03july 2020 - India - Daily PDF

INDIA DAILY
July 3, 2020 India 2-Jul 1-day 1-mo 3-mo

Sensex 35,844 1.2 5.1 29.9
Nifty 10,552 1.2 4.9 30.5
Contents Global/Regional indices

Dow Jones 25,827 0.4 (1.7) 22.7
Special Reports Nasdaq Composite 10,208 0.5 5.4 38.4
Strategy FTSE 6,240 1.3 (2.2) 15.2

Nikkei 22,255 0.5 (1.6) 24.9
Strategy: Three markets but not much to buy for now
Hang Seng 25,319 0.8 4.1 9.0
 No real insights from 4QFY20 results, management commentary and real- KOSPI 2,150 0.7 0.1 24.6
time data
Value traded – India
 'Quality' non-financials stocks: Stock prices already factoring full recovery in Cash (NSE+BSE) 565 649 588
FY2022 Derivatives (NSE) 34,685 11,812
12,40
8
 'Quality' financials stocks: Outlook uncertain; market drawing confidence Deri. open interest 4,591 2,646 2,310
from 'recovery' data
 'Value' stocks: No value unlocking without shareholders taking strong

Forex/money market
measures
Change, basis points
Strategy: Two-paced recovery 2-Jul 1-day 1-mo 3-mo
 UPI transactions at all-time high; no improvement in road traffic Rs/US$ 74.8 5 (60) (167)
10yr govt bond, % 6.2 (3) (11) (50)

 Covid-19 cases continue to rise Net investment (US$ mn)
Daily Alerts 1-Jul MTD CYTD
FIIs (223) (223) (2,664)

Results
MFs 101 101 4,993
Bharat Electronics: Delivers on key counts Top movers
 Strong 4Q leads to two-year CAGR of 12/17% in full year revenue/EBITDA Change, %
Best performers 2-Jul 1-day 1-mo 3-mo

 Generates healthy FCF in spite of worsening debtor days and stiff capex
IHFL IN Equity 225 2.3 75.1 133.1
spends
GNP IN Equity 435 0.0 11.6 104.3
 A modest FY2021 in the making; enough levers to protect margin profile ARBP IN Equity 780 0.5 3.9 103.9
MSS IN Equity 104 6.7 2.7 89.5

 We cut FY2022 estimates by 4% and revise fair value to Rs105; retain BUY
MM IN Equity 530 6.2 9.2 88.7
Company alerts Worst performers
Tata Power: Delivering on deleveraging COAL IN Equity 134 (0.2) (5.7) (3.0)
HUVR IN Equity 2,152 (0.9) 1.5 (0.1)

 Preferential issue to bring in Rs26 bn of equity; approval for InVIT for
NMDC IN Equity 82 0.9 (3.4) 3.2
renewable business
SIEM IN Equity 1,095 (0.0) (3.0) 4.1
 Divestment of non-core assets continue to aid deleveraging, Mundra SBIN IN Equity 185 0.4 6.0 5.7
continues to offer hope
 Maintain BUY with fair value of Rs55/share
kspcg.research@kotak.com
Contact: +91 22 6218 6427
For Private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES.
REFER TO THE END OF THIS MATERIAL.
Company Report
Strategy INDIA
INDIA
July 02, 2020
BSE-30: 35,844
Three markets but not much to buy for now. The Indian market is a 3-in-1 one with
(1) ‘quality’ non-financials fully valued, (2) ‘quality’ financials fairly valued given large
uncertainty on credit costs and (3) ‘value’ stocks undervalued on paper. The market is
quite positive about improving news on Covid-19 and the economy but management
commentary and real-time data may offer only limited insights into eventual levels of
(1) sustainable demand for consumer products and (2) NPLs and credit costs for banks.
INSIDE
No real insights from 4QFY20 results, management commentary and real-time data
3-in-1 market…pg03
4QFY20 results were marred by disruption to both supply and demand across sectors in the second
half of March and are of limited use. The market’s focus is on management commentary and real- 4QFY20 results:
time data on improvement in demand and supply from lockdown-affected depressed levels of April- Significantly below
May. However, these may be of limited help as (1) the eventual level of sustainable demand for expectations…pg37
various consumer products will become clear after a few months; demand will improve on wow and
mom basis for some time from low levels of April-May and (2) eventual level of credit costs and 4QFY20 underlying
NPLs for banks and NBFCs will become clear only from 3QFY21 results; the extended moratorium trend: Bleak outcome,
on loan repayment until August 31, 2020 will hide the true financial position of borrowers. mixed outlook…pg47
‘Quality’ non-financials stocks: Stock prices already factoring full recovery in FY2022
Stock prices of ‘quality’ non-financials stocks have gone back to pre-Covid levels (roughly middle of
February) in most cases (consumer staple and discretionary, IT) and above pre-Covid levels in some
cases (pharmaceuticals and telecom). We have seen modest-to-moderate downgrades in FY2022E
EPS in most cases with some upgrades in pharmaceuticals names (positive news on new products)
and we may see earnings upgrades in the case of telecom stocks (higher ARPU). However, it is
reasonably certain that the post-Covid outlook on FY2022E volumes, profitability and earnings will
be dimmer versus the pre-Covid one in most consumption-related sectors.
‘Quality’ financials stocks: Outlook uncertain; market drawing confidence from ‘recovery’ data Sanjeev Prasad
Stock prices of ‘quality’ financials have seen a sharp rebound in the past few weeks as the market
has gained confidence from data on recovery in (1) the economy (wow and mom improvement in Sunita Baldawa
demand from depressed levels) and (2) recoveries (repayment) from borrowers. However, there is
limited context to such data and we would note that even a recovery rate (collection efficiency) of Anindya Bhowmik
90-95% will be a cause for concern for banks and NBFCs. The true financial health of borrowers
will become clearer once the moratorium period is over. However, it is reasonably certain that the
financial position of certain borrower segments will be far worse versus pre-Covid levels.
‘Value’ stocks: No value unlocking without shareholders taking strong measures
Stock prices of ‘value’ stocks have seen a recovery from bottom levels but they continue to trade at
large discounts to our fair values or at low absolute valuations (in some cases, deservedly so). We
have seen only a handful of cases where managements and/or majority shareholders have taken
appropriate measures to correct the issues (conglomerate structures, ESG issues and unviable
Kotak Institutional Equities
businesses) that result in low multiples for the stocks. Research
Important disclosures appear at

the back
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Strategy India
MARKET VIEW: 3-IN-1 MARKET

We find the reward-risk balance for the Indian market more muted after the sharp run-up in stock prices over
the past few weeks. We had been quite bullish through the early stages of Covid-19 outbreak given attractive
price-value gaps across most sectors and stocks in March-April. The market is now excited about incremental
positive news on recovery in both demand and supply from depressed levels. However, ‘quality’ stocks are
back to/above pre-Covid levels while the economic and earnings impact of Covid will be felt for long.
3-in-1 market makes a challenging investment proposition
The swift recovery in stock prices of ‘quality’ non-financials stocks to pre-Covid or above pre-
Covid levels over the past few weeks has reduced the reward-risk balance of the Indian
market. The Indian market (Nifty-50 Index) is trading at 17X FY2022E net profits (see Exhibit
1), which would put the market at the average valuations of the past 15 years.
Exhibit 1: We expect earnings of the Nifty-50 Index to decline 3% in FY2021 and grow 38% in FY2022
Valuation summary of Nifty-50 sectors (full-float basis), March fiscal year-ends, 2020-22E (based on current constituents)
Mcap. Adj. mcap. Earnings growth (%) P/E (X) EV/EBITDA (X) P/B (X) Div. yield (%) RoE (%)
(US$ bn) (US$ bn) 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E
Automobiles & Components 62 33 (48) (108) 2,341 43 (509) 23 11 15 8 2.5 2.5 2.4 1.6 1.4 1.7 6 (1) 11
Banks 190 145 56 34 19 22 17 14 — — — 2.0 1.8 1.6 0.0 0.7 0.9 9 11 12
Capital Goods 18 16 3 (37) 74 15 24 14 16 18 13 2.3 1.9 1.8 1.9 1.6 2.3 16 8 13
Commodity Chemicals 22 10 21 (30) 90 62 88 47 39 50 30 16 15 13 0.7 0.5 1.0 26 16 27
Construction Materials 32 18 10 (18) 76 27 32 18 12 13 9 2.2 2.0 1.9 0.4 0.4 0.5 8 6 10
Consumer Staples 134 60 14 5 19 41 39 33 30 28 24 13 8.6 8.2 2.2 2.1 2.5 31 22 25
Diversified Financials 81 59 62 (31) 41 22 32 23 — — — 3.6 3.7 3.3 0.7 0.8 0.9 16 12 14
Electric Utilities 25 11 4 13 16 8 7 6 8 7 6 1.0 1.0 0.9 4.5 5.2 6.0 12 13 14
Fertilizers & Agricultural Chemicals 5 3 23 30 18 19 15 12 9 8 7 2.1 1.9 1.7 1.4 1.8 2.1 11 13 14
Gas Utilities 6 3 (5) (28) 22 8 11 9 6 8 6 1.1 1.0 0.9 6.2 3.9 4.8 14 9 11
IT Services 196 84 4 (6) 13 20 21 19 14 14 12 5.3 4.7 4.4 2.5 2.8 3.4 27 23 23
Media 2 1 9 (27) 24 10 13 11 7 8 6 1.7 1.6 1.5 2.6 3.2 3.2 18 12 14
Metals & Mining 21 12 (56) (85) 956 12 83 8 6 8 5 0.7 0.7 0.7 2.1 3.8 3.3 6 1 9
Oil, Gas & Consumable Fuels 187 89 (35) 1 34 19 19 14 10 10 8 1.7 1.6 1.5 1.9 1.8 2.1 9 8 10
Pharmaceuticals 31 18 20 8 25 27 25 20 15 14 11 3.0 2.7 2.5 1.2 0.8 0.9 11 11 12
Retailing 12 6 (0) (39) 103 59 96 47 36 52 30 13 12.0 10.1 0.4 0.3 0.6 22 13 21
Telecommunication Services 46 18 (539) NM 82 NM 56 31 10 8 7 3.8 3.8 3.7 0.9 1.8 1.9 (1) 7 12
Transportation 9 4 35 (30) 17 13 19 16 12 13 11 2.7 2.5 2.2 3.7 1.0 0.9 21 13 14
Nifty-50 Index 1,077 588 (6) (3) 38 23 24 17 11.9 12.1 9.3 2.6 2.4 2.2 1.6 1.7 2.1 11.3 10.2 12.9
Nifty-50 Index (ex-energy) 891 488 7 (4) 39 24 25 18 12.5 12.8 9.9 2.9 2.7 2.5 1.5 1.7 2.1 12.3 10.9 13.9
Nifty-50 Index (ex-banks) 887 443 (13) (11) 44 23 26 18 11.9 12.1 9.3 2.8 2.6 2.4 1.9 2.0 2.3 12.0 10.0 13.2
Notes:
(a) We use consensus numbers for Kotak Mahindra Bank.
Source: Kotak Institutional Equities estimates
The market’s top-down valuations appear quite full on a 12-month forward basis on our
usual metrics (see Exhibit 2). However, FY2021E earnings may be of limited relevance as we
expect a moderate decline in net profits of the Nifty-50 Index in FY2021 on the back of an
economic contraction in India due to Covid-related impact.
KOTAK INSTITUTIONAL EQUITIES RESEARCH 3

India Strategy
Exhibit 2: Nifty-50 Index is trading at fair valuations

1-year rolling forward P/E, P/B, ROE, EV/EBITDA and yield for Nifty-50 Index
P/E (X) Avg Mean+1SD Mean-1SD

28 P/B (X) Avg Mean+1SD
4 25
24
20
20 3
15
16
2
12 10
1
8 5
4 0 0
Jun-05
Jun-06
Jun-10
Jun-11
Jun-15
Jun-16
Jun-07
Jun-08
Jun-09
Jun-12
Jun-13
Jun-14
Jun-17
Jun-18
Jun-19
Jun-20
Jun-05
Jun-08
Jun-09
Jun-12
Jun-15
Jun-16
Jun-19
Jun-06
Jun-07
Jun-10
Jun-11
Jun-13
Jun-14
Jun-17
Jun-18
Jun-20
21 EV/EBITDA (X) Avg
Yield gap (%) Earnings yields (%)
Mean+1SD Mean-1SD 16
10-y G-sec yields (%)
18
12
15
8
12
9 4
6 0
Jun-06
Jun-07
Jun-10
Jun-11
Jun-15
Jun-16
Jun-20
Jun-05
Jun-08
Jun-09
Jun-12
Jun-13
Jun-14
Jun-17
Jun-18
Jun-19
3
(4)
Jun-05
Jun-07
Jun-09
Jun-11
Jun-13
Jun-15
Jun-17
Jun-19
Jun-06
Jun-08
Jun-10
Jun-12
Jun-14
Jun-16
Jun-18
Jun-20
(8)
Source: BSE, RBI, Kotak Institutional Equities
The relative performance of ‘quality’ and ‘value’ stocks over the past three months from
lows in the second half of March 2020 (after the severe price correction in all stocks in the
first fortnight of March) has resulted in the usual premium of ‘quality’ over ‘value’ stocks.
However, there is a new dimension to the usual ‘quality’ and ‘value’ categories in that the
financials sector is falling somewhere in the middle.
 ‘Quality’ non-financials are fully valued on FY2022E EPS. Most stocks in the
consumer staples, consumer discretionary, pharmaceuticals and telecom sectors trade at
full valuations on FY2022E basis. Stock prices have rebounded from their March 2020
lows to pre-Covid levels in most cases and above pre-Covid levels in the case of
pharmaceuticals and telecom stocks (including RIL).
Exhibit 3 compares pre-Covid and current (1) stock prices, (2) FY2022E EPS and (3)
FY2022E EBITDA of the major stocks in the abovementioned sectors in our coverage and
also shows the pre-Covid and current P/E and EV/EBITDA multiples on FY2022E basis. As
can be seen, the P/E and EV/EBITDA multiples of most of the stocks have gone back to
pre-Covid levels or above pre-Covid levels as we have reduced earnings moderately in the
case of consumer staples and discretionary sectors.
4 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Strategy India
Exhibit 3: 'Quality' non-financial stocks are fully valued on FY2022E EPS

Comparison of price, EPS, EBITDA, P/E, EV/EBITDA and P/B, pre-Covid and current for 'quality 'non-financials stocks
Price (Rs) FY2022 EPS (Rs) FY2022 EBITDA (Rs mn) FY2022 P/E (X) FY2022 EV/EBITDA (X)
Company Sector Pre-Covid Current Pre-Covid Current Pre-Covid Current Pre-Covid Current Pre-Covid Current
Bajaj Auto Automobiles & Components 3,146 2,879 214 190 64,855 58,880 15 15 10.1 11.1
Eicher Motors Automobiles & Components 18,704 18,354 999 792 28,708 24,346 19 23 14.2 16.7
Hero Motocorp Automobiles & Components 2,357 2,671 191 168 50,066 45,127 12 16 7.3 9.5
Maruti Suzuki Automobiles & Components 6,914 5,948 296 226 127,846 99,703 23 26 11.8 13.2
Havells India Consumer Durables & Apparel 612 581 20 14 18,813 12,095 30 42 18.7 28.6
Page Industries Consumer Durables & Apparel 22,447 20,262 539 397 8,480 6,566 42 51 29.0 34.1
Whirlpool Consumer Durables & Apparel 2,226 2,102 52 47 9,598 7,764 42 45 27.0 31.4
Britannia Industries Consumer Staples 3,097 3,535 79 83 23,930 25,875 39 43 29.9 32.2
Colgate-Palmolive (India) Consumer Staples 1,340 1,376 41 36 16,862 14,903 33 38 21.2 24.6
Dabur India Consumer Staples 506 465 12 11 25,937 23,278 42 44 33.4 34.2
Godrej Consumer Products Consumer Staples 626 697 21 19 30,158 27,522 30 38 20.8 25.8
Hindustan Unilever Consumer Staples 2,255 2,152 47 44 137,748 142,812 48 49 34.4 34.4
Marico Consumer Staples 302 358 10 9 18,263 17,158 30 38 20.6 26.2
Nestle India Consumer Staples 16,356 16,789 278 282 36,765 38,320 59 59 41.7 41.1
United Breweries Consumer Staples 1,286 1,056 33 22 14,661 10,995 39 48 22.5 25.3
United Spirits Consumer Staples 704 595 21 15 21,133 17,170 34 40 23.5 25.1
Asian Paints Commodity Chemicals 1,877 1,686 40 36 56,647 52,647 46 47 30.9 30.0
Avenue Supermarts Retailing 2,408 2,296 36 39 37,717 36,665 67 59 42.0 39.9
Titan Company Retailing 1,293 986 30 21 39,384 28,855 43 47 28.4 30.0
Cipla Pharmaceuticals 446 646 33 32 44,841 43,995 14 20 7.5 11.4
Dr Reddy's Laboratories Pharmaceuticals 3,304 3,921 185 188 51,261 54,911 18 21 9.8 11.5
Lupin Pharmaceuticals 718 895 48 46 41,672 39,194 15 20 7.1 9.1
Sun Pharmaceuticals Pharmaceuticals 419 473 25 24 97,184 90,825 17 20 8.2 10.5
Torrent Pharmaceuticals Pharmaceuticals 2,097 2,351 86 86 27,961 27,877 24 27 12.5 14.4
Bharti Airtel Telecommunication Services 565 559 13 14 554,341 574,113 42 39 7.1 6.8
Source: Source: Companies, Kotak Institutional Equities estimates
We are/were of the view that the abovementioned sectors would be least affected by
lockdown of and slowdown in the economy and events have more or less validated our
positive view on the stocks in March-April. However, we would be a bit careful about
extrapolating recent trends of wow and mom improvement in production and sales
volumes, especially for the consumer discretionary sectors (4-W automobiles, consumer
durables and paints). Some of the recent recovery in sales (demand) could simply be pent-
up demand and it would be important to get a good handle on the level of sustainable
demand given the damage to household income and sentiment. It is unlikely that
FY2021E or FY2022E demand for consumer discretionary products would go back to the
Street’s pre-Covid demand estimates for the same years.
 ‘Quality’ financials could be fully valued or undervalued depending on how

events play out. ‘Quality’ financial stocks have seen a strong rebound from their lows in
March-April 2020 on recent positive news of (1) improvement in demand conditions from
depressed levels of April-May 2020 affected by stringent lockdowns in most parts of the
country, (2) government’s Rs3 tn credit guarantee scheme for MSME companies and (3)
management commentary on improved collections post the lifting of the lockdown
restrictions, which had hampered collections.
The multiples of almost all banks and NBFCs have come off sharply from their pre-Covid
levels on concerns around potential sharp increase in NPLs and credit costs given the
extended lockdown in April-May 2020 and resultant slowdown in the economy. Exhibit 4
compares the1-year forward P/B multiples of the major banks and NBFCs under our
coverage with their 1-year forward P/B multiples on February 14, 2020. As a corollary, we
would note that the range of valuations in the financial sector is even wider than usual
with the market factoring in modest to significant increase in credit costs for banks and
NBFCs in FY2021-22E depending on the loan mix and historical underwriting skills of the
lenders.

India Strategy
Exhibit 4: Multiples of almost all banks and NBFCs have come off sharply from their pre-Covid levels
Comparison of price, EPS, BPS, P/E and P/B at pre-Covid and current levels for quality 'financials' stocks
Price (Rs) FY2022 EPS (Rs) FY2022 BPS (Rs) FY2022 P/E (X) FY2022 P/B (X)
Company Sector Pre-Covid Current Pre-Covid Current Pre-Covid Current Pre-Covid Current Pre-Covid Current
Axis Bank Banks 737 423 62 42 369 315 11.9 10.1 2.0 1.3
Bandhan Bank Banks 453 346 31 19 154 130 14.5 17.9 2.9 2.7
Bank of Baroda Banks 86 52 27 18 129 137 3.2 2.8 0.7 0.4
HDFC Bank Banks 1,219 1,090 67 52 401 381 18.3 21.0 3.0 2.9
ICICI Bank Banks 546 363 38 28 222 207 14.4 12.8 2.5 1.8
IndusInd Bank Banks 1,176 495 121 73 700 547 9.8 6.8 1.7 0.9
RBL Bank Banks 317 178 41 20 253 216 7.7 9.0 1.3 0.8
State Bank of India Banks 319 185 55 30 307 249 5.8 6.1 1.0 0.7
Bajaj Finance Diversified Financials 4,782 2,969 163 126 824 708 29.3 23.6 5.8 4.2
Bajaj Finserv Diversified Financials 9,691 6,189 475 392 2,928 2,483 20.4 15.8 3.3 2.5
Cholamandalam Diversified Financials 333 197 25 19 144 119 13.0 10.6 2.3 1.7
HDFC Diversified Financials 2,402 1,889 85 74 600 588 28.3 25.4 4.0 3.2
L&T Finance Holdings Diversified Financials 126 69 16 9 101 85 7.8 7.6 1.3 0.8
LIC Housing Finance Diversified Financials 412 282 83 67 434 368 5.0 4.2 1.0 0.8
Mahindra & Mahindra Financial Diversified Financials 385 185 41 25 222 189 9.5 7.4 1.7 1.0
Muthoot Finance Diversified Financials 747 1,109 84 85 410 407 8.9 13.0 1.8 2.7
Shriram City Union Finance Diversified Financials 1,461 685 214 158 1,355 1,228 6.8 4.3 1.1 0.6
Shriram Transport Diversified Financials 1,286 698 162 119 1,012 913 7.9 5.9 1.3 0.8
Source: Companies, Kotak Institutional Equities estimates
In our view, it is simply too early to get a good handle on the FY2021-22E credit costs of
banks and their adjusted book values and return ratios given limited clarity on (1) the
strength of economic recovery and (2) financial position of borrowers in low-income
households and MSME sector. The extended moratorium on loan repayments to August
31, 2020 has compounded the problem—for outsiders, it is hard to arrive at any
meaningful conclusion about the underlying health of borrowers from (1) the disclosures
of banks and NBFCs on loans under moratorium; even banks would not be able to judge
accurately whether a particular borrower under moratorium is unable to pay or unwilling
to pay and/or (2) data on collection efficiency, which would obviously show an improving
trajectory from April-May levels when collection was extremely difficult given full
lockdowns in most parts of the country. In our view, this figure will become relevant only
when collection efficiency crosses 90%. Anything below 90% will spell deep trouble for
most banks and NBFCs.
It would be a lot more helpful for banks and NBFCs to disclose moratorium loan value
and recovery rates by major loan segments given very diverse implications for (1) credit
costs for loans under moratorium and (2) loss-given default (LGD) for bad loans for
different categories of borrowers. It is obvious that the same moratorium value for two
different categories will have fairly different implications for credit costs. For example, a
30% moratorium value for mortgage loans for salaried employees would possibly imply
significantly lower slippages versus 30% moratorium value for unsecured loans. The
moratorium in the case of a salaried employee may simply mean an unwillingness to pay
in the current environment while moratorium in the case of unsecured personal loans
could more likely mean an inability to pay.
 ‘Value’ stocks have value but only if there is a path to unlocking value. ‘Value’
stocks have been underperformers over the Covid period despite most of them trading at
‘low’ valuations before the global Covid pandemic. The ‘value’ stocks in the banks
(especially PSU banks) and NBFCs and electric utilizes sectors have seen severe de-rating
over this period on concerns about further deterioration in the fundamentals (eventual
NPLs and credit costs in the case of banks and NBFCs) and continued apathy among
investors for government-owned entities. Others in metals and oil & gas sectors have seen
sharp downgrades to their FY2021E EPS estimates. Thus, their valuations may look
optically higher. Exhibit 5 shows the 12-month forward valuations of certain ‘value’ stocks
in our coverage. Exhibits 6-7 show the steep decline in valuations (12-month forward P/B)
of PSU banks and NBFCs over the past few months. We note that we have reduced our
FY2021-22E ABVPS also for all the banks and NBFCs under our coverage by assuming
higher loan-loss provisions.

Strategy India
Exhibit 5: 'Value' stocks continue to languish at low multiples; high multiples in a few cases reflects severe earnings cuts in FY2021
12-m forward PE/PB multiple of value stocks in KIE universe, March fiscal year-ends, 2011-22E
12-m forward P/B|P/E multiple (X)
Company Sector Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Current
Apollo Tyres Automobiles & Components 8 7 6 9 8 7 9 14 11 8 25
CEAT Automobiles & Components 6 5 3 5 9 10 11 13 13 13 14
Mahindra & Mahindra Automobiles & Components 14 14 14 15 19 18 20 19 15 7 15
Bank of Baroda Banks 1.7 1.1 0.8 0.9 0.9 1.0 1.2 0.9 0.9 0.5 0.4
Canara Bank Banks 1.3 0.9 0.7 0.5 0.6 0.5 0.9 0.9 1.3 0.3 0.7
Federal Bank Banks 1.3 1.2 1.2 1.1 1.3 0.9 1.7 1.4 1.4 0.6 0.7
State Bank of India Banks 1.9 1.7 1.4 1.3 1.6 1.2 1.5 1.2 1.4 0.8 0.8
Kalpataru Power Transmission Capital Goods 9 8 6 7 15 15 16 19 16 5 7
KEC International Capital Goods 8 8 7 9 13 12 15 19 13 7 10
LIC Housing Finance Diversified Financials 2.2 2.1 1.5 1.4 2.3 2.3 2.5 1.9 1.6 0.6 0.9
L&T Finance Holdings Diversified Financials NA 1.6 2.1 1.8 1.4 1.5 2.6 2.8 2.0 0.6 0.9
Mahindra & Mahindra Financial Diversified Financials 2.7 2.0 2.2 2.5 2.3 2.2 2.7 3.1 2.3 0.8 1.1
Shriram City Union Finance Diversified Financials 1.7 1.7 2.2 1.9 2.7 2.0 2.7 2.3 1.8 0.6 0.6
Shriram Transport Diversified Financials 3.0 1.9 1.8 1.8 2.4 2.0 2.0 2.3 1.7 0.7 0.8
CESC Electric Utilities 8 7 6 10 11 9 14 13 9 4 6
JSW Energy Electric Utilities 8 14 8 10 13 8 10 14 13 7 10
NHPC Electric Utilities 16 10 9 9 9 9 11 9 8 6 7
NTPC Electric Utilities 16 13 10 10 13 10 12 11 11 6 7
Power Grid Electric Utilities 16 14 11 10 12 10 11 10 10 7 8
Tata Power Electric Utilities 15 13 17 14 16 13 13 12 12 7 9
GAIL (India) Gas Utilities 14 11 9 11 13 13 13 14 12 6 10
Hindalco Industries Metals & Mining 10 8 6 11 8 13 9 9 8 4 11
Hindustan Zinc Metals & Mining 10 9 7 7 8 11 12 11 12 15 15
JSW Steel Metals & Mining 9 8 8 11 9 18 11 13 11 9 41
National Aluminium Co. Metals & Mining 17 15 11 14 9 15 16 12 9 13 152
NMDC Metals & Mining 13 8 7 8 9 12 12 9 9 5 7
Tata Steel Metals & Mining 8 9 8 9 9 29 11 8 8 5 46
Vedanta Metals & Mining 6 5 5 7 9 13 9 8 7 4 14
BPCL Oil, Gas & Consumable Fuels 13 15 15 14 14 10 11 10 10 9 14
HPCL Oil, Gas & Consumable Fuels 9 8 9 10 10 8 10 8 8 7 9
IOCL Oil, Gas & Consumable Fuels 9 8 9 10 11 8 10 8 9 5 8
ONGC Oil, Gas & Consumable Fuels 9 9 9 8 9 10 10 8 7 10 17
Coal India Oil, Gas & Consumable Fuels 16 13 11 11 13 12 13 12 9 5 7
Source: FactSet, Kotak Institutional Equities estimates
Exhibit 6: PSU banks are trading well below their long-term multiples
12-m rolling forward P/B charts for PSU banks (X)
PSU banks P/B

1.6
1.2
0.8
0.4
0.0
Jun-12
Jun-14
Jun-15
Jun-17
Jun-18
Jun-20
Jun-13
Jun-16
Jun-19
Dec-14
Dec-16
Dec-17
Dec-19
Dec-12
Dec-13
Dec-15
Dec-18
Notes:
(a) We have included BOB, CBK, PNB, SBI and UNBK in the sector P/B calculation.
Source: FactSet, Kotak Institutional Equities

India Strategy
Exhibit 7: Steep decline in valuations of the NBFC sector

12-m rolling forward P/B of NBFC sector (X)
NBFCs P/B
3.5
3.0
2.5
2.0
1.5
1.0
0.5
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
Jun-18
Jun-19
Jun-20
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Notes:
(a) We have included Chola, IIFL, LTFH, LICHSGFIN, MMFS, PNBHOUSI, SCUF and SHTF for P/B calculation.
Source: FactSet, Kotak Institutional Equities
In our view, ‘value’ stocks may continue to trade at inexpensive valuations without the
majority shareholders fixing the reasons that result in these stocks trading at large
discounts to their ‘fair’ values (in most cases and at most times, the Street’s fair value of
these stocks will be meaningfully higher than their current prices). We have seen only a
handful of such companies starting to do the right things to unlock value for all
shareholders.
Economic impact of Covid—bad for growth, good for BoP

We see a contraction in the economy in FY2021 due to Covid-related lockdown of the
economy in 1QFY21 and subsequent weakening of income of governments and households
and balance sheets of companies, especially MSME entities. Anyway, household income
growth (per capital GDP growth) has slowed on an aggregate basis due to low job creation
in the economy, as highlighted in several of our reports on this topic over the past 18
months. As a corollary, household savings rate has declined sharply over the past 10 years
(see Exhibit 8) as households reduced their savings rate to support consumption (see Exhibit 9).
Exhibit 8: Household savings has declined over the past few years primarily led by lower household physical (residential real estate)
savings
Savings rates as proportion of GDP, March fiscal year-ends, 2012-20E (%)
2012 2013 2014 2015 2016 2017 2018 2019 2020E

Household (physical + net financial savings) (a) 23.6 22.5 20.3 19.6 18.0 18.1 19.2 18.2 17.4
Household physical savings 16.3 15.1 12.9 12.5 9.9 10.7 11.4 11.7 10.0
- Savings in gold 0.4 0.4 0.3 0.4 0.3 0.3 0.2 0.2 0.3
Gross household financial savings 10.7 10.7 10.6 10.1 10.9 10.5 12.1 10.5 10.6
Financial liabilities (3.3) (3.3) (3.2) (3.0) (2.8) (3.0) (4.3) (4.0) (3.1)
Net household financial savings 7.4 7.4 7.4 7.1 8.1 7.4 7.7 6.5 7.5
Public savings (b) 1.5 1.4 1.0 1.0 1.2 1.7 1.7 1.5 1.7
Private corporate savings (c) 9.5 10.0 10.7 11.7 11.9 11.5 11.6 10.4 10.5
Domestic savings rate (a) + (b) + (c) 34.6 33.9 32.1 32.2 31.1 31.3 32.4 30.1 29.6
Notes:
(a) Gold savings is assumed to be equal to net gold imports.
Source: CEIC, Kotak Institutional Equities estimates

Strategy India
Exhibit 9: Share of private consumption has increased as household savings rate has fallen
Share of private domestic consumption expenditure and household savings in GDP, March fiscal year-ends,
2005-20 (%)
Private consumption/GDP (%, LHS) Household savings/GDP (%, RHS)

61 28
60 26
26
60
24 24
59 24 24 24
23 59 59 24
23 59 59
22
58
58 58 22
58
57
57 20
19 20
57 20
56 56 18
56 18 18
56 56
55 56 17 18
55
54 16
2020E
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Source: CSO, CEIC, Kotak Institutional Equities
In our view, the Indian economy suffers from structural challenges of chronic
underinvestment in human and physical capital, which has resulted in moderation in
productivity growth over the past few years. This is unlikely to reverse quickly despite the
likely bounce-back in economic growth in FY2022 and economic reforms being pursued by
the central and state governments.
We focus on the near-term challenges of the Indian economy but note the Covid pandemic
will dampen India’s medium-term growth prospects too.
 GDP to contract around 5-6% in FY2021. We currently assume FY2021E GDP to

contract 5.8% in real terms (see Exhibit 10) led by a sharp decline in manufacturing and
construction activities that were severely affected by the extended lockdown in 1QFY21.
However, the situation is still quite fluid to assess. Our base-case scenario assumes that (1)
the Covid pandemic will gradually fade over the next few months and (2) central and
state governments will not enforce any further extensive lockdowns barring in areas that
see a spike in the number of new cases.
Exhibit 10: We estimate FY2021 GDP to contract 5.8%

Real GVA and components growth, March fiscal-year ends, 2014-21E (%)
2014 2015 2016 2017 2018 2019 2020 2021E

Real GVA 6.1 7.2 8.0 8.0 6.6 6.0 3.9 (5.8)
Agriculture and allied 5.6 (0.2) 0.6 6.8 5.9 2.4 4.0 2.8
Industry 3.8 7.0 9.6 7.7 6.3 4.9 0.9 (14.5)
Mining 0.2 9.7 10.1 9.8 4.9 (5.8) 3.1 (4.1)
Manufacturing 5.0 7.9 13.1 7.9 6.6 5.7 0.0 (18.4)
Electricity 4.2 7.2 4.7 10.0 11.2 8.2 4.1 (1.4)
Construction 2.7 4.3 3.6 5.9 5.0 6.1 1.3 (13.1)
Services 7.7 9.8 9.4 8.5 6.9 7.7 5.5 (3.3)
Trade, hotel, transport, communication 6.5 9.4 10.2 7.7 7.6 7.7 3.6 (9.0)
Financial, real estate, professional services 11.2 11.0 10.7 8.6 4.7 6.8 4.6 (10.2)
Public admin, defence, and others 3.8 8.3 6.1 9.3 9.9 9.4 10.0 15.5
Non-agriculture GVA 6.2 8.7 9.5 8.2 6.7 6.7 3.9 (7.3)
Real GDP 6.4 7.4 8.0 8.3 7.0 6.1 4.2 (5.8)

India Strategy
We note that number of confirmed and active cases in India is still growing but at
significantly lower rates over the past few weeks (see Exhibit 11 for number of total cases,
recovered cases and active cases). India has reached the first milestone of the number of
recovered cases exceeding the number of active cases. It looks like it is close to the
second milestone in terms of peaking of active cases with a slowdown in the number of
active cases. However, it appears to be far away from the third milestone of a decline in
the number of new confirmed cases with the number of new cases growing at 3.6%
CDGR (last 10 days).
Exhibit 11: 10-day CDGR of active Covid-19 cases at 2.6%; recovered cases outpacing active cases
Trend of confirmed, active cases versus recovered cases (#)
Active cases (RHS, #) Recovered cases (RHS, #) Total cases (LHS, #)

700,000 400,000
600,000 350,000
300,000
500,000
250,000
400,000
200,000
300,000
150,000
200,000
100,000
100,000 50,000
- -
22-Apr-20
25-Apr-20
28-Apr-20
10-May-20
13-May-20
22-May-20
25-May-20
28-May-20
16-May-20
19-May-20
31-May-20
6-Jun-20
9-Jun-20
3-Jun-20
1-May-20
4-May-20
7-May-20
12-Jun-20
24-Jun-20
27-Jun-20
15-Jun-20
18-Jun-20
21-Jun-20
30-Jun-20
Source: Covid19India, Kotak Institutional Equities
Recent data on manufacturing and services show a strong rebound from low levels of
April-May. However, we would be careful about extrapolating recent trends beyond a
point; demand for most good and services will recover from depressed levels seen during
the lockdown period. It is reasonably certain that the eventual demand of most goods
and services will fall short of pre-Covid expectations for both FY2021 and FY2022. The
impact will vary across sectors with (1) likely low impact in the case of demand for
agriculture inputs, consumer staples, pharmaceuticals, and telecom, (2) moderate impact
in the case of demand for 2-W automobiles, low-ticket consumer discretionary and
healthcare services and (3) severe impact in the case of demand for large-ticket
discretionary items such as 4-W automobiles and travel (leisure) and investment demand
such as residential real estate, capital goods, construction materials and industrials.
We also see severe medium-term implications of the Covid outbreak in several ways—(1)
lower household income due to job losses will affect private consumption, (2) lower
taxation revenues and weaker fiscal position of government due to contraction in the
economy and surge in overall public debt-to-GDP will impact government consumption
and investment both and (3) weaker balance sheets of banks and NBFCs and MSME
companies will affect private investment.

Strategy India
 Fiscal deficit at 11-12% in FY2021. We expect India’s consolidated fiscal deficit to be in

the range of 11-12% versus the 6-7% range of the past few years (see Exhibit 12) with
most of the increase in the fiscal deficit arising from lower tax revenues and not from any
meaningful increase in expenditure to support the economy. We project central fiscal
deficit at 7.2% versus FY2021BE fiscal deficit of 3.5% (see Exhibit 13 for major revenue
and expenditure items of the central government).
Exhibit 12: Consolidated fiscal deficit likely to increase to 11.2% in FY2021

Consolidated fiscal deficit of center and states, March fiscal year-ends, 2000-21E
Center States Consolidated

12
11.2
10 9.6
9.4 4.0
8 7.2 2.9 7.6
6.9
4.5 6.7 6.7 7.0 7.0
5.9 5.9
6 2.0 3.0
3.3 2.2 2.6 3.1
3.5
2.4 2.5
4
7.2
6.0 5.7 6.0 6.5 5.9
5.2 5.5 4.8 4.9 4.5
2 4.3 3.9 4.0 4.1 3.9 3.5 3.5 3.4 4.6
3.3
2.5
0
2020E
2021E
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Source: Ministry of Finance, Kotak Institutional Equities estimates

India Strategy
Exhibit 13: FY2021 GFD/GDP estimated at 7.2%

Major central government budgetary items, March fiscal year-ends, 2018-21E (Rs bn)
Change (%)
2020P/ 2021BE/ 2021E/
2018 2019 2020P 2021BE 2021E 2019 2020P 2020P
Receipts
1. Revenue receipts (2d + 3) 14,352 15,529 16,821 20,209 16,629 8 20 (1)
2. Gross tax revenues (a + b ) 19,190 20,805 20,099 24,230 19,211 (3) 21 (4)
2.a. Direct taxes 10,068 11,431 10,536 13,265 10,246 (8) 26 (3)
2.a.1. Corporation tax 5,712 6,636 5,569 6,810 5,346 (16) 22 (4)
2.a.2. Income tax 4,308 4,730 4,898 6,380 4,825 4 30 (2)
2.a.3. Other taxes 48 66 69 75 75 5 9 9
2.b. Indirect taxes 9,122 9,373 9,563 10,965 8,965 2 15 (6)
2.b.1. Goods and Services Tax 4,426 5,816 6,015 6,905 3,900 3 15 (35)
2.b.1.1. CGST 2,033 4,575 4,967 5,800 3,300 9 17 (34)
2.b.1.2. IGST 1,767 289 92 — —
2.b.1.3. Compensation cess 626 951 956 1,105 600 0 16 (37)
2.b.2. Customs duty 1,290 1,178 1,092 1,380 944 (7) 26 (14)
2.b.2.1. Basic duties 808 1,048 946 1,240 804 (10) 31 (15)
2.b.2.2. Others 483 130 146 140 140 12 (4) (4)
2.b.3. Excise duty 2,594 2,310 2,396 2,670 4,121 4 11 72
2.b.4. Service tax 812 69 60 10 — (12) (83)
2.c Transfers to states, UTs, etc. 6,765 7,633 6,540 7,871 5,683 (14) 20 (13)
2.d Net tax revenues 12,425 13,172 13,559 16,359 13,528 3 21 (0)
3. Non-tax revenues 1,927 2,357 3,262 3,850 3,101 38 18 (5)
3.a. RBI's transfer of surplus 407 680 1,476 600 850 117 (59) (42)
3.a. Telecommunications 321 408 590 1,330 875 45 126 48
4. Non-debt capital receipts (a + b) 1,157 1,128 686 2,250 850 (39) 228 24
4.a Recovery of loans 156 181 183 150 150 1 (18) (18)
4.b Other receipts (disinvestments) 1,000 947 503 2,100 700 (47) 317 39
5. Total receipts (1 + 4) 15,509 16,657 17,507 22,459 17,479 5 28 (0)
Expenditure
6. Revenue expenditure 18,788 20,074 23,496 26,301 28,633 17 12 22
6.a. Interest payments 5,290 5,826 6,110 7,082 7,082 5 16 16
6.b. Subsidies 1,912 1,968 2,232 2,278 1,869 13 2 (16)
6.b.1. Food 1,003 1,013 1,087 1,156 1,156 7 6 6
6.b.2. Fertilizer 664 706 811 713 713 15 (12) (12)
6.b.3. Oil 245 248 334 409 0 34 23 (100)
6.c. Pay, allowances and pensions 4,464 4,957 4,997 5,877 5,627 1 18 13
6.c.1.a. Pay and allowances 3,007 3,291 3,306 3,770 3,520 0 14 6
6.c.1.b. Pensions 1,457 1,666 1,691 2,107 2,107 2 25 25
6.d. Agriculture and farmers' welfare 374 461 942 1,343 1,496 105 43 59
6.e. Education 800 781 873 972 822 12 11 (6)
6.f. Health and family welfare 483 506 607 639 869 20 5 43
6.g. Rural development 1,086 1,118 1,221 1,200 1,700 9 (2) 39
6.h. Others 4,381 4,457 6,513 6,909 9,167 46 6 41
7. Capital expenditure 2,631 3,077 3,367 4,121 3,001 9 22 (11)
7. a. Defence 954 998 1,161 1,186 786 16 2 (32)
7. b. Railways 434 528 678 700 350 28 3 (48)
7. c. Roads and Highways 508 676 673 820 920 (1) 22 37
7. d. Housing and urban affairs 153 158 193 211 311 22 10 61
7. e. Others 582 717 663 1,204 634 (7) 82 (4)
8. Total expenditure (6 + 7) 21,420 23,151 26,864 30,422 31,634 16 13 18
Deficit
Primary deficit (PD) 621 668 3,246 881 7,073 386 (73) 118
Revenue deficit (RD) 4,436 4,545 6,675 6,092 12,004 47 (9) 80
Gross fiscal deficit (GFD) 5,911 6,494 9,356 7,963 14,155 44 (15) 51
Gross borrowings (dated securities) 5,891 5,715 7,059 7,800 11,942 24 11 69
Net market borrowing 4,518 4,233 4,698 5,449 9,669 11 16 106
Net market borrowing (adjusted for buyback) 4,103 4,233 4,698 5,149 9,669 11 10 106
Short-term borrowing (T-bills) 449 69 1,560 250 1,800
Nominal GDP at market prices 170,983 189,712 203,398 224,894 197,703 7.2 10.6 (2.8)
PD/GDP (%) 0.4 0.4 1.6 0.4 3.6
RD/GDP (%) 2.6 2.4 3.3 2.7 6.1
GFD/GDP (%) 3.5 3.4 4.6 3.5 7.2
Notes:
(a) 'Gross tax revenues' means revenues post refunds and 'net tax revenues' means gross tax revenues minus devolution to states.
(b) RBI's transfer of surplus for FY2021BE and FY2021E are our estimate.
(c) Pay and allowances include pay and allowances from Ministry of Railways.
Source: Ministry of Finance, Kotak Institutional Equities estimates

Strategy India
India’s public debt-to-GDP will likely be in the range of 82-83% by end-FY2021 from 70%
at end-FY2020. This will force the government to go for fiscal consolidation from FY2022,
which may restrict its ability to provide meaningful fiscal stimulus in the future. India’s
public debt-to-GDP will remain at around 80% (see Exhibit 14) for an extended period of
time assuming consolidated fiscal deficit in the range of 6-8% and nominal GDP growth
at 8-9% (real GDP growth of 4-5%). It would be imperative to increase real GDP growth
to 7-9% once again. However, that may not be possible without significant reforms.
Exhibit 14: We expect public debt-to-GDP to increase over FY2019-21E and decline gradually thereon
Trend in government debt as proportion of GDP, March fiscal year-ends, 2005-25E (%)
Government debt/GDP (%)

90
85
80
75
70
Forecast
65
60
55
50
2020E
2021E
2022E
2023E
2024E
2025E
2006
2008
2010
2013
2015
2017
2019
2005
2007
2009
2011
2012
2014
2016
2018
Notes:
(a) We expect nominal GDP growth at 8.5% over FY2022-25E.
 Inflation to be manageable. We expect inflation to be quite manageable with end-

FY2021 CPI inflation at 3.5% (see Exhibit 15). An excellent rabi (winter) output and likely
good kharif (summer) crop on normal monsoons will likely keep a lid on food prices. We
do not expect meaningful price inflation in most other goods and services given weak
demand and deflation in raw material prices in general.
Exhibit 15: We expect end-FY2021 CPI inflation at around 3.5%

Headline and core CPI inflation (%)
CPI inflation Core CPI inflation

10
Mar-21: 3.5
4
2
Mar-21: 3.3
0
Apr-14
Apr-15
Apr-16
Apr-17
Apr-18
Apr-19
Apr-20
Jul-14
Jul-16
Jul-19
Jul-15
Jul-17
Jul-18
Jul-20
Oct-14
Oct-15
Oct-17
Oct-20
Oct-16
Oct-18
Oct-19
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21

India Strategy
In our view, manageable inflation may allow the RBI to reduce interest (repo) rates further.
India can tolerate a period of negative real interest rates to support demand, especially as
India’s external position seems quite comfortable and most other material economies will
also have negative real interest rates for an extended period of time. The RBI has
historically favored moderate positive real interest rates to manage inflation (see Exhibit
16 for real interest rates in India and Exhibit 17 for real interest rates in India and the US).
Exhibit 16: Real interest rate has become positive over the last couple of years
Trend in 10-year G-Sec yield adjusted for CPI inflation (%)
Real interest rate

10
0
May-02
May-03
May-04
May-05
May-06
May-07
May-08
May-09
May-10
May-11
May-12
May-13
May-14
May-15
May-16
May-17
May-18
May-19
May-20
(2)
(4)
(6)
(8)
(10)
Exhibit 17: Real interest rate differential between India and the US has narrowed
Trend of 2-year real yields (CPI adjusted) of government bonds of US and India (%)
Differential US India
8
0
Aug-14
Aug-15
Aug-17
Aug-18
Aug-16
Aug-19
Feb-15
Feb-16
Feb-17
Feb-18
Feb-19
Feb-20
Nov-14
Nov-15
Nov-16
Nov-17
Nov-18
Nov-19
May-14
May-17
May-20
May-15
May-16
May-18
May-19
(2)
(4)
Source: Bloomberg, Kotak Institutional Equities
We expect system rates to remain subdued given weak demand for credit and reasonable
growth in deposits (see Exhibits 18-19). Deposit and lending rates have come off sharply
over the past few months (see Exhibits 20-21) led by favorable supply-demand for credit
and the reduction in repo rates by the RBI and small savings rates by the government (see
Exhibits 22-23).

Strategy India
Exhibit 18: Deposit growth has been steady over the past few months
Yoy growth in deposits, March fiscal year-ends, 2016-21 (%)
2016 2017 2018 2019 2020 2021
20
16
12
Sep
Aug
Nov
Apr
Feb
Dec
May
Oct
Mar
Jun
Jul
Jan
Source: RBI, Kotak Institutional Equities
Exhibit 19: Loan growth continues to be subdued

Yoy growth in advances, March fiscal year-ends, 2016-21 (%)
2016 2017 2018 2019 2020 2021

20
16
12
0 Mar
May
Oct
Dec
Feb
Jul
Jun
Jan
Apr
Sep
Nov
Aug

India Strategy
Exhibit 20: Weighted-average term deposit rates have been on a consistent decline
Weighted average term deposit rates versus repo rate for banks
Repo (month end) Commercial Banks

Public Sector Banks Private Sector Banks
8.8
8.0
7.2
6.4
5.6
4.8
4.0
Apr-15
Apr-16
Apr-17
Apr-18
Apr-19
Apr-20
Jul-19
Jul-15
Jul-16
Jul-17
Jul-18
Oct-15
Oct-16
Oct-17
Oct-18
Oct-19
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Exhibit 21: Weighted-average lending rates are declining

Weighted average lending rates (WALR) for banks (%)
Public Sector Banks Private Sector Banks
Foreign Banks Scheduled Commercial Banks
14
13
12
11
10
9
Apr-13
Apr-14
Apr-15
Apr-16
Apr-17
Apr-18
Apr-19
Apr-20
Oct-13
Oct-14
Oct-19
Oct-15
Oct-16
Oct-17
Oct-18

Strategy India
Exhibit 22: The RBI has cut repo rates by 115 bps in CYTD20
RBI's repo, reverse repo rates, cash reserve ratio and SLR (%)
Reverse repo rate (LHS) Repo rate (LHS) CRR (LHS) SLR (RHS)
10 26
9 25
24
8
23
7
22
6
21
5
20
4 19
3 18
Jun-05
Jun-10
Jun-12
Jun-15
Jun-16
Jun-17
Jun-06
Jun-07
Jun-08
Jun-09
Jun-11
Jun-13
Jun-14
Jun-18
Jun-19
Jun-20
Exhibit 23: Sharp decline in small savings and SBI term deposit rates
Trend in small savings and SBI term deposit rate across select tenors (%)
1-year PO deposit rate 5-year PO deposit rate 5-year NSC rate

9.5 1-2 year SBI deposit rate 3-5 year SBI deposit rate
9.0
8.5
8.0
7.5
7.0
6.5
6.0
5.5
5.0
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
Sep-18
Sep-19
Mar-13
Mar-18
Mar-19
Mar-20
Mar-14
Mar-15
Mar-16
Mar-17
Jun-13
Jun-18
Jun-19
Jun-20
Jun-14
Jun-15
Jun-16
Jun-17
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Source: Company, RBI, Ministry of Finance, Kotak Institutional Equities
 External position to remain comfortable. We do not see any meaningful pressure on

the INR given (1) a comfortable BoP position, (2) large and rising foreign currency reserves
and (3) fair valuations on fundamentals (REER or real effective exchange rate basis).
However, any adverse change in global risk sentiment may result in depreciation in the
currency.
India’s BoP position will likely be quite comfortable (see Exhibit 24) in FY2021 given a
likely current account surplus (led by low oil prices and weak imports) and likely large
capital account flows (led by FDI with significant contribution from Reliance Jio Platforms).
Also, we note that India’s external debt is quite low (see Exhibit 25; US$564 bn at end-
CY2019) relative to GDP (US$2.9 tn for FY2020) and its foreign currency reserves (see
Exhibit 26). Lastly, the INR seems to be in a fair zone on REER basis (see Exhibit 27).

India Strategy
Exhibit 24: Current account led improvement in BoP in FY2021E

India's balance of payments, March fiscal year-ends, 2016-21E (US$ bn)
2021E
2016 2017 2018 2019 2020 Oil@35/bbl Oil@40/bbl Oil@45/bbl
Current account (22.2) (14.4) (48.7) (57.3) (24.7) 15.8 14.3 7.7
GDP 2,104 2,290 2,653 2,715 2,868 2,619 2,619 2,619
CAD/GDP (%) (1.1) (0.6) (1.8) (2.1) (0.9) 0.6 0.5 0.3
Trade balance (130) (112) (160) (180) (158) (86) (93) (99)
Trade balance/GDP (%) (6.2) (4.9) (6.0) (6.6) (5.5) (3.3) (3.5) (3.8)
- Exports 266 280 309 337 320 274 276 278
- oil exports 31 32 37 46 42 32 34 37
- non-oil exports 236 249 272 291 278 242 242 242
- Imports 396 393 469 518 478 360 369 378
- oil imports 83 87 109 141 130 69 78 87
- non-oil imports 313 306 360 377 348 291 291 291
- gold imports 32 28 34 33 28 27 27 27
Invisibles (net) 108 98 111 123 133 102 107 107
- Services 70 68 78 82 85 78 78 78
- software 71 71 72 78 85 78 78 78
- non-software (1.8) (2.4) 5.4 4.3 0.3 0.0 0.0 0.0
- Transfers 63 56 62 70 75 55 60 60
- Income (net) (24) (26) (29) (29) (27) (31) (31) (31)
Capital account 41 36 91 54 83 42 45 45
Percentage of GDP 2.0 1.6 3.4 2.0 2.9 1.6 1.7 1.7
Foreign investment 32 43 52 30 44 34 37 37
- FDI 36 36 30 31 43 42 42 42
- FPI (4) 8 22 (1) 1 (8) (5) (5)
- Equities (4) 8 2 3 0 (3) (2) (2)
- Debt (0) (1) 21 (4) 1 (5) (3) (3)
Banking capital 11 (17) 16 7 (5) (5) (5) (5)
- NRI deposits 16 (12) 10 10 9 5 5 5
Short-term credit (2) 6 14 2 (1) 0 0 0
ECBs (5) (6) (0) 10 23 10 10 10
External assistance 2 2 3 3 4 2 2 2
Other capital account items 3 8 6 1 18 1 1 1
E&O (1) (0) 1 (0) 1 — — —
Overall balance 17.9 21.6 43.6 (3.3) 59.5 57.8 59.3 52.7
Memo items
Average USD/INR 65.4 67.2 64.5 69.9 70.9 75.5 75.5 75.5
Average Brent (US$/bbl) 47.5 49.0 57.6 70.0 60.9 35.0 40.0 45.0
Source: RBI, Kotak Economic Research estimates
Exhibit 25: External debt is at comfortable levels

India’s external debt by debtor categories, March fiscal year-ends, 2013-20 (US$ bn)
2013 2014 2015 2016 2017 2018 2019 Dec-19
Total external debt 409 446 475 485 471 529 543 564
Long term 313 355 389 402 383 427 435 457
Multilateral 52 53 52 54 55 57 57 60
Bilateral 25 25 22 22 23 25 26 26
IMF 6 6 5 6 5 6 6 6
Trade credit 18 16 13 11 10 9 8 7
Commercial borrowing (CB) 140 149 180 181 172 202 207 224
Non-Resident Indian deposits (NRI) 71 104 115 127 117 126 130 133
Rupee debt 1 1 2 1 1 1 1 1
Short term 97 92 85 84 88 102 108 107
Short term: Trade related 87 82 82 80 86 100 102 102
Short term: FII: GSec & Others 10 10 4 3 2 2 6 4
Source: Ministry of Finance, CEIC, Kotak Institutional Equities

Strategy India
Exhibit 26: India's foreign exchange reserves at US$506 bn

India's foreign exchange reserves, March fiscal year-ends, 2017-21
USD (US$ bn, LHS) INR (Rs tn, RHS)

520 38.5 38
500 505.6 36
480 34
460 32
440 30
420 28
400 26
380 24
Aug-18
Aug-19
Apr-18
Apr-19
Apr-20
Oct-18
Oct-19
Feb-19
Feb-18
Feb-20
Jun-18
Jun-20
Jun-19
Dec-17
Dec-18
Dec-19
Source: CEIC, Kotak Institutional Equities
Exhibit 27: INR is fairly valued on REER basis

Trend in 36-country trade weighted REER (2004-05=100)
36-currency REER 5-year average 10-year average

125
120
114.3
115
110
105
100
95
Nov-11
Nov-12
Nov-13
Nov-14
Nov-15
Nov-16
Nov-17
Nov-18
Nov-19
May-12
May-13
May-14
May-18
May-19
May-20
May-11
May-15
May-16
May-17
Earnings recovery in FY2022 after decline in FY2021

We expect FY2021 net profits of the Nifty-50 Index to decline 3.2% and FY2022 net profits
to grow 38%. We would clarify that FY2021E estimates are not very relevant given the
impact of Covid pandemic on domestic and global economy, which will result in a sharp
decline in both volumes and profitably in many sectors. We would note that the modest
decline in net profits in FY2021 hides bigger decline in operating profits as FY2020 profit
was impacted negatively by large adventitious and inventory losses of the downstream oil
companies and RIL.
We expect a steep recovery in the net profits of the Nifty-50 Index in FY2022 (see Exhibit 28)
from the low levels of FY2021. In particular, we see sharp recovery in net profits of (1) banks
due to our assumption of lower provisions in the banking sector in FY2022 from high levels
of provisions assumed in FY2021 to factor in the impact of Covid on finances of households
and companies, (2) the metals sectors led by our view of a sharp recovery in global metal prices
from current depressed levels and (3) the telecom sector led by our assumption of further
increase in ARPUs; current ARPUs are still quite low compared to costs and historical levels.

India Strategy
Exhibit 28: Banks, consumer staples, electric utilities and telecom sectors to drive incremental profits of the Nifty-50 Index in FY2020-22E
Break-up of net profits of the Nifty-50 Index across sectors, March fiscal year-ends, 2015-22E (based on current constituents)
Incremental profits
Net profits (Rs bn) Contribution (%) 2020 2021E 2022E
2015 2016 2017 2018 2019 2020 2021E 2022E 2020 2021E 2022E (Rs bn) (Rs bn) (Rs bn) (%)
Automobiles & Components 272 311 292 288 211 110 (9) 206 3 (0) 4 (101) (119) 216 17
Tata Motors 142 140 94 68 (18) (75) (171) (20) (2) (5) (0) (56) (96) 151 12
Banks 468 459 461 278 405 633 845 1,010 18 25 22 228 212 165 13
ICICI Bank 113 97 98 68 34 79 159 184 2 5 4 46 79 25 2
State Bank of India 131 100 105 (65) 9 145 220 269 4 6 6 136 75 50 4
Capital Goods 33 41 59 72 86 89 56 97 3 2 2 3 (33) 41 3
Commodity Chemicals 14 18 19 21 22 26 18 35 1 1 1 4 (8) 16 1
Construction Materials 38 55 72 70 80 89 73 128 3 2 3 8 (16) 55 4
Consumer Staples 151 152 163 183 213 243 256 303 7 8 6 31 13 47 4
Diversified Financials 85 103 118 161 168 274 189 266 8 6 6 105 (84) 77 6
Electric Utilities 148 121 177 186 210 218 246 286 6 7 6 8 27 40 3
Fertilizers & Agricultural Chemicals 11 9 18 20 14 18 23 27 1 1 1 3 5 4 0
Gas Utilities 33 22 38 46 63 59 43 52 2 1 1 (3) (17) 9 1
IT Services 505 553 604 610 706 737 696 783 21 20 17 31 (42) 88 7
Media 10 10 13 14 16 17 13 16 0 0 0 1 (5) 3 0
Metals & Mining 90 9 168 273 292 128 19 200 4 1 4 (164) (109) 181 14
Tata Steel 0 (19) 40 80 104 40 (24) 74 1.2 (0.7) 1.6 (63) (64) 98 8
Oil, Gas & Consumable Fuels 650 744 948 917 1,103 716 727 972 20 21 21 (387) 10 245 19
Coal India 137 143 93 70 175 167 126 122 5 4 3 (8) (41) (4) (0)
ONGC 189 174 217 223 296 169 48 91 5 1 2 (127) (121) 43 3
Reliance Industries 236 253 299 350 391 396 412 573 11 12 12 5 17 160 13
Pharmaceuticals 83 91 92 58 71 85 92 115 2 3 2 14 7 23 2
Retailing 8 7 8 11 15 15 9 19 0 0 0 (0) (6) 9 1
Telecommunication Services 80 63 61 44 (1) (6) 61 112 (0) 2 2 (5) 67 50 4
Transportation 12 29 39 38 41 55 38 44 2 1 1 14 (17) 6 1
Nifty-50 Index 2,691 2,797 3,369 3,292 3,715 3,507 3,395 4,672 100 100 100 (208) (112) 1,277 100
Nifty-50 change (%) (4.7) 3.9 20.5 (2.3) 12.8 (5.6) (3.2) 37.6
Nifty-50 EPS (FF) 398 384 439 449 480 463 445 615
We have cut our FY2021-22E revenues, EBITDA and net profits significantly for most sectors
over the past three months to factor in the economic damage of the Covid outbreak. Exhibit
29 compares our current revenue, EBITDA and EPS estimates for FY2021-22E for the major
sectors under our coverage with our pre-Covid estimates (after 3QFY20 results). Exhibit 30
shows the sharp decline in our FY2021-22E ‘EPS’ estimates for the Nifty-50 Index.
Notwithstanding the sharp earnings downgrades, we see a great deal of uncertainty around
the earnings of domestic cyclical and global commodity sectors in an extremely fluid
environment.

Strategy India
Exhibit 29: We have seen sharp cuts in our earnings estimates after Covid outbreak
Sector-wise change in net sales, EBITDA and PAT in KIE coverage stocks after Covid outbreak (%)
Change in net sales (%) Change in EBITDA (%) Change in PAT (%)
Sectors 2021E 2022E 2021E 2022E 2021E 2022E
Automobiles & Components (21) (12) (43) (20) (86) (35)
Banks (7) (11) — — (46) (39)
Building Products (16) (15) (14) (5) (18) (5)
Capital Goods (20) (13) (32) (20) (37) (18)
Commercial & Professional Services (10) (14) (14) (14) (30) (25)
Commodity Chemicals (26) (12) (30) (7) (39) (10)
Construction Materials (28) (19) (39) (23) (40) (13)
Consumer Durables & Apparel (30) (20) (42) (25) (40) (20)
Consumer Staples (8) (6) (11) (5) (12) (6)
Diversified Financials (17) (20) — — (33) (19)
Electric Utilities (2) 0 (1) (1) (7) (2)
Fertilizers & Agricultural Chemicals (1) (1) (8) (7) (16) (13)
Gas Utilities (22) (17) (20) (11) (23) (14)
Health Care Services (15) (5) (34) (4) (87) (16)
Hotels & Restaurants (32) (18) (50) (29) (93) (48)
Insurance (19) (13) — — (17) (6)
Internet Software & Services (31) (21) (51) (24) (48) (25)
IT Services (10) (10) (14) (13) (14) (13)
Media (25) (10) (33) (14) (39) (18)
Metals & Mining (20) (10) (36) (16) (77) (33)
Oil, Gas & Consumable Fuels (33) (17) (29) (17) (38) (24)
Pharmaceuticals (5) (3) (8) (4) (6) (2)
Real Estate (13) (8) (19) (12) (28) (18)
Retailing (24) (12) (39) (16) (50) (13)
Speciality Chemicals (22) (11) (26) (9) (31) (12)
Telecommunication Services (2) 2 8 14 18 (39)
Transportation (54) (37) (69) (29) (140) (37)
KIE universe (21) (13) (24) (12) (40) (23)
Exhibit 30: Our EPS estimates have seen sharp cuts in the past few months
Nifty-50 Index EPS estimates trend, March fiscal year-ends, 2018E-22E (Rs)
2018E 2019E 2020E 2021E 2022E

850
800 794
769
750
700
678
650
600 622
615
550
500 463
480
450 449 445
400
Sep-16
Sep-17
Sep-18
Sep-19
Mar-17
Mar-18
Mar-19
Mar-20
Jun-16
Jun-17
Jun-18
Jun-19
Jun-20
Dec-16
Dec-17
Dec-18
Dec-19
We discuss our earnings projections by sectors and the key drivers of earnings through
FY2022E below. We also examine the key risk factors to earnings by sectors, which is
relevant in a highly uncertain environment.

India Strategy
 Automobiles and components. We expect the automobiles sector to report a loss in

FY2021 due to steep decline in volumes in 1QFY21 reflecting the lockdown in most parts
of the country. We would note that demand conditions were quite weak even before the
outbreak of the Covid pandemic given slowdown in household income growth. The
increased cost of ownership from higher cost of vehicles post implementation of BS-VI
fuel norms from April 1, 2020 and higher prices of diesel and gasoline (see Exhibit 31) will
further dent demand.
Exhibit 31: Diesel and gasoline prices have increased sharply in the recent months
Monthly retail price of diesel and gasoline in Delhi, March fiscal year-ends, 2010-21 (Rs/liter)
Diesel retail price (Rs/liter) Gasoline retail price (Rs/liter)

90
80
70
60
50
40
30
20
Jun-10
Jun-11
Jun-13
Jun-14
Jun-16
Jun-17
Jun-19
Jun-20
Jun-12
Jun-15
Jun-18
Source: Companies, Kotak Institutional Equities
However, the demand impact of Covid will be quite different across sectors—(1) 2-Ws
and tractors demand will hold up better as the rural economy is doing quite well on the
back of higher farm incomes and households may opt for personal transportation given
concerns around public transport, (2) 4-W demand will be significantly impacted as
households will likely postpone their decision to buy 4-Ws given acute income and job
uncertainty and (3) CV demand will impacted by lower freight movement in 1HFY21 and
weaker freight economics on the sharp increase in diesel prices.
We expect a sharp bounce in net profits in FY20222 from Covid-affected FY2021 lows
led by (1) recovery in domestic volumes in the 2-W, 4-W and CV segments in FY2022 and
(2) lower losses at TTMT in FY2022 after large loss in FY2021 due to a sharp decline in
global volumes. Exhibit 32 shows our volume assumptions for the major companies and
categories over FY2018-22E.

Strategy India
Exhibit 32: We expect recovery in domestic volumes in the 2-W, 4-W and CV segments in FY2022 after a sharp decline in FY2021
Domestic PV sales and 2-W sales, March fiscal year-ends, 2018-22E
2018 2019 2020 2021E 2022E

Domestic sales volumes (units)
Ashok Leyland 158,597 185,065 116,320 81,128 114,792
Bajaj Auto
Two wheelers 1,974,577 2,541,320 2,078,348 1,823,942 2,135,202
Three wheelers 369,637 399,453 365,759 324,090 369,404
Eicher Motors
Two wheelers 801,229 801,899 658,286 552,214 679,552
Commercial vehicles 55,876 61,721 43,046 30,132 40,917
Hero Motocorp (motorcycles) 6,499,051 6,893,602 5,828,782 4,663,026 5,595,631
Maruti Suzuki 1,653,500 1,753,790 1,461,126 1,268,988 1,569,143
M&M (passenger vehicles) 234,640 236,900 180,263 136,305 176,884
Tata Motors
Commercial vehicles 399,335 468,692 310,855 192,101 268,941
Passenger vehicles 187,321 210,143 131,197 91,838 103,100
TVS Motors
Two wheelers 2,875,766 3,134,477 2,410,642 1,979,748 2,368,133
Three wheelers 16,429 16,715 11,934 9,547 10,979
Source: SIAM, Kotak Institutional Equities estimates
We expect modest-to-meaningful improvement in FY2021E gross margins for most of the

automobile OEMs and component companies under our coverage. In particular, the
battery and tire companies will benefit meaningfully from lower raw material costs.
However, we expect a moderate decline in FY2021E EBITDA margins of the OEMs given
(1) lower volumes that will result in negative operating leverage and (2) higher costs
related to implementation of new fuel emission standards (BS-VI fuel standards applicable
from April 1, 2020 (see Exhibit 33). We expect EBITDA margin to improve in FY2022 on
the back of increase in volumes (positive operating leverage).
Exhibit 33: We expect EBITDA margin to improve in FY2022 on the back of increase in volumes
Gross margin and EBITDA margin of auto companies, March fiscal year-ends, 2015-22E (%)
Gross margin (%) EBITDA margin (%)
2015 2016 2017 2018 2019 2020 2021E 2022E 2015 2016 2017 2018 2019 2020 2021E 2022E
Amara Raja Batteries 34.1 37.0 34.4 32.1 31.6 35.0 36.1 36.3 16.7 17.8 16.0 14.6 14.0 16.1 16.0 16.8
Apollo Tyres 45.4 49.7 47.7 43.4 42.2 44.4 51.2 46.2 15.1 16.9 14.0 11.1 11.2 11.7 11.2 12.3
Ashok Leyland 26.5 30.3 30.6 30.1 28.8 29.2 26.1 27.0 7.6 11.9 10.9 11.2 10.8 6.7 4.9 8.2
Bajaj Auto 29.2 31.3 31.0 29.5 26.8 28.4 27.4 28.1 19.0 21.2 20.3 19.2 17.1 17.0 17.2 17.6
Balkrishna Industries 51.3 59.8 58.3 54.1 53.9 56.6 57.1 57.2 23.9 31.5 32.0 28.9 26.8 28.5 30.5 30.8
Bharat Forge 47.3 46.5 46.9 46.1 44.0 45.4 46.4 46.2 18.9 20.7 19.6 20.6 20.3 16.6 17.7 19.5
CEAT 38.6 43.6 41.0 39.4 40.1 42.2 46.1 45.3 11.8 14.1 11.4 9.8 9.2 10.7 11.8 11.8
Eicher Motors 34.0 44.4 47.3 48.2 48.4 45.4 43.6 44.0 12.8 27.4 30.9 31.3 29.6 23.8 21.8 24.0
Endurance Technologies 39.6 40.5 42.3 42.4 42.1 46.0 46.3 45.3 12.3 13.0 13.6 14.6 15.0 16.3 15.7 16.9
Escorts 28.5 30.6 31.8 32.6 31.6 33.7 34.0 34.5 3.3 5.2 7.9 11.2 11.8 11.7 11.3 12.1
Exide Industries 36.0 38.1 37.8 34.6 34.2 36.4 38.0 37.8 13.2 14.8 14.3 13.5 13.3 13.8 14.0 14.3
Hero Motocorp 26.9 30.7 32.1 31.1 29.5 30.4 29.2 30.0 12.2 15.4 16.3 16.4 14.7 13.7 12.6 14.0
Mahindra & Mahindra 30.4 31.9 32.3 33.5 31.9 33.4 34.5 35.0 12.5 13.5 13.1 14.8 14.2 14.2 14.0 14.5
Mahindra CIE Automotive 54.0 55.3 59.7 56.2 54.8 51.7 52.3 51.4 7.9 9.4 10.0 12.7 13.1 12.5 10.4 11.6
Maruti Suzuki 29.9 32.7 31.3 31.1 30.8 29.7 28.3 30.8 13.4 15.4 15.2 15.1 12.8 9.7 9.3 12.2
Motherson Sumi Systems 38.3 39.8 39.2 39.0 42.2 42.9 44.9 44.0 9.1 9.5 9.8 9.1 8.4 8.2 7.3 10.2
MRF NA 44.1 44.1 39.1 39.6 40.2 39.8 40.6 NA 21.9 19.6 15.3 14.4 14.6 14.3 15.2
Schaeffler India 38.9 42.6 39.6 39.4 37.0 36.9 38.3 39.1 14.8 17.7 16.5 17.3 16.2 14.5 14.8 16.5
SKF 37.9 37.6 38.2 41.6 41.5 37.0 37.5 38.5 11.7 12.1 12.8 15.8 16.0 12.3 12.9 13.5
Tata Motors 39.1 40.2 38.5 36.3 35.0 36.0 37.7 37.8 14.9 14.0 12.4 10.4 8.5 7.6 4.4 10.0
Timken 40.2 40.0 40.9 41.0 44.2 46.8 46.6 47.0 14.4 15.5 15.0 13.2 17.3 21.9 21.3 21.5
TVS Motor 27.3 28.1 27.0 26.6 24.0 26.1 25.5 26.0 6.0 7.3 7.1 7.7 7.9 8.2 7.7 8.7
Varroc Engineering 38.1 36.2 35.1 37.9 37.4 37.7 38.1 37.6 9.1 7.2 6.3 8.6 9.3 8.1 6.5 10.1

India Strategy
We would note that the decline in margins is largely mathematical as we model average
selling price (ASP) of vehicles to increase to reflect higher costs of raw materials and
components related to upgrades in engine and safety equipment. As an example, gross
profitability of Rs30/unit on Rs100 of ASP results in 30% gross margin while gross
profitability of Rs30/unit on Rs110/unit or Rs120/unit of ASP (depending on the increase
in costs) will result in gross margin of 27.3% or 25%.
 Banks and diversified financials (NBFCs). We model 34% increase in the net profits of
banks and diversified financials in FY2021, followed by another 19% increase in FY2022.
The increase in FY2021 despite a grim macroeconomic outlook reflects our assumption of
(1) decline in loan-loss provisions for PSU banks and certain private banks from high levels
of FY2019-20 pertaining to the large corporate loan book that had seen a big increase in
NPLs and provisions over FY2017-19, which will likely offset our assumption of (2)
increase in loan-loss provisions for banks and NBFCs with high exposure to MFI (urban
poor specifically), MSME and unsecured personal loans.
We would note that most banks and NBFCs under our coverage made large provisions in
4QFY20 in anticipation of increase in credit costs following the Covid pandemic despite a
decline in slippages in 4QFY20 (see Exhibit 34 for GNPLs, NNPLs and slippages for banks
under our coverage). The provision coverage of banks has increased sharply in FY2019-20
(see Exhibit 35) as they created provisions in the large corporate loan book in FY2019-20
and in their retail books in FY2020.
Exhibit 34: Most banks under our coverage made large provisions in 4QFY20 due to Covid pandemic
Trend in gross NPLs, net NPLs and slippages, March fiscal year-ends, 2017-20 (%)
Slippages (%) PCR (%)
2017 2018 2019 1QFY20 2QFY20 3QFY20 4QFY20 2017 2018 2019 1QFY20 2QFY20 3QFY20 4QFY20
Public banks
Bank of Baroda 3.5 6.3 3.7 5.7 4.6 7.4 1.9 57.7 58.4 67.6 64.1 64.4 63.8 68.9
Canara Bank 3.6 7.2 4.1 3.4 2.4 4.5 3.7 36.7 39.9 41.5 41.2 42.9 41.8 50.7
Punjab National Bank 5.4 10.6 5.6 4.7 7.7 6.3 4.7 40.9 43.8 61.7 60.9 58.9 60.3 63.0
State Bank of India 2.7 6.0 2.1 3.1 1.7 3.7 1.5 48.1 50.4 61.9 61.1 62.9 63.5 65.2
Union Bank 5.0 7.5 4.7 3.8 5.2 6.3 3.0 44.1 50.7 58.3 56.5 58.3 56.9 64.7
Old private banks
City Union Bank 2.2 2.3 2.2 2.4 2.5 2.8 5.7 40.1 44.6 39.5 44.3 45.0 45.2 44.9
Federal Bank 1.8 3.0 1.9 1.6 2.0 2.0 1.0 45.5 44.5 50.1 50.7 49.0 46.4 54.5
Karur Vysya Bank 3.3 4.9 5.5 3.7 4.1 3.6 3.4 30.4 38.2 45.6 48.5 51.8 56.0 57.1
New private banks
Axis Bank 5.8 9.0 3.2 3.9 4.0 3.9 3.0 57.0 51.6 62.1 62.5 61.7 59.6 69.0
Bandhan Bank 0.8 2.1 2.6 — — — — 29.1 53.7 72.1 72.7 68.3 58.4 60.8
DCB Bank 2.0 2.2 2.0 2.5 2.7 3.4 2.4 51.1 60.2 65.0 58.9 54.5 52.8 53.5
HDFC Bank 1.5 2.3 2.2 — — — — 68.7 69.8 71.4 69.7 69.7 66.7 72.0
ICICI Bank 7.7 6.2 2.5 1.9 1.7 2.8 3.3 40.2 47.7 70.6 75.1 77.0 77.0 76.6
IndusInd Bank 1.6 2.1 3.7 1.6 2.3 3.9 4.0 58.4 56.3 43.0 43.3 49.5 52.5 63.3
RBL Bank 2.5 1.9 1.7 1.7 9.7 7.2 4.8 46.8 44.8 50.6 52.9 40.7 38.5 44.3
Yes Bank 2.7 6.2 3.9 10.3 10.1 NA NA 46.9 50.0 43.1 43.1 43.1 72.7 73.8
Small finance banks
Au Small Finance Bank 1.9 3.1 3.4 2.5 2.5 2.1 1.2 35.4 37.2 37.3 40.5 43.9 46.8 52.5
Equitas Holdings 4.8 4.0 2.6 2.7 3.5 3.8 2.6 49.0 46.9 43.4 44.0 43.8 43.5 45.2
Ujjivan Small Finance Bank NA 8.7 1.1 0.8 1.4 NA NA 89.1 81.5 71.9 69.0 61.1 60.2 80.0

Strategy India
Exhibit 35: PCR has increased sharply over FY2019-20 for most banks
LLP as a percentage of average loans and provision coverage ratio (excluding write-offs), March fiscal year-ends, 2016-22E (%)
LLP (%) PCR (%)
2016 2017 2018 2019 2020 2021E 2022E 2016 2017 2018 2019 2020 2021E 2022E
Public banks
Bank of Baroda 3.3 2.2 3.4 2.7 2.8 2.0 1.5 52 58 58 68 69 71 68
Canara Bank 3.1 2.1 3.9 3.1 2.5 2.5 2.0 34 37 40 41 51 51 51
Punjab National Bank 4.4 2.9 6.5 6.0 2.8 2.8 2.0 37 41 44 62 58 60 41
State Bank of India 2.2 2.3 3.8 2.6 1.9 1.8 1.7 43 48 50 62 65 71 67
Union Bank 1.5 2.4 4.4 3.8 4.0 3.5 2.8 42 44 51 58 65 72 70
Old private banks
City Union Bank 1.1 1.1 1.2 1.0 2.3 2.0 0.8 37 40 45 39 45 44 51
Federal Bank 1.1 0.9 0.9 0.7 1.0 1.3 1.2 43 46 44 50 54 59 59
Karur Vysya Bank 0.8 1.6 2.8 2.8 2.9 2.0 1.8 58 30 38 46 57 56 56
New private banks
Axis Bank 1.5 3.3 4.0 2.4 3.6 1.6 1.5 57 57 52 62 69 38 37
Bandhan Bank 0.9 0.5 1.4 2.2 2.6 4.0 3.5 45 29 54 72 61 84 90
DCB Bank 0.6 0.8 0.7 0.6 1.0 1.3 1.4 51 51 60 65 54 71 86
HDFC Bank 0.6 0.7 0.9 1.0 1.3 1.5 1.5 70 69 70 71 77 71 74
ICICI Bank 2.7 3.2 3.0 3.1 2.3 1.3 1.2 51 40 48 71 76 82 84
IndusInd Bank 0.8 1.0 0.8 1.8 2.2 3.5 1.7 59 58 56 43 63 59 63
RBL Bank 0.6 0.8 0.9 1.1 3.5 3.5 2.3 40 47 45 51 44 45 46
Yes Bank 0.6 0.6 0.7 2.2 12.5 5.0 0.8 62 47 50 43 74 80 83
Small finance banks
Au Small Finance Bank 0.9 1.6 1.3 0.8 0.8 1.7 1.1 40 35 37 37 52 53 60
Equitas Holdings 1.4 1.8 2.5 1.0 1.9 3.0 2.5 30 49 47 43 46 60 64
Ujjivan Small Finance Bank NA 0.2 4.7 0.5 1.4 2.5 2.5 NA 89 82 72 80 26 37
However, we are not sure if our LLP assumptions adequately factor in the eventual credit
costs. We see upside risks to our credit cost assumptions in the retail loan book of banks
and NBFCs in the event of a prolonged downturn in demand. However, we could see a
positive surprise in the NIMs of the larger banks and NBFCs, which could offset the
aforementioned negatives. We model a meaningful decline in their cost of funds given
large liquidity and weak credit demand, which has resulted in banks being able to (1)
raise cheaper funds in wholesale markets and (2) reduce their retail term deposit rates
(see Exhibit 36 for term deposit rates of SBI). Similarly, the stronger NBFCs will also see
lower cost of funds given the sharp decline in money market rates (see Exhibit 37 for one
year CP and CD rates) and bond yields (see Exhibit 38). Exhibit 39 gives the NIM and RoE
of the major banks and NBFCs under our coverage for FY2015-22E.
Exhibit 36: Retail term deposit rates for SBI have declined in recent months
Deposit rates movement for SBI, March fiscal year-ends, 2018-21 (%)
Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Apr-20 May-20 Jun-20
7-14 days 5.75 5.75 5.75 5.75 5.75 5.75 4.50 4.50 3.50 3.50 2.90 2.90
15-30days 5.75 5.75 5.75 5.75 5.75 5.75 4.50 4.50 3.50 3.50 2.90 2.90
31-45days 5.75 5.75 5.75 5.75 5.75 5.75 4.50 4.50 3.50 3.50 2.90 2.90
46 -90 days 6.25 6.25 6.25 6.25 6.25 6.25 5.50 5.50 4.50 4.50 3.90 3.90
91-120days 6.25 6.25 6.25 6.25 6.25 6.25 5.50 5.50 4.50 4.50 3.90 3.90
120-180 days 6.25 6.25 6.25 6.25 6.25 6.25 5.50 5.50 4.50 4.50 3.90 3.90
181-210 days 6.35 6.35-6.4 6.35 6.35 6.35 6.35 6.00 5.80 5.00 5.00 4.80 4.80
211 days-1year 6.40 6.40 6.40 6.40 6.40 6.40 6.00 5.80 5.00 5.00 4.80 4.80
1 year-2year 6.40 6.40 6.70 6.80 6.80 7.00 6.70 6.25 5.70 5.70 5.10 5.10
2 year-3year 6.50 6.60 6.75 6.80 6.80 6.75 6.70 6.25 5.70 5.70 5.10 5.10
3 years-5 years 6.50 6.70 6.80 6.80 6.80 6.70 6.5-6.6 6.25 5.70 5.70 5.70 5.70
5 years-8 years 6.50 6.75 6.85 6.85 6.85 6.60 6.5-6.6 6.25 5.70 5.70 5.70 5.70
8years-10 years 6.50 6.75 6.85 6.85 6.85 6.60 6.5-6.6 6.25 5.70 5.70 5.70 5.70
Source: Company, Kotak Institutional Equities

10
11
12
13
10
11
8
9
6
7
8
9
Jun-13 Jun-13
26
Sep-13 Sep-13
India
Dec-13 Dec-13
Mar-14 Mar-14
Jun-14 Jun-14
Sep-14 Sep-14
Dec-14 Dec-14
Mar-15 Mar-15
Jun-15 Jun-15
Sep-15 Sep-15
Dec-15 Dec-15
Mar-16 Mar-16
Jun-16 Jun-16
Sep-16 Sep-16
10-y A yield (%)

10-y AAA yield (%)
Dec-16 Dec-16
Mar-17 Mar-17
10
3
4
5
6
7
8
9
Jun-17 Jun-17
Sep-17 Sep-17

Dec-17 Dec-17
Apr-17
Mar-18 Mar-18
Average (%)
Jun-17
Average (%)
Jun-18 Jun-18
Sep-18 Sep-18
Dec-18 Dec-18 Aug-17
Exhibit 38: Bond yields have declined in recent months

Mar-19 Mar-19
Jun-19 Jun-19 Oct-17
Sep-19 Sep-19
Dec-19 Dec-19
Dec-17
Mar-20 Mar-20
Jun-20 Jun-20
Feb-18
10
11
12
13
14
10
11
12
8
9
6
7
8
9
Apr-18
Jun-14 Jun-13
Sep-14 Sep-13 Jun-18
Dec-13
Dec-14
CP rate
Mar-14
Mar-15 Aug-18
Jun-14
Jun-15
Sep-14
Sep-15 Dec-14 Oct-18
Dec-15 Mar-15
Yields of corporate bonds across various credit rating buckets, March fiscal year-ends, 2014-21 (%)
Mar-16 Jun-15 Dec-18
Sep-15
Jun-16
Dec-15 Feb-19
Sep-16
Exhibit 37: Sharp decline in CP and CD rates in recent months
Mar-16
Dec-16
Jun-16
Mar-17
Apr-19
1-month Commercial Paper and Certificate of Deposit rates in India (%)
Sep-16
CD rate
10-y AA yield (%)
10-y BBB yield (%)

Jun-17 Dec-16
Mar-17
Jun-19
Sep-17
Jun-17
Dec-17
Sep-17 Aug-19
Mar-18
Dec-17
Jun-18
Mar-18 Oct-19
Sep-18
Average (%)
Average (%)
Jun-18
Dec-18 Sep-18 Dec-19
Mar-19 Dec-18
Mar-19
Jun-19 Feb-20
Jun-19
Sep-19
Sep-19
Dec-19 Apr-20
Dec-19
Mar-20 Mar-20
Jun-20 Jun-20 Jun-20
KOTAK INSTITUTIONAL EQUITIES RESEARCH

Strategy
Strategy India
Exhibit 39: We expect improvement in NIM and RoEs of PSU and 'corporate' private banks; pressure in NIM and RoEs for NBFCs
NIM and RoE of banks and NBFCs (Ind-AS from FY2019, I-GAAP before that), March fiscal year-ends, 2015-22E (%)
NIM (%) RoE (%)
2015 2016 2017 2018 2019 2020 2021E 2022E 2015 2016 2017 2018 2019 2020 2021E 2022E
Banks
AU Small Finance Bank 12.3 12.2 10.1 6.9 5.4 5.2 5.1 5.2 19 23 55 14 14 18 11 14
Axis Bank 3.5 3.6 3.5 3.1 3.2 3.2 3.2 3.2 18 17 6 0 7 2 11 12
Bandhan Bank NA 6.5 9.8 8.3 9.1 8.4 8.2 7.5 NA 11 29 19 19 22 18 16
Bank of Baroda 2.0 1.9 2.1 2.3 2.6 3.0 2.6 2.9 9 (14) 3 (6) 1 1 6 11
Canara Bank 2.0 1.9 1.8 2.2 2.4 2.0 2.6 2.3 9 (9) 3 (12) 1 (6) 0 3
City Union Bank 3.2 3.5 3.7 4.0 3.9 3.7 3.6 3.6 17 15 15 15 15 9 7 12
DCB Bank 3.7 3.7 3.9 3.8 3.6 3.6 3.6 3.7 14 12 11 11 12 11 10 10
Equitas Holdings 10.5 10.0 9.7 7.9 8.2 8.9 8.7 8.1 11 13 9 1 9 8 7 10
Federal Bank 3.2 3.1 3.2 3.0 3.0 2.9 3.0 3.0 14 6 10 8 10 11 8 9
HDFC Bank 4.4 4.4 4.4 4.4 4.4 4.2 4.1 3.9 19 18 18 18 16 16 15 14
ICICI Bank 3.4 3.5 3.4 3.2 3.3 3.6 3.6 3.6 15 11 11 8 3 7 13 14
IndusInd Bank 3.7 3.8 4.0 4.0 3.8 4.4 4.3 4.6 20 17 16 17 14 15 5 13
Karur Vysya Bank 2.9 3.4 3.6 3.7 3.6 3.5 3.5 3.5 12 13 13 6 3 4 5 8
Punjab National Bank 3.0 2.5 2.3 2.1 2.4 2.3 2.5 2.5 8 (13) 4 (33) (25) 3 2 7
RBL Bank 2.5 2.5 2.9 3.3 3.7 4.5 4.7 4.5 10 11 12 12 12 6 5 9
State Bank of India 3.0 2.8 2.7 2.6 2.7 2.8 3.0 2.9 11 7 6 (3) 0 6 9 10
Ujjivan Small Finance Bank NA NA NA NA 10.0 10.6 10.8 10.6 NA NA NA NA 11 14 10 9
Union Bank 2.4 2.2 2.2 2.1 2.2 2.3 2.8 2.8 10 7 3 (24) (13) (10) (4) 3
NBFCs
Bajaj Finance 11.3 11.4 11.6 9.8 9.8 10.3 10.2 10.4 20 21 22 20 22 20 12 19
Cholamandalam 4.7 5.1 5.1 6.4 6.0 5.9 5.6 5.8 17 18 18 20 21 15 12 16
HDFC 3.8 4.1 3.8 4.6 3.6 5.6 3.2 3.4 21 22 20 21 14 22 13 13
L&T Finance Holdings 6.2 6.2 6.3 4.9 5.7 6.3 5.9 5.8 14 13 14 13 18 15 7 11
LIC Housing Finance 2.3 2.5 2.7 2.3 2.4 2.4 2.1 2.4 16 17 17 16 17 14 10 16
Mahindra & Mahindra Financial 7.4 7.2 6.6 7.4 8.5 8.1 8.3 8.3 15 11 6 13 15 8 9 12
Muthoot Finance 9.5 10.7 13.0 15.1 14.3 15.3 13.4 13.6 14 15 19 25 22 28 22 23
PNB Housing Finance 3.0 3.1 2.9 2.9 2.5 2.4 2.4 2.5 15 18 14 14 17 14 15 15
Shriram City Union Finance 13.7 13.5 13.6 13.5 12.8 12.1 11.9 12.2 16 12 12 13 17 15 7 13
Shriram Transport 7.3 7.7 7.3 7.8 7.8 7.5 7.5 7.9 14 12 12 20 17 15 10 13
 Construction materials. We assume higher profitability for cement stocks under our
coverage for FY2021-22. We note that realizations and profitability have increased
sharply over the past 12 months. Cement prices have held up surprisingly well despite
demand conditions having worsened significantly over the past few months. We expect
capacity utilization to remain low on large supply-demand imbalance through FY2023
(see Exhibit 40).
Exhibit 40: Capacity utilization to remain below 70% through FY2023E

Cement demand-supply balance, March fiscal year-ends, 2017-23E (mn tons)
2017 2018 2019 2020 2021E 2022E 2023E
All-India
Closing installed capacity (mtpa) 455 471 483 506 530 547 564
Incremental installed capacity (mtpa) 21 16 12 23 24 18 16
Effective capacity (mtpa) 455 471 483 506 530 547 564
Incremental effective capacity (mtpa) 21 16 12 23 24 18 16
Capacity growth (%) 4.8 3.5 2.5 4.8 4.7 3.4 3.0
Cement consumption (mn tons) 275 293 333 330 288 332 359
Incremental consumption (mn tons) (3) 18 39 (3) (42) 44 27
Consumption growth (%) (1.2) 6.5 13.4 (0.8) (13) 15.3 8.1
Cement production (mn tons) 280 298 337 334 293 337 364
Incremental production (mn tons) (3) 18 39 (3) (42) 44 27
Growth (%) (1.2) 6.3 13.3 (0.8) (12) 15.1 8.0
Capacity utilization (%) 61 63 70 66 55 62 65
Source: CMA, Kotak Institutional Equities estimates

India Strategy
Exhibit 41 compares the historical profitability (Rs/ton) with our assumptions for FY2021-
23E. We would note that cement companies’ earnings have very high sensitivity to
profitability assumptions. Exhibit 42 shows the FY2021-23E EPS of the cement companies
under our coverage at various levels of profitability (Rs100/ton higher and lower versus
our base-case profitability estimates).
Exhibit 41: We model a sharp recovery in the profitability of cement companies under our coverage
Profitability (EBITDA/ton) of cement companies, March fiscal year-ends, 2015-23E (Rs/ton)
Profitability (Rs/ton) Growth (% yoy)
2015 2016 2017 2018 2019 2020 2021E 2022E 2023E 2015 2016 2017 2018 2019 2020 2021E 2022E 2023E
ACC 623 651 641 728 718 834 817 868 863 10 5 (1) 14 (1) 16 (2) 6 (1)
Ambuja Cements 899 712 797 840 782 897 846 947 988 13 (21) 12 5 (7) 15 (6) 12 4
J K Cement 635 662 1,007 820 822 1,209 1,183 1,312 1,328 8 4 52 (19) 0 47 (2) 11 1
JK Lakshmi Cement 567 329 475 457 413 750 648 732 749 6 (42) 44 (4) (9) 81 (14) 13 2
Orient Cement 725 398 321 521 479 651 613 674 756 48 (45) (19) 62 (8) 36 (6) 10 12
Shree Cement 753 789 1,145 1,084 972 1,474 1,410 1,623 1,608 13 5 45 (5) (10) 52 (4) 15 (1)
Ultratech Cement 899 980 1,005 840 870 1,165 1,161 1,347 1,412 8 9 3 (16) 4 34 (0) 16 5
Exhibit 42: Earnings of cement companies are highly sensitive to cement profitability assumptions
EPS sensitivity of cement companies for change in EBITDA/ton, March fiscal year-ends, 2021E-23E
(EBITDA: -Rs100/ton) Base Case (EBITDA: +Rs100/ton)
2021E 2022E 2023E 2021E 2022E 2023E 2021E 2022E 2023E
ACC
Volumes (mn tons) 23.1 28.9 31.8 23.1 28.9 31.8 23.1 28.9 31.8
EBITDA/ton (Rs) 717 768 763 817 868 863 917 968 964
EBITDA (Rs bn) 16.6 22.1 24.2 18.9 25.1 27.4 21.2 28.0 30.7
PAT (Rs bn) 8.3 11.7 12.1 9.8 13.7 14.3 11.4 15.7 16.5
EPS (Rs) 72.3 44.0 62.2 72.3 52.3 72.7 72.3 60.5 83.3
Ambuja standalone
Volumes (mn tons) 19.1 23.9 27.5 19.1 23.9 27.5 19.1 23.9 27.5
EBITDA/ton (Rs) 746 847 888 846 947 988 946 1,047 1,088
EBITDA (Rs bn) 14.3 20.2 24.3 16.2 22.7 27.2 18.1 25.1 30.1
PAT (Rs bn) 9.3 13.3 15.8 10.7 15.2 18.0 12.1 17.0 20.1
EPS (Rs) 4.7 6.7 8.0 5.4 7.6 9.0 6.1 8.6 10.1
Shree Cement
Volumes (mn tons) 22.4 28.0 30.8 22.4 28.0 30.8 22.4 28.0 30.8
EBITDA/ton (Rs) 1,310 1,523 1,509 1,410 1,623 1,608 1,510 1,723 1,708
EBITDA (Rs bn) 29.4 42.7 46.4 31.6 45.5 49.6 33.8 48.3 52.8
PAT (Rs bn) 11.1 20.6 22.6 12.8 22.9 25.1 14.6 25.1 27.7
EPS (Rs) 307 571 627 355 634 697 404 697 767
Ultratech
Volumes (mn tons) 75.8 93.1 101.9 75.8 93.1 101.9 75.8 93.1 101.9
EBITDA/ton (Rs) 1,034 1,215 1,281 1,134 1,316 1,380 1,234 1,416 1,480
EBITDA (Rs bn) 78.7 113.2 130.0 85.9 122.5 140.6 93.2 131.9 151.2
PAT (Rs bn) 28.3 51.9 69.0 33.4 58.5 76.4 38.6 65.1 83.9
EPS (Rs) 98 180 239 116 203 265 134 226 291
We note that cement stocks trade at high multiples (see Exhibit 43) despite our
assumption of strong growth in EBITDA/EPS for the cement stocks over FY2020-22E.

Strategy India
Exhibit 43: Cement stocks trade at high multiples despite our assumption of super-normal profitability in FY2020-22E
Valuation summary of cement stocks under KIE coverage, March fiscal year-ends, 2020-22E
EPS (Rs) EPS growth (%) P/E (X) EV/EBITDA (X) P/B (X)
Company 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E
ACC 72 52 73 36 (28) 39 18 25 18 8 11 8 2.2 2.1 2.0
Ambuja Cements 10.6 7.5 10.7 49 (29) 43 18 26 18 6 8 6 1.6 1.5 1.4
Dalmia Bharat 14 2 19 (12) (85) 844 51 347 37 7 8 6 1.3 1.3 1.2
J K Cement 64 52 92 84 (19) 78 22 27 15 11 11 8 3.6 3.2 2.7
JK Lakshmi Cement 23 11 23 478 (54) 118 11 24 11 5 7 5 1.8 1.7 1.5
Orient Cement 4.2 2.5 5.4 82 (41) 117 17 28 13 7 8 6 1.3 1.3 1.2
Shree Cement 435 355 634 35 (18) 78 52 64 36 22 25 17 6.4 6.0 5.2
Ultratech Cement 133 116 203 45 (13) 75 29 34 19 14 15 10 2.9 2.7 2.4
 Consumer products. We expect the consumer product companies to report a decline in

revenues in FY2021 with several likely to show meaningful decline in revenues following
the extended and extensive lockdown in 1QFY21. The latter would be more applicable for
categories such as (1) beverages and personal care products in the consumer staples
sector where demand will be ‘lost’ and (2) apparels, consumer durables and paints where
demand will be postponed to FY2022 as households will look to conserve cash and cut
discretionary spending.
We expect a sharp rebound in revenue growth in FY2022 on the back of low base in
FY2021 and revenue growth to return to long-term trend of high single-digit growth
from FY2023 led by (1) modest 3-5% volume growth in most cases and (2) moderate
increase in prices. Exhibit 44 gives the revenue growth assumption for various consumer
product companies under our coverage for FY2017-23E.
Exhibit 44: We expect strong double-digit growth in revenues of consumer companies in FY2022-23E after declines in FY2021E
Revenue and growth of consumer product companies under coverage, March fiscal year-ends, 2017-23E (%)
Revenues (Rs bn) Growth yoy (%)

2017 2018 2019 2020 2021E 2022E 2023E 2017 2018 2019 2020 2021E 2022E 2023E
Asian Paints 151 170 193 202 162 231 263 6 13 14 4 (20) 43 14
Avenue Supermarts 119 150 200 249 276 395 486 39 26 33 24 11 43 23
Bajaj Consumer Care 8 8 9 9 8 9 9 (0) 4 11 (7) (6) 8 7
Berger Paints 46 52 61 64 55 74 84 8 13 17 5 (14) 35 14
Britannia Industries 91 99 111 116 134 145 160 8 9 12 5 16 8 10
Colgate-Palmolive (India) 40 42 45 45 46 52 58 3 5 7 1 1 13 12
Dabur India 77 77 85 87 90 104 116 (2) 1 10 2 4 15 11
Godrej Consumer Products 93 98 103 99 100 116 128 10 6 5 (4) 1 16 10
Hindustan Unilever 319 345 382 388 435 500 564 3 8 11 1 12 15 13
ITC 401 406 450 456 440 466 506 10 1 11 1 (4) 6 9
Jubilant Foodworks 26 30 36 39 35 46 54 6 17 18 10 (10) 32 16
Jyothy Laboratories 17 17 18 17 18 20 22 6 (1) 8 (6) 7 8 10
Kansai Nerolac 40 46 52 49 35 54 61 7 15 13 (4) (30) 55 14
Marico 59 63 73 73 72 80 89 (2) 7 16 (0) (2) 12 11
Nestle India 91 100 112 123 139 155 173 12 10 13 10 13 12 11
Page Industries 21 26 29 29 27 32 36 19 20 12 3 (9) 19 13
Pidilite Industries 56 61 71 73 59 82 93 5 8 16 3 (20) 39 14
S H Kelkar and Company 10 10 10 11 10 12 13 6 4 2 7 (6) 11 9
Tata Consumer Products 68 68 73 96 102 111 119 2 1 6 33 5 9 8
Titan Company 133 161 198 211 172 238 283 18 22 23 6 (18) 38 19
United Breweries 47 56 65 65 49 70 78 (2) 19 15 1 (24) 42 13
United Spirits 85 82 90 91 82 100 110 4 (4) 10 1 (10) 22 10
Varun Beverages 39 40 51 71 69 91 100 14 4 28 40 (3) 32 10

India Strategy
We assume modest increase in gross and EBITDA margins over FY2021-23 in most cases
(see Exhibit 45) given that the companies’ margins have already expanded sharply over
the past few years on favorable raw material and taxation changes. However, we note
that a significant part of the increase in EBITDA margin for FY2020 reflects adoption of
Ind-AS 116 accounting standard from April 1, 2019 with respect to treatment of
operating leases. The change in accounting treatment results in higher reported EBITDA
though lower operating expenses but also higher depreciation as leased assets are treated
as part of the company’s balance sheet.
Exhibit 45: We assume modest increase in gross and EBITDA margins over FY2021-23 in most cases
Gross and EBITDA margins of consumer companies, March fiscal year-ends, 2015-23E (%)
2015 2016 2017 2018 2019 2020 2021E 2022E 2023E 2015 2016 2017 2018 2019 2020 2021E 2022E 2023E
Asian Paints 43.8 43.6 44.7 42.9 41.4 43.7 44.3 44.5 44.1 15.8 19.4 19.8 19.6 18.2 20.6 19.5 22.8 22.5
Avenue Supermarts 14.8 14.9 15.3 15.9 15.0 15.1 14.5 15.0 15.0 7.1 7.7 8.2 9.0 8.2 8.6 7.7 9.3 9.4
Bajaj Consumer Care 61.7 62.7 66.2 67.5 67.0 67.9 68.0 67.9 67.9 29.0 34.2 33.1 30.6 29.9 24.1 23.5 22.8 23.1
Berger Paints 39.3 41.5 43.1 41.7 39.0 41.2 41.7 42.1 43.2 12.2 15.3 15.8 15.6 14.5 17.0 17.7 18.2 19.4
Britannia Industries 40.3 40.3 38.3 38.4 40.6 40.3 41.6 41.4 41.5 11.0 14.5 14.1 15.1 15.7 15.9 18.3 17.8 18.2
Colgate-Palmolive (India) 63.1 61.8 62.9 64.4 65.1 65.2 65.6 65.7 65.8 20.6 24.3 23.7 26.6 27.7 26.6 27.9 28.7 29.1
Dabur India 52.5 51.1 50.1 50.4 49.5 49.9 50.3 50.9 51.0 16.8 19.3 19.6 20.9 20.4 20.6 21.7 22.4 22.8
Godrej Consumer Products 53.6 54.1 55.4 56.6 55.8 57.0 57.9 58.2 58.5 16.5 19.4 20.5 21.0 20.5 21.6 22.7 23.7 24.1
Hindustan Unilever 49.2 50.7 50.8 53.0 53.0 54.1 56.5 57.1 57.5 16.6 18.3 19.0 21.1 22.6 24.8 26.7 28.6 29.3
ITC 59.8 63.2 60.1 61.1 61.5 62.2 61.2 62.7 62.7 36.9 37.5 36.4 38.3 38.5 39.2 36.9 40.5 40.8
Jubilant Foodworks 74.8 76.2 75.6 74.6 75.1 75.0 75.3 75.3 75.4 12.2 10.8 9.3 14.6 16.8 22.3 19.1 23.4 23.7
Jyothy Laboratories 48.5 47.5 46.9 47.7 46.5 47.4 47.9 48.2 48.3 12.4 15.0 15.3 15.4 15.5 14.7 16.3 16.1 16.4
Kansai Nerolac 31.8 37.2 41.4 39.5 36.2 38.1 40.3 41.2 41.1 12.8 15.5 18.3 17.2 14.3 15.8 14.3 18.3 18.7
Marico 45.6 49.0 52.2 47.0 45.2 48.8 48.7 48.9 49.1 15.2 17.5 19.6 18.0 17.5 20.1 21.0 21.5 21.7
Nestle India 53.9 57.3 57.2 56.5 59.1 57.5 57.1 58.3 58.5 20.9 19.6 21.7 21.7 23.7 22.9 24.2 24.7 25.1
Page Industries 53.7 61.8 59.5 57.4 58.0 55.5 57.0 57.3 57.4 20.7 20.9 19.4 21.2 21.6 18.1 18.4 20.6 20.9
Pidilite Industries 44.9 51.8 53.0 52.5 49.3 53.4 55.2 54.5 54.5 15.9 21.9 22.4 22.1 19.3 21.6 21.3 23.7 24.1
S H Kelkar and Company 44.9 44.5 45.4 44.9 43.4 43.4 42.9 43.2 43.3 14.1 16.2 16.9 15.5 12.7 14.2 14.3 15.7 16.1
Tata Consumer Products 52.0 45.4 47.5 45.7 44.7 43.9 44.4 44.4 44.6 9.7 9.9 11.7 12.3 10.8 13.4 13.7 14.5 15.0
Titan Company 26.5 27.5 28.3 27.5 27.2 28.0 28.1 29.1 29.6 9.6 8.3 8.7 10.2 10.8 11.7 9.6 12.1 12.8
United Breweries 59.6 56.1 53.9 53.2 53.6 51.6 52.0 52.7 53.2 13.3 14.3 13.6 16.1 17.6 13.5 8.4 15.8 16.8
United Spirits 40.8 41.3 42.9 47.5 48.8 44.8 43.1 44.5 45.3 7.4 10.7 11.4 12.5 14.3 16.6 15.2 17.2 17.9
Varun Beverages 45.0 49.4 55.0 54.8 56.0 54.8 57.3 55.8 56.0 15.4 18.8 20.6 20.9 19.7 20.3 20.3 21.4 21.8
 IT services. We expect net profits of IT stocks in the Nifty-50 Index to decline 6% in

FY2021 from 4% growth in FY2020 as we expect (1) a decline in revenues from certain
affected sectors such as hospitality, retailing, travel and tourism, (2) slowdown in
revenues from the BFSI sector, (3) postponement of certain portion of discretionary
spending by clients and (4) travel-related disruptions, which may affect deal closures. This
will offset the benefits of a weaker INR; we model INR-USD rate at Rs75.5/US$ for
FY2021 versus Rs70.9/US$ in FY2020 and Rs69.9/US$ in FY2019. However, we could see
earnings upgrades in the case of stronger-than-expected recovery in the US and also,
from currency benefits (INR is currently around Rs76/US$).
We expect IT companies to deliver 13% growth in net profits in FY2022 led by high-
single digit revenue growth (around 8% US$ revenue growth for most of the Tier-1 IT
companies) and modest improvement in margins. Exhibit 46 gives the key volume and
profitability assumptions for the IT stocks in the Nifty-50 Index.

Strategy India
Exhibit 46: We expect revenue decline in FY2021E followed by sharp recovery in FY2022E
Assumptions built into our models for the Tier-I Indian IT companies, March fiscal year-ends, 2018-23E
2018 2019 2020 2021E 2022E 2023E 2018 2019 2020 2021E 2022E 2023E
HCL Tech Infosys
Revenues (US$ mn) 7,838 8,632 9,936 9,640 10,380 11,083 Revenues (US$ mn) 10,939 11,799 12,781 12,237 13,450 14,686
US$ revenue growth yoy (%) 12.4 10.1 15.1 (3.0) 7.7 6.8 US$ revenue growth yoy (%) 7.2 7.9 8.3 (4.3) 9.9 9.2
Volume growth yoy (%) 8.4 8.3 15.4 4.6 6.6 (24.1) Volume growth yoy (%) 0.6 9.3 10.6 0.5 10.1 9.1
Pricing change (%) Pricing change (%)
Onsite 5.9 3.3 3.1 (0.1) 0.9 0.6 Onsite 0.7 0.8 (1.0) (5.1) 0.0 0.5
Offshore 2.9 (0.7) (0.5) 0.1 1.0 0.6 Offshore 5.8 (2.5) (2.1) (4.5) 0.0 0.5
Blended 3.7 1.7 (0.3) (7.2) 1.0 40.7 Blended 4.3 (1.9) (2.0) (4.8) (0.1) 0.1
Directs costs (as % of revenues) 65.7 65.0 64.1 64.3 64.1 64.9 Directs costs (as % of revenues) 61.4 62.7 63.7 64.0 63.7 63.6
SG&A expenses (as % of revenues) 11.7 11.9 12.3 12.8 12.8 12.8 SG&A expenses (as % of revenues) 11.7 12.0 11.8 11.6 11.6 11.4
EBIT margin (%) 19.7 19.5 19.6 18.3 18.9 18.4 EBIT margin (%) 24.3 22.8 21.3 21.1 21.5 22.0
Net income (Rs mn) 87,783 100,854 110,521 103,423 116,480 122,553 Net income (Rs mn) 145,960 157,262 165,950 159,840 179,546 202,767
Re/US$ rate (average) 64.5 70.0 71.1 73.8 74.0 74.0 Re/US$ rate (average) 64.5 70.1 71.0 75.5 76.0 77.0
2018 2019 2020 2021E 2022E 2023E 2018 2019 2020 2021E 2022E 2023E
L&T Infotech TCS
US$ revenue growth yoy (%) 16.7 19.1 13.0 0.5 14.4 13.7 US$ revenue growth yoy (%) 8.6 9.6 5.3 (4.5) 9.7 9.2
Volume growth yoy (%) 16.1 18.3 13.8 3.3 11.9 13.1 Volume growth yoy (%) 8.1 5.8 4.9 (0.8) 10.0 8.8
Onsite (0.0) 8.4 5.9 0.2 0.5 0.5 Onsite 1.0 2.6 0.7 (4.4) 0.6 1.0
Offshore 3.2 (3.0) (5.1) (5.0) 0.5 0.5 Offshore (0.0) 3.1 0.0 (4.5) 0.6 1.0
Blended 0.5 0.7 (0.7) (2.7) 2.3 0.5 Blended 0.2 4.4 0.4 (4.1) (0.3) 0.5
IT services EBIT margin (%) 14.1 18.4 16.1 15.7 15.3 15.9 EBIT margin (%) 24.8 25.6 24.6 23.7 24.3 24.2
2018 2019 2020 2021E 2022E 2023E 2018 2019 2020 2021E 2022E 2023E
Tech Mahindra Wipro
US$ revenue growth yoy (%) 9.6 4.2 4.3 (5.1) 9.4 7.6 US$ revenue growth yoy (%) 4.6 1.6 0.8 (5.3) 4.0 3.0
Volume growth yoy (%) 8.2 4.8 7.7 (5.9) 10.0 7.5 Volume growth yoy (%) 5.8 4.1 0.7 3.1 3.9 2.1
Onsite 1.5 3.3 0.0 (3.5) 0.5 1.0 Onsite (0.1) (1.3) (2.3) (5.8) - 0.5
Offshore (1.0) (1.1) (2.4) 1.0 0.9 1.1 Offshore 0.5 (4.8) 0.5 (6.5) - 0.5
Blended 1.3 (0.6) (3.2) 0.8 (0.5) 0.0 Blended 0.3 (3.9) 0.1 (7.4) 0.5 0.7
EBIT margin (%) 11.8 15.0 11.6 10.2 12.4 13.1 IT services EBIT margin (%) 15.8 17.1 17.9 16.4 16.7 16.6
 Metals & mining. We expect the net profits of the metal stocks in the Nifty-50 Index to
decline 85% in FY2021 led by (1) lower volumes and (2) weaker metal prices and
profitability, which will offset the benefits of a weaker currency. The decline would have
been sharper but for large loss of Tata Steel in FY2020. Tata Steel Europe’s FY2020
profitability stood at (-)US$10/ton. We expect this to decline further to US$24/ton in
FY2021, which is still below FY2019 EBITDA/ton of US$81/ton.
However, we expect the metal sector to show strong growth in net profits in FY2022 led
by recovery in realizations and profitability on (1) normalization of current weak global
demand conditions (due to the Covid-19 issue) and (2) sharp improvement in domestic
demand reflecting recovery in demand from the Indian automobiles and construction
sectors.
We assume a moderate recovery in global metal prices from current low levels. However,
our FY2021E metal price assumptions are significantly lower than FY2020 average prices
and our FY2022E price assumptions are modestly lower than FY2020 average prices. In
other words, we do not expect metal prices and profitability to recover to FY2020 levels
in FY2022 also. Exhibit 47 gives our price and profitability assumptions and Exhibit 48 our
volume assumptions for the metal stocks under our coverage.

India Strategy
Exhibit 47: Our price assumptions may be at risk despite building a steep decline in prices in FY2021
Price assumptions for metal companies, March fiscal year-ends, 2018-22E (US$/ton)
Price assumptions Historical prices
2018 2019 2020 2021E 2022E Spot 5-year avg.
Non-ferrous
Hindalco Industries
Aluminum prices (all-in) 2,042 2,050 1,750 1,575 1,700 1,712 1,650
Hindustan Zinc
Lead (LME) 2,379 2,121 1,952 1,653 1,755 1,763 2,089
Zinc (LME) 3,057 2,743 2,402 1,900 1,950 2,037 2,000
Nalco
Vedanta
Lead (LME) 2,379 2,121 1,952 1,653 1,755 1,763 2,089
Zinc (LME) 3,057 2,743 2,402 1,900 1,950 2,037 2,000
Ferrous
JSW Steel
HRC price (domestic) 604 647 566 452 540 518 551
NMDC
Iron ore fines (Rs/ton) 2,270 2,860 2,652 2,616 2,632 2,827 2,366
Iron ore lumps (Rs/ton) 2,544 3,238 2,900 2,864 2,880 3,175 3,089
Tata Steel
HRC price (domestic) 618 663 574 527 578 518 557
Source: Bloomberg, Company, Kotak Institutional Equities estimates
Exhibit 48: Volumes of metal companies to increase moderately over FY2020-22

Volume assumptions of metal companies, March fiscal year-ends, 2018-22E ('000 tons)
Volume assumptions
2018 2019 2020 2021E 2022E
Non-ferrous
Hindalco Industries
Aluminum ('000 tons) 1,281 1,274 1,290 1,238 1,276
Copper ('000 tons) 20 20 20 15 15
Hindustan Zinc
Lead 168 198 180 209 219
Zinc 791 696 680 738 845
Nalco
Aluminum 426 441 391 442 442
Vedanta
Aluminum ('000 tons) 1,597 1,977 1,922 1,937 2,000
Lead 168 198 180 209 219
Zinc 791 696 680 738 845
Iron ore sales ('000 dmt) 7,600 3,800 6,600 4,500 4,500
Oil—gross ('000 boe/d) 186 189 173 191 209
Ferrous
Jindal Steel and Power
Finished steel sales (mn tons) 4 5 6 6 7
JSW Steel
Finished steel sales ('000 tons) 15,622 15,760 15,080 14,508 17,049
NMDC
Iron ore sales ('000 dmt) 36,075 32,361 31,530 28,000 31,000
Tata Steel
Steel deliveries (Standalone) 12,150 12,690 12,690 11,190 13,240
Steel deliveries (Europe) 9,990 9,640 9,579 7,877 9,583
Source: Company data, Kotak Institutional Equities estimates

Strategy India
 Oil, gas and consumable fuels. We expect the profits of the oil, gas and consumable
fuels sector to grow 1% in FY2021 on the back of (1) sharply lower crude oil prices for
the upstream companies; we model crude oil (Dated Brent basis) price at US$40/bbl for
FY2021 and US$45/bbl for FY2022 versus US$60.9/bbl in FY2020 and (2) lower volumes
due to the extensive lockdown in 1QFY21, which will translate into lower demand for
coal and transportation fuels. However, we expect the downstream oil companies (BPCL,
IOCL) to report a sharp rebound in profits as their FY2020 reported net profits were
depressed by large adventitious and inventory losses in 4QFY20 due to the collapse in
crude prices in March 2020.
We expect net profits to grow 34% in FY2022 led by our assumptions of (1) higher
profits of RIL’s telecom business due to further increase in ARPUs, (2) higher crude oil
prices, which will lead to a sharp upswing in the profits of ONGC and (3) higher refining
margins for BPCL, IOCL and RIL due to improved supply-demand balance. Nonetheless,
we have a cautious outlook on global refining margins given large supply-demand
imbalance. Our refining margin assumptions for FY2022-23 are considerably lower than
FY2018-19 refining margins. FY2020 refining margins were depressed by large
adventitious and inventory losses in 4QFY20.
 Downstream oil companies. We note that the profits of the downstream oil
companies have very high sensitivity to refining margin assumptions as can be seen in
Exhibit 49. We assume higher refining margins for FY2021-22 versus FY2020 levels but
that is entirely due to large adventitious and inventory losses in FY2020. Refining
margins are very weak currently (see Exhibit 50).
Exhibit 49: Earnings of downstream companies have high sensitivity to changes in refining margins
Change in standalone EPS estimates, March fiscal year-ends, 2021E-23E (Rs)
2021E 2022E 2023E

BPCL HPCL IOCL BPCL HPCL IOCL BPCL HPCL IOCL
Sensitivity to refining margin
Refining margins (US$/bbl) 3.1 2.7 3.2 4.0 3.5 4.1 4.5 4.2 4.5
Current EPS estimates 25.7 23.9 9.8 33.0 26.5 13.2 35.8 29.2 13.9
Refining margin lower by US$1/bbl 20.1 19.7 7.1 26.3 20.8 10.0 28.9 22.6 10.6
Change (%) (22) (18) (28) (20) (21) (25) (19) (23) (24)
Refining margin higher by US$1/bbl 31.3 28.2 12.6 39.7 32.2 16.5 42.6 35.7 17.2
Change (%) 22 18 28 20 21 25 19 23 24
Exhibit 50: Reuters Singapore refining margins declined in the recent weeks
Singapore refining margins (US$/bbl)
(US$/bbl) Singapore simple refining margins Singapore complex refining margins Reuters Singapore refining margins
15
12
(3)
(6)
Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20
Source: Argus, Kotak Institutional Equities estimates

India Strategy
We see downside risk to our marketing margin assumptions in the event of a sharp
increase in crude oil prices. The government has increased excise duty on diesel and
gasoline sharply to take advantage of low global prices. The downstream oil companies
have so far managed to raise retail fuel prices to match the recent increase in global
crude oil prices. However, we are not sure they can continue to raise prices beyond a
point given that current retail prices are at historical highs despite crude oil prices being
quite low. We keep marketing margins on diesel and gasoline at Rs2.7/liter in FY2021
and FY2022, same as in FY2020. Exhibit 51 shows the sensitivity of the downstream oil
companies to marketing and refining margins.
Exhibit 51: Earnings of downstream companies have high sensitivity to changes in marketing margins
Change in standalone EPS estimates, March fiscal year-ends, 2021E-23E (Rs)
2021E 2022E 2023E

BPCL HPCL IOCL BPCL HPCL IOCL BPCL HPCL IOCL
Sensitivity to marketing margin
Marketing margin on auto fuels (Rs/liter) 2.7 2.7 2.7 2.7 2.7 2.7 2.7 2.7 2.7
Current EPS estimates 25.7 23.9 9.8 33.0 26.5 13.2 35.8 29.2 13.9
Marketing margin lower by Rs0.5/liter 19.8 17.1 7.6 26.2 18.6 10.7 28.6 20.9 11.2
Change (%) (23) (29) (22) (21) (30) (19) (20) (28) (19)
Marketing margin higher by Rs0.5/liter 31.6 30.8 12.0 39.8 34.4 15.8 42.9 37.5 16.6
Change (%) 23 29 22 21 30 19 20 28 19
 Upstream oil & gas companies. We see modest upside risks to our earnings estimates
for GAIL, OIL and ONGC (GAIL and ONGC are relevant from the perspective of the
Nifty-50 Index) in the event of higher-than-expected oil prices. Current crude oil prices
(Dated Brent) are around US$40/bbl, not very different from our FY2021 and FY2022
crude price assumption of US$40/bbl and US$45/bbl. Exhibit 52 shows the sensitivity of
FY2021E EPS of GAIL, OIL and ONGC to various levels of crude oil prices.
Exhibit 52: Upstream companies to benefit from a recovery in crude prices

EPS of GAIL, OIL and ONGC under various scenarios of crude prices, March fiscal year-end, 2021E
Base-case 2021E
Dated Brent (US$/bbl) 40.0 20 25 30 35 40 45 50 55 60 65 70
GAIL
EPS 9.5 7.2 7.8 8.4 8.9 9.5 10.0 10.6 11.1 11.7 12.2 12.8
OIL
Net realized price (US$/bbl) 39 19 24 29 34 39 44 49 54 59 64 70
EPS 3.0 (12.3) (8.4) (4.6) (0.8) 3.0 6.8 10.6 14.4 18.2 22.0 25.8
ONGC
Net realized price (US$/bbl) 39 18 24 29 34 39 44 49 55 60 65 70
EPS 3.8 (12.7) (8.6) (4.4) (0.3) 3.8 7.9 12.1 16.2 20.3 24.4 28.6
 Pharmaceuticals. We expect 8% and 25% growth in the net profits of the

pharmaceuticals sector in FY2021 and FY2022 on the back of (1) new launches of generic
products in the US, which will drive US generic revenues and overall, revenues and profits,
(2) strong increase in revenues of Sun’s specialty products, which would drive its overall
revenues and (3) steady growth in domestic pharmaceutical revenues of all the major
companies.
We expect US generic revenues to recover sharply over FY2021-22 (see Exhibit 53 on the
back of new launches by all the major companies in FY2020-21. The revival in US generic
revenues from 2QFY19 has continued over the past six quarters as all the major companies
have launched new products and will launch several more over the next few quarters.

Strategy India
Exhibit 53: We expect a steady pickup in US generic revenues of pharmaceutical companies under our coverage from FY2020
US revenues for pharmaceuticals companies, March fiscal year-ends, 2017-22E
US revenues (US$ mn) Yoy growth (%)

2017 2018 2019 2020 2021E 2022E 2017 2018 2019 2020 2021E 2022E
Aurobindo 1,020 1,156 1,299 1,622 1,662 1,786 8 13 12 25 2 7
Cipla 6 401 500 555 558 632 17 6,742 25 11 1 13
Dr Reddy's 951 926 863 889 1,008 1,211 (18) (3) (7) 3 13 20
Lupin 1,207 898 778 800 901 1,045 32 (26) (13) 3 13 16
Torrent 201 164 229 209 211 218 (51) (18) 39 (9) 1 3
Sun Pharma 2,056 1,354 1,526 1,463 1,530 1,580 (1) (34) 13 (4) 5 3
Taro 784 545 541 479 441 442 (9) (30) (1) (12) (8) 0
Ex-Taro Sun 1,271 809 985 984 1,089 1,138 6 (36) 22 (0) 11 4
However, we would note that stocks are largely discounting FY2022E earnings given the
steep increase in their prices over the past few months. Exhibit 54 shows the EPS, EBITDA
and valuations of the major pharmaceutical companies under our coverage. Also,
FY2023E earnings are somewhat uncertain as further growth beyond FY2022 will depend
on the launch of new products. The revenues of products launched over FY2020-21 will
peak in FY2021 or FY2022 depending on the product.
Exhibit 54: Most pharmaceuticals stocks are trading around their 'fair' valuations
Valuation summary of pharmaceuticals stocks under KIE coverage, March fiscal year-ends, 2020-22E
EPS (Rs) EBIDTA (Rs mn) EPS growth (%) P/E (X) EV/EBITDA (X) P/B (X)
Company 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E
Aurobindo Pharma 48 51 56 48,643 50,769 55,768 19 6 9 16 15 14 10 9 8 2.7 2.4 2.1
Biocon 6.2 8.2 10.0 16,031 21,306 25,996 2 32 22 63 48 39 29 22 18 6.4 5.8 5.2
Cipla 19 27 32 32,114 38,265 43,995 1 39 20 34 24 20 16 14 11 3.2 3.0 2.7
Dr Reddy's Laboratories 176 147 188 50,318 43,890 54,911 76 (16) 28 22 27 21 13 15 11 4.2 3.7 3.2
Laurus Labs 24 35 38 5,645 7,196 8,258 118 45 10 22 15 14 12 9 8 3.2 2.6 2.2
Lupin 21.7 31.8 45.8 23,549 29,468 39,194 4 46 44 41 28 20 16 12 9 3.2 2.9 2.6
Sun Pharmaceuticals 17 19 24 69,742 78,028 90,825 4 15 25 28 25 20 15 13 10 2.5 2.3 2.1
Torrent Pharmaceuticals 57 70 86 21,700 24,447 27,877 23 22 22 41 33 27 20 17 14 8.2 7.1 6.1
Model portfolio: No changes

Exhibit 55 is our recommended large-cap. model portfolio and Exhibit 56 is our recommended
mid-cap. model portfolio.

India Strategy
Exhibit 55: We recommend large-cap. stocks in banks, consumer staples, IT services and telecommunication services
KIE large-cap. model portfolio
Price (Rs) KIE weight Price (Rs) KIE weight

Company 2-Jul-20 (%) 2-Jul-20 (%)
Automobiles & Components Insurance
Bajaj Auto 2,879 2.0 ICICI Prudential Life 425 2.1
Mahindra & Mahindra 530 2.7 SBI Life Insurance 814 1.9
Automobiles & Components 4.7 Insurance 4.0
Banks IT Services
Axis Bank 423 5.0 HCL Technologies 569 2.9
HDFC Bank 1,090 8.8 Infosys 757 7.9
ICICI Bank 363 9.4 IT Services 10.8
State Bank of India 185 2.9 Metals & Mining
Banks 26.0 Hindalco Industries 148 2.3
Capital Goods Tata Steel 335 2.1
L&T 941 2.6 Metals & Mining 4.4
Capital Goods 2.6 Oil, Gas & Consumable Fuels
Consumer Staples Reliance Industries 1,760 13.0
Britannia Industries 3,535 2.0 Oil, Gas & Consumable Fuels 13.0
Colgate-Palmolive (India) 1,376 1.7 Pharmaceuticals
ITC 206 2.0 Cipla 646 1.9
Hindustan Unilever 2,152 2.8 Pharmaceuticals 1.9
United Breweries 1,056 2.1 Real Estate
United Spirits 595 2.0 DLF 153 1.7
Consumer Staples 12.7 Real Estate 1.7
Diversified Financials Retailing
HDFC 1,889 9.2 Titan Company 986 1.7
Diversified Financials 9.2 Retailing 1.7
Gas Utilities Telecommunication Services
GAIL (India) 104 1.9 Bharti Airtel 559 3.6
Gas Utilities 1.9 Bharti Infratel 222 1.8
Telecommunication Services 5.4
BSE-30 35,844 100
Exhibit 56: Large value in many mid-cap. stocks

KIE mid-cap. model portfolio
Fair
Price Value Upside Mkt cap. EPS (Rs) P/E (X) P/B (X) RoE (%)
Company Sector Rating (Rs) (Rs) (%) (Rs bn) (US$ mn) 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E
Apollo Hospitals Health Care Services BUY 1,363 1,700 25 190 2,534 18 1 44 74 2,179 31 5.7 5.7 5.1 8 0 17
Ashok Leyland Automobiles & Components BUY 49 65 32 144 1,927 1 (1) 2 40 (79) 23 2.0 2.0 1.9 5 (3) 9
CESC Electric Utilities BUY 636 810 27 84 1,126 99 102 114 6 6 6 0.7 0.6 0.6 11 10 11
Cholamandalam Diversified Financials BUY 197 265 34 162 2,160 13 12 19 15 16 11 2.1 2.0 1.7 15 12 16
Escorts Automobiles & Components BUY 1,041 1,000 (4) 92 1,706 55 51 65 19 20 16 2.7 2.1 1.9 14 10 12
Equitas Holdings Banks BUY 55 100 82 19 250 6 6 10 9 9 6 0.7 0.7 0.6 8 7 10
Federal Bank Banks BUY 54 80 49 107 1,426 8 6 7 7 9 8 0.8 0.7 0.7 11 8 9
Jubilant Foodworks Hotels & Restaurants ADD 1,726 1,750 1 228 3,045 24 9 30 73 194 57 20.2 19.8 15.2 26 10 30
Kalpataru Power Transmission Capital Goods BUY 223 470 110 35 462 25 25 39 9 9 6 1.0 0.9 0.8 12 11 15
Kansai Nerolac Commodity Chemicals BUY 463 450 (3) 249 3,333 10 6 13 47 81 37 6.6 6.4 5.8 15 8 17
Max Financial Services Insurance ADD 545 550 1 147 1,966 10 10 28 54 53 19 — — — 13 15 40
Narayana Hrudayalaya Health Care Services BUY 268 360 34 55 733 6 (3) 8 46 (89) 32 4.8 5.1 4.4 11 (6) 15
Petronet LNG Gas Utilities BUY 261 300 15 392 5,240 18 19 22 15 14 12 3.6 3.4 3.2 25 25 28
Prestige Estates Projects Real Estate ADD 201 275 37 81 1,078 11 7 10 18 30 20 1.4 1.5 1.4 9 5 7
PVR Media BUY 1,015 1,625 60 52 697 29 (33) 59 35 (31) 17 2.3 3.0 2.6 9 (8) 16
Shriram City Union Finance Diversified Financials BUY 685 1,250 82 45 604 152 84 158 5 8 4 0.7 0.6 0.6 15 7 13
SRF Speciality Chemicals ADD 3,654 3,800 4 210 2,808 138 151 197 26 24 19 4.3 3.7 3.1 17 16 18
Shriram Transport Diversified Financials BUY 698 1,050 50 158 2,117 110 82 119 6 9 6 0.9 0.9 0.8 15 10 13
Thermax Capital Goods BUY 755 820 9 90 1,203 19 15 31 40 52 25 2.8 2.7 2.5 7 5 11
Varun Beverages Consumer Staples BUY 682 800 17 197 2,630 16 14 29 42 47 23 5.9 5.2 4.3 18 12 20

Strategy India
4QFY20 RESULTS ANALYSIS: RATTLED BY COVID-19

4QFY20 was a tough quarter for corporate earnings due to Covid-related disruption to demand and supply
both. Net profits of the BSE-30 Index and Nifty-50 Index declined 12% yoy and 41% yoy, 22% and 30% below
our expectations. 4QFY20 net profits of KIE universe declined sharply by 45% yoy versus our expectations of
15% yoy decline. Net income of the most of the sectors declined yoy. A few sectors such as banks, healthcare
services, pharmaceuticals and telecommunication services delivered decent yoy growth in net income.
4QFY20 results: Net profits of the BSE-30 Index below expectations
 Net profits below expectations for Nifty-50 Index. Exhibit 57 presents the quarterly
trend in earnings growth of the BSE-30 Index. Adjusted net profits of the BSE-30 Index
declined 12% yoy versus our expectation of 12.5% yoy increase and adjusted net profits
of the Nifty-50 Index declined 41% yoy versus our expectation of 16.4% decline.
Exhibit 57: 4QFY20 adjusted net profits of the BSE-30 Index declined 12% yoy versus our expectations of 12.5% increase
Adjusted net income growth of BSE-30 Index (%)
30 BSE-30 Index earnings growth (%)
20
14.2
12.5
10
1.0
0
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
Sep-18
Sep-19
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
Jun-18
Jun-19
Mar-20E
Mar-19A
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Dec-11
Dec-12
Dec-13
(10)
(12.1)
(20)
50 BSE-30 Index earnings growth ex-energy (%)
40
30
23.6
20 17.5
10
1.8
0
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Sep-17
Sep-18
Sep-19
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Jun-14
Jun-19
Jun-11
Jun-12
Jun-13
Jun-15
Jun-16
Jun-17
Jun-18
Mar-20E
Mar-19A
Dec-14
Dec-18
Dec-11
Dec-12
Dec-13
Dec-15
Dec-16
Dec-17
Dec-19
(10)
(2.8)
40 BSE-30 Index earnings growth ex-energy, ex-banks (%)
30
20
10
(2.1) (8.0)( 2.6)

0
Sep-11
Sep-15
Sep-16
Sep-12
Sep-13
Sep-14
Sep-17
Sep-18
Sep-19
Mar-11
Mar-12
Mar-16
Mar-13
Mar-14
Mar-15
Mar-17
Mar-18
Mar-19
Mar-20E
Jun-13
Jun-14
Jun-18
Jun-11
Jun-12
Jun-15
Jun-16
Jun-17
Jun-19
Mar-19A
Dec-13
Dec-17
Dec-11
Dec-12
Dec-14
Dec-15
Dec-16
Dec-18
Dec-19
(10)
(0.9) (7.9) (2.1)
(20)
(30)

India Strategy
Exhibit 58 compares 4QFY20 adjusted net profits of the BSE-30 stocks with 4QFY19,
3QFY20 and 4QFY20E adjusted net profits while Exhibit 59 compares 4QFY20 adjusted
net profits of the Nifty-50 Index with 4QFY19, 3QFY20 and 4QFY20E adjusted net profits.
Among Nifty-50 stocks that underperformed our estimates at the net income level were
(1) Axis Bank (sharp increase in loan-loss provisions), (2) BPCL, IOCL and RIL due to large
adventitious and inventory losses due to sharp decline in crude prices in end-March and
forex losses due to depreciation in the INR; we treat inventory loss as a normal operating
item although the downstream companies have reported the same as exceptional items,
(3) Eicher Motors (weak volume growth), (4) ICICI Bank (loan-loss provisions were higher
than expected led by higher slippages and provisions for Covid), (5) ONGC (lower-than-
expected volumes, higher costs and lower other income), (6) Sun Pharmaceuticals (lower
other income and forex losses), (7) Tata Motors (miss at EBITDA level, higher depreciation
and interest expense) and (8) Vedanta (higher-than-expected taxes).
On the other hand, a few companies significantly outperformed our estimates: (1) Bajaj
Auto (outperformance at EBITDA level), (2) Dr Reddy’s (lower amortization, higher
other income and tax reversal), (3) Hero Motocorp (lower-than-expected taxes), (4) GAIL
(higher-than-expected marketing margins and other income and lower tax rate), (5) Shree
Cement (lower costs and better volumes) and (6) Ultratech Cement (lower-than-expected
costs).
Exhibit 58: 4QFY20 results of the BSE-30 Index were very disappointing
Comparison of 4QFY20 net income of BSE-30 stocks, actual versus expected
Adjusted net income (Rs bn) Change (%) Growth (%)
Company Sector Mar-19 Dec-19 Mar-20A Mar-20E A versus E yoy qoq
Bajaj Auto Automobiles & Components 10.7 12.6 13.1 10.5 25 23 4
Mahindra & Mahindra Automobiles & Components 10.4 9.8 (5.5) 4.3 (228) (153) (156)
Maruti Suzuki Automobiles & Components 18.0 15.6 12.9 12.9 (0) (28) (17)
Axis Bank Banks 15.1 17.6 (13.9) 8.0 (274) (192) (179)
HDFC Bank Banks 58.9 74.2 69.3 71.2 (3) 18 (7)
ICICI Bank Banks 9.7 41.5 12.2 43.0 (72) 26 (71)
IndusInd Bank Banks 3.6 13.0 3.0 0.4 576 (16) (77)
Kotak Mahindra Bank Banks 20.4 23.5 19.1 24.3 (22) (7) (19)
State Bank of India Banks 8.4 55.8 35.8 92.9 (61) 327 (36)
Bajaj Finance Diversified Financials 11.8 16.1 9.5 14.6 (35) (19) (41)
Bajaj Finserv Diversified Financials 8.4 11.3 1.9 12.9 (85) (77) (83)
HDFC Diversified Financials 28.6 83.7 22.3 22.5 (1) (22) (73)
L&T Capital Goods 32.2 21.6 30.6 27.8 10 (5) 42
Asian Paints Commodity Chemicals 4.7 7.6 4.6 5.4 (15) (2) (40)
UltraTech Cement Construction Materials 10.6 7.3 11.0 6.4 71 4 50
Hindustan Unilever Consumer Staples 15.9 16.9 14.7 19.0 (23) (8) (13)
ITC Consumer Staples 34.4 39.0 34.6 36.5 (5) 1 (11)
Nestle India Consumer Staples 4.7 4.7 5.3 5.1 3 12 14
NTPC Electric Utilities 37.1 30.0 21.4 32.5 (34) (42) (28)
Power Grid Electric Utilities 30.5 26.7 31.8 28.8 11 4 19
HCL Technologies IT Services 25.6 30.4 31.5 28.8 9 23 4
Infosys IT Services 40.8 44.6 43.2 41.0 5 6 (3)
TCS IT Services 81.3 81.2 80.5 82.8 (3) (1) (1)
Tech Mahindra IT Services 11.6 11.5 10.2 8.8 15 (12) (11)
Tata Steel Metals & Mining 19.2 (18.7) 23.1 (9.7) 337 20 224
ONGC Oil, Gas & Consumable Fuels 40.4 41.5 8.0 29.2 (73) (80) (81)
Reliance Industries Oil, Gas & Consumable Fuels 98.7 118.2 63.7 100.1 (36) (35) (46)
Sun Pharmaceuticals Pharmaceuticals 6.4 9.1 6.6 10.2 (35) 4 (28)
Titan Company Retailing 3.7 4.7 3.6 2.7 33 (4) (24)
Bharti Airtel Telecommunication Services (19.1) (11.1) (4.7) (5.7) 18 75 58
BSE-30 Index 682 840 600 767 (21.9) (12.1) (28.6)
BSE-30 Index (ex-oil, gas & consumable fuels) 543 680 528 638 (17.3) (2.8) (22.4)
BSE-30 Index (ex-financials) 518 503 440 478 (7.8) (14.9) (12.5)
BSE-30 Index (ex-financials, oil, gas & consumable fuels) 378 344 369 348 5.9 (2.6) 7.3
Notes:
(a) Kotak Mahindra Bank is not under KIE coverage. We used consensus estimates.
Source: Bloomberg, Companies, Kotak Institutional Equities estimates

Strategy India
Exhibit 59: 4QFY20 results of the Nifty-50 Index were significantly below estimates
Comparison of 4QFY20 net income of Nifty-50 stocks, actual versus expected
Adjusted net income (Rs bn) Change (%) Growth (%)

Bajaj Auto Automobiles & Components 10.7 12.6 13.1 10.5 25 23 4
Eicher Motors Automobiles & Components 5.4 5.0 3.0 4.1 (26) (44) (39)
Hero Motocorp Automobiles & Components 7.3 8.8 6.2 4.6 34 (15) (29)
Mahindra & Mahindra Automobiles & Components 10.4 9.8 (5.5) 4.3 (228) (153) (156)
Tata Motors Automobiles & Components 16.3 15.7 (54.1) (26.7) (103) (433) (444)
Axis Bank Banks 15.1 17.6 (13.9) 8.0 (274) (192) (179)
HDFC Bank Banks 58.9 74.2 69.3 71.2 (3) 18 (7)
ICICI Bank Banks 9.7 41.5 12.2 43.0 (72) 26 (71)
IndusInd Bank Banks 3.6 13.0 3.0 0.4 576 (16) (77)
State Bank of India Banks 8.4 55.8 35.8 92.9 (61) 327 (36)
Kotak Mahindra Bank Banks 20.4 23.5 19.1 24.3 (22) (7) (19)
Bajaj Finance Diversified Financials 11.8 16.1 9.5 14.6 (35) (19) (41)
Bajaj Finserv Diversified Financials 8.4 11.3 1.9 12.9 (85) (77) (83)
HDFC Diversified Financials 28.6 83.7 22.3 22.5 (1) (22) (73)
L&T Capital Goods 32.2 21.6 30.6 27.8 10 (5) 42
Asian Paints Commodity Chemicals 4.7 7.6 4.6 5.4 (15) (2) (40)
Grasim Industries Construction Materials 5.1 1.9 1.2 1.3 (6) (77) (40)
Shree Cement Construction Materials 3.2 3.1 5.9 4.1 43 83 90
UltraTech Cement Construction Materials 10.6 7.3 11.0 6.4 71 4 50
Britannia Industries Consumer Staples 3.0 3.7 3.8 3.4 10 26 1
ITC Consumer Staples 34.4 39.0 34.6 36.5 (5) 1 (11)
NTPC Electric Utilities 37.1 30.0 21.4 32.5 (34) (42) (28)
UPL Fertilizers & Agricultural Chemicals 5.1 7.8 7.9 10.3 (24) 56 2
GAIL (India) Gas Utilities 13.3 12.5 22.5 14.3 57 69 80
Infosys IT Services 40.8 44.6 43.2 41.0 5 6 (3)
TCS IT Services 81.3 81.2 80.5 82.8 (3) (1) (1)
Tech Mahindra IT Services 11.6 11.5 10.2 8.8 15 (12) (11)
Wipro IT Services 24.8 24.6 23.3 25.9 (10) (6) (5)
Zee Entertainment Enterprises Media 2.8 3.9 2.9 2.9 — 4 (24)
Hindalco Industries Metals & Mining 2.4 1.9 3.3 1.8 86 38 69
JSW Steel Metals & Mining 15.2 (0.4) 5.9 3.5 69 (61) 1,618
Tata Steel Metals & Mining 19.2 (18.7) 23.1 (9.7) 337 20 224
Vedanta Metals & Mining 17.8 4.4 (11.9) 8.5 (240) (167) (367)
BPCL Oil, Gas & Consumable Fuels 31.2 12.0 (11.7) (11.1) (5) (137) (198)
Coal India Oil, Gas & Consumable Fuels 60.3 39.2 46.3 50.7 (9) (23) 18
IOCL Oil, Gas & Consumable Fuels 61.0 23.4 (95.9) (57.6) (67) (257) (510)
Cipla Pharmaceuticals 3.7 3.5 2.4 3.5 (32) (35) (32)
Dr Reddy's Laboratories Pharmaceuticals 4.3 5.9 7.6 4.1 85 76 29
Titan Company Retailing 3.7 4.7 3.6 2.7 33 (4) (24)
Bharti Airtel Telecommunication Services (19.1) (11.1) (4.7) (5.7) 18 75 58
Bharti Infratel Telecommunication Services 6.1 8.0 6.5 7.2 (10) 7 (19)
Adani Ports and SEZ Transportation 12.9 13.5 3.4 0.3 904 (74) (75)
Nifty-50 Index 983 1,038 578 823 (29.7) (41.2) (44.3)
Nifty-50 Index (ex-oil, gas & consumable fuels) 692 804 568 711 (20.2) (17.9) (29.4)
Nifty-50 Index (ex-financials) 819 702 419 533 (21.4) (48.9) (40.3)
Nifty-50 Index (ex-financials, oil, gas & consumable fuels) 527 468 408 421 (3.1) (22.5) (12.6)
Notes:
(a) Kotak Mahindra Bank is not under KIE coverage. We used consensus estimates.
(b) Zee Entertainment has not yet reported results. We have kept 4QFY20 PAT at estimates levels.
Source: Bloomberg, Companies, Kotak Institutional Equities estimates

India Strategy
 EBITDA below expectations. Adjusted EBITDA of the BSE-30 Index declined 4.4% yoy,
in line with our expectations. Exhibit 60 compares 4QFY20 EBITDA of the BSE-30 Index
with 4QFY19, 3QFY20 and 4QFY20E EBITDA. Out of the 21 non-finance companies in
the BSE-30 Index, eight companies beat our estimates by more than 5% but nine
companies missed our EBITDA estimates by more than 5%.
We do the same exercise for the Nifty-50 Index in Exhibit 61. For the Nifty-50 Index,
adjusted EBITDA declined 27% yoy and was 9% below expectations. Of the 41 non-
finance companies in the Nifty-50 Index, 14 beat our estimates by more than 5%, while
17 missed our EBITDA estimates by more than 5%.
Among the companies that reported weaker-than-expected EBITDA were (1) Eicher
Motors (weak volume growth and margin pressure in both Royal Enfield and VECV
businesses), (2) Maruti Suzuki (higher-than-expected other expenses), (3) Tata Motors
(weak performance in both JLR and standalone entity) and (4) Vedanta (miss at oil and
Zinc International businesses offset by strong aluminum segment earnings).
However, a few companies in the Nifty-50 Index outperformed at the EBITDA level. The
notable outperformers were (1) Bajaj Auto (better-than-expected gross margins and
improvement in product mix), (2) Hindalco Industries (lower costs in the aluminum
segment), (3) M&M (led by cost cutting initiatives and RM benefits), (4) Shree Cement
(lower costs and better volumes), (5) Tata Steel (strong performance in Europe) and (6)
Ultratech Cement (lower costs despite weaker volumes).
Exhibit 60: 4QFY20 EBITDA of the BSE-30 Index was below estimates
Comparison of 4QFY20 EBITDA of BSE-30 stocks, actual versus expected
Adjusted EBITDA (Rs bn) Change (%) Growth (%)

Bajaj Auto Automobiles & Components 12.3 13.7 12.5 10.9 15 2 (8)
Mahindra & Mahindra Automobiles & Components 18.7 17.9 12.3 10.3 19 (34) (31)
L&T Capital Goods 52.8 41.2 51.2 55.2 (7) (3) 24
Asian Paints Commodity Chemicals 8.2 11.9 8.6 8.9 (4) 4 (28)
UltraTech Cement Construction Materials 24.2 19.2 22.6 17.9 26 (7) 18
ITC Consumer Staples 45.7 46.1 41.6 44.8 (7) (9) (10)
NTPC Electric Utilities 46.4 69.8 55.5 71.9 (23) 19 (20)
Infosys IT Services 51.5 58.0 56.8 58.5 (3) 10 (2)
TCS IT Services 100.7 108.7 109.8 110.9 (1) 9 1
Tech Mahindra IT Services 16.4 15.6 13.5 15.2 (11) (18) (14)
Tata Steel Metals & Mining 70.1 24.5 46.5 29.7 56 (34) 89
Titan Company Retailing 5.0 7.4 6.0 4.4 36 20 (18)
Bharti Airtel Telecommunication Services 66.3 92.7 102.0 96.9 5 54 10
BSE-30 Index 1,034 1,071 988 1,034 (4.5) (4.4) (7.7)
BSE-30 Index (ex-oil, gas & consumable fuels) 701 724 736 737 (0.1) 4.9 1.7

Strategy India
Exhibit 61: 4QFY20 EBITDA of the Nifty-50 Index was below estimates
Comparison of 4QFY20 EBITDA of Nifty-50 stocks, actual versus expected
Adjusted EBITDA (Rs bn) Change (%) Growth (%)

Bajaj Auto Automobiles & Components 12.3 13.7 12.5 10.9 15 2 (8)
Eicher Motors Automobiles & Components 6.8 5.9 4.3 5.1 (15) (37) (27)
Hero Motocorp Automobiles & Components 10.7 10.4 6.6 6.7 (1) (38) (36)
Mahindra & Mahindra Automobiles & Components 18.7 17.9 12.3 10.3 19 (34) (31)
Tata Motors Automobiles & Components 80.2 72.0 23.7 38.0 (38) (70) (67)
L&T Capital Goods 52.8 41.2 51.2 55.2 (7) (3) 24
Asian Paints Commodity Chemicals 8.2 11.9 8.6 8.9 (4) 4 (28)
Grasim Industries Construction Materials 9.0 4.1 4.0 3.7 9 (56) (3)
Shree Cement Construction Materials 8.5 8.5 10.8 9.9 9 27 27
UltraTech Cement Construction Materials 24.2 19.2 22.6 17.9 26 (7) 18
Britannia Industries Consumer Staples 4.4 5.0 4.5 4.7 (4) 4 (10)
ITC Consumer Staples 45.7 46.1 41.6 44.8 (7) (9) (10)
NTPC Electric Utilities 46.4 69.8 55.5 71.9 (23) 19 (20)
UPL Fertilizers & Agricultural Chemicals 12.9 21.0 19.0 23.0 (17) 47 (9)
GAIL (India) Gas Utilities 16.8 20.7 24.8 16.4 51 47 19
Infosys IT Services 51.5 58.0 56.8 58.5 (3) 10 (2)
TCS IT Services 100.7 108.7 109.8 110.9 (1) 9 1
Tech Mahindra IT Services 16.4 15.6 13.5 15.2 (11) (18) (14)
Wipro IT Services 31.3 32.4 32.0 33.9 (6) 2 (1)
Zee Entertainment Enterprises Media 5.7 5.7 4.2 4.2 — (25) (25)
Hindalco Industries Metals & Mining 9.0 10.2 10.6 9.6 11 18 4
JSW Steel Metals & Mining 44.4 22.0 29.8 28.1 6 (33) 35
Tata Steel Metals & Mining 70.1 24.5 46.5 29.7 56 (34) 89
Vedanta Metals & Mining 61.4 47.8 45.5 46.6 (2) (26) (5)
BPCL Oil, Gas & Consumable Fuels 48.0 27.0 (17.0) (13.2) (28) (135) (163)
Coal India Oil, Gas & Consumable Fuels 63.7 33.5 47.6 49.0 (3) (25) 42
IOCL Oil, Gas & Consumable Fuels 108.8 66.5 (110.9) (61.0) (82) (202) (267)
Cipla Pharmaceuticals 9.6 7.6 6.3 7.1 (11) (34) (16)
Dr Reddy's Laboratories Pharmaceuticals 8.2 10.2 9.4 9.0 4 14 (8)
Titan Company Retailing 5.0 7.4 6.0 4.4 36 20 (18)
Bharti Airtel Telecommunication Services 66.3 92.7 102.0 96.9 5 54 10
Bharti Infratel Telecommunication Services 14.9 18.8 17.0 14.7 16 14 (9)
Adani Ports and SEZ Transportation 19.3 22.9 16.4 18.9 (13) (15) (28)
Nifty-50 Index 1,607 1,523 1,177 1,289 (8.7) (26.8) (22.7)
Nifty-50 Index (ex-oil, gas & consumable fuels) 1,055 1,049 1,005 1,016 (1.1) (4.7) (4.2)
 Reported net income of the Nifty-50 Index declined 68% yoy and 69% qoq. Exhibit
62 shows the reported net income of the Nifty-50 Index for 4QFY19, 3QFY20 and
4QFY20. Many companies had large extraordinary items in 4QFY20.
 Bharti Airtel’s extraordinary items included an exceptional charge of Rs56 bn pertaining to

one-time-spectrum-charge issue; Bharti’s appeal on this case is still pending in the
Bombay High Court.
 GAIL reported a few extraordinary items—(1) deferred tax liability reversal of Rs16.5 bn
due to reduction in tax rate, (2) impairment reversal of Rs1 bn related to Konkan LNG and
(3) tax provision of Rs9.2 bn under Vivad se Vishwas Scheme 2020.
 IOCL reported exceptional gain of Rs44 bn due to reduction in deferred tax liability under
the new tax regime.
 M&M recorded Rs35.8 bn of extraordinary loss on account of impairment of certain

assets and investments in 4QFY20.

India Strategy
 ONGC reported an impairment charge of Rs49 bn attributed to the implication on

business environment due to Covid-19.
 Tata Motors reported an exceptional loss of Rs25.1 bn related to rationalization of asset

base and creation of provisions in the PV segment.
 Tata Steel showed an impairment charge of Rs34 bn in respect of non-current assets held
within the European, overseas mining and Indian operations.
 Ultratech Cement reported Rs18 bn as extraordinary income pertaining to deferred tax

liability reversal.
Exhibit 62: Reported net income of the Nifty-50 Index declined 68% yoy and 69% qoq
Comparison of 4QFY20 reported net income of Nifty-50 stocks
Reported net income (Rs bn) Growth (%)
Company Sector Mar-19 Dec-19 Mar-20 yoy qoq
Bajaj Auto Automobiles & Components 13.1 12.6 13.1 0 4
Eicher Motors Automobiles & Components 5.4 5.0 3.0 (44) (39)
Hero Motocorp Automobiles & Components 7.3 8.8 6.2 (15) (29)
Mahindra & Mahindra Automobiles & Components 9.7 3.8 (32.6) (436) (956)
Maruti Suzuki Automobiles & Components 18.0 15.6 12.9 (28) (17)
Tata Motors Automobiles & Components 11.2 17.4 (98.9) (985) (669)
Axis Bank Banks 15.1 17.6 (13.9) (192) (179)
HDFC Bank Banks 58.9 74.2 69.3 18 (7)
ICICI Bank Banks 9.7 41.5 12.2 26 (71)
IndusInd Bank Banks 3.6 13.0 3.0 (16) (77)
State Bank of India Banks 8.4 55.8 35.8 327 (36)
Kotak Mahindra Bank Banks 20.4 23.5 19.1 (7) (19)
Bajaj Finance Diversified Financials 11.8 16.1 9.5 (19) (41)
Bajaj Finserv Diversified Financials 8.4 11.3 1.9 (77) (83)
HDFC Diversified Financials 28.6 83.7 22.3 (22) (73)
L&T Capital Goods 32.2 21.6 30.6 (5) 42
Asian Paints Commodity Chemicals 4.7 7.6 4.6 (2) (40)
Grasim Industries Construction Materials 4.5 1.8 3.6 (21) 93
Shree Cement Construction Materials 3.2 3.1 5.9 83 90
UltraTech Cement Construction Materials 10.6 6.4 29.1 175 352
Britannia Industries Consumer Staples 3.0 3.7 3.7 26 1
Hindustan Unilever Consumer Staples 15.4 16.2 15.2 (1) (6)
ITC Consumer Staples 34.8 41.4 38.0 9 (8)
Nestle India Consumer Staples 4.6 4.7 5.3 14 11
NTPC Electric Utilities 43.5 30.0 12.5 (71) (58)
Power Grid Electric Utilities 30.5 26.7 31.8 4 19
UPL Fertilizers & Agricultural Chemicals 2.1 7.0 6.2 200 (12)
GAIL (India) Gas Utilities 11.2 12.5 30.2 169 141
HCL Technologies IT Services 25.6 30.4 31.5 23 4
Infosys IT Services 40.8 44.6 43.2 6 (3)
TCS IT Services 81.3 81.2 80.5 (1) (1)
Tech Mahindra IT Services 11.6 11.5 8.0 (31) (30)
Wipro IT Services 24.8 24.6 23.3 (6) (5)
Zee Entertainment Enterprises Media 2.9 3.5 2.8 (6) (21)
Hindalco Industries Metals & Mining 2.4 1.9 3.3 38 69
JSW Steel Metals & Mining 15.2 2.1 2.3 (85) 9
Tata Steel Metals & Mining 24.3 (10.3) (11.0) (145) (6)
Vedanta Metals & Mining 26.2 23.5 (125.2) (579) (633)
BPCL Oil, Gas & Consumable Fuels 31.2 12.6 (13.6) (144) (208)
Coal India Oil, Gas & Consumable Fuels 60.3 39.2 46.3 (23) 18
IOCL Oil, Gas & Consumable Fuels 61.0 23.4 (51.9) (185) (322)
ONGC Oil, Gas & Consumable Fuels 40.4 41.5 (31.0) (177) (175)
Reliance Industries Oil, Gas & Consumable Fuels 103.6 116.4 63.5 (39) (45)
Cipla Pharmaceuticals 3.7 3.5 2.4 (35) (32)
Dr Reddy's Laboratories Pharmaceuticals 4.3 (5.7) 7.6 76 234
Sun Pharmaceuticals Pharmaceuticals 6.9 8.4 5.4 (21) (35)
Titan Company Retailing 2.9 4.7 3.6 21 (24)
Bharti Airtel Telecommunication Services 1.1 (10.4) (52.4) (4,979) (406)
Bharti Infratel Telecommunication Services 6.1 8.0 6.5 7 (19)
Adani Ports and SEZ Transportation 13.1 13.6 3.4 (74) (75)
Nifty-50 Index 1,019 1,051 328 (67.8) (68.8)

Strategy India
Exhibit 63 compares reported net income of the Nifty-50 Index with adjusted net income.
We remove extraordinary items, such as prior-period items, while computing adjusted net
income (adjusted for tax impact) but do not remove additional branding costs, employee
costs or foreign currency-related gains or losses. These represent normal costs of doing
business.
Exhibit 63: Many cases of one-off items in 4QFY20

Adjusted and reported net income of the Nifty-50 stocks, 4QFY20 (Rs mn)
Net income
Company Sector Adjusted Reported Difference
Bajaj Auto Automobiles & Components 13,103 13,103 —
Eicher Motors Automobiles & Components 3,043 3,043 —
Hero Motocorp Automobiles & Components 6,207 6,207 —
Mahindra & Mahindra Automobiles & Components (5,503) (32,550) (27,047)
Maruti Suzuki Automobiles & Components 12,917 12,917 —
Tata Motors Automobiles & Components (54,112) (98,943) (44,831)
Axis Bank Banks (13,878) (13,878) —
HDFC Bank Banks 69,277 69,277 —
ICICI Bank Banks 12,214 12,214 —
IndusInd Bank Banks 3,018 3,018 —
State Bank of India Banks 35,808 35,808 —
Kotak Mahindra Bank Banks 19,052 19,052 —
Bajaj Finance Diversified Financials 9,481 9,481 —
Bajaj Finserv Diversified Financials 1,944 1,944 —
HDFC Diversified Financials 22,325 22,325 —
L&T Capital Goods 30,647 30,647 —
Asian Paints Commodity Chemicals 4,619 4,619 —
Grasim Industries Construction Materials 1,173 3,571 2,398
Shree Cement Construction Materials 5,882 5,882 —
UltraTech Cement Construction Materials 11,030 29,063 18,033
Britannia Industries Consumer Staples 3,750 3,750 —
Hindustan Unilever Consumer Staples 14,690 15,190 500
ITC Consumer Staples 34,571 37,971 3,400
Nestle India Consumer Staples 5,327 5,254 (73)
NTPC Electric Utilities 21,446 12,524 (8,922)
Power Grid Electric Utilities 31,827 31,827 —
UPL Fertilizers & Agricultural Chemicals 7,880 6,170 (1,710)
GAIL (India) Gas Utilities 22,493 30,182 7,689
HCL Technologies IT Services 31,532 31,532 —
Infosys IT Services 43,210 43,210 —
TCS IT Services 80,490 80,490 —
Tech Mahindra IT Services 10,199 8,024 (2,175)
Wipro IT Services 23,259 23,259 —
Zee Entertainment Enterprises Media 2,937 2,757 (180)
Hindalco Industries Metals & Mining 3,260 3,260 —
JSW Steel Metals & Mining 5,920 2,310 (3,610)
Tata Steel Metals & Mining 23,102 (10,957) (34,059)
Vedanta Metals & Mining (11,860) (125,210) (113,350)
BPCL Oil, Gas & Consumable Fuels (11,686) (13,610) (1,925)
Coal India Oil, Gas & Consumable Fuels 46,258 46,258 —
IOCL Oil, Gas & Consumable Fuels (95,937) (51,853) 44,084
ONGC Oil, Gas & Consumable Fuels 8,017 (30,983) (38,999)
Reliance Industries Oil, Gas & Consumable Fuels 63,700 63,480 (220)
Cipla Pharmaceuticals 2,387 2,387 —
Dr Reddy's Laboratories Pharmaceuticals 7,642 7,642 —
Sun Pharmaceuticals Pharmaceuticals 6,605 5,435 (1,170)
Titan Company Retailing 3,568 3,568 —
Bharti Airtel Telecommunication Services (4,710) (52,370) (47,660)
Bharti Infratel Telecommunication Services 6,495 6,495 —
Adani Ports and SEZ Transportation 3,402 3,445 43

India Strategy
KIE coverage universe: Net profits declined 45% yoy, 35% below expectations
4QFY20 net profits of the KIE coverage universe declined 45% yoy versus our
expectations of 15% yoy decline. In our coverage universe, 75 stocks beat our earnings
forecast by more than 5%, 25 reported adjusted net income in the -5% and +5% range of
our estimates and 95 missed our estimates by more than 5%.
Exhibit 64 compares 4QFY20 net profits of KIE coverage sectors with 4QFY19, 3QFY20 and
4QFY20E net profits. As can be seen, net income of the most of the sectors declined on a
yoy basis. Only a few sectors such as banks, healthcare services, pharmaceuticals and
telecommunication services delivered decent growth in net income on a yoy basis.
Exhibit 64: Most of the sector showed a yoy decline in net income
Comprehensive sector-wise PAT analysis of 4QFY20 earnings season (Rs bn)
Change (%)
Mar-19 Dec-19 Mar-20A Mar-20E A/E yoy qoq
Automobiles & Components 100 89 (5) 20 (126) (105) (106)
Banks 23 49 104 230 (55) 355 113
Building Products 1 1 1 1 (25) 4 (2)
Capital Goods 63 40 37 62 (40) (41) (7)
Commodity Chemicals 10 12 8 9 (12) (17) (34)
Construction Materials 30 21 27 20 32 (11) 31
Consumer Durables & Apparel 10 10 9 9 (6) (12) (15)
Consumer Staples 74 83 72 81 (12) (2) (13)
Diversified Financials 80 145 53 88 (40) (35) (64)
Electric Utilities 76 68 64 71 (9) (16) (5)
Fertilizers & Agricultural Chemicals 5 10 9 10 (10) 89 (11)
Gas Utilities 24 26 35 26 36 48 33
Health Care Services 4 3 4 2 66 (0) 19
Hotels & Restaurants 0.8 1.2 0.3 0.4 (29) (67) (76)
Internet Software & Services 1 2 1 1 (14) (9) (22)
IT Services 194 203 201 198 1 3 (1)
Media 7 10 5 7 (27) (28) (46)
Metals & Mining 82 16 45 28 59 (45) 186
Oil, Gas & Consumable Fuels 349 246 0.1 109 (100) (100) (100)
Pharmaceuticals 28 33 33 34 (1) 19 3
Real Estate 15 12 (14) 10 (243) (196) (219)
Retailing 8 8 5 4 27 (35) (39)
Speciality Chemicals 6 9 5 7 (24) (12) (39)
Telecommunication Services (54) (60) (51) (35) (48) 6 14
Transportation 21 19 (8) (10) 23 (137) (141)
KIE universe 1,158 1,055 639 984 (35.1) (44.8) (39.4)
KIE universe (ex-oil, gas & consumable fuels) 809 809 639 875 (27.0) (21.0) (21.1)
KIE universe (ex-financials) 1,055 861 482 666 (27.6) (54.3) (44.0)
KIE universe (ex-financials, oil, gas & consumable fuels) 705 615 482 558 (13.5) (31.7) (21.6)
The performance of the automobiles industry remained under pressure due to weak demand.
High slippages and provisions for Covid impacted performance of the banking sector
although their operating performance (PPOP) was quite healthy. The IT sector was facing
challenges even before the Covid impact due to weak spending in a few verticals.
Construction materials sector showed the decent performance primarily due to improved
realization and lower costs. Weak volume and lower prices impacted the performance of
companies in metals & mining sector. Large adventitious, inventory and forex losses marred
the earnings of downstream companies. Pharmaceuticals sector showed strong performance
in domestic segment. Telecommunication services sector showed strong improvement in
ARPU.

Strategy India
Exhibit 65 shows sectors that exceeded or fell short of our expectations on sales, EBITDA and
net profits. Gas utilities, oil, gas & consumable fuels and real estate sectors beat our
estimates at the revenue level while capital goods, consumer durables & apparels and
diversified financials missed our revenue expectations. Construction materials, gas utilities
and telecommunication services sectors beat EBITDA estimates but capital goods, media and
transportation sectors disappointed. Finally, gas utilities, healthcare services and metals &
mining sectors beat our expectations at the net income level while automobiles &
components, banks and oil, gas & consumable fuels disappointed.
Exhibit 65: Automobiles & components, banks and oil, gas & consumable fuels sectors disappointed
at net income levels
Performance of sectors versus expectations (KIE universe) in 4QFY20 (Rs bn)
Companies Net sales (Rs bn) Change

(#) Actual Expected (%)
Revenues: Sectors posting positive surprises
Real Estate 8 77 67 15
Fertilizers & Agricultural Chemicals 5 137 125 10
Gas Utilities 5 292 272 7
Oil, Gas & Consumable Fuels 7 4,395 4,138 6
Transportation 7 160 152 5
Revenues: Sectors posting negative surprises
Capital Goods 15 746 826 (10)
Consumer Durables & Apparel 8 112 122 (8)
Speciality Chemicals 4 44 47 (8)
Diversified Financials 10 260 281 (8)
Consumer Staples 14 407 433 (6)
Companies EBITDA (Rs bn) Change

EBITDA: Sectors posting positive surprises
Telecommunication Services 4 171 136 26
Construction Materials 9 61 52 16
Metals & Mining 8 191 169 13
Retailing 3 12 11 11
EBITDA: Sectors posting negative surprises
Building Products 1 1 2 (26)
Capital Goods 15 84 111 (24)
Transportation 7 27 35 (21)
Media 5 9 11 (21)
Speciality Chemicals 4 9 10 (15)
Companies PAT (Rs bn) Change

PAT: Sectors posting positive surprises
Health Care Services 6 4 2 66
Metals & Mining 8 45 28 59
Construction Materials 9 27 20 32
Retailing 3 5 4 27
PAT: Sectors posting negative surprises
Commercial & Professional Services 2 (0) 1 (133)
Automobiles & Components 23 (5) 20 (126)
Oil, Gas & Consumable Fuels 7 0 109 (100)
Banks 20 104 230 (55)
Telecommunication Services 4 (51) (35) (48)

India Strategy
Exhibit 66 shows the movement in EBITDA margins across sectors over the past few quarters.
We do not focus on EBITDA margins for certain sectors (construction materials, oil, gas and
consumable fuels and metals & mining) and focus on absolute profitability (Rs/ton or
US$/ton). Nonetheless, the exercise is useful to understand specific issues dogging some
sectors.
Exhibit 66: Overall EBITDA margin of KIE Universe stocks declined sharply
Comparison of EBITDA margin for KIE universe stocks (%)
Mar-19 Jun-19 Sep-19 Dec-19 Mar-20A Mar-20E
Automobiles & Components 11.0 9.5 11.6 11.4 8.3 9.0
Building Products 15.4 15.3 17.5 17.8 17.9 18.1
Capital Goods 13.5 10.9 12.0 12.1 11.3 13.4
Commercial & Professional Services 4.5 4.5 4.4 4.6 4.5 4.6
Commodity Chemicals 16.5 20.4 18.6 19.6 17.1 17.4
Construction Materials 18.8 23.0 18.8 17.4 20.4 18.4
Consumer Durables & Apparel 11.6 13.1 12.1 11.6 11.4 11.5
Consumer Staples 25.1 26.6 25.9 25.5 24.4 26.0
Electric Utilities 37.4 40.3 41.6 41.9 37.3 42.5
Fertilizers & Agricultural Chemicals 12.3 15.6 17.0 19.9 15.0 18.8
Gas Utilities 11.3 14.5 13.1 14.2 15.3 12.8
Health Care Services 14.1 14.3 15.1 16.2 15.3 14.2
Hotels & Restaurants 19.3 24.4 24.8 26.6 21.7 21.9
Internet Software & Services 28.6 29.9 29.8 31.1 30.6 28.6
IT Services 23.2 22.4 23.3 23.9 23.7 23.8
Media 27.5 32.6 29.3 30.3 21.5 26.0
Metals & Mining 20.8 20.0 15.6 15.8 19.2 17.2
Oil, Gas & Consumable Fuels 13.3 11.1 11.0 10.7 3.7 6.6
Pharmaceuticals 19.7 22.3 22.5 20.3 19.1 20.6
Real Estate 25.4 30.0 31.8 30.0 26.6 31.9
Retailing 8.6 11.5 10.8 11.2 9.5 8.5
Speciality Chemicals 19.7 22.3 21.6 24.6 19.9 21.7
Telecommunication Services 25.8 36.7 37.4 37.6 39.4 32.3
Transportation 7.3 32.0 18.1 28.7 17.0 22.8
KIE universe 16.4 16.5 16.4 16.3 13.4 14.8
We would clarify that 4QFY20 EBITDA of several companies was higher due to the
implementation of Ind-AS 116 accounting standard from April 1, 2019 (recognition of leases
on balance sheets, which typically results in lower operating expenses and higher EBITDA
but higher depreciation and broadly similar pre-tax profits) and thus, yoy and qoq margin
comparisons may not be strictly valid.

Strategy India
4QFY20 RESULTS TAKEAWAYS: BLEAK OUTCOME, MIXED OUTLOOK

4QFY20 results expectedly reflected Covid-related demand and supply challenges. Banks reported weak loan
growth, stable-to-declining NPLs and low slippages in 4QFY20 but they made higher contingency provisions
to handle potential fallout of the ongoing Covid crisis. Consumer staples companies reported weak volume
growth. Passenger vehicles volumes witnessed further slowdown and commercial vehicle volumes saw a large
decline. Cement companies reported moderate decline in volumes but higher profitability. Industrial
companies saw reasonable order inflows but execution remained weak.
Lenders showed stability; consumption faced stiff challenges
 Slippages declined while credit growth remained under pressure. Barring a few
corporate banks, most banks reported decline in slippages with most PSU banks reporting
multi-quarter lows for net NPLs. NIIs were also healthy for most banks. However, a sharp
increase in provisions including contingency provisions related to Covid-19 outbreak
dented bottom-lines. ‘Corporate’ banks with large NPLs in their corporate loan books
reported stable NPLs (see Exhibit 67). Slippages remained high for AXSB at 3% of loans;
84% of corporate slippages (net) were from the BB and below pool. For ICICIBC, gross
slippages in 4QFY20 were also elevated at Rs53 bn (3.3% of loans), of which corporate
and SME contributed Rs40 bn. Meanwhile, SBIN reported low slippages at Rs83 bn (1.5%
of loans), of which 60% came from the agriculture portfolio.
Exhibit 67: Most banks reported stable-to-declining GNPLs and NNPLs and low slippages in 4QFY20
Trend in gross NPLs, net NPLs and slippages, March fiscal year-ends, 2017-20 (%)
Gross NPLs (%) Net NPLs (%) Slippages (%)
2017 2018 2019 1QFY20 2QFY20 3QFY20 4QFY20 2017 2018 2019 1QFY20 2QFY20 3QFY20 4QFY20 2017 2018 2019 1QFY20 2QFY20 3QFY20 4QFY20
Public banks
Bank of Baroda 10.5 12.3 9.6 10.3 10.3 10.4 9.4 4.7 5.5 3.3 4.0 3.9 4.1 3.1 3.5 6.3 3.7 5.7 4.6 7.4 1.9
Canara Bank 9.6 11.8 8.8 8.8 8.7 8.4 8.2 6.3 7.5 5.4 5.4 5.2 5.1 4.2 3.6 7.2 4.1 3.4 2.4 4.5 3.7
Punjab National Bank 12.5 18.4 15.5 16.5 16.8 16.3 14.2 7.8 11.2 6.6 7.2 7.7 7.2 5.8 5.4 10.6 5.6 4.7 7.7 6.3 4.7
State Bank of India 6.9 10.9 7.5 7.5 7.2 6.9 6.2 3.7 5.7 3.0 3.1 2.8 2.7 2.2 2.7 6.0 2.1 3.1 1.7 3.7 1.5
Union Bank 11.2 15.7 15.0 15.2 15.2 14.9 14.5 6.6 8.4 6.9 7.2 7.0 7.0 6.8 5.0 7.5 4.7 3.8 5.2 6.3 3.0
Old private banks
City Union Bank 2.8 3.0 3.0 3.3 3.4 3.5 4.1 1.7 1.7 1.8 1.9 1.9 2.0 2.3 2.2 2.3 2.2 2.4 2.5 2.8 5.7
Federal Bank 2.3 3.0 2.9 3.0 3.1 3.0 2.8 1.3 1.7 1.5 1.5 1.6 1.6 1.3 1.8 3.0 1.9 1.6 2.0 2.0 1.0
Karur Vysya Bank 3.6 6.6 8.8 9.2 8.9 8.9 8.7 2.5 4.2 5.0 4.9 4.5 4.1 3.9 3.3 4.9 5.5 3.7 4.1 3.6 3.4
New private banks
Axis Bank 5.0 6.8 5.3 5.3 5.0 5.0 4.9 2.1 3.4 2.1 2.0 2.0 2.1 1.6 5.8 9.0 3.2 3.9 4.0 3.9 3.0
Bandhan Bank 0.5 1.3 2.0 2.0 1.8 1.9 1.5 0.4 0.6 0.6 0.6 0.6 0.8 0.6 0.8 2.1 2.6 — — — —
DCB Bank 1.6 1.8 1.8 2.0 2.1 2.2 2.5 0.8 0.7 0.7 0.8 1.0 1.0 1.2 2.0 2.2 2.0 2.5 2.7 3.4 2.4
HDFC Bank 1.1 1.3 1.4 1.4 1.4 1.4 1.3 0.3 0.4 0.4 0.4 0.4 0.5 0.4 1.5 2.3 2.2 — — — —
ICICI Bank 8.7 8.8 6.7 6.5 6.4 6.0 5.5 5.4 4.8 2.1 1.8 1.6 1.5 1.4 7.7 6.2 2.5 1.9 1.7 2.8 3.3
IndusInd Bank 0.9 1.2 2.1 2.2 2.2 2.2 2.5 0.4 0.5 1.2 1.2 1.1 1.1 0.9 1.6 2.1 3.7 1.6 2.3 3.9 4.0
RBL Bank 1.2 1.4 1.4 1.4 2.6 3.3 3.6 0.6 0.7 0.7 0.7 1.6 2.1 2.1 2.5 1.9 1.7 1.7 9.7 7.2 4.8
Yes Bank 1.5 1.3 3.2 5.0 7.4 18.9 16.8 0.8 0.6 1.9 2.9 4.4 NA 5.0 2.7 6.2 3.9 10.3 10.1 NA NA
Small finance banks
AU Small Finance Bank 1.8 2.0 2.0 2.1 2.0 1.9 1.7 1.2 1.3 1.3 1.3 1.1 1.0 0.8 1.9 3.1 3.4 2.5 2.5 2.1 1.2
Equitas Holdings 3.5 2.7 2.5 2.8 2.9 2.9 2.7 1.8 1.4 1.4 1.7 1.6 1.7 1.7 4.8 4.0 2.6 2.7 3.5 3.8 2.6
Ujjivan Small Finance Bank 0.3 3.6 0.9 0.8 0.9 1.0 1.0 0.2 0.7 0.3 0.3 0.3 0.4 0.2 NA 8.7 1.1 0.8 1.4 NA NA
Total 7.7 9.4 7.4 7.5 7.3 7.1 6.5 4.4 4.9 3.0 3.1 3.0 2.9 2.5
Public banks 9.9 12.5 9.5 9.7 9.6 9.3 8.4 6.2 6.6 4.0 4.2 4.1 3.9 3.2
Private banks 4.1 4.7 3.9 3.9 3.7 3.6 3.4 1.3 2.1 1.5 1.4 1.3 1.3 1.3
However, all the banks and NBFCs under our coverage increased their provisions
significantly in 4QFY20 to factor in potential increase in slippages and credit costs in
FY2021 due to the extended lockdown in 1QFY21 and sharp slowdown in the economy
in 1HFY21. Exhibit 68 shows the provisions, pre-provision operating profits (PPOP) and
the ratio of the two for the past five quarters for the banks under our coverage. Most
banks reported stable-to-improving PPOP. As discussed in the first section of the report,
we believe it is too early to get a good handle on the eventual level of NPLs and credit
costs (LLP). The large moratorium loan value in the case of retail banks may mask the true
financial health of retail borrowers (see Exhibit 69).

India Strategy
Exhibit 68: Sharp increase in provisions to buffer against Covid-19 crisis

Provisions and pre-provision operating profits (PPOP) for banks in KIE coverage universe, 4QFY19-4QFY20
Pre-provision operating profits (Rs bn) Provisions (Rs bn) Provisions/PPOP (%)
4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20
Public banks
Bank of Baroda 39 43 53 50 51 54 33 42 72 68 140 77 79 144 134
Canara Bank 30 24 25 23 20 55 19 20 18 54 186 78 80 77 263
Punjab National Bank 29 35 36 38 39 101 20 29 41 49 352 58 82 110 125
State Bank of India 169 132 182 182 185 165 92 131 73 135 97 69 72 40 73
Union Bank 18 18 23 21 25 58 15 39 18 60 328 84 165 85 237
Old private banks
City Union Bank 3 4 3 3 3 1 1 1 1 5 27 33 31 30 134
Federal Bank 8 8 7 7 10 2 2 3 2 6 24 25 35 22 59
Karur Vysya Bank 5 4 4 4 5 4 3 4 4 4 76 74 85 95 86
New private banks
Axis Bank 50 59 60 57 59 27 38 35 35 77 54 65 59 60 132
Bandhan Bank 12 12 13 13 15 2 1 1 3 8 13 10 11 23 54
DCB Bank 2 2 2 2 2 0 0 0 1 1 19 24 23 31 56
HDFC Bank 108 111 117 129 130 19 26 27 30 38 17 23 23 24 29
ICICI Bank 62 63 69 75 74 55 35 25 21 60 87 56 36 28 81
IndusInd Bank 21 26 26 27 28 16 4 7 10 24 75 17 28 38 86
Yes Bank 13 20 15 (0) 1 37 18 13 248 (14) 277 91 92 NM NM
Small finance banks
AU Small Finance Bank 2 3 3 3 3 0 0 1 0 2 18 11 22 13 48
Equitas Holdings 1 1 1 1 2 0 0 0 0 2 20 24 29 32 87
Ujjivan Small Finance Bank 1 2 1 1 2 0 0 0 0 1 31 13 26 21 51
Exhibit 69: Loan moratorium amount varies by banks and loan category
Value of loans under moratorium for banks, April-May, 2020 (%)
Customers Value
(%) (%)
Axis Bank 10-12 25-28
AU Small Finance Bank 29 25
Bandhan Bank
Micro-banking 100
Mortgage 13
SME portfolio 35
NBFC-MFI 59
Bank of Baroda 90
DCB Bank 60
Hoam loans 52
LAP 56
MSME 60
Equitas 93
Federal Bank 35
ICICI Bank 30
IndusInd Bank
Retail 5
RBL Bank 33
SBI 22 23
Yes Bank
Corporate 15-20 40-45
MSME 15-20 35-40
Retail 20-25 40-45
Also, credit off-take remained muted in 4QFY20 despite most large private banks
reporting stable growth. PSU banks reported a qoq decline in credit growth. Outstanding
credit of banks as of April 30, 2020 increased 7% yoy (see Exhibit 70). Even the modest 7%
yoy growth was led by a strong 12% yoy growth in retail loans (housing) and quasi-retail
loans. Loans to NBFCs continued to grow strongly at 28% yoy, while loans to real estate
increased 15% yoy. However, loans to the industry sector increased 2% yoy.

Strategy India
Exhibit 70: Credit growth has slowed down steadily; real estate, retail and NBFCs seeing the bulk of credit growth
Deployment of gross bank credit in major sectors (Rs bn)
Proportion Growth
Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 (%) yoy (%)
Food credit 415 430 655 712 658 622 599 696 910 849 787 654 516 525 1 22
Agriculture 11,113 11,080 11,079 11,258 11,090 11,130 11,278 11,347 11,340 11,391 11,534 11,560 11,578 11,513 13 4
Industry 28,858 28,352 28,140 28,120 27,984 27,652 27,749 27,868 27,722 27,944 28,175 27,928 29,052 28,844 32 2
Textiles 2,035 1,993 1,945 1,936 1,913 1,863 1,868 1,877 1,863 1,892 1,901 1,881 1,924 1,900 2 (5)
Chemical / Products 1,915 1,776 1,760 1,745 1,732 1,770 1,805 1,761 1,732 1,774 1,830 1,842 2,029 1,932 2 9
Iron and Steel 2,829 2,700 2,665 2,662 2,659 2,663 2,700 2,683 2,656 2,548 2,522 2,509 2,624 2,681 3 (1)
Engineering 1,686 1,664 1,652 1,646 1,650 1,665 1,634 1,669 1,627 1,586 1,576 1,554 1,573 1,543 2 (7)
Gems & Jewellery 720 667 657 662 661 664 656 628 613 605 598 591 595 589 1 (12)
Construction 995 984 974 972 954 960 1,001 994 1,001 1,026 1,051 1,040 1,043 990 1 1
Infrastructure 10,559 10,647 10,419 10,265 10,347 10,048 10,038 10,198 10,252 10,294 10,369 10,187 10,539 10,552 12 (1)
- Power 5,690 5,698 5,567 5,637 5,682 5,589 5,572 5,600 5,627 5,620 5,593 5,390 5,598 5,666 6 (1)
- Telecom 1,156 1,297 1,239 1,068 1,122 1,098 1,150 1,275 1,310 1,343 1,361 1,412 1,438 1,390 2 7
- Roads 1,869 1,862 1,863 1,861 1,884 1,909 1,853 1,854 1,865 1,869 1,922 1,861 1,907 1,894 2 2
- Others 1,845 1,790 1,750 1,698 1,659 1,453 1,463 1,469 1,450 1,462 1,492 1,524 1,597 1,602 2 (11)
Others 8,118 7,920 8,070 8,233 8,067 8,019 8,048 8,059 7,979 8,218 8,328 8,323 8,724 8,657 9 9
Trade 5,282 5,074 5,075 5,116 5,135 5,043 5,080 5,050 5,017 5,140 5,195 5,386 5,524 5,452 6 7
Retail loans 22,207 22,228 22,414 22,538 22,755 23,039 23,558 23,897 24,047 24,333 24,973 25,321 25,537 24,908 27 12
Housing 11,601 11,686 11,769 11,870 11,998 12,148 12,532 12,687 12,747 12,896 13,165 13,290 13,390 13,307 15 14
Vehicle loans 2,022 1,998 2,019 2,004 2,013 2,027 2,034 2,067 2,080 2,136 2,202 2,211 2,206 2,170 2 9
Education loans 680 675 674 676 677 685 682 672 669 669 670 666 657 652 1 (3)
Others 7,905 7,868 7,952 7,988 8,068 8,180 8,309 8,470 8,551 8,631 8,935 9,154 9,283 8,779 10 12
Others 18,875 18,077 17,804 17,731 17,994 18,459 18,538 18,474 18,613 18,566 19,124 18,953 20,426 20,289 22 12
Transporters 1,385 1,409 1,416 1,417 1,409 1,412 1,426 1,391 1,398 1,404 1,413 1,421 1,445 1,487 2 6
Professional/others 1,715 1,713 1,708 1,687 1,666 1,691 1,717 1,698 1,707 1,726 1,727 1,729 1,771 1,733 2 1
Real Estate loans 2,023 2,003 2,007 2,055 2,086 2,164 2,181 2,203 2,207 2,196 2,273 2,288 2,298 2,299 3 15
NBFCs 6,412 6,234 6,235 6,351 6,367 6,804 7,135 7,133 7,309 7,286 7,372 7,037 8,074 8,124 9 30
Others 7,339 6,718 6,438 6,222 6,465 6,388 6,079 6,048 5,993 5,955 6,340 6,477 6,839 6,645 7 (1)
Total 86,749 85,241 85,167 85,476 85,615 85,945 86,802 87,331 87,649 88,222 89,788 89,801 92,631 91,531 7
Exhibit 71 shows yoy credit growth for the banks under our coverage as well as total
credit growth for the past few quarters. Most of the banks have reported steady growth
in disbursements; however, loan growth tapered off for private banks due to weak
demand conditions and balance sheet challenges in certain private banks. Public sector
banks, too, showed lower loan growth versus in the previous quarters.
Exhibit 71: Steady growth in overall bank credit with private sector continuing to outstrip public banks
Yoy growth in loans for banks in KIE universe, 4QFY17-4QFY20 (%)
2-year
4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 CAGR
Public banks
Bank of Baroda (0.3) 2.2 6.4 12.7 11.2 11.2 13.0 11.1 5.0 4.3 1.0 1.1 5.9 5.5
Canara Bank 5.3 6.7 9.5 12.5 11.6 12.7 14.3 11.8 12.1 12.0 4.8 1.3 1.0 6.4
Punjab National Bank 1.7 2.1 4.2 17.2 3.4 3.9 5.0 (3.9) 5.7 1.6 (0.7) (2.0) 3.0 4.3
State Bank of India 5.4 0.5 0.9 1.1 (0.9) 4.0 8.6 12.1 13.0 13.8 9.6 7.4 6.4 9.6
Union Bank 8.6 9.9 11.3 13.5 4.0 7.9 2.5 1.0 3.7 0.9 3.0 5.8 6.2 4.9
Old private banks
City Union Bank 12.1 13.4 15.6 19.7 16.9 17.3 17.2 17.4 18.7 14.2 11.9 10.4 4.6 11.4
Federal Bank 26.2 29.1 24.7 22.0 25.4 23.6 25.2 24.2 19.9 18.8 14.8 13.0 10.9 15.3
Karur Vysya Bank 5.0 7.7 11.9 16.6 11.0 12.9 8.8 6.5 10.1 2.7 2.6 3.8 (4.2) 2.7
New private banks
Axis Bank 10.1 11.8 16.1 21.2 17.8 14.4 11.2 12.9 12.5 12.7 14.4 15.8 15.5 14.0
Bandhan Bank NA NA NA NA 76.5 62.9 64.0 47.7 33.4 35.9 88.4 78.9 68.1 49.7
DCB Bank 22.4 22.0 20.5 27.5 28.6 30.6 26.9 23.1 15.9 13.2 12.4 11.1 7.5 11.6
HDFC Bank 19.4 23.4 22.3 27.5 18.7 22.0 24.1 23.7 24.5 17.1 19.5 19.9 21.3 22.9
ICICI Bank 6.7 3.3 6.3 10.5 10.4 11.3 12.8 11.7 14.5 14.7 12.6 12.6 10.0 12.2
IndusInd Bank 27.9 24.3 24.5 25.1 28.2 29.4 32.4 34.7 28.6 28.4 20.8 19.8 10.9 19.4
Yes Bank 34.7 32.1 34.9 46.5 53.9 53.4 61.2 42.2 18.7 10.1 (6.3) (23.7) (29.0) (8.2)
Small finance banks
AU Small Finance Bank NA 13.4 35.7 66.7 101.9 112.1 112.3 99.4 71.4 51.3 36.9 32.9 18.3 42.4
Equitas Holdings 15.0 6.9 13.6 22.2 33.8 37.7 50.5 48.9 50.3 44.8 35.0 34.9 28.9 39.2
Ujjivan Small Finance Bank NA NA NA NA NA 24.5 26.3 29.5 43.9 49.0 59.0 50.9 33.1 38.4
Total 8.1 7.1 7.0 12.7 9.1 11.7 13.9 13.4 13.5 12.1 9.5 8.1 7.9 10.6
Public sector 4.3 2.3 1.2 6.9 3.1 6.3 8.9 8.9 9.9 9.5 5.9 4.5 5.3 7.6
Private sector 16.6 17.0 18.9 24.1 21.0 21.3 22.5 21.1 19.4 16.2 15.1 13.5 11.8 15.6
Notes:
(a) We have used merged entity numbers in case of BOB.

India Strategy
Most NBFCs, under our coverage, had a decent quarter amid a challenging environment
as they reported stable NIMs. Exhibit 72 shows the yields, cost of borrowings, spread and
NIMs for the NBFC stocks under our coverage. Borrowing costs for the top-tier NBFCs
(BAF, HDFC) has declined sharply from the highs of 3Q-4QFY19, the period around the
default by ILFS, a large NBFC. However, borrowing costs continue to be high for second-
tier NBFCs.
Exhibit 72: Yields remained steady-to-improving while cost of borrowing remained under control
Yields, costs of borrowings, spread and NIMs for the NBFC stocks under our coverage, 4QFY18-4QFY20 (%)
Yields Cost of borrowing
4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20
Bajaj Finance 15.8 16.0 15.9 17.1 16.7 16.7 16.5 17.4 17.3 7.9 8.1 8.9 9.2 9.2 9.4 8.7 8.2 8.1
Cholamandalam 14.2 13.7 13.7 14.0 14.3 13.9 14.1 14.6 15.0 9.5 8.6 8.0 7.8 8.1 8.1 8.2 8.5 8.6
HDFC 9.8 9.9 10.2 10.5 10.4 10.5 10.2 10.1 10.0 7.6 7.8 8.4 8.4 8.0 8.4 8.2 7.9 7.5
L&T Finance Holdings 12.6 12.0 13.5 13.7 12.7 13.6 13.4 13.5 13.3 NA NA NA NA NA NA NA NA NA
LIC Housing Finance 9.5 9.6 9.7 9.9 9.8 9.8 9.9 9.8 9.4 8.1 8.3 8.3 8.5 8.2 8.4 8.4 8.2 8.0
Magma Finance NA 14.9 14.7 14.9 15.4 15.2 15.7 15.4 15.4 NA 8.9 9.1 9.5 9.4 10.0 10.6 9.9 10.1
Mahindra Finance 15.2 15.3 15.6 15.5 16.1 15.3 15.5 15.7 15.9 8.0 8.2 8.3 8.4 8.9 8.3 8.6 8.4 8.7
Muthoot Finance 22.8 21.4 20.6 20.8 22.0 20.9 23.5 24.6 24.6 8.6 9.0 9.0 9.5 9.4 9.3 9.5 9.1 9.1
PNB Housing Finance 10.1 10.1 9.9 10.3 10.5 10.6 10.7 10.5 10.5 7.4 7.1 7.3 7.6 7.1 7.2 7.1 6.7 6.4
Shriram City Union Finance 18.8 19.6 19.9 19.5 19.3 19.4 19.1 19.1 19.4 8.3 8.6 8.7 9.2 8.9 9.5 9.9 9.6 9.7
Shriram Transport Finance 15.0 15.1 15.3 15.3 14.9 15.4 15.6 15.5 15.2 8.4 8.9 8.5 8.6 8.5 9.2 9.3 9.3 9.3
Spreads NIM
Bajaj Finance 7.9 7.9 7.0 7.9 7.5 7.3 7.8 9.2 9.2 9.7 9.8 9.3 10.1 9.8 9.8 9.5 10.3 10.3
Cholamandalam 4.6 5.2 5.7 6.2 6.3 5.9 5.9 6.1 6.4 7.0 6.6 6.4 6.5 6.4 6.2 6.1 6.2 6.6
HDFC 2.2 2.1 1.9 2.2 2.4 2.1 2.0 2.2 2.5 2.6 2.6 2.3 2.4 2.6 2.4 2.3 2.5 2.6
L&T Finance Holdings NA NA NA NA NA NA NA NA NA 5.0 5.0 5.6 5.8 5.6 6.0 6.0 6.0 6.1
LIC Housing Finance 1.5 1.3 1.4 1.4 1.6 1.4 1.5 1.6 1.4 2.5 2.4 2.4 2.4 2.6 2.4 2.5 2.5 2.2
Magma Finance NA 6.0 5.6 5.4 6.0 5.2 5.0 5.5 5.3 NA 7.7 7.4 7.3 7.6 6.9 6.7 6.9 6.8
Mahindra Finance 7.2 7.1 7.3 7.1 7.3 7.0 6.9 7.4 7.2 8.6 8.5 8.6 8.3 8.5 8.0 7.9 8.2 8.0
Muthoot Finance 14.2 12.4 11.6 11.3 12.6 11.5 14.1 15.5 15.5 16.4 14.8 13.9 13.5 14.6 13.5 16.1 17.1 17.1
PNB Housing Finance 2.7 3.0 2.6 2.7 3.4 3.3 3.6 3.8 4.1 2.8 2.8 2.3 2.1 2.6 2.5 2.6 2.4 2.5
Shriram City Union Finance 10.5 11.0 11.2 10.3 10.4 9.9 9.2 9.5 9.8 12.4 13.1 13.2 12.3 12.4 12.3 11.9 12.1 11.8
Shriram Transport Finance 6.6 6.2 6.8 6.7 6.4 6.3 6.3 6.1 5.9 7.9 7.5 8.1 7.9 7.6 7.5 7.6 7.5 7.2
We expect the stronger NBFCs to be able to tide over the current challenging
environment given (1) surplus liquidity in the system, (2) sharp decline in interest rates and
borrowing costs for NBFCs; bond yields have further dropped in 1QFY21 as discussed in
the first section of the report and (3) various government measures to counter the near-
term risks from Covid including the Rs3 tn credit guarantee scheme. However, credit costs
may increase sharply in the case of a prolonged downturn in demand, given the high
proportion of moratorium loans of total loans (see Exhibit 73).

Strategy India
Exhibit 73: A high proportion of NBFC customers have availed moratorium

Details on moratorium offered by NBFCs, 4QFY20-1QFY21
Moratorium
offered Covid-19 provision
(%) (Rs mn) (% of AUM) Comments
Aavas ~20-25% 44 0.06 Out of 0.1 mn+ customers, ~6,000 customers had opted for moratorium as of March 31, 2020
Aditya Birla Finance 33 1,630 0.35
Retail 46
Aditya Birla Housing Finance 30 180 0.15
Ashirvad MFI 550 1.00
Bajaj Finance 27 9,000 0.63 Moratorium data is as of April 2020
Capri Global 136 0.34
Housing 34 The company increased PD and LGD estimates by 15% owing to Covid-19. By number of
MSME 44 customers, 39% of MSME customers and 30% of housing finance customers have opted for
CF 35 moratorium
Cholamandalam 76 5,040 0.83
Vehicle finance 79 3,980 0.90
Home equity 66 910 0.70
Business finance/home loans 74 150 0.44
Over 70% of the customers indicated not opting for moratorium 2.0, and about 20% wanted a few
CreditAccess Grameen 829 0.69 more weeks to start transactions. The balance 10% of borrowers might opt for further moratorium
as of June 1, 2020
A significant number of customers had auto debit facility and hence the company did not receive
Gruh Finance 13 installment for only 13% customers. However, some customers have requested for repayment of
auto-debit installment and might opt for moratorium
HDFC 26 ~5500 0.10
IIFL Finance 58 2,820 0.74
Kotak
Kotak Prime >24 500 0.20
Kotak Investment 140 0.24
Data for moratorium is as of March 2020. Provisions incorporate Covid-related provisions on 1-90
L&T Finance Holdings 36 3,140 0.32
dpd for loans under moratorium and incremental provisions owing to change in LGD assumptions
In rural business, 100% of MFI, 29% of WS, 31% of farm equipment and 32% of consumer loan
Rural 1,620 0.59
customers have opted for moratorium
16% of home loan/LAP customer and 28% of real estate borrowers (80% by April 2020) have
Housing 1,330 0.50
opted for moratorium
Infrastructure (ex IDF) 170 0.06 30% of infrastructure borrowers (excluding IDF) have opted for moratorium
De-focused 20 0.04
<1% of gold loan customers (100 customers in total) have opted for moratorium and 10% of
Manappuram (standalone) 149 0.08
vehicle finance book (by value)
Mas Financial 55 203 0.34 AUM under moratorium was ~51% as of April 2020
Mas Rural Housing 20 0.71
Mahindra & Mahindra Financial 75 5,740 0.88 Out of the total provisions of Rs5.7 bn, Rs4.7 bn is towards Stage 3 assets
As of March 31, 2020, 13% of the customers were offered moratorium and it increased to 33% by
MOFS (housing) 36 80 0.22
April 2020
Piramal 19,000 3.73
Retail 24 Out of Rs19 bn of Covid-related provisions, Rs16.5 bn is towards Stage 1 and 2 loans are rest are
Wholesale Almost all towards Stage 3 loans. Overall coverage on the book is ~5.8%
Spandana 1,290 1.89 ~1.8 mn of 2.5 mn customers are under moratorium
75%: The company provided moratorium to all its customers (opt out) under moratorium 1.0 (until May
Shriram City Union Finance MSME, 4,260 1.46 31, 2020). The company received collections (by value) to the tune of 34% in April 2020 and 52%
50%: 2W in May 2020
Shriram Housing 100 0.43
The company provided moratorium to all its customers (opt-out) under moratorium 1.0 (until may
31, 2020). Post that, moratorium has been provided to all eligible customers (95-96% of AUM)
Shriram Transport 9,096 0.83 under moratorium 2.0. The company received collections from 23% of borrowers in April 2020 and
52% of borrowers in May 2020 translating into collection efficiency of 15%+ and 30%+ respectively
in these months
Sundaram Finance 64 272 0.09
The company had offered moratorium on a opt-out basis. Customers will be given an opt-in option
U Gro Capital 80 33 0.40
under moratorium 2.0
 Consumer-facing businesses struggled in a challenging demand environment.

Most of the consumer staples and discretionary companies under our coverage reported
weak performance in 4QFY20. Covid-induced lockdown had varying degrees of adverse
impact on consumer companies with only a handful companies able to report positive
volume growth.
Exhibit 74 shows the trends in the volume growth of the major consumer staples and
discretionary companies under our coverage over the past several quarters. We note that
demand conditions had been quite weak through 9MFY20 and the Covid crisis, which
unfolded from second half of 4QFY20, exacerbated an already-weak demand situation.

India Strategy
Exhibit 74: Consumer companies witnessed sharp slowdown in volumes in 4QFY20

Volume growth of consumer companies, 4QFY18-4QFY20 (%)
4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 2-y CAGR
Staples
Bajaj Consumer Care 5.9 8.7 (0.3) 7.0 5.5 4.7 (0.2) (8.6) (30.3) (14.2)
Britannia Industries - Domestic 12.5 12.5 11.0 8.0 7.0 3.0 3.5 2.0 (1.0) 2.9
Colgate - Overall 4.0 4.0 7.0 7.0 5.0 4.0 4.0 2.3 (8.0) (1.7)
Dabur - Domestic 7.7 21.0 8.1 12.4 4.2 9.6 4.8 5.6 (14.6) (5.7)
GCPL - Soaps 12.0 12.0 12.0 4.0 2.0 4.0 5.0 5.0 (16.0) (7.4)
HUL (FMCG business) 11.0 12.0 10.0 10.0 7.0 5.0 5.0 5.0 (7.0) (0.2)
Marico - Domestic 1.0 12.4 6.0 6.0 8.0 6.0 1.0 (1.0) (3.0) 2.4
Marico - Parachute (5.0) 9.0 8.0 9.0 6.0 9.0 (1.0) (2.0) (8.0) (1.2)
Marico - Saffola (1.0) 10.0 5.0 2.0 18.0 3.0 1.0 11.0 25.0 21.4
Marico - Value-added hair oils 11.0 15.0 5.0 7.0 1.0 7.0 — (7.0) (11.0) (5.2)
Discretionary
Asian Paints 10.0 13.0 11.0 22.0 11.0 17.0 14.0 11.0 2.5 6.7
ITC - Cigarettes (5.0) 1.0 7.0 7.5 10.0 3.0 3.0 2.0 (11.0) (1.1)
Jubilant Foodworks - SSG 26.5 25.9 20.5 14.6 6.0 4.1 4.9 5.9 (3.4) 1.2
Pidilite - Domestic consumer business 13.0 20.0 11.0 13.0 4.0 6.0 (1.0) 2.0 (3.0) 0.4
Titan - Jewelry 6.0 (2.6) 24.0 20.0 15.0 6.0 (14.0) (5.0) (20.0) (4.1)
Gross margin of most companies improved on a yoy basis due to decline in raw material
prices; agriculture- and crude oil-based raw materials both saw a drop in prices. However,
EBITDA margins declined in the case of most companies as negative operating leverage
played out, especially on a qoq basis given the sharp drop in revenues on a qoq basis (see
Exhibit 75).
Exhibit 75: Most consumer companies saw a sharp qoq decline in EBITDA margins on lower revenues and volumes (negative operating
leverage)
Gross and EBITDA margin of consumer companies under our coverage, 4QFY18-4QFY20 (%)
Asian Paints 43.2 43.2 39.8 41.0 41.6 43.5 42.4 43.0 45.8 18.7 19.9 16.9 19.7 16.4 22.5 18.9 21.9 18.5
Avenue Supermarts 14.9 15.6 14.3 14.7 14.4 16.1 15.1 15.0 13.2 7.7 9.3 8.0 8.3 7.5 10.3 8.7 8.8 6.7
Bajaj Consumer Care 67.3 66.6 67.3 67.4 66.3 67.7 67.1 67.7 68.3 32.4 31.2 28.5 30.9 31.6 29.3 28.7 25.7 13.5
Berger Paints 41.3 39.5 38.7 37.8 40.0 40.8 41.0 40.8 43.6 15.4 15.3 13.9 14.6 14.4 17.8 15.7 17.5 15.4
Britannia Industries 38.5 40.0 40.0 41.3 41.2 40.4 40.2 40.9 39.7 15.6 15.3 15.8 15.9 15.6 14.6 16.1 16.8 15.8
Colgate-Palmolive (India) 65.7 65.9 64.8 65.1 64.6 65.9 64.7 65.7 64.7 28.2 27.0 28.2 28.6 26.9 27.6 26.4 27.6 24.5
Dabur India 50.7 49.6 49.4 49.3 49.8 49.5 50.8 50.1 49.1 23.9 18.6 21.2 20.3 21.5 20.1 22.1 20.9 18.9
Godrej Consumer Products 59.0 55.8 54.7 56.3 58.7 57.1 56.6 56.7 57.7 23.6 17.9 20.3 22.3 23.6 19.4 21.9 22.7 22.1
Hindustan Unilever 52.6 54.0 52.0 53.8 52.3 54.0 54.5 54.2 53.7 22.5 23.7 21.9 21.4 23.3 26.2 24.8 24.9 22.9
ITC 62.2 61.6 61.3 61.7 61.5 63.4 61.5 61.4 62.5 39.1 39.2 38.0 38.5 38.1 40.4 39.1 39.1 38.4
Jubilant Foodworks 74.3 74.5 74.6 75.6 76.1 75.5 75.3 74.9 74.4 16.4 16.6 16.7 18.4 17.1 23.3 23.8 23.9 18.9
Jyothy Laboratories 50.6 47.9 46.7 46.5 45.2 48.6 46.4 48.7 45.7 17.1 13.7 16.3 16.1 15.8 15.5 16.6 15.8 10.3
Kansai Nerolac 38.0 38.3 35.5 34.5 36.3 38.3 38.4 37.5 38.5 15.3 16.0 15.1 13.1 13.0 17.0 17.1 15.4 12.9
Marico 46.6 42.3 44.0 46.3 49.0 47.5 49.6 49.1 49.3 17.0 17.5 16.6 18.8 18.3 21.3 19.3 20.4 18.9
Nestle India 59.1 59.6 59.7 58.9 58.5 58.3 57.6 56.8 56.3 25.8 24.6 25.2 21.2 25.5 23.6 23.6 21.9 24.1
Page Industries 62.6 55.0 57.8 57.1 63.6 55.1 56.0 53.2 58.8 24.1 23.2 20.7 22.4 19.7 22.4 19.2 17.5 10.7
Pidilite Industries 52.1 50.5 49.4 47.2 50.3 51.4 53.4 53.8 55.4 18.4 20.8 20.8 18.5 17.0 22.0 20.4 24.0 19.5
S H Kelkar and Company 38.8 44.3 42.5 45.7 42.0 43.1 43.2 42.9 44.4 9.1 14.3 13.0 15.6 9.2 16.9 13.3 14.9 11.7
Tata Consumer Products 44.3 45.6 43.3 44.7 45.2 44.3 44.9 46.2 42.0 8.6 13.8 9.5 10.3 9.8 14.0 12.8 12.2 14.0
Titan Company 29.0 26.9 27.8 25.1 27.2 26.8 29.2 24.9 30.1 11.6 11.5 11.3 11.5 10.7 11.4 11.6 11.9 13.6
United Breweries 52.7 54.1 55.6 53.3 50.5 50.3 52.1 52.7 50.9 14.1 21.5 20.9 17.1 10.5 16.1 12.2 15.2 9.3
United Spirits 49.9 49.1 49.1 48.6 46.5 47.3 45.0 44.4 42.2 12.7 11.3 19.4 14.3 12.6 17.8 18.1 16.4 13.6
Varun Beverages 55.1 53.4 54.8 66.0 55.9 52.7 57.1 55.4 58.8 15.8 27.9 18.1 6.1 16.1 28.0 18.7 9.5 16.2
We note that most consumer companies expect a gradual ‘U’-shaped recovery (see
Exhibit 76) at varying pace depending on product category and geographic salience of
their products (rural or urban). Consumer behavior has seen some changes and
discretionary and out-of-home consumption categories may take longer to recover. Weak
RM trends will likely prevail through FY2021 and companies expect to pass on some of
the gross margin benefits arising from weaker raw material prices to gain/retain market
shares.

Strategy India
Exhibit 76: Companies have ramped up their productions and mitigated supply-chain issues; expectation of a gradual recovery
Key management commentary of select consumer companies, 4QFY20
Company Production Demand Expectation
Witnessed pent-up demand in May and Partial pass-on of RM savings to help manage weak
Asian Paints Operating at ~70% capacity
normal demand in June demand environment
Operating at full capacity despite man- Decline in eating out, brand strength and execution keeps
Britannia Industries Strong growth in April and May
power shortage the company on steady footing
Improvement since mid-April despite To remain weak in FY2021; focus is on market share
Colgate-Palmolive (India) Difficult to assess
operational and supply-chain challenges revival despite subdued environment
Higher rural growth driven by (1) limited Covid disruptions,
Manufacturing units operating at 60-
Dabur India Expects a gradual 'U'-shaped recovery (2) government stimulus and (3) shift of migrant
70% utilization; labor shortage an issue
population to support growth
Sharp increase in demand for health, Personal care demand to gradually revive. Rural recovery
Hindustan Unilever Production at 75-80% utilization hygiene and food products while sharp drop (which was weaker than urban in pre-Covid period) will
in demand of discretionary products depend on current harvest and extent of Covid spread
To focus on (1) value as against premiumization, (2) pass
Operations at 70-80% of FY2020
Marico Difficult to assess on RM gains to improve market share, (3) NPDs in foods
monthly run-rate
and hygiene space and (4) distribution in rural areas
More than 1,400 out of 1,800 stores Average daily sales recovered to 80% of Expects full recovery by 4QFY21 driven by festive demand.
Titan Company
are open normal levels in opened stores Wedding segment to also pick up in 2HFY21
Automobile companies rounded up a disappointing financial year with another poor

quarter with most companies reporting large double-digit decline in volumes on a yoy as
well as 2-year CAGR basis. Exhibit 77 shows the quarterly volumes of various automobile
segments. Volumes in the PV segment were muted with MSIL reporting 18% yoy decline
in volumes. 2-W demand followed the same trend with HMCL reporting 43% yoy drop in
volumes (two-year CAGR of (-)19%), BJAUT reporting 34% yoy decline in domestic
volumes (two-year CAGR of (-)10%) and EIM reported a 18% yoy decline (two-year
CAGR of (-)16%).
Exhibit 77: Large drop in automobile volumes in 4QFY20

Domestic volumes of select companies in auto sector, 4QFY18-4QFY20
2-y CAGR
4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 (%)
Yoy change (%)
Ashok Leyland 24.2 49.9 35.1 (0.7) 2.1 (0.3) (46.3) (30.7) (59) (35)
Bajaj Auto
Two wheelers 20.4 39.3 18.6 38.1 22.5 2.8 (24.7) (15.7) (34) (10)
Three wheelers 144.7 80.4 31.6 (17.3) (16.3) (9.4) (3.8) 6.3 (27) (22)
Eicher Motors
Two wheelers 27.9 22.8 5.4 (5.0) (14.6) (20.6) (31.2) (8.8) (18) (16)
Commercial vehicles 31.5 42.8 21.3 3.5 (9.8) (13.5) (38.1) (24.1) (43) (28)
Hero Motocorp 22.9 13.7 5.0 5.3 (10.7) (12.4) (21.2) (14.2) (26) (19)
Maruti Suzuki 11.6 25.9 (0.4) 1.3 0.4 (21.7) (34.1) (1.1) (18) (9)
M&M (passenger vehicles) 10.0 9.0 (7.1) (0.2) 6.9 (2.2) (26.5) (11.8) (56) (31)
Tata Motors
Commercial vehicles 37.2 84.7 33.9 2.6 (1.1) (19.5) (43.6) (19.9) (50) (29)
Passenger vehicles 41.7 33.3 3.1 (0.1) (8.8) (20.6) (51.4) (30.4) (44) (29)
Source: SIAM, Kotak Institutional Equities
CV volumes were also weak with AL and TTMT reporting 59% and 50% yoy volume
decline respectively, indicating a very challenging underlying demand environment. We
note that management commentaries (Exhibit 78) of most automobile companies suggest
gradual improvement in consumer sentiment and ramp-up of production facilities.

India Strategy
Exhibit 78: Expectations of a gradual recovery in demand to pre-Covid levels

Key management commentary of select automobile companies, 4QFY20
Company Production Demand Expectation

Low capacity utilization given weak Weak demand conditions CV volumes to remain weak until FY2021 due to
Ashok Leyland demand; focused on reducing persist necessitating high (1) pandemic crisis and (2) price increase due to
inventory first discounts BS-VI transition
Some recovery in 2HFY21 led by (1) consumer
At 50-60% capacity utilization post At 25% of normal levels in
Bajaj Auto preference for personal mobility and (2) some
lifting of lockdown restrictions May 2020
pick-up in pent-up demand
Bookings have already New product launch and replacement demand
Eicher Motors Capacity utilization at 40% in June
reached pre-Covid levels (5%) to drive recovery in FY2022
Gradual ramp-up in production is At 70-80% of pre-Covid Some recovery in 2HFY21 led by rural and semi-
Hero Motocorp
underway levels urban areas
Production re-started in Manesar at
Maruti Suzuki Uncertain Uncertain recovery trajectory
50% work-force
Tractors operating at 80% capacity Recovery over 2HFY21 and FY2022 led by (1)
Tractor demand holding up;
M&M utilization; PVs at 30% capacity new models in SUV segment, (2) leveraging Ford
weak for PVs
utilization JV and (3) EV portfolio.
89% of retailers have opened; Enquires as well as sales are
Tata Motors Uncertain recovery trajectory
production has re-started improving
Cement companies under our coverage reported moderate yoy decline in volumes (see
Exhibit 79) with UTCEM reporting 3% yoy decline in volumes resulting in a two-year
CAGR of 3% (including volumes of cement capacities acquired from Century Textiles and
JPA). Most cement companies under our coverage saw decent improvement in
profitability on qoq and yoy basis, as realizations held up on a qoq basis and costs
remained under control. Exhibit 80 shows realizations and profitability of the cement
stocks under our coverage for the past few quarters. Cement companies expect demand
conditions to remain weak and have thus, postponed their expansion plans. Most
companies expect demand to return to pre-Covid levels over the next 3-4 months, while
remaining cautious due to (1) exodus of migrant labor, which may affect the construction
sector and (2) limited visibility of government and private spending.
Exhibit 79: Cement companies under our coverage reported yoy decline in volumes in 4QFY20
Volume trends for cement companies under KIE coverage, 4QFY18-4QFY20
2-y CAGR
4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 (%)
Yoy volume growth (%)
ACC 8 7 10 8 5 0 (2) 4 (12) (4)
Ambuja Cements 3 5 9 11 2 (9) (5) 5 (9) (3)
Dalmia Bharat 14 13 13 8 8 2 8 14 (7) 0
JK Cement 29 23 1 6 21 0 20 19 (7) 6
JK Lakshmi Cement 2 1 12 9 26 0 (2) 0 (14) 4
Orient Cement (3) 14 12 10 7 (6) (18) (1) (11) (2)
Shree Cement 9 19 15 11 13 (13) 2 (4) (5) 3
UltraTech Cement 39 39 27 19 10 (3) 7 7 (3) 3
Total volume growth (%) 17.8 19.5 16.0 12.6 9.7 (4.2) 2.8 5.4 (6.9) 1.1
Volumes (mn tons)
ACC 7.1 7.2 6.6 7.5 7.5 7.2 6.4 7.8 6.6
Ambuja Cements 6.2 6.4 5.5 6.2 6.4 5.8 5.2 6.5 5.8
Dalmia Bharat 5.2 4.5 4.1 4.5 5.6 4.6 4.5 5.1 5.2
JK Cement 2.4 2.3 1.9 2.1 2.9 2.3 2.2 2.6 2.7
JK Lakshmi Cement 2.3 2.3 2.1 2.3 2.9 2.3 2.1 2.3 2.5
Orient Cement 1.7 1.6 1.5 1.5 1.8 1.5 1.2 1.5 1.6
Shree Cement 6.4 7.0 5.6 5.9 7.3 6.1 5.7 5.7 6.9
UltraTech Cement 18.5 17.5 15.7 17.9 20.3 16.9 16.8 19.1 19.6
Total 49.8 48.8 42.9 47.9 54.7 46.7 44.1 50.6 50.9

Strategy India
Exhibit 80: Steady qoq profitability and realizations but higher yoy profitability and realizations for cement companies
Realizations, power & fuel costs and EBITDA for cement companies, 4QFY18-4QFY20 (Rs/ton)
4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20
ACC
Realization (Rs/ton) 4,626 4,836 4,756 4,634 4,690 5,756 5,478 5,232 5,338
Fuel & power cost (Rs/ton) 1,410 1,037 1,115 1,024 1,055 1,131 1,217 954 1,119
EBITDA (Rs/ton) 550 713 538 460 708 1,084 864 697 893
Ambuja
Fuel & power cost (Rs/ton) 1,021 1,028 1,007 1,000 1,114 1,046 1,145 1,023 976
EBITDA (Rs/ton) 815 977 656 846 727 1,200 841 837 1,047
Dalmia Bharat
Fuel & power cost (Rs/ton) 757 876 1,039 965 820 1,020 962 898 747
EBITDA (Rs/ton) 1,137 1,162 942 850 1,087 1,464 1,063 896 983
JK Cement
Fuel & power cost (Rs/ton) 1,041 2,465 1,116 1,047 1,053 1,136 1,003 992 1,008
EBITDA (Rs/ton) 669 658 786 782 897 1,315 1,135 1,086 1,228
JK Lakshmi Cement
Fuel & power cost (Rs/ton) 953 940 1,054 973 872 958 1,014 906 818
EBITDA (Rs/ton) 440 410 429 427 446 729 722 652 825
Shree Cement
Fuel & power cost (Rs/ton) 939 1,012 1,089 1,111 1,046 806 826 713 713
EBITDA (Rs/ton) 962 722 823 1,059 1,103 1,443 1,452 1,360 1,562
UltraTech
Fuel & power cost (Rs/ton) 1,076 1,067 1,201 1,127 1,008 1,063 1,066 966 984
EBITDA (Rs/ton) 965 928 824 772 1,089 1,508 1,077 1,007 1,152
Source:
 Weak execution and modest growth in order inflows for industrial companies.
4QFY20 domestic revenues of industrial companies for the stocks under our coverage
declined 7% yoy (see Exhibit 81) while order inflows grew 13% yoy (see Exhibit 82).
Order inflows were weak in hydrocarbon and power segments but were relatively
stronger in infrastructure segments. Companies expect low order inflows from
government and PSUs and execution challenges due to (1) working capital issues and (2)
labor shortages.
Exhibit 81: Sharp decline in domestic revenues for most industrial companies
Domestic revenues of industrials companies under KIE coverage, 4QFY18-4QFY20
Domestic revenues (Rs bn) Yoy growth (%)
ABB 21 23 21 17 16 15 15 17 13 12 28 34 (29) (23) (36) (28) 1 (18)
BHEL 91 54 61 66 91 41 56 51 43 (1) 2 3 7 0 (24) (9) (23) (53)
Cummins 8 9 10 10 10 10 10 11 8 (4) (5) 34 14 21 16 (5) 4 (22)
Larsen & Toubro 246 139 168 194 270 203 232 232 307 13 13 27 31 10 47 39 20 14
Siemens 28 26 26 24 30 27 35 22 23 12 16 (2) 16 8 4 34 (7) (23)
Thermax 9 6 8 8 13 8 8 8 7 (7) 12 45 22 45 32 1 2 (44)
Total 403 256 295 320 430 304 356 341 401 9 11 19 19 7 19 21 7 (7)
Notes:
(a) We use historical share of exports to estimate domestic revenues of ABB, BHEL, Siemens and Thermax.
(b) We have adjusted revenues for ABB India from 3QFY19 (for like-for-like comparison with 3QFY20) to include only continued business as the Power Grid business is now demerged.

India Strategy
Exhibit 82: Industrial companies saw a decent increase in order inflows

Order inflows of key industrial and construction companies, 4QFY18-4QFY20
Order inflows (Rs bn) Yoy growth (%)
ABB 26 25 24 19 18 20 16 16 20 10 8 22 (35) (31) (20) (32) (16) 10
BHEL 252 37 52 77 59 39 74 47 90 52 110 175 (36) (77) 4 43 (38) 53
Larsen & Toubro 363 192 288 225 378 297 312 240 419 26 27 100 (36) 4 55 8 6 11
Siemens 29 28 28 34 36 30 32 32 28 (38) (0) 5 4 24 6 12 (6) (22)
Thermax 9 9 7 10 12 12 17 16 10 16 58 3 35 35 43 141 57 (18)
Voltas 12 4 11 11 10 7 26 12 15 29 (66) 61 79 (19) 59 142 16 50
Total 691 295 410 376 513 405 477 364 581 40 24 84 (32) (26) 37 17 (3) 13
Notes:
(a) We use domestic order inflows for L&T; for others, we use total order inflows.
(b) For ABB India, order inflows are not available for the discontinued Power Grids business.
Capital good and infrastructure stocks have seen significant de-rating over the past few
quarters on worries about further delays in revival in capital expenditure given funding-
related challenges of both the government and the private sectors. Their multiples look
more interesting after the correction in stock prices (see Exhibit 83). We model strong
recovery in net profits of industrial companies in FY2022 after a sharp decline in FY2021.
Exhibit 83: Valuations of industrial stocks have moderated over the past few months but still high in general
Valuation summary of industrial stocks under KIE coverage, March fiscal year-ends, 2020-22E
EPS (Rs) EPS growth (%) P/E (X) EV/EBITDA (X) P/B (X)
Company 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E
ABB 18 14 21 46 (19) 46 55 68 46 35 44 29 5.8 5.6 5.2
BHEL (4.2) (1.5) 2.5 (221) 64 263 NM NM 15 NM NM 6 0.4 0.4 0.4
Cummins India 26 16 24 (3) (35) 49 16 24 16 18 29 17 2.6 2.6 2.5
Kalpataru Power Transmission 25 25 39 (16) 0 53 9 9 6 4 4 3 1.0 0.9 0.8
KEC International 22 25 31 16 13 24 12 11 9 7 7 5 2.5 2.1 1.7
L&T 63 40 69 3 (37) 74 15 24 14 16 18 13 2.3 1.9 1.8
Siemens 26 33 38 (15) 28 15 42 33 29 28 22 19 4.0 3.7 3.4
Thermax 19 15 31 (49) (22) 110 40 52 25 21 34 17 2.8 2.7 2.5
Voltas 16 10 18 3 (37) 73 35 55 32 28 52 26 4.3 4.1 3.8
 Stable US sales for pharmaceuticals companies on a qoq basis. Pharmaceutical

companies reported decent growth in US sales on a qoq basis, but small decline on a yoy
basis. The five large pharmaceutical companies under our coverage with a large US
presence reported 5% yoy decline and 0.1% qoq growth in overall revenues and 3% yoy
decline and 3% qoq growth in US revenues (see Exhibit 84).

Strategy India
Exhibit 84: Pharmaceutical companies had varied success in their US businesses with ARBP, CIPLA and DRRD reporting strong growth
Trend of quarterly sales of Indian pharmaceuticals across geographies, 4QFY18-4QFY20
Sales (Rs mn) Yoy growth (%) 2-y CAGR
4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 (%)
Aurobindo
Total sales 40,491 42,503 47,514 52,697 52,922 54,446 56,005 58,950 61,584 31 28 18 12 16 23
ARV 1,486 1,556 2,440 2,813 2,915 3,185 2,379 3,134 3,820 96 105 (3) 11 31 60
Europe 11,516 11,991 11,565 12,928 13,118 13,916 14,013 14,763 16,530 14 16 21 14 26 20
RoW 2,096 2,565 3,075 3,405 2,891 3,134 3,192 3,459 3,770 38 22 4 2 30 34
US 17,388 18,894 22,268 24,332 24,811 26,884 28,355 29,694 29,900 43 42 27 22 21 31
Others 8,005 7,497 8,166 9,219 9,187 7,327 8,066 7,900 7,564 15 (2) (1) (14) (18) (3)
Cipla
Total sales 36,980 39,390 40,119 40,075 44,040 39,890 43,958 43,710 42,660 19 1 10 9 (3) 7
Europe 1,360 1,340 1,410 1,890 2,360 2,010 1,900 1,900 2,515 74 50 35 1 7 36
India 13,530 15,440 16,440 15,850 15,000 13,550 17,450 17,770 16,955 11 (12) 6 12 13 12
RoW 3,940 4,690 4,720 3,930 4,060 2,790 4,510 3,230 4,273 3 (41) (4) (18) 5 4
South Africa 5,330 5,750 5,030 5,570 5,130 5,320 5,460 5,940 4,991 (4) (7) 9 7 (3) (3)
US 6,750 6,700 7,580 8,490 11,430 11,190 9,585 9,443 8,925 69 67 26 11 (22) 15
Others 6,070 5,470 4,939 4,345 6,060 5,030 5,053 5,427 5,001 (0) (8) 2 25 (17) (9)
Dr Reddy's Laboratories
Total sales 35,349 37,365 38,175 38,500 40,166 38,435 48,009 43,838 41,457 14 3 26 14 3 8
CIS 1,150 1,180 1,440 1,440 1,180 1,200 1,700 1,800 1,115 3 2 18 25 (5) (2)
Europe 1,711 2,016 1,915 2,000 1,912 2,404 2,764 3,093 2,368 12 19 44 55 24 18
India 6,138 6,074 6,864 6,741 6,505 6,960 7,511 7,636 7,213 6 15 9 13 11 8
RoW 1,790 1,670 2,260 2,200 2,210 2,100 2,500 2,500 2,503 23 26 11 14 13 18
Russia 2,560 3,790 3,790 4,100 3,620 4,000 4,100 4,900 3,421 41 6 8 20 (5) 16
US 14,487 15,903 14,265 14,832 14,957 16,322 14,265 15,999 16,681 3 3 - 8 12 7
Others 7,513 6,732 7,641 7,187 9,782 5,449 15,169 7,910 8,157 30 (19) 99 10 (17) 4
Lupin
Total sales 39,785 37,746 38,909 43,779 43,259 38,155 38,202 37,161 37,910 9 1 (2) (15) (12) (2)
Europe 1,808 1,416 1,525 1,332 1,709 1,416 1,729 1,528 1,780 (5) 0 13 15 4 (1)
India 9,647 11,924 12,032 11,902 10,525 13,077 13,419 12,969 11,921 9 10 12 9 13 11
Japan 5,098 5,032 5,321 5,868 5,517 8
US 14,990 11,858 12,487 14,174 17,406 15,412 13,244 13,766 15,791 16 30 6 (3) (9) 3
Others 8,242 7,516 7,544 10,504 8,102 8,250 9,811 8,898 8,418 (2) 10 30 (15) 4 1
Sun Pharma
Total sales 67,110 71,388 68,465 76,567 70,443 82,593 79,492 80,387 80,780 5 16 16 5 15 10
EM 12,794 13,087 13,720 14,618 12,199 13,486 14,117 13,901 12,456 (5) 3 3 (5) 2 (1)
India 19,626 21,520 18,597 22,351 11,013 23,137 25,148 25,170 23,326 (44) 8 35 13 112 9
RoW 7,437 7,178 7,615 8,981 10,780 11,591 11,371 11,035 11,417 45 61 49 23 6 24
US 23,716 25,437 23,979 26,059 31,238 29,474 23,898 24,924 25,560 32 16 (0) (4) (18) 4
Others 3,538 4,167 4,553 4,559 5,211 4,905 4,959 5,356 8,022 47 18 9 17 54 51
Domestic revenues of the pharmaceutical companies were stable (see Exhibit 85), with
companies reporting double-digit yoy growth. SUNP’s domestic revenues grew by 9% on
a 2-year CAGR basis (yoy not comparable as base quarter had changes in distribution
structure), while CIPLA reported a 2-year CAGR of 12% (13% yoy).
Exhibit 85: Most pharmaceutical companies saw decent growth in domestic sales in 4QFY20
Domestic sales and growth of pharmaceuticals companies, 4QFY18-4QFY20
Domestic sales (Rs mn) Yoy growth (%) 2-y CAGR
4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 (%)
Cipla 13,530 15,440 16,440 15,850 15,000 13,550 17,450 17,770 16,955 10.9 (12.2) 6.1 12.1 13.0 11.9
Dr Reddy's Laboratories 6,138 6,074 6,864 6,741 6,505 6,960 7,511 7,636 7,213 6.0 14.6 9.4 13.3 10.9 8.4
Lupin 9,647 11,924 12,032 11,902 10,525 13,077 13,419 12,969 11,921 9.1 9.7 11.5 9.0 13.3 11.2
Sun Pharma 19,626 21,520 18,600 22,350 11,013 23,137 25,148 25,170 23,326 (43.9) 7.5 35.2 12.6 111.8 9.0
Torrent Pharmaceuticals 6,930 8,300 8,160 8,350 7,540 9,070 8,990 8,710 8,402 8.8 9.3 10.2 4.3 11.4 10.1
Among the major pharmaceutical companies under our coverage, (1) ARBP reported 16%
yoy growth (+4.5% qoq) in overall revenues, (2) CIPLA reported (-)22% yoy (-5.5% qoq)
growth in US revenues while domestic revenues increased 13% yoy leading to (-)3% yoy
growth in overall sales, (3) DRRD’s US sales increased 12% yoy and 4% qoq, (4) LPC’s US
sales declined 9% yoy (+15% qoq) and overall sales declined 12% yoy (+2% qoq) and (5)
SUNP’s US sales were down 18% yoy (+2.5% qoq) but overall sales increased 15% yoy
(+0.5% qoq).

INDIA
Strategy
KIE Covid-19 Tracker JULY 03, 2020
UPDATE
BSE-30: 35,844
Two-paced recovery. Economic indicators such as electricity consumption, UPI

payments, railway freight are either close to pre-Covid levels or improving at a fair pace,
however, other indicators like road traffic congestion, people mobility, import duty
collection are stuck at lower levels and are not improving at the same speed. An ever-
increasing number of daily cases may be the reason for some of these indicators
remaining stuck at low levels.
UPI transactions at all-time high; no improvement in road traffic QUICK NUMBERS
This week’s economic indicator readings continue to show that different parts of economy are  Electricity
recovering at a different pace: consumption gap
narrowed
 Road traffic congestion levels were flat to marginally up compared to the previous week
marginally to 5%
(Exhibits 2-5).
 Daily average e-
 Electricity consumption gap, compared to 2019, narrowed marginally to 5% (Exhibit 33).
waybills generated
 The increase in time spent at workplaces and the decrease in time spent at residence has in the second
plateaued and reversed its direction slightly in the past seven days (Exhibits 22-25). fortnight of June at
March 2020 level
 Daily payment data showed that daily average UPI transaction value in June was at an all-
time high. IMPS and NETC FASTag transactions also increased compared to May (Exhibit 27-  Container volume
29). Closer examination shows that the week-on-week change in June has been negative for
remained low at
UPI and IMPS transaction values.
JNPT
 Railway freight data continues to remain incrementally positive on week-on-week basis
(Exhibits 8-9). Container volume at JNPT remained low while coal and iron ore volume
increased at Paradip port (Exhibits 12-13).
 The number of domestic departures/ passengers carried did not increase meaningfully in the
past week (Exhibit 6).
 E-waybills data shows that the daily average number of e-waybills generated in the second
half of June was similar to the March 2020 figure (Exhibit 7). However, it is still significantly
below the FY2020 average.
 The daily average import duty collection for June 2020 has been stuck at ~65% of the
FY2019 average for a long period of time (Exhibit 21).
 The daily average of property registrations in Maharashtra in June was similar to the daily
average of March 2020, and is ~78% of FY2019 daily average (Exhibit 17).
Covid-19 cases continue to rise
We continue to see a rise in the daily new confirmed Covid-19 cases. The change in the number Anurag Singh
of active cases, which had started trending downwards in the first half of June, has been rising
in the second half of June (Exhibits 45–47). We also show that the geographical spread of
Covid-19, in terms of states and districts affected, is at a high level (Exhibits 54-55). On the
positive side, the mortality rate from Covid-19 continues to fall (Exhibit 58).
kspcg.research@kotak.com
Contact: +91 22 6218 6427
For Private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES, REFER TO THE END OF THIS MATERIAL.
India Strategy
TWO-PACED RECOVERY
KIE’s Covid-19 Tracker examines the impact of Covid-19 on the economy through several sets of factors
contributing to economic activity. We find that (1) electricity consumption gap has narrowed significantly; (2)
road traffic was flat or marginally up compared to the previous week, (3) payment data is back to pre-Covid
level and (4) container volume at JNPT remained low. We plan to continue adding more economic indicators
in the next few editions of this report.
Improvement in economic activity, but some signs of stagnation

We track a set of indicators as a proxy for economic activity.
 Road traffic. Road traffic remains lower than 2019 levels. This data is available for four
Indian cities – Mumbai, New Delhi, Bengaluru and Pune (Exhibits 2-5). While road traffic
is up from the extreme lows of April 2020, we see that the week-on-week change in
congestion level was either flat or marginally positive. We also track the average daily
number of e-waybills generated (Exhibit 7). This is available on a weekly basis and is also a
proxy for the movement of goods across the country. The daily average number of e-
waybills generated during the second half of June (June 15 – June 28) was at March 2020
level.
 Civil aviation data. We track the number of domestic departures and the passengers
carried (Exhibit 6). We see only marginal improvement in both the number of domestic
departures and the number of passengers flying.
 Electricity consumption. Covid-19 forced a prolonged lockdown and temporary

shutting down of factories. This, in turn, led to lower electricity consumption. We show
the daily electricity consumption of major states (Exhibits 33-44) in India and compare this
with consumption in the same week of CY2019. Electricity consumption in India, over the
seven day period ending July 1, was only 5% lower than electricity consumption in the
similar period in 2019. For comparison, this gap was 6% for the seven day period ending
June 24.
 Payment data. We use payment data released by RBI and National Payment Corporation
of India (NPCI). Specifically, we track UPI, IMPS and NETC FASTag transaction values. UPI
transactions have recorded an all-time high and IMPS and NETC transactions are also
close to pre-Covid levels (Exhibits 27-28). However, closer examination of data shows that
the value of UPI and IMPS transactions have been falling in successive weeks of June
2020 (Exhibit 29). We note that some of the UPI/IMPS transactions may be in lieu of cash
payments (as people avoid handling cash used by others) and may not reflect more
spending in June.
 Real estate and vehicle purchases. We track the number of property sales registered in
Maharashtra and the daily number of vehicles registered in Regional Transport Offices
under the Vahan4 umbrella (Exhibits 14-17). The daily average of property registrations in
Maharashtra in June was similar to the daily average of March 2020, and is ~78% of
FY2019 daily average. Vehicle registrations increased in the first ten days of June, as
compared to May.
 Railway/Ports data. We show daily average metric tons of freight carried by Indian
railways as a proxy of goods movement in India. We also show the year-on-year
change in the freight load for major commodities (Exhibits 8-9). Daily average of
freight loaded in June 2020 was close to 90% of FY2019 average and 92% of June
2019 level. We also show the volume of traffic at major ports and the change in
volume for major commodities (Exhibits 10-13). While container volume at JNPT
remained low, iron ore, POL and coal volume at Paradip port improved month-
on-month.

Strategy India
 Number of job postings. Covid-19 has led to hiring freezes as well as involuntary
attrition in certain industries. We show the month-on-month and year-on-year change in
the number of new job postings on Naukri.com (Exhibits 18 and 19). The hospitality
industry was the worst affected industry as of May end. We also show estimated nation-
wide unemployment level based on CMIE survey (Exhibit 20). The unemployment level
estimated by CMIE is now marginally below the March 2020 unemployment level.
 Movement of people. We use Google mobility reports to track the change in the time
spent by people at their residences, their workplaces and at retail and recreational places,
compared against the pre-Covid baseline (Exhibits 22-26). After plateauing for a while,
we saw evidence of risk-averse behavior (people spending more time at home and less
time at workplace/grocery shops).
 Import duty collection. We also monitor external trade by comparing the import duty
collected in the current period against the import duty collected during the same period
in FY2020 (Exhibit 21). The import duty collection for June 2020 was ~65% of the
FY2019 average.
 Petroleum product consumption. Petroleum consumption is another proxy of

economic activity. We track this using data released by Petroleum Planning and Analysis
Cell (PPAC). Monthly data (Exhibits 31-32) show that consumption of motor spirit
(petroleum) and high speed diesel increased in May after falling from a cliff in April.
However, the consumption of petro-products is still well below normal levels.
 Covid-19 mindshare. We also track the mindshare of Covid-19 in people’s minds. We

are assuming that before economic activity regains 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 30).
Most of the indicators above show that economic activity is still well below the pre-Covid
period. However, a lot of these indicators are marginally moving in the correct direction
(Exhibit 1). For some indicators, we do see early signs of stagnation though.

India Strategy
Exhibit 1: Mixed signals given by the economic indicators

Economic indicators tracked by KIE
Indicator Direction Comments

Low, but Road traffic was flat on a week-on-week basis. Railway freight
Movement
improving data improved slightly.
New vehicle Low, but Cars and two-wheeler registrations down close to 60%. Agri-
registration improving vehicles less affected
Electricity Low, but Gap between 2019 and 2020 electricity consumption narrowed
consumption improving to 5%.
Covid-19 Google searches for Coronavirus in India significantly lower
Improving
mindshare from peak.
Property sale registrations in Maharashtra were up in June as
Low, but
Property sales compared to April 2020. They are almost equal to March 2020
improving
daily average.
New job postings are down 91% in hospitality industry.
New job postings Low
Healthcare sector least affected.
Daily import duty collection close to 65% of what it was in the
Import duty Low and
same period in FY2020. It has remained at these levels for
collection stagnant
some time now.
Source: Kotak Institutional Equities
Exhibits 2 to 5 show 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.
Exhibit 2: The congestion levels in Mumbai were flat on a week-on-week basis

Daily traffic congestion data (Mumbai), relative to historical average (%) as estimated on July 1
Source: TomTom.com, Kotak Institutional Equities

Strategy India
Exhibit 3: Road congestion in New Delhi increased slightly from previous week
Daily traffic congestion data (New Delhi), relative to historical average (%) as estimated on July 1
Exhibit 4: Bengaluru traffic congestion was flat to marginally higher compared to previous week
Daily traffic congestion data (Bengaluru), relative to historical average (%) as estimated on July 1

India Strategy
Exhibit 5: Traffic congestion in Pune was also flat, compared to previous week
Daily traffic congestion data (Pune), relative to historical average (%) as estimated on July 1
Exhibit 6 shows the number of domestic flights and the passengers carried. This compares
with a daily average of ~3,000 domestic flights per day and ~400,000 daily domestic
passengers in pre-Covid period.
Exhibit 6: Minor increase in the number of departures over the past three days
Daily domestic departures (#) and passengers carried (#)
Passengers Departures (rhs)
80,000 900
70,000 800
60,000 700
600
50,000
500
40,000
400
30,000
300
20,000 200
10,000 100
0 0
Source: Ministry of Civil Aviation, Kotak Institutional Equities
Exhibit 7 shows the daily average e-waybills generated. E-waybills are needed to transport
goods of value over Rs50,000. For the months prior to June 2020, we divide the number of
monthly e-waybills generated by 30 to estimate the average daily number of e-waybills
generated. From June 2020, we divide the weekly data by 7 to get the average daily e-
waybills generated for the week.
The number of average daily e-waybills generated fell down slightly in March 2020, and
sharply in April 2020 demonstrating the effect of lockdown. With the relaxations in
lockdown effective from May 4, we see that the average daily e-waybills generated have
been rising on a week-on-week basis.

Strategy India
Exhibit 7: Number of e-waybills generated continues to risk week-on-week

Daily average e-waybills generated (mn)
2.5
2.0 1.8 1.8 1.9 1.9

1.8 1.8 1.8 1.7 1.7 1.7 1.8 1.8
1.6 1.6 1.7 1.7 1.7 1.7
1.6 1.5 1.5
1.5 1.4
1.5 1.4
1.2 1.2
0.9
1.0 0.8
0.5 0.3
0.0
June 1- June 7
May-18
May-19
May-20
Mar-19
Mar-20
Aug-18
Aug-19
Jul-18
Jul-19
Nov-19
June 15 - June 28
Nov-18
Sep-19
Apr-18
Sep-18
Dec-18
Feb-19
Apr-19
Dec-19
Feb-20
Apr-20
Oct-19
Oct-18
Jun-18
Jun-19
June 8 - June 14
Jan-19
Jan-20
Source: GST Network, Kotak Institutional Equities
Similarly, railway freight data (Exhibits 8 and 9) shows that there was a sharp decline in
railway freight movement in March and April.
Exhibit 8: Railway freight loading slowly inching back to pre-Covid level

Daily average freight traffic (mn tons)
4.5
4.0 3.7
3.5 3.3 3.1
3.0 2.7
2.5 2.2
2.0
1.5
1.0
0.5
0.0
May-18
May-19
May-20
Aug-18
Aug-19
Nov-18
Dec-18
Mar-19
Nov-19
Mar-20
Dec-19
Jul-18
Jul-19
Oct-18
Oct-19
Apr-18
Sep-18
Apr-19
Sep-19
Apr-20
Jan-20
Jun-20
Jun-18
Jan-19
Feb-19
Jun-19
Feb-20
Source: Indian Railways, Kotak Institutional Equities

India Strategy
Exhibit 9: Incrementally positive signs in all type of freight categories as the yoy fall is reducing
Yoy change (%) for different freight categories; June data as of June 24
Feb-20 Mar-20 Apr-20 May-20 Jun-20
150%
100%
64%
50%
19%
6% 6%
0%
Coal/coke Cement/clinker Food Fertilizer Container Petroleum/gases Others Total (7%)
(16%) (5%)
(23%)
(50%)
(100%)
(150%)
Source: Indian Railways, Kotak Institutional Equities
Apart from rail and road, we also show the impact of Covid-19 and lockdown on port
volumes. Exhibit 10 shows that all major ports saw a yoy drop in volume, when compared to
April and May 2019. The commodities which were most affected were coal and containers
(Exhibit 11). Jawaharlal Nehru Port Trust (JNPT) which handles a significant amount of India’s
container volumes saw a large decline in container volume in April and May (Exhibit 12).
Similarly, Paradip port trust, which handles a significant portion of India’s coal and iron ore
volumes, saw decline in April and May, with the largest drop in volume coming in coal
volumes (Exhibit 13).
Exhibit 10: All major ports have seen a fall in cargo traffic
Yoy change (%); April and May 2020 compared to April and May 2019
Deendayal (Kandla)
Vishakhapattnam
Mumbai
Kolkata
Paradip
JNPT
0%
(5%)
(10%)
(15%) (13%) (13%)
(20%)
(18%)
(25%)
(30%) (27%)
(35%) (32%)
(33%)
Source: Indian Ports Association, Kotak Institutional Equities

Strategy India
Exhibit 11: Significantly lower volume in coal and cargo containers traffic
Yoy change (%) in selected commodities across major ports
40%
30%
20% 34%
10% 14%
0%
(15%) (14%)
(10%) (24%) (19%)
(20%) (36%) (36%) (36%)
(30%)
(40%)
POL
Coal - coking and
Containers (TEUs)
Fertilizers finished
Other liquids
Coal - thermal and
Others
Fertlizers raw
Iron ore
others
steam
Source: Indian Ports Association, Kotak Institutional Equities
Exhibit 12: Container traffic continues to remained depressed in June at JNPT

Monthly container traffic (‘000s TEUs) at JNPT
500
448 449
431 434 426
450 410 418 417 410
400 403
384
400
350
284 275 289
300
250
200
150
100
50
0
May-20
May-19
Aug-19
Nov-19
Dec-19
Mar-20
Jul-19
Oct-19
Apr-19
Sep-19
Apr-20
Jun-19
Jan-20
Feb-20
Jun-20
Source: Jawaharlal Nehru Port Trust (JNPT), Kotak Institutional Equities

India Strategy
Exhibit 13: Improvement in June coal, iron ore and POL volume at Paradip compared to May
Commodity traffic handled (‘000s MTs) at Paradip port
POL Iron Ore Coal
9,000
8,000
7,000
3,686
6,000 3,642 3,451 3,579 3,670
2,665
2,411 2,344 3,566
2,720 2,690
5,000 3,707
1,996
4,000 1,054 1,176 1,550 1,483
1,062 966 638 1,410 1,321 1,711
3,000 1,466
979 1,316
2,000 3,531 3,418
3,206 3,091 3,304 3,023 3,042 2,981 3,176 2,795
1,000 2,360 2,047 2,122
0
May-20
Aug-19
Nov-19
Dec-19
Mar-20
Jul-19
Sep-19
Oct-19
Apr-20
Jun-19
Jan-20
Feb-20
Jun-20
Source: Paradip Port Trust, Kotak Institutional Equities
We split the vehicle registration data into 4 categories – car registrations (Exhibit 14), two-
wheelers registration (Exhibit 15), goods vehicles registrations and agri-vehicles registration
(Exhibit 16). We see that agri-vehicle registrations were least impacted and have recovered
the quickest. Goods vehicle registrations remain extremely low.
Exhibit 14: Car registrations still much below the FY2020 daily average; but above April and May
levels
Daily average car registrations (as reported by Vahan), compared to daily average for FY2020 and April and
May 2020
FY2020 April 2020 May 2020 June 1 - June 10
10,000
8,000
6,000
4,000
2,000
0
Cars
Source: Ministry of Road Transport and Highways, Kotak Institutional Equities

Strategy India
Exhibit 15: Two-wheeler registrations inch upwards in first ten days of June
Daily two-wheeler registration (as reported by Vahan), compared to daily average for FY2020 and April and
May 2020
50,000
40,000
30,000
20,000
10,000
0
Two-wheelers
Exhibit 16: Agri-vehicles registrations did not see as large a fall as goods vehicles registrations
Daily goods vehicles and agri-vehicles registration (as reported by Vahan), compared to daily average for
FY2020 and April and May 2020
2,500
2,000
1,500
1,000
500
0
Goods vehicles Agri-vehicles
The number of property sale registrations in Maharashtra (Exhibit 17) was extremely low in
April 2020 (this was also on account of registration offices being closed).

India Strategy
Exhibit 17: Maharashtra daily property sales in June close to March 2020 levels
Average daily registration of property sales in Maharashtra (#)
4,500 4,248 4,160

3,8 11 3,731 3,8 8 6
4,000 3,68 5 3,662 3,598
3,492
3,348
3,500 3,195 3,217
2,8 32
3,000 2,678 2,663 2,702
2,500
2,000
1,500
972
1,000
500
26
0
May-19
May-20
Aug-19
Mar-19
Nov-19
Mar-20
Dec-19
Jul-19
Apr-19
Oct-19
Apr-20
Sep-19
Jun-19
Jun-20
Jan-19
Feb-19
Jan-20
Feb-20
Source: Department of Registration and Stamps (Maharashtra), Kotak Institutional Equities
Naukri JobSpeak Index measures the number of new job postings in each industry on a
monthly basis. We show the industries where the number of new job postings fell the least
(Exhibit 18) and industries where the number of new job postings fell the most (Exhibit 19).
Center for monitoring Indian economy (CMIE) estimates unemployment rate in India
through surveys (Exhibit 20).
Exhibit 18: Pharma and Health-care new job postings are least affected by the Covid-19 induced slowdown
Mom and yoy decline in Naukri JobSpeak Index (%); May 2020 data
3-month decline (%) YoY decline (%)
80
70
60
50
40
30
20
10
0
Accounting/Taxation/Fina
Semiconductors/Electroni
Telcom/ISP
IT-Software/Software
Courier/Transportation/Fr
Insurance
Medical/Healthcare/Hospi
BPO/ITES/CRM/Transcripti
Media/Dotcom/Entertain
Chemicals/PetroChemical
IT-Hardware &
Pharma/Biotech/Clinical
Architecture/Interior
FMCG/Foods/Beverage
Education/Teaching/Train
Networking
Designing
/Plastic/Rubber
Services
Research
ment
eight
nce
ing
on
tal
cs
Source: Naukri.com, Kotak Institutional Equities

Strategy India
Exhibit 19: New job postings in hospitality sector are down 91% yoy
Mom and yoy decline in Naukri JobSpeak Index (%); May 2020 data
3-month decline (%) YoY decline (%)
100
80
60
40
20
0
Hotels/Restaurants/Airlin
Gas/Power/Infrastructure/
Printing/Packaging
Retailing
Recruitment/Employment
Export/Import
Textiles/Garments/Access
Consumer Durables
Real Estate/Property
Construction/Engineering
Industrial Products/Heavy
Banking/Financial
Auto/Auto Ancillary
Advertising/PR/MR/Events
Services/Broking
/Cement/Metals
Machinery
es/Travel
Oil and
Energy
ories
Firm
Source: Naukri.com, Kotak Institutional Equities
Exhibit 20: Estimated unemployment level has fallen significantly from the peak
Estimated national unemployment level (%); based on CMIE Consumer Pyramids Household Survey
30.0 27.1
23.5 24.0 24.0 24.3

25.0
20.2
20.0 17.5
15.0
11.6
8 .8 8 .5 8 .6
10.0 7.9 7.3 8 .2 8 .1
7.2 7.6 7.2 7.8
7.0 6.9 7.2 6.7 7.4 7.0 7.2
5.0
0.0
Aug 2019
June 7
May 10
May 17
Nov 2019
May 24
May 31
Dec 2019
May 3
Dec 2019
Mar 2019
Mar 2020
Jul 2019
Oct 2019
Jan 2019
Apr 2019
Sep 2019
Jun 2019
Jan 2020
Apr 2020
Feb 2019
Feb 2020
May 2019
June 14
June 21
June 28
Source: Center for Monitoring Indian Economy (CMIE), Kotak Institutional Equities
We also show the daily import duty collected and compare it against the daily average of
import duty collected for same period in FY2020 (Exhibit 21). The import duty collection in
April 2020 was extremely low. Therefore, the FY2021 YTD daily average of import duty
collection is lower than the FY2020 daily average of import duty collection for the same
period.

India Strategy
Exhibit 21: Import duty collection has stagnated at about 65% of FY2019 average
Daily import duty collection (Rs bn); compared to average daily import duty collection in FY2021 YTD, same
period in FY2020 and May 2020
12 11.1
10
7.5 7.3
8 6.8
5.7
6
4
2
0
FY2020, same period

April 2020
FY2021, YTD
June 2020
May 2020
Source: Central Board of Indirect Taxes and Customs, Kotak Institutional Equities
We also use Google mobility reports to show that people have now started to venture out of
their residences (Exhibit 22) and started to go their workplaces (Exhibit 23), but they are still
avoiding retail and recreational places (Exhibit 25). We also see more visits to grocery stores
(Exhibit 24).
Google mobility reports use the location data from Android phones. These reports note the
time spent in locations classified as ‘residence’ or ‘workplace or ‘retail/recreational’ and then
compare it against the time spent in these locations during pre-Covid baseline period.
Exhibit 22: Some evidence of increase in time spent at residences …

Change, from pre-Covid baseline, in time spent in residential areas (%); and its seven-day moving average
Residential (% change from baseline) 7-day moving average
35
30
25
20
15
10
0
4-Apr
11-Apr
18-Apr
25-Apr
15-Feb
14-Mar
21-Mar
28-Mar
27-Jun
22-Feb
29-Feb
2-May
9-May
13-Jun
20-Jun
23-May
30-May
16-May
7-Mar
6-Jun
-5
Source: Google mobility report, Kotak Institutional Equities

Strategy India
Exhibit 23: ... and decrease in time spent at workplaces

Change, from pre-Covid baseline, in time spent at workplaces (%), and its seven-day moving average
Workplace (% change from baseline) 7-day moving average
20
10
0
11-Apr
18-Apr
25-Apr
4-Apr
22-Feb
15-Feb
29-Feb
16-May
23-May
30-May
7-Mar
14-Mar
21-Mar
28-Mar
9-May
13-Jun
2-May
20-Jun
27-Jun
6-Jun
-10
-20
-30
-40
-50
-60
-70
-80
Exhibit 24: ...and grocery shopping

Change, from pre-Covid baseline, in time spent at grocery/pharma stores (%), and its seven-day moving
average
Grocery (% change from baseline) 7-day moving average
20
10
0
11-Apr
18-Apr
25-Apr
4-Apr
15-Feb
22-Feb
29-Feb
14-Mar
21-Mar
28-Mar
6-Jun
9-May
23-May
2-May
13-Jun
16-May
30-May
20-Jun
27-Jun
7-Mar
-10
-20
-30
-40
-50
-60
-70
-80
-90

India Strategy
Exhibit 25: Time spent at retail/recreational spaces continues to remain much lower than pre-Covid
level
Change, from pre-Covid baseline, in time spent at retail and recreational spaces (%), and its seven-day moving
average
Retail/Recreational (% change from baseline) 7-day moving average
10
0
4-Apr
11-Apr
18-Apr
25-Apr
16-May
23-May
30-May
13-Jun
20-Jun
27-Jun
15-Feb
22-Feb
29-Feb
7-Mar
28-Mar
14-Mar
21-Mar
2-May
9-May
6-Jun
-10
-20
-30
-40
-50
-60
-70
-80
-90
-100
We also show the states which have the lowest increase, from the pre-Covid baseline, of
time spent in residential places and the lowest drop, from the pre-Covid baseline, in the time
spent in workplaces (Exhibit 26).
Exhibit 26: States with lowest increase in time spent at home and lowest drop in time spent at workplaces
Change, from pre-Covid baseline, in time spent at residential areas (%), and time spent at workplaces (%); top 5 entries in each column highlighted
Residence (% change from baseline) Workplace (% change from baseline) Grocery (% change from baseline)
Andhra Pradesh 15.4 (18.9) (2.6)
Bihar 2.9 (13.4) 40.6
Delhi 19.3 (45.6) (30.6)
Gujarat 13.3 (26.7) (5.6)
Haryana 13.1 (32.0) (5.4)
Jammu and Kashmir 9.4 156.9 307.6
Jharkhand 8.6 (19.9) 8.0
Karnataka 15.7 (34.1) (4.3)
Kerala 16.7 (20.3) 9.1
Madhya Pradesh 10.4 (26.7) 8.3
Maharashtra 21.6 (45.1) (18.1)
Odisha 11.0 (26.6) (11.4)
Punjab 10.1 (26.6) (0.4)
Rajasthan 7.0 (21.0) 22.4
Tamil Nadu 23.7 (39.1) (26.7)
Telangana 16.7 (36.1) (9.1)
Uttar Pradesh 9.9 (25.9) 19.0
Uttarakhand 11.6 (20.1) 2.4
West Bengal 14.0 (28.1) 0.9
Payment statistics by National Payments Corporation of India (NPCI) shows that UPI and
IMPS payments have rebounded sharply after their precipitous drop in April 2020 (Exhibit
27).

Strategy India
Exhibit 27: June marked an all-time high in UPI transaction value

Daily average UPI and IMPS transaction values (in Rs bn)
UPI IMPS
100
87
90
80 72 72 74
72 73
71 70 69 67 69
68 68
70 63 61
64 63
60 61
56 58 56
60 52
54
51 49 49 50
47
50
40
40
30
20
10
0
Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20
Source: National Payments Corporation of India, Reserve Bank of India, Kotak Institutional Equities
Exhibit 28: NETC FASTag transactions have also increased after falling sharply in April
Daily average NETC FASTag transaction values (in Rs bn)
0.7
0.6
0.6
0.5
0.5
0.5 0.5
0.4
0.4
0.4
0.3 0.3
0.2
0.2
0.2 0.2 0.2 0.2 0.2
0.2
0.1
0.1
0.0
Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20
Source: National Payments Corporation of India, Kotak Institutional Equities

India Strategy
Exhibit 29: There are some signs of a slowdown in UPI and IMPS transactions recently
Daily average UPI and IMPS (in Rs bn) and NETC transaction values (in Rs crores)
June 1 - June 7 June 8 - June 14 June 15 - June 21 June 22 - June 28
100 93
90 86 84 82
80 74
67 65
70 63
60 51 52 52
48
50
40
30
20
10
0
UPI IMPS NETC FASTag
Source: National Payments Corporation of India, Kotak Institutional Equities
Exhibit 30 shows the mindshare of Coronavirus. The number of Google searches for
‘Coronavirus’ in India is down significantly from its peak.
Exhibit 30: Corona-fatigue; Google search share of Coronavirus has fallen a lot from its peak
Google trends data for ‘Coronavirus’; 90 day period from March 11 – June 30
100
90
80
70
60
50
40
30
20
10
0
15-Apr
22-Apr
29-Apr
1-Apr
8-Apr
13-May
20-May
27-May
18-Mar
25-Mar
6-May
10-Jun
17-Jun
24-Jun
3-Jun
Source: Google trends, Kotak Institutional Equities
We also show the consumption data for petro-products – motor spirits (petrol) and high
speed diesel (Exhibits 31 and 32).

Strategy India
Exhibit 31: Petrol consumption increased in May after a large fall in April
Monthly petrol consumption (‘000s metric tons)
3,000 2,737
2,639 2,575
2,523 2,539 2,535 2,511
2,459 2,473 2,456
2,500 2,372
2,156
2,000 1,769
1,500
973
1,000
500
May-20
May-19
Aug-19
Nov-19
Dec-19
Mar-20
Jul-19
Oct-19
Apr-19
Sep-19
Apr-20
Jun-19
Jan-20
Feb-20
Source: Petroleum Planning and Analysis Cell, Kotak Institutional Equities
Exhibit 32: High speed diesel consumption is almost back to March 2020 level
Monthly high speed diesel consumption (‘000s metric tons)
9,000
7,78 8
8,000 7,451 7,571 7,38 7
7,323 7,160
6,8 41 6,942
7,000 6,510
6,117
5,8 37 5,651
6,000 5,495
5,000
4,000 3,250
3,000
2,000
1,000
0
May-19
May-20
Aug-19
Nov-19
Jul-19
Dec-19
Mar-20
Oct-19
Apr-19
Sep-19
Apr-20
Jun-19
Jan-20
Feb-20
Source: Petroleum Planning and Analysis Cell, Kotak Institutional Equities
We also track electricity consumption (Exhibits 33 to 44) for 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 the previous calendar year to isolate any effect of the
weather.

India Strategy
Exhibit 33: Electricity consumption gap narrows to 5%

Reduction in electricity consumption (%) compared to same period last calendar year for India over past seven
days
5%
0%
4-Apr
11-Apr
18-Apr
25-Apr
13-Jun
20-Jun
16-May
23-May
30-May
27-Jun
7-Mar
14-Mar
21-Mar
28-Mar
2-May
9-May
6-Jun
(5%)
(10%)
(15%)
(20%)
(25%)
(30%)
(35%)
(40%)
(45%)
Source: Central Electricity Regulatory Commission, Kotak Institutional Equities
Exhibit 34: Telangana and MP consuming more electricity compared to CY2019

Reduction in average electricity consumption (%) compared to same period last calendar year
Week ending July 1, 2020 Week ending June 24, 2020
25.0
20.0
15.0
10.0
5.0
0.0
Uttar Pradesh
Haryana
Andhra Pradesh
Delhi
Maharashtra
Madhya Pradesh
Tamil Nadu
Gujarat
Telangana
Karnataka
(5.0)
(10.0)
(15.0)
(20.0)

Strategy India
Exhibit 35: Lower electricity consumption in Maharashtra

Electricity consumption (mn kWh) in Maharashtra compared to same week last calendar year (Jan 24 – Jul 1)
600 Maharashtra 2019 Maharashtra 2020
500
400 392.8
370.1
300
200
100
0
Week 5 Week 7 Week 9Week 11Week 13Week 15Week 17Week 19Week 21Week 23Week 25Week 27
Exhibit 36: Electricity consumption gap has opened up again in Delhi

Electricity consumption (mn kWh) in Delhi compared to same week last calendar year (Jan 24 – Jul 1)
160 Delhi 2019 Delhi 2020
140 139.2
120 120
100
80
60
40
20
0

India Strategy
Exhibit 37: Gap in consumption in Andhra Pradesh has opened up

Electricity consumption (mn kWh) in Andhra Pradesh compared to the same week last calendar year (Jan 24 –
Jul 1)
250 Andhra Pradesh 2019 Andhra Pradesh 2020
200
179.4
157
150
100
50
0
Exhibit 38: The electricity consumption gap has widened in Karnataka

Electricity consumption (mn kWh) in Karnataka compared to same week last calendar year (Jan 24 – Jul 1)
300 Karnataka 2019 Karnataka 2020
250
200 195.4
175.3
150
100
50
0

Strategy India
Exhibit 39: The gap between CY2019 and CY2020 electricity consumption widened for Tamil Nadu
Electricity consumption (mn kWh) in Tamil Nadu compared to same week last calendar year (Jan 24 – Jul 1)
400 Tamil Nadu 2019 Tamil Nadu 2020
350 346.7
300
283.4
250
200
150
100
50
0
Exhibit 40: Telangana consumed more electricity in CY2020 than in CY2019

Electricity consumption (mn kWh) in Telangana compared to same week last calendar year (Jan 24 – Jul 1)
300 Telangana 2019 Telangana 2020
250
200
165.9
150 152.5
100
50
0

India Strategy
Exhibit 41: Electricity consumption gap is not there for Gujarat

Electricity consumption (mn kWh) in Gujarat compared to same week last calendar year (Jan 24 – Jul 1)
Gujarat 2019 Gujarat 2020

450
400
350
318.1
300 309.3
250
200
150
100
50
0
Exhibit 42: MP also consumed more electricity in CY2020 than in CY2019

Electricity consumption (mn kWh) in Madhya Pradesh compared to same week last calendar year (Jan 24 – Jul
1)
300 MP 2019 MP 2020
250
200
189.8
161.1
150
100
50
0

Strategy India
Exhibit 43: Quite volatile consumption gap in Uttar Pradesh

Electricity consumption (mn kWh) in Uttar Pradesh compared to same week last calendar year (Jan 24 – Jul 1)
UP 2019 UP 2020
500
450 441.2
400 437.3
350
300
250
200
150
100
50
0
Exhibit 44: Haryana’s electricity consumption gap is small

Electricity consumption (mn kWh) in Haryana compared to same week last calendar year (Jan 24 – Jul 1)
250 Haryana 2019 Haryana 2020

230.8
208.2
200
150
100
50
0

India Strategy
Covid-19 case updates

We continue to see an increase in the number of new confirmed cases. However, recoveries
also continue to rise (Exhibit 45).
Exhibit 45: No signs of a peak in new confirmed cases

Number of recovered cases, deaths, active cases (LHS) and new confirmed cases (RHS), as on Jul 1
Number of recovered cases Number of deaths

Number of active cases Number of new confirmed cases (RHS)
700,000 24,000
600,000 21,000
18,000
500,000
15,000
400,000
12,000
300,000
9,000
200,000
6,000
100,000 3,000
0 0
1-Apr 8-Apr 15-Apr 22-Apr 29-Apr 6-May 13-May 20-May 27-May 3-Jun 10-Jun 17-Jun 24-Jun 1-Jul
Source: Johns Hopkins University, Kotak Institutional Equities
The three-day moving average of new cases continues to increase (Exhibit 46). More
worryingly, the seven day moving average of change in active cases, which had started to
trend downwards since the start of June (on the back of high recoveries) has now started to
increase again (Exhibit 47).
Exhibit 46: Three-day moving average of new cases continues to rise

Daily new confirmed cases and their three-day moving average, as on Jul 1
New confirmed cases 3-day moving average
25000
20000
15000
10000
5000
0
4-Mar 11-Mar 18-Mar 25-Mar 1-Apr 8-Apr 15-Apr 22-Apr 29-Apr 6-May 13-May 20-May 27-May 3-Jun 10-Jun 17-Jun 24-Jun 1-Jul

Strategy India
Exhibit 47: The seven-day moving average of change in active cases continues to rise
Daily change in active cases and their seven-day moving average, as on Jul 1
New active cases 7-day moving average
10,000
8,000
6,000
4,000
2,000
0
1-Apr
8-Apr
15-Apr
22-Apr
29-Apr
10-Jun
17-Jun
24-Jun
13-May
20-May
27-May
1-Jul
6-May
3-Jun
(2,000)
(4,000)
(6,000)
The seven-day compounded growth rate of confirmed cases has been broadly falling since the
announcement of lockdown (Exhibit 48). However, at this juncture, we believe that absolute
numbers are a better metric to track than growth rates.
Exhibit 48: India's seven-day CDGR continues to drop slowly

Long-term compounded daily growth rate (CDGR) of cases, since the day number of cases crossed 30, and seven-day CDGR, as on Jul 1
Long-term CDGR Double every week Double every two weeks

Double every three weeks Seven-day CDGR
25%
20%
15%
10%
5%
0%
Several restrictions were relaxed in lockdown 4.0. From June 1 onwards, there have been a
further graded relaxations. While it is too early to say if these relaxations will definitely lead
to higher growth in number of cases, we do see evidence of higher positive sample rate
(Exhibit 49). We show that the positive sample rate trended downward in lockdown 1.0,
stabilized at around 4% in lockdown 2.0, increased slightly in lockdown 3.0 and sharply in
lockdown 4.0. The increase in positive sample rate can either come from faster spread of
Covid-19 or more targeted testing.

India Strategy
Exhibit 49: The positive sample rate continues to rise as the economy opens up
Seven-day moving average of new cases divided by seven-day moving average of incremental samples tested;
different phases of lockdown are shaded differently
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Source: Covid19India, ICMR, Kotak Institutional Equities
In Exhibit 50, we show that positive sample rate in Rest of India (excluding Maharashtra,
Gujarat and Delhi) increased over the past seven days as positive rate in Maharashtra,
Gujarat and Delhi has fallen owing to higher testing in Delhi.
Exhibit 50: The positive sample rate for Maharashtra, Gujarat and Delhi decreased further
Seven-day moving average of new cases divided by seven-day moving average of incremental samples tested
MH+DL+GJ Rest of India
30%
25%
20%
15%
10%
5%
0%
20-Apr 27-Apr 4-May 11-May 18-May 25-May 1-Jun 8-Jun 15-Jun 22-Jun 29-Jun
Source: Covid19India, ICMR, Kotak Institutional Equities
Exhibit 51 shows the growth in the number of cases in India compared to the same in other
countries. We show the data from the day 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 increasing in that
country. June 24 was the 118th day since the number of cases in India crossed 30. India has
now overtaken France with respect to confirmed number of cases. We are concerned, though,
about the steady rate of growth of cases in India. At T+118, no other country had a higher
rate of growth of cases than India (Exhibit 52).

Strategy India
Exhibit 51: India’s curve is steeper at the moment than other countries
Cumulative number of Covid-19 cases in India, compared to number of cases in other countries, as on Jul 1
India Italy US Spain UK Brazil South Korea Japan France

3,000,000
300,000
30,000
3,000
300
30
T+ 0 T + 15 T + 30 T + 45 T + 60 T + 75 T + 90 T + 105 T + 120 T + 135
Exhibit 52: India's seven-day compounded growth rate of cases still much higher than all countries in
comparison set
Compounded daily growth rate of confirmed Covid-19 cases over past seven days, as measured on T + 118
where T is the day number of cases crossed 30 for each country
Country Seven-day compounded daily growth rate

Italy 0.1%
France 0.1%
Spain 0.1%
Japan 0.2%
South Korea 0.4%
UK 0.3%
US 1.2%
India 3.6%
State-wise trends
We also look at the state-wise data to check the distribution of Covid-19 cases in India
(Exhibit 53). Some of the states are more heavily affected compared to other states.
We also show a time series of number of states where new confirmed cases, as of a given
day, are above the seven-day moving average of new confirmed cases in that state (Exhibit
54). This gives an idea of the number of states where the number of new confirmed cases
continues to rise. We do a similar analysis with number of districts in Exhibit 55. About one-
third of India’s districts are seeing an increasing number of cases.
The mortality rate of Covid-19 varies significantly in different states within India and in
countries across the world. Exhibits 56 and 57 compare the mortality rate for a few states in
India, versus a set of selected countries. The mortality rate in West Bengal, Maharashtra and
Gujarat remains higher than the national mortality rate due to Covid-19.

India Strategy
Exhibit 53: Sharp and sustained increase in CDGR for Telangana

Number of cases, deaths and seven-day compounded daily growth rate (CDGR) for a selected set of states, as
on June 24
State Number of confirmed cases Number of deaths Seven-day CDGR (%)
Telengana 17,357 265 7.5
Karnataka 16,514 255 7.2
Andhra Pradesh 15,252 193 5.7
Assam 8,854 12 5.3
Tamil Nadu 94,049 1,264 4.9
Delhi 89,802 2,803 3.5
Kerala 4,594 26 3.5
West Bengal 19,170 683 3.4
Maharashtra 180,298 8,053 3.4
Haryana 14,941 240 3.2
Bihar 10,204 73 3.0
Uttar Pradesh 24,056 718 3.0
Punjab 5,668 149 2.9
Gujarat 33,318 1,869 2.0
Rajasthan 18,308 424 1.9
Madhya Pradesh 13,861 581 1.5
Exhibit 54: Many states are struggling to stop the spread of Covid-19
Number of states where new cases as of the given day are higher than the 7-day moving average of new
cases in that state
35
30
25
20
15
10
0
1-Apr
8-Apr
15-Apr
22-Apr
29-Apr
13-May
20-May
27-May
10-Jun
17-Jun
24-Jun
25-Mar
6-May
3-Jun
1-Jul

Strategy India
Exhibit 55: About one-third of India’s districts are seeing an increasing number of cases
Number of districts where new cases as of the given day are higher than the 7-day moving average of new
cases in that state
350
300
250
200
150
100
50
0
30-Apr 7-May 14-May 21-May 28-May 4-Jun 11-Jun 18-Jun 25-Jun
Exhibit 56: Gujarat has a much higher mortality rate than the national mortality rate
Mortality rate for a selected set of states, compared to a selected set of countries (%), as on Jul 1
18%
15.3%
16% 14.4%
14%
11.4%
12%
10%
8%
5.6%
6% 4.8 % 5.2%
4.2% 4.5% 4.2% 4.6%
3.6%
4% 3.0% 3.1% 2.9%
2.3% 2.6% 2.2%
1.3% 1.3% 1.5% 1.5%
2% 0.1%
0%
Uttar Pradesh
US
Andhra Pradesh
Brazil
West Bengal
Rajasthan
Madhya Pradesh
India
Delhi
Maharashtra
Germany
Tamil Nadu
Punjab
Korea, South
Japan
Singapore
Telengana
Karnataka
Gujarat
Italy
France
Spain
Source: Johns Hopkins University, Covid19India, Kotak Institutional Equities
We also calculate fatality rates by dividing number of deaths by the number of closed cases
(recoveries or deaths), rather than dividing the number of deaths by total confirmed cases.
Assuming that the current pattern of recoveries holds, India’s mortality rate, thus calculated,
is higher at ~4.7%.

India Strategy
Exhibit 57: India’s mortality rate estimate increases to 4.7% if we take only closed cases (recoveries + deaths) in denominator
Mortality rate for a selected set of states, compared to a selected set of countries (%), as on Jul 1
18%
15.9%
16% 14.9% 15.4%
14%
12%
10% 8 .0%
7.2% 6.9%
8%
5.2% 5.2% 5.6%
6% 4.1% 4.5%
4.7% 4.8 %
3.6%
4% 2.3% 2.7% 2.8 % 3.1% 3.2% 2.4%
2% 0.1%
0%
Uttar Pradesh
US
Andhra Pradesh
Brazil
Rajasthan
West Bengal
Madhya Pradesh
India
Maharashtra
Delhi
Germany
Tamil Nadu
Punjab
Korea, South
Italy
Japan
Singapore
Gujarat
Karnataka
Telengana
Spain
Source: Johns Hopkins University, Covid19India, Kotak Institutional Equities
Finally, we show that the case fatality rate (measured as number of deaths divided by total
number of confirmed cases) and the implied mortality rate (number of deaths divided by
number of closed cases) have been slowly nudging downwards, except for the one-time
addition of deaths in Maharashtra and Delhi (Exhibit 58).
Exhibit 58: Fatality rate continues to fall

Case fatality rate (%) and deaths as a percent of closed cases (%)
Case fatality rate (%) Deaths, as a proportion of closed cases (%)
12.0
10.0
8.0
6.0
4.0
2.0
0.0
30-Apr 7-May 14-May 21-May 28-May 4-Jun 11-Jun 18-Jun 25-Jun

BUY
Bharat Electronics (BHE)
Capital Goods JULY 02, 2020
RESULT
Sector view: Neutral
Delivers on key counts. BEL’s strong end to FY2020 and healthy two-year CAGR for CMP (`): 89
full-year EBITDA reflect the strength of its order backlog and related operating leverage Fair Value (`): 105
benefits. BEL generated healthy FCF in spite of worsening debtor days and stiff capex.
BSE-30: 35,844
We cut FY2022 estimates by 4% and revise our fair value to Rs105 (from Rs110 earlier);
retain BUY on a healthy backlog, limited near-term impact of Covid-19 on business and
levers to protect margin profile.
Bharat Electronics
Stock data Forecasts/valuations 2020 2021E 2022E
52-week range (Rs) (high,low) 122-56 EPS (Rs) 7.5 6.1 6.5
Mcap (bn) (Rs/US$) 217/3 EPS growth (%) (3.3) (18.2) 6.7
ADTV-3M (mn) (Rs/US$) 1,308/17 P/E (X) 11.9 14.5 13.6
Shareholding pattern (%) P/B (X) 2.2 2.0 1.8
Promoters 51.1 EV/EBITDA (X) 7.3 8.6 7.8
FIIs 10.7 RoE (%) 18.9 14.2 14.0
MFs/BFIs 25.2/5.1 Div. yield (%) 3.1 2.6 2.7
Price performance (%) 1M 3M 12M Sales (Rs bn) 130 117 135
Absolute 28 29 (21) EBITDA (Rs bn) 28 23 24
Rel. to BSE-30 21 2 (12) Net profits (Rs bn) 18 15 16
Strong 4Q leads to two-year CAGR of 12/17% in full year revenue/EBITDA

BEL reported a strong 4QFY20 print, ahead of the provisional revenue numbers and much
ahead of our expectations on margin. PAT came in at Rs10.3 bn, up 55% yoy and 30% ahead
of our estimates. Full year performance revenues/EBITDA has grown at a two-year CAGR of
12/17%, benefitting from the strong order inflow in FY2019 and operating leverage gains. PAT
CAGR would have been a tad higher if not for the investment in capex and resultant reduction
in other income. Order backlog at Rs520 bn provides reasonable visibility of four years of
trailing revenues.
Generates healthy FCF in spite of worsening debtor days and stiff capex spends
Adjusting for the deferral in payment of Rs6-7 bn by BEL into April, BEL generated a still heathy
FCF of Rs11-12 bn versus Rs18 bn of reported profits. This marks a shift to ~140 days of
working capital versus 110 days seen over the previous two years and is driven by a
deterioration in debtor days, which we believe is driven by transition of execution towards
projects with spaced out milestones (LRSAM) and select non-defence orders (homeland
security). We expect BEL to generate ~Rs12 bn per annum of FCF over the next two years and
envisage a sharp increase in FCF beyond FY2022 as the capex spends start reducing.
A modest FY2021 in the making; enough levers to protect margin profile

We note approved ordering prospects for FY2021 in electronic warfare (>Rs50 bn), Avionics
Package for Light Combat Aircraft and indigenous Software Defined Radio. We expect such an
order pipeline coupled with base orders for radars to strengthen BEL’s order backlog in FY2021.
Our estimate of FY2021 execution of ~Rs117 bn builds in limited impact of Covid-19, Rs100
Aditya Mongia
bn+ visibility based on end-FY2020 backlog and support of book and bill orders (~ Rs12 bn
ventilator order). We build a 200 bps contraction in EBITDA margin over FY2020-23, reflecting
a deteriorating gross margin. We note margin supports in (1) high provisions booked over the Teena Virmani
previous few years, (2) services share of revenues improving from current 12% levels and (3)
high indigenization content of the Akash missile order.
We cut FY2022 estimates by 4% and revise fair value to Rs105; retain BUY
We cut our FY2022 revenue/EBITDA estimate by 9% and EPS by 4% on lower estimate of rate
of depreciation. Covid-19 impact leads to a higher 17% cut in estimates in FY2021. kspcg.research@kotak.com
Contact: +91 22 6218 6427
Capital Goods Bharat Electronics
Exhibit 1: Strong performance in 4Q negates weakness in 9M; yields 12/17% two-year CAGR in full year revenues/EBITDA
Quarterly standalone financials of Bharat Electronics, March fiscal year-end, 4QFY20 (Rs mn)
% change % change
Two-year
4QFY20 4QFY20E 4QFY19 3QFY20 vs est. yoy qoq FY2020 FY2019 FY2018 yoy CAGR FY2021E FY2020 % change
Net sales 58,058 54,336 38,846 22,710 7 49 156 129,211 120,846 103,090 7 12 117,485 129,211 (9)
Total expenses (43,232) (42,143) (29,556) (19,163) 3 46 126 (101,909) (92,225) (83,092) 11 11 (94,947) (101,909) (7)
Stock (7,627) (2,734) (209) 3,901 179 3,543 (2,594) 1,322 (3,789) (2,259) (2,594)
Operating expenses (RM and others) (25,502) (29,070) (19,447) (16,659) (12) 31 53 (68,457) (60,799) (51,363) (62,041) (68,457)
Employee cost (5,747) (5,177) (4,420) (4,513) 11 30 27 (20,575) (18,791) (17,723) (19,881) (20,575)
Other expenses (4,356) (5,162) (5,479) (1,892) (16) (20) 130 (10,283) (13,957) (10,218) (10,766) (10,283)
EBITDA 14,826 12,193 9,290 3,547 22 60 318 27,302 28,621 19,997 (5) 17 22,538 27,302 (17)
Other income 283 224 1,288 332 1,019 1,695 2,004 1,219 1,019
EBITDA (incl. other income) 15,109 12,417 10,578 3,879 22 43 290 28,321 30,316 22,001 23,757 28,321
Depreciation (950) (1,298) (933) (861) (3,496) (3,162) (2,510) (4,114) (3,496) 18
EBIT 14,159 11,119 9,645 3,018 24,825 27,154 19,491 19,643 24,825
Interest (16) (5) (119) (1) (33) (122) (13) 2 (33)
Profit before tax 14,143 11,114 9,526 3,017 27 48 369 24,792 27,032 19,478 (8) 13 19,645 24,792 (21)
Tax expense (3,797) (3,168) (2,840) (866) (6,853) (7,759) (5,486) (5,038) (6,853)
Net profit 10,346 7,946 6,686 2,151 30 55 381 17,939 19,273 13,993 (7) 13 14,608 17,939 (19)
Exceptional items — — — — — — — — —
Reported PAT 10,346 7,946 6,686 2,151 30 55 381 17,939 19,273 13,993 (7) 13 14,608 17,939 (19)
Key ratios (%)
Operating expenses/ Sales 57.1 58.5 50.6 56.2 55.0 49.2 53.5 54.7 55.0
Employee exp./ Sales 9.9 9.5 11.4 19.9 15.9 15.5 17.2 16.9 15.9
Other exp./ Sales 7.5 9.5 14.1 8.3 8.0 11.5 9.9 9.2 8.0
EBITDA margin 25.5 22.4 23.9 15.6 21.1 23.7 19.4 19.2 21.1
PBT Margin 24.4 20.5 24.5 13.3 19.2 22.4 18.9 16.7 19.2
Tax rate 26.8 28.5 29.8 28.7 27.6 28.7 28.2 25.6 27.6
PAT Margin 17.8 14.6 17.2 9.5 13.9 15.9 13.6 12.4 13.9
EPS 4.2 3.3 2.7 0.9 7.4 7.9 5.7 6.0 7.4
Order details
Order booking 27,158 68,930 12,600 (61) 116 132,000 234,310 102,738 (44) 122,843 132,000 (6.9)
Order backlog 519,730 517,980 549,590 0 (5) 519,730 517,980 401,150 0 525,042 519,730 1.0
Source: Company, Kotak Institutional Equities estimates
Exhibit 2: BEL margin to get cushion from largely stable employee cost
Trend in employee cost and gross margin of BEL (consolidated), March fiscal year-ends, 2011-23E (%)
Employee cost as share of sales (%) Gross margin (%)

60
50
51.4
49.5
49.4
48.5
47.9
47.3
46.7
46.7
45.4
45.3
45.3
45.1
44.8
40
44.0
43.8
43.5
42.4
42.3
42.6
38.4
38.0
30
20
18.6
18.5
18.3
18.0
18.1
17.9
17.2
17.2
16.9
16.6
16.3
16.0
16.1
15.8
15.6
15.6
10
15.4
14.4
14.3
12.7
11.6
0
2021E
2022E
2023E
2003
2004
2007
2008
2009
2010
2011
2012
2013
2017
2018
2019
2020
2005
2006
2014
2015
2016

Bharat Electronics Capital Goods
Exhibit 3: We estimate ~.220 bps decline in EBITDA margin over FY20120-23E due to deteriorating
gross margin
EBITDA and gross margin of Bharat Electronics, March fiscal year-ends, 2003-23E (%)
EBITDA margin (%) Gross margin (%)

60
50
51.4
49.5
49.4
48.5
47.9
47.3
46.7
46.7
45.4
45.3
45.3
45.1
44.8
40
44.0
43.8
43.5
42.4
42.3
42.6
38.4
38.0
30
20
23.9
24.0
23.9
23.8
21.2
20.6
21.0
20.0
19.6
19.2
18.9
18.1
17.7
17.9
16.7
16.6
16.3
10
15.2
14.2
10.8
10.6
0
2021E
2022E
2023E
2003
2004
2005
2006
2011
2012
2013
2014
2015
2016
2017
2018
2007
2008
2009
2010
2019
2020
Exhibit 4: We expect trade working capital to stabilize at 2020 levels adjusted for Rs7 bn deferment
of payment from BEL
Components of trade working capital of BEL, March fiscal year-ends, 2011-30E (days of sales)
Net trade working capital (days of sales) Inventory (days of sales)

Trade receivables (days of sales) Trade payables (days of raw material costs)
400
351
333 337
350 317 311 306
295 285 284 284
300 282
268
253 256
233 237
250 214 214 214 214
196 196 206 208
185 176
200 168 161
150 190 187 185 184
169 176 167 172
150 158
100 135 138 138 138
111 110 120 111 112 108 113 120 120 120 120
50 96 91 89
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E 2022E 2023E 2030E

Exhibit 5: BEL followed a conservative approach in terms of creating provisions for performance warranty, non-current receivables versus
Key balance sheet items related to provisions for BEL (consolidated), March fiscal year-ends, 2015-19 (Rs mn)
Provisions performance warranty as at 31 March (LHS, Rs mn)

Non-current receivables (Rs mn) Less provisions (Rs mn)
Amount used during the year (RHS, Rs mn)
15,000 12,697
6,000 20 11,982 12,659
11,674
10,325
10,000
5,000
16
5,000
4,000
12
3,000 0
8
2,000 (5,000)
4
1,000 (10,000)
(10,325)
(11,982) (11,674)
0 0 (15,000) (12,697) (12,659)
2016 2017 2018 2019 2015 2016 2017 2018 2019
Exhibit 6: BEL followed a conservative approach in terms of creating cost provisions

Cost provisions for BEL (consolidated) as share of sales, March fiscal year-ends, 2016-19 (%)
Net cost provisions expensed as percentage of sales Actual write-offs as percentage of sales
4 3.7 3.7
3.1
3 2.8
2.5
1.2
0.8 0.9
1
0
2016 2017 2018 2019

Bharat Electronics Capital Goods
Exhibit 7: Beyond a sharp contraction in 2021, we cut 2022 estimates by 4%, net of 8-9% decline in EBITDA and lower rate of
depreciation
Change in estimates for Bharat Electronics (consolidated), March fiscal year-ends, 2018-22E (Rs mn)
New estimates Old estimates % change
2018 2019 2020 2021E 2022E 2021E 2022E 2021E 2022E
Income statement
Net revenues 104,008 121,642 129,677 117,485 134,882 140,712 147,509 (17) (9)
Total operating expenses (83,656) (92,580) (102,132) (94,947) (110,408) (113,077) (120,781)
EBITDA 20,352 29,062 27,545 22,538 24,475 27,635 26,728 (18) (8)
Other income 1,957 730 994 1,219 1,649 846 695
Depreciation & amortization (2,717) (3,381) (3,719) (4,114) (5,138) (4,548) (5,745) (10) (11)
Interest expense (22) (128) (36) 2 (5) (5) (5)
PBT 19,570 26,283 24,784 19,645 20,981 23,928 21,673 (18) (3)
Tax expense (5,498) (7,803) (6,858) (5,038) (5,380) (6,136) (5,558)
Recurring PAT 14,073 18,480 17,926 14,608 15,601 17,792 16,115 (18) (3)
Share of profit in associates 238 386 321 321 321 386 386
Minority interest 7 (3) (9) (9) (9) (3) (3)
Reported PAT post minority & associates 14,317 18,864 18,239 14,920 15,913 18,176 16,499
Recurring EPS 5.9 7.7 7.5 6.1 6.5 7.5 6.8 (18) (4)
Growth (%)
Revenue 20 17 7 (9) 15 12 5
EBITDA 14 43 (5) (18) 9 12 (3)
PAT (6) 31 (3) (19) 7 14 (9)
Ratios
EBITDA margin (%) 19.6 23.9 21.2 19.2 18.1 19.6 18.1 (46) bps 3 bps
PBT margin (%) 18.8 21.6 19.1 16.7 15.6 17.0 14.7 (28) bps 86 bps
PAT margin (%) 13.5 15.2 13.8 12.4 11.6 12.6 10.9 (21) bps 64 bps
Exhibit 8: We arrive at an unchanged justified one-year forward P/E multiple of 16X for Bharat Electronics
Justified P/E multiple for BEL (consolidated), March fiscal year-ends (X)
Inputs for growth and terminal phase Inputs for cash conversion
Growth phase PAT CAGR (%) 12.0 PAT margin (%) 14.2
No. of years in initial growth phase (Growth_years) 10.0 Interest rate (%) 10.0
Terminal growth rate (Tg, %) 5.0 Marginal tax rate (%) 34.9
Cost of equity (COE, %) 13.0 Net FATR (X) 8.2
Steady state capital structure - debt mix (%) — Average asset life (years) 11.0
WACC (%) 13.0 Working capital as days of sales 138
Component of justified multiple calculation Formula Calculation

One-year forward exit multiple on FCFE in terminal year 1 / (COE - Tg) 12.5
Terminal phase cash conversion ratio FCFE / PAT 0.82
One-year forward P/E multiple in terminal year 10.3
Discount factor for terminal year multiple to target year 1 / ((1+COE)^ growth years) 0.29
Bump up the multiple by the PAT jump over the growth 1 * ( (1 + growth CAGR) ^
2.9
years (growth years-1)) * (1+Tg)
Justified one-year forward P/E multiple for terminal
8.8
value component
Value of growth period in terms of FCFE 8.6
FCFE multiple * cash
Value of growth period in terms of P/E 7.1
conversion
Justified one-year forward P/E multiple 16.0

Exhibit 9: Summary financials of Bharat Electronics (consolidated), March fiscal year-ends, 2017-30E (Rs mn)
2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E 2030E
Income statement
Net revenues 86,683 104,008 121,642 129,677 117,485 134,882 137,794 148,269 159,196 283,507
Total operating expenses (68,814) (83,656) (92,580) (102,132) (94,947) (110,408) (113,098) (121,223) (129,661) (226,296)
EBITDA 17,870 20,352 29,062 27,545 22,538 24,475 24,696 27,046 29,534 57,211
Other income 4,201 1,957 730 994 1,219 1,649 1,880 2,677 3,326 5,300
Depreciation & amortization (2,116) (2,717) (3,381) (3,719) (4,114) (5,138) (5,659) (5,453) (5,453) (8,528)
Interest expense (129) (22) (128) (36) 2 (5) (5) (5) (5) (5)
PBT 19,826 19,570 26,283 24,784 19,645 20,981 20,911 24,265 27,402 53,978
Tax expense (4,855) (5,498) (7,803) (6,858) (5,038) (5,380) (5,362) (6,222) (7,027) (13,842)
Recurring PAT 14,970 14,073 18,480 17,926 14,608 15,601 15,549 18,042 20,375 40,136
Reported PAT 14,970 14,073 18,480 17,926 14,608 15,601 15,549 18,042 20,375 40,136
Share of profit in associates 263 238 386 321 321 321 321 321 321 321
Minority interest 2 7 (3) (9) (9) (9) (9) (9) (9) (9)
Reported PAT post minority & associates 15,236 14,317 18,864 18,239 14,920 15,913 15,861 18,354 20,687 40,448
Recurring EPS 6.3 5.9 7.7 7.5 6.1 6.5 6.5 7.5 8.5 16.6
Balance sheet
Shareholders' funds 77,358 80,157 92,115 100,715 108,918 117,666 126,386 136,477 147,851 233,219
Minority interest 137 130 133 142 150 159 168 177 185 229
Debt 636 804 333 (137) — — — — — —
Deferred tax liabilities (5,290) (4,301) (4,720) (4,987) (4,487) (3,987) (3,487) (2,987) (2,487) (1,686)
Total sources of funds 72,841 76,790 87,861 95,733 104,581 113,839 123,067 133,667 145,549 231,761
Net fixed assets 23,687 27,790 31,465 35,406 37,352 36,214 31,554 26,101 24,647 36,974
Net working capital (ex-cash) 5,971 31,215 37,032 42,501 41,914 48,154 48,433 53,353 56,173 107,354
Investments 4,911 9,375 9,645 1,621 1,942 2,263 2,584 2,905 3,225 4,830
Cash and bank balances and current investments 38,272 8,411 9,719 16,206 23,373 27,208 40,496 51,308 61,503 82,603
Total application of funds 72,841 76,790 87,861 95,734 104,581 113,838 123,067 133,667 145,549 231,761
Free cash flow
Operating profit before wcap. changes 18,058 21,250 31,114 28,388 23,097 25,034 25,255 27,605 30,094 57,770
Change in working capital / other adjustments (11,460) (21,302) (7,935) 3,058 587 (6,239) (279) (4,920) (2,820) (13,075)
Direct tax paid (7,206) (6,814) (7,718) (5,742) (4,538) (4,880) (4,862) (5,722) (6,527) (13,842)
Net cashflow from operating activites (607) (6,866) 15,461 25,704 19,146 13,914 20,114 16,963 20,746 30,853
Fixed assets (7,921) (8,056) (7,612) (7,457) (6,060) (4,000) (1,000) — (4,000) (19,000)
Cash (used) / realised in investing activities 31,145 (64) (9,281) (6,490) (5,409) (2,919) 312 2,109 (1,242) (14,267)
Free cash flow (CFO + net capex) (8,528) (14,922) 7,849 18,247 13,086 9,914 19,114 16,963 16,746 11,853
Ratios
EBITDA margin (%) 20.6 19.6 23.9 21.2 19.2 18.1 17.9 18.2 18.6 20.2
PBT margin (%) 22.9 18.8 21.6 19.1 16.7 15.6 15.2 16.4 17.2 19.0
PAT margin (%) 17.3 13.5 15.2 13.8 12.4 11.6 11.3 12.2 12.8 14.2
Book value per share (Rs) 31.7 32.9 37.8 41.3 44.7 48.3 51.9 56.0 60.7 95.7
RoAE (%) 17.6 17.9 21.5 18.6 13.9 13.8 12.7 13.7 14.3 18.1
Post-tax RoACE (%) 18.7 18.8 22.6 19.6 14.6 14.3 13.1 14.1 14.6 18.2

BUY
Tata Power (TPWR)
Electric Utilities JULY 03, 2020
UPDATE
Sector view: Attractive
Delivering on deleveraging. Tata Power announced promoter infusion (Tata Sons) of CMP (`): 50
Rs26 bn (at Rs53/share) along with proposed InVIT for its renewable business thus Fair Value (`): 55
continuing to progress well on its debt reduction plan for the company which stood at
BSE-30: 35,844
Rs435 bn (as of March 2020). (1) Favorable regulatory clarity on renewal of coal mines
in Indonesia, (2) resolution on Mundra, and (3) continued sale of non-core business’
augur well for the company. Maintain BUY with FV of Rs55/share.
Tata Power
Stock data Forecasts/valuations 2020 2021E 2022E
52-week range (Rs) (high,low) 74-27 EPS (Rs) 4.4 4.9 6.5
Mcap (bn) (Rs/US$) 135/1.9 EPS growth (%) 110.5 11.4 31.8
ADTV-3M (mn) (Rs/US$) 1,312/18 P/E (X) 11.2 10.1 7.6
Shareholding pattern (%) P/B (X) 0.7 0.7 0.6
Promoters 37.2 EV/EBITDA (X) 7.4 6.5 5.9
FIIs 18.7 RoE (%) 6.9 7.1 8.7
MFs/BFIs 13.3/13.3 Div. yield (%) 0.0 0.0 0.0
Price performance (%) 1M 3M 12M Sales (Rs bn) 289 315 332
Absolute 17 58 (32) EBITDA (Rs bn) 78 81 84
Rel. to BSE-30 10 24 (24) Net profits (Rs bn) 12 13 18
Preferential issue to bring in Rs26 bn of equity; approval for InVIT for renewable business
Tata Power’s board has approved issuance of 490 mn (18% of extant equity) equity shares
through preferential issue to Tata Sons at a price of Rs53/share which will bring in a sum of
Rs26bn likely to be used for debt reduction. Post issuance, Tata Sons ownership in TPWR will
increase to 45.2% (post-money) from 35.2% currently.
The board has also gave an in-principle approval to set up an InVIT to hive-out the renewable
business that will help off-load as much as Rs107 bn (25% of consolidated net debt) of
associated debt, besides equity value realized for investment in renewable assets. Separation of
renewable business will likely comfort investors who have been less enthused owing to (1) large
capex commitment with uncertain return profile for new projects, (2) leveraged buyout of
Welspun’s renewable business, and (3) receivable and contract sanctity with various state
governments looking to renege contracts. The renewable business has a net-worth of Rs83 bn,
EBITDA of Rs23 bn and PAT of Rs760 mn as of March 2020.
Divestment of non-core assets continue to aid deleveraging, Mundra continues to offer hope
TPWR has set aside a target of asset monetization of non-core assets aggregating Rs50 bn
(Rs18/share) for FY2021E itself. Tata Power has realized US$ 112 mn (Rs8.4 bn) from sale of
Cennergi on April 1, 2020 proceeds and additionally entered into a definite agreement for
selling its shipping business for Rs16 bn.
For Mundra, TPWR has received approvals from Gujarat (47.5%) and Maharashtra (20%) of the
five states with joint PPA and with the company allowed to sign individual supplementary
agreements with states in favor of compensatory tariffs will result in faster resolution. We note Murtuza Arsiwalla
that a compensation of Rs0.25/kwh (based on 4QFY20 under-recovery) would imply additional murtuza.arsiwalla@kotak.com
earnings of Rs2.3/share (+46% on FY2021E EPS of Rs4.95/share). Mumbai: +91-22-4336-0870
Samrat Verma
Maintain BUY with fair value of Rs55/share samrat.verma@kotak.com
Mumbai: +91-22-4336-0869
Recent equity raise along with proposed InVIT structure coupled with (1) improved visibility on
renewal of licenses of Indonesian mines, (2) progress on Mundra resolution and (3) divestment
of non-core assets keeps us positive on the company’s plan to reduce debt which stands at
Rs435 bn. Maintain BUY with FV of Rs55/share.
Kotak Institutional Equities Research

kotak.research@kotak.com
Mumbai: +91-22-4336-0000
Electric Utilities Tata Power
Our current fair value assigns no compensation at Mundra (+Rs16), conservative value
assigned to the renewable business, and only Rs38 bn (Rs14/share) for value of non-core
investments that is lower than the asset monetization target for the current year itself.
Exhibit 1: Renewable entities had a combined EBITDA of Rs22 bn in FY2020

Subsidiary-wise key financial and operational metrics (Rs mn)
2019 2020 2021E 2022E 2023E

Tata Power (Standalone)
Net sales 76,881 70,750 76,403 78,281 80,458
EBITDA 23,751 22,704 26,972 27,658 28,488
PAT 6,664 8,648 8,913 8,882 10,169
Regulated equity 39,627 40,956 42,144 43,357 44,597
Tata Power Delhi Distribution
Net sales 77,789 83,510 99,380 112,274 126,894
EBITDA 10,930 12,190 12,094 12,530 12,793
PAT 4,420 4,140 4,727 5,589 6,302
Regulated equity 14,030 15,050 15,050 15,050 15,050
Coastal Gujarat Power Ltd (Mundra UMPP)
Net sales 70,643 70,180 70,477 70,776 70,929
EBITDA (2,661) 7,950 2,470 2,659 2,699
PAT (16,537) (8,890) (13,639) (13,289) (13,252)
Sales (MU) 24,752 24,463 24,883 24,883 24,883
Realization (Rs/kwh) 2.9 2.9 2.8 2.8 2.9
Cost of Production (Rs/kwh) 3.0 2.5 2.7 2.7 2.7
EBITDA incl. other income (Rs/kwh) (0.1) 0.3 0.1 0.1 0.1
Maithon Power Ltd
Net sales 27,761 27,410 27,899 28,557 29,251
EBITDA 7,368 8,670 8,558 8,701 8,851
PAT 2,729 3,370 3,809 4,145 4,675
Sales (MU) 6,858 6,348 6,509 6,509 6,509
Realization (Rs/kwh) 4.0 4.3 4.3 4.4 4.5
Cost of Production (Rs/kwh) 3.0 3.0 3.0 3.1 3.1
EBITDA (Rs/kwh) 1.1 1.4 1.3 1.3 1.4
Coal
KPC
Volumes (mn tons) 57 62 63 65 66
Realizations (US$/ton) 64 55 51 54 54
COGS (US$/ton) 37 37 33 33 33
Gross profit (US$/ton) 18 10 11 13 13
Coal + Infra
Net sales 86,410 87,820 81,255 87,593 89,281
EBITDA 28,890 17,840 19,130 22,817 23,211
PAT 14,230 6,580 8,504 10,027 10,189
TPREL
Capacity (MW) 824 1,139 1,839 1,839 1,839
Generation (MU) 1,382 2,088 3,061 3,061 3,061
Tariff (Rs/kwh) 5.3 4.5 4.2 4.2 4.2
Net sales 7,154 9,170 12,710 12,710 12,710
EBITDA 6,325 7,840 10,476 10,387 10,294
PAT 925 12 1,055 345 651
WREL
Capacity (MW) 1,008 1,010 1,010 1,010 1,010
Generation (MU) 1,756 1,540 1,681 1,681 1,681
Tariff (Rs/kwh) 7.2 7.8 8.0 8.2 8.4
Net sales 12,717 12,030 13,508 13,779 14,054
EBITDA 11,513 10,710 12,162 12,405 12,653
PAT 3,001 2,930 4,493 5,030 5,839

Tata Power Electric Utilities
Exhibit 2: Reduction in coal prices by US$5/ton while maintaining margins in mining business could
increase fair value by Rs9/share
Sensitivity of Tata Power fair value to coal cost at Mundra and margins on mining in Indonesia (US$/ton)
Coal cost (US$/ton)

45 55 60 65 75
9 67 52 43 34 17
10 71 55 46 38 20
Margin (US$/ton) 13 80 64 55 46 29
15 88 73 64 55 38
18 99 83 74 66 48
Exhibit 3: Tata Power sum-of-the-parts valuation based on March 2022E
Multiple Ownership Value

Methodology (X) (%) (Rs mn) (Rs/share)
Mumbai Distribution P/B 1.5 100 65,036 24
Delhi Distribution P/B 1.5 51 13,074 5
Tala Transmission DCF 51 1,594 1
Mundra Generation DCF 100 (95,748) (35)
Maithon Generation DCF 74 17,172 6
IEL Generation DCF 74 9,496 4
Renewable Generation EV/EBITDA 8 100 2,991 1
Coal Coal EV/EBITDA 6 30 89,868 33
Solar Equipment EV/EBITDA 7 100 6,675 2
Investments 38,907 14
Total 149,064 55

Electric Utilities Tata Power
Exhibit 4: Tata Power: Profit model, balance sheet, cash model (consolidated), March fiscal year-ends, 2017-23E (Rs mn)
2018 2019 2020 2021E 2022E 2023E

Profit model (Rs mn)
Net sales 289,214 294,927 289,477 315,155 331,950 350,670
EBITDA 59,471 63,568 77,541 80,927 83,806 84,970
Other income 4,327 3,958 5,626 5,780 6,300 9,012
Interest (37,230) (41,700) (44,937) (45,384) (44,574) (43,230)
Depreciation (23,981) (23,932) (26,336) (27,792) (29,346) (29,956)
Pretax profits 2,587 1,894 11,895 13,531 16,186 20,796
Tax (1,643) (6,561) (6,415) (7,923) (7,799) (10,024)
Minority interest & profit from associates 13,514 10,376 6,535 7,782 9,265 9,386
Net profits 14,458 5,709 12,015 13,390 17,653 20,159
Extraordinary items 10,308 16,200 (1,841) — — —
Earnings per share (Rs) 5.3 2.1 4.4 4.9 6.5 7.5
Balance sheet (Rs mn)

Total equity 152,602 167,212 180,660 194,050 211,703 231,862
Deferred taxation liability 5,166 10,568 11,740 11,740 11,740 11,740
Total borrowings 426,836 465,146 460,035 478,948 469,916 460,573
Currrent liabilities 232,616 177,028 215,444 224,323 233,298 243,365
Capital contribution from Consumers
Minority interest 20,153 21,667 23,320 26,371 29,482 32,656
Total liabilities and equity 837,373 841,620 891,200 935,432 956,139 980,196
Cash 11,858 7,875 20,882 85,092 108,896 135,953
Current assets 102,131 114,827 127,439 110,938 115,209 119,917
Total fixed assets 535,217 530,262 555,309 540,999 521,254 500,986
Investments 124,289 130,181 132,027 142,859 155,236 167,796
Deferred expenditure 63,878 58,476 55,544 55,544 55,544 55,544
Total assets 837,373 841,620 891,200 935,432 956,139 980,196
Key ratios
Net debt / equity (X) 2.4 2.4 2.2 1.8 1.5 1.2
ROE (%) 10.7 3.6 6.9 7.1 8.7 9.1
BVPS (Rs) 56 62 67 72 78 86

Kotak Institutional Equities: Valuation summary of KIE Universe stocks
101
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 2-Jul-20 (Rs) (%) (Rs bn) (US$ bn) (mn) 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E 2020 2021E 2022E (US$ mn)
Automobiles & Components
Amara Raja Batteries REDUCE 684 620 (9) 117 1.6 171 39 33 41 36.7 (14.8) 25.4 18 20.7 16.5 10.6 11.0 8.9 3.2 2.9 2.5 18.9 14.6 16.3 1.6 1.2 1.5 11.6
Apollo Tyres BUY 111 110 (1) 63 0.8 638 8.3 2.3 8.7 (41.9) (72.0) 273.3 13.3 47.6 12.7 6.4 6.6 4.8 0.6 0.6 0.6 4.8 1.4 4.9 2.7 1.2 2.4 12.8
Ashok Leyland BUY 49 65 32 144 1.9 2,936 1.2 (0.6) 2.2 (82.4) (150.8) 447.8 40.1 NM 22.7 13.7 24.0 9.5 2.0 2.0 1.9 4.6 NM 8.6 7.1 0.0 1.3 30
Bajaj Auto BUY 2,879 3,000 4 833 11 289 176 158 190 15.0 (10.1) 20.0 16.3 18.2 15.2 13.2 14.0 11.1 4.2 3.8 3.5 24 22 24 4.2 3.3 4.0 34
Balkrishna Industries SELL 1,278 1,100 (14) 247 3.3 193 50 50 58 25.2 0.6 16.3 25.7 25.6 22.0 17.5 14.6 12.4 4.9 4.5 4.0 19.9 18.3 19.1 1.6 1.7 1.9 11.7
Bharat Forge SELL 334 285 (15) 156 2.1 466 8 0 11 (66.2) (94.5) 2,559.2 44.6 805.9 30.3 16.9 32.7 14.9 3.0 3.0 2.8 6.6 0.4 9.5 0.6 0.0 0.9 15.9
CEAT BUY 919 940 2 37 0.5 40 63 60 78 1.9 (4.6) 30.7 14.7 15.4 11.8 7.7 7.8 6.8 1.3 1.2 1.1 8.9 8.0 9.8 1.3 1.3 1.3 2.3
Eicher Motors ADD 18,354 17,500 (5) 501 6.7 27 671 563 792 (17.7) (16.1) 40.6 27.3 32.6 23.2 20.0 23.9 16.7 6.0 5.3 4.5 24 17.3 21 0.2 — — 58
Endurance Technologies REDUCE 861 820 (5) 121 1.6 141 40 29 46 11.1 (28.4) 59.2 21 29.9 18.8 10.6 12.1 8.5 4.0 3.6 3.1 18.8 12.1 16.6 0.6 0.6 0.9 2.8
Escorts BUY 1,041 1,000 (4) 92 1.7 101 55 51 65 0.4 (5.9) 27.1 19.0 20.3 15.9 13.2 12.3 9.2 2.7 2.1 1.9 14.0 10.5 12.0 0.2 0.7 0.9 40
Exide Industries SELL 153 150 (2) 130 1.7 850 10.0 7.5 9.1 10.3 (24.3) 20.2 15.4 20.3 16.9 9.4 10.9 9.4 2.1 2.0 1.8 13.8 9.9 11.2 2.7 2.3 2.3 7.6
Hero Motocorp ADD 2,671 2,500 (6) 534 7.1 200 159 123 168 (6.1) (22.8) 36.6 16.8 21.8 15.9 11.3 13.5 9.5 3.8 3.6 3.3 24 16.8 21 3.6 3.0 3.8 61
Mahindra CIE Automotive BUY 117 100 (15) 44 0.6 378 9.4 5.9 9.6 (34.9) (37.7) 63.3 12.4 19.9 12.2 5.9 8.0 5.5 1.0 0.9 0.8 8.0 4.7 7.2 — — — 0.4
Mahindra & Mahindra BUY 530 640 21 659 8.8 1,138 24 31 42 (50.0) 32.1 33.4 22.3 16.9 12.6 10.2 10.5 7.7 1.7 1.6 1.5 7.8 9.9 12.1 0.4 1.2 1.6 46
Maruti Suzuki SELL 5,948 4,300 (28) 1,797 24.0 302 187 133 226 (24.7) (28.8) 69.8 32 45 26 19.6 22.5 13.2 3.7 3.5 3.2 11.9 8.1 12.7 1.0 0.8 1.0 138
Motherson Sumi Systems ADD 104 110 6 327 4.4 3,158 3.7 1.9 6.0 (27.5) (47.6) 211.3 28.0 53.4 17.2 7.6 9.5 5.0 2.9 2.9 2.4 10.5 5.4 15.2 1.4 1.2 1.7 31
MRF SELL 66,093 55,000 (17) 280 3.7 4 3,355 2,185 2,861 25.8 (34.9) 30.9 20 30.3 23.1 11.5 11.6 9.3 2.3 2.1 2.0 12.3 7.3 8.9 0.2 0.1 0.1 9.7
Schaeffler India SELL 3,537 3,200 (10) 111 1.5 31 118 105 140 (18.3) (10.5) 33.3 30 34 25 16.1 17.0 13.2 3.7 3.4 3.0 13.0 10.6 12.6 — — — 0.5
SKF ADD 1,667 1,550 (7) 82 1.1 49 58 52 65 (10.7) (10.8) 25.6 29 32 25 21.8 24.7 18.9 4.3 5.4 4.6 15.2 16.9 18.2 0.7 6.5 0.7 1.1
Tata Motors SELL 102 90 (11) 365 4.5 3,829 (20.7) (44.6) (5.1) (284.1) (115.3) 88.5 NM NM NM 5.9 12.6 4.6 0.6 0.8 0.8 NM NM NM — — — 95
Timken SELL 1,011 825 (18) 76 1.0 75 31 32 39 57.4 3.8 20.9 33 31 26 20.6 18.0 14.7 4.9 4.2 3.7 16.1 14.4 15.1 0.1 0.1 0.1 0.6
TVS Motor SELL 386 220 (43) 183 2.4 475 13.0 9.1 15.0 (7.9) (30.1) 65.6 30 42 26 14.8 16.8 12.2 5.1 4.8 4.2 17.7 11.6 17.5 0.9 1.0 1.0 17.2
Varroc Engineering BUY 185 360 95 25 0.3 135 0 (22) 17 (99.4) (11,685.4) 180.1 994.4 NM 10.7 5.4 8.1 3.9 0.8 0.9 0.9 0.1 NM 8.2 — — — 0.8
Automobiles & Components Neutral 6,926 92.6 (39.2) (74.9) 524.6 33.9 134.9 21.6 10.8 14.1 8.1 2.5 2.5 2.3 7.4 1.8 10.7 1.5 1.3 1.5 627
Banks
AU Small Finance Bank SELL 575 515 (11) 176 2.4 304 22.2 16.3 23.5 69.9 (26.4) 44.0 26 35 24 — — — 4.1 3.8 3.3 17.9 10.7 13.7 — — — 6.1
Axis Bank BUY 423 600 42 1,194 16.0 2,822 5.8 36 42 (68.3) 523.2 16.3 73 11.8 10.1 — — — 1.5 1.5 1.3 2.1 11.4 12.0 0.0 1.3 1.5 245
Bandhan Bank ADD 346 270 (22) 558 7.5 1,610 18.1 18.4 19.3 10.9 1.6 4.7 19.1 18.8 17.9 — — — 3.7 3.1 2.7 22.1 17.8 15.8 — — — 59
Bank of Baroda ADD 52 65 26 238 3.2 4,627 1.2 8.2 18 (27.8) 597.5 119.9 44 6.3 2.8 — — — 0.5 0.4 0.4 0.6 5.6 11.4 0.0 3.2 7.0 26
City Union Bank ADD 124 165 33 92 1.2 737 6.5 5.5 9.8 (30.5) (14.9) 79.0 19 22.6 12.6 — — — 1.9 1.8 1.6 9.4 7.4 12.3 0.9 0.8 1.4 3.6
DCB Bank BUY 81 150 86 25 0.3 310 10.9 10.7 11.6 3.6 (1.9) 9.0 7.4 7.6 6.9 — — — 0.8 0.8 0.7 11.2 10.0 9.9 — 1.3 1.4 3.5
Equitas Holdings BUY 55 100 82 19 0.3 342 6.1 6.0 9.7 (4.3) (1.1) 61.6 9.0 9.1 5.7 — — — 0.7 0.7 0.6 7.8 7.1 10.5 — — — 12.7
Federal Bank BUY 54 80 49 107 1.4 1,993 7.7 6.1 6.9 23.6 (21.1) 13.0 6.9 8.8 7.8 — — — 0.8 0.7 0.7 10.9 8.1 8.6 — 2.5 2.9 22
HDFC Bank BUY 1,090 1,050 (4) 5,983 80.0 5,483 48 48 52 23.7 0.1 8.4 23 23 21 — — — 3.5 3.2 2.9 16.4 14.5 14.1 — 0.9 0.9 279
ICICI Bank BUY 363 470 30 2,350 31.4 6,474 12.3 25 28 134.9 100.2 15.7 30 14.8 12.8 — — — 2.2 2.0 1.8 7.1 13.0 13.5 — 1.4 1.6 232
India Daily Summary - July 3, 2020

IndusInd Bank ADD 495 600 21 343 4.6 694 64 27 73 16.3 (57.1) 167.0 8 18.1 6.8 — — — 1.0 1.0 0.9 14.9 5.4 13.3 — 0.8 2.2 197
Karur Vysya Bank BUY 35 65 88 28 0.4 799 2.9 5 7 11.5 54.8 50.2 12 7.6 5.0 — — — 0.5 0.5 0.4 3.6 5.4 7.8 0.0 3.4 5.2 0.8
Punjab National Bank NR 36 — — 341 4.6 9,652 0 2 6 102.3 212.6 283.8 73 23.2 6.1 — — — 0.6 0.7 0.6 0.7 2.1 6.8 — — — 17.7
RBL Bank BUY 178 270 52 90 1.2 509 9.9 11 20 (51.1) 8.2 84.0 18 16.5 9.0 — — — 0.9 0.9 0.8 5.6 5.1 8.8 — 0.8 1.5 87
State Bank of India BUY 185 340 83 1,655 22.1 8,925 16 25 30 1,580.3 51.6 22.7 11 7.5 6.1 — — — 1.0 0.8 0.7 6.4 9.0 10.1 — 0.1 0.1 178
Ujjivan Financial Services BUY 239 490 105 29 0.4 121 26.9 34 44 117.0 24.9 31.6 9 7.1 5.4 — — — 1.3 1.2 1.0 15.7 17.0 19.3 1.3 1.8 2.5 17.1
Ujjivan Small Finance Bank BUY 30 37 23 52 0.7 1,728 2 2 2 38.5 (5.6) (1.9) 16 16.7 17.0 — — — 1.8 1.8 1.6 14.0 10.0 9.2 1.3 1.2 1.2 0.0
Union Bank RS 32 — — 207 2.8 9,414 (8) (2) 2 49.4 77.9 187.9 NM NM 19.7 — — — 0.5 0.7 0.7 NM NM 2.6 — (0.9) 0.8 2.5
Banks Attractive 13,968 186.7 43.1 97.3 43.4 34 17.0 11.9 1.5 1.3 1.2 4.4 7.7 10.1 0.0 0.8 1.1 1,421
Source: Company, Bloomberg, Kotak Institutional Equities estimates


Fair O/S ADVT
Building Products
Astral Poly Technik SELL 981 765 (22) 148 2.0 151 16.4 18 25 25.6 11.7 37.7 60 53 39 33.4 29.5 22.0 9.9 8.4 7.0 17.8 17.0 19.8 0.1 0.1 0.3 1.9
Building Products Cautious 148 2.0 26.6 11.7 37.7 60 53 39 33.4 29.5 22.0 9.8 8.4 7.0 16.5 15.8 18.2 0.1 0.1 0.3 1.9
Capital goods
ABB SELL 963 795 (17) 204 2.7 212 18 14 21 46.3 (19.1) 46.5 55 68 46 35.4 43.5 28.5 5.8 5.6 5.2 9.9 8.4 11.6 0.5 0.7 0.8 2.4
Ashoka Buildcon BUY 63 130 107 18 0.2 281 13.8 8.5 11.5 16.2 (38.0) 34.7 4.6 7.3 5.5 3.1 4.9 3.7 0.7 0.6 0.6 16.1 8.9 11.1 0.0 2.2 2.9 1.2
Bharat Electronics BUY 89 105 18 217 2.9 2,437 7.5 6.1 6.5 (3.3) (18.2) 6.7 11.9 14.5 13.6 7.3 8.6 7.8 2.2 2.0 1.8 18.9 14.2 14.0 3.1 2.6 2.7 17.5
BHEL REDUCE 37 28 (23) 128 1.7 3,482 -4.2 -1.5 2.5 (221.0) 64.0 263.0 NM NM 14.8 (48.8) (293.5) 5.9 0.4 0.4 0.4 NM NM 3.0 (5.6) (1.8) 2.7 29
Carborundum Universal ADD 273 285 4 52 0.7 189 14.4 13.7 15.9 9.9 (4.7) 16.0 19.0 19.9 17.2 12.4 11.5 9.6 2.8 2.5 2.3 15.2 13.3 13.9 1.0 1.0 1.1 0.4
Cochin Shipyard BUY 301 550 83 40 0.5 132 48 39 47 32.5 (19.7) 19.7 6.2 7.7 6.5 2.7 3.3 3.3 1.1 1.0 0.9 18.1 13.2 14.4 5.0 3.9 4.3 1.8
Cummins India BUY 398 460 16 110 1.5 277 26 16 24 (3.2) (35.4) 48.7 15.6 24 16.2 17.5 29.1 16.7 2.6 2.6 2.5 17.0 10.8 15.5 3.5 2.3 3.4 9.3
Dilip Buildcon BUY 286 495 73 39 0.5 137 30 27 45 (45.3) (10.8) 64.8 9.4 10.5 6.4 4.5 5.1 3.1 1.1 1.0 0.8 12.2 9.8 14.2 0.2 0.2 0.3 1.2
IRB Infrastructure BUY 95 150 58 33 0.4 351 21 15 11 (15.2) (27.9) (22.9) 4.6 6.4 8.3 3.2 6.1 5.7 0.5 0.5 0.5 11.1 7.6 5.6 5.3 4.0 2.6 2.6
Kalpataru Power Transmission BUY 223 470 110 35 0.5 153 25 25 39 (16.4) 0.1 53.3 8.8 8.8 5.7 3.9 3.9 3.3 1.0 0.9 0.8 12.0 11.1 15.2 1.5 1.4 2.0 1.7
KEC International BUY 272 342 25 70 0.9 257 22.0 25 31 16.3 13.4 24.4 12.4 10.9 8.8 7.2 6.6 5.4 2.5 2.1 1.7 22 21 22 1.2 1.0 1.2 1.7
L&T BUY 941 1,200 27 1,321 17.7 1,403 63 40 69 3.3 (37.1) 73.8 14.8 24 13.6 15.8 17.9 13.1 2.3 1.9 1.8 15.8 8.9 13.7 1.9 1.6 2.3 75
Sadbhav Engineering BUY 46 137 198 8 0.1 172 7.2 11.7 13.6 (33.4) 61.1 16.3 6.4 3.9 3.4 4.9 2.8 2.3 0.4 0.3 0.3 5.9 9.0 9.6 — — — 0.3
Siemens SELL 1,095 1,000 (9) 390 5.2 356 26 33 38 (14.9) 28.2 14.7 42 33 29 27.9 21.6 19.0 4.0 3.7 3.4 9.9 11.8 12.5 0.7 0.8 1.0 69
Thermax BUY 755 820 9 90 1.2 113 19 15 31 (48.8) (22.5) 109.8 40 52 25 21.5 33.6 17.4 21.5 33.6 17.4 7.0 5.4 10.7 0.9 0.7 1.2 1.2
Capital goods Neutral 2,754 36.8 (16.9) (21.2) 60.1 18.4 23 14.6 1.9 1.7 1.6 10.4 7.4 11.1 1.4 1.3 2.0 1,421
Commercial & Professional Services
SIS REDUCE 383 405 6 56 0.8 149 15 16 20 5.0 3.8 25.7 25 24 19.4 11.7 11.8 10.3 4.1 3.5 3.0 17.1 15.6 16.8 1.0 0.2 0.3 0.3
TeamLease Services ADD 1,660 1,875 13 28 0.4 17 20 50 68 (64.3) 143.7 36.4 81 33 24 29.6 24.3 18.4 5.0 4.3 3.7 6.3 13.9 16.2 — — — 0.5
Commercial & Professional Services Cautious 85 1.1 (16.7) 22.6 28.6 32 26 21 14.5 14.1 11.8 4.3 3.7 3.2 13.3 14.1 15.4 0.7 0.1 0.2 0.8
Commodity Chemicals
Asian Paints REDUCE 1,686 1,700 1 1,618 21.6 959 27.2 19.1 36.2 20.7 (29.9) 90.0 62 88 47 38.6 50.5 30.0 16.0 14.6 12.6 27 17.2 29 0.7 0.5 1.0 67
Berger Paints SELL 493 410 (17) 479 6.4 971 6.8 5.8 9.2 32.2 (15.1) 60.2 73 86 54 45.3 50.0 33.7 18.0 15.7 13.4 26 19.6 27 0.4 0.3 0.6 11.0
Kansai Nerolac BUY 463 450 (3) 249 3.3 539 9.9 5.7 12.5 14.6 (42.6) 120.1 47 81 37 31.3 48.7 24.4 6.6 6.4 5.8 14.8 8.0 16.5 0.7 0.6 0.9 1.8
Tata Chemicals ADD 310 320 3 79 1.1 255 31.7 31.0 37.5 (26.2) (2.1) 21.0 9.8 10.0 8.3 4.7 4.6 3.9 0.6 0.6 0.6 6.4 6.0 7.0 3.5 3.5 4.2 7.9
Commodity Chemicals Neutral 2,425 32.4 9.2 (24.4) 72.2 53 70 40 30.5 36.6 23.9 8.2 7.7 7.0 15.6 11.1 17.2 0.7 0.6 1.1 87
Construction Materials
ACC BUY 1,329 1,400 5 250 3.3 188 72.3 52.3 72.7 35.8 (27.7) 39.2 18.4 25 18.3 8.5 10.9 8.1 2.2 2.1 2.0 12.3 8.3 11.1 1.1 2.0 2.7 25
Ambuja Cements BUY 194 190 (2) 385 5.1 1,986 10.6 7.5 10.7 49.1 (29.5) 43.3 18.3 26 18.1 6.3 8.5 5.9 1.6 1.5 1.4 9.0 6.0 8.1 0.8 0.8 0.8 13.1
Dalmia Bharat BUY 705 935 33 132 1.8 192 14.0 2.0 19.2 (12.1) (85.4) 844.0 51 347 37 7.0 7.5 5.6 1.3 1.3 1.2 2.5 0.4 3.4 — — — 2.5
Grasim Industries ADD 618 735 19 406 5.4 657 52.6 40.6 71.6 (21.1) (22.9) 76.5 11.7 15.2 8.6 7.5 8.2 5.3 0.7 0.7 0.6 6.0 4.6 7.6 0.6 0.2 0.5 19.7
J K Cement BUY 1,395 1,450 4 108 1.4 77 64.2 51.8 92.2 83.6 (19.4) 78.1 22 27 15.1 10.7 11.0 7.7 3.6 3.2 2.7 17.3 12.5 19.4 0.5 0.7 0.7 1.5
JK Lakshmi Cement BUY 260 275 6 31 0.4 118 23.5 10.7 23.3 478.2 (54.5) 118.0 11.1 24 11.1 5.1 6.7 4.6 1.8 1.7 1.5 17.4 7.2 14.3 1.0 0.6 1.3 1.4
Orient Cement BUY 71 55 (22) 15 0.2 205 4.2 2.5 5.4 82.1 (41.2) 117.3 16.7 28 13.1 6.8 7.9 5.9 1.3 1.3 1.2 8.0 4.5 9.5 1.1 2.8 2.8 1.0
Shree Cement REDUCE 22,806 15,500 (32) 823 11.0 36 435.2 355.3 633.7 34.6 (18.3) 78.3 52 64 36 22.2 25.3 17.4 6.4 6.0 5.2 13.9 9.6 15.5 0.5 0.5 0.5 18.6
UltraTech Cement BUY 3,915 4,000 2 1,130 15.1 289 132.9 115.8 202.7 45.2 (12.8) 75.0 29 34 19.3 13.9 14.6 9.5 2.9 2.7 2.4 10.5 8.2 13.1 0.3 0.4 0.5 33
Construction Materials Cautious 3,279 43.8 21.1 (22.9) 71.6 24 32 18.4 10.5 11.8 8.0 2.0 1.9 1.8 8.4 6.1 9.6 0.5 0.6 0.7 115

102
Fair O/S ADVT
103
Consumer Durables & Apparel
Crompton Greaves Consumer SELL 240 185 (23) 151 2.0 627 7.9 5.7 7.9 33.1 (28.2) 38.5 30 42 30 26 32 23 10.3 8.1 6.8 39 21 24 0.0 0.0 1.0 2.9
Havells India SELL 581 475 (18) 364 4.9 626 11.8 8.7 13.8 (6.6) (26.1) 58.5 49 67 42 34 43 29 8.4 7.9 7.1 17.3 12.2 17.7 1.8 0.5 0.8 19.6
Page Industries REDUCE 20,262 16,000 (21) 226 3.0 11 308 277 397 (12.9) (10.0) 43.5 66 73 51 42 46 34 27.6 23.9 19.5 43 35 42 0.8 0.8 1.1 11.2
Polycab ADD 841 725 (14) 125 1.7 149 52 40 51 53.2 (21.7) 27.0 16.3 21 16.4 11 14 11 3.3 2.9 2.5 23 14.6 16.2 0.6 0.5 0.6 2.8
TCNS Clothing Co. REDUCE 356 380 7 22 0.3 66 11 4 15 (47.7) (64.3) 302.6 33 92 23 13 17 8.9 3.5 3.2 2.7 10.9 3.6 12.8 — — — 0.2
Vardhman Textiles ADD 670 800 19 39 0.5 57 85 65 101 (34.1) (23.4) 54.4 7.9 10.3 6.6 5.9 6.5 4.3 0.6 0.6 0.6 8.3 6.0 8.7 2.6 1.9 3.0 0.2
Voltas SELL 562 440 (22) 186 2.5 331 16.2 10.3 17.8 3.4 (36.5) 73.0 35 55 32 28 52 26 4.3 4.1 3.8 12.8 7.7 12.5 0.7 0.5 0.8 20
Whirlpool SELL 2,102 1,580 (25) 267 3.6 127 38 26 47 17.0 (32.0) 82.8 56 82 45 37 55 31 10.5 9.7 8.7 20 12.2 20 0.2 0.4 0.9 1.8
Consumer Durables & Apparel Cautious 1,379 18.4 2.3 (26.6) 35 48 31 24 31 21 5.8 5.3 16.3 11.0 15.1 0.9 0.5 59
Consumer Staples
Bajaj Consumer Care ADD 147 170 16 22 0.3 148 12.5 12.1 12.7 (16.6) (3.6) 5.0 11.7 12.1 11.6 8.4 8.9 8.2 3.3 3.0 2.8 33 26 25 1.4 5.5 5.5 1.1
Britannia Industries REDUCE 3,535 3,300 (7) 850 11.4 240 59 77 83 22.1 30.3 8.2 60 46 43 46 35 32 19.3 16.2 13.0 32 38 34 1.0 0.8 0.9 44
Colgate-Palmolive (India) ADD 1,376 1,450 5 374 5.0 272 28 30 36 5.9 7.4 19.7 49 45 38 30.8 28.8 24.6 23.5 23.3 22.1 51 52 60 2.0 2.1 2.5 22
Dabur India REDUCE 465 400 (14) 822 11.0 1,767 8.6 9.3 10.6 6.1 7.6 13.9 54 50 44 45 41 34 12.4 11.5 10.6 25 24 25 0.6 1.3 1.5 24
Godrej Consumer Products BUY 697 615 (12) 712 9.5 1,022 13.8 14.8 18.6 (4.8) 7.7 25.2 51 47 38 34 32 26 9.0 8.0 7.2 18.6 18.1 20 0.9 1.1 1.4 17.5
Hindustan Unilever ADD 2,152 2,300 7 5,053 67.6 2,343 31 35 44 10.9 12.8 25.8 69 61 49 52 43 34 57.9 11.6 11.1 86 32 23 1.1 1.5 1.9 242
ITC BUY 206 255 24 2,532 33.9 12,308 11.6 10.7 12.4 14.4 (7.2) 15.5 17.8 19.2 16.6 12.4 13.6 11.6 4.0 3.8 3.7 21 19.4 22 4.9 4.5 5.2 82
Jyothy Laboratories ADD 118 135 15 43 0.6 367 4.7 5.2 5.7 (15.5) 11.0 8.2 25 23 21 18.3 15.1 14.0 3.5 3.3 3.2 13.6 15.3 15.7 2.5 3.0 3.4 0.8
Marico BUY 358 350 (2) 462 6.2 1,290 8.1 8.2 9.4 12.4 1.5 13.7 44 43 38 31 30 26 15.3 14.5 13.7 35 34 37 1.8 2.0 2.2 16.7
Nestle India REDUCE 16,789 16,000 (5) 1,619 21.6 96 204 241 282 22.6 17.9 17.3 82 70 59 57 47 41 83.8 68.5 56.6 70 108 104 2.0 1.2 1.4 41
Tata Consumer Products ADD 391 400 2 358 4.8 922 8.0 8.2 10.9 13.9 2.9 33.2 49 48 36 27 24 21 2.6 2.5 2.4 6.9 5.4 6.9 0.7 0.9 1.1 25
United Breweries ADD 1,056 1,180 12 279 3.7 264 16.2 2.5 21.8 (24.0) (84.4) 760.7 65 417 48 32 68 25 7.9 8.0 6.9 12.8 1.9 15.2 0.2 0.1 0.6 11.2
United Spirits ADD 595 620 4 432 5.8 727 11.5 9.3 14.8 21.7 (19.4) 59.9 52 64 40 30 35 25 10.8 9.2 7.5 23 15.5 21 — — — 38
Varun Beverages BUY 682 800 17 197 2.6 289 16.2 14.4 29.1 51.9 (11.3) 102.1 42 47 23 16 16 11 5.9 5.2 4.3 17.6 11.7 20 0.1 0.2 0.3 3.1
Consumer Staples Cautious 13,756 183.9 13.0 3.2 22.1 43 42 34 30 29 24 11.1 8.3 7.8 26 19.9 23 1.8 1.9 2.2 570
Diversified Financials
Bajaj Finance BUY 2,969 2,600 (12) 1,786 23.9 600 104 66 126 50 (37) 92 29 45 24 — — — 5.5 5.0 4.2 20 11.5 19.3 0.3 0.2 0.4 382
Bajaj Finserv BUY 6,189 7,000 13 985 13.2 159 212 238 392 5 12 65 29 26 15.8 — — — 3.1 2.9 2.5 12.2 11.6 16.9 0.2 0.2 0.2 89
Cholamandalam BUY 197 265 34 162 2.2 820 12.8 12.1 18.7 (15) (5.8) 54.3 15.4 16.3 10.6 — — — 2.1 2.0 1.7 14.7 11.5 15.7 0.9 0.7 1.0 36
IIFL Wealth ADD 992 1,200 21 86 1.2 88 23.8 37.0 53.7 (47) 55.8 45.1 42 27 18.5 — — — 2.9 2.8 2.7 7.0 10.7 15.1 1.0 2.4 3.5 0.2
L&T Finance Holdings ADD 69 85 23 138 1.9 2,005 8 5 9 (24.1) (38) 72.6 8.2 13.1 7.6 — — — 0.9 0.9 0.8 14.7 7.0 11.3 2.7 2.1 2.3 16.9
LIC Housing Finance ADD 282 350 24 142 1.9 505 47.6 36.2 66.6 4 (24.0) 84.1 5.9 7.8 4.2 — — — 0.9 0.9 0.8 13.9 9.6 16.0 2.8 2.2 4.0 26
Muthoot Finance ADD 1,109 1,025 (8) 445 5.9 401 75 69 85 52.3 (7) 22.8 14.8 16.0 13.0 — — — 3.8 3.2 2.7 28 22 23 1.4 1.3 1.5 38
Shriram City Union Finance BUY 685 1,250 82 45 0.6 66 152 84 158 1.2 (44) 87.1 4.5 8.1 4.3 — — — 0.7 0.6 0.6 14.7 7.5 12.8 0.9 1.6 3.5 0.5
Shriram Transport BUY 698 1,050 50 158 2.1 227 110.3 81.7 119.0 (2) (25.9) 45.6 6.3 8.5 5.9 — — — 0.9 0.9 0.8 14.8 9.9 13.0 0.7 1.8 2.6 59
Diversified Financials Neutral 7,376 98.6 32.3 (25.9) 43.9 18.0 24 16.9 2.7 2.7 2.4 15.1 11.1 14.2 0.9 0.9 1.2 855



Fair O/S ADVT
Electric Utilities
CESC BUY 636 810 27 84 1.1 133 99 102 114 9 3.3 11.8 6.5 6.2 5.6 5.3 5.0 4.5 0.7 0.6 0.6 10.7 10.4 10.7 2.0 2.0 2.0 5.9
JSW Energy BUY 50 65 29 83 1.1 1,640 6.3 5.3 5.2 49 (17) (1.8) 8.0 9.5 9.7 4.9 4.6 4.0 0.7 0.7 0.6 8.9 7.2 6.6 — — — 1.7
NHPC ADD 20 26 28 204 2.7 10,045 2.8 3.0 3.2 10.7 6 8.7 7.2 6.8 6.3 7.3 8.0 7.1 0.7 0.6 0.6 9.2 9.3 9.7 7.2 8.6 9.2 1.6
NTPC BUY 93 140 50 924 12.4 9,895 11.1 13.2 15.4 (0.9) 18.7 16.8 8.4 7.1 6.1 9.9 7.8 6.1 0.8 0.8 0.7 10.0 11.1 11.9 3.4 4.2 5.0 23
Power Grid BUY 175 220 26 916 12.2 5,232 20.7 22 25 9 6.3 16.1 8.5 8.0 6.9 6.8 6.5 5.8 1.4 1.3 1.2 17.5 17.0 18.1 5.7 6.1 7.0 28
Tata Power BUY 50 55 10 135 1.8 2,705 4.4 4.9 6.5 110 11 31.8 11.2 10.1 7.6 7.4 6.5 5.9 0.7 0.7 0.6 6.9 7.1 8.7 — — — 17.5
Electric Utilities Attractive 2,346 31.4 8.2 10.1 15.7 8.3 7.5 6.5 0.9 0.9 0.8 11.2 11.5 12.2 4.3 4.9 5.6 78
Fertilizers & Agricultural Chemicals
Bayer Cropscience SELL 6,202 3,400 (45) 279 3.7 45 129.3 134.2 149.9 64.7 3.8 11.7 48 46 41 37 33 29 10.8 9.1 7.8 24 21 20 0.4 0.4 0.5 2.2
Dhanuka Agritech SELL 738 535 (27) 35 0.5 48 29.7 34.9 38.2 25.7 17.4 9.5 24.8 21.1 19.3 19.8 16.6 14.9 5.0 4.7 4.5 21 23 24 3.3 3.8 4.2 1.1
Godrej Agrovet SELL 436 375 (14) 84 1.1 192 11.5 12.9 17.0 0.8 11.8 32 38 34 26 22 18 14 3.8 3.5 3.1 10.4 10.7 12.9 1.3 1.0 1.3 1.3
Rallis India ADD 272 230 (15) 53 0.7 195 9.0 10.6 14.2 7.4 17.1 33.7 30.0 25.6 19.2 20.6 17.6 13.5 3.8 3.4 3.0 13.1 13.9 16.5 0.9 1.0 1.1 3.0
UPL SELL 442 350 (21) 338 4.5 765 23.2 30.3 35.7 22.7 30.4 17.8 19 14.6 12.4 8.7 7.7 6.7 2.1 1.9 1.7 11.5 13.5 14.3 1.4 1.8 2.1 40
Fertilizers & Agricultural Chemicals Attractive 1,004 13.4 26.7 22.5 18.8 29 24 20.2 13.7 12.0 10.4 3.9 3.5 3.1 13.2 14.4 15.2 0.9 1.1 1.3 52
Gas Utilities
GAIL (India) BUY 104 150 45 467 6.2 4,510 13.2 9.5 11.6 (5.5) (28.2) 22.2 7.9 10.9 9.0 6.0 7.9 6.3 1.1 1.0 0.9 13.5 9.4 10.9 6.2 3.9 4.8 23
GSPL SELL 225 210 (7) 127 1.7 564 17.2 12.8 11.8 21.9 (25.7) (7.6) 13.1 17.6 19.1 6.1 7.4 7.6 1.9 1.7 1.6 15.5 10.2 8.7 0.9 0.8 1.0 2.2
Indraprastha Gas SELL 445 380 (15) 311 4.2 700 16.7 16.0 20.8 38.6 (4.1) 29.8 26.7 27.8 21.4 19.0 19.7 15.2 6.1 5.3 4.5 25 20 23 0.6 0.6 0.9 26
Mahanagar Gas ADD 1,048 1,185 13 103 1.4 99 74.6 61.9 82.8 32.8 (17.1) 33.9 14.0 16.9 12.6 9.6 11.1 8.1 3.5 3.2 2.8 28 19.6 24 3.3 2.9 4.2 13.0
Petronet LNG BUY 261 300 15 392 5.2 1,500 17.6 18.7 22.2 17.3 6.2 18.5 14.8 14.0 11.8 8.2 7.9 6.8 3.6 3.4 3.2 25 25 28 4.8 5.4 6.9 10.9
Gas Utilities Attractive 1,400 18.7 6.8 (16.9) 20.5 12.2 14.7 12.2 8.0 9.2 7.6 2.0 1.9 1.7 16.5 12.8 14.3 3.9 3.2 4.1 75
Health Care Services
Apollo Hospitals BUY 1,363 1,700 25 190 2.5 139 18.4 1 44 9 (97) 6,877 73.9 ##### 31.2 13.9 21.2 12.2 5.7 5.7 5.1 7.7 0.3 17.2 0.8 0.0 1.3 21
Dr Lal Pathlabs SELL 1,571 1,180 (25) 131 1.8 83 27.1 26.1 37.7 13.4 (3.5) 44.5 58.1 60.2 41.6 36.0 37.1 26.0 12.7 11.1 9.3 23 19.6 24 0.5 0.5 0.7 3.2
HCG BUY 121 140 16 11 0.1 143 (7.7) (6.4) (1.8) (128) 16 72 NM NM NM 9.6 8.1 5.4 2.2 1.8 1.9 NM NM NM — — — 0.8
Metropolis Healthcare SELL 1,359 1,240 (9) 69 0.9 51 29.2 28.9 40.0 22.0 (1.2) 39 46.5 47.1 33.9 28.6 27.8 20.5 13.0 11.1 9.2 31 26 30 0.6 0.6 0.9 7.3
Narayana Hrudayalaya BUY 268 360 34 55 0.7 204 5.8 -3.0 8.3 101.0 (152) 376 46.1 NM 32.4 14.2 29.6 11.6 4.8 5.1 4.4 10.7 NM 14.6 — — — 0.7
Health Care Services Attractive 516 6.9 6 (79) 707 52.8 246.0 30.5 14.3 19.1 11.4 5.3 4.9 4.4 10.0 2.0 14.5 0.5 0.2 0.8 33
Hotels & Restaurants
Jubilant Foodworks ADD 1,726 1,750 1 228 3.0 133 24 9 30 (2) (62.3) 240 73.2 194.2 57.0 25.2 32.8 19.9 20.2 19.8 15.2 26 10.3 30 0.3 0.2 0.6 32
Lemon Tree Hotels BUY 24 38 61 19 0.2 790 -0.1 -0.9 0.6 (118) (655) 161 NM NM 42.5 13.9 28.6 11.1 2.3 2.5 2.4 NM NM 5.7 — 0.0 0.9 1.5
Hotels & Restaurants Attractive 246 3.3 (18) (85) 868 81.4 533.2 55.1 22.8 32.2 18.0 12.6 12.9 10.8 15.5 2.4 19.6 0.3 0.2 0.6 33
Insurance
HDFC Life Insurance ADD 548 530 (3) 1,106 14.8 2,010 6.4 3.7 5.6 1.4 (42.4) 50.5 85.0 147.5 98 — — — 15.7 15.0 14.1 20 10.4 14.8 0.0 0.2 0.3 43
ICICI Lombard SELL 1,289 875 (32) 586 7.8 454 26.3 30.8 35.7 14 17 16 49.1 41.8 36 — — — 9.6 7.9 6.7 21 21 20 0.3 0.2 0.6 20.0
ICICI Prudential Life BUY 425 475 12 611 8.2 1,436 7.4 9.7 12.2 (6) 30.8 25.5 57.2 43.8 35 — — — 8.1 7.1 6.1 14.8 17.2 18.7 0.2 0.4 0.0 18.8
Max Financial Services ADD 545 550 1 147 2.0 343 10.1 10.3 28.1 452 2 173 53.9 52.8 19.4 — — — — — — 12.7 14.5 40 — 0.2 1.2 12.7
SBI Life Insurance BUY 814 1,000 23 814 10.9 1,001 14.2 14.9 15.6 7.2 4.9 4.5 57.2 54.6 52 — — — 10.2 8.8 7.7 18.4 17.3 15.8 — 0.3 0.3 17.1
Insurance Attractive 3,264 43.6 8.4 2.7 32.3 62.2 60.6 46 10.6 9.3 7.6 17.0 15.3 16.6 0.0 0.2 0.2 111

104
Fair O/S ADVT
105
Internet Software & Services
Info Edge SELL 2,790 2,185 (22) 342 4.6 122.3 26.9 19.8 36.7 4.2 (26.5) 85.4 103.7 141.1 76.1 81.6 122.5 60.5 14.0 13.1 11.6 13.8 9.6 16.1 0.3 0.2 0.3 17.7
Just Dial BUY 386 420 9 25 0.3 61.8 42.0 24.3 33.0 31.4 (42.2) 35.9 9.2 15.9 11.7 3.6 8.6 4.9 1.9 2.0 1.7 24 12.2 16.1 — — — 18.5
Internet Software & Services Attractive 367 4.9 15.2 (34.9) 66.5 61.0 93.7 56.3 50.1 83.4 45.8 9.9 9.7 8.5 16.2 10.4 15.1 0.3 0.2 0.3 36
IT Services
HCL Technologies ADD 569 625 10 1,545 20.7 2,716 40.8 38.5 43.8 11.4 (5.6) 13.7 14.0 14.8 13.0 8.7 8.6 7.4 3.2 2.6 2.3 24 19.5 19.0 0.9 1.8 2.4 38
Hexaware Technologies REDUCE 336 260 (23) 100 1.3 302 21.2 18.8 21.1 9.9 (11.2) 12.2 15.8 17.8 15.9 11.5 11.4 9.8 3.7 3.2 2.9 25 19.2 19.2 2.5 1.8 3.0 4.6
Infosys BUY 757 775 2 3,222 43.1 4,259 38.9 37.5 42.2 10.0 (3.6) 12.3 19.4 20.2 17.9 13.6 13.2 11.7 4.9 4.6 4.3 25 24 25 2.3 3.4 4.0 99
L&T Infotech ADD 1,963 1,850 (6) 342 4.6 176 86.6 83.5 101.0 0 (3.6) 21.0 22.7 23.5 19.4 16.1 15.5 13.6 6.4 5.6 4.8 30 25 26 1.4 1.6 1.8 3.2
Mindtree REDUCE 937 760 (19) 154 2.1 165 38.3 46.9 55.3 (16) 22 18 24.5 20.0 16.9 12.9 11.2 9.5 4.9 4.2 3.6 19.5 23 23 3.2 1.5 1.8 14.3
Mphasis REDUCE 870 750 (14) 162 2.2 187 63.5 56.2 62.2 13 (11.5) 10.6 13.7 15.5 14.0 9.1 9.6 8.5 2.8 2.6 2.4 21 17.4 17.9 4.0 4.0 4.0 3.0
TCS REDUCE 2,157 1,705 (21) 8,094 108.2 3,752 86.2 82.6 92.0 4 (4.2) 11.3 25.0 26.1 23.5 18.2 18.7 16.7 9.4 8.8 8.1 36 35 36 3.1 3.1 3.4 104
Tech Mahindra BUY 561 630 12 489 6.5 880 45.9 35.4 48.0 (3.9) (22.8) 35.6 12.2 15.8 11.7 7.4 7.8 6.0 2.3 2.1 1.9 19.2 13.8 17.2 2.7 2.7 3.0 36
Wipro REDUCE 224 195 (13) 1,281 17.1 5,703 16.6 15.8 17.1 11.1 (5.0) 8.3 13.5 14.2 13.1 8.2 8.2 7.3 2.4 2.0 1.9 17.3 15.1 14.9 0.7 0.9 3.8 23
IT Services Cautious 15,390 205.8 4.3 (5.5) 12.8 19.8 21.0 18.6 13.6 13.8 12.1 5.2 4.7 4.3 26 22 23 2.5 2.8 3.4 325
Media
DB Corp. REDUCE 75 81 7 13 0.2 175 15.7 5.3 14.1 0.4 (66.5) 166.7 4.8 14.3 5.4 2.8 4.6 2.2 0.8 0.8 0.8 15.7 5.4 14.3 16.6 2.7 15.9 0.3
Jagran Prakashan REDUCE 41 35 (15) 12 0.2 281 7.0 3.3 7.0 (20.9) (52) NA 5.9 12.3 NA 1.8 2.4 NA 0.6 0.6 NA 10.3 4.9 9.9 10.9 4.9 12.2 0.3
PVR BUY 1,015 1,625 60 52 0.7 51 29.0 -32.7 59.3 (33) (213) 281 35.1 NM 17.1 10.8 32.1 7.3 2.3 3.0 2.6 8.5 NM 16.2 0.3 (0.3) 0.6 42
Sun TV Network REDUCE 401 435 8 158 2.1 394 35.5 34.9 39.7 (2) (1.6) 13.6 11.3 11.5 10.1 7.8 7.4 6.5 2.8 2.7 2.6 25 24 26 6.2 6.2 6.9 16.2
Zee Entertainment Enterprises REDUCE 174 145 (17) 168 2.2 960 17.9 13.1 16.2 8.6 (27.1) 24.4 9.7 13.4 10.7 6.5 8.2 6.3 1.7 1.6 1.5 18.5 12.6 14.6 2.6 3.2 3.2 58
Media Attractive 402 5.4 (0.4) (29.1) 46.0 10.8 15.2 10.4 6.7 8.4 5.9 1.9 1.9 1.8 17.6 12.3 16.9 4.4 3.9 5.0 117
Metals & Mining
Hindalco Industries BUY 148 225 52 332 4.4 2,220 17.8 10.5 20.0 (28.2) (41.1) 91 8.3 14.1 7.4 5.1 6.3 4.7 0.6 0.5 0.5 6.8 3.9 7.1 0.7 0.7 0.7 33
Hindustan Zinc BUY 196 215 9 830 11.1 4,225 16.1 11.5 15.3 (14.5) (28.4) 32.7 12.2 17.0 12.8 6.9 8.9 6.7 2.1 2.5 2.5 18.4 13.2 19.4 8.4 5.9 7.8 2.8
Jindal Steel and Power BUY 154 200 30 157 2.1 1,020 (7.7) (9.0) 14.6 (343) (18) 262 NM NM 10.5 6.6 7.7 5.1 0.5 0.5 0.5 NM NM 4.7 — — — 36
JSW Steel ADD 194 180 (7) 470 6.3 2,402 10.1 (0.4) 14.8 (68.3) (104) 4,298.7 19.3 NM 13.1 9.0 11.4 6.9 1.3 1.3 1.2 6.8 NM 9.5 1.1 1.1 1.1 31
National Aluminium Co. SELL 33 24 (27) 61 0.8 1,866 0.7 (0.4) 1.4 (91) (154) 461.1 44.3 NM 22.7 7.8 14.3 6.9 0.6 0.6 0.6 1.4 NM 2.7 4.6 0.0 2.2 6.3
NMDC ADD 82 105 28 250 3.3 3,062 14.6 11.9 11.1 (0.7) (18.8) (7) 5.6 6.9 7.4 3.9 4.8 5.2 0.9 0.9 0.8 16.7 12.8 11.2 6.8 7.3 6.8 7.2
Tata Steel BUY 335 400 19 380 5.1 1,146 35.2 (20.8) 63.3 (61) (159) 404 9.5 NM 5.3 8.0 9.8 5.2 0.5 0.6 0.5 5.9 NM 10.4 3.0 2.1 3.4 63
Vedanta BUY 106 120 13 396 5.3 3,717 6.5 5.5 12.3 (57) (16) 125.0 16.3 19.4 8.6 4.6 6.0 4.5 0.7 0.8 0.7 4.2 3.8 8.7 3.7 11.5 8.0 44
Metals & Mining Attractive 2,876 38.4 (45.5) (60.0) 235.8 12.3 30.6 9.1 6.3 7.9 5.4 0.9 0.9 0.8 7.1 2.9 9.3 4.3 4.4 4.7 44



Fair O/S ADVT
Oil, Gas & Consumable Fuels

BPCL BUY 384 440 15 832 11.1 1,967 11 26 33 (71.0) 144.2 28.4 36.5 14.9 11.6 20.7 10.8 9.1 2.3 2.1 1.9 5.9 14.7 17.4 4.3 3.3 4.3 40.2
Coal India BUY 134 215 61 823 11.0 6,163 27 20 20 (4) (24.7) (3.2) 4.9 6.5 6.8 3.8 5.8 5.4 2.6 2.5 2.6 57.0 38.9 37.6 11.2 15.0 15.0 20.4
HPCL BUY 215 260 21 328 4.4 1,524 7 24 27 (82.0) 235.0 10.7 30.1 9.0 8.1 18.4 9.2 8.1 1.1 1.1 1.0 3.8 12.2 12.7 4.5 5.6 6.2 22.0
IOCL BUY 88 130 47 832 11.1 9,181 (3.9) 9.8 13.2 (121.9) 349.6 34.4 NM 9.0 6.7 23.3 5.8 5.2 0.9 0.8 0.8 NM 9.4 11.9 4.8 5.0 6.7 21.6
Oil India SELL 95 70 (27) 103 1.4 1,084 21 3 6 (32) (85.6) 105.7 4.6 32.0 15.6 3.3 8.7 7.5 0.4 0.4 0.4 8.6 1.3 2.7 11.1 1.2 2.6 3.0
ONGC SELL 82 60 (27) 1,030 13.8 12,580 13 4 7 (43) (71.7) 89.6 6.1 21.5 11.3 2.8 4.7 3.8 0.4 0.4 0.4 7.3 2.1 3.8 6.1 2.3 3.7 28.2
Reliance Industries BUY 1,760 1,750 (1) 10,434 139.5 5,926 67 70 97 1.2 4.2 38.9 26.4 25.3 18.2 15.6 14.2 10.2 2.3 2.1 1.9 9.4 8.7 11.1 0.4 0.4 0.4 461.4
Oil, Gas & Consumable Fuels Attractive 14,381 192.3 (37.3) 2.3 32.9 19.2 18.8 14.1 10.3 10.2 7.9 1.6 1.5 1.4 8.4 8.1 10.0 2.0 1.9 2.2 596.8
Pharmaceuticals
Aurobindo Pharma REDUCE 780 730 (6) 457 6.1 586 48 51 56 19.3 6 8.8 16.1 15.2 14.0 9.8 9.2 8.1 2.7 2.4 2.1 16.8 15.5 14.8 0.4 1.0 1.1 71.5
Biocon SELL 392 225 (43) 470 6.3 1,202 6.2 8.2 10.0 2 32 21.9 63 48 39 29.3 21.7 17.6 6.4 5.8 5.2 10.6 12.1 13.2 0.2 0.7 0.9 41.9
Cipla BUY 646 650 1 521 7.0 806 19.2 27 32 1.1 39 20 34 24.3 20.2 16.5 13.6 11.4 3.2 3.0 2.7 9.9 12.2 13.2 1.2 0.8 0.9 78.6
Dr Reddy's Laboratories SELL 3,921 3,100 (21) 652 8.7 166 176 147 188 76 (16) 27.5 22 26.6 20.9 12.9 14.8 11.5 4.2 3.7 3.2 13.9 13.9 15.5 0.6 0.6 0.8 67.1
Laurus Labs ADD 525 540 3 56 0.8 107 23.9 34.7 38 117.9 45 10 22 15.2 13.8 11.8 9.4 8.0 3.2 2.6 2.2 15.3 17.3 16.0 (0.7) — — 13.9
Lupin ADD 895 900 1 406 5.4 450 22 32 46 3.6 46 44 41 28 19.5 15.9 12.4 9.1 3.2 2.9 2.6 7.4 10.4 13.3 0.7 0.5 0.8 48.1
Sun Pharmaceuticals ADD 473 480 1 1,135 15.2 2,406 16.7 19.2 24 3.8 15 25 28 25 19.7 14.9 12.9 10.5 2.5 2.3 2.1 9.3 9.4 11.2 1.5 0.8 1.0 90.7
Torrent Pharmaceuticals REDUCE 2,351 2,350 (0) 398 5.3 169 57 70 86 22.6 22 22 41 33 27 19.5 16.8 14.4 8.2 7.1 6.1 20.1 21.2 22.2 1.8 1.0 1.3 30.6
Pharmaceuticals Neutral 4,094 54.7 18.9 13 23 29 25 20.6 15.1 13.5 11.0 3.4 3.1 2.7 11.9 12.1 13.3 1.0 0.8 1.0 442.3
Real Estate
Brigade Enterprises BUY 132 235 79 27 0.4 204 6.4 7 15 (46) 6 114 20.6 19.4 9.0 10.1 9.3 4.7 1.2 1.1 1.0 5.9 6.0 12.0 1.9 1.9 1.9 0.6
DLF BUY 153 200 31 378 5.1 2,475 (2.4) 5.0 8.7 (140) 310 74 NM 30.6 17.6 36.4 42.2 24.5 1.1 1.1 1.0 NM 3.6 6.0 — 1.3 1.3 21.5
Embassy Office Parks REIT ADD 344 400 16 265 3.5 772 9.9 12.3 14.1 110 24 15 35 28 24 16.9 15.8 14.6 1.2 1.3 1.4 3.4 4.4 5.4 7.1 7.7 8.6 8.8
Godrej Properties SELL 867 610 (30) 218 2.9 252 10.7 10.9 17.7 (2.7) 2 62.2 81 79 49 67.7 127.2 115.7 4.5 4.3 4.0 7.4 5.6 8.4 — — — 6.4
Oberoi Realty ADD 360 575 60 131 1.7 364 22 34 38 (4.0) 55.5 12 16.7 10.7 9.5 15.5 9.4 8.0 1.5 1.3 1.2 9.4 13.1 13.1 0.6 0.6 0.6 2.5
Prestige Estates Projects ADD 201 275 37 81 1.1 401 10.9 6.6 10 25.1 (39) 54 18 30 19.7 6.7 7.2 6.2 1.4 1.5 1.4 8.7 4.9 7.2 0.8 0.7 0.7 2.1
Sobha BUY 223 415 86 21 0.3 95 30 36 45 (5) 21.5 24.1 7.5 6.2 5.0 4.6 4.1 3.7 0.9 0.8 0.7 12.1 13.4 14.8 3.1 3.1 3.1 1.2
Sunteck Realty BUY 177 320 81 26 0.3 140 12.2 11.3 25 (24.6) (7) 118 14 15.6 7.1 12.7 13.8 5.5 0.8 0.8 0.7 5.9 5.2 10.5 0.6 0.6 0.6 1.4
Real Estate Neutral 1,147 15.3 (41.9) 105.5 42.5 51 25 17.6 16.3 15.3 12.0 1.4 1.4 1.3 2.7 5.4 7.4 1.9 2.4 2.7 44.4
Retailing
Aditya Birla Fashion and Retail BUY 123 150 22 95 1.3 773 (2.1) (4.2) 2.7 (151.4) (96.4) 165.1 NM NM 45 9.9 12.9 7.7 8.7 12.4 9.7 NM NM 24.3 — — — 4.0
Avenue Supermarts SELL 2,296 1,480 (36) 1,487 19.9 648 21.0 22 39 45.1 5.8 74.1 109 103 59 68 69 40 13.0 11.9 9.9 15.8 12.2 18.2 — — — 14.3
Titan Company BUY 986 1,215 23 876 11.7 888 16.8 10 21 (0.2) (38.6) 102.8 59 96 47 36 52 30 13.1 12.0 10.1 23.4 13.1 23.3 0.4 0.3 0.6 55.8
Retailing Cautious 2,458 32.9 (2.8) (23.2) 125.3 93 121 54 42 52 30 13.0 11.9 10.0 14.0 9.9 18.6 0.1 0.1 0.2 74.1
Speciality Chemicals
Castrol India BUY 124 165 33 122 1.6 989 8.4 6.0 8.9 16.8 (28.8) 48.8 14.8 20.8 14.0 9.8 13.8 9.4 9.0 8.7 8.3 65.3 42.4 60.8 4.4 4.4 6.7 2.3
Pidilite Industries REDUCE 1,389 1,325 (5) 706 9.4 508 23.1 17 28 30.1 (24.5) 60.9 60 80 50 44 55 35 15.8 14.3 12.2 27.2 18.8 26.6 0.5 0.5 0.7 18.7
S H Kelkar and Company BUY 68 95 40 10 0.1 141 4.6 4.6 6.2 (24.3) (1.0) 35.8 14.7 14.8 10.9 7.8 7.5 5.8 1.2 1.1 1.0 7.8 7.6 9.8 2.9 1.5 2.6 1.4
SRF ADD 3,654 3,800 4 210 2.8 57 138 151 197 23.5 9.2 30.9 26.5 24.2 18.5 16.5 14.2 11.2 4.3 3.7 3.1 17.5 16.3 18.2 0.4 0.4 0.5 13.7
Speciality Chemicals Neutral 1,048 14.0 22.1 (15.8) 46.5 37 44 29.8 24.4 27.1 19.3 9.0 8.1 7.0 24.7 18.6 23.6 1.0 0.9 1.4 36.2

106
Fair O/S ADVT
107
Telecommunication Services
Bharti Airtel BUY 559 690 24 3,047 40.7 5,456 (6.7) 5.7 14.5 NM NM NM NM 98.7 38.6 10.7 8.4 6.8 3.9 4.0 3.8 NM 4.0 10.0 0.4 1.1 1.1 184.3
Bharti Infratel BUY 222 185 (17) 411 5.5 1,850 16.5 16.5 17.7 25.7 0.2 6.9 13.5 13.4 12.6 5.6 5.4 5.1 3.0 3.0 3.0 21.7 22.5 23.9 4.8 7.2 7.6 30.3
Vodafone Idea RS 10 — — 289 3.9 28,735 (25.7) (3.3) (5.5) NM NM NM NM NM NM 8.3 6.7 5.4 4.8 -8.0 (1.5) NM NM 137 — — — 78
Tata Communications BUY 611 705 15 174 2.3 285 16.0 14.9 21.4 38.2 (6.6) 43.7 38.2 40.9 28.5 8.2 7.2 6.3 NM NM (35.8) NM NM NM 0.7 0.7 1.0 1.5
Telecommunication Services Cautious 3,921 52.4 NM 58.3 72.9 NM NM NM 9.4 7.7 6.3 4.1 4.6 5.3 NM NM NM 0.8 1.6 1.7 293.8
Transportation
Adani Ports and SEZ BUY 347 390 12 705 9.4 2,032 26.9 18.7 21.9 34.7 (30.5) 16.9 12.9 18.5 15.9 12.2 13.2 11.2 2.7 2.5 2.2 21.8 14.0 14.5 3.7 1.0 0.9 18.7
Container Corp. SELL 422 400 (5) 257 3.4 609 17.3 8.0 13.0 5.7 (53.6) 62.2 24 53 33 14.1 24.9 17.1 2.6 2.5 2.4 10.3 4.8 7.6 0.8 1.0 1.7 11.1
Gateway Distriparks BUY 86 135 57 9 0.1 109 4.2 (0.4) 5.1 (37.5) (108.6) 1,491.1 20.3 NM 16.9 6.9 8.5 6.1 0.7 0.7 0.7 3.5 NM 4.1 3.5 3.5 3.5 0.2
GMR Infrastructure BUY 21 26 23 127 1.7 7,147 (3.1) (1.8) (0.8) (25.4) 40.9 55.9 NM NM NM 16.1 18.8 16.9 (4.7) (7.5) (5.9) 106.6 55.8 25.2 — — — 2.9
Gujarat Pipavav Port BUY 79 106 35 38 0.5 483 6.0 4.5 5.8 42.2 (25.1) 28.0 13.1 17.5 13.6 7.1 7.6 6.6 1.8 1.8 1.8 14.2 10.5 13.5 7.1 5.4 6.9 0.8
InterGlobe Aviation SELL 1,002 925 (8) 386 5.2 383 (6.5) (189.9) 66.4 (258.9) (2,828.8) 135.0 NM NM 15.1 4.6 (9.1) 2.2 6.5 (143.5) 2.2 NM NM 253.3 — — — 45
Mahindra Logistics ADD 279 275 (1) 20 0.3 71 8.9 5.9 10.3 (29.0) (34.2) 75.8 31 48 27 12.9 14.7 10.4 3.7 3.5 3.2 12.2 7.5 12.2 — — — 0.3
Transportation Attractive 1,542 20.6 17.6 (183.9) 288.8 32 NM 20.3 10.9 22.5 9.0 3.6 3.8 3.3 11.2 NM 16.3 2.0 0.8 0.9 78
KIE universe 108,498 1450.6 (13.9) 1.3 50.9 28 27.2 18.0 12.1 12.5 9.5 2.5 2.4 2.2 9.2 8.7 12.1 1.5 1.6 2.0
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$)= 74.80


Disclosures
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 provided
50% 47.1%
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 the next
12 months; Add = We expect this stock to deliver 5-15% returns
30%
over the next 12 months; Reduce = We expect this stock to
23.0%
deliver -5-+5% returns over the next 12 months; Sell = We
20% 17.2% expect this stock to deliver less than -5% returns over the next
12.7% 12 months. Our target prices are also on a 12-month horizon
basis. These ratings are used illustratively to comply with
10%
3.9% applicable regulations. As of 31/03/2020 Kotak Institutional
2.0% 1.5%
0.0% Equities Investment Research had investment ratings on 204
0% equity securities.
BUY ADD REDUCE SELL
Source: Kotak Institutional Equities As of March 31, 2020
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.

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INDIA DAILY

July 3, 2020 India 2-Jul 1-day 1-mo 3-mo

Contents Global/Regional indices

Strategy FTSE 6,240 1.3 (2.2) 15.2

 'Value' stocks: No value unlocking without shareholders taking strong

10yr govt bond, % 6.2 (3) (11) (50)

Daily Alerts 1-Jul MTD CYTD

FIIs (223) (223) (2,664)

 Strong 4Q leads to two-year CAGR of 12/17% in full year revenue/EBITDA Change, %

Best performers 2-Jul 1-day 1-mo 3-mo

MSS IN Equity 104 6.7 2.7 89.5

HUVR IN Equity 2,152 (0.9) 1.5 (0.1)

‘Value’ stocks: No value unlocking without shareholders taking strong measures

Important disclosures appear at

MARKET VIEW: 3-IN-1 MARKET

3-in-1 market makes a challenging investment proposition

Source: Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3

Exhibit 2: Nifty-50 Index is trading at fair valuations

P/E (X) Avg Mean+1SD Mean-1SD

Source: BSE, RBI, Kotak Institutional Equities

4 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Exhibit 3: 'Quality' non-financial stocks are fully valued on FY2022E EPS

Source: Source: Companies, Kotak Institutional Equities estimates

 ‘Quality’ financials could be fully valued or undervalued depending on how

KOTAK INSTITUTIONAL EQUITIES RESEARCH 5

Source: Companies, Kotak Institutional Equities estimates

6 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Source: FactSet, Kotak Institutional Equities estimates

PSU banks P/B

Source: FactSet, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 7

Exhibit 7: Steep decline in valuations of the NBFC sector

Source: FactSet, Kotak Institutional Equities

Economic impact of Covid—bad for growth, good for BoP

2012 2013 2014 2015 2016 2017 2018 2019 2020E

Source: CEIC, Kotak Institutional Equities estimates

8 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Private consumption/GDP (%, LHS) Household savings/GDP (%, RHS)

 GDP to contract around 5-6% in FY2021. We currently assume FY2021E GDP to

Exhibit 10: We estimate FY2021 GDP to contract 5.8%

2014 2015 2016 2017 2018 2019 2020 2021E

Source: CEIC, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 9

Active cases (RHS, #) Recovered cases (RHS, #) Total cases (LHS, #)

10 KOTAK INSTITUTIONAL EQUITIES RESEARCH

 Fiscal deficit at 11-12% in FY2021. We expect India’s consolidated fiscal deficit to be in

Exhibit 12: Consolidated fiscal deficit likely to increase to 11.2% in FY2021

Center States Consolidated

KOTAK INSTITUTIONAL EQUITIES RESEARCH 11

Exhibit 13: FY2021 GFD/GDP estimated at 7.2%

Source: Ministry of Finance, Kotak Institutional Equities estimates

12 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Government debt/GDP (%)

Source: Kotak Institutional Equities estimates

 Inflation to be manageable. We expect inflation to be quite manageable with end-

Exhibit 15: We expect end-FY2021 CPI inflation at around 3.5%

CPI inflation Core CPI inflation

Source: CEIC, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 13

Real interest rate

Source: CEIC, Kotak Institutional Equities estimates

Source: Bloomberg, Kotak Institutional Equities