Kotak India Daily SpecialityChem SBI TaMo UPL SRF TataComm Chola PDF

INDIA DAILY
August 3, 2020 India 31-Jul 1-day 1-mo 3-mo

Sensex 37,607 (0.3) 4.4 11.5
Nifty 11,073 (0.3) 4.4 12.3
Contents Global/Regional indices

Dow Jones 26,428 0.4 2.3 11.4
Special Reports Nasdaq Composite 10,745 1.5 5.3 24.9
Strategy FTSE 5,898 (1.5) (4.2) 2.3

Nikkei 22,126 1.9 (0.8) 12.8
Strategy: All-Season portfolio shines amidst market upheaval
Hang Seng 24,595 (0.5) (3.1) (0.2)
Strategy: Exceptions are exceptions
KOSPI 2,241 (0.4) 4.1 15.1
Theme Report Value traded – India
Speciality Chemicals: Waterproofing: Rising competition alters landscape Cash (NSE+BSE) 655 628 623
26,71
Derivatives (NSE) 11,456 10,901
Daily Alerts 4
Deri. open interest 3,036 2,969 3,484
Results
State Bank of India: A strong performance overall
Forex/money market
Tata Motors: Aggressive cost cutting initiatives surprise
Change, basis points
UPL: Higher margins offset muted revenues 31-Jul 1-day 1-mo 3-mo
SRF: In-line results Rs/US$ 74.9 (5) 19 (76)
Tata Communications: Pieces falling in place 10yr govt bond, % 6.1 - (13) (42)
Net investment (US$ mn)

Cholamandalam: Lower provisions drive earnings
30-Jul MTD CYTD
Dr Lal Pathlabs: Covid testing, cost controls aid performance FIIs 190 - (1,166)
GMR Infrastructure: Prepared for opportunities ahead MFs (40) - 3,881
Top movers
JSW Energy: Holding-up
Change, %
TeamLease Services: Headline weaker but focus on margin improvement a Best performers 31-Jul 1-day 1-mo 3-mo
positive
EDEL IN Equity 76 (4.4) 25.5 91.1
Mahindra Logistics: June raises hopes of swift normalization in business levels MM IN Equity 606 1.4 14.3 65.4
Jagran Prakashan: Challenging quarter BHEL IN Equity 36 (2.3) (7.0) 60.1
TPWR IN Equity 49 1.5 (2.4) 53.6

Results, Change in Reco
PIEL IN Equity 1,473 7.5 4.4 49.0
Sun Pharmaceuticals: Mixed trends Worst performers
Laurus Labs: Blow-out quarter demonstrates underlying operating leverage YES IN Equity 12 0.0 (54.3) (57.2)
DMART IN Equity 2,063 1.1 (9.9) (13.4)

Ujjivan Small Finance Bank: One notch lower
COAL IN Equity 129 0.5 (4.4) (13.0)
Company alerts PIDI IN Equity 1,357 0.6 (2.3) (11.1)
ICICI Bank: EWIs signal stable phase ICICIBC IN Equity 347 0.5 (3.9) (8.8)
Economy alerts
Economy: Fiscal situation remains frail
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
AlphaBet AUGUST 03, 2020
UPDATE
BSE-30: 37,607
All-Season portfolio shines amidst market upheaval. In the five-month period

between February and July, the KIE concentrated All-Season portfolio outperformed the
benchmark by 8%. The best performing single-factor was sentiment and the
concentrated sentiment portfolio beat the benchmark by 48% during this period.
Sentiment, fundamental and the All-Season portfolios outperformed Nifty-50 index in
July, while momentum and low-volatility lagged. Asian Paints replaces Tech Mahindra in
the KIE concentrated All-Season August 2020 portfolio.
QUICK NUMBERS
The concentrated sentiment portfolio beats the benchmark for the fifth month straight  Concentrated All-
The concentrated sentiment portfolio outperformed the index for the fifth consecutive month.
Season portfolio
Fundamental factor also beat the index. Low-volatility and momentum lagged the benchmark in outperformed the
July. Momentum is the black sheep of the factor family currently, and has underperformed the benchmark by ~7%
benchmark YTD. All other single-factor portfolios have outperformed the benchmark YTD in July
(Exhibit 3).
 YTD, it has
All-Season portfolio up 16% against the index YTD outperformed the
index by ~16%
The concentrated All-Season portfolio beat the index handily in July (Exhibit 1). Year-to-date,
the concentrated All-Season portfolio has outperformed Nifty by 16.2% while the broad All-  Concentrated
Season portfolio has outperformed the benchmark by 3.8%. sentiment portfolio
has outperformed
Anti-factor keeps up with the benchmark in July
the benchmark by
After beating the benchmark for three consecutive months, the concentrated anti-factor ~47% YTD
portfolio was flat with respect to the benchmark in July. The anti-factor portfolio consists of
stocks from Nifty-50 index with the worst factor scores. Despite outperforming the index in
April, May and June, the concentrated anti-factor portfolio has underperformed the benchmark
by 4% YTD.
August 2020 changes to the concentrated All-Season portfolio
August 2020 concentrated All-Season portfolio consists of Hindustan Unilever (HUVR), Asian
Paints (APNT), Britannia Industries (BRIT), Dr Reddy’s Laboratories (DRRD) and Infosys (INFO).
APNT replaces Tech Mahindra (TECHM) in the concentrated All-Season portfolio. We show the
scores of these stocks and their position within the universe in Exhibits 5 – 8. The other single
factor portfolio are provided in Exhibits 10-16. The anti-factor portfolio, which contains the
stocks with the worst factor scores, has Tata Motors (TTMT), Zee Limited (Z), Bajaj Finance
(BAF), Axis Bank (AXSB) and HDFC Life Insurance (HDFCLIFE). AlphaBet recommendations can
differ from KIE analyst recommendations.
Anurag Singh
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.
Strategy India
PERFORMANCE UPDATE: ALL-SEASON SHINES AMIDST MARKET UPHEAVAL

The Indian equity markets have seen very high level of volatility in the past five months
amidst the onset and after-effects of Covid-19 pandemic (Exhibit 1). The only time we saw
such high level of volatility in the past was during the Great Financial Crisis.
Along with high level of volatility, the markets also saw an increase in the correlation
between the returns of individual stocks (Exhibit 2). Elevated levels of correlation between
stock returns lead to a lower diversification benefit.
Despite these twin challenges of higher volatility and higher correlations, the AlphaBet suite
performed better than the market over the period in question.
The concentrated All-Season portfolio, which is a multi-factor portfolio of five stocks from
Nifty-50 Index with the best momentum, sentiment, volatility and fundamental scores, has
outperformed the benchmark by close to 8% from the end of February 2020. While the
benchmark’s total return over February 2020 – July 2020 is close to zero, the concentrated
All-Season portfolio has returned 8.3%. The concentrated fundamental portfolio has
returned 4.2% over the same period. The best performing single factor portfolio, however,
has been the concentrated sentiment portfolio, which has gained an eye-catching 48% over
the past five months. Concentrated momentum and concentrated low-volatility portfolios
have lagged the benchmark over this period.
Exhibit 3 shows the performance of the AlphaBet portfolios in the month of July. The
concentrated sentiment portfolio continued to outperform the benchmark for the fifth
consecutive month, while fundamental portfolio also outperformed the benchmark.
Momentum and low-volatility portfolios underperformed the benchmark in July. The multi-
factor All-Season portfolio also outperformed the benchmark by 6.8% in July. On a year-to-
date basis, all single factors have outperformed the Nifty-50 index, except the momentum
factor. The concentrated All-Season portfolio also beat the benchmark YTD.
Exhibit 1: The recent surge in volatility was only seen previously during the Great Financial Crisis
Three-month rolling volatility of Nifty-50 Index (%)
70
60
50
40
30
20
10
0
Aug-06
Aug-07
Aug-08
Aug-09
Aug-14
Aug-15
Aug-16
Aug-17
Aug-05
Aug-10
Aug-11
Aug-12
Aug-13
Aug-18
Aug-19
Source: Bloomberg, Kotak Institutional Equities
KOTAK INSTITUTIONAL EQUITIES RESEARCH 3

India Strategy
Exhibit 2: This high volatility was accompanied by an increase in average stock return correlation
Rolling three-month average correlation between the daily returns of Nifty-50 constituents
1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
Aug-12
Aug-14
Aug-17
Aug-19
Aug-10
Aug-11
Aug-13
Aug-15
Aug-16
Aug-18
Exhibit 3: The concentrated sentiment factor outperformed the benchmark fifth month in a row
Performance of single factor and All-Season portfolios in July 2020
July 2020 returns (%) YTD returns (%) Active July returns (%) Active YTD returns (%)
Nifty Index 7.9 (8.1) NA NA
Concentrated All-season 14.7 8.2 6.8 16.2
Broad All-Season 9.6 (4.2) 1.7 3.8
Concentrated fundamental 9.5 6.3 1.6 14.4
Broad fundamental 9.3 0.1 1.4 8.2
Concentrated low volatility 3.9 (7.6) (4.0) 0.5
Broad low volatility 7.4 (1.0) (0.5) 7.0
Concentrated momentum 4.0 (23.9) (3.9) (15.9)
Broad momentum 7.4 (16.2) (0.5) (8.1)
Concentrated sentiment 13.0 38.6 5.1 46.6
Broad sentiment 7.8 (3.0) (0.1) 5.1
Concentrated anti-factor 10.9 (12.1) 3.0 (4.0)
Broad anti-factor 8.0 0.7 0.1 8.8
The anti-factor portfolio, which selects stocks with the worst sentiment, volatility,
momentum and fundamental scores, also outperformed the index, albeit by a slender
margin. As we mentioned in our previous note, during recovery rallies after a large
drawdown, low-volatility and momentum factors underperform. On the other hand, stocks
with low momentum scores and higher volatility outperform during recoveries. Thus, the
outperformance of the anti-factor portfolio during the current recovery is not unexpected.
However, if/when the market transitions from a ‘recovery rally’ phase to a ‘normal’ phase,
we expect the anti-factor portfolio to underperform again.
4 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Strategy India
AUGUST 2020 PORTFOLIOS

The stocks selected in the concentrated All-Season portfolio for the August 2020 portfolio
are Hindustan Unilever (HUVR), Infosys (INFO), Asian Paints (APNT), Britannia Industries (BRIT)
and Dr Reddy’s Laboratories (DRRD). Asian Paint is the new entrant to the portfolio,
replacing Tech Mahindra.
Exhibit 4 shows the top half of the Nifty50 Index, as sorted by the combined factor score.
The tickers in red (top five) are a part of the concentrated All-Season portfolio.
Exhibit 4: APNT replaces TECHM in the concentrated All-Season portfolio

Top half of Nifty50 Index, as sorted by combined factor score; stock names in red are part of the August 2020 concentrated All-Season portfolio
Stock name Sentiment Fundamental Momentum Low volatility Multi-factor

Hindustan Unilever Ltd 1.2 1.1 0.9 1.4 1.1
Infosys Ltd 2.0 0.8 (0.6) 1.0 0.8
Asian Paints Ltd 0.9 0.4 0.6 1.2 0.8
Britannia Industries Ltd 1.1 0.3 0.7 0.8 0.7
Dr Reddy's Laboratories Ltd 0.7 (0.2) 1.5 0.4 0.6
Power Grid Corp of India Ltd 0.3 0.3 (0.1) 1.3 0.5
Tech Mahindra Ltd 1.6 0.5 (0.6) 0.3 0.4
HDFC Bank Ltd (0.2) 0.8 (0.0) 0.7 0.3
Cipla Ltd/India 0.2 (0.1) 0.7 0.4 0.3
ITC Ltd 0.2 1.0 (0.4) 0.3 0.3
Larsen & Toubro Ltd 0.3 0.5 (0.2) 0.4 0.3
Wipro Ltd 0.9 0.2 (0.7) 0.7 0.3
Housing Development Finance Corp Ltd 1.0 (0.1) (0.2) 0.1 0.2
Coal India Ltd (0.0) 1.4 (0.1) (0.4) 0.2
Bharti Airtel Ltd 0.4 (1.7) 2.1 (0.0) 0.2
Shree Cements Ltd (0.4) (0.3) 0.7 0.6 0.2
HCL Technologies Ltd 0.0 0.3 (0.1) 0.4 0.2
NTPC Ltd 0.3 (0.4) 0.1 0.6 0.1
UltraTech Cement Ltd 0.5 (0.2) 0.1 (0.0) 0.1
Titan Co Ltd (0.0) 0.2 (0.3) 0.3 0.0
Sun Pharmaceutical Industries Ltd 0.1 (0.7) 0.6 0.1 0.0
Bajaj Auto Ltd (1.3) 0.3 0.5 0.4 (0.0)
Hero MotoCorp Ltd (0.9) 0.3 0.1 0.3 (0.0)
Adani Ports & Special Economic Zone Ltd 0.3 (0.9) 0.5 (0.1) (0.0)
Exhibit 5 shows the volatility metrics of the five stocks, alongside the bar chart of the same
for the benchmark. The chart demarcates the four quartiles (color coded) for the three
metrics included in our volatility factor – price volatility, downside deviation and max
drawdown. We also show the relative position of our All-Season portfolio picks and which
quartile they fall into. We truncate the metrics by clipping the edges at both ends. That is, to
reduce the effect of outliers, we cap the metrics at 90th and 10th percentile, respectively.
We also show similar metrics for momentum, fundamental and sentiment scores (see
Exhibits 6-8).

India Strategy
Exhibit 5: All stocks in conc. All-Season portfolio have reasonably good low-volatility characteristics
Concentrated All-Season portfolio, relative to benchmark, on volatility metrics
Exhibit 6: INFO has a lower momentum score, on account of its strong 4-week returns
Concentrated All-Season portfolio, relative to benchmark, on momentum metrics

Strategy India
Exhibit 7: INFO has decent operating performance, high stability and not-very-expensive valuation
Concentrated All-Season portfolio, relative to benchmark, on fundamental metrics
Exhibit 8: All stocks in the All-Season portfolio have good sentiment metrics
Concentrated All-Season portfolio, relative to benchmark, on sentiment metrics
We also show the portfolio for the broad and concentrated All-Season portfolio, along with
the different single factor portfolios in Exhibits 9-16.

India Strategy
Exhibit 9: APNT is the new entrant to the All-Season portfolio

The concentrated All-Season portfolio, as of July 31, 2020
Stock name Portfolio Weight KIE analyst recommendation

Hindustan Unilever Ltd 28.1% ADD
Asian Paints Ltd 23.3% REDUCE
Infosys Ltd 20.9% BUY
Britannia Industries Ltd 16.4% ADD
Dr Reddy's Laboratories Ltd 11.3% SELL
Exhibit 10: More sector diversity in the broad All-Season portfolio

The broad All-Season portfolio, as of July 31, 2020

Power Grid Corp of India Ltd 11.9% BUY
Wipro Ltd 7.7% ADD
Larsen & Toubro Ltd 7.2% BUY
Cipla Ltd/India 6.6% BUY
HDFC Bank Ltd 6.1% ADD
Tech Mahindra Ltd 5.8% BUY
ITC Ltd 5.7% BUY
HCL Technologies Ltd 4.9% ADD
Housing Development Finance Corp Ltd 4.1% NR
Coal India Ltd 3.6% BUY
Exhibit 11: Consumer staples are a big part of concentrated momentum portfolio
The concentrated momentum portfolio, as of July 31, 2020

Nestle India Ltd 23.2% REDUCE
Shree Cements Ltd 19.1% SELL
Bharti Airtel Ltd 15.7% BUY

Strategy India
Exhibit 12: Broad momentum portfolio is relatively diversified across sectors

The broad momentum portfolio, as of July 31, 2020

Reliance Industries Ltd 8.5% ADD
Cipla Ltd/India 7.6% BUY
Bajaj Auto Ltd 6.5% BUY
Sun Pharmaceutical Industries Ltd 6.2% ADD
UltraTech Cement Ltd 4.6% BUY
Adani Ports & Special Economic Zone Ltd 4.3% BUY
Tata Consultancy Services Ltd 4.3% REDUCE
Bharti Infratel Ltd 1.9% ADD
Exhibit 13: No change in the composition of the concentrated low-volatility portfolio for a third
consecutive month
The concentrated low volatility portfolio, as of July 31, 2020

Exhibit 14: The broad low-volatility portfolio is well diversified across sectors
The broad low volatility portfolio, as of July 31, 2020

Wipro Ltd 7.1% ADD
Reliance Industries Ltd 6.8% ADD
Larsen & Toubro Ltd 6.7% BUY
NTPC Ltd 6.1% BUY
HDFC Bank Ltd 5.6% ADD
Bajaj Auto Ltd 5.2% BUY
HCL Technologies Ltd 4.6% ADD

India Strategy
Exhibit 15: Three changes to the concentrated sentiment portfolio

The concentrated sentiment portfolio, as of July 31, 2020

Exhibit 16: Diversified sector exposure in the broad sentiment portfolio

The broad sentiment portfolio, as of July 31, 2020

Wipro Ltd 9.0% ADD
ICICI Bank Ltd 5.1% BUY
UltraTech Cement Ltd 4.7% BUY
Adani Ports & Special Economic Zone Ltd 4.4% BUY
UPL Ltd 4.1% SELL
Bajaj Finserv Ltd 2.7% BUY

INDIA
Strategy
Market AUGUST 02, 2020
NEW RELEASE
BSE-30: 37,607
Exceptions are exceptions. We are skeptical about companies being able to retain
cost savings achieved in 1QFY21. Companies in the construction materials, consumer
and IT sectors saw significant cost savings for a variety of reasons—lower freight and
power & fuel costs (construction materials), advertising and promotion (A&P) expenses
(consumer) and travel costs (IT services). However, they may have to reinvest the savings
in the business and/or pass on the benefits to customers for competitive reasons.
QUICK NUMBERS
 8% yoy decline in
Exceptional cost management in an exceptional quarter; may not sustain freight costs, 15%
It would be imprudent to extrapolate the cost savings achieved by companies in 1QFY21 in yoy decline in
perpetuity as companies may be compelled to eventually (1) reinvest the savings and/or (2) pass power & fuel costs
on the benefits to clients/customers for competitive reasons. Most Nifty-50 companies reported in 1QFY21 for
better-than-expected EBITDA in 1QFY21 on the back of lower-than-estimated costs (see Exhibit cement companies
1). However, aggregate net income is in line with our estimates (see Exhibit 2).
 Average 38% yoy
Construction materials sector saw solid savings from low freight and fuel costs decline in A&P
expenses in 1QFY21
Construction materials (cement) companies saw a sharp improvement in profitability in 1QFY21
(see Exhibit 3) despite stable realizations (see Exhibit 4). They benefited from (1) lower freight for consumer
costs due to low diesel prices and (2) lower power & fuel costs due to low petroleum coke companies
prices (Exhibit 5). However, diesel prices have increased sharply in the past few weeks (see
 8-30% qoq decline
Exhibit 6) and petroleum coke prices stabilized. Anyway, cement is a commodity business and it
in SG&A expenses in
would be optimistic to assume that the industry will continue to witness benign pricing
conditions despite very low capacity utilization through FY2023 (see Exhibit 7). We assume 1QFY21 for IT
moderation in cement profitability from 1QFY21 highs but note that our profitability services companies
assumptions for FY2021-23 are well above historical levels (see Exhibit 8).
Consumer companies sharply cut their A&P spends; no need to spend in ‘lockdown’ quarter
Consumer companies had a challenging 1QFY21 with a sharp decline in volumes (see Exhibit 9)
and contraction in gross margins (see Exhibit 10). However, they were nimble enough to sharply
reduce their A&P expenses. Anyway, 1QFY21 was a bad quarter for new product campaigns or
launches. Exhibits 11-12 show A&P expenses of the consumer companies on an absolute basis
as well as a proportion of their sales. We expect A&P expenses to gradually recover over
FY2022-23 (see Exhibit 13) as companies compete once again for mind and market shares. Sanjeev Prasad
Also, it would be interesting to see how organized retailing companies change the competitive
dynamics of the consumer staples industry. Anindya Bhowmik
IT companies benefitted from reduction in travel expenses

Sunita Baldawa
Most IT services companies under coverage reported a decline in US$ revenues in 1QFY21 (see
Exhibit 14). However, companies benefitted from sharply lower travel costs during the
pandemic, resulting in lower SG&A expenses (see Exhibit 15), which led to significant
improvement in their EBIT margins. However, the benefit of the same is not sustainable at
current levels as (1) companies may have to pass on some of the benefits to clients on
renegotiations and (2) travel may resume in the post-Covid world. We model FY2021-22 EBIT
margins of IT companies to decline from 1QFY21 highs (see Exhibit 16). kspcg.research@kotak.com
Contact: +91 22 6218 6427
India Strategy
Exhibit 1: Most construction materials, consumer staples and IT services companies beat our EBITDA estimates due to solid cost savings
Company-wise EBITDA analysis of Nifty-50 companies (Rs mn)
EBITDA (Rs mn) Change (%)
Company Sector Jun-19 Mar-20 Jun-20A Jun-20E A/E yoy qoq
Bajaj Auto Automobiles & Components 11,982 12,528 4,085 4,068 0 (66) (67)
Maruti Suzuki Automobiles & Components 20,478 15,464 (8,634) (4,117) (110) (142) (156)
Tata Motors Automobiles & Components 29,955 23,733 6,356 (26,002) 124 (78.8) (73.2)
L&T Capital Goods 30,684 51,210 16,205 20,176 (20) (47.2) (68.4)
Asian Paints Commodity Chemicals 11,563 8,596 4,843 2,136 127 (58) (44)
UltraTech Cement Construction Materials 28,930 23,800 20,260 15,691 29 (30) (15)
Britannia Industries Consumer Staples 3,947 4,543 7,170 6,706 7 82 58
Hindustan Unilever Consumer Staples 26,470 20,650 26,440 24,086 10 (0.1) 28.0
ITC Consumer Staples 45,657 41,635 26,466 23,999 10 (42) (36)
Nestle India Consumer Staples 7,073 8,006 7,584 8,463 (10) 7 (5)
HCL Technologies IT Services 34,013 47,234 45,688 41,383 10 34 (3)
Infosys IT Services 51,520 56,760 61,210 55,259 11 19 8
TCS IT Services 100,370 109,760 100,250 104,632 (4) (0) (9)
Tech Mahindra IT Services 13,141 13,478 13,005 11,164 16 (1) (4)
Wipro IT Services 29,734 31,963 33,903 29,194 16 14 6
JSW Steel Metals & Mining 37,160 29,750 13,410 12,644 6 (64) (55)
Reliance Industries O il, Gas & Consumable Fuels 213,150 166,380 168,750 162,557 4 (21) 1
Dr Reddy's Laboratories Pharmaceuticals 7,267 9,376 11,129 8,488 31 53 19
Bharti Airtel Telecommunication Services 82,802 102,021 104,079 103,500 1 26 2
Bharti Infratel Telecommunication Services 18,955 16,990 17,672 19,067 (7) (7) 4
BSE-30 677,831 677,522 590,231 572,997 3.0 (12.9) (12.9)
Nifty-50 804,848 793,877 679,871 623,095 9.1 (15.5) (14.4)
Source: Companies, Kotak Institutional Equities estimates
Exhibit 2: Adjusted profit of Nifty-50 Index in line with our estimates

Company-wise adjusted PAT analysis of Nifty-50 companies (Rs mn)
Adjusted profits (Rs mn) Change (%)
Company Sector Jun-19 Mar-20 Jun-20A Jun-20E A/E yoy qoq
Bajaj Auto Automobiles & Components 11,257 13,103 5,280 6,303 (16) (53) (60)
Maruti Suzuki Automobiles & Components 14,355 12,917 (2,494) (3,847) 35 (117) (119)
Tata Motors Automobiles & Components (34,766) (54,112) (84,884) (94,002) 10 (144.2) (56.9)
Axis Bank Banks 13,701 (13,878) 11,122 9,936 12 (19) 180
HDFC Bank Banks 55,682 69,277 66,586 65,471 2 20 (4)
ICICI Bank Banks 19,080 12,214 25,992 31,340 (17) 36 113
IndusInd Bank Banks 14,325 3,018 4,606 1,221 277 (68) 53
State Bank of India Banks 23,122 35,808 41,893 67,218 (38) 81.2 17.0
Kotak Mahindra Bank Banks 19,322 19,052 18,526 23,187 (20) (4) (3)
Bajaj Finance Diversified Financials 11,953 9,481 9,623 15,959 (40) (19) 1
Bajaj Finserv Diversified Financials 8,453 1,944 12,152 11,412 6 44 525
HDFC Diversified Financials 32,031 22,325 30,515 29,615 3 (5) 37
L&T Capital Goods 14,541 30,647 714 (1,037) 169 (95.1) (97.7)
Asian Paints Commodity Chemicals 6,554 4,619 2,185 122 1,691 (67) (53)
UltraTech Cement Construction Materials 12,550 11,170 9,340 4,970 88 (26) (16)
Britannia Industries Consumer Staples 2,619 3,750 5,458 5,007 9 108 46
Hindustan Unilever Consumer Staples 17,510 14,690 18,730 16,909 11 7.0 27.5
ITC Consumer Staples 31,739 34,571 23,428 19,774 18 (26) (32)
Nestle India Consumer Staples 4,478 5,327 4,975 5,730 (13) 11 (7)
HCL Technologies IT Services 22,215 31,532 29,261 26,840 9 32 (7)
Infosys IT Services 37,980 43,210 42,330 38,559 10 11 (2)
TCS IT Services 81,310 80,490 70,080 78,175 (10) (14) (13)
Tech Mahindra IT Services 9,671 10,199 9,722 6,439 51 1 (5)
Wipro IT Services 23,873 23,259 23,901 22,083 8 0 3
JSW Steel Metals & Mining 10,280 5,920 (5,610) (6,816) 18 (155) (195)
Reliance Industries O il, Gas & Consumable Fuels 101,040 63,700 82,670 74,040 12 (18) 30
Dr Reddy's Laboratories Pharmaceuticals 3,930 7,642 5,793 4,710 23 47 (24)
Bharti Airtel Telecommunication Services (14,052) (4,710) (5,442) (1,385) (293) 61 (16)
Bharti Infratel Telecommunication Services 7,094 6,495 7,036 7,937 (11) (1) 8
BSE-30 548,816 510,706 511,793 526,954 (2.9) (6.7) 0.2
Nifty-50 561,846 503,660 463,488 465,873 (0.5) (17.5) (8.0)

Strategy India
Exhibit 3: Sharp increase in profitability of construction materials companies in 1QFY21

EBITDA/ton of construction materials companies, March fiscal year-ends, 2019-21 (Rs)
ACC Ambuja Cements Orient Cement UltraTech Cement

1,600
1,400
1,200
1,000
800
600
400
200
0
1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21
Source: Companies, Kotak Institutional Equities
Exhibit 4: Realizations of construction materials companies have been broadly steady in 1QFY21
Realization/ton of construction materials companies who have reported 1QFY20 results, March fiscal year-
ends, 2019-21 (Rs)

6,000
5,500
5,000
4,500
4,000
3,500

India Strategy
Exhibit 5: Sharp decline in freight costs and power & fuel costs for construction materials companies
in 1QFY21
Freight costs and power & fuel costs of construction materials companies, March fiscal year-ends, 2020-21
(Rs/ton)
Yoy Qoq
1QFY21 1QFY20 4QFY20 (%) (%)
ACC
Freight costs 1,257 1,449 1,442 (13.3) (12.8)
Power & fuel costs 952 1,131 1,119 (15.8) (14.9)
Ambuja Cements
Freight costs 1,275 1,374 1,381 (7.2) (7.7)
Power & fuel costs 1,006 1,100 1,064 (8.5) (5.4)
Orient Cement
Freight costs 1,162 1,228 1,217 (5.4) (4.5)
Power & fuel costs 836 1,058 992 (21.0) (15.7)
UltraTech Cement
Freight costs 1,141 1,220 1,330 (6.5) (14.2)
Power & fuel costs 886 1,044 984 (15.1) (10.0)
Exhibit 6: Diesel prices have increased sharply in the recent months

Monthly retail price of diesel in Delhi, July 2017 onwards (Rs/liter)
Diesel retail price (Rs/liter)

90
80
70
60
50
Apr-19
Apr-18
Apr-20
Jan-18
Jul-18
Jan-19
Jan-20
Jul-20
Jul-17
Jul-19
Oct-17
Oct-19
Oct-18
Source: Company, Kotak Institutional Equities

Strategy India
Exhibit 7: Capacity utilization to remain below 70% through FY2023E

Cement demand-supply balance, March fiscal year-ends, 2018-23E (mn tons)
2018 2019 2020 2021E 2022E 2023E

All-India
Closing installed capacity (mtpa) 471 483 506 532 548 562
Incremental installed capacity (mtpa) 16 12 23 26 17 14
Effective capacity (mtpa) 471 483 506 532 548 562
Incremental effective capacity (mtpa) 16 12 23 26 17 14
Capacity growth (%) 3.5 2.5 4.8 5.1 3.2 2.5
Cement consumption (mn tons) 293 333 330 288 332 359
Incremental consumption (mn tons) 18 39 (3) (42) 44 27
Consumption growth (%) 6.5 13.4 (0.8) (13) 15.3 8.1
Cement production (mn tons) 298 337 334 293 337 364
Incremental production (mn tons) 18 39 (3) (42) 44 27
Growth (%) 6.3 13.3 (0.8) (12) 15.1 8.0
Capacity utilization (%) 63 70 66 55 61 65
Source: CMA, Kotak Institutional Equities
Exhibit 8: We model moderation in EBITDA/ton over FY2021-23 from 1QFY21 levels

EBITDA/ton of construction materials companies, March fiscal year-ends, 2019-23E (Rs)

1,600
1,400
1,200
1,000
800
600
400
200
0
FY2019 FY2020 1QFY21 FY2021E FY2022E FY2023E

India Strategy
Exhibit 9: Consumer companies saw sharp slowdown in volumes in 1QFY21

Volume growth of consumer companies, 1QFY19-1QFY21 (%)
1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21 2-y CAGR
Staples
Bajaj Consumer Care 8.7 (0.3) 7.0 5.5 4.7 (0.2) (8.6) (30.3) (23.0) (10.2)
Britannia Industries - Domestic 12.5 11.0 8.0 7.0 3.0 3.5 2.0 (1.0) 20.0 13.3
Colgate - Overall 4.0 7.0 7.0 5.0 4.0 4.0 2.3 (8.0) (6.0) (0.7)
Dabur - Domestic 21.0 8.1 12.4 4.2 9.6 4.8 5.6 (14.6) (9.7) (3.0)
HUL (FMCG business) 12.0 10.0 10.0 7.0 5.0 5.0 5.0 (7.0) (7.0) (0.2)
Marico - Domestic 12.4 6.0 6.0 8.0 6.0 1.0 (1.0) (3.0) (14.0) (3.6)
Marico - Parachute 9.0 8.0 9.0 6.0 9.0 (1.0) (2.0) (8.0) (11.0) (2.9)
Marico - Saffola 10.0 5.0 2.0 18.0 3.0 1.0 11.0 25.0 16.0 17.0
Marico - Value-added hair oils 15.0 5.0 7.0 1.0 7.0 — (7.0) (11.0) (30.0) (15.9)
Discretionary
Asian Paints 13.0 11.0 22.0 11.0 17.0 14.0 11.0 2.5 (38.0) (17.0)
ITC - Cigarettes 1.0 7.0 7.5 10.0 3.0 3.0 2.0 (11.0) (38.0) (17.4)
Exhibit 10: Most consumer companies saw a qoq decline in gross margins
Gross margin of consumer companies under our coverage, 1QFY19-1QFY21 (%)
Gross margin (%)

Asian Paints 43.2 39.8 41.0 41.6 43.5 42.4 43.0 45.8 44.7
Bajaj Consumer Care 66.6 67.3 67.4 66.3 67.7 67.1 67.7 68.3 64.4
Berger Paints 39.5 38.7 37.8 40.0 40.8 41.0 40.8 43.6 44.0
Britannia Industries 40.0 40.0 41.3 41.2 40.4 40.2 40.9 39.7 41.7
Colgate-Palmolive (India) 65.9 64.8 65.1 64.6 65.9 64.7 65.7 64.7 66.1
Dabur India 49.6 49.4 49.3 49.8 49.5 50.8 50.1 49.1 49.4
Hindustan Unilever 54.0 52.0 53.8 52.3 54.0 54.5 54.2 53.7 51.8
ITC 61.6 61.3 61.7 61.5 63.4 61.5 61.4 62.5 55.7
Marico 42.3 44.0 46.3 49.0 47.5 49.6 49.1 49.3 48.9
Nestle India 59.6 59.7 58.9 58.5 58.3 57.6 56.8 56.3 56.3
United Spirits 49.1 49.1 48.6 46.5 47.3 45.0 44.4 42.2 41.7
Exhibit 11: Consumer companies reduced their A&P expenses sharply in 1QFY21
Advertising & promotion expenses of consumer companies, 1QFY20-1QFY21 (Rs mn)
Yoy Qoq
1QFY21 1QFY20 4QFY20 (%) (%)
Bajaj Consumer Care 248 391 366 (36) (32)
Colgate 1,139 1,513 1,555 (25) (27)
Dabur 1,456 2,021 1,002 (28) 45
Hindustan Unilever 7,970 11,610 11,640 (31) (32)
Marico 1,370 2,190 1,260 (37) 9
United Spirits 518 1,708 1,200 (70) (57)

Strategy India
Exhibit 12: Sharp reduction in A&P expenses-to-sales ratio for consumer companies in 1QFY21
Advertising & promotion expenses of consumer companies as a proportion of sales, 1QFY20-1QFY21 (%)
Bajaj Consumer Care Colgate Dabur Hindustan Unilever Marico United Spirits
30
25
20
15
10
0
Exhibit 13: We expect A&P expenses-to-sales ratio of consumer companies to recover over FY2022-23
Advertising & promotion expenses of consumer companies as a proportion of sales, March fiscal year-ends,
2018-23E (%)
Bajaj Consumer Care Colgate Dabur Hindustan Unilever Marico United Spirits
20
18
16
14
12
10
8
6
4
2
0
2018 2019 2020 1QFY21 2021 2022 2023

India Strategy
Exhibit 14: Most IT services companies witnessed a decline in their revenues

US$ revenues of IT services companies, 1QFY19-1QFY21 (US$ mn)

Revenues (US$ mn)
HCL Technologies 1,203 1,230 1,267 1,289 1,382 1,513 1,550 1,538 1,572
Infosys 2,575 2,656 2,717 2,783 2,847 2,919 2,949 2,908 2,838
L&T Infotech 320 329 347 354 357 364 394 410 390
Mindtree 241.5 246.4 251.5 262.0 264.2 271.0 275.2 278.4 253.2
TCS 4,689 4,852 4,879 5,010 5,079 5,125 5,190 5,069 4,732
Tech Mahindra 1,224 1,218 1,261 1,268 1,247 1,287 1,353 1,295 1,207
Wipro 2,027 2,041 2,047 2,076 2,039 2,049 2,095 2,074 1,922
Qoq change (%)
HCL Technologies 0.3 2.2 3.0 1.7 7.2 9.5 2.5 (0.8) 2.2
Infosys 0.9 3.2 2.3 2.4 2.3 2.5 1.0 (1.4) (2.4)
L&T Infotech 3.5 2.7 5.6 2.0 0.8 2.0 8.4 3.9 (4.8)
Mindtree 6.8 2.0 2.1 4.2 0.8 2.6 1.5 1.2 (9.1)
TCS 2.0 3.5 0.6 2.7 1.4 0.9 1.3 (2.3) (6.6)
Tech Mahindra (1.6) (0.5) 3.5 0.5 (1.6) 3.2 5.1 (4.3) (6.7)
Wipro (1.7) 0.7 0.3 1.4 (1.8) 0.5 2.2 (1.0) (7.3)
Exhibit 15: Most IT services companies witnessed reduction in SG&A expenses-to-sales ratio
SG&A expenses of IT services companies, 1QFY20-1QFY21 (Rs mn)
Yoy Qoq
1QFY21 1QFY20 4QFY20 (%) (%)
SG&A expenses
HCL Technologies 22,050 21,050 23,910 5 (8)
Infosys 25,970 25,530 28,390 2 (9)
L&T Infotech 2,752 2,364 2,796 16 (2)
Mindtree 2,834 3,969 4,060 (29) (30)
TCS 58,110 60,330 65,290 (4) (11)
Tech Mahindra 12,953 11,747 14,528 10 (11)
Wipro 19,795 19,072 17,976 4 10
SG&A expenses-to-sales (%)
HCL Technologies 12.4 12.8 12.9
Infosys 11.0 11.7 12.2
L&T Infotech 9.3 9.5 9.3
Mindtree 14.5 21.6 19.8
TCS 15.2 15.8 16.3
Tech Mahindra 14.2 13.6 15.3
Wipro 13.2 12.8 11.3

Strategy India
Exhibit 16: We model FY2021-23 EBIT margins at lower than 1QFY21 levels for IT services companies
EBIT margin of IT services companies, March fiscal year-ends, 2018-23E (%)
2018 2019 2020 1QFY21 2021E 2022E 2023E

HCL Technologies 19.7 19.5 19.6 20.5 19.7 19.5 19.1
Infosys 24.3 22.8 21.3 22.7 21.9 22.0 22.3
L&T Infotech 14.1 18.4 16.1 16.9 16.9 16.5 16.7
Mindtree 10.4 12.8 10.5 13.8 14.4 14.9 14.6
TCS 24.8 25.6 24.6 23.6 24.4 24.6 24.6
Tech Mahindra 11.8 15.0 11.6 10.1 10.7 13.0 14.1
Wipro 15.4 16.5 17.2 17.9 17.3 17.4 17.8

NEUTRAL
Speciality Chemicals
India AUGUST 03, 2020
THEME
BSE-30: 37,607
Waterproofing: Rising competition alters landscape. India’s core waterproofing

(WP) market is just about 1/12th the size of the decorative paints market, as against
1/4th in some developed countries. Rising competition from paint/cement players could
potentially expand the market. Our channel checks suggest that APNT’s WP segment is
growing rapidly and has emerged as a challenger to the market leader Pidilite. It remains
to be seen if (1) APNT capitalizes on this success to build a formidable construction
chemicals portfolio, and (2) Pidilite steps up its game and defends its market share.
Waterproofing: nascent market with immense growth potential

The core waterproofing (WP) chemicals market (excl. ad mixtures) in India is pegged at about
Rs35 bn, 1/12th the size of decorative paints. As per our industry interactions, WP:decorative
paints ratio is about 1:4 or 1:3 in the developed world. Under-penetration of WP in India is due
to (1) lack of awareness, and (2) cost considerations. Rising competition from paints/cement
players would create awareness, accelerate market development and expand market. We
believe the WP market can grow at 20% CAGR (2X growth rate of decorative paints) over the
next five years. Profitability for the WP segment is comparable with decorative paints.
Rising competition: paint/cement companies enter the fray

Traditionally, the waterproofing industry comprised global/local speciality chemical players such
as Pidilite (PIDI), SIKA, BASF, Fosroc, etc. Over the past 2-3 years, paints/cement companies have
stepped up focus on WP. Their playbook is simple (1) introduce new products with WP
properties (WP cement/ready-mix concrete and exterior/interior base/top coats with WP
properties), (2) acquire small WP players, (3) leverage existing distribution channel (paint dealers/
cement stores), and (4) leverage existing applicator networks (painters/masons).
Asian Paints sniffs at Pidilite’s heels

Our channel checks suggest that APNT’s WP business (~Rs6 bn; 3-4% of standalone sales) has
grown at a CAGR of 40%+ over the past 2-3 years. Key growth drivers are (1) APNT trained
50,000+ painters in WP over the past 3-4 years; it now enjoys the loyalty of this user base, (2)
success of two products (Damp Roof/ Damp Sheath) that expanded WP market; PIDI’s Dr Fixit
had limited success in these sub-segments, (3) TV ad campaigns, (4) strong influence over paint
dealers. APNT’s WP business is at an inflection point, sustained strong growth hinges on (1) its
ability to succeed in other channels (hardware/cement stores) and multiple user bases (WP
specialists/civil contractors), and (2) success of its recent launches (Vitalia Neo/Repair Polymer) that
compete directly with PIDI’s flagship products LW+/URP (account for 50% of Dr Fixit’s sales).
Pidilite must step up its game in waterproofing to counter Asian Paints

Dr Fixit is a 20+ year old brand with a strong track record. It scores well on key fronts—(1) Jaykumar Doshi
strong R&D/innovation, (2) strength across distribution channels (hardware/paints/cement
stores), (3) strong connect with specialist WP/civil contractors, and (4) NINA Percept (subsidiary), Rohit Chordia
which has successfully executed marquee turnkey projects. PIDI is not likely to face significant
risks from cement players but APNT is certainly a contender in basic WP and construction
Aniket Sethi
chemicals. Even as competition accelerates market development and expand the market, PIDI’s
medium-term growth trajectory in WP (Rs10 bn, 17% of India sales) may moderate from
‘potential 18-20%’ to ’10-15%’; the extent of deceleration would depend on overall macro.
We note that PIDI is revamping its WP customer service to improve customer experience and
lead conversions. We believe the company would do well with a fresh marketing campaign,
more aggressive channel push and influencer connect. PIDI is a dominant player with little
competition in its key categories, it will be interesting to see how it defends its turf in WP. kspcg.research@kotak.com
Contact: +91 22 6218 6427
Speciality Chemicals India
Waterproofing—nascent market with immense growth potential

Waterproofing is significantly under-indexed to paints in India
The waterproofing chemicals market in India is pegged at about Rs35 bn. It is significantly
under-indexed to decorative paints in India—as per our industry interactions, the size of the
waterproofing chemicals market in developed world is about 25-33% that of decorative
paints. Whereas, at Rs35 bn, the waterproofing products market in India is about 8% that
of decorative sales. Under-penetration is attributable to (1) lack of awareness (especially
among independent house builders in rural markets) and (2) cost considerations.
There are four broad applications of waterproofing by surface-type: (1) roof/terrace, (2) wet
areas (bathroom and kitchen), (3) exterior/interior walls, and (4) basement, podium, water
tanks and swimming pools. Based on the approach, waterproofing can be classified into two
segments: (1) integral waterproofing wherein waterproofing chemical is mixed with cement
in concrete mixer, (2) layered waterproofing—applied as a elastomeric/polymer
coat/membrane on a surface. Layered waterproofing is needed for surfaces/applications
wherein integral waterproofing is not adequate. New construction/ Repair + Renovation split
is about 50:50 for the industry. Institutional/Retail split is about 35:65— Institutional (Project
sales) comprise projects with top 200 builders.
Key drivers of waterproofing in India
 Increase in awareness, especially in tier II-IV markets. We note that the cost of
waterproofing is about 1% of the overall construction cost of a new project. Whereas,
the cost of fixing a waterproofing issue is much higher (say 3-4X). Yet, proper
waterproofing is done mainly in the organized sector. Waterproofing penetration in
independent house buildings (IHBs) in small towns is low due to lack of awareness. Small
unorganized builders often do a substandard work in their bid to cut corners. We expect
this to change over the next 3-5 years as awareness among consumers rise. Any
regulatory push by RERA would be a welcome change.
 Rise in repair work due to deteriorating quality of construction. The quality of

construction in India has deteriorated over the past few years, partly due to the struggling
real estate market and developer community. Usage of factory sand due to lack of
availability of river sand in some parts of the country also weakens construction quality. In
our view, these constructions may need repair and waterproofing in 8-10 years. In a
nutshell, the repair cycle may short-driving demand for waterproofing.
 Rise in competition to accelerate market development. About five years ago, the
waterproofing category primarily comprised Dr Fixit (Pidilite) and a few MNC/local firms
(SIKA, BASF, Fosroc, CICO, Sunanda, etc.). Over the past 2-3 years, paint and cement
companies have stepped up focus on this segment. This rise in competition has expanded
the market to some extent. We expect further acceleration in market development and
expansion of the overall pie driven by higher investments in marketing, advertising and
customer awareness/education.
Distribution structure—paint dealers, hardware stores and building material stores
In India, waterproofing products are sold across three different distribution channels: (1)
paint dealers—waterproofing or damp-proofing of walls and wet areas is usually carried out
before repainting. Given this, most paint dealers stock waterproofing products, (2) hardware
stores—it is a traditional channel for waterproofing products, and (3) building
materials/cement stores—this channel has started stocking waterproofing products over the
past few years, especially since the time cement companies have enhanced focus on
waterproofing.

India Speciality Chemicals
Key factors influencing consumer decisions
 Influencer/applicator plays a key role. Unlike home décor activities (such as repainting,
furnishing, etc.) wherein consumers play an active role in decision making (especially from
aesthetics standpoint), waterproofing is a more complex activity of which consumers have
limited knowledge. In waterproofing, application of product is as important as the
product itself. A good product would not give good results if it not applied properly.
Furthermore, there are a broad range of products across price points with specific use
case. Given these factors, consumers tend to rely a lot more on judgment and advice of
waterproofing experts/applicators. Waterproofing is carried out by (1) specialist
waterproofing contractors in case of complex repair work (interior work) or new
constructions, (2) civil contractors/masons in case of exterior repair or new construction,
and (3) painters for basic preventive waterproofing before repainting. Over the past 3-4
years, paint companies such as Asian Paints have trained painters in waterproofing, a
win-win proposition for the company as well as the painter.
 Brand/product awareness is limited. MNC players (SIKA, BASF, Fosroc, Weber, etc.)
and most local waterproofing companies do not spend on advertising and hence brand
awareness among consumers is low. These companies engage with
influencers/applicators to create awareness and promote products. PIDI has consistently
advertised Dr Fixit (Amitabh Bachchan is brand ambassador) and created a well-known
consumer brand. Of late, paint companies have also started marketing their respective
waterproofing brands (Asian Paints—SmartCare, Berger—Home Shield, Kansai Nerolac—
Perma).
 Pricing varies across product range. Most waterproofing companies have a broad
range of products across price bands. Products meant for more complex/critical areas
such as (water tanks, swimming pools basements) are usually more expensive as
compared to basic integral waterproofing products such as Dr Fixit’s LW+ that is mixed
with cement. We note that pricing of waterproofing product varies from Rs8/sq. ft to
Rs50+/sq. ft.
 Warranty—a marketing tool that works with consumers. There are two types of
warranties—product warranty and product + applicator warranty. MNCs grant warranty
in case of large institutional projects but do not give any warranty in the B2C segment.
Pidilite and paint companies are relatively generous in offering warranty of 5-7 years. That
said, we note that product warranty does not help as it becomes difficult to identify root
cause (product/applicator flaw) of leakage at a later date. Pidilite and paint companies
offer full warranty if the waterproofing job is done by their waterproofing partners
(assigned by the company’s customer service team); we believe this approach is working
well for waterproofing repair work. Paint companies have suggested that the claim rate is
very low and hence there is no material risk associated with warranties.

Exhibit 1: Waterproofing segment – competitive landscape
Global Speciality Chemical Local Speciality Chemical

Pidilite
players (BASF, SIKA, players (Sunanda, Cico, Paint companies Cement companies
(Dr Fixit)
Fosroc, Weber) Choksey, etc)
Limited range. Product

Complete range of Complete range of Broad range of portfolio expansion is
Product Portfolio Limited range of products
waterproofing chemicals waterproofing chemicals waterproofing chemicals underway through
organic/inorganic route
Well-diversified distribution Strong distribution in

Strong local distribution. Strong distribution in Paint
across Hardware stores, Limited distribution. Focused building material/cement
Distribution strength Limited distribution outside dealers network. Limited
Paint dealers and building on institutional sales stores. Limited presence in
its own regional market presence in other channels
material/cement stores other channels
Dr Fixit is a 20+ year old Strong connect with paint

Good connect with structural Good connect with
Influencer/Applicator brand having strong contractors who have Good connect with civil
engineers, architects and waterproofing applicators in
connect relationship with specialist diversified in waterproofing contractors/masons
large contractors the local market
waterproofing applicators services
Pushing waterproofing
Expanding product portfolio
cement and ready-mix
through organic/inorganic
Rehaul of waterproofing concrete with waterproofing
route.
customer service process is Focused on institutional Most players are focused on chemicals
Key initiatives and underway to improve lead sales. Limited local markets and offering
Asian Paints has trained
Growth strategy conversion. investments/focus to grow affordable waterproofing Companies are creating
more than 60-70K painters
retail sales. products. awareness and educating
in waterproofing. Focus is to
masons/contractors about
leverage channel strength
these new products. Focus is
and painters connect.
to leverage channel strength.
Exhibit 2: Waterproofing: distribution strength of Pidilite, Asian Paints and cement companies
Pidilite has strong

distribution footprint
Cement companies have across the three
strong relationship channels (Hardw are,
Paints and building
material stores)
Building
material/cement Hardware stores
stores
Paint dealers
Paint companies
have strong
relationship

Exhibit 3: Waterproofing: influencer/applicator connect of Pidilite, Asian Paints and cement

companies
Asian Paints has

strong connect
Specialist
Paint contractors waterproofing
contractors
Pidilite and other

Civil MNC/local speciality
contractor/masons chemical players
have strong connect
Cement
companies have
good connect
APNT closing gap with PIDI, racing for the pole position
Our channel checks suggest that APNT is quickly closing gap with the market leader, PIDI, in
the waterproofing segment and it is eyeing #1 position in the next 2-3 years. We detail our
thoughts below and in Exhibit 4.
APNT leveraged paints dealer network and trained painters in WP to penetrate in
WP market
Waterproofing was traditionally done by specialist waterproofing applicators or civil
contractors/masons and waterproofing products were sold across three channels—hardware
stores, paint stores and building material/cement stores. Following its foray into the category in
2013, Asian Paints managed to find shelf space for its waterproofing products range
(SmartCare) in its paints dealer network but struggled to build influencer/applicators connect.
Hence, APNT expanded applicator base by training paint contractors/painters in waterproofing.
Over the past 4-5 years, APNT has trained more than 50,000 painters who now work as loyal
foot soldiers promoting APNT’s waterproofing products.
APNT’s two successful products— Damp Roof and Damp Sheath
APNT has so far focused on (1) roof waterproofing product and (2) waterproofing basecoat
(primer) and top coat for exterior and interior walls. These products (especially the latter) are
usually sold by paint dealers and applied by painters. Pidilite already had products (Newcoat/
Raincoat) but it has achieved limited success in these sub-segments of WP. A combination of
push from APNT, paint dealers and painters has led to significant increase in adoption of
waterproofing coats for exterior/interior walls (Damp Sheath) and roof (Damp Roof). Asian
Paints has an edge as painters tend to be applicators in this sub-segment of waterproofing.
Pidilite is struggling to build relationship with painters.
APNT has launched Vitalia Neo and Repair Polymer with an eye on PIDI’s LW+ and URP
In our view, APNT’s success thus far has led to expansion of the waterproofing market
without material impact on Pidilite. However, APNT has recently launched Vitalia Neo and
Repair Polymer positioned against Pidilite’s two top-selling products LW+ and URP (together
account for Rs5 bn, 50% of Dr Fixit’s sales). APNT is aggressively pushing paint dealers to
promote these two products over LW+ and URP that paint dealers have been selling since
years. If these two products succeed, Pidilite’s growth could get impacted (and LW+ and URP
could lose share in paints dealer network). Further, APNT would also focus on other channels
(hardware stores and cement stores) and step up advertising. We expect the market to
expand significantly over the next few years but it may be difficult for Dr Fixit to defend
market share in the near-to-medium term.

We do not expect Dr Fixit’s Newcoat/Raincoat to gain share from Damp Sheath and Damp
Roof. Hence, it would be important for PIDI to further strengthen influencer connect to
protect its turf in LW+ and URP space (two products account for 50% of DR Fixit sales and
about Rs5 bn sales in absolute terms).
Exhibit 4: Asian Paints has potential to surpass Dr Fixit in the next three years
Pidilite Asian Paints

(Dr Fixit) (SmartCare)
About Rs9-10 bn About Rs5-6 bn

Size
Double-digit growth trajectory Growing at 30%+
Asian Paints has expanded SmartCare product

Dr Fixit is a well-established brand with complete range of
portfolio over the past 2-3 years and it closing gap
waterproofing products.
Product Portfolio with Pidilite.
LW+ and URP are top-selling products.

Damp roof and Damp Sheath are top-selling products
Hardware stores
Primarily Paint dealers
Distribution strength Paint dealers (facing competition from Paint companies)
Limited success in other channels
Building material/cement stores
Primarily Painters. APNT has given Waterproofing

Specialist Waterproofing contractors training to more than 50K painters over the past few
Influencer/Applicator connect Civil contractors/Masons years.
Limited success in building relationship with Painters Limited engagement with other
influencers/applicators
Asian Paints is a strong parent brand. Its scale of

operations, Balance sheet strength permit
Parent brand, Pidilite is a trusted brand in India. Dr Fixit is
investments for category development and market
an equally well-known brand in waterproofing.
share gains.
Nina Percept (subsidiary) is a leading waterproofing

APNT has limited capabilities and experience in turn-
Key strengths and challenges services provider with experience of executing large
key/complex waterproofing projects.
complex projects
APNT's distribution network and influencer connect
Losing market share in paints dealer network to Paint
outside of Paints stores and paint contractors is
companies.
limited. Augmentation of distribution and influencer
base is critical for it to become market leader.
Revamp of waterproofing customer service process is Launched Vitalia Neo and Repair Polymer to compete
underway to improve customer experience and lead against Dr Fixit's top-2 products (LW+ and URP)
conversion.
Key initiatives
Attempting to strengthen influencer connect among
Attempting to strengthen influencer connect among civil contractors/masons and waterproofing experts.
painters Advertising to establish brand
We believe that Dr Fixit would continue to be a preferred brand for complex waterproofing
issues. However, Asian Paints may succeed in large scalable preventive (basic) waterproofing
sub-segments given its brand strength (associated consumer trust), advertisement campaigns
and strong support from paint dealers and paint contractors.
We note that Cement companies have also launched waterproof cement and ready-mix
concrete with waterproofing chemicals. Akin paint companies, cement manufacturers are
trying to leverage its distribution in cement stores and connect with civil contractors/masons.
We will keep a close eye on their progress.

Exhibit 5: APNT’s and PIDI’s top-selling waterproofing products
LW+ and URP are well established waterproofing products that account for ~50% of Dr Fixit's sales.
APNT recently launched Vitalia Neo and Repair polymer to compete against LW+ and URP.
Dr Fixit- LW+ SmartCare Vitalia Neo Dr Fixit- URP SmartCare Repair Polymer
Latex based waterproofing product for general
Cement additive for integral waterproofing
repair
Damp Sheath and Damp roof are APNT's top selling waterproofing products.
Dr Fixit's Raincoat competes with Damp Sheath but it is not so well-established product.
SmartCare Damp Roof SmartCare Damp Sheath Dr Fixit Raincoat
Elastomeric coating for

Waterproofing for roof Waterproof primer
exterior walls
Source: Kotak Institutional Equities

Exhibit 6: List of projects executed by Nina Percept, Pidilite's waterproofing services subsidiary
Industry vertical Project name City Project name City Project name City
Adani Shantgram Township Ahmedabad Aparna Sarovar Hyderabad Lodha World One Mumbai
After The Rain Bengaluru Godrej Platinum Kolkata Mumbai Oberoi Skycity Mumbai
Brigade Caladium Bengaluru Tata Avenida Kolkata Oberoi Mix Use Mumbai
Godrej Platinum Bengaluru Beaumonde Mumbai Planet Godrej Mumbai
Godrej Woodsman Estate Bengaluru Crecent Bay Mumbai Suraj Apts Mumbai
Residential
Prestige Falcon City Bengaluru Godrej Waldorf Mumbai Vasant Oasis Mumbai
Purva Palm Beach Bengaluru Jay Vijay Kolte Patil Mumbai K Raheja Vistas Pune
Purva West End Bengaluru K Raheja Vivarea Mumbai Nanded City Pune
Sattva Greenage Bengaluru Lodha Palava Mumbai Pride Purple Pune
DLF Camellias Delhi NCR Lodha The Park Mumbai Dost Imperia Thane
Metro Delhi Metro Lucknow Mercedes plant Chakan
Captain of Ports Jetty Goa Master Balancing Reservoir Mumbai Samsung plant Delhi NCR
Industrial and Mandovi Bridge Goa Metro Mumbai Reliance Jamnagar
Infrastructure Metro Hyderabad Baramullah Rail Link Udhampur Srinagar Tata Motors (multiple plants) Pune
Metro Jaipur Toyota plant Bengaluru Serum Institute Pune Pune
Chenani-Nashri Tunnel JK Biocon plant Bengaluru Kia motors plant Punukonda
Astra Zeneca Bengaluru Raheja Mindspace Hyderabad Bramha Corporation Pune

Bagmane Group Bengaluru Divis Labs Hyderabad Geometric Software Pune
Helios Business Park Bengaluru Infosys Jaipur Godrej Millennium Pune
Titan Corporate Office Bengaluru Astro Tower Kolkata HSBC Software Park Pune
Oracle Phase I Bengaluru Candor Techspace Kolkata K Raheja Commerzone Pune
Intel MLCP Bengaluru Bharat Diamond Bourse Mumbai Tata Technologies Pune
Commercial
Intel SRR3 SRR4 Bengaluru Ceat Mumbai Vascon Nucleus Pune
Godrej One Mumbai Fort House Mumbai TCS Pune
Malabar Corporate Office Calicut Leela Business Park Mumbai Diamond Bourse Surat
Airtel Corporate Office Gurugram Windsor Mumbai Shan-E-Awadh Lucknow
Amazon Hyderabad Maker Maxity Mumbai Raheja Mindspace Mumbai, Navi Mumbai
Divis Labs Hyderabad Amar Business Park Pune Inorbit Mumbai
Gujarat Sadan Delhi ONGC Delhi NRDA Raipur

Government
ITPO Pragati Maidan Delhi SBI Mumbai
ISTA Amritsar Cidade De Goa Taj President Mumbai

The Chancery Pavillion Bengaluru Intercontinental Mumbai Taj Wellington Mews Mumbai
Leela Palace Bengaluru Hotel Taj Mahal Mumbai Ginger (Multiple hotels) Mumbai
Conrad Bengaluru The Leela Mumbai JW Marriot Mumbai
Hospitality
Prestige Sheraton Bengaluru ITC Grand Central Mumbai Trident Mumbai
ITC Chola Chennai Marriot Courtyard Mumbai Le Meridien Pune
Taj Malabar Cochin Renaissance Mumbai Courtyard Marriot Pune
Taj Palace Delhi Taj GVK domestic airport Mumbai
Aga Khan Academy Hyderabad Hinduja Hospital Mumbai Aditya Birla hospital Pune
Education and IIT Hyderabad IIT Powai Mumbai Dinanath Mangeshkar hospital Pune
Healthcare Tata Medical hospital Kolkata KEM Hospital Mumbai NITK Suratkal
Asian Heart hospital Mumbai Kokilaben hospital Mumbai IIM Trichy

BUY
State Bank of India (SBIN)
Banks JULY 31, 2020
RESULT
Sector view: Attractive
A strong performance overall. SBI reported ~80% yoy earnings growth led by ~35% CMP (`): 191
yoy operating profit growth. Gross NPL ratio declined ~70 bps qoq to 5.4% while net Fair Value (`): 340
NPLs declined ~40 bps qoq to 1.9% of loans. The moratorium ratio, not strictly
BSE-30: 37,607
comparable, is at ~10% of loans. The retail book should hold up better and with further
resolutions expected from the corporate NPL pool (the bank has high coverage), we see
a lower-than-expected impact on SBI through Covid. Maintain BUY (FV unchanged).
State Bank of India

Stock data Forecasts/valuations 2020 2021E 2022E
52-week range (Rs) (high,low) 351-149 EPS (Rs) 16.2 24.2 28.6
Mcap (bn) (Rs/US$) 1,709/22.9 EPS growth (%) 1,580.3 49.2 17.9
ADTV-3M (mn) (Rs/US$) 13,450/180 P/E (X) 11.8 7.9 6.7 QUICK NUMBERS
Shareholding pattern (%) P/B (X) 1.1 0.9 0.8
Promoters 56.9 BVPS (Rs) 176.4 217.0 245.0  NII up 16% yoy. PAT
FIIs 10.7 RoE (%) 6.4 8.9 9.6
MFs/BFIs 13.5/10.6 Div. yield (%) 0.0 0.1 0.1
up 81% yoy.
Price performance (%) 1M 3M 12M NII (Rs bn) 981 1,141 1,262
Absolute 7 0 (42) PPOP (Rs bn) 676 704 789  GNPL ratio down
Rel. to BSE-30 (0) (10) (43) Net profits (Rs bn) 145 216 255 ~70 bps qoq to
5.4%; NNPL ratio
Strong operating performance giving a solid start to FY2021 down ~40 bps qoq
to 1.9%
SBI reported ~80% yoy growth in earnings led by ~35% yoy growth in operating profits.
Revenues grew impressively at 17% yoy led by a strong 16% yoy growth in NII. NIM was at 3%  Maintain BUY rating
with marginal improvement in domestic NIMs. Non-interest income grew ~20% yoy but with FV at Rs340
contribution from treasury income was higher while the impact of fee income, which hurt
(unchanged)
private banks this quarter, was relatively lower. Cost-income ratio was at 50% despite the bank
making additional provisions for the revision in salaries (wage settlement). Gross NPL hit a ~4-
year low at 5.4% (ninth consecutive quarter of decline) while net NPL is at a 9-year low at 1.9%.
Moratorium is ~10% of loans although the definition is not comparable with other banks.
Despite disadvantages due to its size, SBI has done exceedingly well
SBI’s lack of recovery in market multiples, unlike what we have seen with private banks that
have had similar challenges on the corporate side, is an area of disappointment for us. The
decline in impairment ratios nearly mirrors these banks. The bank has had lower slippages for
FY2019-20 and we see FY2021-22 being no different in this direction as the impact of Covid
would be a lot less visible given the relatively better underwriting on the retail side. MSME has
been facing challenges for the bank for some time and growth has been slow with high NPLs M B Mahesh, CFA
already recognized ahead of the crisis. We believe Covid should leave a lower-than-expected
earnings impact on a relative basis as compared to what we have seen during the corporate NPL Nischint Chawathe
cycle. An area where we have limited visibility but has been crucial for the stock’s re-rating has
been its challenges outside its core business. The bank had to play a role to stabilize certain
Abhijeet Sakhare
parts of the financial system, which private banks have avoided. These risks act as an overhang
as it is not easily identifiable and financial impact, if any, is harder to quantify.
Ashlesh Sonje
Maintain BUY; NPLs likely to go down in the short term before impact of Covid begins
Dipanjan Ghosh
We maintain BUY rating on SBI with an FV of Rs340 (unchanged), valuing the bank at 0.8X
book and 7X June 2022E EPS for RoEs in the range of ~8-10% in the medium term. Our broad
thesis on the bank remains unchanged. It is our preferred idea among public banks – the best
to play the improvement in corporate NPL cycle with the impact of Covid likely to be relatively
lower. The bank has a strong liability franchise, healthy operating profits and leading market
share in most of its subsidiaries. Valuations are attractive to retain our positive view. kspcg.research@kotak.com
Contact: +91 22 6218 6427
State Bank of India Banks
Exhibit 1: SBI quarterly results

March fiscal year-ends, 1QFY20 - 1QFY21 (Rs mn)
(% chg.)
1QFY21 1QFY21E 1QFY20 4QFY20 1QFY21E 1QFY20 4QFY20 2021E 2020 (% chg.) 2022E
Income earned 665,004 653,960 626,378 626,814 2 6 6 2,783,099 2,573,236 8 3,091,399
Income on advances 441,011 451,076 438,634 425,797 (2) 1 4 1,845,264 1,797,488 3 1,906,592
Income on investments 187,055 174,752 169,551 173,165 7 10 8 825,669 682,047 21 1,052,094
Interest on balance with RBI 36,938 28,131 18,193 27,853 31 103 33 112,167 93,700 20 132,712
Interest expense 398,588 395,754 396,990 399,145 1 0 (0) 1,641,607 1,592,388 3 1,829,035
Net interest income (NII) 266,416 258,205 229,388 227,669 3 16 17 1,141,492 980,848 16 1,262,363
Non-interest income 94,972 112,542 80,154 160,775 (16) 18 (41) 382,449 452,215 (15) 424,729
Fees, commission 44,710 52,288 51,770 78,730 (14) (14) (43) 213,526 237,251 (10) 245,554
Invt. income 40,210 26,198 4,850 59,370 53 729 (32) 52,000 85,757 (39) 40,000
Forex income 4,680 5,528 5,180 6,910 (15) (10) (32) 22,653 25,170 (10) 26,051
O ther income excl. treasury 54,762 86,344 75,304 101,405 (37) (27) (46) 330,449 366,458 (10) 384,729
Total income 361,388 370,747 309,542 388,444 (3) 17 (7) 1,523,941 1,433,063 6 1,687,093
O perating expenses 180,777 185,935 177,081 203,793 (3) 2 (11) 805,060 751,737 7 898,267
Staff expenses 70,321 70,535 67,681 69,837 (0) 4 1 501,767 457,150 10 561,327
O ther operating expenses 110,456 115,399 109,400 133,956 (4) 1 (18) 303,293 294,587 3 336,939
Pre-provision operating profit 180,611 184,813 132,462 184,651 (2) 36 (2) 718,880 681,326 6 788,826
Provisions and extraordinaries 125,013 94,466 91,829 134,951 32 36 (7) 428,284 430,699 (1) 446,161
Loan loss provisions 94,205 71,362 116,485 118,937 32 (19) (21) 412,651 418,986 (2) 445,522
Standard assets 2,820 19,406 (12,880) 18,660 (85) NM (85)
Investment depreciation 12,310 — (12,250) (6,040) NM NM 15,000 5,386 —
O ther provisions 15,678 3,697 475 3,394 324 3,201 362 633 6,327 (90) 639
PBT 55,598 90,347 40,632 49,700 (38) 37 12 290,596 250,628 16 342,666
Less tax 13,704 23,129 17,510 13,892 (41) (22) (1) 74,393 105,747 (30) 87,722
Profit after tax 41,893 67,218 23,122 35,808 (38) 81 17 216,204 144,881 49 254,943
Fees to PBT (%) 80 58 NM 158 73 95 72
Key balance sheet data (Rs bn)
Advances 22,983 22,788 21,348 23,253 1 8 (1) 23,907 23,253 3 25,595
Deposits 34,194 33,065 29,488 32,416 3 16 5 35,942 32,416 11 39,932
Investments 12,356 10,784 9,444 10,470 15 31 18 13,851 10,470 32 16,689
Key calculated ratios (%)
Yield on advances 7.3 7.3 7.2 5 bps 13 bps
Cost of funds 4.4 4.9 4.6 -48 bps -23 bps
NIM 2.9 2.8 2.6 12 bps 30 bps
Cost-to-income 50.0 50.2 57.2 52.5 -13 bps -718 bps -244 bps
CD ratio 67.2 72.4 71.7 -518 bps -452 bps
Asset quality details
Gross NPLs (Rs bn) 1,297 1,685 1,491 (23) (13) 1,013 1,491 (32) 1,051
Gross NPLs (%) 5.4 7.5 6.2 -209 bps -71 bps 3.8 5.8 -202 bps 3.6
Net NPLs (Rs bn) 427 656 519 (35) (18) 334 519 (36) 370
Net NPLs (%) 1.9 3.1 2.2 -121 bps -37 bps 1.4 2.2 -83 bps 1.4
Slippages (Rs bn) 39 170 83 (77) (53) 419 498 (16) 598
Slippages (%) 0.7 3.1 1.5 -244 bps -83 bps 1.8 2.3 -48 bps 2.5
PCR- KS (%) 67 61 65 601 bps 186 bps 67 65 186 bps 65
Capital adequacy details (%)
CAR 13.4 12.9 13.1 51 bps 34 bps
Tier I 11.4 10.7 11.0 70 bps 35 bps
Source: Company, Kotak Institutional Equities estimates

Banks State Bank of India
Strong improvement in headline asset quality; net NPLs at a nine-year low

 Headline ratios. Reported GNPLs declined by ~70 bps qoq to 5.4% led by lower
slippages during the quarter. Net NPL ratio declined by ~40 bps qoq to 1.9%. Provision
coverage (excluding technical write-offs) on NPLs improved to ~67% (up ~190 bps qoq).
 Moratorium. As of June 30, 2020, ~9.5% of the term loan portfolio (~Rs16 tn) is under
moratorium. The bank has classified any loan that has made two or more EMI payments
(out of the four due – one each in March, April, May and June 2020) as not under
moratorium. Out of this 9.5%, 2.0% is outstanding to AAA and AA rated private
companies, 3.3% is exposure to other private sector companies while 4.2% belongs to
the retail and SME segments. Further, ~Rs320 bn of home loan portfolio is under
moratorium.
 Slippages. Total slippages for the quarter were Rs39.1 bn (annualized slippage ratio of
0.7%, see the exhibit below), out of which Rs36.37 were fresh slippages. The retail
portfolio saw meaningful fresh slippages of Rs13.31 bn. However, management clarified
that most of these slippages were because some loan accounts, which were not eligible
for moratorium, saw missed payments. Subsequently, the bank communicated this to the
borrowers and most of these accounts were regularized in July.
 Recoveries. The bank expects to make recoveries amounting to ~Rs100-110 bn over the
next two quarters on account of resolution of four accounts – one HFC, one steel account
and two power accounts. The bank currently holds full 100% provision on these accounts
and any recovery will add to the bank’s bottom-line.
 Provisions. The bank made total Covid-related provision of ~Rs29.73 bn as on June 30,
2020. This amounts to 100% provision on interest and 15% provision on the principal on
the SMA accounts (as on February 29, 2020), which have paid less than two EMIs (out of
the four due – one each in March, April, May and June 2020). Further, the bank has
provided completely in 1QFY21 for the HFC account declared as fraud in 4QFY20.
The overall SMA book for the bank is negligible leading to a much lower stressed book. We
are building in slippages of ~1.8% in FY2021, picking up to ~2.5% over FY2022-23E.
Exhibit 2: Slippages were low in 4QFY20 on account of the moratorium and asset classification standstill
Break-up of slippages, March fiscal year-ends, 1QFY19-1QFY21 (Rs bn)

Total slippages 143 109 65 80 170 88 165 81 36
Corporate 34 32 13 23 54 32 95 16 2
Others 110 77 52 57 116 56 71 65 34
SME 18 NA NA NA 40 15 16 2 10
Agri 26 NA NA NA 42 31 30 52 5
Retail 20 NA NA NA 24 6 8 6 13
IBG 3 NA NA NA 2 3 17 5 6
Slippages (%) 3.0 2.3 1.3 1.6 3.1 1.7 3.7 1.5 0.7

Exhibit 3: Total stressed loans (GNPL+SMA-1+SMA-2) down from 8.0% in 2QFY20 to 4.8% in 1QFY21
Break-up of stress loans and provisions, 1QFY20-1QFY21
Amount outstanding Share of total gross loans

1QFY20 2QFY20 3QFY20 4QFY20 1QFY21 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21
(Rs bn) (Rs bn) (Rs bn) (Rs bn) (Rs bn) (%) (%) (%) (%) (%)
Gross NPL 1,685 1,616 1,597 1,491 1,297 6.7 7.2 6.9 6.2 4.7
Net NPL 656 599 582 519 427 2.6 2.7 2.5 2.1 1.6
Watchlist 103 183 81 73 18 0.4 0.8 0.4 0.3 0.1
Total stress loans 1,788 1,799 1,678 1,564 1,314 7.1 8.0 7.3 6.5 4.8
Notes:
(1) For 3QFY19-1QFY20, watch-list refers to SMA-1 and 2 across all verticals (for accounts with exposure of Rs50 mn and above and having an
exposure of <Rs20 bn from the banking system).
(2) Starting 2QFY20, watch-list refers to SMA-1 and SMA-2 accounts with exposure above Rs50 mn, from data submitted to CRILC.
Exhibit 4: Corporate drives improvement in overall GNPL ratio; retail and SME GNPLs stable
Segment break-up of NPLs, March fiscal year-ends, 2014-2020, 1QFY21
Gross NPLs (Rs bn) Gross NPLs (%)
2014 2015 2016 2017 2018 2019 20201QFY21 2014 2015 2016 2017 2018 2019 2020 1QFY21
Corporate 287 245 622 801 1,626 1,160 816 626 6.1 4.9 10.9 13.7 21.9 13.6 9.7 7.7
Top-corporate 24 15 207 331 820 1.0 0.5 6.3 9.7 19.9
Mid-corporate 263 230 415 470 806 11.5 10.6 17.1 19.3 24.4
International 38 26 78 68 72 19 17 22 1.8 1.1 2.9 2.4 2.4 0.6 0.5 0.6
SME 155 164 170 159 257 247 252 253 8.6 9.0 7.8 7.0 9.5 8.6 9.4 9.1
Agri 107 107 87 75 212 234 327 314 8.9 8.9 6.9 5.5 11.2 11.6 15.9 15.4
Retail 30 25 25 22 67 67 79 83 1.3 0.9 0.8 0.5 1.2 1.0 1.1 1.1
Total 616 567 982 1,123 2,234 1,728 1,491 1,297 5.0 4.3 6.5 6.9 10.9 7.5 6.2 5.4
Notes:
(1) Data from FY2018 onwards is for the merged entity.
(2) Gross NPL has been calculated based on outstanding NPL in each category to the reported advances. These ratios differ from those reported by the
bank (exposures have been reclassified between various segments).
Exhibit 5: Slippages decreased to 0.7% in 1QFY21

Movement of NPLs, March fiscal year-ends, 1QFY18-1QFY21 (Rs bn)
1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21
Opening 1,779 1,881 1,861 1,991 2,234 2,128 2,059 1,878 1,728 1,685 1,616 1,597 1,491
Addition 301 106 268 328 143 109 65 80 170 91 201 83 39
Reductions 199 126 138 85 249 179 246 230 213 160 221 189 233
Closing Gross NPL 1,881 1,861 1,991 2,234 2,128 2,059 1,878 1,727 1,685 1,616 1,597 1,491 1,297
Provision coverage (without w/off) 43 47 49 50 53 54 57 62 61 63 64 65 67
Provision coverage (reported) 61 65 66 66 69 71 75 79 79 81 82 84 86
Slippages (%) 6.4 2.2 5.3 7.2 3.0 2.3 1.3 1.6 3.1 1.7 3.7 1.5 0.7
Notes:
(a) Data from 1QFY18 onwards refers to merged entity.

Exhibit 6: Auto loans segment has seen some deterioration in asset quality
GNPL in retail segment, March fiscal year ends, 1QFY19-1QFY21 (Rs mn)
1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21 QoQ
Home loans 1.0 1.0 0.9 0.8 1.0 0.9 0.9 1.0 1.1 10 bps
Auto loans 1.2 1.2 1.1 1.0 1.1 1.0 1.0 1.1 1.3 18 bps
Xpress credit NA 0.6 0.5 0.5 0.6 0.6 0.6 0.5 0.5 0 bps
Other per segment loans 2.0 3.2 3.1 3.1 3.2 2.5 2.7 2.6 2.4 -28 bps
Exhibit 7: Further decline in NPL ratios in 1QFY21; PCR continues to inch up

Gross NPLs, net NPLs and provision coverage ratio, March fiscal year-end, 2003-2020, 1QFY21 (%)
Gross NPLs (LHS) Net NPLs (LHS) PCR (RHS)

12.5 67 75
10.9 62 65
54 57 57 60
56 57
10.0 53 51 9.1 60
9.3 51 50 51 50
7.7 45 7.5
42 43
7.5 39 6.5 45
5.9 6.2
5.7 5.4
5.0 5.2
5.0 4.5 4.5 4.8 4.3 30
3.9 3.8
3.4 3.1 3.0 2.9 3.0 3.3
2.6 3.0
2.6 2.2 1.9
1.9 1.6 1.8 1.8 1.8 2.1 2.1
2.5 1.4 1.6 15
0.0 0
2003
2007
2008
2009
2010
2014
2015
2016
2017
2004
2005
2006
2011
2012
2013
2018
2019
2020
1QFY21
Notes:
1) Data from FY2017 onwards refers to merged entity.
Exhibit 8: Exposure to power sector has steadily decreased to 8.5% in 1QFY21 from a peak level of 9.5%
Power exposure details, March fiscal year-end, 1QFY19-4QFY20 (Rs bn)

Power exposure (gross) 1,768 1,790 1,951 1,996 2,036 1,976 1,992 2,035 1,944
(% of gross advances) 9.4 9.1 9.5 9.1 9.5 9.2 9.1 8.8 8.5
Break-up of standard power sector exposure
Public 1,114 1,074 983 1,056 1,128 1,090 1,082 NA NA
Private 654 716 593 686 650 641 691 NA NA
Power sector asset quality
NPL 323 327 314 253 258 245 219 NA NA
(% of power exposure) 18.3 18.3 16.1 12.7 12.7 12.4 11.0 NA NA
(% of overall GNPLs) 15.2 15.9 16.7 14.7 15.3 15.1 13.7 NA NA
Notes:
(1) Break-up between public and private exposure excludes SMA-1 and 2 accounts for 3QFY19.

Exhibit 9: Overall exposure to NBFCs has declined to 7.1% of total advances

NBFC exposure details, March fiscal year-end, 1QFY19-1QFY21 (Rs bn)

Total exposure to NBFCs 1,607 1,500 1,639 1,876 1,736 1,672 1,691 1,789 1,643
(% of advances) 8.6 7.7 8.0 8.6 8.1 7.8 7.7 7.7 7.1
HFCs 530 507 593 625 635 632 680 657 614
Public 69 117 107 119 140 133 170 164 160
Private 461 390 486 506 495 499 510 493 454
Other NBFCs 1,077 993 1,046 1,251 1,101 1,040 1,011 1,132 1,030
Public 571 477 596 713 506 406 516 577 607
Private 506 516 450 538 594 634 496 555 422
Exhibit 10: 42% of overall exposure to NBFCs is backed by public entities (central/state governments and PSUs), up from 34% in 2QFY20)
Borrower type-wise NBFC loan mix, March fiscal year-ends, 1QFY21 (%)
NBFC HFC Other NBFCs
Other Central and

state Other
private, 19 O ther Backed by Central and
government private, 21
private, 21 PSU, 26 state
, 28 government
, 51
Backed by
Backed by large
large Backed by
large private
private sector
Backed by private
sector institutions,
PSU, 14 sector
institutions, 20 Backed by
institutions,
40 PSU, 8
53

Exhibit 11: Detailed sector-wise exposure and NPL ratios

Break-up of SBI's NPLs across sectors, March fiscal year-ends, 2017-2020
2017 2018 2019 2020 1QFY21
NPL NPL
NPL NPL NPL NPL ratio NPL NPL ratio NPL NPL ratio
ratio ratio
(Rs bn) (%) (Rs bn) (%) (Rs bn) (%) (Rs bn) (%) (Rs bn) (%)
Coal and mining 19 15.0 17 19.6 5 7.6 22 13.1 22 13.1
Iron and steel 563 42.2 532 42.8 258 28.2 61 8.5 61 8.5
Metal and metal products 46 9.7 42 11.7 23 6.8 17 5.9 17 5.9
Engineering 87 23.1 120 31.5 113 26.4 59 13.9 59 13.9
of which electronics 4 6.4 33 49.7 44 48.7 1 3.1 1 3.1
Electricity 6 6.5 - - — — — — — —
Textiles 165 27.7 150 28.2 80 18.5 41 10.6 41 10.6
Cotton 114 32.2 113 31.9 54 19.2 22 8.9 22 8.9
Jute 0 8.1 1 12.8 0 9.5 0 4.7 0 4.7
O thers 50 21.1 36 20.8 25 17.5 19 14.1 19 14.1
Sugar 7 7.9 7 9.2 10 12.1 6 8.0 6 8.0
Tea 2 28.5 2 23.0 1 19.8 1 14.2 1 14.2
Food processing 104 26.6 89 15.3 65 11.9 61 9.1 61 9.1
Vegetable oil and vanaspati 17 28.0 25 39.5 24 41.1 7 12.9 7 12.9
Tobacco/tobacco products 1 12.0 — 4.3 0 3.0 1 43.7 1 43.7
Paper/paper products 10 19.4 9 18.4 6 13.4 6 12.1 6 12.1
Rubber/rubber products 8 8.5 6 7.3 5 6.6 9 10.7 9 10.7
Chemicals/dyes/paints 36 5.2 38 4.2 40 3.9 29 2.9 29 2.9
Fertilizer 0 0.3 4 2.9 10 5.9 11 5.5 11 5.5
Petrochemicals 11 3.7 3 0.7 4 0.6 1 0.3 1 0.3
Drugs and pharmaceuticals 17 14.5 19 16.1 13 9.8 3 2.1 3 2.1
O thers 8 4.7 12 6.4 13 12.2 12 7.6 12 7.6
Cement 24 21.3 11 11.7 11 7.0 12 7.6 12 7.6
Leather/leather products 1 4.4 3 10.2 3.3 12.7 4 11.1 4 11.1
Gems and jewelry 18 11.4 22 15.0 8.0 6.0 8 6.1 8 6.1
Construction 24 10.6 18 6.8 13.6 4.5 13 3.0 13 3.0
Petroleum 47 26.8 41 12.5 20.6 5.6 11 2.6 11 2.6
Automobile and trucks 38 24.7 36 27.4 35.9 22.6 12 6.5 12 6.5
Computer software 4 15.6 1 2.7 0.6 3.1 0 0.4 0 0.4
Infrastructure 233 8.8 582 20.8 476.9 13.2 387 10.7 387 10.7
Power 63 3.6 317 17.9 253.5 12.4 170 8.3 170 8.3
Telecom 3 1.1 86 39.6 76.1 28.9 59 16.8 59 16.8
Roads and ports 73 24.5 90 24.1 82.9 15.1 73 12.1 73 12.1
O thers 95 23.2 89 20.1 64 8.4 86 14.4 86 14.4
O ther industries 127 4.4 209 7.4 208 6.4 336 13.3 336 13.3
Total industry 1,586 14.7 1,961 17.7 1,410 11.6 1,104 9.6 1,104 9.6
Agriculture 178 6.0 212 11.3 234 11.6 327 15.9 327 15.9
Retail 17 0.5 67 1.2 67 1.0 79 1.1 79 1.1
O thers 11 0.4 11 0.9 25 0.9 (8) (0.2) (8) (0.2)
Total 1,792 9.0 2,251 10.9 1,736 7.4 1,501 6.1 1,501 6.1
Loan growth remains subdued
 Headline growth. Overall loan growth remained weak at 8% yoy driven by subdued
corporate (up 3% yoy) and SME loans (down ~1% yoy) while retail loan growth was
better at ~13% yoy.
 Retail. Retail loans constitute ~31% of the loan book and have been growing swiftly (up
~13% yoy) driven by home loans (up ~15% yoy) and Xpress credit (personal loans) (up
~30% yoy) while auto loan portfolio contracted ~2% yoy.
 GECL scheme for MSMEs. The bank has sanctioned ~Rs210 bn loans under the GECL
scheme to eligible MSMEs and disbursed ~Rs151 bn.

 Corporate. The corporate book (including international advances) constitutes ~48% of

the loan book (down from ~56% in FY2016).
 Even as the management indicated a modest growth in advances at ~8% in FY2021, we

are building in a much lower growth rate of ~3%, followed by a modest recovery to ~7-
8% levels in FY2022E-23E.
Exhibit 12: Share of retail loans has inched up to ~31%

Loan growth and loan break-up, March fiscal year-ends, 2011-2020, 1QFY21
Loan growth (YoY %) Loan break-up (%)
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 1QFY21 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 1QFY21
Corporate 11.0 8.7 15.3 23.8 6.0 14.6 25.6 3.1 14.8 (0.9) 3.4 38.3 36.5 36.2 38.5 38.2 37.9 36.8 36.2 37.1 34.8 33.9
Large corporate 3.2 7.3 12.2 38.0 16.2 17.1 21.9 2.3 18.4 17.3 16.7 19.8 21.6 21.9 20.6 20.1
Mid-corporate 19.4 10.0 18.2 11.5 (4.7) 11.4 30.6 4.2 19.9 19.2 19.5 18.7 16.6 16.1 16.2 16.1
International 12.7 24.1 24.6 26.8 9.4 13.8 7.3 5.5 0.2 18.1 11.2 13.8 15.0 16.1 17.5 17.9 17.7 14.7 14.7 13.2 14.7 14.4
SME 22.8 41.3 8.9 (2.4) 0.9 20.0 26.1 (1.7) 6.9 (7.3) (0.9) 15.1 18.7 17.5 14.7 13.9 14.4 14.1 13.2 12.6 11.0 11.7
Retail 22.2 10.8 14.9 13.3 14.6 20.0 47.2 13.5 18.5 15.4 12.8 20.8 20.2 19.9 19.4 20.8 21.7 24.7 26.7 28.2 30.9 31.4
Agriculture 21.2 (9.0) 25.8 10.7 (0.4) 4.7 52.5 (1.6) 7.7 1.7 1.6 12.0 9.5 10.3 9.8 9.2 8.3 9.8 9.2 8.8 8.5 8.6
SME+Corporate NA NA NA NA NA NA NA 1.8 12.7 (2.5) 2.3
Total 16.3 14.1 16.4 16.2 6.9 15.4 29.3 4.9 12.0 5.6 (5.3)
Notes:
(1) Numbers post 4QFY17 are for the merged entity.
Domestic NIM expands as no interest reversals drop
Domestic NIM was higher by ~30 bps qoq at 3.2% in 1QFY21 (2.9% in 4QFY20) mainly
because there were no interest reversals on NPA in the quarter. This was further supported
by a drop of ~50 bps qoq in cost of domestic deposits to 4.5%, while yields on domestic
advances did not decline as much (down ~40 bps qoq to 8.4%). However, overseas NIM
was marginally lower at ~1.1% in 1QFY21 (down from ~1.2% in 4QFY20).
There has been consistent improvement in margins over the past few quarters on the back
of (1) increase in share of high-yielding retail loans, (2) drop in interest reversals and (3)
gradually declining cost of deposits. Over the medium term, we expect margins to remain
around current levels of ~3%.
Deposit growth remained stable at 11% yoy

Deposit growth was strong at ~16% yoy, led by ~17% yoy growth in CASA deposits, while
term deposits grew ~9% yoy. Growth was supported by higher liquidity in the system
(helped by DBT) in general, while SBI benefitted on account of its wide distribution franchise.
We expect deposit growth to stay around ~11% over the medium term.

Exhibit 13: Credit/deposit ratio fell steeply to 67% Exhibit 14: Margins were broadly flat qoq in 1QFY21
CD ratio, March fiscal year-ends, 1QFY18-1QFY21 (%) NIM (reported), March fiscal year-ends, 1QFY18-1QFY21 (%)
80 4.0
77 3.6
75
74 3.2 3.1
72 72
72 3.0 3.0
71 2.9
71 71 2.8 2.8
2.7 2.8 2.8
71 70 2.8
69
69 69 2.5
68 2.4 2.5
67 2.4
68 2.4
65 2.0
1QFY18
2QFY18
3QFY18
4QFY18
1QFY19
2QFY19
3QFY19
4QFY19
1QFY20
2QFY20
3QFY20
4QFY20
1QFY21
1QFY18
2QFY18
3QFY18
4QFY18
1QFY19
2QFY19
3QFY19
4QFY19
1QFY20
2QFY20
3QFY20
4QFY20
1QFY21
Notes:
Notes:
(1) Data from 1QFY17 onwards refers to merged entity.
(1) Data post 4QFY17 refers to merged entity.
Source: Company, Kotak Institutional Equities Source: Company, Kotak Institutional Equities
Exhibit 15: MCLR rates dropped 120 bps in the past 12 months
SBI MCLR rates, June 2017-May 2020 (%)
Jun-17 Sep-17 Jan-18 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Apr-20 May-20 Jun-20
Overnight 7.75 7.75 7.70 7.80 7.90 8.10 8.20 8.20 8.10 7.80 7.65 7.45 7.10 6.95 6.70
One month 7.85 7.85 7.80 7.80 7.90 8.10 8.20 8.20 8.10 7.80 7.65 7.45 7.10 6.95 6.70
Three month 7.90 7.90 7.85 7.85 7.95 8.15 8.25 8.25 8.15 7.85 7.70 7.50 7.15 7.00 6.75
Six month 7.95 7.95 7.90 8.00 8.10 8.30 8.40 8.40 8.30 8.00 7.85 7.70 7.35 7.20 6.95
One year 8.00 8.00 7.95 8.15 8.25 8.45 8.55 8.55 8.45 8.15 7.90 7.75 7.40 7.25 7.00
Two years 8.10 8.10 8.05 8.25 8.35 8.55 8.65 8.65 8.55 8.20 8.10 7.95 7.60 7.45 7.20
Three years 8.15 8.15 8.10 8.35 8.45 8.65 8.75 8.75 8.65 8.35 8.20 8.05 7.70 7.55 7.30
Source: Kotak Institutional Equities , Company
Exhibit 16: SBI’s term deposit rates dropped by ~190 bps since June 2019
Term deposit rates for deposits less than Rs20 mn, May 2017 – May 2020 (%)
May-17 Aug-17 Sep-17 Jan-18 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Apr-20 May-20
7-14 days 5.50 5.50 5.50 5.25 5.75 5.75 5.75 5.75 5.75 2.90 4.50 4.50 3.50 3.50 2.90
15-30days 5.50 5.50 5.50 5.25 5.75 5.75 5.75 5.75 5.75 2.90 4.50 4.50 3.50 3.50 2.90
31-45days 5.50 5.50 5.50 5.25 5.75 5.75 5.75 5.75 5.75 2.90 4.50 4.50 3.50 3.50 2.90
46 -90 days 6.50 6.50 6.50 6.25 6.25 6.25 6.25 6.25 6.25 3.90 5.50 5.50 4.50 4.50 3.90
91-120days 6.50 6.50 6.50 6.25 6.25 6.25 6.25 6.25 6.25 3.90 5.50 5.50 4.50 4.50 3.90
120-180 days 6.50 6.50 6.50 6.25 6.25 6.25 6.25 6.25 6.25 3.90 6.00 5.80 4.50 4.50 3.90
181-210 days 6.50 6.50 6.50 6.25-6.5 6.35 6.35-6.4 6.35 6.35 6.35 5.35 6.00 5.80 5.00 5.00 4.80
211 days-1year 6.50 6.50 6.50 6.50 6.40 6.40 6.40 6.40 6.40 4.40 6.70 6.25 5.00 5.00 4.80
1 year-2year 6.9-6.75 6.5-6.75 6.5-6.75 6.25 6.40 6.40 6.70 6.80 6.80 7.00 6.50 6.25 5.70 5.70 5.10
2 year-3year 6.25 6.25 6.25 6.00 6.50 6.60 6.75 6.80 6.80 6.75 6.25 6.25 5.70 5.70 5.10
3 years-5 years 6.25 6.25 6.25 6.00 6.50 6.70 6.80 6.80 6.80 6.70 6.25 6.25 5.70 5.70 5.70
5 years-8 years 6.25 6.25 6.25 6.00 6.50 6.75 6.85 6.85 6.85 6.60 6.25 6.25 5.70 5.70 5.70
8years-10 years 6.25 6.25 6.25 6.00 6.50 6.75 6.85 6.85 6.85 6.00 6.25 6.25 5.70 5.70 5.70

Exhibit 17: CASA franchise remains strong

CASA ratio break-up across banks, March fiscal year-ends, 2009-2020, 1QFY21 (%)
Current Savings
50
40
30 34.6
26.7 31.9 34.5 34.5 37.1 36.9 37.3
33.7 32.6 33.6 36.8 37.9
20
10
14.9
11.2 11.5 9.4 9.2 8.0 7.9 7.8 7.3 6.9 6.9 6.7 6.0
-
2011
2013
2016
2019
2009
2010
2012
2014
2015
2017
2018
2020
1QFY21
Notes:
(1) Data from FY2017 onwards refer to the merged entity.
Operating expenses decline driven by rental and technology expenses

Overall operating expenses were flat yoy, driven down by 11% yoy reduction in
rent/taxes/lighting costs and 17% yoy decline in ATM/debit card/ other technology expenses.
The bank had been providing for wage revision arrears at the rate of 10%. Since the wage
hike expected is 15%, the bank has made a prudent ad-hoc provision of ~Rs16 bn for the
same. As a result, provisions for employee expenses increased 16% yoy, driving up staff
expenses by ~4% yoy. All put together this has resulted in a decline of ~240 bps in the cost-
to-income ratio, which now stands at ~4.4%.
We build in moderate growth in operating expenses (~7%) in FY2021 and 12% over
FY2022-23E.

Exhibit 18: Cost-to-income marginally higher qoq Exhibit 19: Share of retirement-related costs at ~40% of staff
Operating costs and cost-income ratio, March fiscal year-ends, costs
1QFY17-1QFY21 (%) Retirement costs and staff costs to total income, March fiscal year-
ends, 2012-2020, 1QFY21 (%)
(Rs bn) Operating costs (LHS) Cost-income (RHS) (%) Retirement costs to staff costs (RHS)
225 70 Staff costs to income (LHS)
45 45
180 62
39 36
58 59 57
135 54 56 54 54
51 52 52 33 27
49 51 51 50
51 50
48
90 46
42 27 18
45 38
21 9
20 16 23 18 29 27 18 36 42 41
0 30 15 -
1QFY17
2QFY17
3QFY17
4QFY17
1QFY18
2QFY18
3QFY18
4QFY18
1QFY19
2QFY19
3QFY19
4QFY19
1QFY20
2QFY20
3QFY20
4QFY20
1QFY21
2012
2013
2014
2015
2016
2017
2018
2019
2020
1QFY21
Notes: Notes:
(1) Data from 1QFY17 refers to merged entity. (1) Data post 4QFY17 refers to merged entity.
Exhibit 20: Fee income declined 14% yoy

March fiscal year-ends, 1QFY19-1QFY21 (Rs mn)
YoY
1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21 (%)
Loan processing charges 6,410 6,410 9,260 15,020 6,170 7,660 11,200 19,240 8,250 34
Commission on government business 9,310 9,730 9,530 11,180 9,630 8,930 9,720 9,140 8,630 (10)
Commission on LC/BG 5,920 6,370 6,000 12,890 7,040 7,170 7,710 8,620 6,760 (4)
Cross selling 3,760 4,820 4,860 5,830 3,660 4,910 5,580 6,150 3,090 (16)
Others 24,370 22,820 17,590 40,970 25,270 21,730 22,140 35,580 17,980 (29)
Net fee income 49,770 50,150 47,240 85,890 51,770 50,400 56,350 78,730 44,710 (14)
YoY (%) 2 (6) (5) 2 4 0 19 (8) (14)
Other income 66,795 93,751 80,352 126,851 80,154 120,227 91,059 160,775 94,972
(%) of other income 75 53 59 68 65 42 62 49 47
Exhibit 21: Bancassurance business continues to ramp up in scale

Fee income from bancassurance business, March fiscal year-ends, 2013-2020 (Rs mn)
2013 2014 2015 2016 2017 2018 2019 2020
SBI Life 1,440 1,595 2,446 3,372 4,646 7,148 9,519 11,169
SBI general insurance 339 281 700 623 1,811 2,126 2,709 3,145
Others 307 472 737 896 1,309 17 39 46
Total 2,086 2,348 3,883 4,891 7,766 9,290 12,267 14,361

Other key highlights for the quarter
 Non-interest income increased 18% yoy. This sharp increase was mainly led by ~7X
yoy growth in gain from sale of investments. These gains were partly offset by 14% yoy
decline in core fee income.
 Capital position comfortable. CAR increased by ~30 bps qoq to 13.4% with the Tier-1
ratio also increasing by ~40 bps qoq to 11.4%. Credit RWA to total advances declined by
~160 bps yoy to ~56%. The bank reasoned that RWA was down as the bank has been
focused on underwriting credit to well-rated entities.
 SBI Mutual Fund and insurance subsidiaries. SBI Mutual Fund has the highest market
share (14.79%) in mutual fund. It registered QAAUM growth of ~18% against industry
decline of ~3%. It saw PAT growth of ~57% yoy to Rs1.9 bn in 1QFY21.
 SBI Life Insurance and SBI General Insurance. SBI Life’s PAT was up 5% yoy in
1QFY21 to Rs3.9 bn. VNB recorded an increase of 34%, driven by a strong 19% VNB
margin. PAT for the general insurance business increased 80% yoy in 1QFY21 to Rs1.4
bn. The company underwrote GWP of ~Rs12.4 bn in 1QFY21 – down ~3% yoy vis-à-vis
industry decline of >4%.
 SBI Card. PAT for the cards business increased 14% yoy to Rs3.9 bn in 1QFY21. The
company has a market share of ~20% and ~18% by total spends and card base,
respectively. RoE for the business was at ~28% in 1QFY21.
Exhibit 22: SBI forecasts and valuation

March fiscal year-ends, 2016-2023E
Net int.
income PAT EPS PER ABVPS APBR RoE
(Rs bn) (Rs bn) (Rs) (X) (Rs) (X) (%)
2016 569 100 12.8 13.6 121.3 1.4 7.3
2017 619 105 13.1 13.2 130.0 1.3 6.3
2018 749 (65) (7.3) (23.7) 125.7 1.4 (3.2)
2019 883 9 1.0 180.2 159.3 1.1 0.4
2020E 981 145 16.2 10.7 176.4 1.0 6.4
2021E 1,141 216 24.2 7.2 217.0 0.8 8.9
2022E 1,262 255 28.6 6.1 245.0 0.7 9.6
2023E 1,456 353 39.5 4.4 277.1 0.6 11.9
Notes:
(1) ABVPS: Reported book value of the standalone business less net NPLs at 70%
(2) Data from FY2018 is for the consolidated book. Note that the adjusted book value is reduced for
revaluation reserves

Exhibit 23: SBI is trading at 0.8X one-year forward adj. P/B Exhibit 24: SBI is trading at a ~30% premium to public peers
Rolling 1-year forward APBR (consolidated), July 2006-July 2020 (X) PBR premium to public banks, July 2012-July 2020 (X)
3.0 2.0
2.4 1.6
1.8 1.2
1.2 0.8
0.6 0.4
0.0 0.0
Jul-12
Jul-13
Jul-14
Jul-15
Jul-16
Jul-17
Jul-18
Jul-19
Jul-20
Jul-07
Jul-08
Jul-09
Jul-10
Jul-11
Jul-12
Jul-13
Jul-14
Jul-15
Jul-16
Jul-17
Jul-18
Jul-19
Jul-20
Source: Company, Bloomberg, Kotak Institutional Equities estimates Source: Company, Bloomberg, Kotak Institutional Equities estimates
Exhibit 25: SBI SoTP valuation based on FY2022E
Value per share

SBI holding Value FY2022 FY2022
(%) (Rs mn) (Rs) Methodology adopted
SBI 210 Residual income model
Non banking subsidiaries and investments
SBI Life 56% 437,063 49 Based on appraisal value
SBI MF 63% 126,500 14 5% of AUM- Rs4 tn
NSE 8% 23,200 3 NSE value at Rs200 bn
SBI Caps 100% 40,000 4 10X FY2022E PAT
Others 419,403 46
Non-bank subsidiaries 120
Total value of the bank 330
Source: Kotak Institutional Equities estimates

Exhibit 26: SBI SoTP valuation based on FY2022E
Based on market Implied PBR for standalone bank

Fair value of price of listed based on market prices of listed
SBI share (%) KIE estimates subsidiaries subsidiaries
SBI standalone 210 50 0.20
Non-banking subsidiaries
SBI Life 56% 49 57
SBI MF 63% 14 20 40% discount to HDFC AMC
NSE 8% 3 3
UTI MF 17% 1 1
SBI Caps 100% 4 4
SBI DFHI 72% 1 1
Yes Bank 30% 10
Value of all non-bank subsidiaries 120 142
Value of company 330 191
Exhibit 27: Key changes to estimates

March fiscal year-ends, 2021-2023E (Rs mn)
New estimates Old estimates % change

2021E 2022E 2023E 2021E 2022E 2023E 2021E 2022E 2023E
Net interest income 1,141,492 1,262,363 1,456,076 1,121,406 1,230,933 1,414,898 1.8 2.6 2.9
Loan growth 2.8 7.1 8.1 (0.0) 6.1 6.0 282 bps 101 bps 202 bps
NIM (%) 3.0 3.0 3.1 3.0 2.9 3.0 4 bps 4 bps 4 bps
Loan loss provisions 412,651 445,522 452,674 418,531 407,216 431,853 (1.4) 9.4 4.8
Other income 382,449 424,729 474,515 360,198 395,049 434,051 6.2 7.5 9.3
Fee income 213,526 245,554 270,110 254,199 279,619 307,581 (16.0) (12.2) (12.2)
Treasury income 52,000 40,000 40,000 45,000 45,000 45,000 15.6 (11.1) (11.1)
Operating expenses 805,060 898,267 1,002,974 768,773 857,551 957,302 4.7 4.7 4.8
Employee expenses 501,767 561,327 627,957 460,038 514,644 575,733 9.1 9.1 9.1
PBT 290,596 342,666 474,296 295,128 362,052 460,640 (1.5) (5.4) 3.0
Tax 74,393 87,722 121,420 75,553 92,685 117,924 (1.5) (5.4) 3.0
Net profit 216,204 254,943 352,876 219,576 269,366 342,716 (1.5) (5.4) 3.0
PBT - treasury+LLP 666,248 748,187 886,970 668,660 724,268 847,493 (0.4) 3.3 4.7

Exhibit 28: SBI – growth rates and key ratios

March fiscal year-ends, 2017-2023E (%)
2017 2018 2019 2020E 2021E 2022E 2023E
Growth rates (%)
Net loan 7.3 23.2 13.0 6.4 2.8 7.1 8.1
Total Asset 19.8 27.7 6.5 7.3 11.0 11.2 11.4
Deposits 18.1 32.4 7.6 11.3 10.9 11.1 11.1
Current 9.0 24.8 8.3 10.4 12.5 12.7 12.6
Savings 27.0 33.6 7.7 10.5 11.2 11.4 11.4
Fixed 14.1 32.6 7.4 12.0 10.5 10.7 10.7
Net interest income 8.8 21.0 18.0 11.0 16.4 10.6 15.3
Loan loss provisions 14.7 93.0 (18.8) (23.1) (1.5) 8.0 1.6
Total other income 25.9 25.8 (17.5) 23.0 (15.4) 11.1 11.7
Net fee income 12.9 41.3 1.3 8.0 (10.0) 15.0 10.0
Net capital gains 108.0 24.9 (76.6) 172.5 (39.4) (23.1) —
Net exchange gains 13.1 4.0 (13.2) 20.0 (10.0) 15.0 10.0
O perating expenses 11.2 29.0 16.3 7.9 7.1 11.6 11.7
Employee expenses 5.5 25.3 23.7 11.4 9.8 11.9 11.9
Key ratios (%)
Yield on average earning assets 7.7 7.8 7.4 7.4 7.3 7.3 7.3
Yield on average loans 7.9 8.1 7.8 8.0 7.8 7.7 7.8
Yield on average investments 8.0 7.9 7.5 6.9 6.9 7.0 7.1
Average cost of funds 5.2 5.3 4.8 4.6 4.3 4.4 4.4
Interest on deposits 5.6 5.7 5.0 4.8 4.4 4.4 4.4
Difference 2.5 2.5 2.6 2.8 3.0 2.9 3.0
Net interest income/earning assets 2.7 2.6 2.7 2.8 3.0 3.0 3.1
New provisions/average net loans 2.3 3.8 2.6 1.9 1.8 1.8 1.7
Interest income/total income 63.6 62.7 70.6 68.4 74.9 74.8 75.4
Fee income to total income 16.7 19.3 18.6 16.6 14.0 14.6 14.0
O perating expenses/total income 47.8 50.2 55.7 52.5 52.8 53.2 52.0
Tax rate 29.4 57.8 46.4 42.2 25.6 25.6 25.6
Dividend payout ratio 20.1 — — — 0.8 0.7 0.5
Share of deposits
Current 7.5 7.0 7.1 7.0 7.1 7.2 7.3
Fixed 55.4 55.5 55.4 55.8 55.6 55.4 55.2
Savings 37.1 37.5 37.5 37.2 37.3 37.4 37.5
Loans-to-deposit ratio 76.8 71.5 75.1 71.7 66.5 64.1 62.3
Equity/assets (EoY) 7.0 6.3 6.0 5.9 5.8 5.7 5.8
Asset quality trends (%)
Gross NPL (%) 6.8 10.7 7.2 5.8 3.8 3.6 3.5
Net NPL (%) 3.7 5.7 3.0 2.2 1.4 1.4 1.8
Slippages (%) 2.7 10.2 1.7 2.3 1.8 2.5 2.5
Provision coverage (%, ex write-off) 48.1 50.4 61.9 65.2 67.1 64.8 54.5
Dupont analysis (%)
Net interest income 2.5 2.4 2.5 2.6 2.7 2.7 2.8
Loan loss provisions 1.4 2.2 1.5 1.1 1.0 1.0 0.9
Net other income 1.4 1.4 1.0 1.2 0.9 0.9 0.9
O perating expenses 1.9 1.9 2.0 2.0 1.9 1.9 1.9
Invt. depreciation 0.0 0.3 (0.0) 0.0 0.0 — —
(1- tax rate) 70.6 42.2 53.6 57.8 74.4 74.4 74.4
RoA 0.4 (0.2) 0.0 0.4 0.5 0.6 0.7
Average assets/average equity 14.9 15.1 16.2 16.9 17.2 17.4 17.4
RoE 6.3 (3.2) 0.4 6.4 8.9 9.6 11.9
Notes:
(1) Data from FY2018 is the consolidated performance of the bank.

Exhibit 29: SBI – key financial summary

2017 2018 2019 2020E 2021E 2022E 2023E

Income statement
Total interest income 1,755,182 2,204,993 2,428,687 2,573,236 2,783,099 3,091,399 3,485,010
Loans 1,195,100 1,413,632 1,616,402 1,797,488 1,845,264 1,906,592 2,068,716
Investments 482,053 703,376 744,062 682,047 825,669 1,052,094 1,273,284
Total interest expense 1,136,585 1,456,456 1,545,198 1,592,388 1,641,607 1,829,035 2,028,935
Net interest income 618,597 748,537 883,489 980,848 1,141,492 1,262,363 1,456,076
Loan loss provisions 347,463 670,766 544,545 418,986 412,651 445,522 452,674
Net interest income (after prov.) 271,134 77,771 338,944 561,863 728,841 816,842 1,003,402
O ther income 354,609 446,007 367,749 452,215 382,449 424,729 474,515
Net fee income 162,766 229,968 233,039 237,251 213,526 245,554 270,110
Net capital gains 107,496 134,233 31,469 85,757 52,000 40,000 40,000
Net exchange gains 23,884 24,846 21,558 25,170 22,653 26,051 28,656
O perating expenses 464,728 599,434 696,877 751,737 805,060 898,267 1,002,974
Employee expenses 264,893 331,787 410,547 457,150 501,767 561,327 627,957
Depreciation on investments 2,984 80,876 (7,621) 5,386 15,000 — —
O ther Provisions 9,480 (1,250) 1,361 6,327 633 639 645
Pretax income 148,552 (155,282) 16,075 250,628 290,596 342,666 474,296
Tax provisions 43,711 (89,808) 7,453 105,747 74,393 87,722 121,420
Net Profit 104,841 (65,475) 8,622 144,881 216,204 254,943 352,876
% growth 5.4 (162.5) (113.2) 1,580.3 49.2 17.9 38.4
PBT - Treasury + Provisions 400,983 460,876 522,892 595,570 666,880 748,826 887,616
% growth 5.3 14.9 13.5 13.9 12.0 12.3 18.5
Balance sheet
Cash and bank balance 1,719,716 1,918,986 2,224,901 2,510,970 2,710,685 2,939,402 3,197,800
Cash 120,303 154,724 187,779 201,046 241,255 289,506 347,407
Balance with RBI 1,159,673 1,349,248 1,581,545 1,466,312 1,625,818 1,806,283 2,006,781
Balance with banks 69,339 16,630 46,959 447,703 447,703 447,703 447,703
Net value of investments 7,659,896 10,609,867 9,670,219 10,469,545 13,850,602 16,689,138 19,742,459
Govt. and other securities 5,752,387 8,483,958 7,618,831 8,032,701 11,413,758 14,252,294 17,305,615
Shares 54,457 105,167 98,787 82,214 82,214 82,214 82,214
Debentures and bonds 598,474 779,629 849,484 1,023,638 1,023,638 1,023,638 1,023,638
Net loans and advances 15,710,784 19,348,802 21,858,769 23,252,896 23,907,268 25,595,122 27,660,648
Fixed assets 429,189 399,923 391,976 384,393 274,773 218,408 163,297
O ther assets 1,540,077 2,269,942 2,663,277 2,896,136 3,098,865 3,315,786 3,547,891
Total assets 27,059,663 34,547,520 36,809,142 39,513,939 43,842,193 48,757,854 54,312,095
Deposits 20,447,514 27,063,433 29,113,860 32,416,207 35,942,446 39,932,058 44,364,516

Current 1,524,211 1,901,739 2,058,752 2,273,356 2,556,594 2,880,308 3,244,387
Fixed 11,333,689 15,023,949 16,137,588 18,079,132 19,973,897 22,111,135 24,476,742
Savings 7,589,614 10,137,745 10,917,520 12,063,720 13,411,955 14,940,614 16,643,387
Borrowings and bills payable 3,443,605 3,887,598 4,268,928 3,414,786 3,798,255 4,236,354 4,736,988
O ther liabilities 1,285,683 1,405,203 1,217,216 1,362,872 1,567,303 1,802,398 2,072,758
Total liabilities 25,176,802 32,356,234 34,600,004 37,193,865 41,308,004 45,970,810 51,174,262
Total shareholders' equity 1,882,861 2,191,286 2,209,138 2,320,074 2,534,190 2,787,045 3,137,833
Notes:
(1) Data from FY2018 is the consolidated performance of the bank.

SELL
Tata Motors (TTMT)
Automobiles & Components AUGUST 01, 2020
RESULT
Sector view: Cautious
Aggressive cost cutting initiatives surprise. Tata Motors reported consolidated profit CMP (`): 105
of Rs6.4 bn, which was better than our expectations of loss, driven by aggressive cost Fair Value (`): 90
cutting initiatives. Despite management efforts to cut costs, substantial pick-up in
BSE-30: 37,607
volumes is essential for the company to return to profitability. We see limited visibility of
the company reporting profits anytime soon due to a weak outlook on volumes. We
retain our SELL rating on the stock with an unchanged fair value of Rs90.
Tata Motors
52-week range (Rs) (high,low) 202-64 EPS (Rs) (20.7) (22.6) 2.1
Mcap (bn) (Rs/US$) 377/4.6 EPS growth (%) (284.1) (9.1) 109.3
ADTV-3M (mn) (Rs/US$) 7,434/99 P/E (X) (5.0) (4.6) 49.6
Promoters 42.4 EV/EBITDA (X) 6.0 6.4 4.1
FIIs 27.2 RoE (%) (12.1) (14.3) 1.4
Price performance (%) 1M 3M 12M Sales (Rs bn) 2,611 2,301 2,826
Absolute 7 12 (23) EBITDA (Rs bn) 197 204 322
Rel. to BSE-30 (1) 1 (23) Net profits (Rs bn) (75) (87) 8
Strong JLR performance given tough demand environment
JLR reported EBITDA of GBP101 mn (-53% yoy) in 1QFY21, which was significantly above our
estimate of loss of GBP503 mn primarily due to (1) higher net realizations, (2) better-than-
expected gross margins and (3) lower-than-expected employee costs. Reported EBITDA margin
was 3.5% in 1QFY21 (down 70 bps yoy and down 130 bps qoq), as compared to our estimate
of negative 23.5%. ASPs increased by 20% yoy due to a favorable geographical mix (higher
contribution from China) and favorable model mix (higher Land Rover mix). Realized hedge
losses came in at GBP127 mn versus our estimates of GBP49 mn in 1QFY21. EBIT margin in JLR
UK business in 1QFY21 came in at negative 13.6% due to a steep decline in volumes. A sharp
decline in EBIT margin can be attributed to 22.5% negative impact due to a steep decline in
volumes partly offset by (1) 290 bps positive impact due to lower warranty cost and
manufacturing cost, (2) 500 bps positive impact due to lower marketing and selling costs and
employee cost and (3) 650 bps positive impact due to favorable FX in 1QFY21. The company
furloughed 35% of the total workforce (40% of the manufacturing staff) in 1QFY21 which
resulted in a sharp decline in employee cost on a yoy basis. Net loss came in at GBP648 mn,
which reflects negative impact of GBP235 mn due to non-recognition of deferred tax assets
under IAS12.
Standalone entity continues to remain under pressure in 1QFY21
Standalone business reported an EBITDA loss of Rs8.4 bn (KIE: loss of Rs9.8 bn) in 1QFY21 due
to (1) lower volumes due to shut down across India during the month of April and May, (2)
adverse product mix as M&HCV volumes fell by 92% yoy and (3) 30 bps yoy decline in gross
margin (KIE: 510 bps yoy decline). Hitesh Goel
Maintain SELL; visibility quite low on business turnaround

Rishi Vora
We have increased our FY2021-22E consolidated EBITDA estimates largely to factor in
aggressive cost cuts in the standalone and JLR business. While our estimate on standalone
losses has come down versus our earlier estimate, our fair value remains the same as the PV
business is likely to burn cash and CV business is unlikely to offset the cash burn on a
sustainable basis. Hence we keep our standalone fair value almost unchanged. Our SoTP based
fair value remains unchanged at Rs90.
Contact: +91 22 6218 6427
Tata Motors Automobiles & Components
Key highlights of JLR performance in 1QFY21
 JLR reported EBITDA of GBP101 mn (-53% yoy) in 1QFY21, which was significantly above
our estimate of loss of GBP503 mn primarily due to (1) higher net realizations, (2) better-
than-expected gross margins and (3) lower-than-expected employee costs. Reported
EBITDA margin was 3.5% in 1QFY21 (down 70 bps yoy and down 130 bps qoq), as
compared to our estimate of negative 23.5%. ASPs increased by 20% yoy due to a
favorable geographical mix (higher contribution from China) and favorable model mix
(higher Land Rover mix). Realized hedge losses came in at GBP127 mn versus our
estimates of GBP49 mn in 1QFY21.
 EBIT margin in JLR UK business in 1QFY21 came in at negative 13.6% due to a steep
decline in volumes. Sharp decline in EBIT margin can be attributed to 22.5% negative
impact due to a steep decline in volumes partly offset by (1) 290 bps positive impact due
to lower warranty cost and manufacturing cost, (2) 500 bps positive impact due to lower
marketing and selling costs and employee cost and (3) 650 bps positive impact due to
favorable FX in 1QFY21. The company furloughed 35% of the total workforce (40% of
the manufacturing staff) in 1QFY21 which resulted in a sharp decline in employee cost on
a yoy basis. Net loss came in at GBP648 mn, which reflects negative impact of GBP235
mn due to non-recognition of deferred tax assets under IAS12.
 Share of profit from JLR China JV was zero in 1QFY21 versus loss of GBP28 mn in
1QFY20. This was due to a sharp improvement in retail volumes in China. China JV
reported EBITDA profit of GBP47 mn in 1QFY21 versus EBITDA loss of GBP5 mn in
1QFY20. EBITDA margin for 1QFY21 stood at 9.8%.
 JLR’s overall wholesale volumes declined by 45% yoy to 65,425 units in 1QFY21. In the
UK P&L, (1) Jaguar brand volumes were down 63% yoy due to a steep decline in volumes
for most of its existing models and (2) Land Rover volumes were down 49% yoy in
1QFY21.On the geographical front, China wholesale volumes (excluding China JV)
declined by 12% yoy in 1QFY21. North America volumes declined by 59% yoy in
1QFY21. Europe and UK volumes declined by 57-64% yoy and rest of the world volumes
were down by 47% yoy in 1QFY21.
 The company highlighted that 98% of the retailers have opened/partially opened their
showrooms across the globe and the company has also restarted its production. In China
and UK, 100% of the showrooms have opened. Retail sales volume growth continues to
improve on a mom basis with volumes declining by 62% yoy in April 2020 and 25% yoy
in June 2020. US retail sales were up by 2% yoy in June 2020 whereas China retail sales
were down by 7% yoy in June 2020.
 The company has launched the new Defender – the model was rolled out in May 2020 in
UK & Europe and in June 2020 in America. The company rolled out Defender in China
and overseas market in July 2020. Also, customer orders for new the Defender model
have exceeded the company’s expectations with over >30,000 bookings so far. The
company has clocked in wholesales of 7,900 units of Defender in 1QFY21.
 The company has saved GBP2.9 bn under project Charge of which (1) the company has
achieved savings of GBP1.5 bn in reduction in investments; (2) GBP0.7 bn through
reduction in working capital and (3) saved another GBP0.7 bn driven by a cut in overhead
costs.

Automobiles & Components Tata Motors
 JLR raises project Charge+ savings target: The company has raised project Charge+
target with an aim to save a further GBP3.1 bn (from GBP2.1 bn earlier) by FY2021E out
of which the company has already saved GBP1.2 bn in 1QFY21 and GBP0.6 bn in
4QFY20. The company expects to save the remaining GBP1.3 bn during 9MFY21E. Under
project Charge+, the company will focus on lowering warranty costs, minimizing the
overhead cost base and improving its current portfolio returns by reducing material cost.
The company will also focus on improving profitability by leveraging its most profitable
vehicles, optimizing market performance and maintaining inventory discipline. The
company will also reduce its investment in FY2021E. The company expects to save GBP6
bn combined for Project Charge and Project Charge+.
 During 1QFY21, JLR reported negative FCF of GBP1.5 bn led by (1) deterioration in
working capital cycle (Rs1.1 bn negative impact) and (2) losses in operations (Rs413 mn
negative impact).
 The company did not give any guidance for FY2021E. The company highlighted that
2QFY21 will be significantly better than 1QFY21 in terms of volumes and profitability. The
company expects to turn FCF positive between 2QFY21-4QFY21 led by recovery in China,
working capital improvements and savings from Project Charge+. The company has total
debt of GBP6.6 bn with total cash outflow of ~GBP 650 mn over CY2020-21E. In terms
of liquidity, the company has adequate cash balances of GBP2.7 bn with additional
undrawn revolving facility of GBP1.9 bn. The company has kept its capex and R&D
investment unchanged at GBP2.5 bn.

Exhibit 1: 1QFY21 EBITDA was significantly above our estimates due to higher ASPs and cost cutting initiatives
JLR interim financial results (including China JV income), March fiscal year-ends (GBP mn)
(% chg.)
1QFY21 1QFY21E 1QFY20 4QFY20 1QFY21E 1QFY20 4QFY20 FY2021E FY2020 Yoy (%) FY2022E FY2021E Yoy (%)
Volumes (units) 48,912 48,912 104,190 120,691 (53.1) (59.5) 384,000 475,952 (19.3) 479,700 384,000 24.9
Average realization 58,452 43,737 48,699 44,958 33.6 20.0 30.0 49,819 48,291 3.2 49,465 49,819 (0.7)
Net sales 2,859 2,139 5,074 5,426 33.6 (43.7) (47.3) 19,131 22,984 (16.8) 23,729 19,131 24.0
Of which hedge book gain/(loss) (49) (150) (149) (112) (300) (544) — (300)
Total expenditure (2,758) (2,642) (4,861) (5,167) 4.4 (43.3) (46.6) (17,361) (20,984) (20,954) (17,361)
Raw materials (1,833) (1,465) (3,281) (3,542) 25.1 (44.1) (48.2) (12,244) (14,684) (15,186) (12,244)
Staff cost (435) (600) (656) (626) (27.5) (33.7) (30.5) (2,260) (2,568) (2,526) (2,260)
Other expenditure (489) (577) (890) (1,074) (15.3) (45.1) (54.5) (2,858) (3,640) (3,241) (2,858)
Forex losses (revaluation of WC) (1) — (34) 75 — (92) — —
EBITDA 101 (503) 213 259 (52.6) (61.0) 1,769 2,000 (11.5) 2,775 1,769 56.8
Associate Income (China JV) — 10 (28) (20) 1 (114) 11 1
Interest (50) (55) (35) (50) (9.1) 42.9 — (200) (157) (220) (200)
Depreciation (491) (450) (463) (490) 9.1 6.0 0.2 (2,000) (1,910) (2,100) (2,000)
Pretax profits (440) (998) (313) (301) (430) (181) 465 (430)
Tax expense (235) — (7) (38) — (47) (114) —
Unrealized FX gains/(losses) 27 — (82) (200) 27 (241) — 27
Reported profit after tax (648) (998) (402) (539) (403) (469) 352 (403)
JLR wholesale volume mix (units)
Jaguar 12,158 32,417 30,309 (62.5) (59.9) 86,000 125,820 (31.6) 102,700 86,000 19.4
Land Rover 36,754 71,773 90,382 (48.8) (59.3) 298,000 350,132 (14.9) 377,000 298,000 26.5
China JV 16,513 14,360 6,288 15.0 162.6 64,453 49,450 30.3 71,800 64,453 11.4
Total volumes (including China JV) 65,425 118,550 126,979 (44.8) (48.5) 448,453 525,402 (14.6) 551,500 448,453 23.0
Product Mix (%)
Jaguar 18.6 27.3 23.9 19.2 23.9 18.6 19.2
Land Rover 56.2 60.5 71.2 66.5 66.6 68.4 66.5
China JV 25.2 12.1 5.0 14.4 9.4 13.0 14.4
Geographical Mix - Wholesale Volumes (units)
China (Only JLR P&L, excludes China JV volumes) 8,595 9,801 5,766 (12.3) 49.1 40,000 38,312 4.4 48,321 40,000 20.8
Europe 9,100 25,357 31,600 (64.1) (71.2) 90,160 113,270 (20.4) 99,176 90,160 10.0
North America 10,700 25,977 33,126 (58.8) (67.7) 122,189 135,766 (10.0) 136,852 122,189 12.0
United Kingdom 11,000 25,279 32,494 (56.5) (66.1) 88,054 110,067 (20.0) 96,859 88,054 10.0
Rest of World 9,517 17,776 17,705 (46.5) (46.2) 43,597 78,537 (44.5) 98,492 43,597 125.9
Modelwise wholesale volumes (units)
XE 780 3,169 3,194 (75.4) (75.6) 4,000 12,086 (66.9) 4,000 4,000 —
XF 580 2,557 1,501 (77.3) (61.4) 4,000 6,911 (42.1) 4,400 4,000 10.0
XJ 500 1,587 397 (68.5) 25.9 3,000 2,824 6.2 3,300 3,000 10.0
XK — — — — — — — — —
E-Pace 3,500 8,618 9,247 (59.4) (62.1) 35,000 36,890 (5.1) 48,500 35,000 38.6
F-Pace 3,598 9,352 11,422 (61.5) (68.5) 25,000 45,943 (45.6) 27,500 25,000 10.0
I-Pace 2,200 5,195 2,735 10,000 14,820 (32.5) 10,000 10,000 —
Others (incl. F Type) 1,000 1,939 1,813 (48.4) (44.8) 5,000 6,346 (21.2) 5,000 5,000 —
Jaguar 12,158 32,417 30,309 (62.5) (59.9) 86,000 125,820 (31.6) 102,700 86,000 19.4
Defender 7,900 1 119 35,000 102 40,000 35,000 14.3
Discovery 3,600 7,952 8,267 (54.7) (56.5) 28,000 33,648 (16.8) 30,000 28,000 7.1
Freelander/Discovery Sport 3,800 10,457 12,361 (63.7) (69.3) 30,000 52,889 (43.3) 50,000 30,000 66.7
Range Rover 4,800 10,020 12,534 (52.1) (61.7) 40,000 50,965 (21.5) 45,000 40,000 12.5
Range Rover Evoque 4,600 16,319 23,624 (71.8) (80.5) 60,000 83,198 (27.9) 80,000 60,000 33.3
Range Rover Velar 4,854 10,996 13,043 (55.9) (62.8) 40,000 52,972 (24.5) 52,000 40,000 30.0
Range Rover Sport 7,200 16,028 20,434 (55.1) (64.8) 65,000 76,339 (14.9) 80,000 65,000 23.1
Land Rover 36,754 71,773 90,382 (48.8) (59.3) 298,000 350,113 (14.9) 377,000 298,000 26.5
Currency Movement (average)
GBPUSD 1.2 1.3 1.3 (3.4) (3.0)
GBPEUR 1.1 1.1 1.1 (2.0) (0.1)
GBPCNY 8.8 8.8 8.9 0.3 (1.5)
Ratios (%)
EBITDA margin (%) 3.5 (23.5) 4.2 4.8 9.2 8.7 11.7 9.2
EBIT margin - including China JV profit (%) (13.6) (44.1) (5.5) (4.6) (1.2) (0.1) 2.9 (1.2)
Raw material exp to sales 64.1 68.5 64.7 65.3 64.0 63.9 64.0 64.0
Staff cost to sales 15.2 28.0 12.9 11.5 11.8 11.2 10.6 11.8
Other expenses to sales 17.1 27.0 18.2 18.4 14.9 16.2 13.7 14.9
Tax rate (%) (53.4) — (2.2) (12.6) — (26.0) 24.4 —

Exhibit 2: Lower volumes negatively impacted margins partly offset by savings from project Charge+ and favorable FX in 1QFY21
JLR yearly PBT walk, March fiscal year-ends, 2020-21 (GBP mn))
Exhibit 3: JLR generated negative FCF of GBP1.5 bn in 1QFY21 impacted by coronavirus pandemic
JLR working capital and free cash flow, March fiscal year-ends, 2020-21 (GBP mn)

Exhibit 4: JLR has total debt of GBP6.6 bn at the end of June 2020
Break-up of JLR debt maturity profile, Calendar year-ends, 2020-27 (GBP mn)
Exhibit 5: 98% of the company’s retailers have opened or partially opened across the globe
JLR production plants and retailer update, 2020

Exhibit 6: JLR achieved GBP1.2 bn under project charge+ led by reduction in investments, working capital savings and overhead savings
JLR project Charge and Charge+ update, March fiscal year-ends, 2021 (GBP mn)
Exhibit 7: JLR has introduced project Charge+ with a focus to save additional GBP3.1 bn (from GBP2.1 bn earlier) till FY2021E
JLR project Charge+ target guidance, March fiscal year-ends, 2020-21E (GBP mn)

Exhibit 8: GBP depreciated by ~3% qoq against USD in 1QFY21

Average quarterly currency movement, March fiscal year-ends, 1QFY17-1QFY21
1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21
GBP-USD
Average 1.44 1.31 1.24 1.24 1.28 1.31 1.33 1.39 1.36 1.33 1.29 1.30 1.29 1.23 1.29 1.28 1.24
Period-end 1.33 1.30 1.24 1.25 1.30 1.35 1.35 1.40 1.32 1.30 1.28 1.32 1.27 1.23 1.33 1.24 1.24
EUR-USD
Average 1.13 1.12 1.08 1.07 1.10 1.18 1.18 1.23 1.19 1.16 1.14 1.14 1.12 1.11 1.11 1.10 1.10
Period-end 1.11 1.12 1.05 1.07 1.14 1.18 1.20 1.23 1.17 1.16 1.15 1.13 1.14 1.09 1.12 1.10 1.12
GBP-CNY
Average 9.4 8.8 8.5 8.5 8.8 8.7 8.8 8.8 8.7 8.9 8.9 8.8 8.8 8.6 9.1 8.9 8.8
Period-end 8.8 8.7 8.6 8.6 8.8 8.9 8.8 8.8 8.7 9.0 8.8 8.9 8.7 8.8 9.2 8.8 8.8
GBP-RUB
Average 94.4 84.9 78.2 72.7 73.1 77.1 77.6 79.1 84.4 85.4 85.8 85.9 83.0 79.6 82.0 85.4 89.8
Period-end 85.5 82.3 75.6 70.1 77.1 77.5 77.9 80.1 82.9 85.9 88.7 85.0 80.2 79.8 82.3 97.5 88.3
Exhibit 9: JLR expensed ~39% of R&D in P&L in 1QFY21; overall capex and R&D was GBP547 mn in 1QFY21
Break-up of JLR R&D and capex spend, March fiscal year-ends, 1QFY18-1QFY21 (GBP mn)
R&D expense
Capitalized 355 410 402 443 426 418 391 404 339 353 344 333 168
Expensed 94 83 93 136 99 113 113 96 83 114 104 120 107
Total R&D expense 449 493 495 579 525 531 504 500 422 467 448 453 275
Investment in tangible and other intangible assets 546 540 575 509 541 464 516 500 373 374 444 313 272
Total product and other investment 995 1,033 1,070 1,088 1,066 995 1,020 1,000 795 841 892 766 547
R&D capitalized as % of total R&D 79.1 83.2 81.2 76.5 81.1 78.7 77.6 80.8 80.3 75.6 76.8 73.5 61.1
Exhibit 10: We expect JLR volumes to increase by 3% CAGR over FY2020-23E

Geography-wise volume mix (including China JV), March fiscal year-ends, 2017-23E (units, %)
2017 2018 2019 2020 2021E 2022E 2023E

Geography
N.A 132,000 136,447 133,237 135,766 122,189 136,852 153,274
UK 115,000 114,074 118,734 110,067 88,054 96,859 106,545
Europe (excl Russia and UK) 137,000 126,313 119,248 108,710 86,968 95,665 105,231
Russia 6,000 6,000 5,000 4,560 3,192 3,511 3,862
China 125,004 153,825 97,596 87,762 104,453 120,121 138,140
Asia Pac (excl China) 32,791 34,431 34,431 30,987 24,790 27,269 29,996
Rest of World 53,009 62,420 57,060 47,550 18,807 71,223 43,186
Total Volumes 600,804 633,510 565,306 525,402 448,453 551,500 580,234
Yoy growth (%) 10.4 5.4 (10.8) (7.1) (14.6) 23.0 5.2
Geographical mix (%)
N.A 22.0 21.5 23.6 25.8 27.2 24.8 26.4
UK 19.1 18.0 21.0 20.9 19.6 17.6 18.4
Europe (excl Russia and UK) 22.8 19.9 21.1 20.7 19.4 17.3 18.1
Russia 1.0 0.9 0.9 0.9 0.7 0.6 0.7
China 20.8 24.3 17.3 16.7 23.3 21.8 23.8
Asia Pac (excl China) 5.5 5.4 6.1 5.9 5.5 4.9 5.2
Rest of World 8.8 9.9 10.1 9.1 4.2 12.9 7.4
Total Volumes 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Notes:
(a) Volumes from CJLR JV has been included in China volumes.

Exhibit 11: Success of Evoque, Defender, E-Pace and I-Pace models key to achieve improved volume performance over FY2020-23E
JLR model-wise volume mix assumptions (including China JV), March fiscal year-ends, 2017-23E (units, %)
2017 2018 2019 2020 2021E 2022E 2023E

Model
XF 35,054 41,654 24,469 12,637 9,153 10,200 11,104
XJ 10,100 9,000 4,204 2,824 3,000 3,300 3,630
XK — — — — — — —
F type 10,900 9,200 7,700 6,346 5,000 5,000 5,000
Small Jaguar 46,700 32,108 30,657 22,539 16,000 16,500 17,500
F Pace 76,000 69,500 50,885 45,943 25,000 27,500 30,250
I-Pace/E-Pace — 14,800 59,533 53,981 47,300 61,000 78,750
Jaguar 178,754 176,262 177,448 144,270 105,453 123,500 146,234
Defender 600 — 4 121 35,000 40,000 40,000
Discovery 37,600 52,000 37,635 33,648 28,000 30,000 30,000
Freelander — — 7 — — — —
Discovery Sport 124,873 118,173 84,416 76,420 60,000 83,000 86,000
Range Rover 56,300 54,900 57,051 50,965 40,000 45,000 45,000
RRSport 87,500 76,600 82,600 76,339 65,000 80,000 80,000
Evoque 115,177 96,277 65,377 90,667 75,000 98,000 101,000
Range Rover Velar — 59,200 60,766 52,972 40,000 52,000 52,000
Land Rover 422,050 457,150 387,856 381,132 343,000 428,000 434,000
Total Volumes 600,804 633,412 565,304 525,402 448,453 551,500 580,234
Model mix (%)
XF 5.8 6.6 4.3 2.4 2.0 1.8 1.9
XJ 1.7 1.4 0.7 0.5 0.7 0.6 0.6
XK — — — — — — —
F type 1.8 1.5 1.4 1.2 1.1 0.9 0.9
Small Jaguar 7.8 5.1 5.4 4.3 3.6 3.0 3.0
F Pace 12.6 11.0 9.0 8.7 5.6 5.0 5.2
I-Pace/E-Pace — 2.3 10.5 10.3 10.5 11.1 13.6
Defender — — — — 7.8 7.3 6.9
Discovery 6.3 8.2 6.7 6.4 6.2 5.4 5.2
Freelander — — — — — — —
Discovery Sport 20.8 18.7 14.9 14.5 13.4 15.0 14.8
Range Rover 9.4 8.7 10.1 9.7 8.9 8.2 7.8
RRSport 14.6 12.1 14.6 14.5 14.5 14.5 13.8
Evoque 19.2 15.2 11.6 17.3 16.7 17.8 17.4
Velar — 9.3 10.7 10.1 8.9 9.4 9.0
Total Volumes 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Notes:
(a) Volumes from CJLR JV has been included in China volumes.
Standalone business performance impacted due to steep decline in volumes
 Standalone business reported an EBITDA loss of Rs8.4 bn (KIE: loss of Rs9.8 bn) in
1QFY21 due to (1) lower volumes due to shut down across India during the month of
April and May, (2) adverse product mix as M&HCV volumes fell by 92% yoy and (3) 30
bps yoy decline in gross margin (KIE: 510 bps yoy decline). Gross margin improved on a
qoq basis (+440 bps) possibly due to (1) lower RM cost and (2) improvement in net
pricing. Adjusted net loss came in at Rs21.4 bn (KIE: loss of Rs22.3 bn), which was below
our estimates despite a beat at EBITDA level due to higher finance cost in 1QFY21. During
the quarter, the company took an exceptional loss of Rs489 mn for provision for loan
given to investment in subsidiary and JV.

 Domestic retail CV volumes were down 97% yoy (wholesale CV volumes (including
exports) were down by 89% yoy) in 1QFY21. Retail sales were 67% lower than
wholesales due to muted demand, limited credit availability and negligible opening
inventory. During 1QFY21, the company lost 15.5% market share in the CV segment
from FY2020 levels led by (1) ~16% market share loss in SCV and pickups and CV
passenger segment and (2) 560 bps market share loss in ILCV segment partly offset by
~17% market share gain in M&HCV segment.
 Domestic retail PV volumes declined by 55% yoy in 1QFY21. Wholesale PV volumes

(including exports) also declined by 61% yoy in 1QFY21. During 1QFY21, the company
gained 470 bps market share in the PV segment from FY2020 levels led by launch of New
Altroz hatch during 4QFY20.
 Revenues were down 80% yoy in 1QFY21 led by (1) 82% yoy decline in volumes and (2)
11% yoy increase in ASPs due to transition to BS-VI regime despite a weaker product mix
(CV mix was down 31% yoy in 1QFY21). CV segment revenues declined by 86% yoy led
by (1) 89% yoy decline in CV volumes and (2) 35% yoy increase in ASPs due to cost
increase owing to BS-VI transition and lower discounts. PV revenues declined by 61% yoy
in 1QFY21 largely led by 61% yoy decline in PV volumes.
 EBITDA margin came in at negative 31.3% in 1QFY21 (versus positive 5.5% in 1QFY20
and negative 7.4% in 1QFY20), which was above our estimates of negative 45.1%. In
terms of segments, EBIT margin in CV segment declined by 69.5% yoy to negative
64.8% due to negative operating leverage. In the PV segment, EBIT margin was negative
52.7% in 1QFY21 versus negative 9.9% in1QFY20 – a steep decline due to the
challenging demand environment.
 The company incurred capex of Rs4.9 bn in 1QFY21 – out of which Rs2.4 bn was
incurred to ensure transition towards BS-VI norms and other capital investments. R&D
investments were Rs2.55 bn in 1QFY21. The company generated negative FCF of Rs42.9
bn led by lower cash flow generation from operating activities and deterioration in
working capital cycle in 1QFY21. The company will restrict its capex to Rs15 bn in
FY2021E. The company will focus on delivering Rs60 bn of cost savings in FY2021E. The
company achieved cost savings of Rs10.2 bn in 1QFY21 led by (1) Rs4.8 bn of savings due
to a cut in capex and (2) Rs5.4 bn savings due to a cut in employee costs, marketing cost
and other fixed overheads.
 Gross debt for the standalone entity stood at Rs311 bn as of June 2020 from Rs260.5 bn
as of March 2020 and the company has cash balances (including current investments)
worth Rs54 bn. The company has already secured term funding of Rs40 bn during
1QFY21; however, the company will have to further raise capital in order to meet its debt
obligations.
 Other key points: (1) NBFC vehicles loans dropped to 13% in 1QFY21 from 25% in
FY2020 and (2) 100% of the suppliers have resumed operations with 33% manpower;
however manpower has gradually improved to 70%.

Exhibit 12: The company incurred EBITDA loss of Rs8.4 bn due to steep volume decline and adverse mix
Tata Motors standalone interim financial results, March fiscal year-ends (Rs mn)
(% chg.)
Volumes (units) 25,047 25,047 137,545 101,420 (81.8) (75.3) 303,516 473,377 (35.9) 397,526 303,516 31.0
Net realization (Rs) 1,072,731 863,694 970,730 959,660 24.2 10.5 11.8 1,088,162 927,974 17.3 1,096,726 1,088,162 0.8
Net sales 26,869 21,633 133,519 97,329 24.2 (79.9) (72.4) 330,275 439,282 (24.8) 435,977 330,275 32.0
Total expenditure (35,290) (31,395) (126,135) (104,556) 12.4 (72.0) (66.2) (334,381) (443,404) (24.6) (425,924) (334,381) 27.4
Raw materials (19,400) (16,657) (95,940) (74,591) 16.5 (79.8) (74.0) (243,962) (325,745) (25.1) (315,607) (243,962) 29.4
Staff cost (9,667) (9,197) (11,493) (11,496) 5.1 (15.9) (15.9) (38,028) (43,843) (13.3) (41,830) (38,028) 10.0
Other expenditure (6,222) (5,541) (18,701) (18,469) 12.3 (66.7) (66.3) (52,391) (73,815) (29.0) (68,486) (52,391) 30.7
EBITDA (8,421) (9,762) 7,385 (7,227) (4,106) (4,122) (0.4) 10,054 (4,106) (344.8)
Other income 1,343 1,500 4,012 2,689 10,597 13,831 (23.4) 10,699 10,597 1.0
Interest (5,528) (4,000) (4,395) (5,571) (22,528) (19,730) 14.2 (22,078) (22,528) (2.0)
Depreciation (8,599) (10,000) (7,771) (9,841) (34,171) (33,753) 1.2 (35,491) (34,171) 3.9
Profit before tax before exceptional (21,205) (22,262) (769) (19,950) (50,208) (43,774) (36,817) (50,208)
Extraordinary gain/(loss) (698) — 292 (27,909) — (27,499) — —
Pretax profits (21,903) (22,262) (477) (47,858) (50,208) (71,273) (36,817) (50,208)
Tax expense (4) — (494) (852) — (1,623) — —
Profit after tax (21,906) (22,262) (971) (48,711) (50,208) (72,896) (31.1) (36,817) (50,208) (26.7)
Adjusted PAT (21,383) (22,262) (1,190) (27,779) (50,208) (52,272) (3.9) (36,817) (50,208) (26.7)
Adjusted EPS (Rs) (5.6) (5.8) (0.4) (7.7) (13.1) (14.5) (9.6) (13.1)
Segmental volume breakdown (units)
MHCV 3,106 39,103 27,080 (92.1) (88.5) 80,890 124,446 (35.0) 111,596 80,890 38.0
LCV 7,370 61,254 41,989 (88.0) (82.4) 129,752 216,254 (40.0) 181,653 129,752 40.0
Passenger cars 10,094 17,913 19,958 (43.6) (49.4) 50,558 72,225 (30.0) 55,613 50,558 10.0
Utility vehicles 4,477 19,275 12,393 (76.8) (63.9) 42,316 60,452 (30.0) 48,664 42,316 15.0
Product Mix (%)
MHCV 12.4 28.4 26.7 26.7 26.3 28.1 26.7
LCV 29.4 44.5 41.4 42.7 45.7 45.7 42.7
Passenger cars 40.3 13.0 19.7 16.7 15.3 14.0 16.7
Utility vehicles 17.9 14.0 12.2 13.9 12.8 12.2 13.9
Ratios (%)
Raw material cost as % of net sales 72.2 77.0 71.9 76.6 73.9 74.2 72.4 73.9
Staff cost as % of net sales 36.0 42.5 8.6 11.8 11.5 10.0 9.6 11.5
Other expenses as % of net sales 23.2 25.6 14.0 19.0 15.9 16.8 15.7 15.9
EBITDA margin (%) (31.3) (45.1) 5.5 (7.4) (1.2) (0.9) 2.3 (1.2)
EBIT margin (%) (63.3) (91.4) (0.3) (17.5) (11.6) (8.6) (5.8) (11.6)
Tax rate (%) (0.0) — (1.8) — (2.3) — —
Diluted no. of shares 3,829 3,829 3,396 3,598 3,598 3,829 3,829
Segmental revenues
Commercial vehicles 14,380 102,097 70,157 (85.9) (79.5) 329,329
Passenger vehicles 12,226 30,958 26,926 (60.5) (54.6) 107,725
Corporate/Unallocable 263 464 247 (43.4) 6.6 2,228
Total segment revenue 26,869 133,519 97,329 (79.9) (72.4) 439,282
Eliminations — — — —
Overall revenues 26,869 133,519 97,329 439,282
Segment results
Commercial vehicles (9,277) 4,820 (4,261) (292.5) 117.7 (2,076)
Passenger vehicles (6,450) (3,105) (10,125) 107.7 (36.3) (27,276)
Corporate/Unallocable (508) (720) (1,174) (29.5) (56.7) (2,639)
Total segment result (16,235) 995 (15,560) (1,731.3) 4.3 (31,991)
Eliminations — — — —
Segment EBIT (16,235) 995 (15,560) (31,991)
Segment margin
Commercial vehicles (64.5) 4.7 (6.1) (0.6)
Passenger vehicles (52.8) (10.0) (37.6) (25.3)
Corporate/Unallocable as % of revenues (1.9) (0.5) (1.2) (0.8)
Overall margin (60.4) 0.7 (16.0) (7.3)
Segmental ASPs (Rs)
Commercial vehicles 1,372,623 1,017,336 1,015,745 34.9 35.1 1,563,451
Passenger vehicles 839,084 832,470 832,296 0.8 0.8 1,159,903

Exhibit 13: Lower volumes impacted EBIT margin in 1QFY21

Yearly PBT walk of the standalone business, March fiscal year-ends, 2020-21 (Rs crore)
Exhibit 14: Standalone business generated negative FCF of Rs4.3 bn in 1QFY21 due to weaker operating performance
TTML's standalone cash-flow summary statement, March fiscal year-end, 2020-21 (Rs crore)

Exhibit 15: Tata Motors standalone invested Rs4.9bn during 1QYF21

Tata Motors standalone R&D and capex spend, March fiscal year-ends, 2020-2021 (Rs crore)
Exhibit 16: PV segment EBITDA margin came in at -14.5% (versus +1.2% in 1QFY21) and CV EBITDA margin came in -40.3% in 1QFY21
Segmental revenue, EBITDA and EBIT of standalone business, March fiscal year-ends, 1QFY18-4QFY20 (Rs mn)
Commercial vehicle segment
Revenue 79,750 102,450 122,970 149,710 128,923 139,393 127,088 144,961 102,097 77,858 79,218 70,157 14,380
EBITDA 4,360 13,216 14,850 17,160 15,110 15,891 14,742 13,661 8,780 2,959 1,743 491 (5,795)
EBITDA margin (%) 5.5 12.9 12.1 11.5 11.7 11.4 11.6 9.4 8.6 3.8 2.2 0.7 (40.3)
EBIT 1,140 9,490 10,940 13,324 11,460 12,110 10,548 10,192 4,799 (389) (1,822) (3,718) (9,318)
EBIT margin (%) 1.4 9.3 8.9 8.9 8.9 8.7 8.3 7.0 4.7 (0.5) (2.3) (5.3) (64.8)
Passenger vehicle segment
Revenue 23,420 30,420 37,330 47,656 37,599 37,790 34,703 40,429 30,958 21,865 27,976 26,926 12,226
EBITDA (4,610) (4,198) (1,792) (4,610) (250) 76 312 13 371 (4,679) (1,007) (5,197) (1,773)
EBITDA margin (%) (19.7) (13.8) (4.8) (9.7) (0.7) 0.2 0.9 0.0 1.2 (21.4) (3.6) (19.3) (14.5)
EBIT (7,930) (7,790) (5,525) (8,770) (3,300) (3,280) (2,776) (4,614) (3,065) (8,484) (5,539) (10,393) (6,443)
EBIT margin (%) (33.9) (25.6) (14.8) (18.4) (8.8) (8.7) (8.0) (11.4) (9.9) (38.8) (19.8) (38.6) (52.7)
Consolidated EBITDA was significantly above our estimates due to stronger

performance in JLR operations
The company reported consolidated EBITDA of Rs6.4 bn (-79% yoy), which was significantly
above our estimates due to a beat in EBITDA in JLR and standalone business. Revenues
declined by 48% yoy in 1QFY21 due to (1) 80% yoy decline in standalone revenues and (2)
44% yoy decline in JLR revenues (in GBP terms). Reported net loss was Rs84.4 bn, which
was substantially above our estimates due to a beat at EBITDA level and higher-than-
expected other income in 1QFY21.
Total debt at JLR stood at GBP6.6 bn as on 30 June 2020. Total borrowings in the
standalone entity stood at Rs311 bn as on 30 June 2020. Net consolidated automotive debt
was Rs678 bn as of June 2020 versus Rs482.8 bn as of March 2020.

Net NPA rises for Tata Motors Finance in 1QFY21
Disbursals for Tata Motors Finance were down due to a poor demand scenario. Disbursals
slowed down by 87% to Rs4.9 bn primarily due to a slowdown in demand for long haul
trucks. PBT stood at Rs260 mn in 1QFY21 versus Rs100 mn in 1QFY20. Gross NPA rose to
5.3% in 1QFY21 from 3.9% in 1QFY20 and net NPA rose to 4.4% in 1QFY21 from 2.5% in
1QFY20. The company raised Rs110 bn of capital during 1QFY21. Cost to income ratios
stood at 48% in 1QFY21 versus 57% in 1QFY20. The company has cash and cash
equivalents stood at Rs57 bn as on June 2020.
Exhibit 17: Consolidated EBITDA was significantly above our estimates due to better-than-expected performance in JLR
Tata Motors consolidated interim financial results, March fiscal year-ends (Rs mn)
(% chg.)
Net sales 319,831 240,281 614,670 624,930 33.1 (48.0) (48.8) 2,300,860 2,610,680 (11.9) 2,826,279 2,300,860 22.8
Raw materials (199,212) (139,362) (397,755) (408,096) 42.9 (49.9) (51.2) (1,437,338) (1,671,310) (1,782,576) (1,437,338)
Staff costs (56,943) (57,740) (77,196) (76,987) (1.4) (26.2) (26.0) (292,728) (304,386) (321,819) (292,728)
Other expenses (57,320) (92,890) (109,765) (116,113) (38.3) (47.8) (50.6) (366,667) (437,726) (399,509) (366,667)
Total expenses (313,475) (289,993) (584,715) (601,196) 8.1 (46.4) (47.9) (2,096,733) (2,413,422) (2,503,904) (2,096,733)
EBITDA 6,356 (49,712) 29,955 23,733 (78.8) (73.2) 204,127 197,258 3.5 322,375 204,127 57.9
Other income 6,065 4,000 8,360 5,645 51.6 (27.4) 7.5 24,000 29,732 30,000 24,000
Interest expense (18,768) (15,000) (17,116) (19,528) 25.1 9.7 (3.9) (80,337) (72,433) (85,037) (80,337)
Depreciation (55,994) (55,000) (51,117) (58,149) 1.8 9.5 (3.7) (236,171) (214,254) (246,991) (236,171)
Extraordinary gain/(loss) 504 — (2,464) (44,831) — (46,102) — —
Profit before tax (61,837) (115,712) (32,382) (93,130) (88,380) (105,800) 20,347 (88,380)
Tax expense (22,005) — (1,961) (3,583) (2,743) (3,953) (12,311) (2,743)
Minority interest/associates (538) (2,000) (2,641) (2,230) (956) (10,956) 44 (956)
Profit after tax (84,380) (117,712) (36,983) (98,943) (92,079) (120,708) 8,080 (92,079)
Adjusted profit after tax (84,884) (117,712) (34,766) (54,112) (92,079) (79,217) 8,080 (92,079)
Adjusted EPS (Rs) (22.2) (30.7) (10.2) (15.0) (24.0) (22.0) 2.1 (24.0)
Ratios (%)
Raw material as % of sales 62.3 58.0 64.7 65.3 62.5 64.0 63.1 62.5
Staff costs as % of sales 17.8 24.0 12.6 12.3 12.7 11.7 11.4 12.7
Other expenses as % of sales 17.9 38.7 17.9 18.6 15.9 16.8 14.1 15.9
EBITDA margin (%) 2.0 (20.7) 4.9 3.8 8.9 7.6 11.4 8.9
Tax rate (%) (35.6) — (6.1) (3.8) (3.1) (3.7) (3.1)
Diluted no. of shares 3,829 3,829 3,396 3,598 3,829 3,598 3,829 3,829
Source: Company, Kotak Institutional Equities estimate
Exhibit 18: JLR’s total debt stood at GBP6.6 bn in 1QFY21; standalone entity total borrowings stood at Rs311 bn in 1QFY21
TTML's consolidated debt maturity profile, March fiscal year-end, 2020-2021 (GBP bn, Rs crore)

Exhibit 19: We expect EBITDA margin to improve to 13% in China JV venture in FY2023E
Summary projected financials of JLR China JV venture, March fiscal year-ends, 2016-23E (GBP mn)
2016 2017 2018 2019 2020 2021E 2022E 2023E
Sales volumes (units)
Discovery Sport 8,000 38,873 43,673 26,053 23,531 30,000 33,000 36,000
Evoque 26,751 17,677 18,777 7,680 7,469 15,000 18,000 21,000
Jaguar XF — 9,454 21,854 9,947 5,726 5,153 5,800 6,264
Jaguar XE — — 3,908 11,239 10,453 12,000 12,500 13,500
E-Pace — — — 2,509 2,271 2,300 2,500 2,700
Total sales volumes 34,751 66,004 88,212 57,428 49,450 64,453 71,800 79,464
Net sales 1,106 2,163 2,773 1,697 1,295 1,857 2,068 2,289
Raw material cost (675) (1,298) (1,608) (1,154) (1,036) (1,393) (1,551) (1,671)
Staff cost (50) (73) (98) (109) (109) (98) (106) (114)
Royalty (55) (108) (139) (110) (99) (109) (120) (132)
Other expenses (98) (161) (54) (101) (70) (59) (59) (64)
Total expenses (878) (1,640) (1,899) (1,474) (1,314) (1,659) (1,837) (1,982)
EBITDA 228 523 874 223 (19) 198 232 308
Interest expense (2) (3) (96) 1 (11) (15) (20) (20)
Depreciation expense (58) (105) (139) (209) (201) (180) (180) (180)
Profit before tax 168 415 640 15 (231) 3 32 108
Tax (44) (103) (136) (2) 7 (1) (10) (35)
Profit after tax 124 312 504 13 (224) 2 21 72
Ratios
Raw material cost as % of net sales 61.0 60.0 58.0 68.0 80.0 75.0 75.0 73.0
Staff cost as % of net sales 4.5 3.4 3.5 6.4 8.4 5.3 5.1 5.0
Royalty cost as % of net sales 5.0 5.0 5.0 6.5 7.7 5.9 5.8 5.8
Other expenses cost as % of net sales 8.9 7.4 1.9 5.9 5.4 3.2 2.9 2.8
EBITDA margin (%) 20.6 24.2 31.5 13.1 (1.5) 10.6 11.2 13.4
Exhibit 20: We expect standalone volumes to remain flattish over FY2020-23E

Tata Motors standalone volume assumptions, March fiscal year-ends, 2011-23E (units)
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E 2022E 2023E
M&HCVs 209,522 221,298 152,505 122,498 142,737 176,493 175,262 190,367 224,940 124,446 80,890 111,596 138,504
M&HCVs-domestic 192,127 207,014 143,381 110,225 127,011 156,961 148,901 168,013 195,712 111,752 72,639 101,694 127,118
M&HCVs-exports 17,395 14,284 9,124 12,273 15,726 19,532 26,361 22,354 29,228 12,694 8,251 9,901 11,387
LCVs 287,463 363,756 428,643 298,799 221,818 205,231 209,767 259,066 294,837 216,254 129,752 181,653 217,984
LCVs-domestic 77,558 95,791 113,520 85,140 59,598 59,078 54,488 103,410 124,602 87,820 52,692 73,768 88,522
Ace 177,096 227,179 280,242 183,059 131,533 111,981 121,821 127,912 148,378 111,283 66,770 93,478 112,174
LCVs-exports 32,809 40,786 34,881 30,600 30,687 34,172 33,458 27,744 21,857 17,151 10,291 14,407 17,288
UVs 43,063 56,464 48,617 32,400 25,617 19,364 20,197 53,071 80,095 60,452 42,316 48,664 54,504
UVs-domestic 42,297 55,744 47,454 31,268 24,609 18,621 18,757 51,891 78,756 59,381 41,567 47,802 53,538
UVs-exports 766 720 1,163 1,132 1,008 743 1,440 1,180 1,339 1,071 750 862 966
Passenger vehicles 263,274 265,254 180,355 112,894 111,982 111,072 137,096 136,548 132,069 72,225 50,558 55,613 61,175
Passenger vehicles-domestic 185,767 183,439 120,845 85,648 92,569 86,796 126,908 133,579 131,011 71,816 50,271 55,298 60,828
Passenger vehicles-exports 7,075 7,288 5,663 5,707 2,512 3,264 2,597 1,118 682 409 286 315 346
Small car 70,432 74,527 53,847 21,539 16,901 21,012 7,591 1,851 376 — — — —
Total domestic sales 745,277 843,694 759,289 516,879 452,221 454,449 478,466 586,656 678,835 442,052 283,939 372,041 442,180
Total export sales 58,045 63,078 50,831 49,712 49,933 57,711 63,856 52,396 53,106 31,325 19,578 25,485 29,987
Total vehicle sales 803,322 906,772 810,120.0 566,591 502,154 512,160 542,322 639,052 731,941 473,377 303,516 397,526 472,167
Volume growth (yoy %)
M&HCVs 24.8 5.6 (31.1) (19.7) 16.5 23.6 (0.7) 8.6 18.2 (44.7) (35.0) 38.0 24.1
M&HCVs-domestic 23.8 7.7 (30.7) (23.1) 15.2 23.6 (5.1) 12.8 16.5 (42.9) (35.0) 40.0 25.0
M&HCVs-exports 37.1 (17.9) (36.1) 34.5 28.1 24.2 35.0 (15.2) 30.8 (56.6) (35.0) 20.0 15.0
LCVs 23.0 26.5 17.8 (30.3) (25.8) (7.5) 2.2 23.5 13.8 (26.7) (40.0) 40.0 20.0
LCVs-domestic (10.1) 23.5 18.5 (25.0) (30.0) (0.9) (7.8) 89.8 20.5 (29.5) (40.0) 40.0 20.0
Ace 34.0 28.3 23.4 (34.7) (28.1) (14.9) 8.8 5.0 16.0 (25.0) (40.0) 40.0 20.0
LCVs-exports 115.6 24.3 (14.5) (12.3) 0.3 11.4 (2.1) (17.1) (21.2) (21.5) (40.0) 40.0 20.0
UVs 26.2 31.1 (13.9) (33.4) (20.9) (24.4) 4.3 162.8 50.9 (24.5) (30.0) 15.0 12.0
UVs-domestic 26.1 31.8 (14.9) (34.1) (21.3) (24.3) 0.7 176.6 51.8 (24.6) (30.0) 15.0 12.0
UVs-exports 29.2 (6.0) 61.5 (2.7) (11.0) (26.3) 93.8 (18.1) 13.5 (20.0) (30.0) 15.0 12.0
Passenger vehicles 27.2 0.8 (32.0) (37.4) (0.8) (0.8) 23.4 (0.4) (3.3) (45.3) (30.0) 10.0 10.0
Passenger vehicles-domestic 8.6 (1.3) (34.1) (29.1) 8.1 (6.2) 46.2 5.3 (1.9) (45.2) (30.0) 10.0 10.0
Passenger vehicles-exports 25.5 3.0 (22.3) 0.8 (56.0) 29.9 (20.4) (57.0) (39.0) (40.0) (30.0) 10.0 10.0
Small car 132.1 5.8 (27.7) (60.0) (21.5) 24.3 (63.9) (75.6) (79.7) (100.0) NA NA NA
Total domestic sales 22.5 13.2 (10.0) (31.9) (12.5) 0.5 5.3 22.6 15.7 (34.9) (35.8) 31.0 18.9
Total export sales 70.0 8.7 (19.4) (2.2) 0.4 15.6 10.6 (17.9) 1.4 (41.0) (37.5) 30.2 17.7
Total vehicle sales 25.0 12.9 (10.7) (30.1) (11.4) 2.0 5.9 17.8 14.5 (35.3) (35.9) 31.0 18.8

Exhibit 21: We value Tata Motors at Rs90/share based on SOTP methodology

Tata Motors SOTP valuation (Rs per share)
Multiple Value Value per share
Value (X) (Rs mn) (Rs) Comments
Standalone business (Rs mn)
CV EBIT 30,000 12 28,302 89 Based on March 2023 estimates (normalized profitability)
FCF loss for FY2022 and FY2023 after which we assume
PV EBIT (28,353) (28,353) (7)
FCF breakeven for PV business
Debt (236,930) (62)
Total standalone value 19
JLR
JLR UK net profit 34,701 5.0 173,506 45 based on September 2022 EPS
JLR China JV valuation 17 based on 5X September 2022 EV/EBITDA
Total standalone + JLR 81
Value of Tata Motors Finance 5 1X P/BV on March 2021E
SOTP-based value 86
Fair value 90
Exhibit 22: We have increased our FY2021-23E consolidated EPS estimates led by cost cutting initiatives in JLR and standalone operations
Earnings revision table, March fiscal year-ends, FY2021-23E (Rs mn, GBP mn, %)
New estimates Old estimates change (%)
2021E 2022E 2023E 2021E 2022E 2023E 2021E 2022E 2023E
Standalone (Rs mn)
Volumes (units) 303,516 397,526 472,167 303,516 397,526 472,167 — — —
Net sales 330,275 435,977 537,739 327,965 432,679 526,730 0.7 0.8 2.1
EBITDA (4,106) 10,054 32,447 (25,800) (10,893) 8,809
EBITDA margin (%) (1.2) 2.3 6.0 (7.9) (2.5) 1.7
Adjusted net profit (50,208) (36,817) (16,587) (74,879) (61,070) (46,792)
JLR UK P&L (GBP mn)
Volumes (units) 384,000 479,700 500,770 416,432 499,032 521,092 (7.8) (3.9) (3.9)
Average realization 49,819 49,465 49,229 44,681 46,917 46,778 11.5 5.4 5.2
Net sales 19,131 23,729 24,653 18,607 23,413 24,376 2.8 1.3 1.1
Of which hedged forex losses (300) — — (300) — —
EBITDA 1,769 2,775 2,939 967 2,714 2,943 83.0 2.2 (0.1)
EBITDA margin (%) 9.2 11.7 11.9 5.2 11.6 12.1
Reported net profit (404) 341 390 (1,063) 438 535
China JV (GBP mn)
Volumes (units) 64,453 71,800 79,464 56,657 63,300 68,614 13.8 13.4 15.8
Net sales 1,857 2,068 2,289 1,484 1,658 1,797 25.1 24.8 27.4
EBITDA 198 232 308 27 121 183 640.4 92.2 67.7
EBITDA margin (%) 10.6 11.2 13.4 1.8 7.3 10.2
Net profit 2 21 72 (127) (67) (25)
Consolidated (Rs mn)
Net sales 2,300,860 2,826,279 3,028,262 2,248,780 2,793,000 2,990,951 2.3 1.2 1.2
EBITDA 204,127 322,375 365,112 98,752 289,262 335,743 106.7 11.4 8.7
EBITDA margin (%) 8.9 11.4 12.1 4.4 10.4 11.2
Adjusted net profit (86,594) 8,080 35,997 (177,028) (18,149) 7,962
EPS (22.6) 2.1 9.4 (46.2) (4.7) 2.1
GBPINR 95.0 95.0 95.0 95.0 95.0 95.0 — — —

Exhibit 23: We build in EBIT margin of ~3% in JLR UK financials over FY2022-23E
Jaguar Land Rover (ex-China JV) income statement, March fiscal year-ends, 2011-23E (GBP mn)
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E 2022E 2023E
Volumes (000s) 244 314 372 430 467 509 535 545 508 476 384 480 501
Sales 9,871 13,512 15,784 19,386 22,106 22,286 24,339 25,786 24,214 22,984 19,131 23,729 24,653
Of which realzied forex losses — — — — 240 78 (1,320) (1,389) (703) (544) (300) — —
Realizations per vehicle 40,520 42,972 42,422 45,083 47,387 43,759 45,510 47,296 47,677 48,291 49,819 49,465 49,229
Cost of sales 8,286 11,373 13,254 15,910 18,129 18,821 21,143 22,880 21,812 20,563 17,001 20,594 21,353
Materials 6,178 8,733 9,904 11,904 13,347 13,562 15,071 16,328 15,670 14,684 12,244 15,186 15,531
Labor 789 1,011 1,333 1,654 1,977 2,321 2,490 2,722 2,820 2,568 2,260 2,526 2,831
Manufacturing costs and SG&A 1,319 1,629 2,017 2,352 2,805 2,938 3,582 3,830 3,322 3,311 2,498 2,881 2,991
D&A 396 466 622 875 1,051 1,418 1,656 2,075 2,164 1,910 2,000 2,100 2,200
Product dev 119 149 198 236 253 318 368 406 421 421 360 360 360
EBIT 1,069 1,524 1,710 2,365 2,673 1,729 1,172 425 (183) 90 (231) 675 739
EBITDA 1,465 1,989 2,331 3,240 3,724 3,147 2,828 2,500 1,981 2,000 1,769 2,775 2,939
Other income 36 38 71 153 143 128 379 420 (102) (212) — — —
Interest 23 69 (3) 147 87 52 35 52 76 157 200 220 220
PBT 1,082 1,492 1,784 2,371 2,729 1,805 1,516 793 (361) (279) (431) 455 519
Tax 79 26 460 622 576 293 331 398 (308) 47 — 114 130
Forex gains/(losses) (33) (14) (108) 137 (216) (136) (102) 467 (3,271) (29) 27 — —
PAT 1,036 1,481 1,216 1,886 1,937 1,376 1,083 862 (3,324) (355) (404) 341 390
EBITDA margin (%) 14.8 14.7 14.8 16.7 16.8 14.1 11.6 9.7 8.2 8.7 9.2 11.7 11.9
EBIT margin - including China JV profit (%) 10.8 11.3 10.8 12.2 12.1 8.0 5.5 2.6 (0.7) (0.1) (1.2) 2.9 3.1
Exhibit 24: We expect standalone EBITDA to turn positive from FY2022E onwards
Tata Motors standalone profit and loss, balance sheet and cash flow statement, March fiscal year-ends, 2012-23E (Rs mn)
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E 2022E 2023E
Profit model (Rs mn)
Net sales 543,066 447,657 342,881 362,947 428,455 443,163 578,965 692,028 439,282 330,275 435,977 537,739
EBITDA 41,776 17,180 (9,112) (12,375) 29,466 13,577 23,907 51,548 (4,122) (4,106) 10,054 32,447
Other income 2,104 17,046 18,669 18,814 14,023 9,811 24,925 25,547 13,831 10,597 10,699 10,801
Interest (8,550) (10,041) (13,375) (16,117) (15,920) (15,690) (17,444) (17,936) (19,730) (22,528) (22,078) (22,528)
Depreciaton (16,067) (18,176) (20,703) (26,032) (23,292) (30,371) (31,019) (30,986) (33,753) (34,171) (35,491) (37,306)
Profit before tax 19,263 6,008 (24,521) (35,710) 4,276 (22,674) 369 28,172 (43,774) (50,208) (36,817) (16,587)
Extra ordinary income/(expenses) 5,852 (8,642) 14,263 (4,038) (4,948) (859) (9,838) (4,183) (27,499) — — —
Tax expense — 6 13,603 (7,642) 73 (571) (926) (2,947) (331) — — —
Net profit 12,422 (1,354) 3,346 (47,390) (623) (24,296) (10,349) 20,206 (72,896) (50,208) (36,817) (16,587)
Adjusted net profit 16,519 (3,031) (27,276) (52,240) 3,088 (23,652) (2,970) 23,343 (52,272) (50,208) (36,817) (16,587)
Adjusted Diluted EPS (Rs) 4.9 (0.9) (8.0) (15.4) 0.9 (7.0) (0.9) 6.9 (14.5) (13.1) (9.6) (4.3)
Balance sheet (Rs mn)
Equity 6,348 6,381 6,438 6,438 6,792 6,792 6,792 6,792 7,195 7,658 7,658 7,658
Reserves and Surplus 189,913 187,118 185,328 142,188 225,829 204,834 194,918 214,833 176,681 160,710 123,893 107,307
Deferred tax liability 21,054 19,639 431 — 714 1,476 1,546 2,059 1,986 1,986 1,986 1,986
Total borrowings 158,806 167,990 150,528 211,344 164,733 193,570 184,638 186,396 258,979 238,979 248,979 248,979
Current liabilities 169,073 142,871 154,619 139,462 168,692 182,111 204,229 199,016 181,058 146,784 162,819 183,055
Total liabilities 545,193 523,998 497,344 499,432 566,760 588,783 592,123 609,096 625,899 556,117 545,336 548,985
Net fixed assets 190,562 202,085 215,956 218,240 267,623 280,439 268,004 285,734 290,332 271,161 260,671 253,365
Investments 204,936 199,344 184,584 169,670 152,175 148,584 149,427 156,920 157,309 157,309 157,309 157,309
Cash 18,410 4,629 2,262 9,650 25,343 27,640 26,163 24,820 44,175 30,837 17,717 11,125
Other current assets 128,702 115,790 94,542 101,872 121,619 132,120 148,530 141,622 134,083 96,810 109,639 127,186
Miscellaneous expenditure 2,584 2,150 — — — — — — — — — —
Total assets 545,193 523,998 497,344 499,432 566,760 588,783 592,123 609,096 625,899 556,117 545,336 548,985
Free cash flow (Rs mn)
Operating cash flow excl. working capital 39,671 17,557 (9,949) (6,972) 34,789 15,465 40,824 59,848 (5,320) 6,490 20,752 43,247
Working capital changes (3,135) 5,028 34,583 (15,171) (7,759) (931) 515 3,079 (9,226) 3,000 3,206 2,689
Capital expenditure (28,355) (25,884) (30,941) (30,548) (32,492) (34,965) (27,948) (47,532) (45,134) (15,000) (25,000) (30,000)
Free cash flow (6,642) (21,394) (23,805) (71,140) (26,321) (39,795) (7,593) (8,153) (82,377) (28,038) (23,120) (6,592)
Ratios
Gross margin (%) 26.9 26.4 24.4 25.5 32.1 29.3 26.3 26.9 25.8 26.1 27.6 28.7
EBITDA margin (%) 7.7 3.8 (2.7) (3.4) 6.9 3.1 4.1 7.4 (0.9) (1.2) 2.3 6.0
EBIT margin (%) 4.7 (0.2) (8.7) (10.6) 1.4 (3.8) (1.2) 3.0 (8.6) (11.6) (5.8) (0.9)
Debt/equity (X) 0.8 0.9 0.8 1.4 0.7 0.9 0.9 0.8 1.4 1.4 1.9 2.2
Net debt/equity (X) 0.7 0.8 0.8 1.4 0.6 0.8 0.8 0.7 1.2 1.2 1.8 2.1
RoAE (%) 8.3 (1.6) (14.2) (30.7) 1.6 (10.6) (1.4) 11.0 (25.8) (28.5) (24.6) (13.5)
Book value/share (X) 57.8 57.0 56.5 43.8 68.5 62.3 59.4 65.3 51.1 44.0 34.4 30.0

Exhibit 25: We expect profitability to recover from FY2022E onwards

Tata Motors consolidated profit and loss, balance sheet and cash flow statement, March fiscal year-ends, 2012-23E (Rs mn)
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E 2022E 2023E
Net sales 1,656,545 1,888,176 2,328,337 2,627,963 2,730,456 2,696,925 2,915,505 3,019,384 2,610,680 2,300,860 2,826,279 3,028,262
EBITDA 223,112 245,473 348,377 392,387 383,075 334,988 302,724 255,702 197,258 204,127 322,375 365,112
Other income 6,618 8,115 8,286 8,987 8,854 7,545 39,576 29,653 29,732 24,000 30,000 30,000
Interest (29,822) (35,533) (47,338) (48,615) (48,891) (42,380) (46,818) (57,586) (72,433) (80,337) (85,037) (89,063)
Depreciaton (56,254) (75,693) (110,782) (133,886) (167,108) (179,050) (215,536) (235,906) (214,254) (236,171) (246,991) (258,306)
Profit before tax 143,654 142,362 198,544 218,873 175,930 121,103 79,946 (8,137) (59,698) (88,380) 20,347 47,744
Extra ordinary income/(expenses) (8,315) (6,027) (9,854) (1,847) (24,271) (19,569) 22,123 (269,928) (46,102) — — —
Tax 400 (37,710) (47,648) (76,429) (40,652) (40,899) (33,938) (11,273) (3,953) (2,743) (12,311) (11,791)
Minority Interest + Associate income (574) 301 (1,132) (734) 4,786 13,908 21,758 1,075 (10,956) (956) 44 44
Net profit 135,165 98,926 139,910 139,863 115,793 74,544 89,889 (288,262) (120,708) (92,079) 8,080 35,997
Adjusted net profit 143,480 104,953 149,764 141,710 140,064 94,112 67,766 (18,335) (74,607) (86,594) 8,080 35,997
Adjusted EPS (Rs) 42.3 30.9 44.1 41.7 41.2 27.7 20.0 (5.4) (20.7) (22.6) 2.1 9.4
Equity 6,348 6,381 6,438 6,438 6,792 6,792 6,792 6,792 7,195 7,658 7,658 7,658
Reserves and Surplus 325,152 381,331 649,597 556,181 782,732 573,827 947,487 595,003 623,590 571,233 579,313 615,310
Deferred tax liability 21,651 20,195 15,723 13,432 44,748 11,740 61,258 14,910 19,419 19,419 19,419 19,419
Minority Interest 3,071 3,705 4,207 4,333 4,328 4,532 5,251 5,231 8,136 9,092 10,048 11,004
Total borrowings 471,490 535,914 606,423 736,104 733,413 786,040 889,505 1,061,753 1,247,882 1,242,884 1,279,516 1,310,142
Current liabilities 626,116 764,078 917,596 1,070,091 1,099,398 1,354,613 1,403,213 1,388,255 1,314,992 1,166,189 1,316,349 1,393,830
Total liabilities 1,453,826 1,711,603 2,199,983 2,386,580 2,671,412 2,737,543 3,313,505 3,071,945 3,221,213 3,016,475 3,212,302 3,357,364
Net fixed assets 562,125 694,836 973,754 1,124,226 1,323,909 1,289,696 1,613,309 1,423,705 1,556,770 1,538,900 1,567,709 1,590,203
Goodwill 40,937 41,024 49,788 46,970 7,598 6,733 1,165 7,479 7,771 7,771 7,771 7,771
Investments 89,177 90,577 106,867 12,405 45,340 52,968 61,490 68,324 54,469 54,469 54,469 54,469
Cash 182,381 211,127 297,118 462,120 496,934 511,190 492,777 415,872 445,885 313,144 322,246 369,547
Other current assets 574,691 662,701 748,986 717,389 797,630 876,956 1,144,765 1,156,567 1,156,317 1,102,191 1,260,107 1,335,374
Miscellaneous expenditure 4,514 11,339 23,471 23,471 — — — — — — — —
Total assets 1,453,826 1,711,603 2,199,983 2,386,580 2,671,412 2,737,543 3,313,505 3,071,945 3,221,213 3,016,475 3,212,302 3,357,364
Operating cash flow excl. working capital 206,644 221,302 303,768 388,547 365,864 269,450 317,730 261,114 215,675 230,870 341,064 384,322
Working capital changes (22,801) (680) 57,744 (36,718) 13,132 32,542 (64,337) (72,207) 50,654 (94,676) (7,757) 2,215
Capital expenditure (138,756) (187,570) (269,252) (315,396) (314,442) (304,135) (350,486) (352,363) (295,306) (218,300) (275,800) (280,800)
Free cash flow (including finance business debt) 11,351 (13,508) 30,554 (26,637) 7,397 (55,506) (151,200) (233,506) (104,160) (162,443) (27,530) 16,674
Ratios
EBITDA margin (%) 13.5 13.0 15.0 14.9 14.0 12.4 10.4 8.5 7.6 8.9 11.4 12.1
Debt/equity (X) 1.4 1.4 0.9 1.3 0.9 1.4 0.9 1.8 2.0 2.1 2.2 2.1
Net debt/equity (X) 0.9 0.8 0.5 0.5 0.3 0.5 0.4 1.1 1.3 1.6 1.6 1.5
Book value (Rs per share) 84.2 98.8 171.6 144.9 230.3 169.0 280.7 175.0 173.2 149.2 151.3 160.7
ROAE (%) 54.8 29.2 28.7 23.3 20.7 13.7 8.8 (2.4) (12.1) (14.3) 1.4 6.0

SELL
UPL (UPLL)
Fertilizers & Agricultural Chemicals AUGUST 02, 2020
RESULT
Higher margins offset muted revenues. UPL’s 1QFY21 EBITDA was modestly above CMP (Rs): 478
our estimate, as lower revenues were offset by a sharp expansion in margins. Net debt Fair Value (Rs): 390
remained steady, although the company raised ~US$500 mn of bonds to enhance its
BSE-30: 37,607
liquidity position. New disclosures suggest a large portion of net debt reduction in
FY2020 can be attributed to receivables factoring. We retain SELL with a revised FV of
Rs390 (Rs350 earlier), while noting material downside risks to consensus estimates.
UPL
Mcap (bn) (Rs/US$) 366/4.9 EPS growth (%) 22.7 37.6 14.2
ADTV-3M (mn) (Rs/US$) 3,040/41 P/E (X) 20.6 15.0 13.1
FIIs 50.2 RoE (%) 11.5 14.2 14.6
Price performance (%) 1M 3M 12M Sales (Rs bn) 358 381 402
Rel. to BSE-30 4 2 (20) Net profits (Rs bn) 18 24 28
Sharp decline in LatAm and North America offset by robust growth in India and RoW
UPL reported 1% yoy decline in revenues to Rs78.3 bn in 1QFY21, well below our estimates,
reflecting 16% yoy decline in LatAm and 14% decline in North America, which was partly offset
by 27% growth in India and 10% growth in RoW. Weak performance in LatAm was attributed to
postponement of orders amid sharp devaluation of Brazilian Real, while North America was
impacted due to Covid-related pre-buying in the previous quarter. Healthy growth in India and
South East Asia were driven by a favorable monsoon outlook. Reported gross margin jumped to
54.7% from 43.9% in 4QFY20 amid—(1) favorable product/geographical mix, (2) higher
realizations amid devaluation of Brazilian Real, (3) moderation in input costs and (4) synergy gains.
EBITDA, including forex gain, jumped 39% yoy to Rs18.3 bn, modest 3% above our estimate,
with margins expanding by 630 bps qoq to 23.4%.
Bond issuance amid steady net debt; WC reduction in FY2020 attributed to receivable factoring
Net debt remained stable at ~Rs250 bn (including perpetual bonds) with OCF of Rs18.9 bn, WC
deployment (84 days now) of Rs6.4 bn and capex of Rs5.3 bn. UPL issued US$500 mn of 10-years
bonds to enhance its liquidity position and bought back US$82 mn of 5-year bonds maturing in
October 2021. The company disclosed its receivable factoring was at Rs60 bn now versus Rs69.7
bn as of end-FY2020 and Rs40 bn as of end-1QFY20—this suggests that a large portion of WC
release in FY2020, which was around 80% of US$0.5 bn FCF, was perhaps due to an increase in
receivable factoring. UPL expects to reduce net debt to 2X EBITDA by end-FY2021, which we
believe may be difficult to achieve without perpetual bonds or an equity dilution or receivables
factoring given limited scope to reduce working capital hereon.
UPL’s expectations imply healthy growth in revenues along with sharp moderation in margins
UPL management expects (1) 6-8% growth in revenues for FY2021 implying a healthy 8-11%
increase in revenues for the rest of the year and (2) 10-12% growth in EBITDA for the year as
compared to 29% jump in 1QFY21, implying a relatively lower 6-8% increase in EBITDA during Tarun Lakhotia
the remaining nine months—the latter suggests possibility of sharp moderation in margins. The
management indicated that glyphosate ban could benefit its glufosinate business in the US. UPL
Hemang Khanna
has fully provided for all litigation costs pertaining to patent infringement; however, certain
exceptional costs related to plant closures may be accounted over the next few years.
Fine-tune EPS estimates; retain SELL noting material downside risks to consensus estimates
We raise FY2021-22E EPS by 2-5% and FV to Rs390 from Rs350 factoring in (1) higher margins,
(2) a weaker Rupee, (3) higher finance costs and (4) other minor changes. We retain SELL noting
material downside risks to consensus estimates with our forecasts at 14-21% below the Street.
Contact: +91 22 6218 6427
UPL Fertilizers & Agricultural Chemicals
Exhibit 1: Consolidated interim results of UPL, March fiscal year-ends (Rs mn)
Change (%)
1QFY21 1QFY21E 1QFY20 4QFY20 1QFY21E 1QFY20 4QFY20 FY2021E FY2020 Yoy (%)
Net sales 78,330 90,640 79,060 111,410 (14) (1) (30) 381,126 357,560 7
Total operational costs (60,010) (72,882) (65,860) (92,370) (302,909) (289,830)
Raw materials (35,490) (48,186) (42,030) (62,480) (197,877) (187,430)
Employee expenses (8,700) (9,156) (8,610) (9,680) (35,606) (33,910)
Other expenses (17,100) (16,815) (15,160) (17,560) (68,904) (65,180)
Forex loss 1,280 1,275 (60) (2,650) (522) (3,310)
EBITDA 18,320 17,758 13,200 19,040 3 39 (4) 78,217 67,730 15
Other income 670 288 390 210 1,336 1,040
Finance cost (5,510) (4,982) (3,980) (1,870) 11 38 195 (17,820) (14,810) 20
Depreciation and amortization (5,220) (6,188) (4,460) (5,950) (16) 17 (12) (23,572) (20,120) 17
PBT 8,260 6,877 5,150 11,430 20 60 (28) 38,161 33,840 13
Extraordinary items (250) — (720) (1,710) (1,133) (6,230)
Tax (1,430) (1,444) (770) (2,110) (7,498) (5,860)
PAT 6,580 5,433 3,660 7,610 21 80 (14) 29,530 21,750 36
Income from associate/MI (1,070) (1,000) (740) (1,440) (5,099) (3,990)
Net income 5,510 4,433 2,920 6,170 24 89 (11) 24,431 17,760 38
Reported EPS (Rs) 7.2 5.8 3.8 8.1 24 89 (11) 31.9 23.2 38
Key ratios (%)

Gross margins 54.7 46.8 46.8 43.9 785 bps 785 bps 1,077 bps 48.1 47.6 50 bps
EBITDA margins 23.4 19.6 16.7 17.1 380 bps 669 bps 630 bps 20.5 18.9 158 bps
Effective tax rate 17.3 21.0 15.0 18.5 19.6 17.3
Growth metrics (%)
Volumes 0.0 5.0 29.0 16.0
Realization (1.0) 1.0 (2.0) (1.0)
Exchange rate 0.0 1.0 (2.0) (2.0)
Revenue break-up
India 15,110 14,555 11,930 6,900 4 27 119 44,022 38,280 15
International 63,230 76,086 67,130 104,500 (17) (6) (39) 337,104 319,280 6
Total 78,340 90,640 79,060 111,400 (14) (1) (30) 381,126 357,560 7
Exhibit 2: Margins ex-synergy gains jumped to 22.2% in 1QFY21, perhaps reflecting a favorable geographical mix
UPL's financials including Arysta, 1QFY20 onwards (Rs mn)
1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21 Yoy (%)
Key financials including Arysta
Revenues 74,060 70,660 82,730 88,720 79,060 78,170 88,920 111,410 78,330 (0.9)
Variable cost 42,400 39,160 47,650 53,780 45,080 45,460 51,660 71,880 44,500 (1.3)
Contribution 31,660 31,500 35,080 34,940 33,980 32,710 37,260 39,530 33,830 (0.4)
Gross margins (%) 42.7 44.6 42.4 39.4 43.0 41.8 41.9 35.5 43.2 21 bps
Fixed cost 16,750 17,660 18,110 17,540 17,390 17,300 16,510 17,840 16,790 (3.5)
Reported EBITDA 14,910 13,840 16,970 17,400 16,590 15,410 20,750 21,690 17,040 2.7
EBITDA margins (%) 20.1 19.6 20.5 19.6 21.0 19.7 23.3 19.5 21.8 77 bps
Forex loss 60 920 (320) 2,650 (1,280)
Adjusted EBITDA 16,530 14,490 21,070 19,040 18,320
Adjusted EBITDA margins (%) 20.9 18.5 23.7 17.1 23.4
Realized synergy gains 1,293 1,907 2,150 2,380 954
Ex-synergy adjusted EBITDA 15,237 12,583 18,920 16,660 17,366
Ex-synergy adjusted EBITDA margins (%) 19.3 16.1 21.3 15.0 22.2

Fertilizers & Agricultural Chemicals UPL
Exhibit 3: Robust growth in India and RoW offset sharp declines in LatAm and North America
Trend in sales across key geographies, 1QFY19 onwards
Sales (Rs mn)
India 12,480 10,770 4,860 4,910 11,930 11,950 7,500 6,900 15,110
North America 7,390 4,020 8,660 14,710 11,950 6,210 12,880 25,310 10,270
Europe 6,480 3,670 5,110 11,590 16,320 9,070 7,670 20,700 17,030
LatAm 8,640 17,420 22,840 22,220 24,000 37,670 42,030 33,940 20,150
RoW 6,350 6,690 7,740 12,130 14,860 13,280 18,840 24,550 15,780
Total 41,340 42,570 49,210 65,560 79,060 78,180 88,920 111,400 78,340
Yoy growth (%)
India 11.6 8.0 (20.8) 6.7 (8.0) 6.0 42.0 36.0 26.7
North America 8.5 2.3 21.5 13.5 6.0 (1.0) (12.0) 45.0 (14.1)
Europe 10.8 1.1 36.6 17.9 (3.0) 1.0 (27.0) (2.0) 4.4
LatAm 17.2 25.8 26.5 25.9 25.0 24.0 21.0 27.0 (16.0)
RoW 5.5 5.9 12.7 2.2 7.0 (4.0) 7.0 33.0 6.2
Total 11.0 12.9 17.3 15.2 7.0 11.0 7.0 26.0 (0.9)
Notes:
(a) Including Arysta from 1Q FY20 onwards.
Exhibit 4: Volumes and realizations remain steady during 1QFY21

Breakdown of UPL’s revenues growth in key components, 1QFY15 onwards (%)
(%) Volume growth Price increase Currency

40
30
20
10
(10)
(20)
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY17
3QFY17
4QFY17
1QFY18
2QFY18
3QFY18
3QFY19
4QFY19
1QFY20
2QFY20
3QFY20
4QFY20
2QFY16
3QFY16
4QFY16
1QFY17
4QFY18
1QFY19
2QFY19
1QFY21

Exhibit 5: Net working capital days increased modestly to 84 days in 1QFY21

Trend of UPL’s net working capital days, 1QFY19 onwards (days)
(days) Inventory Receivables Payables Net working capital

150
120
90
60
30
-
Exhibit 6: UPL’s end-year working capital is seasonally lower compared to its global peers
Working capital days for global ag-chem majors (days)
31-Dec-18 31-Mar-19 31-Dec-19 31-Mar-20

UPL
Inventory days 111 106 111 81
Receivable days 139 135 124 118
Payable days 124 123 109 119
Net working capital days 126 119 126 80
Bayer AG
Inventory days 188 229
Receivable days 94 98
Payable days 90 133
Net working capital days 192 194
Corteva
Payable days 139 165
FMC Corp.
Payable days 121 130
Source: Company, Bloomberg, Kotak Institutional Equities

Fertilizers & Agricultural Chemicals UPL
Exhibit 7: Our SoTP-based Fair Value of UPL is Rs390/share

Fair valuation of UPL, March 2022E (Rs bn)
UPL Corp. (Overseas business)

EBITDA 68.9
EV/EBITDA (X) 7.0
EV 482
Net debt 235
Value of minority stake 54
Equity value of UPL Corp. [A] 193
UPL (India business)
EBITDA 14.2
EV/EBITDA (X) 8.0
EV 114
Net debt 8
Equity value of UPL India [B] 105
Total equity value [A]+[B] 299
Fair valuation (Rs/share) 390

Exhibit 8: Consolidated profit model, cash flow statement and balance sheet for UPL, March fiscal year-ends, 2016-23E (Rs mn)
2016 2017 2018 2019 2020 2021E 2022E 2023E

Sales 140,480 163,120 173,780 218,370 357,560 381,126 402,080 424,827
EBITDA 23,950 29,850 35,050 38,130 67,730 78,217 83,103 88,567
Other income 3,160 4,440 4,140 2,400 1,040 1,336 1,291 1,235
Finance cost (7,040) (7,350) (6,470) (9,630) (14,810) (17,820) (14,523) (13,148)
Depreciation and amortization (6,760) (6,720) (6,750) (9,690) (20,120) (23,572) (25,236) (26,887)
Extraordinary items (1,290) (810) (1,560) (4,510) (6,230) (1,133) (1,254) (1,398)
Profit before tax 12,020 19,410 24,410 16,700 27,610 37,028 43,381 48,371
Tax expense (1,650) (1,890) (3,180) (1,650) (5,860) (7,498) (9,652) (11,246)
Minority interest (120) (60) (90) (720) (4,020) (5,175) (5,906) (6,442)
Income from associates (850) (190) (920) 140 30 76 80 85
Reported PAT 9,400 17,270 20,220 14,470 17,760 24,431 27,903 30,767
Reported EPS (Rs) 12.3 22.6 26.4 18.9 23.2 31.9 36.5 40.2
Equity 58,887 73,974 91,690 146,450 162,960 181,077 201,768 224,584
Minority interest 440 330 190 33,580 33,120 38,295 44,200 50,643
Total borrowings 47,710 60,580 65,070 288,610 316,550 276,550 251,550 226,550
Deferred tax liabilities (4,947) (6,494) (6,050) 19,940 11,310 11,310 11,310 11,310
Current liabilities and provisions 60,690 66,480 72,030 126,460 156,580 163,889 169,917 176,460
Total liabilities 162,780 194,870 222,930 615,040 680,520 671,120 678,746 689,547
Net fixed assets 26,000 31,160 39,640 58,200 72,970 74,309 75,441 76,373
Goodwill/Intangible assets 17,460 17,470 17,920 278,640 300,970 298,634 295,916 292,823
Investments 3,350 3,780 10,340 7,340 5,580 5,580 5,580 5,580
Cash and equivalents 11,890 28,950 28,940 28,510 67,520 33,689 30,557 30,121
Current assets and miscellaneous 104,080 113,510 126,090 242,350 233,480 258,909 271,252 284,650
Total assets 162,780 194,870 222,930 615,040 680,520 671,120 678,746 689,547
Operating cash flow 16,880 19,010 19,800 13,760 59,320 51,766 57,674 62,776
Working capital changes (8,780) (270) 1,420 (270) 11,610 (18,120) (6,315) (6,855)
Capital expenditure (10,140) (12,590) (14,040) (15,530) (19,350) (22,575) (23,650) (24,725)
Free cash flow (2,040) 6,150 7,180 (2,040) 51,580 11,071 27,709 31,196
Ratios
EBITDA margin (%) 17.0 18.3 20.2 17.5 18.9 20.5 20.7 20.8
Net debt/equity (X) 0.6 0.4 0.4 1.8 1.5 1.3 1.1 0.9
Book value (Rs/share) 77 97 120 191 213 237 264 294
RoAE (%) 13.5 21.1 21.9 13.8 14.7 14.7 15.2 15.2
RoACE (%) 17.0 22.2 21.9 9.3 9.1 10.2 10.1 10.5

ADD
SRF (SRF)
Speciality Chemicals AUGUST 03, 2020
RESULT
In-line results. SRF’s 1QFY21 results were broadly in line with our expectations, as the CMP (`): 3,793
robust performance of packaging films largely mitigated weakness in other segments. Fair Value (`): 4,000
Specialty chemicals is expected to regain its robust growth trajectory led by (1) potential
BSE-30: 37,607
recovery in HFC demand and (2) ramp-up of recently commissioned capacities; expected
moderation in packaging films margins may be partly offset by volume ramp-up from
new overseas plants. We retain ADD rating and revise FV to Rs4,000 (Rs3,800 earlier).
SRF
52-week range (Rs) (high,low) 4,260-2,468 EPS (Rs) 138.0 150.0 192.6
Mcap (bn) (Rs/US$) 219/3 EPS growth (%) 23.5 8.7 28.4
ADTV-3M (mn) (Rs/US$) 1,019/14 P/E (X) 27.5 25.3 19.7
FIIs 18.3 RoE (%) 17.5 16.2 17.8
MFs/BFIs 11/0.4 Div. yield (%) 0.4 0.4 0.5
Absolute 5 2 40 EBITDA (Rs bn) 15 17 20
Rel. to BSE-30 (2) (9) 40 Net profits (Rs bn) 8 9 11
Higher margins of packaging films offset underlying weakness in other businesses

SRF’s reported revenues declined 12% yoy and 17% qoq to Rs15.45 bn, well below our
estimate, reflecting a sharp decline across technical textiles and chemicals segment impacted by
weakness in demand environment amid lockdowns. Chemicals segment revenues declined 20%
qoq reflecting a sharp drop in refrigerant gas volumes due to the lost sales in a seasonally
strong quarter. Packaging films revenues increased 13% qoq reflecting healthy off-take as well
as higher realizations. Overall EBITDA increased 1% yoy and qoq to Rs3.63 bn, 3% below our
estimate, benefiting from a meaningful reduction in costs; forex-related loss stood at Rs91 mn.
Net income increased 1% yoy but declined 9% qoq to Rs1.77 bn (EPS of Rs30.8), 2% below
our estimate, partly benefiting from lower-than-expected interest cost and depreciation.
 Refrigerant gases impacted by lockdown, specialty chemicals remained robust.
Chemicals revenues declined 20% qoq to Rs7.1 bn impacted by significantly lower off-take
for refrigerant gases due to dismal sales of white goods and automobiles impacted by the
nationwide lockdown; off-take of specialty chemicals remained healthy. A strong 17% yoy
growth in revenues reflects low base of 1QFY20, which was impacted by an unplanned
shutdown in Dahej plant. Segment EBIT increased 13% yoy, but declined 44% qoq to Rs886
mn reflecting ~546 bps qoq moderation in margins to 12.6%.
 Surge in margins for packaging films. Packaging revenues declined 3% yoy, but increased
13% qoq to Rs6.8 bn. EBIT jumped 52% yoy and 69% qoq to Rs2.2 bn as margins
expanded by nearly 11 percentage points qoq to record-high level of 32.6% benefitting
from—(1) favorable demand-supply situation amid lockdown leading to higher realizations
across domestic/export sales and (2) increase in off-take of value-added products.
 Sharp decline for technical textiles. Revenues declined 63% yoy and 56% qoq to Rs1.4
bn impacted by the nationwide lockdown amid—(1) complete closure of all plant operations Tarun Lakhotia
during April 2020 and (2) slowdown in demand for tyres cord fabric. The segment reported
an EBIT loss of Rs140 mn. Plant operations restarted from May 2020.
Hemang Khanna
Fine tune EPS estimates; retain ADD and revise FV to Rs4,000
We retain FY2021E EPS, while reducing FY2022E EPS by 2% factoring in—(1) lower revenues
and margins for technical textiles, (2) lower margins for chemicals segment and (3) higher
margins for the packaging segment, albeit factoring a material decline from elevated 1QFY21
levels. We retain ADD rating on the stock with a revised SoTP-based fair value of Rs4,000
(Rs3,800 earlier) rolling forward to June 2022E estimates. kspcg.research@kotak.com
Contact: +91 22 6218 6427
SRF Speciality Chemicals
Key takeaways from conference call

In the post-results conference call, the management indicated—(1) medium-term outlook of
20-25% growth in specialty chemicals remains intact underpinned by strong demand for
agri-chemicals and planned capacity additions, (2) a new pharma product was launched, off-
take for which will begin in the near term, (3) margins for the chemical business were
impacted by negative operating leverage amid lower sales of refrigerant gases and higher
costs for the recently commissioned HFC facilities, which are being ramped up, (4) margin
expansion in packaging films segment was partly attributed to higher off-take of VAPs;
overall segment volumes remained steady yoy, (5) packaging film business margins are
anticipated to moderate in the near term amid resumption of temporarily-shut capacities
due to the lockdown, (6) the Board has approved a project to double chloromethane
capacities to 195 k tons at a capex of Rs3.15 bn, the project is anticipated to be completed
by end-January 2020, (7) the packaging film plant in Thailand was commissioned in April
2020 and utilizations are healthy at 60% currently; the plant in Hungary has been delayed
by a few months due to travel restrictions in EU and (8) utilizations for the technical textiles
business have increased significantly to 85% in June amid healthy replacement demand for
tires, even as off-take from OEMs remains subdued.
Exhibit 1: Interim results of SRF, consolidated, March fiscal year-ends (Rs mn)
Change (%)
1QFY21 1QFY21E 1QFY20 4QFY20 1QFY21E 1QFY20 4QFY20 FY2021E FY2020 Yoy (%)
Net sales 15,452 18,654 17,633 18,578 (17) (12) (17) 77,804 72,094 8
Raw material (7,415) (9,140) (9,533) (9,175) (19) (22) (19) (39,401) (36,870) 7
Employee costs (1,375) (1,456) (1,290) (1,470) (6) 7 (6) (5,826) (5,419) 8
Power and fuel (1,233) (1,799) (1,554) (1,716) (31) (21) (28) (7,196) (6,726) 7
Forex gain/(loss) (91) (101) 151 (271) (91) (35)
Other expenses (1,705) (2,429) (1,809) (2,334) (30) (6) (27) (8,649) (8,495) 2
EBITDA 3,633 3,729 3,597 3,613 (3) 1 1 16,642 14,549 14
EBITDA margins (%) 23.5 20.0 20.4 19.4 352 bps 311 bps 406 bps 21.4 20.2 121 bps
Other income 101 126 152 63 (20) (33) 60 522 491 7
Interest cost (432) (489) (515) (466) (12) (16) (7) (1,954) (2,007) (3)
Depreciation (1,040) (1,072) (925) (1,014) (3) 13 3 (4,272) (3,886) 10
PBT 2,262 2,293 2,310 2,196 (1) (2) 3 10,938 9,147 20
Exceptionals — — — — — 1,234
Tax (493) (487) (556) (255) 1 (11) 93 (2,324) (1,222) 90
PAT 1,769 1,806 1,753 1,942 (2) 1 (9) 8,614 9,159 (6)
Adjusted PAT 1,769 1,806 1,753 1,942 (2) 1 (9) 8,614 7,925 9
Adjusted EPS (Rs) 30.8 31.5 30.5 33.8 (2) 1 (9) 150.0 138.0 9
PAT from discontinued operations 2 139 (84) — 1,032
Segment-wise sales
Technical textiles 1,404 3,821 3,168 (63) (56) 10,241 13,576 (25)
Chemicals 7,052 6,032 8,819 17 (20) 35,396 29,750 19
Packaging film 6,774 7,017 6,015 (3) 13 29,989 26,040 15
Others 237 772 577 (69) (59) 2,253 2,783 (19)
Total 15,467 17,642 18,578 (12) (17) 77,879 72,148 8
Segment-wise EBIT
Technical textiles (140) 569 372 (125) (138) 918 1,803 (49)
Chemicals 886 787 1,589 13 (44) 5,909 5,115 16
Packaging film 2,207 1,456 1,307 52 69 7,299 5,556 31
Others (3) 101 53 (103) (105) 185 318 (42)
Total 2,950 2,912 3,321 1 (11) 14,309 12,792 12
EBIT margins (%)
Technical textiles (10.0) 14.9 11.7 (2,487)bps (2,173)bps 9.0 13.3 (432)bps
Chemicals 12.6 13.0 18.0 (48)bps (546)bps 16.7 17.2 (50)bps
Packaging film 32.6 20.7 21.7 1,184 bps 1,085 bps 24.3 21.3 300 bps
Others (1.2) 13.1 9.2 (1,429)bps (1,034)bps 8.2 11.4 (321)bps
Overall EBIT margins 19.1 16.5 17.9 256 bps 120 bps 18.4 17.7 64 bps

Speciality Chemicals SRF
Exhibit 2: Consolidated segment-wise performance of SRF, 1QFY18 onwards (Rs mn)

Segment revenues
Technical textiles 5,014 5,436 5,478 4,815 3,821 3,230 3,357 3,168 1,404
Chemicals 4,774 5,420 5,860 8,400 6,032 6,780 8,119 8,819 7,052
Packaging films 6,318 6,959 7,026 6,231 7,017 6,627 6,382 6,015 6,774
Others 1,322 1,353 1,292 1,287 772 744 591 577 237
Total 17,413 19,154 19,640 20,720 17,633 17,378 18,405 18,578 15,483
Yoy growth (%)
Technical textiles (1) 30 21 4 (24) (41) (39) (34) (63)
Chemicals 34 57 46 66 26 25 39 5 17
Packaging films 52 69 63 18 11 (5) (9) (3) (3)
Total 25 49 41 29 1 (9) (6) (10) (12)
Segment EBIT
Technical textiles 721 880 817 563 569 497 365 372 (140)
Chemicals 787 630 766 1,660 787 1,308 1,431 1,589 886
Packaging films 973 1,204 881 1,057 1,456 1,299 1,494 1,307 2,207
Others 117 123 121 107 101 81 83 53 (3)
Total 2,599 2,837 2,585 3,387 2,912 3,186 3,372 3,321 2,950
EBIT margins (%)
Technical textiles 14.4 16.2 14.9 11.7 14.9 15.4 10.9 11.7 (10.0)
Chemicals 16.5 11.6 13.1 19.8 13.0 19.3 17.6 18.0 12.6
Packaging films 15.4 17.3 12.5 17.0 20.7 19.6 23.4 21.7 32.6
Overall EBIT margins 14.9 14.8 13.2 16.3 16.5 18.3 18.3 17.9 19.1

SRF Speciality Chemicals
Exhibit 3: We estimate strong growth in chemicals and packaging film business in FY2021-23E
Consolidated segment-wise performance of SRF, March fiscal year-ends, 2018-23E (Rs mn)
2018 2019 2020 2021E 2022E 2023E

Segment revenues
Technical textiles 18,388 20,742 13,576 10,241 12,677 14,420
Chemicals 16,114 24,454 29,750 35,396 42,660 53,576
Packaging films 17,823 26,533 26,040 29,989 37,843 46,211
Others 4,573 5,254 2,783 2,253 3,205 3,460
Unallocable (49) (57) (54) (75) (75) (75)
Total 56,849 76,927 72,094 77,804 96,309 117,593
Yoy growth (%)
Technical textiles 13 (35) (25) 24 14
Chemicals 52 22 19 21 26
Packaging films 49 (2) 15 26 22
Others 15 (47) (19) 42 8
Total 35 (6) 8 24 22
Segment EBIT
Technical textiles 2,529 2,982 1,515 918 1,326 1,544
Chemicals 2,694 3,843 5,115 5,909 7,761 10,015
Packaging films 2,298 4,115 5,556 7,299 8,169 9,514
Others 444 467 318 185 336 381
Unallocable (2,059) (1,523) (1,840) (1,940) (2,032) (2,152)
Total 5,904 9,884 10,663 12,370 15,561 19,301
EBIT margins (%)
Technical textiles 13.8 14.4 11.2 9.0 10.5 10.7
Chemicals 16.7 15.7 17.2 16.7 18.2 18.7
Packaging films 12.9 15.5 21.3 24.3 21.6 20.6
Others 9.7 8.9 11.4 8.2 10.5 11.0
Overall EBIT margins 10.4 12.8 14.8 15.9 16.2 16.4
Exhibit 4: We value SRF at Rs4,000

SoTP valuation of SRF, June 2022E
EPS P/E Fair value

(Rs) (X) (Rs)
Technical textiles business 15 10 153
Chemicals business 92 25 2,304
Packaging films business 94 16 1,506
Other business 4 10 38
Fair value 4,001
June 2022E consolidated EPS 205
Implied P/E multiple (X) 19

Speciality Chemicals SRF
Exhibit 5: Consolidated profit model, balance sheet and cash flow statement for SRF, March fiscal year-ends, 2016-23E (Rs mn)
2016 2017 2018 2019 2020E 2021E 2022E 2023E

Sales 45,927 48,218 55,890 76,927 72,094 77,804 96,309 117,593
EBITDA 9,625 9,970 9,062 13,552 14,549 16,642 20,421 24,679
Other income 278 455 1,151 401 491 522 543 590
Interest (1,305) (1,018) (1,239) (2,016) (2,007) (1,954) (1,786) (1,480)
Depreciation (2,750) (2,834) (3,158) (3,669) (3,886) (4,272) (4,860) (5,377)
Profit before tax 5,849 6,572 5,817 8,269 9,147 10,938 14,319 18,411
Tax expenses (1,551) (1,422) (1,200) (1,853) (1,222) (2,324) (3,257) (4,419)
Extraordinary items — — — — 1,234 — — —
Reported PAT 4,299 5,150 4,617 6,416 9,159 8,614 11,061 13,992
Adjusted PAT 4,299 5,150 4,617 6,416 7,925 8,614 11,061 13,992
Adjusted EPS (Rs) 75 90 80 112 138 150 193 244
Equity 27,630 31,827 35,645 41,293 49,333 57,022 67,020 79,790
Total borrowings 21,297 19,774 31,418 32,887 32,671 31,171 27,171 21,171
Other long term liabilities 4,321 5,702 3,695 3,986 3,239 3,239 3,239 3,239
Current liabilities and provisions 12,288 14,510 12,871 20,713 23,525 26,638 31,093 36,148
Total liabilities 65,536 71,813 83,631 98,879 108,768 118,070 128,523 140,347
Net fixed assets 42,142 46,586 56,763 63,589 75,327 83,965 89,137 93,947
Other long-term assets 3,558 4,532 3,019 3,567 4,379 4,379 4,379 4,379
Cash and investments 5,498 2,669 2,184 2,994 3,240 1,736 1,063 1,257
Current assets 14,338 18,026 21,664 28,729 25,822 27,991 33,943 40,764
Total assets 65,537 71,813 83,630 98,879 108,768 118,070 128,523 140,347
Operating cash flow 7,382 8,000 7,449 10,095 11,268 12,363 15,377 18,780
Working capital changes 2,214 (2,564) (1,693) (3,155) (239) 945 (1,498) (1,766)
Capital expenditure (5,729) (6,867) (12,829) (10,526) (11,078) (12,910) (10,032) (10,188)
Free cash flow 3,867 (1,430) (7,072) (3,586) (49) 398 3,847 6,827
Ratios (%)
EBITDA margin 21.0 20.7 16.2 17.6 20.2 21.4 21.2 21.0
Net debt/equity (X) 0.6 0.5 0.8 0.7 0.6 0.5 0.4 0.2
Book value (R/share) 481 554 621 719 859 993 1,167 1,390
Adjusted RoAE 17.0 17.3 13.7 16.7 20.2 16.2 17.8 19.1
Adjusted RoACE 12.3 12.9 8.9 13.1 14.7 14.6 16.2 18.0

BUY
Tata Communications (TCOM)
Telecommunication Services AUGUST 02, 2020
RESULT
Pieces falling in place. Covid tailwinds and benefits of the company’s cost- CMP (`): 760
rationalization initiatives showed up strong in TCOM’s 1QFY21 print, driving a mid-20s Fair Value (`): 975
yoy EBITDA growth. The print lends credence to the three-year outlook the company
BSE-30: 37,607
shared in its recent analyst webinar. We believe the company could do better than this
three-year outlook if the innovation bucket inflects and the new key account
management focus is executed well. We raise FY2021-23E EBITDA forecasts by around
13% each and revise our FV up to Rs975/share (from Rs705). Retain BUY.
Tata Communications
ADTV-3M (mn) (Rs/US$) 92/1 P/E (X) 47.5 25.4 20.4
Shareholding pattern (%) P/B (X) (16.9) (39.9) 54.5
FIIs 17.5 RoE (%) (62.4) (93.7) (1,461.8)
Rel. to BSE-30 15 58 165 Net profits (Rs bn) 5 9 11
Blowout quarter aided by Covid tailwinds and benefits of cost-rationalization initiatives
TCOM reported a strong 26% yoy growth in EBITDA in 1QFY21 to Rs10.4 bn, 23% above our
estimate. The EBITDA surprise was led equally by better-than-expected revenues (+5.6% yoy;
2.4% above estimate) and lower-than-expected costs. EBITDA crossed the Rs10 bn mark for the
first time on the back of all-time high EBITDA margins of 23.7%. INR depreciation aided, to some
extent. Even as some of the verticals like media faced disruptions due to Covid, TCOM benefitted
on balance from increased demand of services like UCC/SIP-trunking and GHCC. Capex for the
quarter stood at Rs3.7 bn while EOP net debt stood at Rs90 bn (down Rs1.7 bn qoq).
Acting decisively to leverage new opportunities thrown by Covid; launches SCDX
TCOM has been on a journey towards becoming a digital transformation partner for enterprises
from just a plain-vanilla connectivity provider for the past many years. SCDX (Secure Connected
Digital Experience), the company’s recently launched proposition to help enterprises transform
their network architecture for the post-Covid world, is a good example of the company’s ability
to launch relevant new services in quick time. SCDX, in a nutshell, offers solutions for digital
customer experience, real-time management of distributed partners, collaboration solutions,
and secure connectivity to enterprise applications and cloud (through NetFoundry). We see
SCDX as an illustration of the company’s transition from a product mindset to a solutions one.
Building blocks in place; could this be the start of a consistent delivery phase?
For the past decade or so, TCOM has been putting building blocks in place to transform from a
Rohit Chordia
plain-vanilla network connectivity provider to a digital transformation solutions provider. This is
a transition from a capital-intensive, low-RoCE construct to a capital-light, reasonable-RoCE one
as also a transition from a discrete-product-selling mindset to a solutions-selling one. The Aniket Sethi
transition is still work in progress, to be sure; however, we do feel increasingly comfortable with
the pace and direction of the same. The other transformation that may have started showing up
in numbers is the company’s internal cost transformation drive. Benefits showed up strong in
1QFY21 and we believe a good chunk of the cost savings is sustainable in nature. Key account
management focus being driven by the new CEO has the potential to fast-track the journey.
Contact: +91 22 6218 6427
Telecommunication Services Tata Communications
Raise EBITDA estimates; retain BUY with FV of Rs975/share

We have raised our EBITDA forecasts for FY2021E, 22E, 23E by around 13% each to Rs41.6
bn, Rs45.9 bn, and Rs49.8 bn, respectively. We note that the contribution of the voice
business to overall EBITDA is falling to 3% by FY2023E in our forecasts from around 6-7%
currently. We estimate healthy FCF generation of close to Rs20 bn by FY2023E, implying an
FCF yield of around 6%. Pre-tax RoCE would cross the 20% mark in FY2022E even though
we note that the net-worth erosion over years helps this metric.
We have raised the EV/EBITDA multiple we ascribe to the data business from 7.25X to 8X.
Our revised FV stands at Rs975/share (from Rs705 earlier). Reiterate BUY on the stock.
Segmental results
 Voice segment. EBITDA rose 48% qoq (but down 25% yoy) to Rs450 mn with revenues
down 0.5% qoq. Volumes declined 3.7% qoq while net realization per minute rose
sharply to almost 25p/min. Improvement in net realizations indicates higher quality of
traffic carried.
 Traditional data. Growth of 1.5% qoq (in INR terms) was recorded on account of
increased bandwidth usage due to the lockdown. Margin print came in at 42.2%,
massive margin of 520 bps qoq on account of cost efficiencies and lower costs due to the
lockdown.
 Growth services. There was strong qoq pickup in revenue growth to 7.9%. UCC sub-
segment benefitted (+34.4% qoq) on the back of surge in conferencing traffic. Margin
expansion was robust with print of 12.5% (4Q: 11.6%). EBITDA increased 15.5% qoq.
The segment has been reporting a healthy expansion trajectory considering it had broken
even at the EBITDA level only in end-FY2019.
 Innovation services. Revenues almost halved this quarter with lower loss at the EBITDA
level (US$13 mn). We wouldn’t read much in the sharp decline given the small size of the
segment and relatively concentrated client exposure.
 TCPSL reported a decline in revenues (down 36.3% qoq) due to sharp decline in POS
managed on account of lockdown-led disruptions.
 TCTSL. Revenue declined 7.9% qoq due to loss of revenue following termination of an
onerous contract; termination of this contract led to improved profitability for the
business.
Other result highlights and takeaways from the earnings call
 Solutions for the digital ecosystem. TCOM has launched Secure Connected Digital
Experience (SCDX), which includes a broad range of solutions for the digital ecosystem.
These solutions are gaining traction in the post-Covid world. This includes improved
work-from-home solutions, improved e-commerce and video-commerce solutions and
efficient B2B ecosystem connectivity systems.
 Impact of Covid on costs. While TCOM continues to drive efficiencies across the board,
the Covid impact led to a sharp fall in overhead expenses for the quarter, about Rs500-
600 mn. There were savings in travel costs, marketing costs and general G&A expenses.
They also received some concessions from governments in the international markets.
While some of the cost savings will be structural in nature, costs will increase as things
normalize. The company is rationalizing its employee expenses by changing its headcount
mix from international to India.

Tata Communications Telecommunication Services
 Strong funnel adds though deal closures taking longer. TCOM has seen strong
funnel adds in the last quarter. Management attributes this to their strategy of deeper
engagement with customers. They are more proactive to create new opportunities and
solutions for clients. There has been an increased number of enquiries for network
transformation projects and for the unified communication and collaboration portfolio.
They are also seeing a strong pipeline for NetFoundry.
 Work from home solutions. Besides the traditional VPN service, TCOM is also enabling
advanced work from home solutions. There are solutions and products that even help
their BPO clients to enable remote connectivity for their employees.
Exhibit 1: Key changes to TCOM earnings model, March fiscal year-ends, 2021-23E (Rs mn)
Revised Earlier Change (%)

2021E 2022E 2023E 2021E 2022E 2023E 2021E 2022E 2023E
Revenues (Rs mn) 178,227 189,690 203,688 175,552 186,613 200,139 1.5 1.6 1.8
EBITDA (Rs mn) 41,581 45,909 49,790 36,769 40,569 43,905 13.1 13.2 13.4
EBITDA margin (%) 23.3 24.2 24.4 20.9 21.7 21.9
Recurring PAT (Rs mn) 8,534 10,624 13,053 4,254 6,113 7,799
EPS (Rs/share) 29.9 37.3 45.8 14.9 21.4 27.4
Source: Kotak Institutional Equities
Exhibit 2: Our sum-of-the-parts Fair Value for TCOM is Rs975/share
Voice business
Sep-2022E EBITDA (Rs bn) 1.6
EV/EBITDA (x) 3.0
Enterprise value (Rs bn) 5
Data business
Sep-2022E EBITDA (including rental income) (Rs bn) 46.2
EV/EBITDA (x) 8.0
Enterprise value (Rs bn) 370
Others
Value of 26% stake in DC business sold to STT (Rs bn) 15
Total EV (Rs bn) 389
Consolidated net debt (Rs bn) 96
Less: Potential DOT liability (Rs bn) 16
Net equity value (Rs bn) 278
Equity value per share (Rs/share) 974

Exhibit 3: TCOM – 1QFY21 review, Ind-AS, March fiscal year-ends (Rs mn)
(% chg.)
1QFY21 1QFY21E 1QFY20 4QFY20 KIE Est. yoy qoq FY2021E FY2020 (% chg.)
Revenues 44,029 43,014 41,686 43,979 2.4 5.6 0.1 178,227 170,680 4.4
Total expenditure (33,612) (34,542) (33,430) (35,471) (2.7) 0.5 (5.2) (136,646) (137,350) (0.5)
EBITDA 10,418 8,472 8,256 8,508 23.0 26.2 22.4 41,581 33,330 24.8
Depreciation and amortization (5,899) (5,900) (5,522) (5,797) (0.0) 6.8 1.8 (24,339) (22,507) 8.1
EBIT 4,518 2,572 2,735 2,711 75.7 65.2 66.7 17,242 10,822 59.3
Other income 147 210 88 373 893 697
Interest expense (1,163) (1,245) (1,157) (1,232) (4,859) (4,707)
Pre-tax profits 3,503 1,537 1,666 1,853 127.9 110.3 89.1 13,276 6,812 94.9
Tax (incl. deferred tax) (812) (769) (852) 98 (4,779) (2,267)
Net income pre exceptionals 2,691 769 813 1,951 8,497 4,545
Exceptional items (105) — (65) (4,671) - (5,415)
PAT after exceptional items 2,586 769 749 (2,720) 8,497 (870)
Minority int. share of loss (3) (6) (4) (0) (14) (11)
Share in loss of associates (5) 20 21 (30) 52 22
Reported net income 2,578 783 766 (2,750) 8,534 (860)
Adjusted net profit 2,683 783 831 1,921 8,534 4,555 87.3
EPS (Rs/share) 9.4 2.7 2.9 6.7 29.9 16.0 87.3
Margins (%)
EBITDA 23.7 19.7 19.8 19.3 3.85 4.31 23.3 19.5
EBIT 10.3 6.0 6.6 6.2 9.7 6.3
PBT 8.0 3.6 4.0 4.2 7.4 4.0
PAT (pre exceptionals and MI) 6.1 1.8 2.0 4.4 4.8 2.7

Tata Communications Telecommunication Services
Exhibit 4: TCOM – key operating and financial metrics
Change (%)
Quarter-ending Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 qoq (%) yoy (%)
Gross Revenue by Segment (%)
Global Voice Solutions 21.4 20.5 19.1 18.3 18.1
Global Data Services 78.6 79.5 80.9 81.7 81.9
Global Voice Solutions (Rs mn)
Gross revenues 8,903 8,741 8,090 8,030 7,990 (0.5) (10.3)
Net revenues 1,478 1,493 1,030 1,110 1,280 15.3 (13.4)
EBITDA 866 790 450 440 650 47.7 (24.9)
EBIT 797 715 380 350 560 60.0 (29.7)
EBITDA margin (%) 9.7 9.0 5.6 5.5 8.1
EBIT margin (%) 9.0 8.2 4.7 4.4 7.0
Volumes (bn mins)
Total 6.4 5.9 5.5 5.4 5.2 (3.7) (18.8)
ILD 6.1 5.8 5.4 5.3 5.1 (3.8) (16.4)
NLD 0.3 0.1 0.1 0.1 0.1 — (66.7)
Net realization per min (Rs/min) 0.231 0.253 0.187 0.206 0.246 19.8 6.6
EBITDA per min (Rs/min) 0.135 0.134 0.082 0.081 0.125 53.4 (7.6)
O perating costs per min (Rs/min) 0.096 0.119 0.105 0.124 0.121 (2.4) 26.7
Global Data Solutions (Rs mn)
Gross revenues 32,784 33,986 34,200 35,950 36,040 0.3 9.9
Net revenues 21,808 22,186 21,980 23,380 23,210 (0.7) 6.4
EBITDA 6,690 6,867 7,078 7,368 9,768 32.6 46.0
EBIT 1,238 1,356 1,548 588 3,958
EBITDA margin (%) 20.4 20.2 20.7 20.5 27.1
EBIT margin (%) 3.8 4.0 4.5 1.6 11.0
GR by segment (%)
Service Provider / Carrier 38.0 39.0 38.0 38.0 37.0
Enterprise 62.0 61.0 62.0 62.0 63.0
GR by service line (%)
Traditional services 63.1 63.6 63.1 61.1 61.9
Growth services 24.0 23.4 23.7 25.0 26.3
Subsidiaries 11.9 12.0 12.1 12.3 10.7
GR by geography (%)
India 52.0 54.0 53.0 53.0 51.0
Rest of the world 48.0 46.0 47.0 47.0 49.0
TCPSL
Gross Revenue (Rs mn) 889 850 870 820 520 (36.6) (41.5)
Total ATMs managed 12,399 12,362 12,278 12,240 12,198 (0.3) (1.6)
Managed ATMs 4,076 4,011 3,993 3,955 3,949 (0.2) (3.1)
White label ATMs 8,323 8,351 8,285 8,285 8,249 (0.4) (0.9)
Total PO S managed 8,365 5,823 5,791 5,584 3,412 (38.9) (59.2)
Traditional services (US$ mn)
Revenues 297.1 306.9 303.2 303.7 293.7 (3.3) (1.2)
EBITDA 114.4 116.0 114.0 112.4 123.9 10.3 8.3
Growth services (US$ mn)
Revenues 110.3 109.6 110.3 118.4 121.6 2.7 10.2
EBITDA 3.0 3.9 7.2 13.7 15.2 10.7 407.0
Innovation services (US$ mn)
Revenues 2.7 3.2 3.7 5.9 3.0
EBITDA (19.4) (21.3) (20.8) (18.4) (13.3)
Debt profile
Core business (US$ mn)
Gross debt 1,386 1,406 1,418 1,486 1,477 (0.6) 6.6
Foreign Currency Loans 1,313 1,359 1,369 1,420 1,370 (3.5) 4.3
Rupee Loans 73 47 49 67 107.38 60.7 47.1
Cash and cash equivalent 138 144 159 217 290 33.7 110.4
Net debt 1,248 1,262 1,257 1,216
INR/USD (closing) 69.00 70.79 71.32 75.46
Net debt (Rs mn) 86,112 89,331 89,650 91,760 90,080 (1.8) 4.6

Exhibit 5: TCOM – forecasts and underlying assumptions, March fiscal year-ends, 2017-23E (Rs bn)
Rs bn 2017 2018 2019 2020 2021E 2022E 2023E

Key financials
P&L
Consolidated revenues 176.2 166.5 161.8 170.7 178.2 189.7 203.7
Consolidated EBITDA 24.1 22.9 25.3 33.3 41.6 45.9 49.8
Adjusted EBITDA 25.0 24.1 25.5 33.5 41.7 46.0 49.9
EBITDA margin (%) 13.7 13.8 15.7 19.5 23.3 24.2 24.4
Adjusted EBITDA margin (%) 14.1 14.4 15.7 19.6 23.4 24.3 24.5
EBIT 5.4 3.9 4.7 10.8 17.2 21.0 24.3
Adjusted EBIT 6.4 5.1 4.8 10.9 17.4 21.1 24.5
Recurring PAT 3.0 0.5 (2.9) 4.6 8.5 10.6 13.1
EPS (Rs/share) 10.5 1.6 (10.3) 16.0 29.9 37.3 45.8
Balance sheet
Shareholders' equity 16.1 5.0 (1.8) (12.7) (5.4) 4.0 15.2
Gross debt 92.5 89.5 106.7 116.9 113.9 110.9 107.9
O ther liabilities 102.5 101.5 95.2 117.5 119.5 123.0 127.4
Total equity and liabilities 211.0 196.0 200.1 221.6 228.0 237.9 250.5
Net fixed assets 116.8 113.2 115.6 130.3 122.0 113.6 105.2
Current assets 44.0 40.8 41.9 45.6 50.5 55.8 60.4
Strategic investments 16.3 10.6 9.0 9.0 9.0 9.0 9.0
Cash and equivalents 18.8 14.8 15.7 17.1 26.9 39.9 56.3
O ther assets 15.1 16.6 17.9 19.7 19.7 19.7 19.7
Total assets 211.0 196.0 200.1 221.6 228.0 237.9 250.5
Net debt 73.7 74.7 91.0 99.8 87.0 70.9 51.6
RO CE (%) 5.4 4.5 5.5 11.2 17.0 22.1 27.7
Capex (US$ mn) 244 235 267 225 212 215 220
Key assumptions
Voice segment
Revenues 67.6 53.1 38.7 33.8 29.6 25.7 22.2
EBITDA 4.3 3.4 3.3 2.6 1.9 1.7 1.5
EBITDA margin (%) 6.4 6.3 8.6 7.8 6.4 6.6 6.9
Data segment
Revenues 108.7 113.4 123.1 136.9 148.7 164.0 181.5
EBITDA 19.7 19.6 22.0 30.7 39.7 44.2 48.3
EBITDA margin (%) 18.2 17.2 17.9 22.4 26.7 27.0 26.6
Note:
(a) Financials for FY2017 reflect those of continuing operations only.

BUY
Cholamandalam (CIFC)
Diversified Financials AUGUST 01, 2020
RESULT
Lower provisions drive earnings. Chola’s strong earnings print was driven by a sharp CMP (`): 203
decline in provisions even as NII growth was muted on expected lines. Its strong Fair Value (`): 300
collections encouraged it to bring down ECL and selectively focus on disbursements but
BSE-30: 37,607
incrementally flattening recovery trends are concerning. Low coverage has been a
concern, though Chola has fared well though the cycle, driving our conviction; retain
BUY with FV of Rs300.
Cholamandalam
Mcap (bn) (Rs/US$) 166/2.3 EPS growth (%) (15.4) 8.5 45.0
Promoters 51.6 BVPS (Rs) 93.9 101.0 120.4  PAT up 37% yoy;
FIIs 12.2 RoE (%) 14.7 13.1 16.7 core PBT up 18%
Price performance (%) 1M 3M 12M NII (Rs bn) 35 37 38 yoy
Absolute 7 27 (22) PPOP (Rs bn) 25 25 26
Rel. to BSE-30 (1) 14 (22) Net profits (Rs bn) 11 11 17  AUM up 10% yoy;
disbursements
Lower provisions support earnings down 58% yoy
Chola’s 37% PAT growth was driven by a sharp decline in provisions (down 49% yoy). NII growth  ~50% of AUM
was moderate at 14% yoy with 5% yoy growth in loans on-balance sheet (AUM up 10% yoy), under moratorium
driven by 50 bps yoy NIM expansion to 6.6%, reflecting lower cost of funds. With improvement have made part
in cost/income ratio, core PBT was up 18% yoy. The sharp decline in provisions reflects reduction
payments or paid at
in ECL as a consequence of improved collections from the loan book under moratorium.
least one EMI
Lower credit cost is a bit concerning; recovery trends flattening
Chola incurred credit cost of 36 bps in 1QFY21 versus average of 80 bps during 1Q-3QFY20.
After large Covid provisions in 4QFY20 (total credit cost of 3.7%), the company took cognizance
of improved collections, bringing down its coverage levels. Notably, Chola follows a formula-
based provisioning policy for Covid-19 moratorium. We would have preferred if the company
had used management overlay to make higher provisions. In its earnings call, management
highlighted that while CV utilization levels have picked up in July, its overall collections have
been flat mom. Further, freight movement typically tends to be weak in August and September
due to the monsoon. Hence, we don’t expect significant improvement in collections in the near-
Nischint Chawathe
term. On the positive side, 50% of its borrowers under moratorium have made payments with
34% paying at least one EMI and 17% at least two EMIs. As such, these borrowers will have a
M B Mahesh, CFA
longer time period before migrating to stage 3, even if they are not able to fully service their
loans in 3QFY21E. Chola does not envisage high eventual losses, 45% of stage 1 AUM under
moratorium and 79% of stage 2 AUM under moratorium have vintage of >18 months, Dipanjan Ghosh
improving their equity in the asset even as the moratorium increases the tenure of the loan.
Asset price inflation due to the change in emission norms will help, in this backdrop. Abhijeet Sakhare
Retain BUY; FV of Rs300

Ashlesh Sonje
We are revising up our estimates by 8% for FY2021E and 15% FY2022E for Chola to build in
lower provisions for later years and higher loan growth due to lower run-offs on account of the
moratorium. We continue to like Chola’s agile model which drives superior performance on
growth and recoveries across the cycle as well as the ability to toggle across asset classes. Near-
term performance will likely remain weak. Its coverage ratio has always been a concern. We
retain BUY with RGM-based FV of Rs300 (2.1X book June 2022E), rolled over from Rs265. kspcg.research@kotak.com
Contact: +91 22 6218 6427
Diversified Financials Cholamandalam
Exhibit 1: Cholamandalam - quarterly results summary

Ind-AS Ind-AS Ind-AS Ind-AS (% chg.) Ind-AS Ind-AS Ind-AS
1QFY21 1QFY21E 1QFY20 4QFY20 1QFY21E 1QFY20 4QFY20 2021E 2020 (% chg.) 2022E
Operating income 21,136 21,394 20,295 21,513 (1) 4 (2) 86,501 86,526 (0) 88,311
Interest income 20,710 20,797 19,133 20,465 (0) 8 1 83,018 81,242 2 84,143
Assignment income - 100 472 331 (100) (100) (100) 1,484 2,473 (40) 1,929
Fee income 256 347 454 465 (26) (44) (45) 1,350 1,899 (29) 1,510
Net gain on fair value change 2 50 52 58 (95) (95) (96) 100 156 (36) 150
Sale of services 168 100 183 195 68 (8) (13) 549 757 (27) 579
Interest expense 11,307 11,399 10,870 11,359 (1) 4 (0) 46,446 45,922 1 46,008
NII 9,403 9,399 8,263 9,107 0 14 3 36,571 35,319 4 38,136
Net operating income 9,830 9,996 9,425 10,154 (2) 4 (3) 40,054 40,604 (1) 42,303
Other income 0 1 1 1 (80) (60) (83) 10 3 285 10
Total income 9,830 9,997 9,425 10,156 (2) 4 (3) 40,064 40,607 (1) 42,313
Operating expenses 3,458 3,855 3,500 4,016 (10) (1) (14) 15,561 15,776 (1) 16,109
Employee expense 1,562 1,500 1,458 1,600 4 7 (2) 6,419 6,550 (2) 6,740
Depreciation expense 248 200 233 266 24 6 (7) 1,218 1,075 13 1,249
Other expenses 1,649 2,155 1,809 2,150 (23) (9) (23) 7,924 8,151 (3) 8,121
PPOP 6,372 6,142 5,925 6,140 4 8 4 24,503 24,831 (1) 26,204
Provisions and write-offs 562 3,037 1,095 5,567 (82) (49) (90) 9,163 8,973 2 3,965
PBT 5,810 3,105 4,830 573 87 20 914 15,340 15,857 (3) 22,240
Tax 1,501 795 1,688 147 89 (11) 924 3,927 5,334 (26) 5,693
PAT 4,309 2,310 3,142 427 87 37 910 11,413 10,524 8 16,546
Tax rate (%) 26 26 35 26 23 bps -911 bps 25 bps 26 34 -803 bps 26
Core PBT 6,369 5,992 5,401 5,751 6 18 11 22,920 22,202 3 24,126
Asset quality
Gross stage-3 (Rs bn) 20.0 16.7 21.6 325 bps -167 bps 40.4 21.6 1881 bps 34.6
Gross stage-3 (%) 3.3 3.0 3.8 37 bps -46 bps 7.2 3.8 344 bps 6.2
ECL coverage on stage-3 (%) 41.6 36.1 41.5 549 bps 12 bps 40.0 41.5 -152 bps 39.0
Segmental data (Rs mn)
Loans under management 635,010 609,374 574,940 605,490 4.2 10 5 612,689 605,490 1 614,778
Vehicle finance 468,280 450,538 429,770 442,060 4 9 6 442,214 442,060 0 442,124
LCV 99,280 92,830 94,010 7 6 94,010
HCV 55,850 70,390 56,030 (21) (0) 56,030
Tractor 40,970 31,760 33,980 29 21 33,980
SCV, three wheeler and two wheeler 47,060 36,360 44,710 29 5 44,710
Used CV/ refinance 61,164 53,230 56,124 15 9 56,124
Cars and MUVs 80,130 69,950 76,030 15 5 76,030
Shubh/ older vehicles 58,976 54,160 58,976 9 - 58,976
CE 24,850 21,090 22,220 18 12 22,220
Home equity 131,100 127,120 121,190 129,600 3 8 1 130,502 129,600 1 131,518
Business loans 35,630 31,716 23,980 33,830 12 49 5 39,973 33,830 18 41,137
Disbursements 35,890 85,730 56,630 (58) (37) 199,982 290,920 (31) 264,536
Vehicle finance 32,310 69,400 47,030 (53) (31) 163,716 233,880 (30) 221,017
LCV 3,770 14,340 9,670 (74) (61) 44,390
HCV 400 6,430 2,300 (94) (83) 14,360
Tractor 8,320 5,060 3,200 64 160 16,830
SCV, mini LCV, 3W, 2W 3,670 8,050 6,370 (54) (42) 31,500
Shubh and used CVs 8,440 20,900 15,140 (60) (44) 76,640
Cars and MUVs 4,730 11,450 7,750 (59) (39) 39,450
CE 2,970 3,160 2,580 (6) 15 10,690
Home equity 1,190 11,010 5,890 (89) (80) 21,972 36,620 (40) 26,366
Business loans 2,390 5,320 3,710 (55) (36) 14,294 20,420 (30) 17,153
Yield on loans on balance sheet 14.6 14.6 14.2 14.7 -3 bps 41 bps -12 bps 14.9 15.0 -12 bps 15.1
Cost of funds 8.0 8.2 8.2 8.3 -23 bps -26 bps -30 bps 8.5 8.7 -20 bps 8.7
NII/loans on balance sheet 6.6 6.6 6.1 6.5 2 bps 50 bps 8 bps 6.6 6.5 3 bps 6.8
Cost-to-income 35.2 38.6 37.1 39.5 -338 bps -195 bps -436 bps 38.8 38.9 -1 bps 38.1
Cost-to-average AUM 2.2 2.5 2.5 2.6 -31 bps -27 bps -42 bps 2.6 2.7 -19 bps 2.6
Credit cost (% of AUM) 0.4 2.0 0.8 3.7 -164 bps -42 bps -331 bps 1.5 1.6 -6 bps 0.6
CAR 20.4 17.2 20.7 326 bps -26 bps
Tier-I 15.8 12.9 15.3 290 bps 50 bps
Key parameters (#)
Branches 1,098 995 1,105 10.4 (0.6) 1,110 1,105 0.5 1,160

Cholamandalam Diversified Financials
Lower provisions, NIM expansion, stringent cost control drive strong earnings
Chola’s PAT increased 37% yoy led by a sharp decline in provisions (down 49% yoy to
Rs562 mn). NIM expansion and stringent cost control measures further aid strong earnings
print. Core PBT was up 18% yoy.
NII growth was moderate at 14% yoy despite muted 5% yoy growth in loans on balance
sheet. This was driven by 50 bps yoy/6 bps qoq expansion in NIM to 6.6%. NIM expansion
was led by a sharp decline in cost of funds despite high liquidity on balance sheet (Rs81 bn
in 1QFY21 compared to Rs70 bn in 4QFY20 and Rs58 bn in 1QFY20).
Chola reported 10% AUM growth; disbursements were down 58% yoy. Negligible
repayments during the quarter supported AUM growth.
Operating expenses declined 1% yoy in 1QFY21 on the back of (1) lower discretionary
expenses, (2) lower disbursements and (3) pause in expansionary efforts. Other expenses
declined 9% yoy. Additionally, the company benefited from lower rent expenses during the
quarter.
Provisions declined 49% yoy. Overall ECL coverage declined 27 bps qoq to 2.4% aided by 9
bps qoq decline in coverage on stage 1 and 2 loans. Adjusted for write-offs, the company
witnessed ~Rs850 mn of provision reversals during the quarter. The company follows a
formula-based provisioning policy for Covid-19 provisions; considering improving collections
from the moratorium book, overall credit cost for the quarter was low.
Moratorium high at >75% though collections have improved

A significant proportion of AUM (~78%) is under moratorium for Chola. Management
guided that higher uncertainty on freight movement due to staggered lockdowns, low
freight utilization rates and the consequent drag on cash flows for fleet operators as well as
higher focus on cash conservation drive risk averse behavior among borrowers and hence
most of the customers have opted for the moratorium. However, the company continues to
focus on collections and has strengthened its collection engine. This has led to reduction in
prior overdues (prior to February 2020) and a gradual pick up in collections from customers
under moratorium.
 ~50% of customers under moratorium have made payments to Chola. Exhibit 2

shows that ~34% of overall customers under moratorium have paid at least one EMI
while another 16% have paid partial EMIs. This indicates the propensity to make
repayments as and when fleet utilization improves resulting in higher cash flow. Most
borrowers have opted for the moratorium to avoid delinquencies in case of sudden
disruption in fleet utilization (~39% of customers under moratorium have opted for the
entire six months of moratorium and 43% have opted for five months).
 Fleet utilization remains low albeit higher than trough levels in April and May
2020. Management guided that for a small fleet operator to be able to service EMIs, fleet
utilization levels need to be >65%. Overall inter-state e-way bills were down 84% yoy in
April 2020 and 53% yoy in May 2020 (Exhibit 5). Gradual easing of the lockdown led to
13% yoy decline in e-way bills in June 2020. However, the onset of monsoon and partial
lockdown in select states/districts have led to >20% yoy decline in e-way bills in July
2020. Notably, inter-state bills have declined >25% in July 2020 (down 20% yoy in June
2020). Chola’s exposure in the CV segment is mostly towards large and medium fleet
operators and as such collections will likely remain tepid over the next few months.
 Focus on collection of overdue amounts prior to moratorium. Amidst weakness in

collection from customers under moratorium, Chola has focused on increasing collections
from previous overdue accounts (prior to February 2020). This has resulted in marginal
decline in stage 2 loans during the quarter (down 165 bps yoy).

 Collection trends among delinquent customers encouraging. In the vehicle

finance portfolio, management guided for an increase in recoveries from delinquent
customers. For delinquent customers who have opted for the moratorium, Chola is
monitoring normalization of customers (‘normalization’ for those customers who are
repaying all their outstanding EMIs). NRRB increased to 33.9% in June 2020 from
26.9% in May 2020 and 11% in February 2020 for movement between stage 2 and
stage 1. This ratio increased to 30% in June 2020 for HCVs compared to 17% in May
2020. This shows that the delinquent bucket customers are paying up; this may likely
be due to the fact that these vehicles are deployed in the transportation of essential
goods.
Bucket-wise slippage trend is low for customers under moratorium

Exhibits 3 and 4 suggest that 93% of stage 1 borrowers who have opted for the
moratorium (73% of stage 1 loans) had no past history of defaults. Even in the case of stage
2 borrowers, only 7% of borrowers who have opted for the moratorium (7% of overall
stage 2 loans) have ever slipped to stage 3. Additionally, 45% of stage 1 AUM under
moratorium and 79% of stage 2 AUM under moratorium have a vintage of >18 months.
While we don’t have similar data across peers, the disclosure provides comfort on the quality
of customers who have opted for the moratorium and also signifies lower LGDs (higher
vintage tends to drive lower LGDs). A significant proportion of the customers under
moratorium are likely focused on cash conversion and resuming business activities.
Asset quality deterioration on the horizon

We expect Chola’s gross stage 3 loans to increase to 7.2% in FY2021E (up 340 bps). This
will be driven by a rise in delinquencies from the CV, UV and home equity businesses. Lower
freight volumes will continue to drive higher M&CV delinquencies. Chola lends to the large
and medium-fleet operators in CVs. Lower fleet utilization led by (1) muted demand due to
delay in pick up of construction, infrastructure, etc. activities, (2) lack of availability of
migrant drivers will put pressure on cash flows of these operators thereby curbing
repayment capability of the underlying borrower; the driver-owner segment may benefit on
this account.
In the earnings call, management highlighted that while collections improved in June, the
mom trend in July was almost flat. Further, monsoon will lead to sluggish collections over
the next 1-2 months.
Exhibit 2: ~34% of customers under moratorium have paid at least one full EMI
Details of moratorium and collections, March fiscal year-ends, July 28, 2020
Agreements # of EMIs paid (#)

Moratorium months Number (#) Proportion (%) Part EMI 1 EMI 2 EMIs 3 EMIs 4+ EMIs 1+ EMIs
1 40,953 4 17 31 31
2 30,690 3 18 18 27 45
3 48,213 4 12 20 9 7 36
4 83,910 8 8 23 20 14 5 62
5 475,082 43 10 21 10 7 5 42
6 437,709 39 25 10 3 2 3 18
Overall 1,116,557 100 16 17 8 5 4 34
Notes:
(1) EMIs only consider collections incurred during the period of moratorium for a particular customer. For example, EMI collections from customers
who had opted for 1 month of moratorium from the 2nd month will not be captured in the above table.

Exhibit 3: ~70% of loans under moratorium had no past history of overdue

Moratorium details, March fiscal year-end, 2020, 1QFY21
Provisions outstanding as of FY2020 Provisions outstanding as of 1QFY21
Gross loans Addditional Gross loans Addditional
on-balance sheet provisions Coverage on-balance sheet provisions Coverage
(FY2020) Normal Overall Total (FY2020) (1QFY21) Normal Overall Total (1QFY21)
Asset classification (Rs bn) (%) (Rs bn) (Rs bn) (%) (Rs bn) (%) (Rs bn) (Rs bn) (Rs bn) (%)
Stage 1 527 92.7 1.50 2.41 3.91 0.7 561 93.9 1.63 2.50 4.13 0.7
Non-moratorium 112 19.7 0.28 - 0.28 0.3 121 20.2 0.32 - 0.32 0.3
Moratorium 415 73.0 1.22 2.41 3.63 0.9 441 73.7 1.31 2.49 3.80 0.9
No overdues 379 66.5 1.08 - 1.08 0.3 409 68.4 1.20 - 1.20 0.3
Overdues 37 6.5 0.14 2.41 2.55 6.9 32 5.3 0.11 2.49 2.60 8.2
No past history of flows to other stages 24 4.3 0.09 1.15 1.24 5.1 20 3.3 0.07 1.24 1.31 6.6
Past history of flows to stage 2 12 2.1 0.05 1.16 1.21 10.0 12 2.0 0.04 1.14 1.18 10.0
Past history of flows to stage 3 0 0.1 - 0.10 0.10 34.5 0 0.1 - 0.11 0.11 33.3
Stage 2 20 3.6 1.65 0.68 2.33 11.5 16 2.7 1.32 0.61 1.93 11.8
Non-moratorium 1 0.2 0.12 - 0.12 8.6 1 0.2 0.10 - 0.10 7.9
Moratorium 19 3.3 1.54 0.67 2.21 11.7 15 2.5 1.22 0.61 1.83 12.2
No past history of flows to other stages 17 3.0 1.42 0.33 1.75 10.1 14 2.3 1.13 0.34 1.47 10.6
Past history of flows to stage 3 1 0.3 0.12 0.34 0.46 31.5 1 0.2 0.09 0.27 0.36 32.4
Stage 3 22 3.8 6.73 2.25 8.98 41.5 20 3.3 5.91 2.40 8.31 41.6
Non-moratorium 19 3.3 6.15 1.90 8.05 42.5 17 2.8 5.23 2.04 7.27 43.1
Normal 16 2.8 3.76 1.90 5.66 34.9 14 2.4 3.12 2.04 5.16 35.8
Legal issues 3 0.5 2.39 - 2.39 87.2 2 0.4 2.11 - 2.11 85.8
Moratorium 3 0.5 0.59 0.35 0.94 35.1 3 0.5 0.68 0.35 1.03 33.3
Total 569 9.88 5.34 15.22 2.7 598 8.87 5.51 14.38 2.4
Exhibit 4: ~36% of AUM under moratorium has vintage of >18 months

Vintage-wise moratorium, March fiscal year-ends, July 2020 (%)
0-6 months 6-12 months 12-18 months 18-24 months 24-36 months >36 months
100
9 10 9 11
24 28 24 22
80 20 19 20 19
60 16 16 16 16
38 34 39 40
22 23 22 23
40
17 17 18 18
20 25 23 24 22
15 15 15 18
8 9 1 1 - - 8 9
- 5 5 3 2
Agreements AUM Agreements AUM Agreements AUM Agreements AUM
Stage 1 Stage 2 Stage 3 Overall

Exhibit 5: E-way bills have marginally increased from trough levels observed in April and May 2020
Total E-way bills generated, March fiscal year-ends, May 2018-July 2020 (# mn)
Intra state Inter-state Total
70
56
42
28
14
0
May-18
May-19
May-20
Aug-18
Aug-19
Mar-19
Mar-20
Nov-18
Nov-19
Jul-18
Oct-18
Oct-19
Dec-19
Apr-20
Sep-18
Dec-18
Apr-19
Jul-19
Sep-19
July till date

Feb-20
Feb-19
Jun-19
Jun-20
Jun-18
Jan-19
Jan-20
Notes:
(1) Data for July is till July 26, 2020.
Source: Public Documents
Exhibit 6: Overall ECL coverage will increase to ~4% by FY2021E

NPL and provisions, March fiscal year-end, 2018-2023E (Rs mn)
2018 2019 2020 2021E 2022E 2023E
Asset quality details (Rs mn)
Loan book 430,780 535,410 569,250 558,589 559,313 632,445
Stage 1 and 2 loans 416,020 521,020 547,620 518,151 524,732 606,598
Stage 1 loans 396,380 500,250 527,410 487,429 499,563 581,300
Stage 1 (%) 92.0 93.4 92.6 87.3 89.3 91.9
Stage 2 loans 19,640 20,770 20,210 30,722 25,169 25,298
Stage 2 (%) 4.6 3.9 3.6 5.5 4.5 4.0
Stage 3 loans 14,760 14,390 21,630 40,437 34,581 25,847
Stage 3 (%) 3.4 2.7 3.8 7.2 6.2 4.1
ECL details (Rs mn)
ECL (stage 1-3 provisions) 8,620 9,300 15,230 22,393 21,358 19,438
Stage 1 and 2 provisions 3,550 3,840 6,250 6,218 7,871 9,099
Stage 1 provisions 1,700 1,870 3,920 1,609 3,341 4,545
ECL coverage (%)
Overall ECL coverage 2.0 1.7 2.7 4.0 3.8 3.1
Coverage on stage 1 and 2 0.9 0.7 1.1 1.2 1.5 1.5
Coverage on stage 1 0.4 0.4 0.7 0.3 0.7 0.8
Credit cost details (%)
Overall credit cost 0.8 0.6 1.6 1.5 0.6 0.5
Write-offs 0.3 0.3 0.53 0.33 0.8 0.8
Provision on loans and others 0.5 0.3 1.0 1.2 (0.2) (0.3)

Exhibit 7: NPLs will increase in FY2021E

GNPL/gross stage 3 for Chola, March fiscal year-ends, 2007-2023E
GNPL/gross stage 3 (%)

8.0 7.2
6.2
6.4
5.5
4.7
4.8 4.1
3.8
3.5 3.4
3.0 3.1
3.2 2.6 2.7
1.9
1.6 0.9 1.1
0.5 0.7
0.0
2007
2008
2009
2016
2017
2018
2019
2020
2010
2011
2012
2013
2014
2015
2021E
2022E
2023E
Notes:
(1) Data from FY2018 is based on Ind-AS.
Exhibit 8: Gross stage 2 loans down 165 bps yoy to 2.7%

Asset quality highlights, March fiscal year-end, 4QFY18-1QFY21 (Rs mn)
YoY QoQ
4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21 (%) (%)
AUM mix
Gross stage 1 and 2 416,020 436,240 460,830 482,610 521,020 545,970 549,070 550,720 547,620 577,770 6 6
Gross stage 1 396,380 434,115 500,250 521,212 522,530 527,410 561,480 8 6
Gross stage 2 19,640 26,715 20,770 24,758 26,540 20,210 16,290 (34) (19)
Gross stage 3 14,760 16,170 16,230 16,480 14,390 16,710 18,030 20,240 21,630 19,960 19 (8)
Gross AUM 430,780 452,410 477,060 499,090 535,410 562,680 567,100 570,960 569,250 597,730 6 5
AUM mix (%)
Gross stage 1 and 2 96.6 96.4 96.6 96.7 97.3 97.0 96.8 96.5 96.2 96.7 -37 bps 46 bps
Gross stage 1 92.0 91.0 93.4 92.6 92.1 92.6 93.9 131 bps 129 bps
Gross stage 2 4.6 5.6 3.9 4.4 4.7 3.6 2.7 -167 bps -82 bps
Gross stage 3 3.4 3.6 3.4 3.3 2.7 3.0 3.2 3.5 3.8 3.3 37 bps -46 bps
ECL provisions
ECL on stage 1 and 2 3,550 3,670 3,480 3,710 3,840 3,790 3,890 3,910 6,250 6,070 60 (3)
ECL stage 1 1,700 1,870 3,920 4,130 5
ECL on stage 2 1,850 1,970 2,330 1,940 (17)
ECL on stage 3 5,070 5,550 5,660 5,760 5,460 6,040 6,210 6,670 8,980 8,310 38 (7)
Overall ECL 8,620 9,220 9,140 9,470 9,300 9,830 10,100 10,580 15,230 14,380 46 (6)
Net AUM
Net stage 1 and 2 412,470 432,570 457,350 478,900 517,180 542,180 545,180 546,810 541,370 571,700 5 6
Net stage 1 394,680 498,380 523,490 557,350 6
Net stage 2 17,790 18,800 17,880 14,350 (20)
Net stage 3 9,690 10,620 10,570 10,720 8,930 10,670 11,820 13,570 12,650 11,650 9 (8)
Net AUM 422,160 443,190 467,920 489,620 526,110 552,850 557,000 560,380 554,020 583,350 6 5
Net AUM mix (%)
Net stage 1 and 2 97.7 97.6 97.7 97.8 98.3 98.1 97.9 97.6 97.7 98.0 -7 bps 29 bps
Net stage 1 93.5 94.7 94.5 95.5 105 bps
Net stage 2 4.2 3.6 3.2 2.5 -77 bps
Net stage 3 2.3 2.4 2.3 2.2 1.7 1.9 2.1 2.4 2.3 2.0 7 bps -29 bps
ECL coverage ratio
Stage 1 and 2 0.9 0.8 0.8 0.8 0.7 0.7 0.7 0.7 1.1 1.1 36 bps -9 bps
Stage 1 0.4 0.4 0.7 0.7 -1 bps
Stage 2 9.4 9.5 11.5 11.9 38 bps
Stage 3 34.3 34.3 34.9 35.0 37.9 36.1 34.4 33.0 41.5 41.6 549 bps 12 bps
Overall ECL coverage 2.0 2.0 1.9 1.9 1.7 1.7 1.8 1.9 2.7 2.4 66 bps -27 bps

ECL coverage remains low compared to peers, except credit cost to remain
elevated
Chola incurred Rs170 mn Covid-19 provisions in 1QFY21 (overall Covid-19 provisions of
Rs5.5 bn or 1.1% of AUM under moratorium). The overall ECL coverage at 2.4% is
significantly lower than most vehicle financiers at >4%. Historically, Chola has maintained
lower coverage on its book owing to (1) lending to medium or large fleet CV operators and
relatively lower share of used vehicles (compare to STFC) and (2) diversified product bouquet
(~30% are non-vehicle loans). However, in the current environment we expected the
company to ramp up its coverage ratio as the loans under moratorium are significantly high
at ~75% (though ~50% of customers have made part payments or more than one EMI).
Credit cost remains challenging to predict at this stage owing to (1) uncertainty over
intensity, tenure and spread of Covid-19 and various lockdown-related disruptions, (2)
repayment over the next few months; we don’t read much into the decline in moratorium
which reflects collection received for the month. We pen down credit cost at 1.6% of AUM
in FY2021E (flat yoy). Higher write-offs and rise in delinquency towards hard buckets will
drive credit cost in FY2021E. Overall ECL coverage will likely increase to ~4% in FY2021
from low levels of 2.4% in 1QFY21.
Exhibit 9: Credit cost will remain elevated in FY2021E

Credit cost for Chola, March fiscal year-ends, 2007-2023E
Credit cost (% of AUM)

4.0
3.5
3.2
2.8
2.4 2.2
1.8
1.5 1.6 1.5
1.6 1.3 1.3
1.1 1.0
0.8 0.8
0.8 0.6 0.6
0.5
0.4
0.0
2007
2008
2009
2014
2015
2016
2017
2010
2011
2012
2013
2018
2019
2020
2022E
2023E
2021E
Notes:
(1) Data from FY2018 is based on Ind-AS.
Exhibit 10: Chola’s overall coverage remains lower than peers

ECL coverage for vehicle financiers, March fiscal year-ends, 1QFY19-1QFY21 (%)
ECL coverage on stage 1 and 2 loans
Chola 0.8 0.8 0.8 0.7 0.7 0.7 0.7 1.1 1.1
Magma 2.7 2.5 2.4 2.0 2.0 2.1 2.0 2.2 NA
STFC 2.5 2.7 2.8 2.8 2.9 2.8 2.7 3.1 NA
ECL coverage on stage 3 loans
Chola 34.3 34.9 35.0 37.9 36.1 34.4 33.0 41.5 41.6
Magma 56.0 52.4 35.6 36.8 35.7 35.5 34.4 36.5 NA
STFC 34.0 34.2 35.3 34.4 31.8 32.1 32.1 34.7 NA
Overall ECL coverage
Chola 2.0 1.9 1.9 1.7 1.7 1.8 1.9 2.7 2.4
Magma 7.7 6.9 4.4 3.6 3.7 4.2 4.2 4.4 NA
STFC 5.4 5.4 5.7 5.4 5.3 5.4 5.3 5.8 NA

Disbursements down 58% yoy; tractors provide cushion

AUM growth muted at 10% yoy. AUM growth was muted at 10% yoy; lower repayments
provided cushion. Disbursements declined sharply by 58% owing to lower auto sales in
1QFY21, lockdown related disruptions and a cautious stance in home equity. The company
increased market share in incremental disbursements across most product classes during the
quarter. Tractors disbursements were up 64% yoy (market share in tractor financing
increased to ~11% in 1QFY21 from 3% in 1QFY20). The company increased penetration in
select OEMs and became a preferred financier for a select manufacturer leading to a sharp
increase in overall volumes. Home loan disbursements declined 55% yoy; this is however
better than trends observed by affordable housing financiers.
Business momentum to remain weak; focus shifts to collections

We expect Chola’s AUM to be broadly flat yoy in FY2021E despite a sharp decline in
disbursements (down 31% yoy) This will be supported by a sharp decline in repayments during
the years. Lower disbursements in the initial few months of the quarter due to lockdown
related business disruptions, cautious stance in home equity and muted auto volumes
(mostly new HCVs, LCVs, cars, UVs and 2W) will drive a steep decline in disbursements.
Additionally, the company will focus on improving collections and maintain a strong ALM
position.
 30% yoy decline in vehicle finance disbursements. We expect vehicle finance

disbursements to drop sharply by 30% (AUM broadly flat yoy due to lower repayments).
Given the weak demand for CVs, UVs and PVs and business closure due to lockdowns,
fresh disbursements will decline sharply 1HFY21 and gradually pickup from 2H. Among
major vehicle finance segments, growth will mostly be driven by used vehicles, tractors
and SCVs/3W.
 Chola expects used vehicle disbursements to remain strong relative to other asset
classes. Prices in used CVs have increased 20% post transition to BS-VI (price of used
CVs have increased proportionately to that of new CVs). Additionally, large fleet
operators will focus on rationalization of available fleet based on driver availability and
freight demand. Under such circumstances, used vehicle sales will remain strong.
 SCVs/3Ws/ICVs which are used for last mile transportation will continue to witness
strong traction. Chola will focus on increasing its share of financing these vehicles in
rural areas, where the impact of Covid-19 is relatively lower.
 On the back of strong Rabi, high water reservoir levels and expectation of normal
monsoon, tractor demand will be robust. Rural cash flows are strong and tractor
volumes will likely hold up well. Additionally, increasing penetration in select OEMs will
drive growth.
 Demand for CVs (HCVs/LCVs) will remain weak due to a delay in pick of construction,
mining, e-commerce and infrastructure activities. Focus on cash conservation will
hinder new purchases by fleet operators. Our auto analyst expects ~30% yoy decline
in CVs in FY2021E.
 Our auto analyst expects 2W volumes to decline ~15% yoy in FY2021E. Rising finance
penetration and higher volumes in rural markets will however cushion disbursements.
The company may however tighten underwriting for select customer cohorts.
 40% yoy decline in home equity disbursements in FY2021E. We expect a steep

decline in home equity disbursements by 40% yoy in FY2021E. Given rising asset quality
concerns over the LAP segment and economic slowdown, the company had started to
slow down in the home equity segment pre Covid-19. The drop in ticket size and
cautious stance owing to asset quality issues have led to a decline in the pace of growth.

 Focus on growing affordable housing business. Business finance /home loan

disbursements will likely decline 30% yoy. The company will focus on LMI segment with
ticket size of Rs1 mn.
Exhibit 11: Muted AUMs in FY2021E Exhibit 12: ...led by steep decline in disbursements
AUM for Chola, March fiscal year-ends, 2007-2023E Disbursements for Chola, March fiscal year-ends, 2007-2023E
AUM (LHS) YoY (RHS) Disbursements (LHS) YoY (RHS)

(Rs bn) (%) (Rs bn)
94 (%)
750 80 400 105
65
600 50 60 320 55 70
48
41 36 36 36 32 29
28
450 31 40 240 21 35
26 26 8 13
22
17 15 (2) (4)
300 10 12 12 20 160 0
6
1 0 (31)
(43)
150 0 80 -35
(13)
- -20 - -70
2021E
2022E
2023E
2021E
2023E
2022E
2007
2009
2011
2012
2013
2014
2016
2018
2020
2007
2008
2010
2011
2012
2015
2016
2017
2019
2020
2008
2010
2015
2017
2019
2009
2013
2014
2018
Source: Company, Kotak Institutional Equities estimates Source: Company, Kotak Institutional Equities estimates
Exhibit 13: Share of vehicle finance will decline in FY2021E

AUM mix for Chola, March fiscal year-ends, 2008-2023E (%)
Vehicle finance Home equity Others/business loans
100 4 2 1 2 3 3 3 4 6
9 9 7 7 7
23 21 23
23 25 29 28 24 21 21 21 20
80 18 30 21
24
7
21
60
40 76 75
70 74 73 73 69 67 69 73 73 72 72 73
67
58
20
0
2008
2013
2014
2015
2016
2009
2010
2011
2012
2017
2018
2019
2020
2021E
2022E
2023E
Notes:
(1) Prior to FY2011, 'other's loans were mostly consumer durables.

Exhibit 14: AUM growth at 10% yoy in 1QFY21

AUM break-up, March fiscal year-ends, 1QFY19-1QFY21
Vehicle finance (LHS) Home equity (LHS)

(Rs bn) Business/home loans (LHS) YoY (RHS) (%)
650 40
36
28 32 34
24
520 20 126 130 131 32
21 121 130
15 116
14 31 30
112
30 107
390 104 26 27 24
24
260 16
20
130 12 10 8
335 355 375 406 430 439 446 442 468

0 -
Exhibit 15: Disbursements down 58% yoy in 1QFY21

Disbursements break-up, March fiscal year-ends, 1QFY19-1QFY21
Vehicle finance (LHS) Home equity (LHS) Others (LHS) YoY (RHS)
(Rs bn) (%)
100 60
45 9.5
8.3 10.6
80 10.3 12.4 30
26 22 11.0 10.4
7.2 7.6 13 11
9.5 7 10.6
60 9.4 9.1 -
9.1 (2) 7.4
5.9
40 (30)
(36) 4.8
1.2
20 (58) (60)
57.1 56.1 62.8 73.8 69.4 58.0 59.5 47.0 32.3

0 (90)

Exhibit 16: HCV/LCVs have moderated from peak levels

Vehicle finance AUM composition, March fiscal year-ends, 1QFY19-1QFY21
LCV (LHS) HCV (LHS) Tractor (LHS)
SCV, mini LCV, 3W,2W (LHS) Used CV (LHS) Car and MUV (LHS)
Shubh (LHS) CE (LHS) YoY (RHS) (%)
(Rs bn)
500 60
400 48
300 36
200 24
100 12
0 -
Notes:
(1) AUM for Shubh vehicles for 4QFY20 and 1QFY21 are assumed values.
Comfortable liquidity position; lower funding cost to support NIM

 High liquidity on-balance sheet to drag margins. We expect marginal 13 bps yoy
increase in calculated NIM in FY2021E led by lower funding cost (the company recently
raised four years NCDs at 7.4% and average funding cost from banks is ~7.5%;
significantly lower than blended funding cost of 8.7% in FY2020). Higher liquidity on-
balance sheet will however continue to put pressure on NIM. NIM will be interplay of (1) a
decline in funding cost, (2) recent capital infusion, (3) marginal decline in yields and (4)
high liquidity on-balance sheet. With gradual decline in on-balance sheet liquidity and
increase in share of high yielding vehicle finance loans, NIM will bounce back to 6.4% by
FY2022E.
 Chola’s funding cost will likely decline 20 bps yoy in FY2021E. Its large bank loans
(~66% of total) are linked to bank MCLRs and the benefit of lower bank rates will
reflect in its near-term margins. Besides its bonds yields have been declining; we
expect the company to be one of the fewer NBFCs that command confidence of the
debt market participants.
 Well placed on liquidity. Chola ALM position is comfortable with positive ALM gap in
all buckets up to one year as of 1QFY21 (adjusted for collections from customers who
have availed moratorium). High liquidity on-balance sheet (~Rs 72 bn) and sanctioned
credit lines (~Rs44 bn) augur well. Management guided that the company will continue
to maintain strong cash buffers of ~Rs80 bn in 2QFY21 and gradually reduce it to ~Rs69
bn by FY2021E exit. Chola has not opted for a moratorium from its lenders and the
company is well placed to meet all debt and other expense obligations till December
2020 after considering lower collections due to a significant share of customers under
moratorium.
 Focus on funding mix diversification. In order to reduce the rise in borrowing cost and
manage liquidity, the company has (1) diversified funding sources (raised ECBs in
1QFY20), (2) maintained high liquidity on balance sheet (~Rs65 bn in FY2020 compared
to Rs37 bn in FY2019) and (3) focused on securitization/assignment (9% of funding mix).
Share of bank borrowings in overall funding mix inched up to ~66% in 4QFY20 from
64% in 3QFY20, 49% in FY2019 and 35% in FY2018.

Exhibit 17: Higher on-balance sheet liquidity to drag NIM and offset liability side advantages
Calculated yields, cost of funds and NIM for Chola, March fiscal year-ends, 2007-2023E (%)
Yields on loans (LHS) Cost of funds (LHS) NIM (RHS)
22.5 20.4 9
19.3
8.2
18.0 15.8 16.3 8
15.2 15.6 15.5 15.0 14.8 15.0 14.9 15.1 15.0
14.4 13.9 13.9
13.1 7.2
13.5 6.8 6.8 7
6.5 6.5 6.6
6.3
9.0 6.1 6
5.3 5.1 5.1

4.5 5
4.7
7.7 10.6 4.4
8.8 10.7 8.8 8.3 10.2 4.4 10.6 10.4 9.8 9.5 8.5 8.1 8.7 8.5 8.7 8.6
0.0 4.0 4
3.8
2021E
2023E
2022E
2009
2011
2013
2015
2017
2019
2007
2008
2010
2012
2014
2016
2018
2020
Exhibit 18: NIM expanded 50 bps yoy in 1QFY21 to 6.6%

Calculated NIM, YoA and CoF, March fiscal year-ends, 1QFY19-1QFY21 (%)
Yield on advances (LHS) Cost of borrowings (LHS) NIM (RHS)

20 10
16 14.7 15.2 14.7 9

14.3 14.2 14.6
13.7 14.0 13.9
12 8
8 6.6 6.5 6.6 7

6.4 6.5 6.4
6.2 6.1 6.2
4 6
8.0 7.8 8.1 8.1 8.2 8.5 8.6 8.3 8.0

0 5

Exhibit 19: ALM position comfortable; surplus in near-term buckets

ALM schedule, March fiscal year-ends, 2019, 2020, 1QFY21 (Rs bn)
2019 2020 1QFY21
Maturity Assets Liabilities Gap (%) Assets Liabilities Gap (%) Assets Liabilities Gap (%)
1 month 27 21 27 27 17 60 37 33 11
1-2 months 18 16 15 12 10 21 12 12 6
2-3 months 21 12 75 20 19 6 30 26 16
3-6 months 55 48 16 42 30 43 56 45 23
6-12 months 98 97 2 93 94 (1) 104 112 (7)
1-3 years 236 234 1 270 278 (3) 264 265 (0)
3-5 years 56 59 (6) 80 85 (6) 82 79 5
>5 years 66 91 (27) 97 109 (11) 98 113 (13)
Total 577 577 642 642 684 684
Notes:
(1) The company had adjusted inflows in the upcoming months for lower collections owing to moratorium.
Exhibit 20: Share of bank borrowings remain high at >65%

Borrowings break-up, March fiscal year-ends, 2011-2020, 1QFY21 (%)
Bank loans CPs and FCNR Debentures Subordinated debt and PDI Securitisation
100 0 0 0 0 0 0 0
13 13 12 12 13 12 12 15 11 11 11
8 5 2
80 8 10 10
22 21 20 20 20 21
21 8 11
2 3 3 3 42
60 6 12 32
11
40 11 10
63 60 65 65 64 66 66
55 49
20 35 35
0
2011
2014
2016
2019
2012
2013
2015
2017
2018
2020
1QFY21
Focus on improving cost efficiencies

Operating expenses will likely decline 1% yoy in FY2021E driven by (1) lower variable
incentives, (2) pause in business expansion, (3) focus on improving productivity of existing
infrastructure, (4) renegotiation of rent and other contracts and (5) stringent focus on
reducing overheads. We expect Chola’s cost-to-average AUM to decline 20 bps yoy in
FY2021E to 2.6%. Investment in collection and recoveries, digital and technological
platforms and technologies and operationally intensive low ticket businesses (3W, 2W, SCVs,
etc.), albeit lower than peak levels, will continue to put pressure on cost ratios.
Amid lower volumes and elevated credit cost, muted operating expenses will likely provide a
cushion to profitability. This will remain a key monitorable going ahead.

Exhibit 21: Cost-to-average AUM down ~20 bps yoy in FY2021E to 2.6%
Cost ratios for Chola, March fiscal year-ends, 2007-2023E
Cost-to-income (LHS) Cost-to-average AUM (RHS)

(%) 9.6 (%)
85 10
68 8
6.4
51 6
4.0 4.2
3.6 3.9
3.5
34 3.1 3.1 3.1 3.2 2.9 4
2.6 2.7 2.6 2.6 2.8
17 2
62 57 81 47 53 55 50 44 43 39 42 40 37 39 39 38 38
0 0
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021E
2022E
2023E
Exhibit 22: Cost-to-average AUM declined 40 bps qoq in 1QFY21

Cost ratios, March fiscal year-ends, 1QFY19-1QFY21 (%)
Cost to income (LHS) Cost to average AUM (RHS)

45 4.0
42.5
42 3.6
39.4 39.2 39.5
39 37.1 3.2
36.1
34.7 35.2
36 2.8
2.9
2.5
35.4 2.8
2.8
33 2.6 2.4
2.6 2.6 2.5
30 2.2 2.0
2QFY19
3QFY19
1QFY20
3QFY20
4QFY20
1QFY19
4QFY19
2QFY20
1QFY21
Demonstrated performance in the past; multi-product cycle at play

Chola’s multi-product model has helped it to navigate through different CV cycles. During
some past CV cycles (FY2014-16), the company focused more on the home equity business
(AUM in the home equity business increased to 29% in FY2015 from 23% in FY2013). The
company has been able to toggle between asset classes to deliver stable pre-tax ROAs
of >2.7% since FY2012. We however acknowledge that Covid-19 will likely impact most
asset classes in which Chola operates. As such, the company’s ability to navigate through
this cycle will be monitorable.

Exhibit 23: Chola’s ability to toggle between assets classes has helped it to deliver stable ROAs over the years
Segmental performance, March fiscal year-ends, 2011-2020, 1QFY19-1QFY21 (%)
1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21 YoY 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 YoY
NIM (%) 7.3 7.0 6.8 6.8 6.7 6.7 7.0 6.6 6.1 -60 bps 8.8 7.4 7.6 7.7 7.9 8.7 8.6 7.5 6.8 6.8 0 bps
Vehicle finance 7.2 7.4 7.2 7.6 6.9 6.9 7.0 7.1 7.0 10 bps 8.9 7.7 7.3 7.1 7.5 8.5 8.4 8.1 7.3 7.0 -30 bps
Home Equity 3.8 3.6 3.7 4.1 3.9 3.8 3.9 3.6 3.9 0 bps 5.8 5.4 5.6 5.6 5.4 5.1 4.4 4.1 3.8 3.8 0 bps
Expense ratio (%) 2.5 2.5 2.4 2.9 2.5 2.6 2.7 2.6 2.2 -30 bps 4.6 4.1 3.8 3.4 3.4 3.4 3.6 3.0 2.6 2.6 0 bps
Vehicle finance 2.9 2.9 2.9 3.4 2.9 3.1 3.1 3.0 2.6 -30 bps 4.3 4.1 3.8 3.5 3.6 3.8 3.8 3.6 3.0 3.0 0 bps
Home Equity 1.0 0.9 1.0 1.2 1.0 1.2 1.2 1.0 0.9 -10 bps 2.4 2.0 2.0 1.6 1.3 1.2 1.2 1.1 1.0 1.1 10 bps
Provisions (%) 0.8 0.6 0.7 0.4 0.8 0.6 0.9 0.6 0.4 -40 bps 2.8 0.4 0.8 1.5 1.5 1.7 1.1 0.8 0.6 1.5 90 bps
Vehicle finance 0.9 0.8 0.9 0.4 1.0 0.9 1.2 4.0 0.5 -50 bps 0.8 0.5 0.5 1.6 2.0 1.7 1.4 0.8 0.8 1.8 100 bps
Home Equity 0.5 (0.4) (0.1) (0.1) 0.1 0.2 - 3.1 0.3 20 bps 0.5 0.3 0.3 0.2 0.5 0.7 1.0 0.8 (0.0) 0.7 75 bps
Pre-tax RoA (%) 4.0 3.9 3.6 3.5 3.4 3.4 3.4 0.4 3.6 20 bps 1.4 2.7 3.0 2.8 3.0 3.6 3.9 3.7 3.7 2.7 -100 bps
Vehicle finance 3.4 3.7 3.4 3.8 3.1 2.9 2.7 0.1 3.9 80 bps 3.9 3.1 3.0 2.1 2.0 3.0 3.2 3.7 3.6 2.2 -140 bps
Home Equity 2.2 3.2 2.9 3.0 2.8 2.8 2.7 (0.5) 2.6 -20 bps 2.9 3.1 3.3 3.8 3.7 3.2 2.2 2.3 2.8 2.0 -80 bps
Exhibit 24: Cholamandalam trading at 1.8X one-year forward book

One-year forward rolling PER and PBR (X), March fiscal year-ends, July 2007-July 2020 (X)
Rolling PER (LHS) Rolling PBR (RHS)

40 4.5
32 3.6
24 2.7
16 1.8
8 0.9
0 0.0
Jul-08
Jul-10
Jul-12
Jul-14
Jul-17
Jul-19
Jul-07
Jul-09
Jul-11
Jul-13
Jul-15
Jul-16
Jul-18
Jul-20
Jan-08
Jan-10
Jan-13
Jan-15
Jan-17
Jan-19
Jan-09
Jan-11
Jan-12
Jan-14
Jan-16
Jan-18
Jan-20
Source: Company, Bloomberg, Kotak Institutional Equities estimates

Exhibit 25: Change in estimates

Old and new estimates, March fiscal year-ends, 2021-2023E (Rs mn)
New estimates Old estimates Change in estimates (%)

2021E 2022E 2023E 2021E 2022E 2023E 2021E 2022E 2023E
NII 36,571 38,136 43,188 35,890 35,603 41,346 1.9 7.1 4.5
AUM (Rs bn) 613 615 689 539 584 680 13.6 5.3 1.4
YoY (%) 1 0 12 (11) 8 16 1217 bps -789 bps -436 bps
NIM 6.57 6.82 7.25 6.82 7.01 7.24 -24 bps -19 bps 1 bps
Provisions 9,163 3,965 3,080 9,505 5,793 4,767 (3.6) (31.6) (35.4)
Other income 3,493 4,178 5,207 5,968 6,467 7,339 (41.5) (35.4) (29.1)
Assignment income 1,484 1,929 2,314 2,225 2,381 2,548 (33.3) (19.0) (9.2)
Operating expenses 15,561 16,109 18,178 15,561 15,703 17,309 - 2.6 5.0
PBT 15,340 22,240 27,136 13,330 20,563 27,412 15.1 8.2 (1.0)
Tax 3,927 5,693 6,947 3,412 5,264 7,017 15.1 8.2 (1.0)
PAT 11,413 16,546 20,190 9,917 15,299 20,394 15.1 8.2 (1.0)
Core PBT 22,920 24,126 27,750 21,259 21,343 26,903 7.8 13.0 3.1
Cost-to-income (%) 38.8 38.1 37.6 39.8 39.7 36.9 -91 bps -161 bps 66 bps
Credit cost (%) 1.5 0.6 0.5 1.8 0.6 0.4 -29 bps 5 bps 11 bps
ROA (%) 1.6 2.4 2.8 1.5 2.4 3.0 14 bps 0 bps -16 bps
ROE (%) 13.1 16.7 17.5 11.5 15.7 18.0 164 bps 96 bps -54 bps
EPS (Rs) 14 20 25 12 19 25 15.1 8.2 (1.0)
BVPS (Rs) 112 130 152 110 127 149 1.5 2.3 1.8

Exhibit 26: Cholamandalam - key financial ratios and growth rates

Ind-AS Ind-AS Ind-AS Ind-AS Ind-AS Ind-AS

2018 2019 2020 2021E 2022E 2023E
Growth in key P&L items (%)
Operating income NA 27.6 23.8 (0.0) 2.1 6.9
Interest income NA 25.6 23.6 2.2 1.4 6.0
Assignment income NA NA 185.2 (40.0) 30.0 20.0
Interest expense NA 34.9 28.0 1.1 (0.9) (0.1)
Net interest income NA 15.9 18.3 3.5 4.3 13.2
Net operational income NA 20.7 19.3 (1.4) 5.6 14.4
Total income NA 20.7 19.3 (1.3) 5.6 14.4
Operating expense NA 13.8 24.3 (1.4) 3.5 12.8
PPOP NA 25.2 16.3 (1.3) 6.9 15.3
Provisions NA 2.5 188.3 2.1 (56.7) (22.3)
PBT NA 30.1 (13.0) (3.3) 45.0 22.0
Tax NA 31.9 (16.3) (26.4) 45.0 22.0
PAT NA 29.2 (11.3) 8.5 45.0 22.0
Core PBT NA 17.1 11.9 3.2 5.3 15.0
Growth in key balance sheet items (%)
Loans 27.5 24.5 5.3 0.8 0.1 13.1
Investment NA 0.0 0.0 5.0 5.0 5.0
Net assets 43.5 30.2 11.4 0.4 (2.8) 9.8
Borrowings 58.3 31.9 8.8 (1.3) (5.9) 8.6
Total liabilities 47.6 31.4 8.9 (1.4) (5.9) 8.4
Total shareholder funds 18.2 21.1 32.3 12.4 16.0 16.9
Key ratios (%)
Yield on loans 13.9 13.9 15.0 14.9 15.1 15.0
Cost of borrowings 8.5 8.1 8.7 8.5 8.7 8.6
NIM (% of on-balance sheet loans) 6.8 6.3 6.5 6.6 6.8 7.2
Cost-to-income 39.5 37.3 38.9 38.8 38.1 37.6
Cost-to-average AUM 2.9 2.6 2.7 2.6 2.6 2.8
Credit cost (% of AUM) 0.8 0.6 1.6 1.5 0.6 0.5
Asset quality details
Gross stage-3 (Rs mn) 14,760.0 14,390.0 21,630.0 40,437.5 34,581.3 25,847.1
Gross stage 3 (%) 3.4 2.7 3.8 7.2 6.2 4.1
ECL coverage on stage 3 (%) 34.3 37.9 41.5 40.0 39.0 40.0
ECL coverage on stage 1 and 2 (%) 0.9 0.7 1.1 1.2 1.5 1.5
Overall ECL coverage (%) 2.0 1.7 2.7 4.0 3.8 3.1
Dupont analysis (percentage of average assets and off-balance sheet exposure)-%
Net interest income 6.7 5.8 5.5 5.3 5.5 6.1
Total income 7.4 6.6 6.3 5.8 6.1 6.8
Operating expenses 2.9 2.4 2.5 2.2 2.3 2.6
Provisions 0.8 0.6 1.4 1.3 0.6 0.4
(1- tax rate) 0.7 0.7 0.7 0.7 0.7 0.7
RoA 2.4 2.3 1.6 1.6 2.4 2.8
Average assets and off-balance sheet assets/average equity 8.1 9.2 8.9 8.0 6.9 6.2
RoE 19.5 21.0 14.7 13.1 16.7 17.5

Exhibit 27: Cholamandalam – income statement and balance sheet

Ind-AS Ind-AS Ind-AS Ind-AS Ind-AS Ind-AS

2018 2019 2020 2021E 2022E 2023E
Income statement (Rs mn)
Operating income 54,792 69,920 86,526 86,501 88,311 94,362
Interest income 52,358 65,755 81,242 83,018 84,143 89,167
Fee and commission income 1,537 1,761 1,899 1,350 1,510 2,119
Assignment income - 867 2,473 1,484 1,929 2,314
Other operational income 897 1,537 913 649 729 761
Interest expenses 26,593 35,887 45,922 46,446 46,008 45,979
Net interest income 25,765 29,868 35,319 36,571 38,136 43,188
Net operational income 28,199 34,032 40,604 40,054 42,303 48,383
Other income 4 7 3 10 10 10
Net total income 28,203 34,039 40,607 40,064 42,313 48,395
Loan loss & write-off provisions 3,037 3,112 8,973 9,163 3,965 3,080
Operating expenses 11,153 12,696 15,776 15,561 16,109 18,178
Employee expenses 5,368 5,906 6,550 6,419 6,740 7,549
Other expenses 5,785 6,790 9,226 9,142 9,369 10,630
PBT 14,014 18,232 15,857 15,340 22,240 27,135
Tax 4,831 6,370 5,334 3,927 5,693 6,947
PAT 9,183 11,862 10,524 11,413 16,546 20,189
Core PBT 16,952 19,844 22,202 22,920 24,127 27,752
Net loans 422,532 526,223 554,027 558,589 559,313 632,445
Net investments 729 729 729 766 804 844
Cash & bank balance 8,880 36,749 69,592 69,592 52,194 41,755
Fixed and other assets 8,756 10,563 15,582 13,464 12,167 10,775
Total assets 440,897 574,263 639,930 642,409 624,478 685,819
Total borrowings 383,303 505,674 550,050 543,087 511,042 554,961
Other liabilities 6,612 6,832 8,162 7,446 6,834 6,289
Total liabilities 389,916 512,506 558,212 550,533 517,876 561,250
Shareholder equity 50,982 61,757 81,718 91,876 106,602 124,569
Share capital 1,564 1,564 1,640 1,640 1,640 1,640
Reserves and surplus 49,417 60,193 80,079 90,236 104,963 122,929
Loan book break-up
Loans on balance sheet 422,532 526,080 554,020 558,589 559,313 632,445
Loans outside balance sheet 6,708 16,710 51,470 54,100 55,465 56,812
Loans under management 429,240 542,790 605,490 612,689 614,778 689,257

SELL
Dr Lal Pathlabs (DLPL)
Health Care Services AUGUST 03, 2020
RESULT
Covid testing, cost controls aid performance. Dr Lal’s 1QFY21 revenue (-21% yoy) CMP (`): 1,889
was 9% ahead of our estimate. Higher-than-expected revenues from Covid testing led Fair Value (`): 1,300
to the revenue beat with strong cost controls driving margin surprise. Non-Covid
BSE-30: 37,607
business is recovering well and higher Covid volumes will support revenue growth in
these ‘testing’ times. We retain our SELL rating with an unchanged DCF based fair value
of Rs1,300.
Dr Lal Pathlabs
Mcap (bn) (Rs/US$) 158/2.2 EPS growth (%) 13.4 (1.4) 39.2
ADTV-3M (mn) (Rs/US$) 237/3 P/E (X) 69.8 70.8 50.8
FIIs 20.0 RoE (%) 22.8 20.1 23.9
Covid testing aids revenues; lower costs drive margin surprise
DLPL’s 1QFY21 revenue declined 21% yoy, and was 9% ahead of our estimate. The revenue
beat was primarily driven by Covid testing which contributed Rs510 mn versus KIE estimate of
Rs360 mn. The non-Covid business declined 37% yoy (in line versus KIE). Importantly, revenues
in June grew 14% yoy after a decline of 61% and 12% in April and May respectively. Patient
volumes declined 28% yoy (-33% ex-Covid), with realizations increasing 11% yoy to Rs760 on
account of higher Covid testing. Gross margins declined 730bps qoq (-130 bps vs KIE) led by
higher contribution of low margin RT-PCR testing along with lower volumes impacting
throughput. Strong control on SG&A spend (-21% yoy), which was 14% lower than our
estimates led to EBITDA exceeding our estimates by 36%, despite higher staff costs. Lower
depreciation led to PAT exceeding our estimates by 70%.
Volumes recovering well; Covid testing to boost revenue growth in FY2021
Recovery in non-Covid segment is promising with management indicating that June non-Covid
revenues were at 90% of pre-Covid levels. All labs and collection centers within DLPL’s network
are also now operational. Additionally, with DLPL conducting RT-PCR testing at its Delhi,
Kolkata and Indore labs, we expect meaningful revenues from Covid testing, even as we see
non-Covid segment recovering completely only by 4QFY21. RT-PCR testing In Kolkata has also
enhanced Dr Lal’s brand visibility within the healthcare community in West Bengal. Antibody
testing and government approval for RT-PCR tests without prescription can provide further
upside to Covid revenues. We build in Rs2.4 bn revenues from the Covid segment in FY2021.
Even as margins in Covid testing are well below non-Covid, this segment will help absorb
overheads while strong cost control measures will aid margin defense. With home collection Kumar Gaurav
gaining traction in the non-Covid segment, particularly in the B2C segment we believe Dr Lal,
through its wide network of collection centers is better positioned versus the unorganized
Chirag Talati, CFA
segment. However we do not see rapid consolidation in the near term given unorganized labs
are also fully functional and operating at 70-75% of pre-Covid revenues.
SELL on expensive valuations
We broadly retain our estimates for FY2021-23 with an unchanged DCF-based fair value of
Rs1,300. DLPL trades at expensive valuations of 51X FY2022E EPS. SELL
Contact: +91 22 6218 6427
Dr Lal Pathlabs Health Care Services
Exhibit 1: DLPL’s 1QFY21 EBITDA was 36% ahead of our estimates

Dr Lal Pathlabs, interim results, March fiscal year ends (Rs mn)
chg. (%) chg. (%)

1QFY21 1QFY20E 1QFY20 4QFY20 1QFY20E 1QFY20 4QFY20 FY2020 FY2019 yoy FY2021E
Net sales 2,660 2,447 3,352 3,017 8.7 (20.6) (11.8) 13,304 12,034 10.6 14,352
Cost of materials (759) (665) (712) (720) 14.1 6.6 5.4 (2,987) (2,624) 13.8 (4,280)
Gross profit 1,901 1,782 2,640 2,297 6.7 (28.0) (17.2) 10,317 9,410 9.6 10,072
Employee benefit expense (595) (563) (583) (625) 5.8 2.1 (4.8) (2,426) (2,083) 16.5 (2,669)
ESOP/ESPS cost — — — — — — —
Fee to collection centres (293) (250) (436) (393) 17.0 (32.8) (25.4) (1,730) (1,509) 14.6 (1,895)
Other expenses (530) (614) (670) (706) (13.7) (20.9) (24.9) (2,725) (2,882) (5.4) (2,149)
EBITDA 483 355 951 573 36.1 (49.2) (15.7) 3,436 2,936 17.0 3,361
Depreciation (179) (200) (163) (200) (10.5) 9.8 (10.5) (728) (382) 90.6 (907)
EBIT 304 155 788 373 96.3 (61.4) (18.5) 2,708 2,554 6.0 2,453
Other income 114 110 144 120 3.6 (20.8) (5.0) 550 460 19.6 563
Finance expense (37) (40) (38) (39) (153) (8)
Profit before tax 381 225 894 454 69.5 (57.4) (16.1) 3,105 3,006 3.3 3,017
Profit before tax (ex-ESOP) 381 225 894 454 69.5 (57.4) (16.1) 3,105 3,006 3.3 3,017
Exceptional items — — — — — —
Tax expense (97) (57) (303) (128) (829) (1,000) (772)
Net profit 284 168 591 326 68.9 (51.9) (12.9) 2,276 2,006 13.5 2,244
Minority interest — (1) (3) (1) (17) (13) (16)
Net profit after minority 284 167 588 325 69.9 (51.7) (12.6) 2,259 1,993 13.3 2,228
FD number of shares 83 83 83 83 83 83 83
FD EPS (Rs mn) 3.4 2.0 7.0 3.9 69.9 (51.7) (12.6) 27.1 23.9 26.7
Gross margin (%) 71.5 72.8 78.8 76.1 77.5 78.2 70.2
EBITDA margin (%) 18.2 14.5 28.4 19.0 25.8 24.4 23.4
Staff costs to sales (%) 22.4 23.0 17.4 20.7 18.2 17.3 18.6
Collection centres fees to sales (%) 11.0 10.2 13.0 13.0 13.0 12.5 13.2
Other expenses to sales (%) 19.9 25.1 20.0 23.4 20.5 23.9 15.0
Tax rate (%) 25.5 25.2 33.9 28.2 26.7 33.3 25.6
Operational data
Number of tests (mn) 7.9 — 11.9 11.2 (33.6) (29.5) 47.7 41.8 14.2 44.6
Realizations/test (Rs) 337 — 282 269 19.5 25.0 279 288 (3.2) 322
Number of patients (mn) 3.5 3.3 4.9 4.4 5.1 (28.6) (20.5) 19.4 17.6 10.3 19.1
Realizations/patient (Rs) 760 735 684 686 3.4 11.1 10.8 687 685 0.2 751
Tests/patient 2.26 — 2.43 2.55 (7.1) (11.3) 2.5 2.4 3.6 2.3
Segmental performance
COVID revenues (Rs mn) 559 360 55.2 2,426
Non-COVID revenues (Rs mn) 2,101 2,087 3,352 3,017 0.7 (37.3) (30.3) 11,927
COVID volumes (mn) 0.2 0.1 64.2 1.3
Non COVID volumes (mn) 3.3 3.2 4.9 4.4 2.9 (32.6) (24.9) 17.8
COVID realizations (Rs) 2,836 3,000 (5.5) 1,925
Non COVID realizations (Rs) 636 650 684 686 (2.1) 668

Health Care Services Dr Lal Pathlabs
Exhibit 2: Revenues have recovered on the back of COVID Exhibit 3: Non-Covid revenues declined 37% in 1QFY21
testing Revenue breakup, March fiscal year-ends, 1QFY20-21 (Rs mn)
Revenue and volume growth, March fiscal year-ends (%)
4,000 Non-Covid Covid
20 Revenues Volumes
14
3,500
10 3
3,000
-
2,500
(10) 559
(12) 2,000
(20)
3,352
(30) (25) 1,500
(40) 1,000 2,101
(50) 500
(60)
-
(61) (62)
(70) 1QFY20 1QFY21
April May June
Exhibit 4: Delhi and West Bengal testing has ramped up Exhibit 5: Countries past their peak have not seen meaningful
significantly decline in testing
COVID tests per day (RT-PCR+antigen), April-July 2020 COVID tests per day, March-Jul 2020
Delhi West Bengal Japan South Korea

30,000 90,000
Italy Germany
80,000 France
25,000
70,000
20,000 60,000
50,000
15,000
40,000
10,000 30,000
20,000
5,000 10,000
-
0
Apr 2, 2020
Jul 7, 2020
May 12, 2020
May 20, 2020
May 28, 2020
Mar 1, 2020
Mar 9, 2020
Apr 10, 2020

Apr 18, 2020
Apr 26, 2020
Jul 15, 2020

Jul 23, 2020
Jun 5, 2020
Jun 13, 2020
Jun 21, 2020
Jun 29, 2020
Mar 17, 2020
Mar 25, 2020
May 4, 2020
05/Jun/2020
12/Jun/2020
19/Jun/2020
26/Jun/2020
10/Apr/2020
17/Apr/2020
24/Apr/2020
01/May/2020
08/May/2020
15/May/2020
22/May/2020
03/Jul/2020
10/Jul/2020
17/Jul/2020
24/Jul/2020
29/May/2020
Source: Covid19india.org, Kotak Institutional Equities Source: Ourworldindata.org, Kotak Institutional Equities

Dr Lal Pathlabs Health Care Services
Exhibit 6: We build in Rs2.4 bn revenues from Covid testing in FY2021

Change to estimates, March fiscal year ends, 2020-21E (Rs mn)
2018 2019 2020 2021E 2022E 2023E

Non-COVID
Patient volumes (mn) 15.2 17.6 19.4 17.8 25.0 28.3
Growth (%) 14 16 10 (8) 30 13
Realizations (Rs) 695 684 686 668 691 691
Revenues (Rs mn) 10,569 12,034 13,304 11,927 17,281 19,527
COVID
Patient volumes (mn) — — — 1.3 0.2 —
RT-PCR (mn) — — — 0.9 0.1 —
Antibody (mn) — — — 0.3 0.04 —
Realizations (Rs) 1,925 1,956
RT-PCR (Rs) — — — 2,200 2,200 —
Antibody (Rs) — — — 1,100 1,100 —
Revenues (Rs mn) — — — 2,426 317 —
RT-PCR (Rs mn) — — — 2,079 277 —
Antibody (Rs mn) — — — 347 40 —
Consolidated revenues (Rs mn) 10,569 12,034 13,304 14,352 17,598 19,527
Revenue growth (%) 15.8 13.9 10.6 7.9 22.6 11.0
Exhibit 7: We value DLPL at `1,300/share

DCF-based valuation, March fiscal year ends, 2019-30E (Rs mn)
2020 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E 2032E 2033E 2034E 2040E
Net sales 13,304 14,352 17,598 19,527 22,066 24,824 27,927 31,418 35,345 39,587 43,941 48,336 52,686 57,427 62,022 91,338
YoY (%) 10.6 7.9 22.6 11.0 13.0 12.5 12.5 12.5 12.5 12.0 11.0 10.0 9.0 9.0 8.0 6.0
EBITDA (adjusted for Ind-AS) 3,108 3,000 4,311 4,750 5,384 6,206 6,982 7,855 8,836 9,897 10,985 12,084 13,171 14,357 15,505 22,835
Margin (%) 23.4 20.9 24.5 24.3 24.4 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0 25.0
Depreciation (adjusted for Ind-AS) 383 556 618 680 741 807 878 953 1,034 1,120 1,212 1,311 1,417 1,530 1,651 2,552
EBIT 2,725 2,444 3,694 4,070 4,643 5,399 6,104 6,902 7,803 8,777 9,773 10,773 11,755 12,827 13,854 20,282
Margin (%) 20.5 17.0 21.0 20.8 21.0 21.7 21.9 22.0 22.1 22.2 22.2 22.3 22.3 22.3 22.3 22.2
EBIT (1-tax) 1,809 1,626 2,428 2,715 3,454 4,017 4,542 5,135 5,805 6,530 7,271 8,015 8,745 9,543 10,308 15,090
Capex (1,060) (300) (400) (400) (428) (458) (490) (524) (561) (600) (642) (687) (735) (787) (842) (1,172)
% of revenues (%) 8.0 2.1 2.3 2.0 1.9 1.8 1.8 1.7 1.6 1.5 1.5 1.4 1.4 1.4 1.4 1.3
Change in WC 977 (321) 93 (15) 113 57 62 68 75 78 76 73 67 71 63 45
FCFF 2,109 1,561 2,739 2,980 3,881 4,422 4,991 5,631 6,352 7,127 7,917 8,711 9,494 10,357 11,180 16,515
Discount factor 0.8 1.8 2.8 3.8 4.8 5.8 6.8 7.8 8.8 9.8 10.8 11.8 12.8 18.8
Discounted free cash 2,537 2,492 2,931 3,016 3,073 3,131 3,189 3,230 3,240 3,219 3,168 3,120 3,041 2,435
WACC (%) 10.8 WACC (%)

Terminal growth (%) 5.0 1,300 10.0 10.5 11.0 11.5 12.0
Discounted free cash flow 55,618 4.0 1,392 1,274 1,173 1,087 1,012
Terminal value 44,055 Terminal 4.5 1,447 1,317 1,207 1,114 1,034
Enterprise value 99,674 growth 5.0 1,513 1,368 1,247 1,146 1,059
Less: Net debt (8,845) rate (%) 5.5 1,594 1,429 1,294 1,182 1,088
6.0 1,695 1,503 1,350 1,226 1,122
Equity value 108,518
No. of shares 83
Equity value per share (Rs) 1,300

Health Care Services Dr Lal Pathlabs
Exhibit 8: We expect DLPL to report 16% PAT CAGR over FY2020-23E

March fiscal year ends, 2013-23E (Rs mn)
2013 2014 2015 2016 2017 2018 2019 2020 2021E 2022E 2023E
Net revenues 4,517 5,579 6,596 7,913 9,124 10,569 12,034 13,304 14,352 17,598 19,527
Gross profit 3,544 4,403 5,204 6,184 7,153 8,309 9,410 10,317 10,072 13,610 15,231
EBITDA 977 1,386 1,560 2,097 2,365 2,640 2,936 3,436 3,361 4,706 5,183
Depreciation & amortisation (204) (272) (282) (283) (282) (331) (382) (728) (907) (982) (1,057)
EBIT 773 1,113 1,278 1,815 2,084 2,309 2,554 2,708 2,453 3,724 4,126
Net interest 29 79 119 193 249 304 452 397 563 467 712
Profit before tax 802 1,192 1,397 2,007 2,333 2,613 3,006 3,105 3,017 4,192 4,838
Tax and deferred tax (246) (389) (447) (675) (781) (895) (1,001) (829) (772) (1,073) (1,238)
Less: minority interest (5) (7) (8) (10) (10) (10) (13) (17) (16) (16) (16)
Net income 551 796 942 1,322 1,542 1,708 1,992 2,259 2,228 3,103 3,583
Net income (ex-ESOP) 725 901 1,107 1,328 1,542 1,708 1,992 2,259 2,228 3,103 3,583
Weighted avg. no. of shares (mn) 54.6 54.6 54.6 68.5 83.5 83.5 83.5 83.5 83.5 83.5 83.5
Fully diluted number of shares 83.5 83.5 83.5 83.5 83.5 83.5 83.5 83.5 83.5 83.5 83.5
EPS (Rs) 10.1 14.6 17.3 19.3 18.5 20.5 23.9 27.1 26.7 37.2 42.9
EPS (adjusted) (Rs) 13.3 16.5 20.3 19.4 18.5 20.5 23.9 27.1 26.7 37.2 42.9
FD EPS (adjusted) (Rs) 8.7 10.8 13.3 15.9 18.5 20.5 23.9 27.1 26.7 37.2 42.9
Balance sheet
Cash & equivalents 762 1,143 1,861 2,940 3,456 4,583 6,751 7,334 8,845 11,343 14,133
Debtors 198 252 310 363 418 412 532 514 786 771 856
Other current assets 207 309 646 935 792 1,235 853 1,079 902 1,039 1,097
Current assets 1,167 1,703 2,816 4,237 4,666 6,230 8,136 8,927 10,533 13,154 16,086
Fixed assets (incl. goodwill) 1,271 1,400 1,510 1,697 1,699 2,204 2,121 2,900 2,644 2,427 2,147
Other non-current assets 252 412 427 318 536 755 648 1,917 1,917 1,917 1,917
Total assets 2,690 3,515 4,753 6,252 6,901 9,189 10,905 13,744 15,095 17,498 20,150
Short-term loans 4 9 — — — — — — — — —
Creditors and other liabilities 887 965 1,118 915 848 1,012 1,089 2,274 2,049 2,264 2,392
Current liabilities 891 974 1,118 915 848 1,012 1,089 2,274 2,049 2,264 2,392
Secured loans — — — — — — — — — — —
Other liabilities (incl. deferred) 163 208 202 242 73 228 306 930 930 930 930
Total liabilities 1,053 1,182 1,319 1,157 921 1,240 1,395 3,204 2,979 3,194 3,322
Equity 1,637 2,333 3,434 5,095 5,980 7,949 9,510 10,540 12,116 14,304 16,828
Total equity and liabilities 2,690 3,515 4,753 6,252 6,901 9,189 10,905 13,744 15,095 17,498 20,150
Cash flow
CFO pre-WC changes 1,243 1,577 1,834 2,087 2,504 2,816 3,135 3,652 2,858 4,186 4,644
Working capital (28) (94) (321) 69 (81) 95 93 122 (321) 93 (15)
Tax (334) (503) (534) (687) (706) (940) (1,043) (935) (772) (1,073) (1,238)
Cash flow from operations 881 980 979 1,469 1,716 1,971 2,185 2,839 1,765 3,206 3,391
Capex (including acquisitions) (196) (328) (353) (441) (516) (625) (420) (1,060) (300) (400) (400)
Free cash flow 685 652 626 1,027 1,200 1,346 1,765 1,779 1,465 2,806 2,991
Key ratios (%)
Sales growth (% 23.5 18.2 20.0 15.3 15.8 13.9 10.6 7.9 22.6 11.0
EBITDA margin (%) 21.6 24.8 23.6 26.5 25.9 25.0 24.4 25.8 23.4 26.7 26.5
RoAE (%) 44.3 45.4 38.4 31.1 27.8 24.5 22.8 22.5 19.7 23.5 23.0
RoACE (post-tax, ex-cash) (%) 61.0 72.2 62.7 64.6 59.2 51.6 55.6 58.1 48.1 79.5 97.2
Net debt to equity (X) (0.5) (0.5) (0.5) (0.6) (0.6) (0.6) (0.7) (0.7) (0.7) (0.8) (0.8)

BUY
GMR Infrastructure (GMRI)
Transportation AUGUST 01, 2020
RESULT
Prepared for opportunities ahead. 4QFY20 operating outperformance matters less in CMP (`): 22
the current context. A fully invested cash-rich Groupe ADP, opportunities to add assets Fair Value (`): 26
and ability to monetize/securitize mature/assets, all bode well for GMRI to expand its
BSE-30: 37,607
airport portfolio. It remains optimistic on swift recovery in air volumes based on safety
features introduced and being tested. We maintain our estimates and rating, which we
would revisit after incorporating the recent consultation paper for DIAL’s aero tariffs.
GMR Infrastructure
52-week range (Rs) (high,low) 27-14 EPS (Rs) (3.1) (1.8) (0.8)
ADTV-3M (mn) (Rs/US$) 295/4 P/E (X) (7.0) (11.9) (26.9)
Shareholding pattern (%) P/B (X) (4.9) (7.8) (6.0)
FIIs 20.6 RoE (%) 106.6 55.8 25.2
Rel. to BSE-30 1 14 45 Net profits (Rs bn) (19) (13) (6)
4Q operating metrics beat estimates; meaningful decline in corporate debt on expected lines
GMR’s 4QFY20 EBITDA was 22% ahead of our estimate on a modest 8% yoy decline in
volumes versus 15% estimated and a higher other operating income. This was more than
negated by higher-than-expected net interest cost of Rs8.5 bn, up qoq in spite of receipt of the
first payout from Groupe ADP. This yielded a pre-tax loss of Rs4.8 bn versus the Rs3.6 bn loss
estimate. After the second payout coming from Groupe ADP, the corporate debt has fallen to
Rs30-35 bn in line with our expectation after adjusting for the Rs10.6 bn of deferral of payout.
Such Rs10.6 bn deferred payout would be paid in part or full depending on the EBITDA profile
over FY2022-24.
Optimistic on recovery in passenger volumes and on realizing arbitration claims
GMR expects the airport business to recover fast from current levels, which are at 20% of pre-
Covid levels. It emphasized steps taken to establish air travel as the safest mode of travel –
(1) setting up of bilateral air bubbles, (2) freshening of cabin air every two minutes and
(3) technologies coming up to detect Covid-19 in 30 seconds (refer). Internally, GMR is working
towards rescheduling capex, has reducing operating costs (closed terminals) and other overheads
without compromising on safety and security. Beyond airports, GMRI also expects fast-tracking
of arbitration and realization of proceeds for its highways and thermal power projects.
Cites preparedness for funding business opportunities in airports
GMR has recently formally won two projects in (1) Bhogapuram (Andhra Pradesh) and (2) Ninoy
Aquino International Airport (Manila). It also highlighted six near-term opportunities in India
and expects more opportunities as government/private players monetize their investments. GMR Aditya Mongia
shared its ability to raise finances through (1) levering the recent Rs10 bn primary equity
infusion in GMR Airports, (2) funding support from cash-rich Groupe ADP, (3) prospects to Teena Virmani
monetize/securitize its mature airports assets and (4) Rs55 bn of potential earn-outs till FY2024.
We will revisit estimates after incorporating the DIAL consultation paper on tariffs; retain BUY
Our Rs26 FV has a 3-4% downside related to part collection of the second tranche of earn-outs
and higher-than expected corporate debt. We would incorporate the same and revise estimates
after incorporating details of target revenues from the recently released DIAL consultation paper. kspcg.research@kotak.com
Contact: +91 22 6218 6427
Transportation GMR Infrastructure
Exhibit 1: GMR’s 4QFY20 EBITDA was ahead of our estimates on account of a modest 8% yoy decline in combined passenger volumes
4QFY20 results of GMR Infrastructure (consolidated), March fiscal year-ends (Rs mn)
% change
4QFY20 4QFY20E 4QFY19 3QFY20 vs est. yoy qoq FY2020 FY2019 % change FY2021E FY2020 % change
Net Sales 19,479 17,510 18,905 19,908 11 3 (2) 75,152 71,131 6 75,556 75,152 1
Other Operating Income 4,009 2,057 1,031 2,057 10,403 4,629 — 10,403
Total Sales 23,488 19,567 19,936 21,965 20 18 7 85,555 75,760 13 75,556 85,555
Total Expenditure (16,942) (14,202) (16,736) (14,641) 19 1 16 (59,270) (58,703) 1 (58,064) (59,270)
Raw Material Consumed (1,218) (1,021) (961) (4,349) (5,043) — (4,349)
Stock Adjustment 58 (36) 22 156 (18) — 156
Purchase of Finished Goods (3,054) (2,161) (2,284) (8,305) (6,061) — (8,305)
Employee Expenses (2,365) (1,896) (2,022) (8,312) (7,599) — (8,312)
Loss on Forex Transaction — (35) — — (1,557) — —
Revenue share to concessionaire grantors (5,357) (4,528) (5,232) (20,372) (17,648) — (20,372)
Other Expenses (5,007) (7,060) (4,164) (18,089) (20,778) — (18,089)
EBITDA 6,545 5,365 3,201 7,324 22 104 (11) 26,285 17,056 54 17,492 26,285 (33)
Other Income 2,055 912 3,000 1,012 6,666 7,088 8,149 6,666
EBITDA (including other income) 8,600 6,278 6,201 8,335 37 39 3 32,951 24,144 36 25,641 32,951
Depreciation (2,974) (2,305) (2,505) (2,597) (10,643) (9,840) (9,094) (10,643)
EBIT 5,627 3,972 3,696 5,738 42 52 (2) 22,308 14,304 56 16,547 22,308
Interest (10,474) (7,611) (7,857) (8,584) (35,451) (26,842) (28,371) (35,451)
Profit before tax (4,847) (3,638) (4,161) (2,845) (13,143) (12,537) (11,824) (13,143)
Total tax expense 1,704 (86) 47 (188) — 874 (488) —
Tax 1,704 (86) 47 (188) — 874 (488) —
Fringe Benefit Tax — — — — — — — —
Deferred Tax — — — — — — — —
RPAT (3,143) (3,724) (4,114) (3,033) (13,143) (13,412) (11,336) (13,143)
Minority Interest After NP — (1,490) — — — — 18 —
Profit/Loss of Associate Company (1,320) (1,255) 2,711 242 (2,883) (879) (1,465) (2,883)
Net Profit after Minority Interest & P/L Asso.Co. (4,463) (6,470) (1,403) (2,792) (15,177) (12,542) (13,759) (15,177)
Extra-ordinary Items (6,809) — (22,123) — (6,809) (22,123) — (6,809)
Adjusted Profit (11,272) (6,470) (23,526) (2,792) (21,986) (34,665) (13,759) (21,986)
Key ratios
Operating expenses & stock / Sales 17.9 0.0 16.1 14.7 14.6 14.7 0.0 14.6
Empl / Sales 10.1 0.0 9.5 9.2 9.7 10.0 0.0 9.7
OE / Sales 21.3 0.0 35.6 19.0 21.1 29.5 0.0 21.1
OPM 27.9 27.4 16.1 33.3 30.7 22.5 27.4 30.7
EBIDT Margin 36.6 32.1 31.1 37.9 38.5 31.9 33.9 38.5
PBT Margin (20.6) (18.6) (20.9) (13.0) (15.4) (16.5) (15.6) (15.4)
Tax rate 35.2 (2.4) 1.1 (6.6) 6.5 7.0 (4.1) 6.5
PAT Margin (48.0) (33.1) (118.0) (12.7) (25.7) (45.8) (18.2) (25.7)
EPS (1.9) (1.1) (3.9) (0.5) (3.6) (5.7) (2.3) (3.6)
Exhibit 2: Delhi airport passenger traffic declined by 3% for FY2020 mainly due to Covid-19
Delhi airport passenger traffic details, March fiscal year ends (mn pax)
Domestic International
80
-3%
70
60 18.7 17.8
50
40
30
50.5 49.5
20 -7%
4.9 4
10
11.9 11.6
0
4QFY19 4QFY20 FY2019 FY2020

GMR Infrastructure Transportation
Exhibit 3: Hyderabad airport passenger traffic grew 2% for FY2020

Hyderabad airport passenger traffic details, March fiscal year ends (mn pax)
25
2%
20 3.9
3.9
15
10
17.4 17.8
-12%
5 1.0 0.8
4.5 4
0
4QFY19 4QFY20 FY2019 FY2020
Exhibit 4: Cebu airport passenger traffic grew 11% for 4QFY20

Cebu airport passenger traffic details, March fiscal year ends (mn pax)
3.5
11%
3.0
1.1
2.5 0.9
2.0
1.5
1.0 2 2.1
0.5
0.0
4QFY19 4QFY20

Exhibit 5: Non-aero revenues for Delhi airport were up 5% yoy for FY2020 on stable retail revenues
and healthy growth in cargo revenues
Delhi airport non-aero revenue segment wise, March fiscal year ends (%)
Non-aero revenue breakup of Rs22 bn for Delhi airport for FY2020 (%)
Others, 15
Retail (inc duty
free), 29
Ground Handling, 5
F&B, 7
Advertisement, 7
Cargo, 12 Space Rentals, 25
Exhibit 6: Non-aero revenues for Hyderabad airport were up by 15% for FY2020 on strong growth of
20% seen in retail and car park revenues and uptick of 6% in advertisement revenues
Hyderabad airport non-aero revenue segment wise, March fiscal year ends (%)
Non-aero revenue breakup of Rs3.9 bn for Hyderbad airport for FY2020

Others, 15
Retail (inc duty
free), 27
Car park, 20
Space Rentals, 15
F&B, 13
Advertisement, 10

Exhibit 7: Consolidated net debt of GMR Infrastructure across entities

Details of net debt across entities, March fiscal year ends (Rs bn)
300 Airport Energy Highways Others Corporate (Inc debt for PE exit)
250
90 66
200 91
86 5
5 25
150 2 26
5 26 27
27 26
100 26
27
110 123
50 93
81
0
1QFY20 2QFY20 3QFY20 4QFY20
Exhibit 8: Key assumptions behind DCF-based valuation of GMR (consolidated)
Delhi Hyderabad
Passenger CAGR (%)
2014-19 13 20
2019-24E 4 6
2019-29E 7 9
Aero yield (Rs/pax)
Current 143 509
For the next control period 150 489
For the following control period 150 417
For the following two control periods (average) 150 359
Non-aero revenues CAGR (%)
2014-19 15 4
2019-24E 10 10
2019-29E 11 13
Duty-free spending per international pax (US$)
2019 10 6
2024 17 11
2029 22 17
Lumpy land monetization
Year 2023 NA
Quantum (Rs bn) 19 NA
Regulated RoE (%)
Current 16 16
For the next control period 16 16
Beyond two control periods 12 12
Cost of equity (%) 13.5 13

Exhibit 9: SoTP valuation of GMR (consolidated)
Equity Proportionate Value per

value Stake equity value share
Key vertical / asset Valuation method (Rs bn) (%) (Rs bn) (Rs)
GMR Airports SOTP (DIAL, GHIAL, Duty free JV - DCF) 289 53 153 21.5
GMR Energy SOTP (Warora, Kamalanga and others - DCF) 24 70 17 2.3
Rajahmundry power project (SDR) DCF (19) 45 (9) (1.2)
GMR Highways SOTP (individual projects DCF) 1 100 1 0.2
SIR assets Valuation at 1.5X investment 22 51-100 12 1.6
Project-level valuation of key assets 308 175 29.9
Standalone debt, other investments/L&A Investments valued at negligible 0.1X book value 9 1.3
SoTP of GMR (consolidated) 184 25.8

Exhibit 10: Summary financials of GMR Infrastructure (consolidated), March fiscal year-ends, 2018-22E (Rs mn)
2017 2018 2019 2020E 2021E 2022E

Income statement
Net revenues 97,686 87,212 73,997 85,555 75,149 86,212
Impact of sharp fall in aero
Total operating expenses (65,487) (65,353) (58,703) (59,270) (58,286) (61,284)
revenues for Hyderabad airport
EBITDA 32,200 21,859 15,295 26,285 16,863 24,929 for one year
Other income 4,654 5,530 7,198 6,666 6,061 3,492
Depreciation & Amortization (10,599) (10,284) (9,840) (10,643) (9,100) (8,796)
EBIT 26,255 17,105 12,654 22,308 13,824 19,625
Interest expense (21,285) (23,163) (25,190) (35,451) (24,920) (21,773)
PBT 4,970 (6,058) (12,536) (13,143) (11,096) (2,148)
Tax expense (7,370) (455) 874 849 (549) (763)
Recurring PAT prior to associate income and
(2,401) (6,513) (11,662) (12,294) (11,645) (2,911)
minority interest
Exceptional items and prior period items (net) (558) (319) (21,022) (6,809) — —
Reported PAT prior to associate income and
(2,959) (6,832) (32,684) (19,103) (11,645) (2,911)
minority interest
Associate profits (684) (4,314) (879) (2,883) (1,465) (1,106)
Minority interest (2,103) (2,493) (2,376) — 18 (1,753)
Reported PAT (5,746) (13,639) (35,939) (21,986) (13,092) (5,770)
Recurring PAT (5,188) (13,319) (14,917) (15,177) (13,092) (5,770)
Recurring EPS (0.9) (2.2) (2.5) (2.5) (1.8) (0.8)
Balance sheet
Shareholders' funds 56,475 38,183 (8,201) (24,587) (19,994) (25,764)
Conversion of Rs20 bn of FCCB
Share capital 6,036 6,036 6,036 6,036 7,147 7,147 into shares at Rs18 conversion
Reserves & surplus 50,439 32,148 (14,237) (30,623) (27,141) (32,911) price
Minority interest 17,136 18,265 20,620 26,746 131,859 133,612
Debt 214,840 230,674 275,799 281,528 245,533 295,739
Total sources of funds 314,634 308,976 305,823 300,149 389,702 435,891 ~Rs90 bn from proceeds from
Net fixed assets 130,498 129,694 133,396 199,890 183,054 278,369 monetization of airports.
Net working capital (ex-cash) 1,011 (11,099) 18,702 (46,038) 20,572 23,840
Investments 127,164 120,770 113,634 101,193 130,556 130,915
Cash and bank balances and current investments 47,450 60,184 39,801 44,488 55,520 2,768
Total application of funds 314,634 308,976 305,823 300,149 389,702 435,891
Free cash flow
Operating profit before wcap. changes 35,100 20,766 18,939 25,215 22,924 28,421
Change in working capital / other adjustments 12,732 3,842 (10,864) (9,845) (7,060) (3,268)
Cash flow related to upfront security deposits 327 500 3,215 — 7,000 —
Cash flow impact related to liability to consolidate
— — 11,924 — — —
stake in GMR Energy
Direct tax paid (2,504) (1,636) (2,692) (1,611) (549) (763)
Net cashflow from operating activites 45,655 23,472 20,523 13,759 22,315 24,390
Capex (6,199) (7,148) (28,471) (29,121) (45,114) (104,111)
Cash (used) / realised in investing activities 17,927 (10,142) (36,050) (16,679) (13,608) (104,469) Such requirement would largely
Free cash flow (CFO + net capex) 39,455 16,325 (7,948) (15,362) (22,799) (79,721) get funded by ~Rs90 bn of
Ratios procceds from monetization of
airports' stake.
EBITDA margin (%) 33.0 25.1 20.7 30.7 22.4 28.9
Net debt/equity including minority interest 2.3 3.0 19.0 109.8 1.7 2.7
Net debt/EBITDA 5.2 7.8 15.4 9.0 11.3 11.8
RoACE (%) 3.4 2.5 1.2 3.5 1.4 2.6
RoAIC (%) 7.1 7.1 3.2 9.0 4.5 9.2

Exhibit 11: Financial analysis for DIAL, March fiscal year-ends, 2017-2029E (Rs mn)
CAGR (%)
2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2014-19 2019-29E Comments
Gross revenues 56,242 36,810 32,627 37,353 36,995 41,112 49,015 54,949 61,444 68,446 75,970 84,355 93,711 (3.6) 11.1
True-up of aero-tariff leading to sharp revenue
Aero revenues 39,315 17,055 9,878 9,861 9,379 10,336 11,526 12,854 14,078 15,420 16,891 18,504 20,271 (18.8) 7.5
drop.
Non-aero revenue growth led by duty-free and
Non-aero revenues 15,285 17,988 20,909 21,682 21,701 24,754 28,734 33,340 37,984 43,017 48,443 54,587 61,549 15.4 11.4
F&B.
Income from We assume the 140 acres of monetization by
commercial property 1,642 1,767 1,839 5,810 5,915 6,021 8,755 8,755 9,382 10,009 10,636 11,263 11,891 FY2025E and then the remaining 70 acres of
development land to be leased at ~5 acres per annum.
Revenue share to AAI (26,348) (17,615) (15,913) (17,713) (17,450) (19,151) (22,735) (25,526) (28,663) (31,974) (35,467) (39,281) (43,532) Large 46% revenue share paid to AAI.
Net revenues True-up of aero-tariff leading to sharp
29,894 19,195 16,714 19,640 19,544 21,961 26,280 29,423 32,781 36,472 40,503 45,074 50,178 (4.3) 11.6
revenue drop from FY2018.
EBITDA 20,256 8,226 5,119 8,599 7,935 9,770 13,330 15,555 18,012 20,735 23,732 27,197 31,108 (16.4) 19.8
Depreciation (6,380) (6,459) (6,398) (6,381) (6,112) (5,562) (9,361) (13,080) (12,151) (11,291) (10,504) (9,816) (9,087)
EBIT (incl. other income) 16,945 5,386 4,027 5,323 4,354 5,600 5,056 3,920 8,179 12,293 16,260 20,155 24,485
Interest expense (5,273) (5,792) (6,296) (6,729) (6,822) (6,871) (10,582) (14,126) (13,659) (13,209) (12,799) (12,482) (12,120)
PBT 11,673 (406) (2,269) (1,406) (2,468) (1,271) (5,527) (10,206) (5,480) (916) 3,461 7,673 12,365
Tax expense (5,405) 789 1,151 — — — — — — — (886) (1,964) (3,165)
Recurring PAT 6,268 382 (1,118) (1,406) (2,468) (1,271) (5,527) (10,206) (5,480) (916) 2,575 5,709 9,200
Cash profit 12,648 6,842 5,281 4,975 3,644 4,291 3,834 2,874 6,671 10,375 13,079 15,524 18,287 Cash profit remains strong
No. of passengers (mn) 58 66 69 66 63 69 77 86 94 103 113 123 135 13.4 6.9

Domestic 42 48 51 48 47 52 58 65 72 79 87 96 105 15.8 7.6
International 16 17 19 18 16 17 18 20 22 24 26 28 30 8.1 4.8 Key driver for duty-free revenues.
True-up of aero tariff through interim and final
Aero-tariff per passenger 681 260 143 150 150 150 150 150 150 150 150 150 150
order.
Aero-tariff decline and ramp-up in duty-free,
% share of non-aero
27 49 64 58 59 60 59 61 62 63 64 65 66 F&B, etc. lead to a quick increase in share of
revenues
non-aero revenues.
Current plan is for terminal expansion and new
runway. We also expect further terminal
Expansion capex — — — 10,886 33,432 57,909 3,863 — — — 5,193 15,963 27,695
capacity expansion in line with our passenger
growth assumptions.
Debt 52,620 52,491 55,647 61,542 82,618 119,617 118,282 114,357 110,582 106,950 107,005 114,416 129,562 Debt build-up in line with capex plans.
Net debt to EBITDA (X) 1 3 7 4 6 11 7 6 4 3 3 3 3
RoIC gets contained by sustained capex over
RoAIC (%) 13 2 (1) 2 2 5 3 1 3 5 8 11 15
the next 6-8 years
Exhibit 12: Financial analysis for HIAL, March fiscal year-ends, 2017-2029E (Rs mn)
CAGR (%)
(Rs mn) 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2014-19 2019-29E Comments
Gross revenues 11,054 12,520 14,523 15,294 8,903 15,334 17,476 19,929 22,708 25,891 26,200 29,522 33,161 14.9 8.6
True-up at GHIAL will lead to a small
Aero revenues 8,179 9,323 10,852 11,516 5,104 10,982 12,405 14,017 15,846 17,920 17,038 18,987 21,161 20.7 6.9 drop in aero revenues after an expected
tariff order by FY2019.
Non-aero revenue growth led by duty-
Non-aero revenues 2,875 3,197 3,671 3,778 3,798 4,352 5,072 5,911 6,862 7,971 9,162 10,536 11,999 4.0 12.6
free and F&B.
Concession fee expense for GHIAL is
Concession fee (462) (530) (615) (649) (349) (601) (685) (781) (890) (1,015) (1,027) (1,157) (1,300) modest compared to the large revenue
share paid by DIAL.
Net revenues 10,592 11,991 13,907 14,645 8,554 14,733 16,791 19,147 21,817 24,876 25,173 28,365 31,861 14.9 8.6
EBITDA 8,022 8,837 9,926 10,259 3,935 9,673 10,583 12,271 14,166 16,322 15,625 17,665 19,820 20.4 7.2
Depreciation (2,038) (1,984) (1,390) (1,315) (1,029) (1,259) (3,921) (6,099) (5,685) (5,287) (4,896) (4,519) (4,330)
EBIT (incl. other income) 7,010 8,356 9,708 10,211 4,236 8,824 6,662 6,177 8,497 11,045 10,729 13,145 15,491
Interest expense (2,011) (1,983) (1,982) (2,416) (2,726) (4,158) (5,261) (4,914) (4,495) (4,339) (4,686) (5,466) (5,808)
PBT 5,000 6,374 7,726 7,795 1,510 4,666 1,400 1,264 4,002 6,706 6,044 7,679 9,683 52.3 2.3
Tax expense (1,510) (347) (399) (399) (75) (233) (70) (63) (200) (335) (1,511) (1,920) (2,421)
Modest concession fee allows GHIAL
Recurring PAT 3,490 6,027 7,328 7,396 1,434 4,433 1,330 1,200 3,802 6,371 4,533 5,759 7,262 68.3 (0.1)
to stay profitable
Cash profit 5,528 8,011 8,718 8,711 2,463 5,692 5,252 7,299 9,487 11,658 9,429 10,279 11,592
No. of passengers (mn) 15 18 21 21 20 22 25 29 32 37 41 46 51 19.5 9.1

Domestic 12 15 17 18 17 19 21 24 27 31 35 39 44 22.3 9.7
International 3 4 4 4 4 4 4 5 5 5 6 6 7 10.5 5.6 Key driver for duty-free revenues.
True-up at GHIAL expected to cause a
Aero-tariff per passenger 538 509 509 536 209 489 489 489 489 489 417 417 417 smaller decline in aero tariffs compared
to the sharp drop expected at DIAL.
% share of non-aero
26.0 25.5 25.3 24.7 42.7 28.4 29.0 29.7 30.2 30.8 35.0 35.7 36.2
revenues
We model terminal capacity expansion

Expansion capex — — — 19,500 9,750 35,750 — — — 6,000 12,000 15,500 — in line with our passenger growth
assumptions.
Debt 20,837 25,674 26,920 29,530 34,152 62,973 59,937 54,852 50,149 51,205 58,251 69,442 66,228 Debt build-up in line with capex plans.
Net debt to EBITDA (X) 1.8 2.4 2.5 2.9 3.4 7.0 6.6 6.0 5.4 5.6 6.4 7.8 7.4

BUY
JSW Energy (JSW)
Electric Utilities AUGUST 03, 2020
RESULT
Holding-up. JSW Energy reported a resilient earnings performance with EBITDA of CMP (`): 46
Rs7.5 bn (-8% yoy) in 1QFY21 as lower generation (-16% yoy) was off-set by a decline Fair Value (`): 65
in fuel and O&M costs. JSW Energy continues to generate healthy cash flows and was
BSE-30: 37,607
able to reduce debt by another Rs4.5 bn in 1QFY21, despite weak short-term sales and
a receivable pile up seen across the sector. Maintain BUY with FV of Rs65/share.
JSW Energy
Mcap (bn) (Rs/US$) 76/1.1 EPS growth (%) 49.4 (24.8) 11.6
ADTV-3M (mn) (Rs/US$) 117/2 P/E (X) 7.2 9.6 8.6
FIIs 7.5 RoE (%) 8.9 6.5 6.8
MFs/BFIs 4/5 Div. yield (%) 2.6 0.0 0.0
Absolute (3) 3 (33) EBITDA (Rs bn) 30 29 30
Rel. to BSE-30 (10) (8) (33) Net profits (Rs bn) 10 8 9
Weak sales in short-term market off-set by lower fuel cost and savings on overheads
JSW Energy reported revenues of Rs18 bn (-25% yoy, +1% qoq), EBTIDA of Rs7.5 bn (8% yoy,
+30% qoq) and PAT of Rs2.4 bn (flat yoy, +333% qoq) against our estimates of Rs21.3 bn,
Rs8.9 bn and Rs2.8 bn, respectively. The drop in revenues is attributable to lower generation of
4.9 BUs (-16% yoy) due to lower off-take from long-term customers and weak short-term sales.
Management highlighted that 95% of EBITDA (83% tied up capacity) for the company is
accounted by long-term PPAs while the remaining 5% by short-term sales reducing earnings
volatility, as the company supplies more power to group company JSW Steel.
Realizations for the quarter declined to Rs3.7/kwh (-11% yoy), though were off-set by (1) lower
fuel cost at Rs2.8/kwh (-18% yoy) and (2) lower O&M expenses at Rs0.3/kwh (-26% yoy)
leading to contribution of Rs1.52/kwh (+10% yoy).
De-leveraging continues despite the rise in receivables; GMR Kamalanga acquisition put off
JSW Energy has reduced its net debt by Rs4.5 bn in 1QFY21, after having already reduced the
net debt by Rs1 bn in FY2020. We note that the reduction in net debt is even more credible in
the backdrop of rising receivables over the past six months. We note that debtors increased to
Rs21 bn as of March 2020 compared to Rs14 bn as of March 2019.
JSW Energy has mutually terminated the share purchase agreement for GMR Kamalanga (1
GW) with elapsing of long stop date due to the Covid-19 pandemic. Resolution plan for Ind-
Barath (700 MW) remains on track and is awaiting approval from NCLT.
Maintain BUY with fair value of Rs65/share noting inexpensive valuations

Murtuza Arsiwalla
We view favorably (1) the lower dependence on short-term markets and sensitivity to imported
coal prices, and (2) decision to not acquire GMR Kamalanga at replacement cost compared to
Samrat Verma
the value accretive transaction of Ind-Bharath at 50% discount to replacement cost that could
accrue as much as Rs2/share. Further, continued reduction in net debt in the face of rising
receivables is a credible performance by the company. Maintain BUY rating with fair value of
Rs65/share noting inexpensive valuations—9X P/E and 0.6X P/B.
Contact: +91 22 6218 6427
Electric Utilities JSW Energy
Exhibit 1: Lower generation on account of lower off-take from PPAs, further deleveraging to help reduce finance costs
Interim results for JSW Energy (consolidated), March fiscal year-ends (Rs mn)
(% Chg.)
1QFY21 1QFY21E 1QFY20 4QFY20 KIE yoy qoq 2020 2019 (% chg.) 2021E
Net sales 18,051 21,268 24,122 17,934 (15) (25) 1 82,727 91,376 (9) 91,640
Cost of fuel (9,155) (9,946) (13,664) (9,963) (8) (33) (8) (44,605) (53,562) (53,610)
Purchase of power - (261) (39) (87) (100) (100) (100) (378) (785) (378)
O&M (1,441) (2,148) (2,326) (2,136) (33) (38) (33) (8,176) (8,498) (8,543)
EBITDA 7,455 8,913 8,093 5,748 (16) (8) 30 29,569 28,531 4 29,109
Other income 816 498 518 542 2,870 3,680 2,789
Interest & finance charges (2,404) (2,498) (2,698) (2,480) (4) (11) (3) (10,511) (11,924) (9,507)
Depreciation (2,895) (2,913) (2,913) (2,893) (294) (11,681) (11,637) (11,682)
PBT 2,972 3,999 3,000 917 (26) (1) 224 10,247 8,650 18 10,708
Provision for tax (net) (552) (1,200) (883) (564) (330) (2,124) (2,805)
Net profit before minority interest 2,421 2,799 2,117 354 (14) 14 584 9,917 6,526 52 7,903
Minority interest/share in profit of associates (53) — 256 193 468 426 (90)
Net profit 2,367 2,799 2,373 547 (15) (0) 333 10,385 6,951 49 7,814
Extraordinary - — — - 615 — —
EPS (Rs/share) 1.4 1.7 1.4 0.3 6.3 4.2 4.8
EBITDA margin (%) 41.3 41.9 33.5 32.1 35.7 31.2 31.8
Tax rate (%) 18.6 30.0 29.4 61.4 3.2 24.6 26.2
Key operating parameters
Net generation (mn units) 4,914 5,729 5,863 4,073 (14) (16) 21 21,181 21,928 (3) 23,703
Average realization (Rs/kwh) 3.67 3.67 4.11 4.38 0 (11) (16) 3.89 4.14 (6) 3.85
Fuel cost (Rs/kwh) 2.79 2.43 3.42 2.73 15 (18) 2 2.93 3.20 (9) 3.04
O&M (Rs/kwh) 0.29 0.37 0.40 0.52 (22) (26) (44) 0.39 0.39 (0) 0.36
Contribution (Rs/kwh) 1.52 1.56 1.38 1.41 (2) 10 7 1.40 1.30 7 1.23
Other highlights from 1QFY21 results
 Standalone earnings were impacted by lower generation at both Vijaynagar (-39% yoy,
23% PLF) and Ratnagiri (-29% yoy, 58% PLF). However, contribution per unit increased
to Rs0.97/kwh due to 8% yoy decline in fuel costs.
 Hydro generation was at 1.6 BUs (-12.6% yoy as PLF was reduced to 58% during the
quarter due to lower water availability. Net generation at Barmer increased to 1.4 BUs
(+8% yoy) with PLF improving to 70% in 1QFY21 due to higher off-take by discoms.
 JSW Energy continues to remain focused on achieving generation capacity target of

10GW, it would look at expansion in renewables as the company remains well capitalized
with net debt of Rs85 bn and net debt/equity ratio of 0.7X.
 During the quarter, JSW reduced its net debt by Rs4.5 bn to Rs85 bn (as of June 2020).
Average cost of debt now stands reduced to 8.44% due to reduction in MCLR as well as
repayment of higher cost debt as well fresh borrowings at lower rates. Consequently,
finance cost for the company reduced by 11% yoy to Rs2.4 bn in 1QFY21.

JSW Energy Electric Utilities
Exhibit 2: Generation at Vijaynagar and Ratnagiri remained weak on account of lower off-take
Interim results for JSW Energy (standalone), March fiscal year-ends (Rs mn)
(% chg.)
1QFY21 1QFY21E 1QFY20 4QFY20 KIE yoy qoq 2020 2019 (% chg.) 2021E
Net sales 8,044 11,110 11,428 10,160 (28) (30) (21) 43,140 51,183 (16) 46,834
Fuel costs (5,586) (7,671) (8,206) (6,723) (30,744) (39,737) (35,420)
O&M (596) (892) (763) (1,038) (3,454) (3,403) (3,592)
EBITDA 1,862 2,546 2,459 2,400 (27) (24) (22) 8,942 8,043 11 7,821
EBITDA margin (%) 23 23 22 24 21 16 17
Other income 186 461 487 279 1,979 3,628 2,158
Interest & finance charges (667) (657) (864) (669) (3,220) (4,118) (2,855)
Depreciation (903) (921) (921) (914) (3,693) (3,650) (3,724)
PBT 478 1,429 1,161 1,096 (67) (59) (56) 4,009 3,903 3 3,399
Provision for tax (net) (46) (457) (254) (55) 739 (1,388) (948)
Net profit 433 972 907 1,041 (55) (52) (58) 4,748 2,515 89 2,451
Extraordinary — — — - 230 — —
EPS (Rs/share) 0.3 0.6 0.6 0.6 2.9 1.5 1.5
EBITDA margin (%) 23 23 22 24 21 16 17
Tax rate (%) 10 32 22 5 (18) 36 28
Key operating parameters
Net generation (mn units) 1,790 2,645 2,616 2,298 (32) (32) (22) 9,946 10,708 (7.1) 11,708
Average realization (Rs/kwh) 4.49 4.20 4.37 4.42 7 3 2 4.34 4.78 (9.3) 4.00
Fuel cost (Rs/kwh) 3.12 2.90 3.14 2.93 8 (1) 7 3.09 3.71 (16.7) 3.03
O&M (Rs/kwh) 0.33 0.34 0.29 0.45 (1) 14 (26) 0.35 0.32 9.3 0.31
Contribution (Rs/kwh) 1.04 0.96 0.94 1.04 8 11 (0) 0.90 0.75 19.7 0.67
Exhibit 3: Performance of power generation assets of JSW Energy, March fiscal year-ends, 2019-2021E
(% Chg.)
1QFY21 1QFY20 4QFY20 yoy qoq 2020 2019 (% chg.) 2021E 2022E 2023E
Standalone
Revenue (Rs mn) 8,229 11,914 10,439 (30.9) (21.2) 45,119 51,183 (12) 48,991 52,385 52,976
EBITDA (Rs mn) 2,048 2,946 2,680 (30.5) (23.6) 10,921 11,671 (6) 9,978 12,846 13,280
Operational performance
Net generation (MU) 1,790 2,616 2,298 (31.6) (22.1) 9,951 10,708 (7) 11,708 11,708 11,708
Realization (Rs/kwh) 4.6 4.6 4.5 0.9 1.2 4.5 4.8 (5) 4.2 4.5 4.5
Cost of production (Rs/kwh) 3.5 3.4 3.4 0.7 2.3 3.4 3.7 (7) 3.3 3.4 3.4
EBITDA (Rs/kwh) 1.1 1.1 1.2 1.6 (1.9) 1.1 1.1 1 0.9 1.1 1.1
RWPL
Revenue (Rs mn) 6,780 8,630 6,220 (21.4) 9.0 26,589 25,660 4 32,966 33,357 32,896
EBITDA (Rs mn) 2,760 2,510 2,420 10.0 14.0 10,444 9,930 5 12,400 12,151 11,029
Net generation (MU) 1,492 1,379 1,346 8.2 10.8 5,277 6,016 (12) 5,948 5,948 5,948
Realization (Rs/kwh) 4.5 6.3 4.6 (27.4) (1.7) 5.0 4.3 18 5.5 5.6 5.5
Cost of production (Rs/kwh) 2.7 4.4 2.8 (39.3) (4.6) 3.1 2.6 17 3.5 3.6 3.7
EBITDA (Rs/kwh) 1.8 1.8 1.8 1.6 2.9 2.0 1.7 20 2.1 2.0 1.9
HBPCL
Revenue (Rs mn) 3,570 3,900 1,520 (8.5) 134.9 12,753 12,430 3 12,934 13,105 13,142
EBITDA (Rs mn) 3,270 3,340 1,020 (2.1) 220.6 10,907 11,030 (1) 10,952 10,978 10,863
Net generation (MU) 1,632 1,868 429 (12.6) 280.4 5,953 5,204 14 6,046 6,201 6,201
Realization (Rs/kwh) 2.2 2.1 3.5 4.8 (38.3) 2.1 2.4 (10) 2.1 2.1 2.1
Cost of production (Rs/kwh) 0.2 0.3 1.2 (38.7) (84.2) 0.3 0.3 15 0.3 0.3 0.4
EBITDA (Rs/kwh) 2.0 1.8 2.4 12.1 (15.7) 1.8 2.1 (14) 1.8 1.8 1.8

Exhibit 4: Cost declined during the quarter due to decline in coal prices
Realization and fuel cost trend of JSW Energy, March fiscal year-ends, 1QFY18-1QFY21 (Rs/kwh)
Average realization (Rs/kwh) Average fuel cost (Rs/kwh)
5.0 4.6 4.4

4.3 4.1 4.2
4.5 4.0 3.9 3.7
4.0 3.5 3.5 3.6 3.4
3.3 3.3 3.3 3.2
3.5 3.0 3.1
2.8 2.8 2.9 2.7 2.8
3.0 2.7 2.6 2.6
2.5
2.0
1.5
1.0
0.5
-
1QFY18
2QFY18
3QFY18
4QFY18
1QFY19
2QFY19
3QFY19
4QFY19
1QFY20
2QFY20
3QFY20
4QFY20
1QFY21
Exhibit 5: JSW Energy has steadily reduced its net debt to Rs85 bn
Net debt and equity for JSW Energy, March fiscal year-ends, 3QFY19 - 1QFY21 (Rs bn, X)
Net worth (Rs bn) Net debt (Rs bn) Net debt/equity (X)
140 1.00
0.89
0.85 0.86
0.83 0.90
120 0.76 0.77
0.80
0.70
100 0.70
0.60
80
0.50
60 119 118 119 125 122
118 116 0.40
106 101 102 97 95 89 85 0.30
40
0.20
20
0.10
- -
3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21

Exhibit 6: Tariffs in merchant market have continued to remain subdued in recent months
Monthly clearing price on IEX, Jul 2017- Jul 2020
6.5
5.9
6.0
5.5
5.0 4.7 4.7
4.5
4.14.1 4.04.0
4.0 3.7
3.5 3.6
3.53.3 3.4
3.5 3.23.2 3.33.3 3.2 3.3 3.3
3.1
3.0 3.13.1 3.2
2.9 2.9
3.0 2.82.72.9 2.9
2.5 2.6
2.52.4 2.32.5
2.5
2.0
May-18
May-20
Mar-18
May-19
Mar-19
Mar-20
Nov-18
Jul-17
Nov-17
Sep-17
Jul-19
Nov-19
Sep-19
Jul-18
Sep-18
Jul-20
Jan-19
Jan-18
Jan-20
Source: IEX, Kotak Institutional Equities
Exhibit 7: Forward trades in DEEP show moderation in tariffs

Volumes (MW) and prices (Rs/Kwh) under DEEP, Mar 2016 - Dec 2020
Capacity contracted (MW) Avg. Price (Rs/unit)

14,000 8.0
12,000 7.0
6.0
10,000
5.0
8,000
4.0
6,000
3.0
4,000
2.0
2,000 1.0
- 0.0
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Dec-16
Dec-19
Dec-17
Dec-18
Dec-20
Sep-16
Sep-18
Sep-19
Sep-17
Sep-20
Jun-18
Jun-20
Jun-16
Jun-17
Jun-19
Source: IEX, Kotak Institutional Equities

Exhibit 8: Prices of imported coal have declined considerably in July 2020

Imported coal prices (US$/ton) and currency (Rs/US$), March fiscal-year ends
Coal (US$/ton) USD:INR (Rs)
120 81.0
76.0
100
71.0
80
66.0
60
61.0
40 56.0
May-17
May-18
May-19
May-16
May-20
Nov-15
Nov-16
Nov-17
Nov-18
Nov-19
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Jul-19
Jul-15
Jul-16
Jul-17
Jul-18
Jul-20
Sep-16
Sep-17
Sep-18
Sep-19
Sep-15
Jan-19
Jan-20
Jan-16
Jan-17
Jan-18
Exhibit 9: Coal spreads have come off considerably in recent months despite decline in coal prices
Coal spreads (Rs/kwh)
Coal Spread (Rs/kwh)
5.00
4.00
3.00
2.00
1.00
-
Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18 Jul-19 Jul-20
(1.00)
(2.00)
(3.00)
(4.00)

Exhibit 10: JSW Energy, change in estimates, March fiscal year-ends; 2021 - 23E
Revised estimates Old estimates Change (%)

2021E 2022E 2023E 2021E 2022E 2023E 2021E 2022E 2023E
Revenues 91,640 94,283 93,713 90,156 92,626 91,580 1.6 1.8 2.3
EBITDA 29,109 30,439 28,899 30,162 30,599 29,659 (3.5) (0.5) (2.6)
Net income 7,814 8,720 9,134 8,671 8,517 9,474 (9.9) 2.4 (3.6)
Exhibit 11: Valuation of power project portfolio of JSW Energy
Capacity Cost Ownership Value

Project Type (MW) (Rs bn) (Rs mn / MW) (%) (Rs bn)
Vijaynagar + Ratnagiri Thermal 2,060 95 46 100 33
Barmer Thermal 1,080 69 64 100 45
Jaigadh Power Transco Transmission 74 2
Himachal Baspa Hydro 1,391 86 62 100 15
Ind Bharath Thermal 700 22 32 100 8
Value of power projects 5,231 271 52 102
Cash and investments 4
Total value 107
No. of Shares 1.6
` Value per share 65

Exhibit 12: Profit model, balance sheet, cash model of JSW Energy, March fiscal year-ends, 2018-23E (Rs mn)
2018 2019 2020 2021E 2022E 2023E

Profit model
Net revenues 80,490 91,376 82,727 91,640 94,283 93,713
EBITDA 27,625 28,531 29,569 29,109 30,439 28,899
Other income 4,650 3,680 2,870 2,789 3,917 5,601
Interest (expense)/income (14,559) (11,924) (10,511) (9,507) (8,760) (7,812)
Depreciation (9,661) (11,637) (11,681) (11,682) (11,682) (10,482)
Pretax profits 8,056 8,650 10,247 10,708 13,915 16,205
Tax (2,108) (1,794) (1,119) (2,805) (5,104) (6,980)
Deferred taxation (425) (331) 789 — — —
Minority interest (495) 426 468 (90) (91) (91)
Net income 5,029 6,951 10,385 7,814 8,720 9,134
Extraordinary items (4,179) — 615 — — —
Reported profit 849 6,951 10,999 7,814 8,720 9,134
Earnings per share (Rs) 3.1 4.2 6.3 4.8 5.3 5.6
Balance sheet
Paid-up common stock 16,401 16,409 16,419 16,419 16,419 16,419
Total shareholders' equity 111,097 118,222 116,456 124,270 132,990 142,125
Deferred taxation liability 3,899 3,919 1,899 1,899 1,899 1,899
Minority interest (39) (120) (238) (446) (356) (265)
Total borrowings 108,295 105,639 98,672 94,781 86,942 79,104
Total liabilities and equity 223,251 227,660 216,790 220,503 221,476 222,863
Net fixed assets 199,668 181,281 170,746 160,100 148,416 137,934
Capital work-in progress 2,935 4,000 3,913 3,912 3,912 3,912
Investments 24,150 24,505 18,536 16,896 16,896 16,896
Goodwill 6,398 6,398 6,398 6,398 6,398 6,398
Cash 3,110 2,036 2,007 4,365 12,318 25,070
Net current assets (excl. cash) (13,011) 9,441 15,190 28,833 33,536 32,654
Net current assets (incl. cash) (9,901) 11,476 17,197 33,198 45,855 57,724
Total assets 223,251 227,660 216,790 220,503 221,476 222,863
Ratios
Net debt/equity (%) 94.7 87.7 83.2 73.0 56.3 38.1
Return on equity (%) 4.7 6.1 8.9 6.5 6.8 6.6
Book value per share (Rs) 70.1 74.4 72.1 76.8 82.2 87.7
ROCE (%) 3.3 3.7 5.0 4.9 6.3 7.3

ADD
TeamLease Services (TEAM)
Commercial & Professional Services AUGUST 02, 2020
RESULT
Headline weaker but focus on margin improvement a positive. TeamLease’s CMP (`): 1,850
1QFY21 results were weaker than expected with yoy revenue declines across both Fair Value (`): 2,000
general staffing and HR services segments. Cash generation improved to 80% of
BSE-30: 37,607
EBITDA (100%+ including tax refund) on strong collections. Various cost-rationalization
measures such as exit from unprofitable businesses and core employee headcount
reduction are positives. ADD with a revised SoTP-based FV of Rs2,000 (Rs1,875 earlier).
TeamLease Services
ADTV-3M (mn) (Rs/US$) 46/1 P/E (X) 90.4 37.5 27.5
FIIs 40.8 RoE (%) 6.3 13.7 16.1
Revenues miss estimates due to weaker-than-expected general staffing and HR services
TeamLease posted higher-than-expected revenue decline of 9.2% yoy driven by (1) slower-than-
expected revenue growth of the general staffing business due to decline in core associate
headcount by 10% yoy and (2) winding down of permanent hiring and government training
businesses. TeamLease witnessed 3% yoy improvement in PAPM (per person average monthly
mark-up) due to a change in mix favoring high mark-up accounts. Overall headcount declined
by 16% yoy to ~189,000 and may revive only by 2HFY21. NETAP trainee headcount saw a
steep decline of 37% yoy due to exposure to the manufacturing sector, which was completely
shut during the extended lockdown.
Tight cost control bodes well for future margin performance
EBITDA margin increased 35 bps yoy to 2.2% on account of lower other expenses (down 39%
yoy) and core employee headcount rationalization. The decline in other expenses was primarily
due to lower core employee costs on account of sharp 14% qoq reduction in headcount,
deferment of incentives and lower training. The rationalization in core employee headcount was
largely driven by HR services segment’s restructuring. We believe these cost-control measures
can help boost future margin performance.
Specialized staffing posts decent performance; HR services segment restructuring underway
TeamLease is exiting the permanent hiring business and took a hit of Rs30 mn for the same in
1Q. It is also exiting the government training business with FY2021 revenues expected to be
Rs200 mn versus Rs550 mn in FY2020. Specialized staffing segment was on a strong trajectory
Garima Mishra
– while associate headcount declined by 9% qoq, EBITDA improved 34% qoq due to core
employee cost reduction, as well as healthy margins on higher contribution from IMSI.
Shubhangi Nigam
Expect gradual demand revival; retain ADD
General staffing headcount may remain flattish in 2Q, but we expect demand revival starting
2HFY21 from sectors such as e-commerce, ed-tech, FMCG and pharma. We modestly tweak
estimates as we bake in lower revenues but assume higher margins. Roll-forward and marginally
higher EPS drive an increase in our SoTP-based FV to Rs2,000 (Rs1,875 earlier). Retain ADD.
Contact: +91 22 6218 6427
Commercial & Professional Services TeamLease Services
Exhibit 1: Weak revenues but margin improvement driven by headcount and cost rationalization
Quarterly results snapshot of TeamLease, March fiscal year-ends
Change (%) Yoy growth
1QFY21 1QFY21E 1QFY20 4QFY20 KIE yoy qoq FY2020 FY2019 (%) FY2021E
Revenue from operations 11,364 12,333 12,512 13,303 (7.9) (9.2) (14.6) 52,007 44,476 16.9 53,210
Employee benefits expense (10,907) (11,678) (11,936) (12,615) (6.6) (8.6) (13.5) (49,365) (41,972) 17.6 (51,003)
Other expenses (212) (450) (345) (488) (52.9) (38.6) (56.6) (1,692) (1,560) 8.4 (1,030)
Total Expenses (11,119) (12,128) (12,281) (13,104) (8.3) (9.5) (15.1) (51,056) (43,532) 17.3 (52,033)
EBITDA 246 205 232 199 19.9 6.1 23.3 951 944 0.7 1,177
Finance Costs (26) (5) (28) (37) 413.0 (8.0) (30.2) (123) (52) (94)
Depreciation and amortization expense (82) (28) (61) (83) 194.2 35.1 (0.8) (286) (105) (362)
Other income 41 45 35 147 (9.2) 18.0 (72.1) 308 181 70.8 121
PBT 179 217 178 227 (17.6) 0.7 (21.1) 851 968 (12.1) 842
Tax expense (5) - 15 (518) na na na (480) 16 -
Net profit 171 217 188 (294) (21.3) (9.0) (158.1) 371 984 (62.3) 842
Operational metrics
Number of associate employees 145,259 160,614 161,365 (9.6) (10.0) 161,365 154,095 155,000
Number of NETAP apprentices 35,888 57,292 50,620 (37.4) (29.1) 50,620 56,169 50,620
Number of specialized associates 7,461 6,858 8,225 8.8 (9.3) 8,225 5,947 8,585
Total associates and trainees 188,608 224,764 220,210 (16.1) (14.4) 220,210 216,211 1.8 214,205
Mark-up per general staffing associate per month 751 730 748 2.9 0.4 742 726 2.2 727
Key ratios (%)
Employee cost as proportion of sales 96.0 94.7 95.4 94.8 94.9 94.4 95.9
Other cost as proportion of sales 1.9 3.6 2.8 3.7 3.3 3.5 1.9
EBITDA margin 2.2 1.7 1.9 1.5 1.8 2.1 2.2
Tax rate (2.8) 0.0 8.6 -228.5 (56.4) 1.7 0.0
Segmental performance
Revenues
Staffing and allied services 10,234 11,000 11,306 11,954 (7.0) (9.5) (14.4) 46,813 40,115 16.7
Specialized staffing services 1,009 833 982 1,065 21.1 2.7 (5.3) 4,098 3,092 32.5
Other HR services 122 500 224 284 (75.7) (45.7) (57.2) 1,097 1,269 (13.6)
Total operating income 11,364 12,333 12,512 13,303 (7.9) (9.2) (14.6) 52,007 44,476 16.9
EBIT
Staffing and allied services 198 228 252 (13.2) (21.3) 878 781 12.3
Specialized staffing services 88 63 71 40.2 24.1 273 209 30.5
Other HR services (45) (63) (39) (30) 14.1 (100) 77
Unallocated (40) (27) (23) 47 71.1 (97) (51)
Total 202 201 260 0.6 (22.5) 953 1,016
Less: finance costs (26) (28) (37) (8.0) (30.2) (123) (52)
PBT 176 173 224 2.0 (21.3) 830 964
On a segmental basis, (1) temporary staffing revenues were down 9.5% yoy (vs KIE estimate
of 3% decline), (2) specialized staffing revenues were up 2.7% yoy aided by positive
contribution from IMSI and E-centric, both providing services to IT sector, and (3) HR services
segment revenues were down 57% yoy due to slow government business and phased wind-
up of permanent hiring business.

TeamLease Services Commercial & Professional Services
Exhibit 2: 35 bps yoy margin expansion led primarily by the specialized staffing segment
Segmental revenue and margin snapshot of TeamLease, March fiscal year-ends (Rs mn)
Yoy growth
1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21 (%)
Revenues
Staffing and allied services 8,165 8,350 8,404 8,830 9,161 9,773 10,617 10,565 11,306 11,392 12,161 11,954 10,234 (9)
Specialized staffing services 246 268 587 728 750 756 792 794 982 1,005 1,046 1,065 1,009 3
O ther HR services 118 137 190 217 303 377 314 275 224 282 306 284 122 (46)
Total 8,530 8,756 9,181 9,775 10,213 10,907 11,723 11,634 12,512 12,679 13,514 13,303 11,364 (9)
EBITDA
Staffing and allied services 133 144 176 162 156 184 221 247 234 208 197 265 206 (12)
Specialized staffing services 31 38 59 52 53 55 45 49 63 63 76 65 87 38
O ther HR services 8 (3) 7 27 24 40 3 16 (62) (2) 6 (30) (40) (35)
Unallocated (42) (28) (62) (17) (32) (39) (23) (57) (8) (39) (9) (100) (7) (13)
Total 130 151 180 224 201 240 246 255 227 230 270 200 246 8
EBITDA margin (%)
Staffing and allied services 1.6 1.7 2.1 1.8 1.7 1.9 2.1 2.3 2.1 1.8 1.6 2.2 2.0 -6 bps
Specialized staffing services 12.6 14.2 10.1 7.1 7.1 7.3 5.7 6.2 6.4 6.3 7.3 6.1 8.6 221 bps
O ther HR services 6.8 (2.2) 3.7 12.4 7.9 10.6 1.0 5.8 (27.7) (0.7) 2.0 (10.6) (32.9) -519 bps
Total 1.5 1.7 2.0 2.3 2.0 2.2 2.1 2.2 1.8 1.8 2.0 1.5 2.2 35 bps
Exhibit 3: IMSI and IT staffing drive revenue and EBITDA growth in1QFY21
Specialized staffing revenue and EBIDTA break-up, March fiscal year-ends (Rs mn)
Qoq growth
4QFY19 1QFY20 3QFY20 4QFY20 1QFY21 (%)
Revenues
IT Staffing 365 553 541 520 491 (6)
Telecom Staffing 429 429 433 412 384 (7)
IMSI Staffing — — 73 133 134 1
Total 794 982 1,047 1,065 1,009 (5)
EBITDA
IT Staffing 35 49 55 40 60 50
Telecom Staffing 13 14 10 12 8 (30)
IMSI Staffing — — 11 14 19 36
Total 48 63 76 66 87 32
EBITDA margin (%)
IT Staffing 9.6 8.9 10.2 7.7 12.2 453 bps
Telecom Staffing 3.0 3.3 2.3 2.9 2.2 -73 bps
IMSI Staffing 15.1 10.5 14.2 365 bps
Total 6.0 6.4 7.3 6.2 8.7 246 bps
Key highlights of earnings call
 Forward outlook. Rationalization of headcount and cost. ~75-80% costs savings

achieved in 4QFY20-1QFY21 will be retained as offices open but general focus on
productivity and margins remains. The company maintained that 1QFY21 saw maximum
impact of the lockdown and subsequent quarters will be better. TeamLease is targeting
taking its EBITDA margins back up to FY2019 levels of 2.1%.
 Sectors and geographies in focus. E-commerce, edu-tech, pharmaceuticals, telecom,

IT, agriculture-agrochemicals and FMCG are expected to take off early. Recovery seen in
tier I cities of Bangalore, Delhi, Hyderabad, Chandigarh, Mumbai and Kolkata. The intent
to hire is also centered around tier I/II cities.
 Temporary staffing. 10% yoy loss of associates was lower than expectations of 15-18%
yoy decline as the company was able to add 87 new clients. PBT margin was manageable
even as several amounts of discounts were passed on to clients but are likely to go away

in 2QFY21. Cost optimization efforts and process automation enabling improved

productivity. Net attritions and layoffs were a lot higher than 4QFY20.
 Specialized staffing. The segment saw 5% qoq dip in revenues and improved PBT from
5.2% to 7.6% on a qoq basis due to cost-optimization efforts taken 4QFY20 onwards.
The company has made shared services unit to support all three units-IT staffing, telecom
staffing and IMSI. It also has managed to add 10 large logos. TeamLease expects to
maintain 8-9% margin for FY2021 with all the team and cost correction undertaken.
 Government business. The company has been looking to exit the government training
business and has substantially reduced headcount for the same. It has also stopped taking
any new mandates and is preparing for phased exit by FY2022. Revenue recognition has
been low on the government training business in 1QFY21 as most services couldn’t be
delivered to students via classrooms.
 Permanent hiring. The company will exit this business owing to the reduced demand as
clients aren’t currently looking to hire. Impact of shutdown of this business will be felt in
2QFY21 as well, after which it will be completely removed from the portfolio.
 Other HR services. Services like compliance and payrolls also fall under this. Both have
been profitable in 1QFY21 and are expected to continue to stay profitable for FY2021.
 Cash position. Overall cash conversion improved to 80% with efficient working capital
management and core employee overheads’ cost control. Having a low deduction
certificate (LDC) helped the company to withhold taxes, which in turn reduced cash
outflow. LDC is necessary to be obtained for zero tax companies at the start of the fiscal
year, otherwise 10% of TDS is deducted. Rs80 mn of TDS refund for a subsidiary was
already received and Rs300 mn of refund is expected to be received in 2QFY21. Free cash
stands at Rs700 mn as of June 30, 2020. Moving to new tax regime, no MAT tax is
applicable and hence further savings on cash outflow. The company has opening balance
of Rs1600 mn from Section 80JJAA benefit accumulated.
 Pricing pressure. Price will always remain an important parameter and managing
realizations is the focus of the company. Management highlighted that pricing didn’t
decline much; there was some discounting in certain cases. Most of these discounts have
been negotiated for fixed periods of time and will be rolled back by 2QFY21 or 3QFY21.
Exhibit 4: Associate employee count sees a reduction of ~16,000 in 1Q

Associate employee count for TeamLease, March fiscal year-ends (#, 000)
(#, 000) Associate employee count (#)

167
180
165
161
161
170
154
153
145
145
160
138
150
132
131
130
128
126
140
124
115
130
114
109
109
120
105
101
110
100
90
80
70
1QFY16
3QFY16
4QFY16
2QFY17
3QFY17
4QFY17
1QFY18
3QFY18
4QFY18
2QFY19
4QFY19
1QFY20
3QFY20
1QFY21
2QFY16
1QFY17
2QFY18
1QFY19
3QFY19
2QFY20
4QFY20

Exhibit 5: Apprentice addition dips drastically in 1QFY21

Cumulative apprentice count and net additions (#, 000)
(#, 000) Cumulative apprentice count (#, LHS) Quarterly net addition (#, RHS) (#, 000)
70 10
60 5
50
-
40
(5)
30
(10)
20
10 (15)
- (20)
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY18
3QFY18
4QFY18
1QFY19
2QFY19
3QFY19
4QFY19
1QFY21
2QFY17
3QFY17
4QFY17
1QFY18
1QFY20
2QFY20
3QFY20
4QFY20
Exhibit 6: Core employee productivity has improved majorly due to reduced core employees
Associates and trainees handled per core staffing employee, March fiscal year-ends
(#, '000) Associate+trainee count (#, LHS) (#)

Associates+trainees handled per core staffing employee (#)
240 300
220 280
200
260
180
240
160
220
140
200
120
100 180
80 160
1QFY17
3QFY17
1QFY18
3QFY18
1QFY19
3QFY19
1QFY20
3QFY20
1QFY21
2QFY17
4QFY17
2QFY18
4QFY18
2QFY19
4QFY19
2QFY20
4QFY20

Exhibit 7: Details of estimate changes of TeamLease, March fiscal year-ends
New estimates Old estimates % revision

2021E 2022E 2023E 2021E 2022E 2023E 2021E 2022E 2023E
Total
Sales (Rs mn) 53,210 59,555 70,133 53,671 60,458 71,344 (0.9) (1.5) (1.7)
Sales growth (%) 2.3 11.9 17.8 3.2 12.6 18.0
EBITDA (Rs mn) 1,177 1,460 1,812 1,170 1,452 1,766 0.6 0.5 2.6
EBITDA margin (%) 2.2 2.5 2.6 2.2 2.4 2.5
EBIT (Rs mn) 815 1,089 1,432 808 1,081 1,385 0.9 0.7 3.4
PBT (Rs mn) 842 1,150 1,587 852 1,162 1,572 (1.2) (1.1) 1.0
Tax rate (%) — — — — — —
Net Profit (Rs mn) 842 1,150 1,587 852 1,162 1,572 (1.2) (1.1) 1.0
EPS (Rs) 49.3 67.2 92.8 49.9 68.0 91.9 (1.2) (1.1) 1.0
EPS growth (%) 141 36 38 144 36 35
Exhibit 8: Modest growth assumptions in FY2021

Key segmental assumptions for TeamLease, March fiscal year-ends (Rs mn)
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E 2022E 2023E
Total
Revenues 6,868 9,258 12,507 15,296 20,071 25,049 30,413 36,241 44,476 52,007 53,210 59,555 70,133
Revenue growth (%) 34.8 35.1 22.3 31.2 24.8 21.4 19.2 22.7 16.9 2.3 11.9 17.8
EBITDA (390) (207) (111) 120 241 258 370 688 944 951 1,177 1,460 1,812
EBITDA margin (%) (5.7) (2.2) (0.9) 0.8 1.2 1.0 1.2 1.9 2.1 1.8 2.2 2.5 2.6
Diluted EPS (Rs) (33) (11) (3) 12 20 16 34 43 57 20 49 67 93
EPS growth (%) NA NA NA NA 73 (21) 112 28 33 (64) 141 36 38
Temporary staffing
Number of associate employees (period end) 49,820 61,021 72,491 82,067 94,647 108,860 126,463 132,323 154,095 161,365 155,000 165,850 187,411
Growth in associate employee count (%) 14 22 19 13 15 15 16 5 16 5 (4) 7 13
Number of associate employees (average) 105,852 119,867 130,226 147,417 163,556 147,500 157,825 178,342
Growth in associate employee count (%) 417 518 553 603 653 13 9 13 11 (10) 7 13
Per employee monthly fee (Rs) 417 518 553 603 653 682 661 744 726 742 727 742 749
Growth in per employee fee (%) 24 7 9 8 4 (3) 12 (2) 2 (2) 2 1
Revenues 6,533 9,006 12,236 15,026 19,731 24,640 29,212 33,343 39,536 46,221 47,802 53,664 63,609
Revenue growth (%) 38 36 23 31 25 19 14 19 17 3 12 19
EBITDA 61 140 167 205 201 275 286 409 521 647 765 934 1,189
EBITDA margin (%) 0.9 1.6 1.4 1.4 1.0 1.1 1.0 1.2 1.3 1.4 1.6 1.7 1.9
Apprentice staffing
Average employees billed in the year — — — — — 11,000 23,439 43,052 56,169 50,620 50,620 58,213 66,945
Per employee monthly fee (Rs) — — — — — 530 530 530 530 530 550 550 550
Revenues — — — — — 42 97 180 274 295 285 313 367
Revenue growth (%) — — — — — — 131 85 53 8 (3) 10 17
EBITDA — — — — — 4 19 68 137 118 131 156 183
EBITDA margin (%) 10 20 38 50 40 46 50 50
Specialized staffing
Revenues — — — — — — 1,599 1,829 3,092 4,098 4,424 4,853 5,311
Revenue growth (%) 14 69 33 8 10 9
EBITDA — — — — — — 169 180 202 267 317 363 413
EBITDA margin (%) 11 10 7 7 7 7 8
Others
Revenues 335 252 271 271 339 367 597 890 1,575 1,395 699 725 846
Revenue growth (%) (25) 8 (0) 25 8 62 49 77 (11) (50) 4 17
EBITDA (451) (347) (278) (85) 40 (22) (3) 39 83 (81) (36) 8 25
EBITDA margin (%) (135) (138) (102) (31) 12 (6) (0) 4 5 (6) (5) 1 3

Exhibit 9: SoTP based Fair Value of Rs2,000/share
Description Rs/share
DCF-based valuation of general and IT staffing businesses 1,706
Valuation of Evolve (telecom vertical staffing) at 7X EV/EBITDA 159
Valuation of Schoolguru at 1X invested capital 8
Net debt (cash) as of March 2022 - (4) (127)
SOTP based target price 2,000
Exhibit 10: Consolidated income statement, balance sheet and cash flow, March fiscal year-ends, 2011-23E (Rs mn)
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E 2022E 2023E
Income statement
Total operating income 6,868 9,258 12,507 15,296 20,071 25,049 30,413 36,241 44,476 52,007 53,210 59,555 70,133
Associate employee expenses (6,351) (8,627) (11,755) (14,432) (18,990) (23,773) (28,643) (33,833) (40,903) (47,996) (49,755) (55,818) (65,903)
Gross profit 518 632 752 865 1,081 1,276 1,770 2,408 3,573 4,011 3,455 3,737 4,230
EBITDA (390) (207) (111) 120 241 258 370 688 944 951 1,177 1,460 1,812
Depreciation (66) (38) (36) (19) (27) (30) (61) (92) (105) (286) (362) (371) (381)
EBIT (456) (245) (147) 101 213 228 309 596 839 665 815 1,089 1,432
O ther income 115 83 110 79 114 154 217 156 181 308 121 164 269
Financial charges (2) (3) (5) (2) (1) (4) (11) (25) (52) (123) (94) (103) (114)
Pre-tax profit (343) (165) (43) 178 326 378 515 728 968 851 842 1,150 1,587
Taxation — — — — (18) (130) 61 9 16 (480) — — —
Net income (recurring) (343) (165) (43) 178 308 248 576 737 984 371 842 1,150 1,587
Exceptional items (53) — — — — — — — — — — — —
Net income (reported) (395) (165) (43) 178 308 248 576 737 980 350 842 1,150 1,587
Weighted average number of shares (mn) 12 15 15 15 15 16 17 17 17 17 17 17 17
EPS (Rs) (33.2) (10.8) (2.8) 11.6 20.1 15.9 33.7 43.1 57.3 20.5 49.3 67.2 92.8
Balance sheet
Equity share capital 4 5 5 5 5 171 171 171 171 171 171 171 171
Reserves & surplus 215 1,042 1,005 1,183 1,483 2,945 3,493 4,246 5,220 5,550 6,392 7,542 9,129
Shareholders funds 219 1,047 1,010 1,188 1,488 3,116 3,663 4,417 5,391 5,721 6,563 7,713 9,300
Loan funds 29 81 121 8 — 194 11 73 106 762 522 574 631
Total source of funds 247 1,127 1,131 1,197 1,488 3,309 3,686 4,490 5,497 6,958 7,560 8,761 10,406
Net fixed assets 211 195 107 107 95 111 1,069 1,378 1,578 2,360 2,065 1,769 1,471
Investments — 0 0 0 0 0 103 593 414 253 253 253 253
Cash balances 180 822 780 847 1,147 2,590 1,602 1,424 1,230 970 950 2,295 4,176
Current assets 574 952 1,355 1,478 1,827 3,039 3,224 4,045 5,384 5,959 7,005 7,840 9,041
Inventories 15 9 5 2 2 2 — — — — — — —
Sundry debtors 345 543 618 595 813 1,205 1,729 2,235 2,643 2,959 3,936 4,405 4,996
O ther current assets 76 114 340 367 498 1,054 1,062 1,283 2,064 2,324 2,378 2,661 3,134
Loans and advances 139 286 392 515 514 778 433 527 676 676 692 774 911
Current liabilities and provisions 718 842 1,112 1,236 1,638 2,476 3,091 4,371 5,398 5,595 5,724 6,407 7,545
Total application of funds 247 1,127 1,131 1,197 1,488 3,309 3,686 4,490 5,497 6,958 7,560 8,761 10,406
Cash flow statement
O perating cash flow before WCchanges (390) (207) (111) 120 222 45 351 137 160 404 1,177 1,460 1,812
Change in working capital/ other adjustments 144 (255) (133) 1 53 (150) (19) 656 (285) (307) (917) (153) (62)
Capital expenditure (408) (21) 51 (19) (15) (74) (896) (814) (4) (667) (68) (75) (82)
Free cash flow (654) (483) (193) 103 261 (178) (563) (22) (129) (570) 193 1,232 1,668

ADD
Mahindra Logistics (MAHLOG)
Transportation AUGUST 02, 2020
RESULT
June raises hopes of swift normalization in business levels. 1Q bore the brunt of CMP (`): 298
Covid disruptions and related additional costs of doing business. Swift recovery in Fair Value (`): 305
business levels in June in execution, new project starts and order wins bode well for a
BSE-30: 37,607
swift move towards pre-Covid levels. Key imponderable – whether, when and to what
extent Covid-19 improves the relevance of 3PL in logistics. We maintain our 25X multiple;
increase FV to Rs305 (from Rs280) on 5% higher estimates and roll-forward. ADD.
Mahindra Logistics
ADTV-3M (mn) (Rs/US$) 26/0 P/E (X) 33.5 56.6 27.4
FIIs 17.8 RoE (%) 12.2 6.7 12.9
1QFY21 marred by Covid-19 disruptions; mix benefit on gross margin limited by volume decline
MLL reported a higher-than-expected 54% yoy decline in revenues, leading to a nil EBITDA prior
to ESOP/RSU expenses and a negative Rs2/share adjusted EPS. Key auto business declined more
than 60% while non-auto declined by ~20%. Warehousing and VAS revenue declined lesser at
~14% on support of storage income. Gross margin was broadly flat qoq despite the support of
a lower share of M&M revenues and higher ~40% share of warehousing and VAS in non-M&M
revenues. Management attributed this to a mix of on-site costs (fixed) for auto and
warehousing businesses as well as increase in cost of sanitation during the period.
Swift recovery in key business metrics in June bodes well for swift normalization
June revenues breached 70% of pre-Covid levels and recent NHAI toll-collection data suggests
more than 85% of pre-Covid levels of commercial vehicles in transportation. MLL shared new
business wins becoming comparable in the second half of 1Q. It attributed the swift recovery to
a combination of business gains from competition as well as acceptance of new solutions.
Recent customer acquisitions have been well spread across bulk and engineering (steel, glass),
e-commerce (grocery) and freight-forwarding (PPE). It also highlighted new business
opportunities in setting up short-term capacities for select players from surge in demand.
Key imponderable is impact of Covid-19 on positioning of 3PL
We like (1) MLL’s exposure towards select sectors that may benefit in the post-Covid world
(auto, e-commerce) and (2) increasing relevance of 3PL in such context. We understand select
clients are now working with MLL, it being considered a more responsible service provider.
Beyond such anecdotal gains, we would be keen to see a more structural shift to 3PL providers Aditya Mongia
before revising our growth assumptions. In this context, the increasing relevance of omni-
channel presence by consumer/pharma companies can drive the needs for redesigning and Teena Virmani
moving towards more intricate supply chains. In MLL’s assessment, the focus of majority such
potential client for now is still on gaining control of the supply chain rather than changing it.
Revise estimates by ~5% and Fair Value to Rs305
We increase revenues/PAT for FY2022/23E by 2/5% to build in higher normalized levels of

demand and improvement in working capital. Roll-forward leads to a revised FV of Rs305. kspcg.research@kotak.com
Contact: +91 22 6218 6427
Mahindra Logistics Transportation
Key highlights of the conference call
 Covid-19 opened up opportunities beyond auto sector. Automobile and

manufacturing sectors were impacted quite adversely during April, which impacted MLL’s
performance also. Gradual resumption of activity from May and June along with strong
tailwinds from e-commerce, express logistics, pharma, FMCG, food and beverages aided
revenue growth from May and June for MLL. Once business normalizes, MLL expects
share of transportation to rise for non-M&M revenues.
 Focused towards new customer acquisition and new launches. Customer acquisition
was strong during the second half of the quarter and the company added a few accounts
from a leading steel company, largest decorative and automotive paint company, e-
commerce center fulfillment and expanded in FMCG. It has also seen strong growth in
terms of setting up short-term processing facilities by the clients in managing existing
projects by clients and MLL intends to add more such facilities during 2QFY21-3QFY21.
MLL also supported clients on new launches such as BS VI, inbound and outbound
solutions for large elevator company and bagged new transportation contracts.
 Remain focused on expanding warehousing space. MLL continued to expand in build

to suit warehousing facilities and expects to add 1 mn sq. ft of warehousing capacity,
which has already been contracted out.
 Gross margin intact. The lockdown resulted in sharp decline in transportation revenues
during the quarter. However, gross margins were intact during the quarter on better
margins on warehousing. Negative operating leverage and Covid-related costs impacted
gross margins of the transportation sector, which should improve on improving volumes
going forward.
 Long-term vision. MLL continues to see opportunities in multi-model networks,

increased demand for best-in-class warehousing-based services, emerging trends in omni-
channel distribution and preference for multi-category players. It expects to benefit from
these opportunities over the medium to long term.

Transportation Mahindra Logistics
Exhibit 1: MLL reported a miss on revenues by 13% and posted loss at EBITDA level on negative operating leverage
Quarterly income statement of Mahindra Logistics (consolidated), March fiscal year-end, 1QFY21 (Rs mn)
% change
1QFY21 1QFY21E 1QFY20 4QFY20 vs est. yoy qoq FY2021E FY2020 % change
Net revenue 4,105 4,705 8,990 8,118 (13) (54) (49) 31,457 34,711 (9)
Total expenses (4,127) (4,161) (8,590) (7,738) (1) (52) (47) (30,209) (33,129) (9)
Employee benefit expense (732) (717) (745) 2 (2) 2,241 (2,946)
RSU/ESOP charges (21) (28) (11) (60) (120)
Freight and other expenses (3,374) (7,844) (6,982) (57) (52) (32,390) (30,062)
EBITDA (22) 17 401 380 NM NM NM 1,248 1,583 (21)
Other income 28 35 70 31 110 140
Depreciation & Amortization (184) (197) (149) (220) (751) (734)
EBIT (178) (145) 322 191 NM NM NM 606 988 (39)
Interest expense (46) (41) (36) (57) (164) (176)
PBT (224) (186) 286 134 NM NM NM 443 812 (45)
Tax expense 59 47 (100) (36) (112) (257)
Recurring PAT (165) (139) 187 98 NM NM NM 331 554 (40)
Exceptional items and prior period items (net) — — — — — —
Reported PAT (165) (139) 187 98 NM NM NM 331 554 (40)
Associate profits (2) — (1) (2) — (6)
Minority interest 8 1 1 1 3 3
Reported PAT for equity holders (158) (138) 186 97 NM NM NM 334 551 (39)
Adjusted EPS (excluding ESOPs and RSU cost) (2.0) (1.8) 2.9 1.5 12 (171) ### 5.3 9.0 (41)
Key ratios
Employee expense / sales 17.8 8.0 9.2 (7.1) 8.5
Other expenses / sales 82.2 87.3 86.0 103.0 86.6
EBITDA margin (%) (0.5) 0.4 4.5 4.7 4.0 4.6
Adjusted EBITDA margin (%) (0.0) 0.7 4.8 4.8 4.2 4.9
Effective tax rate (%) 26.4 25.2 34.8 27.0 25.2 31.7
PAT margin (%) (4.0) (3.0) 2.1 1.2 1.1 1.6
Exhibit 2: SCM segment reported lower-than-expected segmental profit; PTS reported another weak quarter
Quarterly segmental financials of Mahindra Logistics (consolidated), March fiscal year-end, 1QFY21 (Rs mn)
% change
1QFY21 1QFY21E 1QFY20 4QFY20 vs est. yoy qoq FY2021E FY2020 % change
Revenues from customers
SCM 3,926 4,317 8,010 7,304 (9) (51) (46) 28,517 31,035 (8)
PTS 178 388 980 813 (54) (82) (78) 2,940 3,675 (20)
Adjustments and eliminations — — — — — —
Total 4,105 4,705 8,990 8,118 (13) (54) (49) 31,457 34,711 (9)
Gross profit (Rs mn)
SCM 405 777 768 (48) (47) 3,079 3,181 (3)
PTS (7) 93 73 (108) (110) 270 337 (20)
Total 398 870 841 (54) (53) 3,348 3,518 (5)
Gross margin (%)
SCM 10.3 9.7 10.5 10.8 10.2
PTS (3.9) 9.5 9.0 9.2 9.2
Total 9.7 9.7 10.4 10.6 10.1
Segment profit (Rs mn)
SCM 241 281 642 571 (14) (63) (58) 2,153 2,529 (15)
PTS (7) 27 95 73 (125) (107) (109) 182 338 (46)
Total 234 308 737 644 (24) (68) (64) 2,335 2,867 (19)
Segment profit margin (%)
SCM 6.1 6.5 8.0 7.8 7.5 8.1
PTS (3.8) 7.0 9.7 8.9 6.2 9.2
Total 5.7 6.5 8.2 7.9 7.4 8.3

Exhibit 3: Warehousing revenues have been resilient; transportation revenues have fallen
meaningfully
Split of non-M&M revenues for MLL, March fiscal year-ends (Rs mn)
1Q19 1Q20 1Q21

Transportation 2,400 2,138 1,355
Warehousing 770 960 850
Total 3,170 3,098 2,205
Auto 850 812 355

Non-auto 2,320 2,286 1,850
Total 3,170 3,098 2,205
Exhibit 4: SCM business margin was impacted in 1QFY21 due to lower revenues
Trend in share of non-Mahindra Group clients in SCM revenues and corresponding segmental gross margin,
Share of non-Mahindra Group clients in SCM revenues (LHS, %) SCM EBIT margin (RHS, %)
60 10.8 10.6 10.8 12
10.2 10.3
50 10
7.9 8.2
7.7
40 7.0 7.2 8
6.3
5.7
30 57 6
49 47 49
41 44
20 40 39 4
29
10 21 2
10 11
0 0
1Q21
2022E
2023E
2021E
2013
2015
2017
2019
2014
2016
2018
2020

Exhibit 5: We increase our estimates for 2022/23 by ~5% on marginal increase in revenue and margin estimates
Change in estimates of Mahindra Logistics (consolidated), March fiscal year-ends, 2018-23E (Rs mn)
New estimates Old estimates Revision (%)
2018 2019 2020 2021E 2022E 2023E 2021E 2022E 2023E
2023E 2021E 2022E 2023E
Segmental financials
Revenues
SCM segment 30,761 34,658 31,036 28,517 34,582 39,141 29,379 34,023 38,524 (3) 2 2
Yoy growth (%) 30 13 (10) (8) 21 13 (5) 16 13
Mahindra group 18,177 20,998 17,243 14,657 18,321 20,153 15,519 17,847 19,631 (6) 3 3
Yoy growth (%) 28 16 (18) (15) 25 10 (10) 15 10
Non-Mahindra group 12,583 13,660 13,793 13,861 16,262 18,989 13,861 16,176 18,893 — 1 1
Yoy growth (%) 32 9 1 0 17 17 0 17 17
PTS segment 3,400 3,855 3,675 2,940 3,234 3,557 2,940 3,234 3,557 — — —
Yoy growth (%) 15 13 (5) (20) 10 10 (20) 10 10
Segmental profit
SCM segment 2,263 2,649 2,529 2,153 2,818 3,268 2,218 2,773 3,217 (3) 2 2
EBIT margin (%) 7.4 7.6 8.1 7.5 8.1 8.3 7.5 8.1 8.3 0 bps 0 bps 0 bps
PTS segment 316 405 338 182 298 334 256 297 334 (29) 0 0
EBIT margin (%) 9.3 10.5 9.2 6.2 9.2 9.4 8.7 9.2 9.4 (250) bps 0 bps 0 bps
Other unallocable expenditure (1,521) (1,685) (1,879) (1,729) (1,974) (2,118) (1,810) (1,983) (2,127)
Overall EBIT 1,059 1,369 988 606 1,142 1,485 663 1,088 1,424 (9) 5 4
EBIT margin (%) 3.1 3.6 2.8 1.9 3 3 2.1 3 3 (12) bps 10 bps 9 bps
Key financials
Net revenue 34,161 38,513 34,711 31,457 37,816 42,699 32,319 37,257 42,081 (3) 2 1
EBITDA 1,197 1,512 1,583 1,248 1,792 2,161 1,331 1,755 2,118
Adjusted EBITDA 1,294 1,568 1,703 1,308 1,853 2,221 1,391 1,815 2,178 (6) 2 2
Adjusted EBITDA margin (%) 3.8 4.1 4.9 4.2 4.9 5.2 4.3 4.9 5.2 (15) bps 3 bps 3 bps
Depreciation (197) (220) (734) (751) (802) (876) (789) (841) (918)
PBT 1,021 1,334 812 443 978 1,321 499 924 1,260 (11) 6 5
Tax expense (368) (468) (257) (112) (246) (333) (126) (233) (317)
Effective tax rate (%) 36.1 35.1 31.7 25.2 25.2 25.2 25.2 25.2 25.2
Reported PAT 640 856 551 334 734 991 376 694 945
Adjusted PAT 708 896 636 376 777 1,033 419 736 987 (10) 5 5
Adjusted EPS 9.9 12.5 8.9 5.3 10.9 14.5 5.9 10.3 13.8 (10) 5 5
Operating working capital cycle (days of sales) (a) 11 13 16 22 21 22 17 17 18
Yoy growth (%)

Net sales 28 13 (10) (9) 20 13 (7) 15 13
Adjusted EBITDA 34 21 9 (23) 42 20 (18) 30 20
Adjusted PAT 18 27 (29) (41) 106 33 (34) 76 34
Adjusted EPS 18 27 (29) (41) 106 33 (34) 76 34
Exhibit 6: Trade receivables for non-M&M clients stand at much higher level than the M&M business
Trend in receivables of M&M and non-M&M clients and operating working capital, March fiscal year-ends,
2013-22E (days of sales)
(Days of sales) Operating working capital M&M receivables Non-M&M receivables

120 108
101 101
96 97
100 89 87 87 87 87
85
80
60
40 26 26 26 26
19 18 21 21
16
20 11 11
22
13 16 21 22
5 9 11
-
(7) (7) (3)
(20)
2013 2014 2015 2016 2017 2018 2019 2020 2021E 2022E 2023E

Exhibit 7: We arrive at DCF-based Fair Value of Rs305/share for Mahindra Logistics

DCF valuation of Mahindra Logistics (consolidated), March fiscal year-ends, 2017-30E (Rs mn)
2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E
FCFF calculation
Net revenue 26,666 34,161 38,513 34,711 31,457 37,816 42,699 49,104 56,469 64,940 74,681 85,883 98,765 113,580
Revenue growth (%) 29.2 28.1 12.7 (9.9) (9.4) 20.2 12.9 15.0 15.0 15.0 15.0 15.0 15.0 15.0
EBIT (excluding other income) 616 1,000 1,293 848 497 990 1,285 1,473 1,694 1,948 2,240 2,576 2,963 3,407
EBIT margin (%) 2.3 2.9 3.4 2.4 1.6 2.6 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0
Operating tax expense (238) (370) (499) (262) (125) (250) (324) (371) (427) (491) (565) (649) (747) (859)
NOPLAT 378 630 794 587 372 741 961 1,102 1,267 1,457 1,676 1,927 2,216 2,549
Depreciation 146 197 220 734 751 802 876 1,007 1,158 1,332 1,532 1,761 2,026 2,330
Change in working capital (1,087) (674) (332) (122) (344) 129 (254) (533) (612) (704) (810) (931) (1,071) (1,232)
Capital expenditure (266) (241) (274) (2,331) (300) (668) (668) (768) (883) (1,016) (1,168) (1,343) (1,544) (1,776)
Free cash flow to the firm (829) (87) 407 (1,132) 479 1,004 915 809 930 1,069 1,230 1,414 1,626 1,870
Key assumptions and value drivers
Tax rate (%) 38.7 37.0 38.6 30.8 25.2 25.2 25.2 25.2 25.2 25.2 25.2 25.2 25.2 25.2
Depreciation as % of sales 0.5 0.6 0.6 2.1 2.4 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.1
Net working capital excluding cash as % of sales 7.3 7.7 7.7 8.9 10.9 8.7 8.3 8.3 8.3 8.3 8.3 8.3 8.3 8.3
DCF valuation
Terminal growth rate (%) 5.0
WACC (%) 12.5
EV and target price calculation
Sum of discounted FCF 7,085 7,815
PV of terminal value 11,940 12,752
Enterprise value 19,025 20,566
Investments 279 279
Net debt/(cash) (33) (895)
Equity value 19,337 21,740
Implied share price (Rs/share) 271 304
One-year forward target price (Rs/share) 305
1-yrforward
1-yr forwardP/E
P/Emultiple
multiple at at target
target price
price (X)(X) 26

Exhibit 8: Income statement of Mahindra Logistics (consolidated), March fiscal year-ends, 2013-23E (Rs mn)
I-GAAP Ind-AS
2013 2014 2015 2016 2017 2018 2019 2020 2021E 2022E 2023E
Net revenue 15,321 17,507 19,309 20,639 26,666 34,161 38,513 34,711 31,457 37,816 42,699
Total expenses (14,956) (16,994) (18,739) (20,116) (25,903) (32,964) (37,001) (33,129) (30,209) (36,024) (40,538)
Employee benefit expenses (688) (882) (1,228) (1,509) (1,883) (2,291) (2,582) (2,946) 2,241 2,974 3,487
Fixed term consultant fees — — (25) (62) (206) (97) (56) (120) (60) (60) (60)
(1)
Other expenses (14,268) (16,112) (17,486) (18,546) (23,815) (30,576) (34,363) (30,062) (32,390) (38,938) (43,965)
Freight and other related expenses (13,111) (14,862) (15,889) (16,555) (20,940) (26,785) (29,780) (25,284) (27,242) (32,749) (36,977)
Labor and other related expenses (584) (592) (775) (967) (1,421) (1,872) (2,375) (2,720) (2,930) (3,523) (3,978)
Rent including lease rentals (157) (228) (295) (337) (399) (645) (674) (338) (365) (438) (495)
Warehouse and related expenses (123) (102) (125) (169) (265) (241) (416) (563) (607) (729) (823)
Legal and other professional costs (35) (52) (78) (137) (285) (172) (143) (136) (146) (176) (198)
Miscellaneous expenses (257) (275) (324) (382) (505) (861) (976) (1,022) (1,101) (1,323) (1,494)
EBITDA 365 513 570 523 762 1,197 1,512 1,583 1,248 1,792 2,161
Adjusted EBITDA 365 513 595 585 968 1,294 1,568 1,703 1,308 1,853 2,221
Other income 35 63 87 132 97 59 76 140 110 151 200
Depreciation & amortization (31) (32) (60) (83) (146) (197) (220) (734) (751) (802) (876)
EBIT 369 544 596 573 713 1,059 1,369 988 606 1,142 1,485
Interest expense (7) (1) (4) (13) (35) (38) (35) (176) (164) (164) (164)
PBT 362 543 592 559 678 1,021 1,334 812 443 978 1,321
Tax expense (117) (177) (207) (200) (218) (368) (468) (257) (112) (246) (333)
Reported PAT prior to associated income and minority interest 244 366 385 360 461 653 867 555 331 731 988
Minority interest — — 7 6 (5) (13) (8) 3 3 3 3
Reported PAT 244 366 393 365 456 640 856 551 334 734 991
Adjusted PAT 244 366 402 399 600 708 896 636 376 777 1,033
Adjusted EPS 3.4 5.1 5.6 5.6 8.4 9.9 12.5 8.9 5.3 10.9 14.5
Key ratios
Employee expenses/sales 4.5 5.0 6.4 7.3 7.1 6.7 6.7 8.5 (7.1) (7.9) (8.2)
Other expenses/sales 93.1 92.0 90.6 89.9 89.3 89.5 89.2 86.6 103.0 103.0 103.0
EBITDA margin (%) 2.4 2.9 3.0 2.5 2.9 3.5 3.9 4.6 4.0 4.7 5.1
Adjusted EBITDA margin (%) 2.4 2.9 3.1 2.8 3.6 3.8 4.1 4.9 4.2 4.9 5.2
Effective tax rate (%) 32.5 32.6 35.0 35.7 32.1 36.1 35.1 31.7 25.2 25.2 25.2
PAT margin (%) 1.6 2.1 2.0 1.7 1.7 1.9 2.2 1.6 1.1 1.9 2.3
Yoy growth (%)
Net sales NA 14.3 10.3 6.9 29.2 28.1 12.7 (9.9) (9.4) 20.2 12.9
Adjusted EBITDA NA 40.7 16.0 (1.7) 65.5 33.7 21.2 8.6 (23.2) 41.6 19.9
Adjusted PAT NA 49.9 9.7 (0.5) 50.3 17.9 26.5 (29.0) (40.8) 106.4 33.1

Exhibit 9: Balance sheet and cash flow details of Mahindra Logistics (consolidated), March fiscal year-ends, 2013-23E (Rs mn)
I-GAAP Ind-AS
2013 2014 2015 2016 2017 2018 2019 2020 2021E 2022E 2023E
Shareholders' funds 859 1,243 2,646 3,018 3,477 4,196 4,982 5,447 5,720 6,321 7,133
Share capital 577 591 598 598 680 711 715 715 715 715 715
Reserves & surplus 282 653 2,048 2,420 2,797 3,485 4,268 4,731 5,005 5,606 6,418
Minority interest — — 35 29 48 70 57 54 52 49 46
Debt and liabilities related to leased assets — — 40 236 280 346 377 1,490 1,490 1,490 1,490
Total sources of funds 859 1,243 2,721 3,283 3,805 4,612 5,416 6,991 7,262 7,860 8,669
Net block 101 156 216 452 572 616 670 2,266 1,815 1,681 1,473
Investments and goodwill — — 1,147 724 624 544 856 279 279 279 279
Cash and bank balances 557 892 1,121 1,106 502 660 700 995 1,523 2,385 3,147
Net working capital (ex-cash) 164 141 147 866 1,953 2,626 2,959 3,081 3,425 3,296 3,551
Deferred tax assets 34 53 71 88 128 141 187 200 200 200 200
Non-current assets held for sale — — 19 19 19 19 19 19 19 19 19
Total application of funds 859 1,243 2,721 3,283 3,805 4,612 5,416 6,991 7,262 7,860 8,669
Free cash flow
Cash flow from operations before wcap. changes 277 423 439 166 295 602 1,215 1,507 1,139 1,549 1,831
Change in working capital / other adjustments 207 64 (171) (645) (589) (483) (265) (653) (344) 129 (254)
Net cashflow from operating activites 484 487 268 (479) (293) 119 950 855 795 1,678 1,576
Fixed assets (52) (99) (108) (353) (243) (376) (342) (617) (300) (668) (668)
Cash (used) / realised in investing activities (18) (39) (1,648) 10 534 1 (797) 355 (40) (517) (468)
Free cash flow (CFO + net capex) 432 387 160 (832) (536) (257) 608 238 495 1,010 908
Ratios
Debt/equity — — — 0.1 0.1 0.1 0.1 0.3 0.3 0.2 0.2
Net debt/equity (0.6) (0.7) (0.4) (0.3) (0.1) (0.1) (0.1) 0.1 (0.0) (0.1) (0.2)
Book value per share (Rs) 12 17 37 42 49 59 70 76 80 88 100
RoAE (%) NA 35 21 14 18 18 20 12 7 13 15
RoAE (adj., %) NA NA 90 40 34 26 30 17 11 25 34
RoACE (%) NA 31 17 9 12 15 17 9 5 10 12

REDUCE
Jagran Prakashan (JAGP)
Media AUGUST 03, 2020
RESULT
Challenging quarter. Jagran reported 76% yoy decline in print ad revenues, 32% CMP (`): 38
decline in circulation revenues and 79% decline in radio revenues, all weaker than our Fair Value (`): 37
estimates. EBITDA loss of Rs342 mn was broadly in line with estimates on account
BSE-30: 37,607
aggressive cost management. Covid would likely accelerate disruptive trends— we now
see structural risks to circulation revenues and radio advertising in addition to print
advertising. We raise our margin forecast and increase FY2021/22E EPS by 17%/5%
and FV to Rs37 (Rs35 earlier), valuing Jagran at 5X FY2022E PE. REDUCE.
Jagran Prakashan
ADTV-3M (mn) (Rs/US$) 30/0 P/E (X) 5.5 9.8 5.2
FIIs 4.4 RoE (%) 10.3 5.7 10.3
MFs/BFIs 18/1.9 Div. yield (%) 11.7 5.2 13.0
Absolute (3) (9) (54) EBITDA (Rs bn) 4 3 4
1QFY21— print ad revenues decline 76% yoy, circulation down 32% and radio down 79%
JAGP’s print ad revenues declined 76% yoy (KIE 70% decline) on account of significant decline
in revenues during the lockdown and weak demand thereafter. Circulation revenues declined
32% yoy (KIE 20% decline); it looks like recovery in circulation post the lockdown is weaker
than anticipated. Radio revenues declined 79% yoy indicating weaker underlying demand
environment for the medium. RM costs declined 65% yoy on account of a dip in circulation
(about 30%), decline in newsprint prices (about 10%) and about 40-45% cut in pagination.
Employee costs declined 9% yoy and other expenses declined 59% yoy. EBITDA loss stood at
Rs342 mn and net loss stood at Rs396 mn (KIE Rs486 mn loss).
We expect Covid to accelerate disruptive trends
A 32% decline in circulation revenues in 1QFY21 is on account cancellation of subscription by

some consumers (precautionary measure) and commercial establishments. With easing of the
lockdown, we expect circulation to gradually recover but it could settle 5-6% below pre-Covid
levels. In our view, lockdown could permanently change media consumption habits (accelerate
print-to-digital shift) of at least a small percentage of consumers. Further, aggressive cost cuts
(especially pagination cuts) may also impact circulation.
Per our channel checks, print/radio ad revenues declined 75-85% in 1QFY21 as compared to
60-65% decline in TV advertising revenues and a much lower decline in digital advertising. In
our view, the lockdown would have compelled a few advertisers of print/radio to consider
digital options and shift print/radio ad spends to digital. A part of these ad spends may not
return to print/radio. Small local advertisers contribute significantly to print/radio advertising;
this segment may see higher economic impact compelling them to aggressively cut back on ad
spends.
Jaykumar Doshi
We tweak estimates and revise fair value to Rs37 (Rs35 earlier), maintain REDUCE
We tweak revenue estimates for FY2021-22 and reduce cost assumptions. This results in a
sharp 17%/5% increase in FY2021/22E EPS. Covid would accelerate print’s and radio’s ad share
loss to digital and could perhaps mark the saturation of print circulation revenues. We maintain
REDUCE and revise fair value to Rs37 (Rs35, valuing Jagran at 5X FY2022E PE.
Contact: +91 22 6218 6427
Jagran Prakashan Media
Exhibit 1: Consolidated Ind-AS financials of Jagran Prakashan (JAGP), March fiscal year-ends (Rs mn)
% chg.
Consolidated financials 1QFY21 1QFY21E 1QFY20 4QFY20 KIE yoy qoq FY2021E FY2020 % chg.
Total revenues 1,911 2,414 5,843 4,456 (20.8) (67.3) (57.1) 15,242 20,973 (27.3)
Print advertising revenues 852 1,052 3,505 2,593 (19.0) (75.7) (67.1) 8,364 12,325 (32.1)
Circulation revenues 740 869 1,086 991 (14.8) (31.8) (25.3) 3,590 4,224 (15.0)
Radio revenues 144 244 698 459 (41.2) (79.4) (68.7) 1,735 2,478 (30.0)
Digital ad revenues 92 109 109 109 (15.4) (15.7) (15.6) 522 435 20.0
Other operating revenues 83 141 445 304 (41.2) (81.4) (72.8) 1,032 1,512 (31.7)
Total expenditure (2,253) (2,731) (4,432) (3,912) (17.5) (49.2) (42.4) (12,419) (16,646) (25.4)
Raw material costs (642) (1,018) (1,807) (1,273) (36.9) (64.5) (49.5) (4,411) (6,206) (28.9)
Employee expenses (979) (862) (1,077) (1,021) 13.6 (9.1) (4.1) (3,608) (4,171) (13.5)
Other expenses (632) (851) (1,548) (1,618) (25.7) (59.2) (60.9) (4,400) (6,269) (29.8)
EBITDA (342) (317) 1,411 544 8.1 (124.3) (162.9) 2,824 4,327 (34.7)
EBITDA margin (%) (17.9) (13.1) 24.1 12.2 -479 bps -4207 bps -3012 bps 18.5 20.6
Other income 134 50 40 40 168.1 235.2 237.0 425 322 31.8
Interest expense (77) (80) (92) (81) (3.8) (16.5) (5.5) (300) (333) (10.0)
D&A expenses (323) (370) (355) (371) (12.6) (9.0) (12.9) (1,350) (1,458) (7.4)
Pretax profits (609) (717) 1,004 131 (15.1) (160.6) (565.0) 1,599 2,859 (44.1)
Extraordinaries — — — — — 781
Tax provision 163 181 (349) (53) (9.7) (146.7) (410.7) (408) (830) (50.9)
Minority interest 50 50 (11) 35 (87) (75)
Reported PAT (396) (486) 644 113 (18.6) (161.5) (449.2) 1,104 2,735 (59.7)
Recurring PAT (396) (486) 644 113 1,104 1,955 (43.5)
Recurring EPS (Rs/share) (1.4) (1.7) 2.3 0.4 (18.6) (161.5) (449.2) 3.9 7.0 (43.5)
Tax rate (%) 26.8 25.2 34.8 40.1 25.5 29.0
Exhibit 2: Revised earnings estimates of JAGP, March fiscal year-ends (Rs mn)
New Old Change (%)

2021E 2022E 2021E 2022E 2021E 2022E
Print ad revenue 8,364 11,291 8,364 11,207 — 0.7
Circulation revenue 3,590 4,021 3,759 4,059 (4.5) (1.0)
Other operating revenue 1,554 2,030 1,719 2,135 (9.6) (4.9)
Radio revenues 1,735 2,342 1,660 2,241 4.5 4.5
Total revenues 15,242 19,684 15,502 19,643 (1.7) 0.2
Total expenditure 12,419 15,557 12,683 15,549 (2.1) 0.1
EBITDA 2,824 4,126 2,819 4,094 0.2 0.8
Adjusted PAT 1,104 2,061 940 1,958 17.4 5.3
Adjusted EPS (Rs) 3.9 7.3 3.3 7.0 17.4 5.3
Print ad revenue growth (%) (32.0) 35.0 (32.0) 34.0

EBITDA margin (%) 18.5 21.0 18.2 20.8

Media Jagran Prakashan
Exhibit 3: Financial summary of JAGP, March fiscal year-ends, FY2014-23E (Rs mn)
2014 2015 2016 2017 2018 2019 2020 2021E 2022E 2023E
Profit model
Net sales 17,027 17,698 21,065 22,830 23,040 23,627 20,973 15,242 19,684 20,261
EBITDA 3,664 4,464 5,896 6,396 5,836 5,337 4,326 2,824 4,126 4,435
Other income 628 321 345 412 467 408 323 425 475 525
Interest (345) (369) (523) (350) (271) (259) (333) (300) (225) (150)
Depreciation (789) (1,035) (1,044) (1,289) (1,361) (1,279) (1,458) (1,350) (1,450) (1,450)
Pretax profits 3,158 3,380 4,674 5,169 4,671 4,207 2,858 1,599 2,926 3,360
Extraordinary items (101) 803 1,163 — — — 781 — — —
Current tax (795) (1,102) (1,390) (1,675) (1,557) (1,470) (830) (408) (761) (874)
Deferred taxation — — — — — — — — — —
Net income 2,262 3,080 4,447 3,476 3,003 2,606 2,736 1,104 2,061 2,361
Adjusted net income 2,337 2,538 3,400 3,476 3,003 2,606 1,955 1,104 2,061 2,361
Adjusted EPS (Rs) 7.5 8.0 10.4 10.6 9.6 8.8 7.0 3.9 7.3 8.4
Balance sheet
Total equity 9,616 11,342 15,812 21,548 20,397 18,757 19,185 19,699 20,171 20,965
Deferred taxation liability 851 707 726 1,702 1,999 2,248 1,460 1,460 1,460 1,460
Total borrowings 4,897 6,480 5,120 3,834 1,476 3,439 2,041 2,041 2,041 2,041
Current liabilities 3,889 4,005 4,028 5,032 6,046 6,571 6,823 4,016 4,597 4,597
Total liabilities and equity 19,253 22,534 25,686 32,116 29,918 31,015 29,509 27,216 28,270 29,064
Cash 325 4,931 493 3,491 1,640 3,421 3,968 5,198 5,772 7,363
Other current assets 6,560 5,576 7,449 7,600 8,627 9,769 9,267 6,628 8,158 8,410
Total fixed assets 9,048 8,454 14,676 15,678 14,885 14,966 14,634 13,684 12,634 11,584
Investments (largely cash equivalent) 3,320 3,573 3,068 5,347 4,765 2,859 1,707 1,707 1,707 1,707
Total assets 19,253 22,534 25,686 32,116 29,918 31,015 29,575 27,216 28,270 29,064
Free cash flow

Operating cash flow 3,681 4,819 5,669 4,721 4,757 4,100 3,223 2,959 3,365 3,562
Working capital changes (120) (506) (1,839) (1,511) (851) (1,254) 37 (168) (949) (252)
Capital expenditure (497) (512) (7,670) (800) (515) (1,422) (333) (400) (400) (400)
Other income 48 199 345 412 146 74 49 425 475 525
Free cash flow 3,112 3,999 (3,495) 2,822 3,537 1,499 2,977 2,816 2,492 3,434
Key metrics and ratios (%)

Print ad revenue growth (%) 12.7 4.0 9.2 2.9 (1.3) 0.8 (10.8) (32.0) 35.0 2.0
EBITDA margin (%) 21.5 25.2 28.0 28.0 25.3 22.6 20.6 18.5 21.0 21.9
Debt/equity 47 54 31 16 7 16 — — — —
Net debt/equity 12 (17) 9 (22) (22) (14) (27) (33) (35) (40)
ROAE (%) 23 23 24 17 13 12 9 5 10 11
ROACE (%) 18 21 24 18 14 13 11 7 12 13

REDUCE
Sun Pharmaceuticals (SUNP)
Pharmaceuticals AUGUST 03, 2020
RESULT, CHANGE IN RECO.
Mixed trends. SUNP reported weaker-than-expected performance, with the US, CMP (`): 532
particularly, the specialty portfolio declining materially on Covid-19 impact, while
domestic was strong with chronic portfolio growth at 10%. A better product mix, lower Fair Value (`): 510
R&D and promotional spend resulted in strong EBITDA performance. While trends bode BSE-30: 37,607
well for Ilumya, we believe Levulan will likely see a more gradual recovery. Given the
recent run-up in stock price, we downgrade our rating to REDUCE with an unchanged
fair value of Rs510/share.
Sun Pharmaceuticals
Mcap (bn) (Rs/US$) 1,276/17.1 EPS growth (%) 3.8 17.6 17.3
ADTV-3M (mn) (Rs/US$) 5,159/69 P/E (X) 31.8 27.0 23.1
FIIs 12.8 RoE (%) 9.3 10.2 11.3
Strong margin defense; DoJ provisions drag profits

SUNP’s 1QFY20 revenues missed on all fronts, with Taro being the biggest drag, declining
US$47 mn qoq (-US$32 mn vs KIE), given slower demand for topical products in the US. Ex-
Taro US business declined US$46 mn (-US$26 mn vs KIE) dragged down by specialty sales,
which fell US$48 mn qoq to US$78 mn, due to the impact of Covid-19 on physician visits.
Domestic business grew 3% yoy (-3% vs KIE), with the chronic segment actually showing a
strong 10% yoy growth. RoW and EMs declined 6% yoy, missing our estimates by ~6%. Gross
margins at 74% were 220 bps higher than estimates, benefitting from the geographic mix
(higher domestic) as well as product mix (higher chronic). EBITDA margins expanded 510 bps to
23.5%, driven by sharply lower SG&A spends (-23% vs KIE) as well as lower R&D spends (-17%
vs KIE), though, a large part of the SG&A savings is temporary. Provisions of Rs36 bn at Taro
(DoJ settlement plus US$60 mn for state level and class action suits), resulted in post-tax loss,
though, adjusting for the provisions, net income was sharply higher than estimates.
Ilumya on the path to recovery, though, Levulan hurt could drag longer
1QFY21 specialty sales of US$78 mn (-US$48 mn qoq) highlights the risks to SUNP’s specialty
franchise, particularly, given its concentration in elective areas such as dermatology and
ophthalmology (dry eye and NSAID’s). Within dermatology as well, there is a high variance, with
Levulan possibly declining 80-90% in 1QFY21, given the longer incubation cycle post
administration (longer wait times at physician offices), which will possibly curtail a rapid
recovery for the product. While Ilumya has also been impacted in 1QFY21, management guided
for recovery in market share. Morever, an analysis of recent 2QCY20 sales from competing
psoriasis products (Skyrizi, Tremfya and Stelara) as well as similar physician administered products
suggests a recovery in prescription and sales from May, with office visits down only 10-15% yoy
Chirag Talati, CFA
in June’20, and elective surgeries at ambulatory surgery centers (ASCs) experiencing yoy growth
in June’20. Similarly, physician administered and early-stage ramp products recovered to pre-
Covid levels in June’20. We believe the trends for ASCs and recovery in physician out-patient Kumar Gaurav
administration, bode well for Ilumya, which is an out-patient medical benefit.
Downgrade to REDUCE from ADD given recent run-up in share price
Post the recent run-up in stock price, SUNP is now trading at 12.5X FY2022 EV/EBITDA (15X ex-
Taro) and ~23X FY2022 P/E. We trim our FY2022/23E EPS by ~4%, and downgrade to REDUCE
from ADD with an unchanged fair value of Rs510/share.
Contact: +91 22 6218 6427
Pharmaceuticals Sun Pharmaceuticals
Exhibit 1: Sun Pharma – consolidated 1QFY21 interim results

March fiscal year-ends, (Rs mn)
(% chg.) yoy
1QFY21 1QFY21E 1QFY20 4QFY20 1QFY21E 1QFY20 4QFY20 FY2020 FY2019 (% chg.) FY2021E
Sales 75,853 81,048 83,744 81,849 (6.4) (9.4) (7.3) 328,375 290,659 13.0 343,923
Gross profit 56,157 58,354 59,166 58,801 (3.8) (5.1) (4.5) 236,071 211,969 11.4 247,884
Staff costs (17,590) (16,482) (15,404) (16,519) 6.7 14.2 6.5 (63,624) (59,671) 6.6 (67,759)
R&D (4,152) (5,000) (4,223) (5,205) (17.0) (1.7) (20.2) (19,252) (19,850) (3.0) (20,927)
SG&A (16,771) (21,932) (19,583) (22,027) (23.5) (14.4) (23.9) (83,454) (68,441) 21.9 (79,555)
EBITDA 17,644 14,940 19,956 15,051 18.1 (11.6) 17.2 69,742 64,008 9.0 79,644
Depreciation (4,959) (5,850) (4,571) (5,754) (15.2) 8.5 (13.8) (20,528) (17,533) 17.1 (23,763)
Interest expense (520) (500) (1,041) (518) 3.9 (50.1) 0.3 (3,027) (5,553) (2,463)
Forex gain/(loss) 792 — — (1,421) 156 (932) —
Other income 1,538 1,000 2,130 1,022 53.8 (27.8) 50.4 6,360 10,255 7,831
Exceptionals (36,333) — — (2,606) (2,606) (12,144) (36,333)
Pretax profits (21,803) 9,590 16,427 5,759 (327.4) (232.7) (478.6) 49,948 38,087 31.1 24,915
Pretax profits (adjusted) 14,530 9,590 16,427 8,365 51.5 (11.5) 73.7 52,554 50,231 4.6 61,248
Tax (2,459) (1,438) (1,461) (831) (8,228) (6,009) 36.9 (9,845)
Minority interest 7,706 (1,092) (1,092) (929) (4,070) (5,424) (4,080)
Net income (16,556) 7,059 13,875 3,998 (334.5) (219.3) (514.1) 37,649 26,654 41.3 10,990
Net income (adjusted) 12,038 7,059 13,875 6,605 70.5 (13.2) 82.3 40,256 38,798 3.8 47,323
EPS (Rs) (6.9) 2.9 5.8 1.7 (334.5) (219.3) (514.1) 15.6 11.1 41.3 4.6
EPS adjusted (Rs) 5.0 2.9 5.8 2.7 70.5 (13.2) 82.3 16.7 16.1 3.8 19.7
Tax rate (%) (11.3) 15.0 8.9 14.4 16.5 15.8 39.5
Divisional sales
US (US $ mn) 282 340 424 375 (17.1) (33.5) (24.8) 1,487 1,526 (2.6) 1,394
- Taro US 98 130 126 145 (24.9) (22.7) (32.6) 499 541 (7.8) 443
- Ex-Taro US 184 210 298 230 (12.2) (38.1) (19.9) 967 985 (1.8) 951
Domestic formulations (Rs. mn) 23,884 24,500 23,137 23,648 (2.5) 3.2 1.0 97,102 73,483 32.1 103,256
RoW (Rs mn) 23,460 24,982 25,077 24,741 (6.1) (6.4) (5.2) 100,394 88,178 13.9 111,983
API 5,537 4,841 4,610 4,830 14.4 20.1 14.6 19,160 17,300 10.8 20,118
Global specialty sales (US$ mn) 78 105 94 126 (25.7) (17.0) (38.1) 429 322 33.2 463
% margin
Gross margin 74.0 72.0 70.7 71.8 71.9 72.9 72.1
R&D 5.5 6.2 5.0 6.4 5.9 6.8 6.1
SG&A 45.3 47.4 41.8 47.1 44.8 44.1 42.8
EBITDA 23.3 18.4 23.8 18.4 21.2 22.0 23.2
Exhibit 2: Changes to estimates

New estimates Old estimates % change

2021E 2022E 2023E 2021E 2022E 2023E 2021E 2022E 2022E
Sales 343,923 376,639 406,752 355,867 379,744 409,884 (3.4) (0.8) (0.8)
Gross profits 247,884 272,903 294,822 256,828 275,145 297,132 (3.5) (0.8) (0.8)
EBITDA 79,644 89,914 101,752 80,793 91,876 103,752 (1.4) (2.1) (1.9)
Adjusted PAT 47,323 55,491 67,655 47,967 58,307 70,779 (1.3) (4.8) (4.4)
Adjusted EPS (Rs) 19.7 23.1 28.1 19.9 24.2 29.4 (1.3) (4.8) (4.4)

Sun Pharmaceuticals Pharmaceuticals
Exhibit 3: Global specialty sales declined US$4 mn qoq due to Exhibit 4: Ilumya WW sales (incl. Ilumetri) reached ~US$100 mn
seasonality in ordering patterns for Absorica and Levulan in FY2020
March fiscal year-ends (US$ mn) March fiscal year-ends (US$ mn)
1QFY20 2QFY20 3QFY20 4QFY20 1QFY21 45

140 126
118 40
120 9
35
100 94 91
78 30
80
25
60 7
20
40
33
15 5
20 5
10 20
0
Global specialty revenues Global specialty R&D 5 10 12
(20) (9)
(16) -17 (17)
(23) 0
(40)
1QFY20 2QFY20 3QFY20 4QFY20
Note: Company Source: Kotak Institutional Equities estimates
Exhibit 5: FY2021 to be a cliff year for SUNP – further in-licensing deals critical to drive incremental growth beyond FY2022
March fiscal year-ends, 2013-25E (US$ mn)
2013 2014 2015 2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E
DUSA 55 72 111 105 130 92 92 99 65 99 102 106 109
Absorica 131 165 151 193 186 129 130 115 48 37 33 34
BromSite 4 25 32 38 46 23 12 6 3
Odomzo 4 12 17 27 37 46 58 71 87
Ilumya 13 75 121 177 214 238 265
Yonsa 25 15 10 5 5 5 5
Xelpros 5 15 25 35 35 35 35
Cequa 11 43 65 81 99 99
Key US brands 55 203 275 256 330 315 313 411 463 497 543 592 637
- as a % of US sales 5 13 12 12 16 23 21 28 33 34 34 36 37
- % growth 271 36 -7 29 -5 -1 31 12 7 9 9 8
Ilumya milestone + royalties 9 17 24 29 34 39 44
Global specialty franchise 55 203 275 256 330 315 322 428 486 526 576 630 681
- % growth 271 36 -7 29 -5 2 33 14 8 10 9 8
Exhibit 6: New product launches and specialty to drive US revenue growth

2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E

Branded/specialty 275 256 330 315 313 411 463 497 543
Taro US 777 866 784 549 541 499 443 440 431
SUNP key opportunities 731 534 623 245 287 297 259 309 360
SUNP base business 460 410 318 245 385 280 229 233 264
Total US sales 2,244 2,066 2,056 1,354 1,526 1,487 1,394 1,478 1,597
yoy growth (%) 38.5 (7.9) (0.5) (34.1) 12.7 (2.6) (6.2) 6.1 8.0
Branded/specialty 12 12 16 23 21 28 33 34 34
Taro US 35 42 38 41 35 34 32 30 27
SUNP key opportunities 33 26 30 18 19 20 19 21 23
SUNP base business 20 20 15 18 25 19 16 16 17

Pharmaceuticals Sun Pharmaceuticals
Exhibit 7: Sun Pharma – we expect US to drive revenue growth

2015 2016 2017 2018 2019 2020 2021E 2022E 2023E
Domestic formulations 67,166 75,537 77,491 80,293 73,483 96,780 103,256 114,356 125,795
US (excluding Taro) 89,692 78,536 85,101 51,987 69,117 68,662 70,364 78,941 88,628
Taro (US) 47,506 56,634 52,487 35,479 37,596 35,399 32,799 33,422 32,767
RoW/EM 60,646 57,461 77,427 78,132 88,178 100,380 111,983 123,437 132,068
Total formulations 265,010 268,168 292,506 245,891 268,375 301,220 318,402 350,157 379,258
API 9,910 14,025 15,978 13,993 17,300 19,030 20,118 21,124 22,180
Others 792 752 454 432 1,000 950 903 857 815
Other income 1,469 5,256 13,142 4,235 3,796 5,123 4,500 4,500 4,500
Total 277,181 288,200 322,080 264,551 290,471 326,323 343,923 376,639 406,752
yoy growth, %
Domestic formulations 82 12 3 4 (8) 32 7 11 10
US (excluding Taro) 56 (12) 8 (39) 33 (1) 2 12 12
Taro 17 19 (7) (32) 6 (6) (7) 2 (2)
RoW 218 (5) 35 1 13 14 12 10 7
Total formulations 72 1 9 (16) 9 12 6 10 8
API 24 42 14 (12) 24 10 6 5 5
Total 70 4 12 (18) 10 12 5 10 8
% of sales
Domestic formulations 24 26 24 30 25 30 30 30 31
US (excluding Taro) 32 27 26 20 24 21 20 21 22
Taro 17 20 16 13 13 11 10 9 8
RoW 22 20 24 30 30 31 33 33 32
Total formulations 96 93 91 93 92 92 93 93 93
API 4 5 5 5 6 6 6 6 5
Exhibit 8 Specialty R&D dipped in FY2019 and FY2020, though, likely to increase post initiation of pivotal trials for Ilumya in PsA
2015 2016 2017 2018 2019 2020 2021E 2022E 2023E
US Sales (Rs mn) 137,198 135,170 137,588 87,466 106,713 105,245 103,163 112,364 121,395
- Generics 67,594 56,701 56,628 24,342 38,376 30,276 24,302 28,308 33,762
- Specialty 16,844 16,765 22,102 20,364 21,779 29,190 34,226 37,765 41,241
- Taro 52,760 61,704 58,858 42,760 46,558 45,779 44,634 46,291 46,393
Sales 275,390 287,953 315,784 264,895 290,659 328,375 343,923 376,639 406,752
R&D expenses (Rs mn) (18,373) (23,025) (21,459) (20,669) (19,850) (20,929) (20,927) (22,771) (22,734)
- Generics (11,455) (12,168) (10,934) (9,816) (11,864) (12,425) (12,210) (12,540) (12,160)
- Specialty (2,913) (6,238) (5,641) (6,304) (3,591) (4,260) (4,736) (6,551) (7,263)
- Taro (4,005) (4,618) (4,884) (4,549) (4,395) (4,244) (3,981) (3,680) (3,312)
R&D as a % of sales (6.7) (8.0) (6.8) (7.8) (6.8) (6.4) (6.1) (6.0) (5.6)
- of which generics 62 53 51 47 60 59 58 55 53
- of which Specialty 16 27 26 31 18 20 23 29 32
- of which Taro 22 20 23 22 22 20 19 16 15

Sun Pharmaceuticals Pharmaceuticals
Exhibit 9: Sun Pharma - consolidated profit and loss, balance sheet, cash model
2015 2016 2017 2018 2019 2020 2021E 2022E 2023E
Net revenues 275,390 287,953 315,784 264,895 290,659 328,375 343,923 376,639 406,752
Gross Profit 207,998 223,121 234,477 190,648 211,969 236,071 247,884 272,903 294,822
Staff costs (45,026) (47,971) (49,023) (53,671) (59,671) (63,624) (67,759) (71,825) (77,211)
R&D expenses (18,373) (23,025) (21,459) (20,669) (19,850) (19,252) (20,927) (22,771) (22,734)
Other expenses (64,462) (63,630) (63,103) (60,227) (68,441) (83,454) (79,555) (88,393) (93,125)
EBITDA 80,136 88,494 100,893 56,081 64,008 69,742 79,644 89,914 101,752
Depreciation & amortisation (11,947) (10,135) (12,648) (14,998) (17,533) (20,528) (23,763) (24,413) (25,063)
EBIT 68,189 78,359 88,245 41,083 46,475 49,214 55,880 65,501 76,689
Net Interest (5,790) (4,769) (3,998) (5,176) (5,553) (3,027) (2,463) (2,378) (2,333)
Other income 4,008 914 6,232 8,388 10,255 6,360 7,831 9,034 12,190
Exceptional items (2,378) (6,852) — (9,505) (12,144) (2,606) (36,333) — —
Profit before tax 63,904 74,486 90,578 44,062 50,231 52,554 61,248 72,157 86,545
Tax & Deferred Tax (9,147) (9,349) (12,116) (8,452) (6,009) (8,228) (9,845) (12,366) (14,542)
Less: minority interest (9,363) (11,126) (8,819) (4,468) (5,424) (4,070) (4,080) (4,299) (4,348)
Net Income (adjusted) 45,394 54,011 69,644 33,665 38,798 40,256 47,323 55,491 67,655
EPS adjusted (Rs) 18.9 22.4 28.9 14.0 16.1 16.7 19.7 23.1 28.1
Balance sheet
Equity 293,582 354,901 404,305 419,847 427,736 471,757 488,709 541,701 604,521
Total borrowings 75,963 83,381 80,910 97,518 98,934 75,783 79,283 77,783 76,283
Deferred tax liability 985 616 3,148 2,190 1,043 581 581 581 581
Other liabilities 92,561 80,263 112,321 118,846 89,689 101,571 112,361 117,232 121,040
Total liabilities 490,279 542,196 614,102 643,028 646,938 682,525 703,937 760,300 825,429
Net fixed assets 110,201 133,606 149,403 157,111 172,919 175,858 152,265 137,852 122,789
Investments 5,989 5,933 16,062 31,572 39,518 50,028 50,028 50,028 50,028
Cash 131,155 147,045 153,717 140,200 112,263 113,849 125,574 178,172 240,520
Other current assets 215,576 225,287 287,360 286,061 283,535 299,260 332,541 350,719 368,562
Total assets 490,279 542,196 614,102 643,028 646,938 682,525 703,937 760,300 825,429
Cashflow statement
Operating profit before working capital 71,765 84,923 95,485 48,621 57,789 70,021 48,678 96,570 111,608
Tax paid (17,404) (19,885) (20,571) (7,417) (8,864) (13,459) (9,845) (12,366) (14,542)
Change in working capital 1,796 2,656 (4,092) (2,123) (26,960) 8,986 (22,491) (13,306) (14,036)
Capital expenditure (23,419) (33,825) (36,929) (19,608) (32,128) (15,420) (10,000) (10,000) (10,000)
Free cash flow 32,739 33,869 33,894 19,473 (10,164) 50,128 6,342 60,897 73,031
Margins and ratios
Gross profit margin (%) 75.5 77.5 74.3 72.0 72.9 71.9 72.1 72.5 72.5
EBITDA margin (%) 29.1 30.7 31.9 21.2 22.0 21.2 23.2 23.9 25.0
Tax rate (%) 14.3 12.6 13.4 19.2 12.0 15.7 16.1 17.1 16.8
RoAE (%) 20.2 16.3 20.5 5.8 6.7 8.7 2.4 11.3 12.4
RoACE (%) 31.4 25.9 24.6 9.4 10.1 9.4 10.2 11.8 13.9

REDUCE
Laurus Labs (LAURUS)
Pharmaceuticals AUGUST 03, 2020
Blow-out quarter demonstrates underlying operating leverage. Laurus’ 1QFY21 CMP (`): 934
numbers impressed, with revenues, EBITDA and EPS all surpassing estimates by a wide Fair Value (`): 870
margin. Continued formulations scale-up, sharp growth in other APIs, and re-bound in
BSE-30: 37,607
ARVs aided revenue growth. Better realizations and forex benefits led to sharp gross
margin expansion, with operating leverage, driving EBITDA margins up to 28.6%. We
raise our FY2021-23E EPS by 45-50%, though, the recent run-up leaves limited room
for further re-rating. Downgrade to REDUCE with revised fair value of Rs870/share.
Laurus Labs
ADTV-3M (mn) (Rs/US$) 1,253/17 P/E (X) 39.1 17.1 16.9
FIIs 11.3 RoE (%) 15.3 24.8 20.1
MFs/BFIs 3.9/0.1 Div. yield (%) (0.4) 0.0 0.0
Blow-out quarter
Laurus’s 1QFY21 revenues grew 77% yoy and were 20% ahead of our estimates led by strong
performance across all segments. ARV APIs recorded growth of 19% yoy (+27% vs KIE), with
3TC (lamivudine) capacity additions aiding growth. Formulations continued its strong growth
trajectory with revenues of Rs3.5bn (+10% vs KIE), while also benefitting from HCQ sales in US.
Other APIs segment grew 2X yoy (+40% vs KIE) on account of macro tailwinds with increased
demand across products, including for contract manufacturing, as benefits of INR depreciation.
Synthesis segment grew 37% yoy (+20% vs KIE). A combination of higher formulations
revenues, and higher realizations in other API segment meant that gross margins expanded
400bps qoq to 54.2% (+370 bps vs KIE). Higher employee cost was offset by lower other
expenses, leading to EBITDA exceeding our estimates by 67% with EBITDA margin at an all-time
high of 28.6%. Despite the higher tax rate, PAT was 73% ahead of our estimates.
Formulations and API scale-up demonstrates operating leverage
We have viewed Laurus as a unique business model offering a hybrid of rapidly growing
synthesis business, an emerging formulations business along with a steady ARV business. Over
the past few quarters, formulations business has scaled up to its potential, with other APIs and
synthesis business still in growth mode. Formulations growth has been led by the LMIC markets
for ARV products (US$1.5 bn first-line market), where we expect incremental growth to be
aided by TLE600, TLE400 and TEE. Laurus has made meaningful investments in capacities with
Unit-2 (FDF unit) operating costs of ~Rs1.6 bn in FY2019, and 1QFY21 performance
demonstrates the operating leverage benefits as the formulation segment is now operating at
full capacity (total 5 bn). Even as additional capacities are likely to be available from 2QFY21, we
expect meaningful capacity additions only from 2HFY22, with eventual FDF capacities likely to Chirag Talati, CFA
reach ~8 bn tablets. We expect other APIs to continue to benefit from supply disruptions in the
industry, with capacity additions of ~20% in FY2022 likely to further aid growth. Kumar Gaurav
Recent run-up leaves limited room for immediate upside – downgrade to REDUCE
We upgrade our FY2021-23 EPS by 45-50%, though, we caution against fully extrapolating
current quarter EPS, given the operating leverage in the business. Given the recent sharp run-
up, the stock trades at 10X FY2022E EV/EBITDA, and 17X P/E, with limited scope for further re-
rating, given that half of the profits are likely to turn ex-growth (ARV and formulations) by
FY2023. Downgrade to REDUCE with revised fair value of Rs870/share. kspcg.research@kotak.com
Contact: +91 22 6218 6427
Laurus Labs Pharmaceuticals
Exhibit 1: Laurus - 1QFY21 interim results

March fiscal year-ends (Rs mn)
(% chg.)
1QFY21 1QFY20E 1QFY20 4QFY20 1QFY20E 1QFY20 4QFY20 FY2020 FY2019 (% chg.) FY2021E FY2020 (% chg.)
Sales 9,743 8,150 5,506 8,391 19.5 77.0 16.1 28,317 22,919 23.6 38,194 28,317 34.9
Raw material (4,461) (4,034) (2,746) (4,183) 10.6 62.5 6.6 (14,134) (12,356) 14.4 (17,851) (14,134) 26.3
Employee expenses (1,116) (900) (803) (881) 24.0 38.9 26.6 (3,449) (2,892) 19.2 (4,138) (3,449) 20.0
R&D expenses (420) (400) (418) (398) 5.0 0.5 5.5 (1,602) (1,659) (3.4) (2,292) (1,602) 43.0
Other expenses (964) (1,150) (671) (1,011) (16.2) 43.7 (4.7) (3,487) (2,452) 42.2 (4,010) (3,487) 15.0
EBITDA 2,783 1,666 868 1,918 67.1 220.6 45.1 5,645 3,560 58.6 9,903 5,645 75.4
Other income 71 20 10 17 59 162 250 59
Interest (151) (175) (225) (207) (13.5) (32.8) (26.7) (896) (882) (581) (896)
Depreciation (488) (475) (458) (461) 2.7 6.5 6.0 (1,873) (1,642) (1,993) (1,873)
Pretax profits 2,215 1,036 194 1,267 113.8 1,042.3 74.7 2,936 1,198 145.2 7,578 2,936 158.1
Tax (497) (43) (43) (166) (383) (260) (1,743) (383)
Minority interest — — — — — — — —
Net income - reported 1,718 993 151 1,102 73.0 1,038.0 56.0 2,553 938 172.3 5,835 2,553 128.6
Adjusted EPS (Rs) 16.1 9.3 1.4 10.4 73.0 1,038.0 56.0 23.9 8.9 169.5 54.6 23.9 128.6
Tax rate (%) 22.4 4.1 22.1 13.1 13.1 21.7 23.0 13.1
Segment wise sales
ARV 3,360 2,650 2,830 2,728 26.8 18.7 23.2 10,863 13,947 (22.1) 12,014 10,863 10.6
Hepatitis C — — — — 1,197 (100.0) 378 —
Oncology 510 500 450 591 2.0 13.3 (13.7) 2,106 2,182 (3.5) 2,365 2,106 12.3
Other APIs 1,350 965 437 920 39.9 208.9 46.7 3,245 1,890 71.7 5,941 3,245 83.1
Ingredients — — — — 606 (100.0) 899 —
Synthesis 1,000 835 729 1,479 19.8 37.2 (32.4) 3,850 2,552 50.9 3,578 3,850 (7.1)
Formulations 3,520 3,200 1,060 2,673 10.0 232.1 31.7 8,253 546 1411.5 13,019 8,253 57.8
Total 9,743 8,150 5,506 8,391 19.5 77.0 16.1 28,317 22,919 23.6 38,194 28,317 34.9
% margin
Gross margin 54.2 50.5 50.1 50.2 50.1 46.1 53.3 50.1
Staff cost 11.5 11.0 14.6 10.5 12.2 12.6 10.8 12.2
R&D expenses 4.3 4.9 7.6 4.7 5.7 7.2 6.0 5.7
Other expenditure 9.9 14.1 12.2 12.1 12.3 10.7 10.5 12.3
EBITDA - adjusted 28.6 20.4 15.8 22.9 19.9 15.5 25.9 19.9
Exbhibit 2: Laurus - changes to estimates

March fiscal year-ends, 2021-23E, (Rs mn)
New estimates Old estimates Change (%)

2021E 2022E 2023E 2021E 2022E 2023E 2021E 2022E 2023E
Revenues 38,194 42,886 48,708 34,079 37,922 42,440 12.1 13.1 14.8
Gross profit 20,343 21,887 25,164 17,393 19,501 21,834 17.0 12.2 15.3
EBITDA 9,903 10,350 12,203 7,196 8,258 9,244 37.6 25.3 32.0
PAT 5,835 5,907 7,015 3,707 4,067 4,592 57.4 45.2 52.8
EPS 54.6 55.3 65.6 34.7 38.0 43.0 57.4 45.2 52.8

Pharmaceuticals Laurus Labs
Exhibit 3: Laurus – segmental revenues

2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E

Revenues (Rs mn)
Anti-virals 11,007 14,590 14,721 15,311 15,144 10,863 12,392 13,071 13,193
ARVs 10,776 12,619 12,212 13,655 15,144 10,863 12,014 12,741 12,875
Hep-C 231 1,971 2,509 1,655 — — 378 330 318
Oncology 1,261 1,413 1,073 1,655 2,182 2,106 2,365 2,578 2,810
Other APIs 265 513 1,498 1,655 2,101 3,245 5,941 7,177 8,499
APIs 12,534 16,517 17,292 18,621 19,427 16,214 20,698 22,826 24,502
Synthesis and ingredients 732 1,300 1,627 2,069 2,947 3,850 4,477 5,279 6,294
Formulations — — — 89 546 8,253 13,019 14,781 17,912
Total revenues 13,266 17,817 18,919 20,779 22,920 28,317 38,194 42,886 48,708
As % of revenues
Anti-virals 83.0 81.9 77.8 73.7 66.1 38.4 32.4 30.5 27.1
Oncology 9.5 7.9 5.7 8.0 9.5 7.4 6.2 6.0 5.8
Other APIs 2.0 2.9 7.9 8.0 9.2 11.5 15.6 16.7 17.4
APIs 94.5 92.7 91.4 89.6 84.8 57.3 54.2 53.2 50.3
Synthesis and ingredients 5.5 7.3 8.6 10.0 12.9 13.6 11.7 12.3 12.9
Formulations — — — 0.4 2.4 29.1 34.1 34.5 36.8
Total revenues 100 100 100 100 100 100 100 100 100
yoy growth (%)
Anti-virals 18.3 32.6 0.9 4.0 (1.1) (28.3) 14.1 5.5 0.9
Oncology 16.6 12.0 (24.1) 54.3 31.8 (3.5) 12.3 9.0 9.0
Other APIs (49.3) 93.6 191.8 10.5 26.9 54.5 83.1 20.8 18.4
APIs 14.9 31.8 4.7 7.7 4.3 (16.5) 27.7 10.3 7.3
Synthesis and ingredients 266.2 77.6 25.1 27.2 42.4 30.6 16.3 17.9 19.2
Formulations NM 1,411.5 57.8 13.5 21.2
Total revenues 15.6 34.3 6.2 9.8 10.3 23.5 34.9 12.3 13.6

Laurus Labs Pharmaceuticals
Exhibit 4: Laurus – profit and loss, balance sheet, cash flow model
2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E

Net revenues 13,266 18,110 19,315 20,690 22,919 28,317 38,194 42,886 48,708
Gross profit 4,982 8,028 9,348 10,053 10,563 14,183 20,343 21,887 25,164
Adjusted EBITDA 2,002 3,622 4,076 4,133 3,560 5,645 9,903 10,350 12,203
Depreciation & amortisation (615) (864) (1,060) (1,255) (1,642) (1,873) (1,993) (2,218) (2,443)
EBIT 1,387 2,758 3,017 2,879 1,918 3,773 7,910 8,132 9,759
Net interest (721) (1,067) (665) (505) (720) (837) (331) (460) (405)
Profit before tax 666 1,690 2,352 2,374 1,198 2,936 7,578 7,672 9,354
Tax & deferred Tax 16 (349) (439) (698) (260) (383) (1,743) (1,764) (2,338)
Minority interest 2 (4) (11) — — — — — —
Net income (reported) 684 1,337 1,903 1,676 938 2,553 5,835 5,907 7,015
EPS (FD) (reported) (Rs) 7.7 13.6 18.0 15.9 8.9 23.9 54.6 55.3 65.6
Balance sheet
Cash & equivalents 589 288 105 31 30 17 2,735 4,827 9,074
Debtors 2,851 4,449 5,676 5,706 7,099 7,914 10,674 11,986 13,613
Other current assets 4,871 5,291 5,617 6,739 7,500 10,189 12,569 14,585 16,215
Current assets 8,311 10,027 11,398 12,476 14,630 18,121 25,979 31,398 38,902
Fixed assets (incl. goodwill) 9,107 10,906 13,732 16,440 17,387 17,506 19,013 19,795 20,351
Other non-current assets 1,465 1,302 1,404 1,252 1,295 1,876 1,876 1,876 1,876
Total assets 18,883 22,235 26,534 30,167 33,312 37,503 46,868 53,069 61,130
Short-term loans 4,316 4,814 6,442 8,382 8,481 8,918 8,918 8,918 8,918
Creditors and other liabilities 2,851 4,023 4,820 4,687 5,758 8,006 9,185 10,479 11,525
Current liabilities 7,167 8,837 11,262 13,069 14,239 16,924 18,103 19,397 20,443
Long-term loans 3,895 4,597 1,246 1,417 2,587 1,650 4,000 3,000 3,000
Other liabilities (incl. deferred) 601 232 722 855 906 1,232 1,232 1,232 1,232
Total liabilities 11,662 13,667 13,230 15,341 17,732 19,805 23,335 23,629 24,675
Equity (inc. minority interest) 7,221 8,568 13,304 14,826 15,580 17,698 23,533 29,440 36,456
Total equity and liabilities 18,883 22,235 26,534 30,167 33,312 37,503 46,868 53,069 61,130
Cash flow
CF from operations pre WC 1,860 3,409 3,844 3,920 3,497 5,472 8,410 8,836 10,114
Working capital (2,507) (1,476) (525) (495) (520) (1,998) (3,961) (2,034) (2,211)
Capex (3,831) (3,370) (2,775) (3,911) (2,543) (2,222) (3,500) (3,000) (3,000)
FCF (4,478) (1,437) 545 (486) 434 1,252 949 3,802 4,903
Ratios
EBITDA margin (%) 15.1 20.0 21.1 20.0 15.5 19.9 25.9 24.1 25.1
RoE (%) 9.5 15.6 14.3 11.3 6.0 14.4 24.8 20.1 19.2
RoCE (%) 9.3 15.6 14.4 11.7 7.2 13.4 23.5 22.3 24.8
Net debt to equity (X) 1.1 1.1 0.6 0.7 0.7 0.6 0.4 0.2 0.1

ADD
Ujjivan Small Finance Bank (UJJIVANS)
Banks AUGUST 01, 2020
One notch lower. We downgrade Ujjivan SFB a notch to ADD from BUY (FV: Rs39 CMP (`): 34
from Rs37 earlier) as strong returns since the upgrade in May do not leave enough
upside. While business normalization continues and the nature of the business offers Fair Value (`): 39
faster recovery, we would be a little guarded as business-as-usual collections still remain BSE-30: 37,607
further away. The medium to long-term trajectory remains comfortable with an
improving deposit mix, strong capitalization and diversifying loan book. We maintain a
positive view on Ujjivan Financial Services with a BUY rating, revise FV to Rs345.
Ujjivan Small Finance Bank

Mcap (bn) (Rs/US$) 60/0.8 EPS growth (%) 34.2 (4.7) (2.9) QUICK NUMBERS
ADTV-3M (mn) (Rs/US$) 0/0 P/E (X) 18.5 19.4 20.0
Shareholding pattern (%) P/B (X) 2.0 2.0 1.9  NII growth of 30%
Promoters 83.3 BVPS (Rs) 17.2 17.1 18.3
yoy; PPoP growth of
FIIs 5.3 RoE (%) 13.6 9.8 8.9
MFs/BFIs 0.8/0.1 Div. yield (%) 1.1 1.0 1.0 33% yoy
Price performance (%) 1M 3M 12M NII (Rs bn) 16 19 21
Absolute 15 0 0 PPOP (Rs bn) 6 8 8  47% of AUM under
moratorium
Provisions dent earning; stable operating performance  Downgrade Ujjivan

Ujjivan SFB reported ~40% yoy decline in earnings on higher-than-expected loan-loss provisions SFB to ADD from
(up ~7X yoy) while operating performance was healthy with 33% yoy PPOP growth. Core BUY
operating performance was strong under the circumstances with 2% qoq AUM growth, ~20
bps qoq decline in cost of funds (qoq NIM decline due to excess liquidity). Deposit momentum
continued with ~40% yoy growth and stable CASA ratio at 15%. Business is yet to normalize
from a growth standpoint as collections are taking precedence currently and July disbursements
are ~35% of pre-Covid levels.
Credit cost outlook still unclear as moratorium approaches its end
Ujjivan SFB reported the trend on collection ratio to give a perspective of the underlying
improvement it is witnessing as the lockdown is gradually being lifted across geographies.
Collection rates on the overall book improved to ~60% in July compared to ~15% in April as the
moratorium book declined to 47% in June from 80% in May. The bank has ~2.5% of provisions
on the AUM. Given the nature of the book and customer segment, the bank needs to see
collection rates improve to 90%+ levels by the end of the moratorium and pre-Covid levels by Abhijeet Sakhare
the end of the year. The operationally intensive nature of collections in the context of further
lockdowns and recent floods in home states add to credit risks over the near to medium term. M B Mahesh, CFA
Downgrade Ujjivan SFB to ADD; risk-reward better with holdco

Nischint Chawathe
We downgrade Ujjivan SFB to ADD from BUY and revise FV to Rs39 (from Rs37 earlier) after the
strong stock return following the upgrade in May. Incrementally, pace of recovery until the end Ashlesh Sonje
of the moratorium and amount of credit cost burden on the P&L before reaching a business-as-
usual environment, will have greater bearing on valuations. Our ADD rating is driven by the Dipanjan Ghosh
bank’s ability to survive adverse scenarios given diversified geographical presence, very strong
capital levels and improvement in liability profile.
We value Ujjivan SFB at 2X book and 18X June 2022E EPS with RoEs of ~15% in the medium-
term. We value the holding company’s stake of 83% in the bank for Ujjivan at Rs345.
The holding company is trading at a discount of ~50% of current market price (~45% to our
fair value). kspcg.research@kotak.com
Contact: +91 22 6218 6427
Ujjivan Small Finance Bank Banks
Exhibit 1: Ujjivan Small Finance Bank – quarterly results (IGAAP)

(% change) (% change)
1QFY21 1QFY21E 1QFY20 4QFY20 1QFY21E 1QFY20 4QFY20 2021E 2020E (% chg.) 2022E
Income statement (Rs mn)
Interest income 7,463 7,454 6,054 7,375 0 23 1 30,737 26,991 14 32,974
Interest expense 2,883 2,768 2,529 2,709 4 14 6 11,401 10,700 7 11,954
Net interest income 4,580 4,686 3,525 4,666 (2) 30 (2) 19,335 16,291 19 21,020
Other income 287 601 1,001 722 (52) (71) (60) 2,606 3,222 (19) 3,233
Total income 4,867 5,287 4,526 5,388 (8) 8 (10) 21,942 19,513 12 24,253
Operating expenses 2,720 3,438 2,914 3,482 (21) (7) (22) 13,614 13,186 3 16,080
Staff cost 1,858 1,881 1,594 1,849 (1) 17 0 8,119 7,185 13 9,379
Other costs 863 1,557 1,320 1,633 (45) (35) (47) 5,495 6,001 (8) 6,702
Operating profit 2,147 1,849 1,613 1,906 16 33 13 8,328 6,327 32 8,172
Provisions 1,403 846 188 969 66 647 45 3,942 1,710 131 3,906
PBT 744 1,003 1,425 937 (26) (48) (21) 4,385 4,617 (5) 4,266
Tax 197 261 480 206 (24) (59) (4) 1,140 1,221 (7) 1,109
PAT 547 742 945 732 (26) (42) (25) 3,245 3,397 (4) 3,157
Tax rate (%) 26 26 34 22 26 26 26
Assets under management (Rs mn)
AUM 143,660 135,505 117,830 141,530 6 22 2 145,559 141,530 3 165,309
Microfinance 94,870 86,430 93,110 10 2
Micro individual loan 14,810 9,580 14,460 55 2
MSE 10,010 6,860 9,800 46 2
Housing 15,490 10,070 15,240 54 2
Others 8,480 4,890 8,920 73 (5)
Disbursement (Rs mn)
Net disbursements 4,740 29,590 32,540 (84) (85)
Microfinance 3,230 21,670 23,380 (85) (86)
Micro individual loan 560 2,440 4,050 (77) (86)
MSE 100 1,410 1,140 (93) (91)
Housing 410 2,050 1,870 (80) (78)
Others 440 2,020 2,100 (78) (79)
Deposits (Rs mn)
Total deposits 110,570 112,117 79,568 107,805 (1) 39 3 130,174 107,805 21 164,477
CASA 15,680 8,270 14,590 90 7 19,570 14,590 34 27,194
CASA ratio (%) 14.2 10.4 13.5 379 bps 65 bps 15.0 13.5 150 bps 16.5
Asset quality
Gross NPL (Rs mn) (90 days) 1,398 958 1,371 46 2 5,617 1,371 310 7,073
Gross NPL (%) 1.0 0.8 1.0 17 bps 0 bps 3.9 1.0 289 bps 4.3
Net NPL (Rs mn) (90 days) 251 297 275 (15) (9) 4,021 275 1,363 4,311
Net NPL (%) 0.2 0.3 0.2 -12 bps -2 bps 2.8 0.20 257 bps 2.6
PCR (calculated) 82.0 69.0 80.0 1305 bps 209 bps
PAR>0 (%) 1.8 — 1.6 180 bps 20 bps
Yield on advances (on-book) 19.6 20.7 20.1 -110 bps -54 bps 20.2 20.7 -57 bps 19.6
Cost of borrowings 7.6 8.6 7.6 -101 bps 1 bps 7.6 8.1 -48 bps 7.1
NIM 10.0 10.5 10.8 -47 bps -79 bps 10.7 10.5 15 bps 10.4
Cost to income 55.9 64.4 64.6 -848 bps -874 bps 62.0 67.6 -553 bps 66.3
Cost to average AUM 7.6 10.2 10.0 -258 bps -240 bps 9.5 10.5 -98 bps 10.3
CAR 28.7 19.0 28.8 970 bps -10 bps 0 bps
Tier I 27.8 18.4 28.0 940 bps -20 bps 0 bps
Other key parameters (#)
Branches 575 524 575 10 -
Employees 17,370 15,626 17,841 11 (3) 18,841 17,841 6 20,341

Banks Ujjivan Small Finance Bank
The holding company discount has moved back to previous levels

Post SFB’s listing, we saw a brief period where the discount to the bank started to narrow
but in the post Covid environment, we have again seen this discount start to expand. We
maintain our view that this discount should come off. Our discussion with investors suggests
that the holding company discount is primarily on account of the following concerns:
 Lack of visibility of the merger with the promoter company. While we don’t
disagree with this concern, we are not too worried on the same as we believe that this is
likely to happen at some point in the near future.
 Leakage in value can be high. We note that the leakage in value is primarily on
account of any taxes. At this point, we don’t see it as a big concern for a few reasons. (1)
Dividends declared by the bank are not taxed again at the promoter level as long as the
dividends declared by the parent are higher while the stake in the bank is greater than
50%. The holding company has negligible business operations and hence, the dividends
would be mostly passed to the shareholder. Value loss, if any, would be negligible. Note
that the dividend distribution tax has been removed in the current budget. (2) The issue is
a bit more acute when the holding in the bank is below 50%. Here again, we think, that
our initial hypothesis will play out wherein the bank would look to merge at the earliest.
Hence, the loss, if any is likely to be lower.
 Promoter is fully invested in the bank and no other line of businesses which can
result in commingling of cash flows. Note that the promoter entity is not engaged in
other forms of business. Hence, the interest of the shareholder of the bank and the
holding company is similar. The issue of holding company discount is a lot more serious
when the holding company has multiples lines of business and investors don’t get full
access to cash flows from the subsidiary.
 Indirect rather than direct control of the bank. Investors have argued that the
shareholders in the holding company don’t have the same degree of control as
shareholders of the bank. While we agree to this, we do need to point out that the
promoter is engaged and aligned to the interest of the bank.
Exhibit 2: Ujjivan Financial Services trades at a significant holding company discount

Market-implied holding company discount for Ujjivan Financial Services, December 2019 – July 2020 (%)
65
58
51
44
37
30
21-Jan-20
14-Jan-20
28-Jan-20
12-May-20
26-May-20
19-May-20
2-Jun-20
9-Jun-20
7-Jan-20
17-Dec-19
24-Dec-19
31-Dec-19
5-May-20
14-Jul-20
21-Jul-20
28-Jul-20
3-Mar-20
17-Mar-20
10-Mar-20
24-Mar-20
31-Mar-20
7-Apr-20
4-Feb-20
16-Jun-20
7-Jul-20
21-Apr-20
23-Jun-20
30-Jun-20
14-Apr-20
28-Apr-20
11-Feb-20
25-Feb-20
18-Feb-20

Valuation is lot more attractive at the holding company level

On the basis of our fair value of the bank, we are valuing the stake of the listed holding
company, Ujjivan Financial Services. We value the ~83% stake in the bank with a holding
company discount of 25%. Our fair value comes to Rs345/share (from Rs330 earlier). Note
that there are differences in accounting between the two and hence, the financial
statements are strictly not comparable. The parent company has already moved into Ind-AS
while the subsidiary company, the SFB is still under I-GAAP.
Exhibit 3: We prefer to play through Ujjivan Financial Services than Ujjivan SFB at this point
Ujjivan Financial Services valuation, March fiscal year-ends, 2022-2023 (%)
KIE estimates
2022 2023
RGM based fair value per share for SFB (Rs) 37 43
Number of shares (mn) 1,728 1,728
RGM based fair value for SFB (Rs mn) 64,433 73,709
Adj. book value per share for SFB (Rs) 18 22
Target multiple for SFB (X) 2.0 2.0
Holding company's stake in SFB (%) 83 83
Fair value of holding company's stake in SFB (Rs mn) 53,686 61,414
Target holding company discount (%) 25.0 25.0
Fair value of holding company (Rs mn) 40,264 46,061
Holding company NOSH 121.2 121.2
Fair value per share of holding company (Rs) 332 380
Current market price of holding company (Rs) 236 236
Upside to current maret price (%) 41 61
Sharp deceleration in loan growth
 AUM growth at ~22% yoy in 1QFY21. AUM growth has fallen sharply reflecting a
slowdown in disbursements and shorter tenor of the book. AUM grew 22% on yoy and
~2% on qoq basis. Microfinance loans comprising c.70% of loans grew 10% yoy. Other
segments such as micro individual loans, MSME and housing grew by c.50% yoy off a
low base. Disbursements declined c.90% yoy across the board reflecting the impact of
the lockdown across several parts of the country.
 The bank is taking a cautious stance of starting disbursements again. First quarter
disbursements are towards the existing good quality customers and these customers are
not under moratorium currently.
The company has piloted and intends to roll out digital disbursement products to existing
customers including ‘loan-on-phone’. The company also intends to extend the benefit of
the government’s relief package to its MSE and affordable housing customers after
evaluating the details of the package.
 Continuous focus on geographic diversification. The share of the top four states
(Karnataka, Tamil Nadu, West Bengal and Maharashtra) stood at ~55% of AUM as of
1QFY21, however, maximum concentration from a single state is not too high (15.8% for
Tamil Nadu). The company is focused on diversification and has been increasing the share
of newer markets including UP, Bihar, Haryana, Rajasthan and Gujarat.

Exhibit 4: AUM growth has moderated to ~22% yoy

AUM and growth, March fiscal year-ends, 1QFY19-1QFY21
(Rs bn) AUM (LHS) AUM growth (RHS) (%)

150 70
54.7
120 51.3 56
46.2 45.7
90 42
31.8
28.1
24.7
60 21.9 28
20.6
30 14
77.9 83.2 93.5 110.5 117.8 128.6 136.2 141.5 143.7

0 0
1QFY19
4QFY19
1QFY20
4QFY20
1QFY21
2QFY19
3QFY19
2QFY20
3QFY20
Exhibit 5: Share of non-microfinance loans continue to increase

Loan mix, March fiscal year-end, 1QFY20-1QFY21 (%)
1QFY20 4QFY20 1QFY21 YoY (%) QoQ (%)

Loan mix (Rs mn)
AUM 117,830 141,530 143,660 22 2
Microfinance 86,430 93,110 94,870 10 2
Micro individual loan 9,580 14,460 14,810 55 2
MSE 6,860 9,800 10,010 46 2
Housing 10,070 15,240 15,490 54 2
Others 4,890 8,920 8,480 73 (5)
Loan mix (%)
Microfinance 73 66 66
Micro individual loan 8 10 10
MSE 6 7 7
Housing 9 11 11
Others 4 6 6
Disbursement mix (Rs mn)
Total disbursements 29,590 32,540 4,740 (84) (85)
Microfinance 21,670 23,380 3,230 (85) (86)
Micro individual loan 2,440 4,050 560 (77) (86)
MSE 1,410 1,140 100 (93) (91)
Housing 2,050 1,870 410 (80) (78)
Others 2,020 2,100 440 (78) (79)
Disbursements mix (%)
Microfinance 73 72 68
Micro individual loan 8 12 12
MSE 5 4 2
Housing 7 6 9
Others 7 6 9

Exhibit 6: We expect UJFS to resume moderate AUM growth in FY22

AUM and yoy growth, March fiscal year-ends, 2013-2023E
(Rs bn) AUM (LHS) YoY (RHS) (%)

275 102 110
220 196 88
65 165
60
165 142 66
146
44 46
110
110 44
76 28
64
54 18 18 19
55 33 14 22
11 16 3
- -
2020E
2021E
2022E
2023E
2013
2014
2015
2016
2017
2018
2019
Exhibit 7: Micro-banking share of AUM has been on a gradual decline to ~66% as of 4QFY20
AUM mix, March fiscal year-ends, 1QFY19-1QFY21 (%)
Microfinance Micro individual loan MSE Housing Others

1 1 2 4 4 6 6 6 6
100
5 6 7
4 4 8 9 9
5 10 11 11
9 8 5 6
80 8 8 6 7 7 7
8
8 9 10 10
60
40 81 81 78 75 73 70 68 66 66
20
0
1QFY19
3QFY19
4QFY19
2QFY20
4QFY20
2QFY19
1QFY20
3QFY20
1QFY21

Exhibit 8: Newer segments to drive growth for Ujjivan Exhibit 9: Share of MFI to decrease gradually
AUM mix, March fiscal year-ends, 2013-2023E (Rs bn) AUM mix, March fiscal year-ends, 2013-2022E (%)
Microfinance Micro-individual loans Microfinance Micro-individual loans Housing Wholesale

Housing Wholesale 100 0 0 0
4 7 5 2
1 4
200 10 3 8 11 12
8 5 14 16
32 7 8
80 8 8
160
24 16
18 13
15 60
120 11
10
8 96 93 98 93
6 90 87 86
80 40 80 79 77
3 146 74
2
1 127
43 108 115
40 94 20
3 62 70
0 1 47
29
11 15
- 0
2020E
2021E
2022E
2023E
2013
2014
2015
2016
2017
2018
2019
2020E
2021E
2022E
2023E
2013
2014
2015
2016
2017
2018
2019
Notes: Notes:
(1) Individual loans include MSE, micro-individual and other loans. (1) Individual loans include MSE, micro-individual and other loans.
Source: Company, Kotak Institutional Equities estimates Source: Company, Kotak Institutional Equities estimates
Strong headline asset quality numbers; ~45% of the loan book under moratorium
 Gross NPL and net NPL ratio remained flat at ~1% and 0.2% in 1QFY21. PAR>0 declined
20bps qoq to 1.8%. The moratorium book has declined to ~45% as of June end from
80% as of May end. The bank has created further provisions of Rs1.3bn in 1Q which
takes the overall provisions to Rs3.7bn i.e. about 2.5% of AUM.
 Collection efficiency as defined by collections for the period as against dues for the period
improved to ~60% in July from ~15% in May. We note than improvement in July versus
June is not as drastic indicating continuing challenges due to lockdowns and challenges
on the ground.
 We remain cautious on the near-term outlook on credit costs given the ask rate for
collections to improve back to business-as-usual. We are building in credit costs of ~2.5%
for FY2021-22E to account for the impact of the pandemic. This compares to ~1.4% in
FY2020.

Exhibit 10: About 50% of loans are under moratorium as of June end
Source: Company
Exhibit 11: Collection efficiency has improved in second moratorium

Collection efficiency (%)
March April May June July

Microbanking 93% 2% 14% 53% 58%
MSE 82% 19% 17% 46% 47%
Affordable housing 94% 32% 33% 52% 68%
Personal loan 91% 44% 38% 62% 60%
Vehicle loan 95% 33% 23% 67% 78%
FIG lending 100% 77% 67% 86% 97%
Total 93% 5% 16% 54% 59%
Source: Company

Exhibit 12: PAR was flat qoq

PAR, March fiscal year-end, 4QFY17-1QFY21 (%)
9.9 PAR>0
10.0
8.8
8.0
6.7
6.0 5.4
4.0
4.0 3.3 3.3
2.4 2.1
1.8 2 1.8
1.6 1.6
2.0
0.0
4QFY17
3QFY18
4QFY18
3QFY19
4QFY19
3QFY20
4QFY20
1QFY18
2QFY18
1QFY19
2QFY19
1QFY20
2QFY20
1QFY21
Exhibit 13: We expect credit costs to remain high over the next two years
Gross NPL and credit cost, March fiscal year-end, 2013-2023E (%)
(%) GNPL (LHS) Credit cost (RHS) (%)

5.5 5.0
4.7
4.4 4.0
2.8
3.3 2.5 3.0
2.2 2.0
1.4
1.2 1.2
0.8 0.9
1.1 0.6 0.6 1.0
0.5
0.1 0.1 0.1 0.2 0.0 0.7 0.3 0.2 2.8 2.6 1.0
0.0 0.0
2020E
2021E
2022E
2023E
2013
2014
2015
2016
2017
2018
2019
Margin declines on higher liquidity; cost of funds decline

USFB has a superior NIM profile at >10%. A large part of this solid NIM profile is on account
of its higher yielding loan portfolio. Steady decline in cost of funds in the past few quarters
has led to an expansion in NIM for the bank. 1QFY21 NIM declined ~100bps qoq to 10.2%
due to higher liquidity on balance sheet. Lending yields were broadly unchanged qoq. Cost
of funds declined ~20bps qoq to 7.7% after continuously having fallen over the past few
quarters. The decline in the cost of funds was driven in part by a reduction in deposit rates
and lower cost refinance from SIDBI.

Exhibit 14: Margin reduction led by higher liquidity

Funding cost, March fiscal year-ends, 2QFY19-1QFY21 (%)
Yield Cost of funds (LHS) NIM (RHS)

22.0 12.0
17.6 11.2 11.4

11.0 11.0
10.9
10.8 10.8
13.2 10.5 10.8
10.2
8.5 8.5 8.5 8.5 8.4 8.1
8.8 7.9 7.7 10.2
4.4 9.6
20.0 21.0 20.0 20.0 20.0 20.0 20.0 19.0

0.0 9.0
2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21
Overall deposit growth momentum continues

Ujjivan reported deposit growth of ~40% yoy and 3% qoq in 1QFY21. Deposit book seems
to have stabilized after the Yes Bank moratorium event. Share of retail deposits has
remained stable at 45%. The bank tapped the low cost refinancing window from NHB and
NABARD in 1Q. Investments made by the bank in building its liability branches resulted in a
rapid increase in the share of deposits in the liability mix in recent quarters.
Exhibit 15: Deposits constitute ~70% of overall funds

Borrowings mix, March fiscal year-ends, 1QFY19-1QFY21 (%)
CASA Retail FD & RD Institutional TD + CD Refinance Others

100 3 1 3
8 6 6 5
13
20 21
23 21 26
80 31 29
34
39
31
60
43 40
43 37
37
40 39
37
39 33
20 23 25 23 24
17 21
15
11
7 9 9 10 10
3 4 6 7 7
0
1QFY19
2QFY19
4QFY19
2QFY20
4QFY20
1QFY21
3QFY19
1QFY20
3QFY20

Exhibit 16: Strong growth in customer base

Customer break-up, March fiscal year-ends, 3QFY19-1QFY21 (# mn)
3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21

Active asset customers 2.2 1.9 1.8 1.6 1.3 1.0 0.7
Liability customers 1.8 2.7 2.9 3.3 3.8 4.2 4.8
Liability only customers 0.5 0.6 0.5 0.6 0.8 0.9 1.2
Total active customers 4.2 4.6 4.7 4.9 5.1 5.3 5.5
Exhibit 17: Share of deposits from individuals is low at ~458%

Deposit mix, March fiscal year-ends, 1QFY2 (%)
Geography-wise Region-wise Client segment-wise
Governmen TASC, 5
East, 15 Semi-urban, Rural, 1
t, 4
15 Corporate,
7
South, 30
Metro, 42 Individuals,
45
West, 20
Banks, 39
Urban, 42
North, 35
Other highlights
 Lower growth in non-interest income led by weaker disbursements. The bank

generates non-interest income through liability and asset related fees (disbursements)
along with bancassurance and sales of priority sector lending certificates. Non-interest
income growth declined sharply by ~70% yoy led by lower growth in loan processing
fees as disbursements was down ~80% yoy in 1QFY21. We build lower non-interest
income growth of ~5% in FY2021. In the medium term, non-interest income growth will
be driven by disbursement growth, rise in fee income from sale of third party products
and PSLC income. Additionally liability fees will pick up as the franchise matures. We
forecast 25% CAGR in non-interest income over FY2022-23E.
 Tight cost control led by lower non-staff costs. Operating expenses declined 7%
yoy led by non-staff costs decline of 35% yoy. Cost-income ratio declined sharply
to 56% from 65% qoq. Part of the non-staff cost decline was driven by rent
negotiations. The bank had seen a sharp rise in its cost structure since inception
primarily on account of higher investments required to transition its asset centers to full-
fledged banking outlets. As branch expansion and investments in technology and people
started to moderate cost ratios witnessed an improvement from ~75% in FY2019 to
~67% in FY2020.
 Capital adequacy ratio at comfortable levels. USFB is reasonably well capitalized from
a regulatory perspective with total CAR at 29% post the IPO, of which the Tier-1 ratio is
at 28% as of 1QFY21. As per the current regulations, the bank has to maintain a
minimum capital adequacy ratio of 15% and a leverage ratio of 4.5%.

Exhibit 18: Cost-to-income ratio has declined in 1QFY21

Cost-to-income ratio and growth in operating expenses, March fiscal year-ends, 1QFY19-1QFY21 (#)
(Rs mn) Cost-income ratio Cost growth (RHS) (%)

80 72 84
70
72 53
50 56
37 38 40
64 36 42
56 28
15
14
48
(7) 0
72 77 78 78 64 69 71 65 56
40 (14)
3QFY19
4QFY19
3QFY20
4QFY20
1QFY19
2QFY19
1QFY20
2QFY20
1QFY21
Exhibit 19: Branch expansion largely complete Exhibit 20: Employee addition remains strong
Number of banking outlets, March fiscal year-ends, 2018-1QFY21 Number of employees, March fiscal year-ends, 2018-1QFY21
600 Number of employees (LHS) yoy growth (%, RHS)

574 575 575
20,000 35
31
560 552
27 27
17,000 24 28
524 524
520 21
14,000 21
480 464
11,000 11 11 14
440
11,242
14,752
17,783
17,841
17,370
16,776
15,626
8,000 7
400
5,000 -
1QFY20
2QFY20
3QFY20
4QFY20
1QFY21
2018
2019
2QFY20
3QFY20
1QFY21
1QFY20
4QFY20
2018
2019

Exhibit 21: Change in estimates for Ujjivan SFB

Old and new estimates, March fiscal year-ends, 2021-23E (Rs mn)
New estimates Old estimates Change (%)

2021E 2022E 2023E 2021E 2022E 2021E 2022E
AUM 145,559 165,309 196,238 143,407 162,776 2 2
Net interest income 19,335 21,020 24,728 19,316 20,831 0 1
NIM (%) 10.7 10.4 10.1 10.8 10.6
Non-interest income 2,606 3,233 3,884 3,580 4,451 (27) (27)
Operating cost 13,614 16,080 18,709 14,860 17,037 (8) (6)
Staff cost 8,119 9,379 10,405 8,873 9,724 (9) (4)
Non-staff cost 5,495 6,702 8,304 5,988 7,312 (8) (8)
Provisions 3,932 3,886 2,169 3,548 3,827 11 2
Profit before tax 4,385 4,266 7,704 4,478 4,397 (2) (3)
Tax 1,140 1,109 2,003 1,164 1,143 (2) (3)
Profit after tax 3,245 3,157 5,701 3,314 3,254 (2) (3)

Exhibit 22: Ujjivan SFB: Key growth rates and ratios

March fiscal year-end, 2018-2023E (%)
2018 2019 2020E 2021E 2022E 2023E

Growth in key parameters
Profit and loss statement
Interest income 576.7 24.8 47.4 13.9 7.3 16.6
Interest expense 454.9 19.5 47.5 6.6 4.8 14.8
Other income 1,111.7 84.8 56.4 (19.1) 24.0 20.1
Fee income 648.0 76.1 45.0 (25.0) 25.0 20.0
Net total income 733.0 35.0 48.7 12.4 10.5 18.0
Provisioning expenses 6,915.1 (86.9) 321.3 130.0 (1.2) (44.2)
Operating expneses 486.0 53.7 31.4 3.2 18.1 16.3
Staff expenses 610.4 43.9 38.5 13.0 15.5 10.9
Admin and other operating expenses 381.9 65.7 23.8 (8.4) 22.0 23.9
Depreciation expenses 711.2 46.5 (73.5) 0.0 8.4 13.2
PBT 883.3 2,933.0 72.0 (5.0) (2.7) 80.6
PAT 13,640.0 2,799.9 70.5 (4.5) (2.7) 80.6
Balance sheet
Loans and advances 25.2 43.8 33.1 3.6 13.6 18.7
Investments (14.8) 23.9 57.0 13.1 60.1 36.7
Fixed assets 41.9 43.4 5.6 (10.2) 13.5 13.4
Cash and bank balances (35.1) 121.2 22.7 (12.8) 9.8 11.2
Other assets (7.8) 34.5 15.3 — — —
Total assets 12.2 45.1 34.0 3.4 19.7 21.4
Borrowings (38.8) 8.1 (5.1) (48.8) — —
Deposit 1,727.7 95.6 46.1 20.8 26.4 26.4
Total liabilities 15.1 52.3 27.7 2.6 22.6 23.3
Share capital — — 20.0 — — —
Reserves and surplus 17,150.0 2,502.8 601.3 18.6 15.2 24.5
Shareholders funds 0.5 11.9 84.5 7.8 7.1 12.2
Key ratios (%)
Cost of funds 8.6 7.5 8.1 7.6 7.1 6.6
Yield on loans 19.9 19.3 20.7 20.2 19.6 19.3
Spread 8.6 9.0 9.3 9.4 9.2 9.0
NIM 10.1 10.0 10.5 10.7 10.4 10.1
Cost-income ratio 67.1 76.5 67.6 62.0 66.3 65.4
Operating expense / assets 7.3 8.6 8.2 7.3 7.7 7.4
ROA decomposition - % of avg. assets
Other income 1.2 1.8 2.0 1.4 1.5 1.5
Loan loss provisions 3.5 0.3 1.1 2.1 1.9 0.9
Employees 4.0 4.5 4.5 4.3 4.5 4.1
Pre -tax pre extraordinary income 0.1 2.3 2.9 2.3 2.0 3.1
(1- tax rate) 77.6 74.2 73.6 74.0 74.0 74.0
ROA 0.1 1.7 2.1 1.7 1.5 2.3
Avg assets/avg equity 5.4 6.7 6.4 5.7 5.9 6.5
ROE 0.4 11.5 13.6 9.8 8.9 14.8

Exhibit 23: Ujjivan SFB: Summarized financial statements

March fiscal year-end, 2018-2023E (Rs mn)
2018 2019 2020E 2021E 2022E 2023E

Profit and loss statement
Interest income 14,679 18,316 26,991 30,737 32,974 38,446
Interest costs 6,069 7,252 10,700 11,401 11,954 13,718
Other income 1,115 2,060 3,222 2,606 3,233 3,884
Net fee income 792 1,395 2,022 1,517 1,896 2,275
Other income 323 665 1,200 1,090 1,337 1,609
Net total income 9,725 13,124 19,513 21,942 24,253 28,612
Provisioning expenses 3,108 406 1,710 3,932 3,886 2,169
Net income (post provisions) 6,617 12,718 17,803 18,009 20,367 26,443
Operating expneses 6,529 10,034 13,186 13,614 16,080 18,709
Staff expenses 3,604 5,188 7,185 8,119 9,379 10,405
Admin and other operating expenses 2,511 4,240 5,840 5,334 6,527 8,107
Depreciation expenses 414 606 161 161 174 197
PBT 88 2,684 4,617 4,385 4,266 7,704
Tax 20 692 1,221 1,140 1,109 2,003
PAT 69 1,992 3,397 3,245 3,157 5,701
Balance sheet
Loans and advances 73,362 105,525 140,436 145,559 165,309 196,238
Investments 12,325 15,266 23,961 27,096 43,382 59,322
Fixed assets 1,983 2,845 3,005 2,698 3,063 3,474
Cash and bank balances 4,948 10,945 13,433 11,716 12,859 14,304
Other assets 2,113 2,842 3,277 3,277 3,277 3,277
Total assets 94,732 137,422 184,112 190,346 227,890 276,614
Liabilities
Borrowings 38,529 41,661 39,533 20,250 20,250 20,250
Deposits 37,725 73,794 107,805 130,174 164,477 207,819
Other liabilities and provisions 2,009 3,771 4,898 5,702 6,668 7,827
Total liabilities 78,262 119,226 152,235 156,127 191,395 235,896
Share capital 14,400 14,400 17,282 17,282 17,282 17,282
Reserves and surplus 69 1,796 12,595 14,937 17,213 21,436
Shareholders funds 14,469 16,196 29,877 32,220 34,495 38,718
Preference capital 2,000 2,000 2,000 2,000 2,000 2,000

BUY
ICICI Bank (ICICIBC)
Banks AUGUST 02, 2020
UPDATE
EWIs signal stable phase. The key readings from the 20F filings: (1) impaired loans in CMP (`): 347
the corporate book decline further but trends marginally weak on the retail side, Fair Value (`): 470
(2) early warning indicators (EWIs), however, are stable and less worrisome given that
BSE-30: 37,607
we have now entered into a post-Covid era and (3) historical trends show much lower
write-off in retail as compared to corporate NPLs. We maintain BUY rating on the bank
with an unchanged FV of Rs470.
ICICI Bank
Mcap (bn) (Rs/US$) 2,246/30.1 EPS growth (%) 134.9 88.0 16.6
Promoters 0.0 BVPS (Rs) 164.9 185.6 204.6  Net NPL in the
FIIs 54.9 RoE (%) 7.7 12.2 12.9
MFs/BFIs 22.4/11.9 Div. yield (%) 0.0 1.3 1.5 corporate book
Price performance (%) 1M 3M 12M NII (Rs bn) 333 355 390 declined ~150 bps
Absolute (1) (9) (18) PPOP (Rs bn) 281 334 321
yoy to 2.2%
 SMA 1-2 is showing

Loan book appears to be well-positioned to ride the Covid apocalypse on a relative basis stable trends with
‘delayed loans’ at
Key takeaways on the bank’s impaired loan portfolio. (1) There was marked reduction in
~1% of loans
corporate NPLs across sectors while net NPLs in this book have declined to 2% of loans from a
peak of 9%. Retail NPL (net) has remained unchanged at 0.6% of loans. (2) Early warning  Working capital
indicators (EWIs) have been stable with ‘delayed loans’ at ~1% of loans. Of this, the 30-90 days
book is ~45% of the
past due is at 0.7% of loans, which is a significant improvement of ~6% delayed payment
overall corporate
during FY2014-16. (3) The corporate loan portfolio has the lowest impaired ratio, including
loan portfolio
EWIs, since this data has been reported. Retail loans have seen marginal deterioration but
nothing meaningful. (4) Better recovery and upgrade ratio in the retail portfolio historically as
compared to corporate loans to augur well in the post-Covid environment.
Working capital and better risk-rated loans take a larger share of loan growth
ICICI Bank reported ~9% yoy loan growth (consolidated) with a larger share of growth coming
from the retail space. Within the corporate portfolio, the growth was slower at ~3% yoy with
working capital loan growth at 8% yoy. Working capital is ~45-50% of the overall corporate
loan book. The investment grade portfolio has grown ~10% yoy while the below investment
grade portfolio declined ~20% yoy. ~70% of the overall fees came from the retail business, of M B Mahesh, CFA
which ~60% came from transaction banking (payment, deposit, etc.).
Nischint Chawathe
Not everything moves in a straight line but the direction looks promising overall
We maintain our BUY rating with an unchanged FV of Rs470, valuing at ~2X book and 15X Abhijeet Sakhare
June 2022E EPS for lower RoEs in the medium term. The key takeaway from the 20F filings on
asset quality trends confirms our hypothesis of the bank’s underwriting. The slippages are not Ashlesh Sonje
too different as compared to the best-in-class players despite FY2020 having two unexpected
slippage from the corporate book. The retail has a larger proportion of secured loan portfolio,
Dipanjan Ghosh
where the impact of moratorium is likely to have a lower credit cost. In short, ICICI Bank has
come into this crisis with a much slower growth and less emphasis on market share, superior
underwriting partly given the challenges faced on the corporate side, and a stronger liability
book that delivers superior NIM. The strong operating profit ratios, value in subsidiaries, and
comfortable CAR should augur well to manage any unexpected stress that is less understood
today. We believe that the credit costs would be closer to the best-in-class players in this cycle. kspcg.research@kotak.com
Contact: +91 22 6218 6427
Banks ICICI Bank
Exhibit 1: A gradual decline in gross NPLs in FY2019

Break up of exposure and gross NPLs across sectors, March fiscal year-ends, 2011-20 (%)
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Retail finance 8.3 6.7 4.6 2.6 1.8 1.7 1.4 1.6 1.6 1.9
Power 0.0 0.1 0.0 0.3 0.3 6.2 20.5 36.8 34.6 24.2
Mining - 0.7 1.0 1.4 2.0 0.9 36.4 85.2 80.2 44.1
Iron and steel 0.1 0.7 1.1 1.9 4.2 24.1 34.3 34.8 23.7 10.4
Construction 1.4 1.5 3.0 5.4 12.9 20.7 35.7 52.6 48.1 53.5
Services - non finance 0.3 0.2 3.8 5.9 9.0 13.0 18.7 23.7 15.9 13.0
Services - finance 0.8 0.8 0.0 0.4 0.4 0.3 - - 0.7 2.2
Other infrastructure 0.0 0.1 0.1 3.6 8.7 10.8 9.6 12.4 9.4 11.2
Crude petrol/others 0.0 3.6 2.6 2.1 2.0 2.8 4.4 15.2 13.4 16.8
Electronics and eng`ing 0.6 2.8 4.1 3.5 10.8 4.6 3.3 15.1 14.1 17.1
Shipping 5.1 1.0 0.8 1.1 22.2 31.8 45.4 44.6 46.0 42.0
Food and beverages 5.1 4.7 5.0 8.7 7.9 8.1 9.4 11.7 25.7 19.1
Manufacturing products (excluding metal)
Wholesale/retail trade 5.1 2.1 5.9 4.9 3.5 4.0 5.3 4.2 5.3 10.0
Cement 1.4 - - 0.4 0.3 - 70.7 - - -
Chemicals and fertilizers 5.9 3.5 4.1 4.5 5.7 4.6 2.1 2.4 4.3 4.5
Metal & products 2.9 2.0 2.1 1.4 1.5 1.8 1.1 2.0 2.1 1.8
Other industries
Total 4.2 3.6 3.2 3.1 3.9 5.8 8.6 9.7 7.2 6.0
Exhibit 2: A gradual decline in gross NPLs in FY2019

Break up of exposure and net NPLs across sectors, March fiscal year-ends, 2012-20 (%)
2012 2013 2014 2015 2016 2017 2018 2019 2020
Corporate
Term loans 0.7 0.7 1.4 2.3 4.7 11.0 11.8 5.2 3.1
Working capital facilities 1.6 2.0 1.7 3.1 4.1 4.9 5.5 1.8 1.2
Total corporate 0.8 1.0 1.5 2.5 4.5 8.8 9.1 3.7 2.2
Retail
Mortgage loans 0.9 0.6 0.4 0.4 0.4 0.4 0.6 0.5 0.6
Other secured loans 1.3 0.6 0.7 0.7 0.7 0.6 0.7 1.0 1.6
Credit cards 1.1 0.5 0.7 0.4 0.5 0.5 0.6 0.6 0.7
Other unsecured loans 0.6 0.1 0.2 0.5 0.4 0.2 0.5 0.4 0.5
Total retail 1.0 0.6 0.5 0.5 0.5 0.4 0.6 0.6 0.9
Net NPL 0.9 0.9 1.1 1.7 2.8 5.0 4.9 2.1 1.5

ICICI Bank Banks
Exhibit 3: Nearly all segments of the business is now showing stable performance
Ageing analysis of 20F filings of the overall loan portfolio of the bank, March fiscal year-ends, 2012-20 (%)
2012 2013 2014 2015 2016 2017 2018 2019 2020
All loans
Current 96.8 95.1 95.1 93.3 93.5 94.9 98.5 98.8 99.0
31-60 days 2.0 3.4 3.4 5.7 5.2 2.5 0.9 0.6 0.5
61-90 days 1.0 0.9 0.9 0.7 0.4 1.0 0.2 0.3 0.2
Above 90 days 0.1 0.6 0.6 0.3 0.9 1.6 0.3 0.3 0.3
All delayed 3.2 4.9 4.9 6.7 6.5 5.1 1.5 1.2 1.0
Commercial loans
Current 95.5 92.8 92.8 87.9 87.3 90.6 98.2 99.2 99.9
31-60 days 2.9 4.9 4.9 10.6 10.6 4.4 1.7 0.5 0.1
61-90 days 1.4 1.4 1.4 1.0 0.4 1.5 0.1 0.2 0.0
Above 90 days 0.2 0.9 0.9 0.5 1.7 3.5 0.0 0.0 -
All delayed 4.5 7.2 7.2 12.1 12.7 9.4 1.8 0.8 0.1
Working capital
Current 98.1 95.4 95.4 95.2 93.8 91.9 99.1 99.5 99.7
31-60 days 1.5 3.9 3.9 4.3 4.3 4.4 0.6 0.3 0.2
61-90 days 0.4 0.4 0.4 0.2 0.9 1.9 0.1 0.2 0.0
Above 90 days - 0.4 0.4 0.3 1.0 1.8 0.2 0.0 0.0
All delayed 1.9 4.6 4.6 4.8 6.2 8.1 0.9 0.5 0.3
Mortgage loans
Current 98.6 99.0 99.0 99.4 99.4 99.4 99.4 99.4 99.3
31-60 days 0.7 0.5 0.5 0.3 0.4 0.3 0.4 0.3 0.5
61-90 days 0.6 0.4 0.4 0.2 0.2 0.3 0.2 0.3 0.3
Above 90 days 0.1 0.0 0.0 0.0 0.0 0.0 0.0 - -
All delayed 1.4 1.0 1.0 0.6 0.6 0.6 0.6 0.6 0.7
Other secured loans
Current 98.4 97.6 97.6 97.1 97.9 97.4 96.3 96.0 95.9
31-60 days 0.8 1.2 1.2 1.3 0.9 0.9 1.4 1.3 1.4
61-90 days 0.4 0.8 0.8 0.9 0.5 0.6 0.6 0.6 0.6
Above 90 days 0.4 0.4 0.4 0.7 0.7 1.1 1.7 2.1 2.2
All delayed 1.6 2.4 2.4 2.9 2.1 2.6 3.7 4.0 4.1
Credit cards
Current 97.9 98.1 98.1 98.5 98.5 98.6 98.4 98.0 97.1
31-60 days 1.1 1.4 1.4 1.0 1.1 1.0 1.1 1.3 1.4
61-90 days 1.0 0.5 0.5 0.6 0.4 0.4 0.5 0.7 1.5
Above 90 days - - - - - 0.0 0.0 0.0 0.0
All delayed 2.1 1.9 1.9 1.5 1.5 1.4 1.6 2.0 2.9
Other unsecured loans
Current 99.0 99.7 99.7 99.4 99.4 99.3 99.4 99.4 99.4
31-60 days 0.6 0.2 0.2 0.4 0.4 0.3 0.4 0.4 0.4
61-90 days 0.4 0.1 0.1 0.2 0.2 0.2 0.2 0.2 0.2
Above 90 days 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0
All delayed 1.0 0.3 0.3 0.6 0.6 0.7 0.6 0.6 0.6
Total
Current 96.8 95.1 95.1 93.3 93.5 94.9 98.5 98.8 99.0
31-60 days 2.0 3.4 3.4 5.7 5.2 2.5 0.9 0.6 0.5
61-90 days 1.0 0.9 0.9 0.7 0.4 1.0 0.2 0.3 0.2
Above 90 days 0.1 0.6 0.6 0.3 0.9 1.6 0.3 0.3 0.3
All delayed 3.2 4.9 4.9 6.7 6.5 5.1 1.5 1.2 1.0
Notes:
(a) All loans up to 30 days past due is considered to be current.

Banks ICICI Bank
Exhibit 4: Fresh provisions increased ~100% in FY2009 Exhibit 5: LLP increased to ~2.5% for FY2009-11 for ICICI Bank
Provisions and growth-retail loans, March fiscal year-ends, 2008-20 Loan loss provisions, March fiscal year-ends, 2008-20
3.5 3.3
(Rs bn) Fresh provisions Growth (%)
40 120
106 2.8
94
32 80 2.3
2.1
54 2.1
24 40
33
1.4
17 17 18
1.4 1.1
16 0
-8
0.7 0.7
-30 -35 0.7 0.5
8 -45 -45 -40 0.4 0.4
0.3 0.3 0.3
0 -80 0.0
2008
2010
2011
2012
2013
2014
2015
2016
2017
2019
2008
2009
2010
2011
2012
2013
2015
2016
2017
2018
2020
2009
2018
2020
2014
2019
Source: US GAAP filings, Kotak Institutional Equities Source: US GAAP filings, Kotak Institutional Equities
Exhibit 6: NPLs touched 8% in the previous cycle Exhibit 7: Slippages remained high for FY2008-10
NPL and ratio in retail loans, March fiscal year-ends, 2008-19 Slippages, March fiscal year-ends, 2008-19 (%)
5.0
(Rs bn) Amount (% of loans) (%) 4.5
80 9.0
7.9
7.3 4.0
64 6.5 7.2
5.9
3.0
2.5
48 5.4
4.2
3.9 2.0 1.9 2.0
2.0
32 3.6 1.4
2.3 2.2 1.2
1.61.6 1.8 1.0 1.1 0.9 1.0 1.0
1.3 1.41.2 1.41.4 1.0 0.7
16 1.1 1.8
0 - 0.0
2005
2006
2007
2008
2010
2011
2012
2013
2015
2016
2017
2018
2020
2008
2009
2010
2011
2012
2013
2015
2016
2017
2018
2020
2004
2009
2014
2019
2014
2019

ICICI Bank Banks
Exhibit 8: Fresh provisions peaked in FY2018-19 Exhibit 9: LLP declined to ~4% in FY2020
Provisions and growth-corporate loans, March fiscal year-ends, 2008- Loan loss provisions for corporate loans, March fiscal year-ends, 2008-
20 20
7.0 6.6
(Rs bn) Fresh provisions Growth (%) 6.3
250 120
112 5.6
102 5.6
95
200 80
74
4.2 3.8
150 40
32
2.8
19
2.8
100 1 0
-10
1.5
50 -37-40 1.4 0.8 0.9
0.6 0.5
0.0 0.0 0.0
0 -80 0.0
2011
2012
2013
2014
2016
2017
2018
2019
2008
2010
2011
2012
2013
2015
2016
2017
2018
2020
2015
2020
2009
2014
2019
Exhibit 10: NPLs touched 18% in the previous cycle Exhibit 11: Slippages are coming from high levels
NPL and ratio in corporate loans, March fiscal year-ends, 2008-20 Slippages – corporate loans, March fiscal year-ends, 2008-20 (%)
12.0 11.3
(Rs bn) Amount (% of loans) (%)
600 17.7 20
9.6 9.2
480 14.8 16
13.6
7.2
11.1 5.9
360 12
9.0
8.3
4.8
240 8
5.3 5.4 3.1 3.0 3.1
3.6 1.9
120 2.6 2.72.3 2.6 4 2.4 1.5
2.0 1.1 1.0
0.9
- -
0 0 0.0
2005
2006
2007
2008
2010
2011
2012
2013
2015
2016
2017
2018
2020
2011
2012
2013
2014
2015
2016
2018
2019
2020
2004
2009
2014
2019
2017

Banks ICICI Bank
Exhibit 12: Recovery and upgrade in the retail loans have been quite strong so far while write-offs have been higher in corporate
Break up of exposure and net NPLs across sectors, March fiscal year-ends, 2012-20 (%)
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Retail loans
Opening gross NPL 69,462 71,778 67,356 49,156 32,968 25,504 26,757 28,062 40,483 51,409
Add: Slippages 18,535 18,604 9,927 12,759 13,030 16,979 15,940 28,777 29,181 50,815
Less: 16,219 23,026 28,127 28,947 20,494 15,726 14,635 16,356 18,255 28,313
Upgrade 5,817 4,927 3,995 3,314 4,425 6,323 5,337 4,107 5,386 6,834
Recovery 9,785 11,461 8,793 6,049 7,505 6,626 7,192 8,105 11,224 14,725
Write-off 617 6,638 15,339 19,584 8,564 2,777 2,106 4,144 1,645 6,754
Total 71,778 67,356 49,156 32,968 25,504 26,757 28,062 40,483 51,409 73,911
Ratios (as a share of opening loans)
Slippages 1.9 2.0 1.0 1.1 0.9 1.0 0.7 1.2 1.0 1.4
Reductions (as a share of opening gross NPLs)
Upgrade 8.4 6.9 5.9 6.7 13.4 24.8 19.9 14.6 13.3 13.3
Recovery 14.1 16.0 13.1 12.3 22.8 26.0 26.9 28.9 27.7 28.6
Write-off 0.9 9.2 22.8 39.8 26.0 10.9 7.9 14.8 4.1 13.1
Corporate loans
Opening gross NPL 36,359 39,797 39,768 58,009 90,026 148,366 266,459 430,862 534,841 440,499
Add: Slippages 14,561 17,183 28,992 40,841 77,915 161,423 332,341 267,192 91,612 100,608
Less: 11,123 17,212 10,751 8,824 19,575 43,330 167,938 163,213 185,954 170,725
Upgrade 1,765 3,485 4,083 1,055 1,500 5,181 4,741 34,561 12,882 4,708
Recovery 7,806 7,995 3,947 5,200 7,434 8,727 39,209 39,998 51,372 55,771
Write-off 1,552 5,732 2,721 2,569 10,641 29,422 123,988 88,654 121,700 110,246
Total 39,797 39,768 58,009 90,026 148,366 266,459 430,862 534,841 440,499 370,382
Ratios (as a share of opening loans)
Slippages 1.1 1.0 1.5 1.9 3.1 5.9 11.3 9.2 3.0 3.1
Reductions (as a share of opening gross NPLs)
Upgrade 4.9 8.8 10.3 1.8 1.7 3.5 1.8 8.0 2.4 1.1
Recovery 21.5 20.1 9.9 9.0 8.3 5.9 14.7 9.3 9.6 12.7
Write-off 4.3 14.4 6.8 4.4 11.8 19.8 46.5 20.6 22.8 25.0
Exhibit 13: Retail is dominating the loan book at ~60% while the share of stressed sectors is declining consistently
Break up of loan exposure (gross) across sectors, March fiscal year-ends, 2011-20 (%)
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Retail finance 38.0 39.4 38.1 40.9 43.4 46.8 50.2 54.0 57.8 60.9
Power 4.2 5.1 5.9 6.0 5.8 5.6 5.8 4.8 3.1 2.9
Mining 2.1 2.9 2.5 1.7 1.8 1.6 2.1 1.8 1.2 0.5
Iron and steel 4.1 4.4 5.1 5.1 5.2 5.3 4.7 3.6 2.6 1.8
Construction 1.9 2.0 2.2 1.5 1.5 2.2 2.0 2.1 1.9 1.6
Services - non finance 8.8 7.8 7.2 6.7 6.4 5.5 4.4 3.9 2.8 2.7
Services - finance 6.1 5.1 4.6 3.2 3.3 3.2 5.1 5.8 6.9 5.8
Other infrastructure 5.7 6.5 6.7 6.9 5.8 5.6 4.5 3.7 4.4 4.1
Crude petrol/others 6.0 2.6 2.8 3.2 3.1 2.1 1.6 2.4 2.5 2.6
Electronics and eng`ing 2.3 2.2 2.2 2.4 1.8 1.6 1.9 1.7 1.8 1.6
Shipping 0.9 1.4 1.3 1.5 1.5 1.2 0.6 0.4 0.3 0.3
Food and beverages 3.2 2.9 2.7 2.1 1.7 1.6 1.7 1.3 1.0 0.9
Manufacturing products (excluding metal)
Wholesale/retail trade 2.0 1.8 2.1 2.1 3.0 2.9 2.5 2.5 2.6 2.4
Cement 0.9 1.6 2.1 2.0 2.1 1.7 1.4 1.1 0.9 0.4
Chemicals and fertilizers 1.2 1.4 1.3 1.0 0.7 0.9 1.0 1.1 1.1 1.1
Metal & products 1.7 2.3 1.9 2.3 2.5 2.3 1.8 0.9 0.9 1.2
Other industries 10.9 10.7 11.3 11.5 10.5 9.9 8.8 8.9 8.2 9.0

ICICI Bank Banks
Exhibit 14: Share of working capital lending has been rising Exhibit 15: Working capital loans are growing at ~20% CAGR
Break-up of term and working capital loans in the corporate sector, Growth in working capital and term loans in the corporate sector,
March fiscal year-ends, 2010-20 (%) March fiscal year-ends, 2011-20 (%)
Term loans Working capital Term loans Working capital

100 40
21 20 19 22 23 27 28 30
80 35
43 45 47
20
60
10
40 79 80 81 78 77 73 72 0
65
57 55 53
20
-10
0 -20
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Source: Company 20F filings, Kotak Institutional Equities Source: Company 20F filings, Kotak Institutional Equities
Exhibit 16: Share of investment grade portfolio on the rise for the bank
Break-up of the overall loan book, March fiscal year-ends, 2011-20 (%)
AAA AA+ AA AA- 1 2A-C A+ A A- 3 A-C BBB+ BBB and BBB- 4A-C
Below investment grade Unrated
100 4 4
10 11 11 12 14 9
9 19
80 28 28
28
29 34 36 29
37 35 28
60
22 22
20
19
40 28 20 21
29 24 23
20 42 45 45
38
29 28 30 32
25 25
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: Company 20F filings, Kotak Institutional Equities
Exhibit 17: The investment grade portfolio grew slower but the reduction in below investment grade has been higher
Growth in loan book in each rating profile, March fiscal year-ends, 2012-20 (%)
2012 2013 2014 2015 2016 2017 2018 2019 2020
Investment grade 16.0 12.5 17.3 11.7 5.8 10.5 16.1 20.5 10.4
AAA AA+ AA AA- 1 2A-C 0.4 13.0 30.4 22.2 19.3 23.1 22.5 21.2 7.9
A+ A A- 3 A-C 14.8 (3.6) 9.0 1.4 15.8 (6.0) 18.0 25.5 26.0
BBB+ BBB and BBB- 4A-C 32.7 25.8 13.8 10.0 (11.7) 8.2 6.3 16.0 2.1
Below investment grade 27.6 23.8 18.6 23.1 71.3 (21.5) (28.2) (45.5) (20.8)
Unrated (46.3) (17.6) 13.1 26.1 (60.6) (15.8) 34.5 (43.1) 52.8
Net loans 14.1 13.0 17.4 13.2 12.6 4.4 10.0 14.1 9.2
Source: Company 20F filings, Kotak Institutional Equities

Banks ICICI Bank
Exhibit 18: Retail fee, ~70% of the overall fees, grew 17% yoy, ~22% yoy growth in transaction banking and 30% yoy in lending
Retail banking fees, March fiscal year-ends, 2019-20 (Rs mn)
2019 2020
Third party O thers O thers

Third party
21% 1% 2%
15%
Commercial
banking Commercial
1% banking
2%
Lending
18%
Transaction
Lending banking Transaction
16% 61% banking
63%
Exhibit 19: Muted growth of 3% yoy in overall fee income on the corporate side
Corporate banking fees, March fiscal year-ends, 2019-20 (Rs mn)
2019 2020
O thers Transaction Transaction

O thers banking
3% banking
3% 3%
4%
Lending
linked fee
Lending 38%
linked fee
38%
Commercial
banking fee Commercial
55% banking fee
56%

ICICI Bank Banks
Exhibit 20: ICICI Bank SoTP (FY2022) valuation
ICICI share (%) FY2022 (Rs) Valuation methodology

Value of ICICI standalone 100.0 328 Based on residual growth model
Subsidiaries
ICICI Financial Services 89
ICICI Prudential Life 51.9 49 2.3X Embedded Value
General insurance 51.9 26 4X FY2022 PBR
Mutual funds 51.0 14 5.5% of AUMs
Other subsidiaries/associates
ICICI Securities 79.2 9 15X FY2022 PER
ICICI Securities Primary Dealer 100.0 3 1X FY2022 PBR
ICICI Homes 100.0 4 1.5X FY2022 PBR
ICICI Bank UK 100.0 3 0.6XFY2022 PBR
ICICI Bank Canada 100.0 4 0.6XFY2022 PBR
Venture capital/MF 100.0 2 10% of AUM of US$2 bn
Value of subsidiaries 115 `
Value of company 443
Exhibit 21: ICICI Bank SoTP (FY2023) valuation
ICICI share (%) FY2023 (Rs) Valuation methodology

Value of ICICI standalone 100.0 428 Based on Residual growth model
Subsidiaries
ICICI Financial Services 105
ICICI Prudential Life 51.9 59 2.3X Embedded Value
General insurance 51.9 30 4.X FY2023 PBR
Mutual funds 51.0 16 5.5% of AUMs
Other subsidiaries/associates
ICICI Securities 79.2 10 15X FY2023 PER
ICICI Securities Primary Dealer 100.0 4 1X FY2023 PBR
ICICI Homes 100.0 4 1.5X FY2023 PBR
ICICI Bank UK 100.0 3 0.6XFY2023 PBR
ICICI Bank Canada 100.0 4 0.6XFY2023 PBR
Venture capital/MF 100.0 2 10% of AUM of US$2 bn
Value of subsidiaries 131
Value of company 559

Banks ICICI Bank
Exhibit 22: ICICI Bank – forecasts and valuation

P/E ABVPS P/B
PAT EPS P/E BVPS P/B RoE Core RoE (standalone) (standalone) (standalone)
(Rs bn) (Rs) (X) (Rs) (X) (%) (%) (X) (Rs) (X)
2013 83 13.1 29.1 105 3.6 13.1 14.7 23 83 3.2
2014 98 15.4 24.7 115 3.3 14.0 14.9 19.9 92 2.9
2015 113 17.7 21.6 126 3.0 14.7 15.0 17.5 101 2.6
2016 97 15.1 25.3 139 2.7 11.4 11.1 21.0 104 2.6
2017 98 15.3 25.0 156 2.4 10.9 10.0 20.4 108 2.5
2018 68 10.5 36.2 164 2.3 8.3 6.0 30.8 113 2.4
2019 34 5.2 73.2 168 2.3 3.4 2.4 75.3 134 2.0
2020 79 12.3 31.2 180 2.1 7.7 6.5 25.9 149 1.8
2021E 149 23.0 16.6 198 1.9 12.2 12.0 12.8 170 1.6
2022E 174 26.9 14.2 218 1.7 12.9 12.6 11.0 189 1.4
2023E 193 29.8 12.8 241 1.6 13.0 12.5 10.0 211 1.3

ICICI Bank Banks
Exhibit 23: ICICI Bank income statement and balance sheet

2018 2019 2020 2021E 2022E 2023E
Growth rates (%)
Net loan growth 10.4 14.5 10.0 6.9 10.8 13.0
Customer assets growth 12.4 12.7 9.2 6.7 10.4 12.5
Corporate loans (0.8) 2.9 1.9 9.1 10.7 14.9
Total retail loans 20.5 23.1 15.0 5.6 10.9 11.9
Deposits growth 14.5 16.4 18.1 11.1 11.7 12.3
Borrowings growth 38.9 (2.8) (40.5) (26.7) 13.8 25.4
Loan loss provisions 1.2 17.5 (29.7) 11.2 (34.6) 12.0
Non-interest income (10.7) (16.7) 13.3 15.7 (13.2) 14.7
Net fee income 9.4 16.4 13.8 (17.6) 15.4 15.5
Net capital gains (26.9) (79.4) 46.2 205.1 (79.3) -
Total income (1.9) 2.7 19.7 9.6 1.9 10.6
Operating expenses 6.4 15.2 19.5 (2.3) 11.0 9.7
Employee expenses 3.1 15.1 21.5 4.1 10.2 9.6
DMA 17.7 22.5 10.7 (29.6) 40.0 19.7
Asset management measures (%)
Yield on average earning assets 7.7 7.8 8.4 8.1 8.0 7.9
Interest on advances 8.4 8.7 9.3 8.9 8.7 8.5
Interest on investments 6.8 6.6 6.7 6.9 7.0 7.1
Average cost of funds 4.7 4.7 4.9 4.8 4.5 4.5
Interest on deposits 4.5 4.4 4.6 4.5 4.5 4.4
Other interest 5.6 5.7 6.5 7.3 5.1 5.4
Difference 3.0 3.2 3.5 3.4 3.5 3.4
Net interest income/earning assets 3.2 3.3 3.7 3.7 3.7 3.6
New provisions/average net loans 3.0 3.1 1.9 2.0 1.2 1.2
Loans-to-deposit ratio 69.5 71.2 73.9 74.1 73.4 73.1
Share of deposits
Current 15.9 14.7 13.3 13.5 13.5 13.4
Fixed 48.3 50.4 54.9 53.4 52.4 51.9
Savings 35.8 34.9 31.9 33.1 34.0 34.7
Tax rate 8.8 11.0 43.5 25.6 25.6 25.6
Dividend payout ratio 21.5 28.7 - 20.0 20.0 20.0
Asset quality metrics (%)
Gross NPL 9.5 7.0 5.8 5.1 5.1 5.0
Net NPL 5.4 2.3 1.5 1.0 1.2 1.2
Slippages 6.2 2.1 2.4 2.5 2.8 2.5
Provision coverage (ex write-off) 42.6 67.3 73.4 79.7 76.9 76.3
RoA composition - % of average assets
Loan loss provisions 1.8 1.9 1.2 1.3 0.8 0.8
Net other income 2.2 1.6 1.6 1.8 1.4 1.5
(1- tax rate) 91.2 89.0 56.5 74.4 74.4 74.4
RoA 1.1 0.4 0.9 1.4 1.5 1.5
Average assets/average equity 7.8 8.6 8.9 8.7 8.6 8.7
RoE 8.3 3.4 7.7 12.2 12.9 13.0

Banks ICICI Bank
Exhibit 24: ICICI Bank, growth rates, key ratios and Du Pont analysis
2018 2019 2020E 2021E 2022E 2023E
Total interest income 549,659 634,012 747,983 783,333 835,018 926,423
Interest on advances 408,662 479,426 575,511 594,729 631,133 695,501
Interest on investments 115,682 127,969 146,732 160,821 168,290 190,152
Total interest expense 319,400 363,864 415,313 428,562 444,921 501,923
Deposits from customers 234,288 265,247 326,878 363,980 403,964 450,516
Loan loss provisions 145,216 170,670 120,020 133,503 87,248 97,687
Net interest income (after prov.) 85,042 99,478 212,651 221,267 302,849 326,814
Other income 174,196 145,122 164,486 190,339 165,262 189,629
Net fee income 87,894 102,319 116,451 95,982 110,772 127,961
Net capital gains 63,059 13,007 19,011 58,000 12,000 12,000
Miscellaneous income 834 918 (1,771) 400 500 625
Operating expenses 157,039 180,891 216,144 211,184 234,383 257,197
Employee expense 59,140 68,082 82,712 86,115 94,891 104,038
DMA 13,036 15,971 17,683 12,452 17,432 20,861
Pre-tax income 74,346 37,769 140,480 200,422 233,728 259,246
Tax provisions 6,570 4,140 61,172 51,308 59,834 66,367
Net profit 67,776 33,629 79,308 149,114 173,894 192,879
% growth (30.8) (50.4) 135.8 88.0 16.6 10.9
PBT+provision-treasury gains 165,583 217,812 248,892 275,926 308,976 344,932
% growth (4.0) 31.5 14.3 10.9 12.0 11.6
Cash and bank balance 625,036 700,095 528,133 766,668 854,444 961,050
Cash 80,448 87,039 99,438 110,455 123,360 138,586
Balance with RBI 250,576 291,541 253,402 463,391 518,979 589,149
Balance with banks 4,849 7,693 1,688 1,856 2,042 2,246
Outside India 289,163 313,821 173,606 190,966 210,063 231,069
Net value of investments 2,029,942 2,077,327 2,495,315 2,398,110 2,647,505 2,946,860
Investments in India 1,962,100 2,013,776 2,415,591 2,319,122 2,569,239 2,869,302
Govt. and other securities 1,391,853 1,479,231 1,883,319 1,768,333 1,998,604 2,277,368
Shares 23,781 18,840 24,622 24,622 24,622 24,622
Subsidiaries 61,489 61,202 61,202 61,202 61,202 61,202
Debentures and bonds 153,889 142,328 119,853 131,838 145,022 159,524
Net loans and advances 5,123,953 5,866,466 6,452,900 6,897,449 7,643,854 8,637,230
Corporate loans 2,184,003 2,247,106 2,290,730 2,500,178 2,768,086 3,180,981
Total retail loans 2,939,950 3,619,360 4,162,170 4,397,271 4,875,767 5,456,249
Fixed assets 79,035 79,314 84,103 75,677 68,179 59,795
Net leased assets 2,415 2,415 2,740 748 636 541
Net owned assets 76,620 76,900 81,363 74,928 67,543 59,255
Other assets 796,303 897,836 759,777 835,754 919,330 1,011,263
Total assets 8,654,268 9,621,038 10,320,227 10,973,658 12,133,310 13,616,199
Deposits 5,609,752 6,529,197 7,709,690 8,563,925 9,564,451 10,744,988

Borrowings and bills payable 1,762,688 1,713,036 1,019,021 746,643 849,335 1,065,354
Preference capital 3,500 - - - - -
Other liabilities 230,239 295,171 426,507 383,856 307,085 245,668
Total liabilities 7,602,679 8,537,404 9,155,218 9,694,424 10,720,871 12,056,010
Paid-up capital 12,858 12,895 12,948 12,948 12,948 12,948
Reserves & surplus 1,038,731 1,070,739 1,152,062 1,266,286 1,399,492 1,547,241
Total shareholders' equity 1,051,589 1,083,634 1,165,009 1,279,234 1,412,440 1,560,189

INDIA
Economy
Public Finance AUGUST 02, 2020
UPDATE
BSE-30: 37,607
Fiscal situation remains frail. Even as June GST revenues were lower, we note that it
did not have much upsides from arrears as was the case in May. Though it is early to be
sure, CGST+IGST shortfall for FY2021E is likely to be around Rs1.5-2 tn. We maintain
our FY2021E GFD/GDP at 7.2% (with some internal changes) with gross G-Sec
issuances at Rs12 tn and T-bill borrowing at Rs1.8 tn. In our view, given the nature of
the crisis and the yield curve, additional borrowings, if any, should be through T-bills.
June GST collections at Rs875 bn
Based on the monthly PIB release, total GST collection was at Rs875 bn for June compared to QUICK NUMBERS
Rs909 bn in May. Gross GST collections in 4MFY21 were at Rs2.7 tn—a contraction of 35%
over 4MFY20. CGST collection for June was Rs161 bn (May: Rs190 bn), SGST was Rs214 bn  June GST collections
(Rs240 bn), IGST at Rs426 bn (Rs403 bn), and compensation cess was at Rs73 bn (Rs77 bn) at Rs909 bn
(Exhibit 1). After allocations from IGST, CGST for June was Rs395 bn (May: Rs323 bn) and SGST
was Rs403 bn (May: Rs351 bn). We note that May collections had the positive impact of  Expect Rs1.5-2 tn of
delayed filings of March-April. June would have much lesser impact (may be late filings of May). CGST+IGST shortfall
Around Rs1.5-2 tn of likely CGST shortfall  Gross tax collections

up to 1QFY21 fell
On a cash accounting basis, GST collections for June will likely be around Rs738 bn and for
by (-)33%;
4MFY21 at Rs2.3 tn. This implies that the required run-rate for the rest of FY2021 would be
expenditure growth
around Rs1.4 tn—impossible given the state of the economy (Exhibit 2). For 4MFY21, CGST is
at 13%
likely at Rs924 bn with IGST at Rs203 bn. SGST is likely at around Rs1 tn. We note that FY2021
GST collections are budgeted at Rs13.4 tn, Rs6.9 tn for the central government and Rs6.5 tn for  Expect FY2021E
the state governments. Even though there will be some improvement in collections over the
GFD/GDP at 7.2%
next few months, we could still witness a CGST shortfall of Rs1.5-2 tn against FY2021BE.
Government maintaining a steady expenditure plan
Expenditure in 1QFY21 was around 27% of budget estimates with revenue expenditure growth
of around 10% and capital expenditure growth of 40%. GFD continued to increase (83% of
budget estimates) given large revenue shortfalls (though central government maintained a high
devolution to states) (Exhibit 3). Key areas for spending growth in 1QFY21 has been agriculture
(74%), health (29%), roads (34X; last year spend was near zero), rural development (2.5X), and
transfer to states (62%). Sharp decline in spends was seen in defense ((-)7%) and subsidies as
expected: food subsidy ((-)43%) and petroleum subsidy ((-)50%).
Expect FY2021E GFD/GDP at 7.2%
With gradual reopening of the economy, tax collections will improve over the next few months. Suvodeep Rakshit
We have already seen some improvement in the activity levels though recently they have been
stagnating. We continue to factor in (1) shortfall of Rs4.9 tn in FY2021E in overall receipts (we Upasna Bhardwaj
now factor in slightly better GST revenues and lower direct taxes), (2) Covid-related expenditure
of around Rs3 tn (announcement of Rs2.7-3.2 tn with fiscal impact of Rs1.8 tn till now), and (3) Avijit Puri
overall expenditure cuts of Rs1.7 tn while increasing spending in railways and roads (Exhibits 4-
5). We retain FY2021E GFD/GDP estimate at 7.2%. If the government were to spend around
Rs1.2 tn (further stimulus) without any expenditure cuts, the GFD/GDP is likely at around 8.1%.
In case of no further stimulus and some expenditure cuts, GFD/GDP could be around 6.6%. We
believe that additional borrowing (in excess of our estimated Rs13.8 tn of gross G-Sec and T-bill
borrowing), if any, should ideally be through T-Bills to ensure that short-term risks are funded
by short-term borrowings and takes advantage of lower rates (given the steepness of the curve).
Contact: +91 22 6218 6427
For Private Circulation Only.

India Economy
Exhibit 1: June GST revenues at Rs875 bn

Trend in GST collections and components (Rs bn)
Compensation Total
CGST SGST IGST IGST (imports) cess Total GST filings (mn)
Jul-17 151 230 481 213 73 936 5.9
Aug-17 148 216 486 238 80 930 5.9
Sep-17 145 219 505 247 82 951 5.7
Oct-17 157 230 448 223 79 913 5.0
Nov-17 136 193 428 218 81 837 5.3
Dec-17 145 205 453 231 86 889 5.6
Jan-18 145 204 447 229 85 880 5.8
Feb-18 157 214 445 232 77 893 6.0
Mar-18 187 257 505 212 86 1,035 6.0
Apr-18 159 217 491 244 73 940 6.2
May-18 160 220 495 245 81 956 6.5
Jun-18 159 223 500 249 84 965 6.6
Jul-18 153 212 499 265 76 940 6.7
Aug-18 153 211 501 253 80 944 6.7
Sep-18 165 228 534 269 80 1,007 6.7
Oct-18 168 231 497 241 80 976 7.0
Nov-18 164 225 479 236 79 947 7.2
Dec-18 178 248 512 241 87 1,025 7.3
Jan-19 176 242 470 214 85 972 7.3
Feb-19 204 275 504 235 83 1,066 7.6
Mar-19 212 288 547 233 92 1,139 7.2
Apr-19 178 245 499 249 81 1,003 7.2
May-19 184 253 478 220 85 999 7.4
Jun-19 179 250 506 242 86 1,021 7.6
Jul-19 177 242 490 248 73 982 7.6
Aug-19 166 226 451 221 76 919 7.6
Sep-19 176 237 465 214 76 954 7.4
Oct-19 196 271 490 209 77 1,035 7.8
Nov-19 200 268 481 213 83 1,032 8.1
Dec-19 209 282 530 235 86 1,108 8.3
Jan-20 206 273 485 207 89 1,054 8.4
Feb-20 192 256 445 181 83 976 7.7
Mar-20 323
Apr-20 620
May-20 190 240 403 157 77 909
Jun-20 161 214 426 203 73 875
Source: PIB, Kotak Economics Research
174 KOTAK ECONOMIC RESEARCH

Economy India
Exhibit 2: Required run-rate for FY2021 CGST revenues at Rs580 bn to meet FY2021BE
Summary of GST collections, March fiscal year-ends (Rs bn)
Feb-18 Feb-19 Feb-20 Mar-20 Apr-20 May-20 Jun-20

Monthly collections (PIB press releases)
Center 278 476 419 — — 323 395
Center GST (CGST) 157 204 192 — — 190 161
Centre's share of IGST (C-IGST) 121 273 227 — — 133 233
States 349 512 435 — — 351 403
States' GST (SGST) 214 275 256 — — 240 214
States' share of IGST (S-IGST) 134 237 179 — — 111 188
Unallocated IGST 189 (5) 39 — — 159 4
Compensation cess 77 83 83 — — 77 73
Total 893 1,066 976 323 620 909 875
Monthly collections (CGA releases)
Center 489 485 425 157 286 398 286
- CGST 274 462 402 59 190 302 373
- CGST refund (estimated) 4 14 17 22 22
- Unallocated IGST 215 23 24 97 96 97 (88)
- IGST refund (estimated) (26) (29) 15 62 92
State (estimated) 345 498 418 79 210 329 381
Compensation cess 76 82 81 10 60 75 71
Total 910 1,065 924 246 556 802 738
FYTD collections (post refunds) FY2018 FY2019 FY2020
Center 3,799 4,865 5,033 157 443 841 1,127
- CGST 2,033 4,575 4,941 59 249 550 924
- Unallocated IGST 1,767 289 92 97 194 291 203
State (estimated) 2,894 5,100 5,105 79 289 618 999
Compensation cess 626 951 956 10 70 145 216
Total 7,320 10,916 11,093 246 802 1,604 2,342
FY2021BE
CGST 5,800
Unallocated IGST 0
State 6,453
Compensation cess 1,105
Total 13,358
Required run rate to meet FY2021BE
CGST 583 610
Unallocated IGST (32) (25)
State 648 682
Compensation cess 107 111
Total 1,306 1,377
FYTD21 run rate
CGST 381 412 59 124 183 231
Unallocated IGST 24 8 97 97 97 51
State 425 425 79 144 206 250
Compensation cess 79 80 10 35 48 54
Total 910 924 246 401 535 586
Source: PIB, CGA, CEIC, Kotak Economics Research estimates
KOTAK ECONOMIC RESEARCH 175

India Economy
Exhibit 3: Tax collections growth remains weak though some improvement from April-May levels
Monthly tax receipts of central government, March fiscal year-ends (Rs bn)
FYTD (Apr-Jun) Chg. (%) FY2021BE FY2021 FY2021E FY2021

(% of Current Required (% of Current Required
Date 2021 2020 yoy Rs bn BE) run rate run rate Rs bn BE) run rate run rate
Gross tax revenues 2,697 4,004 (33) 24,230 11.1 899 2,393 19,539 13.8 899 1,871
Direct taxes 1,193 1,707 (30) 13,265 9.0 398 1,341 9,761 12.2 398 952
Corporation tax 542 706 (23) 6,810 8.0 181 696 5,179 10.5 181 515
Income tax 621 969 (36) 6,380 9.7 207 640 4,507 13.8 207 432
Other taxes 29 32 (7) 75 39 10 5 75 39 10 5
Indirect taxes 1,501 2,292 (34) 10,965 13.7 500 1,052 9,729 15.4 500 914
Customs duty 154 395 (61) 1,380 11.2 51 136 708 21.8 51 62
Excise duty 353 370 (4) 2,670 13.2 118 257 3,776 9.4 118 380
Service tax 8 6 16 10 74 3 0 60 13 3 6
GST 986 1,521 (35) 6,905 14.3 329 658 5,185 19.0 329 467
CGST 550 1,168 (53) 5,800 9.5 183 583 4,335 12.7 183 421
IGST 291 107 172 97 (32) 97 (32)
Compensation cess 145 246 (41) 1,105 13.1 48 107 850 17.0 48 78
Net tax revenues 1,348 2,514 (46) 16,359 8.2 449 1,668 13,641 9.9 449 1,366
Non-tax revenues 152 335 (55) 3,850 3.9 51 411 3,101 4.9 51 328
Non-debt capital receipts 36 48 (25) 2,250 1.6 12 246 850 4.2 12 90
Total receipts 1,536 2,897 (47) 22,459 6.8 512 2,325 17,591 8.7 512 1,784
Total expenditure 8,159 7,217 13 30,422 27 2,720 2,474 31,891 26 2,720 2,637
Revenue expenditure 7,277 6,587 10 26,301 28 2,426 2,114 28,118 26 2,426 2,316
Capital expenditure 883 630 40 4,121 21 294 360 3,773 23 294 321
Fiscal deficit 6,624 4,321 53 7,963 83 2,208 149 14,300 46 2,208 853
Revenue deficit 5,777 3,738 55 6,092 95 1,926 35 11,377 51 1,926 622
Primary deficit 5,019 2,903 73 881 569 1,673 (460) 7,218 70 1,673 244
Notes:
(a) FY2021E is Kotak estimates.
Source: CEIC, Kotak Economics Research
Exhibit 4: GFD/GDP likely be 6.6-8.1% depending on the extent of stimulus and spending cuts
Break-up of GFD/GDP gains and losses, March fiscal year-ends (%)
FY2020BE GFD/GDP 3.5

Gross tax revenue loss/GDP 2.4
Net tax revenue loss/GDP 1.4
Non-tax and divestments loss/GDP 1.1
Total receipts loss/GDP 2.5
Revised GFD/GDP due to receipts loss 6.0
Expenditure cuts/GDP (0.9)
Revised GFD/GDP with expenditure cuts 5.1
Expenditure stimulus/GDP 1.6
Revised GFD/GDP with stimulus 6.7
Effect of lower nominal GDP base 0.5
FY2021E GFD/GDP 7.2
Source: Kotak Economics Research estimates

Economy India
Exhibit 5: We pencil in FY2021E GFD/GDP at 7.2%

Major central government budgetary items, March fiscal year-ends, 2018-21E (Rs bn)
Change (%)
2019/ 2020RE/ 2020P/ 2021BE/ 2021E/
2018 2019 2020RE 2020P 2021BE 2021E 2018 2019 2019 2020P 2020P
Receipts
1. Revenue receipts (2d + 3) 14,352 15,529 18,501 16,821 20,209 16,742 8 19 8 20 (0)
2. Gross tax revenues (a + b ) 19,190 20,805 21,634 20,099 24,230 19,539 8 4 (3) 21 (3)
2.a. Direct taxes 10,068 11,431 11,769 10,536 13,265 9,761 14 3 (8) 26 (7)
2.a.1. Corporation tax 5,712 6,636 6,105 5,569 6,810 5,179 16 (8) (16) 22 (7)
2.a.2. Income tax 4,308 4,730 5,595 4,898 6,380 4,507 10 18 4 30 (8)
2.a.3. Other taxes 48 66 69 69 75 75 37 5 5 9 9
2.b. Indirect taxes 9,122 9,373 9,865 9,563 10,965 9,729 3 5 2 15 2
2.b.1. Goods and Services Tax 4,426 5,816 6,123 6,015 6,905 5,185 31 5 3 15 (14)
2.b.1.1. CGST 2,033 4,575 5,140 4,967 5,800 4,335 125 12 9 17 (13)
2.b.1.2. IGST 1,767 289 — 92 — — (84)
2.b.1.3. Compensation cess 626 951 983 956 1,105 850 52 3 0 16 (11)
2.b.2. Customs duty 1,290 1,178 1,250 1,092 1,380 708 (9) 6 (7) 26 (35)
2.b.2.1. Basic duties 808 1,048 1,104 946 1,240 568 30 5 (10) 31 (40)
2.b.2.2. Others 483 130 146 146 140 140 (73) 12 12 (4) (4)
2.b.3. Excise duty 2,594 2,310 2,480 2,396 2,670 3,776 (11) 7 4 11 58
2.b.4. Service tax 812 69 12 60 10 60 (92) (83) (12) (83)
2.c Transfers to states, UTs, etc. 6,765 7,633 6,588 6,540 7,871 5,899 13 (14) (14) 20 (10)
2.d Net tax revenues 12,425 13,172 15,046 13,559 16,359 13,641 6 14 3 21 1
3. Non-tax revenues 1,927 2,357 3,455 3,262 3,850 3,101 22 47 38 18 (5)
3.a. RBI's transfer of surplus 407 680 1,476 1,476 600 850 67 117 117 (59) (42)
3.a. Telecommunications 321 408 590 590 1,330 875 27 45 45 126 48
4. Non-debt capital receipts (a + b) 1,157 1,128 816 686 2,250 850 (3) (28) (39) 228 24
4.a Recovery of loans 156 181 166 183 150 150 15 (8) 1 (18) (18)
4.b Other receipts (disinvestments) 1,000 947 650 503 2,100 700 (5) (31) (47) 317 39
5. Total receipts (1 + 4) 15,509 16,657 19,317 17,507 22,459 17,591 7 16 5 28 0
Expenditure
6. Revenue expenditure 18,788 20,074 23,496 23,496 26,301 28,118 7 17 17 12 20
6.a. Interest payments 5,290 5,826 6,251 6,110 7,082 7,082 10 7 5 16 16
6.b. Subsidies 1,912 1,968 2,273 2,232 2,278 2,003 3 15 13 2 (10)
6.b.1. Food 1,003 1,013 1,087 1,087 1,156 1,156 1 7 7 6 6
6.b.2. Fertilizer 664 706 800 811 713 713 6 13 15 (12) (12)
6.b.3. Oil 245 248 386 334 409 134 2 55 34 23 (60)
6.c. Pay, allowances and pensions 4,464 4,957 5,447 4,997 5,877 5,627 11 10 1 18 13
6.c.1.a. Pay and allowances 3,007 3,291 3,606 3,306 3,770 3,520 9 10 0 14 6
6.c.1.b. Pensions 1,457 1,666 1,841 1,691 2,107 2,107 14 11 2 25 25
6.d. Agriculture and farmers' welfare 374 461 1,019 942 1,343 1,419 23 121 105 43 51
6.e. Education 800 781 927 873 972 772 (2) 19 12 11 (12)
6.f. Health and family welfare 483 506 608 607 639 869 5 20 20 5 43
6.g. Rural development 1,086 1,118 1,226 1,221 1,200 1,656 3 10 9 (2) 36
6.h. Others 4,381 4,457 5,746 6,513 6,909 8,689 2 29 46 6 33
7. Capital expenditure 2,631 3,077 3,489 3,367 4,121 3,773 17 13 9 22 12
7. a. Defence 954 998 1,154 1,161 1,186 1,036 5 16 16 2 (11)
7. b. Railways 434 528 678 678 700 814 22 28 28 3 20
7. c. Roads and Highways 508 676 722 673 820 942 33 7 (1) 22 40
7. d. Housing and urban affairs 153 158 192 193 211 148 3 22 22 10 (23)
7. e. Others 582 717 743 663 1,204 834 23 4 (7) 82 26
8. Total expenditure (6 + 7) 21,420 23,151 26,986 26,864 30,422 31,891 8 17 16 13 19
Deficit
Primary deficit (PD) 621 668 1,417 3,246 881 7,218 7 112 386 (73) 122
Revenue deficit (RD) 4,436 4,545 4,995 6,675 6,092 11,377 2 10 47 (9) 70
Gross fiscal deficit (GFD) 5,911 6,494 7,668 9,356 7,963 14,300 10 18 44 (15) 53
Gross borrowings (dated securities) 5,891 5,715 7,100 7,059 7,800 12,034 (3) 24 24 11 70
Net market borrowing 4,518 4,233 4,740 4,698 5,449 9,760 (6) 12 11 16 108
Net market borrowing (adjusted for buyback) 4,103 4,233 4,740 4,698 5,149 9,760 3 12 11 10 108
Short-term borrowing (T-bills) 449 69 250 1,560 250 1,800
Nominal GDP at market prices 170,983 189,712 204,422 203,398 224,894 197,703 11.0 7.8 7.2 10.6 (2.8)
PD/GDP (%) 0.4 0.4 0.7 1.6 0.4 3.7
RD/GDP (%) 2.6 2.4 2.4 3.3 2.7 5.8
GFD/GDP (%) 3.5 3.4 3.8 4.6 3.5 7.2
Source: Union Budget documents, CGA, Kotak Economics Research estimates

June 2020: Results calendar
India Daily Summary - August 3, 2020

Mon Tue Wed Thu Fri Sat Sun
KOTAK INSTITUTIONAL EQUITIES RESEARCH
3-Aug 4-Aug 5-Aug 6-Aug 7-Aug 8-Aug 9-Aug

Bank of India Astral Poly Technik Adani Gas Adani Enterprises Adani Transmission DCB Bank
Exide Industries Godrej Consumer Products Apollo Tyres Adani Pow er Aditya Birla Capital Divi's Laboratories
Kansai Nerolac Gujarat Gas Cadila Healthcare Dalmia Bharat Alkem Laboratories
Narayana Hrudayalaya Canara Bank GSPL Amara Raja Batteries
PI Industries DLF Gujarat Pipavav Port Bata India
Tata Consumer Products Godrej Properties Honeyw ell Automation Cipla
Varun Beverages JK Lakshmi Cement HPCL Container Corporation
Jyothy Labs Indian Hotels Co. Emami
Trent Lemon Tree Hotels Mahanagar Gas
Lupin Mahindra & Mahindra
Pidilite Industries REC
Torrent Pow er Siemens
Vodafone Idea Sobha
Whirlpool The Ramco Cement
10-Aug 11-Aug 12-Aug 13-Aug 14-Aug 15-Aug 16-Aug
Ipca Laboratories Adani Port and SEZ Aarti Industries 3M India United Brew eries
Shree Cement AIA Engineering Ashok Leyland Eicher Motors
Titan Company Ashoka Buildcon Bharat Forge Endurance Technologies
Ujjivan Financial Services Bosch Tata Pow er Hero Motocorp
Motherson Sumi Systems Timken
Shriram City Union Finance
Source: NSE, Kotak Institutional Equities

178
Kotak Institutional Equities: Valuation summary of KIE Universe stocks
179
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 31-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 709 620 (13) 121 1.6 171 39 33 41 36.7 (14.9) 25.9 18 21.5 17.1 11.0 11.4 9.3 3.3 3.0 2.6 18.9 14.5 16.3 1.6 1.2 1.5 12.1
Apollo Tyres BUY 108 110 2 62 0.8 638 8.3 1.7 8.9 (41.9) (79.1) 410.6 13.0 62.2 12.2 6.6 7.0 5.1 0.6 0.6 0.6 4.8 1.1 5.1 2.8 1.2 2.5 13.0
Ashok Leyland BUY 49 65 34 143 1.9 2,936 1.2 (0.6) 2.2 (82.4) (150.8) 447.8 39.7 NM 22.5 13.6 23.8 9.4 2.0 2.0 1.9 4.6 NM 8.6 7.2 0.0 1.3 30
Bajaj Auto BUY 3,005 3,400 13 870 12 289 176 159 194 15.0 (9.9) 22.0 17.1 18.9 15.5 14.0 14.6 11.3 4.4 4.0 3.6 24 22 24 4.0 3.2 3.9 37
Balkrishna Industries SELL 1,322 1,100 (17) 256 3.4 193 50 48 58 25.2 (3.4) 21.7 26.6 27.6 22.7 18.1 15.6 12.8 5.1 4.6 4.1 19.9 17.6 19.3 1.5 1.7 1.8 13.2
Bharat Forge SELL 382 285 (25) 178 2.4 466 8 0 11 (66.2) (94.5) 2,559.2 50.9 920.5 34.6 18.9 36.6 16.8 3.4 3.4 3.2 6.6 0.4 9.5 0.5 0.0 0.8 17.6
CEAT BUY 869 940 8 35 0.5 40 63 45 68 1.9 (28.8) 52.6 13.9 19.5 12.8 7.4 8.2 6.7 1.2 1.2 1.1 8.9 6.1 8.8 1.4 1.4 1.4 2.5
Eicher Motors REDUCE 20,639 17,500 (15) 564 7.5 27 671 573 799 (17.7) (14.7) 39.6 30.7 36.0 25.8 22.7 27.3 19.3 6.8 5.9 5.0 24 17.6 21 0.1 — — 66
Endurance Technologies REDUCE 906 820 (9) 127 1.7 141 40 29 46 11.1 (28.4) 59.2 23 31.4 19.7 11.1 12.8 9.0 4.2 3.8 3.3 18.8 12.1 16.6 0.6 0.5 0.8 1.8
Escorts BUY 1,134 1,300 15 101 1.9 101 55 57 74 0.4 3.5 31.7 20.8 20.1 15.2 14.5 12.2 8.8 2.9 2.3 2.0 14.0 11.4 13.3 0.2 0.7 1.0 40
Exide Industries SELL 156 150 (4) 132 1.8 850 10.0 7.5 9.1 10.3 (24.3) 20.2 15.6 20.6 17.2 9.6 11.1 9.5 2.1 2.0 1.9 13.8 9.9 11.2 2.6 2.2 2.2 7.8
Hero Motocorp REDUCE 2,677 2,600 (3) 535 7.1 200 159 131 172 (6.1) (18.0) 31.6 16.8 20.5 15.6 11.4 12.2 9.1 3.8 3.6 3.3 24 17.9 22 3.6 3.2 3.8 63
Mahindra CIE Automotive SELL 109 95 (12) 41 0.5 378 9.4 1.6 7.5 (34.9) (83.0) 366.5 11.5 67.4 14.4 5.5 11.1 6.0 0.9 0.9 0.8 8.0 1.3 5.9 — — — 0.4
Mahindra & Mahindra BUY 606 725 20 754 10.1 1,138 24 32 43 (50.0) 32.6 36.1 25.5 19.2 14.1 11.7 12.3 9.3 2.0 1.8 1.6 7.8 9.9 12.2 0.4 0.5 1.1 53
Maruti Suzuki SELL 6,263 4,500 (28) 1,892 25.3 302 187 141 223 (24.7) (24.7) 58.5 33 44 28 20.9 25.6 15.4 3.9 3.7 3.4 11.9 8.5 12.6 1.0 0.8 0.9 130
Motherson Sumi Systems ADD 95 110 16 300 4.0 3,158 3.7 1.1 5.1 (27.5) (70.3) 359.1 25.6 86.2 18.8 7.1 9.0 4.7 2.7 2.7 2.3 10.5 3.1 13.2 1.6 1.4 1.8 27
MRF SELL 61,049 55,000 (10) 259 3.5 4 3,355 2,185 2,861 25.8 (34.9) 30.9 18 27.9 21.3 10.6 10.6 8.5 2.1 2.0 1.8 12.3 7.3 8.9 0.2 0.1 0.1 9.6
Schaeffler India SELL 3,572 3,150 (12) 112 1.5 31 118 83 128 (18.3) (29.7) 55.1 30 43 28 16.3 21.0 14.4 3.8 3.5 3.1 13.0 8.4 11.9 — — — 0.5
SKF REDUCE 1,470 1,550 5 73 1.0 49 58 43 58 (10.7) (26.2) 33.6 25 34 26 19.0 24.8 17.8 3.8 4.9 4.3 15.2 14.5 16.7 0.8 7.4 0.7 1.5
Tata Motors SELL 105 90 (14) 377 4.6 3,829 (20.7) (22.6) 2.1 (284.1) (9.1) 109.3 NM NM 49.6 6.0 6.4 4.1 0.6 0.7 0.7 NM NM 1.4 — — — 99
Timken SELL 969 825 (15) 73 1.0 75 33 35 42 65.6 6.2 20.1 30 28 23 18.9 16.4 13.4 4.6 4.0 3.4 16.9 15.3 15.9 0.1 0.1 0.1 0.6
TVS Motor SELL 388 260 (33) 184 2.5 475 13.0 7.4 14.7 (7.9) (43.1) 98.4 30 52 26 14.9 19.2 12.8 5.1 4.9 4.3 17.7 9.5 17.3 0.9 0.8 0.9 15.6
Varroc Engineering BUY 197 360 83 27 0.4 135 0 (21) 18 (99.4) (11,519.9) 183.0 1,060.3 NM 11.2 6.2 9.3 4.4 0.9 1.0 0.9 0.1 NM 8.1 — — — 0.9
Automobiles & Components Cautious 7,213 96.5 (39.2) (34.8) 160.4 35.3 54.2 20.8 11.2 12.4 8.2 2.6 2.5 2.3 7.4 4.7 11.2 1.5 1.2 1.4 643
Banks
AU Small Finance Bank SELL 740 590 (20) 227 3.0 304 22.2 19.3 23.0 69.8 (13.1) 19.4 33 38 32 — — — 5.3 4.9 4.3 17.9 12.6 13.2 — — — 8.3
Axis Bank BUY 432 600 39 1,218 16.3 2,822 5.8 35 41 (68.3) 509.3 17.8 75 12.3 10.4 — — — 1.5 1.4 1.3 2.1 11.1 11.9 0.0 1.2 1.4 235
Bandhan Bank REDUCE 345 330 (4) 556 7.4 1,610 18.1 20.7 20.7 10.9 14.3 (0.3) 19.0 16.6 16.7 — — — 3.7 3.1 2.6 22.1 19.8 16.5 — — — 65
Bank of Baroda ADD 47 65 39 216 2.9 4,627 1.2 8.2 18 (27.8) 597.5 119.9 40 5.7 2.6 — — — 0.4 0.4 0.3 0.6 5.6 11.4 0.0 3.5 7.7 28
City Union Bank ADD 121 160 32 89 1.2 737 6.5 5.5 9.8 (30.5) (14.9) 79.0 19 22.1 12.3 — — — 1.9 1.8 1.6 9.4 7.4 12.3 0.9 0.8 1.4 4.1
DCB Bank BUY 77 150 94 24 0.3 310 10.9 10.7 11.6 3.6 (1.9) 9.0 7.1 7.2 6.6 — — — 0.8 0.7 0.7 11.2 10.0 9.9 — 1.4 1.5 3.7
Equitas Holdings BUY 49 100 104 17 0.2 342 6.1 6.0 9.7 (4.3) (1.1) 61.6 8.1 8.2 5.1 — — — 0.6 0.6 0.5 7.8 7.1 10.5 — — — 13.2
Federal Bank BUY 54 80 48 107 1.4 1,993 7.7 6.1 6.9 23.6 (21.2) 12.7 7.0 8.8 7.8 — — — 0.8 0.8 0.7 11.1 8.1 8.6 — 2.5 2.8 26

HDFC Bank ADD 1,033 1,200 16 5,670 75.8 5,483 48 49 54 23.7 2.9 10.3 22 21 19 — — — 3.4 3.0 2.7 16.4 14.9 14.6 — 0.9 1.0 263
ICICI Bank BUY 347 470 36 2,246 30.0 6,474 12.3 23 27 134.9 88.0 16.6 28 15.1 12.9 — — — 2.1 1.9 1.7 7.7 12.2 12.9 — 1.3 1.5 230
IndusInd Bank ADD 524 600 15 363 4.9 756 64 26 64 16.3 (59.2) 147.6 8 20.1 8.1 — — — 1.1 1.1 0.9 14.9 5.3 11.8 — 0.7 1.8 194
Karur Vysya Bank BUY 35 65 88 28 0.4 799 2.9 4 6 11.5 41.4 55.6 12 8.3 5.3 — — — 0.5 0.5 0.4 3.6 4.9 7.4 0.0 3.1 4.9 1.0
Punjab National Bank NR 32 — — 301 4.0 9,652 0 2 6 102.3 212.6 283.8 64 20.5 5.3 — — — 0.5 0.6 0.5 0.7 2.1 6.8 — — — 19.2
RBL Bank BUY 170 270 59 86 1.2 509 9.9 10 20 (51.1) 3.4 97.2 17 16.5 8.4 — — — 0.9 0.9 0.8 5.6 4.8 9.0 — 0.8 1.6 91
State Bank of India BUY 191 340 78 1,709 22.8 8,925 16 24 29 1,580.3 49.2 17.9 12 7.9 6.7 — — — 1.1 0.9 0.8 6.4 8.9 9.6 — 0.1 0.1 180
Ujjivan Financial Services BUY 236 490 108 29 0.4 121 26.9 34 44 117.0 24.9 31.6 9 7.0 5.3 — — — 1.3 1.1 1.0 15.7 17.0 19.3 1.3 1.8 2.5 19.6
Ujjivan Small Finance Bank ADD 34 39 13 59 0.8 1,728 2 2 2 34.2 (4.7) (2.9) 19 19.4 20.0 — — — 2.0 2.0 1.9 13.6 9.8 8.9 1.1 1.0 1.0 0.0
Union Bank RS 29 — — 186 2.5 9,414 (8) (2) 2 49.4 77.9 187.9 NM NM 17.7 — — — 0.4 0.7 0.7 NM NM 2.6 — (1.0) 0.8 2.5
Banks Attractive 13,579 181.5 43.1 96.5 42.4 33 16.6 11.7 1.5 1.3 1.2 4.4 7.6 9.9 0.1 0.8 1.1 1,423


Fair O/S ADVT
Building Products
Astral Poly Technik SELL 965 765 (21) 145 1.9 151 16.4 18 25 25.6 11.7 37.7 59 53 38 32.8 29.0 21.6 9.7 8.3 6.9 17.8 17.0 19.8 0.1 0.2 0.3 2.1
Building Products Cautious 145 1.9 26.6 11.7 37.7 59 52 38 32.8 29.0 21.6 9.7 8.3 6.9 16.5 15.8 18.2 0.1 0.2 0.3 2.1
Capital goods
ABB SELL 895 840 (6) 190 2.5 212 18 9 21 46.3 (50.0) 140.4 51 102 42 32.7 66.1 27.4 5.4 5.3 4.9 9.9 5.3 12.1 0.5 0.6 0.8 2.7
Ashoka Buildcon BUY 51 130 157 14 0.2 281 13.8 8.5 11.5 16.2 (38.0) 34.7 3.7 5.9 4.4 2.5 4.1 3.1 0.5 0.5 0.5 16.1 8.9 11.1 0.0 2.7 3.6 1.3
Bharat Electronics BUY 96 110 15 234 3.1 2,437 7.5 6.2 6.8 (3.3) (16.5) 8.6 12.8 15.3 14.1 7.9 9.2 8.2 2.3 2.1 2.0 18.9 14.5 14.5 2.9 2.4 2.6 21
BHEL REDUCE 36 28 (21) 125 1.7 3,482 -4.2 -1.5 2.5 (221.0) 64.0 263.0 NM NM 14.5 (47.7) (286.8) 5.7 0.4 0.4 0.4 NM NM 3.0 (5.7) (1.9) 2.8 38
Carborundum Universal ADD 248 285 15 47 0.6 189 14.4 12.1 15.2 9.9 (15.9) 26.0 17.2 21 16.3 11.2 11.3 8.9 2.5 2.3 2.1 15.2 11.8 13.7 1.6 1.4 1.7 0.9
Cochin Shipyard BUY 329 550 67 43 0.6 132 48 39 47 32.5 (19.7) 19.7 6.8 8.4 7.1 3.2 3.9 3.8 1.2 1.1 1.0 18.1 13.2 14.4 4.6 3.6 3.9 2.8
Cummins India BUY 402 460 15 111 1.5 277 26 16 24 (3.2) (35.4) 48.7 15.7 24 16.4 17.7 29.4 16.8 2.7 2.6 2.5 17.0 10.8 15.5 3.5 2.2 3.3 8.7
Dilip Buildcon BUY 280 495 77 38 0.5 137 30 27 45 (45.3) (10.8) 64.8 9.2 10.3 6.3 4.4 5.0 3.1 1.1 1.0 0.8 12.2 9.8 14.2 0.2 0.2 0.3 1.6
IRB Infrastructure BUY 121 150 24 42 0.6 351 21 15 11 (15.2) (27.9) (22.9) 5.9 8.2 10.6 3.5 6.4 6.1 0.6 0.6 0.6 11.1 7.6 5.6 4.1 3.2 2.1 4.8
Kalpataru Power Transmission BUY 229 470 105 35 0.5 153 25 25 39 (16.4) 0.1 53.3 9.0 9.0 5.9 4.0 4.0 3.3 1.0 1.0 0.8 12.0 11.1 15.2 1.4 1.4 2.0 1.8
KEC International BUY 275 342 24 71 0.9 257 22.0 25 31 16.3 13.4 24.4 12.5 11.0 8.9 7.3 6.6 5.4 2.5 2.1 1.7 22 21 22 1.2 1.0 1.2 1.6
L&T BUY 913 1,220 34 1,282 17.1 1,403 63 35 67 3.3 (44.4) 89.2 14.4 26 13.7 15.6 18.8 13.3 2.2 1.9 1.7 15.8 7.9 13.1 2.0 1.7 2.3 71
Sadbhav Engineering BUY 43 113 164 7 0.1 172 4.2 5.3 11.4 (61.4) 26.0 115.4 10.2 8.1 3.8 6.0 5.6 3.5 0.3 0.3 0.3 3.5 4.2 8.6 — — — 0.4
Siemens SELL 1,161 1,000 (14) 414 5.5 356 26 33 38 (14.9) 28.2 14.7 45 35 30 29.9 23.2 20.4 4.3 4.0 3.6 9.9 11.8 12.5 0.6 0.8 0.9 67
Thermax BUY 745 820 10 89 1.2 113 19 15 31 (48.8) (22.5) 109.8 39 51 24 21.2 33.1 17.1 21.2 33.1 17.1 7.0 5.4 10.7 0.9 0.7 1.3 0.8
Capital goods Attractive 2,743 36.7 (17.1) (26.8) 69.7 18.4 25 14.8 1.9 1.7 1.6 10.4 6.9 10.9 1.4 1.4 2.0 1,423
Commercial & Professional Services
SIS BUY 361 395 9 53 0.7 149 15 14 19 5.0 (10.2) 36.2 24 27 19.5 11.1 12.0 10.1 3.9 3.4 2.9 17.1 13.6 16.1 1.0 0.2 0.3 0.5
TeamLease Services ADD 1,850 2,000 8 32 0.4 17 20 49 67 (64.3) 140.9 36.5 90 38 28 33.0 26.5 20.5 5.5 4.8 4.1 6.3 13.7 16.1 — — — 0.6
Commercial & Professional Services Attractive 85 1.1 (16.7) 10.1 36.3 32 29 22 14.5 14.8 12.2 4.3 3.8 3.2 13.3 12.8 15.0 0.7 0.1 0.2 1.1
Commodity Chemicals
Asian Paints REDUCE 1,716 1,800 5 1,646 22.0 959 27.2 21.9 36.1 20.7 (19.4) 64.9 63 78 48 39.3 46.1 30.9 16.2 14.6 12.6 27 19.7 29 0.7 0.6 1.0 66
Berger Paints SELL 527 410 (22) 511 6.8 971 6.8 5.8 9.2 32.2 (15.1) 60.2 78 92 57 48.3 53.3 35.9 19.2 16.8 14.3 26 19.6 27 0.4 0.3 0.6 11.4
Kansai Nerolac ADD 434 485 12 234 3.1 539 9.9 7.0 12.5 14.6 (29.5) 78.1 44 62 35 29.3 37.8 22.9 6.2 5.9 5.4 14.8 9.7 16.1 0.7 0.7 1.0 1.5
Tata Chemicals ADD 306 320 5 78 1.0 255 31.7 31.0 37.5 (26.2) (2.1) 21.0 9.7 9.9 8.1 4.7 4.6 3.8 0.6 0.6 0.6 6.4 6.0 7.0 3.6 3.6 4.3 7.9
Commodity Chemicals Neutral 2,468 33.0 9.2 (16.9) 56.4 54 65 41 31.0 34.8 24.5 8.4 7.8 7.0 15.6 12.1 17.1 0.7 0.6 1.0 86
Construction Materials
ACC BUY 1,425 1,550 9 268 3.6 188 72.3 61.4 79.5 35.8 (15.1) 29.5 19.7 23 17.9 9.2 10.4 8.0 2.3 2.2 2.1 12.3 9.8 12.0 1.0 2.2 2.8 24
Ambuja Cements BUY 220 235 7 437 5.8 1,986 10.6 9.5 12.4 49.1 (10.2) 31.0 21 23 17.7 7.5 8.1 6.0 1.8 1.7 1.6 9.0 7.6 9.2 0.7 0.7 0.7 13.3
Dalmia Bharat BUY 761 1,000 31 142 1.9 192 14.0 2.0 19.2 (12.1) (85.4) 844.0 55 374 40 7.5 8.1 6.0 1.4 1.4 1.3 2.5 0.4 3.4 — — — 2.3
Grasim Industries ADD 633 735 16 416 5.6 657 52.6 40.6 71.6 (21.1) (22.9) 76.5 12.0 15.6 8.8 7.6 8.3 5.4 0.7 0.7 0.7 6.0 4.6 7.6 0.6 0.2 0.5 21
J K Cement ADD 1,500 1,525 2 116 1.5 77 64.2 51.8 92.2 83.6 (19.4) 78.1 23 29 16.3 11.3 11.7 8.2 3.8 3.5 2.9 17.3 12.5 19.4 0.5 0.7 0.7 1.7
JK Lakshmi Cement BUY 294 330 12 35 0.5 118 23.5 10.7 23.3 478.2 (54.5) 118.0 12.5 28 12.6 5.6 7.4 5.2 2.1 1.9 1.7 17.4 7.2 14.3 0.8 0.5 1.2 1.6
Orient Cement ADD 64 75 17 13 0.2 205 4.2 3.7 6.3 82.1 (12.9) 72.1 15.2 17.5 10.2 6.5 6.3 5.1 1.2 1.1 1.1 8.0 6.6 10.8 1.2 3.1 3.1 0.9
Shree Cement SELL 21,711 16,000 (26) 783 10.5 36 435.2 382.0 651.5 34.6 (12.2) 70.5 50 57 33 21.3 23.0 16.0 6.1 5.6 4.9 13.9 10.3 15.8 0.5 0.5 0.5 18.6
UltraTech Cement BUY 4,125 4,600 12 1,190 15.9 289 132.9 133.7 219.9 45.2 0.6 64.4 31 31 18.8 14.6 14.0 9.5 3.0 2.8 2.5 10.5 9.4 13.9 0.3 0.4 0.5 33
Construction Materials Attractive 3,401 45.5 21.1 (13.9) 62.7 25 29 18.0 10.9 11.4 7.9 2.1 2.0 1.8 8.4 6.8 10.1 0.5 0.6 0.7 116

180
Fair O/S ADVT
181
Consumer Durables & Apparel
Crompton Greaves Consumer SELL 244 210 (14) 153 2.0 627 7.9 6.9 8.8 33.1 (12.8) 27.1 31 35 28 26 26 21 10.4 7.9 6.5 39 26 26 0.8 0.0 1.0 2.9
Havells India SELL 583 490 (16) 365 4.9 626 11.8 8.7 13.8 (6.6) (26.1) 58.5 50 67 42 34 44 29 8.5 7.9 7.1 17.3 12.2 17.7 1.8 0.5 0.8 21
Page Industries REDUCE 19,818 16,000 (19) 221 3.0 11 308 277 397 (12.9) (10.0) 43.5 64 72 50 41 45 33 27.0 23.3 19.1 43 35 42 0.8 0.8 1.1 10.4
Polycab ADD 820 875 7 122 1.6 149 52 40 53 53.2 (21.5) 30.7 15.9 20 15.5 11 14 10 3.2 2.8 2.4 23 14.7 16.8 0.9 0.7 0.9 3.6
TCNS Clothing Co. REDUCE 330 380 15 20 0.3 66 11 4 15 (47.7) (64.3) 302.6 31 86 21 12 16 8.2 3.3 3.0 2.5 10.9 3.6 12.8 — — — 0.2
Vardhman Textiles ADD 665 720 8 38 0.5 57 85 25 90 (34.1) (70.8) 260.6 7.8 27 7.4 5.9 10.5 4.9 0.6 0.6 0.6 8.3 2.3 8.0 2.6 1.9 3.0 0.2
Voltas SELL 598 440 (26) 198 2.6 331 16.2 10.3 17.8 3.4 (36.5) 73.0 37 58 34 30 56 28 4.6 4.4 4.0 12.8 7.7 12.5 0.6 0.4 0.8 21
Whirlpool SELL 2,073 1,580 (24) 263 3.5 127 38 26 47 17.0 (32.0) 82.8 55 81 44 37 54 31 10.3 9.5 8.6 20 12.2 20 0.2 0.4 0.9 1.5
Consumer Durables & Apparel Cautious 1,381 18.5 2.3 (30.4) 35 51 31 24 32 21 5.8 5.3 16.3 10.5 15.3 1.0 0.5 61
Consumer Staples
Bajaj Consumer Care ADD 176 200 14 26 0.3 148 12.5 12.8 13.1 (16.6) 2.1 2.7 14.0 13.7 13.4 10.5 10.4 10.0 4.0 3.4 3.1 33 27 24 1.1 3.4 4.6 2.7
Britannia Industries ADD 3,824 4,150 9 920 12.3 240 59 81 86 22.1 36.7 6.3 65 47 45 50 35 34 20.9 17.3 13.7 32 39 34 0.9 0.7 0.9 46
Colgate-Palmolive (India) ADD 1,423 1,550 9 387 5.2 272 28 31 36 5.9 8.1 18.0 50 46 39 31.9 29.7 25.5 24.3 24.1 22.9 51 52 60 2.0 2.0 2.4 21
Dabur India REDUCE 514 415 (19) 907 12.1 1,767 8.6 9.5 11.0 6.1 10.2 15.3 60 54 47 50 44 37 13.7 12.6 11.5 25 24 26 0.6 1.2 1.4 24
Godrej Consumer Products ADD 692 750 8 707 9.5 1,022 13.8 15.4 18.7 (4.8) 11.6 21.7 50 45 37 34 31 25 9.0 7.9 7.1 18.6 18.7 20 0.9 1.1 1.4 16.2
Hindustan Unilever ADD 2,210 2,500 13 5,188 69.4 2,343 31 35 45 10.9 12.3 28.1 71 63 49 53 44 35 59.4 12.0 11.4 86 32 24 1.1 1.4 1.9 209
ITC BUY 194 260 34 2,387 31.9 12,308 11.6 10.5 12.3 14.4 (9.4) 17.9 16.8 18.5 15.7 11.5 13.3 11.0 3.7 3.6 3.5 21 18.9 22 5.2 4.6 5.5 80
Jyothy Laboratories ADD 123 135 10 45 0.6 367 4.7 5.2 5.7 (15.5) 11.0 8.2 26 24 22 19.0 15.7 14.6 3.7 3.5 3.3 13.6 15.3 15.7 2.4 2.8 3.2 1.0
Marico ADD 363 390 7 469 6.3 1,290 8.1 8.7 9.7 12.4 7.7 11.2 45 42 37 32 29 26 15.5 14.4 13.4 35 36 37 1.8 1.9 2.1 16.4
Nestle India REDUCE 16,522 16,000 (3) 1,593 21.3 96 204 227 270 22.6 10.9 19.1 81 73 61 56 48 42 82.4 64.8 51.8 70 100 94 2.1 1.0 1.2 41
Tata Consumer Products ADD 428 385 (10) 392 5.2 922 8.0 8.2 10.9 13.9 2.9 33.2 54 52 39 29 27 23 2.9 2.8 2.7 6.9 5.4 6.9 0.6 0.8 1.0 24
United Breweries ADD 952 1,180 24 252 3.4 264 16.2 2.5 21.8 (24.0) (84.4) 760.7 59 376 44 29 61 23 7.1 7.2 6.2 12.8 1.9 15.2 0.3 0.1 0.6 10.9
United Spirits ADD 581 620 7 422 5.6 727 11.5 8.6 14.0 21.7 (25.0) 62.8 51 67 41 29 36 26 10.5 9.3 7.6 23 14.6 20 — — — 39
Varun Beverages BUY 708 800 13 204 2.7 289 16.2 14.4 29.1 51.9 (11.3) 102.1 44 49 24 16 16 11 6.1 5.4 4.5 17.6 11.7 20 0.1 0.2 0.3 3.2
Consumer Staples Attractive 13,902 185.8 13.0 2.4 23.4 44 43 34 31 30 24 11.2 8.4 7.8 26 19.7 23 1.8 1.8 2.2 534
Diversified Financials
Bajaj Finance REDUCE 3,251 2,800 (14) 1,959 26.2 600 104 74 131 49 (28) 77 31 44 25 — — — 6.0 5.4 4.5 20 13.0 19.8 0.3 0.2 0.4 468
Bajaj Finserv BUY 6,206 7,600 22 988 13.2 159 212 252 402 5 19 60 29 25 15.4 — — — 3.2 2.8 2.4 12.2 12.1 16.8 0.2 0.2 0.2 100
Cholamandalam BUY 203 300 48 166 2.2 820 12.8 13.9 20.2 (15) 8.5 45.0 15.8 14.5 10.0 — — — 2.2 2.0 1.7 14.7 13.1 16.7 0.8 0.8 1.1 39
IIFL Wealth ADD 1,070 1,200 12 93 1.2 88 23.8 37.0 53.7 (47) 55.8 45.1 45 29 19.9 — — — 3.1 3.0 2.9 7.0 10.7 15.1 0.9 2.2 3.3 0.3
L&T Finance Holdings ADD 60 90 50 120 1.6 2,005 8 5 9 (24.1) (44) 84.9 7.1 12.7 6.9 — — — 0.8 0.8 0.7 14.7 6.3 10.9 3.2 2.4 2.7 18.6
LIC Housing Finance ADD 263 350 33 132 1.8 505 47.6 36.2 66.6 4 (24.0) 84.1 5.5 7.3 3.9 — — — 0.9 0.9 0.7 13.9 9.6 16.0 3.0 2.3 4.3 24
Muthoot Finance ADD 1,274 1,025 (20) 511 6.8 401 75 69 85 52.3 (7) 22.8 17.0 18.4 15.0 — — — 4.4 3.7 3.1 28 22 23 1.2 1.1 1.3 47
Shriram City Union Finance BUY 659 1,250 90 43 0.6 66 152 84 158 1.2 (44) 87.1 4.3 7.8 4.2 — — — 0.6 0.6 0.5 14.7 7.5 12.8 0.9 1.6 3.6 0.6

Shriram Transport BUY 691 1,050 52 157 2.1 227 110.3 81.7 119.0 (2) (25.9) 45.6 6.3 8.5 5.8 — — — 0.9 0.9 0.8 14.8 9.9 13.0 0.7 1.8 2.6 57
Diversified Financials Attractive 7,421 99.2 32.3 (24.5) 42.0 18.1 24 16.9 2.7 2.7 2.4 15.1 11.2 14.2 0.9 0.9 1.1 963



Fair O/S ADVT
Electric Utilities
CESC BUY 550 810 47 73 1.0 133 99 102 114 9 3.3 11.8 5.6 5.4 4.8 5.0 4.7 4.2 0.6 0.5 0.5 10.7 10.4 10.7 2.3 2.3 2.4 4.3
JSW Energy BUY 46 65 42 75 1.0 1,640 6.3 -2.2 -2.4 49 (136) (5.6) 7.2 NM NM 4.7 8.3 7.2 0.6 0.7 0.7 8.9 NM NM — — — 1.6
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 1.5
NTPC BUY 87 140 61 861 11.5 9,895 11.1 13.2 15.4 (0.9) 18.7 16.8 7.8 6.6 5.6 9.7 7.6 6.0 0.8 0.7 0.6 10.0 11.1 11.9 3.6 4.6 5.3 21
Power Grid BUY 178 220 23 933 12.5 5,232 20.7 22 25 9 6.3 16.1 8.6 8.1 7.0 6.8 6.5 5.8 1.4 1.3 1.2 17.5 17.0 18.1 5.6 6.0 6.9 28
Tata Power BUY 49 55 13 132 1.8 2,705 4.4 4.9 6.5 110 11 31.8 11.0 9.8 7.5 7.4 6.5 5.9 0.7 0.7 0.6 6.9 7.1 8.7 — — — 22
Electric Utilities Attractive 2,278 30.4 8.2 5.7 16.3 8.1 7.6 6.6 0.9 0.8 0.8 11.2 11.1 11.9 4.4 5.0 5.7 78
Fertilizers & Agricultural Chemicals
Bayer Cropscience SELL 5,553 3,400 (39) 250 3.3 45 129.3 134.2 149.9 64.7 3.8 11.7 43 41 37 33 30 26 9.7 8.2 6.9 24 21 20 0.5 0.5 0.5 2.5
Dhanuka Agritech SELL 792 650 (18) 38 0.5 48 29.7 37.0 40.8 25.7 24.4 10.4 26.6 21.4 19.4 21.3 16.0 14.1 5.3 4.5 3.9 21 23 21 3.0 1.2 1.5 1.6
Godrej Agrovet SELL 459 375 (18) 88 1.2 192 11.5 12.9 17.0 0.8 11.8 32 40 36 27 23 19 15 4.0 3.7 3.3 10.4 10.7 12.9 1.2 1.0 1.3 1.6
Rallis India SELL 291 265 (9) 57 0.8 195 9.0 11.3 14.8 7.4 25.0 30.9 32.1 25.7 19.6 22.0 17.3 13.5 4.0 3.6 3.1 13.1 14.7 17.0 0.9 0.9 1.0 4.3
UPL SELL 478 390 (18) 365 4.9 765 23.2 31.9 36.5 22.7 37.6 14.2 21 15.0 13.1 9.1 7.8 7.1 2.2 2.0 1.8 11.5 14.2 14.6 1.3 1.7 2.0 41
Fertilizers & Agricultural Chemicals Cautious 1,064 14.2 26.7 26.9 16.7 31 25 21.1 14.4 12.2 10.9 4.1 3.6 3.2 13.2 14.8 15.3 0.9 1.0 1.2 56
Gas Utilities
GAIL (India) BUY 97 150 55 436 5.8 4,510 13.2 9.5 11.6 (5.5) (28.2) 22.2 7.3 10.2 8.4 5.6 7.4 6.0 1.0 0.9 0.9 13.5 9.4 10.9 6.6 4.1 5.2 22
GSPL SELL 205 210 3 116 1.5 564 17.2 12.8 11.8 21.9 (25.7) (7.6) 11.9 16.1 17.4 5.4 6.5 6.6 1.7 1.6 1.5 15.5 10.2 8.7 1.0 0.9 1.2 2.4
Indraprastha Gas SELL 404 380 (6) 283 3.8 700 16.7 16.0 20.8 38.6 (4.1) 29.8 24.2 25.2 19.4 17.2 17.8 13.7 5.6 4.8 4.1 25 20 23 0.7 0.7 1.0 27
Mahanagar Gas ADD 974 1,175 21 96 1.3 99 74.6 61.9 82.8 32.8 (17.1) 33.9 13.1 15.8 11.8 8.9 10.3 7.4 3.3 2.9 2.6 28 19.6 24 3.6 3.1 4.6 14.0
Petronet LNG BUY 248 300 21 372 5.0 1,500 17.6 18.7 22.2 17.3 6.2 18.5 14.1 13.2 11.2 7.8 7.4 6.4 3.4 3.2 3.0 25 25 28 5.0 5.7 7.2 12.8
Gas Utilities Attractive 1,302 17.4 6.8 (16.9) 20.5 11.4 13.7 11.3 7.4 8.5 7.1 1.9 1.7 1.6 16.5 12.8 14.3 4.2 3.5 4.5 78
Health Care Services
Apollo Hospitals BUY 1,675 1,700 1 233 3.1 139 18.4 1 44 9 (97) 6,877 90.8 ##### 38.4 16.6 25.5 14.6 7.0 7.0 6.3 7.7 0.3 17.2 0.7 0.0 1.0 19.3
Dr Lal Pathlabs SELL 1,889 1,300 (31) 157 2.1 83 27.1 26.7 37.2 13.4 (1.4) 39.2 69.8 70.8 50.8 43.7 44.2 31.0 15.3 13.3 11.2 23 20 24 0.4 0.4 0.6 3.2
HCG BUY 126 140 11 11 0.1 143 (12.0) (8.7) (2.4) (258) 28 73 NM NM NM 10.4 9.4 5.2 2.9 1.9 1.9 NM NM NM — — — 0.8
Metropolis Healthcare SELL 1,574 1,300 (17) 80 1.1 51 30.0 28.9 40.1 25.3 (3.6) 39 52.5 54.4 39.3 33.3 32.4 24.3 15.2 12.9 10.6 32 26 30 0.5 0.6 0.8 3.7
Narayana Hrudayalaya BUY 292 360 23 60 0.8 204 5.8 -3.0 8.3 101.0 (152) 376 50.1 NM 35.2 15.4 31.9 12.6 5.2 5.5 4.8 10.7 NM 14.6 — — — 0.8
Health Care Services Attractive 607 8.1 3 (81) 817 64.4 331.9 36.2 16.6 22.3 13.3 6.3 5.8 5.2 9.7 1.8 14.4 0.4 0.2 0.7 28
Hotels & Restaurants
Jubilant Foodworks ADD 1,720 1,750 2 227 3.0 133 24 9 30 (2) (62.3) 240 73.0 193.6 56.9 25.1 32.7 19.8 20.1 19.8 15.2 26 10.3 30 0.3 0.2 0.6 28
Lemon Tree Hotels BUY 24 38 61 19 0.2 790 -0.1 -0.9 0.6 (118) (655) 161 NM NM 42.6 14.0 28.6 11.1 2.3 2.5 2.4 NM NM 5.7 — 0.0 0.9 1.4
Hotels & Restaurants Attractive 246 3.3 (18) (85) 868 81.2 531.8 54.9 22.7 32.1 17.9 12.6 12.9 10.7 15.5 2.4 19.6 0.3 0.2 0.6 30
Insurance
HDFC Life Insurance REDUCE 627 560 (11) 1,266 16.9 2,010 6.4 6.8 7.4 1.4 5.8 8.2 97 92 85 — — — 18.0 16.6 15.2 20 18.8 18.7 0.0 0.3 0.3 46
ICICI Lombard SELL 1,301 950 (27) 591 7.9 454 26.3 31.9 35.8 14 21 12 50 41 36 — — — 9.6 7.9 6.8 21 21 20 0.3 0.2 0.6 18.1
ICICI Prudential Life BUY 452 500 11 649 8.7 1,436 7.4 8.5 9.6 (6) 14.4 13.2 61 53 47 — — — 8.6 7.6 6.8 14.8 15.2 15.2 0.1 0.3 0.4 16.9
Max Financial Services NR 558 - (100) 151 2.0 343 10.1 9.5 26.7 452 (6) 180 55 59 21 — — — — — — 12.7 13.5 38 — 0.2 1.1 10.6
SBI Life Insurance BUY 913 1,050 15 913 12.2 1,001 14.2 15.5 16.6 7.2 8.9 7.4 64 59 55 — — — 11.4 9.8 8.6 18.4 18.0 16.7 — 0.3 0.3 18.7
Insurance Attractive 3,570 47.7 8.4 12.8 21.3 68.0 60.3 50 11.5 10.1 8.3 17.0 16.7 16.7 0.0 0.2 0.2 110

182
Fair O/S ADVT
183
Internet Software & Services
Info Edge SELL 3,194 2,185 (32) 391 5.2 122.3 26.9 19.8 36.7 4.2 (26.5) 85.4 118.7 161.5 87.1 93.9 141.1 69.8 16.1 14.9 13.2 13.8 9.6 16.1 0.3 0.2 0.3 17.8
Just Dial BUY 367 420 15 24 0.3 61.8 42.0 24.3 33.0 31.4 (42.2) 35.9 8.7 15.1 11.1 3.1 7.7 4.2 1.8 1.9 1.7 24 12.2 16.1 — — — 16.7
Internet Software & Services Cautious 415 5.6 15.2 (34.9) 66.5 69.1 106.0 63.7 57.2 95.2 52.5 11.2 11.0 9.6 16.2 10.4 15.1 0.2 0.1 0.3 35
IT Services
HCL Technologies ADD 705 670 (5) 1,914 25.6 2,716 40.8 42.2 46.4 11.4 3.4 9.9 17.3 16.7 15.2 10.9 9.9 8.8 3.9 3.2 2.8 24 21 19.7 0.7 1.5 1.9 50
Hexaware Technologies REDUCE 382 375 (2) 114 1.5 302 21.2 23.3 24.6 9.9 9.7 5.8 18.0 16.4 15.5 13.1 10.9 9.6 4.2 3.6 3.1 25 23 22 2.2 2.1 2.6 5.5
Infosys BUY 966 950 (2) 4,114 55.0 4,259 38.9 40.5 45.2 10.0 4.0 11.7 24.8 23.8 21.4 17.6 15.8 14.2 6.3 5.7 5.3 25 25 26 1.8 2.7 3.1 140
L&T Infotech ADD 2,417 2,350 (3) 421 5.6 176 86.6 91.0 110.6 0 5.1 21.5 27.9 26.6 21.8 20.0 17.1 14.9 7.8 6.7 5.6 30 27 28 1.1 1.3 1.4 4.7
Mindtree REDUCE 1,083 890 (18) 178 2.4 165 38.3 54.9 62.5 (16) 43 14 28.3 19.7 17.3 15.6 11.6 10.2 5.7 4.8 4.0 19.5 26 25 2.8 1.5 1.7 16.3
Mphasis REDUCE 1,158 1,100 (5) 216 2.9 187 63.5 64.3 70.6 13 1.1 9.9 18.2 18.0 16.4 12.4 11.6 10.3 3.7 3.4 3.1 21 19.6 19.6 3.0 3.0 3.0 5.7
TCS REDUCE 2,281 2,040 (11) 8,561 114.4 3,752 86.2 83.6 94.1 4 (3.0) 12.5 26.5 27.3 24.2 19.3 19.2 17.3 9.9 9.3 8.6 36 35 37 2.9 2.9 3.3 114
Tech Mahindra BUY 682 770 13 594 7.9 880 45.9 40.8 51.3 (3.9) (11.0) 25.7 14.9 16.7 13.3 9.3 9.2 7.1 2.7 2.5 2.3 19.2 15.7 17.9 2.3 2.3 2.5 44
Wipro ADD 281 265 (6) 1,605 21.5 5,703 16.6 17.0 18.2 11.1 2.4 7.1 16.9 16.5 15.4 10.7 9.9 9.0 2.9 2.5 2.3 17.3 16.2 15.7 0.5 0.7 3.0 41
IT Services Attractive 17,718 236.8 4.3 0.1 12.0 22.8 22.8 20.3 15.8 15.0 13.4 6.0 5.3 4.9 26 23 24 2.1 2.4 3.0 421
Media
DB Corp. REDUCE 73 81 11 13 0.2 175 15.7 5.3 14.1 0.4 (66.5) 166.7 4.6 13.8 5.2 2.7 4.4 2.1 0.8 0.7 0.7 15.7 5.4 14.3 17.1 2.7 16.4 0.4
Jagran Prakashan REDUCE 38 37 (4) 11 0.1 281 7.0 3.9 7.3 (20.9) (44) NA 5.5 9.8 NA 1.7 2.1 NA 0.6 0.5 NA 10.3 5.7 10.3 11.7 5.2 13.0 0.4
PVR BUY 1,085 1,625 50 56 0.7 51 29.0 -32.7 59.3 (33) (213) 281 37.4 NM 18.3 11.5 33.8 7.7 2.5 3.2 2.8 8.5 NM 16.2 0.2 (0.3) 0.5 41
Sun TV Network REDUCE 387 435 12 152 2.0 394 35.5 34.9 39.7 (2) (1.6) 13.6 10.9 11.1 9.7 7.4 7.1 6.3 2.7 2.6 2.5 25 24 26 6.5 6.5 7.1 14.8
Zee Entertainment Enterprises REDUCE 139 145 4 133 1.8 960 11.1 11.2 15.2 (32.5) 0.0 36.7 12.5 12.4 9.1 7.4 7.3 5.4 1.4 1.4 1.3 11.7 11.2 14.5 2.5 4.0 4.0 60
Media Cautious 365 4.9 (17.7) (19.6) 52.4 11.8 14.7 9.6 6.9 8.0 5.5 1.7 1.7 1.6 14.8 11.8 16.9 4.6 4.4 5.5 117
Metals & Mining
Hindalco Industries BUY 163 225 38 366 4.9 2,220 17.8 10.5 20.0 (28.2) (41.1) 91 9.2 15.6 8.2 5.3 6.6 4.9 0.6 0.6 0.6 6.8 3.9 7.1 0.6 0.6 0.6 34
Hindustan Zinc BUY 210 225 7 888 11.9 4,225 16.1 11.9 16.2 (14.5) (26.1) 36.1 13.0 17.7 13.0 7.6 9.4 6.9 2.2 2.7 2.7 18.4 13.7 21 7.9 5.7 7.7 4.1
Jindal Steel and Power BUY 185 250 35 189 2.5 1,020 (7.7) 6.6 16.7 (343) 187 152 NM 27.9 11.0 7.0 6.1 5.1 0.6 0.6 0.5 NM 2.1 5.1 — — — 36
JSW Steel ADD 220 225 2 532 7.1 2,402 10.1 5.3 19.0 (68.3) (47) 257.3 21.8 41.4 11.6 9.6 9.9 6.4 1.4 1.4 1.3 6.8 3.5 11.6 1.0 1.0 1.0 32
National Aluminium Co. SELL 33 24 (27) 61 0.8 1,866 0.7 (0.4) 1.4 (91) (154) 461.1 44.2 NM 22.6 7.8 14.3 6.8 0.6 0.6 0.6 1.4 NM 2.7 4.6 0.0 2.2 7.1
NMDC ADD 84 105 25 257 3.4 3,062 14.6 11.9 11.1 (0.7) (18.8) (7) 5.7 7.1 7.6 4.0 4.9 5.3 0.9 0.9 0.8 16.7 12.8 11.2 6.6 7.1 6.6 7.7
Tata Steel BUY 366 400 9 416 5.6 1,146 35.2 (20.8) 63.3 (61) (159) 404 10.4 NM 5.8 8.2 10.1 5.3 0.6 0.6 0.6 5.9 NM 10.4 2.7 1.9 3.1 66
Vedanta BUY 114 120 5 423 5.7 3,717 6.5 5.5 12.3 (57) (16) 125.0 17.4 20.8 9.2 4.7 6.2 4.7 0.8 0.8 0.8 4.2 3.8 8.7 3.4 10.7 7.5 42
Metals & Mining Attractive 3,132 41.9 (45.5) (46.7) 164.9 13.3 25.0 9.4 6.6 7.8 5.5 0.9 1.0 0.9 7.1 3.9 9.7 3.9 4.1 4.4 44



Fair O/S ADVT
Oil, Gas & Consumable Fuels

BPCL BUY 414 440 6 898 12.0 1,967 11 26 33 (71.0) 144.2 28.4 39.3 16.1 12.5 21.9 11.4 9.6 2.5 2.3 2.1 5.9 14.7 17.4 4.0 3.1 4.0 57.7
Coal India BUY 129 215 66 797 10.6 6,163 27 20 20 (4) (24.7) (3.2) 4.8 6.3 6.5 3.6 5.5 5.2 2.5 2.5 2.5 57.0 38.9 37.6 11.6 15.5 15.5 20.9
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 23.8
IOCL BUY 89 130 47 834 11.1 9,181 (3.9) 9.8 13.2 (121.9) 349.6 34.4 NM 9.0 6.7 23.4 5.8 5.2 0.9 0.8 0.8 NM 9.4 11.9 4.8 5.0 6.7 27.3
Oil India SELL 97 70 (28) 105 1.4 1,084 21 3 6 (32) (85.6) 105.7 4.7 32.4 15.8 3.4 8.8 7.6 0.4 0.4 0.4 8.6 1.3 2.7 11.0 1.2 2.5 2.3
ONGC SELL 78 60 (23) 985 13.2 12,580 13 4 7 (43) (71.7) 89.6 5.8 20.5 10.8 2.7 4.5 3.7 0.4 0.4 0.4 7.3 2.1 3.8 6.4 2.4 3.9 25.1
Reliance Industries ADD 2,067 2,150 4 12,252 163.8 5,926 67 67 93 1.2 (0.1) 40.0 31.0 31.0 22.1 17.7 14.6 9.9 2.7 2.4 2.2 9.4 8.3 10.8 0.3 0.3 0.4 554.2
Oil, Gas & Consumable Fuels Attractive 16,197 216.5 (37.3) (0.0) 38.6 21.6 21.6 15.6 11.3 10.3 7.7 1.8 1.7 1.5 8.4 7.8 9.7 1.8 1.7 2.0 711.4
Pharmaceuticals
Aurobindo Pharma REDUCE 875 730 (17) 512 6.9 586 48 51 56 19.3 6 8.8 18.1 17.1 15.7 11.0 10.3 9.1 3.0 2.6 2.3 16.8 15.5 14.8 0.4 0.9 1.0 52.5
Biocon SELL 410 225 (45) 492 6.6 1,202 6.2 8.2 10.1 2 32 22.7 66 50 41 30.6 22.5 18.2 6.7 6.0 5.4 10.6 12.1 13.3 0.1 0.7 0.9 41.7
Cipla BUY 720 650 (10) 581 7.8 806 19.2 27 32 1.1 39 20 38 27.1 22.5 18.3 15.2 12.7 3.6 3.3 3.0 9.9 12.2 13.2 1.1 0.7 0.8 66.0
Dr Reddy's Laboratories SELL 4,521 3,400 (25) 752 10.0 166 130 155 201 30 19 29.7 35 29.1 22.4 18.3 15.9 12.5 4.8 4.2 3.7 13.9 14.6 16.3 0.5 0.5 0.7 64.6
Laurus Labs REDUCE 934 870 (7) 100 1.3 107 23.9 54.6 55 117.9 129 1 39 17.1 16.9 19.6 11.1 10.4 5.6 4.2 3.4 15.3 24.8 20.1 (0.4) — — 16.7
Lupin ADD 927 900 (3) 420 5.6 450 22 32 46 3.6 46 44 43 29 20.2 16.6 12.9 9.4 3.3 3.0 2.7 7.4 10.4 13.3 0.7 0.5 0.7 36.0
Sun Pharmaceuticals REDUCE 532 510 (4) 1,276 17.1 2,406 16.7 19.7 23 3.8 18 17 32 27 23.1 17.0 14.8 12.5 2.8 2.7 2.5 9.3 10.2 11.3 1.3 0.2 0.9 69.0
Torrent Pharmaceuticals REDUCE 2,663 2,450 (8) 451 6.0 169 57 72 89 22.6 25 24 46 37 30 22.0 18.7 15.9 9.3 8.0 6.8 20.1 21.7 22.8 1.6 0.9 1.2 25.0
Pharmaceuticals Attractive 4,582 61.3 12.5 23 21 34 27 22.8 17.5 14.8 12.3 3.8 3.5 3.1 11.2 12.7 13.6 0.9 0.5 0.9 371.6
Real Estate
Brigade Enterprises BUY 140 235 67 29 0.4 204 6.4 7 15 (46) 6 114 22.0 20.7 9.6 10.4 9.6 4.9 1.3 1.2 1.1 5.9 6.0 12.0 1.8 1.8 1.8 0.7
DLF BUY 141 200 42 349 4.7 2,475 (2.4) 5.0 8.7 (140) 310 74 NM 28.3 16.3 33.8 39.1 22.7 1.0 1.0 1.0 NM 3.6 6.0 — 1.4 1.4 21.4
Embassy Office Parks REIT ADD 357 400 12 275 3.7 772 9.9 12.3 14.1 110 24 15 36 29 25 17.5 16.4 15.1 1.2 1.3 1.4 3.4 4.4 5.4 6.8 7.4 8.3 7.7
Godrej Properties SELL 927 640 (31) 234 3.1 252 10.7 11.9 15.4 (2.7) 11 29.4 86 78 60 72.0 87.4 150.5 4.9 4.6 4.3 7.4 6.0 7.3 — — — 6.5
Oberoi Realty ADD 350 450 29 127 1.7 364 19 22 28 (15.7) 14.1 29 18.5 16.2 12.6 13.6 12.9 11.0 1.5 1.4 1.2 8.3 8.8 10.3 0.6 0.6 0.6 1.9
Prestige Estates Projects ADD 197 275 40 79 1.1 401 10.9 6.6 10 25.1 (39) 54 18 30 19.3 6.6 7.2 6.1 1.4 1.4 1.3 8.7 4.9 7.2 0.8 0.8 0.8 2.3
Sobha BUY 219 415 89 21 0.3 95 30 36 45 (5) 21.5 24.1 7.4 6.1 4.9 4.6 4.1 3.7 0.9 0.8 0.7 12.1 13.4 14.8 3.2 3.2 3.2 1.0
Sunteck Realty BUY 186 300 62 27 0.4 140 7.1 8.8 18 (55.9) 23 105 26 21.0 10.3 20.3 17.3 9.8 0.9 0.9 0.8 3.5 4.2 8.1 0.5 0.5 0.5 2.0
Real Estate Attractive 1,141 15.3 (46.2) 100.6 45.5 55 28 19.0 16.2 16.0 12.7 1.4 1.4 1.3 2.5 4.9 6.9 1.9 2.5 2.7 43.5
Retailing
Aditya Birla Fashion and Retail BUY 125 150 20 97 1.3 773 (2.1) (4.2) 2.7 (151.4) (96.4) 165.1 NM NM 46 10.0 13.1 7.8 8.9 12.6 9.9 NM NM 24.3 — — — 4.3
Avenue Supermarts SELL 2,064 1,480 (28) 1,337 17.9 648 21.0 20 39 45.1 (4.4) 92.8 98 103 53 61 68 36 11.7 10.8 9.0 15.8 11.1 18.4 — — — 21.3
Titan Company BUY 1,043 1,215 16 926 12.4 888 16.8 10 21 (0.2) (38.6) 102.8 62 101 50 38 56 32 13.9 12.6 10.7 23.4 13.1 23.3 0.4 0.3 0.6 52.9
Retailing Attractive 2,359 31.5 (2.8) (28.4) 141.8 89 125 52 41 52 29 12.5 11.5 9.6 14.0 9.2 18.7 0.2 0.1 0.2 78.4
Speciality Chemicals
Castrol India BUY 113 165 45 112 1.5 989 8.4 5.1 8.9 16.8 (39.5) 75.0 13.6 22.4 12.8 8.9 14.5 8.5 8.2 8.2 8.0 65.3 36.5 63.0 4.8 4.4 7.5 2.3
Pidilite Industries REDUCE 1,357 1,325 (2) 690 9.2 508 23.1 17 28 30.1 (24.5) 60.9 59 78 48 43 54 34 15.5 13.9 12.0 27.2 18.8 26.6 0.5 0.5 0.7 17.1
S H Kelkar and Company BUY 72 95 33 10 0.1 141 4.6 4.6 6.2 (24.3) (1.0) 35.8 15.5 15.6 11.5 8.1 7.8 6.1 1.2 1.2 1.1 7.8 7.6 9.8 2.8 1.4 2.4 1.9
SRF ADD 3,793 4,000 5 218 2.9 57 138 150 193 23.5 8.7 28.4 27.5 25.3 19.7 17.0 14.9 12.0 4.4 3.8 3.2 17.5 16.2 17.8 0.4 0.4 0.5 13.6
Speciality Chemicals Attractive 1,030 13.8 22.1 (19.1) 51.2 36 45 29.5 24.0 27.5 19.1 8.9 8.0 7.0 24.7 17.9 23.6 1.0 0.9 1.4 34.9

184
Fair O/S ADVT
185
Telecommunication Services
Bharti Airtel BUY 555 710 28 3,027 40.5 5,456 (6.7) 4.8 13.8 NM NM NM NM 115.4 40.1 10.7 8.3 6.8 3.9 5.0 4.7 NM 3.8 12.1 0.4 1.1 1.1 186.4
Bharti Infratel ADD 192 215 12 355 4.7 1,850 16.5 16.3 17.5 25.7 (1.1) 7.4 11.6 11.8 11.0 4.8 4.6 4.4 2.6 2.6 2.6 21.7 22.2 23.7 5.6 8.3 8.8 32.7
Vodafone Idea RS 8 — — 241 3.2 28,735 (25.7) (3.6) (5.9) NM NM NM NM NM NM 8.0 6.8 5.5 4.0 -5.5 (1.1) NM NM 132 — — — 88
Tata Communications BUY 760 975 28 217 2.9 285 16.0 29.9 37.3 47.5 87.3 24.5 47.5 25.4 20.4 9.5 7.3 6.3 NM NM 54.5 NM NM NM 0.5 0.5 0.8 1.2
Telecommunication Services Attractive 3,840 51.3 NM 55.8 67.3 NM NM NM 9.3 7.5 6.2 4.0 5.5 6.7 NM NM NM 0.8 1.7 1.7 308.2
Transportation
Adani Ports and SEZ BUY 315 390 24 640 8.6 2,032 26.9 18.7 21.9 34.7 (30.5) 16.9 11.7 16.8 14.4 11.4 12.2 10.5 2.5 2.2 2.0 21.8 14.0 14.5 4.1 1.1 1.0 18.9
Container Corp. SELL 451 390 (14) 275 3.7 609 17.3 8.0 13.0 5.7 (53.6) 62.2 26 56 35 15.1 26.7 18.4 2.7 2.7 2.6 10.3 4.8 7.6 0.7 1.0 1.6 12.7
Gateway Distriparks BUY 82 135 64 9 0.1 125 4.2 4.2 3.6 (37.5) 0.4 (15.1) 19.4 19.3 22.8 6.8 5.5 5.7 0.7 0.7 0.7 3.5 3.8 3.0 4.2 3.7 3.7 0.2
GMR Infrastructure BUY 22 26 20 131 1.8 7,147 (3.1) (1.8) (0.8) (25.4) 40.9 55.9 NM NM NM 16.3 19.1 17.0 (4.9) (7.8) (6.0) 106.6 55.8 25.2 — — — 3.9
Gujarat Pipavav Port BUY 75 106 42 36 0.5 483 6.0 4.5 5.8 42.2 (25.1) 28.0 12.4 16.6 12.9 6.7 7.1 6.2 1.7 1.7 1.7 14.2 10.5 13.5 7.5 5.7 7.2 0.9
InterGlobe Aviation SELL 980 900 (8) 377 5.0 383 (6.5) (200.9) 62.1 (258.9) (2,999.1) 130.9 NM NM 15.8 4.4 (6.8) 2.0 6.4 (54.4) 2.0 NM NM 477.2 — — — 41
Mahindra Logistics ADD 298 305 2 21 0.3 71 8.9 5.3 10.9 (29.0) (40.8) 106.4 33 57 27 13.8 17.1 11.4 3.9 3.7 3.4 12.2 6.7 12.9 — — — 0.4
Transportation Attractive 1,490 19.9 17.6 (191.6) 269.0 31 NM 20.0 10.6 22.8 8.8 3.5 3.7 3.2 11.2 NM 16.1 2.1 0.8 0.9 78
KIE universe 113,675 1519.6 (14.2) 4.9 48.3 29 27.6 18.6 12.8 12.7 9.7 2.7 2.5 2.3 9.2 8.9 12.1 1.4 1.6 1.9
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$)= 74.81


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%
45.3% 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%
23.6% over the next 12 months; Reduce = We expect this stock to
19.2% deliver -5-+5% returns over the next 12 months; Sell = We
20% expect this stock to deliver less than -5% returns over the next
11.8% 12 months. Our target prices are also on a 12-month horizon
basis. These ratings are used illustratively to comply with
10%
4.4% applicable regulations. As of 30/06/2020 Kotak Institutional
0.5% 0.5% 1.5% Equities Investment Research had investment ratings on 203
0% equity securities.
BUY ADD REDUCE SELL
Source: Kotak Institutional Equities As of June 30, 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
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Other definitions
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Other ratings/identifiers
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NM = Not Meaningful. The information is not meaningful and is therefore excluded.

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INDIA DAILY

August 3, 2020 India 31-Jul 1-day 1-mo 3-mo

Contents Global/Regional indices

Strategy FTSE 5,898 (1.5) (4.2) 2.3

SRF: In-line results Rs/US$ 74.9 (5) 19 (76)

Net investment (US$ mn)

GMR Infrastructure: Prepared for opportunities ahead MFs (40) - 3,881

Jagran Prakashan: Challenging quarter BHEL IN Equity 36 (2.3) (7.0) 60.1

TPWR IN Equity 49 1.5 (2.4) 53.6

DMART IN Equity 2,063 1.1 (9.9) (13.4)

All-Season portfolio shines amidst market upheaval. In the five-month period

August 2020 changes to the concentrated All-Season portfolio

PERFORMANCE UPDATE: ALL-SEASON SHINES AMIDST MARKET UPHEAVAL

Source: Bloomberg, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3

Source: Bloomberg, Kotak Institutional Equities

4 KOTAK INSTITUTIONAL EQUITIES RESEARCH

AUGUST 2020 PORTFOLIOS

Exhibit 4: APNT replaces TECHM in the concentrated All-Season portfolio

Stock name Sentiment Fundamental Momentum Low volatility Multi-factor

Source: Bloomberg, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 5

Source: Bloomberg, Kotak Institutional Equities

Source: Bloomberg, Kotak Institutional Equities

6 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Source: Bloomberg, Kotak Institutional Equities

Source: Bloomberg, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 7

Exhibit 9: APNT is the new entrant to the All-Season portfolio

Stock name Portfolio Weight KIE analyst recommendation

Source: Bloomberg, Kotak Institutional Equities

Exhibit 10: More sector diversity in the broad All-Season portfolio

Stock name Portfolio Weight KIE analyst recommendation

Source: Bloomberg, Kotak Institutional Equities

Stock name Portfolio Weight KIE analyst recommendation

Source: Bloomberg, Kotak Institutional Equities

8 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Exhibit 12: Broad momentum portfolio is relatively diversified across sectors

Stock name Portfolio Weight KIE analyst recommendation

Source: Bloomberg, Kotak Institutional Equities

Stock name Portfolio Weight KIE analyst recommendation

Source: Bloomberg, Kotak Institutional Equities

Stock name Portfolio Weight KIE analyst recommendation

Source: Bloomberg, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 9

Exhibit 15: Three changes to the concentrated sentiment portfolio

Stock name Portfolio Weight KIE analyst recommendation

Source: Bloomberg, Kotak Institutional Equities

Exhibit 16: Diversified sector exposure in the broad sentiment portfolio

Stock name Portfolio Weight KIE analyst recommendation

Source: Bloomberg, Kotak Institutional Equities

10 KOTAK INSTITUTIONAL EQUITIES RESEARCH

IT companies benefitted from reduction in travel expenses

Source: Companies, Kotak Institutional Equities estimates

Exhibit 2: Adjusted profit of Nifty-50 Index in line with our estimates

Source: Companies, Kotak Institutional Equities estimates

12 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Exhibit 3: Sharp increase in profitability of construction materials companies in 1QFY21

ACC Ambuja Cements Orient Cement UltraTech Cement

Source: Companies, Kotak Institutional Equities

ACC Ambuja Cements Orient Cement UltraTech Cement

Source: Companies, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 13