INDIA

Economy
Public Finance MAY 08, 2020
UPDATE
BSE-30: 31,643

Government borrowing catches up with Covid reality. The government has,

expectedly, revised up its FY2021 dated borrowing plan to Rs12 tn. Factoring in states’
additional supply, we expect an overall gross borrowing of Rs20 tn. We restate that,
given this supply, RBI will need to support the markets with large OMO purchases (with
a calendar) and, as a last resort, partial direct monetization. In the absence of any RBI
response, we expect the 10-year yield to move towards 6.15-6.35% range in 1QFY21.

Covid-19 shock prompts the government to revise its borrowing calendar

The central government has revised its FY2021 dated borrowing program as the pandemic is QUICK NUMBERS
likely to lead to a sharp fall in tax collections and has accentuated the need for relief and
stimulus measures. The central government now plans to borrow Rs12 tn in dated securities  FY2021 gross
(budgeted at Rs7.8 tn), in line with our estimates. Net market borrowing for FY2021 would borrowing at Rs12
therefore be Rs9.6 tn (budgeted at Rs5.4 tn). The government has stepped up its 1HFY21 tn; 1HFY20 gross
government dated borrowing by Rs2.1 tn to Rs6.98 tn (Rs4.88 tn as per the initial plan), borrowing at Rs6.98
accounting for around 58% of the FY2021 total issuance. The net issuance for 1HFY21 is now tn
around Rs5.6 tn (Rs3.4 tn in 1HFY20). The weekly bond auction size for the rest of 1HFY21 is
Rs300 bn (range Rs190-210 bn earlier). Absence of redemptions in July, August and September  Average weekly
would imply heavy net supply (Exhibit 1). We note that the RBI has already revised higher the auction size of
central government’s WMA limit to Rs2 tn. The government had also increased its 1QFY21 Rs300 bn for the
gross T-Bill borrowing by Rs2 tn to Rs5 tn (net borrowing of Rs2.6 tn) (Exhibit 2). rest of 1HFY21

Supply concentrated in the belly of the curve  India 10-year

As per the revised calendar, the long-end of the curve (30-year and 40-year) now accounts for benchmark yield to
21.3% of the total supply. The short-end (2-year and 5-year) has total issuance of 25.4%, while move in range of
the belly of the curve (10-year and 14-year) has 47% of the total supply (35.9% earlier). FRB 6.15-6.35% in
reliance has been increased to 6.3% (from 4.9%) and may provide some relief to the belly and 1QFY21
far-end of the curve. The securities that have been opened to unrestricted foreign investment
(5-year, 10-year and 30-year tenor) account for 61.5% of the overall issuance (Exhibit 3).

Government has provided a credible borrowing plan

In our GFD/GDP estimate of 6.7% (0.2% further slippage from our earlier estimate as we revise
our FY2021 real GDP growth to (-)2%), we were already factoring in G-Sec borrowing of Rs11-
13 tn to bridge the deficit (see Covid-19: Financing the stimulus, April 18 for details). We had
factored in a sharp shortfall in receipts (tax, non-tax and divestment) along with relief/stimulus
measures of 2.1% of GDP, which is offset by some capital expenditure cuts (Exhibits 4 and 5).
While we pencil in the Rs12 tn of G-Sec borrowing, we also factor in Rs1.8 tn of T-bill Suvodeep Rakshit
borrowing (budgeted at Rs250 bn) as well as lower financing through small savings. suvodeep.rakshit@kotak.com
Mumbai: +91-22-4336-0898
With states’ GDF/GDP expected at 4%, consolidated GFD/GDP is likely at 10.7%. This would
Upasna Bhardwaj
imply a consolidated government borrowing of Rs20 tn in FY2021E, which will push up yields upasna.bhardwaj@kotak.com
(Exhibit 6). We reiterate that unless RBI supports the market through OMO purchases (possibly Mumbai: +91-22-6166-0531
accompanied by a 2-3 month calendar) for G-Sec/SDLs, it will be difficult to absorb this amount
Avijit Puri
of supply. If OMO purchases fail to have the desired effect, RBI may have to explore the option avijit.puri@kotak.com
of direct monetization of part of the overall borrowing (Exhibit 7). Bond markets may also get Mumbai: +91-22-6166 1547

some respite from additional monetary easing. We retain our call of additional 50-75 bps of
repo rate cuts along with focus on unconventional measures to support liquidity and bond
markets. In the absence of any RBI intervention, we expect the benchmark 10-year G-Sec yield
to move towards 6.15-6.35% in the rest of 1QFY21.

Kotak Economic Research

kotak.research@kotak.com
Mumbai: +91-22-4336-0000

For Private Circulation Only.

India Economy

Exhibit 1: Net supply is expected to surge in 2QFY21

Monthly gross and net borrowings (Rs bn)
FY2020 FY2021
FY2020 FY2021 1,600 1,500
1,600 1,500
1,400
1,400
1,200 1,200 1,200 1,200 1,200
1,200 1,200
1,090

1,000 1,000
790
800 800
671
590
600 600
434
400 400

200 200

0 0

Sep
May

Aug
Apr

Jun

Jul

Sep
May

Aug
Apr

Jun

Jul
Source: RBI, Kotak Economics Research

Exhibit 2: Net short-term borrowing for 1QFY21 is higher at Rs2.6 tn

Gross and net issuances of T-Bill across tenors, March fiscal year-ends (Rs bn)

Gross issuance Net issuance Redemption

1QFY20 1QFY21 1QFY20 1QFY21 1QFY20 1QFY21
91-day 1,170 1,700 650 1,110 520 590
182-day 910 1,760 390 1,240 520 520
364-day 520 1,540 0 1,020 520 520
CMB 0 0 0 (800) 0 800
Total 2,600 5,000 1,040 2,570 1,560 2,430

Source: RBI, Kotak Economics Research

Exhibit 3: Overall issuances in the 5-year, 10-year and 30-year tenor is at 61.5%
Borrowing calendar for different tenors for 1HFY21 (Rs bn)

Borrowing 2 years 5 years 10 years 14 years 30 years 40 years FRB

April 790 60 180 190 90 120 110 40
May 1,090 60 240 280 220 140 110 40
June 1,200 60 240 360 220 140 100 80
July 1,500 90 240 540 220 140 150 120
August 1,200 60 240 360 220 140 100 80
September 1,200 60 240 360 220 140 100 80
Total 6,980 390 1,380 2,090 1,190 820 670 440
% of total 5.6 19.8 29.9 17.0 11.7 9.6 6.3

Source: RBI, Kotak Economics Research

2 KOTAK ECONOMIC RESEARCH

Economy India

Exhibit 4: Measures announced and probable measures by central government

Fiscal
Central govt impact
Relief measures announced Benefits fiscal impact (% of GDP) Beneficiaries Remarks
Hospitals and testing Rs77.7 bn to spend immediately and remaining over 1-4 years
Health infrastructure 150 78 0.0
facilities to build health infrastructure for fighting Covid-19
5kgs of rice/wheat and 1 kg of pulses over and above the
Food security 450 800 mn individuals
existing food security rules
PM-KISAN 160 87 mn farmers Rs2000 transferred to all farmers in April (front loaded)
NREGA 56 56 0.0 136 mn families Rs20 increase in base wages
Senior
30 30 0.0 30 mn individuals Rs500 each in two tranches over next three months
citizens/widows/handicapped
Women Jan Dhan accounts 310 310 0.2 204 mn individuals Rs500 each per month for next three months
Ujwala scheme 130 130 0.1 80 mn BPL families Free cylinders for next three months
24% contribution due for PF for next 3 months to be borne by
8 mn workers/ 0.4 mn
Organized sector - I 50 50 0.0 government; all firms with up to 100 employees and
firms
empoloyees whose salary is <Rs15000/month

PF scheme regulation will be amended to allow non-refundable

Organized sector - II 48 mn workers advance of 70% of outstanding or three months of wages,
whichever is lower
Building and construction workers 310 35 mn workers Through building and other construction worker welfare fund
Women SHG group 68.5 mn households Rs2 mn collateral free loan compared to Rs1 mn earlier
States to use this fund for medical testing/screening/prevention
District Mineral Funds 255 All states
of Covid-19
Total resources from government 1,900 653 0.3
Probable relief measures (during lockdown)
Hospitals and testing Expansion of testing facilities, Covid-19 gears, and
Health infrastructure 150 150 0.1
facilities isolation/quarantine facilities
Rs2000 to all registered farmers in addition to the scheduled
PM-KISAN 200 200 0.1 100 mn farmers
Rs6000 annually
Rs500 each per month for next three months to remaining Jan
Jan Dhan accounts 273 273 0.1 180 mn individuals
Dhan accounts
Credit guarantee for Covid-19 loan of Rs100,000 for all GST
MSME sector 300 100 0.0 Around 3 mn SMEs
registered SMEs
Loans and grants 500 200 0.1 High-risk sectors Fund to support high-risk sectors

Total resources from government 1,423 923 0.4

Probable stimulus measures (post lockdown)

NREGA 100 100 0.0 100 mn families Higher NREGA projects for rural population
Jan Dhan accounts 570 570 0.3 380 mn individuals Rs1500 lumpsum payout to all Jan Dhan accounts
GST rate cut 500 500 0.2 All consumers Reduction in CGST across goods
Construction/Daily wage
Rural and urban infrastructure 500 500 0.2 Higher spending on rural roads, highways, urban infrastructure
labor
Transfer to states/local bodies for last mile spending,
Support to states 1,000 1,000 0.5 States/Local bodies
urban/rural infrastructure
Total resources from government 2,670 2,670 1.3

Source: PIB, Kotak Economics Research estimates

KOTAK ECONOMIC RESEARCH 3

India Economy

Exhibit 5: We expect FY2021E GFD/GDP at 6.7%

Major central government budgetary items, March fiscal year-ends, 2016-21E (Rs bn)
Change (%)
2019/ 2020RE/ 2020E/ 2021BE/ 2021E/
2016 2017 2018 2019 2020RE 2020E 2021BE 2021E 2018 2019 2019 2020E 2020E
Receipts
1. Revenue receipts (2d + 3) 11,950 13,742 14,352 15,529 18,501 16,805 20,209 17,571 8 19 8 20 5
2. Gross tax revenues (a + b ) 14,556 17,158 19,190 20,805 21,634 19,864 24,230 20,721 8 4 (5) 22 4
2.a. Direct taxes 7,458 8,539 10,068 11,431 11,769 10,487 13,265 10,493 14 3 (8) 26 0
2.a.1. Corporation tax 4,532 4,849 5,712 6,636 6,105 5,640 6,810 5,640 16 (8) (15) 21 0
2.a.2. Income tax 2,876 3,646 4,308 4,730 5,595 4,777 6,380 4,777 10 18 1 34 0
2.a.3. Other taxes 50 43 48 66 69 69 75 75 37 5 5 9 9
2.b. Indirect taxes 7,098 8,620 9,122 9,373 9,865 9,377 10,965 10,229 3 5 0 17 9
2.b.1. Goods and Services Tax — — 4,426 5,816 6,123 5,855 6,905 4,840 31 5 1 18 (17)
2.b.1.1. CGST — — 2,033 4,575 5,140 4,920 5,800 3,940 125 12 8 18 (20)
2.b.1.2. IGST — — 1,767 289 — — — — (84)
2.b.1.3. Compensation cess — — 626 951 983 935 1,105 900 52 3 (2) 18 (4)
2.b.2. Customs duty 2,103 2,254 1,290 1,178 1,250 1,150 1,380 994 (9) 6 (2) 20 (14)
2.b.2.1. Basic duties 572 646 808 1,048 1,104 1,004 1,240 854 30 5 (4) 23 (15)
2.b.2.2. Others 1,532 1,608 483 130 146 146 140 140 (73) 12 12 (4) (4)
2.b.3. Excise duty 2,881 3,821 2,594 2,310 2,480 2,360 2,670 4,395 (11) 7 2 13 86
2.b.4. Service tax 2,114 2,545 812 69 12 12 10 — (92) (83) (83) (15)
2.c Transfers to states, UTs, etc. 5,119 6,145 6,765 7,633 6,588 6,058 7,871 6,079 13 (14) (21) 30 0
2.d Net tax revenues 9,438 11,014 12,425 13,172 15,046 13,805 16,359 14,643 6 14 5 18 6
3. Non-tax revenues 2,513 2,728 1,927 2,357 3,455 3,000 3,850 2,928 22 47 27 28 (2)
3.a. RBI's transfer of surplus 659 659 407 680 1,476 1,476 600 750 67 117 117 (59) (49)
3.a. Telecommunications 565 702 321 408 590 590 1,330 887 27 45 45 126 50
4. Non-debt capital receipts (a + b) 630 654 1,157 1,128 816 666 2,250 850 (3) (28) (41) 238 28
4.a Recovery of loans 208 176 156 181 166 166 150 150 15 (8) (8) (10) (10)
4.b Other receipts (disinvestments) 421 477 1,000 947 650 500 2,100 700 (5) (31) (47) 320 40
5. Total receipts (1 + 4) 12,580 14,396 15,509 16,657 19,317 17,471 22,459 18,420 7 16 5 29 5
Expenditure
6. Revenue expenditure 15,378 16,906 18,788 20,074 23,496 22,705 26,301 29,083 7 17 13 16 28
6.a. Interest payments 4,417 4,807 5,290 5,826 6,251 6,251 7,082 7,082 10 7 7 13 13
6.b. Subsidies 2,418 2,040 1,912 1,968 2,273 2,273 2,278 1,869 3 15 15 0 (18)
6.b.1. Food 1,394 1,102 1,003 1,013 1,087 1,087 1,156 1,156 1 7 7 6 6
6.b.2. Fertilizer 724 663 664 706 800 800 713 713 6 13 13 (11) (11)
6.b.3. Oil 300 275 245 248 386 386 409 0 2 55 55 6 (100)
6.c. Pay, allowances and pensions 3,301 3,996 4,464 4,957 5,447 4,997 5,877 5,627 11 10 1 18 13
6.c.1.a. Pay and allowances 2,334 2,682 3,007 3,291 3,606 3,306 3,770 3,520 9 10 0 14 6
6.c.1.b. Pensions 967 1,314 1,457 1,666 1,841 1,691 2,107 2,107 14 11 2 25 25
6.d. Agriculture and farmers' welfare 153 369 374 461 1,019 1,019 1,343 1,496 23 121 121 32 47
6.e. Education 672 720 800 781 927 835 972 972 (2) 19 7 16 16
6.f. Health and family welfare 322 364 483 506 608 608 639 869 5 20 20 5 43
6.g. Rural development 774 951 1,086 1,118 1,226 1,226 1,200 1,700 3 10 10 (2) 39
6.h. Others 3,321 3,658 4,381 4,457 5,746 5,497 6,909 9,467 2 29 23 26 72
7. Capital expenditure 2,530 2,846 2,631 3,077 3,489 3,125 4,121 3,101 17 13 2 32 (1)
7. a. Defence 836 915 954 998 1,154 1,038 1,186 786 5 16 4 14 (24)
7. b. Railways 350 452 434 528 678 509 700 350 22 28 (4) 38 (31)
7. c. Roads and Highways 275 412 508 676 722 722 820 920 33 7 7 14 27
7. d. Housing and urban affairs 106 165 153 158 192 163 211 311 3 22 3 30 91
7. e. Others 963 902 582 717 743 693 1,204 734 23 4 (3) 74 6
8. Total expenditure (6 + 7) 17,908 19,752 21,420 23,151 26,986 25,831 30,422 32,184 8 17 12 18 25
Deficit
Primary deficit (PD) 911 549 621 668 1,417 2,108 881 6,681 7 112 216 (58) 217
Revenue deficit (RD) 3,427 3,164 4,436 4,545 4,995 5,900 6,092 11,512 2 10 30 3 95
Gross fiscal deficit (GFD) 5,328 5,356 5,911 6,494 7,668 8,359 7,963 13,763 10 18 29 (5) 65
Gross borrowings (dated securities) 5,850 5,842 5,891 5,715 7,100 7,100 7,800 12,028 (3) 24 24 10 69
Net market borrowing 4,416 4,093 4,518 4,233 4,740 4,740 5,449 9,677 (6) 12 12 15 104
Net market borrowing (adjusted for buyback) 4,041 3,497 4,103 4,233 4,740 4,740 5,149 9,677 3 12 12 9 104
Short-term borrowing (T-bills) 507 55 449 69 250 1,560 250 1,800
Nominal GDP at market prices 137,719 153,917 170,983 189,712 204,422 203,372 224,894 205,405 11.0 7.8 7.2 10.6 1.0
PD/GDP (%) 0.7 0.4 0.4 0.4 0.7 1.0 0.4 3.3
RD/GDP (%) 2.5 2.1 2.6 2.4 2.4 2.9 2.7 5.6
GFD/GDP (%) 3.9 3.5 3.5 3.4 3.8 4.1 3.5 6.7

Notes:
(a) 'Gross tax revenues' means revenues post refunds and 'net tax revenues' means gross tax revenues minus devolution to states.
(b) RBI's transfer of surplus for FY2020BE and FY2020E are our estimate.
(c) Pay and allowances include pay and allowances from Ministry of Railways.

Source: Ministry of Finance, Kotak Economics Research estimates

4 KOTAK ECONOMIC RESEARCH

Economy India

Exhibit 6: Overall dated borrowing set to move substantially higher in FY2021E

Trend in borrowings of the center and state governments (Rs bn)

2021E-
2020BE 2020RE 2020E 2021BE 2021E 2020E
Central GFD/GDP (%) 3.3 3.8 4.1 3.5 6.7 2.6
Center's gross borrowing 7,100 7,100 7,100 7,800 12,000 4,900
G-Sec redemption 2,369 2,360 2,360 2,351 2,351 (9)
Center's net borrowing 4,731 4,740 4,740 5,449 9,649 4,909
Net T-bill issuance 250 250 1,560 250 1,800 240
State GFD/GDP (%) 2.6 2.9 2.9 2.4 4.0 1.1
States' gross borrowing 5,764 6,345 6,345 5,666 7,987 1,642
States' redemption 1,375 1,375 1,375 1,348 1,348 (27)
States' net borrowing 4,389 4,970 4,970 4,318 6,639 1,668
Total gross dated supply 12,864 13,445 13,445 13,466 19,987 6,542
Total net dated supply 9,120 9,710 9,710 9,767 16,287 6,577

Source: States and union budget documents, RBI, Kotak Economics Research estimates

KOTAK ECONOMIC RESEARCH 5

India Economy

Exhibit 7: Measures announced and probable measures by RBI

Measures announced by RBI

Policy repo rate Cut the repo rate by 75 bps to 4.40%
Reverse Repo rate Cut the reverse repo rate by 115 bps to 3.75% to disinventize banks from parkking the surplus liquidity with the RBI
LTROs Conduct Long Term Repo Operations (LTROs) for up to a total amount of Rs2 tn at the policy repo rate

1) Introduction of Targeted LTRO (TLTRO) auctions of up to three-year tenor for a total amount of Rs1 tn at a floating rate
linked to the repo rate, with the liquidity availed under this to be deployed in CPs, investment-grade corporate bonds and NCDs
2) Banks shall be required to acquire up to 50% of their incremental holdings from primary market issuances and remaining
TLTRO 1.0 50% from secondary market, including from MFs and NBFCs
3) Investments made by banks under this facility will be classified as held to maturity (HTM) even in excess of 25% of total
investment permitted to be included in HTM
4) Exposures under this facility will also not be reckoned under the large exposure framework

1) Conduct targeted long-term repo operations (TLTRO 2.0) for an aggregate amount of Rs500 bn, to begin with, in tranches
of appropriate sizes. The funds availed by banks under TLTRO 2.0 should be invested in investment grade bonds, commercial
paper, and non-convertible debentures of NBFCs, with aleast 50% of the total amount availed going to small and mid-sized
NBFCs and MFIs in the following proportion, a) 10% in securities/instruments issued by Micro Finance Institutions (MFIs), b) 15%
in securities/instruments issued by NBFCs with asset size of Rs5 bn and below; c) 25% in securities/instruments issued by NBFCs
TLTRO 2.0
with assets size between Rs5 bn and Rs50 bn
2) These investments have to be made within one month of the availment of liquidity from the RBI
3) Investments made by banks under this facility will be classified as held to maturity (HTM) even in excess of 25% of total
investment permitted to be included in the HTM portfolio
4) Exposures under this facility will also not be reckoned under the large exposure framework
1) Provide special refinance facilities for a total amount of Rs500 bn to NABARD, SIDBI and NHB to enable them to meet sectoral
credit needs. This will comprise Rs250 bn to NABARD for refinancing regional rural banks (RRBs), cooperative banks and micro
Refinancing Facilities for All India
finance institutions (MFIs); Rs150 bn to SIDBI for on-lending/refinancing; and Rs100 bn to NHB for supporting housing finance
Financial Institutions (AIFIs)
companies (HFCs)
2) Advances under this facility will be charged at the RBI’s policy repo rate at the time of availment
1) Reduce the cash reserve ratio (CRR) of all banks by 100 bps to 3% of net demand and time liabilities (NDTL) for a year
CRR 2) Reduction to release liquidity worth Rs1.37 tn
3) Reduce the requirement of minimum daily CRR balance maintenance from 90% to 80% (available up to June 26, 2020)

1) In order to ease the liquidity position at the level of individual institutions, the RBI decided to bring down the LCR requirement
Liquidity Coverage Ratio for Scheduled Commercial Banks from 100% to 80% with immediate effect
2) The requirement shall be gradually restored back in two phases – 90% by October 1, 2020 and 100% by April 1, 2021

1) Raising MSF to 3% of SLR from 2% in view of the exceptionally high volatility in domestic financial markets which can bring in
MSF phases of liquidity stress. This will remain applicable until June 30, 2020.
2) Allows banks to avail an additional Rs1.37 tn of liquidity under the LAF window in times of stress at the MSF rate
OMO purchases Conducted OMO purchases worth Rs400 bn

The RBI has opened a special 90-day liquidity facility for mutual funds to ease the liquidity strains which have intensified in the
wake of redemption pressures related to closure of some debt MFs and potential contagious effects. Banks meeting the liquidity
Special Liquidity facility for mutual
requirements of MFs by (1) extending loans, and (2) undertaking outright purchase of and/or repos against the collateral of
funds
investment grade corporate bonds, CPs, debentures and CDs held by MFs will be eligible to claim all the regulatory benefits
available under SLF-MF scheme without the need to avail back to back funding from the Reserve Bank under the SLF-MF.

Extends fixed rate reverse repo
and MSF window
USD-INR sell-buy swap
Term loans
Working capital facilities
Working capital financing
WMA limit for the central
government
WMA limit for the state
governments
Probable measures by RBI
Policy rates/corridor
OMO purchases
Corporate bond purchases
NBFCs
Direct monetization of deficit
Decided as an interim measure to extend the window timings of Fixed Rate Reverse Repo and MSF operations to provide eligible
market participants with greater flexibility in their liquidity management. Changes will come into effect from March 31, 2020 and
will be applicable till April 30, 2020
Providing dollar liquidity by having conducted US$4bn worth of USD-INR sell buy swap
Permitting all lending institutions to allow a moratorium of three months on payment of installments for term loans outstanding
as on March 1, 2020 without asset classification downgrade. The RBI also decided to exclude the moratorium period from the
90-day period for NPA classification, implying that an account can remain in default for 180 days before it is classified as an NPA
Permitting lending institutions to allow deferment of three months on payment of interest with respect to working capital
facilities without asset classification downgrade
Permitting lending institutions to recalculate drawing power by reducing margins and/or by reassessing the working capital cycle
for the borrowers In respect of working capital facilities sanctioned in the form of cash credit/overdraft without asset
classification downgrade
Increased the limits for Ways and Means Advances (WMA) for 1HFY21 to Rs2 tn
Increased the limits for Ways and Means Advances (WMA) for states 1HFY21 by 60%
Cut the repo rate by 50-75 bps; further widen policy corridor by reducing reverse repo rate by more 50-75 bps to 3-3.25%
Announce OMO calendar for the next three months. Conduct OMO purchases of around Rs6-7 tn including SDLs. Current RBI
ownership of SDLs is 0% while SCBs, insurance companies, and pension funds own 89% of SDLs
Support corporate bond purchases by buying through banks without appropriate haircuts. LCR norms allow corporate bonds as
part of HQLA
Open a collateralized refinancing window at repo rate
If required, monetize part of central government fiscal deficit (0.5-1% of GDP)

Source: RBI, PIB, media articles, Kotak Economics Research estimates

6 KOTAK ECONOMIC RESEARCH

Disclosures

"Each of the analysts named below hereby certifies that, with respect to each subject company and its securities for which
the analyst is responsible in this report, (1) all of the views expressed in this report accurately reflect his or her personal views
about the subject companies and securities, and (2) no part of his or her compensation was, is, or will be, directly or
indirectly, related to the specific recommendations or views expressed in this report: Suvodeep Rakshit, Upasna Bhardwaj
and Avijit Puri."

Kotak Institutional Equities Research coverage universe

Distribution of ratings/investment banking relationships
Percentage of companies covered by Kotak Institutional
70%
Equities, within the specified category.

60%
Percentage of companies within each category for which Kotak
Institutional Equities and or its affiliates has provided
50% 47.1%
investment banking services within the previous 12 months.

40% * The above categories are defined as follows: Buy = We

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

Source: Kotak Institutional Equities As of March 31, 2020

Ratings and other definitions/identifiers

Definitions of ratings

BUY. We expect this stock to deliver more than 15% returns over the next 12 months.

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

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

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

Our Fair Value estimates are also on a 12-month horizon basis.

Our Ratings System does not take into account short-term volatility in stock prices related to movements in the market. Hence, a particular Rating may not
strictly be in accordance with the Rating System at all times.

Other definitions

Coverage view. The coverage view represents each analyst’s overall fundamental outlook on the Sector. The coverage view will consist of one of the following
designations: Attractive, Neutral, Cautious.

Other ratings/identifiers

NR = Not Rated. The investment rating and fair value, if any, have been suspended temporarily. Such suspension is in compliance with applicable regulation(s)
and/or Kotak Securities policies in circumstances when Kotak Securities or its affiliates is acting in an advisory capacity in a merger or strategic transaction
involving this company and in certain other circumstances.

CS = Coverage Suspended. Kotak Securities has suspended coverage of this company.

NC = Not Covered. Kotak Securities does not cover this company.

RS = Rating Suspended. Kotak Securities Research has suspended the investment rating and fair value, if any, for this stock, because there is not a sufficient
fundamental basis for determining an investment rating or fair value. The previous investment rating and fair value, if any, are no longer in effect for this stock
and should not be relied upon.

NA = Not Available or Not Applicable. The information is not available for display or is not applicable.

NM = Not Meaningful. The information is not meaningful and is therefore excluded.

KOTAK ECONOMIC RESEARCH 7

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