24 Mar 23 Kotak Daily

India Daily
March 24, 2023 NIFTY-50 [Mar 23]: 17,077
Contents
Daily Alerts
Company Alerts
InterGlobe Aviation: Well-prepared to sail through seasonality
GAIL (India): Integrated tariff in line; key catalyst behind
Mahindra & Mahindra Financial: Profitability is key, growth will be secondary
Biocon: The insulin saga adds to the uncertainty
Sector Alerts
Fertilizers & Agricultural Chemicals: Crop & Chemical Dashboard: Cyclical downturn underway
IT Services: Large deals increase; core modernization picking pace
Private Circulation Only.

This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities A ct of 1933
UPDATE
InterGlobe Aviation (INDIGO) BUY

Transportation
CMP(₹): 1,906 Fair Value(₹): 2,550 Sector View: Neutral NIFTY-50: 17,077 March 24, 2023
Well-prepared to sail through seasonality Company data and valuation summary

Indigo in its analyst meet highlighted its focus on cost leadership and
Stock data
expanding international revenues. It expects the domestic market to recover
CMP(Rs)/FV(Rs)/Rating 1,906/2,550/BUY
from the seasonality seen during 4QFY23, and has plans to increase the share
52-week range (Rs) (high-low) 2,180-1,512
of international ASKs to 30% over the next few years, with code share
Mcap (bn) (Rs/US$) 735/9
agreements. Near-term pressure on yields is due to lower demand and fuel
ADTV-3M (mn) (Rs/US$) 1,986/24
prices. Yield movement will be led by demand, load factor and route
optimization in the future. Retain our estimates and FV of Rs2,550. BUY. Shareholding pattern (%)
Indigo expects to benefit from demand improvement 1.2

1.3
6.21.6
The company plans to capitalize on the expected growth potential by leveraging
17.8
its existing network and expanding across international locations. The Indian
aviation market is under penetrated and has a strong scope of growth in coming
71.9
years. Indian market needs 1,100 passenger aircraft by FY2027. Domestically,
Indigo plans to add 50 aircraft by FY2024, as it has already placed an order for
500+ aircraft. It plans to increase the share of international ASKs to 30% in the Promoters FPIs MFs BFIs Retail Others
next two years through code share agreements with Turkish, Qatar, Amer ican
Private Circulation Only. This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities Act of 1933
Airlines, Air France, Qantas, Virgin Atlantic and Jetstar, and has already crossed
Price performance (%) 1M 3M 12M
pre-Covid levels. With incremental investments of $11.8 bn for greenfield
Absolute 2 0) 4
airports and brownfield expansion, we expect Indigo to be rightly placed to
Rel. to Nifty 5 4 5
capitalize on expected demand growth based on its current fleet structure.
Forecasts/Valuations 2023E 2024E 2025E

Focus on maintaining healthy yields
EPS (Rs) (10.5) 122.1 149.7
We maintain our bias for healthy yields for the company, going forward, as EPS growth (%) 93.5 1,268.4 22.5
demand and load factors are fairly strong. Decline in fuel prices can result in P/E (X) (182.3) 15.6 12.7
lower yields in the near term and seasonality impact can play out on yields P/B (X) (11.3) (41.4) 18.4
during 4QFY23, but that is also required to induce demand for the coming EV/EBITDA (X) 9.0 3.7 2.7
RoE (%) 6.4 (114.1) 519.0
quarters. The company would also try to manage peaks and troughs of
Div. yield (%) 0.0 0.0 0.0
domestic market yields by route optimization across the domestic network.
Sales (Rs bn) 543 627 723
Along with this, consolidation in the industry is also positive for pricing. We EBITDA (Rs bn) 67 145 172
expect yields of Rs5.07/Rs5.14 for FY2024E/25E as against Rs5.37 in 3QFY23. Net profits (Rs bn) (4) 47 57
Source: Bloomberg, Company data, Kotak Institutional Equities estimates
Strategic priorities for future
Prices in this report are based on the market close of
Indigo would continue to focus on affordable fares, on time performance, March 23, 2023
hassle-free service, and unparalleled network. The company is also investing in
digitalization and has developed an in-house partnership booking engine to
collaborate seamlessly with global partners. It is also continuously investing in
training and human capital. The company expects to grow its fleet size to 350
and grow its capacity 15-17% yoy for FY2024. It expects to carry 85 mn/100 mn
passengers in FY2023/24E, and plans to add 10-15 destinations on yearly basis.
Its overall forex liability stands at nearly Rs400 bn, and hence, volatility in forex
can impact earnings.
Maintain estimates and fair value of Rs2,550; retain BUY

We maintain our estimates and fair value of Rs2,550 on the company. Key
overhang on the stock may remain from the expected Mr Gangwal’s stake sale,
volatility in crude prices and forex. Retain BUY. Full sector coverage on KINSITE
Aditya Mongia Teena Virmani

FP Body Text
FP Head
FP Bullet
3
Seasonality effect has led to 6% qoq improvement in yields in 3QFY23, but due to weak demand during
4QFY23, yields may come down qoq in 4QFY23
Exhibit 1: Comparison of yields and fuel cost per ASK for INDIGO, March fiscal year-ends, 1Q18-3Q23
Yield (Rs per ASK, LHS) Fuel cost (Rs per ASK, RHS)
6.0 2.5
5.0
2.0
4.0
3.0 1.5
5.37
5.24
5.07
4.50
4.41
4.41
4.21
4.08
3.88
3.84
3.83
3.81
3.73
3.70
3.70
3.70
2.0 3.70
3.63
3.57
3.52
3.48
3.31
3.22
1.0
1.0
0.0 0.5
2QFY18
3QFY18
1QFY19
3QFY19
4QFY19
2QFY20
4QFY20
1QFY21
3QFY21
1QFY22
2QFY22
4QFY22
2QFY23
3QFY23
1QFY18
4QFY18
2QFY19
1QFY20
3QFY20
2QFY21
4QFY21
3QFY22
1QFY23
Source: Company, Kotak Institutional Equities
Load factors for Indigo and industry, after dropping in January 2023, have breached 87%/88% levels in
February
Exhibit 2: Monthly load factors of Indigo and industry (%)
(%) IndiGo (LHS) Difference versus industry average (RHS)

100 3.0
2.0
90
1.0
80
-
70
(1.0)
60
(2.0)
50 (3.0)
Sep-18
Sep-20
Sep-21
Sep-22
Nov-18
Sep-19
Nov-19
Nov-20
Nov-22
Nov-21
May-18
May-20
May-22
May-19
Jul-19
May-21
Jul-21
Jul-22
Jul-18
Jul-20
Jan-20
Jan-22
Jan-19
Jan-21
Jan-23
Mar-19
Mar-21
Mar-20
Mar-22
Source: DGCA, Company, Kotak Institutional Equities
InterGlobe Aviation
Transportation India Research
4
Interglobe Aviation has signed these code-share agreements for domestic leg of international travel across key regions
Exhibit 3: Code-share agreements signed by Interglobe Aviation
Month of
Airline Region signing Nature Benefits
Offers Turnkish Airlines access of undisclosed number of cities in India
Turkish Airlines Europe Dec-18 Two-way
Offers Indigo access to 20 international destinations
Qatar Airways Doha Nov-19 One-way Offers Qatar Airways more flights into Delhi, Mumbai and Hyderabad
American Airlines America Sep-21 One-way Offers American Airlines access to 29 new cities in India
Offers Air-France KLM access to 30 new cities in India
Air France-KLM Europe Dec-21 Two-way
Offers Indigo access to 300 European routes
Sydney (as of Offers Qantas direct flights to South India to start with, cutting travel time by three
Qantas Apr-22 One-way (for now)
now) hours. Also offers 50 cities in India one-stop access to Sydney
Jetstar Aug-22 Interline Will enable Jetstar customers to book flights on Indigo services
Offers Virgin Atlantic flights to seven Indian cities and it will later this year be
Virgin Atlantic Sep-22 One-way (for now)
expanded to include nine more cities.
ATF prices have been coming down and are at Rs108/Kl as on March 1, 2023
Exhibit 4: Trend in monthly Delhi ATF price (Rs per liter)
ATF Price (Rs per litre)

160
140
120
100
80
60
40
20
0
16-Dec-21
16-Dec-22
16-Apr-21
16-Apr-22
16-Oct-22
16-Oct-21
16-Aug-21
16-Aug-22
16-Feb-23
16-Feb-22
16-Jun-21
16-Jun-22
Source: IOCL, Kotak Institutional Equities
We assume ~Rs0.34/Rs0.39 per ASK RASK less CASK prior to forex for FY2024/25 versus Rs0.53 per ASK reported in 3QFY23
Exhibit 5: Key assumptions for IndiGo, March fiscal year-ends
2015 2016 2017 2018 2019 2020 2021 2022 2023E 2024E 2025E
USD/INR rate 61 66 67 65 70 71 74 76 80 81 82
Crude price, Dated Brent (US$/bbl) 86 47 49 57 70 61 43 78 95 90 90
Indigo's fleet size 94 107 131 159 218 262 285 275 305 350 375
Indigo's ASKs (mn units) 35,327 42,826 54,583 63,510 81,028 96,200 45,481 70,414 113,997 131,097 148,139
Yoy growth (%) 18 21 27 16 28 19 (53) 55 62 15 13
Indigo RPKs (mn units) 28,177 35,968 46,288 55,524 69,811 82,500 31,600 51,700 93,478 109,466 124,437
Yoy growth (%) 22 28 29 20 26 18 (62) 64 81 17 14
Load factor (%) 80 84 85 87 86 86 69 73 82 84 84
Average ticket price (Rs) 4,882 4,248 3,721 3,825 3,886 4,190 4,041 4,706 5,694 5,609 5,693
Yoy growth (%) (4) (13) (12) 3 2 8 (4) 16 21 (2) 1
Yield (Rs per RPK) 4.4 3.9 3.5 3.6 3.6 3.8 3.8 4.2 5.1 5.1 5.1
Yoy growth (%) 2 (10) (10) 3 0 6 (2) 13 21 (2) 1
Ancilliary revenues (as % of ticket
13.3 14.8 14.7 15.4 13.3 13.7 26.2 18.0 13.0 13.0 13.0
revenues)
RASK-CASK (Rs) 0.41 0.54 0.25 0.34 (0.12) (0.03) (1.55) (0.8) 0.16 0.34 0.39
EBITDAR margins ex-fuel cost (%) 68.7 64.5 62.5 62.2 58.7 47.5 29.5 40.6 56.2 63.2 63.7
Source: Company, Kotak Institutional Equities estimates
InterGlobe Aviation
5
We assume Rs122 and Rs150 per share EPS in FY2024 and FY2025, respectively
Exhibit 6: Profit and loss model, balance sheet and cash flow statement for Indigo, March fiscal year-ends (Rs mn)
2015 2016 2017 2018 2019 2020 2021 2022 2023E 2024E 2025E
Profit model (Rs mn)
Sales 139,253 161,399 185,805 230,209 284,968 357,560 149,669 259,309 543,181 626,543 722,917
EBITDAR 38,219 56,247 52,687 65,667 47,940 45,348 5,812 8,420 70,202 148,994 177,847
EBITDA 18,697 30,125 21,432 29,565 (2,054) 40,382 3,008 5,303 66,766 144,575 172,301
Other income 3,838 5,151 7,891 9,469 13,249 15,362 10,363 7,245 11,839 17,403 17,403
Interest (1,155) (3,041) (3,308) (3,398) (5,090) (18,759) (21,420) (23,580) (30,889) (38,456) (42,535)
Depreciation (3,022) (5,055) (4,573) (4,369) (7,596) (39,736) (46,987) (50,678) (51,717) (62,048) (71,572)
Profit before tax 18,357 27,181 21,443 31,267 (1,490) (2,751) (55,035) (61,710) (4,001) 61,474 75,597
Tax expense (5,402) (8,373) (4,852) (8,843) 3,052 269 — — — (14,725) (18,313)
PAT 12,956 18,807 16,591 22,424 1,561 (2,482) (55,035) (61,710) (4,001) 46,749 57,285
Year-end number of shares 307 360 360 383 383 383 383 383 383 383 383
Fully diluted number of shares 344 351 360 383 383 383 383 383 383 383 383
EPS-fully diluted (Rs) 38 54 46 59 4 (6) (144) (161) (10) 122 150
Balance sheet (Rs mn)
Equity 4,207 27,232 37,792 70,774 69,448 58,624 709 (60,353) (64,354) (17,605) 39,679
Total borrowings 39,262 30,071 23,957 22,414 21,937 3,466 25,056 38,968 38,968 38,968 38,968
Deferred incentives 17,516 15,832 21,838 26,017 51,883 2,682 2,206 1,730 12,230 27,980 36,730
Other long term liabilities 24,784 20,302 25,602 36,297 37,605 256,627 305,204 368,909 408,829 464,426 511,747
Current liabilities and provisions 21,914 32,750 42,908 55,791 69,245 99,085 96,567 109,348 120,283 132,311 145,542
Total liabilities 107,682 126,187 152,098 211,293 250,117 420,485 429,742 458,602 515,955 646,080 772,666
Net fixed assets 48,765 47,794 38,190 46,113 56,857 169,184 188,872 214,073 248,795 297,065 340,565
Investments 27,237 22,318 19,443 18,865 12,228 27,186 34,718 43,056 48,848 57,537 62,364
Cash & cash equivalent 25,161 47,048 83,459 129,245 151,229 203,286 185,171 181,490 172,362 238,477 308,585
Loans and advances/other current assets 6,519 9,027 11,005 17,070 29,804 20,829 20,982 19,981 45,948 53,000 61,152
Total assets 107,682 126,187 152,098 211,293 250,117 420,485 429,742 458,600 515,954 646,078 772,665
Cash flow statement (Rs mn)
Operating cash flow 15,966 19,730 16,582 20,722 997 40,651 (57,700) (59,138) (6,811) 43,699 56,521
Working capital changes 7,765 7,082 22,361 22,269 34,532 (26,657) (15,308) 12,402 (5,065) 19,928 13,385
Capital expenditure (10,170) (4,084) 5,031 (12,291) (18,340) 68,271 23,987 16,799 (9,183) (11,494) (13,351)
Free cash flow 13,561 22,728 43,974 30,700 17,189 82,265 (49,020) (29,937) (21,058) 52,132 56,555
Ratios (%)
EBITDAR 27.4 34.8 28.4 28.5 16.8 12.7 3.9 3.2 12.9 23.8 24.6
EBITDA margin 13.4 18.7 11.5 12.8 (0.7) 11.3 2.0 2.0 12.3 23.1 23.8
Net debt/equity (X) 6.6 0.3 (0.5) (0.7) (1.0) (1.7) (74.8) 0.6 0.4 5.2 (4.1)
Book value (R/share) 12.2 77.7 104.9 184.9 181.5 153.2 1.9 (157.7) (168.1) (46.0) 103.7
ROAE 312.8 126.4 51.0 41.3 2.2 NM NM NM NM NM NM
ROACE 32.3 51.4 68.9 72.4 NM NM NM NM NM NM NM
InterGlobe Aviation
UPDATE
GAIL (India) (GAIL) REDUCE

Gas Utilities
CMP(₹): 105 Fair Value(₹): 95 Sector View: Attractive NIFTY-50: 17,077 March 24, 2023
Integrated tariff in line; key catalyst behind Company data and valuation summary
PNGRB’s tariff for GAIL’s integrated network (INGPL) of Rs58.6/mmbtu (2%
Stock data
below our Rs60/mmbtu assumption), increases the INGPL tariff by ~22% and
CMP(Rs)/FV(Rs)/Rating 105/95/REDUCE
overall tariff by 22% versus FY2023. However, the tariff increases barely
52-week range (Rs) (high-low) 116-83
offset the impact of increased costs in gas transmission. With no meaningful
increase in per unit EBIT margins (versus FY2022 levels), and full
ADTV-3M (mn) (Rs/US$) 1,693/21
capitalization of JHBDPL, transmission business ROCEs may remain at 7-8%.
Maintain Reduce. Shareholding pattern (%)
INGPL tariff barely compensates for cost increase over past two years
8.8
According to our estimates, GAIL’s INGPL tariff of Rs58.6/mmbtu increased 5.2
8.2
about Rs10.5/mmbtu (versus ~Rs48/mmbtu in FY2023E; higher on benefits of
7.6 51.5
additive tariffs). This rise is also led by liberal allowance of future opex of
Rs1.15 tn (though 25% lower versus GAIL’s demand, but 6x of past opex). 18.7
However, PNGRB’s gas price assumptions are low (US$3.6/mmbtu for APM,
US$7/mmbtu for HPHT) versus likely prices after the Kirit Parikh report is Promoters FPIs MFs BFIs Retail Others
implemented. We expect GAIL to appeal on lower gas price assumption, but we
Private Circulation Only. This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities A ct of 1933
do not expect PNGRB to revise its tariff order soon. At a later stage when tariff
will be trued up for higher gas prices, an offset from lower other opex is likely. Price performance (%) 1M 3M 12M
Absolute 7 15 10
With tariff hike, key catalyst in transmission is behind Rel. to Nifty 10 19 11
We note that gas transmission business accounts for 60% of our FV for GAIL,
and INGLP accounts for over 90% of this volume. With the tariff hike behind, Forecasts/Valuations 2023E 2024E 2025E
volumes will be the key driver of growth. New 20-25mmscmd domestic gas EPS (Rs) 8.8 9.6 9.2
from KG-basin boosts near-term outlook. However, with much elevated EPS growth (%) (43.4) 9.2 (3.9)
P/E (X) 11.9 10.9 11.4
domestic gas prices (APM gas to be pegged to 10% of oil price) and price
P/B (X) 1.2 1.1 1.1
sensitive demand, we are not optimistic on the LT outlook. With GAIL working
EV/EBITDA (X) 9.6 8.8 8.6
on several new pipelines (such as Srikakulam-Angul, Mumbai-Jharsuguda, RoE (%) 10.2 10.6 9.7
Indra Dhanush), like in the past, its capacity growth will exceed volume growth, Div. yield (%) 4.4 4.8 5.1
and pipeline utilization will remain low. In the tariff mechanism, volume risk Sales (Rs bn) 1,391 1,332 1,317
remains with the operator, and thus GAIL’s returns on its transmission business EBITDA (Rs bn) 85 97 101
will likely stay low LT, in our view. Net profits (Rs bn) 58 63 61
Despite lower gas prices, commodity business earnings will be weak
We note lower LNG prices, and improved availability have enabled GAIL to ramp March 23, 2023
up its petchem capacity to full utilization recently. However, profitability will be
weak, and it is likely the segment will remain in loss in the near term. With
reduced APM price, the LPG segment will benefit, but profitability will be weak.
With HH prices weak, GAIL can surprise on higher gains in the gas trading
segment, but earnings have been very volatile, and it disappointed with large
losses recently.
Maintain REDUCE with unchanged FV of Rs95/share Related Research
We have cut our transmission segment earnings for lower INGPL tariff, and → GAIL (India): GAIL: Tariff hikes sooner and at
further cut APM allocation. However, this is offset by higher petchem earnings → one
Gas go
Utilities: Unified tariff: too high to start
(early ramp-up, lower gas prices). We have increased our marketing EBIT → with?
GAIL (India): 3QFY23 much worse; reiterate
assumption by Rs500mn to Rs30-35bn based on revised guidance. Maintain SELL
REDUCE with FV of Rs95/share (unchanged). Full sector coverage on KINSITE
Anil Sharma Aditya Bansal

7
For INGPL, PNGRB’s approved tariff of Rs58.6/mmbtu is 22% Lower fuel costs allowance key reason for lower tariff versus
higher versus current tariff, and 15% below what GAIL sought what GAIL sought
GAIL’s INGPL network current tariff, sought by GAIL Tariff reconciliation between GAIL’s demand versus
and approved tariff from 1-April-2023; Rs/mmbtu PNGRB approval (Rs/mmbtu)
Currrent Sought Determined Rs/mmbtu Tariff Impact
Rs/mmbtu by GAIL by PNGRB Tariff sought by GAIL 68.6
INGPL tariff 48.0 68.6 58.6 Tariff reconcilation
Fuel costs 62.8 -5.8
Change vs current
Pay revision 61.3 -1.5
Rs /mmbtu 20.6 10.6
Volume/capacity adjustments 60.0 -1.3
% 42.8 22.1 Capital expenditure 58.7 -1.2
Change vs sought Opex 58.6 -0.1
Rs mmbtu (9.9) Working capital 58.6 0.01
% (14.5) Tariff determined 58.6
Source: PNGRB, Kotak Institutional Equities Source: PNGRB, Kotak Institutional Equities
PNGRB cut GAIL’s future opex projections by 25%, driven by lower gas costs assumption and
disallowance of pay revision; despite the cut in overall future opex of Rs1.15 tn over next 25 years is high
Sought by Considered by
GAIL PNGRB Change
Rs bn Rs bn Rs bn %
Gas costs 630 411 (220) (35)
Other site opex 629 600 (28) (4)
Corporate opex 138 140 2 1
Pay revision 143 - (143) (100)
Total 1,540 1,151 (389) (25)
Source: PNGRB, Kotak Institutional Equities
Despite the 25% cut by PNGRB, future opex assumption seems rather aggressive
INGPL’s opex: GAIL’s past trends/future projection versus opex considered by PNGRB (Rs bn)
(Rs bn)
Considered by PNGRB Sought by GAIL
96
84
72
60
48
36
24
12
-
FY32E
FY34E
FY42E
FY44E
FY46E
FY24E
FY26E
FY28E
FY30E
FY36E
FY38E
FY40E
FY48E
FY10
FY20
FY22
FY12
FY14
FY16
FY18
Source: Company, PNGRB, Kotak Institutional Equities
GAIL (India)
Gas Utilities India Research
8
Compared with average 70% EBITDA margins, approved tariff model implies declining trends of EBITDA
margins (driven by high 4-4.5% annual opex inflation assumption)
GAIL’s transmission segment revenue, EBITDA and EBITDA margin trends, March fiscal year-ends
(Rs bn, %)
Revenue EBITDA Margin % ( %)

(Rs bn)
108 100
96 90
84 80
70
72
60
60
50
48
40
36
30
24 20
12 10
- -
FY10
FY12
FY14
FY16
FY18
FY20
FY22
FY28E
FY38E
FY40E
FY48E
FY24E
FY26E
FY30E
FY32E
FY34E
FY36E
FY42E
FY44E
FY46E
Source: Company, PNGRB, Kotak Institutional Equities
Revised tariff just compensated for increased costs over past two years
Comparison of likely per unit tariff, costs and margins for FY2024E versus FY2022-23E
(Rs/mmbtu)
FY2024 vs
FY2022 FY2023E FY2024E FY2022E FY2023
Volume mmscmd 111 108 118
Integrated network
Revenue Rs mn 59,391 62,677 83,349
Tariff Rs/mmbtu 43.8 48.1 58.6 14.8 10.5
Other pipelines
Revenue Rs mn 4,534 4,516 5,009
Tariff Rs/mmbtu 26.6 25.2 25.0 (1.6) (0.1)
Overall gas transmission
Revenue Rs mn 63,925 67,193 88,358
Opex Rs mn 14,925 30,191 32,803
EBITDA Rs mn 49,000 37,002 55,555
Depreciation Rs mn 10,943 13,329 15,218
EBIT Rs mn 38,058 23,673 40,337
Overall gas transmission
Tariff Rs/mmbtu 41.9 45.3 54.5 12.6 9.1
Opex Rs/mmbtu 9.8 20.4 20.2 10.4 (0.2)
EBITDA Rs/mmbtu 32.1 25.0 34.2 2.1 9.3
Depreciation Rs/mmbtu 7.2 9.0 9.4 2.2 0.4
EBIT Rs/mmbtu 24.9 16.0 24.9 (0.1) 8.9
Source: PNGRB, Company, Kotak Institutional Equities estimates
GAIL (India)
9
Gas transmission RoCE averaged just 8% over FY13 to FY22; after declining to ~5% in FY2023, these will
recover to 7-8% only, much below 12% post-tax RoCE according to regulations
Gas transmission EBIT and post-tax RoCE, March fiscal year-ends, 1QFY12 onward
(Rs bn) Transmission EBIT Post tax RoCE (RHS) (% )

ROCE as per regulation (RHS) Annual average RoCE
14 14
12 12
10 10
8 8
6 6
4 4
2 2
- 0
1QFY12
3QFY13
1QFY15
1QFY16
3QFY17
1QFY19
3QFY20
1QFY22
1QFY23
3QFY12
1QFY13
1QFY14
3QFY14
3QFY15
3QFY16
1QFY17
1QFY18
3QFY18
3QFY19
1QFY20
1QFY21
3QFY21
3QFY22
3QFY23
With INGPL tariff of Rs58.6/mmbtu (versus earlier considered Rs60.9/mmbtu), unified tariff should decline
to Rs78/mmbtu (versus Rs80/mmbtu earlier)
Unified tariff working summary (mn mmbtu, mmscmd, Rs/mmbtu, Rs mn)
Volume Avg tariff Revenue entitlement
mn mmbtu mmscmd Rs/mmbtu Rs mn share %
GAIL Integrated network 1,319 96.1 58.6 77,293 58.3
GAIL KG 41 3.0 16.1 663 0.5
GSPL HP 370 26.9 34.2 12,637 9.5
GSPL LP 92 6.7 4.1 374 0.3
GITL 29 2.1 31.0 889 0.7
GIGL-MBPL 69 5.1 40.6 2,812 2.1
GIGL-BGPL 1 0.1 5.5 4 0.00
GGL 10 0.8 5.7 59 0.04
PIL 436 31.8 79.5 34,665 26.2
IOCL 67 4.9 11.2 747 0.6
ONGC 46 3.3 34.7 1,592 1.2
RGPL 8 0.6 96.3 755 0.6
Total (includes common volume) 2,487 181.2 132,489 100.0
Common volumes 789 57.5
Unified tariff/volume divisor 1,698 123.7 78.0
Source: PNGRB, Kotak Institutional Equities estimates
Unified tariff—zonal breakup of tariff and volumes (Rs or US$/mmbtu, mmscmd)
Tariff Volumes
Ratio Rs/mmbtu US$/mmbtu mmscmd %
Zone 1 45% of Zone 2 35 0.4 27.0 22
Zone 2 75% of Zone 3 77 0.9 45.7 37
Zone 3 102 1.2 51.0 41
Total / average 78.0 1.0 123.7 100
GAIL (India)
10
In our view, volume divisor of just 124mmscmd taken for unified tariff seems low; any increase in divisor
should lead to lower unified tariff
Likely unified tariff at different volume divisor assumption (Rs/mmbtu, mmscmd)
Volume divisor 124 126 128 130 134 136

Unified tariff 78.0 76.6 75.4 74.3 72.0 71.0
Zonal tarriff break-up
Zone -1 34.5 33.9 33.4 32.9 31.9 31.4
Zone - 2 76.7 75.3 74.1 73.0 70.8 69.8
Zone - 3 102.2 100.4 98.8 97.3 94.4 93.0
Proposed Zone-2/3 unified can lead to high tariff increases for most customers taking APM/LNG
Estimate of current volume, tariff and likely tariff change for domestic APM/LNG and KG-basin gas for key networks
(mmscmd, Rs/mmbtu, %)
Western domestic gas or LNG Eastern offshore gas

likely
likely unified Current change unified Current likely change
Customer location Volume tariff tariff tariff effective tariff
mmscmd Rs/mmbtu Rs/mmbtu Rs/mmbtu % Rs/mmbtu Rs/mmbtu Rs/mmbtu %
GSPL's Gujarat network
LP 6.7 35 4 30 746 102 84 18 21
HP zone 1 10.6 35 33 1 4 102 113 (11) -10
HP zone 2 9.3 77 35 42 120 102 115 (13) -11
HP zone 3 6.9 77 35 42 120 102 115 (13) -11
GAIL's Integrated network pipelines
HVJ zone 1 12.7 35 20 15 74 102 100 2 2
HVJ zone 2 14.9 77 37 40 108 102 117 (15) -13
HVJ zone 3 14.9 77 45 31 69 102 126 (23) -19
HVJ zone 4 32.1 77 50 27 54 102 130 (28) -21
DUDP zone 1 3.4 35 30 6 20 102 110 (7) -7
DUDP zone 2 13.5 77 40 37 92 102 120 (18) -15
Dhabol Bangalore 2.1 77 41 36 88
Chainsa Jhajjar 1.4 102 57 45 78 102 138 (35) -26
Dadri Bawana 7.0 102 64 39 61 102 144 (42) -29
GAIL JHBD 6.0 102 113 (11) -10 102 193 (91) -47
Trombay RCF 2.7 35 25 9 37
Uran Thal Usar 7.4 35 6 28 473
PIL's East West pipeline
EWPL zone 1 1.0 35 65.5 (31) -47
EWPL zone 2 0.5 77 75.3 1 2
EWPL zone 3 0.3 77 78.7 (2) -2
EWPL zone 4 3.8 77 79.8 (3) -4
EWPL zone 5 26.1 102 80.2 22 28
Others
GAIL KG network 3.0 35 16 18 114
IOC Dadri Panipat 4.9 102 66 36 55 102 146 (44) -30
ONGC Uran-Trombay 3.3 35 35 (0) -1
Gujarat Gas HAPI 0.8 35 6 29 507
Mehsana Bhatinda zone 2 3.4 78 41 37 90
Mehsana Bhatinda zone 3 1.5 78 42 37 88
Note:
Proposed Zone-2/3 unified can lead to high tariff increases for most customers taking APM/LNG; benefits for KG-basin gas low,
except for faraway networks such as JHBDPL
Source: PNGRB, Companies, Kotak Institutional Equities estimates
GAIL (India)
11
Key assumptions behind GAIL model, March fiscal year-ends, 2018-25E

2018 2019 2020 2021 2022 2023E 2024E 2025E
Tranmission
Natural gas transmission (mmscmd) 105 107 108 104 111 108 118 125
Integrated Network tariff (Rs/mmbtu) 34 39 43 44 44 48 58.6 58.6
yoy tariff change % 3 15 10 0 0 10 22 -
Other pipelines 34 36 26 25 27 25 25 25
Blended tariffs (Rs/mmbtu) 34 39 42 42 42 45 54 55
Blended tariffs (Rs/scm) 1.30 1.47 1.57 1.57 1.58 1.71 2.05 2.06
yoy tariff change % 3.0 13.8 6.7 (0.5) 0.8 8.3 20.1 0.1
LPG transmission ('000 tons) 3,721 3,975 3,909 4,163 4,199 4,375 4,400 4,425
Transmission tariff(Rs/kg) 1.5 1.6 1.6 1.6 1.6 1.7 1.7 1.7
Gas marketing
Natural gas sales (mmscmd) 85 97 96 89 96 96 98 105
Blended margins (Rs/scm) 0.4 0.8 0.6 (0.2) 1.4 1.1 0.8 0.9
LPG/LHC ('000 tons)
Production ('000 tons) 1,276 1,341 1,264 1,137 1,004 945 950 1,000
LPG price (US$/ton) 528 542 473 390 649 750 640 640
LPG price (Rs/kg) 34 38 33 29 48 60 52 52
Petrochemicals ('000 tons)
Total petrochemicals 673 735 738 872 792 415 756 810
Polyethylene, HDPE (US$/ton) 1,148 1,108 863 894 1,063 1,048 1,126 1,140
PE realisation (Rs/kg) 87 91 74 81 108 113 115 117
Other assumptions
Exchange rate (Rs/US$) 64.5 69.9 70.8 74.3 74.7 80.5 82.0 82.0
APM gas price (GCV, US$/mmbtu) 2.7 3.2 3.5 2.1 2.4 7.4 6.5 7.0
Segmental breakdown of GAIL’s EBITDA and EBIT, March fiscal year-ends, 2018-25E (Rs mn)
2018 2019 2020 2021 2022 2023E 2024E 2025E
EBITDA
Gas transportation 37,137 40,894 46,590 45,890 49,000 37,002 55,555 57,134
LPG transportation 3,268 3,586 3,909 4,120 3,970 4,494 4,479 4,566
Gas marketing 12,561 28,591 21,562 (7,023) 49,322 37,926 30,000 35,000
LPG production 23,480 25,986 16,726 13,880 29,850 13,527 7,755 5,395
Petrochemicals 6,880 8,148 2,043 15,190 17,300 (3,806) 4,158 4,234
Others / unallocable (6,709) (15,180) (5,275) (7,723) (11,151) (3,700) (5,000) (5,000)
Total 76,616 92,024 85,554 64,335 138,290 85,443 96,947 101,330
EBIT
Gas transportation 30,009 32,539 37,258 35,819 38,058 23,673 40,337 40,324
LPG transportation 2,726 3,014 3,309 3,514 3,350 3,893 3,854 3,916
Gas marketing 12,561 28,591 21,562 (7,023) 49,322 37,926 30,000 35,000
LPG production 23,043 25,465 15,806 13,035 28,997 12,640 6,832 4,436
Petrochemicals 2,667 3,849 (2,455) 10,649 12,453 (8,847) (1,085) (1,218)
Others / unallocable (8,817) (12,922) (8,287) (10,621) (15,001) (7,703) (9,163) (9,330)
Total 62,188 80,535 67,194 45,372 117,179 61,581 70,774 73,127
GAIL (India)
12
We value GAIL’s stock at Rs95 per share based on March 2025 estimates
Sum-of-the-parts valuation of GAIL, September 2024E basis (Rs bn, Rs/share)
EV (Rs bn)
Valuation base (Rs bn) Multiples (X) EBITDA Valuation
Other EBITDA Other EV/EBITDA Other basis (Rs/share)
Utility
Natural gas transportation 54.6 7.0 382 57
LPG transportation 4.6 6.0 27 4
Total utility businesses 59.2 410 62
Commodity
Natural gas marketing 34.3 3.0 103 15
LPG/LHC production 4.1 6.0 25 4
Petrochemicals 3.7 6.0 22 3
Total commodity businesses 42.1 150 23
Investments
IGL 69 0.8 55 8
Petronet LNG 43 0.8 34 5
MGL 31 0.8 25 4
China Gas 18 0.8 14 2
ONGC 48 0.6 29 4
Others 125 0.6 75 11
Investments 333 232 35
Total enterprise value 119
Net debt/(cash) 158 24
Equity value 95
Note:
For SOTP, segment EBITDA includes proportionate share of other/unallocables
Source: Bombay Stock Exchange, Kotak Institutional Equities estimates
GAIL (India)
13
Profit model, balance sheet, cash model of GAIL, March fiscal year-ends, 2018-25E (Rs mn)
2018 2019 2020 2021 2022 2023E 2024E 2025E
Profit model (Rs mn)
Net sales 536,616 749,933 720,570 567,302 916,265 1,391,145 1,332,205 1,317,414
EBITDA 76,339 96,038 85,554 64,451 138,290 85,443 96,947 101,330
Other income 9,870 15,712 14,168 19,085 20,469 19,675 21,196 20,434
Interest (2,751) (1,385) (1,085) (1,559) (1,744) (3,186) (6,740) (11,641)
Depreciation (14,151) (15,502) (18,360) (19,079) (21,112) (23,862) (26,172) (28,203)
Pretax profits 69,307 94,862 80,277 62,898 135,903 78,070 85,231 81,920
Current tax (16,333) (24,386) (20,600) (15,496) (32,484) (19,342) (21,114) (20,294)
Deferred tax (7,066) (6,205) — 540 221 (781) (852) (819)
Net profits 46,184 60,257 66,206 48,902 103,640 57,948 63,264 60,807
Adjusted net profits 46,000 62,919 59,459 48,167 103,640 57,948 63,264 60,807
Adjusted EPS (Rs) 6.8 9.3 8.8 7.2 15.6 8.8 9.6 9.2
Balance sheet (Rs mn)

Total equity 403,281 440,929 439,711 466,112 555,868 582,562 612,951 638,690
Deferred taxation liability 46,309 59,477 44,972 45,022 47,673 48,454 49,306 50,125
Total borrowings 20,805 10,011 56,174 61,730 76,558 134,558 193,688 215,688
Current liabilities 110,427 133,369 144,479 160,241 183,307 222,160 215,612 213,779
Total liabilities and equity 580,822 643,786 685,336 733,104 863,405 987,733 1,071,556 1,118,282
Cash 25,294 12,147 8,039 13,618 20,850 1,584 35,375 40,358
Other current assets 112,959 133,472 163,831 146,514 207,920 284,353 284,198 287,090
Total fixed assets 343,038 402,886 438,481 475,734 513,427 580,588 630,774 669,625
Investments 99,531 95,282 74,985 97,238 121,209 121,209 121,209 121,209
Total assets 580,822 643,786 685,336 733,104 863,405 987,733 1,071,556 1,118,282
Free cash flow (Rs mn)

Operating cash flow, excl. working capital 64,201 74,922 64,677 53,655 116,093 62,353 68,344 68,101
Working capital changes 18,864 2,425 3,073 22,210 (29,737) (37,580) (6,393) (4,725)
Capital expenditure (29,456) (59,942) (54,620) (42,619) (53,616) (90,460) (75,610) (65,760)
Investments (7,632) (4,823) (32,993) (10,163) (6,012) — — —
Other income 11,377 10,399 19,049 14,040 13,153 19,675 21,196 20,434
Free cash flow 57,354 22,981 (816) 37,123 39,881 (46,012) 7,537 18,050
Ratios (%)
Debt/equity 4.6 2.0 11.6 12.1 12.7 21.3 29.2 31.3
Net debt/equity (1.0) (0.4) 9.9 9.4 9.2 21.1 23.9 25.5
ROAE (%) 10.5 12.7 13.4 9.8 18.6 9.4 9.8 9.0
ROACE (%) 10.1 13.0 11.5 8.9 16.8 8.3 8.4 7.9
GAIL (India)
UPDATE
Mahindra & Mahindra Financial (MMFS) ADD

Diversified Financials
CMP(₹): 228 Fair Value(₹): 265 Sector View: Attractive NIFTY-50: 17,077 March 24, 2023
Profitability is key, growth will be secondary Company data and valuation summary
Key takeaways from our recent meeting, with management of Mahindra
Stock data
Finance (MMFS): (1) focus on RoA, high growth secondary, (2) new segments
CMP(Rs)/FV(Rs)/Rating 228/265/ADD
and affluent to drive business, trends in monsoon in the forefront for tractors,
(3) further refinement of screens, collections will remain monitorable, and (4)
NIM trends remain a bit unclear. Retain ADD with unchanged FV of Rs265.
ADTV-3M (mn) (Rs/US$) 874/11
High growth target is aspirational, focus on ROA

Shareholding pattern (%)
High growth aspiration. MMFS reported strong trends in growth and collections
over the past few quarters. Though loan growth accelerated in 2QFY23 (9% qoq) 6.41.7
due to higher inventory finance, qoq growth was lower at 5% in 3QFY23 due to 12.0
rundown. The company has reported growth of 1% mom in January and 1.5%
11.5 52.2
mom in February; we are building in 1.9% mom in March 2023E (5% for
3QFY23E), 4Q is seasonally strong quarter. MMFS has guided for doubling of 16.1
loan book to Rs1.3 tn in FY2025E from Rs650 bn in FY2022. A part of this will
be supported by new segments of SME and focus on affluent lending. Promoters FPIs MFs BFIs Retail Others
Closely watching for red flags. Management clarified that the above is an
aspirational target and can be revised based on the business environment. The
company is closely watching any impact of El Nino and volatility in monsoon. Price performance (%) 1M 3M 12M
Our auto team finds mixed impact of El Nino on tractor demand, as observed Absolute (11) 3 43
over the past 25 years (link). Exhibit 1 does not show any direct link between El Rel. to Nifty (8) 7 44
Nino and MMFS’ growth and credit quality either. The company is open to
recalibrate its growth estimates, if the market environment is adverse. As of Forecasts/Valuations 2023E 2024E 2025E
now, there are no signs of stress. We are building in 24% loan growth for EPS (Rs) 15.8 18.5 23.4
FY2023E, moderating to 20-21% for the next two years. EPS growth (%) 96.9 16.9 27.1
P/E (X) 14.4 12.4 9.7
Affluent business to support in case core business face headwinds. In addition P/B (X) 1.8 1.6 1.5
to tractor and MUVs, MMFS is now focusing on the affluent segment for the BVPS (Rs) 126.6 138.4 153.9
financing of cars and other vehicles. The company may benefit from funding on RoE (%) 12.1 13.1 14.9
some newer M&M SUVs in interior India. Overall, yields and credit losses in this Div. yield (%) 3.1 1.6 2.1
(affluent) segment may be lower, but provide a lever to step up growth. Recent Nll (Rs bn) 61 75 92
senior management recruits at MMFS have long experience in private banks PPOP (Rs bn) 38 48 61
that have catered to the rural affluent. Net profits (Rs bn) 19 23 29
RoA in focus. Management highlighted that the key focus of the company
remains on maintaining RoA (2.5% in the near term), despite large investments
March 23, 2023
in new segments. Business poses risk of a slowdown/downside to our growth
estimate of 20-21% for FY2024-25E, if the market is adverse. The company will
need to take a strong call on NIM, in this scenario (discussed later).
Retain ADD; FV of Rs265

We returned fair positive from our meeting with management of MMFS.
Calibration in growth is positive in light of inherent volatility in the business.
Besides, refinement of screen and monitoring early warning indicators will help.
Although we do not rule out a downside to our NIM estimates, we find leeway
in running down large operating expenses at the current juncture. Retain ADD
with unchanged FV of Rs265.
Full sector coverage on KINSITE
Nischint Chawathe M B Mahesh, CFA Varun Palacharla Abhijeet Sakhare Ashlesh Sonje, CFA
15
New beginning in housing finance

The company remains assertive on the housing business. MMFS has recently hired Shantanu Rege (ex-
EA to Anand Mahindra, Harvard graduate) to takeover Mahindra Housing—this business will reduce
focus on rural housing and shift toward affordable housing over the next 2-3 years.
Razor sharp focus on collection continues, tracking developments closely

The recent monthly release (Feb) also suggests that collections continue to improve and MMFS is well-
placed to smoothly transition to deliver 8.0% GNPLs, according to IRAC norms (7.6% in 3QFY23) in
4QFY23. The temporary pause of deploying repossession agents has been lifted, which will reduce loss
on repossession. MMFS does not find any red flags on asset quality as of now.
Seasonal trends suggest weakness in 1Q; the extent of qoq rise in delinquencies in 1Q will determine the
company’s investment strategy for the rest of the year. The new management has focused on two
aspects. (1) Management is continuously engaged in refinement of screens, based on recent trends—
the new book (in the past two years) has been scanned from the same. The list of cohorts of exclusion
has been increasing, even as the company also check for excluded segments that may have been an
opportunity. Leveraging bureau data-based tools and partnership with account aggregators will help
augment the same. (2) Razor sharp focus on collections continues. Management closely monitors 30-
90 days rolling dpd (every day of the month) across portfolio cohorts for any early warning indicators,
which has helped in reducing NPLs over the past few months.
NIM trends unclear

Exhibit 5 shows rates raised by various NBFCs over the past three quarters. Rate hikes have been
significantly lower than 250 bps of policy rate hikes for most. Banks have raised MCLR rates by 120 to
165 bps; with annual repricing of MCLR, increase in borrowing cost of NBFCs is low (69 bps for MMFS
from bottom)—this has supported lower rate hikes for NBFC assets. However, unlike home loans, in the
case of the fixed rate book, the ability to reprice is relatively lower (only on incremental loans); hence, the
impact on NIMs can be higher, if these companies delay passing on the rate hikes. According to most
managements, slower rise in MCLR rates, elevated margins in the base period and intense competition
have ensured that the rate hikes have been lower.
MMFS will consider rate hikes in 1QFY24E based on the view on further policy rate movements, intensity
of competition and expected credit costs to manage its RoTA. We are building in 60 bps yield expansion
for FY2024E (30 bps from 4QFY23E) and 50 bps rise in funding costs (110 bps from bottom of 1QFY23)
in our forecasts. Investments in new businesses remain high and keep the expense ratio higher than
average, until loan growth catches on. Competition in the business remains a sensitivity to our NIM
estimates.
Mahindra & Mahindra Financial

Diversified Financials India Research
16
Correlation of AUM growth and asset quality performance of Mahindra Finance with monsoon deviation is low
Exhibit 1: Domestic tractor industry and MMFS trends against monsoon deviation, March fiscal year-ends, 2002-2023E
Domestic tractor Monsoon deviation GNPA AUM growth

volumes YoY growth Agri GDP growth from normal (Jun-Sep) of MMFS of MMFS
Year (units) (%) (%) (%) (%) (%)
2002 215,005 (8.8) 6.0 (8.0) 7.4
2003 171,622 (20.2) (6.6) (19.0) 7.8 35.0
2004 181,171 5.6 9.0 2.0 8.1 38.6
2005 227,637 25.6 0.2 (14.0) 6.8 54.3
2006 263,514 15.8 5.1 (1.0) 5.5 93.8
2007 319,014 21.1 4.2 (1.0) 5.9 25.0
2008 302,948 (5.0) 5.8 6.0 8.1 11.8
2009 305,868 1.0 0.1 (2.0) 9.6 10.6
2010 402,608 31.6 0.8 (23.0) 6.4 21.0
2011 482,258 19.8 8.6 2.0 4.2 33.7
2012 536,886 11.3 5.0 2.0 3.1 49.2
2013 527,762 (1.7) 1.5 (7.0) 3.1 35.5
2014 634,151 20.2 5.6 6.0 4.6 22.2
2015 551,463 (13.0) (0.2) (12.0) 6.1 8.1
2016 492,932 (10.6) 0.6 (14.0) 8.3 11.0
2017 582,844 18.2 6.3 (3.0) 9.3 13.9
2018 731,637 25.5 5.0 (5.4) 9.8 10.6
2019 788,396 7.8 2.9 (9.1) 6.4 22.4
2020 709,002 (10.1) 2.8 9.6 8.4 7.9
2021 899,314 26.8 3.4 8.8 9.0 (5.1)
2022 842,267 (6.3) 5.0 2.0 7.7 0.5
2023E 947,550 12.5 7.0 7.5 24.4
Source: Company, IMD, Kotak Institutional Equities estimates
Disbursements trend has been strong in January and February 2023

Exhibit 2: Disbursement growth yoy, March fiscal year-ends, August 2022-February 2023 (%)
Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 Dec-22 Jan-23 Feb-23
Disbursement (Rs bn) 27 30 38 39 37 41 53 45 47 40 42
Disbursements growth yoy (%) 106 272 115 63 75 110 97 75 67 58 53
Loan book (Rs bn) NA NA 675 684 704 739 NA 763 773 781 793
Collection efficiency (%) 94 95 96 97 96 98 91 96 98 95 97
Gross stage 3 (%) 8.0 7.0 7.0 7.0 6.2
Gross stage 2 (%) 11.7 10.0 9.0 8.5

17
We expect 20% CAGR loan book growth over FY2023-25E

Exhibit 3: Loans and yoy growth, March fiscal year-ends, 2011-2025E
(Rs bn) Loans (LHS) YoY (RHS)

(%)
1,200 60
42
960 45
34 35
29
720 22 24 30
20 21
14
11 11
480 8 8 15
1
240 (5) 0
- -15
2025E
2023E
2024E
2011
2014
2015
2016
2017
2020
2021
2022
2012
2013
2018
2019
We expect AUM mix to remain stable

Exhibit 4: AUM mix, March fiscal year-ends, 2011-2025E (%)
Auto/utility vehicles Tractors Cars CVs SME Pre-owned vehicles

100
6 7 7 9 8 9 10 9 11 9 8 8
13 15 16
9 12 13 8 9 6 6
12 7 15 16 17
80 15 13 12 13 19 16 12
14 18 10 10 10
31
31 32
60 24 23 24 23 22 22
22 21 21 19 19 18
40 23 20 18 17 16 14 13
19 19 17 17 14
17 17 17
20
31 30 29 29 31 31 30 30 32 32 33 33
27 26 27
0
2024E
2025E
2023E
2011
2012
2013
2015
2017
2018
2020
2022
2014
2016
2019
2021

18
MMFS hiked lending rate by 150-160 bps over 9MFY23 as against 225 bps hike in repo rate
Exhibit 5: Lending rate hikes by select NBFCs, March fiscal year-ends, 1QFY23-3QFY23 (bps)
1QFY23 2QFY23 3QFY23 Cummulative
Repo rate 90 100 35 225
HFCs
Aavas 25 50 50 125
Aptus ― ― 50 50
Home First ― 25 50 75
HDFC 90 100 35 225
LICHF 90 100 35 225
NBFCs
Bajaj Finance 25-40 40-50 50-70 115-160
Cholamandalam 40 40 40-80 120-160
Mahindra Finance 30-40 40 80 150-160
Shriram Finance ― 25-50 ― 25-50
NIM trajectory unclear

Exhibit 6: Yields, cost of funds and NIM, March fiscal year-ends, 2011-2025E (%)
Yields on AUM (LHS) Cost of funds (LHS) NIM (RHS)

24 15
18.0 13
18 16.3 16.4 16.5 15.9
15.3
14.4 15.0 15.2 15.5 14.6 14.7 15.3 15.4
10.7 13.4 11
12
8.3 8.6 8.4 8.4 8.6
8.2 8.1 8.1 9
7.8 7.8
7.4 7.2 7.1
6 6.6
7
8.2 9.3 9.6 9.9 9.8 9.2 8.6 8.1 8.4 8.6 8.0 6.8 7.1 7.6 7.6
0 5
2023E
2024E
2025E
2011
2012
2013
2015
2016
2019
2020
2022
2014
2017
2018
2021
Stressed loans down to 17% from peak of 33% last year

Exhibit 7: Stressed loans, March fiscal year-ends, 3QFY22-3QFY23, 2018-2022 (%)
Including Excluding Excluding Excluding Excluding Including Excluding Including Excluding Excludin
impact of impact of impact of impact of impact of impact of impact of impact of impact of g impact
RBI RBI RBI RBI RBI RBI RBI RBI RBI of RBI
circular circular circular circular circular circular circular circular circular circular
3QFY22 3QFY22 4QFY22 1QFY23 2QFY23 3QFY23 3QFY23 YoY YoY QoQ 2019 2020 2021 2022 YoY
Stressed loans mix
Gross stage-2 (%) 12.0 17.8 14.3 11.7 9.7 6.7 8.4 -530 bps -939 bps -135 bps 8.2 9.2 12.6 14.3 170 bps
Gross stage-3 (%) 17.0 11.3 7.7 8.0 6.7 7.6 5.9 -946 bps -536 bps -76 bps 6.4 8.4 9.0 7.7 -130 bps
Write-off during the quarters (% of opening AUM) 3.8 3.8 7.6 3.5 3.2 2.7 2.7 -107 bps -107 bps -51 bps 3.4 1.3 3.2 4.3 116 bps
Restructured loans (%)-classified in stage-2/3 6.8 6.8 6.7 5.3 4.1 3.9 3.9 -296 bps -296 bps -19 bps 0.1 6.7 664 bps
ECLGS to loans (%) NA NA NA NA NA NA NA 0.8 NA
Overall stressed loans (%)-excluding ECLGS 32.8 32.8 29.5 23.3 19.6 17.0 17.0 -1583 bps -1583 bps -262 bps 18.1 18.9 25.6 33.0 738 bps
ECL coverage
ECL coverage on stage 1 and 2 (%) 3.2 3.2 2.7 2.3 2.0 1.7 1.6 -154 bps -157 bps -34 bps 1.8 2.1 2.2 2.7 48 bps
ECL coverage on stage 3 (%) 53.2 53.2 58.1 58.1 58.2 46.1 59.0 -704 bps 580 bps 81 bps 19.2 31.0 57.9 58.1 15 bps
Overall ECL coverage (%) 8.9 8.9 6.9 6.8 5.7 5.0 5.0 -381 bps -381 bps -71 bps 2.9 4.5 7.2 6.9 -26 bps
ECL to stressed loans (%)-excluding write-offs 30.4 30.4 31.7 34.3 34.9 35.2 35.2 473 bps 473 bps 23 bps 20.0 25.6 32.1 31.6 -55 bps

19
Write-offs to taper
Exhibit 8: Asset quality details, March fiscal year-ends, 2018-2025E
2018 2019 2020 2021 2022 2023E 2024E 2025E
Asset quality details (Rs mn)
Gross loans (Rs mn) 515,519 631,164 680,890 646,080 649,600 808,261 969,938 1,169,973
Gross stage 3 (%) 9.8 6.4 8.4 9.0 7.7 6.5 6.8 7.0
Gross stage 3 (Rs mn) 50,419 40,706 57,467 57,860 49,760 52,537 65,471 81,898
Overall ECL provisions (Rs mn) 30,049 18,529 30,739 46,540 45,080 38,667 47,110 58,803
Overall ECL coverage (%) 5.8 2.9 4.5 7.2 6.9 4.8 4.9 5.0
ECL coverage on stage 1 and 2 (%) 2.8 1.8 2.1 2.2 2.7 1.5 1.6 1.6
ECL provision on stage 1 and 2 (Rs mn) 12,888 10,730 12,937 13,020 16,180 11,348 14,374 17,854
Stage 3 ECL provisions (Rs mn) 17,161 7,799 17,802 33,520 28,900 27,319 32,735 40,949
ECL coverage on stage 3 (%) 34 19 31 58 58 52 50 50
Stage 1-2 provisions/ECL (%) 43 58 42 28 36 29 31 30
Credit cost details (%)
Overall credit cost 1.2 1.1 3.1 5.6 3.7 1.6 1.9 2.1
Write-offs 2.1 3.1 1.3 3.3 4.3 2.5 1.0 1.0
Provision on loans and others (0.9) (2.0) 1.9 2.4 (0.7) (0.9) 0.9 1.1
Cost ratios to remain elevated

Exhibit 9: Cost ratios, March fiscal year-ends, 2011-2025E (%)
Cost-to-income (LHS) Cost-to-average loans (RHS)

(%) (%)
45 7.0
36 5.6
4.1
27 3.5 3.6 3.4 4.2
3.2 3.3 3.2 3.2 3.3
3.0 3.0 2.9 3.1
2.8
2.5
18 2.8
9 1.4
36.5 35.4 31.7 33.0 32.6 36.1 42.9 39.8 38.0 37.3 28.2 35.8 40.8 38.9 36.3
0 0.0
2024E
2023E
2025E
2011
2013
2014
2015
2016
2017
2018
2019
2020
2022
2012
2021
RoEs to rise to 15% in medium term

Exhibit 10: Key parameters of MMFS, March fiscal year-ends, 2007-2025E (%)
IGAAP IGAAP IGAAP IGAAP IGAAP IGAAP IGAAP IGAAP IGAAP IGAAP IGAAP Ind-AS Ind-AS Ind-AS Ind-AS Ind-AS Ind-AS Ind-AS Ind-AS
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023E 2024E 2025E
Mahindra Finance
Disbusements (% yoy) 22 8 7 42 62 35 22 7 (5) 10 19 49 22 (8) (41) 42 60 26 22
Loan growth (% yoy) 32 13 3 22 49 42 35 29 11 8 14 11 22 8 (5) 1 24 20 21
NIM (% of laons) 8.1 9.9 10.6 10.9 10.6 8.2 8.1 7.8 7.4 7.2 6.6 7.1 8.1 7.8 8.3 8.6 8.4 8.4 8.6
Credit cost (% of loans) 2.2 3.7 3.9 2.7 1.4 0.9 1.2 1.7 2.3 2.7 3.0 1.2 1.1 3.1 5.6 3.7 1.6 1.9 2.1
Cost-to-average loans (%) 3.5 3.8 3.7 3.9 4.3 3.5 3.2 3.0 2.8 3.0 3.3 2.9 3.2 3.1 2.5 3.2 3.6 3.4 3.3
Gross stage 3 (%) 5.5 7.6 9.6 7.0 4.2 3.1 3.1 4.4 5.9 8.0 9.0 9.8 6.4 8.4 9.0 7.7 6.5 6.8 7.0
Net stage 3 (%) 2.5 2.9 2.9 1.0 0.6 0.7 1.1 1.9 2.5 3.4 3.8 6.9 5.4 6.1 4.1 3.5 3.3 3.5 3.7
RoA (%) 2.4 2.7 3.0 4.2 4.1 3.8 4.1 2.8 2.2 1.6 0.9 2.2 2.6 1.3 0.4 1.3 2.3 2.3 2.4
RoE (%) 18.1 16.9 15.4 21.5 22.0 22.8 24.5 18.6 15.5 11.4 6.4 13.4 15.2 8.1 2.6 6.5 12.1 13.1 14.9

20
Mahindra Finance trades at 1.6X book

Exhibit 11: Rolling PER and PBR—MMFS, March fiscal year-ends, March 2009-March 2023
Rolling PER (X) (LHS) Rolling PBR (X) (RHS)
75 4.0
60 3.2
45 2.4
30 1.6
15 0.8
0 -
Mar-09
Mar-11
Mar-12
Mar-14
Mar-17
Mar-19
Mar-20
Mar-22
Mar-10
Mar-13
Mar-15
Mar-16
Mar-18
Mar-21
Mar-23
Source: Company, Bloomberg, Kotak Institutional Equities estimates

21
Exhibit 12: Mahindra Finance—key growth rates and ratios, March fiscal year-ends, 2018-2025E
Ind-AS Ind-AS Ind-AS Ind-AS Ind-AS Ind-AS Ind-AS Ind-AS
2018 2019 2020 2021 2022 2023E 2024E 2025E
Growth in key parameters (%)
Operating income NA 31 16 3 (7) 12 27 21
Interest income NA 31 15 3 (8) 13 27 21
Interest expense NA 28 22 (2) (17) 17 32 19
Net interest income NA 33 9 8 0 10 23 23
Net operational income NA 35 10 7 1 9 22 23
Total income NA 35 11 7 0 11 22 23
Operating expense NA 29 9 (19) 27 26 17 14
Employee expense NA 31 5 (12) 15 32 12 14
PPOP NA 39 13 22 (10) 2 26 28
Provisions NA 12 223 82 (37) (50) 47 29
PBT NA 43 (48) (66) 221 93 17 27
PAT NA 45 (42) (63) 195 97 17 27
Net assets 14.8 27 10 4 (2) 23 17 18
Borrowings 13.6 32 12 (1) (5) 30 19 20
Gross loans 10.6 22 8 (5) 1 24 20 21
Key ratios (%)
Yield on loans (%) 13.4 15.0 15.2 15.5 14.6 14.7 15.3 15.4
Cost of borrowings 8.1 8.4 8.6 8.0 6.8 7.1 7.6 7.6
NIM (% of average loans) 7.1 8.1 7.8 8.3 8.6 8.4 8.4 8.6
Cost-to-income 39.8 38.0 37.3 28.2 35.8 40.8 38.9 36.3
Cost-to-average loans 2.9 3.2 3.1 2.5 3.2 3.6 3.4 3.3
Credit cost (% of average loans) 1.2 1.1 3.1 5.6 3.7 1.6 1.9 2.1
Tax rate 35.4 34.6 26.9 20.7 27.1 25.6 25.6 25.6
Dividend payout ratio 22.8 25.7 - 29.2 44.9 44.9 20.0 20.0
ROE decomposition - % of average loans
Net interest income 7.1 7.8 7.2 7.3 7.3 7.3 7.4 7.8
Net operational income 7.2 8.0 7.5 7.5 7.5 7.4 7.6 8.0
Total income 7.3 8.1 7.7 7.7 7.6 7.6 7.8 8.1
Operating expense 2.9 3.1 2.9 2.2 2.7 3.1 3.0 3.0
Provisions 1.2 1.1 2.9 4.9 3.1 1.4 1.7 1.9
Extraordinary items 0.1 - (0.1) 0.0 - - - -
(1- tax rate) 0.6 0.7 0.7 0.8 0.7 0.7 0.7 0.7
ROA 2.2 2.6 1.3 0.4 1.3 2.3 2.3 2.4
Average assets+off-balance sheet/equity (X) 6.1 5.8 6.3 5.8 5.0 5.2 5.8 6.1
ROE 13.4 15.2 8.1 2.6 6.5 12.1 13.1 14.9

22
Exhibit 13: Mahindra Finance—financial summary, March fiscal year-ends, 2018-2025E

Ind-AS Ind-AS Ind-AS Ind-AS Ind-AS Ind-AS Ind-AS Ind-AS
2018 2019 2020 2021 2022 2023E 2024E 2025E
Income statement
Operating income 66,335 87,229 100,979 103,952 96,580 108,467 137,244 166,466
Interest income 65,842 86,146 99,417 102,670 94,756 107,079 135,604 164,533
Interest on loans 64,080 83,696 97,120 97,841 88,320 102,657 130,440 159,014
Fee and commission income 474 869 970 707 1,053 1,113 1,365 1,638
Net gain on fair value change 2 68 262 404 508 100 100 120
Rental income 0 7 87 171 263 150 150 150
Dividend income 17 139 243 0 - 25 25 25
Interest expense 30,816 39,446 48,287 47,332 39,202 45,848 60,559 72,244
Interest on debt securities 16,934 19,979 22,841 20,576 13,949 16,917 20,969 25,049
Interest on other borrowings 7,193 12,407 16,246 13,129 14,213 16,041 23,062 27,549
Interest on deposits 3,485 3,571 6,751 8,175 7,669 9,347 12,446 14,868
Interest on subordinated liabilities 2,637 2,968 3,166 2,933 2,834 3,042 3,581 4,278
Other interest expense 568 521 (718) 2,519 537 500 500 500
Net interest income 35,025 46,700 51,130 55,338 55,554 61,231 75,045 92,289
Net operational income 35,519 47,783 52,691 56,620 57,378 62,619 76,685 94,222
Other income 517 869 1,473 1,216 608 1,500 1,750 1,950
Total income 36,036 48,653 54,164 57,836 57,986 64,119 78,435 96,172
Operating expense 14,336 18,476 20,182 16,325 20,734 26,144 30,516 34,920
Fee and commission expense 133 305 409 311 449 570 717 871
Employee expense 8,325 10,901 11,484 10,152 11,714 15,440 17,255 19,613
Depreciation expense 442 602 1,183 1,259 1,268 1,736 2,299 1,937
Other expense 5,437 6,668 7,105 4,602 7,303 8,398 10,246 12,500
PPOP 21,700 30,177 33,982 41,511 37,252 37,975 47,919 61,252
Provisions 5,681 6,352 20,545 37,348 23,683 11,810 17,334 22,393
PBT 16,668 23,824 12,398 4,224 13,569 26,164 30,585 38,860
Tax 5,907 8,254 3,334 873 3,682 6,698 7,830 9,948
PAT 10,761 15,571 9,064 3,351 9,888 19,466 22,755 28,912
Core PBT 21,681 29,969 33,478 41,107 36,745 37,850 47,794 61,107
EPS (Rs) 18 25 15 3 8 16 18 23
BPS (Rs) 157 177 185 120 127 134 148 166
Balance sheet
Loans on balance sheet 485,470 612,496 649,935 599,470 604,446 769,594 922,828 1,111,171
Total Investments 27,341 37,917 59,110 116,070 84,403 84,403 84,403 84,403
Cash & deposits 4,111 9,585 14,258 32,700 39,507 43,853 48,676 54,031
Net fixed assets 1,124 1,325 3,379 3,120 3,831 10,044 8,394 7,107
Other assets 9,881 9,457 14,030 19,000 20,700 21,323 22,097 22,909
Total assets 527,927 670,780 740,712 770,360 752,887 929,215 1,086,398 1,279,620
Total Borrowings 403,130 531,120 594,623 586,750 559,620 726,195 865,413 1,035,847
Other liabilities 28,578 30,580 32,451 36,500 36,986 37,491 38,023 38,662
Total liabilities 431,708 561,700 627,074 623,250 596,606 763,686 903,436 1,074,509
Share capital 1,229 1,230 1,231 2,460 2,466 2,466 2,466 2,466
Reserves 94,990 107,850 112,408 144,650 153,815 163,064 180,497 202,645
Shareholders' fund 96,219 109,080 113,639 147,110 156,281 165,530 182,963 205,111
Gross loans 515,519 631,164 680,890 646,080 649,600 808,261 969,938 1,169,973

UPDATE
Biocon (BIOS) REDUCE

Pharmaceuticals
CMP(₹): 207 Fair Value(₹): 210 Sector View: Cautious NIFTY-50: 17,077 March 23, 2023
The insulin saga adds to the uncertainty Company data and valuation summary
Three leading insulin manufacturers have lowered list prices for insulins by 65-
Stock data
80% over the past few weeks. While we expect net pricing cuts to be much lower
CMP(Rs)/FV(Rs)/Rating 207/210/REDUCE
due to a high existing gross to net differential, the actual impact on net pricing
will be clear only over the next few quarters. Nevertheless, this development
creates an overhang on our pricing assumptions for Semglee and Aspart for BIOS.
ADTV-3M (mn) (Rs/US$) 1,078/13
Assuming net pricing in the US reduces by 5-20% for BIOS’ Semglee and Aspart
biosimilars, there could be a 3-11% downside risk to BIOS’ overall FY2024-25E Shareholding pattern (%)
EBITDA. While the 25% stock price correction in the past three months limits
further significant downside hereon for BIOS, execution risks stay and there is 3.9
12.5
limited scope for positive surprises. Retain REDUCE with a lower FV of Rs210.
4.7
Apart from the outcry, lifting of caps on rebates could be a reason behind the cuts 3.9
14.4 60.6
The top 3 insulin manufacturers (controlling 90% of the US insulin market), Eli Lilly,
Novo Nordisk and Sanofi have decided to lower list prices by 65-80%, largely w.e.f.
January 1, 2024. Apart from uproar from multiple corners, we believe these price
cuts may also have been driven by the American Rescue Plan, passed in CY2021. Promoters FPIs MFs BFIs Retail Others
This law provisioned the elimination of the 100% cap on rebates (calculated based
Private Circulation Only. This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities Act of 1933
on inflation-adjusted prices) that companies need to pay to Medicaid (90+ mn
people in the US are enrolled in Medicaid), effective January 1, 2024. If the cap was Price performance (%) 1M 3M 12M
removed on the current insulin list prices, insulin players may have been required to Absolute (6) (22) (39)
Rel. to Nifty (3) (18) (38)
pay to the Medicaid program amounts far in excess of the insulin sales through the
Medicaid program. With the lower list prices, Eli Lilly, Novo Nordisk and Sanofi will
manage to bypass these additional payments. Moreover, with the complex pricing Forecasts/Valuations 2023E 2024E 2025E
formula followed by the Medicaid program, these companies could actually end up EPS (Rs) 4.5 7.8 12.7
garnering additional net profits due to this move of lowering list prices. EPS growth (%) (27.2) 74.1 63.8
P/E (X) 46.3 26.6 16.2
Impact on net pricing to be known over time; overhang on Semglee and Aspart P/B (X) 2.1 2.0 1.8
The resultant impact on BIOS’ net pricing still remains unclear, owing to the inherent EV/EBITDA (X) 17.4 10.3 8.0
complexity in the pharmacy rebates and Medicaid scheme pricing. We expect RoE (%) 4.5 7.4 11.0
further clarity to gradually emerge over the next few quarters. Nevertheless, this Div. yield (%) 0.8 1.3 2.2
development creates an overhang on our pricing assumptions for Semglee and Sales (Rs bn) 111 169 198
Aspart for BIOS. Assuming net pricing in the US reduces by 5-20% for BIOS’ Semglee EBITDA (Rs bn) 23 40 51
and Aspart biosimilars, there could be a 3-11% downside risk to BIOS’ overall Net profits (Rs bn) 5 9 15
FY2024-25E EBITDA. Despite setbacks, we have factored in material improvement Source: Bloomberg, Company data, Kotak Institutional Equities estimates
in BIOS’ biosimilar sales trajectory hereon. With steady price declines and delayed Prices in this report are based on the market close of
approvals, we remain wary of BIOS surprising positively on our biosimilars (ex- March 23, 2023
vaccines) sales estimate of US$1,045 mn and US$1,210 mn for FY2024E and

FY2025E, respectively. Amid slower sales traction, elevated debt remains a key
concern with BIOS’ net debt to EBITDA staying elevated at 3X even in FY2025E.
Execution risks remain; retain REDUCE with lower FV of Rs210

BIOS’ bold decision to acquire Viatris’ biosimilars business exposes itself to further
execution and balance sheet risks. While we have not lowered our insulin net pricing
assumptions as yet, we lower the Dec 2024E EV/EBITDA multiple for the Biocon Related Research
Biologics business from 11X to 10X to reflect the impending overhang. We also cut → Biocon: More of the same
BIOS’ FY2024-25E EBITDA assumptions by 1-4% to reflect slightly lower margins in → Biocon: Four in a row
biosimilars and generics. Accordingly, we lower BIOS’ SoTP-based FV to Rs210
→ Biocon: A leap of faith
(from Rs240). Maintain REDUCE.
Alankar Garude, CFA Samitinjoy Basak

24
Prior to the cuts, average insulin list prices in US were 5-10X of other countries
In the US, ~37 mn people suffer from diabetes, of which ~8 mn use insulin. The growing insulin costs
for patients over the past decade has been a persistent debate in the US. For instance, in the US, insulin
list prices have reported a mid-teens CAGR over the past decade. This translated to individual annual
insulin spending among adults with employer-sponsored health insurance, growing 3-4X over the same
period, despite the numerous rebates offered.
To illustrate the rapid price increase for insulin pens and vials, we list down the following data-points:
Sanofi’s Lantus Solostar (pens): Over CY2013-18, list prices increased by ~35%.
Novo Nordisk’s Levemir FlexTouch (pens): Over CY2013-18, list prices increased by ~50%.
Eli Lilly’s Humalog 50-50 Kwikpen: Over CY2013-17, list prices increased by ~65%.
Sanofi’s Apidra: Over CY2014-19, list prices increased by ~70%.
The average price per vial across all types of insulin in the US was US$98.7 in CY2018. According to a
research study published by RAND Corporation in CY2020, insulin prices were more than 8X higher in the
US compared to 32 high-income countries (see Exhibit 1). Even after considering the rebates and
discounts on the list price, the net prices for these insulins have been 4-5X higher in the US, compared
to other countries.
On an average, insulin list prices in US have been significantly higher than 32 other high-income countries
Exhibit 1: Average list pricing comparison for an insulin vial, calendar year-end, 2018 (%)
CY2018
Average list pricing per vial for all insulins (US$)
US 98.70
Australia 6.94
Canada 12.00
France 9.08
Germany 11.00
Japan 14.40
UK 7.52
Non-US OECD 8.81
Average list pricing per vial for human insulins (US$)
US 85.21
Australia 5.08
Canada 7.11
France 9.16
Germany 7.13
Japan 14.30
UK 5.13
Non-US OECD 6.09
Average list pricing per vial for analog insulins (US$)
US 99.94
Australia 7.08
Canada 12.99
France 9.02
Germany 12.60
Japan 14.41
UK 8.09
Non-US OECD 9.32
Source: RAND Corporation, Kotak Institutional Equities
This differential between insulin prices in the US versus other countries has been starker for rapid-acting
insulins, and relatively lower for short or long-acting insulins. Another factor contributing to the high price
differential is the probable usage of a more expensive mix of insulin products in the US. Even in terms of
rebates, rapid-acting insulins have had higher rebates, in percentage terms, compared to short-acting
insulins. These rebates have also increased over the past 3 years, especially for the short-acting insulins.
We note that, the gross margins of incumbents such as Levemir, Tresiba and Lantus remain at 90%+
levels, despite the hike in rebates. An analysis estimates that the cost for manufacturing a single vial of
insulin is less than US$7, and it could be sold for a profit at less than US$9. Even in CY2019, in response
Biocon
Pharmaceuticals India Research
25
to a Senate inquiry into high insulin prices, Sanofi acknowledged that for one of its insulins, it incurred
manufacturing costs of just US$2 per pen. At that time, Sanofi had the same pen listed in the US for a
price of US$75.
Over the past few weeks, the top 3 players have announced cut in list prices of insulins by 65-80%
In the US, Eli Lilly, Novo Nordisk and Sanofi are the three largest insulin manufacturers controlling ~90%
of the insulin market by value. Over the past decade, these companies have been under the radar
regarding insulin list prices and the meaningful difference between list and net prices. Various US states
such as Minnesota, Mississippi, Arkansas and Kansas have initiated legal actions regarding higher
insulin prices. Recently, in Jan 2023, California filed a lawsuit against these three manufacturers and the
three leading pharmacy benefit managers (PBMs), CVS Caremark, Express Scripts and OptumRx, for
allegedly artificially inflating insulin prices well beyond the normal inflation rate. It was alleged that the
three companies set a high list price and PBMs then negotiate for rebates on behalf of health plans. As
per the allegation, given these rebates are based as a percentage of list prices, over the years, the drug
manufacturers had been hiking the insulin prices, in order to incentivize the PBMs with a portion of the
rebates. This rendered the drug less affordable for uninsured or underinsured patients as well as for
patients with high deductible health plans or coverage gaps. We note the clamor around lowering insulin
pricing has picked up over the past few years. To recall, the Inflation Reduction Act was passed in
CY2022, with one of its objectives being to lower prescription drug prices and promote affordability. The
law provides a ceiling to the monthly out-of-pocket (OOP) insulin costs at US$35 for beneficiaries,
enrolled under the Medicare D scheme.
We look at the dynamics for each of these three insulin companies against the backdrop of the 65-80%
cut in list prices over the past few weeks.
Eli Lilly: Currently, Eli Lilly sells a vial of Humalog (insulin Lispro) at a list price of US$275, which it
plans to reduce to US$66 effective 4QCY23. Yet, after discounts and rebates being paid off, average
net price for the same stood at US$43 as of CY2021. In CY1996, Eli Lilly had introduced Humalog at a
list price of US$21. We highlight that the reduced list price of US$66 will still be higher than the
inflation-adjusted growth in price for the product. Besides, Eli Lilly also plans to reduce the list price
of Humulin (human insulin) by 70%. However, it would be maintaining the prices of one of its Humalog
pens (US$530) and Basaglar (approved in CY2015). Among other recent initiatives, Eli Lilly announced
that from May 1, 2023, it would reduce the list price of its non-branded insulin, insulin Lispro Injection,
to US$25 per vial. In addition, from April 1, 2023, it plans to launch Rezvoglar (insulin Glargine) at a
78% discount to Lantus. This product is also an interchangeable and a biosimilar to Lantus. Apart
from reducing insulin prices, Eli Lilly has also taken action to make insulin more affordable. It has
capped OOP costs at US$35 at participating retail pharmacies for people with commercial insurance
using Lilly insulin. It also allows people without commercial insurance to get access to these prices
through the Lilly Insulin Value Program.
Biocon
26
List prices for all of Eli Lilly’s US human pharma drugs have grown higher than inflation over CY2016-21
Exhibit 2: Pricing growth for Lilly’s US product portfolio, December calendar year-ends, 2016-21 (%)
Annual growth of Eli Lilly's prices for US product portfolio (%)

List price Net price
15.0 14.0
9.7
10.0
6.0 5.5 4.9
5.0 3.0 3.4
2.4
0.0
(0.5) (1.2)
(5.0) (3.3)
(5.3)
(10.0)
CY2016 CY2017 CY2018 CY2019 CY2020 CY2021
Notes:
(a) US product portfolio includes all human pharma products marketed in the US for which Lilly is the NDA holder.
(b) List price represents the weighted average yoy change in the wholesale acquisition cost (WAC).
(c) Net price represents the weighted average yoy change in the net price, which is WAC minus rebates, discounts & channel costs.
For Eli Lilly, net prices have reduced as a % of list prices for the US human pharma portfolio
Exhibit 3: Lilly’s net price as a % of list price, calendar year-ends, 2016-21 (%)
Average discount for Lilly's net price to list price across US portfolio (%)
60
50 49
50 46
43
40 39
40
30
20
10
0
CY2016 CY2017 CY2018 CY2019 CY2020 CY2021
Notes:
(a) US product portfolio includes all human pharma products marketed in the US for which Lilly is the NDA holder.
Biocon
27
While list prices for Humalog have increased over CY2016-21, net prices have decreased
Exhibit 4: Pricing comparison, calendar year-ends, 2016-21 (US$)
Humalog list price Insulin Lispro list price Humalog/Insulin Lispro net price
300 268 275 275 275 275

246
250
200
137
150
137 137
100
50
59 61 62 60
50 43
0
CY2016 CY2017 CY2018 CY2019 CY2020 CY2021
Notes:
(a) New list price per vial for Insulin Lispro is US$82.41. It went into effect from Jan-2022.
(b) Medicare Part D participants must be enrolled in a plan in the Senior Savings Model.
Novo Nordisk: After Eli Lilly’s announcement, Novo Nordisk has also decided to lower the list price of
its four legacy insulin brands, namely Novolog and Novolog Mix by 75%, and Novolin and Levemir by
65% effective January 1, 2024. It also intends to reduce the list prices of a few unbranded biologics
(pre-filled pens and vials and pre-mix insulins) to match the lowered price of each respective branded
insulin (see Exhibit 5). As per Novo Nordisk, even prior to this month’s list price cuts, it had been
working on making insulin more affordable in the US. A few of its efforts include the availability of
unbranded insulins such as Degludec and Aspart at 65% and 50% discounts to Tresiba and Novolog,
respectively, offering of human insulin for US$25-35 per vial through a Walmart program as well as
co-pays for eligible patients.
Novo Nordisk plans to reduce its insulin prices by 65-75%

Exhibit 5: Reduced prices per unit for Novo Nordisk’s insulins, calendar year-end, 2023 (US$)
Novolog and
Levemir Novolin
Novolog Mix
Existing prices per unit for Novo Nordisk's insulins (US$)
Vial 378 334 155
FlexPen 598 464 258
Reduced prices per unit for Novo Nordisk's insulins (US$)
Vial 72 108 48
FlexPen 140 162 91
Notes:
(a) Reduced prices will be effective January 1, 2024.
Sanofi: Following Eli Lilly and Novo Nordisk, Sanofi has also announced that it will reduce the list
price of Lantus (insulin glargine injection) in the US by 78%. Earlier in June 2022, Sanofi had taken
initiatives to make its insulins more affordable by launching an unbranded Lantus biologic at a 60%
discount to Lantus. In light of the Inflation Reduction Act, it also plans to establish a US$35 cap on
OOP costs for Lantus, which would be available to all patients with commercial insurance. Finally,
Sanofi also plans to reduce the list price of its short-acting insulin, Apidra (insulin glulisine injection)
by 70%. These actions will come into effect from January 1, 2024.
Biocon
28
List prices for all of Sanofi’s US portfolio have grown over CY2016-22
Exhibit 6: Pricing growth for Sanofi’s US product portfolio, calendar year-ends, 2016-22 (%)
Annual growth of Sanofi's prices for US product portfolio (%)

6 4.6
4.0
4 2.9 2.6
1.6 1.4
2
0.2
0
(2) (0.4)
(1.3)
(2.1)
(4)
(6)
(8)
(8.0) (7.8)
(10) (8.4)
(12) (11.1)
CY2016 CY2017 CY2018 CY2019 CY2020 CY2021 CY2022
Notes:
(a) List price represents the weighted average yoy change in the wholesale acquisition cost (WAC).
(b) Net price represents the weighted average yoy change in the net price, which is WAC minus rebates, discounts & channel costs.
List prices for Lantus have grown by ~140% over CY2016-22, while net prices have declined by ~60%
Exhibit 7: Pricing for Sanofi’s Lantus, calendar year-ends, 2012-22 (US$)
Prices for Sanofi's Lantus (US$)

400
350
300
250
200
150
100
50
0
CY2012
CY2013
CY2014
CY2015
CY2016
CY2017
CY2018
CY2019
CY2020
CY2021
CY2022
Notes:
(a) List price represents the weighted average yoy change in the wholesale acquisition cost (WAC).
(b) Net price represents the weighted average yoy change in the net price, which is WAC minus rebates, discounts & channel costs.
The list price cuts and the Medicaid angle

Apart from uproar from multiple corners, we believe the recent announcements of these price cuts may
also have been driven by the American Rescue Plan, passed in CY2021. This law provisioned the
elimination of the 100% cap on rebates that drug companies need to pay to Medicaid (more than 90 mn
people in the US are enrolled in Medicaid), effective January 1, 2024. If the cap was removed on the
current insulin list prices, insulin manufacturers may have been required to pay to the Medicaid program
amounts far in excess of the insulin sales through the Medicaid program. With the lower list prices, Eli
Lilly, Novo Nordisk and Sanofi will manage to bypass these additional payments. Moreover, with the
Biocon
29
complex pricing formula followed by the Medicaid program, these companies could actually end up
garnering additional net profits due to this move of lowering list prices.
There is a 3-11% downside risk to BIOS’ FY2024-25E EBITDA if insulin net prices correct by 5-20%
In our view, the resultant net pricing impact of these list price cuts will only be known over the next few
quarters, owing to the inherent complexity in the pharmacy rebates and the Medicaid scheme pricing.
Nevertheless, this development creates an overhang on our pricing assumptions for Semglee and Aspart
for BIOS. Assuming net pricing in the US reduces by 5-20% for BIOS’ Semglee and Aspart biosimilars,
there could be a 3-11% downside risk to BIOS’ overall FY2024-25E EBITDA.
There could be a 3-11% downside risk to BIOS’ overall FY2024-25E EBITDA if insulin net prices correct by 5-20%
Exhibit 8: BIOS – insulin net price sensitivity, March fiscal year-ends, 2023-25E (US$ mn, %)
Percentage reduction
in net prices (%) FY2023E FY2024E FY2025E
BIOS' sensitivity to insulin 'price reduction
Combined Semglee and Aspart US sales in our model (US$ mn) 214 274 356
BIOS' overall EBITDA (US$ mn) 290 484 617
5 471 599
Revised BIOS' overall EBITDA post lower insulin net pricing 10 457 581
by the following percentages: 15 443 563
20 430 546
5 (2.8) (2.9)
% cut in BIOS EBITDA due to lower insulin net pricing by the 10 (5.7) (5.8)
following percentages: 15 (8.5) (8.7)
20 (11.3) (11.5)
Notes:
(a) Assuming Viatris consolidation impact from April 1, 2022 and lower Semglee prices effective April 1, 2023
Source: Kotak Institutional Equities estimates
Amid slow traction in biosimilars, BIOS’ elevated debt remains a key concern
We note that BIOS’ organic biosimilars sales have been largely flattish over the past five quarters. Sales
recovery in FY2024 largely hinges on Adalimumab’s launch in July 2023 and slight further gains in
Glargine. Viatris has initiated an interchangeability study for Adalimumab. BIOS has approval for a low
strength product that is citrate-free, latex-free and is a two-click device, which it believes will be a key
competitive advantage. BIOS does not expect product concentration and interchangeability to make a
big difference in terms of success. It remains confident of its relative positioning in Adalimumab in the
US. Management expects its success in the EU in Adalimumab (19% market share in Germany) to repeat
in the US. However, even as BIOS remains confident of its position, the Adalimumab market will be
extremely competitive with at least 10 settled biosimilar launches by end-CY2023. Owing to pending
CRLs, US approval timelines for Bevacizumab and Aspart remain in limbo, with the opportunity size for
Bevacizumab continuing to shrink. BIOS is currently in litigation with the innovator, Regeneron.
Technically, the US FDA cannot grant an approval until the end of data exclusivity (mid-CY2024).
We note Biocon Biologics will be missing its earlier FY2024 guidance of US$1.8 bn sales largely due to
delays in approval for Aspart, Bevacizumab and vaccines. Despite multiple setbacks, we have factored
in material improvement in BIOS’ biosimilar sales trajectory hereon. With its focused approach, BIOS is
trying to add more customers and increase engagement with specialty pharmacies, physicians and offer
additional patient services in the developed markets. With steady price declines and delayed approvals,
we remain wary of BIOS surprising positively on our biosimilars (ex-vaccines) sales estimate of US$1,045
mn and US$1,210 mn for FY2024E and FY2025E respectively. Amid slower sales traction, elevated debt
remains a key concern with BIOS’ net debt to EBITDA staying elevated at 3X even in FY2025E. We note
Biocon Biologics is still in the process of raising equity and hence BIOS has not provided any debt
Biocon
30
guidance. The last PE fundraise for Biocon Biologics was in January 2021, wherein it was valued at
US$4.2 bn.
We expect BIOS’ net debt to EBITDA to stay elevated at 3X even in FY2025E

Exhibit 9: BIOS – debt metrics, March fiscal year-ends, 2017-25E (Rs bn, X)
Gross debt (Rs bn, LHS) Net debt (Rs bn, LHS) Net debt-EBITDA (X, RHS)
186 190
200 181 8
157 161 154 7
150 6
6.7
5
100
4
49 4.1 3
50 36
22 19 18 19 19 3.0 2
1 0 3
0 1
(0) (1) 1.0 0
(50) 0.1 (0.0) (0.1) 0.0 0.2 (1)
2023E
2024E
2025E
2018
2021
2017
2019
2020
2022
BIOS’ base biosimilars business has remained flattish for 5 consecutive quarters
Exhibit 10: BIOS – segmental sales contribution, March fiscal year-ends, 2021-23 (%)
Small molecules Biologics/Biosimilars Research services
120
100
25 30 32 34 33 30 31 30 33 27
36
80
60 40 38 41 45 41 46 51
36 43 40 43
40
20 37 35 30 31 28 29 28 30 27 27 24
0
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
Biocon
31
BIOS – quarterly small molecules sales BIOS – quarterly biosimilars sales

Exhibit 11: March fiscal year-ends, 2021-23 (Rs bn, %) Exhibit 12: March fiscal year-ends, 2021-23 (Rs bn, %)
Small molecules sales (Rs bn, LHS) Biologics/Biosimilars sales (Rs bn, LHS)
yoy growth (%, RHS) yoy growth (%, RHS)
8 7.2 30 16 15.1 60
7.2
6.2 6.0 6.1 6.2 20 14
5.6 5.8 5.3 50
6 5.8 12
10 9.8 9.8 9.8 10.0 40
4.9 10
7.6 7.6 7.4
4 0 8 6.8 6.7 6.6 30
(10) 6 20
2 4
(20) 10
2
0 (30) 0 0
1QFY21
3QFY21
1QFY22
2QFY22
4QFY22
3QFY23
2QFY21
4QFY21
3QFY22
1QFY23
2QFY23
3QFY21
4QFY21
2QFY22
3QFY22
2QFY23
3QFY23
1QFY21
2QFY21
1QFY22
4QFY22
1QFY23
Source: Company, Kotak Institutional Equities Source: Company, Kotak Institutional Equities
BIOS – quarterly Syngene sales BIOS – quarterly overall sales

Research services sales (Rs bn, LHS) Total sales yoy growth (%, RHS)
yoy growth (%, RHS) 35 40
7.6 7.7 7.9 29.4
8 50 30 35
6.6 6.4 6.4 24.1
5.9 6.0 6.1 23.2 30
40 25 21.7
6 5.2 21.4
18.5 18.4 17.6 18.4 25
4.2 20 16.9 17.5
30 20
4 15
20 15
10
2 10
10 5 5
0 0 0 0
2QFY21
3QFY21
4QFY21
4QFY22
1QFY23
2QFY23
1QFY21
1QFY22
2QFY22
3QFY22
3QFY23
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
Biocon
32
BIOS – quarterly gross profits BIOS – quarterly R&D expenses

Gross profits (Rs bn, LHS) R&D spends (Rs bn, LHS)
Gross margin (%, RHS) proportion to sales (%, RHS)
21 19.6 70 4 14
15.8 3.4
18 15.7 68 3.5 12
14.6
15 12.0 14.4 3 10
12.2 12.0 66 2.4
12 10.7 11.4 2.5 1.9 2.0
10.8 8
64 2 1.7
9 1.5 1.5 1.4 6
62 1.5 1.3 1.2
6 1.1
1 4
3 60
0.5 2
0 58
0 0
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
1QFY21
3QFY21
1QFY22
3QFY22
1QFY23
3QFY23
2QFY21
4QFY21
2QFY22
4QFY22
2QFY23
BIOS – quarterly EBITDA BIOS – quarterly PAT

EBITDA (Rs bn, LHS) EBITDA margin (%, RHS) PAT (Rs bn, LHS) PAT margin (%, RHS)
7 6.4 30 3.0 16
2.5
5.9 2.4
6 2.5
25 12
4.9 1.9
4.5 4.7 2.0 1.7 1.7
5
4.1 3.9 4.0 4.4 3.9 4.0 20 1.5 1.4 1.4
1.5 8
4 0.8
15 1.0
3 0.5
0.5 4
10
2
0.0
5 0
1 (0.5)
(0.4)
0 0 (1.0) (4)
2QFY21
3QFY21
4QFY21
4QFY22
1QFY23
2QFY23
1QFY21
2QFY21
2QFY22
3QFY22
4QFY22
3QFY23
1QFY21
1QFY22
2QFY22
3QFY22
3QFY23
3QFY21
4QFY21
1QFY22
1QFY23
2QFY23
Our SoTP based fair value for BIOS is lowered to Rs210

Exhibit 19: BIOS – SoTP valuation, March fiscal year-end, 2024E (Rs mn)
Dec '24 EBITDA Stake Multiple Valuation
(Rs mn) (%) (X) (Rs mn)
Syngene 13,153 55 24 172,356
Biocon Biologics 25,994 63 10 163,762
Generics 8,681 100 9 78,133
Enterprise value 414,250
Net debt 159,760
Equity value 254,490
Fair value/share (Rs) 212
Biocon
33
We lower BIOS’ FY2024-25E EBITDA assumptions by 1-4% to reflect slightly lower margins in biosimilars and generics
Exhibit 20: BIOS – changes in estimates, March fiscal year-ends, 2023-25E (Rs mn, %)
New estimates Old estimates Change (%)
2023E 2024E 2025E 2023E 2024E 2025E 2023E 2024E 2025E
Sales 110,807 169,272 198,046 109,011 168,580 200,165 1.6 0.4 (1.1)
Gross profits 73,145 113,213 133,752 72,236 113,363 135,415 1.3 (0.1) (1.2)
Gross margin (%) 66.0 66.9 67.5 66.3 67.2 67.7 -25 bps -36 bps -12 bps
EBITDA 23,277 39,598 50,572 22,973 40,110 52,501 1.3 (1.3) (3.7)
EBITDA margin (%) 21.0 23.4 25.5 21.1 23.8 26.2 -7 bps -40 bps -69 bps
PAT (adjusted) 5,373 9,355 15,324 5,151 9,284 16,235 4.3 0.8 (5.6)
EPS (adjusted) Rs 4.5 7.8 12.7 4.3 7.7 13.5 4.3 0.8 (5.6)
Aided by the Adalimumab launch, we expect overall biosimilars sales to cross US$1 bn in FY2024E
Exhibit 21: BIOS – biosimilars sales, March fiscal year-ends, 2020-25E (US$ mn)
2020 2021 2022 2023E 2024E 2025E
Biosimilars sales (US$ mn)
Regulated markets 103 110 141 593 712 849
Neulasta (Pegfilgrastim) 75 53 56 103 97 94
Insulin (Glargine and Aspart) 7 8 37 284 351 444
Herceptin (Trastuzumab) 21 49 47 206 174 165
Humira (Adalimumab) - - - - 86 122
Avastin (Bevacizumab) - - - - 5 24
Emerging markets 186 255 325 308 333 361
Total biosimilar sales 289 365 466 901 1,045 1,210
Notes:
(a) Assuming Viatris integration effective 1st April, 2022
Led by the Viatris deal, we expect 34% overall sales CAGR over FY2022-25E
Exhibit 22: BIOS – revenue segments, March fiscal year-ends, 2020-25E (Rs mn, %)
2020 2021 2022 2023E 2024E 2025E
Segmental split
Generics 22,071 23,360 23,404 25,613 29,308 33,802
Biosimilars 23,229 28,000 35,146 56,993 85,968 99,709
Vaccines - - - - 20,438 24,600
Research services 20,119 21,840 26,046 30,990 36,878 43,885
Intersegment (2,259) (2,150) (2,756) (2,789) (3,319) (3,950)
Total sales 63,672 71,060 81,848 110,807 169,272 198,046
Generics 34.7 32.9 28.6 23.1 17.3 17.1
Biosimilars 36.5 39.4 42.9 51.4 50.8 50.3
Vaccines - - - - 12.1 12.4
Research services 31.6 30.7 31.8 28.0 21.8 22.2
Intersegment (3.5) (3.0) (3.4) (2.5) (2.0) (2.0)
%Total sales 100.0 100.0 100.0 100.0 100.0 100.0
Biocon
34
We expect 28% adjusted PAT CAGR over FY2022-25E

Exhibit 23: BIOS – financial summary, March fiscal year-ends, 2017-25E (Rs mn)
2017 2018 2019 2020 2021 2022 2023E 2024E 2025E
Net revenues 39,216 41,297 55,144 63,672 71,060 81,848 110,807 169,272 198,046
Gross profit 23,107 23,046 33,782 40,685 46,270 53,166 73,145 113,213 133,752
Staff costs (6,872) (8,459) (10,618) (13,279) (15,660) (17,973) (22,684) (34,343) (38,256)
R&D expenses (2,662) (2,158) (2,899) (4,394) (5,530) (5,950) (11,524) (15,573) (18,220)
Other expenses (3,778) (4,138) (6,328) (6,981) (8,560) (10,084) (15,661) (23,699) (26,704)
EBITDA 9,795 8,291 13,937 16,031 16,520 19,159 23,277 39,598 50,572
Depreciation & amortisation (2,772) (3,851) (4,478) (5,522) (7,150) (8,149) (11,684) (19,531) (21,461)
EBIT 7,023 4,440 9,459 10,509 9,370 11,010 11,593 20,067 29,110
Net Interest (260) (615) (709) (649) (580) (682) (4,167) (7,055) (7,226)
Other income 1,571 2,062 1,444 1,325 1,850 604 1,151 1,381 1,658
Profit before tax 8,334 5,887 10,194 11,185 10,640 10,932 8,577 14,393 23,541
Tax & Deferred Tax (1,616) (1,569) (1,939) (2,495) (2,120) (2,239) (2,059) (3,454) (5,650)
Less: minority interest (597) (594) (964) (1,227) (990) (1,308) (1,145) (1,584) (2,567)
Net Income (adjusted) 6,121 3,724 7,291 7,463 7,530 7,385 5,373 9,355 15,324
EPS adjusted (Rs) 5.1 3.1 6.1 6.2 6.3 6.1 4.5 7.8 12.7
Balance sheet
Equity 52,138 56,485 67,069 73,831 85,080 94,700 119,165 126,830 139,358
Total borrowings 22,054 19,201 18,028 18,898 35,560 49,040 181,167 185,667 190,167
Deferred tax liability 964 891 8,713 298 320 523 523 523 523
Other liabilities 18,786 23,320 28,114 51,411 64,240 59,677 63,314 73,092 77,249
Total liabilities 93,942 99,897 121,924 144,438 185,200 203,940 364,169 386,111 407,297
Net fixed assets 44,643 50,042 63,699 80,388 90,150 106,794 270,367 271,836 271,375
Investments 13,827 6,752 10,118 10,482 19,530 28,646 28,646 28,646 28,646
Cash 10,443 13,228 10,572 9,986 20,150 6,630 1,546 1,831 13,172
Other current assets 25,029 29,875 37,535 43,582 55,370 61,870 63,609 83,798 94,104
Total assets 93,942 99,897 121,924 144,438 185,200 203,940 364,169 386,111 407,297
Cashflow statement
Operating cash flow before working capital 9,084 9,657 14,752 17,923 17,773 22,281 17,377 33,924 45,003
Tax paid (414) (1,971) (2,915) (3,441) (1,938) (2,620) (2,059) (3,454) (5,650)
Change in working capital (2,270) (1,065) (291) (1,651) (4,238) (7,895) 1,898 (10,412) (6,148)
Capital expenditure (6,084) (7,382) (12,221) (16,042) (15,169) (16,978) (16,000) (18,000) (18,000)
Free cash flow (pre-M&A) 316 (761) (675) (3,211) (3,572) (5,212) 1,217 2,058 15,205
Margins and ratios
Gross profit margin (%) 58.9 55.8 61.3 63.9 65.1 65.0 66.0 66.9 67.5
EBITDA margin (%) 25.0 20.1 25.3 25.2 23.2 23.4 21.0 23.4 25.5
Tax rate (%) 24.0 27.0 19.0 22.3 19.9 20.5 24.0 24.0 24.0
RoAE (%) 12.9 6.9 14.7 10.6 9.3 7.2 2.3 7.6 11.5
RoACE (%) 9.2 5.1 11.2 10.4 8.2 7.4 4.0 5.0 7.1
Biocon
UPDATE
Fertilizers & Agricultural Chemicals

India
Sector View: Cautious NIFTY-50: 17,077 March 23, 2023
Crop & Chemical Dashboard: Cyclical downturn underway

Chemical industry trade data and commentaries by companies indicate
continued demand softness across most end-use segments. The banking
crisis now unfolding in the US and Europe could further exacerbate pressure
on end-demand. Even the relatively defensive agrochemicals segment is
under some pressure due to a channel inventory overhang, while the Indian
fertilizer industry faces risk from the government’s steps to curb subsidies.
Chemicals trade data continues to reflect demand weakness

India’s exports and imports of organic and inorganic chemicals stayed down
yoy in Feb 2023: exports fell 11.2% yoy (10.7% mom), while imports decreased
5.4% yoy (2.2% mom) in USD terms. US chemical exports were down 1.6% yoy
to US$13.5 bn in Jan 2023, although imports jumped 8% yoy. China’s overall
exports (across all sectors) fell 6.8% yoy in Jan and Feb 2023 combined, while
imports for the two months also fell 10.2% yoy. Germany’s chemical
association VCI forecasts a further 7% decline in the country’s chemical
industry sales in 2023. Among key end-use industries, construction and
automotive remain weak (US housing starts were down 18.4% yoy in Feb 2023),
while inflation and now the banking crisis are reasons for broad-based pressure
on consumer spending.
Crop prices showing signs of fatigue, although climate remains a risk

International crop prices are showing signs of fatigue after having rallied
sharply in the past year post the Ukraine war. US corn prices fell 6.6% mom
(16.9% yoy) in the past month, while soybeans corrected 4.9% mom (14.8%) and
wheat declined 9.6% mom (29.8%). The grain corridor out of Ukraine is helping
cool prices, as is the expectation of increased corn planting in the US and
beneficial rainfall in drought-hit Argentina. In the domestic (Indian) market,
wheat prices have corrected as the government has sold saved stocks, while
vegetable prices have plunged on oversupply. However, paddy, wheat, corn and
groundnut remain higher yoy. Climate remains a key risk: unseasonal showers
and hailstorms in India have recently damaged crops, while El Nino looms.
Sector and company comments

Cyclically-exposed segments of the chemical industry are under pressure due
to the economic downturn cited earlier. In addition, the channel inventory
overhang in agrochemicals, along with falling prices, is weighing on that
industry’s growth near term. The Indian fertilizer industry faces a challenging
outlook, with the government trying various means to reduce usage, including
pushing nano-fertilizers and piloting a scheme (in seven districts) to cap sales
of subsidized fertilizers. Product-specific comments: domestic prices of
refrigerant R134a (sold by SRF) have weakened post removal of anti-dumping
duty, though export prices remain firm. However, R125 export prices have
softened. Phenol spreads have recovered in 4QFY23: positive for Deepak
Nitrite. PVC spreads remain under pressure. Ammonia prices have corrected
sharply in the past month, a near-term negative for Deepak Fertilisers.
Abhijit Akella, CFA

36
Prices of key crops worldwide are correcting after last year’s sharp run-up
Exhibit 1: International crop futures prices
Unit 22-Mar-23 21-Feb-23 21-Mar-22 mom yoy
US crop futures prices

Coffee (US$/lb) 1.8 2.0 2.3 -10.8% -21.0%
Cotton (US$/lb) 0.8 0.8 1.0 -4.3% -22.8%
Corn (US$/bushel) 6.4 6.6 7.5 -3.6% -15.0%
Rice (US$/cwt) 17.2 16.8 16.0 2.2% 7.3%
Soybean (US$/bushel) 14.5 15.3 17.0 -5.5% -14.7%
Sugar (USc/lb) 21.1 19.9 18.6 6.2% 13.8%
Wheat (US$/bushel) 6.7 7.5 9.5 -10.8% -29.5%
Brazil crop futures prices
Corn US$/60 kg-bag 16.7 17.1 20.6 -2.9% -19.3%
Soybean US$/60 kg-bag 30.1 33.3 40.9 -9.6% -26.5%
Europe futures prices
Wheat US$/ ton 267.7 297.3 357.0 -10.0% -25.0%
Malaysia futures prices
Palm oil US$/ ton 884.1 938.8 1,542.0 -5.8% -42.7%
Notes: 1 bushel of corn = 25.401 kg, 1 bushel of wheat or soybeans = 27.216 kg, 1 cwt = 45.359 kg
Source: Bloomberg, Kotak Institutional Equities
Crop prices in India, too, are generally correcting, with vegetable prices especially weak
Exhibit 2: Spot prices of crop commodities in India
22-Mar-23 15-Feb-23 15-Mar-22 mom yoy
Crop prices (Rs/quintal)
Paddy 1,850 1,985 1,770 -6.8% 4.5%
Wheat 2,295 2,464 2,127 -6.8% 7.9%
Maize 2,133 2,095 2,018 1.8% 5.7%
Soybeans 4,854 5,130 6,993 -5.4% -30.6%
Cotton 7,448 7,845 8,865 -5.1% -16.0%
Ground nut 6,399 6,825 6,055 -6.2% 5.7%
Rubber (natural) 13,950 13,600 16,315 2.6% -14.5%
Vegetable prices (Rs/quintal)
Cabbage 975 1,110 1,493 -12.1% -34.7%
Cauliflower 1,399 1,220 1,522 14.7% -8.0%
Onion 1,388 1,684 2,146 -17.6% -35.3%
Potato 992 1,046 1,263 -5.1% -21.4%
Tomato 1,340 1,320 1,371 1.5% -2.2%
Source: Agmarknet, Kotak Institutional Equities

India Research
37
Exhibit 3: USDA world agriculture demand and supply estimates
Feb-23 Mar-23
Crop Unit 2020-21 2021-22 Estimate 2022-23 Projection 2022-23 Projection
Corn - world mn MT
Production 1,129.4 1,216.0 1,151.4 1,147.5
Consumption 1,144.0 1,202.6 1,162.4 1,156.8
Closing stocks 292.8 307.7 295.3 296.5
Stock-to-use 25.6% 25.6% 25.4% 25.6%
Corn - world less China mn MT
Production 868.7 943.5 874.2 870.3
Consumption 859.0 911.6 865.4 859.8
Closing stocks 87.1 98.5 88.0 89.1
Stock-to-use 10.1% 10.8% 10.2% 10.4%
mn 480-
Cotton - world
pound bales
Production 111.4 115.9 114.4 115.1
Consumption 123.3 116.3 110.7 110.1
Closing stocks 86.3 86.1 89.1 91.2
Stock-to-use 70.0% 74.1% 80.5% 82.8%
Rice - world mn MT
Production 509.3 514.0 503.0 509.8
Consumption 503.4 519.2 517.2 520.0
Closing stocks 188.7 183.4 169.1 173.3
Stock-to-use 37.5% 35.3% 32.7% 33.3%
Soybean - world mn MT
Production 368.5 358.1 383.0 375.2
Consumption 364.0 362.3 376.4 371.1
Closing stocks 100.0 99.0 102.0 100.0
Stock-to-use 27.5% 27.3% 27.1% 26.9%
Wheat - world mn MT
Production 774.4 779.2 783.8 788.9
Consumption 787.7 792.7 791.2 793.2
Closing stocks 284.9 271.5 269.3 269.3
Stock-to-use 36.2% 34.2% 34.0% 34.0%
Source: USDA, Kotak Institutional Equities

India Research
38
Exhibit 4: USDA India agriculture demand and supply estimates

Dec-22 Jan-23 Feb-23 Mar-23
Crop Unit 2020-21 2021-22 Estimate 2022-23 Projection 2022-23 Projection 2022-23 Projection 2022-23 Projection
mn 480-pound
Cotton
bales
Production 27.6 24.4 27.5 26.5 25.5 24.5
Consumption 26.0 25.0 23.0 22.5 22.5 22.5
Closing stocks 11.9 8.6 11.4 11.2 10.8 10.1
Stock-to-use 45.9% 34.6% 49.6% 49.8% 48.0% 44.9%
Rice mn MT
Production 124.4 129.5 124.0 125.0 125.0 132.0
Consumption 101.1 110.5 108.5 108.5 108.5 111.0
Closing stocks 37.0 34.0 29.5 30.0 29.0 32.5
Stock-to-use 36.6% 30.8% 27.2% 27.6% 26.7% 29.3%
Wheat mn MT
Production 107.9 109.6 103.0 103.0 103.0 104.0
Consumption 102.2 109.9 104.0 104.8 104.1 105.5
Closing stocks 27.8 19.5 12.3 12.6 12.6 12.6
Stock-to-use 27.2% 17.7% 11.8% 12.1% 12.1% 12.0%
Stock-to-use ratios remain lower from their cyclical highs of a few years ago across all key crops except cotton
Exhibit 5: World stock-to-use ratios in key crops
2015 2016 2017 2018 2019 2020 2021 2022E 2023P

Corn 21% 22% 32% 31% 28% 27% 26% 26% 25%
non China 14% 14% 15% 14% 13% 12% 10% 11% 10%
Cotton 100% 85% 69% 66% 67% 94% 70% 74% 81%
Rice 24% 28% 31% 34% 37% 37% 37% 35% 33%
Soybean 26% 25% 29% 29% 33% 27% 27% 27% 27%
Wheat 31% 34% 35% 38% 39% 40% 36% 34% 34%
Exhibit 6: Climate and channel inventory check: Pressure across LatAm, India, southern Europe and parts of Asia
High channel inventories due to unfavorable weather in 2022. Recent unseasonal rains and hailstorms could be an added
India
negative.
Very dry conditions in Argentina and southern Brazil have led to elevated channel inventories. Argentina may see some relief
South America
from recent showers.
Europe Channel inventories are high in southern Europe due to carryover from last season. Northern Europe in better shape.
Southeast Asia Channel inventories high in Indonesia, but near normal levels in the rest of the Southeast Asian region.
Source: USDA, industry reports, Kotak Institutional Equities

India Research
39
Fertilizer prices continue to correct

Exhibit 7: Fertilizer prices (US$/MT)
Price as of % change
Feb-23 Jan-23 Feb-22 17-Mar-23 mom yoy
International prices
Ammonia (US) 740 929 1,135 590 -20.3% -34.8%
DAP (US) 735 775 893 675 -5.2% -17.6%
Phosphoric acid (China) 1,193 1,190 1,310 NA 0.3% -8.9%
Potassium Chloride (US) 563 563 392 NA 0.0% 43.6%
Rock phosphate (Global index) 323 300 173 NA 7.5% 87.0%
Urea (US) 327 399 579 318 -18.1% -43.6%
India prices
Ammonia 752 855 905 455 -12.1% -16.9%
Phosphoric acid 1,050 1,150 1,380 1,050 -8.7% -23.9%
Urea 576 576 671 333 0.0% -14.2%
Fertilizer volume watch: Sales volumes of urea and DAP are up YTD, whereas complexes and SSP are down
Exhibit 8: Production, sales and imports of fertilizers (mn MT)
Jan-23 % yoy YTD 2023 % yoy
(mn MT) Production Sales Import Production Sales Import YTD 2023 Sales Import Production Sales Import
Urea 2.62 3.94 1.16 15% 8% -7% 23.72 32.62 7.31 13% 10% 1%
DAP 0.38 1.85 0.49 3% 295% 98% 3.57 9.75 6.38 4% 16% 50%
Ammonium Sulphate 0.06 NA NA -5% NA NA 0.56 NA NA 8% NA NA
Complex fertilizers 0.83 1.31 NA 47% 49% NA 7.14 8.58 NA -3% -21% NA
Single super phosphate 0.53 NA NA 19% NA NA 4.26 NA NA 4% NA NA
MOP NA 0.24 0.10 NA 98% -65% NA 1.50 1.44 NA -33% -3%
Source: Department of Fertilizers, Kotak Institutional Equities
Fertilizer subsidy disbursement has slowed after the spike of Nov 2022
Exhibit 9: Monthly fertilizer subsidy disbursement (Rs bn)
Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 Dec-22 Jan-23 FY2023 YTD
Fertilizer monthly subsidy disbursement (Rs bn)
Urea 49 55 144 92 136 74 70 363 241 198 1,423
P&K 6 1 1 107 21 133 144 129 5 6 553
Total 56 57 146 199 157 208 213 492 246 204 1,977
Growth (yoy, %)
Urea 453 22 117 43 68 26 85 542 207 (18) 193
P&K 9 (90) (96) 198 (55) 301 958 115 (96) (93) 127
Total 278 (4) 46 99 23 125 317 322 28 (37) 168
Source: Department of Fertilizers, Kotak Institutional Equities

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Exhibit 10: All India rainfall time series March 2023 (in mm)
Source: IMD, Kotak Institutional Equities

India Research
41
Exhibit 11: Sub-divisional rainfall map of India for the month of March 2023
Source: IMD, Kotak Institutional Equities

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42
Water reservoir levels are above 10-year averages across all regions except the East
Exhibit 12: Region-wise water reservoir levels (bn cubic meter) as of Mar 21, 2023
Regions Current storage Last year's storage 10 years average storage

Northern 7.7 6.7 6.6
Eastern 9.1 10.1 10.9
Western 20.4 21.0 15.3
Central 23.7 24.0 21.3
Southern 21.6 26.8 17.0
Source: Central Water Commission, Kotak Institutional Equities
Livestock market watch: Egg prices have firmed up, layer prices corrected month-on-month
Exhibit 13: Prices of broiler (Rs/kg), egg (Rs/100 eggs) and layer prices (Rs65/kg)
Unit Feb-23 Jan-23 Feb-22 mom yoy

Average broiler prices (Rs/kg) NA NA 349
Average egg prices (Rs/100 eggs) 421 522 404 -19% 4%
Average layer prices (Rs/kg) 39 51 42 -23% -5%
Source: Poultry Bazar, Kotak Institutional Equities
Exhibit 14: New product approvals considered by Central Insecticide Board in latest Registration Committee meeting
Company Product Comments
Registration granted and approved for indigenous manufacture for export under only
UPL Daminozide 85% WG
u/s 9(3)
M/s Astec LifeScience Silthiopham technical 98.0% w/w min.
u/s 9(3)
M/s Agro Allied Venture Glyphosate 41% SL
u/s 9(3)
M/s Cheminova India Triflusulfuron methyl technical 96% min
u/s 9(3)
M/s Cheminova India Triflusulfuron methyl technical 50% min
u/s 9(3)
Registration granted and approved for formulation indigenous manufacture of the
M/s Natco Pharma Chlorantraniliprole 35% WG
product Chloranriniliprole 35% WG u/s 9(3) FIM vs FIT.
Registration granted and approved for indigenous manufacture of the product
M/s ADAMA India Pyroxasulfone technical 98.4% min
Pyroxasulfone technical 98.4% min. (TIM vs FI-WRT) u/s 9(3).
Bispyribac sodium 38% + Chlorimuron ethyl 2.5% + Registration granted and approved for indigenous manufacture of Bispyribac sodium
M/s P I Industries
Metsulfuron methyl 2.5% WG 38% + Chlorimuron ethyl 2.5% + Metsulfuron methyl 2.5% WG u/s 9(3).
Registration granted and approved for indigenous manufacture of Diafenthiuron 47.8%
M/s Syngenta India Diafenthiuron 47.8% SC (Diafenthiuron 50% w/v SC)
SC (Diafenthiuron 50% w/v SC) u/s 9(3)FIM.
Registration granted and approved for indigenous manufacture of Dinotefuran 11% +
M/s UPL Ltd Dinotefuran 11% + Pymetrozine 36% WG
Pymetrozine 36% WG u/s 9(3)FIM
Registration granted and approved for import of Tribasic copper sulphate 34.5% SC u/s
M/s Sumitomo Tribasic copper sulphate 34.5% SC
9(3)FI.
Registration granted and approved for indigenous manufacture of Chlorantraniliprole
M/s Crystal Crop Protection Chlorantraniliprole technical 94% w/w min. (TIM vs TI)
technical 94% w/w min. (TIM vs TI) u/s 9(3)
Registration granted and approved for indigenous manufacture of Diclosulam
M/s Deccan Fine Chemicals Diclosulam technical 94.1% w/w min.
technical 94.1% w/w min. u/s 9(3) TIM.
Registration granted and approvde for indigenous manufacture of Permethrin 2%
M/s Arguse Polymers Permethrin 2% Aerosol
Aerosol under section 9(3) FIM
Registration granted and approved for indigenous manufacture of Difenoconazole 6%
M/s Willowood Chemicals Difenoconazole 6% + Validamycin 6% SC
+ Validamycin 6% SC under section 9(3) FIM
Registration granted and approved for import of Chlorantraniliprole 50% FS under
M/s Corteva Agriscience Chlorantraniliprole 50% FS
section 9(3) FI.
Source: CIB, Kotak Institutional Equities

India Research
43
Chemical dashboard
India’s exports and imports of chemicals remained lower yoy in Feb 2023
Exhibit 15: Monthly export and import of organic and inorganic chemicals (US$ mn)
Exports Imports
4000
3500
3000
2500
2000
1500
1000
500
May-…
May-…
Nov-20
Nov-21
Nov-22
Dec-20
Dec-21
Dec-22
Jun-20
Sep-20
Jun-21
Sep-21
Oct-20
Feb-21
Mar-21
Oct-21
Feb-22
Mar-22
Jun-22
Sep-22
Oct-22
Feb-23
Jul-20
Aug-20
Jan-21
Apr-21
Jul-21
Aug-21
Jan-22
Apr-22
Jul-22
Aug-22
Jan-23
Source: Ministry of Commerce, Kotak Institutional Equities
Chapter-wise exports (reported with a month’s lag) show that a yoy decline started in Dec 2022
Exhibit 16: Monthly export value of organic, inorganic and agrochemicals (US$ mn)
Trade Value (in USD Million)

FY 2023 FY 2022
1500
1,344
1,241 1,241 1,216
1,184 1,195 1,205 1,176 1,143
1200 1,175
1,010 1,042 1,032 1,212
994
1,134 1,154
882 1,065
1,064
900
600
300
0
Apr May Jun Jul Aug Sep Oct Nov Dec Jan

India Research
44
Analyzing the data further by volumes and prices, we find volumes were down yoy through most of FY2023
Exhibit 17: Monthly export volumes of organic, inorganic and agrochemicals (kg)
Volume (MT)
FY 2023 FY 2022
600 543 539
502 504 512
489
500 452 462
434 448
481
400 443 411 420 418 435 421 404
382
360
300
200
100
0
Higher prices supported export value growth through much of FY2023, but are now correcting
Exhibit 18: Monthly export realizations on organic, inorganic and agrochemicals (US$/kg)
Price (USD/MT)
FY 2023 FY 2022
3200 2,908 2,953 2,968 2,959 2,989 2,910
2,798 2,862
2,617
2,521 2,496
2,328 2,295
2,221
2400 2,132 2,055 2,112 2,087
1,990 2,496
1600
800
0

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45
On a 3-month moving average basis, US chemical output was down 4.5% yoy in February 2023
Exhibit 19: Change (yoy, 3-month moving average) in chemicals production and producer prices in the US
February 2023 3MMA % yoy change

Production Producer prices
Che m ic a ls -4. 5 5. 0
Agricultural chemicals 0.7 5.8
Consumer products -0.3 9.8
Basic & specialty chemicals -6.0 5.6
Basic chemicals -9.3 4.3
Inorganic chemicals 5.8 15.9
Bulk Petrochem & Organics -17.5 4.7
Plastic resins -6.7 -8.0
Synthetic rubber -6.7 -1.8
Manufactured fibers -3.4 5.2
Specialty chemicals 4.7 9.9
Coatings 12.5 15.8
Other specialities 1.3 7.1
Feedstocks n/a -21.8
Capacity utilization 80.6% n/a
Source: American Chemistry Council, Kotak Institutional Equities
US chemical production fell 1.8% yoy in February 2023, but was up 2.4% mom
Exhibit 20: Changes in chemical production, exports and import prices in the US (%)
Change (%)
Month mom yoy
Chemical production Feb-23 2.4% -1.8%
Chemical export prices Feb-23 0.5% -5.9%
Chemical producer prices Feb-23 0.5% 3.8%
Source: American Chemistry Council, Kotak Institutional Equities
Export prices of HFC 134a are still quite firm, though HFC 125 prices have corrected
Exhibit 21: Average export prices of refrigerants (Rs/kg)
HFC 134A HFC 125 R 22
1,800
1,500
1,200
900
600
300
-
Feb-22
Feb-23
Dec-21
Dec-22
Mar-22
Jan-22
Aug-21
Aug-22
Jan-23
Apr-21
May-21
Apr-22
May-22
Jun-22
Jun-21
Oct-22
Jul-21
Oct-21
Jul-22
Nov-22
Nov-21
Sep-21
Sep-22
Source: Indianpetrochem, Kotak Institutional Equities

India Research
46
Domestic prices are generally under pressure

Exhibit 22: Domestic price trends for refrigerants, agrochemicals and packaging films (Rs/kg)
Refrigerants Latest price 1W 1M 3M 12M Relevant for

HFC 134A 295 -2% -14% -38% -56% SRF
HFC 32 340 -1% -12% -35% -53% SRF, GFL, NFIL
R 22 325 -2% -12% -36% -40% SRF, GFL, NFIL
Agrochemicals
Acetamiprid 1,870 -3% -10% -19% -29%
Chlorpyrifos 540 -3% -2% -4% -17%
Hexaconazole 1,100 0% -4% -4% -12%
Mancozeb 203 0% -4% -22% -41%
Tebuconazole 2,225 -2% -8% -16% -36%
Glyphosate 5,972 -1% -16% -17% -46% BYRCS (FG)
Packaging films
BOPET 112 2% 5% -2% -36% SRF
BOPP 153 1% -5% -9% -16% SRF
Phenol spreads have recovered during 4QFY23

Exhibit 23: Spreads between phenol-acetone versus benzene-propylene (Rs/kg)
Phenol Spread (Rs/Kg) Average (Rs/kg)

110
90
70
50
30
10
May-22
Feb-23
Jan-23
Aug-22
Jun-22
Mar-23
Jul-22
Sep-22
Nov-22
Apr-22
Dec-22

India Research
47
Basic chemical prices have generally been under pressure

Exhibit 24: Price trends for key basic chemicals (Rs/kg)
Product name Latest % change
Basic Chemicals Unit Region Price 1W 1M 3M 12M Relevant for
Acetic acid, local Rs/kg India 60 0% 3% -8% -33% LXCHEM, JUBLINGR (RM)
Acetone Rs/kg India 105 3% 7% 31% -2%
Acrylonitrile Rs/kg India 165 0% 3% 6% -18%
Benzene, local Rs/kg India 85 -3% -2% -2% -8% ARTO (RM)
Bromine, int'l US$/ton China 4314 -7% -26% -35% -53%
Caprolactam Rs/kg India 342 0% 6% 37% 29%
Caustic soda (flakes) Rs/kg India 66 -3% 14% -3% -12% CHEMPLAS, DCM, GACL, GRASIM (FG)
Caustic soda (lye) Rs/kg India 35 -5% -13% -20% -49%
Chloroform Rs/kg India 62 3% 7% 13% 3% NFIL (RM)
Ethyl acetate, local Rs/kg India 90 0% -2% 0% -18% GNFC, JUBILINGR, LXCHEM (FG)
Ethylene dichloride Rs/kg India 49 0% 0% -25% -51%
Fluorspar US$/ton China 444 0% 2% -13% 4% GFL, NFIL, SRF (RM)
Isopropyl alcohol Rs/kg India 96 0% -3% 0% -13%
MTBE US$/ton Singapore 885 6% 10% 1% 7% VO (RM)
Nitric acid Rs/kg India 47 0% -2% 7% -15%
Phenol, local Rs/kg India 122 -1% -1% 2% -19%
Phthalic anhydride Rs/kg India 125 -2% 7% 24% -2%
PVC Rs/kg India 80 -3% -10% -14% -43%
Soda ash (Tata Chemicals) Rs/kg India 38 0% 0% 15% 74%
Sodium nitrite (NNS) Rs/kg India 81 0% -9% 1% 42% DN (FG)
Toluene Rs/kg India 89 -3% -2% -3% -13%
Vinyl acetate monomer Rs/kg India 99 -4% -7% -13% -53%
Chemical spreads
Phenol Rs/kg India 69 2% 7% 25% -27%
PVC - Ethylene Rs/kg India 41 -6% -21% -31% -58%
PVC - VCM Rs/kg India 12 -18% -50% -68% -71%
Energy prices
Brent crude US$/bbl 74 -9% -12% -8% -32%
Coal US$/ton Indonesia 282 -12% -12% -13% 88%
Natural Gas US$/mn BTU US 2 -15% -2% -58% -54%
Natural Gas GBP/ mn BTU UK 12 -24% -22% -64% -64%
Notes: Notes: RM = Raw Material, FG = Finished Good
Source: Bloomberg, Indianpetrochem, Kotak Institutional Equities

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48
Sector valuations summary

Exhibit 25: Valuation comparables
MCap CMP EPS Change (1Y) P/E (X) CAGR 2022-24E (%) Share price performance (%)
(US$ mn) Rating (Rs) (%) 2022 2023E 2024E Revenue EBITDA EPS 1W 1M 3M 1Y
Basics
Chemplast Sanmar 684 NR 376 -37% 9 27.4 12.1 (2.6) (14.2) (14.8) (5.9) (12.0) (25.6) NA
DCM Shriram 1529 NR 802 NM 11.7 (2) (6) (7) (24)
Deepak Fertilisers 854 NR 560 6% 12 6.0 7.9 14.0 31.7 21.9 (9.6) (12.8) (25.6) 1.5
GNFC 979 NR 526 NM 4.8 (2) (6) (9) (31)
GACL 529 NR 593 NM 6 (4.3) (9.6) (21.6) (19.5)
GHCL 581 NR 524 -84% 9.6 4.4 5.1 15.2 29.7 36.81 (2) (3) (5) (5)
Tata Chemicals 3,001 BUY 968 45% 20 11.4 11.0 17.9 31.5 33.4 (2.0) (6.4) (3.4) 0.7
Non-Basics/Specialties/Diversified
Aarti 2,282 REDUCE 517 -47% 24 35.6 26.8 17.6 14.0 11.2 (0.7) (3.8) (15.9) (33.0)
Alkyl Amines 1447 NR 2304 -25% 52.3 48.2 35.9 14.9 21.9 20.7 (5) (8) (15) (19)
Ami Organics 392 NR 904 -19% 53 44.5 37.8 34.4 25.8 18.1 (4.9) (5.1) (7.6) (0.5)
Atul 2467 SELL 6869 -25% 33.6 37.4 27.3 11.1 11.7 11.0 2 (2) (15) (28)
Balaji Amines 777 NR 2,065 -9% 19 16.3 14.0 19.4 19.8 15.4 (8.0) (8.9) (30.4) (36.3)
BASF India 1174 NR 2321 17% 16.9 21.3 16.8 21.5 19.7 10.0 (3) (5) (16) (22)
Camlin Fine Sciences 255 NR 133 -30% 42 27.7 13.4 53.3 76.0 77.3 (6.8) (2.5) (4.8) (8.1)
Clean Science 1737 ADD 1344 -10% 62.5 48.0 39.5 31.1 27.8 25.7 (4) (6) (9) NA
Deepak Nitrite 2,932 NR 1,810 -12% 23 28.5 21.2 16.1 3.8 4.8 (1.8) (1.9) (14.9) (20.3)
Gujarat Fluorochem 3930 NR 3091 39% 44.0 26.0 22.9 27.8 35.7 38.6 (8) (2) (2) (4)
Jubilant Ingrevia 763 NR 387 -2% 12 14.6 10.2 11.7 4.9 6.3 (5.6) (13.7) (26.8) (23.9)
Laxmi Organics 791 NR 250 -45% 21.6 37.4 22.9 6.9 4.5 -2.7 (2) (6) (21) (42)
NFIL 2,572 ADD 4,264 -6% 82 56.9 39.9 40.6 51.8 43.0 1.8 (2.1) (0.5) 2.7
Neogen 402 NR 1273 -15% 63.7 53.8 37.9 31.6 29.0 29.7 (3) 4 8 (17)
Nocil 417 NR 210 -25% 24 22.8 18.0 9.4 16.0 15.5 (1.9) (9.4) (15.7) (4.7)
Sudarshan 313 NR 408 -56% 21.7 83.7 27.1 6.0 1.7 -10.4 (0) 1 (6) (34)
Vinati 2,227 #N/A 1,781 -1% 53 39.4 28.9 32.6 38.3 35.1 (6.0) (8.0) (14.5) (12.0)
SRF 8597 #N/A 2384 1% 37.4 33.5 28.6 16.6 14.1 14.3 1 (0) (1) (11)
Tatva Chintan 467 NR 1,711 -24% 38 73.1 31.1 21.5 19.7 10.0 (4.1) (11.5) (20.9) NA
HPC
Fine Organics 1,531 NR 4,502 54% 71 23.8 28.2 31.4 53.0 58.4 (4.6) (16.8) (28.2) 3.0
Galaxy surfactants 1032 NR 2388 -3% 38.8 23.2 24.2 9.7 24.8 26.8 0 1 (7) (17)
Privi 499 NR 1,044 NM 35 NA NA NA NA NA (2.8) 8.2 (9.6) (43.6)
Oriental Aromatics 140 NR 380 NM 12.5 (2) (10) (22) (50)
Rossari Bio 386 NR 598 -19% 30 28.3 19.8 15.2 24.1 22.7 (3.4) (14.6) (21.9) (38.9)
Agrochemicals
Anupam Rasayan 970 NR 852 -15% 56 45.1 32.6 31.2 32.6 30.6 1.1 17.1 8.9 (15.4)
Astec LifeScience 288 NR 1224 -25% 29.0 39.9 25.0 20.4 11.4 7.7 (7) (16) (30) (27)
Bayer CropSc 2,179 REDUCE 3,985 -2% 30 28.3 25.1 8.4 8.9 9.0 (3.6) (11.6) (15.4) (11.4)
Bharat Rasayan 439 NR 9511 NM 22.3 3 (1) (13) (32)
Best Agro 338 NR 1,103 NM 66 (9.5) (23.3) (25.1) 4.8
Chambal Fertlizers 1,348 NR 269 -10% 7 8.4 7.2 25.5 4.4 (0.4) (2.5) (8.1) (12.4) (36.0)
Coromandel Intl 3028 NR 894 17% 18.0 12.7 12.8 16.3 17.4 18.7 (3) (6) (8) 0
Godrej Agrovet 962 REDUCE 411 -12% 19 31.4 22.4 12.1 2.6 (8.3) (4.8) (8.5) (14.5) (13.8)
PI Industries 5458 ADD 2957 12% 53.1 37.3 30.4 21.3 28.5 32.2 (4) (13) (18) 3
Rallis 469 REDUCE 198 -23% 23 23.8 18.2 11.1 16.1 13.6 0.7 (3.5) (20.1) (20.3)
Sharda Cropchem 477 NR 461 2% 12 12.1 10.0 17.6 14.0 11.2 (5.4) (7.6) (11.2) (21.6)
Sumitomo Chemicals 2631 NR 430 0% 51.4 41.5 34.6 16.9 20.5 21.9 (2) (8) (10) 7
UPL 6,381 ADD 710 5% 14 11.8 11.1 11.5 13.4 12.7 (0.3) (7.3) (6.9) (7.8)
Notes: Notes: RM = Raw Material, FG = Finished Good

India Research
UPDATE
IT Services
India
Sector View: Attractive NIFTY-50: 17,077 March 24, 2023
Large deals increase; core modernization picking pace

Accenture reported 9% growth in local currency at the upper end of the 6-10%
guidance range. The FY2023 guidance was cut to 8-10% from 8-11%,
factoring in 0.5% lower inorganic contribution and a slowdown in consulting
and smaller deals, especially in North America. Demand trends vary by
industry. Impacted ones focus more on costs, others more on growth.
Demand is increasing for large transformation deals, with modernization and
cost take-out flavor, as evidenced by strong TCV. Read through for Indian IT—
players with strength in addressing discretionary and cost take-outs, and heft
in managing complex core modernization programs will benefit. Infosys and
TCS are best positioned among Tier 1. Wipro and CTSH are vulnerable.
Demand commentary in line with our base case prior to recent banking events
Management’s commentary on demand indicates that spending on technology
modernization continues to hold, despite deteriorating macro—(1) Enterprises
continue to pursue compressed transformation. (2) Impacted verticals such as
hi-tech are focusing more on cost-take outs, whereas less impacted ones such
1933
as insurance and energy are focusing on driving growth through tech adoption.
Private Circulation Only. This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities Act of
(3) Focus on core modernization is across verticals and is a must to derive
further benefits from the adoption of new tech stack. (4) Discretionary spending
has reduced, resulting in lower demand for standalone consulting and smaller
deals, whereas the environment for large transformational deals has improved.
Demand, as highlighted by Accenture, conforms to our base case before
banking events, including SVB and Credit Suisse.
Reports 9% growth; largely broad-based except CMT vertical

Accenture reported 9% revenue growth yoy in c/c, at the upper end of the
guidance range of 6-10%. In reported terms, revenues grew 5% yoy to US$15.8
bn. The revenue growth was led by managed services that grew 16% yoy in c/c,
whereas consulting grew at a modest 4%. The growth was led by Europe and
growth markets that grew 12% and 14%, respectively, whereas North America
growth slowed down further to 5%. Revenue was flat on local currency basis in
Communications and High Tech, others grew at or above 9%, with strength in
Health and Public Services (+15%), and Resources (+16%). Attrition moderated
further to just 12%. Headcount addition was a negligible 424 on a net basis,
whereas the utilization rate of 91% was unchanged. Adjusted EPS grew 6% yoy.
Marginal cut in upper end of guidance to 8-10%; same midpoint on organic basis
FY2023 guidance on organic basis stood at 6-8% compared with 5.5-8.5%
earlier; a midpoint of 7% is unchanged. Guidance implies 1.2-3.7% CQGR in the
next couple of quarters. This will include an inorganic element as well, which is
difficult to determine. Slowdown in consulting and smaller SI deals, especially
in North America, led to a cut in the upper end of the guidance. Accenture has
guided for US$16.1-US$16.7 bn revenue in 3QFY23.
Kawaljeet Saluja Sathishkumar S Vamshi Krishna

50
Strong TCV bookings indicate increased uptake of large deals

Bookings increased 17% in c/c and 13% in US$ terms to US$22.1 bn, a record high. Consulting and
outsourcing bookings were healthy, with book-to-bill of 1.3X and 1.5X, respectively. Consulting bookings
declined 2.3% yoy due to the high base of US$10.7 bn. Outsourcing bookings shot up 31.4% to US$11.4
bn. Bookings were broad-based, with strong book-to-bill across geographies and across services, with a
book-to-bill of 1.5X in operations, 1.4X in technology, and 1.3X in strategy and consulting. Strong TCV
was courtesy to higher large deal signings, which included end-to-end deals from consulting to
technology services, according to management. Clearly, discretionary spending is slowing down, and
large deals are picking up due to reprioritization in favor of cost take-outs by clients. Clients are
prioritizing cost optimization and growth. Demand for managed services is healthy, given the need for
modernization and cost savings.
To layoff 19k employees in structural cost reduction move

Accenture will fire 19K employees over FY2023 (approx. 9.5k employees by FY2023) and FY2024 to drive
structural cost reductions to create savings to reinvest in the business and offset the impact of wage
inflation (pricing driver is muted now due to a weak macro). Accenture incurred charge of US$244 mn in
2QFY23 as a ‘business optimization’ cost. The company will spend US$800 mn in FY2023 and
restructuring cost of US$700 mn in FY2024, taking the total to US$1.5 bn; US$1.2 bn will be severance
and US$300 mn will be toward the consolidation of office space. The actions will impact roughly 2.5%
or 19K employees, of which over half will be non-billable corporate functions. This includes over 800 of
more than 10,000 leaders across markets and services. We believe that the layoffs are not just due to a
slowdown in near-term demand, but also to address bloated cost structures caused by supply-demand
mismatch coupled with the strong pace of hiring in the past two years. Net hiring will remain muted in
3QFY23 and will pick up in 4QFY23, as indicated by management.
Read through for Indian IT―divergent growth that depends on multiple factors
Accenture’s results and outlook indicate that though the demand environment is slowing down, the
nature of demand is shifting from discretionary-led to a mix of cost take-out and discretionary. Core
modernization is receiving larger focus as well. Demand trends vary across verticals, with impacted ones
favoring cost take-outs more. The current demand environment favors those with strength in types of
programs and core modernization. TCS and Infosys fit the bill in Tier 1, whereas LTIM and Mphasis can
benefit in mid-tier. Exposure to impacted verticals/services/clients will also play a role in determining
growth. Wipro has higher exposure to consulting and is vulnerable. High exposure to BFS can impact
growth for TCS, Infosys, Wipro, CTSH, LTIM and Mphasis. Mphasis can have larger impact, given high
exposure to vulnerable verticals (BFS), services (mortgage BPO) and clients (large client in logistics
vertical). Finally, a share defense in vendor consolidation is important. Infosys and TCS are well
positioned to gain share on net basis. Wipro and CTSH are vulnerable. These factors will serve to
increase the growth differential between winners and losers in FY2024.
Key highlights from earnings call

M&A investments. Accenture invested US$1.1 bn in acquisitions, primarily attributed to 15
transactions year-to-date.
Geo-vertical growth commentary. Growth in North America was driven by growth in public service,
health and utilities. In Europe, growth was led by industrial, banking and capital markets and public
services. Revenue growth was driven by Germany, Italy and France. In growth markets, growth was
driven by banking and capital markets, chemical and natural resources, and public services. Revenue
growth was led by Japan.
Tech remains very relevant. All strategies continue to lead to technology, particularly cloud, data, AI
and security. Companies remain focused on executing compressed transformations to achieve lower
cost, stronger growth, more agility and greater resilience faster.
Betting big on Industry X. Industry X is the next frontier. Accenture is advancing sustainability
solutions.
Bookings’ trend will be healthy in next quarter; lower TCV sequentially. Pipeline is good. Mix favors
managed services, with continued strong demand for large transformational deals. Consulting
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bookings were better than expected in 2QFY23. Expect solid bookings for 3QFY23 and good pipeline
for consulting.
Several large deals signed. Accenture struck bookings in excess of US$100 mn, with 35 clients in
2QFY23.
Strategy and consulting will pick up in 4QFY23. Mid-single-digit yoy revenue decline will continue in
3QFY23. Ramp up of large deals with strategy and consulting component will lead to pick up in
4QFY23.
Exposure to smaller and regional banks is not large. New developments arising from banking crisis
are still at an early stage. Large banks are focusing a lot on reducing technical debt through core
modernization. The company’s mainframe practice growing at a strong pace as a result. Core systems
need to be agile to get further benefits of investments in digitization.
FY2024 agenda. Accenture will keep investing in business, grow margins by 10-30 bps and grow
faster than the market.
Vendor consolidation is driven not just by costs, but more towards platformization. Vendor
consolidation by itself is not a big driver of growth. Vendor consolidation is less about costs, and more
driven by platformization. It is difficult for enterprises to develop global enterprise-wide platforms,
which require consistency and single approach to data with huge number of vendors.
Other highlights. (a) Slowdown in hi-tech will continue in the near term. (b) Pricing is now stable, and
was increasing in the past five quarters. (c) Strategy and consulting is a competitive differentiator for
larger deals.
Exhibit 1: Accenture interim results, August fiscal year-ends (US$ mn)

2QFY22 1QFY23 2QFY23 % qoq % yoy
Revenues 15,047 15,748 15,814 0.4 5.1
Cost of revenues 10,523 10,562 10,979 4.0 4.3
SG&A expenses 2,462 2,593 2,646 2.0 7.4
Business optimization costs — — 244
EBIT 2,062 2,593 1,945 (25.0) (5.7)
Other income (11) 9 2 (72.7) (120.9)
PBT 2,050 2,602 1,947 (25.2) (5.0)
Provision for taxes 393 605 396 (34.5) 0.8
PAT 1,658 1,996 1,551 (22.3) (6.4)
Minority interest 23 31 27 (13.8) 19.7
PAT after minority interest 1,635 1,965 1,524 (22.5) (6.8)
Margins (%)
Gross margin 30.1 32.9 30.6
SG&A (as % of sales) 16.4 16.5 16.7
EBIT (GAAP) 13.7 16.5 12.3
EBIT (non-GAAP) 13.7 16.5 13.8
Net income 11.0 12.7 9.8
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Exhibit 2: Revenue growth by segments and new bookings (Feb 2023 quarter)
Revenues Growth (%)
(US$ mn) (qoq) (yoy) (yoy) l/c % of total
Total revenues 15,814 0.4 5.1 9.0 100.0
by geography
North America 7,398 (3.0) 4.5 5 46.8
Europe 5,300 4.5 5.8 12 33.5
Growth markets 3,116 2.1 5.3 14 19.7
by verticals
Communications & High Tech 2,885 (3.2) (3.8) - 18.2
Financial Services 3,003 1.3 4.6 10 19.0
Health & Public Services 3,024 0.8 12.5 15 19.1
Products 4,719 1.1 4.3 9 29.8
Resources 2,184 2.1 11.1 16 13.8
by service line
Consulting 8,279 (2.0) (0.5) 4 52.4
Outsourcing 7,535 3.2 12.1 16 47.6
New bookings (US$ bn)
Consulting 10.7 31.3 (2.3) 48.2
Outsourcing 11.4 40.9 31.4 51.8
Total 22.1 36.1 12.7 100.0
Exhibit 3: Accenture's revenue growth guidance history, August fiscal year-ends

Beginning of the year Annual guidance post 1Q Annual guidance post 2Q
guidance (%) (%) (%) Actual (%)
FY2022-23 8-11 8-11 8-10
FY2021-22 12-15 19-22 24-26 26
FY2020-21 2-5 4-6 6.5-8.5 11
FY2019-20 5-8 6-8 3-6 4
FY2018-19 5-8 6-8 6.5-8.5 8.5
FY2017-18 5-8 6-8 7-9 10.5
FY2016-17 5-8 5-8 6-8 7
FY2015-16 5-8 6-9 8-10 10.5
FY2014-15 4-7 5-8 8-10 11
FY2013-14 2-6 2-6 3-6 5
FY2012-13 5-8 5-8 5-8 (lower half) 4
FY2011-12 7-10 7-10 10-12 11
FY2010-11 7-10 8-11 11-14 15
FY2009-10 (3)-1 (3)-1 (3)-1 (lower half) (2)
FY2008-09 9-12 6-10 0-4 0
FY2007-08 9-12 9-12 9-12 11
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Exhibit 4: Revenue growth decelerates sharply in consulting, whereas outsourcing is relatively stable
Consulting ( l/c yoy %) Outsourcing (l/c yoy %)

40
35
30
25
20
15 16
10 10
5 4
0
(5)
(10)
Nov-12
Nov-13
Nov-15
Nov-16
Nov-18
Nov-19
Nov-21
Nov-22
Nov-14
Nov-17
Nov-20
May-14
May-15
May-17
May-18
May-20
May-21
May-13
May-16
May-19
May-22
Exhibit 5: Total booking growth in outsourcing jumps to 31.4% in US$ terms
Outsourcing bookings (yoy %) Total bookings (yoy %)

60
50
40
30 31.4
20
10 12.7
0
(10)
(20)
(30)
Nov-16
Nov-19
Nov-22
Nov-15
Nov-17
Nov-18
Nov-20
Nov-21
May-16
May-17
May-19
May-20
May-22
May-18
May-21
Aug-16
Aug-17
Aug-19
Aug-22
Aug-15
Aug-18
Aug-20
Aug-21
Feb-17
Feb-19
Feb-20
Feb-22
Feb-23
Feb-16
Feb-18
Feb-21
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4
8
12
20
24
32
16
28
(4)
Aug-15 12.0
IT Services
Nov-15 10.0
Feb-16 12.0
May-16 10.0
Aug-16 9.0
Nov-16 7.0
-
5
10
15
20
25
Feb-17 6.0

Nov-16
May-17 7.0
Feb-17
12 12
Aug-17 8.0
May-17
Nov-17 10.0
Aug-17
15 15
Nov-17 Feb-18 10.0
Feb-18 May-18 11.0
13 13
Exhibit 6: Accenture overall revenue growth trajectory
May-18 Aug-18 11.0
17

Aug-18 Nov-18 9.5
18
Nov-18 Feb-19 9.0
Feb-19 May-19 8.4
15 15
May-19 Aug-19 7.2
18
Aug-19 Nov-19 9.0
19
Total revenues (l/c yoy%)
Nov-19 Feb-20 8.0

Feb-20
14 14
May-20 1.3
May-20
11
Attrition rate (%) Aug-20 (1.0)
7
Aug-20 Nov-20 2.0
9
Nov-20 Feb-21 5.0
Exhibit 7: Sharp decline in quarterly annualized voluntary attrition to 12%
Feb-21
12
May-21 16.0
May-21
17
Aug-21 21.0
Aug-21
19
Nov-21 27.0
Nov-21
17
Feb-22 28.0
Feb-22
18
May-22 27.0
May-22
Aug-22 22.4
Aug-22
20 20
Nov-22 15.0
Nov-22
13
Feb-23 9.0
Feb-23
12
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Exhibit 8: Utilization rate remains stable at 91%
Utilization (%)
95 94
94 93 93
93 92 92 92 92 92 92
92 91 91 91 91 91 91 91 91 91 91 91 91 91 91 91
91 90
90
89 88
88
87
86
85
Nov-16
Nov-17
Nov-18
Nov-19
Nov-20
Nov-21
Nov-22
May-17
May-18
May-19
May-20
May-21
May-22
Aug-17
Aug-18
Aug-19
Aug-20
Aug-21
Aug-22
Feb-17
Feb-18
Feb-19
Feb-20
Feb-21
Feb-22
Feb-23
Exhibit 9: Net headcount addition was muted
60,000
50,000
40,000
30,000
20,000
10,000
424
-
(10,000)
Feb-09
Feb-10
Feb-13
Feb-14
Feb-17
Feb-18
Feb-21
Feb-22
Feb-11
Feb-12
Feb-15
Feb-16
Feb-19
Feb-20
Feb-23
Aug-08
Aug-11
Aug-12
Aug-15
Aug-16
Aug-19
Aug-20
Aug-22
Aug-09
Aug-10
Aug-13
Aug-14
Aug-17
Aug-18
Aug-21
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Exhibit 10: Kotak Institutional Equities: valuation summary of key Indian technology companies
23-Mar-23 Mkt cap. EPS (Rs) P/E (X) EV/EBITDA (X) RoE (%)
Company Price (Rs) Rating (Rs m) (US$ m) 2023 2024E 2025E 2023 2024E 2025E 2023 2024E 2025E 2023 2024E 2025E
HCL Technologies 1,066 BUY 2,892,496 35,193 54.0 60.2 68.7 19.7 17.7 15.5 11.8 10.7 9.5 22.7 23.4 25.3
Infosys 1,375 BUY 5,701,158 69,366 58.1 66.9 77.5 23.6 20.6 17.7 15.7 13.7 11.8 32.7 35.5 37.1
LTIMindtree 4,602 REDUCE 1,361,325 16,563 151.5 176.2 207.3 30.4 26.1 22.2 21.0 17.9 14.8 28.2 27.1 26.4
L&T Technology Services 3,361 SELL 354,916 4,318 112.7 123.3 144.1 29.8 27.2 23.3 19.2 18.0 15.2 26.0 23.9 23.6
Rategain 330 BUY 35,745 435 4.5 7.5 10.2 73.9 44.0 32.4 40.1 21.6 16.5 7.5 11.3 13.5
Mphasis 1,783 ADD 335,889 4,087 89.9 100.5 113.0 19.8 17.7 14.7 12.5 11.0 9.2 23.3 23.7 25.7
TCS 3,125 ADD 11,433,255 139,108 115.7 129.9 137.7 27.0 24.1 21.1 18.3 16.5 14.5 45.9 48.4 50.0
Tech Mahindra 1,099 BUY 963,508 11,723 57.9 66.3 79.0 19.0 16.6 13.9 11.0 9.5 8.1 18.8 20.6 22.9
Wipro 362 REDUCE 1,983,832 24,137 20.9 24.1 26.7 17.3 15.0 13.5 10.2 8.7 7.5 16.3 16.8 16.7
Target O/S shares EPS CAGR (%) EPS growth (%) Net Profit (Rs mn) EBITDA (Rs mn) Sales (Rs mn)
Company Price (Rs) (mn) 2023-25E 2023 2024E 2025E 2023 2024E 2025E 2023 2024E 2025E 2023 2024E 2025E
HCL Technologies 1,280 2,714 12.8 8.8 11.3 14.2 146,664 163,292 186,609 227,299 248,131 277,075 1,012,307 1,093,477 1,226,966
Infosys 1,775 4,184 15.5 10.9 15.0 15.9 243,258 277,248 321,293 354,371 401,499 462,115 1,477,298 1,610,307 1,833,310
LTIMindtree 4,600 296 17.0 13.4 16.3 17.6 44,791 52,095 61,281 61,059 69,786 82,285 332,720 367,976 428,818
L&T Technology Services 3,200 106 13.1 24.4 9.4 16.8 11,901 13,021 15,212 17,233 18,632 21,779 79,936 95,383 109,938
Rategain 450 109 51.2 383.6 67.9 36.1 484 813 1,107 807 1,459 1,818 5,707 9,019 10,421
Mphasis 2,330 189 12.1 18.0 11.8 12.4 16,949 18,949 22,899 25,507 28,363 33,472 142,896 156,896 181,815
TCS 3,500 3,660 9.1 11.7 12.2 6.1 423,509 475,278 542,018 595,317 659,814 744,784 2,249,391 2,422,520 2,738,303
Tech Mahindra 1,240 889 16.8 (7.8) 14.6 19.1 51,470 59,026 70,271 82,349 94,136 108,607 532,716 568,444 635,312
Wipro 425 5,487 13.1 (6.2) 15.4 10.9 114,558 132,233 146,659 173,003 194,481 212,480 909,351 963,198 1,057,151
Source: Kotak Institutional Equities estimates
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Kotak Institutional Equities: Valuation summary of KIE Universe stocks
Price (Rs) Fair Value Upside Mkt cap. O/S shares EPS (Rs) EPS growth (%) P/E (X) EV/EBITDA (X) P/B (X) RoE (%) Dividend yield (%) ADVT-3M
Company Rating 23-Mar-23 (Rs) (%) (Rs bn) (US$ bn) (mn) 2023E 2024E 2025E 2023E 2024E 2025E 2023E 2024E 2025E 2023E 2024E 2025E 2023E 2024E 2025E 2023E 2024E 2025E 2023E 2024E 2025E (US$ mn)
Automobiles & Components
Apollo Tyres SELL 310 285 (8) 197 2.4 638 15 20 23 53 28 19 20 16 13 8 6 5 1.6 1.5 1.3 8 10 11 1.2 1.3 1.4 11
Ashok Leyland ADD 137 160 17 403 4.9 2,936 3 7 9 516 113 30 41 19 15 17 11 9 4.9 4.3 3.6 12 24 26 1.0 2.1 2.7 17
Bajaj Auto REDUCE 3,863 3,625 (6) 1,118 14 283 202 219 237 22 8 8 19 18 16 14 13 12 4.4 4.2 4.0 22 24 25 4.2 4.5 4.9 16
Balkrishna Industries SELL 1,979 1,650 (17) 383 4.7 193 59 75 83 (21) 27 11 34 27 24 19 15 14 5.0 4.5 4.0 16 18 18 1.3 1.4 1.5 8
Bharat Forge REDUCE 770 850 10 359 4.4 466 13 32 40 (45) 150 24 59 24 19 22 14 12 5.2 4.4 3.7 9 20 21 0.8 0.9 0.9 12
CEAT SELL 1,406 1,200 (15) 57 0.7 40 42 85 109 115 102 28 33 16 13 9 6 6 1.7 1.6 1.4 5 10 12 0.9 1.3 1.4 2
Eicher Motors SELL 2,928 2,825 (4) 801 9.7 272 105 123 142 71 17 16 28 24 21 20 18 15 6.3 5.3 4.5 24 24 24 0.9 0.9 0.9 22
Endurance Technologies SELL 1,231 1,300 6 173 2.1 141 35 54 66 2 53 24 35 23 19 16 11 9 4.0 3.5 3.1 11 15 17 0.6 0.9 1.1 1
Escorts Kubota SELL 1,857 1,650 (11) 205 3.0 111 55 74 88 (27) 34 19 34 25 21 26 21 17 2.4 2.3 2.1 7 9 10 0.4 0.6 0.7 7
Exide Industries REDUCE 177 175 (1) 151 1.8 850 11 12 13 25 8 10 16 15 13 9 8 7 1.3 1.2 1.2 9 9 9 1.4 1.4 1.4 5
Hero Motocorp REDUCE 2,363 2,600 10 472 5.7 200 141 173 190 14 22 10 17 14 12 9 8 7 2.8 2.7 2.5 17 20 21 4.2 5.1 5.6 11
Mahindra CIE Automotive SELL 362 270 (25) 137 1.7 378 19 21 22 75 13 7 19 17 16 11 9 8 2.4 2.2 2.0 13 13 13 — — — 9
Mahindra & Mahindra BUY 1,165 1,475 27 1,449 17.6 1,159 61 67 75 40 9 13 19 17 15 13 12 10 3.0 2.7 2.3 17 16 16 0.8 0.9 1.0 37
Maruti Suzuki SELL 8,353 7,850 (6) 2,523 30.7 302 264 314 357 112 19 13 32 27 23 19 15 13 4.3 3.9 3.6 14 15 16 1.3 1.5 1.7 47
MRF SELL 84,050 63,000 (25) 356 4.3 4 1,621 3,091 3,940 3 91 27 52 27 21 16 11 9 2.4 2.2 2.0 5 9 10 0.1 0.2 0.2 9
Samvardhana Motherson ADD 65 95 46 442 5.4 6,776 2 4 5 175 77 33 30 17 13 9 7 5 2.0 1.9 1.6 7 12 14 0.9 1.0 1.1 21
Schaeffler India SELL 2,754 2,660 (3) 430 5.2 156 56 66 74 38 18 13 50 42 37 32 27 24 10.0 8.8 7.7 22 22 22 0.1 0.1 0.1 3
SKF SELL 4,251 3,550 (16) 210 2.6 49 111 126 140 38 14 11 38 34 30 26 24 21 9.0 7.4 6.2 23 22 20 0.4 0.4 0.5 1
Sona BLW Precision ADD 414 500 21 242 2.9 583 7 9 13 9 38 37 61 44 32 35 25 20 10.4 8.8 7.3 18 22 25 0.3 0.5 0.7 19
Tata Motors ADD 419 450 7 1,605 18.3 3,829 (5) 31 42 84 787 35 NM 13 10 8 4 3 3.6 2.8 2.2 NM 24 25 0.0 0.0 0.0 72
Timken SELL 2,766 2,400 (13) 208 2.5 75 51 68 82 18 34 20 54 40 34 38 28 23 10.5 8.6 7.1 21 23 23 0.1 0.1 0.1 2
TVS Motor SELL 1,048 830 (21) 498 6.1 475 31 36 42 67 16 16 33 29 25 18 16 14 8.6 7.1 5.9 28 27 26 0.9 0.9 1.0 19
Uno Minda ADD 452 575 27 259 3.2 571 12 15 17 89 23 19 38 31 26 21 17 15 6.3 5.3 4.5 16 17 17 0.3 0.4 0.5 3
Varroc Engineering ADD 254 350 38 39 0.5 153 (54) 17 24 26 131 42 NM 15 11 9 7 5 3.3 2.7 2.1 NM 18 20 — — — 1
Automobiles & Components Cautious 12,814 155.1 129.4 65.2 19.4 33.9 20.5 17.2 13.2 9.6 8.1 3.8 3.4 3.0 11.3 16.5 17.3 1.1 1.3 1.5 360
Banks
AU Small Finance Bank REDUCE 570 575 1 380 4.6 664 21 24 32 16 17 31 27 24 18 — — — 3.6 3.1 2.7 15 14 16 — — — 9
Axis Bank BUY 849 1,100 30 2,611 31.8 3,070 70 78 84 65 12 7 12 11 10 — — — 2.2 1.8 1.6 18 18 17 0.6 1.4 1.5 96
Bandhan Bank BUY 213 250 18 342 4.2 1,611 14 27 27 1,643 96 1 16 8 8 — — — 1.9 1.5 1.3 12 20 17 0.3 1.9 1.9 21
Bank of Baroda ADD 163 185 14 841 10.2 5,178 26 28 31 84 9 11 6 6 5 — — — 1.0 0.9 0.8 16 15 15 3.2 3.5 3.9 60
Canara Bank BUY 281 340 21 509 6.2 1,814 55 62 66 75 12 7 5 5 4 — — — 0.9 0.8 0.7 14 14 14 4.1 4.6 4.9 36
City Union Bank ADD 128 150 17 95 1.2 740 13 14 17 28 9 20 10 9 7 — — — 1.4 1.3 1.1 14 14 15 2.1 2.2 2.7 7
DCB Bank BUY 107 140 31 33 0.4 311 15 20 23 60 35 16 7 5 5 — — — 0.9 0.7 0.6 11 14 14 2.2 3.0 3.4 2
Equitas Small Finance Bank ADD 65 68 5 72 0.9 1,110 5 7 9 110 40 43 14 10 7 — — — 1.5 1.3 1.1 11 13 17 — — — 5
Federal Bank BUY 127 160 26 269 3.3 2,103 14 14 18 52 5 22 9 9 7 — — — 1.3 1.2 1.1 14 13 15 2.2 2.3 2.8 21
HDFC Bank BUY 1,563 1,800 15 8,722 106.1 5,546 79 82 105 19 4 28 20 19 15 — — — 3.2 2.6 2.3 17 17 16 1.2 1.2 1.6 155
ICICI Bank BUY 855 1,070 25 5,973 72.7 6,950 46 47 53 38 2 13 19 18 16 — — — 3.1 2.7 2.4 18 16 16 1.1 1.1 1.2 146
IndusInd Bank BUY 1,018 1,350 33 790 9.6 775 92 107 125 54 17 17 11 9 8 — — — 1.5 1.3 1.2 14 15 15 1.3 1.5 1.8 52
Karur Vysya Bank BUY 97 125 28 78 0.9 800 14 17 20 61 27 15 7 6 5 — — — 1.0 0.9 0.8 14 15 16 3.6 4.6 5.3 4
Punjab National Bank BUY 47 58 24 516 6.3 11,011 3 7 9 8 106 33 14 7 5 — — — 0.7 0.6 0.5 4 8 9 1.5 3.0 4.0 52
SBI Cards and Payment Services BUY 720 960 33 681 8.3 943 23 26 39 36 13 49 31 27 18 — — — 6.9 5.6 4.3 25 23 27 0.2 0.2 0.3 9
State Bank of India BUY 513 725 41 4,576 55.7 8,925 55 59 61 55 7 4 9 9 8 — — — 1.6 1.4 1.2 16 15 14 1.8 2.2 2.5 106
Ujjivan Small Finance Bank BUY 24 33 36 47 0.6 1,926 5 5 6 307 (1) 14 5 5 4 — — — 1.1 0.9 0.8 30 22 20 0.0 0.0 0.0 3
Union Bank BUY 65 85 31 442 5.4 6,835 11 14 15 39 29 10 6 5 4 — — — 0.7 0.6 0.6 10 12 12 4.1 5.3 5.8 19
YES Bank REDUCE 15 16 5 437 5.3 28,751 0 1 1 (31) 90 84 52 27 15 — — — 1.1 1.1 1.0 2 4 7 0.0 0.0 0.0 52
Banks Attractive 27,414 333.5 45.4 18.6 15.6 13.6 11.5 9.9 1.9 1.5 1.4 14.0 13.5 13.9 1.3 1.7 2.0 856
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Capital goods
ABB BUY 3,360 3,425 2 712 8.7 212 33 49 60 69 49 23 102 69 56 71 51 41 14.4 12.1 10.1 15 19 20 0.1 0.1 0.2 12
Bharat Electronics REDUCE 92 98 6 673 8.2 7,310 4 4 5 17 10 7 24 22 20 16 14 13 4.8 4.4 4.0 21 21 20 1.9 2.1 2.3 17
BHEL SELL 74 37 (50) 259 3.1 3,482 (0) 1 3 (137) 238 386 NM 123 25 (74) 49 14 1.0 1.0 0.9 NM 1 4 (0.2) 0.3 1.1 17
Carborundum Universal BUY 951 1,070 13 181 2.2 190 20 28 35 16 39 25 47 34 27 28 21 17 6.8 5.8 5.0 15 18 20 0.4 0.6 0.7 2
Cochin Shipyard BUY 449 620 38 59 0.7 132 39 41 45 (13) 5 10 12 11 10 6 5 4 1.3 1.2 1.1 11 11 12 3.1 3.3 3.5 5
Cummins India BUY 1,631 1,810 11 452 5.5 277 43 52 63 43 22 22 38 31 26 36 29 23 8.5 7.7 6.0 23 26 26 1.4 1.7 0.0 12
G R Infraprojects SELL 1,029 1,070 4 99 1.2 97 87 91 107 11 5 18 12 11 10 8 8 7 1.9 1.6 1.4 18 16 16 0.0 0.0 0.0 1
IRB Infrastructure BUY 25 34 37 150 1.8 6,039 1 2 2 128 27 28 18 14 11 9 8 8 1.3 1.6 2.1 7 10 16 10.6 16.4 21.5 13
Kalpataru Power Transmission BUY 560 640 14 91 1.1 164 27 43 56 39 57 29 20 13 10 8 6 5 2.0 1.7 1.5 10 14 16 0.5 0.7 0.8 3
KEC International BUY 477 530 11 123 1.5 257 8 28 39 (45) 254 36 60 17 12 18 10 8 3.2 2.8 2.3 6 18 20 0.2 0.6 0.9 2
L&T ADD 2,207 2,260 2 3,101 37.7 1,405 76 101 122 25 33 20 29 22 18 20 16 14 4.2 3.8 3.5 15 18 20 1.4 1.9 2.3 58
Siemens SELL 3,325 2,900 (13) 1,184 14.4 356 51 58 70 43 15 20 66 57 47 46 40 33 9.1 8.2 7.3 15 15 16 0.4 0.5 0.6 15
Thermax BUY 2,291 2,470 8 273 3.3 113 42 60 73 53 43 20 54 38 32 41 29 24 41.4 28.8 23.7 13 18 20 1.1 1.5 1.9 2
Capital goods Attractive 7,357 89.5 22.6 31.0 22.6 35.4 27.0 22.1 22.1 17.7 15.0 4.2 3.9 3.6 11.9 14.6 16.4 1.2 1.6 1.9 157
Commercial & Professional Services
SIS BUY 352 480 36 51 0.6 147 22 24 29 (1) 11 21 16 15 12 12 9 8 2.2 1.9 1.6 14 14 15 0.0 0.0 0.0 0
TeamLease Services REDUCE 2,285 2,275 (0) 39 0.5 17 68 77 101 197 12 32 33 30 23 30 25 19 4.8 4.1 3.5 15.6 15.0 16.8 — — — 1
Commercial & Professional Services
Neutral 90 1.1 19.7 11.3 24.1 20.7 18.6 15.0 15.1 12.3 9.9 2.8 2.4 2.1 13.7 13.2 14.1 0.0 0.0 0.0 1
Commodity Chemicals
Asian Paints REDUCE 2,798 2,800 0 2,684 32.7 959 42 52 55 28 24 6 67 54 51 44 36 33 17.4 15.6 17.6 28 30 32 0.9 1.2 1.3 39
Berger Paints REDUCE 576 510 (11) 559 6.8 971 10 13 14 13 34 3 59 44 43 36 28 27 12.5 10.7 9.3 22 26 23 0.7 0.9 1.0 5
Indigo Paints REDUCE 1,042 1,190 14 50 0.6 48 23 31 34 31 36 8 45 33 31 27 20 18 6.6 5.7 5.0 16 18 17 0.5 0.7 0.9 1
Kansai Nerolac REDUCE 385 410 7 207 2.5 539 10 12 13 40 29 7 40 31 29 24 20 18 4.7 4.4 4.1 12 15 15 1.2 1.7 2.1 1
Tata Chemicals BUY 968 1,210 25 247 3.0 255 85 88 89 71 4 1 11 11 11 6 5 5 1.2 1.1 1.0 11 11 10 1.7 2.0 2.0 10
Commodity Chemicals Cautious 3,747 45.6 36.2 19.9 4.6 48.3 40.3 38.5 29.7 25.1 23.8 8.3 7.5 7.4 17.2 18.7 19.1 0.9 1.2 1.3 56
Construction Materials
ACC REDUCE 1,738 1,950 12 326 4.0 188 58 96 134 (40) 65 39 30 18 13 13 10 8 2.2 2.1 1.9 8 12 15 1.7 2.8 3.9 24
Ambuja Cements SELL 372 340 (9) 739 9.0 2,105 13 14 21 (10) 8 47 29 26 18 11 7 6 2.4 1.8 1.7 9 8 10 0.7 0.8 1.1 87
Dalmia Bharat ADD 1,823 2,075 14 342 4.2 185 43 74 96 (30) 70 30 42 25 19 13 10 8 2.1 1.9 1.8 5 8 10 0.4 0.6 0.8 6
Grasim Industries ADD 1,606 1,700 6 1,057 12.9 658 114 135 149 5 18 10 14 12 11 8 7 6 1.3 1.2 1.1 9 10 10 0.5 0.7 0.8 12
J K Cement SELL 2,838 2,300 (19) 219 2.7 77 69 110 131 (22) 60 19 41 26 22 18 13 11 4.6 3.9 3.4 12 16 17 0.4 0.4 0.4 4
Nuvoco Vistas Corp ADD 334 410 23 119 1.5 357 (0) 13 20 (117) 8,503 54 NM 26 17 12 8 - 1.4 1.3 1.2 NM 5 7 0.0 0.0 0.0 1
Orient Cement REDUCE 114 125 10 23 0.3 205 6 12 12 (53) 105 (5) 19 9 10 7 6 7 1.5 1.3 1.2 8 15 12 1.8 1.8 1.8 1
Shree Cement SELL 25,413 16,750 (34) 917 11.2 36 408 711 795 (38) 74 12 62 36 32 29 19 17 5.0 4.4 4.0 8 13 13 0.2 0.4 0.5 17
The Ramco Cements SELL 741 560 (24) 175 2.1 236 13 30 40 (66) 136 33 57 24 18 20 12 10 2.5 2.3 2.1 4 10 12 0.2 0.4 0.5 3
UltraTech Cement REDUCE 7,408 6,350 (14) 2,139 26.0 289 194 301 354 (1) 55 17 38 25 21 20 14 13 3.9 3.5 3.1 11 15 15 0.4 0.6 0.7 34
Construction Materials Cautious 6,057 73.7 (12.0) 44.1 21.0 30.0 20.8 17.2 13.7 10.2 8.5 2.5 2.2 2.0 8.3 10.3 11.3 0.5 0.7 0.9 189
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Consumer Durables & Apparel
Aditya Birla Fashion and Retail BUY 211 345 63 200 2.4 965 1 4 6 182 311 48 221 54 36 13 9 8 5.6 3.9 3.5 3 9 10 — — — 7
Crompton Greaves Consumer ADD 291 340 17 185 2.3 636 7 9 11 (27) 30 21 43 33 27 27 23 19 6.8 5.9 5.1 17 19 20 0.9 0.9 0.9 7
Havells India SELL 1,191 1,075 (10) 746 9.1 627 17 23 29 (12) 38 27 71 51 41 47 34 27 11.4 10.2 9.0 17 21 24 0.6 0.8 1.0 11
Page Industries SELL 37,516 35,000 (7) 418 5.1 11 559 683 831 16 22 22 67 55 45 45 37 30 33.2 28.8 25.2 53 56 60 1.1 1.4 1.8 10
Polycab REDUCE 2,861 2,810 (2) 428 5.2 149 82 92 106 44 12 16 35 31 27 24 21 18 6.7 5.8 5.0 20 20 20 0.7 0.8 0.9 11
TCNS Clothing Co. SELL 451 460 2 28 0.3 69 2 10 15 313 452 53 248 45 29 19 13 9.9 4.6 3.9 3.3 2 9 12 — — — 1
Vedant Fashions REDUCE 1,131 1,150 2 275 3.3 248 16 19 23 30 16 20 69 60 50 42 36 30 20.5 16.4 13.0 33 31 29 — — — 2
Voltas SELL 833 800 (4) 276 3.4 331 12 19 24 (22) 59 26 70 44 35 47 31 27 4.9 4.6 4.2 7 11 13 0.6 0.7 0.8 15
Whirlpool SELL 1,341 1,240 (8) 170 2.1 127 19 26 37 2 32 44 69 52 36 38 29 20 4.8 4.4 4.0 7 8 11 0.2 0.3 0.4 2
Consumer Durables & Apparel Cautious 2,727 33.2 9.0 34.8 25.0 60.8 45.1 36.1 31.9 25.3 20.8 8.6 7.4 6.5 14.1 16.3 18.03 0.6 0.7 0.9 65
Consumer Staples
Britannia Industries ADD 4,243 4,775 13 1,022 12.4 241 79 92 106 24 17 15 54 46 40 38 32 28 36.6 29.7 25.1 70 71 67 1.5 1.9 2.1 15
Colgate-Palmolive (India) ADD 1,521 1,630 7 414 5.0 272 37 42 46 (8) 15 10 42 36 33 28 24 22 23.7 22.5 21.4 57 64 67 2.3 2.6 2.9 6
Dabur India ADD 539 600 11 956 11.6 1,768 11 12 14 2 16 13 51 44 39 41 36 32 10.4 9.4 8.5 21 22 23 1.1 1.3 1.5 11
Godrej Consumer Products BUY 952 1,020 7 974 11.8 1,023 17 21 24 (2) 25 12 55 44 40 40 32 28 8.1 7.6 7.1 15 18 19 1.2 1.5 1.8 11
Hindustan Unilever ADD 2,485 2,825 14 5,839 71.0 2,350 43 50 56 15 18 13 58 50 44 41 35 31 11.5 11.0 10.6 20 23 25 1.5 1.8 2.0 45
ITC ADD 381 430 13 4,728 57.5 12,412 15 17 18 22 11 10 26 23 21 19 17 15 7.4 7.4 7.0 28 31 34 3.4 3.7 4.1 60
Jyothy Labs ADD 188 220 17 69 0.8 367 7 9 10 59 26 9 27 21 19 21 16 13 4.3 3.8 3.5 17 19 19 1.6 1.9 2.4 1
Marico REDUCE 479 525 10 620 7.5 1,290 10 12 13 5 15 13 48 42 37 34 29 26 18.3 18.1 17.9 38 44 49 2.0 2.3 2.6 7
Nestle India ADD 19,044 20,700 9 1,836 22.3 96 248 311 350 0 25 12 77 61 54 50 41 36 74.7 66.1 66.2 105 115 121 1.2 1.5 1.8 13
Tata Consumer Products ADD 707 770 9 657 8.0 922 11 15 17 5 30 19 63 49 41 35 30 25 4.2 4.0 3.8 7 8 10 1.0 1.1 1.2 10
United Breweries ADD 1,436 1,625 13 380 4.6 264 16 28 36 19 69 30 87 52 40 50 32 25 9.3 8.4 7.7 11 17 20 0.9 1.5 1.9 4
United Spirits ADD 769 925 20 559 6.8 727 13 15 19 (5) 17 23 60 51 41 38 33 28 8.3 7.6 7.0 16 16 18 0.7 0.9 1.3 10
Varun Beverages BUY 1,355 1,500 11 880 10.7 650 23 30 36 116 30 21 59 45 37 33 25 21 17.3 12.9 9.9 33 33 30 0.3 0.3 0.3 23
Consumer Staples Attractive 18,933 230.4 16.4 16.6 12.6 44.2 37.9 33.7 31.1 26.7 23.7 10.6 10.1 9.5 24 27 28 1.8 2.1 2.4 216
Diversified Financials
360 One BUY 430 530 23 153 1.9 359 19 20 24 (71) 9 16 23 21 18 — — — 4.8 4.3 4.1 22 22 23 3.3 3.5 4.1 1
Aavas Financiers ADD 1,701 2,150 26 134 1.6 79 52 62 74 14 20 19 33 27 23 — — — 4.2 3.6 3.1 14 14 15 0.0 0.0 0.0 3
ABSL AMC ADD 356 460 — 102 1.2 288 21 24 27 (8) 12 11 17 15 13 — — — 4.2 3.8 3.4 NM NM NM 3.6 4.0 4.5 0
Aptus Value Housing Finance ADD 245 330 — 122 1.5 497 10 11 13 29 15 16 25 22 19 — — — 3.6 3.1 2.6 15 15 15 0.0 0.0 0.0 1
Bajaj Finance REDUCE 5,833 6,150 5 3,531 43.0 603 191 231 276 64 21 20 31 25 21 — — — 6.5 5.3 4.3 24 23 22 0.3 0.4 0.5 87
Bajaj Finserv ADD 1,290 1,525 18 2,055 25.0 1,592 48 60 75 69 25 24 27 21 17 — — — 5.0 4.2 3.5 19 21 22 0.1 0.1 0.1 38
Cholamandalam ADD 747 875 17 614 7.5 821 30 35 45 14 18 27 25 21 17 — — — 4.7 4.0 3.3 19 19 20 0.3 0.4 0.5 13
Computer Age Management Services SELL 2,163 2,050 (5) 106 1.3 49 57 68 81 (2) 18 20 38 32 27 — — — 14.0 12.0 10.3 40 41 42 1.7 2.0 2.4 2
Five Star Business Finance ADD 540 700 30 157 1.9 291 20 25 31 29 25 24 27 22 17 — — — 3.7 3.1 2.7 15 16 16 — — — —
HDFC BUY 2,570 3,050 19 4,710 57.3 1,813 83 95 108 10 14 14 31 27 24 — — — 3.6 3.2 2.9 12 13 13 1.0 1.1 1.3 92
HDFC AMC REDUCE 1,744 2,100 20 372 4.5 214 66 76 87 0 17 14 27 23 20 — — — 6.1 5.5 5.0 24 25 26 2.4 2.8 3.2 10
Home First Finance BUY 692 1,000 44 61 0.7 88 25 29 35 33 16 20 28 24 20 — — — 3.4 3.0 2.6 13 13 14 — — — 3
L&T Finance Holdings REDUCE 85 90 6 210 2.6 2,474 8 8 9 88 (0) 16 10 10 9 — — — 1.0 0.9 0.8 8 9 10 0.0 1.7 2.1 8
LIC Housing Finance BUY 335 525 57 184 2.2 550 48 68 75 15 44 10 7 5 4 — — — 0.9 0.8 0.7 10 13 13 2.9 4.2 4.6 9
Mahindra & Mahindra Financial ADD 228 265 16 281 3.4 1,233 16 18 23 97 17 27 14 12 10 — — — 1.8 1.6 1.5 12 13 15 3.1 1.6 2.1 11
Muthoot Finance BUY 982 1,225 25 394 4.8 401 89 111 131 (9) 24 18 11 9 8 — — — 1.9 1.6 1.4 18 19 20 1.8 2.3 2.7 6
Nippon AMC ADD 209 280 34 130 1.6 622 11 13 14 (5) 15 11 18 16 14 — — — 3.7 3.6 3.5 20 23 25 4.9 5.6 6.2 1
Shriram Finance BUY 1,261 1,700 35 472 5.7 373 170 192 224 70 13 16 7 7 6 — — — 1.1 1.0 0.9 18 15 16 2.1 2.3 2.7 15
UTI AMC BUY 691 880 27 88 1.1 127 36 43 49 (14) 20 13 19 16 14 — — — 2.3 2.2 2.2 12 14 16 3.1 5.0 5.6 2
Diversified Financials Attractive 13,878 168.8 34.1 19.0 18.2 23.5 19.7 16.7 3.4 3.0 2.6 14.7 15.2 15.7 0.8 1.0 1.1 304
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Electric Utilities
CESC BUY 68 100 47 90 1.1 1,326 10 12 14 (7) 29 10 7 6 5 6 5 4 0.7 0.6 0.6 10 12 12 5.9 7.3 7.8 2
JSW Energy SELL 248 130 (48) 408 5.0 1,640 7 8 11 13 5 42 34 32 23 15 14 9 2.2 2.1 2.0 7 7 9 0.8 0.8 0.8 4
NHPC ADD 40 47 18 402 4.9 10,045 4 4 5 6 11 17 11 10 8 10 9 6 1.1 1.1 1.0 11 11 12 5.6 6.0 7.1 6
NTPC ADD 175 186 7 1,693 20.6 9,895 18 20 23 9 9 13 9.5 8.7 8 7 7 6 1.2 1.1 1.0 13 13 13 3.9 4.3 4.7 26
Power Grid BUY 222 260 17 1,550 18.9 6,975 22 24 24 12 11 2 10.3 9.3 9 7 6 6 1.9 1.7 1.6 19 20 18 6.1 6.4 6.6 28
Tata Power SELL 200 192 (4) 639 7.8 3,196 11 8 10 44 (26) 22 19 26 21 13 12 11 2.5 2.3 2.0 14 9 10 — — — 24
Electric Utilities Attractive 4,782 58.2 11.6 7.6 10.4 11.2 10.4 9.4 7.9 7.4 6.4 1.5 1.4 1.3 13.2 13.1 13.4 4.0 4.3 4.6 90
Bayer Cropscience REDUCE 3,985 4,050 2 179 2.2 45 141 159 176 5 13 11 28 25 23 20 18 16 6.7 6.5 6.2 24 26 28 3.2 3.4 3.8 1
Godrej Agrovet REDUCE 412 440 7 79 1.0 192 13 18 24 (40) 40 32 31 22 17 18 14 11 2.8 2.6 2.3 9 12 14 1.8 1.9 2.5 0
Rallis India REDUCE 198 220 11 39 0.5 195 8 11 12 (1) 31 12 24 18 16 13 11 9 2.2 2.0 1.9 9 11 12 1.8 2.0 2.3 1
UPL ADD 710 830 17 533 6.5 751 60 64 77 21 5 20 12 11 9 6 6 5 2.1 1.8 1.6 17 16 16 1.4 1.8 2.1 17
Fertilizers & Agricultural ChemicalsCautious 829 10.1 9.6 10.4 17.5 16.1 14.6 12.5 7.9 6.9 5.9 2.5 2.2 2.0 15.5 15.2 15.9 1.8 2.2 2.5 19
Gas Utilities
GAIL (India) REDUCE 105 95 (10) 691 8.4 6,575 9 10 9 (43) 9 (4) 12 11 11 10 9 9 1.2 1.1 1.1 10 11 10 4.4 4.8 5.1 21
GSPL BUY 275 375 37 155 1.9 564 14 12 13 (20) (11) 3 20 22 21 8 9 8 1.7 1.6 1.6 9 8 7 1.1 1.2 1.5 3
Indraprastha Gas BUY 439 495 13 307 3.7 700 25 28 31 14 12 10 17 16 14 13 11 10 3.8 3.4 3.0 24 23 22 1.5 2.0 2.5 8
Mahanagar Gas BUY 973 1,100 13 96 1.2 99 77 80 82 27 4 2 13 12 12 8 8 7 2.4 2.1 1.9 20 18 17 2.8 2.9 3.0 5
Petronet LNG REDUCE 229 215 (6) 344 4.2 1,500 17 20 23 (17) 17 15 14 12 10 7 7 6 2.3 2.1 1.9 18 19 20 4.2 4.9 6.1 6
Gas Utilities Attractive 1,593 19.4 (29.6) 9.5 3.3 13.7 12.5 12.1 9.3 8.5 7.9 1.7 1.6 1.5 12.3 12.6 12.3 3.4 3.8 4.3 42
Health Care Services
Apollo Hospitals BUY 4,270 5,520 29 614 7.5 144 67 97 132 13 46 35 64 44 32 28 23 19 9.5 8.0 6.6 16 20 22 0.2 0.3 0.5 23
Aster DM Healthcare BUY 240 285 19 120 1.5 500 9 12 15 (5) 34 27 27 20 16 9 7 6 2.8 2.5 2.2 11 13 15 — — — 1
Dr Lal Pathlabs SELL 1,831 1,610 (12) 153 1.9 83 30 37 47 (31) 21 29 60 50 39 29 25 21 9.3 8.4 7.5 16 18 21 0.7 0.9 1.2 6
KIMS BUY 1,324 1,735 31 106 1.3 80 40 48 55 (4) 20 15 33 28 24 18 14 12 6.2 5.1 4.2 21 20 19 0.0 0.0 0.0 1
Max Healthcare ADD 467 490 5 453 5.5 970 14 13 15 49 (4) 14 34 36 31 28 24 21 5.7 4.9 4.3 18 15 15 0.0 0.0 0.0 9
Metropolis Healthcare REDUCE 1,231 1,340 9 63 0.8 51 29 36 46 (26) 24 29 43 34 27 22 19 15 6.4 5.7 5.0 16 18 20 0.7 0.9 1.1 3
Narayana Hrudayalaya ADD 771 815 6 158 1.9 204 27 26 30 63 (5) 17 28 30 25 18 17 15 7.7 6.1 4.9 32 23 21 — — — 2
Rainbow Children's Medicare ADD 734 840 15 74 0.9 96 21 24 28 47 14 14 35 30 27 19 16 13 9.1 7.2 5.9 30 27 24 0.4 0.5 0.6 1
Health Care Services Attractive 1,741 21.2 17.4 16.4 23.6 41.4 35.6 28.8 21.9 18.5 15.6 6.7 5.8 4.9 16.2 16.2 17.0 0.2 0.3 0.3 46
Hotels & Restaurants
Devyani International ADD 142 160 13 171 2.1 1,204 2 2 2 44 (14) 25 67 78 62 26 22 18 18.2 14.7 13.2 31 21 22 0.0 0.0 0.0 4
Jubilant Foodworks ADD 448 530 18 296 3.6 660 6 8 10 (3) 23 24 70 57 46 24 20 17 12.9 10.7 8.9 20 21 21 0.2 0.2 0.2 12
Lemon Tree Hotels REDUCE 75 82 9 59 0.7 791 1 2 4 226 51 92 54 36 19 18 13 8 6.9 6.4 5.4 13 19 31 1.1 1.5 1.9 4
Restaurant Brands Asia ADD 90 115 28 44 0.5 493 (1) (0) 1 36 68 239 NM NM 166 23 15 11 2.3 2.4 2.3 NM NM 1 0.0 0.0 0.0 1
Sapphire Foods BUY 1,185 1,550 31 75 0.9 64 18 19 24 148 4 30 65 63 48 17 14 11 6.7 6.1 5.4 11 10 12 0.0 0.0 0.0 2
Westlife Foodworld ADD 689 820 19 107 1.3 156 8 11 14 7,755 37 28 84 62 48 28 23 19 18.2 14.0 10.9 24 26 25 0.0 0.0 0.0 2
Hotels & Restaurants Attractive 753 9.2 104.0 21.9 39.0 77.6 63.6 45.8 23.1 18.6 14.6 9.8 8.6 7.5 12.6 13.6 16.4 0.2 0.2 0.2 25
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Insurance
HDFC Life Insurance BUY 499 660 32 1,072 13.0 2,020 6 8 9 15 28 11 77 60 54 — — — 6.7 6.4 6.0 9 11 11 0.3 0.4 0.5 31
ICICI Lombard REDUCE 1,084 1,225 13 532 6.5 491 37 42 48 45 11 15 29 26 23 — — — 5.1 4.4 3.9 19 18 18 0.9 1.0 1.1 9
ICICI Prudential Life BUY 419 575 37 602 7.3 1,437 6 7 8 20 14 15 66 58 50 — — — 6.1 5.6 5.2 10 10 11 0.8 0.8 0.8 11
LIC BUY 569 975 71 3,598 43.8 6,325 47 35 42 268 (26) 19 12 16 14 — — — 10.7 7.2 5.1 133 53 44 — — — 14
Max Financial Services BUY 633 925 46 218 2.7 345 11 12 13 281 8 8 56 52 48 — — — — — — 6 6 6 — — — 11
PB Fintech BUY 580 700 21 261 3.2 450 (13) (8) (2) 32 33 76 NM NM NM — — — NM NM NM — — — 15
SBI Life Insurance BUY 1,119 1,450 30 1,120 13.6 1,003 17 19 20 14 12 6 65 58 55 — — — 8.7 7.8 6.9 14 14 13 0.2 0.3 0.3 20
Star Health and Allied Insurance BUY 553 715 29 322 3.9 576 10 17 21 156 71 24 55 32 26 — — — 6.2 5.2 4.3 12 18 18 — — — 4
Insurance Attractive 7,725 94.0 409.9 (17.3) 18.5 21.4 25.8 21.8 7.7 6.3 5.2 36 24 24 0.1 0.2 0.2 115
Internet Software & Services
Cartrade Tech REDUCE 385 500 30 18 0.2 51.5 6 9 12 122 56 30 67 43 33 27 16 10 1.0 1.0 0.9 1.5 2.3 2.9 0.0 0.0 0.0 1
FSN E-commerce Ventures BUY 138 215 56 394 4.8 2,875.0 0 1 1 15 253 97 837 237 120 144 87 54 28.6 25.5 21.1 3.5 11.4 19.2 — — — 23
Info Edge ADD 3,518 4,400 25 454 5.5 128.7 52 57 69 213 10 22 68 62 51 55 51 40 3.2 3.1 2.9 4.7 5.0 5.9 0.2 0.4 0.5 15
Just Dial BUY 587 800 36 49 0.6 83.6 16 31 37 93 89 20 36 19 16 13 6 3 1.4 1.3 1.2 3.8 6.9 7.7 — — — 2
Zomato BUY 53 82 56 450 5.5 8,966 (1) (1) (1) 6 13 55 NM NM NM (23) (25) (47) 2.3 2.4 2.4 NM NM NM 0.0 0.0 0.0 47
Internet Software & Services Neutral 1,366 16.6 80 128 972 NM ### 125 (465) 594 83 3.3 3.3 3.2 NM 0.2 2.5 0.1 0.1 0.2 88
IT Services
HCL Technologies BUY 1,066 1,280 20 2,892 35.2 2,714 54 60 69 9 11 14 20 18 16 12 11 9 4.2 4.0 3.8 23 23 25 4.2 4.7 5.2 42
Infosys BUY 1,375 1,775 29 5,701 69.4 4,184 58 67 78 11 15 16 24 21 18 16 14 12 7.8 6.9 6.3 33 36 37 2.5 3.3 4.2 115
L&T Technology Services SELL 3,361 3,200 (5) 355 4.3 106 113 123 144 24 9 17 30 27 23 19 18 15 7.1 6.0 5.1 26 24 24 0.8 0.9 1.1 12
LTIMindtree REDUCE 4,602 4,600 (0) 1,361 16.6 296 152 176 207 13 16 18 30 26 22 21 18 15 7.8 6.5 5.4 28 27 26 1.0 1.2 1.3 25
Mphasis ADD 1,783 2,330 31 336 4.1 189 90 101 121 18 12 21 20 18 15 12 11 9 4.4 4.0 3.6 23 24 26 3.1 3.4 3.6 12
RateGain BUY 330 450 36 36 0.4 109 4 7 10 384 68 36 74 44 32 40 22 17 5.3 4.7 4.1 7 11 13 0.0 0.0 0.0 2
TCS ADD 3,125 3,500 12 11,433 139.1 3,660 116 130 148 12 12 14 27 24 21 18 16 15 12.2 11.1 10.1 46 48 50 3.5 3.3 3.8 73
Tech Mahindra BUY 1,099 1,240 13 964 11.7 889 58 66 79 (8) 15 19 19 17 14 11 9 8 3.5 3.3 3.1 19 21 23 3.7 3.8 4.0 37
Wipro REDUCE 362 425 18 1,984 24.1 5,487 21 24 27 (6) 15 11 17 15 14 10 9 8 2.7 2.4 2.1 16 17 17 1.4 2.5 2.5 20
IT Services Attractive 25,062 304.9 7.5 13.1 14.7 23.8 21.0 18.3 15.5 13.7 12.0 6.8 6.2 5.6 28.6 29.4 30.6 3.0 3.2 3.7 338
Media
PVR ADD 1,548 1,800 16 152 1.8 61 4 29 41 105 676 41 415 53 38 40 25 21 3.9 3.7 3.4 1 7 9 0.0 0.2 0.3 13
Sun TV Network ADD 427 555 30 168 2.0 394 44 51 54 5 16 5 10 8 8 6 5 4 1.9 1.7 1.5 20 21 20 4.7 5.9 7.0 3
Zee Entertainment Enterprises ADD 216 255 18 207 2.5 960 7 12 14 (40) 72 19 32 18 15 18 12 10 1.9 1.8 1.6 6 10 11 1.2 1.4 1.9 21
Media Attractive 528 6.4 3.8 37.8 11.5 21.9 15.9 14.2 13.3 9.9 8.8 2.3 2.2 2.0 10.7 13.6 14.0 2.0 2.4 3.0 36
Metals & Mining
Hindalco Industries ADD 399 470 18 896 10.9 2,220 41 40 41 (33) (4) 3 10 10 10 5.1 5.4 5.2 1.0 0.9 0.9 11 10 9 1.0 1.0 1.0 39
Hindustan Zinc SELL 320 270 (16) 1,353 16.5 4,225 26 22 22 13 (14) (2) 12 14 15 7.1 8.2 8.2 5.6 5.6 5.6 37 39 38 15.5 6.9 6.8 5
Jindal Steel and Power REDUCE 557 580 4 568 6.9 1,011 48 57 86 (44) 19 52 12 10 6 6.3 6.0 4.2 1.4 1.2 1.0 13 13 18 0.4 0.5 0.8 21
JSW Steel SELL 668 685 3 1,614 19.6 2,417 24 71 91 (73) 195 28 28 9 7 11.3 6.6 5.3 2.3 1.9 1.6 8 22 23 0.8 1.5 1.9 18
National Aluminium Co. SELL 77 70 (10) 142 1.7 1,837 8 7 6 (56) (9) (20) 10 11 14 5.0 5.7 7.0 1.0 1.0 0.9 11 9 7 3.0 2.7 2.1 14
NMDC BUY 111 150 35 325 4.0 2,931 16 18 17 (49) 7 (4) 7 6 7 4.4 4.2 4.3 1.7 1.6 1.5 26 26 24 11.8 12.7 12.2 13
SAIL SELL 86 55 (36) 355 4.3 4,130 4 6 6 (87) 55 8 22 14 13 8.3 7.1 6.8 0.7 0.6 0.6 3 5 5 3.9 3.9 3.9 23
Tata Steel BUY 105 130 24 1,282 15.6 12,224 11 9 12 (69) (17) 36 10 12 9 5.9 6.0 5.1 1.0 1.0 0.9 11 8 11 1.5 1.7 2.0 76
Vedanta SELL 271 240 (12) 1,008 12.3 3,717 27 28 30 (50) 7 7 10 10 9 4.9 4.8 4.4 2.2 2.1 2.0 18 23 23 29.9 7.8 8.0 37
Metals & Mining Attractive 7,544 91.8 (56.2) 16.0 17.0 12.3 10.6 9.0 6.5 6.0 5.3 1.6 1.4 1.3 12.8 13.7 14.5 8.1 3.8 4.0 246
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Price (Rs) Fair Value Upside Mkt cap. O/S shares EPS (Rs) EPS growth (%) P/E (X) EV/EBITDA (X) P/B (X) RoE (%) Dividend yield (%) ADVT-3mo
Oil, Gas & Consumable Fuels
BPCL SELL 348 315 (10) 756 9.2 2,093 (15) 34 45 (135) 332 30 NM 10 8 26.1 6.0 5.1 1.5 1.4 1.3 NM 14 17 (1.6) 3.8 4.9 14
Coal India REDUCE 213 225 5 1,315 16.0 6,163 40 23 26 42 (43) 12 5 9 8 4.3 7.7 6.5 2.4 2.3 2.2 50 25 27 9.4 9.4 9.4 19
HPCL SELL 243 210 (13) 344 4.2 1,419 (80) 58 62 (282) 172 7 NM 4 4 (10.6) 6.8 6.5 1.3 1.1 0.9 NM 28 25 - 9.6 10.2 12
IOCL REDUCE 79 80 1 1,116 13.6 14,121 (0) 14 16 (103) 2,903 18 NM 6 5 16.8 4.6 4.2 0.9 0.8 0.7 NM 14 16 - 8.6 10.1 11
Oil India ADD 257 265 3 279 3.4 1,084 61 48 47 73 (22) (2) 4 5 6 4.1 4.7 4.5 0.8 0.8 0.7 21 15 13 9.4 7.4 7.2 6
ONGC ADD 153 165 8 1,922 23.4 12,580 39 32 33 3 (18) 2 4 5 5 3.0 3.0 2.7 0.7 0.6 0.6 18 13 13 10.9 8.8 8.6 23
Reliance Industries BUY 2,248 3,000 33 14,272 173.6 6,352 104 131 150 14 26 14 22 17 15 11.3 9.1 7.8 1.7 1.6 1.4 8 9 10 0.4 0.4 0.4 195
Oil, Gas & Consumable Fuels Neutral 20,003 243.4 (20.9) 35.2 11.7 15.2 11.3 10.1 8.9 6.6 5.8 1.4 1.3 1.2 9.2 11.5 11.7 2.0 2.6 2.8 281
Pharmaceuticals
Aurobindo Pharma ADD 486 525 8 285 3.5 586 34 46 52 (23) 35 12 14 10 9 7 5 5 1.1 1.0 0.9 8 10 10 2.2 2.7 3.2 10
Biocon REDUCE 207 210 1 249 3.0 1,202 4 8 13 (27) 74 64 46 27 16 17 10 8 2.1 2.0 1.8 5 7 11 0.8 1.3 2.2 13
Cipla BUY 869 1,135 31 701 8.5 806 36 48 56 16 33 17 24 18 16 13 10 8 3.0 2.6 2.3 12 15 15 0.8 1.1 1.3 21
Divis Laboratories SELL 2,803 2,380 (15) 744 9.1 265 71 73 93 (37) 3 28 40 38 30 30 26 20 5.7 5.2 4.7 14 14 16 0.9 0.9 1.2 19
Dr Reddy's Laboratories ADD 4,447 4,725 6 741 9.0 166 243 275 318 30 13 16 18 16 14 11 10 8 3.2 2.7 2.3 17 17 17 0.7 0.8 0.9 17
Gland Pharma REDUCE 1,284 1,375 7 211 2.6 164 58 66 80 (21) 13 20 22 19 16 15 13 10 2.6 2.3 2.0 12 12 12 — — — 11
Laurus Labs REDUCE 303 350 15 163 2.0 536 17 14 19 8 (16) 34 18 22 16 11 12 9 3.8 3.3 2.7 21 15 17 — — — 6
Lupin REDUCE 649 720 11 295 3.6 450 10 32 43 (59) 226 34 66 20 15 16 9 7 2.3 2.1 1.9 3 10 12 — 0.7 1.0 8
Sun Pharmaceuticals ADD 978 1,140 17 2,346 28.5 2,406 36 41 47 11 13 15 27 24 21 18 15 13 4.3 3.7 3.3 16 16 16 0.7 0.8 1.0 28
Torrent Pharmaceuticals REDUCE 1,534 1,600 4 519 6.3 338 39 48 60 12 24 25 40 32 26 18 15 13 7.4 6.2 5.2 19 19 20 0.4 0.5 0.7 4
Pharmaceuticals Cautious 6,254 76.1 (1.4) 21.3 19.7 26.4 21.7 18.2 15.4 12.4 10.3 3.4 3.0 2.6 12.8 13.8 14.6 0.5 0.7 0.8 136
Real Estate
Brigade Enterprises BUY 463 560 21 107 1.3 230 13 11 17 272 (17) 56 36 43 28 15 9 6 3.4 3.2 2.9 10 8 11 0.5 0.5 0.5 1
Brookfield India Real Estate Trust ADD 263 310 18 88 1.1 335 4 8 8 (56) 122 5 73 33 31 15 13 13 1.0 1.1 1.1 1 3 3 4.9 5.5 5.8 0
DLF BUY 368 430 17 910 11.1 2,475 7 22 19 8 216 (11) 54 17 19 72 19 23 2.4 2.1 1.9 5 13 11 0.5 0.5 0.5 15
Embassy Office Parks REIT ADD 305 390 28 289 3.5 948 8 11 16 (18) 42 44 40 28 19 15 13 11 1.2 1.2 1.3 3 4 6 6.2 7.7 9.8 3
Godrej Properties SELL 1,067 1,100 3 297 3.6 278 31 43 85 143 39 99 35 25 13 87 129 22 3.1 2.8 2.3 9 12 20 — — — 6
Macrotech Developers BUY 847 1,300 54 408 5.0 482 32 53 87 27 69 62 27 16 10 21 11 7 3.3 2.7 2.1 12 19 24 — — — 8
Mindspace REIT ADD 303 360 19 180 2.2 593 8 12 14 (7) 53 11 38 25 22 14 13 12 1.1 1.2 1.2 3 5 5 6.9 7.4 7.8 1
Oberoi Realty ADD 856 910 6 311 3.8 364 42 43 62 46 3 43 20 20 14 15 12 8 2.6 2.3 2.0 14 12 16 0.2 0.2 0.2 5
Phoenix Mills ADD 1,297 1,605 24 232 2.8 179 39 57 80 124 45 41 33 23 16 16 10 7 3.0 2.7 2.3 10 12 15 0.2 0.3 0.3 4
Prestige Estates Projects BUY 420 560 33 168 2.0 401 11 27 30 26 155 10 39 15 14 11 8 5 1.8 1.6 1.4 5 11 11 0.4 0.4 0.4 2
Sobha BUY 436 830 90 41 0.5 95 17 46 79 40 170 71 26 9 6 10 6 3 1.6 1.4 1.1 6 16 23 1.6 1.6 1.6 1
Sunteck Realty BUY 299 500 67 44 0.5 140 10 23 38 942 130 70 30 13 8 23 8 6 1.4 1.3 1.1 5 10 16 0.3 0.3 0.3 1
Real Estate Attractive 3,075 37.4 29.6 82.9 29.3 35.6 19.4 15.0 20.9 13.1 9.8 2.1 2.0 1.8 5.9 10.1 11.9 1.4 1.6 1.8 48
Retailing
Avenue Supermarts SELL 3,374 3,550 5 2,185 26.6 648 39 45 58 69 17 28 88 75 59 57 46 37 13.5 11.5 9.6 17 17 18 — — — 16
Titan Company ADD 2,519 2,700 7 2,236 27.2 888 38 41 49 49 9 17 66 61 52 44 40 34 19.2 16.2 13.8 32 29 29 0.5 0.7 0.9 34
Trent REDUCE 1,345 1,300 (3) 478 5.8 356 13 16 22 647 25 32 103 82 62 42 33 26 16.9 14.0 11.5 18 19 20 — — — 11
Retailing Neutral 4,422 59.6 66.7 13.3 23.0 77.5 68.4 55.6 48.7 41.5 33.9 16.0 13.5 11.4 21 19.7 20 0.2 0.3 0.4 60
India Research
63
Price (Rs) Fair Value Upside Mkt cap. O/S shares EPS (Rs) EPS growth (%) P/E (X) EV/EBITDA (X) P/B (X) RoE (%) Dividend yield (%) ADVT-3mo
Specialty Chemicals
Aarti Industries REDUCE 517 560 8 188 2.3 363 15 19 25 (33) 33 31 36 27 20 19 17 13 3.8 3.3 2.9 10 13 15 0.3 0.4 1— 5
Atul SELL 6,869 6,720 (2) 203 2.5 30 184 252 305 (10) 37 21 37 27 22 25 18 14 4.2 3.7 3.3 12 14 15 0.3 0.5 0.8 4
Castrol India BUY 110 130 18 109 1.3 989 9 10 11 14 12 14 13 11 10 8 7 6 6.5 6.2 5.7 52 57 60 7.7 8.1 8.6 1
Clean Science & Technology ADD 1,344 1,600 19 143 1.7 106 28 34 46 30 22 35 48 40 29 35 29 22 14.0 10.8 8.2 33 31 32 0.3 0.4 0.5 1
Navin Fluorine ADD 4,264 4,480 5 211 2.6 50 75 107 143 43 43 33 57 40 30 40 27 20 9.9 8.2 6.6 19 22 24 0.4 0.4 0.4 8
Pidilite Industries REDUCE 2,368 2,285 (4) 1,204 14.6 508 26 37 45 11 40 22 90 64 52 59 43 36 17.3 15.1 13.1 20 25 27 0.6 0.7 0.8 9
PI Industries ADD 2,957 3,550 20 449 5.5 152 79 97 118 42 23 21 37 30 25 28 23 18 6.2 5.3 4.4 18 19 19 0.3 0.4 0.4 13
SRF BUY 2,384 2,800 17 707 8.6 296 71 83 100 12 17 21 34 29 24 21 18 15 6.8 5.6 4.7 22 21 21 0.4 0.5 - 15
Vinati Organics ADD 1,781 2,250 26 183 2.2 104 45 62 78 34 36 26 39 29 23 31 22 17 7.9 6.5 5.3 22 25 25 0.4 0.7 0.9 1
Specialty Chemicals Attractive 3,396 41.3 11.5 26.5 22.7 44.0 34.8 28.3 29.3 23.3 19.0 8.2 7.0 5.9 18.6 20.1 20.9 0.7 0.8 0.8 56
Telecommunication Services
Bharti Airtel ADD 764 875 15 4,405 53.6 5,759 16 27 43 261 64 59 46 28 18 8 7 5 5.6 4.5 3.8 13 18 23 0.3 0.5 0.9 51
Indus Towers REDUCE 151 165 9 407 5.0 2,695 8 14 15 (65) 64 11 18 11 10 5 4 3 1.9 1.7 1.6 10 16 16 3.3 4.0 4.6 11
Vodafone Idea RS 6 — — 314 3.8 48,680 (6) (6) (7) NM NM NM NM NM NM 15 15 16 (0.4) (0.3) (0.2) NM NM NM — — — 17
Tata Communications ADD 1,222 1,150 (6) 348 4.2 285 59 55 63 21 (7) 16 21 22 19 9 9 8 17.5 12.1 8.6 114 64 52 1.9 1.8 2.0 7
Telecommunication Services Attractive 5,474 66.6 1 47 91 NM NM NM 9.0 7.6 6.6 22 27 50 NM NM NM 0.6 0.9 1.2 86
Transportation
Adani Ports and SEZ BUY 655 810 24 1,415 17.2 2,157 34 38 45 31 10 20 19 17 14 15 12 10 3.2 2.7 2.3 18 17 17 0.1 0.5 0.4 132
Container Corp. REDUCE 590 610 3 360 4.4 609 19 21 23 10 8 13 31 28 25 18 16 14 3.2 3.1 3.0 11 11 12 1.9 2.1 2.4 12
Delhivery BUY 326 395 21 237 2.9 725 (14) (8) (5) 18 43 32 NM NM NM (57) 227 39 2.6 2.6 2.6 NM NM NM — — — 10
Gateway Distriparks BUY 62 90 46 31 0.4 500 4 5 6 (3) 4 23 14 14 11 9 7 6 1.7 1.6 1.5 13 12 14 2.5 2.7 3.0 0
GMR Airports BUY 39 43 9 238 2.9 6,036 (1) (1) (1) (40) (58) (4) NM NM NM 25 19 15 (22.1) (15.1) (11.3) 45 51 38 — — — 6
Gujarat Pipavav Port BUY 110 117 6 53 0.6 483 7 7 8 62 12 12 17 15 13 9 8 7 2.6 2.6 2.6 16 18 20 5.7 6.4 6.9 3
InterGlobe Aviation BUY 1,906 2,550 34 735 8.9 383 (10) 122 150 94 1,268 23 NM 16 13 9 4 3 (11.3) (41.4) 2.7 6 NM 519 — — — 24
Mahindra Logistics REDUCE 364 430 18 26 0.3 71 4 9 18 16 132 102 97 42 21 13 9 6 4.3 4.0 3.5 4 10 18 — — — 1
Transportation Neutral 3,095 37.7 2,332.3 85.2 23.3 42.3 22.9 18.6 15.1 9.8 7.9 5.0 4.2 3.5 11.9 18.4 18.9 0.4 0.6 0.6 188
KIE universe 191,495 2,329 6.0 24.0 16.8 23.0 18.6 15.9 13.0 10.6 9.2 3.1 2.7 2.4 13.3 14.6 15.3 1.7 1.8 2.1
Notes:
(a) We have used adjusted book values for banking companies.
(b) 2022 means calendar year 2021, similarly for 2023 and 2024 for these particular companies.
(c) Exchange rate (Rs/US$)= 81.36
India Research
64
DISCLAIMERS, DISCLOSURES & LEGAL

Distribution of ratings/investment banking relationships
Kotak Institutional Equities Research coverage universe
Percentage of companies covered by Kotak Institutional

70%
Equities, within the specified category.
60%
Percentage of companies within each category for which
Kotak Institutional Equities and or its affiliates has
50%
provided investment banking services within the previous
12 months.
40% * The above categories are defined as follows: Buy = We
30.7% expect this stock to deliver more than 15% returns over
30% 27.2% the next 12 months; Add = We expect this stock to deliver
22.8% 5-15% returns over the next 12 months; Reduce = We
19.3% expect this stock to deliver -5-+5% returns over the next
20% 12 months; Sell = We expect this stock to deliver less than
-5% returns over the next 12 months. Our target prices
10% are also on a 12-month horizon basis. These ratings are
4.4% 4.4%
2.2% used illustratively to comply with applicable regulations. As
1.3%
of 31/12/2022 Kotak Institutional Equities Investment
0%
Research had investment ratings on 228 equity securities.
BUY ADD REDUCE SELL
Source: Kotak Institutional Equities

As of December 31, 2022
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.
India Research
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24 Mar 23 Kotak Daily

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India Daily

March 24, 2023 NIFTY-50 [Mar 23]: 17,077

Private Circulation Only.

InterGlobe Aviation (INDIGO) BUY

Well-prepared to sail through seasonality Company data and valuation summary

Indigo expects to benefit from demand improvement 1.2

Forecasts/Valuations 2023E 2024E 2025E

Maintain estimates and fair value of Rs2,550; retain BUY

Aditya Mongia Teena Virmani

(%) IndiGo (LHS) Difference versus industry average (RHS)

Source: DGCA, Company, Kotak Institutional Equities

Source: Company, Kotak Institutional Equities

ATF Price (Rs per litre)

Source: IOCL, Kotak Institutional Equities

Source: Company, Kotak Institutional Equities estimates

Source: Company, Kotak Institutional Equities estimates

GAIL (India) (GAIL) REDUCE

Maintain REDUCE with unchanged FV of Rs95/share Related Research

Anil Sharma Aditya Bansal

Source: PNGRB, Kotak Institutional Equities

Source: Company, PNGRB, Kotak Institutional Equities

Revenue EBITDA Margin % ( %)

Source: PNGRB, Company, Kotak Institutional Equities estimates

(Rs bn) Transmission EBIT Post tax RoCE (RHS) (% )

Source: PNGRB, Kotak Institutional Equities estimates

Unified tariff—zonal breakup of tariff and volumes (Rs or US$/mmbtu, mmscmd)

Source: PNGRB, Kotak Institutional Equities estimates

Volume divisor 124 126 128 130 134 136

Source: PNGRB, Kotak Institutional Equities estimates

Western domestic gas or LNG Eastern offshore gas

Source: PNGRB, Companies, Kotak Institutional Equities estimates

Key assumptions behind GAIL model, March fiscal year-ends, 2018-25E

Source: Company, Kotak Institutional Equities estimates

Source: Company, Kotak Institutional Equities estimates

Source: Bombay Stock Exchange, Kotak Institutional Equities estimates

Balance sheet (Rs mn)

Free cash flow (Rs mn)

Source: Company, Kotak Institutional Equities estimates

Mahindra & Mahindra Financial (MMFS) ADD

High growth target is aspirational, focus on ROA

Retain ADD; FV of Rs265

Full sector coverage on KINSITE

New beginning in housing finance

Razor sharp focus on collection continues, tracking developments closely

NIM trends unclear

Mahindra & Mahindra Financial

Domestic tractor Monsoon deviation GNPA AUM growth

Source: Company, IMD, Kotak Institutional Equities estimates

Disbursements trend has been strong in January and February 2023

Source: Company, Kotak Institutional Equities

Mahindra & Mahindra Financial

We expect 20% CAGR loan book growth over FY2023-25E

(Rs bn) Loans (LHS) YoY (RHS)

We expect AUM mix to remain stable

Auto/utility vehicles Tractors Cars CVs SME Pre-owned vehicles

Source: Company, Kotak Institutional Equities estimates

Mahindra & Mahindra Financial

Source: Company, Kotak Institutional Equities

NIM trajectory unclear

Yields on AUM (LHS) Cost of funds (LHS) NIM (RHS)

Source: Company, Kotak Institutional Equities estimates

Stressed loans down to 17% from peak of 33% last year

Source: Company, Kotak Institutional Equities