Equity Research

April 17, 2023

ICICI Securities Limited
is the author and India Update
distributor of this report
Contents
Page 2 Infosys (Rs1,389): Large discretionary IT spend exposure leading to Buy
Market data as on Apr 13, 2023 revenue drawdown, remain BUY
INDICES
% chg Page 4 Bharti Airtel (Rs767): Can Bharti's FCF surprise positively? Buy
(DoD) Page 7 HDFC Bank (Rs1,692): 17.4% RoE and 2.1% RoA for FY23; investing into Buy
BSE Sensex
S&P CNX Nifty
60431
17828
0.1
0.1 branches for making bank future-ready
BSE 100 18059 0.1 Page 10 Zomato (Rs54): Delivery executive strikes: what’s happening? Buy
BSE 200 7583 0.1
Page 12 Technology: BFS tech spend growth rate moderating, but large technology
OVERSEAS MARKETS# transformation programmes continue
% chg
(DoD) Page 13 Technology: ISG cuts As-A-Services ACV growth outlook modestly,
Dow Jones 33886 (0.4) maintains managed services growth forecast
Nasdaq Comp. 12123 (0.4)
S&P 500 4138 (0.2) Page 14 Automobiles: Rural 2Ws on revival mode; PV demand steady
Hang Seng
Nikkei
20524
28483
0.4
(0.0)
Page 16 Defence Q4FY23 preview: Steady execution, exciting prospects ahead
Page 17 Metals & Mining: Steel: Falling coking coal prices to support spreads
ADVANCES/DECLINES (BSE)
Group A B S Page 18 Results date reckoner / Recent reports/updates
Advances
Declines
377
325
591 1849
561 1643 Highlights
Unchanged 3 15 118
Sector/event Impact
FII TURNOVER (BSE+NSE)* TECHNOLOGY: Large discretionary IT spend exposure leading to revenue drawdown,
(Rs mn)
Bought Sold Net Infosys – remain BUY. As INFY has high exposure to the digital transformation
84520 63000 21520 Q4FY23 result agenda of clients, which is seeing a delay in decision making, it led to a
review sharp revenue drawdown in Q4FY23. We see INFY’s FY24 revenue growth
CURRENCY
US$1 = Rs81.84
guidance at 4-7%, implying 1.5% to 3.2% CQGR, reflecting a strong pick-
up in growth mostly in H2FY24E. We are currently building in a weak 1.4%
*FII turnover (BSE + NSE) as on QoQ CC revenue growth guidance for Q1FY24, followed by a sharp pick
Apr 12, 2023 up in the remaining 9MFY24E. This makes us forecast 6.4% CC revenue
growth in FY24E, closer to the higher end of the guidance. For FY25E/26E,
we largely maintain our double digit revenue growth forecast of 13%/12.4%
in CC terms as structural demand drivers for the industry around cloud
migration/digitalisation and cost optimisation remain intact. On EBIT
margin, we lower our margin assumption over FY24-26E as we believe
INFY is unable to recoup margins in the mega deals it has signed till now
which could repeat itself in future with other mega deals in the pipeline. We
lower our FY24-26E EBIT forecasts by up to 11% and EPS by up to 7% on
account of higher other income. We lower our target price by 7% to Rs1,641
(from Rs1,759), implying 18% upside and maintain our BUY rating on the
stock. Key risk to our thesis: Double digit revenue growth assumption for
FY25E which is predicated on structural demand drivers for the industry
and the fact that technology absorption as %age of global GDP is
increasing. There could be scope for de-rating for INFY and the entire
Indian IT sector, in our view, if the double digit revenue growth assumption
for FY25E seems unlikely.

Market movement (BSE+NSE) Volumes in Rs mn (BSE and NSE) Advances & Declines ratio (BSE)
BSE NSE (RHS) NSE BSE (RHS) 4.0
61000 18000 600000 45000
60500 17800 3.5
550000
60000 40000
17600 3.0
59500 500000
17400 2.5
59000 35000
58500 17200 450000 2.0
58000 17000 30000 1.5
400000
57500
16800 1.0
57000 25000
350000
56500 16600 0.5
56000 16400 300000 20000 0.0
24-3 26-3 28-3 30-3 1-4 3-4 5-4 7-4 9-4 11-4 13-4 24-3 26-3 28-3 30-3 1-4 3-4 5-4 7-4 9-4 11-4 13-4 24-3 26-3 28-3 30-3 1-4 3-4 5-4 7-4 9-4 11-4 13-4

ICICI Securities Limited, ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai-400 025, India.
Phone: +91 22 2288 2460/70 Fax: +91 22 2298 2448
ICICI Securities Inc, 275 Madison Avenue - Suite 1417, 7th Floor, New York, NY 10017
United States. Tel: 212-388-0677
Equity Research INDIA
April 14, 2023
BSE Sensex: 60431 Infosys BUY
ICICI Securities Limited Maintain
is the author and Large discretionary IT spend exposure leading to
distributor of this report revenue drawdown, remain BUY Rs1,389
A big negative surprise in Q4FY23 performance: Infosys has reported revenue of
US$4,554mn, decline of 3.2% QoQ CC, much lower than our/consensus estimates of
Technology +0.1%/0.3% QoQ CC. This resulted in miss in FY23 revenue growth at 15.4% YoY CC vs
guidance of 16-16.5%. Revenue decline was due to unplanned project ramp downs and delays
Q4FY23 result review and in decision making which resulted in lower volumes. There was also one-time revenue impact
earnings revision due to a few project cancellations. EBIT margin came in at 21%, -50bps QoQ lower than
our/consensus estimates of 21.5%/21.7%. Decline in margin was due to dip in utilisation and
Target price: Rs1,641 unexpected fall in revenue. PAT was lower by 4.6%/7.6% than our/consensus estimates on
both revenue and margin miss.
Earnings revision Demand outlook: TCV was muted at US$2.1bn, -36.4% QoQ, -7% YoY with low net new
(%) FY24E FY24E FY25E component at 21%. Demand remains uncertain with more weakness in US than in Europe.
Sales (US$)  1.9  1.6  2.8 Large deal pipeline is healthy with higher vendor consolidation and cost optimisation deals
EBIT  2.8  5.8  10.7
EPS  1.8  1.1  6.7
including a few mega deals. However, pipeline to TCV conversion is getting delayed due to
weak macros.
Target price revision Guidance: Infosys has provided revenue guidance of 4-7% YoY CC for FY24, implying CQGR
Rs1,641 from Rs1,759 of 1.5-3%. Guidance is weak, lower than our and consensus estimate of 6-8% due to lower exit
growth rate. Upper end of the guidance is a strong ask in the current uncertain demand
Shareholding pattern environment and assumes a partial reversal of project ramp downs or a mega deal win, in our
Jun Sep Dec view. Infosys has provided margin guidance of 20-22%, lower than our and consensus
'22 '22 '22
Promoters 13.1 15.2 15.1 expectations of 21-23% for FY24. Guidance factors headwinds from compensation and travel
Institutional costs and tailwinds from utilisation, automation, pyramid optimisation and pricing. We believe
investors 50.6 68.6 69.0 the guidance factors in the likely impact of margins in case of any mega deal win.
MFs and others 15.0 17.6 17.7
FIs/Bank 0.0 1.9 2.0 What to do with the stock?
Insurance Cos. 3.5 12.4 12.6
FIIs 32.1 36.7 36.7 As INFY has high exposure to the digital transformation agenda of clients, which is
Others 36.3 16.2 15.9 seeing a delay in decision making, it led to a sharp revenue drawdown in Q4FY23. We
Source: www.nseindia.com see INFY’s FY24 revenue growth guidance at 4-7%, implying 1.5% to 3.2% CQGR,
reflecting a strong pick-up in growth mostly in H2FY24E. We are currently building in a
weak 1.4% QoQ CC revenue growth guidance for Q1FY24, followed by a sharp pick up in
ESG disclosure score the remaining 9MFY24E. This makes us forecast 6.4% CC revenue growth in FY24E,
Year 2021 2022 Chg closer to the higher end of the guidance. For FY25E/26E, we largely maintain our double
ESG score 60.3 68.8 8.5 digit revenue growth forecast of 13%/12.4% in CC terms as structural demand drivers for
Environment 42.7 54.0 11.2
Social 48.1 56.1 8.0
the industry around cloud migration/digitalisation and cost optimisation remain intact.
Governance 89.9 96.1 6.3 On EBIT margin, we lower our margin assumption over FY24-26E as we believe INFY is
Note - Score ranges from 0 - 100 with a unable to recoup margins in the mega deals it has signed till now which could repeat
higher score indicating higher ESG
disclosures.
itself in future with other mega deals in the pipeline. We lower our FY24-26E EBIT
Source: Bloomberg, I-sec research forecasts by up to 11% and EPS by up to 7% on account of higher other income. We
lower our target price by 7% to Rs1,641 (from Rs1,759), implying 18% upside and
maintain our BUY rating on the stock. Key risk to our thesis: Double digit revenue growth
assumption for FY25E which is predicated on structural demand drivers for the industry
and the fact that technology absorption as %age of global GDP is increasing. There could
be scope for de-rating for INFY and the entire Indian IT sector, in our view, if the double
digit revenue growth assumption for FY25E seems unlikely.
Market Cap Rs5763bn/US$70.3bn Year to March FY23 FY24E FY25E FY26E
Reuters/Bloomberg INFY.BO/INFO IN Revenue (Rs mn) 14,67,670 16,06,193 18,15,234 20,40,030
Shares Outstanding (mn) 4,148.6 Net Income (Rs mn) 2,40,950 2,68,392 2,97,007 3,31,555
52-week Range (Rs) 1749/1365 EPS (Rs) 57.6 64.8 71.7 80.0
Free Float (%) 84.9 % Chg YoY 9.7 12.4 10.7 11.6
Research Analysts:
FII (%) 36.7 P/E (x) 24.1 21.4 19.4 17.4
Sumeet Jain Daily Volume (US$'000) 1,10,995 CEPS (Rs) 67.7 76.4 84.8 94.7
sumeet.jain@icicisecurities.com
+91 22 6807 7573 Absolute Return 3m (%) (7.6) EV/E (x) 16.0 14.3 12.9 11.5
Aditi Patil Absolute Return 12m (%) (18.8) Dividend Yield (%) 2.4 3.4 3.4 3.4
aditi.patil@icicisecurities.com Sensex Return 3m (%) 0.5 RoCE (%) 26.2 28.4 29.5 30.1
+91 22 6807 7452
Sensex Return 12m (%) 4.9 RoE (%) 32.0 34.8 36.2 36.8

Please refer to important disclosures at the end of this report

 Infosys, April 14, 2023 ICICI Securities

Key takeaways from earnings call

 Project ramp downs were in verticals impacted by weak macro environment –
largely in telecom, hi-tech, retail, and sub-segments of financial services - asset
management, investment banking, mortgages.
 Financial services vertical was impacted by budgeting delays at the start of the year
due to macro uncertainties. Softness in mortgages, asset management and
investment banking sub-segments continued in Q4FY23.
 Exposure to regional US banks is less than 2% of revenue and going forward the
company does not anticipate any material impact on its operations due to the recent
events in US regional banking segment.
 TCV comprised 17 large deals - 5 in manufacturing, 4 in financial services, 3 in
CRM, 2 each in life sciences and hi-tech, 1 in energy & utility and region wise 10
were in North America and 7 in Europe.
 Margin walk: EBIT margin declined 50bps QoQ due to headwinds of 1) 70bps
decline in utilisation and 2) 90bps decline on lower revenue growth including one-
time revenue impact, partially offset by tailwinds from a) 50bps on cost
optimisation, 2) 60bps from reduction in customer support cost.
 Infosys has not taken any wage hike decision as of now for FY24. It has given 3
compensation hikes in the span of last 15 months.
 Overall demand for digital transformation on the back of cloud migration, cost
optimisation and vendor consolidation remains healthy.
Note: Target price methodology – Our 12-month target price of Rs. 1,641 is based on
25x FY26E EPS of Rs 80, discounted back by WACC of 12%.
Table 1: Q4FY23 actuals vs estimates
Q4FY23E- vs our
(Rs bn) Q4FY23 Q3FY23 QoQ Q4FY22 YoY Cons vs Cons
ISEC estimates
CC growth -3.2% 2.4% 1.2% 0.1% -327 bps 0.30%
Sales ($ m) 4,554 4,659 -2.3% 4,280 6.4% 4,714 -3.4% 4,730 -3.7%
USD/INR 82.2 82.2 0.0% 75.4 9.0% 82.7 -0.5% 82.2
Sales (Rs bn) 374 383 -2.3% 323 16.0% 390 -3.9% 389 -3.7%
EBIT 79 82 -4.4% 70 13.2% 84 -6.5%
EBIT Margin 21.0% 21.5% -47 bps 21.6% -51 bps 21.5% -42 bps 21.7% -63 bps
Reported PAT 61.3 65.9 -7.0% 56.9 7.8% 65.0 -5.7% 66.3 -7.6%
EPS 14.8 15.7 -5.9% 13.5 9.1% 15.5 -4.6% 16.0 -7.6%
Source: Company data, I-Sec research, Consensus estimates from bloomberg

Table 2: Infosys – change in estimates

Revised Old Change (%)
FY24E FY25E FY26E FY24E FY25E FY26E FY24E FY25E FY26E
Revenues (US$ mn) 19,431 21,960 24,679 19,807 22,315 25,395 -1.9% -1.6% -2.8%
Revenue growth YoY CC 6.4% 13.0% 12.4% 7.4% 12.7% 13.8% -100bps 40bps -140bps
Revenue growth YoY US$ 6.7% 13.0% 12.4% 7.8% 12.7% 13.8% -110bps 40bps -140bps
Rs bn
Revenues 1,606 1,815 2,040 1,637 1,845 2,099 -1.9% -1.6% -2.8%
EBIT 339 372 412 348 395 461 -2.8% -5.8% -10.7%
EBIT margin 21.1% 20.5% 20.2% 21.3% 21.4% 22.0% -20bps -90bps -180bps
EPS (Rs/share) 64.8 71.7 80.0 63.6 72.5 85.8 1.8% -1.1% -6.7%
Source: Company, I-Sec research

2
Equity Research INDIA
April 16, 2023
BSE Sensex: 60431

ICICI Securities Limited

Bharti Airtel BUY
is the author and
Maintained
distributor of this report Can Bharti’s FCF surprise positively? Rs767
The biggest disappointment for Bharti we have heard from investors is lack of
Company update FCF generation in the past, which has capped shareholder value creation. In this
note, we highlight the reasons for Bharti’s lack of FCF generation, which includes
Telecom competitive intensity, costs of building spectrum portfolio, leapfrogging in
technology adoption, regulatory payouts and Africa acquisition. The heavy-lifting
Target price: Rs960 on most investments is behind except for 5G network rollout. Thus, we have come
a long way, and are close to crossing the line from where Bharti can possibly
Shareholding pattern generate cashflow equivalent to 10% of its current market capitalisation, and this,
Jun Sep Dec we believe, is just two years away. We maintain our BUY rating on Bharti with an
’22 ’22 ’22 unchanged SoTP-based target price of Rs960.
Promoters 55.9 55.1 55.1
Institutional Bharti’s FCF generation has been disappointing for long. The single-biggest
investors 38.8 39.6 39.6
MFs and others 12.2 10.7 10.9 disappointment for Bharti since FY10 has been its inability to generate healthy FCF. It
Insurance Cos.
FIIs
2.3
24.3
6.7
22.2
6.8
21.7
has barely registered any FCF after interest payments, which has capped value creation
Others 5.3 5.3 5.5 for shareholders through dividends, buybacks or simple net-debt-reduction, which boost
Source: NSE equity value. We analyse the data from FY10 to reckon what went wrong for Bharti.
Below are a few major factors that adversely impacted FCF generation:
ESG disclosure score  Rise in competitive intensity – India’s telecom industry had seen unreasonable
Year 2021 2022 Chg
ESG score 59.7 63.2 3.5 competitive intensity, which is the prime factor for low cashflow from operations. The
Environment 40.1 50.7 10.6 number of players in the industry went up to 14-15 per circle leading to massive
Social 51.6 51.6 0.0
Governance 87.4 87.4 0.0 price erosion. Reliance Jio (RJio) foray completely shook up the industry forcing it to
Note - Score ranges from 0 - 100 with restructure, though it also helped consolidate. Nonetheless, despite investment
a higher score indicating higher ESG
disclosures. across technologies, ARPUs have remained lower than anticipated. Notably, Bharti’s
Source: Bloomberg, I-sec research ARPU in FY10 was Rs240 (including contribution from IUC) compared to FY23
ARPU estimated at Rs190, which implies hardly any growth.
 Investment to augment spectrum portfolio – Indian government allocated
spectrum through the administrative process till CY08 for small licence fees.
Therefore, spectrum cost was negligible for telcos in the 2G era. While cost was
negligible, spectrum availability was unpredictable and use cases were restricted.
Administratively allocated spectrum had defined technology attached to it, thus
restricting spectrum use. India moved to spectrum allocation via auctions, but the
spectrum prices were most expensive globally, and legacy telcos also ended up
paying huge spectrum payments to renew administratively-allocated spectrum.
Bharti has invested ~Rs1,600bn for spectrum purchases since FY10.
 AGR dues and penalties – Telcos lost their AGR definition case against the
government in Oct’19. This resulted in creation of huge AGR dues and penalties.
Bharti has amassed payment of ~Rs420bn towards AGR dues.

Market Cap Rs4277bn/US$52.2bn Year to Mar FY22 FY23E FY24E FY25E

Reuters/Bloomberg BRTI.BO / BHARTI IN Revenue (Rs bn) 1,165 1,381 1,559 1,712
Shares Outstanding (mn) 5,575.8 Net Income (Rs bn) 26 70 180 261
52-week Range (Rs) 877/629 EPS (Rs) 4.7 12.6 30.2 43.9

Research Analysts: Free Float (%) 44.9 % Chg YoY 207.6 170.9 139.1 45.5
FII (%) 21.7 P/E (x) 99.0 60.8 25.4 17.5
Sanjesh Jain Daily Volume (US$/'000) 49,643 CEPS (Rs) 51.0 62.5 80.0 93.0
sanjesh.jain@icicisecurities.com
+91 22 6807 7153 Absolute Return 3m (%) 0.4 EV/E (x) 11.2 9.3 8.0 6.7
Akash Kumar Absolute Return 12m (%) 3.6 Dividend Yield (%) 0.4 0.8 1.6 2.3
akash.kumar@icicisecurities.com Sensex Return 3m (%) 0.5 RoCE (%) 6.9 9.3 11.4 14.0
+91 22 6807 7637
Sensex Return 12m (%) 4.9 RoE (%) 6.8 9.3 19.4 23.9

Please refer to important disclosures at the end of this report

 Bharti Airtel, April 16, 2023 ICICI Securities
 Technology transition – India has leapfrogged in technology-adoption from being
a laggard to being an early adopter. India’s 3G spectrum auction was conducted in
CY10 while globally 3G rollout started in CY02/CY03. First 4G-LTE was launched
in CY10, but it became popular in CY13 with launch of services by China Mobile
(TD-LTE). India launched commercial 4G services in CY16. First 5G was launched
in CY19, but India is among the countries that are rolling out 5G fastest (5G
spectrum auctions took place in CY22). Refer to article (link) - ‘India ahead of
world in 5G rollout, growing ‘extremely fast’, say Ericsson, Nokia’.
 Leveraged buyout of Zain Africa didn’t work out as anticipated – Bharti
bought Zain’s Africa operation in CY10 for an enterprise value of US$10.7bn. It
was a leveraged buyout. Two aspects impacted Bharti from the Africa acquisition:
1) significant under-performance (the asset was under-invested, and Bharti
misread the market and implemented India-based learning in Africa which didn’t
work), and 2) significant depreciation of African currencies, and the INR. The debt
was largely USD-denominated.
Where are we in each of these aspects? The situation has undergone massive /
rapid repair in each of the five aspects discussed above, which provides huge comfort.
 Consolidation and acceleration in revenue growth – India’s telecom industry
has now consolidated into three private players, wherein one player faces a risk to
its ‘going concern’ status. Further, new player(s) entry has largely been during
technology transition, and Bharti / RJio have rapidly progressed on 5G
deployment. The risk of new entrant is now pushed to 6G. India has also started
taking large tariff interventions supporting revenue growth. Bharti’s ARPU
(adjusted for IUC) has seen a CAGR of 15% over FY20-FY23E. We expect an
ARPU CAGR of 9-10% at least over the next two years as well.
 Spectrum investments to be very limited – Bharti has built a very large
spectrum portfolio across technologies. These spectrums should take care of 5G
rollout and, in worst case, the company may be forced to buy some sub-GHz
spectrum (we assign low probability to it). The next big spectrum payout may only
be in CY30 when its 2100MHz and 2300MHz band spectrum comes for renewal.
 Regulatory payouts – The only large dispute pending with the government is
about one-time-spectrum-charges.
 Technology transition – India has become an early adopter on the technology
front, which means technology transition will coincide with industry hereon. In fact,
India is ahead in SA-5G (standalone 5G) while a developed market such as UK is
planning for ubiquitous rollout only by 2030 (link). We estimate 4G and 5G to
coexist for next 8-10 years before we adopt 6G as the mainstream technology.
Globally, 5G investments are not justified by mobile services; therefore, telcos are
targeting to develop new enterprise use cases. It would require an ecosystem to
evolve for telcos to realise the benefit of 5G investments.
 Africa contributing to FCF – Airtel Africa has smartly turned around in past few
years. Its EBITDA grown >2.5x to US$2.5bn in FY23E since FY18. Despite
significantly increasing dividend payout, its net debt stands at only US$1.6bn.

2
Bharti Airtel, April 16, 2023 ICICI Securities
We remain optimistic on Bharti’s FCF generation. Our confidence in FCF
generation emanates from the following factors: 1) India, at worst, will remain a 3-
private-player market for the foreseeable future limiting competitive intensity; 2) telcos
will keep playing with tariffs, but we expect ARPUs to grow at least 10% p.a. for the
next few years as operators focus on FCF generation vs market share in prepaid 4G /
5G segments. Bharti has taken unprecedented tariff hikes in its base voice plans in the
past two years moving from Rs75 to Rs155 (for 28 days); 3) network capex likely to
peak in FY24, and progressively reduce as 5G coverage layer reaches ~75% of the
population; and 4) spectrum investment to be limited; large spectrum renewal
expected only in CY30.
 Bharti’s cashflow will also benefit from steady growth in non-mobile services
including FTTH and enterprise. Dividends from Airtel Africa and Indus will add to
India FCF generation. Spectrum moratorium is due to end in FY26 and this will
increase cash outflow towards government payment from FY27.
 Our estimates suggest FCF generation (after interest cost) of >Rs400bn for Bharti
in FY25E, which is 10% of its current market capitalisation. Bharti has set a good
precedent of paying dividends in its two related companies – Indus Towers
(erstwhile Bharti Infratel), and Airtel Africa. We remain hopeful of Bharti generously
rewarding shareholders from FY25.

3
 Equity Research INDIA
April 16, 2023
BSE Sensex: 60431

ICICI Securities Limited

HDFC Bank BUY
is the author and Maintained
distributor of this report 17.4% RoE and 2.1% RoA for FY23; investing
Q4FY23 result review, into branches for making bank future-ready Rs1,692
earnings and TP revision
HDFC Bank’s (HDFC) Q4FY23 PAT at Rs120.5bn, up 19.8% YoY but down 1.7%
Banking QoQ, was broadly in line with I-Sec estimate. NII growth for the four quarters of
FY23 averaged 20.4% vs. 11.0% for FY22. On the contrary, opex growth for the
Target price Rs1,990 four quarters of FY23 averaged 27.2% vs 14.7% for FY22. Hence, it can be inferred
that the bank utilised gains from higher NII to make investments for the future,
Earnings revision which led to elevated opex. Profitability thereby was stable with FY23 RoE at
(%) FY24E FY25E 17.4% vs FY22 RoE at 16.9%. The merger with HDFC is likely to come into effect
PAT ↓1 NA
from Jul’23, as per the management.
Target price revision:
Rs1,990 from Rs1,874
For Q4FY23, NII was up 23.7% YoY / 1.6% QoQ while core NIMs on total assets
were flat QoQ at 4.1%. Opex continues to be elevated - up 32.6% YoY and 8.0%
QoQ. Continued investment in branches and employees led to an elevated opex-
Shareholding pattern
to-assets ratio of ~2.26% and cost-to-income at 42%. As a result, operating profit
Sep Dec Mar
'22 '22 '23 stood at Rs186.2bn, up 13.8% YoY and down 2.1% QoQ, but lower than our
Promoters 25.6 25.6 25.6
Institutional
estimate of >Rs195bn. Lowest credit cost in ~6 years at 67bps largely aided the
investors 59.9 60.5 60.6 bank post in-line PAT despite lower-than-expected operating profit. GNPA fell
MFs and others 18.0 18.4 18.5
FIs/Banks 0.0 1.5 1.6 further to a 23-quarter low at 1.12%. Maintain BUY with a revised target price of
Insurance Cos. 7.9 8.1 8.0
FPI 34.0 32.5 34.0
Rs1,990 based on 3.1x Sep’24E book (previous: Rs1,874 based on 3.2x FY24E
Others 14.5 13.9 13.8 book).
Source: BSE
 NII growth at 24% YoY was in line with our estimate; margins flat QoQ: NII grew
24% YoY and 2% QoQ while NII growth for the four quarters of FY23 averaged
ESG disclosure score 20.4% vs 11.0% for FY22, which has been the key driver of earnings in FY23. For
Year 2021 2022 Chg Q4FY23, yield on assets improved to 7.9% vs 7.7% QoQ and 7.0% YoY. Similarly,
ESG score 58.2 63.1 4.9
Environment 43.2 40.1 (3.1) cost of funds (incl. shareholders’ funds) improved to 3.7% from 3.5% QoQ and 3.0%
Social 51.6 56.7 5.1 YoY. As a result, core NIMs rose 10bps YoY and remained flat QoQ at 4.1%, while
Governance 79.8 92.4 12.5
Note - Score ranges from 0 - 100 with NIMs on interest-earning assets also saw a similar rise of 10bps YoY / flat QoQ at
a higher score indicating higher ESG
disclosures.
4.3%.
Source: Bloomberg, I-sec research
Bank has mentioned that the impact of rate hike on its margins is minimal as the
cost rise would be offset by yield rise, though there could be some lead-lag effect.
45% of the loan portfolio is fixed-rate in nature. Broad change in margins is likely to
emanate from change in the loan mix from wholesale to retail. Overall, margins are
likely to continue to operate in a very narrow band of 390-440bps as per
management.
Market Cap Rs9441bn/US$115.2bn Year to Mar FY22 FY23 FY24E FY25E
Reuters/Bloomberg HDBK.BO/HDFCB IN NII (Rs bn) 720 868 1034 1208
Shares Outstanding (mn) 5,579.7 Net Profit (Rs bn) 370 441 524 607
Research Analysts: 52-week Range (Rs) 1707/1271 EPS (Rs) 66.7 79.1 94.0 108.7
Chintan Shah Free Float (%) 74.4 % Change YoY 18.1 18.6 18.9 15.7
chintan.shah@icicisecurities.com
FII (%) 34.0 P/E (x) 25.4 21.4 18.0 15.6
+91 22 6807 7658
Renish Bhuva Daily Volume (US$'000) 1,67,797 P/BV (x) 3.9 3.4 2.9 2.5
renish.bhuva@icicisecurities.com Absolute Return 3m (%) 5.7 P/ABV (x) 4.0 3.4 2.9 2.5
+91 22 6807 7465
Absolute Return 12m (%) 15.5 GNPA (%) 1.2 1.1 1.3 1.3
Sensex Return 3m (%) 0.5 RoA (%) 1.9 2.1 2.0 1.9
Sensex Return 12m (%) 4.9 RoE (%) 16.9 17.4 17.2 17.0
Please refer to important disclosures at the end of this report
HDFC Bank, April 16, 2023 ICICI Securities
 Branch expansion and higher ESOP/RSU cost resulting in elevated opex:
Bank is strengthening its geographical footprint in terms of both reach and density.
It added 638 branches (9% of Q3FY23 branches) in the past 3 months and 1,479
branches in the past 12 months. Incremental addition of 638 branches in Q4FY23
was the second-highest ever after 684 branches in Q3FY23. As a result, total
branch network now stands at 7,821.
On the employee front, the bank added 6,332 employees (4% of Q3FY23
employees) in the past 3 months and 31,643 employees in the past 12 months.
This, coupled with incremental ESOP / RSU cost of ~Rs3.0bn, led to a sharp rise
in employee cost (up 6% QoQ and 39% YoY).
As the bank builds its retail deposit franchise and starts to get back to higher
proportion of retail asset franchise, opex would continue to be elevated, but will
also likely result in improved spreads and higher credit cost. Second highest-ever
branch expansion, focus on scaling-up retail, coupled with investment in
technology led to 9% QoQ and 30% YoY rise in non-employee cost. Overall,
operating cost has risen 8% QoQ and 33% YoY and stood at 2.26% of average
assets vs 2.20% QoQ and 2.03% YoY.
 Advances rose 6.2% QoQ led by growth across loan categories: Management
believes growth runway is huge and it can add one HDFC Bank every five years.
For the quarter, advances growth at 6.2% QoQ was led by growth across loan
categories. Segment-wise, commercial and rural banking were up 29.8% YoY and
9.7% QoQ, retail segment grew 19.3% YoY and 4.6% QoQ, and wholesale book
was up 12.6% YoY and 4.5% QoQ. On YoY basis, credit growth momentum
moderated to 16.9% vs 19.5% / 23.4% / 21.6% Q3FY23 / Q2FY23 / Q1FY23
respectively. However, it is pertinent to note that gross of transfers through inter-
bank participation certificates and bills rediscounted, the bank’s advances grew
21.3% YoY and 6.5% QoQ.
Deposit-gathering is a prime activity with branch expansion - vintage and
productivity improvement being key dimensions to it. In order to aid deposit
growth, the bank has been expanding its distribution franchise. Deposit strategy
revolving around branch-led, relationship-based and self-funding across product
segments, remains an important aspect and a key focus area. Deposit growth
momentum gained traction registering 20.8% YoY and 8.7% QoQ growth. Among
deposits, retail deposits growth was strong at 23.5% YoY / 7.5% QoQ with
accretion of Rs1.07bn. Also, wholesale deposits saw strong growth of 10.0% YoY
and 15.5% QoQ. As a result, the bank saw its highest-ever quarterly deposit
accretion of Rs1.5trn. CASA ratio improved 40bps QoQ to 44.4%, but was down
from 48.2% a year ago. As per management commentary, long-term CASA range
for the bank would be 39-40%.
 Asset quality overwhelming with slippages at 1.1% and GNPA as well as
credit cost at almost 6-year lows: Credit cost at 67bps for Q4FY23 was at a 25-
quarter low and was at 74bps for FY23, while total credit cost net of recoveries for
FY23 was at 53bps. This was despite creating additional contingency buffer of
Rs3bn during the quarter. GNPA for the quarter was at 1.12%, of which 14bps is
standard but included under GNPA, since one of the other facilities of borrower is
NPA. In terms of GNPA movement, slippages were at 28bps (non-annualised) or
Rs49bn, recoveries and upgrades were at 22bps (non-annualised) or Rs33bn and

2
HDFC Bank, April 16, 2023 ICICI Securities
write-offs were at 17bps (non-annualised) or Rs24bn. Further curtailment of
slippages in FY24, better recoveries and improved collections are expected to
support asset quality trends in the coming quarters, in our view.
HDFC Bank now carries cumulative credit-related contingency + floating buffer of
70bps (comprising floating provisions of Rs14.5bn and contingency provisions of
Rs97bn). Total provisions (comprising specific, floating, contingency and general)
of Rs317bn are equivalent to 1.98% of net advances, or 176% of GNPA.
 HDB Financial Services (HDB) earnings reflect improved asset quality and
pick-up in loan growth: HDB stage-3 assets improved substantially to 2.73% (vs
3.73% / 4.88% / 4.95% / 4.99% / 6.05% in Q3FY23 / Q2FY23 / Q1FY23 / Q4FY22
/ Q3FY22). Loanbook gained traction, being up 7.6% QoQ and 14.2% YoY at
Rs700.3bn. Branch lending vs asset finance vs consumer finance mix stood at
45:38:17. Momentum in disbursements gained significant traction with 53% YoY
and 20% QoQ growth while HDB added 2.8mn customers during FY23. With NIM
of 8.5% on assets, it reported RoA of 3.3% in Q4FY23. Overall for FY23, it
reported an RoA of 3.1% and RoE of 18.7%.
 Key risks: Regulatory costs associated with the imminent HDFC merger, and
elevated opex.
Table 1: Gross advances growth (including IBPC) was up 6.5% QoQ and 21.5% YoY led by growth
across categories
(Rs bn, year ending March 31)
Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23 YoY % chg QoQ % chg % of total
Retail 5,318 5,579 5,805 6,066 6,346 19.3% 4.6% 37.9%
Personal loans 1,401 1,479 1,548 1,646 1,717 22.5% 4.3% 10.3%
Auto 1,005 1,040 1,088 1,124 1,174 16.9% 4.4% 7.0%
Home loans 831 882 931 976 1,021 22.9% 4.6% 6.1%
Payment products 768 801 820 833 861 12.2% 3.3% 5.1%
LAP 622 651 693 724 768 23.3% 6.0% 4.6%
2W 93 92 96 98 99 6.9% 1.8% 0.6%
Gold loans 84 88 94 100 108 29.8% 8.0% 0.6%
Other Retail 515 544 536 564 598 16.1% 6.0% 3.6%
Commercial and rural banking 4,847 4,981 5,447 5,733 6,292 29.8% 9.7% 37.6%
Comm & Rural banking ex-Agri 4,202 4,365 4,745 5,024 5,474 30.3% 9.0% 32.7%
Agriculture 645 616 703 709 817 26.6% 15.2% 4.9%
Other wholesale 3,640 3,639 3,968 3,923 4,097 12.6% 4.5% 24.5%
Corporate & other wholesale 3,640 3,639 3,968 3,923 4,097 12.6% 4.5% 24.5%
Total gross advances 13,805 14,199 15,221 15,721 16,734 21.2% 6.4% 100.0%
Source: Company data, I-Sec research

Table 2: CRB share gradually inching up in the overall loan mix

YoY % QoQ %
Q1FY22 Q2FY22 Q3FY22 Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23 Chg Chg
Loan book (Rs bn)
Retail 4,583 4,829 5,058 5,318 5,579 5,805 6,066 6,346 19.3 4.6
Commercial & rural banking 3,863 4,150 4,402 4,847 4,981 5,447 5,733 6,292 29.8 9.7
Other wholesale 3,146 3,124 3,262 3,640 3,639 3,968 3,923 4,097 12.6 4.5
Gross advances 11,592 12,104 12,722 13,805 14,199 15,221 15,721 16,734 21.2 6.4

Loan book (%) Q1FY22 Q2FY22 Q3FY22 Q4FY22 Q1FY23 Q2FY23 Q3FY23 Q4FY23
Retail 40% 40% 40% 39% 39% 38% 39% 38%
Commercial and rural banking 33% 34% 35% 35% 35% 36% 36% 38%
Other wholesale 27% 26% 26% 26% 26% 26% 25% 24%
Total 100% 100% 100% 100% 100% 100% 100% 100%
Source: Company data, I-Sec research

3
Equity Research INDIA
April 17, 2023
BSE Sensex: 60431
Zomato BUY
ICICI Securities Limited Maintain
is the author and
distributor of this report Delivery executive strikes: what’s happening? Rs54
Blinkit delivery executives servicing ~50% of the dark stores in the NCR area are on
Company update strike since 12thApr’23 demanding roll-back of recent changes made to delivery
incentive structures in the region, according to media reports (link).
Internet We estimate Blinkit was operating ~370 dark stores pan-India as of Q3FY23. This
implies ~25% of the dark stores are currently not operational. Given that at least 3-4
days’ sales have already been lost, this implies ~1% loss in revenue from Blinkit
and ~0.15% of consolidated revenue for Q1FY24 – already.
Target price: Rs65
Why strike? According to media reports, Zomato is trying to move from a fixed-fee model
of Rs25/delivery to a hybrid pricing structure of Rs15/delivery and a supplementary
Shareholding pattern incentive based on distance travelled. Apparently, this is being perceived by delivery
Jun Sep Dec executives as a significant cut to their earnings potential.
'22 '22 '22
Promoters 0.0 0.0 0.0 Why was the tweak needed? We think the change in delivery fee structure indicates
Institutional Zomato’s efforts towards cost control. In our view, this would allow Blinkit to increase the
investors 12.6 64.3 63.5
MFs and others 2.4 4.6 5.6 delivery radius for their existing dark stores and thus improve its network coverage with
Banks & Fis 0.1 0.1 0.1 limited capex spends.
Insurance Cos. 0.2 1.2 1.1
FIIs 9.9 26.0 31.7 Should investors worry? We believe strikes/agitations are unavoidable in the sector
FDI 0.0 32.4 25.0
Others 87.4 35.7 36.5 given the large exposure to an urban ‘blue-collared’ workforce. We note Swiggy had also
Source: BSE faced pushback (in Chennai) last September when they revised their incentive structures
ESG disclosure score (link). However, given that the strike (at Blinkit) is happening in the national capital and has
Year 2021 2022 Chg already garnered political attention, we think the company should try to resolve the issue
ESG score - 30.7 - at the earliest. This could be through a combination of clearer communication on expected
Environment - 2.4 - change in earnings for delivery executives and / or some concessions on the delivery fee.
Social - 13.5 -
Governance - 76.1 -
We look forward to any clarification from the company on the matter over the next week.
Note - Score ranges from 0 - 100 with a higher score
indicating higher ESG disclosures. Q4FY23 preview. We estimate food delivery GOV to remain flat sequentially in Q4FY23E
Source: Bloomberg, I-sec research (+14.2% YoY) despite Zomato Gold activation. Our view is restrained given a seasonally
weaker quarter and online consumption fatigue trends. We estimate 1% QoQ decline in
food ordering AOV as delivery fees have been waived for Gold members. We estimate
food ordering contribution margin to remain stable QoQ as restaurant take rate
improvements may offset delivery subsidy increases. We estimate Hyperpure business
(B2B) to grow 26% QoQ and Blinkit to grow 30% QoQ led by an increase in geographical
reach. Overall, we estimate adjusted revenue growth of 9.5% QoQ and 68% YoY and
flattish consolidated EBITDA QoQ in Q4FY23E, indicating sustainable growth in new
businesses.
Valuation. Slowing growth was evident in GOV due to post-Diwali consumption fatigue
and the online-to-offline shift. However, based on sustained improvement in the underlying
operating metrics, we maintain BUY on Zomato with a DCF-based target price of Rs65.
We acknowledge that further slowdown in growth poses a risk to our FY24E/FY25E
estimates, but we think, at CMP, the risk reward is still skewed to the upside (2.6:1).
Market Cap Rs462bn/US$5.6bn Year to Mar FY22 FY23E FY24E FY25E
Research Analysts: Bloomberg ZOMATO IN Revenue (Rs mn) 41,924 64,983 86,718 1,14,273
Shares Outstanding (mn) 8,551.7 EBITDA(Rs mn) (18,508) (13,452) (4,431) 1,659
Abhisek Banerjee
Abhisek.banerjee@icicisecurities.com 52-week Range (Rs) 88/40 Net Income (Rs mn) (12,087) (11,261) (3,644) 1,585
+91 22 6807 7574 Free Float (%) 100.0 EPS (Rs) (1.7) (1.6) (0.5) 0.2
Manoj Menon FII (%) 25.0 P/E (x) n.a. n.a. n.a. 246.5
manoj.menon@icicisecurities.com
+91 22 6807 7209 Daily Volume (US$'000) 51,331 CEPS (Rs) (1.5) (1.3) (0.3) 0.5
Heenal Gada Absolute Return 3m (%) 1.3 EV/E (x) n.a. n.a. n.a. 201.7
heenal.gada@icicisecurities.com Absolute Return 12m (%) (35.8) Dividend Yield - - - -
+91 22 6807 7504
Sensex Return 3m (%) 0.5 RoCE (%) (16.2) (9.2) (3.8) (0.2)
Sensex Return 12m (%) 4.9 RoE (%) (9.8) (7.1) (2.4) 1.1
Chart 5: Zomato Please
upside/downside chart
refer to important disclosures at the end of this report
Zomato, April 17, 2023 ICICI Securities
Chart 1: Zomato upside/downside chart
Zomato upside downside price chart (Rs) Upside : Downside
2.6 : 1
180
160
140
120
100 90
80 54
60 65
40
20 40
-

Dec-21

Dec-22

Dec-23
Aug-21

Aug-22

Aug-23
Feb-22

Feb-23

Feb-24
Jun-22

Jun-23
Oct-21

Apr-23

Apr-24
Apr-22

Oct-22

Oct-23
Source: I-Sec research, Bloomberg data

Upside (Rs90): The upside scenario prices-in a global macro-economic recovery

aiding faster-than-expected revenue growth (65% YoY) in FY23E. This would be
driven by rapid increase in AOV led by higher delivery fees and take-rate, which would
help Zomato business achieve EBITDA breakeven by Q4FY23E.

Base case (Rs65): The base case prices-in a challenging global macro-environment
as seen over the past 2 quarters. We estimate ~55% YoY revenue growth in FY23E
with gradual sequential EBITDA margin improvement from Q2FY23E onwards and
EBITDA breakeven by Q2/Q3 FY24E (Zomato business).

Downside (Rs40): The downside scenario prices-in further worsening of the global
macro-economic environment leading to material derating of equity markets. It pricesin
a modest revenue growth (35% YoY) in FY23E and EBITDA breakeven (Zomato
business) gets delayed to Q1/Q2FY25E.

2
Equity Research
April 16, 2023
INDIA
BSE Sensex: 60431
Technology
ICICI Securities Limited
is the author and BFS tech spend growth rate moderating, but large technology
distributor of this report transformation programmes continue
Large US banks – JP Morgan, Citigroup (Citi), Wells Fargo and PNC Financial
Sector update Services, who have reported Q1CY23 results so far – indicate that YoY growth in
technology expenses as reported in their P&L has moderated for Citi and Wells
Technology Fargo. The same continues to decline for JP Morgan (table-2). However, their
commentaries during earnings call suggests overall technology capex investments
continue to be healthy.
Banks’ ongoing technology investment programmes remain intact: Citi management
mentioned in their earnings call that their overall technology expenses grew 12% YoY in
Q1CY23. Management acknowledged that these investments have driven a significant
increase in expenses, but believes they are crucial to modernise the firm and position Citi
for success in the years to come. Citi’s ongoing technology investments include (table-1)
consolidation of its platforms, modernising IT infrastructure, improving data and IT security,
and investing in data to create advanced decision-making and risk management
capabilities. Citi is also leveraging cloud-based solutions to modernise its systems and
eliminate manual processes and operating costs over time. JP Morgan management
mentioned the 16% YoY increase in their expenses last quarter (Q1CY23) included
technology investments among other things.
Banks are investing in technology for efficiency gains: Wells Fargo has been investing
in technology for improving efficiencies in its consumer banking business for the last 1.5
years. These efficiency initiatives have led to headcount reduction by 9% YoY and branch
reduction by 4% YoY in Q1CY23. But there is still considerable scope for further efficiency
gains as per Wells Fargo management. Company is also investing in new tools and
capabilities to provide better and more personalised advice to customers. It continues to
enhance its mobile app. Its mobile active users were up 4% YoY in Q1CY23. PNC Financial
Services (among the top-10 banks in the US) has set itself a goal to reduce costs by
US$400mn in CY23 through its continuous improvement programme, which funds a
significant portion of its ongoing business and technology investments.
US banks’ commentaries on recession expectations: Citi management believes the US
is likely to enter into a shallow recession later this year. JP Morgan CEO Jamie Dimon also
believes the short-term rate curve indicates higher recessionary risk. PNC Financial
Services is expecting a recession starting in the second half of CY23, resulting in a 1%
decline in real GDP. But despite recession expectations, their commentaries suggest
they are willing to continue with their ongoing technology investments.
IT companies have called out caution among BFSI clients around tech spend, which
got exacerbated post SVB and Credit Suisse crises. In the recent quarter results
(Q4FY23), we saw that BFSI vertical growth for IT companies (Accenture, TCS, INFY)
has been much lower than the company average growth rates. We have already
factored-in slowdown in the BFSI vertical for IT in CY23 due to macro-slowdown,
wherein banks’ profitability may come under pressure due to weak credit growth in
Research Analysts: the economy. Therefore, we have assumed soft revenue growth in the BFSI vertical
in FY24E followed by sharp pick-up in FY25E and FY26E (table-3) because we believe
Sumeet Jain core modernisation and digitisation agendas of BFSI companies remain intact. In a
sumeet.jain@icicisecurities.com
+91 22 6807 7573 recessionary scenario, there is increased focus of clients on IT outsourcing and cost
Aditi Patil optimisation, which are the key strengths of Indian IT vendors. In such situations,
aditi.patil@icicisecurities.com market share gains accelerate for these players on account of vendor consolidation
+91 22 6807 7452
and potential buyout of captive of F500 or G2000 enterprises. We continue to prefer
TCS (BUY), INFY (BUY), LTIM (BUY).
Please refer to important disclosures at the end of this report
Equity Research
April 15, 2023
INDIA
BSE Sensex: 60431
Technology
ICICI Securities Limited
is the author and ISG cuts As-A-Services ACV growth outlook modestly,
distributor of this report maintains managed services growth forecast
ISG (a leading global technology research and advisory firm) conducted its Q1CY23
Sector update
index call to discuss key technology trends and ordering activity across industry
verticals and geographies.
Technology
For Q1CY23, overall ACV (annual contract value of ordering activity) came in at
US$24.1bn, up 0.8% QoQ and down 7.7% YoY, wherein strength in managed services
(at US$9.8bn, + 2.1% QoQ and 1% YoY) was offset by weakness in As-A-Services
ACV (at US$14.3bn, flat QoQ and down 7.7% YoY). Importantly, for CY23, ISG has
lowered its As-A-Services ACV growth forecast from 17% to 15% due to slowdown
in discretionary spending in BFSI vertical. It expects the decline in booking to
continue in Q2CY23 followed by a sharp pick up in H2CY23. It, however, maintained
its managed services growth outlook at 5%, given its high focus on cost optimisation
agenda of clients.
Globally, As-A-Services ACV declined sharply on a YoY basis wherein the ACV of
three hyperscalers (AWS, Azure and GCP) experienced its first decline YoY in the
history, down 12% YoY. Clients slowed down their cloud migration journeys and are
optimising workloads on cloud. IaaS (Infrastructure-As-A-Service) ACV declined 16%
YoY. Both IaaS (Infrastructure-As-A-Service) and SaaS (Software-As-A-Service) ACV
declined YoY due to slowdown in discretionary spending by clients and longer sales
cycles.
Key takeaways from ISG index call
 BFSI industry vertical outlook: There is no discernible slowdown in BFSI industry
despite the recent events. There were a couple of weeks of deal signing impact in
Q1CY23 in BFSI space but the situation improved subsequently assuming no broad
contagion in the space. Having said that, financial services’ combined market ACV grew
just 3% YoY during LTM in Q1CY23 compared to 13% LTM growth during Q4CY22.
BFSI clients are currently focusing on three big bets: digital customer engagement,
contact centre transformation and products/platforms.
 Pricing is increasing in new restructuring deals and ISG is not seeing any rebates in
the market given its focus on innovation. Rates increased by 4-6% in 2023 over 2020;
rates for in-demand skills like data, cloud and analytics increased by 16%. For
infrastructure-managed services, pricing continues to decline.
 Although Q1CY23 saw a decline in hyperscalers’ ACV, their overall backlog is still
strong, implying structural demand around cloud migration is still intact.
 Mega deals: Eight mega deals were signed in Q1CY23 with 6 in US, 1 in EMEA and 1
in APAC. Two were in BFSI and 1 in manufacturing. There are 3 more mega deals in
the pipeline for Q2CY23.
 Hiring slowdown temporary, and likely to resume in H2CY23: The recent layoffs in
technology sector are a result of over-hiring by hyperscalar and SaaS players.
Research Analyst: Companies are also reducing non-billable roles and cutting down sub-contracting costs.
Sumeet Jain However, hiring is expected to improve in H2CY23 to meet the ongoing demand, as per
sumeet.jain@icicisecurities.com ISG.
+91 22 6807 7573
Aditi Patil  ADM (Application, Development and Management) and ER&D grew strong, in double
aditi.patil@icicisecurities.com digit, on YoY basis. Applications, industry BPO and engineering now account for 60%
+91 22 6807 7452
of managed services market.
Please refer to important disclosures at the end of this report
Equity Research
April 17, 2023
INDIA
BSE Sensex: 60431
Automobiles
ICICI Securities Limited
is the author and
distributor of this report
Rural 2Ws on revival mode; PV demand steady
We recently interacted with a large Bihar-based Maruti and Honda 2W dealer, to
get a ground-level understanding of both urban and rural markets. Key
Industry update
takeaways: 1) the dealer is expecting FY24 PV and 2W growth at 8-10% and ~12-
15% respectively; 2) rising LTV and rising financing penetration for both PVs and
Automobiles 2Ws has helped the urban premiumisation theme, which is structural in nature; 3)
limited liquidity in the rural markets resulted in weak 2W demand as consumers
found it tough to arrange for the rising need for down-payments; 4) e-2W
acceptance in both urban and rural markets is spreading through word of mouth
and consumers are happy spending extra for it in return of the TCO benefits; 5)
demand for good e-2Ws like iQube is very strong and the market can absorb 4-5x
the current supply levels with rising production. Even after FAME-2 subsidy goes
away, the dealer believes demand would only rise with increasing localisation
keeping cost inflation limited; 6) Honda Shine 100cc is likely to enter the market
in coming months and would be priced in-between HF Deluxe and Splendor, and
positioned to tap both entry- and executive-segment bike market; 6) PV inventory
levels are currently sub-par at 15-20 days and the dealer expects it to reach ~30
days by the pre-festive season. Discounts are largely stable.
Key takeaways from our interaction:
 Within the state of Bihar, 2W retails in FY23 were down ~24% YoY in the rural
markets while the urban markets grew ~10%. Weakness in rural demand was due to
limited liquidity to cater to rising down-payment needs, that too amid a general
increase of ~10-15% in the price per vehicle. Thus inability to fund the rising down-
payment needs was the larger reason behind demand weakness in rural markets as
against the minor increase in EMIs. In urban markets, neither funding down-payment
(90% LTV) was an issue, nor was taking care of rising EMIs; thus demand was
largely unaffected. The dealer we interacted with is expecting overall 2W market in
Bihar to grow in mid-teens in FY24, with the rural market too growing on a benign
base and improving liquidity.
 Financiers got more aggressive in recent months with rising number of financiers in
the 2W segment in Bihar along with rising LTVs in general. Rs15k-20k/unit cost rise
due to regulatory changes and commodity inflation in FY21-FY23 led to Rs1.5k-
2k/unit rise in down-payment needs and minor rise in EMIs. Post-covid LTV reduced
to 75-80% and has now increased to 85-90% of on-road price, which effectively is
limiting the down-payment need, resulting in improving retail demand in the past few
months. Additionally, 62% of 2Ws are currently financed vs 48% in 2019. Rural area
has seen higher increase in financing coverage and would be in excess of ~65%.
Even within a given model, higher-end models are selling more with better financing
options.
 Weakness has been more pronounced in the 100cc segment as against 125cc and
above segments. Scooters, being largely urban, saw demand remaining steady. With
Research Analysts: Honda launching the 100cc Shine, priced in-between HF Deluxe and Splendor, the
Basudeb Banerjee new model is expected to address both urban and rural markets. Despite El-Nino,
Basudeb.banerjee@icicisecurities.com IMD is predicting ~96-97% of average rainfall pan-India. Thus the dealer is not
+91 22 6807 7260
Vishakha Maliwal expecting any incremental demand headwinds for 2Ws on account of rainfall; also
Vishakha.maliwal@icicisecurities.com distribution of rainfall is more important than overall pan-India rainfall quantum.
+91 22 6807 7161

Please refer to important disclosures at the end of this report

Automobiles sector, April 17, 2023 ICICI Securities
 Strong growth is expected to continue in e-2Ws with customer preference shifting
towards EVs with word-of-mouth spread of benefits in terms of TCO and ease of
managing a model. TVS is planning to increase its production and should see
manifold rise in retails ahead with strong demand. Honda might take at least a
year to enter the EV space. Ather / Ola /new players might see limited traction
ahead once established 2W incumbents enter the EV market in full scale, due to
customer preference towards established brands. e-2W preference is rising even
in rural areas now, with more awareness of cost-savings via oral dissemination of
knowledge and government subsidies/push for EV adoption.
 Currently, for a TVS iQube unit, Central FAME-2 subsidy amount is Rs51,000. In
addition, select states also giving additional Rs10k-15k/unit of subsidy. Today, the
base on-road price of Honda Activa is Rs97k/unit and the base version of iQube is
priced at Rs130k/unit (post Central subsidy). With this pricing difference, iQube
constitutes ~15-20% of TVS’ overall scooter volumes and demand is 4-5x its
present retail volumes. This implies, consumers are getting well aware of the cost
benefits of EVs and are ready to accept the e-2Ws. With FAME-2 subsidy moving
out, prices would increase by ~Rs50k/unit and would take away bulk of the
benefits. The dealer we interacted with believes, falling conversion cost per unit
on rising scale and localisation of battery cells would equivalently reduce the cost
of manufacturing, so that the on-road price does not substantially rise. Thus, with
rising financing options for EVs, down-payment would rise by only ~Rs2k/unit.
Ultimately, the customer would weigh the cost of operation vs increase in EMI,
and this too should continue to be in favour of EVs.
 In PVs, paucity of supply of vehicles is still affecting the segment as the models
with higher demand are yet to see commensurate supply levels. Higher
footfalls/enquiries were visible prior to, and during festive season, but has now
reduced . The dealer is expecting 8-10% growth in FY24 as against the >20%
growth seen in FY23. In the next three months, inventory levels should go from
the current sub-par 15-20 days to the normative levels of a month. Entry-level car
demand is still weak across rural and urban markets, with consumers tending to
go one notch up as ~90-95% LTV options are available.
 In the PV market, there is a structural shift towards relatively higher-priced models
with richer features and Maruti’s portfolio hasn’t significantly changed to cater to
the changed need. Budget of a large chunk of urban customers has increased to
Rs1.5mn and above models and, with this shift, customers give lower importance
to cost of ownership unlike customers buying models priced <Rs1mn. According
to the dealer, Maruti was preferred for its low cost of acquisition, but now may not
be able to acquire customers who give lower importance to the rising cost of
ownership. Also, Maruti is not present in the diesel segment, which accounts for
~15-18% of the market.
 As per the dealer, a key reason behind major upgradation in choice of cars by
Indian consumers in FY22-FY23, including in Bihar, has been mainly rising
quantum of LTV in car loans during the period. From ~75-80%, LTV has moved to
~95%, resulting in minor change in down-payment, despite major rise in car cost.
From an EMI perspective, customers are not that perturbed with the minor
increase in EMI as better-feature cars and rising income are pushing up their
aspirations.

2
 Equity Research INDIA
April 16, 2023
Defence
ICICI Securities Limited
is the author and Q4FY23: Steady execution, exciting prospects ahead
distributor of this report
We expect steady execution for all the companies under our coverage (except BDL)
in the traditionally strong Q4. Besides, the ordering in end-March’23 has come as a
Q4FY23 result preview major relief, particularly for BEL. Key points: 1) BDL’s performance may decline
YoY following one-off factors such as the delay in the receipt of third-party goods
and design changes; 2) GRSE’s performance may be boosted by the delivery of
two ships in Q4FY23; 3) HAL’s orderbook is likely to be boosted by 70nos. HTT-40
Defence and 6nos. Dornier 228 aircraft; and 4) BEL is the primary beneficiary of the MoD’s
(Ministry of Defence) orders worth Rs442bn in late Mar-23.
BEL (BUY) Going ahead, we expect BDL and GRSE to benefit from the likely orders of MRSAM
from Indian Navy and Fast Patrol Vessels (FPV) from Indian Coast Guard in
HAL (BUY) H1FY24. That said, we see BEL’s order accretion to increase further in FY24 from
Solar industries (BUY) the already announced/upcoming orders. We maintain BEL (BUY; TP: Rs125) as
BDL (BUY) our top pick in defence space. We also like BDL (BUY; TP: Rs1,175) on potential
orders of AMOGHA-III and MRSAM in FY24.
MIDHANI (HOLD)
 Q4FY23 is likely to be a steady quarter: We expect Q4FY23 to be a steady quarter
GRSE (REDUCE) with sound execution for companies under our coverage except BDL. Key points: 1)
MDSL (SELL) BDL’s revenue may be impacted by the delay in the receipt of imported electronic
items, explosives and MRSAM kits from third-parties. However, we expect a shortfall
of Rs3.5-4bn to be made up in Q1FY24; 2) GRSE’s performance may get a boost
from the delivery of two ships- 01 Ocean Going Passenger & Cargo Vessel for
Cooperative Republic of Guyana and 01 Fast Patrol Vessel (FPV) for the Indian
Coast Guard in Q4FY23; 3) MDSL’s revenue is likely to be supported by the
commissioning of 5 Scorpene submarine of Project -75 (VAGIR); 4) expect Solar
Industries to achieve its guidance of 65% revenue growth for FY24, despite
ammonium nitrate prices cooling off by end-Mar’23; and 5) MIDHANI’s margin may be
impacted by high raw material costs. Going ahead, we believe execution is likely to
pick up for BEL and BDL as both these companies have been the primary
beneficiaries of the new orders by the MoD.
 Key stocks to watch out: In the last week of Mar’23, MoD had placed orders worth
Rs442.4bn which include: 1) Akash 3rd and 4th regiment orders worth Rs81.6bn on
BDL; 2) awarding of NGPOV and Next Generation Missile Vessels (NGMV) contracts
to GRSE and Goa Shipyard and 3) BEL has received cumulative award of Rs118.3bn
worth of orders with additional opportunities from Akash 3rd and 4th regiment
(pegged at Rs30-40bn) and orders for NGOPVs and NGMVs (pegged at Rs50bn). In
Q4FY23, HAL had also received orders for 70ns. HTT-40 (Rs68bn) and 6nos. Do-228
(Rs6.7bn). Besides, the company also signed a contract with Argentinian Air Force
(AAF) for supply of spares and engine repair of legacy two tonne class helicopters.
During H1FY24, we expect award of MRSAM by Indian Navy (Rs35bn), 11nos. FPVs
by Indian Coast Guard and Pinaka rockets, potentially benefitting BDL, GRSE and
Solar Industries, respectively. That said, we remain circumspect on MDL’s prospects
as we do not expect any major order inflow, going by Indian Navy’s tentative contracts
to be awarded over the next 2 years.
 Outlook: BEL is best placed; BDL’s orderbook is likely to get a major boost: The
flurry of orders by the MoD in end-Mar’23 has addressed investors’ concerns around
BEL’s orderbook that was languishing at a 2-year low level. In case of BDL, we
Research Analyst: expect orders for AMOGHA-III, MRSAM from Indian Navy and HELINA/NAG in the
Amit Dixit near term; however, timely execution of the contracts will be a key monitorable. In
amit.dixit@icicisecurities.com case of HAL, we expect order inflow of ~Rs500-600bn over the next 2 years though
+91 22 6807 7289 progress of LCA-Mk1A is crucial for stock price movement. In case of Solar
Mohit Lohia Industries, despite a decline in ammonium nitrate prices, we expect EBITDA margin
mohit.lohia@icicisecurities.com between 18-20% with potential award of Pinaka order as an additional sweetener that
+91 22 6807 7510
will pave the way for the company to tap the export market as well. We maintain BEL
Pritish Urumkar (BUY; TP: Rs125) and BDL (BUY; TP: Rs1,175) as our key picks in the space. We
pritish.urumkar@icicisecurities.com
+91 22 6807 7314 maintain SELL on MDSL (TP: Rs600) due to lack of orderbook visibility.
Please refer to important disclosures at the end of this report
Equity Research INDIA
April 14, 2023
BSE Sensex: 60431 Metals & mining
ICICI Securities Limited
is the author and
distributor of this report
Steel: Falling coking coal prices to support spreads
HRC prices in traders’ market rose by Rs500/te WoW as hikes taken by major steel
Sector update players in end-March’23 got absorbed in the market. Spot spread has additionally
improved as coking coal price has corrected further by US$8/te. That said, export
prices have corrected by US$10-15/te, tracking slower than expected demand
recovery in China. Longs prices, however, have declined by Rs200-500/te in both
Metals & mining primary and secondary markets owing to subdued demand in projects segment
and high channel inventory.
Jindal Steel (BUY) In China, macro credit indicators continue to stay robust (ahead of estimates for
Jindal Stainless (BUY) the third successive month) led by M2 supply growth of 12.9%. Declining steel
SMEL (BUY) inventory and government contemplating to limit CY23 steel production below
CY22 levels may aid the market balance of steel. Maintain BUY on JSPL (TP:
APL Apollo (BUY)
Rs750), APL Apollo (Rs1,375) and Shyam Metalics (TP: Rs570), and ADD on Tata
NMDC (ADD) Steel (TP: Rs120).
Tata Steel (ADD)
 Flats continue to fare better than longs: Domestic HRC prices in traders’ market
SAIL (REDUCE) rose further by Rs500/te WoW to Rs60,500/te as price hike of Rs1,000-1,500/te
JSW Steel (SELL) taken by major steel players across flat products segment at end-Mar’23 continues to
get absorbed in the system. Even at this level, prices in traders’ market are at a
discount to the prices announced by major steel mills. Besides, despite global prices
correcting by US$10-15/te, we don’t anticipate pressure on domestic HRC prices as
the latter still persists at a discount to the landed price of imports. Hence, we believe,
HRC prices to stay supported in the domestic market. On cost front, coking coal
prices have corrected further by US$8/te to US$255/te. As a result, spot spread has
increased further by Rs1,150/te. In our view, coking coal prices might correct further
as Indonesia ramps up coke production which would find its way in the seaborne
market. In longs, however, high channel inventory and subdued demand from
government projects have resulted in rebar prices coming off. For the first time since
Oct-22, flats prices have moved back to premium compared to longs prices.
 Demand recovery in China is still elusive, though macro credit indicators stay
supportive: Both China’s Aggregate Financing and New Loans issued data for Mar-
23 was ahead of expectations at CNY5.38trn and CNY3.89trn, indicating the intent of
the government to stimulate growth. This was aided by M2 supply growth of 12.7%
YoY for Mar-23. Besides, credit impulse is also back in positive trajectory, coming at
Research Analysts: 1.9% in Mar-23. Furthermore, China’s new home sales rose for a second straight
Amit Dixit month in Mar-23, pointing to a revival in the country’s real estate sector fuelled by a
amit.dixit@icicisecurities.com series of measures introduced by Chinese regulators starting late last year. Hence,
+91 22 6807 7289 we see imminent demand growth, with infrastructure and real estate being the prime
Mohit Lohia drivers.
mohit.lohia@icicisecurities.com
+91 22 6807 7510
 Outlook: Improving domestic spread is the key positive. We remain positive on
Pritish Urumkar
Pritish.urumkar@icicisecurities.com expanding spreads in India. Besides, enough opportunities exist in European
+91 22 6807 7314 markets where realisation is currently stable at EUR830-845/te. We await demand
pick up in China. As a result, we retain our positive view on ferrous space with JSPL
(TP: Rs750) and Shyam Metalics (TP: Rs570) as our key picks. We also prefer Tata
Steel (ADD; TP: Rs120) and APL Apollo (BUY; TP: Rs1,375).

Please refer to important disclosures at the end of this report

India Update, April 17, 2023 ICICI Securities
Results date reckoner
April 2023
Mon Tue Wed Thu Fri Sat Sun
10 11 12 13 14 15 16
TCS; Infosys; HDFC Bank,
17 18 19 20 21 22 23
Angel One; ICICI Lombard; Tata com., Cyient, Yes Bank
Justdial; HCL Tech.,
ICICI Prudential;

24 25 26 27 28 29 30
Persistent Systems AU Small Finance, HDFC Life Ins.; Axis Bank MMFS; CDSL;
Bajaj Auto, L&T Technology; Coforge; Star Health Insu; IDFC First Bank;
HDFC AMC; Maruti Suzuki; Larsen & Toubro UltraTech Cement;
Mahindra CIE; Poonawalla Fin; Mindtree;
Mahindra Holidays SBI Life Insurance; MphasiS
& Resorts; UTI AMC; Tech Mahindra;
Mahindra Life.; Wipro;
Nestle India;
Nippon Life;
Persistent Systems;
Tata Consumer

May 2023
Mon Tue Wed Thu Fri Sat Sun
1 2 3 4 5 6 7
ABB India; 360 ONE; Cams Services
Cholamandalam Blue Star;
Investment; Dabur India
Sonata Software; HDFC
8 9 10 11 12 13 14
Kansai Nerolac Castrol India Bosch; Asian Paints; Cipla; Navin Fluorine
Paints; JM Financial Dr. Reddy's Lab; Zensar Technolgies; Max Financial
Pidilite Industries; Sanofi India; Services
15 16 17 18 19 20 21
JSW Steel
22 23 24 25 26 27 28
Akzo Nobel India;
TTK Prestige
29 30 31

18
India Update, April 17, 2023 ICICI Securities
ravin

Recent reports/updates
Analyst Company/Sector Date
Basudeb / Vishakha Automobiles: Rural 2Ws on revival mode; PV demand steady. Apr 17
Abhisek / Manoj / Heenal Zomato: Delivery executive strikes: what's happening? Apr 17
Sumeet / Aditi Technology: BFS tech spend growth rate moderating, but large technology Apr 16
transformation programmes continue
Sanjesh / Akash Bharti Airtel (BUY): Can Bharti's FCF surprise positively? Apr 16
Chintan / Renish HDFC Bank (BUY): 17.4% RoE and 2.1% RoA for FY23; investing into Apr 16
branches for making bank future-ready
Amit / Mohit / Pritish Defence Q4FY23 preview: Steady execution, exciting prospects ahead Apr 16
Sumeet / Aditi Technology: ISG cuts As-A-Services ACV growth outlook modestly, Apr 15
maintains managed services growth forecast
Sumeet / Aditi Infosys (BUY): Large discretionary IT spend exposure leading to revenue Apr 14
drawdown, remain BUY
Amit / Mohit / Pritish Metals & mining: Steel: Falling coking coal prices to support spreads Apr 14
Prasenjit Basu Economy: Goldilocks redux: Industrial output accelerates in Jan-Feb'23, Apr 12
inflation recedes in Mar'23
AU Small Finance Bank: Top management continuity (3-year extension for Apr 12
MD / CEO) enhances visibility on execution
Sumeet / Aditi Tata Consultancy Services: Right-shifting of demand as near-term negative Apr 12
sentiment takes a back seat
Ashwani / Bharat Capital Goods Preview: Execution to remain upbeat on robust order Apr 11
backlog
Sanjesh / Akash Specialty Chemicals Preview: Excl Chemplast, EBITDA growth is 15% for Apr 11
chemical cos
Amit / Mohit / Pritish Logistics Preview: Expect only limited respite Apr 11
Arun / Sohil Building material Preview: Pipe & ceramic companies’ margins to improve Apr 11
QoQ
Ansuman / Ravin Diversified Financials: FY23 a record year for equity and commodity Apr 11
options; STT hike impact remains to be seen
Amit / Mohit / Pritish Metals & mining Preview: Margins revive Apr 11
Probal / Hardik Oil & Gas: Government notifies new gas pricing regime – mostly positive, Apr 10
but lack of clarity on free pricing a surprise
Ansuman / Ravin InterGlobe Aviation: Expect steady Q4; business momentum remains strong Apr 10
Adhidev Chattopadhyay Phoenix Mills: Strong end to FY23, all eyes on LTL growth for FY24E Apr 10
Basudeb / Vishakha Auto & auto ancillaries: Robust earnings growth across segments Apr 10
Basudeb / Vishakha Auto: Commercial vehicles: Demand drivers intact; freight rate hikes this Apr 10
month awaited
Manoj / Varun / Karan / Consumer: Continuing decent demand print for Jewellery in 4QFY23 Apr 9
Akshay
Amit / Mohit / Pritish Metals & Mining: Steel: HRC back at Rs60,000/te, spot spreads rise Apr 5
Amit / Mohit / Pritish Hindalco Industries: Basic tenets reiterated; Novelis in focus Apr 5
Vinod / Niraj Strategy: ‘Fear of the unknown’ emanating from global markets could force Apr 5
a ‘type-1 error’ in gauging domestic economic activity
Probal / Hardik Oil & Gas Q4FY23 preview: Steady improvement likely, YoY & QoQ Apr 5
Ansuman / Ravin / Vishal Motilal Oswal Financial Services: Attractive valuations Apr 5
Ansuman / Ravin Insurance: Highlights and implications of IRDAI’s expense of management Apr 5
notification, and guidance note on commission
Ansuman / Ravin Star Health and Allied Insurance Co.: Growth levers and operational moats Apr 5
put business at a vantage point
Sanjesh / Akash Telecom Q4FY23 preview: Expect steady quarter, adjusted for two days Apr 5
less in Q4FY23E
Renish / Chintan Banking: SCBs' median MCLR up 130bps in FY23 vs RBI repo rate hike of Apr 4
250bps; SCBs' WALR (on fresh loans) up 142bps
Renish / Chintan BFSI: Gujarat Yatra: Ahmedabad – key takeaways Apr 4
Prasenjit Basu Economy: Twin Deficit Watch: CAD on track to stay below 2% of GDP in Apr 3
FY23, fiscal deficit below 6% of GDP
Adhidev Chattopadhyay Hotels: Stellar check-out (FY23), sanguine check-in (FY24E - potential Apr 3
demand sustenance, price hikes)
Manoj / Varun / Karan / Westlife: Acceleration at play Apr 3
Akshay
Basudeb / Vishakha Automobiles: Auto retails: PV steady, 2W rising, CV at record highs Apr 3
Basudeb / Vishakha Automobiles (wholesale): Strong show across segments; crucial weeks Apr 3
ahead
Sanjesh / Akash Telecom: Re-evaluating our tariff hike thesis – we are not worried! Apr 3
Renish / Chintan Banking: February sectoral credit deployment: Bank credit up 15.9% YoY, Apr 3
0.9% MoM, 13.3% FY23-TD
Sumeet / Aditi Technology: Q4FY23 preview: Weak sequential growth already factored in Apr 1
recent valuation cuts; Buy TCS, INFY, LTIM, MPHL
Sanjesh / Akash Telecom: Subscriber watch: Bharti’s churn still under control Apr 1
Arun / Sohil Prince Pipes and Fittings: Medium-term volume outlook remains healthy Mar 31
Abhisek / Manoj / Heenal Internet: Q4FY23 preview: Strong B2B; B2C may be underwhelming Mar 31

19
 India Update, April 17, 2023 ICICI Securities

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New I-Sec investment ratings (all ratings based on absolute return; All ratings and target price refers to 12-month performance horizon, unless mentioned otherwise)
BUY: >15% return; ADD: 5% to 15% return; HOLD: Negative 5% to Positive 5% return; REDUCE: Negative 5% to Negative 15% return; SELL: < negative 15% return

ANALYST CERTIFICATION
I/We Sumeet Jain, MBA; Aditi Patil, MBA (Finance); Abhisek Banerjee, MBA; Manoj Menon, MBA, CMA; Heenal Gada, CA; Renish Bhuva, CFA (ICFAI); Chintan Shah,
CA; Amit Dixit, PGDM, B.Tech; Mohit Lohia, CA; Pritish Urumkar: MBATech (Finance); Basudeb Banerjee, MBA (Finance); Vishakha Maliwal, B.Tech, PGDM; Sanjesh
Jain, PGDM; Akash Kumar, MBA; authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately
reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific
recommendation(s) or view(s) in this report. Analysts are not registered as research analysts by FINRA and are not associated persons of the ICICI Securities Inc. It is
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months and do not serve as an officer, director or employee of the companies mentioned in the report.
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20