01december2023 India Daily

India Daily
December 01, 2023 NIFTY-50 [Nov 30]: 20,133
Contents
Special Reports
Theme Report
Hotels & Restaurants: Renewed prosperity in hospitality
Gas Utilities: Gas consumption at record highs, growth now to trickle
Daily Alerts
Company Alerts
UltraTech Cement: Strengthens foothold in South with Kesoram acquisition
SRF: Positive outlook for chemicals, bullish on HFC prices
Sector Alerts
IT Services: Persistent cost focus limits hope for quick revival in spending
Quant Research: Making hay while the sun shines
Economy Alerts
Economy: 2QFY24 GDP/GVA: Boosted by investment and manufacturing
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
THEME
Hotels & Restaurants

India
Sector View: Attractive NIFTY-50: 20,097 November 30, 2023
Renewed prosperity in hospitality

We broad-base our coverage on the Indian hospitality sector by initiating on
Indian Hotels (ADD, FV: Rs460/share), Chalet Hotels (ADD, FV: Rs660/share)
and SAMHI Hotels (BUY, FV: Rs230/share). In our view, the hospitality sector
will continue to build on the record profitability of FY2023, as new supply
post-Covid will come in at a moderated pace (back-ended CAGR of 6% over
FY2023-28E), whereas room rates and occupancy will continue to benefit
from the healthy domestic demand (9% CAGR) and improving influx of foreign
tourists.
Earnings growth to remain strong due to rising room rates

We initiate coverage on Indian Hotels (ADD, FV: Rs460/share), Chalet Hotels
(ADD, FV: Rs660/share) and SAMHI Hotels (BUY, FV: Rs230/share). Hospitality
companies under coverage will report a 28% CAGR in aggregate EBITDA over
FY2023-26E, driven by (1) average CAGR of ~10% in ARRs, (2) increase in room
inventory (~5,000 owned/leased keys) with stabilized occupancies, and (3)
sustained cost control—a key learning from the pandemic.
Average room rates for hotels in India rose 39% yoy in FY2023, which will likely
grow at 15% yoy in FY2024E based on current trends and aided by strong
demand levers. Even as foreign tourist arrivals have lagged pre-Covid levels,
domestic demand has shouldered the burden over the past two years, with
rising spends on leisure and weddings. Increasing per capita income, a higher
contribution from the services industry, as well as enabling infrastructure such
as airports and improving flight connectivity will continue to fuel demand for
the hospitality sector in the next decade.
Supply growth to lag demand, fractured by Covid downtime

Hotel inventory has grown at a modest CAGR of 5.5% in the past eight years up
to FY2023, allowing for occupancy to rapidly improve to 66% in FY2023 and
room rates increasing to Rs6,869/day (up 39% yoy). We expect incremental
inventory of 55k keys over FY2023-28E, implying a 6% CAGR in supply, that will
be back-ended as long lead times and high upfront investment will likely keep
the new supply in check in a post-pandemic world—new hotels can take up to
4-5 years to commission, with the development cost going up to ~Rs20mn/key.
This would allow for continued strengthening in occupancies and room rates.
Overestimation of growth in room rates owing to oversupply is a key risk

We hope that a Covid-like health scare would not raise its head again and bring
the hospitality sector to a grinding halt. However, we do concede a potential
overestimation of sustainable growth in room rates owing to benign demand-
supply dynamics. Accordingly, lower-than-estimated improvement in ARRs
remains the key risk for earnings, in addition to increased competitive intensity
along with time and cost overruns in the development of new assets. Elevated
leverage for asset owners could impact profitability in the case of a downcycle.
Full sector coverage on KINSITE
Murtuza Arsiwalla Abhishek Khanna

murtuza.arsiwalla@kotak.com abhishek.khanna2@kotak.com
+91-22-4336-0870 +91-22-4336-0869
3
Strong earnings growth due to ~10% CAGR in room rates

We initiate coverage on Indian Hotels (ADD, FV: Rs460/share), Chalet Hotels (ADD,
FV: Rs660/share) and SAMHI Hotels (BUY, FV: Rs230/share). Hospitality companies under
coverage will report a 28% EBITDA CAGR over the next three years, driven by (1) a CAGR of ~10%
in room rates, (2) an increase in room inventory and stabilized occupancies in excess of 70% and
(3) sustained cost control, which is a key learning from the pandemic. Average room rates for
hotels in India have risen 39% yoy in FY2023 that will likely be followed by 15% yoy growth in
FY2024E and will maintain high single-digit growth over the next decade.
Strong demand levers to aid continuing strengthening of room rates; supply to lag demand
Occupancy for the Indian hospitality sector has sharply rebounded to 66% in FY2023 from 50% in FY2022
and 35% in FY2021, leading to a spiraling of room rates to Rs6,869/day in FY2023 from Rs4,951/day in
FY2022 and Rs4,630/day in FY2021. We estimate occupancies to remain firm and inch up to 75% by
FY2028E on the back of strong demand growth (9% CAGR) exceeding moderated supply addition (6%
CAGR), which will likely result in room rates seeing a 9% CAGR during this period. We highlight that room
rates had grown at a 15% CAGR in FY2002-08, when occupancies rose from 52% to ~70% and the current
demand-supply dynamics are conducive of a similar performance in the next five years.
Occupancy levels improved significantly in FY2023

Trend in industry occupancy, March fiscal year-ends, 2000-28E (%)
Occupancy (%)
75
74
80
72
71
70
72
69
69
68
66
66
66
66
66
65
65
65
65
63
70
62
61
60
60
60
59
58
58
57
57
54
60
52
50
50
35
40
30
20
10
-
2025E
2028E
2024E
2026E
2027E
2000
2002
2003
2005
2006
2008
2009
2011
2012
2014
2015
2017
2018
2020
2021
2023
2001
2004
2007
2010
2013
2016
2019
2022
1QFY23
2QFY23
4QFY23
3QFY23
Notes:
(a) Green and red years refer to the up and down cycles, respectively.
Source: Hotelivate, Kotak Institutional Equities estimates

India Research
4
ARRs scaling new peaks

Trend in industry average room rates, March fiscal year-ends, 2000-28E (Rs/day)
ARR (Rs/ day)
10,451
12,000
9,767
9,128
8,531
10,000
7,989
7,899
7,867
7,722
7,233
7,071
6,869
6,513
6,489
6,104
8,000
6,038
6,032
5,867
5,850
5,779
5,768
5,671
5,611
5,532
5,527
5,444
4,951
4,630
4,299
6,000
3,731
3,569
3,505
3,467
3,269
4,000
2,000
-
2000
2002
2003
2005
2006
2008
2009
2011
2014
2016
2017
2019
2020
2022
2023
2024E
2026E
2027E
2001
2004
2007
2010
2012
2013
2015
2018
2021
2025E
2028E
1QFY23
3QFY23
2QFY23
4QFY23
Notes:
(a) Green and red years refer to the up and down cycles, respectively.
The demand for the hospitality sector in India is likely to witness a 9% CAGR during FY2023-28E on the
back of rising income levels, increasing contribution of the service sector as well as enabling
infrastructure. Even as foreign tourist arrivals have lagged pre-Covid levels, domestic demand has
shouldered the burden in the last two years, with rising spends on leisure and weddings. We expect the
demand to be supported by both foreign and domestic tourists, even as business demand remains
robust. We highlight that the Government of India is looking to grow the Indian tourism sector at 15%
CAGR to US$1 tn currently in its Vision 2047 targets. We highlight that room nights sold have grown at a
9% CAGR during FY2015-23, leading to occupancy inching closer to 65%, barring Covid-impacted years
(FY2021 and FY2022).
Demand to outpace new supply

Demand & supply of branded keys and occupancy, March fiscal year-ends, 2010-28E (‘000, %)
Supply ('000 keys) Demand ('000 keys) Occupancy (%), RHS

250 80
221
199
200 188 70
179
166 172 165
150 148
150 139 144 135 60
127 129 125
108 112 119 110 117
94 101 92
100 84 83 86 50
72 64 71 77 75
62 54 59
43 50 50
50 37 40
- 30
2010
2011
2015
2016
2017
2018
2019
2023
2024E
2025E
2026E
2027E
2012
2013
2014
2020
2021
2022
2028E

India Research
5
While supply grew at an accelerated pace of 12% CAGR during FY2010-15, the pace of new supply
addition moderated to 6% in the next four years leading to Covid (FY2016-20). The onset of Covid led to
(1) shutdown of some operating hotels, (2) delay in the commissioning of under-construction assets,
and (3) a lack of new investments in the hospitality sector. The long gestation period for setting up new
hotels implies that new capacity addition is going to be moderated—6% CAGR over the next five years
(FY2023-28E) and largely concentrated among the larger players with stronger balance sheets.
Supply to grow at a faster pace in non-business cities such as Amritsar, Dehradun, Lucknow and Goa
Break-up of branded keys, March fiscal year-ends, 2010-28E (‘000, %)
# of branded keys ('000)

Leisure Business
221
240
199
188
179
172
166
180
150
144
107
139
129
102
127
119
97
112
108
93
101
90
87
120
94
83
84
82
81
72
78
77
62
74
71
69
66
60
114
60
54
103
46
96
89
2010 23 39
84
79
67
62
58
52
49
45
41
39
35
34
30
2011 25
-
2013
2015
2016
2018
2020
2021
2023
2025E
2027E
2028E
2012
2014
2017
2019
2022
2024E
2026E
Notes:
(a) Leisure and Business classification is based on cities. Business cities include Ahmedabad, Bengaluru, Chennai, Gurugram,
Hyderabad, Kolkata, Mumbai, Navi Mumbai, New Delhi, Noida and Pune.
Source: Hotelivate, Kotak Institutional Equities
Initiate coverage on Indian Hotels, Chalet Hotels and SAMHI Hotels

We initiate coverage on Indian Hotels (ADD, FV: Rs460/share), Chalet Hotels (ADD, FV: Rs660/share) and
SAMHI Hotels (BUY, FV: Rs230/share), while maintaining a REDUCE rating on Lemon Tree Hotels (FV:
Rs105/share). The hospitality industry in India is in a strong upcycle, with FY2023 room rates increasing
39% yoy to Rs6,869/day and occupancy at 66%. Improving demand trends and modest supply increases
will likely help room rates scale new peaks—current trends imply 15% yoy growth for FY2024E.
IHCL and Chalet trade at a premium to Lemon Tree, but have a higher future growth potential; SAMHI trades at a discount to peers
Summary valuation of hospitality companies under coverage, March fiscal year-ends, 2022-25E (X)
CMP EV/EBITDA (X) Attributable EV/EBITDA (X) P/E (X) P/B (X) Market c
(Rs) 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E
Chalet 590 32.1 23.1 17.5 13.1 32.1 23.1 17.5 13.1 85.8 47.9 31.5 20.6 7.8 6.7 5.6 4.4
Indian Hotels 422 33.1 27.2 19.2 15.4 35.0 28.9 20.1 16.2 59.9 46.7 31.0 25.3 7.5 6.5 5.4 4.5
Lemon Tree 114 24.1 16.2 11.4 10.0 28.9 20.7 15.3 13.7 79.0 35.6 23.5 20.0 10.6 9.3 7.6 6.2
SAMHI Hotels 175 17.1 20.6 12.2 10.6 17.1 20.6 12.2 10.6 (4.2) (21.3) 29.1 19.0 (1.9) 3.5 3.2 2.7
FV EBITDA Atributable EBITDA PAT Net worth Net deb

(Rs) 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E
Chalet 660 4,528 6,428 8,489 11,217 4,528 6,428 8,489 11,217 1,410 2,527 3,835 5,863 15,419 17,946 21,781 27,644
Indian Hotels 460 18,046 21,522 29,736 35,477 17,032 20,264 28,350 33,861 9,993 12,828 19,332 23,652 79,820 91,966 110,479 133,149
Lemon Tree 105 4,476 6,870 9,487 10,479 3,580 5,074 6,828 7,594 1,146 2,541 3,844 4,513 8,537 9,689 11,881 14,510
SAMHI Hotels 230 2,377 2,758 4,470 4,915 2,377 2,758 4,470 4,915 (3,578) (1,790) 1,311 2,011 (8,076) 10,794 12,106 13,898
Notes:
(a) Attributable EV/EBITDA is adjusted for ownership of assets
Source: Companies, Kotak Institutional Equities estimates

India Research
6
SAMHI Hotels trades at a significant discount to listed peers

Hospitality business EV/EBITDA for hospitality companies, March fiscal year-ends, 2025E (X)
Hospitality business EV/ EBITDA, FY2025E (X)

25.0
19.6 20.1
20.0
15.3
15.0
12.2
10.0
5.0
-
SAMHI Hotels LT Hotels Chalet Hotels IHCL
Notes:
(a) The above multiples are on attributable share of hospitality EBITDA.
Source: Company, Kotak Institutional Equities estimates
Exhibit 6 gives a comparison of earnings growth between Chalet, Indian Hotels, Lemon Tree and SAMHI
Hotels, along with the comparable valuations for the four companies. We do highlight that in the case
of Chalet, ~30% of the FY2025E EBITDA comes from non-hospitality earnings. We also highlight that
Lemon Tree does not have a pipeline of new (and owned) room inventory beyond FY2025E, while IHCL,
Chalet and SAMHI have new hotels commissioning up to FY2028E, providing headroom for growth
beyond the increase in room rates.
The four hospitality companies combined will report a CAGR of 28% in EBITDA over the next three years
owing to (1) an increase in room rates at a CAGR of ~10%, (2) a rise in room inventory (~5,000
owned/leased keys across the four companies) and room nights sold and (3) overall margin expansion,
also aided by a growth in managed properties (for IHCL and Lemon Tree).
We highlight that room inventory for the coverage universe will increase at a CAGR of 12% in the next
three years (owned keys at CAGR of 6% and managed keys at CAGR of 21%), coupled with the average
increase in room rates at a CAGR of ~10%. We note that in the case of Chalet, near doubling of
commercial real estate space from 1.2 mn sq. ft currently (0.5 mn sq. ft as of March 2023) to 2.3 mn sq.
ft by FY2026E and further to 3.1 mn sq. ft by FY2028E further aids earnings growth.
We expect market share gains for our coverage companies, as the incremental supply for these players
would grow faster than the industry (5-year CAGR of 6% over FY2023-28E).

India Research
7
Strong growth now on, premised on improving room rates and asset addition
Summary of financials, March fiscal year-ends, 2020-26E (Rs mn, #, %)
Growth
2020 2021 2022 2023 2024E 2025E 2026E 2020-23 2023-26E
Revenue
Chalet 9,811 2,856 5,078 11,285 15,028 18,967 25,102 4.8 30.5
Chalet (Hotels) 8,755 2,018 4,058 10,285 13,558 15,583 18,432 5.5 21.5
Indian Hotels 44,631 15,752 30,562 58,099 72,253 85,111 96,136 9.2 18.3
Lemon Tree 6,694 2,517 4,022 8,750 11,904 15,407 16,711 9.3 24.1
SAMHI Hotels 6,056 1,696 3,227 7,386 10,110 13,233 14,036 6.8 23.9
EBITDA
Chalet 3,366 71 985 4,528 6,428 8,489 11,217 10.4 35.3
Chalet (Hotels) 3,110 (432) 520 3,824 5,399 6,143 7,366 7.1 24.4
Indian Hotels 9,675 (3,618) 4,048 18,046 21,522 29,736 35,477 23.1 25.3
Lemon Tree 2,383 613 1,187 4,476 6,870 9,487 10,479 23.4 32.8
SAMHI Hotels 1,500 (694) 114 2,377 2,758 4,470 4,915 16.6 27.4
Adjusted EBITDA
Chalet 3,366 71 985 4,528 6,428 8,489 11,217 10.4 35.3
Chalet (Hotels) 3,110 (432) 520 3,824 5,399 6,143 7,366 7.1 24.4
Indian Hotels 9,087 (3,225) 4,277 17,032 20,264 28,350 33,861 23.3 25.7
Lemon Tree 1,947 463 881 3,580 5,074 6,828 7,594 22.5 28.5
SAMHI Hotels 1,500 (694) 114 2,377 2,758 4,470 4,915 16.6 27.4
Keys (Owned)
Chalet 2,554 2,554 2,554 2,554 2,890 3,090 3,480 — 10.9
Indian Hotels 13,099 13,207 13,170 12,914 13,715 14,365 15,088 (0.5) 5.3
Lemon Tree 5,192 5,192 5,192 5,090 5,759 5,828 5,828 (0.7) 4.6
SAMHI Hotels 4,050 4,050 4,050 3,839 4,801 4,982 4,982 (1.8) 9.1
Earnings growth for the hospitality sector is premised on (1) improving room rates, (2) stable to
improving occupancy and (3) addition of new room capacity. Higher room rates will be an industry-
specific phenomenon, while addition to room inventory is more pronounced in the case of Chalet, IHCL
and SAMHI Hotels, relative to Lemon Tree and the industry at large. We see contained scope of
improvement in occupancy that is already trending closer to 70%.
IHCL is largest while SAMHI is the youngest player; Lemon Tree and Chalet have their strengths
IHCL (22,465 keys), through its iconic ‘Taj’ brand, rules the luxury hotels landscape across India; a few
other brands such as Ginger (mid-scale) have helped it make its presence in the mid-segment as well. In
comparison, Lemon Tree (LTH), with 9,429 keys, operates predominantly in the mid-market segment with
a presence across more than 50 cities. Chalet Hotels, with a portfolio of 2,890 keys and located in high
density business districts, positions itself in the luxury segment through globally recognized brands.
SAMHI Hotels, similar to Chalet, is an asset owner with 4,801 operational keys that caters primarily to
the mid-tier segment. We make a comparison across the four players for key parameters.
 Keys. IHCL, with the largest portfolio of 22,465 keys, has 13,093 owned and the balance under the
management contract model. Lemon Tree has 5,759 owned/leased keys (post the recent
commissioning of 669 keys Aurika Mumbai) and 3,670 keys under management contracts. Chalet has
an operational portfolio of 2,890 keys along with a further development pipeline of 870 keys. SAMHI
has 4,801 keys following the recent acquisition of the ACIC portfolio (962 keys). Unlike IHCL and
Lemon Tree, Chalet and SAMHI being asset owners have their entire portfolio under the
ownership/lease model.

India Research
8
IHCL is largest hospitality company in India; Chalet to see the fastest growth in owned keys
Owned and managed keys for IHCL, Lemon Tree, SAMHI and Chalet, March fiscal-year ends,
current and 2028E (No. of keys)
Owned/ leased keys Managed keys

40,000
33,405
30,000
22,465 17,510
20,000
9,372
11,747
9,429
10,000
15,895 5,919 5,418
13,093 3,670 4,801
2,890 3,760
5,759 5,828 4801 5418 3,760
2,890
-
Now 2028E Now 2028E Now 2028E Now 2028E
Indian Hotels Lemon Tree Hotels SAMHI Hotels Chalet Hotels
Source: Company, Kotak Institutional Equities
 Growth. IHCL, Chalet Hotels, Lemon Tree and SAMHI are expected to report EBITDA CAGRs of 25%,
35% and 33% and 27%, respectively, between FY2023 and FY2026E. Currently, IHCL has a pipeline of
11,062 keys across 82 hotels, comprising 2,908 owned keys (26 hotels) and 8,154 keys (56 hotels)
under management contracts, to be commissioned by FY2028E. Lemon Tree recently commissioned
one hotel–Aurika in October 2023 in Mumbai (669 keys); it now has just one owned hotel (69 keys) to
be commissioned in Shimla. Chalet has turned more aggressive on capacity additions, with a pipeline
of 870 keys on its existing base of 2,890 keys (2,554 keys as of March 2023), after little capacity
addition in the past five years. SAMHI currently has 4,801 keys, following the recent acquisition of 962
keys (ACIC portfolio), with an additional pipeline of 617 keys. Lemon Tree, IHCL and SAMHI have
aggressively added keys through the organic, inorganic and management contract routes during
FY2017-20—Lemon Tree added 4,308 keys, IHCL added 2,714 keys, SAMHI added 2,019 keys while
Chalet added just 226 keys.
 Geography. IHCL and Lemon Tree have a well-diversified portfolio spread across more cities in India
catering to business and leisure demand. Chalet’s concentration in four tier-1 regions, i.e., MMR,
Hyderabad, Bengaluru and Pune (and one leisure hotel in Lonavala and an upcoming hotel in New
Delhi), makes it more dependent on business travel demand to drive occupancy. SAMHI is more
focused on Bangalore, Hyderabad and Pune, but has a wider presence across other cities as well.

India Research
9
IHCL and Lemon Tree have pan-India presence compared to SAMHI and Chalet that are more focused on
city-centric business hotels
Number of locations for IHCL, Lemon Tree, SAMHI and Chalet Hotels (#)
140 Locations
125
120
100
80
56
60
40
20 13
5
0
Indian Hotels Lemon Tree Hotels SAMHI Chalet Hotels
 Revenue mix. Room rentals account for 70% of the revenue for Lemon Tree, as it operates in the mid-
market segment, restricting its offerings for F&B and banquet. Chalet’s hospitality revenues will trend
down to 69% by FY2026E due to a larger contribution from annuity earnings and the residential
segment. IHCL has a high contribution from non-room revenues (51% in FY2026E), aided by a wide
array of F&B and banquet facilities. In addition, IHCL also benefits from services such as airline
catering and exclusive clubs such as the Chambers, among other non-room revenues.
Lemon Tree and SAMHI Hotels have a higher share of revenue from room rentals owing to their presence in the mid-tier segment
Revenue mix for IHCL, Chalet Hotels, Lemon Tree and SAMHI Hotels, March fiscal year-ends, 2023-26E (Rs mn, %)
Indian Hotels Chalet Hotels Lemon Tree Hotels SAMHI Hotels
2023 2024E 2025E 2026E 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E
Revenue (Rs mn)
Hospitality 58,099 72,253 85,111 96,136 10,285 13,558 15,583 18,432 8,750 11,904 15,407 16,711 7,386 10,110 13,233 14,036
Room Rentals 29,241 36,095 41,914 46,926 6,157 8,069 9,275 10,848 7,106 8,751 11,063 11,884 5,328 6,925 8,941 9,484
F&B 20,641 25,698 30,385 33,893 3,386 4,523 5,202 6,297 1,118 1,561 2,172 2,344 1,820 2,770 3,666 3,888
Others 8,218 10,460 12,811 15,317 742 965 1,106 1,286 526 1,592 2,171 2,483 237 415 626 664
Annuity — — — — 1,000 1,470 2,634 3,430 — — — — — — — —
Residential — — — — — — 750 3,240 — — — — — — — —
Total 58,099 72,253 85,111 96,136 11,285 15,028 18,967 25,102 8,750 11,904 15,407 16,711 7,386 10,110 13,233 14,036
Mix (%)
Hospitality 100 100 100 100 91 90 82 73 100 100 100 100 100 100 100 100
Room Rentals 50 50 49 49 55 54 49 43 81 74 72 71 72 68 68 68
F&B 36 36 36 35 30 30 27 25 13 13 14 14 25 27 28 28
Others 14 14 15 16 7 6 6 5 6 13 14 15 3 4 5 5
Annuity — — — — 9 10 14 14 — — — — — — — —
Residential — — — — — — 4 13 — — — — — — — —
 Costs. Lemon Tree is among the more cost-efficient operators per key and as a percentage of
revenue. Absence of substantial F&B facilities and a mid-segment offering helps maintain the cost
leadership. Chalet’s overall margins are aided by the contribution from commercial real estate—a high-
margin business. Lowest staff per room ratio of 0.7X helps Lemon Tree maintain its cost leadership,
whereas IHCL’s employee expenses are at ~27% of its overall revenues, as it has a higher proportion
of luxury keys and has to maintain adequate service levels.

India Research
10
Lemon Tree has most efficient cost structure among hotel companies; its margins are aided by a higher share of room rentals in total
revenue
Cost structure of IHCL, Chalet Hotels, Lemon Tree Hotels, March fiscal year-ends, 2023-26E (Rs mn, %)
Indian Hotels Chalet Hotels Lemon Tree Hotels SAMHI Hotels
2023 2024E 2025E 2026E 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E
Revenue (Rs mn) 58,099 72,253 85,111 96,136 11,285 15,028 18,967 25,102 8,750 11,904 15,407 16,711 7,386 10,110 13,233 14,036
Cost (Rs mn)
Cost of food and beverages
4,729 6,033 7,353 8,449 999 1,134 1,458 1,827 499 746 1,054 1,142 580 969 1,283 1,361
consumed
Employee expenses 15,823 21,093 22,258 24,091 1,511 2,010 2,271 2,596 1,497 1,721 1,927 2,011 1,230 2,270 2,618 2,767
Other operating expenses 19,502 23,606 25,764 28,119 4,246 5,456 6,749 9,463 2,278 2,567 2,938 3,079 3,199 4,112 4,862 4,992
Cost (Rs mn) 40,054 50,732 55,375 60,659 6,757 8,600 10,479 13,886 4,274 5,034 5,919 6,232 5,008 7,352 8,763 9,120
EBITDA (Rs mn) 18,046 21,522 29,736 35,477 4,528 6,428 8,489 11,217 4,476 6,870 9,487 10,479 2,377 2,758 4,470 4,915
Cost (% of revenues)
Cost of food and beverages
8.1 8.3 8.6 8.8 8.9 7.5 7.7 7.3 5.7 6.3 6.8 6.8 7.8 9.6 9.7 9.7
consumed
Employee expenses 27.2 29.2 26.2 25.1 13.4 13.4 12.0 10.3 17.1 14.5 12.5 12.0 16.7 22.5 19.8 19.7
Other operating expenses 33.6 32.7 30.3 29.2 37.6 36.3 35.6 37.7 26.0 21.6 19.1 18.4 43.3 40.7 36.7 35.6
Total cost 68.9 70.2 65.1 63.1 59.9 57.2 55.2 55.3 48.8 42.3 38.4 37.3 67.8 72.7 66.2 65.0
EBITDA margins (%) 31.1 29.8 34.9 36.9 40.1 42.8 44.8 44.7 51.2 57.7 61.6 62.7 32.2 27.3 33.8 35.0
 Margins. Chalet Hotels’ EBITDA margin ranged between 28% and 34% over FY2017-20, which has
improved to 40% in FY2023—we expect a gradual improvement, partly aided by annuity business that
is a high-margin business. Lemon Tree, with its aggressive control over costs, has a superior margin
profile. Lemon Tree’s margins improved significantly post-Covid, reaching 51% in FY2023. IHCL has
had a much lower EBTIDA margin, with its FY2023 margin at 31%. Lemon Tree and IHCL, with
additional income from managed hotels, have a lower contribution at ~88% to overall revenues from
room rentals and F&B. SAMHI’s near term margins would be impacted by ESOP-related and one-off
expenses.
High operating leverage leads to high flow-through of revenues to EBITDA

EBITDA margins for IHCL, SAMHI, Chalet Hotels and Lemon Tree Hotels, March fiscal-year ends,
2023-26E (%)
70 2023 2024E 2025E 2026E

62 63
60 58
51
50 45 45
43
40
40 37
35
32 34 35
31 30
30 27
20
10
-
Indian Hotels SAMHI Chalet Hotels Lemon Tree Hotels
 Debt. Chalet had an outstanding net debt of Rs16.5 bn in March 2020, which increased to Rs24.4 bn
as of March 2023, and further to Rs25 bn as of September 2023—the increase is primarily attributed
to the recent acquisitions and expansion projects by the company. We expect Chalet’s debt levels to
remain elevated over the next three years. On the other hand, IHCL had an outstanding net debt of
Rs19 bn, as of March 2020; IHCL became net cash in FY2023, aided by equity infusion during the
pandemic and would remain net cash, going forward. Lemon Tree had outstanding net debt of Rs19
bn, as of March 2020, which stood at Rs17 bn, as of March 2023. SAMHI had Rs28 bn of net debt,
which has reduced to Rs18 bn post the recent equity issuance, and should come off gradually as
earnings improve.

India Research
11
Chalet’s debt to remain elevated; Indian Hotels has net cash position; SAMHI’s debt has come off post equity issuance
Net debt and net debt/EBITDA for IHCL, Chalet Hotels, Lemon Tree and SAMHI Hotels, March fiscal-year ends, 2023-26E
(Rs bn, X)
Net debt Net debt/ EBITDA (X), RHS

40,000 6.7
5.4
30,000 4.3 3.8 6
3.3 3.7
3.0 2.9
20,000 2.3 1.9 1.4 3
10,000
- 0
(10,000) (0.1) (0.6) (1.0) (1.5) (3)
(20,000)
(30,000) (6)
(40,000)
(9)
(50,000)
(60,000) (12)
2023 2024E 2025E 2026E 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E
Indian Hotels Chalet Hotels Lemon Tree Hotels SAMHI
Notes:
(a) 10.8X Net debt/ EBITDA for SAMHI in FY2023.
IHCL is more sensitive to change in room rates—10% change could impact FV by 21%
Earnings growth hereon are premised on (1) growth in room inventory, (2) improved occupancy, (3)
higher room rates and (4) improving cost efficiency. In terms of absolute growth in room keys, IHCL has
the most at stake, whereas Lemon Tree has just one small hotel (69 keys) to commission. Occupancies
for most hotel companies are above 70% and carry limited upside risks. Accordingly, earnings growth is
most sensitive to the improvement in room rates. Chalet, with a substantial contribution from office
assets, has lower sensitivity to the improvement in room rates. Lemon Tree operates at higher efficiency
(EBITDA margin), and also has lower sensitivity to room rates. IHCL and SAMHI have higher sensitivity
of EBITDA to room rate changes.
Exhibit 14 highlights the sensitivity of earnings to occupancy and room rates and Exhibit 15 shows the
sensitivity to Fair Value estimates.

India Research
12
Lemon Hotels has the lowest sensitivity to room rate changes owing to higher operating efficiency
FY2025E EBITDA sensitivity to ARR and occupancy for IHCL, Chalet, Lemon Tree and SAMHI Hotels (Rs mn)
IHCL FY2025E EBITDA sensitivity
Absolute (Rs mn) Relative
Occupancy change in percentage point Occupancy change in percentage point
29,736 -2 -1 0 1 2 29,736 -2 -1 0 1 2
-20% 16,200 16,857 17,513 18,170 18,826 -20% 54 57 59 61 63
ARR Change (%)
ARR Change (%)

-10% 22,148 22,886 23,625 24,363 25,102 -10% 74 77 79 82 84
0% 28,095 28,915 29,736 30,556 31,377 0% 94 97 100 103 106
10% 34,042 34,945 35,847 36,750 37,652 10% 114 118 121 124 127
20% 39,989 40,974 41,958 42,943 43,928 20% 134 138 141 144 148
Chalet Hotels FY2025E EBITDA sensitivity

-2 -1 0 1 2 -2 -1 0 1 2
-20% 5,515 5,645 5,775 5,905 6,035 -20% 65 66 68 70 71
ARR Change (%)
ARR Change (%)

-10% 6,839 6,985 7,132 7,278 7,424 -10% 81 82 84 86 87
0% 8,163 8,326 8,489 8,651 8,814 0% 96 98 100 102 104
10% 9,488 9,666 9,845 10,024 10,203 10% 112 114 116 118 120
20% 10,812 11,007 11,202 11,397 11,592 20% 127 130 132 134 137
Lemon Tree FY2025E EBITDA sensitivity

-2 -1 0 1 2 -2 -1 0 1 2
ARR Change (%)
ARR Change (%)
Chalet Hotels FY2025E EBITDA

6,262
sensitivity
6,424 6,586 6,748 6,910 -20% 66 68 69 71 73
-10% 7,672 7,854 8,037 8,219 8,401 -10% 81 83 85 87 89
0% 9,082 9,285 9,487 9,690 9,892 0% 96 98 100 102 104
10% 10,492 10,715 10,938 11,161 11,383 10% 111 113 115 118 120
20% 11,902 12,145 12,388 12,631 12,874 20% 125 128 131 133 136
SAMHI Hotels FY2025E EBITDA sensitivity

-2 -1 0 1 2 -2 -1 0 1 2
-20% 1,823 1,951 2,080 2,208 2,337 -20% 41 44 47 49 52
ARR Change (%)
ARR Change (%)
-10% 2,986 3,130 3,275 3,419 3,564 -10% 67 70 73 76 80

0% 4,149 4,309 4,470 4,630 4,791 0% 93 96 100 104 107
10% 5,312 5,488 5,665 5,841 6,018 10% 119 123 127 131 135
20% 6,475 6,667 6,860 7,052 7,245 20% 145 149 153 158 162

India Research
13
SAMHI has highest FV sensitivity to changes in ARR

Fair Value sensitivity to ARR and occupancy for IHCL, Chalet, and Lemon Tree and SAMHI Hotels (Rs/share)
IHCL DCF sensitivity
Absolute (Rs/ share) Relative
460 -2 -1 0 1 2 460 -2 -1 0 1 2
ARR Change (%)
ARR Change (%)

-20% 313 320 327 334 341 -20% 68 70 71 73 74
-10% 378 385 393 401 409 -10% 82 84 86 87 89
0% 442 451 460 469 478 0% 96 98 100 102 104
10% 507 517 527 536 546 10% 110 112 114 117 119
20% 572 583 593 604 615 20% 124 127 129 131 134
Chalet Hotels DCF sensitivity

-2 -1 0 1 2 -2 -1 0 1 2
-20% 413 422 432 441 450
ARR Change (%)
ARR Change (%)

-20% 62 64 65 67 68
-10% 525 535 546 557 567 -10% 79 81 83 84 86
0% 637 649 660 672 684 0% 96 98 100 102 104
10% 749 762 775 788 801 10% 113 115 117 119 121
20% 861 875 889 904 918 20% 130 133 135 137 139
Lemon Tree DCF sensitivity

-2 -1 0 1 2 -2 -1 0 1 2
ARR Change (%)
ARR Change (%)
-20% 66 68 70 72 74 -20% 63 65 67 68 70
-10% 83 85 88 90 92 -10% 79 81 83 85 87
0% 100 103 105 107 110 0% 96 98 100 102 104
10% 117 120 122 125 127 10% 112 114 116 119 121
20% 134 136 139 142 144 20% 127 130 132 135 137
SAMHI Hotels DCF sensitivity

-2 -1 0 1 2 -2 -1 0 1 2
-20% 41 50 59 69 78
ARR Change (%)
ARR Change (%)
-20% 18 22 26 30 34
-10% 124 135 145 155 166 -10% 54 58 63 67 72
0% 207 219 230 242 253 0% 90 95 100 105 110
10% 291 303 316 329 341 10% 126 132 137 143 148
20% 374 388 401 415 429 20% 162 168 174 180 186
Discounted cash flows to better capture aggressive near-term growth

In our view, the elevated (and differing) growth rates in the near term make it difficult to assign an
appropriate multiple to a specific year’s earnings. More importantly, it takes a hotel asset a gestation
period of 2-3 years to stabilize earnings prospects. Accordingly, we find a discounted cash flow approach
more appropriate to value hotel companies in their growth phase. The multiple-based valuation will differ
depending on (1) the portfolio’s growth profile in the explicit forecast period, (2) capital intensity and
capex requirements of the business and (3) potential for margin expansion through improved
efficiencies. We currently use a WACC of 12% and terminal growth of 5% on FY2040E earnings, while
building a 7-8% growth in room rates and 5% cost inflation beyond FY2026E.

India Research
14
Exhibit 16 shows the historical trading multiples for the companies in the hotel sector. Our Fair Value
estimates imply a multiple of 22X for IHCL, 19.2X for Chalet Hotels, 15.4X for Lemon Tree and 14.2X for
SAMHI Hotels on FY2025E estimated EBITDA.
Pre-Covid, hotels traded in the 10-20X 1-year forward EV/EBITDA range

1-year forward EV/EBITDA multiple for IHCL, Chalet and Lemon Tree, March fiscal year-ends,
2005-24 (X)
1 year forward EV/ EBITDA (X)
IHCL Lemon Tree Chalet
80
70
60
50
40
30
20
10
0
Nov-05
Nov-07
Nov-09
Nov-11
Nov-13
Nov-14
Nov-15
Nov-16
Nov-17
Nov-18
Nov-19
Nov-20
Nov-22
Nov-06
Nov-08
Nov-10
Nov-12
Nov-21
Nov-23
Source: Company, Bloomberg, Kotak Institutional Equities
Hotel stocks are now trading at premium to their past trading range
1-year forward EV/EBITDA multiple for IHCL, Chalet and Lemon Tree, March fiscal-year ends,
2018-24 (X)
1 year forward EV/ EBITDA (X)
IHCL Lemon Tree Chalet
80
70
60
50
40
30
20
10
Nov-18
Nov-21
Nov-22
Nov-19
Nov-20
Nov-23
May-19
May-20
May-21
May-23
May-22
Aug-19
Aug-22
Aug-23
Feb-20
Aug-20
Feb-21
Aug-21
Feb-22
Feb-19
Feb-23
Diluted return profile due to capex intensity

Hospitality business is a capital-intensive business, with high operating leverage. Bulk of the cost is
capital in nature, whereas the operating cost is more fixed than variable. Consequently, the return profile
of a new hotel asset is typically in single digits, but improves dramatically over time, as the capital cost
is historical and inflation improves room rates over time. Furthermore, a new hotel property takes a
period of two to three years to attain stabilized operations. The earnings profile is highly sensitive to
room rates, which depends on the point in the cycle with favorable demand-supply dynamics. A
combination of (1) a high gestation period, (2) continuous investment for growth and (3) cyclical nature
of the business implies low return ratios—though a dated standalone asset would deliver high double-
digit returns, implying healthy lifecycle returns for individual hotel assets.

India Research
15
RoCEs to improve as assets stabilize in years ahead

RoCE for IHCL, Chalet, Lemon Tree and SAMHI Hotels, March fiscal year-ends, 2017-26E (%)
SAMHI Indian Hotels Chalet Hotels Lemon Tree Hotels

25
20
15
10
(5)
(10)
(15)
2017 2018 2019 2020 2021 2022 2023 2024E 2025E 2026E
Standalone asset would trade at 15X EV/EBITDA premium for growth portfolio
A standalone hotel asset, with room rates inflating 200 bps faster than cost inflation, could trade at an
EV/EBITDA of 15X. Our base assumes 70% occupancy, coupled with 7% growth in room rates and 5%
growth in cost for 10 years, followed by a 5% terminal growth rate with a WACC of 12%. We note that a
portfolio of assets could trade at a premium owing to higher growth rates from the expanding portfolio
and lower risks due to diversification and cost efficiencies from scale benefits.
Standalone hotel asset could trade at 15X EV/EBITDA, keeping in mind the inflation trajectory and cyclicality in business
Justified multiples for hotel asset
Year 1 2 3 4 5 6 7 8 9 10 11 12 13
Keys (#) 100 100 100 100 100 100 100 100 100 100 100 100 100
ARR (Rs/ day) 5,000 5,775 6,973 8,786 7,842 7,411 7,392 8,538 10,309 12,990 11,593 10,956 10,928
Inflation factor (%) 5 5 5 5 5 5 5 5 5 5 5 5
Cyclicality factor (%) 10 15 20 (15) (10) (5) 10 15 20 (15) (10) (5)
Occupancy (%) 62 64 67 70 67 64 62 64 67 69 67 64 61
RevPAR 3,100 3,724 4,676 6,128 5,250 4,763 4,561 5,479 6,880 9,016 7,725 7,008 6,711
Room rentals (Rs mn) 113.2 135.9 170.7 223.7 191.6 173.9 166.5 200.0 251.1 329.1 282.0 255.8 244.9
Other revenue (Rs mn) 45.3 54.4 68.3 89.5 76.7 69.5 66.6 80.0 100.5 131.6 112.8 102.3 98.0
Revenue (Rs mn) 158.4 190.3 239.0 313.1 268.3 243.4 233.1 280.0 351.6 460.7 394.7 358.1 342.9
Growth (% yoy) 20 26 31 (14) (9) (4) 20 26 31 (14) (9) (4)
Room rental cost (fixed) 80.0 84.0 88.2 92.6 97.2 102.1 107.2 112.6 118.2 124.1 130.3 136.8 143.7
Other revenue cost 33.9 40.8 51.2 67.1 57.5 52.2 49.9 60.0 75.3 98.7 84.6 76.7 73.5
Total cost (Rs mn) 113.9 124.8 139.4 159.7 154.7 154.3 157.2 172.6 193.5 222.8 214.9 213.6 217.2
EBITDA (Rs mn) 44.5 65.5 99.6 153.4 113.6 89.1 75.9 107.4 158.0 237.9 179.8 144.5 125.8
Room rental margin (%) 29 38 48 59 49 41 36 44 53 62 54 47 41
Other revenue margin (%) 25 25 25 25 25 25 25 25 25 25 25 25 25
Blended margin (%) 28 34 42 49 42 37 33 38 45 52 46 40 37
Post-tax (Rs mn) 33.3 49.1 74.7 115.1 85.2 66.9 56.9 80.6 118.5 178.4 134.9 108.4 94.3
WACC (%) 12
Terminal growth (%) 5
NPV (Rs mn) 524.1
Terminal value (Rs mn) 1,414.9
PV of Terminal (Rs mn) 455.6
EV (Rs mn) 979.7
EV/EBITDA (1 year fwd) 15.0
Terminal Value (X) 0.9

India Research
16
Industry dynamics likely to remain firm in the foreseeable future

Hotel inventory has increased at a modest CAGR of 5.5% over the past eight years, allowing for
occupancy to rapidly improve to 66% in FY2023 and room rates increasing to Rs6,869/day. We
expect incremental inventory of ~55k keys over the next five years, which implies a supply CAGR
of 6% over FY2023-28E. Long lead times and high upfront investment will lead to back-ended
supply addition and will likely keep new supply in check in a post-pandemic world. Demand will
outpace supply (9% CAGR over FY2023-28E), supporting newer peaks in room rates (9% CAGR)
and continued strength in occupancy levels (75% by FY2028E).
Room rates hitting new peaks—15% yoy growth in FY2024E, 9% CAGR between FY2023 and FY2028E
Room rates in India averaged Rs6,869/day in FY2023, with February 2023 hitting a new peak at
Rs8,300/day compared with the earlier peak of ~Rs8,000/day in FY2008. At the current trend, we expect
the full-year FY2024 to likely see a 15% yoy growth in room rates on average. As highlighted previously,
earnings for hospitality companies have a high sensitivity to room rates.
Being a cyclical business, we saw room rates rise rapidly at a 15% CAGR during FY2002-08, with a
corresponding rise in occupancy from 52% to ~70%. However, room rates trended soft for the
subsequent eight years, falling at an average 4.5% per annum, with room rates dropping to Rs5,527/day
and occupancy dropping closer to 60%. Room rates again started rising, albeit gradually at a CAGR of
3% from FY2016 to FY2020, with occupancy improving to 66% by FY2020, subsequently impacted by the
pandemic that saw room rates plummet to Rs4,630/day on an average in FY2021.
Occupancy will likely improve to 75% by FY2028E

Demand, supply and occupancy trend, March fiscal year-ends, 2000-28E (‘000 keys, %)
Supply ('000 keys) Demand ('000 keys) Occupancy (%), RHS

250 80
221
199
200 188 70
179
166 172 165
150 148
150 139 144 135 60
127 129 125
108 112 119 110 117
94 101 92
100 84 83 86 50
72 64 71 77 75
62 54 59
43 50 50
50 37 40
- 30
2010
2011
2015
2016
2017
2018
2019
2023
2024E
2025E
2026E
2027E
2012
2013
2014
2020
2021
2022
2028E
We note that room rates have since seen a sharp bounce-back after the pandemic, scaling new peaks
and likely to maintain the momentum, as we see occupancies remaining elevated over the next three
years. Incremental supply is likely to lag incremental demand (discussed in further detail) and will
continue to support room rates.

India Research
17
February 2023 scaled new fresh peak ARR

Monthly trend in industry ARR, calendar year-ends, 2019-23 (Rs/day)
New peak 2019 2020 2021 2022 2023

ARR
8,300
9,000
7,700
7,700
7,600
7,300
7,200
7,100
6,800
8,000
6,762
6,700
6,700
6,700
6,656
6,620
6,560
6,506
6,500
6,364
6,105
6,000
5,850
5,850
5,850
5,850
5,850
7,000
5,750
5,690
5,634
5,588
5,500
5,400
5,365
5,305
5,251
5,100
5,036
5,000
5,000
4,800
6,000
4,500
4,300
4,300
4,300
4,200
4,200
4,200
4,113
4,100
3,800
3,800
5,000
3,700
3,500
3,500
3,353
3,282
3,200
3,141
4,000
3,000
2,000
1,000
-
Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec
60% of branded keys had occupancy >60% in FY2023, close to pre-Covid FY2019 levels
Occupancy buckets for branded keys, March fiscal year-ends, 2019-23 (%)
Occupancy buckets for branded keys, FY2019 (%) Occupancy buckets for branded keys, FY2021 (%)
0-30 60-100
5.2 5.2
30-60
28.1 0-30
39.6
60-100
30-60
66.7
55.3
Occupancy buckets for branded keys, FY2022 (%) Occupancy buckets for branded keys, FY2023 (%)
0-30 0-30
60-100 15.2 7.0
25.3
30-60
32.7
60-100
60.3
30-60
59.6

India Research
18
Half of the branded keys had ARR >Rs5,000 in FY2023, compared to ~40% in pre-Covid FY2019
ARR buckets for branded keys, March fiscal year-ends, 2019-23 (%)
ARR buckets for branded keys, ARR buckets for branded keys,
FY2019 (%) FY2021 (%)
>20,000 >20,000
2.2 1.5
5,000-20,000
24.3
5,000-20,000
37.6
<5,000
60.2
<5,000
74.3
ARR buckets for branded keys, ARR buckets for branded keys,
FY2022 (%) FY2023 (%)
>20,000 >20,000
2.6 4.0
5,000-20,000
25.6
<5,000
5,000-20,000 50.7
45.3
<5,000
71.8
The time series analysis aside, regional dynamics also show a strong correlation between occupancy
and room rates. Mumbai, Delhi and Goa stack up well on occupancy and room rates in FY2023.
Rising ARRs across key geographies

ARR trend across Goa, Mumbai and New Delhi, March fiscal year-ends, 2000-23 (Rs/day)
Goa Mumbai New Delhi

12,000
10,000
8,000
6,000
4,000
2,000
0
2000
2003
2004
2005
2006
2010
2011
2012
2013
2017
2018
2019
2020
2023
2001
2002
2007
2008
2009
2014
2015
2016
2021
2022

India Research
19
Occupancy levels also following similar trend

Occupancy trend across Goa, Mumbai and New Delhi, March fiscal year-ends, 2000-23 (%)
Goa Mumbai New Delhi

90
80
70
60
50
40
30
20
10
0
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2000
2001
2002
2003
2004
2005
2021
2022
2023
Supply-side growth to lag demand growth in the aftermath of pandemic

New supply for the hotel sector in India is expected to increase at a CAGR of 6% (~55k keys) over the
next five years (FY2023-28E), a tad higher than the 5.5% CAGR over FY2015-23, but lower than the CAGR
of 7.9% during FY2010-23. The ebb and flow of the pandemic over the past few years caused a significant
shift in consumer choices across segments and has resulted in hotel companies recalibrating their
business decisions with a renewed focus on flexibility and continuity. The pandemic has impacted new
supply creation owing to (1) the time lost on execution for projects already underway, (2) the period of
indecision that prevented new projects being taken up and (3) fractured balance sheets that may drive
many players out of contention. We note that out of these incremental 55k keys to be commissioned for
the sector over FY2023-28E, the listed players (IHCL, Chalet, Lemon Tree and SAMHI) are likely to add
as much as 18-19k keys, while Marriott plans to add 10-11k keys through various asset owners in the
country (some overlap between SAMHI and Marriott growth).
The hotel inventory growth rate in India has been increasing at a diminishing rate compared with previous
years. With the significant rationalizing of new developments, mature and upcoming markets are
witnessing a slower growth in the pipeline than before. High barriers to entry and a long gestation period
will likely see key cities and metro markets having limited development activity, most likely in emerging
parts of the city.
Among cities, Bengaluru, Mumbai and Delhi account for ~26% of hotel inventory, as of March 2023.
Bengaluru and Mumbai would continue to add new keys at a modest pace (5-6% CAGR over FY2023-
28E), while new supply in Delhi is coming at a more moderated pace (~2% CAGR). We note lower growth
in supply among key metro cities will further aid room rate improvement for our coverage universe. In
terms of occupancy, Mumbai clocked the strongest occupancy on average in the 10 years (up to
FY2020), followed by Goa and New Delhi.

India Research
20
6% CAGR in hotel keys over FY2023-28E

Data on supply and demand for hotels, March fiscal year-ends, 2010-28E (‘000 keys, %)
Supply ('000 keys) Demand ('000 keys) Occupancy (%, RHS)

250 80
221
199
200 188 70
179
166 172 165
150 148
150 139 144 135 60
127 129 125
108 112 119 110 117
94 101 92
100 84 83 86 50
72 64 71 77 75
62 54 59
43 50 50
50 37 40
- 30
2010
2011
2015
2016
2017
2018
2019
2023
2024E
2025E
2026E
2027E
2012
2013
2014
2020
2021
2022
2028E
60% of new the inventory to be upper-midscale and above

Break-up of pipeline keys (%)
New supply mix by positioning (% ) New supply mix by city tier (%)
Budget Luxury
14.8 6.8
Tier 1
27
Upscale
26.5
Tier 3
44
Midscale
26.1
Upper
Tier 2
midscale
29
25.6
New supply mix by zone (% ) New supply mix by brand origin (% )

South
17
North
East
42 Indian
10
46
International
54
West
31

India Research
21
Bengaluru and Mumbai to see healthy incremental supply

City-wise supply for hotel keys, March fiscal year-ends, 2020-28E ('000 keys)
2020 2022 2023 2028E

25
20
20 18
17
151515 15
15 131314 14 14
12
10 9 9 8
8 7 7 7
7 7
6 6
5
0
Mumbai Delhi Bengaluru Goa Hyderabad Gurgugram
We do highlight that against overall industry estimates of capacity addition of 55k keys over FY2023-
28E, our coverage universe has plans to add 18-19k (owned + managed) keys by FY2028E. In addition,
an analysis of the top players in the industry suggests that they have aggressive capacity addition plans.
We would remain watchful of an under-estimation of incremental supply that could play spoilsport, to
our assumption of moderated supplies.
Top 5 brands own ~50% of the branded keys in India as of August 2023
Branded key inventory mix by brand, August 2023 (%)
Inventory mix by brand, August 2023 (%)
Marriott
International
14.0
Others
33.2
IHCL
11.4
Radisson Hotel
Group
Concept Hospitality 7.4
3.2
ITC Hotels
Sarovar Hotels 6.9
3.4 Accor
IHG
Lemon TreeHyatt Hotels 6.3
4.3
4.9 5.1

India Research
22
Healthy hotel pipeline (domestic) for key hotel brands

Existing and pipeline hotels in India for key brands (#)
Existing hotels (#) Pipeline hotels (#)

300
250
82
200 105
150
51 15
11
100
5 10 44
50 16 51
5
176 145 95 120 110 70 58 44 34 24 24
-
Radisson
Accor
Hilton
Hyatt
EIH
Ferns
Marriott
ITC
IHG
IHCL
Lemon Tree
Top hotel brands plan to increase their hotel supply by ~40% and add ~40k keys over next 3-4 years
Pipeline keys in India for key brands (#)
Pipeline keys (#)

12,000
10,000
8,000
6,000
4,000
2,000
-
Radisson
Accor
Hilton
Hyatt
Ferns
EIH
Marriott
ITC
IHG
IHCL
Lemon Tree
Higher development costs and long construction times to ensure supply addition is back-ended
Hotel development costs have seen an increase compared with pre-pandemic hotel development costs.
The average period of hotel construction varies from three to five years, depending on the positioning of
the hotel, giving us a reasonable lead-time for advent of new supply. Rising material costs and supply
chain issues have become a cause for concern for realtors and stakeholders, with key building materials
such as steel, cement and labor charges facing inflationary pressures.

India Research
23
Average cost of development stands at Rs9 mn/key

Development cost per key across hotel categories (Rs mn/key)
Development cost per key (Rs mn)

25
20
15
Median Rs 9 mn
10
5
4 6 6 11 17 24
-
Mid-Market
Upscale
Luxury
Upper Mid-Market
Upper Upscale
Budget/Economy
Higher cost per key as rooms increase for more premium hotels
Development cost per key across hotel categories (Rs mn/key)
Development cost per key (Rs mn)

16
<= 150 keys > 150 keys 14.3
14 +35%
12
10.5
10
8 -25%
6 5.4
4.0
4
0
Mid-Market Upper Mid-Market
& Lower & Higher

India Research
24
Premium hotels can take up to five years to construct, on average

Average construction tenure by hotel category (months)
Average construction tenure (months)

60
53
51
48
50
42
39
40
32
30
20
10
0
Budget/ Mid-Market Mid-Market Upscale Upper Upscale Luxury
Economy Upper
Demand growth on rebound—expect 9% CAGR up to FY2028E

Domestic tourists leading the charge; foreign tourist arrivals still to revive fully
Demand for hotel rooms increased at a healthy CAGR of 9.6% between FY2010 and FY2020, impacted
by Covid-linked shutdowns in the subsequent two years. We highlight that the demand for hotel inventory
has fallen marginally short of 60%—only in 3 out of the past 15 years (up to FY2020), averaged 63% and
crossed 70% in two instances (2006/2007). Occupancy has been steadily improving since 2013.
We highlight the steady improvement in foreign tourist arrivals and domestic passenger travel, which
reflect on the trends in growing demand for hotel stays. We further note that though domestic passenger
travel has rebounded to pre-pandemic levels, foreign tourist arrivals still have scope for improvement.
Furthermore, we do note the investment in new airports and development of new travel routes, which will
further fuel domestic travel both business and leisure, and fuel incremental demand for the hospitality
sector.
FTAs rose 106% yoy during 1HCY23

Foreign tourist arrivals, December year-ends, 2010-1HCY23 (mn)
Foreign tourist arrivals (mn)

12 10.9
10.2 10.6
10
8.8
8.0 7.7
8 7.0
6.3 6.6
6.2
5.8
6
4.4
4
2.7
2 1.5
0
1HCY23
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Source: Ministry of Tourism, Kotak Institutional Equities

India Research
25
FTAs to rise 4X by 2030 (over 2022 levels)

Foreign tourist arrivals, December year-ends, 2022-47E (mn)
Foreign tourist arrivals (mn)

120
100
100
80
60
40
25
20
6.2
0
2030E
2047E
2022
Source: HVS Anarock, Kotak Institutional Equities
Domestic tourists have been inching up post-Covid

Domestic tourist arrivals, December year-ends, 2010-22 (mn)
Domestic tourist visits (mn)

2,500 2,322
2,000 1,854
1,731
1,615 1,658
1,432
1,500 1,283
1,143
1,045
1,000 865
748
610 678
500
-
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Source: Ministry of Tourism, Kotak Institutional Equities

India Research
26
Domestic tourist arrivals to rise 9X by CY2047E

Domestic tourist arrivals, December year-ends, 2022-2047E (mn)
Domestic tourist visits (mn)

16,000 15,000
14,000
12,000
10,000
8,000
6,000
4,000
1,731
2,000
-
2022 2047E
Source: HVS Anarock, Kotak Institutional Equities
Sustainable demand from sporting events
Recurring sporting events throughout the year such as the Indian Premier League (IPL), Indian Soccer
League (ISL), Hockey India League (HIL) and Pro Kabaddi League (PKL) have become a regular source
of demand for branded hotel rooms. These events are generally at least a month-long, and there is a
requirement to station the staff/event planners, along with the teams (players and coaches). These
would continue to support demand for hotels in India in the years to come, especially as more sports
(other than cricket) continue to gain prominence in the country.
India has recurring sports leagues which create an additional source of demand for hotels
Key sporting events in the country
Sporting event Year launched Event dates (most recent )

Indian Premier League 2007 Apr 23 to May 23
Indian Soccer League 2013 Sep 23 to Mar 24
Pro Kabaddi League 2014 Starting Oct 23
Premier Badminton League 2016
Indian Soccer League (Women) 2023 Mar 23
Rising spends on leisure and weddings
Domestic demand has shouldered the burden of generating demand for the hospitality sector over the
past two years, with rising spends on leisure and weddings. India has seen a strong surge in leisure
travel, with some leisure destinations like Udaipur seeing record room rates.

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27
Some leisure destinations such as Udaipur and Goa seeing very strong room rates with rising leisure travel
ARR and occupancy trend across cities, FY2023 (Rs/day, %)
14,000
Udaipur
13,000
12,000
11,000
Goa
ARR (Rs/ day)
10,000
9,000 Mumbai
8,000 New Delhi

Bengaluru
7,000 Jaipur Gurugram
Agra Noida Chandigarh Hyderabad
6,000
Dehradun Pune Kolkata
Kochi Chennai
5,000 Navi Mumbai
Amritsar Ahmedabad
Lucknow
4,000
55.0 60.0 65.0 70.0 75.0 80.0
Occupancy (%)
Supply to grow at a faster pace in non-business cities such as Amritsar, Dehradun, Lucknow and Goa
Break-up of branded keys, March fiscal year-ends, 2010-28E (‘000 keys)
# of branded keys ('000)

Leisure Business
221
240
199
188
179
172
166
180
150
144
107
139
129
102
127
119
97
112
108
93
101
90
87
120
94
83
84
82
81
72
78
77
62
74
71
69
66
60
60 114
54
103
46
96
89
2010 23 39
84
79
67
62
58
52
49
45
41
39
35
34
30
2011 25
-
2022
2023
2024E
2025E
2026E
2027E
2028E
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Notes:

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28
Improvement in occupancy trends for both leisure and business cities

Occupancy trend for the hospitality sector, March fiscal year-ends, 2000-28E (%)
Occupancy (%)
Leisure Business Overall
80
70
60
50
40
30
2024E
2025E
2026E
2027E
2028E
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Notes:
Higher propensity to spend on travel and stay
There is a higher propensity to spend on travel and hotel stays among Indians owing to rising income
levels and higher aspirations. Accordingly, we’ve seen a slightly better recovery in terms of occupancy
and ARR improvement for higher-rated hotels versus two- and three-star hotels.
Higher occupancy recovery for better rated hotels

Occupancy rates across hotel categories, March fiscal year-ends, 2000-23 (%)
Five-star deluxe Five-star Four-star Three-star Two-star
70
60
50
40
30
2002
2003
2006
2007
2009
2010
2013
2014
2017
2018
2020
2021
2022
2000
2001
2004
2005
2008
2011
2012
2015
2016
2019
2023

India Research
29
Five- and four-star hotels have seen a higher room rate increase post-Covid
Change in average room rates across hotel categories, March fiscal year-ends, 2001-23 (% yoy)
Change in ARR (% yoy)
Five-star deluxe Five-star Four-star Three-star Two-star
50
40
30
20
10
(10)
(20)
(30)
2003
2004
2005
2007
2008
2009
2012
2013
2016
2017
2018
2020
2021
2022
2001
2002
2006
2010
2011
2014
2015
2019
2023
India has ~40% of existing inventory in the upscale and above categories
Break-up of branded keys in India, March fiscal year-end, 2023 (%)
Mix of branded keys in India, FY2023 (%)
Economy Luxury
Budget 3 10
12
Upper Upscale
11
Midscale
23
Upscale
18
Upper midscape
23
India to have third-largest volume of air passenger traffic by FY2024
The Indian aviation market (a reflection of hospitality demand) reached its record high in FY2019 and
after a three-year impact due to the pandemic restrictions is on the path to a full recovery. Average
monthly air passenger traffic in India during FY2020 was recorded at approximately 28.5 mn. This figure
dropped to 9.6 mn for FY2021 due to the pandemic and started recovery, with 15.8 mn by FY2022.
Monthly traffic data for 1HFY23 has only been increasing month-on-month and is 136% more than the
air passenger traffic recorded for 1HFY22 and approximately 10% lower than 1HFY20. IATA forecasts
suggest that India will have the third-largest volume of air passenger traffic by FY2024. With a total of
over 80 operational airports and over 100 more in the pipeline, the Airports Authority of India has set
aside a budget of Rs900 bn for the upcoming airport development to further boost air travel, as of
February 2022.

India Research
30
Air passenger volume between FY2014 and FY2020 has more than doubled for most key cities, resulting
in healthy growth rates. From FY2013 to FY2020, the passenger load factor for the domestic aviation
segment witnessed a CAGR of 2%; the available seat kilometers increased at a CAGR of 11% and the
revenue passenger kilometers grew 13%. Key urban consumption centers in India such as Ahmedabad,
Bengaluru, Chennai, Coimbatore, Delhi, Goa, Hyderabad, Kolkata, Mumbai, Nashik, Pune and
Vishakhapatnam account for over 70% of the country’s total air traffic.
Upcoming airports and planned upgradations and expansions across several cities such as Pune,
Bengaluru, Delhi, Noida, Hyderabad, Goa, Coimbatore, Chennai and Mumbai will further boost the volume
of passengers.
New opportunities in mid-scale hospitality versus traditional domination of luxury properties

Luxury and upper-upscale brands account for 21% of the total hotel inventory, although upper mid-scale/
mid-scale (46% of inventory) brands have been closing the gap, with supply increasing at a faster pace
over the past decade compared with the overall industry growth. Traditionally, the Indian hospitality
sector was dominated by luxury hotels, as it was only the very affluent who would use hotel stays.
However, increased urbanization, the prominence of the service sector economy and more importantly,
a burgeoning middle-class has given rise to demand for branded mid-scale hotels—smaller rooms and
lower F&B options, though fulfill the lodging and boarding requirements with a value-for-money
proposition.
We highlight that the higher capital cost for a luxury hotel is compensated by higher RevPAR and
incremental contribution from F&B facilities, while reporting lower build out and operational cost. Exhibit
46 highlights the return profile for mid-scale and premium properties at different stages of the cycle. We
further highlight that an old asset (lower capital cost) is able to make reasonable returns relative to a
new asset in a downcycle. Accordingly, weakening demand trends could prompt asset owners with an
older vintage to lower room rates faster.
Mature hotels offer healthy return profile

Return analysis for mid-scale and premium offerings
Mid-scale Premium
New Asset Old Asset New Asset Old Asset
Keys 100 100 100 100 100 100 100 100 100 100 100 100
Capex 5.0 5.0 5.0 2.5 2.5 2.5 10.0 10.0 10.0 5.0 5.0 5.0
Occupancy 70 60 50 70 60 50 70 70 50 70 60 50
ARR 6,000 4,000 3,000 6,000 4,000 3,000 10,000 8,000 6,000 10,000 8,000 6,000
RevPAR 4,200 2,400 1,500 4,200 2,400 1,500 7,000 5,600 3,000 7,000 4,800 3,000
CostPAR 2,200 2,200 2,200 2,200 2,200 2,200 3,200 3,200 3,200 3,200 3,200 3,200
F&B (%) 25 25 25 25 25 25 25 25 25 25 25 25
Margin (%) 50 50 50 50 50 50 50 50 50 50 50 50
Others (%) 25 25 25 25 25 25 25 25 25 25 25 25
Rentals 153 88 55 153 88 55 256 204 110 256 175 110

F&B 38 22 14 38 22 14 64 51 27 64 44 27
Others 38 22 14 38 22 14 64 51 27 64 44 27
Revenue 230 131 82 230 131 82 383 307 164 383 263 164
Overheads (80) (80) (80) (80) (80) (80) (117) (117) (117) (117) (117) (117)
F&B (19) (11) (7) (19) (11) (7) (32) (26) (14) (32) (22) (14)
EBITDA 130 40 (5) 130 40 (5) 235 164 34 235 124 34
EBITDA (%) 57 31 (6) 57 31 (6) 61 54 21 61 47 21
ROIC 26 8 (1) 52 16 (2) 23 16 3 47 25 7
Source: Kotak Institutional Equities estimates

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31
Entry of global brands has broadened competitive landscape

The entry of global hotel brands has been an emerging trend in the Indian hospitality sector over the past
decade—with global brands now accounting for over 40% of the overall inventory in the hotel space.
Asset owners such as Chalet, among others, are happy to tap into the global loyalty program of large
international brands, while also benefitting from the branding and best-in-class practices adopted by
such global brands. On the other hand, players such as IHCL and Lemon Tree believe in building their
own local brands (IHCL has a reasonable international presence), besides also tapping into the
incremental opportunity of managed contracts.
Brand penetration in India has been on an upward trajectory since CY2013 and has steadily increased
yoy, despite the pandemic. As of September 2022, brand penetration in India stands at 43%, which is the
highest in the past decade and yet is considerably lower than other comparable markets in the region,
thus presenting an opportunity for further consolidation.

India Research
INITIATING COVERAGE
Indian Hotels (IH) ADD

CMP(₹): 422 Fair Value(₹): 460 Sector View: Attractive NIFTY-50: 20,133 November 30, 2023
Indian Hotels—a house of brands Company data and valuation summary

We initiate coverage on Indian Hotels with an ADD rating and FV of Rs460/ Stock data
share. Indian Hotels is the largest hospitality player in India, with 192
CMP(Rs)/FV(Rs)/Rating 422/460/ADD
operating hotels (22,465 keys, of which 13,093 are owned) that are
52-week range (Rs) (high-low) 436-280
geographically diversified, at various price points and catering to varied
Mcap (bn) (Rs/US$) 599/7.2
business and leisure requirements. The “Taj” brand has been voted as the
ADTV-3M (mn) (Rs/US$) 1,315/15.8
leading hospitality brand in the world, a positioning that allows the company
to broad-base its revenue profile through incremental management contracts Shareholding pattern (%)
and drive continued earnings growth.
2.8
14.1
Initiate coverage with ADD rating and FV of Rs460/share
4.6 38.2
We initiate coverage on Indian Hotels with an ADD rating and a FV of
Rs460/share. IHCL is trading at 20X EV/EBITDA on FY2025E attributable 18.2
earnings, which we believe is rich but justifiable as earnings growth will likely
22.2
remain strong (25% EBITDA CAGR in the next three years), as the company will
benefit from (1) the addition of 2,174 owned keys and 6,536 keys under Promoters FPIs MFs BFI s Retail Others
management contracts over FY2023-26E, (2) 7% CAGR improvement in ARR to

Price performance (%) 1M 3M 12M
1933
Rs14,140/day in FY2026E from Rs11,425/day in FY2023 and (3) improvement
Absolute 10 0 31
Private Circulation Only. This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities Act of
in margins to 37% by FY2026E, a ~600 bps improvement over FY2023 margins Rel. to Nifty 4 (4) 24
of 31%. We see IHCL as the preferred play on the improving demand-supply Rel. to MSCI India 4 (5) 25
dynamics in the Indian hospitality industry.
Forecasts/Valuations 2024E 2025E 2026E
IHCL—the largest and most diversified hospitality platform in India EPS (Rs) 9.0 13.6 16.7
IHCL has an operational portfolio of 22,465 keys across 192 hotels, making it EPS growth (%) 28.4 50.7 22.3
P/E (X) 46.7 31.0 25.3
the largest hospitality platform in India. It has an additional project pipeline of
P/B (X) 6.5 5.4 4.5
11,062 keys across 82 hotels, through a combination of owned (2,908 keys) and
EV/EBITDA (X) 26.6 18.7 15.0
managed properties (8,154 keys) that will likely be commissioned in the next
RoE (%) 14.9 19.1 19.4
five years. Geographically, 87% of room keys are in India, with the balance
Div. yield (%) 0.1 0.1 0.2
spread across neighboring countries and key world cities. In terms of
Sales (Rs bn) 72 85 96
categories, 54% of the room keys belong to the premium Taj brand, whereas the
EBITDA (Rs bn) 22 30 35
mid-scale brand Ginger accounts for 22% of the portfolio.
Net profits (Rs bn) 13 19 24
EBITDA to grow at 25% CAGR over FY2023-26E Source: Bloomberg, Company data, Kotak Institutional Equities estimates
IHCL will see a revenue CAGR of 18% in the next three years, yielding an EBITDA Prices in this report are based on the market close of
November 30, 2023
of Rs35.5 bn in FY2026E (25% CAGR), with a margin expansion of ~600 bps
over this period. Earnings growth is a combination of (1) incremental hotel
inventory with a pipeline of 8,710 keys by FY2026E, (2) improvement in room
rates to Rs14,140/day by FY2026E (from Rs11,425/day in FY2023) and (3)
modest improvement in occupancy to 74% (from 69% in FY2023). IHCL is sitting
on a liquid balance sheet, with net cash of ~Rs10 bn (as of Sep 2023), giving it
ample room to fund its incremental capex of Rs19 bn in the next three years.
Lower-than-estimated ARR growth, delay in commissioning of assets key risks

Lower-than-estimated ARR growth and delays in the commissioning of new
assets remain the key risks to the earnings of IHCL.

+91-22-4336-0870 +91-22-4336-0869
3
IHCL: The most diversified hospitality company

Healthy ROCEs in the coming years on the back of stabilization of existing hotels
Key financials for IHCL, March fiscal year-ends, 2020-26E (Rs mn)
Revenue Net Net debt / Net debt / EV / EBITDA

Year to Revenue growth EBITDA EBITDA profit EBITDA Equity RoACE RoAE (attributable) P / BV
March (Rs mn) (% yoy) (Rs mn) margin (%) (Rs mn) (X) (X) (%) (%) (X) (X)
2020 44,631 (1) 9,675 22 3,637 2.0 0.5 7 7 57 11.5
2021 15,752 (65) (3,618) (23) (7,201) (6.4) 0.6 (9) (22) (163) 13.7
2022 30,562 94 4,048 13 (2,477) 2.0 0.1 (0) (5) 142 8.5
2023 58,099 90 18,046 31 10,026 (0.1) (0.0) 12 13 35 7.5
2024E 72,253 24 21,522 30 12,828 (0.6) (0.1) 14 15 29 6.5
2025E 85,111 18 29,736 35 19,332 (1.0) (0.3) 18 19 20 5.4
2026E 96,136 13 35,477 37 23,652 (1.5) (0.4) 19 19 16 4.5
Diversified earnings profile with increasing contribution from fees and other revenues
Profit & Loss, balance sheet, cash flows and key ratios for IHCL, March fiscal year-ends, 2020-26E
2020 2021 2022 2023 2024E 2025E 2026E
Profit & loss
Revenue 44,631 15,752 30,562 58,099 72,253 85,111 96,136
Total expenses (34,956) (19,369) (26,515) (40,054) (50,732) (55,375) (60,659)
EBITDA 9,675 (3,618) 4,048 18,046 21,522 29,736 35,477
Depreciation and amortization expense (4,042) (4,096) (4,061) (4,161) (4,426) (4,734) (4,932)
EBIT 5,633 (7,714) (13) 13,885 17,095 25,002 30,544
Other income 1,324 1,647 1,552 1,389 2,082 2,089 2,407
Finance costs (3,411) (4,028) (4,277) (2,361) (1,832) (1,777) (1,742)
Profit before tax 3,546 (10,095) (2,738) 12,914 17,345 25,314 31,209
Tax expenses (448) 1,553 358 (3,232) (5,190) (6,710) (8,280)
Extraordinary items 410 1,600 156 33 — — —
Profit after tax (after extraordinary items) 3,508 (6,942) (2,224) 9,714 12,155 18,604 22,929
Share of profit from associates 130 (1,014) (426) 814 1,430 1,601 1,766
Profit after tax 3,637 (7,956) (2,650) 10,528 13,585 20,205 24,695
EPS (Rs) 3 (6) (2) 7 9 13 16
Balance Sheet
Property, plant and equipment 52,707 57,280 57,259 57,364 59,947 60,016 57,938
CWIP 2,432 1,650 1,935 3,321 3,179 4,279 6,695
Other non-current assets 49,269 47,965 52,405 56,059 56,759 56,759 56,759
Total non-current assets 104,407 106,895 111,600 116,743 119,884 121,054 121,391
Trade receivables 2,900 2,198 2,553 4,465 5,790 6,990 8,102
Cash and cash equivalents 3,156 1,536 11,878 10,534 20,577 36,755 59,562
Other current assets 3,955 3,318 3,285 3,364 3,432 3,640 3,833
Total current assets 10,011 7,053 17,716 18,363 29,798 47,385 71,497
Total Assets 114,418 113,947 129,316 135,106 149,683 168,439 192,888
Total equity 43,568 36,484 70,623 79,820 91,966 110,479 133,149
Borrowings 22,921 24,664 19,848 8,183 7,361 7,470 7,545
Deferred tax liabilities (net) 1,104 (399) (704) (15) (15) (15) (15)
Other non-current liabilities 70,204 61,685 95,584 109,628 122,589 141,984 165,698
Total non–current liabilities 94,228 85,949 114,727 117,796 129,935 149,439 173,227
Borrowings
Other financial liabilities 3,893 3,178 3,873 4,766 5,657 6,434 7,095
Other current liabilities 16,296 24,820 10,716 12,544 14,090 12,565 12,565
Total current liabilities 20,189 27,998 14,589 17,310 19,748 18,999 19,661
Total equity and liabilities 114,418 113,947 129,316 135,106 149,683 168,439 192,888
Cash flows
Operating cash flow, excl. working capital 10,062 (2,654) 4,953 18,453 26,430 31,657 37,908
Working capital changes 235 (767) 1,212 241 1,045 (2,157) (644)
Cash taxes paid (2,062) 234 551 (2,504) (5,190) (6,710) (8,280)
Capital expenditure (3,120) (1,544) (2,691) (4,276) (6,868) (5,904) (5,270)
Free cash flows 5,115 (4,731) 4,026 11,914 15,417 16,887 23,714
Ratios
Net debt 19,765 23,127 7,970 (2,352) (13,216) (29,285) (52,017)
Net debt/ equity (x) 0.5 0.6 0.1 (0.0) (0.1) (0.3) (0.4)
Net debt/ EBITDA (X) 2.0 (6.4) 2.0 (0.1) (0.6) (1.0) (1.5)
ROAE (%) NA (10.0) (0.6) 26.8 30.3 32.0 40.1
ROCE (%) NA 4.4 7.6 14.3 17.5 20.3 23.4
Indian Hotels
Hotels & Restaurants India Research
4
IHCL: The largest player in the Indian hospitality sector

We initiate coverage on Indian Hotels with an ADD rating and FV of Rs460/share. Indian Hotels
currently trades at an EV/EBITDA of 20X on adjusted FY2025 estimates. We estimate IHCL’s
EBITDA to grow to Rs35.5 bn in FY2026E from Rs18 bn in FY2023, yielding a CAGR of 25% over
three years. The earnings performance is well-rounded and contributed by (1) 7% CAGR in room
inventory of owned properties, (2) continued improvement in ARR (7% CAGR) and occupancy
(~460 bps) and (3) incremental contribution from non-room revenue streams, with a 27% CAGR
in management fees.
Initiate coverage with ADD rating and FV of Rs460/share

IHCL is the leading hospitality brand in India, with a presence across cities with 192 hotels (22,465 keys),
and the pre-eminent avenue to tap on the favorable demand-supply dynamics in the hospitality industry
in India. At 20X EV/EBITDA (attributable) and 31X P/E on FY2025E, the stock appears a tad rich, although
it offers 18% CAGR in revenues between FY2023 and FY2026E that will likely deliver 25% EBITDA CAGR
during that period. Our DCF-based target price is based on September 2025E earnings and comprises
86% for the standalone business (4,354 owned keys and 7,500 managed keys as of March 2023), 7% for
Roots that houses the mid-tier Ginger brand, while 3% comes from the various international hotels
primarily in the US and the UK. Exhibit 3 gives the valuation multiples, coupled with growth, margin and
return profile of the company.
IHCL trades at 20X attributable EV/EBITDA on FY2025 estimates

Key financial & operating metrics and valuations for IHCL, March fiscal year ends, 2020-26E
2020 2021 2022 2023 2024E 2025E 2026E
Market cap. 501,528 501,528 598,983 598,983 598,983 598,983 598,983
Net debt 19,765 23,127 7,970 (2,352) (13,216) (29,285) (52,017)
Attributable net debt 18,527 21,409 7,950 (2,801) (13,045) (28,325) (50,117)
Enterprise value 520,055 522,937 606,933 596,181 585,938 570,657 548,866
Revenue 44,631 15,752 30,562 58,099 72,253 85,111 96,136
EBITDA 9,675 (3,618) 4,048 18,046 21,522 29,736 35,477
Attributable EBITDA 9,087 (3,225) 4,277 17,032 20,264 28,350 33,861
PAT 3,228 (8,801) (2,633) 9,993 12,828 19,332 23,652
EV/EBITDA 57.2 (162.2) 141.9 35.0 28.9 20.1 16.2
P/E 155 (57) (227) 60 47 31 25
Total keys 18,960 19,634 20,609 21,633 24,204 27,230 30,343
Owned 13,099 13,207 13,170 12,914 13,715 14,365 15,088
Managed 5,861 6,427 7,439 8,719 10,489 12,865 15,255
ARR 8,636 4,958 7,629 11,425 12,602 13,477 14,140
Occupancy 66 37 51 69 72 74 74
IHCL has a presence across the hotel business chain, with (1) wholly owned hotels, (2) leased hotels and
(3) managed hotels. While management aspiration is to move toward an asset-light management model,
owned hotels continue to form a significant part of extant portfolio (13,093 keys as of September 2023)
with another 2,908 keys in the pipeline. Exhibit 4 highlights the ramp-up of owned and managed keys for
IHCL over the years.
Indian Hotels
5
Owned keys to increase after being static for the last four years; managed keys have grown rapidly
Owned and managed keys for IHCL, March fiscal year ends, 2020-26E
Owned Managed Total keys

32,000 30,343
27,230
28,000
24,204
24,000 21,633
20,609 15,255
18,960 19,634 12,865
20,000
10,489
7,439 8,719
16,000 5,861 6,427
12,000
8,000 15,088
13,099 13,207 13,170 12,914 13,715 14,365
4,000
-
2020 2021 2022 2023 2024E 2025E 2026E
We use a DCF-based approach to value IHCL, as a multiple-based approach is unable to fully capture (1)
high-growth with 8,710 keys getting commissioned over FY2023-26E (including 2,174 owned keys), (2)
stabilization period for 2,670 keys commissioned in the past three years (almost all under management
contracts) and room inventory that will be commissioned up to FY2024E, and (3) inflexion point in the
industry due to improving occupancy levels that will reflect in high ARRs in the next three years. Part-
ownership in hotel properties partly owned by IHCL require an SoTP of the various subsidiaries to
account for the proportionate economic interest.
We value Indian Hotels using DCF method to fully capture the growth phase
DCF for Indian Hotels, September 2025
Sep-25
Discount rate (%) 12%
Growth in perpetuity 5%
Enterprise value 539,958
Net debt (20,641)
Equity value 560,599
Shares outstanding (mn) 1,420
FV of IHCL ex-subs (Rs/share) 395
FV of IHCL (Rs/share) 460
Upside 9%
Indian Hotels
6
Using the SoTP method, the various subsidiaries account for 14% of the total value
SoTP for Indian Hotels
Ownership EBITDA Value Attributable Value

(%) 2024E 2025E 2026E EV Net Debt Equity (Rs mn) Rs/ share
Indian Hotels, Standalone 100 18,287 22,674 27,005 539,958 (20,641) 560,599 560,599 395
Roots Corporation Limited 100 1,656 2,264 2,772 42,894 (1,529) 44,423 44,423 31
PIEM Hotels Limited 59 1,629 1,953 2,210 34,701 (1,636) 36,337 21,312 15
St. James Court Hotel Limited 77 1,011 1,327 1,697 15,700 2,125 13,576 10,434 7
United Overseas Holdings Inc. 100 143 403 544 7,472 1,213 6,259 6,259 4
Benares Hotels Limited 52 390 434 479 6,670 (782) 7,452 3,851 3
Others (1,594) 681 770 6,534 6,534 6,534 5
Total 21,522 29,736 35,477 653,929 (21,251) 675,179 653,412 460
We highlight that our FV of Rs460/share implies a 22X EV/EBITDA on FY2025E estimates.
Rising room rates and tight demand-supply dynamics augur well for IHCL
As discussed previously, the hospitality industry in India is at an inflexion point, with room rates having
improved to Rs6,700/day in FY2023, substantially higher than the room rates as low as Rs4,630/day
during the peak of the pandemic (FY2021). We estimate room tariffs to further improve as demand in
the hospitality sector remains robust, even as the pipeline of incremental capacity addition stays lean,
suggesting that the current upcycle will likely sustain in the next few years. The hospitality industry has
a high operating leverage, with most costs being fixed in nature, and the benefits of improved tariffs
flowing through the bottom line on a post-tax basis.
We expect 7% CAGR in room rates over FY2023-26E

ARR and occupancy trend for Indian Hotels, March fiscal year-ends, 2020-26E
ARR (Rs/ day, LHS) Occupancy (%, RHS)

16,000 72 74 74 80
69
14,000 66 70
12,000 60
51
10,000 50
37
8,000 40
6,000 30
4,000 20
2,000 10
8,636 4,958 7,629 11,425 12,602 13,477 14,140
- -
2020 2021 2022 2023 2024E 2025E 2026E
We currently factor in average utilization for IHCL to improve to 74% by FY2026E from 69% in FY2023,
with blended room rates improving to Rs14,140/day in FY2026E from Rs11,425/day in FY2023. We note
that the improvement in blended room rates is also attributable to contribution of hotels in Mumbai that
operate at higher realizations compared to those in other cities.
Indian Hotels
7
Premium valuations to factor in superior return profile, aggressive growth path

IHCL trades at 20X EV/EBITDA on FY2025E, a premium to both global hotel stocks as well as its own
trading range, although the same should be seen in the context of (1) superior growth profile of IHCL,
especially with the commissioning of 82 hotels with 11,062 keys in the next 4-5 years, (2) a healthy (and
improving) mix of managed properties which help improve the return profile, (3) geographical and
category-wise diversification and (4) presence across the hotel value chain that helps the company
capitalize on growth opportunities and still maintain a less capital-intensive business model.
IHCL’s rich EV/EBITDA multiple should be seen in the context of healthy growth in hotel keys
1-year forward EV/EBITDA multiple for IHCL, March fiscal-year ends, 2005-24
IHCL 1yr fwd EV/ EBITDA (X)

40
35
30
25
20
15
10
0
Nov-05
Nov-06
Nov-22
Nov-23
Nov-07
Nov-08
Nov-09
Nov-10
Nov-11
Nov-12
Nov-13
Nov-14
Nov-15
Nov-16
Nov-17
Nov-18
Nov-19
Nov-20
Nov-21
IHCL trades at a premium to listed peers


25.0
19.6 20.1
20.0
15.3
15.0
12.2
10.0
5.0
-
Note: The above multiples are on attributable share of hospitality EBITDA.
Indian Hotels
8
Higher trading multiples in comparison to historical averages owing better growth profile
Key valuation multiples for hospitality companies, March fiscal year-ends, 2023-26E (X)
CMP EV/EBITDA (X) Attributable EV/EBITDA (X) P/E (X) P/B (X) Marke
(Rs) 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E
Chalet 590 32.1 23.1 17.5 13.1 32.1 23.1 17.5 13.1 85.8 47.9 31.5 20.6 7.8 6.7 5.6 4.4
Indian Hotels 422 33.1 27.2 19.2 15.4 35.0 28.9 20.1 16.2 59.9 46.7 31.0 25.3 7.5 6.5 5.4 4.5
Lemon Tree 114 24.1 16.2 11.4 10.0 28.9 20.7 15.3 13.7 79.0 35.6 23.5 20.0 10.6 9.3 7.6 6.2
SAMHI Hotels 175 17.1 20.6 12.2 10.6 17.1 20.6 12.2 10.6 (4.2) (21.3) 29.1 19.0 (1.9) 3.5 3.2 2.7
FV EBITDA Atributable EBITDA PAT Net worth Net d

(Rs) 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E
Chalet 660 4,528 6,428 8,489 11,217 4,528 6,428 8,489 11,217 1,410 2,527 3,835 5,863 15,419 17,946 21,781 27,644
Indian Hotels 460 18,046 21,522 29,736 35,477 17,032 20,264 28,350 33,861 9,993 12,828 19,332 23,652 79,820 91,966 110,479 133,149
Lemon Tree 105 4,476 6,870 9,487 10,479 3,580 5,074 6,828 7,594 1,146 2,541 3,844 4,513 8,537 9,689 11,881 14,510
SAMHI Hotels 230 2,377 2,758 4,470 4,915 2,377 2,758 4,470 4,915 (3,578) (1,790) 1,311 2,011 (8,076) 10,794 12,106 13,898
Note: Attributable EBITDA is adjusted for ownership in assets
Indian Hotels
9
Financials: 18% revenue CAGR between FY2023 and FY2026E

IHCL will likely deliver an 18% revenue CAGR over FY2023-26E, improving on the 9% CAGR during
the period FY2020-23. The revenue performance will be driven by (1) 7% CAGR in room additions
(owned), (2) 7% CAGR in ARR, which is a combination of improving underlying ARRs as well as
entry in new high-value markets and (3) improving occupancy (~460 bps) that will also reflect in
higher margins. IHCL will likely incur a capex of Rs19 bn in the next three years as it looks to add
another 2,174 owned keys, although a liquid balance sheet and strong earnings imply that the
company will continue to hold a net cash balance sheet of Rs35 bn as of March 2025.
Improving room rates and inventory to lead 18% CAGR in revenues

We estimate a revenue CAGR of 18% between FY2023 and FY2026E on the back of (1) a 7% CAGR in
room addition due to the commissioning of 2,174 room keys, (2) 7% CAGR in ARR due to the
commissioning of hotels in high-value markets of Mumbai and underlying growth in ARR, and (3)
improving occupancy and stabilization of earnings from room keys that were commissioned in the past
three years.
Indian Hotels’ revenue to improve on the back of new keys and improving ARRs
Revenue, EBITDA and PAT for IHCL, March fiscal-year ends, 2020-26E (Rs bn)
Revenue EBITDA PAT

120
96
100
85
80 72
58
60
45
35
40 31 30
22 24
16 18 19
20 10 10 13
4 4
-
(4)(7) (2)
(20)
2020 2021 2022 2023 2024E 2025E 2026E
Operating costs being largely fixed, improving ARRs reflect in better EBITDA margins, as seen in FY2023.
Fixed costs as a percentage of total costs are higher for hotel companies (~35% for IHCL). Hence, any
increase in ARR and occupancy improvement significantly flows through to the EBITDA. IHCL’s revenues
have seen a CAGR of 9% over FY2020-23 to Rs58 bn, while its EBITDA has seen a CAGR of 23%, benefiting
from the operating leverage.
Room revenues will stay strong, other components will chip in as well
Revenue CAGR of 18% to Rs96 bn in FY2026E from Rs58 bn in FY2023 comes primarily from the
improvement in room rentals, but it is adequately supplemented by alternate revenue streams as well.
Initiatives to supplement room revenues through supplementary services will help F&B revenues
increasing at a similar 18% CAGR to Rs34 bn by FY2026E and membership fees growing at a 13% CAGR
to Rs2.2 bn in the same period. We highlight that management fees will improve at a 27% CAGR to Rs8.2
bn by FY2026E (from Rs4 bn in FY2023) as IHCL adds another 6,636 keys to its existing management
portfolio of 8,719 keys as of March 2023.
Indian Hotels
10
Indian Hotels’ revenue to improve on the back of new keys and improving ARRs
IHCL revenue breakup, March fiscal-year ends, 2020-26E (Rs bn)
Room rentals F&B Shop rentals Membeship fees Mangament fees Other operating income
100 96
85
8
80 72 6
58 5 34
60
30
45 4
26
40 2 21
31
17 2
16 42 47
20 11 36
1 29
21 5 15
7
-
2020 2021 2022 2023 2024E 2025E 2026E
Significant growth in keys under management contracts, aiding management fees for IHCL
Owned and managed keys for IHCL, March fiscal year ends, 2020-26E (Keys)
Owned Managed Total keys

32,000 30,343
27,230
28,000
24,204
24,000 21,633
20,609 15,255
18,960 19,634 12,865
20,000
10,489
7,439 8,719
16,000 5,861 6,427
12,000
8,000 15,088
13,099 13,207 13,170 12,914 13,715 14,365
4,000
-
2020 2021 2022 2023 2024E 2025E 2026E
Higher ARR performance leads to better EBITDA margins

We estimate the ARR to improve to Rs14,140/day by FY2026E on the back of improving demand-supply
dynamics for the overall industry as well as the commissioning of properties in Mumbai that is a high-
price market. Blended net ARRs increased from Rs8,640/day in FY2020 to Rs11,425/day in FY2023.
Overall occupancies in the operating, owned and leased keys also increased from 66% in FY2020 to 69%
in FY2023, and are further expected to improve to 74% by FY2026E.
Indian Hotels
11
Steady 7 % CAGR in room rates in the next three years

ARR and occupancy trend for Indian Hotels, March fiscal year-ends, 2020-26E (Rs/day, %)
ARR (Rs/ day, LHS) Occupancy (%, RHS)

16,000 72 74 74 80
69
14,000 66 70
12,000 60
51
10,000 50
37
8,000 40
6,000 30
4,000 20
2,000 10
8,636 4,958 7,629 11,425 12,602 13,477 14,140
- -
2020 2021 2022 2023 2024E 2025E 2026E
Steadily improving EBITDA margins on the back of improving ARRs

Profit and loss statement of IHCL, March fiscal year-ends, 2020-26E (Rs mn)
2020 2021 2022 2023 2024E 2025E 2026E
Total revenues 44,631 15,752 30,562 58,099 72,253 85,111 96,136
- Room rentals 21,331 7,025 14,775 29,241 36,095 41,914 46,926
- F&B 17,329 5,454 10,594 20,641 25,698 30,385 33,893
- Shop rentals 476 342 310 447 547 626 693
- Membeship fees 1,148 774 1,185 1,506 1,588 1,870 2,159
- Mangament fees 2,127 1,365 2,312 3,986 4,979 6,458 8,196
- Other operating income 2,220 792 1,387 2,279 3,345 3,858 4,269
Expenses
F&B (3,706) (1,438) (2,572) (4,729) (6,033) (7,353) (8,449)
Power (2,699) (1,729) (2,248) (3,031) (3,530) (3,940) (4,273)
Employee costs (14,946) (8,940) (11,502) (15,823) (21,093) (22,258) (24,091)
SG&A costs (13,606) (7,262) (10,192) (16,471) (20,076) (21,824) (23,846)
EBITDA 9,675 (3,618) 4,048 18,046 21,522 29,736 35,477
Depreciation / amortisation (4,042) (4,096) (4,061) (4,161) (4,426) (4,734) (4,932)
EBIT 5,633 (7,714) (13) 13,885 17,095 25,002 30,544
Other income 1,324 1,647 1,552 1,389 2,082 2,089 2,407
Interest (3,411) (4,028) (4,277) (2,361) (1,832) (1,777) (1,742)
Pre-tax profits 3,546 (10,095) (2,738) 12,914 17,345 25,314 31,209
Tax (448) 1,553 358 (3,232) (5,190) (6,710) (8,280)
PAT 3,098 (8,542) (2,380) 9,681 12,155 18,604 22,929
Profit from associates 130 (1,014) (426) 814 1,430 1,601 1,766
Exceptional items 410 1,600 156 33 — — —
PAT (after minority interest) 3,637 (7,201) (2,477) 10,026 12,828 19,332 23,652
EPS 3 (6) (2) 7 9 13 16
Margins (%)
EBITDA 22 (23) 13 31 30 35 37
Adjusted net income 7 (49) (7) 16 16 21 23
Effective tax rate (%) 13 15 13 25 30 27 27
Growth (%)
Total revenues (1) (65) 94 90 24 18 13
Net adjusted income 30 (376) (72) (507) 26 53 23
Indian Hotels
12
Operational cash flows remain strong reflecting improved business performance

We highlight that operating cash flows for IHCL have improved to over Rs16 bn in FY2023 from (-) Rs3.2
bn in FY2021 and Rs8.2 bn in FY2020 and are estimated to increase further to Rs28.9 bn by FY2026E.
The hospitality business is generally not very working capital intensive, and the conversion from EBITDA
to CFO is reasonably healthy (~0.8X). IHCL had raised equity of Rs40 bn via QIP and a rights issue in
FY2022, enabling the company to substantially alter its balance sheet from a net debt of Rs23 bn in
FY2021 to net cash of Rs2.3 bn in FY2023 and net cash position of Rs52 bn by FY2026E.
IHCL’s operating cash flows would improve significantly in the next three years
Operating cash flows and CFO/EBITDA for IHCL, March fiscal year-ends, 2020-26E (Rs bn, X)
Operating cash flow CFO/ EBITDA (X, RHS)

35,000 1.66 1.8
30,000 1.6
1.4
25,000
1.04 1.2
20,000
0.85 0.88 0.90 1.0
0.82
15,000 0.77
0.8
10,000
0.6
5,000
0.4
8,235 6,716 16,190 22,285 22,790 28,984
- 0.2
(3,187)
(5,000) 0.0
2020 2021 2022 2023 2024E 2025E 2026E
Capex commitments notwithstanding, IHCL has headroom to grow further

We estimate a capex of Rs19 bn in the next three years as the company looks to increase owned room
capacity from 12,914 in FY2023 to 15,088 by FY2026E. We expect a further improvement in net cash
position to Rs52 bn by FY2026E, from Rs2.3 bn as of FY2023 and ~Rs10 bn as of Sep 2023, as
stabilization of operations from recently commissioned capacities aids cash flow generation.
Rs19 bn of capex requirement in the next three years, primarily for the addition of 2,174 owned keys
Capex for Indian Hotels, March fiscal year-ends, 2020-26E (Rs mn)
8,000 7,568
7,000
5,904
6,000
5,270
5,000
4,276
4,000
3,120
3,000 2,691
2,000 1,544
1,000
-
2020 2021 2022 2023 2024E 2025E 2026E
Indian Hotels
13
Strong operating cash flow generation owing to growth and robust industry tailwinds
Cash flow statement for ICHL, March fiscal year-ends, 2020-26E
2020 2021 2022 2023 2024E 2025E 2026E
Operating
Profit before tax 3,955 (8,495) (2,582) 12,946 17,345 25,314 31,209
Depreciation 4,042 4,096 4,061 4,161 4,426 4,734 4,932
Profit on sale of investments/ assets (1,467) (500) (390) (727) — — —
Interest income/ finance costs 3,225 3,580 3,542 1,910 1,832 1,777 1,742
Dividend income (73) (54) (50) (52) — — —
Provisions 69 345 267 159 — — —
Others 310 (1,626) 105 56 2,827 (168) 24
Operating cash flow before WC changes & tax 10,062 (2,654) 4,953 18,453 26,430 31,657 37,908
(Increase)/decrease in WC 235 (767) 1,212 241 1,045 (2,157) (644)
Income tax refund/ (paid) (2,062) 234 551 (2,504) (5,190) (6,710) (8,280)
Operating cash flow 8,235 (3,187) 6,716 16,190 22,285 22,790 28,984
Investing
Capex (3,120) (1,544) (2,691) (4,276) (6,868) (5,904) (5,270)
Investments (2,222) 53 (10,614) 1,468 — — —
Others 323 294 (3,120) 1,363 (700) — —
Investing cash flow (5,019) (1,197) (16,425) (1,446) (7,568) (5,904) (5,270)
Financing
Dividend (757) (601) (524) (644) (682) (818) (982)
Equity — — 39,820 13 — — —
Debt raised (1,897) 3,404 (22,708) (14,648) (822) 110 74
Financing cash flow (2,654) 2,804 16,588 (15,279) (1,504) (708) (907)
Opening cash 1,893 2,508 943 7,835 7,364 20,577 36,755
Free cash flow 562 (1,580) 6,879 (534) 13,213 16,178 22,807
Others 53 14 13 63 — — —
Closing cash 2,508 943 7,835 7,364 20,577 36,755 59,562
Rs52 bn net cash position as of FY2026E

IHCL net debt and net debt/ EBITDA, March fiscal year-ends, 2023-26E (Rs mn, X)
Net debt (Rs bn) Net debt/EBITDA (X), RHS
30 2.0 2.0 3.0
20 2.0
10 1.0
(0.1)
(0.6) -
- (1.0)
(1.5)
(1.0)
(10)
(2.0)
(20)
(3.0)
(30)
(6.4) (4.0)
(40) (5.0)
(50) (6.0)
(60) (7.0)
2020 2021 2022 2023 2024E 2025E 2026E
Indian Hotels
14
IHCL to remain net cash going forward

Balance sheet of IHCL, March fiscal year-ends, 2020-26E
2020 2021 2022 2023 2024E 2025E 2026E
Share capital 1,189 1,189 1,420 1,420 1,420 1,420 1,420
Reserves/surplus 42,379 35,295 69,202 78,399 90,545 109,059 131,729
Shareholders' funds 43,568 36,484 70,623 79,820 91,966 110,479 133,149
Non-controlling interests 7,649 6,346 5,930 6,601 7,358 8,231 9,274
Debt 22,921 24,664 19,848 8,183 7,361 7,470 7,545
Lease liabilities 18,987 18,855 19,031 23,208 23,266 23,274 23,274
Deferred tax liabilities 1,104 (399) (704) (15) (15) (15) (15)
Capital employed 94,228 85,949 114,727 117,796 129,935 149,439 173,227
Gross block 66,222 74,891 78,082 81,316 88,326 93,129 95,983
Accumulated depreciation (13,515) (17,611) (20,822) (23,953) (28,379) (33,113) (38,046)
Net block 52,707 57,280 57,259 57,364 59,947 60,016 57,938
CWIP 2,432 1,650 1,935 3,321 3,179 4,279 6,695
Intangible assets + Goodwill 12,059 11,800 11,760 12,032 12,732 12,732 12,732
Right of use assets 15,833 15,297 15,134 18,789 18,789 18,789 18,789
Financial assets + Investments 17,895 17,698 22,516 21,900 21,900 21,900 21,900
Other non-current assets 3,483 3,170 2,996 3,338 3,338 3,338 3,338
Current assets 10,011 7,053 17,716 18,363 29,798 47,385 71,497
Inventory 936 929 1,008 1,092 1,158 1,366 1,559
Trade receivables 2,900 2,198 2,553 4,465 5,790 6,990 8,102
Cash 3,156 1,536 11,878 10,534 20,577 36,755 59,562
Loans and advances 1,658 1,056 865 97 97 97 97
Other current assets 1,361 1,333 1,412 2,175 2,176 2,177 2,177
Current liabilities 20,189 27,998 14,589 17,310 19,748 18,999 19,661
Trade payables 3,893 3,178 3,873 4,766 5,657 6,434 7,095
Provisions 2,756 2,625 2,909 7,255 7,262 7,263 7,263
Key ratios (%)
Net debt/equity (X) 0.5 0.6 0.1 (0.0) (0.1) (0.3) (0.4)
Net debt/EBITDA (X) 2.0 (6.4) 2.0 (0.1) (0.6) (1.0) (1.5)
RoAE (%) 7.4 (22.0) (4.9) 13.3 14.9 19.1 19.4
RoACE (%) 6.8 (8.6) (0.0) 11.9 13.8 17.9 18.9
Book value per share (Rs) 37 31 50 56 65 78 94
P/BV (X) 11.5 13.7 8.5 7.5 6.5 5.4 4.5
Indian Hotels
15
Key risks: Lower-than-estimated room rates, delays in project completion

IHCL’s earnings are susceptible to (1) lower-than-estimated room rates and potential drop in
occupancy, (2) delay in the commissioning of new hotel assets—owned as well as managed, and
(3) an inability to renew terms for leasehold land on favorable terms, especially The Taj at
Mumbai. In our view, room rates will continue to benefit from a favorable demand-supply scenario,
while the commissioning of new assets could be susceptible to execution-linked slippages but
will not severely dent earnings growth.
10% lower room rate could impact FY2025E EBITDA by 21%

The earnings of hospitality companies are highly sensitive to room rate assumptions—we currently build
for blended room rates to increase to Rs13,477/day by FY2025E in comparison with Rs11,425/day in
FY2023. A 10% decline in room rates will impact consolidated EBITDA in FY2025E by 21%.
10% lower ARRs to impact EBITDA by 18%; 100 bps lower occupancy leads to 2% decline in EBITDA
Sensitivity of IHCL’s FY2025E EBITDA to change in room rates and occupancy
IHCL FY2025E EBITDA sensitivity
29,736 -2 -1 0 1 2 29,736 -2 -1 0 1 2
-20% 16,200 16,857 17,513 18,170 18,826 -20% 54 57 59 61 63
ARR Change (%)
ARR Change (%)

-10% 22,148 22,886 23,625 24,363 25,102 -10% 74 77 79 82 84
0% 28,095 28,915 29,736 30,556 31,377 0% 94 97 100 103 106
10% 34,042 34,945 35,847 36,750 37,652 10% 114 118 121 124 127
20% 39,989 40,974 41,958 42,943 43,928 20% 134 138 141 144 148
We currently build for blended occupancy to improve to 74% by FY2025E compared to occupancy of 69%
in FY2023. We note that occupancy has lower headroom for surprises, though a 100 bps lower
occupancy will impact EBITDA by 3%.
82 hotels to be commissioned by FY2028E

IHCL has a pipeline of 82 hotels (11,203 keys) to be commissioned through a combination of owned (24
hotels/2,836 keys) and managed properties (55 hotels/8,367 keys).
Indian hotels will add over 11,203 keys by FY2028E of which 8,367 would be under management contracts
Pipeline of new keys across brands, March fiscal year-ends, 2024-28E
Brands 1HFY24
(operationalized) 2HFY24 FY2025 FY2026 FY2027 / 2028 Total Hotels
Taj 295 375 697 1,404 1,225 3,701 21
IHCL — — 255 — 220 475 4
Management Contracts 295 375 442 1,404 1,005 3,226 17
SeleQtions 254 450 761 147 — 1,358 13
IHCL — — — — — — —
Management Contracts 254 450 761 147 — 1,358 13
Vivanta 88 174 848 964 870 2,856 21
IHCL — — — 125 — 125 1
Management Contracts 88 174 848 839 870 2,731 20
Ginger 73 862 720 598 967 3,147 27
Owned/Leased 73 728 395 598 587 2,308 21
Management Contracts — 134 325 — 380 839 6
Grand Total 710 1,861 3,026 3,113 3,062 11,062 82
Owned/Leased 73 728 650 723 807 2,908 26
Management Contracts 637 1,133 2,376 2,390 2,255 8,154 56
Note:
(a) IHCL has operationalized a 371-keys Ginger hotel in Mumbai in November 2023.
Indian Hotels
16
Renewal of leasehold land for Taj Mahal, Mumbai

Some of IHCLs hotels, including certain key hotels, are maintained under license or lease arrangements
entered with third parties including government and quasi-government authorities and other entities.
While IHCL typically has long-term license or lease arrangements, there can be no assurance that its
license or leasehold arrangements will be renewed upon the expiry of the license or lease period or that
such agreements are not terminated prior to the completion of the relevant term.
IHCL had been granted lease of land for Taj Mahal Palace by way of three long-term leases executed
with the trustees of the Mumbai Port Trust, which expired in 1999 and 2001, respectively. IHCL made
applications to the Mumbai Port Trust requesting renewal of the terms of the lease deeds which should
be made to run concurrently for a period of 99 years. Meanwhile, the Mumbai Port Trust had revised
general rent rates for all its properties, which were being challenged before the Bombay High Court and
the Supreme Court by other tenants. Pending the approval of the revised rent by the courts, the Mumbai
Port Trust agreed to renew the lease of TMP Hotel for a term of 30 years on revised rates. The company
agreed to such renewal without prejudice to its right to get the leases renewed for a period of 99 years.
In 2006, the Mumbai Port Trust further revised the rent, pursuant to its decision that all companies having
a paid-up capital exceeding Rs10 mn would be exempt from the Maharashtra Rent Control Act with effect
from September 1, 2006. The Mumbai Port Trust by way of several letters alleged that the company is
liable for alleged unauthorized construction of mezzanine floors of TMP Hotel and arrear in the revised
lease rental terms of 2006, in service tax and has consequently delayed renewal of the lease. IHCL also
received notices issued by the Mumbai Port Trust for the termination of the lease of TMP Hotel under
the provisions of the Public Premises (Eviction of Unauthorized Occupants) Act, 1971. Consequently,
IHCL filed a suit before the Bombay High Court challenging the said notices as illegal, arbitrary and
unreasonable and notice of motion has also been filed for relief for stay of the said two notices of
termination. The Mumbai Port Trust filed a statement before the Bombay High Court that it shall not give
effect to its notice of termination during the pendency of the suit and the statement continues to be in
force till date. Subsequently, the Mumbai Port Trust has filed a notice of motion with the Bombay High
Court requesting expedition of the matter and vacation of the earlier order of interim relief. The Mumbai
Port Trust’s notice of motion was dismissed and the IHCL’s notice of motion was made absolute through
order dated October 23, 2018. The Court directed the Mumbai Port Trust to accept the lease rent in
consonance with the arrangement of 2002. IHCL continues to pay lease rent in terms of the said
arrangement. The Mumbai Port Trust has filed an appeal against the order dated October 23, 2018. The
appeal is currently pending.
A public interest litigation before the Bombay High Court against IHCL, in relation to a proposed
convention center-cum-hotel on a plot of land at Bandstand, Bandra, Mumbai, which was acquired by the
Company by way of purchase of shares in the sub-lessee company, ELEL Hotels and Investments Limited
(“ELEL”).
In 1979, ELEL had constructed Hotel Sea Rock on the leased land which was subsequently demolished
in 2009. The Ministry of Environment and Forests (the “MoEF”) approved the reconstruction of the hotel
with FSI of 2.49. Subsequently, the Government of Maharashtra approved sanction of additional FSI of
3.00 to IHCL for reconstruction of the hotel under the Development Control Rules, 1991, subject to
environmental clearance from the MoEF. The Petitioner has, inter alia, alleged that the project is situated
on an ecologically sensitive area as the land on which Hotel Sea Rock is to be constructed falls on
Coastal Regulation Zone I(A) (“CRZ-I(A)” ), various approvals granted were illegal, non-payment of proper
stamp duty on transfer of sub-lease and that FSI had been sanctioned under two different regulations
namely, Development Control Rules, 1967 and Development Control Rules, 1991.
Indian Hotels
17
Indian Hotels—a century of hospitality leadership

Indian Hotels is a leading hospitality chain in India, having started its journey in 1902 with the Taj
Mahal Palace in Mumbai in 1903. The “Taj” brand was ranked as the Number 1 brand in India
across all sectors, and the strongest hospitality brand in the world in 2021. IHCL has a portfolio
of 192 hotels (22,465 keys) with a pipeline of another 82 hotels (11,062 keys) through a
combination of owned and managed properties. IHCL has a suite of business as well as leisure
properties both in India and select international locations.
IHCL is the most diversified hospitality company in India

Multiple brands of IHCL
Ahvaan 2025—sustaining profitable growth and a healthy balance sheet

IHCL has set its near-term objectives through its strategic initiative Ahvaan 2025, which is targeting (1)
a portfolio of over 300 hotels comprising 100 Taj Hotels, 75 SeleQtions/Vivanta and 125 Ginger, (2)
margins in excess of 33%, (3) a healthy balance sheet with zero net debt and (4) a balanced portfolio
split 50:50 between owned and managed properties. IHCL also endeavors to make strategic acquisitions
as well as simplify the ownership structure of the company. It will leverage on the group’s presence in
the aviation sector, as well as the loyalty program (Tata Neu) and the synergies with other group
companies (demand and supply side).
Indian Hotels is targeting a 300-hotel portfolio under its Ahvaan strategy

IHCL targets for 2025 under its Ahvaan strategy
2023 2025
Margins (%) 32.7 33
Net debt Zero Zero
Portfolio mix 50:50 50:50
Hotels 263 300
Taj 100 100
Seleqtions / Vivanta 78 75
Ginger 85 125
Indian Hotels
18
Portfolio of 22k keys likely to increase by 50% in the next five years
As of March 2023, IHCL had a portfolio of 188 hotels with 21,633 keys (which has increased to 22,465
keys across 192 hotels as of September 2023, with another 11,062 keys across 82 hotels under various
stages of implementation and likely to be commissioned by FY2028E). As of March 2023, the parent
entity had 11,854 operational keys. The next largest portfolio is under Roots (Ginger) with 4,736 keys as
of March 2023, with 25% of the portfolio under management contracts.
IHCL also co-owns 27 hotels (2,837 keys) through various joint ventures and associates. The exhibit
below lays down the structure of hotel ownership for operational keys under IHCL.
IHCL had 11,854 keys under the standalone entity as of March 2023
Summary of ownership of IHCL, March fiscal year-ends, Number of keys, 2022-26E
2022 2023 2024E 2025E 2026E
Indian Hotels (Total) 20,609 21,633 24,204 27,230 30,343
Owned 13,170 12,914 13,715 14,365 15,088
- Domestic 11,711 11,455 12,256 12,906 13,629
- International 1,459 1,459 1,459 1,459 1,459
Managed 7,439 8,719 10,489 12,865 15,255
- Domestic 6,042 7,325 9,095 11,471 13,861
- International 1,397 1,394 1,394 1,394 1,394
Standalone 10,807 11,854 13,861 16,167 18,682
Owned 4,485 4,354 4,725 4,980 5,105
- Domestic 4,485 4,354 4,725 4,980 5,105
- International — — — — —
Managed 6,322 7,500 9,136 11,187 13,577
- Domestic 4,925 6,106 7,742 9,793 12,183
- International 1,397 1,394 1,394 1,394 1,394
Ginger 4,756 4,736 5,300 6,020 6,618
Owned 3,668 3,546 3,976 4,371 4,969
- Domestic 3,668 3,546 3,976 4,371 4,969
Managed 1,088 1,190 1,324 1,649 1,649
- Domestic 1,088 1,190 1,324 1,649 1,649
Other subsidiaries 2,211 2,206 2,206 2,206 2,206
Owned 2,211 2,206 2,206 2,206 2,206
- Domestic 1,338 1,333 1,333 1,333 1,333
- International 873 873 873 873 873
Managed — — — — —
- Domestic — — — — —
Other associates / JVs 2,835 2,837 2,837 2,837 2,837
Owned 2,806 2,808 2,808 2,808 2,808
- Domestic 2,220 2,222 2,222 2,222 2,222
- International 586 586 586 586 586
Managed 29 29 29 29 29
- Domestic 29 29 29 29 29
Indian Hotels
19
Diversified portfolio—across geographies, price points and profile

IHCL has a well-diversified portfolio with 87% of its keys in India and the balance 13% in key world cities,
including London, New York and Dubai, among others. Within India, IHCL has a dominant position in the
key cities of Mumbai, the NCR, Bengaluru, Goa, Chennai and Hyderabad.
IHCL has 11,062 keys in pipeline across 82 hotels, of which 2,908 would be owned keys
Current and pipeline rooms for IHCL (#)
Current Pipeline Pipeline
Hotels Keys Hotels Keys Hotels Keys
Taj 82 12,042 21 3,701 103 15,743
Vivanta 28 3,891 21 2,856 49 6,747
SeleQtions 23 1,567 13 1,358 36 2,925
Ginger 59 4,965 27 3,147 86 8,112
Total 192 22,465 82 11,062 274 33,527
Ama 41 31 72
IHCL has a well-diversified geographical presence

IHCL’s geographical presence
Indian Hotels
20
In addition to the geographical spread, IHCL has a well-distributed presence across brands with Taj
(12,042 keys), Vivanta (3,891 keys), SeleQtions (1,567 keys) and Ginger having another 4,965 keys as of
September 2023. We further highlight that IHCL has a broad array of business as well as destination
hotels, with the leisure category extending to palace stays, beach properties, jungle safaris as well as
mountain holidays.
IHCL has a broad array of destination hotels in addition to its business properties
Key destination hotels of IHCL
Type Hotels
Beach resort Goa (India), Bekal (India), Bentota (Sri Lanka) and Emboodhu Finolhu (Maldives)
Coonoor (India), Coorg (India), Ooty (India), Srinagar (India), Theog (India), Darjeeling (India)
Hill station
and Thimpu (Bhutan)
Wildlife Bandhavgarh (India), Kanha (India), Panna (India), Pench (India), Chitwan National Park
sanctuaries (Nepal), Gir Forest (India), Corbett (India), and Sawai Madhopur (India)
Indian: Bengaluru, Chennai, Mumbai, New Delhi, Hyderabad and Kolkata

Major cities International: Cape Town (South Africa), Colombo (Sri Lanka), Dubai (UAE), London (England),
New York (USA) and San Francisco (USA)
Tourist
Indian: Ajmer, Amritsar, Jaipur, Jodhpur, Kumarakom, Rishikesh, Varanasi, and Udaipur
destinations
Offerings beyond the lodging—benefiting from culinary experiences and more

IHCL has also extended services beyond in-house boarding and lodging, through associated service
offerings, such as (1) The Chambers—an exclusive club that offers business center services as well as
associated F&B, (2) Taj Sats that offers in-flight catering services and clocked revenues of Rs6.4 bn in
FY2023, (3) Q-Min which is a gourmet delivery platform and (4) Wellness Circle that provides spa services
and Niu & Nau that offers salon services.
IHCL has a broad array of destination hotels in addition to its business properties
Key destination hotels of IHCL
Business Description
Bunglow stays - 66 in operation and 51 in pipeline as of March 2023 50% growth in
Ama trails and stays
portfolio in FY2023.
IHCL's culinary and food delivery platform present in 24 cities delivering via the
Qmin app. Has offline presence through Qmin Shops, Qmin QSR and Qmin food
Qmin
trucks. 17 Ginger hotels now also have Qmin QSRs as an ‘All Day Diner’ taking the
total count of Qmin QSRs to 34.
Exclusive business club with presence across eight landmark Taj hotels in India,
The Chambers Dubai, London and one in New York. 2,600 members as of March 2023,
membership fee of Rs1 bn earned from The Chambers in FY2023.
IHCL's flight kitch busines with 58% market share in India. Delivered revenue of
TajSATS
Rs6.4 bn (+53% in comparison to FY2020) and 19.7% EBITDA margin in FY2023
Leveraging the Taj brand—building a portfolio of managed hotels

IHCL has leveraged the Taj brand by building a portfolio of 82 managed hotels (9,372 keys) as of
September 2023, with an incremental pipeline of 56 hotels (8,154 keys). Managed properties require
negligible financial commitment and balance sheet support from IHCL, as the management earns a fee
from lending its brand as well as sales and support teams. IHCL clocked management fees of Rs4 bn in
FY2023 that are estimated to grow at 27% CAGR by FY2026E on the back of an expanded portfolio as
well as higher revenues from the extant portfolio.
Indian Hotels
21
27% CAGR in management fees from FY2023-26E

Keys under management contracts and management fees, March fiscal year-ends, 2020-26E
Management keys (#) Management fees (Rs mn), RHS

18,000 9,000
16,000 15,255 8,000
14,000 12,865 7,000
12,000 10,489 6,000
10,000 8,719 5,000

7,439
8,000 4,000
6,427
5,861
6,000 3,000
4,000 2,000
2,000 1,000
- -
2020 2021 2022 2023 2024E 2025E 2026E
IHCL—another gem from the Tata group of companies

IHCL is part of the Tata group (38.2% promoter ownership) whose business interests expands from
technology services, steel, power and consumer staples among others. The promoter group has 38.2%
ownership in IHCL as of June 2023.
Indian Hotels has a broad-based shareholding

IHCL shareholding pattern, Sep 2023
(%)
Promoter and promoter group 38.2
Tata Sons Private Limited 35.7
Tata Investment Corporation Limited 1.3
Other promoter shareholders 1.2
Public 61.8
Mutual Funds 18.2
Insurance Companies 4.5
FPIs 22.2
Resident individuals 14.1
Other public shareholders 2.9
Total 100.0
Indian Hotels
22
The first Taj Hotel was launched more than 100 years ago
Chronology of development of IHCL
Year Event
1902 Incorporation
1903 Launched the Taj Mahal Palace, Mumbai
1970 1st company to run palaces as hotels (Taj Lake Palace & Ramgarh Palace, Jaipur)
1979 First International Foray in Africa
1982 Acquired St. James' Court, London
1986 Forayed into Kerala with Taj Malabar Resort & Spa
1998 Forayed into Sri Lanka
2000 Established Taj GVK Hotels & Resorts Limited
2001 Forayed into Maldives
2005 Forayed into New York with The Pierre
2006 Launched Taj Safaris
2007 Forayed into San Francisco with Taj Campton Place
2010 Launched new brand - Vivanta by Taj
2015 Forayed into Dubai with Taj Dubai
2017 Restructured brand architecture
2019 Launched new brand - SeleQtions
2020 Launched Qmin under ancilliary brand Expressions
2022 Launched Ahvaan 2025 - long-term strategy plan
2023 Acquired balance stake in Roots Corporation (Ginger), making it a WoS
Key management personnel

Mr Puneet Chhatwal – Managing Director & Chief Executive Officer
Mr Puneet Chhatwal joined IHCL as the MD & CEO in November 2017. He is a global professional with
close to four decades of leadership experience at highly acclaimed hotel groups in Europe and North
America. Mr Chhatwal also serves as the Chairman of the National Committee of Tourism and
Hospitality, CII and President of Hotel Association of India. Prior to this, he was the Chief Executive
Officer and Member of the Executive Board of Steigenberger Hotels AG – Deutsche Hospitality. He was
also the Chief Development Officer of The Rezidor Hotel Group – Carlson Hotels Worldwide. Mr Chhatwal
is a graduate of both, Delhi University and Institute of Hotel Management, Delhi. He has completed an
MBA in Hospitality from ESSEC, Paris and an Advanced Management Program from INSEAD.
Mr Rohit Khosla – Executive Vice President–Operations, North and West India

Mr Khosla joined IHCL in 1999 as Executive Assistant Manager, at the capital’s iconic Taj Palace, New
Delhi, and has held several positions within the group since then. Currently he oversees Hotels in
Northern, Eastern and Western states of India, Taj Tashi, Bhutan and the Operations of Taj Safaris in
India and Nepal. He is a Post Graduate from Institute of Hotel Management, Mumbai and has been
felicitated with numerous industry awards. He is the member of the Executive Committee of the Hotel
Association of India (HAI) and SKAL, Chairman of Tata Network Forum – North, member of the CII
National Committee and WTTCII and served as the past Chairman CII Northern Tourism Regional
Committee.
Mr Prabhat Verma – Executive Vice President–Operations, South India, International &

Expressions
Mr Prabhat Verma, a hotel management graduate from IHMCTAN, Kolkata, joined IHCL in the year 1990
as a Management Trainee and has held key positions like General Manager of Taj Malabar, Cochin, and
Taj Coromandel, Chennai. He was re-located as Hotel Manager to Crowne Plaza, St. James Court and 51
Buckingham Gate, the London properties of the Taj. He subsequently took over as General Manager -
Crowne Plaza, St. James and 51 Buckingham gate, London. Mr Verma has won numerous industry
accolades till date.
Indian Hotels
23
Mr Giridhar Sanjeevi – Executive Vice President and Chief Financial Officer

Mr Sanjeevi is a CA and an MBA from IIM Ahmedabad. Spanning 30 years, he has built a broad-based
career, both finance and commercial, across multiple businesses–consumer businesses, financial
services, retail and pharma, and across multiple geographies–Asia and Europe. He has lived and worked
in India, Dubai, Singapore and London. Mr Giri joined IHCL from Merck & Co, where he was the CFO for
South Asia and the Business Head for Pakistan, Bangladesh, Sri Lanka and Nepal. He started his career
in ITC Ltd, where he did a variety of roles across businesses in India and the Middle East. Subsequently,
he was with IL&FS as an Investment Banker and head of M&A. Mr Giri spent several years with Diageo
plc – he was their Global Business Development Director at London, covering M&A and Strategy. Earlier,
he was the Finance Director at Singapore for large parts of Asia. At Wockhardt, where he was the Global
CFO. Giri has also built experience in Retail through stints in Shoppers Stop and Aditya Birla Group, where
he was the CFO.
Ms Suma Venkatesh – Executive Vice President–Real Estate & Development

Ms Venkatesh heads the company’s Development, Technical Services and Projects functions. She
oversees IHCL’s initiatives for growth through greenfield developments, acquisitions, licenses and
management contracts. Over the last 16 years with IHCL, she has been involved in tripling the Group’s
inventory with over 21,000 keys. Ms Venkatesh is an Electrical Engineer by training and holds a Master’s
Degree in Management Studies from Mumbai University in India. She has over 26 years of cross-
functional experience across industries. Before joining IHCL, she has worked in different functions
across multiple industry sectors in India.
Mr Parveen Chander – Executive Vice President, Sales & Marketing

Mr Parveen brings with him 28 years of experience in Operations. He has successfully executed many
critical leadership roles within the organization at hotels such as Taj Lands End, Mumbai, The Taj Mahal
Palace, Mumbai, and Taj Lake Palace Udaipur. He has also provided strong leadership to the company’s
hotels in the West in his roles as Area Director Pune & Nashik and Area Director – West. Mr Parveen has
an MBA in International Hospitality–Marketing and Innovation from the Glion Institute of Higher
Education, Switzerland, a Bachelor’s Degree from University of Delhi and a Diploma in Hotel Management
from IHM Pusa.
Board of directors
IHCL’s board is chaired by Mr N Chandrasekaran
Board of Directors of IHCL
Director Designation
Mr. N. Chandrasekaran Chairman
Mr. Nasser Munjee Non-Executive, Independent Director
Ms. Hema Ravichandar Non-Executive, Independent Director
Mr. Venkataramanan Anantharaman Non-Executive, Independent Director
Mr. Anupam Narayan Non-Executive Independent Director
Mr. Puneet Chhatwal Managing Director & Chief Executive Officer
Indian Hotels
INITIATING COVERAGE
Chalet Hotels (CHALET) ADD

Chalet Hotels—on an expansion spree Company data and valuation summary

We initiate coverage on Chalet Hotels with an ADD rating and FV of Rs660. Stock data
Chalet owns 2,890 keys across nine hotels under global brands in the
CMP(Rs)/FV(Rs)/Rating 590/660/ADD
premium segment. Chalet has another 870 keys under construction that will
likely commission by FY2028E. The company also has 1.2 mn sq. ft of
Mcap (bn) (Rs/US$) 121/1.5
operational commercial space, which will increase to 3.1 mn sq. ft by
ADTV-3M (mn) (Rs/US$) 111/1.3
FY2028E. In our view, the strong industry tailwinds with a healthy launch
pipeline, and growing contribution from annuity assets, will continue to aid Shareholding pattern (%)
earnings growth, although leasing of new office spaces remains a key risk.
1.8
2.4
Initiate coverage with ADD rating and FV of Rs660 1.9
We initiate coverage on Chalet Hotels with an ADD rating and FV of Rs660 based 19.6
on September 2025E earnings. Chalet currently trades at 17.5X EV/EBITDA on 2.5

FY2025E estimates, with the hospitality business trading at 19.6X. Chalet’s 71.7
earnings will likely grow at 35% CAGR over FY2023-26E on the back of (1)
commissioning of 926 keys over this period, of which 336 have already been
Promoters FPIs MFs BFI s Retail Others
commissioned, and (2) expansion of the commercial portfolio to 2.3 mn sq. ft
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
by FY2026E from 0.5 mn sq. ft as of March 2023 (1.2 mn sq. ft currently). Price performance (%) 1M 3M 12M
Occupancy for the hospitality business is near-peak (72% for FY2023), which Absolute 8 7 58
implies that the earnings growth is premised mainly on (1) timely Rel. to Nifty 2 2 51
commissioning of new hotel assets, (2) improvement in ARRs, and (3) leasing Rel. to MSCI India 1 2 52
of the incremental office space.

EPS (Rs) 12.3 18.7 28.6
Chalet a key beneficiary of tight supply in the hospitality market
EPS growth (%) 79.2 51.8 52.9
Chalet Hotels, the hospitality arm of K. Raheja Corp, owns and operates 2,890
P/E (X) 47.9 31.5 20.6
keys across nine premium hotels in four key regions. Unlike its peer set, Chalet
P/B (X) 6.7 5.6 4.4
is a pure asset owner, and operates under the branding of global hotel chains. EV/EBITDA (X) 23.2 17.5 13.1
Chalet recently acquired the Dukes Retreat in Lonavala, marking its entry into RoE (%) 15.1 19.3 23.7
the leisure segment. Chalet has a pipeline of 870 keys, including a 390-key Taj Div. yield (%) 0.0 0.0 0.0
hotel at the IGI Airport, New Delhi—its first asset in North India. In the annuity Sales (Rs bn) 15 19 25
portfolio, Chalet currently has operational assets of 1.2 mn sq. ft across EBITDA (Rs bn) 6 8 11
Mumbai and Bangalore, with an additional pipeline of 1.9 mn sq. ft. Net profits (Rs bn) 3 4 6
Earnings growth to be driven by ARR improvement and asset addition Source: Bloomberg, Company data, Kotak Institutional Equities estimates
Prices in this report are based on the market close of

Chalet will likely see 31% revenue CAGR and 35% EBITDA CAGR over FY2023-
November 30, 2023
26E, with margins expanding ~450 bps to 45%. The improvement would be led
by (1) commissioning of 926 hotel keys, of which 336 have already been
commissioned, (2) 11% CAGR in ARRs and steady occupancy over FY2023-26E,
and (3) commercial space increasing to 2.3 mn sq. ft by FY2026E from 0.5 mn
sq. ft as of March 2023. Net debt of Rs25 bn is a tad higher and would rise
further as the company executes its expansion plans, but is manageable in the
context of the growth trajectory and healthy operating cash flows.
Risks—lower-than-estimated room rates, inability to lease office spaces

Lower-than-estimated improvement in room rates as well as the inability of
Chalet to lease out new annuity assets in Powai will remain key risks.

+91-22-4336-0870 +91-22-4336-0869
3
Chalet Hotels—stepping on the growth accelerator

Asset addition and ARR improvement to support topline growth for Chalet Hotels
Key financials for Chalet Hotels, March fiscal year-ends, 2020-26E (Rs mn, %, X)
Revenue EBITDA Net Net debt/ Net debt/ EV /
Year to Revenue growth EBITDA margin profit EBITDA Equity RoACE RoAE EBITDA P / BV
March (Rs mn) (%) (Rs mn) (%) (Rs mn) (X) (X) (%) (%) (X) (X)
2020 9,811 (1) 3,366 34 1,007 5.1 1.0 7.5 6.8 41 7.8
2021 2,856 (71) 71 2 (1,313) 291.5 1.4 (3.4) (8.8) 1,978 8.5
2022 5,078 78 985 19 (704) 25.7 1.8 (0.6) (5.1) 145 9.0
2023 11,285 122 4,528 40 1,410 6.2 1.7 8.4 9.8 32 7.8
2024E 15,028 33 6,428 43 2,527 4.7 1.6 11.3 15.1 23 6.7
2025E 18,967 26 8,489 45 3,835 3.6 1.3 14.1 19.3 17 5.6
2026E 25,102 32 11,217 45 5,863 2.6 1.0 17.6 23.7 13 4.4
Steady improvement in the earnings profile due to asset addition in the hospitality as well as office segment
Chalet Hotels: P&L, balance sheet & cash flow model, March fiscal year-ends, 2020-26E (Rs mn)
2020 2021 2022 2023 2024E 2025E 2026E

Profit model
Net sales 9,811 2,856 5,078 11,285 15,028 18,967 25,102
EBITDA 3,366 71 985 4,528 6,428 8,489 11,217
Depreciation (1,133) (1,175) (1,184) (1,173) (1,327) (1,463) (1,599)
EBIT 2,233 (1,104) (199) 3,355 5,100 7,025 9,618
Other income 279 219 219 495 368 453 496
Interest expense (1,462) (1,520) (1,444) (1,545) (2,099) (2,365) (2,296)
Pre-tax profits 1,050 (2,404) (1,424) 2,305 3,369 5,113 7,818
Tax (12) 1,092 720 (895) (842) (1,278) (1,954)
Net income 1,038 (1,313) (705) 1,410 2,527 3,835 5,863
Earnings per share (Rs) 5 (7) (4) 9 12 19 29
Balance sheet
Total equity 15,546 14,161 13,413 15,419 17,946 21,781 27,644
Non-controlling interests (3) (3) (3) (4) (4) (4) (4)
Total borrowings 17,049 20,583 25,340 27,939 29,951 30,851 29,308
Deferred tax liability (631) (1,359) (1,450) (489) (345) (215) (98)
Total liabilities and equity 39,275 38,091 41,879 47,863 54,042 59,723 65,354
Net fixed assets 29,930 30,545 33,302 37,443 41,671 45,350 50,666
CWIP 909 384 928 1,534 2,156 3,256 2,656
Other non-current assets — 1,341 938 1,237 1,097 1,097 1,097
Goodwill 226 226 226 537 537 537 537
Current assets 8,165 5,551 6,422 7,044 8,498 9,400 10,315
Investments 45 45 63 68 83 83 83
Total assets 39,275 38,091 41,879 47,863 54,042 59,723 65,354
Free cash flow
Operating cash flow excl. working capital 3,308 223 1,037 4,773 4,840 6,707 9,534
Working capital changes (784) (88) (452) (35) 1,299 119 623
Capital expenditure (896) (1,418) (3,415) (5,840) (6,006) (6,000) (6,050)
Free cash flow
Ratios (%)
Net debt (Rs mn) 14,472 18,711 22,338 24,368 27,822 27,597 26,267
Net debt / equity (X) 0.9 1.3 1.7 1.6 1.6 1.3 1.0
Net debt / EBITDA (X) 4.3 265.0 22.7 5.4 4.3 3.3 2.3
RoAE (%) 7 (9) (5) 10 15 19 24
RoACE (%) 7 (3) (1) 8 11 14 18
Chalet Hotels
4
Chalet—blend of business hotels and office spaces

We initiate coverage on Chalet Hotels with an ADD rating and DCF-based FV of Rs660/ share.
Chalet Hotels currently trades at 17.5X EV/EBITDA on FY2025E estimates; adjusted for value of
the residential and commercial business, the hospitality segment trades at 19.6X EV/EBITDA.
Chalet will likely deliver strong 35% EBITDA CAGR over FY2023-26E, with EBITDA more than
doubling to Rs11.2 bn by FY2026E. The earnings improvement is a result of (1) commissioning of
926 hotel keys over this period, (2) 11% CAGR in ARRs and steady occupancy over FY2023-26E,
and (3) commissioning of 1.9 mn sq. ft commercial space over the same period.
Initiate coverage with ADD rating and FV of Rs660/ share

We initiate coverage on Chalet Hotels with an ADD rating and FV of Rs660 based on September 2025
estimates. The stock trades at 17.5X EV/EBITDA and 32X P/E on FY2025E, that should be seen in the
context of strong earnings growth on the back of gradual ARR improvement as well as commissioning
of new hotel keys and commercial assets. We expect Chalet Hotels to deliver strong 35% CAGR in
EBITDA over the next three years, on the back of 31% CAGR in revenues. Our DCF-based Fair Value of
Rs660/ share assigns ~20% value to the commercial business, with the balance largely being attributable
to the hotels business. The implied multiple for the hospitality segment at CMP is higher at 19.6X
EV/EBITDA, making Chalet among the more richly valued hospitality companies. Exhibit 3 gives the
valuation multiples, coupled with growth, margin and return profile of the company.
Chalet’s hospitality business trades at 19.6X EV/EBITDA on FY2025E earnings

Key financial and operating metrics for Chalet Hotels, March fiscal year-ends, 2020-26E (Rs mn)
2020 2021 2022 2023 2024E 2025E 2026E
Market cap. 120,913 120,913 120,913 120,913 120,913 120,913 120,913
Net debt 15,770 18,711 22,338 24,368 27,822 27,597 26,267
Commercial EV 7,713 9,063 9,863 10,488 14,734 26,080 34,161
Resi EV 2,107 2,107 2,107
Implied Hospitality EV 128,970 130,561 133,388 134,793 131,894 120,324 110,913
Revenue 9,811 2,856 5,078 11,285 15,028 18,967 25,102
Commercial revenue 1,003 838 1,020 1,000 1,470 2,634 3,430
Resi revenue 53 — — — — 750 3,240
Hospitality revenue 8,755 2,018 4,058 10,285 13,558 15,583 18,432
EBITDA 3,366 71 985 4,528 6,428 8,489 11,217
Commercial EBITDA 617 725 789 839 1,179 2,086 2,733
Resi EBITDA (176) (95) (209) (85) (150) 259 1,118
Hospitality EBITDA 2,925 (559) 405 3,774 5,399 6,143 7,366
PAT 1,007 (1,313) (704) 1,410 2,527 3,835 5,863
EV/EBITDA 40.6 1,977.7 145.5 32.1 23.1 17.5 13.1
Hospitality EV/ EBITDA 44.1 (233.4) 329.7 35.7 24.4 19.6 15.1
P/E 121 (89) (161) 66 48 32 21
Keys 2,554 2,554 2,554 2,554 2,890 3,090 3,480
ARR 8,482 4,040 4,576 9,169 10,671 11,556 12,410
Occupancy 71 30 51 72 73 74 74
Chalet currently has an operational portfolio of 2,890 keys as of October 2023 (2,554 keys as of FY2023),
post the recent acquisition of 80-key Dukes Retreat in Lonavala, the commissioning of the new 168-key
Westin HITEC City at Hyderabad and the commissioning of additional 88 keys at Novotel Pune. Chalet
plans to further expand its room inventory by 30% or 870 keys to 3,760 keys by FY2028. A large part of
the incremental keys would come from its recently announced hotel at the IGI Airport in New Delhi where
it plans to commission a 390-key hotel in partnership with Indian Hotels (Taj). There is another 280 keys
hotel that it plans to commission in Airoli, Navi Mumbai, while the balance is through the addition of new
keys at its existing hotel (Marriott Whitefield).
Chalet Hotels
5
Chalet Hotels will increase its room keys by 30% by FY2028E

Chalet Hotels room keys, March fiscal-year ends, 2020-28E (#)
4,000 30% growth 3,760

3,480 3,480
3,500
3,090
2890 2,890
3,000
2,554 2,554 2,554 2,554
2,500
2,000
1,500
1,000
500
-
2020 2021 2022 2023 Now 2024E 2025E 2026E 2027E 2028E
We use a DCF-based approach to value Chalet Hotels to be able to fully capture the high growth phase
(addition of 870 hotel keys, +30% on existing base and 1.9 mn sq. ft of commercial space, +150% on
existing base, by FY2028) and the consequent stabilization period. We believe that the hospitality
industry is in a strong up-cycle, as is apparent in near-peak occupancy levels and record ARRs. While
new and existing supply (especially for smaller/individual assets) got impacted by Covid, the resurgence
of demand implies that the occupancy levels will remain high over the next few years, and this strength
will reflect in continued ARR growth over the coming years.
We value Chalet using a DCF-based approach

DCF-based value for Chalet Hotels, September 2025E (Rs mn)
Sep-25
Discount rate (%) 12.0%
Total PV of free cash flows 87,895
Growth in perpetuity 5.0%
Terminal value 435,643
PV of terminal value 75,222
Net debt 27,710
Equity value 135,408
Shares outstanding (mn) 205
Fair value of Chalet (Rs/share) 660
CMP (Rs/ share) 590
Upside/ (Downside) 12%
Chalet Hotels
6
SoTP-based value implies Rs147/share contribution to EV from the annuity business

SoTP-based valuation for Chalet Hotels, September 2025E (Rs mn, Rs/share)
September 2025E Value Rs/ share
EV (using DCF) 163,117 796
Value of hotel portfolio 130,890 638
Value of commercial portfolio 30,120 147
Value of residential project 2,107 10
Net debt (Rs mn) 27,710 135
Equity value (Rs mn) 135,408 660
Implied EV/EBITDA multiple (X) for hotel portfolio 19
EBITDA for hotel portfolio 6,755
EBITDA for commercial portfolio 2,410
Number of shares 205
EV/ key (Rs mn) 51
Rental and annuity business contribute nearly a fifth of the overall value to Chalet Hotels
Break-up of SoTP-based valuation for Chalet Hotels, September 2025E (%)
Residential, 1
Commercial , 18
Hotel, 80
Industry at inflexion point with improving occupancies; ARRs will likely follow
The hospitality industry in India is at an inflexion point with occupancy levels having improved to 66% in
FY2023, recovering from a low of 35% during the peak of the pandemic. Room tariffs have reflected the
strength in occupancy, with average tariffs at Rs6,869/day in FY2023 (+39% yoy) compared to
Rs4,630/day seen in FY2021. We estimate room tariffs to further improve as demand for the hospitality
sector remains robust, even as the pipeline of incremental capacity addition stays lean suggesting that
the current up-cycle will likely last over the next few years. The hospitality industry has a high operating
leverage, with most costs being fixed in nature, and the benefit of improved tariffs flowing through the
bottom line on a post-tax basis.
For Chalet, we expect the ARRs to increase at 11% CAGR to Rs12,410/day in FY2026E, from Rs9,170/day
in FY2023, which is up 100% yoy and 8% over FY2020 ARR for the company. We highlight that the
occupancy for FY2023 stood at 72%, in comparison to 71% in FY2020. The improvement in occupancy
would only be gradual hereon, with FY2026E still at 72% (dragged by the commissioning of the 390-key
Taj Hotel in New Delhi), and increasing to ~75% thereafter.
Chalet Hotels
7
ARRs to scale new lifetime highs on the back of favorable demand-supply dynamics
Chalet Hotels ARR, occupancy, RevPAR, March fiscal year-ends, 2020-26E (Rs/night, %)
ARR (Rs/night, LHS) RevPAR (Rs, LHS) Occupancy (%, RHS)

16,000 73 74 74 80
71 72
14,000 70
12,410
11,556
12,000 10,671 60
51
10,000 9,169 9,139 50
8,482 8,608
7,799
8,000 6,602 40
6,022 30
6,000 30
4,576
4,040
4,000 20
2,355
2,000 1,214 10
- -
2020 2021 2022 2023 2024E 2025E 2026E
Premium valuations owing to superior growth profile and broad-basing of topline

Chalet Hotels trades at 17.5X EV/EBITDA on FY2025E estimates, similar to peers, although the
hospitality business trades at 19.6X EV/EBITDA. The premium valuations for Chalet reflect its strong
growth profile, as is visible in its pipeline of hotel keys and commercial space, as well as slightly better
performance of more premium assets. Having expanded only modestly in the past few years, Chalet
Hotels has built up a strong pipeline of hospitality assets across key business cities.
Chalet Hotels trades at premium valuations owing to superior growth

1-year forward EV/EBITDA multiple for Chalet Hotels, March fiscal year-ends, 2019-24 (X)
Chalet Hotels 1yr fwd EV/ EBITDA (X)

80
70
60
50
40
30
20
10
Nov-19
Nov-21
Nov-23
Nov-20
Nov-22
May-20
May-21
May-23
May-22
Feb-21
Feb-22
Feb-20
Feb-23
Aug-20
Aug-22
Aug-21
Aug-23
From 2,554 keys as of March 2023, Chalet has reached 2,890 keys through the addition of 88 keys at
Novotel Pune, operationalization of 168 keys at the Westin HITEC City Hyderabad and the acquisition of
80 keys at Dukes Retreat. It plans to further expand its room inventory by 30% or 870 keys to 3,760 keys
by FY2028E. A large part of the incremental keys would come from its recently announced hotel at the
IGI Airport in New Delhi where it plans to commission a 390-key hotel in partnership with Indian Hotels
(Taj). There is another 280 keys hotel that it plans to commission in Airoli, Navi Mumbai, while the
balance is through the addition of new keys at its existing hotels (Novotel Pune and Marriott Whitefield).
Chalet Hotels
8
On the commercial front, Chalet plans to expand from 1.2 mn sq. ft of operational space now (0.66 mn
sq. ft added in 1QFY24) to 3.1 mn sq. ft by FY2028E, through the addition of assets at Powai, Mumbai
and Whitefield, Bengaluru. Even as the commercial real estate sector is currently in a relatively soft spot
owing to regulatory (pertaining to clarity on part de-notification of SEZ areas) and economic headwinds
(owing to weak hiring activity, especially in the IT sector), it does offer diversification of topline,
protecting the business from any Covid-like events in the future that can disrupt business dynamics in
the hospitality industry. Accordingly, we expect the rental and annuity business to contribute ~15% of
the overall topline in the medium term, from sub-10% pre-Covid.
Chalet Hotels will increase its leasable area by 150% by 2028E

Leasable area for rental and annuity assets, March fiscal year-ends, 2020-28E (mn sq. ft)
3.5
3.1
3.0 150% growth
2.5 2.3 2.3 2.3
2.0
1.5
1.5
1.2
0.9 0.9 0.9
1.0
0.5
0.5
-
2020 2021 2022 2023 Now 2024E 2025E 2026E 2027E 2028E
Rental and annuity business to contribute ~15% of revenues by FY2026E

Chalet Hotels revenue break-up, March fiscal year-ends, 2017-26E (Rs bn)
Real estate revenue (Rs bn)
Rental and annuity revenue (Rs bn) Other hotel revenue (Rs bn)
F&B revenue (Rs bn) Room rentals (Rs bn)
Share of rental and annuity revenue (%), RHS
40 35
Covid-19
30 25
25
19
20 3 15
15 3
11 1 6
8 10 10 5
10 7 1 5 5
0 0 1 5
0 3 3 3
2 3 3 11
1 8 9
4 5 5 5 1 2 6
- 1
1 2 (5)
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
The ARR and occupancy assumptions can have a large impact on the value of hospitality stocks. For
Chalet Hotels, we highlight that a 10% lower ARR would lead to 17% impact on our Fair Value estimate
(September 2025E).
Chalet Hotels
9
DCF-based value for Chalet has high sensitivity to ARR assumptions

Sensitivity of DCF-based value to ARR and occupancy changes, absolute (Rs/share) and relative
Chalet Hotels DCF sensitivity
-2 -1 0 1 2 -2 -1 0 1 2
-20% 413 422 432 441 450
ARR Change (%)
ARR Change (%)

-20% 62 64 65 67 68
-10% 525 535 546 557 567 -10% 79 81 83 84 86
0% 637 649 660 672 684 0% 96 98 100 102 104
10% 749 762 775 788 801 10% 113 115 117 119 121
20% 861 875 889 904 918 20% 130 133 135 137 139
Chalet’s higher multiple owing strong future growth


25.0
19.6 20.1
20.0
15.3
15.0
12.2
10.0
5.0
-
CMP EV/EBITDA (X) Attributable EV/EBITDA (X) P/E (X) P/B (X) Marke
(Rs) 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E
Chalet 590 32.1 23.1 17.5 13.1 32.1 23.1 17.5 13.1 85.8 47.9 31.5 20.6 7.8 6.7 5.6 4.4
Indian Hotels 422 33.1 27.2 19.2 15.4 35.0 28.9 20.1 16.2 59.9 46.7 31.0 25.3 7.5 6.5 5.4 4.5
Lemon Tree 114 24.1 16.2 11.4 10.0 28.9 20.7 15.3 13.7 79.0 35.6 23.5 20.0 10.6 9.3 7.6 6.2
SAMHI Hotels 175 17.1 20.6 12.2 10.6 17.1 20.6 12.2 10.6 (4.2) (21.3) 29.1 19.0 (1.9) 3.5 3.2 2.7

(Rs) 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E
Chalet 660 4,528 6,428 8,489 11,217 4,528 6,428 8,489 11,217 1,410 2,527 3,835 5,863 15,419 17,946 21,781 27,644
Indian Hotels 460 18,046 21,522 29,736 35,477 17,032 20,264 28,350 33,861 9,993 12,828 19,332 23,652 79,820 91,966 110,479 133,149
Lemon Tree 105 4,476 6,870 9,487 10,479 3,580 5,074 6,828 7,594 1,146 2,541 3,844 4,513 8,537 9,689 11,881 14,510
SAMHI Hotels 230 2,377 2,758 4,470 4,915 2,377 2,758 4,470 4,915 (3,578) (1,790) 1,311 2,011 (8,076) 10,794 12,106 13,898
Chalet Hotels
10
Financials—35% CAGR in EBITDA over the next three years

Chalet Hotels will likely deliver 31% CAGR in revenues over FY2023-26E, which will be driven by
(1) addition of 926 keys over this period, (2) 11% CAGR in ARR and steady occupancy levels, and
(3) increase in commercial space to 2.3 mn sq. ft from 0.5 mn sq. ft as of March 2023.
Commissioning of new assets would require capex of Rs18 bn over the next three years, which
will likely result in higher leverage from the current levels of Rs25 bn. Leverage may seem high,
but should be manageable in the context of the recent acquisitions as well as investments in new
asset build-up.
Revenue CAGR of 31% over the next three years, driven by both hospitality and office segment
Chalet Hotels will likely deliver a robust 31% CAGR in revenues to Rs25 bn by FY2026E from Rs11 bn in
FY2023. Revenue growth is backed by (1) 21% CAGR in the hospitality segment on the back of room
additions as well as higher room rates, (2) 51% CAGR in the office leasing segment with area under lease
quadrupling to 2.3 mn sq. ft by FY2026E from 0.5 mn sq. ft as of March 2023, and (3) contribution of Rs7
bn from the residential segment cumulatively over the next 3-4 years. Exhibit 16 highlights the revenue
contribution from individual business segments.
Chalet Hotels’ revenue to improve on back of commissioning of new keys/office space and improving ARRs
Revenue, EBITDA and PAT for Chalet Hotels, March fiscal year-ends, 2020-26E (Rs bn)
Total revenues EBITDA PAT

30
25
25
19
20
15
15
11 11
10
10 8
6 6
5 5
5 3 4
3 3
1 1 1
0
-
(1) (1)
(5)
2020 2021 2022 2023 2024E 2025E 2026E
Chalet Hotels
11
We expect contribution from rental and annuity assets to increase to ~15% by FY2026E
Chalet Hotels: Key assumptions, March fiscal year-ends, 2020-26E (Rs mn)
2020 2021 2022 2023 2024E 2025E 2026E

Hospitality
Keys (#) 2,554 2,554 2,554 2,554 2,890 3,090 3,480
Room nights (#) 934,764 932,210 932,210 932,210 1,030,364 1,071,490 1,162,950
Occupancy (%) 71 30 51 72 73 74 74
ARR (Rs/day) 8,482 4,040 4,576 9,169 10,671 11,556 12,410
RevPaR (Rs/day) 6,022 1,214 2,355 6,602 7,799 8,608 9,139
Revenue (Rs mn) 8,755 2,018 4,058 10,285 13,558 15,583 18,432
EBITDA (Rs mn) 3,110 (432) 520 3,824 5,399 6,143 7,366
EBITDA margin (%) 36 (21) 13 37 40 39 40
Commercial
Leasable area (mn sq, ft) 0.8 0.8 0.8 0.8 2.2 2.2 2.2
Occupancy (%) 75 70 72 76 70 75 79
Rentals (Rs/sq. ft per month) 119 123 143 128 135 142 149
Rentals (Rs mn) 810 781 934 887 1,244 2,177 2,845
Revenue (Rs mn) 1,000 838 1,020 1,000 1,470 2,634 3,430
EBITDA (Rs mn) 617 725 789 839 1,179 2,086 2,733
EBITDA margin (%) 62 87 77 84 80 79 80
Chalet’s hospitality segment will likely see revenues grow to Rs18.4 bn by FY2026E from Rs10 bn in
FY2023 on the back of (1) higher operational keys (3,480 by FY2026E), (2) 11% CAGR in room rates to
Rs12,410/day in FY2026E from Rs9,169/day in FY2023, and (3) steady occupancy levels. Chalet Hotels
has seen a healthy improvement in ARRs, with FY2023 ARR rising 100% yoy and 127% over FY2021 ARR.
For 1HFY24, ARR for Chalet stood at Rs9,960/night, +30% yoy. For FY2024, we expect Chalet’s ARR to
rise 16% yoy to Rs10,671/day, followed by a more modest 7-8% yoy improvement in ARRs.
ARRs to scale new lifetime highs on the back of favorable demand-supply dynamics
Chalet Hotels ARR, occupancy, RevPAR, March fiscal year-ends, 2020-26E (Rs/night, %)
ARR (Rs/night, LHS) RevPAR (Rs, LHS) Occupancy (%, RHS)

16,000 73 74 74 80
71 72
14,000 70
12,410
11,556
12,000 10,671 60
51
10,000 9,169 9,139 50
8,482 8,608
7,799
8,000 6,602 40
6,022 30
6,000 30
4,576
4,040
4,000 20
2,355
2,000 1,214 10
- -
2020 2021 2022 2023 2024E 2025E 2026E
Occupancy improvement, however, would be limited hereon as FY2023 witnessed 72% occupancy, close
to peak levels as Chalet has a significant business demand. We expect Chalet’s occupancy to peak
around 75-76% levels at the portfolio level. Thus, improvement in ARRs would primarily lead to an
improvement in the revenue and EBITDA of the existing hotels.
Chalet Hotels
12
Pipeline of new assets augurs well for earnings growth

Chalet has a pipeline of 870 keys that it plans to add to its portfolio, which would take the total to 3,760
keys as of FY2028E, from 2,890 keys currently and 2,554 keys as of FY2023. It has already (1) added 88
keys to its Novotel Pune in Oct 2023 (311 keys now), (2) opened a new 168-key Westin Hotel in
Hyderabad in June 2023, and (3) acquired 80-key Dukes Retreat in Lonavala. Chalet plans to commission
a 390-key hotel at the IGI Airport in New Delhi in FY2027, for which it has tied up with IHCL (Taj). Other
additions include—(1) incremental 130 keys at Marriott Whitefield (391 existing keys) in FY2025, (2)
incremental 70 keys at Dukes Retreat (80 existing keys), and (3) the commissioning of 280-keys Hyatt
Regency at Airoli in FY028E.
Chalet Hotels will increase its room keys by 30% by 2028E

Chalet Hotels room keys, March fiscal-year ends, 2020-28E (#)
4,000 30% growth 3,760

3,480 3,480
3,500
3,090
2890 2,890
3,000
2,554 2,554 2,554 2,554
2,500
2,000
1,500
1,000
500
-
2020 2021 2022 2023 Now 2024E 2025E 2026E 2027E 2028E
Chalet Hotels
13
Chalet is adding 926 keys between FY2023 and FY2026E

Key operational metrics by geography for Chalet Hotels, March fiscal year-ends, 2020-26E (#, Rs/night, %)
Total 2020 2021 2022 2023 2024E 2025E 2026E
Keys (#) 2,554 2,554 2,554 2,554 2,890 3,090 3,480
ARR (Rs/ night) 8,482 4,040 4,576 9,169 10,671 11,556 12,410
Occupancy (%) 71 30 51 72 73 74 74
RevPAR (Rs/ night) 6,022 1,214 2,355 6,602 7,799 8,608 9,139
MMR 2020 2021 2022 2023 2024E 2025E 2026E
Keys (#) 1,513 1,513 1,513 1,513 1,513 1,513 1,513
ARR (Rs/ night) 8,309 4,056 4,714 9,741 11,787 12,847 13,811
Occupancy (%) 72 35 58 74 75 76 76
RevPAR (Rs/ night) 5,982 1,420 2,734 7,208 8,840 9,764 10,496
Lonavala 2020 2021 2022 2023 2024E 2025E 2026E
Keys (#) 80 150 150
ARR (Rs/ night) 9,526 11,431 13,717
Occupancy (%) 50 53 69
RevPAR (Rs/ night) 4,763 6,059 9,428
Pune 2020 2021 2022 2023 2024E 2025E 2026E
Keys (#) 223 223 223 223 311 311 311
ARR (Rs/ night) 5,255 2,871 3,505 5,460 6,006 6,486 6,973
Occupancy (%) 40 28 64 84 72 74 79
RevPAR (Rs/ night) 2,102 804 2,243 4,586 4,296 4,822 5,480
Hyderabad 2020 2021 2022 2023 2024E 2025E 2026E
Keys (#) 427 427 427 427 595 595 595
ARR (Rs/ night) 8,688 4,161 4,850 9,624 10,586 11,539 12,405
Occupancy (%) 70 19 45 69 77 78 76
RevPAR (Rs/ night) 6,082 791 2,183 6,641 8,137 8,977 9,476
Bengaluru 2020 2021 2022 2023 2024E 2025E 2026E
Keys (#) 391 391 391 391 391 521 521
ARR (Rs/ night) 9,093 4,611 4,403 8,825 9,884 10,675 11,475
Occupancy (%) 73 24 28 61 66 70 69
RevPAR (Rs/ night) 6,638 1,107 1,233 5,383 6,523 7,491 7,948
NCR 2020 2021 2022 2023 2024E 2025E 2026E
Keys (#) 390
ARR (Rs/ night) 11,000
Occupancy (%) 35
RevPAR (Rs/ night) 3,850
Office assets will likely play a larger role in near-term earnings growth
On the commercial front, Chalet repositioned itself in FY2022 by deciding to exit the retail assets, and
focusing on office assets only. Consequently, it has re-purposed its existing malls into new office
spaces. It had 0.5 mn sq. ft of operational office space (The Orb, Sahar in Mumbai) as of FY2023, which
now stands at 1.2 mn sq. ft with the commissioning of Tower 1 at Cignus Whitefield in Bengaluru. It has
an additional pipeline of 1.1 mn sq. ft expected to be commissioned by FY2026E, and 1.9 mn sq. ft
(cumulative) before FY2028E, which would take the total to 3.1 mn sq. ft. Additions include — (1) 0.3 mn
sq. ft of Tower 2 at Cignus Whitefield in Bengaluru in FY2024 itself, (2) 0.8 mn sq. ft in Powai, Mumbai
in FY2025E, and (3) 0.8 mn sq. ft in Powai, Mumbai in FY2028E.
Chalet Hotels
14
Chalet hotels will increase its leasable area by 150% by 2028E

Chalet Hotels leasable area for rental and annuity assets, March fiscal-year ends, 2020-28E (mn
sq. ft)
3.5
3.1
3.0 150% growth
2.5 2.3 2.3 2.3
2.0
1.5
1.5
1.2
0.9 0.9 0.9
1.0
0.5
0.5
-
2020 2021 2022 2023 Now 2024E 2025E 2026E 2027E 2028E
Margins likely to expand with higher contribution from office assets, improvement in hospitality
We expect 31% CAGR in revenue over FY2023-26E, led by 11% ARR CAGR over the same period. With a
significant portion of costs being fixed in nature, we expect consolidated EBITDA margins to expand to
45% by FY2026E, and 47% by FY2028E from 40% in FY2023, as operating leverage kicks in with the
stabilization of occupancy at newly commissioned hotels. Incrementally, rental and annuity assets yield
a higher EBITDA margin (~84% in FY2023) in comparison to the hospitality business (~42% in FY2023)—
the commissioning of new office assets would also aid margin improvement.
Rental and annuity business to contribute ~15% of revenues by FY2026E

Chalet Hotels revenue break-up, March fiscal year-ends, 2017-26E (Rs bn, %)
Real estate revenue (Rs bn)
Rental and annuity revenue (Rs bn) Other hotel revenue (Rs bn)
F&B revenue (Rs bn) Room rentals (Rs bn)
Share of rental and annuity revenue (%), RHS
40 35
Covid-19
30 25
25
19
20 3 15
15 3
11 1 6
8 10 10 5
10 7 1 5 5
0 0 1 5
0 3 3 3
2 3 3 11
1 8 9
4 5 5 5 1 2 6
- 1
1 2 (5)
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Chalet Hotels
15
Chalet Hotels’ revenues to grow at 31% CAGR over the next three years
Profit & loss statement, March fiscal year-ends, 2020-26E (Rs mn)
2020 2021 2022 2023 2024E 2025E 2026E
Total revenues 9,811 2,856 5,078 11,285 15,028 18,967 25,102
Real estate development cost (229) (95) (209) (85) (150) (491) (2,122)
F&B (828) (239) (539) (999) (1,134) (1,458) (1,827)
Operating supplies consumed (307) (123) (244) (393) (489) (571) (674)
Employee (1,523) (893) (1,000) (1,511) (2,010) (2,271) (2,596)
Others (3,558) (1,435) (2,102) (3,769) (4,817) (5,687) (6,667)
EBITDA 3,366 71 985 4,528 6,428 8,489 11,217
Depreciation / amortisation (1,133) (1,175) (1,184) (1,173) (1,327) (1,463) (1,599)
EBIT 2,233 (1,104) (199) 3,355 5,100 7,025 9,618
Other income 279 219 219 495 368 453 496
Pre-tax profits 1,050 (2,404) (1,424) 2,305 3,369 5,113 7,818
Tax (12) 1,092 720 (895) (842) (1,278) (1,954)
Net income 1,038 (1,313) (705) 1,410 2,527 3,835 5,863
Minority interests (30) (1) 1 — — — —
PAT (after minority interest) 1,007 (1,313) (704) 1,410 2,527 3,835 5,863
EPS (Rs) 5 (7) (4) 9 12 19 29
Margins (%)
EBITDA 34 2 19 40 43 45 45
Adjusted net income 10 (46) (14) 12 17 20 23
Effective tax rate (%) 1 45 51 39 25 25 25
Growth (%)
Revenue (1) (71) 78 122 33 26 32
EBITDA 5 (98) 1,295 360 42 32 32
PAT NM NM NM NM 79 52 53
High capex to keep debt elevated in the coming years

Chalet’s net debt as of FY2023 stood at Rs24.4 bn (5.4X net debt/EBITDA), up from Rs14.5 bn as of
FY2019—the increase in debt is primarily on account of acquisitions and growth assets. Given the
pipeline of new assets, we expect Chalet’s net debt to remain elevated until FY2026E at Rs26 bn, and
then fall as newly commissioned assets begin to generate strong cash flows. Chalet has a pending capex
of Rs18 bn until FY2026E, which would also taper off in the years after FY2026E. Even as the net debt
rises, the simultaneous improvement in earnings would mean that net debt/ EBITDA declines to 2.3X in
FY2026E. We expect Chalet to turn net cash by FY2030E.
Chalet Hotels
16
Chalet Hotels to have Rs18 bn of capex over the next three years
Chalet Hotels capex plans, March fiscal year-ends, 2020-30E (Rs mn)
7,000
6,006 6,000 6,050
5,840
6,000
5,000
4,000
3,415
3,000
2,000
1,418
896
1,000
-
2020 2021 2022 2023 2024E 2025E 2026E
Chalet’s debt to remain elevated in coming years owing to high capex requirements
Chalet Hotels net debt and net debt/EBITDA, March fiscal year-ends, 2020-26E (Rs mn, X)
Net debt (Rs bn) Net debt/ EBITDA (X), RHS

30 25
25 22.7
20
20
15
15
10
10
5.4
4.7 4.3
3.3 5
5 2.3
16 19 22 24 28 28 26
- 0
2020 2021 2022 2023 2024E 2025E 2026E
Note:
(a) Very high net debt/ EBITDA in FY2021 on marginal EBITDA of Rs71 mn due to the impact of Covid
Chalet Hotels
17
Chalet’s operating cash flows to increase over the next few years
Chalet Hotels CFO and CFO/EBITDA, March fiscal year-ends, 2020-26E (Rs mn, X)
CFO (Rs mn) CFO/ EBITDA (X), RHS

12,000 9.0
10,157 8.0
10,000
7.0
8,000 6.0
6,825
6,139 5.0
6,000
4,769 4.0
4,000 3.0
2,524
2.0
2,000
602 622 1.0
- -
2020 2021 2022 2023 2024E 2025E 2026E
Chalet’s cash flows to improve significantly by FY2026E

Cash flow model, March fiscal year-ends, 2020-26E (Rs mn)
2020 2021 2022 2023 2024E 2025E 2026E

Operating
Profit before tax 752 (2,446) (1,469) 2,728 3,369 5,113 7,818
Depreciation & amortization 1,133 1,175 1,184 1,173 1,327 1,463 1,599
Finance costs — 1,520 1,444 1,545 — — —
Others 1,423 (26) (123) (673) 144 130 117
Operating cash flow before WC changes and tax 3,308 223 1,037 4,773 4,840 6,707 9,534
(Increase)/decrease in WC (784) (88) (452) (35) 1,299 119 623
Income tax refund/ (paid) — 467 38 31 — — —
Operating cash flow 2,524 602 622 4,769 6,139 6,825 10,157
Investing
Capex (net) (896) (1,418) (3,415) (5,840) (6,006) (6,000) (6,050)
Investments (net) (2,311) 855 (602) (113) 15 — —
Others (731) 64 56 29 — — —
Investing cash flow (3,937) (499) (3,961) (5,924) (5,991) (6,000) (6,050)
Financing
Dividend — — — — — — —
Equity 740 — 500 251 — — —
Debt raised (net) 588 1,081 4,911 2,386 2,012 900 (1,543)
Interest and finance charges paid — (1,422) (1,302) (1,377) — — —
Financing cash flow 1,328 (341) 4,109 1,260 2,012 900 (1,543)
Opening cash (216) (301) (539) 232 354 1,701 1,906
Free cash flow (85) (238) 771 105 2,160 1,725 2,565
Closing cash (301) (539) 232 354 1,701 1,906 2,251
Chalet Hotels
18
Debt levels to remain elevated over the next three years

Balance sheet, March fiscal year-ends, 2020-30E (Rs mn)
2020 2021 2022 2023 2024E 2025E 2026E

Share capital 2,050 2,050 2,050 2,050 2,050 2,050 2,050
Reserves/surplus 13,495 12,110 11,362 13,369 15,896 19,731 25,594
Shareholders' funds 15,546 14,161 13,413 15,419 17,946 21,781 27,644
Non-controlling interests (3) (3) (3) (4) (4) (4) (4)
Debt 17,049 20,583 25,340 27,939 29,951 30,851 29,308
Deferred tax/ other non-current liabilities (631) (1,359) (1,450) (489) (345) (215) (98)
Net block 29,930 30,545 33,302 37,443 41,671 45,350 50,666
CWIP 909 384 928 1,534 2,156 3,256 2,656
Investment 45 45 63 68 83 83 83
Goodwill 226 226 226 537 537 537 537
Other non-current assets — 1,341 938 1,237 1,097 1,097 1,097
Current assets 8,165 5,551 6,422 7,044 8,498 9,400 10,315
Inventory 3,924 3,912 3,935 4,129 4,587 4,258 5,240
Trade receivables 417 306 436 590 760 865 1,011
Cash and bank balances 1,279 458 998 1,220 2,129 3,254 3,041
Loans and advances 144 159 — — 28 28 28
Other current assets 2,401 716 1,053 1,105 994 994 994
Trade payables 1,062 829 867 1,502 1,863 2,253 2,977
Provisions 1,161 985 933 191 191 191 191
Key ratios (%)
Debt/equity 1.1 1.5 1.9 1.8 1.7 1.4 1.1
Debt/capitalization 0.1 0.2 0.2 0.2 0.2 0.3 0.2
Net debt/equity (X) 1.0 1.4 1.8 1.7 1.6 1.3 1.0
Net debt/capitalization 0.1 0.2 0.2 0.2 0.2 0.2 0.2
Debt /EBITDA (X) 5.1 291.5 25.7 6.2 4.7 3.6 2.6
Net debt/EBITDA (X) 4.7 265.0 22.7 5.4 4.3 3.3 2.3
RoAE (%) 6.8 (8.8) (5.1) 9.8 15.1 19.3 23.7
RoACE (%) 7.5 (3.4) (0.6) 8.4 11.3 14.1 17.6
Book value per share (Rs) 75.8 69.1 65.4 75.2 87.5 106.2 134.8
P/BV (X) 7.8 8.5 9.0 7.8 6.7 5.6 4.4
Chalet Hotels
19
Risk—lower-than-estimated room rates, inability to lease new offices

Lower-than-anticipated improvement in room rates, delay in commissioning of new hotel projects,
and inability to lease the incremental office space in due course of time remain the key risks for
Chalet Hotels’ earnings projections. We remain less concerned on room rates, despite the high
sensitivity of earnings to the same, but would be watchful on the leasing of new office spaces in
smaller format office towers adjacent to the hotel properties of Chalet.
Risks from slowdown of corporate customers and consequent impact on ARRs

Revenues from corporate customers form a bulk for Chalet Hotels’ revenues due to its city-centric hotels.
The company’s operations are dependent on corporate customers such as IT companies, MNCs and
consultancy firms. Inability to increase room rates offered to corporate clients, competition offering
better rates/services, or slowdown in business of corporate clients resulting in lower travel will impact
occupancy and revenues for Chalet Hotels.
EBITDA is highly sensitive to changes in ARRs and occupancy rates

Sensitivity of FY2025E EBITDA to changes in ARR and occupancy, absolute (Rs mn) and relative
Chalet Hotels FY2025E EBITDA sensitivity
-2 -1 0 1 2 -2 -1 0 1 2
-20% 5,515 5,645 5,775 5,905 6,035 -20% 65 66 68 70 71
ARR Change (%)
ARR Change (%)
-10% 6,839 6,985 7,132 7,278 7,424 -10% 81 82 84 86 87

0% 8,163 8,326 8,489 8,651 8,814 0% 96 98 100 102 104
10% 9,488 9,666 9,845 10,024 10,203 10% 112 114 116 118 120
20% 10,812 11,007 11,202 11,397 11,592 20% 127 130 132 134 137
Delay in development and operations of under-construction properties

Chalet Hotels is planning to add 870 keys, including two greenfield hotels (Delhi and Airoli), and 1.9 mn
sq. ft of office space by FY2028E, which could face execution delays.
Renewal of contracts with brand operators

Chalet Hotels has seven operational hotels under managed contracts with single operator Marriott and
one with Accor. In the event of the hotel operators deciding to terminate or not renew any agreement
with Chalet Hotels, the operation of hotels may be impacted.
High net debt could prevent significant outlay for expansion projects
As of September 2023, Chalet Hotels had net debt of Rs25 bn, which is estimated to go up to Rs28 bn in
FY2024E on account of planned capital expenditure, requiring the company to dedicate substantial
portion of cash flows to service debt. Any further increase in leverage would increase the company’s
vulnerability to a downturn in business as well as limiting its ability to raise additional funds or refinance
existing indebtedness.
Chalet Hotels
20
Chalet Hotels—changing gears, accelerating growth

Chalet has a portfolio of nine premium hotel assets (2,890 keys) in four key city-centric locations
that cater to business demand. Its most recent acquisition of Dukes Retreat in Lonavala marks its
entry in the leisure segment, while the proposed 390 key property at New Delhi airport will see the
company’s geographical diversification to North India. Chalet supplements the hotel portfolio with
two office assets, generally adjacent to the hotel properties with total leasable area of 1.2 mn sq.
ft but likely to ramp up to 3.1 mn sq. ft over the next five years.
Portfolio comprising nine hotels and office space aggregating 1.2 mn sq. ft
Chalet Hotels is a part of the K. Raheja Corp group having extensive experience in developing large-scale
real estate, hospitality and commercial projects, resulting in a strong understanding of industry and
market trends. Chalet Hotels Limited is an owner, developer and asset manager of high-end hotels in key
metro cities in India. Chalet’s hotel platform comprises nine operating hotels (2,890 keys) located in the
key Indian locations (MMR, Hyderabad, Bengaluru, Pune and Lonavala). Chalet’s hotels are branded with
globally recognized brands, such as JW Marriott, Westin, Marriott and Novotel, among others, which are
part of the Marriott and Accor group. Chalet follows an active asset management model for hotels
operated by third parties, closely monitoring and exercising a review mechanism to drive operational and
financial performance.
Chalet Hotels commenced operations in the year 1999 with a 100-key hotel in Mumbai
History and chronological events
Year Particulars
2000 Launched "Lakeside Chalet, Marriott Executive Apartments" at Mumbai
2001 Launched "The Westin Mumbai Powai Lake"
2009 Launched "The Westin Hyderabad Mindspace"
2009 Launched "Four Points by Sheraton, Navi Mumbai, Vashi"
2012 Launched "Inorbit Mall, Whitefield, Bengaluru"
2013 Launched "Marriott Hotel, Whitefield, Bengaluru"
2014 Launched "Commercial Tower, Whitefield, Bengaluru"
2015 Launched "JW Marriott Mumbai Sahar "
2018 Launched "The Orb Retail and Commercial Tower, Sahar, Mumbai"
2020 Acquired "Novotel, Nagar Road" in Pune
2023 Acquired "Dukes Retreat" in Lonavala
2023 Launched "Westin HITEC City" in Hyderabad
Chalet Hotels
21
Chalet has a presence in MMR, Pune, Bangalore and Hyderabad, and an upcoming hotel in Delhi
Chalet Hotels geographical presence
Shareholding pattern of Chalet Hotels

Chalet Hotels shareholding pattern, September 2023
Shareholding Pattern as of Sep 2023 (%)
Promoter & Promoter Group 71.7
Neel Chandru Raheja 5.0
Ravi Chandru Raheja 2.5
Jyoti Chandru Raheja 3.8
Casa Maria Properties LLP 8.1
Capstan Trading LLP 8.1
Raghukool Estate Development LLP 8.1
Touchstone Properties & Hotels Pvt Ltd 7.1
Anbee Construction LLP 6.4
Cape Trading LLP 6.4
K Raheja Pvt Ltd 6.1
K Raheja Corp Pvt Ltd 1.9
Other promoter shareholders 8.4
Public 28.3
Mutual Funds 19.6
FPIs 2.5
Resident individuals 2.4
Other public shareholders 3.8
Total 100.0
Chalet Hotels
22
Third party hotel management with active portfolio management

Chalet’s competitive advantage lies in identifying strategic locations and efficiently designing,
developing and asset managing premium properties for global hotel brands. Chalet achieves this by
maximizing the gross built-up area and minimizing the cost per key, while also developing co-located
commercial assets as a mixed-use strategy to maximize value generation.
Chalet’s keys are set to expand by 30% by 2028E

Existing and pipeline hotels for Chalet Hotels
Year of launch/
Existing hotels acquisition Category City Location Keys (#)
The Westin, Powai Lake 2001 Business Mumbai Powai 600
Marriott, Lakeside Chalet 2001 Business Mumbai Powai 173
Sheraton, Vashi 2009 Business Navi Mumbai Vashi 152
JW Marriott, Sahar 2015 Business Mumbai Sahar, Mumbai Airport 588
The Dukes Retreat 2023 Leisure Lonavala Khandala 80
Westin, Mindspace 2009 Business Hyderabad Mindspace 427
Westin HITEC City 2023 Business Hyderabad HITEC City 168
Marriott, Whitefield 2013 Business Bengaluru Whitefield 391
Novotel, Nagar Road 2020 Business Pune Weikfield 311
Total (existing) 2,890
Year of launch/
Pipeline hotels acquisition Category City Location Keys (#)
The Dukes Retreat - New keys 2025 Leisure Lonavala Khandala 70
Hyatt Regency, Airoli 2027 Business Navi Mumbai Airoli 280
Marriott, Whitefield - new keys 2024 Business Bengaluru Whitefield 130
Taj, New Delhi 2026 Business New Delhi IGI Airport 390
Total (pipeline) 870
Total (existing + pipeline) 3,760
Chalet follows an active asset management model for its hotels, which are operated by global hotel
brands. This entails closely monitoring, exercising regular oversight and contributing to the performance
of hotel properties in addition to contractual obligations under its agreements with brand owners.
As part of its active asset management model, the company regularly
 engages with the hotel management team at each hotel in order to discuss and agree on budgeting,
cost-management initiatives and operational and financial targets for each of its hotel properties. For
example, conducting detailed performance review meetings each month with the hotel management
team to assess hotel performance on a host of parameters and provide regular inputs on cost-saving
initiatives and potential improvements;
 reviews performance reports generated by each hotel; conducts periodic meetings with hotel
operator’s management teams;
 discusses and optimizes pricing strategies to maximize room yield by active monitoring of key
corporate accounts and provides inputs on promotional activities;
 reviews furniture, fixtures and equipment deployment plans and assists with execution of these plans;
reviews competitor set performance and penetration across relevant micro-markets.
Chalet Hotels
23
Supplementing hospitality portfolio with lower volatility office assets

Chalet is focused on increasing its annuity assets, which would result in a steady income stream. It has
1.2 mn sq. ft of operational leasable area across Mumbai and Bengaluru. Chalet earlier decided to exit
the retail annuity business; it accordingly decided to convert its retail spaces in Mumbai and Bengaluru
into commercial office spaces. Additionally, it plans to add up to 1.9 mn sq. ft of office space across
Mumbai (1.6 mn sq. ft) and Bengaluru (0.3 mn sq. ft).
Chalet’s annuity assets are set to expand by 150% by 2028E

Existing and pipeline annuity assets for Chalet Hotels
Year of launch/ Area

Existing asset acquisition Category City Location (mn sq. ft)
Orb, Sahar 2016 Office + Retail Mumbai Sahar, Mumbai Airport 0.5
Cignus Whitefield, Tower 1 2023 Office Bengaluru Whitefield 0.7
Total 1.2
Year of launch/ Area

Existing asset acquisition Category City Location (mn sq. ft)
Cignus Whitefield, Tower 2 2023 Office Bengaluru Whitefield 0.3
Cignus Powai 1, Westin Complex 2025 Office Mumbai Powai 0.8
Cignus Powai 2, Westin Complex 2027 Office Mumbai Powai 0.8
Total 1.9
Total (existing + pipeline) 3.1
Notes:
(a) The Bengaluru assets were earlier a mixed-use asset (retail + office) which have/are being refurbished in 2023.
Key management personnel
Mr Sanjay Sethi, Managing Director and CEO

Mr Sanjay Sethi is the Managing Director and CEO of Chalet Hotels. He is a hotel management graduate
from IHM Pusa. He is also a Certified Hotel Administrator (CHA) from American Hotel and Lodging
Educational Institute and has completed various management programs from IIM-Bangalore, XLRI and
Cornell. Mr Sethi has over 33 years of experience in the hospitality industry. He founded Berggruen Hotels
Private Limited in 2006 along with Berggruen Holdings, New York. He has briefly worked with ITC Limited
as Chief Operating Officer for their Hotels Division and had a 14-year stint with the Taj Group of Hotels.
Mr Milind Wadekar, CFO

Mr Milind Wadekar is the CFO of Chalet Hotels and been associated with the company since 2009. He
holds a bachelor’s degree in commerce from M.L. Dahanukar College of Commerce, University of
Bombay, and is a qualified Chartered Accountant with close to three decades of experience in the fields
of finance, accounts and tax. In his current role, he is responsible for several key aspects of the business
including financial reporting, controls and planning, strategic advisory, risk management, investor
relationship and stakeholder management and regulatory compliances. Prior to joining the company, he
was working with the erstwhile Hotel Leela Ventures Limited as Corporate Financial Controller.
Mr Rajneesh Malhotra, COO

Mr Rajneesh Malhotra is an industry veteran with three decades of hospitality experience and an award-
winning business strategist, with a track-record of turning around underperforming assets and
developing hotels. He is a hotel management graduate and an MBA. Mr Rajneesh Malhotra has worked
for leading international hotel brands, including Holiday Inn Crown Plaza, Southern Pacific Hotel
Corporation and Radisson Hotel Group.
Chalet Hotels
24
Mr Shwetank Singh, Chief Growth & Strategy Officer

Mr Shwetank Singh has nearly 25 years of industry experience. He plays a pivotal role in driving the
company’s growth trajectory and strategic initiatives. With a bachelor’s degree from IIT, and an MBA in
Finance & Marketing from FMS, he has a proven track record in driving innovation. Prior to joining Chalet,
Mr Shwetank Singh held key leadership positions at global organizations such as Golden Sands LLC in
Dubai, Interglobe Hotels as well as companies such as Tata Steel, Citi Financial, IIDC, and Premier Inn.
Mr Vishal Sharma, Senior Vice President – Projects

Mr Vishal Sharma is a civil engineering graduate from Pune University with over 30 years of experience
in the hospitality industry. He has a proven track-record of successfully leading large-scale projects. In
his current role with Chalet, Mr Vishal Sharma leads the design and projects team of the company. He
oversees the planning, development, and execution of all major hotel projects within the company’s
portfolio. Prior to joining Chalet, he was associated with Colliers Project Management Services, and he
has also worked with Gulf General Investment Dubai, Dheeraj & East Coast Dubai, Taj Group of Hotels,
and AL HABIB & CO. LLC (Muscat) in various capacities.
Board of Directors:
Mr Hetal Gandhi, Chairman and Independent Director
Mr Hetal Gandhi is the Chairman and Independent Director of Chalet Hotels. He is a CA and holds a
bachelor’s degree in commerce from the University of Mumbai. He has been on the Board since March
2003; he was appointed as an Independent Director of the company for a period of five years with effect
from June 12, 2018. He is the Co-founder and Managing Director of Tano India Advisors Private Limited
and was previously associated with a diversified financial services company as its head-financial
services and with ORIX Auto and Business Solutions Limited as its Chief Executive Officer. He has over
30 years of experience in the financial services industry.
Mr Joseph Conrad D’Souza, Independent Director

Mr Joseph Conrad D’Souza holds a master’s degree in commerce and a diploma in financial
management from the University of Mumbai and a master’s degree in business administration from the
South Gujarat University. He is also a graduate of the Senior Executive Program from the London
Business School. He has been on the board of the company since March 2012. He was appointed as an
Independent Director on June 12, 2018 for a period of five years. He has been associated with HDFC
Limited since its inception.
Ms Radhika Piramal, Independent Director

Ms Radhika Piramal holds a bachelor’s degree in arts from Brasenose College, University of Oxford and
a master’s in business administration from Harvard Business School. She was appointed as an
Independent Director on June 12, 2018 for a period of five years. She is the Executive Vice President of
VIP Industries Limited and was previously associated with Bain & Company in New York.
Mr Arthur William De Haast, Independent Director

Mr Arthur William De Haast holds a bachelor’s degree in Hotel Management from the University of
Strathclyde. He has also been elected as a Life Fellow of the Institute of Hospitality. He is the Chairman
of the Global Capital Markets Advisory Council of JLL. He was appointed as an Independent Non-
Executive Director of InterContinental Hotels Group PLC in Jan 2020. He has over 36 years of experience
in the hospitality and real estate sector.
Mr Ravi C. Raheja, Non-Executive director

Mr Ravi C. Raheja holds a bachelor’s degree in commerce from the University of Mumbai and an MBA
from the London Business School. He has been on the board of the company since September 1995. He
has led business development for the real estate arm of the K. Raheja Corp Group. Mr Ravi C. Raheja has
over 25 years of experience across the real estate, hotel and retail industry.
Mr Neel C. Raheja, Promoter and Non-Executive director

Mr Neel C. Raheja holds a bachelor’s degree in law and a master’s degree in commerce from the Mumbai
University. He has also completed the Owner/President Management Program from Harvard Business
School. He has been on the board of the company since December 1996. He has been instrumental in
the diversification of the K. Raheja Corp group’s business from real estate development to retail and
hospitality for the past two decades, bringing in the malls and department stores format in India.
Chalet Hotels
INITIATING COVERAGE
SAMHI Hotels (SAMHI) BUY

SAMHI: Acquire to grow, rebrand to premiumize Company data and valuation summary
We initiate coverage on SAMHI Hotels with a BUY rating and an FV of Stock data
Rs230/share. SAMHI Hotels is among India’s largest hotel ownership and
CMP(Rs)/FV(Rs)/Rating 175/230/BUY
asset management platforms, with a portfolio of 4,801 keys across 31
operating hotels, built through an acquisition led-strategy. SAMHI ties up with
Mcap (bn) (Rs/US$) 38/0.5
international brands such as Marriott, IHG and Hyatt, and is primarily focused
ADTV-3M (mn) (Rs/US$) 0/0.0
on the mid-scale segment, with limited presence in the upscale segment.
Integration of the recently acquired 962 keys (ACIC portfolio) and a growth Shareholding pattern (%)
pipeline of 617 keys (greenfield + expansions), coupled with healthy industry
dynamics, should aid a 27% EBITDA CAGR over FY2023-26E.
0.0
24.7
Initiate coverage with a BUY rating and FV of Rs230/share
We initiate coverage on SAMHI Hotels with a BUY rating and a DCF-based FV of 55.6
12.8
Rs230/share based on September 2025E earnings, implying 14X EV/EBITDA on
0.0
FY2025E estimates. At CMP, SAMHI trades at 12.2X EV/EBITDA on FY2025E 6.9
estimates, a substantial discount to listed peers that are trading at 15-20X. We

see SAMHI’s earnings increasing at a CAGR of 27% over FY2023-26E, largely in
1933
line with the peer set, with leverage of 6.7X net debt/EBITDA (FY2024E) falling Price performance (%) 1M 3M 12M
to 3.7X in FY2025E. SAMHI started as a private equity-backed platform, with Absolute 18 0 0
financial investors having a substantial stake, even after the dilution in the Rel. to Nifty 12 0 0
recently concluded IPO. However, the valuation gap with the peer set is large, Rel. to MSCI India 12 0 0
and should narrow, led by healthy earnings growth and declining leverage.
EPS (Rs) (8.2) 6.0 9.2
Among the fastest-growing hotel companies in India
EPS growth (%) 80.4 173.2 53.3
SAMHI Hotels has the third-largest inventory of operational keys (owned and
P/E (X) (21.3) 29.1 19.0
leased) in India, built primarily through an acquisition-led strategy. It currently
P/B (X) 3.5 3.2 2.7
has a portfolio of 4,801 keys, built within 13 years of incorporation–among the
EV/EBITDA (X) 20.5 12.2 10.6
fastest-growing hospitality companies in India.
RoE (%) (131.7) 11.5 15.5
Div. yield (%) 0.0 0.0 0.0
Earnings to increase at CAGR of 27% in FY2023-26E
Sales (Rs bn) 10 13 14
SAMHI’s EBITDA will likely increase at a CAGR of 27% during FY2023-26E, as
against CAGR of 34% over the past five years. Earnings growth will be aided by
Net profits (Rs bn) (2) 1 2
(1) the addition of 1,143 keys over this period, including the recently
consummated 962-key acquisition of the ACIC portfolio (another 436 keys over Source: Bloomberg, Company data, Kotak Institutional Equities estimates
FY2026-28E), (2) 10% CAGR in room rates (ARR) and (3) margin improvement Prices in this report are based on the market close of
of 280 bps due to higher room rates and contained costs. Equity infusion of November 30, 2023
Rs12 bn has led to a reduction in pro forma net debt to ~Rs18 bn, as of
September 2023, from Rs28 bn, as of March 2023, which will aid the company’s
PAT of Rs1.3 bn in FY2025E.
Risks—lower/negative ARR growth, high debt, commissioning delays

A demand slowdown in the mid-scale segment would impact the expected ARR
growth, posing a key risk to the earnings improvement. The net debt has come
off to Rs18 bn (from Rs28 bn, as of March 2023) owing to equity issuance—
although more manageable, it still remains high at 6.7X net debt/EBITDA
(FY2024E). Though the company’s future growth plans are modest (~Rs5 bn
capex over the next five years), any aggression in asset acquisition could lead
to an increase in debt. Full sector coverage on KINSITE

+91-22-4336-0870 +91-22-4336-0869
3
SAMHI—one of the fastest-growing hotel ownership & management platforms

Improving room rates and recently concluded acquisition to aid earnings growth
Key financials for SAMHI Hotels, March fiscal year-ends, 2020-26E (Rs mn)
Revenue Net debt / Net debt / EV /
Year to Revenue growth EBITDA EBITDA Net profit Net debt EBITDA Equity RoACE RoAE EBITDA P / BV
March (Rs mn) (% yoy) (Rs mn) margin (%) (Rs mn) (Rs mn) (X) (X) (%) (%) (X) (X)
2020 6,056 29 1,500 25 (1,603) 20,238 13.5 7.2 1 (73) 22 5
2021 1,696 (72) (694) (41) (4,765) 22,420 (32.3) (11.5) (8) (1,101) (52) (7)
2022 3,227 90 114 4 (4,248) 24,419 213.6 (3.8) (4) 106 331 (2)
2023 7,386 129 2,377 32 (3,578) 25,714 10.8 (3.2) 7 47 17 (2)
2024E 10,110 37 2,758 27 (1,790) 18,580 6.7 1.7 7 (132) 21 4
2025E 13,233 31 4,470 34 1,311 16,348 3.7 1.4 10 11 12 3
2026E 14,036 6 4,915 35 2,011 14,084 2.9 1.0 11 15 11 3
Commissioning of new assets to further aid revenue/ profit growth for SAMHI
Profit & loss, balance sheet, cash flows and key ratios for SAMHI Hotels, March fiscal year-ends,
2020-26E
2020 2021 2022 2023 2024E 2025E 2026E
Profit & loss statement
Net sales 6,056 1,696 3,227 7,386 10,110 13,233 14,036
EBITDA 1,500 (694) 114 2,377 2,758 4,470 4,915
Depreciation (1,262) (1,118) (1,006) (963) (1,083) (1,237) (1,273)
EBIT 239 (1,812) (892) 1,415 1,676 3,233 3,643
Other income 220 97 104 229 121 237 291
Interest (2,080) (3,087) (3,460) (5,221) (3,587) (2,158) (1,923)
Pretax profits (1,621) (4,802) (4,248) (3,577) (1,790) 1,311 2,011
Tax 17 38 (0) (0) — — —
Net profit (1,603) (4,765) (4,248) (3,578) (1,790) 1,311 2,011
Extraordinary items (1,395) (13) (184) 192 — — —
Reported net income (2,999) (4,777) (4,433) (3,386) (1,790) 1,311 2,011
Earnings per share (21) (62) (56) (42) (8) 6 9
Balance sheet
Equity 76 76 76 85 218 218 218
Reserves and surplus 2,747 (2,031) (6,465) (8,162) 10,576 11,888 13,680
Non-controlling interest — — — — — — —
Borrowings (non-current) 18,638 18,706 23,742 20,553 15,035 13,700 11,575
Current liabilities and provisions 4,614 8,129 6,512 10,154 10,464 11,331 11,839
Total liabilities and equities 26,076 24,880 23,866 22,630 36,294 37,137 37,313
Net fixed assets 22,641 21,706 20,206 18,943 25,410 25,523 24,950
CWIP 189 177 197 202 1,102 702 1,252
Goodwill 67 67 67 67 4,255 4,255 4,255
Current assets 1,880 2,232 2,607 2,472 4,581 5,711 5,910
Investments/ other assets 1,298 698 789 945 945 945 945
Total assets 26,076 24,880 23,866 22,630 36,294 37,137 37,313
Free cash flow
Operating cash flow excluding working capital 1,411 (521) 116 2,442 2,758 4,470 4,915
Working capital changes 211 738 147 (267) (182) 634 448
Capital expenditure (282) (7) — 868 (1,081) (950) (1,250)
Other income 79 62 38 52 121 237 291
Free cash flow 1,420 272 301 3,095 1,617 4,391 4,404
Other metrics/ ratios
Net debt (Rs mn) 20,238 22,420 24,419 25,714 18,580 16,348 14,084
Net debt/equity (X) 7.2 (11.5) (3.8) (3.2) 1.7 1.4 1.0
Net debt/EBITDA (X) 13.5 (32.3) 213.6 10.8 6.7 3.7 2.9
RoAE (%) (73) (1,101) 106 47 (132) 11 15
RoACE (%) 1 (8) (4) 7 7 10 11
Book value per share (Rs) 37 (26) (84) (95) 50 56 64
Note: The ACIC acquisition of Rs11.7 bn EV in August 2023, funded through issuance of 37 mn equity shares (Rs8.9 bn) and debt of Rs2.8
bn, does not reflect in the cash flow statement.
SAMHI Hotels
4
SAMHI Hotels: Catering to the mid-tier segment

We initiate coverage on SAMHI Hotels with a BUY rating and a DCF-based FV of Rs230/share
based on September 2025E earnings, implying 14X EV/EBITDA on FY2025E estimates. SAMHI
currently trades at 12.2X EV/EBITDA on FY2025E estimates, a significant discount to listed peers
that are trading at 15-20X. We expect SAMHI’s EBITDA to increase at a CAGR of 27% over FY2023-
26E, aided by (1) the addition of 1,143 keys over this period, including the recently consummated
962-key acquisition of the ACIC portfolio (another 436 keys over FY2026-28E), (2) 10% CAGR in
room rates, and (3) margin improvement of 280 bps on higher room rates and contained costs.
Initiate with BUY and FV of Rs230/share

We initiate coverage on SAMHI Hotels with a BUY rating and a DCF-based FV of Rs230/share based on
September 2025E earnings. SAMHI currently trades at 12.2X EV/EBITDA and 29X P/E on FY2025E
estimates—substantially lower than listed peers that trade at a multiple of 15-20X (attributable
hospitality EBITDA). SAMHI has traditionally had higher leverage owing to its aggressive growth
acquisitions (4,801 keys within 13 years of incorporation); the recently concluded equity issuance of
Rs12 bn corrects the leverage with net debt-EBITDA at 3.7X based in FY2025E, from 10.8X in FY2023.
We estimate SAMHI’s EBITDA to increase at a CAGR of 27% during FY2023-26E, lower than the 34%
CAGR seen in the preceding five years.
SAMHI Hotels trades at 12.2X EV/EBITDA on FY2025E estimates

Key financial & operating metrics and valuations for SAMHI Hotels, March fiscal year-ends, 2020-
26E
2020 2021 2022 2023 2024E 2025E 2026E
Market cap. 13,253 13,366 13,366 14,954 38,211 38,211 38,211
Net debt 20,238 22,420 24,419 25,714 18,580 16,348 14,084
Revenue 6,056 1,696 3,227 7,386 10,110 13,233 14,036
EBITDA 1,500 (694) 114 2,377 2,758 4,470 4,915
PAT (1,603) (4,765) (4,248) (3,578) (1,790) 1,311 2,011
EV/EBITDA (X) 22.3 (51.6) 330.5 17.1 20.6 12.2 10.6
P/E (X) (8) (3) (3) (4) (21) 29 19
Total keys (#) 4,050 4,050 4,050 3,839 4,801 4,982 4,982
ARR (Rs/ day) 4,516 2,624 3,149 5,069 5,805 6,281 6,815
% yoy (14) (42) 20 61 15 8 8
Occupancy (%) 61 28 46 72 73 74 75
RevPAR (Rs/ day) 2,772 734 1,445 3,633 4,248 4,678 5,122
SAMHI had an operational portfolio of 3,839 keys, as of March 2023, which has now increased to 4,801
keys as the company concluded the acquisition of six operating hotels with 962 keys (ACIC portfolio) in
the upper-midscale segment. SAMHI’s growth has been led by an acquisition-oriented model, allowing it
to become the third-largest operator of hotels (owned and leased keys) in India within 13 years of
incorporation.
Going forward, SAMHI has an incremental pipeline of 617 keys, which includes a land parcel in Navi
Mumbai (part of the ACIC acquisition), which would house a 350-keys hotel in the upper-midscale
segment. Of these 617 keys, 181 would be added over the FY2023-26E, taking the portfolio to 4,982 keys
by March 2026. The addition of new keys (and renovation of existing hotels) would entail a combined
capex of ~Rs5 bn over the next few years.
SAMHI Hotels
5
SAMHI’s growth has been led by acquisitions that have enabled the rapid growth of the platform
SAMHI’s operating inventory growth (# of operating keys), March fiscal year-ends, 2011-26E
SAMHI (organic) SAMHI (inorganic) ACIC Portfolio

6,000
4,982 4,982
4,801
5,000
4,050
3,839
4,000
2.8x
3,000
3,385 3,174 3,174 3,355 3,355

2,000
1,460
5.8x
1,000 948
252
- 512 665 665 665 665 665
- 252
31-Mar-11 31-Mar-14 31-Mar-17 31-Mar-20 31-Mar-23 31-Mar-24 31-Mar-25 31-Mar-26
Notes:
1) Figures for March 31, 2023, exclude Four Points by Sheraton Ahmedabad and Fairfield by Marriott OMR Chennai, which were sold
on February 2, 2023, and February 8, 2023, respectively.
Source: Company
We use a DCF-based approach to value SAMHI Hotels to fully capture the (1) growth phase with 181/617
keys being added over the next three/five years, (2) integration period for the recently acquired 962 keys
under the ACIC portfolio, (3) stabilization of capital structure, leading to net profitability following the
recent equity issuance and (4) inflexion point in the industry, with improving occupancy levels and higher
ARRs owing to healthy demand that exceeds supply over the coming years.
We value SAMHI using DCF method to fully capture the growth phase
SoTP for SAMHI Hotels, September 2025
Sep-25
Discount rate 13%
Total PV of free cash flows 43,322
Growth in perpetuity 5%
Terminal value 161,993
PV of terminal value 24,383
Net debt 17,464
Equity value 50,241
Shares outstanding 218
Fair value (Rs/ share) 230
CMP 175
Upside 31%
SAMHI Hotels
6
SAMHI Hotels trades at a significant discount to listed peers


25.0
19.6 20.1
20.0
15.3
15.0
12.2
10.0
5.0
-
CMP EV/EBITDA (X) Attributable EV/EBITDA (X) P/E (X) P/B (X) Market
(Rs) 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E
Chalet 590 32.1 23.1 17.5 13.1 32.1 23.1 17.5 13.1 85.8 47.9 31.5 20.6 7.8 6.7 5.6 4.4
Indian Hotels 422 33.1 27.2 19.2 15.4 35.0 28.9 20.1 16.2 59.9 46.7 31.0 25.3 7.5 6.5 5.4 4.5
Lemon Tree 114 24.1 16.2 11.4 10.0 28.9 20.7 15.3 13.7 79.0 35.6 23.5 20.0 10.6 9.3 7.6 6.2
SAMHI Hotels 175 17.1 20.6 12.2 10.6 17.1 20.6 12.2 10.6 (4.2) (21.3) 29.1 19.0 (1.9) 3.5 3.2 2.7

(Rs) 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E
Chalet 660 4,528 6,428 8,489 11,217 4,528 6,428 8,489 11,217 1,410 2,527 3,835 5,863 15,419 17,946 21,781 27,644
Indian Hotels 460 18,046 21,522 29,736 35,477 17,032 20,264 28,350 33,861 9,993 12,828 19,332 23,652 79,820 91,966 110,479 133,149
Lemon Tree 105 4,476 6,870 9,487 10,479 3,580 5,074 6,828 7,594 1,146 2,541 3,844 4,513 8,537 9,689 11,881 14,510
SAMHI Hotels 230 2,377 2,758 4,470 4,915 2,377 2,758 4,470 4,915 (3,578) (1,790) 1,311 2,011 (8,076) 10,794 12,106 13,898
SAMHI Hotels
7
We expect 10% CAGR in room rates for SAMHI Hotels over FY2023-26E
ARR and occupancy trend for SAMHI Hotels, March fiscal year-ends, 2020-26E
ARR (Rs/ day) Occupancy (%), RHS
8,000 73 74 75 80
72
7,000 61 70
6,000 60
5,000 46 50
4,000 40
28
3,000 30
2,000 20
1,000 10
4,516 2,624 3,149 5,069 5,805 6,281 6,815
- -
2020 2021 2022 2023 2024E 2025E 2026E
SAMHI Hotels
8
27% EBITDA CAGR over FY2023-26E; positive PAT beginning FY2025E

SAMHI will likely deliver 27% CAGR in EBITDA over FY2023-26E, driven by (1) the addition of 1,143
keys over this period, including the recently consummated 962-key acquisition of the ACIC
portfolio (another 436 keys over FY2026-28E), (2) 10% CAGR in room rates during the same period
and (3) margin improvement of 280 bps on higher room rates and contained costs.
Commissioning of the new hotels and renovation of existing hotels would require capex of ~Rs5
bn over the next few years. Net debt of Rs18 bn is high at 3.7X FY2025E EBITDA, but manageable
in the context of the improving earnings profile.
Acquisition and turnaround specialist

SAMHI Hotels, an asset owner catering primarily to the mid-tier segment, has grown rapidly to 4,801 keys
across 31 operating hotels within 13 years since inception. SAMHI Hotels aggressively acquired
dislocated/under-performing hotel assets in the past and turned around the assets through rebranding
with an international hotel chain (Marriot, IHG, Hyatt), refurbishing and active asset management. This
has allowed SAMHI to significantly improve the ARR and occupancy of the asset, leading to better
revenue and EBITDA–see Exhibit 9 below.
Operational impact of renovation and rebranding exercise at Sheraton Hyderabad/Holiday Inn Express and
the Marriott portfolio
Key operating metrics for Sheraton Hyderabad and Holiday Inn Express portfolio after renovation
Pre-Renovation After Renovation and Rebranding
Sheraton Hyderabad 4QFY14 1QFY17 1QFY20 1QFY23 4QFY23
Number of Keys 158 216 272 272 272
Occupancy (%) 41% 28% 74% 75% 77%
Average Room Rate (Rs/day) 3,349 5,888 6,434 6,811 10,344
RevPAR (Rs/day) 1,377 1,668 4,786 5,124 7,938
Holiday Inn Express (10 hotels) 3QFY18 3QFY20 4QFY23
Number of Keys 1,319 1,427 1,427
Occupancy (%) 62% 67% 78%
Average Room Rate (Rs/day) 1,768 2,752 3,675
RevPAR (Rs/day) 1,095 1,852 2,883
Marriott Hotels (3 hotels) 3QFY18 4QFY23
Number of Keys 334 343
Occupancy (%) 45% 76%
Average Room Rate (Rs/day) 2,857 5,722
RevPAR (Rs/day) 1,279 4,369
Revenue/EBITDA CAGR of 24%/27% over the next three years

SAMHI will deliver a robust revenue CAGR of 24% to Rs14 bn in FY2026E from Rs7.4 bn in FY2023.
EBITDA will increase at a CAGR of 27% to Rs4.9 bn, aided by (1) the addition of 1,143 keys over this
period, including the recently consummated 962-key acquisition of the ACIC portfolio (another 436 keys
over FY2026-28E), (2) 10% CAGR in room rates, coupled with an increase in occupancy to 75% and (3)
margin improvement of 280 bps on higher room rates and contained costs. We highlight that the ACIC
portfolio (962 keys) was acquired by SAMHI in August 2023 and is estimated to contribute 10-11% to
FY2024E EBITDA, which would rise to 15-16% for FY2025E and beyond. Adjusted for the contribution of
the ACIC portfolio, EBITDA growth would have moderated to a CAGR of 18% over the next three years.
SAMHI Hotels
9
Revenue growth to translate into positive net profits, partly aided by debt reduction
Revenue, EBITDA and PAT for SAMHI Hotels, March fiscal-year ends, 2020-26E (Rs bn)
Revenues EBITDA PAT

15 14
13
10
10
7
6
4 5
5 3
2 3
2 2 2
1
0
-
(1)
(2) (2)
(5) (4)
(5) (4)
(10)
2020 2021 2022 2023 2024E 2025E 2026E
Steady improvement in room rates will be the key driver for earnings growth
SAMHI Hotels—key assumptions, March fiscal year-ends, 2020-26E (Rs mn)
2020 2021 2022 2023 2024E 2025E 2026E
Hospitality
Keys (#) 4,050 4,050 4,050 3,839 4,801 4,982 4,982
Room nights (#) 1,478,250 1,478,250 1,478,250 1,439,635 1,630,182 1,911,329 1,851,553
Occupancy (%) 61 28 46 72 73 74 75
ARR (Rs/day) 4,516 2,624 3,149 5,069 5,805 6,281 6,815
ARR growth (% yoy) (14) (42) 20 61 15 8 8
RevPaR (Rs/day) 2,772 734 1,445 3,633 4,248 4,678 5,122
Revenue (Rs mn) 6,056 1,696 3,227 7,386 10,110 13,233 14,036
EBITDA (Rs mn) 1,500 (694) 114 2,377 2,758 4,470 4,915
EBITDA margin (%) 25 (41) 4 32 27 34 35
ARRs to scale new peaks; marginal improvement in occupancy levels

SAMHI Hotels—ARR, RevPAR and Occupancy, March fiscal-year ends, 2020-26E (Rs mn)
ARR (Rs/day) RevPaR (Rs/day) Occupancy (%), RHS
8,000 73 74 75 80
72
6,815
7,000 61 6,281 70
5,805
6,000 60
5,069 5,122
4,516 46 4,678
5,000 50
4,248
4,000 3,633 40
28 3,149
2,772 2,624
3,000 30
2,000 1,445 20
734
1,000 10
- -
2020 2021 2022 2023 2024E 2025E 2026E
SAMHI Hotels
10
Steady growth in earnings across sub-segments

Key operational/financial metrics by market segment, March fiscal-year ends, 2020-26E (Rs mn)
2020 2021 2022 2023 2024E 2025E 2026E
Upper Upscale and Upscale
Number of Keys 1,074 1,074 1,074 1,074 1,074 1,090 1,307
Average Occupancy 68 24 48 71 73 75 76
Average Room Rate 7,245 3,607 4,263 7,902 9,324 10,257 11,077
% yoy NA (50) 18 85 18 10 8
RevPAR 4,922 857 2,028 5,641 6,842 7,732 8,461
Rental Revenue NA 336 795 2,211 2,690 3,053 3,726
Total Income from assets 3,276 685 1,461 3,605 4,483 5,089 6,210
Adjusted EBITDA from assets 1,234 (207) 213 1,453 1,883 2,392 2,981
Adjusted EBITDA margin from assets 38 NA 15 40 42 47 48
Upper Mid-scale
Number of Keys 1,412 1,412 1,412 1,201 2,163 2,163 1,946
% yoy NA (36) 17 51 15 9 8
RevPAR 2,689 965 1,693 3,663 4,213 4,654 5,026
Rental Revenue NA 497 873 1,747 2,800 4,261 3,769
Total Income from assets 1,933 748 1,254 2,450 4,001 6,087 5,385
Adjusted EBITDA from assets 584 (59) 173 830 1,200 2,130 1,938
Mid-scale
Number of Keys 1,564 1,564 1,564 1,564 1,564 1,729 1,729
% yoy NA (27) 18 53 11 8 8
RevPAR 1,371 439 822 2,226 2,507 2,707 3,007
Rental Revenue — 251 469 1,271 1,435 1,627 1,988
Total Income from assets 970 313 562 1,443 1,794 2,033 2,485
Adjusted EBITDA from assets 155 (87) 56 522 664 854 1,069
Total Portfolio
Number of Keys 4,050 4,050 4,050 3,839 4,801 4,982 4,982
% yoy — (0) 0 1 0 0 0
RevPAR 2,772 733 1,445 3,632 4,248 4,678 5,122
Rental Revenue — 1,084 2,137 5,229 6,925 8,941 9,484
Total Income from assets 6,179 1,746 3,277 7,499 10,277 13,209 14,080
Adjusted EBITDA from assets 1,973 (354) 443 2,805 3,746 5,376 5,988
Corporate expenses (252) (243) (225) (200) (867) (669) (782)
Adjusted EBITDA 1,721 (597) 218 2,606 2,880 4,707 5,206
SAMHI Hotels
11
Margin expansion of 280 bps over the next three years

We expect SAMHI to see an improvement in EBITDA margins, as (1) operating leverage kicks in, with
improving revenues as most costs are largely fixed in nature, resulting in 75-80% EBITDA flow-through
and (2) integration of the recently acquired ACIC portfolio, with its existing portfolio and review of
existing franchise agreements with global brands, which will bring additional cost savings.
We highlight that the hotels in the ACIC portfolio were under the franchise agreements, with the brand
owner (Marriott), in comparison to management contracts for the rest of SAMHI’s portfolio hotels.
SAMHI would convert these franchise agreements into management contracts, helping integrate the
ACIC portfolio with its shared services center and Marriott-operated hotels, resulting in an improvement
in EBITDA margins (current asset-level EBITDA margin of 34% increasing to ~38% over the next 3-4
quarters).
We also note that the near-term EBITDA margin would be impacted by one-time (IPO-related) and ESOP-
related expenses. The one-time expense for FY2024E stands at Rs200 mn. ESOP expenses would be
Rs460 mn, Rs177 mn, Rs95 mn and Rs40 mn for FY2024, 25, 26 and 27E, respectively, for the recently
issued ESOPs (vesting over 4 years). Post this, the ESOP expenses would reduce to more normalized
levels on an ongoing basis.
24% CAGR in revenues over FY2023-26E

Profit & loss statement for SAMHI Hotels, March fiscal year-ends, 2020-26E
2020 2021 2022 2023 2024E 2025E 2026E
Revenues 6,056 1,696 3,227 7,386 10,110 13,233 14,036
Room rentals 4,107 1,084 2,137 5,328 6,925 8,941 9,484
Food and beverage 1,676 510 950 1,820 2,770 3,666 3,888
Recreation and other services 230 35 64 152 329 537 573
Property mgmt and space rental 43 67 77 85 87 89 90
Expenses 4,556 2,390 3,113 5,008 7,352 8,763 9,120
Cost of materials consumed 535 186 328 580 969 1,283 1,361
Employee benefit expense 1,307 865 905 1,230 2,270 2,618 2,767
Other expenses 2,714 1,339 1,880 3,199 4,112 4,862 4,992
EBITDA 1,500 (694) 114 2,377 2,758 4,470 4,915
Depreciation (1,262) (1,118) (1,006) (963) (1,083) (1,237) (1,273)
EBIT 239 (1,812) (892) 1,415 1,676 3,233 3,643
Other income 220 97 104 229 121 237 291
PBT (1,621) (4,802) (4,248) (3,577) (1,790) 1,311 2,011
Tax 17 38 (0) (0) — — —
PAT (1,603) (4,765) (4,248) (3,578) (1,790) 1,311 2,011
Exceptional items (1,395) (13) (184) 192 — — —
PAT after exceptional items (2,999) (4,777) (4,433) (3,386) (1,790) 1,311 2,011
EPS (21) (62) (56) (42) (8) 6 9
Shares outstanding (mn) 76 76 76 85 218 218 218
Growth (%)
Revenue 29 (72) 90 129 37 31 6
EBITDA 69 (146) (116) 1,980 16 62 10
PAT NA NA NA NA NA NA NA
Margins (%)
EBITDA 24.8 (40.9) 3.5 32.2 27.3 33.8 35.0
PAT (25.5) (265.8) (127.5) (47.0) (17.5) 9.7 14.0
SAMHI Hotels
12
3.7X net debt/EBITDA (FY2025E) appears reasonable for an asset-heavy business that has grown rapidly
SAMHI Hotels’ net debt and net debt/EBITDA, March fiscal year-ends, 2020-26E (Rs mn, X)
Net debt (Rs mn) Net debt/EBITDA (X), RHS

30 16
13.5
14
25
10.8 12
20
10
15 6.7 8
6
10
3.7
2.9 4
5
2
20 22 24 26 19 16 14
- 0
2020 2021 2022 2023 2024E 2025E 2026E
Notes:
1) SAMHI Hotels had negative/negligible EBITDA in FY2021/22
Cash generation has been healthy, aggressive growth and pandemic weighed on leverage
SAMHI has consistently had healthy cash generation from operations relative to EBITDA (see Exhibit 17).
However, the aggressive growth over the years meant that cash flows just about supported interest cost
(not the case during the pandemic) and growth capex was funded almost entirely through debt. Making
matters worse, operating cash flows were not able to support interest cost during the pandemic, leading
to an aggressive debt build-up. We estimate moderation in capex and improving cash flows, besides the
infusion of fresh equity, to help SAMHI generate higher free cash that can be used to further de-leverage
the balance sheet.
We note that the large acquisition in FY2024—ACIC portfolio (962 keys)—was primarily funded through
the issuance of new shares, while the recently concluded IPO led to an infusion of Rs12 bn in the form
of equity capital, allowing for debt reduction. We estimate SAMHI’s operating cash flows to improve to
Rs5 bn in FY2025E, against which the company has a capex of Rs1 bn and interest cost of Rs2.1 bn,
which would still allow for de-leveraging of Rs1.3 bn.
SAMHI Hotels
13
Positive free cash generation for FY2024E

Cash flow statement for SAMHI Hotels, March fiscal year-ends, 2020-26E
2020 2021 2022 2023 2024E 2025E 2026E
Profit / (loss) before tax (3,016) (4,815) (4,432) (3,386) (1,790) 1,311 2,011
Depreciation and amortization 1,262 1,118 1,006 963 1,083 1,237 1,273
Finance costs 2,080 3,087 3,460 5,221 3,587 2,158 1,923
Interest income (61) (42) (25) (64) (121) (237) (291)
Profit/(loss) from sale of investments 1 (3) 152 (232) — — —
Provisions (41) (7) 0 (31) — — —
Others 1,233 7 (10) (21) — — —
Income taxes paid (45) 134 (35) (8) — — —
Cash flow before working capital changes 1,411 (521) 116 2,442 2,758 4,470 4,915
Changes in working capital 211 738 147 (267) (182) 634 448
Cash flow from operations 1,623 217 263 2,174 2,577 5,104 5,363
Capital expenditure (282) (7) 0 868 (1,081) (950) (1,250)
Interest received 79 62 38 52 121 237 291
Profit/(loss) from sale of investments 117 367 (64) (236) — — —
Cash flow from investing activities (86) 423 (25) 684 (960) (713) (959)
Equity — — — — 11,904 — —
Dividend paid — — — — — — (218)
Borrowings 641 1,521 3,382 258 (8,000) (1,335) (2,125)
Finance costs paid (1,877) (1,456) (3,557) (3,445) (3,587) (2,158) (1,923)
Cash flow from financing activities (1,236) 65 (174) (3,187) 317 (3,493) (4,266)
Net change in cash 301 704 63 (328) 1,934 898 138
Opening cash balance 446 747 1,451 1,514 1,185 3,119 4,017
Closing cash balance 747 1,451 1,514 1,185 3,119 4,017 4,155
Note: The ACIC acquisition of Rs11.7 bn EV in August 2023, funded through issuance of 37 mn equity shares (Rs8.9 bn) and debt of Rs2.8 bn, does not reflect in the cash flow
statement.
SAMHI has consistently demonstrated healthy cash generation relative to EBITDA

SAMHI Hotels CFO and CFO/EBITDA, March fiscal year-ends, 2020-26E (Rs mn, X)
Cash flow from operations CFO/ EBITDA (X), RHS

6,000 2.5
5,363
5,104
5,000
2.0
4,000
1.5
3,000 2,577
2,174 1.0
2,000 1,623
0.5
1,000
217 263
- -
2020 2021 2022 2023 2024E 2025E 2026E
Notes:
1) SAMHI Hotels had negative EBITDA in FY2021
SAMHI Hotels
14
Rs5 bn capex up to FY2028E to facilitate the addition of 617 keys and renovation of existing hotels
SAMHI plans to add 617 keys over the next few years through brownfield and greenfield additions. This,
along with renovation/ rebranding of some existing hotels, would entail a capex of ~Rs5 bn until
FY20208E, largely concentrated in the next three years. We highlight that SAMHI’s recent equity issuance,
as well as internal accruals beginning in FY2023 should suffice for these capex requirements. SAMHI
had a gross block of Rs27 bn as of March 2023 (3,839 keys), which should grow to Rs39 bn (including
goodwill) by March 2024 (4,801 keys) and eventually to Rs44 bn (5,418 keys) by March 2028E.
We note that in FY2023, SAMHI sold two hotel assets (211 keys across Four Points by Sheraton
Ahmedabad and Fairfield by Marriott OMR Chennai) for a sales consideration of Rs975 mn, which is
reflected in the negative capex of Rs868 mn for the year.
Recent equity issuance and internal accruals to support capex requirements

Capex plans for SAMHI, March fiscal year-ends, 2020-26E (Rs mn)
1,500
1,250
1,081
950
1,000
500
282
7
-
(0)
(500)
(1,000) (868)
2020 2021 2022 2023 2024E 2025E 2026E
Notes:
1) SAMHI Hotels sold off two hotels in FY2023
Rs44 bn of gross block by 2028E, implying capital cost of Rs8.1 mn/key

Gross block and gross block per key for SAMHI, March fiscal year-ends, 2020-26E (Rs mn)
Gross block (incl. goodwill) (Rs mn) Gross block per key (Rs mn), RHS
50,000
14
45,000
40,000 12
35,000
10
8.2 8.1 8.3 8.2 8.1
30,000
7.1 7.1 6.9 7.2 8
25,000
20,000 6
15,000
4
10,000
2
5,000
28,691 28,855 28,117 27,478 39,216 40,566 41,266 41,566 44,066
- 0
2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E
Notes:
1) SAMHI Hotels sold off two hotels in FY2023
SAMHI Hotels
15
Positive equity aided by the recent fresh equity issue

Balance sheet for SAMHI Hotels, March fiscal year-ends, 2020-26E
2020 2021 2022 2023 2024E 2025E 2026E
Non-current assets
Gross block 28,624 28,788 28,050 27,411 34,961 36,311 37,011
Accumulated depreciation 6,074 7,150 7,895 8,499 9,582 10,819 12,092
Property, plant and equipment 22,550 21,638 20,155 18,912 25,379 25,492 24,919
Capital work-in-progress 189 177 197 202 1,102 702 1,252
Goodwill 67 67 67 67 4,255 4,255 4,255
Other intangible assets 91 68 51 31 31 31 31
Loans — 44 59 66 66 66 66
Other non-current assets 1,298 654 730 879 879 879 879
Current assets
Inventories 46 29 25 33 50 66 70
Investments 106 100 93 129 129 129 129
Trade receivables 337 179 248 513 702 919 974
Cash and cash equivalents 747 1,451 1,514 1,185 3,119 4,017 4,155
Loans 39 — 4 0 0 0 0
Other current assets 606 473 723 612 581 581 581
Total assets 26,076 24,880 23,866 22,630 36,294 37,137 37,313
Equity share capital 76 76 76 85 218 218 218

Other equity 2,747 (2,031) (6,465) (8,162) 10,576 11,888 13,680
Equity attributable to the owners of the Company 2,823 (1,955) (6,388) (8,076) 10,794 12,106 13,898
Non-controlling interest — — — — — — —
Total equity 2,823 (1,955) (6,388) (8,076) 10,794 12,106 13,898
Non-current Liabilities
Borrowings 18,638 18,706 23,742 20,553 15,035 13,700 11,575
Deferred tax liabilities (net) 16 — — — — — —
Other non-current liabilities 934 904 2,459 817 817 817 817
Current liabilities
Borrowings 2,346 5,164 2,191 6,347 6,664 6,664 6,664
Trade payables 683 1,003 1,225 1,400 1,393 2,260 2,768
Other current liabilities 610 1,036 616 1,559 1,559 1,559 1,559
Provisions 24 22 21 31 31 31 31
Total liabilities 23,253 26,835 30,254 30,706 25,500 25,032 23,414
Total equity and liabilities 26,076 24,880 23,866 22,630 36,294 37,137 37,313
Ratios
Book value per share (Rs) 37 (26) (84) (95) 50 56 64
Net debt (Rs mn) 20,238 22,420 24,419 25,714 18,580 16,348 14,084
Net debt/equity (X) 7.2 (11.5) (3.8) (3.2) 1.7 1.4 1.0
Net debt/EBITDA (X) 13.5 (32.3) 213.6 10.8 6.7 3.7 2.9
RoAE (73) (1,101) 106 47 (132) 11 15
RoCE 1 (8) (4) 7 7 10 11
Working capital
Inventory days 10 21 10 7 7 7 7
Receivable days 28 59 41 34 35 35 35
Payable days 41 216 139 69 50 62 72
Working capital days (3) (137) (88) (28) (8) (20) (30)
SAMHI Hotels
16
Weak ARR growth and delay in commissioning of assets among key risks
SAMHI’s business is susceptible to industry-level risks including lower occupancies and room
rates, as well as the domination of channel partners such as online travel agents. However, a well-
diversified portfolio both in terms of geographical spread and multi-brand operators will likely
hold the company in good stead. Company-specific risks emanating from the (1) high leverage of
the company, (2) high employee attrition and (3) potential delay in the development of new
projects at stated costs and commissioning timelines could prove to be a dampener for the
business.
Competitive intensity in the hospitality industry

The hospitality industry in India is intensely competitive, and SAMHI’s hotels compete with large
multinational and Indian hotel companies, in their respective regions. The hotels owned or managed by
new/existing competitors may offer lower rates or offer better services or amenities or significantly
expand or improve facilities in the market in which they operate. A slowdown in economic growth in India
could have an adverse effect on SAMHI’s business and financial condition.
Dependence on online travel agents

A portion of SAMHI’s hotel bookings originate from online travel agents (OTAs) and intermediaries. In
the event such companies continue to gain market share compared to the direct booking channels, or if
SAMHI’s competitors negotiate more favorable terms with such agents and intermediaries, SAMHI’s
business and results of operations may be adversely affected.
We highlight that SAMHI’s total expenses (cost of materials, employees and others) of Rs5 bn in FY2023
include a commission of Rs318 mn (6% of expenses), which relates to the commission paid to OTAs and
credit card service providers.
Impact of a Covid like health situation

The hospitality industry in India and globally was severely impacted by the global outbreak of the Covid
pandemic due to reduced traveler traffic and government-mandated restrictions on movement. Any such
event in the future can have a significant impact on SAMHI’s financial condition and cash flows.
Substantial leverage on balance sheet

SAMHI had a net debt of Rs26 bn as of March 2023, implying a net debt/EBITDA (FY2023) of 10.8X. The
acquisition of the ACIC portfolio led to a slight increase in net debt to Rs28 bn. SAMHI used the recent
equity issuance to reduce its borrowings, which should lead to the net debt declining to Rs18 bn as of
March 2024E (net debt/EBITDA of 6.7X as of end-FY2024), and then decline further from there on (3.7X
as of end-FY2025). More importantly, the simultaneous improvement in EBITDA implies that debt
serviceability improved considerably, leading to positive net profits beginning FY2025E. However, the
debt levels still remain high, and any impact on profitability/cash flows may limit the company’s ability
to make interest/principal payments.
SAMHI’s net debt peaked out in FY2023, and should trend downward going forward
Debt, Interest and EBITDA trend for SAMHI Hotels, March fiscal year-ends, 2020-1HFY23 (Rs mn)
2020 2021 2022 2023 2024E 2025E 2026E
Net Debt 20,238 22,420 24,419 25,714 18,580 16,348 14,084
EBITDA 1,500 (694) 114 2,377 2,758 4,470 4,915
Interest expense 2,080 3,087 3,460 5,221 3,587 2,158 1,923
Net Debt/ EBITDA (X) 13.5 (32.3) 213.6 10.8 6.7 3.7 2.9
EBITDA / Interest expense (X) 0.7 NA 0.0 0.5 0.8 2.1 2.6
SAMHI Hotels
17
Non-compliance with certain debt covenants

In the last three financials years, SAMHI was not in compliance with certain financial covenants under
several financing agreements due to the impact of the pandemic on its revenues and indebtedness
levels. The total outstanding principal amount under such financing agreements was Rs10.5 bn as of
June 2023. Such covenants included the maintenance of a specified RevPAR and certain minimum
ratios, such as specified debt service coverage ratios, maximum debt-to-EBITDA ratios, interest service
coverage ratios and maximum bank borrowings to total net worth ratios. While the company received
waivers of such defaults under the relevant financing agreements from such lenders, it may not be able
to comply with these or other covenants in the future.
SAMHI has pledged equity shares of certain subsidiaries in favor of certain lenders to secure loan
facilities availed by certain of its subsidiaries: (1) 28% of the share capital of the subsidiary, Ascent, in
favor of Vistra ITCL on behalf of HDFC Limited, and 99.99% on behalf of DBS Bank India and Piramal
Enterprises; (2) 30% of the share capital of the subsidiary, Caspia, in favor of SBI; (3) 99.99% of the share
capital of the subsidiary, Argon, in favor of Axis Trustee Services on behalf of Citicorp Finance, Citibank,
N.A., Aditya Birla Finance and Federal Bank; (4) 99.99% of the share capital of the subsidiary, Barque, in
favor of Axis Trustee Services on behalf of Citicorp Finance, Citibank, N.A., Aditya Birla Finance and
Federal Bank; (5) 99.99% of the share capital of the subsidiary, SAMHI JV, in favor of Axis Trustee
Services on behalf of Citicorp Finance, Citibank, N.A. and Aditya Birla Finance; and (6) 100% of the share
capital of the subsidiary, SAMHI Ahmedabad, in favor of Vistra ITCL on behalf of ICICI Prudential
Corporate Credit Opportunities Fund (and other investors identified by ICICI Prudential Corporate Credit
Opportunities Fund) and Piramal Enterprises Limited.
SAMHI had also availed a moratorium on installments of certain term loans and interest on certain
working capital facilities availed by it in accordance with the guidelines issued by the RBI during the
pandemic. As of June 2023, SAMHI had drawn down an aggregate amount of Rs6.3 bn at interest rates
ranging from 8.5% to 13% (with a weighted average interest rate of 10.4%), under credit lines from their
lenders pursuant to the Emergency Credit Line Guarantee Scheme (“ECLGS”) offered by the Government
of India. It had also raised further capital aggregating to Rs6.95 bn from Sarvara Investment Fund I for
the repayment of its existing debt during the pandemic, which was fully repaid as of March 2023 by
refinancing through another term loan.
Concentration risk with select hotels, brands and geographies

Three of SAMHI’s largest hotels, namely Hyatt Regency in Pune, Sheraton in Hyderabad and Courtyard
by Marriott in Bengaluru ORR, in the aggregate contributed to revenues of Rs2.87 bn (38%) in FY2023. In
addition, a large portion of its revenues are derived from hotels concentrated in a few geographical
regions, namely Bengaluru, Pune and Hyderabad.
SAMHI derives a substantial majority of its revenue from hotels operated by third-party operators, namely
Marriot, Hyatt and IHG. As of September 2023, SAMHI has a portfolio of 31 operating hotels, of which 17
are operated by Marriott, 10 by IHG and two by Hyatt, comprising a total of 4,522 keys, or 94% of the total
keys. Termination (due to non-compliance or for any other reason) or non-renewal upon expiry of the
contract will result in SAMHI being unable to use the brands/loyalty programs of the hotel operators to
market the hotels and the business, and this could impact its operational and financial performance.
SAMHI Hotels
18
SAMHI faces some concentration risk with respect to select hotel operators and geographies
Share of SAMHI’s total income from assets, FY2023 (%)
100% Caspia, 2
Others, 11
IHG, 18 Midscale, 19
Chennai, 7
80% Ahmedabad, 8
Hyatt, 18 Delhi-NCR, 11
Upper Midscale, 32
60%
Pune, 18
40%
Hyderabad, 19
Marriott, 61
Upper Upscale &
20% Upscale, 47
Bengaluru, 27
0%
By Operator By Segment By City
Employee attrition has been high in the hospitality industry

SAMHI has a large workforce deployed across its hotels. As of March 2023, it had 1,981 permanent
employees and 421 personnel on contract. For FY2023, it had attrition of 1,424 permanent employees,
representing an attrition rate of 91%. Such attrition was mainly due to the impact of the Covid pandemic,
reorganization of mid-level and senior roles and international mobility programs. According to the JLL
Report, the average annual employee attrition in India across the branded hotel segment was 36% for
CY2022—the attrition for executive employees and non-executive employees in the hospitality industry
was approximately 20% and 42%, respectively, for CY2022.
We highlight that the high attrition should come off in FY2024, in-line with industry standards, as the
acquisition consummates and Covid-related disruptions become history.
SAMHI is exposed to employee disruptions

Trend in attrition at SAMHI Hotels, March fiscal year-ends, 2020–2023
2020 2021 2022 2023
Attrition (# of employees) 1,132 1,026 1,360 1,424
Attrition Rate (%) 51 47 87 91
Source: Company
Project execution risk due to time and cost overruns

SAMHI is pursuing several development projects by renovating/rebranding their existing hotels, and
building and acquiring new properties. Its inability to acquire, develop and renovate new projects within
budgeted cost and time constraints would impact future operations.
SAMHI is in the process of renovating and rebranding its existing Hyatt Regency Pune (301 keys) and
developing Holiday Inn Express in Rajarhat, Kolkata (111 keys). Further, it is expanding its existing
portfolio of hotels by adding 156 keys, renovating and/or rebranding 402 keys and adding two additional
F&B outlets across several locations, including Hyatt Regency Pune, Four Points by Sheraton Vizag,
Holiday Inn Express Bengaluru Whitefield, Fairfield by Marriott Chennai Sriperumbudur, and Caspia Pro
Greater Noida. In addition, it intends to pursue several growth opportunities within the ACIC Portfolio,
such as the renovation and rebranding of the 217 keys Four Points by Sheraton Pune into an Upper
Upscale and Upscale hotel and the development of a 350 keys hotel under the Upper Mid-scale segment
in MIDC, Navi Mumbai.
SAMHI Hotels
19
SAMHI: India’s fastest-growing branded hotel portfolio

SAMHI is a prominent branded hotel ownership and asset management platform in India, with the
third-largest inventory of operational keys (owned and leased) in India. Following the recent
acquisition of the ACIC portfolio, SAMHI has 31 operating hotels in its portfolio with 4,801 keys.
SAMHI has a growth pipeline to 617 keys (including two additional hotels in the cities of Kolkata
and Navi Mumbai), thereby increasing the presence to 14 key urban regions.
SAMHI is among the fastest-growing hotel ownership and asset management platform in India, having
grown to a portfolio of 4,801 keys (31 hotels) spread across 13 cities in a short span of 13 years. SAMHI
believes in its abilities to acquire under-performing and/or underpriced assets, where it can improve the
asset performance through a combination of refurbishing, rebranding and active asset management.
SAMHI was founded by Mr Ashish Jakhanwala through equity contributions from several prominent
private equity funds. During the course of the past decade, SAMHI has tapped on a combination of equity
as well as debt capital for an aggressive growth of hotel assets, in key service centers in the country.
SAMHI has a well-diversified presence across key cities in India

Location of SAMHI’s assets across India
SAMHI Hotels
20
SAMHI has ~40% of its shareholding with PE players

Shareholding pattern for SAMHI, September 2023
Shareholding (September 2023)
Others
Individuals 6% ACIC Mauritius
7% 17%
Blue Chandra Pte

Ltd
FPIs 9%
24%
Goldman Sachs Investments
8%
GTI Capital Alpha Pvt Ltd

Alternate TIMF Holdings 6%
Investment Funds Mutual Funds 1%
9% 13%
We highlight that post the recent equity issuance, SAMHI has a more diversified shareholding, with the
share of PE players at ~40% (including 17% for ACIC Mauritius in exchange for the portfolio acquisition).
The shareholding of directors stands at ~1% post the issuance. We do note that certain shareholders in
SAMHI (see Exhibit below) have voluntarily locked-in part of their shareholding in the company
(aggregating 15.8% of the post-offer holding), for a period of 18 months from the date of allotment in
September 2023.
SAMHI has 15.8% of post-IPO shareholding locked-in voluntarily for 18 months

Details of voluntary lock-in post IPO
Shareholder Post-offer lock-in (%)
Asiya Capital (ACIC) 8.6
Blue Chandra Pte. Ltd. 4.0
GTI Capital Alpha Pvt Ltd 1.5
Others 1.3
Mr. Ashish Jakhanwala 0.4
Total 15.8
Competitive strengths—low capital cost, quick turnaround, well-diversified presence

 Ability to acquire dislocated hotels and rerate hotel performance through renovation/rebranding
SAMHI has established an asset ownership business model, enabling it to achieve scale and earnings
growth by incurring low capital expenditures. Within 13 years of starting its business operations, the
company has grown to become India’s third-largest hotel owner, by number of keys (owned and
leased). Furthermore, it is the fastest-growing hotel owner by number of keys added per calendar year
compared with listed hospitality companies in India (based on their growth since their respective
inception). As of September 2023, SAMHI has added ~369 keys to its portfolio per year since
inception. SAMHI has demonstrated the ability to identify, acquire and turnaround hotels, which offer
significant opportunities for value accretion over the years, and consequently, has grown its total
operating keys to 4,801 keys across 31 hotels as of September 2023.
SAMHI Hotels
21
SAMHI’s growth has been led by acquisitions that have enabled the rapid growth of the platform
SAMHI operating inventory growth (# of operating keys)
SAMHI (organic) SAMHI (inorganic) ACIC Portfolio

6,000
4,982 4,982
4,801
5,000
4,050
3,839
4,000
2.8x
3,000
3,385 3,174 3,174 3,355 3,355

2,000
1,460
5.8x
1,000 948
252
- 512 665 665 665 665 665
- 252
31-Mar-11 31-Mar-14 31-Mar-17 31-Mar-20 31-Mar-23 31-Mar-24 31-Mar-25 31-Mar-26
Notes:
1) SAMHI sold Four Points by Sheraton Ahmedabad and Fairfield by Marriott OMR Chennai on 2 February 2023 and 8 February 2023,
respectively.
SAMHI follows a data analytics-driven approach to evaluate acquisition opportunities; the final decision
to act on such opportunities is primarily driven by its ability to create products at a discount on
replacement cost, expected hotel profitability, integration with existing portfolio, and long-term
prospects of the market. The company evaluates each acquisition opportunity on several parameters
such as location, micro-market life cycle and acquisition cost relative to replacement cost. It follows an
assessment policy focusing on improving performance indicators to allow its asset-management team
to plan turnaround strategies.
Complementing its acquisition strategy is the in-house development capabilities to build greenfield
hotels within reasonable timelines at marquee locations in high density tier-1 markets, where existing
supply is not available to acquire. For these greenfield hotels, SAMHI typically follows predictable
demand-supply trends, with a goal to create a long-term asset and high barriers to entry. Its ability to
acquire and build hotels by adopting a capital-effective model enables it to achieve significant returns
on its invested capital, as demonstrated by a relatively low average cost per key compared with the
industry.
SAMHI has lower average cost per key versus the industry
Capital cost comparison between SAMHI and industry average (Rs mn/key)
Upper Upscale and Upscale Upper Mid-scale Mid-scale
SAMHI's Portfolio 11.96 5.73 2.36
India Industry Average 12.0 - 18.0 7.0 - 9.0 5.0 - 7.0
Source: Company
Following the acquisition of dislocated hotels, SAMHI usually carries out renovation and rebranding,
which has historically shown accretive returns on incremental capital expenditure, primarily driven by a
material increase in average room rates after renovation and rebranding, leading to a significant growth
in hotel revenues and profitability.
SAMHI Hotels
22
Operational impact of renovation and rebranding exercise at Sheraton Hyderabad/Holiday Inn Express and
the Marriott Portfolio
Key operating metrics for Sheraton Hyderabad and Holiday Inn Express portfolio after renovation
Pre-Renovation After Renovation and Rebranding
Sheraton Hyderabad 4QFY14 1QFY17 1QFY20 1QFY23 4QFY23
Number of Keys 158 216 272 272 272
Occupancy (%) 41% 28% 74% 75% 77%
Average Room Rate (Rs/day) 3,349 5,888 6,434 6,811 10,344
RevPAR (Rs/day) 1,377 1,668 4,786 5,124 7,938
Holiday Inn Express (10 hotels) 3QFY18 3QFY20 4QFY23
Number of Keys 1,319 1,427 1,427
Occupancy (%) 62% 67% 78%
RevPAR (Rs/day) 1,095 1,852 2,883
Marriott Hotels (3 hotels) 3QFY18 4QFY23
Number of Keys 334 343
Occupancy (%) 45% 76%
Average Room Rate (Rs/day) 2,857 5,722
RevPAR (Rs/day) 1,279 4,369
Source: Company
 Portfolio’s scale and diversification further enhanced by sector tailwinds

SAMHI’s hotels are located in 13 cities in India that constitute key urban consumption centers across
India, which collectively account for 70% of air passenger traffic and 90% of office space in India, as
of March 2023. SAMHI has selected its target cities based on macro themes such as proximity to
airports and premium office space growth to ensure long-term and sustainable growth within
selected cities.
SAMHI benefits from diversification across cities, price-points and hotel operators, which reduces the
impact of market volatility in any of the key markets. The multi-brand and segments business model
enables SAMHI to capitalize on expected growth in many hotel segments. The spread between
geographies, segments and hotel operators diversifies the revenue base and functions in rationalizing
the risks associated with the dependence on any one city, segment or hotel operator.
SAMHI’s earnings are spread across operators, price points and cities; some concentration risk in terms of
hotel operators (esp. Marriott)
Share of SAMHI’s total income from assets, FY2023 (%)
100% Caspia, 2
Others, 11
IHG, 18 Midscale, 19
Chennai, 7
80% Ahmedabad, 8
Hyatt, 18 Delhi-NCR, 11
Upper Midscale, 32
60%
Pune, 18
40%
Hyderabad, 19
Marriott, 61
Upper Upscale &
20% Upscale, 47
Bengaluru, 27
0%
By Operator By Segment By City
SAMHI Hotels
23
SAMHI’s presence in key markets by segment and potential growth opportunities

SAMHI’s key portfolio hotels
Market Upper Upscale and Upscale Upper Mid-scale Mid-scale
Fairfield by Marriott (ORR) Holiday Inn Express (Whitefield)
Bangalore Courtyard by Marriott (ORR) Fairfield by Marriott (Rajajinagar) Holiday Inn Express (Tumkur Road)
Fairfield by Marriott (Whitefield)
A 350 keys hotel under the Upper Mid-scale segment (Navi

Mumbai – –
Mumbai) (1) (2)
Hyatt Place in Udyog Vihar, Holiday Inn Express (Gurgaon)

Delhi NCR Caspia (Shalimar Bagh)
Gurugram Caspia Pro (Greater Noida)
(1)
Holiday Inn Express (Hi-Tech)
Hyderabad Sheraton Fairfield by Marriott (Gachibowli)
Holiday Inn Express (Banjara Hills)
Fairfield by Marriott (Kharadi) Holiday Inn Express (Hinjewadi)
Pune Hyatt Regency on Nagar Road (1)(3)
Four Points by Sheraton (Viman Nagar) Holiday Inn Express (Pimpri)
Fairfield by Marriott (Sriperumbudur)
(1)
Chennai – Four Points by Sheraton (OMR) Holiday Inn Express (OMR)
(1)
Fairfield by Marriott (MWC)
(1)
Ahmedabad Renaissance (SG Highway) Fairfield by Marriott (Ashram Road) Holiday Inn Express (SG Road)
Kolkata – – Holiday Inn Express (Rajarhat)
Four Points by Sheraton (Vizag)
Fairfield by Marriott (Coimbatore)
Others – Holiday Inn Express (Nashik)
Fairfield by Marriott (Goa)
(1)
Four Points by Sheraton (Jaipur)
Notes:
1) This hotel is part of the ACIC Portfolio.
2) This hotel is currently under development and is expected to be completed by June 2027.
3) This hotel is currently under renovation and rebranding into an Upper Upscale and Upscale hotel, and is expected to be completed by September 2025.
Source: Company
 SAMHI’s track record to operate hotels efficiently

SAMHI’s operating efficiency enables it to maximize the impact of favorable revenue growth on its
profitability and limit the impact of low revenue cycles. The parameters for measuring the operating
efficiency of its hotels include gross floor area per room, staff per room and EBITDA margin.
 Efficient space utilization: Across SAMHI’s portfolio of hotels, it has an average gross floor area
of 61 sq. mt per room.
 Shared services centers: Given the partnership with Marriott and IHG across multiple hotels, the
company has set up shared services centers to centralize the key functions across hotels. This
enables it to reduce on-property staff for operational functions such as finance, engineering and
procurement.
 Lowest staffing ratios among peers: The use of technology to manage hotels, space efficiencies
and shared services centers enables SAMHI to achieve one of the lowest staffing ratios among
peers.
SAMHI has one of the lowest staffing ratios among peers

Average staff per key for SAMHI and Industry
Staffing Ratio Upper Upscale and Upscale Upper Mid-scale Mid-scale
SAMHI 1.00 0.65 0.33
Industry Average 1.1-1.3 0.60-0.80 0.40-0.60
Source: JLL Report
 Ability to create operating arbitrage using analytical tools

SAMHI has developed SAMHIntel, a proprietary analytics tool, and SAMConnect, a building
management tool. SAMHIntel helps to manage, analyze and use operating data received from the
hotel, whereas SAMConnect helps facilitate efficient hotel management across the portfolio.
SAMHI Hotels
24
Core strategy hinges on acquisitions, renovations and rebranding

SAMHI’s core strategy is to acquire and own hotels with the intent of obtaining long-term, sustainable
and risk-adjusted return on capital employed. Its key evaluation criteria include location, airline
passenger traffic growth, product and positioning potential, future supply prospects/competition and
the development risk. It prepares an asset management plan as part of its investment underwriting,
which includes a product improvement plan, and immediate actions required after the completion of the
acquisition and positioning strategy.
On August 10, 2023, SAMHI completed the acquisition of the ACIC portfolio, comprising 962 keys across
6 operating hotels, located in Hyderabad, Pune, Chennai, Ahmedabad and Jaipur, and a land parcel in
Navi Mumbai, with development potential of 350-keys hotel. In consideration for the sale of the ACIC
portfolio, the company issued 37.5 mn equity shares to Asiya Capital, constituting 30.51% of the pre-IPO
fully diluted share capital. SAMHI intends to pursue growth opportunities within the ACIC portfolio
through the renovation and rebranding of the 217 keys Four Points by Sheraton Pune into an Upper
Upscale and Upscale hotel and the development of the 350 keys Upper Mid-scale hotel in Navi Mumbai.
Additionally, SAMHI has a pipeline of growth opportunities through (1) renovation and rebranding of the
existing 301-keys Hyatt Regency Pune Hotel into a luxury brand hotel under Hyatt’s management, which
is expected to be completed by September 2025, (2) completion of a 111-keys Holiday Inn Express in
Rajarhat, Kolkata, which is currently under development and is expected to be completed by September
2024; and (3) expansion and renovation within the existing portfolio of hotels by renovating and/or
rebranding 402 keys, adding 156 keys and adding two additional F&B outlets across several locations,
including Hyatt Regency Pune, Four Points by Sheraton Vizag, Holiday Inn Express Bengaluru Whitefield,
Fairfield by Marriott Chennai Sriperumbudur, Caspia Pro Greater Noida and Caspia Delhi, which are
expected to be completed between September 2024 and September 2026.
 Position hotels to benefit from favorable demand trends in sector and enhance operating
efficiencies
SAMHI’s portfolio has seen occupancy levels reaching above 70% for FY2023; the company intends
to focus on increasing ARRs and improving operating margins, while driving occupancies further. It
intends to focus on the following key initiatives to benefit from favorable demand:
 Monitor the performance of various demand generators, analyze trends in the modes and sources
of bookings and identify high occupancy periods to improve ARRs across the portfolio.
 Work with hotel operators to identify areas that could present incremental revenue opportunities.
Certain areas that it has identified using SAMHIIntel include predictions of low occupancy weeks
within a month, steps to improve weekend occupancy in business hotels and the impact of space
utilization on operating margins.
 Rationalize operating cost base across major expense heads, while benchmarking each hotel to
other hotels within the existing portfolio, using analytics platforms.
 Augment the product offerings by way of improved F&B services, room facilities, event facilities
for meetings, incentives, conferences and exhibitions to maintain competitiveness, and achieve
improved growth in the market share.
 Enhance hotel utilization and revenue-generating areas within the portfolio.
 Complete identified opportunities currently under development
 SAMHI has a strong pipeline of projects that are under development, which it intends to complete
in the near future; these are projects where material capital expenditure has already been incurred:
(1) renovation and rebranding of Hyatt Regency Pune into a luxury brand hotel under Hyatt’s
management; (2) completion of under-development Holiday Inn Express in Rajarhat, Kolkata; and
(3) expansion of existing facilities.
SAMHI Hotels
25
SAMHI plans to expand several facilities in its hotels to capture future demand growth
Planned renovation and expansion across the portfolio
Renovation & Rebranding
Asset Rooms Plan Current Status Target Completion
Hyatt Regency Pune 301 Renovation & Rebrand Design & Development Sep-25
Four Points by Sheraton Pune 217 Renovation & Rebrand Concept Discussion Sep-25
Four Points by Sheraton Vizag 123 Renovation Design & Development Sep-24
Caspia Pro Greater Noida 137 Renovation & Rebrand Detail & Tendering Sep-24
Caspia Delhi 142 Renovation & Rebrand Concept Discussion Sep-24
Total 920
Inventory Addition
Asset Rooms Plan Current Status Target Completion
Holiday Inn Express Whitefield Bangalore 54 Extension Fit-out Stage Sep-24
Holiday Inn Express Kolkata 111 New Build Fit-out Stage Sep-24
Hyatt Regency Pune 16 Extension Design & Tendering Sep-24
Fairfield by Marriott Sriperumbudur 86 Extension Design Development Sep-26
Upper Mid-scale Hotel Navi Mumbai 350 New Build Concept & Approval Jun-27
Total 617
Source: Company
The estimated capex for the above renovations/expansions is Rs5 bn, which SAMHI aims to fund
utilizing its cash flows from operations. These projects are expected to offer economies of scale
benefits through operating leverage and further improve the results of operations from the underlying
hotels.
 Integrate ACIC portfolio to drive enhanced performance

On August 10, 2023, SAMHI completed the acquisition of the ACIC portfolio, comprising 962 keys
across 6 operating hotels, located in Hyderabad, Pune, Chennai, Ahmedabad and Jaipur, and a land
parcel in Navi Mumbai, with the development potential of a 350-keys hotel (upper mid-scale).
We expect SAMHI to see an improvement in EBITDA margins, as (1) operating leverage kicks in with
improving revenues as most costs are largely fixed in nature, resulting in 75-80% EBITDA flow-through
and (2) integration of the recently acquired ACIC portfolio with its existing portfolio and review of
extant franchisee agreements with global brands, which will bring additional cost savings. We
highlight that the hotels in the ACIC portfolio were under the franchise agreements with brand owners,
in comparison with management contracts for the rest of SAMHI’s portfolio hotels. SAMHI would
convert these franchise agreements to management contracts, helping integrate the ACIC portfolio
with its shared services center with Marriott operated hotels, resulting in an improvement in the
EBITDA margins (current asset-level EBITDA margin of 34% to ~38% in the next 3-4 quarters). We do
note that the near-term EBITDA margin would, however, be impacted by one-time and ESOP-related
expenses.
The ACIC portfolio operates at a higher occupancy in comparison to SAMHI’s existing portfolio (blended)
Key metrics for ACIC portfolio, March fiscal year-ends, 2022-1HFY23
2022 2023 1HFY24
Number of Keys 962 962 962
Average Occupancy (%) 58% 79% 78%
RevPAR (Rs/day) 1,743 3,865 4,013
SAMHI Hotels
26
 Pursue growth opportunities through acquisitions

The company’s growth strategy to expand the hotel portfolio is based on its track record in hotel
acquisition and turnaround, and is focused on acquiring properties, with the intent of obtaining long-
term and sustainable risk-adjusted returns on capital employed. The strategy is based on the
following key factors:
 Identification of hotels which it views as dislocated (i.e., hotels underperforming as compared to

a fair competitive set) from their inherent potential due to a combination of factors such as poor
product, brand, capital structure or management or inadequate operating model.
 Strategic timing of target selection (with adequate demand base but with significant potential for
growth as the precinct matures in terms of social and commercial infrastructure).
 Renovation and rebranding of acquired hotels by identifying core target market, product and brand.
 Assessing potential operating opportunities using data analytics, asset management tools and
economies of scale.
 Engaging with hotel operators such as Marriott, IHG and Hyatt, allowing access to industry best
practices and their global network of loyalty programs, among other things.
 Reduction of debt
SAMHI’s weighted average cost of debt has improved to 10.5% as of November 2023 from 12.5% as
of March 2023, as it repaid some of its high-cost debt. SAMHI is targeting a further 100-120 bps
reduction in its cost of debt as it reprices the remaining high-cost borrowings.
We highlight that SAMHI had sold Four Points by Sheraton Ahmedabad and Fairfield by Marriott OMR
Chennai for Rs640 mn and Rs335 mn, respectively, in February 2023, which also aided some debt
reduction.
Management and operation of hotels—dependence on global hotel brands

 Hotels managed by third-party hotel operators. As of September 2023, 29 (out of 31) of the operating
hotels are managed by third-party operators, namely, Marriott, IHG and Hyatt, pursuant to hotel
operator services agreements and related agreements executed with them.
 Hotels under transition. SAMHI operates two hotels, comprising a total of 279 keys under its own
brands, Caspia and Caspia Pro. SAMHI is operating these hotels on a temporary basis. It has entered
into a binding hotel operator services agreements with Marriott in November 2017 and IHG in
November 2017, respectively, to renovate and relaunch these hotels at New Delhi and Greater Noida
as Fairfield by Marriott and Holiday Inn Express hotels, respectively. The renovation and rebranding of
these hotels are expected to be completed by September 30, 2024.
 Hotel operator and related agreements. SAMHI benefits from hotel operator services agreements
and related agreements with (1) Marriott for global brands such as Renaissance, Four Points by
Sheraton, Sheraton, Fairfield by Marriott and Courtyard by Marriott, (2) IHG for the global brand Holiday
Inn Express, and (3) Hyatt for global brands Hyatt Regency and Hyatt Place; with terms generally
ranging from 20 to 30 years. With certain hotel operators (or their relevant affiliates), it also enters into
ancillary agreements such as license and royalty agreements for the use of brands and trademarks,
international marketing program participation agreements, technical services agreements and
training and computer systems agreements, all of which generally have the same tenure as the
corresponding hotel operator services agreements.
 Obligations of the hotel operators. Pursuant to the terms of the hotel operator services
agreements, the hotel operators are required to render technical and professional services and
supervise, control and direct the operation of the hotels. SAMHI works closely with the respective
operators to finalize annual operating plans for the hotels.
 SAMHI’s obligations. Pursuant to the hotel operator services agreements, SAMHI is required to
maintain good and marketable title in the freehold property and hotel buildings, subject to any
encumbrances that may be created for financing of the relevant hotel. It is also responsible for
procuring and renewing all licenses, permits and approvals necessary for operation of the hotels,
SAMHI Hotels
27
and also for procuring and maintaining certain specified insurance policies during the subsistence
of the hotel operator services agreements.
 Payment terms. SAMHI is generally obliged to pay to the hotel operators (or their relevant
affiliates) fee for technical design services, periodic operating fees including, management fees
and license fees for the use of certain trademarks, based on invoices raised, and commercial
remittances against invoices for advertising, sales and marketing, promotion, information
technology services and related expenses incurred by the hotel operator or their affiliates. The
aforementioned management fee and license fee compensate the hotel operators based on a fixed
percentage of the gross revenue of the hotel and/or a specified portion of gross operational profits
as incentive fees, subject to the terms of the hotel operator services agreements.
SAMHI is the among the fastest growing hospitality company in India

Key events and milestones for SAMHI
Calendar Year Events and Milestones
2010 Incorporation of the Company
2011 Initial equity investment by "GTI Samhi Pte Limited" and "Blue Chandra" in the Company
Opening of the Corporate Office in Gurugram
2012
Acquisition of a majority stake (60%) in "Barque" and addition of "Formule 1" hotels to the portfolio
2013 Commencement of operations at "Fairfield by Marriott Bangalore Rajajinagar" Hotel
2014 Investment by IFC in the Company by way of subscription to the FCCDs
Commencement of operations at "Hyatt Place Gurgaon Udyog Vihar"
Equity investment by "GSA" in the Company
2015 Commencement of operations at "Sheraton Hyderabad Hotel, Fairfield by Marriott Bangalore Outer Ring Road
and Courtyard by Marriott Bangalore Outer Ring Road"
Acquisition of 100% shareholding in "Ascent", which currently owns the "Hyatt Regency Pune" hotel
2016
Commencement of operations at "Four Points by Sheraton Visakhapatnam"
Acquisition of the remaining 40% shareholding in "Barque" as a result of which Barque became a wholly owned
Subsidiary of the Company
Entered into hotel operator agreements with "Intercontinental Hotels Group" for rebranding the portfolio of
2017
hotels, which was acquired as a result of acquisition of Barque to “Holiday Inn Express”
Commencement of operations under the Marriott brand at "Renaissance Ahmedabad Hotel" and "Fairfield by
Marriott Coimbatore"
Acquisition of "Luxury Singapore Holding Company Pte Limited’s" 33% shareholding in SAMHI JV, as a result of
which the Company acquired 100% shareholding of SAMHI JV
Commencement of operations at "Holiday Inn Express Pune Hinjewadi, Holiday Inn Express Chennai OMR
Thoraipakkam, Holiday Inn Express Gurgaon Sector 50, Holiday Inn Express Bengaluru Whitefield ITPL, Holiday
2018 Inn Express Ahmedabad Prahlad Nagar, Holiday Inn Express Hyderabad Banjara Hills, Holiday Inn Express
Hyderabad Hitech City, Holiday Inn Express Nashik Indira Nagar, Holiday Inn Express Pune Pimpri and Holiday
Inn Express Yeshwanthpur Bengaluru"
Commencement of operations at "Fairfield by Marriott Bengaluru Whitefield, Fairfield by Marriott Pune Kharadi,
Fairfield by Marriott Goa Anjuna, Fairfield by Marriott Sriperumbudur Hotel"
Acquisition of the "ACIC SPVs" which includes 962 keys across six operating hotels in the Upper Midscale
2023 segment under the "Fairfield by Marriott" and "Four Points by Sheraton" brands and a parcel of land for the
development of a hotel under the Upper Mid-scale segment in Navi Mumbai, Maharashtra
SAMHI Hotels
28
Board of directors and key management Personnel at SAMHI Hotels

Board of directors and key management personnel at SAMHI Hotels
Board of Directors
Name Designation Brief Profile
Mr. Jakhanwala is a founder of the Company. He holds a bachelor’s degree in commerce from the University of
Delhi, a diploma in hotel management and catering technology from the National Council for Hotel Management
Chairman, Managing
and Catering Technology, New Delhi and a PGDM from International Management Institute, New Delhi. He was
Ashish Jakhanwala Director and Chief
previously associated with InterGlobe Hotels Private Limited and Pannell Kerr Forster Consultants Pvt. Ltd. He was
Executive Officer (CEO)
also awarded the Gold Bernache by Accor in 2009. He has experience in the field of hotel operations, design,
consulting and investment.
Mr. Jacob holds a bachelor’s degree in commerce from the Mahatma Gandhi University, Kerela, and is a CPA from
the State of Delaware, USA. He has previously worked with Albazie & Co.(RSM) and Ernst & Young, prior to joining
Ajish Abraham Jacob Non-Executive Director
Asiya Capital Investments Company K.S.C.P. He has been associated with Asiya Capital Investments Company
K.S.C.P. since 2013 and is currently the Assistant Vice President – Investments.
Mr. Thadani holds a bachelor’s degree in science and a master’s degree in arts each from New York University. He
Manav Thadani Non-Executive Director is an experienced consultant in the field of hospitality and is the founder and chairman of Hotelivate Private
Limited. He was previously associated with HVS Licensing LLC.
Mr. Schulhof holds a bachelor’s degree in arts from Grinnell College, Iowa and a master’s degree in science from
Michael Peter Cornell University, New York. He also holds a degree of doctor of philosophy (physics) from Brandeis University,
Non-Executive Director
Schulhof Massachusetts and was awarded an honorary degree of doctor of science from Grinnell College, Iowa. At present,
Michael Peter Schulhof is the chairman of GTI Holdings LLC.
Mr. Jain holds a bachelors’ degree in mechanical engineering from Birla Institute of Technology, Ranchi University
Aditya Jain Independent Director and MBA from Henley - The Management College, Brunel University. He is the chairman and editorial director of
International Market Assessment India Private Limited.
Ms. Kapoor holds a bachelor’s degree in science and an MBA from the University of Allahabad. She has experience
across various sectors, including tourism and finance, and has previously worked with the Tourism Finance
Archana Capoor Independent Director
Corporation of India as the chairman and managing director, the Indian Trust for Rural Heritage and Development
as a member secretary and Jet Airways as a finance consultant.
Mr. Dhawan holds a bachelor’s degree in economics from the University of Delhi, and an MBA from the Indian
Institute of Management, Ahmedabad. He was previously associated with Bank of America as a senior vice
Krishan Dhawan Independent Director
president and manager of its Asia Banking Unit, Oracle India as a managing director, and Shakti Sustainable Energy
Foundation as the chief executive officer.
Mr. Holland holds a master’s degree in Property Development (Project Management) from the South Bank
University, London, a bachelor’s degree in Building Surveying from the Thames Polytechnic and is a fellow of the
Michael Holland Independent Director
Royal Institution of Chartered Surveyors. He has over 23 years of work experience in the commercial real estate
sector in Asia and Europe.
Key Managerial Personnel and Senior Management
Name Designation Brief Profile
He is an associate of the Institute of Chartered Accountants of India. He holds a bachelor’s degree in commerce
(honours) from the Sri Guru Teg Bahadur Khalsa College, University of Delhi and a diploma in management from
Rajat Mehra Chief Financial Officer the Indira Gandhi National Open University, New Delhi. He joined the Company on December 11, 2012. Previously,
he was associated with Religare Corporate Services Limited as an executive vice president–finance change
management.
Senior Director – He is a member of the Institute of Company Secretaries of India and a member of the Institute of Cost and Works
Corporate Affairs, Accountants of India. He holds a bachelor’s degree in commerce (honours) from the University of Delhi.
Sanjay Jain
Company Secretary & Previously, he was associated with Consortium Finance Limited, DLF Universal Limited, AAPC India Hotel
Compliance Officer Management Private Limited, Beekman Helix India Consulting Private Limited.
He holds a bachelor’s degree in architecture from Visvesvaraya National Institute of Technology, Nagpur and a
Executive Vice President
Gyana Das master’s degree in city planning from the Indian Institute of Technology, Kharagpur. He joined SAMHI on February
and Head of Investments
8, 2011. Previously, he was associated with InterGlobe Hotels Private Limited.
She holds a bachelor’s degree in law from Army Institute of Law, Mohali. She joined SAMHI on May 2, 2017.
Tanya Chakravarty General Counsel
Previously, she was associated with Phoenix Legal, Vaish Associates Advocates and Unitech Limited.
SAMHI Hotels
ANNEXURE
29
A1
SAMHI’s portfolio
SAMHI has 4,801 keys (31 hotels) in its portfolio, spread across 13 cities in India. The portfolio
is well-diversified geographically and segment-wise. After the recent acquisition of the ACIC
portfolio, it has 22%/45%/33% of its operating inventory in upper upscale and upscale/upper
midscale/midscale categories, respectively.
SAMHI has a well-diversified presence across key cities in India

Location of SAMHI’s assets across India
Source: Company
SAMHI Hotels
THEME
Gas Utilities
India
Sector View: Cautious NIFTY-50: 20,097 November 30, 2023
Gas consumption at record highs, growth now to trickle Company data and valuation summary
Indian gas consumption is up sharp 15% yoy to ~185 mmscmd in FY2024TD. Price (Rs) Fair Value Upside
Apart from the increased HPHT gas production, LNG imports have been Company Rating 29-Nov-2023 (Rs) (%)
Gas Utilities
markedly higher. After multi-year declines, gas offtake by the power sector GAIL (India) REDUCE 126 97 (5)
picked up due to seasonal factors. New fertilizer capacity also fully ramped GSPL BUY 285 375 32
Indraprastha Gas REDUCE 390 515 (4)
up. With lower prices, oil to gas switch demand also recovered. But growth Mahanagar Gas REDUCE 1,034 1,115 (6)
will likely trickle now. CGDs segment growth has considerably slowed, and Petronet LNG SELL 199 175 (12)
fertilizer may not need much additional LNG. We remain cautious on gas Source: Bloomberg, Company data, Kotak Institutional Equities estimates
utilities with SELL on PLNG and REDUCE on GAIL, IGL and MGL.
November 29, 2023
Gas consumption up strongly in FY2024
Several stars have aligned to push Indian gas usage to record highs this year.
KG-D6 production has ramped up to ~30 mmscmd. Most of new fertilizer Quick Numbers
capacity that has been gradually commissioning is also fully operational now.
After five years of decline, gas offtake by the power sector recovered India’s gas consumption likely to increase 22
temporarily due to seasonal factors. Also, with much lower LNG prices (versus mmscmd (~14%) yoy to record ~183 mmscmd in
FY2024E
past two years), oil-to-gas arbitrage demand recovered in refining and other
industries. Domestic gas usage up 8 mmscmd (9%) and LNG
imports up ~14 mmscmd (19%) in FY2024E
CGD demand growth has considerably slowed However, gas consumption increased at less than 1%
While gas volumes are up strongly in FY2024, we note that from 2012 levels CAGR over FY2012-24E and long-term outlook remains
weak
(previous KG-D6 production peak), gas consumption has grown at below 1%
CAGR. With policy focus, priority gas allocation and low APM prices, over 2012-
22 CGDs’ gas demand was up 2.2X (8% CAGR), whereas growth was weak for
most other key demand segments. With rising APM shortfall and higher APM
prices (new formula did not bring much relief), CGD’s pricing advantage has
withered and growth has considerably slowed (~3% CAGR over FY2022-24E).
Medium-term volume outlook weak; LT outlook even weaker

CGDs. In our view, with new APM price formula and rising shortfall, CGDs’ gas
cost will keep rising. Despite several new CGDs starting operations, CGDs’
demand growth will be weak. For other consuming segments, outlook is weaker.
In power sector, APM gas allocation keeps declining. Also, at current APM/LNG
prices, gas-based generation has limited offtake in merit-order dispatch regime.
Volumes will likely remain weak, unless there is policy support (such as for
offsetting impact of renewable power intermittency issues).
In fertilizer, no new gas-based fertilizer capacity is planned. Rather with policy
focus now on green hydrogen, there will be mandates soon to switch to green
hydrogen usage, with entire fertilizer capacity moving to green H2 over LT.
For other segments, gas usage will continue to be dependent on price arbitrage
Related Research
of liquid fuels versus gas. With not much incremental domestic gas, and
relatively tighter global LNG markets, we believe the pace of switch to gas will → GAIL: Limited benefits from higher oil price
remain slow. Also, similar to fertilizer, there will be rising policy focus to switch → IGL: Volume recovery still elusive
to green H2 usage instead of gas in the longer term.
→ Green Hydrogen: Hope + Hype
Anil Sharma Aditya Bansal

anil.sharma2@kotak.com aditya.bansal@kotak.com
+91-22-4336-0875 +91-22-4336-0876
5
Remain cautious on gas names

Gas consumption in FY2024 has been higher versus our earlier estimates. However, with CGD sector
demand growth considerably slower, the growth outlook remains weak. We remain cautions on gas
utilities.
Petronet LNG: Maintain SELL with revised FV of Rs175 (Rs165 earlier). Driven by higher LNG imports
in FY2024E, we have increased our near-term volume assumptions, and have increased FY2024-26E
EBITDA by 7-9%. However, with subdued LT gas demand outlook, LNG demand outlook is weak. With
several new terminals, competitive intensity has increased. PLNG has also struggled to recover use-
or-pay charges from several of its customers (including its own promoters). With its key Qatar
contracts due for renewal, its bargaining power is low. PLNG’s recent decision to diversify in
petrochemicals with large capex of Rs207 bn will be a drag. Maintain SELL.
Maintain REDUCE on GAIL with FV Rs Rs120 (unchanged). We continue to believe that worst is
behind for GAIL with integrated transmission tariff revisions, and decline in gas prices from record
highs. However, outlook is not too bright. In transmission, GAIL is realizing much higher tariff (versus
approved by PNGRB), and is a positive. But, with reduced allocation of APM gas, its costs are rising.
Also, with volumes outlook weak, and large capex in new pipelines ongoing, transmission RoCEs will
get weaker. Its commodity business continues to suffer, and profitability is likely to remain weak.
Maintain REDUCE on IGL (FV Rs375) and MGL (FV Rs975). Our thesis that CGD demand will not
recover much with the implementation of new APM pricing formula, seems to be playing out. For
1HFY24E, MGL’s volumes were flat yoy (versus earlier trends of 4-6% yoy growth) and just 3.3% yoy
for IGL (versus double-digit yoy growth earlier). In the new APM pricing regime, CGDs gas costs will
continue to increase gradually due to a combination of (1) increasing shortfall of APM, (2) rising share
of new wells in APM portfolio (20% higher prices) and (3) APM ceiling price increases. Electric vehicles
(EVs), as such, is a key threat to the CNG business model, and eroding advantage of CNG (versus
petrol/diesel) makes it even more potent.
Maintain BUY on GSPL (FV Rs375). Continued delays in tariff revision for GSPL’s HP pipeline remains
a key overhang. We assume a ~20% tariff cut from April 2024. At CMP, there is a ~70% holding
company discount on GUJS’s 54% GUJGA stake, which we believe is excessive. We believe that the
holdco discount could narrow with rising shareholder returns from higher dividends and potential
buyback after the Gujarat government’s recent policy.
Gas Utilities
India Research
6
India’s gas consumption sharply up in FY2024E

Based on PPAC’s monthly sectoral consumption data, for April-October 2023, India’s overall gas
consumption at 185 mmscmd is up 15% yoy, with 11% growth for domestic gas and 19% for LNG. With
demand for gas-based power generation declining, and also as LNG prices firm up in winter, we expect
some moderation in gas consumption in 2HFY24E. Still, we estimate India’s gas consumption to rise
~14% yoy to record ~183 mmscmd in FY2024E.
There has been higher domestic gas production driven by further increase in KG-D6 production to
~30 mmscmd. We expect domestic gas availability to increase by ~8 mmscmd (~9%) in FY2024E.
But bigger increase is driven by recovery in LNG imports. After successive declines for three years,
we expect LNG imports to recover ~14 mmsmcd (19% yoy) to 87 mmscmd (but still below FY2020-
21).
In terms of consuming sectors, domestic gas availability for both fertilizer and power sectors declined
further, due to declining APM volumes and higher priority to CGDs. However, the LNG usage sharply
increased in both these sectors. In power sector, it was driven by one-off seasonal factors as power
demand shot-up during summers, in August and also in October. Fertilizer sector saw three new fertilizer
plants of HURL scaling up to over 100% utilization levels. With relatively weaker spot LNG prices,
arbitrage between oil-gas has been favorable, and volumes also picked up in sectors such as refining,
and other manufacturing.
But CGD sector, which has seen strongest growth in consumption over last 10-12 years, continues to see
weak demand growth. Apart from highest priority on APM allocation, CGDs also now gets the highest
priority on HPHT gas. This has enabled CGDs to make up for shortfall of APM gas with higher HPHT gas
tie-up. Over FY2022-24E, overall gas consumption in CGDs has increased only at about 3% CAGR versus
earlier growth rates of 7-8%.
Driven by KG-D6, domestic gas availability has been rising over After three years of decline, LNG import also recovered in
past three years, and up 7-8 mmscmd in FY2024E FY2024E on lower price, higher power/fertilizer offtake
Domestic gas production, from April-19 (mmscmd) LNG imports in India, April-19 onwards (mmscmd)
(mmscmd) Domestic production LNG import Annual average

110 120
100 110
90 100
90
80
80
70
70
60
60
50 50
40 40
Jul-19
Jul-20
Jul-21
Jul-22
Jul-23
Apr-19
Apr-20
Apr-21
Apr-22
Apr-23
Oct-23
Oct-19
Oct-20
Oct-21
Oct-22
Jan-20
Jan-21
Jan-22
Jan-23
Oct-19
Oct-20
Oct-21
Oct-22
Oct-23
Jul-19
Jul-20
Jul-21
Jul-22
Jul-23
Apr-19
Apr-20
Apr-21
Apr-22
Apr-23
Jan-20
Jan-21
Jan-22
Jan-23
Source: PPAC, Kotak Institutional Equities Source: PPAC, Kotak Institutional Equities
Gas Utilities
India Research
7
Gas consumption up sharply in FY2024 due to higher domestic gas availability, and higher LNG usage in fertilizer/power; despite sharp
increase, gas consumption has grown at just ~1% CAGR since FY2012
Sector-wise gas supply, March fiscal year-ends, 2012-24E (mmscmd)
yoy Change 2012-24
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024E mmscmd % mmscmd CAGR %
Domestic gas
Fertilizers 31.0 31.5 30.3 26.8 25.9 21.5 18.9 17.2 18.0 17.7 15.8 11.3 9.8 (1.5) (13.6) (21) (9.2)
Power 54.2 37.5 27.3 25.4 22.9 23.5 25.7 25.2 20.5 19.7 20.4 19.0 16.3 (2.7) (14.2) (38) (9.5)
CGD 7.5 6.9 7.3 9.1 9.3 13.5 12.9 14.3 16.8 13.5 18.6 23.8 27.5 3.7 15.6 20 11.5
Refineries 7.0 3.1 2.9 4.8 3.9 4.0 5.8 1.8 44.8
Petrochemicals 4.6 2.1 1.5 1.1 1.6 2.6 3.4 0.9 34.6
Others 24.0 23.5 20.7 16.5 14.3 12.9 0.5 7.0 2.2 6.0 23.2 27.2 33.1 5.9 21.5 9 2.7
Total 116.6 99.5 85.5 77.7 72.3 71.5 69.6 68.8 61.8 62.8 83.5 87.8 95.8 8.0 9.1 (21) (1.6)
RLNG
Fertilizers 7.3 8.9 13.2 14.8 18.2 20.7 21.3 23.9 26.1 31.1 33.7 41.8 48.3 6.4 15.4 41 17.1
Power 7.6 6.5 3.7 4.0 6.9 8.3 7.2 7.7 9.8 9.9 7.4 3.4 9.1 5.7 169.5 1.5 1.5
CGD 7.8 8.9 8.9 5.8 5.7 6.6 10.6 10.9 13.0 11.8 14.7 9.2 7.9 (1.3) (13.8) 0.1 0.1
Refineries 10.9 16.3 18.4 16.8 10.6 6.7 9.3 2.6 38.2
Petrochemicals 6.4 7.2 8.3 7.3 6.3 2.8 3.8 1.0 34.9
Others 26.5 23.9 23.0 26.4 27.7 32.4 18.6 12.8 17.1 14.0 12.2 9.1 8.8 (0.3) (3.4) (18) (8.8)
Total 49.2 48.3 48.8 51.0 58.4 68.1 75.2 78.7 92.6 91.0 85.0 73.0 87.1 14.1 19.4 38 4.9
Total gas demand
Fertilizers 38.3 40.4 43.5 41.6 44.1 42.3 40.2 41.1 44.0 48.7 49.5 53.2 58.1 4.9 9.2 20 3.5
Power 61.8 44.0 30.9 29.4 29.8 31.8 33.0 32.9 30.3 29.7 27.8 22.3 25.4 3.0 13.6 (36) (7.2)
CGD 15.3 15.8 16.2 14.8 14.9 20.1 23.5 25.2 29.7 25.3 33.4 33.0 35.4 2.4 7.4 20 7.2
Refineries 11.6 10.7 10.9 12.5 13.9 14.7 17.9 19.3 21.3 21.7 14.6 10.7 15.1 4.4 40.7 3 2.2
Petchems 5.1 6.8 6.6 7.9 10.2 11.4 11.0 9.3 9.8 8.4 7.8 5.4 7.2 1.9 34.8 2 3.0
Others 33.7 30.0 26.2 22.4 17.9 19.2 19.1 19.8 19.3 20.0 35.4 36.3 41.8 5.5 15.3 8.1 1.8
Total 165.8 147.7 134.2 128.6 130.7 139.6 144.7 147.5 154.4 153.7 168.5 160.8 183.0 22.2 13.8 17.2 0.8
Source: MoP&NG, PPAC, Kotak Institutional Equities estimates
Gas Utilities
India Research
8
CGDs: Volume growth has considerably slowed

Over past 2-3 years, with elevated APM price and also very high and volatile LNG prices, CGDs’ gas costs
have sharply increased. With increased prices, CNG’s advantage versus alternates such as petrol/diesel
declined. In addition, rising EV penetration is also impacting CNG demand.
We also have a view that CNG demand will not recover much with the implementation of new APM pricing
formula. In the new APM pricing regime, CGDs gas costs will continue to increase gradually due to a
combination of (1) increasing shortfall of APM, (2) rising share of new wells in APM portfolio (20% higher
prices) and (3) APM ceiling price increases. EV, as such, is a key threat to the CNG business model, and
eroding advantage of CNG (versus petrol/diesel) makes it even more potent.
Except during pandemic (and when spot LNG prices were very high), gas usage in CGD sector has typically
trended up; despite lower prices, growth have been tepid in FY2024TD
CGDs: Domestic gas and LNG consumption trends, April 2016 onwards (mmscmd)
(mmscmd) CGDs: Domestic gas consumption CGD: LNG consumption

40
35
30
25
20
15
10
5
0
Oct-16
Oct-18
Oct-19
Oct-20
Oct-22
Oct-23
Jul-16
Jul-17
Oct-17
Jul-19
Jul-20
Jul-21
Jul-18
Oct-21
Jul-23
Jul-22
Apr-17
Apr-18
Apr-21
Apr-22
Apr-16
Apr-19
Apr-20
Apr-23
Jan-18
Jan-19
Jan-22
Jan-23
Jan-17
Jan-20
Jan-21
Source: PPAC, Kotak Institutional Equities
Despite highest priority on APM (and now on HPHT as well), LNG usages has declined with switch to alternates fuels;
domestic gas volume growth has been weak volumes recovery slow despite softer LNG prices
CGD's domestic gas consumption, from April 2020 CGD's LNG consumption, from Apr 2020 (mmscmd)
(mmscmd)
(mmscmd) CGD: LNG consumption
(mmscmd) CGDs: Domestic gas consumption 20
35
30 15
25
20 10
15
5
10
5
0
Apr-20
Apr-21
Apr-22
Apr-23
Jul-20
Jul-21
Jul-22
Jul-23
Oct-20
Oct-21
Oct-22
Oct-23
Jan-21
Jan-22
Jan-23
0
Jul-20
Jul-21
Jul-22
Jul-23
Apr-22
Apr-20
Apr-21
Apr-23
Oct-20
Oct-21
Oct-22
Oct-23
Jan-21
Jan-22
Jan-23

Gas Utilities
India Research
9
Fertilizers: All new plants getting fully operational boosted gas demand
Historically, fertilizer sector has been the largest consumer of natural gas. The sector had high priority
for domestic gas allocation historically. However, in recent years, with CGDs getting higher priority,
domestic gas availability has been reducing. Also, fertilizer sector is under government control, and all
gas costs are reimbursed. With priority on maximizing fertilzer production (so that direct imports are
lower), gas demand in fertilizer sector has been agnostic to LNG prices. This has meant that reduced
domestic gas allocation has been offset by higher LNG usage.
Domestic gas availability has progressively reduced for But LNG usage has more than doubled; with gas costs
fertilizer sector reimbursed, LNG usage is price inelastic in fertilizer sector
Fertilizer sector domestic gas consumption Fertilizer sector LNG consumption (mmscmd)
(mmscmd)
(mmscmd) Fertilser(LNG)
(mmscmd) Fertiliser (Domestic gas) 60
25
50
20 40
15 30
20
10
10
5
0
Jul-19
Jul-20
Jul-21
Jul-22
Jul-23
Apr-19
Apr-20
Apr-21
Apr-22
Apr-23
Oct-19
Oct-20
Oct-21
Oct-22
Oct-23
Jan-19
Jan-20
Jan-21
Jan-22
Jan-23
0
Jul-19
Jul-20
Jul-21
Jul-22
Jul-23
Apr-19
Apr-20
Apr-21
Apr-22
Apr-23
Oct-20
Oct-19
Oct-21
Oct-22
Oct-23
Jan-19
Jan-20
Jan-21
Jan-22
Jan-23

To facilitate fresh investments, and to make India self-sufficient for urea production, the government had
announced a new investment policy in 2012. The government had decided to revive five closed fertilizer
units at Gorakhpur, Sindri, Talcher, Barauni and Ramagundam. Each of these units was to have 1.27
mmtpa of urea capacity. While Talcher plant was to be based on coal-based methane (CBM), remaining
four plants were to be based on natural gas. In addition, two new gas-based plants by Chambal fertilizer
at Gadepan and Matix Fertilizers at Panagarh were also to be set up.
Among these new fertilizer plants, while Chambal fertilizer’s plant commenced operations in 2019, other
plants were seeing considerable delays. The start-up was also delayed due to pandemic. In recent
months, all the delayed plants (particularly Sindri and Baruani) have also been fully commissioned and
ramped up to full utilization levels. Addition of these new six fertilizer plants has added to nearly 14-15
mmscmd of additional gas usage in fertilizer sector.
All five new gas-based fertilizer plants are now operating at full capacity; now new gas based fertilizer capacity planned
Status of new gas-based fertilizer capacity
Urea capacity Gas requirement Completion/
Company Location (mtpa) mmscmd commercial operation Current status
Kota, Rajasthan Chambal Fertilizer 1.3 2.4 Jan-19 Fully operational since FY2020
Ramagundam Fertilizers and Chemicals Ramagundam, Telangana 1.3 2.3 Mar-21 100% utilisation from April-2022
Matix Fertilisers and Chemicals Panagarh, West Bengal 1.3 2.3 Apr-20 Operating at full capacity
Gorakhpur, Uttar Pradesh 1.3 2.3 Dec-21 / May-22 All three plants on over 100%
Hindustan Urvarak & Rasayan Sindri, Jharkhand 1.3 2.3 Nov-22 / April -23 utilisation now, with record
Barauni, Bihar 1.3 2.3 Oct-22 / April -23 output in September 2023
Total 7.7 13.9
Source: Company, Ministry of Chemicals and Fertilizer, Kotak Institutional Equities
Gas Utilities
India Research
10
No new gas-based capacity now; existing capacity to switch to green H2 in LT

We note that no new meaningful gas-based fertilizer capacity is under construction or planning stage.
Rather the new focus is on Green Hydrogen (GH) based urea and fertilizer production. As we highlighted
in our note on Green Hydrogen, National Green Hydrogen Mission has set a target for 100% import
substitution by producing green H2 based urea by 2034-35. In addition, to build the initial eco-system,
government will likely mandate green hydrogen consumption obligation (GHCO) soon.
We expect only marginal increase in gas consumption in fertilizer sector after FY2025E. While we do not
see much impact of GH mandates by 2030, the gas consumption could significantly decline in fertilizer
sector post 2030, in our view.
Fertilizer sector has highest share (~30%) of gas consumption in India; this would be under threat if green
hydrogen usage picks up
Fertilizers: domestic gas and LNG consumption trends, Jan 2019 onwards (mmscmd)
(mmscmd) Fertiliser (Domestic gas) Fertilser(LNG)

70
60
50
40
30
20
10
0
Jul-19
Jul-20
Jul-21
Jul-22
Jul-23
Oct-19
Oct-20
Oct-21
Oct-22
Oct-23
Apr-19
Apr-20
Apr-21
Apr-22
Apr-23
Jan-19
Jan-20
Jan-21
Jan-22
Jan-23
Gas Utilities
India Research
11
Power: Gas consumption boosted by seasonal factors

In 1HFY24 due to several one-off seasonal factors, and unusually high-power demand, reliance on gas-
based power generation increased. There were spikes in gas-based power generation in April-May, and
August, early September and also in October. With demand falling to normalized levels, gas-based
generation has returned to normal levels.
Over longer term, the gas-based power generation continues on a declining trend, with overall PLF
declining to just 11% in FY2023. In the merit-order dispatch system, there is weak demand both for LNG
and also for APM gas in recent years. Most of domestic gas allocation for power sector is now limited
to isolated production that is not linked to main gas grid. Otherwise, gas-based power generation is
mainly used to meet peak power requirement near large urban areas or to meet emergency demand in
case of power shortage (as we noted earlier).
In our view, gas consumption will remain weak in power sector in the near term. We believe that there
will be a case to increase gas-based generation to resolve intermittency issues as share of renewable
generation increases in coming years.
Gas-based power generation was elevated during 1HFY2024 due PLF for gas-based capacity increased in recent months but
to sudden demand spikes, coal shortages, etc. remains very low
Daily average gas-based power generation (million India’s gas-based power generation capacity and
units/day) PLF (MW, %)
(MU/day) Capacity PLF (%)

(MW) FY2023 Apr-Oct 2023
200
Central sector 7,238 16.0 22.7
State sector 7,002 18.0 19.2
160 Private / IPPs 10,788 2.9 9.0
Total 25,028 11.0 15.9
120
Source: CEA, Kotak Institutional Equities
80
40
-
Oct-16
Oct-17
Oct-18
Oct-19
Oct-20
Oct-21
Oct-22
Oct-23
Apr-16
Apr-17
Apr-18
Apr-19
Apr-20
Apr-21
Apr-22
Apr-23
Source: National Power Portal, Kotak Institutional Equities
APM availability for power progressively cut, with most allocation now to isolated plants
Quarterly break-up of gas usage in power sector (mmscmd)
(mmscmd) APM KG-D6 LT- LNG Spot LNG

40
35
30
25
20
15
10
5
0
2QFY20
4QFY20
2QFY21
4QFY21
2QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23
1QFY20
3QFY20
1QFY21
3QFY21
1QFY22
3QFY22
1QFY24
2QFY24
Source: CEA, Kotak Institutional Equities
Gas Utilities
India Research
12
We expect muted consumption growth over FY2025-30E

Driven by strong growth in FY2024TD, we raise our gas consumption assumptions for FY2024E and near
term. However, as highlighted earlier, growth is likely to remain muted for CGDs (versus earlier 8% CAGR).
With newly commissioned fertilizer plants ramping up completely in FY2024, we expect only a marginal
increase in gas consumption in fertilizer sector after FY2025E. Further, gas consumption would likely
remain muted in power sector and oil to gas switch would be dependent on relative pricing of fuels.
Overall, we expect modest ~3.7% CAGR in India’s gas consumption over FY2022-30E.
After relatively strong FY2024E, gas demand growth will likely slow; LNG imports will likely be weak in FY2025-26E, and recover only
after domestic production begins to decline
India gas supply and consumption trends and forecasts, March fiscal year-ends, 2022 onwards
Change 2022 to 2030
2022 2023 2024E 2025E 2026E 2027E 2028E 2029E 2030E mmscmd CAGR %
Supply
Total domestic sales (ex IC) 83 88 96 102 104 103 100 97 94 10.2 1.4
ONGC 46 46 47 52 54 55 54 52 50 4.6 1.2
Oil India 7 7 7 7 7 7 7 7 7 0.3 0.5
Private / JV 31 35 41 42 42 40 38 37 36 5.3 2.0
LNG imports 85 73 87 89 92 99 109 120 131 46.4 5.6
Total supply 168 161 183 190 196 202 209 217 225 56.6 3.7
yoy change %
Domestic gas 33 5 9 6 2 (1) (3) (3) (3)
LNG imports (7) (14) 19 2 4 8 10 10 10
Total 10 (5) 14 4 3 3 3 4 4
Consumption
Fertilizers 50 53 58 61 62 62 62 63 63 13.2 3.0
Power 28 22 25 23 23 22 22 21 22 (6.3) (3.2)
CGD 33 33 35 38 40 43 46 49 52 18.8 5.7
Refineries 15 11 15 16 16 16 17 17 17 2.9 2.3
Petchem 8 5 7 8 8 8 8 8 8 0.5 0.8
Others 35 36 42 45 48 51 55 59 63 27.4 7.4
Total demand 168 161 183 190 196 202 209 217 225 56.6 3.7
Source: MoP&NG, PPAC, Companies, Kotak Institutional Equities estimates
With commissioning of Chara terminal and break-water at With new LNG capacities, and weak demand, LNG terminal
Dabhol, India’s regas capacity will be over 50 mmtpa utilization have been weak, and will likely remain so
India’s LNG import capacity by 2024 (mmtpa) India regas capacity utilization, FY2018 onwards (%)
Capacity (%)
Terminal State Operator (mmtpa) 70
West coast
Dahej Gujarat PLNG 17.5 60
Hazira Gujarat Shell 5.0
50
Mundra Gujarat ATGL 5.0
Chharra Gujarat HPCL 5.0 40
Dabhol Maharashtra GAIL 5.0
Kochi Kerala PLNG 5.0
30
East coast 20
Ennore Tamilnadu IOC 5.0
Dhamra Odisha ATGL 5.0 10
Total 52.5
0
2023E
2024E
2025E
2026E
2027E
2028E
2029E
2030E
2020
2018
2019
2021
2022
Gas Utilities
India Research
13
PLNG: Maintain SELL with revised FV of Rs175 (Rs165 earlier)

Driven by higher LNG imports in FY2024E, we have increased our near-term volume assumptions, and
have increased FY2024-26E EBITDA by 7-9%. However, with subdued LT gas demand outlook, LNG
demand outlook is weak. With several new terminals, competitive intensity has increased. PLNG has
also struggled to recover use-or-pay charges from several of its customers (including its own
promoters). With its key Qatar contracts due for renewal, its bargaining power is low. PLNG’s recent
decision to diversify in petrochemicals with large capex of ~Rs210 bn will be a drag. Maintain SELL with
revised FV of Rs175 (Rs165 earlier).
Key assumptions for Petronet LNG, March fiscal year-ends, 2019-26E

2019 2020 2021 2022 2023 2024E 2025E 2026E
Volume assumptions (mn tons)
Contract LNG volumes 9.1 8.6 8.5 8.9 9.1 8.8 8.8 8.8
Spot LNG volumes 0.5 0.6 0.5 0.4 0.1 0.6 0.8 0.9
Tolling volumes 7.1 9.0 8.6 7.3 5.7 7.7 7.2 7.1
Total volumes 16.6 18.2 17.6 16.6 14.9 17.2 16.8 16.8
Dahej 16.1 17.4 16.7 15.5 14.1 16.0 15.5 15.5
Kochi 0.5 0.8 0.9 1.0 0.8 1.1 1.2 1.3
Total volumes 16.6 18.2 17.6 16.5 14.9 17.2 16.8 16.8
Price assumptions (US$/mn BTU)
LNG purchase price (FOB) 9.5 8.6 5.7 10.0 13.0 11.3 11.3 10.7
Landed cost (incl. import tariff) 10.1 9.1 6.2 10.6 13.6 11.9 11.9 11.3
Re-gasification charges for Dahej 0.68 0.70 0.71 0.74 0.72 0.73 0.76 0.80
Re-gasification charges for Dahej (Rs/mn BTU) 47.5 49.9 52.4 55.0 57.7 60.6 63.7 66.9
Tolling contract charges for Dahej 0.64 0.66 0.66 0.69 0.68 0.69 0.72 0.75
Tolling contract charges for Dahej (Rs/mn BTU) 44.7 46.9 49.2 51.7 54.3 57.0 59.8 62.8
Re-gasification charges for Kochi 1.42 0.99 0.99 1.03 1.01 1.03 1.07 1.12
Re-gasification charges for Kochi (Rs/mn BTU) 99.6 70.0 73.5 77.2 81.0 85.1 89.3 93.8
Blended sales price 10.8 9.9 7.0 11.3 14.4 12.7 12.7 12.2
Other assumptions
Exchange rate (Rs/US$) 69.9 70.8 74.2 74.7 80.4 82.7 83.5 84.0
Gas Utilities
India Research
14
We value PLNG stock at Rs175 using DCF methodology

Calculation of equity value using discounted cash flow analysis (Rs mn)
2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E 2032E 2033E 2034E 2035E
Volumes (mn tons)
Dahej 16.0 15.5 15.5 16.0 16.2 16.3 16.4 16.5 16.7 16.8
Kochi 1.1 1.2 1.3 1.6 1.8 1.9 2.0 2.0 2.1 2.1
Total 17.2 16.8 16.8 17.6 18.0 18.2 18.4 18.6 18.8 19.0
DCF valuation
EBITDA 50,950 52,704 56,074 62,502 64,163 65,287 66,553 67,288 68,056 68,344
Adjusted tax expense (11,464) (11,593) (12,310) (13,855) (14,313) (14,750) (15,051) (14,993) (14,968) (14,874)
Change in working capital 822 (2,482) (1,217) (3,202) (2,752) (2,820) (2,941) (2,263) (3,013) (2,855)
Operating cash flow 40,308 38,630 42,547 45,446 47,098 47,717 48,561 50,032 50,074 50,614
Capital expenditure (17,605) (74,762) (69,115) (63,684) (63,466) (9,576) (9,643) (9,666) (10,149) (10,657)
Free cash flow 22,703 (36,132) (26,568) (18,239) (16,368) 38,142 38,918 40,366 39,925 39,958 39,958 39,958
Discounted cash flow-now 21,623 (30,580) (19,987) (12,196) (9,726) 20,146 18,272 16,846 14,806 13,172
Discounted cash flow-1 year forward (34,414) (22,485) (13,721) (10,946) 22,665 20,556 18,952 16,662 14,818 13,172
Discounted cash flow-2 year forward (25,304) (15,436) (12,314) 25,506 23,126 21,321 18,745 16,676 14,818 13,172
Now +1-year +2-years

Discount rate (%) 12.5% 12.5% 12.5%
Total PV of free cash flow 32,377 25,260 80,310
Terminal value assumption
Growth in perpetuity 0.0% 0.0% 0.0% Sensitivity of 12-month fair value to WACC and perpetual growth
FCF in terminal year 39,958 39,958 39,958 Perpetual growth (%)
Exit FCF multiple (X) 8.0 8.0 8.0 175 -2.0% -1.0% 0.0% 1.0% 2.0%
Exit EV/EBITDA multiple (X) 4.7 4.7 4.7 11.5% 168 174 181 189 199
WACC (%)
Terminal value 319,661 319,661 319,661 12.0% 166 171 177 185 194
PV of terminal value 105,374 105,374 105,374 12.5% 164 169 175 181 190
Total company value 137,751 130,635 185,685 13.0% 162 166 172 178 186
13.5% 160 164 169 175 182
Net debt (29,463) (43,164) (5,393)
Equity value 167,214 173,798 191,077
Shares outstanding (mn) 1,500 1,500 1,500
Equity value (Rs) 111 116 127
Equity value of 26% stake in Dahej Port (Rs) 11 13 14
Assumed 50% write-off of use or pay charges (Rs) 4 4 4
Ascribed value to petchem (at 0.5x investments) 42 47 53
Fair value of PLNG, including dividends (Rs) 161 175 199
Gas Utilities
India Research
15
Profit model, balance sheet, cash model, March fiscal year-ends, 2018-26E (Rs mn)
2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E
Profit model (Rs mn)
Net sales 305,986 383,954 354,520 260,229 427,376 590,505 530,114 544,371 530,916
EBITDA 33,194 34,425 43,515 46,995 48,213 40,069 50,950 52,704 56,074
Other income 3,174 4,503 3,726 3,882 3,073 5,736 5,940 5,403 4,783
Interest (1,630) (989) (4,032) (3,360) (3,173) (3,305) (2,718) (2,372) (2,927)
Depreciation (4,117) (4,112) (7,761) (7,841) (7,685) (7,643) (8,137) (9,183) (9,522)
Pretax profits 30,621 33,826 35,447 39,677 40,428 34,856 46,035 46,552 48,408
Extraordinary items (70) (1,490) (581) — 4,310 8,489 — — —
Current tax (6,593) (7,895) (8,600) (10,250) (11,692) (12,220) (12,327) (12,400) (12,801)
Deferred tax (3,180) (2,887) 710 67 477 1,274 176 171 167
Adjusted net profits 20,826 22,547 26,456 29,494 30,294 26,054 33,884 34,324 35,774
Earnings per share (Rs) 13.9 15.0 17.6 19.7 20.2 17.4 22.6 22.9 23.8
Balance sheet (Rs mn)

Total equity 97,205 100,661 109,530 116,495 134,255 149,347 168,232 195,055 227,079
Deferred taxation liability 10,482 13,360 8,883 8,806 8,324 7,031 6,855 6,684 6,517
Total borrowings 27,367 18,195 11,170 10,170 9,566 7,423 6,490 5,557 24,623
Currrent liabilities 21,484 18,632 57,407 53,856 59,046 60,424 58,414 58,779 58,263
Total liabilities and equity 156,537 150,848 186,990 189,326 211,191 224,226 239,991 266,075 316,482
Cash and equivalents 8,625 29,603 44,320 43,423 43,178 56,800 65,930 23,588 13,702
Current assets 24,191 31,220 62,165 57,343 87,071 81,181 78,350 81,196 81,897
Total fixed assets 82,499 80,133 77,014 74,709 72,184 77,548 87,015 152,594 212,186
Investments 41,222 9,893 3,491 13,852 8,758 8,697 8,697 8,697 8,697
Total assets 156,537 150,848 186,990 189,326 211,191 224,226 239,991 266,075 316,482
Free cash flow (Rs mn)

Operating cash flow, excl. working capital 25,228 25,175 26,209 32,572 35,115 34,941 35,905 37,932 40,346
Working capital 2,947 (4,907) (1,843) (1,746) (6,340) (15,943) 822 (2,482) (1,217)
Capital expenditure (1,753) (1,628) (408) (730) (723) (10,577) (17,605) (74,762) (69,115)
Free cash flow 26,422 18,640 23,958 30,096 28,053 8,421 19,122 (39,312) (29,985)
Investments (11,027) 867 7,294 (11,456) (12,096) (3,742) — — —
Other income 3 1 2,524 2,913 2,186 2,952 5,940 5,403 4,783
Ratios (%)
Debt/equity 25 16 9 8 7 5 4 3 11
Net debt/equity 17 (10) (28) (27) (24) (32) (34) (9) 5
RoAE 21.2 19.4 23.2 24.2 25.0 21.7 20.4 18.2 16.4
RoACE 22.7 23.5 31.2 36.5 34.5 26.2 37.1 33.0 30.6
Adjusted CROCI 25.5 23.3 34.1 36.4 29.4 25.3 30.6 24.5 24.6
Dividend yield 2.1 4.8 5.2 4.8 5.2 4.6 4.6 2.3 1.2
FCF yield 8.2 6.0 6.6 8.4 8.5 2.6 5.9 (12.1) (9.3)
Gas Utilities
India Research
16
GAIL: Maintain REDUCE with unchanged FV of Rs120
Key assumptions behind GAIL model, March fiscal year-ends, 2019-26E

2019 2020 2021 2022 2023 2024E 2025E 2026E
Tranmission
Natural gas transmission (mmscmd) 107 108 104 111 107 120 125 130
Integrated Network tariff (Rs/mmbtu) 39 43 44 44 48 69 70 70
yoy tariff change % 15 10 0 0 9 44 1 —
Other pipelines 36 26 25 27 25 25 25 25
Blended tariffs (Rs/mmbtu) 39 42 42 42 45 64 65 65
Blended tariffs (Rs/scm) 1.47 1.57 1.57 1.58 1.70 2.40 2.43 2.44
yoy tariff change % 13.8 6.7 (0.5) 0.8 8 41 1 0.3
LPG transmission ('000 tons) 3,975 3,909 4,163 4,199 4,335 4,360 4,385 4,410
Transmission tariff(Rs/kg) 1.6 1.6 1.6 1.6 1.7 1.7 1.7 1.7
Gas marketing
Natural gas sales (mmscmd) 97 96 89 96 95 101 105 110
Blended margins (Rs/scm) 0.8 0.6 (0.2) 1.5 1.0 1.2 1.1 1.0
LPG/LHC ('000 tons)
Production ('000 tons) 1,341 1,264 1,137 1,004 929 975 1,000 1,000
LPG price (US$/ton) 542 473 390 649 746 626 723 668
LPG price (Rs/kg) 38 33 29 48 60 52 60 56
Petrochemicals ('000 tons)
Total petrochemicals 735 738 872 792 400 760 810 810
Polyethylene, HDPE (US$/ton) 1,108 863 894 1,063 998 949 980 1,000
PE realisation (Rs/kg) 91 74 81 108 123 107 114 122
Other assumptions
Exchange rate (Rs/US$) 69.9 70.8 74.3 74.7 80.4 82.5 83.0 84.0
APM gas price (GCV, US$/mmbtu) 3.2 3.5 2.1 2.4 7.4 6.5 6.5 6.8
2019 2020 2021 2022 2023 2024E 2025E 2026E

EBITDA
Gas transportation 40,894 46,590 45,890 49,000 31,200 66,494 74,743 79,197
LPG transportation 3,586 3,909 4,120 3,970 4,350 4,031 4,128 4,225
Gas marketing 28,591 21,562 (7,023) 51,200 34,330 44,017 40,452 40,817
LPG production 25,986 16,726 13,880 29,850 13,270 7,220 15,692 9,935
Petrochemicals 8,148 2,043 15,190 17,300 (5,080) 1,729 5,009 13,268
Others / unallocable (15,180) (5,275) (7,606) (13,029) (11,081) (10,000) (10,000) (10,000)
Total 92,024 85,554 64,451 138,291 66,989 113,492 130,023 137,442
EBIT
Gas transportation 32,539 37,258 35,819 38,058 19,197 51,241 57,660 60,880
LPG transportation 3,014 3,309 3,514 3,350 3,687 3,406 3,478 3,549
Gas marketing 28,591 21,562 (7,023) 49,322 30,788 44,017 40,452 40,817
LPG production 25,465 15,806 13,035 28,997 12,284 6,297 14,733 8,937
Petrochemicals 3,849 (2,455) 10,649 12,453 (10,609) (3,514) (444) 7,597
Others / unallocable (12,922) (8,287) (10,621) (15,001) (13,238) (14,163) (14,330) (14,503)
Total 80,535 67,194 45,372 117,179 42,109 87,285 101,549 107,278
Gas Utilities
India Research
17
We value GAIL at Rs120 per share, based on September 2025E estimates

Sum-of-the-parts valuation of GAIL (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 72.0 7.0 504 76
LPG transportation 4.2 6.0 25 4
Total utility businesses 76.1 529 79
Commodity
Natural gas marketing 39.1 3.0 117 18
LPG/LHC production 10.3 6.0 62 9
Petrochemicals 8.1 6.0 49 7
Total commodity businesses 57.6 228 34
Investments
IGL 60 0.8 48 7
Petronet LNG 37 0.8 30 4
MGL 33 0.8 27 4
China Gas 18 0.8 14 2
ONGC 55 0.6 33 5
Others 125 0.6 75 11
Investments 328 226 34
Total enterprise value 148
Net debt/(cash) 192 29
Equity value 119
Notes:
(a) For SoTP segment, EBITDA includes proportionate share of other/unallocables.
Gas Utilities
India Research
18
Profit model, balance sheet, cash model of GAIL, March fiscal year-ends, 2019-26E (Rs mn)
2019 2020 2021 2022 2023 2024E 2025E 2026E
Net sales 749,933 720,570 567,302 916,265 1,442,497 1,390,998 1,360,538 1,428,150
EBITDA 96,038 85,554 64,451 138,290 66,989 113,492 130,023 137,442
Other income 15,712 14,168 19,085 20,469 26,847 24,696 22,434 22,434
Interest (1,385) (1,085) (1,559) (1,744) (3,117) (6,122) (12,218) (13,838)
Depreciation (15,502) (18,360) (19,079) (21,112) (24,881) (26,206) (28,475) (30,164)
Pretax profits 94,862 80,277 62,898 135,903 65,838 105,859 111,765 115,874
Current tax (24,386) (20,600) (15,496) (32,484) (12,775) (26,215) (27,657) (28,669)
Deferred tax (6,205) — 540 221 (48) (1,059) (1,118) (1,159)
Net profits 60,257 66,206 48,902 103,640 53,015 78,585 82,991 86,046
Adjusted net profits 62,919 59,459 48,167 103,640 53,015 78,585 82,991 86,046
Adjusted EPS (Rs) 9.3 8.8 7.2 15.6 8.1 12.0 12.6 13.1

Total equity 440,929 439,711 466,112 555,868 556,537 585,809 616,199 646,357
Deferred taxation liability 59,477 44,972 45,022 47,673 46,628 47,686 48,804 49,963
Total borrowings 10,011 56,174 61,730 76,558 157,295 221,547 243,547 293,547
Current liabilities 133,369 144,479 160,241 183,307 200,856 216,460 212,324 217,861
Total liabilities and equity 643,786 685,336 733,104 863,405 961,316 1,071,502 1,120,874 1,207,727
Cash 12,147 8,039 13,618 20,850 4,020 28,547 53,291 87,717
Other current assets 133,472 163,831 146,514 207,920 270,091 275,166 252,151 259,205
Total fixed assets 402,886 438,481 475,734 513,427 559,318 639,902 687,545 732,918
Investments 95,282 74,985 97,238 121,209 127,888 127,888 127,888 127,888
Total assets 643,786 685,336 733,104 863,405 961,316 1,071,502 1,120,874 1,207,728

Operating cash flow, excl. working capital 74,922 64,677 53,655 116,093 53,208 80,474 88,792 93,398
Working capital changes 2,425 3,073 22,210 (29,737) (30,932) 10,529 18,880 (1,518)
Capital expenditure (59,942) (54,620) (42,619) (53,616) (74,191) (106,110) (74,760) (74,000)
Investments (4,823) (32,993) (10,163) (6,012) (10,586) — — —
Other income 10,399 19,049 14,040 13,153 18,469 24,696 22,434 22,434
Free cash flow 22,981 (816) 37,123 39,881 (44,032) 9,589 55,345 40,314
Ratios (%)
Debt/equity 2.0 11.6 12.1 12.7 26.1 35.0 36.6 42.2
Net debt/equity (0.4) 9.9 9.4 9.2 25.4 30.5 28.6 29.6
ROAE (%) 12.7 13.4 9.8 18.6 8.8 12.7 12.8 12.6
ROACE (%) 13.0 11.5 8.9 16.8 7.7 10.3 10.4 10.1
Gas Utilities
India Research
19
IGL: Maintain REDUCE with unchanged FV of Rs375
Key assumptions for IGL, March fiscal year-ends, 2019-28E

2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E
Sales volume (mn scm)
CNG 1,602 1,738 1,357 1,847 2,209 2,335 2,429 2,550 2,671 2,788
PNG 553 619 587 704 743 778 843 909 977 1,044
Domestic 120 141 169 182 197 214 237 262 289 313
Commercial/Industrial 252 298 285 352 364 382 424 465 506 549
Other CGD companies 181 180 133 170 182 182 182 182 182 182
Total volumes 2,155 2,357 1,944 2,551 2,952 3,113 3,272 3,459 3,648 3,832
CNG (mn kgs) 1,148 1,234 956 1,295 1,566 1,644 1,710 1,796 1,881 1,963
Average daily volumes (mcm/d) 5.9 6.4 5.3 7.0 8.1 8.5 9.0 9.5 10.0 10.5
Growth in volumes (%) 14.0 9.4 (17.5) 31.2 15.7 5.4 5.1 5.7 5.5 5.0
Operating metrics (Rs/scm)

Gross margin 11.0 11.9 13.9 13.0 12.6 14.3 13.6 13.8 13.6 13.6
Operating cost 5.2 5.5 6.3 5.6 5.7 5.8 6.0 6.0 6.1 6.2
Operating profit 5.8 6.4 7.6 7.4 6.9 8.5 7.7 7.7 7.5 7.4
We value IGL at Rs375 using DCF methodology

2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E 2032E 2033E 2034E 2035E
Assumptions
Volumes (mcm/d) 8.5 9.0 9.5 10.0 10.5 11.0 11.5 12.0 12.7 13.2 13.7 14.2
Growth (%) 5.4 5.1 5.7 5.5 5.0 4.8 4.6 4.5 4.4 4.1 3.8 3.5
Unit margins (Rs/scm) 8.5 7.7 7.7 7.5 7.4 7.3 7.3 7.1 6.9 6.8 6.6 6.6
DCF model
EBITDA 26,416 25,136 26,724 27,240 28,100 29,473 30,754 31,282 32,077 32,900 33,161 33,988
Adjusted tax expense (5,170) (4,666) (4,923) (4,933) (5,064) (5,352) (5,629) (5,722) (5,885) (6,057) (6,083) (6,254)
Change in working capital (738) 1,130 988 1,071 1,048 1,003 992 1,111 920 961 828 813
Operating cash flow 20,508 21,600 22,790 23,378 24,083 25,125 26,117 26,671 27,112 27,803 27,906 28,546
Capital expenditure (15,000) (14,000) (12,000) (12,000) (9,000) (9,000) (8,000) (8,000) (8,000) (8,000) (8,000) (8,000)
Free cash flow 5,508 7,600 10,790 11,378 15,083 16,125 18,117 18,671 19,112 19,803 19,906 20,546
Discounted cash flow-now 5,246 6,434 8,120 7,611 8,966 8,520 8,509 7,795 7,090 6,530
Discounted cash flow-1 year forward 7,239 9,135 8,562 10,090 9,585 9,573 8,769 7,979 7,346 6,564

Discount rate (%) 12.5% 12.5% 12.5%
Exit FCF multiple (X) 11.5 11.5 11.5 375 1.5% 2.5% 3.5% 4.5% 5.5%
WACC (%)
Terminal value 227,736 228,916 236,279 12.0% 366 376 388 403 423
Value of extant CGD business 149,916 151,938 155,644 13.0% 347 354 363 374 388
Value of 50% stake in CUGL and MNGL 63,408 72,285 79,513 13.5% 338 345 353 362 374
Net debt (30,524) (31,045) (33,429)
Equity value 243,847 255,268 268,586
Shares outstanding (mn) 700 700 700
Fair value of IGL (Rs), including dividends 348 375 404
Gas Utilities
India Research
20
2018 2019 2020 2021 2022 2023 2024E 2025E 2026E
Net sales 45,921 57,648 64,853 49,408 77,100 141,459 135,644 143,104 156,581
EBITDA 11,144 12,570 15,196 14,830 18,811 20,398 26,416 25,136 26,724
Other income 1,021 1,462 1,564 1,502 2,150 2,619 2,837 3,005 3,335
Finance cost (17) (21) (81) (113) (132) (106) (137) (144) (151)
Depreciation (1,813) (2,011) (2,523) (2,904) (3,171) (3,634) (4,188) (4,954) (5,641)
Pretax profits 10,335 12,000 14,157 13,315 17,659 19,277 24,928 23,043 24,267
Extraordinary items — — 817 — — — — — —
Current tax (3,169) (3,703) (3,345) (2,955) (4,168) (4,316) (5,857) (5,393) (5,732)
Deferred tax (448) (430) (263) (303) (342) (511) (486) (461) (436)
Adjusted net profits including associates 7,217 8,421 11,673 11,726 15,407 16,479 20,898 19,733 20,872
Adjusted EPS including associates (Rs) 10.3 12.0 16.7 16.8 22.0 23.5 29.9 28.2 29.8

Total equity 35,129 41,299 50,624 58,719 69,362 70,866 82,450 92,289 102,687
Deferred tax liability 2,253 2,678 2,119 2,422 3,272 3,168 3,654 4,115 4,552
Borrowings — — — — — — — — —
Customer deposits 5,447 6,493 7,716 8,897 10,413 11,904 12,705 13,744 14,806
Cash 5,580 6,071 21,799 11,323 13,616 26,332 26,853 29,238 34,702
Current assets 4,044 4,433 5,226 6,598 7,345 12,982 13,376 13,919 14,901
Investments 11,477 15,440 2,581 18,258 19,758 6,773 6,773 6,773 6,773
Total assets 49,282 59,493 71,723 85,874 104,523 117,759 129,486 141,459 154,265

Working capital 841 2,671 1,720 3,473 3,777 6,469 (738) 1,130 988
Capital expenditure (4,699) (6,807) (9,632) (8,829) (13,370) (11,221) (15,000) (14,000) (12,000)
Other income 959 490 452 1,349 798 1,618 2,837 3,005 3,335
Free cash flow 5,053 5,254 4,427 7,979 6,403 12,698 7,521 9,734 13,165
Ratios (%)
Net debt/equity (15.9) (14.7) (43.1) (19.3) (19.6) (37.2) (32.6) (31.7) (33.8)
RoAE 19.6 19.3 23.5 17.7 19.7 19.7 23.2 18.8 17.8
RoACE 17.1 16.9 19.1 15.5 17.3 17.2 20.2 16.6 15.7
Adjusted CRoCI 22.9 21.6 23.7 20.0 21.6 21.7 23.9 19.9 18.5
Gas Utilities
India Research
21
MGL: Maintain REDUCE with unchanged FV of Rs975
Key assumptions for MGL, March fiscal year-ends, 2020-28E
2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E

Sales volume (mcm)
CNG 784 517 772 909 939 975 1,007 1,047 1,089
PNG 296 291 323 340 357 378 397 418 440
Domestic 148 170 170 178 185 194 201 211 220
Commercial 66 48 59 63 67 71 75 79 84
Industrial 82 74 93 99 105 113 121 128 135
Total volumes 1,080 807 1,095 1,249 1,296 1,353 1,404 1,465 1,529
Average daily volumes (mcm/d) 3.0 2.2 3.0 3.4 3.5 3.7 3.8 4.0 4.2
Growth in volumes (%) 0.3 (25.3) 35.6 14.1 3.7 4.4 3.8 4.3 4.4
Operating metrics (Rs/scm)

Gross margin 14.7 17.4 13.8 14.9 18.5 16.3 16.3 16.7 17.1
Operating cost 5.0 5.8 5.4 5.4 5.9 6.3 6.8 7.2 7.7
Operating profit 9.7 11.6 8.4 9.5 12.6 10.0 9.5 9.5 9.4
We value MGL at Rs975 using DCF methodology

2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E 2032E 2033E 2034E 2035E
Assumptions
Volumes (mcm/d) 3.5 3.7 3.8 4.0 4.2 4.4 4.6 4.8 5.0 5.2 5.4 5.6
Growth (%) 3.7 4.4 3.8 4.3 4.4 4.7 4.6 4.4 4.1 4.4 3.8 3.0
Unit margins (Rs/scm) 12.6 10.0 9.5 9.5 9.4 9.4 9.3 9.3 9.3 9.3 9.3 9.3
DCF model
EBITDA 16,294 13,513 13,368 13,901 14,401 14,982 15,653 16,247 16,887 17,645 18,337 18,876
Adjusted tax expense (3,609) (2,854) (2,760) (2,833) (2,897) (2,975) (3,106) (3,221) (3,351) (3,515) (3,667) (3,780)
Change in working capital 2,472 243 441 394 424 442 396 411 345 328 326 322
Operating cash flow 15,158 10,901 11,049 11,462 11,928 12,450 12,943 13,437 13,881 14,457 14,996 15,417
Capital expenditure (6,144) (6,181) (5,976) (5,939) (5,909) (5,757) (5,666) (5,482) (5,418) (5,066) (5,053) (5,009)
Free cash flow 9,014 4,721 5,073 5,523 6,020 6,692 7,277 7,956 8,463 9,391 9,943 10,408
Discounted cash flow-now 8,580 3,994 3,816 3,692 3,576 3,534 3,416 3,319 3,137 3,095

Discount rate (%) 12.5% 12.5% 12.5%
Exit FCF multiple (X) 10.3 10.3 10.3 975 0.0% 1.5% 2.5% 3.0% 4.0%
WACC (%)
Terminal value 96,257 101,915 106,680 12.0% 938 979 1014 1034 1082
Enterprise value 71,878 68,658 69,810 13.0% 881 913 939 955 990
Net debt (15,366) (22,489) (24,270) 13.5% 856 884 907 921 951
Equity value 87,245 91,146 94,080
Shares outstanding (mn) 99 99 99
Fair value of MGL, including dividends (Rs) 899 975 1,035
Gas Utilities
India Research
22
2019 2020 2021 2022 2023E 2024E 2025E 2026E
Net sales 28,040 29,721 21,525 35,602 62,993 64,768 65,379 69,601
EBITDA 8,985 10,528 9,338 9,243 11,842 16,294 13,513 13,368
Other income 777 990 805 857 1,119 1,021 957 1,062
Interest (3) (65) (72) (75) (94) (103) (108) (114)
Depreciation (1,259) (1,617) (1,737) (1,963) (2,311) (2,342) (2,576) (2,929)
Pretax profits 8,499 9,835 8,335 8,063 10,555 14,870 11,786 11,388
Extraordinary items (129) 567 — — — — — —
Current tax (2,614) (2,332) (1,978) (1,858) (2,573) (3,850) (3,078) (3,011)
Deferred tax (291) (136) (163) (235) (82) (57) (32) (7)
Adjusted net profits 5,549 7,367 6,195 5,970 7,900 10,964 8,676 8,370
Adjusted EPS (Rs) 56.2 74.6 62.7 60.4 80.0 111.0 87.8 84.7

Total equity 23,989 29,527 32,324 35,973 41,342 48,742 54,381 59,822
Deferred tax liability 2,048 1,636 1,802 2,038 2,116 2,172 2,204 2,210
Borrowings 18 6 8 8 11 — — —
Customer deposits 5,179 5,817 6,355 7,150 8,203 8,653 8,739 9,132
Currrent liabilities 3,176 4,299 5,522 7,169 8,652 9,389 9,047 9,187
Total liabilities and equity 34,410 41,285 46,011 52,338 60,323 68,956 74,372 80,351
Cash 2,988 2,295 5,119 4,652 2,279 4,080 5,862 8,595
Current assets 3,551 3,602 4,574 6,011 9,491 7,211 7,239 7,438
Total fixed assets 21,331 24,174 26,069 30,792 35,455 39,257 42,862 45,909
Investments 6,540 11,215 10,250 10,883 13,098 18,408 18,408 18,408
Total assets 34,410 41,285 46,011 52,338 60,323 68,956 74,372 80,351

Operating cash flow, excl. working capital 6,422 8,378 7,448 7,380 9,559 12,341 10,326 10,243
Working capital 418 1,374 602 1,657 134 3,468 (284) 334
Capital expenditure (3,625) (4,349) (3,397) (6,490) (7,131) (6,144) (6,181) (5,976)
Free cash flow 3,216 5,403 4,653 2,547 2,562 9,665 3,861 4,601
Investments (1,138) (3,765) 1,287 (357) (1,748) (5,310) 0 0
Other income 377 475 (2,331) 1,440 2,384 1,021 957 1,062
Ratios (%)
Debt/equity — 0.0 0.0 0.0 — — — —
Net debt/equity (12.4) (7.8) (15.8) (12.9) (5.5) (8.4) (10.8) (14.4)
RoAE 22.4 27.7 19.0 16.6 19.4 23.2 16.1 14.1
RoACE 19.0 22.1 16.1 14.1 16.5 19.8 14.0 12.4
Adjusted CRoCI 24.6 26.5 20.5 18.3 20.0 22.0 16.2 14.5
Gas Utilities
India Research
23
GSPL: Maintain BUY with unchanged FV of Rs375
Conservatively we have assumed ~20% cut in tariffs from Apr 2024

Key assumptions for GSPL, March fiscal year-ends, 2018-26E
2018 2019 2020 2021 2022 2023E 2024E 2025E 2026E
Volumes (mcm/d) 31.5 34.6 37.8 36.6 33.9 25.4 31.0 35.0 38.5
yoy change % 27 10 9 (3) (7) (25) 23 13 10
Approved HP network tariff (Rs/mmbtu) 26.6 34.0 34.0 34.0 34.0 34.0 34.0 27.2 27.2
Tariff change % — 27.9 — — — — — (20) —
Realised avg. tariff (Rs/mmbtu) 29.6 36.3 34.7 33.5 34.9 42.4 40.0 29.2 28.2
Impact of LP network and ship-or pay etc 3.1 2.3 0.7 (0.5) 0.9 8.4 6.0 2.0 1.0
Realised tariffs (Rs/scm) 1.13 1.37 1.31 1.26 1.31 1.60 1.51 1.10 1.06
change % 2 22 (4) (4) 4 22 (6) (27) (3)
Discounted cashflow valuation for GSPL’s standalone transmission business

2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E 2032E 2033E 2034E
EBITDA 15,162 11,989 12,718 12,748 13,028 13,308 13,586 13,863 14,136 14,404 14,668
Adjusted tax expense (2,863) (2,386) (2,549) (2,539) (2,557) (2,607) (2,656) (2,669) (2,718) (2,771) (2,816)
Change in working capital (549) 141 (83) (36) (40) (57) (44) (61) (48) 213 (363)
Operating cash flow 11,749 9,744 10,086 10,172 10,431 10,644 10,887 11,133 11,371 11,846 11,489
Capital expenditure (1,837) (1,808) (1,729) (1,651) (1,674) (1,496) (1,518) (1,340) (1,361) (1,282) (1,319)
Free cash flow 9,912 7,936 8,356 8,521 8,757 9,148 9,368 9,793 10,009 10,564 10,169
+ 1-year
Discount rate (%) 12.5
Total PV of free cash flow 53,428
Growth to perpetuity (%) 2.0 Sensitivity of 12-month fair value to WACC and perpetual growth
FCF in 2034E 10,169 Perpetual growth (%)
Exit FCF multiple (X) 9.7 153 - 1.0 2.0 3.0 4.0
Exit EV/EBITDA multiple (X) 6.7 11.5 155 161 168 177 188
WACC (%)
Terminal value 98,785 12.0 148 153 160 168 177

PV of terminal value 32,627 12.5 142 147 153 159 168
Total value of operating business 86,055 13.0 137 141 146 152 159
Shares outstanding (mn) 564 13.5 132 136 140 145 151
EV of Gujarat pipeline network (Rs) 153
We compute fair value of GSPL at Rs375/share including investments and dividends

SoTP valuation of GSPL (Rs mn)
Fair value
Valuation basis (Rs mn) (Rs/share)
Gujarat state pipeline network DCF valuation 86,055 153
Gujarat Gas (54.2% stake) 0.65X CMP 101,104 179
Sabarmati Gas (27.5% stake) 2,696 5
Other investments 9,273 16
Net debt (9,468) (17)
Fair value of GSPL including dividends (Rs) 211,417 375
Gas Utilities
India Research
24
Standalone financial summary of GSPL, March fiscal year-ends, 2018-26E (Rs mn)
2018 2019 2020 2021 2022E 2023 2024E 2025E 2026E
Net sales 13,317 18,772 23,686 20,794 20,200 17,618 20,789 18,260 19,619
EBITDA 11,478 15,426 15,749 14,733 13,976 12,587 15,162 11,989 12,718
Other income 735 594 649 693 1,045 1,684 3,037 3,230 3,701
Interest (354) (2,192) (1,645) (929) (313) (47) (35) — —
Depreciation (1,750) (1,800) (1,966) (2,030) (1,960) (1,939) (2,078) (2,252) (2,310)
Pretax profits 10,108 12,028 12,786 12,467 12,748 12,286 16,086 12,967 14,109
Extraordinaries — — 1,400 — — — — — —
Current tax (3,156) (3,819) (2,829) (3,042) (2,879) (2,823) (3,539) (3,199) (3,481)
Deferred tax (268) (262) (270) (118) (78) (13) (80) (65) (71)
Adjusted net profits 6,684 7,947 9,687 9,307 9,791 9,450 12,467 9,704 10,558
Adjusted EPS (Rs) 11.9 14.1 17.2 16.5 17.4 16.7 22.1 17.2 18.7

Total equity 50,650 57,440 67,226 75,450 84,429 92,732 100,562 105,237 110,533
Deferred tax liability 4,984 5,226 4,081 4,218 4,250 4,238 4,318 4,383 4,454
Total borrowings 30,578 23,660 16,303 10,260 877 — — — —
Cash 3,645 1,583 957 877 864 6,917 12,019 17,344 23,208
Current assets 3,926 4,876 5,732 5,907 5,013 6,457 6,717 6,510 6,621
Investments 41,814 42,772 46,111 50,062 51,737 51,700 54,200 54,200 54,200
Deferred expenditure — — — — — — — — —
Total assets 89,485 89,500 91,029 93,728 93,400 100,883 108,504 113,178 118,573

Working capital changes 508 (8,255) 893 684 (202) (274) (549) 141 (83)
Capital expenditure (2,895) (2,165) (1,073) (1,126) (804) (1,982) (1,837) (1,808) (1,729)
Investments (29,793) 1,476 (2,594) (3,846) (149) (6,264) (2,500) — —
Other income 749 563 558 586 912 1,137 3,037 3,230 3,701
Free cash flow 6,423 (297) 11,409 10,948 10,523 8,813 12,239 10,353 11,126
Ratios (%)
Debt/equity 55.0 37.8 22.9 12.9 1.0 — — — —
Net debt/equity 35.5 27.4 18.6 11.4 1.0 — — — —
RoAE 12.7 13.4 14.5 12.3 11.6 10.2 12.4 9.0 9.4
RoACE 10.1 11.2 13.3 11.4 11.3 10.2 12.5 9.1 9.5
CROCI 15.0 17.5 19.5 17.5 17.0 14.6 16.9 12.5 12.8
Gas Utilities
India Research
UPDATE
UltraTech Cement (UTCEM) SELL

Construction Materials
CMP(₹): 9,004 Fair Value(₹): 7,200 Sector View: Cautious NIFTY-50: 20,133 November 30, 2023
Strengthens foothold in South with Kesoram acquisition Company data and valuation summary
UTCEM has announced the acquisition of Kesoram’s (KSI) cement assets Stock data
through a pure share swap. KSI’s 10.75 mtpa cement plants in South would
CMP(Rs)/FV(Rs)/Rating 9,004/7,200/SELL
mark UTCEM’s entry into the state of Telangana and increase its foothold in
52-week range (Rs) (high-low) 9,021-6,604
the Southern region. We see the acquisition cost at US$100/ton, similar to
Mcap (bn) (Rs/US$) 2,599/31.2
replacement cost, as reasonable. The acquisition is likely to complete in
ADTV-3M (mn) (Rs/US$) 2,621/31.4
2HFY25E and we estimate a ~2% EPS accretion in FY2026E. We expect
gradual consolidation in the cement industry to continue, mainly led by Shareholding pattern (%)
leveraged companies.
5.43.9
1.4
UTCEM to acquire the cement business of KSI 12.1
UTCEM’s board has approved the scheme of arrangement between UTCEM, KSI
17.2 60.0
and their respective shareholders and creditors. The scheme involves demerger
of cement business of KSI into UTCEM on a going concern basis and reduction
and cancellation of preference share capital of KSI. The proposed transaction Promoters FPIs MFs BFIs Retail Others
involves no cash outgo and is a share swap transaction where 1 equity share of
Price performance (%) 1M 3M 12M
UTCEM will be issued for every 52 equity shares of KSI. Non-convertible
Absolute 7 9 27
redeemable preference shares (NCRPS) of UTCEM will be issued for
Rel. to Nifty 1 4 20
outstanding cumulative NCRPS/OCPRS of KSI held by preference shareholders, Rel. to MSCI India 1 3 21
which shall stand cancelled upon scheme consummation.
Reasonable valuation and EPS-accretive acquisition EPS (Rs) 277.4 357.4 404.5
KSI cement business at two integrated cement plants includes: (1) Telangana EPS growth (%) 57.9 28.8 13.2
– 1.75 mtpa grinding and 1.2 mtpa clinker and (2) Karnataka – 9 mtpa grinding P/E (X) 32.5 25.2 22.3
and 5.1 mtpa clinker. The acquisition would mark UTCEM’s entry into the state P/B (X) 4.3 3.8 3.3
of Telangana, spreading its geographic reach and increase the capacity share EV/EBITDA (X) 18.6 15.1 13.1
of South from 15.5% currently to 22% in FY2026E. We estimate the acquisition RoE (%) 13.9 15.9 15.8
EV of US$100/ton adjusting for 2.25 mtpa of surplus grinding capacity at Div. yield (%) 0.5 0.6 0.3
Sales (Rs bn) 726 808 887
US$30/ton. Our pro-forma financials (see Exhibit 2) suggest 2% EPS accretion
on FY2026E factoring higher margins due to various synergies, lower interest EBITDA (Rs bn) 140 169 189
costs and tax credits.
Source: Bloomberg, Company data, Kotak Institutional Equities estimates
Industry consolidation continues albeit at a gradual pace
The cement industry has seen acquisition announcements of three stressed November 30, 2023
assets, total 24 mtpa capacity, in the past one year after the entry of Adani in
2022. The recent two acquisitions at US$100/ton EV are closer to replacement
cost but lower than past 15-year average of US$130/ton. The consolidation
continues to be led by three groups – Ultratech, Adani and Dalmia. While, there
are no large assets readily on the block, like in the past, we do see a potential
for further 30-40 mtpa capacity changing hands over the next 2-3 years.
Related Research
Strong prices, robust demand and muted costs to aid margins in 2HFY24E
→ Construction Materials: Prices soften in
We expect margins to firm up in 2HFY24, led by a combination of higher prices,
→ November but 3QFY24
UltraTech Cement: standing
Strong demandstrong
partly
muted costs and operating leverage due to seasonality. We estimate EBITDA of
offsetting higher costs
Rs1,152/1,273/ton in FY2024/25E versus Rs954/ton in 2QFY24 for UTCEM. We
remain constructive on industry’s demand, margin expansion prospects and
find UTCEM better-placed than most peers. Maintain SELL on rich valuations. Full sector coverage on KINSITE
Sumangal Nevatia Siddharth Mehrotra

sumangal.nevatia@kotak.com siddharth.mehrotra@kotak.com
+91-22-4336-0861 +91-22-4336 0863
26
We estimate adjusted EV of ~US$100/ton for KSI acquisition

Exhibit 1: Valuation estimates for cement business of KSI
Grinding Capacity mtpa 10.75

Clinker backed mtpa 8.50
Surplus grinding mtpa 2.25
Clinker capacity mtpa 6.30
New shares mn 5.97

Existing mn 288.6
Total Shares mn 294.6
FX 83.5
Share price Rs/share 9,000
Equity Rs mn 53,769
Net Debt Rs mn 22,000
EV 75,769
Valuation
Gross EV/ton US$/ton 84
Adjusted EV/ton US$/ton 99
We estimate 2% EPS accretion in FY2026E based on pro-forma financials

Exhibit 2: EPS estimates for UTCEM post-merger and integration
UTCEM KSI Combined Pro-forma

Volume mn tons 145 8.0 153
EBITDA Rs/ton 1,303 1,000 1,287
EBITDA Rs bn 189,341 8,000 197,341

PAT Rs bn 116,742 4,830 121,572
Shares mn 289 295
EPS Rs/share 405 413
EPS accretion/(dilution) % 2.0
KSI’s cement assets are concentrated in South India

Exhibit 3: Details of KSI cement assets
Plant State Clinker Capacity (mtpa) Grinding Capacity (mtpa)

Sedam Karnataka 5.1 9
Basantnagar Telangana 1.2 1.75
Total 6.3 10.75
UltraTech Cement
Construction Materials India Research
27
KSI acquisition would increase South’s capacity share to 22% in FY2026E

Exhibit 4: Region-wise grinding capacity (India operations) breakup for UTCEM
Region 2QFY24 % of total FY2026E (pro forma) % of total

North 26.5 20.0 31.8 18.6
Central 28.4 21.4 38.3 22.4
East 26.4 19.9 33.4 19.5
West 30.7 23.2 29.7 17.4
South 20.5 15.5 37.8 22.1
Total (India) 132.5 100 170.8 100
KSI acquisition at US$100/ton is lower than historical average

Exhibit 5: Valuation (EV/ton) details for deals in the Indian cement sector (US$/ton)
300
248
250 230
200
157 159 157
141 140
150 127 127
112 94 108 90 100
88 100
100 65 59 49 64
50 33
Gujarat Siddhee…
Calcom
Adhunik
Holcim
JPA_Bokaro
JPA__Bela & Sidhi

My Home
Kesoram
Emami
R-ADAG
Murli
Lafarge
Century Textile
Kalyanpur
JPA_Gujarat
JPA
JPA
Lafarge- Baring
Binani
Bhavya Cements
Sanghi
Exhibit 6: Key operating metrics for cement business of KSI, March fiscal year-ends, 2019-24
2019 2020 2021 2022 2023 1QFY24 2QFY24
Cement Capacity (mtpa) 7.3 7.3 10.75 10.75 10.75 10.75 10.75
Sales volume (mn tons) 6.37 5.71 5.44 7.46 7.02 1.85 1.88
Utilization 87% 78% 51% 69% 65% 69% 70%
Realisation/ton 4,559 4,633 4,876 4,834 5,382 5,399 5,073
Costs/ton 4,080 4,232 4,186 4,147 4,996 4,834 4,706
EBITDA/ton 479 401 690 686 385 565 367
UltraTech Cement
28
UTCEM capacity to increase to ~170 mtpa by FY2026E post KSI acquisition

Exhibit 7: Capacity, capacity addition details for UTCEM, March fiscal year-ends, 2022, 2023-26E (mtpa)
180.0 44.0 170.9

160.0
140.0 5.5 5.6 127.0
1.3
120.0 114.6
100.0
80.0
60.0
40.0
20.0
-
FY2022 2QFY23 3QFY23 4QFY23 FY2023 FY2024-26E FY2026E
Capacity
Source: Kotak Institutional Equities estimates, Company
UTCEM is on track to increase the share of green power to 60% by FY2026E

Exhibit 8: Share of green power for UTCEM, March fiscal year-ends, 2018-26E (mn tons)
Green Power (% of total power requirement)

70
60
60
50
40 34
30 25
18
20
13
10
8 7
10
0
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024E FY2026E
UltraTech Cement
29
Our assumptions factor a strong volume growth over FY2024-26E

Exhibit 9: Key assumptions for UTCEM (India operations, consolidated), March fiscal year-ends, 2019-26E (Rs mn, Rs/ton)
2019 2020 2021 2022 2023 2024E 2025E 2026E
India Operations
Capacity (mtpa) 105 111 113 116 127 137 149 160
Utilization (%) 79 71 72 77 80 87 87 88
Volumes (mn tons) 82 79 81 89 102 119 130 141
% yoy (4) 3 10 14 17 10 8
Realisation (Rs/ton) 4,860 5,157 5,222 5,678 6,021 5,954 6,054 6,171
Costs (Rs/ton) 3,991 4,004 3,852 4,406 5,010 4,802 4,781 4,848
EBITDA (Rs/ton) 869 1,153 1,370 1,272 1,011 1,152 1,273 1,324
Revenue (Rs mn) 404,808 406,180 431,150 505,700 612,370 705,833 788,309 867,136
Costs (Rs mn) 333,258 315,390 318,060 392,430 509,520 569,221 622,577 681,143
EBITDA (Rs mn) 71,550 90,790 113,090 113,270 102,850 136,612 165,731 185,993
Consolidated
Revenues (Rs mn) 416,088 424,299 447,258 525,988 632,400 725,863 808,338 887,166
EBITDA (Rs mn) 73,469 92,472 115,679 115,144 106,199 139,961 169,080 189,341
PAT (Rs mn) 24,004 57,521 53,168 71,726 50,694 80,060 103,135 116,742
Net Debt (Rs mn) 230,808 169,810 67,170 39,010 27,020 6,557 (45,128) (120,813)
Capex (Rs mn) (95,482) (99,980) (18,387) (56,134) (62,001) (70,000) (60,000) (50,000)
We maintain our Fair Value at Rs7,200/share on December 2025E financials

Exhibit 10: UTCEM, valuation details, March fiscal year-end, December 2025E financials
Multiple EV
Rs bn (X) Rs bn Rs/share
Valuation
Consolidated EBITDA 184 9.5 1,759 6,095
Net-debt (adjusted for dividends and tax credit) (139) (480)
CWIP 178 618
Equity value 2,076 7,200
FV (Rs/share) 7,200
UltraTech Cement
30
Exhibit 11: UTCEM, profit model, balance sheet and cash flow model (consolidated), March fiscal year-ends, 2018-26E (Rs mn)
2018 2019 2020 2021 2022 2023 2024E 2025E 2026E
Net sales 309,786 416,088 424,299 447,258 525,988 632,400 725,863 808,338 887,166
EBITDA 61,452 73,469 92,472 115,679 115,144 106,199 139,961 169,080 189,341
Other income 5,886 4,634 6,511 7,342 5,078 5,031 6,479 5,796 6,651
Interest (12,376) (17,779) (19,917) (14,857) (9,447) (8,227) (8,145) (3,538) (3,538)
Depreciaiton (18,479) (24,507) (27,227) (27,002) (27,148) (28,880) (31,263) (33,456) (36,381)
Profit before tax 36,482 35,818 51,840 81,162 83,627 74,122 107,031 137,881 156,073
Extra-ordinary items (3,466) (1,133) — (2,607) 15,180 — — — —
Current tax (6,846) (7,166) (9,203) (14,151) (27,292) (20,708) (26,972) (34,746) (39,330)
Deferred tax (3,925) (3,515) 14,885 (11,237) 212 (2,721) - - -
Net profit 22,246 24,004 57,521 53,168 71,726 50,694 80,060 103,135 116,742
Adjusted PAT 25,734 25,169 57,553 55,809 56,623 50,640 80,175 103,251 116,858
Earnings per share (Rs) 94 92 199 193 196 175 278 358 405
Equity 263,812 337,507 390,437 441,746 504,352 543,245 607,353 689,921 783,375
Borrowings 194,802 253,370 217,646 196,184 103,528 99,008 79,008 38,008 38,008
Current liabilities 78,987 103,576 119,440 142,778 151,054 188,874 199,529 208,931 217,917
Other Non current Liabilities 2,078 6,807 15,554 20,719 19,011 20,141 20,066 19,991 19,916
Total liabilities 571,506 765,374 792,198 861,835 838,277 913,870 968,557 1,019,452 1,121,817
Fixed assets 386,790 446,433 452,814 436,254 425,922 464,803 463,540 490,084 513,703
CWIP 15,112 11,486 9,095 16,810 47,773 40,349 80,349 80,349 70,349
Investments 14,870 13,862 16,618 12,554 2,129 5,643 5,643 5,643 5,643
Cash 2,191 7,397 5,399 20,076 3,592 13,622 14,085 24,770 100,455
Other current assets 112,422 111,211 135,754 210,461 182,596 193,807 209,294 222,960 236,022
Other Non current Assets 29,757 54,926 53,721 47,761 59,024 76,307 76,307 76,307 76,307
Goodwill 10,363 120,060 118,796 117,920 117,242 119,338 119,338 119,338 119,338
Total assets 571,505 765,374 792,198 861,835 838,277 913,870 968,557 1,019,452 1,121,817
Net Debt 153,120 230,808 169,810 67,170 39,010 27,020 6,557 (45,128) (120,813)
Operating cash flow excl. working capital 54,606 66,304 83,269 101,529 87,851 85,491 112,989 134,334 150,011
Working capital changes (12,554) (6,957) 5,157 23,289 (4,730) (3,370) (4,832) (4,264) (4,075)
Net finance cost/ income (6,490) (13,144) (13,406) (7,515) (4,369) (3,196) (1,667) 2,258 3,113
Cash flow from operations 35,562 46,202 75,020 117,303 78,752 78,925 106,490 132,327 149,048
Capital expenditure (180,717) (95,482) (99,980) (18,387) (56,134) (62,001) (70,000) (60,000) (50,000)
Free cash flow (145,154) (49,280) (24,960) 98,916 22,618 16,924 36,490 72,327 99,048
Ratios
Book value (Rs/share) 961 1,229 1,353 1,531 1,748 1,882 2,104 2,390 2,714
RoAE (%) 9.7 7.5 14.7 12.6 11.2 9.3 13.2 15.0 14.9
RoACE (%) 9.9 8.1 10.7 13.4 13.5 11.4 15.0 17.4 17.7
CRoCI (%) 12.5 12.4 21.8 19.1 17.0 14.9 19.3 20.7 21.2
EV (US$/ton) 367 329 312 277 267 225 201 180 163
EV/EBITDA 39.2 33.8 27.5 21.1 20.9 22.6 17.0 13.8 11.9
P/E 101.3 93.9 41.2 44.6 41.9 46.8 29.6 23.0 20.3
P/B 8.5 6.7 6.1 5.4 4.7 4.4 3.9 3.4 3.0
Net Debt/EBITDA 2.5 3.1 1.8 0.6 0.3 0.3 0.0 (0.3) (0.6)
UltraTech Cement
UPDATE
SRF (SRF) BUY

Specialty Chemicals
CMP(₹): 2,367 Fair Value(₹): 2,630 Sector View: Neutral NIFTY-50: 20,133 November 30, 2023
Positive outlook for chemicals, bullish on HFC prices Company data and valuation summary
We met with SRF’s senior management team on Thursday. Management is Stock data
bullish on HFC refrigerant prices, amid expected demand-supply tightening
CMP(Rs)/FV(Rs)/Rating 2,367/2,630/BUY
in the coming years. On the Specialty Chemicals Business (SCB), demand is
52-week range (Rs) (high-low) 2,637-2,040
seen progressively picking up in 2HFY24; the company continues to target
Mcap (bn) (Rs/US$) 702/8.4
single-digit growth in FY2024, followed by acceleration in FY2025. SRF also
ADTV-3M (mn) (Rs/US$) 890/10.7
holds a positive outlook for fluoropolymers, despite the PFAS concern there.
Shareholding pattern (%)
Bullish outlook for HFC refrigerant prices
5.5
Management sees world HFC demand remaining stable over the next few years,
11.5
with demand growth across the developing world offsetting declines in the
5.4
developed world. In contrast, HFC production is expected to decline in line with 7.4 50.5
Montreal Protocol regulations, leading to tightening demand-supply—
particularly in R-32, the most important HFC given its low Global Warming 19.8
Potential (GWP) value. Management expects China’s HFC export availability to

fall as much as 50%, as Chinese producers begin to focus more on profitability,
after a few years of aggressive dumping when their primary motivation was to Price performance (%) 1M 3M 12M
maximize production quota entitlement in line with Montreal Protocol Absolute 8 0 0
regulations. In 2Q of this year, China produced 15% less than it did last year and Rel. to Nifty 2 (4) (7)
consequently, in the past two months, SRF is seeing signs of rising HFC prices. Rel. to MSCI India 2 (5) (6)
SCB demand seen progressively picking up Forecasts/Valuations 2024E 2025E 2026E

EPS (Rs) 50.4 73.0 102.1
Management continues to expect 3QFY24 to be better than 2QFY24 for the SCB,
EPS growth (%) (30.9) 45.0 39.8
even though 3Q is seasonally a weaker quarter. 4QFY24 is expected to be better
P/E (X) 47.0 32.4 23.2
than 3QFY24. For FY2024 overall, management continues to guide to single -
P/B (X) 6.1 5.3 4.4
digit growth, accelerating to at least 15-20% in FY2025. While demand has been
EV/EBITDA (X) 25.1 18.7 14.1
under pressure due to destocking by customers amid higher interest rates, end-
RoE (%) 13.7 17.4 20.7
demand from farmers remains fairly healthy. Management expects customer
Div. yield (%) 0.5 0.6 0.0
demand to pick up by end-3QFY24 and foresees a scenario in which customers
Sales (Rs bn) 143 170 198
eventually rush to restock inventories. Plans to launch the 6-7 new active
ingredients are on track; all of these, except one, are patented products and
even in the off-patent product, there is a technology entry barrier. Investment
Source: Bloomberg, Company data, Kotak Institutional Equities estimates
plans for SCB remain in line with previous expectations.
November 30, 2023
Confident about fluoropolymers business, despite PFAS concerns
Although the commissioning of the PTFE plant—which marks SRF’s foray into
fluoropolymers—was delayed by a year due to the Covid-19 pandemic and visa
issues faced by Chinese engineers, the plant was commissioned in late-October
and initial samples sent to European and Indian customers have elicited an
encouraging response. The approval process may take 2-6 months, depending
Related Research
on the grade; SRF expects to utilize full capacity within the next one year. SRF
is starting production with bulk PTFE and then aims to eventually move to 50% → SRF: Soft 2QFY24 likely marks earnings
value-added products. Regarding the PFAS scare associated with → trough
SRF: Cyclical downturn presents buying
fluoropolymers, management pointed to multiple opinions indicating that opportunity
→ SRF: Chemicals business continues to
fluoropolymers do not have harmful environmental consequences and the impress
company’s production technology is PFOS/PFOA-free.
Abhijit Akella, CFA Sumit Kumar Eesha Mohanty

abhijit.akella@kotak.com sumit.kumar01@kotak.com eesha.mohanty@kotak.com
+91-22-4336-0878 +91-22-6166-1803 +91-22-4336-0877
32
Key takeaways from management meeting
Refrigerants (fluorochemicals) business

Expect tightening demand-supply to lead to higher prices in HFCs
Management expects HFC demand to grow over the next few years across the developing world,
particularly India, China and the Middle East, offsetting declines in the developed world. On a net basis,
therefore, world HFC demand is seen remaining stable. In contrast, HFC production is expected to
decline amid production cuts in the developed world and production freezes in the developing world.
Consequently, management believes R-32—the most important HFC refrigerant for the future given its
low GWP value—will be in shortage within the next 3-4 years. HFC prices are already higher in the US and
Europe because those regions are further down the curve in terms of production phase-downs and a
similar pattern is likely to play out across the rest of the world.
Expect China’s production and exports of HFCs to fall in CY2024
While the fact that there is a 30% production cut in HFCs looming in the US (in line with regulations)
effective from January 1, 2024, is a widely known fact, SRF’s management added that it expects China’s
export availability of HFCs to fall 50%, as the Chinese ramp down production. Management believes that
the Chinese are losing money on every kilogram of HFCs they sell and that the financials of Chinese
producers have been hurt very badly over the past 18 months. Yet, the reason they have been very
aggressive in the export markets is that their goal has been to maximize their production quota
entitlement in line with Montreal Protocol regulations—the baseline period that will be considered for
production quota determination is CY2020-22 in the case of China. However, CY2024 will be the year
when a capacity addition freeze comes into effect in China (again, in line with regulations) and therefore,
management expects the Chinese to start focusing more on profitability, going forward—their export
availability is seen falling as much as 50%. In 2Q of this year, China produced 15% less than it did last
year and consequently, in the past two months, SRF says it is seeing signs of rising prices of HFCs. On
a structural basis, consumption will continue to grow in China, leading to reduced quantities available
for exports. Management believes it is a matter of time before HFC prices increase.
New HFC capacity in UAE seen as possibly another route for China to circumvent US duties
Chinese producers created a unique HFC blend (R-410b), ostensibly to circumvent the hefty anti-dumping
duties imposed by the US on China. This matter is now being scrutinized by regulators, as there are
complaints that the Chinese are evading duties by using this route. Regarding the new HFC capacity that
has been put up in the UAE (Abu Dhabi) a year ago by iGas USA, management said the Americans think
it could be another case of attempted circumvention of duties. IGas already has previous legal cases
pending against it in the US. The speed at which the new capacity has come up and the lack of backward
integration raise suspicions around the entire set-up.
Thailand example illustrates how SRF has been building export outlets
Management cited the company’s work in Thailand over the past 3-4 years to highlight how the company
has been creating export avenues for refrigerants. SRF put up a filling station in Thailand and has been
importing refrigerants into that market a few years ago and thus, will enjoy an import quota under
Montreal Protocol regulations—SRF is among the top-3 entitlement-holders in Thailand. On the other
hand, Chinese producers have, in general, not done this sort of groundwork and thus, will not have access
to the Thai market.
Other takeaways
SRF has the capability to make its production capacities fungible between HFC products (such as
shifting from R-134a to R-32), but not every producer in the world has that capability. This flexibility
should be an advantage for SRF in the years to come.
Any producer that adds refrigerant capacity after the cut-off date set under the Montreal Protocol will
not be eligible for compensatory payments from the global fund that will be set up for the purpose of
enabling the transition to newer-generation refrigerants. The compensatory payments could be fairly
large—by way of reference, China is believed to have received $1 bn in compensation during the
previous round of phase-downs of older generation refrigerants (CFCs and HCFCs).
SRF
Specialty Chemicals India Research
33
Specialty Chemicals Business

Still aiming for single-digit growth in FY2024
Management continues to expect 3QFY24 to be better than 2QFY24 for the SCB, even though 3Q is
seasonally a weaker quarter. 4QFY24 is expected to be better than 3QFY24. For FY2024 overall,
management continues to guide to single-digit growth, accelerating to at least 15-20% in FY2025.
End-demand from farmers remains healthy, thus far
The agrochemical industry was overly optimistic in the past few years, leading to excessive stockpiling
of products. However, with the rise of interest rates, the finance teams are now pushing for inventory
reduction to save costs. Meanwhile, demand from farmers remains fairly healthy. On the other hand,
China is competing fiercely for market share and has slashed prices to generate cash flow. This has
created a downward pressure on prices, which have reached their lowest levels in the past two quarters.
Management expects this situation to improve by end-3QFY24. Management also foresees a scenario
in which customers eventually get desperate to restock inventories. Meanwhile, the pharma segment
within the SCB has been least affected, though there is an onslaught of Chinese producers in bulk
intermediates; however, that scenario has already existed for the past few years.
Pricing pressure not yet visible
Management said SRF has contracts for most of its business in SCB, but these are flexible and may be
subject to timing deferrals based on customer request. On pricing, SRF has not yet been impacted by the
crisis, but if the downturn in prices persists for a long time, then the company will have to adapt to the
new reality.
Business composition
Management said the agrochemical business is mainly focused on fungicides and insecticides; the
business also produces some herbicides, but those are a relatively smaller percentage. SRF does not
have a clear picture of the crops on which its products are used, because it does not have visibility into
the end-formulations sold by customers. However, management estimates that soybeans and corn
account for 35-50% of sales, followed by wheat and rice, and then other crops. SRF does not compete in
the commodity market of glyphosate, which is dominated by low-cost players. Instead, it tries to focus
on specialty products that have higher margins. Plans to launch the 6-7 new active ingredients are on
track; all of these, but one, are patented products and even in the off-patent product, there is a technology
entry barrier.
Fluoropolymers business
Confident about fluoropolymers business, despite PFAS scare
Management stated that a majority of the company’s products will be cyclical. Accordingly, the
fluoropolymer PTFE will bounce back in terms of demand. Regarding the PFAS scare associated with
fluoropolymers, management cited a recent study from Germany that showed that incinerating
fluoropolymers does not result in the formation of harmful PFAS compounds in the environment.
Moreover, not all PFAS are harmful, and some of them have been proven to be safe and effective for
their intended uses. The world is moving toward PFOS/PFOA-free polymerization, and SRF’s technology
follows the best practices and standards in this regard. The OECD has also recognized that these
products are not harmful and do not pose a significant risk to human health or the environment. The
recent reversal of the lawsuits against 3M & Chemours on the topic of PFAS is a further shot in the arm
for producers in this sector.
PTFE commissioning delayed, but ramp-up expected within the next year
The PTFE project is progressing well, despite some challenges. The commissioning of the plant was
delayed by a year due to the Covid-19 pandemic and the visa issues faced by Chinese engineers.
However, the plant was commissioned in late-October based on the work done by SRF’s in-house team.
SRF is starting production with bulk PTFE and then aims to eventually move to 50% value-added
products. The company has sent some samples of suspension-grade PTFE to Europe and received
positive feedback from potential customers. Management expects a visit from the European teams next
month. The approval process for PTFE products may take 2-6 months, depending on the grade. For
SRF
34
modified PTFE, which has superior properties and higher prices than the base product, the approval may
take longer, as it requires more testing and validation. SRF is also selling bulk samples of PTFE in India
and has received good demand from the local market. Management expects that it will be able to utilize
its full capacity within the next one year.
SRF continues to hold a strong project execution pipeline

Project-wise details for SRF, 2016 onward (Rs mn)
Capacity (tons) Capex Description
Project Segment Announcement Completion Existing Expansion (Rs mn)
Capacitor grade BOPP Film Packaging film Oct-23 Jun-26 4500 MTPA 2,750 Manufacturing facility for Capacitor Grade BOPP film at Indore
Facility to produce agrochemical intermediate Chemicals Oct-23 Aug-24 600 MTPA 2,350 Project to set up a new facility to produce agrochemical intermediate at Dahej
Electricity grid connectivity Aug-23 Sep-23 1,470 220 KV grid connectivity at Dahej plant
TCF value chain Aug-23 Sep-23 1,610 Phased capacity enhancement of TCF value chain
Anhydrous hydrogen chloride Chemicals Jul-23 161 Capacity expansion for AHCl, which finds application in pharma intermediates
Specialty fluoropolymers Chemicals Jan-23 Jan-25 5,950 Project for setting up a range of specialty fluoropolymers at Dahej
Specialty chemicals Chemicals Jan-23 Nov-23 1,100 Dedicated facility for an agrochemical intermediate at Dahej
Facility development Chemicals Jan-23 400 Project to create a structure for a new plant building
Specialty chemicals Chemicals Nov-22 Nov-23 6,000 Four new plants -4 agro intermediates including 2 for backward integration
Technical textiles Technical textiles Jul-22 Mar-25 1100tpm 1800tpm 1,620 Capacity expansion and modernization of belting fabric operations, Viralimalai
Dedicated facility Chemicals Jul-22 May-23 1000tpa 2,500 New and dedicated facility to produce an agrochemical intermediate at Dahej
Capacity expansion Chemicals Jul-22 On going 915tpa 720 Capacity expansion of an intermediate used in agrochemicals and pharma
Technical structures Chemicals Jul-22 On going 780 Two technical structures for new plant buildings for certain agrochemicals
Dedicated facilties Chemicals May-22 On going 1,150 Dedicated facilities to produce key specialty products in Dahej
R 22 capacity expansion Chemicals May-22 On going 300 Expansion of R 22 capacity by 2,500 tons for captive and non-emissive sales
Pharma Capacity Chemicals Jan-22 Nov-22 1,950 Capacity for manufacturing pharma intermediates, asset turnover of 1.25X
Dedicated facility Chemicals Jan-22 Sep-22 300 tpa 580 Dedicated plant for an agrochemicals intermediate (P38)
Aluminium foil Packaging film Jan-22 Oct-23 5,300 Initial project cost given by the company was Rs. 4250mn. Project with asset turnover of 1.75X
Facility development Chemicals Jul-21 On going 1,350 Installation of 200 KV grid at Dahej to meet power requirements
Refrigerants expansion Chemicals Jul-21 Sep-23 50,000 15,000 5,500 Expansion of fluorocarbon refrigerants with backward integration
MPP-4 Chemicals May-21 Jul-22 — — 3,750 Fourth Multipurpose plant in Dahej largely for agrochemicals
Facility development Chemicals Nov-20 Nov-23 2,500 Water security and thermal oxidation facility at Dahej
Dedicated plant for P16 Chemicals Nov-20 Jul-21 200 175 Dedicated facility for P16, a key intermediate
BOPP (Indore) Packaging film Nov-20 Aug-22 45,000 60,000 4,240 60,000MTPA BOPP capacity line at Indore along with metaliser line
Chloromethane Chemicals Jul-20 Sep-22 95,000 100,000 3,150 Three products NPC, CTC and Chloroform will be manufactured
Specialty chemicals Chemicals Feb-20 Nov-20 — 2,150 2,380 Dedicated facilities for 5-6 intermediate to be used in agrochemicals
HFC expansion Chemicals Feb-20 655 HFC Phase-I expansion for expanding R32 capacity to 7,500 TPA
Dedicated facility Chemicals Nov-19 Jun-20 1,800 1,600 400 Dedicated plant for molecule having multiple applications
Greige fabric Technical textiles Nov-19 Mar-23 3,800 750 1,250 Capacity expansion of NTCF and relocation of Thailand assets
Yarn Technical textiles Nov-19 Mar-23 3,450 1,255
BOPP Packaging film Nov-19 Sep-21 — 45,000 3,550 New BOPP line in Thailand
PTFE Chemicals Aug-19 Oct-23 5,000 4,890 PTFE plant, delayed by one year in July 2020. Cost overrun, initial cost was Rs4890 mn
MPP Chemicals Feb-19 Oct-19 — — 1,660 MPP plant for agrochemicals intermediate
BOPET (Thailand) Packaging film Jul-18 Sep-20 28,500 40,000 4,100 BOPET film line and resin plant
BOPET (Hungary) Packaging film Feb-18 Sep-20 — 40,000 4,611 BOPET film line and metalizer
P-34 Chemicals Feb-18 Dedicated facility to produce P34, carbon monoxide and ethylene pipeline
HFC Chemicals Nov-17 Oct-19 17,500 34,500 4,770 HFCs (R-125, R-32, R134a) and AHF capacity expansion
P-33 Chemicals Aug-17 May-18 — 800-1,000 850 Dedicated facility to produce P33 for agrochemicals at Dahej
Dedicated plant Chemicals May-17 250 2,000 Facility for agrochemicals and modification in R134a plant
R&D facility Chemicals Nov-16 R&D center in Bhiwadi, earlier announced in Feb-2015
MPP-3 Chemicals Aug-16 Dec-17 — — 1,800 MPP for wider set of agrochemicals and pharma
Chloromethane Chemicals Aug-16 Dec-17 40,000 40,000 1,650 Capacity would help in meeting pharma customers demand for MDC
BOPP (Indore) Packaging film May-16 Dec-17 — 35,000 2,690
HFC-125 acquisition Chemicals Nov-17 — — 658
BOPET (Indore) Packaging film Aug-15 Feb-17 — — 3,560
R&D center (Rajasthan) R&D Feb-15 Nov-16 — — 226
Modernization of technical textile plant (Gwalior) Technical textiles Feb-15 Jul-16 — — 531
R-134a Chemicals Aug-15 Mar-16 — — 260
Conversion of HFC-134a to swing HFC-134a and HFC-32 Chemicals Aug-15 Mar-16 — — 120
Dedicated plant for pharma products (Dahej) Chemicals May-15 Jan-16 — — 437
P-17 Chemicals Aug-14 Mar-15 — — 1,130
MPP-2 Chemicals May-14 Mar-15 — — 1,400
SRF
35
Chemicals segment growth will slow in FY2024, but should rebound in FY2025
Consolidated segment-wise performance of SRF, March fiscal year-ends, 2017-26E (Rs mn)
All figures in Rs mn 2017 2018 2019 2020 2021 2022 2023 2024E 2025E 2026E
Segment revenue
Technical Textiles 20,102 18,388 17,349 13,576 12,401 20,852 18,939 19,871 20,335 20,813
Chemicals 17,214 16,114 24,454 29,750 36,449 52,408 74,109 73,172 92,978 116,203
Packaging Films 14,092 17,823 26,533 26,040 32,917 47,792 51,828 44,845 51,144 55,492
Others — 4,573 2,716 2,783 2,320 3,403 3,926 4,845 5,330 5,863
Unallocable (43) (49) (57) (57) (87) (119) (99) (109) (119) (131)
Total 51,366 56,849 70,996 72,091 84,000 124,337 148,703 142,624 169,668 198,240
Yoy growth (%)
Technical Textiles (6) (22) (9) 68 (9) 5 2 2
Chemicals 52 22 23 44 41 (1) 27 25
Packaging Films 49 (2) 26 45 8 (13) 14 9
Others (41) 2 (17) 47 15 23 10 10
Total 25 2 17 48 20 (4) 19 17
Segment EBIT
Technical Textiles 2,543 2,529 2,982 1,515 1,769 4,714 2,617 2,782 2,847 2,914
Chemicals 3,273 2,694 3,843 5,115 7,281 13,969 23,407 19,025 26,034 34,861
Packaging Films 1,970 2,298 4,115 5,556 8,979 9,463 5,562 2,466 4,603 6,659
Others — 444 467 318 256 204 348 1,017 958 1,054
Unallocable (652) (2,059) (1,523) (1,840) (1,364) (1,763) (2,395) (2,470) (2,750) (3,062)
Total 7,135 5,904 9,884 10,663 16,921 26,587 29,539 22,820 31,693 42,426
EBIT margins (%)
Technical Textiles 12.6 13.8 17.2 11.2 14.3 22.6 13.8 14.0 14.0 14.0
Chemicals 19.0 16.7 15.7 17.2 20.0 26.7 31.6 26.0 28.0 30.0
Packaging Films 14.0 12.9 15.5 21.3 27.3 19.8 10.7 5.5 9.0 12.0
Others 9.7 17.2 11.4 11.0 6.0 8.9 21.0 18.0 18.0
Overall EBIT margins 13.9 10.4 13.9 14.8 20.1 21.4 19.9 16.0 18.7 21.4
The Chemicals segment continues to represent over 90% of our SOTP-based Fair Value
SRF’s SoTP valuation summary (Rs mn, unless specified)
Segment Sep-2025E EBITDA (Rs mn) 1 year fwd EV/EBITDA (X) Sep-24 EV (Rs mn) Per share (Rs)
Technical textiles business 3,280 6 19,681 66
Chemicals business 36,526 20 730,510 2,466
Packaging films 7,774 8 62,189 210
Others 1,082 8 8,652 29
Total 45,883 23 821,032 2,772
Net Debt and investments 41,220 139
Market capitalization 779,812 2,629
Target price (Rs) 2,630
No. of shares 296
SRF
36
EPS will likely dip in FY2024, but should rebound starting FY2025
Consolidated financial model for SRF, March fiscal year-ends (Rs mn, unless specified)
(Rs mn) 2017 2018 2019 2020 2021 2022 2023 2024E 2025E 2026E
Profit model
Revenue 48,218 55,890 76,927 72,094 84,000 124,337 148,703 142,624 169,668 198,240
EBITDA 9,970 9,062 13,552 14,549 21,452 31,759 35,292 29,540 39,798 51,969
Other income 455 1,151 401 491 545 428 749 659 716 652
Interest (1,018) (1,239) (2,016) (2,007) (1,340) (1,159) (2,048) (3,293) (3,538) (3,258)
Depreciation (2,834) (3,158) (3,669) (3,886) (4,531) (5,172) (5,753) (6,720) (8,105) (9,543)
Profit before tax 6,572 5,817 8,269 9,147 16,127 25,856 28,240 20,186 28,870 39,820
Tax expenses (1,422) (1,200) (1,853) (1,222) (4,144) (6,966) (6,617) (5,248) (7,218) (9,557)
Extraordinary items — — — 1234 — — — — — —
Reported PAT 5,150 4,617 6,416 9,159 11,983 18,889 21,624 14,938 21,653 30,263
Adjusted PAT 5,150 4,617 6,416 8,090 11,983 18,889 21,624 14,938 21,653 30,263
Year-end number of shares 287 287 287 287 292 296 296 296 296 296
Fully diluted number of shares 287 287 287 287 292 296 296 296 296 296
Adjusted EPS (Rs) 17.9 16.1 22.3 28.1 41.1 63.8 72.9 50.4 73.0 102.1
Balance sheet
Equity 31,827 35,645 41,293 49,333 68,564 85,654 103,271 115,082 133,171 159,372
Total borrowings 19,774 31,418 32,887 33,548 30,083 35,394 43,541 50,541 50,541 42,541
Other long-term liabilities 5,702 3,695 3,986 2,499 4,730 10,318 12,140 12,140 12,140 12,140
Current liabilities and provisions 14,510 12,871 20,713 23,388 25,916 26,401 28,594 28,310 33,059 38,107
Total liabilities 71,813 83,631 98,879 108,768 129,294 157,766 187,545 206,073 228,911 252,159
Net fixed assets 46,586 56,763 63,589 77,603 85,986 100,999 124,553 145,833 160,728 174,185
Other long-term assets 4,532 3,019 3,567 2,103 3,919 4,254 5,242 5,242 5,242 5,242
Cash and investments 2,669 2,184 2,994 3,240 6,945 7,761 11,065 9,379 9,261 10,507
Current assets 18,026 21,664 28,729 25,822 32,444 44,752 46,684 45,618 53,679 62,224
Total assets 71,813 83,630 98,879 108,768 129,294 157,766 187,545 206,073 228,911 252,159
Free cash flow
Operating cash excld. working capital 9,018 8,688 12,111 13,284 18,953 27,702 29,621 24,292 32,580 42,412
Working capital changes (2,564) (1,693) (3,155) (239) (1,236) (6,645) (604) 783 (3,312) (3,498)
Finance costs 968 1,200 1,971 1,841 1,246 919 1,601 2,634 2,822 2,605
Cash flow from operations 5,487 5,795 6,985 11,204 16,471 20,138 27,416 22,440 26,446 36,309
Capital expenditure (6,409) (12,829) (10,526) (13,730) (12,048) (18,171) (28,243) (28,000) (23,000) (23,000)
Free cash flow (922) (7,034) (3,541) (2,525) 4,423 1,967 (827) (5,560) 3,446 13,309
Ratios (%)
Gross margin 49.8 45.8 43.3 48.9 52.2 51.2 50.3 49.8 50.1 50.4
EBITDA margin 20.7 16.2 17.6 20.2 25.5 25.5 23.7 20.7 23.5 26.2
Net debt/equity (X) 0.5 0.8 0.7 0.6 0.3 0.3 0.3 0.4 0.3 0.2
Book value (Rs/share) 111 124 144 172 235 289 348 388 449 538
RoAE (%) 17.3 13.7 16.7 17.9 20.3 24.5 22.9 13.7 17.4 20.7
RoACE (%) 11.1 7.9 10.9 12.0 13.9 17.7 16.9 10.8 13.6 16.7
RoIC (%) 12.6 8.9 12.5 14.5 16.8 21.5 21.7 13.6 16.1 19.2
SRF
UPDATE
IT Services
India
Sector View: Neutral NIFTY-50: 20,133 December 01, 2023
Persistent cost focus limits hope for quick revival in spending

An analysis of the commentary of leading global enterprises across verticals
does not inspire confidence in a quick rebound in discretionary spending.
Cost reduction is front and center for a large number of enterprises across
sectors, with cost savings targets that extend well into CY2024. The intent to
invest in tech remains, with a focus on digitalization, automation, back-end
systems and AI initiatives, and catch-up is possible once macro improves.
The environment is ideal for cost take-outs; however, significant deals have
not materialized in the December quarter, leading to a focus shift to 1HCY24.
Baking in weaker revenue growth in 1HCY24 can lead to a 1-2% cut in FY2025
revenue and EPS estimates across IT companies. Infosys and HCLT are our
top picks.
Tough environment for discretionary spending likely in 1HCY24

Enterprises across most sectors are focused on cost-reduction priorities. Many
have outlined cost-savings targets that stretch into 2024. The reprioritization of
spends toward focus areas of investment is not yet complete. These do not
inspire confidence of a significant recovery in discretionary spending at least in
1HFY24. Note that our revenue growth estimates bake in healthy growth in
1QFY25, a seasonally strong quarter. Baking in a weaker June quarter can lead
to a 1-2% cut in our revenue and EPS estimates for FY2025.
Higher focus on digitalization, automation, back-end systems and AI initiatives

Enterprises are looking to invest in technology initiatives that can drive better
productivity, with an emphasis on digitalization and automation. Companies are
investing in adopting a modern tech stack for data management and back-
office systems, including ERP. Several M&A events across sectors are also
leading to consolidation opportunities. Digital laggards continue to invest in
front-office capabilities as well.
Tech modernization is a long journey—catch-up possible once macro improves

Companies are still in the middle of moving the requisite workloads to cloud
and creating data, analytics and automation infrastructure. Middle- and back-
office systems need to be modernized to get the full benefits of cloud and
AI/automation technologies. Many of these programs are in the slow lane due
to financial constraints or inadequate RoI. Confidence in macro-improvement
can be a driving force for many such programs.
Ideal environment for cost take-out deals; conversions in 1HCY24 in focus

Several large-deal themes, such as application/infra rationalization,
Related Research
centralization/standardization of systems, vendor consolidation and rebadging
of employees, are in play. The September quarter saw many such deals being → BFS - no signs of optimism visible for 2024 tech
converted across companies. Deal announcements have been muted in the → spends
Sailing in murky waters
December quarter. An uptick in deal conversions in 1HCY24 is required to
provide a better safety net on FY2025E growth projections.
Kawaljeet Saluja Sathishkumar S Vamshi Krishna

kawaljeet.saluja@kotak.com sathishkumar@kotak.com vamshi.krishna@kotak.com
+91-22-4336-0860 +91-22-4336-0879 +91-22-6166-1801
38
Infosys and HCLT continue to be our top picks

We like stocks with healthy growth characteristics, ability to cater to both discretionary spending and
cost take-out programs and trade at reasonable valuations. Infosys and HCLT are our preferred picks in
the IT services pack. We like Cyient in ERD. Mid-tier names such as Persistent have strong growth
characteristics, but trade at full valuations, implying limited upside from current levels.
India GCC expansion and insourcing continue for select clients

The below firms that have indicated insourcing of technology and ER&D work and expansion of India
captives in recent months. We believe this represents only a small fraction of a larger set of firms that
are setting up or expanding captive centers in India. Overall revenue growth can be impacted for
companies with high exposure to heavily insourcing clients.
Airbus. Has internalized a number of activities since it is more efficient to have Airbus employees
rather than subcontractors of third-parties. The cost impact of insourcing has been slightly positive.
HCA Healthcare. Announced plans to build a GCC in India focusing on IT and later evaluate additional
functions. The rationale is to get better access to global talent, power automation and innovation and
derive significant cost reduction.
AMD. Has planned to invest US$400 mn over the next five years to expand ER&D operations in India
and has opened its largest global design center in Bengaluru that can house 3k people.
CNH Industrial. Hiring additional 400 people over the next 12-24 months in India to add to the existing
staff of 600.
AstraZeneca. Has a large India center and looks to insource clinical trials to get better cost
advantage.
Vertical-wise tech spending outlook

Trends around cost-reduction mandates and tech spending outlook across individual sectors are
detailed below. Note that an analysis of BFS was published in an earlier note. The hospitality segment
and American utilities, which comprise only a tiny proportion of overall IT spending, provided positive
commentary around tech spending and capex uplift. Tech spending commentary of CPG firms were
reasonable given the environment. In technology, recovery green-shoots were visible in the software
segment. The outlook was mixed among insurers, healthcare payers and medical devices―companies
are pursuing cost-reduction targets, but also want to reinvest savings in technology. Incremental
negatives were spotted in life sciences, airlines and manufacturing verticals. Telecom, discretionary
retail, semiconductor and logistics, with a few exceptions, did not provide indications of hope of
significant recovery in discretionary spending in 2024.
Telecom—cost reductions and layoffs dominate

Top telecom operators and equipment manufacturers continue to dial down on costs. Verizon is working
on a program to reduce expenses by US$2-$3 bn within 2025. Vodafone announced plan to lay off 11,000
jobs over three years in May 2023. Telefonica plans to lay off 2,500 employees in Spain, a 12% reduction
in its domestic workforce. BT is focused on cost efficiency and has delivered the FY2025 target of
GBP2.5 bn of savings ahead of time. The company has taken multiple tech initiatives to cut costs,
including consolidating 17 financial systems into a single standard version, saving around GBP70 mn in
annual running costs. Nokia targets EUR800-1,200 mn cost reduction by the end of 2026, leading to
rationalizing of workforce by 9-14k. Ericson noted positive discussions with operators around network
investments, but plans for current market conditions to prevail into 2024. The company is on track to
reduce costs by SEK12 bn (US$1.1 bn) by 2023.
On the positive side, enterprises are focused on bringing efficiencies through data and AI. Telefonica
indicated promotion of AI and ML to bring benefits in terms of minimization of costs and allocation of
resources. BT has moved 80% of data from multiple locations into Google’s cloud platform in the last
two years and intends to use the data for AI and analytics applications.
IT Services
India Research
39
Insurance―mixed; some more focused on costs; some take a favorable approach to tech spends
Most insurers highlighted an uncertain macro environment. Certain insurers such as Geico and State
Farm with high underwriting losses have taken cost-reduction measures, including layoffs to meet
expense reduction targets. The outlook among other insurers is mixed. Insurers such as Progressive,
Marsh and Mclennan, Swiss Re and Lincoln Financial were more focused on cost control. Marsh and
Mclennan indicated restructuring efforts to get total savings of roughly US$$400 mn by 2024. The
restructuring actions include rationalization of technology. Insurers such as Jackson Financial and
MetLife provided more moderate commentary and highlighted the utility of technology investments
made. Prudential Financial indicated simplification of organizational structure by reducing management
layers, complexity, and costs while still making investments in technology and data platforms. Travelers
indicated continued investments in a range of priorities, including digitizing the value chain, digitizing the
customer journey, modernizing the foundation, advanced analytics, automation, faster speed to market,
etc.
Retailers—not in a good spot; willing to invest but impacted by macro; a few exceptions
The slowdown in discretionary spending has reduced the ability to invest in digital and cloud. Companies
also had to invest in physical stores given the return to in-store shopping. Key retailers have reduced
their capex, cut discretionary spending and initiated cost-savings programs. Best Buy has cut sales
outlook for 4QFY23. Target has lowered next year capex guidance to US$3-4 bn from US$4-5 bn in the
current year. Home Depot is working on a plan to get annualized cost savings of US$500 mn by 2024.
Macys has a similar target of US$300-350 mn by 2024. Dicks Sporting Goods, indicated focus on
productivity and lower discretionary spending to moderate SG&A growth in 2024.
Some companies have indicated outright impact on IT investments as well. Estee Lauder for instance
indicated a rationalization of smaller diluted innovation programs that were planned over the next year
or two. Walgreen Boots indicated US$1 bn of cost savings during fiscal year 2024, which include reducing
all nonessential spend and reducing areas for contracted or project work. GAP indicated focus on
optimizing technology investments and getting more value from spends.
Laggards in digital and ecommerce/D2C penetration continue to invest in IT modernization. For example,
investing in digital is a key priority for BJ’s wholesale which derives 10% of sales through digital channels.
There is a general appetite among retailers to invest in data and analytics for better personalization and
in automation for cost efficiencies. For example, Macys’ indicated a focus on automating processes to
create cost savings. Kohls indicated embedding more technology into operations to drive productivity.
Tesco is leveraging technology and automation to create cost savings. Walgreen Boots is centralizing
services such as customer support and driving supply chain efficiencies using AI.
There are exceptions as well. For example, Marks and Spencer indicated that it will be accelerating
investments in IT infrastructure next year. Bath Body and Works indicated that tech spend will remain
elevated to support the initiatives in the growth capabilities.
CPG companies are impacted by demand slowdown but faring better; some are modernizing ERP
The slowdown in demand and higher inflation are creating headwinds. Still, a reasonable chunk of
companies are in investment mode. Areas of investment include the DTC channel, loyalty programs, ERP
modernization (Nike, Clorox and Mondelez for example), AI and automation. Pepsi indicated that it
continues to drive the transformation of the business with automation at the center of it. Archer Daniels
Midland is spending higher on global technology in the current year versus the previous year to support
digital transformation efforts. Constellation Brands indicated moderate increase in tech spends going
forward. Clorox indicated that it is in the middle of digital transformation effort and is deeply committed
to it.
Travel transportation, logistics and hospitality—varying outlook across segments

In the hospitality segment (including restaurants), intent to invest in technology is high. For example,
Starbucks indicated incremental investments in digital innovation and supply-chain modernization in
2024. Marriott indicated elevated spending levels in the current year and next few years for technology
transformation. Caesars Entertainment highlighted investments in new tech capabilities and indicated
IT Services
India Research
40
that it has an exciting and robust technology plan. Yum Brands indicated acceleration of tech
deployments and AI initiatives.
Airlines continues to focus on digital but faces incremental headwinds to expenses in 2024. Southwest
Airlines indicated that inflationary pressures, particularly labor rates, combined with moderated capacity
growth have led to increased headwinds to 2024 expenses.
Logistics players are plagued by weak demand, leading to cost-reduction measures. UPS reduced
headcount by 2.3k in operations and overheads. FedEx is undertaking a massive organizational
restructuring in 2024. Companies do have strong willingness to invest in technology modernization. For
example, FedEx focuses on using data to make network more efficient; make customer experiences
better; and drive new profitable revenue streams through digital. CSX Corporation indicated that its
technology in many cases is on antiquated platforms and is investing in moving that data out of data
centers and on to the cloud to get near real-time business insights.
Life sciences—incremental negatives on the horizon

Companies such as Pfizer and Moderna have been impacted by a slowdown in Covid-related sales
volumes, leading to cost take-outs and lower budgets. Pfizer has announced an enterprise-wide cost-
savings program to deliver at least US$3.5 bn of savings by end-2024. Other key companies also
indicated cost focus. Gilead indicated a high focus on moderating the growth in expenses. Sanofi
announced efficiency initiatives, targeting up to EUR2 bn savings to free up operational resources and
support accelerated R&D investments. The incremental focus on tech spending of pharma companies
is on data, analytics and AI applications. Pfizer indicated the application of AI across the entire spectrum
of the organization, chiefly to achieve better productivity. AstraZeneca is using AI and advanced analytics
to drive faster decision-making and to analyze large medical data sets for multiple use cases, such as in
clinical trials, precision medicine, cancer screening and better patient-physician communication. Bayer
continues to focus on data-driven marketing to getter better RoI on marketing spends. The company is
also accelerating e-commerce presence. Amgen expects huge potential of AI in drug discovery and drug
developments.
Healthcare payers—cost rationalization but reinvestments in technology

Key players are embarking on cost-saving initiatives. Humana indicated a rationalization of the IT
portfolio and will move away or consolidate certain standalone business-specific systems and
applications. CVS indicated a focus on meeting the upper end of US$700-800 mn cost-savings target by
next year. Savings will be reinvested in technology. The focus on digitalization and the use of AI to get
productivity improvements will drive technology spends. Humana indicated that in the traditional fee-for-
service space, the industry has not invested significantly in technology and analytics, leading to higher
administration and patient care costs—the company will invest in improving the cost structure. Humana
indicated investments in AI-powered tools to reduce consumer call times and increased use of digital
channels for patient physician interaction. CVS is working on increasing digital engagement and
removing barriers to digital adoption. The company indicated continued investments in technology to
enable streamlined workflows and smoother operations. Elevance Health has taken actions, including
layoffs to generate cost savings, a part of which will be deployed in the accelerated rollout of certain
digital capabilities. The company indicated that it is committed to keeping pace with the rapid and
accelerating pace of technological innovation. Cigna indicated that it is continuing to innovate and build
on leading virtual care platforms and plans to further accelerate new capabilities in 2024. Centene is
focusing on automation, AI and clinical data capture for better efficiencies in processes and workflows,
improvement in self service in contact centers and enable better accuracy.
Healthcare providers—difficult to gauge due to limited information

Not many publicly listed large healthcare providers were available to get a firm grip on trends. Among
the large players, HCA Healthcare indicated cost savings plan, driven by tech investments and
committing a significant amount of resources to technology over the next few years, aided by
reinvestments from efficiency initiatives. Fresenius indicated continued tight management of costs but
did not comment on tech spends.
IT Services
India Research
41
Medical devices—headwinds from cost-reduction mandates cloud intent to invest in tech

Companies are focused on cost-reduction efforts. New tech investments are in data and AI,
softwarization and connected care solutions. Companies such as Philips, Agilent, Thermofisher and GE
Healthcare are still in the cost-cutting mode. Agilent indicated a slow recovery in 2024 and is continuing
with reductions in discretionary spend and is optimizing workforce. Thermofisher has been impacted by
lower Covid-related revenues and has lowered its 2023 revenue guidance. Philips has racked up
cumulative cost savings of EUR685 mn year-to-date. GE Healthcare is simplifying IT services and
systems across the businesses to create efficiencies with actions to impact in 2024 and beyond. Steris
indicated that the weak discretionary spending environment is impacting elective procedures in dental
healthcare.
On technology investments, Stryker indicated a focus on predictive intelligence, intelligent guidance and
ambient intelligence. Medtronic is investing in AI and robotics based surgical devices and platforms.
Baxter has realigned its business operating model and is ramped up R&D efforts, particularly increasing
investments in advancing our connected care. ResMed is reprioritizing investments leading to increase
in areas such as digital health tech, hardware and software development to create connected and
intelligent healthcare solutions. The changes have also resulted in a reduction of global workforce by
5%.
Technology—some green shoots of recovery visible in software

The technology sector has multiple segments: broadly semiconductors, hardware/consumer electronics
and software. The semiconductor space continues to be under pressure in the near term, given the weak
macro backdrop. Intel and Micron will continue expense reduction initiatives. Analog Devices indicated
a cut in capex next year and a reduction in discretionary spends. Global Foundries also flagged the weak
macro and hinted at a material reduction in capex next year.
Hardware/consumer electronics companies continue to be impacted by weak demand. Companies are

focusing on developing hardware with an ability run generative AI inferences on mobile and PC
environments.
Among software companies, big tech has considerably slowed down the pace of layoffs but still doing
reprioritization toward critical areas. It is possible for hiring to recover in 2024 in big tech. Startups and
small companies may continue to struggle.
Energy—difficult to gauge with limited information available

Shell indicated a cut in capex and opex. BP indicated capex for the current year at the lower end of the
guided range. Exxon Mobil indicated a focus on strengthening digital capabilities to make its operations
more efficient. We note that key oil and gas companies, Exxon Mobil and Chevron, have announced large
acquisitions whose integration and consolidation can play a key role in shaping their tech spending.
Utilities—mixed outlook in Europe, positive in US

Among European utilities, Fortum indicated about a massive growth capex reduction program and focus
on cost efficiencies, including layoffs. On the other hand, E. ON indicated a possibility of capex increase
if right incentives are available. In the US, many utilities have highlighted higher capex going forward.
Engie has basically reconfirmed capex guidance. Several American utilities have plans to increase capex
investments in the next few years, which can be a positive.
Manufacturing—cracks beginning to emerge

The manufacturing vertical has been a pillar of resilience so far. Yet, macro uncertainty, higher inflation
and interest rates are beginning to impact firms in the manufacturing domain as well. Firms such as 3M,
Emerson, Carrier, DuPont, Dow, Amcor, Stanley Black and Decker and Dover indicated a focus on cost
reduction and productivity enhancement. In the automotive segment, key firms are focused on
investments in electrification and softwarization. The cost-reduction aspect is visible in certain firms.
For example, Volkswagen has embarked on a EUR$10 bn savings target by 2026, which involves staff
IT Services
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42
reduction. Industrial equipment and machinery manufacturers such as Caterpillar (indicated

investments in e-commerce and other digital capabilities), Deere and CNH Industrial (continuing to
aggressively pursue building out of in-house tech solutions) appear to be relatively better positioned.
Vertical-wise exposure for IT services companies, %, Sep-23 quarter

Sep-23
BFSI Manufacturing, E&U Telecom Technology Retail/CPG/Logistics/travel Healthcare
TCS 39.6 14.1 6.9 8.6 15.9 10.9
Infosys 27.5 27.0 11.4 7.8 15.2 7.8
Wipro 33.6 18.6 4.3 12.1 18.7 12.7
HCLT 22.6 29.2 8.0 13.1 9.6 17.5
TechM 16.1 19.8 37.0 11.0 8.2 7.0
CTSH 30.1 NA NA NA NA 28.7
LTIMindtree 36.5 17.9 ― 23.8 15.3 6.5
Mphasis 57.9 ― ― 17.3 13.4 11.4
Coforge 54.2 NA NA NA 18.5 NA
Persistent 32.3 ― ― 40.4 ― 19.3
Zensar 37.3 25.9 ― 27.2 ― 9.6
Birlasoft 21.1 54.8 ― ― ― 24.0
Notes
(a) KIE estimate for BFSI revenue mix of TCS
(b) Zensar's manufacturing revenue mix contains consumer vertical as well
Outsourced IT services spending mix across verticals, %
25
20 21
20
15
9 9 9
10 7
6
5 2 2 2 3 3 3 2 1 1
0
Manufacturing
Insurance
Healthcare payers and
Hospitality
BFS
Logistics
Others
Airlines
Energy
Retail
Utilities
Telecom
Medical devices
CPG
Technology
Life sciences
providers
Notes
(a) Others includes government, education and professional services verticals
(b) Higher impacted verticals are colored red while lower impacted verticals are colored grey
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43
Kotak Institutional Equities: valuation summary of key Indian technology companies

30-Nov-23 Mkt cap. EPS (Rs) P/E (X) EV/EBITDA (X) RoE (%)
Company Price (Rs) Rating (Rs m) (US$ m) 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E
Cyient 1,935 BUY 214,350 2,571 70.1 87.2 97.6 27.6 22.2 19.8 15.5 13.4 12.1 19.4 20.1 20.2
HCL Technologies 1,341 BUY 3,638,754 43,643 57.2 65.0 72.0 23.5 20.6 18.6 14.2 12.8 11.6 23.5 25.4 26.7
Infosys 1,455 BUY 6,039,506 72,438 59.5 68.8 77.8 24.4 21.1 18.7 15.8 13.9 12.4 31.5 33.6 34.8
KPIT Technologies 1,499 SELL 411,024 4,930 21.2 27.8 35.7 70.8 54.0 42.0 41.0 32.0 25.7 29.9 30.5 31.2
L&T Technology Services 4,769 SELL 504,202 6,047 122.9 141.7 161.0 38.8 33.7 29.6 25.4 22.4 19.6 24.3 24.4 24.2
LTIMindtree 5,537 REDUCE 1,638,397 19,651 165.6 196.9 233.0 33.4 28.1 23.8 22.5 19.2 16.3 27.2 27.5 27.6
Mphasis 2,355 REDUCE 444,299 5,329 83.1 97.3 114.1 28.3 24.2 20.6 17.7 15.2 13.2 19.2 21.1 22.9
Persistent Systems 6,400 ADD 492,316 5,905 145.5 183.0 226.8 44.0 35.0 28.2 27.4 22.0 17.9 25.9 27.5 28.4
Rategain 660 ADD 77,727 932 12.0 15.2 17.4 55.1 43.6 37.8 39.1 31.9 25.6 16.8 17.7 16.9
Tata Elxsi 8,253 SELL 513,955 6,164 132.5 157.1 185.0 62.3 52.5 44.6 45.7 38.3 32.2 36.3 36.6 36.7
TCS 3,488 ADD 12,761,308 153,059 127.1 142.4 157.2 27.4 24.5 22.2 19.2 17.1 15.4 49.2 51.0 50.9
Tech Mahindra 1,221 REDUCE 1,074,328 12,885 34.5 59.0 72.4 35.4 20.7 16.9 18.6 11.9 10.0 11.0 18.7 22.1
Wipro 413 REDUCE 2,157,060 25,872 21.3 23.2 25.2 19.4 17.8 16.4 11.4 10.2 9.2 14.8 15.2 14.7
Target O/S shares EPS CAGR (%) EPS growth (%) Net Profit (Rs mn) EBITDA (Rs mn) Sales (Rs mn)
Company Price (Rs) (mn) 2024-26E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E
Cyient 2,000 111 18.0 36.0 24.5 11.9 7,756 9,655 10,803 13,352 15,282 16,767 72,157 81,614 92,221
HCL Technologies 1,410 2,714 12.2 4.6 13.7 10.8 155,167 176,573 195,778 241,451 266,521 290,836 1,102,725 1,216,241 1,333,932
Infosys 1,700 4,146 14.3 3.4 15.6 13.1 246,832 285,307 322,648 369,573 415,448 462,207 1,545,355 1,699,829 1,875,668
KPIT Technologies 940 273 29.9 51.2 31.1 28.7 5,783 7,581 9,754 9,930 12,648 15,494 48,540 59,270 70,772
L&T Technology Services 3,850 106 14.4 10.9 15.2 13.6 12,979 14,958 16,991 18,955 21,286 24,112 96,601 107,812 122,286
LTIMindtree 5,350 296 18.6 11.0 18.9 18.3 48,944 58,200 68,863 68,151 78,461 90,624 361,175 408,112 466,791
Mphasis 2,160 188 17.2 (4.4) 17.1 17.2 15,658 18,341 21,500 24,453 28,260 32,302 136,460 156,069 177,846
Persistent Systems 6,000 77 24.9 20.7 25.8 23.9 11,188 14,074 17,441 17,506 21,422 25,808 97,846 113,458 133,026
Rategain 650 109 20.8 131.0 26.6 15.2 1,308 1,656 1,907 1,872 2,237 2,701 9,614 11,004 12,550
Tata Elxsi 5,450 62 18.2 9.2 18.6 17.8 8,249 9,783 11,520 10,898 12,911 15,243 36,366 42,706 50,365
TCS 3,760 3,649 11.2 10.4 12.0 10.4 463,784 515,150 568,866 637,248 712,719 784,518 2,434,184 2,724,189 2,920,901
Tech Mahindra 1,150 890 44.8 (39.5) 71.0 22.6 30,712 52,514 64,404 55,012 85,837 101,475 515,571 547,049 604,658
Wipro 375 5,287 8.9 2.9 9.1 8.6 112,451 121,294 131,734 169,713 178,838 190,842 898,433 927,414 994,070
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Quant Research
India
NIFTY-50: 20,133 December 01, 2023
Making hay while the sun shines

Quick Numbers
November was the second consecutive month where all factors
outperformed the index. The index itself was up 5.6%, with extremely low
volatility. With this upside move, the Nifty index is overvalued as per our ‘Nifty Concentrated and broad All-Season portfolios
outperformed the index by 3% and 0.7%, respectively,
fair value’ model. We do not see any decent upside to the index over the next in November
six months. In addition, with realized volatility dropping to an extremely low
Since inception, both portfolios have delivered ~1.5%
level, we recommend caution in the medium term. LT and ITC replace COAL
annualized absolute outperformance and 6.7% and
and NTPC in the concentrated All-Season portfolio. 5.6% annualized risk-adjusted outperformance
Momentum has been the unstoppable force With the upside move in November, Nifty slips into the
overvalued zone as per our ‘Nifty fair value’ model
Momentum has worked quite well over FY2024, and November was no
exception. Since the start of FY2024, concentrated and broad momentum December 2023 portfolio: NEST, TCS, BJAUT, LT, ITC
portfolios have returned 35% and 25.2%, compared to 17% for the Nifty index.
Concentrated and broad momentum portfolios returned 10.6% and 8.9%,
respectively, in November. The optimized BSE-200 momentum portfolio
returned 14%, while the optimized Nifty-50 momentum portfolio returned 9.9%.
Other single factors also outperformed the benchmark in November. Since
inception, all broad single-factor portfolios have outperformed the index. The
broad and concentrated All-Season portfolios have also outperformed the
index, both in absolute and risk-adjusted terms.
Nifty index currently overvalued

The Nifty-50 index was up 5.6% in November. As per our ‘Nifty fair value’ model
that accounts for changes in index valuation by looking at expected growth,
bond yields, profitability and VIX, the index is now 13% overvalued, compared
to 8% at the end of October. While index starting valuation may not be a
sufficient pre-condition for a price-correction, we do not expect any decent
upside to the Nifty index over the next six months and do anticipate a time-
correction. The median pairwise correlations continue to be close to their long-
term average, but the index volatility has dropped like a stone again after rising
a bit in October. There were upgrades to the EPS estimates in November.
December 2023 portfolios

December 2023 concentrated All-Season portfolio consists of Nestle India
(NEST), Tata Consultancy Services (TCS), Bajaj Auto (BJAUT), Larsen and
Toubro (LT) and ITC (ITC). We show the factor scores and their relative
positions within the universe in Exhibit 11. The factor portfolios are shown in
Exhibits 12-19. The concentrated anti-factor portfolio consists of ADSEZ, ADE,
UPLL, DIVI and HNDL. We also show the optimized momentum portfolios in
Exhibits 20-21. Finally, we also show the mean-reversion portfolio as noted in
our recent research note (Momentum and mean-reversion) in Exhibit 22. Related Research
AlphaBet recommendations can differ from KIE analyst recommendations. The → Higher returns through rules-based investing
model portfolio is not advice or recommendation or a suggestion for buying or
→ Mean-reversion and momentum
selling securities as shown. It is only an indicative portfolio to show how a
→ Strength in diversity
portfolio can be built. Please consult an expert to build your portfolio.
Anurag Singh
anurag.singh4@kotak.com
+91-22-4336-1374
45
For a second consecutive month, all single factors outperformed the index
Exhibit 1: Returns of single factor and All-Season portfolios in November 2023 and since inception (28 February, 2020)
November 2023 returns (%) Returns since inception (%) Active November returns (%) Active returns since inception (%)
Nifty Index 5.6 88.8 NA NA
Concentrated All-season 8.6 97.4 3.0 8.5
Broad All-Season 6.3 98.2 0.7 9.4
Concentrated fundamental 7.0 100.2 1.4 11.4
Broad fundamental 8.0 104.7 2.4 15.9
Concentrated low volatility 7.1 52.2 1.5 (36.6)
Broad low volatility 6.7 90.9 1.1 2.1
Concentrated momentum 10.6 27.0 5.0 (61.9)
Broad momentum 8.9 110.1 3.3 21.2
Concentrated sentiment 6.4 255.9 0.8 167.1
Broad sentiment 7.4 138.7 1.8 49.9
Concentrated anti-factor 9.6 221.1 4.0 132.3
Broad anti-factor 8.2 206.7 2.6 117.9
Note: The model portfolio is not advice or recommendation or a suggestion for buying or selling securities as shown. It is only an indicative portfolio to show how a
Source: Bloomberg, Factset, Kotak Institutional Equities
Both broad and concentrated All-Season portfolios have delivered strong risk-adjusted outperformance since inception
Exhibit 2: Performance metrics of single factor and All-Season portfolios since inception (28 February, 2020)
Annualized Returns (%) Annualized Volatility (%) Max Drawdown Alpha (%) Beta Sharpe
Nifty Index 18.8 20.4 (32.5) 0.0 1.00 0.9
Concentrated All-season 20.3 19.4 (22.6) 6.7 0.72 1.0
Broad All-Season 20.4 17.3 (25.1) 5.6 0.76 1.2
Concentrated fundamental 20.7 18.8 (23.5) 5.4 0.79 1.1
Broad fundamental 21.5 17.3 (25.1) 6.3 0.77 1.2
Concentrated low volatility 12.1 18.5 (23.9) 0.2 0.67 0.7
Broad low volatility 19.2 17.0 (25.5) 5.1 0.72 1.1
Concentrated momentum 6.7 25.0 (34.2) (8.4) 0.95 0.4
Broad momentum 22.3 20.3 (31.0) 5.2 0.89 1.1
Concentrated sentiment 41.1 22.2 (21.0) 22.8 0.84 1.7
Broad sentiment 26.6 18.6 (24.9) 10.3 0.80 1.4
Concentrated anti-factor 37.2 28.5 (33.9) 16.3 1.07 1.3
Broad anti-factor 35.5 24.0 (31.6) 13.9 1.05 1.4
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November was a good month for the constituents of the broad All-Season portfolio
Exhibit 3: Monthly performance of the stocks in the October broad All-Season portfolio and the Nifty-50 index
20%
15%
10%
5%
0%
TCS
BAF
TATACONS
RELIANCE
PWGR
BRIT
MSIL
NEST
LT
COAL
BJAUT
INFO
NTPC
DRRD
NIFTY
CIPLA
-5%
-10%
Source: FactSet, Kotak Institutional Equities
Stock selection boosted returns of conc. All-Season portfolio Broad All-Season portfolio also benefitted from stock selection
Exhibit 4: The impact of stock selection and portfolio Exhibit 5: The impact of stock selection and portfolio
weighting on performance weighting on performance
10.0% 7.0%
8.0% 6.0%
5.0%
6.0%
4.0%
4.0%
3.0%
2.0%
2.0%
0.0%
1.0%
-2.0% 0.0%
-4.0% -1.0%
Index Stock Weighting Portfolio Index Stock Weighting Portfolio
Selection Return Selection Return
Note: The model portfolio is not advice or recommendation or a suggestion for Note: The model portfolio is not advice or recommendation or a suggestion for
buying or selling securities as shown. It is only an indicative portfolio to show buying or selling securities as shown. It is only an indicative portfolio to show
how a portfolio can be built. Please consult an expert to build your portfolio. how a portfolio can be built. Please consult an expert to build your portfolio.
Source: Factset, Kotak Institutional Equities Source: Factset, Kotak Institutional Equities
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47
Expected growth and VIX have the maximum impact on index valuation
Exhibit 6: Regression betas for regression of one-year forward index earnings yield on growth, ROE, 10-year yield and VIX
– Aug 2023)
Coefficients Standard Error t Stat P-value
Intercept (0.00) 0.8% (0.4) 0.7
Expected Growth (0.10) 1.5% (6.6) 0.0
Index ROE 0.28 4.5% 6.2 0.0
10-year yield 0.23 7.6% 3.0 0.0
VIX 0.05 0.5% 8.9 0.0
Source: Factset, Kotak Institutional Equities
With the >5% move in November, Nifty index looks to be ~13% overvalued as per our model
Exhibit 7: Actual one-year forward index earnings yield and model predicted index earnings yield
FY1 Earning Yield Model predicted earnings yield
12%
10%
8%
6%
4%
2%
0%
Jul-08
Jul-09
Jul-13
Jul-17
Jul-21
Jul-22
Jan-09
Jul-10
Jul-11
Jul-12
Jan-13
Jan-14
Jul-14
Jul-15
Jul-16
Jan-18
Jul-18
Jul-19
Jul-20
Jan-22
Jul-23
Jan-08
Jan-10
Jan-11
Jan-12
Jan-15
Jan-16
Jan-17
Jan-19
Jan-20
Jan-21
Jan-23
After a slight increase in volatility in October, the index volatility has slumped again
Exhibit 8: Monthly realized volatility for the BSE-200 index (Dec 2005 – Nov 2023)
90
80
70
60
50
40
30
20
10
0
Dec-05
Dec-06
Dec-07
Dec-14
Dec-15
Dec-16
Dec-08
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-17
Dec-18
Dec-19
Dec-20
Dec-21
Dec-22
Jun-10
Jun-11
Jun-12
Jun-19
Jun-20
Jun-21
Jun-06
Jun-07
Jun-08
Jun-09
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
Jun-18
Jun-22
Jun-23
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The median pairwise correlation is now close to its long-term average

Exhibit 9: Median pairwise correlation between BSE-200 index constituent returns over the past three months
Median correlation Average over time Avg + 1SD Avg - 1SD
0.60
0.50
0.40
0.30
0.20
0.10
0.00
Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Jan-22 Jan-23
Source: FactSet, Kotak Institutional Equities estimates
EPS estimates were revised upwards in November

Exhibit 10: Percentage of net EPS estimate upgrades ([#upgrades - #downgrades] / [#upgrades + #downgrades]) for FY1E (current
fiscal) and FY2E (next fiscal) for stocks in the Nifty-50 Index
Net upgrade % FY1 Net upgrade % FY2
80
60
40
20
0
Dec-08
Dec-13
Dec-14
Dec-19
Dec-05
Dec-06
Dec-07
Dec-09
Dec-10
Dec-11
Dec-12
Dec-15
Dec-16
Dec-17
Dec-18
Dec-20
Dec-21
Dec-22
Jun-06
Jun-11
Jun-12
Jun-16
Jun-17
Jun-22
Jun-23
Jun-07
Jun-08
Jun-09
Jun-10
Jun-13
Jun-14
Jun-15
Jun-18
Jun-19
Jun-20
Jun-21
-20
-40
-60
-80
-100
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December 2023 AlphaBet Portfolios
Two changes to the concentrated All-Season portfolio

Exhibit 11: Top half of Nifty50 Index, as sorted by combined factor score; stock names in red are part of the December 2023
concentrated All-Season portfolio
Stock name Sentiment Fundamental Momentum Low volatility Multi-factor

Nestle India Ltd (0.0) 1.6 0.8 1.3 0.9
Larsen & Toubro Ltd 1.1 (0.3) 1.7 0.7 0.8
Tata Consultancy Services Ltd 0.3 1.5 (0.2) 0.9 0.6
ITC Ltd 0.3 0.9 0.1 0.9 0.6
Bajaj Auto Ltd (0.2) 0.7 1.0 0.7 0.6
NTPC Ltd (0.2) 0.1 1.5 0.8 0.5
Britannia Industries Ltd 0.3 1.1 (0.6) 1.2 0.5
Titan Co Ltd 1.2 0.0 0.4 0.4 0.5
HCL Technologies Ltd 0.4 0.7 0.5 0.2 0.4
Sun Pharmaceutical Industries Ltd 0.9 (0.4) (0.0) 1.2 0.4
Tata Consumer Products Ltd 0.4 (0.4) 0.4 0.7 0.3
Hero MotoCorp Ltd 0.8 0.3 (0.0) (0.0) 0.3
Asian Paints Ltd 0.7 0.6 (0.8) 0.4 0.2
Maruti Suzuki India Ltd 0.1 (0.2) 0.5 0.6 0.2
Infosys Ltd 0.4 1.0 (0.6) 0.1 0.2
Hindustan Unilever Ltd 0.0 0.6 (0.8) 0.9 0.2
Power Grid Corp of India Ltd (1.1) 0.2 0.9 0.7 0.2
Tata Motors Ltd 1.5 (0.7) 1.1 (1.2) 0.2
Bajaj Finance Ltd 0.8 (0.3) 0.5 (0.4) 0.1
HDFC Bank Ltd 0.5 0.2 (1.0) 0.8 0.1
Bharti Airtel Ltd 0.5 (1.1) (0.0) 1.0 0.1
SBI Life Insurance (0.1) (0.5) 0.1 0.8 0.1
Cipla Ltd/India (0.8) (0.2) 0.6 0.7 0.1
UltraTech Cement Ltd 0.2 (0.4) 0.3 0.2 0.1
Coal India Ltd (2.3) 1.0 1.9 (0.3) 0.1
Dr Reddy's Laboratories Ltd (0.3) (0.2) 0.4 0.3 0.0
Kotak Mahindra Bank Ltd 0.5 (0.3) (0.8) 0.6 0.0
Reliance Industries Ltd 0.0 (0.4) (0.5) 0.8 (0.0)
LT and ITC replace COAL and NTPC in the concentrated All-Season portfolio
Exhibit 12: The concentrated All-Season portfolio, as of November 30, 2023
Nestle India Ltd 29.8% ADD
Larsen & Toubro Ltd 19.3% REDUCE
Tata Consultancy Services Ltd 17.5% ADD
Bajaj Auto Ltd 17.2% SELL
ITC Ltd 16.3% ADD
Note: The model portfolio is not advice or recommendation or a suggestion for buying or selling securities as shown. It is only an
indicative portfolio to show how a portfolio can be built. Please consult an expert to build your portfolio.
Quant Research
India Research
50
The broad All-Season basket is reasonably well-diversified

Exhibit 13: The broad All-Season portfolio, as of November 30, 2023
Stock name Portfolio Weight KIE analyst recommendation
Britannia Industries Ltd 9.4% ADD
Sun Pharmaceutical Industries Ltd 9.0% ADD
ITC Ltd 6.3% ADD
NTPC Ltd 6.2% ADD
Tata Consumer Products Ltd 5.8% ADD
Titan Co Ltd 5.5% ADD
Power Grid Corp of India Ltd 5.4% ADD
Maruti Suzuki India Ltd 5.3% SELL
HCL Technologies Ltd 5.2% BUY
Asian Paints Ltd 4.8% REDUCE
Infosys Ltd 4.6% BUY
Concentrated momentum portfolio has a heavy cyclical tilt

Exhibit 14: The concentrated portfolio, as of November 30, 2023
NTPC Ltd 29.7% ADD
Coal India Ltd 16.9% REDUCE
Oil & Natural Gas Corp Ltd 12.0% ADD
Tata Motors Ltd 11.4% REDUCE
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On the other hand, broad momentum portfolio is well diversified

Exhibit 15: The broad momentum portfolio, as of November 30, 2023
Cipla Ltd/India 8.3% ADD
NTPC Ltd 8.2% ADD
Maruti Suzuki India Ltd 7.0% SELL
HCL Technologies Ltd 6.9% BUY
Coal India Ltd 4.7% REDUCE
Bajaj Finance Ltd 4.6% REDUCE
Oil & Natural Gas Corp Ltd 3.3% ADD
IndusInd Bank Ltd 3.3% BUY
Tata Steel Ltd 2.8% BUY
No major changes to the concentrated low-volatility basket

Exhibit 16: The concentrated low-volatility portfolio, as of November 30, 2023
Bharti Airtel Ltd 16.1% ADD
ITC Ltd 14.6% ADD
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The broad low-volatility portfolio has a defensive tilt, as expected

Exhibit 17: The broad low-volatility portfolio, as of November 30, 2023
Hindustan Unilever Ltd 7.7% ADD
Cipla Ltd/India 5.9% ADD
ITC Ltd 5.8% ADD
NTPC Ltd 5.8% ADD
HDFC Bank Ltd 5.6% BUY
SBI Life Insurance 5.5% BUY
ICICI Bank Ltd 5.5% BUY
Reliance Industries Ltd 5.5% BUY
No particular sector dominates the concentrated Sentiment portfolio

Exhibit 18: The concentrated sentiment portfolio, as of November 30, 2023
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The broad sentiment portfolio is also well-diversified

Exhibit 19: The broad sentiment portfolio, as of November 30, 2023
HDFC Bank Ltd 7.8% BUY
Tata Consumer Products Ltd 7.5% ADD
UltraTech Cement Ltd 7.1% SELL
Hero MotoCorp Ltd 6.2% REDUCE
Asian Paints Ltd 6.1% REDUCE
Infosys Ltd 5.9% BUY
Bharat Petroleum Corp Ltd 5.8% REDUCE
Apollo Hospitals 4.9% BUY
LTI Mindtree 4.1% REDUCE
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Optimized Momentum Portfolios
Optimized momentum portfolio selected from BSE-200 index has representation from most sectors
Exhibit 20: The optimized momentum portfolio from the BSE-200 index universe, as of November 30, 2023
Name Weight Momentum Score
Larsen & Toubro Ltd 7.5% 1.6
Colgate-Palmolive India Ltd 7.5% 1.3
Titan Co Ltd 7.5% 1.0
Coforge Ltd 7.5% 1.6
Bajaj Auto Ltd 7.5% 1.4
Tata Motors Ltd DVR 7.5% 1.9
Supreme Industries 7.2% 2.3
TVS Motor Co Ltd 7.2% 1.5
Aurobindo Pharma Ltd 6.1% 1.6
Polycab India Ltd 5.3% 1.7
HDFC Asset Management Company Ltd 4.8% 1.4
Oil & Natural Gas Corp Ltd 3.9% 0.9
Trent Ltd. 3.7% 1.5
Persistent Systems Ltd 2.8% 1.0
Lupin Ltd 2.7% 1.2
REC Ltd 2.6% 1.5
PB Fintech Ltd 2.3% 1.3
Oil India Ltd 1.8% 1.1
Adani Power Ltd 1.5% 1.7
Power Finance Corp Ltd 1.5% 1.6
Varun Beverages Ltd 1.5% 1.3
Optimized momentum portfolio selected from Nifty-50 index has representation from most sectors
Exhibit 21: The optimized momentum portfolio from the Nifty index universe, as of November 30, 2023
Name Weight Momentum Score
Bharti Airtel Ltd 7.5% 1.3
HCL Technologies Ltd 7.5% 1.4
Larsen & Toubro Ltd 7.5% 1.6
Titan Co Ltd 7.5% 1.3
Tata Consultancy Services Ltd 7.5% 0.1
Nestle India Ltd 7.5% 0.8
Power Grid Corp of India Ltd 7.5% 1.0
Tech Mahindra Ltd 7.5% 0.7
ITC Ltd 7.5% 0.7
Bajaj Auto Ltd 6.4% 1.3
Dr Reddy's Laboratories Ltd 5.8% 0.7
Oil & Natural Gas Corp Ltd 5.8% 1.0
NTPC Ltd 5.5% 1.5
Tata Consumer Products Ltd 3.6% 0.7
Tata Motors Ltd 2.9% 1.5
Reliance Industries Ltd 2.5% (0.1)
Quant Research
India Research
55
Mean-reversion portfolio
The mean-reversion portfolio selected from Nifty-50 index has representation from most sectors
Exhibit 22: The mean-reversion portfolio from the Nifty-50 index universe, as of November 30, 2023
Name Residual return Weight

Maruti Suzuki India Ltd (5.8%) 14.5%
Nestle India Ltd (7.0%) 13.6%
Grasim Industries Ltd (1.7%) 11.8%
Dr Reddy's Laboratories Ltd (0.6%) 11.1%
Power Grid Corp of India Ltd (3.1%) 10.9%
Larsen & Toubro Ltd (2.2%) 10.1%
IndusInd Bank Ltd (2.5%) 9.1%
Infosys Ltd (2.4%) 8.4%
Mahindra & Mahindra Ltd (5.3%) 6.2%
Cipla Ltd/India (0.9%) 4.4%
Quant Research
India Research
UPDATE
Economy
National Accounts
November 30, 2023
2QFY24 GDP/GVA: Boosted by investment and manufacturing Macro Table
Real GDP growth at 7.6% in 2QFY24 was much better than expected led by 2022 2023 2024E 2025E
Real economy
strong investment growth (while consumption growth remained muted). GVA Real GDP growth (%) 9.1 7.2 6.8 6.3
growth was boosted by industrial sector growth. Over the next few quarters Nominal GDP growth (%)
CPI Inflation (avg., %)
18.4
5.5
16.1
6.7
9.4
5.3
11.0
4.7
robust corporate profitability trend will continue to keep growth numbers Public finance
Center's GFD/GDP (%) 6.8 6.4 5.9 5.3
buoyant even as consumption could remain under pressure. Any moderation Monetary policy
Repo Rate (%, eop) 4.00 6.50 6.50 6.25
in global demand will weigh on exports. Incorporating the latest GDP print SDF Rate (%, eop) 3.35 6.25 6.25 6.00
and a better global growth profile, we revise our FY2024E real GDP growth to CRR (%, eop)
External sector
4.0 4.5 4.5 4.5
6.8% (6.2% earlier) while maintaining our FY2025E real GDP growth at 6.3%. Current Account Balance (% of GDP) (1.2) (2.0) (1.5) (1.8)
Brent crude oil price (avg., USD/bbl) 80.0 95.4 85.0 90.0
USD/INR (avg.) 74.5 80.3 82.9 83.5
Governments’ role visible in boosting GDP growth

Source: CEIC, Bloomberg, RBI, Kotak Economics Research estimates
Real GDP growth at 7.6% in 2QFY24 (1QFY24: 7.8%, Consensus: 6.8%, Kotak:
7%) surprised on the upside. The governments’ role was evident given (1)
investment growth at 11% (aided by government capex), and (2) government
expenditure at 12.4% (see Exhibit 1). Private consumption growth continued to Quick Numbers
be weak at only 3.1% (1QFY24: 6%). Nominal GDP in 2QFY24 grew by 9.1% (8%
in 1QFY24). In 1HFY24, GDP growth at 7.7% in 1HFY24 was led by investment
1933
2QFY24 real GDP and GVA growth at 7.6% and 7.4%,
growth at 9.5% while personal consumption growth was at 4.5%. respectively
Upside surprise in real GVA growth led by manufacturing and construction 2QFY24 industry growth at 13.2%; services growth at
5.8%; PFCE growth at 3.1%; GFCF growth at 11%
Real GVA growth at 7.4% in 2QFY24 (1QFY24: 7.8%, Consensus: 6.8%, Kotak:
6.8%) was led by strong industrial sector growth at 13.2% (1QFY24: 5.5%) while Estimate FY2024E-25E real GDP growth at 6.8% and
service sector growth moderated to 5.8% (10.3%) (see Exhibit 2). Manufacturing 6.3%, respectively
sector growth at 13.9% was led by favorable base effects and high profitability
aided by low input costs. Construction sector growth at 13.3% (7.9% in 1QFY24)
continued to reflect the government’s capex thrust. Agriculture sector growth,
as expected, was weak in 2QFY24. Real GVA growth at 7.6% in 1HFY24 was led
by construction, manufacturing, and financial/real estate services.
FY2024E-25E real GDP growth likely at 6.8% and 6.3%, respectively

High frequency indicators continue to point to resilience in economic activity
(see Exhibit 3). However, headwinds to growth loom large from (1) continued
weak rural demand, which can be exacerbated in case of adverse rainfall
impacting winter crops, (2) muted overall consumption growth in the near term ,
which can be further impacted by the higher risk weights on key credit
segments, (3) lagged impact of cumulative rate hikes and financial tightening,
and (4) moderation in global growth over the next few quarters leading to some
pressure on manufacturing and exports. Factoring in the latest print as well as
a better-than-expected global growth outturn, we raise our FY2024E real GDP
growth to 6.8% (6.2% earlier) with 2HFY24E growth at 6% (5.7% earlier) (see
Exhibit 4). We maintain our FY2025E real GDP growth at 6.3% assuming some
Related Research
global slowdown in 1HFY25 followed by recovery in both global and domestic
demand conditions. Growth prospects in FY2025 will also be shaped by some → 1QFY24 GDP: Local maxima
easing in financial conditions, normal monsoons/agriculture sector outlook, → India Economy: Moving into a riskier phase
and continuation of government’s capex (albeit at a much slower pace). → GDP growth surprises on the upside
Suvodeep Rakshit Upasna Bhardwaj Anurag Balajee

suvodeep.rakshit@kotak.com upasna.bhardwaj@kotak.com anurag.b@kotak.com
+91-22-4336-0898 +91-22-6166-0531 +91-22-6166-1547
57
2QFY24 real GDP growth at 7.6% led mainly by government spending and investment
Real GDP and components growth, March fiscal year-ends, 2019-24 (%)
2019 2020 2021 2022 2023 2QFY22 3QFY22 4QFY22 1QFY23 2QFY23 3QFY23 4QFY23 1QFY24 2QFY24
Real GDP 6.5 3.9 (5.8) 9.1 7.2 9.1 5.2 4.0 13.1 6.2 4.5 6.1 7.8 7.6
Private consumption 7.1 5.2 (5.2) 11.2 7.5 14.2 10.8 4.7 19.8 8.3 2.2 2.8 6.0 3.1
Government consumption 6.7 3.9 (0.9) 6.6 0.1 11.7 5.8 11.8 1.8 (4.1) (0.6) 2.3 (0.7) 12.4
Gross fixed capital formation 11.2 1.1 (7.3) 14.6 11.4 12.4 1.2 4.9 20.4 9.6 8.0 8.9 8.0 11.0
Inventory 27 (59) (85) (688) (3) (655.9) (618.9) (613.8) (7) 2.6 0.1 (5.9) (3.9) (11.6)
Valuables (9.7) (14.2) 26 34 (19) 157 45 (52) 58.7 (19.5) (38.0) (23.4) (21.0) (4.0)
Exports 11.9 (3.4) (9.1) 29 14 25 28 22 20 12.2 11 12 (8) 4.3
Imports 8.8 (0.8) (13.7) 22 17 27 20 7 33.6 23.1 10.7 4.9 10.1 16.7
Source: CEIC, Kotak Economics Research
2QFY24 real GVA growth at 7.4% led mainly by industry; services growth moderated
Real GVA and components growth, March fiscal year-ends, 2021-24 (%)
2QFY22 3QFY22 4QFY22 1QFY23 2QFY23 3QFY23 4QFY23 1QFY24 2QFY24

Real GVA 9.3 4.7 3.9 11.9 5.4 4.7 6.5 7.8 7.4
Agriculture and allied 4.8 2.3 4.1 2.4 2.5 4.7 5.5 3.5 1.2
Industry 8.1 1.6 2.3 9.4 (0.5) 2.3 6.3 5.5 13.2
Mining 10.6 5.4 2.3 9.5 (0.1) 4.1 4.3 5.8 10.0
Manufacturing 6.6 1.3 0.6 6.1 (3.8) (1.4) 4.5 4.7 13.9
Electricity 10.8 6.0 6.7 14.9 6.0 8.2 6.9 2.9 10.1
Construction 10.8 0.2 4.9 16.0 5.7 8.3 10.4 7.9 13.3
Services 11.1 7.6 4.9 16.3 9.4 6.1 6.9 10.3 5.8
Trade, hotel, transport, communication 13.1 9.2 5.0 25.7 15.6 9.6 9.1 9.2 4.3
Financial, real estate, professional services 7.0 4.3 4.6 8.5 7.1 5.7 7.1 12.2 6.0
Public admin, defence, and others 16.8 10.6 5.2 21.3 5.6 2.0 3.1 7.9 7.6
Real GDP 9.1 5.2 4.0 13.1 6.2 4.5 6.1 7.8 7.6
Economy
India Research
58
High frequency data holding up in 3QFYTD24

Key growth indicators (yoy, %)
Oct-22 Nov-22 Dec-22 Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23
Manufacturing
PMI manufacturing 55.3 55.7 57.8 55.4 55.3 56.4 57.2 58.7 57.8 57.7 58.6 57.5 55.5
Credit growth (industry) 13.6 13.1 8.6 8.7 7.0 5.7 7.0 6.0 8.0 5.7 6.6 7.1
Petroleum products consumption (industrials) 8.8 5.2 11.7 3.4 7.5 17.3 (8.8) 15.0 9.5 (1.3) 13.7 12.2 (6.0)
Average no. of daily GST e-way bills (mn) 2.5 2.7 2.7 2.7 2.9 2.9 2.8 2.8 2.9 2.8 3.0 3.1 3.2
IIP manufacturing (5.8) 6.7 3.6 4.5 5.9 1.5 5.5 6.3 3.5 5.0 9.3 4.5
Railways freight traffic 0.8 4.3 6.0 6.4 4.7 3.0 (0.6) (2.1) (7.6) (3.5) 2.2 4.2 4.6
Steel production 2.2 4.6 0.5 9.3 14.3 11.6 6.5 15.3 13.8 14.6 16.6 14.6 14.1
Construction
Steel consumption 12.0 10.4 12.0 9.7 21.6 20.8 8.0 7.8 15.8 17.6 21.5 18.7 15.3
IIP cement (4.2) 29.1 9.5 4.7 7.4 (0.2) 12.4 15.9 9.9 6.9 19.3 4.7
Core infrastructure 0.7 5.7 8.3 9.7 7.4 4.2 4.6 5.2 8.4 8.4 12.5 8.1
Credit growth (home loans) 16.0 16.2 16.0 15.5 15.0 15.0 14.3 14.6 15.0 37.6 37.7 37.3
Services
PMI services 55.1 56.4 58.5 57.2 59.4 57.8 62.0 61.2 58.5 62.3 60.1 61.0 58.4
Credit growth (services) 22.6 21.5 19.5 21.5 20.7 19.8 21.7 21.4 26.8 23.6 24.8 25.1
Domestic air passenger traffic 29.8 11.5 14.2 95.6 56.8 21.4 22.2 15.2 18.8 24.7 22.8 18.4 10.8
Airport cargo (14.5) (2.3) (5.9) (3.7) 2.1 1.4 0.0 (0.3) (0.8) (1.2) 6.9 (0.3) 13.1
Consumption
Credit growth (personal loans) 20.1 19.6 20.0 20.4 20.4 20.6 19.4 19.2 20.9 31.2 30.8 30.4
Passenger vehicle sales 28.6 28.1 7.2 17.2 11.0 4.5 31.7 13.5 2.0 19.2 27.7 17.7 33.9
Non-oil imports 0.5 4.8 (4.5) (8.1) (8.6) 2.3 (12.5) (5.9) (9.9) (8.9) 2.0 (13.0) 13.9
Mobility
Diesel consumption 5.6 19.2 6.6 12.7 7.4 1.1 8.6 12.8 3.0 3.8 5.2 3.8 9.3
FASTag (mn) 44.5 46.5 49.4 48.1 46.8 50.7 51.5 54.4 52.0 49.8 51.8 50.9 55.4
Labor market
Naukri job index (2.7) 42.9 4.3 1.7 (2.2) 5.2 (5.2) (0.5) (2.9) (18.8) (5.7) (8.6) 1.2
All India unemployment rate (%) 7.8 8.0 8.3 7.1 7.5 8.1 8.5 7.7 8.5 8.0 8.1 7.1 10.1 9.1
- Rural 8.0 7.6 7.4 6.4 7.2 7.8 7.7 6.9 8.8 7.8 7.1 6.2 10.8 9.4
- Urban 7.2 9.0 10.1 8.6 7.9 8.6 10.3 9.1 7.9 8.1 10.1 8.9 8.4 8.6
Rural
Two wheeler sales 2.3 17.7 3.9 5.0 8.8 9.0 16.5 17.4 1.7 (7.2) 0.6 0.8 20.2
Tractor sales 3.6 4.4 19.2 16.0 11.8 10.1 (13.0) (2.4) (0.7) (0.0) (4.1) (15.6) (5.3)
Employment demanded under MNREGA (sa, mn) 27.0 30.0 27.7 26.5 24.9 27.1 29.4 30.9 29.5 29.8 28.9 29.2 29.1
Fertilizer sales (2.4) 2.0 0.6 18.0 9.9 19.0 (13.9) 2.1 1.7 4.4 2.7 5.7
Color code > (Mean + 1SD) >= Mean & <= (Mean + 1SD) < Mean >= (Mean -1SD) < (Mean - 1SD)
We revise up our FY2024 real GDP growth estimate to 6.8%; maintain FY2025 estimate at 6.3%
Real GVA and components growth, March fiscal-year ends, 2019-25E (%)
2019 2020 2021 2022 2023 2024E 2025E 1QFY23 2QFY23 3QFY23 4QFY23 1QFY24 2QFY24 3QFY24E 4QFY24E
Real GVA 5.8 3.9 (4.2) 8.8 7.0 6.7 6.1 11.9 5.4 4.7 6.5 7.8 7.4 6.4 5.4
Agriculture and allied 2.1 6.2 4.1 3.5 4.0 1.5 4.3 2.4 2.5 4.7 5.5 3.5 1.2 0.7 1.1
Industry 5.3 (1.4) (0.9) 11.6 4.4 9.9 7.1 9.4 (0.5) 2.3 6.3 5.5 13.2 12.6 8.7
Mining (0.8) (3.0) (8.6) 7.1 4.6 7.8 6.8 9.5 (0.1) 4.1 4.3 5.8 10.0 7.9 7.8
Manufacturing 5.4 (3.0) 2.9 11.1 1.3 10.4 6.7 6.1 (3.8) (1.4) 4.5 4.7 13.9 13.8 9.4
Electricity 7.9 2.3 (4.3) 9.9 9.0 8.0 7.7 14.9 6.0 8.2 6.9 2.9 10.1 10.3 9.2
Construction 6.5 1.6 (5.7) 14.8 10.0 10.0 7.8 16.0 5.7 8.3 10.4 7.9 13.3 12.1 7.6
Services 7.2 6.4 (8.2) 8.8 9.5 6.4 6.1 16.3 9.4 6.1 6.9 10.3 5.8 5.0 4.6
Trade, hotel, transport, communication 7.2 6.0 (19.7) 13.8 14.0 4.8 5.7 25.7 15.6 9.6 9.1 9.2 4.3 3.4 3.2
Financial, real estate, professional services 7.0 6.8 2.1 4.7 7.1 7.4 6.6 8.5 7.1 5.7 7.1 12.2 6.0 5.3 5.4
Public admin, defence, and others 7.5 6.6 (7.6) 9.7 7.2 7.0 5.6 21.3 5.6 2.0 3.1 7.9 7.6 7.0 5.6
Real GDP 6.5 3.9 (5.8) 9.1 7.2 6.8 6.3 13.1 6.2 4.5 6.1 7.8 7.6 6.6 5.6
Source: CEIC, Kotak Economics Research estimates
Economy
India Research
59
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 30-Nov-23 (Rs) (%) (Rs bn) (US$ bn) (mn) 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E (US$ mn)
Automobiles & Components
Apollo Tyres SELL 427 345 (19) 271 3.3 638 27 27 28 70 (2) 3 16 16 15 7 7 6 1.9 1.7 1.6 13 11 11 1.2 1.4 1.6 12
Ashok Leyland REDUCE 183 170 (7) 538 6.4 2,936 9 9 9 114 0 (1) 19 19 19 11 12 12 5.2 4.5 3.9 29 25 21 2.1 2.1 2.1 27
Bajaj Auto SELL 6,091 4,500 (26) 1,762 21 283 253 264 287 27 4 9 24 23 21 19 18 16 6.4 6.1 5.8 27 27 28 3.3 3.5 3.8 31
Balkrishna Industries SELL 2,576 1,900 (26) 498 6.0 193 68 78 89 24 15 14 38 33 29 22 19 16 5.8 5.2 4.5 16 17 17 0.7 0.8 0.8 8
Bharat Forge SELL 1,120 760 (32) 522 6.3 466 24 34 40 110 38 18 46 33 28 21 18 16 6.9 5.9 5.0 16 19 19 0.5 0.6 0.7 15
CEAT SELL 2,100 1,400 (33) 85 1.0 40 149 118 117 188 (21) (1) 14 18 18 7 7 7 2.2 2.0 1.8 16 12 11 1.8 1.4 1.3 6
CIE Automotive SELL 478 470 (2) 181 2.2 378 22 26 29 20 19 14 22 19 16 12 11 10 3.0 2.7 2.4 15 15 16 1.1 1.3 1.5 3
Eicher Motors SELL 3,897 2,900 (26) 1,067 12.8 272 145 147 160 36 1 9 27 26 24 23 21 19 7.0 6.1 5.5 28 25 24 1.2 1.3 1.5 23
Endurance Technologies SELL 1,684 1,280 (24) 237 2.8 141 46 57 65 33 25 15 37 30 26 18 15 13 4.8 4.3 3.8 13 14 15 0.6 0.7 0.8 2
Escorts Kubota SELL 3,150 2,100 (33) 348 4.2 111 98 107 111 78 9 4 32 30 28 27 24 23 3.7 3.4 3.1 12 11 11 0.5 0.5 0.5 15
Exide Industries REDUCE 285 250 (12) 242 2.9 850 12 15 16 16 18 12 23 20 18 13 11 10 2.0 1.9 1.7 9 10 10 0.9 0.9 0.9 8
Hero Motocorp REDUCE 3,819 2,900 (24) 763 9.2 200 195 204 216 34 5 6 20 19 18 13 12 11 4.3 4.0 3.8 23 22 22 3.6 3.7 4.0 23
Mahindra & Mahindra BUY 1,648 1,680 2 2,049 24.6 1,159 89 84 93 35 (5) 11 19 20 18 15 14 12 3.7 3.2 2.7 22 17 17 0.8 0.8 0.8 47
Maruti Suzuki SELL 10,609 8,450 (20) 3,205 38.4 314 377 385 420 41 2 9 28 28 25 18 17 15 4.9 4.5 4.0 19 17 17 1.4 1.5 1.6 63
MRF SELL 111,683 77,500 (31) 474 5.7 4 4,961 4,567 4,935 174 (8) 8 23 24 23 11 11 10 2.8 2.6 2.3 13 11 11 0.3 0.3 0.3 8
Samvardhana Motherson ADD 92 100 9 624 7.5 6,776 4 5 6 56 45 13 26 18 16 9 7 7 2.6 2.3 2.0 10 14 14 0.8 0.9 0.9 11
Schaeffler India SELL 2,838 2,720 (4) 444 5.3 156 61 69 78 9 14 12 47 41 37 31 27 24 9.2 8.2 7.2 21 21 21 0.1 0.1 0.0 5
SKF SELL 4,600 3,925 (15) 227 2.7 49 107 138 158 1 29 15 43 33 29 31 24 21 8.5 7.3 6.3 20 22 21 0.7 0.9 1.0 2
Sona BLW Precision REDUCE 558 520 (7) 327 3.9 583 9 12 14 33 31 21 62 47 39 36 28 24 12.1 10.1 8.4 21 23 23 0.4 0.5 0.6 8
Tata Motors REDUCE 706 630 (11) 2,705 32.4 3,829 53 60 62 2,665 13 4 13 12 11 5 5 4 4.2 3.1 2.4 37 30 24 0.3 0.3 0.4 81
Timken SELL 2,942 2,450 (17) 221 2.7 75 55 69 88 6 24 28 53 43 33 36 28 22 9.1 7.6 6.2 19 19 20 0.1 0.1 0.0 3
TVS Motor SELL 1,865 1,000 (46) 886 10.6 475 41 45 50 29 10 13 46 42 37 27 24 22 12.0 10.0 8.4 29 26 25 0.5 0.6 0.7 20
Uno Minda ADD 673 600 (11) 386 4.6 571 15 17 19 29 13 13 46 40 36 26 22 20 7.8 6.7 5.7 17 17 16 0.3 0.4 0.4 3
Varroc Engineering SELL 538 420 (22) 82 1.0 153 16 25 30 129 63 17 35 21 18 12 10 8 6.6 5.0 3.9 19 24 22 — — — 5
Automobiles & Components Cautious 18,145 217.6 92.2 6.4 8.1 22.9 21.5 19.9 11.7 10.8 9.7 4.6 4.0 3.5 20 18.6 17.6 1.2 1.2 1.3 428
Banks
AU Small Finance Bank SELL 741 615 (17) 496 5.9 667 24 33 44 12 36 34 31 23 17 — — — 4.0 3.3 2.8 14 16 18 — — — 16
Axis Bank BUY 1,074 1,100 2 3,311 39.7 3,077 79 84 94 14 7 12 14 13 11 — — — 2.3 2.0 1.7 18 17 16 1.1 1.2 1.3 101
Bandhan Bank BUY 226 270 19 364 4.4 1,611 23 26 30 68 13 15 10 9 8 — — — 1.7 1.4 1.2 17 17 17 1.5 1.7 2.0 26
Bank of Baroda ADD 197 215 9 1,019 12.2 5,178 30 29 32 11 (6) 14 7 7 6 — — — 1.0 0.9 0.8 15 13 13 3.1 2.9 3.3 46
Canara Bank BUY 403 425 5 731 8.8 1,814 79 91 100 35 16 9 5 4 4 — — — 1.0 0.9 0.7 18 18 17 4.0 4.7 5.1 39
City Union Bank ADD 146 140 (4) 108 1.3 740 12 14 17 (1) 13 17 12 10 9 — — — 1.5 1.3 1.1 12 12 13 1.7 1.9 2.3 8
DCB Bank BUY 112 150 34 35 0.4 312 19 21 26 26 10 27 6 5 4 — — — 0.8 0.7 0.6 12 12 14 1.7 2.3 3.4 3
Equitas Small Finance Bank ADD 94 110 17 106 1.3 1,122 7 10 12 41 32 25 13 10 8 — — — 1.9 1.6 1.4 15 17 19 — — — 6
Federal Bank BUY 147 170 15 358 4.3 2,419 13 16 18 (6) 17 17 11 9 8 — — — 1.3 1.2 1.1 13 13 13 1.8 2.1 2.5 24
HDFC Bank BUY 1,559 1,800 15 11,831 141.9 7,580 87 99 113 10 14 14 18 16 14 — — — 2.8 2.5 2.2 19 16 16 1.2 1.4 1.6 355
ICICI Bank BUY 935 1,150 23 6,554 78.6 6,984 53 56 61 17 4 10 18 17 15 — — — 2.9 2.6 2.3 17 16 15 1.1 1.2 1.3 153
IndusInd Bank BUY 1,466 1,600 9 1,140 13.7 776 110 123 141 16 12 14 13 12 10 — — — 1.9 1.7 1.5 15 14 15 1.1 1.2 1.4 54
Karur Vysya Bank BUY 155 155 0 124 1.5 802 17 20 23 25 15 16 9 8 7 — — — 1.3 1.2 1.1 15 16 16 2.9 3.3 3.9 5
Punjab National Bank BUY 78 82 6 854 10.2 11,011 8 13 14 240 65 11 10 6 5 — — — 0.9 0.8 0.7 8 13 13 2.8 4.7 5.2 60
SBI Cards and Payment Services BUY 739 925 25 702 8.4 946 25 31 46 5 24 48 29 24 16 — — — 5.9 4.8 3.8 22 22 26 0.4 0.5 0.6 15
State Bank of India BUY 565 725 28 5,040 60.5 8,925 61 63 71 8 3 13 9 9 8 — — — 1.5 1.3 1.1 16 14 14 2.1 2.1 2.1 102
Ujjivan Small Finance Bank ADD 57 58 2 111 1.3 1,928 6 6 7 5 8 8 10 9 8 — — — 2.0 1.7 1.4 24 20 18 0.0 0.0 0.0 15
Union Bank BUY 108 115 7 799 9.6 7,412 18 22 23 47 20 4 6 5 5 — — — 1.0 0.8 0.7 16 16 15 4.1 4.9 5.1 39
YES Bank REDUCE 19 17 (12) 556 6.7 31,315 0 1 1 13 202 62 69 23 14 — — — 1.4 1.3 1.2 2 6 9 0.0 0.0 0.0 53
Banks Attractive 34,241 410.7 26.8 11.6 13.1 13.2 11.8 10.5 1.9 1.7 1.5 14.5 14.3 14.3 1.5 1.7 1.8 1,120
Source: Company, Bloomberg, Kotak Institutional Equities estimates
India Research
60

Building Products
Astral SELL 1,950 1,600 (18) 524 6.3 269 23 29 35 37 25 21 84 67 56 50 41 35 16.1 13.3 11.1 21 22 22 0.2 0.2 0.3 18
Building Products Cautious 524 6.3 36.8 24.6 20.7 83.6 67.1 55.6 49.9 41.5 35.1 16.1 13.3 11.1 19.2 19.9 19.9 0.2 0.2 0.3 18
Capital goods
ABB REDUCE 4,420 4,200 (5) 937 11.2 212 58 66 80 78 15 20 76 67 55 60 52 43 15.5 12.8 10.6 22 21 21 0.1 0.1 0.1 13
Bharat Electronics SELL 146 118 (19) 1,066 12.8 7,310 5 5 6 16 6 12 31 29 26 22 20 17 6.9 6.3 5.7 24 23 23 1.5 1.6 1.8 23
BHEL SELL 170 65 (62) 594 7.1 3,482 (1) (0) 2 (187) 60 554 NM NM 83 (8,741) 89 33 2.2 2.2 2.2 NM NM 3 0.0 0.0 (0.2) 61
Carborundum Universal REDUCE 1,190 1,120 (6) 226 2.7 190 24 32 41 9 34 29 50 37 29 30 24 18 7.1 6.2 5.3 15 18 20 0.4 0.5 0.7 3
Cochin Shipyard REDUCE 1,205 1,060 (12) 158 1.9 132 46 48 64 121 4 34 26 25 19 18 14 10 3.3 3.1 2.7 13 13 15 1.2 1.3 1.4 47
Cummins India ADD 1,909 2,040 7 529 6.3 277 51 59 68 13 17 15 38 32 28 36 30 26 9.0 8.1 7.3 25 26 27 1.5 1.7 2.0 18
Dixon Technologies SELL 5,511 4,200 (24) 330 4.0 59 76 99 129 77 30 30 72 55 43 41 32 25 18.8 14.1 10.6 30 29 28 0.0 0.0 0.0 26
G R Infraprojects SELL 1,036 1,010 (3) 100 1.2 97 77 81 99 (12) 5 22 13 13 11 9 8 7 1.7 1.5 1.3 13 12 13 0.0 0.0 0.0 1
IRB Infrastructure BUY 37 38 2 224 2.7 6,039 1 2 2 3 57 19 30 19 16 10 9 8 1.7 1.7 1.7 6 9 10 4.1 4.9 5.6 18
Kalpataru Projects BUY 663 745 12 108 1.3 160 37 55 68 37 48 24 18 12 10 7 6 5 2.0 1.7 1.5 12 16 17 0.5 0.6 0.7 3
KEC International REDUCE 578 610 5 149 1.8 257 19 34 47 171 85 38 31 17 12 12 9 7 3.6 3.0 2.5 12 19 22 0.3 0.6 0.9 4
L&T REDUCE 3,109 2,700 (13) 4,371 52.4 1,373 93 111 131 24 19 17 33 28 24 23 19 17 6.1 5.4 4.8 18 21 21 0.9 1.1 1.2 71
Siemens SELL 3,658 3,300 (10) 1,303 15.6 356 61 73 84 12 20 15 60 50 44 43 36 31 8.9 7.9 6.9 16 17 17 0.4 0.5 0.6 14
Thermax REDUCE 2,535 2,730 8 302 3.6 113 52 62 74 31 18 20 48 41 34 39 31 24 39.0 31.2 24.5 15 15 16 0.5 0.6 0.6 2
Capital goods Cautious 10,396 124.7 19.5 21.1 21.2 41.0 33.9 28.0 25.5 21.3 18.1 5.7 5.2 4.7 14.0 15.3 16.7 0.8 0.9 1.1 303
Commercial & Professional Services
SIS BUY 486 500 3 71 0.9 147 23 28 35 (4) 24 24 21 17 14 13 11 9 2.7 2.3 2.0 13 14 15 0.0 0.0 0.0 1
TeamLease Services REDUCE 2,524 2,430 (4) 42 0.5 17 70 96 125 8 38 30 36 26 20 30 22 17 5.1 4.3 3.5 14.4 17.8 19.2 — — — 1
Commercial & Professional Services
Neutral 113 1.4 (1.5) 27.3 25.7 25.1 19.7 15.7 16.1 13.0 10.8 3.2 2.8 2.4 12.9 14.1 15.1 0.0 0.0 0.0 2
Commodity Chemicals
Asian Paints REDUCE 3,120 3,050 (2) 2,993 35.9 959 59 60 62 35 3 3 53 52 50 37 35 34 16.0 14.0 12.5 32 29 26 1.0 1.0 1.1 33
Berger Paints SELL 574 500 (13) 670 8.0 1166 11 11 12 48 3 7 53 51 48 33 32 31 12.8 11.2 9.9 26 23 22 0.8 0.8 0.8 9
Indigo Paints REDUCE 1,489 1,375 (8) 71 0.9 48 33 37 40 35 14 6 45 40 37 28 24 23 7.9 6.9 6.1 19 18 17 0.5 0.6 0.9 2
Kansai Nerolac REDUCE 318 295 (7) 257 3.1 808 9 9 10 53 (0) 5 35 35 33 22 22 21 5.1 4.7 4.4 15 14 14 1.0 1.4 1.5 1
Tata Chemicals SELL 970 790 (19) 247 3.0 255 53 39 42 (43) (26) 8 18 25 23 7 8 8 1.2 1.2 1.1 7 5 5 2.0 1.4 1.5 9
Commodity Chemicals Cautious 4,237 50.8 14.8 (1.5) 4.2 46.4 47.1 45.2 28.4 28.5 27.2 8.4 7.7 7.1 18.0 16.3 15.7 1.0 1.0 1.1 54
Construction Materials
ACC REDUCE 1,876 1,970 5 352 4.2 188 92 111 130 66 20 17 20 17 14 11 9 7 2.3 2.0 1.8 12 13 13 1.0 1.2 1.4 13
Ambuja Cements SELL 439 350 (20) 872 10.5 2,463 14 19 20 4 30 8 31 24 22 9 8 7 2.2 2.0 1.9 9 9 9 0.5 0.7 0.7 14
Dalmia Bharat ADD 2,218 2,350 6 416 5.0 185 55 102 126 61 87 24 41 22 18 14 10 8 2.5 2.3 2.0 6 11 12 0.4 0.7 0.9 10
Grasim Industries REDUCE 2,005 1,925 (4) 1,320 15.8 658 124 133 145 18 8 9 16 15 14 8 7 6 1.5 1.4 1.3 10 10 10 0.6 0.7 0.8 16
J K Cement SELL 3,644 2,600 (29) 282 3.4 77 103 127 152 87 22 20 35 29 24 15 13 11 5.2 4.5 3.9 16 17 17 0.4 0.4 0.4 5
Nuvoco Vistas Corp ADD 365 365 0 130 1.6 357 5 11 15 (56) 115 34 71 33 25 10 9 8 1.4 1.4 1.3 2 4 5 0.0 0.0 0.0 1
Orient Cement REDUCE 258 200 (22) 53 0.6 205 11 14 16 90 21 15 23 19 16 10 9 7 2.9 2.6 2.3 14 15 15 0.8 0.8 0.8 4
Shree Cement SELL 26,742 17,900 (33) 965 11.6 36 643 753 867 75 17 15 42 35 31 21 18 15 4.8 4.3 3.9 12 13 13 0.4 0.5 0.6 9
The Ramco Cements SELL 994 690 (31) 235 2.8 236 27 36 48 105 31 35 36 28 21 15 13 11 3.2 2.9 2.5 9 11 13 0.3 0.4 0.5 6
UltraTech Cement SELL 9,004 7,200 (20) 2,599 31.2 289 277 357 405 58 29 13 32 25 22 19 15 13 4.3 3.8 3.3 14 16 16 0.5 0.6 0.3 31
Construction Materials Cautious 7,224 86.6 38.8 23.6 13.3 27.2 22.0 19.4 12.5 10.6 9.1 2.7 2.4 2.2 9.8 10.9 11.2 0.5 0.6 0.6 110
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Consumer Durables & Apparel
Aditya Birla Fashion and Retail REDUCE 232 210 (9) 220 2.6 998 (8) (6) (4) (2,009) 31 34 NM NM NM 17 12 10 5.8 5.0 5.4 NM NM NM — — — 8
Havells India SELL 1,303 1,140 (12) 816 9.8 628 20 25 30 19 22 20 64 52 44 43 35 29 11.2 10.1 9.0 18 20 22 0.6 0.8 0.9 14
Page Industries SELL 37,259 34,500 (7) 416 5.0 11 539 663 778 5 23 17 69 56 48 43 35 30 25.0 20.6 17.3 40 40 39 0.8 1.0 1.2 11
Polycab SELL 5,268 4,120 (22) 791 9.5 150 116 128 149 35 10 16 45 41 35 31 28 24 10.0 8.5 7.3 24 22 22 0.5 0.6 0.7 34
TCNS Clothing Co. REDUCE 385 420 9 24 0.3 69 (3) 1 4 (22) 127 316 NM 455 109 19 14 12.0 4.2 3.9 3.6 NM 1 3 — — — 1
Vedant Fashions REDUCE 1,370 1,200 (12) 333 4.0 248 18 23 27 5 24 21 75 61 50 47 38 32 20.3 16.5 13.2 29 30 29 — — — 3
Voltas SELL 828 770 (7) 274 3.3 331 11 22 27 (7) 104 25 78 38 31 55 29 25 4.8 4.4 4.0 6 12 14 0.5 0.8 1.0 12
Whirlpool SELL 1,571 1,020 (35) 199 2.4 127 20 28 39 17 38 41 78 56 40 42 31 23 5.4 5.0 4.5 7 9 11 0.3 0.3 0.4 2
Consumer Durables & Apparel Cautious 3,256 39.0 2.0 34.6 12.2 73.7 54.7 48.8 34.5 27.2 23.5 9.1 8.0 7.9 12.4 14.6 16.14 0.5 0.6 0.6 92
Consumer Staples
Britannia Industries ADD 4,853 4,800 (1) 1,169 14.0 241 88 98 110 9 11 13 55 50 44 39 35 31 29.8 26.9 24.2 57 57 58 1.6 1.9 2.1 19
Colgate-Palmolive (India) ADD 2,196 2,075 (6) 597 7.2 272 46 51 55 19 9 9 47 43 40 32 30 27 32.9 31.3 29.6 71 74 77 2.0 2.2 2.4 12
Dabur India ADD 538 590 10 953 11.4 1,772 11 13 14 16 13 13 48 43 38 38 33 29 9.6 8.6 7.7 21 21 21 1.0 1.2 1.3 11
Godrej Consumer Products ADD 1,008 1,150 14 1,031 12.4 1,023 19 23 26 11 21 15 53 44 38 36 30 26 6.8 6.2 5.7 13 15 16 0.7 1.0 1.3 10
Hindustan Unilever ADD 2,546 2,775 9 5,981 71.7 2,350 45 50 57 8 13 12 57 51 45 40 35 31 11.6 11.2 10.7 21 23 24 1.6 1.8 2.0 46
ITC ADD 436 470 8 5,436 65.2 12,428 16 18 20 7 11 9 27 24 22 20 18 16 7.7 7.4 7.0 27 30 32 3.2 3.5 3.9 50
Jyothy Labs REDUCE 434 370 (15) 160 1.9 367 10 11 13 64 10 11 42 38 34 32 29 26 9.0 8.0 7.2 23 22 22 1.0 1.3 1.4 6
Marico REDUCE 539 550 2 697 8.4 1,290 12 13 14 14 9 11 47 43 38 33 30 27 15.4 13.1 11.3 36 33 32 1.1 1.2 1.4 10
Nestle India ADD 24,236 24,500 1 2,337 28.0 96 312 367 415 26 18 13 78 66 58 52 44 39 80.9 76.5 74.2 112 119 129 1.1 1.4 1.7 20
Sula Vineyards ADD 464 530 14 39 0.5 84 11 13 15 11 14 18 42 37 31 23 20 18 6.5 5.7 5.1 16 17 17 0.6 0.7 1.0 4
Tata Consumer Products ADD 941 915 (3) 874 10.5 929 15 18 20 30 21 15 64 53 46 38 33 29 5.2 5.0 4.8 8 10 11 1.0 1.1 1.2 16
United Breweries ADD 1,647 1,675 2 435 5.2 264 19 31 38 42 63 24 87 53 43 51 34 28 10.2 9.2 8.5 12 18 21 0.9 1.4 1.7 5
United Spirits ADD 1,049 1,075 2 763 9.2 727 16 19 22 16 23 13 67 55 48 44 36 32 10.8 9.8 9.0 17 19 19 0.2 1.0 1.1 12
Varun Beverages ADD 1,105 1,025 (7) 1,436 17.2 1,299 16 19 23 36 21 22 71 58 48 41 33 28 20.9 15.9 12.3 34 31 29 0.2 0.2 0.3 22
Consumer Staples Attractive 21,908 262.8 11.9 13.7 11.9 45.8 40.3 36.0 32.7 28.5 25.4 11.1 10.4 9.7 24 26 27 1.7 1.9 2.2 241
Diversified Financials
360 One BUY 572 600 5 205 2.5 355 20 24 29 9 16 22 28 24 20 — — — 6.0 5.6 5.2 23 24 27 2.7 3.1 3.8 4
Aavas Financiers BUY 1,440 2,025 41 114 1.4 79 64 78 95 17 22 22 23 19 15 — — — 3.0 2.6 2.2 14 15 16 0.0 0.0 0.0 5
ABSL AMC ADD 449 450 0 129 1.6 288 22 24 27 8 10 9 20 18 17 — — — 4.7 4.2 3.8 NM NM NM 3.0 3.3 3.6 1
Aptus Value Housing Finance ADD 290 330 14 145 1.7 498 12 14 17 18 17 21 24 21 17 — — — 3.9 3.3 2.8 17 17 17 1.4 0.0 0.0 3
Bajaj Finance REDUCE 7,122 7,400 4 4,401 52.8 615 238 301 372 25 27 24 30 24 19 — — — 5.8 4.8 3.9 23 22 22 0.4 0.5 0.7 92
Bajaj Finserv ADD 1,674 1,725 3 2,670 32.0 1,593 67 84 98 66 25 18 25 20 17 — — — 4.9 4.2 3.8 21 22 23 0.1 0.1 0.1 28
Cholamandalam ADD 1,117 1,250 938 11.3 839 40 50 61 23 26 22 28 22 18 — — — 5.1 4.2 3.3 20 20 20 0.2 0.3 0.3 28
Computer Age Management ServicesADD 2,801 2,500 (11) 138 1.7 49 68 80 94 17 18 17 41 35 30 — — — 15.1 13.0 11.2 40 40 40 1.6 1.9 2.2 7
CRISIL SELL 4,275 3,300 (23) 313 3.7 73 85 92 104 10 9 13 50 46 41 — — — #DIV/0! #DIV/0! #DIV/0! 33 32 32 1.3 1.4 1.6 3
Five Star Business Finance ADD 751 840 12 219 2.6 291 26 32 39 27 20 22 29 24 19 — — — 4.3 3.6 3.1 16 17 17 — — — 8
HDFC AMC ADD 2,970 3,000 1 634 7.6 214 82 95 105 22 16 11 36 31 28 — — — 9.5 8.9 8.2 27 29 30 2.1 2.4 2.6 25
Home First Finance BUY 898 1,175 31 79 1.0 88 33 40 49 26 22 24 27 23 18 — — — 3.8 3.3 2.8 15 16 17 — — 0.5 4
ICRA REDUCE 5,460 5,100 (7) 53 0.6 10 162 180 201 14 11 12 34 30 27 — — — #DIV/0! #DIV/0! #DIV/0! 15 16 17 — — 0 0
Kfin Technologies ADD 533 465 (13) 91 1.1 169 13 15 17 9 15 19 42 37 31 — — — 8.5 7.0 6.2 16 16 18 — 0.8 1 2
L&T Finance Holdings SELL 148 100 (33) 369 4.4 2,480 8 10 12 (16) 23 22 19 15 12 — — — 1.6 1.5 1.4 9 10 12 1.7 2.0 2.4 18
LIC Housing Finance BUY 491 600 22 270 3.2 550 85 79 82 61 (7) 3 6 6 6 — — — 1.0 0.9 0.8 16 13 12 2.8 2.6 2.7 14
Mahindra & Mahindra Financial ADD 274 310 13 339 4.1 1,234 14 20 26 (12) 43 28 19 14 11 — — — 2.0 1.8 1.6 10 13 15 1.0 1.5 1.9 13
Muthoot Finance ADD 1,482 1,500 1 595 7.1 401 100 122 144 16 22 18 15 12 10 — — — 2.5 2.1 1.8 18 19 19 1.3 1.6 1.9 8
Nippon AMC ADD 418 400 (4) 261 3.1 623 14 15 17 20 11 11 30 27 24 — — — 7.2 7.0 7.2 24 26 29 3.0 3.3 3.7 4
SBFC REDUCE 90 75 (17) 96 1.2 1,091 2 3 3 29 32 25 43 32 26 — — — 4.0 3.5 3.1 10 10 12 0.0 0.0 0.0 -
Shriram Finance BUY 2,007 2,300 15 754 9.0 376 187 224 263 17 19 18 11 9 8 — — — 1.6 1.4 1.2 15 16 17 1.4 1.7 2.0 30
UTI AMC ADD 824 840 2 105 1.3 127 45 42 46 31 (8) 11 18 20 18 — — — 2.6 2.6 2.5 15 13 14 4.4 4.0 4.5 2
Diversified Financials Attractive 12,917 154.9 27.3 21.0 19.1 22.9 19.0 15.9 3.8 3.3 2.9 16.6 17.4 18.0 0.8 0.9 1.0 298
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Electric Utilities
CESC BUY 97 105 8 129 1.5 1,326 11 14 14 6 26 6 9 7 7 6 5 5 0.9 0.9 0.8 11 13 13 5.3 5.4 5.9 8
JSW Energy SELL 408 225 (45) 672 8.1 1,640 10 15 18 17 52 23 42 28 22 17 12 11 3.4 3.0 2.7 8 12 13 0.5 0.5 0.5 27
NHPC ADD 54 55 1 546 6.6 10,045 4 5 6 13 8 24 12 11 9 14 8 6 1.4 1.3 1.2 12 12 14 4.2 4.7 5.5 19
NTPC ADD 261 260 (1) 2,534 30.4 9,895 19 22 24 14 14 8 13.5 11.8 11 10 8 8 1.6 1.5 1.4 12 13 13 2.8 3.1 3.3 39
Power Grid ADD 209 220 5 1,943 23.3 9,301 18 19 20 10 4 3 11.4 11.0 11 7 7 6 2.2 2.0 1.8 20 19 18 5.2 5.4 5.6 36
Tata Power SELL 268 230 (14) 856 10.3 3,196 9 8 10 (15) (8) 28 30 33 26 12 12 10 2.7 2.5 2.3 9 8 9 — — — 34
Electric Utilities Attractive 6,680 80.1 9.9 10.0 9.5 14.4 13.1 11.9 9.4 8.2 7.4 1.9 1.7 1.6 13.0 13.3 13.4 3.1 3.3 3.5 163
Fertilizers & Agricultural Chemicals
Bayer Cropscience REDUCE 5,351 5,080 (5) 240 2.9 45 188 210 232 24 11 11 28 26 23 20 18 16 8.5 8.1 7.7 30 32 34 3.0 3.3 3.7 2
Godrej Agrovet ADD 501 530 6 96 1.2 192 17 23 30 40 35 35 30 22 16 17 13 10 3.3 3.0 2.7 11 14 17 1.4 1.9 2.6 1.1
Rallis India REDUCE 233 210 (10) 45 0.5 195 9 11 13 90 21 15 26 21 19 14 12 10 2.5 2.3 2.1 10 11 12 1.5 1.7 1.9 3
UPL REDUCE 571 550 (4) 428 5.1 751 27 40 52 (40) 46 31 21 14 11 7 6 5 1.5 1.4 1.2 7 10 12 1.0 1.5 2.0 19
Fertilizers & Agricultural ChemicalsCautious 810 9.7 (23.4) 35.0 26.3 23.8 17.7 14.0 9.0 7.7 6.5 2.2 2.1 1.9 9.4 11.7 13.4 1.7 2.1 2.6 25
Gas Utilities
GAIL (India) REDUCE 132 120 (9) 867 10.4 6,575 12 13 13 48 6 4 11 10 10 9 8 8 1.5 1.4 1.3 14 14 14 5.7 6.1 6.4 23
GSPL BUY 289 375 30 163 2.0 564 22 17 19 32 (22) 9 13 17 15 6 8 7 1.6 1.5 1.5 13 9 10 2.8 3.1 3.2 3
Indraprastha Gas REDUCE 389 375 (4) 272 3.3 700 30 28 30 27 (6) 6 13 14 13 9 10 9 3.3 3.0 2.7 27 23 21 2.6 2.7 2.8 12
Mahanagar Gas REDUCE 1,041 975 (6) 103 1.2 99 111 88 85 39 (21) (4) 9 12 12 6 7 7 2.1 1.9 1.7 24 17 15 3.5 3.0 2.8 8
Petronet LNG SELL 203 175 (14) 304 3.6 1,500 23 23 24 30 1 4 9 9 9 5 5 6 1.8 1.6 1.3 21 19 17 4.9 2.5 1.2 12
Gas Utilities Cautious 1,709 20.5 38.9 (0.9) 4.0 10.9 11.0 10.6 7.9 7.6 7.3 1.7 1.6 1.5 15.9 14.6 14.1 4.7 4.4 4.4 59
Health Care Services
Apollo Hospitals BUY 5,529 5,900 7 795 9.5 144 64 103 135 12 61 31 87 54 41 34 25 20 11.4 9.7 8.0 14 19 21 0.2 0.3 0.4 26
Aster DM Healthcare ADD 382 415 9 191 2.3 498 9 13 16 7 47 18 42 29 24 11 9 8 4.0 3.5 3.1 10 13 14 — — — 4
Dr Lal Pathlabs SELL 2,698 1,850 (31) 225 2.7 83 42 49 56 46 17 14 64 55 48 36 31 26 12.3 11.1 10.0 20 21 22 0.8 1.0 1.1 8
Global Health REDUCE 957 885 (8) 257 3.1 268 18 20 25 45 15 23 54 47 38 30 26 22 9.1 7.8 6.6 18 18 19 0.3 0.3 0.4 3
KIMS ADD 1,950 2,075 6 156 1.9 80 45 55 68 11 22 23 43 35 29 23 18 15 7.7 6.3 5.2 20 20 20 0.0 0.0 0.0 2
Max Healthcare REDUCE 636 585 (8) 618 7.4 971 13 15 19 (4) 17 26 49 41 33 33 27 21 6.5 5.6 4.8 14 15 16 0.0 0.0 0.0 11
Metropolis Healthcare REDUCE 1,703 1,425 (16) 87 1.0 51 30 43 52 7 44 20 57 39 33 28 23 19 8.0 7.1 6.2 15 19 20 0.5 0.8 0.9 7
Narayana Hrudayalaya REDUCE 1,226 1,170 (5) 250 3.0 204 39 42 49 31 8 18 32 29 25 21 18 15 8.6 6.6 5.2 31 26 24 — — — 5
Rainbow Children's Medicare REDUCE 1,073 1,100 2 109 1.3 102 22 28 31 8 25 12 48 38 34 25 20 18 8.7 7.3 6.2 20 21 20 0.4 0.5 0.5 4
Health Care Services Cautious 2,689 32.2 13.0 27.9 23.3 53.8 42.1 34.1 26.4 21.5 17.8 8.1 6.9 5.9 15.0 16.4 17.2 0.2 0.2 0.3 71
Chalet Hotels ADD 590 660 12 121 1.5 205 12 19 29 79 52 53 48 32 21 23 18 13 6.7 5.6 4.4 15 19 24 0.0 0.0 0.0 1
Devyani International ADD 175 195 11 211 2.5 1,204 1 2 3 (39) 49 26 123 83 66 29 23 19 19.3 17.3 15.3 17 22 25 0.0 0.0 0.0 6
Indian Hotels ADD 422 460 9 599 7.2 1,420 9 14 17 28 51 22 47 31 25 27 19 15 6.5 5.4 4.5 15 19 19 0.1 0.1 0.2 16
Jubilant Foodworks REDUCE 561 500 (11) 370 4.4 660 5 8 10 (4) 45 22 104 72 59 30 24 21 16.0 13.5 11.3 16 20 21 0.2 0.3 0.4 18
Lemon Tree Hotels REDUCE 114 105 (8) 91 1.1 792 3 5 6 122 51 17 36 24 20 16 11 10 9.3 7.6 6.2 28 36 34 1.3 1.5 1.7 10
Restaurant Brands Asia REDUCE 116 110 (5) 58 0.7 495 (1) (1) 0 24 53 115 NM NM 1,473 22 17 13 3.1 3.2 3.2 NM NM 0 0.0 0.0 0.0 5
Samhi Hotels BUY 175 230 31 38 0.5 218 (8) 6 9 80 173 53 NM 29 19 21 12 11 3.5 3.2 2.7 NM 11 15 0.0 0.0 0.0 -
Sapphire Foods BUY 1,391 1,700 22 89 1.1 64 15 20 26 (60) 39 29 95 68 53 18 15 12 6.6 6.0 5.4 7 9 11 0.0 0.0 0.0 2
Westlife Foodworld REDUCE 900 845 (6) 140 1.7 156 7 9 12 (3) 32 35 129 98 72 34 28 23 21.4 18.4 15.5 18 20 23 0.0 0.0 0.0 2
Hotels & Restaurants Attractive 1,717 20.6 25.2 68.5 27.8 75.2 44.6 34.9 25.5 19.0 15.7 8.5 7.3 6.1 11.3 16.3 17.6 0.2 0.2 0.2 59
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Insurance
HDFC Life Insurance BUY 691 830 20 1,485 17.8 2,020 8 9 10 21 19 15 90 76 66 — — — 10.8 10.2 9.5 12 14 15 0.3 0.3 0.4 21
ICICI Lombard REDUCE 1,480 1,300 (12) 728 8.7 491 41 49 57 18 18 16 36 30 26 — — — 6.1 5.3 4.6 18 19 19 0.7 0.8 1.0 9
ICICI Prudential Life BUY 563 650 16 810 9.7 1,439 6 7 8 6 13 20 94 83 69 — — — 7.5 7.0 6.5 8 9 10 0.6 0.6 0.6 12
LIC BUY 680 1,040 53 4,298 51.5 6,325 47 47 51 (18) 1 8 15 14 13 — — — 6.3 4.7 3.7 51 37 31 — — — 12
Max Financial Services BUY 1,019 1,100 8 352 4.2 345 2 2 2 312 12 15 615 547 476 — — — — — — 1 1 1 — — — 10
PB Fintech ADD 819 850 4 369 4.4 450 0 6 12 101 5,432 110 7,873 142 68 — — — 0 5 9 — — — 10
SBI Life Insurance BUY 1,435 1,625 13 1,437 17.2 1,004 19 20 21 10 5 8 76 73 68 — — — 11.1 9.8 8.8 15 14 14 0.2 0.2 0.2 16
Star Health and Allied Insurance ADD 578 620 7 338 4.1 582 14 19 23 30 34 23 42 31 25 — — — 5.4 4.6 3.9 14 16 17 — — — 4
Insurance Attractive 9,816 117.7 (11.7) 4.7 10.5 26.6 25.4 23.0 7.2 5.9 5.0 27 23 22 0.1 0.1 0.1 95
Internet Software & Services
Cartrade Tech SELL 766 470 (39) 36 0.4 51.5 8 11 13 28 32 15 91 69 60 56 36 28 1.9 1.8 1.8 2.1 2.7 3.0 0.0 0.0 0.0 3
FSN E-commerce Ventures ADD 176 170 (3) 502 6.0 2,875.0 0 1 2 321 158 73 483 187 108 131 78 53 34.4 29.2 23.0 7.3 16.9 24 — — — 14
Indiamart SELL 2,604 2,700 4 159 1.9 60.7 57 70 83 30 22 19 45 37 31 38 29 24 8.3 6.8 5.6 17.6 20.0 19.6 0.1 0.1 0.1 7
Info Edge ADD 4,611 5,000 8 597 7.2 129.0 62 69 81 13 11 18 75 67 57 60 53 44 5.2 4.9 4.6 7.1 7.5 8.4 0.3 0.4 0.4 15
Just Dial BUY 720 920 28 61 0.7 85.0 39 47 54 102 20 17 18 15 13 10 6 3 1.5 1.4 1.3 8.7 9.4 10.0 — — — 1
Zomato BUY 119 130 10 1,033 12.4 9,131 0 1 3 115 711 105 713 88 43 (18,031) 80 36 5.4 5.0 4.4 0.8 5.9 10.9 0.0 0.0 0.0 105
Internet Software & Services Attractive 2,388 28.6 780 84 55 134 73 47 113 59 38 5.8 5.4 4.8 4.3 7.4 10.3 0.1 0.1 0.1 144
IT Services
Cyient BUY 1,935 2,000 3 214 2.6 111 70 87 98 36 24 12 28 22 20 15 13 12 4.7 4.2 3.8 19 20 20 1.9 2.4 2.7 10
HCL Technologies BUY 1,341 1,410 5 3,639 43.6 2,714 57 65 72 5 14 11 23 21 19 14 13 12 5.4 5.1 4.8 23 25 27 3.7 4.1 4.3 35
Infosys BUY 1,455 1,700 17 6,040 72.4 4,146 60 69 78 3 16 13 24 21 19 16 14 12 7.4 6.8 6.2 31 34 35 3.1 3.5 4.0 92
KPIT Technologies SELL 1,499 940 (37) 411 4.9 273 21 28 36 51 31 29 71 54 42 41 32 26 18.6 14.8 11.7 30 31 31 0.4 0.5 0.7 20
L&T Technology Services SELL 4,769 3,850 (19) 504 6.0 106 123 142 161 11 15 14 39 34 30 25 22 20 8.8 7.7 6.7 24 24 24 0.9 1.1 1.3 9
LTIMindtree REDUCE 5,537 5,350 (3) 1,638 19.7 296 166 197 233 11 19 18 33 28 24 23 19 16 8.4 7.2 6.0 27 28 28 1.3 1.4 1.6 22
Mphasis REDUCE 2,355 2,160 (8) 444 5.3 188 83 97 114 (4) 17 17 28 24 21 18 15 13 5.3 4.9 4.5 19 21 23 2.5 2.8 3.0 13
Persistent Systems ADD 6,400 6,000 (6) 492 5.9 77 145 183 227 21 26 24 44 35 28 27 22 18 10.6 8.8 7.3 26 28 28 0.8 1.0 1.2 30
RateGain ADD 660 650 (2) 78 0.9 109 12 15 17 131 27 15 55 44 38 39 32 26 8.5 7.0 5.9 17 18 17 0.0 0.0 0.0 4
Tata Elxsi SELL 8,253 5,450 (34) 514 6.2 62 132 157 185 9 19 18 62 53 45 46 38 32 20.9 17.8 15.1 36 37 37 0.9 1.1 1.3 13
TCS ADD 3,488 3,760 8 12,761 153.1 3,649 127 142 157 10 12 10 27 24 22 19 17 15 13.3 11.9 10.7 49 51 51 1.6 3.3 3.6 84
Tech Mahindra REDUCE 1,221 1,150 (6) 1,074 12.9 890 35 59 72 (39) 71 23 35 21 17 19 12 10 3.9 3.8 3.6 11 19 22 2.5 3.6 3.8 31
Wipro REDUCE 413 375 (9) 2,157 25.9 5,287 21 23 25 3 9 9 19 18 16 11 10 9 3.0 2.5 2.3 15 15 15 0.2 0.2 2.2 25
IT Services Neutral 29,967 359.4 4.4 14.7 12.2 26.7 23.3 20.8 17.4 15.3 13.6 7.6 6.9 6.3 28.4 29.5 30.1 2.0 2.9 3.3 387
Media
PVR INOX ADD 1,718 1,850 8 169 2.0 98 34 62 75 242 85 21 51 28 23 19 12 10 2.0 1.9 1.7 4 7 8 0.2 0.4 0.4 11
Sun TV Network BUY 674 725 8 266 3.2 394 49 52 55 14 6 6 14 13 12 9 8 8 2.6 2.4 2.2 20 19 19 3.7 4.1 4.4 9
Zee Entertainment Enterprises REDUCE 253 275 9 243 2.9 960 7 8 9 18 18 6 36 30 28 20 18 17 2.2 2.1 2.1 6 7 7 1.2 1.6 1.6 29
Media Attractive 677 8.1 43.5 17.6 8.7 23.0 19.5 18.0 14.2 12.0 10.8 2.3 2.1 2.0 9.9 11.0 11.2 1.9 2.3 2.4 49
Metals & Mining
Hindalco Industries ADD 516 535 4 1,159 13.9 2,220 38 41 45 (15) 7 9 13 13 12 6.6 6.1 5.5 1.1 1.0 1.0 9 9 9 0.7 0.8 0.9 36
Hindustan Zinc SELL 299 265 (11) 1,264 15.2 4,225 20 20 20 (20) (1) 3 15 15 15 8.8 8.6 8.3 9.8 9.8 9.8 65 64 66 6.7 6.6 6.8 2
Jindal Steel and Power BUY 671 800 19 684 8.2 1,020 48 60 83 7 26 39 14 11 8 7.4 6.5 4.9 1.6 1.4 1.2 12 13 16 0.4 0.9 1.9 16
JSW Steel REDUCE 801 820 2 1,959 23.5 2,417 53 69 89 108 31 28 15 12 9 8.3 6.8 5.5 2.5 2.1 1.8 18 20 22 1.0 1.3 1.7 19
National Aluminium Co. SELL 92 75 (18) 169 2.0 1,837 7 7 7 (22) 1 1 14 14 14 6.8 6.6 6.4 1.2 1.1 1.1 9 9 8 2.9 2.9 2.9 11
NMDC ADD 182 195 7 532 6.4 2,931 20 21 19 36 3 (7) 9 9 10 5.7 5.4 5.7 2.1 1.9 1.7 24 22 19 5.5 5.7 5.3 32
SAIL SELL 92 60 (35) 381 4.6 4,130 4 6 7 (5) 32 16 21 16 14 7.6 7.1 6.9 0.7 0.7 0.6 3 4 5 1.7 2.3 2.6 19
Tata Steel BUY 128 140 9 1,563 18.7 12,224 5 11 16 (17) 125 40 25 11 8 9.6 6.5 5.3 1.6 1.4 1.2 6 13 17 1.0 2.2 3.1 52
Vedanta SELL 233 220 (6) 867 10.4 3,717 17 20 21 (42) 22 2 14 11 11 5.0 4.6 4.4 2.1 2.0 2.0 15 18 18 6.3 7.5 7.8 27
Metals & Mining Cautious 8,579 102.9 (2.5) 28.0 19.4 15.4 12.0 10.1 7.4 6.3 5.5 1.8 1.7 1.5 11.8 13.8 14.9 2.6 3.1 3.5 214
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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 REDUCE 436 360 (17) 945 11.3 2,093 84 46 48 482 (45) 5 5 9 9 4.0 6.4 5.7 1.5 1.4 1.3 31 15 14 8.6 4.7 5.0 22
Coal India REDUCE 342 275 (20) 2,109 25.3 6,163 33 28 31 (27) (16) 10 10 12 11 9.6 13.3 11.4 3.2 3.0 2.7 34 26 26 5.8 5.8 5.8 50
HPCL REDUCE 347 270 (22) 493 5.9 1,419 71 60 60 213 (17) 1 5 6 6 6.1 7.4 7.3 1.5 1.3 1.1 33 23 21 8.2 6.9 6.9 22
IOCL REDUCE 112 90 (19) 1,578 18.9 14,121 17 15 14 190 (13) (6) 7 8 8 4.8 5.4 5.2 1.1 1.0 0.9 17 14 12 7.6 6.6 6.2 27
Oil India ADD 305 335 10 331 4.0 1,084 53 54 57 (15) 2 5 6 6 5 5.0 4.7 4.4 0.9 0.8 0.7 16 15 15 4.4 6.5 7.1 9
ONGC ADD 195 210 8 2,453 29.4 12,580 41 41 39 10 0 (5) 5 5 5 3.0 3.0 2.9 0.8 0.7 0.6 17 15 13 6.3 6.6 6.3 24
Reliance Industries BUY 2,377 2,725 15 16,086 192.9 6,766 109 130 138 11 19 6 22 18 17 11.5 9.8 8.7 2.1 1.9 1.7 10 11 10 — 0.4 0.4 185
Oil, Gas & Consumable Fuels Neutral 23,994 287.8 35.0 (0.7) 2.1 11.8 11.9 11.7 7.3 7.2 6.6 1.7 1.5 1.4 14.1 12.7 11.8 2.5 2.3 2.3 338
Pharmaceuticals
Aurobindo Pharma SELL 1,042 840 (19) 610 7.3 586 52 60 69 58 16 14 20 17 15 11 10 8 2.1 1.9 1.8 11 12 12 1.5 1.7 2.1 24
Biocon REDUCE 238 235 (1) 286 3.4 1,202 4 9 16 (30) 110 73 55 26 15 14 11 8 1.2 1.2 1.1 2 5 8 0.6 1.3 2.3 9
Cipla ADD 1,212 1,320 9 979 11.7 806 49 55 59 41 14 7 25 22 20 15 13 12 3.7 3.2 2.9 16 16 15 0.9 1.0 1.1 25
Concord Biotech REDUCE 1,337 1,300 (3) 140 1.7 105 29 38 49 28 28 30 46 36 27 32 25 20 9.2 7.7 6.4 22 24 25 0.5 0.7 0.9 -
Divis Laboratories SELL 3,789 2,775 (27) 1,006 12.1 265 64 83 102 (6) 29 23 59 46 37 41 32 26 7.5 6.9 6.3 13 16 18 1.0 1.1 1.2 18
Dr Reddy's Laboratories REDUCE 5,788 5,375 (7) 965 11.6 166 323 339 322 33 5 (5) 18 17 18 11 10 10 3.4 2.9 2.6 21 18 15 0.7 0.8 0.8 27
Gland Pharma SELL 1,775 1,365 (23) 292 3.5 164 54 65 72 14 19 11 33 27 25 20 16 14 3.3 2.9 2.6 11 11 11 - - - 8
Laurus Labs SELL 381 270 (29) 205 2.5 536 7 12 16 (52) 73 33 54 31 23 21 15 12 4.6 4.0 3.4 9 14 16 - - - 9
Lupin SELL 1,281 970 (24) 583 7.0 455 38 45 53 300 18 18 34 29 24 16 14 12 4.2 3.7 3.3 12 13 14 0.5 0.6 0.7 16
Mankind Pharma ADD 1,898 2,000 5 760 9.1 401 45 56 69 40 25 23 42 34 27 30 24 20 8.7 7.3 6.1 22 23 24 0.6 0.7 0.9 5
Sun Pharmaceuticals ADD 1,226 1,280 4 2,941 35.3 2,399 38 46 53 6 20 14 32 27 23 21 17 15 4.7 4.1 3.6 15 16 16 0.6 0.8 0.9 26
Torrent Pharmaceuticals REDUCE 2,127 1,950 (8) 720 8.6 338 49 60 76 33 24 26 44 35 28 21 19 16 9.5 7.8 6.3 24 24 25 0.4 0.5 0.6 10
Pharmaceuticals Neutral 9,565 114.7 23.2 19.2 14.5 30.8 25.9 22.6 18.0 15.4 13.3 4.1 3.7 3.3 13.5 14.2 14.5 0.5 0.6 0.7 179
Real Estate
Brigade Enterprises BUY 816 780 (4) 188 2.3 231 14 21 28 8 57 33 60 38 29 18 12 9 5.4 4.8 4.2 9 13 16 0.3 0.3 0.3 3
Brookfield India Real Estate Trust ADD 239 280 17 105 1.3 439 6 12 17 44 119 37 43 19 14 16 12 10 1.0 1.1 1.1 2 4 6 7.8 9.5 10.4 1
DLF ADD 626 590 (6) 1,549 18.6 2,475 13 16 20 55 27 21 49 39 32 55 44 34 3.8 3.5 3.2 8 10 10 0.3 0.3 0.3 28
Embassy Office Parks REIT ADD 322 345 7 305 3.7 948 10 14 17 84 44 21 33 23 19 15 12 11 1.3 1.4 1.5 4 6 8 6.9 8.0 9.1 2
Godrej Properties SELL 1,877 1,370 (27) 522 6.3 278 21 43 50 (6) 104 18 89 44 37 (230) 145 160 5.3 4.7 4.2 6 11 12 — — — 14
Macrotech Developers ADD 882 910 3 850 10.2 964 17 50 59 1 184 20 50 18 15 33 13 10 5.9 4.4 3.4 12 29 26 — — — 16
Mindspace REIT ADD 320 350 9 190 2.3 593 10 13 15 45 23 15 31 25 22 14 12 12 1.3 1.3 1.4 4 5 6 6.5 6.8 7.3 1
Nexus Select Trust ADD 131 135 3 199 2.4 1,515 5 5 6 35 13 15 28 24 21 15 14 13 6.7 8.3 10.9 28 30 44 7.0 7.0 7.5 1
Oberoi Realty REDUCE 1,401 1,080 (23) 509 6.1 364 47 57 103 (10) 22 79 30 24 14 21 15 9 3.7 3.2 2.6 13 14 21 0.1 0.1 0.1 10
Phoenix Mills ADD 2,371 2,190 (8) 424 5.1 179 49 74 85 3 49 16 48 32 28 20 16 14 4.6 4.1 3.6 10 13 14 0.1 0.2 0.2 8
Prestige Estates Projects ADD 1,003 910 (9) 402 4.8 401 41 14 22 161 (67) 60 24 73 45 19 17 15 3.5 3.3 3.1 15 5 7 0.1 0.1 0.1 11
Sobha BUY 907 835 (8) 86 1.0 95 29 66 50 179 124 (24) 31 14 18 17 8 8 3.1 2.6 2.3 11 21 14 0.4 0.5 0.6 8
Sunteck Realty BUY 498 520 4 73 0.9 140 20 23 58 19,785 15 154 25 22 9 20 17 7 2.3 2.1 1.7 10 10 22 0.2 0.2 0.2 4
Real Estate Attractive 5,403 64.8 33.8 43.8 28.8 41.7 29.0 22.5 26.7 18.1 14.1 3.4 3.1 2.9 8.1 10.8 12.8 1.2 1.3 1.4 106
Retailing
Avenue Supermarts SELL 3,950 3,600 (9) 2,570 30.8 651 41 54 68 11 32 25 97 73 58 61 47 37 13.7 11.6 9.6 15 17 18 — — — 16
Titan Company ADD 3,491 3,350 (4) 3,099 37.2 888 41 50 61 11 21 22 85 70 58 57 45 38 21.5 17.8 14.7 28 28 28 0.4 0.5 0.5 34
Trent ADD 2,787 2,700 (3) 991 11.9 356 25 36 51 127 43 41 110 77 54 57 42 32 28.3 20.7 15.0 30 31 32 — — — 19
Retailing Neutral 5,669 79.9 19.0 28.0 26.1 92.6 72.3 57.4 58.1 45.2 36.7 18.2 15.0 12.2 19.6 21 21 0.2 0.2 0.2 69
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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
Specialty Chemicals
Aarti Industries REDUCE 554 490 (12) 201 2.4 363 11 16 25 (29) 50 55 52 35 22 23 18 13 3.8 3.5 3.1 8 11 15 0.3 0.4 0.9 11
Atul SELL 6,599 4,070 (38) 195 2.3 30 134 167 203 (23) 24 21 49 40 33 27 22 19 3.9 3.6 3.3 8 9 11 0.3 0.5 0.6 4
Castrol India ADD 138 150 9 137 1.6 989 9 10 10 4 12 7 16 14 13 11 9 9 6.7 6.2 5.7 43 45 45 5.1 5.8 6.2 4
Clean Science & Technology ADD 1,364 1,480 9 145 1.7 106 18 32 53 (35) 75 67 75 43 26 54 31 19 12.4 10.0 7.6 18 26 34 0.2 0.4 0.7 2
Deepak Nitrite REDUCE 2,196 2,120 (3) 300 3.6 136 60 69 79 (4) 15 15 37 32 28 25 22 20 6.2 5.3 4.5 18 18 18 0.3 0.3 0.4 11
Navin Fluorine ADD 3,701 3,620 (2) 183 2.2 50 69 99 143 (8) 42 45 53 38 26 33 23 17 7.4 6.2 5.1 15 18 22 0.2 0.2 0.3 13
Pidilite Industries ADD 2,552 2,750 8 1,298 15.6 508 38 45 52 52 17 16 67 57 49 45 39 34 15.8 14.0 12.5 25 26 27 0.7 1.0 1.2 12
PI Industries ADD 3,771 4,110 9 572 6.9 152 111 126 148 36 13 18 34 30 25 27 22 19 6.6 5.5 4.6 21 20 20 0.3 0.4 0.5 12
SRF BUY 2,367 2,630 11 702 8.4 296 50 73 102 (31) 45 40 47 32 23 25 19 14 6.1 5.3 4.4 14 17 21 0.5 0.6 — 11
Vinati Organics SELL 1,710 1,510 (12) 176 2.1 104 36 49 62 (19) 35 26 47 35 28 34 25 19 6.7 5.7 4.9 15 18 19 0.3 0.4 0.5 1
Specialty Chemicals Neutral 3,908 46.9 (0.6) 25.5 26.0 46.1 36.7 29.1 29.6 23.8 19.3 7.5 6.6 5.7 16.3 17.9 19.4 0.7 0.8 0.9 79
Telecommunication Services
Bharti Airtel ADD 1,015 975 (4) 5,944 71.3 5,967 26 38 47 62 47 25 40 27 21 9 7 6 6.9 5.3 4.4 19 22 22 0.5 0.5 0.6 57
Indus Towers ADD 184 185 0 497 6.0 2,695 19 21 13 106 9 (37) 10 9 14 4 3 4 1.9 1.6 1.6 22 20 11 0.8 7.0 4.1 20
Vodafone Idea RS 13 — — 635 7.6 48,680 (7) (6) (7) NM NM NM NM NM NM 19 18 21 (0.6) (0.5) (0.4) NM NM NM — — — 49
Tata Communications SELL 1,706 1,400 (18) 486 5.8 285 37 44 64 46 18 46 46 39 27 14 11 9 24.7 17.3 11.7 61 52 53 0.8 0.9 1.4 20
Telecommunication Services Attractive 7,563 90.7 32 93 256 NM NM 634.7 10.2 8.6 7.8 80 60 166 NM NM 26 0.5 0.9 0.8 146
Transportation
Adani Ports and SEZ BUY 826 940 14 1,783 21.4 2,160 40 48 55 4 19 16 21 17 15 14 12 10 3.4 2.8 2.4 18 18 17 0.3 0.4 0.5 50
Container Corp. SELL 776 660 (15) 473 5.7 609 21 24 28 8 17 17 37 32 28 23 20 17 4.0 3.8 3.6 11 12 13 1.3 1.5 1.7 10
Delhivery REDUCE 391 390 (0) 287 3.4 729 (4) (0) 2 69 92 596 NM NM 221 1,766 67 38 3.1 3.0 2.9 NM NM 1 — — — 7
Gateway Distriparks BUY 103 97 (6) 52 0.6 500 5 6 7 10 18 13 19 16 15 13 11 9 2.6 2.4 2.1 14 15 15 1.6 1.8 2.0 1
GMR Airports REDUCE 60 55 (8) 361 4.3 6,036 (1) (0) 0 12 86 225 NM NM 288 22 12 10 (36.8) (118.2) (200.8) 83 16 NM — — — 8
Gujarat Pipavav Port ADD 141 140 (0) 68 0.8 483 8 9 10 14 15 15 18 16 14 11 9 8 2.8 2.7 2.5 16 17 19 3.7 4.2 4.8 5
InterGlobe Aviation BUY 2,705 3,300 22 1,044 12.5 383 179 175 199 2,295 (2) 13 15 15 14 5 4 3 174.5 14.2 2.8 NM 170 68 — — — 24
Mahindra Logistics REDUCE 358 340 (5) 26 0.3 71 3 10 20 (34) 222 90 111 35 18 12 9 7 4.5 4.1 3.5 4 12 21 — — — 1
Transportation Attractive 4,094 49.1 106.9 16.9 17.2 25.0 21.4 18.2 12.2 9.6 8.0 5.2 4.2 3.5 21 19.8 19.2 0.4 0.4 0.5 106
KIE universe 239,182 2,869 24.5 13.1 12.3 22.6 20.0 17.8 13.3 11.8 10.6 3.5 3.1 2.8 15.4 15.5 15.6 1.4 1.6 1.7
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$)= 83.4
India Research
66
“Each of the analysts named below hereby certifies that, with respect to each subject company and its securities for which the analyst is
responsible in this report, (1) all of the views expressed in this report accurately reflect his or her personal views about the subject companies
and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or
views expressed in this report: “Kawaljeet Saluja, Sathishkumar S., Vamshi Krishna, Murtuza Arsiwalla, Abhishek Khanna, Abhijit Akella, Sumit
Kumar, Eesha Mohanty, Anil Sharma, Aditya Bansal, Sumangal Nevatia, Siddharth Mehrotra, Suvodeep Rakshit, Upasna Bhardwaj, Anurag
Balajee, Anurag Singh.”
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
expect this stock to deliver more than 15% returns over
29.0% the next 12 months; Add = We expect this stock to deliver
30% 25.3%
24.5% 5-15% returns over the next 12 months; Reduce = We
21.2%
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% 6.1% are also on a 12-month horizon basis. These ratings are
3.7% 2.4% used illustratively to comply with applicable regulations. As
0.4%
of 30/09/2023 Kotak Institutional Equities Investment
0%
Research had investment ratings on 245 equity securities.
BUY ADD REDUCE SELL
Source: Kotak Institutional Equities

As of September 30, 2023
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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India Daily

December 01, 2023 NIFTY-50 [Nov 30]: 20,133

Private Circulation Only.

Hotels & Restaurants

Renewed prosperity in hospitality

Earnings growth to remain strong due to rising room rates

Supply growth to lag demand, fractured by Covid downtime

Overestimation of growth in room rates owing to oversupply is a key risk

Full sector coverage on KINSITE

Murtuza Arsiwalla Abhishek Khanna

Strong earnings growth due to ~10% CAGR in room rates

Occupancy levels improved significantly in FY2023

Source: Hotelivate, Kotak Institutional Equities estimates

Hotels & Restaurants

ARRs scaling new peaks

ARR (Rs/ day)

Source: Hotelivate, Kotak Institutional Equities estimates

Demand to outpace new supply

Supply ('000 keys) Demand ('000 keys) Occupancy (%), RHS

Source: Hotelivate, Kotak Institutional Equities estimates

Hotels & Restaurants

# of branded keys ('000)

Source: Hotelivate, Kotak Institutional Equities

Initiate coverage on Indian Hotels, Chalet Hotels and SAMHI Hotels

FV EBITDA Atributable EBITDA PAT Net worth Net deb

Source: Companies, Kotak Institutional Equities estimates

Hotels & Restaurants

SAMHI Hotels trades at a significant discount to listed peers

Hospitality business EV/ EBITDA, FY2025E (X)

Source: Company, Kotak Institutional Equities estimates

Hotels & Restaurants

Source: Companies, Kotak Institutional Equities estimates

Hotels & Restaurants

Owned/ leased keys Managed keys

Source: Company, Kotak Institutional Equities

Hotels & Restaurants

Source: Company, Kotak Institutional Equities

Source: Company, Kotak Institutional Equities estimates

Hotels & Restaurants

Source: Company, Kotak Institutional Equities estimates

High operating leverage leads to high flow-through of revenues to EBITDA

70 2023 2024E 2025E 2026E

Source: Company, Kotak Institutional Equities estimates

Hotels & Restaurants

Net debt Net debt/ EBITDA (X), RHS

Source: Company, Kotak Institutional Equities estimates

Hotels & Restaurants

ARR Change (%)

Chalet Hotels FY2025E EBITDA sensitivity

ARR Change (%)

Lemon Tree FY2025E EBITDA sensitivity

ARR Change (%)

Chalet Hotels FY2025E EBITDA

SAMHI Hotels FY2025E EBITDA sensitivity

ARR Change (%)

-10% 2,986 3,130 3,275 3,419 3,564 -10% 67 70 73 76 80

Source: Company, Kotak Institutional Equities estimates

Hotels & Restaurants

SAMHI has highest FV sensitivity to changes in ARR

ARR Change (%)

Chalet Hotels DCF sensitivity

ARR Change (%)