INDIA DAILY

October 21, 2011

India

20-Oct 1-day1-mo 3-mo

Sensex

16,937

(0.9) (0.8) (8.1)

5,092

(0.9) (0.8) (8.1)

Nifty

Contents

Daily Alerts
Results
Cairn India: 'Royal'ty conundrum
Bajaj Auto: Margins improve sequentially
UltraTech Cement: 2QFY12: Profitability reflective of seasonal vagaries

Global/Regional indices
11,542

0.3

Nasdaq Composite

Dow Jones

2,599

(0.2)

FTSE

5,385

(1.2)

Nikkie

8,690

0.1

Hang Seng

3.7 (9.3)
2.4

(8.3)

1.8

(8.7)

(0.6) (13.2)

17,993

0.1 (4.4) (18.2)

1,822

0.9 (1.7) (15.1)

KOSPI
Value traded – India

Exide Industries: 2QFY12 results impacted by decline in replacement demand

Cash (NSE+BSE)

117

YES Bank: Holding fort in the current environment

Derivatives (NSE)

1,592

1,323 1,335

Biocon: PAT miss due to cost-licensing income mismatch

Deri. open interest

1,368

1,410 1,436

130

137

Thermax: Better-than-expected results; but inflows just about keep pace
DB Corp: Peak investment quarter

Forex/money market

Hexaware Technologies: Remarkable run continues; raise estimates, maintain
ADD
Hindustan Media Ventures: Strong 2QFY12 in challenging environment

Change, basis points
20-Oct 1-day
Rs/US$
10yr govt bond, %

Results, Change in Reco
Crompton Greaves: Results disappoint; near-term outlook remains
challenging

1-mo

3-mo

49.8

0

148

540

8.8

3

47

53

Net investment (US$mn)
19-Oct

MTD CYTD

FIIs

4

(76)

(226)

MFs

(2)

56

(282)

1-mo

3-mo

Company
Indiabulls Real Estate: Sales increase qoq drives EBITDA margin expansion

Top movers -3mo basis
Change, %
Best performers
ACEM

News Round-up

IDEA

` Food inflation shot up to a 25 week high, moving again into double-digit territory &
increasing the likelihood the RBI will raise interest rates yet again at next week's
monetary policy review. Food inflation for the week to Oct. 8 rose to 10.6% from a
year ago compared with 9.32% in the previous week. (ECNT)

UTCEM

` Shares of housing finance cos. fell in a weak market on concern the regulatory move
to ban these firms from penalising pre-payment of loans would affect their profits.
(ECNT)

RCAPT

IN Equity
IN Equity
IN Equity

20-Oct 1-day
153.9

(1.0)

2.7

21.9

93.3

(0.8)

(5.8)

17.0

1119.1

(0.4)

(4.2)

15.0

MM

IN Equity

801.6

(1.1)

(1.6)

14.1

ACC

IN Equity

1115.1

(1.0)

4.0

14.0

(46.3)

Worst performers
IVRC

IN Equity
IN Equity

36.0

(2.6)

(12.2)

337.5

1.1

(20.1)

(42.5)

69.6

(2.5)

(15.3)

(40.6)

IBREL

IN Equity

HDIL

IN Equity

93.9

(1.7)

(16.9)

(39.0)

ADE

IN Equity

465.6

(1.6)

(24.8)

(35.3)

` The Directorate General of Hydrocarbon's move to arm-twist Reliance Ind. (RIL IN)
into spending about USD 612.24mn to drill four new wells at the KG-D6 block faces
scrutiny by the national auditor as the wells turned out to be dry & the govt. will have
to foot the bill. (ECNT)
` SEBI set to probe alleged disclosure & investor protection rule violation by DLF (DLFU
IN). (ECNT)
` Hindustan Zinc (HZ IN) has discovered zinc & lead reserves in Ajmer district of
Rajasthan. The co. has found proven reserves of 10-12 million tonne zinc & expects it
can go further after exploration. (TTOI)
` SBI (SBIN IN) hikes home loan tenure to 30 years. Rising rates prompt extension by 10
more years; others may follow suit. (BSTD)
Source: ECNT= Economic Times, BSTD = Business Standard, FNLE = Financial Express, THBL = Business Line.
Kotak Institutional Equities Research
kotak.research@kotak.com . Mumbai: +94-22-6634-1100

For Private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES.
REFER TO THE END OF THIS MATERIAL.

REDUCE

Cairn India (CAIR)
Energy

OCTOBER 20, 2011
RESULT
Coverage view: Attractive

‘Royal’ty conundrum. Cairn reported weak 2QFY12 results with adjusted net income
at Rs7.2 bn (quarterly results not comparable) versus our estimate of Rs8.6 bn (adjusted
for one-off royalty payment). 2QFY12 results had multiple adjustments on account of
(1) royalty being treated as cost recoverable, (2) foreign exchange gain and (3) finance
charges. We have explained the impact of these one-off items later in the note. We
maintain our REDUCE rating on the stock given modest upside to our revised 12-month
target price of Rs300 (Rs295 previously).
Company data and valuation summary
Cairn India
Stock data
52-week range (Rs) (high,low)
372-249
Market Cap. (Rs bn)
558.3
Shareholding pattern (%)
Promoters
62.2
FIIs
7.4
MFs
1.7
Price performance (%)
1M
3M
12M
Absolute
(3.9)
(7.2) (13.0)
Rel. to BSE-30
(3.0)
1.4
2.0

Forecasts/Valuations
EPS (Rs)
EPS growth (%)
P/E (X)
Sales (Rs bn)
Net profits (Rs bn)
EBITDA (Rs bn)
EV/EBITDA (X)
ROE (%)
Div. Yield (%)

2011
33.3
501.1
8.8
109.0
63.3
85.4
6.3
16.9
0.0

2012E
41.8
25.4
7.0
133.8
80.5
109.0
4.6
18.3
1.7

2013E
50.6
21.2
5.8
163.2
96.3
129.3
3.7
20.0
5.1

2QFY12 results—not comparable due to several one-offs
Cairn reported 2QFY12 EBITDA at `21 bn (-33.7% qoq), versus our estimate of `27.8 bn. Crude
price realization was lower qoq at US$102.8/bbl (-2.9% qoq). Crude oil production from Rajasthan
block remained stable qoq at 125,251 b/d (gross basis). 2QFY12 gas realization was US$4.5/mcf
versus US$4.5/mcf in 1QFY12 and 2QFY11. The management highlighted that it expects to start
production from Bhagyam in 4QCY11 and Aishwariya in 2HCY12. However, the management was
diffident of achieving production beyond 175,000 b/d in the near term without augmentation of
infrastructure capacity.
And now the details of one-offs

Price (Rs): 294
Target price (Rs): 300
BSE-30: 16,937

QUICK NUMBERS
• US$425 mn of priorperiod royalty =
US$294 mn of
exceptional item +
US$42 mn of
adjustment against
1QFY12 profit
petroleum + US$89
mn of royalty
adjusted from
2QFY12 revenues
• Stock price
discounting
US$90/bbl of crude
price in perpetuity

(1) We note that 2QFY12 results had multiple adjustments on account of royalty becoming cost
recoverable. 2QFY12 reported net income of `7.6 bn included `13.6 bn of provision on account of
cost-recoverability of royalty for prior periods. (2) Other income increased sharply to `5.9 bn in
2QFY12, led by foreign exchange gain of `5.3 bn, which reflects the impact of rupee depreciation
on foreign currency-denominated deposits of US$1 bn. (3) Finance charges increased sharply to
`1.23 bn in 2QFY12 due to one-time charge of `0.83 bn on repayment of foreign currency loans.
Not a BUY unless we assume very high crude oil prices and/or recoverable reserves
We maintain our REDUCE rating on the stock with a target price of `300. We find it difficult to
build a case for investment in the stock at current levels unless we assume (1) very high crude oil
prices in perpetuity or (2) significantly higher recoverable reserves. We note that the current stock
price is discounting US$90/bbl in perpetuity. We also highlight that we already assume recoverable
reserves at 1.45 bn bbls from the Rajasthan block versus management guidance of 2P reserves of
1.15 bn bbls.
Fine-tuned earnings; retain REDUCE with a revised target price of `300
We have revised our FY2012-14E EPS to `41.8 (+3.4%), `50.6 (+2.6%) and `41.4 (+2.5%) to
reflect (1) 2QFY12 results, (2) revised exchange rate assumptions, (3) lower production from
Rajasthan field and (4) other minor changes. We retain our REDUCE rating on the stock with a 12month DCF-based target price of `300 (`295 previously) noting modest upside from current levels.

Gundeep Singh
gundeep.singh@kotak.com
Mumbai: +91-22-6634-1286

Tarun Lakhotia
tarun.lakhotia@kotak.com
Mumbai: +91-22-6634-1188

Kotak Institutional Equities Research
kotak.research@kotak.com
Mumbai: +91-22-6634-1100
For private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES, REFER TO THE END OF THIS MATERIAL.

Cairn India

Energy

Details of 2QFY12 results and other operational update
Exhibit 1 gives highlights of Cairn’s 2QFY12 results and compares the same with 1QFY12
and 2QFY11. We discuss key highlights below.
Interim results of Cairn India (` mn)

Income from operations
Total expenditure
Inc/(Dec) in stock
Operating expenses
Staff cost
Government taxes/share of profit
Other expenditure
EBITDA
Other income
Interest
Exploration costs written off
DD&A
Pretax profits
Extraordinaries/sales tax benefit
Tax
Deferred taxation
Net income
EPS (Rs)
Income tax rate (%)

1QFY12
37,127
(5,387)
(56)
(4,257)
(191)

(883)
31,740
528
(446)
(187)
(3,460)
28,175

(651)
(258)
27,266
14.3
3.2

2QFY12E
(19.9)
2.2

(% chg.)
2QFY11
(1.3)
2.3

1QFY12
(28.6)
1.8

(4,372)
(295)

(696)
27,762
974
(362)
(250)
(3,650)
24,475

(1,532)

22,238
11.7
9.1

2QFY11
26,864
(5,358)
(268)
(4,257)
(300)

(534)
21,506
282
(1,281)
(422)
(2,756)
17,329

(2,799)
1,321
15,851
8.3
8.5

7.7
(20.6)

10.6
(21.7)

10.6
23.0

(17.2)
(24.2)

7.9
(2.2)

(34.7)
(33.7)

55.5
(13.9)
(9.3)

(7.9)
14.0
28.2

107.6
(9.2)
(21.2)

(21.0)

(56.7)

86.0

(65.7)

(51.9)

(72.0)

172.3
99.8
87.5
3.7
2.2
8.0
8.6
6.8
9.9
103.4
4.6
45.8

165.4
94.3
81.2
4.5
2.6
11.2
8.6
6.6
11.7
69.5
4.5
46.5

171.8
99.6
87.6
3.5
2.2
8.0
8.5
6.9
9.9
105.9
4.5
44.7

(1.4)
(0.5)
0.2
(7.4)
(1.9)
(5.1)
(5.1)
(10.1)
25.1
(0.6)
(2.6)

2.8
5.2
7.9
(24.2)
(18.3)
(32.1)
(5.0)
(8.3)
5.8
47.9

(1.1)
(0.4)
0.1
(3.9)
(3.4)
(5.0)
(4.3)
(11.5)
25.0
(2.9)

2QFY12
26,522
(5,482)
37
(4,708)
(235)

(576)
21,040
5,930
(1,228)
(389)
(3,142)
22,211
(13,552)
(1,211)
182
7,630
4.0
11.9

2QFY12E
33,125
(5,363)

169.9
99.2
87.7
3.4
2.2
7.6
8.1
6.1
12.4
102.8
4.5
45.7

Production, selling price data
Production volume, gross ('000 boepd)
Production volume, net ('000 boepd)
Rajasthan
CB-OS-2
Oil
Gas (mn cf/d)
Ravva
Oil
Gas (mn cf/d)
Selling price, oil (US$/bbl)
Selling price, gas (US$/mcf)
Exchange rate (Rs/US$)

1HFY12
51,126
(10,861)
(19)
(8,965)
(426)

(1,451)
40,265
6,450
(1,674)
(576)
(6,602)
37,862
(1,028)
(1,862)
(76)
34,896
18.3
5.3

170.9
99.4
87.6
3.5
2.2
7.8
8.3
6.5
11.1
104.4
4.5
45.2

yoy
1HFY11 (% chg.)
35,270
45.0
(7,705)
41.0
402
(6,445)
39.1
(489)
(12.9)

(1,173)
23.6
27,565
46.1
563
(1,774)
(744)
(22.5)
(4,416)
49.5
21,195
78.6

(3,095)
(39.8)
565
18,665
87.0
9.8
11.9

130.2
69.6
56.2
5.0
3.0
12.0
8.5
6.6
11.4
70.8
4.6
46.1

31.3
42.9
56.1
(29.9)
(26.0)
(35.0)
(1.5)
(1.4)
(2.0)
47.5
(1.1)

2012E
123,205
(24,002)

(19,772)
(1,182)

(3,048)
99,203
9,778
(2,457)
(1,500)
(15,153)
89,871
(1,028)
(6,586)
(2,817)
79,440
41.8
10.6

182.5
106.6
94.3
3.6
2.2
7.8
8.7
6.8
10.7
100.0
4.6
47.3

Source: Company, Kotak Institutional Equities estimates

` Decline in EBITDA due to cost recovery of royalty. Cairn India reported 2QFY12
consolidated net revenues at `26.5 bn (-28.6% qoq and -1.3% yoy) and EBITDA at `21
bn (-33.7% qoq and -2.2% yoy). The qoq decline in EBITDA reflects (1) royalty
adjustment of US$209 mn versus nil in the previous quarter and (2) lower crude price
realization for Rajasthan block at US$101.6/bbl versus US$104.9/bbl in 1QFY12. Gross
production from Rajasthan block remained steady qoq at 125,251 b/d (gross basis).
The discount to Dated Brent was ~US$11/bbl for the overall company and about
US$12/bbl for the Rajasthan block. Gas price realization was at US$4.5/mcf versus
US$4.5/mcf in 1QFY12.
` Production remains steady for Rajasthan block. Cairn’s share of production from
Rajasthan block was at 87,676 boe/d (working interest-basis) in 2QFY12 versus 87,589
boe/d in 1QFY12. At CB-OS-2, gas production declined 5% qoq and oil production
declined 3.4% qoq. At Ravva, oil production declined by 11.5% qoq and gas production
increased by 25% qoq.
` One-off impact of royalty being treated as a cost-recoverable item. We note that
2QFY12 reported earnings of `7.6 bn includes a one-off provision of `13.6 bn to account
for royalty being treated as cost-recoverable item for FY2010-11 and 1QFY12.

KOTAK INSTITUTIONAL EQUITIES RESEARCH

3

We note that the reported net revenues of US$578 mn (`26.2 bn in 2QFY12 versus deferred tax liability of `0. The remaining US$89 was carried forward to 2QFY12. The management has guided DD&A expenses to be ~US$9/bbl in the long term. ` DD&A charges decline 9. However. US$294 is the net extraordinary item appearing in 2QFY12.3% in 1HFY12 which reflects availing of MAT credit for `4.83 bn on repayment of foreign currency loans. We highlight that the impact is fairly complicated given that multiple variables get impacted. This includes (1) US$120 mn pertaining to 2QFY12 (A) and (2) US$89 which was carried forward from 1QFY12 as unrecovered royalty. Cairn reported extraordinary item of `13. ` Royalty pertaining to prior periods. Cairn could have recovered only US$336 mn out of US$425 mn given the insufficient level of revenues to recover the same. The qoq decline in DD&A expenses was on account of lower exploration activities due to monsoon.9 bn from `528 mn in 1QFY12 led by foreign exchange fluctuation gain of `5. reflecting a one-time charge of `0. However. 4 KOTAK INSTITUTIONAL EQUITIES RESEARCH .2% qoq. This represents the gross revenues without any impact of royalty being made cost recoverable. ` Gross revenues (A). Cairn India reported a sharp increase in finance cost to `1. ` Extraordinary item relating to prior periods. We note that US$336 was the total royalty that Cairn could have recovered upto 1QFY12. ` Taxation. ` Increase in finance charges.3 bn in 1QFY12.1 bn (-9. The effective tax rate for the company was 5.2% qoq).23 bn from `446 mn in 1QFY12. The total royalty for the Rajasthan block pertaining to 2QFY12 was US$171 mn and Cairn’s share of royalty (70%) was US$120 mn. the same has been netted for the profit petroleum of US$42 mn that it paid to the government in 1QFY12. The company booked a deferred tax asset of `0. Cairn’s share of the same was US$425 mn. Cairn’s gross revenues for 2QFY12 were at US862 mn. which reflects the impact of rupee depreciation on its foreign currencydenominated deposits of US$1 bn. ` Royalty pertaining to 2QFY12.Energy Cairn India ` Sharp increase in other income.5 bn) represents (1) gross sales of US$862 mn (A) less (2) royalty impact taken in 2QFY12 of US$209 mn (B) less (3) profit petroleum of US$75 attributable to the government. Cairn reported DD&A expense at `3. Thus. More on the royalty adjustment We attempt to provide clarity on the adjustment on account of royalty being made cost recoverable. We highlight that the total royalty adjusted from the revenues of 2QFY12 was US$209 mn. ` Net (adjusted) sales revenues for Cairn in 2QFY12.3 bn. Cairn’s other income increased sharply to `5.6 bn (US$294 mn) in 2QFY12 relating to royalty adjustment for prior periods up to (and including) 1QFY12. The gross royalty pertaining to prior periods for the Rajasthan block was US$608 mn.7 bn. ` Royalty impact taken in 2QFY12 (B).

However. However.15 bn barrels Original oil in place and reserves of RJ-ON-90/1 block (mn bbls) Orginal oil in place MBA MBA EOR Rajasthan other fields Total RJ-ON-90/1 2.3 to reflect (1) 2QFY12 results. However.3 and `40. This is despite a very modest sensitivity of fair value to nearterm crude oil prices.45 bn bbls of cumulative production. ` Upgrade to reserves.Cairn India Energy Difficult to build a case for investment unless one assumes (1) a very bullish view on crude oil prices and/or (2) significant upgrade to reserves We find it difficult to build a case for investment in the stock at current valuations unless (1) we build a very bullish view on crude oil prices from current levels and/or (2) there is a significant upgrade of reserves from Rajasthan block. we have already modeled higher estimates versus the announced 2P reserves from the Rajasthan block.15 1. We note that the current stock prices is discounting US$90/bbl in perpetuity assuming (1) 1.45 bn bbls from the Rajasthan block versus the company’s guidance of 2P reserves of 1.49 0. Kotak Institutional Equities Ramp-up in production may be slower given capacity constraints Cairn management is planning to (1) ramp up production from Mangala field to 150.4 from `40.22 0.6 and `41. The management has stated it will have to augment its infrastructure capacity to ramp up production beyond 175. (2) exchange rate assumption of `45/US$ in perpetuity and (3) 2% annual inflation adjustment to crude oil prices from FY2016E onwards. `50. We find it difficult to justify upside to the current stock price unless we model significantly higher crude oil prices in the long term. `49. (3) lower production from Rajasthan field and (4) other minor changes.15 Working Interest 0. FY2013E and FY2014E EPS to `41. (2) revised exchange rate assumptions.000 b/d and (2) start production from Bhagyam field in 4QFY12E. the management has cautioned against overly optimistic assumptions on the ramp-up of production given capacity constraints on its infrastructure. KOTAK INSTITUTIONAL EQUITIES RESEARCH 5 .05 1.8. Earnings revision and key assumptions We have revised our FY2012E. the stock price has shown a high sensitivity given that the stock is only crude oil play in India. We note that our fair valuation changes b y `11/share even if we assume US$10/bbl higher crude oil prices for FY2012-13E. We have assumed recoverable reserves of 1.000 b/d. We give our views on these potential drivers below: ` Crude oil prices. The management also maintained its guidance of (1) commissioning of Train IV in 2HCY11E and (2) commencement of production from Aishwariya field in 2HCY12E. We note that the company typically does an appraisal of its reserves at the end of the financial year. We discuss our key assumptions behind earnings estimates below.15 bn bbls (see Exhibit 2). Revised gross oil in place is about 4 bn barrels and 2P reserves is 1.31 0.69 0. We highlight that the stock has historically shown a very high correlation to crude oil prices.98 4.000 b/d for FY2012E. We do not rule out upside to our fair value from any potential upgrade to reserves from Cairn’s Rajasthan block.4.000 b/d versus 125. The company has guided for an exit rate of 175.11 0.81 Source: Company.03 2P reserves 0.

903 305 Source: Kotak Institutional Equities estimates 6 KOTAK INSTITUTIONAL EQUITIES RESEARCH .903 301 + 2-years 9.75/US$ and `48. ` Crude oil price assumption.1 mn tons (202 kb/d) for FY2014E.7 mn tons (135 kb/d) for FY2012E.275 (382) 11.517 1.902 290 + 1-year 10.5/US$ versus `46.45 bn bbls (1 bn bbls net to Cairn) over the life of the field. We have assumed an exchange rate for FY2015E onwards at `45/US$. Crude price discounted at various levels of stock price of Cairn Stock price (Rs/share) 390 375 360 345 330 315 300 285 270 255 240 Crude price discounted (US$/bbl) 115 110 107 102 99 96 91 87 84 81 77 Note: (1) Crude price discounted from FY2012E in perpetuity. Source: Kotak Institutional Equities estimates We value Cairn India stock at `300 EV and equity value of Cairn (US$ mn) RJ-ON-90/1 CB-OS-2 Ravva Upside potential (KG-DWN-98/2) Total Net debt Equity value Equity shares (mn) Equity value per share (Rs/share) Now 10.3/US$. US$100/bbl and US$95/bbl for FY2012E.657 1.081) 11.934 18 184 125 10. ` Exchange rate. (2) Exchange rate assumption (FY2015E onwards) is Rs45/US$. FY2013E and FY2014E to `47. We model gross production from the Rajasthan block at 6.833 65 277 100 11. We have revised our exchange rate assumptions for FY2012E. We assume gross production of 1.15 bn bbls.714) 11. We assume FY2015E crude price at US$90/bbl and an increase in crude prices by 2% in perpetuity beyond FY2015E to reflect the impact of inflation. which is higher than the management’s guidance of 2P reserves of 1. We assume crude oil (Dated Brent) prices at US$110/bbl. `45.062 39 223 112 10.436 (1.Energy Cairn India ` Volumes.63/US$ and `45/US$ previously.976 1. `49. FY2013E and FY2014E.263 (1. 9 mn tons (180 kb/d) for FY2013E and 10. (3) Inflation assumption of 2% in crude prices from FY2016E onwards.3/US$. We model US$10/bbl discount to Dated Brent for Cairn’s Rajasthan crude.

4 — 70.298 (58. excl.6 146.564 16.761 99.227 123.613) (25.203 9.515) 106.716 516.0 Note: (a) 15 months period starting from January 1.949 6.653) 89.429 13.0 221.739) (53.120) (740) (764) (100) (0.716 83.842 8.132 393.087 10.944 253.589) 3.006 62.124 8.213 (31.8 163.Cairn India Energy Profit model.3 — 68.282 32.0 10.256 (5.082) (33.804 4.232 (69) (739) 1.324 (27) (4.909) (13.194 2.847 34.328 6.006 (540) (22. 2006-07.193 — 391.0 150.510 (64) (4. working capital Working capital changes Capital expenditure Investments/Goodwill Other income Free cash flow Key assumptions Gross production ('000 boe/d) Net production ('000 boe/d) Gross production from Rajasthan block ('000 boe/d) Dated Brent (US$/bbl) Discount of Rajasthan crude to Dated Brent (US$/bbl) 2006 2007 2009 (a) 2010 2011 2012E 2013E 2014E 18.794) 87.689) 71. calendar year-ends.169 — 32.596) 68.0 86.007 14.129 253.540 43.038 39.4 19.162 (283) (1.949 402.0 100.372 310.6 87.717) — (219.258 5.4 — 64.521 0 (201) (497) 6.715 10.933 9.944 253.9 101.716 341.5 106.430 41.403 4.524 (2.736 95.5 202.269 17.944 253.035 4.3 22.530 8.440 41.1 17.778 46.5 238.023 5.874 4.829 101.401 103.912 538. March fiscal year-ends.358 4.713 253.863) 1.004) 903 12.511 5.7 10.1 — 65.077 (148) (3.469 — (8.8 67.470 17.400 496.382) 10.354 4 254.782 29.193 943 504.771 1.428 10.566 66.193 943 464.3 — 75.871 (1.3 133.4 292.0 10.213 1.014 (4.453 34.561 6.062) 1.124 253.612 26.0 5.752) (34) 78.771 328.823 — (2.548 2.599) — 9.422 88.112 44.932 5.029 25.157 4.387 (908) (11.203 — 33. balance sheet.122 39. 2009-14E (` mn) Profit model (Rs mn) Net sales EBITDA Other income Interest Depreciation Pretax profits Extraordinary items Tax Deferred taxation Net profits Earnings per share (Rs) Balance sheet (Rs mn) Total equity Deferred tax liability Total borrowings Currrent liabilities Total liabilities and equity Cash Current assets Total fixed assets Net producing properties Investments Goodwill Deferred expenditure Total assets Free cash flow (Rs mn) Operating cash flow.221) (623) 8.817 1.309 10.390 7.944 253. 2009.117 1.403 127.3 21.592 44.683 4.170) — 6.5 136.900 294.712 62.259 338.403 (10.925 75.159 504.344 33.5 108.525 79.570) 10.900 61.400 67.900 — (4.0 25.115 — 341.320 50. Source: Kotak Institutional Equities estimates KOTAK INSTITUTIONAL EQUITIES RESEARCH 7 .193 370 310.259 18.980 43.348 6. cash model of Cairn.0 8.586) (2.808 99.619) (252.617) — 8.635 9.817) 79.193 943 538.648) (24.751 103.156 9.479 3.824) 8.422 — (24.850 10.054 20.088) (25.916 3.266 464.6 134.098 5.1) 25.627 9.097) (27.254) (22) 4.778 (2.806 391.254 7.574) 6.6 16.465 92.0 182.662) 25.542 91.904 4.6 110.540 49.222 29.014 1.457) (16.028) (6.660 3.684 41.592 450.193 — 393.505 34.259 (2.6 180.518 (45.609 2.504 19.219) (740) 96.325) (34.193 943 559.730) 6.501 (7.977 84. 2008 to March 31.8 — 87.360 (6.266 559.159) 63.2 150.995 17.654 (2.288 (2.968 53.397) (1.0 95.278 — (9.0 11.

` EBITDA margins came in at 20.5 43.com Mumbai: +91-22-6634-1327 Kotak Institutional Equities Research kotak.4 43.695-1. to BSE-30 0.3 8. However. Staff costs declined by 6% qoq while other expenses rose sharply by 22% qoq.3 52.goel@kotak.com Mumbai: +91-22-6634-1100 For private Circulation Only.2 2.5 2012E 103.2 34.1 38. which we believe could be due to a sharp depreciation of the INR versus USD during the quarter.SELL Bajaj Auto (BJAUT) Automobiles OCTOBER 20. ` Domestic premium motorcycle segment increased by 18% qoq and the company increased its market share by 1.research@kotak.1 217.6 2.9 bn (+16% yoy. (Rs bn) 467. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES. +100 bps qoq) which was driven by – (1) improvement in export realizations by 3% qoq due to appreciation of rupee vs.7%.9 bn (+16% yoy. Yield (%) 2011 90.8 14.1% (-60 bps yoy. We maintain our SELL rating on the stock as we believe margins are likely to trend down as competitive intensity increases in the sector with addition in capacities.3 Forecasts/Valuations EPS (Rs) EPS growth (%) P/E (X) Sales (Rs bn) Net profits (Rs bn) EBITDA (Rs bn) EV/EBITDA (X) ROE (%) Div.0 12.9) 13. REFER TO THE END OF THIS MATERIAL.0 Shareholding pattern (%) Promoters 50.9 MFs 2.7 27. Company data and valuation summary Bajaj Auto Stock data 1. +11% qoq) was 4% above our estimates due to a higher-than-estimated average selling price and lower raw material costs. 2011 RESULT Coverage view: Cautious Margins improve sequentially.5 Rel.3 11. The company’s market share increased across the three segments sequentially by 1-1. We maintain our SELL rating on the stock with a target price of Rs 1.614 Target price (Rs): 1.1% (60 bps above our estimates) driven by an improvement in product mix. ` Export volumes were robust (+38% yoy) while export revenues increased by 50% yoy indicating that the pricing/mix improved by 12% yoy in the quarter. We reckon EBITDA margins are likely to decline going forward as competition intensifies with Honda nearly doubling its capacity over the next two years.5 Price (Rs): 1.4% in 2QFY12 (120 bps decline qoq) driven by superior product mix and decline in raw material costs during the quarter. We will revisit our estimates post the concall on Monday. The tax rate came in at 23.2 13. EBITDA margins came in at 20.4% below our estimate of 27%.0 15. Bajaj Auto 2QFY12 profit of Rs7.9 160.5 Improvement in product mix and higher export selling prices helped beat expectations ` Bajaj Auto 2QFY12 adjusted profit of Rs7. .585 based on 14X FY2013E EPS as we believe the stock is fairly valued.9 33.6 Price performance (%) 1M 3M 12M Absolute (0. The executive segment declined by 1% qoq while the economy segment increased by 8% qoq.9 2. Export average selling price increased by 3% qoq. Revenues grew by 21% yoy (4% above our estimates) due to improvement in product mix.low) Market Cap.6 84. The company indicated that they it not increase prices in export markets during the quarter. Raw material costs as a percentage of net sales declined to 71.9 30. Domestic motorcycle volumes were up 8% yoy while domestic three wheeler volumes declined by 9% yoy. +11% qoq) was 4% above our estimates.9 17.0 40.5% in export markets from October 1 to pass on the impact due to a decline in the DEPB rate to 5.166 52-week range (Rs) (high.5% from 9%.0 FIIs 15.1 9.7% qoq. Hitesh Goel hitesh.1 23. the company has stated that it increased prices by 3. USD and 3% qoq improvement in domestic realizations driven by higher share of premium bikes in the mix and (2) benefit of lower raw material cost.9 15.937 2013E 114.5 189.0 26.585 BSE-30: 16.

But we believe they will have to pay this amount as it was part of the original agreement to pay 1% of profits made at Pantnagar plant to National Calamity Fund.3 mn towards national calamity contingent duty which is paid on the sale of vehicles from its Pantnagar plant.9 bn (+16% yoy. We maintain our SELL rating on the stock with a target price of Rs 1.4% in 2QFY12 (120 bps decline qoq) driven by superior product mix and a decline in raw material costs during the quarter. nearly doubling its capacity over the next two years.Bajaj Auto Automobiles Margins surprise positively as Pulsar sales bounce back ` Bajaj Auto 2QFY12 adjusted profit of Rs7. The tax rate came in at 23.4% below our estimate of 27%. in our view. ` The company also reported a mark-to-market loss of Rs 954 mn on the forward contracts it has taken for exports which is a notional loss. Export average selling price increased by 3% qoq which we believe could be due to sharp depreciation of the INR versus USD during the quarter. and is unlikely to impact cash flow of the company. However. ` Export volumes were robust (+38% yoy) while export revenues increased by 50% yoy indicating that the pricing/mix improved by 12% yoy in the quarter.5% in export markets from October 1 to pass on the impact due to decline in DEPB rate to 5. Bajaj has not taken this impact in the financials as of now and has filed a writ petition against this in court. Executive segment declined by 1% qoq while the economy segment increased by 8% qoq. we expect export volume growth to slow down in 2HFY12E. ` Domestic premium motorcycle segment increased by 18% qoq and the company increased its market share by 1.5% from 9%. ` Three-wheeler volumes also increased at a robust pace of 17% yoy driven by 44% yoy increase in export volumes while domestic three-wheeler volumes declined by 9% yoy. it also stated that it increased prices by 3. The company’s market share increased across the three segments sequentially by 1-1.7% qoq. KOTAK INSTITUTIONAL EQUITIES RESEARCH 9 . The company indicated that it did not increase prices in export markets during the quarter. However. Revenues grew by 21% yoy (4% above our estimates) due to an improvement in product mix. +11% qoq) was 4% above our estimates. ` The company also indicated that it has received a notice from the Uttarakhand government to pay Rs 779. Staff costs declined by 6% qoq while other expenses rose sharply by 22% qoq. We reckon EBITDA margins are likely to decline going forward as competition intensifies with Honda. This could impact margins going forward.585 based on 14X FY2013E EPS as we believe stock is fairly valued. in our view. Raw material costs as a percentage of net sales declined to 71. ` The company had launched Boxer 150cc in August 2011 and will launch new Pulsar variants in 4QFY12E which should help the company improve its market share in 2HFY12E.7%.1% (-60 bps yoy. ` EBITDA margins came in at 20. +100 bps qoq) which was driven by – (1) improvement in export realizations by 3% qoq due to appreciation of the INR versus USD and 3% qoq improvement in domestic realizations driven by higher share of premium bikes in the mix and (2) benefit of lower raw material cost. ` Domestic motorcycle volumes were up 8% yoy while domestic three wheeler volumes declined by 9% yoy.

599 342.5 (6.8 28.4 88.686 1.6 21.032 1.4) 22.332 81.8) 5.2 1QFY12 1.7 30.164 339.0 5.4 12.164.9 27.148 33.715 9.3 57.5 8.6) 21.164.3 13.0 KIE est 4.9 100.111 72.821 6.2 8.1 1.815 40.605 36. Rs mn Volumes (units) Net realisations Net sales Inc/dec in stock Raw materials Staff costs Other expenses Total expenses EBITDA Other income Interest expense Depreciation expense Profit before tax before exceptional Extraordinary income Extraordinary exp Profit before tax Tax expense Profit after tax Adj PAT Raw material cost as % of net sales Staff cost as % of net sales Other expenses as % of net sales EBITDA margin (%) No of shares EPS Tax rate (%) Volume breakdown (units) Economy Executive Premium Domestic motorcycle Export motorcycle Total motorcycle Domestic 3 wheelers Export 3 wh 3 wheelers Total volumes Volume mix (%) Economy Executive Premium Domestic motorcycle Export motorcycle Total motorcycle Domestic 3 wheelers Export 3 wh 3 wheelers Total volumes 2QFY12 1.4 15.9 31.472 60.531 9.0 11.1 5.8 (11.815 43.6 16.593 34.2 2.2 17.7 2.6 33.8 7.9 5.822 883.470 50.9 (12.500 2.6 16.4 126.503 2.3 (8.095 189.4 22.8 (6.768 2.4) 6.686 1.7 2.0 8.8 20.000.499 129.775 1.5 14.517 1.980 368.420 7.2 16.6) 3.306 632.092.5 19.393 43.246 52.980 368. Kotak Institutional Equities estimates 10 KOTAK INSTITUTIONAL EQUITIES RESEARCH .6 2.2 4.040 42.4 2.9 16.611 38.1 4.401 623.570 43.8 100.1 88.8 100.3 4.716 47.612 7.2 36.876 963.2 32.276 87.973 837 7 300 9.1 289 24.142 2.428 10.5 289 26.898 71.890 850 2 310 10.8 31.574 745 202 394 10.531 2.0) 8.0 31.400 1.7 100.3 27.524 684.164.098 1.1 48.418 (320) 31.1 3.660 338.095 189.2 25.332 81.9 (6.684 208.852 1.3 qoq 6.8 29.650 250.0 10.6 11.566 56.722 954 9.9 16.137 43.5 10.092.5 14.8 22.8 29.4 2QFY12E 1.099 10.8 2.5 3.111 7.031 1.7 289 23.599 342.510 7.258 7.0 20.7 12.6 6.Automobiles Bajaj Auto Bajaj Auto 2QFY12 result summary March fiscal year-end.5 Source: Company.682 6.3 (12.5 6.612 71.6 25.000.3 58.7 (9.285 55.6 28.311 3.852 1.1 88.821 70.0) 8.673 (415) 38.137 126.8 3.5 3.285 55.8 63.607 355.164.3 3.389 2.0 20.1 11.532 117.109 731 2 306 9.0 11.5 (5.173 42.520 136.027.6) 44.665 9.9) (4.137 85.6 16.1 % change yoy 16.8 2.9 3.3 21.524 684.7 3.9 0.570 111.6 19.137 45.3 23.428 2.3) (10.9 8.6) 12.0 10.2 4.9 31.4 88.2 9.520 136.8 6.0 2QFY11 1.3 58.446 8.4 6.8 7.027.503 9.5 6.816 7.156 156.815 10.773 1.0 11.1 289 27.3 6.

485 1.1 35.7 100.822 883.5 28.686 1.632 2011 3.0 ─ 13.760.040 129.0 29.809.0 20.414.562 211.074 317.0 15.572 2.679 238.9 33.909 340.509 108.851 2.357 231.0 20.606 1.167 808.1 35.270 4.696.083.0 50.0 (5.273 10.092.6 11.1 60.5 63.0 28.416 836.173 306.7 1.751 319.832 459. 2009-2014E (units) Motorcycles Domestic < 125 cc > 125 cc Exports < 125 cc > 125 cc Scooters Total 2-wheelers Domestic 3-Wheelers Passenger 3-wheelers Goods 3-wheelers Exports Total 3-wheelers Total vehicles Growth (yoy %) Motorcycles Domestic < 125 cc > 125 cc Exports < 125 cc > 125 cc Scooters Total 2-wheelers Domestic 3-Wheelers Passenger 3-wheelers Goods 3-wheelers Exports Total 3-wheelers Total vehicles 2009 1.2 30.2 10.4 100.627 201.160.230 219.4 27.1 11.2 25.0 10.5) 31.9 100.258 1.0 57.7 58.0 12.256 528.337 488.976.781.8 33.260 262.599 342.2 11.2 12.9 60.733 332.285 136.0 34.015.0 20.1 11.883 63.2) (8.809 177.0 ─ 34.2 11.548 265.511.9 10.8) (23.3 25.132 4.0 20.986 252.908 3.0 10.043 205.391.418.517 1.242 546.679 3.246 685.5 25.2 30.527 948.0 12.534 164.027.854 1.5 30.5 27.704 3.3 89.6 24.0 10.334 5.851 550.076 1.0 28.537 494.1 88.0 13.6 12.5) 31.588.2) (12.8 40.968 617.276.056 274.281 808.772 1.194.543.262 321.0 15.696 176.9 16.707 186.493 11.8 100.097 533.3 5.313 712.168 557.4 21.397 11.951 2012E 3.0 19.620 1.228 277.936 2.0) 24.0 13.0 38.779.113 206.0 28.000.716 1.0 15.218 232.811 333.0 38.8 100.489 600.387.0 19.8 29.159.1 34.2 63.878 852.852.7) (61.Bajaj Auto Automobiles Premium motorcycle volumes increased in the product mix in 2QFY12 Bajaj Auto quarterly volume-mix trend.8 13.0 (75.626 310.190 1. March fiscal year-ends (units) Domestic motorcycle <125 cc >125cc Total domestic motorcycle Exports Total motorcycles 3 wheelers Total volumes Mix (%) <125 cc >125cc Total domestic motorcycle Exports Total motorcycles 3 wheelers Total volumes EBITDA margins (%) 1QFY10 2QFY10 3QFY10 4QFY10 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 100.551 843.7 88.0 15.6 114.9 13.2 87.973 311.197 139.582 135.9 100.571.0 10.309 287.383 378.526 2.427 432.659 838.590 632.904 229.387.9 12.391 99.164.650 250.0 15.919.1 14.5 28.1 22.4 11.125 207.963 882.196 85.1 25.255.4) (10.971 4.594 413.0 10.281 436.8 29.764 1.245 3.043 2.0 15.852 1.442 310.260 3.0 20.0 20.5 61.0) (1.6 68.194 152.1 33.060 345.876 631.4 39.467 5.0 85.472 117.967 566.290 330.823.085 613.6 Source: Company.0 12.850 239.146 224.540.039 598.083.0 31.4 27.3 31.689 482.648 1.918 928.152 239.2 12.326 351.7 28.0 20.0) (41.0 35.0 22.8 100.028 1.870 725.7 34.506.002 1.1 88.099 4.4 5.0 88.1 11.872 295. Kotak Institutional Equities estimates KOTAK INSTITUTIONAL EQUITIES RESEARCH 11 .2 10.027 164.714 6.5 42.124 5. March fiscal year-ends.126 191.672 2013E 4.1 16.7) (11.0 22.0 10.9 31.976.502.1 34.748 928.692 96.363 946.416 972.0 ─ 12.0 17.0 20.845 1.646 111.470.4 88.164 339.572 216.384 (10.1 Source: Company estimates We expect the volumes to increase at a 13% CAGR over the next two years Bajaj Auto volume assumptions.9) (58.0 15.459 96.876 963.3 88.065 2014E 5.0 12.907.4 16.040 255.437 639.1 88.001 5.386 5.108 2010 2.121 262.0 ─ 17.3 11.0 20.2 25.0 60.1 18.341.689 712.924 767.137 18.4 100.3 29.3 13.7 (23.3 (44.270 828.060.0 22.5 13.862 1.166.722 392.090 623.1 35.6 100.502.0 12.003 162.470 125.877 684.1 88.8) 30.0 20.7) 2.680 399.4 20.154 254.810 1.0 65.9 100.804 291.1 23.0 20.

265 15.016) 6.403 (2.0 16.744) (3.090 83.498 (1.5 20.809 1.339 (17) (1.215 1.9) 295. balance sheet and cash flow model March fiscal year-ends.029 33.884 1.6 30.827 (13.078) 26.9 42.8 37.228) 36.0 14.250) 30.085 1.5 20.228 43 137.6 36.963 27.609 107.102 297 3.216) 33.148 1.5 (0.632 (2.2 43.246 (10.613 (1.579 71.365) 25.171 62.9 217.824 71.7 18.Automobiles Bajaj Auto Bajaj Auto profit and loss.502) 49.9) 374.075) 17.302 30.7) 101.624) (7.168 3.085 26.029 114.369 21.5 115.125) 30.079 103.246 (12.702 4.870 (4.036 85.027 18.9 14.7 18.043 (210) (1.0 (0.211 40.215) (1.332 65.0 (0.697 42 15.544 43 114.374 125.213 (1.352 (4.632 (2.8 52.491) 45.2 64.4 189.624 165.614) 18.3 0.023 8.9 14.700 24.547 32.124 297 3.1 0.179 43 165.8 159.416 29.7 84.079 30.298) 11.481 18.8) 227.996 58.9 18.993 4.413 (1.565 23.3 0.659 28.7 21.7 19.262 7.374 36.638 297 3.523 24.553 92. working capital Working capital changes Capital expenditure Free cash flow Ratios EBITDA margin (%) PAT margin (%) Debt/equity (X) Net debt/equity (X) Book Value (Rs/share) RoAE (%) RoACE (%) 2009 2010 2011 2012E 2013E 2014E 84.191 13.117 8.8 0.2 70.385 43.071) (3.955 297 3.453) 36.861) 265 18.204 65.1 37.0 (0.9 64.175 976 (60) (1.1 248.261 35.293 24.204 15.4 Source: Company.324 6.097 1.398 26.146 53.036 16.838 101.814 29.726 (1.890 (981) (2.265 49.023 17.386 28.283 17 13.014 14.042 137.250) 27.483 47.161 43 92.7 0. 2009-2014E (Rs mn) Profit model (Rs mn) Net sales EBITDA Other income Interest Depreciation Profit before tax Extra-ordinary items Taxes Net profit Adjusted net profit Adjusted earnings per share (Rs) Balance sheet (Rs mn) Equity Deferred tax liability Total borrowings Current liabilities Total liabilities Net fixed assets Investments Cash Other current assets Miscellaneous expenditure Deferred tax assets Total assets Free cash flow (Rs mn) Operating cash flow excl.2 43.952 5.152 90.609 17.3 15.702 2.252 39.892 40.401) 41.1 (0.954 114.545 7.146 44.110) 33.981 34.814 15.871 37.8) 170.250) 21.2 0.702 10. Kotak Institutional Equities estimates 12 KOTAK INSTITUTIONAL EQUITIES RESEARCH .376 58.4 0.874 8.7 7.369 12.204 (11.146 49.

Further.220/share and note that UTCEM continues to trade at discounted valuation as compared to peers.2) 24. Murtuza Arsiwalla murtuza. the unrelenting cost pressures from higher fuel and freight cost have likely been absorbed and may stabilize at current levels.3) 24. typical of the weakness witnessed in the monsoons.3 17. Seasonal impact of low volumes and weak pricing implied drop in profitability to Rs628/ton (-48% qoq. REFER TO THE END OF THIS MATERIAL.9 16. Higher other income. 2011 RESULT Coverage view: Neutral 2QFY12: Profitability reflective of seasonal vagaries.research@kotak.7 Shareholding pattern (%) Promoters 63.6 (0.3 FIIs 15.1 12. -10% qoq). UTCEM trades at 6.satyarth@kotak.8 bn. Company data and valuation summary UltraTech Cement Stock data 1.1 Forecasts/Valuations EPS (Rs) EPS growth (%) P/E (X) Sales (Rs bn) Net profits (Rs bn) EBITDA (Rs bn) EV/EBITDA (X) ROE (%) Div. to BSE-30 (1.119 Target price (Rs): 1.2) Rel.low) Market Cap. respectively.5 Price (Rs): 1.7 68.7 41. (Rs bn) 306.9 (49.5 mn tons) and higher overhead expenses dented the benefits of better realizations (2% above estimate) leading to a 6% miss in operating profits. Yield (%) 2011 44.5 bn. Our channel checks.6 Price performance (%) 1M 3M 12M Absolute (2. We discuss the result in detail in the subsequent section.8 bn (43% yoy. however. marginally ahead of our estimates but significantly below Street expectations.220/share We maintain our ADD rating on UTCEM with a target price of Rs1.5 2012E 75.7 0.8 0.3 mn tons versus estimated 9.7 14.5 12.2) 13. Maintain ADD rating with target price of Rs1. Rs6. indicate some revival in cement prices in several pockets—especially those of West and North India.com Mumbai: +91-22-6634-1125 Shubham Satyarth shubham. absorbed the miss at operating level resulting in a beat at net income.9 7. operating profits of Rs5. Realizations dip sequentially on seasonal weakness in prices UTCEM’s average realization decreased 6% qoq (~Rs13/bag) on account of pricing weakness in July and August. Operating environment remains challenging—weak demand could weigh Challenging operating environment driven by subdued demand could weigh on the already fragile demand-supply balance and test the market discipline that has allowed for continued pricing discipline. -59% qoq) against our estimate of Rs39.937 2013E 89.3 10.2 bn and Rs2.9 0. However.arsiwalla@kotak.1 bn (22% yoy.9 6. .198-883 52-week range (Rs) (high. prices in South India (~25% of UTCEM sales) remained stable at Rs275-280/bag levels through the quarter despite sluggish demand and low utilization rates. +40% yoy).ADD UltraTech Cement (UTCEM) Cement OCTOBER 20.3 28.220 BSE-30: 16.9 132.5 MFs 1. -51% qoq) and net income of Rs2. Maintain ADD with a target price of Rs1. Cement prices on an average declined by Rs14-15/bag sequentially.com Mumbai: +91-22-6634-1100 For private Circulation Only. 20% discount to ACC and Ambuja Cement. Lower-than-estimated volumes (9. UltraTech (UTCEM) reported 2QFY12 net income of Rs2. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES.5 24.com Mumbai: +91-22-6634-1320 Kotak Institutional Equities Research kotak.6 bn.7 20. though we expect recent price increases and better volumes post-monsoon to help alleviate operating profits.1 17.5 195. however.8 bn (141% yoy.220/share. We note that recent agitations in Andhra Pradesh will further strain the demand environment in South India and chances of a potential revival in 2HFY12E.6 48.5X EV/EBITDA on FY2013E.5 Net income marginally ahead of estimate on higher other income UTCEM reported revenues of Rs39.1 17.7 18.8 174.

911) (1.5 4.480) (451) (7.654 (4.351) (6.0 9.752) — — 2.434) (10.042 2012E 174.579 22.107) 32 12. Total volumes declined to 9.279) 25.602) (43.1 3.217 28.7 27.6 14.3 mn tons (2% yoy.911) (8.153 3. -6% qoq).752 (1.2 703 684 658 (766) (845) (726) (2.525) 5.424 19.578) 38.841) (10.230) 1.503 520 219 1. 14 KOTAK INSTITUTIONAL EQUITIES RESEARCH . ` Volumes.5X (20% discount to Ambuja Cement and ACC) on FY2013E capacity and earnings. ` Realization.034 (672) (2.361) (2.099 (17. Blended realizations decreased to Rs4.222) (21.098 (6.062 788 39 700 1.4% to account for better realizations.862 (5.126) (575) (2.735) (8.7 64.397 3.733 9.058) (9.691) (228) (229) (376) (7.510) (32.130 835 24 774 650 30.218) (2.940) (4. Sequential decline in blended realization is on account of pricing weakness in July and August.067 501 192 898 829 35 612 731 28.4 2QFY12E 2QFY11 1QFY12 39.2 2.583 3.484) 29.4 39.255 478 189 1.734 (% chg) 32.549) (7.162) 2.5% and 4.222/ton in 2QFY12 (20% yoy.255 14.226) (28.331 (2. While sequential decline in volumes is a seasonal impact.626 1.533 3.426 577 216 1.451 32.7 4. Kotak Institutional Equities estimates Detailed analysis of quarterly results We discuss below some key highlights of 2QFY12 results.2 15. respectively.158 6. muted 2% yoy growth is reflective of general demand weakness.473 3.594 671 222 1.435) (6.222 3.1 3.798 3.3 mn tons of clinker and cement exports. -5% qoq) comprising 9 mn tons of domestic sales and 0.8 Source: Company.867 (2.7 12.1 32.367) (7.831 — 102 2.575) (6. Exhibit 1: Net income marginally ahead of estimate on higher other income Quarterly results for UltraTech Cement.147 43.9 1.452 (7.881 15.734 — 20.Cement UltraTech Cement UTCEM now trades at EV/ton of US$133/ton (24% discount to Ambuja Cement and 3% discount to ACC) and EV/EBTDA of 6.9 62.7 Change (%) 2QFY12E 2QFY11 1QFY12 (1) 22 (10) (6) 43 (51) 6 141 (59) (3) 2 2 20 (5) (6) (3) 40 (48) 2011 132.925) (793) 20.787 1.228) 3. ` Power and fuel cost.935) (6. Further decline in power and fuel cost could also be on account of higher quantum of clinker purchases during the quarter as reflected in a sharp jump in raw material cost.8 51.416) (4.816 14.665) (31.031 808 49 813 628 29.703 (22.951 (1. UTCEM’s power and fuel cost remained stable at Rs1.095 821 23 694 971 29.062/ton in 1QFY12) as prices of imported coal remained stable with some moderation witnessed more recently.3 4.849) (1.8 3.622) (900) (27.176 4.657) 17.2 9.789 2.260 6.974) (9.085) (1.031/ton in 2QFY12 (Rs1.184) (2.8 4. March fiscal year-ends (Rs mn) Net sales Raw materials Employee costs Power costs Freight costs Purchase of finished goods Other costs EBITDA EBITDA (%) Other income Interest Depreciation PBT Tax Deferred tax PAT Extraordinaries Reported PAT Sales (mn tons) Realization (Rs/ton) Cost (Rs/ton) Raw materials Employee costs Power & fuel costs Freight costs Purchase of finished goods Other costs Profitability (Rs/ton) Tax rate (%) 2QFY12 39.078 11.836) 6.771) (7.831 9.663) (2.789 9.085 485 210 927 715 25 722 448 33.505) (7.3 34.626 1. We have revised our FY2012/13E EPS estimates upwards by 3.

We note that bulk of the capex is for its expansion capacities at Chhattisgarh and Karnataka aggregating to 9.5 bn in 1HFY11. North. Rs11 bn for evacuation and logistic infrastructure.UltraTech Cement Cement ` Freight cost. sharp jump in raw material cost could likely be on account of higher quantum of clinker purchases during the quarter. We note that the marginal 3% increase is primarily on account of hike in diesel prices in June 2011 though highlight that truck freight rates have remained fairly stable owing to increased supply of trucks leading to increased competition.5 bn as of March 2011 to Rs40 bn as of September 2011. Kotak Institutional Equities estimates Balance sheet analysis for 1HFY12 We discuss below some key takeaways from UTCEM balance sheet as of September 2011. West and All India average (Rs/bag) North West Exhibit 3: Prices in South continues to be robust Cement prices. Total gross debt declined marginally from Rs41. 38% yoy). UTCEM incurred a capex of Rs11 bn in 1HFY12 as against a total capex of Rs12. As highlighted above. Rs7 bn for captive power units (120 MW) and another Rs37 bn on modernization and upgradation of existing plants. The management has guided for a capex of Rs110 bn during the FY2012-14E period which includes Rs51 bn for the expansion capacities. Exhibit 2: Prices trending upwards after monsoon weakness Cement prices. Both inventories and debtors remained fairly stable at 47 and 16 days of sales in 1HFY12 (against 46 and 14 in FY2011).4 bn in FY2011 and Rs4. Central and East India (Rs/bag) Central All India average East South 270 285 265 245 245 220 225 195 205 185 170 165 145 145 Sep-11 Jan-11 May-11 Sep-10 Jan-10 May-10 Sep-09 Jan-09 May-09 Sep-08 Jan-08 May-08 Sep-07 Jan-07 May-07 Sep-06 Jan-06 May-06 Sep-11 Jan-11 May-11 Sep-10 Jan-10 May-10 Sep-09 Jan-09 May-09 Sep-08 Jan-08 May-08 Sep-07 Jan-07 May-07 Sep-06 Jan-06 May-06 Sep-05 Source: CMA. Raw material cost increased sharply to Rs671/ton (40% qoq. ` Working capital. South.2 mtpa. Freight cost increased to Rs808/ton in 2QFY12 from Rs788/ton in 1QFY12. ` Capex run rate picks up. Kotak Institutional Equities estimates Sep-05 120 125 Source: CMA. KOTAK INSTITUTIONAL EQUITIES RESEARCH 15 . ` Debt. The management has indicated that the expansion capacities will likely be operational by FY2014E. ` Raw material cost.

592) (8.446 34.7 217.881) 12.036 1.085 197.831 70.448 10.303 224.427 77.7 195.634 5.355 40.056 37.383) (23.407 Source: CMA.185 (1.639) (6.518 12.776 1.303 250.771) (7.111 5.583 156.232 168.711 37.913 (329) (26.402 224.901 120.497 15.740 103.268 33.547 9. working capital Working capital Capital expenditure Investments Free cash flow 2010 2011 2012E 2013E 2014E 63.378 11.000) — 8.102 3.622 2. Kotak Institutional Equities estimates Exhibit 5: Profit model.3 43.348 77.486 29.094 1.452 (8.946 1.734 — 75.216) — 11.657) 17.758 12.946 143.563 250.011 16. Kotak Institutional Equities estimates 16 KOTAK INSTITUTIONAL EQUITIES RESEARCH .302 (2.175) (3.944 17.023 1.696 83.394 16.301 165.076) 36.952 Source: Company.949) 8.556 (2.385 138.154) 4.303 277.703 38.429 5.047 26.887 52.552 40.085 5.111) 41.226) (2.579 3.430 123.230) (3.991 83.260 (308) (7.479 7.8 88.802 37.130 10. balance sheet and cash model of Ultratech.787 1.227 (1.348) (4.582 3.303 199.446 17.531 173.303 19.448 36.539 199.567 9.496 20.233 973 47.998 — — 78.244 1.551 28.094 54.285 1.867 (2.758 31.961 41.2 132.020 2.626 31.704 35.804 5.608 150.267) 28.288 21.416 12.884 35.411 14.255) (1.171 (11.315 (13.477 45.407 131. 2009-14E (Rs mn) 2009 Profit model (Rs mn) Net sales EBITDA Other income Interest Depreciation Pretax profits Tax Net profits Extraordinary items Earnings per share (Rs) Balance sheet (Rs mn) Total equity Total borrowings Currrent liabilities Total liabilities and equity Cash Current assets Total fixed assets Investments Total assets Free cash flow (Rs mn) Operating cash flow.735 1.875 154.844) (4.283 22.048 — 102.741 113.637) (10.947 (3.598) 24.233) (11.9 174.331 (2.246 58.172 51.718) 20.600 37.622 125.045 12.573 — 89.227 32.484) 29.862 (5.424 2.920 41.368 43.901 2.099 25.430 837 13.075) 12.571 53.161 17.681 193 541 (8.045 12.565 6.571 37.391 (704) (12. March fiscal year-ends.447 173.600 165.125 25.953 156.Cement UltraTech Cement Exhibit 4: UTCEM incurred a capex of Rs11 bn in 1HFY12 Balance sheet of UTCEM as of September 2011 (Rs mn) Sources of funds Share capital Reserves and surplus Loan funds Deferred tax liability Total Utilization of funds Fixed Assets Investments Inventories Sundry debtors Cash and bank balances Loans and advances Current liabilities Provisions Net current assets (ex cash) Total Sep-11 Sep-10 Mar-11 2.196 52.250 21.419) — 9.987 277.946 44.255 44.139 125.000) — 35.056 37.085 5. excl.740 95.974) (9.861 18.646 54.296 49.

goel@kotak. We will revisit our estimates post the concall on Monday after we get more clarity on the replacement/OEM mix in the automotive segment. We base our assumptions on the following facts: ` Replacement market is a stable market and in our opinion the volumes cannot decline in a growing 4-wheeler market like India.com Mumbai: +91-22-6634-1327 Kotak Institutional Equities Research kotak.9) (22.3 8. 2011 RESULT Coverage view: Cautious 2QFY12 results impacted by decline in replacement demand.5 1.SELL Exide Industries (EXID) Automobiles OCTOBER 20.6 6.0 16. The company also indicated that they had purchased high-cost lead in 1QFY12 which impacted profitability as they could not increase prices in the market because they were losing market share to competitors.2 Price performance (%) 1M 3M 12M Absolute (8. The company indicated that replacement demand for 4-wheeler batteries has declined by 15% yoy in 2QFY12.research@kotak.5 18.com Mumbai: +91-22-6634-1100 For private Circulation Only.7 25. Other income has also fallen significantly qoq due to lower smelter profits.8 11.8 19. (Rs bn) 103. Our concerns on waning pricing power of Exide in the battery market are coming true and we believe it will be difficult for the company to raise prices in the future even if replacement demand revives.1 EBITDA margins nosedive sequentially due to decline in replacement demand and high lead cost Exide’s 2QFY12 profit of Rs512 mn (-72% yoy.937 2013E 7.8 8.1 12. probably the company has lost significant market share in replacement market which could be a major cause of worry.1 Price (Rs): 121 Target price (Rs): 120 BSE-30: 16.1 MFs 4. We base our thesis on the fact that replacement tyre volumes in cars as well as trucks has only declined once (in low single digit) over the past 10year history (Exhibit 3).5 6.5 1. Hitesh Goel hitesh.low) Market Cap.9) 17. In our view.2 2012E 6.2) (10. We believe automotive replacement battery demand will revive after a few quarters but the company’s EBITDA margins may not come back to historical high levels. to BSE-30 (7.1 Shareholding pattern (%) Promoters 46.1 19. We believe pricing power of the company is waning and it will be very difficult for the company to raise prices even if replacement demand revives. REFER TO THE END OF THIS MATERIAL. Company data and valuation summary Exide Industries Stock data 188-110 52-week range (Rs) (high.0 FIIs 16. ` Replacement tyre volume between April and August has grown by 9% yoy and replacement tyre volume growth in August was ~3% yoy.8) (23. -69% qoq) was 61% below our estimates.8) (28.3 11. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES. .3 5.3 45. The company had also subsequently cut 4-wheeler automotive battery prices by 10-12% in September to protect their market share.9 50.9 17.4) Forecasts/Valuations EPS (Rs) EPS growth (%) P/E (X) Sales (Rs bn) Net profits (Rs bn) EBITDA (Rs bn) EV/EBITDA (X) ROE (%) Div. We maintain our SELL rating on the stock.8 (8. We maintain our SELL rating on the stock.4 1.7 9. industrial battery revenue growth and lead smelter contribution in the company’s lead sourcing. Yield (%) 2011 7.3 56.0 15.7) Rel. Exide’s 2QFY12 results were significantly below our and consensus estimates due to 15% yoy decline in 4-wheeler battery replacement volumes and higher cost of lead during the quarter.

Automobiles

Exide Industries

Exide Industries 2QFY12 results summary
March fiscal year-ends (Rs mn)

Gross sales
Less: excise duty and sales tax
Other operating income
Net sales
Raw materials
Staff costs
Other expenses
Total expenses
EBITDA
Other income
Interest expense
Depreciation
Profit before tax
Tax expense
Exceptional income
Profit after tax
Recurring PAT
No of shares
EPS
Excise duty, sales tax to gross sales (%)
Raw material to net sales (%)
Staff costs to net sales (%)
Other expenses to net sales (%)
EBITDA margin (%)
Tax rate (%)

2QFY12
14,326
2,574
8
11,761
8,499
644
1,715
10,858
903
79
16
247
719
208

512
512
850
0.6

2QFY12E
14,005
2,542
7
11,470
7,400
700
1,580
9,680
1,790
300
11
237
1,842
534

1,308
1,308
850
1.5

2QFY11
13,739
2,472
5
11,272
6,686
660
1,471
8,817
2,455
191
17
201
2,428
768
469
2,129
1,801
850
2.1

1QFY12
15,163
2,726
7
12,444
7,906
720
1,596
10,222
2,223
308
11
237
2,282
650

1,632
1,632
850
1.9

18.0
72.3
5.5
14.6
7.7
28.9

18.2
64.5
6.1
13.8
15.6
29.0

18.0
59.3
5.9
13.0
21.8
31.6

18.0
63.5
5.8
12.8
17.9
28.5

kotak est
2.3
1.2
10.8
2.5
14.9
(8.0)
8.6
12.2
(49.6)
(73.7)
46.4
4.1
(61.0)
(61.1)

change (%)
yoy
4.3
4.1
74.5
4.3
27.1
(2.4)
16.6
23.1
(63.2)
(58.7)
(4.7)
22.5
(70.4)
(73.0)

qoq
(5.5)
(5.6)
10.8
(5.5)
7.5
(10.5)
7.4
6.2
(59.4)
(74.4)
42.5
4.1
(68.5)
(68.1)

(60.9)
(60.9)

(76.0)
(71.6)

(68.7)
(68.7)

Source: Company, Kotak Institutional Equities estimates

Exide Industries sum-of-the-parts valuation methodology
March fiscal year-ends (Rs mn)

Standalone FY2013 EPS
ING Vysya (50% stake value)
SOTP based value
SOTP based value

EPS
(Rs)
7.9

PE
(X)
14

Per share
value
111
12
123
120

Source: Kotak Institutional Equities estimates

18

KOTAK INSTITUTIONAL EQUITIES RESEARCH

Exide Industries

Automobiles

Exhibit 3: Replacement tyre volumes historical trend
March fiscal year-ends (000 units)

Year
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

Cars
4,358
5,376
5,443
6,020
7,308
7,092
8,248
7,994
9,662
12,078

yoy chg (%)
23.4
1.2
10.6
21.4
(3.0)
16.3
(3.1)
20.9
25.0

MHCV
5,852
6,701
6,914
6,507
7,379
7,262
7,905
9,177
10,522
10,838

yoy chg (%)
14.5
3.2
(5.9)
13.4
(1.6)
8.9
16.1
14.7
3.0

Source: Crisil estimates, ATMA, Kotak Institutional Equities estimates

Exide Industries profit and loss, balance sheet and cash flow model
March fiscal year-ends, 2009-2014E (Rs mn)
Profit model (Rs mn)
Net sales
EBITDA
Other income
Interest
Depreciation
Profit before tax
Tax expense
Adjusted net profit
Adjusted earnings per share (Rs)
Balance sheet (Rs mn)
Equity
Total Borrowings
Deferred Tax Liability
Current liabilities
Total liabilities
Net fixed assets
Investments
Cash
Other current assets
Total assets
Free cash flow (Rs mn)
Operating cash flow
Working capital changes
Capital expenditure
Change in investments
Free cash flow
Ratios
EBITDA margin (%)
PAT margin (%)
Net debt/equity (X)
Book Value (Rs/share)
RoAE (%)
RoACE (%)

2009

2010

2011

2012E

2013E

2014E

33,930
5,448
65
(479)
(679)
4,354
(1,510)
2,844
3.6

37,940
8,894
121
(103)
(807)
8,106
(2,735)
5,371
6.3

45,536
8,788
1,038
(57)
(835)
8,934
(2,740)
6,335
7.5

50,262
8,094
1,008
(31)
(946)
8,124
(2,356)
5,768
6.8

56,613
9,282
1,345
(34)
(1,090)
9,503
(2,756)
6,747
7.9

64,359
10,461
1,613
(9)
(1,209)
10,856
(3,148)
7,708
9.1

12,504
3,172
412
4,866
20,954
6,853
6,682
337
7,082
20,954

22,198
900
590
5,929
29,616
7,144
13,354
29
9,089
29,616

27,425
22
675
7,964
36,086
9,018
13,780
148
13,140
36,086

31,918
300
675
7,830
40,723
11,772
13,940
202
14,809
40,723

37,390
50
675
8,578
46,693
13,182
18,180
234
15,097
46,693

43,823
50
675
9,491
54,039
13,973
21,840
1,100
17,127
54,039

3,456
488
(1,515)
(1,499)
1,804

6,355
(637)
(1,098)
(6,672)
3,683

7,115
(2,015)
(2,708)
(426)
1,209

6,715
(1,804)
(3,700)
(160)
11

7,837
460
(2,500)
(4,240)
4,597

8,917
(1,117)
(2,000)
(3,660)
4,600

16.1
8.4
0.2
15.6
25.0
34.3

23.4
14.2
0.0
26.1
31.0
38.1

19.3
13.9
(0.0)
32.3
25.5
34.9

16.1
11.5
0.0
37.6
19.4
27.7

16.4
11.9
(0.0)
44.0
19.5
27.9

16.3
12.0
(0.0)
51.6
19.0
27.1

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH

19

BUY

YES Bank (YES)
Banks/Financial Institutions

OCTOBER 20, 2011
RESULT
Coverage view: Attractive

Holding fort in the current environment. Yes Bank reported 33% earnings growth
driven by moderate NIM expansion (10 bps) and healthy non-interest income—earnings
impressive despite a high interest rate environment that is difficult for the bank’s
operating environment. Fee income was driven by capital market activities and core
transaction banking. Asset quality trends have been strong with negligible slippages
while restructured loans increased primarily from MFIs. The bank is currently trading at
2.2X book and 11X FY2012E EPS for 20% RoEs and EPS growth of about 25% CAGR
for FY2011-13E. Retain BUY and TP of `420.
Company data and valuation summary
Yes Bank
Stock data
388-234
52-week range (Rs) (high,low)
Market Cap. (Rs bn)
98.9
Shareholding pattern (%)
Promoters
26.5
FIIs
52.9
MFs
2.2
Price performance (%)
1M
3M
12M
Absolute
(1.6) (10.7) (19.2)
Rel. to BSE-30
(0.7)
(2.4)
(5.2)

Price (Rs): 290
Target price (Rs): 420
BSE-30: 17,085

QUICK NUMBERS
Forecasts/Valuations
EPS (Rs)
EPS growth (%)
P/E (X)
NII (Rs bn)
Net profits (Rs bn)
BVPS
P/B (X)
ROE (%)
Div. Yield (%)

2011
20.9
39.6
13.6
12.5
7.3
109.3
2.6
21.1
0.9

2012E
26.2
25.3
10.9
16.2
9.1
131.9
2.2
21.8
1.1

2013E
31.9
21.5
8.9
22.2
11.1
159.3
1.8
21.9
1.3

High interest impacts growth while fee income contribution showed improvement; maintain BUY

• NIMs improve 10
bps qoq; NII grew
by 23% yoy
• Gross NPLs at 0.2%;
flat qoq
• Maintain BUY with
TP of `420 (same as
before)

Yes Bank’s earnings (33% yoy) were driven by healthy revenue growth (35% yoy) led by strong
contribution from margin expansion (10 bps), capital market-related businesses and core
transaction banking. Cost of funds remains high at 8.6% implying a negative return in its SLR
portfolio and making it difficult to grow balance sheet (21% yoy) at current NIMs. We see growth
delayed by a few quarters till interest rates cools off from current levels. Fee income has been
impressive but the quarter saw a few one-off large transactions in capital markets (debt-related)
driving performance—unlikely to be repeated given market conditions but we expect core
transaction banking fees to drive overall non-interest income.
Weak CASA deposit mobilization remains a key disappointment (2% qoq and 20% yoy). CASA
ratio is flat qoq at 11% and recent branch expansion is yet to make meaningful contribution to
overall CASA deposits. We have broadly maintained our estimates (increased credit costs to factor
the current environment) and note that the low interest rate environment conducive for wholesale
business models like that of Yes Bank. Retain BUY and target of `420 valuing the bank at 2.6X
FY2013E book and 13X EPS. We expect Yes Bank to outperform the broader market as interest
rates soften from current levels.
NIMs improve 10 bps to 2.9%; high cost of funds implies negative yields on SLR
NIMs for the quarter improved by 10 bps to 2.9% on the back of shift in the composition of assets
and liabilities. The bank has shed some wholesale loans and sourced relatively low-cost borrowings
(including overseas funds) to manage its liabilities. Cost of funds remains high at 8.6%, implying
negative returns on SLR deposits. Overall loan yields remain high at 12.2%, one of the highest
among peers for an asset portfolio primarily in corporate segment.
We maintain our current NIM assumptions (20 bps decline in FY2012E but an improvement of
about 10 bps in FY2013E). The bank should see early benefits when interest rates decline as the
bank has a larger share of shorter duration liabilities (except capital funds).

M.B. Mahesh
mb.mahesh@kotak.com
Mumbai: +91-22-6634-1231

Nischint Chawathe
nischint.chawathe@kotak.com
Mumbai: +91-22-6634-1545

Kotak Institutional Equities Research
kotak.research@kotak.com
Mumbai: +91-22-6634-1100
For private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES, REFER TO THE END OF THIS MATERIAL.

4% having declined to a low of 1. We note that the bank has accelerated the branch expansion which could probably result in improvement in the liability franchise.YES Bank Banks/Financial Institutions Weak loan growth as credit substitutes take a higher share of growth Yes Bank’s reported loan growth was weak at 13% yoy (3% qoq) as focus shifted to nonSLR-related investments which grew sharply qoq (40% qoq). we expect loan growth at 30% CAGR for FY2011-13E. However. improving CASA ratio continues to remain a struggle. Given the market conditions. Large corporate houses account for about 60% of loans while the mid-corporate segment is about 25% of loans.04% of loans. CASA ratio is currently at 11% (flat qoq) despite weak deposit growth. we expect a more subdued performance in capital marketrelated activities but expect healthy growth in core banking-related activities. client-driven rather than choice. ` Tier-1 ratio for the quarter was at 9. The bank opened 50 branches (134 branches in the past four quarters) taking the total branches to 305. transaction banking impressive Yes Bank saw overall non-interest income grow 63% yoy primarily on the back of strong business from debt underwriting (few large deals) and healthy growth in transaction banking income. Expect sell-down from this portfolio as yields decline from current levels and shift focus to loan growth.4%. We believe that the increase in lending through credit substitutes. The bank has made an ad hoc provisions of about `80 mn during the quarter in addition to specific and loan loss provisions of `100 mn each. Restructured assets increased by `885 mn to `1. The management indicated that a combination of refinancing facilities from various domestic and international markets was utilized over the past few quarters to mobilize marginally lower cost funds. Consequently. A slowdown in overall loan growth has resulted in lower capital consumption and we believe that the bank should be able to grow comfortably without any near-term concern on pace of capital consumption. primarily in the form of CP/bonds. KOTAK INSTITUTIONAL EQUITIES RESEARCH 21 . Fee income boosted from financial markets.2% and net NPLs 0. Non-staff expenses increased 38% yoy (23% qoq). We are building fee income to grow by 25% CAGR for FY2011-13E. Performance on core transaction banking-related activities was impressive (59% yoy). Balance sheet growth supported by growth in borrowings and less on deposits Overall deposits grew by 10% yoy (1% qoq) as compared to balance sheet growth of 21% yoy growth as the bank looked at other windows to mobilize funds. while deposits from branches have grown impressively (about 100% yoy).5% of loans) as the bank restructured few MFI accounts—classified as standard post CDR exercise. looks opportunistic. Slippages were negligible for the quarter (about 20 bps). Financial markets (forex related) grew 20% while retail fees were flat. ` Cost-income ratio declined marginally to 36% from 37% in June 2011—largely driven by stable staff costs. Given the lumpiness in corporate loans and interest rates. Staff expenses increased by 25% yoy.1% in June 2011. Other highlights for the quarter ` Asset quality continues to remain very healthy with gross NPLs at 0. fee income to assets improved to 1. Overall composition of loans changed marginally towards retail (includes portfolio/loans buyouts) which is currently about 15% of loans (12% in June 2011).7 bn (0.

178 2.353 1.034 33.488 433 173 260 3.195 1.4 2.treasury gains+provisions 2QFY11 9.100 1.981 41 10.939 5.666 4.236 1.185 937 3.487 (2) 3.995 10.492 2.226 8.653 420 829 2QFY12 14.132 1.640 877 1.530 3.232 1.122 1.542 1.113 250 140 110 2.648 80 10.8) 10 10 Source: Kotak Institutional Equities 22 KOTAK INSTITUTIONAL EQUITIES RESEARCH .481 1.treasury gains PBT.442 1.055 1.024 3.695 8 96 (57) 10.161 33.681 2.262 8.859 379 350 29 3.2 3.287 5.021 2.848 1.374 6 1 (7) 11 8 8 17 (43) 8 5 10 (2.993 70 8.814 174 174 2.454 3. 2QFY11-2QFY12 (` mn) Interest income Advances Investments Balance with RBI Interest expenses Net interest income Non-interest income Transaction banking Financial advisory Total income Operating expenses Employee cost Other operating cost Pre-prov profit Provisions Loan loss Others Profit before tax Tax Profit after tax Tax rate (%) PBT.387 10.098 846 3.251 15 15 3.Banks/Financial Institutions YES Bank Yes Bank quarterly results March fiscal year-end.736 903 833 3.310 383 637 3QFY11 11.079 3.072 2.911 33.628 878 750 2.856 2.883 3.030 835 3.075 2.350 32.969 9 536 14 675 45 5.252 2.572 (0) 3.038 3.712 4 1.741 3.716 Growth yoy (%) 51 42 77 47 64 23 63 59 54 35 31 25 38 37 117 101 32 29 33 (2) 34 39 Vs KIE 2QFY12E estimates (%) 14.262 3.138 1.485 1.209 1.5 3.284 1 10.863 952 1.269 60 8.854 3.245 28 6.2 2.4 3.094 5.136 33.868 654 772 1QFY12 13.865 1.030 3.944 1.406 3.997 2.2 2.763 33.130 2.318 3.338 3.559 350 300 50 3.617 498 535 4QFY11 12.689 2.538 7.141 609 978 4.

0 305 341.1 506 74.759 388.707 78.636 223.6 2.9 255 331.169 144.6 16.941 209.7 6.448 569.546 517.1 8.049 175.963 394.8 16.072 47.0 3.2 174 0.0 9.4 11.261 47.0 714 88.949 214.2 10.2 92 0.0 8.723 40.4 18.3 688 0.2 172 0.2 560 0.481 211.2 870 0. 2QFY11-2QFY12 (%) Key balance sheet items (Rs bn) Deposits Demand deposits Term deposits CASA ratio (%) Branches Loans Large coporate ELC/SME Retail Investments Total assets Yield management measures (%) Cost of funds Yield on advances NIM Spread Asset quality details Gross NPLs (Rs mn) Gross NPL (%) Net NPLs (Rs mn) Net NPAs (%) Provisions (Rs mn) Provision Coverage (%) Restructured Loans (Rs mn) Restructured Loans (% of cust.3 805 0.2 1.6 829 0.236 188.0 2.2 2.4 7.482 32.9 3.4 6.042 209.0 552 80.219 80.8 10.2 136 0.380 31.7 2.5 19.0 8.6 341 637 148 (200) 383 1 1310 410 535 174 498 (0) 1617 241 772 201 654 (0) 1868 247 829 157 420 (0) 1653 410 978 143 609 1 2141 Growth yoy (%) 10 13 48 21 2 (21) 154 20 54 (3) 59 63 Source: Kotak Institutional Equities KOTAK INSTITUTIONAL EQUITIES RESEARCH 23 .830 59.286 40.3 677 0.952 81.759 392.223 522.369 627.1 10.070 435.8 3.2 27 0.0 533 95.755 0.276 48.YES Bank Banks/Financial Institutions Yes Bank quarterly results Key financial items.7 690 0.1 837 0.636 440.8 3.498 10.5 9.5 3.389 412.5 11.1 171 303.6 6.1 555 76.137 359.518 6.317 10.2 185 311.318 69.693 41.3 7.3 7.122 210.774 41.382 50.288 590.7 9.242 10.8 16.3 214 343. March fiscal year-ends. assets) Capital adequacy details (%) CAR Tier I Tier II Fee income composition (Rs mn) Financial markets Financial advisory Third party distribution Treasury trading income Transaction banking Others Total 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 400.528 354.2 728 0.2 9.414 10.484 11.447 459.8 3.6 12.423 152.

751 13.4) 4.1 (0.196 8.226 9.069 13.502 11.135 800 13.580 16.687 9.418 12.030 3.630 11.353 14.3) 2.2) (1.972 7.2 0.5 Source: Kotak Institutional Equities estimates Rolling PER and PBR (X) for Yes Bank October 2006-October 2011 6.197 27.575 1.1) (3.225 22.388 797.510 2.969 622.829 19.469 7.9) 2014E (0.623 14.354 8.Banks/Financial Institutions YES Bank Yes Bank-.1 (2.5 493.9 2.593 17.016 9.5 2.067 7.6 Jan-07 26 Oct-06 4.9) (0.6 2.6 638.5 3.470 7.8 2.321 16.4 2.210 18.9 29.5 783.388 2.117 20.107 11.509 14.312 4.314 24.429 5.502 20.136 300 9.712 5.471 5.249 3.504 6.2 0.5 (2.164 2012E 16.357 9.4 Jul-07 20 Apr-07 3.753 23.8) (2.990 1.0 33 Rolling PBR (X) (RHS) Rolling PER (RHS) Oct-11 Jul-11 Jan-11 Apr-11 Oct-10 Jul-10 Apr-10 Jan-10 Oct-09 Jul-09 Apr-09 Jan-09 Oct-08 Jul-08 7 Apr-08 1.6 476.095 14.7) (4.054 300 800 800 9.944 2.787 13.9) (0.559 4.864 5.3) (1.5 1.6 3.1 (2.4) 0.464 9.357 2012E (1.756 Old estimates 2013E 22.2 Jan-08 13 Oct-07 2.923 2.450 2.109 11.8 Source: Kotak Institutional Equities 24 KOTAK INSTITUTIONAL EQUITIES RESEARCH .5) 25.3) (1.310 4.8) (0.189 13.041 13.6) (0.842 2014E 27. 2012-2014E (` mn) Net interest income NIM (%) Customer assets Loan loss provisions Other income Fee income Treasury income Operating expenses Employee expenses PBT Tax Net profit PBT-treasury+provisions New estimates 2012E 2013E 2014E 16.433 6.estimate changes March fiscal year-ends.6 3.4) % change 2013E (0.692 800 17.2 0.691 11.895 9.9) 3.

3 1.7 8.tax rate) ROA Average assets/average equity ROE 2009 2010 2011 2012E 2013E 2014E 31.2 27.6 — 67.0 77.0 103.9 1.3 0.1 146.7 1.6 20.6 1.2 6.5 35.7 0.2 32.7) 25.6 0.1 34.8 58.8 (147.8) 8.3 2.5 3.1 28.3 1.0 77.6 0.7 (3.4 55.0) 56.8 74.6 20.7 0.5 2.8 6.3 (164. growth rates.9 19.0 5.7 1.1 1.5 91. CPs and debentures Net fixed assets Cash and bank balance Total Asset Deposits Current Savings Fixed Net interest income Loan loss provisions Total other income Net fee income Net capital gains Net exchange gains Operating expenses Employee expenses Key ratios (%) Yield on average earning assets Yield on average loans Yield on average investments Average cost of funds Interest on deposits Difference Net interest income/earning assets Spreads on lending business New provisions/average net loans Total provisions/gross loans Interest income/total income Other income / total income Fee income to total income Fees income to PBT Net trading income to PBT Exchange inc.8 4.8 78.5 35.8 165.9 7.8 37.9 2.1 109.9 8.7 3.9 (34.7 34.0 29.5 30.3 36.3 38.3 54.9 34.6 — 67.0 39.4 7.1 6.1 89.7 36.8 6.0 27.7 0.6 2.8 52.7 5.1) 65.7 2.2 1.1 24.1 27.3 2.0 21.5 29.0 2.0 151.3 2.1 34.6 0.1 36.7 0.9 11.3 27.0 58.2 29.5 82.7 0.8 42.9 (11.2 2.0 — 25.7 51.6) 6.6 1.3 65.3 2.8 6.7 7.1 57.7 78.9 10.4 62.3 1.9 0.9 21.9 9.9 29.9 21.7 14.9 52.5 (0.5 51.6 7.5 8.5 1.4 87.4 53.7 25. 2009-2014E (%) Growth rates (%) Net loan Net loan including CPs and debentures Investments excld.9) 39.1 1.5 2.3 1.6 3./PBT Operating expenses/total income Operating expenses/assets Operating profit /AWF Tax rate Dividend payout ratio Share of deposits Current Fixed Savings Loans-to-deposit ratio Equity/assets (EoY) Dupont analysis (%) Net interest income Loan loss provisions Net other income Operating expenses Invt.5 13.8 54.5 74.7 28.0 44.2 65.2 1.4 25.0 29.1 34.4 6.3 0.6 3.8 38.8 2.2 1.0 10.5 54.6 29.7 67.9 6.3 17.2 0.2 2.1 28.5 25.6 2.4 0.7 0.3 39.0 166.1 2.5 13.2 28.4 6.9 65.4 1.4 10.1 10.1 7.5 32.0 71.5 — 67.0 38. Kotak Institutional Equities KOTAK INSTITUTIONAL EQUITIES RESEARCH 25 .4 2.9 9.2 2.3 13.9 2.3 1.1 1.2 22.2 2.6 0.6 62.3 53.9 7.4 16.8 32.3 31.4 10.4 82.9 14.3 2.6 18.9 71.9 38.4 1.6 3.3 30.4 84.8 46.4 59.7 33.3 Source: Company.2 23.8 2.4 7.1 5.2 11.1 51.0 5.8 21.8 66.1 12.4 3. key ratios and Du Pont analysis March fiscal year-ends.4 2.6 1.5 0.1 30.9 41.8 62.0 6.8 - 8.4 28.8 10.9 48.8 8.3 25.7 23.4 11.7 99.9 6.4 11.1 36.8 0.4 8.1 21.8 6.8 1.1 4.2 10.1 2.3 309.3 1. depreciation (1.2 (27.6 30.5 7.3 1.6 89.1 0.1 (0.8 33.2 76.9 34.9 20.5 40.2 71.1 65.2 18.6 6.2 8.1 6.6 41.5 36.9 11.5 33.8 65.YES Bank Banks/Financial Institutions Yes Bank.8 10.2 34.6 12.1 27.0 28.2 31.8 24.7 6.3 1.6 0.3 31.5 30.8 31.2 2.3) 55.1 53.7 39.7 30.9 57.9 32.2 6.1 1.5 17.1 2.7 1.2 1.0) 66.5 54.0 21.1 1.0 44.1 9.4 54.0 32.6 8.0 66.1 27.9 11.7 13.4 1.0 25.3 58.6 3.6 7.1 27.9 6.

933 3.207 245.948 22.951 10.471 63.197 582.357 300 857 9.258 1.067 — 300 13.071 13.155 11.070 459. and other securities Shares Debentures and bonds Net loans and advances Fixed assets Net leased assets Net Owned assets Other assets Total assets Deposits Borrowings and bills payable Other liabilities Total liabilities Paid-up capital Reserves & surplus Total shareholders' equity 2009 2010 2011 2012E 2013E 2014E 20.109 25.268 17.164 24 19.257 4.631 114.779 983.069 21.031 1.976 8.880 1.502 5.861 590.757 3.865 827 8.488 4.907 363.170 46.065 552.002 2.311 26.530 40.041 — 300 20.534 7.2 7.314 18 95.271 52.155 34.859 123 15.623 23.236 583.203 90 244.996 140 14.885 11.469 37.509 9.251 12.368 81 60.197 757.186.675 25.829 17 75.180 (199) (19) 4.551 67.129 3.428 135 40.213 332.008 161.650 7.857 45.067 1.7 3.Banks/Financial Institutions YES Bank Yes Bank.197 3.2 12. Kotak Institutional Equities 26 KOTAK INSTITUTIONAL EQUITIES RESEARCH .954 16.382 22.653 98 40.771 3.433 11.458 3.282 54.225 1.830 55.732 357 19.818 12.269 229.485 453 67.731 16.359 912.339 17.697 17.463 145 71.959 135 40.570 14.556 6.527 1.659 1.324 21.397 27.354 23.227 315 12.694 40.120 212.022 Source: Company.978 32.195 90 413.451 69.014 14.922 3.891 10.825 267.960 596 30.185 2.249 14.371 42.471 42.5 19.528 56.870 (464) 686 6.921 12.593 7.792 28 23.164 90 188.369 2.941 3.715 5.615 5.471 51.418 800 1.777 57.016 — 300 16.268 48.040 9.775 163.311 13.429 9.621 3.484 15.271 5.930 3.485 281 4.670 347.499 30.787 5.798 3.580 4.043 340 44.3 14.312 18.233 5.1 24.114 34.093 836 4.197 343.278 17.242 124.954 1.687 13.737 394 53.727 90 318.191 3.007 148.691 7.986 48.288 107.801 55 10.682 55.514 25.361 3.489 750.253.310 6.377 3.970 13.301 3.662 755.151 20.099 67.265 6.778 3.214 27.584 704.471 34.755 3.636 1.469 914 11.942 12.417 29.923 4.766 2.469 12. income statement and balance sheet March fiscal year-ends 2009-2014E (` mn) Income statement (Rsmn) Total interest income Loans Investments Cash and deposits Total interest expense Deposits from customers Net interest income Loan loss provisions Net interest income (after prov.569 154 (50) 7.791 980 441 5.054 800 1.272 16.197 436.878 4.484 62.265 2.437 37.488 135 40.596 123 102.473 135 40.) Other income Net fee income Net capital gains Net exchange gains Operating expenses Employee expenses Depreciation on investments Other Provisions Pretax income Tax provisions Net Profit % growth Operating profit % growth Balance sheet (Rsmn) Cash and bank balance Cash Balance with RBI Balance with banks Net value of investments Govt.740 967.896 1.084 44.915 221.742 16.389 67.242 1.038 51.623 (72) 140 10.897 87.471 9.324 47.661 43.931 1.273 253 27.306 45.

4 0. Fidaxomicin supplies.6 bn in FY2012E.0 Price performance (%) 1M 3M 12M Absolute 3.BUY Biocon (BIOS) Pharmaceuticals OCTOBER 20.2 22. in line with our estimate driven by (1) 35% growth in branded formulations.0 6. up 38% yoy and 12% qoq to Rs724 mn. and (2) higher other expenses at Rs351 mn. REFER TO THE END OF THIS MATERIAL. We expect EBITDA margin (including other income) at 30. (Rs bn) 69. lower reported EPS due to lower licensing. to BSE-30 4.7 5. and biopharma sales excluding licensing at Rs3.2% in 1QFY12 and 28.9 4. PT at Rs445.2 14. We believe correction of this in 2HFY12E coupled with sustenance of sales momentum of 2QFY12 will lead to a better 2HFY12E. down 70 bps qoq and lower than our estimate of 31% due to higher development costs from Pfizer-related work reflected across all cost items at Rs260 mn against income of Rs365 mn in 2QFY12 versus Rs40 mn against income of Rs144 mn in 1QFY12.9 27.3) (21.7 bn. in line with our estimate. Company data and valuation summary Biocon Stock data 52-week range (Rs) (high. and (2) higher EBITDA contribution from licensing which we estimate at Rs1. (2) growth in statins.2 (versus Rs21. Lower EBITDA margin due to costlicensing income mismatch despite in-line sales was the main reason behind PAT miss of 7% versus our estimate.9 FIIs 5. up 45% qoq. led to lower EBITDA margin.5% in 2QFY12 due to (1) pick-up in high-margin Fidaxomicin in 2HFY12E. Yield (%) 2011 18.5 (6.6 9. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES.7 16.arora@kotak.7 0. Fidaxomicin supplies PAT at Rs857 mn.0 2012E 17. EBITDA margin (including other income of Rs160 mn) was at 28. 7% below our estimate of Rs922 mn Despite in-line sales and lower tax and interest cost.7 20.2. Contract research showed strong growth at 19% yoy for the third quarter in a row.5 Shareholding pattern (%) Promoters 60.9 19. up 19% yoy on a like-to-like basis Total sales excluding licensing income was up 19% yoy and 10% qoq to Rs4.7 bn grew 19% yoy. and (2) higher off-take of Fidaxomicin. FY2013E presents upsides to our estimates due to Atorvastatin. We value stock at Rs445 at (1) 18X FY2013E core EPS of Rs20. lower EBITDA margin was the main reason for PAT miss.937 QUICK NUMBERS • PAT miss of 7% versus our estimate • Total sales at Rs5 bn. .9 18.4) in FY2013E.8 11. Priti Arora priti.6 in FY2012E (versus Rs19. We estimate sales ex-licensing to grow at 13-14% in FY2012-13E (see Exhibits 3.com Mumbai: +91-22-6634-1551 Kotak Institutional Equities Research kotak.3 17.0 Total sales at Rs5 bn in line with our estimate. unchanged (18X core FY2013E EPS) We expect sales momentum of 2QFY12 to sustain and expect mismatch of higher development costs versus licensing to correct in 2HFY12E.4 23.1) 19.0 2013E 20. and (3) growth in immunosuppresants (around 10% of biopharma sales).1 16.6) Rel.6 MFs 6. versus 16/17% growth seen in 1HFY12/FY2011. We leave our core EPS unchanged.5% in FY2012E versus 29.1) Forecasts/Valuations EPS (Rs) EPS growth (%) P/E (X) Sales (Rs bn) Net profits (Rs bn) EBITDA (Rs bn) EV/EBITDA (X) ROE (%) Div. We reduce FY2012-13E reported EPS by 6-9% due to lower licensing income (Rs1.4 earlier.4). (2) cash/share of Rs26.7 3.com Mumbai: +91-22-6634-1100 For private Circulation Only. licensing income) unchanged We leave our FY2012-13E core EPS largely unchanged. We maintain BUY with PT at Rs445.6 bn in FY2012E versus Rs2 bn earlier). Lack of gross margin expansion coupled with sharp increase in (1) staff costs. in line with our estimate • FY2013E presents upsides to our estimates due to Atorvastatin. in line with guidance.3 (8. BUY. We estimate reported EPS (see Exhibit 6) of Rs17.5 5. 2011 RESULT Coverage view: Cautious PAT miss due to cost-licensing income mismatch. Also gross margin was flat qoq despite (1) higher proportion of sales from branded business. 3% above our estimate. Price (Rs): 347 Target price (Rs): 445 BSE-30: 16.low) 460-301 Market Cap.9 10.5 2. and (3) Pfizer deal NPV/value of Rs57.5%.6 (4.research@kotak.3 3. We largely leave F2012-13E core EPS (excluding R&D.4 0. Rs7.8 in 1HFY12) to increase by 14% to Rs20.

` Licensing income was Rs511 mn in 1HFY12.035 — 437 1.Pharmaceuticals Biocon Key takeaways from conference call ` Pfizer has launched insulin and glargine at same price points as Biocon in 1QFY12 in India under different brand names. ` Significant numbers from Fidaxomicin supplies for Biocon are expected in FY2013E. only Rs220 mn of this flowed to EBITDA and Rs110 mn to bottom line versus entire amount of Rs437 mn which went to bottom line in 1HFY11. ` Biocon is supplying Atorvastatin API to 4 partners in Europe and has tied up with 2 partners in US who are likely to launch in FY2013E. however.52 bn. PAT break-up (Rs mn) Biocon Contract research Licensing Total 1HFY11 1.207 240 110 1.472 1HFY12 1. We estimate sales of Rs4 bn in FY2014E. Optimer received positive response from CHMP (Committee for Medicinal Products for Human Use) in September 2011.5 bn earlier. The European Commission generally follows the recommendations of the CHMP and delivers its final decision within three months of the CHMP opinion.6 bn in FY2011. Biocon expects licensing income to pick up in 2HFY12E to touch FY2011 levels of Rs1. Company 28 KOTAK INSTITUTIONAL EQUITIES RESEARCH .557 % growth 17 NM NM 6 Source: Kotak Institutional Equities estimates. Biocon has also tied up as the exclusive supplier for Europe where launch is planned in 2012E with Astellas as marketing partner. Registrations in emerging markets are underway. ` Contract research delivered PAT of Rs240 mn in 1HFY12 versus breakeven position in 1HFY11 (see Exhibit below). Biocon is targeting 40% plus growth in FY2012E and Rs5 bn of sales from branded formulations in India by FY2014E versus Rs1. Recently Optimer increased its peak sales forecast to US$2 bn from US$1.

070 156 914 22 893 1.204 203 29.791 — 928 365 5.084 3.642 2.334 306 28.821 9.992 1HFY11 6.675 1.176 2.789 3.788 8.150 3.182 260 922 — 922 3.700 yoy growth (%) 9 25 (0) 11 12 Source: Kotak Institutional Equities estimates.735 2HFY11 7. March fiscal year-ends (Rs mn) 2QFY12 3.744 yoy growth (%) 15 20 16 16 16 2HFY12E 7.437 197 22.798 200 707 684 (37) 1.086 10.5 20 429 160 1.190 1.776 782 231 1QFY12 3.181 7.025 1.142 227 724 657 — 1.Biocon Pharmaceuticals Interim results—Biocon.795 904 452 With Axicorp 2QFY11 5.1) (50) (5) 7 (12) (28) (7) NM (7) (44) 13 2 (4) NM (7) 55 6.093 1.795 — 904 452 5.3 (69) 10 79 (2) 21 (6) NM (4) 12 (2) 12 52 NM 11 51 (0.5 40 450 150 1.502 437 8. Company KOTAK INSTITUTIONAL EQUITIES RESEARCH 29 .7) (65) (5) 30 28 58 22 NM 22 Biopharmaceuticals Axicorp Contract research Technology licensing fees Total 3.522 404 31.273 0 19 10 Sales Contract research fees Technology Licensing Fees Expenses Materials Power Staff costs Other expenses FX Losses(gains) EBITDA R&D expenses EBITDA margin Interest Depreciation Other income PBT Current tax PAT Minority interest PAT Source: Kotak Institutional Equities estimates.906 231 644 432 — 1.242 1.698 3.791 928 365 2QFY12E 3. Company 1H/2HFY12 sales break-up (Rs mn) Biopharma Research Licensing income Total Total ex licensing 1HFY12 7. income 4.600 782 231 6.2 57 451 123 819 119 700 — 700 0 7 16 0 NM (12) (24) (3.399 — 874 144 4.399 874 144 2QFY12E (0) 3 (19) % change 2QFY11 (34) 19 58 1QFY12 12 6 153 2.088 9.802 509 9.719 4.958 4.501 8.138 211 625 654 — 1.045 188 857 — 857 2.417 (0) NM 3 (19) (1) 19 NM 19 58 (25) 12 NM 6 153 15 Total ex Axicorp/l.2 65 391 89 1.

314 18.768 6.525 25.031 3.071) 3.008) 3.894 21.800) (2. Company 30 KOTAK INSTITUTIONAL EQUITIES RESEARCH .2 20.755 (160) (100) 600 700 4.438 (160) (100) 600 700 4.483 4.038 (882) (1.4 17.586 1.214 6.825 22.832 3.150) 4.301 3.247 2.4 % change 2012E 2013E (0) (0) 3 0 (22) (11) (2) (1) (7) (5) 0 0 (10) (7) 0 0 0 0 (9) (6) (9) (6) (9) (6) (0) (2) (9) (0) (6) (2) Source: Kotak Institutional Equities estimates.458 4.1 18.832 16.4 18.284 3.778 4.588 (1. licensing FY2010 11. Company Change in estimates Biopharma Research Licensing Net sales EBITDA Depreciation EBIT Net finance cost Other income PBT Current tax PAT PAT excluding licensing.3 21.414 4.854 5.584 2.525 27.318 14.314 22. recombinant Source: Kotak Institutional Equities estimates.1 Earlier estimates 2012E 2013E 14.893 4.150) 3.483 3.082 19.031 2.586 yoy growth (%) 11 18 4 (27) 14 1.455 4.478 yoy growth (%) 18 13 (0) 0 9 17 FY2012E 14.555 3.825 20.739 1.708 16.527 4.177 9.807 9.3 20. Company Price target.069 15 13 13 Source: Kotak Institutional Equities estimates.6 17.800) (2.355 (971) (1. R&D EPS Core EPS Current estimates 2012E 2013E 14.4 20.883 4.836 16.Pharmaceuticals Biocon Sales break-up (Rs mn) Biopharma Research Axicorp Licensing income Total Total ex Axicorp.054 FY2011 13.0 367 21 57 444 445 Share price target * Only glargine.0 361 26 57 Earlier 20.905 (1.589 1.893 0 1.053 20.010 17.894 5.589 20.725 yoy growth (%) 12 23 FY2013E 16.968 4.408 5.192 6.645 23.705 1. FY2013E Diluted core EPS (excl R&D and licensing) P/E (X) Value per share Cash per share Pfizer deal NPV* Now 20.

002 2011 27.957 4. Company KOTAK INSTITUTIONAL EQUITIES RESEARCH 31 .527 3.588 (2.245 2.639 2.932 — 2.000 12.515) 243 938 5.906 4.841 2.578 5.309 (97) (17) (15) 2.836 3.359 1.495 25.527 — 3.107 5.009 79 930 — 930 2.676 2.520 14.929 6.472) 1.150) 4.546) 5.678 (18.073) (3.233 (1.751 75 3. excl.676 — 3.413 10.038 (1.230 Source: Kotak Institutional Equities estimates.000 12.515 (445) (42) — 3.302) (4.541 4.408 (882) — — 3.998 2012E 20.025 17.800) 3.444 — 4.608 44. 2008-2014E (Rs mn) Balance sheet Total equity Total debt Current liabilities Minority interests Deferred tax liabilities Total equity and liabilities Cash and cash equivalents Current assets Net assets incl intangibles Investments Total uses of funds Free cash flow Operating cash flow.902 — 497 40. March fiscal year-ends.327 3.384 20.782) (254) 1. Company Balance sheet.005 (73) 465 20.031 4.444 — 4.896 28.401) 3.086 (12.394 4.436 118 7.963) 4.799 338 508 29.495 4.552) 2.114 4.975 (764) (3.836) 3.789 96 5.932 3.862 40.047 (102) 364 — 2.300 (257) 429 — 4.608 (18.410 2010 23.872 (20) (1.438 (100) 700 — 5.314 (14.000 16.008) — — 4.192) 7.455 2013E 22.894 (16.103) 2.717 3.071) (3.202 1.174 3.306 29.250 10.789 15.000 14.375 248 466 25.605 35.701 (1.616 15.210 6.134 4.622 4.180 (65) 2. 2008-2014E (Rs mn) Net sales Total expenditure EBITDA Depreciation EBIT Net finance cost Other income Forex loss/(gain) PBT Current tax Deferred tax FBT PAT Profit /(loss)in mi PAT Exceptional items PAT PAT excluding licensing.708 (21.306) 6.527 — 3.432 (1.500 11.806 13.399 9.256 (363) (1.185 6.105 18.915 (60) 700 — 5.868 (1.607) 4.415 (2.444 4.243) (1.497 2.111) — — 4.239 4.896 1.240 — 497 44.538 (7.359 20.343 10.500) 4.976 5.748 20.664 Source: Kotak Institutional Equities estimates. working capit Working capital Capital expenditure Investments Free cash flow 2008 2009 2010 2011 2012E 2013E 2014E 14.986 (939) 2.238) 299 6.853) 3.568) 4.551 3.457) 2.000 14.010 2014E 25.555 (1.064 2009 16.014 3.028 96 2.695 4.997 377 497 35.136 5.768 (1. R&D 2008 10.974 3.968 (160) 600 — 4.314 (169) 370 — 3.547) 630 2.202 2.009 (1.128 (98) (1) (19) 1.840) 5.031 — 4.541 22.031 — 4. cash model.167) (3.472 (721) — — 3. March fiscal year-ends.848 38.Biocon Pharmaceuticals Profit and loss statement.131 (177) 646 (1.436 17.464 1.781 — 497 38.715 (1.878 (3.676 25.

6) (36.5 2. Note that contribution margins were in fact down 190 bps yoy.7 for FY2012E and FY2013E and our target price of Rs515/share (based on16X FY2013E earnings). 2Q inflows of Rs12 bn (down 11.7 bn at end-2QFY12.3 bn. Company data and valuation summary Thermax Stock data 52-week range (Rs) (high. REFER TO THE END OF THIS MATERIAL.8 22. (3) strong expansion of business opportunity. Kotak Institutional Equities Research kotak.0 26. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES.com Mumbai: +91-22-6634-1453 We would revisit our estimates/TP/rating post today’s conference call. The declining backlog and inflows reflect the weakness in overall ordering for the sector and may affect revenue momentum for Thermax.3 13.937 2013E 31. Both the segments contributed to sales growth (energy up 16% yoy to Rs10.2 bn at end-Mar-11. Yield (%) 2011 31. up19% yoy and 14% above our estimates.1) (28.7X EV/EBITDA).3 MFs 9. The order inflow is just about keeping pace with our expectation of Rs12-13 bn per quarter in order to meet our full-year inflow estimate of Rs50 bn.3) (21. EBITDA margin at 10.9 3.7 6. Thermax reported a PAT of Rs1 bn. EBITDA margin at 10.8 3.4 Price performance (%) 1M 3M 12M Absolute (16. Retain ADD. This implies order inflows of about Rs11.com Mumbai: +91-22-6634-1383 Aditya Mongia aditya. (2) estimates build in conservative assumptions. We also highlight the increase in company’s debt levels to Rs902 mn from Rs480 mn at end-Mar-11. . 2011 RESULT Coverage view: Cautious Better-than-expected results. raising concerns on future revenue momentum.8 5. significantly ahead of our estimate of Rs11.mongia@kotak. but were partly buffered by operating leverage gains (on lower employee cost as a percentage of sales).6% yoy and 21% ahead of our estimate of Rs837 mn.7 (0.5% yoy) is just about keeping pace with our full-year estimate. margin in line with estimates Thermax reported 2QFY12 standalone sales of Rs13 bn (up 19% yoy). down 12.4 3. was in line with our estimates. Thermax reported strong revenues of Rs13 bn.8 5. up 13. but inflows just about keep pace. and (4) a very strong balance sheet. Order inflows decline. lower than the Rs13 bn of orders won in 2QFY11. Backlog declined both sequentially and yoy.garg@kotak. would revisit estimate post today’s concall We retain our estimates of Rs31.subramanian@kotak.0 FIIs 10. (Rs bn) 50.com Mumbai: +91-22-6634-1100 For private Circulation Only.com Mumbai: +91-22-6634-1496 Supriya Subramanian supriya.9 and Rs31.6% yoy and also marginally lower on a sequential basis (from Rs59 bn at end-1QFY11).2) (45. just keeping pace with expectations.9 0.4 Shareholding pattern (%) Promoters 62. environment up 20% to Rs3 bn).0) Forecasts/Valuations EPS (Rs) EPS growth (%) P/E (X) Sales (Rs bn) Net profits (Rs bn) EBITDA (Rs bn) EV/EBITDA (X) ROE (%) Div.5X FY2013E P/E.2 Results ahead of expectations on revenues and profits. may drag down sales going forward Thermax reported standalone order backlog of Rs57.low) 930-406 Market Cap. possibly on declining backlog.6) 13. This was primarily led by lower current liabilities.6 44.4 2.3 56.2 Price (Rs): 423 Target price (Rs): 515 BSE-30: 16. thus probably led by lower advances as the backlog declined.4 53. Lokesh Garg lokesh.research@kotak.7 7.7 bn in 2QFY12. down 100 bps yoy. Working capital deteriorates a little on lower liabilities likely led by declining backlog The company’s net working capital (excluding cash) increased to Rs455 mn at end-2QFY12 versus negative working capital of Rs2.3 56. Working capital also deteriorated a little on lower liabilities.8 13.8%. to BSE-30 (15.8% (down 100 bps yoy) was in line with estimates as contribution margin decline (190 bps) was buffered by operating leverage gains. We retain our ADD rating based on (1) attractive valuations (13.3 2.5) Rel.ADD Thermax (TMX) Industrials OCTOBER 20. Retain estimates and ADD rating (TP: Rs515). 7.1 2012E 31.4 bn.7 7.3 31.8 5.

3 11.0 17.1 8.9 (5.2 7.514) 1.717 3. Net PAT of Rs1.8 7.528) (43./sales Other expenses/sales EBITDA margin PBT margin Tax rate PAT margin EPS (Rs) 10.490 5.897 2.4 (46.954) (5.613 1.9 30.6 26.2 9.814 24.8 12.630) (10. yoy 13.464) (990) (1.117 57.1 (458) (432) 6.7 56.9 9.144) 22.0 % change vs est.4 bn.0 24.7 Key ratios (%) Raw material /sales Contribution margin Employee exp.1 11.170 (371) 799 Order details Order booking Order backlog 11.5 10.6 10.7 30.6 18.017 837 2QFY11 10.171) 7.230 208 139 1. PAT grew by 14% yoy (versus our estimate of a 6% decline) to Rs1.9 26.035 11.298 15. Kotak Institutional Equities estimates Both segments clocked healthy sales growth.7% (10. It reported a 50 bps increase in EBIT margin to 10.676 52.0 25.9 bn in 2QFY11.9 20.419 (5) (105) 1.3 14.5 13.0 7.565 5.3 8.9 12.9 21.2 70.6 10.0 7.137 147 1.4) 25.8) Source: Company.2 29.6 11.5 5.2 7.8 22.519 15.4 32.0) 26.4) (12.6 6.0 30.832 6.309 (414) 895 1QFY12 10.9 13.0 23.9 11.2 5.6) qoq 24.3 bn.1 27.630) (7.635) (2.307) (7.1 31.6 (22) (22) — (228) (211) 8.121) 1.916 (9.1 2.221) 6.3 13.4 12.405 1.5 (4.230 53.3 (2.9 bn implied 24% growth yoy.8 (16.6 8.742) 8.686) 10.6) (6.3 1HFY12 1HFY11 % change FY2012E FY2011 % change 23.2 11.1 (6.557 16.2% last year) ` Environment segment: Sales grew 20% yoy to Rs2.3 49.8) (19.509) (34.327) 11.8%. The sales were ahead of our estimate of Rs11.2 31.347) (905) (1.1 31.6 9.508 66.208) 1.4 (0.245 13.7 33.9 2.8 11.2 32. The company’s EBITDA margin declined 100 bps on a yoy basis to 10.6 41.284 (4) (111) 1.214) (9.4 31.045 6.484) (12.0 31.2 8.816 1.730 (2.890) (1.3 31.444 (9.9) (838) (741) 13.249 (468) (412) 1.8 32.Thermax Industrials Results ahead of expectations on revenues and profits.542 2.183 (2.740) 29.824 (2. also contracting by 30 bps on a sequential basis.2 67.8 5.6 (11.286 133 1.5 (20.937) (16.479 18.5 7.020 69.8 52.569) 26.8 13. margins in line Thermax reported standalone sales of Rs13 bn.4 8.060 70.1 555 523 6.485 1.3 7.0) 1.8%.5) (12.137) (985) (1.6 3.661 (3.7 15.654 2. Results beat estimates on revenues and profit Thermax (standalone) .677 57.3 2.key numbers (Rs mn) Total income Expenses Raw material Employee Other expenses EBITDA Other income PBDIT Interest Depreciation PBT Tax Net profit 2QFY12 2QFY12E 13.369 (11) (5) (117) (115) 1.1 (14. Contribution margin declined by 190 bps on a yoy basis to 30%.2) (15) (10) 45.906) (3. EBIT margin contracted by 160 bps to 10.0 11.8% KOTAK INSTITUTIONAL EQUITIES RESEARCH 33 . energy segment margin improves ` Energy segment: Sales grew by 16% yoy to Rs10.9 19.8 11.700 13.0 6.8 11.4 10.890 70.6 11.440 58.700 30.5 68.4 13.3 7.1) (2.8 8.2QFY12 .0 bn (22% ahead of our estimates). in line with our estimate of 10. up 19% yoy from Rs10.9 35.8 141.3 bn grew 35% yoy.6 7. Lower employee expenses (150 bps yoy improvement) supporting margin.6 101.8 2.848) (1.020 14.8 25.7 10.4 11.0 30.198 66.0) 355 273 30.7 33.444 (11.065) (3.2 10.4 (36.1 11.018 48.9 11.5 69.6 191.2 (1.7 7.8 10.7 10.4 13.6) 49.0 7.9 33.9 bn.170 56.7 (1. Consolidated sales for 1HFY12 at Rs27.

5 40. lower than Rs14.000 - Source: Company.7 (100.703 (864) 18.2 12.546 — 5.3 12.2 24.4 10.7 10.730 (2.366 (759) 52. This implies order inflows of about Rs11.2 10.912 633 124 2.160 1.0 30.0 50.616 (509) 23.3 22.975 4. LHS) Years of visibility (RHS) (Rs bn) 70.476 116 5.7 bn in 2QFY12.9 76.9 1. Order backlog & visibility trend for Thermax at end-Sep-11 Order booking (Rs bn.0 FY2012E FY2011 % change 29.9 11.916 8.000 40.024 2.711) 48.8 3.7) 19.1) 176.1 19.479 14.2 10. Order backlog provides visibility of 1 years based on forward four quarter revenues Order booking. Kotak Institutional Equities estimates Order inflows decline yoy and just about keep pace with our expectation Thermax reported a standalone order backlog of Rs57.000 2.2 44.348 2.3 11.9) 13.3 24.6 12.910 2.6 23.Industrials Thermax Segmental revenues and margins of Thermax for 2QFY12 (Rs mn) Revenues Energy Environment Less Intersegment Total PBIT Energy Environment Net unallocable income Total PBIT Revenue mix (%) Energy Environment EBIT margin (%) Energy Environment Total PBIT % change yoy qoq 2QFY12 2QFY11 1QFY12 1HFY12 1HFY11 % change 10.444 16.4 77.1 11.0) 142.654 1.472 (1.8 11.1 24.8 (55.0 2QFY12 1QFY12 4QFY11 3QFY11 2QFY11 1QFY11 4QFY10 3QFY10 2QFY10 1QFY10 4QFY09 3QFY09 2QFY09 1QFY09 4QFY08 3QFY08 2QFY08 1QFY08 4QFY07 3QFY07 2QFY07 - 1QFY07 10.0 12.3 78.000 1.832 3.9) 75.482 (475) 10.0) (2.6 12.412 12.2 26.9 (12.000 20.484 913 308 93 1.309 810 313 51 1.7 bn versus Rs66 bn a year ago and Rs59 bn at end-Jun-11.5 36.6) 6.7 10. Kotak Institutional Equities estimates 34 KOTAK INSTITUTIONAL EQUITIES RESEARCH .2 2.6 (40.4 77.4 12.8 18. The backlog presently provides a visibility of little over a year on base on four quarter forward revenues (assuming 4.7 Source: Company. LHS) Order backlog (Rs bn.4 11.372 5.170 20.8 11.9 162.647 (227) 10.968 (282) 13.3 10.7 22.5 10.7 167.7 10.2 21.565 4.298 153.1 23.018 39.2 4. The declining backlog and inflows reflect the weakness in the overall ordering in the sector and may affect revenue momentum.4 bn worth of orders secured in same quarter last year.7 (100.0 60.8 10.035 8.9) 4.3% yoy sales growth).041 1.4 76.6 23.814 169.000 (# of years) 4.4 7.4 1.072 11.8 76.0 12.7 (20.593 577 137 2.000 3.102 320 73 1.

2 bn at FY2011-end.100 13.401 3.268 3.155 2.923 18.538 21.225 22.094 4.265 7.397 23.726 Mar-12E 15.547 376 455 5.674 3.630 238 14.378 3.125 3.242 23.163 4.505 480 201 18. cash) Sep-10 11.425 175 63 154 71 59 389 383 6 (42) 154 22 76 24 32 170 158 12 (17) 134 21 70 22 21 131 128 3 3 167 60 80 23 4 177 165 12 (10) 167 60 80 23 4 167 155 12 0 Source: Company.168) 5.539 8.566 (2.324 17. We highlight the increase in company’s debt levels to Rs902 mn from Rs480 mn at end-Mar-11.566 20.935 238 11.233 5.875 3.544 6. Thermax balance sheet at end-Sep-11.359 5.741 312 (2.707 19.345 238 15.026 Mar-13E 17.026 18.818 8. 2011 (Rs mn) Shareholders funds Share capital Reserves & surplus Loan funds Deferred tax liability Total sources of funds Fixed assets Investments Cash & bank balances Current assets Inventories Sundry debtors Loans & advances Other current assets Current liabilities & provisions Current liabilities Provisions Net working capital (excl.874 7.331 4.831 1.727 (1. cash) Miscellaneous expenditure Total application of funds As days of sales Current assets Inventories Sundry debtors Loans & advances Other current assets Current liabilities & provisions Current liabilities Provisions Net working capital (excl.027 10.451 11.915 3.726 16.Thermax Industrials Working capital deteriorates a little on declining backlog led lower liabilities The company reported that its net current assets.425 5.100 Mar-11 12. excluding cash.515 1.551 11. This was primarily led by lower current liabilities. Kotak Institutional Equities estimates KOTAK INSTITUTIONAL EQUITIES RESEARCH 35 .823 10.013 3.923 238 12. have gone up to Rs455 mn versus negative working capital of Rs2.706 2 12.053 19. thus probably led by lower advances as the backlog declines.482 6.080 1.044 6.392 902 194 15.143 3.756 1.294 6.106 480 201 16.605 15.743 238 17.177) 5.797 23.424) 5.605 Sep-11 14.084 18.022 20.323 20.685 480 201 13.696 165 12.296 570 25.257 563 23.

474 (0.5 1.0 14.6 81.1 28.207 25.2 8.9 6.093 39.8 10.082 39. municipal sewage plants.7 7.2) (6.7 83.041 10.7 4.912 38.510 46.6 28.6) 6.000 82.211 13.8 (1.368 45.5 Assume moderate growth in order inflows in the core energy business (excluding utility orders).3 3.060 52.799 35.5 13.6 82.724 43.8 7.0 30.1) 19.0 62.680 77.587 5.0 6.8 5.9) (4.0) 5.310 11.680 78.0 19.3 52.296 4.230 52.340 24.0 3.810 56.5) 58.8 12.9 14.606 8.546 12.6 665 12.2) 51.553 14.7 82.7 67. Assume moderate growth in order inflows in FY2012E-13E Assume slower execution as order size increase.173 24.190 42.922 (10.173 14.3 (8.9 11.9 34.935 5.0 57.6) 26.6 21.4 (4.1 (7.8 27.757 (26.7) 71.993 82.6 93.855 48.9 2. Execution rate of order book would be less than historical as company takes largersized orders and projects.0 24.013 36.366 7.4 4.000 66.0 1.873 4.770 35.653 12.461 7.705 3.930 53.2 (6.578 (1.9 10.9 2.0) 20.814 53.820 (19.5 60.2 11.9 12.005 4.973 13.1 13.3 4.261 29.9 5.5) (10.6 3.111 47.113 8.4 11.4 12.420 12.513 23.843 51.676 52.0 9. March fiscal year-ends.509 44.1 792 12.324 59.3 6.765 5.221 6. Decline in standalone order inflows in FY2011 (based on consolidated backlog) Source: Company.6 10.315 2.0 9.8 62.889 46.412 38.3 (3.9 50.5 59. for e.901 53.082 40.Industrials Thermax Energy segment expected to record strong growth on the back of large order inflows Energy segment revenues for Thermax. 2007-13E (Rs mn) 2007 Energy segment Revenue Growth (%) Order inflow Growth (%) Order backlog Growth (%) Bill to book ratio (%) EBIT EBIT Margin (%) Environment segment Revenue Growth (%) Order inflow Growth (%) Order backlog Growth (%) Bill to book ratio (%) EBIT EBIT Margin (%) Sum of Segments Revenues Growth (%) EBIT Margin (%) Order inflow Growth (%) Order backlog Growth (%) 17.0 31.9 1.8) 77.8 3.170 49.5 1.3 106.881 14.6 13.1 82.5 31.0 8.168 (21.0 2008 2009 2010 2011 2012E 2013E 26.340 28.1) 74.2 4.140 1.g.041 3.577 34.534 12.472 36.194 50.825 9.8) 53.157 5.8) 1.0 11.752 5.7 1.352 41.5) (0.224 43.476 12.9 24.7 97.160 4. Kotak Institutional Equities estimates 36 KOTAK INSTITUTIONAL EQUITIES RESEARCH .0 10.568 32.4) 3.410 24.3) 62.970 (12.5 (11.

EBITDA of Rs829 mn (-13% yoy) was in line with expectations.com Mumbai: +91-22-6634-1100 For private Circulation Only. in our view. We view the street’s fears on DBCL market expansions as significantly overblown given the track record of the company. (2) reduced advertising revenues and (3) revised Rs/US$ assumptions impacting newsprint prices.2) led by (1) one-off forex losses (overhead costs) in FY2012E. Amit Kumar amit. to BSE-30 4.7 24. Adjusted EBITDA of Rs829 mn (-13% yoy) was in line with expectations.07 bn (+2% yoy) in mature markets led by robust leading position across MPCG (MP-Chhattisgarh). Mature business EBITDA came in at Rs1.1 32.2 17. the risk is continued inexpensive valuations given operating losses from emerging markets for some time.0) 19.3 12.1 MFs 3. ` DBCL reported 2QFY12 EBITDA of Rs1.1 (Rs14. emerging business losses increased to Rs231 mn (+189% yoy).2 22.7 2.8 12.0 10.5 FIIs 5.5 2QFY12 results appear weak given Rs58 mn forex losses ` DBCL reported optically weak 2QFY12 EBITDA of Rs771 mn (-19% yoy) led by forex losses of Rs58 mn (un-hedged ECB exposure) despite reasonably robust 16% yoy advertising revenue growth.5X FY2013E mature business EPS estimates.6 4. the focus on Maharashtra expansion (operating breakeven) is the prudent approach.9 16.6 4. Rajasthan.07 bn (+2% yoy) in a challenging environment.4 2. in a challenging advertising environment.7 16. FY2013E TP of Rs320 Retain BUY with FY2013E TP of Rs320 (Rs330 previously). we do not presume any value-addition from new markets in our TP (implied 19X FY2013E mature market EPS). Additionally. However.4) Forecasts/Valuations EPS (Rs) EPS growth (%) P/E (X) Sales (Rs bn) Net profits (Rs bn) EBITDA (Rs bn) EV/EBITDA (X) ROE (%) Div.research@kotak.0 previously) and Rs14.ckumar@kotak.8) Rel. our FY2012E-13E earnings estimates are revised to Rs11.9 14.937 2013E 14.6 (18.low) 310-186 Market Cap.0 3. ` 2QFY12 may be the peak investment quarter with Rs231 mn of emerging market losses at ~22% of mature market earnings of Rs1. Company data and valuation summary DB Corp Stock data 52-week range (Rs) (high.4 9.2 (0.1 (16. The operating losses in emerging markets have also been impacted by the challenging environment (advertising.0 1.com Mumbai: +91-22-6634-1392 Kotak Institutional Equities Research kotak. are likely to be value-accretive in time. the latter may be negated by a reported modest decline in domestic newsprint prices (80% consumption share in DBCL).6 11. Nonetheless. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES.9 2. currency). .8 2.7 2012E 11.6 35. however.5 Price performance (%) 1M 3M 12M Absolute 4. inexpensive valuations at 13.BUY DB Corp (DBCL) Media OCTOBER 21. Retain BUY with FY2013E TP of Rs320 (Rs330 previously). REFER TO THE END OF THIS MATERIAL. (Rs bn) 42. we highlight that the apparent decline in EPS to Rs11. 2011 RESULT Coverage view: Neutral Peak investment quarter. Inexpensive valuations at 13.2 Shareholding pattern (%) Promoters 86.5X FY2013E mature business EPS estimates.6 (Rs13.6 27. DBCL reported apparently weak 2QFY12 EBITDA of Rs771 mn (-19% yoy).2 3. impacted by Rs150 mn increased losses in emerging markets (Jharkhand/Maharashtra). CPH (Chandigarh-Punjab-Haryana) and Gujarat.1 in FY2011 has to be viewed against (1) forex losses in FY2012E and (2) tax savings from accrued losses of FM radio business in FY2011. given new expansions. Yield (%) 2011 14.07 bn.6 in FY2012E from Rs14. The concern on potential challenges of simultaneous expansion in two large markets (Maharashtra and Bihar) was put to rest by the deferment of Bihar expansion.6 Price (Rs): 230 Target price (Rs): 320 BSE-30: 16. adjusted for Rs58 mn of forex losses (un-hedged ECB exposure).1 3. Retain BUY led by mature market franchise.

3 chg (%) 2QFY12E 2QFY11 1QFY12 3 18 0 (1) 16 (4) 5 13 6 32 50 31 5 34 9 (0) 38 5 13 24 15 7 34 7 15 36 19 (7) (19) (23) (61) 34 (1) (14) (39) 78 16 (28) (47) 149 6 (33) (12) (36) (31) (15) (15) (27) (27) (34) (34) (15) (28) (34) 1HFY12 1HFY11 7.258 2.9 chg (%) 18 18 9 41 36 40 23 37 35 (15) (26) 11 14 (20) (27) (103) (19) (19) (19) Source: Company data.775 2.625 2.169 1.013 1. Kotak Institutional Equities estimates DBCL's mature business financials.9 2.325 4.145 38 chg (%) Emerging Mature 11 5 (6) Notes: (a) Mature business financials include legacy print as well as FM radio.059) (2.496 1. ` DBCL reported 2QFY12 circulation revenues of Rs601 mn (+13% yoy) and helped support financials in a challenging advertising environment. 38 KOTAK INSTITUTIONAL EQUITIES RESEARCH .2 35. Source: Company data.2 2QFY12E 2QFY11 1QFY12 3.538 2.010 3.302) (3.0 3.8 56 75 (94) (85) (241) (211) 1.071 (76) 33 2QFY11 Emerging Mature 10 2. where the expansion was scaled up during this quarter.250) (901) (1.2 5.069 583 412 (5.246 32.768) (1.977 1.717 575 532 568 250 220 252 (2.534) (1.6 3.429) (1. incremental contribution from emerging markets will take time to scale up. Kotak Institutional Equities ` DBCL reported 2QFY12 advertising revenues of Rs2.184) (400) (363) (392) (575) (459) (575) (400) (337) (384) 825 951 1.8 20 (67) (124) 600 (197) (0) 403 403 32.1 36.188) (869) (842) (623) 1.013 1.608 601 330 (2.087 25.7 2.61 bn (credible +16% yoy). March fiscal year-ends (Rs mn) Total revenues Advertising revenues Circulation revenues Other operating revenues Total expenditure Raw material costs Other direct costs Employee expenses SG&A expenses EBITDA OPM (%) Other income Interest expense D&A expenses PBT Extraordinaries Tax provision Minority interest Adjusted PAT Reported PAT Tax rate (%) EPS (Rs/share) 2QFY12 3. 1HFY11-12 (Rs mn) Revenues EBITDA Margin (%) 2QFY12 Emerging Mature 302 3.077 5.6 28.307 (173) 1.052 (800) 35 chg (%) Emerging Mature 8 189 2 (90) (5) Revenues EBITDA Margin (%) 1QFY12 Emerging Mature 219 3.998 (80) 1. However.Media DB Corp Interim results of DB Corp (DBCL).6 6.997 5.1 34.867 (482) (656) (1) 36 1. We have previously highlighted that the effective cover price in the Marathi market remains at reasonable levels.910) (2.4 50 32 37 (50) (38) (27) (125) (107) (117) 700 839 896 (225) (308) (284) 20 (1) 475 551 611 475 551 611 32.450 3.223 (231) 1.246 1. advertising growth was slowest in the past six quarters led by the economic slowdown in India.004 23.9 31.625) (2. including incremental contribution from emerging markets.7 31.245) (451) (613) (458) 771 21.733) (843) (685) (1.198 (79) 36 1QFY11 Emerging Mature 2.539 2. (b) 2QFY12 mature business financials adjusted for Rs58 mn of forex losses.515 1.

This also resulted in 50% yoy increase in other income in 2QFY12. (2) first full quarter of Aurangabad edition (May 2011 launch).8 760 Adjusted for direct cost but not distribution cost 2. We also highlight that DBCL acquired the operations of Writers and Publishers (WWPL). adjusted overheads were in line with expectations.0 0. We note that 2QFY12 included the following new editions: (1) first full quarter of Dhanbad edition (April 2011 launch). 2QFY12 other direct costs as well as employee costs increased 15% yoy and 7% yoy.8 1. ` SG&A expenses with higher by Rs58 mn on account of forex loss (un-hedged ECB exposure). the negative variance was on account of (1) dividend payout for FY2011 during 1QFY12 as well as (2) acquisition of WPPL (Rs350 mn). ` DBCL’s 2QFY12 net interest expenses were Rs47 mn versus Rs10 mn of other income in 1QFY12.2 Adjusted for direct cost but not distribution cost 0. The raw material costs were contained as (1) likely cost rationalization measures and (2) stable qoq domestic newsprint prices. engaged in outsourced printing. during the quarter. ` However. Kotak Institutional Equities Effective cover price realization for DBCL from Divya Marathi (Rs/copy) Urban Circulation scheme Initial cost to subscriber (Rs) Monthly payment (Rs) Annual cost to subscriber (Rs) Gross realization (Rs) Consumer freebies Free gift to subscriber (Rs) Gidt cost to DBCL (Rs) Free advertising given (Rs) Adv cost to DBCL (Rs) Net cost to DBCL (Rs) Effective realization DBCL realization (Rs) DBCL realization (Rs/copy) Commission expense (Rs/copy) Net realization (Rs/copy) Rural Comments 199 45 540 739 199 55 To be paid to the hawker at home 660 859 199 100 540 100 199 100 660 100 640 1.1 1. KOTAK INSTITUTIONAL EQUITIES RESEARCH 39 .25 bn (+5% qoq) were in line with expectations.9 Retail price of the gift given to the subscriber Volume discount given bulk buying by DBCL Zero cost to DBCL given low advertising at launch Limited advertising in the newspaper at launch Source: Company data. margin (%) 40 30 20 10 1QFY10 2QFY10 3QFY10 4QFY10 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 Source: Company data. (3) launch of Nashik edition in July 2011 as well as (4) launch of Jalgaon edition in September 2011. Kotak Institutional Equities ` 2QFY11 raw material costs at Rs1.DB Corp Media Trends in advertising growth and operating margins of DBCL (%) Ad growth (%) Op.

6 EBITDA (Rs bn) 2011 2012E 3.6 9.9 10.2 2010 11.4 3.1 15.8 6.3 6.8 23.0 1.7 10.2 14 31 73 11 6.7 10.950 1.4 0 5 2.5 11.6 3.1 5.7 8.4 2013E 13.7 7. (c) Adjusted for 22% minority interest in subsidiary HMVL post IPO in October-2010.0 6.3 0.360 735 695 674 664 67 68 69 69 Notes: (a) Adjusted for higher dividend payout versus peers DBCL and HTML.5 16.1 7.2 10.4 2.0 7.7 3.7 6.3 17.1 1.2 13. (b) Adjusted for near-term startup losses in Jharkhand and Maharashtra. Kotak Institutional Equities 40 KOTAK INSTITUTIONAL EQUITIES RESEARCH .7 2.4 2.8 8.0 8. 2010-13E JAGP JAGP (adjusted) DBCL DBCL (adjusted) HMVL HTML HTML (adjusted) EV (Rs bn) 33 31 42 42 8 29 29 2010 2.7 2.2 4.2 4.4 2.6 15.9 1.5 3.9 1.392 2.1 3.2 17.3 15.8 2.8 13.7 6.7 21.6 3.6 3.9 9.1 1.1 1.2 P/E (X) 2011 2012E 15.8 2.4 2.1 17.0 3.6 4.9 JAGP JAGP (adjusted) DBCL DBCL (adjusted) HMVL HTML Price (Rs) 105 105 230 230 133 140 2010 5.8 2.4 12.4 4.8 3.2 9.8 5.1 9.6 1.6 8.6 17.5 3.1 3.3 1.2 EV/EBITDA (X) 2011 2012E 9.0 1.1 4.6 8.5 11.967 1.3 1.1 18.7 16.9 1.4 3.8 1.1 7.4 6.9 17.6 2013E 7.1 8.9 7.1 6. Source: Company data.0 19.3 (1) 2 6 Source: Indian Readership Survey.8 6.6 15. legacy markets (mn) MPCG Dainik Bhaskar Nai Dunia Patrika Dainik Hari Bhoomi Rajasthan Rajasthan Patrika Dainik Bhaskar CPH Dainik Bhaskar Punjab Kesari Dainik Jagran Gujarat Gujarat Samachar Divya Bhaskar Sandesh Dainik Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 chg (%) 4.0 10.9 1.8 3.4 16.6 11.1 7.449 2.0 EPS (Rs/share) 2011 2012E 6.5 10.7 3.8 16.2 11.2 10.6 2.7 21.9 16.7 8.4 9.6 14.8 12.8 11.0 1.1 12.1 12.9 13.7 17.4 3.3 8.6 10.0 14.8 16.7 6.6 0.3 4.6 4.1 1.9 6.2 14.8 18.3 1.3 2013E 4.8 3.7 (2) (6) (8) 4.5 11.6 3.4 3.0 9.2 13. Kotak Institutional Equities estimates Readership of DBCL across core.7 1.2 4.1 11.6 2013E 8.2 4.2 4.4 9.2 4.2 1.6 16.5 2010 17.4 5.0 3.8 2.Media DB Corp Valuation of Indian print media companies.4 JAGP DBCL HMVL Discount (%) Readership (mn) Q3 2010 Q4 2010 Q1 2011 Q2 2011 16.4 4.3 2.1 1.8 2.4 0.971 1.7 16.8 3.6 7.0 EV/Reader (X) Q3 2010 Q4 2010 Q1 2011 Q2 2011 1.911 2. March fiscal year-ends.5 0.1 12.381 2.5 4.2 4.1 4.4 6.9 6.

031 142 (153) (433) 3.207 2.631 2.630 3.189 10.475 205 126 12. GUJ) Baroda (2004.138 1. RAJ) Bikaner (1997.5 Balance sheet Total equity Deferred taxation liability Total borrowings Current liabilities Total capital Cash Other current assets Total fixed assets Investments Miscellaneous expenditure Total assets Free cash flow Operating cash flow.3 2.551) (72) 3. GUJ) Mumbai (2004.372 2.358 163 110 13.372 4.115 2. Kotak Institutional Equities estimates KOTAK INSTITUTIONAL EQUITIES RESEARCH 41 .714 7.328 8 (560) (70) 706 763 4.718) 2.899 3.8 10. RAJ) Udaipur (1997.607 2.461 109 (510) (290) 770 — (377) (47) 346 464 2.198 346 3. GUJ) Surat (2004.652 4.980 2.585 14.016 122 (2.6 12.936 2.212 (76) (1.272 16. MAH) Rajkot (2005.128 774 2.1 14.606 14.718 163 110 18.829 116 (397) (220) 1.121 11.914 6.2 21. GUJ) Bhavnagar (2004.297 (556) (1.026 854 2.172) (80) 2.936 808 3.980 10.548 9. working capital Working capital changes Capital expenditure Income from investments Free cash flow Ratios (%) Debt/equity Net debt/equity ROAE (%) ROACE (%) 2009 2012E 2013E 2014E Source: Company data.562 186 (153) (618) 4. CPH) Delhi (2007.067) 186 3. CPH) Hissar (2000.345 8. excl. GUJ) Amritsar (2006.536 6.749 1.187 7.404 3.262 1.754 3.436 1.859 — (1.081) 113 1.828 10.588 2.951 3. March fiscal year-ends.024 18.566 (174) (603) 111 1.073 12.016) 182 2. CPH) Phase IV expansion Ahmedabad (2003.731 4.CPH) Panipat (2000.021 135 103 34 15 190 174 17 8 45 18 36 21 26 7 32 25 24 3 22 19 22 (1) 25 21 20 (4) 30 25 Profit model Net sales EBITDA Other income Interest Depreciation Pretax profits Extraordinary items Current tax Deferred taxation Net income Adjusted net income Earnings per share (Rs) 8.430 112 (357) (378) 2.450 2.057 4.DB Corp Media DBCL's geographic expansion in various states of India Phase I expansion Phase II expansion Jaipur (1996.138 2. RAJ) Kota (1997.126 — (932) (79) 2.627 170 (153) (519) 3.420 8.843 7.814 927 2.610 1.577 393 5. RAJ) Ajmer (1997. CPH) Ludhiana (2007.807 163 110 14. CPH) Jalandhar (2006.760 3.696 (138) (968) 170 1.372 3.6 17.548 1.289 695 2.471 238 217 10.384 182 (153) (555) 3.914 452 3. RAJ) Phase III expansion Chandigarh (2000.556 674 (1.498 5.803 6. 2008-14E (Rs mn) 2008 2010 2011 9.420 1.485 8.524 2.664 6.587 — (897) (102) 2.627 1.524 10. RAJ) Jodhpur (1997.433) 142 1.189 13. CPH) Source: Company data.966) 109 (1.806 — (841) (216) 1.011 (109) (1. Kotak Institutional Equities Financial summary of DB Corp Limited.976 — (1.353 3.319 5.350 18. CPH) Faridabad (2001.269 163 110 16.487 609 3.623 68 33 7.302 4.372 2.861 4.707 14.

1 2.0 (36. A good 770 bps of this expansion has come on the back of SG&A leverage – SG&A expenses as % of revenues are down to 19.1 Rel. maintaining target CY2012E P/E multiple.8 10.8 23.3% qoq and 54% yoy. Company data and valuation summary Hexaware Technologies Stock data 94-37 52-week range (Rs) (high.9 148.8 Price performance (%) 1M 3M 12M Absolute 21. EBITDA margin – the journey from 6. Substantial EBITDA margin beat drove a 20% net income beat over our estimates. Gross margin expansion of 420 bps over this timeframe has primarily come on the back of offshore shift and some benefits from Re depreciation.1 0. . FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES. Yield (%) 2011 3. we also understand from the company that it has cut G&A in absolute terms over the timeframe.4 Price (Rs): 89 Target price (Rs): 100 BSE-30: 16. +29% yoy) were marginally ahead of estimates. Hexaware reported another solid quarter of revenue growth and margin expansion. Sustaining its rich vein of form. (2) strong hiring trends – the company added 745 employees during the quarter following on strong net hiring in the June 2011 quarter.saluja@kotak.3%. and (3) sustained strong traction in top client relationships.7% in the September 2011 quarter – an expansion of almost 12% pts in just five quarters.3% qoq. Expansion in target multiples would have to wait for more confidence on margin sustenance what has reached higher-than-historical-average levels. After hitting a low of 6. management confident of sustaining margins We note some of the key positive indicators on revenue growth – (1) a robust December 2011 quarter revenue growth guidance (+4-4. ADD.9 Shareholding pattern (%) Promoters 28. 2011 RESULT Coverage view: Attractive Remarkable run continues.9 112.937 2013E 8.chordia@kotak.7% in five quarters (June 2010 to September 2011) In addition to sustained strong revenue momentum. (Rs bn) 25.9 21.7% (+340 bps qoq despite absorbing onsite wage hikes) were 240 bps ahead of our estimated 16. EBITDA of Rs686 mn was however 16% ahead of our estimate – reported margins of 18.7 2012E 8.500. currency benefits.5 1.6 2.low) Market Cap. Hexaware has also delivered a strong EBITDA margin turnaround over the past five quarters. up 7.5% from 27.com Mumbai: +91-22-6634-1100 For private Circulation Only. Kawaljeet Saluja kawaljeet.6 14.5 18. Absolute SG&A has gone up by just 4% in this timeframe versus a revenue growth of nearly 46%.3 1.2 FIIs 47. and further SG&A rationalization were the key drivers of margin expansion.research@kotak.6 Another robust quarter.5 MFs 3.com Mumbai: +91-22-6634-1397 Shyam M. Net income for the quarter was Rs646 mn.1 9.9 Forecasts/Valuations EPS (Rs) EPS growth (%) P/E (X) Sales (Rs bn) Net profits (Rs bn) EBITDA (Rs bn) EV/EBITDA (X) ROE (%) Div.4 186.2%.8% as late as June 2010.8 mn (+5.7 29. raise estimates. partly aided by revised Re/US$ assumptions.6 3. driving lower rental and facility expenses.7 3. roughly 23% of endMarch 2011 quarter. margins surprise again Reported revenues of US$78.7% qoq). We raise our CY2011/12/13E EPS estimates by 13/21/22%.8) 30. Sharp offshore shift in revenues. Lead indicators on revenue growth positive. maintain ADD.5 2. Bulk of G&A savings have accrued from a move to owned premises from rented ones. cumulative employee additions over the past two quarters has been 1. Net income beat of 19.m@kotak.0 10. shyam.8% to 18.2 16. to BSE-30 22. REFER TO THE END OF THIS MATERIAL.3% was further aided by higher-thanexpected other income.0 6. Even as increased sales force efficiency has contributed (S&M headcount is up just 6% since June 2010 from 139 to 147).5 3.ADD Hexaware Technologies (HEXW) Technology OCTOBER 20.4 8. EBITDA margin has expanded to 18.com Mumbai: +91-22-6634-1243 Rohit Chordia rohit.8 3.2 10.com Mumbai: +91-22-6634-1470 Kotak Institutional Equities Research kotak.9 23. We raise TP to Rs100/share.

Even as we concur with the management on these drivers.0 8. ` Receivable days stood at a healthy 57 days. partly driven by a revised Re/US$ assumption.1 20.0 CY2013 436 17. maintain ADD We have raised our CY2011/12/13E EPS estimates by 13/21/22% to Rs8. Macro-led volume slowdown could thus be a double whammy – growth as well as margin pressure – this remains a key risk. We raise our target price on the stock to Rs100/share (from Rs80 earlier).Hexaware Technologies Technology In addition. Reiterate our ADD rating on the stock. EPS revision is driven by a modest upward revision in revenue growth estimates. Raise estimates. The company sees three key drivers – (1) some more scope of SG&A rationalization.8/10.5 3.48/EUR.4 CY2013 2.0 45. Upside to our target price would demand more confidence on margin sustenance.4 46.5 44.7 7.4 CY2011 306 15. Outstanding Euro hedges totaled to EUR10. even on an ex-currency basis.2 1. Exhibit 1: Key changes in CY2011-13E estimates Revenues (US$ mn) EBITDA Margin (%) Recurring EPS (Rs/ share) Re/ US$ rate CY2011 307 17.3 45.4 mn at an average rate of Rs70. and a sharp one in margin forecasts. Other result highlights ` End-September 2011 dollar hedges outstanding stood at US$176.4 CY2013 427 15.7 mn at an average rate of Rs47.1 8.1 Change (%) CY2012 2.8 1.0 7.6 Source: Kotak Institutional Equities estimates KOTAK INSTITUTIONAL EQUITIES RESEARCH 43 . ` The management expected the tax rates for CY2011E and CY2012E to be around 17% and 22-23%. and (3) employee pyramid expansion. the management remains confident of its ability to sustain margins at current level.89/US$. We note that Hexaware has started inducting campus graduates into its employee pool on an accelerated basis from this year after almost three years of lull on this front. we believe margin benefits from these can be extracted only if strong volume growth sustains and pricing holds fort.2 12.2 44.7 CY2011 0. ` 12 new clients were added over the quarter. maintaining our target PE multiple of roughly 11X CY2012E earnings.2 22.0 New CY2012 360 17. respectively.4/8. (2) potential to increase offshore revenues mix.8 46.8 10. respectively. ` Attrition has declined significantly to 14.7% from 2QCY11 levels of 18%.9 8.6 Old CY2012 353 14.

7 2.8 3.3 1.7% qoq.3 16.0 60.1 2.6 287.3 37.9 (4.1 290.5 8.1 284.Technology Hexaware Technologies Exhibit 2: Hexaware .9 290.4) 18.224 (714) 510 (59) 451 267 718 (116) 602 — 602 3QCY11 78.3 9.5 mn revenues for 4QCY11.3 21.2 (0.3 yoy 29.2 21.1 (6.3 3.4 2.874) 943 (703) 240 (58) 182 (5) 177 (9) 168 252 420 2QCY11 74.3 7.Reported Recurring EPS (Rs/share) No of shares outstanding (mn) As % of revenues Gross Margin (%) EBITDA Margin SG&A Expenses (%) Billing Rates (US$/manhour) Onsite Offshore Revenue Mix (%) Onsite Offshore 3QCY10 61.660 (2.3 21.3 19. an increase of 4-4.7 (0.3) 34.9 (40) 8.262) 1.7 19. December year-ends (Rs mn) Revenue (US$ mn) Revenues Software Development Costs Gross profit Total SG&A Expenses EBITDA Depreciation EBIT Other Income Profit Before Tax Provision for Tax Net Profit Extraordinary items Net Profit.281) 1.8) 3.0 0.9 17.3 53.5 37.2 7.3 2.8 7.Consolidated quarterly results 3QCY11.3 39.7 56.3 242 (3.5 23.5 71.3 19.7 48.5 22 19.2 290.2 18.3 % chg.9 20.4 # Kotak estimates 78.5 72.300) 341.341 (2.2 19.2 1.5 6.4 % deviation 0.8 280. Source: Company.355 (763) 592 (67) 525 132 657 (115) 542 — 542 1. qoq 5.7 46.0 36.8 1.0 29.8 14.0 Hexaware has guided for US$ 82-82.0 22.3 53.7 0.636 (2.117) 1.5 72. Kotak Institutional Equities estimates 44 KOTAK INSTITUTIONAL EQUITIES RESEARCH .8 3.4 38.5 8.5 25.5 7.7 43.1 18.4 33.398 (712) 686 (64) 622 160 782 (136) 646 — 646 0.8 10.817 (1.411.7) 15.6 15.3 185.

67 Sep-11 78.3 8.9 2.664 7.1 156 9 94.5 34.7 4.1 174 11 93.0 7.5 30.3 35.6 34.6 59.0 55 70.4 39.6 9.32 Dec-09 54.1 23.98 Mar-11 70.13 Dec-10 66.1 29.4 9.0 6.2 67.041 5.7 70.3 8.4 5.7 60.5 72.3 70.4 27.7 2.6 1.7 66.304 6.0 22.1 48.031 6.8 20.9 11.9 24.7 50.5 69.7 4.2 180 10 92.5 71.2 5.308 6.2 40.5 57 75.4 17.9 57 75.4 69.7 43.6 6.2 21.6 3.3 20.9 2.1 19.2 2.0 19.9 65.4 7.8 167 13 94.4 18.7 5.5 10.4 19.2 40.%) Others (incl tech support .660 46.7 29.9 41.8 2.6 71.9 58.2 19.996 44.0 5.4 11.3 23.4 44.9 63 69.0 27.2 68.3 39.24 Jun-11 74.0 2. reclassification from Americas to Europe to allign with the Clients Global Corporate Office.3 44.9 5.5 65.9 157 7 96.6 39.7 25.3 97.4 5.2 72.3 9.9 4. (b) Starting Q1 10.0 46.8 - 36.1 11.4 2.5 18.1 30.Utilisation and Attrition metrics pertain to IT business only.7 41.0 23.5 21.6 63 71.5 38.8 40.35 Sep-09 54.1 10.591 48.2 19.5 7.6 39.4 23.2 6.8 1.419 8.8 10.7 28.3 69.2 - 36.0 27.6 (10.4 60.7 13.5 9.2 6.5 2.7 28.5 19.4 6.9 68.9 9.6 9.2 9.3 11.9 48.0) 2.8 5.8 6.4 12.0 2.7 49.5 62 68.8 5.6 10.5 23.185 45.5 7.220 45.8 8.9 5.2 60.7 72.6 14.6 37.4 24.341 44.2 31.4 159 9 96.137 5.1 41.5 9.0 70.817 46.6 48.0 27.3 6.632 48.0 1.7 39.0 70. Kotak Institutional Equities KOTAK INSTITUTIONAL EQUITIES RESEARCH 45 .006 5.7 46.1 2.5 1.1 70.520 46.5 12.5 8.7 49.9 13.2 3.4 64.7 1.2 23.0 1.7 19.164 18.7 60.3 52.3 18.9 22.5 49 40 6 3 47 38 6 3 47 39 4 4 47 39 4 4 49 40 5 4 50 39 7 4 50 39 7 4 49 39 6 4 50 40 6 4 51 39 8 4 68.5 194 12 12.8 56.0 70.1 49.6 33.68 Jun-10 54.5 9.5 38.2 32.7 38.6 39.513 45.3 3.7 26.0 22.3 9.5 190 14 93.9 17.1 7.8 - 32.0 46.9 5.0 (0.1 64.3 9.5 26.2 27.3 39.9 72.9 20.9 2.6 59 72.8 13.7 3.3 53.4 56 69.1 6.2 19.9) 2.7 2.7 28.4 2.7 7.3 51.6 42.9 6.1 7.8 39. Revenue Concentration includes all IT business and BPO revenues.4 67.5 74.6 71.6 5.5 18.66 Mar-10 48.0 2.5 156 12 94.6 26.3 166 10 96.0 7.US$10 mn > US$10 mn Billing rates (US$/hr) Onsite Offshore Employee metrics Total employees (consolidated) Billable personnel (%) Onsite (%) Offshore (%) Marketing (incl sales support .73 Sep-10 61.5 24.9 41.5 10. Source: Company.1 60.9 37.8 - 35.6 9.3 29.6 42.5 - 34. Billing Rates.0 39.US$5 mn Between US$5 mn .5 23.6 53 68.0 22.9 6.3 39.8 6.9 11.7 4.3 26.7 7.511 6.8 8.%) Jun-09 53.7 73.8 18.0 21.7 57 Utilization (%) Attrition rate (%) annualized DSO Notes: (a) Starting Q2 10.9 - 34.1 66.4 6.8 7.3 49.5 40.6 38.8 2.7 19.Hexaware Technologies Technology Exhibit 3: Hexaware: key operational metrics Revenues (US$ mn) qoq growth (%) Revenues (Rs mn) Exchange rate Vertical split of revenues (%) BFSI TTHL Emerging segments Others Service line split of revenues (%) ADM EAS Testing / BTO Business intelligence & analytics BPO Others Geographical split of revenues (%) Americas Europe Rest of the world Onsite-Offshore mix (%) Onsite Offshore Client metrics Repeat business (%) Clients billed Clients added Revenue concentration (%) Top 1 client Top 5 clients Top 10 clients Client size (ttm) > US$1 mn Between US$1 mn .45 40.4 5.1 2. (c) Starting Q1 10.0 49.4 70.8 16.4 6.2 21.6 29.1 19.2 42.1 49.7 60.9 31.4 9.9 24.4 10.7 68.

084 (836) (340) (92) 2.712 4.6 8.5 17. WC Working capital changes Capital expenditure Free cash flow Ratios (%) EBITDA margin ROE ROCE 2009 2010 2011E 2012E 10.785 12.419 (257) 734 2.970 (300) 639 3.386 2.405 4.8 22.310 (763) 2.5 17.446 (103) 1.497 (110) 2.8 8.551 4.431 1.7 10.709 11.259 9.838 283 (82) 2.089 (169) 2.226 (723) (660) 843 2.639 4.536 19.Technology Hexaware Technologies Exhibit 4: Consolidated financials for Hexaware.113 2.481 13. excl. 2009-2012E (Rs mn) Profit model Total income EBITDA Depreciation and ammortisation Other income Pretax profits Tax Profit after tax Diluted recurring EPS (Rs/share) Balance sheet Total equity Deferred taxation liability Current liabilities Total liabilities and equity Cash Other current assets Tangible fixed assets Total assets Free cash flow Operating cash flow.282 4. Kotak Institutional Equities estimates 46 KOTAK INSTITUTIONAL EQUITIES RESEARCH .343 4.078 12.0 14.828 15.069 15.801 4.040 1.6 22.382 4.1 23.4 16.7 17.992 2.6 Source: Company.530 (169) 3.454 8.655 (169) 2.431 5.3 7.792 13.259 2.023 (270) (307) 1.356 3.546 938 (247) 249 941 (92) 849 3.7 20.585 2.897 (443) 2.9 9. December year-ends.552 4.9 21.424 (242) (646) 1.358 11.547 8.382 11.712 12.

0 13.4 Price performance (%) 1M 3M 12M Absolute (6. The company plans to launch 2 editions in UP (Aligarh.3) (25.1 39.5 18.2 0.6 (12. and start targeting the runners-up position) to drive advertising benefits in FY2013E (advertising recovery). REFER TO THE END OF THIS MATERIAL.com Mumbai: +91-22-6634-1392 Kotak Institutional Equities Research kotak. UP) and (2) so does the focus of the company on improving monetization (bridging the large gap versus leading peers JAGP/DBCL).937 2013E 12. HMVL reported strong 2QFY12 EBITDA of Rs314 mn (+73% yoy) led by (1) strong 23% yoy advertising growth in challenging environment.13 bn (+23%) after 2 quarters of sub-20% growth (fanning fears of slowdown in growth momentum). Company data and valuation summary Hindustan Media Ventures Stock data 52-week range (Rs) (high.9 0.8 2012E 10.3 0. Our revised FY2012E-13E EPS estimates are Rs10 (Rs9 previously) and Rs12 (unchanged) adjusted for advertising growth.8 Price (Rs): 133 Target price (Rs): 220 BSE-30: 16. (Rs bn) 9.1 7.7 FIIs 0.BUY Hindustan Media Ventures (HMVL) Media OCTOBER 20. ~70% EV/reader discount versus peers.0 18.ckumar@kotak. 2011 RESULT Coverage view: Neutral Strong 2QFY12 in challenging environment.5 0.6) 5. much below peer margins).5) (3.4 5.com Mumbai: +91-22-6634-1100 For private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES.research@kotak.1 5.4 1.7 Shareholding pattern (%) Promoters 77. The next few quarters provide the opportunity: (1) reduced competition (weak advertising environment). Yield (%) 2011 7. (2) reduced newsprint pressures and (3) margin tailwinds (favorable base.2 20. to BSE-30 (5. ` HMVL reported strong 2QFY12 advertising revenues of Rs1. cost control and Rs/US$ assumptions) led by (1) leadership position in Bihar (structural advertising growth).3) Forecasts/Valuations EPS (Rs) EPS growth (%) P/E (X) Sales (Rs bn) Net profits (Rs bn) EBITDA (Rs bn) EV/EBITDA (X) ROE (%) Div.3 0. Amit Kumar amit. HMVL needs to (1) ensure continued robust market share in Bihar (emerging competition) and (2) complete the UP expansion (the top cities at least.2) Rel. (1) the structural growth drivers remain intact (Bihar.9 1.9 8. cost control and revised Rs/US$ assumptions. Moradabad) and strengthen Bihar (Gaya) in 2HFY12E.6 23.9 MFs 15.1 0.6 10.5 Strong 2QFY12: advertising growth momentum recovers in challenging environment ` HMVL reported strong 2QFY12 EBITDA of Rs314 mn (+73%) led by (1) strong advertising growth (+23%) in challenging environment as well as (2) relatively stable cost structure resulting in improved margin performance (+7 ppts yoy).8 7. The strong growth was led by (1) structural advertising shift in Bihar (due to economic turnaround) and (2) continued incremental contribution flowing through from the UP expansion. Retain BUY with unchanged FY2013E TP of Rs220.7 1. Retain BUY with unchanged FY2013E TP of Rs220 (EPS adjusted for growth. HMVL remains attractively valued at 11X FY2013E EPS but more important. We expect the discount to close led by continued operational and improved financial performance. . (2) improved margins (+7 ppts yoy) but also (3) favorable base (impact of cover price cut in Jharkhand from 2QFY11).0 6. Retain BUY: likely reduction in ~65% EV/reader discount versus peers sooner than later The rebound in advertising growth renews the confidence that weak performance of the past few quarters was largely on account of one-off impediments. (2) tail stage of UP expansion and (3) attractive valuations at 11X FY2013E EPS estimates. However. We expect the ~70% EV/reader discount versus peers to reduce over the next few quarters. ` We highlight that HMVL’s 2QFY12 financials below the EBITDA line are not comparable to prior quarters given equity raising/IPO of the company in 3QFY11. HMVL also had a favorable base (Exhibits 2-3) given impact of cover price cuts in Jharkhand from 2QFY11.3 17.low) 200-120 Market Cap.3 198.

023 2.077) (1.108 325 288 331 75 55 42 (1.228) (635) (179) (414) 314 (47) 41 (6) (80) 222 20 26 3. The completion of UP expansion in 2HFY12E will provide HMVL with the option of rate hikes in FY2013E as well. circulation wastage) as well as improved employee productivity. resulting in interest income of Rs35 mn in 2QFY12. March fiscal year-ends (Rs mn) Total revenues Advertisement revenues Circulation revenues Other operating revenues Total expenditure Raw material costs Employee expenses SG&A and other expenses EBITDA Depreciation Other income Interest expense Tax provision Net income OPM (%) Tax rate (%) EPS 2QFY12 1. ` HMVL has already taken provisions of Rs35 mn against its ad-for-equity investments in GTL Infrastructure. notably newsprint consumption (pagination levels. Kotak Institutional Equities Trends in EBITDA performance of HMVL (Rs mn) Trends in margins of HMVL versus peers JAGP and DBCL (%) 400 HMVL 320 314 300 260 181 200 185 JAGP 3332 31 33 30 20 2728 2525 200 100 DBCL 40 18 14 14 15 2QFY11 3QFY11 4QFY11 20 22 10 - 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 Source: Company data.877 664 611 118 90 (2.6 5.133 333 76 (1.241 1. resulting in positive operating leverage (+7 ppts yoy increase in EBITDA margin. Tax rates were optically lower at 26% given interest income from FMPs is exempt from tax.0 2QFY12E 2QFY11 1QFY12 1. Kotak Institutional Equities 2QFY12 1QFY12 2QFY12 Source: Company data.23 bn (+14% yoy) versus 23% yoy growth in revenues.221) (625) (559) (604) (200) (165) (179) (425) (352) (438) 250 181 260 (50) (40) (45) 25 20 54 (8) (5) (75) (46) (79) 150 107 186 17 14 18 33 30 30 2.257 1. ` The EBITDA margin was also supported by lack of new launches in this particular quarter. no further provisions are envisaged.100 914 1.076) (1. which reached 20%+ levels in 2QFY12).1 chg (%) 17 19 9 32 18 15 Source: Company data. HMVL highlighted cost optimization measures.5 chg (%) 2QFY12E 2QFY11 1QFY12 3 23 4 3 24 2 2 16 1 1 38 81 (2) 14 1 2 14 5 (11) 8 (3) 18 (5) 26 73 21 (6) 18 5 64 105 (25) (25) 28 7 74 2 48 107 19 48 61 19 1HFY12 1HFY11 3. Kotak Institutional Equities ` HMVL reported 2QFY12 operating costs of Rs1. ` HMVL continues to maintain a strong balance sheet (net cash of Rs1. which is timely in our view.500 1.250) (1.87 bn) after IPO.0 1.578 2.083) (358) (310) (852) (683) 574 501 (92) (75) 95 33 (11) (34) (159) (134) 408 290 19 19 28 32 5.481 1. HMVL plans to renew its expansion and consolidation in core UP and Bihar markets in 2HFY12E.Media Hindustan Media Ventures Interim results of Hindustan Media (HMVL).239) (1.449) (2.9 2. 48 KOTAK INSTITUTIONAL EQUITIES RESEARCH .542 1.

7 21.4 0.3 0.269 — — 600 1. Kotak Institutional Equities estimates KOTAK INSTITUTIONAL EQUITIES RESEARCH 49 .2 6.903 1.6 15.842 Free cash flow Operating cash flow.940 5.344 (80) (915) 350 Source: Company data.762 1.0 14.1 12.3 19.4 9.2 10.392 161 — (272) 1.9 17. (b) Adjusted for near-term startup losses in Jharkhand and Maharashtra.8 16.1 7.911 2.0 14.2 13.790 36 205 1.807 123 1.6 10.0 10.7 JAGP JAGP (adjusted) DBCL DBCL (adjusted) HMVL Price (Rs) 105 105 230 230 133 2010 5.157 15.890 7.8 16.7 6.568 6.178 3.9 12.098 — — 1.2 2010 17.1 2013E 13. 2008-14E (Rs mn) Hindustan 2008 2009 Profit model Net sales EBITDA Other income Interest Depreciation Pretax profits Extraordinary items Tax provision Minority interest Reported net income Adjusted net income Earnings per share (Rs) 2010 (b) 2011 HMVL 2012E 2013E 2014E 2.298 271 1.0 16.5 11.776 7.493 1.303 1.350 1.8 12.7 8.4 9.950 1.4 12.8 4. Source: Company data.6 15.9 1.197 886 83 (43) (164) 762 — (226) — 536 536 8.9 7.527 134 10 (51) (122) (30) — (11) — (40) (40) 4.1 5.177 62 — 1. March fiscal year-ends.392 2.7 6.4 16. working capital Working capital changes Capital expenditure Free cash flow 117 (59) (146) (89) 142 115 (822) (565) 804 205 (499) 510 705 (134) (293) 277 800 (126) (830) (156) 1.381 2. 2010-13E JAGP JAGP (adjusted) DBCL DBCL (adjusted) HMVL EV (Rs bn) 33 31 42 42 8 2010 2.686 1.1 12.082 1.8 18.8 EBITDA (Rs bn) 2011 2012E 3.0 8.8 11.5 5.8 3.559 312 22 3.441 5.890 5.3 1.009 — (265) — 745 745 10.807 5.411 835 33 (65) (147) 656 (14) (204) — 438 452 7.449 50 — 1.2 4.281 — (383) — 898 898 12.5 16.8 9.9 JAGP DBCL HMVL Discount (%) Readership (mn) Q3 2010 Q4 2010 Q1 2011 Q2 2011 16.5 8.864 148 — (325) 1.869 754 28 1.050 171 — (212) 1.392 1.6 11.688 — (531) — 1.993 73 — 1.4 3.7 10.7 16.3 17.6 3.1 2013E 4.2 14.891 2.890 6.167 3. excl.6 4.1 8.Hindustan Media Ventures Media Valuation of Indian print media companies.9 EPS (Rs/share) 2011 2012E 6.6 3.6 3.2 8.1 2013E 8.5 11.1 12.0 13. (c) Adjusted for 22% minority interest in subsidiary HMVL post IPO in October-2010. March fiscal year-ends.449 2.7 21.1 15.7 16.9 10. Kotak Institutional Equities estimates Financial summary of Hindustan/HMVL.661 2.6 2013E 7.8 8.2 9.8 2.650 110 9 (17) (87) 16 — (16) — (1) (1) 3.7 7.336 1.5 EV/EBITDA (X) 2011 2012E 9.0 7.1 17.6 17.4 2010 11.0 9.971 1.0 3.842 280 2.9 5.7 17.6 10.2 4.2 4.8 P/E (X) 2011 2012E 15.8 5.6 7.134 1.967 1.8 13.869 11 760 1.2 10.157 1.6 16.360 735 695 674 664 67 68 69 69 Notes: (a) Adjusted for higher dividend payout versus peers DBCL and HTML.329 361 1.2 15.299 5.021 (103) (872) 47 1.940 86 1.0 EV/Reader (X) Q3 2010 Q4 2010 Q1 2011 Q2 2011 1.8 Balance sheet Total equity Deferred taxation liability Total borrowings Current liabilities Total capital Cash and equivalents Other current assets Total fixed assets Investments Miscellaneous expenditure Total assets 639 — — 302 941 8 577 356 — — 941 1.298 3.329 4.890 5.

7 2012E 9.1 12. The company’s balance sheet also took a hit with higher debt levels to fund higher working capital requirements.ADD Crompton Greaves (CRG) Industrials OCTOBER 20.937 QUICK NUMBERS • Consolidated revenues of Rs27 bn up 12.8) 15. down 45% yoy • Margin contraction led by overseas subs (560 bps yoy) and domestic power segment (630 bps) Reasonable order inflows lead to flat backlog.8% yoy • EBITDA margin contracts by 550 bps yoy to 8. Coverage view: Cautious Results disappoint. Key assumptions include (1) 8% consolidated revenue CAGR over FY2011-13E.0 9. Valuations appear reasonable at about 12.2) (14.9) Forecasts/Valuations EPS (Rs) EPS growth (%) P/E (X) Sales (Rs bn) Net profits (Rs bn) EBITDA (Rs bn) EV/EBITDA (X) ROE (%) Div.com Mumbai: +91-22-6634-1496 Supriya Subramanian supriya. (2) negatively surprised by sequential decline in standalone business.7 1.4 31. Downgrade to ADD as business remains under pressure (though may be largely priced-in). Yield (%) 2011 14. The medium/long-term outlook remains positive. Attempts at enhanced and more transparent communication are visible and positive. REFER TO THE END OF THIS MATERIAL.5% standalone) and (3) 20% tax rate (standalone). low cost sourcing.4% • Net PAT at Rs1.2 17.8) (21.3 and Rs11.7% consolidated EBITDA margin in FY2012E (11.0 2013E 11.9 FIIs 21.7 bn (up Rs5 bn from FY11-end). though the focus remains on manufacturing and not on EPC business. Consumer segment may pick up but only to the extent of 10-15% as dealer feedback on business remains weak.research@kotak.4) (46. Downgrade to ADD (from BUY) with a revised TP of Rs160 (from Rs200) as (1) business remains under pressure on both revenues and margins across segments even though it may be largely priced-in. Lokesh Garg lokesh.garg@kotak. in the near term. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES.3 9. skeptical of backlog-based explanation of higher inventories in overseas The increase in inventory and debtor levels (particularly in overseas subsidiaries) was attributed to execution of backlog.9 100.com Mumbai: +91-22-6634-1100 For private Circulation Only.low) Market Cap.3 (34. downgrade to ADD Revise estimates to Rs9.1 9. Debt increased to Rs9. to BSE-30 (10.4 17. We remain skeptical of this rationale as the order backlog has not increased materially on a yoy basis.8 7.4 6.3 and Rs12.com Mumbai: +91-22-6634-1453 Kotak Institutional Equities Research kotak.2 bn. CHANGE IN RECO. near-term outlook remains challenging.1 Near-term outlook challenging. BS takes a bit of a knock.2 20.2 from Rs10.subramanian@kotak. both these may pan out only over a period of time. Revise estimates and target price to Rs160/share (Rs200 earlier).3 107. The nearterm outlook remains challenging in terms of growth as well as margins. (3) lack of visible improvement in overseas business margins and (4) balance sheet deterioration with higher debt and inventory levels. on lower revenue growth and margins.2 11. 765 KV substation win from PGCIL (a first as earlier one from UP state).4) (55.6 MFs 12. Crompton’s results disappointed with higher-than-expected margin correction across segments. . Company data and valuation summary Crompton Greaves Stock data 349-133 52-week range (Rs) (high.4 Shareholding pattern (%) Promoters 40. PGCIL substation order win is a first Consolidated inflows of Rs22 bn were relatively flat on a yoy basis (up 33% qoq) even as consolidated backlog remained flat at Rs71.2 bn.mongia@kotak.0 7.7 1.7 Price performance (%) 1M 3M 12M Absolute (10.6) Rel.2 13.com Mumbai: +91-22-6634-1383 Aditya Mongia aditya.0 1. 2011 RESULT.7 for FY2012E and FY2013E. CRG may continue to face pressures as (1) the power segment may remain weak as competition and cycle concerns linger and (2) overseas business growth is partly fed by acquisition/currency which may not continue while margin may remain weak. Price (Rs): 143 Target price (Rs): 160 BSE-30: 16. Inflows at Rs22 bn were reasonable leading to a backlog of Rs71 bn. manufacturing to drive medium-term growth Business across segments may remain challenging in terms of growth as well as margins.7 116. however. (Rs bn) 91.5 9.5X FY2013E EPS.2 6. However.3 11. (2) 8. Long-term drivers were identified as (1) using Indian manufacturing base to supply to global markets and (2) low cost sourcing to increase margins.

8-10% EBITDA margin The management has retained the business guidance in terms of revenue growth (10-12%) and EBITDA margin (8-10%). we expect that both these measures would play out only over a period of time. 9% revenue growth and margins have been at 8%.5% at standalone level) and (3) 20% effective tax rate for the standalone entity. Note that the first half revenue growth and margins have been broadly on track i. The management made all comparisons of 2Q performance against 1QFY12 and hence the company’s operational performance and expectations have been reset at lower levels. The management retained other components of guidance as well such as (1) R&D related tax advantages to come through in 2HFY12E (R&D expenses are certified in beginning of 4Q.2 for FY2013E. manufacturing to drive growth Business across segments may remain challenging in terms of growth as well as margins. We expect Crompton to record an EPS of Rs9. Long-term drivers were identified as (1) using Indian manufacturing base to supply to global markets and (2) low cost sourcing to increase margins – the company presently sources only 43% of its inputs from low-cost countries. KOTAK INSTITUTIONAL EQUITIES RESEARCH 51 . Key assumptions underlying our estimates include (1) about 8% consolidated revenue CAGR over FY2011-13E. in the near term the company may continue to face pressures as (1) the power segment may remain weak as competition and cycle concerns linger. low-cost sourcing.3 for FY2012E and Rs11.Crompton Greaves Industrials Near-term outlook challenging. expects 15% effective tax rate for FY2012E) and (2) aircraft would go off the books in 3QFY12E. Retains business guidance of 10-12% revenue growth.e. However. and (2) 2Q overseas business growth was partly fed by acquisition/currency which may not continue while margin may remain weak (7%).7% consolidated EBITDA margin in FY2012E (11. (2) 8. The consumer segment may pick up but only to the extent of 10-15% yoy growth as dealer feedback on business remains weak. We believe that while the medium/long-term outlook for the company remains positive.

March fiscal year-ends 2011-13E (Rs mn) 2011 Valuation EPS (Rs) BVPS (Rs) P/E (X) P/B (X) Consolidated Revenue Yoy growth (%) EBITDA margin (%) PAT Segmental Power systems Revenue Yoy growth (%) EBITmargin (%) Consumer products Revenue Yoy growth (%) EBITmargin (%) Industrial systems Revenue Yoy growth (%) EBITmargin (%) Others Revenue Yoy growth (%) EBITmargin (%) Overseas subsidiaries Revenue Yoy growth (%) EBITDA margin (%) 1QFY12 2QFY12 1HFY12 2HFY12E 2012E 2013E 1.0 9.0 61 (31.2 100.1 14.230 16.5 13.5 14.7 7.5) 11.7 14. but steel still remains high and copper may be largely hedged Some benefit of commodity price decline may flow through.5 171 (31.2 24.801 3.8 8.0 (0.1 22.9 1.212 7.5 6.4 7.2 11.8 53.7 bn at end-FY2011 to Rs9.689 1.9 9.4 9. Copper requirements for long-lead power business are typically hedged.961 55. Some of the benefit may come in as the company was absorbing part of the commodity price increases (unable to pass onto customers) and thus the recent decline may help in slightly better margins in incremental orders.6 2.2 6.377 5.9 120 (30.904 (2.0 2. 52 KOTAK INSTITUTIONAL EQUITIES RESEARCH .5 26.536 5.674 1.up by Rs5 bn during 1HFY12 from Rs4.149 5.5) 12.1 9.6 15.4 4.6 2.2 46.2 11.717 2.5 23. BS takes a bit of a knock.307 12.0 15.090 7.1 10.5 3.6 15.311 8.5 120 12.4 7.8 18.7 5.7 5.0 12.5) 11.2 2.5 30 (31.031 107.2 8.238 2.0) 12. particularly in the consumer and industrial segment.3 58.2 13.8 18.191 24.7 10. Kotak Institutional Equities estimates Recent ease in commodity prices may benefit.3 58.485 14.051 9.9 13.5) 17.991 116.5 11.0 11.3 10.617 16.9 4.5 40. Note that these are short lead-time businesses wherein the commodity requirements are not hedged.0 5.0) 11.9 7.8 2.0 17.183 51. we remain skeptical of this rationale as the order backlog has not increased materially on a yoy or sequential basis.6 11.7 3.6 5.7 24. skeptical of backlog based explanation of higher inventories in overseas Crompton management attributed the increase in inventory and debtor levels (particularly in overseas subsidiaries) primarily in order to service the existing order book.197 25.4 9.4 11.541 31.988 (7.4 1.1 10.1 9.761 8.3 28 (31. However.5 12.6 2.7 Source: Company.212 25.3 51.9 3.255 13.4 20.2 15.6 58 (31.4 15.7 bn at enf-1HFY12.479 2.1 53.055 12.5 778 27.6 5.5) 11.7 1.407 12.5) 13.766 9.779 5.473 10.3 7.5 20. Increased working capital levels led to higher debt levels at the consolidated level .5 5.5 11.5 2.4 14.5) 12.066 19.433 9.8 8.230 (5.3 15.542 1.5 14.9 12.437 2.2 68.Industrials Crompton Greaves Key segmental assumptions for Crompton.686 11.5) 9.383 12.0 50.

982 7.767 Standalone 2011 23.706 9.670 6.implied 1HFY11 2011 1HFY12 1HFY12 24. The sequential growth was primarily led by power segment inflows at Rs18.Crompton Greaves Industrials Consolidated and standalone balance sheet of Crompton.400 21.080 Source: Company.453 9.417 6. Kotak Institutional Equities estimates Order inflows and backlog flat yoy. a 33% growth on a sequential basis and relatively flat on a yoy basis.747 2.277 Fixed assets Investments Cash & bank balance Current assets Inventories Sundry debtors Loans & advances Current liabilities & provision Current liabilities Provisions Net current assets (excl. The company has won a 765 KV substation tender from PGCIL (a first as earlier one was from UP state).539 253 203 50 647 25.525 4.484 32.767 1HFY12 34.868 242 111 131 885 21.492 2. 2008-1HFY12 (Rs bn) 30 25 25 20 15 (Rs bn) 75 Consolidated inflows 27 24 17 17 17 18 17 15 23 22 21 21 68 68 66 66 63 64 61 64 60 60 26 17 45 Consolidated backlog 71 70 72 71 71 52 30 10 15 5 2QFY12 1QFY12 4QFY11 3QFY11 2QFY11 1QFY11 4QFY10 3QFY10 2QFY10 1QFY10 4QFY09 3QFY09 2QFY09 1QFY09 2QFY12 1QFY12 4QFY11 3QFY11 2QFY11 1QFY11 4QFY10 3QFY10 2QFY10 1QFY10 4QFY09 3QFY09 2QFY09 1QFY09 4QFY08 4QFY08 - - Source: Company. CRG reported a consolidated backlog of Rs71.232 18.438 268 (413) 43.149 2. Kotak Institutional Equities KOTAK INSTITUTIONAL EQUITIES RESEARCH 53 .522 16.595 4.300 26.473 3.283 33.283 1.970 36.182 16.781 32.498 31.111 15.984 42.352 1.837 17.301 13.175 3.915 22.2 bn versus 1Q-end backlog of Rs71 bn.626 14.503 16.325 1.816 1.170 10.801 7.893 25.277 19.758 134 82 52 735 23.102 3.780 37.910 Overseas . 2010-12E (Rs mn) Shareholders funds Share capital Reserves & surplus Loan funds Secured loans Unsecured loans Deferred tax liabilities (net) Total sources of funds Consolidated 1HFY11 2011 28.701 7. though it still wants to retain focus on manufacturing and not on the EPC execution business.555 4. March fiscal year-ends.933 12.187 14.283 18.174 1.450 2.355 23.388 4.509 22.619 37.475 20.835 10.283 27.780 23.464 5.055 9.505 23.747 1. March fiscal year-ends.430 50.822 1.069 9.041 1.338 13.449 28.171 7.567 4.283 21.700 34.341 4.924 1. Consolidated Quarterly order booking and backlog trend for Crompton.554 229 149 159 160 34.892 29.801 1HFY11 20.272 6.904 5.293 1.427 5.860 13.910 9.151 1.536 2.969 3.856 1.906 14.098 31.455 39.265 13.192 33.975 8.774 14.767 9.025 4.390 18.796 4.000 12.298 8. cash) Total application of funds 17.046 2.857 19.543 17.693 5.605 3.283 23.675 12.512 11.721 5.673 2.163 925 26.116 14.526 3.963 25.153 6.222 20.230 7.600 4.057 15.703 5.721 8.986 15.353 43.3 bn recording a 41% sequential growth.941 15.301 2.007 4.104 16.569 9. PGCIL substation order win is a first Crompton reported consolidated order inflows (excluding Consumer business revenues) of Rs22 bn.710 3.

5 20.717 3— 2.5 26.2 11.621 13.0 24.227 13.0 10.933 13.1 48.864 11.9) 4. We correspondingly revise our target price to Rs160/share (from Rs200/share) based on 14X FY2013E EPS (from 15X earlier).5X FY2013E EPS.5 26.3 11.9) (4.761 8.8) 116.680 11. 2012-13E (Rs mn) 2011 Standalone power Revenues Growth (%) EBIT EBIT margin (%) Consumer products Revenues Growth (%) EBIT EBIT margin (%) Industrial systems Revenues Growth (%) EBIT EBIT margin (%) Overseas subsidiaries Revenues Growth (%) EBITDA EBITDA margin (%) Consolidated Revenues Growth (%) EBITDA EBITDA margin (%) EPS (Rs) EPS growth (%) Revised estimates 2012E 2013E Previous estimates 2012E 2013E 25.7) (2.1 107.7 15.9) (13. (2) slower-thanexpected pick-up in international demand.8 2.5) (20.158 8.0 3.5 26.2 4.3 3.210 8.2 20. (3) Euro area business (17% of business) and Euro currency (translation).820 — 3.1) (2.212 25.597 9.7 23.5 14. (2) negatively surprised by sequential decline in standalone business.407 12.9) 0.5 (10.5 13.2 Variation (%) 2012E 2013E (7.8) Source: Company.0 3.7 9.820 5.8 7.8 4. Key risks to earnings relate to (1) aggressive competition and large capacity additions in the domestic power T&D segment may pressure revenue growth and margins.0 17. Valuations appear reasonable at about 12.9) (16.0 5.0 100.0 2.5 107.7 51.7 for FY2012E and FY2013E.5 20.5 21.099 10. Revised assumptions of Crompton. Attempts to communicate more transparently are visible and positive.9 12.321 15. (3) lack of visible improvement in overseas business margins and (4) balance sheet deterioration with higher debt and inventory levels.6 12.247 10.5 45.006 7.Industrials Crompton Greaves Revise estimates and target price to Rs160/share.630 10.307 12.762 13.068 14. based on lower revenue growth and margin assumptions across most segments.4 14.473 10.9 10.5 23.3 (34.3 and Rs12. downgrade to ADD We revise our earnings estimates on Crompton to Rs9.4 1.0 40.0 16.602 18.5) (11.332 8.5 2.212 7.228 19.2 9.5 (11.2 from Rs10.5) 2.3 (28.978 9.127 8. 54 KOTAK INSTITUTIONAL EQUITIES RESEARCH .5 2.621 13.603 5.275 14. and (4) slower-than-expected growth and lower-than-expected margins in the consumer and industrial business.5 14.4 2.542 1.4 4.389 6.0) (17.1) (9.438 13.0 2.051 9.8) (16.9 10.1 2.493 1.928 14.0 3. March fiscal year-ends.3 and Rs11.4 11.066 19.2 0.1 12.9 52.149 5.728 7. respectively.524 14.904 (2.0 2.626 18.007 11.343 4.900 10.0 2.5 23.5 2.5) (18.382 11.443 12. Kotak Institutional Equities estimates Downgrade to ADD (from BUY) with a revised TP of Rs160 (from Rs200) as (1) business remains under pressure on both revenues and margins across segments even though it may largely priced-in.0) 116.770 5.

448 (4.4 0.560 (1.396 (51.551) 11.410 (1.6 13.9 0.6 0.891 (3.459) 6.815) 8.873 645 4.322 157 6.813 (2.036) 5.7 22.113 8.619 2.1) 17.191 14.834) (290) (3.4 0.602 1.567) 4. Kotak Institutional Equities estimates KOTAK INSTITUTIONAL EQUITIES RESEARCH 55 .018 733 12.010 30.672 4.054) 4.944) 7.758) 6.151 10.631 25.956 587 (655) (1.7 15.153) 9.2 0.526) (3.182 25.043) 7.577 139 7.310 733 17.955 284 9.055 8.283 36.2 (0.760 5.491 (2.0 15.1 10.465 21.978 768 (452) (2.936) 12.972 (481) 5.445 588 21.7 32. March fiscal year-ends.625 15.2 Balance sheet Shareholders funds Equity share capital Reserves and surplus Minority interest Loan funds Total sources of funds Net fixed assets Investments Net current assets (excl.747 12.5 35.149 2.495) 2.703 46.161 6.211) (8.747 11.560 12.212 (97.8 8.360 (1.1 30.9 0.424) 6 (6.557) (738) (3.607 19.1 35.6 Ratios EBITDA margin (%) Debt/equity Net debt/equity RoAE (%) RoACE (%) Source: Company.761 (105.785 1.028) 3.7 25.3 107.047) 5.483 21.8 26.588 (125) 10.0 0.438 999 (209) (1.891 (3.605 1.373 (77.650) 8.295) 5.747 8.783) 10.8 11.884) 7.1 9.0 17.6 31.703 37.421 10.6 0.8 100.864) (5.095 32.068 (583) (954) 4.283 31.017 10.323 (60.389) 5.991 9.688 (49) 30.2 (0. cash) Cash Net deferred tax asset Total application of funds 9.2 87.043 1.095 13.607 37.332 669 (398) (2.703 50.098 11.803 (990) 8.409 (78.656 482 25.593) (1.672 (3.8 68.Crompton Greaves Industrials Consolidated financials of Crompton Greaves.367 7.051 (86.285 123 8.152 (2.073 11.683) — (3.613) 13. changes Change in working capital / other adjustments Net cashflow from operating activites Fixed Assets Investments Cash (used) / realised in investing activities Free cash flow 4.056 6.462 (1.3 116.209 9.382 (6.1 0.7 0.444 934 5.7 21.100) 9.216) 8.541) 5.035 5.433 (2.464 157 4.439 757 (781) (1.283 42.4 0.415 418 19.716 (2.3 91.828 1.560 18.1) 39.141 (1.418) (3.263) 6.283 23.989 (7.623 1.340 157 8.536 4.161 7.417 6.639) 12.880) 9.984 (160) 37.420 21.661 6.465 Free cash flow Operating profit before wcap.568) 5.124) 2.747 1.865 7.017 13.417) 9.483 43.4 0.667 2.770 937 (265) (1.7 14.197 11.760 43 5.683) 2. 2007-13E (Rs mn) 2007 2008 2009 2010 2011 2012E 2013E Income statement Operating income Total operating expenses EBITDA Other income Interest expense Depreciation Pre-tax profit Tax Net profits EPS (Rs) 56.804) (1.291 (3.758) — (2.241 12.066 (160) 50.631 13.679 (160) 46.688 733 8.045 19.

7% margin (and 2QFY11 margin of 16%).087) (5.0 2QFY11 23.3 42.6) (34.7 52.377 (22.402 (463) (600) 1.96 bn in 1HFY12 versus Rs4 bn in 1HFY11.0 9.6) vs est.3 13.260 2.079) 4. about 6% ahead of our estimate of Rs25. The margin miss was led by overseas subsidiaries where sequential improvement has been lower than expectations.1 28.2 12.4%.795) (6.4 11.032 — 4.9 12.9% in 2QFY12 and versus our estimate of 11.3) 24.5 bn.048) (6.3) (10.8 (49.4 bn.183 1.9 1HFY12 51.567 (39. down 45% yoy and 34% below our estimate of Rs1. about 17% below our estimate of Rs1.788) 6.055 25.4 (9.819 151 (110) (608) 1. Crompton Greaves .0 13.0 7.745 (1.695) 1.0 12.9 5.4 16.5) 52. margins disappointed recording a sharp correction of 490 bps yoy to 11.8 20.183 1.961 17 1.917) 3.2 8.054 (920) 2.4 199.7 58.reported net PAT of Rs1.047) (3.713) 4. The sharp margin decline led to net PAT of Rs1./Sales EBITDA margin PBT Margin Tax rate PAT margin 2QFY12 2QFY12E 27.2 qoq 11.1 (6.306 411 (99) (873) 5. sharp margin contraction led to a steep miss on net results.3 (31.2 11.5 7.3 13.9) (34.5) (45.2) (51. up 9.0 (35.134 1QFY12 24.6 9.273) (3. 2011.4% in the previous year) leading to a 51% yoy decline in net PAT .2QFY12 consolidated revenue model (Rs mn) Sales Expenses Stock Raw material Employee Other expenses EBITDA Other income Interest Depreciation PBT Tax Net profit Extraordinary items RPAT Key ratios (%) Raw material/Sales Employee exp.6) 110.4 9.5) 42.2) (5. Crompton reported an EBITDA margin of 8.1% in 2QFY12 versus our expectation of 12.6) (44.001 (40.9 3.1 28.1 4.3 13.7) 19.796) (22.032 67.433 (47.917 215 151 (102) (113) (726) (553) 1.4 25.7 (46. relatively flat on a yoy basis and marginally (about 3%) lower than our expectation of Rs14.2 29.6 32.354) 4.0 (1.059) 1.9 (32.5 11.7 30.1) (49.5 31.978 1HFY11 47.093) (2.0 12.2 13.8% yoy growth.9 12.334) 2.8 61.2 11.1 48.9 66.8 7. Kotak Institutional Equities estimates Standalone results Nil revenue growth (broadly in line) however margins disappoint Crompton reported 2QFY12 standalone revenues of Rs14.2 (22.4 (2.614 (24.574) (3.332 228 (49) (458) 3.7 11.021) 2.4 6.36 bn.801 — — 1.6 3.4 3. Sharp margin contraction led to a 29% yoy decline in net PAT to Rs1.2) 31. recording 12. EBITDA margin declined by 550 bps yoy to 7.3) % change yoy 12.979 (20.1) 5.646 2.8 bn.899 (938) 1.847 (20.4 12.9 bn.1 bn in 2QFY12 (from Rs1.527 (30.698) 1.000) (3.6 (32.1 190. Crompton reported consolidated revenues of Rs51. For the half year ending September 30.3) (44.5) (22. 5.6 bn.078 366 (212) (1.647) 636 (15.Industrials Crompton Greaves Results disappoint on sharp margin contraction despite revenue outperformance Consolidated results Crompton reported consolidated revenues of Rs27 bn in 2QFY12.1 8.3 15./Sales Other exp.8) 114. The revenue outperformance was largely led by better-than-expected revenues at the overseas subsidiaries.347) (6.6 5.4%.9) Source: Company.134 — 2.559) 2.3 31.801 67.4) (50. down 550 bps yoy from 13.9% in 1HFY12 (versus 13.4% yoy from Rs47 bn in 1HFY11.253 (475) 778 17 795 61.1 37. Despite the betterthan-expected revenues.221) (3.721 (19.6 % change 9.8 13.6 bn in 2QFY11).8 8.2 bn.5 5. However. 56 KOTAK INSTITUTIONAL EQUITIES RESEARCH .

540) 2.515 1. and down 7% yoy.0 31.359 72.3% versus our estimate of 12. the power segment revenues have remained relatively flat yoy at Rs11.7 bn.194) (892) (1. Consumer business EBIT margin corrected by 320 bps yoy to 11.9) (4.4 25.614 1.3) 7.123 1.4 bn in 1HFY12 versus Rs3 bn in 1HFY11.5) 7.688 (12.314 (729) 1.3 10.5 8.6 (57.5 (16.0) 2.6 (13.3) (29.5) (46.238 (824) 2.403 341 13 (368) 4.008) 3.867 157 (14) (286) 1.901) (13.7 16.3 6.822) 794 (11.5 10.8) 1.5) (12.585 1QFY12 14.6% in 1QFY12 despite a 5% sequential growth in revenues.9 6.3 11.5% below our estimate of Rs6.4 (96.9 15.7) (212.3 23.1 10.0 9.7 11.5) (6.812 (391) (453) 1. ` Consumer Products and Industrial Systems: Consumer and industrial segments recorded moderate revenue growth of 3.203 (25.467) (3.1) 50.9% in 1HFY12 (from 15.4) (13.044) 4.2) 36. EBITDA margin contracted by 390 bps yoy to 11.007 71. 2011.6) (12.1 2QFY11 14.2) (40.6 (97.2QFY12 standalone revenue model (Rs mn) Sales Expenses Stock Raw material Employee Other Exp EBITDA Other income Interest Depreciation PBT Tax Net profit Key ratios (%) Raw material/Sales Employee exp.7% in 2QFY12 (marginally below our estimate of 16%).400) (1.515 14.Crompton Greaves Industrials Crompton Greaves .1) qoq (1.6 (137.4 (26.810) (3.383) 3.9) 1HFY12 29.8) (107.3 (388. This segment also disappointed significantly at the margin level recording EBIT margin of 11.5 11.6) 6.170 (20.492) 1.5 6.4 (1.3 (1.723 (433) 1.8 9.7 bn.413 1HFY11 27.962) (741) (1./Sales Other exp. Margins also declined sequentially from 12.1 10.8 7.0 70.reported net PAT of Rs2.2 12.7 31.0) (1.1% in 1HFY11.6) (17.8 15.1 10.2) (15.6% and 9% yoy respectively (about 3-4% ahead of our estimates). Kotak Institutional Equities estimates For the half year ending September 30. (3.1) (9. Segmental results: Power leads revenue disappointment while margin disappoints across segments ` Power Systems: Revenue disappointment was led by the power segment which reported revenues of Rs6 bn.0) (2.474) 1.6) (9.9 (34./Sales EBITDA margin PBT Margin Tax rate PAT margin 2QFY12 2QFY12E 14.2) 0.3 10.905 168 156 (1) (17) (267) (231) 1.6 6.9 11.5) (30.481 325 (15) (553) 3.0 5.448 (12.2 10.8 vs est. For the half year ending September 30.3 20. standalone revenues recorded a 4.722) 496 (21.8% yoy growth to Rs29 bn.7 12.516) 1. EBIT margins recorded a sharp correction to about 12% in 1HFY12 versus 17.4) % change yoy 0.877 (23.5% and down 630 bps yoy.3 68.389 (1.1) 15.2% versus our estimate of 13.1 25.7 12.1 25.8%) leading to a 20% yoy decline in net PAT .2) (20.133) (1.7) Source: Company.4 11.139) 104 (9. KOTAK INSTITUTIONAL EQUITIES RESEARCH 57 .5% while industrials segment EBIT margin corrected by 480 bps yoy to 15.7 25. Margins for these segments also disappointed versus estimates.1 8.0 16.290 68. 2011.206) (918) (1.1) (12.057) (298) (10.309 193 7 (195) 2.4) (19. about 11.2 5.8 % change 4.962 (12.

634 3.5 5.0 24.4 0.7 bn.0) (7.801 3.7 37.5 11.5 12.9 15.810 (29. The strong growth was partially aided by favourable currency movement (Euro-INR). The management cited that Emotron recorded revenues of Euro 12 mn and QEI recorded revenues of US$4 mn in 2QFY12.1 25.5%.688 (11.4) (19.1 (3. However. Kotak Institutional Equities estimates Overseas subsidiary results Revenue growth partially on currency depreciation.3 41. recording strong growth of 31.5 17.1) (16.6 13.1 (1.762 4.1 (12. reported EBITDA margin of 5.2 31.952 6.0) 3.0 13. EBITDA positive but goodwill write-downs affected net results Emotron and QEI made reasonable contribution (to the tune of about Rs1 bn) to the quarters revenues. %change yoy qoq 1HFY12 1HFY11 % change 5.448 5.440 4.238 7.8 13.8) 41.7 15.554 27.7 (11.5 13.2) (28. 58 KOTAK INSTITUTIONAL EQUITIES RESEARCH .7 23.4) (6.0 24. Furthermore.6 32.686 5.3 15.617 14.442 14.6) (12.8 672 543 591 1.5) 3.7% ahead of our estimate of Rs10.2 2.128 671 705 2.3 33.9 45.Industrials Crompton Greaves Segment-wise standalone revenues and EBIT for Crompton (Rs mn) Revenues Power Systems Consumer Products Industrial systems Total PBIT Power Systems Consumer Products Industrial systems Total Revenue mix (%) Power Systems Consumer Products Industrial systems PBIT margins (%) Power Systems Consumer Products Industrial systems Total 2QFY12 2QFY12E 2QFY11 1QFY12 vs est.1 25.5 14.1% down 560 bps yoy and versus our estimate of 9. Emotron and QEI contributed Rs1 bn to 2Q revenues.474 1.5 17. Both these companies were positive at the EBITDA level as well but goodwill write-downs (amortization of goodwill on consolidated) affected net level contribution.383 29.674 10.8 20.1 14.5 16.962 6.617 14.5 20.4) (19.541 9.203 11.077 1.347 4.8 38.766 14.0 35.3 (11.510 717 754 576 2.296 1.988 4.7) 4. this quarter’s numbers also include revenues of Emotron and QEI (acquired in 1QFY12) and hence yoy comparison is not comparable.515 6.9 17.6 4.6 40.6 9.2) 11.808 913 579 579 2.9) (40.050 (26.2 11.437 3.3) 2.634 3.3 Source: Company.858 1.2 17.0 11.8) 1.9 14.0) 2. Margin disappointment led to net PAT of Rs60 mn (down 89% yoy) against our estimate of Rs442 mn. but margins again much below expectations Overseas subsidiaries reported 2QFY12 sales of Rs12.877 1.2 44.7 12.3) (28.4 12.389 1.974 1.6 4.9 12.166 3.0) (13.5 bn. overseas subsidiaries also reported disappointing margins.4 35.0) (6.9 12.6% yoy and 17.1 23.

4 5.0) (36.012 47 (5) (102) (95) (459) (322) 132 590 (72) (147) 60 442 61.2 vs est.3) 9.1) (111. Kotak Institutional Equities estimates KOTAK INSTITUTIONAL EQUITIES RESEARCH 59 .377) 1.0 FY2012E 2QFY12 1QFY12 FY2011 4QFY11 3QFY11 2QFY11 1QFY11 FY2010 4QFY10 3QFY10 2QFY10 (7.0) (5.6 29.041.903 70 (112) (505) 1.2 302.4 12.0 Subsidiary revenue growth (in INR terms) 21.0) (65.2) (983.9 11.8 74.2 (4. Quarterly subsidiary revenues of Crompton in local currency and INR terms Subsidiary growth (in Euro terms) (%) 35.0) Source: Company.312) (2.0 EUR-INR movement 28.652 (11.0 7.302) (1.1 72.541 10.1 (89.737) 1.5 26.230 (21.504) 646 1.2 14.2QFY12 subsidiaries revenue model (Rs mn) Sales Expenses Stock Raw material Employee Other Exp EBITDA Other income Interest Depreciation PBT Tax Net profit Key ratios (%) Raw material/Sales Employee exp.5 25.985) (3.1 24.7 7.9 7.214) (4.3) (86.8 25.508) 533 (5.7 (1.2 (0.7) 1HFY12 22.1 16.5 0.0) 83.4 39.5 24.2) Source: Company.4 % change 16.5) (144.5 2QFY11 9.4 85.2) (128.Crompton Greaves Industrials Crompton Greaves .352) (1.689 (9.3 9.8 42.023 35 (55) (263) 740 (191) 549 1QFY12 9.8 60./Sales EBITDA margin PBT Margin Tax rate PAT margin 2QFY12 2QFY12E 12.025 61.5) (4.8 2.1 54.6 (125.124 (17. Kotak Institutional Equities estimates Part of revenue growth on favourable currency movement We highlight that the strong sales growth of 31.4 10.5 9.8 16.8% positive EUR-INR currency impact.5) (33.5) % change yoy qoq 31.356 (331) 1.853) (2.744) 1.445.7) (51.682) (1.1 (983.794) (2.4 13.0 4.567) (48) (5) (95) (322) (470) (42) (513) 50.7 (77.0) 51. The subsidiary sales have likely recorded a revenue growth of about 24% yoy in EUR terms.6) (40.8 5.6 6.9) (9.6% reported by the overseas subsidiaries include a 7.5 5.0) 6.531 (8.7 23.8 22.6 1.620) (2.7 (82.632) 4.071) 598 42 (197) (781) (339) (114) (453) 1HFY11 19.2 25.8 7.145 (9.0) 1QFY10 - (14.6 23.926 (7.0) (62.1 54.221) 357 (10.4 14.8 42.895) (9.072 (17.8) 76.1 1.7) (2. 17.9 (68.4) 34.640) 2.5 21.1 24./Sales Other exp.0) (21.3) 70.7 14.647) (4.0 14.1 22.9) (1.0 5.4 (36. Bloomberg.8 11.

8 10.7 2013E 15.2 mn sq.5 14.8% in 1QFY12 and 27.5 24. ft of projects in the midincome segment.com Mumbai: +91-22-6634-1376 Dhruva Acharya dhruva.4 3.9% in 2QFY11 (due to lower interest costs).0) Forecasts/Valuations EPS (Rs) EPS growth (%) P/E (X) Sales (Rs bn) Net profits (Rs bn) EBITDA (Rs bn) EV/EBITDA (X) ROE (%) Div.3 bn (+37% qoq.2 8.3 4.3 1.095.78 mn sq.1 MFs 0. Ajay Mathrani ajay.8 mn sq. Area under construction increased due to addition in commercial segment While area under construction in residential segment remained stagnant qoq at 14. ft (value of Rs3.9 Price performance (%) 1M 3M 12M Absolute (16. The company has also handed over 0.3% in 1QFY12 (due to high other income) and 16.937 QUICK NUMBERS • Revenues of Rs3. Company data and valuation summary Indiabulls Real Estate Stock data 219-68 52-week range (Rs) (high. Net profit at Rs0.0 1.low) Market Cap.2 16. ft in 2QFY12 (same as in 1QFY12) bringing the total are under lease to 2.4 bn (-40% qoq.com Mumbai: +91-22-6634-1417 Kotak Institutional Equities Research kotak. has declined by 40% qoq and 23% yoy led by higher interest costs.0 Shareholding pattern (%) Promoters 28.1 2.967/sq. The company leased an additional 0.ft.2 mn sq. to BSE-30 (15.8 6. ft (value of Rs4.8 bn) in 1QFY12 and 1. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES.research@kotak.4 bn. ft in 1QFY12 and 1. ft area in Ahmedabad. +26% yoy) with EBITDA margin expanding to 30.1 mn sq.1 8. PAT came in at Rs0.4 2012E 8. EBITDA margin jumped in 2QFY12 as cost of construction and development as a percentage of sales declined to 53% in 2QFY12 versus 67% in 1QFY12 and 62% in 2QFY11.3 bn (+37% qoq.6 mn sq.2 12.5) (61. REFER TO THE END OF THIS MATERIAL. +11 yoy) • Sold 1. ft in 1QFY12 • Value of listed entities is 70% of current market cap Sales volume improves qoq.6 3.9 mn sq.4 0.mathrani@kotak.9% versus 27. ft at end-2QFY12. ft in Ahmedabad IBREL sold 1.2 mn sq.3 bn in 2QFY12 are up 37% qoq and 11% yoy and EBITDA of Rs1 bn is up 230% qoq and 26% yoy. ft (2. commercial area under construction increased to 2.2) (41.0 mn sq.9 0.9) (66.5 4.4 5.78 mn sq.4 81.7 1.9 bn) in 2QFY12 versus 0.0 Interest expenses negate EBITDA margin expansion IBREL reported revenues of Rs3.RS Indiabulls Real Estate (IBREL) Property OCTOBER 20.0 FIIs 52. Price (Rs): 70 Target price (Rs): BSE-30: 16.3 mn sq. indicating sales are moving in mid-income projects.5) 17.com Mumbai: +91-22-6634-1100 For private Circulation Only. ft in 2QFY12 versus 0. ft in 2QFY12 versus 0. . IBREL sold 1.4) (36.8 mn sq. delivers 0.acharya@kotak.4 3. ft (stagnant for the past three quarters). -23% yoy) and PAT margin declined to 11. The company has now sold 71% of residential area under construction (63% at end-1QFY12) and incremental qoq growth will have to come from revenue recognition in the balance 29% as they get booked as sales. (Rs bn) 28. +11% yoy) and EBITDA of Rs1 bn (+230% qoq. 2011 UPDATE Coverage view: Cautious Sales increase qoq drives EBITDA margin expansion.0 (1.6 mn sq.2 mn sq. indicating that sales are taking place in mid-income projects. ft in 2QFY11 while realization dropped 18% qoq and 76% yoy.1% in 2QFY11. Revenues of Rs3. however.9% versus 12.8 mn sq.8) Rel. ft (value of Rs31 bn) in 2QFY11 while realizations declined by 18% qoq and 76% yoy to Rs3. ft at end-1QFY12) as the company added 0.5 114.1 mn sq. Yield (%) 2011 4.

31 17.029 449 (127) (76) 1.000 8. ft in 1QFY12.022 363 660 2QFY11 3.27 (0. in July and August 2011.78 mn sq.37 56.753) (257) (285) 1.406 353 1.37 0. IBREL.1 40.870 4.9 43.967/sq. FBT and wealth tax) PAT before minority interest Minority Interest PAT after minority interest 2QFY12 3.15) 16.150 30.69 Source: Company.3 18.ft.080 8.23 mn sq.026 350 (724) (55) 597 (213) 384 (10) 394 1QFY12 2.25 1.3 23.276 (519) 756 42 714 23.15 61.320 (2.925 (519) 1. KOTAK INSTITUTIONAL EQUITIES RESEARCH 61 .19 0.78 mn sq. IBREL.38 64. March fiscal year-ends 2QFY12 Value Area (Rs mn) (mn sq ft) Sales status Opening Balance Add: Sales booked in quarter Less: Handed over Closing balance Under construction Opening Balance New launches less handovers Closing balance 1QFY12 Value Area (Rs mn) (mn sq ft) 4QFY11 Value Area (Rs mn) (mn sq ft) 3QFY11 Value Area (Rs mn) (mn sq ft) 64.616) (198) (296) 311 1. IBREL sold 0.880 9.790 8.33 (0.100-4. March fiscal year-ends (Rs mn) Net sales Expenditure Real estate construction and development expenses Employees cost Other expenditure EBITDA Other income Interest costs Depreciation PBT Taxes (including deferred tax.336 1.23 14. ft in 1QFY12 Sales and construction status.405) (3.688) (3. indicating that sales are taking place in mid-income projects. ft in its Indiabulls Greens project in Panvel which is selling for Rs4.750 10.406 (334) (53) 1.421 (2.054 1HFY11 4.718 (3.0 21.23 61.7 12.17 0.84 (0.329 (306) 1.8 15.69 2.741 (4.874) (136) (178) 813 243 (116) (42) 897 (393) 505 (4) 509 30.37 mn sq. Kotak Institutional Equities 1.8 Key ratios EBITDA margin (%) PAT margin (%) Effective tax rate (%) % change qoq 37 9 8 29 (4) 230 (75) 116 4 (55) (30) (62) NA (40) yoy 11 5 (6) 89 60 26 44 521 31 (34) (46) (24) 152 (23) 1HFY12 5.12 14.870 9. ft.294) (1.9 35.41 14.4 27.41 2.46 0.08) 5.369) (455) (581) 1.197) (258) (233) 1.990 (143) 47.19 2QFY11 Value Area (Rs mn) (mn sq ft) 17.Indiabulls Real Estate Property Revenues up 11% yoy while profit declines 23% yoy Interim results.12 48. Kotak Institutional Equities ` Though IBREL sold 1.500/sq.680 - 17.17 16.080 3.188) (1.997 3.19 5.48 16.78 55.1 16.50 17.15 1.9 11. As per Propequity.7 % change 22 19 5 76 149 30 291 734 43 51 (0) 86 735 48 Source: Company.0 27. realizations declined by 18% qoq and 76% yoy to Rs3.756 (1.56) 7.8 27.98 17.650 5.680 69.058) (109) 1.23 mn sold in 2QFY12 versus 0.001 (2.65 1. ft in 2QFY12 versus 0.430 7.110) (1.

9 12. The break-up is—(1) residential area of 533 versus 527 acres at end-1QFY12. (2) 43 mn sq.1 bn qoq to Rs48 bn.6 Mid-income 4.6 mn sq.6 4.6 0.5 bn and (4) overall loan funds reduced by Rs1.2 bn to Rs25.2 — 1.2 Premium 0 0 Mid-income 2.9 3. ft qoq to 17. and (3) SEZ area of 2.7 Total residential 14.4 1.5 Source: Kotak Institutional Equities ` Area under construction increased by 0. ft versus 63 mn sq. ft of space in Ahmedabad.5 17.3 4. Current liabilities have increased sharply by Rs19. ft and has now remained at this number for the past three quarters.9 1.3 3. ft at end-1QFY12— (1) residential area of 55 mn sq.4 — 0.6 14. end-2QFY12 2QFY12 1QFY12 (mn sq ft) (mn sq ft) Residential area under construction Super premium 3.3 14.6 4. (2) compulsorily convertible debentures have reduced by Rs1.9 2. On the liabilities side.86 bn to Rs55.1 0.3 mn sq.9 4.3 16.9 bn.7 4.7 14.4 3. Debt has not risen as it is likely that 1QFY12 funding for projects undertaken in the quarter came from letters of credit drawn against sanctioned loan facilities which is cheaper in terms of interest rates and forms a part of current liabilities. ft (54 mn sq.2 12.4 bn at end-1QFY12. qoq.3 6.3 bn. ` IBREL’s land bank for future development stands as 3.3 6. ` On the assets side.9 2. ` Area under development increased to 64 mn sq.8 1.6 3.3 1. ft at end-2QFY12 as IBREL added area in the mid-income commercial segment.1 bn to Rs6.7 bn to Rs59. 62 KOTAK INSTITUTIONAL EQUITIES RESEARCH .7 bn to Rs30. The company has handed over 0. qoq.6 3.1 mn sq. (1) cash and investments including mutual fund investments declined by Rs0. ft at end-1QFY12). Area under construction in residential segment remained stagnant qoq at 14.7 2. ft at end-1QFY12) and (2) commercial area of 9 mn sq ft (steady qoq).9 bn. IBREL.4 Total commercial 2.551 acres (implied though the 2QFY12 presentation does not explicitly mention this). ft in commercial segment Break-up of area under construction.4 — 0.5 mn sq.6 bn. (3) loans from others have increased by Rs1. (1) optionally convertible debentures have reduced to zero from Rs1.2 0.7 bn and (3) loans and advances increased by Rs2.7 14.2 4QFY11 (mn sq ft) 3QFY11 (mn sq ft) 2QFY11 (mn sq ft) 1QFY11 (mn sq ft) 3. ft of commercial area (46 mn sq.3 4.2 bn to Rs22.3 Premium 6.124 acres at end-1QFY12 as the company acquired 34 acres of land (categorized under residential area) and moved 31 acres to area under development (28 acres of residential area and 3 acres of commercial area).127 acres (including SEZ land) versus 3.2 16. (2) fixed assets including CWIP and capital advances increased by Rs14.7 14.6 Commercial area under construction Super premium 0.6 6.6 Total 17.9 2.Property Indiabulls Real Estate Area under construction increases by 0.9 — 0.3 mn sq.

284 4.424 4.578 566 132.107 47.045 20.027 8.328 54.734 798 61.125 806 88.090 3.325 70. loans and advances Inventories Sundry debtors Cash and bank balances Other current assets Loans and advances Less: current liabilities and provisions Current liabilities Provisions Net current assets Debit balance of P&L Account Total 4QFY10 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 803 93.188 234 23.410 7.045 23. Kotak Institutional Equities estimates KOTAK INSTITUTIONAL EQUITIES RESEARCH 63 .862 48.6 Value of IBREL's stake @ 20% discount (Rs bn) Per share (Rs) 9.474 2 132.476 261 26.358 25.256 1.834 38 1 1.899 5.974 52.463 1.077 51.501 4 135.358 155.743 2.691 152.120 1.980 1.470 3.220 5.986 3.657 3.671 2.650 57 135.577 1. (Rs bn) 25.512 0 803 93.Indiabulls Real Estate Property Quarterly balance sheet of IBREL March fiscal year-ends.9 11.284 48 150.090 3.507 — — — — 156.944 6.058 95 18.0 22 10.534 8 156.045 23.489 190 10.986 21.427 72.273 47.679 727 26.410 7.701 51.728 804 93.956 3.567 606 50.100 51.045 20.800 28.2 Market cap.046 1. 4QFY10-2QFY12 (Rs mn) Shareholders funds Share capital Reseves and surplus Share application money pending allotment Share application money received by subsidiary pending allotment Share warrants Share warrants of subsidiary companies Minority interest Preference share capital of subsidiary companies Loan funds Optionally convertible debentures Compulsorily convertible debentures Loans from others Interest accrued and due Deferred tax laibility (Net) Total Fixed assets (including CWIP/capital advances) Investments (Including mutual funds investments) Deferred tax asset (Net) Current assets.105 1.749 — — — — 804 89.096 7. Kotak Institutional Equities Value of listed entities is 70% of current market capitalization Value implied by the current market prices of the two listed entities (IPIT and IBPOW) in which IBREL holds stakes (even after assuming a 20% holding company discount) is worth Rs49/share which is 70% of IBREL’s stock price.986 2.125 1. IBPOW and IPIT account for 70% of IBREL’s current market capitalization Contribution to IBREL share price from IBPOW and IPIT based on respective market prices Entity IPIT Indiabulls Power Total IBREL stock price Accounted for by listed entities Share price (Rs) 6.0 58.410 7.699 26.6 IBREL's stake (%) 45.234 1.027 8.986 4.986 21.125 805 87.691 37.883 Source: Company. Bloomberg.410 7.168 44.040 73.269 3.639 6.518 360 47.981 1.948 25.390 3.090 3.284 2.572 3.419 68.633 — 3 1.125 1 1.690 11.6 26 49 70 70% Source: Company.533 214 25.0 22.439 24.585 1.386 4.944 1.833 2 — — — 804 94.085 1.454 101 18.410 7.125 20.840 6.698 9 152.690 11.901 2.168 150.542 — — — — — — — — — — 131.986 25.185 66.063 257 49.818 4.353 771 131.981 10 155.883 59.073 223 25.357 3.125 20.574 14.947 1.867 22.540 135 24.967 2.364 28 3 1.184 3.710 50.410 7.043 943 39.184 19.574 20.229 7.

Kotak Institutional Equities 64 India Daily Summary .October 21.September 2011: Results calendar Tue 18-Oct Chambal Fertilisers Chennai Petroleum Coromandel International CRISIL Edelweiss Financial Services HCL Technologies Hero Motocorp IFCI Indusind Bank Jindal Steel & Power Kirloskar Brothers NIIT Technologies Patni Computer Systems Petronet LNG Torrent Pharmaceuticals Wed 19-Oct Bajaj Finance Bajaj Finserv Biocon Crompton Greaves Dish TV Eclerx Services Essar Port HDFC Bank Hindustan Zinc Indraprastha Gas Mastek Rallis India Torrent Power Wire and Wireless Zee News 25-Oct Dr Reddy's Laboratories Engineers India KEC International Kotak Mahindra Bank NTPC Oracle Financial Services Sesa Goa 26-Oct Muthoot Finance 1-Nov ACC Aditya Birla Nuvo Ambuja Cements Bajaj Electricals Central Bank of India 2-Nov Karur Vysya Bank Piramal Life Sciences 8-Nov ABB Aban Offshore Godrej Industries IDFC 14-Nov India Cements Mahindra & Mahindra Tata Motors 15-Nov Tata Power 9-Nov Apollo Tyres Lupin Power Finance Corp Ranbaxy Laboratories Tata Communications Voltas 16-Nov Source: BSE. Welspun Corp 4-Nov Apollo Hospital Enterprises Bharti Airtel Glaxosmithkline Consumers Glaxosmithkline Pharmaceuticals Marico 5-Nov Carborudum Universal MTNL Motherson Sumi 10-Nov Cadila Healthcare GVK Power & Infra Hindalco Industries VA Tech Wabag 11-Nov Dishman Pharma Jet Airways JK Cement Tata Chemicals Shree Cements 12-Nov 17-Nov 18-Nov 19-Nov 29-Oct LIC Housing Finance Maharashtra Seamless Mahindra Holidays & Resorts Maruti Suzuki India Daily Summary . 2011 KOTAK INSTITUTIONAL EQUITIES RESEARCH Mon 17-Oct HDFC ING Vysya Bank Magma Fincorp Mahindra Life Space Developers Mindtree Motilal Oswal Financial Services Persistent Systems South Indian Bank TCS Zee Entertainment Enterprises . NSE.October 2 24-Oct Container Corp ITC JM Financial MMFSL Pfizer Sterlite Industries Tata Coffee Titan Industries Union Bank of India 31-Oct Bank of Baroda Bata India BPCL Canara Bank Castrol India Century Textiles Colgate Palmolive Corporation Bank Dabur India Dena Bank EIH Gujarat Pipavav Port Hindustan Unilever ICICI Bank Jammu & Kashmir Bank Karnataka Bank SJVN United Bank of India Wipro 7-Nov Madras Cement Punj Llyod Thu 20-Oct Bajaj Auto Bajaj Holding & Investments Cairn India DB Corp Deepak Fertilisers Dewan Housing Finance Dhanlaxmi Bank Exide Industries Hexaware Technologies HMVL IDBI Bank Indiabulls Power Indiabulls Real Estate Indiabuls Securities MRF Piramal Healthcare SREI Thermax 27-Oct Fri 21-Oct 3I Infotech Akzo Nobel Asian Paints Federal Bank GCPL Godrej Properties HCC HT Media Idea Indiabulls Financial Services JSW Steel Kansai Nerolac L&T NIIT PVR Shoppers Stop Texmaco United Phosphorus 28-Oct BEML Bharat Electronics NHPC Redington India Tata Global Beverages Sat 22-Oct Axis Bank Binani Industries Grasim Industries Jagran Prakashan Kalpataru Power Transmission Polaris Power Grid Corp Suzlon Energy Syndicate Bank 3-Nov SunTV Network TVS Motor Co.

5 6.252 5.0 2.250 289 79.2 3.0 0.7 4.7 1.0 10.8 13.5 98.2) 63.011.3 1.7 21.5 (9.7 13.105 2.3 1.9 22.1 4.237 Banks/Financial Institutions BUY Attractive 43.223 3.2 1.0 2.787 2.1 1.585 (1.0 (8.4 650 16.6 2.9 3.9 141.7 58.3 44.4 2.9 11.319 BUY 212.4 37.3 J&K Bank 814 ADD 39.7 430 42.7 20.6 2.6 2.661 2.8 9.1 2.1 1.9) 1.1 13.5) (0.5 55.9 (15.7 19.9 12.8 6.2 700 15.1 2.3 6.8 31.4 28.9 119.908 393 108.5 1.4 6.2 8.2 21.2 1.4 3.525 466 12.5 Cement 1.4 2.052.6 4.2 1.6 11.0 29.8 1.8 — — — 3.6 1.8 Ashok Leyland 25 SELL 65.625 145 78.122 (23.8 19.359 171 34.1 2.3 (17.1 1.8 7.1 7.8 10.6 10.0 8.9 0.7 22.8 23.3 12.0 21.961 9.7 4.5 2.1 24.056 3.791 1.3 11.5 18.9 (49.5 15.7 3.1 Bajaj Auto Bharat Forge 287 ADD 68.2 3.6 1.6 0.1 4.2 27.3 21.9) 9.5 560 14.2 27.4 18.9 3.9) 17.0 90.5 0.0 50.074 475 20.9 8.7 10.1 25.4 56.782 430 38.9 2.6 3.2 Banks/Financial Institutions Andhra Bank Axis Bank HDFC Bank BUY 61.3 Grasim Industries 2.783 4.5 1.0 22.2 60.9 (72.893 REDUCE 65.1 1.8 9.4 13.220 9.900 25.3 4.6 0.7 13.6 1.6 2.717 3.4 17.5 13.7 8.763 292 51.5 15.0 12.4 240 37.9 7.9 9.1) 6.7 4.4 1.1 Cement Neutral Source: Company.3 120.8 19.9 4.0 1.7 17.3 1.9 5.4 — — — 4.2 3.808 12.8 5.9 2.7 0.1 24.550 1.9 15.3 70 (2.8 16.0 Indian Bank 207 BUY 88.3 1.6 7.8 23.4 7.0 109.2 10.1 25.2 21.7) 56.0 15.9 52.3 — — — 1.139 200 99.9) 27.7 18.0 4.2 20.6 23.6 14.467 24.5 50.0 1.0 1.4 37.8 4.7 1.1) 3.5 19.0 28.585 6.8 1.1 2.2 2.6 21.4 2.250 66.7 Bank of Baroda 749 BUY 294.3 1.1 27.256 317 140.5 13.5) 11.1 3.2 1.3 2.1 2.1 85 59.5 2.3 1.8 1.275 6.700 50.1 1.9) 50.8 33.9 13.1 65.632 524 39.6 9.3 1.7 0.5 23.5 12.7 490 ADD 1.6 IndusInd Bank 270 BUY 125.5 425 70.0 2.4 36.2 7.6 1.8 1.614 SELL 466.0 5.6 0.4 20.6 6.3 12.100 25.119 ADD 306.0 13.1 23.5 LIC Housing Finance 218 ADD 103.4 22.9 3.8 23.131 BUY 464.7 0.4 8.4 10.5 1.0 14.9 17.2 2.1 2.1) 22.6 12.8 0.6 66.9 0.1 23.2 83.6 2.0 2.9 14.472 987 26.7 0.7 6.8 7.6 15.9 51.7 11.0 11.4) 24.3 18.4 1.4 14.3 (19.3) 77.0 19.1 27.9 3.6 2.896 1.9 8.228.0 0.1 21.0 9.9 2.4 (11.4 14.0 0.6 2.319 411 82.6 13.1 1.5 1.8 14.1 4.0 22.5 8.2 4.7 12.6 9.1 — — — 1.3) 6.1 5.8 21.8 5.226 619 17.0 5.9 737.4 69.4 68.4 23.6 2.2 (22.7 11.0 Corporation Bank 413 148 95.5 7.0 50.522 7.2 1.1 1.5 8.5 PFC 150 BUY 198.3 470 39.9 6. Kotak Institutional Equities estimates India Daily Summary .0 300 45.7 13.9 5.7 1.8 1.1 16.5 3.5 22.9 10.8) 15.5 3.9 8.0 4.9 15.3 9.9 18.3 30.8 1.8 4.4 India Infoline 72 SELL 23.8 22.3 99 BUY 61.8 1.1 2.0 14.1) (11.1 4.7 0.4 26.8 2.1 — — — 2.3 3.5 4.6 277.2 17.2 1.943 155.5 12.0 2.9 7.6 7.8 4.Kotak Institutional Equities: Valuation summary of key Indian companies 65 Company 20-Oct-11 Price (Rs) Rating Mkt cap.1 7.4 7.8 16.6) 1.0 1.4 4.1 5.882 614 41.5 129.3 9.9 3.0 2.4 13.4 16.0 0.1 26.1 2.985 347 21.5 26.0 16.0 14.2 1.9 5.0 0.6 3.7 1.0 9.9 State Bank of India 28.7 8.3 9.2 56.704 1.2 2.7 7.5 470 40.0 19.2 1.152 44.7 KOTAK INSTITUTIONAL EQUITIES RESEARCH India Cements 75 ADD 22.4 9.2 11.8 0.138.8 — — — 2.163 9.7 14.1 6.8 29.8 — — — 1.6 17.4) (109.5 12.3 4.2 1.5 3.6 1.5 6.961 1.0 0.0 8.8 14.0) 3.5 5.6 18.2) 339.3 20.1 10.6 — — — 2.2) 8.2 195.9 0.206 188 55.243 371 15.6 14.453 1.4 3.755 24.9 10.7 0.2 190 59.070 850 7.0 20.0 254.8 Cautious 492.569 473 327 7.7 7.1 13.7 25.4 21.3 6.5 1.2 32.0 18.4 4.3 12.3 10.2 2.3 1.4 3.1 19.4 93.668 547 45.2 26.9 1.9 11.4 6.7 7.1 — — — 2.6 10.3 14.320 22.0 Oriental Bank of Commerce 301 BUY 87.5 28.8 18.5 13.7 0.0 16.0 16.2 — — — 4.9 260 19.3 13.1 31.0 4.3 16. Bloomberg.040 1.9) 13.6 16.756 22.7 22.978 301 74 15.5 36.7 Mahindra & Mahindra Financial 630 BUY 64.9 3.3 22.9 15.2 1.2 66.0 18.0 2.9 1.9 8.8 3.5 11.8 3.863 2.7 23.4 337 REDUCE 83.7 4.1 129.8 11.9 2.2 19.3 33.240 15.8 3.4 15.7 6.6 2.2 1.9 Bajaj Finserv 559 ADD 80.4 39.4 18.1 1.995 1.664 6.0 600 31.1 2.6 12.3 33.141 1.8 (3.030 SELL 405.8 152.2 3.3 825 30.2 1.4 1.1 — — — 2.7 8.9 29.8 0.5 11.9 7.7 11.9 (41.4 — — — 1.0 29.725 223 55.3 10.6 8.3 (2.9 11.1 20.920 1.2 8.5 3.5 135.7 12.2 2.4 5.0 17.900 (6.8 2.5) 33.6 2.8 Ambuja Cements ACC 154 SELL 234.7 20.3 11.5 1.077 Automobiles ADD 12.2 45.1 2.6 22.7 17.1 230 38.695 1.6 3.0 0.3 28.9 12.8 20.4 9.7 2.7 3.6 (26.3 420 47.4 15.2 5.6 15.067 1.4 35.7 5.3 1.4 — — — 5.4 17.2 6.8 0.3 21.0 16.4 9.8 1.1) 7.1 16.2 4.4) (16.4 — — — 0.4 3.7 61.4 19.9 — — — 2.4 22.9 4.6 Canara Bank 458 BUY 202.0 UltraTech Cement 1.6 1.1 1.3 1.3 113.0 3.8 16.2 26.6 12.703 2.7 23.2 630 52.3 950 167 BUY 61.115 SELL 209.7) 36.0 0.4 2.7 21.1 14.1 Union Bank 250 BUY 131.1 2.7 9.1 34.2 13.2) 52.0 163.0 17.2 (81.6 — — — 0.8 2.1 23.4 2.8 18.294 4.296 102 45.4) 1.0 1.0) 25.3 17.3 0.3 13.2 37.2 9.0 12.9 7.5 2.6 5.4 Mahindra & Mahindra Maruti Suzuki Tata Motors 802 9.3 17.7 225 50.0 4.2 19.1 11.5 84.3 40.6 1.7 8.2 5.096 51.314 2.8 11.0 4.4 1.509 8.5 47.0 ADD 311.3 19.9 3.3 10.5 0.1 1.1 2.3 190 92.6 12.4 21.9 14.5) 25.1 14.3 5.2 17.0 18.1 72.5 19.2 14.9 — — — 1.9 Bank of India 334 BUY 182.7 5.5 3.730 (8.109 2.4 114.7 20.2 24.4 3.2 2.0 14.3 15.6 26.3 6.9 1.1 11.5) 45.8) (2.670 635 130.818 538 504 8.9 1.3 17.3 8.0 2.402.8 (25.4 17.6 2.7 1.9 150 23.5 55.2 — — — 1.5 22.1 29.3 1.3 4.0 201.5 7.3 — — — 1.6 16.8 20.5 24.6 4.8 19.9 12.3 — — — 1.7 10.6 12.8 21.976 1.3 24.3 7.9 — — — 8.021 21.3 21.4 12.3 (8.0 1.8 10.1 0.8 17.769 1.7 (39.7 0.5 3.3 1.8 17.2 8.5 1.5 6.9 43.0 4.2 1.9 14.4 17.4 54.7 5.3 1.7 37.8 24.8 325 20.9 20.2 8.0 (5.1 15.7 — — — 1.5 24.9 — — 3.0 SKS Microfinance 203 RS 14.5 20.5 120 (1.6 256.3 12.6 3.1 6.3 17.500 52.3 1.5 0. 175 BUY 172.9 86.9 7.5 7.9 0.4 20.6 Federal Bank 396 BUY 67.6 24.0 43.3 4.2 2.1) 6.1 4.5 59.182 16.2 2.0 Indian Overseas Bank Muthoot Finance 20.0 63.356 20.8 Shriram Transport 608 REDUCE 135.6 75.2 Yes Bank 285 98.8 5.700 1.9 15.3) (34.6 65.7 30.8 9.1 — — — 1.2 62.2 9.4 16.3 13.5 20.5 — — — 51.1 17.3 4.271 92 232.5 2.9 15.8 17.8 3.3 6.4 102.326 16.7 7.6 900 12.093 1.9 21.1 320 11.3 11.7 108.7 1.5 6.6 22.0 6.3 3.375 289 90.7 3.4 1.5 0.1 22.4 (3.3 180 (1.9 135 (12.1 21.2 2.1 18.4 6.9 5.2 — — 8.6 — — — 0.4 20.941 3.750 42.4 1.9 Hero Motocorp 2.3 6.6 3.867 1.3 1.6 — — — 1.8 500 26.473 793 48 126.325 2.9 0.4 4.3 11.6 5.3 11.228 4.8 21.1 8.0 14. (Rs mn) (US$ mn) O/S shares (mn) 2011E EPS (Rs) 2012E 2013E EPS growth (%) 2011E 2012E 2013E 2011E PER (X) 2012E 2013E EV/EBITDA (X) 2011E 2012E 2013E Price/BV (X) 2011E 2012E 2013E Dividend yield (%) 2011E 2012E 2013E 2011E RoE (%) 2012E 2013E Target price Upside (Rs) (%) ADVT-3mo (US$ mn) Automobiles Apollo Tyres 53 BUY 26.9 3.7 46.2 4.7 12.8 1.3 1.2 23.1 — — — 1.5 22.8 1.1 — — — 1.7 183 ADD 608.8 2.9 1.731.885 459 307 1.1) 21.9 6.3 4.325 27.305 1.5 2.0 1.1 20.9 10.6 1.3 108.9 22.7 5.6 22.367 237 27.7 (33.7) 24.0 1.5 0.9 7.5 1.668 246 9.5 19.9 8.7 5.3 29.1 15.2 20.157 274 44.8 3.1 132.2 20.5 82 10.5 8.3 2.2 — — — 1.7 2.077 18.5 7.6 — — — 1.2 15.2 19.722 4.4 103.1 1.9 21.1 980 (12.5 1.3 1.0 32.7 33.1 16.7 119 BUY 66.935 BUY 1.0 30.3 3.6 23.2 ICICI Bank 878 BUY 1.9 — — — 1.8 7.9 9.2 — 984 BUY 311.1 85.9 4.0 1.9 1.401 8.9 1.5 16.0 0.9 20.2 1.8 25.5 1.1 3.7) 23.4 5.8 22.2 27.548.7 28.758 1.6 17.8 4.9 14.3 20.0 6. 2011 Punjab National Bank Reliance Capital .0 16.7 0.4 1.2 27.8 19.159 82.6 — — — 0.5 5.1 13.4 7.8 5.8 (1.8 0.3 5.9 18.1 1.324 35 57.6 6.9 25.2 1.3 725 12.8 1.2 1.2 22.4 2.1 1.9 27.5 5.1 HDFC 645 REDUCE 946.1 IDFC 122 BUY 184.7 26.5 24.3 3.5 17.4 5.5 Exide Industries 121 SELL 103.058 3.4 — — — 2.2 2.9 73.4 19.8 2.7 12.1 (11.3 6.6 Shree Cement 1.2 0.4 2.6 5.5 67.1 (9.0 4.3 Rural Electrification Corp.2 2.9) 12.October 21.1 20.071 443 90.340 560 22.0 70.3 4.3 (5.0 1.4 1.0 2.3 79.5 54.8 42.9 31.4 11.8) (349.4 15.2 26 5.7 15.4 1.5 16.9 2.496 4.2 20.4 1.6 60.1 23.7 8.1 17.0 60.

4 6.5 17.8 2.8 94.127 28.2 17.445 80 107.7 19.7 29.2 1.4) 0.8 20.7 7.7 5.5 370 12.2 (1.6 16.6 24.819 96 80.2) 10.473 750 8.7 8.8 1.3 33.7 21.1 16.7 24.0 13.7 3.5 0.1 19.9 51.0 23.5 560 32.7 29.7 5.7 10.October 2 Industrials 0.8) 34.7 5.0 33.5 17.4 0.2 43.3 5.875 23.2 100.6 GVK Power & Infrastructure 14 RS 22.2 43.6 48.448 1.3 1.355 ADD 99.2 1.0 1.389 49.1 12.6 (6.5 0.268 SELL 411.9 31.0 77.3 — — — 23.5 2.2 4.8 3.6 (73.1 19.7 9.8 7.6 25.2 32.9 24.2 20.2 (58.8 44.2 2.6 Colgate-Palmolive (India) Dabur India GlaxoSmithkline Consumer (a) 6.0 2.2 5.586 14.9 11.8 14.6 51.0) Nestle India (a) Tata Global Beverages 1.0 28.5 7.4 8.9 32.0 39.1 41.8 120 40.2 11. 2011 KOTAK INSTITUTIONAL EQUITIES RESEARCH Company .0 510 24.4 4.8 8.0 2.3 5.3 (0.6 31.1) 1.9 7.1 25.6 14.5 7.4 2.430 1.1 16.587 12.8 13.0 12.3 13.3 6.3 12.9 17.5 4.4 0.1 76.3 25.7 33.8 (243.4 6.4 18.3 27.6 1.6 110 12.6 5.9 1.5 8.2 13.4 4.6) 1.1 8.9 8.6) (467.1 Attractive SELL 7.0 16.6 6.7 31.7 1.272 1.5 1.4 17.8 3.3 6.8 7.640 2.719 1.1 34.1 23.4 13.0 4.0 1.415 50.6 1.9 15.4 2.3 13.4 50.1 6.6 4.3 135 35.9 11.6 8.4 0.6 — 2.1 15.7 160 12.3 0.5 1.8 11.7 10.0 9.8 12.7 12.3 4.1 102.579 1.1 11.8 100.5 35.2 3.7 GMR Infrastructure 25 RS 93.6 15.0 10.0 1.3 12.2 1.2 8.5 460 39.6 1.4 28.1 2.5 10.3 36.1 (3.7 2.1 7.8) (50.0 20.0 0.9 6.9 13.261 96 86.952 2.9 18.8 26.5 0.7 (4.2 1.1) 0.6 0.460.8) 30.7 9.4 1.7 6.0 20.6 46.8 13.8 7.3 85.4 16.4 14.6 5.2 13.3 40.7 0.7 65 19.3 3.583 453 1.8 40.0 26.8 100 83.1 3.1 12.9 32.5 11.7 11.5 3.6 300 36.8 30.2 35.2 40.3 19.7 341 ADD 115.750 37.7 31.2 (4.5 8.2 9.8 13.5 18.9 17.3 5.4 7.1) 4.4 28.0 Constructions IVRCL 36 BUY 9.3 22.574.5) 7.9 7.4 2.5) 12.6 17.0 8.2 16.9 2.1 REDUCE 777.2 41.6 11.3 25.8 1.0 33.7 135.156 65 11.1 7.9 — — 19.5 44.6 1.2 Thermax 423 Voltas 100 ADD BUY Cautious 1.6 23.6 14.0) 2.1 12.7 116.1 2.2 8.0 2.8) 4.6 1.1 28.1 13.1 16.922 31.6 Jubilant Foodworks 858 SELL 56.6 25.5 6.925 661 331 9.1 150 7.4 0.0 0.2 12.197 4.6 3.3 2.4 1.9 7.3 Source: Company.1 11.5 3.2 17.8 0.7 6.2 7.8 15.2 16.5 22.6 4.2) (4.2 Maharashtra Seamless 330 BUY 23.7 3.959 1.5 14.0 1.6 21.8 1.8 23.1 19.0 29.6 30.8 8.5 24.022 1.October 21.0 5.0) (1.4 15.4 1.8 21.7) 98 SELL 170.5 4.6 1.5 12.2 3.3 385 32.500 (18.2 780 21.9 — 0.6 45.3 12.2 ITC 205 ADD 1.8 9.5 98.0 14.9 26.902 33.4 (56.6 2.4 230 12.2 Punj Lloyd 54 REDUCE 18.2 7.5 39.7 1.6 17.0 1.6 14.4) 67.9 — — — (0.440 370 340 (1.5) 38.2 21.6 1.569 130 67.428 1.7 97 SELL 54.8) 31.423 8.1 1.501 81.6 1.2 17.2 26.7 13.235 4.1 Jyothy Laboratories 140 ADD 11.4 6.9 28.1 43.6 7.2 15.599 193 267 5.9 1.901 45.7 13.5 175 15.4 14.5 9.556 24.9 16.2 7.8 2.4 9.2 33.280.1 3.1 7.8 (5.0 27.3 10.1 4.2 0.4 1.4 1.9 15.4 (10.9 20.5 15.1 29.9 1.7 6.4 8.1 700 (0.4 0.1 32.6 0.548.5 26.8 1.744 123.2 41.8 27.8 7.2 6.1 10.8 — — 2. Bloomberg.5) 11.7 18.5 5.3 16.0 36.8 40.6 Cairn india 294 REDUCE 558.2 14.6 16.7 26.3 0.3 — — — (9.5 2.424 2.4 2.5 0.8 4.2 2.9 27.235 10.7 27.1 1.4 1.2 — — — 26.6 4.3 12.0 29.8) 50.0) (12.6 9.9 0.7 19.4 2.4 11.4 8.4 39.3) 57.9 (102.7 16.2 17.0 143 REDUCE 91.6 44.7 4.3 16.625 360 17.7 0.0 22.4 Hindustan Unilever 330 ADD 713.3 15.490 337 22.1 12.4 22.6 21.3 35.7 24.4 1.2 2. Kotak Institutional Equities estimates 66 India Daily Summary .9 7.9 28.5 430 26.3 17.5) 5.4 0.6 17.4 1.4 8.4 1.1 2.380 247 19.7 3.9 3.1) 9.9 18.9 49.5 4.7 1.0 32.9 (26.794 8.8 10.0 14.8 50.8 9.1 12.9 28.5 19.981 62.5 Siemens 811 SELL 273.9 (0.4 32.2 5. (Rs mn) (US$ mn) O/S shares (mn) 2011E EPS (Rs) 2012E 2013E EPS growth (%) 2011E 2012E 2013E 2011E PER (X) 2012E 2013E EV/EBITDA (X) 2011E 2012E 2013E Price/BV (X) 2011E 2012E 2013E Dividend yield (%) 2011E 2012E 2013E 2011E RoE (%) 2012E 2013E Target price (Rs) Upside (%) ADVT-3mo (US$ mn) Consumer products Asian Paints 3.1 30.2 33.6 1.4 12.4 16.522 318 212 3.3 20.1 3.7 12.9 10.3 2.4 21.8 21.1 1.8 0.8 29.3 380 42.8 17.1 3.2 34.9 7.1) 67.398 984 ADD 127.740 3.8 22.1 1.5 5.3 27.3 11.2 2.9 7.0 1.4 1.9 11.9 6.7 7.8 15.2 16.4 1.8 2.1 10.5 0.1 9.0 267 BUY 2.9 28.3 4.6 3.3 22.1 2.5 0.1 1.7 3.0 0.6 22.0 7.5 15.6 0.9 Titan Industries 216 ADD 192.9 400 25.8) (201.414 1.8 0.229 386 Attractive 61.2 24.0 2.0 3.229 Energy Aban Offshore BUY 17.1 (34.0 10.3 23.4 15.4 23.150 151.2 94.1 20.8 4.6 111.3 United Spirits 871 126 29.8 14.9 135 (17.7 113.1 7.2 1.474 2.1 11.3 0.000 19.1 Godrej Consumer Products 410 ADD 132.5 (0.1 17.8 20.2 4.8 (82.1) 3.4 11.9 11.4 4.7 12.4 Bharat Petroleum 642 ADD 232.4 17.0) 3.8 2.7 0.1 2.9 18.667 (0.870 3.249 6.0 20.3 1.6 3.6 24.4 13.7 0.073 3.8 8.8 15.0 240 10.0 8.1 8.8 4.6 12.5 9.6 25.9 7.7) 12.3 0.7 7.7 1.2 99.0 1.5 706.3 11.4 13.6 234.5 1.3 18.2 17.3 17.663 362 38.7 27.9 0.3) 25.4 17.4 26.8 10.3 29.4 2.4 5.1 5.308 11.722 136 29.8 11.1 20.1 — 1.8 4.740 44 134. 54 BUY 13.1 21.2 12.6 17.2 1.6) 9.9 5.2 11.7 190.746 (6.117 6.981 50.5 2.7 2.9 5.3 5.2 2.3 3.7 (12.2 1.0 0.1 4.8 1.8 830 2.3 13.5 5.5 7.8 0.3 2.8 7.1 33.7 1.8 10.3 515 21.9 10.2 7.0 24.4 10.1 7.4 12.0 28.1 1.9 Castrol India (a) 479 SELL 118.0 2.012 119 31.4 8.0 1.3 121.3 1.1 99.1 6.9 220 57.7 32.257 467 71 46.7 170.3 2.663 324 14.9 ADD 121.2 8.7 37.3 14.8 30.1 1.9 15.2 1.5 12.0) 1.4 1.9 85 ADD 52.6 46.9 0.9 1.6 21.3 11.8 9.1 2.1 1.7 20.4 21.958 280 257 6.0 7.412 14.6 1.4 92 (4.7 Petronet LNG 164 Reliance Industries 839 Energy 2.0 3.3) 0.6 10.3 8.534 2.7) 29.146 240 120.0 8.6) (129.1 6.9 GAIL (India) 422 BUY 535.4 2.058 618 4.7 4.0 1.2 2.3 3.7 39.6) 18.3 10.2 2.0 (9.3 16.0 22.1 1.3 6.5) (2.0 19.8 23.6 14.1 2.0 70.327 2.6 70.5 Infrastructure Container Corporation 44.1 33.3 (1.0 17.1 25.8 2.856 888 4.183 GSPL Hindustan Petroleum Indian Oil Corporation Oil India Oil & Natural Gas Corporation 408 356 17.2 3.9 18.7 3.6 0.9 (20.2 19.5 295 0.756 2.1 18.9 (36.900 23.226 1.0) (0.5 34.930.165 50.1 1.2) 606.9 2.7 0.4 9.5 11.273 BUY 306.7 9.083 332 13.9 0.6 180 40.5 Cautious 633.9 8.5 9.5 9.3 291 BUY 2.6 19.2 6.2 6.4 39.1 21.3 2.7) (3.0 Suzlon Energy 36 SELL 63.1 2.7 3.4 6.3 Tecpro Systems 220 ADD 11.0 6.9 7.2) 80.5 13.4 47.1 1.8 20.7 40 10.8 71.8 1.3 0.4 9.5 22.6) 29.3 28.4 200 23.7 3.159 9.9 5.9 17.1 (34.5 17.2 6.900 997 SELL 135.2 7.4 19.7 16.7 19.2 8.6 2.0 25.8 10.3 4.8 4.8 1.3 11.7 5.8 21.2 3.5 16.4 13.869 615 3.1 1.6 34.3 14.9 40.6 13.1 30.9) 15.6 11.5 9.0 1.7 6.0 6.3 (9.7 17.3 2.3 2.7 1.454 5.6 1.8 11.1 38.8 1.5 2.0 6.197 2.5 3.8 3.1 3.8 2.8 9.2 33.3 11.4 Marico 151 ADD 93.617 2.5 11.0 17.0 55.379 16.8 25.0 4.2 3.6 1.8 2.5 9.5 2.8 36.8 16.8 6.1 13.9 1.2 34.0 29.0 2.1 7.157 SELL 302.9 0.0 2.9 33.5 14.7 5.8 20.8 13.1 9.500.7) (7.0 6.4 22.1 1.3 4.3 12.385 REDUCE 843.6 750 (12.0 38.093 563 8.3 13.4 5.9 0.4 7.8 (9.0 21.9 0.4 2.6 124.2 104.980.268 226 81 10.3 36.8 3.4 2.8 2.9 19.5 0.0 4.0 2.9 8.7 31.3 501.3 0.1 18.4 8.055.0 1.7 0.7 6.1 1.9 15.104 223 50 27.6 1.5 0.0 3.152 1.7 9.1 33.4 1.6 6.8 7.3 2.5 1.7 51.6 0.0 13.518 2.8 2.2 22.0) (2.2 — — 3.1 Consumer products ADD Neutral 109.6 2.0 29.0 33.428 32.4 35.0 43.3 66.2 1.2 20.0 5.5 4.1 31.3 11.5 11.933 609 67.3 64.6 7.5 1.9 15.9 13.Kotak Institutional Equities: Valuation summary of key Indian companies 20-Oct-11 Price (Rs) Rating Mkt cap.8 (0.2 0.3 7.6 8.4 1.5 7.5 29.363 1.731 3.4) (71.4 2.8 0.6 78 11.7 4.7 29.4) 14.8 18.7 425 (11.5 6.2 28.9 17.4 1.3 53.3 14.8 1.5 2.2 24.7 25.9 87.469 8.9 670 64.3 28.6 18.8 35.721 Infrastructure (14.6 (15.8 Industrials ABB BGR Energy Systems Bharat Electronics Bharat Heavy Electricals Crompton Greaves Larsen & Toubro 701 SELL 25.2 91.3 4.3 1.3 8.4 5.5 (34.6 1.9 9.7) 6.8 20.3 17.7 0.8 103.7 319 Reduce 23.0 2.5 2.0 60.8 2.3 26.319 339 40.8 0.6 2.3 50.1 33.0) 26.4 12.1 48.1 6.2 1.5 24.4 0.0 1.5 11.3 9.3 83.1 1.4 2.4 16.7 79.3 3.847 15.6 1.3 12.6 123.7 5.9 4.9) 19.3 7.1 11.681 6.209 1.8 1.8 8.6 0.3 53.4 49.5 7.4 32.9 7.1 10.5 11.3 18.3 27.2 22.110 1.8 18.6 51.9 1.8 3.3 32.692 596 424 (1.8 1.5 2.6) 115.9 8.3 5.7 Mundra Port and SEZ 152 ADD 306.7 0.6 9.7 3.8 ADD 2.9 17.1 India Daily Summary .1 23.3 71.5 8.0) 20.9 24.3 12.3 5.4 121.5 28.6 (25.2) 1.1 4.7 10.3 24.8 3.1 1.8) 12.3 IRB Infrastructure 162 BUY 53.9 75 108.5 6.9 10.2 50.6 7.3 9.3 39.9 54.5 27.2 900 (9.5 10.1) 25.2 15.2 90.0 1.7 (29.6 11.988 42 71.2 7.7 1.080 (8.5 20.2 11.8 1.7 Sadbhav Engineering 128 Construction BUY 19.9 11.100 26.7 10.5 Gujarat Pipavav Port 70 ADD 29.3 13.2 16.8 (4.564 2.558 148.6 8.4 2.2 6.149 2.5 10.3 3.1 (32.7 17.3 0.1 1.3 7.2 — — — 46.8 0.3 7.2 34.0 29.3 18.8 9.1 17.8 11.2 3.8 3.268 28.0) (10.3 7.0 24.6 6.4 8.5 18.6 21.8) 20.746 1.1) 15.1 10.2 3.8 21.7 32.6 23.6 (65.150 11.0 Nagarjuna Construction Co.5 175 15.6 35.1 9.6 2.6) 52.2 3.9) 4.4 24.4 4.1 8.3 21.5 0.5 39.3 86.3 10.8 2.8 11.7 22.0 2.8 0.9 10.0 0.9 64.835 642 14.6 32.5 11.6 11.6 3.2 2.9 22.6 0.017 4.620 7.5 0.9 1.3 7.5 8.0 1.2 1.1 4.6 1.1 5.4 28.0 0.3 1.053 463 72 44.0 171.

0 1.8 21.2 7.2 0.4 10.9 230 10.6 2.1 29.126 3.9 38.8 6.1 6.6 5.2 15.2 22.0 1.8 2.5 7.0 3.4 6.4 8.6 13.4 14.888 42.7 National Aluminium Co.9 24.7 1.9 3.8 10.7 11.1 29.7 Pharmaceuticals Cautious Property DLF KOTAK INSTITUTIONAL EQUITIES RESEARCH 231 BUY 395.9 24.7 625 41.8 (14.6 20.2) (10.6 13.3 21.3 5.577 4.8 2.3 24.8 21.0 8.6 13.7 8.0) 43.4 8.9 36.4 (1.0 1.3 7.073 92.8 1.4 0.0 10.2 830 14.6 2.1 2.0 6.8 37.848 3.8 26.3 34.5 21.4 21.9 12.5 22.7 16.1 7.6 26.3 16.7 34.406 631 159 14.1 9.3 (45.9 6.2 27.644 226 78.715 9.2 4.8 20.5 3.5 11.4 1.8 0.3 1.7 10.1 16.8 3.604 Source: Company.4 29.1 5.6 15.908 7.3 14.1 5.2 7.2 3.996 562 402 4.8 6.1 11.6 1.7 454 37.2 17.3 4.5 12.1 4.8 32.1 8.7 4.5 1.9 10.3 17.4 0.5 17.650 8.2 3.9 660 13.4 0.0 12.0 1.555 453 98 18.1 40.6 0.9 17.7 10.2 36.6 6.5 37.2 23.2 11.0 1.2 5.0 1.0 1.7 16.0 44.9 13.7 560 14.9 18.8 36.9 3.9 4.2 18.633 314 213 5.017 2.9 15.7 6.2 27.0 9.5 11.1 0.9 300 60.794 8.450 1.8 7.5) 282.5 19.5 7.6) 3.6 1.5 1.3 Sun TV Network 271 BUY 106.7 15.7 14.7 (8.5 15.5 14.4 19.0 Eros International 270 ADD 26.5 9.9 17.2 20.1 8.2 33.5 21.4 11.3 18.7 4.8 4.7 30.9 3.5 23.7 7.267 423 40.5 20.5 16.5 2.3 17.5 Jagran Prakashan 105 BUY 33.7 6.9 5.3 Phoenix Mills 187 BUY 27.8 14.220 6.606 4.209 978 5.125 2.0 2.6 17.210 1.5 650 26.0 11.0 24.3) 17.1 6.109 205 34.4 3.7 13.8 Neutral 441.7 — — — 19.6 0.1 12.9 28.7 0.2 14.8) (18.4 16.6 0.8 0.4 1.8 5.7 1.1 1.0 15.5 (4.0 Housing Development & Infrastructure 94 BUY 41.1 18.2 2.503 1.7 20.0 20.5 14.7 6.6 (36.3 9.416 Cautious 727.9 9.4 19.9 6.8 19.1 8.9 22.0 15.4 2.6 0.0 (58.6 0.3 6.1 6.5 30.5 (2.0 16.4 20.6 10.8 6.7 11.4 1.1 31.3 25.3 Jubilant Life Sciences 197 REDUCE 31.4 21.8 9.5 — 0.1 38.0 9.7 5.7 15.3 30.9 — — — 25.8 1.5 — — — 9.2 Oberoi Realty 234 BUY 77.0 11.4 10.7 18.5 Puravankara Projects Sobha Developers Unitech Property 27 RS 70.0 13.6 3.5 30.1 9.8 440 62.4 Zee Entertainment Enterprises 112 BUY 110.6 8.9 15.102.5 2.9 80.1 3.7 17.9 4.9 3.1 23.8 Hindustan Zinc 121 ADD 509.9 16.4 310 32.3 0.3 9.6 27.3 0.8 Lupin 470 ADD 210.9 20.1 19.0 1.9 16.1 21.5 6.4 5.9) 62.2 45.0 230 BUY 22.4 34.2 1.3 9.085 934 40.2 14.1 10.8 11.2 1.5 9.4 11.9 24.2 2.1 81.7 1.1 13.0 3.5 5.1 13.2 56 REDUCE 4.9 0.3 26.9 17.8 19.668 2.6 8.2 — 0.0 1.7 5.4 7.5 13.1 Hindalco Industries 125 ADD 238.2 1.8 2.7 12.8 0.4 22.1 3.388 14.3 12.2 0.3 30.5 27.7 8.6 Hindustan Media Ventures 133 BUY 9.8 0.6 54.3 18. Bloomberg.201 10.7 59.9 190 35.2 4.9 22.113 10.7 2.4 16.509 1.4 24.4 20.5 270 0.5 22.3 1.611 5.6 12.7) 53.9 0.0 8.2 44.6 330 43.5 49.514 91 81 9.9 5.0 20.3 14.3 16.9 5.0) 9.3 70 26.3 40.0 24.7 150 59.0 — — 8.3 78.522 727 REDUCE 258.3 37.3 68.3 39.0 2.5 9.380 7.192 170 64.7 530 12.1 2.200 847 183 14.3 1.1 18.4 Cipla 289 REDUCE 231.3 0.1 13.8 8.7 23.5 0.3 17.7 10.7 1.6 70.7 1.2 25.8 16.0 Sterlite Industries 116 BUY 390.6 11.5 12.8 28.3 5.835 2.0 18.557 85 68.0 25.3 2.4) 18.7 36.0 21.8 18.4 16.2 1.0 15.9 (2.9 15.6 9.2 10.0 1.975 8.1 2.5) 31.6 10.7 35.3 20.4 Mahindra Life Space Developer 312 BUY 12.1 2.0 19.6 3.0 5.1 1.7 5.0 16.3 0.4) 12.9 13.2 2.2 0.1 17.7 53.8 13.9 0.9 30.3 42.8) 12.1 JSW Steel 583 SELL 131.9 2.2 2.5 25.6 3.2 13.7 450 44.8 2.4 19.6) 234.2 20.627.0 9.1 6.2 1.6 0.7 (31.7 0.811 6.7 11.7 21.9 1.145 394 19.2 Media Metals & Mining Coal India 330 ADD 2.2 1.3 2.9 24.826 1.1 1.7 19.5 10.4 3.8 24.7 23.1) 19.6 10.2 4.2 12.093 544 145 6.1 5.9 28.9 1.9 — — — 34.0 4.1 24.0 25.394 200 18.3 14.9 0.3 11.0 9.9 32.5 33.9 210 57.8 435 (13.0 20.7 0.6 12.1 2.1) (8.4) (119.0 2.0 1.0 26.4 0.899 39.9 0.8 10.5 5.5 10.222 4.3 14.6 13.4 15.1 1.1 1.4 3.6 12.2 140 16.4 36.4 3.938 1.127 665 316 6.656 803 12.0 1.9 15.2 15.6 29.7 1.1 21.0 17.9 8.1 80 9.772 196 73 7.714 255 41 24.1 2.3 8.4 4.786 839 445 19.505 41.7 76.8 15.0 15.3) 22.2 9.1 HT Media 140 ADD 32.5 31. Kotak Institutional Equities estimates India Daily Summary .5 13.7 (45.1 1.4 8.9 7.7 3.0 26.0 1.6 8.6 24.2 31.6 10.4 13.5 19.4 — — — 20.8 95 24.5 5.0 11.0 Tata Steel 442 BUY 428.6 900 19.3 5.140 525 97 11.915 12.6 17.8 3.3 1.0 18.9 12.4 12.6 Indiabulls Real Estate 70 RS 27.1 60 SELL 155.326 10.2 270 17.7 0.7 3.2 Ranbaxy Laboratories 502 SELL 212.9 160 42.5 3.4 10.0 1.4 7.2 205 4.9 19.9 11.0 65 7.5 4.4 0.7 3.5 35.3 1.7 1.5 — — — 9.1 5.1) 14.4 0.5 11.623 1.7 0.5 9.8 1.0 1.4 0.9 2.9 0.7 1.1 1.0 26.0 10.4 3.2 2.0 1.5 12.6 25.6 33.6 39.0 Cadila Healthcare 756 REDUCE 154.0 0.0 175 40.2 0.7 (23.7 1.5 20.7 4.1 35.1 73 ADD 15.2 8.8 3.4 0.5 3.7 19.0 8.3 24.3 — 1.4 370 60.5 10.3 3.3 15.9 8.8 15.5 0.0 1.9 0.7 9. Sesa Goa Metals & Mining Attractive Pharmaceutical Apollo Hospitals 515 ADD 71.3 8.8 DishTV 76 ADD 80.6 1.2 12.0) 17.1 4.8 6.3 2.5 15.9 5.8 1.7 0.1 9.1 12.9 1.9 198.8 9.877 660 235 7.148 3.3 4.3 9.0 14.6 1.456 1.0 40.0 0.5 310 7.788 4.9 8.7 12.036 17.1 2.0 5.7 3.3 13.1 10.3 13.0 26.3 25.4 2.7 45.0 19.9 5.8 7.6 16.316 17.7 7.5 4.0 12.3 12.6 16.3 2.7 2.3) 8.2 18.9 2.1 5.0 3.7 12.4 2.2 37.7 2.2 12.5 17.5 13.7 13.1 8.2 2.4 16.4 1.7 11.5 (10.1 11.8 2.5 33.4 — — 14.2 23.2 8.4 61.7) 0.7 17.1 14.4 13.2 88.7 (14.7 6.258.6 4.2 2.2 17.7 1.2 1.8 21.7 14.3 18.0 0.1 4.1 13.5 8.9 0.0 16.6 4.9 (18.8 18.9 20.6 6.5 — — — 24.5 32.8 160 52.550 330 15. (Rs mn) (US$ mn) O/S shares (mn) 2011E EPS (Rs) 2012E 2013E EPS growth (%) 2011E 2012E 2013E 2011E PER (X) 2012E 2013E EV/EBITDA (X) 2011E 2012E 2013E Price/BV (X) 2011E 2012E 2013E Dividend yield (%) 2011E 2012E 2013E 2011E RoE (%) 2012E 2013E Target price (Rs) Upside (%) ADVT-3mo (US$ mn) Media DB Corp 230 BUY 42.2 9.6 565 5.0 20.8 8.2 5.0 4.5 22.0 5.1 1.3 31.4 14.4) 7.9 2.794 1.6 11.9 1.9 10.6 59.082.October 21.8 3.3 1.5 1.6) 14.7 10.616 2.7 (1.7 0.8 8.4 5.2 36.5 6.2 23.5 (10.2 10.2 11.0 Sun Pharmaceuticals 489 ADD 506.9 11.8 19.2 Dishman Pharma & chemicals Divi's Laboratories 96.225 11.3 (4.0 13.1 17.095.2 107.4 19. 2011 ADD Dr Reddy's Laboratories .1 12.4 16.7 19.613 971 75.0 25.0 6.730 1.4 Glenmark Pharmaceuticals 287 ADD 77.8 1.6 2.8 16.4 9.1 1.2 1.1 48.9 19.Kotak Institutional Equities: Valuation summary of key Indian companies 67 Company 20-Oct-11 Price (Rs) Rating Mkt cap.8 18.9 8.4 2.7 0.6 12.7 26.1 13.5 209 SELL 187.7 1.2 17.6 4.9 20.8 9.9 17.2 23.0 14.8 10.1 1.7 2.0 34.665 3.0 0.1 1.163 1.6 13.1 12.2 10.9 11.4 4.9 5.5 47.4 6.1 3.4 23.3 2.0 98.1 24.0 7.0 9.4 17.5 23.8 1.4 0.7 7.1 0.4 23.9 3.8 0.9 1.3 12.7 38.4 1.7 29.6 10.7 5.5 22.0 17.7 20.9) 14.6 10.361 15.4 14.8 21.4 445 28.3 2.6 2.4 24.5 3.0 12.8 22.5 0.4 1.8 25.6 22.561 270 17.4 4.220 43.3 2.9 25.0 0.0 0.4 5.9 GlaxoSmithkline Pharmaceuticals (a) 2.1 3.8 1.9 Jindal Steel and Power 538 REDUCE 502.5 9.8 6.7 1.0 36.1 7.1 1.7 24.436 139 13.5 2.1 2.870 51.4 10.9 16.3 1.757 895 47.3 19.6 7.062 (1.7 11.9 2.0 6.8 Biocon 347 BUY 69.6 0.2 5.0 34.0 29.5 5.8 7.4 7.1 41.3 5.2 9.2 32.091 REDUCE 177.0 13.8 11.0 2.8 3.5 932.0 4.2 18.5 14.1 8.5 10.8 185 59.5 1.2 19.8 28.3 0.2 (32.6 18.1 13.3 19.2 41.529 4.7 22.8 475.7 5.6 5.937 133 32.5) 114.228 448 19.3 19.2 395 37.6 8.3 6.1 1.0 2.851 3.0 12.8 2.7 2.2 8.3 8.1 17.4 2.9 1.3 1.5 1.4 4.2 17.3 7.4 1.8 — — — (56.1 5.7 17.884 4.4 1.8 21.8 7.2 11.6 5.5 11.5 0.

0 2.7 1.7 1.6 18.4 1.7 7.5 33.8 2.3 1.4 8.8 11.033 6.1 28.6 6.8 600 5.9 13.3 20.9 13.6 22.992 5.5 51.8 Mphasis BFL 322 SELL 67.207 2.5 Jaiprakash Associates Jet Airways SpiceJet 14.9 10.162 887.1 5.3) 19.2 1.8 34.6 9.7 3.5 8.6 7.8 387.5 11.4 8.8 15.8 37.0 14.5 29.0 3.2 230.2 — — — 13.7 1.3 0.5 7.0 6.540 4.1 NHPC 23 ADD 285.7 141.045.9 IDEA 93 ADD 308.1 6.7 0.1 5.1 9.7 7.8 18.1 11.7 2.742 12.9 2.8 Lanco Infratech 15 BUY 33.418 735.9 2.0 (40.1 11.7 11.5 Attractive SELL 5.078 41.026 382 630 (10.7 0.5 12.2 1.0 23.7) (5.5) (27.8 14.7 10.2 18.2 1.7 14.8 (36.1 14.3 34.223 2.9 14.2 9.6 3.0) 3.1 5.5 1.3 3.3 2.3 46.4) (33.2 20.1) 2. Kotak Institutional Equities estimates 68 India Daily Summary .7 9.3 37.2 (7.5 870.4 7.1 1.075 263 247 6.7 11.577.0) 5.7 1.3 1.9 460 20.0 22.8) 0.1 6.5) 34.664 574 119.7 2.782 23.159 265 58.1 (45.7) (3.9 (5.8 10.3 14. (c) EV/Sales & EV/EBITDA for KS universe excludes Banking Sector.7 42.5 21.1 10.8 19.412.1 70 SELL 1.81 (d) Rupee-US Dollar exchange rate (Rs/US$)= Source: Company.2 4.2 12.6) 1.6 19.1 13.0 64.452 ADD 71.4 18.0 2.3 1.0) (5.6 37.3) (3.9 (25.2 16.9 11.0 16.3 0.2 12.1 2.2 1.1 10.8 — — — 8.8 30 29.8 18.8 10.1 1.9 7.1 11.8 Reliance Communications 75 SELL 159.4 5.4 8.468 7.4 15.8 290 Havells India 363 REDUCE 45.1 20.3 Reliance Infrastructure 405 BUY 107.2 36.9 18.1 2.6 38.6 (28.4 0.5) (1.3 3.0 8.3 26.4 (5.2 23.4 1.7 7.5 1.4 5.5 10.9 29.5 239 BUY 20.6 1.3 9.8 3.7 2.2 1.1 16.9 29.1 — — — 13.250 908 125 24.0 45.3) 36.8 2.6 45 196.1 15.1 400 (2.0 1.6 5.4 11.1 11.0 15.1 2.4 1.9 383 ADD 15.9 4.4 29.8 0.9 22.1 3.1 8.7 1.4 3.4 460 17.6 12.0 19.0 21.5 9.6 1.7 9.2 8.2) 36.3 85.6 5.9 4.4 — — — 3.3 3.3 17.0 8.2 5.9 17.3 6.4) 10.4 8.4 11.5 15.2 85.4 Others KS universe (b) 44.0 2.4) 103.8) 3.4 5.3 0.9 10.3 2.5 (57.8 12.7 12.324 621.5 1.4 11.8 1.6 14.5 2.094 290.4 17.0 1.6 10.8 4.3 1.9 16.2 21.7 21.2 1.3 13.2 16.1 7.3 — — — 4.7 0.2) (210.1 1.6 2.7 1.8 Balrampur Chini Mills 53 BUY 13.6 7.8 18.0 15.9 0.7 0.7 16.3 12.7 0.4 24.8 0.481.7 10.126 6.7 20.8) (34.740 3.2 3.5 53.6 5.5 1.4 5.7 2.4 1.7 50 121.3 9.0 16.454 21.0 35.1 1.5 2.3 10.2 2.047 285 (24.6 26.5 3.5 — — — 27.0 NTPC 171 REDUCE 1.6 (2.7) 90.1) (23.1 75.8 72.0 2.4 10.6 0.6 71.120 1.3 135 38. Bloomberg.0) 13.3 18.9 0.3 1.3 17.2 7.2 34.0 7.4 1.2 1.4 13.5 9.2 — — — (6.1 15.894 102.8 11.3 21.1 4.1 8.3 0.150 10.9 2.5) 10.6 1.3 3.1 12.7) 57.2 6.6 8.0) 4.3 7.640.0 6.1 3.8 14.7 1.6 1.6 10.6 8.4 4.5 10.1 4.October 2 Notes: India Daily Summary .1 11.8 2.5 15.8 28.3 (1.441 126 48.6 8.0 20.2 6.151 53.0 12.8 Others Carborundum Universal 156 SELL 93 18.4 7.3 17.5 19.2 12. 49.4 (52.6 2.7 2.2 8.7 2.3 115 63.303 2.6 11.4 166.0 18.1 12.4 (24.0 1.957 44.726 3.1 7.617 255 26.3 23.8 (0.7 (39.1 1.5 3.3 1.1 6.7) 25.0 7.7 12.4 11.5 9.6 (0.6 5.8 1.060 1.5 31.7 2.2 7.9 12.7 12.3 2.4 0.2 5.5 0.9 6.7 13.3 11.0 18.2 1.1 — — — 7.0) 15.1 7.6 180 5.653 31.5 Shree Renuka Sugars 56 BUY 37.0 3.1 7.1) (2.8 Tata Chemicals 316 REDUCE 80.8) 186.5 9.7 1.5 10.8 12.9 12.586 293 6.1 1.8 30.652.3 7.4 3. (Rs mn) (US$ mn) O/S shares (mn) 2011E EPS (Rs) 2012E 2013E EPS growth (%) 2011E 2012E 2013E 2011E PER (X) 2012E 2013E EV/EBITDA (X) 2011E 2012E 2013E Price/BV (X) 2011E 2012E 2013E Dividend yield (%) 2011E 2012E 2013E 2011E RoE (%) 2012E 2013E Target price (Rs) Upside (%) ADVT-3mo (US$ mn) Sugar Bajaj Hindustan 37 REDUCE 8.4 1.767 317 41 24.8 26.7 2.9 1.0 8.9 0.3 1.5) 31.6 — — — 12.3 400 23.6 30.3 1.3 7.3 3.0) 588 (110.3 15.0 15.748 BUY 1.3 14.0 200.0 9.4 11.5 2.8 4.4 1.2 4.2 0.8 16.3 8.0 11.2 1.7 5.1 2.3 6.6) (13.827 705 34.9 38.1 4.5 6.8 4.0 13.7 4.3 1.788 233.1 9.9 0.1 1.6 8.5 (29.8 5.7 47.9) (3.0 2.7 1.0 7.8 8.6 2.7 2.2 26.0 16.9 1.0 25.5 17.0 0.5 1.1 76.3 14.742 758 670 10.2 10.9 4.9 80 51.8 28.8 1.5 (a) For banks we have used adjusted book values.7 14.5 17.6 6.9 0.0 12.5) 94.5 — — — 6.9 2.4 8.3 12.146 1.0 8.2 KS universe (b) ex-Energy 36.0 1.8 11.5 1.3 2.1 5.3 2.348 462 12.2 264 BUY 33.133 6.6 1.6) 9.3 1.7 17.9 4.4 24.5 25.8 7.5 35.6) 0.4 2.8 1.7 1.9 11.5 3.8 9.0 6.5 8.1 20.3 2.7 370 4.9 (6.973.8 15.3 MTNL 30 SELL 19.3 5.6 1.2 8.0 15.5 10.6 1.1 3.5 2.000 9.2 6.8 5.6 19.1 60 60.878 7.0 16.155 1.6 71.7 16.5) 35 15.9 2.6 30.6 1.5 6.8 3.4 5.7 1.4 36. similarly for 2011 and 2012 for these particular companies.1 7.640 5.5 1.6 11.4) (21.1 1.7 8.3 2.193 40.2 17.020.1 2.7) 70.9 10.4 1.6 8.7 10.8 8.9 1.6) 37.8 22.0 11.6 2.3 16.4) (9.3 2.254 29.5 16.9 Telecom Bharti Airtel 390 ADD 1.1 23 BUY 9.008 663 125 37.2 7.6 30.1) (5.4 (6.4 8.3 18.9 6.7 18.4) 9.0 1.2 4.301 1.9 0.7 10.8 (5.1) 7.4 0.4 27.7 11.8 1.066 17.6 12.7) (11.9 — — — (5.882 20.9 1.4) 7.7 1.1 Neutral 2.0 60.0 12.7 Sugar Technology HCL Technologies Hexaware Technologies Infosys Technologies Mahindra Satyam 412 SELL 5.3 7.5 1.371 1.5 1.8) (220.0 Cautious 59.0 28.664 274 100 19.201.4 2.2 920 126.8 2.8 334.4 75 33.9 19.1 (27.2 — — — (961) (41.2) (1.7 10.2 28.9 18.9 0.7 80 6.3 16.3 11.1 70 BUY 149.8 7.0) — — 16.8 1.6 1.7 8.9 19.4 4.1) (8.448 28.1 11.3 (6.1 10.8 9.7 1.2) Tech Mahindra 570 Wipro 355 Technology 1.5 53.8 300 (6.8 10.5 240.4) 29.5 1.5 7.8 1.5 10.8 (25.5 14.2 9.7 11.082 1.4 10.4 0.520 2.6 9.5 1.3 50 86 REDUCE 82.1 Mindtree TCS 82.8 38.9 183 REDUCE 52.4 2.8 6.3 1.594 413 86 (10.7 1.5 9.8 13.7 9.889 520 290 3.5 0.7 19.9 1.2) 180 (1.8 3.0 6.0 11.5 1.4 8.0 11.9 11.5 1.7 1.0 3.0 4.554 172 228 1.6) 1.8) 89 ADD 25.8 53.7 2.2 4.0 10.1 1.008 2.3 2.6 10.2 23.541 1.2 2.648 4.4 15.553 7.0 1.6 5.217 Tata Communications Telecom 15.6 1.8 9.8) 9.2) 6.5 2.0 2.9 220 51. (b) 2010 means calendar year 2009.1 12.9 6.9 1.007 5.1 (0.8 15.8 6.4 2.9) (8.7 5.2 14.3 1.8 100 16.0 2.1 13.1 19.6 KS universe (d) ex-Energy & ex-Commodities 30.805 2.1 9.2 1.6 1.7 11.7 1.5 14.5 1.9 15.0 115 23.3 23.7 24.3 2.3 18.6 7.8 20.0 2.861 19.2 15.1 161.7 29.2 (71.2 3.176 4.9 3.1 13.5) (22.0 12.0 3.5 1.4 9.7 13.8 130 (5.6 5.3 34.2 0.4 6.0 68.4 20.7 16.0 1.1 48.5 Patni Computer Systems 324 ADD 43.4) 89.0 67.3 3.3 7.6 5.4 0.5 365 15.6 6. 2011 KOTAK INSTITUTIONAL EQUITIES RESEARCH Company .0 8.7 2.953 200 441 2.320 22.0 1.9 Reliance Power 85 Tata Power 97 Utilities SELL BUY Cautious 239.358 8.8 15.362 211 51.7 3.9 16.4 11.842 1.1 1.Kotak Institutional Equities: Valuation summary of key Indian companies 20-Oct-11 Price (Rs) Rating Mkt cap.5 5.0) (50.1 4.8 — — — (17.9 37.2 3.2 2.3 30.0 (7.6 22.184 3.9 21.3 0.8 3.3 9.6 1.9 3.7 1.8 5.0 5.2 70 - 8.6 1.8 14.2 32.6 100 12.3 9.2 (17.2 11.9 13.9 370 2.469 2.5 24.3 1.829 2.5 1.1 19.7 2.5 440 66.5 1.0 214.8 0.4 15.7 42.5 (3.0) — — 500 109.7 7.6 1.1 8.4 5.3 2.7 88 3.102.7 111.5 Polaris Software Lab 58.8 1.9 9.5 17.4 1.8 14.4 1.440 18.4 1.0 5.5 25.0 (91.3 1.6 3.6 United Phosphorus 145 BUY 67.1 3.9 15.1 Utilities Adani Power CESC JSW Energy 2.4 2.1 3.4 14.7 368.7 11.5 19.8 13.4 0.8 15.3 1.5) 6.7 (2.0 7.9) (28.810 2.7 17.3 6.8 12.9 10.3 14.9 REDUCE 205.3 1.9 2.7) (7.2 8.8) 47.3 1.1 1.4 16.560 9.6 9.4 137 REDUCE 13.4 5.245 11.393 2.9 2.6 13.798 14.6 0.3 7.249 31.045 REDUCE 2.144 866 133 42.4 4.2 12.0 (32.1) (69.790 678 2.1 2.192 122.3 1.2 12.7 11.3 8.3 6.1) (59.0 10.2 10.8 4.1 1.808 3.5 12.4 17.6 2.October 21.3 60 19.1 18.3 6.6 7.3 2.

Sell = We expect this stock to underperform the BSE Sensex by more than 0% over the next 12 months. related to the specific recommendations or views expressed in this report: Kawaljeet Saluja. within the specified category. because there is not a sufficient fundamental basis for determining an investment rating or target. NM = Not Meaningful.4% 3. is. Kotak Securities does not cover this company. Kotak Securities has suspended coverage of this company. We expect this stock to deliver 0-7. 2011 Ratings and other definitions/identifiers Definitions of ratings BUY. 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. Other definitions Coverage view. if any.B. CS = Coverage Suspended.0% BUY ADD REDUCE SELL 0% * The above categories are defined as follows: Buy = We expect this stock to outperform the BSE Sensex by 17.5% returns over the next 12 months.0% 4. are no longer in effect for this stock and should not be relied upon. NC = Not Covered. The information is not meaningful and is therefore excluded. or will be. RS = Rating Suspended. Neutral. Reduce = We expect this stock to underperform the BSE Sensex by 0-7. Jasdeep Walia. Add = We expect this stock to outperform the BSE Sensex by 7. Source: Kotak Institutional Equities As of September 30. Other ratings/identifiers NR = Not Rated. Ajay Mathrani.5% over the next 12 months. NA = Not Available or Not Applicable. REDUCE. The investment rating and target price.5% returns over the next 12 months. M." Kotak Institutional Equities Research coverage universe Distribution of ratings/investment banking relationships Percentage of companies covered by Kotak Institutional Equities.5% returns over the next 12 months. We expect this stock to deliver less than 0% returns over the next 12 months. Gundeep Singh.2% 20% 10% 15. if any. Our target prices are also on a 12-month horizon basis. The information is not available for display or is not applicable.5% over the next 12 months. Our target prices are also on a 12-month horizon basis. SELL. 50% 40% 36. Nischint Chawathe. directly or indirectly. have been suspended temporarily. and (2) no part of his or her compensation was. We expect this stock to deliver 7. ADD."Each of the analysts named below hereby certifies that.5% over the next 12 months. Amit Kumar. Murtuza Arsiwalla. for this stock.3% 30% 19. Hitesh Goel.6% 2.5% 29. if any. The coverage view will consist of one of the following designations: Attractive. We expect this stock to deliver more than 17. The coverage view represents each analyst’s overall fundamental outlook on the Sector. These ratings are used illustratively to comply with applicable regulations.8% 3. Priti Arora. Mahesh.5-17. As of 30/09/2011 Kotak Institutional Equities Investment Research had investment ratings on 167 equity securities. Lokesh Garg.5-17. Kotak Securities Research has suspended the investment rating and price target. 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. 70% 60% Percentage of companies within each category for which Kotak Institutional Equities and or its affiliates has provided investment banking services within the previous 12 months. Cautious. The previous investment rating and price target. .

and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein. Kotak Mahindra (UK) Ltd Kotak Mahindra Inc Bakhtawar. integrated investment banking. Kotak Securities Limited generally prohibits its analysts. Our research professionals provide important input into our investment banking and other business selection processes. We and our affiliates. investment management. Kotak Securities Limited generally prohibits its analysts and persons reporting to analysts from serving as an officer. India London EC 3N 1 LS White Plains. Our salespeople. seek professional advice. have acted on or used this research to the extent that it relates to non US issuers.310 229. financial situations. director. 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