[korak] india daily, january 20, 2016 - kotak securities · consumer querimetrix first edition:...

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

Contents

Special Reports

Strategy

Strategy: Consumer Querimetrix - consumer insights derived from big data

Daily Alerts

Results

Reliance Industries: In-line results

HCL Technologies: No surprises; core still weak

Reliance Power: Sasan steams ahead

Rallis India: Darker before dawn

Economy alerts

Economy: INR: Syncing up with CNY?

INDIA DAILY January 20, 2016 India 19-Jan 1-day 1-mo 3-mo

Sensex 24,480 1.2 (4.1) (10.4)

Nifty 7,435 1.1 (4.2) (10.0)

Global/Regional indices

Dow Jones 16,016 0.2 (6.5) (7.0)

Nasdaq Composite 4,477 (0.3) (9.1) (8.3)

FTSE 5,877 1.7 (2.9) (7.4)

Nikkei 16,935 (0.7) (10.8) (7.0)

Hang Seng 19,636 2.1 (9.7) (14.6)

KOSPI 1,872 (0.9) (5.2) (8.2)

Value traded – India

Cash (NSE+BSE) 192 129 45

Derivatives (NSE) 2,743 2,210 1,625

Deri. open interest 2,522 2,410 2,348

Forex/money market

Change, basis points

19-Jan 1-day 1-mo 3-mo

Rs/US$ 67.8 4 152 275

10yr govt bond, % 8.0 (1) 2 20

Net investment (US$ mn)

18-Jan MTD CYTD

FIIs (276) (1,116

) (1,116)

MFs 46 291 295

Top movers

Change, %

Best performers 19-Jan 1-day 1-mo 3-mo

RELI IN Equity 475.4 0.9 5.6 24.1

JSTL IN Equity 998.6 0.8 (2.8) 11.8

RIL IN Equity 1043.6 2.6 5.2 9.1

NHPC IN Equity 19.4 1.0 (2.0) 7.2

NTPC IN Equity 135.2 0.4 (0.5) 5.6

Worst performers

CBK IN Equity 178.6 0.8 (26.4) (40.6)

JPA IN Equity 9.1 2.8 (19.6) (35.4)

POWF IN Equity 158.9 (1.3) (25.4) (35.2)

UNBK IN Equity 114.3 1.5 (24.2) (34.3)

BOI IN Equity 93.8 1.5 (20.2) (34.2)

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

Key findings—digital marketplaces are changing the car buyer’s journey

Consumer Querimetrix gives the following insights on Indian passenger cars: (1) Digital

marketplaces are changing the car-buying journey, calling for carmakers to change the way

they engage customers, (2) recent car launches are up against fragmented mindshare of

consumers, (3) machine-learning offers many useful insights into the unpredictable price-

sensitive car buyer’s digital journey and (4) our nowcasting suggests ~195,000 passenger cars

will be sold in January.

Deciphering billions of searches—big data needs machine learning

The Querimetrix’ machine-learning algorithm identifies the most relevant factors for near-term

predictions (nowcasting), doing away with human intervention and its accompanying biases. To

identify relevant factors, the algorithm uses more than 400 possible predictors as well as

Bayesian inference to overcome spurious correlations. We have used the framework proposed

by Hal Varian and Steven L. Scott in the whitepaper ‘Predicting the Present with Bayesian

Structural Time Series’ for this study (click here for whitepaper). Please refer to the Appendix for

more details on how Consumer Querimetrix uses machine learning to glean insights from Big

Data.

Consumer Querimetrix first edition: Passenger cars

In the inaugural edition of Consumer Querimetrix, we focus on the passenger car industry and

highlight the effects of the digital wave on the traditional car-buying process.

Consumers are simultaneously assessing cars and their financing options online. The effect is

visible as car loans are increasingly being sourced outside dealerships. This trend can eat into

financing margins earned by dealers and hurt profitability. On the other hand, carmakers

with captive finance arms can use this opportunity to differentiate themselves in the online

evaluation phase.

Maruti Suzuki’s retention strategy can be put under pressure because of online classifieds

and evolving used car markets. Online classifieds may also be impeding new car sales, as per

the Querimetrix.

Hyundai's digital strategy for its compact cars shows promise even as its mid-size offering

loses out to Honda City and the Ciaz. However, it would be interesting to monitor Honda’s

position due to the taxi aggregation, SUVs and the Suzuki Ciaz in the premium sedan

category.

Maruti Suzuki Baleno has been the most successful car launch in recent times as far as digital

inquiries are concerned. It seems to have eclipsed most of the car launches in terms of

search-share and is mirroring the buzz seen during the Ford Ecosport launch in 2013.

Strategy India Quantitative

Consumer Querimetrix—consumer insights derived from big data. Kotak

Institutional Equities, in collaboration with Google, launch the Consumer Querimetrix.

The Querimetrix infers consumer behavior by analyzing Google search queries. In this

first edition of the series, we provide consumer insights into India’s evolving car-buying

journey. Our machine-learning algorithm nowcasts (near-term predictions) consumer

activity, capturing inflection points earlier than traditional forecasting tools.

INDIA

JANUARY 20, 2016

NEW RELEASE

BSE-30: 24,480

QUICK FACTS

An evolving car

buying journey is

set to change

ground rules for car

makers

Dealer profitability

challenged as car

financing begins to

move out of the

dealerships

Online classifieds

may be impeding

new car sales and

affecting customer

retention strategies

http://people.ischool.berkeley.edu/~hal/Papers/2013/pred-present-with-bsts.pdf


Higher other income and lower interest cost offset modest operational miss

RIL reported 4.5% qoq increase in standalone EBITDA to ₹103 bn, 3% below our estimate of

₹106 bn, led by (1) sequentially higher refining margins, (2) surprisingly strong petchem

profitability and (3) increase in crude throughput and petchem production. Refining margins

were at US$11.5/bbl, reflecting a premium of US$3.5/bbl over Singapore complex margins, a

moderation from 2QFY16 premium of US$4.4/bbl. Higher-than-expected other income and

lower interest cost boosted net income, which increased 10% qoq to ₹72.2 bn, 1% higher

than our estimate. RIL’s consolidated EBITDA increased 6.2% qoq to ₹114 bn and adjusted net

income increased 13% qoq to ₹72.9 bn (EPS of ₹24.7), reflecting strength in the standalone

performance. Reported consolidated net debt increased rather modestly by ₹100 bn in 9MFY16

despite a significant capex of ₹815 bn (including forex capitalization).

Strong performance from refining and petchem segments

Refining segment EBIT increased 17% qoq to `63.3 bn led by (1) higher crude throughput at 18

mn tons and (2) US$0.9/bbl increase in refining margins. The petchem segment EBIT increased

modestly by 3% qoq to `25.9 bn in 3QFY16 reflecting (1) higher production volumes and

(2) better-than-benchmark realized margins due to strong domestic demand. Domestic E&P

segment EBIT was modestly lower at `0.4 bn in 3QFY16 versus `0.6 bn in 2QFY16 despite

moderate decline in oil and gas realizations. Retail business EBIT increased 26% qoq to `1.5 bn,

driven by 19% qoq growth in revenues. RIL’s consolidated shale business EBIT of `0.6 bn

reported in 3QCY15 versus `1.9 bn in 2QCY15, reflected lower oil and gas realizations.

Fine tune estimates and raise target price to ₹1,130

We revise our FY2016-18E EPS estimates (standalone) for RIL to `84.7 (+4.1%), `89 (+1.9%)

and `100.2 (-1%) factoring in (1) higher refining margins, (2) weaker Rupee-Dollar exchange

rate assumptions, (3) lower crude oil and petrochemical prices and (4) other minor changes. We

raise our target price to `1,130 (from `1,080 previously), now based on September 2017

estimates. Our reverse valuation exercise shows that the RIL stock is ascribing 6X EV/EBITDA to

its core businesses post completion of ongoing projects, while factoring in nil equity value from

non-core businesses of telecom and US shale. RIL’s reasonable valuations reflect investors’

muted expectations from the company’s telecom foray leaving headroom for any positive

surprise, if the company is able to add reasonable subscriber-base in FY2017-18 without

compromising on earlier indicated ARPUs of ₹300-500 per month.

Reliance Industries (RIL) Energy

In-line results. RIL’s standalone net income at `72.2 bn was 1% above our estimate, as

higher other income and lower interest cost offset a modest miss on the operational

front. The management maintained its guidance on incremental contribution of

US$3-3.5 bn from core-business projects, despite challenging economics. We retain

ADD rating on the stock given reasonable valuations, despite recent strong

outperformance and raise our SOTP-based TP to `1,130 from `1,080, rolling it forward

to September 2017.

ADD

JANUARY 20, 2016

RESULT

Coverage view: Attractive

Price (`): 1,044

Target price (`): 1,130

BSE-30: 24,480

QUICK NUMBERS

Consolidated EPS of

`68 in 9MFY16

31% growth in

EBITDA in FY2016-

18, led by core-

business projects

Stock trading at

10.7X FY2017

standalone EPS,

adjusted for

treasury shares

Reliance Industries

Stock data Forecasts/Valuations 2016E 2017E 2018E52-week range (Rs) (high,low) EPS (Rs) 84.7 89.0 100.2

Market Cap. (Rs bn) EPS growth (%) 20.7 5.0 12.7

Shareholding pattern (%) P/E (X) 12.3 11.7 10.4

Promoters 45.2 Sales (Rs bn) 2,716.8 3,011.6 3,487.4

FIIs 18.7 Net profits (Rs bn) 274.4 288.2 324.7

MFs 2.9 EBITDA (Rs bn) 401.6 461.7 527.2

Price performance (%) 1M 3M 12M EV/EBITDA (X) 10.1 8.6 6.8

Absolute 5.2 8.3 18.6 ROE (%) 12.0 11.4 11.7

Rel. to BSE-30 9.7 21.1 37.0 Div. Yield (%) 1.0 1.1 1.3

Company data and v aluat ion summary

1,090-796

3,069.8

Energy Reliance Industries

4 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Key takeaways from analyst meet

Maintained guidance on incremental contribution from core-business projects.

The management maintained its guidance on incremental contribution of US$3-3.5 bn

from ongoing core-business projects despite reduced economics of (1) petcoke

gasification project due to sharp decline in LNG prices and (2) refinery off-gas cracker

(ROGC) due to sustained lower crude prices. The company will indeed have an economic

advantage over other players in the downstream industry due to moderate savings on

energy costs for its refining segment and lower cost of ethylene production from ROGC

as compared to other feedstocks.

Core-business projects remain on track to commission through CY2016. RIL

maintained its guidance on its commissioning schedule of core-business projects,

indicating start-up of PX plant and two gasifier units in the coming months, stabilization

of gasification project by 2HFY17, commencement of refinery off-gas cracker and ethane

import project by 3QFY17. The company has commissioned new PTA plant in Dahej in

January 2016.

Proposed agreement with RCOM to expand coverage to 18 circles in 800 MHz

band. Jio’s proposed agreement with RCOM to change allotment of spectrum will

expand its coverage to 18 circles in 800 MHz band. The company expects the allotment

process to be complete in the next 3-5 months, post liberalization of RCOM’s spectrum

and receipt of necessary regulatory approvals. Jio is also planning to share spectrum with

RCOM in 17 of these circles.

Telecom launch, possibly after allotment of spectrum from RCOM. Jio is extensively

testing end-to-end services post recent trial launch for RIL group employees. The initial

results have been positive and the company is preparing to start commercial operations

once it finds all the processes and platforms adequately robust for the larger roll-out. The

company is prepared to launch telecom services even without the allotment of spectrum

from RCOM given its significant presence across 800 MHz, 1800 MHz and 2300 MHz;

however, it may choose to wait if the allotment is expected around its commercial launch

in order to upgrade its coverage for a better consumer experience.

No major impairment in the US shale business. RIL has not reported significant

impairments in its shale business unlike its US counterparts primarily due to the difference

in accounting practices across countries. The company’s assessment of shale business

based on gradual recovery in oil and gas prices in the long term does not necessitate any

significant write-downs. On the other hand, US-based companies are required to realign

assumptions to spot/futures prices to compute impairments. The company also expects

50-60% reduction in capital expenditure in US shale business in CY2016.

Gradual expansion in fuel marketing business. RIL has opened 762 retail outlets till

date, while achieving highest retail outlet throughput of nearly 200 KL/month,

significantly higher than the industry average. RIL’s domestic sales increased to 4 mn tons

in 3QFY16, as the company achieved 2.3 mn KL/year of exit rate in December 2015. The

company gained 3.5% market share in bulk diesel volumes and reported strong growth

in sales of retail ATF and bulk LPG sales. The company indicated additional margins of

US$5-6/bbl from fuel retailing

Reliance Industries Energy

KOTAK INSTITUTIONAL EQUITIES RESEARCH 5

Key highlights of 3QFY16 standalone results

Exhibit 1: Interim results of Reliance Industries, March fiscal year-ends (` mn)

Source: Company, Kotak Institutional Equities estimates

(% chg.)

3QFY16 3QFY16E 3QFY15 2QFY16 3QFY16E 3QFY15 2QFY16 9MFY16 9MFY15 (% chg.) FY2016E

Net sales 565,670 561,206 801,960 608,170 0.8 (29.5) (7.0) 1,832,010 2,730,330 (32.9) 2,716,768

Total expenditure (462,950) (455,560) (729,880) (509,840) 1.6 (36.6) (9.2) (1,537,890) (2,500,600) (38.5) (2,315,183)

Inc/(Dec) in stock (14,820) — (49,070) (19,570) (15,360) (22,110) —

Raw materials (371,490) (372,346) (604,940) (411,100) (0.2) (38.6) (9.6) (1,285,350) (2,237,630) (42.6) (1,950,348)

Staff cost (10,910) (10,597) (8,320) (9,390) 3.0 31.1 16.2 (32,470) (26,930) 20.6 (43,126)

Other expenditure (65,730) (72,617) (67,550) (69,780) (9.5) (2.7) (5.8) (204,710) (213,930) (4.3) (321,708)

EBITDA 102,720 105,646 72,080 98,330 (2.8) 42.5 4.5 294,120 229,730 28.0 401,585

Other income 22,890 19,049 24,020 16,170 20.2 (4.7) 41.6 57,240 65,880 (13.1) 78,684

Interest cost (6,090) (7,903) (8,810) (6,940) (22.9) (30.9) (12.2) (19,000) (19,630) (3.2) (25,555)

DD&A expense (24,050) (24,895) (21,050) (23,720) (3.4) 14.3 1.4 (70,420) (63,560) 10.8 (95,148)

Pretax profits 95,470 91,897 66,240 83,840 3.9 44.1 13.9 261,940 212,420 23.3 359,566

Extraordinaries — — — — — — —

Current tax (22,530) (18,427) (13,780) (17,500) 22.3 63.5 28.7 (57,250) (44,240) 29.4 (86,648)

Deferred tax (760) (2,250) (1,610) (730) (3,720) (3,420) 1,486

Reported net income 72,180 71,220 50,850 65,610 1.3 41.9 10.0 200,970 164,760 22.0 274,404

Adjusted net income 72,180 71,220 50,850 65,610 1.3 41.9 10.0 200,970 164,760 22.0 274,404

Adjusted EPS (Rs) 22.3 22.0 15.7 20.3 62.0 50.9 84.7

Effective tax rate (%) 24.4 22.5 23.2 21.7 23.3 22.4 23.7

Petchem production

Polymer volumes ('000 tons) 1,183 1,238 1,049 1,200 (4.4) 12.8 (1.4) 3,483 3,263 6.7 4,597

Polyester volumes ('000 tons) 548 561 451 543 (2.3) 21.5 0.9 1,603 1,390 15.3 2,184

Fiber intermediates ('000 tons) 1,725 1,505 1,241 1,475 14.6 39.0 16.9 4,652 3,632 28.1 6,393

Refining

Crude throughput (mn tons) 18.0 17.7 17.7 17.1 1.7 1.7 5.3 51.8 51.7 0.2 68.4

Refining margin (US$/bbl) 11.5 12.0 7.3 10.6 (4.0) 57.5 8.5 10.8 8.1 33.3 11.1

Average exchange rate (Rs/US$) 65.9 65.9 62.0 65.0 6.4 1.4 64.8 60.8 6.6 65.5

Upstream production

Crude oil production (000 tons) 102 106 125 117 (4.1) (18.7) (13.0) 328 388 (15.7) 430

Gas production (bcf) 26 27 30 28 (3.0) (12.1) (5.7) 81 92 (11.7) 108

Segment results

Revenues

Petrochemicals 180,310 213,060 198,510 (15.4) (9.2) 574,340 699,530 (17.9)

Refining & marketing 495,520 731,520 512,650 (32.3) (3.3) 1,621,750 2,559,310 (36.6)

Oil & gas 9,920 13,470 11,660 (26.4) (14.9) 33,580 42,840 (21.6)

Others 2,520 3,730 2,780 (32.4) (9.4) 7,260 7,870 (7.8)

Gross turnover 688,270 961,780 725,600 (28.4) (5.1) 2,236,930 3,309,550 (32.4)

Inter segment 77,020 135,310 80,450 (43.1) (4.3) 266,410 491,540 (45.8)

Excise duty 45,580 24,510 36,980 86.0 23.3 138,510 87,680 58.0

Net sales 565,670 801,960 608,170 (29.5) (7.0) 1,832,010 2,730,330 (32.9)

Operating costs

Petrochemicals 154,390 191,090 173,310 (19.2) (10.9) 498,640 634,680 (21.4)


Oil & gas 9,530 10,800 11,100 (11.8) (14.1) 31,800 31,980 (0.6)

Others 1,640 2,990 2,220 (45.2) (26.1) 5,190 5,950 (12.8)

Total 597,750 904,410 645,140 (33.9) (7.3) 1,988,500 3,124,320 (36.4)

EBIT

Petrochemicals 25,920 21,970 25,200 18.0 2.9 75,700 64,850 16.7

Refining & marketing 63,330 31,990 54,140 98.0 17.0 168,880 107,600 57.0

Oil & gas 390 2,670 560 (85.4) (30.4) 1,780 10,860 (83.6)

Others 880 740 560 18.9 57.1 2,070 1,920 7.8

Total 90,520 57,370 80,460 57.8 12.5 248,430 185,230 34.1

Interest expense (6,090) (8,810) (6,940) (30.9) (12.2) (19,000) (19,630) (3.2)

Interest income 8,420 13,330 10,340 (36.8) (18.6) 28,730 41,310 (30.5)

Other unallocable (net) 2,620 4,350 (20) 3,780 5,510

PBT 95,470 66,240 83,840 44.1 13.9 261,940 212,420 23.3

Current tax (22,530) (13,780) (17,500) (57,250) (44,240)

Deferred tax (760) (1,610) (730) (3,720) (3,420)

PAT 72,180 50,850 65,610 41.9 10.0 200,970 164,760 22.0

Capital employed

Petrochemicals 423,510 467,650 461,610 (9.4) (8.3) 423,510 467,650 (9.4)

Refining & marketing 1,036,450 790,860 968,450 31.1 7.0 1,036,450 790,860 31.1

Oil & gas 334,520 314,540 333,710 6.4 0.2 334,520 314,540 6.4

Others 455,560 389,820 454,340 16.9 0.3 455,560 389,820 16.9

Unallocated corporate 1,227,260 1,175,340 1,184,720 4.4 3.6 1,227,260 1,175,340 4.4

Total 3,477,300 3,138,210 3,402,830 10.8 2.2 3,477,300 3,138,210 10.8



Exhibit 2: Segment EBIT numbers boosted by lower overheads or apportioning of other income Difference between RIL's segment EBIT and reported EBIT, March fiscal year-ends, 2014-16YTD (` mn)

Source: Company, Kotak Institutional Equities

Higher margins boost refining EBIT. 3QFY16 refining segment EBIT increased 17%

qoq to `63.3 bn (+98% yoy), led by higher refining margins at US$11.5/bbl (+US$0.9/bbl

qoq and +US$4.2/bbl yoy) and increase in crude throughput. The sequential increase of

$0.9/bbl in refining margins was low when compared to an increase of US$1.7/bbl in

Singapore complex margins and expansion of US$0.5/bbl in Arab light-heavy differential.

RIL’s premium over Singapore benchmark margins moderated to US$3.5/bbl from

US$4.4/bbl in 2QFY16. Crude throughput was at 18 mn tons in 3QFY16 versus 17.1 mn

tons in 2QFY16 and 17.7 mn tons in 3QFY15.

Exhibit 3: Quarterly performance of refining segment, March fiscal year-ends, 1QFY14-3QFY16


1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16

Segment EBIT

Petrochemicals 18,880 25,040 21,240 20,960 18,850 24,030 21,970 21,220 24,580 25,200 25,920

Refining 29,510 31,740 31,410 39,540 37,730 37,880 31,990 47,270 51,410 54,140 63,330

Oil & gas 3,520 3,560 5,400 3,780 4,870 3,320 2,670 1,640 830 560 390

Others 840 420 940 1,990 520 660 740 1,240 630 560 880

Total EBIT (A) 52,750 60,760 58,990 66,270 61,970 65,890 57,370 71,370 77,450 80,460 90,520

Reported EBIT

EBITDA (excluding other income) 70,750 78,490 76,220 83,310 75,300 82,350 72,080 86,290 93,070 98,330 102,720

DD&A (21,380) (22,330) (21,430) (22,750) (20,240) (22,270) (21,050) (21,320) (22,650) (23,720) (24,050)

Reported EBIT (B) 49,370 56,160 54,790 60,560 55,060 60,080 51,030 64,970 70,420 74,610 78,670

Difference (A)-(B) 3,380 4,600 4,200 5,710 6,910 5,810 6,340 6,400 7,030 5,850 11,850


Financials (Rs mn)

Revenues 814,580 974,560 954,320 876,240 909,980 917,810 731,520 486,390 613,580 512,650 495,520

EBIT 29,510 31,740 31,410 39,540 37,730 37,880 31,990 47,270 51,410 54,140 63,330

Capital employed 604,590 615,630 548,280 663,730 709,460 708,880 790,860 909,430 920,590 968,450 1,036,450

Operating metrics

Crude throughput (mn tons) 17.1 17.7 17.0 16.3 16.7 17.3 17.7 16.2 16.6 17.1 18.0

Refining margin (US$/bbl) 8.4 7.7 7.6 9.3 8.7 8.3 7.3 10.1 10.4 10.6 11.5

Rupee-Dollar exchange rate 56.0 62.1 62.0 62.0 59.8 60.6 62.0 62.2 63.4 65.0 65.9



Exhibit 4: RIL's premium over Singapore refining margins moderated sequentially in 3QFY16 RIL's refining margins versus Singapore benchmark, March fiscal year-ends, 2010-16YTD (US$/bbl)


Surprisingly strong petchem profitability driven by higher volumes and better

realized margins. 3QFY16 petchem segment EBIT increased 2.9% qoq to `25.9 bn

(+18% yoy) despite a sequential decline in Asian petchem margins, reflecting (1) higher

volumes led by the ramp up in production of PTA and PET from new plants in Dahej and

(2) higher realized margins, given the strength of domestic demand. RIL’s polymer

production volumes reduced 2% qoq to 1.17 mn tons in 3QFY16. Polyester production

volumes increased 1% qoq to 0.55 mn tons. Volume of fiber intermediates increased

17% qoq to 1.7 mn tons. Domestic polymer demand increased robustly by 20% yoy and

polyester demand grew 6% yoy in 3QFY16.

Exhibit 5: Quarterly performance of petrochemicals segment, March fiscal year-ends, 1QFY14-3QFY16


0

2

4

6

8

10

12

0

2

4

6

8

10

12

14

1Q

FY10

2Q

FY10

3Q

FY10

4Q

FY10

1Q

FY11

2Q

FY11

3Q

FY11

4Q

FY11

1Q

FY12

2Q

FY12

3Q

FY12

4Q

FY12

1Q

FY13

2Q

FY13

3Q

FY13

4Q

FY13

1Q

FY14

2Q

FY14

3Q

FY14

4Q

FY14

1Q

FY15

2Q

FY15

3Q

FY15

4Q

FY15

1Q

FY16

2Q

FY16

3Q

FY16

Reuters Singapore complex margins RIL's premium over benchmark margins Arab light-heavy differential


Financials (Rs mn)

Revenues 219,500 248,920 252,800 243,430 237,150 249,320 213,060 200,560 195,520 198,510 180,310

EBIT 18,880 25,040 21,240 20,960 18,850 24,030 21,970 21,220 24,580 25,200 25,920

Capital employed 394,760 426,960 449,100 446,010 450,000 471,580 467,650 437,830 461,430 461,610 423,510

Production volumes ('000 tons)

PP 703 708 717 672 690 703 666 641 600 800 734

PE 251 275 250 224 266 253 217 264 300 200 274

PVC 167 169 170 194 126 176 169 129 200 200 175

Polymer volumes 1,122 1,151 1,137 1,072 1,082 1,132 1,049 1,037 1,100 1,200 1,183

POY 167 159 144 201 220 215 205 212 205 187 190

PSF 157 161 160 152 148 160 156 157 151 153 163

PET 87 85 88 87 87 113 89 85 156 203 195

Polyester volumes 411 405 399 433 455 488 451 457 512 543 548

PX 428 535 524 502 477 569 565 558 567 585 583

PTA 499 517 536 493 519 502 532 521 707 711 956

MEG 159 176 172 168 160 163 145 167 178 179 186

Fiber intermediates 1,086 1,228 1,230 1,165 1,156 1,235 1,241 1,245 1,452 1,475 1,725




Exhibit 6: Margins for key polymers and polyesters declined sequentially Asia petchem margins and prices, March fiscal year-ends, 2015-16YTD

Source: Platt’s, Kotak Institutional Equities

Dismal EBIT for E&P segment. 3QFY16 E&P EBIT remained weak at `0.4 bn versus `0.6

bn in 2QFY16 and `2.7 bn in 3QFY15 reflecting lower volumes and realizations on both

oil and gas. RIL’s share of crude oil production decreased 13% qoq to 0.1 mn tons and

gas production declined 6% qoq to 26 bcf. KG D-6 gas volume (gross basis) declined 7%

qoq to 10.6 mcm/d in 3QFY16. Oil and condensate production from MA-1 field declined

to 4.5 kb/d in 3QFY16 versus 5.1 kb/d in 2QFY16 and 6 kb/d in 3QFY15.

Exhibit 7: Quarterly performance of E&P segment, March fiscal year-ends, 1QFY14-3QFY16


Standalone financial highlights.

Higher other income. Other income increased sharply to `22.9 bn in 3QFY16

versus `16.2 bn in 2QFY16 and `24 bn in 3QFY15.

Lower interest cost. Reported interest expense declined to `6.1 bn in 3QFY16

versus `6.9 bn in 2QFY16 and `8.8 bn in 3QFY15.

Stable DD&A expense. RIL’s reported DD&A expense was sequentially stable at

`24.1 bn.

Higher effective tax rate. RIL’s effective tax rate increased to 24.4% in 3QFY16 as

compared to 21.7% in 2QFY16 and 23.2% in 3QFY15.

Key highlights of 3QFY16 consolidated results

(% chg.)

1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 yoy qoq

Global margins (US$/ton)

HDPE – naphtha 556 613 740 655 772 744 663 (10.3) (10.8)

LLDPE – naphtha 589 650 748 667 758 716 639 (14.5) (10.7)

PP – naphtha 549 594 700 563 687 587 446 (36.4) (24.1)

PVC – naphtha 81 131 288 329 316 368 319 11.0 (13.2)

PSF – naphtha 563 711 788 666 670 708 690 (12.4) (2.4)

PFY – naphtha 778 881 982 1,001 1,088 1,068 952 (3.0) (10.8)

PX – naphtha 280 414 343 309 345 342 325 (5.3) (4.9)

Global prices (US$/ton)

HDPE 1,509 1,527 1,376 1,157 1,334 1,205 1,110 (19.4) (7.9)

LLDPE 1,542 1,564 1,385 1,170 1,320 1,177 1,086 (21.6) (7.7)

PP 1,502 1,508 1,337 1,066 1,249 1,048 892 (33.3) (14.9)

PVC 1,034 1,045 924 831 877 829 765 (17.2) (7.6)

PSF 1,517 1,625 1,425 1,168 1,232 1,168 1,137 (20.2) (2.7)

PFY 1,732 1,795 1,618 1,503 1,650 1,528 1,398 (13.6) (8.5)

PX 1,233 1,328 980 811 907 802 771 (21.3) (3.9)


Financials (Rs mn)

Revenues 14,540 14,640 17,330 14,170 15,570 13,800 13,470 12,230 12,000 11,660 9,920

EBIT 3,520 3,560 5,400 3,780 4,870 3,320 2,670 1,640 830 560 390

Capital employed 276,510 295,260 298,880 285,710 290,730 307,010 314,540 315,570 324,180 333,710 334,520

Operating metrics

KG-D6 gas realization (US$/mn BTU) 4.2 4.2 4.2 4.2 4.2 4.2 5.1 5.6 5.2 5.2 4.2

Dated Brent crude price (US$/bbl) 103 110 109 108 110 102 76 54 62 50 43

Crude oil production (000 tons) 123 124 132 127 137 126 125 119 108 117 102

Gas production (bcf) 37 34 31 32 32 31 30 28 28 28 26




Exhibit 8: Interim performance of RIL's subsidiaries, March fiscal year-ends (` mn)


(% chg.)

3QFY16 3QFY15 2QFY16 3QFY15 2QFY16 9MFY16 9MFY15 (% chg.)

Net sales 116,940 133,320 100,840 (12.3) 16.0 330,910 349,320 (5.3)

Total expenditure (105,980) (118,510) (92,130) (10.6) 15.0 (302,540) (304,090) (0.5)

Inc/(Dec) in stock (4,270) (13,270) 6,020 (740) 3,760 (119.7)

Raw materials (72,600) (67,520) (69,860) 7.5 3.9 (215,460) (217,630) (1.0)

Staff cost (9,350) (7,160) (8,470) 30.6 10.4 (25,410) (19,100) 33.0

Other expenditure (19,760) (30,560) (19,820) (35.3) (0.3) (60,930) (71,120) (14.3)

EBITDA 10,960 14,810 8,710 (26.0) 25.8 28,370 45,230 (37.3)

Other income 1,370 (620) (210) 1,300 (2,650) (149.1)

Interest cost (3,120) (2,560) (2,780) 21.9 12.2 (8,950) (6,760) 32.4

DD&A expense (7,280) (8,490) (7,990) (14.3) (8.9) (23,030) (24,040) (4.2)

Pretax profits 1,930 3,140 (2,270) NA NA (2,310) 11,780 NA

Extraordinaries — — 2,520 2,520 —

Current tax (680) (380) (370) (2,080) (1,400)

Deferred tax 140 (1,700) 760 2,090 (4,880)

Net income 1,390 1,060 640 31.1 117.2 220 5,500 NA

Segment EBIT

Petrochemicals 470 (1,330) 110 (620) (1,970)

Refining & marketing 1,580 680 470 3,160 1,650

Oil & gas 510 5,650 1,860 1,860 16,060

Organized retail 1,470 1,330 1,170 3,750 3,130

Others 1,970 1,740 1,720 5,400 4,440

Total 6,000 8,070 5,330 13,550 23,310



Exhibit 9: Interim consolidated results of Reliance Industries, March fiscal year-ends (` mn)


(% chg.)

3QFY16 3QFY15 2QFY16 3QFY15 2QFY16 9MFY16 9MFY15 (% chg.)

Net sales 682,610 935,280 709,010 (27.0) (3.7) 2,162,920 3,079,650 (29.8)

Total expenditure (568,930) (848,390) (601,970) (32.9) (5.5) (1,840,430) (2,804,690) (34.4)

Inc/(Dec) in stock (19,090) (62,340) (13,550) (16,100) (18,350)

Raw materials (444,090) (672,460) (480,960) (34.0) (7.7) (1,500,810) (2,455,260) (38.9)

Staff cost (20,260) (15,480) (17,860) 30.9 13.4 (57,880) (46,030) 25.7

Other expenditure (85,490) (98,110) (89,600) (12.9) (4.6) (265,640) (285,050) (6.8)

EBITDA 113,680 86,890 107,040 30.8 6.2 322,490 274,960 17.3

Other income 24,260 23,400 15,960 3.7 52.0 58,540 63,230 (7.4)

Interest cost (9,210) (11,370) (9,720) (19.0) (5.2) (27,950) (26,390) 5.9

DD&A expense (31,330) (29,540) (31,710) 6.1 (1.2) (93,450) (87,600) 6.7

Pretax profits 97,400 69,380 81,570 40.4 19.4 259,630 224,200 15.8

Extraordinaries — — 2,520 2,520 —

Current tax (23,210) (14,160) (17,870) 63.9 29.9 (59,330) (45,640) 30.0

Deferred tax (620) (3,310) 30 (1,630) (8,300)

Net income 73,570 51,910 66,250 41.7 11.0 201,190 170,260 18.2

Share of profit/(loss) of associates (160) 800 840 1,540 1,850

Minority interest (510) (150) 110 (410) (260)

Adjusted profits 72,900 52,560 64,680 38.7 12.7 199,800 171,850 16.3

Adjusted EPS (Rs) 24.7 17.9 22.0 67.8 58.4

Effective tax rate (%) 24.5 25.2 21.9 23.5 24.1

Petchem production

Polymer volumes ('000 tons) 1,175 1,049 1,200 12.0 (2.1) 3,475 3,263 6.5

Polyester volumes ('000 tons) 550 451 543 22.0 1.3 1,605 1,394 15.2

Fiber intermediates ('000 tons) 1,725 1,241 1,475 39.0 16.9 4,652 3,632 28.1

Refining

Crude throughput (mn tons) 18.0 17.7 17.1 1.7 5.3 51.8 51.7 0.2

Refining margin (US$/bbl) 11.5 7.3 10.6 57.5 8.5 10.8 8.1 33.3

Average exchange rate (Rs/US$) 65.9 62.0 65.0 6.4 1.4 64.8 60.8 6.6

Upstream production

Crude oil production (000 tons) 102 125 117 (18.7) (13.0) 328 388 (15.7)

Gas production (bcf) 26 30 28 (12.1) (5.7) 81 92 (11.7)

Segment results

Revenues

Petrochemicals 193,980 230,010 212,390 (15.7) (8.7) 614,950 750,500 (18.1)


Oil & gas 17,650 28,410 20,670 (37.9) (14.6) 58,890 90,210 (34.7)

Organized retail 60,420 46,860 50,910 28.9 18.7 158,310 128,520 23.2

Others 31,270 34,470 28,660 (9.3) 9.1 85,720 76,740 11.7

Gross turnover 877,170 1,157,520 920,310 (24.2) (4.7) 2,786,690 3,880,450 (28.2)

Inter segment 143,760 194,220 169,140 (26.0) (15.0) 471,470 704,140 (33.0)

Excise duty 50,800 28,020 42,160 81.3 20.5 152,300 96,660 57.6

Net sales 682,610 935,280 709,010 (27.0) (3.7) 2,162,920 3,079,650 (29.8)

Operating costs

Petrochemicals 167,590 209,370 187,080 (20.0) (10.4) 539,870 687,620 (21.5)


Oil & gas 16,750 20,090 18,250 (16.6) (8.2) 55,250 63,290 (12.7)


Others 28,420 31,990 26,380 (11.2) 7.7 78,250 70,380 11.2

Total 780,650 1,092,080 834,520 (28.5) (6.5) 2,524,710 3,671,910 (31.2)

EBIT

Petrochemicals 26,390 20,640 25,310 27.9 4.3 75,080 62,880 19.4

Refining & marketing 64,910 32,670 54,610 98.7 18.9 172,040 109,250 57.5

Oil & gas 900 8,320 2,420 (89.2) (62.8) 3,640 26,920 (86.5)


Others 2,850 2,480 2,280 14.9 25.0 7,470 6,360 17.5

Total 96,520 65,440 85,790 47.5 12.5 261,980 208,540 25.6

Capital employed

Petrochemicals 447,720 497,340 484,360 (10.0) (7.6) 447,720 497,340 (10.0)

Refining & marketing 1,055,650 805,190 983,860 31.1 7.3 1,055,650 805,190 31.1

Oil & gas 764,030 698,960 754,950 9.3 1.2 764,030 698,960 9.3


Others 826,320 607,590 760,560 36.0 8.6 826,320 607,590 36.0

Unallocated corporate 1,184,220 1,141,520 1,143,320 3.7 3.6 1,184,220 1,141,520 3.7

Total 4,340,530 3,812,140 4,189,600 13.9 3.6 4,340,530 3,812,140 13.9



Steady performance of retail business. RIL’s retail business reported 18.7% qoq

increase in revenues to `60.4 bn and 25.6% qoq increase in EBIT to `1.5 bn in 3QFY16.

The company added 187 stores in 3QFY16, increasing the overall store count to 3,043.

Exhibit 10: Robust growth in revenues from retail operations Key operating metrics and financials for RIL's retail operations, March fiscal year-ends, 2011-16YTD (` bn)


Resilient performance of US shale business. RIL’s shale business reported 6% qoq

decline in revenues to US$110 mn and 8% qoq decline in EBITDA to US$58 mn in

4QCY15, as higher volumes and lower operating costs offset lower realizations on oil and

gas. RIL has consolidated sequentially lower revenues of `7.7 bn (-14% qoq) and EBIT of

`0.6 bn pertaining to 3QCY15 in 3QFY16 financials. The company invested US$164 mn

in 4QCY15, taking cumulative investments in the shale business to US$8.7 bn.

Exhibit 11: RIL's shale profitability deteriorates further in lower crude price environment Key details of RIL's shale business, March fiscal year-ends, 2014-16YTD


Moderate increase in net debt despite significant capex. Reported capital

expenditure including forex-related capitalization was higher at US$4.3 bn in

3QFY16 versus US$3.1 bn in 2QFY16. RIL’s reported consolidated net debt increased

rather modestly by ₹100 bn in 9MFY16 despite a significant capex of ₹815 bn (including

forex capitalization).

FY2011 FY2012 FY2013 FY2014 1QFY15 2QFY15 3QFY15 4QFY15 FY2015 1QFY16 2QFY16 3QFY16

Operating metrics

Store category

Brands 49 68 102 100 100 104 107 107 112 118

Jewelry 37 51 54 54 53 53 53 53 53 53

Fashion & lifestyle 353 448 533 540 569 599 649 649 662 697

Digital 93 139 284 427 689 920 1,196 1,196 1,298 1,379 1,537

Value and others 750 760 718 602 595 609 616 616 622 610 597

Total stores 1,090 1,282 1,466 1,691 1,723 2,006 2,285 2,621 2,621 2,747 2,857 3,043

Area (mn sq. ft) NA 6.5 9.0 11.7 NA NA NA NA NA 12.5 12.8 12.8

Revenue break-up

Brands 1 1 2 3 1 1 1 1 4 1 1

Jewelry 3 5 8 12 2 3 4 2 11 2 2

Fashion & lifestyle 8 11 16 19 6 6 7 6 24 7 8

Digital 7 12 21 30 8 10 11 12 41 12 13 17

Value and others 42 46 61 80 23 23 24 26 95 24 27 28

Financials

Revenue 61 76 108 145 40 42 47 48 176 47 51 60

EBITDA NA (3.4) 0.8 3.6 1.7 1.9 2.3 2.0 7.8 2.0 2.1 2.4

EBIT NA NA NA NA 0.8 1.0 1.3 1.0 4.2 1.1 1.2 1.5

Net profit (5.0) (4.5) (2.7) NA NA NA NA NA NA NA NA NA

909

15

1QFY14 2QFY14 3QFY14 4QFY14 FY2014 1QFY15 2QFY15 3QFY15 4QFY15 FY2015 1QFY16 2QFY16 3QFY16

Macro data

WTI spot price (US$/bbl) 93.8 105.8 97.6 98.7 98.1 103.1 96.3 73.2 48.5 79.6 57.9 46.5 42.0

Henry hub prices (US$/mn BTU) 4.1 3.6 3.8 5.2 4.1 4.6 3.9 3.8 2.9 3.7 2.7 2.8 2.1

Financials

Revenues 215 193 221 266 895 270 244 206 138 858 141 117 110

EBITDA 165 127 174 199 664 201 202 174 91 668 86 63 58

Cumulative investment (US$ bn) 6.0 6.5 6.8 7.0 7.0 7.4 7.7 7.9 8.1 8.1 8.4 8.6 8.7

Average realization (US$/mcfe) 6.7 6.2 6.0 7.0 6.5 6.6 5.7 4.6 3.4 6.3 3.5 2.8 2.4

Net volumes (bcfe)

Gas sales 19.4 19.4 22.3 22.4 83.5 25.0 25.9 27.1 24.6 102.6 NA NA NA

Condensate sales 7.4 6.7 8.3 8.7 31.1 9.3 9.4 10.3 10.1 39.1 NA NA NA

NGL sales 5.5 5.3 6.1 6.4 23.3 7.2 7.6 7.9 6.3 29.0 NA NA NA

Total sales 32.4 31.2 36.7 37.5 137.9 41.4 42.9 45.3 41.0 137.9 41.7 NA NA

Total production 37.9 36.5 43.0 44.2 161.6 48.6 49.8 52.1 49.4 199.9 49.3 51.0 54.2



Exhibit 12: RIL's net debt has increased moderately despite significant capital expenditure Consolidated details, March fiscal year-ends, 2015-16YTD (₹ bn)


Key assumptions behind earnings model

Refining margins. We model FY2016, FY2017 and FY2018 refining margins at

US$11.1/bbl, US$11.6/bbl and US$12.1/bbl versus US$10.8/bbl in 9MFY16. Higher

margins in FY2017-18 despite our expectations of modestly weaker underlying margins

reflect expected savings (albeit lower) on fuel costs from the petcoke gasification project.

Exhibit 13: Major assumptions for RIL's refining segment, March fiscal year-ends, 2010-18E (US$/bbl)

Source: Kotak Institutional Equities estimates

Chemical margins. We model higher petchem volumes over the next few years factoring

in timely completion of expansion projects. We expect the company to generate higher

blended margins from the petchem segment, as completion of ongoing projects will drive

further integration of RIL’s petchem business.

Exhibit 14: Major assumptions for RIL's petchem segment, March fiscal year-ends, 2010-18E (US$/bbl)


Taxation. We model an effective tax rate of 23.7%, 25.2% and 26.6% for FY2016E,

FY2017E and FY2018E versus 23.3% in 9MFY16.

Exchange rate. We now assume US Dollar-Indian Rupee exchange rate for FY2016E,

FY2017E and FY2018E at `65.5/US$, `68.4/US$ and `70/US$.

1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16

Gross debt 1,358 1,421 1,500 1,609 1,708 1,728 1,781

Cash and cash equivalents 816 835 787 845 874 857 917

Reported net debt 542 586 713 764 834 870 863

Cash profits 90 93 85 95 94 96 97

Capital expenditure, including forex capitalization 152 297 254 300 327 202 286

2010 2011 2012 2013 2014 2015 2016E 2017E 2018E

Rupee-Dollar exchange rate 47.4 45.6 47.9 54.4 60.5 61.1 65.5 68.4 70.0

Crude throughput (mn tons)

RIL's old refinery 34.5 34.5 35.2 35.6 37.7 37.5 37.7 37.7 37.7

SEZ refinery 26.4 32.1 32.4 32.9 30.3 30.4 30.7 30.7 30.7

Total crude throughput 60.9 66.6 67.6 68.5 68.0 67.9 68.4 68.4 68.4

Blended refining margins (US$/bbl) 6.6 8.4 8.6 9.2 8.1 8.6 11.1 11.6 12.1

2010 2011 2012 2013 2014 2015 2016E 2017E 2018E

Rupee-Dollar exchange rate 47.4 45.6 47.9 54.4 60.5 61.1 65.5 68.4 70.0

Production volumes (mn tons)

Polymers 4.1 4.1 4.5 4.4 4.5 4.3 4.6 4.9 5.4

Polyesters 1.7 1.7 1.7 1.6 1.6 1.8 2.2 2.8 3.1

Fiber intermediates 4.6 4.5 4.8 4.8 4.7 4.9 6.4 7.0 7.9

Total volumes 10.4 10.3 10.9 10.8 10.8 11.0 13.2 14.7 16.3

Petchem EBITDA per ton (US$/ton) 219 245 212 163 168 174 142 160 181



Exhibit 15: Stock ascribing 6X EV/EBITDA multiple to core business, post expansion projects Implied EV/EBITDA for RIL's petchem and refining business, post completion of projects (` bn)


Exhibit 16: Reliance's earnings have high leverage to refining margins Sensitivity of RIL's earnings to key variables, March fiscal year-ends, 2016-18E


Market capitalization 3,074

Equity value of retail business 160

Equity value of shale business —

Equity value of telecom business —

Equity value attributable to core business 2,914

Net debt 912

Other investments 655

EV of core business 3,171

EBITDA post completion of ongoing projects 527

Implied EV/EBITDA of core business 6.0

Fiscal 2016E Fiscal 2017E Fiscal 2018E

Downside Base case Upside Downside Base case Upside Downside Base case Upside

Exchange rate

Rupee-dollar exchange rate 64.5 65.5 66.5 67.4 68.4 69.4 69.0 70.0 71.0

Net profits (Rs mn) 267,823 274,404 281,007 280,700 288,189 295,678 316,971 324,672 332,372

EPS (Rs) 82.7 84.7 86.8 86.7 89.0 91.3 97.9 100.2 102.6

% upside/(downside) (2.4) 2.4 (2.6) 2.6 (2.4) 2.4

Petchem prices

Change in prices (%) (5.0) 5.0 (5.0) 5.0 (5.0) 5.0

Net profits (Rs mn) 265,511 274,404 283,297 274,603 288,189 301,775 310,926 324,672 338,418

EPS (Rs) 82.0 84.7 87.5 84.8 89.0 93.2 96.0 100.2 104.5

% upside/(downside) (3.2) 3.2 (4.7) 4.7 (4.2) 4.2

Blended refining margins

Margins (US$/bbl) 10.1 11.1 12.1 10.6 11.6 12.6 11.1 12.1 13.1

Net profits (Rs mn) 250,017 274,404 298,771 261,059 288,189 315,319 298,763 324,672 350,577

EPS (Rs) 77.2 84.7 92.2 80.6 89.0 97.4 92.2 100.2 108.2

% upside/(downside) (8.9) 8.9 (9.4) 9.4 (8.0) 8.0

Natural gas price

Natural gas price (US$/bbl) 3.7 4.7 5.7 3.0 4.0 5.0 3.0 4.0 5.0

Net profits (Rs mn) 270,292 274,404 278,515 284,511 288,189 291,867 321,661 324,672 327,682

EPS (Rs) 83.4 84.7 86.0 87.8 89.0 90.1 99.3 100.2 101.2

% upside/(downside) (1.5) 1.5 (1.3) 1.3 (0.9) 0.9



Exhibit 17: SOTP valuation of Reliance is `1,050 per share on FY2017E estimates Sum-of-the-parts valuation of Reliance Industries, FY2017E basis (`)


Exhibit 18: SOTP valuation of Reliance is `1,210 per share on FY2018E estimates Sum-of-the-parts valuation of Reliance Industries, FY2018E basis (`)


Valuation base (Rs bn) Multiple (X) EV Valuation

Other EBITDA Multiple EV/EBITDA (Rs bn) (Rs/share)

Chemicals 160 8.0 1,283 435

Refining & Marketing 282 6.5 1,831 621

Oil and gas—PMT 13 4.0 52 18

Oil and gas—KG-DWN-98/3 (a) 55 55 19

Retailing 11 12.0 134 46

US shale 116 — — —

Telecom 447 — — —

Investments excluding retail, shale and telecom 655 1.0 655 222

Total enterprise value 4,011 1,361

Net debt (b) 912 309

Implied equity value 3,099 1,052

Notes:

(a) We value KG D-6 gas based on DCF model.

(b) We have written off equity investments in shale and telecom, and excluded related net debt from SOTP valuation.

(c) We use 2.947 bn shares (excluding treasury shares) for per share computations.

Valuation base (Rs bn) Multiple (X) EV Valuation

Other EBITDA Multiple EV/EBITDA (Rs bn) (Rs/share)

Chemicals 207 6.5 1,344 456

Refining & Marketing 301 6.3 1,884 639

Oil and gas—PMT 13 4.0 54 18

Oil and gas—KG-DWN-98/3 (a) 55 55 19

Retailing 15 11.0 160 54

US shale 116 — — —

Telecom 447 — — —

Investments excluding retail, shale and telecom 655 1.0 655 222

Total enterprise value 4,153 1,409

Net debt (b) 585 199

Implied equity value 3,568 1,211

Notes:

(a) We value KG D-6 gas based on DCF model.

(b) We have written off equity investments in shale and telecom, and excluded related net debt from SOTP valuation.

(c) We use 2.947 bn shares (excluding treasury shares) for per share computations.



Exhibit 19: Core business to drive medium-term growth Segment breakdown of Reliance's standalone financials, March fiscal year-ends, 2011-18E (₹ mn)


2011 2012 2013 2014 2015 2016E 2017E 2018E

Standalone

Revenues

Petrochemicals 631,550 806,250 881,080 964,650 900,090 808,209 1,037,037 1,224,150

Refining & marketing 2,154,310 2,947,340 3,337,740 3,619,700 3,045,700 2,114,872 2,314,751 2,686,680

Upstream 172,500 128,980 82,800 60,680 55,070 43,306 39,340 39,644

Others 6,150 12,130 9,530 15,490 11,550 — — —

Inter-divisional sales (482,810) (595,660) (708,180) (759,350) (721,650) (249,620) (379,496) (463,097)

Total revenues 2,481,700 3,299,040 3,602,970 3,901,170 3,290,760 2,716,768 3,011,632 3,487,377

EBITDA

Petrochemicals 115,202 111,040 96,030 110,480 117,570 122,808 160,363 206,811

Refining & marketing 131,387 140,520 171,780 175,890 187,250 254,092 281,676 301,442

Upstream 141,257 100,100 56,870 36,110 33,500 24,686 19,683 18,969

Others 330 350 2,550 4,190 3,160 — — —

Total EBITDA 388,176 352,010 327,230 326,670 341,480 401,585 461,723 527,222

EBIT

Petrochemicals 93,050 89,670 73,280 86,120 86,070 84,864 111,137 146,198

Refining & marketing 91,720 96,540 127,880 132,200 154,870 221,215 237,751 253,856

Upstream 67,000 52,500 28,870 16,260 12,500 358 (3,659) (3,329)

Others 330 350 2,550 4,190 3,160 — — —

Total EBIT 252,100 239,060 232,580 238,770 256,600 306,437 345,230 396,724

Interest expense (23,280) (26,670) (30,360) (32,060) (23,670) (25,555) (35,838) (38,221)

Interest income 26,210 44,140 62,450 64,720 54,140 78,684 76,064 84,043

Other unallocable (net) (2,610) 970 (1,830) 6,750 7,610 — — —

PBT 252,420 257,500 262,840 278,180 294,680 359,566 385,455 442,547

Current tax (43,200) (51,500) (52,440) (58,120) (61,240) (86,648) (80,793) (103,036)

Deferred tax (6,360) (5,600) (370) (220) (6,250) 1,486 (16,473) (14,839)

PAT 202,860 200,400 210,030 219,840 227,190 274,404 288,189 324,672

Notes:

(a) We do not include a portion of other income or exclude a portion of overheads in our segment-wise forecasts.



Exhibit 20: Standalone profit model, balance sheet, cash model, March fiscal year-ends, 2011-18E (` mn)


2010 2011 2012 2013 2014 2015 2016E 2017E 2018E

Profit model (Rs mn)

Net sales 1,924,610 2,481,700 3,299,040 3,602,970 3,901,170 3,290,760 2,716,768 3,011,632 3,487,377

EBITDA 305,807 381,257 336,190 307,870 308,770 316,020 401,585 461,723 527,222

Other income 24,605 30,517 61,920 79,980 89,360 87,210 78,684 76,064 84,043

Interest (19,972) (23,276) (26,670) (30,360) (32,060) (23,670) (25,555) (35,838) (38,221)

Depreciation & depletion (104,965) (136,076) (113,940) (94,650) (87,890) (84,880) (95,148) (116,493) (130,498)

Pretax profits 205,474 252,422 257,500 262,840 278,180 294,680 359,566 385,455 442,547

Extraordinary items — — — — — — — — —

Tax (31,118) (43,204) (51,500) (52,440) (58,120) (61,240) (86,648) (80,793) (103,036)

Deferred taxation (12,000) (6,355) (5,600) (370) (220) (6,250) 1,486 (16,473) (14,839)

Net profits 162,357 202,863 200,400 210,030 219,840 227,190 274,404 288,189 324,672

Adjusted net profits 162,357 202,863 200,400 210,030 219,840 227,190 274,404 288,189 324,672

Earnings per share (Rs) 49.6 62.0 61.3 65.0 68.0 70.2 84.7 89.0 100.2

Balance sheet (Rs mn)

Total equity 1,371,706 1,515,403 1,660,960 1,800,200 1,970,910 2,161,760 2,397,295 2,639,513 2,911,142

Deferred taxation liability 109,263 115,618 121,220 121,930 122,150 126,770 125,284 141,757 156,596

Total borrowings 624,947 673,967 684,470 724,270 899,680 976,170 1,085,747 1,004,954 909,401

Other liabilities 404,148 542,206 484,750 538,710 683,090 713,150 581,829 589,648 676,397

Total liabilities and equity 2,510,064 2,847,194 2,951,400 3,185,110 3,675,830 3,977,850 4,190,156 4,375,872 4,653,536

Cash 134,627 271,349 395,980 495,470 332,240 115,710 90,426 104,534 328,002

Other assets 489,165 644,070 800,570 875,910 971,750 833,250 732,450 771,138 828,627

Total fixed assets 1,653,987 1,555,260 1,214,770 1,288,640 1,511,220 1,903,160 2,091,550 2,224,470 2,221,177

Investments 232,286 376,515 540,080 525,090 860,620 1,125,730 1,275,730 1,275,730 1,275,730

Total assets 2,510,064 2,847,194 2,951,400 3,185,110 3,675,830 3,977,850 4,190,156 4,375,872 4,653,536

Free cash flow (Rs mn)

Operating cash flow, excl. working capital 222,605 304,310 265,810 237,080 235,920 236,020 271,147 336,639 383,510

Working capital (53,015) 695 (27,700) 57,820 145,150 83,150 (30,520) (30,870) 29,261

Capital expenditure (219,427) (123,661) (80,080) (159,440) (324,560) (427,200) (229,394) (212,678) (111,450)

Investments 14,206 (195,439) (201,760) (54,140) (385,430) (201,360) (150,000) — —

Other income 22,043 23,316 18,930 65,280 69,290 67,720 78,684 76,064 84,043

Free cash flow (13,587) 9,220 (24,800) 146,600 (259,630) (241,670) (60,083) 169,155 385,363

Ratios (%)

Debt/equity 42.2 41.3 38.4 37.7 43.0 42.7 43.0 36.1 29.6

Net debt/equity 33.1 24.7 16.2 11.9 27.1 37.6 39.5 32.4 19.0

RoAE 12.1 13.4 11.9 11.3 10.8 10.3 11.3 10.8 11.0

RoACE 8.8 10.3 9.3 9.1 8.6 7.8 8.5 8.5 9.0

Adjusted RoACE 12.3 12.5 11.6 11.8 12.4 13.5 17.3 13.9 12.7

CRoCI 12.8 14.7 12.9 11.7 9.8 8.3 8.7 9.1 10.0

Adjusted CRoCI 15.3 20.0 18.0 16.6 14.6 13.3 14.4 11.6 13.4


Headline numbers meet expectation; composition could have been better

HCLT delivered c/c revenue growth of 2.1% (KIE 2%). Revenue growth was aided by contribution

of 0.4% from acquisition of Powerteam LLC. Revenue growth was led by IMS and BPO

practices. EBIT margin expanded 60 bps to 20% (on reported basis) but was down 60 bps

adjusted for one-off provision in the previous quarter. Decline in recurring margin is surprising

noting

(1) sharp rise in utilization rate (+110 bps), (2) rupee depreciation and (3) sharp improvement in

BPO profitability partly led by write-back of provisions. Net profit of `19.2 bn beat our estimate

by 3% due to higher other income (US$21 mn gain on sale of property/ equipment). Free cash

generation declined 18% 1HFY16 due to mix of seasonal factors and decline in unearned

revenues; part of the decline could be due to normal ebbs and flow of business.

Familiar challenges in the metrics and business

The usual metrics where HCLT has struggled has not changed. Applications services grew 1.4%

to US$633 mn; large part of the growth was led by acquisition of Powerteam LLC. Application

services accounted for 40.4% of revenues in the most recent quarter. The company can do

more in building strong digital capabilities. Underinvestment in SG&A is getting corrected (up to

13% of revenues) but will have its margin consequences. Attrition rate continues at over 30%

on quarterly annualized basis. Familiar challenges repeat quarter after quarter.

Growth drivers in the future—more of the same

IMS of HCLT is strong, no doubt. However, increased competition and pricing pressure will lead

to diminishing returns. Strong growth of past in IMS is unlikely to continue. BPO is growing but

too small for now. Engineering services business has potential given the deals in IoT (and

analytics around it), embedded software and re-platforming of product. Traditional core

product development deals in engineering services cannot be a sustained growth driver.

Modeling approach, near-term drivers and changes to our estimate

We build in Volvo IT services business acquisition in our FY2017/18E numbers. We model

7.3/11.2% revenue growth for FY2016-18E and retain our EPS estimates largely due to change

in Re/USD estimates (Exhibit 2). Retain REDUCE with unchanged TP of `850 (14X Sep 2017E EPS).

HCL Technologies (HCLT) Technology

No surprises; core still weak. HCL Technologies’ (HCLT) operational performance was

in line with our estimate although a tad weak on composition. Challenges facing HCLT

once again came to the fore with weak growth in applications practice partly due to lag

in digital and continued weakness in metrics. The fact is that HCLT is underinvested in

business and will have to either accelerate investments and take a hit on margins or

sacrifice revenue growth for profitability. Either way EPS is at risk. We broadly maintain

our below-industry EPS estimates and target price of `850. REDUCE.

REDUCE

JANUARY 20, 2016

RESULT


Price (`): 838

Target price (`): 850

BSE-30: 24,480

HCL Technologies

Stock data Forecasts/Valuations 2016 2017E 2018E

52-week range (Rs) (high,low) EPS (Rs) 54.3 59.2 64.1



Promoters 60.6 Sales (Rs bn) 422.3 479.0 535.0


MFs 3.9 EBITDA (Rs bn) 91.9 102.2 111.9


Absolute (0.9) (2.3) 1.9 ROE (%) 27.9 24.8 22.7

Rel. to BSE-30 3.3 9.2 17.7 Div. Yield (%) 1.9 2.1 2.1

Company data and valuation summary

1,058-798

1,181.4

Technology HCL Technologies


Our assessment of challenges at HCLT implies that the company has to choose from either

growth or margins. These challenges have showed up in numbers; 1HFY16 EBIT margin is

down 390 bps. We believe that HCLT will be prudent and choose revenue growth. To get

the growth going, investments are required in S&M (gone up to some extent) and

development of capabilities in-house and through acquisitions in application services and

digital. Our model assumes that margins of HCLT will decline progressively.

Management of HCLT indicated possibility of strong near-term performance led by ramp-up

of rebid deals won recently. The management stated that most of the 10 deals won in the

September quarter are in transition phase and expected to achieve steady state in the March

quarter. Volvo outsourcing deal and acquisition would boost growth in the June quarter.

Such near-term trades are always possible although we advocate focusing on structural

concerns in the business

Headline margins weak, composition weaker

HCLT’s EBIT margin declined 60 bps sequentially to 20% (as compared to recurring EBIT

margin of Sep quarter). We note that the decline was restricted to 60 bps due to recovery in

doubtful debts in BPO business than resulted in sharp sequential improvement of BPO

business EBIT margin to ~18% from 8%. But for this consolidated EBIT margin would have

been lower by 50 bps.

We highlight that HCLT’s EBIT margin has declined 360 bps to 20.3% (excluding one-off

provision of 1QFY16) in 1HFY16 from 23.9% in 1HFY15. EBIT margin has declined more

than 400 bps yoy in IMS and software services business (application services + engineering

services and R&D). We believe that the pressure on software services could be either due to

execution challenges in application services given there is barely any revenue growth or very

low profitability of the new business won in engineering and R&D services.

Additional disclosures on deal TCVs can help

Disconnect in TCV and revenue growth continues. We have highlighted multiple times in the

past, TCV is not completely reliable in forecasting growth—we believe there could be

possible leakage of revenues from the overall numbers. HCLT defines TCV as only

incremental business and excludes renewals from the numbers. US$10 bn+ of incremental

deals signed in the past two years should have ideally resulted in incremental revenues of

~US$1 bn, assuming 5 years as the average tenure of deals. This should have ideally

translated into ~20%+ revenue growth as compared to actual number of 13.5% (c/c) on

ttm basis. This perhaps indicates some possible leakage of revenues. HCLT was the first to

start disclosing TCVs—it can take the lead in disclosing order book to better-appreciate what

that means for the overall growth numbers.

The disconnect between weak hiring and strong growth guidance

HCLT’s net headcount has declined 2.3% in 1HFY16 and its utilization increased 110 bps

sequentially in the December quarter notwithstanding seasonal weakness. A reduction in

headcount ahead of a strong 2H (management guidance) is a bit surprising. HCL Tech

management attributed it to two factors (1) few IT outsourcing deals have already ramped

up and transition is under progress, and (2) capacity building (bench) is not required in new

deals that involve takeover of employees (rebadging). We note that HCLT’s rebadging of

close to 3,000 people in FY2015 impacted margins. Continuation of meaningful rebadging-

led growth in FY2017 could weigh on margins.

HCL Technologies Technology


Highlights from 2QFY16 results and conference call

Guidance. HCL Tech has lowered its EBIT margin guidance to 21-22% in 2HFY16 from

21-22% for the full year FY2016. We note that EBIT margin in 1H was 19.7% (or 20.3%

adjusted for one-offs). The management has indicated that revenue growth will be

stronger in 2H.

Margin walk-through. HCL Tech’s EBIT margin declined 60 bps sequentially to 20%.

The management attributed the decline to investments (in terms of tools, software and

assets) in the projects under transition. Additionally, there was a small impact from costs

associated with Chennai floods.

Deal wins and pipeline. HCL Tech has signed 8 deals having total contract value (TCV)

of more than US$1 bn. The management indicated that most of the 10 deals won in the

September quarter are in transitioning phase and expected to achieve steady state in the

March quarter. The management indicated that the IT outsourcing deal with Volvo will

ramp up starting April quarter.

Change in accounting year starting FY2017. HCL Tech management indicated that it

will shift from June-ending fiscal year to March-ending. Consequently, March quarter will

be the last quarter of fiscal FY2016.

Improvement in BPO profitability due to one-offs. HCLT’s BPO business’ EBIT margin

increased sequentially to 17.9% from 7.7%. The management stated that this sharp

improvement was led by lumpiness in revenues and recovery of doubtful debts.

Sustainable EBIT margin for BPO business continues to be in the range of 8-10%.

Exhibit 1: HCL Technologies (year-ending June) - 2QFY16 financial performance


Change

2QFY16 2QFY16E 1QFY16 2QFY15 2QFY16E 1QFY16 2QFY15 1HFY16 1HFY15 (%) FY2016E

Revenues (US$ mn) 1,566 1,565 1,545 1,491 0.0 1.4 5.0 3,111 2,924 6.4 6,388

Revenues 103,410 103,478 100,970 92,830 (0.1) 2.4 11.4 204,380 180,180 13.4 422,324

Cost of revenues (67,680) (67,799) (67,437) (58,493) (0.2) 0.4 15.7 (135,117) (113,720) 18.8 (276,264)

Gross profit 35,730 35,679 33,533 34,337 0.1 6.6 4.1 69,263 66,460 4.2 146,060

SG&A expenses (13,480) (13,189) (12,629) (11,153) 2.2 6.7 20.9 (26,109) (21,370) 22.2 (54,164)

EBIDTA 22,250 22,490 20,904 23,184 (1.1) 6.4 (4.0) 43,154 45,090 (4.3) 91,896

Depreciation (1,530) (1,448) (1,354) (1,088) 5.7 13.0 40.6 (2,884) (2,129) 35.5 (5,881)

EBIT 20,720 21,042 19,550 22,095 (1.5) 6.0 (6.2) 40,270 42,961 (6.3) 86,015

Other income 3,550 2,730 2,416 2,146 5,966 5,187 11,517

PBT 24,270 23,773 21,967 24,241 2.1 10.5 0.1 46,237 48,148 (4.0) 97,532

Provision for tax (5,080) (5,111) (4,726) (5,091) (0.6) 7.5 (0.2) (9,806) (10,279) (4.6) (20,834)

Net Income (before extraordinaries) 19,190 18,660 17,241 19,150 2.8 11.3 0.2 36,431 37,869 (3.8) 76,698

EPS (Rs/share) 13.6 13.2 12.2 13.6 2.8 11.3 0.2 25.8 26.8 (3.8) 54.3

No of shares outstanding 1,411.6 1,411.6 1,411.6 1,411.6 1,411.6 1,411.6 1,413.0

Segmental revenues (US$ mn)

Software 924 915 921 905 0.9 0.3 2.1 1,845 1,772 4.1 3,773

Infrastructure 556 567 542 513 (1.9) 2.5 8.5 1,098 1,007 9.0 2,268

BPO 86 83 81 73 3.4 6.0 18.0 167 145 15.7 347

Margins (%)

Gross profit margin 34.6 34.5 33.2 37.0 33.9 36.9 34.6

SG&A as % of revenues 13.0 12.7 12.5 12.0 12.8 11.9 12.8

EBITDA margin 21.5 21.7 20.7 25.0 21.1 25.0 21.8

EBIT margin 20.0 20.3 19.4 23.8 19.7 23.8 20.4

NPM 18.6 18.0 17.1 20.6 17.8 21.0 18.2

Change (%)



Exhibit 2: Key changes to our FY2016-18E estimates


Exhibit 3: Revenue growth across geographies, verticals and service lines


(US$ mn) 2016E 2017E 2018E 2016E 2017E 2018E 2016E 2017E 2018E

Revenues 6,388 7,103 7,868 6,470 7,207 7,943 (1.3) (1.4) (0.9)

Revenue growth yoy (%) 7.3 11.2 10.8 8.7 11.4 10.2

EBITDA 1,390 1,516 1,645 1,422 1,540 1,669 (2.3) (1.6) (1.4)

EBIT 1,301 1,398 1,519 1,333 1,422 1,544 (2.4) (1.7) (1.6)

Net Income 1,160 1,241 1,336 1,178 1,255 1,357 (1.6) (1.0) (1.5)

EBITDA margin (%) 21.8 21.3 20.9 22.0 21.4 21.0

EBIT 20.4 19.7 19.3 20.6 19.7 19.4

Re/ US$ rate 66.1 67.4 68.0 65.4 66.5 67.0 1.1 1.3 1.5

EPS Rs/share 54.3 59.2 64.1 54.5 59.0 64.1 (0.4) 0.4 0.0

Revised Old Change (%)

Revenues Contribution to

(US$ mn) qoq yoy revenues (%)

Total revenues 1,566 1.4 5.0 100

Geographical split of revenues

US 955 5.4 11.6 61

Europe 468 (4.4) (0.9) 29.9

Asia Pacific 143 (3.9) (12.3) 9.1

Vertical split of revenues

Financial services 406 0.6 2.3 25.9

Manufacturing 493 (1.7) 0.6 31.5

Retail & CPG 149 9.5 2.9 9.5

Telecom, media, publishing, entertainment 152 2.4 21.3 9.7

Life sciences 191 (0.2) 15.5 12.2

Energy-utilities-public sector 166 7.5 17.2 10.6

Others 9 1.4 (65.0) 0.6

Service line split of revenues

Application services 633 1.4 0.1 40.4

Engineering and R&D services 291 (1.8) 6.8 18.6

Infrastructure services 556 2.5 8.5 35.5

BPO services 86 6.0 18.0 5.5

Growth (%)



Exhibit 4: HCL Tech’s segmental performance, June fiscal year-ends (US$ mn)


1HFY15 1HFY16 Incremental Change (%)

Revenues (US$ mn)

Software services 1,772 1,844 72 4.1

- Application services 1,254 1,257 2 0.2

- Engineering and R&D services 518 588 70 13.5

IMS 1,007 1,098 91 9.0

BPO 145 167 23 15.7

Total 2,924 3,110 186 6.4

EBIT (US$ mn)

Software services 419 357 (61) (14.7)

IMS 260 234 (26) (10.0)

BPO 19 22 3 16.9

Total 697 613 (84) (12.1)

EBIT margin (%)

Software services 23.6 19.4 -426 bps

IMS 25.8 21.3 -451 bps

BPO 12.9 13.0 12 bps

Total (a) 23.8 19.7 -414 bps

Notes:

(a) EBIT margin in 1HFY16 was 20.3% excluding one-time provision in the Sep quarter.



Exhibit 5: HCL Tech has lost growth leadership in IMS Infrastructure services growth in US$ terms of the top 4 Indian IT companies (yoy %)


Exhibit 6: IMS growth has decelerated over past 6-8 quarters


37

21

18

13

20

37

42 44

42

36

32

26

18 15

10 12

10 8

0

10

20

30

40

50

Sep

-11

Dec-

11

Mar-

12

Jun-1

2

Sep

-12

Dec-

12

Mar-

13

Jun-1

3

Sep

-13

Dec-

13

Mar-

14

Jun-1

4

Sep

-14

Dec-

14

Mar-

15

Jun-1

5

Sep

-15

Dec-

15

Wipro TCS HCL Tech Infosys

8

0

10

20

30

40

50

Sep

-11

Dec-

11

Mar-

12

Jun-1

2

Sep

-12

Dec-

12

Mar-

13

Jun-1

3

Sep

-13

Dec-

13

Mar-

14

Jun-1

4

Sep

-14

Dec-

14

Mar-

15

Jun-1

5

Sep

-15

Dec-

15

IMS growth (yoy %)



Exhibit 7: Growth in engineering and R&D services softens in the Dec quarter


Exhibit 8: Application services business remains a drag on growth


7

0

10

20

30

Mar-

12

Jun-1

2

Sep

-12

Dec-

12

Mar-

13

Jun-1

3

Sep

-13

Dec-

13

Mar-

14

Jun-1

4

Sep

-14

Dec-

14

Mar-

15

Jun-1

5

Sep

-15

Dec-

15

ERD growth (yoy %)

0

0

3

6

9

12

15

Mar-

12

Jun-1

2

Sep

-12

Dec-

12

Mar-

13

Jun-1

3

Sep

-13

Dec-

13

Mar-

14

Jun-1

4

Sep

-14

Dec-

14

Mar-

15

Jun-1

5

Sep

-15

Dec-

15

Application services growth (yoy %)



Exhibit 9: Investments in SG&A


Exhibit 10: EBIT margin down 380 bps yoy


13.0

10

12

14

16

18

Jun-0

5

Dec-

05

Jun-0

6

Dec-

06

Jun-0

7

Dec-

07

Jun-0

8

Dec-

08

Jun-0

9

Dec-

09

Jun-1

0

Dec-

10

Jun-1

1

Dec-

11

Jun-1

2

Dec-

12

Jun-1

3

Dec-

13

Jun-1

4

Dec-

14

Jun-1

5

Dec-

15

SG&A as % of revenues

12 14

15 14

15 15

19 19 19 20 21

24 24 25 24 24 24

21 20

19 20

5

10

15

20

25

Dec-

10

Mar-

11

Jun-1

1

Sep

-11

Dec-

11

Mar-

12

Jun-1

2

Sep

-12

Dec-

12

Mar-

13

Jun-1

3

Sep

-13

Dec-

13

Mar-

14

Jun-1

4

Sep

-14

Dec-

14

Mar-

15

Jun-1

5

Sep

-15

Dec-

15

EBIT margins (%)



Exhibit 11: EBIT margins have declined sharply in IMS and software services segment


Exhibit 12 : Low depreciation cost rules out positive surprise from below-EBITDA levers


16 14

18 18 18 19

21

23 24 25 25 26 26

23 21 22

21

17 17

21

21

21

21 22

26 25 26 25

24 24 22

20 19 20

1 2 2

6 6 6 6 6 5

12 13 13

8

11

8

18

0

5

10

15

20

25

30

Dec-

11

Mar-

12

Jun-1

2

Sep

-12

Dec-

12

Mar-

13

Jun-1

3

Sep

-13

Dec-

13

Mar-

14

Jun-1

4

Sep

-14

Dec-

14

Mar-

15

Jun-1

5

Sep

-15

Dec-

15

IMS Software services BPO

1.0

1.5

2.0

2.5

3.0

0

500

1,000

1,500

2,000

Dec-

11

Mar-

12

Jun-1

2

Sep

-12

Dec-

12

Mar-

13

Jun-1

3

Sep

-13

Dec-

13

Mar-

14

Jun-1

4

Sep

-14

Dec-

14

Mar-

15

Jun-1

5

Sep

-15

Dec-

15

Depreciation (Rs mn) (LHS) Depreciation as % of revenues (RHS)



Exhibit 13: Effective tax rate (ETR) helped earnings growth over FY2012-15; ETR to increase from

here


Exhibit 14: HCLT's attrition remains high and sticky


20.9

10

15

20

25

30

Mar-

11

Jun-1

1

Sep

-11

Dec-

11

Mar-

12

Jun-1

2

Sep

-12

Dec-

12

Mar-

13

Jun-1

3

Sep

-13

Dec-

13

Mar-

14

Jun-1

4

Sep

-14

Dec-

14

Mar-

15

Jun-1

5

Sep

-15

Dec-

15

Effective tax rate (%)

31.0

20

25

30

35

40

Mar-

10

Jun-1

0

Sep

-10

Dec-

10

Mar-

11

Jun-1

1

Sep

-11

Dec-

11

Mar-

12

Jun-1

2

Sep

-12

Dec-

12

Mar-

13

Jun-1

3

Sep

-13

Dec-

13

Mar-

14

Jun-1

4

Sep

-14

Dec-

14

Mar-

15

Jun-1

5

Sep

-15

Dec-

15

Consolidated attrition (%, quarterly annualized)



Exhibit 15: Condensed consolidated financials for HCL Technologies, June fiscal year-ends, 2013-18E (Rs mn)


2013 2014 2015 2016E 2017E 2018E

Profit model

Revenues 257,332 329,180 370,620 422,324 479,019 535,019

EBITDA 57,511 86,667 86,947 91,896 102,204 111,876

Depreciation (incl amortization of intangibles) (6,727) (7,329) (4,505) (5,881) (7,953) (8,558)

Other income 1,565 (168) 9,114 11,517 13,768 16,199

Pretax profits 52,349 79,169 91,556 97,532 108,020 119,517

Tax (12,218) (15,482) (19,074) (20,834) (24,304) (28,684)

Profit after tax 40,132 63,688 72,483 76,698 83,715 90,833

Diluted earnings per share (Rs) 28.5 45.1 51.3 54.3 59.2 64.1

Balance sheet

Total equity 132,167 204,918 242,116 307,353 367,419 431,476

Deferred taxation liability 1,281 1,132 784 832 849 856

Total borrowings 6,435 7,662 4,584 3,955 4,034 4,068

Minority interest 1 5 6 6 6 6

Other non-current liabilities 13,283 14,206 11,783 13,190 14,666 16,065

Current liabilities 59,934 83,215 90,058 98,973 108,615 117,437

Total liabilities and equity 213,100 311,138 349,329 424,310 495,590 569,909

Cash 40,194 95,826 107,805 154,541 199,422 250,175

Other current assets 74,740 100,337 115,661 131,014 149,372 166,292

Goodwill and intangible assets 45,842 52,544 50,905 53,561 54,126 54,088

Tangible fixed assets 25,225 32,108 37,363 42,863 47,198 50,959

Investments 6,400 6,382 7,604 8,074 8,236 8,305

Other non-current assets 20,700 23,941 29,992 34,258 37,236 40,091

Total assets 213,100 311,138 349,329 424,310 495,590 569,909

Free cash flow

Operating cash flow, excl. working capital 46,621 71,049 73,235 71,062 77,900 83,192

Working capital changes 2,707 (3,446) (16,951) (6,583) (9,156) (9,024)

Capital expenditure (5,824) (4,861) (11,989) (8,571) (10,924) (11,436)

Acquisition — — — — — —

Free cash flow 43,504 62,742 44,296 55,907 57,820 62,732

Ratios (%)

EBITDA margin 22.3 26.3 23.5 21.8 21.3 20.9

EBIT margin 19.7 24.1 22.2 20.4 19.7 19.3

Debt/equity 0.0 — — — — —

Net debt/equity (0.3) (0.5) (0.5) (0.5) (0.6) (0.6)


Lower generation at Rosa does not impact realizations as plant availability is maintained

Loss of generation owing to back-down of demand at Rosa and higher contribution from Sasan

led to a sequential drop in blended realizations at `2.4/kwh (-55% yoy, -1.6% qoq). However,

EBITDA in 3QFY16 was higher at `12.3 bn, compared to `11.9 bn in 2QFY16 due to lower cost

of fuel. We note that the results are not comparable to the same period last year, owing to

consolidation of earnings from Sasan UMPP from 1QFY16. Overall, RPWR reported revenues of

`25.6 bn (+48% yoy), EBITDA of `12.3 bn (+96% yoy, +3% qoq) and net income of `3.5 bn

(+38% yoy) against our estimates of `26 bn, `11.3 bn and `2.8 bn respectively. Earnings beat

was primarily owing to the fact that PAF was maintained at a high level at Rosa despite the

drop in generation, leading to a spike in realizations under the cost-plus tariff regime.

Sasan gets approvals for additional compensation, Samalkot still needs resolution

Sasan has further ramped up generation to 8.2 BU (93% PLF) in 3QFY16, with revenue and

EBITDA of `12.8 bn and `6.9 bn respectively. CERC has also approved a compensatory tariff of

`3 bn per annum (`0.09/kwh) towards the incidence of electricity duty and clean energy cess.

RPWR continues to pursue options to revive the gas-based capacity at Samalkot (capex of `93.4

bn incurred up to Dec-2015, net debt of `30 bn as of FY2015) while progress on Chitrangi

remains slow in the absence of clarity on fuel sourcing.

Maintain SELL rating with a target price of `40/share

We maintain our SELL rating on Reliance Power with a target price of `40/share. Our cautious

stance on the company is not prompted by demanding valuations, or near-term earnings

growth prospects, but premised on its inability to secure fuel for the expansion project based on

surplus coal mines of Sasan and resolution of gas-supply issues for Samalkot. Projects beyond

Sasan UMPP have very low visibility—(1) Samalkot is looking at potential re-location to

Bangladesh, (2) court directive to de-allocate the ‘excess’ coal available at Sasan UMPP, puts at

risk fuel sourcing for Chitrangi, and (3) RPWR has withdrawn from both the Krishnapatnam

UMPP as well as Tilaiya UMPP, the former owing to unfavorable economics of the project and

the latter due to the government’s inability to acquire requisite land within stated timelines.

Reliance Power (RPWR) Utilities

Sasan steams ahead. Reliance Power continued to report healthy earnings growth

owing to (1) higher generation from Sasan (PLF of 93%), and (2) resilient earnings from

Rosa under the cost-plus regime, despite the drop in generation (PLF of 51%). Resilient

earnings performance notwithstanding, uncertainty over Chitrangi and Samalkot

continues to loom, owing to lack of clarity on fuel supplies. Maintain SELL rating with a

revised target price of `40/share.

SELL

JANUARY 20, 2016

RESULT


Price (`): 51


BSE-30: 24,480

Reliance Power







MFs 1.1 EBITDA (Rs bn) 50.6 62.7 70.7


Absolute (1.2) 4.0 (18.5) ROE (%) 6.5 7.0 8.2

Rel. to BSE-30 3.0 16.3 (5.9) Div. Yield (%) 0.0 0.0 0.0


67-33

142.1

Reliance Power Utilities


Exhibit 1: Sasan formed the mainstay of earnings growth during the quarter contributing more than 50% of revenues and EBITDA Interim financials of Reliance Power Ltd, March fiscal year-ends (Rs mn)


Exhibit 2: Realizations for Rosa improved in 3QFY16 on lower PLF, characteristic of cost-plus regime Project-wise operating metrics for Reliance Power, March fiscal year-ends (Rs/kwh)


(% Chg.)

3QFY16 3QFY16E 3QFY15 2QFY16 3QFY16E 3QFY15 2QFY16 9MFY16 9MFY15 (% chg.) FY2016 FY2015 (% chg.)

Net sales 25,618 26,021 17,294 27,416 (2) 48 (7) 80,542 52,657 53 109,811 68,507 60

Operating costs

Cost of fuel (10,329) (12,501) (10,353) (12,539) (36,151) (31,751) (48,685) (39,825)

Personnel costs (441) (281) (115) (407) (1,238) (553) (1,600) (656)

Other expenses (2,555) (1,886) (569) (2,502) (7,368) (1,776) (8,943) (2,696)

EBITDA 12,292 11,354 6,258 11,967 8 96 3 35,785 18,577 93 50,583 25,329 100

EBITDA margin (%) 48 44 36 44 44 35 46 37

Other income 1,039 1,145 972 1,144 3,311 2,555 4,141 3,514

Interest & finance charges (6,003) (6,244) (2,696) (6,116) (17,876) (7,884) (25,674) (10,742)

Depreciation (2,775) (2,696) (1,383) (2,646) (7,931) (4,043) (11,721) (5,237)

PBT 4,553 3,559 3,150 4,349 28 45 5 13,289 9,205 44 17,328 12,864 35

Provision for tax (net) (1,035) (712) (606) (893) (2,871) (1,687) (3,421) (2,580)

Net profit 3,518 2,847 2,544 3,456 24 38 2 10,418 7,519 39 13,907 10,283 35

EPS 1.3 1.0 0.9 1.2 3.7 2.7 5.0 3.7

EBITDA margin (%) 48 44 36 44 44 35 46 37

Tax rate (%) 23 20 19 21 22 18 20 20

Key operating parameters

Units generated (MU) 10,548 10,846 3,142 11,103 (3) 236 (5) 31,858 9,614 41,769 12,236

Average realization (Rs/kWh) 2.43 2.40 5.51 2.47 1 (56) (2) 2.53 5.48 2.79 5.95

Cost of fuel (Rs/unit) 0.98 1.15 3.29 1.13 (15) (70) (13) 1.13 3.30 1.17 3.25

O&M (Rs/unit) 0.28 0.20 0.22 0.26 42 31 8 0.27 0.24 0.25 0.27

1QFY16 2QFY16 3QFY16

Gross generation (MU)

Rosa 2,141 2,187 1,342

Butibori 1,075 944 1,022

Sasan 6,948 7,922 8,158

Others 43 50 26

Total 10,207 11,103 10,548

Realization (Rs/kwh)

Rosa 5.1 4.6 5.7

Butibori 5.1 5.5 4.8

Sasan 1.5 1.5 1.6

Total 2.7 2.5 2.4

Cost of generation (Rs/kwh)

Rosa 3.4 3.1 3.0


Sasan 0.8 0.7 0.7

Total 1.6 1.4 1.3

EBITDA (Rs/kwh)

Rosa 1.8 1.6 2.7


Sasan 0.7 0.8 0.8

Total 1.1 1.1 1.2

Utilities Reliance Power


Exhibit 3: Valuation of power project portfolio of Reliance Power


Exhibit 4: Profit model, balance sheet, cash model of Reliance Power Ltd, March fiscal year ends, 2012-2018E (Rs mn)


Capacity Ownership Value (Rs/share)

Project Type (MW) (%) 2017E

Rosa I Thermal 600 100 14

Rosa II Thermal 600 100 15

Butibori Thermal 600 100 12

Sasan Thermal 3,960 100 6

Chitrangi Thermal 3,960 100 45

Projects 11,982 91

Cash and equivalents 20

Total 111

No. of shares 3

Value per share (Rs) 40

2012 2013 2014 2015 2016E 2017E 2018E

Profit model

Net revenues 20,192 49,266 51,122 68,507 109,811 136,586 161,937

EBITDA 6,239 17,129 18,534 25,329 50,583 62,727 70,680

Other income 7,476 3,572 4,337 3,514 4,141 3,312 4,530

Interest (expense)/income (2,976) (5,853) (6,844) (10,742) (25,674) (31,683) (34,536)

Depreciation (1,215) (2,851) (3,639) (5,237) (11,721) (14,177) (14,177)

Pretax profits 9,524 11,996 12,388 12,864 17,328 20,178 26,497

Tax (856) (1,882) (2,121) (2,580) (3,421) (4,133) (6,267)

Net income 8,668 10,115 10,267 10,283 13,907 16,045 20,230

Extraordinary items — — — — — — —

Reported profit 8,668 10,115 10,267 10,283 13,907 16,045 20,230

Earnings per share (Rs) 3.1 3.6 3.7 3.7 5.0 5.7 7.2

Balance sheet

Paid-up common stock 28,051 28,051 27,966 28,051 28,051 28,051 28,051

Total shareholders' equity 175,696 185,811 194,684 206,320 220,227 236,272 256,502

Deferred taxation liability — 70 — — — — —

Minority interest — 15 15 15 15 15 15

Total borrowings 181,353 275,107 300,425 332,185 386,460 390,215 376,576

Total liabilities and equity 357,049 461,002 495,125 538,520 606,702 626,502 633,093

Net fixed assets 65,720 89,462 138,389 336,337 297,049 341,042 326,865

Capital work-in-progress 217,970 303,104 322,548 155,306 265,732 222,104 225,013

Investments 14,140 401 1,414 8,609 8,609 8,609 8,609

Cash 14,058 48,353 26,411 11,708 465 19,669 32,430

Net current assets (excl. cash) 45,161 19,682 6,363 26,560 34,847 35,077 40,177

Total assets 357,049 461,002 495,125 538,520 606,702 626,502 633,093

Free cash flow

Operating cash flow, excl. working capital 9,882 12,966 13,905 15,520 25,628 30,222 34,407

Working capital changes (42,025) 25,478 13,319 (20,197) (8,286) (231) (5,100)

Capital expenditure (122,445) (112,548) (74,460) (40,802) (82,859) (14,542) (2,908)

Free cash flow (154,587) (74,103) (47,235) (45,478) (65,517) 15,449 26,399

Ratios

Net debt/equity (%) 95 122 141 155 175 157 134

Return on equity (%) 5.0 5.6 5.4 5.1 6.5 7.0 8.2

Book value per share (Rs) 62.6 66.3 69.6 73.6 78.5 84.2 91.4

RoCE (%) 3.2 2.9 2.6 2.5 3.0 3.3 4.2


Decline in international business revenues weighs on 9MFY16 standalone performance

Rallis reported SA net sales at `9.9 bn for 9MFY16 (-19% yoy). As per the management, bulk of

underperformance came from the exports business, as low crop prices and high channel

inventories led to customers scaling back on orders in major markets of Brazil and the US.

Rallis’s domestic ag-chem business recorded muted revenue growth in 9MFY16, which is

satisfactory in our view, in the context of weak demand for ag-inputs in the same period.

Standalone EBITDA, at `1.6 bn, was down 23% yoy in 9MFY16; EBITDA margins were down 80

bps yoy, as benefits from decline in input prices were negated by adverse operating leverage.

Growth momentum in the seeds business slowed down to 7% yoy in 9MFY16 (versus 41% in

FY2015) due to lower acreage of key crops and absence of government buying programs.

Post a washout FY2016, all eyes now on the likelihood of earnings picking up in FY2017E

The management pointed out that a deficient rainfall during kharif and rabi seasons, subdued

crops prices and high channel inventory led to muted performance of Rallis’s domestic ag-chem

and seeds business segments (70% of consolidated revenues). However, it expects a strong

recovery in industry demand in FY2017E on account of expectations of normal monsoons. It

expects Rallis to outperform the industry given (1) launch of six new products in the past 18

months, which are showing promise, and (2) low channel inventory as it restrained product

placement in FY2016, given weak demand.

Valuations: Cut estimates and TP to `180, maintain ADD on likely turnaround in FY2017E

In light of a poor 9MFY16 performance in the standalone business, we have cut our FY2016-

18E PAT estimates by 13% to 22%. However, we maintain ADD with TP of `180 (`225 earlier)

on 18X Sep 2017E EPS, as we believe that the sharp recent correction in the stock price offers

an opportunity to play the strong turnaround in financial performance in FY2017E, which may

pan out in the event of normal monsoons in FY2017E. We continue to hold a positive view on

Rallis given (1) the firm’s standing in the domestic market is intact and (2) growth momentum in

the seeds business (42% CAGR in FY2010-15) should resume as industry demand normalizes.

Rallis India (RALI) Others

Darker before dawn. Rallis reported weaker-than-expected results for 3QFY16;

consolidated revenues and PAT declined 20% yoy. However, the dent was mainly on

the exports side, as domestic ag-chem revenues are flat in 9MFY16, while the seeds

business grew 7% yoy. We expect Rallis to see a strong turnaround in its earnings in

FY2017E (assuming a normal monsoon), which should trigger upsides in its stock price.

We cut estimates by 13-22% but maintain ADD rating with TP of `180 (`225 earlier) on

18X September 2017E EPS.

ADD

JANUARY 20, 2016

RESULT

Coverage view:

Price (`): 149


BSE-30: 24,480

Rallis India



Market Cap. (Rs bn) EPS growth (%) (19.9) 34.2 26.5




MFs 7.5 EBITDA (Rs bn) 2.3 2.9 3.6


Absolute (15.0) (30.4) (33.5) ROE (%) 14.9 18.4 20.7

Rel. to BSE-30 (11.4) (22.2) (23.2) Div. Yield (%) 2.0 2.1 2.3


299-145

28.9

Others Rallis India


Exhibit 1: Results were below estimates on account of underperformance of the standalone business Interim results of Rallis, consolidated, March fiscal year-ends (Rs mn)


Exhibit 2: Sales decline of 19% yoy in 9MFY16 was mainly driven by a sharp fall in revenues from international business Interim results of Rallis, standalone, March fiscal year-ends (Rs mn)


Exhibit 3: Seeds business segment recorded 7% yoy growth in 9MFY16 Consol-standalone numbers for Rallis, March fiscal year-ends (Rs mn)


3QFY16 3QFY16E 2QFY16 3QFY15 Est qoq yoy 9MFY16 9MFY15 % change FY2016E

Sales 3,103 3,505 5,017 3,895 (11) (38) (20) 12,796 14,942 (14) 15,532

Raw material cost (1,586) (2,664) (2,047) (40) (23) (6,446) (8,205) (21) (7,731)

Employee cost (321) (345) (342) (7) (6) (987) (980) 1 (1,263)

Other expenses (845) (1,042) (1,002) (19) (16) (3,480) (3,429) 1 (4,228)

EBITDA 352 454 966 505 (23) (64) (30) 1,883 2,327 (19) 2,310

Other income/forex gain/(loss) 8 9 28 9 49 33 51 54

Depreciation and amortization (140) (137) (130) (126) (387) (364) 6 (526)

Interest cost (36) (29) (29) (26) (106) (76) 39 (146)

Extraordinaries — — — — —

Profit before tax 184 297 836 361 (38) (78) (49) 1,439 1,920 (25) 1,692

Tax (net) 4 (98) (278) (128) (293) (535) (45) (407)

PAT 188 199 558 233 (6) (66) (19) 1,147 1,386 (17) 1,285

Minority interest (17) (22) (15) (22) (39) (27) 46 (26)

Net income 204 221 573 255 (8) (64) (20) 1,108 1,359 (18) 1,259

Key ratios (%)

Gross margins 48.9 46.9 47.4 49.6 45.1 50.2

EBITDA margins 11.3 13.0 19.3 13.0 14.7 15.6 14.9

Other exp/sales 27.2 20.8 25.7 27.2 23.0 27.2

Emp. cost/sales 10.3 6.9 8.8 7.7 6.6 8.1

% Change

3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 Yoy (%) 9MFY15 9MFY16 Yoy (%)

Net sales from operations 3,735 3,036 2,890 5,784 3,500 2,807 2,440 4,622 2,774 (21) 12,174 9,837 (19)

Other operating income 47 76 31 59 47 66 34 20 39 (17) 80 93 16

Total income 3,782 3,111 2,921 5,844 3,547 2,873 2,474 4,642 2,813 (21) 12,254 9,929 (19)

Raw material cost (2,300) (1,824) (1,664) (3,661) (1,948) (1,644) (1,438) (2,545) (1,528) (22) (7,216) (5,511) (24)

Employee cost (240) (205) (264) (246) (279) (247) (240) (271) (246) (12) (788) (757) (4)

Other expenditure (626) (604) (710) (704) (748) (542) (616) (795) (638) (15) (2,162) (2,049) (5)

EBITDA 615 478 283 1,233 572 440 181 1,031 402 (30) 2,088 1,613 (23)

Depreciation (82) (122) (97) (113) (112) (124) (103) (113) (123) (322) (339)

Other income/forex gain/(loss) 20 9 14 3 6 1 6 25 4 22 35

Interest (net) (19) (12) (9) (15) (12) (12) (21) (18) (22) (36) (61)

Exceptional items — — — — — — — — — — —

PBT 534 354 191 1,107 453 306 63 925 261 (42) 1,752 1,249 (29)

Tax (185) (103) (60) (346) (128) (69) (19) (278) 4 (535) (293)

PAT 349 251 131 761 325 237 45 647 265 (19) 1,217 956 (21)

Ratio analysis (%)

Gross margin 39.2 41.4 43.0 37.3 45.1 42.8 41.9 45.2 45.7 41.1 44.5

EBITDA margin 16.3 15.4 9.7 21.1 16.1 15.3 7.3 22.2 14.3 17.0 16.2

Employee cost/sales 6.4 6.6 9.0 4.2 7.9 8.6 9.7 5.8 8.7 6.4 7.6

Other expenditure/sales 16.6 19.4 24.3 12.0 21.1 18.8 24.9 17.1 22.7 17.6 20.6

3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 Yoy (%) 9MFY15 9MFY16 Yoy (%)

Income 225 203 1,764 576 348 346 2,209 375 290 (17) 2,688 2,874 7

EBITDA (35) (61) 305 (14) (67) 4 384 (65) (50) (26) 224 269 20

PBT (64) (80) 293 (33) (92) (10) 356 (89) (77) (16) 169 190 13

PAT (before minority int.) (64) (70) 293 (33) (92) (25) 356 (89) (77) (16) 169 190 13

EBITDA (%) (15.4) (30.0) 17.3 (2.4) (19.4) 1.1 17.4 (17.3) (17.2) 8.3 9.4

Rallis India Others


Other highlights

The management noted that the early forecasts of monsoons predict occurrence of La

Niña in FY2017E, which is associated with heavy rainfall in South East Asia and Australia

(and dry weather/draught) in America. The management believes that demand for ag-

inputs in FY2017E will improve significantly as farmers may likely spend more to capitalize

on beneficial weather conditions.

The management expects Rallis to outperform industry growth in FY2017E on account of

strong response to its recent product launches (six products introduced in the past 18

months). It further noted that inventory for Rallis is low as it placed its products in the

channel in line with demand in 9MFY16.

The management pointed out that high channel inventory, along with subdued demand

for branded ag-inputs in Brazil and North America, has led to sharp cut in orders from

international customers. As per the management, revenues in the domestic ag-chem

business were flat on a yoy basis in 9MFY16, and decline in standalone business revenues

was led by fall in revenues from the international business segment.

The management expects international business to do well in 4QFY16 as some of the

deferred orders in 1HFY16 are likely to get filled in the fourth quarter.

Seeds business recorded 17% yoy drop in revenues in 3QFY16 (7% yoy growth in

9MFY16) led by (1) high channel inventory, which restricted shipments in 3QFY16, and

(2) absence of government purchase programs in maize and rice seed segments, which

dented industry demand.

Cutting estimates to account for poor 9MFY16 performance

We have reduced our estimates led by lower growth assumptions in the branded

formulations business as well as the exports business in FY2016, in line with the trend seen

in 9MFY16. However, we continue to build strong recovery in revenues and earnings in

FY2017E, led by a likely recovery in industry demand next year, on expectations of a normal

monsoon season.

Exhibit 4: Change in estimates for Rallis, consolidated, March fiscal year-ends (Rs mn)


Assumptions

Exhibit 5: Our assumptions for Rallis, consolidated, March fiscal year-ends (Rs mn)


New Old % change New Old % change New Old % change

Revenue 15,532 16,909 (8.1) 19,210 21,072 (8.8) 22,438 24,626 (8.9)

EBITDA 2,310 2,491 (7.3) 2,911 3,481 (16.4) 3,568 4,327 (17.5)

Net income 1,259 1,440 (12.6) 1,690 2,171 (22.2) 2,137 2,729 (21.7)

2018E2016E 2017E

2013 2014 2015 2016E 2017E 2018E

Sales 14,582 17,466 18,218 15,532 19,210 22,438

Standalone 13,238 15,308 15,185 12,412 14,999 17,174

Metahelix (a) 1,344 2,157 3,034 3,119 4,211 5,264

EBITDA 2,106 2,613 2,772 2,310 2,911 3,568

Standalone 2,032 2,473 2,534 2,060 2,490 2,937

Metahelix 73 140 237 250 421 632

EBITDA (%)

Standalone 15.4 16.2 16.7 16.6 16.6 17.1

Metahelix 5.5 6.5 7.8 8.0 10.0 12.0

Others Rallis India


Exhibit 6: Summary financials: Rallis Profit and loss model, cash flow statement and balance sheet for Rallis, consolidated, March fiscal year-ends (Rs mn)


2011 2012 2013 2014 2015 2016E 2017E 2018E

Profit model (Rs mn)

Sales 10,934 12,749 14,582 17,466 18,218 15,532 19,210 22,438

EBITDA 1,991 2,030 2,106 2,613 2,771 2,310 2,911 3,568

Other income 69 69 117 64 42 54 68 90

Interest (40) (146) (185) (126) (101) (146) (86) (58)

Depreciation (175) (287) (315) (407) (496) (526) (575) (635)

Extraordinardy items — (172) — — — — — —

Profit before tax 1,845 1,494 1,723 2,144 2,216 1,692 2,318 2,965

Tax expense (580) (487) (535) (617) (618) (407) (580) (748)

Minority interest — 15 (2) 8 26 26 48 80

Extraordinardy items — — — — — — — —

PAT 1,264 992 1,190 1,519 1,572 1,259 1,690 2,137

EPS 6.5 5.1 6.1 7.8 8.1 6.5 8.7 11.0

Balance sheet (Rs mn)

Equity 5,049 5,530 6,207 7,180 8,145 8,704 9,647 10,991

Preference capital — — — — — — — —

Total borrowings 1,172 1,523 1,314 768 1,106 1,253 453 123

Deferred tax liability/minority interest 54 145 328 420 457 483 531 611

Current liabilities and provisions 3,891 4,028 4,047 4,603 4,650 3,883 4,803 5,609

Total liabilites 10,167 11,226 11,897 12,972 14,358 14,323 15,434 17,334

Net fixed assets 4,009 4,236 4,223 4,393 4,260 4,234 4,459 4,625

Goodwill 1,236 1,533 1,676 1,859 1,958 1,958 1,958 1,958

Investments 256 227 197 187 187 187 187 187

Cash 146 112 258 157 127 799 799 1,190

Other current assets and miscellaneous 4,520 5,118 5,542 6,376 7,826 7,145 8,030 9,374

Total assets 10,167 11,226 11,897 12,972 14,358 14,323 15,434 17,334

Free cash flow (Rs mn)

Operating cash flow 1,232 1,315 1,585 1,906 2,143 1,627 2,398 2,897

Working capital changes (284) (507) (321) (274) (1,563) 191 (119) (672)

Capital expenditure (1,378) (570) (349) (584) (431) (500) (800) (800)

Free cash flow (430) 237 915 1,048 150 1,318 1,479 1,424

Ratios

EBITDA margin (%) 18.2 15.9 14.4 15.0 15.2 14.9 15.2 15.9

Net debt/equity (X) 0.20 0.26 0.17 0.09 0.12 0.05 (0.04) (0.10)

Book value (Rs/share) 26.0 28.4 31.9 36.9 41.9 44.8 49.6 56.5

RoAE (%) 26.2 20.4 18.9 22.1 20.5 14.8 18.4 20.8

RoACE (%) 23.6 17.4 16.4 19.4 18.2 13.4 16.6 19.6

For Private Circulation Only.

EM FX weakening amid slow and steady CNY depreciation

In an EM complex that is dominated by export-oriented and commodity-linked economies, a

slow and steady CNY depreciation is likely to trigger successive rounds of competitive

devaluation. The competitiveness of most of the EMs will be under threat from CNY’s moves,

especially as they continue to fight adverse macroeconomic conditions. Markets expect the

USD/CNY to depreciate to ~7.0 by March 2017. While the PBoC would like to keep the anchor

around a basket of currency, any slip could start a round of competitive devaluation, even

though it is likely to be involuntary. In a scenario of steady CNY depreciation, it is difficult to

foresee strengthening in the EM currencies in the near to medium term.

Fed rate hike cycle may be less aggressive than anticipated

One of the key questions for CY2016 will be whether US core PCE growth inches towards the

2% mark. The recent Fed minutes have indicated that it will focus on actual inflation build-up

rather than expectation of inflation pick-up. The wage growth is yet to signal a sustained

improvement though expectations are being built for some buoyancy in 2HCY16. Gains out of

lower crude are likely translating into savings rather than incremental demand generation (see

Exhibit 2). The room for rate hikes will be limited not just due to the domestic demand situation

but also due to the ramifications of weaker Chinese outlook. If China (and other export-

oriented EMs) continue to export disinflation globally through its FX policies, it is unlikely that

the Fed can raise rates by 75-100 bps. We pencil in 50 bps of rate hike for now.

Significant possibility of USD/INR touching close to 70-72

The gains from a more dovish Fed will likely be more than offset by the volatility from the CNY.

We believe that flows and FX volatility and subsequent FX intervention strategy will likely be

closer linked to the CNY/CNH moves. The INR, though a relatively better performer among the

EMs against the USD, has moved in line with the CNY/CNH (offshore renminbi) (see Exhibits 3

and 4). Our basic calculation incorporating the effect of DXY and CNH indicates that a 5-6%

depreciation of CNH and a 1.5-2.0% strengthening of the DXY can push the USD/INR to ~70-

72—a substantial upside to our current base case of an upper bound of 69 (see Exhibit 5).

Focusing on CNY moves for a more effective FX intervention strategy

The fundamentals of INR remain relatively strong as compared to other EMs (see Exhibits 6 and

7). But when EM FX as a basket is weakening, it is imprudent to expect the INR to be resilient.

Against the USD, INR has performed relatively better since the start of China’s currency reforms

(see Exhibit 8) and will likely be relatively better-placed than its peers. Given that the weakness

is across all major EM currencies, the RBI would likely stay away from any heavy intervention to

prop up the INR. The RBI would possibly aim to only smoothen the volatility stemming from

CNY movements and policy actions and ensure a slow depreciation bias to the INR.

Economy FX

INR: Syncing up with CNY? EM FX movements are now seemingly linked more to the

CNY rather than the US Fed actions. We believe that the RBI will closely watch the

PBoC’s moves as a factor in its FX intervention strategy. While we maintain our range of

66-69 as a base case for USD/INR for FY2017, we revise our FY2017 USD/INR average

to 68.4 from our earlier estimate of 67.4. We see significant risks to the upper bound of

our base case moving to 70-72 given the signals emanating out of China.

INDIA

JANUARY 20, 2016

UPDATE

BSE-30: 24,480

QUICK NUMBERS

We revise our

FY2017 USD/INR

average to 68.4

We maintain our

range for FY2017

USD/INR at 66-69

Significant upside

risks of the USD/INR

touching 70-72

India Economy

36 KOTAK ECONOMIC RESEARCH

Exhibit 1: INR likely to range 66-69 in FY2017 but significant risks to touch 70-72 Trend and estimates of INR and major currencies against USD, March fiscal year-ends (X)

Source: Bloomberg, Kotak Economic Research estimates

Exhibit 2: Economic variables still giving mixed signals regarding US growth scenario Trend in key economic variables for the US

Source: Bloomberg, CEIC, Kotak Economic Research

2014 2015 2016E 2017E 1QFY16 2QFY16 3QFY16 4QFY16E 1QFY17E 2QFY17E 3QFY17E 4QFY17E

Average Rate

USD/INR 60.5 61.1 65.5 68.4 63.5 64.9 65.9 67.5 68.0 68.3 68.5 68.8

EUR/USD 1.34 1.26 1.10 1.05 1.11 1.11 1.10 1.08 1.08 1.05 1.03 1.04

GBP/USD 1.59 1.61 1.51 1.42 1.53 1.56 1.52 1.45 1.42 1.40 1.42 1.45

USD/JPY 100.3 110.0 120.9 123.8 121.4 122.2 121.4 118.5 121.0 123.0 125.0 126.0

Depreciation (-)/appreciation (+) (%)

USD/INR (10.0) (1.1) (6.6) (4.3) (2.0) (2.2) (1.5) (2.4) (0.7) (0.4) (0.4) (0.4)

EUR/USD 4.1 (5.7) (13.0) (4.6) (1.8) 0.5 (1.5) (1.0) (0.6) (2.6) (1.9) 1.0

GBP/USD 0.7 1.4 (6.1) (6.1) 1.2 1.7 (2.8) (4.4) (2.1) (1.4) 1.4 2.1

USD/JPY (17.2) (8.8) (9.0) (2.3) (1.8) (0.7) 0.6 2.5 (2.1) (1.6) (1.6) (0.8)

US monthly indicators Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15

Labor market indicators

Average private earnings (yoy, %) 2.2 2.0 2.1 2.3 2.3 2.0 2.2 2.2 2.3 2.5 2.3 2.5

Non-farm payrolls ('000) 201 266 119 187 260 245 223 153 145 307 252 292

Participation rate (%) 62.9 62.8 62.7 62.7 62.8 62.6 62.6 62.6 62.4 62.5 62.5 62.6

Umemployment rate (%) 5.7 5.5 5.5 5.4 5.5 5.3 5.3 5.1 5.1 5.0 5.0 5.0

Consumption indicators

Conference Board consumer confidence (X) 103.8 98.8 101.4 94.3 94.6 99.8 91.0 101.3 102.6 99.1 92.6 96.5

Core PCE (yoy, %) 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3 1.3

Housing starts (SAAR, '000) 1,080 900 954 1,190 1,072 1,211 1,152 1,116 1,207 1,062 1,173

Personal sav ings rate (% of disposable income) 5.3 5.4 4.9 5.1 4.8 5.0 5.1 5.2 5.2 5.6 5.5

Retail sales excl. automobiles (yoy, 3MMA, %) 2.6 1.5 1.1 0.6 0.7 0.7 1.2 1.2 1.1 0.7 0.5 0.7

S&P house price index (yoy, %) 4.4 4.9 4.9 4.8 4.8 4.8 5.0 5.1 5.4 5.6

Production indicators

Industrial production (yoy, %) 4.5 3.5 2.5 2.1 1.4 0.9 1.3 1.4 0.8 0.5 (1.3) (1.8)

ISM manufacturing (X) 53.5 52.9 51.5 51.5 52.8 53.5 52.7 51.1 50.2 50.1 48.6 48.2

ISM non-manufacturing (X) 56.7 56.9 56.5 57.8 55.7 56.0 60.3 59.0 56.9 59.1 55.9 55.3

US quarterly indicators Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15

CAD/GDP (%) (2.4) (2.2) (2.2) (2.1) (2.1) (2.2) (2.3) (2.4) (2.5)

GFD/GDP (%) (4.1) (3.3) (2.9) (3.1) (2.8) (2.8) (2.9) (2.4) (2.4)

Real GDP (SAAR, qoq, %) 3.0 3.8 (0.9) 4.6 4.3 2.1 0.6 3.9 2.0

Economy India

KOTAK ECONOMIC RESEARCH 37

Exhibit 3: INR has closely mimicked CNY/CNH movement Trend in USD/INR (LHS) and USD/CNH (RHS)

Source: Bloomberg, Kotak Economic Research

Exhibit 4: Dollar strengthening has been instrumental too Trend in USD/INR (LHS) and dollar index, DXY (RHS)


Exhibit 5: USD/INR can move towards 70-72 if CNY weakness continues Estimate from a simple regression of INR on CNH and DXY movements

Source: Kotak Economic Research estimates

6.2

6.3

6.4

6.5

6.6

6.7

6.8

63

64

65

66

67

68

69

1-A

ug-

15

16-A

ug-1

5

31-A

ug-1

5

15-S

ep-1

5

30-S

ep-1

5

15-O

ct-1

5

30-O

ct-1

5

14-N

ov-1

5

29-N

ov-1

5

14-D

ec-1

5

29-D

ec-1

5

13-J

an-1

6

USD/INR (LHS) USD/CNH (RHS)

93

94

95

96

97

98

99

100

101

63

64

65

66

67

68

69

1-A

ug-

15

16-A

ug-1

5

31-A

ug-1

5

15-S

ep-1

5

30-S

ep-1

5

15-O

ct-1

5

30-O

ct-1

5

14-N

ov-1

5

29-N

ov-1

5

14-D

ec-1

5

29-D

ec-1

5

13-J

an-1

6

USD/INR (LHS) DXY (RHS)

58

60

62

64

66

68

70

72

74

Mar-

14

Jun-1

4

Sep-1

4

Dec

-14

Mar-

15

Jun-1

5

Sep-1

5

Dec

-15

Mar-

16

Jun-1

6

Sep-1

6

Dec

-16

Mar-

17

USD/INR (alt. case) USD/INR (base case)

Forecast

India Economy

38 KOTAK ECONOMIC RESEARCH

Exhibit 6: India is in a relatively stronger position than its peers in terms of FX reserves strength Import cover for various EMs (months)

Notes:

(a) Data as of December 2015 except for Malaysia, Mexico, Russia, Thailand and Turkey (November), and

Philippines (October).

Source: CEIC, Kotak Institutional Equities

Exhibit 7: India’s external debt position superior to other EM countries Short-term debt/forex reserves of various countries, calendar year-end, 2014 (%)

Source: World Bank, Kotak Economic Research

25 24 23

14

11 10 9 9 7 6

5

0

5

10

15

20

25

30

Bra

zil

Chin

a

Russ

ia

Phili

ppin

es

India

Kor

ea

Thaila

nd

Indones

ia

Turk

ey

Mala

ysia

Mexi

co

Import cover

0

20

40

60

80

100

120

Turk

ey

Mala

ysia

South

Afr

ica

Mexi

co

Indones

ia

Thaila

nd

India

Phili

ppin

es

Chin

a

Bra

zil

Short-term debt/forex reserves (%)

Economy India

KOTAK ECONOMIC RESEARCH 39

Exhibit 8: INR has remained relatively resilient amongst its peers Emerging market currencies depreciation since August 11, 2015 (%)


(24.2)

(13.9)

(11.0) (10.4)(9.2) (8.4)

(4.9) (4.2) (3.8) (3.4) (2.7) (2.6) (2.6)(1.4)

(30)

(25)

(20)

(15)

(10)

(5)

0

ZAR BRL COP MXN MYR TRY INR TWD CNY PHP KRW THB SGD IDR

KO

TA

K IN

STIT

UTIO

NA

L EQ

UIT

IES R

ESEA

RC

H

40

Ind

ia D

aily

Su

mm

ary

- Jan

uary

20

, 201

6

Ind

ia D

aily

Su

mm

ary

- Jan

uary

20

, 201

6

December 2015: Results calendar

Source: BSE, NSE, Kotak Institutional Equities

Mon Tue Wed Thu Fri Sat Sun

18-Jan 19-Jan 20-Jan 21-Jan 22-Jan 23-Jan 24-Jan

Asian Paints HCL Technologies Axis Bank Biocon Ashoka Buildcon PC Jew eller

Kotak Mahindra Bank Reliance Industries Indiabulls Housing Finance Exide Industries Cairn India

MindTree Reliance Pow er JSW Energy Hindustan Zinc Coromandel International

Rallis India Reliance Infrastructure Idea Cellular DB Corp

Wipro South Indian Bank Indiabulls Real Estat ITC

UltraTech Cement Indiabulls Real Estate L&T Finance Holdings

InterGlobe Aviation Reliance Communication

M&M Financial Services

Reliance Capital

25-Jan 26-Jan 27-Jan 28-Jan 29-Jan 30-Jan 31-Jan

Container Corporation Bharat Electronics Bharti Airtel Cholamandalam Grasim Industries

HDFC Bank Bharti Infratel Dabur India JSW Steel IDFC

Supreme Industries Colgate Palmolive (India) Emami Larsen & Toubro

Godrej Consumer Products Glenmark Pharmaceuticals NTPC

Havells India Gujarat Pipavav Pidilite Industries

HDFC ICICI Bank Shriram City Union Finance

Pow er Grid Corporation Info Edge (India) Siemens

SKS Microfinance Jyothy Laboratories Thermax

United Spirits Maruti Suzuki TVS Motor Company

Muthoot Finance WABCO India

Syndicate Bank Yes Bank

Titan Company

1-Feb 2-Feb 3-Feb 4-Feb 5-Feb 6-Feb 7-Feb

Ajanta Pharma Amara Raja Bajaj Finance ABB India Carborundum Universal JK Cement

Century Textiles Crompton Greaves Bajaj Finserv Bajaj Auto Lupin Procter & Gamble Hygiene

Tech Mahindra Cummins India Hexaw are Technologies Bajaj Holdings & Investment Tata Pow er Company

Godrej Properties Indian Oil Berger Paints Whirlpool

Orient Cement Gillette India

Shree Cements JK Lakshmi Cement

Mphasis

Tata Steel

8-Feb 9-Feb 10-Feb 11-Feb 12-Feb 13-Feb 14-Feb

AIA Engineering ACC GlaxoSmithKline Pharma Godrej Industries

Apollo Tyres NHPC Mahindra & Mahindra

Britannia Industries Nestle India

Dr. Reddy's Laboratories PI Industries

Minda Corporation

Motherson Sumi

Suprajit Engineering

The Ramco Cements

Ind

ia D

aily

Su

mm

ary

- Jan

uary

20

, 201

6

41

K

OTA

K IN

STIT

UTIO

NA

L EQ

UIT

IES R

ESEA

RC

H

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

Source: Company, Bloomberg, Kotak Institutional Equities estimates

Target O/S

Price (Rs) price Upside Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) ADVT-3mo

Company Rating 19-Jan-16 (Rs) (%) (Rs mn) (US$ mn) (mn) 2016E 2017E 2018E 2016E 2017E 2018E 2016E 2017E 2018E 2016E 2017E 2018E 2016E 2017E 2018E 2016E 2017E 2018E 2016E 2017E 2018E (US$ mn)

Automobiles

Amara Raja Batteries SELL 809 680 (15.9) 138,179 2,044 171 28.3 31.9 36.4 17.2 12.8 14.1 28.6 25.4 22.2 16.9 14.7 13.1 6.7 5.6 4.7 0.7 0.8 0.9 25.6 24.0 22.9 4.5

Apollo Tyres BUY 132 240 81.3 67,395 997 509 21.6 24.0 24.3 0.3 11.1 1.2 6.1 5.5 5.4 3.6 3.6 3.7 1.1 0.9 0.8 1.6 1.7 1.7 19.8 18.5 16.1 5.4

Ashok Leyland ADD 87 95 9.4 247,022 3,653 2,846 3.3 5.1 6.5 262.3 54.3 27.1 26.4 17.1 13.4 13.9 10.4 8.7 4.3 3.7 3.2 1.1 1.8 2.2 17.3 23.4 25.4 20.0

Bajaj Auto BUY 2,266 2,900 28.0 655,792 9,699 289 136.2 151.7 170.6 25.0 11.4 12.5 16.6 14.9 13.3 13.0 11.7 10.6 5.1 4.3 3.7 2.4 2.7 3.0 33.6 31.4 30.0 10.6

Balkrishna Industries BUY 634 770 21.5 61,282 906 97 58.7 57.0 70.7 20.2 (3.1) 24.0 10.8 11.1 9.0 6.7 6.2 4.8 2.2 1.8 1.5 0.4 0.4 0.5 22.3 17.9 18.7 0.6

Bharat Forge BUY 790 965 22.1 183,931 2,720 237 30.7 38.1 48.2 (4.4) 24.0 26.4 25.7 20.7 16.4 13.8 11.5 9.1 4.7 4.0 3.4 0.8 0.9 1.2 19.6 20.8 22.2 12.2

Eicher Motors SELL 15,824 11,600 (26.7) 429,679 6,355 27 473.8 573.5 664.7 108.7 21.0 15.9 33.4 27.6 23.8 18.2 16.0 13.5 11.6 8.3 6.2 0.2 0.2 0.2 41.3 35.1 30.0 13.7

Exide Industries REDUCE 128 145 13.5 108,545 1,605 850 7.0 7.6 8.3 8.4 8.7 9.5 18.3 16.9 15.4 10.8 9.8 9.0 2.5 2.3 2.1 1.9 1.9 1.9 14.0 14.0 14.1 2.5

Hero Motocorp BUY 2,483 3,000 20.8 495,784 7,332 200 154.3 174.0 196.3 21.3 12.7 12.8 16.1 14.3 12.6 12.0 10.7 9.6 6.4 5.4 4.6 3.1 3.5 4.0 42.9 40.9 39.3 13.9

Mahindra CIE Automotive BUY 211 300 42.0 68,321 1,010 323 10.1 13.2 15.6 36.0 30.3 17.9 20.9 16.0 13.6 12.9 9.0 7.5 3.1 2.6 2.2 — — — 16.0 17.6 17.4 0.7

Mahindra & Mahindra ADD 1,153 1,330 15.4 715,809 10,587 569 63.9 70.9 77.7 17.7 11.0 9.5 18.0 16.3 14.8 13.2 12.0 10.8 2.9 2.6 2.3 1.4 1.5 1.7 17.2 16.9 16.5 19.6

Maruti Suzuki BUY 4,198 5,100 21.5 1,268,177 18,756 302 173.4 240.3 273.7 41.1 38.6 13.9 24.2 17.5 15.3 13.7 10.8 9.6 4.6 3.8 3.2 0.8 1.1 1.3 20.4 23.8 22.8 57.5

Minda Corp. BUY 89 110 24.3 18,524 274 209 4.4 6.2 7.9 6.0 39.8 27.2 19.9 14.3 11.2 9.9 7.5 6.1 3.4 2.8 2.3 0.6 0.7 0.8 18.3 21.5 22.4 0.3

Motherson Sumi Systems SELL 249 240 (3.7) 329,491 4,873 1,323 9.3 12.2 15.4 27.3 30.8 26.6 26.7 20.4 16.1 9.6 7.6 5.8 8.0 6.4 5.1 1.1 1.5 1.9 33.1 34.6 35.0 15.1

Suprajit Engineering BUY 127 165 30.1 15,219 225 120 5.2 7.4 8.9 25.2 41.1 19.6 24.2 17.1 14.3 13.2 9.5 8.3 5.2 4.2 3.5 0.7 1.1 1.3 23.7 27.4 26.6 0.1

Tata Motors BUY 354 500 41.2 1,156,716 17,107 3,395 28.8 42.8 55.5 (31.0) 48.5 29.9 12.3 8.3 6.4 4.4 3.7 3.2 1.7 1.4 1.1 — — — 15.2 18.2 19.5 51.1

WABCO India ADD 5,479 7,700 40.5 103,915 1,537 19 117.5 173.5 201.4 84.7 47.7 16.1 46.6 31.6 27.2 29.1 19.8 16.7 9.8 7.7 6.2 0.2 0.3 0.4 23.2 27.3 25.2 0.7

Automobiles Attractive 6,063,780 89,681 3.1 29.5 19.7 18.2 14.1 11.7 8.7 7.3 6.4 3.4 2.8 2.4 1.1 1.3 1.4 18.5 20.1 20.2 228.4

Banks/Financial Institutions

Axis Bank BUY 393 620 57.8 935,036 13,829 2,371 35.4 41.8 46.8 14.0 18.2 11.8 11.1 9.4 8.4 — — — 1.8 1.6 1.4 1.4 1.6 1.8 17.4 17.8 17.2 69.6

Bajaj Finserv ADD 1,858 1,810 (2.6) 295,655 4,373 159 120.9 141.4 166.0 13.7 17.0 17.4 15.4 13.1 11.2 — — — 2.2 1.9 1.9 0.7 0.7 0.7 15.7 15.2 16.7 1.7

Bank of Baroda ADD 125 180 43.8 288,366 4,265 2,449 10.6 20.2 26.8 (31.0) 91.1 32.6 11.8 6.2 4.7 — — — 0.7 0.7 0.6 1.7 3.3 4.4 6.4 11.1 13.4 14.6

Bank of India ADD 94 145 54.7 74,242 1,098 813 (6.0) 35.7 41.7 (123.5) 693.6 16.6 (15.6) 2.6 2.2 — — — 0.2 0.2 0.2 (1.3) 7.4 8.7 (1.7) 9.3 10.0 5.0

Canara Bank REDUCE 179 300 68.0 96,978 1,434 515 43.4 64.4 85.0 (23.7) 48.5 31.8 4.1 2.8 2.1 — — — 0.3 0.2 0.2 4.5 6.7 8.8 6.7 9.1 11.2 7.1

Cholamandalam ADD 604 710 17.6 94,212 1,393 155 33.3 40.4 49.8 10.3 21.5 23.3 18.1 14.9 12.1 — — — 2.6 2.3 2.0 0.9 1.1 1.3 16.5 16.3 17.5 0.8

City Union Bank BUY 81 110 36.1 48,334 715 597 7.3 8.1 9.3 10.2 11.0 14.8 11.1 10.0 8.7 — — — 1.6 1.4 1.2 1.5 1.7 1.9 15.2 14.9 15.2 0.7

Dewan Housing Finance BUY 193 285 47.8 56,267 832 291 28.6 34.2 41.1 (39.9) 19.8 19.9 6.7 5.6 4.7 — — — 1.1 1.0 0.8 1.6 1.9 2.3 16.5 17.1 17.6 2.9

Federal Bank BUY 49 75 54.5 83,389 1,233 1,713 3.8 5.7 7.0 (34.5) 48.4 22.4 12.6 8.5 6.9 — — — 1.0 0.9 0.8 1.6 2.4 2.9 8.2 11.3 12.7 4.2

HDFC ADD 1,153 1,385 20.1 1,820,272 26,921 1,575 51.9 54.1 62.6 28.6 4.2 15.8 22.2 21.3 18.4 — — — 5.3 4.9 4.4 1.9 1.9 2.2 24.0 22.2 22.8 43.4

HDFC Bank ADD 1,036 1,150 11.0 2,615,484 38,682 2,507 49.1 59.4 72.1 20.6 20.8 21.4 21.1 17.4 14.4 — — — 3.6 3.1 2.7 0.9 1.1 1.4 18.5 19.3 20.1 20.1

ICICI Bank BUY 229 375 63.9 1,329,552 19,664 5,798 20.7 23.8 26.4 7.4 15.1 10.9 11.1 9.6 8.7 — — — 1.5 1.4 1.2 2.7 3.1 3.5 14.2 14.9 15.0 45.6

IDFC BUY 41 105 156.4 65,275 965 1,593 (4.4) 5.2 6.9 (141.2) 216.8 33.5 (9.3) 7.9 6.0 — — — 0.6 0.6 0.5 (4.5) 1.3 1.5 (4.9) 11.5 14.7 4.7

IIFL Holdings BUY 194 245 26.5 61,098 904 310 17.3 20.4 22.1 19.9 17.8 8.2 11.2 9.5 8.8 — — — 1.8 1.5 1.2 0.0 0.0 0.0 19.6 18.7 17.8 0.8

IndusInd Bank ADD 896 1,040 16.0 532,177 7,871 589 37.4 46.9 56.9 10.4 25.4 21.2 24.0 19.1 15.8 — — — 3.0 2.6 2.3 0.5 0.6 0.7 16.3 15.0 15.9 15.2

J&K Bank BUY 69 110 60.3 33,256 492 485 17.2 17.7 19.1 63.6 3.2 8.0 4.0 3.9 3.6 — — — 0.5 0.4 0.4 5.0 5.2 5.6 12.9 12.1 11.9 0.9

Karur Vysya Bank BUY 424 580 36.7 51,294 759 122 49.0 61.6 71.5 30.7 25.9 16.0 8.7 6.9 5.9 — — — 1.1 1.0 0.9 2.9 3.6 4.2 13.4 15.2 15.8 0.7

L&T Finance Holdings ADD 58 80 37.3 102,124 1,510 1,750 4.9 5.7 7.0 (1.7) 16.4 23.0 12.0 10.3 8.4 — — — 1.4 1.2 1.0 1.0 1.0 1.5 12.3 12.7 13.7 1.5

LIC Housing Finance ADD 470 515 9.6 237,091 3,506 505 36.8 39.9 46.0 22.5 8.4 15.4 12.8 11.8 10.2 — — — 2.6 2.2 1.9 1.4 1.5 1.7 19.9 18.5 20.3 12.9

Magma Fincorp ADD 76 110 45.7 17,877 264 236 8.5 10.7 13.1 (3.0) 25.7 22.5 8.9 7.1 5.8 — — — 0.8 0.7 0.6 1.1 2.1 2.6 10.0 10.6 11.5 0.2

Mahindra & Mahindra Financial BUY 220 300 36.2 125,242 1,852 564 13.3 17.2 22.1 (10.2) 29.8 28.6 16.6 12.8 10.0 — — — 2.0 1.8 1.6 1.6 2.0 2.6 12.6 14.9 17.1 3.4

Max India ADD 459 565 23.2 122,447 1,811 266 10.5 13.9 20.8 0.4 31.9 49.4 43.5 33.0 22.1 — — — 2.9 2.5 2.1 1.6 2.1 3.1 7.5 8.1 10.4 2.3

Muthoot Finance BUY 176 250 41.8 70,175 1,038 397 18.3 23.1 27.8 8.4 26.1 20.3 9.6 7.6 6.3 — — — 1.3 1.1 1.0 3.1 3.9 4.7 13.7 15.7 16.9 0.9

Oriental Bank of Commerce ADD 108 180 67.4 32,234 477 300 43.7 57.6 68.2 163.6 31.8 18.4 2.5 1.9 1.6 — — — 0.2 0.2 0.2 8.1 10.7 12.6 9.2 11.2 12.2 4.4

PFC ADD 159 320 101.4 209,754 3,102 1,319 52.3 47.4 53.1 15.8 (9.4) 12.0 3.0 3.4 3.0 — — — 0.6 0.5 0.4 6.6 6.0 6.7 19.8 15.7 15.6 7.3

Punjab National Bank REDUCE 92 145 56.8 181,535 2,685 1,855 18.2 25.7 31.6 10.5 40.7 23.2 5.1 3.6 2.9 — — — 0.4 0.4 0.3 3.9 5.5 6.8 8.7 11.2 12.6 9.1

Rural Electrification Corp. ADD 184 275 49.3 181,939 2,691 987 63.6 46.3 50.7 19.4 (27.2) 9.7 2.9 4.0 3.6 — — — 0.6 0.5 0.5 7.4 5.4 5.9 23.0 14.5 14.3 8.2

Shriram City Union Finance REDUCE 1,415 1,720 21.6 93,286 1,380 66 95.9 113.7 132.4 13.3 18.6 16.4 14.8 12.4 10.7 — — — 2.0 1.7 1.5 0.8 0.9 1.0 14.2 14.8 15.1 0.3

Shriram Transport ADD 775 1,050 35.4 175,891 2,601 223 62.4 76.6 89.1 12.4 22.8 16.3 12.4 10.1 8.7 — — — 1.7 1.5 1.3 1.1 1.4 1.6 14.2 15.4 15.7 8.0

SKS Microfinance ADD 476 500 5.1 60,479 894 126 22.7 30.6 39.3 52.2 34.4 28.7 20.9 15.6 12.1 — — — 4.5 3.5 2.7 — — — 24.1 25.2 25.2 13.4

State Bank of India BUY 183 300 64.0 1,420,200 21,004 7,566 20.6 24.2 28.9 17.1 17.9 19.2 8.9 7.5 6.3 — — — 1.0 0.9 0.8 2.0 2.2 2.3 11.4 12.1 13.0 46.1

Union Bank ADD 114 170 48.7 78,575 1,162 687 28.4 44.6 55.1 1.4 56.9 23.6 4.0 2.6 2.1 — — — 0.4 0.3 0.3 4.6 7.2 8.9 9.9 13.7 15.1 7.3

YES Bank ADD 681 860 26.2 285,784 4,227 418 56.2 64.7 72.6 17.0 15.2 12.2 12.1 10.5 9.4 — — — 2.1 1.8 1.6 1.5 1.8 2.0 18.6 18.6 18.1 32.2

Banks/Financial Institutions Attractive 11,896,259 175,941 8.5 22.3 18.2 12.1 9.9 8.4 1.5 1.4 1.2 1.8 2.1 2.4 12.4 13.7 14.4 397.6

Price/BV (X) Dividend yield (%) RoE (%)

K

OTA

K IN

STIT

UTIO

NA

L EQ

UIT

IES R

ESEA

RC

H

42

In

dia

Da

ily S

um

ma

ry - Ja

nu

ary

20

, 201

6

Ind

ia D

aily

Su

mm

ary

- Jan

uary

20

, 201

6



Target O/S



Cement

ACC SELL 1,237 1,300 5.1 232,241 3,435 188 38.1 59.9 77.6 (16.7) 57.4 29.5 32.5 20.6 15.9 18.2 10.3 7.6 2.8 2.6 2.3 1.9 1.9 1.9 8.6 12.9 15.3 4.1

Ambuja Cements SELL 191 190 (0.7) 296,956 4,392 1,550 5.5 8.5 10.4 (35.5) 54.0 22.4 34.8 22.6 18.5 20.1 13.0 10.4 2.9 2.7 2.5 2.2 2.2 2.7 8.1 12.3 14.1 7.2

Dalmia Bharat BUY 752 820 9.0 61,103 904 81 17.2 65.5 92.0 1,424.9 280.3 40.5 43.7 11.5 8.2 9.9 6.5 5.0 1.9 1.6 1.4 0.2 0.3 0.3 4.5 15.4 18.4 0.5

Grasim Industries ADD 3,523 4,200 19.2 323,626 4,786 92 215.7 278.7 369.8 13.0 29.2 32.7 16.3 12.6 9.5 8.1 5.6 3.9 1.3 1.2 1.1 1.1 1.1 1.1 8.3 9.9 11.9 2.6

India Cements REDUCE 84 87 4.1 25,665 380 307 5.1 10.0 16.0 4,819.8 96.2 60.0 NM 8.4 5.2 7.1 5.5 4.2 0.7 0.7 0.6 2.5 2.5 2.5 4.4 8.1 11.9 4.9

J K Cement BUY 472 680 44.1 32,997 488 70 3.2 38.7 66.2 (82.5) 1,127.5 70.8 149.6 12.2 7.1 12.4 7.1 5.3 2.1 1.8 1.5 1.1 1.1 1.1 1.4 15.8 22.7 0.2

JK Lakshmi Cement BUY 281 340 21.2 33,018 488 118 (5.7) 16.6 29.6 (138.6) 390.6 79.0 (49.3) 17.0 9.5 22.4 9.9 6.4 2.7 2.4 1.9 0.7 0.7 0.7 (5.2) 14.8 22.4 0.3

Orient Cement BUY 142 170 19.5 29,153 431 205 3.7 9.1 18.7 (61.5) 147.4 106.2 38.8 15.7 7.6 19.4 9.6 6.0 2.9 2.6 2.0 1.4 1.4 1.4 7.6 17.4 29.3 0.3

Shree Cement SELL 9,843 8,850 (10.1) 342,903 5,071 35 156.3 338.7 450.5 17.9 116.7 33.0 63.0 29.1 21.8 21.0 12.6 9.4 6.0 5.0 4.1 0.2 0.2 0.2 9.9 18.8 20.8 1.8

UltraTech Cement SELL 2,639 2,450 (7.2) 724,120 10,709 274 66.2 107.3 149.9 (9.9) 62.2 39.7 39.9 24.6 17.6 19.1 13.1 9.9 3.4 3.1 2.6 0.3 0.3 0.3 9.1 13.2 16.1 11.6

Cement Cautious 2,101,782 31,085 (9.8) 70.2 37.3 33.7 19.8 14.4 14.3 9.4 7.0 2.6 2.4 2.1 0.9 0.9 1.0 7.7 11.9 14.3 33.6

Consumer products

Asian Paints REDUCE 846 800 (5.4) 811,050 11,995 959 19.0 22.4 26.5 28.0 17.8 18.5 44.5 37.8 31.9 28.3 23.6 19.9 14.5 12.3 10.4 1.0 1.1 1.4 35.3 35.2 35.2 14.3

Bajaj Corp. BUY 381 495 29.8 56,257 832 148 17.1 19.4 21.8 15.0 13.5 12.2 22.3 19.6 17.5 18.8 15.6 13.2 11.5 10.5 9.5 3.0 3.3 3.9 51.6 55.8 56.9 0.5

Britannia Industries ADD 2,733 3,500 28.1 327,894 4,849 120 71.6 91.9 114.1 58.4 28.3 24.2 38.2 29.7 23.9 25.0 19.4 15.6 18.8 13.6 10.2 0.9 1.1 1.5 57.4 53.0 48.7 7.3

Coffee Day Enterprises ADD 244 310 27.2 50,223 743 206 0.9 5.1 8.4 117.2 479.8 66.2 278.4 48.0 28.9 14.7 12.6 10.8 2.3 2.2 2.0 - - - 1.3 4.6 7.2 -

Colgate-Palmolive (India) REDUCE 912 1,000 9.7 247,997 3,668 272 22.4 27.2 31.9 8.9 21.3 17.4 40.7 33.6 28.6 25.4 20.8 17.4 27.9 23.5 19.5 1.6 1.9 2.2 73.4 75.9 74.5 4.2

Dabur India ADD 250 300 20.2 438,994 6,493 1,759 7.1 8.2 9.5 19.1 15.5 15.1 35.0 30.3 26.3 28.5 24.6 20.9 10.8 9.0 7.6 1.0 1.2 1.5 33.7 32.3 31.2 4.5

GlaxoSmithKline Consumer REDUCE 5,939 6,300 6.1 249,787 3,694 42 164.8 186.7 215.3 18.7 13.3 15.3 36.0 31.8 27.6 25.1 21.4 18.1 9.9 8.6 7.4 1.1 1.3 1.5 29.9 28.9 28.8 1.4

Godrej Consumer Products ADD 1,208 1,350 11.8 411,313 6,083 340 34.2 40.5 47.8 30.1 18.3 18.2 35.3 29.9 25.3 25.2 21.3 17.6 8.0 6.7 5.7 0.6 0.7 0.9 24.6 24.5 24.3 4.4

Hindustan Unilever REDUCE 810 825 1.8 1,753,709 25,937 2,164 18.7 21.5 24.2 7.3 14.9 12.8 43.4 37.8 33.5 30.0 26.0 22.9 44.0 41.6 40.0 1.9 2.1 2.4 104.7 113.2 121.8 15.1

ITC ADD 314 370 17.8 2,523,922 37,328 8,064 12.5 14.3 16.4 5.1 13.9 14.8 25.0 22.0 19.1 16.4 14.4 12.4 7.4 6.7 6.1 2.2 2.6 3.1 28.1 29.1 32.0 33.9

Jubilant Foodworks SELL 1,199 1,250 4.2 78,874 1,167 66 19.7 28.9 40.4 16.8 46.5 39.7 60.8 41.5 29.7 24.6 18.1 13.5 10.6 8.8 7.1 0.3 0.4 0.6 18.7 23.2 26.7 6.9

Jyothy Laboratories NR 277 - - 50,205 743 181 8.6 10.3 11.8 49.0 20.4 14.2 32.3 26.9 23.5 21.1 18.1 15.0 5.8 5.9 5.2 1.4 1.4 1.8 24.2 26.7 23.4 0.6

Manpasand Beverages BUY 463 500 7.9 23,185 343 50 10.8 17.0 21.7 36.0 56.4 28.1 42.7 27.3 21.3 19.6 14.7 11.4 3.8 3.4 3.0 0.3 0.5 0.9 13.5 13.1 15.0 0.2

Marico REDUCE 227 210 (7.3) 292,224 4,322 1,290 5.6 6.5 7.5 25.1 17.3 15.0 40.6 34.6 30.1 27.0 23.0 20.0 13.1 10.7 8.9 0.9 1.0 1.2 35.4 34.0 32.3 8.0

Nestle India REDUCE 5,429 5,800 6.8 523,422 7,741 96 99.3 133.1 159.5 (18.7) 34.0 19.8 54.7 40.8 34.0 31.1 23.1 19.7 18.8 17.3 15.9 1.1 1.7 2.0 37.3 46.9 51.4 4.6

Page Industries SELL 12,830 11,500 (10.4) 143,104 2,116 11 232.3 294.2 360.4 32.2 26.6 22.5 55.2 43.6 35.6 35.1 28.0 22.7 26.7 19.3 14.2 0.7 0.7 0.8 56.2 51.4 46.0 1.9

PC Jeweller BUY 371 500 34.7 66,500 984 179 23.9 29.8 35.8 13.1 24.6 20.4 15.5 12.5 10.4 8.3 6.6 5.4 2.8 2.4 2.0 1.0 1.3 1.6 19.8 20.9 21.2 1.5

Pidilite Industries REDUCE 540 530 (1.8) 276,717 4,093 513 14.1 15.9 18.4 39.4 12.7 16.1 38.4 34.0 29.3 24.0 21.4 18.3 10.0 8.5 7.2 0.7 0.9 1.1 28.7 27.0 26.5 2.9

Speciality Restaurants REDUCE 116 130 12.0 5,452 81 47 2.1 3.9 5.9 6.5 82.9 50.7 54.1 29.6 19.6 15.7 10.3 7.3 1.7 1.6 1.5 0.9 1.1 1.3 3.2 5.6 7.9 0.1

Tata Global Beverages BUY 126 150 18.7 79,775 1,180 631 6.0 7.1 8.2 10.7 17.6 15.5 21.0 17.8 15.5 11.5 9.8 8.6 1.4 1.4 1.3 2.0 2.4 2.8 6.8 7.7 8.6 2.3

Titan Company REDUCE 339 320 (5.7) 301,137 4,454 888 9.2 11.1 12.6 (0.5) 20.2 13.4 36.7 30.5 26.9 25.5 21.3 18.0 8.3 7.1 6.0 0.8 0.9 1.1 24.5 25.0 24.2 5.8

United Breweries SELL 841 700 (16.8) 222,352 3,288 264 10.2 14.1 18.4 3.6 38.3 30.2 82.5 59.6 45.8 32.6 26.7 21.9 10.7 9.4 8.0 0.2 0.3 0.3 13.7 16.8 18.8 2.2

United Spirits BUY 2,731 4,000 46.5 396,912 5,870 145 38.7 73.4 88.1 447.2 89.8 20.0 NM 37.2 31.0 31.0 20.5 18.0 20.4 11.3 8.1 0.2 0.4 0.4 43.1 39.1 30.5 9.7

Consumer products Cautious 9,331,001 138,002 14.7 19.1 16.5 35.3 29.6 25.4 22.9 19.3 16.5 10.7 9.3 8.1 1.4 1.7 2.0 30.3 31.4 32.0 132.5

Energy

Aban Offshore RS 192 — — 11,229 166 58 83.0 81.4 84.3 (7.2) (1.9) 3.5 2.3 2.4 2.3 6.2 6.1 5.7 0.2 0.2 0.2 3.0 3.1 3.1 8.6 8.2 8.0 5.1

BPCL ADD 896 960 7.2 647,739 9,580 723 88.4 89.5 91.7 25.8 1.1 2.5 10.1 10.0 9.8 6.4 6.1 5.2 2.4 2.1 1.8 2.5 2.5 2.6 25.9 22.2 19.6 14.7

Cairn India RS 115 — — 215,047 3,180 1,875 13.4 14.8 17.3 (61.6) 10.2 17.2 8.6 7.8 6.6 4.2 2.9 2.4 0.4 0.4 0.3 6.1 6.1 7.0 4.2 4.6 5.3 4.6

Castrol India SELL 419 430 2.6 207,271 3,065 495 12.7 13.9 14.9 32.2 9.8 7.0 33.0 30.1 28.1 21.7 19.8 18.5 39.8 37.2 34.5 2.5 2.6 2.9 123.3 127.8 127.3 1.8

GAIL (India) ADD 343 400 16.6 435,024 6,434 1,268 15.0 23.2 29.9 (42.8) 54.9 29.2 22.9 14.8 11.5 13.3 9.3 7.5 1.4 1.4 1.3 1.7 2.0 2.6 6.4 9.5 11.5 8.8

GSPL ADD 139 145 4.1 78,426 1,160 563 8.1 9.2 9.8 25.4 13.1 7.3 17.2 15.2 14.2 8.5 7.6 7.1 2.0 1.8 1.7 1.4 2.2 3.5 12.0 12.6 12.6 1.4

HPCL REDUCE 824 870 5.5 279,164 4,129 339 88.3 93.4 94.5 9.5 5.9 1.2 9.3 8.8 8.7 6.9 6.3 5.9 1.6 1.4 1.3 3.3 3.4 3.5 17.6 16.7 15.3 13.5

IOCL BUY 415 480 15.7 1,007,600 14,902 2,428 49.0 51.8 56.4 184.4 5.7 9.0 8.5 8.0 7.4 5.9 4.8 4.2 1.3 1.2 1.1 3.9 4.1 4.1 16.5 15.6 15.4 10.1

ONGC BUY 218 285 30.7 1,865,097 27,584 8,556 20.8 23.4 30.1 (5.8) 12.1 28.6 10.5 9.3 7.3 4.4 4.1 3.3 1.0 0.9 0.9 3.9 4.1 5.0 9.6 10.2 12.4 13.4

Oil India BUY 343 470 37.0 206,280 3,051 601 38.4 39.5 46.8 (8.0) 2.9 18.2 8.9 8.7 7.3 5.5 5.4 4.6 0.9 0.9 0.8 4.7 5.0 5.8 10.5 10.2 11.5 5.9

Petronet LNG ADD 248 280 12.8 186,113 2,753 750 12.6 16.4 24.0 27.7 30.3 46.3 19.7 15.1 10.4 12.2 9.7 6.7 2.9 2.5 2.2 1.2 1.6 2.8 16.8 17.9 22.8 7.2

Reliance Industries ADD 1,044 1,130 8.3 3,069,762 45,401 3,239 84.7 89.0 100.2 20.7 5.0 12.7 12.3 11.7 10.4 10.1 8.6 6.8 1.4 1.3 1.2 1.0 1.1 1.3 12.0 11.4 11.7 60.0

Energy Attractive 8,208,752 121,404 11.1 8.1 16.0 10.8 10.0 8.6 7.0 6.1 5.0 1.2 1.1 1.0 2.5 2.7 3.2 11.2 11.1 11.9 146.5


In

dia

Da

ily S

um

ma

ry - Ja

nu

ary

20

, 201

6

43

K

OTA

K IN

STIT

UTIO

NA

L EQ

UIT

IES R

ESEA

RC

H



Target O/S



Industrials

ABB SELL 1,022 800 (21.7) 216,570 3,203 212 14.5 23.4 34.8 34.6 61.2 48.6 70.4 43.7 29.4 30.1 22.9 16.9 7.2 6.3 5.3 0.4 0.4 0.4 10.5 15.4 19.6 1.1

BHEL SELL 144 145 0.5 353,189 5,224 2,448 4.9 9.6 14.2 (16.0) 97.3 47.5 29.6 15.0 10.2 15.5 4.7 2.2 1.0 1.0 0.9 0.7 1.4 2.1 3.5 6.6 9.1 10.3

Carborundum Universal ADD 178 190 6.7 33,550 496 188 8.0 10.6 12.6 53.9 33.5 18.1 22.4 16.8 14.2 10.6 8.5 7.2 2.8 2.4 2.1 0.8 1.1 1.2 13.0 15.4 16.1 0.1

Crompton Greaves REDUCE 175 195 11.3 109,806 1,624 627 1.7 6.8 9.1 (42.8) 307.3 33.0 104.3 25.6 19.3 20.5 13.6 11.5 2.5 2.3 2.1 0.9 0.5 0.6 2.6 9.4 11.5 5.4

Cummins India REDUCE 948 950 0.2 262,730 3,886 277 27.5 34.2 41.3 1.8 24.0 20.8 34.4 27.7 23.0 30.9 24.6 20.0 8.2 7.3 6.4 1.5 1.8 2.2 25.0 27.8 29.8 2.4

Havells India REDUCE 284 270 (5.1) 177,633 2,627 624 6.8 8.8 10.1 (11.6) 30.0 14.6 41.9 32.2 28.1 20.3 19.7 17.2 8.5 7.6 6.6 0.4 1.1 1.4 21.7 24.8 25.1 9.6

Kalpataru Power Transmission BUY 195 310 58.9 29,948 443 153 10.4 18.3 21.4 32.9 75.2 17.4 18.7 10.7 9.1 7.6 6.3 5.6 1.3 1.2 1.0 0.8 0.8 0.8 7.0 11.3 12.0 0.3

KEC International ADD 118 165 39.5 30,401 450 257 8.4 13.6 17.2 34.6 61.4 26.3 14.0 8.7 6.9 6.8 5.2 4.4 2.0 1.7 1.4 1.0 1.7 2.1 15.2 21.1 22.2 1.5

L&T ADD 1,123 1,450 29.1 1,045,708 15,466 930 43.7 57.2 70.3 24.4 31.0 22.9 25.7 19.6 16.0 17.2 14.4 12.4 2.7 2.5 2.2 1.4 1.3 1.4 10.9 13.3 14.7 47.1

Siemens SELL 1,035 750 (27.5) 368,638 5,452 356 18.2 23.2 29.6 7.7 27.4 27.4 56.8 44.5 34.9 32.9 26.3 20.7 6.6 6.1 5.4 0.5 0.7 0.9 12.2 14.2 16.4 4.4

Thermax REDUCE 846 850 0.5 100,806 1,491 119 27.0 26.5 33.6 23.9 (1.7) 26.8 31.4 31.9 25.2 19.1 19.8 15.4 4.2 3.9 3.5 0.8 0.8 0.9 14.2 12.7 14.6 0.8

Voltas ADD 277 300 8.4 91,605 1,355 331 10.0 12.6 15.3 (2.1) 25.4 21.8 27.6 22.0 18.1 22.5 18.6 14.5 3.9 3.5 3.1 0.9 1.1 1.4 15.0 16.9 18.2 6.5

Industrials Cautious 2,820,584 41,715 9.8 43.8 28.6 32.5 22.6 17.6 18.4 14.1 11.5 2.8 2.6 2.3 1.0 1.1 1.3 8.6 11.4 13.2 89.7

Infrastructure

Adani Port and SEZ ADD 233 310 33.1 482,221 7,132 2,084 12.4 16.2 14.7 11.2 31.3 (9.2) 18.9 14.4 15.8 14.1 11.7 10.3 3.7 3.0 2.6 0.6 0.6 1.0 21.7 23.3 17.8 14.0

Ashoka Buildcon BUY 176 235 33.8 32,863 486 188 5.0 5.0 1.8 (3.1) 0.6 (63.5) 35.3 35.1 96.0 9.7 8.7 8.1 1.7 1.7 1.7 0.9 1.1 1.2 5.7 4.8 1.8 0.6

Container Corporation ADD 1,181 1,520 28.7 230,304 3,406 195 47.2 55.6 66.5 (12.3) 17.9 19.6 25.1 21.2 17.8 16.5 13.6 11.0 2.8 2.5 2.3 1.0 1.2 1.4 11.6 12.5 13.7 3.8

Gujarat Pipavav Port ADD 143 175 22.0 69,325 1,025 483 3.4 5.5 7.5 (61.6) 59.9 36.9 41.8 26.1 19.1 17.8 13.6 10.5 3.4 3.0 2.7 — — 1.1 8.7 12.2 14.7 2.0

IRB Infrastructure BUY 223 300 34.5 78,408 1,160 351 19.2 18.1 18.4 24.1 (5.7) 1.6 11.6 12.3 12.1 8.1 7.2 7.0 1.5 1.2 1.1 1.7 1.7 1.7 13.9 10.7 9.3 6.1

Sadbhav Engineering BUY 293 355 21.0 50,328 744 172 9.5 15.0 18.3 34.7 56.7 22.4 30.7 19.6 16.0 16.7 12.5 10.3 3.4 2.9 2.5 — — — 11.5 16.0 16.9 0.5

Infrastructure Attractive 943,450 13,953 1.3 24.5 0.1 20.6 16.5 16.5 12.7 10.6 9.3 2.9 2.5 2.2 0.7 0.8 1.1 14.3 15.2 13.5 27.0

Internet

Info Edge BUY 795 955 20.1 95,957 1,419 121 11.5 16.7 22.9 (29.0) 45.4 37.2 69.4 47.7 34.8 61.8 36.5 25.0 5.5 5.1 4.7 0.5 0.7 1.0 8.1 11.1 14.2 1.4

Just Dial BUY 803 1,000 24.5 56,634 838 69 17.6 27.1 39.3 (10.6) 54.1 44.8 45.6 29.6 20.4 33.6 19.2 12.7 9.6 8.1 6.6 0.8 1.2 1.7 19.5 29.7 35.6 12.0

Internet Attractive 152,591 2,257 (21.7) 49.5 40.9 58.6 39.2 27.8 47.3 27.6 18.7 6.6 6.0 5.3 0.6 0.9 1.3 11.2 15.3 19.1 13.3

Media

DB Corp. ADD 311 350 12.4 57,185 846 184 19.2 23.3 28.2 11.1 21.5 21.0 16.2 13.4 11.0 9.2 7.4 6.2 4.0 3.6 3.2 3.1 4.1 5.1 25.9 28.3 30.8 0.2

DishTV BUY 87 125 43.1 93,100 1,377 1,066 2.2 3.8 5.3 7,478.1 71.8 36.9 NM 22.8 16.6 9.3 7.6 6.1 5.6 5.6 5.6 — — — 14.3 24.5 33.6 7.2

Jagran Prakashan ADD 158 160 1.5 51,538 762 327 10.0 11.5 13.3 24.8 14.8 16.4 15.8 13.8 11.8 8.9 7.6 6.5 3.7 3.3 3.0 2.9 3.5 4.4 25.9 25.5 26.8 0.3

PVR BUY 765 900 17.7 35,620 527 47 26.4 26.4 34.4 922.5 0.1 30.5 29.0 29.0 22.2 12.2 10.5 8.8 4.1 3.6 3.2 0.3 0.3 0.5 19.2 13.3 15.3 1.4

Sun TV Network ADD 370 390 5.5 145,713 2,155 394 23.0 26.3 29.2 16.0 14.2 11.1 16.1 14.1 12.7 10.2 8.7 7.6 4.0 3.7 3.4 3.6 4.1 4.7 25.9 27.2 27.6 6.9

Zee Entertainment Enterprises BUY 394 465 17.9 378,705 5,601 961 9.5 12.8 16.2 9.5 34.9 26.9 41.6 30.8 24.3 24.8 19.3 15.0 6.2 5.5 4.8 1.1 1.4 1.8 15.6 18.9 21.2 13.9

Media Neutral 761,860 11,268 30.0 25.9 21.8 26.7 21.2 17.4 13.8 11.3 9.3 5.0 4.6 4.1 1.5 1.9 2.3 18.9 21.6 23.8 29.9

Metals & Mining

Coal India ADD 309 390 26.3 1,950,809 28,852 6,316 23.4 26.1 29.7 7.7 11.4 14.0 13.2 11.8 10.4 7.1 6.7 5.5 4.0 3.5 3.0 3.8 4.2 4.8 31.9 31.1 31.0 15.5

Hindalco Industries REDUCE 72 60 (16.5) 148,369 2,194 2,065 (0.1) 1.6 6.5 (100.9) 1,920.4 301.0 (809.9) 44.5 11.1 9.5 7.8 6.5 0.4 0.4 0.4 1.4 1.4 1.4 (0.0) 0.9 3.5 11.5

Hindustan Zinc BUY 139 175 25.9 587,319 8,686 4,225 17.5 16.8 17.9 (9.6) (3.9) 6.5 7.9 8.3 7.8 3.8 3.2 2.4 1.2 1.1 1.0 4.5 3.2 3.2 16.3 14.3 13.8 2.0

Jindal Steel and Power RS 64 — — 58,874 871 915 (19.1) (11.7) 2.0 (375.3) 38.5 117.0 (3.4) (5.5) 32.2 13.2 9.4 7.5 0.3 0.3 0.3 - - - (8.7) (5.9) 1.0 11.9

JSW Steel ADD 999 980 (1.9) 241,372 3,570 242 (12.2) 117.4 141.7 (116.1) 1,060.8 20.7 (81.7) 8.5 7.0 10.2 5.6 5.3 1.1 1.0 0.9 1.2 1.2 1.2 (1.3) 12.0 13.0 12.8

National Aluminium Co. SELL 35 30 (13.7) 89,559 1,325 2,577 2.6 1.7 2.2 (45.0) (34.0) 29.7 13.3 20.2 15.5 3.8 5.5 3.8 0.7 0.7 0.7 5.0 2.9 2.9 5.2 3.4 4.4 0.5

NMDC SELL 84 80 (4.2) 331,054 4,896 3,965 8.5 7.8 7.8 (48.2) (8.3) (0.3) 9.8 10.7 10.7 5.2 6.3 6.1 1.0 1.1 1.1 10.2 8.4 8.4 10.6 9.8 9.9 2.1

Tata Steel REDUCE 238 175 (26.5) 231,149 3,419 971 (24.3) 10.0 16.8 (74,890.0) 141.3 68.0 (9.8) 24 14.1 12.4 6.9 6.2 0.8 0.8 0.7 3.4 3.4 3.4 (7.6) 3.2 5.2 25.5

Vedanta BUY 69 110 58.8 205,305 3,036 3,717 7.7 10.6 18.3 (55.2) 38.7 72.5 9.0 6.5 3.8 6.5 5.2 4.3 0.4 0.4 0.4 4.7 4.7 4.7 4.9 6.3 10.3 17.5

Metals & Mining Cautious 3,843,811 56,848 (37.2) 38.4 27.1 15.6 11.3 8.9 8.0 6.3 5.4 1.2 1.2 1.1 4.3 4.1 4.4 7.9 10.4 12.3 99.3


K

OTA

K IN

STIT

UTIO

NA

L EQ

UIT

IES R

ESEA

RC

H

44

In

dia

Da

ily S

um

ma

ry - Ja

nu

ary

20

, 201

6

Ind

ia D

aily

Su

mm

ary

- Jan

uary

20

, 201

6



Target O/S



Pharmaceutical

Biocon SELL 494 375 (24.1) 98,840 1,462 200 33.1 24.9 31.5 33.4 (24.7) 26.1 14.9 19.8 15.7 13.9 11.9 9.5 2.2 2.0 1.8 1.6 1.8 2.2 16.6 10.6 12.2 4.4

Cipla BUY 598 790 32.1 480,377 7,105 805 23.6 29.2 40.1 61.0 23.6 37.6 25.3 20.5 14.9 16.4 13.4 9.9 3.9 3.4 2.9 0.8 1.0 1.4 16.2 17.6 20.8 12.5

Dr Reddy's Laboratories REDUCE 2,916 3,000 2.9 497,196 7,353 170 151.8 136.0 151.2 11.9 (10.4) 11.2 19.2 21.4 19.3 11.4 11.8 10.3 3.7 3.2 2.8 0.8 0.7 0.8 21.1 16.1 15.7 43.3

Lupin REDUCE 1,700 1,700 0.0 765,731 11,325 450 50.7 71.6 82.8 (5.1) 41.3 15.6 33.5 23.7 20.5 21.7 15.0 13.3 7.1 5.6 4.6 0.4 0.6 0.7 23.1 26.4 24.6 25.7

Sun Pharmaceuticals SELL 794 730 (8.0) 1,910,605 28,257 2,406 22.1 30.6 35.0 11.1 38.3 14.3 35.9 26.0 22.7 22.2 17.5 13.5 6.2 5.1 4.3 0.6 1.0 1.1 18.5 21.6 20.5 50.2

Torrent Pharmaceuticals REDUCE 1,371 1,320 (3.7) 231,951 3,430 169 87.0 59.3 67.7 96.1 (31.9) 14.2 15.8 23.1 20.3 10.5 14.8 13.2 6.2 5.1 4.2 1.0 0.8 0.8 47.2 24.2 22.7 4.1

Pharmaceuticals Cautious 3,984,700 58,932 19.2 17.8 17.8 28.0 23.8 20.2 17.8 15.2 12.2 5.3 4.4 3.7 0.7 0.9 1.0 18.7 18.6 18.5 140.2

Real Estate

DLF BUY 96 180 87.2 171,448 2,536 1,799 8.2 3.3 3.5 172.3 (60.2) 8.5 11.7 29.4 27.1 14.9 11.9 10.7 0.6 0.6 0.6 2.1 2.1 2.1 5.0 1.9 2.1 20.2

Godrej Properties REDUCE 320 280 (12.5) 63,835 944 199 18.2 17.6 6.3 90.0 (3.1) (64.5) 17.6 18.1 51.1 12.4 12.1 13.4 3.0 2.6 2.5 0.8 0.8 0.8 18.2 15.3 5.0 1.3

Oberoi Realty BUY 248 345 38.9 84,249 1,246 339 13.3 18.0 43.5 51.0 35.0 141.5 18.6 13.8 5.7 11.7 7.9 2.8 1.6 1.4 1.2 0.8 0.8 0.8 9.1 10.9 22.5 0.8

Prestige Estates Projects BUY 185 250 35.2 69,319 1,025 375 11.2 14.1 15.8 26.0 26.6 12.0 16.5 13.1 11.7 9.1 6.7 6.4 1.7 1.5 1.3 0.8 0.8 0.8 10.5 12.0 12.1 0.3

Sobha BUY 289 545 88.9 28,291 418 98 22.0 29.7 49.0 (9.5) 35.2 65.0 13.1 9.7 5.9 7.6 6.3 4.5 1.1 1.0 0.9 2.4 2.4 2.4 8.6 10.9 16.1 0.6

Sunteck Realty BUY 228 420 84.1 14,363 212 60 25.6 82.9 53.3 124.9 224.1 (35.6) 8.9 2.8 4.3 8.0 2.1 0.0 0.8 0.7 0.6 0.9 0.9 0.9 10.0 26.8 14.2 0.1

Real Estate Attractive 431,504 6,382 85.9 (6.8) 26.6 14.0 15.0 11.9 12.1 8.9 7.1 0.9 0.9 0.8 1.4 1.4 1.4 6.7 6.0 7.1 23.3

Technology

HCL Technologies REDUCE 838 850 1.4 1,181,360 17,472 1,413 54.3 59.2 64.1 5.8 9.0 8.3 15.4 14.2 13.1 11.1 9.6 8.3 3.9 3.2 2.7 1.9 2.1 2.1 27.9 24.8 22.7 18.6

Hexaware Technologies SELL 216 230 6.5 65,153 964 304 13.2 15.9 17.4 22.3 19.8 9.7 16.3 13.6 12.4 10.8 9.1 8.1 4.7 4.3 3.9 3.7 4.4 4.8 29.8 32.8 32.8 3.5

Infosys ADD 1,140 1,300 14.1 2,617,713 38,715 2,286 57.8 66.0 75.8 7.2 14.3 14.8 19.7 17.3 15.0 13.6 11.4 9.6 4.5 4.0 3.5 2.0 2.4 2.6 24.4 24.5 24.7 52.3

Mindtree REDUCE 1,444 1,425 (1.3) 121,098 1,791 84 71.9 82.6 97.9 12.9 14.9 18.5 20.1 17.5 14.7 14.2 11.4 9.6 5.0 4.2 3.5 1.3 1.5 1.8 27.3 26.1 25.9 4.1

Mphasis REDUCE 451 390 (13.5) 94,777 1,402 210 35.7 38.8 40.3 10.6 8.7 3.9 12.6 11.6 11.2 7.7 6.5 6.1 1.6 1.5 1.5 4.0 4.3 4.5 13.3 13.7 13.4 2.7

TCS ADD 2,279 2,525 10.8 4,491,196 66,423 1,970 121.7 136.0 152.8 21.3 11.8 12.4 18.7 16.8 14.9 13.6 11.6 10.1 6.4 5.4 4.5 2.1 2.4 2.7 37.6 34.8 32.8 38.4

Tech Mahindra ADD 513 600 17.1 495,552 7,329 865 33.7 40.1 48.5 12.1 19.0 21.0 15.2 12.8 10.6 10.7 8.4 6.8 3.0 2.5 2.1 1.2 1.2 1.2 21.7 21.7 21.9 11.3

Wipro REDUCE 542 585 7.9 1,338,995 19,803 2,467 36.8 40.1 44.5 5.1 8.7 11.2 14.7 13.5 12.2 9.9 8.6 7.3 2.9 2.6 2.3 2.6 3.0 3.0 20.9 20.1 19.9 11.0

Technology Attractive 10,405,844 153,898 12.7 11.9 12.6 17.8 15.9 14.1 12.5 10.6 9.1 4.5 3.9 3.4 2.1 2.4 2.6 25.6 24.7 24.0 141.9

Telecom

Bharti Airtel ADD 310 385 24.1 1,240,393 18,345 3,997 10.5 13.2 17.2 (30.5) 25.7 30.5 29.6 23.5 18.0 6.3 5.6 4.9 2.0 1.9 1.8 0.9 1.1 1.7 6.7 8.1 10.2 16.5

Bharti Infratel ADD 374 395 5.6 709,638 10,495 1,903 12.6 15.7 17.9 19.6 24.6 14.5 29.7 23.9 20.9 12.6 10.8 9.6 4.1 4.0 3.8 2.3 3.0 3.5 13.9 16.9 18.9 10.2

IDEA BUY 117 180 54.2 420,162 6,214 3,598 8.1 4.0 6.6 (7.6) (50.3) 62.5 14.4 28.9 17.8 6.7 6.2 5.2 1.6 1.6 1.5 0.9 1.3 1.8 12.1 5.6 8.7 9.3

Reliance Communications SELL 73 60 (18.1) 182,318 2,696 2,488 3.0 3.6 5.7 5.7 19.3 58.3 24.2 20.3 12.8 7.9 7.4 6.7 0.5 0.5 0.5 — — — 2.3 2.7 4.1 18.2

Tata Communications ADD 405 480 18.4 115,496 1,708 285 2.3 6.7 14.1 (39.3) 193.6 112.2 178.7 60.9 28.7 7.2 6.6 5.9 29.3 19.7 11.7 1.4 1.6 1.6 17.9 38.8 51.1 2.8

Telecom Cautious 2,668,007 39,459 (14.0) 4.6 34.3 25.8 24.7 18.4 7.2 6.4 5.6 1.9 1.8 1.8 1.2 1.5 2.0 7.4 7.4 9.6 57.0

Utilities

Adani Power SELL 27 31 13.3 80,295 1,188 2,872 (5.5) 0.0 1.5 (23.9) 100.9 2,859.4 (4.9) 554.5 18.7 10.0 8.0 7.7 1.9 1.9 1.7 — — — (32.2) 0.3 9.6 4.1

CESC ADD 457 620 35.7 60,579 896 133 35.6 54.9 71.5 139.1 54.1 30.4 12.8 8.3 6.4 6.8 6.0 5.6 0.7 0.7 0.6 1.8 1.8 1.9 5.6 8.2 10.0 4.1

JSW Energy ADD 75 92 23.5 122,184 1,807 1,640 8.9 11.3 13.2 5.7 26.3 17.3 8.4 6.6 5.6 6.3 4.8 4.5 1.3 1.1 0.9 — — — 17.6 18.4 18.0 3.0

NHPC REDUCE 19 20 3.4 214,217 3,168 11,071 2.6 2.4 3.3 12.3 (9.1) 37.9 7.4 8.2 5.9 5.9 6.2 5.1 0.7 0.6 0.6 3.7 3.3 4.7 9.1 7.8 10.1 1.2

NTPC BUY 135 150 11.0 1,114,374 16,481 8,245 11.5 13.0 15.4 13.3 13.3 18.6 11.8 10.4 8.8 11.8 9.3 7.3 1.3 1.2 1.1 2.5 2.9 3.4 11.2 11.7 12.8 8.8

Power Grid BUY 136 175 28.7 711,235 10,519 5,232 11.5 14.5 15.9 20.0 25.9 9.5 11.8 9.4 8.6 9.8 8.2 6.7 1.7 1.5 1.3 1.7 2.1 2.3 14.9 16.6 16.0 5.3

Reliance Power SELL 51 40 (21.0) 142,080 2,101 2,805 5.0 5.7 7.2 35.2 15.4 26.1 10.2 8.9 7.0 10.4 8.2 6.9 0.6 0.6 0.6 — — — 6.5 7.0 8.2 7.2

Tata Power ADD 64 78 21.4 173,772 2,570 2,800 3.3 5.0 5.1 547.1 49.3 3.3 19.3 12.9 12.5 7.2 6.0 5.7 1.2 1.1 1.1 1.9 1.9 1.9 6.4 9.1 8.8 3.2

Utilities Attractive 2,618,736 38,730 20.8 26.0 19.3 12.5 9.9 8.3 9.4 7.8 6.6 1.2 1.1 1.0 2.0 2.2 2.6 9.5 11.0 11.9 36.8

Others

Astral Poly Technik BUY 408 470 15.2 48,858 723 120 9.0 13.5 17.9 39.9 50.0 33.3 45.5 30.3 22.7 21.6 16.2 12.5 6.8 5.6 4.6 0.1 0.1 0.3 16.0 20.2 22.1 0.2

Dhanuka Agritech BUY 506 640 26.5 25,310 374 50 20.7 27.6 34.3 (4.3) 33.4 24.5 24.5 18.4 14.7 17.7 13.7 10.9 5.2 4.3 3.5 0.9 1.2 1.5 22.9 25.5 26.2 0.2

Godrej Industries ADD 350 425 21.4 117,613 1,739 336 20.8 20.6 22.3 73.6 (0.9) 8.2 16.8 17.0 15.7 13.7 12.4 9.2 3.0 2.6 2.3 0.5 0.5 0.5 19.7 16.6 15.6 1.7

InterGlobe Aviation BUY 1,207 1,500 24.3 434,860 6,431 351 76.8 92.3 106.7 103.6 20.2 15.6 15.7 13.1 11.3 10.3 8.4 7.2 14.0 9.0 6.4 3.2 3.8 4.4 156.4 86.3 68.1 -

Kaveri Seed BUY 335 520 55.4 23,106 342 69 30.6 49.0 61.6 (30.2) 60.3 25.7 10.9 6.8 5.4 8.5 4.9 3.4 2.6 2.1 1.7 2.3 4.4 5.5 25.4 33.4 33.8 8.0

PI Industries ADD 614 730 18.9 84,203 1,245 136 21.6 28.1 34.1 19.7 29.9 21.7 28.4 21.9 18.0 18.6 14.7 12.0 7.3 5.7 4.5 0.5 0.6 0.8 28.9 29.4 28.2 3.4

Rallis India ADD 149 180 20.9 28,947 428 194 6.5 8.7 11.0 (19.9) 34.2 26.5 23.0 17.1 13.5 12.7 9.8 7.8 3.3 3.0 2.6 2.0 2.1 2.3 14.9 18.4 20.7 1.0

Tata Chemicals ADD 361 480 32.9 92,043 1,361 255 34.7 43.0 46.7 20.2 24.0 8.4 10.4 8.4 7.7 6.4 5.5 4.9 1.5 1.4 1.2 3.5 3.5 3.5 15.3 17.1 16.6 3.1

UPL NR 392 - (100.0) 167,991 2,485 429 27.6 34.1 40.8 2.6 23.6 19.7 14.2 11.5 9.6 7.7 6.7 5.8 2.5 2.1 1.8 1.3 1.4 1.5 18.7 19.9 20.2 8.7

Whirlpool ADD 621 740 19.1 78,838 1,166 127 19.2 22.7 26.7 15.8 18.2 17.4 32.3 27.3 23.3 18.9 16.2 13.8 6.8 5.7 4.8 - 0.7 0.9 23.5 22.7 22.4 0.6

Others 1,101,770 16,295 39.6 23.1 16.2 16.8 13.7 11.8 10.2 8.5 7.2 4.4 3.6 3.0 1.9 2.3 2.7 26.2 26.6 25.7 27.0

KIE universe 67,334,430 995,850 5.3 20.1 18.7 17.0 14.2 12.0 10.5 8.8 7.4 2.2 2.0 1.8 1.8 2.0 2.3 13.1 14.2 15.2

KIE universe (ex-energy) 59,125,679 874,446 4.0 22.9 19.2 18.5 15.1 12.6 11.5 9.5 8.1 2.5 2.3 2.0 1.7 1.9 2.2 13.6 15.1 16.1

Notes:

(a) We have used adjusted book values for banking companies.

(b) 2016 means calendar year 2015, similarly for 2017 and 2018 for these particular companies.

(c) Exchange rate (Rs/US$)= 67.62

Price/BV (X) RoE (%)Dividend yield (%)

Ind

ia D

aily

Su

mm

ary

-Ja

nu

ary

20

, 201

6


Economy India

Ratings and other definitions/identifiers

Definitions of ratings

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

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

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

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

Our target prices are also on a 12-month horizon basis.

Other definitions

Coverage view. The coverage view represents each analyst’s overall fundamental outlook on the Sector. The coverage view will consist of one of the following

designations: Attractive, Neutral, Cautious.

Other ratings/identifiers

NR = Not Rated. The investment rating and target price, if any, have been suspended temporarily. Such suspension is in compliance with applicable regulation(s)

and/or Kotak Securities policies in circumstances when Kotak Securities or its affiliates is acting in an advisory capacity in a merger or strategic transaction

involving this company and in certain other circumstances.

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

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

RS = Rating Suspended. Kotak Securities Research has suspended the investment rating and price target, if any, for this stock, because there is not a sufficient

fundamental basis for determining an investment rating or target. The previous investment rating and price target, if any, are no longer in effect for this stock

and should not be relied upon.

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

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

Kotak Institutional Equities Research coverage universeDistribution of ratings/investment banking relationships

Source: Kotak Institutional Equities As of December 31, 2015

Percentage of companies covered by Kotak Institutional

Equities, within the specified category.

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

expect this stock to deliver more than 15% returns over the

next 12 months; Add = We expect this stock to deliver 5-15%

returns over the next 12 months; Reduce = We expect this stock

to deliver -5-+5% returns over the next 12 months; Sell = We

expect this stock to deliver less than -5% returns over the next

12 months. Our target prices are also on a 12-month horizon

basis. These ratings are used illustratively to comply with

applicable regulations. As of 31/12/2015 Kotak Institutional

Equities Investment Research had investment ratings on 173

equity securities.

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.

32.9% 34.1%

17.9%15.0%

6.4%

2.3% 1.7%0.0%

0%

10%

20%

30%

40%

50%

60%

70%

BUY ADD REDUCE SELL

Corporate Office Overseas Affiliates

Kotak Securities Ltd.

27 BKC, Plot No. C-27, “G Block”

Bandra Kurla Complex, Bandra (E)

Mumbai 400 051, India

Tel: +91-22-43360000

Kotak Mahindra (UK) Ltd

8th Floor, Portsoken House

155-157 Minories

London EC3N 1LS

Tel: +44-20-7977-6900

Kotak Mahindra Inc

369 Lexington Avenue

28th Floor, New York

NY 10017, USA

Tel:+1 212 600 8856

Copyright 2016 Kotak Institutional Equities (Kotak Securities Limited). All rights reserved.

1. Note that the research analysts contributing to this report may not be registered/qualified as research analysts with FINRA; and

2. Such research analysts may not be associated persons of Kotak Mahindra Inc and therefore, may not be subject to NASD Rule 2711 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

3. Any U.S. recipients of the research who wish to effect transactions in any security covered by the report should do so with or through KotakMahindra Inc and (ii) any transactions in the securities covered by the research by U.S. recipients must be effected only through Kotak Mahindra Inc at [email protected].

This report is distributed in Singapore by Kotak Mahindra (UK) Limited (Singapore Branch) to institutional investors, accredited investors or expert investors only as defined under the Securities and Futures Act. Recipients of this analysis / report are to contact Kotak Mahindra (UK) Limited (Singapore Branch) (16 Raffles Quay, #35-02/03, Hong Leong Building, Singapore 048581) in respect of any matters arising from, or in connection with, this analysis / report. Kotak Mahindra (UK) Limited (Singapore Branch) is regulated by the Monetary Authority of Singapore.

Kotak Securities Limited and its affiliates are a full-service, integrated investment banking, investment management, brokerage and financing group. We along with our affiliates are leading underwriter of securities and participants in virtually all securities trading markets in India. We and our affiliates have investment banking and other business relationships with a significant percentage of the companies covered by our Investment Research Department. Our research professionals provide important input into our investment banking and other business selection processes. Investors should assume that Kotak Securities Limited and/or its affiliates are seeking or will seek investment banking or other business from the company or companies that are the subject of this material and that the research professionals who were involved in preparing this material may participate in the solicitation of such business. Our research professionals are paid in part based on the profitability of Kotak Securities Limited, which include earnings from investment banking and other business. Kotak Securities Limited generally prohibits its analysts, persons reporting to analysts, and members of their households from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. Additionally, Kotak Securities Limited generally prohibits its analysts and persons reporting to analysts from serving as an officer, director, or advisory board member of any companies that the analysts cover. Our salespeople, traders, 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, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additionally, other important information regarding our relationships with the company or companies that are the subject of this material is provided herein.

This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. We are not soliciting any action based on this material. It is for the general information of clients of Kotak Securities Limited. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any advice or recommendation in this material, clients should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the investments referred to in this material and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. Kotak Securities Limited does not provide tax advise to its clients, and all investors are strongly advised to consult with their tax advisers regarding any potential investment.

Certain transactions -including those involving futures, options, and other derivatives as well as non-investment-grade securities - give rise to substantial risk and are not suitable for all investors. The material is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only. We endeavor to update on a reasonable basis the information discussed in this material, but regulatory, compliance, or other reasons may prevent us from doing so. We and our affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of this material, may from time to time have “long” or “short” positions in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. Kotak Securities Limited and its non US affiliates may, to the extent permissible under applicable laws, have acted on or used this research to the extent that it relates to non US issuers, prior to or immediately following its publication. Foreign currency denominated securities are subject to fluctuations in exchange rates that could have an adverse effect on the value or price of or income derived from the investment. In addition, investors in securities such as ADRs, the value of which are influenced by foreign currencies affectively assume currency risk. In addition options involve risks and are not suitable for all investors. Please ensure that you have read and understood the current derivatives risk disclosure document before entering into any derivative transactions.

Kotak Securities Limited established in 1994, is a subsidiary of Kotak Mahindra Bank Limited. Kotak Securities is one of India’s largest brokerage and distribution house.

Kotak Securities Limited is a corporate trading and clearing member of BSE Limited (BSE), National Stock Exchange of India Limited (NSE), MSEI and United Stock Exchange of India Limited (USEIL). Our businesses include stock broking, services rendered in connection with distribution of primary market issues and financial products like mutual funds and fixed deposits, depository services and Portfolio Management.

Kotak Securities Limited is also a depository participant with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). Kotak Securities Limited is also registered with Insurance Regulatory and Development Authority as Corporate Agent for Kotak Mahindra Old Mutual Life Insurance Limited and is also a Mutual Fund Advisor registered with Association of Mutual Funds in India (AMFI). Kotak Securities Limited is registered as a Research Analyst under SEBI (Research Analyst) Regulations, 2014.

We hereby declare that our activities were neither suspended nor we have defaulted with any stock exchange authority with whom we are registered in last five years. However SEBI, Exchanges and Depositories have conducted the routine inspection and based on their observations have issued advise letters or levied minor penalty on KSL for certain operational deviations. We have not been debarred from doing business by any Stock Exchange / SEBI or any other authorities; nor has our certificate of registration been cancelled by SEBI at any point of time.

We offer our research services to primarily institutional investors and their employees, directors, fund managers, advisors who are registered with us

Details of Associates are available on our website i.e. www.kotak.com

Research Analyst has not served as an officer, director or employee of Subject Company. We or our associates have received compensation from the subject company in the past 12 months. We or our associates have managed or co-managed public offering of securities for the subject company in the past 12 months. We or our associates have received compensation for investment banking or merchant banking or brokerage services from the subject company in the past 12 months. We or our associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months. We or our associates have received any compensation or other benefits from the subject company or third party in connection with the research report.

Research Analyst or his/her relative’s may have financial interest in the subject company. Kotak Securities Limited or its associates have financial interest in the subject company. Research Analyst or his/her relatives does not have actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of Research Report: Kotak Securities Limited does not have actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of Research Report. Associates of Kotak Securities Limited may have actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of Research Report. Subject Company has been client during twelve months preceding the date of distribution of the research report.

A graph of daily closing prices of securities is available at www.nseindia.com and http://economictimes.indiatimes.com/markets/stocks/stock-quotes. (Choose a company from the list on the browser and select the “three years” icon in the price chart).

Kotak Securities Limited. Registered Office: 27 BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E), Mumbai 400051. CIN: U99999MH1994PLC134051, Telephone No.: +22 43360000, Fax No.: +22 67132430. Website: www.kotak.com. SEBI Registration No: NSE INB/INF/INE 230808130, BSE INB 010808153/INF 011133230, MSEI INE 260808130/INB 260808135/INF 260808135, Research Analyst INH000000586, AMFI ARN 0164 and PMS INP000000258. NSDL: IN-DP-NSDL-23-97. CDSL: IN-DP-CDSL-158-2001. Compliance Officer Details: Mr. Manoj Agarwal. Call: 022-4285 6825 or Email: [email protected]

[korak] india daily, january 20, 2016 - kotak securities · consumer querimetrix first edition:...

Documents