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BFSI Monthly

Manish AgarwallaPradeep AgrawalParesh Jain

20 January 2015

Management Meet: Key takeawaysManagement Meet: Key takeaways

2

Andhra Bank Asset quality to remain stable on a sequential basis: The bank is likely to report stable gross NPAs as up-gradations andrecoveries from the agri loan portfolio would likely to get offset by delinquencies in the infra and iron & steel segment wherestress continues to persist. In Q1FY15 and Q2FY15 agri loans worth Rs 10.7 bn and Rs 2.5 bn slipped due to waiver announced bythe AP and Telangana government, of this the bank has recovered Rs 3.3 bn in Q2FY15 and is likely to recover Rs 3.7 bn inQ3FY15. The Telangana government has released the payment of Rs5.7 bn and Andhra Pradesh government has released anamount of Rs5.8 bn to Andhra Bank. The bank expects moderate restructuring in H2FY15. The bank reported gross NPA of Rs43.2 bn. (gross NPA ratio of 3.86%). It has a restructured loan book of Rs110 bn (9.6% of loans book).

Balance sheet growth to remain tepid: The bank management hinted that loan growth would remain moderate in the range of 13-14% due to weak demand in corporate loans, while the primary drivers of the loan book are retail and agri advances. However,going forward the management sounded positive on the balance sheet growth as activities on the corporate side is expected tog g g p g p pincrease post the political unrest in the erstwhile Andhra Pradesh state.

NIM to improve marginally: The bank has guided for NIM of 3% in Q3FY15 (2.93% in 2QFY15), the marginal improvement islik l f i b k f i l hi h k l i Q1FY15 f d f l i i l Al hlikely to come from write back of interest reversal which took place in Q1FY15 on account of default in agri loans. Also the termdeposits of the bank are skewed towards less than one year, which would get re-priced at lower rates on maturity and willsupport the margins.

Treasury gains to drive non-interest income: The bank has an AFS book of Rs 91.9 bn (which is 20% of the investment book) witha modified duration of 4.9, given the decline in the 10 year G-sec yields by approximately 70 bps to 7.9%, we expect the bank toreport high treasury gains in Q3FY15 compared to Rs 520 mn gains in Q3FY14 and Rs 350 mn in Q2FY15. However, on the feei f t d t t i ifi t t ti dit ff t k i th t b i ti t i kincome front we do not expect any significant traction as credit off take in the corporate business continues to remain weak.

3

Recommendation & Valuation: We believe that the stock already prices the negatives like subdued credit growth, large pool ofrestructured loan and low Tier I capital and risk of equity dilution at discount to book value. We expect the implementation offarm loan waiver scheme to clear ambiguity in terms of eligibility and encourage the renewal of agri loan by borrower in order tofarm loan waiver scheme to clear ambiguity in terms of eligibility and encourage the renewal of agri loan by borrower in order toget finance by bank. Moreover the partial waiver amount of both the state government has been received aiding to some recovery.

The stable political scenario in erstwhile Andhra Pradesh state, declining interest scenario will resume economic growth. This willprovide a positive ramification on the asset book of the bank which has been under stress. Hence we upgrade the stock to Buywith revised target price of Rs126. We have rolled over our target price to FY17e adjusted book value per share (ABVPS) of Rs139,implying a price to adjusted book value multiple of 0.9x. At CMP of Rs94, the stock trades at 0.8x FY16 ABVPS of Rs114 and 0.7xFY17 ABVPS of Rs139FY17 ABVPS of Rs139.

4

HDFC BankAdvance growth to remain moderate: The bank advance growth to moderate to 17% in FY15 from 21.8% in Q2FY14, due to thebase effect of FCNR book. Adjusted for FCNR related book, advance growth stood at 17.5% in Q2FY15. Lack of working capitaldemand to lead to subdued the credit growthdemand to lead to subdued the credit growth.

Resumed fresh disbursement in Commercial Vehicle: Commercial vehicle share in the total retail portfolio has come down to9% in Q2FY14 from 13% in Q3FY13, as the bank turned cautious in this segment. The segment has seen negative to low singledigit qoq growth in the last 7 quarters barring Q1FY15 where it showed some pick up. The bank has now fully resumed lendingin the CV segment and expecting the growth to pick up further in coming quarter. However on yoy basis the book will remainflat in FY15.

NIMs to remain in the range of 4.3-4.4%: The bank’s NIMs expanded by a healthy 10bps qoq in Q2 to 4.5%. The managementdoes not see any much scope for further improvement in margins from the current levels and expect full year to remain in therange of 4.3-4.4%.

Fee income growth to remain moderate: The fee income is likely to remain moderate in the range of 10-12% as there is nomaterial pick up in customer driven transactions. Almost 85% of the banks fee income is retail in nature of which majority comesfrom customer driven transactions. As there is no material pickup in economic activity, customer driven transactions continue tofrom customer driven transactions. As there is no material pickup in economic activity, customer driven transactions continue toremain tepid.

5

Opex ratio to remain in the range of 46-47%: The bank cost/ Income ratio saw a material improvement in FY14 as it declined to45.6% from 49.6% in FY13. With sharp deterioration in macros, the bank took a cautious decision to cut back on all possibleexpenses like employee hiring marketing expenses which helped the bank to limit opex increase to just 7% in FY14 as againstexpenses like employee hiring, marketing expenses, which helped the bank to limit opex increase to just 7% in FY14 as againstaverage increase of 25% in earlier three years. The bank has now lifted all curbs and likely to show 17% growth in opex in FY15.However endeavor would be to maintain its cost/ Income ratio in the range of ~46%.

Slippages on a downward trajectory; to maintain credit cost at current levels to improve provision cover: While the bank hasthe best asset quality in the industry, it expects further moderation in slippages in H2FY15. However the bank will continue tomaintain its current level of credit cost, which is at 60bps, to build up its provision cover, which has been coming off over last 6-7quarters The banks specific provision cover has declined to 72 7% as on 31st Sept 2014 from 80% in FY13 The bank floatingquarters. The banks specific provision cover has declined to 72.7% as on 31st Sept 2014 from 80% in FY13. The bank floatingprovision currently stood at Rs17.3bn.

Capital issuance likely in Q4FY15: While the bank recently got the Foreign Investment Promotion Board clearance for Rs100bncapital issuance, final approval is pending with Cabinet Committee on Economic Affairs, on which a decision is likely in January2015. Subject to necessary approvals, the capital issuance is likely during current fiscal.

Recommendation & Valuation: We expect the earnings momentum to continue followed by improvement in RoA, which isp g y p ,expected to improve to 2.1% by FY17. We expect the bank to deliver a loan book growth of ~20% over FY14-17E. NIMs are likelyto remain stable while fee income growth will remain moderate. Going forward, balance sheet growth to drive operating profit.We have factored capital infusion of Rs100bn at Rs950 per share by FY16 in our assumption. At a CMP of Rs950, the stock trades

3 4 FY16 dj d b k l h (ABVPS) f R 277 d 2 9 FY17 ABVPS f R 320 W h ll d iat 3.4x FY16e adjusted book value per share (ABVPS) of Rs277 and 2.9x FY17e ABVPS of Rs320. We have rolled over our pricetarget to FY17e ABVPS. Maintain Buy with revised price target of Rs1127.

6

IndusInd BankAdvance growth to be maintained at 20-25% as the bank restrain from corporate loan sell down: Advance growth maintained at22.4% as on Sept 2014, as the bank has stopped the sell down of corporate loans, resulting in 10% higher growth. The bank used tosell around Rs30 40bn of corporate loans during peak times As the bank continue to restrain from portfolio sell down it is likelysell around Rs30-40bn of corporate loans during peak times. As the bank continue to restrain from portfolio sell down, it is likelyto maintain growth in the range of 20-25% for FY15.

CV segment showing signs of revival: Monthly net addition in CV book has increased to Rs1.5bn-2.0bn from Rs1bn inSeptember. The utilization level (SRTOs) of vehicle operators has increased to 22 days from 16 days at the bottom of the cycle.Operators profitability has also increased as 1) freight rates are going up by 10-15% every month 2) cut in petrol/ diesel prices hashelped in Rs5000 -6000 saving per month.

Refinance by SIDBI/ NABARD helped to keep borrowing cost low: As loan to small road transport operators (SRTOs)/ Agriloans are eligible for refinance from SIDBI/ NABARD respectively, the bank increasingly resorted to this channel, which helped tokeep cost low as these borrowings are exempted from SLR/ CRR requirement. Total refinance book has increased from Rs10bn toRs50bn. The bank can take the refinance book upto its net-worth, which stood at Rs99.3bn as on Sept 2014. The bank has alsoreduced its savings rate on less than Rs0.1mn deposits by 100 bps to 4.5% in September, which will also cushion cost of funds inH2FY15.

7

Focus on retail through expansion in tier II cities: The bank has identified 20 tier II cities (Patna, Gurgaon, Noida etc) which willbe focus area for the bank. The bank intends to have 5% share in city branch network in these 20 locations. This will help bank toincrease its retail advances share to 50% from current 43% of loan book The non vehicle retail contributed 7% of total loan whichincrease its retail advances share to 50% from current 43% of loan book. The non vehicle retail contributed 7% of total loan, whichis expected to increase to 15% by FY17. The bank will take its total branch network from 685 as on Sept 2014 to 800 by March 2015.The bank has earlier guided for 1200 branch network by 2017, which it might revise upwards.

Asset quality maintained; few restructuring in the quarter: Asset quality is likely to be maintained with stable slippage run rate.However few restructuring are likely in Q3 which will lead to ~10bps increase in restructuring book. The current restructuredbook stands at 0.52% of advances. While the management has guided for 65bps of credit cost in CV segment in Q3, they continueto maintain their full year guidance at less than 60bps on aggregate bookto maintain their full year guidance at less than 60bps on aggregate book.

Recommendation & Valuation: The bank is well poised to gain the benefits of falling interest rate and uptick in commercialvehicle cycle. The judicious mix of borrowing and deposit provided stability to margin. The increase in consumer financeproportion and declining interest rate will provide comfort in terms of margin. The receding stress in consumer segment tocontain credit cost and boost return ratios. We expect RoA to improve to 2%. Given the favorable operating environment, weupgrade the stock to “Buy” with revised target price of Rs950. At CMP of Rs790, the stock trades at 2.9x FY16 adjusted book valueper share (ABVPS) of Rs274 and Rs2.5x FY17ABVPS of Rs315.p ( )

8

Indian BankCredit growth to remain moderate: Credit growth to remain in upper single digit driven by sectors like MSME and Agriculture.Tepid corporate loan demand to keep overall loan book growth moderate. MSME is expected to grow at 15% where as agricultureloan is expected to grow at ~8%loan is expected to grow at ~8%.

Net Interest Margin to expand: Containment of slippage and reduction in high cost deposit will aid margin expansion. NIMs areexpected to improve by 10bps from the current level of 2.67%.

Fee income growth to mirror balance sheet growth: However given decline in G.sec yield, treasury gain to remain robust. Thebank has been reviewing the pension liability every quarter and making necessary provision for retirement benefits based onrevised assumption be it new mortality table or revision of discounting factorrevised assumption, be it new mortality table or revision of discounting factor.

Asset quality showing signs of recovery: Improved power scenario in Tamil Nadu (TN); and resolution to political crisis inAndhra Pradesh to improve business sentiment. The SME in TN which was worst hit due to power crisis are sighting relief whichcan be witnessed in recovery number. The calibrate moderation in credit growth and focus on recovery has started yieldingresults. The slippage has been contained in previous two quarter and the same is expected to continue. We expect the slippage tobe lower in Q3FY15 compared to Rs7.86bn in Q2FY15. Moreover strong recovery to restrict the overall GNPA at Rs52bn-Rs53bn.The diminishing restructuring pipeline to keep outstanding restructured number flat.g g p p p g

Strong Capital position: Indian bank has comfortable capital position amongst PSBs. The total CRAR stands at 13.05% with Tier Iat 10.56%. The bank is well poised to capitalize the upturn in business cycle in south India.

9

Recommendation & Valuation: The management guided for improvement in asset quality driven by containment of slippage andstrong recoveries. Slippages are expected to moderate in subsequent quarter, full year recovery targeted at Rs10bn. NIMs areexpected to improve by 10bps driven by improvement in domestic credit to deposit ratio which stands at 71 7% Vs 76 1% inexpected to improve by 10bps driven by improvement in domestic credit to deposit ratio which stands at 71.7% Vs 76.1% inQ4FY14. The stability in NPA will contain credit cost, translating into a 15% CAGR in earnings over FY14-17 and improvement inreturn ratios from 0.68% to 0.73%. We have rolled over the target price to FY17 adjusted book value per share (ABVPS) and giventhe inexpensive valuation, we maintain our Buy rating with a revised PT of Rs 270 (1x FY17 ABVPS of Rs269).

10

Union Bank of IndiaSubdued credit growth: Credit growth to remain subdued at ~10% in FY15 & FY16 owing to weak credit demand in corporatesector. Surplus capacity in industries and declining inflation to keep capex and working capital loan demand low. However retailand MSME segment will continue to witness strong credit growth ranging between 20% 25%and MSME segment will continue to witness strong credit growth ranging between 20%-25%.

Net Interest Margin to expand: The bank targets exit NIM of 2.8% by end of fiscal 2015 compared to current NIM of 2.53%. Theimprovement in NIM to be driven by factors like 1. Rebalancing of credit portfolio, reduce low yielding corporate book and focuson high yielding SME, Retail & agri 2. Containment of slippage will restrict interest reversal 3. Slow credit growth will enablebank to shed high cost deposit translating to decline in deposit cost.

The NIM for the bank has declined from the level of ~3% owing to high slippage; decline in current deposit proportion andThe NIM for the bank has declined from the level of 3% owing to high slippage; decline in current deposit proportion andincrease in low yielding RIDF bonds.

Fee income growth to mirror balance sheet growth: However given decline in G.sec yield, treasury gain to remain robust.Operating expenses have upside risk as employee expenses factors wage revision of 10%-12%, whereas the actual can be higher.Moreover given the softening of G.sec yield, the pension liability may witness escalation leading to pressure on operatingexpenses.

Asset quality stress persists: Mid corporate segment continues to remain under pressure. Sectors like iron & steel; EPCcontractors and pharma continues to remain under stress. The slippage in H2FY15 has upside risk to the guidance ofRs12bn/quarterly. The restructured pipeline of Rs15bn does not provide much relief in near term.

11

Weak Capital position: UBI has a relatively weaker capital position and the bank propose to raise Rs13.9bn through QIP. Themanagement is committed not to make dilution, book value decretive (which again seems unlikely). The Tier I stands at 7.31%and total CRAR at 10 3%and total CRAR at 10.3%.

Recommendation & Valuation: We expect earnings CAGR of 33% over FY14-16 and improvement in return ratio from 0.5% to0.87% by FY17. We have rolled over our valuation to FY17 adjusted book value per share (ABVPS) hence revised the target priceupward from Rs250 to Rs303 per share (1x FY17 ABVPS of Rs303). At the CMP, UBI trades at 0.95x FY16E ABVPS of Rs254 and0.8x FY17 ABVPS of Rs303.

12

State Bank of IndiaCredit growth to remain moderate: lack of demand from oil marketing companies; weak working capital requirement to keepcredit growth low in the range of 10%-12% for current fiscal. Large corporate credit demand has shifted to commercial papermarket due to wide rate differential between base rate and commercial paper ratemarket due to wide rate differential between base rate and commercial paper rate.

Net Interest Margin to be maintained: Containment of slippage and reduction in cost of deposit will enable the bank to maintainNIMs at ~3.1% level. The bank has CASA base of 43% and is expected to maintain the same.

Fee income growth to be faster than balance sheet and cost to remain under control: Revision of fee income charges in retail andmid corporate segment will aid fee income growth. The bank has under taken revision of some of these charges resulting 19%growth in fee income The bank has been reviewing the pension liability every quarter and making necessary provision forgrowth in fee income. The bank has been reviewing the pension liability every quarter and making necessary provision forretirement benefits based on revised assumption. Measures like centralized procurement and focus on cost control to enable thebank to reduce its cost to income ratio which now stands at ~52%. Subsidiary banks will be merged only once their financialsimprove.

Asset quality showing signs of recovery: Focus on recovery in agriculture portfolio and mid corporate segment to contain assetquality. Slippage is expected to remain similar to Q2FY15 run rate whereas recovery from agriculture portfolio of erstwhileAndhra Pradesh state to keep asset quality under control.p q y

Strong Capital position: The bank has comfortable capital position amongst PSBs. The total CRAR stands at 12.33% with Tier I at9.62%.

13

Recommendation & Valuation: The credit growth will remain a challenge in short term as project pipeline seem to be completelyexhausted. NIMs have limited scope for expansion given competitive pressure. Fresh stress formation has been declining,restructuring pipeline moderate and stress in large corporate under control As per the management the stress has subsided inrestructuring pipeline moderate and stress in large corporate under control. As per the management, the stress has subsided inlast few quarters but concerns remains in mid corporate and SME due to strained cash flow. We believe, the improvement inoverall economic activity will allay the asset quality concern pertaining to mid corporate. At CMP, the bank trades at 1.4x FY16core ABVPS of Rs197 (Subsidiary value of Rs30 per share) and 1.2x FY17e ABVPS of Rs232. The uptick in economic activity toimprove the operational efficiency and reduce credit cost translating into a earnings CAGR of 25% over FY14-17 and RoAimprovement of ~20 bps to 0.9% by FY17. Moderation in NPA and improvement in earnings profile, warrant premium valuationover median level. We maintain Buy with revised TP of Rs 380 (implying a valuation of 1.5x FY17 ABVPS for banking business ofRs 232 and valuing non-banking subsidiaries at Rs 30/share)Rs 232 and valuing non banking subsidiaries at Rs 30/share).

14

BFSIBFSI

15

Banking: Business aggregates

8028

SCB Business aggregatesDeposit Gwth (%) Credit Gwth (%) CD ratio (rhs)

Sector wise credit growth (%)

Non‐Food Credit Agriculture Industry Retail Services

72

74

76

78

161820222426

15

20

25

g y

66

68

70

72

810121416

12 12 12 12 12 13 13 13 13 13 13 14 14 14 14 14 140

5

10

Growth Rate (%)

Apr

-1

Jun-

1

Aug

-1

Oct

-1

Dec

-1

Feb-

1

Apr

-1

Jun-

1

Aug

-1

Oct

-1

Dec

-1

Feb-

1

Apr

-1

Jun-

1

Aug

-1

Oct

-1

Dec

-10

Aug-

12

Nov

-12

Feb-

13

May

-13

Aug-

13

Nov

-13

Feb-

14

May

-14

Aug-

14

Nov

-14

• Credit growth continued to remain low at 10.5% YoY as onDec 26, 2014 as 1) corporate investment activity remainsubdued and 2) lesser off take by oil marketing companies dueto their improved financials backed by declining oil prices.

Growth Rate (%)

Basic Metal & Metal Product 6.8

Commercial Real Estate 15.4

All Engineering 6.7• Deposit growth picked up to 11.5% YoY from 10.6% in

November 2014.

• The Credit-deposit ratio of the banking system has reduced to76.1% from 76.8% a year back.

All Engineering 6.7

Non‐Banking Financial Cos (NBFCs) 6.2

Personal Housing 16.4

Iron & Steel 6.3

16Source: Bloomberg, PhillipCapital India Research

Power 14.9

Banking: Deposit and base rate of top banks

• Couple of banks including SBI have started to reduce

Current less than 1yr

1-2yr More than 2yr

• Couple of banks including SBI have started to reducetheir deposit rates in some of the buckets

• With muted credit growth at sub 12% and fallingLDR, other banks could also cut deposit rates in thenear to mid term

Axis Bank 3.50-8.50 8.50-8.90 8.90-9.05

BOB 4.50-8.25 9.05 9.05

BOI 4.00-8.25 9.05 8.75-9.05

HDFC BANK 3 50 8 75 8 75 8 25 8 75 near to mid term.HDFC BANK 3.50-8.75 8.75 8.25-8.75

ICICI Bank 4.50-7.75 8.00-8.10 8.10-8.75

PNB 4.00-9.00 9.00 9.00

SBI 6.00-7.50 8.75 8.50-8.75

With RBI d i t b 25 b li

UBI 4.00-8.60 9.05 9.05

Base Rate December 2014• With RBI reducing repo rates by 25 bps policy

rates, most banks most banks are expected to reducetheir base rates.

• The spread over base rate for retail loans continues toremain low which will exert pressure on NIMs for

Axis Bank 10.15

BOB 10.25

BOI 10.2remain low which will exert pressure on NIMs forbanks.

• As base rate continue to remained sticky, most of thecorporate have shifted to CP market for working capitalrequirement as rates in CP market has reduced

HDFC BANK 10.0

ICICI Bank 10.0

PNB 10.25

SBI 10 0

17

requirement as rates in CP market has reduced.SBI 10.0

UBI 10.25

Source: Company, PhillipCapital India Research

Banking: Capex data

50%

60%90,000

1,00,000

Under ImplementationUnder implementation Rs bn YoY (%), RHS

200%9,000

New Projects

Series1 Series2

20%

30%

40%

50%

40,00050,00060,00070,00080,000

50%

100%

150%

4,0005,0006,0007,0008,000

0%

10%

20%

010,00020,00030,000

r-07

n-07

p-07

c-07

r-08

n-08

p-08

c-08

r-09

n-09

p-09

c-09

r-10

n-10

p-10

c-10

r-11

n-11

p-11

c-11

r-12

n-12

p-12

c-12

r-13

n-13

p-13

c-13

r-14

n-14

p-14

c-14

-100%

-50%

0%

01,0002,0003,000

07 07 07 07 08 08 08 08 09 09 09 09 10 10 10 10 11 11 11 11 12 12 12 12 13 13 13 13 14 14 14 14N j b 180% R 4 1

Mar Jun

Sep

Dec

Mar Jun

Sep

Dec

Mar Jun

Sep

Dec

Mar Jun

Sep

Dec

Mar Jun

Sep

Dec

Mar Jun

Sep

Dec

Mar Jun

Sep

Dec

Mar Jun

Sep

Dec

Mar

-Ju

n-Se

p-D

ec-

Mar

-Ju

n-Se

p-D

ec-

Mar

-Ju

n-Se

p-D

ec-

Mar

-Ju

n-Se

p-D

ec-

Mar

-Ju

n-Se

p-D

ec-

Mar

-Ju

n-Se

p-D

ec-

Mar

-Ju

n-Se

p-D

ec-

Mar

-Ju

n-Se

p-D

ec-

Under ImplementationUnder implementation Rs bn YoY (%), RHS

• New project announcements grew by 180%yoy to Rs4.1tn,highest in last 18 quarters largely driven by aviation and roadprojects

• Outstanding project under implementation continue to growi l i l di it f 1 5%

40%

50%

60%

60,00070,00080,00090,000

1,00,000p ( )

in low single digit range of 1-5%.

• On account of land/environment clearance & fuelunavailability Proportion of stalled projects as a per cent ofproject under implementation have increased to 14%compared to 12% a year back and average proportion of 1 2%0%

10%

20%

30%

010,00020,00030,00040,00050,000

18Source: CMIE, PhillipCapital India Research

compared to 12% a year back and average proportion of 1-2%(During 1999-2009).

0%0

Mar

-07

Jun-

07Se

p-07

Dec

-07

Mar

-08

Jun-

08Se

p-08

Dec

-08

Mar

-09

Jun-

09Se

p-09

Dec

-09

Mar

-10

Jun-

10Se

p-10

Dec

-10

Mar

-11

Jun-

11Se

p-11

Dec

-11

Mar

-12

Jun-

12Se

p-12

Dec

-12

Mar

-13

Jun-

13Se

p-13

Dec

-13

Mar

-14

Jun-

14Se

p-14

Dec

-14

Banking: Asset quality aggregates• Outstanding restructured stock of PSBs continue to

remain high, and have increased to 5.78% in Q2FY15from 5.54% as on Q114. The restructured portfolio ofprivate banks declined by 7bps QoQ to 1 86%5 20 5.45 5.49 5.54

6.04 5.935.58 5.53 5.54 5.786.0

7.0Outstanding restructured portfolio (% to gross advances)

Private PSB

private banks declined by 7bps QoQ to 1.86%.

• In Q2FY15 14 cases worth Rs133.1bn were referred inQ2FY15

• Given the elongated period of slowdown corporate1.92 1.871 46 1 59

1.87 1.93 1.86

5.204.76

2 0

3.0

4.0

5.0

• Given the elongated period of slowdown, corporatewhich were restructured previously has highprobability of slipping to non performing category.

0.871.25 1.32 1.33 1.46 1.59

0.0

1.0

2.0

FY10

FY11

FY12

FY13

FY14

Q1F

Y14

Q2F

Y14

Q3F

Y14

Q4F

Y14

Q1F

Y15

Q2F

Y15

Q Q Q Q Q Q

Gross SlippagePrivate bank PSB Real GDP Growth %, rhs

• Slippages ratio for PSBs have declined marginallyfrom 3.51% in Q1Fy15 to 3.32% in Q2FY15.

• Large part of slippages are now accruing from therestructured portfolio, as very few corporate have7

8

9

10

2 0

2.5

3.0

3.5

4.0

seen improvement in their financials over last twoyears.

• Slippage ratio for private banks have increased from1.37% to 1.51% sequentially.4

5

6

7

0.0

0.5

1.0

1.5

2.0

19Source: Company, PhillipCapital India Research

Banking valuation

• Historically, 90% of the time, Private banks havetraded in the range of 1.3x – 2.7x, 1yr forward ABVPS

4 510

Private BankGDP Growth %, lhs Interest rate %, lhs P/ABV+1.65SD -1.65SD g , y

• Current valuation of 2.7x is above the medianvaluation of 2.1x.

• Private banks are trading at ~ 100% premium to PSBs

3.0

4.5

5

8

10

g p

0.0

1.5

0

3

-05

-06

-07

-08

-09

-10

-11

-12

-13

-14

• Historically, 90% of the time, PSBs have traded in the

Dec

-

Dec

-

Dec

-

Dec

-

Dec

-

Dec

-

Dec

-

Dec

-

Dec

-

Dec

-

Public Bank

GDP Growth %, lhs Interest rate %, lhs PS Banks (P/ABV)range of 0.7x – 1.6x, 1yr forward ABVPS. Currentvaluation of 1.2x is in line with the median valuationof 1.2x.

• The slowing economic activity and large pool ofd d

1.6

2.0

2.4

6

8

10+1.65SD -1.65SD

restructured assets may act as a deterrent invaluation.

0.4

0.8

1.2

2

4

6

20Source: PhillipCapital India Research

0.00

Dec

-05

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

NBFC – Contribution of fleet operator; Mortgage rate; Auto sales

30

Auto Sales

Passenger vehicles growth (YoY) CV sales growth (YoY)

Two wheeler sales (YoY)

Contribution (Freight‐fuel cost) Rs per tone Kilometer

Delhi ‐ Mumbai‐Delhi Delhi ‐ Kolkata‐DelhiDelhi ‐ Chennai‐Delhi

-10

0

10

20

0.600.650.700.750.80

-40

-30

-20

n-13

b-13

r-13

r-13

y-13

n-13

l-13

g-13

p-13 t-1

3v-

13c-

13n-

14b-

14r-

14r-

14y-

14n-

14l-1

4g-

14p-

14 t-14

v-14

c-14

0.400.450.500.55

• The contribution (freight – fuel cost) which had seen up-trendtill November 2014, has see dip of 5% & 1.2% in the month of13

HDFC Ltd lending rates

Jan

Feb

Mar

Apr

May Jun

Jul

Aug Se

pO

ctN

ov Dec Jan

Feb

Mar

Apr

May Jun

Jul

Aug Se

pO

ctN

ov Dec

December & January respectively. However, theimprovement over December 2013 the improvement has beensignificant. We expect the improvement in the utilizationlevels will improve the cash flow of the fleet operators.

Th h i d bl f l h1011111212

• The mortgage rates has remained stable for last many months.However, given the decline in the base rate we expect rates togo down.

• In the month of December CV volumes has seen pick andh t d th f 9% Y Y i N 14 d D 14 I

899

1010

8 9 0 0 1 2 2 3 4 4


have reported growth of 9% YoY in Nov 14.and Dec 14. Inaddition the growth in passenger vehicles and two wheelerssales have picked from negative growth in Oct 14.D

ec-0

8

Aug

-09

Apr

-10

Dec

-10

Aug

-11

Apr

-12

Dec

-12

Aug

-13

Apr

-14

Dec

-14

Life Insurance: Total premium

• Total premium for the life insurance industry (new +renewal) grew by 6.6% YoY in 3MFY15 (9.1% in FY14).603500

Total IndustryTotal premium (Rs bn) Growth (YoY) (rhs)

) g y % ( % )

• Total premiums for LIC increased by 5.8% YoY in3MFY15 (13.1% YoY in FY14)

• In terms of new business, APE for life insurance30

40

50

2000

2500

3000

industry grew by 8.8% YoY driven by a 16%yoygrowth in APE for private players, while APE for LICgrew by 4.4%.

10

0

10

20

0

500

1000

1500

-100

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 6MFY15

Private Insurers

• Private insurer’s total premium declined by 9.5% YoYin 3MFY15 compared to % in 1.7%in FY14.

• In terms of new business, APE of private players60

80

100

600700800900

1000Total premium (Rs bn) Growth (YoY) (rhs)

, p p yincreased by 16% YoY in 3MFY15 (-4.9%% in FY14)

• Total premium for private players have increased afterseeing a declining trend for the three straight year.

0

20

40

100200300400500600

22

-200100

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 3MFY15

Source: PhillipCapital India Research

Life insurance: Annualized Premium Equivalent (APE)

• 6MFY15 New business premium (NBP) for life insurance companies increased by 1.9% YoY to Rs 195 500000

LIC V/s Private APE (Rs mn)LIC Pvt

p ybn. NBP for LIC declined by 1.8% YoY while for private insurers, NBP increased by 13.1% YoY.

• New traditional products from Jan 1, 2014 will have lower surrender values, high risk cover and agent’s

200000

300000

400000

commission linked to tenure of the policy. This will also impact the NBAP margins on traditional products which had been dominating the product mix in the last few years.

0

100000

200000

FY10 FY11 FY12 FY13 FY14 6MFY15 • In terms of APE, the total industry growth was 8.8% YoY; 4.4% YoY for LIC and 16% for private players.

• Amongst major private insurers, strong growth was witnessed by HDFC Life and Birla Life , while Bajaj Alli d K k i i h i NBP

FY10 FY11 FY12 FY13 FY14 6MFY15

120

LIC V/s Private Market Share

Pvt LIC

Allianz and Kotak saw contraction in their NBP collection.

• Although LIC continued to dominate with its market, but in 3MFY15 it lost 380 bps of market share t th i t l Th t k t h f LIC

53.141.3 34.8 39.5 36.7 40.5

60

80

100

to the private players. The current market share of LIC is at 59.5%.

46.958.7 65.2 60.5 63.3 59.5

20

40


0FY10 FY11 FY12 FY13 FY14 6MFY15

Life insurance: APE Trend

5070000

SBI Life

APE (Rs mn) Growth (YoY) (rhs)8040000

Reliance Life

APE (Rs mn) Growth (YoY) (rhs)

01020304050

30000

40000

50000

60000

70000

0

20

40

60

20000

25000

30000

35000

-50-40-30-20-10

0

10000

20000

30000

FY09 FY10 FY11 FY12 FY13 FY14 6MFY15

-60

-40

-20

0

5000

10000

15000


HDFC Standard ICICI Prudential

10

20

30

40

25000

30000

35000

40000APE (Rs mn) Growth (YoY) (rhs)

150

200

250

300

40000

50000

60000

70000APE (Rs mn) Growth (YoY) (rhs)

30

-20

-10

0

10

0

5000

10000

15000

20000

50

0

50

100

150

0

10000

20000

30000

40000

24

-300


Source: PhillipCapital India Research

-500FY09 FY10 FY11 FY12 FY13 FY14 6MFY15

MACROMACRO

25

Policy rates

• WPI for Dec’14 has slumped to 0.11% vs. ourexpectation of 0.8% and consensus expectation of0.4%. We are positively surprised by the contraction12

Policy Rate (%)

WPI Repo Rate SBI 1yr Dep Rate CRR

0.4%. We are positively surprised by the contractionin food inflation and stability in manufacturinginflation

• RBI announced out of the monetary policy rate cut of25 bps to 7.75% on account of sharp correction in the4

6

8

10

p pcommodity, foods and vegetable prices and onexpectation that crude oil prices would continue toremain weak.

• As comfort has emerged on RBI’s expectation of-2

0

2

4

1 2 2 2 3 3 3 4 4 4

25

Real Interest Vs Deposit GrowthReal Interest rate (%) Deposit Growth (%)

• With WPI inflation coming down and deposit rates

g pattaining the CPI inflation target of 6% or below, weexpect RBI to cut rates by 75-100 bps till March FY16.D

ec-1

Apr

-1

Aug

-1

Dec

-1

Apr

-1

Aug

-1

Dec

-1

Apr

-1

Aug

-1

Dec

-1

10

15

20

25 • With WPI inflation coming down and deposit ratesremaining high, the real interest rates have increasedfurther to ~8.4%. in December from 6.6% inSeptember 2014.

• While high positive real interest rate is positive for

-5

0

5

10 While high positive real interest rate is positive forbanks deposit growth, lower credit growth has led tolower LDR, hence negative for margins.

26

Dec

-11

Mar

-12

Jun-

12

Sep-

12

Dec

-12

Mar

-13

Jun-

13

Sep-

13

Dec

-13

Mar

-14

Jun-

14

Sep-

14

Dec

-14

Source: Bloomberg, PhillipCapital India Research

Yield curve

16

1 yr CD rate9.25

Yield Curve (%)

Nov‐14 Dec‐14 Sep‐14

8

10

12

14

16

8.25

8.5

8.75

9

0

2

4

6

-08

-09

-09

-10

-10

-11

-11

-12

-12

-13

-13

-14

-147.25

7.5

7.75

8

AAA Corporate Bond Spread over G-Sec

Dec

-

Jun-

Dec

-

Jun-

Dec

-

Jun-

Dec

-

Jun-

Dec

-

Jun-

Dec

-

Jun-

Dec

-

7G-Sec 1yr G-Sec 2yr G-Sec 3yr G-Sec 4yr G-Sec 5yr G-Sec 10yr

• AAA corporate bond which have been declining till Nov 14have increased in Dec 14.

• CD rates have moderated from 9.3% in Dec 2013 to 8.7% inD 2014

AAA Corporate Bond Spread over G Sec

1 Yr spread

2 Yr spread

3 Yr spread

4 Yr spread

5 Yr spread

Aug‐14 0.50 0.78 0.82 0.71 0.72

Dec 2014.

• Yield curve has flattened with short term rates higher thanlong term, implying downward pressure on interest ratesin medium to long term.

Sep‐14 0.43 0.75 0.78 0.77 0.68

Oct‐14 0.49 0.65 0.63 0.62 0.63

Nov‐14 0.37 0.58 0.49 0.53 0.53


Dec‐14 0.36 0.67 0.68 0.70 0.73

Money supply data

10

12

0

500

LAF (Repo) / Rev. Repo LAF (Rs bn) Call Rate (rhs)

800

Factors affecting liquidityChange in Curr. In circulation (m-o-m Rs bn)

Change in Govt. cash balance (m-o-m Rs bn)

4

6

8

10

-1500

-1000

-500

0

-2000

200400600

0

2

4

-2500

-2000

1500

ec-1

1

ar-1

2

un-1

2

p-12

ec-1

2

ar-1

3

un-1

3

p-13

ec-1

3

ar-1

4

un-1

4

p-14

ec-1

4

-800-600-400

ec-1

1

ar-1

2

un-1

2

ep-1

2

ec-1

2

ar-1

3

un-1

3

ep-1

3

ec-1

3

ar-1

4

un-1

4

ep-1

4

ec-1

4

18

M3 Growth (YoY %)

De

Ma Ju Se De

Ma Ju Se De

Ma Ju Se De De

Ma Ju Se De

Ma Ju Se De

Ma Ju Se De

14

16• M3 growth has come down further to at 11.1% as on YoY

from recent high of 14.8% in December 2013.

• Borrowing has increased as RBI injected Rs 9bn in Decemberas against daily average net injection of Rs5.3bn in

8

10

12

2 2 2 3 3 4 4 4

November 2014.

28

Apr

-12

Jun-

1 2

Aug

-12

Oct

-12

Dec

-12

Feb-

13

Apr

-13

Jun-

1 3

Aug

-13

Oct

-13

Dec

-13

Feb-

14

Apr

-14

Jun-

1 4

Aug

-14

Oct

-14

Dec

-14

Source: Bloomberg, PhillipCapital India Research

Fiscal conditions

• Reduction in inflation and improvement in macrosentiments and improving fiscal position has resulted

10.0 5000

GOI BorrowingIncremental net borrowing (Rs bn) GIND10YR Index (rhs)

se t e ts a d p o g sca pos t o as esu tedin decline of 23bps in 10 yr bond yields to 8.28% overlast one month.

• The fiscal deficit for FY15 is expected to be 4.1% andthe recent cut in government borrowings by 100bn is

7.0

8.0

9.0

1000

2000

3000

4000

g g ylargely driven by decline in commodity prices andinflows from increase in excise duty in petrol.

• FY15 Gross government borrowing is aimed at Rs5.98tn vs. Rs 5.63tn in FY14.

4.0

5.0

6.0

-2000

-1000

0

12 13 13 13 13 13 13 14 14 14 14 14 14

Percent of FY15Budgeted borrowing Amount (Rs bn)

Percent of FY14 Budgeted borrowing Amount (Rs bn)

Dec

-1

Feb-

1

Apr

-1

Jun-

1

Aug

-1

Oct

-1

Dec

-1

Feb-

1

Apr

-1

Jun-

1

Aug

-1

Oct

-1

Dec

-1Apr‐14 2 113 Apr‐13 10 450May‐14 13 609 May‐13 20 923Jun‐14 24 1079 Jun‐13 30 1382Jul‐14 37 1669 Jul‐13 42 1972Aug‐14 50 2289 Aug‐13 56 2623Sep‐14 59 2704 Sep‐13 54 2553Oct‐14 67 3060 Oct‐13 67 3143Nov‐14 71 3260 Nov‐13 80 3753Dec‐14 84 3820 Dec‐13 90 4193Jan‐15 95 4332 Jan‐14 99 4648


Feb‐15 100 4592 Feb‐14 100 4684Mar‐15 Mar‐14Net borrowing FY15 (Budgeted) 4570 Net borrowing FY14 4684

Macro snapshot

Latest 1M-Ago 3M-Ago 6M-Ago 12M-Ago

WeeklyWeekly

Forex Reserves, $Bn 319 316 314 316 293

Government Borrowing, Rs Bn 4970 4410 3400 1830 5095

Monthly

WPI,% 0.1 0.0 2.4 5.7 6.4

CPI,% 5.0 5.0 6.8 7.0 11.5

Index of Industrial Production,% 3.8 -4 1 6 -1

6-core Industry,% 6.7 6 6 2 3

Exports, $ Bn 25 26.1 27.0 28.0 24.2

Imports, $ Bn 35 39.5 37.8 39.2 33.8

Trade Deficit, $ bn -9 -13.4 -10.8 -11.2 -9.6

Quarterly

GDP,% 5.7 - 5.3 5.5 6.0

Agriculture,% 1.1 - 1.2 2.9 4.1

Industry,% 2.3 - 1.1 0.8 0.9

Services,% 6 - 7.1 7.4 8.1

Exports, $ Bn 85.3 - 81.7 83.7 81.2

Imports, $ Bn 123.8 - 116.4 114.3 114.5

Trade Deficit, $ Bn -38.6 -34.6 -30.7 -33.3

Invisibles, $ Bn 28.5 - 26.8 29.3 28.1

Current Account Deficit, % of GDP -10.1 - -7.9 -1.3 -5.2


Net capital flows, $ Bn 23.9 - 16.1 16.6 17.2

Valuation matrix: Coverage universeMCap MCap CMP __Gwth (14-16E)____ ____P/Adj. BV____ _____RoE (%)_____ ____NII(Rs bn)____ ______NIM(%)______ _____CAR(%)_____

Rs bn US$ bn (Rs) NII % PPP% PAT% FY14 FY15e FY16e FY14 FY15e FY16e FY14 FY15e FY16e FY14 FY15e FY16e FY14 FY15e FY16e

Public Sector Banks

Andhra Bank 55 0.9 93 17.1 14.4 78.9 1.14 1.17 1.01 5.1 9.4 14.5 37.6 37.6 37.4 2.4% 2.5% 2.5% 10.8 10.2 9.8

Bank of India 193 3.1 300 18.0 16.4 24.9 1.00 0.99 0.84 11.2 12.3 14.1 83.1 90.2 108.3 2.2% 2.1% 2.1% 10.1 9.6 9.2

BOB 466 7.5 1081 17.7 12.6 18.8 1.73 1.54 1.35 13.8 15.0 15.2 103.2 113.2 119.7 2.0% 2.0% 2.1% 12.3 11.7 11.3

Canara Bank 210 3.4 456 18.4 14.0 34.9 1.26 1.15 0.98 10.4 14.0 15.5 76.9 78.8 89.4 2.1% 2.1% 2.1% 10.6 10.3 10.1

Corp Bank 58 0.9 348 9.8 2.7 31.4 0.83 0.88 0.87 5.7 8.2 9.0 31.5 34.3 37.8 1.8% 1.7% 1.7% 12.1 11.2 10.5

IOB 84 1.4 60 14.8 7.6 40.6 0.89 0.95 0.83 4.6 4.6 7.1 50.2 52.5 55.8 2.2% 2.3% 2.2% 11.6 11.2 10.7

Oriental Bank 103 1.7 328 13.9 10.9 33.0 1.18 1.07 0.94 9.2 12.0 13.1 42.2 47.0 51.3 2.5% 2.5% 2.5% 11.0 11.6 11.8

PNB 74 1.2 205 15.5 10.2 30.9 1.70 1.49 1.27 10.2 11.8 14.1 134.1 148.6 161.5 3.2% 3.2% 3.2% 11.5 11.4 11.4

SBI 236 3.8 315 13.2 12.0 23.3 0.22 0.19 0.17 10.0 10.7 12.1 578.8 611.6 675.8 3.1% 3.0% 3.0% 12.4 12.8 12.8

Union Bank 162 2.6 236 15.8 16.2 33.0 1.28 1.11 0.96 10.3 12.8 13.9 67.9 75.4 78.8 2.4% 2.5% 2.6% 10.8 11.2 11.1

Indian Bank 92 1.5 213 17.1 14.4 78.9 1.03 1.12 0.95 10.5 11.0 12.8 43.6 51.4 61.5 2.6% 2.6% 2.7% 12.8 11.9 10.5

Private Sector Banks

Axis Bank 243 3.9 515 16.0 18.5 21.0 3.34 2.86 2.43 17.4 17.9 18.7 80.2 96.7 119.5 3.4% 3.3% 3.3% 16.1 50.6 51.2

HDFC Bank 2402 38.7 1001 21.8 23.2 24.0 5.62 4.73 3.57 21.3 22.2 21.2 128.8 158.1 184.8 4.3% 4.3% 4.4% 16.0 16.4 18.4

ICICI Bank 410 6.6 354 17.1 15.4 13.9 0.60 0.54 0.49 14.0 14.6 15.0 107.3 138.7 164.8 3.1% 3.2% 3.2% 17.7 17.1 16.5

IndusInd Bank 437 7.0 832 1.5 1.5 1.6 4.40 3.04 2.53 16.9 17.9 16.4 28.9 34.5 42.6 3.7% 3.7% 3.8% 13.8 13.5 17.1IndusInd Bank 437 7.0 832 1.5 1.5 1.6 4.40 3.04 2.53 16.9 17.9 16.4 28.9 34.5 42.6 3.7% 3.7% 3.8% 13.8 13.5 17.1

Dvpt Cr Bank 30 0.5 119 18.5 29.9 12.8 2.89 2.31 2.05 14.0 12.7 12.0 2.3 2.8 3.7 3.1% 3.7% 3.5% 16.0 16.4 18.4

NBFC's

HDFC Ltd 1864 30.1 1195 17.0 16.2 16.2 6.87 6.11 5.36 20.5 21.1 21.8 70.0 81.4 95.8 3.4% 3.5% 3.6% 17.9 18.1 17.7

Shriram Transport Fin 264 4 3 1165 19 9 15 0 15 6 3 23 2 84 2 45 16 3 15 7 16 6 33 8 41 4 48 5 7 3% 8 0% 8 2% 17 7 18 0 17 9

31

Shriram Transport Fin 264 4.3 1165 19.9 15.0 15.6 3.23 2.84 2.45 16.3 15.7 16.6 33.8 41.4 48.5 7.3% 8.0% 8.2% 17.7 18.0 17.9

LIC HF 246 4.0 487 18.3 17.9 12.7 3.43 2.95 2.53 18.8 17.1 17.8 19.2 22.1 26.8 2.2% 2.1% 2.2% 16.4 16.7 16.2

SKS Micro Fin. 59 0.1 470 42.8 78.3 65.6 11.11 5.96 5.01 16.5 21.5 17.3 2.7 2.7 2.7 7.5% 8.6% 9.0% 27.2 35.8 28.7

Source: Company, PhillipCapital India Research Estimates

Valuation matrix: Coverage universe_______PAT(Rs bn)_______ ________CASA(%)________ ______EPS (Rs)_______ _______Adj BV (Rs)_______ _______GNPA(%)_______ ________NNPA(%)________

FY14 FY15e FY16e FY14 FY15e FY16e FY14 FY15e FY16e FY14 FY15e FY16e FY14 FY15e FY16e FY14 FY15e FY16e

Public Sector Banks

Andhra Bank 4.4 8.5 13.9 24.8% 24.4% 24.8% 7.4 14.4 23.7 81.3 79.5 91.9 3.8 5.7 6.8 3.2 3.4 3.2

Bank of India 27.3 33.8 42.6 22.9% 22.4% 22.2% 42.4 52.5 66.2 299.7 304.0 357.7 3.0 3.2 3.1 2.0 1.9 1.5

BOB 44.8 55.5 63.2 25.6% 25.6% 25.7% 104.0 128.9 146.8 625.5 701.2 798.6 2.4 3.0 3.2 1.5 1.6 1.5

Canara Bank 24.4 35.5 44.4 24.5% 24.7% 24.8% 52.9 77.1 96.2 361.8 398.2 464.8 2.6 2.5 2.6 2.0 2.0 1.9

Corp Bank 5.6 8.5 9.7 20.3% 20.3% 20.4% 33.5 50.7 57.9 420.7 394.8 400.2 1.7 3.5 4.5 2.3 2.9 3.0

IOB 6.0 6.9 11.9 25.9% 25.4% 25.4% 5.1 4.9 8.5 67.8 63.3 72.1 4.1 5.5 6.0 3.4 3.5 3.5

Oriental Bank 11.4 16.4 20.2 24.3% 24.3% 24.2% 38.0 52.3 64.2 277.8 308.1 349.4 3.2 4.0 3.9 2.8 2.8 2.7

PNB 33.4 42.8 57.3 38.2% 37.8% 37.4% 18.5 23.7 31.7 120.9 137.9 161.4 4.4 5.4 5.2 2.9 2.7 2.5

SBI 141.7 171.5 215.4 40.7% 40.6% 40.4% 189.7 229.6 278.0 1450.4 1625.8 1903.7 4.6 5.1 4.4 2.7 2.4 2.1

Union Bank 17.0 24.0 30.0 29.4% 29.8% 29.7% 26.9 35.0 43.7 185.3 213.2 245.4 3.0 4.2 4.3 2.4 2.4 2.3

Indian Bank 11.6 13.2 16.8 27.0% 26.9% 26.9% 24.9 28.4 36.1 206.5 189.7 223.2 3.7 3.2 3.2 2.3 2.1 2.0

Private Sector Banks

Axis Bank 62.2 74.4 91.1 44.8% 44.8% 44.7% 26.5 31.5 38.4 154.2 179.8 212.2 1.2 1.4 1.8 0.4 0.5 0.5

HDFC Bank 84.8 105.6 130.5 44.5% 44.2% 44.7% 35.3 44.0 51.8 178.3 211.7 280.4 1.0 1.0 0.8 0.3 0.3 0.3

ICICI Bank 98.1 112.4 127.2 42.4% 41.6% 40.8% 84.9 97.1 109.7 592.0 651.5 724.2 3.3 3.1 2.6 1.0 0.9 0.8

IndusInd Bank 17.5 22.2 27.5 34.2% 35.3% 36.5% 33.3 38.5 47.8 188.9 274.0 328.9 1.2 1.1 1.1 0.3 0.3 0.2IndusInd Bank 17.5 22.2 27.5 34.2% 35.3% 36.5% 33.3 38.5 47.8 188.9 274.0 328.9 1.2 1.1 1.1 0.3 0.3 0.2

Dvpt Cr Bank 14.0 13.9 13.5 24.6% 23.6% 22.9% 6.0 6.2 6.5 41.0 51.4 57.9 1.7 1.9 1.7 0.9 0.8 0.7

NBFC's

HDFC Ltd 54.4 62.8 73.4 34.9 40.2 47.0 173.9 195.5 222.9 0.7 0.7 0.7 0.4 0.4 0.4

Shriram Transport Fin 12 6 13 9 16 9 55 7 61 3 74 5 360 2 410 4 474 8 3 9 4 4 4 6 0 8 1 0 1 0

32

Shriram Transport Fin 12.6 13.9 16.9 55.7 61.3 74.5 360.2 410.4 474.8 3.9 4.4 4.6 0.8 1.0 1.0

LIC HF 13.2 13.9 16.7 26.1 27.5 33.1 142.2 165.0 192.8 0.7 0.6 0.6 0.4 0.3 0.3

SKS Microfinance 0.7 0.7 0.7 6.5 12.6 15.3 42.3 78.9 93.8 17.7 10.9 1.8 0.1 0.1 0.1

Source: Company, PhillipCapital India Research Estimates

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Certifications: The research analyst(s) who prepared this research report hereby certifies that the views expressed in this research report accurately reflect the research analyst’s personal views about all of thebj i d/ i i h h l h k fli f i d f h h l ’ i i ill b di l i di l l d h ifi isubject issuers and/or securities, that the analyst have no known conflict of interest and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific views or

recommendations contained in this research report. The Research Analyst certifies that he /she or his / her family members does not own the stock(s) covered in this research report.

Independence: PhillipCapital (India) Pvt. Ltd. has not had an investment banking relationship with, and has not received any compensation for investment banking services from, the subject issuers in the past twelve(12) months, and PhillipCapital (India) Pvt. Ltd does not anticipate receiving or intend to seek compensation for investment banking services from the subject issuers in the next three (3) months. PhillipCapital (India)Pvt. Ltd is not a market maker in the securities mentioned in this research report, although it or its affiliates may hold either long or short positions in such securities. PhillipCapital (India) Pvt. Ltd does not hold morethan 1% of the shares of the company(ies) covered in this report.

Suitability and Risks: This research report is for informational purposes only and is not tailored to the specific investment objectives, financial situation or particular requirements of any individual recipient hereof.Certain securities may give rise to substantial risks and may not be suitable for certain investors. Each investor must make its own determination as to the appropriateness of any securities referred to in this researchreport based upon the legal, tax and accounting considerations applicable to such investor and its own investment objectives or strategy, its financial situation and its investing experience. The value of any securitymay be positively or adversely affected by changes in foreign exchange or interest rates, as well as by other financial, economic or political factors. Past performance is not necessarily indicative of future performanceor results.

Sources, Completeness and Accuracy: The material herein is based upon information obtained from sources that PCIPL and the research analyst believe to be reliable, but neither PCIPL nor the research analysth h i f i i d h i i l d i h ld b li d h O i i d h i i i f h d i hirepresents or guarantees that the information contained herein is accurate or complete and it should not be relied upon as such. Opinions expressed herein are current opinions as of the date appearing on this

material and are subject to change without notice.Furthermore, PCIPL is under no obligation to update or keep the information current.

Copyright: The copyright in this research report belongs exclusively to PCIPL. All rights are reserved. Any unauthorized use or disclosure is prohibited. No reprinting or reproduction, in whole or in part, is permittedwithout the PCIPL’s prior consent, except that a recipient may reprint it for internal circulation only and only if it is reprinted in its entirety.

Caution: Risk of loss in trading in can be substantial. You should carefully consider whether trading is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances.

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PhillipCapital (India) Pvt. Ltd.Registered office: No. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel West, Mumbai 400013

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