1 July 2009

New HopeResearch Team (Rajat@MotilalOswal.com)Prices as of Friday, 26 June 2009

India Strategy

RESULTS PREVIEW

Quarter ending June 2009

1QFY10 - best quarterlyreturn in 17 years;

several sectors to showrecovery

Aggregate earnings in1QFY10 will likely show

a decline…

…but the earningsdowngrade cycle seems

to be behind

Government's policyactions will be key to

market uptrend

Impending union budgetpresentation will be

keenly watched

Monsoons are a crucialevent; inflation to turn

positive in 3QFY10

Valuations back tohistorical averages

226 June 2009

ContentsIndia Strategy 3-58

1. Automobiles 59-70Bajaj Auto 66Hero Honda 67Mahindra & Mahindra 68Maruti Suzuki India 69Tata Motors 70

2. Banking 71-96Andhra Bank 80Axis Bank 81Bank of Baroda 82Bank of India 83Canara Bank 84Corporation Bank 85Federal Bank 86HDFC 87HDFC Bank 88ICICI Bank 89Indian Bank 90Indian Overseas Bank 91J&K Bank 92Oriental Bank 93Punjab National Bank 94State Bank 95Union Bank 96

3. Cement 97-110ACC 104Ambuja Cement 105Birla Corporation 106Grasim Industries 107India Cements 108Shree Cement 109UltraTech Cement 110

4. Engineering 111-124ABB 116Bharat Electronics 117BHEL 118Crompton Greaves 119Cummins India 120Larsen & Toubro 121Siemens 122Suzlon Energy 123Thermax 124

5. FMCG 125-144Asian Paints 133Britannia Industries 134Colgate Palmolive 135

Dabur India 136GSK Consumer 137Godrej Consumer Products 138Hindustan Unilever 139ITC 140Marico 141Nestle India 142Tata Tea 143United Spirits 144

6. Information Technology145-156HCL Technologies 150Infosys 151MphasiS 152Patni Computer 153TCS 154Tech Mahindra 155Wipro 156

7. Infrastructure 157-165Hindustan Construction 161IVRCL 162Jaiprakash Associates 163Nagarjuna Construction 164Simplex Infrastructure 165

8. Media 166-176Deccan Chronicle 171HT Media 172Jagran Prakashan 173Sun TV Network 174TV Today 175Zee Entertainment 176

9. Metals 177-190Hindalco 183Hindustan Zinc 184Jindal Steel 185JSW Steel 186Nalco 187Sterlite Industries 188SAIL 189Tata Steel 190

10. Oil & Gas 191-208BPCL 199Cairn India 200Chennai Petroleum 201GAIL 202HPCL 203IOC 204Indraprastha Gas 205

MRPL 206ONGC 207Reliance Industries 208

11. Pharmaceuticals 209-226Aventis Pharma 214Biocon 215Cadila Healthcare 216Cipla 217Divi’s Laboratories 218Dr Reddy’s Labs. 219GSK Pharma 220Glenmark Pharma 221Jubilant Organosys 222Lupin 223Piramal Healthcare 224Ranbaxy Labs. 225Sun Pharmaceuticals 226

12. Real Estate 227-238DLF 237Unitech 238

13. Retailing 239-244Pantaloon Retail 243Titan Industries 244

14. Telecom 245-252Bharti Airtel 250Idea Cellular 251Reliance Communication 252

15. Textiles 253-259Alok Industries 256Arvind Mills 257Raymond 258Vardhman Textiles 259

16. Utilities 260-270CESC 266NTPC 267PTC India 268Reliance Infrastructure 269Tata Power 270

17. Others 271-275Blue Star 271Bombay Rayon 272Everest Kanto Cylinders 273Sintex Industries 274United Phosphorus 275

Results Preview

326 June 2009

India Strategy

Navin Agarwal (Navin@MotilalOswal.com)/Rajat Rajgarhia (Rajat@MotilalOswal.com)

Results PreviewQUARTER ENDING JUNE 2009

From fading darkness to new hopeFrom a quarter of ‘fading darkness’, we move on to a quarter of ‘new hope’. The threekey factors fuelling new hope are: (1) the formation of a stable government, (2) possibleupturn in the domestic economy, and (3) expectations of a revival in the global economy.The results of the 2009 general elections gave such a positive surprise that the marketindices jumped 18% in a single day. There are multiple expectations from the newgovernment and the markets will keenly watch the impending union budget presentation.

1QFY10: best quarterly return in 17 yearsThe BSE Sensex has delivered returns of 52% in 1QFY10 – the best quarter sinceMarch 1992. From the lows of March 2009, the index has moved up by 80%. Thestrong performance was a result of an unexpected positive outcome to the elections.The markets were also strong because of a strong global rally and signs of economicrecovery. Post this strong performance, India has emerged as one of the best performingmarkets globally, recouping the underperformance of the previous quarter.

Several sectors to show recoveryWe expect MOSL Universe (comprising 120 companies) excluding oil refining &marketing companies (RMCs) to report 8.5% YoY decline in sales, 7.5% YoY decline inEBITDA, and 13.5% YoY decline in net profit in 1QFY10. Decline in earnings wouldlargely be driven by Metals (-60% YoY) and Real Estate (-67% YoY). Excluding thesetwo sectors, aggregate earnings would grow at a healthy rate of 15% YoY. Severalsectors are expected to sustain their recovery mode – Autos, Cement, Pharma. EvenMetals and Real Estate would show sharp improvement QoQ.

Indian corporate earnings cycle: worst is behindIndian corporate earnings downgrade cycle seems to be behind. Our FY11 Sensex EPSestimate has been upgraded by 5% in the last three months, although our FY10 EPSestimate has remained unchanged. The stable EPS in FY09-10 masks a significantdowngrade in cyclicals, particularly since September 2008. While our FY09 SensexEPS estimate witnessed a downgrade of 14%, the downgrade in our FY10 Sensex EPSestimate has been higher at 30%. The large contributors to these downgrades werefrom global commodities and related sectors. If commodities sustain the recent uptrend,this sector could now be a source of earnings upgrades.

FY11 Sensex EPS growth back on track at 16%We estimate Sensex EPS for FY11 at Rs1,028, implying a growth of 16%. The keycontributors to earnings growth would be Tata Steel (21%), SBI (13%), Reliance

BSE Sensex: 14,765 S&P CNX: 4,376 26 June 2009

From fading darkness...

... to new hope

426 June 2009

Industries (12.5%), ICICI Bank (11%), HDFC Bank (8%), and Bharti Airtel (5%). Weexpect 23 of the 30 Sensex stocks to contribute positively to growth in FY11. Based onour current estimate of Rs1,028 for FY11, Sensex earnings would grow at a CAGR of8.6% over FY09-11 v/s a CAGR of 10.1% over FY07-09. Though earnings growth hasdecelerated, the magnitude is relatively low. Sensex EPS CAGR over FY02-11 wouldbe ~18%.

Government’s policy actions: key to market uptrendThere are multiple expectations from the new government to unleash a new set ofreforms, improve the growth prospects of the economy, and provide significant investmentopportunities. The government has a big task ahead of it in the form of striking the rightbalance between growth and fiscal prudence. To support India’s economy in a time ofglobal recession, the UPA government had rolled out stimulus packages. Following therecent improvement in performance, as indicated by various lead indicators like cementdispatches, auto volumes, and industrial production, the government may consider rollingback few of the measures to recoup lost revenue streams. This could be viewednegatively. However, possible divestment, increase in permissible FDI in sectors likeinsurance, steps towards consolidation of state-owned banks, oil price deregulation,continued infrastructure thrust, etc would be viewed positively.

Monsoons: next few weeks crucialIn its second-stage forecast, India Meteorological Department (IMD) has reduced itsSouth-West Monsoon rainfall estimate for 2009 to 93% from 96%. The seasonal rainfall(June to September) is likely to be below normal – 93% of long period average (LPA),with model error of ±4%. IMD expects the South-West Monsoon to cover the entirecountry by the middle of July and the Central Western region within this week. Heightenedmonsoon activity in rain-dependent Central and Southern India is crucial for agriculturalGDP growth in the coming season.

Valuations: from undervaluation to averagesAs the Sensex declined from 21,000 to below 10,000, all the key valuation parametersfell below the historical averages. The BSE Sensex now trades at a forward P/E of16.1x v/s the 15-year average of 14.3x, while the P/B multiple has declined from 4.7x to2.8x. Following the deceleration in earnings momentum, Sensex RoE is now estimatedat 18% v/s its peak RoE of 24%. At the current levels, earnings yield to bond yield is0.8x, close to the long-term average of 0.73x. (At March 2009 Sensex levels of 9,500, itwas about 1.3x.) This is one of the important parameters indicating that equities havemoved from a stage of undervaluation to their long-term average fair values.

Sectors/stocks to bet onGiven the new political equation, strong domestic liquidity, and emerging new opportunities,we play the following themes: (1) Continued focus on infrastructure, (2) economicreforms, and (3) expected global economic recovery. We recommend investing inFinancials, Infrastructure, Autos, and Telecom. Among the large caps, we like SBI,ICICI Bank, and IDFC in Financials, Grasim, Jaiprakash and DLF in Infrastructure,Hero Honda and M&M in Autos, and Bharti in Telecom. Other top bets in portfolio areJSPL, Wipro, ONGC and Bank of Baroda.

India Strategy

526 June 2009

India Strategy

1QFY10: best quarterly return in 17 years

The BSE Sensex has delivered returns of 52% in 1QFY10 (the best quarter since March1992). From the lows of March 2009, the Index has moved up by 80%. The strongperformance was a result of an unexpected positive outcome to the elections. The marketswere also strong because of a strong global rally and signs of economic recovery. Postthis strong performance, India has emerged as one of the best performing markets globally,recouping the underperformance of the previous quarter.

WORLD EQUITY INDICES CY09 - YTD PERFORMANCE (%) WORLD EQUITY INDICES 2QCY09 - YTD PERFORMANCE (%)

Source: Bloomberg/MOSL

51

41

40

32

11

2

-4

-5

48

53

24

13

38

India - Sensex

Russia

India - Nifty

Taiw an

China

Brazil

Thailand

South Korea

MSCI - Asia

Japan

S&P 500

US

UK

39

38

37

26

16

15

11

8

45

27

22

24

52India - Sensex

India - Nifty

Russia

Thailand

China

Brazil

MSCI - Asia

Taiw an

Japan

South Korea

S&P 500

US

UK

SENSEX QUARTERLY RETURN (%)

Source: Bloomberg/MOSL

-50

0

50

100

150

Mar

-92

Dec

-92

Sep

-93

Jun-

94

Mar

-95

Dec

-95

Sep

-96

Jun-

97

Mar

-98

Dec

-98

Sep

-99

Jun-

00

Mar

-01

Dec

-01

Sep

-02

Jun-

03

Mar

-04

Dec

-04

Sep

-05

Jun-

06

Mar

-07

Dec

-07

Sep

-08

Jun

09

Biggest quarterly gain since March 1992

The BSE Sensex hasdelivered returns of 52% in1QFY10 - the best quarter

since March 1992

626 June 2009

India Strategy

No change in leadership yet in this rallyThe BSE Sensex has delivered returns of 52% in 2QCY09 (1QFY10). This is on the backof a 21% CAGR over FY03-09. Surprisingly, the market has not seen any change inleadership in the recent rally. The top performers of the last six years continued tosignificantly outperform the markets last quarter. Engineering, Real Estate and Bankshave led the upturn. Also, the underperformers of FY03-09 have maintained their trend in2QCY09. Pharma and FMCG continue to be laggards. Autos performed in line with themarkets during both the periods.

COMPARISION OF INDIAN MARKETS WITH GLOBAL MARKETSINDEX EPS (RS) P/E (X) P/BV (X) ROE (%)

CY08/FY09 CY09/FY10 CY08/FY09 CY09/FY10 CY08/FY09 CY09/FY10 CY08/FY09 CY09/FY10Russia 955 116 156 8.2 6.1 0.8 0.7 9.6 12.0Korea 1,395 100 140 14.0 9.9 1.2 1.1 8.6 11.1Brazil 51,810 3,831 4,984 13.5 10.4 1.6 1.52 12.2 14.6US - S&P 500 920 59 74 15.6 12.5 1.9 1.7 12.1 14.0Hong Kong 18,600 1,114 1,320 16.7 14.1 1.8 1.7 10.5 11.7India - Sensex 14,765 871 883 17.0 16.7 3.3 2.9 19.7 17.3China 2,928 132 159 22.1 18.4 2.9 2.6 13.1 14.2Nikkei 9,877 220 432 44.8 22.9 1.3 1.2 2.9 5.4

Source : Bloomberg/MOSL

116103

89 88

6457 53 52 51 48 42

33 29

1210

40

70

100

130

Rea

l Est

ate

Eng

inee

ring

Met

al

Pvt

- B

anks

PS

U -

Ban

ks

Util

ities

Aut

o

Sen

sex

PS

U IT

Tele

com Oil

Pha

rma

FMC

G

SECTORAL PERFORMANCE FOR 2QCY09 YTD (%)

SECTORAL PERFORMANCE FOR 2003-2009 (%)

Source: Bloomberg/MOSL

3834

3128

24 23 22 2119

1610

0

12

24

36

48

Eng

inee

ring

Pvt

- B

anks O

il

PS

U -

Ban

ks

Met

al

Aut

o

PS

U

Sen

sex

FMC

G

Pha

rma IT

Engineering, Real Estate andBanks have led the upturn

726 June 2009

India Strategy

1QFY10: several sectors to show recovery

We expect MOSL Universe (comprising 120 companies) excluding oil refining & marketingcompanies (RMCs) to report 8.5% YoY decline in sales, 7.5% YoY decline in EBITDA,and 13.5% YoY decline in net profit in 1QFY10. Decline in earnings would largely bedriven by Metals (-60% YoY) and Real Estate (-67% YoY). Excluding these two sectors,aggregate earnings would grow at a healthy rate of 15% YoY. Several sectors are expectedto sustain their recovery mode – Autos, Cement, Pharma. Even Metals and Real Estatewould show sharp improvement QoQ.QUARTERLY PERFORMANCE - MOSL UNIVERSE (RS B)

SALES EBITDA NET PROFITJUN.09 VAR. VAR. JUN.09 VAR. VAR. JUN.09 VAR. VAR.

% YOY % QOQ % YOY % QOQ % YOY % QOQAuto (5) 218.7 8.6 -0.5 26.7 31.3 21.7 16.5 5.1 44.0Banks (17) 208.5 11.9 -1.7 165.6 15.1 -22.2 84.6 29.2 -20.3Cement (7) 106.0 14.1 -2.9 34.0 25.4 9.2 21.1 23.6 10.1Engineering (9) 220.1 11.1 -36.5 25.2 11.4 -56.1 16.6 -0.1 -59.0FMCG (12) 172.9 10.1 6.9 33.6 15.8 4.4 23.4 15.0 11.1IT (7) 241.3 9.5 -3.9 55.0 8.9 -11.1 43.4 13.4 -4.0Infrastructure (5) 65.4 32.6 -8.6 10.6 53.8 -12.8 4.1 52.2 -20.8Media (6) 15.7 0.7 -1.8 4.9 -8.6 9.6 2.9 -18.5 9.9Metals (8) 505.5 -31.3 -6.4 84.6 -47.6 74.3 40.8 -60.4 134.6Oil Gas & Petchem (10) 1,834.7 -27.2 7.2 251.3 14.4 -21.5 139.5 15.8 -39.5Pharma (13) 112.9 8.4 -1.6 21.2 -12.8 -9.5 16.5 6.1 703.6Real Estate (2) 19.3 -60.2 23.4 11.4 -61.5 202.5 7.5 -67.0 236.9Retail (2) 26.2 19.3 3.7 2.3 17.5 -1.5 0.7 2.5 -15.4Telecom (3) 196.6 23.0 4.1 77.3 19.1 7.5 40.4 2.8 4.2Textiles (4) 24.5 29.8 0.2 3.8 61.3 -4.5 0.2 9.0 -74.8Utilities (5) 170.0 7.3 -1.3 43.4 38.2 53.7 26.5 10.3 -8.1Others (5) 35.3 12.5 -1.7 6.5 20.6 -7.1 3.6 14.9 -11.0MOSL (120)* 4,174 -15.2 -1.0 858 1.3 -9.1 488 -4.0 -15.4Excl. Banks (103) 3,965 -16.3 -1.0 692 -1.5 -5.3 404 -8.9 -14.3Excl. Metals (112) 3,668 -12.3 -0.2 773 12.8 -13.6 448 10.2 -20.0Excl. RMs (117) 3,019 -8.5 -2.7 785 -7.5 3.1 454 -13.5 7.1Excl. Metals & RMs (109) 2,514 -1.9 -2.0 701 1.9 -1.7 413 -2.0 1.7Excl. Oil & Metals (102) 1,833 10.2 -6.7 522 12.0 -9.3 308 7.9 -6.3Sensex (30) 1,904 -12.5 -2.6 517 -9.1 11.8 300 -17.3 11.2Sensex Excl. Metals (27) 1,574 -3.8 -2.2 477 1.0 5.8 287 -4.9 3.6*Tata Steel Consolidated Source: MOSL

QUARTERLY PAT TREND MOSL UNIVERSE (RS B)SECTOR JUN-06 SEP-06 DEC-06 MAR-07 JUNE-07 SEP- 07 DEC-07 MAR-08 JUNE-08 SEP- 08 DEC-08 MAR-09 JUN-09Automobiles 12.4 12.8 12.6 15.1 14.1 15.2 16.8 16.9 15.7 13.5 5.2 11.4 16.5Banking 40.8 54.3 55.8 61.3 57.6 69.0 80.9 82.8 65.5 89.6 111.6 106.1 84.6Cement 14.2 12.1 15.9 16.6 19.0 16.9 16.9 16.3 17.1 14.5 14.3 19.2 21.1Engineering 7.6 13.1 17.3 29.7 9.2 19.0 19.7 34.9 16.6 19.8 24.9 40.4 16.6FMCG 15.0 16.6 17.1 15.0 18.2 19.2 20.9 18.5 20.3 20.5 21.9 21.0 23.4IT 26.1 31.4 34.4 37.5 35.0 37.8 39.9 40.2 38.3 43.4 47.0 45.3 43.4Infrastructure 1.8 1.5 2.0 2.7 2.5 1.9 2.9 4.1 2.7 3.3 3.5 5.2 4.1Media 1.7 1.8 2.6 2.6 3.3 3.2 3.9 2.6 3.5 3.0 2.7 2.6 2.9Metals 53.3 67.5 70.8 69.8 74.9 72.6 64.0 96.9 103.0 120.5 37.8 17.4 40.8Oil & Gas 82.0 131.3 107.9 93.5 110.0 158.1 115.8 76.9 120.5 -23.9 81.1 230.8 139.5Pharma 10.4 13.2 13.7 14.5 12.8 14.2 13.5 13.5 15.6 14.6 10.8 2.1 16.5Real Estate 0.7 1.0 4.5 3.6 25.4 24.3 26.7 25.4 22.9 22.9 8.1 2.2 7.5Retail 0.2 0.5 0.5 0.7 0.2 0.8 0.6 0.8 0.6 1.2 0.8 0.8 0.7Telecom 13.7 17.6 22.6 25.7 30.4 31.6 33.5 37.0 39.3 38.7 38.6 38.7 40.4Utilities 18.8 18.7 21.3 21.1 22.5 21.1 23.8 26.5 24.1 23.6 25.4 28.9 26.5MOSL Universe 301 396 401 413 438 508 483 498 509 410 437 577 488MOSL Exl. Oil & Gas 219 265 293 320 327 350 367 421 388 433 356 346 349

Autos, Cement, and Pharmaare expected to sustain theirrecovery mode; even Metalsand Real Estate would show

sharp improvement QoQ

826 June 2009

Net profit for MOSL Universe (ex Metals and RMCs) has grown consistently over thelast several quarters, with a peak in 1QFY09. While 3QFY09 saw significant moderationin absolute profits due to an unfavorable environment, net profits are likely to bounce backto previous highs in 1QFY10. India would be amongst the very few economies wherecorporate profits are likely be closer to previous highs again in this short time period.

Another impressive feature of 1QFY10 earnings growth is a very low contribution fromthe metals and real estate. The contribution of these two sectors in 1QFY09 was 24%,which has now declined to 11% in 1QFY10, despite the Universe profits being almost thesame. The contribution of earnings from sectors which are dependent on domestic economyand non-commodities have been on a rise, providing stability to total earnings.

CONTRIBUTION OF METALS & REAL ESTATE TO MOSL UNIVERSE PAT EX RMCS IS DECLINING

India Strategy

188214 211 231 245

275308 316

347379 397 404 421 418

365406 413

0

125

250

375

500

Jun-

05

Sep

-05

Dec

-05

Mar

-06

Jun-

06

Sep

-06

Dec

-06

Mar

-07

June

-07

Sep

- 07

Dec

-07

Mar

-08

June

-08

Sep

- 08

Dec

-08

Mar

-09

June

-09

CONSISTENT GROWTH IN NET PROFIT SINCE JUNE 2005 (RS B)*

*For MOSL Universe, excluding RMs, Metals Source: Company/MOSL

0

40

80

120

160

Jun-

05

Sep

-05

Dec

-05

Mar

-06

Jun-

06

Sep

-06

Dec

-06

Mar

-07

June

-07

Sep

- 07

Dec

-07

Mar

-08

June

-08

Sep

- 08

Dec

-08

Mar

-09

June

-09

0

8

16

24

32Profit of Metals and Real Estate (Rs b) - LHS as a % of MOSL Universe (Ex-RMs)

Decline in profit of2% from 1QFY09

Source: Company/MOSL

926 June 2009

Divergence in performance has peakedFor 1QFY10, we expect most sectors except global commodities to report positive earningsgrowth. Sectors that have benefited from the revival in the economy are Infrastructure,Banks, Cement and FMCG. Metals and Real Estate remain laggards, and are likely toreport negative earnings growth.

Inter-sector performance divergence has been stark, as earnings growthslowed down? Top-5 sectors account for 69% of the total earnings of MOSL Universe. Ex RMCs,

Oil & Gas would report a decline, led by ONGC.? Banking and Oil & Gas, the two biggest contributors to earnings, would account for

42% of earnings, while other sectors with strong earnings growth would be Infrastructure(52% YoY), Cement (24% YoY), FMCG (15%), IT (13%) and Utilities (10%).

? The highest earnings de-growth would be reported by Real Estate (67%), Metals(60%), and Oil & Gas (23%).

TOP 5 SECTORS CONTRIBUTE 69% OF TOTAL EARNINGS  CONTRIBUTION TO (%) CHG (%)  PAT PAT GR. YOYOil Gas & Petchem (7) 23 -44 -23Banks (17) 19 27 29IT (7) 10 7 13Metals (8) 9 -88 -60Telecom (3) 9 2 3Total (Top 5 Sectors) 69 -96 -18Total (Others) 31 196 -2MOSL Universe 100 100 -13

SECTORS WITH HIGHEST EARNINGS GROWTH CONTRIBUTION TO (%) CHG (%)  PAT PAT GR. YOYBanks (17) 19 27 29Cement (7) 5 6 24FMCG (12) 5 4 15Top 3 Total MOSL Universe 28 37 25Total (Others) 72 63 -23MOSL Universe 100 100 -13

SECTORS WITH EARNINGS DE-GROWTH CONTRIBUTION TO (%) CHG (%)  PAT PAT GR. YOYReal Estate (2) 2 -22 -67Metals (8) 9 -88 -60Oil Gas & Petchem (7) 23 -44 -23Bottom 3 Total MOSL Universe 34 -154 -41Total (Others) 66 254 14MOSL Universe 100 100 -13Note: For this section, the analysis excludes RMCs Source: MOSL

India Strategy

Banking and Oil & Gas, thetwo biggest contributors to

earnings, would account for42% of earnings

Highest earnings de-growthwould be reported by Real

Estate, Metals,and Oil & Gas

Expect most sectors exceptglobal commodities to report

positive earnings growth

1026 June 2009

India Strategy

Intra-sector performance divergence remains highWe note that besides the inter-sector performance divergence that we have highlightedabove, there would be significant intra-sector divergences in 1QFY10 performance. Considerthe following:? Hero Honda is likely to report earnings growth of 71% YoY v/s sector earnings growth

of 5% YoY. Maruti is expected to report earnings de-growth of 3% YoY, while TataMotors’ earnings are likely to de-grow by 61% YoY.

? ICICI Bank is expected to show flat earnings YoY v/s sector earnings growth of 29%YoY. Key outperformers would be: Bank of Baroda (up 45% YoY), PNB (up 44%YoY) and Indian Bank (up 41% YoY).

? BHEL, Crompton Greaves and L&T would report earnings growth YoY v/s flat growthin Engineering sector. ABB and Siemens are expected to report a decline in earnings.BHEL would report the highest earnings growth of 25% YoY, followed by CromptonGreaves at 12% YoY and L&T at 12% YoY.

? United Spirits is the only FMCG company under our coverage that is likely to reportnegative earnings growth of 23% YoY v/s FMCG sector earnings growth of 15%YoY. Marico, Dabur and GSK Consumer are expected to report earnings growth ofover 20% YoY.

? Wipro is expected to lead the top IT companies pack, with earnings growth of 10%YoY, followed by Infosys at 7% YoY and TCS at 5% YoY.

? Jaiprakash is expected to report strong PAT growth of 98% YoY, v/s Infrastructuresector earnings growth of 52% YoY. Hindustan Construction would report negativeearnings growth of 23% YoY.

? Bharti Airtel is expected to report earnings growth of 27% YoY v/s sector earningsgrowth of 3% YoY and Reliance Communication’s earnings de-growth of 30% YoY.

DISTRIBUTION OF COMPANIES BASED ON EARNINGS GROWTH PROPORTION OF COMPANIES WITH EARNINGS GROWTH OF 0-15%

PROPORTION OF COMPANIES WITH EARNINGS GROWTH>15% PROPORTION OF COMPANIES WITH EARNINGS GROWTH <0%

PAT NO OF COMPANIESRANGE GR. (%) >15% >0-15% <0%Dec 07 15.4 67 12 21Mar 08 24.3 57 19 24June 08 25.6 53 24 23Sep 08 19.7 48 26 26Dec 08 -8.4 36 22 42Mar 09 -13.3 41 19 40June 09 -13.4 44 20 37

Source: MOSL

67

5753

48

3641

44

25

37

49

61

73

Dec 07 Mar 08 June 08 Sep 08 Dec 08 Mar 09 June 09

12

19

2622

19 2024

0

7

14

21

28

Dec 07 Mar 08 June 08 Sep 08 Dec 08 Mar 09 June 09

2124 23

26

4237

40

0

12

24

36

48

Dec 07 Mar 08 June 08 Sep 08 Dec 08 Mar 09 June 09

There would be significantintra-sector divergences in

1QFY10 performance

1126 June 2009

INTRA-SECTOR 1QFY10 EARNINGS DIVERGENCESECTORS 1QFY10 PAT EARNINGS GROWTH IN EARNINGS NEGATIVE EARNINGS

GROWTH (%) EXCESS OF 15% GROWTH IN 0-15% EARNINGS GROWTH MOMENTUMAuto 5 Hero Honda, Bajaj Auto, Maruti Suzuki,

Mahindra & Mahindra Tata Motors

Banks 29 Canara Bank, Union Bank, Bank of India, OBCIndian Bank, SBI, BoB, ICICI Bank

HDFC, Axis BankCement 24 Shree Cement, ACC Grasim Industries

Ultratech, Ambuja CementsEngineering 0 Bharat Electronics, Crompton Greaves , ABB, Thermax,

BHEL Larsen & Toubro Suzlon Energy

FMCG 15 Godrej Consumer, Dabur, Asian Paints, United SpiritsITC, Nestle, Hind. Unilever

ColgateInfrastructure 52 J P Associates, Nagarjuna Simplex Infrastructure Hindustan Construction

Construction, IVRCL Infra.IT 13 HCL Technologies, Wipro, Infosys, Tech Mahindra,

MphasiS TCS Patni ComputerMedia -18 TV Today, Sun TV Jagran Prakashan Zee Entertainment,

Deccan ChronicleMetals -60 JSPL, Sterlite,

Hindalco, JSW Steel,SAIL, Tata Steel

Oil Gas & Petchem -23 Reliance Inds ONGC, GAIL, Cairn India

Pharma 6 Cipla, Lupin, Dr Reddy’ s, Glenmark, Piramal Healthcare, GSK Pharma Sun Pharma,

Divis Labs Ranbaxy LabsReal Estate -67 DLF, Unitech

Retail 2 Titan Industries Pantaloon

Telecom 3 Bharti Airtel, Reliance Comm. Idea Cellular

Textiles 9 Arvind Mills, Raymond,Vardhman

Utilities 10 Tata Power, PTC India CESC, NTPCReliance Infrastructure

Others 15 Bombay Rayon, United Phosphorous Everest KantoBlue Star, Sintex Inds.

Note: Earnings momentum represents number of companies in every sector in the MOSL Universe in each of the 3 buckets of earnings growth

30

124

42

2 2

8 3

3 1

2 1

00

0 1

7 2

0 0

2

1

1

5

1

1

3

8

6

4

2

0 1 1

1 0 2

0 0 4

2 3 0

3 1 1

2 3 2

India Strategy

ESTIMATES V/S ACTUAL SENSEX PAT GROWTH (%)

Source: MOSL

22 2328

33

18 16 1421

15 17

-6

31 30

43

3025

17 1924 21

-12 -17-15 -17

33

-24

-5

14

33

52

1QFY

07

2QFY

07

3QFY

07

4QFY

07

1QFY

08

2QFY

08

3QFY

08

4QFY

08

1QFY

09

2QFY

09

3QFY

09

4QFY

09

1QFY

10E

Estimates Actual YOY

1226 June 2009

India Strategy

1QFY10 EARNINGS DECOMPOSITION OF SENSEX STOCKS (RS B)SALES EBITDA PAT PAT

COMPANY NAME JUN-09 VAR. VAR. JUN-09 VAR. VAR. JUN-09 VAR. VAR. CONTRIBUTION% YOY % QOQ % YOY % QOQ % YOY % QOQ % GR. %

ACC 20.0 11.9 -2.8 6.4 54.1 -1.5 4.0 53.7 -3.9 1.35 2.2Bharti Airtel 101.6 19.8 3.4 42.7 21.1 6.6 25.8 27.2 15.0 8.58 8.8BHEL 51.8 19.6 -50.9 7.2 40.1 -65.0 6.0 25.0 -62.5 1.99 1.9DLF 14.1 -63.1 25.3 8.8 -62.4 470.8 6.4 -65.4 305.0 2.15 -19.4Grasim Industries 28.0 7.9 -3.1 7.5 -0.5 10.1 4.8 -6.2 25.3 1.61 -0.5HDFC 9.4 26.6 -12.8 8.3 27.1 -19.4 5.9 25.4 -19.8 1.96 1.9HDFC Bank 19.2 11.4 3.7 13.5 31.7 -13.8 5.8 24.9 -8.1 1.93 1.8Hero Honda 37.9 33.1 11.0 5.9 74.4 10.5 4.7 70.9 16.0 1.55 3.1Hind. Unilever 45.5 5.8 12.7 7.4 17.1 24.8 6.2 15.0 35.9 2.07 1.3Hindalco 37.5 -19.4 2.7 4.8 -49.1 27.5 2.6 -62.1 29.8 0.88 -6.9ICICI Bank 21.4 2.2 -0.1 20.6 19.9 -4.6 7.3 0.8 -1.3 2.45 0.1Infosys 52.2 7.5 -7.4 16.5 11.7 -12.7 13.6 6.7 -15.2 4.52 1.3ITC 40.8 3.8 4.0 13.4 14.9 2.8 8.7 16.4 7.7 2.90 2.0Jaiprakash Associates 18.6 62.0 -10.7 6.0 90.8 -15.5 2.5 97.8 -20.2 0.84 2.0Larsen & Toubro 83.1 20.4 -20.6 8.1 21.9 -41.1 5.5 11.7 -48.5 1.83 0.9Mahindra & Mahindra 39.5 23.7 9.2 4.7 42.0 11.4 3.1 34.5 11.9 1.04 1.3Maruti Suzuki 60.9 25.3 -5.3 6.4 11.9 41.7 4.5 -3.2 85.5 1.50 -0.2NTPC 106.8 12.0 -6.7 35.3 45.6 58.8 20.9 10.4 -12.3 6.98 3.1ONGC 172.2 -14.1 25.6 87.7 -25.4 51.8 46.2 -30.0 109.1 15.38 -31.5Reliance Comm 64.3 20.8 5.0 25.9 15.1 8.6 11.5 -29.6 -15.2 3.84 -7.7Reliance Inds. 295.6 -28.9 4.2 65.5 7.0 20.5 43.6 6.1 11.4 14.53 4.0Reliance Infrastructure 22.4 -2.0 -6.0 2.5 -13.6 58.3 2.7 7.5 -9.1 0.90 0.3State Bank 48.5 0.6 0.1 36.7 -7.4 -30.5 19.0 15.7 -30.8 6.33 4.1Sterlite Inds. 44.3 -23.1 0.7 8.1 -55.7 -3.5 5.3 -53.7 36.5 1.78 -9.8Sun Pharma 9.5 -7.7 -17.9 3.2 -41.3 -15.7 3.2 -36.3 -20.3 1.06 -2.9Tata Motors 58.3 -15.8 -12.1 5.9 10.9 16.6 1.6 -61.0 411.6 0.55 -4.1Tata Power 18.8 -7.0 27.8 4.1 36.0 41.3 1.8 16.0 95.2 0.61 0.4Tata Steel 247.9 -43.0 -6.1 27.8 -60.3 7107.9 5.0 -88.3 -137.7 1.67 -59.9TCS 68.8 7.4 -4.0 16.9 10.2 -10.2 12.7 5.5 -3.0 4.25 1.1Wipro 64.7 8.5 -1.2 9.7 -5.8 -15.1 9.0 10.7 -0.7 3.00 1.4Sensex (30) 1,904 -12.5 -2.6 517 -9.1 11.8 300 -17.3 11.2Sensex Excl Metals (27) 1,574 -3.8 -2.2 477 1.0 5.8 287 -4.9 3.6Sensex Excl Metals & RE (26) 1,560 -2.4 -2.4 468 4.4 4.2 281 -0.9 1.8Note: Tata Steel Consolidated Source: MOSL

Key earnings divergence for Sensex in 1QFY10? Sensex earnings are expected to decline by 17% in 1QFY10, led by a sharp decline in

Metals and Real Estate. Excluding Metals and Real Estate, Sensex earnings would beflat YoY, and up 2% QoQ.

? Bharti Airtel (27% YoY growth) and SBI (16% YoY growth) would be the biggestcontributors to Sensex earnings growth for 1QFY10.

? Reliance Industries (6% YoY), NTPC (10% YoY), and Hero Honda (71% YoY) wouldalso contribute positively to Sensex earnings growth in 1QFY10.

? 20 (v/s 18 in 4QFY09) of the 30 Sensex stocks would report positive earnings growth.? Among the Sensex stocks, Commodities would report the biggest earnings contraction:

Tata Steel (-60%), ONGC (-32%), DLF (-19%), Sterlite Industries (-10%), RelianceCommunication (-8%), and Hindalco (-7%).

Sensex earningsare expected to decline by

17% in 1QFY10, led by asharp decline in Metals and

Real Estate

1326 June 2009

India Strategy

TREND IN SENSEX EPS FY00-11E

EPS growth YoY (%)

FY09E SENSEX EPS AT RS871 (GROWTH OF 4.4%)

Indian corporate earnings cycle: worst is behind

? Indian corporate earnings downgrade cycle seems to be behind. Our FY11Sensex EPS estimate has been upgraded by 5% in the last three months,although our FY10 EPS estimate has remained unchanged.

? The stable EPS in FY09-10 masks a significant downgrade in cyclicals, particularlysince September 2008. While our FY09 Sensex EPS estimate witnessed a downgradeof 14%, the downgrade in our FY10 Sensex EPS estimate has been higher at 30%.

? The large contributors to these downgrades were from global commodities and relatedsectors. If commodities sustain the recent uptrend, this sector could now be a sourceof earnings upgrades.

? Over the last three months, we have seen stability in our estimates. Whileour FY09 and FY10 earnings estimates are almost unchanged at the aggregatelevels, we are upgrading our FY11 estimates by 5% and our FY11 EPS growthestimate is now 16%.

? FY08-10 marks the period of consolidation for Indian corporate earnings, similar tothe period of consolidation during FY00-03. Earnings grew at a CAGR of 25% afterthe period of consolidation (FY03-08).

? Commissioning of a large number of mega projects coupled with recovery in globaland domestic economy will mark a repetition of the strong earnings growth trend andupgrades starting FY11, in our view.

871 8831028

718

348

236216 272

450523

280

833

3715 29 1628 9 -23 1 16 4 1 16

150

400

650

900

1150

FY00

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

E

FY10

E

FY11

E

-24

-8

8

24

40

Sensex EPS (Rs) Sensex EPS Grow th (%)

1,007

840877 871891

955989

908

101610021011

1064

894

1 7 92121202018171610 5 4

820

890

960

1030

1100

Dec

-06

Mar

-07

Jun-

07

Sep

-07

Dec

-07

Mar

-08

Jun-

08

Sep

-08

Oct

-08

Dec

-08

Feb-

09

Mar

-09

June

09

0

6

12

18

24

FY 09 EPS % Grow th Revision in FY09 EPS

Source: MOSL

Our FY11 Sensex EPSestimate has been upgraded

by 5% in the lastthree months

1426 June 2009

FY10E EPS AT RS883 (GROWTH OF 1.4%) FY11E EPS AT RS1,028 (GROWTH OF 16.4%)

Source: MOSLEPS growth YoY (%)

883

1061

882970

886

12591373 1299 1309

29 30 29 24 17 8 5 1 1

800

950

1,100

1,250

1,400

Dec

-07

Mar

-08

Jun-

08

Sep

-08

Oct

-08

Dec

-08

Feb-

09

Mar

-09

June

09

0

8

16

24

32

FY10 EPS % Grow th Revision in FY10 EPS

1028

980

1611

800

875

950

1,025

1,100

Mar-09 June 0910

12

14

16

18

FY11 EPS % Grow th Revision in FY11 EPS

31 30

43

33 3025

17 1924

21

-12

20

38

-17 -18-17-20

-5

10

25

40

55

1QFY

07

2QFY

07

3QFY

07

4QFY

07

1QFY

08

2QFY

08

3QFY

08

4QFY

08

1QFY

09

2QFY

09

3QFY

09

4QFY

09

1QFY

10E

2QFY

10E

3QFY

10E

4QFY

10E

TOP 5 & WORST 5 EPS ESTIMATE CHANGE IN LAST 3 MONTHS (FY10 & FY11) PREVIEW EPS (RS) VARIANCE PREVIEW EPS (RS) VARIANCE

4QFY09 1QFY10 (%) 4QFY09 1QFY10 (%)Top 5 EPS Estimates Change FY10 Worst 5 EPS Estimates Change FY10Grasim Industries 183.6 266.6 45.2 Tata Steel 83.2 48.1 -42.1ACC 55.5 75.2 35.6 Tata Power 71.7 57.3 -20.1Sterlite Inds. 23.5 31.7 34.9 Tata Motors 16.7 14.9 -10.4Mahindra & Mahindra 60.6 68.9 13.8 Infosys 106.6 96.9 -9.1Hero Honda 79.5 87.7 10.3 TCS 26.7 25.5 -4.6

Top 5 EPS Estimates Change FY11 Worst 5 EPS Estimates Change FY11DLF 8.9 19.1 114.3 Tata Power 65.3 57.4 -12.1Grasim Industries 150.5 244.5 62.4 TCS 27.3 25.0 -8.6ACC 35.9 57.5 60.2 Tata Motors 19.4 18.0 -7.1Sterlite Inds. 33.3 43.5 30.4 Infosys 105.9 101.0 -4.7State Bank 198.8 235.1 18.3 ITC 11.5 11.3 -2.0

Source: MOSL

SENSEX QUARTERLY PAT TREND (%)

Source: MOSL

India Strategy

1526 June 2009

Domestic sectors have assumed growth leadershipOur aggregate earnings estimates for FY10 have remained unchanged since March 2009.However, it is interesting to note that several stocks, largely domestic-market oriented andnon-cyclical businesses, have seen upgrades. While Autos and Cement have maintainedthe trend of upgrades since December 2008, Banks and Telecom have seen higher earningsin the last three months. The trend of earnings upgrades is likely to continue for thesesectors.

CHANGES IN FY10 EPS ESTIMATES OVER LAST FEW MONTHS% UPGRADE / 

OCT-08 DEC-08 JAN-09 MAR-09 MAY-09 CURRENT DOWNGRADE FROM MAR-09

Domestic / Non Cyclical StoriesHero Honda 77.6 76.0 76.0 79.5 87.1 87.7 10.3Maruti Suzuki 59.1 48.7 46.1 50.1 53.1 54.3 8.5ACC 41.7 39.7 39.7 55.5 66.4 75.2 35.6Grasim Industries 202.1 172.3 155.7 183.6 215.7 266.6 45.2State Bank 146.3 153.8 150.9 134.2 141.7 142.7 6.3BHEL 89.9 86.5 86.5 86.5 87.8 87.8 1.4IVRCL Infra. 23.8 21.2 21.4 18.8 22.6 22.6 20.2Bharti Airtel 55.0 54.9 52.3 51.9 54.4 55.2 6.3

Source: MOSL

Cyclicals yet to see upgrades; future earnings driversGoing forward, the big drivers for upgrade of aggregate earnings growth for CorporateIndia will come from cyclicals / high-beta names, in our view. We are yet to see majorchanges in estimates for these stocks, post the major downgrade in 2HFY09. These stocksare highly sensitive to business cycles, with small changes in assumptions resulting in largechanges in earnings growth.

CHANGES IN FY10 EPS ESTIMATES OVER LAST FEW MONTHS% UPGRADE /  % UPGRADE / 

OCT-08 DEC-08 JAN-09 MAR-09 MAY-09 CURRENT DOWNGRADE DOWNGRADE FROM OCT-08 FROM MAR-09

Tata Steel 86.2 85.1 78.0 83.2 - 48.1 -44.1 -42.1JSW Steel 126.2 90.5 99.2 102.6 63.1 67.5 -46.5 -34.1DLF 40.0 34.0 15.6 13.6 13.8 13.5 -66.2 -1.0ICICI Bank 42.7 42.2 38.6 33.6 35.3 34.3 -19.5 2.2Larsen & Toubro 64.7 57.4 56.8 57.9 58.5 58.5 -9.5 1.2ONGC 105.5 97.6 84.5 85.7 - 89.4 -15.2 4.4

Source: MOSL

India Strategy

BEST 5 PERFORMING STOCKS WITH THERE CHANGE IN FY10 EPS WORST 5 PERFORMING STOCKS WITH THERE CHANGE IN FY10 EPS FY10 EPS (RS) FY10 EPS (RS)COMPANY NAME AS OF CURRENT % UPGRADE/ YTD COMPANY NAME AS OF CURRENT % UPGRADE/ YTD

DEC-08 DOWNGRADE PRICE DEC.08 DOWNGRADE PRICECHG. (%) CHG. (%)

Jindal Steel & Power 192.1 207.8 8.2 168.0 Ranbaxy Labs 12.5 -4.8 -138.3 1.1

Mahindra & Mahindra 70.6 68.9 -2.4 153.8 Hind. Unilever 11.3 10.6 -6.8 6.0

Sterlite Inds. 39.0 31.7 -18.8 134.7 Sun Pharma 63.9 69.8 9.3 7.1

Reliance Infrastructure 41.5 47.0 13.1 118.1 NTPC 8.8 10.2 15.6 7.7

Tata Motors 18.4 14.9 -18.8 114.0 BPCL 59.0 43.7 -25.9 12.0Source: MOSL

Several stocks, largelydomestic-market oriented

and non-cyclical businesses,have seen upgrades

Going forward, the bigdrivers for upgrade of

aggregate earnings growthfor Corporate India will

come from cyclicals / high-beta names

1626 June 2009

Few sectors / stocks are very sensitive to assumptionsIn this section, we discuss the earnings sensitivity of few sectors and stocks to variousbusiness assumptions.

Autos? Hero Honda: Our FY10 estimates factor in volume growth of 13%, resulting in an

EPS of Rs87.7. Q1 volumes are 1.1m, and Q1 volumes usually average 23-25% ofannual volumes. At this run rate, our volume estimate for FY10 could see furtherupgrade of 5% (4.4m), resulting in an EPS of Rs92.7.

? M&M: Our estimates factor in volume growth of 7% (14% including acquisitions)based on 5% growth in tractors, 8% growth in UVs, and 8% growth in three-wheelers.Our consolidated EPS estimate for FY10 is Rs69. Q1 volumes are 94,304 units, andQ1 volumes usually average 22-23% of annual volumes. At this rate, our volumeestimate for FY10 could see further upgrade of 10%, resulting in EPS of Rs79.5.

? Maruti: Our estimates factor in volume growth of 14%, driven by 9% growth indomestic sales and 70% growth in exports, translating into an EPS of Rs54. Marginsand currency movement could result in upgrade in our estimates. At 5% higher volumes,EPS will be Rs58.

? Tata Motors: We estimate volume growth of 7%, driven by 2% growth in CVs and13% growth in PVs, resulting in consolidated EPS of Rs14.9 ex-JLR. At 5% highervolumes, ex-JLR EPS works out to Rs17.9.

EARNINGS SENSITIVITY TO VOLUMESEPS -10% -5% BASE CASE +5% +10%Hero Honda (~13%) 79.7 83.7 87.7 92.7 98.9M&M (~14%)* 58.3 63.6 68.9 74.2 79.5Maruti (~14%) 46.7 50.5 54.3 58.1 61.9Tata Motors (~7%) 9.1 12 14.9 17.9 20.7* incl PTL; Number in brackets are current volume assumptions Source: MOSL

CementFor cement, we had modeled prices to decline by an average Rs5/bag in 2QFY10 and byfurther Rs5/bag in 3QFY10. Given the strength in volumes in 1HCY09, price declinescould be more moderate than our estimates. Any change in excise duty in the upcomingbudget will also be an important factor.? Our EPS estimate for ACC at current assumptions is Rs76.9 in CY09. If there is no

decline in prices, EPS will be Rs83.2.? Our EPS estimate for Grasim is Rs252. If there is no decline in prices, FY10 EPS

would be upgraded to Rs283.

EPSBASE CASE BASE CASE BASE CASE* BASE CASE BASE CASE

- RS10/BAG - RS5/BAG + RS5/BAG + RS10/BAGACC 64.3 70.6 76.9 83.2 89.5Grasim 191.6 222.1 252.5 282.9 313.3* Base case assumes Rs5/bag QoQ decline each in 2QFY10 & 3QFY10 Source: MOSL

RS5/BAG DECLINE IN FY10 OVER FY09  EPS IMPACT ON EPS CHG (%)ACC 62.1 13.0 -17.3Grasim 242.1 23.8 -9.0

Source: MOSL

India Strategy

1726 June 2009

ONGC and Reliance Industries1. ONGCLikely upgrades in ONGC could be from: (1) gas price hike, (2) lower than estimatedsubsidy burden (can be due to partial de-regulation)? Every 10% hike in gas price increases ONGC’s EPS by 2% (Rs2/share)? Lower than estimated subsidy, led by likely de-regulation of petrol/diesel, will increase

ONGC’s EPSONGC’s EPS estimate remains unchanged over crude price of US$50/bbl, if no changesare made in the system and upstream bears 1/3rd subsidy.However, in case of de-regulation of petrol/diesel, ONGC’s EPS would move up fromRs90 to Rs116 (at crude price of US$70/bbl and exchange rate of Rs48/US$).

ONGC: FY10 CONS EPS SENSITIVITY TO APM GAS PRICE  CURRENT BASE CASE        Gas Price (US$/mmbtu) 2.0 2.1 2.2 2.4 2.6 2.8 4.0Change from Current (%)   5 10 20 30 40 100ONGC FY10 Cons EPS (Rs) 88 89 90 93 94 96 108Change from Current (%)   1 2 4 7 9 22

Source: MOSL

2. Reliance IndustriesLikely upgrades in RIL could come from (1) higher than expected GRM; (2) higher thanexpected gas volumes, and (3) lower than expected decline in petchem margins.

For FY10, we have factored in GRM of US$8/bbl and KG-D6 gas sales of 48mmscmd inour estimates. We have factored in ~33% decline in petchem EBIT in FY10.

? Every US$1/bbl increase in GRM increases RIL’s EPS by 7% (Rs9.7/share).? Every 1mmscmd increase in average FY10 KG-D6 gas volume will change EPS by

4% (Rs1.2/ share).

RIL FY10 EPS SENSITIVITY TO GRM AND KG-D6 GAS PRODUCTIONGRM (US$/BBL)

    6 8 10 12

44 115.9 135.3 154.6 174.048 120.5 139.9 159.3 178.752 125.2 144.6 163.9 183.356 129.8 149.2 168.6 188.0

Source: MOSL

India Strategy

GAS

PRO

DUCT

ION

(MM

SCM

D)

1826 June 2009

India Strategy

SENSITIVITY OF EPS TO CHANGES IN PRICESFY10 EPS EPS CHANGE ON STEEL PRICE CHANGE (%)

(RS) 5 10 15 20Tata Steel 48.1 87.0 174.0 260.9 347.8SAIL 13.9 23.0 46.0 69.1 92.1JSW Steel 67.5 36.0 72.0 108.0 144.0JSPL 207.8 11.1 22.2 33.3 44.4

SENSITIVITY OF EPS TO CHANGES IN PRICESFY10 EPS EPS CHANGE ON STEEL PRICE CHANGE (%)

(RS) 5 10 15 20Nalco 13.0 10.0 20.0 30.0 40.0Hindalco 5.0 25.0 50.0 75.0 100.0Hindustan zinc 56.6 7.5 15.0 22.5 30.0Sterlite 31.7 8.5 17.0 25.5 34.0

Source: Company/MOSL

Metals? Our estimates for steel companies are based on HRC price assumption of Rs24,000/

ton (~US$500/ton). Our FY10 estimates for non-ferrous companies are based onprice assumptions of US$1,500/ton for aluminum, zinc and lead and US$4,600/ton forcopper.

? Current base metal prices are higher than our FY10 assumptions, with aluminum quotingat ~US$1,650/ton, zinc at ~US$1,600/ton and copper at US$5,000/ton.

? Among the steel companies, Tata Steel and JSW Steel are the most sensitive to steelprices - a 10% change in blended realizations can change estimates by 174% and72%, respectively.

? Hindalco is the most sensitive to price changes in non-ferrous metals - a 10% changein realizations changes EPS by 50% v/s 20% change in EPS of Nalco.

1926 June 2009

Sensitivity of Sensex EPS to constituent stock EPSThe table below indicates the sensitivity of Sensex EPS to the EPS of each constituentstock. Companies with the highest impact on aggregate growth are Reliance (SensexEPS changes 1.8% for every 10% change in RIL’s EPS), SBI (Sensex EPS changes0.8% for every 10% change in SBI’s EPS), and Infosys (Sensex EPS changes 0.7% forevery 10% change in Infosys’ EPS).

ONGC and Tata Steel could provide the biggest change to our estimates as the earningsof these two companies remain highly sensitive to underlying commodities.

SENSITIVITY OF SENSEX EPS TO CONSTITUENT STOCK EPS  MKT CAP   CURRENT EPS ASSUMING IMPACT ON

EPS (RS) 10% UPGRADE (RS) SENSEX EPSUS$B WEIGHT (%) FY10E FY10E (%)

Reliance Inds. 66.0 15.0 139.9 153.9 1.8State Bank 22.5 4.6 185.9 204.5 0.8Infosys 20.8 8.1 96.9 106.6 0.7ONGC 44.4 4.0 89.4 98.4 0.6ICICI Bank 16.3 7.4 34.3 37.8 0.6Bharti Airtel 31.4 5.0 55.2 60.7 0.6Larsen & Toubro 18.0 7.4 58.5 64.4 0.5Tata Steel 7.0 2.2 48.1 53.0 0.4ITC 15.5 4.9 9.9 10.9 0.4HDFC Bank 14.4 5.6 63.2 69.5 0.4HDFC 13.6 5.6 92.6 101.8 0.4Reliance Comm 12.9 2.1 25.8 28.4 0.3Grasim Industries 4.2 1.4 266.6 293.3 0.3BHEL 21.0 3.3 87.8 96.5 0.2Mahindra & Mahindra 4.3 1.5 68.9 75.8 0.2NTPC 33.6 2.3 10.2 11.2 0.2TCS 15.3 1.7 25.5 28.0 0.2Hind. Unilever 11.7 2.7 10.6 11.6 0.2Sterlite Inds. 8.8 1.6 31.7 34.9 0.1Tata Power 5.3 1.7 57.3 63.0 0.1Hero Honda 6.0 1.4 87.7 96.4 0.1ACC 2.9 0.7 75.2 82.7 0.1Maruti Suzuki 6.2 1.4 54.3 59.8 0.1Wipro 11.5 1.0 24.9 27.3 0.1Reliance Infrastructure 5.8 1.7 47.0 51.7 0.1Jaiprakash Associates 5.8 1.4 8.4 9.2 0.1DLF 11.6 1.3 13.5 14.8 0.1Sun Pharma 5.6 1.0 69.8 76.8 0.1Hindalco 3.2 0.9 5.0 5.5 0.1Tata Motors 3.6 0.9 14.9 16.4 0.1Sensex 449 100 883 971 10

Source: MOSL

India Strategy

Any significant change inONGC and Tata Steel’searnings could drive a

meaningful upgrade

2026 June 2009

Sensex earnings to grow 29% in 2HFY10 v/s 18% decline in 1HDespite flat earnings growth forecast in FY10, growth rates will vary across quarters.While 1HFY10 would see an 18% drop in Sensex earnings, we expect growth of 29% in2HFY10, driven by a sharp rebound in earnings in Metals, Reliance, and ICICI Bank.

Few stocks with very strong growth across all four quarters are Bharti, BHEL, HDFCBank, Hero Honda and Jaiprakash.

SENSEX COMPANIES PAT GROWTH (%)GROWTH (%)

COMPANY NAME 1HFY10 2HFY10 1QFY10 2QFY10 3QFY10 4QFY10Strong Growth in both Half'sBharti Airtel 26.1 21.2 27.2 24.9 22.3 20.2BHEL 22.6 19.4 25.0 20.8 26.5 15.6HDFC 19.5 14.7 25.4 14.3 15.2 14.3HDFC Bank 25.6 28.3 24.9 26.3 24.9 31.7Hero Honda 57.4 19.4 70.9 45.4 28.1 12.9ITC 14.7 14.4 16.4 13.2 11.8 17.2Jaiprakash Associates 54.5 26.8 97.8 27.3 27.8 26.2Low Growth in both Half'sHindalco -65.9 -35.1 -62.1 -69.6 -57.0 23.4Infosys -2.1 -8.5 6.7 -9.8 -10.6 -6.5Larsen & Toubro 12.2 2.0 11.7 12.7 12.5 -4.4NTPC 3.3 3.3 10.4 -4.2 17.1 -8.5Reliance Infrastructure 5.5 -2.1 7.5 3.1 -4.5 0.1State Bank 0.0 -1.3 15.7 -11.4 -7.1 4.1TCS -1.3 -4.4 5.5 -7.8 -8.0 -0.7Wipro 3.9 6.4 10.7 -2.9 1.6 11.1Earnings Recovery in 2HFY10DLF -72.9 56.1 -65.4 -80.1 -4.7 312.7Grasim Industries -7.8 11.5 -6.2 -9.6 17.4 6.3ICICI Bank -12.4 13.9 0.8 -21.9 -20.4 72.6Mahindra & Mahindra 26.1 56.7 34.5 19.2 522.8 -7.3Maruti Suzuki 6.9 66.0 -3.2 22.8 61.5 69.8ONGC -21.3 96.8 -30.0 -9.5 94.6 99.1Reliance Comm -26.9 2.3 -29.6 -24.3 -6.1 11.5Reliance Inds. 10.7 55.6 6.1 15.2 52.6 58.2Sterlite Inds. -56.9 42.6 -53.7 -59.7 21.7 68.6Sun Pharma -34.9 0.7 -36.3 -33.5 0.1 1.4Tata Motors -47.9 LP -61.0 -27.9 LP 747.1Tata Power 1.0 95.4 16.0 -11.1 93.4 97.4Tata Steel -83.0 LP -88.3 -78.6 13.6 LPEarnings Detoriation in 2HFY10ACC 27.0 -6.3 53.7 2.2 3.8 -14.4Hind. Unilever 15.5 9.5 15.0 16.2 8.9 10.4Sensex (30) -17.9 28.6 -17.3 -18.5 19.8 37.7LP = Loss to Profit Source: MOSL

India Strategy

While 1HFY10 would see an18% drop in Sensex

earnings, we expect growthof 29% in 2HFY10

2126 June 2009

India Strategy

FY11 Sensex EPS growth back on track at 16%We estimate Sensex EPS for FY11 at Rs1,028, implying a growth of 16%. The keycontributors to earnings growth would be Tata Steel (21%), SBI (13%), Reliance Industries(12.5%), ICICI Bank (11%), HDFC Bank (8%), and Bharti Airtel (5%). We expect 23 ofthe 30 Sensex stocks to contribute positively to growth in FY11.

Based on our current estimate of Rs1,028 for FY11, Sensex earnings would grow at aCAGR of 8.6% over FY09-11 v/s a CAGR of 10.1% over FY07-09. Though earningsgrowth has decelerated, the magnitude is relatively low. Sensex EPS CAGR over FY02-11 would be ~18%.

SENSEX STOCKS EARNINGS ESTIMATES AND CONTRIBUTION TO SENSEX EPS GROWTHEPS (RS) EPS GROWTH (%) CONTRIBUTION (%) CONT. GR. %

COMPANY NAME FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E FY11ETata Steel 134.4 48.1 87.7 42.7 -64.2 82.1 12.1 4.3 6.7 21.4State Bank 178.4 185.9 235.1 25.7 4.2 26.4 8.0 8.2 8.9 13.2Reliance Inds. 103.1 139.9 155.3 5.0 35.7 11.0 12.2 17.8 17.0 12.5ICICI Bank 33.8 34.3 44.5 -9.7 1.7 29.6 5.9 5.9 6.5 10.6HDFC Bank 52.8 63.2 84.2 27.7 19.8 33.3 3.0 3.7 4.3 7.6Bharti Airtel 44.7 55.2 63.0 26.4 23.5 14.2 4.6 5.6 5.5 4.9Reliance Comm 29.8 25.8 32.8 11.7 -13.4 26.9 3.4 2.9 3.1 4.7HDFC 80.2 92.6 111.2 17.5 15.4 20.1 3.2 3.7 3.8 4.5BHEL 72.9 87.8 112.9 42.1 20.4 28.7 1.9 2.3 2.6 4.0ITC 8.7 9.9 11.3 4.6 14.7 13.9 3.6 4.0 3.9 3.4Larsen & Toubro 51.5 58.5 65.0 31.1 13.7 11.1 4.2 4.7 4.5 3.2Sterlite Inds. 46.8 31.7 43.5 -24.0 -32.3 37.2 2.1 1.4 1.5 2.5DLF 26.9 13.5 19.1 -41.3 -49.8 41.5 1.8 0.9 1.1 2.3Infosys 102.5 96.9 101.0 29.5 -5.5 4.2 7.8 7.3 6.5 1.9Maruti Suzuki 42.1 54.3 66.0 -28.8 29.0 21.5 0.9 1.2 1.3 1.6NTPC 9.9 10.2 12.2 9.9 3.3 19.5 1.9 1.9 1.8 1.3Hind. Unilever 9.4 10.6 11.7 15.6 12.4 11.0 1.6 1.8 1.7 1.2Mahindra & Mahindra 53.0 68.9 74.8 -2.7 30.0 8.6 1.8 2.3 2.1 1.2Hero Honda 64.2 87.7 99.1 32.4 36.6 13.0 1.0 1.3 1.3 1.1Sun Pharma 87.8 69.8 82.0 22.2 -20.4 17.4 1.1 0.9 0.9 0.9Tata Motors 9.9 14.9 18.0 -72.7 51.5 20.7 0.5 0.7 0.7 0.9Reliance Infrastructure 46.4 47.0 47.9 52.3 1.3 1.9 1.1 1.1 0.9 0.1Tata Power 53.7 57.3 57.4 55.9 6.8 0.1 1.3 1.4 1.2 0.0Wipro 23.6 24.9 24.7 6.7 5.2 -0.8 1.1 1.1 0.9 -0.1Jaiprakash Associates 7.2 8.4 8.2 38.6 16.1 -2.0 0.7 1.0 0.8 -0.1Hindalco 9.9 5.0 4.8 -38.9 -49.6 -3.9 1.8 0.9 0.7 -0.2TCS 26.2 25.5 25.0 3.0 -2.9 -2.0 2.0 1.9 1.6 -0.2ONGC 90.6 89.4 86.8 -2.5 -1.3 -3.0 6.0 5.9 4.9 -1.1Grasim Industries 238.5 266.6 244.5 -18.9 11.8 -8.3 2.6 2.8 2.2 -1.4ACC 57.9 75.2 57.5 -15.0 30.0 -23.5 1.0 1.2 0.8 -1.8Sensex 871 883 1028 4.5 1.4 16.4 100 100 100 100

Source: MOSL

We estimate Sensex EPS forFY11 at Rs1,028, implying a

growth of 16%

2226 June 2009

Government’s policy actions: key to market uptrend

The results of the 2009 central elections have been completely unexpected. Such was thesurprise that the markets jumped 20% in a single day. This upmove has led to multipleexpectations from the new government to unleash a new set of reforms and improve thegrowth prospects of the economy. The government has a big task ahead of it in the formof striking the right balance between growth and fiscal prudence. We analyze the impactof the current stimulus package on various sectors and on fiscal deficit, probable action inthe direction of disinvestment, reforms (FDI, consolidation, oil price deregulation), andfocus on infrastructure.

A) Stimulus v/s fiscal deficit – a trade-offHaving assumed charge, the government will have to strike a balance between fiscaldeficit and growth catalysts. To support India’s economy in a time of global recession, theUPA government had rolled out stimulus packages. Following the recent improvement inperformance, as indicated by various lead indicators like cement dispatches, auto volumes,and industrial production, the government may consider rolling back few of the measuresto recoup lost revenue streams. Based on our interactions with various companies/industries, we note that if a significant part of the benefits are withdrawn/slashed, it wouldbe very negative.

Government finances have deteriorated: We expect the government to retain thestimulus measures for most of FY10 and consider withdrawing them in February 2010.However, we note that central government finances have deteriorated due to loss inrevenues, coupled with overall slowdown in the economy. The pace of deterioration hasbeen despite respite in the form of lower subsidies (fertilizers), import bills (lower crudeprices). Going forward, we believe that financing government deficit could become thekey issue for the Indian economy. Few solutions to raise resources in the near term withthe government are – 3G auction, disinvestment, fuel price hike, etc. Any shortfall infunding would have to be met through domestic/external borrowing, which will put pressureon the prevailing interest rates.

India Strategy

The government will have tostrike a balance betweenfiscal deficit and growth

catalysts

Central government financeshave deteriorated due to loss

in revenues, coupled withoverall slowdown in the

economy

2326 June 2009

India StrategyST

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2426 June 2009

India StrategyST

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Com

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/MO

SL

2526 June 2009

FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 % CH. FY09BE FY09RE % CH. FY10BE % CH.Revenue (Rs b)Gross Tax Revenue 1,886 1,871 2,163 2,543 3,050 3,662 4,735 5,931 25.3 6,877 6,279 5.9 6,713 6.9

Corporation Tax 357 366 462 636 827 1,013 1,443 1,929 33.7 2,264 2,220 15.1 2,442 10.0Income Tax 318 320 369 414 493 560 751 1,026 36.7 1,383 1,226 19.4 1,354 10.4Excise Duty 685 726 823 908 991 1,112 1,176 1,236 5.1 1,379 1,084 -12.3 1,106 2.1Customs 475 403 449 486 576 651 863 1,041 20.6 1,189 1,080 3.7 1,102 2.0Other Tax Revenues 51 56 61 100 163 326 502 699 39.2 662 670 -4.1 709 5.9

NCCF Expenditure 3 7 16 16 16 28 20 18 -10.0 18 18 0.0 25 38.9Devolvement to States and UTs 517 528 561 658 786 944 1,203 1,518 26.2 1,788 1,602 5.5 1,712 6.9Net Tax Revenues 1,367 1,335 1,585 1,870 2,248 2,689 3,512 4,395 25.2 5,072 4,660 6.0 4,976 6.8Non-tax Revenues 557 678 723 768 812 768 832 1,024 23.0 958 962 -6.0 1,120 16.4Net Revenue Receipts 1,924 2,013 2,308 2,638 3,060 3,458 4,344 5,419 24.8 6,029 5,622 3.7 6,096 8.4Non-debt Capital Receipts 142 200 373 841 665 122 64 439 583.0 147 122 -72.1 109 -11.3

Recovery of Loans 120 164 342 672 620 106 59 51 -13.5 45 100 95.6 110 10.6Other Receipts 21 36 32 170 44 16 5 3887,165.2 102 23 -94.2 -2 -107.9

Total Revenues 2,066 2,214 2,682 3,479 3,725 3,580 4,408 5,858 32.9 6,176 5,744 -1.9 6,204 8.0

Expenditure (Rs b)Revenue Expenditure 2,778 3,015 3,387 3,621 3,844 4,394 5,146 5,945 15.5 6,581 8,034 35.1 8,481 5.6Interest 993 1,075 1,178 1,241 1,269 1,326 1,503 1,710 13.8 1,908 1,927 12.7 2,255 17.0

Prem. for Prepayment of Ext. Debt 74Defense 397 400 411 453 759 483 855 917 7.2 576 1,146 25.0 1,417 23.7Subsidies 269 305 446 443 437 442 571 709 24.2 714 1,292 82.2 1,009 -21.9Plan Expenditure 511 617 716 786 875 1,119 1,424 1,736 21.9 2,098 2,417 39.2 2,483 2.8Admin. & Social Services 631 620 636 698 504 1,024 793 873 10.1 1,285 1,253 43.5 1,316 5.1

Capital Expenditure 478 608 745 1,091 1,139 664 688 1,182 71.9 928 975 -17.5 1,051 7.8Defense 148 162 150 169 225 344 480Other Non-plan Expenditure 14 28 133 467 348 34 62 479 674.6 111 137 -71.4 128 -6.7Plan Expenditure 316 395 399 436 448 288 274 315 14.8 336 413 31.1 368 -10.9

Total Expenditure 3,256 3,623 4,132 4,712 4,983 5,057 5,834 7,127 22.2 7,509 9,010 26.4 9,532 5.8

Deficit TrendsFiscal Deficit 1,190 1,410 1,451 1,233 1,258 1,478 1,426 1,269 1,333 3,265 3,328

% to GDP 5.7 6.1 5.9 4.5 4.0 4.1 3.5 2.7 2.5 6.0 5.5Revenue Deficit 852 1,002 1,079 983 784 936 802 526 552 2,413 2,385

% to GDP 4.1 4.3 4.3 3.6 3 2.6 1.9 1.1 1.0 4.4 4.0Primary Deficit 195 335 273 -82 -11 138 -77 -441 -575 1,338 1,073

% to GDP 0.9 1.5 1.2 0.0 0 0.4 -0.2 -0.9 -1.1 2.5 1.8

Financing the Deficit 1,190 1,410 1,451 1,233 1,258 1,478 1,426 1,269 1,333 3,265 3,328Market Borrowings 729 877 976 889 460 954 1,104 1,318 1,006 2,620 3,086Other Internal Financing 386 476 594 479 650 449 237 -142 217 550 81External Assistance 75 56 -119 -135 148 75 85 93 110 96 160

Key IndicatorsInt Expenses / Fiscal Deficit 83.4 76.2 81.2 100.7 101 89.8 105.4 134.8 143.2 59.0 67.8Int Expenses / Revenues Receipts 51.6 53.4 51.0 47.0 41 38.4 34.6 31.6 31.6 34.3 37.0Defense / Total Expenditure 16.7 15.5 13.6 13.2 20 16.3 14.7 12.9 14.1 12.7 14.9

Source: Budget Documents/MOSL

GOVERNMENT REVENUE AND EXPENDITURE AT A GLANCE

India Strategy

2626 June 2009

Reducing fiscal deficit – disinvestment can come handy: Expectations of possibledisinvestment have risen, with the UPA forming the government without the support of itspast allies like the Left Front. Disinvestment of select state-owned enterprises will notonly allow them to access “growth capital”, but also enable the government to raise fundsfor its sinking fiscal deficit. The Congress party manifesto, which was published beforethe general elections in May 2009 re-iterates the importance of selective disinvestment.

Extract from Congress manifesto: Both the public sector and private sector are essentialfor India’s continued high growth success story. The Indian National Congress rejects thepolicy of blind privatization followed by the BJP-led NDA government, but believes that theIndian people have every right to own part of the shares of public sector companies whilethe government retains majority shareholding. Public sector enterprises in the manufacturingsector (like energy, transport and telecom) and in the financial sector (like banks andinsurance companies) will remain in the public sector and will be given all support to growand become competitive.

LIST OF TOP 20 LISTED CPSUS (EX BANKS)COMPANY GOVERNMENT MARKET CAP PAT

(CENTRAL / STATE) (US$B) (US$B)Oil & Natural Gas Corpn 74 45.1 3.3NTPC 89 33.0 1.7MMTC 99 30.8 0.0NMDC 98 29.2 0.9Bharat Heavy Electricals 68 21.5 0.6Indian Oil Corporation 80 13.4 0.6Steel Authority of India 86 12.6 1.3Power Grid Corporation of India 86 9.3 0.3GAIL (India) 57 7.3 0.6National Aluminium Company 87 4.0 0.3Hindustan Copper 100 4.6 0.1Power Finance Corporation 90 4.6 0.4Neyveli Lignite Corporation 94 4.3 0.2Bharat Petroleum Corporation 55 3.1 0.2Rural Electrification Corporation 82 3.0 0.3Container Corporation Of India 63 2.5 0.2Bharat Electronics 76 2.2 0.2Hindustan Petroleum Corporation 51 2.1 0.1Mahanagar Telephone Nigam 56 1.3 0.0Engineers India 90 1.1 0.1Total 84 234.9 11.2

Source: Capitaline/MOSL

We believe that CPSUs that are already listed could see stake sales / follow-on publicissues, while loss-making PSUs would be divested. Currently, the total number of listedPSUs on Indian bourses stands at 87, with a cumulative market cap of US$332b, wherethe holding of Government of India works out to US$253b. Total revenues of all theselisted PSUs put together is US$280b, while PAT stands at US$21b. A 10% stake sale inthe top 20 listed CPSUs can generate almost US$25b to the government. This representssignificant scope for the government to open the disinvestment window, which can be awin-win situation for the company concerned and the economy at large.

India Strategy

The Congress partymanifesto re-iterates the

importance of selectivedisinvestment

CPSUs that are alreadylisted would be the first

ones to be allowed to goahead with their follow-on

public issues

2726 June 2009

B) Reforms – a key catalyst for growthEarlier, the UPA had made breakthroughs in policy initiation, with Civil-Nuclear Agreement,FDI hike in telecom and civil aviation, proposal of FDI in insurance sector, and pro-infrastructure policies (power, SEZ, etc). However, the impact was limited due to tworeasons: (1) lack of support from allies to pursue reforms at fast pace, and (2) administrativefailure (dismal achievement in power and road sectors, no privatization, etc). In the newterm, we believe that the government’s focus would be to try and clear hurdles in the wayof key reforms.

1. Increasing FDI in key sectorsForeign direct investment (FDI) is a stable and long-term resource for capital starvedemerging economies like India. One sector that has witnessed significant growth, besidesfacilitating government finances, after FDI was allowed is Telecom. The current FDI limitin Telecom is 74%, as against 26% in Insurance and 74% in Banking.

SECTOR WISE FDI LIMITS (%)

Source: RBI/MOSL

Pending reforms in financial sector may see light of day? FDI hike in Insurance has been long pending. We expect the government to hike the

permitted FDI from 26% to 49%.? Most of the Indian stakeholders have an agreement with their foreign partners in the

Insurance JVs to transfer stake at market value.? While estimated market values have seen significant erosion in the last 18 months, we

see significant opportunity of value unlocking. This will also improve the capitaladequacy of the Indian players.

? ICICI Bank and HDFC are our top bets on this theme.

74% 74%

49% 49%

26% 26% 26%

100%

26%

Man

ufac

turin

g

Priv

ate

Ban

k

Tele

com

Air

Tran

spor

tS

ervi

ces

Bro

adca

stin

g

Def

ense

Pro

duct

ion

Prin

t Med

ia

Insu

ranc

eS

ecto

r

Sto

ckE

xcha

nges

,A

RC

s, D

P

India Strategy

The government’s focus would be to try and

clear hurdles in the way ofkey reforms

Expect the government tohike the permitted FDI in

insurance from 26% to 49%

2826 June 2009

2. Consolidation of state-owned banks? Consolidation of PSU banks is an important reform to be undertaken by the new

government. SBI has initiated the process of group consolidation.? Cost efficiency will be the biggest benefit of SBI’s group consolidation. SBI (standalone)

has ~18 employees/branch and six associate banks (on an aggregate) have ~14employees/branch. Investments in technology should enable improvement in employeeproductivity.

? Cost-to-income ratio could drop by 400bp, as operating costs grow at 10% while incomegrows ~14%. Every 100bp drop in C/I ratio improves RoA by 4bp and RoE by 75bp.

India Strategy

GROWTH IN INSURANCE SECTOR, VALUE CREATION THROUGH FDIOWN SHARE (RS B) CURRENT PEAK POTENTIAL

STAKE OF CAPITAL PEAK CURRENT VALUATION VALUATION UPSIDE FORINSURANCE JV PARTNER INDIAN INVESTED VALUATION* VALUATION MCAP. AS A AS A INSURANCECOMPANY PARENT (RS B) (RS B) (RS B) (RS B) %AGE %AGE BUS AT PEAK

(%) OF MCAP OF MCAP VALUATIONICICI Pru Life Prudential Inc 74 36 370 116 776 15 48 218Reliance Life - 100 27 202 92 225 41 90 119HDFC Standard Life Standard Life 74 15 195 56 665 8 29 246SBI Life BNP Paribas 74 15 150 71 1084 7 14 110Kotak OM Life Old Mutual 74 4 60 28 210 13 29 119* Our peak valation for the company or indicative internal peak valution, whichever is higher Source: Company/MOSL

SBI’S SIX SUBSIDIARIES - AT A GLANCE (FY09)% STATE OF RS B C-D LOANS CLOSING (%)

STAKE DOMINANCE BRAN- EMPL- NET DEPO- LOANSASSETS PROFIT RATIO TO NW ROA ROECHES YEES WORTH SITS % (X)

St. Bk. of Hyderabad* 100 Andhra Pradesh 1,001 12,813 32.1 625 437 768 6.2 69.9 13.6 0.8 19.2St. Bk. of Bikaner & Jaipur 75 Rajasthan 860 12,169 20.5 392 299 465 4.0 76.1 14.6 0.9 19.7St. Bk. of Patiala* 100 Punjab 798 11,175 31.3 600 436 697 5.3 72.7 13.9 0.8 17.0St. Bk. of Travancore 75 Kerala 726 11,365 22.5 420 327 495 6.1 77.8 14.5 1.2 27.0St. Bk. of Mysore 92 Karnataka 674 9,671 22.7 329 256 405 3.4 77.8 11.3 0.8 14.8St. Bk. of Indore 98 Madhya Pradesh 470 6,285 15.6 283 216 331 2.8 76.3 13.9 0.8 17.9Total of 6 Subs 4,529 63,478 144.7 2,650 1,971 3,159 27.7 74.4 13.6 0.9 19.2State Bank of India 11,448 205,896 579.5 7,421 5,425 9,650 91.2 73.1 9.4 0.9 15.7Subs % to SBI 39.6 30.8 25.0 35.7 36.3 32.7 30.4* Branches and Employees as of March 2008 Source: Company/MOSL

6.0

12.0

18.0

24.0

FY10E FY11E FY12E FY13E FY14E

Income Grow th Opex Grow th

POSSIBLE TREND IN OPEX AND INCOME GROWTH (FY10-14) COST TO INCOME RATIO % (FY09-14)

45.9

49.5

45.043.7

42.541.2

FY09 FY10E FY11E FY12E FY13E FY14E

Source: MOSL

SBI has initiated the processof group consolidation

2926 June 2009

3. Oil price de-regulation – a tough call but a necessityAs we write this report, the government has announced hike of Rs4/liter in prices of petroland Rs2/liter in prices of diesel.? Breakeven point for under-recoveries is ~US$54/bbl. For every US$10/bbl rise

in oil price, losses on petrol/diesel increase by Rs275b, while losses on LPG/SKOincrease by Rs100b.

? Price hike required at crude oil price of US$70/bbl in case of deregulation is Rs7.2/liter for petrol and Rs3.4/liter for diesel.

? While RMCs have not reported losses in any of the previous years of high oil prices,they become vulnerable to government’s policy on deregulation and subsidy sharing asoil moves above US$54/bbl.

? ONGC’s EPS remains unchanged over US$50/bbl, if no changes are made and upstreambears 1/3rd subsidy. However, in case of deregulation of petrol/diesel, ONGC’s EPSmoves up from Rs90 to Rs116 (at crude of US$70/bbl and exchange rate of Rs48/US$). Every 10% hike in gas prices increases the EPS by 2% (Rs2/share).

AT OIL PRICE OF US$70/BBL, FY10 UNDER-RECOVERIES COULD BE 80% OF FY08 LEVELSFY05 FY06 FY07 FY08 FY09 FY10E

Exchange Rate (Rs/US$) 44.9 44.3 45.2 40.3 46.0 47.4Avg Brent Price ($/bbl) 42.2 58.0 64.4 82.3 84.8 70.0Gross (Under) recoveries (Rs b)Petrol -2 -27 -20 -73 -52 -116Diesel -22 -126 -188 -353 -523 -204PDS SKO -95 -144 -179 -191 -282 -187Domestic LPG -84 -102 -107 -156 -176 -110Total -201 -400 -494 -773 -1,033 -618Sharing (Rs b)Oil Bonds - 115 241 353 713 288Upstream 59 140 205 257 329 206OMC's Sharing 142 138 48 163 (9) 124Total 201 393 494 773 1,033 618Sharing (%)Oil Bonds - 29 49 46 69 47Upstream 30 36 42 33 32 33OMC's Sharing 70 35 10 21 (1) 20Total 100 100 100 100 100 100

Source: Companies/MoPNG/PPAC/MOSL

India Strategy

GROSS (UNDER)/OVER RECOVERY FOR MS, HSD, LPG & SKO (RS B)Brent Price (US$/bbl)

40 50 60 70 80

44 642 289 -65 -418 -77246 573 203 -166 -536 -90548 504 118 -267 -653 -1,03850 435 33 -369 -770 -1,17252 366 -52 -470 -887 -1,305

Source: MOSL

Fx R

ate

(Rs/

US

$)For every US$10/bblchange in crude price, gross

under-recoveries changeby Rs375b

Fx R

ate

(Rs/

US

$)

For every US$10/bblchange in crude price,

losses on LPG/SKOincrease by Rs100b

(UNDER)/OVER RECOVERY FOR LPG & SKO (RS B)Brent Price (US$/bbl)

40 50 60 70 80

44 35 -61 -156 -252 -34846 22 -78 -179 -279 -37948 8 -96 -201 -305 -41050 -5 -114 -223 -332 -44152 -19 -132 -245 -359 -472

Source: MOSL

3026 June 2009

India Strategy

? Impact on RMCs’ FY10 EPS still dependant upon sharing of LPG/SKO under-recoveries

? We look at the different scenarios for sharing LPG/SKO under-recoveries:1) 50% sharing by RMCs, 2) 1/3rd sharing by RMCs, and, 3) Nil sharing by RMCs.

FY10E EPS SENSITIVITY TO CRUDE PRICES AND SUBSIDY SHARING FOR LPG AND SKO (FX RATE: RS48/US$)HPCL BRENT PRICE (US$/BBL) BPCL BRENT PRICE (US$/BBL) IOC BRENT PRICE (US$/BBL)

60 70 80 60 70 80 60 70 8050% Sharing 10.1 (16.7) (49.1) 50% Sharing 22.0 0.3 (21.9) 50% Sharing 33.6 17.6 1.533% Sharing 23.8 9.6 (6.8) 33% Sharing 36.1 21.5 6.8 33% Sharing 44.0 33.3 22.60% Sharing 51.2 51.2 51.2 0% Sharing 64.2 64.2 64.2 0% Sharing 64.6 64.7 64.8

Source: MOSL

IMPACT ON ONGC’S FY10 EPS IN CASE OF PARTIAL DE-REGULATION AND GAS PRICE HIKEONLY GAS PRICES HIKED FROM THE CURRENT LEVEL OF US$2/MMBTU (RS3,200/MSCM)  CURRENT BASE CASE        Gas Price (US$/mmbtu) 2.0 2.1 2.2 2.4 2.6 2.8 4.0Change from current (%) 5 10 20 30 40 100ONGC FY10 Cons EPS (Rs) 88 89 90 93 94 96 108Change from Current (%)   1 2 4 7 9 22

Source: Company/MOSL

FY10 EPS SENSITIVITY IN AUTO FUEL DE-REGULATION SCENARIO Brent Price (US$/bbl)

50 60 70 80

46 69 89 109 12948 74 95 116 13650 80 101 123 144

Source: MOSL

Fx R

ate

(Rs/

US

$)

3126 June 2009

India Strategy

Monsoons: next few weeks very crucial

IMD cuts monsoon forecasts to 93% of LPA (below normal)IMD has predicted below normal monsoon season rainfall over the country as whole, in itssecond round of forecast. Quantitatively, monsoon season rainfall for the country as awhole is likely to be 93% of the long period average (LPA) with a model error of ±4%.? Rainfall all over the country in July 2009 is likely to be 93% of its LPA and in August,

it is likely to be 101% of LPA both with a model error of ±9%.? Over the four broad geographical regions of the country, rainfall is likely to be 81% of

its LPA over North-West India, 92% over North-East India, 99% over Central Indiaand 93% over South Peninsula, all with a model error of ±8%.

DEFINITION OF RAINFALL CATEGORIESExcess Above 110% of LPAAbove Normal 104-110% of LPANear Normal 96-104% of LPABelow Normal 90-96% of LPADeficient Below 90% of LPALPA: long period average Source: IMD

Source: Company/MOSL

SPATIAL DISTRIBUTION OF RAINFALLAREA LONG PERIOD COEFFICIENT OF FORECAST

AVERAGE (MM) VARIATION (%) (% OF LPA)All India (June to September) 890 10 93All India (July) 293 13 93All India (August) 262 14 101NW India 612 19 81Central India 994 14 99NE India 1,429 8 92South Peninsula 725 15 93

Source: IMD

RAINFALL HAS BEEN LOWER THAN IMD FORECAST (>5%) ON 5 OCCASIONS IN PAST 9 YEARS

99

108

99 98101

96100

98 99102 102

99 99

105

97 95939692

87

9396

79

98

103100

105

92

70

80

90

100

110

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

IMD's Forecast (% of LPA) Actual Rainfall (% of LPA)

Source: IMD

IMD has predictedbelow normal monsoonseason rainfall over the

country as whole

3226 June 2009

India Strategy

Central-Western region rainfall in next three weeks crucialAlthough June accounts for 33% of the total seasonal rainfall, July and August hold thekey to normal monsoons. There have been instances in the past (1983) when monsoonshave been normal despite poor rainfall in June.

BREAK DOWN OF SOUTH WEST MONSOON RAINFALL BY MONTH

July33%

August29%

September20%

June18%

Source: IMD

IMD expects that monsoons will cover the entire country by the middle of July and Central-Western region within this week. Southern India has seen heightened monsoon activity inthe past few days. IMD expects good monsoon showers in the Central Western regionduring the next 2-3 weeks. If the rainfall in the Central Western region is below estimatesby July 15, the implications of below normal monsoons could be significant. IMD hasestimated rains in the Central region at 99% of LPA, which indicates normal rainfall.

Although IMD has predicted rains in North-West India at 81% of LPA, vast areas in thisregion have good irrigation facilities and so the impact of below normal monsoon would bevery limited. This region is house to the foodgrain bowl of the country, which comprises ofPunjab, Haryana and Western UP.

Contribution of agriculture declining, down to 18% nowThe contribution of Agriculture to the overall economy has declined to just 18% (frommore than 55% in 1951). However, the size of the population (~45% of India’s population)dependent on it makes it important in terms of demand generation and consumptionsentiment. Despite steady increase in irrigation facilities in the past five decades, grossirrigated area still accounts for just 40% of the total cultivated area. South-West Monsoon(accounting for ~80% of annual rainfall for the country) continues to be the major sourceof irrigation for the balance ~60% of the area under cultivation.

If the rainfall in the Central Western region is

below estimates by July 15,the implications of below

normal monsoons could besignificant

3326 June 2009

India Strategy

18%36%

55%

18%19%

11%

45%

62%

34%

0%

20%

40%

60%

80%

1951

Year

1959

1963

1967

1971

1975

1979

1983

1987

1991

1995

1999

2003

2007

Share of Agriculture in GDPShare of Industry in GDPShare of Services in GDP

434138342923

1817

0

25

50

75

100

1950

-51

1960

-61

1970

-71

1980

-81

1990

-91

1995

-96

2000

-01

2005

-06

Gross Irrigated area (m hec) % of Total area

98.0

79.4

87.4

3.8

7.5

6.7

75

85

95

105

115

2001

2002

2003

2004

2005

2006

2007

2008

0.0

3.0

6.0

9.0

12.0Actual Rainfall as a % of LPA (LHS) GDP Grow th %

CONTRIBUTION OF AGRICULTURE TO GDP IS DECLINING RAINFALL ACCOUNTS FOR ~60% OF CULTIVATED AREA

ACTUALRAINFALL VS AGRICULTURE GDP GROWTH

Source: Ministry of Agriculture/MOSL

GDP GROWTH (%)YEARS OVERALL AGRICULTURE1991 5.3 1.261992 1.5 -0.61997 8.0 2.81998 4.5 -0.71999 6.7 1.62000 6.5 0.72002 5.8 1.52003 4.2 -1.62004 8.5 2.22005 7.6 0.0

FY10E % OF SENSEX EARNINGS WHICH HAVE CONTR. FROM RURAL AREAS

Monsoon Direct 13.9

Monsoon Indirect

12.2

Monsoon No Impact

73.9

Source: MOSL

Impact on economy and sectors? Increased allocation for rural employment

schemes: We expect the government to increase focuson rural employment schemes like NREGS andinfrastructure development to ward off the impact oflower income in agriculture-dependent sections.Allocation to NREGS was Rs300b in FY09 and will, inall likelihood, be increased in FY10.

? Demand setback in FMCG/Autos: Buoyancy in therural economy has been the key growth driver in FMCGand Autos. Demand for these sectors could face atemporary setback due to poor monsoons, as consumersin the lower-income strata downtrade or shift to lowerpriced offerings by the unorganized sector.

? Sensex earnings impact: Among Sensex stocks, weestimate that ~12% of earnings are derived from directplays on rural demand (Autos, FMCG, Telecom) whileanother 14% are indirect plays (State-owned Banks,Cement).

3426 June 2009

India Strategy

Inflation likely to turn positive in 3QFY10

? Inflation has turned negative in FY10 due to fall in commodity prices and high base ofprevious year.

? We expect inflation to turn positive in 3QFY10, without considering any fuel price hike? We present a scenario analysis to assess the outlook for inflation. (A) Base case: an

average WoW rise of 0.05% for the next 6-9 months, (B) Optimistic case: 0.10%change in WPI, and (C) Pessimistic case: No WoW change in WPI. Even assumingthe pessimistic scenario, we expect the base effect to kick in from December 2009and inflation to turn positive.

? For the base-case and optimistic scenario too, we expect positive inflation only inOctober 2009.

WHOLESALE PRICE INDEX (WPI) SENSITIVITY

Source: Company/MOSL

0.84

(3.6)

1.8(1.6)

6.6

(2.3)

4.5

-8.00

0.00

8.00

16.00

Sep

-07

Dec

-07

Mar

-08

Jun-

08

Sep

-08

Dec

-08

Mar

-09

Jun-

09

Sep

-09

Dec

-09

Mar

-10

No WoW grow th in WPIAssuming 0.10% WoW grow th in WPIAssuming 0.05% WoW grow th in WPI

INFLATION AND 1 YEAR TERM DEPOSIT RATE TREND IN CORPORATE BOND VS G-SEC YIELD

TREND IN CRR (%) TREND IN REPO RATES (%)

Source: Company/MOSL

0

4

8

12

16

FY 9

4

FY 9

5

FY 9

6

FY 9

7

FY 9

8

FY 9

9

FY00

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

E

1 Year Deposit Rates Inf lation (%)

8.6

11.5

7.0

9.3

4.5

6.0

7.5

9.0

10.5

12.0

Jun-

02

Dec

-02

Jun-

03

Dec

-03

Jun-

04

Dec

-04

Jun-

05

Dec

-05

Jun-

06

Dec

-06

Jun-

07

Dec

-07

Jun-

08

Dec

-08

Jun-

09

10 Year AAA Corporate Yield (%)10 Year G-Sec Yield (%)

5.50

5.006.

006.50

9.00

8.75

6.25 6.

50

6.00 7.

00 7.50

7.75 8.

00

8.25

8.50

4.0

5.5

7.0

8.5

10.0

Mar

07

Apr

07

Apr

07

Aug

07

Nov

07

Apr

08

May

08

May

08

July

08

July

08

Aug

08

Oct

08

Oct

08

Nov

08

Jan

09

14th & 28th Apr

12th & 26th

8th & 22nd

8.00 8.50

5.506.50

7.508.009.00

7.75

4.755.00

4.00

5.50

7.00

8.50

10.00

Mar

07

Jun

08

Jun

08

Aug

08

Oct

08

Nov

08

Dec

08

Jan

09

Mar

09

Apr

09

12 Jun 25 Jun

We expect inflation to turnpositive in 3QFY10, without

considering any fuel pricehike

3526 June 2009

Valuations: from undervaluation to averages

As the Sensex declined from 21,000 to below 10,000, all the key valuation parameters fellbelow the historical averages. The BSE Sensex now trades at a forward P/E of 16.1x v/s the 15-year average of 14.3x, while the P/B multiple has declined from 4.7x to 2.8x.

Following the deceleration in earnings momentum, Sensex RoE is now estimated at 18%v/s its peak RoE of 24%.

At the current levels, earnings yield to bond yield is 0.8x, close to the long-term average of0.73x. (At March 2009 Sensex levels of 9,500, it was about 1.3x.) This is one of theimportant parameters indicating that equities have moved from a stage of undervaluationto their long-term average fair values.

We present the sectoral premiums and discounts to Sensex P/E for the last five years.Autos, Engineering, Metals and Oil & Gas are trading at significant premium to theiraverages. Banks are trading at their averages, while Cement, FMCG, IT, Pharma, Telecomand Media are trading below their averages.

SENSEX P/E (X) SENSEX P/BV (X)

SENSEX RETURNS V/S EARNINGS YIELD TO BOND YIELD (%) SENSEX ROE (%)

Source: MOSL

India Strategy

8.7

23.624.6

16.1

7

12

17

22

27

Jun-

94

Jun-

95

Jun-

96

Jun-

97

Jun-

98

Jun-

99

Jun-

00

Jun-

01

Jun-

02

Jun-

03

Jun-

04

Jun-

05

Jun-

06

Jun-

07

Jun-

08

Jun-

09

15 Year Average 14.3x

17.5

24.1

14.113

16

19

22

25

Jun-

94

Jun-

95

Jun-

96

Jun-

97

Jun-

98

Jun-

99

Jun-

00

Jun-

01

Jun-

02

Jun-

03

Jun-

04

Jun-

05

Jun-

06

Jun-

07

Jun-

08

Jun-

09

15 Year Average 18.5%

2.8

4.7

1.6

3.8

1.2

2.2

3.2

4.2

5.2

Jun-

94

Jun-

95

Jun-

96

Jun-

97

Jun-

98

Jun-

99

Jun-

00

Jun-

01

Jun-

02

Jun-

03

Jun-

04

Jun-

05

Jun-

06

Jun-

07

Jun-

08

Jun-

09

15 Year Average 2.6x

0.2

0.6

1.0

1.4

1.8

FY93

FY94

FY95

FY96

FY97

FY98

FY99

FY00

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

EFY

10YT

D

-50

-10

30

70

110

Sensex Return (%) (RHS)Earnings Yield / G-Sec Yield (LHS)

Average forthe period 0.73x

Earnings yield to bond yieldis 0.8x, close to the long-term

average of 0.73x

3626 June 2009

India Strategy

SECTORAL P/E PREMIUM / DISCOUNT TO SENSEXSECTORS TRADING ABOVE THEIR AVERAGE PREMIUM/DISCOUNT TO SENSEX P/E

SECTORS TRADING BELOW THEIR AVERAGE PREMIUM/DISCOUNT TO SENSEX P/E

13

-24

-12

0

12

24

Mar

-04

Sep

-04

Feb-

05

Jul-0

5

Dec

-05

Jun-

06

Nov

-06

Apr

-07

Sep

-07

Feb-

08

Aug

-08

Jan-

09

Jun-

09

Auto PE Relative to Sensex PE

Avg of -1% for the period

30

0

25

50

75

100

Mar

-04

Sep

-04

Feb-

05

Jul-0

5

Dec

-05

Jun-

06

Nov

-06

Apr

-07

Sep

-07

Feb-

08

Aug

-08

Jan-

09

Jun-

09

FMCG PE Relative to Sensex PE

Avg of 45% for the period

-30

-85

-70

-55

-40

-25

Mar

-04

Sep

-04

Feb-

05

Jul-0

5

Dec

-05

Jun-

06

Nov

-06

Apr

-07

Sep

-07

Feb-

08

Aug

-08

Jan-

09

Jun-

09Metal PE Relative to Sensex PE

Avg of -56% for the period -23

-50

-40

-30

-20

-10

Mar

-04

Sep

-04

Feb-

05

Jul-0

5

Dec

-05

Jun-

06

Nov

-06

Apr

-07

Sep

-07

Feb-

08

Aug

-08

Jan-

09

Jun-

09

Oil & Gas PE Relative to Sensex PE

Avg of -28% for the period

-46

-60

-40

-20

0

20

Mar

-04

Sep

-04

Feb-

05

Jul-0

5

Dec

-05

Jun-

06

Nov

-06

Apr

-07

Sep

-07

Feb-

08

Aug

-08

Jan-

09

Jun-

09

Cement PE Relative to Sensex PE

Avg of -29% for the period

46

-30

0

30

60

90

Mar

-04

Sep

-04

Feb-

05

Jul-0

5

Dec

-05

Jun-

06

Nov

-06

Apr

-07

Sep

-07

Feb-

08

Aug

-08

Jan-

09

Jun-

09

Engineering PE Relative to Sensex PE

Avg of 26% for the period

1

-35

0

35

70

105

Mar

-04

Sep

-04

Feb-

05

Jul-0

5

Dec

-05

Jun-

06

Nov

-06

Apr

-07

Sep

-07

Feb-

08

Aug

-08

Jan-

09

Jun-

09

IT PE Relative to Sensex PE

Avg of 32% for the period

-2

-30

0

30

60

90

Sep

-05

Mar

-06

Sep

-06

Feb-

07

Aug

-07

Feb-

08

Jul-0

8

Jan-

09

Jun-

09

Media PE Relative to Sensex PE

Avg of 46% for the period

3726 June 2009

SECTORAL P/E PREMIUM / DISCOUNT TO SENSEX (CONTD...)SECTORS TRADING BELOW THEIR AVERAGE PREMIUM/DISCOUNT TO SENSEX P/E

Source: MOSL

India Strategy

6

-50

0

50

100

150

Mar

-04

Sep

-04

Feb-

05

Jul-0

5

Dec

-05

Jun-

06

Nov

-06

Apr

-07

Sep

-07

Feb-

08

Aug

-08

Jan-

09

Jun-

09

Pharma PE Relative to Sensex PE

Avg of 48% for the period

-18-24

-12

0

12

24

Mar

-06

Jul-0

6

Oct

-06

Jan-

07

Apr

-07

Aug

-07

Nov

-07

Feb-

08

May

-08

Sep

-08

Dec

-08

Mar

-09

Jun-

09

Telecom PE Relative to Sensex PE

Avg of 2% for the period

22

-20

0

20

40

60

Mar

-04

Sep

-04

Feb-

05

Jul-0

5

Dec

-05

Jun-

06

Nov

-06

Apr

-07

Sep

-07

Feb-

08

Aug

-08

Jan-

09

Jun-

09

Pvt Banks PE Relative to Sensex PE

Avg of 14% for the period

-53

-70

-60

-50

-40

-30

Mar

-04

Sep

-04

Feb-

05

Jul-0

5

Dec

-05

Jun-

06

Nov

-06

Apr

-07

Sep

-07

Feb-

08

Aug

-08

Jan-

09

Jun-

09

PSU Banks PE Relative to Sensex PE

Avg of -51% for the period

SECTORS TRADING AT THEIR AVERAGE PREMIUM/DISCOUNT TO SENSEX PE

3826 June 2009

COMPANIES TRADING ABOVE THEIR AVERAGE PREMIUM / DISCOUNT TO SENSEX P/E

India Strategy

46

-100

-50

0

50

100

Jun-

93

Jun-

94

Jun-

95

Jun-

96

Jun-

97

Jun-

98

Jun-

99

Jun-

00

Jun-

01

Jun-

02

Jun-

03

Jun-

04

Jun-

05

Jun-

06

Jun-

07

Jun-

08

Jun-

09

B H E L

Avg. of -5% for the period

56

-100

-50

0

50

100

Jun-

93

Jun-

94

Jun-

95

Jun-

96

Jun-

97

Jun-

98

Jun-

99

Jun-

00

Jun-

01

Jun-

02

Jun-

03

Jun-

04

Jun-

05

Jun-

06

Jun-

07

Jun-

08

Jun-

09

H D F C

Avg. of 7% for the period

-3

-120

-70

-20

30

80

Jun-

93

Jun-

94

Jun-

95

Jun-

96

Jun-

97

Jun-

98

Jun-

99

Jun-

00

Jun-

01

Jun-

02

Jun-

03

Jun-

04

Jun-

05

Jun-

06

Jun-

07

Jun-

08

Jun-

09

Hero Honda Motor

Avg. of -35% for the period

15

-40

0

40

80

Jul-0

3

Jan-

04

Jul-0

4

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Dec

-08

Jun-

09

Maruti Suzuki

Avg. of -2% for the period

-27

-120

-90

-60

-30

0

Jun-

96

Jun-

97

Jun-

98

Jun-

99

Jun-

00

Jun-

01

Jun-

02

Jun-

03

Jun-

04

Jun-

05

Jun-

06

Jun-

07

Jun-

08

Jun-

09

O N G C

Avg. of -49% for the period

-20

-90

-60

-30

0

30

Jun-

97

Jun-

98

Jun-

99

Jun-

00

Jun-

01

Jun-

02

Jun-

03

Jun-

04

Jun-

05

Jun-

06

Jun-

07

Jun-

08

Jun-

09

GAIL (India)

Avg. of -44% for ther period

-29

-80

-60

-40

-20

0

Jun-

94

Jun-

95

Jun-

96

Jun-

97

Jun-

98

Jun-

99

Jun-

00

Jun-

01

Jun-

02

Jun-

03

Jun-

04

Jun-

05

Jun-

06

Jun-

07

Jun-

08

Jun-

09

St Bk of India

Avg. of -45% for the period -12

-90

-60

-30

0

30

Jun-

93

Jun-

94

Jun-

95

Jun-

96

Jun-

97

Jun-

98

Jun-

99

Jun-

00

Jun-

01

Jun-

02

Jun-

03

Jun-

04

Jun-

05

Jun-

06

Jun-

07

Jun-

08

Jun-

09

Reliance Inds.

Avg. of -31% for the period

3926 June 2009

COMPANIES TRADING AT THEIR AVERAGE PREMIUM / DISCOUNT TO SENSEX P/E

India Strategy

-43

-80

-40

0

40

80

Jun-

93

Jun-

94

Jun-

95

Jun-

96

Jun-

97

Jun-

98

Jun-

99

Jun-

00

Jun-

01

Jun-

02

Jun-

03

Jun-

04

Jun-

05

Jun-

06

Jun-

07

Jun-

08

Jun-

09

Grasim Inds

Avg. of -32% for the period

36

-40

0

40

80

120

Oct

-95

Nov

-96

Dec

-97

Dec

-98

Jan-

00

Jan-

01

Feb-

02

Mar

-03

Mar

-04

Apr

-05

Apr

-06

May

-07

May

-08

Jun-

09HDFC Bank

Avg. of 37% for the period -38

-90

-45

0

45

90

Jun-

93

Jun-

94

Jun-

95

Jun-

96

Jun-

97

Jun-

98

Jun-

99

Jun-

00

Jun-

01

Jun-

02

Jun-

03

Jun-

04

Jun-

05

Jun-

06

Jun-

07

Jun-

08

Jun-

09

M & M

Avg. of -39% for the period

84

-100

0

100

200

300

Jun-

94

Jun-

95

Jun-

96

Jun-

97

Jun-

98

Jun-

99

Jun-

00

Jun-

01

Jun-

02

Jun-

03

Jun-

04

Jun-

05

Jun-

06

Jun-

07

Jun-

08

Jun-

09

Hind. Unilever

Avg. of 120% for the period

-3

-150

-75

0

75

150

Jun-

99

Jun-

00

Jun-

01

Jun-

02

Jun-

03

Jun-

04

Jun-

05

Jun-

06

Jun-

07

Jun-

08

Jun-

09

Sun Pharma.

Avg. of -15% for the period

19

-60

-20

20

60

100

Jun-

00

Jun-

01

Jun-

02

Jun-

03

Jun-

04

Jun-

05

Jun-

06

Jun-

07

Jun-

08

Jun-

09

ITC

Avg. of 17% for the period

13

-30

0

30

60

90

Nov

-04

Apr

-05

Sep

-05

Feb-

06

Jul-0

6

Dec

-06

May

-07

Oct

-07

Mar

-08

Aug

-08

Jan-

09

Jun-

09

NTPC

Avg. of 8% for the period

-58

-90

-60

-30

0

30

Jun-

94

Jun-

95

Jun-

96

Jun-

97

Jun-

98

Jun-

99

Jun-

00

Jun-

01

Jun-

02

Jun-

03

Jun-

04

Jun-

05

Jun-

06

Jun-

07

Jun-

08

Jun-

09

Tata Steel

Avg. of -52% for the period

4026 June 2009

COMPANIES TRADING BELOW THEIR AVERAGE PREMIUM / DISCOUNT TO SENSEX P/E

India Strategy

16

-120

0

120

240

360

Jun-

97

Jun-

98

Jun-

99

Jun-

00

Jun-

01

Jun-

02

Jun-

03

Jun-

04

Jun-

05

Jun-

06

Jun-

07

Jun-

08

Jun-

09

Infosys Tech.

Avg. of 92% for the period

-29

-60

-35

-10

15

40

Mar

-06

Jun-

06

Sep

-06

Dec

-06

Mar

-07

Jun-

07

Sep

-07

Dec

-07

Mar

-08

Jun-

08

Sep

-08

Dec

-08

Mar

-09

Jun-

09Reliance Comm

Avg. of -4% for the period12

-40

20

80

140

200

Mar

-01

Oct

-01

May

-02

Nov

-02

Jun-

03

Dec

-03

Jul-0

4

Jan-

05

Aug

-05

Mar

-06

Sep

-06

Apr

-07

Oct

-07

May

-08

Nov

-08

Jun-

09

Zee Entertainment

Avg. of 79% for the period

-12-25

0

25

50

75

Jan-

03

Jul-0

3

Jan-

04

Jul-0

4

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Dec

-08

Jun-

09

Bharti Airtel

Avg. of 22% for the period

4126 June 2009

India Strategy

Model portfolio: focus on three themes

Several sectors that presented opportunities for strong returns are now fairly valued andeven expensive in a few cases. While there is no large sectoral deviation in allocations inour model portfolio, given the new political equation, strong domestic liquidity, and emergingnew opportunities, we play the following themes:? Continued focus on infrastructure (weightage of over 25% across sectors in the portfolio)? Economic reforms – permitting higher FDI, disinvestment / consolidation of state-

owned enterprises, de-regulation of oil prices (35% of portfolio will benefit from this)? Global economic recovery (over 28% of portfolio will benefit from this)? Expected earnings growth for our model portfolio is 5% in FY10 and 15% in FY11 (as

against 1% and 16%, respectively for the Sensex).? Our model portfolio quotes at 14.5x FY10E EPS as against 16.7x FY10E EPS for the

Sensex.

Few risks that could impact the performance of our model portfolio are:? Delayed global recovery would impact our allocation to IT and commodities? Poor monsoons impacting the rural economy and government finances adversely

Financials – weightage remains high at 22% (similar to benchmark)? We have allocated equally to state-owned and private Financials. SBI’s weightage

has been increased, as the stock still offers 18% upside and we believe that it canspring the largest positive surprise in earnings, led by economic revival (20%+ upgradelikely).

? We have replaced PNB with BoB, as we expect BoB to sustain strong earningsgrowth, leading to a 20% RoE in the coming years. This would drive a re-rating.

? Among private sector players, we have introduced HDFC in place of HDFC Bank.HDFC Bank now trades at 3x FY11 diluted book after HDFC converts the warrantsin HDFC Bank. While HDFC also appears expensive at 3.8x FY11E adjusted book,there is likelihood of value unlocking in insurance business and increased tax breaksfor housing finance.

? We have increased our allocation to ICICI Bank. Our earnings estimates of ICICIhave seen an upgrade of 5.5% for FY11. Our Financials Analyst believes that ICICIBank could surprise positively in 2HFY10, as NPA costs on unsecured loans decline inabsolute terms and there is value unlocking potential in insurance business (subject tochanges in government regulations) at higher valuations than our estimates (could addRs55-75 to SOTP).

? We have introduced IDFC in our model portfolio. IDFC offers a play on infrastructureand capital markets. We model RoE expansion from 13% in FY09 to 15% in FY11, ledby RoA expansion from 2.6% to 3%.

Second highest allocation to Infrastructure(includes Engineering, Construction, Real Estate and Cement)? We are positive on the opportunities offered by increased thrust on Indian Infrastructure

sector. We have a significant overweight on Grasim (strong demand growth to driveearnings upgrades, attractive valuations at 9x forward earnings - a 45% discount to

4226 June 2009

India Strategy

Sensex). Grasim is better placed than peers due to high visibility for volume growthand cost savings.

? We re-introduce DLF in our model portfolio. DLF is not only well placed to benefitfrom the recovery in the residential vertical, but also best positioned to benefit fromthe likely recovery in the commercial and retail verticals over the next 3-4 quarters.

? Jaiprakash offers a combination of strong growth in cement and real estate volumesand is best positioned to capture the strong growth in Infrastructure and Real Estatesectors.

? Post the recent outperformance of L&T over BHEL, we have switched partly fromL&T to BHEL, although both the stocks are richly valued.

Oil & Gas – introducing ONGC into the portfolio? We have cut exposure to Reliance Industries as the stock trades well above our target

price and long-term uncertainty relating to KG-DG gas supplies remains.? We have introduced ONGC in the portfolio with a 4% weight to reflect the optimism

on multiple reforms relating to oil price de-regulation and hike in gas prices. ONGC’sEPS of Rs85-90 is secure, with net realizations of US$45/bbl.

Autos – removing Maruti from portfolio? Maruti trades at 18.5x forward earnings, close to its highest multiple of 19x. As we do

not expect any major upsides to either to our earnings estimates or valuations, weeliminate our exposure to the stock.

? We like M&M despite the recent concerns on monsoons, as valuations at 10x forwardearnings remain attractive and there is potential for earning upgrades. We believe thatthe jury is still on the impact of monsoons on rural economy. Tractors contribute 24%of the consolidated M&M EPS.

FMCG – Underweight? We are underweight on the FMCG sector as volume growth remains low, input costs

issues resurface and increasing product prices is a difficult option.? ITC and United Spirits remain our two bets in the FMCG space.

Pharma – Neutral? We add Divi’s and Piramal to model portfolio. Piramal will be a key beneficiary of

increased outsourcing from India, given the strong MNC relations which the companyenjoys and improving profitability in the CRAMS business. The stock trades at 13xFY10E and 10x FY11E EPS (EPS CAGR of 31%).

? Divi’s too will benefit from increased outsourcing from India given its strong relationshipswith global innovator pharma companies. We estimate 20% EPS CAGR over FY09-11. Valuations are reasonable at 15x FY10E and 12x FY11E EPS.

? We are favorably considering including Dr Reddy’s in our model portfolio, subject tocorrection in valuations (16x FY11E EPS).

Mid-caps – removing LIC Housing? LIC Housing has been our top mid-cap pick for last several quarters and has moved

up by 75% since election results. As a result, the stock now trades at 2x book value,and we remove the stock from model portfolio.

? Our top mid-cap bets are Sintex, United Phosphorus and India Cements.

4326 June 2009

MOSL MODEL PORTFOLIOSECTOR WEIGHT / BSE-100 MOST WEIGHT RELATIVE EFFECTIVE SECTORPORTFOLIO PICKS WEIGHT TO BSE-100 STANCE

Banks 21.7 22.0 0.3 OverweightSBI 3.3 6.0 2.7 BuyICICI Bank 5.3 6.0 0.7 BuyHDFC 3.9 4.0 0.1 NeutralBank of Baroda 0.5 4.0 3.5 BuyIDFC 0.9 2.0 1.1 Buy

Infrastructure & Surrogate 15.3 17.0 1.7 OverweightGrasim 1.0 4.0 3.0 BuyBHEL 2.4 3.0 0.6 NeutralJaiprakash 0.9 3.0 2.1 BuyDLF 0.9 3.0 2.1 BuyL&T 5.3 2.0 -3.3 NeutralIVRCL 0.3 2.0 1.7 Buy

Metals / Utilities 11.2 11.0 -0.2 NeutralJindal Steel & Power 1.2 4.0 2.8 BuyJSW Steel 0.4 3.0 2.6 BuyTata Steel 1.4 2.0 0.6 NeutralSterlite 1.1 2.0 0.9 Buy

Telecom 6.0 8.0 2.0 OverweightBharti Airtel 3.6 6.0 2.4 BuyReliance Communication 1.5 2.0 0.5 Buy

Information Technology 8.4 8.0 -0.4 NeutralWipro 0.7 4.0 3.3 NeutralInfosys 5.8 4.0 -1.8 Neutral

Petrochemicals 11.9 7.0 -4.9 UnderweightReliance Inds. 10.7 7.0 -3.7 Buy

Oil & Gas 5.9 6.0 0.1 NeutralONGC 2.9 4.0 1.1 NeutralIOC 0.4 2.0 1.6 Buy

Auto 4.3 6.0 1.7 OverweightHero Honda 1.0 3.0 2.0 BuyM&M 1.0 3.0 2.0 Buy

FMCG 6.7 5.0 -1.7 UnderweightITC 3.5 3.0 -0.5 BuyUnited Spirits 0.3 2.0 1.7 Buy

Pharmaceuticals 3.3 4.0 0.7 NeutralDivis Lab 0.2 2.0 1.8 BuyPiramal Healthcare 0.0 2.0 2.0 Buy

Others 5.2 6.0 0.8 -Sintex 0.0 2.0 2.0 BuyUnited Phosphorus 0.3 2.0 1.7 BuyIndia Cements 0.2 2.0 1.8 Buy

Cash 0.0 0.0 0.0Total 100.0 100.0

Model Portfolio

4426 June 2009

VALUATIONS - MOSL UNIVERSESECTOR P/E EV/EBITDA P/BV ROE DIV. EARN.

(X) (X) (X) (%) YLD (%) CAGR(NO. OF COMPANIES) FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E FY09 (FY11-09)Auto (5) 23.4 18.0 15.9 13.2 9.9 8.4 3.9 3.4 2.9 16.5 18.7 18.4 1.3 21.3Banks (17) 12.6 11.8 9.8 2.3 2.0 1.7 2.3 2.0 1.7 18.0 16.9 17.9 1.7 13.6Cement (7) 10.0 8.4 9.9 6.0 4.3 4.4 2.3 1.9 1.6 23.3 22.6 16.5 1.7 0.2Engineering (9) 26.1 24.0 20.2 19.3 16.4 13.5 6.6 5.5 4.7 25.3 23.0 23.3 0.8 13.7FMCG (12) 25.3 21.6 18.6 16.5 14.1 12.2 7.6 6.6 5.8 30.2 30.7 30.9 2.5 16.5IT (7) 15.8 15.8 15.6 10.9 10.9 10.3 4.5 3.8 3.3 28.6 24.0 21.1 1.9 0.4Infrastructure (5) 30.1 22.3 20.7 19.3 13.6 12.5 4.0 3.5 3.1 13.2 15.6 14.8 0.6 20.6Media (6) 20.1 17.6 14.4 12.0 9.9 7.9 3.0 2.7 2.5 14.9 15.5 17.2 1.5 18.3Metals (8) 8.0 12.1 9.6 5.6 7.1 6.1 1.7 1.5 1.4 21.2 12.7 14.2 1.6 -8.6Oil Gas & Petchem (10) 16.9 12.9 11.8 9.5 7.4 6.7 2.4 2.0 1.7 13.9 15.4 14.7 1.5 19.7Pharma (13) 23.9 17.9 15.0 13.0 13.0 10.7 3.9 3.4 2.9 16.4 18.8 19.2 1.1 26.3Real Estate (2) 12.9 22.7 18.2 13.3 18.2 14.8 2.5 2.2 2.0 19.1 9.8 11.0 0.3 -15.6Retail (2) 30.6 25.4 20.0 12.5 11.1 9.6 4.2 3.4 2.9 13.6 13.2 14.5 0.7 23.9Telecom (3) 15.6 14.4 12.2 10.0 8.0 6.6 3.3 2.7 2.2 20.9 18.7 17.8 0.3 13.2Textiles (4) 52.4 27.0 8.3 7.9 7.7 6.2 0.4 0.4 0.4 0.9 1.7 5.2 2.7 151.8Utilities (5) 20.4 19.8 18.2 17.1 11.2 10.7 2.7 2.4 2.3 13.1 12.4 12.4 1.7 5.9Others (5) 12.5 10.0 7.5 8.1 6.4 4.8 2.5 2.1 1.7 20.0 20.8 22.6 1.1 28.6MOSL (120) 15.7 14.8 12.9 N.M N.M N.M 2.9 2.5 2.1 18.2 16.7 16.6 1.4 10.1Excl. Banks (103) 16.4 15.4 13.7 10.4 9.1 8.1 3.0 2.6 2.2 18.2 16.7 16.3 1.4 9.2Excl. Metals (112) 17.1 15.0 13.3 N.M N.M N.M 3.0 2.6 2.3 17.7 17.3 17.0 1.4 13.1Excl. RMs (117) 15.5 14.9 13.0 N.M N.M N.M 3.0 2.6 2.2 19.1 17.1 17.0 1.4 9.1Excl. Metals&RMs (109) 16.9 15.3 13.5 N.M N.M N.M 3.2 2.7 2.3 18.7 17.8 17.4 1.4 12.0Sensex (30) 17.0 16.7 14.4 N.M N.M N.M 3.3 2.9 2.5 19.7 17.3 17.5 1.3 7.8Sensex Ex. Metals (27) 18.9 16.9 14.9 N.M N.M N.M 3.5 3.0 2.6 18.7 17.8 17.5 1.2 10.2N.M. - Not Meaningful Source: MOSL

MOSL Universe

ANNUAL PERFORMANCE - MOSL UNIVERSE (RS BILLION)SALES EBITDA NET PROFIT

FY09 FY10E FY11E CHG. CHG. FY09 FY10E FY11E CHG. CHG. FY09 FY10E FY11E CHG. CHG.(%)* (%)# (%)* (%)# (%)* (%)#

Auto (5) 807 904 1,010 12.0 11.7 78 107 120 36.1 12.4 47 61 69 30.2 13.0Banks (17) 829 944 1,120 13.9 18.7 642 727 895 13.3 23.0 373 399 481 6.9 20.7Cement (7) 463 498 516 7.6 3.7 120 149 130 24.4 -12.6 70 82 70 18.6 -15.3Engineering (9) 1,106 1,203 1,417 8.8 17.8 148 175 213 18.1 21.2 109 119 141 9.0 18.5FMCG (12) 653 734 830 12.5 13.1 125 145 165 15.7 13.6 83 97 113 16.8 16.2IT (7) 949 978 1,045 3.1 6.8 237 231 236 -2.3 2.3 173 172 175 -0.4 1.3Infrastructure (5) 228 293 339 28.8 15.4 33 48 53 47.0 9.9 15 20 21 34.9 7.7Media (6) 64 69 77 6.9 11.8 19 23 27 17.8 18.9 12 13 17 14.0 22.8Metals (8) 3,210 2,490 2,694 -22.4 8.2 550 440 517 -20.0 17.6 310 205 259 -33.8 26.2Oil Gas (10) 9,032 7,646 8,215 -15.3 7.4 841 1,082 1,175 28.7 8.5 433 566 621 30.6 9.7Pharma (13) 448 489 498 9.2 1.8 97 95 113 -2.0 18.8 50 67 80 33.8 19.2Real Estate (2) 130 91 103 -29.7 12.9 72 49 59 -31.1 19.1 56 32 40 -42.9 24.7Retail (2) 102 117 137 14.5 17.4 10 11 12 11.0 15.9 3 4 5 20.6 27.3Telecom (3) 701 845 992 20.6 17.4 273 333 391 22.0 17.3 155 169 199 8.7 17.8Textiles (4) 112 122 133 8.7 9.0 16 18 20 9.3 14.0 1 1 3 94.1 226.7Utilities (5) 686 821 882 19.7 7.5 132 207 230 57.2 11.1 109 112 122 3.3 8.5Others (5) 130 149 176 15.1 17.7 24 29 36 21.9 24.4 13 16 22 24.7 32.6MOSL (120) 19,647 18,393 20,185 -6.4 9.7 3,417 3,870 4,392 13.3 13.5 2,011 2,137 2,437 6.2 14.0Ex. Banks 18,819 17,450 19,065 -7.3 9.3 2,775 3,142 3,497 13.2 11.3 1,638 1,738 1,956 6.1 12.5Ex. Metals 16,437 15,903 17,491 -3.3 10.0 2,867 3,430 3,875 19.6 13.0 1,702 1,932 2,178 13.5 12.8Ex. RMs 14,174 14,337 15,926 1.2 11.1 3,292 3,653 4,184 11.0 14.5 1,975 2,050 2,349 3.8 14.6Ex. Met.&RMs10,964 11,847 13,231 8.1 11.7 2742 3,213 3,667 17.2 14.1 1,665 1,845 2,090 10.8 13.3Sensex (30) 9,628 9,653 10,428 0.3 8.0 2,240 2,473 2,780 10.4 12.4 1,373 1,398 1,594 1.9 14.0Sensex Ex.Met.7,722 8,278 8,890 7.2 7.4 1,953 2,279 2,531 16.6 11.1 1,209 1,313 1,467 8.7 11.7* Growth FY10 over FY09; # Growth FY11 over FY10. For Banks : Sales = Net Interest Income, EBITDA = Operating Profits; Tata SteelFigures are consolidated including corus

4526 June 2009

QUARTER-WISE SALES GROWTH (% YOY) QUARTER-WISE NET PROFIT GROWTH (% YOY)

Source: MOSL

1QFY10: Oil & Gas offsets Metals to arrest dip in PAT

1QFY10 aggregates for our universe of 120 companies suggest almost flat PAT YoY (-4%). Profits are dragged down by Metals sector (-60% YoY) due to lower product prices.However, this has been significantly offset by 16% YoY growth in Oil & Gas sector,driven by lower crude prices and higher GRMs.

We expect profit performance of Sensex stocks to be significantly worse than our universe,with PAT down 17% YoY. Sensex PAT would be hit by the double whammy of ONGC(PAT down 30% YoY due to fall in crude prices) and Tata Steel (PAT down 88% YoY dueto fall in steel prices).

MOSL Universe

QUARTERLY PERFORMANCE - MOSL UNIVERSE (RS BILLION)SECTOR SALES EBITDA NET PROFIT(NO. OF COMPANIES) JUN.09 VAR. VAR. JUN.09 VAR. VAR. JUN.09 VAR. VAR.

% YOY % QOQ % YOY % QOQ % YOY % QOQAuto (5) 218.7 8.6 -0.5 26.7 31.3 21.7 16.5 5.1 44.0Banks (17) 208.5 11.9 -1.7 165.6 15.1 -22.2 84.6 29.2 -20.3Cement (7) 106.0 14.1 -2.9 34.0 25.4 9.2 21.1 23.6 10.1Engineering (9) 220.1 11.1 -36.5 25.2 11.4 -56.1 16.6 -0.1 -59.0FMCG (12) 172.9 10.1 6.9 33.6 15.8 4.4 23.4 15.0 11.1IT (7) 241.3 9.5 -3.9 55.0 8.9 -11.1 43.4 13.4 -4.0Infrastructure (5) 65.4 32.6 -8.6 10.6 53.8 -12.8 4.1 52.2 -20.8Media (6) 15.7 0.7 -1.8 4.9 -8.6 9.6 2.9 -18.5 9.9Metals (8) 505.5 -31.3 -6.4 84.6 -47.6 74.3 40.8 -60.4 134.6Oil Gas & Petchem (10) 1,834.7 -27.2 7.2 251.3 14.4 -21.5 139.5 15.8 -39.5Pharma (13) 112.9 8.4 -1.6 21.2 -12.8 -9.5 16.5 6.1 703.6Real Estate (2) 19.3 -60.2 23.4 11.4 -61.5 202.5 7.5 -67.0 236.9Retail (2) 26.2 19.3 3.7 2.3 17.5 -1.5 0.7 2.5 -15.4Telecom (3) 196.6 23.0 4.1 77.3 19.1 7.5 40.4 2.8 4.2Textiles (4) 24.5 29.8 0.2 3.8 61.3 -4.5 0.2 9.0 -74.8Utilities (5) 170.0 7.3 -1.3 43.4 38.2 53.7 26.5 10.3 -8.1Others (5) 35.3 12.5 -1.7 6.5 20.6 -7.1 3.6 14.9 -11.0MOSL (120)* 4,174 -15.2 -1.0 858 1.3 -9.1 488 -4.0 -15.4MOSL Excl. Banks (103) 3,965 -16.3 -1.0 692 -1.5 -5.3 404 -8.9 -14.3MOSL Excl. Metals (112) 3,668 -12.3 -0.2 773 12.8 -13.6 448 10.2 -20.0MOSL Excl. RMs (117) 3,019 -8.5 -2.7 785 -7.5 3.1 454 -13.5 7.1MOSL Excl. Metals & RMs (109) 2,514 -1.9 -2.0 701 1.9 -1.7 413 -2.0 1.7MOSL Excl Oil & Metals (102) 1,833 10.2 -6.7 522 12.0 -9.3 308 7.9 -6.3Sensex (30) 1,904 -12.5 -2.6 517 -9.1 11.8 300 -17.3 11.2Sensex Excl. Metals (27) 1,574 -3.8 -2.2 477 1.0 5.8 287 -4.9 3.6* Tata Steel Consolidated; PL = Profit to Loss Source: MOSL

37.5%

-15.2%

-6.7%

7.9%

Sep- 08 Dec-08 Mar-09 June-09

-19.4%

-5.9%

18.0%

-4.0%

Sep- 08 Dec-08 Mar-09 June-09

4626 June 2009

MOSL Universe

Sales de-growth of 15% YoY, lowest ever so farIn 1QFY10, we expect aggregate sales to de-grow 15% YoY. This is the lowest ever inIndia’s corporate history. The adversely affected sectors are expected to be Real Estate(-60% YoY), Metals (-31%) and Oil & Gas (-27%). These three sectors combined morethan offset positive sales growth in all the other sectors led by Infrastructure/Construction(+33% YoY), Telecom (+23%) and Cement (+14%).

SECTORAL SALES GROWTH - QUARTER ENDED JUNE 2009 (%)

-80

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Source: MOSL

330bp expansion in EBITDA margin, EBITDA flat YoYDespite 15% de-growth in sales, 1QFY10 EBITDA is expected to be flat YoY due to330bp expansion in EBITDA margin, again led by higher GRMs and lower under-recoveriesin the Oil & Gas sector.

SECTORAL EBITDA GROWTH - QUARTER ENDED JUNE 2009 (%)

MOSL Universe Sales Growth = -15.2%

Source: MOSL

-80

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MOSL Universe EBITDA Growth = 1.3%

4726 June 2009

MOSL Universe

Aggregate PAT down 4% YoY; Sensex PAT down 17% YoYWe expect aggregate 1QFY10 PAT to de-grow 4% YoY. Healthy PAT growth in sectorslike Banks (+29% YoY), Cement (+24%), Oil & Gas (+15.8%) and FMCG (+15%) ismore than offset by a massive 60% YoY de-growth in the Metals sector.

Within the Sensex, we expect 22 companies to report profit growth YoY, the top threebeing Jaiprakash Associates (+98% YoY), Hero Honda (+71%) and ACC (+54%).However, this is more than offset by huge profit de-growth in heavyweights such asONGC (-30% YoY), Tata Steel (-88%), DLF (-65%) and Sterlite (-53%).

SECTORAL NET PROFIT GROWTH - QUARTER ENDED JUNE 2009 (%)

Source: MOSL

-105

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MOSL Universe Net Profit Growth = -4%

4826 June 2009

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QUARTERLY PERFORMANCE - MOSL UNIVERSESECTOR EBITDA MARGIN (%) NET PROFIT MARGIN (%)(NO. OF COMPANIES) JUN.08 JUN.09 CHG. (%) JUN.08 JUN.09 CHG. (%)Auto (5) 10.1 12.2 2.1 7.8 7.5 -0.3Banks (17) 77.2 79.4 2.2 35.1 40.6 5.4Cement (7) 29.2 32.0 2.9 18.4 19.9 1.5Engineering (9) 11.4 11.5 0.0 8.4 7.5 -0.8FMCG (12) 18.5 19.4 1.0 12.9 13.5 0.6IT (7) 22.9 22.8 -0.1 17.4 18.0 0.6Infrastructure (5) 13.9 16.2 2.2 5.5 6.3 0.8Media (6) 34.5 31.3 -3.2 22.6 18.3 -4.3Metals (8) 21.9 16.7 -5.2 14.0 8.1 -5.9Oil Gas & Petchem (10) 8.7 13.7 5.0 4.8 7.6 2.8Pharma (13) 23.3 18.8 -4.6 15.0 14.6 -0.3Real Estate (2) 61.0 58.9 -2.1 47.2 39.1 -8.1Retail (2) 9.0 8.9 -0.1 3.0 2.5 -0.4Telecom (3) 40.6 39.3 -1.3 24.6 20.5 -4.0Textiles (4) 12.4 15.4 3.0 1.1 0.9 -0.2Utilities (5) 19.8 25.5 5.7 15.2 15.6 0.4Others (5) 17.3 18.5 1.2 10.0 10.2 0.2MOSL (120)* 17.2 20.5 3.3 10.3 11.7 1.4MOSL Excl. Banks (103) 14.8 17.5 2.6 9.4 10.2 0.8MOSL Excl. Metals (112) 16.4 21.1 4.7 9.7 12.2 2.5MOSL Excl. RMs (117) 25.7 26.0 0.3 15.9 15.0 -0.9MOSL Excl. Metals & RMs (109) 26.8 27.9 1.1 16.4 16.4 0.0MOSL Excl Oil & Metals (102) 28.0 28.5 0.5 17.2 16.8 -0.4Sensex (30) 26.2 27.2 1.0 16.7 15.8 -0.9Sensex Excl. Metals (27) 28.8 30.3 1.4 18.5 18.2 -0.2*Tata Steel Consolidated Source: MOSL

SECTORAL CONTRIBUTION TO GROWTH IN SALES, EBITDA AND NET PROFIT (%)SECTOR CONTRIBUTION SECTOR CONTRIBUTION SECTOR CONTRIBUTION TO SALES GR. TO EBITDA GR. TO NP GR.Telecom (3) 4.9 Oil Gas & Petchem (10) 290.6 Banks (17) 95.8Banks (17) 3.0 Banks (17) 198.9 Oil Gas & Petchem (10) 95.2Engineering (9) 2.9 Telecom (3) 113.9 IT (7) 25.8IT (7) 2.8 Utilities (5) 110.0 Cement (7) 20.2Auto (5) 2.3 Cement (7) 63.1 FMCG (12) 15.2Infrastructure (5) 2.2 Auto (5) 58.4 Utilities (5) 12.4FMCG (12) 2.1 FMCG (12) 42.0 Infrastructure (5) 7.0Cement (7) 1.8 IT (7) 41.0 Telecom (3) 5.5Utilities (5) 1.6 Infrastructure (5) 33.9 Pharma (13) 4.8Pharma (13) 1.2 Engineering (9) 23.7 Auto (5) 4.0Textiles (4) 0.8 Textiles (4) 13.2 Others (5) 2.3Retail (2) 0.6 Others (5) 10.3 Textiles (4) 0.1Others (5) 0.5 Retail (2) 3.2 Retail (2) 0.1Media (6) 0.0 Media (6) -4.2 Engineering (9) -0.1Real Estate (2) -3.9 Pharma (13) -28.4 Media (6) -3.2Metals (8) -30.9 Real Estate (2) -166.5 Real Estate (2) -76.8Oil Gas & Petchem (10) -91.8 Metals (8) -703.0 Metals (8) -308.3

Source: MOSL

EBITDA MARGIN GROWTH - QUARTER ENDED JUNE 2009 (%) NET PROFIT MARGIN GROWTH - QUARTER ENDED JUNE 2009 (%)

MOSL Universe

MOSL Universe EBITDA Margin Growth = 330bp MOSL Universe Net Profit Margin Growth = 140bp

4926 June 2009

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TOP 10 BY NET PROFIT GROWTH (%)

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WORST 10 BY NET PROFIT GROWTH (%)

Scoreboard (quarter ended June 2009)

Source: MOSL

MOSL Universe

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5026 June 2009

THIS SPACE IS INTENTIONALLY LEFT BLANK

Note: In our quarterly performance tables, our four-quarter numbers may not always add up to the full-year numbers. This is because ofdifferences in classification of account heads in the company’s quarterly and annual results or because of differences in the way we

classify account heads as opposed to the company.

5126 June 2009

Ready reckoner: valuations

PULL OUT

CMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)26.6.09 FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E

Automo bilesBajaj Auto 1,000 Buy 55.0 72.1 77.5 18.2 13.9 12.9 11.0 8.1 7.3 39.9 39.5 33.6Hero Honda 1,413 Buy 64.2 87.7 99.1 22.0 16.1 14.3 14.3 10.8 9.2 37.8 39.9 35.1Mahindra & Mahindra 698 Buy 53.0 68.9 74.8 13.2 10.1 9.3 12.4 9.7 9.4 17.7 18.8 17.0Maruti Suzuki 1,059 Buy 42.1 54.3 66.0 25.1 19.5 16.0 13.9 10.0 7.9 12.8 14.4 15.1Tata Motors 340 Neutral 9.9 14.9 18.0 34.5 22.8 18.9 13.7 10.1 8.4 6.1 7.8 9.1Sector Aggregate 23.4 18.0 15.9 13.2 9.9 8.4 16.5 18.7 18.4CementACC 799 Neutral 57.9 75.2 57.5 13.8 10.6 13.9 8.0 5.8 7.4 23.9 24.7 16.7Ambuja Cements 92 Neutral 7.4 9.3 8.0 12.3 9.8 11.5 7.3 5.6 5.9 22.1 23.1 17.2Birla Corporation 200 Buy 42.0 49.8 42.1 4.8 4.0 4.7 2.4 1.4 1.0 25.1 23.6 17.0Grasim Industries 2,373 Buy 238.5 266.6 244.5 9.9 8.9 9.7 5.5 3.8 3.5 21.1 19.4 14.4India Cements 146 Buy 17.7 20.3 14.7 8.2 7.2 9.9 5.5 4.0 4.8 17.6 17.4 11.2Shree Cement 1,186 Buy 177.5 175.5 164.5 6.7 6.8 7.2 4.9 3.5 3.4 64.6 40.0 27.5Ultratech Cement 714 Buy 79.8 107.6 88.8 8.9 6.6 8.0 5.8 3.7 3.7 31.5 31.6 20.7Sector Aggregate 10.0 8.4 9.9 6.0 4.3 4.4 23.3 22.6 16.5EngineeringABB 789 Neutral 25.1 23.8 27.8 31.4 33.2 28.4 21.7 21.2 18.8 28.4 21.5 20.8Bharat Electronics 1,339 Buy 101.1 109.6 118.7 13.3 12.2 11.3 7.0 5.9 4.6 23.7 21.6 19.8BHEL 2,202 Neutral 72.9 87.8 112.9 30.2 25.1 19.5 22.3 15.7 11.9 30.2 30.0 31.2Crompton Greaves 296 Neutral 15.3 16.9 19.0 19.4 17.5 15.6 17.0 15.6 13.8 36.8 31.2 28.1Cummins India 277 Neutral 21.9 20.0 22.7 12.6 13.8 12.2 8.6 8.4 7.3 34.4 24.8 23.7Larsen & Toubro 1,611 Neutral 51.5 58.5 65.0 31.3 27.5 24.8 26.1 23.1 20.2 24.5 21.3 20.2Siemens 498 Neutral 14.6 18.5 17.5 34.1 27.0 28.5 20.4 15.2 15.6 28.5 22.9 16.7Suzlon Energy 123 Neutral 7.8 6.2 8.4 15.8 19.9 14.6 11.8 12.9 10.3 14.1 10.2 12.8Thermax 410 Neutral 24.8 21.2 21.1 16.6 19.3 19.4 11.4 12.9 12.7 35.3 26.3 24.2Sector Aggregate 26.1 24.0 20.2 19.3 16.4 13.5 25.3 23.0 23.3FMCGAsian Paints 1,153 Neutral 41.9 53.5 64.0 27.5 21.6 18.0 16.6 12.7 10.5 33.6 35.0 34.2Britannia 1,561 Buy 84.1 106.1 118.6 18.5 14.7 13.2 14.4 11.5 10.5 22.7 24.1 22.8Colgate 574 Buy 21.7 25.5 29.7 26.5 22.5 19.3 27.3 21.7 18.3 152.6 156.5 151.1Dabur 121 Buy 4.5 5.6 6.6 26.8 21.7 18.4 21.7 17.3 14.5 47.8 44.5 40.6Godrej Consumer 176 Buy 6.7 9.2 11.0 26.2 19.1 15.9 21.3 14.6 12.1 29.0 35.2 36.7GSK Consumer 938 Buy 44.8 59.0 70.7 20.9 15.9 13.3 14.6 10.6 8.7 24.8 27.3 27.4Hind. Unilever 265 Neutral 9.4 10.6 11.7 28.2 25.1 22.6 21.5 18.8 16.9 132.9 101.7 98.3ITC 197 Buy 8.7 9.9 11.3 22.7 19.8 17.4 13.7 11.9 10.4 23.5 23.5 23.4Marico 73 Buy 3.1 3.8 4.8 23.5 18.9 15.1 15.3 12.2 9.9 41.3 36.5 33.1Nestle 1,869 Buy 58.6 70.4 85.3 31.9 26.5 21.9 20.6 16.8 14.1 119.4 118.6 119.6Tata Tea 728 Neutral 47.4 48.0 55.0 15.4 15.2 13.2 5.7 5.8 5.1 7.5 7.3 8.0United Spirits 929 Buy 32.2 40.5 60.4 28.9 22.9 15.4 16.0 13.8 11.3 12.1 13.2 16.4Sector Aggregate 25.3 21.6 18.6 16.5 14.1 12.2 30.2 30.7 30.9

MOSL Universe

5226 June 2009

Ready reckoner: valuationsCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)

26.6.09 FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11EInformation TechnologyHCL Technologies 192 Neutral 18.6 14.9 17.3 10.3 12.9 11.1 6.7 6.5 6.2 24.0 18.0 18.5Infosys 1,827 Neutral 102.5 96.9 101.0 17.8 18.9 18.1 13.2 13.8 12.8 36.7 27.6 24.3MphasiS 409 Buy 14.1 37.7 38.1 29.1 10.8 10.7 21.8 7.3 6.5 22.8 43.8 31.9Patni Computer 271 Neutral 28.6 24.5 22.5 9.5 11.1 12.1 4.0 3.7 3.8 13.4 10.7 9.0TCS 397 Neutral 26.2 25.5 25.0 15.1 15.6 15.9 10.5 10.9 10.8 36.4 30.0 26.6Tech Mahindra 739 Neutral 70.6 73.3 69.8 10.5 10.1 10.6 7.5 9.7 9.5 55.0 37.9 27.0Wipro 384 Neutral 23.6 24.9 24.7 16.2 15.4 15.6 10.9 10.7 9.6 24.6 21.7 18.2Sector Aggregate 15.8 15.8 15.6 10.9 10.9 10.3 28.6 24.0 21.1InfrastructureHindustan Construction 105 Neutral 3.0 3.8 6.3 35.6 27.8 16.7 11.3 10.4 8.5 7.6 9.1 13.6IVRCL Infra. 378 Buy 17.0 22.6 25.2 22.2 16.7 15.0 24.6 17.9 15.6 13.3 15.4 15.0Jaiprakash Associates 221 Buy 7.2 8.4 8.2 30.7 26.4 26.9 25.3 15.5 15.2 16.8 19.3 16.5Nagarjuna Construction 136 Buy 6.7 9.0 10.7 20.3 15.2 12.7 11.4 9.8 8.0 9.4 11.6 12.6Simplex Infra. 381 Buy 28.6 36.7 44.0 13.3 10.4 8.7 6.8 5.6 5.0 17.5 19.3 19.5Sector Aggregate 30.1 22.3 20.7 19.3 13.6 12.5 13.2 15.6 14.8MediaDeccan Chronicle 80 Buy 5.6 7.1 8.7 14.3 11.3 9.3 6.3 5.3 4.4 12.6 15.4 18.1HT Media 95 Neutral 4.4 5.3 6.5 21.4 17.8 14.5 12.6 10.2 8.4 8.7 9.9 11.4Jagran Prakashan 74 Neutral 3.0 3.6 4.4 24.4 20.7 16.7 13.4 11.2 8.9 16.3 18.0 20.2Sun TV 238 Neutral 10.5 13.0 15.4 22.7 18.3 15.4 11.9 9.5 7.7 24.4 24.0 24.0TV Today 93 Buy 5.8 7.1 9.5 16.1 13.1 9.8 8.9 5.7 3.7 10.6 11.7 13.8Zee Entertainment 171 UR 9.2 8.9 11.3 18.5 19.2 15.1 14.8 12.8 10.1 12.6 11.3 13.3Sector Aggregate 20.1 17.6 14.4 12.0 9.9 7.9 14.9 15.5 17.2MetalsHindalco 87 Sell 9.9 5.0 4.8 8.8 17.5 18.2 5.5 5.5 5.1 16.0 7.3 6.5Hindustan Zinc 604 Buy 64.6 56.6 67.1 9.4 10.7 9.0 5.6 6.8 4.8 19.0 14.4 14.8Jindal Steel & Power 2,444 Buy 198.6 207.8 250.2 12.3 11.8 9.8 8.4 9.0 8.6 45.1 32.4 28.3JSW Steel 624 Buy 52.0 67.5 79.2 12.0 9.2 7.9 8.2 5.7 4.9 12.0 13.6 13.9Nalco 309 Sell 19.7 13.0 11.2 15.6 23.7 27.4 10.0 15.3 19.1 13.0 8.1 6.8SAIL 152 Sell 16.6 13.9 14.6 9.2 10.9 10.4 5.1 6.4 6.6 24.0 17.3 15.9Sterlite Inds. 612 Buy 46.8 31.7 43.5 13.1 19.3 14.1 7.5 12.3 7.7 13.0 8.2 10.2Tata Steel 388 Neutral 134.4 48.1 87.7 2.9 8.1 4.4 3.9 6.1 4.6 66.0 23.9 33.0Sector Aggregate 8.0 12.1 9.6 5.6 7.1 6.1 21.2 12.7 14.2

Oil & GasBPCL 421 Buy 17.5 43.7 46.8 24.0 9.6 9.0 11.2 6.4 5.9 4.8 11.3 11.1Cairn India 234 Buy 4.3 6.2 24.5 54.9 38.0 9.5 50.4 19.3 6.1 2.6 3.5 12.9Chennai Petroleum 177 Buy -2.9 41.3 28.2 -61.4 4.3 6.3 -27.1 3.0 3.7 -12.2 18.7 11.8GAIL 284 Buy 22.5 21.5 23.4 12.6 13.2 12.1 8.4 9.0 7.9 19.0 16.4 15.9HPCL 303 Buy 12.8 31.3 28.4 23.5 9.7 10.7 6.9 5.0 5.5 4.1 9.3 7.9Indraprastha Gas 135 Neutral 11.9 12.6 11.6 11.3 10.7 11.6 5.7 5.0 5.0 26.7 24.1 19.8IOC 538 Buy 21.8 49.8 50.4 24.7 10.8 10.7 14.2 6.5 6.7 5.9 12.7 11.5MRPL 86 Sell 8.3 5.5 4.2 10.4 15.6 20.7 7.4 8.9 13.0 28.0 19.0 12.8ONGC 1,041 Neutral 90.6 89.4 86.8 11.5 11.6 12.0 4.9 4.8 4.7 23.1 19.9 17.2Reliance Inds. 2,029 Buy 103.1 139.9 155.3 19.7 14.5 13.1 14.8 10.2 8.7 16.1 18.1 17.3Sector Aggregate 16.9 12.9 11.8 9.5 7.4 6.7 13.9 15.4 14.7

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UR - Under Review

5326 June 2009

Ready reckoner: valuationsCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)

26.6.09 FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11EPharmaceuticalsAventis Pharma 1,138 Buy 72.2 59.4 68.6 15.8 19.2 16.6 10.9 14.4 11.6 21.7 16.6 17.5Biocon 227 Buy 4.7 13.0 15.5 48.7 17.5 14.6 14.4 10.5 9.0 6.0 14.9 15.7Cadila Health 388 Buy 24.1 32.4 37.3 16.1 12.0 10.4 9.1 7.3 6.5 27.5 30.3 27.9Cipla 261 Neutral 9.9 15.6 17.1 26.5 16.8 15.3 16.3 13.6 11.8 17.6 22.8 21.0Divis Labs 1,152 Buy 64.6 76.8 94.2 17.8 15.0 12.2 13.9 12.7 9.8 39.8 34.6 32.5Dr Reddy’ s Labs 771 Buy -30.7 40.0 46.9 -25.1 19.3 16.5 11.7 14.9 13.1 -11.9 14.0 14.7GSK Pharma 1,232 Buy 52.9 59.0 69.0 23.3 20.9 17.8 16.1 13.8 11.8 29.1 29.2 30.8Glenmark Pharma 232 Neutral 4.3 12.3 14.3 53.6 19.0 16.2 20.5 11.2 9.9 6.7 16.2 15.2Jubiliant Organosys 168 Buy 15.9 22.0 16.9 10.5 7.6 9.9 8.5 8.6 7.4 18.6 25.3 16.3Lupin 843 Buy 56.9 67.0 76.6 14.8 12.6 11.0 12.2 10.0 8.7 34.1 31.5 29.0Piramal Healthcare 301 Buy 17.1 23.4 29.4 17.6 12.8 10.2 12.0 8.9 7.2 29.7 32.4 31.8Ranbaxy Labs 255 Neutral 2.5 -4.8 0.4 103.6 -53.5 688.2 26.6 2117.1 34.0 2.4 -4.6 0.3Sun Pharma 1,140 Buy 87.8 65.2 74.8 13.0 17.5 15.3 11.2 15.1 12.5 31.7 19.2 18.9Sector Aggregate 23.9 17.9 15.0 13.0 13.0 10.7 16.4 18.8 19.2Real EstateDLF 326 Buy 26.9 13.5 19.1 12.1 24.1 17.0 12.9 19.8 13.9 18.7 8.6 10.9Unitech 82 Neutral 6.1 4.3 3.5 13.6 19.1 23.8 14.7 14.7 18.0 21.5 15.9 11.3Sector Aggregate 12.9 22.7 18.2 13.3 18.2 14.8 19.1 9.8 11.0RetailingPantaloon Retail 323 Buy 7.8 9.7 12.3 41.6 33.4 26.4 10.8 9.8 8.8 6.9 7.7 8.9Titan Industries 1,138 Neutral 46.3 51.3 64.2 24.6 22.2 17.7 15.9 13.8 11.1 37.5 31.4 30.5Sector Aggregate 30.6 25.4 20.0 12.5 11.1 9.6 13.6 13.2 14.5TelecomBharti Airtel 810 Buy 44.7 55.2 63.0 18.1 14.7 12.8 10.6 8.5 7.1 31.4 28.8 25.6Idea Cellular 80 Neutral 3.0 3.5 3.6 26.3 22.6 22.3 10.0 8.3 7.4 10.4 7.6 6.9Reliance Comm 312 Buy 29.8 25.8 32.8 10.5 12.1 9.5 9.0 7.1 5.5 20.7 15.7 17.0Sector Aggregate 15.6 14.4 12.2 10.0 8.0 6.6 20.9 18.7 17.8TextilesAlok Ind 22 Buy 9.0 5.2 8.3 2.5 4.3 2.7 6.5 6.9 6.1 12.5 6.6 9.7Arvind Mills 27 Neutral -4.5 -1.1 0.7 -6.0 -25.3 39.0 8.3 7.2 6.4 -5.0 -1.2 0.8Raymond 158 Buy -37.2 -12.1 0.8 -4.2 -13.1 197.7 29.2 12.3 6.0 -18.1 -7.1 0.2Vardhman Textiles 119 Buy 33.2 15.7 23.5 3.6 7.6 5.1 6.8 7.8 6.3 14.8 6.4 9.0Sector Aggregate 52.4 27.0 8.3 7.9 7.7 6.2 0.9 1.7 5.2

UtilitiesCESC 290 Neutral 29.5 28.0 30.0 9.8 10.3 9.7 7.9 7.8 7.3 12.9 11.0 10.7NTPC 195 Neutral 9.9 10.2 12.2 19.7 19.1 16.0 15.5 9.7 9.5 14.8 14.0 14.2PTC India 95 Buy 4.3 3.9 4.6 22.3 24.7 20.7 95.5 44.6 35.9 6.4 6.2 6.3Reliance Infra. 1,264 Buy 46.4 47.0 47.9 27.3 26.9 26.4 24.7 24.7 21.8 10.2 9.1 8.6Tata Power 1,163 Neutral 53.7 57.3 57.4 21.7 20.3 20.3 27.7 17.6 16.0 7.0 8.7 9.7Sector Aggregate 20.4 19.8 18.2 17.1 11.2 10.7 13.1 12.4 12.4

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5426 June 2009

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CMP (RS) RECO EPS (RS) P/E (X) P/BV (X) ROE (%)26.6.09 FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E

BanksAndhra Bank 83 Buy 13.5 14.3 15.7 6.2 5.8 5.3 1.1 1.0 0.9 18.9 18.0 17.7Axis Bank 818 Buy 50.6 59.3 75.2 16.2 13.8 10.9 2.9 2.5 2.1 19.1 19.2 20.7Bank of Baroda 436 Buy 60.9 62.7 75.6 7.1 6.9 5.8 1.4 1.2 1.0 20.9 18.4 19.2Bank of India 345 Neutral 57.2 61.0 67.0 6.0 5.7 5.1 1.5 1.3 1.0 29.2 24.4 22.1Canara Bank 266 Buy 50.6 61.8 70.1 5.3 4.3 3.8 1.1 0.9 0.8 22.8 23.4 22.4Corporation Bank 332 Buy 62.2 64.3 64.6 5.3 5.2 5.1 1.0 0.8 0.8 19.6 17.6 15.5Federal Bank 245 Buy 29.3 31.2 34.7 8.4 7.9 7.1 1.0 0.9 0.8 12.1 11.8 12.0HDFC 2,436 Neutral 80.2 92.6 111.2 30.4 26.3 21.9 5.3 4.8 4.2 23.7 24.9 25.8HDFC Bank 1,497 Neutral 52.8 63.2 84.2 28.4 23.7 17.8 4.2 3.2 2.8 15.6 15.9 17.0ICICI Bank 754 Buy 33.8 34.3 44.5 22.3 22.0 17.0 1.7 1.6 1.5 10.1 10.2 12.5Indian Bank 141 Buy 29.0 32.2 37.2 4.9 4.4 3.8 1.1 0.9 0.8 24.8 23.0 22.3Indian Overseas Bank 86 Sell 24.3 19.5 21.2 3.5 4.4 4.1 0.8 0.7 0.6 24.8 16.8 16.1J&K Bank 483 Buy 84.5 93.8 110.4 5.7 5.1 4.4 0.9 0.8 0.7 16.6 16.3 16.9Oriental Bank 185 Buy 36.1 36.9 38.1 5.1 5.0 4.8 0.6 0.6 0.6 14.8 14.6 14.5Punjab National Bank 655 Buy 98.0 108.4 126.9 6.7 6.0 5.2 1.6 1.3 1.1 25.8 23.7 23.3State Bank 1,749 Buy 143.7 142.7 183.1 12.2 12.3 9.6 1.9 1.7 1.5 17.1 14.8 16.8Union Bank 232 Buy 34.2 37.7 42.5 6.8 6.1 5.5 1.7 1.4 1.1 27.2 24.2 22.4Sector Aggregate 12.6 11.8 9.8 2.3 2.0 1.7 18.0 16.9 17.9

Ready reckoner: valuations

MOSL Universe

CMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)26.6.09 FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E

OthersBlue Star 311 Neutral 20.0 22.6 25.7 15.5 13.7 12.1 10.3 9.1 7.9 56.9 47.3 41.4Bombay Rayon 201 Buy 19.6 31.9 48.0 10.2 6.3 4.2 8.9 5.8 4.0 18.9 20.8 25.4Everest Kanto 208 Neutral 14.1 15.4 21.0 14.7 13.5 9.9 8.4 7.8 5.9 24.5 20.0 22.6Sintex Inds. 222 Buy 24.0 27.3 34.7 9.3 8.1 6.4 6.9 5.6 4.3 19.8 18.7 19.8United Phosphorous 156 Buy 10.7 13.7 18.3 14.5 11.4 8.5 7.8 5.9 4.4 20.0 21.5 23.9Sector Aggregate 12.5 10.0 7.5 8.1 6.4 4.8 20.0 20.8 22.6

5526 June 2009

Ready reckoner: quarterly performanceCMP (RS) RECO SALES EBITDA NET PROFIT

26.6.09 JUN.09 VAR. VAR. JUN.09 VAR. VAR. JUN.09 VAR. VAR.RS M % YOY % QOQ RS M % YOY % QOQ RS M % YOY % QOQ

AutomobilesBajaj Auto 1,000 Buy 22,099 -4.4 17.3 3,864 44.9 35.2 2,531 44.5 35.1Hero Honda 1,413 Buy 37,856 33.1 11.0 5,949 74.4 10.5 4,664 70.9 16.0Mahindra & Mahindra 698 Buy 39,537 23.7 9.2 4,688 42.0 11.4 3,127 34.5 11.9Maruti Suzuki 1,059 Buy 60,898 25.3 -5.3 6,365 11.9 41.7 4,510 -3.2 85.5Tata Motors 340 Neutral 58,317 -15.8 -12.1 5,881 10.9 16.6 1,639 -61.0 411.6Sector Aggregate 218,707 8.6 -0.5 26,747 31.3 21.7 16,471 5.1 44.0CementACC 799 Neutral 19,983 11.9 -2.8 6,375 54.1 -1.5 4,041 53.7 -3.9Ambuja Cements 92 Neutral 17,958 14.4 -2.8 6,248 31.7 19.1 4,140 36.1 23.9Birla Corporation 200 Buy 4,284 8.2 -25.0 1,292 13.0 -2.1 941 2.5 3.9Grasim Industries 2,373 Buy 27,983 7.9 -3.1 7,485 -0.5 10.1 4,821 -6.2 25.3India Cements 146 Buy 9,438 12.7 6.2 2,837 -4.8 25.8 1,464 -6.4 40.5Shree Cement 1,186 Buy 8,220 33.8 2.0 3,400 61.5 2.9 1,939 66.5 -20.2Ultratech Cement 714 Buy 18,322 22.5 -1.5 6,074 36.2 13.9 3,617 36.5 16.9Sector Aggregate 106,037 14.1 -2.9 33,974 25.4 9.2 21,149 23.6 10.1EngineeringABB 789 Neutral 17,213 6.5 23.6 1,859 -2.3 46.2 1,187 -7.9 51.5Bharat Electronics 1,339 Buy 3,858 0.5 -85.9 -391 20.2 PL 95 276.5 -98.3BHEL 2,202 Neutral 51,785 19.6 -50.9 7,250 40.1 -65.0 5,970 25.0 -62.5Crompton Greaves 296 Neutral 12,509 15.5 -8.1 1,589 15.0 -26.7 999 12.4 -23.7Cummins India 277 Neutral 7,328 -9.4 4.2 1,186 -14.4 3.8 746 -25.9 -4.6Larsen & Toubro 1,611 Neutral 83,068 20.4 -20.6 8,058 21.9 -41.1 5,479 11.7 -48.5Siemens 498 Neutral 17,769 -2.4 -25.4 2,048 -22.8 -41.3 1,293 -23.7 -42.7Suzlon Energy 123 Neutral 18,741 -10.2 -54.6 2,913 -3.6 -48.6 293 -79.2 -86.7Thermax 410 Neutral 7,783 0.7 -17.9 739 -14.5 -44.6 501 -14.2 -46.1Sector Aggregate 220,055 11.1 -36.5 25,249 11.4 -56.1 16,563 -0.1 -59.0FMCGAsian Paints 1,153 Neutral 14,407 16.0 1.1 1,988 15.5 11.0 1,191 11.5 16.0Britannia 1,561 Buy 8,181 18.0 7.3 728 26.4 6.2 569 24.3 32.4Colgate 574 Buy 4,687 15.0 2.9 787 19.1 -2.7 837 16.4 2.2Dabur 121 Buy 7,250 20.0 -0.9 1,170 34.3 -9.7 912 29.1 -12.5Godrej Consumer 176 Buy 4,321 19.5 26.1 799 61.2 20.9 651 66.4 9.6GSK Consumer 938 Buy 4,800 27.5 -11.0 725 32.7 -38.9 565 22.4 -32.7Hind. Unilever 265 Neutral 45,490 5.8 12.7 7,440 17.1 24.8 6,209 15.0 35.9ITC 197 Buy 40,826 3.8 4.0 13,350 14.9 2.8 8,714 16.4 7.7Marico 73 Buy 6,851 14.0 22.1 939 24.0 28.1 580 25.1 31.9Nestle 1,869 Buy 12,305 18.8 -2.8 2,338 19.9 -24.5 1,475 18.8 -29.0Tata Tea 728 Neutral 12,141 7.0 0.2 1,469 -4.5 -5.1 756 1.8 39.0United Spirits 929 Buy 11,600 15.0 27.8 1,885 -3.4 29.9 897 -23.4 61.3Sector Aggregate 172,860 10.1 6.9 33,619 15.8 4.4 23,356 15.0 11.1

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MOSL Universe

5626 June 2009

Ready reckoner: quarterly performance

Information TechnologyHCL Technologies 192 Neutral 26,368 21.6 -7.9 4,853 0.5 -17.8 3,624 291.8 81.6Infosys 1,827 Neutral 52,173 7.5 -7.4 16,516 11.7 -12.7 13,558 6.7 -15.2MphasiS 409 Buy 10,464 41.0 -0.2 2,744 120.2 -2.6 1,810 129.1 -19.4Patni Computer 271 Neutral 7,740 -1.2 -2.7 1,301 8.0 -9.1 1,000 -3.6 31.5TCS 397 Neutral 68,832 7.4 -4.0 16,880 10.2 -10.2 12,748 5.5 -3.0Tech Mahindra 739 Neutral 11,004 -1.4 4.7 3,033 5.7 17.0 1,672 -35.4 -18.6Wipro 384 Neutral 64,696 8.5 -1.2 9,714 -5.8 -15.1 9,009 10.7 -0.7Sector Aggregate 241,278 9.5 -3.9 55,041 8.9 -11.1 43,421 13.4 -4.0InfrastructureHindustan Construction 105 Neutral 10,434 20.5 6.5 1,116 22.6 -26.0 150 -23.2 -70.9IVRCL Infra. 378 Buy 12,231 31.7 -24.8 1,162 41.7 -19.9 517 18.9 -35.3Jaiprakash Associates 221 Buy 18,607 62.0 -10.7 5,957 90.8 -15.5 2,517 97.8 -20.2Nagarjuna Construction 136 Buy 11,467 18.1 4.4 1,032 12.7 23.2 457 23.2 19.5Simplex Infra. 381 Buy 12,637 24.3 -7.3 1,302 18.2 2.4 461 9.6 39.7Sector Aggregate 65,376 32.6 -8.6 10,569 53.8 -12.8 4,102 52.2 -20.8MediaDeccan Chronicle 80 Buy 1,725 -10.9 -11.5 431 -54.3 -14.7 207 -66.0 177.8HT Media 95 Neutral 3,300 1.6 -1.1 396 -40.3 -1.5 199 -47.3 -32.5Jagran Prakashan 74 Neutral 2,125 2.9 5.6 531 7.0 36.2 327 3.4 50.0Sun TV 238 Neutral 2,810 25.7 -5.0 2,079 23.6 8.2 1,240 20.8 11.1TV Today 93 Buy 720 12.3 34.1 202 54.4 292.1 117 27.9 43.8Zee Entertainment 171 UR 4,970 -8.3 -3.3 1,260 -12.7 4.9 774 -29.1 -5.9Sector Aggregate 15,650 0.7 -1.8 4,900 -8.6 9.6 2,864 -18.5 9.9MetalsHindalco 87 Sell 37,471 -19.4 2.7 4,835 -49.1 27.5 2,639 -62.1 29.8Hindustan Zinc 604 Buy 13,206 -19.7 4.6 5,385 -44.9 -3.0 5,711 -32.6 3.6Jindal Steel & Power 2,444 Buy 17,258 -8.9 -2.0 5,177 -33.8 20.2 2,842 -37.9 -9.9JSW Steel 624 Buy 36,875 0.4 10.8 10,080 17.3 148.2 3,207 -12.5 956.3Nalco 309 Sell 10,902 -25.7 -3.2 2,993 -59.4 213.3 2,228 -57.6 168.4Sterlite Inds. 612 Buy 44,349 -23.1 0.7 8,094 -55.7 -3.5 5,332 -53.7 36.5SAIL 152 Sell 97,500 -11.6 -19.1 20,271 -32.6 -3.9 13,853 -30.3 -7.1Tata Steel 388 Neutral 247,939 -43.0 -6.1 27,750 -60.3 7107.9 5,002 -88.3 LPSector Aggregate 505,500 -31.3 -6.4 84,585 -47.6 74.3 40,814 -60.4 134.6Oil & GasBPCL 421 Buy 281,962 -27.7 6.4 13,525 LP -67.4 5,563 LP -84.7Cairn India 234 Buy 2,423 -40.0 33.3 1,399 -48.6 61.3 541 -60.9 189.6Chennai Petroleum 177 Buy 66,113 -41.2 37.5 5,784 -50.5 11.3 3,137 -62.4 3.4GAIL 284 Buy 64,054 11.8 4.9 9,967 -28.8 4.1 6,325 -33.0 0.4HPCL 303 Buy 268,990 -22.5 6.9 13,073 LP -76.0 5,397 LP -89.4Indraprastha Gas 135 Neutral 2,317 21.5 1.9 752 -0.4 5.0 417 -4.5 3.5IOC 538 Buy 603,361 -31.7 1.2 45,597 374.8 -47.1 23,680 470.4 -64.2MRPL 86 Sell 77,732 -27.7 18.9 7,960 -42.5 -15.4 4,701 -49.4 -22.6ONGC 1,041 Neutral 172,174 -14.1 25.6 87,730 -25.4 51.8 46,162 -30.0 109.1Reliance Inds. 2,029 Buy 290,899 -30 2.6 62,424 2 14.8 40,480 -1.5 3.4Sector Aggregate 1,830,025 -27.2 7.2 248,211 14.4 -21.5 136,403 15.8 -39.5

CMP (RS) RECO SALES EBITDA NET PROFIT26.6.09 JUN.09 VAR. VAR. JUN.09 VAR. VAR. JUN.09 VAR. VAR.

RS M % YOY % QOQ RS M % YOY % QOQ RS M % YOY % QOQ

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Tata Steel and Sterlite numbers are consolidated; UR - Under Review

5726 June 2009

Ready reckoner: quarterly performance

PharmaceuticalsAventis Pharma 1,138 Buy 2,331 -6.3 1.8 382 -24.1 -2.0 363 -13.2 -10.4Biocon 227 Buy 4,807 82.2 3.1 1,082 87.9 20.6 665 343.3 167.3Cadila Health 388 Buy 8,151 16.7 12.7 1,904 30.3 27.7 1,144 27.5 43.6Cipla 261 Neutral 14,645 21.3 7.2 3,736 38.3 4.0 3,662 161.5 44.8Divis Labs 1,152 Buy 2,965 11.4 -7.1 1,189 0.1 -13.1 1,129 17.0 8.2Dr Reddy’ s Labs 771 Buy 16,760 11.5 -15.6 2,229 22.8 -51.7 1,508 11.9 LPGlenmark Pharma 232 Neutral 5,862 27.2 25.0 1,368 -3.0 LP 625 -32.3 LPGSK Pharma 1,232 Buy 4,742 13.9 3.7 1,642 14.9 5.1 1,288 12.3 2.8Jubiliant Organosys 168 Buy 8,800 6.5 4.6 1,468 -11.5 -23.7 1,200 840.5 136.1Lupin 843 Buy 10,350 20.0 1.7 1,701 11.4 4.4 1,475 31.6 -6.3Piramal Healthcare 301 Buy 7,990 12.8 -2.4 1,710 21.8 15.0 1,000 39.6 -7.2Ranbaxy Labs 255 Neutral 15,505 -19.6 3.9 -569 PL -30.7 -842 PL 2.1Sun Pharma 1,140 Buy 9,948 -2.8 -13.7 3,317 -38.3 -11.4 3,442 -31.1 -13.7Sector Aggregate 112,940 8.4 -1.6 21,212 -12.8 -9.5 16,543 6.1 703.6Real EstateDLF 326 Buy 14,062 -63.1 25.3 8,824 -62.4 470.8 6,441 -65.4 305.0Unitech 82 Neutral 5,234 -49.3 18.6 2,539 -58.3 14.8 1,105 -73.9 70.1Sector Aggregate 19,296 -60.2 23.4 11,362 -61.5 202.5 7,546 -67.0 236.9RetailingPantaloon Retail 323 Buy 17,055 23.5 3.9 1,708 21.0 -1.3 322 -1.2 -6.5Titan Industries 1,138 Neutral 9,100 12.3 3.3 610 8.8 -1.9 342 6.1 -22.4Sector Aggregate 26,155 19.3 3.7 2,318 17.5 -1.5 664 2.5 -15.4TelecomBharti Airtel 810 Buy 101,604 19.8 3.4 42,658 21.1 6.6 25,761 27.2 15.0Idea Cellular 80 Neutral 30,746 41.2 4.7 8,798 22.1 8.5 3,071 16.7 12.0Reliance Comm 312 Buy 64,298 20.8 5.0 25,892 15.1 8.6 11,536 -29.6 -15.2Sector Aggregate 196,648 23.0 4.1 77,348 19.1 7.5 40,368 2.8 4.2TextilesAlok Ind 22 Buy 8,101 49.1 -10.8 1,871 40.4 -22.2 251 -15.9 -64.2Arvind Mills 27 Neutral 6,030 10.6 2.8 675 23.0 19.9 -111 PL -25.8Raymond 158 Buy 3,418 45.0 -5.8 270 LP 65.9 -65 -84.2 PLVardhman Textiles 119 Buy 6,999 23.6 18.3 973 13.4 16.4 146 -53.5 -5.3Sector Aggregate 24,548 29.8 0.2 3,790 61.3 -4.5 221 9.0 -74.8UtilitiesCESC 290 Neutral 8,222 5.0 11.0 1,459 19.6 -4.0 835 1.2 -11.1NTPC 195 Neutral 106,842 12.0 -6.7 35,258 45.6 58.8 20,947 10.4 -12.3PTC India 95 Buy 13,663 13.6 16.0 70 19.0 198.1 237 25.4 36.4Reliance Infrastructure 1,264 Buy 22,445 -2.0 -6.0 2,469 -13.6 58.3 2,690 7.5 -9.1Tata Power 1,163 Neutral 18,843 -7.0 27.8 4,145 36.0 41.3 1,838 16.0 95.2Sector Aggregate 170,015 7.3 -1.3 43,401 38.2 53.7 26,548 10.3 -8.1

CMP (RS) RECO SALES EBITDA NET PROFIT26.6.09 JUN.09 VAR. VAR. JUN.09 VAR. VAR. JUN.09 VAR. VAR.

RS M % YOY % QOQ RS M % YOY % QOQ RS M % YOY % QOQ

PULL OUT

MOSL Universe

UR - Under Review

5826 June 2009

Ready reckoner: quarterly performance

MOSL Universe

PULL OUT

CMP (RS) RECO SALES EBITDA NET PROFIT26.6.09 JUN.09 VAR. VAR. JUN.09 VAR. VAR. JUN.09 VAR. VAR.

RS M % YOY % QOQ RS M % YOY % QOQ RS M % YOY % QOQOthersBlue Star 311 Neutral 6,940 10.0 -4.3 664 16.5 -29.7 439 20.6 -34.2Bombay Rayon 201 Buy 4,126 50.0 -1.1 957 50.7 -1.0 474 35.7 -0.3Everest Kanto 208 Neutral 2,065 9.1 5.3 591 -8.5 34.3 338 -10.3 140.1Sintex Inds. 222 Buy 7,863 7.9 -7.8 1,179 27.8 -29.8 681 20.6 -40.3United Phosphorous 156 Buy 14,315 8.9 2.2 3,158 18.9 4.7 1,666 12.8 2.8Sector Aggregate 35,309 12.5 -1.7 6,549 20.6 -7.1 3,598 14.9 -11.0PL: Profit to Loss; LP: Loss to Profit; UR=Under Review

CMP (RS) RECO NET INT INCOME OPERATING PROFIT NET PROFIT26.6.09 JUN.09 VAR. VAR. JUN.09 VAR. VAR. JUN.09 VAR. VAR.

RS M % YOY % QOQ RS M % YOY % QOQ RS M % YOY % QOQBanksAndhra Bank 83 Buy 3,775 9.0 -4.5 2,625 27.9 -39.2 1,530 97.1 -23.9Axis Bank 818 Buy 10,228 26.2 -1.0 9,891 23.3 -13.1 4,479 35.7 -23.0Bank of Baroda 436 Buy 13,836 30.9 -5.9 10,444 21.4 -19.9 5,382 45.1 -28.5Bank of India 345 Neutral 13,899 17.7 -3.0 11,804 10.1 -16.2 6,306 12.2 -22.2Canara Bank 266 Buy 12,989 27.4 -0.5 9,821 39.6 -22.8 5,866 378.1 -18.4Corporation Bank 332 Buy 4,322 14.3 0.9 3,983 24.1 -41.0 2,184 18.5 -16.2Federal Bank 245 Buy 2,945 5.9 -8.2 2,575 1.6 -19.3 842 23.5 -26.3HDFC 2,436 Neutral 9,433 26.6 -12.8 8,308 27.1 -19.4 5,871 25.4 -19.8HDFC Bank 1,497 Neutral 19,197 11.4 3.7 13,535 31.7 -13.8 5,798 24.9 -8.1ICICI Bank 754 Buy 21,360 2.2 -0.1 20,560 19.9 -4.6 7,344 0.8 -1.3Indian Bank 141 Buy 6,621 22.7 -0.8 4,963 13.7 -21.9 3,079 41.5 -21.9Indian Overseas Bank 86 Sell 6,973 -4.0 -1.0 4,973 106.2 -38.8 2,871 12.2 -10.9J&K Bank 483 Buy 2,392 5.7 -4.5 1,808 -0.4 -17.2 965 2.0 22.6Oriental Bank 185 Buy 4,800 7.5 4.3 3,930 11.1 -27.0 2,197 -0.4 12.2Punjab National Bank 655 Buy 18,067 25.1 -5.2 13,011 32.4 -18.1 7,378 44.0 -14.8State Bank 1,749 Buy 48,465 0.6 0.1 36,672 -7.4 -30.5 18,990 15.7 -30.8Union Bank 232 Buy 9,193 13.5 -0.8 6,673 8.3 -26.8 3,509 53.7 -24.6Sector Aggregate 208,496 11.9 -1.7 165,575 15.1 -22.2 84,589 29.2 -20.3

5926 June 2009

Automobiles

COMPANY NAMEBajaj Auto

Hero Honda

Mahindra & Mahindra

Maruti Suzuki India

Tata Motors

EXPECTED QUARTERLY PERFORMANCE SUMMARY (RS MILLION)CMP (RS) RECO SALES EBITDA NET PROFIT

26.6.09 JUN.09 VAR. VAR. JUN.09 VAR. VAR. JUN.09 VAR. VAR.% YOY % QOQ % YOY % QOQ % YOY % QOQ

AutomobilesBajaj Auto 1,000 Buy 22,099 -4.4 17.3 3,864 44.9 35.2 2,531 44.5 35.1Hero Honda 1,413 Buy 37,856 33.1 11.0 5,949 74.4 10.5 4,664 70.9 16.0Mahindra & Mahindra 698 Buy 39,537 23.7 9.2 4,688 42.0 11.4 3,127 34.5 11.9Maruti Suzuki 1,059 Buy 60,898 25.3 -5.3 6,365 11.9 41.7 4,510 -3.2 85.5Tata Motors 340 Neutral 58,317 -15.8 -12.1 5,881 10.9 16.6 1,639 -61.0 411.6Sector Aggregate 218,707 8.6 -0.5 26,747 31.3 21.7 16,471 5.1 44.0

Results PreviewQUARTER ENDING JUNE 2009

Jinesh K Gandhi (Jinesh@MotilalOswal.com)

Recovery continues in 1QFY10: Recovery in volumes, which was initially witnessedin 4QFY09, continued in 1QFY10, supported by overall improvement in sentiment, creditavailability, lower interest rates, and new product launches. We expect two-wheelervolumes to grow ~8% YoY and 10% QoQ, car volumes to grow ~10% YoY but decline5% QoQ, CV volumes to decline 14% YoY but grow 1.6% QoQ, and UV volumes to beflat YoY but decline 5% QoQ.

Demand outlook improving, upgrading volume estimates: With improvement inexternal environment, stable new government at the center, improving availability offinance at lower rates and inventory under control, the volume outlook is improving.Hence, we are upgrading our volume estimates for FY10 and FY11 for the companiesunder our coverage.

Commodity prices bottomed out, started moving up: Full benefits of softening inprices of key raw materials – steel, aluminum and rubber – would be realized from1QFY10, translating into margin expansion of 210bp YoY (~230bp QoQ) for MOSLuniverse in 1QFY10. However, commodity prices have started hardening, after bottomingout in 2HFY09. Our estimates now factor in increase in RM cost from 2HFY10, therebyimpacting margins.

Valuation and view: Volume growth in the domestic market is witnessing revival.Valuations in the sector remain attractive, especially considering impending improvementin macro environment for the auto industry. Our top picks are Hero Honda, M&M andBajaj Auto.

BSE Sensex: 14,765 S&P CNX: 4,376 26 June 2009

6026 June 2009

Automobiles

Recovery continues in 1QFY10Recovery in volumes, which was initially witnessed in 4QFY09, continued in 1QFY10,supported by overall improvement in sentiment, credit availability, lower interest rates, andnew product launches. We expect two-wheeler volumes to grow ~8% YoY and 10%QoQ, car volumes to grow ~10% YoY but decline 5% QoQ, CV volumes to decline 14%YoY but grow 1.6% QoQ, and UV volumes to be flat YoY but decline 5% QoQ.

? Two-wheeler volumes are likely to grow 8% YoY (~10% QoQ). Hero Honda wouldbenefit the most, with volumes growing 25% YoY (~12% QoQ). TVS Motor’s volumeswould grow 4% YoY (~1% QoQ) while Bajaj Auto’s two-wheeler volumes woulddecline 15% YoY (but grow ~27% QoQ).

? Car volumes would grow 10% YoY (~5% QoQ decline), driven by growth in bothdomestic sales and exports. While Maruti Suzuki’s volumes would grow 16% YoY(but decline ~5% QoQ), Tata Motors’ volumes would decline 7% YoY (~26% QoQ).

? The commercial vehicle segment would witness volume de-growth of 14% YoY (butgrowth of ~1.6% QoQ), impacted by 38% YoY decline (~10.5% QoQ) in M&HCVvolumes. However, LCV volumes would grow 12% YoY (~11% QoQ). Tata Motors’CV volumes would decline 5% YoY (but grow ~2% QoQ), with its M&HCV volumesdeclining 27% YoY (~3% QoQ) but LCV volumes growing 15% YoY (~5.5% QoQ).

AUTO VOLUME SNAPSHOT FOR APRIL-JUNE 20091QFY10 1QFY09 YOY (%) 4QFY09 QOQ (%)

Two wheelers 2,287 2,118 8.0 2,078 10.1Three wheelers 113 115 -2.0 117 -3.9Passenger cars 443 402 10.0 466 -5.0UVs 67 67 0.0 63 5.6M&HCV 40 64 -38.0 44 -10.5LCV 65 58 12.0 58 10.9Total 3,014 2,824 6.7 2,827 6.6

Source: SIAM/ MOSL

Demand outlook improving, upgrading volume estimatesWith improvement in external environment, stable new government at the center, improvingavailability of finance at lower rates and inventory under control, the volume outlook isimproving. Hence, we are upgrading our volume estimates for FY10 and FY11 for thecompanies under our coverage.

REVISED FY10 VOLUME GROWTH ESTIMATES (%)REV OLD

Bajaj Auto 2.4 2.4Hero Honda 12.9 10.0Maruti 14.4 11.7M&M 13.9 6.9

Source: MOSL

6126 June 2009

Automobiles

Commodity prices bottomed out, started moving upFull benefits of softening in prices of key raw materials – steel, aluminum and rubber –would be realized from 1QFY10, translating into margin expansion of 210bp YoY (~230bpQoQ) for MOSL universe in 1QFY10. However, commodity prices have started hardening,after bottoming out in 2HFY09. Our estimates now factor in increase in RM cost from2HFY10, thereby impacting margins.

TREND IN COMMODITY PRICES IN 1HCY09

TREND IN COMMODITY PRICES (FIGURES IN BRACKETS INDICATES YOY CHANGE)STEEL - HRC (RS/TON)

58 54

40

52 51

64 67

48

6455

0

20

40

60

80

Steel (HRC) Copper Zinc Aluminium Rubber

1QCY09 2QCY09

+11% QoQ +25% QoQ +22% QoQ+20% QoQ +9% QoQ

COPPER (US$/TON)

390350390

1,1301,053970

590565550 -(62.9%)-(63.9%)-(33.9%)

(100.0%)(91.4%)(70.9%)

(16.8%)(16.5%)-(9.1%)

200

450

700

950

1,200

1QFY

08

2QFY

08

3QFY

08

4QFY

08

1QFY

09

2QFY

09

3QFY

09

4QFY

09

1QFY

10

4,0035,009

7,678 8,087

6,642

8,510 8,693

6,388

3,042

(3.4%) (6.9%)(5.3%)

(23.0%) (13.2%)

-(21.0%)

-(54.2%)-(53.0%)

-(42.4%)

0

2,500

5,000

7,500

10,000

1QFY

08

2QFY

08

3QFY

08

4QFY

08

1QFY

09

2QFY

09

3QFY

09

4QFY

09

1QFY

10

Source: Bloomberg/Industry

6226 June 2009

Automobiles

RUBBER (BAHT/KG)

ZINC (US$/TON)

ALUMINIUM (US$/TON)

Source: Bloomberg/Industry

We estimate margins for the MOSL universe to improve by 210bp YoY (~ 230bp QoQ) to13%, with the largest benefit for M&M (~610bp QoQ), Tata Motors (~370bp QoQ) andMaruti (~230bp QoQ).

1,166

3,339 3,063

2,354 2,2931,903

1,6541,180

-(49.1%)

(3.1%) -(7.9%)

-(45.1%) -(29.6%)-(43.0%)

-(46.0%) -(49.9%)

0

1,000

2,000

3,000

4,000

1QFY

08

2QFY

08

3QFY

08

4QFY

08

1QFY

09

2QFY

09

3QFY

09

4QFY

09

1,651

1,355

2,6762,466 2,358

2,9413,065

2,377

1,508

-(46.2%)

(3.3%)-(3.4%) -(16.7%)

(6.2%)(14.5%)

-(3.6%)

-(36.1%)-(53.9%)

1,100

1,700

2,300

2,900

3,500

1QFY

08

2QFY

08

3QFY

08

4QFY

08

1QFY

09

2QFY

09

3QFY

09

4QFY

09

1QFY

1053 58

79 7383

90

110

92

65

-(47.3%)-(40.9%)

-(24.6%) -(3.0%) (45.4%)(10.6%)

(38.7%)

(26.4%)

-(21.9%)

20

50

80

110

140

1QFY

08

2QFY

08

3QFY

08

4QFY

08

1QFY

09

2QFY

09

3QFY

09

4QFY

09

1QFY

10

6326 June 2009

Automobiles

YOY QOQUSD 11.7 -5.2JPY 23.2 -2.6EUR -1.2 -0.3GBP -7.5 9.1

MARGINS TO IMPROVE FROM 1QFY10 (%)JUN-09 JUN-08 YOY MAR-09 QOQ

Bajaj Auto 17.5 11.5 590 15.2 230Hero Honda 15.7 12.0 370 15.8 -10Mahindra & Mahindra 10.5 11.7 -130 7.0 350Maruti Suzuki 11.9 10.3 160 11.5 30Tata Motors 9.9 7.7 230 7.4 260Auto Sector Aggregate 12.2 10.1 210 9.9 230

Source: Bloomberg/Industry

Forex fluctuation continues to have destabilizing effectExchange rate fluctuation has led to concerns over export revenue realization and cost ofimported inputs, and the effectiveness of hedging practices being followed by companies.While the rupee has depreciated considerably versus major currencies, its impact wouldvary depending upon the hedging strategies deployed by respective companies.

TREND IN RUPEE MOVEMENT (INDEX)

60

80

100

120

140

Jun-

06

Sep

-06

Dec

-06

Mar

-07

Jun-

07

Sep

-07

Dec

-07

Mar

-08

Jun-

08

Sep

-08

Dec

-08

Mar

-09

Jun-

09

USD Euro GBP JPY

Source: Bloomberg/Industry

Sector outlook remains positiveThe auto sector put forth mixed performance in FY09. While M&HCV, tractor and three-wheeler volumes were lower, two-wheelers, passenger vehicles and LCVs continued toregister robust growth. While concerns over higher input costs, volatility in foreign currencyexchange rates and higher interest rates subside, we remain bullish on the auto sector forthe following reasons:? The recent stimulus package by the government would boost demand in the medium

term. The auto industry would benefit from the recent announcements on fiscal(CENVAT rate cut), monetary (rate reduction) and fuel price cuts.

? A revival in auto volumes will result in economies of scale for most companies overtheir expanded capacities. Moreover, the leading companies have successfullyundertaken cost reduction and productivity improvement programs, which coupledwith lower commodity prices, will boost margins.

? Ramping up of operations in tax-free zones like Uttaranchal will help counter costpressures through lower tax burden. Auto majors like Tata Motors, Bajaj Auto, TVSMotor, Hero Honda and Ashok Leyland have respectively set up plants in the tax-exempt region of Uttaranchal. All the companies have commenced their operationsat these plants. As volumes are ramped up further at these tax-exempt locations, auto

6426 June 2009

Automobiles

companies will be in even better position to take further advantage of these tax benefitsoffered and thereby counter cost pressures. The recent excise duty cut by 4% willalso boost demand.

? The exports market is yet to be fully tapped by Indian auto manufacturers; this segmentmay become a further volume growth driver for the industry. Companies like Maruti,Tata Motors, M&M, and Bajaj Auto are in a position to further increase their exportsby tapping newer destinations and increasing penetration in their existing markets.

Valuation and viewVolume growth in the domestic market is witnessing revival. Valuations in the sector remainattractive, especially considering impending improvement in macro environment for theauto industry. There are re-rating triggers in the form of (a) lower material cost, (b) lowerinterest cost / better availability of finance, (c) lower fuel cost, and (d) strong EPS growthin FY10 on low base. Our top picks are Hero Honda, M&M and Bajaj Auto.

6526 June 2009

Automobiles

RELATIVE PERFORMANCE - 3 MONTH (%) RELATIVE PERFORMANCE - 1 YEAR (%)

Stock performance and valuations

STOCK PERFORMANCE (%) ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR

3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEARAutomobilesBajaj Auto 62 104 14 102 8 54Hero Honda 37 98 -10 96 -17 48Mahindra & Mahindra 81 26 33 24 27 -24Maruti Suzuki 37 56 -10 54 -17 6Tata Motors 97 -28 49 -31 43 -79

CMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)26.6.09 FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E

Automo bilesBajaj Auto 1,000 Buy 55.0 72.1 77.5 18.2 13.9 12.9 11.0 8.1 7.3 39.9 39.5 33.6Hero Honda 1,413 Buy 64.2 87.7 99.1 22.0 16.1 14.3 14.3 10.8 9.2 37.8 39.9 35.1Mahindra & Mahindra 698 Buy 53.0 68.9 74.8 13.2 10.1 9.3 12.4 9.7 9.4 17.7 18.8 17.0Maruti Suzuki 1,059 Buy 42.1 54.3 66.0 25.1 19.5 16.0 13.9 10.0 7.9 12.8 14.4 15.1Tata Motors 340 Neutral 9.9 14.9 18.0 34.5 22.8 18.9 13.7 10.1 8.4 6.1 7.8 9.1Sector Aggregate 23.4 18.0 15.9 13.2 9.9 8.4 16.5 18.7 18.4

60

90

120

150

180

Jun-08 Sep-08 Dec-08 Mar-09 Jun-09

MOSt Automobiles Index Sensex

80

100

120

140

160

Mar-09 Apr-09 May-09 Jun-09

Sensex MOSt Automobiles Index

6626 June 2009

Equity Shares (m) 144.7

52-Week Range (Rs) 1,155/295

1,6,12 Rel.Perf.(%) 0/108/102

M.Cap. (Rs b) 144.7

M.Cap. (US$ b) 3.0

BuyPrevious Recommendation: Buy Rs1,000

26 June 2009BLOOMBERGBJAUT IN

REUTERS CODEBJAT.BO

Results PreviewSECTOR: AUTOMOBILES

Bajaj Auto

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA3/08A 90,462 8,241 57.0 17.6 9.1 51.9 42.4 1.5 10.7

3/09A 88,104 7,963 55.0 -3.4 18.2 7.3 39.9 51.7 1.5 11.0

3/10E 94,378 10,437 72.1 31.1 13.9 5.5 39.5 52.9 1.4 8.1

3/11E 101,427 11,220 77.5 7.5 12.9 4.3 33.6 45.8 1.2 7.3

Jinesh K Gandhi (Jinesh@MotilalOswal.com)

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QVolumes (nos) 620,095 640,040 493,748 440,269 535,710 640,100 551,500 519,648 2,194,154 2,246,958

Change (%) 8.5 4.2 -30.8 -20.3 -13.6 0.0 11.7 18.0 (10.5) 2.4Net Realization (Rs/unit) 37,265 39,817 42,595 42,779 41,252 41,409 42,545 42,933 40,154 42,003

Change (%) 1.0 3.5 21.4 14.0 10.7 4.0 -0.1 0.4 8.8 4.6Net Sales 23,108 25,484 21,031 18,834 22,099 26,506 23,464 22,310 88,104 94,378

Change (%) 9.6 7.9 -15.9 -9.2 -4.4 4.0 11.6 18.5 -2.6 7.1EBITDA 2,668 3,439 3,058 2,858 3,864 4,600 3,916 3,511 12,023 15,892

EBITDA Margins (%) 11.5 13.5 14.5 15.2 17.5 17.4 16.7 15.7 13.6 16.8Other Income 288 221 379 229 210 225 325 200 1,117 960Extraordinary Expenses 0 611 611 829 611 611 611 0 2,071 1,833Interest 9 59 90 52 55 53 52 53 210 213Depreciation 335 331 319 313 325 335 355 387 1,298 1,402PBT 2,611 2,659 2,417 1,893 3,083 3,826 3,223 3,271 9,561 13,404Tax 860 810 755 591 971 1,205 1,015 1,030 3,016 4,222

Effective Tax Rate (%) 32.9 30.5 31.2 31.2 31.5 31.5 31.5 31.5 31.5 31.5Rep. PAT 1,751 1,849 1,662 1,302 2,112 2,621 2,208 2,241 6,545 9,182

Change (%) -4.3 (22.5) (22.2) 7.8 20.6 41.7 32.8 72.1 -13.4 40.3Adj. PAT 1,751 2,274 2,082 1,873 2,531 3,040 2,626 2,241 7,963 10,437

Change (%) -4.3 (6.7) (16.2) 21.9 44.5 33.7 26.1 19.7 -4.6 31.1E: MOSL Estimates

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect volumes to decline 13.6% YoY (~21.7% QoQ increase) in 1QFY10. Volumes have recovered QoQ afterseeing significant decline in 2HFY09. Two-wheeler volumes should improve 27% QoQ (decline ~15% YoY), whereasthree-wheeler volumes should decline 9% QoQ (~1.5% YoY).

? We estimate net sales at Rs22.1b, a decline of 4.4% YoY. Realizations should improve 11% YoY, reflecting improvementin product mix and higher export realizations (as new hedges are at higher rupee rate). EBITDA margin wouldexpand 590bp YoY (~230bp QoQ) to 17.5%, aided by higher realizations and lower RM cost. We estimate EBITDAat Rs3.86b (~45%YoY growth) and adjusted PAT at Rs2.5b (~44.5% YoY growth).

? The company plans to launch a new bike in the mid-segment in July 2009, which could be its key volume growthdriver. This coupled with encouraging response for XCD 135 and new Pulsar would support volume recovery.

? Our FY10 earnings estimate factors in 2.4% growth in volumes, with domestic volume growth of 5.4% and exportde-growth of 3.2%, as well as higher RM cost in 2HFY10. The stock trades at 13.9x FY10E and 12.9x FY11E EPS.Maintain Buy.

6726 June 2009

Hero Honda

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 103,318 9,679 48.5 12.8 29.2 9.4 35.5 45.7 2.5 19.0

3/09A 123,191 12,818 64.2 32.4 22.0 7.4 37.8 47.9 2.0 14.3

3/10E 142,741 17,507 87.7 36.6 16.1 5.7 39.9 48.2 1.6 10.8

3/11E 155,706 19,790 99.1 13.0 14.3 4.5 35.1 42.4 1.4 9.2

Equity Shares (m) 199.7

52-Week Range 1,550/630

1,6,12 Rel. Perf. (%) -3/20/96

M.Cap. (Rs b) 282.2

M.Cap. (US$ b) 5.9

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QTotal Volumes (nos) 894,244 972,095 857,806 997,855 1,118,253 1,070,000 940,000 1,073,739 3,722,000 4,201,992

Change (%) 11.4 28.5 -4.0 12.9 25.1 10.1 9.6 7.6 11.5 12.9Net Realization (Rs/unit) 31,798 32,813 33,505 34,192 33,853 33,900 34,044 34,096 33,098 33,970

Change (%) 4.3 5.6 9.1 8.4 6.5 3.3 1.6 -0.3 6.9 2.6Net Sales 28,435 31,897 28,740 34,118 37,856 36,273 32,001 36,611 123,191 142,741

Change (%) 16.2 35.6 4.8 22.3 33.1 13.7 11.3 7.3 19.2 15.9Total Cost 25,025 27,672 24,643 28,734 31,907 30,763 27,213 31,272 106,074 121,154EBITDA 3,410 4,226 4,098 5,384 5,949 5,510 4,788 5,339 17,118 21,587

As % of Sales 12.0 13.2 14.3 15.8 15.7 15.2 15.0 14.6 13.9 15.1Other Income 467 662 508 549 600 750 600 845 2,187 2,795Interest -50 -83 -87 -96 -95 -98 -102 -105 -317 -400Depreciation 422 466 475 444 460 485 500 538 1,807 1,983PBT 3,505 4,505 4,219 5,586 6,184 5,873 4,990 5,751 17,815 22,799Tax 777 1,442 1,214 1,564 1,520 1,420 1,142 1,210 4,997 5,293

Effective Tax Rate (%) 22.2 32.0 28.8 28.0 24.6 24.2 22.9 21.0 28.1 23.2PAT 2,729 3,063 3,004 4,022 4,664 4,453 3,849 4,541 12,818 17,507Adj. PAT 2,729 3,063 3,004 4,022 4,664 4,453 3,849 4,541 12,818 17,507

Change (%) 43.7 49.9 9.2 34.7 70.9 45.4 28.1 12.9 32.4 36.6E: MOSL Estimates

BuyPrevious Recommendation:Buy Rs1,413

26 June 2009BLOOMBERGHH IN

REUTERS CODEHROH.BO

Results PreviewSECTOR: AUTOMOBILES

Jinesh K Gandhi (Jinesh@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect volumes to grow by 25% YoY (~12% QoQ) in 1QFY10. Hero Honda continues to dominate the two-wheeler industry and has continuously gained market share. Also, realizations are likely to improve by 6.5% onaccount of price increase taken in 1HFY09 and higher sales from Haridwar (~27% of volumes v/s 5.1% in 1QFY09).Our estimates factor in about 300,000 units from Haridwar in 1QFY10.

? Net sales would increase by 33% YoY to Rs37.9b, while operating margins are likely to improve 370bp YoY to 15.7%(flat QoQ), driven by ramp-up at Haridwar plant and benefit from softening in commodity prices. This coupled withlower tax (due to ramp-up at Haridwar) would boost PAT growth to 71% to Rs4.7b.

? We maintain our EPS estimate for FY10 at Rs87.7, but upgrade our EPS estimate for FY11 by 6.9% to Rs99.1 tofactor in upgrade in volumes. Our volume estimates for Hero Honda are 4.2m units (~13% growth) for FY10 and4.54m (~8% growth) for FY11. However, we now factor in increase in RM cost, in line with the increase in commodityprices, which is curtailing an upgrade in our earnings estimates.

? The stock trades at 16.1x FY10E and 14.3x FY11E EPS. Maintain Buy.

6826 June 2009

Mahindra & Mahindra

YEAR NET SALES S/A PAT ADJ.EPS CONS. P/E CONS, ROE ROCE EV/ EV/END (RS M) (RS M) (RS) EPS (RS) (X) P/E (X) (%) (%) SALES EBITDA

3/08A 114,106 10,332 36.4 54.5 19.2 12.8 23.8 16.8 1.3 11.6

3/09A 130,937 9,297 32.8 53.0 21.3 13.2 17.7 13.2 1.2 11.8

3/10E 154,173 11,251 39.6 68.9 17.6 10.1 18.8 15.4 1.0 9.3

3/11E 167,337 11,413 40.2 74.8 17.4 9.3 17.0 14.5 0.9 9.0

Diluted Eq. Shares (m) 283.8

52-Week Range 824/236

1,6,12 Rel.Perf.(%) 6/104/24

M.Cap. (Rs b) 198.1

M.Cap. (US$ b) 4.1

BuyPrevious Recommendation: Buy Rs698

26 June 2009BLOOMBERGMM IN

REUTERS CODEMAHM.BO

Results PreviewSECTOR: AUTOMOBILES

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QTotal Volumes (nos) 81,433 78,892 61,130 88,860 94,304 96,700 87,500 93,770 326,890 372,274

Change (%) 21.1 13.7 -20.7 12.4 15.8 22.6 43.1 5.5 11.3 13.9Net Realization 394,232 397,753 412,114 411,259 419,249 409,469 419,440 408,867 400,553 414,138

Change (%) 1.0 -1.8 7.7 2.9 6.3 2.9 1.8 -0.6 2.0 3.4Gross Sales 36,126 35,358 28,293 40,465 43,751 43,966 40,380 42,762 146,046 170,859Less: Excise 4,174 4,429 3,231 4,273 4,215 4,370 3,679 4,423 16,194 16,686

Excise (%) 13.1 14.3 12.9 11.8 10.7 11.0 10.0 11.5 12.5 10.8Net Sales 31,952 30,930 25,063 36,192 39,537 39,596 36,701 38,339 129,853 154,173

Change (%) 22.3 14.4 -14.6 15.2 23.7 28.0 46.4 5.9 14.0 18.7EBITDA 3,301 2,929 847 4,208 4,688 4,475 3,870 4,092 13,298 17,124

As % of Sales 10.3 9.3 3.4 11.5 11.9 11.3 10.5 10.7 10.2 11.1Other income 447 1,143 436 51 465 980 420 324 1,871 2,189Interest 81 153 141 209 210 215 220 226 453 871Depreciation 617 639 653 932 940 955 1,005 1,025 2,915 3,925EO Expense 779 665 461 -1,968 1,437 0PBT 2,271 2,616 29 5,086 3,224 3,620 2,605 5,132 10,365 14,517Tax 576 348 17 905 725 815 586 1,155 1,997 3,266

Effective Tax Rate (%) 25.4 13.3 58.9 17.8 22.5 22.5 22.5 22.5 19.3 22.5Reported PAT 1,695 2,268 12 4,181 2,498 2,806 2,019 3,977 8,368 11,251

Change (%) -16.9 -20.7 -99.7 89.1 47.4 23.7 NA -4.87 -24.2 34.5Adj PAT 2,324 2,804 384 2,795 3,127 3,342 2,391 2,591 9,297 11,251

Change (%) 13.3 1.1 -85.8 33.8 34.5 19.2 522.8 -7.3 -4.5 21.0E: MOSL Estimates

Jinesh K Gandhi (Jinesh@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect M&M to report overall volume growth of 15.8% YoY (~6% QoQ) in 1QFY10, driven by PTL merger and12% growth in UV volumes. As a result of the PTL merger, contribution of tractors would go up to 42.6% from 37%in 1QFY09. Realizations should improve 6.4% YoY (~1.9% QoQ) driven by improvement in product mix.

? Net sales are likely to grow 23.7% YoY to Rs39.5b. Higher realizations and savings in raw material cost would drive160bp YoY (~40bp QoQ) improvement in EBITDA margin to 11.9%. Further, lower tax provisioning would boostrecurring PAT growth to 34.5% to Rs3.13b.

? IPO of Mahindra Holidays would enable monetizing of its holding, as M&M is offering ~3.37m shares in the IPOpriced at Rs275-325/share.

? We are revising our standalone EPS estimates by 4.5% to Rs39.6 for FY10 and by 2.4% to Rs40.2 for FY11, andupgrading our consolidated EPS estimates by 1.6% to Rs68.9 for FY10 and by 1.1% to Rs74.8 for FY11. Ourestimates factor in higher volumes, and also increase in RM cost in 2HFY10. On a consolidated basis, the stocktrades at 10.1x FY10E EPS and 9.3x FY11E EPS. Maintain Buy.

6926 June 2009

Maruti Suzuki India

YEAR TOTAL INC. PAT ADJ. EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 182,599 17,100 59.2 9.1 17.9 3.6 20.6 26.7 1.5 10.0

3/09A 209,075 12,175 42.1 -28.8 25.1 3.2 12.8 16.9 1.3 13.9

3/10E 246,867 15,705 54.3 29.0 19.5 2.8 14.4 19.1 1.1 10.0

3/11E 277,614 19,074 66.0 21.5 16.0 2.4 15.1 20.2 0.9 7.9

Diluted Equity Shares (m) 289.0

52-Week Range 1,120/428

1,6,12 Rel.Perf.(%) 2/49/54

M.Cap. (Rs b) 306.1

M.Cap. (US$ b) 6.4

BuyPrevious Recommendation: Buy Rs1,059

26 June 2009BLOOMBERGMSIL IN

REUTERS CODEMRTI.BO

Results PreviewSECTOR: AUTOMOBILES

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QTotal Volumes (nos) 192,584 189,451 173,494 236,638 224,120 215,000 226,000 241,436 792,167 906,556

Change (%) 13.5 -1.0 -14.0 17.0 16.4 13.5 30.3 2.0 3.6 14.4Realizations (Rs/unit) 245,661 253,695 263,274 266,582 265,721 265,711 267,044 266,428 257,689 266,237

Change (%) 6.5 7.2 14.1 11.9 8.2 4.7 1.4 -0.1 10.0 3.3Net Op. Revenues 48,588 49,936 46,808 64,329 60,898 58,708 61,587 65,674 209,075 246,867

Change (%) 21.0 6.7 -1.7 28.7 25.3 17.6 31.6 2.1 13.4 18.1Total Cost 42,899 44,779 43,290 59,836 54,534 52,461 55,334 58,674 190,205 221,003EBITDA 5,689 5,157 3,518 4,493 6,365 6,247 6,253 7,000 18,871 25,864

As % of Sales 11.7 10.3 7.5 7.0 10.5 10.6 10.2 10.7 9.0 10.5Change (%) -13.6 -27.1 -49.6 -39.4 11.9 21.1 77.7 55.8 -33.5 37.1

Non-Operating Income 2,236 960 1,209 1,054 2,000 1,000 750 1,015 5,445 4,765Interest 168 208 45 89 100 95 92 88 510 375Gross Profit 7,756 5,910 4,700 5,459 8,265 7,152 6,911 7,927 23,824 30,254Less: Depreciation 1,661 1,658 1,775 1,971 2,000 2,100 2,150 2,192 7,065 8,442PBT 6,096 4,252 2,925 3,487 6,265 5,052 4,761 5,735 16,759 21,812Tax 1,437 1,290 789 1,056 1,754 1,415 1,333 1,606 4,571 6,107

Effective Tax Rate (%) 23.6 30.3 27.0 30.3 28.0 28.0 28.0 28.0 27.3 28.0PAT 4,659 2,961 2,136 2,431 4,510 3,637 3,428 4,129 12,187 15,705Adjusted PAT 4,659 2,961 2,122 2,431 4,510 3,637 3,428 4,129 12,174 15,705

Change (%) -6.8 -36.5 -54.6 -49.4 -3.2 22.8 61.5 69.8 -32.5 29.0E: MOSL EstimatesJinesh K Gandhi (Jinesh@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect Maruti’s volumes to grow 16.4% YoY in 1QFY10, aided by improvement in consumer sentiment, Ritzlaunch and A-Star exports. Realizations should improve by 8.2% YoY (flat QoQ), reflecting better product mix andhigher export realizations (due to fresh hedges at higher rates).

? Net sales are likely to grow by 25% YoY to Rs60.9b. Improvement in realizations is a reflection of product miximprovement. EBITDA margins are estimated to expand by 350bp QoQ (but decline 120bp YoY) to 10.5%, aided bylower raw material cost and better product mix. However, higher depreciation and higher tax would result in 3% YoYdecline in recurring PAT to Rs4.5b.

? Volume growth in domestic market is driven by A-Star (launched in November 2008), Ritz (launched in May 2009)and continuing strong volumes for Swift and Swift Dzire. Further, the company is witnessing improvement in urbanmarkets, resulting in continued growth.

? We are upgrading our EPS estimates by 2.3% to Rs54.3 for FY10 and by 3.4% to Rs66 for FY11. Our FY10earnings estimate factors in 14.4% volume growth, with 9% growth in domestic volumes and 70% growth in exportvolumes, and increase in RM cost from 2HFY10. The stock trades at 19.5x FY10E and 16x FY11E earnings.Maintain Buy.

7026 June 2009

Results PreviewSECTOR: AUTOMOBILES

Tata Motors

YEAR SALES S/A PAT ADJ EPS CONS, P/E CONS. ROE ROCE EV/ EV/END (RS M) (RS M) (RS) EPS (RS) RATIO P/E (X) (%) (%) SALES EBITDA

3/08A 287,394 16,154 30.2 36.2 11.3 9.4 20.6 17.3 0.4 4.1

3/09A 256,101 4,953 9.2 9.9 36.8 34.5 6.1 6.4 0.9 13.7

3/10E 265,844 6,568 12.3 14.9 27.7 22.8 7.8 7.6 1.0 10.1

3/11E 307,956 7,936 14.8 18.0 23.0 18.9 9.1 8.9 0.8 8.4

Diluted Eq.Shares (m) 535.7

52-Week Range 480/122

1,6,12 Rel. Perf. (%) -4/60/-31

M.Cap. (Rs b) 182.1

M.Cap. (US$ b) 3.8

NeutralPrevious Recommendation: Neutral Rs340

26 June 2009BLOOMBERGTTMT IN

REUTERS CODETAMO.BO

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QTotal Volumes (nos) 133,079 135,037 98,760 139,545 119,714 138,500 123,250 159,872 506,421 541,336Net Sales 69,284 70,293 47,136 66,319 58,317 67,468 59,439 77,093 253,033 262,317

Change (%) 14.4 9.9 -34.6 -25.3 (15.8) (4.0) 26.1 16.2 -11.3 3.7Total Cost 63,980 65,035 46,670 63,399 53,236 61,559 54,508 70,394 239,084 239,697EBITDA 5,305 5,754 917 5,042 5,881 6,785 5,831 7,651 17,017 26,147

EBITDA Margins (%) 7.7 8.1 1.9 7.4 9.9 9.9 9.7 9.8 6.6 9.8Non-Operating Income 2,020 705 517 815 1,200 750 700 831 4,057 3,481Forex Gain / (Loss) -1,999 -2,850 -2,265 6,462 -653 0Extraordinary Income 1,136 3,588 478 508 5,710 0Interest 1,123 1,483 1,684 2,447 2,450 2,480 2,520 2,585 6,737 10,035Gross Profit 5,339 5,714 -2,038 10,380 4,631 5,055 4,011 5,896 19,395 19,592Depreciation & Amort. 1,808 2,029 2,017 2,892 2,850 2,890 2,910 2,958 8,745 11,608Product Dev. Expenses 79 105 137 190 100 115 130 155 512 500PBT 3,451 3,580 -4,192 7,298 1,681 2,050 971 2,783 10,138 7,484Tax 190 110 -1,559 1,384 206 251 119 341 125 916

Effective Tax Rate (%) 5.5 3.1 37.2 19.0 12.2 12.2 12.2 12.2 1.2 12.2PAT 3,261 3,470 -2,633 5,914 1,475 1,799 852 2,442 10,013 6,568Adj PAT 4,206 2,771 -2,344 320 1,639 1,998 947 2,713 4,953 6,568

Change (%) 28.4 -15.2 -156.4 -94.1 (61.0) (27.9) (140.4) 747.1 -69.3 32.6E: MOSL Estimates

Jinesh K Gandhi (Jinesh@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

* Excl JLR

? We expect Tata Motors to post 10% YoY volume decline (~14% QoQ) in 1QFY10, impacted by 27% YoY de-growthin M&HCVs and 38% YoY de-growth in UVs. However, LCV volumes have witnessed recovery, with an estimated15% YoY growth. Realizations would decline by 6.4%YoY (but improve 2.5% QoQ) due to lower contribution fromM&HCVs (~23% v/s 29% in 1QFY09).

? Net sales are likely to de-grow by 16% YoY to Rs53.2b. However, margins would improve 220bp YoY (~250bp QoQ)to 9.9%, as the company benefits from lower RM cost. Further, decline in other income, increase in interest, depreciationand tax would result in 61% YoY decline in recurring PAT to Rs1.6b.

? Tata Motors’ M&HCV volumes have increased, driven by extension of accelerated depreciation on CVs purchasedtill 30 September 2009. This coupled with recovery in LCVs would drive recovery for the company. However,increasing contribution of Nano car from 2QFY10 would put pressure on margins.

? We are downgrading our standalone EPS estimates for FY10 by 9.6% to Rs12.3, but are upgrading it for FY11 by2.5% to Rs14.8 to factor in higher depreciation and interest cost. Consolidated earnings estimates are downgraded by8% to Rs14.9 for FY10, but upgraded by 2.1% to Rs18 for FY11. The stock trades at 22.8x FY10E and 18.9x FY11Econsolidated EPS. Maintain Neutral.

7126 June 2009

Banking

COMPANY NAMEAndhra Bank

Axis Bank

Bank of Baroda

Bank of India

Canara Bank

Corporation Bank

HDFC

HDFC Bank

Federal Bank

ICICI Bank

Indian Bank

Indian Overseas Bank

J&K Bank

Oriental Bank

Punjab National Bank

State Bank

Union Bank

Ajinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) /Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com)

Results PreviewQUARTER ENDING JUNE 2009

EXPECTED QUARTERLY PERFORMANCE SUMMARY (RS MILLION)CMP (RS) RECO NET INT INCOME OPERATING PROFIT NET PROFIT

26.6.09 JUN.09 VAR. VAR. JUN.09 VAR. VAR. JUN.09 VAR. VAR.% YOY % QOQ % YOY % QOQ % YOY % QOQ

BanksAndhra Bank 83 Buy 3,775 9.0 -4.5 2,625 27.9 -39.2 1,530 97.1 -23.9Axis Bank 818 Buy 10,228 26.2 -1.0 9,891 23.3 -13.1 4,479 35.7 -23.0Bank of Baroda 436 Buy 13,836 30.9 -5.9 10,444 21.4 -19.9 5,382 45.1 -28.5Bank of India 345 Neutral 13,899 17.7 -3.0 11,804 10.1 -16.2 6,306 12.2 -22.2Canara Bank 266 Buy 12,989 27.4 -0.5 9,821 39.6 -22.8 5,866 378.1 -18.4Corporation Bank 332 Buy 4,322 14.3 0.9 3,983 24.1 -41.0 2,184 18.5 -16.2Federal Bank 245 Buy 2,945 5.9 -8.2 2,575 1.6 -19.3 842 23.5 -26.3HDFC 2,436 Neutral 9,433 26.6 -12.8 8,308 27.1 -19.4 5,871 25.4 -19.8HDFC Bank 1,497 Neutral 19,197 11.4 3.7 13,535 31.7 -13.8 5,798 24.9 -8.1ICICI Bank 754 Buy 21,360 2.2 -0.1 20,560 19.9 -4.6 7,344 0.8 -1.3Indian Bank 141 Buy 6,621 22.7 -0.8 4,963 13.7 -21.9 3,079 41.5 -21.9Indian Overseas Bank 86 Sell 6,973 -4.0 -1.0 4,973 106.2 -38.8 2,871 12.2 -10.9J&K Bank 483 Buy 2,392 5.7 -4.5 1,808 -0.4 -17.2 965 2.0 22.6Oriental Bank of Commerce 185 Buy 4,800 7.5 4.3 3,930 11.1 -27.0 2,197 -0.4 12.2Punjab National Bank 655 Buy 18,067 25.1 -5.2 13,011 32.4 -18.1 7,378 44.0 -14.8State Bank 1,749 Buy 48,465 0.6 0.1 36,672 -7.4 -30.5 18,990 15.7 -30.8Union Bank 232 Buy 9,193 13.5 -0.8 6,673 8.3 -26.8 3,509 53.7 -24.6Sector Aggregate 208,496 11.9 -1.7 165,575 15.1 -22.2 84,589 29.2 -20.3

Outlook has improved, but loan growth yet to pick upStability at the center has raised expectations of acceleration in the reforms process and aspeedy economic revival. We believe that the new government’s primary focus would beon infrastructure spending and boosting domestic demand, both of which augur well forIndian banks. The resultant improvement in business sentiment is translating into lowerconcerns on the asset quality of Indian banks and better loan growth prospects.

As business plans get aligned and finalized according to the evolving economic growthexpectation post the impending budget, we expect gradual acceleration in loan disbursals.Our interactions with bankers suggest that while there is no dearth of loan proposals,disbursals are lower, as entrepreneurs are still firming up their revised business plans.Statistical base may keep industry loan growth muted at around the current level of 16%or even lower till September 2009.

While all the large banks (excluding ICICI Bank) are targeting loan growth of 20%+ inFY10, we have kept our loan growth estimates at 18% (highest for Axis Bank at 25%). Inour view, RBI and the government will make all efforts to keep strong liquidity in thesystem and avoid spikes in interest rates.

BSE Sensex: 14,765 S&P CNX: 4,376 26 June 2009

7226 June 2009

Banking

In our slippage estimates, we have assumed that 30% of the restructured standard loanswould turn into NPAs, apart from the 1-2% normal slippages. Our slippage estimates haveaccordingly been revised down 50-100bp for all banks, leading to earnings upgrades, mainlyfor state-owned banks. The sharpest earnings upgrades have been for Canara Bank (over30% for each of FY10 and FY11) among the large state-owned banks, and Indian Bankand IOB among the mid-sized banks (10%+ upgrades).

Expect loan growth to improve in 2HFY10Loan growth for the sector moderated to 15.7% as on 5 June 2009. In 1QFY10, loanshave declined by Rs128b from the March 2009 level. However, for the fortnight ended 5June 2009, some pick-up was witnessed, when loans grew by Rs215b. Our interactionswith bankers suggest that there is a pipeline of sanctions available and significantdisbursement is expected in 2HFY10. In the near-term, we expect moderation in loangrowth to continue (partly due to higher base). We have modeled ~18% loan growth inFY10 for banks under our coverage.

Deposit growth remains strong at 22%In 1QFY10 (as on 5 June 2009), deposits grew 22% YoY and 3.7% QoQ to Rs39.7t.Strong growth in deposits without corresponding growth in loans is creating surplus liquidityin the system. SBI has reduced its peak deposit rates as well as short-term deposit ratesby 200-250bp from January 2009 to reduce incremental cost of deposits.

Surplus liquidity finding its way to reverse repo and G-SecsBanks parked a daily average of ~Rs1.2t during 1QFY10 with RBI under the reverserepo window. Banks have been aggressively buying G-Secs in 1QFY10, as loan offtakehas not picked up. Actual SLR ratio currently stands at ~29% v/s 27.4% as at the end ofFY09. In 1QFY10 (till 5 June), banks have increased their SLR book by Rs1t v/s a depositgrowth of Rs1.4t

Margins to decline in 1HFY10…In 1HFY10, margins would be under pressure for most state-owned banks due to excessliquidity in the balance sheet and stickiness of deposit costs. In 2HFY09, state-ownedbanks had reduced their PLR by ~200bp (75bp in 3QFY09), taking a cue from the cut inbenchmark rates by the RBI. This impacted margins in 4QFY09 and would continue toimpact margins in 1HFY10.

Our interactions with bankers suggest that AAA rated corporates are already borrowingat significantly lower than PLR (indicating loss of pricing power due to excess liquidity),implying pressure on yield on loans. To protect margins, banks have reduced deposit rates(down 200-350bp from the peak across maturities). SBI cut deposit rates four times in1QFY10, and has decided to cut PLR from 29 June 2009 by 50bp (first PLR cut afterJanuary 2009).

7326 June 2009

Banking

… but expected to improve in 2HFY10We believe that margins will improve in 2HFY10, as (1) the benefits of deposit rate cutswould accrue with a lag, (2) the full impact of reduction in bulk deposit rates would be felt,and (3) CD ratio would expand.

NPAs unlikely to increase significantly in FY10 due to restructuringThe number of restructured loans (approved + pending) ranged from 2-4% of the totalloans for large state-owned banks and 4-7% for mid-sized state-owned banks. Privatesector banks gave a positive surprise, with just 1-2.5% of customer assets gettingrestructured. Restructuring would lead to under-statement of NPAs in FY10. ICICI Bankand Axis Bank have said that restructuring number would increase in FY10.

Apart from the normal slippage expectation of 1-2%, we have modeled ~10% of therestructured loans to turn NPAs in FY10 and 20% of restructured loans to turn NPAs inFY11. This leads to 50-100bp reduction in our slippage expectations for all banks.

STRESSED ASSET PORTFOLIO (RS M)AS ON MAR-09 GROSS GNPA PROV RESTURCTURED LOAN TOTAL LOAN % OF

NPA % COV % DONE PENDING STRESS BOOK LOAN BOOKA B C D = A +B + C E F = D/E

Axis Bank 8,978 1.1 64 16,259 4,520 29,756 934,657 3.2HDFC Bank 19,881 2.0 68 330 511 20,721 1,004,360 2.1ICICI Bank 96,493 4.3 53 61,270 19,875 177,638 2,356,633 7.5Total Private Banks 125,352 2.9 77,859 24,905 228,115 4,295,650 5.3Andhra bank 3,681 0.8 78 15,915 8,391 26,237 441,393 5.9BoB 18,429 1.3 76 23,599 15,518 57,547 1,439,859 4.0BoI 24,709 1.7 75 47,987 19,669 92,365 1,429,094 6.5Canara Bank 21,680 1.6 30 20,660 21,000 63,340 1,382,190 4.6Corporation 5,592 1.1 75 10,430 12,803 28,825 485,122 5.9Indian Bank 4,592 0.9 80 26,009 12,267 42,868 514,653 8.3IOB 19,234 2.5 48 48,960 29,960 98,154 748,853 13.1OBC 10,581 1.5 58 23,353 17,592 51,526 685,004 7.5PNB 27,675 1.8 90 40,740 6,300 74,715 1,547,030 4.8SBI 155,886 2.8 39 107,773 87,867 351,526 5,425,032 6.5Union Bank 19,234 2.0 83 29,185 7,413 55,831 965,342 5.8Total PSU Banks 311,293 2.1 394,612 238,779 942,934 15,063,570 6.3Total All Banks 436,644 2.3 472,471 263,684 1,171,049 19,359,220 6.0Note: Source: Company/MOSL1. Private bank’s loans taken as customer assets2. For state-owned banks and HDFC Bank, we have taken restructuring of standard loans done during FY09 only. In our view,

accumulated restructured standard loans would not be materially different from this number. However, for ICICI Bank and Axis Bank, wehave taken accumulated restructured loans as of March 2009, as their numbers are significantly higher than the standard loansrestructured during the year.

3. IOB, Indian Bank, Union Bank and BoI have disclosed the restructuring details borrower-wise.

7426 June 2009

Banking

Trading profits and low base to drive earnings growth in 1QFY10In 1QFY10 (as of 26 June 2009), 1-year yields declined by ~100bp, while 2-year declinedby ~10bp and 10-year yields remain flat. The yield curve has become steep and is likely toremain so. We do not expect MTM provisions in 1QFY10; however, there could be write-back of MTM provisions on equity portfolios. We expect banks to report higher tradinggains in 1QFY10 on YoY basis due to higher volatility in G-Secs and strong equity markets.Also, in 1QFY09, several banks had large MTM losses due to hardening of yields andearnings were subdued for several state-owned banks (SBI, Canara Bank, Union Bank,Indian Bank, to name a few). Low base impact itself would drive earnings growth in1QFY10.

Valuation and viewState-owned banks trade at 0.7x-1.5x FY10E BV, with RoE in the range of 15-25%. Weprefer selective buying, and like banks with strong core deposit franchise, higher tier-Icapital and high provision coverage ratio. BoB, SBI and Union Bank are our top picksamong state-owned banks. Axis Bank is our top pick among private banks.

REDUCTION IN SLIPAGE RATIO AND CREDIT COST LEADING TO 5-30% UPGRADE IN EARNINGS FOR VARIOUS BANKS SLIPPAGE (%) CREDIT COST (%) EPS (RS) BV (RS) ROE (%) P/BV

OLD REVISED OLD REVISED OLD REVISED OLD REVISED REVISED (X)FY10SBI (Std) 3.0 2.4 1.00 0.74 142 143 1,020 1,021 14.8 1.62PNB 2.3 1.8 0.88 0.64 106 108 494 497 23.7 1.32BoB 2.0 1.5 0.76 0.68 60 63 363 366 18.4 1.19BoI 2.5 2.4 0.98 0.81 57 61 272 273 24.5 1.26Canara 3.5 1.8 1.30 0.75 44 62 274 287 23.4 0.93Union 2.2 1.9 1.07 0.83 34 38 168 171 24.1 1.35IoB 3.0 2.7 1.30 0.83 18 20 119 123 16.8 0.70Indian Bk 2.0 1.6 1.33 0.81 29 32 149 152 23.0 0.92Andhra Bk 1.5 1.3 0.96 0.82 14 14 84 84 18.0 0.99OBC 3.0 1.8 0.83 0.43 34 37 284 286 14.6 0.65Corp Bank 2.0 1.2 0.99 0.67 58 64 385 391 17.6 0.85FY11SBI (Std) 3.0 2.7 1.00 0.84 179 183 1,156 1,161 16.8 1.43PNB 2.5 2.1 0.86 0.76 124 127 585 590 23.3 1.11BoB 2.0 2.0 0.72 0.60 69 76 416 423 19.2 1.03BoI 3.0 2.5 1.26 0.93 58 67 322 331 22.2 1.04Canara 3.5 2.0 1.29 0.76 55 70 315 340 22.4 0.78Union 2.3 2.1 1.21 0.96 38 42 199 207 22.4 1.12IoB 3.0 3.1 1.29 0.94 19 21 132 139 16.1 0.62Indian Bk 2.5 2.0 1.24 0.88 33 37 174 181 22.3 0.78Andhra Bk 1.8 1.8 1.02 0.99 15 16 93 94 17.7 0.89OBC 3.0 2.4 0.82 0.65 37 38 312 315 14.5 0.59Corp Bank 2.0 1.7 1.16 0.95 60 65 430 441 15.5 0.75

Source: Company/MOSL

7526 June 2009

Banking

DEPOSITS GROWTH STRONG AT ~22% YOY LOAN GROWTH MODERATED SIGNIFICANTLY TO 16% YOY

Source: RBI/MOSL

CREDIT TO DEPOSITS RATIO AT ~69%

Source: Company/MOSL

Strong deposits growthcoupled with muted loans

growth leading to lowerCD ratio

TREND IN INFLATION (%) AND WPI INDEX (PT)

Inflation index is increasinghowever, on a higher basereported inflation nos are

near to zero

Source: RBI/MOSL

20212022

2325242524

232121

18

22

8

18

28

38

48

4QFY

06

1QFY

07

2QFY

07

3QFY

07

4QFY

07

1QFY

08

2QFY

08

3QFY

08

4QFY

08

1QFY

09

2QFY

09

3QFY

09

4QFY

09

05-J

un-0

9

12

16

20

24

28Deposits (Rs t) Chg YoY (%) RHS

24

1617

262623

222224

2930

323131

8

14

20

26

32

4QFY

06

1QFY

07

2QFY

07

3QFY

07

4QFY

07

1QFY

08

2QFY

08

3QFY

08

4QFY

08

1QFY

09

2QFY

09

3QFY

09

4QFY

09

05-J

un-0

9

15

20

25

30

35Loans (Rs t) LHS Chg YoY (%) RHS

74.1

70.5 70.771.8

73.9 72.8 73.9 73.5

69.4

72.3

58

62

66

70

74

78

4QFY

07

1QFY

08

2QFY

08

3QFY

08

4QFY

08

1QFY

09

2QFY

09

3QFY

09

4QFY

09

05-J

un-0

9

0.0

3.0

6.0

9.0

12.0

15.0

May

-06

Jul-0

6

Sep

-06

Nov

-06

Jan-

07

Mar

-07

Apr

-07

Jun-

07

Aug

-07

Oct

-07

Dec

-07

Feb-

08

Mar

-08

May

-08

Jul-0

8

Sep

-08

Nov

-08

Dec

-08

Feb-

09

Apr

-09

Jun-

09

180

194

208

222

236

250Inf lation (%) - (LHS) WPI - Index (RHS)

7626 June 2009

Banking

1,480

8991,248

789

2,130

1,1961,505

1,239 1,1131,339

1,7662,116

1,413

2,087

0

800

1,600

2,400

3,200

4QFY

06

1QFY

07

2QFY

07

3QFY

07

4QFY

07

1QFY

08

2QFY

08

3QFY

08

4QFY

08

1QFY

09

2QFY

09

3QFY

09

4QFY

09

05-J

un-0

9

1,396

455

1,127

1,657

1,211

467

1,3391,165

-87

1,1091,027 1,110

2,154

-128

-200

425

1,050

1,675

2,300

4QFY

06

1QFY

07

2QFY

07

3QFY

07

4QFY

07

1QFY

08

2QFY

08

3QFY

08

4QFY

08

1QFY

09

2QFY

09

3QFY

09

4QFY

09

05-J

un-0

9

-1,000

-200

600

1,400

2,200

Apr

-08

Apr

-08

May

-08

Jun-

08

Jul-0

8

Jul-0

8

Aug

-08

Sep

-08

Oct

-08

Nov

-08

Nov

-08

Dec

-08

Jan-

09

Feb-

09

Mar

-09

Mar

-09

Apr

-09

May

-09

Jun-

09

In 1QFY10 RBI on an average daily basis absorbed ~Rs1,200b

In Oct-08 RBI average daily basis infused ~Rs370b

LIQUIDITY REMAINS STRONG IN THE SYSTEM (DAMAGING PRICING POWER OF BANKS)

STRONG DEPOSITS GROWTH AND LOWER LOAN GROWTH WILL PUT PRESSURE ON MARGINSQUARTERLY DEPOSITS (RS B) QUARTERLY LOANS (RS B)

Source: Company/MOSL

BANK'S PLR (%)

Source: Company/MOSL

13.7

5

14.0

0

14.0

0

14.0

0

14.0

0

14.0

0

14.0

0

11.7

5

11.0

0 12.0

0

12.0

0

12.0

0

11.7

5

12.5

0

16.5

0

17.2

5

16.0

0

15.7

5

10.0

12.0

14.0

16.0

18.0

SB

I

PN

B

Can

ara

BoI

BoB UB

I

Ind.

Bk.

ICIC

I Bk

HD

FC B

k

Peak Current

Source: Company/MOSL

Lending rates down~200bp from Peak

7726 June 2009

Banking

SBI: PLR CHANGED IN JUNE 2009 AFTER JANUARY 2009

DEPOSIT RATES ACROSS MATURITIES - SBI (%)1-OCT-08 1-DEC-08 1-JAN-09 9-MAR-09 13-APR-09 4-MAY-09 18-MAY-09 15-JUN-09

7days-45days 4.75 4.75 4.25 4.25 4.00 3.75 3.25 3.0046days-90days 5.25 5.25 5.25 5.25 5.00 4.75 4.25 4.0091days-180days 7.50 7.00 6.50 6.50 6.25 6.00 5.50 5.25180days-less than 1yr 8.50 8.00 7.25 7.25 7.00 6.75 6.50 6.251yr to less than 2yrs 10.00 9.50 8.50 8.10 7.75 7.50 7.25 7.001000 days dep.scheme 10.50 10.00 9.00 8.50 8.25 8.00 7.75 7.502yrs to less than 3yrs 9.50 9.00 8.75 8.25 8.00 7.75 7.50 7.253yrs to less than 5yrs 9.75 9.25 8.50 8.50 8.00 7.75 7.50 7.255yrs and above 9.25 9.00 8.50 8.50 - - - -5yrs to less than 8 yrs - - - - 8.25 8.00 8.00 7.758 yrs and above - - - - 8.50 8.25 8.25 8.00

Source: Company/MOSL

CERTIFICATE OF DEPOSIT RATES

14.0

4.2

7.65.6

2

6

10

14

18

Apr

-08

May

-08

Jun-

08

Jul-0

8

Sep

-08

Oct

-08

Nov

-08

Jan-

09

Feb-

09

Mar

-09

May

-09

Jun-

09

6 Month (%) 12 Month (%)

14.0

8.1

7.2

0.0

4.0

8.0

12.0

16.0

Dec

-05

Mar

-06

May

-06

Aug

-06

Oct

-06

Jan-

07

Apr

-07

Jun-

07

Sep

-07

Dec

-07

Feb-

08

May

-08

Jul-0

8

Oct

-08

Jan-

09

Mar

-09

Jun-

09

CP RATES (%)

Source: Company/MOSL

10.7511.00

11.50

12.25

12.7512.50

12.25

12.75

13.75

13.00

12.25

11.75

Apr

-06

Aug

-06

Dec

-06

Feb-

07

Apr

-07

Feb-

08

Feb-

08

Jun-

08

Aug

-08

Nov

-08

Jan-

09

Jun-

09

Significant decline in CDrates will bring down

cost of funds

CP rates declined frompeak of 15% in 3QFY09

to 7% in 1QFY10

SBI pressure on marginsevident, first rate cut after

January 2009

7826 June 2009

MARGINS ARE EXPECTED TO DECLINE FOR PSU BANKS UNDER OUR COVERAGE

1-YEAR G-SEC YIELDS DECLIENED BY ~100BP QOQ

10-YEAR G-SEC YIELDS REMAINED FLAT QOQ

PROVISION COVERAGE RATIO (%) AS ON FY09

Source: Company/MOSL

Significant decline in 1 yearG-Sec will help banks to

earn higher trading profits In 1QFY10

2.0

3.0

4.0

5.0

6.0

SB

I

PN

B

Can

ara

BoB BoI

Uni

on IOB

OB

C

Indi

an

ICIC

I

HD

FC B

k

Axi

s

FY09 FY10E

Banking

9183 80 76

6864 61 58 58

4839

30

20

40

60

80

100

PN

B

UB

I

Indi

an B

k

BoB

HD

FC B

k

Axi

s

BoI

ICIC

I Bk

OB

C

IOB

SB

I

Can

ara

3.00

5.00

7.00

9.00

11.00

Jan-

08

Feb-

08

Mar

-08

Apr

-08

Jun-

08

Jul-0

8

Aug

-08

Oct

-08

Nov

-08

Dec

-08

Feb-

09

Mar

-09

Apr

-09

Jun-

09

5.00

6.00

7.00

8.00

9.00

10.00

Jan-

08

Feb-

08

Mar

-08

Apr

-08

Jun-

08

Jul-0

8

Aug

-08

Oct

-08

Nov

-08

Dec

-08

Feb-

09

Mar

-09

Apr

-09

Jun-

09

We prefer banks with higherprovision coverage ratio

Volatile 10 year G-Sec willhelp to earn higher

trading profits

7926 June 2009

Banking

RELATIVE PERFORMANCE - 3 MONTH (%) RELATIVE PERFORMANCE - 1 YEAR (%)

Stock performance and valuationsSTOCK PERFORMANCE (%)

ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR 3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEAR

BankingAndhra Bank 80 44 33 41 14 14Axis Bank 94 21 47 19 28 -8Bank of Baroda 85 106 37 104 19 77Bank of India 54 40 6 38 -13 11Canara Bank 66 46 18 44 0 17Corporation Bank 93 29 45 26 27 -1Federal Bank 83 29 35 27 16 0HDFC 47 9 0 7 -19 -20HDFC Bank 50 41 3 39 -16 12ICICI Bank 102 8 54 6 35 -21Indian Bank 69 43 22 41 3 14Indian Overseas Bank 77 -4 30 -6 11 -33J&K Bank 93 -12 46 -14 27 -41Oriental Bank of Commerce 65 34 17 31 -1 4Punjab National Bank 57 55 10 53 -9 26State Bank 60 44 12 41 -6 14Union Bank 62 105 14 103 -4 76

CMP (RS) RECO EPS (RS) P/E (X) P/BV (X) ROE (%)26.6.09 FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E

BanksAndhra Bank 83 Buy 13.5 14.3 15.7 6.2 5.8 5.3 1.1 1.0 0.9 18.9 18.0 17.7Axis Bank 818 Buy 50.6 59.3 75.2 16.2 13.8 10.9 2.9 2.5 2.1 19.1 19.2 20.7Bank of Baroda 436 Buy 60.9 62.7 75.6 7.1 6.9 5.8 1.4 1.2 1.0 20.9 18.4 19.2Bank of India 345 Neutral 57.2 61.0 67.0 6.0 5.7 5.1 1.5 1.3 1.0 29.2 24.4 22.1Canara Bank 266 Buy 50.6 61.8 70.1 5.3 4.3 3.8 1.1 0.9 0.8 22.8 23.4 22.4Corporation Bank 332 Buy 62.2 64.3 64.6 5.3 5.2 5.1 1.0 0.8 0.8 19.6 17.6 15.5Federal Bank 245 Buy 29.3 31.2 34.7 8.4 7.9 7.1 1.0 0.9 0.8 12.1 11.8 12.0HDFC 2,436 Neutral 80.2 92.6 111.2 30.4 26.3 21.9 5.3 4.8 4.2 23.7 24.9 25.8HDFC Bank 1,497 Neutral 52.8 63.2 84.2 28.4 23.7 17.8 4.2 3.2 2.8 15.6 15.9 17.0ICICI Bank 754 Buy 33.8 34.3 44.5 22.3 22.0 17.0 1.7 1.6 1.5 10.7 11.0 13.5Indian Bank 141 Buy 29.0 32.2 37.2 4.9 4.4 3.8 1.1 0.9 0.8 24.8 23.0 22.3Indian Overseas Bank 86 Sell 24.3 19.5 21.2 3.5 4.4 4.1 0.8 0.7 0.6 24.8 16.8 16.1J&K Bank 483 Buy 84.5 93.8 110.4 5.7 5.1 4.4 0.9 0.8 0.7 16.6 16.3 16.9Oriental Bank 185 Buy 36.1 36.9 38.1 5.1 5.0 4.8 0.6 0.6 0.6 14.8 14.6 14.5Punjab National Bank 655 Buy 98.0 108.4 126.9 6.7 6.0 5.2 1.6 1.3 1.1 25.8 23.7 23.3State Bank 1,749 Buy 143.7 142.7 183.1 12.2 12.3 9.6 1.9 1.7 1.5 17.1 14.8 16.8Union Bank 232 Buy 34.2 37.7 42.5 6.8 6.1 5.5 1.7 1.4 1.1 27.2 24.2 22.4Sector Aggregate 12.6 11.8 9.8 2.3 2.0 1.7 18.0 16.9 17.9

0

40

80

120

160

Jun-08 Sep-08 Dec-08 Mar-09 Jun-09

MOSt Banking Index Sensex

0

50

100

150

200

Mar-09 Apr-09 May-09 Jun-09

Sensex MOSt Banking Index

8026 June 2009

Andhra Bank

YEAR NET INCOME PAT EPS EPS P/E P/BV CAR ROAE ROAA P/ABVEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO

3/08A 19,660 5,756 11.9 7.0 7.0 1.2 11.7 18.0 1.1 1.3

3/09A 23,923 6,530 13.5 13.5 6.2 1.1 13.2 18.9 1.0 1.1

3/10E 25,343 6,953 14.3 6.5 5.8 1.0 12.2 18.0 0.9 1.0

3/11E 28,541 7,638 15.7 9.8 5.3 0.9 11.3 17.7 0.9 0.9

Equity Shares (m) 485.0

52-Week Range 98/35

1,6,12 Rel.Perf.(%) -13/-8/41

M.Cap. (Rs b) 40.4

M.Cap. (US$ b) 0.8

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QInterest Income 11,574 13,281 13,824 15,067 14,870 15,167 15,471 16,594 53,746 62,102Interest Expense 8,111 8,948 9,305 11,114 11,094 10,540 10,561 11,466 37,477 43,661Net Interest Income 3,463 4,333 4,519 3,953 3,775 4,628 4,910 5,128 16,269 18,440

% Change (Y-o-Y) 0.9 25.7 29.2 22.6 9.0 6.8 8.7 29.7 21.4 13.3Other Income 1,187 1,354 2,165 3,204 1,450 1,595 1,754 2,105 7,654 6,903Net Income 4,649 5,687 6,684 7,157 5,225 6,222 6,664 7,233 23,923 25,343Operating Expenses 2,597 2,905 2,958 2,839 2,600 3,120 2,964 2,956 11,043 11,640Operating Profit 2,053 2,782 3,725 4,318 2,625 3,102 3,700 4,277 12,880 13,703

% Change (Y-o-Y) -8.1 19.8 29.2 37.9 27.9 11.5 -0.7 -0.9 21.9 6.4Other Provisions 1,227 569 249 1,856 500 700 1,250 1,460 3,900 3,910Profit before Tax 826 2,213 3,477 2,462 2,125 2,402 2,450 2,816 8,980 9,793Tax Provisions 50 600 1,350 450 595 673 686 886 2,450 2,840Net Profit 776 1,613 2,127 2,012 1,530 1,729 1,764 1,930 6,530 6,953

% Change (Y-o-Y) -45.0 6.7 33.8 62.0 97.1 7.2 -17.1 -4.1 13.5 6.5Interest Exp/Interest Income (%) 70.1 67.4 67.3 73.8 74.6 69.5 68.3 69.1 69.7 70.3Other Income/Net Income (%) 25.5 23.8 32.4 44.8 27.7 25.6 26.3 29.1 32.0 27.2Cost/Income Ratio (%) 55.8 51.1 44.3 39.7 49.8 50.1 44.5 40.9 46.2 45.9Provisions/Operating Profits (%) 59.8 20.4 6.7 43.0 19.0 22.6 33.8 34.1 30.3 28.5Tax Rate (%) 6.1 27.1 38.8 18.3 28.0 28.0 28.0 31.5 27.3 29.0E: MOSL Estimates

BuyPrevious Recommendation: Buy Rs83

26 June 2009BLOOMBERGANDB IN

REUTERS CODEADBK.BO

Results PreviewSECTOR: BANKING

Ajinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) /Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect net interest income (NII) to grow 9% YoY (decline ~5% QoQ) to Rs3.8b due to pressure on margins.Loans should grow 28% YoY on a lower base.

? Trading profits are likely to be strong; however, moderate growth in fee-based income (~10% expected) would keepnon-interest income growth lower at ~22%.

? With gross NPAs at just 0.8% and net NPAs at 0.18%, incremental provisioning for NPA would be low during thequarter.

? The stock is trading at 1x FY10E BV and 0.9x FY11E BV. The stock also offers an attractive dividend yield of ~6%.Maintain Buy.

8126 June 2009

Axis Bank

YEAR NET INCOME PAT EPS EPS P/E P/BV CAR ROAE ROAA P/ABVEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO

3/08A 43,808 10,710 29.9 28.0 27.3 3.3 13.7 17.6 1.2 3.4

3/09A 65,831 18,154 50.6 68.9 16.2 2.9 13.7 19.1 1.4 2.9

3/10E 79,483 21,299 59.3 17.3 13.8 2.5 12.5 19.2 1.3 2.6

3/11E 96,126 26,984 75.2 26.7 10.9 2.1 11.6 20.7 1.3 2.2

Equity Shares (m) 357.7

52-Week Range 849/279

1,6,12 Rel.Perf.(%) 1/12/19

M.Cap. (Rs b) 292.8

M.Cap. (US$ b) 6.1

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QInterest Income 22,664 25,450 29,848 30,392 30,981 32,144 33,912 35,633 108,355 132,670Interest Expense 14,560 16,316 20,551 20,066 20,753 20,964 21,878 22,494 71,493 86,089Net Interest Income 8,105 9,134 9,297 10,326 10,228 11,181 12,034 13,139 36,862 46,581

% Change (Y-o-Y) 92.5 55.2 24.4 24.6 26.2 22.4 29.4 27.2 42.6 26.4Other Income 6,248 6,944 7,322 8,455 7,463 8,018 8,189 9,231 28,969 32,901Net Income 14,353 16,078 16,619 18,781 17,691 19,198 20,224 22,370 65,831 79,483Operating Expenses 6,329 7,334 7,522 7,396 7,800 8,450 8,975 9,285 28,582 34,510Operating Profit 8,023 8,744 9,096 11,385 9,891 10,748 11,249 13,085 37,249 44,973

% Change (Y-o-Y) 118.1 88.9 35.3 57.5 23.3 22.9 23.7 14.9 67.3 20.7Other Provisions 2,967 2,558 1,320 2,552 3,000 3,001 2,500 3,704 9,397 12,205Profit before Tax 5,056 6,186 7,777 8,833 6,891 7,747 8,749 9,381 27,852 32,768Tax Provisions 1,754 2,157 2,768 3,019 2,412 2,711 3,062 3,283 9,698 11,469Net Profit 3,302 4,029 5,009 5,815 4,479 5,036 5,687 6,098 18,154 21,299

% Change (Y-o-Y) 88.7 76.8 63.2 60.9 35.7 25.0 13.5 4.9 69.5 17.3Interest Exp/Interest Income (%) 64.2 64.1 68.9 66.0 67.0 65.2 64.5 63.1 66.0 64.9Other Income/Net Income (%) 43.5 43.2 44.1 45.0 42.2 41.8 40.5 41.3 44.0 41.4Cost/Income Ratio (%) 44.1 45.6 45.3 39.4 44.1 44.0 44.4 41.5 43.4 43.4Provisions/Operating Profits (%) 37.0 29.3 14.5 22.4 30.3 27.9 22.2 28.3 25.2 27.1Tax Rate (%) 34.7 34.9 35.6 34.2 35.0 35.0 35.0 35.0 34.8 35.0E: MOSL Estimates

BuyPrevious Recommendation: Buy Rs818

26 June 2009BLOOMBERGAXSB IN

REUTERS CODEAXBK.BO

Results PreviewSECTOR: BANKING

Ajinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) /Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect NII growth of ~26% YoY in 1QFY10 on the back of 35% loan growth. However on a QoQ basis, weexpect loan book and NII to remain flat.

? Despite muted loan growth, we expect margins to remain stable QoQ and YoY at ~3.4% due to positive impact of re-pricing of bulk deposits during the quarter

? We expect fee income growth to slow down to <15% due to expectation of a decline in capital market fees. Excludingcapital market fees, we expect other fees to grow at a strong ~25% in 1QFY10.

? We have factored in higher NPA provisions during 1QFY10 (1.5% on annualized basis).

? The stock currently trades at 2.5x FY10E BV and 2.1x FY11E BV. Axis Bank is our top pick among private sectorbanks.

8226 June 2009

Bank of Baroda

YEAR NET INCOME PAT EPS EPS P/E P/BV CAR ROAE ROAA P/ABVEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO

3/08A 59,628 14,355 39.3 39.8 11.1 1.6 12.9 15.8 0.9 1.7

3/09A 78,811 22,272 60.9 55.1 7.1 1.4 14.1 20.9 1.1 1.4

3/10E 83,946 22,920 62.7 2.9 6.9 1.2 13.5 18.4 0.9 1.2

3/11E 94,240 27,626 75.6 20.5 5.8 1.0 12.9 19.2 1.0 1.1

Equity Shares (m) 365.5

52-Week Range 464/181

1,6,12 Rel.Perf.(%) -8/7/104

M.Cap. (Rs b) 159.2

M.Cap. (US$ b) 3.3

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QInterest Income 32,938 35,510 41,080 41,388 41,176 42,617 44,109 48,177 150,916 176,079Interest Expense 22,368 24,172 26,462 26,680 27,340 28,433 29,855 32,803 99,682 118,431Net Interest Income 10,570 11,338 14,618 14,708 13,836 14,184 14,254 15,374 51,234 57,648

% Change (Y-o-Y) 16.9 15.5 46.6 43.0 30.9 25.1 -2.5 4.5 31.0 12.5Other Income 5,126 4,759 9,156 8,536 6,257 6,195 6,381 7,465 27,577 26,298Net Income 15,696 16,097 23,774 23,244 20,094 20,379 20,635 22,838 78,811 83,946Operating Expenses 7,094 7,641 9,627 10,199 9,650 9,747 9,552 9,848 35,761 38,796Operating Profit 8,602 8,456 14,147 13,045 10,444 10,632 11,083 12,990 43,050 45,150

% Change (Y-o-Y) 33.5 32.7 51.7 60.2 21.4 25.7 -21.7 -0.4 47.0 4.9Other Provisions 2,803 2,419 3,501 2,097 2,350 2,500 2,500 3,334 9,621 10,684Profit before Tax 5,799 6,037 10,646 10,947 8,094 8,132 8,583 9,657 33,429 34,466Tax Provisions 2,090 2,084 3,562 3,421 2,711 2,724 2,875 3,235 11,157 11,546Net Profit 3,709 3,953 7,084 7,527 5,382 5,408 5,708 6,422 22,272 22,920

% Change (Y-o-Y) 12.1 20.8 41.4 172.3 45.1 36.8 -19.4 -14.7 66.8 2.9Interest Exp/Interest Income (%) 67.9 68.1 64.4 64.5 66.4 66.7 67.7 68.1 66.1 67.3Other Income/Net Income (%) 32.7 29.6 38.5 36.7 31.1 30.4 30.9 32.7 35.0 31.3Cost/Income Ratio (%) 45.2 47.5 40.5 43.9 48.0 47.8 46.3 43.1 45.4 46.2Provisions/Operating Profits (%) 32.6 28.6 24.7 16.1 22.5 23.5 22.6 25.7 22.3 23.7Tax Rate (%) 36.0 34.5 33.5 31.2 33.5 33.5 33.5 33.5 33.4 33.5E: MOSL Estimates

BuyPrevious Recommendation: Buy Rs436

26 June 2009BLOOMBERGBOB IN

REUTERS CODEBOB.BO

Results PreviewSECTOR: BANKING

Ajinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) / Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect NII to grow 31% YoY on a lower base of 1QFY09. We expect NII to decline QoQ as we believe loanswould decline.

? We expect margins to be under pressure QoQ due to lower yields and lower loan book growth.

? On a higher base, we expect fee income growth to remain subdued. However, higher trading gains would result inother income growth of 20%+.

? We believe the bank will make higher NPA provisions on the back of strong operating profitability during the quarter.On a YoY basis, we believe overall provisions would decline, as there was a large MTM provision on the investmentbook in 1QFY09.

? The stock trades at 1.2x FY10E BV and 1x FY11E BV. BoB is our top pick among the state-owned banks.

8326 June 2009

Bank of India

YEAR NET INCOME PAT EPS EPS P/E P/BV CAR ROAE ROAA P/ABVEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO

3/08A 63,461 20,094 38.2 66.0 9.0 2.1 12.0 27.6 1.3 2.2

3/09A 85,508 30,077 57.2 49.7 6.0 1.5 13.0 29.2 1.5 1.6

3/10E 90,798 32,075 61.0 6.6 5.7 1.3 12.8 24.5 1.3 1.4

3/11E 102,328 35,260 67.0 9.9 5.1 1.0 12.7 22.2 1.3 1.1

Equity Shares (m) 525.9

52-Week Range 365/180

1,6,12 Rel.Perf.(%) -2/-35/38

M.Cap. (Rs b) 181.5

M.Cap. (US$ b) 3.8

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QInterest Income 35,483 39,628 43,432 44,931 45,000 46,125 48,432 49,469 163,474 189,026Interest Expense 23,676 25,996 28,215 30,598 31,101 31,412 31,883 32,489 108,485 126,886Net Interest Income 11,808 13,631 15,217 14,334 13,899 14,713 16,548 16,980 54,989 62,140

% Change (Y-o-Y) 24.7 38.3 41.0 17.8 17.7 7.9 8.8 18.5 30.0 13.0Other Income 5,664 6,495 10,506 7,854 5,905 6,141 7,062 9,550 30,519 28,658Net Income 17,472 20,126 25,722 22,187 19,804 20,854 23,610 26,530 85,508 90,798Operating Expenses 6,748 7,979 8,107 8,107 8,000 8,160 8,323 8,521 30,940 33,005Operating Profit 10,724 12,147 17,616 14,081 11,804 12,694 15,287 18,009 54,568 57,794

% Change (Y-o-Y) 58.2 44.6 81.4 16.2 10.1 4.5 -13.2 27.9 47.4 5.9Other Provisions 3,490 2,868 2,720 3,846 2,800 2,380 3,213 4,225 12,920 12,618Profit before Tax 7,234 9,280 14,896 10,234 9,004 10,314 12,074 13,783 41,648 45,175Tax Provisions 1,615 1,651 6,174 2,131 2,698 2,888 3,501 4,013 11,571 13,101Net Profit 5,620 7,629 8,722 8,104 6,306 7,426 8,573 9,770 30,077 32,075

% Change (Y-o-Y) 78.3 79.4 70.4 7.1 12.2 -2.7 -1.7 20.6 49.7 6.6Interest Exp/Interest Income (%) 66.7 65.6 65.0 68.1 69.1 68.1 65.8 65.7 66.4 67.1Other Income/Net Income (%) 32.4 32.3 40.8 35.4 29.8 29.4 29.9 36.0 35.7 31.6Cost/Income Ratio (%) 38.6 39.6 31.5 36.5 40.4 39.1 35.3 32.1 36.2 36.3Provisions/Operating Profits (%) 32.5 23.6 15.4 27.3 23.7 18.7 21.0 23.5 23.7 21.8Tax Rate (%) 22.3 17.8 41.4 20.8 30.0 28.0 29.0 29.1 27.8 29.0E: MOSL Estimates

NeutralPrevious Recommendation: Neutral Rs345

26 June 2009BLOOMBERGBOI IN

REUTERS CODEBOI.BO

Results PreviewSECTOR: BANKING

Ajinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) / Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect loan growth of ~20% and deposit growth of ~22%. On a QoQ basis, this implies a growth of 2%.

? We expect margins to remain under pressure and expect a fall in NII on a QoQ basis.

? On a lower base, we expect ~75% growth in trading gains. We expect slower (15%) growth in fees and slowdownin recoveries to exert pressure on other income growth.

? We expect earnings growth for FY10 to remain subdued for BoI due to decline in margins, lower trading gains (inFY09, 14% of operating profit was derived from trading gains) and higher NPA provisions. The stock is trading at1.3x FY10E BV and 1x FY11E BV. We maintain Neutral.

8426 June 2009

Canara Bank

YEAR NET INCOME PAT EPS EPS P/E P/BV CAR ROAE ROAA P/ABVEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO

3/08A 57,507 15,650 38.2 10.1 7.0 1.3 13.3 19.1 0.9 1.4

3/09A 70,290 20,728 50.6 32.4 5.3 1.1 12.3 22.8 1.0 1.2

3/10E 77,779 25,334 61.8 22.2 4.3 0.9 11.9 23.4 1.1 1.0

3/11E 87,114 28,747 70.1 13.5 3.8 0.8 11.4 22.4 1.0 0.9

Equity Shares (m) 410.0

52-Week Range 297/135

1,6, 12 Rel.Perf.(%) -11/-17/44

M.Cap. (Rs b) 109.1

M.Cap. (US$ b) 2.3

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QInterest Income 37,305 41,092 46,254 46,539 46,882 47,117 48,059 51,446 171,191 193,505Interest Expense 27,114 29,602 33,811 33,486 33,893 34,232 34,917 35,501 124,012 138,542Net Interest Income 10,192 11,490 12,443 13,053 12,989 12,885 13,143 15,946 47,178 54,963

% Change (Y-o-Y) 14.0 46.0 33.2 41.5 27.4 12.1 5.6 22.2 33.4 16.5Other Income 3,685 3,388 7,575 8,465 5,131 5,388 5,927 6,370 23,112 22,816Net Income 13,877 14,877 20,018 21,518 18,121 18,273 19,069 22,316 70,290 77,779Operating Expenses 6,841 7,142 7,877 8,792 8,300 8,217 8,135 8,091 30,653 32,743Operating Profit 7,036 7,735 12,141 12,726 9,821 10,056 10,935 14,225 39,638 45,036

% Change (Y-o-Y) 15.0 18.9 60.2 35.5 39.6 30.0 -9.9 11.8 33.9 13.6Other Provisions 5,409 1,441 3,526 3,538 2,000 2,500 2,500 4,257 13,910 11,257Profit before Tax 1,627 6,294 8,615 9,188 7,821 7,556 8,435 9,967 25,728 33,779Tax Provisions 400 1,000 1,600 2,000 1,955 1,889 2,109 2,492 5,000 8,445Net Profit 1,227 5,294 7,015 7,188 5,866 5,667 6,326 7,476 20,728 25,334

% Change (Y-o-Y) -49.0 31.8 52.9 54.9 378.1 7.0 -9.8 4.0 32.4 22.2Interest Exp/Interest Income (%) 72.7 72.0 73.1 72.0 72.3 72.7 72.7 69.0 72.4 71.6Other Income/Net Income (%) 49.3 48.0 39.4 40.9 45.8 45.0 42.7 36.3 43.6 42.1Cost/Income Ratio (%) 26.6 22.8 37.8 39.3 28.3 29.5 31.1 28.5 32.9 29.3Provisions/Operating Profits (%) 76.9 18.6 29.0 27.8 20.4 24.9 22.9 29.9 35.1 25.0Tax Rate (%) 24.6 15.9 18.6 21.8 25.0 25.0 25.0 25.0 19.4 25.0E: MOSL Estimates

BuyPrevious Recommendation: Buy Rs266

26 June 2009BLOOMBERGCBK IN

REUTERS CODECNBK.BO

Results PreviewSECTOR: BANKING

Ajinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) / Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect loans to grow by 26% YoY (on a lower base). On a QoQ basis, we expect loans to remain flat.

? We expect NII to grow 27% YoY due to lower base. For Canara Bank, pressure on margins would be lower due tothe effect of re-pricing of its bulk deposits in the quarter.

? We expect operating profit to grow 40% in 1QFY10 due to robust NII growth and trading gains. In 1QFY09, CanaraBank had reported a trading loss of Rs219m.

? We expect provisions to remain lower during the quarter, as asset quality is likely to be stable. Write-backs on equitybook could bring in surprises in provisions.

? The stock is trading at 0.9x FY10E BV and 0.8x FY11E BV. We maintain Buy.

8526 June 2009

Corporation Bank

YEAR NET INCOME PAT EPS EPS P/E P/BV CAR ROAE ROAA P/ABVEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO

3/08A 21,431 7,350 51.2 37.1 6.5 1.1 12.1 18.4 1.2 1.1

3/09A 27,982 8,928 62.2 21.5 5.3 1.0 13.6 19.6 1.2 1.0

3/10E 28,753 9,224 64.3 3.3 5.2 0.8 12.9 17.6 1.0 0.9

3/11E 32,111 9,272 64.6 0.5 5.1 0.8 12.3 15.5 0.9 0.8

Equity Shares (m) 143.4

52-Week Range 344/155

1,6,12 Rel.Perf.(%) -3/23/26

M.Cap. (Rs b) 47.6

M.Cap. (US$ b) 1.0

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QInterest Income 12,887 14,488 16,235 17,064 17,075 17,587 18,115 18,836 60,674 71,614Interest Expense 9,107 10,421 11,455 12,781 12,754 12,881 13,074 13,355 43,764 52,065Net Interest Income 3,780 4,067 4,780 4,283 4,322 4,706 5,041 5,480 16,910 19,549

% Change (Y-o-Y) 7.2 10.3 37.3 14.6 14.3 15.7 5.5 28.0 17.2 15.6Other Income 1,576 1,744 2,820 4,933 2,311 2,288 2,174 2,431 11,072 9,204Net Income 5,356 5,810 7,600 9,216 6,633 6,994 7,214 7,911 27,982 28,753Operating Expenses 2,146 2,295 3,106 2,468 2,650 2,915 2,944 2,762 10,016 11,271Operating Profit 3,210 3,515 4,494 6,747 3,983 4,079 4,270 5,150 17,966 17,482

% Change (Y-o-Y) 16.5 19.3 61.9 67.2 24.1 16.1 -5.0 -23.7 43.6 -2.7Other Provisions 1,008 558 185 2,107 700 800 900 1,107 4,104 3,507Profit before Tax 2,201 2,957 4,309 4,640 3,283 3,279 3,370 4,043 13,862 13,976Tax Provisions 358 1,042 1,744 2,035 1,099 1,115 1,146 1,392 4,935 4,752Net Profit 1,843 1,915 2,565 2,605 2,184 2,164 2,224 2,652 8,928 9,224

% Change (Y-o-Y) 4.1 18.7 34.3 26.7 18.5 13.0 -13.3 1.8 21.5 3.3Interest Exp/Interest Income (%) 70.7 71.9 70.6 74.9 74.7 73.2 72.2 70.9 72.1 72.7Other Income/Net Income (%) 29.4 30.0 37.1 53.5 34.8 32.7 30.1 30.7 39.6 32.0Cost/Income Ratio (%) 40.1 39.5 40.9 26.8 40.0 41.7 40.8 34.9 35.8 39.2Provisions/Operating Profits (%) 31.4 15.9 4.1 31.2 17.6 19.6 21.1 21.5 22.8 20.1Tax Rate (%) 16.3 35.2 40.5 43.9 33.5 34.0 34.0 34.4 35.6 34.0E: MOSL Estimates

BuyPrevious Recommendation: Buy Rs332

26 June 2009BLOOMBERGCRPBK IN

REUTERS CODECRBK.BO

Results PreviewSECTOR: BANKING

Ajinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) / Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect loans to grow 23% YoY (flat QoQ) and deposits to grow 26% YoY on a lower base. On a QoQ basis, weexpect NII to be flat and margins to remain stable due to benefit of re-pricing of bulk deposits. On a YoY basis, NIIis expected to increase 14%.

? We expect operating profit to rise 24% on back of 14% NII growth and strong trading profits. In 1QFY09, tradingprofits were lower at Rs45m. Fee income is likely to grow 15% YoY.

? Asset quality remains robust, with net NPAs at 0.3%. We do not expect any material weakening of the asset portfoliofor the bank.

? The stock is trading at 0.8x FY10E BV and 0.8x FY11E BV. Maintain Buy.

8626 June 2009

Federal Bank

YEAR NET INCOME PAT EPS EPS P/E P/BV CAR ROAE ROAA P/ABVEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO

3/08A 12,627 3,680 21.5 -37.1 11.4 1.1 22.5 13.6 1.3 1.1

3/09A 18,312 5,005 29.3 36.0 8.4 1.0 20.1 12.1 1.4 1.0

3/10E 19,841 5,328 31.2 6.5 7.9 0.9 18.6 11.8 1.3 0.9

3/11E 22,103 5,932 34.7 11.3 7.1 0.8 17.8 12.0 1.3 0.8

Equity Shares (m) 171.0

52-Week Range 269/111

1,6,12 Rel.Perf.(%) -6/-2/27

M.Cap. (Rs b) 41.9

M.Cap. (US$ b) 0.9

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QInterest Income 7,451 8,281 8,764 8,657 8,913 9,359 9,640 9,891 33,154 37,803Interest Expense 4,669 4,963 4,918 5,448 5,968 5,998 5,638 5,331 19,999 22,936Net Interest Income 2,782 3,318 3,846 3,209 2,945 3,361 4,002 4,560 13,155 14,867

% Change (Y-o-Y) 47.3 63.9 88.8 17.5 5.9 1.3 4.0 42.1 51.5 13.0Other Income 962 1,042 1,648 1,505 1,280 1,293 1,196 1,205 5,158 4,974Net Income 3,744 4,360 5,494 4,714 4,225 4,654 5,197 5,765 18,312 19,841Operating Expenses 1,209 1,331 1,650 1,525 1,650 1,568 1,724 1,615 5,715 6,557Operating Profit 2,535 3,029 3,844 3,189 2,575 3,086 3,473 4,149 12,598 13,284

% Change (Y-o-Y) 34.5 71.5 129.3 22.0 1.6 1.9 -9.7 30.1 58.6 5.4Other Provisions 1,724 1,569 500 875 1,300 1,350 1,000 1,561 4,668 5,211Profit before Tax 811 1,461 3,344 2,314 1,275 1,736 2,473 2,588 7,930 8,072Tax Provisions 130 318 1,306 1,172 434 590 841 880 2,925 2,745Net Profit 682 1,143 2,039 1,142 842 1,146 1,632 1,708 5,005 5,328

% Change (Y-o-Y) 1.8 19.9 98.1 11.0 23.5 0.3 -19.9 49.6 36.0 6.5Interest Exp/Interest Income (%) 62.7 59.9 56.1 62.9 67.0 64.1 58.5 53.9 60.3 60.7Other Income/Net Income (%) 25.7 23.9 30.0 31.9 30.3 27.8 23.0 20.9 28.2 25.1Cost/Income Ratio (%) 32.3 30.5 30.0 32.4 39.1 33.7 33.2 28.0 31.2 33.0Provisions/Operating Profits (%) 68.0 51.8 13.0 27.4 50.5 43.7 28.8 37.6 37.1 39.2Tax Rate (%) 16.0 21.8 39.0 50.7 34.0 34.0 34.0 34.0 36.9 34.0E: MOSL Estimates

BuyPrevious Recommendation: Buy Rs245

26 June 2009BLOOMBERGFB IN

REUTERS CODEFED.BO

Results PreviewSECTOR: BANKING

Ajinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) / Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect NII growth of 6% on the back of higher base (due to large capital raising of Rs21b in 4QFY08).

? We expect loans to grow 9% YoY (on a higher base) and deposits to grow 17% YoY. On a QoQ basis, loans anddeposits are likely to remain flat.

? Margins are expected to come under pressure QoQ (due to excess liquidity in the balance sheet) and YoY (as thebank got benefit of capital raising in 1QFY09).

? Strong trading profits would keep other income growth strong at 30%+. We expect trading profits of Rs250m v/s atrading loss of Rs80m in 1QFY09. We expect fee income to remain flat YoY on a higher base.

? On a conservative basis, we are building in higher NPA provisions. In 1QFY09, the bank provided Rs1,320m provisionsfor MTM depreciation.

? Federal Bank is a value pick. The stock trades at 0.9x FY10E BV and 0.8x FY11E BV, with RoA of 1.3%+. RoE islikely to remain low due to lower leverage. Maintain Buy.

8726 June 2009

HDFC

YEAR NET INCOME PAT ADJ. EPS EPS AP/E* P/BV CAR ROAE ROAA AP/ABV*END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO

3/08A 30,532 19,400 68.3 11.9 29.3 5.8 16.5 28.2 2.6 6.4

3/09A 35,852 22,825 80.2 17.5 25.3 5.3 15.4 23.7 2.5 6.1

3/10E 41,736 26,648 92.6 15.4 18.6 4.8 14.8 24.9 2.4 4.6

3/11E 49,891 32,007 111.2 20.1 15.3 4.2 14.3 25.8 2.5 3.9

Equity Shares (m) 287.9

52-Week Range 2,595/1,116

1,6,12 Rel.Perf.(%) 8/10/7

M.Cap. (Rs b) 701.1

M.Cap. (US$ b) 14.6

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QIncome from Operations 23,135 26,151 29,193 31,458 29,025 29,246 29,526 32,482 109,948 120,278Other Income 51 55 56 67 50 51 52 107 229 260Reported Total Income 23,186 26,206 29,248 31,524 29,075 29,297 29,578 32,589 110,177 120,538Investment Profits 0 226 15 12 150 150 100 100 252 500Total Income ex invst. profits 23,186 25,980 29,233 31,513 28,925 29,147 29,478 32,489 109,924 120,038YoY Change (%) 28.5 37.5 42.5 36.0 24.7 12.2 0.8 3.1 36.3 9.2Interest and Other Charges 15,684 17,573 20,427 20,641 19,591 19,584 19,636 19,992 74,325 78,803Other Expenses 967 991 960 569 1,175 1,076 1,027 745 3,487 4,023Total Expenses 16,651 18,563 21,387 21,210 20,766 20,660 20,663 20,737 77,812 82,826PBDT 6,535 7,643 7,861 10,314 8,308 8,637 8,915 11,852 32,365 37,712

YoY Change (%) 28.5 30.3 2.8 15.5 27.1 13.0 13.4 14.9 17.5 16.5Depreciation 37 43 45 50 40 40 40 60 175 180PBT Ex Invest. profits 6,499 7,374 7,801 10,253 8,118 8,447 8,775 11,692 31,938 37,032

YoY Change (%) 35.7 26.9 18.8 15.7 24.9 14.5 12.5 14.0 22.7 16.0Reported PBT 6,499 7,600 7,816 10,265 8,268 8,597 8,875 11,792 32,190 37,532Provision for Tax 1,818 2,258 2,348 2,943 2,398 2,493 2,574 3,420 9,365 10,884Reported PAT 4,681 5,342 5,468 7,322 5,871 6,104 6,302 8,372 22,825 26,648

YoY Change (%) 25.6 -17.4 -15.7 -4.5 25.4 14.3 15.2 14.3 -6.3 16.7E: MOSL Estimates

NeutralPrevious Recommendation: Neutral Rs2,436

26 June 2009BLOOMBERGHDFC IN

REUTERS CODEHDFC.BO

Results PreviewSECTOR: BANKING

* Price is adjusted for value of key ventures. Book Value is adjusted by deducting investments inkey ventures from net worth

Ajinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) / Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We estimate HDFC’s disbursement growth at ~15% YoY and loan growth at ~17% YoY.

? Despite lending rate cuts, we expect spreads to be unaffected due to significant reduction in wholesale borrowingcosts during the quarter.

? While fee income growth would remain muted, strong trading profits would help keep other operating income growthstrong. HDFC Bank dividend will come in 2QFY10. HDFC recieved the same in 1Q of previous year.

? The stock trades at 4.6x FY10E AP/ABV (price adjusted for value of other businesses and book value adjusted forinvestments made in those businesses) and 3.9x FY11E AP/ABV. This is higher than our target multiple of 3.5x BVfor the stock. Further BV multiple re-rating would be limited in our view, given limited scope for RoE expansion.Maintain Neutral.

8826 June 2009

HDFC Bank

YEAR NET INCOME PAT EPS EPS P/E P/BV CAR ROAE ROAA P/ABVEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO

3/08A* 88,403 17,530 41.3 22.1 36.2 4.6 13.6 16.2 1.3 4.7

3/09A 107,118 22,449 52.8 27.7 28.4 4.2 15.7 15.6 1.3 4.3

3/10E 130,306 28,543 63.2 19.8 23.7 3.2 15.2 15.9 1.4 3.3

3/11E 158,774 38,044 84.2 33.3 17.8 2.8 14.1 17.0 1.6 2.9

Equity Shares (m) 451.6

52-Week Range 1,580/774

1,6,12 Rel.Perf.(%) 3/-4/39

M.Cap. (Rs b) 675.9

M.Cap. (US$ b) 14.0

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QInterest Income 36,217 39,912 44,685 42,508 42,903 45,692 48,662 49,813 163,323 187,070Interest Expense 18,983 21,248 24,893 23,988 23,706 24,181 24,664 24,384 89,111 96,935Net Interest Income 17,234 18,665 19,793 18,520 19,197 21,511 23,998 25,430 74,212 90,135

% Change (Y-o-Y) 74.9 60.5 37.7 12.8 11.4 15.3 21.2 37.3 42.0 21.5Other Income 5,934 6,431 9,394 11,147 9,138 9,595 10,075 11,363 32,906 40,171Net Income 23,169 25,096 29,186 29,667 28,335 31,106 34,072 36,793 107,118 130,306Operating Expenses 12,894 13,867 14,606 13,962 14,800 15,540 16,317 18,004 55,328 64,661Operating Profit 10,275 11,229 14,581 15,705 13,535 15,566 17,755 18,789 51,790 65,645

% Change (Y-o-Y) 31.1 35.8 36.7 44.3 31.7 38.6 21.8 19.6 37.6 26.8Other Provisions 3,445 3,460 5,318 6,574 5,008 5,759 6,335 6,568 18,791 23,670Profit before Tax 6,830 7,768 9,263 9,131 8,527 9,807 11,420 12,220 32,999 41,975Tax Provisions 2,187 2,488 3,046 2,822 2,729 3,138 3,655 3,911 10,549 13,432Net Profit 4,643 5,280 6,217 6,309 5,798 6,669 7,766 8,310 22,449 28,543

% Change (Y-o-Y) 44.5 43.3 44.8 33.9 24.9 26.3 24.9 31.7 41.2 27.1Interest Exp/Interest Income (%) 52.4 53.2 55.7 56.4 55.3 52.9 50.7 49.0 54.6 51.8Other Income/Net Income (%) 25.6 25.6 32.2 37.6 32.3 30.8 29.6 30.9 30.7 30.8Cost/Income Ratio (%) 55.7 55.3 50.0 47.1 52.2 50.0 47.9 48.9 51.7 49.6Provisions/Operating Profits (%) 33.5 30.8 36.5 41.9 37.0 37.0 35.7 35.0 36.3 36.1Tax Rate (%) 32.0 32.0 32.9 30.9 32.0 32.0 32.0 32.0 32.0 32.0E: MOSL Estimates

NeutralPrevious Recommendation: Buy Rs1,497

26 June 2009BLOOMBERGHDFCB IN

REUTERS CODEHDBK.BO

Results PreviewSECTOR: BANKING

* Includes pro forma merged figures for HDFC Bank and CBoP

Ajinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) / Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? While we expect QoQ loan growth, higher base of 1QFY09 implies that YoY growth in loan book may be in singledigits in 1QFY10.

? Slower loan growth would imply subdued NII growth on a YoY basis. However, we expect higher CASA funds tohelp maintain margins, as cost of funds would decline.

? We expect other income to grow 50%+ in 1QFY10 due to traction in fees and expectation of trading gains in 1QFY10v/s a loss in 1QFY09.

? We believe provisions could surprise positively, as the bank had accelerated provisions in FY09 on CBoP loan book,which is unlikely in FY10.

? We estimate PAT CAGR of 30% over FY09-11, with RoE increasing to ~17% by FY11 (assuming conversion ofwarrants by HDFC Limited). The stock trades at 3.2x FY10E BV and 2.8x FY11E BV. We believe valuations arefair, thus we downgrade the stock to Neutral.

8926 June 2009

ICICI Bank

YEAR NET INCOME PAT EPS EPS P/E AP/E* P/BV AP/ABV* CAR ROEEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (X) (X) (%) (%)

3/08A 161,149 41,577 37.4 8.0 20.2 16.9 1.8 2.0 14.0 15.2

3/09A 159,704 37,582 33.8 -9.7 22.3 18.7 1.7 2.0 16.0 10.7

3/10E 162,468 38,230 34.3 1.7 22.0 16.7 1.6 1.8 15.2 11.0

3/11E 184,847 49,540 44.5 29.6 17.0 12.9 1.5 1.7 14.5 13.5

Equity Shares (m) 1,112.7

52-Week Range 797/253

1,6,12 Rel.Perf.(%) 5/22/6

M.Cap. (Rs b) 839.3

M.Cap. (US$ b) 17.4

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QInterest Income 78,918 78,350 78,361 75,297 74,144 74,326 75,151 76,911 310,926 300,532Interest Expense 58,021 56,874 58,457 53,909 52,784 51,973 52,030 53,012 227,259 209,800Net Interest Income 20,898 21,476 19,904 21,388 21,360 22,353 23,120 23,899 83,666 90,732

% Change (Y-o-Y) 41.3 20.2 1.6 2.9 2.2 4.1 16.2 11.7 14.5 8.4Other Income 15,382 18,773 25,145 16,737 15,700 17,500 18,250 20,286 76,038 71,736Net Income 36,279 40,250 45,050 38,125 37,060 39,853 41,370 44,185 159,704 162,468Operating Expenses 19,136 17,400 17,341 16,571 16,500 19,000 19,500 20,370 70,451 75,370Operating Profit 17,144 22,849 27,708 21,555 20,560 20,853 21,870 23,815 89,253 87,098

% Change (Y-o-Y) 12.5 21.1 22.7 -5.9 19.9 -8.7 -21.1 10.5 12.1 -2.4Other Provisions 7,925 9,235 10,077 10,845 10,500 10,000 8,000 6,228 38,083 34,728Profit before Tax 9,219 13,614 17,631 10,709 10,060 10,853 13,870 17,587 51,171 52,370Tax Provisions 1,935 3,472 4,910 3,272 2,716 2,930 3,745 4,749 13,588 14,140Net Profit 7,283 10,142 12,722 7,438 7,344 7,923 10,125 12,839 37,582 38,230

% Change (Y-o-Y) -6.0 1.2 3.4 -35.3 0.8 -21.9 -20.4 72.6 -9.6 1.7Interest Exp/Interest Income (%) 73.5 72.6 74.6 71.6 71.2 69.9 69.2 68.9 73.1 69.8Other Income/Net Income (%) 42.4 46.6 55.8 43.9 42.4 43.9 44.1 45.9 47.6 44.2Cost/Income Ratio (%) 52.7 43.2 38.5 43.5 44.5 47.7 47.1 46.1 44.1 46.4Provisions/Operating Profits (%) 46.2 40.4 36.4 50.3 51.1 48.0 36.6 26.2 42.7 39.9Tax Rate (%) 21.0 25.5 27.8 30.5 27.0 27.0 27.0 27.0 26.6 27.0E: MOSL Estimates

BuyPrevious Recommendation: Buy Rs754

26 June 2009BLOOMBERGICICIBC IN

REUTERS CODEICBK.BO

Results PreviewSECTOR: BANKING

*Price is adjusted for value of key ventures; Book value adjusted for investment in subsidiaries

Ajinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) / Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect loans to decline ~2% YoY but remain flat QoQ, as retail loan growth has slowed down significantly. Weexpect deposits to decline ~6% YoY due to net repayment of bulk deposits and moderation in loan book growth.

? Large part of the incremental deposits is likely to come from CASA funds and re-pricing of bulk deposits would lowerthe cost of funds. However, we expect build up of priority sector loans in 4QFY09 and cut in PLR to keep marginsflat QoQ.

? On a high base of 1FY09, we expect fees to decline by ~30% YoY. We have assumed trading profits of Rs1b v/s atrading loss (including MTM provisions) of Rs5.9b in 1QFY09, which would drive other income growth.

? With continued deterioration on unsecured retail loan book, we expect NPA provisions to remain high.

? Excluding subsidiaries, the stock trades at 1.8x FY10E ABV and 1.7x FY11E ABV (BV adjusted for NPA andinvestment in subsidiaries). We maintain Buy.

9026 June 2009

Indian Bank

YEAR NET INCOME PAT EPS EPS P/E P/BV CAR ROAE ROAA P/ABVEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO

3/08A 30,596 10,087 23.5 32.8 6.0 1.3 12.7 26.0 1.6 1.3

3/09A 36,440 12,453 29.0 23.5 4.9 1.1 13.3 24.8 1.6 1.1

3/10E 41,011 13,849 32.2 11.2 4.4 0.9 13.0 23.0 1.5 0.9

3/11E 45,975 15,983 37.2 15.4 3.8 0.8 12.7 22.3 1.5 0.8

Equity Shares (m) 429.8

52-Week Range 153/64

1,6,12 Rel.Perf.(%) 1/-48/41

M.Cap. (Rs b) 60.5

M.Cap. (US$ b) 1.3

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QInterest Income 15,018 16,882 17,840 18,564 17,711 18,773 19,712 21,548 68,303 77,745Interest Expense 9,623 10,063 10,644 11,888 11,090 11,645 11,994 13,045 42,218 47,774Net Interest Income 5,395 6,818 7,196 6,676 6,621 7,129 7,718 8,503 26,085 29,971

% Change (Y-o-Y) 11.7 44.7 24.6 27.7 22.7 4.6 7.3 27.4 27.0 14.9Other Income 2,432 2,128 2,873 2,921 2,610 2,480 2,356 3,595 10,354 11,040Net Income 7,827 8,946 10,069 9,597 9,231 9,608 10,074 12,098 36,440 41,011Operating Expenses 3,461 3,618 3,833 3,239 4,268 4,140 4,037 4,261 14,151 16,706Operating Profit 4,366 5,328 6,237 6,357 4,963 5,468 6,037 7,837 22,288 24,305

% Change (Y-o-Y) 32.4 55.1 34.6 21.6 13.7 2.6 -3.2 23.3 19.1 12.5Other Provisions 1,690 1,089 1,410 243 500 800 1,000 2,221 4,427 4,521Profit before Tax 2,676 4,239 4,827 6,114 4,463 4,668 5,037 5,616 17,861 19,784Tax Provisions 500 1,409 1,320 2,173 1,383 1,409 1,320 1,822 5,408 5,935Net Profit 2,176 2,829 3,507 3,941 3,079 3,259 3,717 3,794 12,453 13,849

% Change (Y-o-Y) 2.6 14.3 14.0 63.1 41.5 15.2 6.0 -3.7 23.5 11.2Interest Exp/Interest Income (%) 64.1 59.6 59.7 64.0 62.6 62.0 60.8 60.5 61.8 61.4Other Income/Net Income (%) 31.1 23.8 28.5 30.4 28.3 25.8 23.4 29.7 28.4 26.9Cost/Income Ratio (%) 44.2 40.4 38.1 33.8 46.2 43.1 40.1 35.2 38.8 40.7Provisions/Operating Profits (%) 38.7 20.4 22.6 3.8 10.1 14.6 16.6 28.3 19.9 18.6Tax Rate (%) 18.7 33.3 27.3 35.5 31.0 30.2 26.2 32.4 30.3 30.0E: MOSL Estimates

BuyPrevious Recommendation: Buy Rs141

26 June 2009BLOOMBERGINBK IN

REUTERS CODEINBA.BO

Results PreviewSECTOR: BANKING

Ajinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) / Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect loan growth of ~17% and deposit growth of ~20% on a higher base. We expect loan book to remain flatQoQ and deposits to grow 3% QoQ. We expect margins to come under pressure due to higher liquidity in the balancesheet. However, strong interest recovery on written-off accounts could provide upside to our NII growth estimates.In 1QFY09, interest recovery was lower at Rs210m.

? We expect other income growth to be ~7% on the back of ~13% growth in fee income. We have assumed lowerrecovery on written-off accounts – Rs300m v/s Rs535m in 1QFY09.

? Provisioning expenses base was higher on account of higher MTM depreciation on investment. On account of lowGNPA ratio (0.9%) and higher provision coverage ratio (~80%), we estimate lower NPA provisions in 1QFY10.

? Indian Bank has disclosed restructuring (including pending application) of ~7.5% of FY09 loan book. However,disclosure is borrower-wise. Viewed facility-wise, this would be ~5.8% of the book, which is largely in line with othermid-sized state-owned banks. Higher provision coverage ratio (~80%), strong RoE (~23% for FY10-11) and highertier-I ratio of ~11.9% (FY09) provides us comfort. Stock is trading at 0.9x FY10E BV and 0.8x FY11E BV. MaintainBuy.

9126 June 2009

Indian Overseas Bank

YEAR NET INCOME PAT EPS EPS P/E P/BV CAR ROAE ROAA P/ABVEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO

3/08A 34,871 11,973 22.0 18.7 3.9 1.0 11.1 27.8 1.3 1.0

3/09A 44,654 13,258 24.3 10.7 3.5 0.8 11.8 24.8 1.2 0.9

3/10E 44,142 10,639 19.5 -19.8 4.4 0.7 11.5 16.8 0.8 0.9

3/11E 49,290 11,541 21.2 8.5 4.1 0.6 11.5 16.1 0.8 0.8

Equity Shares (m) 544.8

52-Week Range 118/38

1,6,12 Rel.Perf.(%) -9/-34/-6

M.Cap. (Rs b) 46.8

M.Cap. (US$ b) 1.0

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QInterest Income 22,171 24,270 26,541 25,115 25,663 26,304 26,962 28,255 96,414 107,184Interest Expense 14,909 16,420 18,315 18,074 18,690 18,877 19,066 19,738 67,718 76,370Net Interest Income 7,262 7,850 8,227 7,041 6,973 7,427 7,896 8,517 28,696 30,814

% Change (Y-o-Y) 2.4 24.2 25.4 13.0 -4.0 -5.4 -4.0 21.0 17.1 7.4Other Income -303 2,835 5,508 6,227 3,350 3,417 3,554 3,008 15,958 13,328Net Income 6,959 10,684 13,734 13,268 10,323 10,844 11,450 11,525 44,654 44,142Operating Expenses 4,547 4,670 5,057 5,142 5,350 5,484 5,621 5,138 19,417 21,592Operating Profit 2,412 6,014 8,677 8,126 4,973 5,361 5,829 6,387 25,237 22,549

% Change (Y-o-Y) -41.1 31.3 76.0 26.7 106.2 -10.9 -32.8 -21.4 26.1 -10.7Other Provisions -605 1,790 1,731 2,770 750 1,250 1,750 3,154 5,694 6,904Profit before Tax 3,017 4,224 6,946 5,356 4,223 4,111 4,079 3,233 19,543 15,646Tax Provisions 457 633 3,062 2,132 1,351 1,315 1,305 1,035 6,285 5,007Net Profit 2,560 3,590 3,884 3,224 2,871 2,795 2,774 2,199 13,258 10,639

% Change (Y-o-Y) -4.7 12.3 26.0 5.4 12.2 -22.1 -28.6 -31.8 10.7 -19.8Interest Exp/Interest Income (%) 67.2 67.7 69.0 72.0 72.8 71.8 70.7 69.9 70.2 71.3Other Income/Net Income (%) -4.3 26.5 40.1 46.9 32.5 31.5 31.0 26.1 35.7 30.2Cost/Income Ratio (%) 65.3 43.7 36.8 38.8 51.8 50.6 49.1 44.6 43.5 48.9Provisions/Operating Profits (%) -25.1 29.8 20.0 34.1 15.1 23.3 30.0 49.4 22.6 30.6Tax Rate (%) 15.2 15.0 44.1 39.8 32.0 32.0 32.0 32.0 32.2 32.0E: MOSL Estimates

SellPrevious Recommendation: Sell Rs86

26 June 2009BLOOMBERGIOB IN

REUTERS CODEIOBK.BO

Results PreviewSECTOR: BANKING

Ajinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) / Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect NII to decline 4% YoY due to higher base effect. We expect loan growth of 21% YoY and depositsgrowth of 20% YoY.

? We expect non-interest income to increase from negative Rs300m to Rs3,350m. In 1QFY09, the bank providedRs1,170m for transfer of securities from AFS to HTM, and had booked a trading loss of Rs560m. We expect tradingprofits to be strong in 1QFY10.

? Provisions are likely to increase from a write-back of Rs600m to provisioning charge of Rs750m. In 1QFY09, thebank had reversed MTM provisions of Rs1,060m on account of transfer of securities from AFS to HTM.

? PAT growth is likely to be 12% in 1QFY10, driven by strong trading profits.

? We remain concerned about the bank’s asset quality. The stock is trading at 0.7x FY10E BV and 0.6x FY11E BV.We maintain Sell.

9226 June 2009

Jammu & Kashmir Bank

YEAR NET INCOME PAT EPS EPS P/E P/BV CAR ROAE ROAA P/ABVEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO

3/08A 10,555 3,600 74.2 31.2 6.5 1.0 12.8 16.7 1.2 1.1

3/09A 12,453 4,099 84.5 13.8 5.7 0.9 14.5 16.6 1.2 1.0

3/10E 13,666 4,549 93.8 11.0 5.1 0.8 13.1 16.3 1.1 0.9

3/11E 15,512 5,356 110.4 17.7 4.4 0.7 12.6 16.9 1.2 0.8

Equity Shares (m) 48.5

52-Week Range 610/210

1,6,12 Rel.Perf.(%) -2/-20/-14

M.Cap. (Rs b) 23.4

M.Cap. (US$ b) 0.5

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QInterest Income 6,514 7,478 8,000 7,889 7,802 8,036 8,397 8,532 29,881 32,767Interest Expense 4,252 4,865 5,379 5,383 5,410 5,437 5,382 5,254 19,879 21,483Net Interest Income 2,263 2,613 2,621 2,506 2,392 2,599 3,015 3,278 10,003 11,284

% Change (Y-o-Y) 19.3 33.9 30.2 11.7 5.7 -0.5 15.0 30.8 23.4 12.8Other Income 649 411 394 997 716 501 476 689 2,451 2,381Net Income 2,911 3,024 3,015 3,503 3,108 3,100 3,491 3,966 12,453 13,666Operating Expenses 1,096 1,148 1,145 1,320 1,300 1,274 1,242 1,316 4,708 5,132Operating Profit 1,815 1,876 1,870 2,184 1,808 1,826 2,249 2,651 7,745 8,534

% Change (Y-o-Y) 38.4 25.2 11.4 7.6 -0.4 -2.6 20.3 21.4 18.8 10.2Other Provisions 414 243 120 646 400 300 450 743 1,424 1,893Profit before Tax 1,401 1,633 1,750 1,538 1,408 1,526 1,799 1,908 6,321 6,641Tax Provisions 455 474 543 751 444 481 567 601 2,223 2,092Net Profit 946 1,159 1,207 787 965 1,046 1,232 1,307 4,099 4,549

% Change (Y-o-Y) 13.6 7.5 10.6 31.6 2.0 -9.8 2.1 66.1 13.8 11.0Interest Exp/Interest Income (%) 65.3 65.1 67.2 68.2 69.3 67.7 64.1 61.6 66.5 65.6Other Income/Net Income (%) 22.3 13.6 13.1 28.5 23.0 16.2 13.6 17.4 19.7 17.4Cost/Income Ratio (%) 37.7 38.0 38.0 37.7 41.8 41.1 35.6 33.2 37.8 37.6Provisions/Operating Profits (%) 22.8 12.9 6.4 29.6 22.1 16.4 20.0 28.0 18.4 22.2Tax Rate (%) 32.5 29.0 31.0 48.8 31.5 31.5 31.5 31.5 35.2 31.5E: MOSL Estimates

BuyPrevious Recommendation: Buy Rs483

26 June 2009BLOOMBERGJKBK IN

REUTERS CODEJKBK.BO

Results PreviewSECTOR: BANKING

Ajinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) / Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect NII to grow 6% to Rs2.4b in 1QFY10 on the back of expected muted loan growth of 6% YoY (2% QoQ).We expect margins to come under pressure in 1QFY10 v/s 4QFY09 due to significantly higher liquidity in the balancesheet.

? Other income growth is expected to be subdued due to lackluster fee-based income growth.

? We expect net profit to remain flat YoY due to muted NII and fee income growth.

? The stock trades at 0.8x FY10E BV and 0.7x FY11E BV. We maintain Buy.

9326 June 2009

Oriental Bank of Commerce

YEAR NET INCOME PAT EPS EPS P/E P/BV CAR ROAE ROAA P/ABVEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO

3/08A 22,987 8,409 33.6 1.7 5.5 0.8 12.1 14.8 1.0 0.9

3/09A 30,678 9,054 36.1 7.7 5.1 0.6 13.0 14.8 0.9 0.7

3/10E 31,425 9,233 36.9 2.0 5.0 0.6 12.0 14.6 0.8 0.7

3/11E 36,537 9,546 38.1 3.4 4.8 0.6 11.3 14.5 0.7 0.6

Equity Shares (m) 250.5

52-Week Range 203/95

1,6,12 Rel. Perf.(%) -6/-33/31

M.Cap. (Rs b) 46.3

M.Cap. (US$ b) 1.0

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QInterest Income 19,537 21,518 24,028 23,481 23,713 24,425 25,402 27,105 88,565 100,645Interest Expense 15,070 16,302 18,350 18,878 18,913 19,291 19,677 20,561 68,600 78,442Net Interest Income 4,467 5,217 5,678 4,603 4,800 5,134 5,725 6,544 19,965 22,203

% Change (Y-o-Y) 0.8 30.6 41.1 5.3 7.5 -1.6 0.8 42.2 19.5 11.2Other Income 2,055 2,092 3,154 3,413 2,580 2,322 2,205 2,115 10,713 9,222Net Income 6,522 7,308 8,832 8,016 7,380 7,455 7,930 8,659 30,678 31,425Operating Expenses 2,985 3,241 4,970 2,633 3,450 3,536 3,713 4,302 13,828 15,002Operating Profit 3,537 4,067 3,862 5,383 3,930 3,919 4,217 4,357 16,850 16,423

% Change (Y-o-Y) 8.8 49.4 30.2 65.6 11.1 -3.6 9.2 -19.1 38.2 -2.5Other Provisions 2,071 1,875 519 783 1,000 1,000 1,000 1,112 5,255 4,112Profit before Tax 1,466 2,192 3,343 4,600 2,930 2,919 3,217 3,245 11,595 12,311Tax Provisions -739 -177 821 2,642 732 730 804 811 2,540 3,078Net Profit 2,206 2,369 2,522 1,958 2,197 2,189 2,413 2,434 9,054 9,233

% Change (Y-o-Y) 10.0 0.3 26.3 -4.3 -0.4 -7.6 -4.3 24.3 7.7 2.0Interest Exp/Interest Income (%) 77.1 75.8 76.4 80.4 79.8 79.0 77.5 75.9 77.5 77.9Other Income/Net Income (%) 31.5 28.6 35.7 42.6 35.0 31.1 27.8 24.4 34.9 29.3Cost/Income Ratio (%) 45.8 44.3 56.3 32.8 46.7 47.4 46.8 49.7 45.1 47.7Provisions/Operating Profits (%) 58.5 46.1 13.4 14.5 25.4 25.5 23.7 25.5 31.2 25.0Tax Rate (%) -50.4 -8.1 24.6 57.4 25.0 25.0 25.0 25.0 21.9 25.0E: MOSL Estimates

BuyPrevious Recommendation: Buy Rs185

26 June 2009BLOOMBERGOBC IN

REUTERS CODEORBC.BO

Results PreviewSECTOR: BANKING

Ajinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) / Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect margin to remain stable QoQ, and NII to grow 8% YoY and 4% QoQ due to benefit of bulk deposit re-pricing.

? Loan growth is likely to be ~26% in 1QFY10 and deposit growth to be 19% YoY (on a higher base).

? We expect non-interest income to grow 26% YoY, aided by 15% YoY increase in fee income and strong tradingprofits. We expect trading profits of Rs1b v/s Rs610m in 1QFY09.

? In 1QFY09, OBC had provided Rs1.5b for MTM depreciation on investment. While we expect requirement of NPAprovisions to be lower (due to GNPA ratio of 1.5%), we expect the bank to make higher NPA provisions on accountof strong profitability.

? The stock is trades at 0.7x FY10E BV. We maintain Buy.

9426 June 2009

Punjab National Bank

YEAR NET INCOME PAT EPS EPS P/E P/BV CAR ROAE ROAA P/ABVEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO

3/08A 75,317 20,488 65.0 33.0 10.1 1.9 13.5 19.6 1.1 2.0

3/09A 99,506 30,909 98.0 50.9 6.7 1.6 14.0 25.8 1.4 1.6

3/10E 107,301 34,179 108.4 10.6 6.0 1.3 13.0 23.7 1.3 1.3

3/11E 123,629 40,010 126.9 17.1 5.2 1.1 12.0 23.3 1.3 1.1

Equity Shares (m) 315.3

52-Week Range 717/286

1,6,12 Rel.Perf.(%) -6/-27/53

M.Cap. (Rs b) 206.6

M.Cap. (US$ b) 4.3

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QInterest Income 41,385 46,504 52,947 52,426 51,741 53,811 56,501 61,935 193,262 223,988Interest Expense 26,937 29,382 33,274 33,360 33,674 35,021 36,772 38,521 122,953 143,988Net Interest Income 14,448 17,122 19,674 19,065 18,067 18,790 19,729 23,414 70,309 80,000

% Change (Y-o-Y) 11.0 32.6 38.1 25.7 25.1 9.7 0.3 22.8 27.0 13.8Other Income 4,561 6,628 9,452 8,556 6,444 6,766 6,935 7,155 29,197 27,300Net Income 19,009 23,750 29,126 27,621 24,511 25,556 26,665 30,569 99,506 107,301Operating Expenses 9,185 10,072 11,066 11,740 11,500 11,385 10,247 11,912 42,062 45,043Operating Profit 9,824 13,678 18,059 15,882 13,011 14,171 16,418 18,657 57,443 62,257

% Change (Y-o-Y) 5.3 60.0 82.2 29.5 32.4 3.6 -9.1 17.5 43.4 8.4Other Provisions 2,105 3,177 1,813 2,678 2,000 2,500 2,500 4,243 9,774 11,243Profit before Tax 7,719 10,501 16,246 13,203 11,011 11,671 13,918 14,413 47,669 51,014Tax Provisions 2,595 3,430 6,188 4,548 3,634 3,851 4,593 4,756 16,760 16,835Net Profit 5,124 7,071 10,058 8,656 7,378 7,820 9,325 9,657 30,909 34,179

% Change (Y-o-Y) 20.5 31.3 85.8 59.2 44.0 10.6 -7.3 11.6 50.9 10.6Interest Exp/Interest Income (%) 65.1 63.2 62.8 63.6 65.1 65.1 65.1 62.2 63.6 64.3Other Income/Net Income (%) 24.0 27.9 32.5 31.0 26.3 26.5 26.0 23.4 29.3 25.4Cost/Income Ratio (%) 48.3 42.4 38.0 42.5 46.9 44.5 38.4 39.0 42.3 42.0Provisions/Operating Profits (%) 21.4 23.2 10.0 16.9 15.4 17.6 15.2 22.7 17.0 18.1Tax Rate (%) 33.6 32.7 38.1 34.4 33.0 33.0 33.0 33.0 35.2 33.0E: MOSL Estimates; Quarterly and Annual numbers may not tally due to reclassification

BuyPrevious Recommendation: Buy Rs655

26 June 2009BLOOMBERGPNB IN

REUTERS CODEPNB.BO

Results PreviewSECTOR: BANKING

Ajinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) / Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect loan growth to remain strong at over 25% YoY on a lower base. However on a QoQ basis, loans woulddecline ~5% given build-up of short-term loans in 2HFY10.

? We expect trading gains to drive other income growth of 40%+ in 1QFY10.

? Gross NPA and net NPA ratios remain comfortable at 1.8% and 0.2%, with provision coverage ratio of 91% as atMarch 2009. NPA provisions would remain minimal in 1QFY10.

? We expect the bank to report PAT growth of 44% in 1QFY10, largely on the back of strong core operations andlower provisions.

? The stock is trading at 1.3x FY10E BV and 1.1x FY11E BV. We maintain Buy.

9526 June 2009

State Bank of India

YEAR NET INCOME PAT EPS EPS GR. P/E P/BV CAR ROAE ROAA P/ABVEND (RS M) (RS M) (RS) (RS) (X) (X) (%) (%) (%) (X)

3/08A 257,162 67,291 106.6 23.5 16.4 2.3 13.0 16.8 1.0 2.5

3/09A 335,639 91,212 143.7 34.8 12.2 1.9 14.3 17.1 1.1 2.1

3/10E 362,358 90,575 142.7 -0.7 12.3 1.7 13.0 14.8 0.9 1.9

3/11E 437,741 116,254 183.1 28.4 9.6 1.5 13.2 16.8 1.0 1.8

Equity Shares (m) 634.9

52-Week Range 1,935/894

1,6,12 Rel.Perf.(%) -5/-18/41

M.Cap. (Rs b) 1,110.4

M.Cap. (US$ b) 23.1

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QInterest Income 137,992 155,665 180,303 173,424 175,396 179,434 193,560 202,165 637,884 750,555Interest Expense 89,815 101,112 122,722 125,005 126,931 128,297 129,652 133,417 429,153 518,296Net Interest Income 48,177 54,554 57,582 48,419 48,465 51,138 63,908 68,748 208,731 232,259

% Change (Y-o-Y) 14.7 45.0 35.3 0.9 0.6 -6.3 11.0 42.0 22.6 11.3Other Income 24,039 23,431 32,256 47,182 28,707 26,684 30,712 43,997 126,908 130,100Net Income 72,215 77,985 89,838 95,602 77,172 77,822 94,620 112,745 335,639 362,358Operating Expenses 32,592 36,053 45,011 42,831 40,500 42,525 44,651 49,290 156,487 176,966Operating Profit 39,623 41,932 44,826 52,771 36,672 35,297 49,968 63,455 179,152 185,392

% Change (Y-o-Y) 67.8 54.5 22.5 20.7 -7.4 -15.8 11.5 20.2 36.7 3.5Other Provisions 15,495 6,106 1,968 13,777 7,000 4,000 14,000 18,869 37,346 43,869Profit before Tax 24,129 35,826 42,858 38,994 29,672 31,297 35,968 44,586 141,807 141,523Tax Provisions 7,721 13,229 18,074 11,571 10,682 11,267 12,949 16,051 50,594 50,948Net Profit 16,408 22,597 24,784 27,423 18,990 20,030 23,020 28,535 91,212 90,575

% Change (Y-o-Y) 15.1 40.2 37.0 45.6 15.7 -11.4 -7.1 4.1 35.5 -0.7Interest Exp/Interest Income (%) 65.1 65.0 68.1 72.1 72.4 71.5 67.0 66.0 67.3 69.1Other Income/Net Income (%) 33.3 30.0 35.9 49.4 37.2 34.3 32.5 39.0 37.8 35.9Cost/Income Ratio (%) 45.1 46.2 50.1 44.8 52.5 54.6 47.2 43.7 46.6 48.8Provisions/Operating Profits (%) 39.1 14.6 4.4 26.1 19.1 11.3 28.0 29.7 20.8 23.7Tax Rate (%) 32.0 36.9 42.2 29.7 36.0 36.0 36.0 36.0 35.7 36.0E: MOSL Estimates

BuyPrevious Recommendation: Buy Rs1,749

26 June 2009BLOOMBERGSBIN IN

REUTERS CODESBI.BO

Results PreviewSECTOR: BANKING

Ajinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) / Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect loan growth of 22% YoY (on a higher base) and deposit growth of 35%+ YoY (on a lower base). On aQoQ basis, we expect loan book to remain flat and deposits to grow 3%.

? We expect margins to remain under pressure due to strong liquidity in the balance sheet and lag impact of deposit re-pricing.

? Fee income growth is likely to be 20%. We expect trading profits to be strong during the quarter. On a YoY basis, weexpect ~20% growth in non-interest income.

? We have factored in higher NPA provisions of Rs9b due to lower provision coverage. In 1QFY09, the bank hadprovided Rs16.6b MTM depreciation on investments. We note that SBI could surprise positively on the provisionfront.

? The stock is trading at 1.9x FY10E and 1.8x FY11E consolidated ABV. Maintain Buy.

9626 June 2009

Union Bank of India

YEAR NET INCOME PAT EPS EPS P/E P/BV CAR ROAE ROAA P/ABVEND (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) (%) RATIO

3/08A 41,733 13,870 27.5 64.1 8.4 2.1 12.5 26.8 1.2 2.1

3/09A 52,961 17,266 34.2 24.5 6.8 1.7 13.3 27.2 1.2 1.7

3/10E 59,062 19,044 37.7 10.3 6.1 1.4 12.5 24.2 1.1 1.4

3/11E 67,555 21,460 42.5 12.7 5.5 1.1 12.0 22.4 1.1 1.2

Equity Shares (m) 505.1

52-Week Range 241/96

1,6,12 Rel.Perf.(%) 9/-11/103

M.Cap. (Rs b) 117.1

M.Cap. (US$ b) 2.4

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QInterest Income 25,332 28,313 32,617 32,897 32,866 34,181 35,890 38,651 118,894 141,588Interest Expense 17,232 18,560 21,333 23,633 23,673 24,147 24,630 24,842 80,758 97,292Net Interest Income 8,100 9,753 11,284 9,264 9,193 10,034 11,260 13,808 38,136 44,296

% Change (Y-o-Y) 10.3 48.6 63.1 20.1 13.5 2.9 -0.2 49.1 33.6 16.2Other Income 2,217 2,833 3,921 5,590 3,500 3,350 3,434 4,482 14,826 14,766Net Income 10,317 12,586 15,205 14,854 12,693 13,384 14,694 18,290 52,961 59,062Operating Expenses 4,157 5,589 6,656 5,740 6,020 6,171 6,047 5,662 22,141 23,899Operating Profit 6,160 6,997 8,548 9,115 6,673 7,214 8,647 12,629 30,820 35,162

% Change (Y-o-Y) 17.3 32.4 34.4 2.3 8.3 3.1 1.2 38.6 19.4 14.1Other Provisions 2,957 2,033 -449 2,834 1,800 1,500 1,750 3,661 7,375 8,711Profit before Tax 3,203 4,965 8,997 6,281 4,873 5,714 6,897 8,967 23,446 26,451Tax Provisions 920 1,350 2,280 1,630 1,364 1,600 1,931 2,511 6,180 7,406Net Profit 2,283 3,615 6,717 4,651 3,509 4,114 4,966 6,456 17,266 19,044

% Change (Y-o-Y) 1.6 31.1 83.8 -10.8 53.7 13.8 -26.1 38.8 24.5 10.3Interest Exp/Interest Income (%) 68.0 65.6 65.4 71.8 72.0 70.6 68.6 64.3 67.9 68.7Other Income/Net Income (%) 21.5 22.5 25.8 37.6 27.6 25.0 23.4 24.5 28.0 25.0Cost/Income Ratio (%) 40.3 44.4 43.8 38.6 47.4 46.1 41.2 31.0 41.8 40.5Provisions/Operating Profits (%) 48.0 29.0 -5.3 31.1 27.0 20.8 20.2 29.0 23.9 24.8Tax Rate (%) 28.7 27.2 25.3 26.0 28.0 28.0 28.0 28.0 26.4 28.0E: MOSL Estimates

BuyPrevious Recommendation: Buy Rs232

26 June 2009BLOOMBERGUNBK IN

REUTERS CODEUNBK.BO

Results PreviewSECTOR: BANKING

Ajinkya Dhavale (AjinkyaDhavale@MotilalOswal.com) / Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect loan growth of ~30% YoY and deposit growth of ~33% YoY on a lower base. On a QoQ basis, we expectloans to be flattish and deposits to grow 3%. We expect margins to come under pressure due to strong liquidity in thebalance sheet. We estimate NII growth of 14% YoY.

? Core fee income is likely to grow ~40% YoY (on a lower base) on the back of the bank’s increased thrust on scalingup traditional non-fund-based revenue. On a QoQ basis we estimate fee income to decline ~10%.

? The bank enjoys strong asset quality, with gross NPAs at 1.96% and net NPAs at 0.34%. However, on the back ofthe higher operating profits, we expect the bank to accelerate NPA provisions during the quarter. In 1QFY09, thebank had provided Rs3.4b for MTM provisions on investments.

? The stock is trading at 1.4x FY10E BV and 1.1x FY11E BV. We maintain Buy.

9726 June 2009

Cement

COMPANY NAMEACC

Ambuja Cements

Birla Corporation

Grasim Industries

India Cements

Shree Cement

UltraTech Cement

EXPECTED QUARTERLY PERFORMANCE SUMMARY (RS MILLION)CMP (RS) RECO SALES EBITDA NET PROFIT

26.6.09 JUN.09 VAR. VAR. JUN.09 VAR. VAR. JUN.09 VAR. VAR.% YOY % QOQ % YOY % QOQ % YOY % QOQ

CementACC 799 Neutral 19,983 11.9 -2.8 6,375 54.1 -1.5 4,041 53.7 -3.9Ambuja Cements 92 Neutral 17,958 14.4 -2.8 6,248 31.7 19.1 4,140 36.1 23.9Birla Corporation 200 Buy 4,284 8.2 -25.0 1,292 13.0 -2.1 941 2.5 3.9Grasim Industries 2,373 Buy 27,983 7.9 -3.1 7,485 -0.5 10.1 4,821 -6.2 25.3India Cements 146 Buy 9,438 12.7 6.2 2,837 -4.8 25.8 1,464 -6.4 40.5Shree Cement 1,186 Buy 8,220 33.8 2.0 3,400 61.5 2.9 1,939 66.5 -20.2Ultratech Cement 714 Buy 18,322 22.5 -1.5 6,074 36.2 13.9 3,617 36.5 16.9Sector Aggregate 106,037 14.1 -2.9 33,974 25.4 9.2 21,149 23.6 10.1

Snapshot of 1QFY10? Expect volumes to be 11.3% higher in 1QFY10? Domestic prices to be higher by 5.6% YoY and 4.3% QoQ? Capacity utilization at 90% (v/s 90% in 1QFY09), despite 25MT capacity addition

since 1QFY09? Full benefit of lower imported coal cost to be reflected in 1QFY10. Biggest

beneficiaries would be Ambuja Cements, India Cement, and UltraTech Cement.? Aggregate EBITDA margins for 1QFY10 to expand by 310bp QoQ (~410bp YoY).

Margins sustainable over the next 3-4 quarters, as demand and prices remain robust.? Revising earnings estimates for FY10 upwards by 12-39% across companies, based

on increase in cement prices in 1QFY10 and change in cement pricing assumption toRs5/bag decline in each of 2QFY10 and 3QFY10.

? Valuations attractive despite recent outperformance, as strong demand and stableprices led to stable margins. Prefer companies that are ahead of the curve in addingcapacity, along with strong cost saving possibilities. Among large-cap stocks, Grasimremains our top pick, while we prefer Birla Corp, India Cements and ShreeCement among mid-caps.

CEMENT INDUSTRY DYNAMICS: DEMAND AND PRICE TRENDS

Jinesh K Gandhi (Jinesh@MotilalOswal.com)

Results PreviewQUARTER ENDING JUNE 2009

CHANGE DISPATCHES PRICES (%) YOY QOQ YOY QOQ1QFY10 11.3 12.5 5.6 4.3FY08 8.2 3.0FY09 8.2 12.7FY10E 10.0 1.7

BSE Sensex: 14,765 S&P CNX: 4,376 26 June 2009

Source: CMA/MOSL

49.344.3

41.638.6

198225

235249

25

34

43

52

1QFY07 3QFY07 1QFY08 3QFY08 1QFY09 3QFY09 1QFY10

(MT)

180

205

230

255(Rs/bag)Despatches (MT) Avg National Retail Prices (Rs/bag)

9826 June 2009

1QFY10: SUMMARY PRICING TREND PRICE CHANGE (%) *

YOY QOQNorth 5.2 5.2East 4.9 9.9West 1.1 1.7South 5.6 -0.4Central 14.0 10.2National 5.6 4.3* adjusted for changes in prices for excise duty

Source: Industry/Motilal Oswal Securities

PRICE TREND – NORTH (RS/BAG)

PRICE TREND – EAST (RS/BAG) PRICE TREND – WEST (RS/BAG)

PRICE TREND – SOUTH (RS/BAG) PRICE TREND – CENTRAL (RS/BAG)

Pricing: Cement prices remain stable

1QFY10 Highlights? YoY Comparative: higher by 5.6%? QoQ Comparative: higher by 4.3%

Cement

* Figure in bracket indicates YoY Change Source: CMA/MOSL

220225 225

229 230 229 229

241

219

(5.2%)(1.8%)

(11.1%)

(1.8%)(4.5%)(4.6%)(5.8%)(9.8%)

(11.7%)

200

215

230

245

1QFY

08

2QFY

08

3QFY

08

4QFY

08

1QFY

09

2QFY

09

3QFY

09

4QFY

09

1QFY

10

222228

234233

219221222221

244

(15.5%) (17.2%) (9.6%)(3.1%)

(5.4%) (5.4%)(3.2%)

(1.4%)

(4.7%)

205

220

235

250

1QFY

08

2QFY

08

3QFY

08

4QFY

08

1QFY

09

2QFY

09

3QFY

09

4QFY

09

1QFY

10

263264266

257

249251246

244

229

(5.6%)(5.2%)(8.1%)(5.3%)

(8.7%)(19.5%)(21.2%)

(18.0%)

(13.2%)

225

240

255

270

1QFY

08

2QFY

08

3QFY

08

4QFY

08

1QFY

09

2QFY

09

3QFY

09

4QFY

09

1QFY

10

245

223

210214215213

216218214

(14.0%)

(4.7%)

-(2.8%)-(1.8%)(0.5%)

(4.1%)(9.1%)(16.9%)

(13.3%)

205

220

235

250

1QFY

08

2QFY

08

3QFY

08

4QFY

08

1QFY

09

2QFY

09

3QFY

09

4QFY

09

1QFY

10

245

241242242242240

237239

236

(1.2%)

(0.4%)(2.1%)(1.3%)(2.5%)(8.0%)

(11.7%)

(15.6%)

(14.2%)

230

236

242

248

1QFY

08

2QFY

08

3QFY

08

4QFY

08

1QFY

09

2QFY

09

3QFY

09

4QFY

09

1QFY

10

9926 June 2009

Cement

MOSL CEMENT UNIVERSE: 1QFY10 PERFORMANCE AT A GLANCE  VOL (M TON) GROWTH (%) REAL (RS/BAG) CHANGE (%)  1QFY10 YOY YTD FY10 1QFY10 YOY QOQ FY10EACC 5.5 3.0 4.6 6.0 183 8.6 2.2 2.6Ambuja Cement 4.9 10.8 8.4 7.8 181 5.1 2.2 1.9Grasim 4.8 21.4 21.4 15.5 176 4.8 2.3 -0.4UltraTech 5.2 19.8 19.8 14.7 176 2.2 3.0 -0.5Birla Corp 1.2 -0.8 -0.8 2.8 168 8.5 3.1 3.8India Cement 2.4 2.4 2.4 11.4 180 4.8 0.0 -2.4Shree Cement 2.4 24.5 24.5 14.8 163 1.9 3.2 0.6Industry 49.3 11.3 11.3 10.0 249 5.6 4.3 1.7* Adjusted for change in excise Source: CMA/MOSL

Demand gathers momentum, with 11.3% growth in 1QFY10Demand in the domestic market is expected to grow 11.4% in 1QFY10, as against 8.2%in FY09. Cement demand over the last six months has been driven by individual housingand infrastructure-spend. However, there has been a fall in demand from the organizedreal estate sector, ITES and organized retail segment. Demand growth in 1QFY10 wouldhave been higher but for lower demand growth in South India (~5.7% growth). While thecentral and eastern regions have maintained growth momentum, with growth estimated at21.8% and 9.3%, respectively, the northern and western regions witnessed recovery indemand, with growth estimated at 14.7% and 9.3%, respectively.

DEMAND GROWTH IMPROVES TO 11.4%

Source: CMA/MOSL

New capacity addition suppresses capacity utilizationCapacity utilization for 1QFY10 is estimated to be 90% (v/s 95% in 4QFY09 & 90% in1QFY09), impacted by new capacity additions (~9.5MT in 1QFY10). Although ~25MTcapacity has been added since 1QFY09, it has limited impact, as it takes time to ramp up.Capacity utilization for the industry is expected to ease from ~90% in FY09 to ~84% inFY10 and FY11 largely due to 70-80MT capacity addition over the next 2-3 years.

PERIOD MT GROWTH (%)FY08 168 8.2FY09 181 8.2FY10E 200 10.01QFY10E 49 11.3

49.3

44.341.6

38.634.8

25

34

43

52

1QFY

05

2QFY

05

3QFY

05

4QFY

05

1QFY

06

2QFY

06

3QFY

06

4QFY

06

1QFY

07

2QFY

07

3QFY

07

4QFY

07

1QFY

08

2QFY

08

3QFY

08

4QFY

08

1QFY

09

2QFY

09

3QFY

09

4QFY

09

1QFY

10

(MT)

0%

6%

12%

18%Despatches (MT) Grow th (%)

10026 June 2009

Cement

CAPACITY UTILIZATION: NEW CAPACITIES EASING THE PRESSURE

Source: CMA/MOSL

Strong demand, limited capacity addition boosts domestic cement pricesCement prices in 1QFY10 are estimated to improve 5.6% YoY and 4.3% QoQ, driven byprice increases as well as full benefit of price increase in 4QFY09. Price improvement isthe highest in the eastern and central regions, in line with strong volume growth. Priceincreases in central (up by Rs20-23/bag), eastern (up by Rs20-22/bag), northern (up byRs10-12/bag) and western (up by Rs3-4/bag) markets were driven by strong demand.However, prices were stable in the South, as demand slowed down.

PRICES RECOVER AFTER DECLINING IN LAST SIX MONTHS (RS/BAG) (NATIONAL AVERAGE, RS/BAG)

CAP UTILIZATION %FY08 98FY09 90FY10E 841QFY10E 90

* Figure in bracket indicates YoY Change Source: CMA/MOSL

90%90%

100%

95%

91%

83%

70%

80%

90%

100%

110%

1QFY

05

2QFY

05

3QFY

05

4QFY

05

1QFY

06

2QFY

06

3QFY

06

4QFY

06

1QFY

07

2QFY

07

3QFY

07

4QFY

07

1QFY

08

2QFY

08

3QFY

08

4QFY

08

1QFY

09

2QFY

09

3QFY

09

4QFY

09

1QFY

10

249

238238238235232

231230225

(6%)(3%)(3%)(3%)

(4%)(9%)

(13%)(16%)(14%)

205

220

235

250

1QFY

08

2QFY

08

3QFY

08

4QFY

08

1QFY

09

2QFY

09

3QFY

09

4QFY

09

1QFY

10

PRICE INCREASE HIGHEST IN CENTRAL & EASTERN INDIA

229233

242

215

235241 244 245

263

245249249

200

225

250

275

North East West South Central NationalAverage

1QFY09 2QFY09 3QFY09 4QFY09 1QFY10

10126 June 2009

Cement

Export realizations declineExport realizations for cement have declined further by US$5/ton fob to US$50-52/ton,whereas clinker realizations have declined by US$3/ton fob to US$45-48/ton. Further,appreciating rupee would put further pressure on export realizations. However, demandfrom the export markets remains stable. Decline in export realizations would impactUltraTech Cement and Ambuja Cement the most.

Revenue growth driven by higher volumes and pricesWe expect our cement universe to report around 12% volume growth, driven bycommissioning of new capacities of Grasim and UltraTech. Further, higher realizations(Rs4/bag QoQ & Rs8/bag YoY), coupled with cost savings would drive EBITDA increaseof Rs6.5/bag QoQ and Rs9/bag YoY to Rs61/bag.

TREND IN 1QFY10 KEY OPERATING PARAMETERS   VOLUME (M TON) REALIZATION (RS/BAG) EBITDA (RS/BAG)

1QFY10 YOY QOQ 1QFY10 YOY QOQ 1QFY10 YOY QOQ(%) (%) (RS) (RS) (RS) (RS)

ACC 5.5 3.0 -4.9 183 14.6 4.0 58 19.4 2.0Ambuja Cement 4.9 10.8 -4.9 185 5.8 4.0 64 10.2 13.0Grasim 4.8 21.4 0.0 176 8.1 4.0 66 5.5 1.2UltraTech 5.2 19.8 -4.4 176 3.8 5.2 58 7.0 9.4Birla Corp 1.2 -0.8 -26.1 168 13.2 5.0 55 3.8 6.2India Cement 2.4 2.4 4.4 184 12.1 -2.5 58 -4.5 9.9Shree Cement 2.4 24.5 -0.8 163 3.1 5.0 66 10.9 2.8Sector Aggregate 26.3 12.2 -4.0 179 8.3 3.9 61 9.3 6.5

Source: CMA/MOSL

Overall, we expect our cement universe's revenue to grow by 18% YoY, with EBITDAmargin improving by 310bp QoQ (~380bp YoY) to 33.2%, translating into 35% YoY (~7.5%QoQ) increase in PAT (excluding Grasim).

TREND IN 1QFY10 KEY FINANCIAL PARAMETERS  NET SALES (RS M) EBITDA MARGIN (%) NET PROFIT (RS M)

1QFY10 YOY QOQ 1QFY10 YOY QOQ 1QFY10 YOY QOQ(%) (%) (BP) (BP) (%) (%)

ACC 19,983 11.9 -2.8 31.9 870 40 4,041 53.7 -3.9Ambuja Cement 17,958 14.4 -2.8 34.8 460 640 4,140 36.1 23.9Grasim* 20,301 25.5 -1.0 31.8 160 70 4,821 -6.2 25.3UltraTech 18,322 22.5 -1.5 33.1 330 450 3,617 36.5 16.9Birla Corp 4,284 8.2 -25.0 30.1 130 700 941 2.5 3.9India Cement 9,438 12.7 6.2 30.1 -550 470 1,464 -6.4 40.5Shree Cement 8,220 33.8 2.0 41.4 710 40 1,939 66.5 -20.2Sector Aggregate* 98,504 18.4 -2.3 33.2 380 310 16,143 34.9 7.5* Grasim’s sales and EBITDA margin for cement business only; Sector PAT excl Grasim

Source: CMA/MOSL

Revising estimatesWe are revising our FY10 estimates upwards for all cement companies under our coverage,to factor in further increase in prices during 1QFY10 and change in our pricing assumptionto reflect the positive outlook. Our estimates factor in Rs5/bag decline in each of 2QFY10and 3QFY10 (as against Rs10/bag earlier).

10226 June 2009

Cement

Valuation and viewWith expected increase in focus on infrastructure under the new government, volumegrowth is likely to remain robust. This coupled with continued delay in new capacitieswould result in maintenance of demand-supply equilibrium. The impact of new capacitieson the demand-supply equilibrium is expected only by 2QCY10 (as against earlier estimateof 2QCY09). In the interim, margins are expected to improve, with recovery in prices andmoderation in energy cost.

Despite recent outperformance, valuations for the cement companies under our coverageare attractive, and below replacement cost of US$120/ton and at significant discount tobenchmark valuations. We prefer companies that are ahead of the curve in adding capacity,along with strong cost saving possibilities. Among large-cap stocks, Grasim remains ourtop pick, while we prefer Birla Corp, India Cement and Shree Cement among mid-caps.

VALUATIONS - ATTRACTIVE DESPITE RECENT RUN UP

REVISING FY10 ESTIMATES VOLUME (MT) REALIZATIONS (RS/TON) EBITDA (RS/TON) EPS (RS/SH)

REV OLD CHG (%) REV OLD CHG (%) REV OLD CHG (%) REV OLD CHG (%)ACC 22.3 22.3 0.0 3,570 3,479 2.6 1,029 922 11.6 75.2 66.4 13.3Ambuja 19.0 18.9 0.6 3,608 3,512 2.8 1,149 1,060 8.4 9.3 8.3 12.2Grasim 30.7 29.4 4.4 3,453 3,300 4.7 1,009 982 2.7 266.6 215.7 23.6UltraTech 21.0 19.9 5.9 3,278 3,140 4.4 1,095 990 10.7 107.6 87.7 22.6Birla Corp 5.5 5.5 0.0 3,224 3,081 4.6 983 772 27.3 50 40 25.2India Cement 10.8 10.3 4.9 3,554 3,401 4.5 1,010 1,090 -7.4 20 21 -4.3Shree Cement 9.7 9.3 4.2 3,136 2,933 6.9 1,224 1,032 18.6 176 126 39.1

Source: MOSL

Ambuja, (23%, US$100)

Grasim, (19%, $84)

UltraTech, (32%, US$71)

Birla Corp, (24%, US$21)

India Cement, (18%, US$61)

Shree Cement, (24%, US$73)

ACC, (25%, US$99)

$0

$20

$40

$60

$80

$100

$120

10% 15% 20% 25% 30% 35%

EV (US$/Ton)

RoE

(%)

Replacement Cost at US$100/ton

Source: MOSL

10326 June 2009

Cement

RELATIVE PERFORMANCE - 3 MONTH (%) RELATIVE PERFORMANCE - 1 YEAR (%)

Stock performance and valuations

STOCK PERFORMANCE (%) ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR

3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEARCementACC 43 33 -5 31 1 15Birla Corporation 12 13 -36 11 -30 -5Grasim Industries 48 16 1 14 6 -2Ambuja Cement 32 5 -16 2 -10 -14India Cements 36 -7 -12 -9 -6 -25Shree Cement 86 93 39 90 44 74Ultratech Cement 37 20 -10 18 -5 2

CMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)26.6.09 FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E

CementACC 799 Neutral 57.9 75.2 57.5 13.8 10.6 13.9 8.0 5.8 7.4 23.9 24.7 16.7Ambuja Cements 92 Neutral 7.4 9.3 8.0 12.3 9.8 11.5 7.3 5.6 5.9 22.1 23.1 17.2Birla Corporation 200 Buy 42.0 49.8 42.1 4.8 4.0 4.7 2.4 1.4 1.0 25.1 23.6 17.0Grasim Industries 2,373 Buy 238.5 266.6 244.5 9.9 8.9 9.7 5.5 3.8 3.5 21.1 19.4 14.4India Cements 146 Buy 17.7 20.3 14.7 8.2 7.2 9.9 5.5 4.0 4.8 17.6 17.4 11.2Shree Cement 1,186 Buy 177.5 175.5 164.5 6.7 6.8 7.2 4.9 3.5 3.4 64.6 40.0 27.5Ultratech Cement 714 Buy 79.8 107.6 88.8 8.9 6.6 8.0 5.8 3.7 3.7 31.5 31.6 20.7Sector Aggregate 10.0 8.4 9.9 6.0 4.3 4.4 23.3 22.6 16.5

80

100

120

140

160

Mar-09 Apr-09 May-09 Jun-09

Sensex MOSt Cement Index

40

65

90

115

140

Jun-08 Sep-08 Dec-08 Mar-09 Jun-09

MOSt Cement Index Sensex

10426 June 2009

ACC

YEAR NET SALES PAT EPS* EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

12/07A 68,807 12,798 68.1 15.3 11.7 3.6 30.8 33.7 2.0 7.2

12/08A 73,086 11,787 62.7 -7.9 13.8 3.0 23.9 25.0 1.9 8.0

12/09E 79,500 14,683 78.2 24.6 10.6 2.5 24.7 28.5 1.7 5.8

12/10E 81,049 11,245 59.9 -23.4 13.9 2.2 16.7 18.4 1.7 7.4

Equity Shares (m) 187.9

52-Week Range 907/369

1,6,12 Rel. Perf. (%) 4/17/31

M.Cap. (Rs b) 150.1

M.Cap. (US$ b) 3.1

QUARTERLY PERFORMANCE (STANDALONE) (RS MILLION)Y/E DECEMBER CY08 CY09 CY08 CY09E

1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QECement Sales (m ton) 5.40 5.29 4.86 5.46 5.73 5.45 5.20 5.89 21.0 22.3

YoY Change (%) 9.5 -0.9 3.8 8.8 6.1 3.0 7.0 7.9 5.2 6.0Cement Realization 3,325 3,375 3,599 3,522 3,587 3,667 3,567 3,467 3,479 3,570

YoY Change (%) 5.5 3.4 5.9 8.8 7.9 8.6 -0.9 -1.6 6.7 2.6QoQ Change (%) 2.7 1.5 6.6 -2.2 1.8 2.2 -2.7 -2.8

Net Sales 17,958 17,857 18,046 19,226 20,551 19,983 18,546 20,420 73,086 79,500YoY Change (%) 9.8 -3.1 7.5 11.5 14.4 11.9 2.8 6.2 6.2 8.8

EBITDA 4,700 4,136 4,382 4,455 6,474 6,375 4,708 5,355 17,332 22,912Margins (%) 26.2 23.2 24.3 23.2 31.5 31.9 25.4 26.2 23.7 28.8

Depreciation 714 724 736 768 789 810 885 968 2,942 3,452Interest 56 108 116 120 144 150 155 141 400 589Other Income 661 472 661 1,093 508 400 500 742 2,887 2,150PBT before EO Item 4,592 3,776 4,190 4,660 6,049 5,815 4,168 4,989 16,877 21,021EO Income/(Expense) 366 123 0 0 -224 0 0 0 489 0PBT after EO Item 4,958 3,899 4,190 4,660 5,825 5,815 4,168 4,989 17,366 21,021Tax 1,383 1,185 1,356 1,315 1,777 1,774 1,271 1,516 5,238 6,338

Rate (%) 27.9 30.4 32.4 28.2 30.5 30.5 30.5 30.4 30.2 30.2Reported PAT 3,575 2,714 2,834 3,345 4,048 4,041 2,897 3,473 12,128 14,683Adjusted PAT 3,312 2,629 2,834 3,345 4,203 4,041 2,897 3,473 11,787 14,683

Margins (%) 18.4 14.7 15.7 17.4 20.5 20.2 15.6 17.0 16.1 18.5YoY Change (%) -5.9 -24.4 0.9 8.5 26.9 53.7 2.2 3.8 -7.9 24.6

E: MOSL Estimates

NeutralPrevious Recommendation: Neutral Rs799

26 June 2009BLOOMBERGACC IN

REUTERS CODEACC.BO

Jinesh K Gandhi (Jinesh@MotilalOswal.com)

* Fully Diluted EPS

Results PreviewSECTOR: CEMENT

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect muted growth of 3% in dispatches to 5.45MT in 2QCY09, as ACC continues to face capacity constraints.Average realizations are likely to improve by 8.6% YoY (~2.2% QoQ) to Rs3,667/ton.

? Net sales would grow 11.9% YoY to Rs20b. Cement business EBITDA margins would expand 870bp YoY (~50bpQoQ) to 31.9%, driven by higher realizations and lower fixed cost. EBITDA should increase 54% YoY to Rs6.4b andPAT is likely to grow 54% YoY to Rs4.04b.

? The commissioning of 1.2MT capacity in Orissa by July 2009 and 3MT capacity in Karnataka (in phases fromAugust 2009) would drive ACC’s volume growth from 2HCY09.

? We are upgrading our EPS estimates by 12.7% to Rs78.2 for CY09 and by 19.7% to Rs59.9 for CY10 to factor in thechange our pricing assumption. Valuations at 10.6x CY09E EPS and EV of 5.8x CY09E EBITDA appear rich.Maintain Neutral.

10526 June 2009

Ambuja Cements

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

12/07A 56,314 13,078 8.6 -2.8 10.7 3.0 32.2 43.0 2.1 5.9

12/08A 62,347 11,335 7.4 -13.3 12.3 2.5 22.1 31.1 2.1 7.3

12/09E 68,445 14,200 9.3 25.3 9.8 2.1 23.1 31.4 1.8 5.6

12/10E 71,117 12,175 8.0 -14.3 11.5 1.9 17.2 23.3 1.6 5.9

Equity Shares (m) 1,522.4

52-Week Range 107/43

1,6,12 Rel. Perf. (%) -6/-19/2

M.Cap. (Rs b) 139.6

M.Cap. (US$ b) 2.9

QUARTERLY PERFORMANCE (STANDALONE) (RS MILLION)Y/E DECEMBER CY08 CY09 CY08 CY09E

1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QESales Volume (m ton) 4.80 4.38 3.92 4.50 5.10 4.85 4.25 4.77 17.60 18.97

YoY Change (%) 10.6 -0.3 4.0 5.7 6.3 10.8 8.4 5.9 5.0 7.8Realization (Rs/ton) 3,448 3,588 3,576 3,570 3,623 3,703 3,603 3,503 3,542 3,608

YoY Change (%) 5.4 8.6 4.3 3.6 5.1 3.2 0.7 -1.9 5.4 1.9QoQ Change (%) 0.0 4.1 -0.3 -0.2 1.5 2.2 -2.7 -2.8

Net Sales 16,549 15,698 14,019 16,081 18,476 17,958 15,311 16,701 62,347 68,445YoY Change (%) 16.6 8.2 8.5 9.5 11.6 14.4 9.2 3.9 259.3 247.8

EBITDA 5,146 4,743 4,091 3,800 5,247 6,248 4,928 5,363 17,779 21,786Margins (%) 31.1 30.2 29.2 23.6 28.4 34.8 32.2 32.1 28.5 31.8

Depreciation 618 616 654 709 686 720 880 1,015 2,598 3,301Interest 57 57 59 148 65 72 78 80 321 294Other Income 420 350 333 652 409 375 350 676 1,754 1,810PBT before EO Item 4,890 4,420 3,711 3,594 4,905 5,831 4,320 4,944 16,615 20,001Extraordinary Inc/(Exp) -59 3,142 0 0 0 0 0 0 3,083 0PBT after EO Exp/(Inc) 4,832 7,562 3,711 3,594 4,905 5,831 4,320 4,944 19,698 20,001Tax 1,570 1,791 1,210 1,105 1,565 1,691 1,253 1,292 5,676 5,800

Rate (%) 32.5 23.7 32.6 30.7 31.9 29.0 29.0 26.1 28.8 29.0Reported Profit 3,262 5,770 2,501 2,490 3,341 4,140 3,067 3,653 14,023 14,200Adj PAT 3,302 3,043 2,501 2,490 3,341 4,140 3,067 3,653 11,335 14,200

YoY Change (%) -7.8 -20.1 -14.0 -11.0 1.2 36.1 22.6 46.7 -13.3 25.3

E: MOSL Estimates

NeutralPrevious Recommendation: Neutral Rs92

26 June 2009BLOOMBERGACEM IN

REUTERS CODEGACM.BO

Jinesh K Gandhi (Jinesh@MotilalOswal.com)

Results PreviewSECTOR: CEMENT

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect dispatches to grow 10.8% YoY to 4.85MT, and average realizations to grow 3.2% YoY (~2.2% QoQ) toRs3,703/ton. Volume growth would be driven by purchased clinker; Ambuja continues to face clinker capacityconstraint. Also, realization growth would have been higher, but for decline in export realizations.

? Net sales would grow 14.4% YoY to Rs18b. EBITDA margin would expand 460bp YoY (~640 QoQ) to 34.8%,driven by higher realizations and savings on imported coal. However, higher tax provisioning would restrict recurringPAT growth at 36% to Rs4.1b.

? Ambuja would benefit from the commissioning of new capacities in 2HCY09 at Chattisgarh (~2.2MT in 3QCY09)and Himachal Pradesh (~2.2MT in 4QCY09), which would not only drive volume growth but also profitability (due tolower reliance on purchased clinker).

? We are upgrading our EPS estimates by 12.2% to Rs9.3 for CY09 and by 14.7% to Rs8 for CY10 to factor in thechange in our pricing assumption. Valuations at 9.7x CY09E EPS and EV of 5.5x CY09E EBITDA are a fairreflection of business fundamentals. Maintain Neutral.

10626 June 2009

Birla Corporation

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/08A 17,248 3,936 51.1 20.6 3.9 1.5 39.2 42.6 0.7 2.0

03/09A 17,907 3,235 42.0 -17.8 4.8 1.2 25.1 29.0 0.6 2.4

03/10E 19,017 3,831 49.8 18.4 4.0 0.9 23.6 28.8 0.4 1.4

03/11E 20,346 3,241 42.1 -15.4 4.7 0.8 17.0 21.9 0.2 1.0

Equity Shares (m) 77.0

52-Week Range 248/71

1,6,12 Rel. Perf. (%) -16/9/11

M.Cap. (Rs b) 15.4

M.Cap. (US$ b) 0.3

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QCement Sales (m ton) 1.19 1.11 1.40 1.60 1.18 1.15 1.45 1.67 5.29 5.45 YoY Change (%) -7.1 -7.2 5.3 8.2 -0.8 3.4 3.6 4.6 0.1 3.1Cement Realization 3,096 3,083 2,931 3,259 3,359 3,259 3,159 3,159 3,105 3,224

YoY Change (%) 4.2 0.6 -2.8 10.0 8.5 5.7 7.8 -3.1 3.5 3.8QoQ Change (%) 4.5 -0.4 -4.9 11.2 3.1 -3.0 -3.1 0.0

Net Sales 3,959 3,718 4,521 5,708 4,284 4,068 4,971 5,695 17,907 19,017YoY Change (%) -3.3 -5.6 4.5 16.8 8.2 9.4 9.9 -0.2 3.8 6.2

Total Expenditure 2,816 2,941 3,503 4,389 2,992 3,011 3,601 4,018 13,649 13,622EBITDA 1,143 777 1,019 1,319 1,292 1,057 1,370 1,676 4,258 5,395

Margins (%) 28.9 20.9 22.5 23.1 30.1 26.0 27.6 29.4 23.8 28.4Depreciation 98 100 110 126 128 132 135 153 434 548Interest 50 37 56 78 65 67 75 78 221 285Other Income 235 121 191 215 200 130 175 218 761 723Profit before Tax 1,230 760 1,044 1,331 1,299 988 1,335 1,663 4,365 5,285Tax 311 163 230 425 357 272 367 457 1,130 1,453

Rate (%) 25.3 21.5 22.1 31.9 27.5 27.5 27.5 27.5 25.9 27.5Adjusted PAT 918 597 814 906 941 716 968 1,206 3,235 3,831

Margins (%) 23.2 16.1 18.0 15.9 22.0 17.6 19.5 21.2 18.1 20.1YoY Change (%) -5.8 -42.1 -23.6 4.7 2.5 20.0 18.9 33.1 -17.8 18.4

E: MOSL Estimates

BuyPrevious Recommendation: Buy Rs200

26 June 2009BLOOMBERGBJUT IN

REUTERS CODEBRLC.BO

Jinesh K Gandhi (Jinesh@MotilalOswal.com)

Results PreviewSECTOR: CEMENT

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect revenues to grow 8.2% YoY to Rs4.3b in 1QFY10. Cement realizations are likely to improve by 8.5%YoY (~3.1% QoQ) to Rs3,359/ton, and volumes are likely to remain flat at 1.18MT. Improvement in realizations is areflection of significant price increase in its key markets of North, East and Central India.

? Higher realizations would translate into an EBITDA margin expansion of 120bp YoY (~700bp QoQ) to 30.1%. Also,the company would benefit from decline in pet coke and domestic open market coal prices. However, higher depreciationand higher tax provisioning would translate into flat PAT at Rs941m.

? Birla Corp’s volume growth would remain muted, as its brownfield expansion (~1.75MT) at Madhya Pradesh andRajasthan has got delayed to December 2009.

? We are upgrading our EPS estimates by 25% to Rs49.8 for FY10 and by 36.6% to Rs42.1 for FY11 to factor incontinuing strength in the company’s key markets and change in pricing assumptions. The stock trades at 4x FY10EEPS and 4.7x FY11E EPS – at a discount to comparable peers, which in our view is unjustified. Valuations, based onearnings as well as replacement cost, are compelling. Maintain Buy.

10726 June 2009

Grasim Industries

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END* (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 169,739 26,951 293.9 37.0 8.1 2.4 34.3 31.1 1.7 5.7

03/09A 184,039 21,867 238.5 -18.9 9.9 1.9 21.1 20.6 1.5 6.4

03/10E 190,000 24,376 265.9 11.5 8.9 1.6 19.3 20.9 1.3 5.0

03/11E 198,686 22,346 243.7 -8.3 9.7 1.4 14.4 21.1 1.1 4.9

Equity Shares (m) 91.7

52-Week Range 2,670/831

1,6,12 Rel. Perf. (%) 5/41/14

M.Cap. (Rs b) 217.6

M.Cap. (US$ b) 4.5

QUARTERLY PERFORMANCE (STANDALONE) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 25,923 26,853 26,536 28,870 27,983 25,402 26,472 28,279 108,040 108,136

YoY Change (%) 6.0 8.4 2.3 5.9 7.9 -5.4 -0.2 -2.0 5.8 0.1EBITDA 7,520 5,792 4,995 6,800 7,485 6,182 6,525 6,941 24,965 27,132

Margins (%) 29.0 21.6 18.8 23.6 26.7 24.3 24.6 24.5 23.1 25.1Depreciation 1,050 1,069 1,198 1,253 1,350 1,500 1,545 1,553 4,570 5,948Interest 305 288 444 385 420 460 500 510 1,421 1,890Other Income 822 997 806 738 800 900 750 650 3,504 3,100PBT 6,988 5,431 4,159 5,900 6,515 5,122 5,230 5,528 22,478 22,394Tax 1,846 1,236 864 2,053 1,694 1,332 1,360 1,437 5,999 5,823

Rate (%) 26.4 22.8 20.8 34.8 26.0 26.0 26.0 26.0 26.7 26.0Reported PAT 5,142 4,195 3,296 3,847 4,821 3,790 3,870 4,091 16,480 16,572Adj. PAT 5,142 4,195 3,296 3,847 4,821 3,790 3,870 4,091 16,480 16,572

YoY Change (%) 0.5 -16.1 -40.0 -7.1 -6.2 -9.6 17.4 6.3 -16.6 0.6E: MOSL Estimates; Quarterly results do not add-up to full year results due to restatement

BuyPrevious Recommendation: Buy Rs2,373

26 June 2009BLOOMBERGGRASIM IN

REUTERS CODEGRAS.BO

Jinesh K Gandhi (Jinesh@MotilalOswal.com)

* Consolidated

Results PreviewSECTOR: CEMENT

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect Grasim (standalone) to post sales growth of 8% YoY to Rs28b in 1QFY10 due to hive-off of sponge ironbusiness with effect from 22 May 2009. However, cost savings in cement and improvement in VSF business woulddrive margin expansion of 310bp QoQ (~230bp YoY decline) to 26.7%. Further, higher depreciation and interest costwould result in 6.2% YoY decline in PAT to Rs4.8b.

? Cement volumes would be favorably impacted by the commencement of new 4.5MT capacity in Rajasthan, driving21% YoY growth in volumes to 4.82MT. Realizations would improve by 4.8% YoY (~2.3% QoQ) to Rs3,528/ton. Thecement division’s operating margins are likely to expand 160bp YoY (~70bp QoQ) to 31.8%, aided by higher realizationsand lower energy cost.

? VSF business continued to improve in 1QFY10, with volume growth of 8.4% and 6.1% QoQ increase (~9.7% YoYdecline) in realizations to Rs92/kg. We expect operating margins for the VSF business to expand 300bp QoQ (~10.7ppYoY decline) to 20.3%.

? We are upgrading our EPS estimates by 23.6% to Rs265.9 for FY10 and by 38.6% to Rs243.7 for FY11 to factor inthe change in our cement pricing assumption and improvement in the VSF business. Valuations at 8.9x FY10E EPSand EV of 5x FY10E EBITDA (consolidated) appear reasonable. Maintain Buy.

10826 June 2009

India Cements

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 30,442 6,739 24.7 29.7 5.9 1.6 34.0 25.6 1.7 4.8

03/09A 34,268 4,851 17.7 -28.2 8.2 1.4 17.6 18.0 1.6 5.5

03/10E 39,401 5,547 20.3 14.3 7.2 1.2 17.4 18.4 1.1 4.0

03/11E 43,381 4,028 14.7 -27.4 9.9 1.1 11.2 13.5 1.0 4.8

Equity Shares (m) 281.9

52-Week Range 180/69

1,6,12 Rel. Perf. (%) -6/-3/-9

M.Cap. (Rs b) 41.0

M.Cap. (US$ b) 0.9

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QSales Dispatches (m ton) 2.37 2.43 2.00 2.32 2.43 2.85 2.50 3.02 9.12 10.80

YoY Change (%) 2.7 6.9 -8.3 -5.5 2.4 17.4 25.0 30.1 -1.1 18.4Realization (Rs/ton) 3,440 3,585 3,629 3,733 3,683 3,583 3,483 3,483 3,594 3,554

YoY Change (%) 13.4 7.4 6.9 10.7 7.0 -0.1 -4.0 -6.7 9.6 -1.1QoQ Change (%) 2.0 4.2 1.2 2.9 -1.3 -2.7 -2.8 0.0

Net Sales 8,375 9,455 7,529 8,885 9,438 10,421 8,877 10,665 34,268 39,401YoY Change (%) 19.4 24.2 2.0 5.3 12.7 10.2 17.9 20.0 12.6 15.0

Total Expenditure 5,393 6,554 5,728 6,630 6,601 7,578 6,510 7,814 24,306 28,502EBITDA 2,981 2,901 1,801 2,255 2,837 2,843 2,367 2,852 9,962 10,898

Margins (%) 35.6 30.7 23.9 25.4 30.1 27.3 26.7 26.7 29.1 27.7Depreciation 490 498 513 533 590 615 625 450 2,033 2,280Interest 230 248 293 350 275 280 290 479 1,122 1,324Other Income 132 91 141 131 120 100 150 260 470 630PBT before EO Expense 2,392 2,246 1,136 1,503 2,092 2,048 1,602 2,183 7,277 7,925Extra-Ord Expense 218 296 132 149 0 0 0 0 794 0PBT 2,175 1,950 1,004 1,354 2,092 2,048 1,602 2,183 6,483 7,925Tax 754 608 385 415 627 608 476 666 2,161 2,377

Rate (%) 34.6 31.2 38.3 30.7 30.0 29.7 29.7 30.5 33.3 30.0Reported PAT 1,421 1,343 619 939 1,464 1,440 1,126 1,517 4,322 5,547Adj PAT 1,564 1,546 700 1,042 1,464 1,440 1,126 1,517 4,851 5,547

YoY Change (%) -15.3 -29.2 -44.9 -26.0 -6.4 -6.9 60.8 45.6 -28.0 14.3Margins (%) 18.7 16.4 9.3 11.7 15.5 13.8 12.7 14.2 14.2 14.1

E: MOSL Estimates; *Excluding Visaka merger

BuyPrevious Recommendation: Buy Rs146

26 June 2009BLOOMBERGICEM IN

REUTERS CODEICMN.BO

Results PreviewSECTOR: CEMENT

Jinesh K Gandhi (Jinesh@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect India Cement to report 12.7% YoY sales growth to Rs9.4b, driven by 7% YoY (-1.3% QoQ) higherrealizations to Rs3,683/ton and flat volumes of 2.43MT. Volumes are impacted due to power cuts in Andhra Pradeshand ongoing brownfield expansion at its key plants.

? Savings due to lower cost of imported coal and gains of IPL would translate into EBITDA margin expansion of 470bpQoQ (~550bp YoY decline) to 30.1% and 26% QoQ higher EBITDA of Rs2.8b. Lower tax provisioning wouldrestrict PAT de-growth to 6.4% to Rs1.46b.

? Going forward, India Cement would benefit from the commissioning of brownfield units and split grinding units,augmenting capacity to 14MT by June 2009. We estimate 11% volume growth in FY10.

? The stock quotes at 7.2x FY10E EPS and EV of 4x FY10E EBITDA. Valuations are attractive; maintain Buy.

10926 June 2009

Shree Cement

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 20,659 2,879 82.6 83.2 14.3 6.1 51.1 27.0 2.4 5.8

03/09A 27,150 6,185 177.5 114.9 6.7 3.3 64.6 36.7 1.7 4.9

03/10E 32,041 6,115 175.5 -1.1 6.8 2.3 40.0 30.0 1.3 3.5

03/11E 32,320 5,729 164.5 -6.3 7.2 1.8 27.5 25.4 1.1 3.4

Equity Shares (m) 34.8

52-Week Range 1,230/330

1,6,12 Rel. Perf. (%) 11/94/90

M.Cap. (Rs b) 41.3

M.Cap. (US$ b) 0.9

BuyPrevious Recommendation: Buy Rs1,186

26 June 2009BLOOMBERGSRCM IN

REUTERS CODESHCM.BO

Jinesh K Gandhi (Jinesh@MotilalOswal.com)

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QSales Dispatches (m ton) 1.92 2.02 2.11 2.41 2.39 2.30 2.40 2.61 8.45 9.70 YoY Change (%) 33.7 35.1 30.2 17.2 24.5 14.0 14.0 8.3 28.0 14.8Realization (Rs/ton) 3,201 3,055 3,049 3,163 3,263 3,163 3,063 3,063 3,118 3,136

YoY Change (%) 4.2 -4.2 -6.9 -1.8 1.9 3.5 0.4 -3.2 -2.4 0.6QoQ Change (%) -0.7 -4.6 -0.2 3.7 3.2 -3.1 -3.2 0.0

Net Sales 6,143 6,292 6,653 8,062 8,220 7,680 7,750 8,391 27,150 32,041YoY Change (%) 39.3 32.2 25.6 21.7 33.8 22.1 16.5 4.1 28.7 18.0

EBITDA 2,106 1,828 2,269 3,306 3,400 2,670 2,801 3,002 9,508 11,874Margins (%) 34.3 29.0 34.1 41.0 41.4 34.8 36.1 35.8 35.0 37.1

Depreciation 461 537 509 547 1,000 800 1,200 1,492 2,054 4,492Interest 171 167 166 218 235 245 250 249 744 979Other Income 118 336 183 169 200 400 200 200 829 1,000PBT before EO Exp 1,592 1,460 1,776 2,710 2,365 2,025 1,551 1,461 7,538 7,403Extra-Ord Expense 76 97 53 83 60 60 65 65 309 250PBT 1,516 1,363 1,723 2,627 2,305 1,965 1,486 1,396 7,229 7,153Tax 407 288 484 271 415 354 268 251 1,449 1,287

Rate (%) 26.9 21.1 28.1 10.3 18.0 18.0 18.0 18.0 20.0 18.0Reported PAT 1,109 1,075 1,239 2,356 1,890 1,611 1,219 1,145 5,780 5,865Adj PAT 1,164 1,151 1,278 2,431 1,939 1,661 1,272 1,198 6,027 6,070

YoY Change (%) -0.4 8.4 264.7 480.6 66.5 44.2 -0.4 -50.7 106.7 0.7Margins (%) 19.0 18.3 19.2 30.2 23.6 21.6 16.4 14.3 22.2 18.9

E:MOSL Estimates

Results PreviewSECTOR: CEMENT

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect sales to grow 33.8% YoY to Rs8.2b, driven by volume growth of 24.5% YoY to 2.39MT and realizationimprovement of 1.9% YoY (~3.2% QoQ) to Rs3,263/ton.

? Higher realizations and lower energy cost would drive margin expansion of 710bp YoY (~40bp QoQ) to 41.4% andEBITDA growth of 6.1% to Rs3.4b.

? Depreciation is likely to increase to ~Rs1b, as unit-VII is expected to be capitalized in 1QFY10, curtailing recurringPAT growth at 66.5% to Rs1.94b.

? We are upgrading our EPS estimates by 39% to Rs175.5 for FY10 and by 37% to Rs164.5 for FY11 to factor in thechange in our pricing assumption. The stock quotes at 6.8x FY10E EPS and EV of 3.5x FY10E EBITDA. Valuationsare attractive; maintain Buy.

11026 June 2009

Results PreviewSECTOR: CEMENT

UltraTech Cement

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 55,092 10,076 80.9 28.8 8.8 3.3 45.2 40.7 1.9 6.0

03/09A 63,831 9,940 79.8 -1.4 8.9 2.5 31.5 29.1 1.6 5.8

03/10E 72,043 13,392 107.6 34.7 6.6 1.8 31.6 32.3 1.2 3.7

03/11E 74,473 11,056 88.8 -17.4 8.0 1.5 20.7 24.2 1.0 3.7

Equity Shares (m) 124.5

52-Week Range 801/250

1,6,12 Rel. Perf. (%) -4/39/18

M.Cap. (Rs b) 88.9

M.Cap. (US$ b) 1.8

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q* 2Q 3Q 4Q 1Q 2Q 3Q 4QSales (m ton) 4.34 3.98 4.57 5.44 5.20 4.50 5.15 6.19 18.48 21.04

YoY Change (%) -2.9 10.2 4.6 12.9 19.8 13.0 12.7 13.7 7.0 13.8Realization (Rs/ton) 3,271 3,346 3,398 3,278 3,372 3,302 3,206 3,243 3,295 3,278

YoY Change (%) 11.0 7.3 11.8 2.7 3.1 -1.3 -5.7 -1.1 7.2 -0.5QoQ Change (%) 2.5 2.3 1.5 -3.5 2.9 -2.1 -2.9 1.2

Net Sales 14,960 13,962 16,308 18,601 18,322 15,610 17,258 20,853 63,831 72,043YoY Change (%) 10.0 19.6 18.2 16.2 22.5 11.8 5.8 12.1 15.9 12.9

EBITDA 4,458 2,967 4,308 5,331 6,074 4,370 5,679 6,913 17,064 23,036Margins (%) 29.8 21.3 26.4 28.7 33.1 28.0 32.9 33.1 26.7 32.0

Depreciation 711 808 805 906 1,000 1,040 1,070 1,073 3,230 4,183Interest 247 309 359 340 390 410 420 438 1,255 1,658Other Income 266 278 204 287 270 285 220 375 1,036 1,150PBT after EO Expense 3,766 2,129 3,348 4,372 4,954 3,205 4,409 5,777 13,615 18,345Tax 1,116 487 964 1,277 1,337 865 1,190 1,559 3,675 4,953

Rate (%) 29.6 22.9 28.8 29.2 27.0 27.0 27.0 27.0 27.0 27.0Reported PAT 2,650 1,642 2,384 3,095 3,617 2,340 3,219 4,218 9,940 13,392Adj PAT 2,650 1,642 2,384 3,095 3,617 2,340 3,219 4,218 9,940 13,392

YoY Change (%) 2.2 -11.7 -14.7 9.4 36.5 42.5 35.1 36.3 -1.4 34.7E: MOSL Estimates

BuyPrevious Recommendation: Buy Rs714

26 June 2009BLOOMBERGUTCEM IN

REUTERS CODEULTC.BO

Jinesh K Gandhi (Jinesh@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect net sales to grow 22.5% YoY to Rs18.3b, driven by 19.8% YoY growth in volumes to 5.2MT and 3.1%YoY (~2.9% QoQ) improvement in realizations to Rs3,372/ton. RMC sales are likely to remain flat at Rs785m(~4.3% of sales). While domestic market realizations have improved, export realizations have declined by aboutUS$5/ton and have been impacted by rupee appreciation.

? Savings in energy and freight cost would result in EBITDA margin expansion of 330bp YoY (~440bp QoQ) to 33.1%.EBITDA would grow 36% YoY to Rs6.1b. However, higher depreciation and interest cost (on account of newcapacity) would curtail PAT growth at 36.5% to Rs3.6b.

? L&T has sold its 11.5% stake in UltraTech through the QIP route at Rs725-730/share. Post stake sale by L&T, freefloat in UltraTech has increased to 45.2% from 33.7%.

? We are upgrading our EPS estimates by 22.6% to Rs107.6 for FY10 and by 32% to Rs88.8 for FY11 to factor in thechange in our pricing assumptions. At 6.6x FY10E EPS and EV of 3.7x FY10E EBITDA, valuations do not fullyreflect the improving operating performance and organic growth visibility at low cost of expansion. Maintain Buy.

11126 June 2009

Engineering

COMPANY NAMEABB

Bharat Electronics

BHEL

Crompton Greaves

Cummins India

Larsen & Toubro

Siemens

Suzlon Energy

Thermax

EXPECTED QUARTERLY PERFORMANCE SUMMARY (RS MILLION)CMP (RS) RECO SALES EBITDA NET PROFIT

26.6.09 JUN.09 VAR. VAR. JUN.09 VAR. VAR. JUN.09 VAR. VAR.% YOY % QOQ % YOY % QOQ % YOY % QOQ

EngineeringABB 789 Neutral 17,213 6.5 23.6 1,859 -2.3 46.2 1,187 -7.9 51.5Bharat Electronics 1,339 Buy 3,858 0.5 -85.9 -391 20.2 PL 95 276.5 -98.3BHEL 2,202 Neutral 51,785 19.6 -50.9 7,250 40.1 -65.0 5,970 25.0 -62.5Crompton Greaves 296 Neutral 12,509 15.5 -8.1 1,589 15.0 -26.7 999 12.4 -23.7Cummins India 277 Neutral 7,328 -9.4 4.2 1,186 -14.4 3.8 746 -25.9 -4.6Larsen & Toubro 1,611 Neutral 83,068 20.4 -20.6 8,058 21.9 -41.1 5,479 11.7 -48.5Siemens 498 Neutral 17,769 -2.4 -25.4 2,048 -22.8 -41.3 1,293 -23.7 -42.7Suzlon Energy 123 Neutral 18,741 -10.2 -54.6 2,913 -3.6 -48.6 293 -79.2 -86.7Thermax 410 Neutral 7,783 0.7 -17.9 739 -14.5 -44.6 501 -14.2 -46.1Sector Aggregate 220,055 11.1 -36.5 25,249 11.4 -56.1 16,563 -0.1 -59.0

Satyam Agarwal (Agarwals@MotilalOswal.com) / Shridatta Bhandwaldar (Shridatta.Bhandwaldar@MotilalOswal.com)

Results PreviewQUARTER ENDING JUNE 2009

Base effect to help IPP/capital goods indices; marginal improvementexpectedIn April 2009, the IIP witnessed positive growth of 1.4% YoY after two months ofnegative growth, whereas the capital goods index saw negative growth of 1.3% YoY. InFY09, cumulative IIP growth was 2.6% as against 8.5% in FY08; the capital goodsindex grew 7% in FY09 as against 18% in FY08. Careful observation suggests that thepositive base effect will start contributing positively to both the indices in the comingmonths. During the next two months, we expect YoY growth in the capital goods indexto be strong due to lower base.

CAPITAL GOODS INDEX (% YOY) IIP INDEX (% YOY)

Source: Ministry of Statistics

BSE Sensex: 14,765 S&P CNX: 4,376 26 June 2009

-14

0

14

28

42

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ilM

ayJu

ne

July

Aug Sep Oct

Nov

Dec Jan

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Mar

FY07 FY08 FY09 FY10

-4

2

8

14

20

Apr

il

May

June

July

Aug Sep Oct

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Dec Jan

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FY07 FY08 FY09 FY10

11226 June 2009

Engineering

Expect capital goods companies to post flat net profit in 1QFY10For 1QFY10, we expect our capital goods universe to deliver moderate revenue growth of11.1% YoY, EBITDA growth of 11.4% YoY and marginal net profit decline of 0.1% YoY.While the unwinding of existing order books would enable moderate growth in revenuesand EBITDA, net profits would be stagnant due to YoY increase in interest cost anddepreciation, and decline in other income for larger players like BHEL and L&T.

Aggregate numbers would continue to be driven by heavyweights – BHEL and L&T.There has been a sharp decline in prices of raw material (steel, copper, etc) in 2HFY09,which should favorably impact EBITDA margins for FY10, particularly for BHEL andCrompton due to higher proportion of pure raw material and fixed price contracts. BHEL,Crompton and L&T would deliver better performance than peers. We expect ABB andSiemens to report decline in revenues as well as profits.

Order intake: no clear signs on private capex yet, public capex likely to bestrongDuring the last 12 months, the order books of BHEL, L&T and ABB have remainedhealthy, driven by project ordering in power equipment and capex on completion of existingprojects by hydrocarbon and process industries. While order intake has been good on thepower side, there are no signs of industrial capex revival, yet. The only positive sign forindustrial capex comes from lower cost of equity and debt as compared to FY09. Thus,projects kept on hold for want of funds could be revived again.

Siemens experienced stagnation of order book during the last 9-12 months due to lack ofmega-order intake, whereas Suzlon’s order book declined significantly due to issues relatedto blade cracks in the US, global slowdown and credit market freeze during FY09. Projectaward activity in transmission and distribution (T&D) has been subdued and is likely toimprove in FY10, as (1) the remaining 765KV substation orders would be awarded, and(2) new central and state governments are likely to increase focus on T&D spend (includingschemes like APDRP, RGGVY, new grid development, etc).

ORDER BACKLOG (RS B AND % YOY)  MAR 08 MAR 09 GROWTH (%) BOOK TO BILL(X)ABB 62 70 13.3 1.0BHEL 839 1170 39.5 4.3Crompton Greaves 51 66 30.9 0.8L&T 527 709 33.4 2.1Siemens 96 97 1.4 1.2Suzlon 183 100 NA 0.5

Source: Company

ORDER INTAKE (RS M, %YOY)4QFY07 1QFY08 2QFY08 3QFY08 4QFY08 1QFY09 2QFY09 3QFY09 4QFY09 % YOY

ABB 20 20 17 20 27 22 19 13 23 -14.5BHEL 133 110 146 109 137 159 148 160 146 6.6Crompton NA 19 19 16 20 29 28 20 21 1.4L&T 77 99 75 130 120 122 125 146 121 0.8Siemens 19 18 13 19 23 21 24 20 19 -20.6Suzlon 47 60 65 40 61 9 27 2 NA NA

Source: Company

BHEL provides the bestrevenue visibility in the

capital goods space

11326 June 2009

Engineering

ABB/SIEMENS/L&T HAVE HIGHEST EXPOSURE (% OF ORDER BOOK) TO INDUSTRIAL CAPEX  GOVERNMENT INDUSTRIAL INFRASTRUCTURE CONSUMERSABB 62 38 0 0BHEL 79 19 2 0Crompton Greaves** 70 15 0 15Larsen and Toubro 20 42 38 0Siemens 48 37 8 7Suzlon 62 38 0 0** Based on the consolidated numbers Source: Company/MOSL

INDUSTRIAL INVESTMENTS - MAJOR CONTRIBUTION FROM HYDROCARBONS AND METALS% ORDER BOOK PROCESS HYDROCARBONS OTHERS TOTALABB 10 15 13 38BHEL 6 5 14 25Crompton Greaves* 11 2 2 15Larsen and Toubro 14 23 5 42Siemens 20 10 8 38* For consolidated Source: Company/MOSL

Aggregate EBITDA margins likely to be stable but industrial/consumerbusinesses to continue witness margin pressureFor 1QFY10, we expect aggregate EBITDA margins to remain stable at 11.5% (+10bp),buoyed by BHEL’s EBITDA margin expansion of 210bp YoY to 14%. Few likely trendsduring 1QFY10 are:? Increased competitive pressures would impact the profitability of the consumer and

industrial businesses of L&T, ABB, Crompton, etc. We had observed this during2HFY09. Also, volumes would be impacted due to relatively lower demand.

? Declining commodity prices would favorably impact EBITDA margins of players likeBHEL and Crompton due to higher fixed price contracts.

EBITDA MARGINS FLAT AT 11.5% BUT PAT MARGINS DOWN 90BP YOY AT 7.5%

We expect delays andcancellations on account of

difficulties in financialclosures and sharp decline in

demand for commodities

Process and hydrocarbonindustries account for mostof the industrial capex, and

L&T, ABB and Siemensare most exposed to these

two segments

Source: MOSL

15.9 16.618.1

13.9

11.811.4

14.1

11.5

11.9

13.6

8.7

10.112.4

15.217.5

8.5

13.7

4

8

12

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4

8

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16

20EBITDA Margin (LHS) Net Prof it Margin (RHS)

11426 June 2009

Engineering

Limited room for further outperformance; valuations running ahead ofearningsOur coverage universe has delivered 77% returns since March 2009 v/s 41% by BSESensex and 47% by NSE Nifty. The recent outperformance was driven by comfortablevaluations (14x FY10E earnings in March 2009) and expectations of positive impact onbusiness environment with continuity of the government. Post the recent outperformance,the 1-year forward sector PER now stands at 20x and is only marginally below the averageof 21x during FY05-09. The period FY05-09 was one of the best in terms of power andindustrial capex, resulting in earnings CAGR of 38%. During FY09-11, we expect earningsCAGR of 17%; the current PER of 20x leaves limited room for further outperformance.We maintain Neutral on the sector.

SECTOR PER AT 20X FY10E; EXPECTED EARNINGS CAGR AT 17% OVER FY09-11

Shaded area indicates earnings growth excess of 20% YoY Source: Company/MOSL

Further out-performance looks difficult with earningsCAGR of just 17% during FY09-11E; unless visibility

improves on order intake and earnings

PER expansion was driven byearnings CAGR of 38% in FY05-09,

vs average 22% during FY95-09

14

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FY10

E

Average 1-yr fw d PER at 16x

11526 June 2009

Engineering

RELATIVE PERFORMANCE - 3 MONTH (%) RELATIVE PERFORMANCE - 1 YEAR (%)

Stock performance and valuations

STOCK PERFORMANCE (%) ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR

3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEAREngineeringABB 92 -14 44 -16 9 -35Bharat Electron 57 25 9 23 -26 4BHEL 40 53 -7 51 -43 32Crompton Greaves 145 28 97 25 62 6Cummins India 54 17 7 15 -29 -4Larsen & Toubro 144 37 96 34 60 15Siemens 100 14 53 12 17 -7Suzlon Energy 176 -49 129 -52 93 -70Thermax 143 4 95 2 60 -17

COMPARATIVE VALUATIONCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)

26.6.09 FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11EEngineeringABB 789 Neutral 25.1 23.8 27.8 31.4 33.2 28.4 21.7 21.2 18.8 28.4 21.5 20.8Bharat Electronics 1,339 Buy 101.1 109.6 118.7 13.3 12.2 11.3 7.0 5.9 4.6 23.7 21.6 19.8BHEL 2,202 Neutral 72.9 87.8 112.9 30.2 25.1 19.5 22.3 15.7 11.9 30.2 30.0 31.2Crompton Greaves 296 Neutral 15.3 16.9 19.0 19.4 17.5 15.6 17.0 15.6 13.8 36.8 31.2 28.1Cummins India 277 Neutral 21.9 20.0 22.7 12.6 13.8 12.2 8.6 8.4 7.3 34.4 24.8 23.7Larsen & Toubro 1,611 Neutral 51.5 58.5 65.0 31.3 27.5 24.8 26.1 23.1 20.2 24.5 21.3 20.2Siemens 498 Neutral 14.6 18.5 17.5 34.1 27.0 28.5 20.4 15.2 15.6 28.5 22.9 16.7Suzlon Energy 123 Neutral 7.8 6.2 8.4 15.8 19.9 14.6 11.8 12.9 10.3 14.1 10.2 12.8Thermax 410 Neutral 24.8 21.2 21.1 16.6 19.3 19.4 11.4 12.9 12.7 35.3 26.3 24.2Sector Aggregate 26.1 24.0 20.2 19.3 16.4 13.5 25.3 23.0 23.3

40

65

90

115

140

Jun-08 Sep-08 Dec-08 Mar-09 Jun-09

MOSt Engineering Index Sensex

80

110

140

170

200

Mar-09 Apr-09 May-09 Jun-09

Sensex MOSt Engineering Index

11626 June 2009

ABB

YEAR NET SALES PAT EPS EPS GR. P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) (%) (X) (X) (%) (%) SALES EBITDA

12/08A 68,370 5,325 25.1 8.3 31.4 7.9 28.4 46.1 2.4 21.1

12/09E 72,611 5,044 23.8 -5.3 33.2 6.5 21.5 34.5 2.3 20.7

12/10E 81,236 5,887 27.8 16.7 28.4 5.4 20.8 32.7 2.0 18.1

12/11E 94,887 7,022 33.1 19.3 23.8 4.5 20.7 32.4 1.6 14.3

Equity Shares (m) 211.9

52-Week Range 947/344

1,6,12 Rel. Perf. (%) 24/23/-16

M.Cap. (Rs b) 167.2

M.Cap. (US$ b) 3.5

QUARTERLY PERFORMANCE (RS MILLION)Y/E DECEMBER CY08 CY09 CY08 CY09E

1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QESales 15,353 16,163 15,191 21,663 13,931 17,213 16,801 24,664 68,370 72,611

Change (%) 17.0 15.4 10.3 17.8 -9.3 6.5 10.6 13.9 15.3 6.2EBITDA 1,728 1,902 1,348 2,680 1,271 1,859 1,630 3,127 7,658 7,888

Change (%) 34.8 16.1 -21.8 3.0 -26.4 -2.3 20.9 16.7 5.7 3.0As % of Sales 11.3 11.8 8.9 12.4 9.1 10.8 9.7 12.7 11.2 10.9

Depreciation 83 88 92 103 109 110 113 118 367 449Interest 28 8 67 159 103 93 88 97 262 381Other Income 185 184 399 507 143 166 182 152 1,275 643PBT 1,801 1,990 1,589 2,925 1,202 1,822 1,611 3,065 8,304 7,700Tax 624 701 540 993 419 635 561 1,042 2,858 2,657

Effective Tax Rate (%) 34.6 35.2 34.0 34.0 34.8 34.8 34.8 34.0 34.4 34.5Repoted PAT 1,177 1,289 1,048 1,931 783 1,187 1,050 2,023 5,474 5,044Adj. PAT 1,177 1,289 927 1,931 783 1,187 1,050 2,023 5,325 5,044

Change (%) 35.9 19.5 -20.8 6.8 -33.4 -7.9 13.2 4.8 8.3 -5.3E: MOSL Estimates

NeutralPrevious Recommendation: Neutral Rs789

26 June 2009BLOOMBERGABB IN

REUTERS CODEABB.BO

Results PreviewSECTOR: ENGINEERING

Satyam Agarwal (Agarwals@MotilalOswal.com) / Shridatta Bhandwaldar (Shridatta.Bhandwaldar@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? In 1QCY09, order intake was Rs23b – down 15% YoY but up 83% QoQ, implying better environment as comparedto 2HCY08. While the QoQ improvement was substantial, it was driven by exceptionally low 4QCY08 order intakeof Rs12.6b. At the end of 1QCY09, the order backlog stood at Rs70.3b (up 13.8% YoY), book-to-bill ratio of 1.1xTTM revenues. During 2QCY09, ABB announced order worth ~Rs8b.

? EBITDA margin in CY08 and 1QCY09 witnessed a decline of 100bp and 220bp YoY, respectively. While we haveestimated further decline in EBITDA margin to 10.9% in CY09, there is positive risk to our EBITDA margin estimate,as there were non-recurring cost components in CY08. Adjusted (for non-recurring cost) EBITDA margin for CY08was 12% as against reported EBITDA of 11.2%.

? EBITDA margin declined 210bp YoY in 1QCY09 to 9.1%, driven by power systems (EBIT margin down 260bpYoY) and automation products (EBIT margin down 270bp YoY). While the profitability of automation products hasbeen volatile, power systems’ profitability has been impacted by exit from rural electrification and bad debt provision.

? In CY08, net working capital cycle (excluding cash) increased to 15.1% (55 days) of revenues from 7.9% (29 days)in CY07. This is primarily on account of increase in debtors by 10 days and decline in creditors by 12 days. Thiscoupled with increased capex of Rs2.7b in CY08 led to negative cash flow from operations (post capex) of Rs2.5bin CY08.

? The stock trades at 33.2x CY09E and 28.4x CY10E earnings. We estimate EPS at Rs23.8 for CY09 and Rs27.8 forCY10. Maintain Neutral.

11726 June 2009

Bharat Electronics

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 40,603 8,272 103.4 15.2 12.9 3.3 29.4 29.4 2.0 8.1

3/09A 45,707 8,085 101.1 -2.3 13.3 2.8 23.7 23.9 1.7 7.0

3/10E 51,443 8,772 109.6 8.5 12.2 2.3 21.6 21.6 1.3 5.7

3/11E 56,587 9,498 118.7 8.3 11.3 2.0 19.8 19.8 1.1 4.5

Equity Shares (m) 80.0

52-Week Range 1,469/545

1,6,12 Rel. Perf. (%) -5/36/23

M.Cap. (Rs b) 107.1

M.Cap. (US$ b) 2.2

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QSales 3,839 7,807 6,709 27,352 3,858 8,488 8,231 30,866 45,707 51,443

Change (%) -5.1 10.1 1.3 19.2 0.5 8.7 22.7 12.8 12.3 12.5EBITDA -326 1,626 1,606 8,068 -391 1,470 1,237 8,858 10,974 11,174

Change (%) -606.4 6.0 26.6 15.5 20.2 -9.6 -23.0 9.8 12.7 1.8As of % Sales -8.5 20.8 23.9 29.5 -10.1 17.3 15.0 28.7 24.0 21.7

Depreciation 240 256 270 277 275 285 295 302 1,043 1,157Interest 0 71 0 36 2 0 0 0 108 2Other Income 612 532 456 478 808 750 692 635 2,079 2,885PBT 46 1,831 1,793 8,233 139 1,935 1,634 9,191 11,903 12,899Tax 20 594 565 2,639 45 619 523 2,941 3,818 4,128

Effective Tax Rate (%) 44.8 32.4 31.5 32.1 32.0 32.0 32.0 32.0 32.1 32.0Reported PAT 25 1,237 1,228 5,594 95 1,316 1,111 6,250 8,085 8,772

Change (%) -90.4 0.7 8.7 10.8 276.5 6.3 -9.5 11.7 5.4 276.5E: MOSL Estimates

BuyPrevious Recommendation: Buy Rs1,339

26 June 2009BLOOMBERGBHE IN

REUTERS CODEBAJE.BO

Results PreviewSECTOR: ENGINEERING

Satyam Agarwal (Agarwals@MotilalOswal.com) / Shridatta Bhandwaldar (Shridatta.Bhandwaldar@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? For 1QFY10, we expect BEL to report revenue of Rs3.9b (up 0.5% YoY), EBITDA loss of Rs391m, and net profitof Rs91m (up 277% YoY).

? Management has guided for revenue of Rs100b for FY12, in line with previous (April 2007) guidance of US$2b. Itimplies revenue CAGR of 29.5% over FY09 revenues of Rs45.7b.

? Order book position at the end of FY09 stood at over Rs100b, book-to-bill ratio of 2.2x FY09 revenues.

? Every year, the company signs an MoU with the Ministry of Defense stating its target for the year. During FY09,BEL has reported turnover of Rs46.5b to achieve an excellent rating from the government. In FY08, BEL achievedan excellent rating.

? In FY09, BEL signed MoUs with: (1) Astra Microwave Products for manufacturing microwave components andassemblies, which will cater to the requirements of the Indian defense forces, government establishments, etc., (2)SELEX Galileo to explore opportunities in the filed of electronic warfare for domestic and export markets, (3) Boeingto open a center to support India’s defense modernization. BEL has also been selected by Northrop GrummanCorporation to manufacture components of F-16 fire control radar.

? The stock trades at 12.2x FY10E and 11.3x FY11E EPS. Buy.

11826 June 2009

BHEL

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 197,652 25,095 51.3 3.9 40.8 9.5 25.7 51.1 5.2 26.6

03/09A 268,586 35,671 72.9 42.1 30.2 8.0 30.2 45.4 3.6 21.1

03/10E 322,260 42,959 87.8 20.4 25.1 6.5 30.0 49.5 3.0 14.8

03/11E 404,711 55,279 112.9 28.7 19.5 5.2 31.2 50.7 2.5 11.3

Equity Shares (m) 489.5

52-Week Range 2,386/984

1,6,12 Rel. Perf. (%) 2/11/51

M.Cap. (Rs b) 1,077.7

M.Cap. (US$ b) 22.4

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QSales 43,292 53,426 60,223 105,401 51,785 63,405 73,690 126,957 262,342 315,837

Change (%) 33.9 34.7 21.3 46.4 19.6 18.7 22.4 20.5 35.5 20.4EBITDA 3,737 7,107 10,207 16,963 7,250 9,828 14,738 26,350 38,014 58,166

Change (%) 20.3 2.2 2.3 24.4 94.0 38.3 44.4 55.3 12.9 53.0As a % Sales 8.6 13.3 16.9 16.1 14.0 15.5 20.0 20.8 14.5 18.4

Adjusted EBITDA 5,173 7,448 11,280 20,711 7,250 9,828 14,738 26,350 44,612 58,166Change (%) 148.6 25.7 26.0 43.4 40.1 32.0 30.7 27.2 33.6 30.4As a % Sales 11.9 13.9 18.7 19.6 14.0 15.5 20.0 20.8 17.0 18.4

Interest 26 22 179 81 123 115 123 164 307 525Depreciation 726 744 865 1,008 948 957 967 976 3,343 3,848Other Income 2,917 3,072 3,063 5,072 3,005 3,103 3,094 3,097 14,124 12,298PBT 5,903 9,414 12,226 20,945 9,184 11,858 16,742 28,307 48,489 66,091Tax 2,059 3,256 4,321 7,471 3,214 4,150 5,860 9,907 17,106 23,132

Effective Tax Rate (%) 34.9 34.6 35.3 35.7 35.0 35.0 35.0 35.0 35.3 35.0Reported PAT 3,844 6,158 7,906 13,475 5,970 7,708 10,882 18,399 31,382 42,959

Change (%) 33.0 -10.5 2.4 21.3 55.3 25.2 37.7 36.5 9.8 36.9Adj. PAT 4,777 6,379 8,603 15,911 5,970 7,708 10,882 18,399 35,671 42,959

Change (%) 115.0 30.4 22.0 36.7 25.0 20.8 26.5 15.6 42.1 20.4E: MOSL Estimates

NeutralPrevious Recommendation: Neutral Rs2,202

26 June 2009BLOOMBERGBHEL IN

REUTERS CODEBHEL.BO

Results PreviewSECTOR: ENGINEERING

Satyam Agarwal (Agarwals@MotilalOswal.com) / Shridatta Bhandwaldar (Shridatta.Bhandwaldar@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? For 1QFY10, we expect revenues of Rs51.8b (+19.6% YoY) and EBITDA margin expansion of 210bp YoY, drivenby raw material cost decline and lower wage costs.

? Revenue visibility continues to be robust with FY09 order book of Rs1,170b (+39.7%), book-to-bill of 4.2x FY09revenues. Order intake for FY09 was robust at Rs597b (+16.6% YoY).

? As against the order intake of Rs597b in FY09, FY10 is expected to be subdued, with order intake of Rs500b. Themanagement indicated that the industrial division will contribute Rs100b and exports will contribute Rs50b. Thus,power division order intake is expected to be Rs350b in FY10, down 24.2% from Rs462b in FY09.

? During 1QFY10, BHEL bagged orders such as (1) 600MW rating Avantha Bhandar Thermal Power Project inChattisgarh (Rs14.8b), (2) 270MW thermal power plant in Maharashtra (Rs7b), and (3) (6*150MW ) captive powerplant for Hindalco in Orissa (Rs40b).

? During FY09, BHEL’s wage provisions were Rs17.3b, including Rs10.6b for wage provisions on account of SixthPay Commission revisions and gratuity provisions of Rs6.7b (gratuity amount for an employee has increased to Rs1mfrom Rs0.4m earlier).

? The stock trades at 25.1x FY10E and 19.5x FY11E EPS. Maintain Neutral.

11926 June 2009

Crompton Greaves

YEAR NET SALES PAT* EPS* EPS GR. P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) (%) (X) (X) (%) (%) SALES EBITDA

3/08A 38,758 3,654 10.0 60.0 29.7 11.7 34.3 50.0 2.8 22.3

3/09A 46,107 5,599 15.3 53.2 19.4 8.8 36.8 51.9 2.3 16.5

3/10E 52,869 6,197 16.9 10.7 17.5 6.6 31.2 45.1 1.9 14.8

3/11E 61,525 6,973 19.0 12.5 15.6 5.4 28.1 41.3 1.6 12.7

Equity Shares (m) 366.6

52-Week Range 312/100

1,6,12 Rel. Perf. (%) 9/70/25

M.Cap. (Rs b) 108.6

M.Cap. (US$ b) 2.3

NeutralPrevious Recommendation: Neutral Rs296

26 June 2009BLOOMBERGCRG IN

REUTERS CODECROM.BO

QUARTERLY PERFORMANCE (STANDALONE) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QSales 10,829 10,862 10,797 13,618 12,509 12,614 12,313 15,433 46,107 52,869 Change (%) 20.8 20.0 18.0 17.4 15.5 16.1 14.0 13.3 19.0 14.7EBITDA 1,381 1,435 1,386 2,167 1,589 1,640 1,539 2,189 6,381 6,956

Change (%) 32.2 34.4 19.5 38.4 15.0 14.3 11.1 1.0 31.9 9.0As of % Sales (Adj) 12.8 13.2 12.8 15.9 12.7 13.0 12.5 14.2 13.8 13.2

Depreciation 108 120 94 130 132 134 136 131 452 533Interest 22 39 47 38 39 40 35 40 146 154Other Income 81 102 85 104 96 102 97 109 361 404PBT 1,332 1,379 1,330 2,102 1,514 1,568 1,465 2,127 6,143 6,674Tax 443 453 483 793 515 533 513 775 2,172 2,336

Effective Tax Rate (%) 33.3 32.9 36.3 37.7 34.0 34.0 35.0 36.4 35.4 35.0Reported PAT 889 925 847 1,309 999 1,035 953 1,351 3,971 4,338Adj PAT 889 925 847 1,309 999 1,035 953 1,351 3,971 4,338

Change (%) 65.3 44.3 34.7 38.6 12.4 11.8 12.4 3.3 44.3 9.2E: MOSL Estimates

* Consolidated; pre-exceptionals

Results PreviewSECTOR: ENGINEERING

Satyam Agarwal (Agarwals@MotilalOswal.com) / Shridatta Bhandwaldar (Shridatta.Bhandwaldar@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect Crompton to continue delivering healthy performance in 1QFY10. We estimate standalone revenue atRs12.5b, up 15.5% YoY, EBITDA at Rs1.6b, up 15% YoY, and net profit at Rs1b, up 12.4% YoY.

? Crompton’s current consolidated order book stands at Rs66b (largely power), translating into book-to-bill of 1.1xpower business revenues. The standalone and international order book at the end of FY09 stood at Rs27.7b (up30.2%) and Rs38b (up 26.9%), respectively. The standalone power segment continues to maintain strong orderintake from Powergrid, SEBs and exports; while Pauwels and Ganz are relatively better positioned, given increasedfocus on transmission and renewable energy.

? For 1QFY10, we expect stable EBITDA margin YoY at 12.7% due to benefits of lower commodity prices on fixedprice contracts. For FY10, Crompton management expects stable EBITDA margins driven by (1) benefit of lowercommodity prices due to lower variable price based contracts, (2) continued focus on power products unlike peerswho have significant exposure to lower margin projects business, (3) sourcing from India (8-9% for Pauwels / Ganz),and (4) improvement in design and manufacturing efficiencies.

? We expect Crompton to report consolidated EPS of Rs16.9 in FY10 (up 45.2%) and Rs19 in FY11 (up 7.7%). Thestock trades at 17.5x FY10E and 15.6x FY11E EPS. Maintain Neutral.

12026 June 2009

Cummins India

YEAR NET SALES PAT EPS EPS GR. P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) (%) (X) (X) (%) (%) SALES EBITDA

03/08A 26,555 3,249 16.4 21.2 16.9 4.4 28.8 34.9 1.6 11.3

03/09A 35,285 4,338 21.9 33.5 12.6 3.8 34.4 39.7 1.3 8.6

03/10E 36,109 3,967 20.0 -8.6 13.8 3.2 24.8 33.2 1.2 8.4

03/11E 39,931 4,497 22.7 13.4 12.2 2.7 23.7 31.3 1.0 7.3

Equity shares (m) 198.0

52-Week Range 331/148

1, 6, 12 Rel. Perf. (%) 2/-18/15

M. Cap. (Rs b) 54.8

M. Cap. (US$ b) 1.1

QUARTERLY PERFORMANCE (STANDALONE) (RS MILLION)Y/E MARCH FY09** FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 8,091 9,038 8,577 7,035 7,328 8,327 8,660 8,993 32,740 33,309

Change (%) -9.4 -7.9 1.0 27.8 1.7EBITDA 1,385 1,472 1,747 1,143 1,186 1,389 1,488 1,585 5,747 5,648

Change (%) -14.4 -5.6 -14.8 38.7 -1.7EBITDA Margin (%) 17.1 16.3 20.4 16.2 16.2 16.7 17.2 17.6 17.6 17.0

Depreciation 109 109 120 122 122 122 125 127 460 496Interest 9 5 4 9 0 0 0 0 26 0Financial Income 130 143 113 53 50 60 65 69 439 244Extraordinary Inc/ (Exp) 0 0 291 0 0 0 0 0 291 0PBT 1,397 1,501 2,028 1,065 1,114 1,327 1,428 1,526 5,990 5,395Tax 389 420 562 282 368 438 471 504 1,654 1,780

Tax/PBT (%) 27.9 28.0 27.7 26.5 33.0 33.0 33.0 33.0 27.6 33.0Standalone PAT 1,007 1,080 1,467 782 746 889 957 1,023 4,337 3,615Adjusted PAT 1,007 1,080 1,175 782 746 889 957 1,023 4,045 3,615

Change (%) -25.9 -17.7 -18.6 30.7 -10.6Profit from Subsidiaries and Associates 293 352Consolidated PAT 4,338 3,967

Change (%) 12.3 11.0E: MOSL Estimates; ** FY09 quarterly results including CSS & CAS are estimates as the company had reported results for full year only.

BLOOMBERGKKC IN

REUTERS CODECUMM.BO

Consolidated numbers

NeutralPrevious Recommendation: Neutral Rs277

26 June 2009

Results PreviewSECTOR: ENGINEERING

Shrinath Mithanthaya (ShrinathM@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? In FY09, Cummins (CIL) had merged its subsidiaries Cummins Sales and Service (CSS) and Cummins Auto Service(CAS) w.e.f. 1 April 2008. However, CIL reported the entire year performance of these subsidiaries in 4QFY09. Wehave estimated the quarterly results for FY09 based on full year numbers of CSS and CAS.

? FY10 will be the year of consolidation for CIL after reporting high growth for last many years. In FY10, we expectconsolidated sales to grow by 2.3% to Rs36b, EBITDA margins to decline by 60bp to 16.1% and adjusted PAT ofRs4b (down 8.6%).

? During 1QFY10 we estimate sales to decline by 9.4% to Rs7.3b (due to lower exports and continued headwinds inthe domestic market). We estimate EBITDA margin of 16.2% (down 90bp YoY) and adjusted PAT of Rs746m(down 26% YoY).

? At CMP of Rs277, the stock trades at P/E of 13.8x FY10E and 12.2x FY11E. Our estimates indicate FY09-11 EPSCAGR of 2%. Despite intrinsic strengths such as zero debt, high RoE and robust dividend payout, we believe flatearnings growth will cause the stock to trade at the lower end of the 12-15x P/E band. We maintain Neutral with atarget price of Rs272 (12x FY11E EPS).

12126 June 2009

BLOOMBERGLT IN

REUTERS CODELART.BO

Larsen & Toubro

YEAR NET SALES PAT * EPS* EPS GR. P/E* P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) (%) (X) (X) (%) (%) SALES EBITDA

3/08A 249,387 22,910 39.3 25.1 41.0 9.9 27.0 29.5 3.8 33.1

3/09A 338,616 30,046 51.5 31.1 31.3 7.6 24.5 26.0 2.9 26.1

3/10E 392,840 34,164 58.5 13.7 27.5 6.1 21.3 22.9 2.3 21.5

3/11E 453,200 37,945 65.0 11.1 24.8 5.3 20.2 22.3 2.0 18.8

Equity Shares (m) 584.7

52-Week Range 1,800/557

1,6,12 Rel. Perf. (%) 20/58/34

M.Cap. (Rs b) 942.1

M.Cap. (US$ b) 19.6

* Consolidated; EPS is fully diluted

NeutralPrevious Recommendation: Neutral Rs1,611

26 June 2009

Satyam Agarwal (Agarwals@MotilalOswal.com) / Shridatta Bhandwaldar (Shridatta.Bhandwaldar@MotilalOswal.com)

Results PreviewSECTOR: ENGINEERING

QUARTERLY PERFORMANCE (STANDALONE) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 69,014 76,864 85,940 104,648 83,068 87,274 100,163 120,077 336,465 390,582

Change (%) 53.2 39.8 34.6 23.6 20.4 13.5 16.6 14.7 35.4 16.1EBITDA 6,609 6,809 7,799 14,845 8,058 8,378 10,517 13,956 36,061 40,909

Change (%) 55.9 15.8 12.1 31.3 21.9 23.0 34.9 -6.0 27.1 13.4Margin (%) 9.6 8.9 9.1 14.2 9.7 9.6 10.5 11.6 10.7 10.5

Adjusted EBIDTA 6,609 7,409 9,429 13,685 8,058 8,378 10,517 13,956 37,131 40,909Adjusted Margin (%) 9.6 9.6 11.0 13.1 9.7 9.6 10.5 11.6 11.0 10.5

Depreciation 659 731 781 889 942 989 1,039 1,140 3,060 4,111Interest 382 690 975 1,455 1,021 1,174 1,350 1,673 3,503 5,218Other Income 1,983 1,518 3,072 3,331 2,022 2,139 2,552 3,324 9,903 10,038Reported PBT 7,551 6,906 9,114 15,832 8,117 8,354 10,681 14,466 39,402 41,618Tax 2,526 2,304 3,073 4,409 2,638 2,715 3,471 4,285 12,312 13,110

Effective Tax Rate (%) 33.5 33.4 33.7 27.8 32.5 32.5 32.5 29.6 31.2 31.5Reported PAT 5,025 4,602 15,204 9,984 5,479 5,639 7,210 10,180 34,814 28,508Adjusted PAT 4,906 5,004 6,406 10,646 5,479 5,639 7,210 10,180 26,967 28,508

Change (%) 67.8 30.4 24.4 17.0 11.7 12.7 12.5 -4.4 28.4 5.7E: MOSL Estimates; All quarterly numbers are for standalone entity

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? L&T’s current order book stands at Rs703b (+33% YoY), a book-to-bill ratio of 2.1x TTM revenues. Despiterelatively moderate order intake during the last two months (announced orders), L&T has maintained FY10 orderintake guidance of 25-35% growth (to Rs650b-703b) over FY09 order intake of Rs520b. This is likely to be driven bysectors like transportation, oil & gas, power (BTG), fertilizers, BOT road projects and international airports.

? Post March 2009, L&T announced large orders including: (1) Rs12.5b hydropower project from Bhutan, (2) Rs13.5bMRPL refinery, (3) Rs11.4b Tata Steel mining, steel expansion projects, and (4) Rs5.2b T&D order from Oman.

? Performance of Machinery and Industrial Products (MIP) and Electrical Business Group (EBG) divisions wasimpacted in FY09 given slowing domestic volumes in construction equipments, switchgears and other industrialproducts. While EBITDA margins for EBG division declined 350bp to 11.4% (mainly due to switchgears and highercompetition in low voltage products), EBIT margin for MIP stood at 18.9% (+110bp). We expect continued volumeand margin pressure in few products segments like switchgears, construction equipments, and few other industrialequipments even during FY10.

? Management has indicated 15-20% revenue growth during FY10 and stable E&C EBITDA margins. We believe thatlower revenue growth guidance on the back of a 23% order book increase is due to constraints in terms of projectexecution, including delays. We maintain FY10 revenue growth estimate of 16% and EBITDA at 12.8%, down 30bp.

? The stock trades at 27.5x FY10E and 24.8x FY11E EPS. Maintain Neutral.

12226 June 2009

BLOOMBERGSIEM IN

REUTERS CODESIEM.BO

Siemens

YEAR NET SALES PAT* EPS* EPS GR. P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) (%) (X) (X) (%) (%) SALES EBITDA

9/07A 77,660 5,369 15.9 35.1 31.3 10.6 40.1 69.1 2.1 22.0

9/08A 83,577 5,214 14.6 -8.3 34.1 8.1 28.5 46.2 1.9 20.4

9/09E 81,063 5,995 18.5 26.4 27.0 5.0 22.9 45.9 1.7 14.2

9/10E 89,866 5,682 17.5 -5.4 28.5 4.3 16.7 26.7 1.5 14.5

Equity Shares (m) 337.2

52-Week Range 598/186

1,6,12 Rel. Perf. (%) 7/27/12

M.Cap. (Rs b) 168.0

M.Cap. (US$ b) 3.5

QUARTERLY PERFORMANCE (STANDALONE) (RS MILLION)Y/E SEPTEMBER FY08 FY09 FY08 FY09E

1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QETotal Revenues 19,195 21,546 18,204 24,636 16,399 23,830 17,769 23,066 83,582 81,063

Change (%) 17.5 0.9 1.7 11.7 -14.6 10.6 -2.4 -6.4 7.6 -3.0EBITDA 1,548 152 2,654 3,437 1,702 3,489 2,048 2,634 7,791 9,873

Change (%) 25.4 -90.9 191.7 -3.9 10.0 2,192.9 -22.8 -23.4 5.1 26.7As % of Revenues 8.1 0.7 14.6 13.9 10.4 14.6 11.5 11.4 9.3 12.2

Depreciation 151 149 161 178 181 184 193 206 639 765Interest Income 131 54 111 157 165 94 104 105 451 468Other Income 16 15 16 21 2,233 30 0 0 67 2,263PBT 2,789 71 2,620 3,436 3,919 3,429 1,959 2,533 8,916 11,840Tax 819 55 926 1,186 613 1,174 666 899 2,984 3,352

Effective Tax Rate (%) 29.4 76.6 35.3 34.5 15.6 34.2 34.0 35.5 33.5 28.3Reported PAT 1,970 17 1,694 2,250 3,306 2,255 1,293 1,634 5,931 8,488Adjusted PAT 1,090 17 1,694 2,250 1,073 2,255 1,293 1,634 5,051 6,255

Change (%) 10.8 -98.5 164.0 14.8 -1.6 13,428 -23.7 -27.4 8.1 23.8E: MOSL Estimates; Nos are for standalone entity

NeutralPrevious Recommendation: Neutral Rs498

26 June 2009

Results PreviewSECTOR: ENGINEERING

Satyam Agarwal (Agarwals@MotilalOswal.com) / Shridatta Bhandwaldar (Shridatta.Bhandwaldar@MotilalOswal.com)

*Consolidated

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? For 3QFY09 (September year ending), we expect Siemens to report revenue of Rs17.8b (down 2.4% YoY), EBITDAof Rs2b (down 22.8% YoY), and net profit of Rs1.3b (down 23.7% YoY). During 1HFY09, the industrial segmentmargins have witnessed pressure and this is likely to continue in 2HFY09, as well.

? Order intake during 2QFY09 stood at Rs18.6b (down 20.6% YoY, down 6.1% QoQ). The order backlog stood atRs97b (up 1.4% YoY), a book-to-bill ratio of 1.2x FY09E revenues. The order book is stagnant for the last 10quarters, which we believe will constrain execution. Management stated last quarter that order intake is impacted asSiemens did not participate in various projects, given concerns on profitability and customer payments.

? During 1QFY10, the announced orders include: (1) Rs13.8b (Siemens share of Rs7.2b) from Adani Power Limited toinstall HVDC transmission system of 2,500MW capacity in consortium with Siemens AG, and (2) Rs790m order tosupply 11kv Air Insulated Switchgears to Qatar General Electricity and Water Corporation (KAHRAMAA) distributionnetwork.

? Siemens announced capex of Rs2.8b to expand its turbine manufacturing capacity at Vadodara to manufactureindustrial turbines up to 100MW from current capacity of up to 45MW. This facility will cater to domestic and exportmarkets. Also, it started operations at its gas-insulated switchgear manufacturing facility at Aurangabad, whichmanufactures switchgear products of 72.5kV, 145kV and 245kV. It intends to expand production to include 420kVswitchgears.

? The stock trades at 27x FY10E and 28.5x FY11E EPS. We maintain Neutral.

12326 June 2009

Results PreviewSECTOR: ENGINEERING

Suzlon Energy

YEAR NET SALES PAT* EPS* EPS GR.* P/E* P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) (%) (X) (X) (%) (%) SALES EBITDA

3/08A 136,794 12,607 8.4 40.2 14.7 2.3 21.7 15.3 1.6 10.4

3/09A 182,810 12,147 7.8 -6.9 14.2 1.8 14.1 10.0 1.4 11.0

3/10E 154,816 9,635 6.2 -20.7 19.9 1.7 10.2 7.1 1.5 12.0

3/11E 188,107 13,111 8.4 36.1 14.6 1.6 12.8 8.6 1.3 9.6

Equity Shares (m) 1,497.0

52-Week Range 255/33

1,6,12 Rel. Perf. (%) 34/59/-52

M.Cap. (Rs b) 184.6

M.Cap. (US$ b) 3.8

QUARTERLY PERFORMANCE (WTG BUSINESS - CONSOLIDATED) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QSales 20,866 41,818 39,320 41,247 18,741 38,551 34,454 32,038 143,251 123,784

Change (%) 38.9 33.3 49.3 -1.6 -10.2 -7.8 -12.4 -22.3 24.9 -13.6EBITDA 3,022 4,126 5,063 5,666 2,913 4,855 4,409 3,713 17,877 15,889

Change (%) 137.0 -23.6 53.5 -3.6 17.7 -12.9 -34.5 4.3 -11.1As of % Sales 14.5 9.9 12.9 13.7 15.5 12.6 12.8 11.6 12.5 12.8

Depreciation 486 625 752 908 999 1,049 1,101 1,195 2,771 4,344Interest 1,205 1,885 2,188 2,530 2,024 1,821 1,730 1,759 7,808 7,334Other Income 429 159 534 467 450 500 534 488 1,588 1,971Exceptional items (reported) 2,298 2,778 4,489 0 0 0 0 0 9,565 0PBT -538 -1,003 -1,832 2,695 340 2,485 2,111 1,247 -678 6,183Tax 351 302 -258 493 48 348 296 197 889 888

Effective Tax Rate (%) (65.4) (30.1) 14.1 18.3 14.0 14.0 14.0 15.8 (131.0) 14.4Reported PAT -889 -1,305 -1,575 2,202 293 2,137 1,815 1,050 -1,567 5,294

Change (%) -169.8 -140.1 -223.7 -132.9 -263.7 -215.3 -52.3 -118.5 -437.8Adj. PAT 1,409 1,473 2,914 2,202 293 2,137 1,815 1,050 7,998 5,294

Change (%) 4.7 -74.0 116.4 -79.2 45.1 -37.7 -52.3 -29.3 -33.8E: MOSL Estimates

NeutralPrevious Recommendation: Neutral Rs123

26 June 2009BLOOMBERGSUEL IN

REUTERS CODESUZL.BO

* Consolidated

Satyam Agarwal (Agarwals@MotilalOswal.com) / Shridatta Bhandwaldar (Shridatta.Bhandwaldar@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? In December 2008, Suzlon order book stood at Rs104b (down 39.3% YoY and 26.1% QoQ). In terms of MW, theorder book stood at 1,916MW including domestic order book of 98MW and the international order book of 1,818MW.Out of the current 1,916MW of order book, ~650MW would have been executed during 4QFY09, leaving ~1,100MWfor FY10 from the old order book.

? During 4QFY09/1QFY10, Suzlon has secured orders including (1) 113MW order from Australia for 54 units of2.1MW WTG’s, (2) 100MW order from China to supply 80 units of 1.25MW turbine during FY10/FY11, (3) 132MWorder from AGL, Australia to supply 63 units of 2.1MW WTG’s, and (4) 42MW repeat order from Duke Energy,USA to supply 20 units of 2.1MW WTG’s. Thus, the order book during 1QFY10 would be ~1,500MW, down from1,916MW in 3QFY09.

? Suzlon’s management had indicated possible order inflow of 1GW in the near future. Out of this, it has alreadybagged two orders of ~400MW during 4QFY09 and 1QFY10 (till date) from China, Australia and USA.

? We expect Suzlon to report EPS of Rs6.2 for FY10 and Rs8.4 for FY11. The stock trades at 19.9x FY10E and 14.6xFY11E consolidated earnings. We maintain Neutral.

12426 June 2009

Results PreviewSECTOR: ENGINEERING

Thermax

YEAR NET SALES PAT* EPS* EPS GR.* P/E* P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) (%) (X) (X) (%) (%) SALES EBITDA

03/08A 32,042 2,876 24.1 45.5 17.0 6.6 42.4 64.1 1.5 11.9

03/09A 32,644 2,950 24.8 2.6 16.6 5.5 35.3 51.0 1.4 11.4

03/10E 34,589 2,531 21.2 -14.2 19.3 4.9 26.3 39.6 1.3 12.5

03/11E 36,909 2,515 21.1 -0.6 19.4 4.6 24.2 36.6 1.2 12.3

Equity Shares (m) 119.2

52-Week Range (Rs) 530/151

1,6,12 Rel. Perf. (%) 6/73/2

M.Cap. (Rs b) 48.9

M.Cap. (US$ b) 1.0

QUARTERLY PERFORMANCE (STANDALONE) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QSales 7,725 7,907 7,951 9,483 7,783 7,956 8,474 10,377 33,065 34,589

Change (%) 17.4 2.7 -6.0 2.8 0.7 0.6 6.6 9.4 3.2 4.6EBITDA 864 799 968 1,333 739 752 930 1,186 3,964 3,606

Change (%) 27.0 -20.9 -7.8 4.9 -14.5 -5.9 -3.9 -11.0 -3.2 -9.0As of % Sales 11.2 10.1 12.2 14.1 9.5 9.5 11.0 11.4 12.0 10.4

Depreciation 73 67 84 100 85 90 95 103 324 373Interest 3 8 6 17 12 10 8 10 33 40Other Income 105 213 88 119 107 109 116 142 525 474PBT 894 937 966 1,348 748 761 943 1,215 4,146 3,668Tax 310 368 243 405 247 255 311 430 1,326 1,243

Effective Tax Rate (%) 34.6 39.2 25.2 30.0 33.0 33.5 33.0 35.4 32.0 33.9Reported PAT 584 570 723 943 501 506 632 785 2,820 2,425

Change (%) 4.3 -17.7 -3.7 17.1 -14.2 -11.1 -12.6 -16.8 0.4 -14.0Adj PAT 584 570 723 930 501 506 632 785 2,806 2,425

Change (%) 26.3 (17.7) (3.7) 18.5 (14.2) (11.1) (12.6) (15.6) 0.7 (13.6)E: MOSL Estimates

NeutralPrevious Recommendation: Neutral Rs410

26 June 2009BLOOMBERGTMX IN

REUTERS CODETHMX.BO

* Consolidated

Satyam Agarwal (Agarwals@MotilalOswal.com) / Shridatta Bhandwaldar (Shridatta.Bhandwaldar@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? For 1QFY10, we expect revenue of Rs7.8b (up 0.7% YoY), EBITDA of Rs739m, and net profit of Rs501m (down14.2% YoY).

? During 4QFY09, the consolidated order backlog for the company stood at Rs30.8b (up 16.7% YoY) as compared toRs26.4b during FY08. Driven by subdued order book, we expect Thermax to report just 4.6% growth during FY10.

? In FY09, Thermax signed a technical transfer license with Babcock & Wilcox Power Generation Group Inc. (B&WPGG), USA that grants it the right to engineer, manufacture and sell sub-critical B&W radiant utility boilers up to800MW in India for the next 15 years. This has marked the entry for Thermax into the high MW power generationspace.

? We expect Thermax to report consolidated net profit of Rs2.5b (down 14.2%) in FY10 and Rs2.5b (down 0.6%) inFY11.

? The stock trades at 19.3x FY10E and 19.4x FY11E EPS. We maintain Neutral.

12526 June 2009

FMCG

COMPANY NAMEAsian Paints

Britannia Industries

Colgate Palmolive

Dabur India

GSK Consumer

Godrej Consumer Products

Hindustan Unilever

ITC

Marico

Nestle India

Tata Tea

United Spirits

EXPECTED QUARTERLY PERFORMANCE SUMMARY (RS MILLION)CMP (RS) RECO SALES EBITDA NET PROFIT

26.6.09 JUN.09 VAR. VAR. JUN.09 VAR. VAR. JUN.09 VAR. VAR.% YOY % QOQ % YOY % QOQ % YOY % QOQ

FMCGAsian Paints 1,153 Neutral 14,407 16.0 1.1 1,988 15.5 11.0 1,191 11.5 16.0Britannia 1,561 Buy 8,181 18.0 7.3 728 26.4 6.2 569 24.3 32.4Colgate 574 Buy 4,687 15.0 2.9 787 19.1 -2.7 837 16.4 2.2Dabur 121 Buy 7,250 20.0 -0.9 1,170 34.3 -9.7 912 29.1 -12.5Godrej Consumer 176 Buy 4,321 19.5 26.1 799 61.2 20.9 651 66.4 9.6GSK Consumer 938 Buy 4,800 27.5 -11.0 725 32.7 -38.9 565 22.4 -32.7Hind. Unilever 265 Neutral 45,490 5.8 12.7 7,440 17.1 24.8 6,209 15.0 35.9ITC 197 Buy 40,826 3.8 4.0 13,350 14.9 2.8 8,714 16.4 7.7Marico 73 Buy 6,851 14.0 22.1 939 24.0 28.1 580 25.1 31.9Nestle 1,869 Buy 12,305 18.8 -2.8 2,338 19.9 -24.5 1,475 18.8 -29.0Tata Tea 728 Neutral 12,141 7.0 0.2 1,469 -4.5 -5.1 756 1.8 39.0United Spirits 929 Buy 11,600 15.0 27.8 1,885 -3.4 29.9 897 -23.4 61.3Sector Aggregate 172,860 10.1 6.9 33,619 15.8 4.4 23,356 15.0 11.1

Amnish Aggarwal (AmnishAggarwal@MotilalOswal.com) / Amit Purohit (AmitPurohit@MotilalOswal.com)

Results PreviewQUARTER ENDING JUNE 2009

Consumer demand steady; focus shifts to volume growth and market share:Consumer demand for most FMCG products has grown at a steady pace. Rural demandis holding strong due to benefits of NREGS (National Rural Employment GuaranteeScheme) and farm loan waiver. Focus of most FMCG companies has shifted to gainingmarket share and boosting volume growth, as price increases are unlikely to materialize.FMCG companies are adopting aggressive strategies to increase volume growth throughaggressive pricing to boost volumes and gain more share.

Budget and monsoons key factors to watch for: The Union Budget for FY10 will bea key factor to watch. Measures such as (1) higher outlay on NREGS, (2) employmentgeneration through infrastructure projects, and (3) increase in subsidized foodgrains tothe poor will go a long way in boosting FMCG growth. In addition, we will be keenlywatching excise duty trends in cigarettes. Overall progress of monsoons has been tardy,despite early arrival in South India; farm productivity will play a crucial role in FMCGgrowth in FY10.

Input costs show mixed trends: Prices of key inputs are showing mixed trends.While the prices of crude-linked inputs like palm oil and packaging material have increasedsignificantly from the bottom, the prices of copra, mentha oil and calcium carbonate aresoft. Wheat prices are quoting below MSP (minimum support price); sugar prices arefirm. We expect GCPL, Marico, Asian Paints, HUL, Colgate and Dabur to gain fromlower input costs. United Spirits and Tata Tea will be impacted by higher input costs.

Our preferred bets: ITC and Nestle are our preferred bets among large caps. Maricoand GSK Consumer are our top mid-cap picks.

BSE Sensex: 14,765 S&P CNX: 4,376 26 June 2009

12626 June 2009

FMCG

Consumer demand steady; focus shifts to volume growth and market shareFMCG demand has been steady for most companies. During the quarter ended March2009, companies like Colgate, United Spirits, GCPL, Marico, GSK Consumer and AsianPaints had witnessed strong acceleration in volume growth. However, ITC's cigarettevolumes continued to decline at 3%, while HUL reported 4.2% volume decline.

Consumer demand has been strong, as the impact of high income growth in FY09 stillprevails. Rural India and the lower-income populace have gained due to implementation ofNREGS, farm loan waiver, and higher crop prices. Urban demand has been strong, asgovernment employees have gained due to implementation of Sixth Pay Commissionrecommendations.

VOLUME GROWTH TRENDJUN-08 SEP-08 DEC-08 MAR-09

Hindustan Unilever 8.3 6.8 2.3 -4.2ITC (cigarette) -3.0 -2.0 -3.5 -3.0Asian Paints 20.0 19.0 2.0 13.0United Spirits 19.0 15.0 19.0 24.0Colgate 11.5 11.1 14.0 15.2GSK Consumer 13.0 16.0 13.0 20.0Marico

Parachute 8.0 12.0 9.0 8.0Hair Oil 26.0 14.0 14.0 14.0Saffola 28.0 9.0 3.0 5.0

Godrej ConsumerSoaps NA 14.0 19.0 34.0Hair Color 19.0 -4.0 7.0 13.0Dabur 11.0 13.0 14.0 14.0

Source: Company/MOSL

Post the price hikes taken during the last 18 months, there is very little scope to increaseproduct prices. Sales growth in the current year will be a function of volume growth asprice increases are unlikely. Market leader, HUL has lost significant share in key categorieslike toilet soaps, shampoos and skin care. We have seen several initiatives by industryplayers to increase market share: (1) 6-15% price reductions in categories like toilet soapsand detergents, (2) sales promotion schemes, with increased freebies, (3) increase indealer margins to push products (Breeze and Godrej Expert Hair Dye), and (4) grammageincrease in key brands.

PROMOTIONAL OFFERS ARE ON THE RISECATEGORIES BRANDS COMPANY SKU MRP (RS) OFFERSPersonal Care Sunsilk HUL 200ml 97 Lakme Enamel

Dove Hair Fall Control HUL 200ml 115 Dove Soap (worth Rs32)Foods Maggi Ketchup Nestle 500gm 95 Rs.10 off

Source: Company/MOSL

Budget holds key to acceleration in volume growthWe believe that the Union Budget holds the key to further acceleration in volume growthfor the FMCG sector. Measures like NREGS, farm loan waiver, and the implementationof Pay Commission have been the chief growth drivers in FY09. We hold the view thatincremental demand growth in the FMCG sector comes from: (1) increasing penetration

12726 June 2009

FMCG

at the bottom end of the pyramid, and (2) increase in per capita consumption by peoplewho are already using the product. Any government initiative that increases the per capitaincome of the lower income groups will contribute to increase in volume growth for theindustry.

We will watch out for the following:(1) Allocation for initiatives like NREGS and infrastructure development(2) Subsidized foodgrains (35kg at Rs3/kg) for families below poverty line. This will provide

food security and increase disposable income, leading to higher spend on other goodsincluding FMCG products.

(3) Excise duty on cigarettes. In the last Union Budget, excise duty on non-filter cigaretteswas raised while filter cigarettes were spared. The industry expects 6-8% increase inexcise.

Monsoon progress tardy; holds key to agricultural growthThe progress of the south west monsoon has been tardy, despite early onset (3 days) atthe Kerala coast. The Cyclone Aila, which hit Orissa and West Bengal, has reduced theintensity of the monsoon and curtailed further advance. The south west monsoon accountsfor ~80% of India's annual rainfall and is the major source of irrigation for ~60% of grosscultivated areas. Country-wide rainfall till 17 June 2009 has been 45% below normal, with28 of the 36 meteorological regions receiving deficit/scanty rainfall.

MONSOONS PLAYING TRUANT NO. OF SUB-DIVISIONS WITH RAINFALLFOR THE PERIOD FROM 1ST JUNE TO

16-JUN 15-JUN 14-JUN 20-JUN 18-JUN 17-JUN2004 2005 2006 2007 2008 2009

Excess 19 3 6 8 21 4Normal 6 2 11 23 11 4Total 25 5 17 31 32 8Deficient 10 10 17 3 4 12Scanty 1 21 2 2 0 15No Rain 0 0 0 0 0 1Total 11 31 19 5 4 28Grand Total 36 36 36 36 36 36

Source: Company/MOSL

The absence/deficiency of rainfall during the crucial sowing period could have an adverseimpact on the yields of Kharif crops as had happened with the sugarcane crop inMaharashtra last year. While IMD (Indian Meteorological Department) has indicated thatoverall rainfall in the current year will be lower than last year, further delay does not augurwell for agricultural output. Lower agricultural output can lead to: (1) high prices of dailyfood items, adversely impacting the disposable income of consumers, (2) higher cost ofagri-based raw materials for the industry, (3) lower income level in the rural economy,which accounts for a significant proportion of incremental demand for FMCG.

12826 June 2009

FMCG

Prices of crude-based inputs have rallied significantlyPrices of major crude-linked inputs for FMCG players (palm fatty acid, LAB, and packagingmaterial) have increased by 12-90% from the bottom. Palm fatty acid distillate (key inputin toilet soaps) has seen prices jump from a low of US$280/ton to current levels of US$542/ton. In addition, the rupee has depreciated 15%. Current prices of crude-linked inputs areonly 15% lower than the peak prices. We expect margins of toilet soap manufacturers tocome under pressure from 2QFY10.

Mentha oil prices have declined 35% from the peak; we expect the benefits of lower inputprices to accrue to toothpaste manufacturers only from 2QFY10. Marico will gain fromlow input costs of copra (15%) and safflower (17%). Sugar prices are up 20%, and willadversely impact Britannia. High prices of ENA will impact the profit margins of UnitedSpirits. Wheat prices are soft due to a bumper crop and will benefit Britannia and Nestle;lower barley malt prices will benefit GSK Consumer. Tea prices are holding strong andwill adversely impact HUL and Tata Tea.

MONSOONS AND KHARIF CROP OUTPUT AGRI GDP AND FMCG GROWTH

Source: Company/MOSL

IMPACT OF INPUT PRICE CHANGESINPUT PRICE UNIT 52 WEEK CURRENT IMPACT COMPANIES

TREND H/L PRICELAB Up Rs/Kg 122/71 Rs79/Kg Negative HULSoda Ash Up Rs/Tonne 12,904/12,300 Rs12,904/Tonne Negative HULPalm Fatty Acid Up US$/Tonne 730/290 US$527/Tonne Negative HUL, Godrej ConsumerSugar Up Rs/Qtl 2,450/1,853 Rs2,354/Qtl Negative Nestle, GSK Cons.,ITC, USL and BritanniaWheat Up Rs/Qtl 1,194/1,100 Rs1,194/Qtl Negative Nestle, ITC and BritanniaMilk Up Index 236/216 236 (Index) Negative Nestle, GSK ConsumerCopra Down Rs/Qtl 4,550/3,175 Rs3,175/Qtl Positive Marico

Source: Company/MOSL

75

85

95

105

115

2000

2001

2002

2003

2004

2005

2006

2007

2008

-40

-20

0

20

40

Rainfall as a % of LPA (LHS) Kharif Prod. Y-O-Y (RHS)

75

85

95

105

115

2001

2002

2003

2004

2005

2006

2007

2008

-12

-6

0

6

12

Actual Rainfall as a % of LPA (LHS)Agri GDP grow th (RHS)

12926 June 2009

FMCG

RUPEE V/S DOLLAR - SLIDE IN RUPEE CONTINUES

PALM FATTY ACID: 90% UP FROM THE BOTTOM (US$/MT)

SUGAR: UP 20% YOY (RS/QTL)

COPRA: SOFT PRICE TREND CONTINUES (RS/QTL)

Source: Company/MOSL

Copra Prices

3,175

4,550

2,800

3,350

3,900

4,450

5,000

Aug

-07

Oct

-07

Dec

-07

Feb-

08

Apr

-08

Jun-

08

Aug

-08

Oct

-08

Dec

-08

Feb-

09

Apr

-09

Jun-

09

Sugar Prices

2,341

2,450

2,0642,000

2,150

2,300

2,450

2,600

Jan-

09

Jan-

09

Feb-

09

Mar

-09

Apr

-09

Apr

-09

May

-09

Jun-

09

Palm Fatty Acid

587.5 527.5

250

400

550

700

850

Apr

-05

Jun-

05

Aug

-05

Nov

-05

Jan-

06

Mar

-06

May

-06

Jul-0

6

Sep

-06

Dec

-06

Feb-

07

Apr

-07

Jun-

07

Aug

-07

Oct

-07

Jan-

08

Mar

-08

May

-08

Jul-0

8

Sep

-08

Nov

-08

Feb-

09

Apr

-09

Jun-

09

47.8

40.2

32

38

44

50

56

Dec

-06

Feb-

07

Apr

-07

Jun-

07

Aug

-07

Oct

-07

Dec

-07

Feb-

08

Apr

-08

Jun-

08

Aug

-08

Oct

-08

Dec

-08

Feb-

09

Apr

-09

Jun-

09

13026 June 2009

SAFFLOWER OIL: DECLINES 20% YOY (RS/MT)

MENTHA OIL: SOFT PRICES TO BENEFIT COLGATE (US$/TON)

CALCIUM CARBONITE: SOFT PRICES TO BENEFIT COLGATE (US$/TON)

LAB: GRADUALLY INCHING UP (RS/KG)

Source: Company/MOSL

FMCG

LAB Prices

67.863.5

90.0

122.1

71.1

79.1

60

80

100

120

140

Jun-

06

Sep

-06

Dec

-06

Mar

-07

Jun-

07

Sep

-07

Dec

-07

Mar

-08

Jun-

08

Sep

-08

Dec

-08

Mar

-09

Jun-

09

93

105

75

85

95

105

115

Mar

-07

May

-07

Jul-0

7

Sep

-07

Nov

-07

Jan-

08

Mar

-08

May

-08

Jul-0

8

Sep

-08

Nov

-08

Jan-

09

Mar

-09

May

-09

547

839.3

450

550

650

750

850

Apr

-07

Jun-

07

Aug

-07

Oct

-07

Nov

-07

Jan-

08

Mar

-08

May

-08

Jul-0

8

Sep

-08

Oct

-08

Dec

-08

Feb-

09

Apr

-09

Jun-

09

Safflow er Oil Prices

68,000

88,000

53,00050,000

62,000

74,000

86,000

98,000

Sep

-07

Oct

-07

Nov

-07

Dec

-07

Jan-

08

Feb-

08

Mar

-08

Apr

-08

May

-08

Jun-

08

Jul-0

8

Aug

-08

Sep

-08

Oct

-08

Nov

-08

Dec

-08

Jan-

09

Feb-

09

Mar

-09

Apr

-09

May

-09

Jun-

09

13126 June 2009

FMCG

Valuations have caught up in the last one monthFMCG sector valuations have caught up significantly in the past one month due to sharprally in the markets. Most FMCG stocks are close to fair valuation based on FY10 estimates.We have upgraded our earnings estimates for six (Asian Paints, Colgate, GCPL, GSKConsumer, Marico and Dabur) of the 12 FMCG stocks under our coverage post 4QFY09results. We believe 1QFY10 will be another quarter of strong growth, particularly for mid-sized companies.

? We continue to like companies in the food processing space due to huge growth potentialand niche plays

? HPC segment will continue to witness significant competition due to emergence ofstrong regional players

? We remain positive on spirits and tobacco (assuming no adverse regulatory newsinflows) due to strong pricing power, high entry barriers, and leadership position of keylisted players

ITC and Nestle are our preferred bets among large caps. Marico and GSK Consumerare our top picks in the mid-cap stream.

HDPE: 85% UP FROM THE BOTTOM (US$/MT)

Source: Company/MOSL

HDPE

1,270

690650

1,050

1,450

1,850

2,250

May

-07

Jul-0

7

Aug

-07

Oct

-07

Nov

-07

Jan-

08

Feb-

08

Apr

-08

May

-08

Jul-0

8

Aug

-08

Oct

-08

Dec

-08

Jan-

09

Mar

-09

Apr

-09

Jun-

09

13226 June 2009

RELATIVE PERFORMANCE - 3 MONTH (%) RELATIVE PERFORMANCE - 1 YEAR (%)

Stock performance and valuations

STOCK PERFORMANCE (%) ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR

3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEARFMCGAsian Paints 50 -2 3 -5 34 -13Britannia 18 10 -30 8 2 0Colgate 26 59 -21 57 10 48Dabur 29 38 -19 36 13 27Godrej Consumer 46 33 -1 31 30 22GSK 49 39 1 37 33 28Hind. Unilever 11 25 -37 23 -5 14ITC 6 3 -41 0 -10 -8Marico Industries 23 24 -24 22 7 13Nestle 23 15 -25 13 7 4Tata Tea 30 -8 -17 -11 14 -19United Spirits 40 -30 -7 -32 24 -41

FMCG

COMPARATIVE VALUATIONCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)

26.6.09 FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11EFMCGAsian Paints 1,153 Neutral 41.9 53.5 64.0 27.5 21.6 18.0 16.6 12.7 10.5 33.6 35.0 34.2Britannia 1,561 Buy 84.1 106.1 118.6 18.5 14.7 13.2 14.4 11.5 10.5 22.7 24.1 22.8Colgate 574 Buy 21.7 25.5 29.7 26.5 22.5 19.3 27.3 21.7 18.3 152.6 156.5 151.1Dabur 121 Buy 4.5 5.6 6.6 26.8 21.7 18.4 21.7 17.3 14.5 47.8 44.5 40.6Godrej Consumer 176 Buy 6.7 9.2 11.0 26.2 19.1 15.9 21.3 14.6 12.1 29.0 35.2 36.7GSK Consumer 938 Buy 44.8 59.0 70.7 20.9 15.9 13.3 14.6 10.6 8.7 24.8 27.3 27.4Hind. Unilever 265 Neutral 9.4 10.6 11.7 28.2 25.1 22.6 21.5 18.8 16.9 132.9 101.7 98.3ITC 197 Buy 8.7 9.9 11.3 22.7 19.8 17.4 13.7 11.9 10.4 23.5 23.5 23.4Marico 73 Buy 3.1 3.8 4.8 23.5 18.9 15.1 15.3 12.2 9.9 41.3 36.5 33.1Nestle 1,869 Buy 58.6 70.4 85.3 31.9 26.5 21.9 20.6 16.8 14.1 119.4 118.6 119.6Tata Tea 728 Neutral 47.4 48.0 55.0 15.4 15.2 13.2 5.7 5.8 5.1 7.5 7.3 8.0United Spirits 929 Buy 32.2 40.5 60.4 28.9 22.9 15.4 16.0 13.8 11.3 12.1 13.2 16.4Sector Aggregate 25.3 21.6 18.6 16.5 14.1 12.2 30.2 30.7 30.9

60

75

90

105

120

Jun-08 Sep-08 Dec-08 Mar-09 Jun-09

MOSt FMCG Index Sensex

80

100

120

140

160

Mar-09 Apr-09 May-09 Jun-09

Sensex MOSt FMCG Index

13326 June 2009

Results PreviewSECTOR: FMCG-PAINTS

Asian Paints

YEAR NET SALES ADJ. PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 44,043 4,175 43.5 45.8 26.5 10.8 42.5 57.6 2.4 16.0

3/09A 54,632 4,015 41.9 -3.8 27.5 8.9 33.6 49.8 2.0 15.9

3/10E 63,341 5,128 53.5 27.7 21.6 7.3 35.0 53.1 1.7 12.2

3/11E 72,810 6,137 64.0 19.7 18.0 5.9 34.2 53.3 1.4 10.1

Equity Shares (m) 95.9

52-Week Range 1,298/681

1,6,12 Rel. Perf. (%) 1/-25/-5

M.Cap. (Rs b) 110.6

M.Cap. (US$ b) 2.3

NeutralPrevious Recommendation: Neutral Rs1,153

26 June 2009BLOOMBERGAPNT IN

REUTERS CODEASPN.BO

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 12,420 14,753 13,210 14,249 14,407 17,261 14,795 16,877 54,632 63,341

Change (%) 29.3 30.2 12.2 25.8 16.0 17.0 12.0 18.4 24.0 15.9Total Expenditure 10,698 12,665 12,117 12,459 12,419 14,810 12,739 14,615 47,938 54,583EBITDA 1,722 2,088 1,093 1,791 1,988 2,451 2,057 2,262 6,694 8,758

Margin (%) 13.9 14.2 8.3 12.6 13.8 14.2 13.9 13.4 12.3 13.8Change (%) 27.2 15.0 -41.1 15.0 15.5 17.4 88.1 26.3 1.7 30.8

Interest 55 68 66 75 47 49 51 91 263 238Depreciation 154 186 202 201 210 211 218 226 744 865Other Income 103 179 122 114 92 165 105 92 517 454Operational PBT 1,616 2,014 946 1,629 1,823 2,356 1,893 2,038 6,204 8,110Non Recurring Income -6 -9 -6 -15 0 0 0 0 -35 0PBT 1,610 2,005 940 1,614 1,823 2,356 1,893 2,038 6,169 8,110Tax 519 634 291 530 602 778 634 663 1,974 2,676

Effective Tax Rate (%) 32.2 31.6 30.9 32.8 33.0 33.0 33.5 32.5 32.0 33.0PAT 1,091 1,370 650 1,084 1,222 1,579 1,259 1,375 4,195 5,434Minorrity Interest 29 55 60 73 31 64 68 143 216 306Adjusted PAT 1,068 1,324 596 1,026 1,191 1,515 1,191 1,232 4,014 5,128

Change (%) 31.0 9.8 -49.8 6.2 11.5 14.4 99.7 20.1 -3.9 27.8E: MOSL Estimates

Amnish Aggarwal (AmnishAggarwal@MotilalOswal.com) /Amit Purohit (AmitPurohit@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect net sales to grow 19.2% YoY to Rs14.4b, with hgih single-digit volume growth in decorative paints.Volume growth would be impacted by high base effect (~20% volume growth in 1QFY09) and pipeline filling during4QFY09 (13% volume growth).

? Input cost index for Asian Paints had declined by 10% in 4QFY09, as prices of titanium dioxide, turpentine oil andpackaging material have softened. EBITDA margin will decline 10bp due to 9.9% price reduction and higher adspends. EBITDA is expected to grow 15.5% to Rs 2b while Adj PAT will grow 11.5% to Rs1.2b.

? We expect the recovery in the domestic decorative paints business to continue, but the automotive paints and industrialbusinesses would remain under pressure. The Middle East would continue to be the key driver of internationaloperations; recent increase in oil prices augurs well for sustaining growth momentum in the Middle East.

? Demand from tier-II cities and rural India has been strong in the last six months; turnaround in the domestic housingmarket and monsoons will be key factors to watch for. The stock trades at 21.6x FY10E and 18x FY11E earnings.Maintain Neutral.

13426 June 2009

BuyPrevious Recommendation: Buy Rs1,561

BLOOMBERGBRIT IN

REUTERS CODEBRIT.BO

Britannia Industries

26 June 2009

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 26,099 2,019 84.5 87.0 18.5 5.0 26.7 29.3 1.3 13.4

03/09A 31,122 2,010 84.1 -0.4 18.6 4.2 22.7 28.2 1.1 12.8

03/10E 36,083 2,535 106.1 26.1 14.7 3.6 24.1 29.1 0.9 9.9

03/11E 40,185 2,833 118.6 11.7 13.2 3.0 22.8 27.6 0.8 8.7

Equity Shares (m) 23.9

52-Week Range 1,890/991

1,6,12 Rel. Perf. (%) -17/-33/8

M.Cap. (Rs b) 37.3

M.Cap. (US$ b) 0.8

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 6,933 8,385 8,183 7,621 8,181 9,811 9,574 8,517 31,122 36,083

YoY Change (%) 20.2 27.3 24.7 10.0 18.0 17.0 17.0 11.8 19.2 15.9Raw Material Cost 4,846 5,953 5,784 5,184 5,686 6,917 6,750 5,855 21,767 25,207Gross Profit 2,087 2,433 2,399 2,437 2,495 2,894 2,824 2,662 9,355 10,875

Margins (%) 30.1 29.0 29.3 32.0 30.5 29.5 29.5 31.3 30.1 30.1Other Exp 1,511 1,762 1,743 1,751 1,767 2,011 1,991 1,899 6,767 7,669

% of Sales 21.8 21.0 21.3 23.0 21.6 20.5 20.8 22.3 21.7 21.3EBITDA 576 671 656 686 728 883 833 763 2,589 3,207

Margins (%) 8.3 8.0 8.0 9.0 8.9 9.0 8.7 9.0 8.3 8.9Depreciation 79 82 86 88 89 90 91 91 335 361Interest 35 44 30 8 25 30 20 9 117 84Other Income 79 167 73 75 75 145 76 80 394 376PBT 541 712 614 665 689 908 798 742 2,531 3,137Tax 83 116 88 235 120 160 140 182 521 602

Rate (%) 15.3 16.2 14.3 35.3 17.4 17.6 17.5 24.6 20.6 19.2Adjusted PAT 458 597 526 430 569 748 658 560 2,010 2,535

YoY Change (%) 16.8 15.6 7.7 -17.8 24.3 25.4 25.1 30.3 -0.4 26.1Extraordinary Expenses 55 64 64 23 37 37 37 37 206 148Reported PAT 403 533 462 407 532 711 621 523 1,804 2,387E: MOSL Estimates

Results PreviewSECTOR: FMCG

Amnish Aggarwal (AmnishAggarwal@MotilalOswal.com) / Amit Purohit (AmitPurohit@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect Britannia to report net sales of Rs8.2b, 18% growth YoY. We expect double-digit volume growth tosustain in 1QFY10.

? EBITDA margins are likely to expand 40bp, with EBITDA expected to grow 26% YoY to Rs728m. Adjusted PATshould grow 24.3% YoY to Rs569m.

? Resolution of management dispute has seen an increase in dividend payout from Rs18/share to Rs40/share (payoutratio has increased from ~22% in FY08 to ~45% in FY09). In addition, the company has announced an issue of bonusdebentures with a face value of Rs170 in the ratio of 1:1; these debentures will have a tenure of three years and carryan interest rate of 8.5%.

? Britannia has acquired majority control in the dairy business and also Daily Bread, a retail bakery venture.

? The stock trades at 14.7x FY10E EPS of Rs106.1 and 13.2x FY11E EPS of Rs118.6. Excluding the value of bonusdebentures (Rs170), the stock trades at 13.2x FY10E and 11.8x FY11E. Maintain Buy.

13526 June 2009

BuyPrevious Recommendation: Buy Rs574

BLOOMBERGCLGT IN

REUTERS CODECOLG.BO

Colgate Palmolive

26 June 2009

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 14,734 2,318 17.0 52.7 33.7 48.1 104.7 103.3 5.2 33.5

03/09A 16,948 2,951 21.7 27.3 26.5 39.0 152.6 42.4 4.4 27.5

03/10E 19,543 3,465 25.5 17.4 22.5 32.2 156.5 101.2 3.8 21.9

03/11E 22,046 4,040 29.7 16.6 19.3 26.7 151.1 72.5 3.3 18.5

Equity Shares (m) 136.0

52-Week Range (Rs) 580/341

1,6,12 Rel. Perf. (%) 15/-16/57

M.Cap. (Rs b) 78.1

M.Cap. (US$ B) 1.6

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 4,076 4,125 4,192 4,555 4,687 4,777 4,846 5,232 16,948 19,543

YoY Change (%) 16.2 13.4 14.1 16.4 15.0 15.8 15.6 14.9 15.0 15.3Total Exp 3,415 3,614 3,447 3,746 3,900 3,941 3,974 4,320 14,193 16,135EBITDA 661 512 746 809 787 836 872 912 2,755 3,408

Margins (%) 16.2 12.4 17.8 17.8 16.8 17.5 18.0 17.4 16.3 17.4Depreciation 55 56 55 64 64 64 66 73 230 267Other Income 312 270 228 205 340 275 250 241 987 1,106PBT 913 721 918 950 1,059 1,042 1,050 1,074 3,502 4,226Tax 194 86 140 131 222 208 168 162 551 761 Rate (%) 21.3 11.9 15.3 13.7 21.0 20.0 16.0 15.1 15.7 18.0Adjusted PAT 719 635 777 819 837 834 882 912 2,951 3,465

YoY Change (%) 16.2 16.0 28.6 47.3 16.4 31.3 13.5 11.4 27.3 17.4Extraordinary Expenses 0 0 0 49 0 0 0 0 49 0Reported PAT 719 635 777 771 837 834 882 912 2,902 3,465

YoY Change (%) 18.1 16.0 28.6 38.6 16.4 31.3 13.5 18.4 25.2 19.4E: MOSL Estimates

Results PreviewSECTOR: FMCG

Amnish Aggarwal (AmnishAggarwal@MotilalOswal.com) / Amit Purohit (AmitPurohit@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect Colgate to report net sales of Rs4.7b in 1QFY09, a growth of 15% YoY. Volume growth is likely to be13% YoY (10.9% in 1QFY09).

? The company had taken 2-3% price increase on the entire portfolio, effective April 2009, which would enable 60bpmargin expansion in 1QFY10 to 16.8%. We estimate 16.4% increase in PAT on YoY basis.

? During the quarter, the company launched a 35gm SKU, attractively priced at Rs10, which has evoked encouragingresponse, especially at the bottom end of the pyramid.

? Colgate has been able to garner market share at the expense of both HUL and Dabur. However, both of them havestepped up their focus on the product segment, with aggressive pricing and promotion. We believe that gainingincremental market share would be an uphill task, given high cost sales promotions and aggressive pricing.

? Colgate continues to be the best pure play on the expanding oral care market in India. We estimate steady PATgrowth of 17% over FY10-11. The stock is trading at 22.5x FY10E EPS of Rs25.5 and 19.3x FY11E EPS of Rs29.7.Maintain Buy.

13626 June 2009

BuyPrevious Recommendation: Neutral Rs121

BLOOMBERGDABUR IN

REUTERS CODEDABU.BO

Dabur India

26 June 2009

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 23,610 3,337 3.9 17.7 31.3 16.1 54.0 55.6 4.1 23.8

03/09A 28,054 3,912 4.5 17.1 26.8 12.2 47.8 44.6 3.5 20.6

03/10E 34,074 4,814 5.6 23.2 21.7 9.2 44.5 44.0 2.9 16.4

03/11E 39,241 5,672 6.6 17.8 18.4 7.1 40.6 44.2 2.4 13.8

Equity Shares (m) 864.0

52-Week Range 122/60

1,6,12 Rel. Perf. (%) -1/12/36

M.Cap. (Rs b) 104.5

M.Cap. (US$ b) 2.2

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 6,040 6,912 7,787 7,317 7,250 8,420 9,475 8,929 28,054 34,074

YoY Change (%) 16.0 18.3 19.9 20.6 20.0 21.8 21.7 22.0 18.8 21.5Total Exp 5,168 5,664 6,497 6,021 6,080 6,715 7,855 7,396 23,350 28,046EBITDA 871 1,248 1,290 1,296 1,170 1,705 1,620 1,533 4,705 6,028

Margins (%) 14.4 18.1 16.6 17.7 16.1 20.2 17.1 17.2 16.8 17.7Depreciation 117 123 109 144 145 152 153 155 492 605Interest 40 40 69 44 50 55 85 75 232 265Other Income 120 145 114 49 110 75 140 74 468 399PBT 834 1,230 1,226 1,158 1,085 1,573 1,522 1,378 4,448 5,558Tax 127 156 152 106 170 200 200 159 540 729

Rate (%) 15.2 12.7 12.4 9.1 15.7 12.7 13.1 11.6 12.1 13.1Minority Interest 1 -4 -11 10 3 3 5 3 -4 14Adjusted PAT 707 1,078 1,085 1,042 912 1,370 1,317 1,215 3,912 4,814

YoY Change (%) 13.5 11.6 14.8 29.7 29.1 27.1 21.4 16.6 17.2 23.6Reported PAT 707 1,078 1,085 1,042 912 1,370 1,317 1,215 3,912 4,814E: MOSL Estimates

Results PreviewSECTOR: FMCG

Amnish Aggarwal (AmnishAggarwal@MotilalOswal.com) / Amit Purohit (AmitPurohit@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect Dabur India to report net sales of Rs7.25b in 1QFY09, an increase of 20% YoY. Judicious price increasesand lower packaging material cost is likely to result in margin expansion of 170bp. Adjusted PAT is likely to grow 29%YoY to Rs912m.

? Domestic volume growth should sustain at 12-13% (14% in FY09). We expect sales growth to remain strong inshampoos, hair care and skin care.

? International business is expected to report yet another good quarter, with sales growth of over 30%. Expansion innew geographies in GCC region would be the key growth driver for the company.

? Dabur's retail venture, newU has added three new stores. The business has realigned its cost structure and isexpected to report sharp reduction in losses in 1QFY10 on YoY basis; turnaround is unlikely in the near term.

? Fem acquisition is likely to be completed by the end of 1QFY10; our 1QFY10 estimates do not include the benefits ofthe acquisition. We expect Dabur to declare consolidated numbers from 2QFY10.

? The stock is trading at 21.7x FY10E EPS of Rs5.6 and 18.4x FY11E EPS of Rs6.6. We upgrade the stock fromNeutral to Buy.

13726 June 2009

BuyPrevious Recommendation: Buy Rs938

BLOOMBERGSKB IN

REUTERS CODEGLSM.BO

GlaxoSmithKline Consumer

26 June 2009

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

12/07A 12,778 1,620 38.5 27.6 24.3 6.0 25.1 38.5 2.7 15.6

12/08A 15,431 1,883 44.8 16.3 20.9 5.1 24.8 38.4 2.2 14.3

12/09E 19,700 2,482 59.0 31.7 15.9 4.3 27.3 42.4 1.7 10.4

12/10E 22,793 2,974 70.7 19.8 13.3 3.6 27.4 41.9 1.5 8.5

Equity Shares (m) 42.1

52-Week Range (Rs) 950/480

1,6,12 Rel. Perf. (%) 3/18/37

M.Cap. (Rs b) 39.5

M.Cap. (US$ b) 0.8

QUARTERLY PERFORMANCE (RS MILLION)Y/E DECEMBER CY08 CY09 CY08 CY09E

1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QENet Sales 4,109 3,764 4,225 3,334 5,394 4,800 5,350 4,156 15,431 19,700

YoY Change (%) 25.8 19.3 20.2 17.3 31.3 27.5 26.6 24.7 20.8 27.7Total Exp 3,300 3,218 3,594 2,932 4,207 4,075 4,520 3,648 13,043 16,450EBITDA 809 546 631 402 1,187 725 830 508 2,388 3,250

Margins (%) 19.7 14.5 14.9 12.1 22.0 15.1 15.5 12.2 15.5 16.5Depreciation 106 102 104 107 106 108 110 110 419 434Interest 25 13 14 30 13 12 15 25 82 65Other Income 186 262 265 242 256 240 270 279 955 1,045PBT 864 692 778 507 1,324 845 975 652 2,841 3,796Tax 298 231 247 181 485 280 320 230 957 1,314

Rate (%) 34.0 33.3 33.0 35.8 36.6 33.1 32.8 35.2 33.7 34.6PAT 566 462 530 326 839 565 655 422 1,883 2,482

YoY Change (%) 33.7 9.1 5.0 18.5 48.4 22.4 23.5 29.6 16.3 31.8E: MOSL Estimates

Results PreviewSECTOR: FMCG

Amnish Aggarwal (AmnishAggarwal@MotilalOswal.com) / Amit Purohit (AmitPurohit@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect GSK Consumer to report net sales of Rs4.8b, up 27.5% YoY. Volume growth is likely to be boosted bystrong domestic demand, new launches as well as rising export demand.

? EBITDA margins are likely to expand 60bp, as benefits of lower cost of malted barley and 5.5% price increase inHorlicks are captured fully. We expect adjusted PAT to grow 22.4% YoY to Rs565m.

? Raw material pricing pressure is likely to subside in coming quarters. Increase in malted capacity of barley wouldreduce prices of malt while wheat prices are ruling easy due to bumper crop. However, prices of milk and sugarcontinue to be firm.

? During the quarter, the company launched flavored milk, Horlicks Chilled Doodh, to capitalize on the growing outof home consumption. The product is priced at Rs15/100ml and is available in three variants.

? The stock is currently trading at attractive valuations of 15.9x CY09E EPS of Rs59 and 13.3x CY10E EPS ofRs70.7. We maintain Buy.

13826 June 2009

BuyPrevious Recommendation: Buy Rs176

BLOOMBERGGCPL IN

REUTERS CODEGOCP.BO

Godrej Consumer Products

26 June 2009

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 11,040 1,592 7.1 18.6 24.9 25.2 92.8 64.4 3.6 18.2

03/09A 13,930 1,733 6.7 -4.8 26.1 7.3 29.0 27.8 3.0 20.3

03/10E 16,220 2,370 9.2 36.9 19.1 6.4 35.2 35.4 2.5 13.9

03/11E 18,603 2,849 11.0 20.2 15.9 5.6 36.7 36.9 2.1 11.5

Equity Shares (m) 258.1

52-Week Range 191/94

1,6,12 Rel. Perf. (%) -3/-36/31

M.Cap. (Rs b) 45.3

M.Cap. (US$ b) 0.9

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 3,616 3,465 3,421 3,427 4,321 4,071 3,918 3,910 13,930 16,220

YoY Change (%) 26.3 26.4 25.4 26.1 19.5 17.5 14.5 14.1 26.3 16.4Total Exp 3,121 3,068 2,938 2,766 3,522 3,318 3,212 3,222 11,892 13,274EBITDA 496 397 483 661 799 753 705 688 2,037 2,946

Margins (%) 13.7 11.5 14.1 19.3 18.5 18.5 18.0 17.6 14.6 18.2Depreciation 55 46 51 40 44 48 60 71 193 223Interest -12 -47 -42 -60 -23 -25 -28 -32 -160 -108Other Income 35 31 15 7 20 20 15 13 87 68PBT 487 428 489 688 798 750 688 662 2,092 2,899Tax 96 81 88 94 148 135 117 90 360 489

Rate (%) 19.7 18.9 18.1 13.7 18.5 18.0 17.0 13.5 17.2 16.9PAT 391 347 401 594 651 615 571 573 1,733 2,410

YoY Change (%) 1.2 -6.3 -6.9 45.4 66.4 77.1 42.5 -3.5 8.8 39.1E: MOSL Estimates

Results PreviewSECTOR: FMCG

Amnish Aggarwal (AmnishAggarwal@MotilalOswal.com) / Amit Purohit (AmitPurohit@MotilalOswal.com)

* Equity capital for EPS calculation in FY09-10E is Rs258m (Post rights)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect GCPL to report net sales of Rs4.3b up 19.5% YoY. EBITDA margins would expand 480bp YoY onaccount of lower prices of palm fatty acid distillate. Adj PAT is expected to increase 66.4% YoY to Rs651m.

? In toilet soaps, strong traction continues in its key brand, Godrej No 1. Increase in competitive intensity has notimpacted the growth momentum of No 1. GCPL seems to be well placed in the soaps segment, as it has low cost rawmaterial inventory up to August/September 2009.

? Hair color volumes are likely to grow in double digits, as the impact of new launches and higher retail marginscontinues to drive sales.

? Kinky’s performance should improve, as most of the integration issues have been sorted out. We expect Keyline toremain under pressure on account of slowdown in UK markets. Rapidol should benefit from widening distributionreach and new launches.

? GCPL has acquired 50% stake in Godrej Sara Lee from group companies through share swap, which will result in20% equity dilution. We estimate that the acquisition of 50% stake will be EPS neutral in FY10 and will boost EPS by6% in FY11.

? The stock is trading at 19.1x FY10E EPS of Rs9.2and 15.9x FY11E EPS of Rs11. Maintain Buy.

13926 June 2009

NeutralPrevious Recommendation: Neutral Rs265

BLOOMBERGHUVR IN

REUTERS CODEHLL.BO

Hindustan Unilever

26 June 2009

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

12/07A 139,109 17,691 8.1 16.4 32.7 38.3 122.9 144.7 3.9 25.8

03/09A* 168,245 20,449 9.4 15.6 28.3 29.0 132.9 154.8 2.6 17.2

03/10E 182,191 22,980 10.6 12.4 25.1 24.4 101.7 126.3 2.9 17.9

03/11E 204,445 25,506 11.7 11.0 22.6 21.2 98.3 122.6 2.6 16.0

Equity Shares (m) 2,177.5

52-Week Range 271/185

1,6,12 Rel. Perf. (%) 7/-53/23

M.Cap. (Rs b) 577.8

M.Cap. (US$ b) 12.0

Results PreviewSECTOR: FMCG

Amnish Aggarwal (AmnishAggarwal@MotilalOswal.com) / Amit Purohit (AmitPurohit@MotilalOswal.com)

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales (incl service inc) 42,996 41,109 43,787 40,354 45,490 43,725 47,250 45,726 168,245 182,191

YoY Change (%) 22.6 21.0 15.2 5.1 5.8 6.4 7.9 13.3 20.9 8.3Total Expenditure 36,642 35,516 36,147 34,390 38,050 37,125 38,800 39,124 142,694 153,099EBITDA 6,354 5,594 7,640 5,963 7,440 6,600 8,450 6,602 25,551 29,092

YoY Change (%) 20.3 16.5 12.5 22.9 17.1 18.0 10.6 10.7 22.9 13.9Margins (%) 14.8 13.6 17.4 14.8 16.4 15.1 17.9 14.4 15.2 16.0

Depreciation 379 393 406 413 425 430 445 449 1,590 1,749Interest 87 0 0 22 0 0 0 0 109 0Other Income 808 409 292 203 925 525 350 327 1,711 2,127PBT 6,695 5,610 7,526 5,731 7,940 6,695 8,355 6,480 25,562 29,470Tax 1,294 1,231 1,425 1,164 1,731 1,607 1,713 1,439 5,113 6,489

Rate (%) 19.3 21.9 18.9 20.3 21.8 24.0 20.5 22.2 20.0 22.0Adjusted PAT 5,401 4,379 6,101 4,568 6,209 5,088 6,642 5,041 20,449 22,980

YoY Change (%) 19.6 7.0 10.1 20.7 15.0 16.2 8.9 10.4 15.6 12.4Extraordinary Inc/(Exp) 180 1,087 56 -618 0 0 0 0 706 0Reported Profit 5,582 5,466 6,157 3,950 6,209 5,088 6,642 5,041 21,155 22,980

YoY Change (%) 13.2 34.0 -2.5 3.7 11.2 -6.9 7.9 27.6 9.9 8.6E: MOSL Estimates

* EPS for 12 months (April 2008-March 2009)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect HUL to report sales growth of 5.8% YoY in 1QFY10 to Rs45.5b (5QFY09 sales growth was 5.2%).EBITDA margins would expand 160bp due to decline in raw material prices. Adjusted PAT would grow 15% YoY toRs6.2b.

? We expect volume growth to bounce back strongly (-4.2% in 5QFY09), as HUL has increased grammage (6-25%)in key brands like Wheel, Lux and Surf Excel Blue. HUL has also started aggressive promotional campaign in oralcare, skin care and shampoos which should boost sales growth.

? Prices of key inputs like palm fatty acid have increased 90% from the bottom. In addition, packaging and LAB pricesare also inching up. We expect further market share decline in toilet soaps, detergents/washing powder, toothpasteand skin care. We believe that failure to regain market share by price cuts and aggressive advertising can startimpacting margins.

? The stock is currently trading at 25.1x FY10E EPS of Rs10.6 and 22.6x FY11E EPS of Rs11.7. We believe that thestock is fairly valued. We maintain Neutral.

14026 June 2009

BuyPrevious Recommendation: Buy Rs197

BLOOMBERGITC IN

REUTERS CODEITC.BO

ITC

26 June 2009

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 141,778 31,202 8.3 16.4 23.8 6.2 25.9 35.8 5.2 15.5

03/09A 155,827 32,636 8.7 4.6 22.7 5.4 23.5 33.3 4.6 13.9

03/10E 173,353 37,385 9.9 14.6 19.8 4.7 23.5 33.7 4.0 12.1

03/11E 194,801 42,584 11.3 13.9 17.4 4.1 23.4 33.8 3.5 10.6

Equity Shares (m) 3,768.6

52-Week Range 210/132

1,6,12 Rel. Perf. (%) -2/-43/0

M.Cap. (Rs b) 741.1

M.Cap. (US$ b) 15.4

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 39,340 38,627 38,587 39,274 40,826 42,200 43,800 46,527 155,827 173,353

YoY Change (%) 18.7 16.3 9.8 -2.8 3.8 9.3 13.5 18.5 9.9 11.2Total Exp 27,726 26,473 24,806 26,291 27,476 28,696 28,689 31,755 105,296 116,615EBITDA 11,614 12,154 13,780 12,983 13,350 13,504 15,111 14,772 50,532 56,737

Margins (%) 29.5 31.5 35.7 33.1 32.7 32.0 34.5 31.7 32.4 32.7Depreciation 1,261 1,340 1,442 1,451 1,465 1,470 1,480 1,504 5,494 5,919Interest 14 28 5 137 20 22 25 23 183 90Other Income 801 1,105 976 523 950 1,450 1,250 843 3,403 4,493PBT 11,140 11,890 13,310 11,918 12,815 13,462 14,856 14,088 48,257 55,221Tax 3,653 3,864 4,277 3,828 4,101 4,375 4,754 4,607 15,622 17,836

Rate (%) 32.8 32.5 32.1 32.1 32.0 32.5 32.0 32.7 32.4 32.3Reported PAT 7,487 8,027 9,032 8,090 8,714 9,087 10,102 9,481 32,636 37,385

YoY Change (%) -4.4 4.1 8.7 10.0 16.4 13.2 11.8 17.2 4.6 14.6Adjusted PAT 7,487 8,027 9,032 8,090 8,714 9,087 10,102 9,481 32,636 37,385

YoY Change (%) -4.4 4.1 8.7 10.0 16.4 13.2 11.8 17.2 4.6 14.6E: MOSL Estimates

Results PreviewSECTOR: FMCG

Amnish Aggarwal (AmnishAggarwal@MotilalOswal.com) / Amit Purohit (AmitPurohit@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect ITC to post 3.8% YoY growth in revenues in 1QFY10 to Rs40.8b. EBITDA margins would expand by420bp YoY to 32.7%. PAT would increase by 16.4% YoY to Rs8.7b.

? Cigarette volumes are likely to grow in low single digits. A 2.5% price increase on the company's cigarette portfolioand a late budget (no excise increase) would enable mid-teen PBIT growth. There could be a small (Rs150-200m)impact of implementation of pictorial warnings and increase in trade inventory ahead of the implementation and de-stocking post implementation.

? The hotels business continues to be under pressure and PBIT is likely to decline YoY. The paper business wouldreflect (1) benefits of capacity expansion and backward integration, (2) cheaper input costs, (3) planned shutdownahead of implementation of pictorial warnings for supply to cigarettes business.

? New FMCG losses are likely to remain flat QoQ (Rs1.27b loss in 3QFY09). The company continues to maintainfocus on higher value-added products, which would result in low sales growth. Focus is on new variant launches inBingo and biscuits.

? Excise duty on cigarettes would be a key factor to watch for. Single-digit excise increase would be positive, but anypenal excise increase on filter cigarettes would be a big negative. The stock trades at 19.8x FY10E earnings and17.4x FY11E earnings. We maintain Buy with an SOTP-based target price of Rs200.

14126 June 2009

BuyPrevious Recommendation: Buy Rs73

BLOOMBERGMRCO IN

REUTERS CODEMRCO.BO

Marico

26 June 2009

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 19,067 1,589 2.6 62.6 27.8 13.9 50.5 33.5 2.4 18.9

03/09A 23,884 1,882 3.1 18.4 23.5 9.6 41.3 37.5 1.9 15.1

03/10E 26,934 2,342 3.8 24.5 18.9 6.8 36.5 38.9 1.6 12.1

03/11E 31,725 2,936 4.8 25.4 15.1 4.9 33.1 40.4 1.3 9.8

Equity Shares (m) 609.0

52-Week Range 79/47

1,6,12 Rel. Perf. (%) 3/-20/22

M.Cap. (Rs b) 44.2

M.Cap. (US$ b) 0.9

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 6,009 6,035 6,228 5,612 6,851 6,820 6,976 6,288 23,884 26,934

YoY Change (%) 28.1 30.1 23.0 20.5 14.0 13.0 12.0 12.0 25.3 12.8Total Exp 5,253 5,296 5,437 4,879 5,912 5,892 6,041 5,471 20,864 23,316EBITDA 757 739 791 733 939 927 935 817 3,020 3,617

Margins (%) 12.6 12.2 12.7 13.1 13.7 13.6 13.4 13.0 12.6 13.4Depreciation 75 82 98 104 106 108 108 113 358 435Interest 80 87 68 113 90 85 65 53 348 293Other Income 10 12 31 80 15 15 35 87 133 152PBT 612 583 657 595 758 749 797 737 2,447 3,041Tax 149 111 148 156 178 169 167 185 564 699

Rate (%) 24.4 19.1 22.5 26.1 23.5 22.5 21.0 25.2 23.0 23.0Adjusted PAT 463 471 509 439 580 581 629 552 1,883 2,342

YoY Change (%) 15.1 11.6 19.0 45.6 25.1 23.2 23.7 25.6 18.8 24.4Exceptional Items 0 0 0 4 0 0 0 0 4 0Reported PAT 463 471 509 444 580 581 629 552 1,887 2,342E: MOSL Estimates

Results PreviewSECTOR: FMCG

Amnish Aggarwal (AmnishAggarwal@MotilalOswal.com) / Amit Purohit (AmitPurohit@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect net sales to grow 14% YoY to Rs 6.8b, EBITDA margins to expand 110bp YoY, and Adj PAT is expectedto report a growth of 25.1% to Rs580m.

? Parachute volumes are likely to increase by 8-9%, while Saffola volumes would grow in low double-digits (benefitof price reduction of 5-10%). Volume growth would decline YoY on account of high base effect (volume growth of26% in hair oils and 28% in Saffola during 1QFY09).

? Prices of key raw materials, copra and safflower oil have each declined by ~20% in the last six months and will drivea 110bp margin expansion in 1QFY10.

? We expect improved performance from international businesses on account of: (1) supply chain rationalization inEgypt, (2) re-launch of the Enaleni brand in South Africa, (3) commissioning of the new plant in Egypt, and (4) entryinto new markets in the Middle East and Africa.

? The stock is trading at 18.9x FY10E EPS of Rs3.8 and 15.1x FY11E EPS of Rs4.8. Maintain Buy.

14226 June 2009

BuyPrevious Recommendation: Buy Rs1,869

BLOOMBERGNEST IN

REUTERS CODENEST.BO

Nestle India

26 June 2009

YEAR NET SALES PAT* EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

12/07A 35,044 4,313 44.7 30.7 41.8 40.8 103.1 153.6 4.8 24.3

12/08A 43,242 5,650 58.6 31.0 31.9 36.0 119.4 169.9 3.9 19.5

12/09E 51,337 6,791 70.4 20.2 26.5 29.8 118.6 173.5 3.3 15.9

12/10E 60,703 8,221 85.3 21.1 21.9 24.8 119.6 172.1 2.7 13.3

Equity Shares (m) 96.4

52-Week Range 1,875/1,220

1,6,12 Rel. Perf. (%) 0/-26/13

M.Cap. (Rs b) 180.2

M.Cap. (US$ b) 3.7

QUARTERLY PERFORMANCE (RS MILLION)Y/E DECEMBER CY08 CY09 CY08 CY09E

1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QENet Sales 10,909 10,356 11,076 10,901 12,659 12,305 13,106 13,268 43,242 51,337

YoY Change (%) 26.4 23.5 22.2 21.7 16.0 18.8 18.3 19.8 23.4 18.7Total Exp 8,419 8,406 9,004 8,778 9,562 9,967 10,590 10,647 34,607 40,765EBITDA 2,490 1,950 2,072 2,123 3,097 2,338 2,516 2,621 8,636 10,572

Margins (%) 22.8 18.8 18.7 19.5 24.5 19.0 19.2 19.8 20.0 20.6Depreciation 211 224 233 257 256 248 250 295 924 1,049Other income 63 67 82 129 103 65 85 168 341 421PBT 2,341 1,780 1,921 1,994 2,943 2,154 2,350 2,481 8,036 9,928Tax 640 538 596 614 864 678 740 854 2,387 3,137

Rate (%) 27.3 30.2 31.0 30.8 29.4 31.5 31.5 34.4 29.7 31.6Adjusted PAT 1,701 1,242 1,325 1,380 2,078 1,475 1,610 1,627 5,648 6,791

YoY Change (%) 52.7 25.6 9.3 40.3 22.2 18.8 21.5 17.9 30.9 20.2Extraordinary Inc/(Exp) -100 -31 -14 -169 -105 -20 -20 -194 -308 -339Reported PAT 1,601 1,211 1,311 1,211 1,973 1,455 1,590 1,433 5,340 6,452

YoY Change (%) 47.6 26.5 13.0 29.4 23.2 20.2 21.3 18.4 29.0 20.8E: MOSL Estimates

* Excluding extraordinary items and provisions

Results PreviewSECTOR: FMCG

Amnish Aggarwal (AmnishAggarwal@MotilalOswal.com) / Amit Purohit (AmitPurohit@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect Nestle to report net sales of Rs12.3b, up 18.8% YoY. EBITDA margins would expand 20bp due tobenefits from economies of scale. Adjusted PAT would increase 18.8% YoY to Rs1.5b.

? Prepared dishes & cooking aids would lead volume growth, with strong growth in Maggi Noodles. Milk and milkproducts would maintain double-digit volume growth on the back of dairy products. Chocolates would report bounce-back in volume growth, as the company has reverted to the Rs2 price point. Coffee exports will remain underpressure due to lower demand from parent company.

? Raw material prices remain a mixed bag. While the prices of milk (up 9% YoY) and sugar (up 20%) remain firm,prices of wheat, vegetable oil and packaging material are lower on a YoY basis.

? Nestle remains our preferred paly on food processing segment. We expect the volume growth to accelerate withexpected improvement in consumer sentiment. The stocks trades at 26.5x CY09E EPS of Rs70.4 and 21.9x CY10EEPS of Rs85.3. Maintain Buy.

14326 June 2009

NeutralPrevious Recommendation: Neutral Rs728

Results PreviewSECTOR: FMCG

BLOOMBERGTT IN

REUTERS CODETTTE.BO

Tata Tea

26 June 2009

YEAR NET SALES PAT* EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 43,923 2,898 46.9 7.0 15.5 1.3 8.1 11.5 0.9 5.6

3/09A 48,479 2,930 47.4 1.1 15.4 1.2 7.5 10.6 0.7 5.7

3/10E 51,469 2,967 48.0 1.3 15.2 1.1 7.3 9.8 0.7 5.8

3/11E 55,998 3,402 55.0 14.7 13.2 1.1 8.0 10.7 0.6 5.1

Equity Shares (m) 61.8

52-Week Range 846/430

1,6,12 Rel. Perf. (%) -4/-32/-11

M.Cap. (Rs b) 45.0

M.Cap. (US$ b) 0.9

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q* 1Q 2Q 3Q 4QNet Sales 11,347 12,003 13,009 12,120 12,141 12,783 13,490 13,055 48,479 51,469

YoY Change (%) 12.3 13.8 9.8 6.1 7.0 6.5 3.7 7.7 10.4 6.2Total Exp 9,809 10,568 11,286 10,572 10,672 11,364 11,939 11,573 42,236 45,549EBITDA 1,538 1,435 1,722 1,548 1,469 1,419 1,551 1,481 6,243 5,920

Margins (%) 13.6 12.0 13.2 12.8 12.1 11.1 11.5 11.3 12.9 11.5Depreciation 222 221 241 303 240 250 260 315 987 1,065Interest 109 154 155 125 40 51 65 73 542 229Other Income 74 281 91 148 61 75 87 96 594 319PBT 1,280 1,341 1,418 1,268 1,250 1,193 1,313 1,189 5,308 4,945Tax 440 402 485 466 419 370 407 436 1,793 1,632

Rate (%) 34.4 30.0 34.2 36.7 33.5 31.0 31.0 36.7 33.8 33.0PAT 840 939 934 802 831 823 906 753 3,515 3,313

YoY Change (%) 108.1 31.4 1.0 1.3 -1.0 -12.3 -2.9 -6.2 24.0 -5.7Minority Interest/ Share of Associate -97 -117 -113 -258 -75 -65 -60 -147 -585 -347Adjusted PAT 743 822 821 544 756 758 846 606 2,930 2,967

YoY Change (%) 110.3 -2.9 -0.1 -38.0 1.8 -7.8 3.1 11.4 1.1 1.3Extraordinary Gains 14 1,356 3,141 -434 0 0 0 0 4,076 0Reported PAT 757 2,178 3,961 110 756 758 846 606 7,005 2,967

YoY Change (%) 72.4 167.7 -69.7 -90.3 -0.1 -65.2 -78.6 451.9 -54.6 -57.7E: MOSL Estimates; * 4QFY08 sales show adjustment for previous quarters due to sale of north India plantations

Amnish Aggarwal (AmnishAggarwal@MotilalOswal.com) / Amit Purohit (AmitPurohit@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect net sales to grow 7% YoY to Rs12.1b. EBITDA margins would decline 150bp due to higher leaf teaprices, and higher spend on advertising and distribution for new product launches. Adjusted PAT would grow 1.8%YoY to Rs756m.

? Domestic branded sales are likely to remain strong, though the company would continue to face margin pressure onaccount of high prices of inputs.

? Tetley's performance would continue to be impacted by adverse INR-GBP movement. Low pricing power vis-à-visretailers in developed markets, coupled with high tea prices would continue to strain margins.

? The company has announced aggressive plans to mark its presence in various sub-categories within beverages.Pursuant to this, the company is aggressively promoting Himalayan (mineral water) in India, and specialty tea andgreen tea in developed markets. It is also prototyping a fruit drink in Indian markets under the Tion brand. We believethat near-term margins would remain under pressure and the benefits of these initiatives would be reflected only inthe long term.

? The stock trades at 15.2x FY10E EPS of Rs48 and 13.2x FY11E EPS of Rs55. Maintain Neutral.

14426 June 2009

BuyPrevious Recommendation: Buy Rs929

Results PreviewSECTOR: FMCG

BLOOMBERGUNSP IN

REUTERS CODEUNSP.BO

United Spirits

26 June 2009

YEAR NET SALES PAT* EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 46,275 2,831 31.7 -10.0 29.3 3.6 12.4 12.1 2.8 12.2

03/09A 52,859 2,850 32.2 1.7 28.9 3.4 12.1 10.6 2.6 13.5

03/10E 59,785 3,591 40.5 26.0 22.9 3.0 13.2 12.1 2.2 11.6

03/11E 67,136 5,350 60.4 49.0 15.4 2.5 16.4 14.0 1.9 9.4

Equity Shares (m) 100.2

52-Week Range 1,416/426

1,6,12 Rel. Perf. (%) 3/-54/-32

M.Cap. (Rs b) 93.0

M.Cap. (US$ b) 1.9

* Consolidated

Amnish Aggarwal (AmnishAggarwal@MotilalOswal.com) / Amit Purohit (AmitPurohit@MotilalOswal.com)

QUARTERLY PERFORMANCE (STANDALONE) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 10,087 9,020 10,293 9,078 11,600 10,509 11,836 10,559 38,478 44,505

YoY Change (%) 31.7 19.9 15.8 19.6 15.0 16.5 15.0 16.3 21.3 15.7Total Exp 8,135 7,230 9,229 7,626 9,715 8,827 9,753 8,874 32,221 37,169EBITDA 1,952 1,790 1,063 1,452 1,885 1,681 2,083 1,685 6,257 7,335

Margins (%) 19.4 19.8 10.3 16.0 16.3 16.0 17.6 16.0 16.3 16.5Depreciation 82 87 87 98 90 95 96 101 354 382Interest 341 395 529 565 525 510 480 445 1,830 1,960PBT From operations 1,529 1,308 447 789 1,270 1,076 1,507 1,140 4,073 4,993Other income 272 125 60 109 100 140 180 250 566 670PBT 1,801 1,433 507 898 1,370 1,216 1,687 1,389 4,639 5,663Tax 630 494 201 342 473 426 641 487 1,666 2,027

Rate (%) 35.0 34.5 39.7 38.0 34.5 35.0 38.0 35.1 35.9 35.8PAT 1,171 939 306 556 897 791 1,046 902 2,972 3,636

YoY Change (%) 30.8 17.0 -65.3 -14.6 -23.4 -15.8 242.0 62.2 -5 22.3Reported PAT 1,171 939 306 556 897 791 1,046 902 2,972 3,636E: MOSL Estimates

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect United Spirits to report net sales of Rs11.6b, up 15% YoY. EBITDA margins would decline 310bp (30bpQoQ expansion seasonal) to 16.3%. Adjusted PAT would decline 23.4% to Rs897m.

? We expect double-digit volume growth of 12-13% to sustain due to strong brand franchise and all-round improvementin first-line brand sales, despite restriction on movement of alcohol during elections.

? ENA prices are expected to be Rs140/case as against Rs126/case in 4QFY09 and Rs111/case in 1QFY09 due toincrease in prices post the crushing season. In addition, the quarter will also reflect ad spends during the IPL (IndianPremier League). The company will gain from price increases in key states in the past few months.

? We expect molasses prices to remain firm in 1HFY10. Price trend post 2QFY10 will be a function of sugarcaneproduction in the coming season. Current estimates indicate 20-25% increase in sugarcane production. Monsoon willbe a key factor to watch for; FY09 yield decline was due to uneven rains in Maharashtra.

? While there are concerns with regard to highly leveraged balance sheet, business outlook for the company remainspromising. We expect sale of treasury stock to enable reduction in debt levels by the end of FY10. We believe thatUnited Spirits continues to be the best bet in the liquor space in India. The stock is trading at 22.9x FY10E EPS and15.4x FY11E EPS. Maintain Buy.

14526 June 2009

Information Technology

COMPANY NAMEHCL Technologies

Infosys

MphasiS

Patni Computer

TCS

Tech Mahindra

Wipro

EXPECTED QUARTERLY PERFORMANCE SUMMARY (RS MILLION)CMP (RS) RECO SALES EBITDA NET PROFIT

26.6.09 JUN.09 VAR. VAR. JUN.09 VAR. VAR. JUN.09 VAR. VAR.% YOY % QOQ % YOY % QOQ % YOY % QOQ

Information TechnologyHCL Technologies 192 Neutral 26,368 21.6 -7.9 4,853 0.5 -17.8 3,624 291.8 81.6Infosys 1,827 Neutral 52,173 7.5 -7.4 16,516 11.7 -12.7 13,558 6.7 -15.2MphasiS 409 Buy 10,464 41.0 -0.2 2,744 120.2 -2.6 1,810 129.1 -19.4Patni Computer 271 Neutral 7,740 -1.2 -2.7 1,301 8.0 -9.1 1,000 -3.6 31.5TCS 397 Neutral 68,832 7.4 -4.0 16,880 10.2 -10.2 12,748 5.5 -3.0Tech Mahindra 739 Neutral 11,004 -1.4 4.7 3,033 5.7 17.0 1,672 -35.4 -18.6Wipro 384 Neutral 64,696 8.5 -1.2 9,714 -5.8 -15.1 9,009 10.7 -0.7Sector Aggregate 241,278 9.5 -3.9 55,041 8.9 -11.1 43,421 13.4 -4.0

Ashwin Mehta (Ashwin.Mehta@MotilalOswal.com) / Vihang Naik (Vihang.Naik@MotilalOswal.com)

Results PreviewQUARTER ENDING JUNE 2009

Expect volumes to remain subduedWe expect volumes to decline for Infosys and Wipro, and remain flattish for TCS andHCL Tech. We estimate volume decline of 3% for Infosys and 1% for Wipro in 1QFY10,the second consecutive quarter of volume decline for these companies.

VOLUME GROWTH QOQ

BSE Sensex: 14,765 S&P CNX: 4,376 26 June 2009

-8%

-4%

0%

4%

8%

3QFY08 4QFY08 1QFY09 2QFY09 3QFY09 4QFY09

Infosys (IT Services) Wipro (Global IT Services)

Source: Company/MOSL

We believe volume sluggishness will put utilization under pressure, even though we expectmarginal headcount addition at most companies except Wipro, where we see start offresher induction for offers given in FY09.

BFSI/Telecom expected to depress volumes, Retail and Manufacturingto growWe expect BFSI and Telecom, two verticals that have largely contributed to revenuedecline in the last two quarters, to continue contributing towards volume declines. Theseverity of the cuts is likely to reduce and positive statements on stability of at least BFSI

14626 June 2009

Information Technology

should be heard from the companies. BFSI and Telecom together contribute 50% ofaggregate revenues for the top-4 IT companies.

Manufacturing and Retail, the two verticals that have bucked the declining trend, are likelyto continue posting growth. However, we expect some pressure at TCS in Manufacturingon account of its high auto exposure (~40%). Manufacturing and Retail together contribute33% of aggregate revenues for the top-4 IT companies.

AGGREGATE VERTICAL GROWTH QOQ

-16%

-8%

0%

8%

16%

3QFY08 4QFY08 1QFY09 2QFY09 3QFY09 4QFY09

BFSI Retail Telecom Manufacturing

Source: Company/MOSL

Expect Infosys’ constant currency full-year revenue guidance to be intactWe expect Infosys to post revenues towards the higher end of its 1QFY10 guidance of5.4-3.7% decline. We expect the company to maintain its full-year constant currencyrevenue guidance of 4-0% decline. On a reported currency basis, we believe the guidanceat the lower end could be revised upwards to -5%, on cross currency benefits. The companyhad assumed a ~3% cross currency hit in FY10; we expect this hit to be ~1% if currentexchange rates were to continue.

We expect Infosys to reduce its FY10 EPS guidance to Rs93-96 on account of change incurrency assumption from Rs50.7/US$ to 1QFY10 closing rates of about Rs47/US$. Webelieve the company would build in greater efficiencies to reduce EPS guidance less thanpurely suggested by the rupee appreciation.

INFOSYS’ GUIDANCE EXPECTATIONSGUIDED EXPECTED

1QFY10 Revenue Growth -5.4% to 3.7% -4%FY10 US$ Revenue Growth -6.7% to -3.1% -5% to -1%FY10 US$ CC Revenue Growth -4% to 0% UnchangedFY10 EPS Rs.96.65-Rs101.18 Rs.93-Rs.962QFY10 Revenue Growth 1-2%

Source: Company/MOSL

Infosys’ guidance was based on US$/GBP, US$/EUR and US$/AUD exchange rates of1.43, 1.33 and 0.69, respectively.

14726 June 2009

Information Technology

We believe flattish growth guidance by Infosys and Wipro for 2QFY10 would still leavethe demand rebound picture hazy.

Forex movement might not hurt in 1QFY10Forex movement during the quarter has been characterized by appreciation of all othercurrencies against the US$, thus negating the effect of US$ depreciation v/s the INR.

CURRENCY MOVEMENTS (%)USD DEPRECIATION EUR GBP AUDClosing   5 14 17Average   4 9 14INR DEPRECIATION US$ EUR GBP AUDClosing -6 -1 8 9Average -2 2 6 11

Source: RBI/Oanda

Positive for US$ reported revenues, marginal impact on rupee revenues: Webelieve cross currency movements and rupee appreciation would counter each other leadingto minimal impact on rupee revenues and EBITDA margins, though reported US$ revenueswould be positively impacted to the tune of 2%.

IMPACT OF CURRENCY MOVEMENTS ON 1QFY10 REVENUE (%)  INVOICE CONTRIBUTION CROSS CURRENCY IMPACT CURRENCY IMPACT

US$ EUR GBP AUD ON US$ REVENUES ON RUPEE REVENUESTCS 59.0 8.0 15.0 1 1.8 -0.2Infosys 73.4 7.7 9.8 4.8 1.9 -0.4Wipro 73.0 7.0 15.0 NA 1.6 -0.6HCLT 61.0 8.0 19.6 NA 2.0 -0.1

Source: Company/MOSL

Expect positive impact on other income of Wipro, TCS and HCL Tech: We expecta positive impact on other income of Wipro, TCS and HCL Tech, with HCL Tech likely tobenefit the most. This is on account of our expectation that forex hedging gains would bemore than translation losses. HCL Tech would post hedging and translation gains on accountof its net foreign currency debt status. Also, we expect accumulated forex losses in thebalance sheet to come down for Wipro, TCS and HCL Tech. We believe the rupeemovement would be largely neutral for Infosys.

COMPARISON OF HEDGING POSITION (AS OF MARCH 2009)COMPANY HEDGE ACCUMULATED FOREX PARTICULARS

(US$ M) LOSSES (US$M)TCS 709 146 US$ 399m expire in FY10E, remaining in

FY11 and FY12Infosys 506 0 MTM at the end of each quarterWipro Tech ~1,900 315 ~1/3rd for FY10HCLT 1,288 225 ~14% for FY09, ~66% for FY10

Source: Company/MOSL

14826 June 2009

Information Technology

TRANSLATION LOSS IMPACT IN 1QFY10          INVOICE CONTRIBUTION (%) TRANSLATION LOSSCOMPANY US$ EUR GBP AUD IMPACT (%)TCS 59.0 8.0 15.0 1.0 -2.0Infosys 73.4 7.7 9.8 4.8 -2.9Wipro Tech 73.0 7.0 15.0 NA -2.9HCLT 61.0 8.0 19.6 NA -1.9

Source: Company/MOSL

Positive macro indicators yet to give a demand uptick signal, maintainNeutralOur interactions with companies and channel checks indicate that sharp decline in spendshave abated and stability has returned to the market, though incremental business decisionscontinue to be slow and are yet to translate into better demand. Large contributing verticalslike BFSI and Telecom continue to be under stress, and volume upticks are still a fewquarters away. We expect large IT vendors to de-grow by 4-1% in FY10 organically. Weexpect gradual improvements post 2QFY10 and expect 10-14% US$ revenue growth fortop-tier IT stocks in FY11. We have assumed an average INR/US$ rate of Rs48.5 for1QFY10, Rs47.4 for FY10 and Rs45 for FY11.

With absolute run up of 37-84% in the top-4 IT stocks over the last three months, webelieve valuations are building in a sharp rebound and possible STPI extension beyond2010. We believe the next run would be decided by outlook of a possible rebound ofbusiness volumes; any disappointments therein would impact valuations negatively.

With valuations in the range of 13-18x FY10E earnings, we believe absolute upsides arelimited. We view the sector as defensive, if the broader market corrects due to positivecurrency impact, significant cost management levers and strong free cash flow generation.We maintain our Neutral rating on the sector.

14926 June 2009

RELATIVE PERFORMANCE - 3 MONTH (%) RELATIVE PERFORMANCE - 1 YEAR (%)

Stock performance and valuations

STOCK PERFORMANCE (%) ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR

3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEARInformation TechnologyHCL Technologies 88 -30 41 -33 43 -23Infosys 32 3 -15 0 -14 10MphasiS 101 78 53 76 55 85Patni Computer 122 19 75 17 76 26TCS 42 -9 -5 -12 -3 -2Tech Mahindra 175 1 127 -1 129 8Wipro 51 -20 3 -22 5 -13

COMPARATIVE VALUATIONCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)

26.6.09 FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11EInformation TechnologyHCL Technologies 192 Neutral 18.6 14.9 17.3 10.3 12.9 11.1 6.7 6.5 6.2 24.0 18.0 18.5Infosys 1,827 Neutral 102.5 96.9 101.0 17.8 18.9 18.1 13.2 13.8 12.8 36.7 27.6 24.3MphasiS 409 Buy 14.1 37.7 38.1 29.1 10.8 10.7 21.8 7.3 6.5 22.8 43.8 31.9Patni Computer 271 Neutral 28.6 24.5 22.5 9.5 11.1 12.1 4.0 3.7 3.8 13.4 10.7 9.0TCS 397 Neutral 26.2 25.5 25.0 15.1 15.6 15.9 10.5 10.9 10.8 36.4 30.0 26.6Tech Mahindra 739 Neutral 70.6 73.3 69.8 10.5 10.1 10.6 7.5 9.7 9.5 55.0 37.9 27.0Wipro 384 Neutral 23.6 24.9 24.7 16.2 15.4 15.6 10.9 10.7 9.6 24.6 21.7 18.2Sector Aggregate 15.8 15.8 15.6 10.9 10.9 10.3 28.6 24.0 21.1

Information Technology

90

110

130

150

170

Mar-09 Apr-09 May-09 Jun-09

Sensex MOSt IT Index

40

60

80

100

120

Jun-08 Sep-08 Dec-08 Mar-09 Jun-09

MOSt IT Index Sensex

15026 June 2009

HCL Technologies

YEAR NET SALES PAT* EPS* EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

6/08A 76,394 10,363 15.2 -18.8 12.6 2.4 20.3 20.2 1.3 6.4

6/09E# 103,297 12,537 18.6 22.1 10.3 2.4 24.0 18.8 1.3 6.6

6/10E 109,288 10,066 14.9 -19.7 12.9 2.2 18.0 13.6 1.2 6.5

6/11E 116,640 11,798 17.3 16.0 11.1 1.9 18.5 15.0 1.1 6.3

Equity Shares (m) 671.7

52-Week Range 285/89

1,6,12 Rel. Perf. (%) 11/11/-33

M.Cap. (Rs b) 128.8

M.Cap. (US$ b) 2.7

QUARTERLY PERFORMANCE (US GAAP) (RS MILLION)Y/E JUNE FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4QE 1Q 2Q 3Q 4QRevenues 23,623 24,691 28,615 26,368 26,644 27,002 27,605 28,037 103,297 109,288

Q-o-Q Change (%) 8.9 4.5 15.9 -7.9 1.0 1.3 2.2 1.6 35.2 5.8Direct Expenses 14,567 15,178 18,207 17,266 17,255 17,530 17,855 18,391 65,218 71,031Sales, General & Admin. Expenses 4,019 4,332 4,503 4,249 4,232 4,286 4,378 4,502 17,103 17,398Operating Profit 5,037 5,181 5,905 4,853 5,157 5,186 5,372 5,144 20,976 20,860

Margins (%) 21.3 21.0 20.6 18.4 19.4 19.2 19.5 18.3 20.3 19.1Other Income 558 1,206 -24 -46 -34 -25 -38 -15 1,694 -112Forex Gain / (Loss) -904 -1,205 -2,016 731 -889 -1,062 -661 -563 -3,394 -3,175Depreciation & Amort. 908 971 1,417 1,376 1,264 1,279 1,302 1,320 4,672 5,164PBT bef. Extra-ordinary 3,783 4,211 2,448 4,163 2,970 2,820 3,371 3,247 14,605 12,408Provision for Tax 422 667 470 539 464 444 516 918 2,098 2,342

Rate (%) 11.2 15.8 19.2 13.0 15.6 15.8 15.3 28.3 14.4 18.9Minority Interest -14 1 -17 0 0 0 0 0 -30 0PAT after ESOP chrg 3,375 3,543 1,995 3,624 2,506 2,376 2,855 2,329 12,537 10,066

Q-o-Q Change (%) 264.9 5.0 -43.7 81.6 -30.8 -5.2 20.2 -18.4 21.0 -19.7E: MOSL Estimates; Axon is consolidated since December 2008

NeutralPrevious Recommendation: Neutral Rs192

26 June 2009BLOOMBERGHCLT IN

REUTERS CODEHCLT.BO

Results PreviewSECTOR: INFORMATION TECHNOLOGY

* After ESOP charges; # Axon consolidated in December 2008

Ashwin Mehta (Ashwin.Mehta@MotilalOswal.com) / Vihang Naik (Vihang.Naik@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect HCL Technologies to report revenues of Rs26.4b, down 7.9% QoQ and up 21.6% YoY.

? EBITDA margins would decline by 220bp to 18.4% due to expected pricing decline and rupee appreciation.

? HCL has forward covers of approximately US$1.3b; we expect the company to book forex gains of Rs731m due topositive impact of its net monetary liabilities and large forex covers. Its hedges have been reduced from US$1,288min March 2009 to US$810m in May 2009. The company has cancelled covers worth US$230m during the currentquarter. The benefit of rupee appreciation will not accrue on these covers.

? We expect the company to book net profit of Rs3.6b v/s Rs2b in 3QFY09, a QoQ growth of 82%.

? The stock trades at 12.9x FY10E and 11.1x FY11E earnings (after ESOP charges). Maintain Neutral.

? Key risks: Protracted recovery, currency volatility, existing client ramp downs, successful integration of Axon.

15126 June 2009

Infosys

YEAR NET SALES PAT* EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 166,920 45,380 79.2 19.8 23.1 7.6 36.2 37.0 5.8 18.6

3/09A 216,930 58,800 102.5 29.5 17.8 5.7 36.7 40.2 4.4 13.2

3/10E 210,805 55,547 96.9 -5.5 18.9 4.8 27.6 28.2 4.3 13.8

3/11E 227,817 57,885 101.0 4.2 18.1 4.1 24.3 25.2 3.9 12.7

Equity Shares (m) 573.4

52-Week Range 1,876/1,040

1,6,12 Rel. Perf. (%) 10/6/0

M.Cap. (Rs b) 1,047.4

M.Cap. (US$ b) 21.8

QUARTERLY PERFORMANCE (INDIAN GAAP) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QRevenues 48,540 54,180 57,860 56,350 52,173 51,024 52,893 54,715 216,930 210,805

Q-o-Q Change (%) 6.9 11.6 6.8 -2.6 -7.4 -2.2 3.7 3.4 30.0 -2.8Direct Expenses 27,540 28,910 30,750 30,450 28,979 28,726 29,479 30,254 117,650 117,438SG&A 6,210 7,330 6,800 6,990 6,678 6,888 6,876 7,113 27,330 27,555Operating Profit 14,790 17,940 20,310 18,910 16,516 15,410 16,538 17,348 71,950 65,812

Margins (%) 30.5 33.1 35.1 33.6 31.7 30.2 31.3 31.7 33.2 31.2Other Income 1,170 660 400 2,520 2,036 2,337 2,635 2,759 4,730 9,767Depreciation 1,690 1,770 1,870 2,280 2,315 2,280 2,246 2,214 7,610 9,056PBT bef. Extra-ordinary 14,270 16,830 18,840 19,150 16,237 15,467 16,927 17,892 69,070 66,523Provision for Tax 1,560 2,510 3,030 3,170 2,679 2,552 2,793 2,952 10,270 10,976

Rate (%) 10.9 14.9 16.1 16.6 16.5 16.5 16.5 16.5 14.9 16.5PAT before EO 12,710 14,320 15,810 15,980 13,558 12,915 14,134 14,940 58,800 55,547

Q-o-Q Change (%) 3.4 12.7 10.4 1.1 -15.2 -4.7 9.4 5.7 29.6 -5.5Extra-ordinary Items 310 0 620 150 0 0 0 0 1,080 0PAT aft. Minority and EO 13,020 14,320 16,430 16,130 13,558 12,915 14,134 14,940 59,880 55,547

Q-o-Q Change (%) 4.2 10.0 14.7 -1.8 -15.9 -4.7 9.4 5.7 28.5 -7.2Diluted EPS (Rs) 22.2 25.0 27.5 28.1 23.6 22.5 24.7 26.1 102.5 96.9E: MOSL Estimates

NeutralPrevious Recommendation: Neutral Rs1,827

26 June 2009BLOOMBERGINFO IN

REUTERS CODEINFY.BO

Results PreviewSECTOR: INFORMATION TECHNOLOGY

Ashwin Mehta (Ashwin.Mehta@MotilalOswal.com) / Vihang Naik (Vihang.Naik@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect Infosys’ consolidated revenues to decline by 7.4% QoQ. Revenues in US dollar terms are likely to de-grow by 4% QoQ. Infosys had guided for 1QFY10 revenue de-growth of 5.4-3.7% QoQ.

? We expect pricing to decline by 1.3% QoQ, after 2% constant currency decline in 4QFY09. Our revenue growthestimates factor in 2.8% QoQ volume decline.

? During 1QFY10, GBP and EUR have appreciated by 9% and 4% respectively, against the US$. Infosys bills ~25%of its invoices in non-dollar currencies.

? We expect EBITDA margins to decline by 190bp QoQ to 31.7%. EBITDA margins could be hurt due to a decline inpricing and utilization. Average rupee appreciation of 2% in 1QFY10 is also expected to dent EBITDA margins.

? EBITDA at Rs16.5b is expected to de-grow by 13% QoQ and grow 12% YoY.? Infosys held hedges worth US$506m as of March 2009. We expect Infosys to book MTM forex losses of Rs205m in

1QFY10 v/s Rs150m in 4QFY09.? Net profits are likely to decline by 15.2% QoQ to Rs13.6b, in line with its guided EPS of Rs23.6.? The stock currently trades at 18.9x FY10E and 18.1x FY11E earnings. Maintain Neutral.? Key risks: Protracted recovery, currency volatility, top client declines.

15226 June 2009

Mphasis

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 24,231 2,553 12.1 41.0 33.6 7.4 23.6 25.7 3.5 20.1

10/08A* 19,065 2,954 14.1 15.7 29.1 5.9 22.8 22.1 4.5 21.8

10/09E 41,257 7,912 37.6 167.8 10.9 3.9 43.8 47.7 1.9 7.3

10/10E 45,965 8,009 38.1 1.2 10.7 3.0 31.9 36.2 1.6 6.5

Equity Shares (m) 209.0

52-Week Range 414/119

1,6,12 Rel. Perf. (%) 26/114/76

M.Cap. (Rs b) 85.4

M.Cap. (US$ b) 1.8

QUARTERLY PERFORMANCE (RS MILLION)Y/E OCTOBER PE OCT.08 FY09 PEOCT.08 FY09E

1Q 2Q 1MOCT.08 1Q 2Q 3QE 4QERevenues 7,422 8,361 3,282 9,777 10,485 10,464 10,531 19,065 41,257

Q-o-Q Change (%) 12.9 12.6 NA NA 7.2 -0.2 0.6 NA NADirect Expenses 5,472 5,755 2,089 6,118 6,555 6,647 6,835 13,316 26,155Sales, General & Admin. Exp. 704 837 325 1,067 1,111 1,073 1,084 1,865 4,336Operating Profit 1,247 1,769 868 2,592 2,818 2,744 2,612 3,884 10,766

Margins (%) 16.8 21.2 26.4 26.5 26.9 26.2 24.8 20.4 26.1Other Income 17 164 37 64 153 -251 -182 218 -215Depreciation 412 446 147 486 552 548 541 1,005 2,127PBT bef. Extra-ordinary 852 1,487 757 2,170 2,419 1,946 1,889 3,096 8,424Provision for Tax 62 77 4 70 174 136 132 143 513

Rate (%) 7.3 5.2 0.5 3.2 7.2 7.0 7.0 4.6 6.1PAT bef. Extra-ordinary 790 1,411 753 2,100 2,245 1,810 1,757 2,953 7,911

Q-o-Q Change (%) 10.6 78.6 NA NA 6.9 -19.4 -2.9 NA NAE: MOSL Estimates; Financial year ending has been changed to year ending October from March earlier.

BuyPrevious Recommendation: Buy Rs409

26 June 2009BLOOMBERGMPHL IN

REUTERS CODEMBFL.BO

Results PreviewSECTOR: INFORMATION TECHNOLOGY

Ashwin Mehta (Ashwin.Mehta@MotilalOswal.com) / Vihang Naik (Vihang.Naik@MotilalOswal.com)

* Financial year ending has been changed to year ending October from March earlier

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect Mphasis to report revenues of Rs10.5b. In US$ terms, we expect the company to report revenues ofUS$214m, up 2.7% QoQ.

? EBITDA margins are likely to decline by 70bp QoQ to 26.2%.

? EBITDA would de-grow by 2.6% QoQ to Rs2.7b.

? Net profit is likely to de-grow by 19.4% QoQ to Rs1.8b, largely on higher translation losses due to rupee appreciation.

? We believe that Mphasis is differentiated in the mid-cap IT space due to lower revenue concerns in the companygiven its HP-EDS parentage.

? The stock is currently trading at 10.9x FY09E and 10.7x FY10E earnings. Maintain Buy.

? Key risks: Protracted recovery, currency volatility, delay in decision making, client concentration.

15326 June 2009

Patni Computer Systems

NeutralPrevious Recommendation: Neutral Rs271

26 June 2009BLOOMBERGPATNI IN

REUTERS CODEPTNI.BO

Equity Shares (m) 128.4

52-Week Range 274/94

1,6,12 Rel. Perf. (%) 19/55/17

M.Cap. (Rs b) 34.8

M.Cap. (US$ b) 0.7

QUARTERLY PERFORMANCE (US GAAP) (RS MILLION)Y/E DECEMBER CY08 CY09 CY08 CY09E

1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QERevenues 7,061 7,837 8,523 8,570 7,955 7,740 7,623 7,349 31,991 30,668

Q-o-Q Change (%) 2.9 11.0 8.7 0.6 -7.2 -2.7 -1.5 -3.6 18.7 -4.1Direct Expenses 4,843 5,267 5,594 5,455 5,143 5,066 5,098 4,753 21,158 20,060Sales, General & Admin. Expenses 1,157 1,365 1,530 1,496 1,380 1,374 1,353 1,305 5,549 5,412Operating Profit 1,061 1,205 1,399 1,619 1,432 1,301 1,172 1,291 5,284 5,195

Margins (%) 15.0 15.4 16.4 18.9 18.0 16.8 15.4 17.6 16.5 16.9Other Income 59 285 197 -435 -202 171 -119 -104 106 -254Depreciation 279 283 300 286 288 302 297 287 1,147 1,174PBT bef. Extra-ordinary 842 1,207 1,296 898 941 1,170 755 901 4,243 3,767Provision for Tax 117 170 168 117 180 170 113 140 572 603

Rate (%) 13.9 14.1 12.9 13.1 19.1 14.5 15.0 15.5 13.5 16.0Net Income bef. Extra-ordinary 725 1,037 1,129 780 761 1,000 642 761 3,671 3,164

Q-o-Q Change (%) -27.3 43.1 8.8 -30.9 -2.5 31.5 -35.8 18.5 -20.9 -13.8Extra-ordinary items 0 0 -873 0 0 0 0 0 -873 0Net Income aft. Extra-ordinary 725 1,037 2,002 780 761 1,000 642 761 4,544 3,164

Q-o-Q Change (%) -27.3 43.1 93.0 -61.0 -2.5 31.5 -35.8 18.5 -2.1 -30.4E: MOSL Estimates

YEAR NET SALES PAT* EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

12/07A 26,950 4,643 32.4 30.0 8.4 1.4 18.9 18.9 0.9 4.9

12/08A 31,991 3,671 28.6 -11.9 9.5 1.2 13.4 13.4 0.7 4.0

12/09E 30,668 3,164 24.5 -14.2 11.1 1.1 10.7 10.7 0.6 3.7

12/10E 31,755 2,905 22.5 -8.2 12.0 1.0 9.0 9.0 0.5 3.8

Results PreviewSECTOR: INFORMATION TECHNOLOGY

* Reflects adjusted PAT

Ashwin Mehta (Ashwin.Mehta@MotilalOswal.com) / Vihang Naik (Vihang.Naik@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect revenues to de-grow 2.7% QoQ to Rs7.7b in rupee terms in 2QCY09. In US$ terms, revenues would beflat QoQ at US$156m, lower than the company guidance.

? EBITDA margins are likely to decline to 16.8% as against 18% in 1QCY09. We expect the operating margins to behit due to 2.2% rupee appreciation QoQ and pricing pressure.

? EBITDA would de-grow by 9% QoQ and grow 8% YoY to Rs1.3b.

? We expect net profit to grow 32% QoQ to Rs1b, primarily on account of high other income due to maturing FMPs(fixed-maturity plans) during the quarter.

? The stock trades at 11.1x CY09E and 12x CY10E earnings. Maintain Neutral.

? Key risks: Protracted recovery, currency volatility, delay in decision making, client concentration.

15426 June 2009

Tata Consultancy Services

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 228,614 50,191 25.5 20.8 15.6 6.2 46.5 46.2 3.3 12.6

3/09A* 278,129 51,369 26.2 3.0 15.1 4.9 36.4 44.2 2.7 10.5

3/10E* 274,664 49,874 25.5 -2.9 15.6 4.4 30.0 34.8 2.7 10.9

3/11E* 288,025 48,899 25.0 -2.0 15.9 4.0 26.6 31.6 2.5 10.8

Equity Shares (m) 1,957.2

52-Week Range 445/209

1,6,12 Rel. Perf. (%) 19/10/-12

M.Cap. (Rs b) 776.8

M.Cap. (US$ b) 16.1

QUARTERLY PERFORMANCE (US GAAP) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E*

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QRevenues 64,107 69,534 72,770 71,717 68,832 67,239 68,657 69,936 278,129 274,664

Q-o-Q Change (%) 6.0 8.5 4.7 -1.4 -4.0 -2.3 2.1 1.9 21.7 -1.2Direct Expenses 36,427 36,879 39,348 38,120 37,630 37,208 37,750 38,232 150,774 150,820Sales, General & Admin. Exp. 12,366 14,458 13,948 14,802 14,323 13,976 14,094 14,316 55,574 56,709Operating Profit 15,314 18,197 19,474 18,795 16,880 16,055 16,813 17,388 71,781 67,135

Margins (%) 23.9 26.2 26.8 26.2 24.5 23.9 24.5 24.9 25.8 24.4Other Income 332 -1,784 -1,847 -1,374 283 -271 -26 160 -4,673 146Depreciation 1,167 1,349 1,454 1,796 1,669 1,624 1,659 1,691 5,766 6,643PBT bef. Extra-ordinary 14,479 15,064 16,173 15,625 15,494 14,160 15,127 15,856 61,342 60,638Provision for Tax 2,297 2,291 2,481 2,293 2,557 2,336 2,496 2,616 9,362 10,005

Rate (%) 15.9 15.2 15.3 14.7 16.5 16.5 16.5 16.5 15.3 16.5Minority Interest 96 158 168 190 190 190 190 190 611 758Net Income after. EO 12,086 12,615 13,525 13,143 12,748 11,634 12,442 13,050 51,369 49,874

Q-o-Q Change (%) -3.8 4.4 7.2 -2.8 -3.0 -8.7 6.9 4.9 3.0 -2.9E: MOSL Estimates;

NeutralPrevious Recommendation: Neutral Rs397

26 June 2009BLOOMBERGTCS IN

REUTERS CODETCS.BO

Results PreviewSECTOR: INFORMATION TECHNOLOGY

*EPS cum-bonus of 1:1

Ashwin Mehta (Ashwin.Mehta@MotilalOswal.com) / Vihang Naik (Vihang.Naik@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect TCS to report revenues of Rs68.8b, de-growth of 4% QoQ and growth of 7.4% YoY, with US$ revenuede-growth of 1% QoQ to US$1419m on a consolidated basis.

? EBITDA margins are expected to be at 24.5%, down 170bp QoQ due to rupee appreciation and declining pricing.

? We estimate other income for the quarter at Rs283m. Forex loss would be lower than last quarter since translationlosses are largely set off by hedging gains. TCS’ cash flow accounting policy would reflect part of the forex lossesunder ‘other comprehensive income’ (OCI) in the balance sheet.

? Net profit is likely to decline by 3% QoQ to Rs12.7b.

? TCS has not experienced major project cancellations during 1QFY10, after significant cancellations in 4QFY09. Weexpect volumes to grow 1% QoQ due to base effect.

? Billing rates could dip by 2% as compared to 4QFY09 owing to renegotiations in existing deals.

? The stock trades at 15.6x FY10E and 15.9x FY11E earnings. Maintain Neutral.

? Key risks: Protracted recovery, currency volatility, delay in decision making, client bankruptcies in manufacturing

15526 June 2009

Tech Mahindra

YEAR NET SALES PAT EPS* EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 37,661 7,693 58.9 26.8 12.6 7.1 70.7 69.2 2.3 10.7

3/09A 44,647 9,224 70.6 19.9 10.5 4.3 55.0 53.9 1.8 6.9

3/10E* 43,126 9,578 73.3 3.8 10.1 3.0 37.9 33.9 3.0 9.1

3/11E* 43,983 9,120 69.8 -4.8 10.6 2.4 27.0 21.7 2.4 8.9

Equity Shares (m) 130.7

52-Week Range (Rs) 860/204

1,6,12 Rel. Perf. (%) 60/155/-1

M.Cap. (Rs b) 96.6

M.Cap. (US$ b) 2.0

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QRevenues 11,164 11,648 11,322 10,513 11,004 10,874 10,761 10,487 44,647 43,126

Q-o-Q Change (%) 9.3 4.3 -2.8 -7.1 4.7 -1.2 -1.0 -2.5 18.5 -3.4Direct Cost 6,825 6,867 6,572 6,364 6,409 6,423 6,412 6,306 26,628 25,549Other Operating Exps 1,470 1,520 1,570 1,557 1,563 1,577 1,582 1,573 6,117 6,294Operating Profit 2,869 3,261 3,180 2,592 3,033 2,874 2,767 2,609 11,902 11,283

Margins (%) 25.7 28.0 28.1 24.7 27.6 26.4 25.7 24.9 26.7 26.2Other Income 261 -320 -397 78 -220 -163 -161 -157 -378 -702Interest 2 0 0 23 605 582 558 534 25 2,279Depreciation 258 267 286 286 308 304 301 294 1,097 1,208PBT bef. Extra-ordinary 2,870 2,674 2,497 2,361 1,900 1,825 1,746 1,624 10,402 7,095Provision for Tax 282 321 269 306 228 228 227 219 1,178 902

Rate (%) 9.8 12.0 10.8 13.0 12.0 12.5 13.0 13.5 11.3 12.7Minority Interest 2 -1 -1 0 0 0 0 0 0 0Net Income bef. Extra-ordinary 2,586 2,354 2,229 2,055 1,672 1,597 1,519 1,405 9,224 6,192

Q-o-Q Change (%) 18.1 -9.0 -5.3 -7.8 -18.6 -4.5 -4.9 -7.5 19.9 -32.9Extra-ordinary items 0 673 0 250 0 0 0 0 923 0Net Income aft. Extra-ordinary 2,586 3,027 2,229 2,305 1,672 1,597 1,519 1,405 10,147 6,192

Q-o-Q Change (%) -217.0 17.0 -26.4 3.4 -27.5 -4.5 -4.9 -7.5 208.0 -39.0E: MOSL Estimates

NeutralPrevious Recommendation: Neutral Rs739

26 June 2009BLOOMBERGTECHM IN

REUTERS CODETEML.BO

Results PreviewSECTOR: INFORMATION TECHNOLOGY

* Includes profits from Satyam

Ashwin Mehta (Ashwin.Mehta@MotilalOswal.com) / Vihang Naik (Vihang.Naik@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect Tech Mahindra to report 4.7% QoQ revenue growth in 1QFY10 to Rs11b. US$ revenues ($227m) arelikely to grow by 7.3% QoQ, aided by GBP appreciation against US$. Tech Mahindra derives almost 60% of itsrevenues from Europe.

? EBITDA margins would expand 290bp QoQ to 27.6%, with the GBP appreciating by an average 9% against theUS$. Last quarter, EBITDA margins were hit due to GBP depreciation against US$.

? Tax rate is expected to be flat at around 12%.

? We expect net profit to de-grow by 19% QoQ to Rs1.7b on account of interest expenses amounting to Rs605m onloan taken for Satyam acquisition.

? The stock trades at 10.1x FY10E and 10.6x FY11E consolidated (diluted) earnings. Maintain Neutral.

? Key risks: Integration with Satyam, problems with BT, currency volatility, delay in decision making.

15626 June 2009

Wipro

YEAR NET SALES PAT* EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 197,428 32,240 22.2 9.8 17.3 4.3 27.9 23.1 2.8 14.0

3/09A 254,564 34,415 23.6 6.7 16.2 3.7 24.6 21.6 2.2 10.8

3/10E 268,198 36,202 24.9 5.2 15.4 3.0 21.7 17.7 2.0 10.6

3/11E 290,780 35,907 24.7 -0.8 15.6 2.6 18.2 16.6 1.7 9.5

Equity Shares (m) 1,456.2

52-Week Range 487/182

1,6,12 Rel.Perf.(%) -6/11/-22

M.Cap. (Rs b) 558.7

M.Cap. (US$ b) 11.6

CONSOLIDATED QUARTERLY PERFORMANCE (US GAAP) (RS MILLION)Y/E MARCH FY09 FY10E* FY09* FY10E*

1Q 2Q 3Q* 4Q* 1Q 2Q 3Q 4QIT Services and Products# 51,573 56,779 58,572 59,230 57,747 60,413 60,271 59,366 226,154 237,798Other Businesses 8,050 7,315 6,815 6,230 6,949 7,260 7,743 8,444 28,410 30,400Revenues 59,623 64,094 65,387 65,460 64,696 67,674 68,014 67,809 254,564 268,198

Q-o-Q Change (%) 6.6 7.5 2.0 0.1 -1.2 4.6 0.5 -0.3 0.0 5.4Y-o-Y Change (%) 42.5 35.6 24.9 17.0 8.5 5.6 4.0 3.6 28.9 229.6

Direct Expenses 41,400 45,223 45,953 45,600 46,336 49,212 48,913 47,597 178,176 192,058SG&A 7,687 8,004 8,754 8,013 8,242 8,425 8,536 8,643 32,458 33,846EBIT 10,309 10,372 10,318 11,443 9,714 9,633 10,161 11,166 42,442 40,678

Margins (%) 17.3 16.2 15.8 17.5 15.0 14.2 14.9 16.5 16.7 15.2Other Income -140 -671 -223 -238 1,223 640 514 629 -1,272 3,006Forex Gain/(Loss) -689 -321 150 -736 -397 -937 0 0 -1,596 -1,333Income from equity investees 107 106 114 35 100 100 100 100 362 400PBT 9,587 9,486 10,359 10,504 10,639 9,437 10,774 11,895 39,936 42,750Provision for Tax 1,436 1,240 1,364 1,382 1,581 1,401 1,601 1,769 5,422 6,352

Rate (%) 15.0 13.1 13.2 13.2 14.9 14.8 14.9 14.9 13.6 14.9Minority Interest 12.0 22.0 16.0 49.0 49.0 49.0 49.0 49.0 99 196.0Net Income 8,139 8,224 8,979 9,073 9,009 7,987 9,124 10,077 34,415 36,202

Q-o-Q Change (%) -7.0 1.0 9.2 1.0 -0.7 -11.3 14.2 10.4 6.7 5.2E: MOSL Estimates; * includes Infocrossing. # reclassified in FY09

NeutralPrevious Recommendation: Neutral Rs384

26 June 2009BLOOMBERGWPRO IN

REUTERS CODEWIPR.BO

Results PreviewSECTOR: INFORMATION TECHNOLOGY

* Reflects adjusted PAT; * Citi Technology Services is fully consolidated in FY10

Ashwin Mehta (Ashwin.Mehta@MotilalOswal.com) / Vihang Naik (Vihang.Naik@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect Wipro to report consolidated revenues of Rs64.7b, a decline of 1.2%.

? In IT Services, we expect the company to report a QoQ US$ revenue de-growth of 1.3% as against the guidedrevenue de-growth of 2-3.5%.

? Consolidated EBIT margins are likely to decline by 250bp QoQ to 15% on account of lower utilization and negativeimpact of rupee appreciation. We also expect a marginal decline in pricing.

? EBIT would decline 15% QoQ and 6% YoY to Rs9.7b.

? We expect consolidated net profit to de-grow by 0.7% QoQ to Rs9b in 1QFY10, buoyed by lower forex loss.

? The stock is trading at 15.4x FY10E and 15.6x FY11E earnings. Maintain Neutral.

? Key risks: Protracted recovery, currency volatility, delay in decision making.

15726 June 2009

Infrastructure

COMPANY NAMEHindustan Construction

IVRCL

Jaiprakash Associates

Nagarjuna Construction

Simplex Infrastructure

EXPECTED QUARTERLY PERFORMANCE SUMMARY (RS MILLION)CMP (RS) RECO SALES EBITDA NET PROFIT

26.6.09 JUN.09 VAR. VAR. JUN.09 VAR. VAR. JUN.09 VAR. VAR.% YOY % QOQ % YOY % QOQ % YOY % QOQ

InfrastructureHindustan Construction 105 Neutral 10,434 20.5 6.5 1,116 22.6 -26.0 150 -23.2 -70.9IVRCL Infra. 378 Buy 12,231 31.7 -24.8 1,162 41.7 -19.9 517 18.9 -35.3Jaiprakash Associates 221 Buy 18,607 62.0 -10.7 5,957 90.8 -15.5 2,517 97.8 -20.2Nagarjuna Construction 136 Buy 11,467 18.1 4.4 1,032 12.7 23.2 457 23.2 19.5Simplex Infra. 381 Buy 12,637 24.3 -7.3 1,302 18.2 2.4 461 9.6 39.7Sector Aggregate 65,376 32.6 -8.6 10,569 53.8 -12.8 4,102 52.2 -20.8

Satyam Agarwal (AgarwalS@MotilalOswal.com) / Shridatta Bhandwaldar (Shridatta.Bhandwaldar@MotilalOswal.com)

Results PreviewQUARTER ENDING JUNE 2009

Healthy operating performance; order intake likely to accelerate from2QFY10During 1QFY10, we expect infrastructure companies in our universe to report healthyrevenue growth of 23.7% YoY (32.6% including Jaiprakash), EBITDA growth of 23.1%YoY (53.8% including Jaiprakash), and net profit growth of 11.5% YoY (52.2% includingJaiprakash). We do not expect any EBITDA margin pressure during 1QFY10, since thefixed price contracts would not incur losses now. EBITDA margin would be 10.1% asagainst 9.9% in 1QFY09, excluding Jaiprakash. Despite strong operating performance,increase in interest and depreciation would result in lower net profit growth.

Key trends? While order intake has been relatively subdued (based on announced orders) during

the quarter due to elections, the book-to-bill ratio at 3x FY09 revenues providesvisibility for the next 2-3 years. We expect acceleration in order intake from 2QFY10,as election-related delays would be over.

? EBITDA margin pressure due to lower profits/losses on fixed price contracts islikely to ease during 1QFY10. This would result in EBITDA growth of 23.1% YoY(excluding Jaiprakash Associates) as against revenue growth of 22.1% YoY duringthe quarter.

? Net profit would continue to be under pressure on account of higher interest cost(YoY). However, working capital has eased marginally in the recent period and thisis reflected in a decline in outstanding debt for most companies in 4QFY09. Weexpect borrowing cost to be largely stagnant QoQ but higher on a YoY basis during1QFY10.

? Post the recent elections at the center and a few states like Andhra Pradesh, orderintake would be driven by (1) road orders from NHDP on PPP/cash contract basis,(2) irrigation and water sector orders from state governments, municipal corporations,etc, (3) orders for civil work from power sector, where projects of ~50GW areunder execution, and (4) possible revival in real estate / private industrial capex.

BSE Sensex: 14,765 S&P CNX: 4,376 26 June 2009

15826 June 2009

Infrastructure

REVENUE (RS M) AND EBITDA (%) TREND*

TREND IN REVENUE (RS B)  1QFY08 2QFY08 3QFY08 4QFY08 1QFY09 2QFY09E 3QFY09 4QFY09 1QFQ10E YOY (%)Gammon 6.5 4.7 5.2 7.3 5.9 4.8 6.5 7.6 6.8 15.9HCC 7.3 5.5 7.5 10.6 8.7 6.5 8.2 9.8 10.4 20.5IVRCL 6.8 6.9 9.7 13.2 9.3 11.4 11.9 16.3 12.2 31.7NCC 7.6 6.8 7.8 12.5 9.7 10.6 10.3 11.0 11.5 18.1Patel 3.3 2.4 2.6 4.7 4.0 3.1 3.3 5.7 4.7 19.1Simplex Infrastructure 5.8 5.7 7.0 8.5 10.2 10.1 12.7 13.6 12.0 18.5Aggregate 37 32 40 57 48 46 53 65 58 20.8

Source: Companies

*EBITDA margin at 9.9% for 1QFY08 and 1QFY09 excluding Gammon, and Patel Source: Companies

TREND IN ORDER BOOK (RS B)  1QFY08 2QFY08 3QFY08 4QFY08 1QFY09 2QFY09 3QFY09 4QFY09 YOY (%)Gammon* 80 78 75 80 90 73 80 NA NAHCC 94 96 91 102 102 108 122 164 61IVRCL 95 96 110 127 124 138 143 145 14L&T 416 440 496 527 582 629 688 703 34NCC 78 90 98 114 122 124 124 122 7Patel* 50 54 55 60 60 60 71 NA NASimplex Infra 70 71 89 100 100 107 102 NA NAAggregate(Excl. L&T) 467 485 517 582 597 609 643

% Growth (QoQ) 9.7 3.9 6.6 12.6 2.6 2.0 5.5  *4QFY09 estimates Source: Companies

10.710.2

10.410.3

9.810.110.0

10.4

11.4

0

18,000

36,000

54,000

72,000

1QFY

08

2QFY

08

3QFY

08

4QFY

08

1QFY

09

2QFY

09

3QFY

09

4QFY

09

1QFY

10

8

9

10

11

12Net Sales EBITDA (%)

We have witnessed earnings upgrades for IVRCL and NCC post 4QFY09. We expectfurther earnings upgrades in the sector, if the marginal cost of borrowing continues todecline. Based on our current estimates, interest cost as a percentage of sales will declineto 3% in FY10 from 3.3% in FY09. Upgrades would also depend upon the order intaketrend, which has been healthy during FY09 and is likely to remain healthy post governmanetcontinuity. Our top picks are NCC, IVRCL, and Simplex.

15926 June 2009

Infrastructure

Working capital, borrowing cost moderation aheadQUARTERLY INTEREST COST, % REVENUES  4QFY07 4QFY08 1QFY09 2QFY09 3QFY09 4QFY09 1QFY10E % YOYGammon 0.2 1.7 2.1 3.0 2.5 2.8 2.8 55HCC 2.5 4.4 4.3 6.8 6.6 6.3 5.7 53IVRCL 0.3 1.6 2.1 2.4 3.5 2.4 3.0 91NCC 1.9 1.4 2.5 2.6 2.3 1.9 2.2 6Patel Engg 1.3 2.6 3.7 5.3 6.1 3.9 4.4 44Simplex Infra 3.5 2.2 2.7 3.2 3.4 2.9 2.9 29Aggregate 1.6 2.2 2.8 3.5 3.8 3.2 3.4 45* 4QFY09 estimates for Gammon, Patel and Simplex Source: Company/MOSL

ANNUAL INTEREST COST, % REVENUES  FY06 FY07 FY08 FY09 FY10E FY11EGammon* 2.8 0.7 1.1 2.4 2.4 2.5HCC 2.1 2.6 4.9 6.4 5.6 5.1IVRCL 1.7 1.3 1.3 2.7 2.4 2.3NCC 1.2 1.8 2.1 2.3 2.2 2.1Patel Engg* 2.5 0.6 1.6 4.6 4.2 3.3Simplex Infra* 3.0 3.7 3.6 3.1 2.6 2.2Aggregate 2.1 1.8 2.5 3.3 3.0 2.8* FY09 estimates for Gammon, Patel and Simplex

NET DER (TAKING MOBILIZATION ADVANCE AS PART OF DEBT), X  FY06 FY07 FY08 FY09E FY10E FY11EGammon* 0.3 0.5 0.8 1.4 1.5 1.4HCC** 0.4 1.7 1.8 2.5 2.7 2.7IVRCL 1.2 0.4 0.7 0.9 0.9 0.8NCC 0.2 0.9 0.7 1.0 1.2 1.2Patel Engg 2.0 0.5 0.8 1.0 1.1 1.1Simplex Infra 2.2 3.5 1.6 2.1 2.0 1.8* Includes acquisition debt of Rs7.5b**Includes FCCB of Rs4b as debt

NWC (ADJUSTED FOR ADVANCES TO SUBSIDIARIES), DAYS  FY06 FY07 FY08 FY09E FY10E FY11EInventory 97 102 104 105 100 101Debtors 68 79 78 87 83 79Loans & advances 57 80 63 62 63 59Other CA 20 21 26 26 27 26Current liabilities 140 164 147 155 151 151NWC 102 118 124 125 123 115

Source: Company/MOSL

We remain positive on the sectorWe remain positive on the construction sector, given the strong revenue visibility (3x TTMbook-to-bill), receding concerns on borrowing costs and commodity prices, and growthopportunity in the target markets. The sector is likely to outperform the market due tosuperior earnings CAGR of 27% during FY09-11. We maintain NCC, IVRCL and Simplexas our top picks.

16026 June 2009

Infrastructure

RELATIVE PERFORMANCE - 3 MONTH (%) RELATIVE PERFORMANCE - 1 YEAR (%)

Stock performance and valuations

STOCK PERFORMANCE (%) ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR

3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEARInfrastructureHindustan Construction 173 9 125 6 -21 -35IVRCL 185 17 137 14 -8 -27Jaiprakash Associates 158 44 110 42 -36 1Nagarjuna Construction 145 -6 98 -8 -48 -49Simplex Infra. 160 -20 112 -22 -33 -64

COMPARATIVE VALUATIONCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)

26.6.09 FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11EInfrastructureHindustan Construction 105 Neutral 3.0 3.8 6.3 35.6 27.8 16.7 11.3 10.4 8.5 7.6 9.1 13.6IVRCL Infra. 378 Buy 17.0 22.6 25.2 22.2 16.7 15.0 24.6 17.9 15.6 13.3 15.4 15.0Jaiprakash Associates 221 Buy 7.2 8.4 8.2 30.7 26.4 26.9 25.3 15.5 15.2 16.8 19.3 16.5Nagarjuna Construction 136 Buy 6.7 9.0 10.7 20.3 15.2 12.7 11.4 9.8 8.0 9.4 11.6 12.6Simplex Infra. 381 Buy 28.6 36.7 44.0 13.3 10.4 8.7 6.8 5.6 5.0 17.5 19.3 19.5Sector Aggregate 30.1 22.3 20.7 19.3 13.6 12.5 13.2 15.6 14.8

0

40

80

120

160

Jun-08 Sep-08 Dec-08 Mar-09 Jun-09

MOSt Infrastructure Index Sensex

50

110

170

230

290

Mar-09 Apr-09 May-09 Jun-09

Sensex MOSt Infrastructure Index

16126 June 2009

Hindustan Construction

YEAR NET SALES PAT EPS EPS GR. P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) (%) (X) (X) (%) (%) SALES EBITDA

3/08A 30,828 708 2.8 39.7 38.0 2.7 7.4 11.2 1.4 11.7

3/09A 33,137 760 3.0 7.3 35.6 2.7 7.6 11.7 1.5 11.3

3/10E 40,951 970 3.8 27.7 27.8 2.5 9.4 10.1 1.3 10.4

3/11E 52,397 1,613 6.3 66.3 16.8 2.3 14.3 12.5 1.0 8.5

Equity Shares (m) 256.3

52-Week Range 129/29

1,6,12 Rel. Perf. (%) -5/66/6

M.Cap. (Rs b) 27.0

M.Cap. (US$ b) 0.6

NeutralPrevious Recommendation: Neutral Rs105

26 June 2009BLOOMBERGHCC IN

REUTERS CODEHCNS.BO

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q* 4Q 1Q 2Q 3Q 4QSales (Excl JV) 8,659 6,489 8,194 9,795 10,434 7,690 10,120 12,707 33,137 40,951

Change (%) 18.8 18.3 9.3 -7.2 20.5 18.5 23.5 29.7 7.5 23.6EBITDA 911 837 1,060 1,508 1,116 923 1,336 1,583 4,316 4,958

Change (%) 15.2 39.2 9.5 15.5 22.6 10.3 26.0 4.9 17.7 14.9As of % Sales 10.5 12.9 12.9 15.4 10.7 12.0 13.2 12.5 13.0 12.1

Depreciation 253 296 299 304 319 330 335 341 1,152 1,326Interest 391 492 573 650 598 568 570 569 2,105 2,304Other Income 124 268 -46 242 15 18 22 27 588 82PBT 392 317 143 796 195 23 433 680 1,647 1,331Tax 84 117 -90 281 64 8 143 224 392 439

Effective Tax Rate (%) 21.3 37.0 -62.8 35.3 33.0 33.0 33.0 33.0 23.8 33.0Reported PAT 308 199 232 515 130 16 290 456 1,255 892Adj PAT 195 -47 300 515 150 35 310 475 964 970

Change (%) 37.4 - 52.7 43.6 -23.2 175.6 3.2 -7.8 36.2 0.6E: MOSL Estimates; * Actual adj profit is Rs190m for 3QFY09, tax write back of 1HFY09 is Rs110m

Results PreviewSECTOR: INFRASTRUCTURE

Satyam Agarwal (AgarwalS@MotilalOswal.com) / Shridatta Bhandwaldar (Shridatta.Bhandwaldar@MotilalOswal.com)

* Fully Diluted

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect HCC to post revenues of Rs10.4b (+20.5% YoY), EBITDA of Rs1.1b (+22.6% YoY) and net profit ofRs150m (-23.2% YoY) during 1QFY10. During the quarter, HCC bagged a Rs6.9b order from Punatsangchhu-IHydro Electric Project Authority for work on 1,200 MW project. Announced orders have been subdued as comparedto 4QFY09.

? At the end of FY09, HCC’s order book stood at Rs164b (up 64% YoY), book-to-bill ratio of 5x FY09E revenues.Order intake during FY09 was strong at Rs92b (+145%), providing visibility for 23% revenue CAGR till FY11.

? During FY09, share of power sector in revenues increased to 38% (from 28% in FY08) and share of transportationsector has declined to 34% (v/s 44% in FY08). Given that order book comprises of: power 51%, water and irrigation31% and transportation 17%, we expect share of irrigation and power sector to increase in FY10. The share oftransportation sector in order book has declined from 32% as of March 2008 to 17% as of March 2009.

? As of March 2009, investments in real estate and infrastructure subsidiaries stood at Rs3.7b. Investment in HCCReal Estate (100% subsidiary) stood at Rs3b (including Rs2.2b in Lavasa). For Lavasa, phase-I funding of Rs17b hasbeen raised as follows: Rs2.7b as equity, Rs7.5b as debt, Rs5.3b as quasi-equity (including Rs812m by BennettColeman & Company in 4QFY09) and Rs1.5b through customer advances.

? The stock trades at 27.8x FY10E and 16.8x FY11E EPS. We maintain Neutral.

16226 June 2009

IVRCL Infrastructure

YEAR NET SALES PAT EPS EPS GR. P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) (%) (X) (X) (%) (%) SALES EBITDA

3/08A 36,606 2,052 15.4 40.9 24.6 3.1 14.0 14.6 1.6 16.6

3/09A 48,819 2,290 17.0 10.5 22.2 2.8 13.3 13.6 1.3 15.1

3/10E 61,440 3,042 22.6 32.8 16.7 1.9 15.4 15.6 0.9 9.3

3/11E 70,885 3,393 25.2 11.6 15.0 1.7 15.0 15.8 0.8 8.1

Equity Shares (m) 134.8

52-Week Range 385/57

1,6,12 Rel. Perf. (%) 31/104/14

M.Cap. (Rs b) 50.9

M.Cap. (US$ b) 1.1

BuyPrevious Recommendation: Buy Rs378

26 June 2009BLOOMBERGIVRC IN

REUTERS CODEIVRC.BO

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QSales 9,285 11,366 11,896 16,272 12,231 14,242 15,643 19,324 48,819 61,440

Change (%) 37.1 65.1 22.0 23.1 31.7 25.3 31.5 18.8 33.4 25.9EBITDA 820 913 1,085 1,450 1,162 1,324 1,502 1,919 4,268 5,907

Change (%) 36.6 65.0 0.1 4.5 41.7 45.1 38.4 32.3 18.1 38.4As of % Sales 8.8 8.0 9.1 8.9 9.5 9.3 9.6 9.9 8.7 9.6

Depreciation 102 113 123 134 138 145 150 150 473 583Interest 194 304 419 392 371 362 360 398 1,309 1,491Other Income 26 172 14 87 10 15 20 22 298 67PBT 550 667 556 979 663 832 1,012 1,392 2,753 3,900Tax 115 96 91 181 146 183 223 306 483 858

Effective Tax Rate (%) 20.9 14.4 16.3 18.5 22.0 22.0 22.0 22.0 17.6 22.0Reported PAT 435 571 465 798 517 649 789 1,086 2,269 3,042Adj PAT 435 601 465 799 517 649 789 1,086 2,300 3,042

Change (%) 14.6 70.5 -16.6 9.0 18.9 8.0 69.6 36.0 11.6 32.8E: MOSL Estimates

Results PreviewSECTOR: INFRASTRUCTURE

Satyam Agarwal (AgarwalS@MotilalOswal.com) / Shridatta Bhandwaldar (Shridatta.Bhandwaldar@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? At the end of 4QFY09, IVRCL’s order book stood at Rs145b (+15%YoY), book to bill ratio of 3x FY09E revenues.Share of irrigation/water segment increased to 70% in FY09, up from 61% in FY08.

? During 1QFY10, IVRCL’s announced order intake stands at Rs10.9b. Declared order intake during the quarter islower than average orders received in the previous four quarters due to elections. Major orders bagged during thequarter include Rs3b water supply scheme order from Bihar, Rs1.6b flyover order from Kolkata Municipal Corporationand Rs1.4b coal handling system for Mundra Project in Gujarat.

? During FY09, EBITDA margins stood at 8.6%, down 120bp YoY, largely due to adverse project mix and losses oninitial projects in power T&D. IVRCL is trying to gain pre-qualifications in certain T&D segments and thus theseprojects have lower margins. Higher execution of these projects in FY09 impacted EBITDA margins. Managementhas guided for EBITDA margins of 9.8-10.3% (+120-170bp YoY) for FY10 as against 8.6% in FY09.

? During FY09, order inflow stood at Rs67b. Management has guided for order book of Rs160b-180b by end-FY10,implying an order intake of Rs78b-98b (+15-45% YoY).

? The stock trades at 16.7x FY10E and 15x FY11E earnings. We maintain Buy.

16326 June 2009

Jaiprakash Associates

YEAR NET SALES PAT EPS* EPS GR.* P/E* P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) (%) (X) (X) (%) (%) SALES EBITDA

3/08A 39,670 6,097 5.2 31.8 42.5 5.6 16.3 10.6 8.2 34.8

3/09A 57,703 8,562 7.2 38.6 30.7 4.7 16.8 11.2 6.2 22.3

3/10E 87,283 11,770 8.4 0.0 26.4 4.7 19.3 13.6 4.9 15.5

3/11E 95,160 11,538 8.2 -2.0 26.9 4.2 16.5 12.3 4.5 15.2

Equity Shares (m) 1,404.6

52-Week Range 236/47

1,6,12 Rel. Perf. (%) 15/142/42

M.Cap. (Rs b) 310.7

M.Cap. (US$ b) 6.5

BuyPrevious Recommendation: Buy Rs221

26 June 2009BLOOMBERGJPA IN

REUTERS CODEJAIA.BO

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QSales 11,487 11,825 13,217 20,846 18,607 18,876 21,399 29,334 57,750 87,283

Change (%) 23.9 37.2 46.9 63.1 62.0 59.6 61.9 40.7 45.6 51.1EBITDA 3,123 3,477 2,473 7,050 5,957 5,892 6,646 8,918 16,123 27,412

Change (%) 30.6 57.3 10.9 78.2 90.8 69.4 168.8 26.5 49.5 70.0As of % Sales 27.2 29.4 18.7 33.8 32.0 31.2 31.1 30.4 27.9 31.4

Depreciation 622 667 646 1,023 1,010 1,020 1,150 1,215 2,958 4,395Interest 984 1,008 992 1,682 1,574 1,663 2,182 2,780 5,024 8,199Other Income 394 1,040 1,254 1,100 500 650 700 736 4,147 2,586PBT 1,911 2,843 2,089 5,445 3,873 3,858 4,014 5,659 12,289 17,404Tax 639 812 434 1,591 1,355 1,273 1,325 1,681 3,477 5,634

Effective Tax Rate (%) 33.4 28.6 20.8 29.2 35.0 33.0 33.0 29.7 28.3 32.4Reported PAT 1,273 2,030 1,655 3,853 2,517 2,585 2,689 3,978 8,812 11,770Adj PAT 1,273 2,030 2,105 3,153 2,517 2,585 2,689 3,978 8,562 11,770

Change (%) -9.1 95.2 34.9 50.3 97.8 27.3 27.8 26.2 40.4 37.5E: MOSL Estimates; excluding Real Estate

Results PreviewSECTOR: INFRASTRUCTURE

* Fully Diluted

Satyam Agarwal (AgarwalS@MotilalOswal.com) / Nalin Bhatt (NalinBhatt@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? For 1QFY10, we expect Jaiprakash to report revenues of Rs18.5b (up 62% YoY), EBITDA of Rs6b (up 91% YoY)and net profit of Rs2.5b (up 98% YoY).

? Jaiprakash has reportedly sold 2.5m shares (of the total 203m shares) as part of the treasury stock at ~Rs200/share,and raised ~Rs5b. We expect monetization of the entire treasury stock to reduce standalone DER from 1.74x (debtof Rs98b) to ~1x.

? The company requires Rs28b of investment in cement business and Rs7b in EPC business over FY10-11. Also, theequity requirement for the power business is Rs40b-45b over FY10-11 towards Karcham Wangtoo, Nigrie and BinaPower projects.

? In FY09, Jaiprakash reported consolidated PAT of Rs4.2b (down 38%) v/s standalone PAT of Rs9b. The decline inconsolidated profit was due to elimination of construction EBIT of Rs6.6b towards execution of in-house projects anddividend of Rs1.7b received from subsidiaries. In construction business (standalone), in-house projects contributed77% of revenues and 87% of EBIT, driven by execution at the Yamuna Expressway (YE) project. Also, margins onin-house construction projects were ~29% and ~15% on third party contracts.

? We expect Jaiprakash to report standalone net profit of Rs11.8b in FY10E and Rs11.5b in FY11E. Buy.

16426 June 2009

Nagarjuna Construction

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 34,730 1,623 7.1 10.4 19.3 2.0 12.4 12.3 1.2 11.8

3/09A 41,514 1,539 6.7 -4.8 20.3 1.8 9.4 11.0 1.0 11.4

3/10E 49,015 2,057 9.0 33.7 15.2 1.5 11.6 12.9 0.9 9.2

3/11E 58,439 2,453 10.7 19.2 12.7 1.4 12.6 13.5 0.7 7.6

Equity Shares (m) 228.8

52-Week Range 159/34

1,6,12 Rel. Perf. (%) 3/47/-8

M.Cap. (Rs b) 31.2

M.Cap. (US$ b) 0.6

BuyPrevious Recommendation: Neutral Rs136

26 June 2009BLOOMBERGNJCC IN

REUTERS CODENGCN.BO

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QSales 9,709 10,558 10,266 10,981 11,467 12,427 12,165 12,956 41,514 49,015

Change (%) 27.4 55.9 31.7 -12.4 18.1 17.7 18.5 18.0 19.5 18.1EBITDA 916 1,085 899 838 1,032 1,268 1,192 1,215 3,737 4,707

Change (%) 15.9 27.4 4.2 -23.4 12.7 16.8 32.6 45.1 3.9 12.7As of % Sales 9.4 10.3 8.8 7.6 9.0 10.2 9.8 9.4 9.0 9.6

Depreciation 142 149 119 123 135 146 157 163 533 601Interest 239 275 238 213 213 245 269 296 964 1,024Other Income 9 10 8 15 8 8 10 9 42 35PBT 544 671 551 517 692 885 775 765 2,282 3,117Tax 173 248 188 135 235 301 264 260 743 1,060

Effective Tax Rate (%) 31.8 36.9 34.1 26.1 34.0 34.0 34.0 34.0 32.6 34.0Reported PAT 371 423 363 382 457 584 512 505 1,539 2,057Adj PAT 371 423 363 382 457 584 512 505 1,539 2,057

Change (%) 3.9 24.5 -8.4 -27.4 23.2 38.1 40.9 32.1 -5.0 33.7E: MOSL Estimates

Results PreviewSECTOR: INFRASTRUCTURE

Satyam Agarwal (AgarwalS@MotilalOswal.com) / Shridatta Bhandwaldar (Shridatta.Bhandwaldar@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect NCC to post revenues of Rs11.5b during the quarter, up 18% YoY. With EBITDA margin remaining atsimilar levels, EBITDA would grow 19% YoY to Rs1.1b and PAT would grow 26.3% YoY to Rs468m.

? During 1QFY10, NCC has not announced any order. At the end of FY09, NCC’s order backlog stands at Rs122b (up7% YoY), implying book-to-bill ratio of 2.9x TTM. Order intake during the quarter was Rs20.5b (down 29% YoY).Order intake has been impacted due to the removal of Rs11.8b Bharat Oman Refinery Project from the order book.However, surprisingly, the company included the entire project cost of Rs9b for the Dubai real estate project in itsorder book (part of NCC Urban Infra), of which tower-2 is yet to be launched. The current order book includes Rs3bof own BOT projects and Rs10b of RE projects.

? For the Dubai RE development project, design change has been approved and the company can now completeconstruction of tower-1 initially (largely sold out), and tower-2 construction can be taken separately depending onproject launch. We believe that this is positive, as it restricts commitment by NCC and addresses one of the keyoverhangs relating to the stock.

? The stock trades at attractive valuations of 15.2x FY10E and 12.7x FY11E earnings. We maintain Buy.

16526 June 2009

Simplex Infrastructure

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 28,121 1,021 20.6 65.5 16.7 2.5 19.8 18.1 0.9 9.4

3/09A 46,556 1,416 28.6 38.7 13.3 2.0 17.5 17.9 0.6 6.4

3/10E 54,565 1,813 36.7 28.1 10.4 1.7 19.3 18.0 0.5 5.3

3/11E 61,674 2,178 44.0 20.1 8.7 1.4 19.5 19.1 0.5 4.7

Equity Shares (m) 49.5

52-Week Range 491/102

1,6,12 Rel. Perf. (%) -3/63/-22

M.Cap. (Rs b) 18.8

M.Cap. (US$ b) 0.4

BuyPrevious Recommendation: Buy Rs381

26 June 2009BLOOMBERGSINF IN

REUTERS CODESINF.BO

QUARTERLY PERFORMANCE (STANDALONE) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Income 10,167 10,050 12,703 13,636 12,637 11,970 14,621 15,338 46,556 54,565

Change (%) 74.7 76.0 80.4 42.8 24.3 19.1 15.1 12.5 65.6 17.2EBITDA 1,101 988 1,156 1,271 1,302 1,221 1,404 1,448 4,516 5,374

Change (%) 89.2 72.8 63.9 55.9 18.2 23.5 21.4 14.0 68.8 19.0As % of Sales 11.0 10.2 9.4 9.6 10.5 10.5 9.9 9.9 10.0 10.2

Other Income 18 39 37 42 30 40 50 69 135 189Interest 275 324 436 397 331 335 345 351 1,431 1,362Depreciation 255 302 370 372 380 387 391 397 1,299 1,555PBT 552 378 387 543 621 539 718 729 1,860 2,606Tax 169 98 134 213 160 170 250 293 614 873Tax/PBT 30.6 25.9 34.7 39.3 25.8 31.6 34.8 40.2 33.0 33.5PAT 383 280 253 330 461 369 468 436 1,246 1,733Adjusted PAT 421 303 303 330 461 369 468 516 1,356 1,813

As % of Sales 4.1 3.0 2.4 2.4 3.6 3.1 3.2 3.4 2.9 3.3Change (%) 114.7 59.2 37.3 (20.4) 9.6 21.9 54.6 56.3 32.8 33.7

E: MOSL Estimates

Results PreviewSECTOR: INFRASTRUCTURE

Satyam Agarwal (AgarwalS@MotilalOswal.com) / Shridatta Bhandwaldar (Shridatta.Bhandwaldar@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect Simplex to report revenues of Rs12.6b (+24.3% YoY), EBITDA of Rs1.3b (+18.2% YoY) and net profitof Rs461m (+9.6% YoY).

? The company’s reported order book stands at Rs102b (+15% YoY, -4% QoQ) as of December 2008, book-to-billratio of 2.2x FY09E revenues. Current order book composition is as follows: 69% domestic orders and 31% ordersfrom Middle East. Its exposure to the real estate sector is 16% (5% in India and 11% in Middle East).

? The management indicated that the end-market activity has improved as compared to the previous quarter in bothdomestic as well as Middle East markets. Simplex has highest exposure to private projects at ~50% of the orderbook.

? In 4QFY09, the working capital situation improved further for Simplex. This resulted in the company repaying Rs1bof debt. Debt as at the end of 4QFY09 would be ~Rs12.5b, up from Rs13.2b at the end of 3QFY09.

? The stock is trading at 10.4x FY10E and 8.7x FY11E earnings. We maintain Buy.

16626 June 2009

General elections and IPL provide some respite in 1QFY10: Two big events occurredin 1QFY10 – the general elections and the IPL, providing some respite to the advertisingindustry. Further, recovery in sectors like autos is a positive for the advertising industry.However, despite expectation of a revival in the economy, advertisers are reluctant tospend and our interactions with media agencies suggest that advertising growth is likely tobounce back only in 3QFY10. Print media was not able to attract as much advertising aspopularly expected during the elections, as political parties preferred advertising on televisionand radio.

Fragmentation in viewership evident in contraction of GRP gap: The Hindi GECspace continued to be vibrant. The quarter saw history being created, with Star Plus losingits No1 position for the first time in nine years to Colors. Zee TV’s strategy of focusing onnon-film content has played out well and should help attract advertisers. GRP gap betweenthe top three players has narrowed down to 40 points, with movies becoming the keydifferentiator. For week 24, Star Plus regained its No 1 position with GRP of 266. Colors’GRP stood at 232; Zee TV posted GRP of 221.

Newsprint prices headed towards FY08 levels: Domestic newsprint prices havedeclined 40% from the peak in September 2008, while imported newsprint prices havefallen 23%. The recent appreciation in rupee will benefit both HT Media and DCHL.

Expect broadcasting to outperform print: Media stocks have run-up significantly inthe current uptrend in the market. We believe that in the current scenario, broadcastingcompanies are better placed than print media companies as (1) advertisers prefer lowCPRP medium, and (2) there is strong traction in subscription revenue. Print media numbersare likely to remain under pressure due to: (1) lower than expected print advertising duringelections, and (2) delayed gains from decline in newsprint prices. We expect broadcastingsegment to outperform print media in the near term.

Media

COMPANY NAMEDeccan Chronicle

H T Media

Jagran Prakashan

Sun TV Network

TV Today

Zee Entertainment

Results PreviewQUARTER ENDING JUNE 2009

Amnish Aggarwal (AmnishAggarwal@MotilalOswal.com) / Amit Purohit (AmitPurohit@MotilalOswal.com)

EXPECTED QUARTERLY PERFORMANCE SUMMARY (RS MILLION)CMP (RS) RECO SALES EBITDA NET PROFIT

26.6.09 JUN.09 VAR. VAR. JUN.09 VAR. VAR. JUN.09 VAR. VAR.% YOY % QOQ % YOY % QOQ % YOY % QOQ

MediaDeccan Chronicle 80 Buy 1,725 -10.9 -11.5 431 -54.3 -14.7 207 -66.0 177.8HT Media 95 Neutral 3,300 1.6 -1.1 396 -40.3 -1.5 199 -47.3 -32.5Jagran Prakashan 74 Neutral 2,125 2.9 5.6 531 7.0 36.2 327 3.4 50.0Sun TV 238 Neutral 2,810 25.7 -5.0 2,079 23.6 8.2 1,240 20.8 11.1TV Today 93 Buy 720 12.3 34.1 202 54.4 292.1 117 27.9 43.8Zee Entertainment 171 UR 4,970 -8.3 -3.3 1,260 -12.7 4.9 774 -29.1 -5.9Sector Aggregate 15,650 0.7 -1.8 4,900 -8.6 9.6 2,864 -18.5 9.9

BSE Sensex: 14,765 S&P CNX: 4,376 26 June 2009

UR = Under Review

16726 June 2009

Media

General elections and IPL provide some respite in 1QFY10Two big events occurred in 1QFY10 – the general elections and the IPL, providing somerespite to the advertising industry. IPL-2 has been a big success, with average TRP of 5,which touched 8.3 during the finals. In addition, IPL-2’s reach was 15-18% higher. IPL-2dominated the top programs in C&S households; Star Plus’ Bidayi and Yeh Rishta KyaKehlata Hai were the only other two programs that could consistently maintain theirstandings in the top-10. IPL-2 garnered ad revenue of Rs6-7b according to industryestimates. We expect ad revenues of Hindi GECs to suffer in 1QFY10 due to the impactof IPL-2, elections and T-20 World Cup.     

Elections resulted in significant increase in the GRPs of various news channels, whichwould result in higher ad revenue growth for this genre in 1QFY10. However, contrary toexpectations, print media has not been able to capitalize on the election advertising. Strictcap imposed by the Election Commission on candidates’ expenses and increased focus bythe leading political parties on television and radio pared gains for print media.

Our interactions with media agencies indicate that the advertising market should begin afull-throttle recovery only in 3QFY10. Some of the worst impacted sectors like autos andfinancial services have begun to recover, which is positive for the advertising industry.However, advertisers are still reluctant to increase ad budgets. Advertisers would be keenlywatching for the recovery to sustain before allocating additional sums.

Fragmentation in viewership evident in contraction of GRP gapThe Hindi GEC space continued to be vibrant and witnessed a historic moment, with StarPlus losing its No1 position for the first time in nine years to Colors. Zee TV’s strategy offocusing on non-film content has played out well and should help attract advertisers. GRPgap between the top three players has narrowed down to 40 points, with movies becomingthe key differentiator. For week 24, Star Plus regained its No.1 position with GRP of 266.Colors’ GRP stood at 232; Zee TV posted GRP of 221.

GRP GAP NARROWS    

Source:www.Indiatimes.com

We concur with Zee TV’s strategy on focusing on non-film content, as it is more sustainableand cost effective. The number of movies shown on Zee TV is 50% lower than themovies shown on Star Plus and Colors.

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narrow s

16826 June 2009

ZEE FOCUS ON NON-FILM CONTENT – GRP OF WEEK 24 – 13TH JUNE 2009   

Media

Source:www.Indiatimes.com

Programming rationalization drive is fast catching up in the GEC space, with Zee andSony leading the pack. Zee TV has been able to maintain its share in the top-100 programseven during IPL-2 while Star Plus’ share in the top-100 declined. We believe thatfragmentation, narrow GRP gap among the top-3 players and slowdown in the economyhas made advertisers/media planners focus on aspects like (1) share in top-100 programs,(2) number of programs contributing to GRPs, and (3) reach of the channel.

We believe that the Hindi GEC market is stabilizing and expect the ad revenue re-allocationamong the top-3 players to be concluded in 3-6 months.

ZEE TV’S SHARE IN TOP-100SHARE IN 29MAR- 5-11 12-18 19-25 26APR- 3-9 10-16 17-23 24-30 31MAY-TOP 100 4APR APR APR APR 2MAY MAY MAY MAY MAY 6JUNStar Plus 17 11 15 13 14 10 11 12 10 13Zee TV 13 14 12 10 11 13 12 13 14 10Colors 15 14 14 11 14 15 12 13 13 11Sun TV 20 20 22 19 24 22 22 24 19 20Sony 3 4 3 4 3 3 2 3 5 4NDTV Imagine 3 5 5 4 3 4 4 5 6 6Star One 1 2 1 1 1 1 3 2 1 1Gemini TV 8 4 6 3 5 4 3 5 7 5Zee Cinema 5 6 3 2 3 4 7 4 8 6SET MAX 4 8 5 28 16 16 14 13 10 5Zee Marathi 3 2   2 2 2 4 2 1 4Target group: CS 4 + Yrs Source: www.Indiatimes.com

Newsprint prices headed towards FY08 levelsNewsprint prices continue to slide, with domestic newsprint prices declining 40% from thepeak in September 2008 and imported newsprint prices declining 23%. Newsprint pricesare headed towards the lows of FY08, which would bring much needed respite to printmedia companies. Further, rupee appreciation will also lower the cost of imported newsprintfor both HT Media (80% import content) and Deccan Chronicle (100% import content).Though some bounce-back in newsprint prices cannot be ruled out, they are unlikely tospiral to previous highs.

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16926 June 2009

NEWSPRINT PRICES CONTINUE TO SLIDE

Media

Source: Bloomberg

Expect broadcasting to outperform printMedia stocks have run-up significantly in the current uptrend in the market. We believethat in the current advertising scenario, broadcasting companies are better placed thanprint media companies as (1) advertisers prefer audio-visual media to print media, and (2)there is strong traction in subscription revenue. Print media numbers are likely to remainunder pressure due to: (1) lower than expected print advertising during elections, and (2)delayed gains from decline in newsprint prices (high-priced inventory till 1QFY10). Weexpect broadcasting segment to outperform print media in the near term.

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17026 June 2009

RELATIVE PERFORMANCE - 3 MONTH (%) RELATIVE PERFORMANCE - 1 YEAR (%)

Stock performance and valuations

STOCK PERFORMANCE (%) ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR

3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEARMediaDeccan Chronicle 85 -31 37 -33 30 -10HT Media 107 -2 59 -5 52 18Jagran Prakashan 36 9 -12 6 -18 29Sun TV 41 -25 -6 -27 -13 -4T V Today 42 2 -6 -1 -13 22Zee Entertainment 62 -23 14 -25 7 -3

COMPARATIVE VALUATIONCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)

26.6.09 FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11EMediaDeccan Chronicle 80 Buy 5.6 7.1 8.7 14.3 11.3 9.3 6.3 5.3 4.4 12.6 15.4 18.1HT Media 95 Neutral 4.4 5.3 6.5 21.4 17.8 14.5 12.6 10.2 8.4 8.7 9.9 11.4Jagran Prakashan 74 Neutral 3.0 3.6 4.4 24.4 20.7 16.7 13.4 11.2 8.9 16.3 18.0 20.2Sun TV 238 Neutral 10.5 13.0 15.4 22.7 18.3 15.4 11.9 9.5 7.7 24.4 24.0 24.0TV Today 93 Buy 5.8 7.1 9.5 16.1 13.1 9.8 8.9 5.7 3.7 10.6 11.7 13.8Zee Entertainment 171 UR 9.2 8.9 11.3 18.5 19.2 15.1 14.8 12.8 10.1 12.6 11.3 13.3Sector Aggregate 20.1 17.6 14.4 12.0 9.9 7.9 14.9 15.5 17.2

Media

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Under Review

17126 June 2009

Results PreviewSECTOR: MEDIA

Deccan Chronicle

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 7,824 2,719 11.1 64.5 7.2 1.8 25.5 25.7 2.5 4.1

03/09A 8,297 1,394 5.6 -49.3 14.3 1.8 12.6 17.5 2.9 8.8

03/10E 7,986 1,755 7.1 25.9 11.3 1.7 15.4 20.4 2.8 7.2

03/11E 8,775 2,148 8.7 22.4 9.3 1.7 18.1 23.5 2.5 5.9

Equity Shares (m) 245.0

52-Week Range 134/26

1,6,12 Rel. Perf. (%) -1/27/-33

M.Cap. (Rs b) 19.7

M.Cap. (US$ b) 0.4

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QSales 1,935 2,264 2,147 1,803 1,725 1,950 2,250 2,061 8,297 7,986

Change (%) 11.6 20.6 -0.7 -12.1 -10.9 -13.9 4.8 14.3 6.0 -3.7EBITDA 943 773 544 422 431 722 1,013 960 2,766 3,125

Change (%) -9.1 -34.3 -61.5 -65.7 -54.3 -6.7 86.1 127.5 -43.1 13.0As of % Sales 48.7 34.2 25.3 23.4 25.0 37.0 45.0 46.6 33.3 39.1

Depreciation 73 75 78 95 85 85 80 86 312 336Interest 198 198 191 123 120 115 80 81 771 396Other Income 59 155 136 77 50 75 85 97 462 307PBT 732 655 411 282 276 597 938 890 2,144 2,700Tax 122 202 154 200 69 179 281 416 750 945

Effective Tax Rate (%) 16.7 30.9 32.0 71.1 25.0 30.0 30.0 46.7 35.0 35.0Reported PAT 610 453 257 82 207 418 656 474 1,394 1,755Adj PAT 610 453 257 82 207 418 656 474 1,394 1,755

Change (%) -27.2 -45.2 -75.1 207.5 -66.0 -7.8 155.6 481.7 -48.7 25.9E: MOSL Estimates

BuyPrevious Recommendation: Buy Rs80

26 June 2009BLOOMBERGDECH IN

REUTERS CODEDCHL.BO

Amnish Aggarwal (AmnishAggarwal@MotilalOswal.com) / Amit Purohit (AmitPurohit@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect Deccan Chronicle to post revenue decline of 10.9% YoY on the back of a sharp decline in advertisingrevenue.

? Decline in newsprint prices would benefit the company from 2QFY10. We estimate a 54% decline in EBITDA, asmargins decline to 25% v/s 48.7% in 1QFY09.

? The advertising industry continues to be under pressure and advertising budgets for metros and big cities have beenimpacted more. Deccan Chronicle focuses on big cities (Hyderabad, Chennai and Bangalore) and metros, and wouldbe affected.

? The company intends to fully/partially sell its stake in its IPL venture, The Deccan Charger Sporting Venture. Itsrecent win in IPL-2 would enable the company to get better valuation.

? We estimate PAT of Rs207m in 1QFY10, a decline of 66%.

? The stock is trading at 11.3x FY10E and 9.3x FY11E earnings. We maintain Buy.

17226 June 2009

Results PreviewSECTOR: MEDIA

H T Media

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 11,862 1,445 6.2 25.3 15.4 2.4 15.8 15.2 1.6 8.6

03/09A 13,231 1,040 4.4 -28.0 21.4 2.3 8.7 9.9 1.6 11.6

03/10E 14,186 1,249 5.3 20.1 17.8 2.1 9.9 12.4 1.5 9.4

03/11E 15,526 1,531 6.5 22.6 14.5 1.9 11.4 14.7 1.4 7.7

Equity Shares (m) 234.2

52-Week Range 144/36

1,6,12 Rel. Perf. (%) -20/-21/-5

M.Cap. (Rs b) 22.2

M.Cap. (US$ b) 0.5

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QSales 3,247 3,342 3,338 3,338 3,300 3,400 3,750 3,736 13,230 14,186

Change (%) 18.8 16.1 4.5 6.5 1.6 1.7 12.3 11.9 11.5 7.2EBITDA 663 399 424 402 396 510 675 709 1,853 2,290

Change (%) 19.3 -28.3 -23.9 -33.2 -40.3 -23.1 69.3 67.2 -16.9 23.6As of % Sales 20.0 11.9 12.7 12.0 12.0 15.0 18.0 19.0 14.0 16.1

Depreciation 129 128 138 155 155 170 180 192 550 697Interest 51 74 101 91 60 50 40 20 317 170Other Income 82 52 79 101 70 50 50 49 347 219Extra-ordinary income 0 0 128 60 50 50 40 48 188 188PBT 565 248 135 196 201 290 465 497 1,145 1,453Tax 188 86 57 -38 52 78 126 136 293 392

Effective Tax Rate (%) 33.3 34.5 42.2 (19.4) 26.0 27.0 27.0 27.4 25.6 27.0Reported PAT 377 163 78 234 149 212 339 361 852 1,061Exceptional Items 0 0 128 60 50 50 40 48 188 188Adj PAT 377 163 206 295 199 262 379 409 1,041 1,249

Change (%) 10.4 -52.3 -36.5 -29.2 -47.3 -30.6 133.1 98.4 -28.0 20.0E: MOSL Estimates

NeutralPrevious Recommendation: Buy Rs95

26 June 2009BLOOMBERGHTML IN

REUTERS CODEHTML.BO

Amnish Aggarwal (AmnishAggarwal@MotilalOswal.com) / Amit Purohit (AmitPurohit@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect HT Media to post revenue of Rs3.3b, up 1.6% YoY.

? EBITDA margin is likely to decline from 20% in 1QFY09 to 12% in 1QFY10.

? The company is carrying high cost inventory of newsprint, which will get over in 2QFY10.

? Its Hindi daily Hindustan continues to do well while HT Mumbai and Mint continue to be in investment mode.Management expects its radio business to breakeven in FY10.

? PAT is likely to decline by 47.3% YoY to Rs199m.

? The stock is trading at 17.8x FY10E and 14.5x FY11E earnings. We downgrade the stock to Neutral.

17326 June 2009

Results PreviewSECTOR: MEDIA

Jagran Prakashan

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 7,497 981 3.3 28.7 22.8 4.2 18.2 22.6 2.7 12.3

03/09A 8,234 916 3.0 -6.6 24.4 4.0 16.3 18.4 2.4 12.5

03/10E 9,009 1,080 3.6 17.9 20.7 3.7 18.0 21.7 2.2 10.7

03/11E 10,048 1,339 4.4 23.9 16.7 3.4 20.2 25.2 2.0 8.7

Equity Shares (m) 301.2

52-Week Range 88/41

1,6,12 Rel. Perf. (%) -2/-26/6

M.Cap. (Rs b) 22.4

M.Cap. (US$ b) 0.5

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QSales 2,065 2,086 2,070 2,013 2,125 2,145 2,310 2,429 8,234 9,009

Change (%) 12.6 17.8 4.0 5.9 2.9 2.8 11.6 20.7 9.8 9.4EBITDA 496 380 301 390 531 450 462 453 1,567 1,896

Change (%) -3.6 -2.6 -30.4 29.9 7.0 18.6 53.7 16.0 -4.3 21.0 As of % Sales 24.0 18.2 14.5 19.4 25.0 21.0 20.0 18.6 19.0 21.0

Depreciation 84 89 98 113 100 110 110 138 383 458Interest 10 12 18 20 10 10 10 62 59 92Other Income 63 55 45 64 60 50 40 95 227 245PBT 466 334 229 322 481 380 382 348 1,352 1,591Tax 150 108 75 104 154 122 122 113 436 511

Effective Tax Rate (%) 32.1 32.1 32.0 32.3 32.0 32.0 32.0 32.5 32.2 32.1Reported PAT 316 227 155 218 327 259 260 235 916 1,080Adj PAT 316 227 155 218 327 259 260 235 916 1,080

Change (%) -8.8 3.2 -40.1 41.4 3.4 14.0 68.0 7.6 -6.5 17.9E: MOSL Estimates

NeutralPrevious Recommendation: Neutral Rs74

26 June 2009BLOOMBERGJAGP IN

REUTERS CODEJAGP.BO

Amnish Aggarwal (AmnishAggarwal@MotilalOswal.com) / Amit Purohit (AmitPurohit@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect Jagran Prakashan to post revenue of Rs2.1b, up 2.9% YoY. We do not expect any significant gain frompolitical advertising. However, being a regional player, Jagran would be able to withstand the decline in advertisingrevenue growth.

? Net advertising benefit from elections during 1QFY10 is estimated at Rs70m. Strong growth in education sector andrecovery in auto sector would enable the company to post better than industry advertising growth.

? EBITDA margin is likely to expand by 100bp to 25% on the back of decline in newsprint cost. Newsprint price for1QFY10 is likely to be 10% lower YoY.

? We estimate a PAT of Rs327m, up 3.4% YoY.

? The stock is trades at 20.7x FY10E and 16.7x FY11E earnings. We maintain Neutral.

17426 June 2009

Results PreviewSECTOR: MEDIA

Sun TV Network

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 8,697 3,670 9.3 36.5 25.6 6.4 25.0 44.3 10.3 14.2

3/09A 10,082 4,165 10.6 13.5 22.5 5.5 25.4 45.6 9.0 11.7

3/10E 12,244 5,126 13.0 23.1 18.3 4.4 24.0 42.8 7.1 9.7

3/11E 14,197 6,085 15.4 18.7 15.4 3.7 24.0 42.2 5.8 7.8

Equity Shares (m) 394.1

52-Week Range 323/125

1,6,12 Rel. Perf. (%) -14/-14/-27

M.Cap. (Rs b) 93.8

M.Cap. (US$ b) 1.9

QUARTERLY PERFORMANCE (STANDALONE) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QSales 2,023 1,945 2,178 2,465 2,236 2,379 2,708 2,759 10,082 12,226

Change (%) 126.3 105.8 91.0 -35.0 10.5 22.3 24.4 11.9 17.1 21.3EBITDA 1,529 1,398 1,710 1,581 1,683 1,763 2,013 2,257 7,716 8,978

Change (%) 120.8 95.5 93.5 -37.4 10.0 26.1 17.7 42.8 24.1 16.4As of % Sales 75.6 71.9 78.5 64.1 75.0 74.1 74.3 81.8 76.5 73.4

Depreciation 243 248 262 377 278 464 446 662 1,849 1,841Interest 5 15 25 11 0 21 8 10 39 40Other Income 149 143 142 215 164 165 144 154 627 753Extraoridnary Item 207 207 -PBT 1,431 1,278 1,565 1,408 1,568 1,650 1,703 1,740 6,661 7,850Tax 500 477 542 494 543 567 581 599 2,290 2,724

Effective Tax Rate (%) 34.9 37.3 34.6 35.1 34.6 36.0 34.1 34.7 34.4 34.7Reported PAT 931 802 1,023 915 1,026 1,083 1,122 1,141 4,371 5,126Adj PAT 931 802 1,023 915 1,026 951 1,122 1,141 4,165 5,126

Change (%) 120.4 67.1 71.2 -23.1 10.2 18.6 9.7 24.7 13.5 23.1E: MOSL Estimates

NeutralPrevious Recommendation: Neutral Rs238

26 June 2009BLOOMBERGSUNTV IN

REUTERS CODESUTV.BO

Amnish Aggarwal (AmnishAggarwal@MotilalOswal.com) / Amit Purohit (AmitPurohit@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

Standalone numbers excluding radio Business

? We expect Sun TV to post revenue of Rs2.8b (up 25.7% YoY), EBITDA of Rs2b (up 23.6% YoY), and PAT ofRs1.2b (up 20.8% YoY).

? We estimate 12% increase in advertising revenue during the quarter. DTH revenue would drive subscription revenue.

? Sun TV continues to be the undisputed leader in South India, with presence across all the four states. The regionaladvertising market has not been impacted significantly due to slowdown in economy.

? The company has forayed into the movie business and has a radio business; both these businesses are under investmentmode.

? The stock is trading at 18.3x FY10E and 15.4x FY11E earnings. We maintain Neutral.

17526 June 2009

Results PreviewSECTOR: MEDIA

TV Today

YEAR NET SALES PAT* EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 2,311 437 7.5 40.1 12.4 1.9 15.1 22.5 1.7 6.4

03/09A 2,499 336 5.8 -23.1 16.1 1.7 10.6 15.0 1.6 8.9

03/10E 2,847 413 7.1 22.9 13.1 1.5 11.7 17.7 1.2 5.7

03/11E 3,268 551 9.5 33.6 9.8 1.4 13.8 20.9 0.9 3.7

Equity Shares (m) 58.0

52-Week Range 120/47

1,6,12 Rel. Perf. (%) -12/-27/-1

M.Cap. (Rs b) 5.4

M.Cap. (US$ b) 0.1

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QSales 641 669 652 537 720 650 750 727 2,499 2,847

Change (%) 24.5 44.1 -6.0 -15.8 12.3 -2.8 15.0 35.4 8.2 13.9EBITDA 131 122 138 51 202 104 195 117 442 618

Change (%) 9.9 55.2 -43.4 -72.1 54.4 -14.5 41.2 128.0 -29.4 -1.2As of % Sales 21.5 18.2 21.2 9.6 28.0 16.0 26.0 16.1 17.7 21.7

Depreciation 41 42 65 46 65 55 50 66 194 236Interest 0 0 0 1 1 0 0 0 1 1Other Income 45 38 70 89 45 50 80 79 242 254PBT 135 118 143 93 181 99 225 130 488 635Tax 43 42 56 12 63 35 79 46 153 222

Effective Tax Rate (%) 31.8 35.7 35.0 12.7 35.0 35.0 35.0 35.0 31.2 35.0Reported PAT 92 76 87 82 117 64 146 85 336 413Adj PAT 92 76 87 82 117 64 146 85 336 413

Change (%) 14.9 41.0 -48.0 -39.6 27.9 -15.0 68.7 3.7 -22.9 22.9E: MOSL Estimates

BuyPrevious Recommendation: Buy Rs93

26 June 2009BLOOMBERGTVTN IN

REUTERS CODETVTO.BO

Amnish Aggarwal (AmnishAggarwal@MotilalOswal.com) / Amit Purohit (AmitPurohit@MotilalOswal.com)

* Excluding extraordinary items and provisions

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect TV Today to post revenue of Rs720m, up 12.3% YoY. EBITDA margins are likely to expand to 28%.

? 4QFY09 revenues declined due to lower inventory utilization as advertisers held back their ad spend for election andIPL-2. Aaj Tak had the highest viewership during elections and we expect the company to have benefited the mostfrom political advertising during the quarter.

? Operating margins are expected to improve on the back of strong traction in subscription revenues and lower spendon carriage fee.

? We estimate PAT of Rs117m, up 27.9% YoY.

? The stock is trading at 13.1x FY10E and 9.8x FY11E earnings. We maintain Buy.

17626 June 2009

Results PreviewSECTOR: MEDIA

Zee Entertainment Enterprises

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 18,354 3,850 8.9 58.7 19.2 2.6 13.5 19.6 4.2 14.1

3/09A 21,730 3,995 9.2 3.8 18.5 2.4 12.6 17.3 3.6 14.8

3/10E 22,449 3,856 8.9 -3.5 19.2 2.2 11.3 17.3 3.4 12.8

3/11E 24,988 4,893 11.3 26.9 15.1 2.0 13.3 20.6 2.9 10.1

Equity Shares (m) 433.6

52-Week Range 239/88

1,6,12 Rel. Perf. (%) -8/-35/-25

M.Cap. (Rs b) 74.0

M.Cap. (US$ b) 1.5

Under ReviewPrevious Recommendation: Neutral Rs171

26 June 2009BLOOMBERGZ IN

REUTERS CODEZEE.BO

Amnish Aggarwal (AmnishAggarwal@MotilalOswal.com) / Amit Purohit (AmitPurohit@MotilalOswal.com)

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QAdvertsing Revenue 2,798 2,851 2,684 2,284 2,170 2,405 2,960 2,597 10,618 10,132Subscription Revenue 2,150 2,244 2,274 2,345 2,350 2,400 2,450 2,650 9,014 9,850Other Sales and Services 471 621 497 508 450 650 625 742 2,098 2,467Net Sales 5,420 5,717 5,456 5,137 4,970 5,455 6,035 5,989 21,730 22,449

Change (%) 38.4 43.4 5.3 -2.3 -8.3 -4.6 10.6 16.6 18.4 3.3Prog, Transmission & Direct Exp 2,366 2,613 2,684 2,241 2,300 2,485 2,750 2,560 9,904 10,095Staff Cost 690 513 382 439 460 480 530 573 2,025 2,043Selling and Other Exp 921 1,102 1,189 1,255 950 1,095 1,150 1,232 4,468 4,427EBITDA 1,443 1,488 1,201 1,202 1,260 1,395 1,605 1,625 5,332 5,885

Change (%) 20.5 12.6 -23.5 -7.8 -12.7 -6.2 33.7 35.3 -1.7 10.4As of % Sales 26.6 26.0 22.0 23.4 25.4 25.6 26.6 27.1 24.5 26.2

Depreciation 55 65 84 99 80 80 90 92 304 342Interest 214 223 386 509 290 300 250 235 1,331 1,075Other Income 278 280 401 444 240 250 401 238 1,403 1,130Extraordinary items 574 792 26 260 263 263 1,677 525PBT 2,025 2,271 1,158 1,298 1,393 1,528 1,666 1,536 6,751 6,122Tax 417 489 318 330 348 412 492 462 1,552 1,714

Effective Tax Rate (%) 20.6 21.5 27.5 25.4 25.0 27.0 29.5 30.1 22.9 28.0Reported PAT 1,608 1,782 840 968 1,044 1,115 1,175 1,074 5,225 4,408Minority Interest 60.0 -11.0 14.7 3.4 8 6 8 6 23.0 27.6Adj PAT after Minority Interest 1,092 1,118 917 822 774 847 1,167 1,069 3,995 3,856

Change (%) 41.5 20.9 -16.4 -11.0 -29.1 -24.3 27.2 29.9 4.4 -3.5E: MOSL Estimates

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect ZEE to report revenue decline of 8.3% YoY – while advertising revenue would decline 22% YoY, subscriptionrevenue would grow by 9% YoY. PAT is likely to decline 29% YoY to Rs774m.

? Advertising revenue would de-grow due to IPL, slowdown in advertising, and higher base of last year.

? Despite sharp decline in advertising revenue, operating margins would decline by just 120bp YoY to 25.4% due to costrationalization (lower programming and carriage cost).

? Zee TV’s strategy of focusing on content has played out well and the channel has been able to narrow the GRP gapbetween the number-1 and number-2 player. Hindi GEC space continues to get fragmented, with no clear number-1player.

? The stock trades at 19.2x FY10E EPS of Rs8.9 and 15.1x FY11E EPS of Rs11.3. Under Review.

17726 June 2009

Metals

COMPANY NAMEHindalco

Hindustan Zinc

Jindal Steel

JSW Steel

Nalco

Sterlite Industries

SAIL

Tata Steel

EXPECTED QUARTERLY PERFORMANCE SUMMARY (RS MILLION)CMP (RS) RECO SALES EBITDA NET PROFIT

26.6.09 JUN.09 VAR. VAR. JUN.09 VAR. VAR. JUN.09 VAR. VAR.% YOY % QOQ % YOY % QOQ % YOY % QOQ

MetalsHindalco 87 Sell 37,471 -19.4 2.7 4,835 -49.1 27.5 2,639 -62.1 29.8Hindustan Zinc 604 Buy 13,206 -19.7 4.6 5,385 -44.9 -3.0 5,711 -32.6 3.6Jindal Steel & Power 2,444 Buy 17,258 -8.9 -2.0 5,177 -33.8 20.2 2,842 -37.9 -9.9JSW Steel 624 Buy 36,875 0.4 10.8 10,080 17.3 148.2 3,207 -12.5 956.3Nalco 309 Sell 10,902 -25.7 -3.2 2,993 -59.4 213.3 2,228 -57.6 168.4Sterlite Inds. 612 Buy 44,349 -23.1 0.7 8,094 -55.7 -3.5 5,332 -53.7 36.5SAIL 152 Sell 97,500 -11.6 -19.1 20,271 -32.6 -3.9 13,853 -30.3 -7.1Tata Steel 388 Neutral 247,939 -43.0 -6.1 27,750 -60.3 7107.9 5,002 -88.3 LPSector Aggregate 505,500 -31.3 -6.4 84,585 -47.6 74.3 40,814 -60.4 134.6

Results PreviewQUARTER ENDING JUNE 2009

Sanjay Jain (SanjayJain@MotilalOswal.com) / Ashutosh Somani (Ashutosh.Somani@MotilalOswal.com)

BSE Sensex: 14,765 S&P CNX: 4,376 26 June 2009

Iron and steelGlobal crude steel production declined 21% YoY in MayAccording to data released by the World Steel Association (WSA), global crude steelproduction declined 21% YoY to 95.6m tons in May 2009. This is a slight improvement,considering ~24% YoY decline in the last two months. World crude steel production forthe first five months of 2009 was 449m tons, down 22.4% as compared to the correspondingperiod in 2008.

GLOBAL CRUDE STEEL PRODUCTION IS RECOVERING

Source: Company/MOSL

India’s production up 9.3% YoY, China up marginalyChina’s crude steel production for May 2009 was 46.5m tons, 0.6% higher than May2008. China produced 217.2m tons of crude steel for the first five months of 2009, aslight increase of 0.4%. India’s crude steel production for May 2009 was 4.73m tons,

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17826 June 2009

Metals

Source: Company/MOSL

Japan produced 6.5m tons of crude steel in May 2009, down -38.5% compared to thesame month last year. In the EU, Germany’s crude steel was 2.2m tons in May 2009, adecrease of 47.8% from May 2008. The US produced 4.3m tons of crude steel in May2009, a decrease of 50.6% compared to the same month last year. Brazil produced 1.9mtons of crude steel in May 2009, 36.3% lower than May 2008. Russia’s crude steelproduction for May 2009 was 4.7m tons, a decrease of 31.2% from May 2008. Ukraineproduced 2.4m tons of crude steel in May 2009, 40% lower than May 2008.

PRODUCTION RATES ARE RECOVERING FAST IN CIS COUNTRIES

9.3% higher than May 2008. India produced 22.7m tons of crude steel for the first fivemonths of 2009, a slight decrease of 1%. BRIC countries continue to garner larger sharein production, contributing nearly 59% of global production as compared to their previousshare of ~50%, backed primarily by China’s production.

BRIC COUNTRIES CONTINUE GAINING SHARE IN GLOBAL PRODUCTION

Source: Company/MOSL

SAIL has settled coking coal import contracts in line with Japanese contracts and haschanged its contract cycle from July-June to April-March. As a result, its coking coalcosts will start correcting three months earlier. We understand that SAIL will be buyingonly 20-25% of carry-over quantities of 4-5m tons of coking coal in FY10. The balancequantities will be purchased in subsequent years. The stock trades at expensive EV/EBITDAof 7.2x FY10E. Maintain Sell.

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17926 June 2009

JSW Steel will benefit from buoyancy of steel prices in the international markets, whichwill open the export window for it and drive volume growth. The company has deniedreports of promoter selling his 10% stake in the company. The stock is trading at EV/EBITDA of 6x FY10E and P/BV of 1.3x FY10E. Maintain Buy.

Jindal Steel and Power is expected to increase steel production by 30-40% to ~2m tonsin FY10; its pellet plant is likely to start production in 2HFY10. Its captive power plant of540MW at Raigarh will drive earnings in FY11. The Angul project will start in phases,810MW captive power plant and plate mill should be commissioned during FY11. Iron oremining in Bolivia is likely to start in 2HFY10, and will be ramped up gradually. We believestrong pipeline of projects and large accumulation of resources (2.5b tons of coal mines inIndia, access to large iron ore reserves in Bolivia, and initiative in oil and gas in Georgia)will continue to drive earnings and re-rating of JSPL. Maintain Buy.

Tata Steel: Corus continues to suffer due to low capacity utilization and high fixed costs.Teesside plant’s cancellation of off-take agreement has added to its woes. Tata Steel hadto further invest ~GBP500m to get waiver of debt covenants. Corus will be the keybeneficiary whenever demand picks up in Europe. Tata Steel’s Indian operations arebenefiting from stronger domestic demand. Its largest blast furnace “H” suffered productionloss during May due to unplanned shutdown, but is once again running at full production.The Jamshedpur plant had idled 4 smallest blast furnaces when production from H furnacewas fully ramped up. Furnace B was lit in May to cover loss of production of “H” furnace.Steel production is expected to increase 25% YoY in 1QFY10 despite shutdowns, and willramp-up further in subsequent quarters. Indian operations have strong cash flows, whileCorus is a drag. We have upgraded our earnings estimates for Indian operations due tostronger prices and cost reduction. Maintain Neutral.

STEEL SALES (M TONS) MARCH APRIL MAY

2009 YOY (%) 2009 YOY (%) 2009 YOY (%)SAIL 1.53 4 0.89 30 1.00 12Tata Steel 0.70 45 0.45 31 0.47 18JSW 0.26 53 0.40 135 0.46 70

Source: Company/MOSL

Steel outlookHRC inventories across the world are reported to be low. De-stocking was complete inUSA few months ago. According to Tex report, Japanese inventories too declined sharplydue to bookings by overseas buyers recently. According to Metal Bulletin reports, pricesare set to rise in UK due to end of de-stocking though demand has yet to pick up. BaoSteel recently increased prices by US$59 per ton. Inventories of steel have peaked inChina.

According to our interactions with Indian traders and steel mills, the inventories of HRCare reported to be low in India, while demand is picking up gradually. Improved demandfor value-added products has driven demand for HRC in India. SAIL has raised prices byRs500-700 per ton by reducing discounts. JSW Steel too has selectively increased pricesthough the company denies price hikes. JSW Steel has reduced inventories in the past few

Metals

18026 June 2009

months. Essar Steel is planning a shut down HSM in July for upgrading its capacity. Thiswill result in production loss of 100,000-120,000 tons.

We believe that steel prices will pick up as demand recovers because de-stocking is alreadybehind. However, higher prices will prompt idle mills to re-start, which will cap the upside.Domestic prices are likely to remain stronger than international prices due to strongerlocal demand. Director General of Safeguard (DGS) has once gain recommended 25%safeguard duty on import of HRC below US$500 per ton (earlier recommendation was atUS$600 per ton). This may not be of significance in the present scenario where prices arealready hovering close to US$500 per ton. However, this will prevent domestic pricesfrom falling if international HRC prices soften later in the year due to increased supply,protecting margins.

SENSITIVITY OF EPSFY10 EPS EPS CHANGE (%) ON STEEL PRICE CHANGE (%)

(RS) 5 10 15 20Tata Steel 47.5 111.4 220.0 323.4 440.1Tata Steel (Corus Unchanged) 23.5 47.0 70.5 94.0SAIL 13.9 25.1 50.1 75.2 100.2JSW Steel 63.1 38.4 76.7 115.1 153.5JSPL 205.0 11.1 22.2 33.3 44.4

Source: Company/MOSL

Non-ferrous metalsAluminum prices have moved up the most on LME among the base metals due tostronger demand, de-stocking, and shortage of metal in spot markets due to large buyingby Glencore (despite huge inventories on LME). The rise in domestic aluminum prices hasbeen even sharper. The government may consider 10% safeguard duty to buffer domesticproducers against cheap imports.

Chinese aluminum production has increased 14% MoM and 12% YoY to ~1m tons assmelters ramped up production on stronger prices. If current metal prices were to stick,Hindalco will see the largest earnings upgrades. Stronger domestic prices due to safeguardduty would provide further upsides. Hindalco has lined up huge capex for its long gestationgreenfield projects, which will result in higher debt on balance sheet, capping upsides to itsequity value.

Spot TC/RCs have declined to US$20-30 per ton in China: Spot copper treatmentand refining charges (TC/RCs) have dropped to US$20-30 per ton / 2-3 cents per lb inChina, from US$35 per ton in less than a fortnight. This is below the cost of production forlocal smelters including the most cost efficient player ‘Tongling’. The current price is alsofar below the 2009 benchmark price of US$75 per ton / 7.5 cents per lb.

Sterlite has recently increased the note portion of its offer for Asarco to US$770mfrom US$600m stated in the old offer. The old purchase consideration comprised of cashpayment of US$1.1b on closing and senior secured non-interest bearing promissory notefor US$600m, payable over a period of nine years. In the new offer, the increase ofUS$170m is on account of working capital inclusion of US$120m and a net increase ofUS$50m on account of rising copper prices. Sterlite as a part of the new offer has also

Metals

18126 June 2009

agreed to payments to asbestos claimants to the tune of US$160m contingent to the decisionby the bankruptcy court.

Valuations of Nalco and Sterlite are capturing future earnings. Sterlite has informed stockexchanges of Board approval of enabling resolution to dilute equity by 25% to raise capitalin domestic and/or international market, while the purpose is missing. This is a little surprising,because the company is already sitting with large cash surpluses of nearly US$4b. Thisleaves us guessing on the next move by the promoter.

CHANGE IN ASSUMPTIONS (US$/TON) FY10 FY11

OLD NEW OLD NEWAluminium 1,400 1,500 1,400 1,500Copper 3,600 4,600 3,600 4,600Zinc 1,400 1,500 1,400 1,500Alumina 200 200 200 200INR/US$ 49.6 47.4 46 45

Source: Company/MOSL

Metals

EPS REVISIONSCOMPANIES CMP MCAP OLD EPS (RS) REV EPS (RS) REV EPS GR (%) P/E (X) RATING

(RS) (RS B) FY10 FY11 FY10 FY11 FY10 FY11 FY10 FY11 OLD NEWHindalco 88 154 5.2 4.4 5.0 4.8 -49.6 -3.9 17.7 18.5 Sell SellHindustan zinc 626 256 54.6 62.2 56.6 67.1 -12.3 18.6 10.7 9.0 Buy BuyJindal steel 2,474 381 205.0 249.2 207.8 250.2 4.7 20.4 11.9 9.9 Buy BuyJSW 605 113 63.1 69.7 70.4 73.5 35.4 4.4 8.6 8.2 Buy BuyNalco 352 227 11.3 13.0 13.0 11.2 -34.1 -13.6 27.0 31.3 Sell SellSAIL 152 629 12.6 15.1 13.9 14.6 -16.1 5.1 11.0 10.4 Sell SellSterlite 607 430 29.6 39.1 31.7 43.5 -32.3 37.2 19.1 14.0 Buy BuyTata Steel 412 338 39.2 77.3 48.1 87.7 -64.2 82.1 8.6 4.7 Neutral Neutral

Source: Company/MOSL

BASE METAL PRICES (US$/TON)QUARTER ZINC ALUMINIUM COPPER LEAD ALUMINA

AVG. QOQ % YOY % AVG. QOQ % YOY % AVG. QOQ % YOY % AVG. QOQ % YOY % AVG. QOQ % YOY %1QFY10 1,495 24 -30 1,505 7 -50 4,640 33 -44 1,481 26 -36 208 10 -494QFY09 1,208 -1 -51 1,401 -26 -50 3,494 -11 -55 1,173 -7 -60 190 -32 -513QFY09 1,219 -32 -54 1,885 -34 -25 3,948 -48 -46 1,265 -34 -61 279 -32 -192QFY09 1,798 -16 -44 2,839 -5 9 7,571 -9 -1 1,915 -18 -38 408 -1 171QFY09 2,150 -13 -42 2,995 8 7 8,323 8 10 2,330 -20 7 411 5 144QFY08 2,460 -8 -29 2,779 11 1 7,741 7 30 2,900 -10 66 391 14 213QFY08 2,664 -17 -36 2,500 -4 -8 7,259 -5 2 3,232 4 104 343 -1 432QFY08 3,221 -12 -4 2,610 -7 3 7,624 1 0 3,094 42 159 347 -4 21QFY08 3,679 7 14 2,802 2 4 7,578 27 6 2,184 25 95 360 12 -384QFY07 3,441 -17 52 2,748 1 12 5,975 -16 23 1,751 10 43 322 34 -473QFY07 4,142 23 152 2,726 8 32 7,096 -7 72 1,587 33 57 240 -29 -552QFY07 3,359 4 155 2,531 -6 37 7,628 7 115 1,194 7 37 340 -42 -211QFY07 3,239 43 152 2,684 10 50 7,158 47 123 1,119 -9 18 583 -4 344QFY06 2,267 38 71 2,447 18 29 4,862 18 55 1,224 21 31 607 15 463QFY06 1,642 25 45 2,071 12 14 4,130 17 39 1,011 16 9 530 23 322QFY06 1,316 2 32 1,849 3 8 3,544 10 27 869 -8 0 432 0 291QFY06 1,287 -3 23 1,795 -5 6 3,213 3 19 949 1 22 434 5 -54QFY05 1,327 17 22 1,891 4 13 3,127 5 16 937 1 15 415 3 -13QFY05 1,131 13 20 1,818 6 19 2,975 7 45 927 6 47 401 19 292QFY05 998 -4 19 1,718 2 21 2,788 3 58 872 12 71 336 -27 181QFY05 1,043 -4 32 1,690 1 22 2,698 0 63 777 -5 68 458 9 62

Source: Company/MOSL

18226 June 2009

RELATIVE PERFORMANCE - 3 MONTH (%) RELATIVE PERFORMANCE - 1 YEAR (%)

Stock performance and valuations

STOCK PERFORMANCE (%) ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR

3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEARMetalsHindalco 66 -34 18 -37 -1 -21Hindustan Zinc 39 15 -9 13 -28 29Jindal Steel & Power 98 29 50 26 31 42JSW Steel 207 -40 160 -42 140 -26Nalco 32 -17 -16 -19 -35 -3SAIL 58 -2 10 -4 -9 12Sterlite Inds. 66 -16 19 -18 -1 -2Tata Steel 89 -49 42 -51 22 -35

Metals

COMPARATIVE VALUATIONCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)26.6.09 FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E

MetalsHindalco 87 Sell 9.9 5.0 4.8 8.8 17.5 18.2 5.5 5.5 5.1 16.0 7.3 6.5Hindustan Zinc 604 Buy 64.6 56.6 67.1 9.4 10.7 9.0 5.6 6.8 4.8 19.0 14.4 14.8Jindal Steel & Power 2,444 Buy 198.6 207.8 250.2 12.3 11.8 9.8 8.4 9.0 8.6 45.1 32.4 28.3JSW Steel 624 Buy 52.0 67.5 79.2 12.0 9.2 7.9 8.2 5.7 4.9 12.0 13.6 13.9Nalco 309 Sell 19.7 13.0 11.2 15.6 23.7 27.4 10.0 15.3 19.1 13.0 8.1 6.8SAIL 152 Sell 16.6 13.9 14.6 9.2 10.9 10.4 5.1 6.4 6.6 24.0 17.3 15.9Sterlite Inds. 612 Buy 46.8 31.7 43.5 13.1 19.3 14.1 7.5 12.3 7.7 13.0 8.2 10.2Tata Steel 388 Neutral 134.4 48.1 87.7 2.9 8.1 4.4 3.9 6.1 4.6 66.0 23.9 33.0Sector Aggregate 8.0 12.1 9.6 5.6 7.1 6.1 21.2 12.7 14.2

80

110

140

170

200

Mar-09 Apr-09 May-09 Jun-09

Sensex MOSt Metals Index

30

55

80

105

130

Jun-08 Sep-08 Dec-08 Mar-09 Jun-09

MOSt Metals Index Sensex

18326 June 2009

Hindalco

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 600,128 19,803 16.1 -33.2 5.4 2.0 36.6 7.4 0.5 4.8

3/09A 642,784 17,273 9.9 -38.9 8.8 1.4 16.0 5.6 0.5 5.5

3/10E 512,320 8,699 5.0 -49.6 17.5 1.3 7.3 5.4 0.6 5.5

3/11E 520,121 8,356 4.8 -3.9 18.2 1.2 6.5 5.5 0.5 5.1

Equity Shares (m) 1,752.1

52-Week Range 145/37

1,6,12 Rel. Perf. (%) 0/20/-37

M.Cap. (Rs b) 151.8

M.Cap. (US$ b) 3.2

QUARTERLY PERFORMANCE (STANDALONE) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 46,475 56,366 41,172 36,480 37,471 36,489 39,843 42,973 180,492 156,776

Change (YoY %) -0.6 13.6 -9.1 -27.2 -19.4 -35.3 -3.2 17.8 -5.9 -13.1Total Expenditure 36,985 46,898 33,380 32,687 32,636 32,116 35,200 38,105 149,950 138,058EBITDA 9,490 9,468 7,792 3,792 4,835 4,373 4,643 4,868 30,542 18,718

Change (YoY %) 7.3 2.7 -2.7 -52.4 -49.1 -53.8 -40.4 28.4 -10.3 -38.7As % of Net Sales 20.4 16.8 18.9 10.4 12.9 12.0 11.7 11.3 16.9 11.9

Interest 761 855 932 913 887 961 924 924 3,462 3,696Depreciation 1,568 1,592 1,611 1,627 1,552 1,576 1,595 1,611 6,398 6,334Other Income 2,147 2,234 1,505 1,354 1,124 937 843 843 7,240 3,746PBT (before EO item) 9,308 9,255 6,754 2,606 3,519 2,773 2,967 3,176 27,923 12,434Extra-ordinary Income - - - - - - - - - -PBT (after EO item) 9,308 9,255 6,754 2,606 3,519 2,773 2,967 3,176 27,923 12,434Total Tax 2,340 2,056 1,306 573 880 582 623 667 6,275 2,752

% Tax 25.1 22.2 19.3 22.0 25.0 21.0 21.0 21.0 22.5 22.1Reported PAT 6,968 7,200 5,448 2,033 2,639 2,190 2,344 2,509 21,648 9,682Adjusted PAT 6,968 7,200 5,448 2,033 2,639 2,190 2,344 2,509 21,648 9,682

Change (YoY %) 15.6 12.0 0.4 -62.1 -62.1 -69.6 -57.0 23.4 -11.0 -55.3E: MOSL Estimates

SellPrevious Recommendation: Sell Rs87

26 June 2009BLOOMBERGHNDL IN

REUTERS CODEHALC.BO

Consolidated

Results PreviewSECTOR: METALS

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

Sanjay Jain (SanjayJain@MotilalOswal.com) / Ashutosh Somani (Ashutosh.Somani@MotilalOswal.com)

? We expect net sales to decline 19.4% YoY to Rs37.5b due to steep decline in metal prices and by-product realizations,partly cushioned by YoY volume growth.

? EBITDA would decline by 49% YoY due to a 50% YoY fall in aluminum prices at the LME while copper Tc/Rcmargins remain subdued.

? Aluminum smelting capacity (Hirakud) expansion from 143ktpa to 151ktpa is in progress and is expected to becompleted by August 2009.

? Aluminum prices have moved up most on LME among base metals due to stronger demand, de-stocking, and shortageof metal in spot markets due to large buying by Glencore. We estimate EPS of Rs5 for FY10, with our revisedaluminum price assumption of US$1,500/ton (earlier US$1,400/ton) and revised currency assumption of Rs47.4/US$(earlier Rs49.6/US$). However, Hindalco has lined up huge capex for its long-gestation greenfield projects, whichwill result in higher debt on the balance sheet, capping upsides to its equity value. Maintain Sell.

18426 June 2009

Hindustan Zinc

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 78,778 43,961 104.0 -1.0 5.8 2.2 37.1 41.9 2.3 3.3

3/09A 57,660 27,276 64.6 -38.0 9.4 1.8 19.0 16.9 2.7 5.6

3/10E 53,259 23,909 56.6 -12.3 10.7 1.5 14.4 11.0 2.8 6.8

3/11E 60,508 28,367 67.1 18.6 9.0 1.3 14.8 11.3 2.1 4.8

Equity Shares (m) 422.5

52-Week Range 696/215

1,6,12 Rel. Perf. (%) -1/26/13

M.Cap. (Rs b) 255.4

M.Cap. (US$ b) 5.3

QUARTERLY PERFORMANCE (STANDALONE) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 16,437 17,905 10,692 12,627 13,206 12,872 13,590 13,591 57,660 53,259

Change (YoY %) -16.6 -9.8 -35.5 -44.3 -19.7 -28.1 27.1 7.6 -26.8 -7.6Total Expenditure 6,660 8,084 7,641 7,076 7,821 7,628 7,968 7,968 29,461 31,386EBITDA 9,777 9,821 3,051 5,551 5,385 5,244 5,622 5,623 28,199 21,873

Change (YoY %) -31.9 -30.8 -70.8 -62.5 -44.9 -46.6 84.3 1.3 -47.6 -22.4As % of Net Sales 59.5 54.8 28.5 44.0 40.8 40.7 41.4 41.4 48.9 41.1

Interest 69 71 44 49 49 49 49 49 232 194Depreciation 686 704 712 750 678 705 650 678 2,853 2,710Other Income 2,094 1,807 2,363 2,205 2,393 2,554 2,716 2,888 8,468 10,551PBT (before EO item) 11,116 10,853 4,658 6,956 7,051 7,044 7,638 7,785 33,583 29,519Extra-ordinary Income - - - - - - - - - -PBT (after EO item) 11,116 10,853 4,658 6,956 7,051 7,044 7,638 7,785 33,583 29,519Total Tax 2,638 1,257 969 1,442 1,340 1,338 1,451 1,479 6,306 5,609

% Tax 23.7 11.6 20.8 20.7 19.0 19.0 19.0 19.0 18.8 19.0Reported PAT 8,478 9,595 3,688 5,515 5,711 5,706 6,187 6,306 27,276 23,910Adjusted PAT 8,478 9,595 3,688 5,515 5,711 5,706 6,187 6,306 27,276 23,910

Change (YoY %) -28.5 -16.4 -53.0 -56.8 -32.6 -40.5 67.8 14.3 -38.0 -12.3E: MOSL Estimates

BuyPrevious Recommendation: Buy Rs604

26 June 2009BLOOMBERGHZ IN

REUTERS CODEHZNC.BO

Results PreviewSECTOR: METALS

Sanjay Jain (SanjayJain@MotilalOswal.com) / Ashutosh Somani (Ashutosh.Somani@MotilalOswal.com)

Standalone

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect net sales to decline ~20% YoY to Rs13b due to 30% YoY fall in zinc prices, partly cushioned by strongvolume growth. PAT is likely to decline 33% YoY to Rs5.7b.

? EBITDA would decline ~45% YoY and margins would decline sharply to 40.8% due to lower metal and by-productrealizations, worsened further by rupee appreciation. Revenues from by-products would decline due to sharp fall insulphuric acid prices.

? Capacity expansion to 1m tons for both zinc and lead combined is expected to be completed on schedule by mid-2010.Zinc volumes would grow at 12% CAGR in FY09-11 to 700,000 tons, with the execution of 1m ton expansion plan,while silver volumes would grow at 68% CAGR to 270k tons, with the expansion of Sindesar Khurd mine in Rajasthan.We have revised our zinc price assumption recently from US$1,400/ton to US$1,500/ton, thereby upgrading ourFY10 EPS estimate by ~9% to Rs56.6. The stock trades at 1.5x FY10E book value (RoE of 11%). Maintain Buy.

18526 June 2009

Jindal Steel & Power

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 54,890 13,634 88.6 97.0 27.6 9.8 35.4 16.6 8.0 18.6

3/09A 108,443 30,572 198.6 124.2 12.3 5.6 45.1 28.5 4.0 8.4

3/10E 109,538 32,000 207.8 4.7 11.8 3.8 32.4 19.8 4.4 9.0

3/11E 126,419 38,524 250.2 20.4 9.8 2.8 28.3 17.1 4.4 8.6

Equity Shares (m) 154.0

52-Week Range 2,709/517

1,6,12 Rel. Perf. (%) 11/126/26

M.Cap. (Rs b) 376.3

M.Cap. (US$ b) 7.8

BuyPrevious Recommendation: Buy Rs2,444

26 June 2009BLOOMBERGJSP IN

REUTERS CODEJNSP.BO

QUARTERLY PERFORMANCE (STANDALONE) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 18,953 22,161 17,811 17,607 17,258 17,438 20,081 22,406 76,532 77,183

Change (YoY %) 55.0 74.6 27.6 15.6 -8.9 -21.3 12.7 27.3 41.4 0.9Total Expenditure 11,128 13,610 10,965 13,300 12,081 12,207 12,450 13,184 51,605 49,921EBITDA 7,825 8,551 6,846 4,307 5,177 5,231 7,631 9,222 24,927 27,261

Change (YoY %) 63.3 58.2 28.6 -36.6 -33.8 -38.8 11.5 114.1 9.4 9.4As % of Net Sales 41.3 38.6 38.4 24.5 30.0 30.0 38.0 41.2 32.6 35.3

Interest 475 563 743 759 510 571 449 510 2,040 2,040Depreciation 1,057 1,077 1,109 1,087 1,148 1,239 1,102 1,102 4,330 4,590Other Income 74 150 104 1,135 171 177 145 164 1,462 657PBT (before EO item) 6,368 7,061 5,097 3,596 3,691 3,598 6,225 7,774 20,019 21,288Extra-ordinary Income (770) (1,106) (726) 500 - - - - - -PBT (after EO item) 5,598 5,955 4,371 4,096 3,691 3,598 6,225 7,774 20,019 21,288Total Tax 1,575 1,455 1,120 505 849 828 1,432 1,788 4,654 4,896

% Tax 28.1 24.4 25.6 12.3 23.0 23.0 23.0 23.0 23.2 23.0Reported PAT 4,023 4,500 3,252 3,591 2,842 2,771 4,793 5,986 15,365 16,392Adjusted PAT 4,576 5,336 3,792 3,153 2,842 2,771 4,793 5,986 15,365 16,392

Change (YoY %) 97.5 92.3 18.8 -34.2 -37.9 -48.1 26.4 89.9 12.0 6.7Consolidated PAT 4,989 8,483 9,538 8,798 8,828 5,792 7,905 8,676 30,572 32,000

Change (YoY %) 115.3 205.7 198.9 83.6 76.9 -31.7 -17.1 -1.4 144.3 4.7E: MOSt Estimates

Results PreviewSECTOR: METALS

Consolidated

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

Sanjay Jain (SanjayJain@MotilalOswal.com) / Ashutosh Somani (Ashutosh.Somani@MotilalOswal.com)

? We expect net sales to decline 8.9% YoY to Rs17.3b due to decline in steel prices. EBITDA is likely to decrease 34%YoY to Rs5.2b. Standalone post-tax adjusted profit is likely to decline by 38% YoY to Rs2.8b.

? We estimate JPL’s 1Q PAT at Rs6.4b. Consolidated PAT is likely to grow 85% YoY to Rs9.2b. We assume powersales of 1,757MU and a realization of Rs6.5/unit for the quarter (in line with 4QFY09).

? Volume growth in steel business due to revamp of 0.5mtpa mini blast furnace, start of new 100ton EAF, 540MW CPPat Raigarh, 4.5mtpa pellet plant, plate mill and 810MW CPP in Orissa will provide earnings growth during FY10-11,while JPL’s strong cash flows will be invested into 2,400MW brown-field expansion over the next 4 years. We expectmargins of steel business to remain under pressure until 1QFY10 due to high cost coking coal inventories. The stocktrades at 11.8x FY10E EPS. Maintain Buy.

18626 June 2009

JSW Steel

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 123,455 15,367 82.2 9.2 7.6 1.5 20.2 11.5 1.9 7.3

3/09A 164,558 9,729 52.0 -36.7 12.0 1.4 12.0 8.9 1.7 8.2

3/10E 178,058 12,635 67.5 29.9 9.2 1.3 13.6 11.8 1.5 5.7

3/11E 192,858 14,816 79.2 17.3 7.9 1.1 13.9 12.7 1.3 4.9

Equity Shares (m) 187.1

52-Week Range 1,050/161

1,6,12 Rel. Perf. (%) 16/137/-42

M.Cap. (Rs b) 116.7

M.Cap. (US$ b) 2.4

BuyPrevious Recommendation: Buy Rs624

26 June 2009BLOOMBERGJSTL IN

REUTERS CODEJSTL.BO

QUARTERLY PERFORMANCE (STANDALONE) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QSales (tons) 817,000 837,000 711,000 1,062,000 1,300,000 1,400,000 1,500,000 1,600,000 3,427,000 5,800,000

Change (YoY %) 13.2 3.7 -18.0 5.2 59.1 67.3 111.0 50.7 0.6 69.2Realization (Rs per ton) 44,938 51,006 39,178 31,345 28,365 28,196 27,983 27,734 41,012 28,052

Change (YoY %) 36.0 52.8 21.2 -11.3 -36.9 -44.7 -28.6 -11.5 22.0 -31.6Net Sales 36,714 42,692 27,855 33,288 36,875 39,475 41,975 44,375 140,549 162,700

Change (YoY %) 53.9 58.5 -0.6 -6.7 0.4 -7.5 50.7 33.3 22.7 15.8Total Expenditure 28,121 31,789 23,941 29,227 26,795 28,474 30,406 32,113 113,077 117,788EBITDA 8,593 10,904 3,915 4,061 10,080 11,001 11,569 12,262 27,472 44,912

Change (YoY %) 11.0 25.8 -50.8 -49.9 17.3 0.9 195.5 201.9 -15.4 63.5As % of Net Sales 23.4 25.5 14.1 12.2 27.3 27.9 27.6 27.6 19.5 27.6

EBITDA (Rs per ton) 10,518 13,027 5,506 3,824 7,754 7,858 7,713 7,664 8,016 7,743Interest 1,531 1,960 2,333 2,149 2,703 2,948 3,317 3,317 7,973 12,285Depreciation 1,852 1,975 2,141 2,309 2,759 3,010 3,260 3,511 8,277 12,540Other Income 273 426 420 973 350 338 288 275 2,092 1,250PBT (before EO Item) 5,483 7,394 -139 577 4,969 5,381 5,279 5,709 13,315 21,337EO Items -2,266 -2,684 -1,768 178 0 0 0 0 -6,540PBT (after EO Item) 3,217 4,711 -1,907 755 4,969 5,381 5,279 5,709 6,775 21,337Total Tax 1,024 1,536 -632 263 1,689 1,829 1,795 1,941 2,191 7,255

% Tax 31.8 32.6 33.1 34.9 34.0 34.0 34.0 34.0 32.3 34.0Reported PAT 2,193 3,175 -1,275 492 3,279 3,551 3,484 3,768 4,584 14,083Preference Dividend 72 72 72 72 72 72 72 72 289 289Adjusted PAT 3,665 4,911 -165 304 3,207 3,479 3,412 3,696 8,720 13,794

Change (YoY %) -4.0 3.6 -104.9 -92.6 -12.5 -29.2 N.A 1,117.3 -45.6 58.2E: MOSL Estimates

Results PreviewSECTOR: METALS

Consolidated

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

Sanjay Jain (SanjayJain@MotilalOswal.com) / Ashutosh Somani (Ashutosh.Somani@MotilalOswal.com)

? We expect net sales to remain flat YoY at Rs36.9b, as decline in realizations by ~37% YoY to Rs28,365/ton would beoffset by volume growth of 59% YoY to 1.3m tons. EBITDA is likely to increase 14% YoY to Rs9.8b. Margin wouldincrease ~3pp to 26.5% due to lower coking coal and coke costs.

? The company ramped up production aggressively during the quarter in tandem with the improved domestic demandoutlook in construction and automotive sectors. US pipe and mill operations continue to face a challenging demandoutlook and we expect them to work at previous low capacity utilizations of ~20%.

? Strong volume growth of ~69% to 5.8m ton in FY10 and significant cost savings will drive earnings growth in FY10-11. We believe that JSW Steel is best placed among Indian steel producers due to its strongest volume growth,geographical advantage in southern India, low conversion costs due to high manpower productivity and operationalefficiencies, and easing input pressures. We estimate an EPS of Rs67.5 for FY10 and Rs79.2 for FY11. The stocktrades at an EV/EBITDA of 5.7x FY10E. Maintain Buy.

18726 June 2009

Nalco

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 49,888 16,483 25.6 -31.1 12.1 2.2 18.6 20.4 3.3 7.4

3/09A 51,655 12,723 19.7 -22.8 15.6 2.0 13.0 14.1 3.4 10.0

3/10E 43,671 8,387 13.0 -34.1 23.7 1.9 8.1 6.7 4.0 15.3

3/11E 44,071 7,248 11.2 -13.6 27.4 1.9 6.8 4.3 4.0 19.1

Equity Shares (m) 644.3

52-Week Range 452/108

1,6,12 Rel. Perf. (%) -17/13/-19

M.Cap. (Rs b) 198.8

M.Cap. (US$ b) 4.1

QUARTERLY PERFORMANCE (CONSOLIDATED) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 14,675 15,364 10,360 11,257 10,902 10,514 11,034 11,220 51,655 43,671

Change (YoY %) 25.9 17.4 -6.6 -19.9 -25.7 -31.6 6.5 -0.3 3.6 -15.5Total Expenditure 7,307 8,957 7,704 10,301 7,909 8,055 8,169 8,130 34,268 32,263EBITDA 7,368 6,408 2,655 956 2,993 2,459 2,865 3,091 17,387 11,408

Change (YoY %) 19.5 12.7 -39.7 -84.1 -59.4 -66.6 -55.3 16.4 -22.0 -34.4As % of Net Sales 50.2 41.7 25.6 8.5 27.5 23.4 26.0 27.5 33.7 26.1

Interest 4 1 6 29 0 0 0 0 40 0Depreciation 679 696 642 713 901 1,023 1,105 1,064 2,730 4,093Other Income 1,262 1,181 1,133 1,078 1,283 1,603 1,336 1,122 4,654 5,345PBT (before EO Item) 7,948 6,892 3,140 1,292 3,376 3,039 3,096 3,149 19,272 12,660PBT (after EO Item) 7,948 6,892 3,140 1,292 3,376 3,039 3,096 3,149 19,272 12,660Total Tax 2,694 2,447 946 462 1,148 1,033 1,053 1,039 6,549 4,273

% Tax 33.9 35.5 30.1 35.7 34.0 34.0 34.0 33.0 34.0 33.8Reported PAT 5,253 4,445 2,195 830 2,228 2,006 2,043 2,110 12,723 8,387Adjusted PAT 5,253 4,445 2,195 830 2,228 2,006 2,043 2,110 12,723 8,387

Change (YoY %) 17.6 1.1 -33.4 -80.8 -57.6 -54.9 -6.9 154.1 -23.0 -34.1E: MOSL Estimates

SellPrevious Recommendation: Sell Rs309

26 June 2009BLOOMBERGNACL IN

REUTERS CODENALU.BO

Results PreviewSECTOR: METALS

Standalone

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

Sanjay Jain (SanjayJain@MotilalOswal.com) / Ashutosh Somani (Ashutosh.Somani@MotilalOswal.com)

? We expect net sales to decline 25.7% YoY to Rs10.9b due to steep fall in aluminum prices at the LME. Aluminumaveraged US$1,505/ton in 1QFY10, down 50% YoY. Alumina prices declined 49% YoY to US$208/ton.

? EBITDA would decline ~59% YoY to Rs3b while margins would decline ~23pp to 27.5% due to higher prices ofcarbon materials.

? Nalco is expanding smelter capacity from 345ktpa to 460ktpa by adding 240 pots. Commissioning of pots is beingdone in phases. 120 pots are now operational and monthly production has increased by 15-20% to 35,000-36,000 tons.The balance 120 pots will be commissioned in the next six months. Capacity expansion will increase production from360,000 tons in FY08 to 426,000 tons in FY10. We estimate an EPS of Rs13 for FY10 factoring in our aluminum priceassumption of US$1,500/ton. Other income will contribute ~50% to FY10E PBT. Cash surpluses are Rs37.5b (Rs58/share). The stock trades at expensive valuations. Maintain Sell.

18826 June 2009

Sterlite Industries

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 247,243 43,581 61.5 -23.4 10.0 1.9 19.5 21.2 1.4 6.7

3/09A 215,233 33,141 46.8 -24.0 13.1 1.7 13.0 10.1 1.8 10.5

3/10E 170,694 22,452 31.7 -32.3 19.3 1.6 8.2 4.9 2.4 16.2

3/11E 201,682 29,101 43.5 37.2 14.1 1.4 10.2 6.3 2.0 9.3

Equity Shares (m) 708.5

52-Week Range 739/165

1,6,12 Rel. Perf. (%) 5/88/-18

M.Cap. (Rs b) 433.6

M.Cap. (US$ b) 9.0

QUARTERLY PERFORMANCE (CONSOLIDATED) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 57,701 68,110 45,362 44,060 44,349 43,128 43,374 39,843 215,233 170,694

Change (YoY %) -6.0 3.0 -14.2 -35.5 -23.1 -36.7 -4.4 -9.6 -13.5 -20.7Total Expenditure 39,435 49,588 39,709 35,669 36,255 35,192 34,956 31,272 164,401 137,674EBITDA 18,266 18,522 5,653 8,392 8,094 7,936 8,418 8,571 50,832 33,020

Change (YoY %) -15.3 -7.9 -65.2 -62.6 -55.7 -57.2 48.9 2.1 -36.7 -35.0As % of Net Sales 31.7 27.2 12.5 19.0 18.3 18.4 19.4 21.5 23.6 19.3

Interest 874 581 1,220 1,312 1,000 1,200 1,250 1,326 3,986 4,776Depreciation 1,655 1,667 1,654 2,032 1,850 1,950 2,000 2,178 7,007 7,978Other Income 4,024 3,948 5,852 3,940 4,458 4,670 5,307 6,369 17,764 20,805PBT (before XO item) 19,761 20,224 8,632 8,988 9,702 9,457 10,476 11,435 57,604 41,069Extra-ordinary Exp. 0 -100 283 2,076 0 0 0 0 2,258 0PBT (after XO item) 19,761 20,124 8,914 11,063 9,702 9,457 10,476 11,435 59,862 41,069Total Tax 3,808 2,916 1,591 1,941 1,843 1,797 1,990 2,277 10,255 7,907

% Tax 19.3 14.5 17.8 17.5 19.0 19.0 19.0 19.9 17.1 19.3Reported PAT 15,953 17,208 7,323 9,122 7,859 7,660 8,485 9,158 49,607 33,162Minority interest 4,470 4,425 1,720 2,057 2,028 2,026 2,196 2,239 12,671 8,488Share of Associates -27 14 466 1,082 500 450 383 333 1,536 1,665Adjusted PAT 11,510 12,869 4,855 3,907 5,332 5,185 5,906 6,586 33,141 23,009

Change (YoY %) 0.7 18.9 -43.2 -71.5 -53.7 -59.7 21.7 68.6 -24.0 -30.6E: MOSL Estimates

BuyPrevious Recommendation: Buy Rs612

26 June 2009BLOOMBERGSTLT IN

REUTERS CODESTRL.BO

Results PreviewSECTOR: METALS

Consolidated

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

Sanjay Jain (SanjayJain@MotilalOswal.com) / Ashutosh Somani (Ashutosh.Somani@MotilalOswal.com)

? We expect net sales to decline 23% YoY to Rs44b due to lower base metal prices on the LME. EBITDA is expectedto decline 56% YoY and margin would contract 13pp to 18.3%. PAT is likely to decrease 54% YoY to Rs5.3b.

? By-product realizations would be significantly lower YoY due to the steep fall in sulfuric acid prices. Balco’s marginsare under pressure due to 50% YoY lower aluminum prices, despite initiatives to minimize cost.

? We believe Sterlite’s low cost capacities of zinc, copper custom smelting will continue to generate positive cash flowsirrespective of metal prices. We have revised our metal price assumptions for zinc, aluminum and lead to US$1,500/ton from US$1,400/ton earlier. Our revised currency assumption is Rs47.4/US$ as against Rs49.6/US$ earlier. OurFY10E EPS is Rs31.7 factoring in the new assumptions. Maintain Buy.

18926 June 2009

Steel Authority of India

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 400,581 84,603 20.5 34.8 7.4 2.7 36.4 45.8 1.3 4.2

3/09A 446,369 68,420 16.6 -19.1 9.2 2.2 24.0 31.3 1.2 5.1

3/10E 400,405 57,372 13.9 -16.1 10.9 1.9 17.3 23.1 1.4 6.4

3/11E 416,325 60,279 14.6 5.1 10.4 1.6 15.9 22.1 1.5 6.6

Equity Shares (m) 4,130.4

52-Week Range 186/55

1,6,12 Rel. Perf. (%) -9/57/-4

M.Cap. (Rs b) 626.2

M.Cap. (US$ b) 13.0

QUARTERLY PERFORMANCE (CONSOLIDATED) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QSales (m tons) 2.65 2.65 2.40 3.60 3.00 3.00 3.00 3.20 11.30 12.20

Change (YoY %) 4.7 -11.7 -20.3 -5.3 13.2 13.2 25.0 -11.1 -8.4 8.0Realization (Rs per ton) 41,621 46,183 37,169 33,494 32,500 32,500 32,500 32,500 39,156 32,500

Change (YoY %) 31.0 51.2 17.4 -5.6 -21.9 -29.6 -12.6 -3.0 20.2 -17.0Net Sales 110,294 122,386 89,206 120,578 97,500 97,500 97,500 104,000 442,465 396,500

Change (%) 37.2 33.6 -6.4 -10.5 -11.6 -20.3 9.3 -13.7 10.0 -10.4EBITDA 30,086 37,015 11,287 21,097 20,271 21,771 21,771 24,431 99,485 88,242

Change (YoY %) 22.1 36.6 -63.2 -55.4 -32.6 -41.2 92.9 15.8 -23.3 -11.3As % of Net Sales 27.3 30.2 12.7 17.5 20.8 22.3 22.3 23.5 22.5 22.3

EBITDA per ton 11,353 13,968 4,703 5,860 6,757 7,257 7,257 7,635 8,804 7,233Interest 568 475 1,078 412 699 729 729 881 2,532 3,039Depreciation 3,165 3,194 3,194 3,298 3,373 3,508 3,239 3,373 12,851 13,494Other Income 3,926 4,224 5,550 5,323 4,791 3,833 3,066 2,453 19,023 14,142PBT (before EO Inc.) 30,278 37,570 12,566 22,710 20,989 21,365 20,869 22,629 103,124 85,852EO Income (exp) -2,350 -6,900 160 -9,090PBT (after EO Inc.) 27,928 30,670 12,566 22,870 20,989 21,365 20,869 22,629 94,034 85,852Total Tax 9,577 10,574 4,132 8,004 7,136 7,264 7,095 7,694 32,286 29,190

% Tax 34.3 34.5 32.9 35.0 34.0 34.0 34.0 34.0 34.3 34.0Reported PAT 18,352 20,096 8,433 14,867 13,853 14,101 13,773 14,935 61,748 56,662Adjusted PAT 19,882 24,670 8,251 14,913 13,853 14,101 13,773 14,935 67,717 56,662

Change (YoY %) 26.6 41.5 -58.2 -52.1 -30.3 -42.8 66.9 0.1 -19.4 -16.3E: MOSL Estimates

SellPrevious Recommendation: Sell Rs152

26 June 2009BLOOMBERGSAIL IN

REUTERS CODESAIL.BO

Results PreviewSECTOR: METALS

Consolidated

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

Sanjay Jain (SanjayJain@MotilalOswal.com) / Ashutosh Somani (Ashutosh.Somani@MotilalOswal.com)

? We expect net sales to decline 12% YoY to Rs98b, driven by 22% decline in average realization despite volumegrowth of 13.2% YoY to 3m tons.

? EBITDA margin would decline 6.5pp YoY to 20.8% due to high cost coking coal inventory and falling realizations.PAT is likely to decline 30% YoY to Rs14b.

? We estimate an EPS of Rs13.9 in FY10 and Rs14.6 in FY11, assuming a blended realization of Rs32,500/ton. Rs540bcapex to expand capacity from 13mtpa to 23mtpa will bring volume growth in FY12-14. In FY10 and FY11, costreduction due to coking coal price correction will be the key earnings driver due to absence of meaningful volumegrowth. SAIL’s balance sheet is risk-free due to absence of loans, while surplus cash of >US$3b is an addedcomfort. The stock trades at expensive valuations of 10.9x FY10E EPS. Maintain Sell.

19026 June 2009

Results PreviewSECTOR: METALS

Tata Steel

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 1,315,359 77,404 94.2 34.1 4.1 2.0 48.4 15.1 0.6 4.3

3/09A 1,473,130 90,610 110.2 17.1 3.5 2.4 68.2 14.6 0.6 4.6

3/10E 1,022,021 39,577 48.1 -56.3 8.1 2.4 30.2 9.5 0.8 6.4

3/11E 1,119,474 70,350 85.6 77.8 4.5 2.0 43.2 12.7 0.7 5.1

Equity Shares (m) 822.0

52-Week Range 784/146

1,6,12 Rel. Perf. (%) -1/25/-51

M.Cap. (Rs b) 318.8

M.Cap. (US$ b) 6.8

QUARTERLY PERFORMANCE (STANDALONE) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10EStandalone Financials 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QProduction ('000 tons) 1,187 1,330 1,235 1,624 1,450 1,750 1,750 1,850 5,375 6,800

Change (YoY %) 11.5 3.9 -0.9 28.1 22.2 31.6 41.7 13.9 10.6 26.5Sales ('000 tons) 1,159 1,220 1,072 1,791 1,450 1,750 1,750 1,850 5,242 6,800

Change (YoY %) 11.4 0.1 -13.8 40.0 25.1 43.4 63.3 3.3 9.6 29.7Realization (Rs per ton) 45,737 48,286 41,666 37,666 36,750 36,750 36,750 36,750 43,293 36,750

Change (YoY %) 24.7 36.9 18.4 -3.8 -19.6 -23.9 -11.8 -2.4 18.3 -15.1Net Sales 61,650 67,442 48,021 67,231 57,763 66,238 66,875 70,550 244,344 261,425

Change (YoY %) 46.9 40.9 -3.5 17.2 -6.3 -1.8 39.3 4.9 24.1 7.0EBITDA 30,246 30,765 14,780 17,955 19,893 22,642 24,323 25,971 93,745 92,828

Change (YoY %) 78.0 51.9 -29.5 -25.3 -34.2 -26.4 64.6 44.6 14.0 -1.0(% of Net Sales) 49.1 45.6 30.8 26.7 34.4 34.2 36.4 36.8 38.4 35.5

EBITDA(Rs/tss) 21,918 20,609 12,401 8,750 11,648 11,062 12,153 12,386 15,247 11,890Interest 2,417 2,548 3,482 3,308 3,500 3,233 3,233 2,965 11,755 12,931Depreciation 2,168 2,488 2,513 2,614 2,650 2,625 2,596 2,513 9,783 10,384Other Income 122 3,449 85 370 613 613 613 613 4,026 2,450PBT (before EO Inc.) 25,783 29,177 8,869 12,403 14,355 17,397 19,106 21,105 76,232 71,963EO Income (exp) -3,034 -3,454 -1,268 -7,756PBT (after EO Inc.) 22,749 25,723 7,601 12,403 14,355 17,397 19,106 21,105 68,476 71,963Total Tax 7,865 7,845 2,939 4,167 4,823 5,845 6,420 7,091 22,816 24,180

% Tax 34.6 30.5 38.7 33.6 33.6 33.6 33.6 33.6 33.3 33.6Reported PAT 14,884 17,878 4,662 8,236 9,532 11,551 12,687 14,014 45,660 47,784Adjusted PAT 17,918 21,332 5,930 8,236 9,532 11,551 12,687 14,014 53,417 47,784

Change (YoY %) 79.5 82.7 -45.1 -36.6 -46.8 -45.9 113.9 70.2 19.6 -10.5Consolidated FinancialsNNet Sales 435,083 441,990 331,910 314,176 247,939 256,414 257,045 260,730 1,523,159 1,022,128EBITDA 69,876 82,497 46,014 12,334 27,750 34,339 34,236 35,893 210,721 132,219Adjusted PAT 42,043 51,679 27,586 -10,436 5,002 11,007 11,113 12,449 110,443 39,572E: MOSL Estimates; tss=ton of steel sales

BuyPrevious Recommendation: Buy Rs388

26 June 2009BLOOMBERGTATA IN

REUTERS CODETISC.BO

Consolidated

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

Sanjay Jain (SanjayJain@MotilalOswal.com) / Ashutosh Somani (Ashutosh.Somani@MotilalOswal.com)

? We expect standalone net sales to decline 6% YoY to Rs58b due to ~20% decline in realizations to Rs36,750/tonpartly cushioned by a strong volume growth of 25% YoY to 1.45m tons. EBITDA would decline 34% YoY and marginwould contract 470bp to 34%.

? Though Indian operations will benefit from strong volume growth and favorable steel pricing environment in India,cash flows will be routed to Corus and the greenfield projects in India may suffer as a consequence. However, TataSteel remains committed to its brownfield expansion at Jamshedpur to raise capacity to 10mtpa. The stock trades at2.4x FY10E BV and an EV of 6.4x FY10E EBITDA. Maintain Buy.

19126 June 2009

Oil & Gas

COMPANY NAMEBPCL

Cairn India

Chennai Petroleum

GAIL

HPCL

IOC

Indraprastha Gas

MRPL

ONGC

Reliance Industries

EXPECTED QUARTERLY PERFORMANCE SUMMARY (RS MILLION)CMP (RS) RECO SALES EBITDA NET PROFIT

26.6.09 JUN.09 VAR. VAR. JUN.09 VAR. VAR. JUN.09 VAR. VAR.% YOY % QOQ % YOY % QOQ % YOY % QOQ

Oil & GasBPCL 421 Buy 281,962 -27.7 6.4 13,525 LP -67.4 5,563 LP -84.7Cairn India 234 Buy 2,423 -40.0 33.3 1,399 -48.6 61.3 541 -60.9 189.6Chennai Petroleum 177 Buy 66,113 -41.2 37.5 5,784 -50.5 11.3 3,137 -62.4 3.4GAIL 284 Buy 64,054 11.8 4.9 9,967 -28.8 4.1 6,325 -33.0 0.4HPCL 303 Buy 268,990 -22.5 6.9 13,073 LP -76.0 5,397 LP -89.4Indraprastha Gas 135 Neutral 2,317 21.5 1.9 752 -0.4 5.0 417 -4.5 3.5IOC 538 Buy 603,361 -31.7 1.2 45,597 374.8 -47.1 23,680 470.4 -64.2MRPL 86 Sell 77,732 -27.7 18.9 7,960 -42.5 -15.4 4,701 -49.4 -22.6ONGC 1,041 Neutral 172,174 -14.1 25.6 87,730 -25.4 51.8 46,162 -30.0 109.1Reliance Inds. 2,029 Buy 290,899 -30 2.6 62,424 2 14.8 40,480 -1.5 3.4Sector Aggregate 1,830,025 -27.2 7.2 248,211 14.4 -21.5 136,403 15.8 -39.5

Harshad Borawake (HarshadBorawake@MotilalOswal.com)

Results PreviewQUARTER ENDING JUNE 2009

Oil rebounds to US$71/bbl; Singapore complex average GRM at US$4.1/bblYoY comparative (v/s 1QFY09)? Average Brent price down 52% to ~US$59/bbl (v/s US$122/bbl); Dubai crude down

50% to US$59/bbl (v/s US$117/bbl)? Benchmark Singapore complex average refining margins down 50% to ~US$4.1/bbl

(v/s US$8.1/bbl)? Key petchem spreads increase except for MEG, aided by 17% rupee depreciation

Polymers: PE up 24%; PP up 20%Polyester intermediates: PTA up 68%; MEG down 39%Integrated polyesters: POY up 28%; PSF up 33%

QoQ comparative (v/s 4QFY09)? Average Brent and Dubai crude prices up 32% from US$45/bbl? Singapore complex margins down 27% from US$5.5/bbl? Mixed trend in polymer and polyester spreads

Polymers: PE up 8%; PP down 5%Polyester intermediates: PTA up 24%; MEG down 12%Integrated polyesters: POY and PSF flat QoQ

Factors to watch? We expect refiners to report inventory gain during the quarter, led by oil price increase

from US$48/bbl to ~US$70/bbl during the quarter.? Forthcoming budget could include various measures for the sector such as (1) de-

control of retail fuel pricing (maybe partial); (2) changes in custom and excise dutiesfor crude and petroleum products.

BSE Sensex: 14,765 S&P CNX: 4,376 26 June 2009

19226 June 2009

Oil & Gas

Oil rebounds to US$71/bbl; next move to depend on pace of economicrecovery1QFY10 highlights? Average Brent price down 52% YoY to US$59/bbl (v/s US$122/bbl in 1QFY09)? Average Brent price up 32% QoQ (v/s US$45/bbl in 4QFY09)

After hitting lows in December 2008 (WTI touched US$32.4/bbl on 4 December), crudeoil prices have more than doubled to US$71/bbl. Brent price has increased 41% QTD and45% CYTD.

The price rise towards the end of 4QFY09 was to some extent driven by OPEC members’compliance towards production cuts to the extent of ~80%. In its December 2008 meeting,OPEC had announced total production cut of 4.2mmbbl/d from the actual September 2008production level. The last 1-2month of 1QFY10, price increase can be attributed toexpectations of global economic recovery, a weak dollar and some upward revisions in2009 demand forecasts.

The sustainability of current prices and further increase would depend on the pace ofeconomic recovery. Oil prices could decline once again if (1) the expected economicrecovery is delayed, (2) oil & oil products inventory levels remain high, and if (3) OPECspare capacity increases further (current estimates of 4.7mmbbl/d in 2009 and 5.2mmbbl/d in 2010 v/s an average of 2.8mmbbl/d in the last 10 years; source: IEA).

IEA increases its 2009 oil demand forecast for the first time in 10 months:International Energy Agency (IEA) increased its 2009 oil demand forecast (thoughmarginally) for the first time in 10 months in June 2009. IEA has noted that the revisions donot necessarily imply the beginning of a global economic recovery, and may only signal thebottoming out of the recession. It expects 2009 oil demand to drop 2.9% to 83.3mmbbl/d.

In our estimates, we have built in an average Brent price of US$60/bbl for FY10, US$65/bbl for FY11, and US$65/bbl for the long-term.

OIL PRICES INCREASED SIGNIFICANTLY IN 1QFY10 (US$/BBL)

Brent crude price Source: Bloomberg/MOSL

20

55

90

125

160

Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09

19326 June 2009

0

4

8

12

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Feb-

04

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07

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Monthly Quarterly

Oil & Gas

Refining margins: down QoQ and YoY, outlook remains weak1QFY10 highlights: Benchmark Singapore complex refining margins at US$4.1/bbl? down 50% YoY (v/s US$8.1/bbl in 1QFY09)? down 27% QoQ (v/s US$5.5/bbl in 4QFY09)

SINGAPORE REFINING MARGINS (US$/BBL)

Source: Industry/ MOSL

Singapore refining margins have been on a continual decline in 1QFY10, led by weakermiddle distillate cracks. After increasing to US$5.2/bbl in April from US$3.5/bbl in March,led by increase in gasoline and middle-distillates, the Singapore GRM declined in April andMay. This decline was driven by further weakening of light/middle distillates and lowernaphtha and LPG cracks in June 2009.

Mixed trend in crude oil differentialsArab light-heavy differential at US$1.9/bbl was down 48% QoQ and 77% YoY. WTI-Maya differential at US$4.7/bbl was up 4% QoQ and down 78% YoY. Lower light/heavyand sweet/sour differentials would result in lower premiums for complex refiners oversimple refiners.

PRODUCT CRACK SUMMARY (US$/BBL)MONTH GASOLINE DIESEL JET/KERO FUEL OIL NAPHTHA LPG SINGA. GRM REMARKSNov-08 (3.9) 17.1 23.6 (13.0) (20.4) (20.6) 1.4 Negative gasoline cracks prompted refiners to pre-Dec-08 (2.1) 17.0 18.0 (8.7) (10.2) (10.9) 3.1 pone maintenance and reduce gasoline productionJan-09 4.4 13.3 15.0 (12.1) (3.3) (5.2) 6.1 This resulted in lowering supply of gasoline and

higher cracks, however diesel and Jet/ Kerocracks weakened

Feb-09 12.4 6.3 9.8 (9.5) 2.5 (6.2) 7.1 Feb-09 GRMs were boosted by strong gasolinecracks and reversal in Naphtha cracks due to restocking by downstream converters

Mar-09 7.5 6.4 7.6 (10.0) 0.0 (14.2) 3.5 With refineries coming back from maintenance, andno respite on the demand front, gasoline cracks declined; Diesel, Jet/Kero further declined

Apr-09 8.0 7.8 8.8 (11.5) (1.4) (17.1) 5.2 Middle distillate cracks continue to remain inthe single digit; Naphtha back to negative zone

May-09 8.0 6.7 6.8 (10.9) (3.0) (22.7) 4.1 LPG cracks decline significantly leading tofurther drop in GRM

Jun-09 5.6 7.2 7.2 (12.7) (4.0) (26.7) 3.0 Barring a marginal uptick in middle-distillates;cracks across the products have declined inJune-09.

Product cracks are for Singapore product prices over Dubai crude Source: Bloomberg/MOSL

19426 June 2009

Oil & Gas

Outlook: We expect refining margins to remain low in the medium term, as new 1.2-1.6mmbbl/d capacity (including RPET) is expected to go online in the next few months,when the demand outlook is still weak. We assume Singapore GRM of US$4/bbl in FY10and FY11 in our estimates.

Petrochemicals: margins largely flat QoQPetrochemical prices increased QoQ, led by increase in feedstock price and demand inkey consuming regions like China. Key polymer prices in rupee terms were up 4-13%QoQ and down 12-18% YoY. Polyester prices in rupee terms were up ~6% QoQ anddown ~6% YoY. Naphtha prices in rupee terms were up 23% QoQ and down 43% YoY.

Though margins have witnessed sharp decline to modest rise across product categories,integrated players have been impacted to a lesser extent. Further, domestic polymer pricescontinued to be higher than landed international prices, helping domestic players like RILand GAIL.

Outlook: Pressure on petchem margins, though imminent due to new capacities in MiddleEast and China, would be delayed by 3-6 months led by some delay in commissioning ofthese capacities. However, as these projects are in the final stages of commissioning, theywill eventually put pressure on global petchem margins.

KEY PRODUCT SPREADS (RS/KG)1QFY10 4QFY09 QOQ CH (%) 1QFY09 YOY CH (%)

PE 43.5 40.3 7.8 35.0 24.2PP 41.3 43.5 -5.2 34.3 20.4PTA 29.1 23.5 23.9 17.3 68.0MEG 12.9 14.7 -12.1 21.3 -39.2POY integrated 46.3 46.9 -1.3 36.2 27.8PSF integrated 42.4 42.4 0.0 31.9 33.1* PE,PP,PTA and MEG spreads over naphtha, POY & PSF spreads over PTA-MEG adjusted forconsumption norms Source: Company/MOSL

RELATIVE PRICES – NAPHTHA V/S POLYMERS RELATIVE PERFORMANCE – NAPHTHA V/S POLYESTER CHAIN

Source: Company/MOSL

60

120

180

240

300

Dec

-04

Mar

-05

Jun-

05S

ep-0

5D

ec-0

5M

ar-0

6Ju

n-06

Sep

-06

Dec

-06

Mar

-07

Jun-

07S

ep-0

7D

ec-0

7M

ar-0

8Ju

n-08

Sep

-08

Dec

-08

Mar

-09

Jun-

09

PE PP Naphtha

30

105

180

255

330

Dec

-04

Mar

-05

Jun-

05S

ep-0

5D

ec-0

5M

ar-0

6Ju

n-06

Sep

-06

Dec

-06

Mar

-07

Jun-

07S

ep-0

7D

ec-0

7M

ar-0

8Ju

n-08

Sep

-08

Dec

-08

Mar

-09

Jun-

09

POY PSF PTAMEG Naphtha

19526 June 2009

Oil & Gas

POY SPREAD OVER NAPHTHA (RS/KG) PSF SPREAD OVER NAPHTHA (RS/KG)

PTA SPREAD OVER NAPHTHA (RS/KG) MEG SPREAD OVER NAPHTHA (RS/KG)

Source: Company/MOSL

23

34

45

56

67

Apr May Jun July Aug Sept Oct Nov Dec Jan Feb Mar

2004-07 Avg 2004-07 FY08FY09 FY10

20

30

40

50

60

Apr May Jun July Aug Sept Oct Nov Dec Jan Feb Mar

2004-07 Avg 2004-07 FY08FY09 FY10

0

10

20

30

40

Apr May Jun July Aug Sept Oct Nov Dec Jan Feb Mar

2004-07 Avg 2004-07 FY08FY09 FY10

0

10

20

30

40

Apr May Jun July Aug Sept Oct Nov Dec Jan Feb Mar

2004-07 Avg 2004-07 FY08FY09 FY10

PE SPREAD OVER NAPHTHA (RS/KG) PP SPREAD OVER NAPHTHA (RS/KG)

20

28

36

44

52

Apr May Jun July Aug Sept Oct Nov Dec Jan Feb Mar

2004-07 Avg 2004-07 FY08FY09 FY10

24

32

40

48

56

Apr May Jun July Aug Sept Oct Nov Dec Jan Feb Mar

2004-07 Avg 2004-07 FY08FY09 FY10

19626 June 2009

Oil & Gas

Valuation and viewRefining outlook weak: We expect refining margins to remain weak, based on (1)expected product demand slowdown, led by weak economic fundamentals, and (2) largecapacities scheduled to start over the next few quarters (1.2-1.5mmbbl/d), leading tooversupply. We model Singapore refining margin of US$4/bbl in FY10 and FY11.

Petchem margin pressure, though inevitable, delayed by 1-2 quarters: Pressureon petchem margins, though imminent due to new capacities in Middle East and China,would be delayed by 3-6 months due to some delay in commissioning of these capacities.

FY10 under-recovery estimated at Rs262b v/s Rs1,033b in FY09: We expect under-recoveries to decline 75% to Rs262b in FY10. Our estimates factor in Brent price ofUS$60/bbl and exchange rate of Rs47.4/US$. We assume subsidy sharing of 47% throughoil bonds, 33% through upstream sharing and the rest 20% to be borne by OMCs. However,if exchange rate or product cracks were to remain lower than estimated, then the under-recovery could be lower than our estimate.

WE HAVE BUILT IN 20% SHARING BY OMCS IN FY10  FY05 FY06 FY07 FY08 FY09 1QFY10E FY10EExchange Rate (Rs/US$) 44.9 44.3 45.2 40.3 46.0 48.5 47.4Avg Brent Price (US$/bbl) 42.2 58.0 64.4 82.3 84.8 59.2 60.0Gross Under recoveries (Rs b)              Petrol 2 27 20 73 52 12 66Diesel 22 126 188 353 523 (19) (18)PDS Kerosene 95 144 179 191 282 33 152Domestic LPG 84 102 107 156 176 12 62Total 201 400 494 773 1,033 38 262Sharing (Rs b)    Oil Bonds - 115 241 353 713 18 122Upstream 59 140 205 257 329 13 87OMC’s Sharing 142 138 48 163 (9) 8 52Total 201 393 494 773 1,033 38 262Sharing (%)    Oil Bonds - 29 49 46 69 47 47Upstream 30 36 42 33 32 33 33OMC’s Sharing 70 35 10 21 (1) 20 20Total 100 100 100 100 100 100 100

Source: Company/MOSL

Likely de-regulation (though partial) positive for RMCs; but LPG/SKO under-recovery sharing would still be an important factor to watch: With the new politicalequation, optimism on deregulation of domestic fuel prices has gathered steam in therecent weeks. We believe free pricing at best will only be for petrol (MS) and diesel(HSD); LPG and kerosene (SKO) prices will continue to be government regulated.

A deregulation of petrol and diesel prices will mean significant price hikes, given the currentcrude oil prices. At a crude price of US$70/bbl, we estimate the required price increase atRs7.2/liter (18%) for petrol and Rs3.5/liter (11%) for diesel. Though the de-regulation, ifany, would most likely be only for auto fuels, it would be positive for RMCs, as they wouldonly have to deal with the problem of LPG/SKO under-recoveries.

19726 June 2009

Oil & Gas

RMCs are implementing several upgradation projects for their capacity, which will enablethem to: (1) produce a higher share of middle distillates, (2) produce Euro-III/IV compliantfuels, and (3) process a larger share of sour/heavy crudes. Completion of these projects,in time and within schedule, would be margin-accretive, effective FY11. We maintain Buyon HPCL, BPCL and IOC.

As gas production from KG-D6 reaches initial peak levels of 80mmscmd by end-FY09/early-FY10, RIL would become the largest gas producer in India and E&P would becomethe key contributor to its bottomline. For FY10, we factor in average KG-D6 gas productionvolume of 48mmscmd and model well-head gas price of US$4.2/mmbtu in our estimates.

Apart from its core business, we believe that the stock performance would continue to beinfluenced by news flow/updates on (1) further course in RIL-RNRL gas pricing andsupply issues; (2) ramp-up of KG-D6 gas volumes, and (3) updates on its E&P business.We continue to be positive on RIL, primarily due to large potential upsides from E&P. Wemaintain Buy on RIL.

We believe a significant portion of RIL’s new gas will flow through GAIL’s network as amajority of priority consumers (as per the Gas Utilization Policy) such as fertilizer, LPG,power and CGD are linked to GAIL’s pipelines. We maintain Buy on GAIL.

The ONGC stock, recently has been buoyant led by news flow in terms of (1) likely de-regulation of auto fuel pricing, leading to lower subsidy burden/rationalization in the subsidysharing, and (2) likely gas price hike for ONGC’s APM gas.

Now, with a stable government, there is a possibility of some decision on these issues.However, on the gas price hike, we believe that the most likely scenario would be steadyincrease in gas price over the next few years to bring it at par with the market price. Wemaintain Neutral on ONGC.

Cairn’s Rajasthan development project is on track for its scheduled 2QFY10 productionstart. Further, Cairn has also indicated an increase in the nameplate capacity at Rajasthanto 205kbd (as against peak production guidance of 175kbd). We believe this is a precursorto higher production from the field. We model long-term Brent price of US$65/bbl in ourestimates. We maintain Buy on Cairn.

19826 June 2009

Oil & Gas

STOCK PERFORMANCE (%) ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR

3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEAROil & GasBPCL 17 56 -31 54 -13 47Cairn India 23 -14 -25 -16 -7 -23Chennai Petroleum 95 -40 47 -43 65 -50GAIL 21 17 -27 15 -9 8HPCL 18 54 -30 51 -12 44Indraprastha Gas 28 15 -20 13 -2 6IOC 36 52 -12 49 6 42MRPL 106 45 58 43 76 36ONGC 29 20 -18 17 -1 10Reliance 29 -9 -18 -12 -1 -19

RELATIVE PERFORMACE - 3 MONTHS (%) RELATIVE PERFORMANCE - 1 YEAR (%)

Stock performance and valuations

COMPARATIVE VALUATIONCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)

26.6.09 FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11EOil & GasBPCL 421 Buy 17.5 43.7 46.8 24.0 9.6 9.0 11.2 6.4 5.9 4.8 11.3 11.1Cairn India 234 Buy 4.3 6.2 24.5 54.9 38.0 9.5 50.4 19.3 6.1 2.6 3.5 12.9Chennai Petroleum 177 Buy -2.9 41.3 28.2 -61.4 4.3 6.3 -27.1 3.0 3.7 -12.2 18.7 11.8GAIL 284 Buy 22.5 21.5 23.4 12.6 13.2 12.1 8.4 9.0 7.9 19.0 16.4 15.9HPCL 303 Buy 12.8 31.3 28.4 23.5 9.7 10.7 6.9 5.0 5.5 4.1 9.3 7.9Indraprastha Gas 135 Neutral 11.9 12.6 11.6 11.3 10.7 11.6 5.7 5.0 5.0 26.7 24.1 19.8IOC 538 Buy 21.8 49.8 50.4 24.7 10.8 10.7 14.2 6.5 6.7 5.9 12.7 11.5MRPL 86 Sell 8.3 5.5 4.2 10.4 15.6 20.7 7.4 8.9 13.0 28.0 19.0 12.8ONGC 1,041 Neutral 90.6 89.4 86.8 11.5 11.6 12.0 4.9 4.8 4.7 23.1 19.9 17.2Reliance Inds. 2,029 Buy 103.1 139.9 155.3 19.7 14.5 13.1 14.8 10.2 8.7 16.1 18.1 17.3Sector Aggregate 16.9 12.9 11.8 9.5 7.4 6.7 13.9 15.4 14.7

60

80

100

120

140

Jun-08 Sep-08 Dec-08 Mar-09 Jun-09

MOSt Oil & Gas Index Sensex

80

100

120

140

160

Mar-09 Apr-09 May-09 Jun-09

Sensex MOSt Oil & Gas Index

19926 June 2009

BPCL

YEAR NET SALES ADJ. PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END * (RS B) (RS B) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 1,112 15.1 41.9 -28.3 10.1 1.2 12.5 8.5 0.3 8.5

03/09A 1,366 6.3 17.5 -58.1 24.0 1.1 4.8 6.1 0.3 11.1

03/10E 1,112 15.8 43.7 143.7 9.6 1.0 11.3 8.9 0.3 6.4

03/11E 1,178 16.9 46.8 8.1 9.0 0.9 11.1 9.2 0.2 5.9

Equity Shares (m) 361.5

52-Week Range (Rs) 516/206

1,6,12 Rel. Perf. (%) -14/-46/54

M.Cap. (Rs b) 152.2

M.Cap. (US$ b) 3.2

QUARTERLY PERFORMANCE (STANDALONE) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 390,220 378,262 318,845 265,050 281,962 268,923 271,855 273,857 1,352,377 1,096,597

Change (%) 63.5 50.3 10.2 -18.6 -27.7 -28.9 -14.7 3.3 22.4 -18.9EBITDA -7,693 -21,674 15,209 41,531 13,525 8,046 7,833 7,874 27,373 37,277

Change (%) nm nm 247.9 382.9 nm nm -48.5 -81.0 -10.8 36.2% of Sales -2.0 -5.7 4.8 15.7 4.8 3.0 2.9 2.9 2.0 3.4

Depreciation 2,691 2,419 3,014 2,631 3,103 3,196 3,356 3,309 10,756 12,964Interest 3,016 5,338 7,161 6,149 4,407 3,825 3,375 3,209 21,664 14,815Other Income 2,757 3,225 3,002 6,104 2,412 2,890 2,798 2,776 15,087 10,876PBT -10,643 -26,207 8,036 38,854 8,427 3,915 3,900 4,132 10,041 20,374Tax 24 46 38 2,574 2,864 1,331 1,325 1,405 2,682 6,925

Rate (%) -0.2 -0.2 0.5 6.6 34.0 34.0 34.0 34.0 26.7 34.0PAT -10,667 -26,253 7,998 36,280 5,563 2,584 2,574 2,728 7,359 13,449

Change (%) nm nm 174.5 nm nm nm -67.8 -92.5 -53.4 82.8Adj. PAT -10,667 -26,253 7,998 36,280 5,563 2,584 2,574 2,728 7,359 13,449Key Assumptions (Rs b)Gross Under Recovery 115 103 28 -8 7 14 16 18 238 56Upstream Sharing 27 34 12 2 3 5 5 6 76 19Oil Bonds 58 48 36 21 4 7 7 8 162 26Net Under Recovery 31 21 -21 -31 1 3 3 4 0 11Net Sharing (%) 27 20 -74 nm 18 19 20 20 0 19E: MOSL Estimates

BuyPrevious Recommendation: Buy Rs421

26 June 2009BLOOMBERGBPCL IN

REUTERS CODEBPCL.BO

* Consolidated

Results PreviewSECTOR: OIL & GAS

Harshad Borawake (HarshadBorawake@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect BPCL to report net profit of Rs5.6b v/s loss of Rs11b in 1QFY09. Loss in 1QFY09 was primarily due tolarge net under-recoveries (Rs31b) borne by the company.

? For 1QFY10, we assume under-recovery sharing of 47% through oil bonds and 33% by upstream, with the rest 20%to be borne by BPCL. We estimate net under-recoveries of Rs1b post the compensation of Rs4b through oil bondsand Rs3b by way of upstream discounts.

? Significant oil price increase during the quarter from US$48/bbl to ~US$70/bbl would lead to significant inventorygains, leading to higher reported refining margins.

? On the operational front, we expect throughput at 4.9mmt (down 7% QoQ and up 1% YoY).? With the new political equation, there is optimism on deregulation of domestic fuel prices. However, given the required

price increases in diesel and petrol (11-18%), we believe the chances of de-regulation are low. Also, even if de-regulation happens, at best it will only be for petrol (MS) and diesel (HSD); LPG and kerosene (SKO) prices willcontinue to be government regulated.

? The stock is trading at 9.6x FY10E consolidated EPS of Rs43.7 and 1x FY10E BV. Buy.

20026 June 2009

Cairn India

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

12/07A 10,123 -245 -0.1 - - 1.4 -0.1 1.1 40.6 61.6

03/09A 14,326 8,082 4.3 N.M. 54.9 1.3 2.6 2.5 32.7 50.4

03/10E 32,554 11,678 6.2 44.5 38.0 1.3 3.5 4.1 14.2 19.3

03/11E 86,398 46,492 24.5 298.1 9.5 1.2 12.9 14.7 5.1 6.1

Equity Shares (m) 1,894.4

52-Week Range 285/88

1,6,12 Rel. Perf. (%) 4/-12/-16

M.Cap. (Rs b) 443.4

M.Cap. (US$ b) 9.2

QUARTERLY PERFORMANCE (CONSOLIDATED) (RS MILLION)Y/E MARCH FY09 (15M PERIOD) FY10E FY09 FY10E

1Q 2Q 3Q 4Q 5Q 1Q 2Q 3Q 4QNet Sales 3,158 4,036 3,206 2,108 1,818 2,423 5,024 11,561 13,546 14,326 32,554

Change (%) 33.6 65.9 20.6 -21.0 -42.5 -23.3 24.5 260.6 542.5 41.5 127.2EBITDA 2,280 2,721 2,483 950 867 1,399 3,463 8,712 10,331 9,301 23,906

% of Net Sales 72.2 67.4 77.4 45.1 47.7 57.7 68.9 75.4 76.3 64.9 73.4D,D & A (inc. w/off) 807 1,075 729 701 1,070 950 2,750 3,080 3,406 4,382 10,186Interest 3 29 5 6 21 120 250 263 654 64 1,287Other Income (Net) 218 324 1,182 884 862 490 423 385 350 3,470 1,648Forex Fluctuations -19 254 873 567 -74 -150 0 0 0 1,602 -150PBT 1,824 2,196 3,600 1,694 565 669 886 5,755 6,620 9,878 13,931Tax 659 810 667 -671 378 128 142 921 1,062 1,844 2,253

Rate* (%) 35.8 41.7 24.5 -59.5 59.2 15.6 16.0 16.0 16.0 18.7 16.2PAT 1,164 1,385 2,933 2,364 187 541 745 4,834 5,558 8,034 11,678Adj. PAT 1,009 1,385 3,137 2,364 187 541 745 4,834 5,558 8,082 11,678Production - Cairn’s Share (kboepd)Ravva and Cambay 18.0 18.8 17.1 16.6 15.8 15.8 15.8 15.8 15.8 17.3 15.8Rajasthan 0.0 14.0 47.8 61.8 - 30.9E: MOSL Estimates; * Excluding forex fluctuations; *2007 - Dec year end, 2009 - 15 month period

BuyPrevious Recommendation: Buy Rs234

26 June 2009BLOOMBERGCAIR IN

REUTERS CODECAIL.BO

Results PreviewSECTOR: OIL & GAS

Harshad Borawake (HarshadBorawake@MotilalOswal.com)

Consolidated

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect Cairn to report net sales of Rs2.4b (v/s Rs4b in the quarter ended June 2008), primarily due to decline inoil prices.

? We estimate PAT at Rs541m v/s adjusted PAT of Rs1.4b in 2QFY09.

? We estimate gross oil & gas production at 60kboepd (flat QoQ and down 15% YoY). Net working interest productionfor Cairn is estimated at 15.8kboepd (flat QoQ and down 16% YoY).

? Average realization for the quarter is estimated at US$52/boe (v/s US$95/boe in 2QFY09 and US$41/boe in 5QFY09).

? We build first production from its Rajasthan Block to commence from July 2009 in our estimates. We have built grossoil production from Rajasthan field at 15.6mmbbl in FY10, of which Cairn’s share is 11mmbbl (Cairn’s net share –30.9kbpd).

? We assume Brent price of US$60/bbl for FY10 and US$65/bbl for the long-term. The stock currently trades at 9.5xFY11E earnings. Buy.

20126 June 2009

Chennai Petroleum Corporation

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 280,186 10,891 73.1 92.7 2.4 0.8 37.2 33.3 0.2 2.7

03/09A 319,990 -431 -2.9 -104.0 -61.4 0.9 -12.2 -6.0 0.1 -27.1

03/10E 231,148 6,149 41.3 NM 4.3 0.8 18.7 21.5 0.2 3.0

03/11E 220,615 4,203 28.2 -31.6 6.3 0.7 11.8 16.1 0.2 3.7

Equity Shares (m) 149.0

52-Week Range 325/78

1,6,12 Rel. Perf. (%) -4/-7/-43

M.Cap. (Rs b) 26.4

M.Cap. (US$ b) 0.5

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 112,532 102,833 56,175 48,100 66,113 62,335 63,266 75,007 319,639 266,721

Change (%) 80.9 62.3 -20.4 -42.7 -41.2 -39.4 12.6 55.9 14.1 -16.6Raw Materials (incl Stock Adj) 95,838 99,794 71,749 42,896 58,085 57,189 58,090 69,200 310,277 242,563Employee Costs 857 568 366 139 580 609 639 599 1,929 2,428Other Exp 4,148 3,006 2,072 -132 1,664 1,664 1,664 1,664 9,094 6,657EBITDA 11,689 -534 -18,013 5,196 5,784 2,873 2,873 3,543 -1,662 15,072

% of Sales 10.4 -0.5 -32.1 10.8 8.7 4.6 4.5 4.7 -0.5 5.7Change (%) 97.6 nm nm -23.6 -50.5 nm nm -31.8 -107.9 nm

Depreciation 639 637 638 659 672 685 692 692 2,572 2,742Interest 380 607 834 419 523 680 918 1,544 2,239 3,665Other Income 101 158 221 60 163 163 163 163 541 650PBT 10,771 -1,619 -19,263 4,179 4,752 1,670 1,425 1,469 -5,931 9,315Tax 3,739 -592 -6,564 1,460 1,615 568 484 499 -1,958 3,166

Rate (%) 34.7 nm nm 34.9 34.0 34.0 34.0 34.0 33.0 34.0PAT 7,033 -1,027 -12,699 2,720 3,137 1,102 941 970 -3,973 6,149

Change (%) 117.6 nm nm -20.9 -55.4 nm nm -64.3 nm -12.6Adj PAT* 8,340 264 -12,068 3,034 3,137 1,102 941 970 -431 6,149E: MOSL Estimates; * Adjusted for forex gain/loss

BuyPrevious Recommendation: Buy Rs177

26 June 2009BLOOMBERGMRL IN

REUTERS CODECHPC.BO

Results PreviewSECTOR: OIL & GAS

Harshad Borawake (HarshadBorawake@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect CPCL to report net profit of Rs3b (v/s adjusted net profit of Rs8.3b in 1QFY09 and Rs3b in 4QFY09).

? Large YoY decline in profit would be led by lower refining margins. Regional Benchmark Singapore GRM is down50% YoY from US$8.1/bbl to US$4.1/bbl in 1QFY09. Significant oil price increase during the quarter from US$48/bbl to ~US$70/bbl would lead to significant inventory gains, enabling higher reported refining margins. We expectCPCL to report GRM of US$7.3/bbl v/s reported GRM of US$15.9/bbl in 1QFY09.

? On the operational front, we expect refinery throughput at 2.6mmt (up 2% QoQ and down 5% YoY).

? We expect refining margin to remain subdued in the short term, as 1.2-1.6mmbbls new refining capacity is expectedto come online in the next few months. For CPCL, we have built GRM of US$5/bbl for FY10 and US$4.5/bbl forFY11. The stock trades at 4.3x FY10E EPS of Rs41.3 and an EV of 3x FY10E EBITDA. Buy.

20226 June 2009

GAIL (India)

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 180,082 25,442 20.1 24.3 14.2 2.8 20.0 25.2 1.8 8.3

03/09A 237,760 28,511 22.5 12.1 12.6 2.4 19.0 24.7 1.5 8.4

03/10E 260,918 27,278 21.5 -4.3 13.2 2.2 16.4 20.6 1.4 9.0

03/11E 319,096 29,740 23.4 9.0 12.1 1.9 15.9 19.7 1.2 7.9

Equity Shares (m) 1,268.5

52-Week Range 317/165

1,6,12 Rel. Perf. (%) -6/-16/15

M.Cap. (Rs b) 360.6

M.Cap. (US$ b) 7.5

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 57,307 61,293 58,117 61,043 64,054 66,296 68,656 61,912 237,760 260,918

Change (%) 35.0 35.3 35.2 23.7 11.8 8.2 18.1 1.4 32.0 9.7Finished Gds Purchase 33,281 36,224 41,717 39,582 40,994 42,429 43,940 39,624 150,804 166,987Raw Materials Cons 4,962 5,511 5,240 5,570 6,405 6,630 6,866 6,191 21,283 26,092Employee Costs 866 1,180 3,226 495 910 956 1,003 1,168 5,767 4,037Other Exp (incl Stock Adj) 4,204 4,063 5,275 5,821 5,777 5,817 6,639 3,484 19,363 21,717EBITDA 13,995 14,314 2,660 9,575 9,966 10,465 10,208 11,446 40,544 42,085

% of Net Sales 24.4 23.4 4.6 15.7 15.6 15.8 14.9 18.5 17.1 16.1Change (%) 34.7 63.0 -69.5 -17.5 -28.8 -26.9 283.8 19.5 2.7 3.8

Depreciation 1,430 1,386 1,374 1,410 1,500 1,700 1,800 1,991 5,599 6,991Interest 190 189 185 306 315 314 322 302 870 1,253Other Income 1,148 2,289 2,352 2,178 1,015 1,700 1,900 1,078 7,966 5,693PBT 13,522 15,029 3,453 10,037 9,166 10,151 9,986 10,231 42,041 39,534Tax 4,554 4,794 919 3,737 2,842 3,147 3,096 3,171 14,003 12,256

Rate (%) 33.7 31.9 26.6 37.2 31.0 31.0 31.0 31.0 33.3 31.0PAT 8,969 10,234 2,534 6,300 6,325 7,004 6,891 7,059 28,037 27,278

Change (%) 30.9 78.8 -59.2 -12.8 -29.5 -31.6 171.9 12.0 7.8 -2.7Adj PAT 9,442 10,234 2,534 6,300 6,325 7,004 6,891 7,059 28,511 27,278Subsidy Sharing (Rs b) 4.8 4.0 9.0 - 1.4 1.6 1.8 1.8 17.8 6.6E: MOSL Estimates; Adjusted for subsidy in 1QFY09

BuyPrevious Recommendation: Buy Rs284

26 June 2009BLOOMBERGGAIL IN

REUTERS CODEGAIL.BO

Results PreviewSECTOR: OIL & GAS

Harshad Borawake (HarshadBorawake@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect GAIL to report net profit of Rs6.3b (flat QoQ and down 29% YoY).

? Subsidy sharing skews the GAIL’s quarterly reported numbers. We have built subsidy of Rs1.4b in 1QFY10 (v/sRs4.7b in 1QFY09 and nil in 4QFY09).

? We expect GAIL to report EBIT (including other income) of Rs9.5b, down 8% QoQ and down 31% YoY. Adjustedfor subsidy sharing, GAIL’s EBIT would have been up 5% QoQ and down 41% YoY. Large QoQ decline in otherincome is primarily because, 4QFY09 other income of Rs2.2b included Rs1.1b on account of VAT refund.

? Large YoY decline in profits (adjusted for subsidy) would be primarily due to lower LPG and petchem realizations.We estimate LPG realization to be down 52% YoY at US$420/MT and petchem realizations to be down 12% YoY toRs68/kg in 1QFY10. In petchem business, domestic price realization continued to be higher than the landed prices.

? We estimate gas transmission volumes at 90mmscmd (up 9% QoQ and 7% YoY), primarily due to new gas fromRIL’s KG-D6. We have built average gas volumes of 110mmscmd in FY10 v/s 83mmscmd in FY09.

? The stock trades at 13.2x FY10E EPS of Rs21.5. Buy.

20326 June 2009

HPCL

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 1,047,038 7,263 21.4 -49.6 14.1 1.0 7.2 7.6 0.2 13.6

03/09A 1,246,943 4,355 12.8 -40.0 23.5 0.9 4.1 8.8 0.2 6.9

03/10E 940,809 10,601 31.3 143.4 9.7 0.9 9.6 9.8 0.2 5.0

03/11E 996,800 9,626 28.4 -9.2 10.7 0.8 7.9 9.1 0.2 5.5

Equity Shares (m) 339.0

52-Week Range 398/164

1,6,12 Rel. Perf. (%) -18/-47/51

M.Cap. (Rs b) 102.6

M.Cap. (US$ b) 2.1

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 346,920 354,622 293,858 251,542 268,990 257,056 256,246 258,999 1,246,943 940,809

Change (%) 59 46 8 -20 -22.5 -27.5 -12.8 3.0 19.1 -24.6EBITDA -4,110 -26,036 4,715 54,374 13,073 7,001 6,572 6,703 28,943 33,349

% of Net Sales -1.2 -7.3 1.6 21.6 4.9 2.7 2.6 2.6 2.3 3.5Change (%) nm nm 218 2,407 nm nm 39 -88 86.2 15

Depreciation 2,367 2,420 2,482 2,545 2,672 2,806 2,807 2,883 9,813 11,168Interest 4,064 5,269 7,961 3,779 4,076 3,588 3,383 3,257 21,073 14,302Other Income 1,679 1,577 1,539 4,263 1,850 2,450 2,369 1,519 9,057 8,188PBT -8,861 -32,149 -4,189 52,313 8,175 3,058 2,751 2,082 7,114 16,067Tax 20 40 40 1,273 2,779 1,039 935 708 1,373 5,461

Rate (%) nm nm nm 2 34 34 34 34 19.3 34PAT -8,881 -32,189 -4,229 51,040 5,397 2,019 1,816 1,375 5,741 10,606

Change (%) nm nm nm nm nm nm nm -97.3 -49.4 84.7Key Assumptions (Rs b)Gross Under Recovery 102 91 27 -7 9 15 16 18 213 58Upstream Sharing 24 30 12 6 3 5 6 6 72 19Oil Bonds 51 42 33 20 4 7 8 8 147 27Net Under Recovery 28 18 -18 -33 2 3 3 4 -6 11Net Sharing (%) 27 20 -67 nm 19 20 20 20 -3 20E: MOSL Estimates; PAT adjusted for extraordinary and MAT

BuyPrevious Recommendation: Buy Rs303

26 June 2009BLOOMBERGHPCL IN

REUTERS CODEHPCL.BO

Results PreviewSECTOR: OIL & GAS

Harshad Borawake (HarshadBorawake@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect HPCL to report net profit of Rs5.4b v/s loss of Rs9b in 1QFY09. Loss in 1QFY09 was primarily due tolarge net under-recoveries (Rs28b) borne by the company.

? For 1QFY10, we assume under-recovery sharing of 47% through oil bonds and 33% by upstream, with the rest 20%to be borne by HPCL. We estimate net under-recoveries of Rs2b post the compensation of Rs4b through oil bondsand Rs3b by way of upstream discounts.

? Significant oil price increase during the quarter from US$48/bbl to ~US$70/bbl would lead to significant inventorygains, leading to higher reported refining margins.

? On the operational front, we expect throughput at 4.1mmt (down 2% QoQ and up 22% YoY). Large QoQ increaseis due to shutdown at Mumbai refinery in 1QFY09.

? With the new political equation, there is optimism on deregulation of domestic fuel prices. However, given the requiredprice increases in diesel and petrol (11-18%), we believe the chances of de-regulation are low. Also, even if de-regulation happens, at best it will only be for petrol (MS) and diesel (HSD); LPG and kerosene (SKO) prices willcontinue to be government regulated.

? The stock is trading at 9.7x FY10E consolidated EPS of Rs31.3 and 0.9x FY10E BV. Buy.

20426 June 2009

Indian Oil Corporation

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS B) (RS B) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 2,279 79.1 66.4 34.5 8.1 1.5 19.7 17.4 0.4 8.3

03/09A 2,861 26.0 21.8 -67.1 24.7 1.4 5.9 8.2 0.4 14.0

03/10E 2,004 60.5 49.8 128.6 10.8 1.2 12.7 13.8 0.5 6.5

03/11E 2,084 61.2 50.4 1.2 10.7 1.2 11.5 13.5 0.4 6.7

Equity Shares (m) 1,214.0

52-Week Range (Rs) 662/299

1,6,12 Rel. Perf. (%) -13/-30/49

M.Cap. (Rs b) 653.0

M.Cap. (US$ b) 13.6

BuyPrevious Recommendation: Buy Rs538

26 June 2009BLOOMBERGIOC IN

REUTERS CODEIOC.BO

*Consolidated

Results PreviewSECTOR: OIL & GAS

Harshad Borawake (HarshadBorawake@MotilalOswal.com)

QUARTERLY PERFORMANCE (STANDALONE) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 883,996 862,612 703,687 595,967 603,361 570,346 568,676 573,090 3,046,261 2,315,472

Change (%) 67.2 60.6 9.9 -17.1 -31.7 -33.9 -19.2 -3.8 25.6 -24.0EBITDA 9,602 -60,941 32,177 86,171 45,597 27,530 26,607 24,556 67,010 124,290

% of Net Sales 1.1 -7.1 4.6 14.5 7.6 4.8 4.7 4.3 2.2 5.4Change (%) -32.3 nm 8.4 1,285.4 374.8 nm -17.3 -71.5 -33.8 85.5

Depreciation 6,726 6,775 7,275 8,041 8,161 8,325 8,374 8,473 28,817 33,333Interest 6,142 9,928 15,054 8,397 8,663 7,088 6,975 11,475 39,521 34,200Other Income 7,490 7,263 19,831 10,031 7,100 7,810 8,591 6,770 44,615 30,271PBT 4,224 -70,381 29,679 79,765 35,873 19,928 19,849 11,379 43,286 87,028Tax 72 90 93 13,535 12,193 6,773 6,747 3,868 13,790 29,581 Rate (%) 1.7 -0.1 0.3 17.0 34.0 34.0 34.0 34.0 31.9 34.0PAT 4,151 -70,471 29,586 66,230 23,680 13,154 13,102 7,511 29,495 57,447

Change (%) -71.7 -284.6 41.5 nm 470.4 nm -55.7 -88.7 -57.6 94.8Adj. PAT 4,151 -70,471 29,586 66,230 23,680 13,154 13,102 7,511 29,495 57,447Key Assumptions (Rs b)Gross Under Recovery 271 247 79 -12 22 39 42 46 586 149Upstream Sharing 62 82 36 2 7 13 14 15 182 49Oil Bonds 135 116 91 62 10 18 19 21 404 69Net Under Recovery 73 50 -47 -75 5 8 8 9 0 30Net Sharing (%) 27 20 -60 nm 21 20 20 20 0 20E: MOSL Estimates

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect IOC to report net profit of Rs24b v/s Rs4b in 1QFY09. Lower 1QFY09 PAT was primarily due to largenet under-recoveries (Rs73b) borne by the company.

? For 1QFY10, we assume under-recovery sharing of 47% through oil bonds and 33% by upstream, with the rest 20%to be borne by IOC. We estimate net under-recoveries of Rs5b post the compensation of Rs10b through oil bonds andRs7b by way of upstream discounts.

? Significant oil price increase during the quarter from US$48/bbl to ~US$70/bbl would lead to significant inventorygains, leading to higher reported refining margins.

? On the operational front, we expect throughput at 13.5mmt (v/s 13mmt in 1QFY09 and 14.7mmt in 4QFY09)? With the new political equation, there is optimism on deregulation of domestic fuel prices. However, given the required

price increases in diesel and petrol (11-18%), we believe the chances of de-regulation are low. Also, even if de-regulation happens, at best it will only be for petrol (MS) and diesel (HSD); LPG and kerosene (SKO) prices willcontinue to be government regulated.

? The stock is trading at 10.8x FY10E consolidated EPS of Rs49.8 and 1.2x FY10E BV. Buy.

20526 June 2009

Indraprastha Gas

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 7,060 1,745 12.5 26.4 10.8 3.3 33.4 47.0 2.5 5.8

03/09A 8,528 1,761 11.9 -4.1 11.3 2.8 26.7 38.5 2.0 5.7

03/10E 10,153 1,761 12.6 5.3 10.7 2.4 24.1 35.0 1.6 5.0

03/11E 11,776 1,628 11.6 -7.6 11.6 2.2 19.8 28.8 1.4 5.0

Equity Shares (m) 140.0

52-Week Range 154/92

1,6,12 Rel. Perf. (%) -10/-25/13

M.Cap. (Rs b) 18.9

M.Cap. (US$ b) 0.4

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 1,907 2,152 2,194 2,274 2,317 2,537 2,602 2,697 8,528 10,153

Change (%) 17.9 23.6 20.1 21.4 -67.2 33.0 20.9 22.9 20.8 19.1Raw Material Consumed 844 959 1,148 1,157 1,175 1,284 1,317 1,361 4,107 5,137Staff Cost 54 54 63 65 66 67 69 70 235 272Other Exp (incl Stock Adj) 254 288 305 336 324 355 364 378 1,184 1,421EBITDA 755 851 678 717 752 831 852 888 3,001 3,324

% of Net Sales 39.6 39.6 30.9 31.5 32.5 32.7 32.8 32.9 35.2 32.7% Change 9.9 13.5 -13.1 -8.4 -74.9 10.0 0.1 31.1 0.0 10.7

Depreciation 164 169 166 176 190 220 250 278 674 938Other Income 63 69 66 65 70 70 70 73 262 283PBT 654 752 578 605 632 681 672 683 2,589 2,668Tax 218 249 195 202 215 231 229 232 864 907

Rate (%) 33.2 33.2 33.7 33.4 34.0 34.0 34.0 34.0 33.4 34.0PAT 437 502 383 403 417 449 444 451 1,725 1,761

Change (%) 13.7 17.2 -14.9 -16.3 -76.1 2.8 -11.6 17.8 -1.1 2.1E: MOSL Estimates

NeutralPrevious Recommendation: Neutral Rs135

26 June 2009BLOOMBERGIGL IN

REUTERS CODEIGAS.BO

Results PreviewSECTOR: OIL & GAS

Harshad Borawake (HarshadBorawake@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect IGL to report PAT of Rs417m (v/s Rs437m in 1QFY09 and Rs403m in 4QFY09).

? We expect EBITDA margin at 33% (v/s 40% in 1QFY09 and 32% 4QFY09).

? We expect CNG volumes to grow by 20% YoY to 164mmscm and PNG volumes to grow by 38% YoY to 16mmscm.

? IGL currently operates 181 CNG stations and plans to add 15-18 new stations over the next few quarters.

? Concerns over likely implications of Petroleum and Natural Gas Regulatory Board (PNGRB) regulations on thecompany remain. IGL has reported high EBITDA margin (~40%) and high RoCE (38-45%) over the last three years.

? The new PNGRB regulation would limit both the network tariff including compression charges (14% post-tax or21.2% pre-tax RoCE). Though we do not expect any large cuts in selling prices in the near term, we believe IGL’sability to pass on the impending gas price hikes would be limited.

? The stock is trading at 10.7x FY10E EPS of Rs12.6. Neutral.

20626 June 2009

MRPL

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 327,179 10,979 6.7 124.8 12.8 4.0 38.9 27.6 0.5 8.2

03/09A 382,438 11,926 8.3 23.2 10.4 3.2 28.0 24.4 0.4 7.4

03/10E 287,336 9,711 5.5 -33.3 15.6 2.8 19.0 17.5 0.6 8.9

03/11E 284,635 7,313 4.2 -24.7 20.7 2.5 12.8 10.2 0.7 13.0

Equity Shares (m) 1,752.6

52-Week Range 102/30

1,6,12 Rel. Perf. (%) 23/65/43

M.Cap. (Rs b) 151.3

M.Cap. (US$ b) 3.1

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 107,466 134,280 75,340 65,352 77,732 69,143 69,143 71,318 382,438 287,336

Change (%) 44 76 -7 -31 -28 -49 -8 9 17 -25RM Consumed (incl. inv chg) 89,394 130,544 77,583 53,854 67,071 62,966 62,966 64,997 351,375 258,000Staff Cost 442 217 184 287 285 291 297 371 1,130 1,243Other Expenditure 3,776 2,108 1,116 1,803 2,415 2,352 2,431 2,263 8,802 9,461EBITDA 13,855 1,410 -3,543 9,407 7,960 3,535 3,450 3,687 21,130 18,632

% of Net Sales 12.9 1.1 -4.7 14.4 10.2 5.1 5.0 5.2 5.5 6.5Change (%) 124 -69 -165 118 -43 151 nm 61 3.2 -11.8

Depreciation 952 962 962 947 980 990 1,000 1,131 3,823 4,101Interest 364 379 363 329 398 406 414 164 1,435 1,382Other Income 648 369 520 708 540 540 540 -57 2,244 1,563PBT 13,187 439 -4,349 8,839 7,122 2,679 2,576 2,335 18,117 14,713Tax 4,489 -185 -1,495 2,904 2,422 911 876 794 5,713 5,002Prior Year Tax Adjustment 244 375 0 -140 0 0 0 0 479

Rate (%) 35.9 -42.2 34.4 32.8 34.0 34.0 34.0 34.0 31.5 34.0PAT 8,454 249 -2,854 6,076 4,701 1,768 1,700 1,541 11,926 9,711

Change (%) 129.4 -92.5 -196.9 169.6 -44.4 609 nm -74.6 -2.3 -18.6Adj. PAT* 9,293 1,526 -2,334 6,076 4,701 1,768 1,700 1,541 14,561 9,711E: MOSL Estimates; * Adjusted for MAT credit and forex gain/(loss)

SellPrevious Recommendation: Sell Rs86

26 June 2009BLOOMBERGMRPL IN

REUTERS CODEMRPL.BO

Results PreviewSECTOR: OIL & GAS

Harshad Borawake (HarshadBorawake@motilaloswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect MRPL to report net profit of Rs4.7b (v/s adjusted net profit of Rs9.3b in 1QFY09 and Rs6b in 4QFY09).

? Large YoY decline in profit would be led by lower refining margins. Regional Benchmark Singapore GRM is down48% YoY from US$8.1/bbl in 1QFY09 to US$4.2 /bbl. However, significant oil price increase during the quarter fromUS$48/bbl to ~US$70/bbl would lead to significant inventory gains, leading to higher reported refining margins. Weestimate MRPL to report GRM of US$7.9/bbl v/s reported GRM of US$18/bbl in 1QFY09.

? On the operational front, we expect refinery throughput at 3.2mmt (down 2% QoQ and up 16% YoY). Large YoYincrease is primarily due to shutdown in 1QFY09.

? We expect refining margin to remain subdued in the short term as 1.2-1.6mmbbls new refining capacity is expectedto come online in the next few months. For MRPL, we have built GRM of US$5.1/bbl for FY10 and US$4.6/bbl forFY11. The stock trades at 15.6x FY10E EPS of Rs5.5 and an EV of 8.9x FY10E EBITDA. Sell.

20726 June 2009

ONGC

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS B) (RS B) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 968 199 92.9 11.8 11.2 2.9 27.7 27.5 2.0 4.7

03/09A 1,046 198 92.3 -0.6 11.3 2.5 23.7 23.2 1.9 4.8

03/10E 1,027 191 89.4 -3.1 11.6 2.2 20.2 21.1 1.9 5.1

03/11E 1,070 186 86.8 -3.0 12.0 2.0 17.6 18.7 1.8 5.1

Equity Shares (m) 2,138.9

52-Week Range (Rs) 1,219/538

1,6,12 Rel. Perf. (%) -6/3/17

M.Cap. (Rs b) 2,226.4

M.Cap. (US$ b) 46.3

QUARTERLY PERFORMANCE (STANDALONE) (RS BILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 200.5 174.1 124.4 137.0 172.2 167.6 165.4 168.8 636.0 674.0

Change (%) 46.5 12.9 -17.8 -12.3 -14.1 -3.7 33.0 23.2 6.3 6.0EBITDA 117.6 84.1 50.0 57.8 87.7 82.0 79.7 81.5 309.5 330.9

% of Net Sales 58.6 48.3 40.2 42.2 51.0 48.9 48.2 48.3 48.7 49.1Change (%) 48.4 0.0 -37.7 0.1 -25.4 -2.6 59.4 41.0 2.7 6.9

D,D & A 28.0 21.8 28.6 42.4 28.2 28.3 28.4 27.8 120.8 112.6Other Income 10.5 14.9 12.2 14.1 10.8 12.7 13.7 13.1 51.7 50.3PBT 100.0 76.2 33.6 29.3 70.0 66.0 64.6 66.5 239.1 267.0Tax 34.1 28.1 11.7 7.2 23.8 22.4 22.0 22.6 81.2 90.8

Rate (%) 34.1 36.9 34.8 24.7 34.0 34.0 34.0 34.0 33.9 34.0PAT 65.9 48.1 21.9 22.1 46.2 43.5 42.6 43.9 158.0 176.3

Change (%) 43.0 -5.7 -49.8 -16.0 -30.0 -9.4 94.6 98.9 -5.4 11.6Extraordinary Items 0.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.4 0.0Adjusted PAT 66.4 48.1 24.7 22.1 46.2 43.5 42.6 43.9 161.3 176.3Key Assumptions (US$/bbl)Gross Oil Realization 125.8 119.4 59.0 47.9 62.2 63.0 63.0 63.8 88.0 63.0Subsidy 56.7 72.7 25.0 4.5 5.5 9.8 10.7 11.7 39.7 9.4Net Oil Realization 69.1 46.7 34.0 43.4 56.7 53.2 52.3 52.0 48.3 53.6Subsidy (Rsb) 98.1 126.6 49.0 8.5 10.2 19.0 20.8 23.0 282.3 73.0E: MOSL Estimates

NeutralPrevious Recommendation: Neutral Rs1,041

26 June 2009BLOOMBERGONGC IN

REUTERS CODEONGC.BO

Consolidated

Results PreviewSECTOR: OIL & GAS

Harshad Borawake (HarshadBorawake@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We estimate ONGC to report net profit of Rs46b (v/s Rs66b in 1QFY09 and estimate of Rs30b in 4QFY09). Weestimate EBITDA at Rs88b (v/s Rs118b in 1QFY09 and estimate of Rs64b in 4QFY09).

? We estimate gross realization at US$62/bbl v/s US$126/bbl in 1QFY09 and estimated US$43/bbl in 4QFY09.

? We build a subsidy of Rs10b in 1QFY10 v/s Rs98b in 1QFY09 and Rs8.5b in 4QFY09. Net realization is estimatedat US$57/bbl (v/s US$69/bbl in 1QFY09 and estimate of US$43/bbl in 4QFY09)

? Decision on APM gas price hike is expected soon. We have built a moderate gas price hike of 5% in FY10 in ourestimates.

? Our Brent price assumption is US$60/bbl for FY10 and US$65/bbl for FY11. We have built 1/3rd subsidy sharing byupstream companies (ONGC, GAIL and OIL) in our estimates The stock trades at 11.6x FY10E consolidated EPSof Rs89.4. Neutral.

20826 June 2009

Results PreviewSECTOR: OIL & GAS

Reliance Industries

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS B) (RS B) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 1,334 143 98.2 19.5 20.7 3.6 20.1 16.6 2.5 14.0

03/09A 1,463 156 103.1 -1.1 19.7 2.8 16.1 13.7 2.3 14.3

03/10E 1,711 231 139.9 35.7 14.5 2.3 18.1 15.3 2.0 9.5

03/11E 1,923 258 155.3 11.0 13.1 2.0 17.3 16.5 8.0 8.0

Equity Shares (m) 1,573.4

52-Week Range 2,490/930

1,6,12 Rel. Perf. (%) -14/9/-12

M.Cap. (Rs b) 3,191.8

M.Cap. (US$ b) 66.3

QUARTERLY PERFORMANCE (STANDALONE) (RS BILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 416 448 316 284 291 298 306 322 1,463 1,216

Change (%) 40.8 39.8 -8.8 -23.9 -30.0 -33.4 -3.1 13.5 9.6 -16.8EBITDA 61 65 54 54 62 70 78 94 234 304

% of Net Sales 14.7 14.5 17.0 19.2 21.5 23.4 25.5 29.2 16.0 25.0Change (%) 7.9 12.0 -8.1 -9.7 2.0 7.6 45.1 72.6 0.4 29.8

Depreciation 12 13 13 13 15 16 17 21 51 69Interest 3 4 5 5 5 6 6 7 17 24Other Income 2 2 7 10 6 7 8 8 20 29PBT 49 49 42 46 48 54 62 75 187 239Tax 8 8 7 7 7 7 8 10 30 32

Rate (%) 16.2 16.3 17.1 15.3 15.0 13.3 13.3 13.2 16.2 13.6Adj. PAT 41 41 35 39 40 47 54 65 156 207

Change (%) 13.2 7.4 -9.8 0.1 -1.5 14.3 54.5 65.6 2.5 32.0Key AssumptionsGRM (US$/bbl) 15.7 13.4 10.0 9.9 8.2 8.1 7.9 7.8 12.3 8.0KG-D6 Gas Prodn (mmscmd) - - - - 14 40 56 80 - 48E: MOSL Estimates

BuyPrevious Recommendation: Buy Rs2,029

26 June 2009BLOOMBERGRIL IN

REUTERS CODERELI.BO

Harshad Borawake (HarshadBorawake@motilaloswal.com)

FY10E onwards includes RPET financials

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect RIL to report net profit of Rs40b (v/s Rs41b in 1QFY09 and Rs39b in 4QFY09).? We estimate GRM at US$8.2/bbl, indicating a premium of US$4/bbl over Benchmark Singapore (v/s reported premium

of US$7.6/bbl in 1QFy09 and US$4.4/bbl in 4QFY09). Singapore GRM at ~US$4.1/bbl in 1QFY10 is down 50% YoYand down 27% QoQ. We have built GRM of US$8/bbl for FY10 and FY11 in our estimates for RIL.

? Polymer prices in rupee terms were up 4-13% QoQ and down 12-18% YoY, while polyester prices were up 5-6%QoQ and down 6% YoY.

? We have built the average gas production volume from KG-D6 at 14mmscmd in our estimates in 1QFY10. For FY10and FY11 we have factored in the gas volumes of 48mmscmd and 80mmscmd respectively. Our estimates factor ingas price of US$4.2/mmbtu.

? Key events to watch out for RIL in the near term would be (1) resolution of its gas supply and pricing issues withRNL; and (2) ramp-up of KG-D6 gas production.

? We continue to be positive primarily due to large potential upsides from E&P. RIL currently trades at 14.5x FY10EEPS of Rs140 and 13.1x FY11E EPS of Rs155 (including RPL). Buy.

20926 June 2009

Pharmaceuticals

COMPANY NAMEAventis Pharma

Biocon

Cadila Healthcare

Cipla

Divi’s Laboratories

Dr Reddy’s Labs.

GSK Pharma

Glenmark Pharma

Jubilant Organosys

Lupin

Piramal Healthcare

Ranbaxy Labs.

Sun Pharmaceuticals

EXPECTED QUARTERLY PERFORMANCE SUMMARY (RS MILLION)CMP (RS) RECO SALES EBITDA NET PROFIT

26.6.09 JUN.09 VAR. VAR. JUN.09 VAR. VAR. JUN.09 VAR. VAR.% YOY % QOQ % YOY % QOQ % YOY % QOQ

PharmaceuticalsAventis Pharma 1,138 Buy 2,331 -6.3 1.8 382 -24.1 -2.0 363 -13.2 -10.4Biocon 227 Buy 4,807 82.2 3.1 1,082 87.9 20.6 665 343.3 167.3Cadila Health 388 Buy 8,151 16.7 12.7 1,904 30.3 27.7 1,144 27.5 43.6Cipla 261 Neutral 14,645 21.3 7.2 3,736 38.3 4.0 3,662 161.5 44.8Divis Labs 1,152 Buy 2,965 11.4 -7.1 1,189 0.1 -13.1 1,129 17.0 8.2Dr Reddy’ s Labs 771 Buy 16,760 11.5 -15.6 2,229 22.8 -51.7 1,508 11.9 LPGlenmark Pharma 232 Neutral 5,862 27.2 25.0 1,368 -3.0 LP 625 -32.3 LPGSK Pharma 1,232 Buy 4,742 13.9 3.7 1,642 14.9 5.1 1,288 12.3 2.8Jubiliant Organosys 168 Buy 8,800 6.5 4.6 1,468 -11.5 -23.7 1,200 840.5 136.1Lupin 843 Buy 10,350 20.0 1.7 1,701 11.4 4.4 1,475 31.6 -6.3Piramal Healthcare 301 Buy 7,990 12.8 -2.4 1,710 21.8 15.0 1,000 39.6 -7.2Ranbaxy Labs 255 Neutral 15,505 -19.6 3.9 -569 PL -30.7 -842 PL 2.1Sun Pharma 1,140 Buy 9,948 -2.8 -13.7 3,317 -38.3 -11.4 3,442 -31.1 -13.7Sector Aggregate 112,940 8.4 -1.6 21,212 -12.8 -9.5 16,543 6.1 703.6

US business growth continuesWe expect most of the generic companies to report higher sales for the US business(excluding upsides from patent challenges) driven mainly by increased pace of newproduct launches. This is especially true for the tier-2 generic companies, for which,past product filings with the US FDA are now coming up for approvals leading to increasedpace of new launches. The exception to this trend will be Ranbaxy which will witness a40-50% decline in US revenues due to the ongoing US FDA ban and Sun Pharma due tohigh base of last year and on-going US FDA issues at Caraco.

Stringent US FDA leads to cGMP problems at many leading companiesOver the past few quarters, many leading Indian pharmaceutical companies like SunPharma, Lupin and Cipla, have received 483s/warning letters from the US FDA relatedto cGMP non-compliance. Ranbaxy continues to be impacted by the part-ban imposedby the US FDA in September 2008. We believe that this has to partly do with the USFDA becoming more stringent in its approval process post the adverse experience withsome of the Chinese facilities. Opening up of local offices in India by the US FDA willresult in more frequent audits for Indian players. This implies that Indian companies willhave to be ready for audits at short notices.

Nimish Desai (NimishDesai@MotilalOswal.com)

Results PreviewQUARTER ENDING JUNE 2009

BSE Sensex: 14,765 S&P CNX: 4,376 26 June 2009

21026 June 2009

Pharmaceuticals

Semi-regulated markets continue to post double-digit growth…The size of the semi-regulated markets is expected to increase from US$46b in 2007 toUS$74b by 2012. The opportunity spans more than 150 markets through Latin America,Asia, Eastern Europe and Australia. The current market share of Indian companies ismerely about 6%, implying that there is substantial room for growth. Secondly, most ofthese markets are branded generic markets, thus, resulting in better margins comparedwith the US generic market (GPM of about 60-70% compared with about 40-50% for theUS). Indian generic companies have already established a reasonable presence in someof these markets (like Russia, Latam) while they are in the process of strengthening theirpresence in some of the other markets (like China, Australia, New Zealand). We expectmost of the Indian generic companies to report double-digit growth in RoW markets.

… but, liquidity/credit squeeze may pose some risksAlthough, liquidity conditions have started easing partly, we believe that the Indian genericcompanies still face some risks linked to the ongoing liquidity/credit squeeze. Some of thekey risks to watch out for over the next few quarters will be:1. Extended working capital cycles and credit losses in emerging markets – Ranbaxy,

Glenmark and DRL are most exposed to these markets.2. Extent of inventory correction undertaken by the global MNC pharmaceutical companies

– Most Indian CRAMS companies will be impacted by this. We believe that thisinventory correction can last till 1HFY10.

3. Slow-down in CRAMS business from small and mid-sized research/biotech companies– Most of the CRAMS players have some exposure to this segment but not verysignificant. DRL’s evolving CPS business also has some exposure to this segment.

Currency appreciation will have negative impact operationallyThe INR has appreciated by about 6% against the US$ since 31st March given the inflowof foreign funds in the past few weeks. We believe that an appreciating currency will havea negative impact operationally for both generic and CRAMS companies. Key companieswhich will get operationally impacted include DRL, Ranbaxy, Glenmark, Cipla, Lupin andJubilant.

RUPEE DEPRECIATION: EARNINGS IMPACT (FOR INR APPRECIATION FROM RS49.6 TO RS45)COMPANY NET FOREX FOREX PROFIT CHANGE (RS M) EPS ESTIMATE - FY10/CY09 (RS)

EXPOSURE LOANS HEDGES OPER. FOREX NET IMPACT AT AT RS45/US$ % CHG % CHG  (US$ M) GAIN GAIN PBT PAT RS49.6/ INCL FX EXCL FX INCL FX EXCL FX

US$ GAIN GAIN GAIN GAINDRL 450 40 120 -2,070 1,000 -1,070 -910 42.5 37.1 32.0 -12.7 -24.7Lupin** 242 185 157 -1,111 391 -720 -591 69.6 62.9 59.3 -9.6 -14.8Biocon# 86 0 226 -396 156 -240 -206 14.2 13.1 12.5 -7.7 -12.0Glenmark 290 155 0 -1,334 1,113 -221 -168 13.0 12.4 9.2 -4.6 -29.2Divi’s Labs 147 10 30 -338 184 -154 -142 79.7 77.5 74.9 -2.8 -6.0Sun Pharma 64 0 0 -296 0 -296 -281 65.5 64.2 64.2 -2.0 -2.0Piramal Healthcare# 45 75 0 -207 161 -46 -41 23.7 23.5 22.8 -0.8 -3.8Cipla 276 170 120 -1,272 1,334 62 52 15.3 15.3 13.9 0.0 -9.2Ranbaxy 354 440 1,400 -1,629 14,904 13,275 8,762 -17.2 3.6 -19.8 L to P NAJubilant# 212 575 250 -974 1,150 176 144 21.1 22.0 15.6 4.3 -26.1Net Exposure is calculated as all US$-denominated revenues less all US$-denominated expenses and excludes the impact of forex loansand hedges; # Companies which have adopted revised AS-11 implying impact of MTM forex gains/losses on long-term liabilities will reflectin B/S** FCCBs of US$70m not subjected to MTM as per company’s policy Source: Company/MOSL

21126 June 2009

But will lead to large MTM translation forex gains…With rupee appreciating by 6% QoQ, many pharmaceutical companies would record MTMtranslational forex gains on outstanding foreign currency loans and hedges. Operationally,exporters will be adversely impacted by recording lower topline growth, but significantforward covers/options and forex loans will result in large gains for some companies at thePAT level. Companies like Ranbaxy and Jubilant Organosys are likely to report significantMTM forex gains on foreign currency loans/hedges. The exact quantum of the forexgains will be contingent on the closing INR/US$ rate on 30 Jun 2009.

... many companies have adopted revised AS-11 leading to lower gainsGiven the recent relaxation on booking MTM forex losses (revised AS-11); some companieshave adopted the new policy. These companies will now be recording MTM forex gains/losses on long-term liabilities in B/S (as compared to previous practice of recording it inthe P&L). The following table gives a list of companies which have adopted the revisedAS-11 and companies which are still following the previous AS-11:

REVISED AS-11 PREVIOUS AS-11 OTHERSBiocon Cipla DRL – Follows IFRSJubilant Organosys Divi’s LabsPiramal Healthcare LupinGlenmark Ranbaxy

Sun PharmaSource: Company/MOSL

Top generic companies are unlikely to record any significant increase inEBITDA marginThe larger generic companies are unlikely to record any significant EBITDA marginexpansion (excluding patent challenge upsides) despite a favourable YoY currencymovement due to following company-specific reasons:1. Ranbaxy – due to the on-going US FDA issues.2. DRL – due to margin pressure in Germany and slow-down in domestic formulations.3. Sun Pharma – due to relatively low exposure to the US$ (adjusted for US$ costs)4. Cipla – will be the only exception to this with an estimated EBITDA margin expansion

of 310bp due to 140% increase in technology licensing income to Rs872m (which addsdirectly to EBITDA).

CRAMS players to reflect impact of on-going inventory correction bycustomersWe expect our universe of CRAMS companies (Divi’s, Piramal Healthcare and Jubilant)to record 10% topline growth reflecting the adverse impact of inventory reductionsundertaken by CRAMS customers. Combined EBITDA margin for these companies arelikely to decline by 200bp to 26% mainly due to higher base of last year for Divi’s Labs.PHL’s margins are likely to expand by 160bp due to closure of the Huddersfield facility.However, PAT for our universe for the quarter is likely to get boosted due to Rs925m offorex gain for Jubilant Organosys (on its US$250m of forex hedges).

Pharmaceuticals

21226 June 2009

Pharmaceuticals

MNC performance continues to be lacklusterWe expect our MNC pharmaceutical universe (Aventis and GSK) to record 4% toplinegrowth for the quarter, mainly due to absence of Rabipur revenues for Aventis. GSK’stopline is expected to record 14% growth. While Aventis will witness a reduction in EBITDAmargins, GSK Pharma’s margins are likely to remain flat for the quarter.

OutlookGenericsWe believe that the worst is over for Indian generic companies and expect gradualimprovement in their performance over the next two years. Emerging markets, US andsome Western European markets are likely to be key revenue drivers in the short-to-medium term. Japan will be the next frontier of growth for generics in the long-term.

Geographically diversified operations, a pragmatic mix of IPR driven low-competition andnormal products, vertically integrated operations and a differentiated business model arethe key perquisites for success in the generics space. Our top picks in the generic spaceare Dr Reddy’s, Sun Pharma and Lupin.

CRAMSDespite the short-term adverse impact of inventory corrections, we believe that the Indiancontract-manufacturing segment will see strong double-digit secular growth (given India’sadvantages) with the financial impact visible from 2HFY10. Divi’s Labs and PiramalHealthcare remain our top picks among the CRAMS players.

MNC pharmaWe remain favorably inclined towards MNC Pharma stocks in the long term. In our view,the current risk-reward equation is stacked in favor of MNC stocks. Leading PharmaMNCs are geared to gain from the opportunities arising in the stronger patent regime. Weremain bullish on the long-term prospects of these companies. The potential upside fromproduct patents would create ‘option value’ in these stocks over the longer term. It shouldbe noted that some of the patented products may be launched by the parent through the100% subsidiary route. However, we believe that most of the mass-market products (whichneed a large field force for promotion) are likely to be launched through the listed entities.GSK Pharma remains our top pick among the MNCs.

21326 June 2009

RELATIVE PERFORMACE - 3 MONTHS (%) RELATIVE PERFORMANCE - 1 YEAR (%)

Stock performance and valuationsSTOCK PERFORMANCE (%)

ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR 3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEAR

PharmaceuticalsAventis Pharma 28 51 -20 48 -2 63Biocon 67 4 19 2 37 17Cadila Health 52 23 4 21 22 36Cipla 26 21 -22 18 -4 33Divis Labs 25 -18 -23 -20 -5 -5Dr Reddy’ s Labs 73 18 26 16 43 31GSK Pharma 16 11 -32 9 -14 23Jubiliant Organosys 80 -49 32 -52 50 -37Lupin 34 25 -14 23 4 37Piramal Healthcare 75 -5 27 -7 45 8Glenmark Pharma 56 -63 8 -65 26 -50Ranbaxy Labs 62 -52 14 -55 32 -40Sun Pharma 6 -15 -42 -17 -24 -3

Pharmaceuticals

COMPARATIVE VALUATIONCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)

26.6.09 FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11EPharmaceuticalsAventis Pharma 1,138 Buy 72.2 59.4 68.6 15.8 19.2 16.6 10.9 14.4 11.6 21.7 16.6 17.5Biocon 227 Buy 4.7 13.0 15.5 48.7 17.5 14.6 14.4 10.5 9.0 6.0 14.9 15.7Cadila Health 388 Buy 24.1 32.4 37.3 16.1 12.0 10.4 9.1 7.3 6.5 27.5 30.3 27.9Cipla 261 Neutral 9.9 15.6 17.1 26.5 16.8 15.3 16.3 13.6 11.8 17.6 22.8 21.0Divis Labs 1,152 Buy 64.6 76.8 94.2 17.8 15.0 12.2 13.9 12.7 9.8 39.8 34.6 32.5Dr Reddy’ s Labs 771 Buy -30.7 40.0 46.9 -25.1 19.3 16.5 11.7 14.9 13.1 -11.9 14.0 14.7GSK Pharma 1,232 Buy 52.9 59.0 69.0 23.3 20.9 17.8 16.1 13.8 11.8 29.1 29.2 30.8Glenmark Pharma 232 Neutral 4.3 12.3 14.3 53.6 19.0 16.2 20.5 11.2 9.9 6.7 16.2 15.2Jubiliant Organosys 168 Buy 15.9 22.0 16.9 10.5 7.6 9.9 8.5 8.6 7.4 18.6 25.3 16.3Lupin 843 Buy 56.9 67.0 76.6 14.8 12.6 11.0 12.2 10.0 8.7 34.1 31.5 29.0Piramal Healthcare 301 Buy 17.1 23.4 29.4 17.6 12.8 10.2 12.0 8.9 7.2 29.7 32.4 31.8Ranbaxy Labs 255 Neutral 2.5 -4.8 0.4 103.6 -53.5 688.2 26.6 - 34.0 2.4 -4.6 0.3Sun Pharma 1,140 Buy 87.8 65.2 74.8 13.0 17.5 15.3 11.2 15.1 12.5 31.7 19.2 18.9Sector Aggregate 23.9 17.9 15.0 13.0 13.0 10.7 16.4 18.8 19.2

60

75

90

105

120

Jun-08 Sep-08 Dec-08 Mar-09 Jun-09

MOSt Pharmaceuticals Index Sensex

80

100

120

140

160

Mar-09 Apr-09 May-09 Jun-09

Sensex MOSt Pharmaceuticals Index

21426 June 2009

Aventis Pharma

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END* (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA12/07A 8,735 1,444 62.7 -14.7 18.1 3.9 21.5 33.1 2.4 12.8

12/08A 9,833 1,662 72.2 15.1 15.8 3.4 21.7 33.9 2.1 10.9

12/09E 9,185 1,367 59.4 -17.7 19.2 3.2 16.6 25.2 2.1 14.4

12/10E 9,966 1,580 68.6 15.6 16.6 2.9 17.5 26.6 1.9 11.6

Equity Shares (m) 23.0

52-Week Range 1,310/662

1,6,12 Rel. Perf. (%) -16/-32/48

M.Cap. (Rs b) 26.2

M.Cap. (US$ b) 0.5

QUARTERLY PERFORMANCE (STANDALONE) (RS MILLION)Y/E DECEMBER CY08 CY09 CY08 CY09E

1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QENet Sales 2,169 2,486 2,479 2,699 2,289 2,331 2,319 2,246 9,833 9,185

YoY Change (%) 1.9 8.0 9.5 32.3 5.5 -6.3 -6.5 -16.8 12.6 -6.6Total Expenditure 1,764 1,982 2,000 2,232 1,899 1,948 1,953 2,013 7,978 7,814EBITDA 405 504 479 467 390 382 365 233 1,855 1,371

Margins (%) 18.7 20.3 19.3 17.3 17.0 16.4 15.8 10.4 18.9 14.9Depreciation 51 44 43 44 42 46 45 56 182 189Other Income 189 196 253 288 320 214 223 135 926 892PBT after EO Items 543 656 689 711 668 551 544 312 2,596 2,075Tax 198 238 243 255 263 188 185 71 934 708

Effective tax Rate (%) 36.5 36.3 35.3 35.9 39.4 34.1 34.1 22.8 36.0 34.1Reported PAT 345 418 446 456 405 363 358 241 1,662 1,367Adj PAT 345 418 446 456 405 363 358 241 1,662 1,367

YoY Change (%) -20.3 12.1 21.2 68.9 17.4 -13.2 -19.7 -47.2 15.1 -17.7Margins (%) 15.9 16.8 18.0 16.9 17.7 15.6 15.5 10.7 16.9 14.9

E: MOSL Estimates

BuyPrevious Recommendation: Buy Rs1,138

26 June 2009BLOOMBERGHOEC IN

REUTERS CODEHOEC.BO

* Standalone results

Results PreviewSECTOR: PHARMACEUTICALS

Nimish Desai (NimishDesai@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? APL’s 2QCY09 topline is expected to de-grow by 6% to Rs2.3b due to a 12% de-growth in the domestic formulationsbusiness, given the discontinuation of Rabipur sales. Export revenues at Rs578m are expected to record growth of16% on a low base.

? EBITDA margin is expected to decline by 387bp mainly due to lower Rabipur sales (a high margin product contributingabout 12% of revenue).

? We estimate PAT de-growth of 13% for the quarter at Rs363m due to loss of Rabipur revenues.

We believe that APL will be one of the key beneficiaries of the patent regime in the long-term. The parent has a strongR&D pipeline with a total of 81 products undergoing clinical trials, of which 42 are in Phase-III, some of which are likelyto be launched in India. Topline growth continues to be elusive and is thus impacting margins and earnings for APL. Weexpect the company to record EPS of Rs59.4 for CY09E (18% YoY decline). It is currently valued at 19.2x CY09E and16.6x CY10E EPS. We believe that the stock price performance is likely to remain muted till clarity emerges on growthdrivers in absence of Rabipur revenues. Maintain Buy.

21526 June 2009

Biocon

BuyPrevious Recommendation: Buy Rs227

26 June 2009BLOOMBERGBIOS IN

REUTERS CODEBION.BO

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/08A 10,540 2,250 11.3 12.4 20.2 3.1 15.3 14.6 4.1 14.6

03/09A 16,091 931 4.7 -58.6 48.7 2.9 6.0 6.6 2.9 14.4

03/10E 20,551 2,594 13.0 178.5 17.5 2.6 14.9 14.9 2.2 10.5

03/11E 22,852 3,104 15.5 19.7 14.6 2.3 15.7 15.5 1.9 9.0

Equity Shares (m) 200.0

52-Week Range 235/87

1,6,12 Rel. Perf. (%) 20/33/2

M.Cap. (Rs b) 45.4

M.Cap. (US$ b) 0.9

QUARTERLY PERFORMANCE (CONSOLIDATED) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 2,639 4,427 4,362 4,663 4,807 5,014 5,292 5,438 16,091 20,551

YoY Change (%) -2.6 58.7 84.1 74.6 82.2 13.3 21.3 16.6 52.7 27.7Total Expenditure 2,063 3,598 3,420 3,765 3,725 3,884 4,175 4,459 12,858 16,243EBITDA 576 830 943 898 1,082 1,130 1,117 980 3,234 4,309

Margins (%) 21.8 18.7 21.6 19.2 22.5 22.5 21.1 18.0 20.1 21.0Depreciation 253.0 290.4 270.9 306.2 320.0 330.0 360.0 383.0 1,102.5 1,393.0Interest 37.0 42.2 36.3 61.3 40.0 50.0 60.0 66.7 176.6 216.7Other Income -129.0 -190.2 -296.0 -211.3 80.0 100.0 120.0 133.2 -826.4 433.2PBT 157 307 339 319 802 850 817 663 1,128 3,132Tax 17 59 58 -16 112 119 114 93 118 438

Rate (%) 10.8 19.2 17.1 -5.0 14.0 14.0 14.0 14.0 10.5 14.0Minority Interest -10 -6 0 86 25 25 25 25 7 100PAT 150 254 281 249 665 706 678 545 1,002 2,594

YoY Change (%) -71.7 -52.9 -47.0 -61.7 343.3 177.8 140.9 119.2 -55.4 158.7Margins (%) 5.7 5.7 6.4 5.3 13.8 14.1 12.8 10.0 6.2 12.6

E: MOSL Estimates

Results PreviewSECTOR: PHARMACEUTICALS

Nimish Desai (NimishDesai@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? Biocon’s 1QFY10 topline is expected to grow by 82% mainly due to consolidation of AxiCorp (Germany) operationswhich will contribute about Rs1.5b in revenues for the quarter. Organic topline growth for the quarter is likely to be23% led by a 49% increase in contract research revenues due to favourable currency and gradual scale-up of theBMS contract.

? EBITDA margins are expected to expand by 70bp due to favourable currency and incremental contribution fromsupply of MMF to the US market.

? Biocon has converted all its forex hedges into cash-flow hedges (making them “effective hedges”) on which noMTM provision for forex losses is to be made. The company has also adopted the revised AS-11 guidelines, althoughthe impact due to this change is negligible. This implies that the impact of forex losses/gains on the P&L will be limitedonly to the extent of actual losses/gains.

Traction in the company’s Insulin and contract research initiative, coupled with incremental contribution fromimmunosuppressants should augur well for Biocon’s FY10E performance. However, higher R&D costs, higher depreciationand expenses linked to the scale-up of the domestic formulations business will continue to temper down earnings growth.We have down-graded our FY10E earnings estimates by 3% to take into account the appreciation of the INR v/s theUS$. Biocon is currently valued at 17.5x FY10E and 14.6x FY11E earnings. Maintain Buy.

21626 June 2009

Cadila Healthcare

BuyPrevious Recommendation: Buy Rs388

26 June 2009BLOOMBERGCDH IN

REUTERS CODECADI.BO

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END* (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/08A 23,245 2,632 20.5 9.9 18.9 4.6 26.7 23.3 2.4 12.2

03/09A 29,275 3,228 24.1 17.7 16.1 3.8 25.8 21.3 1.9 9.4

03/10E 34,398 4,421 32.4 34.2 12.0 3.2 30.3 21.8 1.7 7.7

03/11E 38,328 5,093 37.3 15.2 10.4 2.6 27.9 21.5 1.5 6.9

Equity Shares (m) 125.6

52-Week Range 394/222

1,6,12 Rel. Perf. (%) 11/-16/21

M.Cap. (Rs b) 48.8

M.Cap. (US$ b) 1.0

QUARTERLY PERFORMANCE (CONSOLIDATED) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Revenues 6,985 7,566 7,491 7,233 8,151 8,843 8,954 8,450 29,275 34,398

YoY Change (%) 22.1 24.2 29.3 28.3 16.7 16.9 19.5 16.8 25.9 17.5Total Expenditure 5,524 5,884 6,067 5,743 6,247 6,751 7,190 6,676 23,217 26,864EBITDA 1,461 1,681 1,425 1,491 1,904 2,092 1,764 1,774 6,058 7,534

Margins (%) 20.9 22.2 19.0 20.6 23.4 23.7 19.7 21.0 20.7 21.9Depreciation 246 259 299 314 315 320 320 319 1,118 1,274Interest 148 99 233 440 200 175 200 342 978 917Other Income 27 -269 -11 172 30 35 40 46 -23 151PBT before EO Income 1,094 1,054 881 909 1,419 1,632 1,284 1,160 3,938 5,494EO Exp/(Inc) 0 18 0 223 0 0 0 0 241 0PBT after EO Income 1,094 1,036 881 687 1,419 1,632 1,284 1,160 3,698 5,494Tax 123 101 284 158 255 294 231 209 666 989

Rate (%) 11.3 9.7 32.2 23.0 18.0 18.0 18.0 18.0 18.0 18.0Minority Int/Adj on Consol 74 -14 -8 -51 20 20 22 23 1 85Reported PAT 897 949 605 579 1,144 1,318 1,031 928 3,031 4,421Adj PAT 897 965 606 796 1,144 1,318 1,031 928 3,228 4,421

YoY Change (%) 21.4 17.4 10.3 53.2 27.5 36.5 70.2 16.5 22.7 36.9Margins (%) 12.8 12.8 8.1 11.0 14.0 14.9 11.5 11.0 11.0 12.9

E: MOSL Estimates; Quarterly numbers don’t add up to full year numbers due to restatement

Results PreviewSECTOR: PHARMACEUTICALS

Nimish Desai (NimishDesai@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? Cadila’s 1Q topline is likely to record 16.7% growth led by a 23% growth in exports. The company’s US revenueswill show increased traction due to favourable YoY currency movement and incremental contribution from newlaunches. Domestic revenues are expected to grow by 11.6% for the quarter.

? EBITDA margins are likely to expand by 250bp led by favourable product and geographical mix and reduced otherexpenses.

? PAT is likely to record 27.5% growth to Rs1.1b for the quarter due to above reasons.

We expect Cadila to record 26% earnings CAGR for FY09-11 period led by increased traction in its internationalbusinesses. Our estimates take into account the demerger of the consumer business and related equity dilution. Tractionin international business, commencement of Hospira supplies coupled with a de-risked business model should ensuregood long-term potential for the company. We have downgraded our FY10E EPS estimates by 3.7% to factor in anappreciating currency. Cadila is currently valued at 10.6x FY10E, and 9.2x FY11E consolidated earnings. Reiterate Buy.

21726 June 2009

Cipla

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/08A 42,184 7,014 9.0 3.6 29.0 5.4 18.7 19.0 4.9 24.2

03/09A 52,705 7,678 9.9 9.4 26.5 4.7 17.6 18.1 4.0 16.3

03/10E 62,585 12,111 15.6 57.2 16.8 3.8 22.8 23.8 3.3 13.6

03/11E 71,260 13,260 17.1 9.4 15.3 3.2 21.0 22.4 2.9 11.8

Equity Shares (m) 777.3

52-Week Range (Rs) 269/146

1,6,12 Rel. Perf. (%) 10/-15/18

M.Cap. (Rs b) 203.1

M.Cap. (US$ b) 4.2

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 12,071 13,547 13,420 13,667 14,645 16,320 15,750 15,871 52,705 62,585

YoY Change (%) 33.9 23.3 21.5 22.7 21.3 20.5 17.4 16.1 24.9 18.7Total Expenditure 9,371 10,392 10,035 10,076 10,908 12,150 12,250 11,963 39,873 47,271EBITDA 2,701 3,155 3,385 3,591 3,736 4,170 3,500 3,908 12,832 15,314

Margins (%) 22.4 23.3 25.2 26.3 25.5 25.6 22.2 24.6 24.3 24.5Depreciation 382 406 412 557 550 570 550 501 1,757 2,171Interest 37 56 110 133 100 110 100 114 335 424Other Income -576 -876 -241 54 1,273 175 175 76 -1,640 1,699Profit before Tax 1,705 1,817 2,622 2,957 4,359 3,665 3,025 3,369 9,101 14,418Tax 305 303 388 428 697 586 484 539 1,423 2,307

Rate (%) 17.9 16.6 14.8 14.5 16.0 16.0 16.0 16.0 15.6 16.0Reported PAT 1,400 1,514 2,234 2,529 3,662 3,079 2,541 2,830 7,678 12,111

YoY Change (%) 16.9 -20.6 6.1 59.3 161.5 103.3 13.7 11.9 13.0 57.7Margins (%) 11.6 11.2 16.6 18.5 25.0 18.9 16.1 17.8 14.6 19.4

E: MOSL Estimates

NeutralPrevious Recommendation: Neutral Rs261

26 June 2009BLOOMBERGCIPLA IN

REUTERS CODECIPL.BO

Results PreviewSECTOR: PHARMACEUTICALS

Nimish Desai (NimishDesai@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? Cipla’s 1QFY10 topline is likely to grow by 21% led mainly by a 140% increase in other operating income and 19%growth in export revenues. Domestic business growth is likely to be about 16%. Other operating income (includingtechnology licensing income) is likely to aid topline growth with a 140% increase to Rs872m.

? EBITDA margins are likely to expand by 314bp YoY due to favourable YoY currency movement and the significantincrease in other operating income (which adds directly to EBITDA).

? The recent appreciation of the INR v/s the US$ is likely to result in MTM forex gains amounting to Rs1b onUS$170m of forex loans and US$120m of forex hedges. The company has not adopted the revised AS-11 and hencethe MTM forex gains/losses continue to reflect in the P&L.

? PAT is likely to record 161% growth to Rs3.6b led by better operational performance and partly boosted by forexgains of Rs1b.

We believe that Cipla has one of the strongest generic pipelines among Indian companies. It has tie-ups with 17 US-based generic companies for supply of generic products. This coupled with its low-risk strategy and strong capex shouldensure good long-term potential. Most of the forex hedges are likely to run out by 1HFY10 leaving the company exposedto an appreciating currency. We have upgraded our FY10E EPS estimates by 2% despite an appreciating currency (tofactor-in large forex gains) and downgraded FY11E EPS by 2%. Cipla is currently valued at 16.8x FY10E and 15.3xFY11E earnings. Maintain Neutral.

21826 June 2009

Divi's Laboratories

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/08A 10,328 3,476 53.8 81.1 21.4 8.6 49.5 47.2 7.3 18.3

03/09A 11,803 4,168 64.6 19.9 17.8 6.0 39.8 40.9 6.2 13.9

03/10E 13,478 4,958 76.8 18.9 15.0 4.6 34.6 36.3 5.1 12.7

03/11E 15,990 6,084 94.2 22.7 12.2 3.5 32.5 34.3 4.1 9.8

Equity Shares (m) 64.6

52-Week Range 1,614/765

1,6,12 Rel. Perf. (%) -6/-69/-20

M.Cap. (Rs b) 74.3

M.Cap. (US$ b) 1.5

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Op Revenue 2,661 3,305 2,648 3,191 2,965 3,100 3,653 3,760 11,803 13,478

YoY Change (%) 16.7 36.3 -6.9 14.8 11.4 -6.2 38.0 17.8 14.3 14.2Total Expenditure 1,473 1,676 1,565 1,823 1,776 1,849 2,128 2,280 6,536 8,033EBITDA 1,188 1,629 1,083 1,368 1,189 1,251 1,525 1,480 5,267 5,444

Margins (%) 44.6 49.3 40.9 42.9 40.1 40.4 41.7 39.4 44.6 40.4Depreciation 107 119 123 129 130 133 135 138 479 536Interest 20 18 16 17 12 12 12 12 71 48Other Income -38 0 -63 -132 167 90 100 113 -234 470PBT 1,023 1,491 880 1,089 1,214 1,196 1,478 1,443 4,484 5,331Tax 42 101 59 64 85 84 103 101 266 373Deferred Tax 16 26 26 -18 0 0 0 0 50 0

Rate (%) 5.7 8.5 9.6 4.2 7.0 7.0 7.0 7.0 7.0 7.0Adj PAT 965 1,364 795 1,044 1,129 1,112 1,374 1,342 4,168 4,958

YoY Change (%) 43.4 49.5 -21.0 21.0 17.0 -18.5 72.8 28.6 20.6 18.9Margins (%) 36.3 41.3 30.0 32.7 38.1 35.9 37.6 35.7 35.3 36.8

E: MOSL Estimates

BuyPrevious Recommendation: Buy Rs1,152

26 June 2009BLOOMBERGDIVI IN

REUTERS CODEDIVI.BO

Results PreviewSECTOR: PHARMACEUTICALS

Nimish Desai (NimishDesai@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? Divi’s 1QFY10 topline is expected to grow by only 11.4% to Rs2.96b reflecting the adverse impact of the on-goinginventory corrections undertaken by CRAMS customers. We believe that this impact will last till 1HFY10 and expecta recovery in CRAMS revenues beginning 2HFY10 onwards. The company commissioned its Carotenoids facility inJune 2009 and we expect a gradual scale-up in revenues from this initiative over the next two years.

? EBITDA margins are likely to decline by 450bp to 40.1% reflecting the above impact.? Bottomline growth is expected to be 17% for the quarter reflecting the slowdown in CRAMS business.

We expect Divi’s to be a key beneficiary of the increased pharmaceutical outsourcing from India given its strongrelationships with global innovator pharmaceutical companies. In the short-term, outsourcing supplies will be adverselyimpacted as customers are likely to reduce inventories. We have downgraded our FY10E and FY11E EPS estimates by3-4% each to factor in the adverse impact of INR appreciation v/s the US$ (the company has miniscule forex hedges).Divi’s is currently valued at 15x FY10E and 12.2x FY11E EPS. We continue to be positive about Divi’s long-termprospects. Maintain Buy.

21926 June 2009

Dr Reddy's Laboratories

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/09A 69,441 -5,168 -30.7 -210.7 -25.1 3.0 -11.9 -5.7 2.1 11.703/10E 69,552 6,730 40.0 19.3 2.7 14.0 10.5 2.1 14.903/10E* 74,711 7,955 47.303/11E 76,916 7,880 46.9 17.1 16.5 2.4 14.7 11.4 1.9 13.103/11E* 80,291 9,410 56.0 18.3

Equity Shares (m) 168.2

52-Week Range (Rs) 800/357

1,6,12 Rel. Perf. (%) 8/7/16

M.Cap. (Rs b) 129.7

M.Cap. (US$ b) 2.7

GLOBAL QUARTERLY PERFORMANCE (US GAAP) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QGross Sales 15,038 16,152 18,401 19,850 16,760 17,750 17,610 17,432 69,441 69,552

YoY Change (%) 25.1 27.5 49.3 52.7 11.5 9.9 -4.3 -12.2 38.9 0.2EBITDA 1,815 2,326 4,202 4,614 2,229 2,450 2,553 2,688 12,946 9,920

Margins (%) 12.1 14.4 22.8 23.2 13.3 13.8 14.5 15.4 18.6 14.3Depreciation & Amortization 391 472 339 14,339 325 340 340 348 15,526 1,353Other Income 166 -338 -1,540 158 -130 -163 -163 -195 -1,415 -650Profit before Tax 1,590 1,516 2,323 -9,567 1,774 1,947 2,051 2,145 -3,995 7,916Tax 242 303 399 240 266 292 308 322 1,173 1,188

Rate (%) 15.2 20.0 17.2 -2.5 15.0 15.0 15.0 15.0 -29.4 15.0Net Profit 1,348 1,213 1,924 -9,807 1,508 1,655 1,743 1,823 -5,168 6,729EO (Exp)/Inc 0 0 1,027 1,243 0 0 0 0 2,270 0Adjusted PAT 1,348 1,213 897 -11,049 1,508 1,655 1,743 1,823 -7,437 6,729

YoY Change (%) -26.3 0.3 - -1,170.3 11.9 36.4 94.3 -116.5 -258.9 -190.5Margins (%) 9.0 7.5 4.9 -55.7 9.0 9.3 9.9 10.5 -10.7 9.7

E: MOSL Estimates; DRL commcenced IFRS reporting wef 2QFY09. Past financials are as per US GAAP; Estimates exclude upsides fromPara-IV products unless explicity stated.

BuyPrevious Recommendation: Buy Rs771

26 June 2009BLOOMBERGDR IN

REUTERS CODEREDY.BO

Results PreviewSECTOR: PHARMACEUTICALS

Nimish Desai (NimishDesai@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

* - includes patent challenge/low competition upsides

? We expect DRL’s topline to grow by only 11.5% to Rs16.76b impacted by slowdown in domestic formulation sales(4.5% growth), a 15% de-growth in API revenues and 8% growth in European generic sales.

? Despite the positive impact of currency depreciation (YoY), EBITDA margins are expected to expand by only 120bpat 13.3% due to above reasons.

? We expect a PAT growth of 12% to Rs1.5b for the quarter after excluding Rs1.2b PAT contribution from genericImitrex.

Traction in the branded formulations and US businesses will be the key growth drivers for DRL over next two years. Ourestimates take into account the potential margin erosion in Germany related to the AOK tender. We believe that DRL hasinitiated steps towards a more focused approach towards its business by announcing the exit from some marginal genericmarkets. Monetization of patent challenge/low competition products will result in positive newsflows going forward. Wehave downgraded our FY10E EPS estimates by 6% and FY11E EPS by 4% to factor in an appreciating currency. DRLtrades at 19.3x FY10E and 16.5x FY11E EPS (excluding patent challenge upsides). Maintain Buy.

22026 June 2009

GlaxoSmithKline Pharmaceuticals

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA12/07A 15,703 3,997 47.2 10.5 26.1 7.7 29.4 44.8 5.7 18.0

12/08A 16,604 4,484 52.9 12.2 23.3 6.8 29.1 44.0 5.3 16.1

12/09E 18,597 4,999 59.0 11.5 20.9 6.1 29.2 44.1 4.7 13.8

12/10E 20,828 5,848 69.0 17.0 17.8 5.5 30.8 46.5 4.1 11.8

Equity Shares (m) 84.7

52-Week Range (Rs) 1,299/930

1,6,12 Rel. Perf. (%) 0/-49/9

M.Cap. (Rs b) 104.4

M.Cap. (US$ b) 2.2

QUARTERLY PERFORMANCE (RS MILLION)Y/E DECEMBER CY08 CY09 CY08 CY09E

1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QENet Sales 4,215 4,163 4,579 3,647 4,572 4,742 5,207 4,076 16,604 18,597

YoY Change (%) 0.3 6.3 9.2 7.5 8.5 13.9 13.7 11.8 5.7 12.0Total Expenditure 2,780 2,734 2,950 2,628 3,009 3,101 3,339 2,787 11,161 12,255EBITDA 1,435 1,429 1,629 1,018 1,563 1,642 1,868 1,288 5,443 6,342

Margins (%) 34.1 34.3 35.6 27.9 34.2 34.6 35.9 31.6 32.8 34.1Depreciation 37 39 40 47 37 41 42 52 163 172Other Income 428 341 389 367 383 352 352 321 1,525 1,410PBT before EO Expense 1,824 1,730 1,977 1,336 1,908 1,952 2,178 1,556 6,799 7,574Tax 622 585 668 442 644 664 740 527 2,315 2,575Deferred Tax -9 -2 -10 0 11 0 0 -11 0 0

Rate (%) 33.6 33.7 33.3 33.1 34.3 34.0 34.0 33.2 34.1 34.0Adjusted PAT 1,211 1,147 1,319 895 1,253 1,288 1,437 1,039 4,484 4,999

YoY Change (%) -14.6 19.0 20.9 8.0 3.4 12.3 9.0 16.2 12.2 11.5Margins (%) 28.7 27.6 28.8 24.5 27.4 27.2 27.6 25.5 27.0 26.9

Extra-Ord Expense 0 0 0 -1,193 -178 0 0 0 -1,282 -178Reported PAT 1,211 1,147 1,319 2,088 1,431 1,288 1,437 1,039 5,766 5,177E: MOSL Estimates

BuyPrevious Recommendation: Buy Rs1,232

26 June 2009BLOOMBERGGLXO IN

REUTERS CODEGLAX.BO

Results PreviewSECTOR: PHARMACEUTICALS

Nimish Desai (NimishDesai@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect GSK’s topline to grow by 14% to Rs4.7b led by double-digit growth in Priority Products (60-70% of sales)and contribution from new launches. DPCO products (~26% of sales) are likely to record single-digit revenuegrowth.

? EBITDA margin is likely to remain almost flat at 34.6%.? PAT is expected to grow by 12.3% for the quarter.

We continue to be positive about GSK’s long-term prospects. It is one of the best plays on IPR regime in India with plansto launch 9 patented/low-competition products by CY10E. We believe the company deserves premium valuations due tothe strong parentage (giving access to a large product pipeline), brand-building ability and its likely positioning in the postpatent era. Parent is fully committed to the listed entity, which is evident from the fact that it is proposing to launch mostof the patented products through the listed entity. GSK is currently valued at 20.9x CY09E and 17.8x CY10E earnings.Maintain Buy.

22126 June 2009

Glenmark Pharmaceuticals

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/08A 19,757 3,154 12.0 166.1 19.4 3.8 20.8 15.8 3.3 8.3

03/09A 20,930 1,143 4.3 -63.8 53.6 3.4 6.7 8.2 3.3 20.5

03/10E 26,623 3,231 12.3 182.7 19.0 2.9 16.2 15.7 2.7 11.2

03/11E 30,656 3,784 14.3 17.1 16.2 2.3 15.2 15.0 2.3 9.9

Equity Shares (m) 248.7

52-Week Range (Rs) 697/119

1,6,12 Rel. Perf. (%) -14/-80/-65

M.Cap. (Rs b) 57.8

M.Cap. (US$ b) 1.2

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Income 4,608 5,609 5,814 4,688 5,862 6,320 6,700 7,740 20,930 26,623

YoY Change (%) 31.2 49.6 -14.4 -18.1 27.2 12.7 15.2 65.1 5.8 27.2EBITDA 1,410 1,694 1,891 -1,824 1,368 1,437 1,568 2,043 3,380 6,415

Margins (%) 30.6 30.2 32.5 -38.9 23.3 22.7 23.4 26.4 16.1 24.1Depreciation 215 225 291 296 293 305 305 317 1,027 1,219Interest 155 187 343 719 375 390 390 406 1,405 1,562Other Income 109 433 92 1,106 91 105 114 146 1,740 456PBT before EO Expense 1,148 1,715 1,349 -1,734 791 846 987 1,466 2,689 4,090Tax 678 319 452 -695 166 178 207 308 754 859Deferred Tax -684 222 83 379 0 0 0 0 0 0

Rate (%) -0.5 31.6 39.6 18.2 21.0 21.0 21.0 21.0 28.0 21.0Reported PAT 1,154 1,174 814 -1,417 625 668 780 1,158 1,935 3,231Adj PAT 923 943 584 -1,648 625 668 780 1,158 1,143 3,231

YoY Change (%) 61.5 25.5 -52.9 - -32.3 -29.1 33.6 -170.3 -81.9 182.7Margins (%) 20.0 16.8 10.0 -35.1 10.7 10.6 11.6 15.0 5.5 12.1

E: MOSL Estimates; Adj PAT includes capitalized R&D exp & excludes NCE upsides

NeutralPrevious Recommendation: Neutral Rs232

26 June 2009BLOOMBERGGNP IN

REUTERS CODEGLEN.BO

Results PreviewSECTOR: PHARMACEUTICALS

Nimish Desai (NimishDesai@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? Glenmark’s 1Q topline is expected to record 27.2% growth (on low base of last year) led mainly by double digitgrowth in emerging markets and higher growth for API business. US revenues are expected to de-grow by 4%despite a favorable currency due to the ongoing slowdown in US FDA approvals (impacting new launches).

? EBITDA margin are estimated to decline by almost 730bp due to 71% increase in SG&A expenses.? Margin pressure coupled with higher interest and depreciation as well as significant increase in tax rate (21% v/s -

0.5% for 1QFY09) is likely to result in a 32% de-growth in adjusted PAT.

Glenmark has differentiated itself amongst Indian pharmaceutical companies through its significant success in NCEresearch. It emerged as the most successful NCE research company by out-licensing 3 molecules and receiving US$117min upfront and milestone payments till date. Given this success, Glenmark has been aggressive in adding new NCEs to itspipeline, which will put pressure on its operations in the short-term as the company will have to fund the R&D expensesfor these NCEs on its own. It’s formulations business, both branded and generics, is likely to face growth pressures in theshort-term due to de-stocking, delays in product approvals and efforts by the company to control receivables in high-riskmarkets. We have downgraded our FY10E and FY11E EPS by 3-4% each to take into account an appreciating currency.Glenmark is currently valued at 19x FY10E and 16.2x FY11E EPS. Maintain Neutral.

22226 June 2009

Jubilant Organosys

BuyPrevious Recommendation: Buy Rs168

26 June 2009BLOOMBERGJOL IN

REUTERS CODEJUBO.BO

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 8,266 9,405 9,096 8,412 8,800 10,800 10,300 9,641 35,180 39,541

YoY Change (%) 53.1 52.1 41.8 22.1 6.5 14.8 13.2 14.6 41.3 12.4Total Expenditure 6,608 7,632 7,686 6,488 7,332 8,880 8,380 7,695 28,414 32,287EBITDA 1,658 1,773 1,411 1,924 1,468 1,920 1,920 1,946 6,766 7,254

Margins (%) 20.1 18.8 15.5 22.9 16.7 17.8 18.6 20.2 19.2 18.3Depreciation 337 411 434 451 650 675 725 728 1,632 2,778Interest 138 221 324 388 350 400 425 419 1,070 1,594Other Income -1,002 -1,671 -1,161 -1,881 999 71 112 -87 -1,631 1,095PBT before EO Expense 182 -530 -508 -796 1,467 916 882 712 2,432 3,978Extra-Ord Expense 0 0 110 -644 0 0 0 0 -534 0PBT after EO Expense 182 -530 -618 -152 1,467 916 882 712 2,966 3,978Tax 61 166 283 -243 264 165 159 128 267 716

Rate (%) 33.6 -31.3 -45.7 159.7 18.0 18.0 18.0 18.0 9.0 18.0PAT 121 -696 -901 91 1,203 751 724 584 2,699 3,262Minority Interest -7 -69 -25 -33 3 2 2 3 -133 10Adjusted PAT 128 -627 -715 508 1,200 749 722 581 2,346 3,252

YoY Change (%) -91.1 -157.0 -178.5 -9.4 840.5 -219.4 -200.9 14.3 -41.2 38.6Margins (%) 1.5 -6.7 -7.9 6.0 13.6 6.9 7.0 6.0 6.7 8.2

E: MOSL Estimates

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/08A 24,889 3,988 27.1 71.2 6.2 2.0 37.0 16.6 1.6 9.0

03/09A 35,180 2,346 15.9 -41.4 10.5 2.0 18.6 8.2 1.6 8.5

03/10E 39,541 3,252 22.0 38.6 7.6 1.9 25.3 10.8 1.6 8.6

03/11E 43,543 2,488 16.9 -23.5 9.9 1.4 16.3 9.6 1.3 7.4

Equity Shares (m) 147.5

52-Week Range 380/85

1,6,12 Rel. Perf. (%) -12/-13/-52

M.Cap. (Rs b) 24.7

M.Cap. (US$ b) 0.5

Results PreviewSECTOR: PHARMACEUTICALS

Nimish Desai (NimishDesai@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? Jubilant’s 1QFY10 topline is expected to record only 6.5% growth due to ongoing slowdown in CRAMS business anddeclining realizations. The PLSP business (65% of revenues) is likely to grow by 9% while the chemicals business islikely to record 2% growth.

? EBITDA margins are expected to decline by 340bp despite favorable currency movement due to 27% increase instaff costs linked to acquired companies.

? Despite significant increase in depreciation and interest costs, PAT is expected to grow by 840% (on a very low base)due to forex gains of Rs925m vs Rs1b of forex loss for 1QFY09.

We have revised our FY10E EPS upwards by 4.7% despite an appreciating currency, to take into account the large forexgains on US$250m of hedged positions. Our FY11E EPS has been downgraded by 6.6% to take into account theoperational impact of an appreciating currency and assuming zero forex hedges (current hedges will be utilized in FY10Eitself). Based on our revised estimates, Jubilant is currently valued at 7.6x FY10E and 9.9x FY11E consolidated earnings.It is likely to benefit from the increased outsourcing from India due to its existing relationships with global pharmaceuticaland agrochemical players and significant ramp-up in Hollister’s injectibles business in the US. Despite these positivemacro drivers, valuations are likely to remain muted due to the uncertainty on funding of the US$270m FCCB repayment(incl interest) scheduled between May 2010 and May 2011. Maintain Buy.

22326 June 2009

Lupin

BuyPrevious Recommendation: Buy Rs843

26 June 2009BLOOMBERGLPC IN

REUTERS CODELUPN.BO

QUARTERLY PERFORMANCE (CONSOLIDATED) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 8,624 9,343 9,618 10,174 10,350 11,403 11,329 11,972 37,759 45,053

YoY Change (%) 49.8 41.8 33.3 35.6 20.0 22.0 17.8 17.7 39.5 19.3Total Expenditure 7,097 7,555 8,079 8,544 8,648 9,325 9,430 9,685 31,274 37,088EBITDA 1,527 1,788 1,540 1,630 1,701 2,078 1,899 2,287 6,485 7,964

Margins (%) 17.7 19.1 16.0 16.0 16.4 18.2 16.8 19.1 17.2 17.7Depreciation 193 201 219 266 230 240 260 280 880 1,010Interest 102 127 146 124 150 160 180 180 499 670Other Income 202 13 221 517 490 160 170 158 954 978PBT 1,433 1,474 1,396 1,757 1,811 1,838 1,629 1,986 6,060 7,263Tax 313 312 219 139 326 331 293 357 983 1,307

Rate (%) 21.8 21.2 15.7 7.9 18.0 18.0 18.0 18.0 16.2 18.0Reported PAT 1,120 1,162 1,178 1,618 1,485 1,507 1,335 1,628 5,077 5,956Minority Interest -1 5 13 44 10 12 14 14 62 50Recurring PAT 1,121 1,156 1,165 1,574 1,475 1,495 1,321 1,614 5,015 5,906

YoY Change (%) 100.6 52.9 9.9 64.2 31.6 29.3 13.4 2.6 50.4 17.7Margins (%) 13.0 12.4 12.1 15.5 14.3 13.1 11.7 13.5 13.3 13.1

E: MOSL Estimates

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/08A 27,064 3,334 37.8 43.3 22.3 5.4 31.0 22.0 2.9 18.0

03/09A 37,759 5,015 56.9 50.4 14.8 4.2 34.1 23.9 2.1 12.2

03/10E 45,053 5,906 67.0 17.7 12.6 3.3 31.5 24.2 1.8 10.0

03/11E 51,950 6,755 76.6 14.4 11.0 2.7 29.0 23.6 1.5 8.7

Equity Shares (m) 82.1

52-Week Range 905/518

1,6,12 Rel. Perf. (%) -11/-15/23

M.Cap. (Rs b) 69.2

M.Cap. (US$ b) 1.4

Results PreviewSECTOR: PHARMACEUTICALS

Nimish Desai (NimishDesai@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? Lupin’s 1QFY10 topline is expected to record 20% growth driven by mainly by ramp-up of regulated formulationrevenues (up 38%) and a 23% increase in formulation revenues in emerging markets (including India).

? However, EBITDA margins are likely to decline by 130bp mainly due to significant increase in staff costs and otherexpenses. Margin expansion will be partly tempered down by the loss of high-margin Cefdinir revenues.

? PAT is expected to grow by 31.6% partly boosted by Rs314m of forex gains and reduction in tax rate for the quarter.

Lupin is likely to witness a gradual improvement in the underlying fundamentals led by an expanding US genericspipeline, niche / Para-IV opportunities in the US, strong performance from Suprax (branded product in US) and ramp-upin formulation revenues from its European initiative. Long-term benefits will be visible in Japan through the Kyowaacquisition. To factor-in an appreciating currency, we have downgraded our EPS estimates for FY10E by 4% andFY11E by 4.6%. Lupin is currently valued at 12.6x FY10E and 11x FY11E EPS. Reiterate Buy.

22426 June 2009

Piramal Healthcare

BuyPrevious Recommendation: Buy Rs301

26 June 2009BLOOMBERGPIHC IN

REUTERS CODENICH.BO

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 7,083 8,893 8,283 8,189 7,990 9,809 9,902 10,024 32,448 37,725

YoY Change (%) 16.5 17.5 13.1 5.5 12.8 10.3 19.5 22.4 12.9 16.3Total Expenditure 5,680 7,066 6,728 6,702 6,280 7,653 7,939 7,733 26,176 29,605EBITDA 1,403 1,827 1,555 1,487 1,710 2,157 1,963 2,291 6,272 8,120

Margins (%) 19.8 20.5 18.8 18.2 21.4 22.0 19.8 22.9 19.3 21.5Depreciation 270 288 295 343 400 450 475 560 1,196 1,885Interest 120 170 261 286 180 200 210 172 838 762Other Income -207 -408 -309 540 30 35 55 60 -384 180PBT before EO Expense 806 960 691 1,397 1,160 1,542 1,333 1,619 3,854 5,653Extra-Ord Expense 41 96 0 310 0 0 0 0 446 0PBT after EO Expense 766 864 691 1,087 1,160 1,542 1,333 1,619 3,408 5,653Tax 87 114 72 118 106 142 122 149 391 519Deferred Tax 0 0 0 -171 33 43 38 46 -171 159

Rate (%) 11.3 13.2 10.4 -4.9 12.0 12.0 12.0 12.0 6.4 12.0PAT 679 750 619 1,140 1,020 1,357 1,173 1,424 3,188 4,974Less: Minority Interest -2 17 20 -10 20 20 20 20 26 80Reported PAT 681 733 599 1,150 1,000 1,337 1,153 1,404 3,163 4,894Adj PAT 717 816 599 1,078 1,000 1,337 1,153 1,404 3,580 4,894

YoY Change (%) 19.8 -21.0 -36.3 13.8 39.6 63.8 92.5 30.3 -1.7 36.7E: MOSL Estimates; Quarterly numbers don’t add up to full year numbers due to restatement

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 28,728 3,643 17.4 58.9 17.3 5.8 34.0 25.6 2.4 12.8

03/09A 32,448 3,580 17.1 -1.7 17.6 4.8 29.7 21.0 2.3 12.0

03/10E 37,725 4,894 23.4 36.7 12.8 3.7 32.4 23.9 1.9 8.9

03/11E 43,446 6,155 29.4 25.8 10.2 2.9 31.8 26.6 1.6 7.2

Equity Shares (m) 209.0

52-Week Range 367/164

1,6,12 Rel. Perf. (%) 10/-29/-7

M.Cap. (Rs b) 62.9

M.Cap. (US$ b) 1.3

Results PreviewSECTOR: PHARMACEUTICALS

Nimish Desai (NimishDesai@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? PHL’s 1QFY10 topline is expected to grow by only 13% to Rs8b reflecting the ongoing slowdown in its CRAMSbusiness and the closure of the Huddersfield facility in UK. Domestic formulations business is likely to grow by 14%while CRAMS business is expected to decline by 14% for the quarter.

? EBITDA margins are expected to expand by 160bp due to cost savings from the closure of the Huddersfield facility.? As the company has adopted the revised AS-11, there will be miniscule impact of forex gains/losses on the P&L.? PAT is expected to grow by 40% led by margin expansion and low base of last year (due to forex losses).

Despite the short-term adverse impact of inventory reductions, the macro environment for CRAMS business remainsfavorable given India’s inherent cost advantages and chemistry skills. We believe that PHL will be a key beneficiary ofincreased outsourcing from India, given the strong MNC relations which the company enjoys. A steady growing domesticformulations business (49% of total revenues for FY09) with good profitability and potential debt reduction should alsoaugur well over the next two years. We have downgraded our FY10E and FY11E EPS by 1% each to reflect theappreciation to the INR vs the US$. The stock trades at 12.8x FY10E and 10.2x FY11E EPS. Reiterate Buy.

22526 June 2009

Ranbaxy Laboratories

Equity Shares (m) 422.8

52-Week Range (Rs) 557/133

1,6,12 Rel. Perf. (%) -4/-41/-55

M.Cap. (Rs b) 107.9

M.Cap. (US$ b) 2.2

QUARTERLY PERFORMANCE (RS MILLION)Y/E DECEMBER CY08 CY09 CY08 CY09E

1Q 2Q 3Q 4Q 1Q 2QE 3QE 4QENet Income 16,986 19,286 18,532 16,370 14,926 15,505 19,690 17,677 71,174 67,798

YoY Change (%) 7.4 14.4 4.4 -13.9 -12.1 -19.6 6.2 8.0 2.5 -4.7EBITDA 2,552 3,261 1,440 -1,085 -822 -569 394 1,058 6,168 60

Margins (%) 15.0 16.9 7.8 -6.6 -5.5 -3.7 2.0 6.0 8.7 0.1Depreciation 621 672 643 720 639 700 775 1,044 2,656 3,158Interest 384 465 595 442 246 205 205 164 1,886 820Other Income -713 -1,832 -3,069 -1,374 -816 1,739 224 319 -6,988 1,466PBT before EO Expense 834 292 -2,867 -3,621 -2,523 264 -362 169 -5,362 -2,452Extra-Ord Expense -895 0 2,441 7,843 9,188 -14,700 0 1,680 9,389 -3,832PBT after EO Expense 1,729 292 -5,308 -11,464 -11,711 14,964 -362 -1,511 -14,751 1,380Tax 361 63 -1,363 -4,666 -4,101 5,088 -123 -395 -5,605 469

Rate (%) 20.9 21.6 25.7 40.7 35.0 34.0 34.0 26.1 38.0 34.0Reported PAT 1,368 229 -3,945 -6,798 -7,610 9,876 -239 -1,117 -9,146 911Minority Interest 0 0 0 0 0 0 0 0 0 0Adj PAT after Minority Int. 1,017 1,386 156 -1,060 -825 -842 -239 -110 1,491 -2,016

YoY Change (%) 20.8 30.1 -89.6 -162.0 -181.1 -160.8 -253.2 -89.6 -70.8 -235.3Margins (%) 6.0 7.2 0.8 -6.5 -5.5 -5.4 -1.2 -0.6 2.1 -3.0

E: MOSL Estimates

NeutralPrevious Recommendation: Neutral Rs255

26 June 2009BLOOMBERGRBXY IN

REUTERS CODERANB.BO

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END* (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA12/07A 69,756 5,325 13.3 4.2 19.2 3.4 19.1 11.7 2.1 15.8

12/08A 70,852 1,042 2.5 -81.5 103.6 2.5 2.4 5.4 1.8 25.4

12/09E 67,798 -2,016 -4.8 -53.5 2.5 -4.6 -3.7 1.8 -

12/10E 76,892 157 0.4 688.2 2.4 0.3 1.0 1.5 32.3

Results PreviewSECTOR: PHARMACEUTICALS

Nimish Desai (NimishDesai@MotilalOswal.com)

* Excludes upsides from FTF products

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? Ranbaxy’s 2Q topline is expected to de-grow by 20% despite a favourable currency due to the ongoing US FDA banon some products as well as significant forward covers taken in the past. A slow-down in emerging markets is alsolikely to adversely impact topline growth.

? We believe that the company will report a loss at the EBITDA level due to forex losses on US$1.4b hedges and a40% decline in US revenues.

? The recent appreciation of the INR v/s the US$ will reverse the large MTM forex loss booked in 1Q. We expect thecompany to record forex gains of Rs14.7b on forex hedges and Rs1.54b gain on outstanding FCCBs, thus boostingreported PAT significantly. Excluding the MTM forex losses on foreign currency loans and hedges, we expect thecompany to record a net loss of Rs842m.

We believe that Ranbaxy needs to clearly demonstrate that the upside from Para-IV opportunities (DCF value of Rs118/share) is not at risk due to the US FDA problems. Given the significant impact of US FDA issues and MTM forex losses,PE valuations may not be relevant as of now. Ranbaxy’s BV for CY08 was Rs101/sh (estimated BV for CY09 is Rs103/sh). The company has cash of Rs6.6b on its books. Maintain Neutral.

22626 June 2009

Sun Pharmaceuticals Industries

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA03/09A* 42,723 18,177 87.8 22.2 13.0 3.6 31.7 33.1 4.9 11.2

03/10E 37,058 13,513 65.2 -25.7 17.5 3.1 19.2 19.2 5.3 15.1

03/10E* 43,220 17,518 84.6 -3.6

03/11E 42,113 15,488 74.8 14.6 15.3 2.7 18.9 18.9 4.4 12.5

Equity Shares (m) 207.1

52-Week Range 1,600/953

1,6,12 Rel. Perf. (%) -21/-50/-17

M.Cap. (Rs b) 236.2

M.Cap. (US$ b) 4.9

QUARTERLY PERFORMANCE (CONSOLIDATED) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Revenues 10,239 11,778 9,183 11,523 9,948 8,124 9,376 9,610 42,723 37,058

YoY Change (%) 66.4 82.2 16.2 -7.0 -2.8 -31.0 2.1 -16.6 29.8 -13.3EBITDA 5,379 5,379 4,134 3,745 3,317 2,758 3,308 3,548 18,638 12,931

Margins (%) 52.5 45.7 45.0 32.5 33.3 34.0 35.3 36.9 43.6 34.9Depreciation 277 287 311 359 319 332 332 345 1,233 1,328Net Other Income 451 524 443 669 509 531 553 574 2,086 2,167PBT 5,554 5,616 4,266 4,055 3,507 2,957 3,529 3,777 19,491 13,770Tax 299 288 170 -45 70 59 71 76 712 275

Rate (%) 5.4 5.1 4.0 -1.1 2.0 2.0 2.0 2.0 3.7 2.0Profit after Tax 5,255 5,329 4,097 4,100 3,437 2,898 3,458 3,701 18,780 13,495Share of Minority Partner 261 223 10 109 -5 -5 -5 -3 603 -18Adj Net Profit 4,994 5,106 4,086 3,991 3,442 2,903 3,463 3,705 18,177 13,513

YoY Change (%) 119.8 133.6 28.4 -44.8 -31.1 -43.1 -15.2 -7.2 22.2 -25.7Margins (%) 48.8 43.4 44.5 34.6 34.6 35.7 36.9 38.6 42.5 36.5

E: MOSL Estimates; * Quaterly results have been recasted and hence do not tally with full year results

BuyPrevious Recommendation: Buy Rs1,140

26 June 2009BLOOMBERGSUNP IN

REUTERS CODESUN.BO

Results PreviewSECTOR: PHARMACEUTICALS

Nimish Desai (NimishDesai@MotilalOswal.com)

* Includes Para-IV upsides

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? Sun Pharma’s 1QFY10 topline is expected to de-grow by 3% to Rs9.9b due to absence of exclusivity based Pantoprazolesupplies.

? We expect the company to record negligible Pantoprazole revenues as it is unlikely to lower prices (for recordinghigher volumes) given that it is a “launch-at-risk” product.

? EBITDA Margins are expected to record 19.2% point drop to 33.3% due to absence of Pantoprazole revenues.Excluding this one-time impact we expect a minor increase in EBITDA Margins.

? While reported PAT is likely to de-grow by 31% due to absence of one-off upsides of Pantoprazole, we believe thatexcluding these one-offs, bottomline is expected to grow by 12% due to only single-digit growth in its domesticformulation business (the most profitable segment for the company).

An expanding generic portfolio coupled with change in product mix in favor of high-margin exports is likely to bring inlong-term benefits for SPIL. Its ability to sustain high growth rates at superior margins even on a high base is a clearpositive. Key drivers for future include ramp-up in US (from India facitlities), the expected value unlocking by leveragingacquired companies (Able Labs & Valeant) and monetization of the Para-IV pipeline. We have reduced our FY10E andFY11E EPS by 1% each to factor-in an appreciating currency. SPIL is currently valued at 17.5x FY10E and 15.3xFY11E core earnings. Maintain Buy.

22726 June 2009

Real Estate

Siddharth Bothra (SBothra@Motilal Oswal.com ) / Mansi Trivedi (Mansi.Trivedi@MotilalOswal.com)

Results PreviewQUARTER ENDING JUNE 2009

EXPECTED QUARTERLY PERFORMANCE SUMMARY (RS MILLION)CMP (RS) RECO SALES EBITDA NET PROFIT

26.6.09 JUN.09 VAR. VAR. JUN.09 VAR. VAR. JUN.09 VAR. VAR.% YOY % QOQ % YOY % QOQ % YOY % QOQ

Real EstateDLF 326 Buy 14,062 -63.1 25.3 8,824 -62.4 470.8 6,441 -65.4 305.0Unitech 82 Neutral 5,234 -49.3 18.6 2,539 -58.3 14.8 1,105 -73.9 70.1Sector Aggregate 19,296 -60.2 23.4 11,362 -61.5 202.5 7,546 -67.0 236.9

COMPANY NAMEDLF

Unitech

Expect better financial performance in 1QFY10 than 4QFY09We expect the financial performance of most real estate (RE) companies to be better than4QFY09, largely backed by the recovery in the affordable residential segment. However,the financial performance would continue to be lower on a YoY basis. There has been aspurt in RE activity in the last 3-4 months, with (i) increase in number of launches (largelyaffordable housing projects), and (ii) high sales volumes (60-80% of the newly launchedprojects have already been sold).

However, we believe that maintaining the current sales momentum would be a mammothtask, considering the historical volumes of key RE companies. The recovery is confined tothe affordable residential segment and RE companies will need contributions from otherverticals such as commercial office, retail and premium housing projects, as well. If recoveryin these verticals is slow or absent in FY10-11, the cash flows of RE companies wouldremain strained.

4QFY09 WAS THE WORST QUARTER FOR RE COMPANESREVENUES DECLINE YOY OWING TO WEAK RE ENVIRONMENT (%)

*Estimates Source: Company/MOSL

During 4QFY09, revenues forkey RE companies declinedby ~67% YoY owing to low

sales volumes and reductionin sales realizations

BSE Sensex: 14,765 S&P CNX: 4,376 26 June 2009

-99

-74 -70-63 -62

-56-48

-120

-90

-60

-30

0

IBR

EL

DLF

Sob

ha

HD

IL

Uni

tech

*

Pur

avan

kara

Mah

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22826 June 2009

Real Estate

4QFY09 PAT FOR KEY RE COMPANIES DECLINE BY ~82% YOY

During 4QFY09, net profitfor key RE companies

declined by ~82% YoYmainly owing to high

interest outgo

*Estimates Source: Company/MOSL

Successful recapitalization of balance sheets has reduced solvency riskKey RE companies have raised ~US$1.6b (~56% of FII inflow in YTD CY09) throughequity sale. Several others are in the queue to raise US$3.8b though QIP, largely aimed atreducing debt. While successful equity raising/easing of liquidity and pick-up of RE activityhas significantly lowered ‘solvency and business risk’, stock prices have moved up muchfaster than warranted, in our opinion.

KEY RE COMPANIES HAVE RAISED ~US$1.7B SINCE APRIL 2009ISSUE SHARE SHARE OBJECTS OF DILUTION

DATE COMPANY SIZE PRICE ISSUED THE ISSUE (USD M) (RS) (M)

17-Apr-09 Unitech 325 38.5 168 To reduce debt ~26% dilution

through QIP13-May-09 DLF Promoters 777 230 421 To reduce debtors ~9.9% Stake sale

(high outstanding by promotersfrom DAL)

18-May-09 IBREL 550 185 3 Not Clear ~56% dilutionthrough QIP

Total 1,652Source: Company/MOSL

KEY DEVELOPERS HAVE ANNOUNCED PLANS TO RAISE UP TO US$4BCOMPANY AMOUNT (USD M) OBJECT OF THE ISSUEOrbit 106 Current and new projectsPuravankara 163 Project completionOmaxe 383 To reduce debtSobha 319 To reduce debtAnant Raj 426 To reduce debtParsvnath 532 To reduce debtHDIL 600 To reduce debtUnitech (follow on)** 1,080 To reduce debtUnitech (promoter warrants) 230 To reduce debtTotal 3,839Note: ** Unitech has received approval for raising funds by issuing 1b equity shares

Source: Company/MOSL

-106-92 -91

-82 -80

24

-39

-120

-80

-40

0

40

Sob

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*

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22926 June 2009

Real Estate

Key RE companies have accelerated new launchesKey RE companies have accelerated their new launches over the last 3-4 months. Severalkey developers including DLF, Unitech, HDIL, Sobha and Parsvnath have launchedattractively-priced projects, mainly in the affordable housing vertical, to gauge buyerresponse and kick-start activity. Developers seem to have reconciled themselves with thecurrent market dynamics and no longer seem fixated about pricing and margins. The key

VALUATIONS HAVE REVERSEDP/B (X) KEY RE STOCKS' EV HAS JUMPED SIGNIFICANTLY (RS B)

PREMIUM/DISC TO NAV (%) INCREASE IN RE STOCKS WEIGHTAGE (%)

Prices as on 19 June 2009 Source: Company/MOSL

AFFORDABLE HOUSING ALONE WILL NOT MEET RECURRING CASH FLOW REQUIREMENTS (RS B)INTEREST RECURRING CASH RENTAL MIN. CASH ASP INFLOW - GROSS REQUIRED SALES COST (A) COST (B) OUTFLOW INCOME REQUIRED (RS/SF) YR 1, (30%) MARGIN SALES OF FLATS

(A+B) (C) (A+B-C) (RS/SF) ON INFLOW (MSF) (PER MONTH)#BEF. LAND

COST (45%*)Unitech 9.5 1.9 11.4 0.3 11.1 2,300 690 311 36 3,320DLF 19.6 4.7 24.3 9.3 15.0 2,300 690 311 48 4,483Sobha 2.6 1.3 3.9 0.0 3.9 1,700 510 230 17 1,578Omaxe 3.0 1.1 4.1 0.0 4.1 2,000 600 270 15 1,410Parsvnath 2.8 1.2 4.0 0.2 3.8 2,000 600 270 14 1,302HDIL 5.3 0.9 6.3 0.2 6.1 5,200 1,560 702 9 801Puravankara 0.9 0.3 1.3 0.0 1.3 1,700 510 230 6 519MLL 0.4 0.3 0.7 0.2 0.5 1,700 510 230 2 204IBREL 0.8 0.7 1.5 1.1 0.4 2,200 660 297 1 138* Assuming land cost already paid; # Average size of flats assumed to be 900sf Source: Company/MOSL

0.91.1

0.40.6 0.5 0.4

2.1

1.2 1.2 1.10.9

2.6

0.2

0.9

1.5

2.2

2.8

Uni

tech

DLF

HD

IL

Pur

avan

kara

IBR

EL

Mah

Life

Mar-09 Jun-09

260

567

46164

20 63

152

96 8024

-10

4140

85

148

-10-10

190

390

590

790

DLF(Feb09)

DLF(Jun09)

Unitech(Feb09)

Unitech(Jun09)

HDIL(Feb09)

HDIL(Jun09)

IBREL*(Feb09)

IBREL*(Jun09)

Mkt Cap Net Debt

1.5

0.3

1.82.1

0.6

2.7

0.0

0.8

1.6

2.4

3.2

Nifty (DLF) Nifty (Unitech) Nifty (RE Total)

Mar-09 Jun-09

-84-67 -65 -63 -60

-28-48

-30-12

-34-19

6

-100

-50

0

50

Mah

Life

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HD

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Uni

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EL

DLF

Mar-09 Jun-09

23026 June 2009

Real Estate

focus areas for most developers seem to be: (1) generating enough cash flows over thenext 1- 2 years to meet their near-term liabilities; and (2) remaining operationally andfinancially lean by not taking on any new capital intensive projects or aggressive bets.

Extrapolating current RE activity, a key riskThere has been a spurt in RE activity over the past 3-4 months, with (i) increase in numberof launches (largely affordable housing projects), and (ii) high sales volumes (60-80% ofthe newly launched projects have already been sold). However, we believe that maintainingthe current sales momentum would be a mammoth task, considering the historical volumesof key RE companies.

YTD LAUNCH

*Unitech as per May-09 presentation Source: Company/MOSL

Recovery confined to residential segmentThe recent recovery in the RE sector has been confined largely to the affordable housingor attractively priced city-centric projects. Several developers have altered theirdevelopment plans to focus on the high volume affordable housing segment as attractivelypriced affordable housing projects have recently garnered encouraging response fromhomebuyers, across metros. However, the premium/luxury residential segment continuesto be under pressure.

The RE sector comprises of several verticals, which follow their own cycles. Hence, onecannot look at the real estate cycle as a composite one. While the affordable housingvertical is already in a growth phase, the commercial, retail and premium housing verticalsare still in a corrective phase. The retail and premium housing verticals are most susceptibleto further price correction and could take 1-2 years to recover.

Commercial vertical continues to be under pressureThe commercial vertical continues to be in a downturn with (i) low enquiries, (ii) rentalsunder pressure, and (iii) high vacancy levels across projects. Jones Lang LaSalle Meghraj(JLLM) expects vacancy levels to increase from 12-15% currently to ~20% by the end ofCY09. According to JLLM, ~52msf supply is likely to be delivered in CY09 (~70% of thetotal projects announced for completion in CY09) across major cities in India.

2.0 2.8

9.0 9.57.8

11.3

36.0 38.0

0.0

10.0

20.0

30.0

40.0

HDIL DLF Unitech IBREL

YTD launch

Annual launch considering current runrate

Key RE companies are likely to launch ~93msf of

residential projects in FY10,considering their YTDlaunches, which seems

aggressive

23126 June 2009

Real Estate

Source: Company/MOSL

However, there is some revival in the number of enquiries for the commercial officesegment, largely led by non-IT companies. (Historically, IT/ITeS companies constituted~80% of the total commercial office demand). According to JLLM, commercial officedemand is likely to be driven by sectors like telecom, semi-conductors, autos, KPO, logisticsand warehousing. Transaction volumes from non-IT companies are likely to start pickingup in metros such as Mumbai, Delhi and Bangalore over the next 4-6 months.

Retail vertical far from recoveryThe retail vertical has witnessed maximum correction in terms of supply and absorption.JLLM expects pan India retail supply of ~15msf in CY09, of which there is visibility forabsorption of just ~7.5msf. For CY11, ~15msf of retail projects have been announced; ofthis, Bangalore accounts for ~86% or ~13msf. However, construction has not commencedat any of these announced projects. Several developers have altered their retail developmentplans to residential or mixed-use development.

JLLM expects vacancies to increase in all cities to >25% in CY09. Rentals are also likelyto be under pressure. JLLM expects rentals to correct by 25-35% in metros like Mumbaiand Delhi, and by >45% in tier-II cities like Pune and Hyderabad. The retail segment haswitnessed a shift in rental trends from fixed lease rentals to revenue sharing agreementswith retailers. Considering the bleak outlook on absorption and rentals, the retail vertical islikely to be under pressure and is far from recovery.

SHARP INCREASE IN RETAIL VACANCY LEVELS ACROSS CITIES

COMMERCIAL VACANCY LEVELS TO INCREASE TO ~20% BY END CY09

Source: Company/MOSL

0

30

60

90

120

2005 2006 2007 2008F 2009F 2010F 2011F

Sup

ply

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sf)

0

10

20

30

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Rat

e

Annual Completions Absorption Vacancy rate (%)

0

13

26

39

52

2005 2006 2007 2008F 2009F 2010F 2011F

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sf)

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15

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45

60

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Rat

e

Annual Completions Absorption Vacancy rate (%)

According to JLLM,though Bangalore has thehighest commercial office

stock of ~45msf, it is likely tooutperform other key cities in

terms of vacancy levelsowing to good pre-leasing

and affordable rentals

Rentals in tier I and tier IIare likely to be under

pressure considering thehigh existing inventory of

retail projects

23226 June 2009

Real Estate

Mortgage rates must decline another 3pp to stimulate RE demandTightened credit severely limits the ability of consumers and companies to spend even ifthey are so inclined. RBI has taken several initiatives to enhance liquidity but the impact ofliquidity easing would be evident with a lag. Though credit flow to the RE sector hasimproved considerably, mortgage disbursals remain weak. In FY09, housing loans declined29.4%, reflecting weak property sales. We believe that mortgage rates would have todrop to 7-8.5% from the existing 10.5-11.5% to start stimulating RE demand.

Upgrading NAV estimatesIn light of the improved liquidity scenario and some improvement in outlook for the sector,we have revised our NAV estimates across our RE universe by ~30%. This is mainly toaccount for the (i) reduction in WACC due to better availability of institutional finance fordevelopers, (ii) reduction in cap rates owing to sharp pullback in global REIT markets, (iii)price CAGR of 5% across projects and cities to build in an accelerated recovery in the REsector.

UPGRADING NAVS BY ~30% ACROSS OUR COVERAGE UNIVERSE CHART

Source: Company/MOSL

Revising earnings estimates upwardsIn light of accelerated pick up in the RE activity in the past 3-4months and improvedavailability of finance for developers, we are upgrading our estimates across companies inour coverage universe. We have increased our estimates to factor in (i) 5% CAGR inprices, (ii) accelerated launches by developers, (iii) lower debt on account of improvedaccess to finance. For our coverage universe, we estimate net profit to decline by 39%YoY in FY10 and to increase by 48% YoY in FY10.

57 72

205 229 248

66124

244

313 326

0

150

300

450

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DLF

HD

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Old NAV New NAV

NAV UPGRADES ACROSS OUR COVERAGE UNIVERSECOMPANY CMP RATING NAV (RS) FY11BV (RS) TP (RS) UPSIDE

(RS) OLD NEW OLD REV OLD REV OLD REV (%)DLF 331 Buy Buy 229 360 145 162 290 360 9Unitech 80 Neutral Neutral 57 83 33 49 66 83 4IBREL 199 UR UR 205 244 - 186 - - -HDIL 228 Neutral Neutral 248 326 184 190 184 244 7Mah Lifespaces 268 Buy Buy 518 518 301 283 210 388 45Puravankara 82 Buy Neutral 72 124 68 68 66 93 14Prices as on 19 June 2009 Source: Company/MOSL

23326 June 2009

Real Estate

Valuation and viewFollowing the successful balance sheet recapitalization by key RE companies, valuationshave swiftly moved from ‘distress valuations’ towards ‘going concern valuations’. Whilesolvency risk has come down significantly, business risk remains, as all RE verticals havestill not recovered. While the RE sector seems firmly entrenched on the path to recovery,we believe valuations have moved ahead of fundamentals. We recommend waiting fordips for fresh exposure to RE stocks.

We expect FY10 to be a year of consolidation, in which the industry leaders would getdifferentiated from the weaker players. We believe developers with staying power wouldutilize this consolidation phase to emerge stronger. Focus on companies with (1) highvisibility on monetization of assets over the next 3-5 years, (2) low leverage and robustfinancials, and (3) strong execution track record.

INCREASING ESTIMATES ACROSS OUR COVERAGE UNIVERSE (RS M)COMPANY CMP MKT CAP OLD EPS REVISED EPS REV. EPS GR. (%) P/E (X) P/B (X)

RS B FY10 FY11 FY10 FY11 FY10 FY11 FY10 FY11 FY10 FY11DLF 331 566.7 13.8 9.3 13.5 19.1 -49.8 41.5 24.5 17.3 2.4 2.1Unitech 80 163.7 1.2 1.8 4.3 3.5 -29.0 -19.7 18.6 23.2 3.0 2.7IBREL 199 79.8 3.9 6.8 3.1 8.8 -5.1 179.8 63.2 22.6 1.1 1.1HDIL 228 62.9 9.5 12.2 11.7 16.2 -55.2 38.0 19.4 14.1 1.3 1.2Puravankara 82 17.5 3.2 2.9 3.2 3.0 -53.2 -4.0 25.9 27.0 1.2 1.2Prices as on 19 June 2009 Source: Company/MOSL

VALUATION SUMMARYCOMPANY RATING CMP MKT CAP NAV PREM/DISC EPS (RS/SH) P/E (X) BV (RS/SH) P/B (X)  (RS/SH) (RS B) (RS/SH) TO NAV (%) FY10 FY11 FY10 FY11 FY10 FY11 FY10 FY11DLF Buy 331 567 313 6 13.5 19.1 24.5 17.3 136 154 2.4 2.1Unitech Neutral 80 164 66 21 4.3 3.5 18.6 23.2 27 30 3.0 2.7IBREL UR 199 80 244 -19 3.1 8.8 63.2 22.6 181 186 1.1 1.1HDIL Neutral 228 75 326 -30 11.7 16.2 19.4 14.1 174 190 1.3 1.2MLL Buy 269 11 518 -48 21.5 39.7 12.5 6.8 240 283 1.1 1.0Puravankara Neutral 82 18 124 -34 3.2 3.0 25.9 27.0 66 68 1.2 1.2UR: Under Review; Prices as on 19 June 2009 Source: MOSL

RE NAVS ACROSS COMPANIES (RS/SHARE)PARTICULARS DLF UNITECH IBREL HDIL MAH PURAVANKARA BOM

LIFESPACES DYEINGApartments 181 57 41 181 171 244 72Villas 22 46 0 0 0 0 0Plots/Inst Plots 49 14 0 0 0 0 0Commercial 103 51 79 133 0 9 797Hotels 12 6 0 0 0 0 0Retail 107 14 34 175 0 0 0Others 0 3 11 213 270 0 0Total 462 191 165 702 441 253 870Add: Misc 63 14 0 0 0 0 37Gross Asset Value 525 206 165 702 441 253 907Less: Tax 97 47 33 164 0 56 183Add: Cash 4 13 81 14 90 1 0Less: Debt 66 44 74 150 0 38 123Less: Land Cost 1 9 29 22 0 13 0Less: Oper. Exp & Others 42 53 14 55 0 23 74Net Asset Value 313 66 244 326 518 124 527CMP (Rs/sh) 331 80 199 228 286 82 327% Prem/Disc 6 21 -18 -30 -45 -34 -38Bombay Dyeing, Rs37 for textiles business; Prices as of 19 June 2009 Source: MOSL

23426 June 2009

Real Estate

RE SECTOR HAS OUTPERFORMED THE SENSEX SINCE APRIL 2009

RE STOCKS IN OUR COVERAGE UNIVERSE TRADE AT SUBSTANTIAL DISCOUNT TO NAV (EXCL. DLF)

RE STOCKS IN OUR COVERAGE UNIVERSE ARE TRADING AT ~1.6 X FY11 BV

Prices as on 19 June 2009 Source: Company/MOSL

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23526 June 2009

COMPARATIVE FINANCIALSCMP SALES EBITDA NP

Y/E (RS/SH) SALES GR. EBITDA GR. NP GR. NPMEND 19.6.09 (RS M) (%) (RS M) (%) (RS M) (%) (%)

DLF Mar-08 331 144.3 447.2 97.1 551.7 78.1 304.4 54.1Mar-09 100.4 -30.4 54.9 -43.5 46.3 -40.7 46.1Mar-10 58.6 -41.7 33.5 -39.0 23.2 -49.8 39.7Mar-11 74.4 27.0 46.1 37.8 32.9 41.5 44.2

Unitech Mar-08 80 41.2 25.1 22.0 20.5 16.7 27.2 40.5Mar-09 29.5 -28.4 16.8 -23.6 9.9 -40.9 33.5Mar-10 32.7 11.1 15.9 -5.5 8.8 -10.7 26.9Mar-11 28.7 -12.2 12.7 -20.2 7.1 -19.7 24.6

IBREL Mar-08 199 1.4 910.8 0.0 350.1 4.0 2,763.3 284.6Mar-09 1.3 -6.7 -0.3 1,341.2 0.9 -78.2 66.4Mar-10 1.8 38.1 -0.3 2.9 0.8 -5.0 45.7Mar-11 7.7 324.4 3.0 -1,120.6 2.3 175.9 29.7

HDIL Mar-08 272 23.8 97.7 16.9 155.6 14.1 157.3 59.2Mar-09 17.2 -27.8 7.8 -53.9 8.3 -41.1 48.3Mar-10 15.0 -12.5 6.6 -15.9 3.2 -61.1 21.5Mar-11 18.0 20.0 7.8 19.5 4.5 38.0 24.7

Mahindra Mar-08 269 2.3 6.8 0.7 112.1 0.4 271.2 19.4Lifespaces Mar-09 3.4 47.9 0.7 10.9 0.6 -1.1 18.7

Mar-10 3.9 13.2 1.5 99.9 0.9 33.4 22.6Mar-11 5.5 40.9 2.5 69.1 1.6 85.3 29.7

Puravankara Mar-08 82 5.7 35.7 2.1 55.3 2.4 85.9 42.4Mar-09 4.4 -21.4 1.3 -36.8 1.4 -39.8 32.5Mar-10 2.7 -40.4 0.7 -48.5 0.7 -53.2 25.5Mar-11 2.6 -3.4 0.7 5.1 0.6 -4.0 25.3

COMPARATIVE VALUATIONCMP EV/ DIV.

Y/E (RS/SH) EV EPS P/E EBITDA DPS YIELD ROE ROCE BV P/BVEND 19.6.09 (RS M) (RS/SH) (X) (X) (RS/SH) (%) (%) (%) (RS/SH) (X)

DLF Mar-08 331 664.9 45.8 7.2 6.8 4.0 1.2 39.7 43.0 103.2 3.2Mar-09 715.1 26.9 12.3 13.0 1.4 0.4 18.7 15.5 131.3 2.5Mar-10 668.6 13.5 24.5 20.0 0.7 0.2 8.6 7.9 144.0 2.3Mar-11 769.8 19.1 17.3 16.7 1.0 0.2 10.9 11.3 162.0 2.0

Unitech Mar-08 80 235.1 10.2 7.8 10.7 0.3 0.3 46.1 21.5 22.2 3.6Mar-09 242.5 6.1 13.2 14.4 0.1 0.1 21.5 11.6 28.3 2.8Mar-10 229.0 4.3 18.6 14.4 0.0 0.1 15.9 10.8 27.1 3.0Mar-11 223.4 3.5 23.2 17.6 0.0 0.0 11.3 8.7 30.6 2.6

IBREL Mar-08 199 35.1 15.5 12.8 - 13.5 6.8 8.9 10.3 170.6 1.2Mar-09 -32.2 3.4 58.8 113.5 7.0 3.5 1.8 2.7 177.1 1.1Mar-10 47.0 3.2 61.9 -160.9 3.0 1.5 1.1 2.5 181.3 1.1Mar-11 50.4 8.9 22.4 16.9 5.0 2.5 2.9 4.5 185.8 1.1

HDIL Mar-08 272 76.6 65.8 4.1 4.5 5.0 1.8 38.8 23.0 169.7 1.6Mar-09 89.6 26.2 10.4 11.5 2.1 0.8 16.1 9.0 162.2 1.7Mar-10 82.1 11.7 23.2 12.5 1.2 0.4 6.7 7.2 173.9 1.6Mar-11 74.2 16.2 16.8 9.5 1.6 0.6 8.5 8.7 190.1 1.4

Mahindra Mar-08 269 13.4 16.0 16.8 20.4 2.5 0.9 7.8 8.0 207.2 1.3Lifespaces Mar-09 11.5 16.1 16.7 15.9 4.0 1.5 7.2 9.2 221.0 1.2

Mar-10 11.2 21.5 12.5 7.7 3.0 1.1 8.9 12.7 239.7 1.1Mar-11 8.9 39.7 6.8 3.6 3.0 1.1 14.0 18.9 282.9 1.0

Puravankara Mar-08 82 12.7 11.2 7.3 6.1 2.0 2.4 19.8 15.0 56.8 1.4Mar-09 14.4 6.8 12.1 11.0 0.7 0.9 10.6 6.5 63.9 1.3Mar-10 13.3 3.2 25.9 19.7 0.3 0.4 4.8 3.2 66.1 1.2Mar-11 12.0 3.0 27.0 16.9 0.3 0.3 4.5 3.5 68.0 1.2

Source:MOSL

Real Estate

23626 June 2009

RELATIVE PERFORMANCE - 3 MONTH (%) RELATIVE PERFORMANCE - 1 YEAR (%)

Stock performance and valuations

STOCK PERFORMANCE (%) ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR

3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEARReal EstateDLF 85 -28 37 -30 -16 -167Unitech 125 -56 78 -58 25 -195

Real Estate

COMPARATIVE VALUATIONCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)

26.6.09 FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11EReal EstateDLF 326 Buy 26.9 13.5 19.1 12.1 24.1 17.0 12.9 19.8 13.9 18.7 8.6 10.9Unitech 82 Neutral 6.1 4.3 3.5 13.6 19.1 23.8 14.7 14.7 18.0 21.5 15.9 11.3Sector Aggregate 12.9 22.7 18.2 13.3 18.2 14.8 19.1 9.8 11.0

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23726 June 2009

Results PreviewSECTOR: REAL ESTATE

DLF

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 144,329 78,120 45.8 262.8 7.1 3.2 39.7 43.0 4.5 6.8

3/09A 100,440 46,292 26.9 -41.3 12.1 2.5 18.7 15.5 7.0 12.9

3/10E 58,593 23,246 13.5 -49.8 24.1 2.3 8.6 7.9 11.3 19.8

3/11E 74,404 32,871 19.1 41.4 17.1 2.0 10.9 11.2 8.5 13.9

Equity Shares (m) 1,714.4

52-Week Range 576/124

1,6,12 Rel. Perf. (%) -12/-40/-30

M.Cap. (Rs b) 558.1

M.Cap. (US$ b) 11.6

BuyPrevious Recommendation: Buy Rs326

26 June 2009BLOOMBERGDLFU IN

REUTERS CODEDLF.BO

Siddharth Bothra (SBothra@Motilal Oswal.com ) / Mansi Trivedi (Mansi.Trivedi@MotilalOswal.com)

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QSales 38,106 37,444 13,667 11,223 14,062 11,133 15,820 17,578 100,440 58,593

Change (%) 24.0 15.2 (62.0) (73.9) -63.1 -70.3 15.8 56.6 -30.4 -41.7Total Expenditure 14,661 15,274 5,947 9,677 5,239 5,490 6,319 8,074 45,559 25,122EBITDA 23,445 22,170 7,720 1,546 8,824 5,643 9,501 9,504 54,881 33,471

Change (%) 6.4 -2.1 -69.1 -94.4 -62.4 -74.5 23.1 514.8 -43.5 -39.0As % of Sales 61.5 59.2 56.5 13.8 62.7 50.7 60.1 54.1 54.6 57.1

Depreciation 546 505 788 516 623 567 879 765 2,355 2,834Interest 541 469 938 1,625 759 690 984 1,018 3,574 3,451Other Income 357 958 1,361 2,291 245 223 301 346 4,967 1,115PBT 22,715 22,154 7,356 1,695 7,686 4,609 7,940 8,067 53,919 28,301Tax 3,766 2,813 537 -2 1,245 760 1,548 1,502 7,115 5,056

Effective Tax Rate (%) 16.6 12.7 7.3 -0.1 16.2 16.5 19.5 18.6 13.2 17.9Reported PAT 18,949 19,341 6,818 1,697 6,441 3,848 6,392 6,565 46,804 23,245

Change (%) 24.4 -4.2 (68.1) (92.3) 45.8 34.6 40.4 37.3 -40.2 -50.3P/L of Associat./ Minority Int. 308 12 -110 -106 0 0 0 0 -513 0Adj. PAT 18,640 19,354 6,708 1,591 6,441 3,848 6,392 6,565 46,292 23,245

Change (%) 23.0 (4.1) (68.7) (92.7) (65.4) (80.1) (4.7) 312.7 (40.7) -49.8E: MOSL Estimates

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect revenues to decline by 63% YoY to Rs14b and net profit to decline by 65% YoY to Rs6.4b. We expectEBITDA margins to decline by 122bp to 62.7% owing to high contribution from the mid-income housing segment.

? During the quarter, DLF successfully launched DLF Capital Greens in West Delhi and has already sold ~2.1msf or~1,450 flats (phase-1). As DLF follows the percentage of completion method (POCM) of accounting, it is likely toaccount for 60-70% of the project revenue for the sold area in 1QFY10 itself. We expect DLF to book ~Rs9b ofrevenues in 1QFY10 on account of SRM residential project. The management plans to launch phase-2 of this projectcloser to the festive period (September-October).

? In the last few months, the management has taken proactive steps to address several non-DAL concerns by: (1)resorting to aggressive price resets to de-freeze residential sales, (2) resolving land cost outstanding issue (downfrom Rs57b to Rs3b), (3) refinancing short-term debt with longer-term debt, (4) down-sizing land bank by exitingunviable projects, and (5) lowering operational stress (~26msf of commercial and retail construction discontinued).

? We have revised our NAV estimate to Rs313/share from Rs229/share earlier to account for (i) reduction of WACCand cap rates, and (ii) 5% CAGR in real estate prices. DLF trades at 2x FY11E adjusted BV of Rs154/share.DLFfrom Under Review to Buy with a TP of Rs360 (1x FY11 NAV). Successful resolution of DAL issue is likely to leadto higher valuation multiple for DLF, as majority of the negative overhang gets over.

23826 June 2009

Results PreviewSECTOR: REAL ESTATE

Unitech

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 41,152 16,692 10.2 -36.4 8.0 3.7 46.1 21.5 5.8 10.9

3/09A 29,456 9,909 6.1 -40.4 13.5 2.9 21.6 11.6 8.3 14.6

3/10E 32,714 8,807 4.3 -29.3 19.1 3.0 15.9 10.8 7.1 14.5

3/11E 28,723 7,074 3.5 -19.7 23.8 2.7 11.3 8.7 7.9 17.7

Equity Shares (m) 2,041.2

52-Week Range 192/22

1,6,12 Rel. Perf. (%) 4/70/-58

M.Cap. (Rs b) 168.1

M.Cap. (US$ b) 3.5

NeutralPrevious Recommendation: Neutral Rs82

26 June 2009BLOOMBERGUT IN

REUTERS CODEUNTE.BO

Siddharth Bothra (SBothra@Motilal Oswal.com ) / Mansi Trivedi (Mansi.Trivedi@MotilalOswal.com)

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QSales 10,317 9,831 4,894 4,414 5,234 6,543 9,487 11,450 29,456 32,714

Change (%) 19.2 -3.0 -57.1 -61.9 -49.3 -33.4 93.9 159.4 -28.9 11.1Total Expenditure 4,233 3,739 2,451 2,204 2,696 3,566 4,857 5,693 12,626 16,812EBITDA 6,084 6,092 2,443 2,210 2,539 2,977 4,630 5,757 16,829 15,902

Change (%) 21.5 20.2 -66.7 -54.1 -58.3 -51.1 89.5 160.4 -24.5 -5.5As of % Sales 59.0 62.0 49.9 50.1 48.5 45.5 48.8 50.3 57.1 48.6

Depreciation 68 38 53 74 58 53 61 70 233 243Interest 1,079 1,341 967 1,325 1,211 1,236 1,314 1,391 4,712 5,152Other Income 227 184 176 24 112 117 139 165 611 533Extra-ordinary Income -4 0 -20 0 0 0 0 0 -4 0PBT 5,160 4,896 1,579 836 1,382 1,804 3,394 4,461 12,495 11,040Tax 927 1,300 219 187 276 334 688 935 2,632 2,232

Effective Tax Rate (%) 18.0 26.5 13.9 22.3 20.0 18.5 20.3 21.0 21.1 20.2Reported PAT 4,233 3,597 1,361 650 1,105 1,470 2,706 3,526 9,863 8,808Adj PAT 4,233 3,589 1,380 650 1,105 1,470 2,706 3,526 9,867 8,808

Change (%) 15.3 -12.5 -73.6 -82.0 -73.9 -59.0 96.1 442.7 -40.6 -10.7E: MOSL Estimates

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect Unitech’s revenue to decline by 49% YoY to Rs5.2b and net profit to decline by 74% YoY to Rs1.1b. Weexpect EBITDA margins to decrease by 1,050bp to 48.5%.

? During the quarter, Unitech raised US$325m through a fresh issue of 420m equity shares to qualified institutionalinvestors at Rs38.5/share. Post the QIP issue, Unitech’s debt has declined significantly from 1.9x in 4QFY09E to1.1x in 1QFY10E and liquidity has improved. If Unitech manages to successfully implement its asset sale and PEinfusion plan in FY10, its leverage is likely to decline further.

? Unitech plans to launch ~30msf of new projects, largely in the affordable housing vertical, and is confident of selling~20msf during FY10 itself. Since March 2009, it has already launched 14msf of projects in Gurgaon, Chennai,Mohali, Kolkata and Mumbai, and has already sold ~3.2msf.

? Unitech had debt repayment obligation of ~Rs25b in the beginning of FY10. It has already re-paid Rs2b-3b of debtobligations and hopes to repay ~Rs17b of debt obligations during FY10, primarily through inflows from asset sale andPE funding. It is in talks to restructure the remaining Rs5b-7b of debt.

? We have upgraded our NAV estimate to Rs66/share from Rs57/share, to account for (i) reduction of WACC and caprates, and (ii) 5% CAGR in real estate prices. However, even post the successful QIP issue, Unitech has notmanaged to come out of the woods yet, as it is still dependent on asset sales and PE inflow to meet its FY10 outflowobligations. The stock trades at 2.7x FY11E adjusted BV of Rs30/share.Maintain Neutral.

23926 June 2009

Retailing

COMPANY NAMEPantaloon Retail

Titan Industries

EXPECTED QUARTERLY PERFORMANCE SUMMARY (RS MILLION)CMP (RS) RECO SALES EBITDA NET PROFIT

26.6.09 JUN.09 VAR. VAR. JUN.09 VAR. VAR. JUN.09 VAR. VAR.% YOY % QOQ % YOY % QOQ % YOY % QOQ

RetailingPantaloon Retail 323 Buy 17,055 23.5 3.9 1,708 21.0 -1.3 322 -1.2 -6.5Titan Industries 1,138 Neutral 9,100 12.3 3.3 610 8.8 -1.9 342 6.1 -22.4Sector Aggregate 26,155 19.3 3.7 2,318 17.5 -1.5 664 2.5 -15.4

Retailers see better same-store sales growth as consumption sentimentimproves…Major retailers have seen gradual increase in same-store sales growth in the last coupleof months on account of rising footfalls and consumer spending. There has been a definiteimprovement in consumption sentiment in metros, which would reflect in 1QFY10 results.We note that revival in lifestyle retailing would lag value retailing on account of a consumertilt towards value-for-money purchases.

… instilling confidence in companies as they scout for alternative sourcesof capitalBetter visibility of sales seems to have instilled confidence among retailers, as they aremore certain of achieving the requisite sales/sf in their new stores. We expect companiesto ramp up their expansion plans in the coming quarters, as low lease rentals and industryconsolidation offers opportunity to garner higher share of consumer wallet. De-freezingof capital flows and improvement in capital markets would prompt retailers to raiseequity funds due to lack of internal cash generation.

Parliamentary standing committee on FDI in retail recommends a blanketbanExpectations of relaxation in FDI on retail received a setback from the parliamentarystanding committee formed by the government to study the implications of organizedretail on general trade. It has recommended (1) blanket ban on the entry of foreign aswell as domestic players in categories like grocery, fruits and vegetables, and (2) prohibitionof issue of fresh licenses for the cash-and-carry store format. The recommendationswill be debated in the parliament before any implementation.

India re-instated as ‘most attractive retail destination’In its report, AT Kearney has hailed India as the most attractive retail destination in theworld. The report highlighted the improving viability of organized retail on account of40% decline in lease rentals in tier-II and tier-III cities. This would result in increasedinterest of global retailers to expand operations in India; domestic retailers would find iteasier to raise resources for expansion. We retain Pantaloon Retail as our top pick in thesector.

Amnish Aggarwal (AmnishAggarwal@MotilalOswal.com)/Amit Purohit (AmitPurohit@MotilalOswal.com)/Nikhil Kumar(Nikhil.N@MotilalOswal.com)

Results PreviewQUARTER ENDING JUNE 2009

BSE Sensex: 14,765 S&P CNX: 4,376 26 June 2009

24026 June 2009

Retailing

Retailers see better same-store sales growth as consumption sentimentimproves…Major retailers have seen gradual increase in same-store sales growth in the last couple ofmonths on account of rising footfalls and consumer spending. There has been a definiteimprovement in consumption sentiment in metros, which would reflect in 1QFY10 results.We note that revival in lifestyle retailing would lag value retailing on account of a consumertilt towards value-for-money purchases.

Retailing companies on their part have initiated several measures to boost sagging salesgrowth. Pantaloon, for instance, has reduced prices in its lifestyle segment by 10-15% andhas increased promotional budget, especially in the value retailing segment. Lifestyle, whichfocused predominantly on brands, has launched attractively priced private labels in itsapparel section. Retailers have been wooing customers by offering attractive discountsand promotional offers ahead of the monsoon season discounts, which usually begin inJuly/August.

PANTALOON: SAME-STORE SALES GROWTH INCHING UP

Source: Company/MOSL

Monthly sales numbers reported by Pantaloon Retail indicated significant improvement inperformance – in May 2009, same-store sales grew 8.15% YoY in value retailing (7% inApril 2009) and 8.35% YoY in lifestyle retailing (6% in April 2009), indicating steadyimprovement in consumer sentiment. May was the fourth consecutive month of risingtrend in same-store sales growth. We believe performance would improve from hereon,with same-store sales growth likely to enter double digits in the coming months.

… instilling confidence in companies as they scout for alternative sourcesof capitalBetter visibility of sales seems to have instilled confidence among retailers, as they aremore certain of achieving the requisite sales/sf in their new stores. We expect companiesto ramp up their expansion plans in the coming quarters, as low lease rentals and industryconsolidation offers opportunity to garner higher share of consumer wallet. De-freezing ofcapital flows and improvement in capital markets would prompt retailers to raise equityfunds due to lack of internal cash generation.

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24126 June 2009

Retailing

Pantaloon Retail has approvals for raising funds through various sources:? Preferential issue of 15.1m equity shares at Rs183/share amounting to Rs2.76b to

promoters/part of the promoter group, and private investor not forming part of thepromoter group, approved by shareholders in the EGM.

? The board approved fund raising of additional Rs10b through further issuance of equity-based securities to various investors by various means including public/private offeringsand/or qualified institutional placement.

We expect similar initiatives from listed retailers like Vishal Retail, Shoppers Stop, etc.Unlisted players like Aditya Birla Retail are also likely to rope in financial investors. Webelieve incumbents would be better placed to raise funds, as they have established formats,certain minimum stores and have significantly cut excess flab in the last couple of years.We believe that ability to raise funds would be a key determinant in deciding leadershipstatus in the coming years.

Parliamentary standing committee on FDI in retail recommends a blanketbanExpectations on relaxation in FDI on retail received a setback from the parliamentarystanding committee formed by the government to study the implications of organized retailon general trade. In its report titled “Foreign and Domestic Investment in Retail Sector”,the committee has recommended the following:? Blanket ban should be imposed on domestic corporate heavyweights and foreign

retailers from entering into retail trade in grocery, fruits and vegetables.? Government should stop issuing further licenses for ‘cash and carry’ either to the

transnational retailers or to a combination of transnational retailers and the Indianpartner, as it is a mere camouflage for doing retail through back-door.

The proposals are in sharp contrast to the ICRIER panel study, which had supportedorganized retail in the country.

India re-instated as ‘most attractive retail destination’India has been re-instated as the most attractive retail destination, after slipping to thethird position last year. In its report, AT Kearney has highlighted the improving viability oforganized retail on account of 40% decline in lease rentals in tier-II and tier-III cities. Webelieve this would draw global retailers to India, given the potential offered by thedemography and rising per capita income.

Wal-Mart has already opened its first cash-and-carry store in Amritsar in JV with BhartiGroup. Tesco has formed an alliance with Tata Trent, while Carrefour has time and againshown interest in having presence in India. We believe, given the uniqueness of Indianmarkets, foreign retailers would choose to enter in alliance with a local partner.

We believe that Pantaloon Retail is best placed in the listed space to capitalize on thegrowth opportunity due to established formats and scale of operations. We retain Pantaloonas our top pick in this segment.

24226 June 2009

Retailing

RELATIVE PERFORMANCE - 3 MONTH (%) RELATIVE PERFORMANCE - 1 YEAR (%)

Stock performance and valuations

STOCK PERFORMANCE (%) ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR

3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEARRetailingPantaloon Retail 100 -9 53 -11 22 -12Titan Industries 47 8 -1 6 -32 5

COMPARATIVE VALUATIONCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)

26.6.09 FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10 FY11ERetailingPantaloon Retail 323 Buy 7.8 9.7 12.3 41.6 33.4 26.4 10.8 9.8 8.8 6.9 7.7 8.9Titan Industries 1,138 Neutral 46.3 51.3 64.2 24.6 22.2 17.7 15.9 13.8 11.1 37.5 31.4 30.5Sector Aggregate 30.6 25.4 20.0 12.5 11.1 9.6 13.6 13.2 14.5

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24326 June 2009

BuyPrevious Recommendation: Buy Rs323

Results PreviewSECTOR: RETAILING

BLOOMBERGPF IN

REUTERS CODEPART.BO

Pantaloon Retail

26 June 2009

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

06/08A 50,489 1,259 7.9 90.0 40.9 2.7 6.8 9.3 1.4 15.0

06/09E 63,845 1,362 7.8 -1.6 41.6 2.8 6.9 11.4 1.1 10.5

06/10E 74,154 1,842 9.7 24.5 33.4 2.5 7.7 11.6 0.9 9.5

06/11E 87,242 2,395 12.3 26.7 26.4 2.3 8.9 11.7 0.8 8.5

Equity Shares (m) 175.2

52-Week Range (Rs) 379/105

1,6,12 Rel. Perf. (%) -1/0/-11

M.Cap. (Rs b) 56.6

M.Cap. (US$ b) 1.2

QUARTERLY PERFORMANCE (RS MILLION)Y/E JUNE FY08 FY09 FY08 FY09E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QENet Sales 10,864 12,268 13,543 13,814 15,112 15,257 16,421 17,055 50,489 63,845

YoY Change (%) 80.1 63.0 57.3 35.5 39.1 24.4 21.2 23.5 56.0 26.5Total Exp 9,908 11,171 12,402 12,402 13,563 13,684 14,691 15,347 45,884 57,285EBITDA 956 1,096 1,141 1,412 1,549 1,573 1,730 1,708 4,605 6,560

Growth % 130 92 89 149 62 44 51.6 21 114 42Margins (%) 8.8 8.9 8.4 10.2 10.2 10.3 10.5 10.0 9.1 10.3

Depreciation 153 204 223 254 319 325 369 374 834 1,387Interest 352 418 429 655 684 742 847 859 1,853 3,132Other Income 7 13 17 1 12 15 16 12 38 55PBT 459 487 506 504 557 522 530 486 1,956 2,096Tax 162 171 185 178 196 187 186 165 697 734

Rate (%) 35.3 35.1 36.6 35.4 33.5 35.8 35.0 33.9 35.6 35.0Adjusted PAT 297 317 321 325 362 335 344 322 1,259 1,362

YoY Change (%) 82.9 65.3 71.5 369.1 21.8 6.0 7.1 -1.2 106.2 8.2Reported PAT 297 317 321 325 362 335 344 322 1,259 1,362E: MOSL Estimates

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect Pantaloon’s revenues to grow 23.5% YoY to Rs17b, with value retailing driving growth during the quarter.Sales growth would be higher than 3QFY09 as same-store sales growth has been firming up for the past threemonths.

? We expect EBITDA margins to decline 20bp to 10% (high base effect) and EBITDA to grow 21% YoY to Rs1.7b.

? High financial leverage and the resultant interest outgo (Rs859m in 4QFY09) would result in adjusted PAT decline of1.2% to Rs322m.

? Retail space additions in FY09 have been muted (at 1.8msf till May 2009) on account of financial constraints andslackening consumption sentiment. However, we believe the recent revival in same-store sales growth and capitalinfusion of Rs3.8b (by promoters / private placement) would enable faster store rollout in the coming months.

? The stock is trades at 33.4x FY10E EPS of Rs9.7 and 26.4x FY11E EPS of Rs12.3. We maintain Buy.

Amnish Aggarwal (AmnishAggarwal@MotilalOswal.com)/Amit Purohit (AmitPurohit@MotilalOswal.com)/Nikhil Kumar(Nikhil.N@MotilalOswal.com)

24426 June 2009

NeutralPrevious Recommendation: Neutral Rs1,138

Results PreviewSECTOR: RETAILING

BLOOMBERGTTAN IN

REUTERS CODETITN.BO

Titan Industries

26 June 2009

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 29,937 1,483 33.4 25.5 34.1 11.5 34.0 30.7 1.7 20.6

03/09A 38,034 2,056 46.3 38.6 24.6 9.1 37.5 34.2 1.4 16.5

03/10E 42,466 2,278 51.3 10.8 22.2 6.9 31.4 33.6 1.2 14.4

03/11E 49,620 2,850 64.2 25.1 17.7 5.4 30.5 35.2 1.0 11.5

Equity Shares (m) 42.3

52-Week Range 1,316/668

1,6,12 Rel. Perf. (%) 10/-32/6

M.Cap. (Rs b) 48.1

M.Cap. (US$ b) 1.0

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 8,103 10,886 10,238 8,807 9,100 12,050 11,270 10,046 38,034 42,466

YoY Change (%) 23.2 53.0 27.6 7.1 12.3 10.7 10.1 14.1 27.0 11.7Total Exp 7,543 9,624 9,519 8,185 8,490 10,700 10,450 9,237 34,869 38,877EBITDA 561 1,261 719 622 610 1,350 820 809 3,165 3,589

Margins (%) 6.9 11.6 7.0 7.1 6.7 11.2 7.3 8.1 8.3 8.5Depreciation 77 79 79 93 85 87 92 98 327 362Interest 52 62 56 55 60 67 55 48 228 230Other Income 8 12 12 20 7 10 10 14 53 41PBT 440 1,133 596 494 472 1,206 683 677 2,662 3,038Tax 117 261 175 53 130 270 195 164 607 759

Rate (%) 26.7 23.1 29.3 10.8 27.5 22.4 28.6 24.3 22.8 25.0Adjusted PAT 322 872 421 441 342 936 488 512 2,056 2,278

YoY Change (%) 79.1 78.0 36.6 -12.7 6.1 7.4 15.8 16.2 38.6 10.8Extraordinary Income 0 0 -176 -290 0 0 0 0 -466 0Reported PAT 322 872 245 150 342 936 488 512 1,590 2,278E: MOSL Estimates

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect Titan to clock revenues of Rs9.1b in 1QFY10, a growth of 12.3% YoY. EBITDA margins are likely todecline 20bp due to overheads on new stores and decline in same-store jewelry sales.

? We expect low double-digit sales growth in the watch business on account of base effect (2% in 1QFY09). Titan andFastrack are likely to report strong growth while Sonata de-stocking would continue to impact primary sales.

? Jewelry sales would grow in teens, led by 20-25% higher gold prices. Sales volumes would decline YoY although theextent of decline would be lower than the 9% volume decline in 4QFY09. Improvement in consumer sentiment andstability in gold prices holds the key to volume growth in the coming quarters.

? Titan Eye+ is performing in line with expectations. The company has added three stores during the quarter, taking thetotal to 73. The management has guided addition of just 15-20 stores in FY10.

? The stock is currently trading at 22.2x FY10E EPS of Rs51.3 and 17.7x FY11E EPS of Rs64.2. We maintainNeutral.

Amnish Aggarwal (AmnishAggarwal@MotilalOswal.com)/Amit Purohit (AmitPurohit@MotilalOswal.com)/Nikhil Kumar(Nikhil.N@MotilalOswal.com)

24526 June 2009

Telecom

COMPANY NAMEBharti Airtel

Idea Cellular

Reliance Communication

EXPECTED QUARTERLY PERFORMANCE SUMMARY (RS MILLION)CMP (RS) RECO SALES EBITDA NET PROFIT

26.6.09 JUN.09 VAR. VAR. JUN.09 VAR. VAR. JUN.09 VAR. VAR.% YOY % QOQ % YOY % QOQ % YOY % QOQ

TelecomBharti Airtel 810 Buy 101,604 19.8 3.4 42,658 21.1 6.6 25,761 27.2 15.0Idea Cellular 80 Neutral 30,746 41.2 4.7 8,798 22.1 8.5 3,071 16.7 12.0Reliance Comm 312 Buy 64,298 20.8 5.0 25,892 15.1 8.6 11,536 -29.6 -15.2Sector Aggregate 196,648 23.0 4.1 77,348 19.1 7.5 40,368 2.8 4.2

1QFY10 likely to be a balanced quarter: 1QFY10 is likely to be a balanced quarterfor the Indian wireless sector. Subscriber growth remains buoyant, with monthly netadditions of 11-12m wireless subscribers per month. While there was a significant jumpin net additions run-rate in 4QFY09 led by specific promotional schemes and year endadjustments, subscriber additions have pulled back to more normalized levels in 1QFY10.Bharti, Idea, and RCom are expected to report average QoQ subscriber growth of 9-14% and EOP subscriber growth of 9-10%. There were no significant headline tariffcuts during the quarter – negative surprise on RPM is unlikely. We expect modest QoQdecline in MOU, resulting in QoQ wireless traffic growth of 10-16% for the listed majors.

Reported revenue growth to be dragged by MTC cut: Effective from April 2009,termination charge has been cut from Rs0.3/min to Rs0.2/min. This will impact reportedwireless revenues by 4-5% but will have modest impact on EBITDA, as terminationcharges are pass-through in nature. We expect reported revenue growth of 3-5% QoQ.

QoQ margin expansion led by termination cut impact and stable core RPM: Weexpect EBITDA margin to expand by 100-135bp QoQ, led by impact of MTC cut andrelatively stable core RPM. We expect EBITDA growth of 7-9% QoQ, driven by strongwireless traffic growth.

Forex gains likely for Bharti/RCom, led by INR appreciation: INR appreciationduring the quarter is likely to result in forex gain for Bharti. Our 1QFY10 earningsestimate factors in a derivative gain of Rs2.5b for Bharti. During 4QFY09, RComannounced that it would be following AS-11 from the current quarter. This could lead toforex gain for RCom as well; however, we have not factored any forex gain in our1QFY10 estimates for RCom.

Idea earnings upgraded on higher margin for established circles; factor in 41%consolidation for Spice v/s 100% earlier: We are upgrading our FY10 EBITDAestimate for Idea by 3.5%, as we expect higher established circle margins. Peak capex

Results PreviewQUARTER ENDING JUNE 2009

Shobhit Khare (Shobhit.Khare@MotilalOswal.com)

BSE Sensex: 14,765 S&P CNX: 4,376 26 June 2009

24626 June 2009

Telecom

in established circles is over in FY09; lower decline in RPM and operating leverage arelikely to support margins. Our revised numbers are based on 41% consolidation for Spicev/s full consolidation assumed earlier, as the merger process is yet to be completed (likelyby 3QFY10).

3G auctions due in 2HCY09; aggressive bidding unlikely: Auction of spectrum for3G services has been earmarked as a priority area by the new government and is expectedto take place during 2HCY09. Keeping in view the lead time of 6-9 months for rollouts,winning bidders are likely to launch 3G services in FY11. The state-owned operators –BSNL and MTNL – have already rolled out their 3G networks, as they were allocated 3Gspectrum without auctions.

We arrive at 3G spectrum valuation of Rs39b for an incumbent pan-India operator basedon: (1) IRR expectation of 15%, (2) subscriber penetration of 25% and incremental ARPUof Rs100/month on terminal basis, (3) incremental 3G rollout capex of Rs30b, terminal 3GEBITDA margin of 40%, and FCF/EBITDA ratio of 60%.

Valuations attractive; Buy Bharti, RCom: Sector valuations at 5.4-7.8x FY11E EV/EBITDA are attractive, given strong 16-25% EBITDA CAGR. We maintain Buy onBharti due to its strong incumbency advantage. Our positive outlook on RCom stems fromexpectation of operational turnaround driven by GSM expansion, and cheap valuations.We are Neutral on Idea due to lower visibility on new circle losses/NPV and fair valuations– any potential M&A is an upside risk.

GSM SUBSCRIBER BASE AND NET ADDITIONS (EX-RCOM) (M)

WIRELESS SUBSCRIBER BASE AND NET ADDITIONS (M)

Source: TRAI/MOSL

224 232249

259267 274

240

218211

204198192187181175168162

5.7 5.76.9

5.8 5.8 5.9 5.9 5.76.6 6.9

8.69.8

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8.57.46.9

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24726 June 2009

Telecom

1QFY10: Summary expectations

WIRELESS KPIS1QFY09 2QFY09 3QFY09 4QFY09 1QFY10E YOY (%) QOQ (%)

EOP Wireless Subs (m)Bharti 69 77 86 94 102 47 9Idea* 27 30 34 39 43 56 9RCOM 51 56 61 73 80 57 10Avg. Wireless Subs (m)Bharti 66 73 82 90 98 49 9Idea* 26 29 32 37 41 59 11RCOM 48 53 59 67 76 58 14ARPU (Rs/Month)Bharti 350 331 324 305 288 -18 -5Idea* 278 261 266 254 240 -14 -6RCOM 282 271 251 224 212 -25 -5MOU Per SubsBharti 534 526 505 485 490 -8 1Idea* 431 421 416 402 398 -8 -1RCOM 424 423 410 372 379 -11 2Revenue Per MinuteBharti 0.66 0.63 0.64 0.63 0.59 -10 -6Idea* 0.65 0.62 0.64 0.63 0.60 -7 -5RCOM 0.67 0.64 0.61 0.60 0.56 -16 -7Wireless Traffic (b minute)Bharti 105 116 124 131 144 37 10Idea* 33 36 40 44 49 47 10RCOM 61 68 72 75 87 41 16* All operational numbers for Idea are on ex-Spice basis

QUARTERLY FINANCIALS (CONSOLIDATED)1QFY09 2QFY09 3QFY09 4QFY09 1QFY10E YOY (%) QOQ (%)

Revenue (Rs b)Bharti 84.8 90.2 96.3 98.2 101.6 20 3Idea 21.8 23.0 27.3 29.4 30.7 41 5RCOM 53.2 56.4 58.5 61.2 64.3 21 5EBITDA (Rs b)Bharti 35.2 37.0 39.5 40.0 42.7 21 7Idea 7.2 6.0 6.9 8.1 8.8 23 9RCOM 22.5 23.0 23.5 23.8 25.9 15 9EBITDA Margin (%)Bharti 41.5 41.0 41.0 40.7 42.0 47bp 126bpIdea 32.9 26.2 25.5 27.6 28.6 -431bp 100bpRCOM 42.3 40.8 40.2 38.9 40.3 -201bp 135bpPAT (Rs m)Bharti 20.3 20.5 21.6 22.4 25.8 27 15Idea 2.6 1.4 2.2 2.7 3.1 17 12RCOM 16.4 16.8 14.8 13.6 11.5 -30 -15EPS (Rs)Bharti 10.7 10.8 11.4 11.8 13.6 27 15Idea 1.0 0.5 0.7 0.9 1.0 -1 12RCOM 7.9 8.1 7.2 6.6 5.6 -30 -15

Source: Company/MOSL

Sustained subscribermomentum - averagesubscriber growth of

9-14% QoQ

Forex gain ofRs2.5b for Bharti

due to INR appreciation.Assume 6% net finance

cost for RCOM (no forexgaon/loss) resulting inlikely QoQ decline in

PAT. Idea earningsupgraded on higherestablished circle

margins lower lossesfrom "Spice" - merger

now expected onlyby FY10 end

We expect 5-6%QoQ decline in ARPUled by ~4% impact oftermination cut. RPMexpected ti decline by5-7%; MOU shouldremain stable QoQ

QoQ EBITDAgrowth of 7-9%.EBITDA margin

to expand by100-135bp QoQ

24826 June 2009

Telecom

ESTIMATE CHANGE SUMMARYBHARTI RCOM IDEA

FY10E FY11E FY10E FY11E FY10E FY11EWireless Subs (m)Old 124 148 109 133 56 69Actual/New 124 148 104 128 55 69

Change (%) 0.0 0.0 -4.6 -3.7 -1.9 -1.3Wireless ARPU (Rs/Month)Old 271 247 209 198 236 218Actual/New 271 248 209 198 233 215

Change (%) 0.2 0.2 -0.1 -0.1 -0.9 -1.2Revenue (Rs b)Old 424 478 289 353 145 176Actual/New 428 479 283 342 134 171

Change (%) 0.8 0.2 -1.8 -2.9 -7.7 -3.2EBITDA (Rs b)Old 177 204 115 142 36 44Actual/New 182 207 114 139 37 44

Change (%) 2.6 1.7 -0.1 -1.8 3.5 0.5Net Profit (Rs b)Old 103.2 115.5 55.0 72.0 9.5 10.8Actual/New 104.6 119.4 53.3 67.6 10.9 11.7

Change (%) 1.4 3.4 -3.0 -6.1 15.3 9.1EPS (Rs)Old 54.4 60.9 26.6 34.9 3.0 3.3Actual/New 55.2 63.0 25.8 32.8 3.5 3.6

Change (%) 1.4 3.4 -3.0 -6.1 19.0 9.1Net Finance Cost (Rs b)Old 2.5 0.5 7.3 9.1 6.0 7.8Actual/New -0.5 -1.9 7.1 9.0 4.6 7.6

Change (%) -122.1 -487.2 -2.1 -1.3 -23.2 -3.5Tax Rate (%)Old 14 18 2 5 2 5Actual/New 14 18 2 5 6 8

Change (bp) 43 0 0 0 492 300Source: MOSL

RCOM continuesto report net financeincome despite highnet debt position. Wehave assumed a net

finance cost of 6% forFY10. For Bharti,

finance costsdecrease due toassumed forexgain from INRappreciation

in 1Q

Subscriber estimatesdowngraded for Idea and

RCom; ARPU largelyunchanged; Revenue

downgraded for Idea onlower subscriber adds

Idea FY10EBITDA upgraded by3.5% despite lower

contribution assumedfrom Spice on higher

established circlemargins

24926 June 2009

RELATIVE PERFORMANCE - 3 MONTH (%) RELATIVE PERFORMANCE - 1 YEAR (%)

Stock performance and valuations

STOCK PERFORMANCE (%) ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR

3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEARTelecomBharti Airtel 31 5 -17 3 -14 17Idea Cellular 55 -21 7 -23 11 -9Reliance Communication 85 -37 37 -39 41 -25

COMPARATIVE VALUATIONCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)

26.6.09 FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11ETelecommunicationBharti Airtel 810 Buy 44.7 55.2 63.0 18.1 14.7 12.8 10.6 8.5 7.1 31.4 28.8 25.6Idea Cellular 80 Neutral 3.0 3.5 3.6 26.3 22.6 22.3 10.0 8.3 7.4 10.4 7.6 6.9Reliance Comm 312 Buy 29.8 25.8 32.8 10.5 12.1 9.5 9.0 7.1 5.5 20.7 15.7 17.0Sector Aggregate 15.6 14.4 12.2 10.0 8.0 6.6 20.9 18.7 17.8

Telecom

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Sensex MOSt Telecom Index

25026 June 2009

Results PreviewSECTOR: TELECOM

Bharti Airtel

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 270,250 67,008 35.4 57.4 22.9 6.8 36.9 25.8 5.8 13.9

3/09A 369,615 84,699 44.7 26.4 18.1 4.9 31.4 23.8 4.3 10.6

3/10E 424,468 103,201 54.4 21.9 14.9 3.7 28.5 21.1 3.7 8.9

3/11E 477,719 115,540 60.9 12.0 13.3 3.0 25.0 19.9 3.2 7.5

Equity Shares (m) 1,895.5

52-Week Range (Rs) 990/484

1,6,12 Rel. Perf. (%) -4/-40/3

M.Cap. (Rs b) 1,535.4

M.Cap. (US$ b) 31.9

QUARTERLY PERFORMANCE (CONSOLIDATED) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QGross Revenue 84,833 90,203 96,334 98,245 101,604 105,726 108,982 111,424 369,615 427,736

YoY Growth (%) 43.7 42.3 38.3 25.6 19.8 17.2 13.1 13.4 36.8 15.7QoQ Growth (%) 8.5 6.3 6.8 2.0 3.4 4.1 3.1 2.2

Total Operating Expenses 49,612 53,210 56,884 58,231 58,946 60,818 62,531 63,802 217,937 246,097EBITDA 35,221 36,993 39,450 40,014 42,658 44,908 46,451 47,623 151,678 181,639

YoY Growth (%) 44.0 36.5 33.1 23.1 21.1 21.4 17.7 19.0 33.4 19.8QoQ Growth (%) 8.3 5.0 6.6 1.4 6.6 5.3 3.4 2.5Margin (%) 41.5 41.0 41.0 40.7 42.0 42.5 42.6 42.7 41.0 42.5

Net Finance Costs 1,832 5,741 1,904 2,136 -1,881 540 431 367 11,613 -544Non-Operating Income 470 21 -215 313 390 440 490 540 588 1,860Depreciation & Amortization 10,045 11,549 12,702 13,285 13,701 14,432 15,135 15,823 47,581 59,091Profit before Tax 23,815 19,724 24,628 24,906 31,228 30,376 31,375 31,973 93,073 124,954Income Tax Expense / (Income) 3,282 -1,247 2,558 2,022 4,903 4,253 4,393 4,476 6,615 18,024Profit/(Loss) to Min.Shareholders 282 508 478 491 565 560 579 590 1,759 2,294Reported Net Profit / (Loss) 20,251 20,463 21,592 22,393 25,761 25,563 26,403 26,907 84,699 104,634

YoY Growth (%) 34.0 26.8 25.4 20.9 27.2 24.9 22.3 20.2 26.4 23.5QoQ Growth (%) 9.3 1.0 5.5 3.7 15.0 -0.8 3.3 1.9 26.4 23.5Margin (%) 23.9 22.7 22.4 22.8 25.4 24.2 24.2 24.1 22.9 24.5

Mobile ARPU (Rs/month) 350 331 324 305 288 276 265 254 325 272QoQ Growth (%) -2.0 -5.4 -2.1 -5.9 -5.4 -4.3 -4.0 -4.0

Mobile MOU/sub/month 534 526 505 485 490 483 478 473 508 483QoQ Growth (%) 5.3 -1.5 -4.0 -4.0 1.0 -1.4 -1.0 -1.0

E: MOSL Estimates; Financials as per US GAAP

BuyPrevious Recommendation: Buy Rs810

26 June 2009BLOOMBERGBHARTI IN

REUTERS CODEBRTI.BO

Shobhit Khare (Shobhit.Khare@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect revenues to grow 20% YoY and 3% QoQ. While average subscriber growth remains strong at ~9%,reported revenues would be dragged by 4-5% negative impact of MTC cut.

? EBITDA margin is likely to expand by ~125bp QoQ on MTC cut and relatively stable tariffs.? Mobility revenues would grow 3.3% QoQ, implying an ARPU of Rs288 (decline of 5.4% QoQ). EBITDA margin for

mobile business is estimated at 33.5%, up 2bp QoQ.? Net profit is likely to grow 27.2% YoY and 15% QoQ to Rs25.8b. We have modeled for derivative gain of Rs2.5b due

to INR appreciation.? Bharti is well positioned with strong incumbency advantage and healthy balance sheet. Valuations at 13.3x FY11E

EPS and an EV of 7.5x FY11E EBITDA are well supported by expected CAGR of 17-19% in EBITDA and earningsover FY09-11. Maintain Buy.

25126 June 2009

Results PreviewSECTOR: TELECOM

Idea Cellular

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 67,374 10,424 4.0 84.4 20.4 6.0 36.4 14.7 4.0 11.8

3/09A 101,485 9,008 3.0 -23.7 26.7 1.7 10.4 7.4 2.8 10.1

3/10E 144,804 9,451 3.0 -2.2 27.3 1.4 6.0 4.9 2.3 9.3

3/11E 176,186 10,766 3.3 10.4 24.7 1.4 5.8 5.0 2.0 7.8

Equity Shares (m) 3,100.1

52-Week Range (Rs) 106/34

1,6,12 Rel. Perf. (%) 5/6/-23

M.Cap. (Rs b) 249.9

M.Cap. (US$ b) 5.2

NeutralPrevious Recommendation: Neutral Rs80

26 June 2009BLOOMBERGIDEA IN

REUTERS CODEIDEA.BO

QUARTERLY PERFORMANCE (CONSOLIDATED) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QGross Revenue 21,781 23,037 27,311 29,356 30,746 32,547 34,344 36,081 101,485 133,719

YoY Growth (%) 47.4 47.3 59.7 47.9 41.2 41.3 25.8 22.9 50.6 31.8QoQ Growth (%) 9.7 5.8 18.6 7.5 4.7 5.9 5.5 5.1

EBITDA 7,203 6,068 6,974 8,108 8,798 8,867 9,424 9,878 28,353 36,968YoY Growth (%) 40.2 18.3 22.5 20.4 22.1 46.1 35.1 21.8 24.9 30.4QoQ Growth (%) 6.9 -15.8 14.9 16.3 8.5 0.8 6.3 4.8Margin (%) 33.1 26.3 25.5 27.6 28.6 27.2 27.4 27.4 27.9 27.6

Net Finance Costs 1,526 1,497 874 1,046 929 1,081 1,230 1,350 4,943 4,590Depreciation & Amortisation 2,749 3,032 3,937 4,321 4,703 5,026 5,350 5,654 14,039 20,732Profit before Tax 2,928 1,540 2,163 2,741 3,166 2,762 2,844 2,874 9,371 11,645Income Tax Expense / (Income) 297 99 -31 -2 95 138 228 287 363 748Adjusted Net Profit / (Loss) 2,631 1,441 2,194 2,743 3,071 2,624 2,617 2,587 9,008 10,897

YoY Growth (%) -14.7 -34.6 -7.3 -0.9 16.7 82.1 19.2 -5.7 -13.6 21.0QoQ Growth (%) -4.9 -45.2 52.3 25.0 12.0 -14.6 -0.3 -1.1Margin (%) 12.1 6.3 8.0 9.3 10.0 8.1 7.6 7.2 8.9 8.1

Mobile ARPU (Rs/month) 278 261 266 254 240 233 226 219 264 233QoQ Growth (%) -3.1 -6.1 1.9 -4.5 -5.6 -2.7 -2.9 -3.4

Mobile MOU/sub/month 431 421 416 402 394 388 382 376 418 382QoQ Growth (%) 4.9 -2.3 -1.2 -3.4 -2.0 -1.5 -1.5 -1.5

E: MOSL Estimates

Shobhit Khare (Shobhit.Khare@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect revenues to grow 41.2% YoY and 4.7% QoQ. ARPU (ex-Spice) is likely to decline 5.6% QoQ, impactedby MTC cut.

? EBITDA margin is likely to expand ~100bp QoQ to 28.6%. We expect margins in established circles to expand QoQ;the full impact would be offset by continued (though lower) EBITDA losses in Mumbai and Bihar, and additionallosses from Orissa/Tamil Nadu launches in 1QFY10.

? Net profit is likely to grow by 16.7% YoY and 12% QoQ.

? Idea trades at 24.7x FY11E EPS and an EV of 7.8x FY11E EBITDA. We are Neutral, due to lower visibility on newcircle losses/NPV and fair valuations – any potential M&A is an upside risk.

25226 June 2009

Results PreviewSECTOR: TELECOM

Reliance Communication

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 190,679 55,095 26.7 71.0 11.7 2.3 22.7 12.0 3.87 9.0

3/09A 229,410 61,552 29.8 11.7 10.5 2.1 20.7 10.0 3.60 8.9

3/10E 288,705 54,961 26.6 -10.7 11.7 1.8 16.2 9.7 2.8 7.1

3/11E 352,552 71,980 34.9 31.0 8.9 1.5 18.1 12.1 2.2 5.4

Equity Shares (m) 2,063.0

52-Week Range (Rs) 541/131

1,6,12 Rel. Perf. (%) -2/-6/-39

M.Cap. (Rs b) 629.5

M.Cap. (US$ b) 13.4

BuyPrevious Recommendation: Buy Rs312

26 June 2009BLOOMBERGRCOM IN

REUTERS CODERLCM.BO

QUARTERLY PERFORMANCE (CONSOLIDATED) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QGross Revenue 53,223 56,449 58,502 61,237 64,298 68,519 72,981 77,642 229,411 283,440

YoY Growth (%) 23.7 23.3 20.0 15.3 20.8 21.4 24.7 26.8 20.3 23.6QoQ Growth (%) 0.2 6.1 3.6 4.7 5.0 6.6 6.5 6.4

EBITDA 22,501 23,016 23,525 23,832 25,892 27,632 29,477 31,411 92,875 114,412YoY Growth (%) 24.0 17.3 11.7 2.9 15.1 20.1 25.3 31.8 13.3 23.2QoQ Growth (%) -2.9 2.3 2.2 1.3 8.6 6.7 6.7 6.6Margin (%) 42.3 40.8 40.2 38.9 40.3 40.3 40.4 40.5 40.5 40.4

Net Finance Costs -2,340 -2,353 -1,496 -1,678 1,844 1,790 1,766 1,738 -7,867 7,138Depreciation & Amortization 8,638 9,180 10,069 11,426 12,277 12,892 13,532 14,194 39,313 52,895Profit before Tax 16,203 16,189 14,952 14,084 11,771 12,950 14,179 15,478 61,429 54,379Income Tax Expense / (Income) -194 -567 153 485 235 259 284 310 -123 1,088Adjusted Net Profit / (Loss) 16,397 16,756 14,799 13,599 11,536 12,691 13,896 15,169 61,552 53,291

YoY Growth (%) 34.5 26.1 6.1 -13.2 -29.6 -24.3 -6.1 11.5 11.7 -13.4QoQ Growth (%) 4.7 2.2 -11.7 -8.1 -15.2 10.0 9.5 9.2Margin (%) 30.8 29.7 25.3 22.2 17.9 18.5 19.0 19.5 26.8 18.8

EO Exp/Minority Interest 1,275 1,447 697 -945 300 300 300 300 2,474 1,200Reported Net Profit / (Loss) 15,122 15,308 14,102 14,544 11,236 12,390 13,596 14,869 59,078 52,091Wireless ARPU (Rs/month) 282 271 251 224 212 211 210 209 244 209

QoQ Growth (%) -11.0 -3.9 -7.4 -10.8 -5.1 -0.6 -0.6 -0.6Wireless MOU/sub/month 424 423 410 372 379 391 403 415 389 396

QoQ Growth (%) -1.4 -0.2 -3.1 -9.3 2.0 3.0 3.0 3.0E: MOSL Estimates

Shobhit Khare (Shobhit.Khare@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect revenues to grow 21% YoY and 5% QoQ to Rs64.3b. Growth would be driven by sustained wirelessadditions (average subscribers up 16% QoQ) and follow-on recharges on the GSM subscriber momentum builtduring 4QFY09.

? We expect wireless ARPU to decline by ~5% QoQ to Rs212. While RPM is likely to decline by 7% QoQ, we expectthe MOU trend to reverse.

? EBITDA margin would expand 135bp QoQ but decline 200bp YoY. Significant volume growth, MTC cut and withdrawalof discounts would aid margins.

? Pre-minority interest net profit is likely to decline 30% YoY and 15% QoQ, primarily owing to our assumption of netfinance cost of Rs1.8b v/s net finance income in comparable quarters. However, RCom could continue to surprisepositively on the net finance cost, driven by treasury income/forex gains.

? RCom is trading at 8.9x FY11E EPS and an EV of 5.4x FY11E EBITDA. We maintain Buy – we anticipateoperational turnaround driven by GSM expansion; valuations are cheap.

25326 June 2009

Textiles

COMPANY NAMEAlok Industries

Arvind Mills

Raymond

Vardhman Textiles

Siddharth Bothra (SBothra@MotilalOswal.com)

Chinese exports drop 11% YoY during January-May 2009According to China National Garment Association (CNGA), clothing exports woulddecrease by no less than 15% in 2009 to less than US$100 billion. China’s textile andapparel exports plunged further in May, signaling that the global clothing market is farfrom bottoming out. Total textile and clothing exports declined 14.75% YoY, reflectingincreased weakness compared to 12.55% YoY fall in April.

Clothing exports were down 13.7% YoY in May compared to a decline of 11.2% YoY inApril. Textile exports dropped 16.3% YoY compared to 14.4% YoY drop in the precedingmonth. Over the January-May period, China’s textile and clothing exports finally fell11% YoY, compared with a rise of 15.4% in the same period last year. Clothing exportsdeclined 8% YoY while textile exports were down 15.5% YoY.

US apparel imports slowing downIndia’s apparel exports are slowing down in line with economic recession in its keymarkets - United States and the European Union. The rupee’s decline and some financialsupport from the government are supporting apparel sales. Labor and transport costsare not rising further in India, while raw material prices have relatively come down. Aweak rupee along with easy availability of fibers, yarns and fabrics at probably thelowest rates in the last one year will now help India’s apparel exporters to lower theirprices.

Results PreviewQUARTER ENDING JUNE 2009

EXPECTED QUARTERLY PERFORMANCE SUMMARY (RS MILLION)CMP (RS) RECO SALES EBITDA NET PROFIT

26.6.09 JUN.09 VAR. VAR. JUN.09 VAR. VAR. JUN.09 VAR. VAR.% YOY % QOQ % YOY % QOQ % YOY % QOQ

TextilesAlok Ind 22 Buy 8,101 49.1 -10.8 1,871 40.4 -22.2 251 -15.9 -64.2Arvind Mills 27 Neutral 6,030 10.6 2.8 675 23.0 19.9 -111 PL -25.8Raymond 158 Buy 3,418 45.0 -5.8 270 LP 65.9 -65 -84.2 PLVardhman Textiles 119 Buy 6,999 23.6 18.3 973 13.4 16.4 146 -53.5 -5.3Sector Aggregate 24,548 29.8 0.2 3,790 61.3 -4.5 221 9.0 -74.8

BSE Sensex: 14,765 S&P CNX: 4,376 26 June 2009

US APPAREL IMPORTS IN 2008 (%)2008 VOLUME CHANGE 2008 VALUE CHANGE

World -2.7 -3.2China -3.1 0.8India 1.7 -3.1Vietnam 20.0 19.8Bangladesh 6.3 10.9Sri Lanka -7.2 -6.8Pakistan -0.4 -0.6Hong Kong -27.9 -23.7

Source: Company/MOSL

25426 June 2009

Textiles

Threat of sanctions on China re-emergingThreats of renewed sanctions on Chinese textile exports to US have resurfaced after anintroduction of statistical monitoring of Chinese shipments into the so-called “appropriationsbill”, which was passed by the US Congress. While imposing textile quotas is now againstWTO rules, the agreement upon China’s accession to the WTO includes a “product-specific safeguard” which allows taking sanctions on imports from China until 11 December2013. The related US legislation is known as “section 421”. Although total US apparelimports are now declining in line with the economic recession, shipments from China aresurging in categories where limits have been removed from January 2009. Hence, anyaction against Chinese exports would be positive for the Indian textile industry.

Textile players shift focus from exports to domestic marketA clear trend seems to be emerging in the domestic textile industry, wherein players areshifting their focus from the export market to the domestic market. This shift in strategyhas been driven by two key factors – (1) the export market has become less attractive dueto raw material and labor cost-push and the relative competitive advantage enjoyed byneighboring countries, and (2) the domestic market has become extremely attractive onthe back of rising per capita income and emergence of organized retail. This has resultedin large companies such as Arvind, Raymond and Alok trying to forward integrate intobranding and retail.

Domestic RMG market to emerge as a big opportunityCRISIL estimates the ready-made garment (RMG) market to grow at a CAGR of 14.4%to US$50.4b in FY11 from US$25.8b in FY06. It estimates the domestic RMG market togrow at a CAGR of 12.6% to US$32b in FY11 from US$17.7b in FY06. This growth willprimarily be led by increasing income levels and a shift in consumption pattern from tailoredto readymade garments. We believe with the consolidation of retail industry in India, thedomestic RMG market would present a big opportunity for the Indian garmentmanufacturers.

Outlook and viewMost of the textile companies have expanded and modernized their capacities to achievecritical size. Consequently, due to their modern plants and global capacities, they have alsomanaged to attract large international institutional buyers with whom they now haveestablished strategic relationships. This has allowed them to move their business frombeing a transitional-based model to a strategic vendor-based relationship model. While theslowdown in the developed economies would impact export demand in the near term, weexpect the domestic demand growth to compensate for the same. Further, the sharpdepreciation in Indian rupee v/s US dollar could boost textile exports from India in the nearterm. We maintain our Neutral rating on Arvind. We remain bullish on VardhmanTextiles .

25526 June 2009

Textiles

RELATIVE PERFORMANCE - 3 MONTH (%) RELATIVE PERFORMANCE - 1 YEAR (%)

Stock performance and valuations

STOCK PERFORMANCE (%) ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR

3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEARTextilesAlok Ind 85 -50 37 -52 -21 -48Arvind 109 -25 61 -28 3 -24Raymond 109 -27 61 -29 3 -25Vardhman Textiles 153 16 106 14 48 18

COMPARATIVE VALUATIONCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)

26.6.09 FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11ETextilesAlok Ind 22 Buy 9.0 5.2 8.3 2.5 4.3 2.7 6.5 6.9 6.1 12.5 6.6 9.7Arvind Mills 27 Neutral -4.5 -1.1 0.7 -6.0 -25.3 39.0 8.3 7.2 6.4 -5.0 -1.2 0.8Raymond 158 Buy -37.2 -12.1 0.8 -4.2 -13.1 197.7 29.2 12.3 6.0 -18.1 -7.1 0.2Vardhman Textiles 119 Buy 33.2 15.7 23.5 3.6 7.6 5.1 6.8 7.8 6.3 14.8 6.4 9.0Sector Aggregate 52.4 27.0 8.3 7.9 7.7 6.2 0.9 1.7 5.2

30

55

80

105

130

Jun-08 Sep-08 Dec-08 Mar-09 Jun-09

MOSt Textiles Index Sensex

50

100

150

200

250

Mar-09 Apr-09 May-09 Jun-09

Sensex MOSt Textiles Index

25626 June 2009

Alok Industries

YEAR NET SALES PAT EPS* EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 21,593 2,519 12.7 77.5 1.8 0.3 21.6 5.7 1.8 7.4

3/09A 29,664 1,879 9.0 -25.4 2.5 0.3 12.5 7.0 1.7 6.5

3/10E 35,220 1,079 5.2 -42.6 4.3 0.3 6.6 6.1 1.6 6.9

3/11E 39,447 1,729 8.3 60.3 2.7 0.3 9.7 7.3 1.4 6.1

Equity Shares 208.9

52-Week Range 45/11

1,6,12 Rel.Per. (%) -4/-13/-52

M.Cap (Rs. b) 4.7

M.Cap (US$ b) 0.1

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QSales 5,434 6,981 8,164 9,084 8,101 8,453 9,157 9,509 29,664 35,220

Change (%) 29.7 50.2 48.2 25.3 49.1 21.1 12.2 4.7 37.4 18.7Total Expenditure 4,102 5,264 6,020 6,678 6,229 6,500 7,033 7,196 22,063 26,959EBITDA 1,333 1,718 2,144 2,406 1,871 1,953 2,124 2,313 7,601 8,261

Change (%) 31.2 58.2 59.1 33.4 40.4 13.7 -0.9 -3.8 44.7 8.7As % of Sales 23.8 24.6 26.3 26.5 23.1 23.1 23.2 24.3 25.6 23.5

Depreciation 488 531 704 754 781 815 883 917 2,476 3,397Interest 413 515 702 824 741 775 876 977 2,454 3,369Other Income 10 4 5 164 26 29 31 34 182 120Extra-ordinary 0 -31 -25 11 0 0 0 0 -82 0PBT 442 677 743 991 375 391 396 453 2,853 1,615Tax 143 224 245 279 124 130 132 150 892 536

Effective Tax Rate (%) 32.5 33.9 33.0 28.2 33.1 33.2 33.3 33.1 31.3 33.2Repoted PAT 298 422 473 712 251 261 264 303 1,879 1,079

Change (%) -45.8 -1.9 -3.0 32.5 -15.9 -38.0 -44.1 -57.4 -6.3 -42.6Adj. PAT 298 453 498 701 251 261 264 303 1,961 1,079

Change (%) 4.6 5.3 2.1 8.5 -15.9 -42.3 -46.9 -56.8 17.1 -45.0E: MOSL Estimates

BuyPrevious Recommendation: Neutral Rs22

26 June 2009BLOOMBERGALOK IN

REUTERS CODEALOK.BO

Siddharth Bothra (SBothra@MotilalOswal.com)

*Fully Diluted EPS

Results PreviewSECTOR: TEXTILES

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect revenues to grow 49.1% YoY to Rs8.1b, aided by higher capacities across all textile segments.

? EBITDA margin is likely to contract 70bp to 23.1% from 23.8% in 1QFY09.

? During the quarter, Alok raised ~Rs4b through a rights issue, which would improve its debt-equity ratio.

? The management has drawn up restructuring plans, which include creating dedicated verticals for the textile andretail businesses. It has ambitious expansion plans for its domestic retail business, which entails introducing internationalbrands in India and opening ~500 H&A retail outlets over the next three years. Post restructuring, we expect Alok toemerge as a large retail play.

? The stock trades at inexpensive valuations of 4.3x FY10E EPS of Rs5.2 and 2.7x FY11E EPS of Rs8.3. We maintainBuy.

25726 June 2009

Arvind Mills

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 22,713 274 1.3 55.6 20.9 0.3 1.5 4.4 1.1 8.4

3/09A 27,211 -994 -4.5 -463.2 -6.0 0.3 -5.0 4.6 0.9 8.2

3/10E 27,410 -237 -1.1 -76.2 -25.3 0.3 -1.2 5.7 0.9 7.2

3/11E 28,780 153 0.7 164.9 39.0 0.3 0.8 6.4 0.8 6.3

Equity Shares (m) 218.9

52-Week Range (Rs) 41/11

1,6,12 Rel.Per. (%) -6/14/-28

M.Cap (Rs b) 6.0

M.Cap (US$ b) 0.1

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QSales 5,454 5,809 5,995 5,867 6,030 6,304 7,127 7,949 23,189 27,410

Change (%) 6.9 3.0 17.7 -5.2 -10.1 18.2Total Expenditure 4,905 5,345 5,178 5,304 5,355 5,579 6,264 6,886 20,732 24,084EBITDA 549 465 817 563 675 725 862 1,062 2,568 3,325

Change (%) -23.9 -40.7 122.7 104.8 23.0 56.0 5.5 88.5 1.6 29.5As % of Sales 10.1 8.0 13.6 9.6 11.2 11.5 12.1 13.4 11.1 12.1

Depreciation 294 293 308 330 282 308 334 359 1,221 1,284Interest 322 663 772 455 532 580 629 677 2,221 2,418Other Income 73 535 -40 76 35 42 46 53 519 175Non Recurring Expense 39 -21 -24 -55 0 0 0 0 106 0PBT 44 22 -327 -199 -104 -121 -55 79 -460 -202Tax 3 6 5 5 7 8 9 11 19 35

Effective Tax Rate (%) 5.9 26.1 -1.6 -2.5 -6.7 -6.6 -16.6 13.9 -4.0 -17.4Reported PAT 41 16 -332 -204 -111 -130 -64 68 -479 -237

Change (%) -29.0 -84.4 -685.0 -480.4 -368.9 -889.8 -80.8 -133.3 -356.8 -50.6Adj. PAT 2 37 -308 -150 -111 -130 -64 68 -585 -237

Change (%) -110.2 -64.8 -574.4 -204.0 - -450.1 -79.3 -145.4 -780.4 -59.5E: MOSL Estimates, * Restated Quarterly Numbers

NeutralPrevious Recommendation: Neutral Rs27

26 June 2009BLOOMBERGARVND IN

REUTERS CODEARMI.BO

Siddharth Bothra (SBothra@MotilalOswal.com)

Results PreviewSECTOR: TEXTILES

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect Arvind Mills to record revenue growth of 3.8% YoY to Rs6b in 1QFY10, primarily driven by increase indenim realizations.

? EBITDA margin is likely to expand by 110bp YoY to 11.2%.

? We expect the company to report net loss of Rs111m in 1QFY10 v/s reported profit of Rs41m in 1QFY09.

? Arvind has covered its entire rupee exposure for FY09 at ~Rs43.75/US$. As per the Accounting Standard 30 issuedby ICAI, Arvind had unrealized losses of Rs831m till 1QFY09 on account of instruments qualifying for hedge accounting.

? We do not expect domestic demand-supply equilibrium in the denim sector to emerge in the near-to-medium term.Hence, we expect pressure on denim margins.

? Arvind is currently working on restructuring plans, which could include relocating a part of its commodity gradedenim capacity to other countries and increasing its focus on branded apparel and garment manufacturing.

? The stock trades at 0.3x FY10E book value of Rs86.9/share. We maintain Neutral.

25826 June 2009

Raymond

YEAR NET SALES PAT* EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 22,830 649 10.6 -31.6 14.9 0.7 4.5 8.0 0.6 7.3

3/09A 25,595 -2,283 -37.2 -452.0 -4.2 0.8 -18.1 -1.3 0.9 32.0

3/10E 28,037 -741 -12.1 -67.5 -13.1 0.9 -7.1 2.2 0.7 13.6

3/11E 29,795 49 0.8 -106.6 197.7 1.0 0.2 4.9 0.3 5.1

Equity Shares 61.4

52-Week Range 236/68

1,6,12 Rel.Per. (%) 11/-9/-29

M.Cap (Rs. b) 9.7

M.Cap (US$ b) 0.2

BuyPrevious Recommendation: Neutral Rs158

26 June 2009BLOOMBERGRW IN

REUTERS CODERYMD.BO

Siddharth Bothra (SBothra@MotilalOswal.com)

QUARTERLY PERFORMANCE (CONSOLIDATED) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Sales 2,357 4,337 3,589 3,629 3,418 3,729 4,040 4,350 13,792 15,537

Change (%) 12.7 25.5 8.1 -16.7 45.0 -14.0 12.6 19.9 4.3 12.7Total Expenditure 2,747 3,834 3,321 3,467 3,148 3,423 3,684 3,898 13,496 14,155EBITDA -390 502 268 163 270 306 355 452 296 1,383

Change (%) 865.3 86.0 39.0 -60.7 -169.2 -39.1 32.9 177.6 -64.6 366.5As % of Sales -16.5 11.6 7.5 4.5 7.9 8.2 8.8 10.4 4.6 8.9

Depreciation 203 206 217 262 214 223 242 251 888 930Interest 91 166 191 133 187 191 199 190 631 781Other Income 274 137 26 98 72 75 78 75 628 300Extra-ordinary Income -4 10 11 2,561 0 0 0 0 2,388 0PBT -409 257 -125 -2,695 -59 -34 -7 86 -2,982 -28Tax 7 14 17 -304 6 9 14 31 -267 60

Effective Tax Rate (%) -1.7 5.3 -13.6 11.3 -10.1 -26.7 -195.0 36.0 25.5 25.5Reported PAT -416 243 -153 -2,391 -65 -43 -22 55 -2,715 -88Adj. PAT after MI -412 234 -142 170 -65 -43 -22 55 -327 -88

Change (%) -632.6 -25.4 -243.9 -38.6 -54.1 -125.1 - -95.8 -142.7 -73.2E: MOSL Estimates

Results PreviewSECTOR: TEXTILES

* Consolidated

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect Raymond to report standalone revenue of Rs3.4b in 1QY10 v/s standalone revenue of Rs2.4b in 1QFY09.

? EBITDA for 1QFY10 is likely to be around Rs270m v/s negative EBITDA of Rs390m in 1QFY09. EBITDA marginis expected to be 7.9% in 1QFY10.

? During 4QFY09, Raymond closed down its loss-making denim operations in US and Belgium, for which it providedRs2.3b of one-time loss. The management now plans to focus only on the cost competitive Romanian and Indianoperations.

? Raymond’s decision to close down its loss-making denim operations in US and Belgium would lower the huge losses(Rs600m in FY09) it was incurring in its denim operations. Further, with the successful commissioning of Raymond’snew 7m meters worsted fabric plant at Vapi, the chances of faster monetization of its real estate (135- acre propertyin Thane) have increased significantly. We upgrade the stock from Neutral to Buy, with a price target of Rs212 (1.2xFY10E BV of Rs169).

25926 June 2009

Vardhman Textiles

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 22,947 1,225 21.2 -28.6 5.6 0.6 10.6 6.0 1.4 9.1

3/09A 29,654 1,917 33.2 56.4 3.6 0.5 14.8 6.0 1.1 6.8

3/10E 31,816 907 15.7 -52.7 7.6 0.5 6.4 5.1 1.1 7.8

3/11E 35,500 1,360 23.5 50.0 5.1 0.4 9.0 6.1 0.9 6.3

Equity Shares (m) 57.8

52-Week Range (Rs) 137/43

1,6,12 Rel.Per. (%) 7/44/14

M.Cap (Rs. b) 6.9

M.Cap (US$ b) 0.1

BuyPrevious Recommendation: Buy Rs119

26 June 2009BLOOMBERGVTEX IN

REUTERS CODEMHSP.BO

Siddharth Bothra (SBothra@MotilalOswal.com)

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QSales 5,662 6,507 6,451 5,917 6,999 7,636 8,272 8,908 24,537 31,816

Change (%) 7.3 14.9 4.7 2.1 23.6 6.9 29.7Total Expenditure 4,804 5,395 5,518 5,082 6,027 6,574 7,097 7,723 20,799 27,354EBITDA 858 1,111 933 836 973 1,061 1,175 1,252 3,738 4,461

Change (%) -4.3 25.9 -0.9 8.6 13.4 -4.5 25.9 49.8 5.4 19.4As % of Sales 12.2 17.1 14.5 14.1 13.9 13.9 14.2 14.1 15.2 14.0

Depreciation 504 525 546 498 540 551 563 596 2,073 2,250Interest 285 315 248 190 287 313 339 365 1,023 1,303Other Income 36 100 111 103 66 72 78 84 335 301Extra-ordinary items 1044 65 -74 130 0 0 0 0 775 0PBT 105 307 175 250 212 270 352 375 1,751 1,209Tax 53 113 83 96 66 73 79 85 344 302

Effective Tax Rate (%) 49.9 36.7 47.3 38.4 31.3 26.9 22.4 22.7 19.6 25.0Reported PAT 1,097 194 92 25 146 197 273 290 1,408 907Adj. PAT 314 129 166 154 146 197 273 290 633 907

Change (%) -2.8 -65.5 -58.6 9.8 -53.5 52.7 64.2 88.3 -48.4 43.3E: MOSL Estimates

Results PreviewSECTOR: TEXTILES

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? Vardhman is likely to report revenue growth of 7.6% YoY to Rs7b. We expect EBITDA margin to expand 170bp YoYto 13.9%.

? Adjusted PAT is likely to register 53.3% YoY decline to Rs146m, negatively impacted by higher cotton prices, higherdepreciation, and rising interest cost.

? Vardhman’s Rs26b capex plans have been largely completed in FY09, full utilization will start only towards the end ofFY10.

? Post the capacity expansion Vardhman’s spinning capacity has increased from ~0.5m spindles to around 0.75mspindles, while its processing fabric plant capacity has increased from 40m meters to ~80m meters.

? The stock trades at 7.6x FY10E EPS of Rs15.7 and 5.1x FY11E EPS of Rs23.5. We maintain Buy.

26026 June 2009

Utilities

COMPANY NAMECESC

NTPC

PTC India

Reliance Infrastructure

Tata Power

EXPECTED QUARTERLY PERFORMANCE SUMMARY (RS MILLION)CMP (RS) RECO SALES EBITDA NET PROFIT

26.6.09 JUN.09 VAR. VAR. JUN.09 VAR. VAR. JUN.09 VAR. VAR.% YOY % QOQ % YOY % QOQ % YOY % QOQ

UtilitiesCESC 290 Neutral 8,222 5.0 11.0 1,459 19.6 -4.0 835 1.2 -11.1NTPC 195 Neutral 106,842 12.0 -6.7 35,258 45.6 58.8 20,947 10.4 -12.3PTC India 95 Buy 13,663 13.6 16.0 70 19.0 198.1 237 25.4 36.4Reliance Infrastructure 1,264 Buy 22,445 -2.0 -6.0 2,469 -13.6 58.3 2,690 7.5 -9.1Tata Power 1,163 Neutral 18,843 -7.0 27.8 4,145 36.0 41.3 1,838 16.0 95.2Sector Aggregate 170,015 7.3 -1.3 43,401 38.2 53.7 26,548 10.3 -8.1

Satyam Agarwal (AgarwalS@MotilalOswal.com) / Nalin Bhatt (NalinBhatt@MotilalOswal.com)

Results PreviewQUARTER ENDING JUNE 2009

For 1QFY10, we expect companies in the utilities segment to report revenue growth of7.3% YoY, EBITDA growth of 38.2% YoY, and net profit de-growth of 8.1% YoY. Thegrowth in EBITDA is driven by higher tax gross up and increase in interest anddepreciation, the increase in revenue is moderate due to lower fuel cost.

Expected capacity addition of 14.5GW in FY10: For FY10, CEA has estimated totalcapacity addition of 14.5GW (v/s initial target of 15.1GW), the break-down being asfollows: central sector - 3.4GW, state sector - 5GW and private sector - 6.1GW. Duringthe period April-May 2009, total capacity addition was 1.4GW v/s the target of 922MW.Higher achievement is attributed to completion and commissioning of new as well alreadyconstructed plants awaiting gas from the KG D-6 basin. During the same period, bothbase and peak deficit declined by 190bp YoY to 8.9% and by 220bp YoY to 12.3%.

CEA expects NTPC to add 1.25GW in FY10 v/s company target of 3.3GW: CEAexpects NTPC to add three projects with cumulative capacity of 1.25GW. This includesthe 500MW Kahalgaon project, which has already commissioned. Additionally, CEAexpects 250MW Bhilai JV Project and 490MW of Dadri Project to be commissioned inFY10. This compares with management guidance of 500MW Kahalgaon, 980MW ofDadri, 1,320MW of Sipat, and 500MW Korba TPP. We have assumed that NTPC wouldcommission the 500MW Kahalgaon Project and the 500MW Korba Project in FY10.

Traction in financial closure for power sector projects: Based on the monitoredcapacity in our universe, 9.2GW of projects costing a total of Rs353b have achievedfinancial closure in FY10, comprising 5.5GW of Reliance Power, 1.1GW of GMR Energyand 2.6GW of Indiabulls Real Estate. This indicates improvement in overall liquidityscenario as also the fast track development of private sector projects. Reliance Power’sWestern Region System Strengthening Scheme (WRSS), costing Rs14b, has also beenfinancially closed in FY10.

Valuation and view: We remain neutral on the sector, given the rich valuations ofincumbents. Our top picks in the sector are Reliance Infrastructure and Tata Power.

BSE Sensex: 14,765 S&P CNX: 4,376 26 June 2009

26126 June 2009

Utilities

Expected capacity addition of 14.5GW in FY10; highest contribution fromprivate sectorFor FY10, CEA estimates total capacity addition of 14.5GW (v/s initial target of 15.1GW),the break-down being as follows: central sector - 3.4GW, state sector - 5GW and privatesector - 6.1GW. During the period April-May 2009, total capacity addition was 1.4GW v/s the target of 922MW. Higher achievement is attributed to completion and commissioningof new as well already constructed plants awaiting gas from the KG D-6 basin. The entirecapacity addition came from private sector players like GVK Power and Infrastructure(464MW), JSW Energy (300MW), Torrent Power (383MW) and VBC Ferrow (280MW).

OVER ACHIEVEMENT OF 155% IN CAPACITY ADDITION DURING APRIL-MAY 2009 (MW)MAY-09 YTDFY10 YTDFY09 TOTAL % TO

TARGET ACH. % TARGET ACH. % TARGET ACH. % CAP. TOTALThermal 583 1,127 193 883 1,427 162 520 310 60 95,152 64Hydro 39 - - 39 - 0 125 125 100 36,878 25Nuclear - - - - - - - - 0 4,120 3RES - - - - - - - - - 13,242 9Total 622 1,127 181 922 1,427 155 645 435 67 149,392 100

Source: CEA

CAPACITY ADDITION ANTICIPATED BY CEA IN FY10COMPANY PROJECT TARGET ACH. COD

CAP (MW) CAP (MW)NTPC Kahalgaon II 500 Jun-09

NCP Project St-II 490 Jan-10Bhilai TPP (SAIL JV) 250 Jun-09

CESC Budge Budge III 250 Aug-09Reliance Power Rosa TPP 300 Mar-10Torrent Power Sugen U-2 383 383 COMMD

Sugen U-3 383 Jun-09JSW Energy Torangallu U-1 300 300 COMMD

Torangallu U-2 300 Dec-09Jallippa-Kapurdi U-1 135 Jun-09Jallippa-Kapurdi U-2 135 Sep-09Jallippa-Kapurdi U-3 135 Nov-09Jallippa-Kapurdi U-4 135 Dec-09Jallippa-Kapurdi U-5 135 Feb-09

Lanco Pathadi U-1 300 Jun-09Pathadi U-2 300 Dec-09Kondapalli U-1 233 Dec-09Kondapalli U-2 133 Dec-09

Adani Power Mundra TPP U-1 330 Aug-09Mundra TPP U-2 330 Oct-09

GVKPIL Gautami GT-1 145 145 COMMDGautami GT-2 145 145 COMMDGautami ST 174 174 COMMD

Sterlite Sterlite TPP 600 Dec-09VBC Ferrow Konaseema GT-1 140 140 COMMD

Konaseema GT-2 140 140 COMMDKonaseema ST 165 Jul-09

Other Pvt Players* 400Other Central Players 2,162State Sector 4,980Total 14,507 1,427*Include Allain Duhangan (192MW), Malana-II (100MW) & Rithala CPP (108MW) Source: CEA

During YTD FY10, totalcapacity addition was1,427MW v/s target of

922MW, owing tocommercialization of gas-

based power projects

CEA expects 14.5GW ofcapacity addition in FY10,

the break-down being asfollows: central sector -

3.4GW, state sector - 5GW,and private sector - 6.1GW

26226 June 2009

NTPC, CESC, Reliance Power, Torrent Power, JSW Energy, Adani Powerand Sterlite to add 6GW of capacity in FY10Of the 14.5GW anticipated capacity addition in FY10 by CEA, the private sector wouldcontribute a total of 6.1GW – 42% of the total capacity addition. The major private sectorcontributors would be JSW Energy (1,275MW), Lanco Infra (966MW), Torrent Power(765MW), Adani Power (660MW), Sterlite (600MW), Reliance Power (300MW) andCESC (250MW). Of the 3.4GW central sector capacity addition, NTPC would add1,240MW in FY10.

CEA expects NTPC to add 1.25GW in FY10 v/s company target of 3.3GWCEA expects NTPC to add three projects with cumulative capacity of 1.25GW. Thisincludes the 500MW Kahalgaon project, which has already commissioned. Additionally,CEA expects 250MW Bhilai JV Project and 490MW of Dadri Project to be commissionedin FY10. This compares with management guidance of 500MW Kahalgaon, 980MW ofDadri, 1,320MW of Sipat, and 500MW Korba TPP. We have assumed that NTPC wouldcommission the 500MW Kahalgaon Project and the 500MW Korba Project in FY10.

NTPC: EXPECTED CAPACITY ADDITION IN FY10 (MW)PROJECT AS PER AS PER

CEA COMPANYSipat Stage-I 1,320Kahalgaon Stage -II 500 500Korba Stage -III 500NCTPP Stage -II 490 980Bhilai TPP (NTPC-SAIL JV) 250Total 1,240 3,300

Source: CEA

Traction in financial closure for power sector projectsBased on the monitored capacity in our universe, 9.2GW of projects costing a total ofRs353b have achieved financial closure in FY10, comprising 5.5GW of Reliance Power,1.1GW of GMR Energy and 2.6GW of Indiabulls Real Estate. This indicates improvementin overall liquidity scenario as also the fast track development of private sector projects.Reliance Power’s Western Region System Strengthening Scheme (WRSS), costing Rs14b,has also been financially closed in FY10.

PROJECTS FINANCIALLY CLOSED IN FY10PARTICULARS OPEARTOR CAPACITY COST DEBT EQUITY EXPECTED

(MW) (RS B) (RS B) (RS B) CODSasan UMPP Rel Power 4,000 194 146 49 FY12Rosa Stage II Rel Power 1,200 30 24 6 FY12Butibori St-1 Rel Power 300 20 16 4 FY11Kamlanga GMR Energy 1,050 45 34 11 FY13Amravati Indiabulls RE 2,640 64 52 12 FY13Total 9,190 353 271 82WRSS Rel Power 14 10 4 FY11Butibori Exp.* Rel Power 300 15 12 3 FY12Grand Total 9,490 382 293 89* Financial closure expected in June/July 2009 Source: Company/MOSL

9.19GW of power capacity costing Rs353b

achieved financial closure inApril-March 2009

Utilities

26326 June 2009

All-India YTD FY10 generation up 4.7% YoYDuring YTD FY10, all-India generation increased by 4.7% YoY to 126BU (from 120BU)and PLF remained flat at 63.4%. Coal-based generation increased by 7% YoY to 92.8BU(from 86.7BU) at a PLF of 81% (up 140bp YoY) whereas gas-based generation increasedby 7.5% YoY to 14.1BU (from 13.2BU) at PLF of 63.1% (down 120bp YoY). 

GENERATION (BU) UP 4.7% YOY IN APRIL-MAY 2009; PLF FLAT AT 63.4%MAY-09 MAY-08 YTDFY10 YTDFY09

ALL INDIA PLF GEN. PLF (%) GEN. PLF (%) GEN. PLF (%) GEN. PLF (%)Thermal-Coal & Lignite 46.1 79.2 43.9 79.3 92.8 81.0 86.7 79.6Thermal-Gas 7.1 60.8 6.6 63.7 14.1 63.1 13.2 64.3Nuclear 1.4 50.1 1.2 40.7 2.9 48.4 2.5 41.8Hydro 8.5 30.6 9.9 36.5 16.1 29.0 18.0 33.0Total* 63.1 62.8 61.7 64.3 126.0 63.4 120.3 63.4

Source: CEA

ALL INDIA BASE DEFICIT (%) ALL INDIA PEAK DEFICIT (%)

During YTD FY10, all-Indiageneration increased by 3%

YoY to 126BU, while all-India PLF stood at 63.4%

(flat YoY)

In May 2009, both base andpeak deficit declined by

210bp YoY (and 370bp QoQ)and by 120bp YoY (and 50bp

QoQ), respectively, due toincreased generation during

elections

NTPC: IMPROVEMENT IN PLF POST DECEMBER 2008 (%) GENERATION OF 37.4BU IN APRIL-MAY 2009

Source: CEA

During April-May 2009,NTPC’s generation was

37.4BU, at an average PLFof 93.3%, while net

generation increased by 8%YoY to 18.9BU in May 2009

Utilities

7%

3%

6%

9%

12%

15%

Jan

Feb

Mar

Apr

May Jun

Jul

Aug Sep Oct

Nov

Dec

CY07 CY08 CY09

12%

3%

7%

11%

15%

19%

Jan

Feb

Mar

Apr

May Jun

Jul

Aug Sep Oct

Nov

Dec

CY07 CY08 CY09

8

12

16

20

24

Jan-

07

Apr

-07

Jul-0

7

Oct

-07

Jan-

08

Apr

-08

Jul-0

8

Oct

-08

Jan-

09

Apr

-09

NTPC reported generation of 18.9BUs in May 2009, up 8% YoY as

compared to May 200894

91

84 83

8991

8890

89

84 8386 87

96

919593 9494

1009796 97

81

93

72

80

88

96

104

Apr Jun

Aug Oct

Dec

Feb

FY08 FY09 FY10

CY07 9.4%CY08 10.9%YTD CY09 10.0%

CY07 15.2%CY08 15.0%YTD CY09 12.1%

26426 June 2009

Short-term power trading prices bounce back after hitting all-time low ofRs2/unit in June 2009For the week ended 27 June 2009, short-term power tariffs were at Rs11/unit, up from alow of Rs2/unit in the week ended 6 June 2009. The spike is led by shortage of power dueto delayed monsoon.

SHORT TERM POWER TRADING PRICES (RS/UNIT)

Short-term power tariffs wereat Rs11/unit, up from a low

of Rs2/unit in the weekended 6 June 2009

Utilities

8.56.6

5.84.2

10.412.0

3.6

2.0

11.3

0.5

3.5

6.5

9.5

12.5

Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Jan-09 Feb-09 Mar-09 May-09 Jun-09

Recent volatility in short term prices due to elections

Source: Company/MOSL

26526 June 2009

Utilities

RELATIVE PERFORMANCE - 3 MONTH (%) RELATIVE PERFORMANCE - 1 YEAR (%)

Stock performance and valuations

STOCK PERFORMANCE (%) ABSOLUTE PERF REL PERF TO SENSEX REL PERF TO SECTOR

3 M 1 YEAR 3 M 1 YEAR 3 M 1 YEARUtilitiesCESC 35 -29 -13 -32 14 -50NTPC 8 25 -40 23 -13 5PTC India 40 21 -8 19 19 1Reliance Infrastructure 124 32 76 29 103 11Tata Power 49 3 1 1 28 -17

COMPARATIVE VALUATIONCMP (RS) RECO EPS (RS) P/E (X) EV/EBITDA ROE (%)

26.6.09 FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11E FY09 FY10E FY11EUtilitiesCESC 290 Neutral 29.5 28.0 30.0 9.8 10.3 9.7 7.9 7.8 7.3 12.9 11.0 10.7NTPC 195 Neutral 9.9 10.2 12.2 19.7 19.1 16.0 15.5 9.7 9.5 14.8 14.0 14.2PTC India 95 Buy 4.3 3.9 4.6 22.3 24.7 20.7 95.5 44.6 35.9 6.4 6.2 6.3Reliance Infra. 1,264 Buy 46.4 47.0 47.9 27.3 26.9 26.4 24.7 24.7 21.8 10.2 9.1 8.6Tata Power 1,163 Neutral 53.7 57.3 57.4 21.7 20.3 20.3 27.7 17.6 16.0 7.0 8.7 9.7Sector Aggregate 20.4 19.8 18.2 17.1 11.2 10.7 13.1 12.4 12.4

60

80

100

120

140

Jun-08 Sep-08 Dec-08 Mar-09 Jun-09

MOSt Utilities Index Sensex

80

100

120

140

160

Mar-09 Apr-09 May-09 Jun-09

Sensex MOSt Utilities Index

26626 June 2009

CESC

YEAR NET SALES PAT EPS* EPS* P/E* P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 27,749 3,297 26.4 -6.4 11.2 1.5 13.0 11.8 1.6 7.9

03/09A 30,310 3,685 29.5 11.8 10.0 1.4 12.9 11.8 1.6 8.0

03/10E 32,494 3,502 28.0 -5.0 10.6 1.2 11.0 10.0 1.6 7.9

03/11E 36,032 3,753 30.0 7.2 9.9 1.1 10.7 9.5 1.6 7.4

Equity Shares (m) 124.9

52-Week Range 423/165

1,6,12 Rel. Perf.(%) -26/-35/-32

M.Cap. (Rs b) 36.2

M.Cap. (US$ b) 0.8

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QSales 7,830 7,550 7,520 7,410 8,222 7,852 8,197 8,224 30,310 32,494

Change (%) 9.2 3.4 11.2 16.1 5.0 4.0 9.0 11.0 9.2 7.2EBITDA 1,220 1,870 1,510 1,520 1,459 1,649 1,721 1,837 6,120 6,666

Change (%) -6.2 32.6 -2.6 20.6 19.6 -11.8 14.0 20.8 10.7 8.9As of % Sales 15.6 24.8 20.1 20.5 17.8 21.0 21.0 22.3 20.2 20.5

Depreciation 420 430 430 420 425 430 560 612 1,700 2,027Interest 320 350 360 370 330 380 470 512 1,400 1,692Other Income 590 310 390 340 290 275 290 317 1,515 1,172PBT 1,070 1,400 1,110 1,070 994 1,114 981 1,031 4,650 4,120Tax 130 160 130 130 159 167 137 154 550 618

Effective Tax Rate (%) 12.1 11.4 11.7 12.1 16.0 15.0 14.0 15.0 11.8 15.0Reported PAT 940 1,240 980 940 835 947 844 876 4,100 3,502Adjusted PAT 825 940 980 940 835 947 844 876 3,685 3,502

Change (%) 21.3 16.0 5.4 9.3 1.2 0.7 -13.9 -6.8 11.8 -5.0E: MOSL Estimates, Standalone Numbers (excl Spencers Retail)

NeutralPrevious Recommendation: Neutral Rs290

26 June 2009BLOOMBERGCESC IN

REUTERS CODECESC.BO

* Excl Spencers; fully diluted

Results PreviewSECTOR: UTILITIES

Satyam Agarwal (AgarwalS@MotilalOswal.com) / Nalin Bhatt (NalinBhatt@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? For 1QFY10, we expect CESC to post revenue of Rs8.2b (up 5% YoY) and net profit of Rs835m (up 1% YoY).

? In FY09, Spencer Retail reported income of Rs10.7b (up 32%) with net loss before exceptional item of Rs3.7b (v/sRs1.5b in FY08). The company’s average monthly sale increased to Rs750/sf/month (up 11% YoY) for the month ofMarch 2009. This is mainly due to reduced number of stores from 371 in FY08 to 256 in FY09, with trading areadeclining from 1.145msf in FY08 to 1.13msf in FY09.

? Spencer has guided (1) reduction in monthly cash losses by Rs100m effective April 2009 from ~Rs250m/month inFY09, (2) breakeven at the store level by the end of FY10, and (3) reduction of overall losses by Rs1b in FY10.

? Progress on various projects: (1) 250MW Budge-Budge expansion likely to be commissioned by September 2009, (2)600MW Haldia Project financial closure has been delayed by 8-9 months and is now expected by August 2009;management expects to award EPC award for the project by July-August 2009.

? We expect CESC to report standalone net profit of Rs3.5b in FY10 (down 5%) and Rs3.8b in FY11 (up 7%),excluding Spencer.

26726 June 2009

National Thermal Power Corporation

YEAR NET SALES PAT* EPS* EPS P/E P/BV ROE ROCE EV/ EV/END* (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 370,910 75,688 9.0 8.0 21.7 3.1 15.0 20.8 4.3 13.9

03/09A 419,237 81,507 9.9 9.9 19.7 2.9 14.8 18.6 3.9 15.8

03/10E 485,456 84,170 10.2 3.3 19.1 2.6 14.0 26.3 3.5 9.9

03/11E 531,530 93,047 12.2 19.5 16.0 2.4 14.2 25.3 3.2 9.7

Equity Shares (m) 8,245.5

52-Week Range 233/113

1,6,12 Rel. Perf. (%) -12/-48/23

M.Cap. (Rs b) 1,607.5

M.Cap. (US$ b) 33.4

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QSales 95,395 96,614 112,771 114,458 106,842 111,106 133,069 134,439 419,237 485,456

Change (%) 6.4 20.5 20.9 6.5 12.0 15.0 18.0 17.5 8.5 15.8EBITDA 24,218 25,476 32,086 22,199 35,258 50,276 43,248 42,898 103,978 171,679

Change (%) -10.1 -7.3 8.1 -21.3 45.6 97.3 34.8 93.2 -8.9 65.1As of % Sales 28.0 26.4 28.5 19.4 33.0 45.3 32.5 31.9 24.8 35.4

Depreciation 5,524 5,267 5,590 7,264 5,950 6,200 6,400 6,788 23,645 25,338Interest 4,219 5,264 5,076 5,671 5,100 5,500 6,100 6,308 20,229 23,008Other Income 7,172 7,448 8,513 10,357 7,531 7,597 5,959 4,973 33,490 26,059PBT 21,646 22,394 29,933 19,621 31,738 46,173 36,706 34,775 93,595 149,393Tax 4,381 1,289 7,424 -1,512 10,791 16,161 12,847 12,924 11,582 52,722

Effective Tax Rate (%) 20.2 5.8 24.8 -7.7 34.0 35.0 35.0 37.2 12.4 35.3Reported PAT 17,265 21,105 22,509 21,134 20,947 30,012 23,859 21,851 82,013 96,670Adj. PAT (Pre Exceptional) 18,973 18,272 20,378 23,885 20,947 17,512 23,859 21,851 81,507 84,170

Change (%) 7.5 12.3 2.4 9.7 10.4 -4.2 17.1 -8.5 7.7 3.3E: MOSL Estimates

NeutralPrevious Recommendation: Neutral Rs195

26 June 2009BLOOMBERGNTPC IN

REUTERS CODENTPC.BO

* Pre Exceptional Earnings

Results PreviewSECTOR: UTILITIES

Satyam Agarwal (AgarwalS@MotilalOswal.com) / Nalin Bhatt (NalinBhatt@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect NTPC to report revenue of Rs106.8b (up 12% YoY) and net profit of Rs20.9b (up 10% YoY) in 1QFY10.

? During FY10, CEA expects capacity addition at 1.2GW v/s company’s target of 3.3GW, the key difference being1.3GW of Sipat Project and 500MW Korba Power Project.

? On a consolidated basis, including capex in JVs and project SPVs, NTPC’s planned capex for FY10 is Rs245b v/sactual spending of Rs152b in FY09, up 61% YoY. For NTPC, 17.9GW of projects are under construction as of March2009. Of this, for 7.2GW (40%), actual capex is less than 20% of planned capex. For another 6GW (34%), actualcapex is less than 50% of planned capex. Thus, cumulative actual capex is less than 50% of planned capex for13.2GW (74%) of capacity under implementation.

? We expect NTPC’s capacity addition at 11.5GW in FY11-12 v/s 3.7GW in FY08-10. Given the significant ramp-upin terms of capex, we expect CWIP to increase to 34% of capital employed in FY10, up from 28% in FY09.

? We expect NTPC to report net profit of Rs84.2b (up 3.3%) in FY10 and Rs93.1b (up 20%) in FY11. The stock tradesat 19.1x FY10E and 16x FY11E reported earnings. Neutral.

26826 June 2009

PTC India

YEAR NET SALES PAT* EPS* EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 38,515 489 2.3 -1.2 38.6 1.4 5.6 6.5 0.5 112.5

03/09A 65,289 972 4.3 84.9 20.9 1.3 6.4 7.1 0.2 64.7

03/10E 85,970 1,135 3.9 -9.7 23.1 1.3 6.2 7.6 0.2 40.9

03/11E 104,908 1,352 4.6 19.1 19.4 1.2 6.3 7.8 0.2 33.1

Equity Shares (m) 294.1

52-Week Range 100/43

1,6,12 Rel. Perf.(%) 2/-8/19

M.Cap. (Rs b) 28.0

M.Cap. (US$ b) 0.6

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QPower Traded (MUs) 2,687 5,159 3,497 2,182 3,036 6,191 4,896 4,599 13,525 18,722Sales 12,031 20,313 21,168 11,777 13,663 24,763 24,479 23,065 65,289 85,970

Change (%) 3.8 38.4 188.5 115.5 13.6 21.9 15.6 95.8 67.1 31.7EBITDA 59 141 27 23 70 170 122 116 250 479

Change (%) 1.1 36.1 67.0 -15.4 19.0 21.0 349.8 395.4 21.8 91.5As of % Sales 0.5 0.7 0.1 0.2 0.5 0.7 0.5 0.5 0.4 0.6

Depreciation 15 16 16 15 16 17 18 18 62 69Interest 9 8 7 2 25 30 35 42 25 132Other Income 176 281 312 193 250 330 300 261 960 1,141Extraordinary Income/(Expense) 1 0 0 -12 0 0 0 0 -12 0PBT 211 398 316 211 279 453 369 317 1,135 1,419Tax 22 59 79 55 42 68 65 52 226 226

Effective Tax Rate (%) 10.3 14.9 25.1 26.2 15.0 15.0 17.5 16.2 19.9 15.9Reported PAT 190 338 237 155 237 385 305 266 909 1,193Adjusted PAT 189 334 275 174 237 385 305 266 972 1,135

Change (%) 58.7 189.6 344.3 -9.7 25.4 15.4 10.8 53.0 98.9 16.8E: MOSL Estimates

BuyPrevious Recommendation: Buy Rs95

26 June 2009BLOOMBERGPWTC IN

REUTERS CODEPTCI.BO

* Pre-exceptional

Results PreviewSECTOR: UTILITIES

Satyam Agarwal (AgarwalS@MotilalOswal.com) / Nalin Bhatt (NalinBhatt@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? For 1QFY10, we expect PTC to report revenue of Rs13.7b (up 13.6% YoY), EBITDA of Rs70m, and net profit ofRs237m (up 25% YoY).

? We expect long and medium term power trading volumes (including international projects) to account for ~80% of thetotal trading, leading to lower volatility in core earnings. We estimate that PTC would add ~1.3GW of new projects toits long-term portfolio in FY10.

? PTC India is moving towards being an “Integrated Utility” from a “Trading Company” given its plans to launchEnergy Sector Fund, which will invest equity in projects where feasibility study is done and it has signed PPAs(~10GW of projects).

? It plans to launch the fund with a corpus of Rs20b; the recent fund raising of Rs5b will enable it to make its initialcontribution towards the fund. This will not only provide additional revenue stream from fund management (2:20structure), but will also complement its existing trading portfolio.

? Cash and cash equivalents stand at Rs20b (Rs68/share), while equity commitment towards the project SPVs stand atRs6.5b, to be invested by FY10. As at March 2009, the company has already invested Rs3.3b in various power IPPsand PTC Financial Services.

? We expect PTC to report net profit of Rs1.1b in FY10 (up 16.8%) and Rs1.4b in FY11 (up 19.1%). Buy.

26926 June 2009

Reliance Infrastructure

YEAR NET SALES PAT EPS* EPS P/E* P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

3/08A 63,642 6,831 30.4 -14.8 41.5 2.9 11.0 9.7 3.6 42.1

3/09A 98,686 10,405 46.4 52.3 27.3 2.7 10.2 9.0 2.5 23.9

3/10E 135,801 10,537 47.0 1.3 26.9 2.6 9.1 9.3 1.9 24.9

3/11E 125,983 10,739 47.9 1.9 26.4 2.4 8.6 9.0 2.6 21.6

Equity Shares (m) 224.3

52-Week Range 1,374/354

1,6,12 Rel. Perf. (%) 4/75/29

M.Cap. (Rs b) 283.6

M.Cap. (US$ b) 5.9

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QSales 22,903 24,732 27,176 23,875 22,445 24,683 26,905 24,544 98,686 98,576

Change (%) 39.8 58.2 77.5 39.2 -2.0 -0.2 -1.0 2.8 53.0 -0.1EBITDA 2,858 2,772 3,120 1,559 2,469 1,975 2,758 2,911 10,309 10,113

Change (%) 80.3 19.2 211.6 -22.9 -13.6 -28.8 -11.6 86.7 51.0 -1.9As of % Sales 12.5 11.2 11.5 6.5 11.0 8.0 10.3 11.9 10.4 10.3

Depreciation 612 620 589 627 630 650 710 774 2,449 2,764Interest 774 653 865 1,013 1,150 1,200 1,325 1,357 3,305 5,032Other Income 1,103 2,016 1,436 2,824 2,300 2,450 2,450 2,736 7,379 9,936PBT 2,575 3,515 3,101 2,743 2,989 2,575 3,173 3,517 11,934 12,253Tax (incl contingencies) 49 626 589 -719 299 386 476 554 546 1,715

Effective Tax Rate (%) 1.9 17.8 19.0 -26.2 10.0 15.0 15.0 15.8 4.6 14.0Reported PAT 2,525 2,890 2,512 3,462 2,690 2,188 2,697 2,962 11,389 10,537PAT (Pre Exceptionals) 2,502 2,122 2,823 2,958 2,690 2,188 2,697 2,962 10,405 10,537

Change (%) 12.9 -5.2 100.4 -19.1 7.5 3.1 -4.5 0.1 52.3 1.3E: MOSL Estimates; Quarterly nos. are on standalone basis

BuyPrevious Recommendation: Buy Rs1,264

26 June 2009BLOOMBERGRELE IN

REUTERS CODERLEN.BO

Results PreviewSECTOR: UTILITIES

* Consolidated, Fully Diluted

Satyam Agarwal (AgarwalS@MotilalOswal.com) / Nalin Bhatt (NalinBhatt@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? For 1QFY10, we expect Reliance Infra to report revenue of Rs22.4b (down 2% YoY) and net profit of Rs2.7b (up8% YoY).

? To maximize shareholder value and to simplify business structures, the company has announced a scheme of de-merger of (1) Dahanu TPS into Reliance Energy Ltd, (2) Goa and Samalkot power stations into Reliance Goa andSamalkot Power Ltd, (3) power transmission business into Reliance Power Transmission Ltd, (4) power distributionbusiness into Reliance Energy Ltd, (5) toll road business into Reliance InfraVentures Ltd, and (6) real estate divisioninto Reliance Property Developers Ltd. All the resulting entities will be wholly-owned subsidiaries.

? Project updates: (1) Of the five road projects, construction (4-laning) is complete on two projects and approval ofNHAI is sought to commence toll collection. Thus, the roads will be under commercial operation by June 2009, whilethree projects are expected to commence in 2QFY11. (2) Financial closure completed for Mumbai and Delhi metroprojects; expected CoD for both projects by 2QFY11. (3) Financial closure achieved for Rs14b WRSS transmissionscheme.

? During 1QFY10, Reliance Power Ltd (45% subsidiary) achieved financial closure for three power projects (costingRs244b), constituting total capacity of 5.5GW. This provides strong visibility on the EPC division of the company.

? We expect Reliance Infra to report net profit of Rs10.5b in FY10 (up 1.3%) and Rs10.7b in FY11 (up 1.9%). Buy.

27026 June 2009

Results PreviewSECTOR: UTILITIES

Tata Power

YEAR NET SALES PAT* EPS* EPS P/E* P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 59,159 7,315 34.4 32.1 33.8 3.4 7.7 6.2 4.8 30.3

03/09A 72,362 11,936 53.7 55.9 21.7 3.2 7.0 6.3 4.1 26.6

03/10E 81,250 12,751 57.3 6.8 20.3 3.0 8.7 9.3 3.8 17.1

03/11E 84,021 12,764 57.4 0.1 20.3 2.8 9.7 9.7 3.8 17.1

Equity Shares (m) 222.5

52-Week Range 1,225/532

1,6,12 Rel. Perf.(%) 1/1/1

M.Cap. (Rs b) 258.8

M.Cap. (US$ b) 5.4

NeutralPrevious Recommendation: Neutral Rs1,163

26 June 2009BLOOMBERGTPWR IN

REUTERS CODETTPW.BO

QUARTERLY PERFORMANCE (STANDALONE) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QTotal Operating Income 20,261 19,589 17,769 14,744 18,843 19,785 20,434 22,188 72,362 81,250

Change (%) 34.0 45.0 25.2 -9.8 -7.0 1.0 15.0 50.5 22.3 12.3EBITDA 3,049 2,647 2,560 2,934 4,145 4,254 4,802 5,094 11,190 18,295

Change (%) 5.0 1.3 -4.5 105.7 36.0 60.7 87.6 73.6 16.3 63.5As of % Sales 15.0 13.5 14.4 19.9 22.0 21.5 23.5 23.0 15.5 22.5

Depreciation 731 763 809 986 1,050 1,150 1,200 1,226 3,289 4,626Interest 522 681 952 904 950 1,100 1,400 1,863 3,058 5,313Other Income 872 1,884 460 3,108 425 460 500 526 6,324 1,911PBT 2,668 3,087 1,260 4,152 2,570 2,464 2,702 2,531 11,167 10,267Tax 763 468 109 605 733 714 811 673 1,945 2,930

Effective Tax Rate (%) 28.6 15.2 8.7 14.6 28.5 29.0 30.0 26.6 17.4 28.5Reported PAT 1,906 2,619 1,151 3,547 1,838 1,749 1,891 1,859 9,222 7,337Adjusted PAT 1,584 1,969 978 941 1,838 1,749 1,891 1,859 5,472 7,337

Change (%) -13.5 20.5 -34.6 N.A. 16.0 -11.1 93.4 97.4 10.8 34.1E: MOSL Estimates

* Consolidated including share of profit from Bumi Resources, Pre Exceptionals, Fully Diluted

Satyam Agarwal (AgarwalS@MotilalOswal.com) / Nalin Bhatt (NalinBhatt@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? For 1QFY10, we expect Tata Power to report revenues of Rs18.8b (down 7% YoY), EBITDA of Rs4.2b (up 36%YoY), and net profit of Rs1.8b (up 16% YoY).

? The company has achieved financial closure for all projects under development, and equity commitment towards5,660MW projects under construction stands at ~Rs60b. Of this, it has already invested Rs12.6b (Rs9.1b in MundraUMPP and Rs3.5b in Maithon TPP), while it needs additional Rs17.8b by FY10 and Rs29.6b beyond FY10.

? We expect Tata Power to commission 2,500MW of capacity by FY12, including first unit of Mundra UMPP (800MW)in September 2011 and additional units at a gap of 4 months. Capacity addition in FY09 has been 340MW (250MWTrombay and 90MW Hadlia), while it plans to commission another 150MW (30MW of Haldia and 120MW Tata SteelCPP at Jojbera) in FY10.

? We expect Bumi to report net profit of US$656m in CY09 and US$538m in CY10. Thus, we expect share of profitfrom KPC and Arutmin Mines for Tata Power at Rs4.7b in FY10 and Rs3.5b in FY11. We believe that these cashflows will be largely sufficient for Tata Power to meet debt service obligations (including debt repayment) towardsacquisition of debt for KPC/Arutmin mines (US$764m as of March 2009).

? We expect Tata Power to report consolidated net profit of Rs12.8b (up 7%) for FY10 and Rs12.8b for FY11(including share of profit from Bumi Resources). Neutral.

27126 June 2009

Results PreviewSECTOR: AIR-CONDITIONERS

Blue Star

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 22,330 1,468 16.3 106.2 19.1 10.6 73.1 58.5 1.3 12.1

03/09A 25,691 1,803 20.0 22.8 15.5 7.6 56.9 73.1 1.1 10.3

03/10E 28,257 2,035 22.6 12.9 13.7 5.7 47.3 63.1 1.0 9.1

03/11E 32,400 2,311 25.7 13.6 12.1 4.5 41.4 57.5 0.9 7.8

Equity Shares (m) 89.9

52-Week Range 434/122

1, 6, 12 Rel. Perf. (%) 7/51/-25

M. Cap. (Rs b) 28.0

M. Cap. (US$ b) 0.6

NeutralPrevious Recommendation: Buy Rs311

26 June 2009BLOOMBERGBLSTR IN

REUTERS CODEBLUS.BO

QUARTERLY PERFORMANCE (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QOperating Income 6,309 6,465 5,667 7,249 6,940 7,112 6,234 7,972 25,691 28,257

Change (%) 36.5 18.0 10.1 2.4 10.0 10.0 10.0 10.0 15.0 10.0Total Expenses 5,739 5,776 5,146 6,304 6,275 6,317 5,587 7,007 22,964 25,186EBITDA 570 690 522 945 664 795 647 965 2,727 3,072

Change (%) 50.4 0.8 -6.4 30.5 16.5 15.3 24.0 2.1 16.3 12.6EBITDA Margin (%) 9.0 10.7 9.2 13.0 9.6 11.2 10.4 12.1 10.6 10.9

Depreciation 57 61 70 71 75 80 90 92 259 337Interest 20 44 53 19 2 3 3 2 136 10Other Income 17 12 1 20 6 6 6 7 50 25PBT 510 596 400 876 593 718 560 878 2,382 2,750Tax 146 147 78 208 154 187 146 228 579 715

Tax/PBT (%) 28.6 24.6 19.6 23.8 26.0 26.0 26.0 26.0 24.3 26.0Reported PAT 364 449 322 668 439 532 414 650 1,803 2,035Adjusted PAT 364 449 322 668 439 532 414 650 1,803 2,035

Change (%) 63.1 -2.2 -9.2 55.1 20.6 18.3 28.7 -2.7 22.8 12.9PAT Margin (%) 5.8 7.0 5.7 9.2 6.3 7.5 6.6 8.2 7.0 7.2

E: MOSL Estimates

Shrinath Mithanthaya (ShrinathM@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? Blue Star’s total order book at the beginning of 1QFY10 is Rs13.4b, up 18% YoY. Thus, there is fair visibility ofrevenue and profits for 1HFY10. However, for the first time in the last several quarters, order inflow in 4QFY09 isdown 39% YoY to Rs4.2b. Thus, performance in 2HFY10 is contingent on order inflow during FY10.

? We believe the company will be able to slightly better its FY09 margins through a combination of: (1) lower materialcosts, (2) judicious price hikes, and (3) cost savings through value engineering and check on overheads.

? For1QFY09, we expect 10% growth in operating income to Rs6.9b. We have factored in 60bp improvement inEBITDA margin to 9.6%.

? Blue Star is a near zero debt company (end-FY09 debt of only Rs230m). As a result, we expect interest cost to besignificantly lower than in FY09.

? We maintain our earnings estimates for Blue Star, FY10 EPS of Rs22.6 and FY11 EPS of Rs25.7. The stock tradesat a P/E of 13.7x FY10E and 12.1x FY11E.

? We value Blue Star at 12x FY11E EPS to arrive at a target price of Rs308. Considering limited upside from currentlevels, we downgrade the stock from Buy to Neutral.

27226 June 2009

Results PreviewSECTOR: TEXTILES

Bombay Rayon

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 10,891 1,201 19.1 120.7 22.7 16.8

03/09A 15,145 1,367 19.8 3.8 10.2 1.6 18.8 13.0 2.0 9.6

03/10E 22,723 2,489 28.6 44.5 7.0 1.6 25.6 14.9 1.7 7.4

03/11E 31,772 3,812 43.8 53.1 4.6 1.2 30.2 18.1 1.3 5.2

Equity Shares (m) 87.1

52-Week Range 392/80

1, 6, 12 Rel. Perf. (%) -8/9/-38

M. Cap. (Rs b) 17.5

M. Cap. (US$ b) 0.4

BuyPrevious Recommendation: Buy Rs201

26 June 2009BLOOMBERGBRFL IN

REUTERS CODEBRFL.BO

QUARTERLY PERFORMANCE- STANDALONE (INCLUDING ERSTWHILE LEELA LACE FROM 3QFY09) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q CONS. CONS.Net Sales 2,751 2,870 3,449 3,332 3,600 4,100 5,700 7,048 15,145 22,723

Change (%) 36.7 23.5 41.5 31.1 30.9 42.8 65.3 111.5 62.6 50.0Total Expenses 2,116 2,184 2,606 2,497 2,682 3,034 4,218 5,198 12,027 17,031EBITDA 635 687 843 835 918 1,066 1,482 1,851 3,118 5,317

Change (%) 60.4 20.4 45.6 33.5 44.6 55.2 75.8 121.7 43.7 70.5EBITDA Margin (%) 23.1 23.9 24.4 25.1 25.5 26.0 26.0 26.3 20.6 23.4

Depreciation 93 96 110 123 150 200 275 313 513 1,008Interest 74 108 165 227 180 190 210 213 686 823Other Income 13 16 10 11 12 12 12 14 65 70PBT 481 498 578 495 600 688 1,009 1,339 1,985 3,556Tax 132 131 162 244 180 206 303 402 611 1,067

Tax/PBT (%) 27.4 26.3 27.9 49.3 30.0 30.0 30.0 30.0 30.8 30.0PAT 349 367 417 251 420 482 706 937 1,374 2,489Adjusted PAT 349 367 417 251 420 482 706 937 1,374 2,489

Change (%) 80.0 19.6 20.6 -25.9 20.2 31.3 69.5 273.6 16.0 81.2PAT Margin (%) 12.7 12.8 12.1 7.5 11.7 11.7 12.4 13.3 9.1 11.0

E: MOSL Estimates; Note: The company has included Leela Lace numbers from 3QFY09. However, the Leela merger is with retrospective effectfrom 1QFY09. So, quarterly numbers do not add up to the full year numbers.

Shrinath Mithanthaya (ShrinathM@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? Bombay Rayon continues to witness healthy order flows from customers despite global slowdown. This is mainly dueto a significant shift in garments sourcing from China to India, caused by currency and labor cost differentials.

? Bombay Rayon’s 1QFY10 figures should reflect higher capacity utilization in its two new garmenting units atIcchalkaranji and Osmanabad (both part of its Maharashtra project), which were commissioned in 2QFY09.

? The weaving and fabric processing facility at Tarapur (the heart of the Maharashtra project) is delayed by about sixmonths, and is now expected to commission in 2QFY10.

? We expect Bombay Rayon (standalone Indian operations) to report 1QFY10 net sales of Rs3.6b, EBITDA margin of25.5% and PAT of Rs420m. These numbers include that of the erstwhile Leela Lace, and hence are strictly notcomparable to 1QFY09 numbers.

? GURU operations have been affected by the current global slowdown. We expect GURU to break even in FY10.

? The stock trades at a P/E of 7x FY10E. This is attractive considering 49% EPS CAGR through FY11E. We valueBombay Rayon standalone at 10x FY10E to arrive at a target of Rs286. We maintain Buy.

27326 June 2009

Results Preview

Everest Kanto Cylinders

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 5,287 1,029 10.2 38.4 26.3 24.1

03/09A 8,564 1,503 14.1 39.1 14.7 3.0 24.5 21.9 3.0 9.8

03/10E 9,349 1,632 15.4 8.6 13.5 2.5 20.0 17.2 2.6 9.0

03/11E 11,776 2,228 21.0 36.5 9.9 2.0 22.6 21.1 2.1 7.0

Equity Shares (m) 101.2

52-Week Range 327/84

1, 6, 12 Rel. Perf. (%) 8/-44/-28

M. Cap. (Rs b) 21.0

M. Cap. (US$ b) 0.4

NeutralPrevious Recommendation: Buy Rs208

26 June 2009BLOOMBERGEKCL IN

REUTERS CODEEKCL.BO

QUARTERLY PERFORMANCE (CONSOLIDATED) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QNet Income 1,892 2,210 2,503 1,961 2,065 2,412 2,732 2,141 8,566 9,349

Change (%) 69.9 73.0 99.4 19.5 9.1 9.1 9.1 9.1 62.0 9.1Total Expenses 1,255 1,420 1,701 1,529 1,474 1,721 1,950 1,528 5,904 6,673EBITDA 646 808 811 440 591 690 782 613 2,705 2,676

Change (%) 105.8 96.7 76.5 20.2 -8.5 -14.6 -3.6 39.2 74.5 -1.1EBITDA Margin (%) 34.1 36.6 32.4 22.4 28.6 28.6 28.6 28.6 31.6 28.6

Depreciation 121 156 212 205 180 185 188 190 693 743Interest 100 47 71 54 50 50 50 28 272 178Other Income 23 12 8 -62 15 15 15 15 -20 60Extraordinary items (net) * -27 -88 -86 12 0 0 0 0 -189 0PBT 421 528 451 131 376 470 559 410 1,531 1,815Tax 71 96 69 -81 38 47 56 41 156 183

Tax/PBT (%) 16.9 18.2 15.3 -61.6 10.1 10.1 10.1 10.1 10.2 10.1PAT 350 432 382 212 338 423 503 368 1,375 1,632Adjusted PAT 377 520 468 141 338 423 503 368 1,505 1,632

Change (%) 69.6 91.2 60.4 -49.4 -10.3 -18.6 7.4 161.6 46.3 8.4PAT Margin (%) 19.9 23.5 18.7 7.2 16.4 17.5 18.4 17.2 17.6 17.5

E: MOSL Estimates; * Extraordinary items include non-cash forex impact (net)

Shrinath Mithanthaya (ShrinathM@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? For Everest Kanto, FY10 will be a year of consolidation due to slowdown in the auto sector, both in India and acrossthe world. Further, there is a delay of 3-6 months in its expansion plans – billet-pierced industrial cylinders plant inGandhidham is expected to commission by end-2QFY10, and steel plate cylinders SEZ unit in Kandla is expected tocommission in 4QFY10.

? In 1QFY10, Everest Kanto has invested Rs24m to acquire ~73% stake in Kolkata-based Calcutta Compressions andLiquefaction Engineering Pvt Ltd (CC&L). This company has an existing gas purchase agreement with ONGC forsourcing 5,000-50,000scmd from ONGC’s coal bed methane (CBM) project at Parnbatpur in Jharkhand. CCCL willinitially supply gas to industrial customers in and around Dhanbad and Bokaro. The company will transport gas usingcascades and jumbo cylinders. There is also potential for city gas distribution in the eastern region in the future.Everest Kanto plans to invest Rs200m in FY10. We have not considered this project in our estimates.

? Based on our management interaction, we have lowered EKC’s sales estimate for FY10 by 10% and FY11 by 6%.As a result, our EPS estimate for FY10 is down 16% and for FY11 down 9%. We see 1QFY10 and 2QFY10 PAT tode-grow on a YoY basis.

? Following the recent run-up in the stock, it is currently trading at a P/E of 13.5x FY10E and 9.9x FY11E consolidatedearnings. We continue to value the stock at 15x FY10E, implying a revised target price of Rs231 (Rs273 earlier).Considering the low upside from current levels, we downgrade the stock to Neutral.

27426 June 2009

Sintex Industries

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 22,978 2,170 16.0 35.5 21.5 14.7

03/09A 31,356 3,251 24.0 49.9 9.3 1.7 19.8 12.3 1.1 6.9

03/10E 36,599 3,696 27.3 13.7 8.1 1.4 18.7 15.6 0.9 5.6

03/11E 42,644 4,698 34.7 27.1 6.4 1.2 19.8 17.0 0.7 4.3

Equity shares (m) 135.5

52-Week Range 386/70

1, 6, 12 Rel. Perf. (%) 0/-41/-40

M. Cap. (Rs b) 30.1

M. Cap. (US$ b) 0.6

BuyPrevious Recommendation: Buy Rs222

26 June 2009BLOOMBERGBVML IN

REUTERS CODESNTX.BO

QUARTERLY PERFORMANCE (CONSOLIDATED) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QOperating Income 7,286 7,340 8,202 8,528 7,863 8,782 9,583 10,370 31,356 36,599

YoY Growth (%) 109.4 87.8 33.3 -9.6 7.9 19.6 16.8 21.6 36.5 16.7EBITDA 923 1,340 1,273 1,681 1,179 1,581 1,437 1,927 5,217 6,124

EBITDA Margin (%) 12.7 18.3 15.5 19.7 15.0 18.0 15.0 18.6 16.6 16.7YoY Growth (%) 47.7 67.9 22.3 5.1 27.8 17.9 12.9 14.6 28.4 17.4

Depreciation 304 314 315 211 300 330 350 382 1,144 1,362Interest 175 187 255 202 122 122 122 122 820 488Other Income 242 221 252 131 124 124 124 124 846 496Profit before Tax 686 1,060 954 1,399 881 1,253 1,089 1,547 4,100 4,770Tax Provisions 119 222 237 248 194 276 240 340 826 1,049Tax / PBT 17.4 20.9 24.8 17.7 22.0 22.0 22.0 22.0 20.1 22.0PAT before MI 567 838 717 1,151 687 977 850 1,206 3,274 3,721Minority Interest 3 1 9 11 6 6 6 6 23 25Consolidated PAT 565 838 708 1,140 681 971 843 1,200 3,251 3,696Adj. Consolidated PAT 565 838 708 1,140 681 971 843 1,200 3,251 3,696

YoY Growth (%) 71.4 89.2 21.1 40.4 20.6 15.9 19.1 5.2 49.9 13.7E: MOSL Estimates

Shrinath Mithanthaya (ShrinathM@MotilalOswal.com)

Results PreviewSECTOR: DIVERSIFIED

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect Sintex to register 15-20% volume growth in FY10, on the back of strong growth in monolithic constructionand pre-fab structures. Sintex is commencing FY10 with an order backlog of Rs14b in monolithic construction, book-to-bill of over 3x.

? The economic slowdown in India and elsewhere in the world, would affect growth in the plastic composites business,both in Sintex and its overseas subsidiaries, Nief Plastic, France and Wausaukee Composites, USA.

? We expect 4QFY09 operating income of Rs7.9b, up 8% YoY and PAT of Rs681m, up 21% YoY.

? We maintain our estimates for FY10 and FY11.

? The stock trades at a P/E of 8.1x FY10E and 6.4x FY11E. We value Sintex at 10x FY10E consolidated EPS ofRs27.3 to arrive at a target of Rs273. Maintain Buy.

27526 June 2009

Results PreviewSECTOR: AGROCHEMICALS

United Phosphorus

YEAR NET SALES PAT EPS EPS P/E P/BV ROE ROCE EV/ EV/END (RS M) (RS M) (RS) GROWTH (%) (X) (X) (%) (%) SALES EBITDA

03/08A 37,616 3,954 8.6 18.7 18.2 1.5 21.2 15.8 1.9 10.8

03/09A 49,735 4,946 10.7 25.0 14.5 2.5 20.0 18.3 1.5 8.5

03/10E 53,131 6,338 13.7 28.1 11.4 2.1 21.5 18.1 1.3 6.6

03/11E 59,398 8,444 18.3 33.2 8.5 1.8 23.9 21.5 1.0 5.0

Equity Shares (m) 439.6

52-Week Range (Rs) 185/65

1,6,12 Rel. Perf. (%) -12/-7/3

M.Cap. (Rs b) 68.4

M.Cap. (US$ b) 1.4

QUARTERLY PERFORMANCE (CONSOLIDATED) (RS MILLION)Y/E MARCH FY09 FY10E FY09 FY10E

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QGross Revenues 13,141 11,648 10,944 14,002 14,315 12,377 11,497 14,942 49,735 53,131

YoY Change (%) 55.5 31.4 35.2 14.7 8.9 6.3 5.0 6.7 32.2 6.8Total Expenditure 10,484 9,407 8,990 10,987 11,158 9,803 9,014 11,375 39,868 41,349EBITDA 2,657 2,242 1,954 3,015 3,158 2,574 2,483 3,567 9,867 11,782

Margins (%) 20.2 19.2 17.9 21.5 22.1 20.8 21.6 23.9 19.8 22.2Depreciation 378 455 457 638 630 635 650 671 1,927 2,586Interest 634 600 810 875 525 500 475 468 2,919 1,968PBT before EO Expense 1,645 1,187 687 1,502 2,003 1,439 1,358 2,428 5,021 7,228Extra-Ord Expense 0 0 0 101 0 0 0 0 101 0PBT after EO Expense 1,645 1,187 687 1,401 2,003 1,439 1,358 2,428 4,921 7,228Tax 99 59 54 77 320 173 407 184 289 1,084Deferred Tax 92 21 23 -160 0 0 0 217 -19 217

Rate (%) 11.6 6.7 11.1 -5.9 16.0 12.0 30.0 16.5 5.5 18.0Reported PAT 1,454 1,108 611 1,484 1,682 1,266 951 2,027 4,651 5,927Income from Associate Co 22 113 36 29 -16 175 125 127 200 411Adjusted PAT 1,477 1,220 646 1,620 1,666 1,441 1,076 2,155 4,946 6,338

YoY Change (%) 100.1 38.3 33.1 -15.1 12.8 18.1 66.5 33.0 25.1 28.1Margins (%) 11.2 10.5 5.9 11.6 11.6 11.6 9.4 14.4 9.9 11.9

E: MOSL Estimates

BuyPrevious Recommendation: Buy Rs156

26 June 2009BLOOMBERGUNTP IN

REUTERS CODEUNPO.BO

Jinesh K Gandhi (Jinesh@MotilalOswal.com)

STOCK INFO.BSE Sensex: 14,765

S&P CNX: 4,376

? We expect United Phosphorus (UPL) to report 9% YoY growth in consolidated revenues to Rs14.3b, as robustvolume growth would get diluted by lower realizations (as the company passes on the benefit of lower raw materialcost). Our estimates factor in volume growth of about 12% and realization decline of 5% in FY10.

? EBITDA margin would expand by 190bp to 22.1%, aided by lower raw material cost. However, higher depreciationcoupled with higher tax provisioning would restrict PAT growth at 12.8% YoY to Rs1.67b.

? UPL’s volume growth would be vulnerable to adverse climatic patterns in Europe, Australia and Latin-America, anddelayed in monsoon in India. This coupled with delays in purchase by the consumer would result in volatile quarterlyrevenues.

? The improvement in financial performance driven by synergies of integration with Cerexagri and deployment offunds in business (as it would impact EPS and return ratios in the interim) would act as a catalyst for stock performance.Valuations at 11.4x FY09E EPS (fully diluted) and EV of 6.6x EBITDA do not reflect the company’s growth potential(both organic and inorganic). Maintain Buy.

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