india daily, january 14, 2015 - kotak securitiesbusiness. cie automotive is a global supplier with a...

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

Contents

Special Reports

Initiating Coverage

Mahindra CIE Automotive: The making of a global auto-component player

Daily Alerts

Results

IndusInd Bank: Trends unchanged

DCB Bank: Momentum sustained

Sector alerts

Metals & Mining: MMDR ordinance - may bring cheer to miners

INDIA DAILY January 14, 2015 India 13-Jan 1-day 1-mo 3-mo

Sensex 27,426 (0.6) 0.3 4.1

Nifty 8,299 (0.3) 0.9 5.5

Global/Regional indices

Dow Jones 17,614 (0.2) 1.9 8.0

Nasdaq Composite 4,661 (0.1) 0.2 10.3

FTSE 6,542 0.6 3.8 2.3

Nikkei 16,980 (0.6) (2.3) 13.7

Hang Seng 24,276 0.2 4.4 5.3

KOSPI 1,923 0.3 0.1 (0.3)

Value traded – India

Cash (NSE+BSE) 209 79 27

Derivatives (NSE) 2,574 2,448 1,937

Deri. open interest 1,997 2,184 1,922

Forex/money market

Change, basis points

13-Jan 1-day 1-mo 3-mo

Rs/US$ 62.0 4 (158) 59

10yr govt bond, % 7.9 (4) (4) (73)

Net investment (US$ mn)

12-Jan MTD CYTD

FIIs 42 (13) 16,162

MFs (27) (400) 4,802

Top movers

Change, %

Best performers 13-Jan 1-day 1-mo 3-mo

LICHF IN Equity 462.4 0.7 5.8 38.6

KMB IN Equity 1393.0 1.6 11.7 37.5

AL IN Equity 59.8 (0.8) 21.9 34.1

YES IN Equity 781.8 0.5 11.9 33.1

UBBL IN Equity 926.1 1.4 16.0 31.9

Worst performers

RCOM IN Equity 76.5 (2.0) (14.6) (24.5)

GMRI IN Equity 16.9 (2.3) (6.6) (23.6)

JPA IN Equity 24.7 (3.7) (5.7) (18.1)

SSLT IN Equity 204.6 (0.8) (5.2) (18.0)

CAIR IN Equity 234.1 (0.6) (3.3) (17.6)

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

Mahindra CIE to become a global auto component player

CIE Automotive bought controlling stake (53%) in Mahindra CIE, formed after the merger of

Mahindra’s forgings, stampings, gears, castings and CIE Automotive’s European forgings

business. CIE Automotive is a global supplier with a significant presence in forgings, stampings

and plastics in Europe and NAFTA. CIE grew briskly through organic and inorganic routes but

maintained double-digit EBITDA margins and post-tax RoCE of 17% in the automotive business.

CIE Automotive has a strong track record of operational excellence. We believe with the change

in management, Mahindra CIE will become a global auto-components player with strong

capabilities in forging, stamping, gears and casting.

Turnaround of Mahindra Europe and new product development would be key catalysts

The company is likely to implement its strategy in two phases. In the first phase (FY2014-17), it

will focus on improving Mahindra CIE’s Europe business profitability through (1) price negotiation

for some old contracts, (2) productivity enhancement, (3) EUR4 mn annual power subsidy from

the German government, (4) reduction of some temporary staff and (5) outsourcing low-end

jobs. We expect EBITDA margin in the Europe business to improve to 12.9% in FY2017 from

6.2% in FY2014.

In the second phase (FY2017-20), the company will focus on enhancing the product portfolio of

its businesses in India and adding new clients. In phase two, we expect new products to

account for about half the incremental revenue over FY2017-20. We expect Mahindra CIE’s

revenues and EBITDA to grow by 2X and 4X respectively over FY2014-20.

We initiate coverage with a BUY rating

We initiate coverage on the stock with a BUY rating and target price of `280. We value the stock

at 12X FY2017E EBITDA. We believe 12X EV/EBITDA multiple is justified, driven by strong growth

in EBITDA over the next six years. We believe the company can grow its EBITDA by 4X over

FY2014-20. We expect the company to deliver strong cash flow (FCF/EBITDA conversion of

40-50%) and fund its capex plans through internal accruals. We see weak execution as a key risk

to our investment thesis.

Mahindra CIE Automotive (MACA) Automobiles

The making of a global auto-component player. We initiate coverage on Mahindra

CIE with a BUY rating and target price of `280. Mahindra CIE will become a global

auto-component powerhouse with the scale of business in India and merger of CIE

Automotive’s global forgings business. We expect the company to deliver strong

earnings growth over the next few years, led by an operational turnaround in

Mahindra’s European forgings business and strong growth in the Indian business.

BUY

JANUARY 14, 2015

INITIATING COVERAGE

Coverage view: Attractive

Price (`): 243

Target price (`): 280

BSE-30: 27,426

Mahindra CIE Automotive

Stock data Forecasts/Valuations 2015 2016E 2017E

52-week range (Rs) (high,low) EPS (Rs) 1.2 5.0 9.6

Market Cap. (Rs bn) EPS growth (%) (63.1) 305.0 90.5

Shareholding pattern (%) P/E (X) 195.7 48.3 25.4

Promoters 78.6 Sales (Rs bn) 55.4 60.9 67.4

FIIs 2.9 Net profits (Rs bn) 0.4 1.6 3.1

MFs 5.4 EBITDA (Rs bn) 4.8 6.4 8.4

Price performance (%) 1M 3M 12M EV/EBITDA (X) 8.4 5.8 4.0

Absolute 9.6 25.1 356.0 ROE (%) 2.9 10.9 17.9

Rel. to BSE-30 8.7 19.7 249.4 Div. Yield (%) 0.0 0.0 0.0

Company data and valuation summary

252-46

22.7

Mahindra CIE Automotive Automobiles

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3

MAHINDRA CIE—FINANCIAL SNAPSHOT

Exhibit 1: Mahindra CIE: forecast and valuation March fiscal year-ends, 2014-17E (` mn)

Source: Company, Kotak Institutional Equities estimates

Exhibit 2: We expect EBITDA CAGR of 28% over FY2014-17E Mahindra CIE, pro-forma financial summary, March fiscal year-ends, 2014-17E (` mn)


Net sales EBITDA PAT EPS EV/EBITDA P/E RoCE RoE

(Rs mn) (Rs mn) (Rs mn) (Rs) (X) (X) (%) (%)

2014 55,911 3,935 1,084 3.3 23.0 65.9 4.5 7.9

2015E 55,409 4,845 400 1.2 18.4 178.7 7.1 2.8

2016E 60,939 6,419 1,620 5.0 13.3 44.1 12.3 10.3

2017E 67,416 8,371 3,086 9.6 9.8 23.0 18.5 16.4

2014P 2015E 2016E 2017E

Profit model (Rs mn)

Net sales 55,911 55,409 60,939 67,416

EBITDA 3,935 4,845 6,419 8,371

Other income 389 467 577 677

Interest expenses (1,499) (1,254) (1,120) (907)

Depreciation (2,940) (3,114) (3,286) (3,457)

Profit before tax (115) 944 2,590 4,684

Exceptional gains 2,188 — — —

Tax expenses (988) (544) (970) (1,597)

Profit after tax 1,084 400 1,620 3,086

EPS 3.3 1.2 5.0 9.6

Balance sheet (Rs mn)

Shareholder equity 13,724 14,124 15,745 18,831

Deferred tax liability 151 151 151 151

Borrowings 22,419 21,169 19,197 16,765

Provisions 4,140 4,140 4,140 4,140

Current liabilities 7,206 7,905 9,343 10,382

Total liabilities 47,641 47,490 48,576 50,269

Net fixed assets 30,402 30,138 29,702 29,095

Investments 712 712 712 712

Cash 2,198 2,553 3,991 5,112

Other current assets 14,329 14,087 14,172 15,351

Total assets 47,641 47,489 48,576 50,269

Cash flow (Rs mn)

Operational cash flow 2,151 4,768 6,026 7,450

Change in working capital 1,324 941 1,353 (140)

Capex (1,791) (2,850) (2,850) (2,850)

Free cash flow 1,684 2,859 4,529 4,460

Ratios (%)

EBITDA margin (%) 7.0 8.7 10.5 12.4

PAT margin (%) 1.9 0.7 2.7 4.6

Net debt/equity (X) 1.5 1.3 1.0 0.6

RoCE (%) 4.5 7.1 12.3 18.5

RoE (%) 7.9 2.8 10.3 16.4

Automobiles Mahindra CIE Automotive

4 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Exhibit 3: We expect EBITDA to increase by 4X over FY2014-20 Mahindra CIE revenue and EBITDA estimates, 2014-20E (` mn, %)

Source: Kotak Institutional Equities estimates

2014P 2015E 2016E 2017E 2018E 2019E 2020E

Net sales

Forgings 3,865 3,930 4,624 5,416 7,041 9,505 12,832

Stampings 7,230 7,091 8,237 9,573 11,966 14,958 18,697

Gears 1,455 1,605 1,859 2,102 2,354 2,637 2,953

Castings and composites 5,256 5,584 6,509 7,259 8,711 10,453 12,544

India revenues 17,806 18,210 21,229 24,350 30,072 37,553 47,026

Forgings Europe 34,042 32,940 35,246 38,386 40,305 42,321 44,437

Gear Europe 4,062 4,259 4,464 4,680 4,914 5,160 5,418

Europe revenues 38,104 37,199 39,710 43,066 45,219 47,480 49,854

Rest of the world (forgings) 8,000 8,400 8,820

Total net revenues 55,910 55,409 60,939 67,416 83,291 93,433 105,700

EBITDA

Forgings 523 673 843 1,058 1,479 2,186 3,208

Stampings 510 402 612 825 1,197 1,795 2,244

Gears 201 229 287 332 377 422 473

Castings and composites 357 336 484 609 871 1,045 1,254

India EBITDA 1,591 1,640 2,226 2,824 3,923 5,448 7,178

Forgings Europe 2,243 2,972 3,810 5,095 5,643 6,348 6,665

Gear Europe 101 234 383 452 491 516 542

Europe EBITDA 2,344 3,206 4,193 5,547 6,134 6,864 7,207

Rest of the world 1,200 1,260 1,323

EBITDA 3,935 4,846 6,419 8,371 11,257 13,572 15,709

EBITDA margin (%)

Forgings 13.5 17.1 18.2 19.5 21.0 23.0 25.0

Stampings 7.1 5.7 7.4 8.6 10.0 12.0 12.0

Gears 13.8 14.3 15.4 15.8 16.0 16.0 16.0

Castings and composites 6.8 6.0 7.4 8.4 10.0 10.0 10.0

India EBITDA 8.9 9.0 10.5 11.6 13.0 14.5 15.3

Forgings Europe 6.6 9.0 10.8 13.3 14.0 15.0 15.0

Gear Europe 2.5 5.5 8.6 9.7 10.0 10.0 10.0

Europe EBITDA 6.2 8.6 10.6 12.9 13.6 14.5 14.5

Rest of the world 15.0 15.0 15.0

EBITDA 7.0 8.7 10.5 12.4 13.5 14.5 14.9

Mahindra CIE Automotive Automobiles


VALUATIONS: STRONG GROWTH PROSPECTS DESERVE PREMIUM VALUATIONS

We initiate coverage on Mahindra CIE with a BUY rating and target price of `280. Our target price is based

on 12X FY2017E EBITDA. We expect Mahindra CIE to deliver strong earnings growth over the next six years,

led by improved profitability in overseas businesses and strong revenue growth in the Indian business due to

the addition of new products and clients. We expect revenue and EBITDA to grow by ~2X and ~4X

respectively over FY2014-20. The stock trades at 10.5X FY2017E EBITDA, which we believe is inexpensive,

given the company’s strong growth prospects.

Mahindra CIE was formed by merging Mahindra’s forgings, castings, gears, stampings,

composites and CIE’s European forgings businesses. CIE Automotive holds 53% and M&M

20% stake in Mahindra CIE.

We initiate coverage on Mahindra CIE with a BUY rating and target price of `280, based on

12X FY2017E EBITDA. The 12X EV/EBITDA multiple is justified for the stock as we believe the

company can grow its EBITDA by 4X over FY2014-20. We expect the company to deliver

strong cash flows (FCF/EBITDA conversion of 40-50%) and fund its capex plans through

internal accruals. We expect the company to reduce its net debt by half during this period,

which is likely to strengthen the balance sheet. Net-debt-to-EBITDA ratio is likely to fall to

0.5X by FY2020 from 5X in FY2014.

Exhibit 4: EBITDA to increase by 4X over 2014-20E Mahindra CIE EBITDA and EBITDA margin, March fiscal year-ends, 2014-20E (` mn, %)

Source: Bloomberg, Kotak Institutional Equities

The company is in the nascent stage of scaling up its business and hence comparing its

valuations to any Indian component player may not give the correct picture of the stock’s

steady-state trading multiple. We believe the stock will trade at premium valuations in the

near term due to depressed earnings versus other large global auto component players.

We believe Mahindra CIE may be compared to Bharat Forge to judge the steady-state

multiple at which the company should trade once it scales up its business.

Discount to Bharat Forge likely to contract given strong earnings momentum

Mahindra CIE trades at a 25% discount to Bharat Forge. We believe Mahindra CIE will trade

at 5-10% discount to Bharat Forge on a steady-state basis. Mahindra CIE is in a transformation

phase with improvement in profitability and in balance sheet strength. Mahindra CIE has

ample opportunity to grow, given the sub-scale nature of the domestic business, which can

be scaled up through new products and customer diversification that will lead to narrowing

of the discount of Mahindra CIE with Bharat Forge over the medium term.

7.0

8.7

10.5

12.4

13.5 14.5

14.9

0

2

4

6

8

10

12

14

16

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2014P 2015E 2016E 2017E 2018E 2019E 2020E

EBITDA (Rs mn) (LHS) EBITDA margin (%) (RHS)(Rs mn) (%)

Automobiles Mahindra CIE Automotive


On a steady-state basis, we believe Bharat Forge will trade at a premium to Mahindra CIE for

the following reasons.

Bharat Forge’s business model is well-diversified; Mahindra CIE is focused on a few

customers. Bharat Forge operates in the automotive and non-automotive businesses. The

non-auto business, which accounts for 40% of Bharat Forge’s standalone revenue, offers

good growth prospects as the opportunity size is large. Mahindra CIE is dependent on

Daimler Europe and Mahindra & Mahindra for business.

Bharat Forge and Mahindra CIE have similar shares in the heavy truck market in Europe.

Bharat Forge has a sizeable presence in the US CV market but Mahindra CIE is not

present in the US. Bharat Forge has a much wider presence across the globe than

Mahindra CIE. However, Mahindra CIE will become a global player when CIE merges its

forgings businesses, in China, Brazil and Mexico, in Mahindra CIE.

Mahindra CIE is present in forgings, castings, stampings and gears while Bharat forge has

a presence only in the forgings industry. However, Mahindra CIE has to scale up the

castings, gears and stampings businesses to capture strong growth opportunities in these

segments.

Mahindra CIE and Bharat Forge can deliver post-tax RoCE of 17-18% over the medium

term but the growth prospects of Bharat Forge are far superior due to the strong growth

potential of the non-auto business. Scale-up of the Mahindra CIE business will depend on

new products and the addition of new customers in the automotive segment.

Exhibit 5: Bharat Forge trades at ~16X one-year forward EV/EBITDA Bharat Forge forward EV/EBITDA, March fiscal year-ends (X)

Source: Bloomberg, Kotak Institutional Equities

10.1

0

4

8

12

16

20

Dec-

07

Mar-

08

Jun-0

8

Sep

-08

Dec-

08

Mar-

09

Jun-0

9

Sep

-09

Dec-

09

Mar-

10

Jun-1

0

Sep

-10

Dec-

10

Mar-

11

Jun-1

1

Sep

-11

Dec-

11

Mar-

12

Jun-1

2

Sep

-12

Dec-

12

Mar-

13

Jun-1

3

Sep

-13

Dec-

13

Mar-

14

Jun-1

4

Sep

-14

Fwd EV/EBITDA Average


A stable performance overall

IndusInd Bank delivered a stable performance with an impressive earnings growth of 29% yoy

on the back of 22% yoy revenue growth and 22% decline in provisions due to reversal of

interest rates. Revenue growth was led by strong growth in non-interest income at 27% yoy,

primarily due to higher contribution from treasury (13% of PBT). NIM was stable qoq at 3.7%

while the bank grew its loans by 22% yoy. Retail loans grew 10% yoy while non-retail loans

grew 32% yoy. Impairment ratios were stable with gross NPLs at 1.1% and restructured loans

at 0.6% of loans.

Well-placed among peers in the current environment

We find the bank well-placed among peers in the current environment. We expect NII growth

to lead revenue growth over the next few quarters led by (1) decline in funding costs, especially

on wholesale deposits, and (2) change in loan mix towards high-yielding retail assets. While the

former is already visible as funding costs are softening, the healthy disbursement growth should

offset the high repayments that the balance sheet has been seeing in the retail portfolio in the

next few quarters. Further, the broad call is that the bank would see a far more diversified loan

book in retail at the end of this cycle. Lower crude prices and early signs of a macro recovery

augur well for the bank’s CV portfolio.

Our positive view stays but strong outperformance unlikely; maintain ADD

At 3.4X book and ~20X September 2016E EPS, IndusInd Bank is one of the most expensive

Indian bank stocks. While we don’t see huge upsides from current levels, we see the bank as a

strong earnings compounding idea as against banks that can provide multiple expansion.

Valuations, in our view, are at the upper end, giving little headroom for expansion from current

levels. The bank has consumed capital very aggressively in this cycle with tier-1 ratio at 11.5%

but it represents the change in mix in business and higher allocation of capital to non-fund-based

business, which may imply that the bank could look at dilution over the next few quarters. The

stock is pricing in a strong recovery in business and assigning a high probability of success on most

of the recent initiatives taken by the bank. Our positive view is driven by the superior execution,

strong return ratios and scalability of the business given the size of the bank and opportunity in

the market. We have increased our earnings and TP to `870 (from `830 earlier). Maintain ADD.

IndusInd Bank (IIB) Banks/Financial Institutions

Trends unchanged. 3QFY15 marked a strong quarter with earnings growth of 29% yoy

led by healthy revenue growth and lower provisions. Loan growth of 22% yoy was led by

the corporate segment. IIB is well-placed compared to peers as (1) macro recovery, lower

crude prices and softening of interest rates should result in better retail loan growth and

upsides to NIM and (2) strong execution is leading to a diversified balance sheet, better

revenue mix and improvement in CASA. Maintain ADD; TP at `870 (from `830 earlier).

ADD

JANUARY 14, 2015

RESULT


Price (`): 826


BSE-30: 27,426

QUICK NUMBERS

Earnings grew 29%

yoy; NII grew 18%

yoy

Gross NPLs at 1.1%;

restructured loans

at 0.6% of loans

Maintain ADD. TP at

`870 (from `830)

IndusInd Bank



Market Cap. (Rs bn) EPS growth (%) 26.8 23.7 15.6


Promoters 15.1 NII (Rs bn) 34.5 44.0 52.2


MFs 7.2 BVPS 190.4 225.0 265.7

Price performance (%) 1M 3M 12M P/B (X) 4.3 3.7 3.1

Absolute 6.0 30.0 99.8 ROE (%) 19.3 19.9 19.5



849-369

436.7

Banks/Financial Institutions IndusInd Bank


Exhibit 1: IndusInd Bank – quarterly financial statements March fiscal year-ends, 3QFY14-3QFY15 (` mn)

Source: Company, Kotak Institutional Equities

3QFY15 3QFY15E 3QFY14 2QFY15 3QFY15E 3QFY14 2QFY15 9MFY15 9MFY14 FY2015E

Interest income 24,370 24,757 21,435 23,788 (1.6) 13.7 2.4 71,130 60,743 17.1 96,879

Interest on advances 19,539 19,957 17,387 19,089 (2.1) 12.4 2.4 57,002 48,616 17.2 77,906

Interest on investments 4,120 4,331 3,685 4,113 (4.9) 11.8 0.2 12,346 11,013 12.1 16,871

Other interest 711 469 364 586 51.7 95.5 21.5 1,783 1,114 60.0 2,102

Interest expense 15,756 15,818 14,134 15,457 (0.4) 11.5 1.9 46,179 39,648 16.5 62,374

Net interest income 8,614 8,938 7,301 8,331 (3.6) 18.0 3.4 24,951 21,095 18.3 34,505

Non-int.income 6,108 5,724 4,803 5,583 6.7 27.2 9.4 17,454 13,676 27.6 23,608

Fee income 5,223 5,194 4,268 5,093 0.5 22.4 2.5 15,181 11,824 28.4 20,808

Treasury income 885 530 535 490 66.9 65.5 80.7 2,273 1,853 22.7 2,800

Non treasury income 5,223 5,194 4,268 5,093 0.5 22.4 2.5 15,181 11,824 28.4 20,808

Total income 14,721 14,663 12,104 13,914 0.4 21.6 5.8 42,405 34,771 22.0 58,112

Op. expenses 6,983 6,934 5,630 6,667 0.7 24.0 4.7 19,928 16,000 24.5 27,275

Employee cost 2,555 2,585 2,058 2,393 (1.1) 24.2 6.8 7,151 6,014 18.9 9,763

Other cost 4,427 4,349 3,572 4,274 1.8 23.9 3.6 12,777 9,987 27.9 17,513

Operating profit 7,738 7,729 6,474 7,247 0.1 19.5 6.8 22,477 18,771 19.7 30,837

Provisions and cont. 980 878 1,262 732 11.6 (22.3) 33.9 2,816 3,471 (18.9) 3,995

NPLs 1,057 728 641 607 45.1 64.9 74.2 2,516 1,911 31.7 3,695

PBT 6,758 6,851 5,212 6,515 (1.3) 29.7 3.7 19,661 15,300 28.5 26,842

Tax 2,286 2,318 1,743 2,213 (1.3) 31.2 3.3 6,677 5,178 28.9 8,992

Net profit 4,472 4,533 3,469 4,302 (1.3) 28.9 3.9 12,985 10,122 28.3 17,850

Tax rate (%) 33.8 33.8 33.4 34.0 34.0 33.8 33.5

Op.profit excl. treasury gains 6,854 7,199 5,939 6,757 (4.8) 15.4 1.4 20,204 16,918 19.4 28,037

EPS (Rs) 8 — 7 8 27.9 3.8 25 19 27.3 34

Key balance sheet items (Rs bn)

Total deposits 694 562 660 23.3 5.1

Savings deposits 122 93 114 31.5 6.9

Current deposits 115 88 110 29.7 4.4

Term deposits 457 382 436 19.9 4.8

CASA ratio (%) 34.1 32.2 33.9

Loans 638 525 599 21.7 6.5

Retail credit 270 246 260 9.6 4.0

Commercial vehicles 100 100 97 0.7 3.7

Utility vehicles 20 21 20 (2.3) -

Cars 30 26 29 16.4 2.8

2 wheelers 28 25 27 15.6 5.6

3 wheelers 19 21 19 (9.0) (1.2)

Equipments 28 29 28 (4.0) 0.1

Credit card 6 4 5 37.5 11.6

Home loans/Personal loans 39 22 35 76.8 12.0

Corporate Advances 187 143 173 31.2 8.0

SME/Commercial banking 106 89 102 18.8 3.8

Others 75 47 64 61.9 16.9

(% chg.)

(% chg.)

IndusInd Bank Banks/Financial Institutions


Exhibit 2: NII growth has stabilized qoq at 18-19% yoy NII and total income growth, March fiscal year-ends, 3QFY13-3QFY15 (%)


Exhibit 3: Sharp slowdown in retail loans due to weak CV cycle Total and retail loan growth, March fiscal year-ends, 3QFY13-3QFY15 (%)


Margins stable qoq; cost of funds continues to show signs of softening

NIM was stable qoq at 3.7% (4 bps improvement) but as indicated in the previous few

quarters, we have started to see the cost of deposits showing some signs of moderation

with it declining 20 bps qoq. However, we still don’t think this fully reflects the recent

changes in wholesale/retail deposit rates and we expect further reduction coming through

over the next few quarters.

Lending yields also showed a similar decline but it can be attributed to (1) negative mix in

the loan portfolio with a higher share of lending in the corporate segment and (2) decline in

lending yields in the corporate portfolio of ~30 bps. The management highlighted that some

portion of this decline can be attributed to a higher share of low-yielding foreign currency

lending disbursed in the current quarter.

We retain our positive outlook on NIM as we believe that any pick-up in retail loans,

especially in the vehicle portfolio, would give a significant boost for expansion as the yield

differential between retail and corporate loans is >450 bps. We note that the share of retail

loans has fallen to its lowest level at <45% as of 2QFY15.

Also, we believe that NIM expansion has higher potential for improvement from the re-

pricing of liabilities downwards. The management has taken two initiatives that we are

positive about: (1) cut in savings deposit rates for balances less than `100,000 and

increasing share of CASA to overall deposits and (2) decline in wholesale rates that we have

started to see in recent months.

34

42 40 37

26

18 18 19 18

34 36

43

35

30 27

20

25 22

-

9

18

27

36

45

3Q

FY1

3

4Q

FY1

3

1Q

FY1

4

2Q

FY1

4

3Q

FY1

4

4Q

FY1

4

1Q

FY1

5

2Q

FY1

5

3Q

FY1

5

NII Revenue

31 26 27 24 24 24 24 22 22

38

30

24

18

14 11

9 7 10

-

12

24

36

48

60

3Q

FY1

3

4Q

FY1

3

1Q

FY1

4

2Q

FY1

4

3Q

FY1

4

4Q

FY1

4

1Q

FY1

5

2Q

FY1

5

3Q

FY1

5

Total loans Retail loans



Exhibit 4: Margin expansion dependent on bank’s ability to keep funding costs low and possible improvement in retail contribution Drivers for margin expansion, March fiscal year-ends, 3QFY13-3QFY15 (%)


Exhibit 5: Difference between fixed rate assets and CASA has declined Proportion of vehicles to overall loans, 2010-3QFY15 (%)


3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15

Yield management measures (%)

Yield on advances 13.7 13.5 13.4 13.5 13.8 13.7 13.5 13.3 13.0

- Corporate and commercial 11.6 11.4 11.3 11.5 11.9 11.6 11.6 11.3 10.9

- Consumer finance 15.9 15.7 15.6 15.5 15.6 15.8 15.8 15.8 15.8

Cost of deposits 8.4 8.1 8.2 8.2 8.4 8.1 8.2 8.0 7.8

Costs of funds 7.3 6.8 6.8 7.0 7.0 7.0 7.0 7.0 7.0

NIM 3.5 3.7 3.7 3.7 3.7 3.8 3.7 3.6 3.7

Composition of loans (%)

Retail loans to overall loans 51.1 50.5 49.2 49.4 47.0 45.0 43.2 43.3 42.3

Vehicle loans to overall loans 47.6 46.4 44.9 44.6 42.0 39.2 37.2 36.7 35.3

0

5

10

15

20

25

0

12

24

36

48

60

2010 2011 2012 2013 2014 1QFY15 2QFY15 3QFY15

CASA (LHS) Vehicle loans to overall loans (LHS) Difference (RHS)



Exhibit 6: CD rates declined by ~20 bps in 3QFY15 CD rates, January 2014-January 2015 (%)


Exhibit 7: NIM to improve by 10 bps in FY2016-17E Net interest margin, March fiscal year-ends, 2010-17E (%)


Loan growth continues driven by corporate segment; vehicle loans showing

signs of improvement

Overall loan growth remained strong at 22% yoy led by 32% yoy growth in corporate loans

and non-vehicle retail loans (70% yoy on a low base). Vehicle loan growth, which declined

to its slowest pace in the previous quarter, grew 2% yoy. Loans to CVs have moved to the

positive zone with 1% yoy growth largely led by a healthy growth in disbursements (17%

yoy). Given the recent pick-up in heavy commercial vehicles, we expect the trends on

disbursements to remain strong for the medium term, which should result in loan growth in

vehicle finance portfolio to reach closer to the overall average growth for the bank.

Growth in loans to two-wheelers and cars remained strong at 16% yoy and 16% yoy

respectively, however, it has been declining gradually led by decline in fresh disbursements

and short duration of the loans. Share of vehicle loans has come down to 35% (200 bps

decline qoq) compared to 46% in FY2013. Non-vehicle retail loan growth remained strong,

LAP grew 77% yoy and credit cards grew 38% yoy.

We factor loan growth at ~20% CAGR over FY2015-17E though the growth is likely to be

led by corporate loans at least over the next few quarters.

8.0

8.5

9.0

9.5

10.0

10.5

Jan

-14

Feb-1

4

Mar-

14

Apr-

14

May-

14

Jun-1

4

Jul-1

4

Aug

-14

Sep

-14

Oct

-14

Nov-

14

Dec-

14

Jan

-15

2.8

3.4 3.3 3.4 3.6 3.5

3.7 3.8

93

55

24

31 29

19

28

18

-

20

40

60

80

100

0.0

1.0

2.0

3.0

4.0

5.0

20

10

20

11

20

12

20

13

20

14

20

15

E

20

16

E

20

17

E

NIM (LHS) NII growth (RHS)



Exhibit 8: Retail is a challenge as the underlying business in key markets has slowed sharply Break-up of loans, March fiscal year-ends, 2010-3QFY15 (%)


Deposits grew 23% yoy, led by strong growth in CASA deposits (~30% yoy growth in both

SA and CA deposits). CASA ratio improved 20 bps qoq to 34.1% but we do note that the

bank has seen a sharper growth in borrowings this quarter, which implies that the growth

as compared to overall funds has not improved qoq. IndusInd Bank had cut saving deposit

rates by 100 bps (for deposits <`0.1 mn in value) towards the end of the previous quarter,

but there has been negligible impact in saving deposits in the current quarter. The

management is targeting to reach a CASA ratio of >35% by FY2017E through doubling of

the branch network by FY2017E.

Exhibit 9: IndusInd Bank’s CA is comparable to peers, SA deposits increasing steadily Break-up of CASA across private banks, March fiscal year-ends, 2010-3QFY15 (%)


Impairment trends stable; only UV segment sees a marginal increase in NPL

Headline NPL numbers were stable with gross NPLs standing at 1.1% of loans and net NPLs

at 0.3% of loans. Fresh slippages were negligible in corporate loans and marginally higher

(50 bps qoq) at 2.2% in retail loans. NPL ratio in commercial loans was stable qoq at 1.5%

while UV reported an increase of 30 bps qoq at 1%. Restructured loans increased marginally

by <5 bps qoq to 0.5% of loans.

Overall provision coverage remained flat qoq at 70%, similar to the previous few

quarters. We note that the bank maintained provision coverage at 70-73% over FY2011-

13, and increased it to 80% in 1HFY14 making use of high treasury gains.

2010 2011 2012 2013 2014 1QFY15 2QFY15 3QFY15

Retail advances 40.4 44.4 49.2 50.5 45.0 43.2 43.3 42.3

Vehicle financing 39.6 43.5 46.9 46.4 39.2 37.2 36.7 35.3

Commercial vehicles 19.5 21.8 23.6 22.5 17.4 16.4 16.2 15.7

Utility vehicles 3.4 3.2 3.5 4.0 3.7 3.5 3.4 3.2

Cars 2.3 3.2 4.0 4.6 4.8 4.7 4.8 4.7

Two and three wheelers 8.9 9.7 9.7 9.1 8.1 7.7 7.6 7.4

Equipment 5.5 5.7 6.1 6.1 5.2 4.9 4.7 4.4

Home loans 0.8 0.9 1.6 3.4 4.9 5.2 5.8 6.1

Personal loans — — 0.7 0.8 0.8 0.9 0.9 0.9

Corporate advances 59.6 55.6 50.8 49.5 55.0 56.8 56.7 57.7

Large corporate advances 28.5 26.1 27.1 26.7 27.4 28.6 28.9 29.3

SME/commercial banking 22.2 19.3 15.2 14.6 17.6 17.4 17.0 16.6

Other loans 8.9 10.1 8.5 8.1 10.1 10.8 10.7 11.8

2010 2011 2012 2013 2014 1QFY15 2QFY15 3QFY15

IndusInd Bank

Current 16.5 18.3 16.2 16.3 16.2 16.8 16.6 16.5

Savings 7.2 8.9 11.1 13.0 16.4 16.6 17.3 17.6

HDFC Bank

Current 22.2 22.3 18.4 17.7 16.7 14.6 14.8

Savings 29.8 30.4 30.0 29.8 28.1 28.4 28.4

ICICI Bank

Current 15.3 15.4 13.7 12.6 13.0 12.4 13.7

Savings 26.3 29.6 29.8 29.3 29.9 30.6 30.0

Axis Bank

Current 22.8 19.5 18.1 19.1 17.3 14.9 16.4

Savings 24.0 21.6 23.5 25.2 27.7 27.4 28.2

Yes Bank

Current 9.1 8.6 9.9 10.0 9.5 9.8 9.5

Savings 1.5 1.8 5.1 9.0 12.6 12.5 12.9



We build high slippages of 1.5% and loan-loss provisions of 60-70 bps over FY2015-16E for

any likely deterioration in asset quality. With a steady recovery in economy, we think there is

a lot lower concern on further deterioration in impairment ratios.

Exhibit 10: Gross NPLs declined across all product segments, barring CV loans, in the quarter Gross and net NPL, March fiscal year-ends, 2010-3QFY15 (%)

Notes: (a) Gross NPL ratios for individual retail products have been calculated based on period ending outstanding loans.


Fee income slows led by lower contribution from investment banking; third

party fee income gains traction

Overall non-interest income grew 27% yoy but fee income, which has been growing

at >30% CAGR in the previous few quarters, slowed to 22% yoy while treasury-related

income grew 66% yoy primarily on a low base. Most of the sub-segments in fee income

reported strong growth barring investment banking, which was flat yoy. Fee income growth

remains above NII growth but we think that the trends could reverse by the 4QFY15

primarily on the back of a high base in fees as well as better trends on NII growth.

Core fee income grew 22% yoy led by high contribution from foreign exchange (29% yoy)

and distribution of third-party products (41% yoy). The strong performance on growth in

forex income continues to be led by better acquisition and maintenance strategy. Processing

fees grew 18% yoy.

We expect non-interest income to moderate to 17% CAGR over FY2015-17E primarily on

the back of a high base in most fee income streams.

2010 2011 2012 2013 2014 1QFY15 2QFY15 3QFY15

Gross NPL (Rs mn) 2,555 2,659 3,471 4,578 6,208 6,544 6,545 6,727

Wholesale (Rs mn) 1,010 820 1,100 1,990 3,100 3,370 3,380 3,410

Retail (Rs mn) 1,540 1,840 2,370 2,600 3,110 3,180 3,170 3,320

Commercial vehicle (%) 1.5 1.2 1.0 1.0 1.4 1.4 1.5 1.5

Utility vehicle (%) 1.1 1.1 1.3 0.9 0.9 0.8 0.7 1.0

Construction equipments (%) 1.6 1.4 1.2 1.2 1.3 1.6 1.6 1.6

3 Wheeler (%) 0.4 0.6 0.9 0.8 0.9 0.8 0.7 0.9

2 Wheeler (%) 5.3 3.9 3.4 3.0 2.5 2.5 2.5 2.4

Cars (%) 3.7 1.6 1.0 0.7 0.5 0.5 0.4 0.5

Gross NPL ratio (%) 1.2 1.0 1.0 1.0 1.1 1.1 1.1 1.1

Net NPL (Rs mn) 1,018 728 947 1,368 1,841 1,956 1,950 2,015

Net NPL ratio (%) 0.5 0.3 0.3 0.3 0.3 0.3 0.3 0.3

Provision coverage (%) 60.1 72.6 72.7 70.1 70.4 70.1 70.2 70.0

Loan-loss provisions (%) 0.5 0.3 0.3 0.4 0.4 0.4 0.3 0.5

Slippages (%) 1.0 0.9 1.0 1.2 1.4 1.2 0.8 1.1

Wholesale (%) 0.8 0.3 0.5 0.5 0.6 0.8 0.0 0.2

Retail (%) 1.3 1.6 1.6 1.9 2.4 1.7 1.7 2.2



Exhibit 11: IndusInd Bank is building a strong platform in other income that is independent of balance sheet growth Comparison of non-interest income (ex-treasury) to income and proportion of assets, March fiscal year-ends, 3QFY12-3QFY15 (%)


Other highlights for the quarter

Cost-income declined marginally of ~50 bps qoq to 47%. Operating expenses grew 24%

yoy and is expected to remain high as the bank is aggressively looking to invest in

technology and physical network. We expect operating costs to grow at a CAGR of 20%

and cost-income at 46-47% in FY2015-17E as it looks to double its branch network by

FY2017E.

Consumption of capital was a bit high this quarter but it appears that a large share of the

capital consumed is primarily on account of the off-balance sheet items. Capital adequacy

stands comfortable with tier-1 ratio at 11.5% with overall CAR at 13%. Given the market

condition, which is poised for growth, and the strong position of IndusInd Bank’s balance

sheet, it is quite likely that the bank could look to strengthen capital in FY2016E.

Exhibit 12: IndusInd Bank grew branch network by 6% qoq Branches and ATM, March fiscal year-ends, 2010-3QFY15 (#)


Exhibit 13: Opex growth ahead of revenue growth in 3QFY15 Operating expenses and revenue growth, March fiscal year-ends, 3QFY13-3QFY15 (%)


3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15

Non-interest income (ex-treasury) to income

Axis Bank 36.7 38.6 33.7 35.3 35.4 37.9 28.9 37.4 34.8 37.1 28.6 30.6

ICICI Bank 42.5 38.8 37.5 34.6 34.4 35.2 33.0 36.2 33.4 37.2 33.5 35.2

HDFC Bank 33.1 32.8 29.9 29.5 30.3 28.5 27.2 31.9 30.9 28.3 26.0 25.8

IndusInd Bank 36.0 34.9 33.5 35.7 35.3 33.5 30.6 34.9 35.3 33.9 35.3 36.6 35.5

Yes Bank 32.7 32.4 32.6 34.3 34.9 32.9 31.5 39.4 36.8 38.2 36.3 37.1

Non-interest income (ex-treasury) to assets

Axis Bank 2.0 2.1 1.6 1.9 1.9 2.1 1.6 2.1 1.8 2.2 1.5 1.7

ICICI Bank 1.7 1.8 1.6 1.5 1.5 1.6 1.5 1.6 1.7 1.9 1.7 1.7

HDFC Bank 1.8 2.0 1.8 1.7 1.9 1.8 1.7 1.9 1.9 1.6 1.5 1.6

IndusInd Bank 1.9 1.9 1.8 2.0 2.0 1.9 2.0 2.1 2.2 2.1 2.2 2.3 2.2

Yes Bank 1.2 1.3 1.3 1.4 1.5 1.4 1.4 1.7 1.5 1.7 1.6 1.8

210 300 400 500 602 638 685 727 497

594 692

882

1,110 1,238 1,277

1,350

-

500

1,000

1,500

2,000

2,500

20

10

20

11

20

12

20

13

20

14

1Q

FY1

5

2Q

FY1

5

3Q

FY1

5

ATM Branches

34 36

43

35 30

27

20 25

22

33 29 27 29

22 20 24 26 24

-

9

18

27

36

45

3Q

FY1

3

4Q

FY1

3

1Q

FY1

4

2Q

FY1

4

3Q

FY1

4

4Q

FY1

4

1Q

FY1

5

2Q

FY1

5

3Q

FY1

5Revenue Operating expenses



Exhibit 14: IndusInd Bank – key parameters and balance sheet March fiscal year-ends, 3QFY14-3QFY15


3QFY14 4QFY14 1QFY15 2QFY15 3QFY15

Yield management measures (%)

Yield on advances 13.8 13.7 13.5 13.3 13.0

- Corporate and commercial banking 11.9 11.6 11.6 11.3 10.9

- Consumer finance division 15.6 15.8 15.8 15.8 15.8

Cost of deposits 8.4 8.1 8.2 8.0 7.8

NIM 3.7 3.8 3.7 3.6 3.7

Asset quality details

Gross NPL(Rs mn) 6,258 6,208 6,544 6,545 6,727

Net NPLs (Rs mn) 1,649 1,841 1,956 1,950 2,015

Gross NPL (%) 1.2 1.1 1.1 1.1 1.1

Net NPL (%) 0.3 0.3 0.3 0.3 0.3

Provision coverage (%) 73.6 70.4 70.1 70.2 70.0

Capital adequacy ratios (%)

CAR 14.4 13.8 13.1 13.0 12.4

Tier I 13.3 12.7 12.1 12.0 11.5

Tier II 1.1 1.1 1.1 0.9 0.9

Other key details

Branches (#) 573 602 638 685 727

ATMs (#) 1,055 1,110 1,238 1,277 1,350

Balance sheet snapshot (Rs mn)

Capital and liabilities

Capital 5,250 5,367 5,260 5,407 5,290

Reserves and surplus 81,390 85,063 89,510 93,916 98,610

Deposits 562,470 605,023 638,930 659,961 693,760

Borrowings 147,710 147,620 141,960 133,188 167,520

Other liabilities and provisions 21,170 27,187 27,890 30,423 34,890

Total 817,990 870,259 903,550 922,896 1,000,070

Assets

Cash and bank balance 31,000 44,139 36,210 33,210 35,330

Balance with bank and money at call 24,470 23,555 33,600 37,599 48,910

Investments 201,340 215,630 212,880 214,606 231,580

Advances 524,690 551,018 586,640 599,313 638,470

Fixed Assets 8,090 10,165 10,480 10,871 11,190

Other assets 28,400 25,753 23,740 27,296 34,590

Total 817,990 870,259 903,550 922,896 1,000,070



Exhibit 15: IndusInd Bank—change in estimates March fiscal year-ends, 2015-17E (` mn)


Exhibit 16: IndusInd Bank trading at 3.8X one-year forward

book March fiscal year-ends, 2008-15 (X)

Source: Company, Bloomberg, Kotak Institutional Equities estimates

Exhibit 17: IndusInd Bank trading at premium to peers IndusInd Bank premium to peers, 2008-15 (X)


2015E 2016E 2017E 2015E 2016E 2017E 2015E 2016E 2017E

Net loan growth (%) 23.5 22.0 18.4 23.5 22.0 18.4

Loans (Rs bn) 681 830 983 681 830 983 — — —

Total income 58,112 71,612 84,244 57,852 69,379 82,123 0.4 3.2 2.6

Net interest income 34,505 44,023 52,164 35,095 42,784 50,784 (1.7) 2.9 2.7

NIM (%) 3.7 3.9 3.9 3.8 3.8 3.8

Other income 23,608 27,590 32,080 22,757 26,595 31,339 3.7 3.7 2.4

Expenses 27,275 33,023 38,955 27,389 32,811 38,709 (0.4) 0.6 0.6

Employee cost 9,763 11,668 13,570 9,861 11,437 13,301 (1.0) 2.0 2.0

Other cost 17,513 21,355 25,385 17,528 21,374 25,409 (0.1) (0.1) (0.1)

Loan loss provisions 3,695 5,288 6,799 3,695 5,288 6,799 — — —

PBT 26,842 33,201 38,389 26,668 31,180 36,515 0.7 6.5 5.1

PAT 17,850 22,078 25,529 17,734 20,735 24,282 0.7 6.5 5.1

% growth yoy 26.8 23.7 15.6 25.9 16.9 17.1

PBT-treasury+provisions 28,037 35,389 41,889 28,263 34,068 40,414 (0.8) 3.9 3.6

Old estimatesNew estimates % change

0

5

10

15

20

25

30

-

0.8

1.6

2.4

3.2

4.0

Jan

-08

Jan

-09

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Jan

-14

Jan

-15

Rolling PBR (X) (LHS) Rolling PER (X) (RHS)

0.5

0.7

0.9

1.1

1.3

1.5

Jan

-08

Jan

-09

Jan

-10

Jan

-11

Jan

-12

Jan

-13

Jan

-14

Jan

-15



Exhibit 18: IndusInd Bank – key growth rates and financial ratios March fiscal year-ends, 2012-17E (%)


2012 2013 2014 2015E 2016E 2017E

Growth rates (%)

Net loan 34.0 26.4 24.3 23.5 22.0 18.4

Customer assets 34.4 27.7 25.3 22.7 21.4 18.0

Investments excl. CPs and debentures 18.9 18.5 8.9 33.7 19.7 20.9

Net fixed and leased assets 10.1 15.1 34.4 (20.0) 17.2 9.8

Cash and bank balance 37.6 23.6 (1.2) 25.8 12.1 11.4

Total assets 26.2 27.3 18.7 23.7 18.7 16.9

Deposits 23.3 27.7 11.8 27.1 24.4 20.7

Current 9.5 28.6 10.7 31.1 27.4 23.5

Sav ings 53.5 49.8 41.0 38.8 36.6 31.5

F ixed 23.0 24.2 6.7 23.4 20.3 16.6

Net interest income 23.8 31.0 29.5 19.4 27.6 18.5

Loan loss provisions (3.2) 43.0 48.4 (2.4) 43.1 28.6

Total other income 41.8 34.7 38.7 24.9 16.9 16.3

Net fee income 173.6 34.7 23.6 15.0 20.0 20.0

Net exchange gains 54.2 38.0 87.9 10.0 10.0 10.0

Operating expenses 33.2 30.8 24.4 24.8 21.1 18.0

Employee expenses 26.9 36.3 22.3 20.6 19.5 16.3

Key ratios (%)

Yield on average earning assets 10.8 11.1 10.7 10.4 10.1 9.7

Yield on average loans 13.8 14.1 13.3 12.7 12.1 11.6

Yield on average investments 7.7 7.5 7.2 7.0 7.1 7.0

Average cost of funds 8.0 8.2 7.7 7.4 6.8 6.4

Interest on deposits 8.0 8.3 7.6 7.4 6.8 6.3

Difference 2.9 2.9 3.0 3.0 3.3 3.3

Net interest income/earning assets 3.4 3.5 3.8 3.7 3.9 3.9

New provisions/average net loans 0.6 0.6 0.8 0.6 0.7 0.8

Total provisions/gross loans 0.7 0.7 0.8 1.2 1.6 2.0

Fee income to total income 25.9 26.3 24.5 23.2 22.6 23.0

Net trading income to PBT 4.9 4.0 (1.7) 10.4 9.6 8.9

Exchange income to PBT 19.9 20.8 29.0 25.3 22.5 21.4

Operating expenses/total income 49.4 48.8 45.7 46.9 46.1 46.2

Operating expenses/assets 2.6 2.7 2.7 2.8 2.8 2.8

Tax rate 32.7 32.7 33.8 33.5 33.5 33.5

Div idend payout ratio 12.8 14.8 13.1 13.1 13.1 13.1

Share of deposits

Current 16.2 16.3 16.2 16.7 17.1 17.5

F ixed 72.7 70.7 67.5 65.5 63.3 61.2

Sav ings 11.1 13.0 16.4 17.9 19.6 21.4

Loans-to-deposit ratio 82.8 81.9 91.1 88.5 86.8 85.1

Equity/assets (EoY) 8.2 10.4 10.4 9.8 9.7 9.8

Asset quality trends (%)

Gross NPL 1.0 1.0 1.1 1.2 1.3 1.3

Net NPL 0.3 0.3 0.3 0.3 0.4 0.4

Slippages 1.1 1.5 1.4 1.5 1.5 1.5

Provision coverage 72.7 70.1 70.4 71.9 72.2 74.0

Dupont analysis (%)


Loan loss provisions 0.3 0.4 0.5 0.4 0.4 0.5

Net other income 2.0 2.1 2.4 2.4 2.3 2.3


Invt. depreciation (0.0) 0.0 0.1 — — —

(1- tax rate) 67.3 67.3 66.2 66.5 66.5 66.5

RoA 1.6 1.6 1.8 1.8 1.9 1.8

Average assets/average equity 12.9 11.3 10.3 10.5 10.6 10.6

RoE 20.1 18.3 18.0 19.3 19.9 19.5



Exhibit 19: IndusInd Bank – income statement and balance sheet March fiscal year-ends, 2012-17E (` mn)


2012 2013 2014 2015E 2016E 2017E

Income statement

Total interest income 53,592 69,832 82,535 96,879 114,101 130,158

Loans 42,166 56,103 66,274 77,906 91,622 104,958

Investments 10,782 12,825 14,770 16,871 20,267 23,029

Cash and deposits 644 904 1,492 2,102 2,213 2,170

Total interest expense 36,549 47,504 53,628 62,374 70,079 77,993

Deposits from customers 30,763 40,268 43,824 50,516 58,660 66,891

Net interest income 17,042 22,329 28,907 34,505 44,023 52,164

Loan loss provisions 1,783 2,551 3,785 3,695 5,288 6,799

Net interest income (after prov.) 15,259 19,778 25,122 30,809 38,734 45,365

Other income 10,118 13,630 18,905 23,608 27,590 32,080

Net fee income 7,029 9,470 11,706 13,462 16,154 19,385

Net capital gains 577 644 518 2,800 3,200 3,400

Net exchange gains 2,378 3,280 6,163 6,780 7,458 8,204

Operating expenses 13,430 17,564 21,851 27,275 33,023 38,955

Employee expenses 4,855 6,615 8,093 9,763 11,668 13,570

Depreciation on investments (10) 13 876 — — —

Other provisions 31 67 16 300 100 100

Pretax income 11,927 15,764 21,285 26,842 33,201 38,389

Tax provisions 3,900 5,152 7,203 8,992 11,122 12,860

Net profit 8,026 10,612 14,082 17,850 22,078 25,529

Growth (%) 39.0 32.2 32.7 26.8 23.7 15.6

PBT - Treasury + Provisions 13,153 17,750 25,443 28,037 35,389 41,889

Growth (%) 26.3 35.0 43.3 10.2 26.2 18.4

Balance sheet

Cash and bank balance 55,396 68,487 67,694 85,162 95,481 106,379

Cash 3,204 3,968 4,968 7,451 7,824 8,215

Balance w ith RBI 25,832 28,530 39,172 40,766 50,712 61,218

Balance w ith banks 26,360 35,989 23,555 36,945 36,945 36,945

Net value of investments 145,720 196,542 215,630 266,215 305,688 356,077

Government and other securities 119,019 141,083 153,800 205,775 246,501 298,015

Shares 537 580 527 527 527 527

Debentures and bonds 2,386 7,538 13,903 12,513 11,261 10,135

Net loans and advances 350,640 443,206 551,018 680,682 830,318 982,880

F ixed assets 6,568 7,561 10,164 8,130 9,524 10,454

Net owned assets 6,568 7,561 10,164 8,130 9,524 10,454

Other assets 17,638 17,269 25,753 36,054 36,775 37,510

Total assets 575,961 733,065 870,259 1,076,242 1,277,787 1,493,300

Deposits 423,615 541,167 605,023 769,163 956,830 1,155,065

Borrow ings and bills payable 90,542 98,108 150,731 165,492 160,745 156,471

Other liabilities 14,386 17,487 24,076 36,114 36,114 36,114

Total liabilities 528,544 656,763 779,830 970,770 1,153,689 1,347,651

Paid-up capital 4,677 5,229 5,256 5,256 5,256 5,256

Reserves and surplus 42,740 71,074 85,173 100,215 118,841 140,392

Total shareholders' equity 47,417 76,303 90,430 105,472 124,098 145,649


Growth impressive as previous few quarters; performance on NII a bit disappointing

DCBB reported 17% yoy growth in earnings (PBT grew 37% yoy) on the back of 34% yoy

revenue growth. NII grew 30% yoy but was lower than expectations primarily due to lower yield

on loans, which we believe has occurred due to the impact of higher restructuring of loans qoq.

Strong contribution from treasury boosted non-interest income growth (46% yoy). The full benefit

from the recently raised capital was offset by lower returns from loans. Loan growth was strong at

29% yoy primarily driven by mortgages. Slippages were negligible but restructured loans

increased 100 bps to 5% of loans (total number of restructured accounts is low at eight).

Guidance on CASA lowered to 20-22%, which is on expected lines

The management has cut its guidance on CASA ratio to 20-22% in the short term, which is on

expected lines. We maintain our view that expecting an improvement in CASA ratio at this

stage was premature as there is higher focus on the assets side of the balance sheet and the

focus would be to invest a large share of revenues back into business. We are factoring CASA

ratio to decline in the medium term. Building a strong liability franchise would require a much

higher scale, size of net worth and products/service, especially for current account, even as the

bank would need to invest in brand, especially for retail customers. We would broadly monitor

(1) risk-adjusted NIM, (2) relative movement of the cost of liabilities with growth in CASA on an

absolute basis and (3) loan mix to understand risk.

Maintain BUY as we believe execution would remain strong

We maintain our BUY rating on the bank and value the stock at `140 (from `120 earlier)

reflecting changes to earnings and medium-term growth assumptions. At our target price,

we are valuing the bank at 2.2X book and 16X EPS for RoEs in the range of 13-14% but strong

earnings growth at 17-20% CAGR over the next few years. Despite the recent outperformance,

we still think DCBB is a good bank to own. The scope for valuation expansion is probably limited

but we see this bank as a good earnings compounding idea over the long term. We don’t see

RoEs expanding in the medium term as the bank would continue to keep cost growth at

relatively high levels to build its liability franchise. A strong tier-1 ratio, low impairment risks,

high growth phase and strong execution of the current management make it one of the best

among peers. DCBB remains our preferred mid-cap pick.

DCB Bank (DCBB) Banks/Financial Institutions

Momentum sustained. 3QFY15 registered a strong quarter with PBT growing 37% yoy

(PAT grew 17% yoy) on the back of strong revenue growth (34% yoy) and improvement

in cost-income ratio (370 bps yoy, 150 bps qoq). NII growth was probably the only key

disappointing item given the recent capital infusion. The management’s guidance of a

lower CASA ratio in the medium term was expected. We maintain our positive view (TP

revised to `140 from `120 to reflect changes to our earnings and growth assumptions).

BUY

JANUARY 14, 2015

RESULT


Price (`): 123


BSE-30: 27,426

QUICK NUMBERS

Earnings grew 17%

yoy; NII grew 30%

yoy

Cost-income ratio at

60%; 150 bps

improvement qoq

Maintain BUY. TP

revised to `140

from `120 earlier

DCB Bank



Market Cap. (Rs bn) EPS growth (%) 7.1 22.1 23.0


Promoters 16.4 NII (Rs bn) 5.1 6.0 7.3


MFs 13.8 BVPS 52.1 58.8 67.5

Price performance (%) 1M 3M 12M P/B (X) 2.4 2.1 1.8

Absolute 14.7 46.2 113.7 ROE (%) 13.8 13.5 14.5



127-50

34.6

Banks/Financial Institutions DCB Bank


Exhibit 1: DCB Bank – quarterly performance March fiscal year-ends, 3QFY14-3QFY15 (` mn)


NIM maintained qoq at 3.7%; improvement did not materialize

NIM for the quarter was high at 3.7% (flat qoq) but was lower than our expectations given

that the bank had the full benefit of the capital that it had raised in the previous quarter.

It does appear that the bank has seen a higher impact on lending yields on sequential basis,

which has resulted in a lower performance on NIM. On the other hand, the bank has not

seen any decline in its funding costs this quarter despite softening of interest rates, which

we believe is probably due to focus on long-term retail deposits given that the bank has a

higher share of lending in long-duration assets like mortgages. For the quarter, lending

yields declined ~10 bps qoq while the cost of funds was flat. The management has indicated

that there could be a bit of pressure on NIM in the medium term, especially considering the

current business environment and the structure of the loan book.

The big cushioning factor to offset any large pressure on lending yields would be to shift the

funding mix slightly towards wholesale as there has been a sharp decline in yields over the

past few quarters and the bank has received upgrades from rating agencies, which could

help it lower costs.

The medium-term outlook on NIM is negative unless there is a change in loan mix. NIM is

high for the business mix that the bank currently has. We think CASA ratio is more likely to

decline than improve. Getting productivity from branches, especially with an early stage

brand like DCBB, would be a challenge.

3QFY15 3QFY15E 3QFY14 2QFY15 3QFY15E 3QFY14 2QFY15 9MFY15 9MFY14 (% chg.) FY2015E

Interest Earned 3,565 3,480 2,908 3,349 2.4 22.6 6.5 10,436 8,204 27.2 14,256

Interest on Advances 2,814 2,817 2,223 2,644 (0.1) 26.6 6.4 7,997 6,290 27.1 11,032

Interest on Investment 741 643 635 638 15.2 16.7 16.2 2,034 1,781 14.2 2,789

Others 10 20 50 67 (48.7) (79.6) (84.7) 405 132 205.5 435

Interest expense 2,346 2,188 1,968 2,172 7.2 19.2 8.0 6,650 5,520 20.5 9,134

Net interest income 1,219 1,292 940 1,177 (5.7) 29.7 3.6 3,785 2,683 41.1 5,122

Other Income 480 425 328 370 13.0 46.1 29.8 1,194 1,052 13.5 1,677

Commission & exchange 307 315 267 309 (2.6) 15.0 (0.6) 876 731 19.8 1,193

Treasury 126 65 21 40 93.8 500.0 215.0 209 190 10.0 320

Forex profit 27 22 18 15 22.7 50.0 80.0 54 35 54.3 79

Recovery 14 10 10 16 40.0 40.0 (12.5) 63 64 (1.6) 80

Others 6 13 12 (10) (53.1) (52.6) (156.6) (8) 32 (123.4) 5

Total Income 1,699 1,717 1,268 1,546 (1.0) 34.0 9.9 4,980 3,736 33.3 6,799

Operating Expenses 1,015 1,005 805 948 1.0 26.2 7.1 2,885 2,358 22.4 3,917

Staff costs 495 513 395 474 (3.6) 25.3 4.4 1,432 1,160 23.4 1,966

Other operating expenses 520 491 410 474 5.9 27.1 9.8 1,454 1,198 21.4 1,951

Pre-provisioning profit 684 712 464 598 (4.0) 47.5 14.2 2,094 1,378 52.0 2,882

Provisions 184 129 100 137 42.3 84.3 34.0 551 255 115.9 692

Profit before tax 499 582 364 461 (14.2) 37.3 8.3 1,543 1,123 37.4 2,190

Provision for Taxes 74 128 — 50 261 — 372

Net Profit 425 454 364 411 (6.4) 16.9 3.4 1,282 1,123 14.2 1,818

Tax rate (%) 14.9 22 — 10.9 16.9 — 17.0

PBT - net treasury income 373 517 343 421 (27.7) 9.0 (11.3) 1,334 933 43.0 1,880

EPS (Rs) 2 1 2 4.2 (7.8) 5 4 1.8 6

Key balance sheet items (Rs bn)

Total deposits 119 96 109 23.5 8.7

CASA ratio (%) 23.8 24.8 25.5

Loans 95 74 88 28.9 7.9

Corporate banking 23 18 21 27.5 8.1

SME+MSME 14 14 13 (2.4) 2.3

Mortgages 40 29 37 40.3 9.9

CV/CE/STVL 2 1 2 55.5 8.5

Agriculture 13 9 11 46.8 15.0

Others 3 3 4 10.3 (11.9)

(% chg.)

DCB Bank Banks/Financial Institutions


Asset quality shows negligible deterioration; bank preparing for one large NPL

Gross NPLs were stable qoq at 1.9% of loans while net NPLs declined marginally to 1% of

loans. Provision coverage was also stable qoq to 77% (including write-off). Calculated

coverage improved ~300 bps to 47%. Slippages were negligible at ~1% of loans. SME

portfolio has not seen further deterioration in the current quarter but is still high at 7% of

loans with the management still not looking to grow that portfolio aggressively. Importantly,

the net increase in SME loans appears to have stabled over the past few quarters. The critical

portfolio of mortgage has reported stable NPL ratio of ~1%. Restructured loans appear to

be a bit high at 5% of loans but these are essentially driven by very few accounts (eight by

quantum).

The bank has indicated that there is a bit of stress though has not quantified the amount so

far. While we are building higher provision in our estimates for FY2015, we do think that

the stress may not be too high considering that the top-20 borrowers of the bank contribute

~11% of the total exposure for the bank (top exposure is ~1.1%).

Exhibit 2: Rise in NPLs in the corporate and SME segments Segment-wise NPLs, March fiscal year-ends, 2010-3QFY15 (%)


Exhibit 3: Gross NPLs have been steadily declining since FY2010 Gross and net NPLs, March fiscal year-ends, 2010-17E (%)


Exhibit 4: Slippages normalized to 1.5% over FY2011-14 Slippages and credit costs, March fiscal year-ends, 2010-17E (%)


2010 2011 2012 2013 2014 1QFY15 2QFY15 3QFY15

Vehicle loans 24.1 2.4 2.6 3.1 3.6

Corporate loans 5.9 5.7 6.0 3.3 0.9 0.7 1.3 1.3

SME loans 2.2 1.3 1.0 3.8 6.2 6.7 6.7 6.9

Mortgage 1.3 0.6 0.9 0.8 0.9 0.9 0.9

Gross NPLs 8.7 5.9 4.4 3.2 1.7 1.8 1.9 1.9

Net NPLs 3.1 1.0 0.6 0.7 0.9 1.0 1.1 1.0

Provision coverage ratio 66.3 84.4 87.5 77.6 46.5 46.1 44.1 46.9

Provision coverage ratio (including technical write-offs) — 91.2 85.7 80.5 79.1 76.8 77.1

8.7

5.9

4.4

3.2

1.7 1.9 1.8 1.7

3.1

1.0 0.6 0.7 0.9 1.1 1.1 0.9

0

2

4

6

8

10

20

10

20

11

20

12

20

13

20

14

20

15

E

20

16

E

20

17

E

Gross NPL (LHS) Net NPL (LHS)5.6

1.4 1.5 1.4 1.4 1.5 1.4 1.3

3.4

1.3

0.6 0.3 0.5

0.7 0.4 0.4

0

1

2

4

5

6

20

10

20

11

20

12

20

13

20

14

20

15

E

20

16

E

20

17

E

Slippages Credit costs



Loan growth led by mortgage, corporate and agriculture segments

Overall loans grew 29% yoy, driven by mortgages (40% yoy), corporate (28% yoy) and

agriculture loans (47% yoy). The growth in agriculture loans is likely to come off as the bank

is looking to build scale in this business as well as meet the annual PSL targets. Growth in

this segment may ease by 4QFY15. Growth in mortgage loans has picked up this quarter but

a large share of this loans appears be driven by loans against property as compared to

housing loans. The mix between LAP and housing loans is ~60:40 at this stage. Loans to

SME/MSME was flat as the bank is primarily looking to take this exposure through the

mortgage portfolio as compared to SME lending as the loss-given-default is lower.

We expect overall loan growth to remain above the industry average, over 25% yoy.

However, as compared to the current composition of loans, which has a higher share of

mortgage, we think that this is likely to decline and the focus would be move back to SME.

Corporate lending is likely to remain a selective opportunity as the management is focused

on not increasing exposure to a few large companies.

Exhibit 5: Retail and trade are the main focus areas for the bank Break-up of loans, March fiscal year-ends, 2010-3QFY15 (%)


As per the latest available data, we broadly see the shift in the origination of loans in DCBB

within the mortgage portfolio. In the initial years, the bank did acquire a large share of loans

but in recent years we see a lot of the origination moving in-house. As per the latest

available data, ~80% of the loans are sourced by DCBB as compared to 65% a few years ago.

Exhibit 6: Share of loans acquired on the decline Break-up of loans acquired and self-originated in mortgage, March fiscal year-ends, 2009-1QFY15 (%)


Retail deposits grow 32% yoy, CASA ratio trending downwards

Total deposits grew 24% yoy on the back of strong growth in retail deposits. Retail deposits

grew 32% yoy on the back of strong growth in retail term deposits, which grew 38% yoy.

Retail deposits contribute 82% of the overall deposits as compared to 83% of total deposits

in the previous quarter. NRI deposits grew 29% yoy, resulting in an increase in share to 9%

from 6% in FY2013.

We believe the recent upgrade by rating agencies and the increase in limit for borrowings

from several agencies resulted in a shift in the funding program for the bank. We note that

the bank provides a higher interest rates on term deposits (>6 months) as compared to

peers. We think that the bank could look to shift focus towards wholesale deposits for some

time given the interest rates differential.

2009 2010 2011 2012 2013 2014 1QFY15 2QFY15 3QFY15

Corporate banking 29.0 32.0 26.0 22.6 23.8 25.7 23.9 23.7 23.7

SME and MSME 14.0 17.0 24.0 27.2 22.6 16.6 16.2 15.2 14.4

Retail 40.0 26.0 30.0 35.1 42.0 43.5 45.5 48.6 48.5

Mortgage loans 8.0 12.0 25.0 29.4 36.4 38.4 40.0 41.7 42.4

Vehicle loans 17.0 8.0 2.0 2.1 1.7 2.1 2.3 2.4 2.4

Others 5.0 3.0 2.8 3.7 3.9 3.0 3.1 4.4 3.6

Agriculture 17.0 25.0 20.0 15.2 11.6 14.2 14.5 12.6 13.4

2009 2010 2011 2013 2014 1QFY15

Mortgages sourced by DCB (Rs bn) 2 3 7 15 24 26

Mortgages acquired (Rs bn) 1 1 4 9 8 8

Total loans (Rs bn) 3 4 11 24 31 33

Mortgages sourced by DCB (% of total loans) 81 71 64 64 75 77

Mortgages acquired (% of total loans) 19 29 37 36 25 23



CASA traction was steady, growing 19% yoy against 8-15% yoy reported in earlier quarters.

The share of CASA deposits declined 170 bps qoq to 24%. The management has guided

that it is likely to lower its CASA ratio guidance to 20-22% in the short term but would aim

to improve it back to ~25% over the medium term. This change was expected given the

constraints on brand, reach and its ability to invest in building a liability sales model. We

believe CASA ratio may continue to see downward pressure even from current levels.

Exhibit 7: The share of CASA and retail deposits has fallen over the past year Break-up of retail deposits, March fiscal year-ends, 2010-3QFY15 (%)


Exhibit 8: Maharashtra has been the driver of deposits for the bank Break-up of retail deposits, March fiscal year-ends, 2010-1QFY15 (%)


Improvement in cost-income ratio of 150 bps qoq at 60%

Cost-income ratio showed a marginal improvement of 150 bps qoq at 60% in 3QFY15

against ~61% in 2QFY15 and 63% in 3QFY14. Operating expenses grew 26% yoy on the

back of 25% yoy growth in staff expenses and 27% yoy growth in non-staff expenses.

There has been a good improvement in revenue on the back of stronger loan growth but

we see the bank investing a large share of revenue into building infrastructure. The bank has

increased its branch network by ~26% yoy to 145.

We are not building a strong decline in cost structure at this stage and we build it to

improve to ~55% by FY2016. We think that the management has shifted focus towards

expanding infrastructure as compared to consciously declining it to <50%. The bank has a

long way towards building a strong bank from a liability side and this is likely to be a greater

focus for the management.

2010 2011 2012 2013 2014 1QFY15 2QFY15 3QFY15

Current 16.2 15.8 13.2 10.8 9.3

Savings 19.2 19.4 18.9 16.4 15.7

CASA 35.4 35.2 32.1 27.2 25.0 25.4 25.5 23.8

Term deposits 64.6 64.8 67.9 72.8 75.0 74.6 74.5 76.2

NRI deposits 4.9 6.2 8.0 8.5 9.1 9.0

Retail deposits 81.5 81.2 84.4 77.4 77.0 78.8 82.8 82.0

Wholesale deposits 18.5 18.8 15.6 22.6 23.0 21.2 17.2 18.0

2010 2011 2013 2014 1QFY15

Maharashtra 27 32 47 56 55

Delhi 7 6 10 9 11

Gujarat 4 4 7 9 9

Orissa 0 1 NA

Paschim Banga 6 7 7

Telangana 4 4 6 7 7

Others 6 10 9 15 16

Total deposits 48 56 84 103 106



Exhibit 9: Cost-income ratio to decline to ~55% over FY2015-16 Cost-income ratio, March fiscal year-ends, 2010-17E (%)


Exhibit 10: We expect operating leverage to continue Operating expenses to assets, March fiscal year-ends, 2010-17E (%)


Other highlights for the quarter

Non-interest income grew 46% yoy mainly due to strong performance from treasury

income. Core fee income grew 15% yoy while the income from treasury improved

sharply (on a lower base). Income from forex increased sharply (50% yoy). We expect the

bank to generate higher retail fee income, led mainly by wealth-management products

and we model 15-18% CAGR in fee income over FY2015-16.

The bank is well capitalized with tier-1 ratio of 14%. The recent capital infusion and RoEs

of ~13% should be sufficient for the bank to grow balance sheet at closer to current

levels for the next two years. This has also effectively addressed the concerns on promoter

holding as it has been reduced to ~16% from ~18% previously.

Exhibit 11: DCB trades at 2.2X one-year forward book (adjusted) One-year forward PBR, 2009-15 (X)


Exhibit 12: DCB Bank trading premium to peers has increased in

recent months DCB trading premium to private banks, 2009- 15 (X)


80.6

71.4 74.6

68.6

62.9

57.6 56.3 54.0

40

52

64

76

88

100

20

10

20

11

20

12

20

13

20

14

20

15

E

20

16

E

20

17

E

3.3 3.2

3.1

2.8 2.6

2.8 2.6

2.4

0.0

0.8

1.6

2.4

3.2

4.0

20

10

20

11

20

12

20

13

20

14

20

15

E

20

16

E

20

17

E

0.0

0.5

1.0

1.5

2.0

2.5

Jan

-09

Jul-0

9

Jan

-10

Jul-1

0

Jan

-11

Jul-1

1

Jan

-12

Jul-1

2

Jan

-13

Jul-1

3

Jan

-14

Jul-1

4

Jan

-15

0.0

0.2

0.4

0.6

0.8

1.0

Jan

-09

Jul-0

9

Jan

-10

Jul-1

0

Jan

-11

Jul-1

1

Jan

-12

Jul-1

2

Jan

-13

Jul-1

3

Jan

-14

Jul-1

4

Jan

-15



Exhibit 13: DCB Bank - change in estimates March fiscal year-ends, 2015-17E (` mn)


2015E 2016E 2017E 2015E 2016E 2017E 2015E 2016E 2017E

Net loan growth (%) 25.2 29.9 25.5 24.0 26.5 26.1

Loans (Rs bn) 102 132 166 101 128 161 1.0 3.7 3.3

Total income 6,799 8,134 9,932 6,787 7,866 9,410 0.2 3.4 5.5

Net interest income 5,122 6,045 7,317 5,193 5,834 6,848 (1.4) 3.6 6.9

NIM (%) 3.7 3.6 3.4 3.8 3.5 3.3

Other income 1,677 2,089 2,614 1,593 2,032 2,562 5.3 2.8 2.1

Fee income 1,193 1,455 1,775 1,193 1,455 1,775 — — —

Treasury income 320 420 570 225 345 495 42.5 21.9 15.3

Operating expenses 3,917 4,582 5,367 3,834 4,435 5,133 2.2 3.3 4.5

Employee expenses 1,966 2,244 2,634 1,930 2,198 2,494 1.9 2.1 5.6

Other cost 1,951 2,338 2,733 1,904 2,237 2,639 2.5 4.5 3.6

Loan loss provisions 642 410 597 638 400 577 0.5 2.5 3.4

PBT 2,190 3,082 3,898 2,265 2,971 3,629 (3.3) 3.7 7.4

Tax 372 863 1,169 408 802 1,089 (8.7) 7.6 7.4

Net profit 1,818 2,219 2,729 1,857 2,169 2,540 (2.1) 2.3 7.4

% growth yoy 20.1 22.1 23.0 22.7 16.8 17.1

PBT-treasury+provisions 2,562 3,132 3,995 2,728 3,086 3,782 (6.1) 1.5 5.6

% changeOld estimatesNew estimates



Exhibit 14: DCB Bank – key financial ratios and growth rates March fiscal year-ends, 2012-17E (%)


2012 2013 2014 2015E 2016E 2017E

Growth rates (%)

Net loan 23.7 24.6 23.6 25.2 29.9 25.5

Total Asset 17.5 30.0 14.6 18.2 28.4 23.4

Deposits 12.9 32.0 23.5 18.6 32.4 25.5

Current (5.3) 7.2 6.7 5.9 28.4 25.5

Savings 9.7 14.8 18.2 11.1 27.9 21.1


Loan loss provisions (45.0) (27.8) 78.9 81.2 (36.1) 45.7

Total other income (8.4) 13.9 18.5 21.0 24.5 25.2

Net fee income 19.1 13.5 13.2 18.0 22.0 22.0

Net capital gains (53.5) 18.2 61.5 42.5 31.3 35.7

Net exchange gains 21.0 21.0 21.0 40.0 30.0 30.0


Employee expenses 17.1 10.7 13.9 25.2 14.1 17.4

Key ratios (%)

Yield on average earning assets 9.4 9.6 9.7 10.4 10.1 10.0

Yield on average loans 11.2 12.0 11.8 12.0 11.8 11.5

Yield on average investments 7.2 6.7 7.0 7.3 7.2 7.2

Average cost of funds 6.9 7.2 7.1 7.4 7.4 7.2

Interest on deposits 6.8 7.3 7.1 7.5 7.4 7.3

Spread 2.5 2.4 2.6 3.0 2.7 2.7

Net interest income/earning assets 3.0 3.0 3.2 3.7 3.6 3.4

Spreads on lending business 4.3 4.8 4.7 4.6 4.4 4.2

Spreads on lending business (incl. fees) 6.0 6.3 6.1 5.9 5.6 5.4

New provisions/average net loans 0.6 0.3 0.5 0.7 0.4 0.4

Total provisions/gross loans 3.8 2.5 0.8 1.2 1.3 1.4

Interest income/total income 68.9 70.8 72.7 75.3 74.3 73.7

Other income / total income 31.1 29.2 27.3 24.7 25.7 26.3

Fee income to total income 23.8 22.3 19.9 17.5 17.9 17.9

Fee income to advances 1.6 1.5 1.4 1.3 1.2 1.2

Fees income to PBT 142.8 87.5 66.8 54.5 47.2 45.5

Net trading income to PBT 19.8 14.0 15.0 14.2 13.3 14.4

Exchange income to PBT 12.6 7.1 3.7 3.6 3.3 3.4

Operating expenses/total income 74.6 68.6 62.9 57.6 56.3 54.0

Operating expenses/assets 3.1 2.8 2.6 2.8 2.6 2.4

Operating profit /AWF 0.6 0.9 1.1 1.4 1.6 1.6

Tax rate 0.1 0.0 — 17.0 28.0 30.0

Dividend payout ratio — — — — — —

Share of deposits

Current 18.9 16.4 15.7 14.7 14.2 13.7

Fixed 67.9 72.8 75.0 77.0 77.8 78.3

Savings 18.9 16.4 15.7 14.7 14.2 13.7

Loans-to-deposit ratio 83.4 78.7 78.8 83.2 81.7 81.7

Equity/assets (EoY) 9.9 8.9 8.9 10.3 9.2 8.6

Loan impairment ratios (%)

Gross NPL 4.4 3.2 1.7 1.9 1.8 1.7

Net NPL 0.6 0.7 0.9 1.1 1.1 0.9

Slippages 1.5 1.4 1.4 1.5 1.4 1.3

Loan-loss provisions — 77.1 46.5 40.2 39.0 47.9

Dupont analysis (%)


Loan loss provisions 0.3 0.2 0.3 0.5 0.2 0.3

Net other income 1.3 1.2 1.1 1.2 1.2 1.2


(1- tax rate) 99.9 100.0 100.0 83.0 72.0 70.0

ROA 0.7 1.0 1.3 1.3 1.3 1.2

Average assets/average equity 11.7 11.4 11.8 10.7 10.6 11.6

ROE 8.0 11.6 14.8 13.8 13.5 14.5



Exhibit 15: DCB Bank – income statement and balance sheet March fiscal year-ends, 2012-17E (` mn)


2012 2013 2014 2015E 2016E 2017E

Income statement

Total interest income 7,170 9,161 11,283 14,256 17,222 21,315

Loans 5,362 7,118 8,679 11,032 13,784 17,131

Investments 1,725 1,963 2,453 2,789 3,286 4,012

Cash and deposits 83 80 151 435 152 171

Total interest expense 4,893 6,317 7,599 9,134 11,177 13,997

Deposits from customers 4,081 5,346 6,649 8,440 10,552 13,333

Net interest income 2,277 2,844 3,684 5,122 6,045 7,317

Loan loss provisions 274 198 354 642 410 597

Net interest income (after prov.) 2,003 2,646 3,330 4,480 5,635 6,720

Other income 1,027 1,170 1,387 1,677 2,089 2,614

Net fee income 787 893 1,011 1,193 1,455 1,775

Net capital gains 118 139 225 320 420 570

Net exchange gains 69 72 57 79 103 134

Operating expenses 2,466 2,753 3,191 3,917 4,582 5,367

Employee expenses 1,246 1,379 1,571 1,966 2,244 2,634

Depreciation on investments 8 (4) (2) 10 10 10

Other provisions 5 46 14 40 50 60

Pretax income 551 1,021 1,514 2,190 3,082 3,898

Tax provisions 0 0 — 372 863 1,169

Net profit 551 1,021 1,514 1,818 2,219 2,729

% growth 157 85 48 20 22 23

PBT - Treasury + Provisions 721 1,122 1,655 2,562 3,132 3,995

% growth 19 56 47 55 22 28

Balance sheet

Cash and bank balance 4,566 8,833 6,896 6,901 8,295 9,749

Cash 857 906 849 891 936 983

Balance with RBI 3,218 2,882 4,202 4,165 5,514 6,921

Net value of investments 25,178 33,587 36,342 40,129 50,647 60,198

Govt. and other securities 20,219 24,332 28,072 31,898 42,451 52,033

Shares — 2 — — — —

Debentures and bonds 30 30 391 352 317 285

Net loans and advances 52,844 65,861 81,402 101,909 132,416 166,217

Fixed assets 1,846 2,394 2,386 1,710 2,287 2,827

Net Owned assets 1,846 2,394 2,386 1,710 2,287 2,827

Other assets 2,335 2,114 2,205 2,095 2,514 3,017

Total assets 86,768 112,788 129,231 152,744 196,158 242,006

Deposits 63,356 83,638 103,252 122,492 162,164 203,558

Borrowings and bills payable 12,561 16,693 10,854 8,720 9,681 10,785

Other liabilities 2,238 2,426 3,587 5,739 6,313 6,944

Total liabilities 78,155 102,758 117,692 136,951 178,157 221,287

Paid-up capital 2,407 2,501 2,503 2,808 2,808 2,808

Reserves & surplus 6,207 7,529 9,036 12,985 15,194 17,912

Total shareholders' equity 8,614 10,031 11,540 15,793 18,001 20,720


MMDR ordinance gets presidential nod; incorporates the auction of other minerals, as well

The MMDR ordinance incorporates the auction process for mine awards of other minerals as

well after inclusion of coal. New leases will be awarded through auctions but the ordinance also

introduces a transient clause, aimed at terminating the existing leases after a certain number of

years and putting them up for auction. Such a transition is more tolerant of mines catering to

captive needs rather than merchant ones. We detail the main inclusions.

Existing leases get moratorium. The MMDR ordinance is lenient towards captive mines

versus merchant mines as it allows existing captive mines to operate at least until March 31,

2030 and merchant mines until March 31, 2020 or the later of (1) the end of 50 years

from the date of first grant of the lease, or (2) the actual expiry of the lease period

(for lease renewals).

Pending mining leases likely to be covered, too. The ordinance states that a moratorium

provision will not apply only to leases for which renewals have been rejected or the

leases lapsed. The ordinance states that such cases would remain eligible where the state

has issued a letter of intent for grant of mining lease; the mining leases will be granted

within two years.

Auction process. All new leases to private companies will be granted through a competitive

bidding process compared to the allotment route earlier while government companies will

continue to receive allotments. The auctioning process for (1) explored minerals will entail

direct auction of mining leases based on the procedure laid by the Central Government, and

(2) unexplored minerals (inadequate evidence of existence) will be through auction of

prospecting license-cum-mining leases with a right to subsequent mining leases on success.

District Mining Fund. A District Mining Fund will be created for people affected by mining

operations and will be funded by an additional levy on the mines for a maximum amount of

a third of existing royalty payouts. An additional amount equal to 2% of royalty on minerals

will be paid to National Mineral Exploration Trust. This effectively means a 35% increase in

royalty. For example, royalty on iron ore will rise to 20.3% from the existing 15%.

Implication on miners in Odisha and Goa

Mines that that were closed in Odisha/Jharkhand due to applicability of the second deemed

renewal and mines whose leases were not renewed can operate till March 2020/March 2030

(merchant/ captive). The ordinance states the moratorium clause will not only be applicable to

mining leases for which renewal has been rejected, or lease has lapsed. However, uncertainty

exists for 18 mines that were closed under the second deemed renewal provision since the

Odisha government indicated its intention to auction the mines. The Goa government renewed

31 mines that can function until expiry of lease renewals (2027). We estimate moderate cost

increases for NMDC, Tata Steel, Jindal Steel and Power and Hindustan Zinc due to the effective

increase in royalty rates. We believe JSW Steel stands to benefit as the ordinance paves the way

for expediting new mine auctions.

Metals & Mining India

MMDR ordinance—may bring cheer to miners. The MMDR ordinance provides

deemed extension of existing mine leases to the later of (1) March 2030 for

captive/March 2020 for merchant or (2) end of 50 years from the date of the initial

grant of lease or (3) the actual expiry of the mining lease. The existing mines will be put

on auction after this period. The transition period provided by the bill may bring cheer

to miners and end uncertainty about mining operations (except in Odisha). Payment to

the District Mining Fund and National Mineral Exploration Trust has been set at 33%

and 2% of royalty, respectively. Non-integrated mills like JSW Steel can gain from

expedited mine auctions.

CAUTIOUS

JANUARY 14, 2015

UPDATE

BSE-30: 27,426



Tata Steel – leases likely to be extended to 2030

Tata Steel’s major iron ore mines in (1) Odisha (Joda East and Katamati) resumed operations

from December 15, 2014, based on express orders, and (2) Jharkhand (Noamundi) resumed

operations from January 2015 following the state government’s express orders. These three

mines account for 16 mtpa of iron ore production or 95% of Tata Steel’s extant iron ore

requirements. We believe the leases will be eligible for a moratorium until March 31, 2030

before being re-auctioned with right of first refusal to Tata Steel.

The Odisha government, in a recent Cabinet meeting, decided to auction 18 iron ore and

manganese leases that were awaiting express orders and to renew leases of only eight

mines. Khandband is included in the list of 18 mines to be auctioned. Khandband is a

relatively small mine for Tata Steel with big potential – it supplies mere 5% of extant iron

ore requirements but was likely to be main iron ore source for upcoming Kalinganagar Steel

projects through mine expansion. We are not sure whether Odisha’s order can be construed

as rejection of the renewal application for the Khandband mines. The lease will be deemed

to be extended if there is no express rejection as the MMDR ordinance would override the

state’s order. In any case, the right of first refusal offers comfort in terms of iron ore

availability for the project from Khandband, though at a cost now.

Tata Steel costs will also increase due to the contribution to the District Mining Fund (DMF).

We expect (1) EBITDA impact of 2% on assuming contribution of a third of the iron ore

royalty to the DMF and (2) fair value impact of 4%.

Exhibit 1: Tata Steel may find lease renewal of Khandband mine difficult given that the Odisha government has not issued express orders Date of lease expiry, mine production of various mines of Tata Steel and Jindal Steel and Power, (mn tons)

Note: (1) ROM production

Source: Odisha government, Shah Commission Report, Jharkhand High Court, Kotak Institutional Equities

JSW Steel can benefit from mine auctions

We believe the MMDR ordinance is likely to expedite the mine-award process, which came

to a standstill due to lack of clarity regarding various illegalities associated with iron ore

mining and investigation by the Supreme Court appointed committee.

JSW Steel will benefit from the expedited mine auctions. JSW Steel can bid for mines in

Karnataka as well as Odisha. We believe the distance of Odisha-based mines will be feasible

for JSW Steel’s steel plants, though it may be constrained to sell 50% of produce in the

state, as per a state order.

Lease expired Production1

Company Iron ore mine /expiry on Lease renewals applied mtpa Mine status

Tata Steel

Joda East 30-Jun-05 Applied for 3rd renewal on 27 April 2004 6.1 Express orders

Khandbandh 16-Jan-03 Applied on 29 October 2001 0.8 Operations suspended

Katamati 16-Jan-03 Applied for 3rd renewal on 5 September 2001 5.0 Express orders

Noamundi 31-Dec-11 Applied for 3rd renewal on 17 December 2009 4.8 Express orders

Total production (ROM) 16.6

Jindal Steel and Power

TRB mines 24-May-05 Applied for first lease renewal on 15 April 2004 2.4

Sarda mines 13-Aug-21 7.6 Operations suspended due to EC expiry

Total production (ROM) 10.0

India Metals & Mining


Relevant provisions from the MMDR ordinance

Provision for enhancement of area for prospecting license/mining lease. The

MMDR Act earlier restricted the prospecting license/mining lease (one or more such

license/lease) that can be acquired by an entity to 25/10 square kilometers. The MMDR

ordinance gives powers to the central government to increase the area limit in the

interest of mineral/industry development by recording it in writing.

New mining leases for 50 years. All new mining leases will be granted for 50 years and

all mining leases before commencement of MMDR ordinance shall be deemed to be

granted for 50 years. Note that earlier provisions entitled first lease for 30 years and

subsequent renewals to a maximum of 20 years.

Auction process. The auction process will differ for explored minerals (where adequate

evidence exists of mineral content) and unexplored minerals (where such evidence does

not exist).

Explored minerals. In cases where the existence of mineral contents by the central

government is established, the state government shall grant a mining lease through

the auction method (including e-auctions). The Central government will notify terms

and conditions and procedure for auctions which may include (1) share in production

of mineral or (2) a payment linked to royalty or a combination or modification of these.

Unexplored minerals. In cases of inadequate evidence to confirm existence of

minerals, the state government can (after the central government’s approval) grant a

prospecting license-cum-mining lease for notified minerals in such areas. The

procedure will be (1) state government will notify the areas in which prospecting

license cum mining lease shall be granted, (2) selection will be based on auction (e-

auction), (3) the holder shall be required to complete prospecting within stipulated

time, and (4) the holder as it establishes the existence of mineral content shall have the

right to get the mining lease in the area.

Moratorium period. On expiry of the lease period, the existing leases shall be put up for

auction .Also, for pre-existing leases before the commencement of the MMDR ordinance,

the lease expiry shall be the later of

a) The mining lease for captive use. (1) March 31 2030, (2) until the completion of

the renewal period in case of renewals, or (3) 50 years from date of first grant of

lease.

b) Merchant mines. (1) March 31, 2020, (2) till the completion of renewal period in

case of renewals, or (3) 50 years from date of first grant of lease.

Right of first refusal. If the mineral is used for captive purposes, the leaseholder will

have the right of first refusal at the time of auctions.

Determined, lapsed or rejected leases. The above provisions shall not apply to leases

that have been rejected, determined or lapsed.

District Mineral Foundation. To the benefit of people affected by mining, a DMF will

be established by the state government, which will collect revenues from mine holders for

amounts not exceeding a third of royalty.

National Mineral Exploration Trust. The mine holder will also pay 2% of royalty

amount to National Mineral Exploration Trust, a non-profit body set up by central

government for regional and detailed exploration of minerals.



Prior applications are ineligible. All applications for mining lease received prior to

MMDR ordinance will become ineligible.

Pending mining leases. However, if the state government has already issued a letter of

intent to grant a mining lease, the mining lease shall be granted within two years from

the date of MMDR ordinance.

A Reconnaissance Permit, Prospecting License. In cases where a RP/PL is granted

before the commencement of MMDR ordinance, the permit holder shall have the right to

obtain a PL/ML if the state government is satisfied that reconnaissance or prospecting

operations have been carried on.

Non-exclusive reconnaissance permit. The state government may grant a non-exclusive

reconnaissance permit, but the holder shall not be entitled to make any claim for grant of

prospecting license cum mining lease.

Transfer of mining lease. A mining lease holder (or prospecting license holder) may

transfer his mining lease with the previous approval of state government after intimating

the consideration payable by the successor. If state government does not respond to the

request within 90 days, it shall be construed that it has not objection in such transfer.

Mining lease to a government company. The state government may grant prospecting

license or mining lease to Government Company on payment of amount prescribed by

the Central government; in case the government company enters into JV with private

company, the JV partner shall be selected through competitive process but the

government company shall hold more than 75%.

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December 2014: Results calendar

.

Mon Tue Wed Thu Fri Sat Sun

12-Jan 13-Jan 14-Jan 15-Jan 16-Jan 17-Jan

CMC DCB BANK BAJAJ FINANCE BAJAJ AUTO AXIS BANK M&M FINANCIAL

INDUSIND BANK BAJAJ FINSERV BAJAJ HOLDINGS DHFL

RELIANCE INFRASTRUCTURE LIC HOUSING FINANCE DB CORP NIIT LTD

NIIT TECHNOLOGIES FEDERAL BANK OBEROI RLTY

YES BANK TCS RELIANCE INDUSTRIES

RS SOFTWARE

WIPRO


GRUH BASF INGVYSYA BANK BIOCON COLGATE-PALMOLIVE PERSISTENT

IBULHSGFIN HINDUSTAN MEDIA VENTURES L&T FINANCE CAIRN COROMANDEL TATACOFFEE

HIND UNILVR KIRLOSKAR OIL RAYMOND DISH TV WABCO INDIA

HINDUSTAN ZINC KOTAK BANK ZEE ENTERTAINMENT MAHINDRA HOLIDAYS BEL

MINDTREE RALLIS MASTEK EDELWEISS

NAUKRI SOUTHBANK POLARIS

TATASPONGE ZEEMEDIA


CHENN PETRO RANBAXY LABORATORIES ASHOK LEY BERGER PAINT TORNT POWER

CHOLA FINANCE TORRENT PHARMACEUTICALS ASIAN PAINT DABUR

GSFC JYOTHY LAB DR REDDY HCL TECH

KARNATAKA BANK HDFC ICICIBANK

MARUTI IDFC JSW STEEL

OIL COUN TUB MAHINDRA LIFESPACE

TRENT MONSANTO

TECH MAHINDRA

SHOPER STOP

SUNTV

2-Feb 3-Feb 4-Feb 5-Feb 6-Feb 7-Feb

GICHSGFIN DEEPAK FERT TATA POWER GODREJ CONSUMER CHAMBL FERT GIPCL

TBZ JK CEMENT


AURO LAB CARE RATING GILLETTE

MOTHERSUMI


AMBUJA CEMENTS

Source: BSE, Kotak Institutional Equities

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Kotak Institutional Equities: Valuation summary of KIE Universe stocks

Target O/S

Price (Rs) price Upside Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) ADVT-3mo

Company Rating 13-Jan-15 (Rs) (%) (Rs mn) (US$ mn) (mn) 2015E 2016E 2017E 2015E 2016E 2017E 2015E 2016E 2017E 2015E 2016E 2017E 2015E 2016E 2017E 2015E 2016E 2017E 2015E 2016E 2017E (US$ mn)

Automobiles

Amara Raja Batteries SELL 823 550 (33.2) 140,579 2,262 171 24.4 29.9 35.4 13.6 22.5 18.4 33.7 27.5 23.2 20.4 16.9 14.7 8.4 6.8 5.5 0.6 0.7 0.9 27.4 27.2 26.3 4.0

Apollo Tyres BUY 224 250 11.8 113,843 1,832 509 22.1 23.6 24.8 4.2 6.4 5.4 10.1 9.5 9.0 5.7 5.8 5.6 2.0 1.7 1.4 0.4 0.4 0.4 22.0 19.3 17.1 13.3

Ashok Leyland SELL 60 40 (33.1) 170,183 2,738 2,848 0.4 1.9 2.7 121.2 401.7 42.0 157.3 31.3 22.1 22.8 14.5 11.9 3.2 3.1 2.9 — 1.4 2.0 2.2 10.0 13.5 16.3

Bajaj Auto ADD 2,324 2,650 14.0 672,518 10,820 289 106.2 133.3 152.6 (5.2) 25.4 14.5 21.9 17.4 15.2 15.8 13.7 12.2 6.0 5.1 4.3 1.8 2.3 2.6 29.5 31.4 30.5 15.3

Bharat Forge SELL 985 630 (36.0) 229,326 3,690 237 29.5 35.9 42.2 40.5 21.7 17.3 33.4 27.4 23.4 17.3 14.8 13.0 7.2 6.0 5.0 0.6 0.7 0.8 23.7 23.9 23.4 15.0

Eicher Motors SELL 14,799 9,000 (39.2) 401,128 6,454 27 238.0 380.8 483.2 63.3 60.0 26.9 62.2 38.9 30.6 34.9 22.6 18.0 15.3 11.3 8.4 0.2 0.2 0.2 27.5 33.4 31.4 13.3

Exide Industries REDUCE 185 160 (13.6) 157,420 2,533 850 7.1 8.9 10.3 24.2 24.9 15.9 26.0 20.8 18.0 16.2 13.4 11.8 3.9 3.4 3.0 1.4 1.4 1.4 15.5 17.4 17.9 7.4

Hero Motocorp BUY 2,893 3,650 26.2 577,736 9,295 200 146.2 195.5 230.6 38.4 33.8 18.0 19.8 14.8 12.5 15.3 11.5 10.1 8.5 6.9 5.7 2.5 3.4 4.0 47.0 51.6 49.7 33.2

Mahindra CIE Automotive BUY 244 280 14.9 22,766 366 323 1.2 5.0 9.6 (63.1) 305.0 90.5 196.5 48.5 25.5 8.4 5.8 4.0 5.6 5.0 4.2 — — — 2.9 10.9 17.9 1.0

Mahindra & Mahindra REDUCE 1,249 1,275 2.1 775,620 12,479 562 58.7 63.4 79.1 (14.3) 7.9 24.8 21.3 19.7 15.8 16.7 15.8 12.9 3.9 3.7 3.3 0.5 0.7 1.4 18.9 19.3 22.1 20.5

Maruti Suzuki BUY 3,468 4,000 15.3 1,047,689 16,856 302 117.2 189.4 249.5 27.2 61.6 31.7 29.6 18.3 13.9 17.2 11.6 8.9 4.5 3.8 3.2 0.8 1.4 1.8 15.9 22.4 25.0 16.4

Motherson Sumi Systems REDUCE 446 370 (17.1) 393,511 6,331 882 9.7 15.5 22.6 (4.2) 59.2 45.7 45.8 28.8 19.8 14.8 10.8 7.9 10.5 7.7 5.5 0.6 1.0 1.5 25.6 30.9 32.6 16.3

Tata Motors BUY 519 680 30.9 1,560,605 25,108 3,218 51.9 69.1 79.6 11.6 33.1 15.2 10.0 7.5 6.5 4.8 4.0 3.4 2.0 1.6 1.3 — — — 22.6 23.8 21.8 39.7

WABCO India ADD 4,817 4,900 1.7 91,362 1,470 19 72.7 130.4 159.9 25.3 79.5 22.6 66.3 36.9 30.1 40.6 23.5 19.2 10.5 8.8 7.3 0.2 0.7 0.8 17.0 25.9 26.3 0.6

Automobiles Attractive 6,354,286 102,233 12.3 34.4 19.8 18.6 13.8 11.5 9.8 7.9 6.7 3.7 3.1 2.5 0.7 1.1 1.4 20.1 22.2 21.9 212.4

Banks/Financial Institutions

Axis Bank ADD 505 525 4.1 1,192,369 19,184 2,349 29.5 35.2 40.3 11.3 19.6 14.5 17.1 14.3 12.5 — — — 2.7 2.4 2.0 1.0 1.2 1.4 16.9 17.6 17.5 30.5

Bajaj Finserv ADD 1,286 1,380 7.3 204,707 3,293 159 102.5 113.9 128.7 6.4 11.0 13.0 12.5 11.3 10.0 — — — 2.1 1.7 1.5 1.1 1.1 1.1 17.0 16.7 16.1 1.9

Bank of Baroda ADD 1,082 1,050 (2.9) 464,455 7,473 431 111.0 133.9 167.4 5.3 20.7 25.0 9.7 8.1 6.5 — — — 1.2 1.1 0.9 2.1 2.5 3.2 13.0 14.1 15.8 18.5

Bank of India ADD 295 320 8.7 189,146 3,043 643 58.6 65.7 89.9 38.0 12.1 36.8 5.0 4.5 3.3 — — — 0.6 0.5 0.5 2.3 2.6 3.6 13.5 13.5 16.2 17.3

Cholamandalam ADD 499 500 0.2 71,686 1,153 155 27.3 36.2 44.0 6.6 32.6 21.6 18.3 13.8 11.3 — — — 2.5 2.2 1.9 0.9 1.1 1.4 15.8 16.8 17.8 0.6

City Union Bank ADD 96 105 8.9 57,471 925 589 7.2 7.9 9.0 13.0 9.3 14.0 13.3 12.2 10.7 — — — 2.1 1.8 1.6 1.2 1.3 1.5 17.9 16.0 16.0 1.1

DCB Bank BUY 123 140 13.8 34,624 557 281 6.5 7.9 9.7 7.1 22.1 23.0 19.0 15.6 12.7 — — — 2.2 1.9 1.7 - - - 13.8 13.5 14.5 2.8

Dewan Housing Finance BUY 433 540 24.8 55,686 896 128 50.5 58.6 67.9 21.9 15.9 15.9 8.6 7.4 6.4 — — — 1.4 1.2 1.0 1.3 1.5 1.8 16.8 16.9 16.9 6.6

Federal Bank BUY 148 145 (2.3) 126,941 2,042 855 12.0 14.0 15.9 22.5 16.5 13.7 12.3 10.6 9.3 — — — 1.6 1.5 1.3 1.7 1.9 2.2 14.0 14.6 14.8 9.0

HDFC ADD 1,122 1,210 7.8 1,764,159 28,383 1,561 41.3 48.1 56.9 18.4 16.4 18.4 27.1 23.3 19.7 — — — 6.1 5.5 4.8 1.5 1.8 2.1 21.8 22.6 23.7 39.0

HDFC Bank ADD 963 1,000 3.8 2,328,810 37,468 2,399 43.1 51.7 60.4 22.0 19.8 16.9 22.3 18.7 16.0 — — — 4.5 3.8 3.2 0.9 1.0 1.2 21.8 22.0 21.7 29.5

ICICI Bank BUY 341 400 17.3 1,974,353 31,765 5,775 19.0 22.3 26.0 12.0 17.2 16.7 17.9 15.3 13.1 — — — 2.5 2.2 2.0 1.7 2.0 2.3 14.3 15.2 16.1 64.4

IDFC BUY 157 200 27.7 249,151 4,009 1,585 10.1 9.1 11.9 (16.0) (10.3) 31.8 15.5 17.3 13.1 — — — 1.4 1.3 1.2 1.2 0.5 0.6 10.0 8.1 9.8 15.4

IIFL Holdings BUY 167 175 4.9 51,107 822 296 14.0 16.5 19.2 49.3 17.5 16.7 11.9 10.1 8.7 — — — 2.0 1.8 1.5 2.2 2.5 3.0 18.5 19.1 19.6 0.4

IndusInd Bank ADD 826 870 5.4 436,734 7,027 526 34.0 42.0 48.6 26.8 23.7 15.6 24.3 19.7 17.0 — — — 4.1 3.5 3.0 0.5 0.7 0.8 19.3 19.9 19.5 11.3

J&K Bank REDUCE 152 135 (11.2) 73,662 1,185 485 17.9 20.6 22.1 (26.7) 15.2 7.5 8.5 7.4 6.9 — — — 1.2 1.0 0.9 2.4 2.8 3.0 14.3 14.8 14.2 1.9

Karur Vysya Bank BUY 564 620 9.9 68,160 1,097 121 48.0 65.0 77.1 19.8 35.4 18.6 11.7 8.7 7.3 — — — 1.6 1.4 1.2 2.1 2.9 3.4 15.1 16.9 17.7 1.3

L&T Finance Holdings ADD 67 80 19.7 114,946 1,849 1,718 4.9 5.6 6.9 42.9 13.6 22.1 13.5 11.9 9.7 — — — 1.8 1.6 1.4 2.2 1.2 1.2 13.9 14.2 15.3 5.1

LIC Housing Finance ADD 462 450 (2.7) 233,331 3,754 505 30.8 36.3 43.1 17.9 17.9 18.9 15.0 12.7 10.7 — — — 2.9 2.5 2.1 1.1 1.4 1.6 19.1 19.3 19.6 23.6

Magma Fincorp ADD 106 135 27.0 20,238 326 190 9.5 12.0 13.5 32.3 26.5 13.0 11.2 8.9 7.8 — — — 1.2 1.1 1.0 1.4 1.8 2.0 11.2 13.3 13.8 0.2

Mahindra & Mahindra Financial SELL 304 260 (14.4) 172,705 2,779 564 17.2 20.0 25.2 9.2 16.6 25.6 17.7 15.2 12.1 — — — 3.0 2.6 2.2 1.3 1.6 1.9 17.8 18.2 19.9 6.5

Max India ADD 405 450 11.1 107,956 1,737 266 7.8 10.5 13.9 48.1 35.9 31.9 52.2 38.4 29.1 — — — 3.0 2.6 2.2 1.3 1.8 2.4 6.3 7.3 8.2 3.2

Muthoot Finance BUY 196 235 19.9 77,972 1,254 397 18.3 22.5 27.7 (12.9) 23.1 23.2 10.7 8.7 7.1 — — — 1.5 1.4 1.2 2.8 3.4 4.2 15.4 16.4 18.1 0.8

Oriental Bank of Commerce ADD 321 300 (6.6) 96,296 1,549 300 42.5 51.4 61.5 11.8 20.9 19.8 7.6 6.3 5.2 — — — 0.7 0.6 0.6 2.6 3.2 3.8 9.2 10.3 11.4 10.4

PFC ADD 275 330 19.9 363,407 5,847 1,319 45.2 43.4 45.4 10.2 (4.1) 4.6 6.1 6.3 6.1 — — — 1.1 1.0 0.9 3.6 3.5 3.6 20.2 16.9 15.6 14.4

Punjab National Bank REDUCE 207 180 (13.2) 375,376 6,039 1,810 24.8 28.6 33.0 34.2 15.4 15.4 8.4 7.3 6.3 — — — 1.0 1.0 0.9 6.5 7.5 8.6 12.7 13.9 15.3 19.9

Rural Electrification Corp. ADD 311 350 12.6 307,001 4,939 987 55.1 54.0 55.4 16.1 (2.0) 2.6 5.6 5.8 5.6 — — — 1.2 1.1 0.9 3.5 3.7 3.8 23.7 19.6 17.5 15.2

Shriram City Union Finance REDUCE 1,968 1,550 (21.3) 129,721 2,087 66 89.7 113.9 131.8 4.1 26.9 15.8 21.9 17.3 14.9 — — — 3.1 2.7 2.3 0.5 0.6 0.7 16.6 16.5 16.6 1.1

Shriram Transport ADD 1,040 1,150 10.6 235,845 3,794 223 63.6 82.4 99.8 12.3 29.5 21.2 16.3 12.6 10.4 — — — 2.5 2.1 1.8 0.9 1.1 1.3 16.0 18.0 18.7 12.6

SKS Microfinance ADD 460 400 (13.0) 58,001 933 126 16.4 20.2 27.4 154.2 23.0 35.3 28.0 22.7 16.8 — — — 5.4 4.4 3.5 - - - 27.2 21.4 23.1 15.7

State Bank of India ADD 305 330 8.2 2,277,795 36,647 7,466 18.8 21.6 26.9 28.8 15.2 24.1 16.2 14.1 11.4 — — — 1.8 1.6 1.4 1.0 1.1 1.1 11.3 11.9 13.3 89.3

YES Bank ADD 782 680 (13.0) 326,190 5,248 414 44.4 47.6 56.3 (1.1) 7.3 18.3 17.6 16.4 13.9 — — — 2.8 2.5 2.2 1.0 1.1 1.3 19.7 16.0 16.6 30.6

Banks/Financial Institutions Attractive 14,593,068 234,785 18.2 14.7 18.2 14.8 12.9 10.9 2.1 1.9 1.7 1.5 1.7 2.0 14.2 14.6 15.3 533.6

Dividend yield (%) RoE (%)Price/BV (X)


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Cement

ACC SELL 1,442 1,280 (11.2) 270,672 4,355 188 50.4 68.8 90.5 7.6 36.6 31.5 28.6 20.9 15.9 16.1 11.2 8.3 3.2 2.9 2.6 1.6 1.6 1.6 11.6 14.6 17.1 7.7

Ambuja Cements SELL 230 205 (10.9) 356,597 5,737 1,522 9.1 11.5 14.3 35.2 26.3 23.5 25.2 19.9 16.1 16.0 12.6 9.8 3.2 3.0 2.6 1.3 1.5 1.7 13.3 15.7 17.4 5.8

Grasim Industries ADD 3,546 3,590 1.2 325,728 5,241 92 203.9 260.2 355.0 (4.0) 27.6 36.4 17.4 13.6 10.0 7.0 5.0 3.4 1.4 1.3 1.2 1.1 1.1 1.1 8.4 9.9 12.2 4.1

India Cements REDUCE 90 100 11.5 27,554 443 307 2.8 6.2 12.8 224.0 126.9 104.4 32.6 14.4 7.0 8.0 6.6 5.3 0.7 0.7 0.7 3.0 3.0 3.0 2.2 5.0 9.8 4.3

Shree Cement SELL 9,232 6,400 (30.7) 321,614 5,174 35 255.1 374.3 480.5 8.1 46.7 28.4 36.2 24.7 19.2 18.1 13.6 11.0 6.1 5.0 4.0 0.2 0.2 0.2 18.0 22.1 23.1 1.7

UltraTech Cement SELL 2,819 2,300 (18.4) 773,407 12,443 274 81.6 103.4 141.7 9.2 26.7 37.1 34.5 27.3 19.9 18.5 13.6 10.4 4.1 3.6 3.1 0.4 0.4 0.4 12.4 14.0 16.6 9.8

Cement Cautious 2,075,572 33,393 11.4 31.7 33.9 28.0 21.2 15.9 13.5 10.1 7.6 2.9 2.7 2.3 0.8 0.8 0.9 10.5 12.5 14.6 33.4

Consumer products

Asian Paints REDUCE 834 750 (10.1) 799,827 12,868 959 16.4 21.9 24.9 27.7 33.7 13.9 51.0 38.1 33.5 32.3 23.9 21.1 16.5 13.2 10.8 0.8 0.9 1.1 35.3 38.4 35.5 19.0

Bajaj Corp. BUY 429 495 15.4 63,248 1,018 148 14.9 19.0 22.3 23.6 27.4 17.7 28.8 22.6 19.2 25.3 19.2 15.3 12.8 10.9 9.0 2.7 2.0 2.6 43.3 52.1 51.5 2.6

Britannia Industries BUY 1,933 2,050 6.0 231,865 3,730 120 48.3 61.0 70.8 46.5 26.1 16.2 40.0 31.7 27.3 25.7 20.4 17.5 18.0 13.3 10.2 0.8 1.0 1.2 55.6 48.2 42.4 4.4

Colgate-Palmolive (India) ADD 1,940 1,970 1.6 263,785 4,244 136 42.2 51.0 60.3 16.9 20.9 18.2 46.0 38.0 32.2 31.4 25.4 21.0 40.5 36.0 31.9 1.6 1.9 2.3 91.7 100.2 105.2 5.7

Dabur India ADD 236 260 10.3 414,098 6,662 1,744 6.1 7.8 9.0 18.0 26.6 15.3 38.5 30.4 26.3 30.3 23.9 20.3 12.5 10.1 8.3 1.0 1.2 1.4 35.9 36.7 34.5 4.8

GlaxoSmithKline Consumer REDUCE 5,715 5,800 1.5 240,335 3,867 42 142.1 166.7 192.6 (11.5) 17.4 15.5 40.2 34.3 29.7 29.9 24.2 20.3 11.1 9.4 8.0 0.9 1.0 1.3 30.0 29.7 29.2 0.9

Godrej Consumer Products REDUCE 1,081 960 (11.2) 368,071 5,922 340 26.1 32.7 38.3 17.0 25.3 16.8 41.4 33.0 28.3 27.8 22.1 18.5 8.3 7.1 6.1 0.6 0.7 0.9 21.7 23.2 23.2 2.7

Hindustan Unilever ADD 885 800 (9.6) 1,913,486 30,786 2,163 19.0 22.2 24.9 15.6 16.6 12.5 46.6 39.9 35.5 34.8 28.4 24.9 48.5 39.5 32.9 1.6 1.7 1.9 113.8 109.1 101.1 15.6

ITC ADD 360 410 13.9 2,879,156 46,322 8,096 12.2 14.1 16.1 14.1 15.4 14.4 29.5 25.6 22.4 19.4 16.4 14.0 10.0 8.9 7.9 2.0 2.3 2.7 31.8 33.0 36.1 42.0

Jubilant Foodworks SELL 1,397 1,100 (21.3) 91,592 1,474 66 18.0 25.8 36.2 17.4 43.2 40.3 77.6 54.2 38.6 35.4 25.3 18.3 13.8 11.0 8.6 — — 0.1 19.5 22.6 25.2 5.8

Jyothy Laboratories REDUCE 279 250 (10.4) 50,533 813 181 9.5 11.6 15.2 102.4 22.2 30.2 29.3 24.0 18.4 27.2 19.3 16.4 6.2 5.4 5.2 1.1 1.3 1.4 22.3 24.1 28.8 0.9

Marico BUY 334 370 10.7 215,559 3,468 645 9.2 11.9 13.6 16.1 30.3 14.0 36.5 28.0 24.6 24.2 18.5 16.0 12.2 9.4 7.6 0.7 1.0 1.2 37.8 38.0 34.2 4.9

Nestle India REDUCE 6,715 5,950 (11.4) 647,398 10,416 96 121.9 159.4 185.9 6.5 30.8 16.6 55.1 42.1 36.1 31.1 24.5 21.9 21.6 16.9 13.6 0.7 0.9 1.1 46.0 46.9 43.4 2.2

Page Industries SELL 10,871 7,500 (31.0) 121,249 1,951 11 180.6 223.2 273.6 31.0 23.6 22.6 60.2 48.7 39.7 37.7 30.6 25.0 30.9 22.8 16.7 0.7 0.8 0.8 59.2 54.0 48.6 2.9

Pidilite Industries ADD 539 540 0.3 276,095 4,442 513 11.4 15.7 18.3 27.7 38.1 16.9 47.4 34.3 29.4 32.2 22.9 19.2 11.9 9.8 8.2 0.6 0.9 1.1 27.3 31.4 30.3 3.4

Speciality Restaurants REDUCE 183 175 (4.4) 8,598 138 47 2.6 4.0 6.3 (34.8) 53.6 55.8 69.8 45.4 29.2 23.7 16.2 11.2 2.7 2.6 2.4 0.5 0.5 0.7 4.0 5.8 8.4 0.3

Tata Global Beverages REDUCE 155 160 3.1 96,006 1,545 631 6.5 7.7 8.8 18.3 18.1 15.0 23.9 20.2 17.6 12.3 10.8 9.4 1.6 1.5 1.5 1.4 1.6 1.9 6.9 7.8 8.5 6.5

Titan Company REDUCE 372 350 (6.0) 330,434 5,316 888 9.4 11.1 13.0 11.1 18.4 16.8 39.7 33.5 28.7 27.1 21.5 18.3 10.7 9.1 7.8 0.7 1.1 1.3 29.7 29.4 29.2 6.6

United Breweries SELL 926 650 (29.8) 244,866 3,940 264 10.1 13.6 17.4 18.1 34.0 28.7 91.5 68.3 53.1 37.5 31.3 26.1 13.2 11.4 9.7 0.2 0.2 0.3 15.0 17.9 19.7 3.3

United Spirits BUY 3,104 3,200 3.1 451,105 7,258 145 24.7 67.3 83.6 375.8 172.3 24.3 125.6 46.1 37.1 43.6 25.9 22.2 14.4 11.3 9.0 0.1 0.2 0.3 11.7 27.5 26.9 12.7

Consumer products Neutral 9,707,304 156,179 18.7 23.2 15.9 40.0 32.5 28.0 26.6 21.4 18.3 13.2 11.2 9.7 1.3 1.5 1.8 32.9 34.6 34.5 147.1

Energy

Aban Offshore RS 484 — — 27,523 443 57 99.6 106.8 110.5 18.8 7.2 3.5 4.9 4.5 4.4 6.6 6.2 5.9 0.5 0.5 0.4 1.5 1.2 1.2 12.3 11.4 10.7 16.3

Bharat Petroleum ADD 670 800 19.5 484,141 7,789 723 44.2 56.3 58.8 (21.2) 27.3 4.4 15.1 11.9 11.4 7.8 6.3 6.1 2.3 2.0 1.8 2.0 2.5 2.7 15.6 17.9 16.7 19.5

Cairn India REDUCE 234 255 9.0 438,805 7,060 1,875 40.4 28.6 25.8 (38.0) (29.1) (9.8) 5.8 8.2 9.1 4.2 5.2 4.4 0.7 0.7 0.6 3.5 2.6 2.6 12.8 8.6 7.3 12.0

Castrol India SELL 511 300 (41.2) 252,473 4,062 495 10.0 11.4 12.6 (0.2) 14.3 10.5 51.3 44.8 40.6 34.1 29.7 26.8 47.0 44.6 42.4 1.5 1.8 2.0 76.5 102.1 107.3 3.8

GAIL (India) ADD 428 460 7.4 543,099 8,738 1,268 27.8 26.9 34.4 (14.9) (3.2) 27.9 15.4 15.9 12.4 10.9 10.2 7.9 1.9 1.7 1.6 1.9 2.0 2.8 12.5 11.3 13.4 13.9

GSPL ADD 126 105 (17.0) 71,169 1,145 563 7.5 8.7 10.0 0.9 15.5 15.3 16.8 14.6 12.6 7.9 7.0 6.1 1.9 1.8 1.7 1.2 2.1 3.2 12.1 12.7 13.6 3.4

Hindustan Petroleum REDUCE 588 540 (8.2) 199,147 3,204 339 46.3 57.8 58.2 (9.6) 24.9 0.7 12.7 10.2 10.1 10.3 7.6 6.8 1.2 1.2 1.1 2.4 3.0 3.0 10.1 11.8 11.0 19.5

Indian Oil Corporation ADD 340 375 10.2 825,868 13,287 2,428 16.2 34.1 37.0 (33.2) 110.5 8.6 21.0 10.0 9.2 11.1 5.9 5.0 1.2 1.1 1.0 1.8 3.3 3.6 5.8 11.5 11.5 8.1

Oil & Natural Gas Corporation ADD 340 365 7.4 2,908,439 46,793 8,556 28.8 33.0 38.4 (7.4) 14.8 16.4 11.8 10.3 8.8 5.0 4.3 3.7 1.6 1.4 1.3 2.9 3.7 4.3 13.6 14.5 15.5 30.5

Oil India ADD 535 615 14.9 321,728 5,176 601 49.5 58.3 65.3 (0.3) 18.0 12.0 10.8 9.2 8.2 7.1 5.7 5.1 1.4 1.3 1.2 3.7 4.5 5.0 13.8 15.2 15.7 3.7

Petronet LNG REDUCE 207 190 (8.3) 155,438 2,501 750 10.9 12.5 15.4 14.8 14.9 23.0 19.0 16.6 13.5 10.4 9.6 8.0 2.8 2.5 2.2 1.1 1.6 2.2 15.4 15.9 17.4 4.5

Reliance Industries ADD 843 1,000 18.6 2,476,965 39,851 3,233 71.5 74.0 90.0 5.1 3.6 21.6 11.8 11.4 9.4 9.3 8.9 6.0 1.3 1.2 1.0 1.1 1.2 1.5 11.2 10.6 11.7 52.4

Energy Cautious 8,704,793 140,050 (11.0) 11.8 14.7 12.0 10.7 9.3 7.3 6.2 5.1 1.4 1.3 1.2 2.2 2.6 3.1 11.4 11.8 12.4 187.8



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Industrials

ABB SELL 1,271 700 (44.9) 269,399 4,334 212 11.6 24.0 32.2 38.6 107.4 34.3 109.9 53.0 39.4 58.7 33.4 26.3 9.5 8.3 7.0 0.3 0.3 0.3 8.9 16.7 19.2 2.4

Bharat Heavy Electricals SELL 258 200 (22.3) 630,257 10,140 2,448 11.6 13.7 15.9 (18.1) 18.0 16.6 22.2 18.8 16.2 14.4 10.9 8.0 1.8 1.7 1.6 1.0 1.1 1.3 8.3 9.2 10.0 21.3

Crompton Greaves BUY 187 210 12.1 117,358 1,888 627 5.7 9.2 13.1 45.7 61.3 42.5 33.0 20.4 14.3 16.6 12.0 8.9 3.0 2.5 2.2 0.7 0.8 0.9 9.4 13.4 16.3 20.6

Cummins India REDUCE 878 720 (18.0) 243,479 3,917 277 26.7 32.6 43.7 25.3 21.9 34.2 32.9 27.0 20.1 30.0 21.4 15.6 8.2 7.0 5.9 1.3 1.5 2.0 26.7 28.1 32.0 2.9

Kalpataru Power Transmission ADD 235 200 (14.9) 36,048 580 153 9.9 8.7 11.6 24.3 (12.4) 33.3 23.7 27.1 20.3 9.1 7.7 6.7 1.6 1.5 1.5 0.6 0.6 0.6 7.0 5.8 7.4 2.0

KEC International ADD 93 115 23.2 23,999 386 257 4.5 8.5 12.1 37.6 87.6 41.8 20.5 10.9 7.7 8.0 6.2 5.0 1.7 1.5 1.3 1.1 2.1 3.0 8.9 14.5 18.2 0.7

Larsen & Toubro ADD 1,520 1,650 8.6 1,411,386 22,708 927 40.7 58.6 78.8 (16.3) 43.8 34.4 37.3 25.9 19.3 19.7 15.1 13.0 3.7 3.3 3.0 1— 1— 1— 10.4 13.5 16.2 42.7

Siemens SELL 919 600 (34.7) 327,417 5,268 356 17.8 24.3 29.9 104.7 36.2 23.1 51.6 37.9 30.7 29.2 22.3 18.0 7.2 6.4 5.7 0.6 0.8 1.0 14.3 18.0 19.6 5.0

Thermax REDUCE 1,029 850 (17.4) 122,582 1,972 119 22.7 33.5 45.9 10.1 47.5 36.8 45.3 30.7 22.4 31.5 20.3 14.4 5.6 5.0 4.4 0.8 1.0 1.4 12.8 17.2 20.8 1.0

Voltas REDUCE 242 260 7.4 80,091 1,289 331 8.7 12.0 14.2 16.9 38.4 18.6 27.9 20.2 17.0 22.9 14.9 12.2 4.0 3.5 3.1 0.9 1.5 1.8 14.9 18.5 19.4 11.0

Industrials Neutral 3,262,016 52,482 (5.8) 35.7 29.0 34.6 25.5 19.8 20.0 15.2 12.6 3.4 3.1 2.8 0.8 1.0 1.2 9.8 12.2 14.1 109.6

Infrastructure

Adani Port and SEZ REDUCE 323 300 (7.1) 668,627 10,757 2,084 12.0 16.5 21.2 43.4 37.8 28.7 27.0 19.6 15.2 16.9 13.0 10.5 5.7 4.6 3.7 0.6 0.7 0.9 24.2 25.9 26.8 13.4

Container Corporation REDUCE 1,357 1,330 (2.0) 264,668 4,258 195 48.9 55.4 70.4 (3.1) 13.2 27.0 27.7 24.5 19.3 18.9 15.9 12.2 3.4 3.1 2.8 0.8 0.9 1.2 13.0 13.4 15.3 2.5

Gujarat Pipavav Port REDUCE 219 160 (26.8) 105,728 1,701 483 7.0 9.4 12.1 94.1 33.5 29.2 31.1 23.3 18.0 26.5 20.0 15.5 6.1 4.8 3.7 — — — 21.7 23.0 23.3 4.4

IRB Infrastructure REDUCE 235 210 (10.8) 78,222 1,258 332 13.3 15.3 20.9 (3.8) 15.4 36.4 17.7 15.3 11.3 8.6 7.6 7.5 2.0 1.9 1.7 1.7 1.7 1.7 11.9 12.7 15.5 11.7

Sadbhav Engineering buy 250 275 10.1 42,818 689 171 8.3 9.3 10.9 24.6 12.1 17.6 30.1 26.9 22.8 15.4 12.7 11.1 3.0 2.8 2.5 — — — 12.1 10.8 11.4 1.1

Infrastructure Cautious 1,160,062 18,664 26.4 29.0 28.8 26.5 20.6 16.0 15.5 12.3 10.3 4.4 3.7 3.1 0.7 0.8 0.9 16.5 18.1 19.6 33.0

Infrastructure

Info Edge ADD 855 1,070 25.1 102,821 1,654 120 10.1 16.5 26.7 23.0 63.9 61.5 84.7 51.7 32.0 79.5 44.0 23.4 6.8 6.4 5.9 0.4 0.7 1.1 11.1 12.8 19.2 2.2

Just Dial ADD 1,546 1,650 6.7 108,857 1,751 70 20.6 28.6 51.7 20.0 38.5 81.0 74.9 54.1 29.9 57.3 38.9 19.5 17.5 14.7 11.4 0.5 0.6 1.2 25.1 29.5 42.9 7.5

Internet Attractive 211,677 3,406 26.4 50.1 71.3 79.6 53.1 31.0 65.9 41.1 21.1 10.0 9.1 7.8 0.4 0.7 1.1 12.5 17.1 25.3 9.6

Media

DB Corp. ADD 400 375 (6.3) 73,452 1,182 183 18.7 23.3 27.1 12.1 24.5 16.1 21.4 17.1 14.8 12.3 9.9 8.5 5.7 4.9 4.3 2.3 2.8 3.5 28.1 30.7 31.2 0.3

DishTV ADD 67 70 3.9 71,778 1,155 1,065 (0.1) 1.4 3.2 93.5 1,516.7 135.4 (705.4) 49.8 21.2 11.3 9.1 7.0 4.3 4.3 4.3 — — — (0.6) 8.7 20.4 4.0

Jagran Prakashan ADD 138 150 9.1 44,950 723 311 7.7 9.7 11.5 2.6 26.1 18.5 17.8 14.1 11.9 9.8 8.2 7.0 4.0 3.6 3.2 2.9 3.6 4.4 23.8 27.1 28.7 0.6

Sun TV Network ADD 371 385 3.8 146,205 2,352 394 20.2 22.7 26.5 6.2 12.7 16.6 18.4 16.3 14.0 11.7 10.1 8.5 4.3 3.9 3.5 2.8 3.3 3.8 24.4 25.0 26.4 5.9

Zee Entertainment Enterprises ADD 362 375 3.7 347,442 5,590 960 8.6 10.4 12.8 (6.8) 21.4 23.4 42.3 34.8 28.2 24.7 20.8 17.2 6.7 6.0 5.4 1.2 1.5 1.8 16.5 18.2 20.2 18.6

Media Neutral 683,828 11,002 8.8 26.4 25.4 31.2 24.7 19.7 15.6 13.1 10.8 5.4 4.9 4.5 1.4 1.8 2.2 17.3 20.0 22.7 29.4

Metals & Mining

Coal India ADD 361 360 (0.3) 2,281,471 36,706 6,316 22.5 28.1 23.7 (5.9) 24.7 (15.5) 16.0 12.9 15.2 9.6 8.3 9.1 4.5 3.9 3.6 3.2 4.0 3.3 29.8 32.8 24.6 17.0

Hindalco Industries REDUCE 152 165 8.8 313,258 5,040 2,065 16.3 16.6 20.4 31.0 1.9 22.5 9.3 9.1 7.4 7.9 6.4 5.5 0.7 0.7 0.6 0.9 0.9 0.9 8.0 7.6 8.7 22.2

Hindustan Zinc ADD 159 190 19.4 672,460 10,819 4,225 16.9 18.3 19.3 2.7 8.1 5.8 9.4 8.7 8.2 5.4 4.2 3.2 1.6 1.4 1.2 2.2 2.2 2.2 17.8 16.8 15.7 3.6

Jindal Steel and Power REDUCE 149 160 7.6 136,092 2,190 915 15.9 21.6 25.6 (23.8) 35.9 18.6 9.3 6.9 5.8 8.0 6.1 5.6 0.6 0.6 0.5 1.3 1.3 1.3 6.6 8.9 9.7 18.8

JSW Steel BUY 993 1,490 50.0 240,139 3,864 242 111.0 140.2 160.0 67.8 26.3 14.1 8.9 7.1 6.2 5.6 5.0 4.4 1.0 0.9 0.8 1.2 1.2 1.2 11.6 13.1 13.3 10.3

National Aluminium Co. SELL 49 56 14.8 125,769 2,023 2,577 5.0 5.1 5.4 88.9 2.4 6.7 9.8 9.6 9.0 3.9 3.7 3.1 1.0 0.9 0.8 3.1 3.1 2.0 10.2 9.8 9.7 1.5

NMDC ADD 135 185 37.0 535,237 8,611 3,965 18.4 18.5 17.5 15.3 0.5 (5.6) 7.3 7.3 7.7 3.8 4.0 4.0 1.6 1.5 1.4 6.3 6.3 6.3 23.1 21.0 18.2 7.3

Sesa Sterlite BUY 205 250 22.2 606,575 9,759 2,965 21.3 17.4 21.6 25.9 (18.6) 24.3 9.6 11.8 9.5 5.4 5.2 4.1 0.8 0.8 0.7 1.6 1.6 1.6 8.4 6.5 7.7 18.7

Tata Steel REDUCE 392 495 26.4 380,231 6,117 971 38.9 45.6 56.2 4.4 17.0 23.4 10.1 8.6 7.0 6.3 6.1 5.4 0.9 0.8 0.7 2.0 2.0 2.0 8.9 9.7 11.0 36.4

Metals & Mining Cautious 5,291,231 85,130 8.6 10.4 2.4 11.1 10.1 9.8 6.5 5.8 5.2 1.5 1.4 1.3 2.8 3.2 2.9 13.6 13.7 12.9 135.8

Pharmaceutical

Biocon SELL 427 360 (15.7) 85,380 1,374 200 20.6 21.8 23.4 (0.5) 5.7 7.6 20.7 19.6 18.2 12.9 11.8 10.6 2.7 2.5 2.3 1.7 1.8 1.9 13.1 13.2 13.0 6.7

Cipla BUY 636 680 6.9 510,979 8,221 803 17.3 24.2 32.3 0.3 39.5 33.4 36.7 26.3 19.7 21.4 16.5 12.3 4.6 4.0 3.5 0.5 0.8 1.1 13.1 16.3 18.9 17.8

Dr Reddy's Laboratories ADD 3,223 3,175 (1.5) 548,916 8,831 170 135.2 141.6 154.6 7.5 4.7 9.2 23.8 22.8 20.8 15.7 14.3 12.5 5.0 4.2 3.6 0.6 0.7 0.7 22.8 19.9 18.5 17.5

Lupin BUY 1,433 1,600 11.6 643,743 10,357 450 53.9 59.5 71.0 32.1 10.4 19.2 26.6 24.1 20.2 16.2 14.2 11.6 7.1 5.7 4.6 0.6 0.6 0.7 30.2 26.3 25.1 11.9

Sun Pharmaceuticals SELL 833 790 (5.2) 1,725,437 27,760 2,072 31.2 34.0 37.9 13.2 8.7 11.5 26.7 24.5 22.0 19.5 16.3 14.5 7.0 5.6 4.6 0.9 1.0 1.1 30.1 25.4 22.9 29.7

Pharmaceuticals Neutral 3,514,455 56,543 13.1 11.5 15.4 27.0 24.2 21.0 18.1 15.4 13.1 6.0 4.9 4.1 0.7 0.9 1.0 22.1 20.3 19.5 83.6



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Real Estate

DLF BUY 133 210 57.6 237,442 3,820 1,781 2.9 4.1 6.0 (21.0) 42.0 48.5 46.5 32.7 22.0 14.9 12.9 9.2 0.8 0.8 0.8 2.2 1.5 1.5 1.8 2.5 3.6 35.2

Godrej Properties REDUCE 253 225 (11.0) 50,375 810 198 9.7 11.2 17.4 20.7 14.9 56.4 26.0 22.6 14.5 21.1 13.3 8.6 2.6 2.4 2.1 0.8 1.0 1.0 10.3 10.9 15.4 1.1

Oberoi Realty BUY 267 325 21.6 87,753 1,412 328 7.4 18.2 29.7 (21.9) 146.0 63.1 36.1 14.7 9.0 8.5 4.5 3.6 1.9 1.7 1.5 0.7 0.7 0.7 5.4 12.4 17.6 1.2

Prestige Estates Projects REDUCE 223 240 7.7 83,550 1,344 375 11.2 15.8 14.8 8.5 40.4 (6.0) 19.8 14.1 15.0 11.8 9.0 8.3 2.1 1.9 1.7 0.5 0.5 0.5 12.1 14.0 11.7 1.0

Sobha Developers ADD 470 540 14.9 46,085 741 98 23.0 36.2 67.1 (3.9) 57.2 85.3 20.4 13.0 7.0 10.0 7.6 4.9 1.9 1.7 1.4 1.5 1.5 1.5 9.6 13.8 21.9 1.6

Sunteck Realty ADD 241 410 69.9 15,194 244 60 10.7 81.2 88.8 (57.4) 656.7 9.3 22.5 3.0 2.7 22.8 2.6 1.3 2.1 1.2 0.9 4.5 4.5 — 9.7 52.7 37.5 0.3

Real Estate Attractive 520,399 8,373 (11.1) 80.1 39.2 31.4 17.4 12.5 13.1 9.0 6.8 1.2 1.2 1.1 1.2 1.3 1.1 3.9 6.6 8.6 40.3

Technology

HCL Technologies REDUCE 1,584 1,575 (0.5) 1,112,275 17,895 707 101.8 108.1 120.2 12.9 6.2 11.1 15.6 14.6 13.2 10.9 9.7 8.2 4.3 3.5 2.9 1.5 1.8 1.9 31.1 26.6 24.2 25.7

Hexaware Technologies SELL 215 195 (9.2) 64,653 1,040 302 11.1 13.4 15.6 (12.4) 20.7 16.9 19.4 16.1 13.8 13.0 11.1 9.4 6.8 6.1 5.4 4.1 3.7 4.4 31.0 39.8 41.5 7.0

Infosys ADD 2,089 2,350 12.5 2,399,044 38,598 1,143 108.4 123.1 146.0 14.0 13.6 18.5 19.3 17.0 14.3 13.8 11.6 9.4 4.6 3.9 3.4 1.7 1.9 2.2 25.7 25.0 25.3 113.7

Mindtree ADD 1,331 1,275 (4.2) 111,439 1,793 84 63.3 73.2 86.4 18.0 15.6 18.0 21.0 18.2 15.4 14.7 12.2 9.8 5.5 4.6 3.8 1.2 1.4 1.6 29.1 27.5 26.8 3.9

Mphasis SELL 383 400 4.4 80,484 1,295 210 33.0 34.4 37.9 124.5 4.2 10.2 11.6 11.1 10.1 6.3 5.8 5.1 1.5 1.4 1.3 4.3 4.5 4.9 13.2 13.0 13.6 0.5

TCS ADD 2,498 2,800 12.1 4,892,706 78,718 1,959 108.6 127.4 149.5 11.2 17.4 17.3 23.0 19.6 16.7 17.1 14.1 11.7 7.8 6.5 5.4 2.4 2.0 2.4 36.1 36.1 35.2 47.6

Tech Mahindra ADD 2,761 3,000 8.7 662,608 10,661 214 136.6 168.6 199.0 6.7 23.4 18.0 20.2 16.4 13.9 14.3 11.6 9.6 5.2 4.1 3.3 0.9 1.1 0.7 28.4 28.0 26.4 23.9

Wipro ADD 564 675 19.8 1,391,110 22,381 2,467 34.8 39.6 47.3 10.1 13.6 19.6 16.2 14.2 11.9 10.8 9.0 7.2 3.4 2.9 2.5 1.6 1.8 1.8 22.9 22.1 22.4 17.0

Technology Attractive 10,714,319 172,381 12.4 14.6 17.2 19.9 17.3 14.8 14.2 11.9 9.8 5.3 4.5 3.8 2.0 1.9 2.1 26.8 25.8 25.4 239.3

Telecom

Bharti Airtel BUY 346 430 24.2 1,384,300 22,272 3,997 15.5 17.1 21.1 85.8 10.2 24.0 22.4 20.3 16.4 6.7 5.9 5.2 2.1 2.0 1.9 0.6 1.0 1.5 9.9 10.1 11.7 26.9

Bharti Infratel REDUCE 341 270 (20.8) 644,111 10,363 1,889 11.2 13.0 15.7 38.9 16.3 20.7 30.5 26.3 21.8 12.7 11.2 9.7 3.6 3.6 3.5 3.3 2.9 3.5 11.8 13.8 16.3 6.2

IDEA BUY 147 192 30.6 528,830 8,508 3,595 8.4 9.5 9.4 41.3 13.5 (0.7) 17.5 15.5 15.6 8.2 6.8 5.9 2.3 2.0 1.8 0.5 0.6 0.7 15.2 13.9 12.3 10.9

Reliance Communications SELL 76 90 17.7 183,657 2,955 2,467 3.5 5.3 8.8 8.8 50.0 66.8 21.7 14.4 8.7 6.4 5.9 5.1 0.6 0.5 0.5 — — — 2.8 3.8 6.0 10.5

Tata Communications ADD 425 435 2.3 121,225 1,950 285 3.4 7.5 12.6 171.9 122.3 69.3 126.7 57.0 33.6 7.4 6.7 5.9 8.1 7.0 5.7 1.1 1.3 1.5 8.3 13.2 18.8 4.0

Telecom Cautious 2,862,123 46,048 63.4 15.8 22.1 23.3 20.1 16.5 7.5 6.6 5.7 2.0 1.9 1.8 1.1 1.2 1.6 8.7 9.4 10.7 58.6

Utilities

Adani Power SELL 45 36 (20.8) 130,529 2,100 2,872 (6.9) (4.2) (4.3) (577.9) 38.1 (0.6) (6.6) (10.7) (10.6) 10.7 9.3 9.7 2.8 3.7 5.7 — — — (34.9) (29.5) (42.2) 3.1

CESC ADD 712 695 (2.3) 94,314 1,517 133 28.1 55.5 70.4 (28.5) 97.2 27.0 25.3 12.8 10.1 11.3 8.0 7.2 1.1 1.0 1.0 1.0 1.0 1.1 4.6 8.4 9.9 5.2

JSW Energy SELL 101 73 (28.0) 166,384 2,677 1,640 9.5 9.2 8.0 37.8 (3.8) (12.4) 10.7 11.1 12.6 6.5 6.0 6.2 2.0 1.7 1.5 — — — 21.2 16.9 12.8 5.4

NHPC REDUCE 19 22 18.6 205,361 3,304 11,071 1.6 1.9 2.0 (1.1) 21.4 2.2 11.8 9.7 9.5 8.6 7.4 7.5 0.7 0.7 0.6 2.2 2.7 2.7 6.0 7.0 6.8 1.7

NTPC REDUCE 139 140 0.8 1,145,707 18,433 8,245 10.7 13.1 14.8 (16.7) 22.5 13.6 13.0 10.6 9.4 11.1 8.6 7.0 1.3 1.2 1.1 2.3 2.8 3.2 9.9 11.3 11.9 12.1

Power Grid BUY 136 160 17.8 710,711 11,435 5,232 9.8 12.4 15.6 14.0 26.4 25.8 13.8 10.9 8.7 10.2 9.1 7.7 1.9 1.7 1.5 2.2 2.8 3.5 14.3 16.3 18.4 9.4

Reliance Power SELL 60 62 3.1 168,728 2,715 2,805 3.7 4.1 6.2 (11.9) 11.5 50.5 16.2 14.6 9.7 21.1 10.8 8.1 0.8 0.8 0.7 — — — 5.2 5.5 7.7 8.0

Tata Power ADD 79 96 21.4 213,936 3,442 2,800 1.5 4.4 5.6 (28.3) 187.7 27.7 51.5 17.9 14.0 8.1 6.6 5.9 1.6 1.5 1.4 1.5 1.5 1.5 3.2 8.5 10.1 5.4

Utilities Cautious 2,835,671 45,623 (13.9) 33.3 18.0 16.6 12.4 10.5 10.4 8.4 7.4 1.3 1.2 1.1 1.8 2.2 2.5 8.0 9.9 10.8 50.3

Others

Carborundum Universal ADD 174 200 14.6 32,806 528 188 5.9 11.3 14.4 20.6 92.6 27.4 29.7 15.4 12.1 12.9 8.6 6.9 2.8 2.4 2.1 0.9 1.3 1.7 9.6 16.8 18.7 0.4

Coromandel International SELL 297 210 (29.3) 84,950 1,367 283 16.5 18.6 21.6 36.7 13.1 16.0 18.1 16.0 13.8 10.2 9.3 8.1 3.2 2.8 2.4 1.5 1.5 1.5 19.1 18.8 18.9 1.1

Godrej Industries ADD 293 345 17.7 98,401 1,583 331 14.6 18.0 20.2 48.6 22.7 12.2 20.0 16.3 14.5 17.7 12.6 8.9 3.1 2.6 2.3 0.6 0.6 0.6 16.5 17.4 16.8 1.9

Havells India ADD 270 310 14.7 168,830 2,716 624 9.0 11.2 13.2 12.8 24.5 17.7 30.0 24.1 20.5 18.4 14.8 12.5 8.7 7.3 6.2 1.2 1.6 1.9 31.2 33.1 32.8 13.9

Jaiprakash Associates RS 25 — — 59,960 965 2,432 1.1 4.5 4.5 120.0 306.6 (0.1) 22.1 5.4 5.5 12.1 9.3 9.0 0.5 0.5 0.4 0.0 0.0 0.0 2.5 9.0 8.5 17.2

Rallis India BUY 217 230 6.1 42,161 678 194 9.1 11.5 14.5 16.7 26.1 25.8 23.8 18.9 15.0 14.0 10.9 8.6 5.0 4.2 3.5 1.2 1.2 1.3 22.8 24.3 25.3 1.0

Tata Chemicals BUY 448 520 16.1 114,093 1,836 255 32.0 41.0 46.7 110.1 28.0 13.9 14.0 10.9 9.6 7.5 6.2 5.4 1.9 1.7 1.5 2.2 2.2 2.2 14.1 16.3 16.5 4.3

UPL ADD 345 370 7.3 147,761 2,377 429 27.7 32.9 37.5 13.7 19.1 13.7 12.5 10.5 9.2 7.4 6.5 5.6 2.4 2.0 1.7 1.3 1.5 1.6 20.7 20.9 20.2 9.8

Others 748,961 12,050 153.7 42.8 12.6 18.4 12.9 11.4 11.2 9.0 8.0 2.2 2.0 1.7 1.2 1.4 1.5 12.1 15.3 15.3 49.6

KIE universe 73,239,766 1,178,341 8.2 18.2 16.7 18.2 15.4 13.2 10.9 9.1 7.7 2.6 2.3 2.1 1.6 1.8 2.0 14.3 15.1 15.7

KIE universe (ex-energy) 64,534,973 1,038,291 13.6 19.6 17.1 19.5 16.3 13.9 11.9 9.9 8.5 2.9 2.6 2.3 1.5 1.6 1.8 15.1 16.1 16.6

Notes:

(a) We have used adjusted book values for banking companies.

(b) 2015 means calendar year 2014, similarly for 2016 and 2017 for these particular companies.

(c) Exchange rate (Rs/US$)= 62.16

Dividend yield (%)Price/BV (X) RoE (%)


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Ratings and other definitions/identifiers

Definitions of ratings

BUY. We expect this stock to deliver more than 15% returns over the next 12 months.

ADD. We expect this stock to deliver 5-15% returns over the next 12 months.

REDUCE. We expect this stock to deliver -5-+5% returns over the next 12 months.

SELL. We expect this stock to deliver <-5% returns over the next 12 months.

Our target prices are also on a 12-month horizon basis.

Other definitions

Coverage view. The coverage view represents each analyst’s overall fundamental outlook on the Sector. The coverage view will consist of one of the following

designations: Attractive, Neutral, Cautious.

Other ratings/identifiers

NR = Not Rated. The investment rating and target price, if any, have been suspended temporarily. Such suspension is in compliance with applicable regulation(s)

and/or Kotak Securities policies in circumstances when Kotak Securities or its affiliates is acting in an advisory capacity in a merger or strategic transaction

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CS = Coverage Suspended. Kotak Securities has suspended coverage of this company.

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NA = Not Available or Not Applicable. The information is not available for display or is not applicable.

NM = Not Meaningful. The information is not meaningful and is therefore excluded.

Kotak Institutional Equities Research coverage universeDistribution of ratings/investment banking relationships

Source: Kotak Institutional Equities As of September 30, 2014

Percentage of companies covered by Kotak Institutional

Equities, w ithin the specified category.

Percentage of companies w ithin each category for which

Kotak Institutional Equities and or its affiliates has provided

investment banking serv ices w ithin the previous 12 months.

* The above categories are defined as follows: Buy = We

expect this stock to deliver more than 15% returns over the

next 12 months; Add = We expect this stock to deliver 5-

15% returns over the next 12 months; Reduce = We expect

this stock to deliver -5-+5% returns over the next 12 months;

Sell = We expect this stock to deliver less than -5% returns

over the next 12 months. Our target prices are also on a 12-

month horizon basis. These ratings are used illustratively to

comply w ith applicable regulations. As of 30/09/2014 Kotak

Institutional Equities Investment Research had investment

ratings on 154 equity securities.

22.1%

36.4%

22.1%19.5%

4.5% 4.5%1.9% 0.6%

0%

10%

20%

30%

40%

50%

60%

70%

BUY ADD REDUCE SELL

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