29 January 2020

Investors are advised to refer through important disclosures made at the last page of the Research Report. Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Research Team (Gautam.Duggad@MotilalOswal.com)

Equities - India Close Chg .% CY19 % Sensex 40,967 -0.5 14.4 Nifty-50 12,056 -0.5 12.0 Nifty-M 100 18,232 -0.3 -4.3 Equities-Global Close Chg .% CY19 % S&P 500 3,276 1.0 28.9 Nasdaq 9,270 1.4 35.2 FTSE 100 7,481 0.9 12.1 DAX 13,324 0.9 25.5 Hang Seng 10,976 0.0 10.3 Nikkei 225 23,216 -0.5 18.2 Commodities Close Chg .% CY19 % Brent (US$/Bbl) 59 1.9 24.9 Gold ($/OZ) 1,567 -0.9 18.3 Cu (US$/MT) 5,675 -0.7 3.4 Almn (US$/MT) 1,738 -1.0 -4.4 Currency Close Chg .% CY19 % USD/INR 71.3 -0.1 2.3 USD/EUR 1.1 0.0 -2.2 USD/JPY 109.2 0.2 -1.0 YIELD (%) Close 1MChg CY19 % 10 Yrs G-Sec 6.6 0.02 -0.8 10 Yrs AAA Corp 7.8 0.03 -0.9 Flows (USD b) 28-Jan MTD CY19 FIIs -0.19 2.04 14.23 DIIs 0.10 -0.48 5.98 Volumes (INRb) 28-Jan MTD* CY19* Cash 412 369 369 F&O 15,658 16,486 16,486 Note: *Average

Today’s top research idea Market snapshot

Chart of the Day: Consumer (Rural India – Green shoots visible, but pace of growth uncertain)

Consumer: Rural India – Green shoots visible, but pace of growth uncertain Once a key volume driver for Consumer companies, rural growth has been on

a continuous slide for the past five quarters. Nielsen's data released on 21st Jan'20 too suggests continued slowdown in rural growth for the Dec'19 quarter. In fact, rural growth has slipped below urban growth for two successive quarters now.

However, the worst now seems to be over based on the recent data on WPI food inflation, lower agri input costs and improved government spending post elections. High reservoir levels post the monsoon season augur well for Rabi crop cash flows.

Questions, though remain on the pace of the recovery as corporate commentary over the past two months has turned incrementally negative.

To play the rural recovery story - although the pace of revival may be slower than anticipated - we prefer HUVR for its nimbleness and CLGT for its newfound aggressiveness.

Cos/Sector Key Highlights Consumer Rural India – Green shoots visible, but pace of growth uncertain Ecoscope Pre-Budget III: Why will 2020-21 be more challenging year? Maruti Suzuki Miss on higher discounts; demand outlook improving Airtel Africa A quarter of broad-based growth United Spirits Strong execution in P&A, RM pressure abating M & M Fin. Serv. Business growth continues to moderate Cummins India In-line revenues, margins surprise on cost optimization Team Lease Serv. This too shall pass!

Pace of FMCG growth has declined sharply until 4QCY19 (3QFY20)

Source: Nielsen, MOFSL

Research covered

Piping hot news

Gadkari unveils InvIT road map for NHAI, initial target ₹20,000 cr The National Highways Authority of India (NHAI) will initially raise ₹15,000-20,000 crore in its maiden InvIT offer and then go for a larger round, depending on the response it receives from investors, Union minister Nitin Gadkari said.

29 January 2020 2

Tata Sons may bank on TCS to clear teleservices’ AGR dues Tata Sons has started the process of arranging funds for paying off statutory dues of Rs 13,823 crore owed by Tata Teleservices, top officials close to the development said…

Burger King gets Sebi’s go ahead to float IPO Quick service restaurant chain Burger King India has received markets regulator Sebi’s approval for an initial public offer. The company, which filed its draft IPO papers with the watchdog in November, obtained its final observations on January 24, as per the latest update with the Securities and Exchange Board of India (Sebi)…

Worldwide sales of smartphones decline for the first time since 2008 Worldwide sales of smartphones to end users declined 2% in 2019, the first time since 2008 that the global market for such phones experienced a decline, Gartner said…

Sidbi eyes Rs 4,500 crore exit from Bandhan Bank’s Holding Co Small Industries Development Bank of India (Sidbi) is all set to sell its minority stake in Bandhan Financial Services Ltd (BFSL), the holding firm for Bandhan Bank, for about Rs 4,500 crore…

Budget 2020: Govt may infuse fresh capital into regional rural banks The Centre is looking to infuse fresh capital into regional rural banks (RRB) to help them meet the minimum capital requirement of 9% and this may find a mention in the Union Budget on February 1, people close to the development said…

Maruti Suzuki hikes prices of some models by up to 4.7% The price of entry level model Alto has gone up in the range of ₹9,000-6,000, S-Presso between ₹1,500 to 8,000, WagonR between ₹1,500 and ₹4,000…

Import duty waiver on open cell TV panels may be extended The government is considering extension of zero duty import of ready-to-use open cell television panels beyond September after leading manufacturers like Samsung and LG reached out to the ministry saying the current norm is an anomaly which would hurt Indian manufacturing…

Kindly click on textbox for the detailed news link

In the news today

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Rural India – Green shoots visible, but pace of growth uncertain Once a key volume driver for Consumer companies, rural growth has been on a

continuous slide for the past five quarters. Nielsen’s data released on 21st Jan’20 too suggests continued slowdown in rural growth for the Dec’19 quarter. In fact, rural growth has slipped below urban growth for two successive quarters now.

However, the worst now seems to be over based on the recent data on WPI food inflation, lower agri input costs and improved government spending post elections. Also, high reservoir levels post the monsoon season augur well for Rabi crop cash flows.

Questions though remain on the pace of the recovery as corporate commentary over the past two months has turned incrementally negative, leading us to expect delayed recovery/overall growth in the rural sector.

To play the rural recovery story – although the pace of revival may be slower than anticipated – we prefer HUVR for its nimbleness and CLGT for its newfound aggressiveness. On the other hand, we are cautious on DABUR due to high wholesale dependence and international business contributing over 25% to overall sales. We are also cautious on BRIT owing to rising commodity costs and the fact that biscuits’ demand usually recovers with a lag.

Rural growth slowing considerably: Rural growth was at the vanguard of driving

volume growth for consumer companies until the past few quarters. According to Nielsen’s data for Dec’19 quarter, while urban growth is still healthy at ~7% levels despite the relative slowdown compared to the past, rural growth has declined sharply from ~18% to ~5% over the last five quarters. This has led to an overall revenue slowdown with rural growth notably dipping below urban over the last two quarters.

Green shoots evident: Recently, there have been green shoots on the rural growth front in the form of (a) higher food inflation over the past two months indicating higher realizations for farmers, (b) lower agri input costs, (c) improved government spending on rural, and (d) higher reservoir levels.

Rural growth to improve based on Nielsen’s forecast: In the third week of Jan’20, Nielsen expressed optimism on the growth path for the Consumer sector, led by their belief that the worst, in terms of the rural slowdown may already be over. The factors mentioned above are the key factors underpinning Nielsen’s optimism.

Notably, recovery is off a trough with weak management commentary: While these factors are likely to have an incrementally positive impact on rural demand, we believe that recovery will be off the troughs, coming out of a particularly tepid 2QFY20 and 3QFY20, when rural growth was at a 7-year low. We also note that despite the recovery, Nielsen’s overall growth forecast for CY20 at 9-10% is identical to the growth reported in CY19, albeit better than the 6.6% reported in 3QFY20. Moreover, in contrast to the earlier expectations of a sharp recovery from 4QFY20, corporate commentary from large consumer companies (such as HUVR, ITC, NEST, BRIT and MRCO) is largely cautious on substantial rural recovery over the next couple of quarters.

Sector Update | 28 January 2020

Consumer While rural is decelerating…

… urban not as affected

29 January 2020 4

HUVR and CLGT remain our top rural picks: Despite our caution over the pace of rural recovery in the near term, we do have buy ratings on two companies under our coverage (HUVR and CLGT) that have substantial revenue share from rural or incremental share of revenue growth coming from rural.

HUVR remains our top rural pick because its reinvigorated nimbleness in recent years enables it to take better advantage of rural recovery v/s peers. Taking into account synergies from the GSKCH acquisition, the stock is trading below its 5-year average P/E.

CLGT’s new-found aggression in ad-spends and product pipeline may affect its near-term earnings growth, but any material market share gain will be positively received by investors. Valuations of 41.4x FY21 are also attractive v/s peers.

BRIT’s long-term topline and earnings growth opportunity is strong. However, rising commodity costs, historically lagged recovery in the biscuits’ category and expensive near-term valuations of 49.2x FY21 leads us to maintain Neutral rating.

DABUR’s high exposure to the wholesale channel (where recovery is even more uncertain compared to rural recovery), overseas business that contributes ~25-30% to overall sales and expensive valuations of 48.6x FY21 EPS leaves little room for an upside.

Exhibit 1: Pace of FMCG growth has declined sharply until 4QCY19 (3QFY20)

Source: Nielsen, MOFSL

Exhibit 2: Volume growth of companies with higher rural exposure/ incrementally higher rural sales

Quarterly volume growth (%) 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 Britannia (Base business) 11 10 8 10 2 2 2 5 11 11 11 11 7 7 3 3 Colgate (Toothpaste) 1 3 5 4 (12) (3) (5) (1) 12 4 4 7 7 5 4 4 Dabur (Domestic FMCG) (3) 7 4 5 (5) 2 (4) 7 13 8 21 8 12 4 10 5 Emami (Domestic) 9 18 18 11 0 (2) (18) 10 6 8 18 (4) 4 0 0 1 Hindustan Unilever (Domestic) 6 4 4 (1) (4) 4 0 4 11 11 12 10 10 7 5 5

Source: Company, MOFSL

8.7 8.3 13.2 11.9 9.9 6.2 3.9 3.5

2.7 2.3

3.0 3.8 3.6

3.8 3.4 3.1

11.4 10.6

16.2 15.7 13.4

10.0 7.3 6.6

4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20

Volume growth Price-led growth Value growth

29 January 2020 5

28 January 2020

ECOSCOPE The Economy Observer

Pre-Budget III: Why will 2020-21 be more challenging year? Weak RBI support could entirely offset better tax growth

In this third and final report of our pre-budget series, we discuss the factors that make the Union Budget 2020-21 very challenging. In FY20, while net taxes are likely to grow only ~3% (v/s budgeted growth of 25.3%) and divestment proceeds will also be likely only 50-60% of the target (down 30% from FY19), total receipts are still expected to grow 6% YoY, primarily helped by unexpectedly large dividends from the RBI amounting to INR1.48t. Besides, the cumulative rate cuts of 135bp in CY19 will help the government save ~INR600b on its interest payments. Together, thus, the RBI provided a massive support of INR2.1t (or 1.03% of GDP) in FY20, which went almost unappreciated.

Things, however, will be different in FY21. Even if we assume disinvestment proceeds of INR1t and higher growth of ~10% in (net) tax receipts, the absence of the RBI’s support can turn out to be an offsetting factor. With (a) the banks parking excess funds (averaging INR1.9t till 24th Jan’20) at the RBI’s liquidity adjustment facility (LAF) window v/s average LAF deficit of INR459b last year and (b) no room for further rate cuts, the government is unlikely to receive as large a support in FY21. Also, if the RBI provides an interim dividend this year, the surplus next year will be even lower.

Overall, notwithstanding expectations of better GDP growth next year, total receipts could grow slowly at only ~4% YoY in FY21 vis-à-vis expected growth of 6% this year. Assuming an unchanged fiscal deficit of 3.5% of GDP, spending growth would also be lower at 6.6% next year, as against ~7% this year. The budgeted estimates (BEs) to be presented in the budget on 1st Feb’20, however, could be very different from these estimates.

In Part I of our pre-budget note series, we had highlighted the need for a fiscal policy to match the monetary policy and discussed about the limited fiscal space available in Part II. In this third and final note, we argue that, notwithstanding higher expectations, the Union Budget 2020-21 could be even more challenging. RBI’s exceptional support in otherwise dismal year Total receipts of the government increased at a respectable ~13% YoY in the 8MFY20 (Apr-Nov’19) – much better than 3.4% growth in the year-ago period but short of 25% growth budgeted in the Union Budget 2019-20 presented in Jul’19. Details of total receipts, however, reveal a very interesting insight. While (net) tax receipts increased at a dismal 2.6% over Apr-Nov’19 (vis-à-vis 4.6% growth in the same period last year), large part of reasonable growth in total receipts is attributed to non-tax revenue receipts, which increased ~68% YoY, following 31% YoY growth in the corresponding period last year (Exhibit 1 on the next page). It implies that taxes (which account for ~80% of total receipts) accounted for only ~16% of total receipts growth (2.1 percentage point (pp) out of ~13% growth), while non-tax revenue receipts (NTRR) accounted for more than four fifths of total receipts growth (10.5pp out of ~13% growth) in 8MFY20 (Exhibit 2). Disinvestments, albeit 10% higher than in the year-ago period, accounted for only ~2% of total receipts growth in 8MFY20.

Taxes accounted for only ~16% of total receipt

growth, while non-tax revenue receipts

accounted for more than four fifths of total receipt

growth in 8MFY20.

29 January 2020 6

Estimate change TP change Rating change Bloomberg MSIL IN Equity Shares (m) 302 M.Cap.(INRb)/(USDb) 2113.6 / 29.6 52-Week Range (INR) 7755 / 5447 1, 6, 12 Rel. Per (%) -3/15/-7 12M Avg Val (INR M) 7217 Free float (%) 43.8

Financials & Valuations (INR b) Y/E MARCH 2020E 2021E 2022E Sales 773 855 971 EBITDA 77.4 101.9 132.6 Adj. PAT 58.5 76.9 100.1 EBIT Margin (%) 5.4 7.7 9.5 Cons. Adj. EPS (INR) 200.0 261.7 338.9 EPS Gr. (%) -19.2 30.8 29.5 BV/Sh. (INR) 1,625 1,771 1,977 Ratios Net D:E -0.8 -0.8 -0.8 RoE (%) 11.9 14.4 16.8 RoCE (%) 15.1 18.4 21.5 Payout (%) 50 42 38 Valuations

P/E (x) 35.0 26.7 20.6 P/BV (x) 4.3 3.9 3.5 Div. Yield (%) 1.1 1.3 1.5 FCF Yield (%) 1.5 2.0 3.2

Shareholding pattern (%) As On Dec-19 Sep-19 Dec-18 Promoter 56.2 56.2 56.2 DII 15.6 15.0 13.4 FII 23.2 23.4 22.7 Others 5.0 5.3 7.7 FII Includes depository receipts

CMP: INR6,997 TP: INR8,000 (+14%) Buy

Miss on higher discounts; demand outlook improving Performance bottoms out; Buy into weakness MSIL’s 3QFY20 results are a reflection of the company’s efforts to revive

demand through discounts during the festive season and ahead of year change/BS6 transition. We believe MSIL’s operating performance has bottomed out and recovery is expected from 1QFY21.

Our FY20/FY21 EPS estimates remain unchanged and we would buy into any weakness post such weak results. Maintain Buy.

Record-high discounts dilute benefit of operating leverage MSIL’s 3QFY20 revenues/EBITDA/PAT grew 5%/9%/5% YoY to

~INR207b/INR21b/INR15.6b respectively. 9MFY20 revenue/EBITDA/PAT declined 11%/32%/22% respectively.

Domestic PV market share recovered 130bp YoY (+240bp QoQ) to 52%. Net realization increased 3% YoY (-6% QoQ) to ~INR473k (v/s est. ~INR499k).

QoQ decline was due to higher discounts and adverse mix. Discounts inched up to ~INR33k/unit (v/s ~INR24k in 3QFY19 v/s INR25.8k in 2QFY20).

Gross margin declined ~150bp QoQ due to (a) higher sourcing from Gujarat (accounting impact), (b) higher discounts (~190bp QoQ), (c) lower production (v/s wholesales; ~100bp QoQ impact), and (d) ~60bp benefit of lower cost.

EBIT margins improved 10bp YoY (+200bp QoQ) to 6% (v/s est. ~6.2%). EBIT grew ~7% YoY (+83% QoQ) to ~INR12.4b (v/s est. ~INR13.6b).

Highlights from management commentary Demand environment is improving, which can be gauged by the increase in

inquiries. While rural demand is now better than urban, outlook is also promising based on encouraging estimates for Rabi crop. SIAM has forecasted PV industry growth at 3-5% for FY21. Our estimates factor in recovery from 1QFY21 and volume growth of 8.5% for FY21.

MSIL does not expect material pre-buying in 4QFY20 as it plans to stop diesel car production beginning Feb’20. Currently, it has <10 days inventory for diesel.

Post BS6, it expects a further decline in industry share of diesel to 15-20% (from ~29% in 3QFY20). Even in mid-sized SUVs like Hector, Creta and Venue, share of petrol is picking up. For MSIL, we expect the loss in diesel to be made up by petrol and CNG/hybrids.

In Jan’20, key models have seen INR5-6k reduction in discounts and price increase of INR5-6k. This implies 200-250bp QoQ recovery in gross margins.

Commodity prices, which have started to increase (steel, rhodium, palladium etc.), will start reflecting in P&L from 1QFY21. We have lowered our gross margin estimates to reflect the inflation in key commodities.

Valuation & view Signs of headwinds easing augur well as it should enable faster recovery for

MSIL. A key monitorable in the near term would be the smooth transition of diesel to petrol.

Valuations at 26.7x/20.6x FY21/FY22E consol. EPS are on the early recovery cycle, as we estimate ~30% EPS CAGR over FY20-22E. Maintain Buy with TP of ~INR8,000 (~25x Dec’21 consol. EPS).

28 January 2020 3QFY20 Results Update | Sector: Automobiles

Maruti Suzuki

29 January 2020 7

S/A Quarterly Performance (INR Million) Y/E March FY19 FY20 FY19 FY20E FY20

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE

3QE

Net operating revenues 2,24,594 2,22,332 1,96,683 2,14,594 1,97,198 1,69,853 2,07,068 1,98,709 8,60,203 7,72,828 2,18,480 Change (%) 28.0 2.1 2.0 1.4 -12.2 -23.6 5.3 -7.4 7.8 -10.2 11.1 EBITDA 33,511 32,313 19,311 22,634 20,478 16,063 21,021 19,815 1,07,993 77,377 22,915 Change (%) 43.8 -12.1 -36.4 -24.9 -38.9 -50.3 8.9 -12.5 -12.3 130.9 18.7 Depreciation 7,198 7,212 7,677 8,102 9,186 9,261 8,580 8,473 30,189 35,500 9,350 EBIT 26,313 25,101 11,634 14,532 11,292 6,802 12,441 11,342 77,804 41,877 13,565

EBIT Margins (%) 11.7 11.3 5.9 6.8 5.7 4.0 6.0 5.7 9.0 5.4 6.2 Interest 207 257 206 88 547 282 217 254 758 1,300 300 Non-Operating Income 2,718 5,266 9,173 8,677 8,364 9,200 7,840 8,080 25,610 33,484 9,500 PBT 28,824 32,110 20,601 23,121 19,109 15,720 20,064 19,168 1,04,656 74,061 22,765 Effective Tax Rate (%) 31.5 30.2 27.7 22.3 24.9 13.6 22.0 22.4 28.3 21.1 25.2 Adjusted PAT 19,753 21,009 14,893 17,956 14,355 13,586 15,648 14,879 73,573 58,468 17,028 Change (%) 26.9 -15.4 -17.2 -12.9 -27.3 -35.3 5.1 -17.1 -6.8 -20.5 14.3

Key Performance Indicators

Y/E March FY19 FY20 FY19 FY20E FY20 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE 3QE

Dom. PV Market Sh (%) 52.6 51.7 50.7 50.0 51.7 49.6 52.0

51.3 Volumes ('000 units) 490.5 484.8 428.6 458.5 402.6 338.3 437.4 409.6 1,862.4 1,587.9 437.4 Change (%) 24.3 -1.5 -0.6 -0.7 -17.9 -30.2 2.0 -10.7 4.7 -14.7 2.0 Discounts (INR '000/car) 15.2 18.8 24.3 15.1 16.9 25.8 33.0

18.2

% of Net Realn 3.3 4.1 5.3 3.2 3.5 5.1 7.0

3.9 Net Realizations (INR '000/car) 457.9 458.6 458.9 468.1 489.8 502.1 473.4 485.1 461.9 486.7 499.5 Change (%) 3.0 3.7 2.6 2.1 7.0 9.5 3.2 3.6 3.0 5.4 5.2 Cost Break-up

RM Cost (% of sales) 69.0 68.7 71.4 71.9 71.5 71.2 72.5 71.5 70.0 71.7 71.7 Staff Cost (% of sales) 3.4 3.6 4.5 3.8 4.4 4.9 4.2 4.3 3.8 4.4 3.9 Other Cost (% of sales) 12.6 13.2 14.3 13.8 13.8 14.4 13.2 14.2 13.6 13.9 13.9

Gross Margins (%) 31.0 31.3 28.6 28.1 28.5 28.8 27.5 28.5 30.0 28.3 28.3 EBITDA Margins (%) 14.9 14.5 9.8 10.5 10.4 9.5 10.2 10.0 12.6 10.0 11 EBIT Margins (%) 11.7 11.3 5.9 6.8 5.7 4.0 6.0 5.7 9.0 5.4 6.2 E:MOFSL Estimates

29 January 2020 8

BSE SENSEX S&P CNX 40,967 12,056

A quarter of broad-based growth Better-than-expected performance: Airtel Africa’s 3QFY20 performance

was marginally better than our expectations. Revenue increased 4.6% QoQ to USD883m on a reported basis and 5% QoQ to USD896m (in-line) on a constant currency (CC) basis. EBITDA was up by 15.3% QoQ at USD421m on a reported basis (margin expansion of 440bp to 48%) and by 7.4% QoQ to USD404m on a CC basis (5% beat; margin expansion of 100bp to 45%). PAT grew by 7.3% QoQ to USD103m on a reported basis and by 29.4% QoQ to USD110m on a CC basis. Blended ARPU was up 3.8% QoQ at USD2.8 (in-line), with net subscriber addition of 3.3m to 107.1m. Monthly churn increased 70bp to 5.2%.

Revenue growth on all fronts: Voice, Data and Mobile Money revenue grew by 4.5%, 7.9% and 6.3% QoQ to USD513m, USD247m, and USD84m, respectively. ARPU was up 4% QoQ to USD2.6 in Data, declined 5.6% QoQ to USD1.7 in Mobile Money and remained flat QoQ at USD1.6 in Voice. In terms of subscribers, Mobile Money exhibited the highest increase of 7.2% QoQ to 17m, while Data/Voice subscribers were up 3.1% QoQ at 33m/107m. This indicates growth in Mobile Money/Voice was led by healthy subscriber addition, while Data growth was driven by both ARPU and subscribers. Region-wise, Nigeria recorded highest revenue growth of 8.8% QoQ to USD357m, East Africa revenue increased 4.6% QoQ to USD321m and Rest of Africa revenue was flat at USD222m. EBITDA grew across regions, with Nigeria/East Africa/Rest of Africa recording sequential growth of 12.1%/4%/7.8% to USD195m/USD130m/USD83m.

Concall Highlights: (1) Voice revenue growth was driven by both existing and new areas, but Data revenue growth majorly came from existing towns. (2) Mobile Money growth remained strong but slowed down YoY (base quarter had one-time benefit of extensive network rollout); KPIs of Mobile Money remained healthy. (3) Effective tax rate for 9MFY20 stood at 41.7%, implying a marginal increase due to higher withholding tax on dividend from subsidiaries (it is expected to remain similar level for the year).

FCF improvement led by healthy earnings and lower interest: Airtel Africa’s FCF increased to USD391m (+94% YoY) in 9MFY20, mainly on account of better EBITDA and lower interest cost (lower debt), partially offset by increasing capex. However, FCF is expected to be lower in the next quarter as capex is skewed toward the fourth quarter. Management’s guidance for FY20 capex was unchanged at USD650m-700m. Further, Airtel Africa has reduced its leverage to 2.2x from 3.2x a year earlier.

Valuation: Airtel Africa trades at GBX72 on LSE with market cap of USD3.5b and EV (excl. lease obligation) of USD5.6b. The stock trades at FY21E EV/EBITDA of 3.3x.

28 January 2019 3QFY20 Results Update | Sector: Telecom

Airtel Africa

29 January 2020 9

Airtel Africa 3QFY20 concall highlights Key Highlights FCF stood at USD391m (+94% YoY) for 9MFY20. It is expected to be lower in 4QFY20 as

capex is skewed toward fourth quarter. The guidance for FY20 capex remains unchanged at USD650-700m.

Effective tax rate for 9MFY20 stood at 41.7% – the marginal increase is due to higher withholding tax on dividend from subsidiaries. It is expected to remain at similar level for the year.

Mobile Money growth remained strong but slowed down YoY (base quarter had one-time benefit of extensive network rollout); KPIs of Mobile Money remained healthy.

The company has filed an application to buy 10MHz of 900 spectrum at USD74m, excluding regulatory fees, and awaiting approval; payments will be made post approval.

Voice revenue growth has come from both existing and new areas, but Data revenue growth majorly came from existing towns.

Operational Highlights Airtel Africa reported double-digit revenue growth for the eighth consecutive

quarter. Growth is in line with management’s strategy of improving Voice and Mobile

Money revenue. The company’s blended ARPU increased by 3.5%. FCF for 9MFY20 stood at USD391m (up 94% YoY), mainly due to higher EBITDA

and lower interest cost, partially offset by increasing capex. Due to management’s deleveraging measures, leverage reduced to 2.2x from

3.2x in 3QFY19. In 3QFY20, Airtel Africa recognized exceptional item benefit of USD27m. Due to the company’s change in criteria of calculating number of customers,

there is a correction of 2.5m customer base in Nigeria. The company launched Airtel TV in certain geographies like Nigeria, wherein it

provides large content to customers. Most of it can be seen without subscription, driving data usage. Content cost for the company is very nominal.

Licensing & Network Highlights The company is waiting for approval of payment service bank in Nigeria. It

remains hopeful of receiving the same. It launched 4G across markets and is able to provide this service across 14

countries. Partnerships Entered into a partnership with Mastercard and Ecobank that enables

customers to get international money directly in their wallets. Launched virtual card with Mastercard which will enable customers to have

access to all Mastercard merchants.

29 January 2020 10

Outlook In certain sub-Saharan markets, customer penetration is ~44-45%, which

provides opportunity to grow Voice revenue. FCF in 4QFY20 is expected to be low as capex is skewed toward the fourth

quarter – guidance for FY20 capex remains unchanged at USD650-700m. Looking for growth opportunity in Voice in under-penetrated markets and for

huge growth opportunity in Data. Rest of Africa has lagged other markets due to phase out of 4G investments;

management is expecting 4G momentum to kick in and is looking for reasonable growth.

Looking for opportunity to buy spectrums. Intends to apply for NTO license (deadline 31 Jan, 2020) in Uganda. Proceeds from Malawi IPO should be received in the fourth quarter.

Exhibit 3: Airtel Africa consolidated performance Bharti Africa - In Constant Currency (USD m) 3QFY19 2QFY20 3QFY20 YoY% QoQ% 3QFY20E v/s Est (%) Revenue 812 853 896 10.3 5.0 883 1.5 Total Expenditure 466 485 497 6.6 2.5 497 0.0 EBITDA 352 376 404 14.8 7.4 386 4.6 EBITDA margin (%) 43% 44% 45% 174.0 101.0 44% 137 Depreciation 140 154 155 11.0 0.6 PBT 121 143 175 44.6 22.4 Tax 15 69 96 555.3 39.1 PAT 114 85 110 -3.5 29.4 ARPU (USD) 2.8 2.8 2.8 0.0 0.0 2.8 -0.2 Subscriber base (000's) 97,922 1,03,881 1,07,140 9.4 3.1 1,05,959 1.1

Source: MOSL, Company

Exhibit 4: Airtel Africa consolidated performance (Reported Currency) Bharti Africa - In Reported Currency (USD m) 3QFY19 2QFY20 3QFY20 YoY% QoQ% Revenue 783 844 883 12.8 4.6 Total Expenditure 465 479 462 -0.6 -3.5 EBITDA 318 365 421 32.4 15.3 EBITDA margin (%) 41% 43% 48% 706.5 443.2 Depreciation 144 162 163 13.2 0.6 Net Finance Cost 73 58 76 4.2 31.0 Other Income 5 7 4 -27.1 -42.9 PBT 106 150 186 76.2 24.0 Tax -28 54 83 -396.4 53.7 PAT 134 96 103 -22.9 7.3

Source: MOSL, Company

29 January 2020 11

Exhibit 5: Airtel Africa consolidated segment-wise summary (USD m) in Constant Currency USDm 3QY19 2QFY20 3QFY20 YoY% QoQ% Regional Revenue Nigeria 289 328 357 23.5 8.8 East Africa 298 307 321 7.7 4.6 Rest of Africa 232 221 222 -4.3 0.5 Regional EBITDA Nigeria 144 174 195 35.4 12.1 East Africa 125 125 130 4.0 4.0 Rest of Africa 88 77 83 -5.7 7.8 Regional EBITDA Margins Nigeria 49.8% 53.0% 54.6% 479bps 157bps East Africa 41.9% 40.7% 40.5% -145bps -22bps Rest of Africa 37.9% 34.8% 37.4% -54bps 255bps Africa Consolidated (in CC USD m) 3QY19 2QFY20 3QFY20 YoY% QoQ% Segmental Revenue Voice Revenue 500 491 513 2.6 4.5 Data Revenue 180 229 247 37.2 7.9 Mobile Money Revenue 68 79 84 24.0 6.3 Segmental ARPUs Voice ARPU 1.7 1.6 1.6 -5.9 0.0 Data ARPU 2.1 2.5 2.6 23.8 4.0 Mobile Money ARPU 1.6 1.8 1.7 4.4 -5.6 Segmental Subscribers Voice Subscribers 97,922 1,03,881 1,07,140 9.4 3.1 Data Subscriber 29 32 33 12.4 3.1 Mobile Money Subscribers 14 16 17 20.5 7.2 Segmental KPIs Subscriber base 98 104 107 9.4 3.1 Net adds (QoQ) 3.8 4.2 3.3 -14.9 -22.6 Monthly Churn 4.7% 4.5% 5.2% 10.6 15.6 ARPU (blended) 2.8 2.8 2.8 0.0 0.0

Source: Company

29 January 2020 12

Exhibit 6: Airtel Africa consolidated region-wise performance Region Wise Performance (in CC USD m) 3QY19 2QFY20 3QFY20 YoY% QoQ% Nigeria Segmental Performance

Voice Revenue 190 200 219 15.3 9.5 Voice ARPU 1.8 1.7 1.8 0.0 5.9 Voice Subscribers 37 40 40 8.9 0.9 Data Revenue 67 106 116 73.1 9.4 Data ARPU 1.7 2.3 2.5 47.1 8.7 Data Subscribers 14 15 15 12.2 -1.5

Other KPIs Subscriber base 37 40 40 8.9 0.9 Net adds 2.4 2.0 0.3 -85.9 -83.2 Monthly Churn 4.2% 4.7% 6.8% 61.9 44.7 ARPU (blended) 2.7 2.8 3.0 11.1 7.1

East Africa Segmental Performance Voice Revenue 163 158 161 -1.2 1.9 Voice ARPU 1.3 1.2 1.2 -7.7 0.0 Voice Subscribers 43 45 47 11.4 5.2 Data Revenue 70 75 83 18.6 10.7 Data ARPU 2.2 2.1 2.2 0.0 4.8 Data Subscribers 11 12 13 19.4 6.3

Other KPIs Subscriber base 43 45 47 11.4 5.2 Net adds 1.3 2.0 2.4 85.7 20.7 Monthly Churn 4.7% 3.8% 3.8% -19.1 0.0 ARPU (blended) 2.4 2.3 2.3 -4.2 0.0

Rest of Africa Segmental Performance Voice Revenue 154 135 136 -11.7 0.7 Voice ARPU 2.7 2.3 2.3 -14.8 0.0 Voice Subscribers 19 19 20 6.1 2.9 Data Revenue 43 48 48 11.6 0.0 Data ARPU 3.3 3.7 3.5 6.1 -5.4 Data Subscribers 19 19 20 6.1 2.9

Other KPIs Subscriber base 19 19 20 6.1 2.9 Net adds 0.1 0.2 0.6 331.8 162.7 Monthly Churn 5.5% 5.8% 5.4% -1.8 -6.9 ARPU (blended) 4.1 3.8 3.8 -7.3 0.0

*Blended ARPU includes Mobile Money ARPU as well

Source: Company

29 January 2020 13

Estimate changes CMP: INR656 TP: INR801 (+22% ) Buy TP change Rating change

Bloomberg UNSP IN Equity Shares (m) 727 M.Cap.(INRb)/(USDb) 477 / 6.7 52-Week Range (INR) 675 / 497 1, 6, 12 Rel. Per (%) 13/3/8 12M Avg Val (INR M) 914

Financials & Valuations (INR b) Y/E March 2019 2020E 2021E 2022E Sales 89.8 94.7 106.2 119.9 Sales Gr. (%) 9.9 5.4 12.2 12.9 EBITDA 12.9 15.3 17.8 21.8 EBITDA Margin (%) 14.3 16.2 16.8 18.2 PAT 6.8 8.7 11.3 14.6 EPS (INR) 9.3 12.0 15.6 20.0 EPS Gr. (%) 38.1 28.4 30.4 28.5 BV/Sh.(INR) 43.1 52.6 68.2 88.2 Ratios RoE (%) 21.6 22.7 22.9 22.7 RoCE (%) 14.7 18.4 29.5 31.6 Payout (%) 0.0 0.0 0.0 0.0 Valuations P/E (x) 70.5 54.9 42.1 32.8 P/BV (x) 15.2 12.5 9.6 7.4 EV/EBITDA (x) 38.8 32.0 26.7 21.3 Shareholding pattern (%) As On Dec-19 Sep-19 Dec-18 Promoter 56.8 56.8 56.8 DII 7.7 7.9 6.6 FII 22.4 22.4 23.1 Others 13.1 12.9 13.6 FII Includes depository receipts

Strong execution in P&A, RM pressure abating UNSP not only reported 8% sales growth in the Prestige & Above (P&A)

segment (mainly led by the return of mix improvement and despite a challenging base of 16% growth in 3QFY19), but also ended the quarter with healthy winter and Christmas/New Year eve sales. This is comforting, particularly when looked at the uncertain outlook on P&A at end-2QFY20.

After facing RM cost pressure for a few quarters, management cited some relief on ENA costs over the last two months.

Despite significant pressure on the gross margin from ENA costs, the company (contrary to expectations of EBITDA margin pressure for FY20) reported ~120bp YoY operating margin improvement in 9MFY20 (adjusted for bulk scotch), including 210bp YoY expansion in 3QFY20.

Premiumization trend returned with each sub-segment growing faster than the one beneath it.

Sales growth below expectations but significant beat on EBITDA Standalone net sales grew 3.4% YoY to INR25.8b (our estimate: INR26.8b). Reported volumes declined 1.8% YoY (our estimate: +5%). P&A volumes

grew 2.7% YoY, while Popular volumes were down sharply by 6.5% YoY. EBITDA grew 18.4% YoY to INR4.2b (our estimate: INR3.7b). Despite significant gross margin compression, the EBITDA margin expanded

210bp YoY to 16.4% (our estimate: 13.8%), primarily led by savings in operating costs and to a lesser extent by the lower marketing reinvestment rate (other expenses were down 390bp YoY, staff costs were down 150bp YoY and ad spends were down 100bp YoY).

PBT grew 7.9% YoY to INR3.4b (our estimate: INR3.2b). Adj. PAT was up 21.7% at INR2.6b (our estimate: INR2.4b), led by higher EBITDA and lower corporate tax rates.

For 9MFY20, sales/EBITDA/PAT growth stood at 5.4%/18.9%/18.3% YoY.

Highlights from management commentary P&A is likely to grow in double-digits and Popular in low-single-digits. Liquidity in trade (a problem in 2QFY20) has improved sequentially. Reduction in debt and working capital continued in 9MFY20. ~INR15b of

assets are to be monetized, providing more opportunity for debt reduction.

Valuation and view Despite (a) healthy earnings CAGR of 35.2% for the five years ending FY20

(since Diageo took control), (b) among the best-of-breed earnings outlook (~29.5% CAGR over the next two years) and (c) continued RoCE improvement, the stock trades in line with peers at 42.1x FY21E EPS.

On our DCF calculations, we arrive at a target price of INR801, implying a 22% upside (effective target multiple of 40x Mar’22E EPS).

28 January 2020 3QFY20 Results Update | Sector: Consumer

United Spirits

29 January 2020 14

Quarterly Performance (INR Million) Y/E March FY19 FY20 FY19 FY20E FY20 Var. (Standalone) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE 3QE (%) Volume growth % 1.1 10.3 3.8 1.0 6.0 1.0 -1.8 1.7 3.9 1.7 5.0 Total revenues 20,088 22,249 24,969 22,500

22,184 22,962 25,825 23,699 89,806 94,670 26,842 -3.8%

YoY change (%) 12.7 14.0 10.3 3.5

10.4 3.2 3.4 5.3 9.9 5.4 7.5 Gross Profit 10,090 11,175 12,130 10,462

10,497 10,325 11,459 10,794 43,857 43,075 12,503

Margin (%) 50.2 50.2 48.6 46.5

47.3 45.0 44.4 45.5 48.8 45.5 46.6 EBITDA 2,387 4,429 3,582 2,836 3,971 4,156 4,240 2,932 12,874 15,299 3,716 14.1% Margins (%) 11.9 19.9 14.3 12.6

17.9 18.1 16.4 12.4 14.3 16.2 13.8

EBITDA growth (%) 38.8 61.6 30.7 2.9 66.4 -6.2 18.4 3.4 25.2 18.8 3.8 Depreciation 339 350 355 401

500 573 524 498 1,445 2,095 505

Interest 582 438 575 605 520 452 455 377 2,200 1,804 420 PBT From operations 1,466 3,641 2,652 1,830

2,951 3,131 3,261 2,056 9,229 11,399 2,792

Other income 133 167 533 119 101 137 176 252 952 666 373 PBT 1,599 3,808 3,185 1,949

3,052 3,268 3,437 2,309 10,181 12,066 3,165 8.6%

Tax 545 1,221 1,059 641

1,065 1,022 849 443 3,416 3,378 760 Rate (%) 34.1 32.1 33.2 32.9 34.9 31.3 24.7 19.2 33.6 28.0 24.0 Adj. PAT 1,054 2,587 2,126 1,308

1,987 2,246 2,588 1,866 6,765 8,687 2,405 7.6%

YoY change (%) 45.6 89.8 43.5 -29.3 88.5 -13.2 21.7 42.7 38.1 28.4 13.1 E: MOFSL Estimates; quarterly numbers for FY19 are adjusted for re-grouping impact

Key Performance Indicators Y/E March FY19 FY20 (Standalone) 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Key Metrics

Sales Volume (m Cases)

18.2 20.4 21.9 21.1

19.3 20.6 21.5 22.1 Volume Growth %

1.1 10.3 3.8 1.0

6.0 1.0 -1.8 1.7

Realization/case (INR)

1,104 1,091 1,140 1,066

1,149 1,115 1,201 1,072 Realization growth %

11.5 3.4 6.3 2.5

4.1 2.2 5.4 0.5

EBIDTA/Case (INR) 131.2 217.1 163.6 134.4 205.8 201.7 197.2 132.5 Segmental performance

P&A Volumes (m Cases)

9.5 10.5 11.1 10.5

10.3 10.8 11.4 10.9 Popular Volumes (m Cases)

8.7 9.9 10.8 10.6

9.0 9.8 10.1 10.6

P&A Volumes Growth (%)

13.1 15.4 12.1 7.1

8.4 2.9 2.7 3.5 Popular Volumes Growth (%)

-9.4 5.3 -3.6 -4.5

3.4 -1.0 -6.5 0.0

P&A Sales Growth (%)

19.0 19.0 16.0 8.0

9.0 0.0 8.0 9.5 Popular Sales Growth (%) -3.0 8.0 -3.0 -2.0 2.0 -1.0 -5.0 2.0

2Y average growth (%)

Volume

-8.9 -2.8 -5.2 -0.7

3.6 5.6 1.0 1.3

Sales

0.0 5.1 1.3 5.4

11.6 8.6 6.9 4.4 EBITDA

9.7 40.4 11.9 4.3

52.6 27.7 24.5 3.1

PAT 16.3 64.6 21.9 27.1 67.1 38.3 32.6 6.7 % of Sales

COGS

49.8 49.8 51.4 53.5

52.7 55.0 55.6 54.5 Operating expenses

38.3 30.3 34.2 33.9

29.4 26.9 28.0 33.2

Depreciation 1.7 1.6 1.4 1.8 2.3 2.5 2.0 2.1 YoY change (%)

COGS

5.9 10.4 10.6 10.6

16.9 14.1 11.9 7.2 Operating expenses

15.7 0.1 3.2 -5.8

-15.3 -8.6 -15.5 3.1

Other Income

-57.1 -46.1 122.1 -90.2

-24.1 -18.0 -67.0 112.1 EBIT 46.4 69.0 34.3 1.9 69.5 -12.2 15.2 -0.1

E: MOFSL Estimates

29 January 2020 15

Estimate change TP change Rating change Bloomberg MMFS IN Equity Shares (m) 615 M.Cap.(INRb)/(USDb) 217.6 / 3.1 52-Week Range (INR) 450 / 285 1, 6, 12 Rel. Per (%) 10/7/-28 12M Avg Val (INR M) 779

Financials & Valuations (INR b)

Y/E March 2020E 2021E 2022E NII 52.5 57.4 64.3 PPP 33.7 36.7 41.5 PAT 13.4 18.3 21.1 EPS (INR) 21.7 29.8 34.3 EPS Gr. (%) -14.2 36.9 15.4 BV/Sh.(INR) 187 210 237 Ratios NIM (%) 8.4 8.2 8.2 C/I ratio (%) 39.2 39.7 39.4 RoA (%) 1.9 2.2 2.3 RoE (%) 12.2 15.0 15.3 Payout (%) 21.1 21.1 21.1 Valuations P/E (x) 16.2 11.8 10.3 P/BV (x) 1.9 1.7 1.5 Div. Yield (%) 1.1 1.5 1.8

Shareholding pattern (%) As On Dec-19 Sep-19 Dec-18 Promoter 51.2 51.2 51.2 DII 15.4 15.3 13.2 FII 25.3 25.6 27.4 Others 8.2 8.0 8.2 FII Includes depository receipts

CMP: INR352 TP: INR420 (+19%) Buy Business growth continues to moderate MMFS reported 3QFY20 PAT of INR3.7b (+15% YoY) – a 6% miss. Better-

than-expected margins (NII beat of 6%) and opex performance (4% beat) led to PPoP beat of 13%. However, contingency provision (for customers who have a prolonged default history) of INR940m led to a PBT miss of 4%. Adjusted for the same, the PBT beat was 14%.

Other highlights: (a) Loans were up 2.5% QoQ/12% YoY. (b) Spreads were up 10bp QoQ (9M v/s 1H). (c) Asset quality disappointed with GS3% up 60bp QoQ to 8.5%. (d) Share of securitization in borrowings increased to 15% from 12% last quarter.

MMFS remains comfortable on the funding side. However, near-term growth challenges will remain with pressure in the underlying segment. We cut our estimates by 5% (led by higher provisions) and factor in ~13% AUM CAGR with RoA/RoE of 2.2%/15%. Maintain Buy.

Mid-teens AUM growth; NIM improves Value of assets financed declined by 4% for 3Q/9M, leading to further

moderation in loan growth to 12% YoY. While AUM mix was largely stable, MMFS would place a greater focus on pre-owned vehicle book.

Reported gross spreads (derived from cumulative reported) improved 30bp QoQ to 7.9%, which surprised us positively.

MMFS continues to reduce its dependence on term loans from banks and NCDs while offsetting it with increased PSL securitization (share up from 6% in 3QFY19 to 12% in 2QFY20 and 15% currently) and more fixed deposits (share up from 9% to 14% YoY).

Pressure on asset quality; contingency provisions leading to higher PCR Given the weak farm cycle, the GNPL ratio increased 60bp QoQ to 8.5%,

driven by a 9% QoQ increase in NPL contracts to 137k. MMFS incurred a termination loss and bad debt recovery stands at INR1.4b.

MMFS also took INR940m one-time provisioning for customers who have been delinquent for a long time. These factors resulted in 300bp+ QoQ improvement in PCR to 23%.

Highlights from management commentary Amongst product segments, highest asset quality pressure is felt in CV

finance. MMFS may have to increase PCR if asset quality pressure sustains. It may increase the share of securitization to 20% if the bond markets

remain weak.

Valuation and view MMFS’ performance in FY20 is marred by weak growth in the underlying segment and risk aversion toward segments like NBFCs/SMEs. Given its parentage, it has been able to raise debt at reduced costs and thus improve margins. GNPL ratio increased meaningfully in 9MFY20 led by weak rural economy, but a stronger-than-expected rural recovery can provide a significant upside to earnings. We bake in credit cost of 1.7% in FY21 v/s 2.3% in FY20. We factor ~13% AUM CAGR with RoA/RoE of 2.2%/15% over the medium term. We cut our estimates by 5-6% to factor in higher- than-expected provisions. Buy with an SOTP-based TP of INR420 (Sep’21E based).

28 January 2020 3QFY20 Results Update | Sector: Financials

Mahindra & Mahindra Financial

29 January 2020 16

Quarterly performance (INR m) Y/E March FY19 FY20 FY19 FY20 3QFY20E v/s est 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Operating Income 19,285 21,097 22,304 24,552 23,940 24,864 25,806 27,210 87,229 101,819 25,612 1 Other Income 111 357 157 243 185 545 354 350 869 1,434 150 Total income 19,397 21,455 22,461 24,795 24,125 25,409 26,160 27,560 88,098 103,253 25,762 2

YoY Growth (%) 28.6 39.4 22.7 37.2 24.4 18.4 16.5 11.1 31.8 17.2 14.7 Interest Expenses 8,488 9,310 10,205 11,443 11,282 12,022 12,089 12,413 39,446 47,806 12,503 -3 Net Income 10,909 12,145 12,256 13,352 12,843 13,387 14,072 15,146 48,653 55,447 13,259 6

YoY Growth (%) 44.8 50.8 20.7 29.7 17.7 10.2 14.8 13.4 35.0 14.0 8.2 Operating Expenses 3,849 4,276 4,812 5,549 5,600 5,196 5,189 5,774 18,476 21,758 5,410 -4 Operating Profit 7,060 7,869 7,444 7,803 7,243 8,190 8,883 9,373 30,177 33,689 7,849 13

YoY Growth (%) 65.8 65.9 12.4 28.4 2.6 4.1 19.3 20.1 39.1 11.6 5.4 Provisions 2,938 2,311 2,247 -1,145 6,196 3,606 4,001 791 6,352 14,595 2,750 45 Profit before Tax 4,122 5,558 5,197 8,947 1,047 4,584 4,882 8,581 23,824 19,094 5,099 -4 Tax Provisions 1,432 1,744 2,010 3,068 363 2,066 1,229 2,070 8,254 5,728 1,198 3 Net Profit 2,691 3,814 3,187 5,880 684 2,518 3,653 6,511 15,571 13,366 3,901 -6

YoY Growth (%) 33.6 132.5 -3.8 87.0 -74.6 -34.0 14.6 10.7 54.0 -14.2 22.4 Key Operating Parameters (%) Yield on loans (Cal) 15.3 15.6 15.5 16.1 15.3 15.5 15.7

Cost of funds (Cal) 8.2 8.2 8.4 8.9 8.4 8.6 8.4

Spreads (Cal) 7.1 7.4 7.2 7.2 6.9 6.8 7.3

Rep Spreads (Cum) 7.6 8.2 8.1 8.1 7.6 7.6 7.7

Credit Cost (Cal) 2.3 1.7 1.6 -0.8 4.0 2.3 2.5

Cost to Income Ratio 35.3 35.2 39.3 41.6 43.6 38.8 36.9 38.1 38.0 39.2 Tax Rate 34.7 31.4 38.7 34.3 34.6 45.1 25.2 24.1 34.6 30.0 Balance Sheet Parameters Loans (INR B) 516 555 583 612 624 638 655 678 612 678

Change YoY (%) 17.8 20.6 21.9 26.2 20.9 15.0 12.4 10.6 26.2 10.6

Value of Asset Fin (INR B) 103 109 133 117 106 97 128 120 462 452

Change YoY (%) 35.3 43.5 24.1 -1.1 2.5 -10.2 -3.8 2.7 22.3 -2.3

Borrowings (INR B) 427 479 498 528 548 565 587 603 528 603

Change YoY (%) 21.0 28.2 37.0 31.8 28.4 18.0 17.9 14.1 31.8 14.1

Loans/Borrowings (%) 120.9 115.9 117.0 115.9 113.9 112.9 111.5 112.4 115.9 112.4

Debt/Equity (x) 4.3 4.8 4.8 4.8 5.0 5.3 5.3 5.2 5.1 5.2

Asset Quality Parameters (%) GS 3 (INR B) 55.3 56.4 50.6 40.6 53.0 52.0 57.7 50.2 40.7 50.2

Gross Stage 3 (% on Assets) 9.4 9.0 7.7 5.9 7.4 7.2 7.6

NS 3 (INR B) 35.9 36.7 37.0 32.8 39.8 41.9 44.5 41.2 32.9 41.2

Net Stage 3 (% on Assets) 6.3 6.0 5.8 4.8 5.7 5.8 6.0

PCR (%) 35.1 34.9 26.9 19.2 24.9 19.5 22.9 18.0 19.2 18.0

ECL (%) 5.30 5.10 3.60 2.70 3.30 3.10 3.20 Return Ratios (%)

ROAA 2.0 2.7 2.1 3.6 0.4 1.4 2.0

2.6 1.9

ROAE 11.0 15.4 12.6 22.2 2.5 9.3 13.4 15.8 12.2

Source: Company, MOFSL

29 January 2020 17

BSE SENSEX S&P CNX CMP:INR589 TP: INR640 (+9%) Buy 40,967 12,056

Conference Call Details Date: 29th January 2020 Time: 09:30am IST Dial-in details: 18001029810 (PIN: 80947066#)

Financials & Valuations (INR b) Y/E Mar 2020E 2021E 2022E Sales 56.0 61.6 67.9 EBITDA 6.9 8.1 9.1 PAT 6.8 7.4 8.2 EBITDA (%) 12.3 13.2 13.4 EPS (INR) 24.4 26.6 29.4 EPS Gr. (%) (6.5) 9.1 10.7 BV/Sh. (INR) 158.8 169.6 181.5 Ratios Net D/E (0.1) (0.1) (0.1) RoE (%) 15.3 15.7 16.2 RoCE (%) 14.4 14.7 15.3 Payout (%) 49.7 49.7 49.7 Valuations P/E (x) 24.1 22.1 20.0 P/BV (x) 3.7 3.5 3.2 EV/EBITDA (x) 22.9 19.4 17.2 Div Yield (%) 2.1 2.2 2.5 FCF Yield (%) 3.3 2.7 3.1

In-line revenues, margins surprise on cost optimization Revenue declined 3% YoY to INR14.5b and was in-line with our estimate.

Domestic market grew 4% YoY while exports declined 16% YoY. Note that for 9MFY20, domestic market growth stood at 4% vs guidance of 3-5%, while exports has declined 22% vs. guidance of 20% decline.

Gross margins remained stable at 34.9% (3QFY19: 35.0%; 2QFY20: 34.9%). EBITDA margins surprised at 14.8% (-30bp YoY) vs expectation of 13.0% as

company opted for cost optimization. Thus, EBITDA stood at INR2.2b (-5% YoY) and was 11.5% ahead of our

expectation. PBT declined 6% to INR2.5b and was 6% ahead of expectation. Effective tax rate came in at just 22%. Adj. PAT grew 5.6%YoY to INR2.0b and was 10% ahead of our expectation. Exceptional item included VRS related one-time expense of INR160m (net of

tax benefits = INR112m) as 73 employees opted for VRS. Subsequent to 31 Dec 2019, the company has discontinued services of some

employees and the aggregate amount of compensation paid out stood at INR38m.

Quarterly Performance (INR M) FY19 FY20E FY19 FY20E Vs Est. Var. Y/E March 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE 3QE (%) Sales 13,280 14,869 15,038 13,404 13,430 13,084 14,534 14,937 56,590 55,986 14,885 -2.4 Change (%) -1.0 28.9 11.0 8.7 1.1 -12.0 -3.3 11.4 11.3 -1.1 -1.0

EBITDA 2,147 2,509 2,267 1,718 1,514 1,525 2,158 1,690 8,641 6,886 1,935 11.5 Change (%) 9.9 49.8 15.3 -0.7 -29.5 -39.2 -4.8 -1.6 24.0 -6.3 -14.7

As of % Sales 16.2 16.9 15.1 12.8 11.3 11.7 14.8 11.3 15.3 12.3 13.0 Depreciation 271 274 279 280 291 293 296 300 1,103 1,179 295 Interest 36 40 41 45 52 55 47 46 162 200 50 Other Income 696 785 755 692 769 926 723 803 2,928 3,221 800 PBT 2,536 2,980 2,702 2,085 1,940 2,102 2,538 2,147 10,304 8,728 2,390 6.2

Tax 706 865 831 676 525 269 564 614 3,078 1,972 602 Effective Tax Rate (%) 27.8 29.0 30.8 32.4 27.1 12.8 22.2 28.6 29.9 22.6 25.2 Adjusted PAT 1,830 2,116 1,871 1,409 1,415 1,833 1,975 1,533 7,226 6,755 1,788 10.4

Change (%) 10.2 38.4 8.7 (12.6) (22.7) (13.4) 5.6 8.8 10.8 (6.5) (4.4) Extra-ordinary Income (net) - - - - - - -112 - - - - Reported PAT 1,830 2,116 1,871 1,409 1,415 1,833 1,862 1,533 7,226 6,755 1,788 4.1

Change (%) (17.6) 38.4 8.7 (12.6) (22.7) (13.4) (0.5) 8.8 2.0 (6.5) (4.4)

28 January 2020 3QFY20 Results Flash | Sector: Capital Goods

Cummins India

RESULTS FLASH

29 January 2020 18

Estimate change TP change Rating change Bloomberg TEAM IN

Equity Shares (m) 17

M.Cap.(INRb)/(USDb) 44.2 / 0.6

52-Week Range (INR) 3201 / 2286

1, 6, 12 Rel. Per (%) 4/-15/-17

12M Avg Val (INR M) 56

Financials & Valuations (INR b) Y/E Mar 2020E 2021E 2022E Sales 52.4 64.0 79.3 EBIT Margin (%) 1.5 1.7 1.9 PAT 903.0 1187.3 1631.7 EPS (INR) 54.1 69.4 95.4 EPS Gr. (%) -6.0 28.4 37.4 BV/Sh. (INR) 369.4 438.9 534.3 Ratios RoE (%) 15.8 17.2 19.6 RoCE (%) 15.8 17.0 19.1 Payout (%) 0.0 0.0 0.0 Valuations P/E (x) 47.7 37.2 27.1 P/BV (x) 7.0 5.9 4.8 EV/EBITDA (x) 39.7 29.2 20.6 Div Yield (%) 0.0 0.0 0.0

Shareholding pattern (%) As On Dec-19 Sep-19 Dec-18 Promoter 40.0 40.3 40.8 DII 9.3 7.7 5.8 FII 43.1 44.6 44.5 Others 7.6 7.4 8.9 FII Includes depository receipts

CMP: INR2583 TP: INR3280 (+27%) Buy

This too shall pass! Fundamentals remain strong; Reiterate Buy The soft job market and the weak festive season translated into lower-than-

expected headcount/revenue growth (by up to 6%) in general staffing. However, TEAM's ability to command an increase in mark-ups (from INR739 in 2Q to INR750) amidst weak demand and continuous mark-up pressure was impressive. This comes without any increase in the share of working capital funded clients (at 14%). Demand issues, along with multiple one-offs which adversely impacted margins, have translated into depressed earnings in FY20. However, as demand improves and margins normalize, we expect a rebound in earnings over the medium term (34% CAGR over FY21-22).

We downgrade our EPS estimate for FY21-22 by 3%-7%, given the weak near-term outlook. Despite the macro/demand issues, the fundamentals of the business remain strong, in our view. Reiterate Buy.

Miss on headcount and revenue growth; Adjusted EBITDA in-line Headcount addition in general staffing (2,187) was weaker than our estimate

(4,500). General staffing/overall revenue was 5%-6% below our estimate. This was largely led by the soft job market and the weak festive season.

On an organic basis, both specialized staffing and other HR services remained largely flat YoY, further constraining growth.

EBITDA margin adjusted for one-time provision in general staffing (2.1%) was marginally ahead of our estimate (by ~13bp).

Reported general staffing EBITDA margin (1.6%) was optically lower (by 20bp QoQ) due to one-time provision and higher salary per associate.

On a sequential basis, adjusted EBITDA margin expanded ~20bp, led by IT staffing, partial integration of IMSI and other HR services.

Reported EBITDA margin of Evolve was optically lower (by 60bp QoQ). This was due to the renegotiation of working capital terms with a top client.

Despite the weakness in the job market and no increase in the share of working capital funded clients (remains at 14%), mark-ups increased from INR739 (in 2Q) to INR750. We see this as a key positive reflecting TEAM's ability to defend pricing and margins.

Staffing productivity (associate to core ratio) increased marginally. Tax assessment for the first year of claiming Sec 80JJAA (FY17) was cleared. Downbeat commentary on revenue growth and margins TEAM expects ~10% rise in general staffing headcount in FY20. This

translates into headcount addition of ~2,300 in 4QFY20 (v/s 1,400 YoY), which is a seasonally weak quarter with impact of roll-offs/absorptions.

Overall revenue growth is expected to be ~18% for FY20. It expects steady state EBITDA margin of 2% in general staffing in the near

term. Some cost-rationalization measures are underway, both in general staffing

and specialized staffing (eliminating redundancies at acquired entities). It is confident on provision reversal (INR40m) in staffing/HR services in 4Q.

28 January 2020 3QFY20 Results Update | Sector: Technology

Teamlease

29 January 2020 19

Valuation view – medium-term outlook remains robust TEAM should continue to be the key beneficiary of (i) robust foreign funding into

Indian businesses increasing the need for labor law compliances, (ii) formalization of workforce in the end industries and (iii) shift of clients from unorganized to organized staffing vendors.

Medium-term headcount growth should be strong (14% CAGR over FY21-22). Given the continuous mark-up pressures in the industry, the EBIT margin is a

more critical variable to watch out for, in our view. (i) Scale-driven operating leverage in general staffing, (ii) pick-up in apprentice addition, (iii) recovery in margins of Evolve technologies, (iv) stabilization of other HR services and (v) complete integration of E-Centric and IMSI should drive ~40bp expansion in the EBIT margin to 1.9% by FY22.

While the market is over concerned about the potential provision related to ILFS/DHFL exposure in the PF trust (INR1.7b, 32% of FY19 net worth), we believe the likelihood of TEAM having to take this provision is limited. We get this comfort from (i) strong liquidity cushion in the PF trust and (ii) higher preference given to PF trusts in the insolvency proceedings.

The company should continue to avail the benefits of Sec 80JJAA exemption under the new tax regime. However, it need not pay MAT (hitherto at ~20.5%) going forward. This is a key positive from an FCF standpoint.

Given the expected non-linearity in headcount and EBITDA trajectory, P/E multiples on FY21/22E do not adequately capture the potential value creation in the long term. We prefer 10-year DCF. Our DCF-based TP of INR3,280 implies 34x FY22E EPS (v/s current multiple of 38x FY21E EPS).

29 January 2020 20

Consolidated Quarterly Performance (INR m) FY19 FY20E FY19 FY20E Est. Var.

(% / bp) 1Q 2Q 3Q 4Q 1Q 2Q 3QE 4QE 3QFY20 Total income from operations 10,213 10,907 11,722 11,634 12,512 12,678 13,514 13,728 44,476 52,432 14,301 -6% YoY Change (%) 19.7% 24.6% 27.7% 19.0% 22.5% 16.2% 15.3% 18.0% 22.7% 17.9% 22.0% -672bp Total Expenditure 10,012 10,666 11,477 11,377 12,281 12,433 13,239 13,413 43,531 51,366 14,046 -6% EBITDA 202 240 245 257 232 245 288 315 945 1,066 286 1% Margins (%) 2.0% 2.2% 2.1% 2.2% 1.9% 1.9% 2.1% 2.3% 2.1% 2.0% 2.0% 13bp EBIT Margin (%) 1.7% 1.9% 1.9% 2.0% 1.4% 1.4% 1.5% 1.7% 1.9% 1.5% 1.5% -7bp Depreciation 27 29 25 25 61 66 76 76 105 279 66 16% Interest 11 14 13 14 28 29 29 29 52 115 28 3% Other Income 52 40 36 52 35 54 73 53 181 214 52 40% PBT 216 237 244 268 173 195 251 258 968 887 239 5% Tax -3 -12 -9 8 -15 -6 -16 0 -16 -38 0 Rate (%) -1% -5% -4% 3% -9% -3% -6% 0% -2% -4% 0% -647bp Adj PAT 218 249 253 260 188 202 268 258 980 916 239 12% YoY Change (%) 33% 43% 37% 22% -14% -19% 6% -1% 33% -7% -5% 1145bp Margins (%) 2.1% 2.3% 2.2% 2.2% 1.5% 1.6% 2.0% 1.9% 2.2% 1.7% 1.7% 31bp Reported PAT 218 249 253 260 188 202 255 258 980 903

KeyPerfor.Indicators Y/EMarch FY19 FY20E FY19

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QE Headcount General staffing 1,37,735 1,45,145 1,52,693 1,54,095 1,60,614 1,65,029 1,67,216 1,52,693 Apprentices 47,493 48,725 52,525 56,169 57,292 51,341 52,388 52,525 Specialised staffing 6,407 6,065 6,117 5,947 6,858 6,549 8,244 6,117 Core Employees 1,726 1,704 1,708 1,687 1,818 2,005 2,150 1,708 Revenue General staffing 9,160.8 9,773.1 10,616.9 10,564.5 11,306.0 11,391.6 12,161.1 40,115 Specialised staffing 750 756 792 794 982 1,005 1,046 3,092 Other HR Services 303 377 314 275 224 282 306 1,269 EBITDA Margins General staffing 1.6 1.8 2.0 2.3 2.0 1.8 1.6 1.9 Specialised staffing 7.2 7.7 6.2 6.0 6.4 6.1 7.4 6.7 Other HR Services 7.4 10.1 0.3 5.5 (28.3) (1.3) 1.9 6.0

29 January 2020 21

1. HDFC: LOAN DEMAND IN LOW-TICKET SEGMENT ROBUST BUT SLOWING FOR HIGH-END MARKET; Keki Mistry, VC and CEO

Individual loans in the affordable housing segment continue to remain good. Focus on affordable housing loans continues unabated. If one looks at the breakdown of the lending company has done in this quarter, and the nine-month periods, it is almost the same.

The loans given to customers, who are in the economically weaker section (EWS) or the lower income group (LIG) would constitute in number terms 36 percent, in value terms 18 percent. For that segment of the market, the demand is fairly strong and robust. Problem is in the high-end market. Demand for high value loans, higher ticket items is slowing down.

The transition of Gruh into Bandhan happened during the course of this quarter because the National Company Law Tribunal (NCLT) approval happened now and therefore under the accounting rules, company had to mark-to-market (MTM) the Bandhan shares based on the share price. Cannot reflect it at cost price, the way company was reflecting the Gruh price.

So, there is a MTM gain that gets recognised but on that MTM gain, have created the deferred tax liability - in future, if company has to sell it, it has to pay tax, there is a deferred tax liability that is being created.

2. WOCKHARDT : RESTRUCTURING UNDERWAY TO RAISE

FUNDS; Habil F Khorakiwala, Founder, Chairman and Group CEO

Company is looking to raise some equity and cash through some kind of restructuring of the organisation.

(Restructuring) would be rather soon in next month or so. Have completed most of remediation measures and are in communication with

USFDA [the US Food and Drug Administration] and there are certain additional information USFDA is requiring which company is providing and hope that during the coming financial year, there will be an inspection early enough and hope that company should be back on track.

India business has three components, one is branded business which is not down very significantly — it is down by less than single digit. The generic business that company had, more or less company has discontinued that and that is also showing a decline. Third element was some Active Pharmaceutical Ingredient (API) business domestically is down but internationally it is up.

Globally focus is on three-four big areas. One is pharma business which is very important worldwide including India. Second in terms of therapy area antibiotics since company has the research programme with the new chemical entity (NCE). Third is biosimilars especially the insulin Glargine and other analogues are important because USFDA has come out with new guidelines a month back and company is seriously considering to enter the US market with our biosimilars.

In conversation

29 January 2020 22

1. OPPORTUNITIES FOR INDIA IN THE ASIAN CENTURY India is at an inflection point. Its recent period of significant growth—faster than

the global average—has stalled in the face of global headwinds against trade, volatile commodity markets, stagnant private investment, weaker domestic consumption and constrained government spending in the wake of recent fiscal and monetary reforms. At the same time, Asia is becoming the world’s powerhouse and economic center. New research from the McKinsey Global Institute finds that Asia could generate more than half of the world’s GDP by 2040 as cross-border flows shift toward the region, which is rapidly integrating; with 60% of goods traded, 56% of greenfield foreign direct investment (FDI) and 74% of journeys by Asian air travelers taking place within the region. This research identifies 4 distinct sub-Asias—diverse groups of economies with characteristics that complement each other, which are fast becoming increasingly interconnected. As a result, dynamic new flows and networks are appearing, redefining globalization as we know it. The new era will be one of regionalization, and Asia is taking a lead. Historically, India—and other countries in ‘Frontier Asia’ (Bangladesh, Sri Lanka, Kazakhstan, Uzbekistan, etc)—have had relatively low levels of integration when compared with the rest of the region; only around 31% of their flows are intra-regional. Yet, how they now respond to these shifting flows, and the opportunities they present, could be key in defining and delivering its next chapter of growth.

2. MONETARY POLICY’S BLINKERED VIEW OF CREDIT The RBI’s frequent shifts in policy relating to bank lending rates over the last 25

years — starting with the PLR in 1994, the BPLR (2003), Base Rate (2010), the MCLR (2016), and now, external benchmarking — reflect policy rate uncertainty. Leaving aside the market rates, even banks’ lending rates remain at variance with monetary policy intents. Growing financial sector instability/vulnerability, growth uncertainty, credit-constrained MSMEs, low farm prices, surplus liquidity with banks as against unprecedented liquidity constraint with businesses and a high level of cash in the economy despite digitisation reflect poor monetary policy outcomes. How did we get to such adverse conditions? Why is the financial sector more vulnerable now than ever before, despite the experience/expertise gained by the RBI over the last 25 years, the advent of monetary-model based policy analysis and economic forecasting, and Big Data analytics? One of the key reasons lies in the bank-centric monetary policy framework. It misses out on the systemic role of the trade credit channel in defining monetary policy transmission (MPT). A guesstimate of working capital requirement based on the turnover of 94.3 lakh firms which filed income tax/service tax returns for FY14, the outstanding working capital of banks and miniscule bank working capital flows to the unorganised sector show that banks meet less than one-third of the aggregate working capital needs of businesses. A monetary policy architecture which built on a narrow, bank-centric base cannot be stable and sound.

From the think tank

29 January 2020 23

3. AMERICA’S WAR ON CHINESE TECHNOLOGY The worst foreign-policy decision by the United States of the last generation –

and perhaps longer – was the “war of choice” that it launched in Iraq in 2003 for the stated purpose of eliminating weapons of mass destruction that did not, in fact, exist. Understanding the illogic behind that disastrous decision has never been more relevant, because it is being used to justify a similarly misguided US policy today. The decision to invade Iraq followed the illogic of then-US Vice President Richard Cheney, who declared that even if the risk of WMDs falling into terrorist hands was tiny – say, 1% – we should act as if that scenario would certainly occur. Such reasoning is guaranteed to lead to wrong decisions more often than not. Yet the US and some of its allies are now using the Cheney Doctrine to attack Chinese technology. The US government argues that because we can’t know with certainty that Chinese technologies are safe, we should act as if they are certainly dangerous and bar them. Proper decision-making applies probability estimates to alternative actions. A generation ago, US policymakers should have considered not only the (alleged) 1% risk of WMDs falling into terrorist hands, but also the 99% risk of a war based on flawed premises. By focusing only on the 1% risk, Cheney (and many others) distracted the public’s attention from the much greater likelihood that the Iraq War lacked justification and that it would gravely destabilize the Middle East and global politics.

29 January 2020 24

CMP TP % Upside EPS (INR) EPS Gr. YoY (%) P/E (x) P/B (x) ROE (%) Company Reco (INR) (INR) Downside FY19 FY20E FY21E FY19 FY20E FY21E FY20E FY21E FY20E FY21E FY20E FY21E Automobiles Amara Raja Buy 791 823 4 28.3 38.0 38.4 2.6 34.2 1.1 20.8 20.6 3.6 3.2 18.2 16.3 Ashok Ley. Buy 85 103 22 6.9 1.7 3.5 16.4 -75.0 102.2 49.0 24.2 3.1 3.0 6.2 12.7 Bajaj Auto Neutral 3061 3225 5 165.4 178.9 187.7 9.3 8.2 4.9 17.1 16.3 3.6 3.3 22.4 21.1 Bharat Forge Buy 499 567 14 22.2 17.4 21.5 20.3 -21.4 23.1 28.6 23.3 4.0 3.6 14.5 16.2 Bosch Neutral 14694 15803 8 542.4 387.9 493.0 15.5 -28.5 27.1 37.9 29.8 5.7 5.0 13.7 17.8 CEAT Buy 999 1250 25 66.9 55.7 71.5 4.6 -16.8 28.3 18.0 14.0 1.4 1.3 7.9 9.4 Eicher Mot. Buy 21078 25570 21 813.9 745 894 1.8 -8.5 20.1 28.3 23.6 5.4 4.6 20.8 21.0 Endurance Tech. Buy 1158 1254 8 36.2 42.4 48.4 24.5 17.2 14.0 27.3 23.9 5.5 4.7 21.5 21.1 Escorts Neutral 728 705 -3 53.2 52.6 61.4 34.7 -1.1 16.8 13.8 11.8 2.1 1.8 16.2 16.3 Exide Ind Buy 203 224 10 9.1 10.2 10.8 10.6 12.6 6.0 19.9 18.8 2.6 2.4 13.3 12.9 Hero Moto Neutral 2468 2700 9 169.5 150.2 167.7 -8.5 -11.4 11.7 16.4 14.7 3.6 3.3 22.6 23.6 M&M Buy 573 696 22 42.7 35.4 43.4 4.1 -17.2 22.6 16.2 13.2 1.8 1.7 11.7 10.6 Mahindra CIE Buy 175 198 13 14.5 11.4 14.6 48.6 -21.2 27.5 15.3 12.0 1.4 1.3 9.6 11.0 Maruti Suzuki Buy 6997 8000 14 243.6 193.5 254.7 -7.1 -20.6 31.6 35.0 26.7 4.3 3.9 11.9 14.4 Motherson Sumi Buy 139 176 27 5.1 4.6 6.7 -5.2 -9.1 44.9 29.9 20.7 3.6 3.2 12.4 16.3 Tata Motors Buy 176 220 25 -4.4 0.9 12.3 PL LP 1,254.7 194.3 14.3 1.0 0.9 0.5 6.6 TVS Motor Neutral 462 442 -4 14.1 13.1 17.7 1.1 -7.2 35.4 35.3 26.0 5.8 5.0 17.4 20.4 Aggregate -21.1 -9.4 35.9 27.1 19.9 2.9 2.7 10.9 13.6 Banks - Private AU Small Finance Buy 1044 1100 5 13.2 25.4 34.4 28.9 92 35.7 41.2 30.3 7.2 5.8 20.0 21.3 Axis Bank Buy 737 835 13 18.2 18.1 43.3 1,538.1 -1 139.2 40.7 17.0 2.4 2.1 6.4 13.3 DCB Bank Neutral 178 200 12 10.5 12.2 16.4 32.0 15.7 35.0 14.6 10.8 1.6 1.4 12.3 14.6 Equitas Hold. Buy 112 125 12 5.2 7.0 12.0 1,186.6 35.9 70.6 15.9 9.3 1.4 1.3 9.4 14.3 Federal Bank Buy 95 115 21 6.3 8.6 10.6 32.2 37.2 22.7 11.0 9.0 1.3 1.2 12.3 13.6 HDFC Bank Buy 1223 1500 23 39.6 49.5 62.9 16.9 24.9 27.1 24.7 19.4 3.9 3.4 16.9 18.6 ICICI Bank Buy 528 650 23 5.2 16.8 29.3 -52.8 221.7 74.6 31.4 18.0 3.0 2.6 9.9 15.8 IndusInd Buy 1255 1720 37 54.9 85.8 115.4 -8.8 56.3 34.5 14.6 10.9 2.4 2.0 17.8 19.9 Kotak Mah. Bk Neutral 1626 1625 0 37.7 47.0 55.2 16.0 24.6 17.4 34.6 29.5 4.7 4.0 14.3 14.6 RBL Bank Buy 340 415 22 20.3 9.7 22.3 34.3 -52.3 130.6 35.0 15.2 1.6 1.5 5.4 10.1 South Indian Buy 11 15 38 1.4 1.9 2.5 -26.2 39.8 32.8 5.7 4.3 0.4 0.3 6.4 8.0 Aggregate 16.7 42.4 46.8 27.6 18.8 3.4 2.9 12.3 15.6 Banks - PSU BOB Buy 93 115 23 1.6 -2.0 13.8 LP PL LP NM 6.8 0.6 0.6 -1.2 8.9 BOI Neutral 66 75 13 -24.6 -10.3 5.7 Loss Loss LP NM 11.6 0.5 0.4 -6.3 3.6 Canara Neutral 204 240 18 4.7 15.1 28.0 LP 222.6 85.8 13.5 7.3 0.5 0.5 3.4 6.5 Indian Bk Neutral 104 120 16 6.7 23.2 31.3 -74.4 246.8 34.7 4.5 3.3 0.3 0.3 7.3 9.9 PNB Neutral 61 65 7 -27.1 -4.5 7.6 Loss Loss LP NM 7.9 0.7 0.7 -4.9 8.4 SBI Buy 315 425 35 2.6 26.4 39.3 LP 924 49.1 11.9 8.0 1.2 1.0 10.6 14.2 Union Bk Neutral 51 54 5 -20.1 0.0 4.5 Loss LP - 1,327.2 11.6 0.5 0.5 0.0 4.3 Aggregate Loss LP 171 20 7.4 0.8 0.7 3.9 9.7 NBFCs Aditya Birla Cap Buy 103 110 7 4.0 4.3 5.6 25.7 9.8 29.3 23.7 18.3 2.1 1.8 9.8 10.6 Bajaj Fin. Neutral 4213 4500 7 69.3 103.4 137.1 59.6 49.3 32.6 40.8 30.7 7.5 6.2 23.2 22.0 Cholaman.Inv.&Fn Buy 326 390 20 15.2 18.2 21.6 29.1 19.8 18.9 17.9 15.1 3.5 2.9 21.2 20.9

HDFC Buy 2432 2875 18 44.4 51.0 57.0 28.7 14.9 11.8 47.7 42.7 4.7 4.4 14.4 14.1 HDFC Life Insur. Neutral 604 600 -1 6.3 6.8 8.1 14.6 7.9 17.8 88.2 74.9 5.5 4.7 20.1 18.5 ICICI Pru Life Buy 527 565 7 8.0 8.2 9.4 -29.5 3.6 14.1 63.9 56.0 3.0 2.6 16.8 17.0 Indostar Capital Buy 274 270 -2 26.1 20.6 26.8 2.5 -21.2 30.5 13.3 10.2 0.8 0.7 6.1 7.4 L&T Fin Holdings Buy 119 145 22 11.2 12.0 13.9 74.3 7.4 15.6 9.9 8.6 1.6 1.4 16.8 17.0 LIC Hsg Fin Buy 457 530 16 48.1 56.6 61.6 21.4 17.6 8.8 8.1 7.4 1.3 1.1 16.5 15.8 MAS Financial Buy 913 1000 10 27.8 32.3 39.4 47.1 16.0 22.1 28.3 23.2 4.9 4.2 19.4 20.2 M&M Fin. Buy 352 420 19 25.3 21.7 29.8 53.9 -14.3 37.3 16.2 11.8 1.9 1.7 12.2 15.0 Muthoot Fin Neutral 757 750 -1 49.2 66.3 76.3 10.8 34.8 15.0 11.4 9.9 2.7 2.3 26.2 25.2

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CMP TP % Upside EPS (INR) EPS Gr. YoY (%) P/E (x) P/B (x) ROE (%) Company Reco (INR) (INR) Downside FY19 FY20E FY21E FY19 FY20E FY21E FY20E FY21E FY20E FY21E FY20E FY21E PNB Housing Neutral 448 563 26 71.1 71.4 74.1 40.9 0.3 3.9 6.3 6.0 0.9 0.8 15.2 13.9 Repco Home Buy 330 390 18 37.5 48.6 52.5 16.7 29.7 8.0 6.8 6.3 1.1 1.0 18.2 16.7 Shriram City Union Buy 1368 1600 17 149.9 167.9 181.6 48.7 12.0 8.1 8.1 7.5 1.2 1.1 16.1 15.1

Shriram Trans. Buy 1079 1385 28 113.0 122.8 129.9 4.2 8.7 5.8 8.8 8.3 1.4 1.2 16.5 15.2 Aggregate 32.4 20.5 16.0 24.9 21.5 3.6 3.2 14.6 14.9 Capital Goods ABB Buy 1330 1460 10 12.0 19.3 25.8 12.7 61.2 33.7 68.8 51.5 6.2 6.9 14.0 13.5 Bharat Elec. Buy 100 120 20 7.9 6.4 7.5 37.7 -19.3 17.5 15.7 13.3 2.5 2.2 15.7 16.8 BHEL Neutral 43 46 6 3.5 3.4 3.0 58.9 -3.6 -9.7 12.9 14.2 0.5 0.5 3.7 3.3 Blue Star Neutral 850 870 2 19.5 26.8 33.1 34.7 37.7 23.6 31.7 25.7 7.7 6.3 24.2 24.3 CG Cons. Elec. Buy 259 296 14 6.0 7.6 9.6 15.5 27.1 26.1 34.1 27.0 11.8 9.4 38.5 38.7 Cummins Buy 589 640 9 26.1 24.4 26.6 10.8 -6.5 9.1 24.1 22.1 3.7 3.5 15.3 15.7 Engineers India Buy 99 146 48 5.9 6.5 8.7 -8.4 10.5 33.8 15.3 11.4 2.8 2.7 17.6 22.5 Havells Neutral 617 660 7 12.7 13.3 15.1 12.9 5.4 13.0 46.2 40.9 8.1 7.2 17.5 17.5 K E C Intl Buy 338 430 27 18.9 24.2 28.6 6.1 28.1 17.9 14.0 11.8 2.9 2.4 20.9 20.3 L&T Buy 1347 1680 25 63.5 77.4 93.2 22.8 21.9 20.5 17.4 14.5 2.7 2.4 15.3 16.3 Siemens Neutral 1507 1705 13 25.1 30.5 40.0 27.1 21.6 31.0 49.3 37.7 5.9 5.3 12.0 14.1 Thermax Neutral 1068 1170 10 27.2 29.8 39.0 32.4 9.6 31.0 35.9 27.4 3.7 3.4 10.7 12.8 Voltas Buy 716 785 10 15.7 20.0 24.6 -9.1 27.0 23.1 35.9 29.2 5.2 4.6 14.5 15.9 Aggregate 16.1 15.9 18.8 23.8 20.1 3.0 2.7 12.4 13.5 Cement Ambuja Cem. Neutral 216 220 2 6.1 7.2 7.6 -3.2 18.2 5.4 30.0 28.5 1.9 1.8 6.6 6.6 ACC Buy 1561 1780 14 53.5 75.5 79.3 9.9 41.1 5.0 20.7 19.7 2.5 2.3 12.7 12.0 Birla Corp. Buy 731 930 27 33.2 61.1 70.1 53.6 84.1 14.8 12.0 10.4 1.2 1.1 10.0 10.6 Dalmia Bhar. Buy 860 1030 20 15.8 14.0 19.2 4.3 -11.4 37.2 61.4 44.8 1.5 1.5 2.5 3.4 Grasim Inds. Neutral 808 775 -4 66.1 41.3 53.8 39.7 -37.5 30.1 19.6 15.0 1.2 1.2 4.3 4.0 India Cem Neutral 86 80 -7 2.3 3.8 4.1 -31.0 69.5 6.9 22.6 21.1 0.5 0.5 2.2 2.3 J K Cements Buy 1386 1490 8 34.1 64.2 69.1 -19.8 88.2 7.6 21.6 20.1 3.4 3.0 17.0 15.9 JK Lakshmi Ce Buy 371 410 11 6.8 20.0 23.2 -8.7 195.8 16.0 18.5 16.0 2.5 2.2 14.5 14.8 Ramco Cem Neutral 850 800 -6 21.9 28.1 29.8 -8.7 28.5 5.9 30.3 28.6 4.0 3.5 13.9 13.1 Shree Cem Neutral 23433 22360 -5 324.1 453.7 569.5 -18.2 40.0 25.5 51.6 41.1 6.3 5.6 14.3 14.5 Ultratech Buy 4609 5440 18 90.3 140.1 186.8 1.0 55.1 33.4 32.9 24.7 3.4 3.0 11.4 13.6 Aggregate 9.8 15.8 22.4 29.0 23.6 2.5 2.3 8.6 9.7 Consumer Asian Paints Sell 1779 1608 -10 23.1 29.7 32.6 9.1 28.8 9.7 59.9 54.6 16.0 14.3 28.3 27.7 Britannia Neutral 3180 3254 2 48.1 56.7 64.6 15.1 17.8 14.0 56.1 49.2 16.8 16.4 30.9 33.7 Colgate Buy 1489 1859 25 27.4 29.9 36.0 8.8 9.3 20.1 49.7 41.4 29.3 31.9 57.5 73.8 Dabur Neutral 488 443 -9 8.5 9.0 10.0 9.5 5.6 11.7 54.3 48.6 13.5 12.5 26.4 26.7 Emami Buy 318 407 28 12.2 13.0 14.7 0.2 6.7 13.5 24.5 21.6 6.2 6.0 26.7 28.2 Godrej Cons. Neutral 736 680 -8 15.1 15.5 17.6 7.2 2.6 13.5 47.5 41.8 9.8 9.6 21.2 23.2 GSK Cons. Neutral 8909 8509 -4 216.1 290.3 327.6 29.8 34.3 12.8 30.7 27.2 8.0 7.0 27.7 27.5 HUL Buy 2061 2195 7 28.9 32.8 39.1 18.2 13.2 19.2 62.9 52.8 56.7 55.7 91.3 106.5 ITC Neutral 231 280 21 10.2 12.6 13.0 14.8 23.7 3.8 18.4 17.7 4.5 4.2 25.5 24.4 Jyothy Lab Neutral 160 169 6 5.4 6.0 7.1 10.5 10.9 18.6 26.7 22.5 4.2 4.0 16.1 18.1 Marico Neutral 335 358 7 7.2 7.5 8.0 14.3 3.4 7.9 44.9 41.7 11.9 10.4 29.0 26.7 Nestle Neutral 15414 14168 -8 178.6 214.4 244.7 27.5 20.1 14.1 71.9 63.0 69.0 62.6 70.9 104.2 Page Inds Neutral 25146 24582 -2 353.2 388.2 457.6 13.5 9.9 17.9 64.8 55.0 31.7 28.5 49.0 51.8 Pidilite Ind. Neutral 1462 1333 -9 18.6 22.1 26.5 -2.0 18.8 20.0 66.3 55.2 15.1 12.8 24.7 25.1 P&G Hygiene Neutral 11136 11397 2 129.6 151.0 200.3 12.5 16.4 32.7 73.8 55.6 34.1 28.6 49.8 56.0 Tata Global Buy 381 371 -3 7.0 8.9 9.7 -14.6 27.3 8.7 42.8 39.4 3.1 2.5 7.5 8.3 United Brew Neutral 1277 1404 10 21.3 18.0 26.6 42.8 -15.7 48.4 71.1 47.9 9.4 8.0 14.0 18.1 United Spirits Buy 656 801 22 9.3 12.0 15.6 38.1 28.9 30.0 54.9 42.1 12.5 9.6 22.7 22.9 Aggregate 14.8 18.0 12.4 42.3 37.6 12.2 10.8 28.8 28.8 Healthcare

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CMP TP % Upside EPS (INR) EPS Gr. YoY (%) P/E (x) P/B (x) ROE (%) Company Reco (INR) (INR) Downside FY19 FY20E FY21E FY19 FY20E FY21E FY20E FY21E FY20E FY21E FY20E FY21E Alembic Phar Neutral 632 640 1 31.0 43.5 34.0 41.6 40.1 -21.7 14.5 18.6 3.5 3.0 26.5 17.3 Alkem Lab Buy 2324 2470 6 63.8 89.2 108.9 8.4 39.8 22.1 26.0 21.3 4.4 3.8 18.2 19.3 Ajanta Pharma Buy 1162 1124 -3 44.4 49.1 57.5 -16.1 10.5 17.0 23.7 20.2 3.9 3.4 17.9 18.1 Aurobindo Buy 504 533 6 43.2 47.0 61.5 1.1 8.9 31.0 10.7 8.2 1.8 1.5 18.1 19.8 Biocon Neutral 289 300 4 6.2 7.3 9.9 99.6 18.4 35.5 39.4 29.1 5.1 4.6 13.7 16.6 Cadila Buy 272 300 10 18.3 14.5 17.0 4.3 -21.0 17.9 18.8 16.0 2.5 2.2 11.3 14.8 Cipla Neutral 465 500 8 18.7 22.1 25.7 -3.1 18.1 16.3 21.0 18.1 2.2 2.0 10.5 11.0 Divis Lab Neutral 1946 1736 -11 50.0 53.6 67.2 55.0 7.2 25.2 36.3 29.0 6.4 5.4 18.9 20.3 Dr Reddy’s Neutral 3189 3000 -6 105.2 119.1 139.8 62.6 13.3 17.4 26.8 22.8 3.4 3.0 13.4 14.1 Glenmark Neutral 345 340 -1 25.9 24.5 28.6 -9.0 -5.5 16.9 14.1 12.1 1.6 1.4 11.7 12.3 Granules Buy 152 165 8 9.2 14.5 16.2 76.5 57.8 11.4 10.5 9.4 2.2 1.9 22.4 21.5 GSK Pharma Neutral 1688 1575 -7 24.6 32.4 34.8 25.2 31.7 7.6 52.1 48.4 10.8 10.0 20.7 20.7 IPCA Labs Buy 1243 1310 5 37.1 46.9 59.3 95.7 26.4 26.3 26.5 21.0 4.3 3.7 17.5 18.9 Jubilant Life Buy 599 627 5 57.5 59.0 66.8 26.1 2.7 13.2 10.1 9.0 1.7 1.4 17.6 17.0 Laurus Labs Buy 426 455 7 10.4 15.2 23.1 -34.5 46.4 52.1 28.0 18.4 2.6 2.3 9.8 13.3 Lupin Buy 747 890 19 23.3 24.4 37.8 -27.1 4.5 55.3 30.7 19.7 2.3 2.1 7.7 11.1 Strides Pharma Buy 452 440 -3 6.9 22.0 34.0 -39.2 220.5 54.7 20.6 13.3 1.4 1.3 7.1 10.3 Sun Pharma Buy 453 515 14 15.1 18.3 22.1 12.2 21.3 20.9 24.7 20.5 2.4 2.2 10.2 11.3 Torrent Pharma Neutral 1913 1930 1 42.7 57.3 73.8 -7.1 34.2 28.7 33.4 25.9 6.0 5.3 19.2 21.7 Aggregate 11.9 14.0 22.3 23.7 19.4 3.0 2.7 12.8 13.9 Infrastructure Ashoka Buildcon Buy 114 150 32 11.5 11.6 12.5 35.8 1.2 7.5 9.8 9.1 1.3 1.1 13.8 13.1 IRB Infra Neutral 113 77 -32 24.2 18.0 4.9 1.2 -25.6 -73.0 6.3 23.2 0.6 0.6 9.6 2.5 KNR Constructions Buy 292 374 28 17.8 19.7 19.7 -7.8 10.2 0.5 14.9 14.8 2.4 2.1 17.8 15.2

Sadbhav Engineering Buy 129 185 44 10.8 9.2 16.6 -15.7 -15.5 80.8 14.0 7.8 1.0 0.6 7.5 10.5

Aggregate 9.8 11.9 1.0 0.8 10.5 7.1 Logistics Allcargo Logistics Buy 117 120 3 9.7 10.4 11.2 33.6 7.5 7.9 11.2 10.4 1.3 1.1 12.0 11.5 Concor Buy 571 685 20 19.9 17.2 19.7 14.9 -13.7 14.3 33.2 29.0 3.3 3.1 10.0 11.0 Aggregate 18.5 -9.4 11.1 27.6 24.9 2.8 2.6 10.0 10.4 Media D B Corp Neutral 140 160 15 15.7 17.3 17.7 -11.1 10.7 2.1 8.1 7.9 1.3 1.3 16.2 15.7 Ent.Network Buy 258 311 20 10.9 8.0 15.3 60.2 -26.4 91.2 32.3 16.9 1.3 1.2 4.0 7.3 Jagran Prak. Neutral 70 70 0 8.8 11.5 11.4 -8.7 30.7 -0.8 6.1 6.1 1.0 0.9 17.2 15.4 Music Broadcast Buy 27 42 55 2.2 2.2 2.4 22.9 -3.0 12.4 12.6 11.2 1.1 1.0 9.4 9.6 PVR Buy 1935 2250 16 37.9 49.4 65.0 41.9 30.5 31.6 39.2 29.8 5.5 4.7 16.3 17.0 Sun TV Buy 493 531 8 35.4 38.5 40.4 27.6 8.6 5.1 12.8 12.2 3.0 2.6 25.6 23.1 Zee Ent. Neutral 273 300 10 16.4 16.9 19.4 12.7 3.0 14.7 16.1 14.0 2.6 2.2 18.1 17.0 Aggregate 1.5 17.6 0.5 13.9 13.9 2.3 2.3 16.2 16.7 Metals Hindalco Buy 196 256 31 24.7 19.7 22.3 30.9 -20.2 12.9 9.9 8.8 1.0 0.9 10.7 11.0 Hind. Zinc Neutral 199 225 13 18.8 17.5 18.6 -10.8 -6.9 5.9 11.3 10.7 2.2 2.0 20.7 19.5 JSPL Buy 175 210 20 3.3 -3.8 8.3 LP PL LP NM 21.2 0.5 0.5 -1.1 2.5 JSW Steel Buy 255 320 25 31.8 19.3 29.8 32.4 -39.4 54.4 13.2 8.6 1.6 1.4 12.7 17.4 Nalco Buy 45 54 20 9.2 1.4 3.5 79.9 -85.0 154.6 32.6 12.8 0.8 0.8 2.5 6.3 NMDC Buy 124 152 23 15.6 13.3 16.0 19.2 -14.9 20.3 9.3 7.8 1.4 1.3 15.2 16.9 SAIL Neutral 47 43 -9 6.3 -1.0 3.2 2,344.1 PL LP NM 14.7 0.5 0.5 -1.0 3.3 Vedanta Neutral 142 142 0 18.1 12.6 12.7 -11.0 -30.7 1.3 11.3 11.2 0.8 0.8 7.4 7.2 Tata Steel Neutral 446 458 3 88.6 50.3 64.6 27.3 -43.2 28.5 8.9 6.9 0.8 0.7 8.9 10.6 Aggregate 22.0 -35.9 30.7 12.7 9.7 1.0 0.9 8.0 9.7 Oil & Gas Aegis Logistics Buy 209 247 18 6.6 6.3 12.1 11.9 -5.3 92.5 33.2 17.3 4.6 3.8 14.6 24.3 BPCL Neutral 481 522 9 43.4 30.2 46.2 -12.9 -30.4 53.0 15.9 10.4 2.2 2.0 14.7 20.1

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CMP TP % Upside EPS (INR) EPS Gr. YoY (%) P/E (x) P/B (x) ROE (%) Company Reco (INR) (INR) Downside FY19 FY20E FY21E FY19 FY20E FY21E FY20E FY21E FY20E FY21E FY20E FY21E Castrol India Buy 133 185 39 7.2 8.0 8.9 2.4 11.1 11.4 16.7 15.0 10.2 9.2 64.0 64.2 GAIL Buy 126 152 20 14.0 11.7 13.2 38.4 -16.7 12.7 10.8 9.6 1.2 1.1 11.5 12.0 Gujarat Gas Buy 291 270 -7 6.2 16.2 12.2 46.9 160.1 -24.6 18.0 23.8 6.5 5.4 42.4 24.8 Gujarat St. Pet. Buy 262 285 9 14.1 19.9 18.0 18.9 41.0 -9.6 13.2 14.6 2.2 1.9 17.9 14.1 HPCL Buy 242 348 44 43.9 33.3 45.9 -7.3 -24.1 37.8 7.3 5.3 1.1 1.0 16.0 19.9 IOC Buy 118 177 50 18.8 9.6 18.6 -23.7 -49.2 94.8 12.3 6.3 0.9 0.9 7.6 14.1 IGL Neutral 515 405 -21 11.2 16.5 17.2 19.1 46.9 4.0 31.2 30.0 7.2 6.0 25.2 21.8 Mahanagar Gas Neutral 1229 1000 -19 55.3 80.6 68.1 14.3 45.7 -15.5 15.3 18.1 4.3 3.8 30.3 22.1 MRPL Neutral 46 46 -1 1.9 -8.0 5.7 -84.8 PL LP NM 8.1 0.9 0.8 -14.0 10.3 Oil India Buy 138 181 31 32.0 25.1 25.4 35.6 -21.5 1.2 5.5 5.4 0.5 0.5 10.0 9.5 ONGC Buy 117 150 29 27.1 22.3 26.7 34.4 -17.8 19.8 5.2 4.4 0.6 0.6 12.6 13.9 PLNG Buy 273 350 28 14.4 20.3 20.9 3.7 41.0 3.0 13.5 13.1 3.7 3.4 28.9 27.4 Reliance Ind. Buy 1471 1820 24 67.2 78.1 105.2 10.4 16.2 34.7 18.8 14.0 2.0 1.8 11.4 13.7 Aggregate 6.0 -11.1 35.0 14.3 10.6 1.6 1.4 11.2 13.6 Retail Avenue Supermarts Sell 1929 1700 -12 14.5 21.6 28.8 11.9 49.4 33.3 89.3 67.0 17.4 13.8 21.5 22.9

Aditya Birla Fashion Buy 229 278 21 1.6 3.1 4.8 156.7 89.6 55.1 73.4 47.3 10.8 8.8 15.7 20.4

Future Lifestyle Buy 409 490 20 8.6 7.3 11.2 30.1 -15.1 53.6 55.9 36.4 3.5 3.2 6.9 9.2 Future Retail Buy 333 450 35 14.6 14.1 16.2 19.1 -3.6 14.8 23.7 20.6 2.6 2.3 13.6 11.6 Jubilant Food. Buy 1755 1984 13 24.1 27.6 35.6 62.0 14.6 29.1 63.6 49.2 15.7 13.0 24.6 26.4 Shoppers Stop Neutral 421 415 -1 7.8 9.0 11.1 -36.3 16.0 22.8 46.6 37.9 3.5 3.2 7.9 8.9 Titan Company Neutral 1195 1242 4 15.7 17.2 22.3 24.0 9.5 30.0 69.7 53.6 17.5 14.8 25.1 30.0 Trent Buy 590 615 4 2.9 4.5 7.6 11.6 53.6 70.5 131.5 77.1 7.1 6.5 7.2 9.4 V-Mart Retail Neutral 1938 1750 -10 39.5 42.3 53.5 -8.0 7.1 26.4 45.8 36.2 7.2 6.0 17.1 18.1 Aggregate 21.6 19.8 31.8 69.7 52.8 11.1 9.4 15.9 17.9 Technology Cyient Neutral 492 470 -5 43.4 35.9 40.7 13.4 -17.3 13.4 13.7 12.1 2.0 1.8 14.3 15.0 HCL Tech. Buy 602 720 20 36.8 39.8 45.3 17.6 8.2 13.8 15.1 13.3 3.2 2.9 23.3 22.8 Hexaware Neutral 352 380 8 19.3 21.8 24.8 16.5 12.8 13.8 16.1 14.2 3.8 3.2 25.2 24.3 Infosys Buy 778 870 12 35.4 38.6 42.8 9.3 9.1 10.8 20.1 18.2 5.8 5.4 26.9 30.8 L & T Infotech Buy 1946 2260 16 86.6 86.4 106.7 30.6 -0.2 23.5 22.5 18.2 5.6 4.6 27.6 27.6 Mindtree Neutral 876 985 12 44.7 38.4 48.7 55.5 -14.2 27.0 22.8 18.0 4.6 4.1 20.6 23.9 Mphasis Buy 925 1050 13 56.1 62.4 72.2 27.4 11.2 15.8 14.8 12.8 3.3 2.8 23.1 25.1 NIIT Tech Neutral 2009 1620 -19 66.2 76.1 88.6 45.3 14.9 16.4 26.4 22.7 5.2 4.5 21.0 21.3 Persistent Sys Buy 721 830 15 44.0 45.1 48.5 8.9 2.6 7.5 16.0 14.9 2.4 2.2 14.8 15.1 TCS Neutral 2184 2320 6 83.5 86.4 95.2 26.4 3.6 10.2 25.3 22.9 9.2 8.9 36.0 39.5 Tech Mah Buy 794 880 11 48.2 47.5 53.1 12.8 -1.5 11.9 16.7 15.0 3.3 3.0 20.4 21.5 Wipro Neutral 244 250 2 14.8 17.5 18.3 10.1 18.1 5.1 14.0 13.3 2.6 2.5 18.0 19.1 Zensar Tech Neutral 174 180 4 14.4 10.5 9.9 40.4 -27.1 -5.4 16.6 17.6 1.8 1.7 11.6 10.0 Aggregate 14.7 2.8 10.7 21.4 19.3 5.7 5.3 26.6 27.4 Telecom Bharti Airtel Buy 491 575 17 -8.7 -2.9 -0.9 PL Loss Loss NM NM 3.5 3.5 -2.1 -0.6 Bharti Infratel Neutral 237 279 18 13.6 18.4 17.7 -0.3 35.3 -4.0 12.9 13.4 3.0 3.0 23.3 22.2 Vodafone Idea Buy 5 9 68 -18.5 -6.4 -5.7 Loss Loss Loss NM NM 0.7 3.5 -45.6 -130.4 Tata Comm Neutral 437 490 12 -2.2 11.9 25.5 PL LP 114.8 36.8 17.1 84.4 14.2 -1,974 142.3 Aggregate Loss Loss Loss -21 -26.2 3.2 3.7 -15.0 -14.2 Utiltites Coal India Buy 189 271 43 28.3 27.0 27.6 47.9 -4.7 2.1 7.0 6.9 4.3 3.8 61.4 55.1 CESC Buy 733 957 31 88.9 91.9 99.5 43.1 3.4 8.2 8.0 7.4 1.0 0.9 13.0 12.8 JSW Energy Neutral 67 75 12 4.2 4.5 5.6 40.2 6.4 24.3 14.9 12.0 0.9 0.9 6.2 7.4 NHPC Neutral 27 25 -9 2.6 3.0 3.0 5.9 17.1 -0.7 9.0 9.1 0.8 0.8 9.6 9.1 NTPC Buy 112 158 41 11.6 13.1 15.2 30.3 13.4 16.0 8.5 7.4 0.9 0.9 11.4 12.3 Power Grid Buy 190 244 28 19.2 20.8 22.8 16.0 8.5 9.7 9.1 8.3 1.5 1.4 17.4 17.2

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CMP TP % Upside EPS (INR) EPS Gr. YoY (%) P/E (x) P/B (x) ROE (%) Company Reco (INR) (INR) Downside FY19 FY20E FY21E FY19 FY20E FY21E FY20E FY21E FY20E FY21E FY20E FY21E Torrent Power Buy 325 345 6 18.7 28.9 27.8 -4.6 54.5 -4.0 11.2 11.7 1.6 1.4 14.6 12.6 Tata Power Neutral 61 65 7 2.1 4.2 4.7 -60.5 100.1 10.9 14.4 13.0 0.9 0.9 6.7 7.1 Aggregate 30.9 4.9 8.2 8.4 7.7 1.4 1.3 17.2 17.1 Others Brigade Enterpr. Buy 230 252 9 11.7 8.2 8.3 63.2 -30.5 2.3 28.2 27.6 2.0 1.9 7.5 7.2 BSE Buy 541 710 31 38.1 26.0 30.5 -12.4 -31.6 17.2 20.8 17.7 1.2 1.2 5.7 6.9 Coromandel Intl Buy 615 677 10 25.2 32.2 36.1 6.5 28.1 12.2 19.1 17.0 4.4 3.7 25.4 23.7 Delta Corp Buy 186 235 26 7.2 8.1 9.4 23.8 12.9 16.1 23.0 19.8 2.4 2.1 10.8 11.3 Indian Hotels Buy 140 191 36 2.4 3.0 4.3 257.4 27.5 44.4 46.6 32.3 3.6 3.3 8.0 10.7 Interglobe Neutral 1453 1617 11 4.1 32.1 66.9 -93.0 691 108 45 21.7 7.1 5.7 16.6 29.0 Info Edge Neutral 2766 2400 -13 23.0 23.6 37.2 54.2 2.7 57.6 117.3 74.4 13.4 11.6 15.4 16.9 Gateway Distr. Buy 139 160 15 9.8 10.2 9.0 121.8 4.6 -11.8 13.6 15.4 1.1 1.0 8.2 6.9 Godrej Agrovet Buy 573 623 9 12.5 14.2 20.1 10.9 13.6 41.4 40.2 28.4 6.0 5.3 15.8 19.8 Kaveri Seed Buy 476 583 23 34.4 36.2 36.3 7.7 5.0 0.5 13.2 13.1 2.8 2.7 21.8 20.7 Lemon Tree Hotel Buy 53 72 35 0.7 0.2 0.9 271.9 -66.4 287.3 235.3 60.8 3.2 3.0 1.6 5.1 MCX Buy 1380 1400 1 28.7 41.5 40.2 35.2 44.8 -3.1 33.2 34.3 5.2 4.8 16.2 14.5 Navneet Education Buy 95 139 46 6.7 8.8 9.9 22.5 31.4 13.3 10.9 9.6 2.3 1.9 23.0 21.8

Oberoi Realty Buy 553 631 14 22.5 23.2 24.5 78.1 3.2 5.8 23.9 22.5 2.3 2.1 10.0 9.7 Phoenix Mills Buy 836 932 12 25.0 23.2 29.7 57.8 -7.2 28.2 36.1 28.2 3.4 3.1 9.8 11.5 Quess Corp Neutral 597 530 -11 17.5 21.9 34.5 -19.8 25.0 57.5 27.3 17.3 2.2 1.9 11.1 15.3 PI Inds. Buy 1574 1670 6 29.7 37.1 53.2 11.6 24.6 43.5 42.5 29.6 8.1 6.6 20.6 24.5 SRF Buy 3765 4077 8 113.7 134.8 186.2 60.0 18.5 38.1 27.9 20.2 4.5 3.8 17.5 20.2 S H Kelkar Buy 112 151 35 6.1 6.5 8.4 -13.4 6.8 28.6 17.1 13.3 1.8 1.7 10.7 13.0 Tata Chemicals Buy 749 875 17 42.9 44.2 54.7 -10.8 3.1 23.6 16.9 13.7 1.5 1.4 8.9 10.3 Team Lease Serv. Buy 2583 3280 27 57.6 54.1 69.4 33.5 -6.0 28.3 47.7 37.2 7.0 5.9 15.8 17.2 Trident Buy 7 8 8 0.8 1.0 1.0 71.2 14.7 2.7 7.3 7.2 1.1 1.0 15.4 14.6 UPL Neutral 537 610 14 27.3 31.5 39.4 -5.7 15.4 25.0 17.0 13.6 2.6 2.3 15.9 18.0

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N O T E S

29 January 2020 30

Explanation of Investment Rating Investment Rating Expected return (over 12-month) BUY >=15% SELL < - 10% NEUTRAL > - 10 % to 15% UNDER REVIEW Rating may undergo a change NOT RATED We have forward looking estimates for the stock but we refrain from assigning recommendation *In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend. Disclosures: The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations). Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. 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Disclosure of Interest Statement Companies where there is interest Analyst ownership of the stock No A graph of daily closing prices of securities is available at www.nseindia.com, www.bseindia.com. Research Analyst views on Subject Company may vary based on Fundamental research and Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOFSL research activity and therefore it can have an independent view with regards to subject company for which Research Team have expressed their views. Regional Disclosures (outside India) This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions. 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Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by MOFSL, including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement. The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account. For Singapore: In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets services license and an exempt financial adviser in Singapore, as per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”, of which some of whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and inform MOCMSPL. Disclaimer: The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject MOFSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. The person accessing this information specifically agrees to exempt MOFSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays. Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263; Website www.motilaloswal.com. CIN No.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.

Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst: INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579 ;PMS:INP000006712. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL. Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no assurance or guarantee of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085. * MOFSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National Company Law Tribunal, Mumbai Bench.