re-shaping india post conference...

Post Conference Report

featuring

CEO Track 12 CEO presentations 6 Thematic presentations

Panel Discussion India Banking: Beginning of

a new era

Company Connect Takeaways from company

interactions

Re-shaping IndiaRe-shaping India

9th Annual Global Investor Conference

Index

Investors are advised to refer through disclosures made at the end of the Research Report.

Company ConnectTakeaways from management interactions 34-112

CEO TrackCEO Company Page

Ms Chanda Kochar, CEO & MD ICICI Bank 3

Dr Kamal Sharma, Vice Chairman Lupin 5

Mr Punit Goenka, CEO & MD Zee Entertainment 6

Dr Arup Roy Choudhury, CMD NTPC 8

Mr Sudhir Vasudeva, CMD ONGC 10

Mr N R Narayana Murthy, Chairman Infosys 11

Mr Adi Godrej, Chairman Godrej Group 12

Mr Gopal Vittal, JMD and CEO (India) Bharti Airtel 14

Mr Onne Van Der Weijde, MD Ambuja Cements 15

Mr Satish Reddy, Vice Chairman & MD Dr Reddy’s Laboratories 17

Mr Kumarmangalam Birla, Chairman Aditya Birla Group 18

Ms Arundhati Bhattacharya, MD State Bank of India 19

Thematic/Special PresentationsIndia: The rising role of judiciary & the way forward 21

Dr Subramanian Swamy, Eminent Lawyer, Politician, Academician

Indian Education: Taking the train less travelled 23

Prof. Sandeep Desai, The Grassroot Educationalist

Looking beyond the gloom & doom 25

Mr Deepak Parekh, Chairman, HDFC

Unleashing human spirit – most & more 27

Mahatria Ra, Spiritual Guru

The Great India Management of Dabbawala 29

Dr Pawan Agarwal, Management & Motivation Guru

Art of doing business in India – Conquering the chaos 31

Mr Ravi Venkatesan, Ex-Chairman, Microsoft (I), Cummins (I)

Mr Romesh SobtiMD & CEO, IndusInd Bank

Mr Ramesh RamanathanFounder, Janalakshmi Microfinance

Panel Discussion: India Banking: Beginning of a new era 32

Moderated by Mr Tamal Bandopadhyay, Deputy Editor MINT, Author

Mr Ramesh IyerMD & CEO, M&M Financial Services

Mr Vikram LimayeCEO, IDFC

1September 2013


Conference Highlights

2013 so far has been a challenging year, to say the least! Growth parameters are hitting new lows

and current account deficit new highs. The rupee is hurtling down, and global headwinds have

been on a rise. On corporate earnings, June 2013 quarter PAT in fact de-grew 2% YoY, causing ~3%

downgrade in Sensex EPS estimates (FY14 Sensex EPS to grow only 7%). Amidst this challenging

backdrop, we hosted our 9th Motilal Oswal Annual Global Investor Conference in the first week of

September 2013 at the Grand Hyatt in Mumbai.

Motilal Oswal Annual Global Investor Conferences are arguably the biggest in India, a trend which

continued in 2013 as well. During 2-4 September, top management of over 100 leading Indian

companies interacted with more than 600 investors from all over the world, translating into 3,000+

company-investor meetings. During the last two days (Sep 5-6), we also had an insightful visit to

the power corridors in Delhi.

Conference Highlights CEO Track: During the first two days of the conference, 12 of India's leading CEOs shared their

vision, strategies and success stories.

Thematic presentations: By eminent personalities on a diverse range of themes -

Dr Subramanian Swamy, Eminent Lawyer, Politician, Academician, shared his views on

India: The rising role of judiciary & the way forward

Prof Sandeep Desai, The Grassroot Educationalist, discussed his views on Indian Education:

Taking the train less travelled

Mr Deepak Parekh, Chairman, HDFC, spoke on Looking beyond the gloom & doom

Mahatria Ra, Spiritual Guru, threw light on Unleashing human spirit - most & more

Mr Ravi Venkatesan, ex-Chairman, Microsoft (India), Cummins (India), spoke on Conquering

the chaos - Art of doing business in India.

"Food-for-thought" luncheon sessions: On Day 1, we had a panel discussion on India Banking:

Beginning of a new era, featuring leading CEOs from the financial sector. On Day 2, we had an

insightful case study of the Mumbai dabbawalas, by Dr Pawan Agarwal, Management & Motivation

Guru.

We also set up a unique evening on the opening day (Sep 2) - Super Theater - featuring "Blame It On

Yashraj", a unique play combining Bollywood, comedy, dance … and more !

All-in-all, the positive feedback we received makes us believe that the Conference indeed lived up to

its theme of Re-shaping India, leaving global investors with interesting insights, winning themes,

greater conviction, and the best investment ideas.

We thank you for the active participation at the event. We will host the 10th Motilal Oswal Annual

Global Investor Conference in September 2014 and look forward to your participation.

Navin Agarwal Rajat Rajgarhia

CEO – Institutional Equities MD – Institutional Equities

2September 2013


CEO Track

CEO Track takeaways12 CEOs, 6 Thematics, Panel discussion on India Banking

3September 2013


ICICI Bank

Ms Chanda Kochhar is the MD

and CEO of ICICI Bank, India’s

largest private sector bank

and overall second largest

bank in the country. She is

recognized for her role in

shaping retail banking in

India, leadership in the ICICI

Group and contributions to

various forums in India and

globally. Ms Kochhar began

her career with the erstwhile

ICICI Ltd in 1984 and was

instrumental in establishing

ICICI Bank during the 1990s.

She has held various

significant positions in the

group and assumed the

current role in 2009.

Under Ms Kochhar ’s

leadership, ICICI Bank was

conferred with the “Best

Retail Bank in India” award

in 2001, 2003, 2004 and 2005

and “Excellence in Retail

Banking Award” in 2002

by The Asian Banker.

She was conferred with the

Padma Bhushan award in

2011. In 2013, Ms Kochhar has

been named as the most

powerful business women in

India in the Forbes list of

“The World’s 100 Most

Powerful Women 2013”. She

is the only Indian to be

featured in the Dow Jones

list of “Most Influential

Female Executives in the

World” of the last decade

and is ranked 12th in the

global list.

Covering Analyst(s):Alpesh Mehta+91 22 3982 [email protected]

Sohail Halai+91 22 3982 [email protected]

Key takeaways

Core essence Across business lines, ICICIBC is focusing on a judicious mix of profitability, growth

and risk management to enhance RoE.

Retail to be the key growth driver due to soft outlook on the corporate and SME

business.

Having achieved 15% consolidated RoE, ICICIBC is targeting 18% over the next few

years. Quantifying the timeframe for that is difficult due to current headwinds.

Industry insights The differential between credit and deposit growth rates is not much. A lot of

credit demand is for working capital - not for building inventory but to fund

receivables. There is no cut back in retail lending except for CV loans.

Steps taken by the government - coal imports, reallocation of gas from fertilizer

to power, SEBs raising tariffs - should help, going forward.

Stress in the corporate segment is mainly due to projects having negative cash

flows, which is resulting in postponement of capital investments. Wherever

exposure is high, ICICIBC is advising its corporate borrowers to monetize assets.

There is a possibility of banks converting loans into equity, as several projects

need hand-holding. Provisioning guidelines are not remunerative enough to keep

loans standard by restructuring.

Difference between the slowdown of 90s and now:

1. At that time, money was stuck in half-completed assets/projects. Today, money

is stuck in ready projects.

2. No promoter in the 90s was willing to sell/monetize assets. Today, promoters

are willing to do so, but sale of assets takes time.

Company vision and strategyBalanced approach in tough economic environment

Profitability/NIM: ICICIBC targets to enhance full-year margins, led by

improvement in international margins and loan mix. Improvement in funding

profile will keep cost of funds under control. Strong control over opex is likely to

continue and ICICIBC aims to keep C/I ratio at ~40%. Insurance profitability is

likely to remain superior and drive consolidated earnings.

Growth: Domestic loan growth to be 2-3% higher than system loan growth, driven

by secured retail loans. Cross-selling and further penetration of retail products to

existing client base would drive growth. ICICIBC retains its cautious view on

ThematicPresentation

Ms Chanda Kochhar

Managing Director & CEO

ICICI Bank CEO Track

4September 2013


corporate and SME loans, and growth will be driven by working capital loans.

Growth in the Insurance business is likely to improve.

Risk management: ICICIBC is focusing on further portfolio diversification. It intends

to reduce the share of corporate and international business, and increase the

share of retail business. Underwriting norms have been tightened.

Granular retail business - a key focus area in difficult macro environment

Profitability: Margin vulnerability has reduced due to sharp increase in the share

of granular retail deposits. Helped by recoveries from written-off retail loans and

shift towards secured retail loans, credit cost for the retail business has been near

zero for several quarters. ICICIBC expects this trend to continue. While overall

fee income growth remains muted at low single digits, retail business streams

like liability-related, third-party products, asset-linked fees, etc, remain healthy.

Growth: ICICIBC is focusing on secured retail loans and in 1QFY14, disbursements

grew 32% YoY. Home/auto loan disbursements grew 36%/17% YoY and outstanding

loans grew 20%/21% YoY. ICICIBC continues its calibrated approach towards CV

loans and unsecured products. Of the term deposits, 60% are retail deposits. Since

March 2009, savings/retail term deposits have shown CAGR of 20%/17%.

Risk management: ICICIBC continues to focus on secured retail loans and growth

is expected to be moderate in unsecured retail loans and CV portfolio.

Corporate and SME lending - taking a cautious approach

Profitability: (a) Fees: Project financing related fee income generation remains

low; in the corporate segment, ICICIBC is focusing on transaction banking and

forex-related fees, which are granular in nature, (b) Margins: The bank is focusing

on better asset-liability management, improvement in international margins, etc.

Growth: Growth to remain moderate in the large and mid corporate segments.

Focus would remain on working capital loans. The share of SME business is likely

to remain low, considering the tough macroeconomic environment.

Risk management: Credit selection norms have been enhanced and the bank is

closely monitoring all accounts.

Leveraging on distribution network and technology platform

Expanding distribution network: Since March 2012, 70% of its incremental branches

have been opened in rural and semi-urban areas. ICICIBC has the largest network

among private banks, with 3,350+ branches and 11,000+ ATMs. Strong branch

expansion helped in origination (30% of home loan origination is from branches

now) and third party distribution (50% CAGR in life insurance premium since FY11).

Technological initiatives: ICICIBC has launched various technological initiatives

like improving presence on social networking sites, 24x7 branches, mobile apps,

reward programs, superior ATM performance, etc, to improve business growth.

Key triggers/milestones/challenges Resolution of issues plaguing large infrastructure projects

Direction of monetary policy

ICICI Bank

5September 2013


Lupin

Dr Kamal Sharma is Vice

Chairman of Lupin Ltd. In a

career spanning more than

three decades, Dr Sharma

has held a range of senior

management positions

managing projects,

corporate development and

general management in

the pharmaceuticals and

chemicals industries. He

has been associated with

the Lupin Group since 1979.

Dr Sharma serves as the

Chairman of Kyowa

Pharmaceutical Industry Co

Ltd. He has a PhD in

Economics from IIT,

Mumbai and has

completed an Advanced

Management Programme at

Harvard Business School,

Boston.

Dr Sharma took over as MD

of Lupin in 2003, when the

company had limited

global presence. Under his

leadership, Lupin today

has become the 5th largest

company by generic

prescription share in the

largest pharma market,

USA. He is also responsible

for steering the company

into Japan, the 3rd largest

pharma market, where no

other Indian player has

been able to establish a

strong enough foothold.

Covering Analyst(s):Alok Dalal+91 22 3982 [email protected]

Hardick Bora+91 22 3982 [email protected]

Key takeaways

Core essence Significant opportunities in healthcare across key markets but regulatory

challenges, price controls by local government will be key challenges for the

industry.

Lupin (LPC) aspires to achieve sales of USD5b by 2018.

Industry insights Opportunities across the globe, healthcare reforms favoring generics, bio-similars

and an ageing population are other opportunities for growth.

A hybrid business model will be the way forward, whereby the originator company

uses its intellectual capital capabilities to merge with the cost capabilities of

generic companies.

Company vision and strategy LPC aspires to be a USD5b company by 2018.

US, India, Japan and emerging markets are the key pillars of growth. Increasing

focus on specialty product launches in the US over next few years. Focus on

expanding branded generic presence in the US.

Backward integration benefits to aid growth and margins in Japan. India growth

outlook seen to be ahead of the industry growth rate.

Key triggers/milestones/challenges With over 116 ANDAs awaiting approval from the US FDA, of which 25 are first-to-

file generics, LPC is very strongly placed in the US generics space. A strong product

mix in India is likely to enable the company grow significantly ahead of industry

on a consistent basis. Japan continues to remain a key long term strategic

opportunity.

Regulatory challenges, changing contours of the ecosystem, holistic thinking

leading to empowerment of people and risk management practices are some of

the key risks faced by the industry and LPC.

Dr Kamal Sharma

Vice Chairman

Lupin CEO Track

6September 2013


Zee Entertainment Enterprises

Mr S GopalakrishnanExecutive Co-ChairmanInfosys

Mr Punit Goenka

Managing Director & CEO

Zee Entertainment Enterprises CEO Track

Covering Analyst(s):Shobhit Khare+91 22 3029 [email protected]

Anil Shenoy+91 22 3982 [email protected]

Mr Punit Goenka is MD and

CEO of Zee Entertainment

Enterprises (ZEE). His

strong work ethics and

hands-on approach have

helped steer the ZEE

empire to new frontiers of

success. Under his

leadership, Zee TV has

emerged a leader among

general entertainment

channels in India. He is

now working on

strengthening ZEE’s reach

internationally.

Mr Goenka has grown up

the ranks, handling

various responsibilities

across the Essel

conglomerate for over 15

years. He began his career

with Zee TV in 1995 as

Head of the Music division

and went on to shoulder

addit ional

responsibilities across

group companies. In 2004,

he took charge as the

Business Head of Zee TV

and soon was promoted to

Network Operating Officer

in 2005 and was made

responsible for the

programming, operations,

administration and HR

functions of all of ZEE’s

entertainment channels.

He assumed the current

role in July 2008.

Key takeaways

Core essence Indian TV industry is witnessing structural changes in subscription and advertising

business; Zee to emerge stronger given scale advantage.

Industry insights India remains the fastest growing TV market globally. Regional markets continue

to lead growth, with most growing at 12-15%.

Mandatory digitization yet to be implemented in phase III/IV, which account for

~75% of TV households. DTH could have an advantage in phase III/IV.

Industry estimates indicate 26% subscription revenue CAGR over CY12-17E.

India unlikely to reach US market levels of ~80% subscription revenue contribution

in the foreseeable future.

Digitization offers level playing field to niche channels, which is an additional

revenue opportunity.

Company vision and strategy Zee expects subscription revenue to equal advertising revenue in next four to

five years v/s current ratio of 5:4 for advertising-subscription.

Confident of maintaining margins at current levels despite investments in new

businesses and sports.

Zee has been reducing inventory, resulting in better pricing/ratings and making it

better placed for the implementation of regulations on ad cap.

INR depreciation a concern for sport business, which is currently loss making. Zee

continues to invest in sports, given subscription revenue potential. Ten Network

accounts for ~25% of sports viewership, including cricket and ~50% excluding

cricket.

Movie costs remain high. Company has no plans of entering the movie production

business but can potentially become a studio in the future by acquiring movie

rights, compared to only TV rights currently.

7September 2013



Key triggers/milestones/challenges Phase III/IV digitization sunset effective from September/December 2014. While

it could provide significant upside potential to subscription revenue, delayed

monetization (phase I/II so far) remains a concern.

Low ARPU/ad pricing and economic slowdown are the key challenges.

Issues pertaining to lack of transponder capacity for DTH operators are restricting

addition of new channels on DTH platforms.

Ad rates to be increased to offset further inventory decline due to 12 min/hr ad

cap regulation effective from October 1, 2013.

Advertising currency shift from Cost Per Rating Point (CPRP) to Cost Per Thousand

(CPT) to be a major positive for content monetization.

Cable & Satellite (C&S) universe has increased ~60% in the past five years but

industry did not get commensurate ad rate increases due to the CPRP model.

8September 2013


NTPC

Dr Arup Roy Choudhury is

the Chairman and MD of

NTPC Ltd. Dr Choudhury’s

rich and varied

contribution of over 32

years has been recognized

by prestigious

professional, academic

and government

institutions, both national

and international.

He has the distinction of

becoming the youngest CEO

of a central public sector

enterprise (CPSE) at the

age of 44 when he joined

as Chairman and MD of

National Buildings

Construction Corporation

Ltd (NBCC) in 2001 and also

transformed NBCC from a

sick status to a blue chip

enterprise, having

Schedule “A” and

“Miniratna” status

conferred by the

Government of India.

Dr Choudhury was

conferred Doctorate in

‘Performance Assessment

of Infrastructure

Development Projects’ from

IIT Delhi on 18.04.2013. He

has been ranked at No. 40

in “The Economic Times”

list of India Inc’s top 100

CEOs 2013 and is No. 2

among the CEOs of Public

Sector Enterprises (PSEs).

Key takeaways

Core essence NTPC targets addition of 14gw of capacity in 12th Plan, and has 20gw of capacity

already under construction, on current installed base of 41gw. This provides strong

medium term growth visibility. In addition, 20gw is under development stage.

98% of capacity is covered under long term fuel supply agreement and 76% of

linkages are through own railway network - a key differentiating factor.

Industry insights India has the lowest per capita consumer of electricity globally, lagging Brazil and

China by ~3:1. Per capita consumption of India is only 29% of the world average

and hence the country has huge potential for power consumption.

India needs to add 106gw of capacity in the 12th Plan to regain the GDP growth

target of 8%.

Base deficit has remained range-bound ~8.5-8.7% during FY11-13. However, peak

deficit lowered in FY13 at 9.1% from 11.1% in FY12.

Company vision and strategyA] Robust capacity addition growth

NTPC is targeting to add 14gw of capacity addition in the 12th Plan, of which it

added 4.2gw in FY13. For FY14, management expects capacity addition of 2gw.

Similarly, commercialization for FY13 stood at 4.8gw, its highest-ever in a year.

The guidance for commercialization is maintained at 1.5gw.

Management highlighted that last four years witnessed capacity addition of 10gw

- fastest 10gw addition. NTPC's installed capacity stood at 41gw. Management

highlighted its vision to achieve installed capacity of 128gw by 2032.

It has robust project pipeline with capacity award of 13gw over last 2.5 years. The

total capacity under construction as of now stands at 20gw. Additional 20gw is

under development (3gw under bidding and 16.5gw feasibility report is approved).

B] Enhancing fuel security

Fuel security remains the prime focus, with 98% of capacity covered under long

term fuel agreement. 76% of fuel supply is through its own rail network, which

further adds to stability. Coal import could be on an average of ~10% on long term

basis.

Dr Arup Roy Choudhury

Chairman and Managing Director

NTPC CEO Track

Covering Analyst(s):Nalin Bhatt+91 22 3982 [email protected]

Aditya Bahety+91 22 3982 [email protected]

9September 2013


FY14 would be an important year on fuel security front given two vital landmarks:

a) first captive mine, Pakri Barwadih, is to start in December 2013 and b) Jetty for

Farakka and Kahalgaon projects, among the worst hit due to coal supply, is expected

to begin trial operations before 2QFY14-end.

In addition, NTPC has been allocated four new coal blocks, with 2b tons of reserve

for 8.5gw of upcoming capacity.

Company's average cost of power generation is INR2.92/sh, comprising of fuel

cost of INR1.84/unit and fixed cost of INR1.08/unit. This makes its positioning

better on merit order dispatch.

Key triggers Higher generation from coal-based projects and robust PAF/PLF are the key

triggers. In YTD FY14, NTPC's generation de-grew by 2% YoY, comprising of 2% YoY

growth for coal-based projects and 40% YoY de-growth in gas-based projects. PLF

for coal projects have come off by 5.1ps YoY.

Management expects FY14 RAB to grow by ~8% to INR352b (standalone basis),

while FY13 RAB stood at INR326b (a growth of 20% YoY). This would lead to superior

earnings growth ahead in FY14E/15E.

NTPC

10September 2013


ONGC

Mr Sudhir Vasudeva is the

Chairman and MD of Oil &

Natural Gas Corporation

Ltd (ONGC), India’s most

valuable Maharatna public

sector unit (PSU). He is

also the Chairman of ONGC

Videsh Ltd (OVL),

Mangalore Refinery and

Petrochemicals Ltd (MRPL)

and five other ONGC Group

companies — ONGC

Petroadditions, ONGC

Mangalore Petrochemicals,

Mangalore SEZ, ONGC

Tripura Power Company and

ONGC Mittal Energy.

Mr Vasudeva is a gold

medalist Chemical

Engineer with Advanced

Diploma in Management.

Under his leadership,

ONGC registered the

highest-ever profit, became

the highest-ever dividend

paying company in India

and often retains the

numero uno position in

terms of market

capitalization. Mr

Vasudeva has received

accolades for outstanding

achievement in Exploration

& Production (E&P) award

by Chemtech Foundation in

2012. He has also been

conferred with NDTV Profit

Business Leadership

Awards 2012 in Oil & Gas

Sector in April 2013.

Covering Analyst(s):Harshad Borawake+91 22 3982 [email protected]

Kunal Gupta+91 22 3982 [email protected]

Key takeaways

Core essence ONGC aims for aggressive long term production targets, pitching for higher net

realization to the Government and build the non-E&P business to reach 30% of

revenue by FY30. It aspires for 2x increase in group production, led by 6x increase

in international production under its Perspective Plan 2030.

Industry insights Technology and innovation is expanding the capabilities of global E&P sector,

helping to explore geographically difficult basins. Arctic region holds ~20% of the

world's undiscovered hydrocarbon reserves.

NOCs (National Oil Companies) getting aggressive in M&A (spent USD112b in 2012)

and hold 90% of proved world reserves currently.

The US has infrastructure advantage (pipeline network, rigs) v/s other countries,

enabling it to become the largest shale gas producer (40% of current US gas

production comes from Shale).

India's primary energy demand at 7.2% CAGR till 2031-32 is expected to be higher

than China at 2.9%, the US at 0.1% and world 1.5%.

Unconventional energy reserves in India - CBM >450tcf; underground coal

gasification (UCG) ~6,900tcf; gas hydrates ~142bcm and shale gas >65tcf.

Company vision and strategy ONGC requires a minimum net realization of USD65/bbl (v/s FY13 net realization

of USD47.8/bbl) for sustainability (production cost of USD40/bbl); does not expect

upstream companies subsidy share at >USD56/bbl in FY13.

ONGC's domestic oil production (incl JV) to reach a peak of 28-29mmt by FY15/16

for two to three years v/s 26.2mmt in FY13. Key fields include G-1/GS-15(KG basin),

D-1 (Mumbai offshore) and B-193 (western offshore).

Company has produced 80mmt of the total estimate of 172mmt additions, aided

by new and marginal field development at the cost of INR342b.

Perspective Plan 2030 envisages to double production to >130mmtoe by 2030,

aided by increasing OVL's production from current ~8 to 60mmt.

Key triggers/milestones/challenges Key things to watch (1) continued diesel reforms, (2) clarity on Sudan and Syria

production for OVL, (3) subsidy sharing (4) visibility on production growth.

Mr Sudhir Vasudeva

Chairman & Managing Director

ONGC CEO Track

11September 2013


Infosys

Mr N R Narayana Murthy is

the Executive Chairman of

Infosys Ltd. He co-founded

Infosys in 1981, served as

the CEO during 1981-2002,

as the Chairman and Chief

Mentor during 2002-2011

and as the Chairman

Emeritus during August

2011-May 2013. Under his

leadership, Infosys was

listed on Nasdaq in 1999.

He articulated, designed

and implemented the

Global Delivery Model

which has become the

foundation for huge

success in IT services

outsourcing from India. He

has also led key corporate

governance initiatives in

India and is an IT advisor

to several Asian countries.

Mr Murthy was listed

among the “12 greatest

entrepreneurs of our time”

by the Fortune magazine in

2012. He has been

conferred with several

awards and honors,

including the Padma

Vibhushan and Padma

Shri, the Legion d’honneur

by the Government of

France and the CBE by the

British government. He is

the first Indian winner of

Ernst and Young’s World

Entrepreneur of the year

award and the Max

Schmidheiny Liberty prize.

Covering Analyst(s):Ashish Chopra+91 22 3982 [email protected]

Siddharth Vora+91 22 3982 [email protected]

Key takeaways

Core essence Infosys' (INFO) financial performance over the last couple of years has been of

concern, during which revenue growth fell by 80% and profitability reduced by

~7-8pp. While the performance coincides with the onset of Infosys 3.0, there is

nothing wrong with strategy, and the problem has been with execution.

In its quest to increase the share of revenue in consulting-led transformation

business and Products/Platforms/Solutions, INFO lost focus on the bread-n-butter

traditional business. Such price sensitive large deals are imperative to growth

and the company cannot do away with the required aggression.

Industry Insights Large deals in outsourcing are highly price sensitive and INFO is surprised by the

behavior of some growth hungry peers.

Also, there have been some very complex engagements, driving the requirement

of highly specialized people.

Immigration and other foreign norms are further increasing the strain, with the

added uncertainty around currency.

Given the revived focus in growing the traditional business, company is now

approaching this business with the understanding that while markets determine

the price, INFO can only determine its cost. Hence, there is greater focus on cost

optimization than before.

Company vision and strategyINFO is focused on getting its execution in order, with increased emphasis on:

1. Approaching large deals with requisite aggression and successfully closing them.

2. Reinvigorating the sales team to increase the effectiveness of sales, incentivizing

the sales team appropriately to attain the aspired growth.

3. Re-establishing the excellence in delivery execution - by moving from project

level measures of tracking efficiency to individual level measures.

4. Getting the right quality of talent to help de-lineate revenue growth with

headcount growth.

Key triggers/milestones/challenges While growth will still be the key lever for operating margin, INFO aspires to take

its margins higher by increasing cost efficiencies. One of the reasons for lower

margins was higher employee cost outside India. INFO is striving to reduce the

onsite-offshore efforts mix.

INFO will continue "letting bad news take the elevator, good news take the stairs".

Mr N R Narayana Murthy

Chairman

Infosys CEO Track

12September 2013


Godrej Group

Mr Adi Godrej is the

Chairman of the Godrej

Group and several entities

that are part of one of

India’s leading

conglomerates. Over the

last five decades, Mr

Godrej has played an

important role in the

development of a variety of

industries by leading key

organizations of trade and

commerce as the former

Chairman and President of

the Indian Soap &

Toiletries Makers’

Association, the Central

Organisation for Oil

Industry and Trade, the

Solvent Extractors’

Association of India, the

Compound Livestock Feeds

Manufacturers’

Association, the Indo-

American Society and as

member of the Governing

Board of the National

Council of the

Confederation of Indian

Industry. Under his

leadership, the group is

involved in philanthropic

activities too and is a great

supporter of the World

Wildlife Fund of India

(WWFI).

For his contribution to

Indian industry, Mr Godrej

has been the recipient of

several awards and

recognitions, including the

Rajiv Gandhi Award 2002,

Padma Bhushan in 2013.

Covering Analyst(s):Gautam Duggad+91 22 3982 [email protected]

Key takeaways

Core essence Consumption growth, though challenged in the current weak macro environment,

has strong long term drivers, facilitated by rising disposable incomes, youth

demographics and rising aspirations of middle class. There exists significant room

for growth in per capita consumption.

Middle class is spreading to tier II and tier III towns. But credit availability to rural

markets is essential to sustain the consumption growth.

Longer term outlook for Godrej group is extremely positive - specifically, GCPL is

targeting 10x growth in 10 years as a part of its 10 by 10 strategy.

Godrej group is following a CREATE strategy - C-Consumer, RE-Real Estate, A-Agri,

T-Transformational and E-Emerging.

Government needs to act fast and regulators need to ensure timely intervention

to revive short term growth and sentiments.

Industry insightsLong term consumption drivers solid despite near term challenges

Mr Godrej outlined the attractive long term consumption opportunity in India -

driven by favorable macro drivers such as rising disposable incomes, young

demographics and growing middle class.

Significant headroom exists for growth in per capita consumption, which in turn

depends on disposable incomes, extent of urbanization and access to credit.

Shape of India's income pyramid can change due to rising rural consumption. Per

capita consumption growth in rural markets has outpaced urban growth in last

two years.

Pessimism will pave way for optimism in second half, with the onset of harvest

season.

Near term challenges notwithstanding - low growth, high inflation and dampened

consumer sentiments - next wave of growth will come from spreading out of

middle class in tier II and tier III.

Company vision and strategy Godrej group is following a CREATE strategy - C- Consumer, RE - Real Estate, A-

Agriculture, T - Transformational, E - Emerging.

Mr Adi Godrej

Chairman

Godrej Group CEO Track

13September 2013


Consumer: Slowdown in premium segment; however, bottom of the pyramid is

flourishing. Household insecticides still remain under-penetrated.

Real Estate: 13 successful launches. The Godrej project in Gurgaon was a big success,

with complete sale in 24 hours. Land Acquisition Bill to increase the impact of cost

of land significantly, especially in rural areas.

Agriculture: Agriculture is at an inflection point. Godrej group participates in agri

sector through Godrej Agrovet Pvt Ltd. Company saw strong growth in oil palm

business.

Transformation: Human capital - Focus is on building strong human capital.

Emerging: Food retailing is a new business and is doing well, with good same

store sales growth and new store-driven growth.

Key triggers/milestones/challenges Short term - lower growth and higher inflation is impacting consumer demand.

While lower dependence ratio is extremely positive for consumption, young

population needs to be absorbed into labor force.

There is limited penetration of financial services in rural markets, which can pose

challenges for PCC ahead. Thus, there is a pressing need to make credit available

in rural geographies.

Godrej Group

14September 2013


Bharti Airtel

Mr Gopal Vittal is the Joint

MD and CEO (India) at

Bharti Airtel. He also

served as an Executive

Director of Home &

Personal Care of Hindustan

Unilever since September

2008 to January 2012.

He has more than 16 years

of rich experience across

various aspects of

marketing and sales. Mr

Vittal started his career

with Unilever India,

working across

geographies in India and

Asia. He has led several

branding forays for

Unilever and was

responsible for

conceptualizing, leading,

piloting and rolling out

Project Bharat, Unilever’s

largest rural marketing

initiative in India.

Mr Vittal has also been

recognized as one of

India’s Hottest Young

Executives by Business

Today in 2006. He has 18

years experience in

Marketing & Sales in FMCG

market, including skin care,

soaps and laundry. He has

worked both in India and

Asia for Unilever for over 16

years, following which he

served as the Marketing

Director at Bharti Airtel.



Key takeaways

Core essence With its unique leadership position and strong asset base, Bharti India is well

positioned to benefit from an improving industry structure, latent data potential

and increasing regulatory clarity.

Industry insights Indian wireless industry is undergoing passive consolidation. Top 3 revenue market

share has increased from 66% to 70% in the past five to six quarters, implying an

incremental share of ~90% for the top 3.

There is still significant room for an increase in voice RPM, given huge discount of

30-40%, currently being offered v/s headline tariffs.

Economic slowdown is unlikely to impact the wireless sector due to 1) increased

pricing power, 2) limited impact on ticket-sized product/services like telecom

and 3) strong rural growth, driven by better monsoon.

Young demographics are a tailwind for data growth as aspirations are driving usage

even in the non-urban locations.

Company vision and strategy Driving increased usage through marketing innovations (recently launched INR1/

song store) and usage by enhancing 3G uptake. 3G data subscribers use 5x data

compared to 2G data subscribers.

Enhanced focus on quality of subscriber acquisitions; equipping front-end with

information based on analysis to improve effectiveness and acquire/retain high

value subscribers.

Further headroom to improve cost efficiencies by eliminating wasteful

expenditure on sales and distribution and improving network utilization.

Key triggers/milestones/challenges Regulatory clarity is increasing with the Telecom Regulatory Authority of India

(TRAI) doing a commendable job of maintaining a fine balance in its recent

pronouncements.

Strong US dollar v/s INR and African currencies remains a challenge, given ~10b

USD denominated debt/liabilities.

Africa business continues to face competitive and regulatory headwinds.

Mr Gopal Vittal

Joint Managing Director & CEO (India)

Bharti Airtel CEO Track

15September 2013


Ambuja Cements

Covering Analyst(s):

Jinesh K Gandhi

+91 22 3982 5416

[email protected]

Sandipan Pal+91 22 3982 [email protected]

Mr Onne Van Der Weijde is

MD of Ambuja Cements Ltd.

He is a Dutch national

with over 15 years of

experience in cement

industry, including seven

years in the Indian cement

industry. Mr Weijde was

CFO at Holcim Indonesia

from 2001 to 2005. In 2005,

he was appointed General

Manager of Holcim India

Ltd and in 2006 he also

assumed the CFO function

at ACC Ltd until October

2008. From November 2009,

he was the CEO of Ambuja

Cements Ltd. He assumed

the current role of MD in

2010.

Recently Holcim has given

him additional

responsibility by

appointing him as Area

Manager and a member of

its Senior Management

Team. Mr Weijde holds a

Bachelor's degree in

Business Administration

in Economics & Accounting

from Rotterdam,

Netherlands and a

Masters degree in

Business Administration

from the University of

Bradford, UK.

Key takeaways

Core essence Long term demand drivers remain intact, giving confidence of 8% CAGR on steady

state basis. Ambuja Cements (ACEM) would focus on selective growth, cost

competitiveness and deriving synergies from ACC's acquisition to compete in an

over-capacity environment.

Industry insights Short term negative outlook notwithstanding, Holcim continues to believe in India

story. India is one of the most attractive markets in the world, and expects 5.2%/

7.7% demand CAGR over CY13-15E/CY15E-18E.

This growth is expected to be driven by commercial segment (~10% CAGR),

infrastructure (~6.3%) and residential (~5.8%).

Capacity is expected to post a CAGR of 6.3-7% over CY12-16E to 406-415mt.

Company vision and strategy Focus on competitiveness, to exceed cost of capital, in a highly competitive market,

reflecting in RoIC of 39%/37% for ACEM/ACC over 2006-12.

Investments in cost competitiveness is an area of priority viz a) revenue

optimization (through brand premium and focus on retail), b) optimizing fuel mix

(increasing share of pet-coke, captive coal and alternate fuel) and c) logistics

optimization. Making further investments in logistics by professionalizing 'Hub-

and-spoke' architecture.

It is focusing on selective growth through a) region specific (North, Central & East)

expansion and b) M&A opportunities. Objective to deliver return on investments

would be a focus area, rather than maintaining market share. All of its future

capacity expansions (from 58mt to 73.6mt) is in these attractive markets, with

better industry structure, high utilization and pricing power.

Acquisition of ACC is a significant step in the potential merger, although it would

take three to four years to realize entire benefits of synergies. Acquisition of ACC

is at an attractive cost of USD115/ton and offers saving potentials of ~INR9b p.a.

ACEM would have screened almost all cement assets on the block. While M&A

valuation expectations have moderated over last few months, considering the

condition of most plants in India, it would need to invest additional 30-35% to

bring those plants to Holcim's group standards.

Mr Onne Van Der Weijde

Managing Director

Ambuja Cements CEO Track

16September 2013


Key triggers/milestones/challenges It is investing for capacity addition in Rajasthan (4.5mt in ACEM by CY15) and

Chhattisgarh (~3.6mt in ACC, by ACC), and also is planning a Greenfield plant at

Ametha (3mt in ACC, by CY17) and Tikaria (1.5mt in ACC, by CY17).

Initiatives to reduce fuel cost escalation - (1) use more pet coke supplies for

north-based plants, (2) captive coal, (3) ensure 20-25% Indonesian coal usage at

coastal plan and (4) increase usage of alternate fuels to at least 12-15% of fuel

requirement. It would need to invest in its plants to derive these cost savings of

8-10%.

Acquisition of ACC offers synergy benefits of ~INR9b driven by:

Supply chain optimization through clinker/cement swaps between ACC/ACEM,

driving savings of INR3.6-4.2b.

Common procurement driving savings of INR2.7-3b.

Fixed cost reductions by improving efficiency and eliminating duplications,

thus driving savings of INR1.5-1.75b.

Ambuja Cements

17September 2013


Dr Reddy’s Laboratories

Covering Analyst(s):Alok Dalal+91 22 3982 [email protected]

Hardick Bora+91 22 3982 [email protected]

Mr Satish Reddy is the Vice

Chairman and MD of Dr

Reddy’s Laboratories Ltd.

He steers two of the

company’s core

businesses:

Pharmaceutical Services &

Active Ingredients (PSAI)

and Global Generics

businesses. He joined Dr.

Reddy’s in 1993 as

Executive Director and in

1997 went on to become

the Managing Director.

Mr Reddy serves as a

National Council member

of CII, Chairman of CII

National Committee on

Drugs and Pharmaceuticals

and as an executive

council member of the

Indian Pharmaceutical

Alliance (IPA). Earlier, he

was also a member of the

Drugs Technical

Association Board (DTAB)

of India, the highest policy

making body under the

Drugs & Cosmetics Act in

India between 2005-11.

He received the 2009

Distinguished Alumnus

Award from the School of

Pharmacy and

Pharmaceutical Sciences,

Purdue University, U.S.A.

He was identified as a

“Young Global Leader for

2007” by the World

Economic Forum and was

awarded the “IBLA - India

Corporate Citizen of the

Year” by CNBC in 2005.

Key takeaways

Core essence Emerging markets are likely to play a significant role in the global pharma market

growth over the next decade. Increased regulatory risks, consolidation at the

trade levels, declining product opportunities in the US are key challenges. Dr

Reddy's Laboratories (DRRD) is well placed to counter these challenges by

developing a high value product portfolio, deeper customer engagement in

generic products and newer channels of growth like OTC and institutional business.

Industry insights Global pharma industry is likely to reach USD1.2t by 2016, 30% of which could be

generics.

Emerging markets likely to contribute ~70% to the USD200b sales addition till

2016.

Changing business models and consolidation are strategic choices made by pharma

companies.

Company vision and strategyThree pillars of growth:

Product portfolio shifts: Differentiated generics, including formulations and APIs,

by leveraging on vertical integration. DRRD believes it has a strong record in this

area.

Deeper customer engagement: Unbranded generics, physician and retailer

relationships in branded business in markets like India and Russia.

OTC and institutional channels in branded markets: Scale-up in non Rx channels in

Russia and India (OTC and institutional).

Key triggers/milestones/challengesThree key challenges:

Daunting patent cliff in US: USD42b in sales coming off patent in 2014-17, a 42%

decline compared to 2010-13.

Government interference in pricing of products (Germany).

Increasing regulatory risks: US FDA and local authorities are significantly stepping

up regulatory scrutiny.

Increased consolidation of channels, leading to a shift in balance of power in US.

Mr Satish Reddy

Vice Chairman & Managing Director

Dr Reddy’s Laboratories CEO Track

18September 2013


Aditya Birla Group

Covering Analyst(s):Sanjay Jain+91 22 3982 [email protected]

Pavas Pethia+91 22 3982 [email protected]

Mr Kumarmangalam Birla is

the Chairman of Aditya

Birla Group. Mr Birla chairs

the major group

companies in India and

globally. He took over as

Chairman of the group in

1995 and under his

leadership the group has

expanded to telecom,

software, BPO and other

areas. He has restructured

the business and made 26

acquisitions in 17 years in

India and globally, the

highest by an Indian

multinational in India.

He has held and continues

to hold several key

positions on various

regulatory and

professional boards,

including Chairmanship of

the Advisory Committee

constituted by the Ministry

of Company Affairs in 2006

and 2007, membership of

The Prime Minister of

India’s Advisory Council on

Trade and Industry. He also

serves as the Chairman of

Sebi Committee on

Corporate Governance and

is a member of CII.

Mr Birla has received many

awards and honors,

including Forbes India

Leadership Award –

“Entrepreneur of the Year,

2012”, ranked 3rd most

powerful CEO.

Key takeaways

Core essence Aditya Birla Group is a premium global conglomerate, with revenue of USD40b

and operations in 36 countries. Each of its key businesses has focus on quality,

innovation, strong value system, cost & market leadership, and social responsibility

beyond business. The group is last man standing in testing times and first man

forward when the tide turns favorable.

Industry insights Land acquisition bill is likely to slow down growth as the costs and time in acquiring

land for projects will be stretched.

The Cabinet Committee on Investment (CCI) is likely to help in de-bottlenecking

of projects.

Opportunities in aggregation, particularly in North America.

Company vision and strategy To be a global conglomerate at group level but very focused at company level,

with maximum of two businesses.

The group has focused on cash flows, cost leadership and strived to be among the

dominant players. Every business has been built over a long period of time.

Key triggers/milestones/challenges The group's revenue has increased 25x to USD40b and EBITDA has increased 12.5x

to USD5b in 18 years (by FY13), with 53% of revenue coming from overseas

operations. The organization has become younger, with average age falling from

56 years to 36 years.

The group's revenue is expected to increase 63% to USD65b and EBITDA is expected

to increase 1.5x to USD10b as high margin projects start generating cash flows

over next five to seven years. It is likely to witness margin expansion and sharper

increase in cash flows than revenue.

Mr Kumarmangalam Birla

Chairman

Aditya Birla Group CEO Track

19September 2013


State Bank of India



Ms Arundhati Bhattacharya

is the Managing Director of

State Bank of India since

August 2013. She also

served as the Corporate

Development Officer and

Deputy MD at State Bank of

India. She joined the bank

as a Direct Recruit Officer

in 1977 and served as its

Chief General Manager of

Bangalore Circle. Ms

Bhattacharya also had a

stint in the bank’s New

York office where she was

in charge of monitoring

branch performance,

overseeing external audit

and correspondent

relations. She has served

as the Chief General

Manager of New

Businesses for Corporate

Centre at SBI and as its

General Manager of

Network-II, Lucknow and

as Chief Development

Officer.

In her extensive service

with the bank, Ms

Bhattacharya had the

opportunity of working in

metro, urban and rural

areas, thus crisscrossing

the length and breadth of

the country. She has

handled large corporate

credit and initiatives like

financial inclusion and

financing of self help

groups.

Key takeaways

Core essence Focusing on retail liabilities to grow balance sheet; growth to be higher than

industry

Stress continues to rise; monitoring accounts closely

Focusing on improving employee productivity to enhance return ratios.

Industry insights Tight liquidity has significantly increased cost of funds at the industry level. Banks

with higher retail liabilities are better placed.

Green shoots are visible in export-driven sectors like Metals and Textiles, and

small businesses focusing on exports. Given the good monsoon, agricultural

production should increase, in turn resulting in improvement in asset quality.

Difference between the 90s and now: (1) This time, asset quality issues are more

on account of domestic factors; (2) Restructuring and asset quality norms are more

stringent now.

Company strategyEndeavour to maintain domestic NIM at around 3.5%

Systemic interest rate has increased. However, SBIN continues to enjoy the

advantage of strong CASA and retail term deposits flow (proportion of bulk

deposits is negligible). This has helped the bank to contain cost of funds at ~6.5%.

While there is marginal increase in blended cost of funds, the bank is tweaking

spreads over the base rate to maintain margins. Currently, SBIN believes that a

base rate hike is not necessary.

The bank has maintained its domestic NIM guidance of 3.5% for FY14.

Growth to be driven by top-rated corporate and retail loans

Demand outlook for new projects remains muted. However, there is huge

opportunity for refinancing of top-rated corporate loans.

Further, healthy growth in the retail segment (especially home loans) and

incremental demand from substitution of CPs and ECBs would help.

The management expects overall loan growth of ~20%, though its expectation of

systemic growth remains low.

Ms Arundhati Bhattacharya

Managing Director

State Bank of India CEO Track

20September 2013


Asset quality marred by macros; closely monitoring accounts; focusing on agri NPLs

Headwinds in the mid-corporate and SME segments continue; these segments

will be the key contributors to NPAs.

In 2Q, recoveries from the agriculture segment and upgradation of some accounts

due to restructuring might help contain headline GNPAs.

Restructuring is likely to continue, as the current macroeconomic scenario does

not instill positivity. While SBIN has not given any specific guidance on the

restructuring pipeline, as at the end of 1QFY14, it was at INR100b.

SBIN has raised the income limit for auto loans to INR0.6m to reduce risk on the

portfolio. This is the second time in two years that the bank has increased eligibility

criteria/tightened lending process in this segment. While there may be some

moderation in growth, considering that auto loans are just 2-3% of the overall

book, this will not impact overall loan growth meaningfully.

Key triggers/milestones/challenges Clarity on interest rates and improvement in macroeconomic outlook

Resolution of issues plaguing large infrastructure projects

Default rates might move up if economic slowdown persists

Chairperson change in September 2013 - uncertainty on asset quality; change in

strategy expected

Cost-to-income remains high at 50%+; expected slowdown in income growth and

sticky opex to put strain on profitability

Internal plan to merge subsidiaries - uncertainty on asset quality and opex

realignment with parent.

State Bank of India

21September 2013



Dr Subramanian Swamy is an

academician, politician,

activist and economist. He

was president of the

Janata Party which merged

with BJP in August 2013. Dr

Swamy has previously

served as a member of

the Planning Commission

of India and cabinet

minister of India and has

written extensively on

foreign affairs of India

dealing largely with

China, Pakistan and Israel.

He is also a published

author. He had earned a

doctorate in Economics

from Harvard University in

1964. Dr Swamy had also

worked as a team with

Nobel Laureate economists

and has served as a

professor of Economics in

Harvard University and IIT,

New Delhi.

He is responsible for

creating the blueprint that

opened India’s economy to

the world in 1991 and also

simplified trade

procedures and formulated

a new export strategy,

which became the

forerunner of trade reforms

adopted subsequently. In

1994, he was appointed as

Chairman of the

Commission on Labour

Standards and

International Trade. Dr

Swamy has been elected

five times to Parliament.

Indian judiciary laying the ground rules for growth

India can grow at double digit through education, innovation and leadership

Young population, innovations spell enormous potentional of India.

Judiciary is not holding back growth but laying foundation for it.

Education is key for India's growth.

Tax concessions may lift near term settlements.

Enormous potential of India Leadership: India's enormous potential needs leadership and policies.

Young population: 70% of India's population is below 35 years, with average age

of only 27 years vs China (37), the US (38), Europe (47) and Japan (50).

Innovations: New innovations to fuel India's growth. Capital and labour are factors,

however, innovation is the multiplier as proven many times be it in the case of

Internet, jet engines, telex or railways.

Excellence: Indian companies are globally recognized as leaders in quality in the

auto ancillary industry and software ahead of even the US. Ironically, Indians seem

to be performing everywhere except in India!

Agriculture: There is enormous potential in Indian agriculture as we are fortunate

of being able to cultivate it for all 12 months. We can easily grow three crops, but

currently grow only one crop or more in 25% of the land. Yields are very low

although our agriculture research has demonstrated capability to achieve seven

times the current yield. We can become leading exporter of agriculture globally.

Judiciary is not holding back growth but laying foundation for it Judiciary and development: Many think that judiciary is holding up development,

but it has actually given hope that India's governance system can really be

improved.

The PIL system: Judiciary was initially designed to be an Appellate Body. But in

1981, while examining the incidence of bonded labor, Supreme Court found that

the Constitution has given them power to address issues raised in public interest,

even though the petitioner is not an affected party.

Landmark anti corruption law: In 1988, under the Prime Ministership of Rajiv

Gandhi, while Parliament passed the Prevention of Corruption Act, the anti bribery

bill introduced a novel section that anybody holding a public office and facilitating

pecuniary gains for any other party, which is not in public interest, is liable for

ThematicPresentationDr Subramanian Swamy

Eminent Lawyer, Politician, Academician

India: The rising role of judiciary &

the way forward


Dipankar Mitra

+91 22 3982 [email protected]

22September 2013


prosecution, even though he might not have directly benefited from it. These

provisions have been used by Dr Swamy to highlight the recent cases of 2G etc.

Ram Setu: This was another example where Dr Swamy was successful in arguing

that the decision of Tamil Nadu government that time was 'arbitrary', as alternate

and cheaper route is available. Subsequently, the Pachori Committee raised

objection to the project on environmental consideration and now it is on the

backburner.

Some concluding remarks Double digit growth for a decade: India can grow at 12-13% at a stretch for a decade

but should be done in a legal way.

Education holds the key: Such growth is possible in India if we focus on educating

the young population, which enables innovation, the biggest growth multiplier.

Curb discretionary powers: Government is not bad per se, with them playing an

important role in many countries including Japan and even China. But discretionary

powers should be curtailed.

India moved in crisis: India has successfully come out of many crisis, including

food crisis that was overcome by green revolution.

Tax concessions may lift near term sentiments: To lift the mood of investors,

some radical measures could be thought like abolition of personal income tax.

This can be compensated by auctioning huge natural resources that we have or by

bringing back the USD1.5t of illegal money held abroad by Indians.

Vodafone and Vedanta cases: It is difficult to comment on individual cases.

However, the mindset that needs to be adopted is that one should be prepared to

be questioned and subject to judicial oversight.


23September 2013


Indian Education: Taking the train less travelled

Prof. Sandeep Desai pursued

marine engineering (DMET)

and MBA in his academic

period. He has worked with

a leading shipping

company and has extensive

experience in a marketing

profile at MNCs. He

subsequently shifted focus

to academics and social

causes. He was a

professor at S P Jain

Institute of Management &

Research and a visiting

faculty at several B-schools

across India. Prof. Desai

has devoted his entire life

to improving the lives of

those around him and

people who reach out to

him.

Shloka Missionaries is a

public charitable trust

managed by professionals

dedicated to 'Seva-Bhaav'

way of living. The trust has

been committed to reforms

in education from its

inception and the trustees

believe that 'vidya' is the

true wealth of a nation and

its people. Pursuing this

mission, the trust has been

involved with creating new

pools of learning, where

none existed, and bettering

existing pools of

knowledge.

Raises money from local trains to open free schools for the poor

Motilal Oswal Foundation signs up and so does another investor in AGIC

Prof Sandeep Desai, the man who begs in Mumbai's local trains to fund schooling for the

underprivileged in the interiors of Maharashtra, had a corporate beginning.

As a marine engineer he visited 43 countries and then worked in the areas of marketing and

strategy, following his MBA degree.

Subsequently, he taught at business schools, with added responsibility to teach social studies.

It is then he saw the wide gap in reaching quality education for rural poor.

Appalled by the state of education, Prof Desai filed 32 PILs in the court and won 28 of them.

However, while pronouncing the verdict, the judge asked him, "have you ever run a school"?

It acted as a trigger point in his life following which he embarked on a mission to open

schools imparting quality education for the needy.

He started begging in Mumbai's local trains to raise funds for the school and in the process

got arrested. However, a media outcry followed and he was let off with a fine of INR700 by

the court.

Prof Desai, a bachelor, now is on a mission to set up 100 schools before his death that would

provide good quality English medium schooling to the needy children.

Responding to his call to each corporate adopting a school, Motilal Oswal Foundation

announced sponsoring one school. Another noted investor also announced adoption of

another one.

Prof Sandeep Desai - Making of the man Background: Prof Sandeep Desai studied marine engineering from Kolkata, a career

he had chosen for visiting countries. He visited 43 countries in five-and-half years.

Subsequently, he studied MBA and worked for various MNCs, including Castrol

and Aral AG. Thereafter, he took up an assignment of visiting faculty at SP Jain

Management Institute and later became full time professor of marketing and

strategy.

Early motivation and failures: Prof Desai had an additional responsibility to teach

social studies. It is during this period that he got interested in rural education,

particularly in the field of primary education. He had shot off 200 letters to

corporates for donations but a single help was not forthcoming.

Activism: Appalled by the state of education in various schools, he filed 32 PILs

and won more than 28 that drew adverse sanctions of the court on the wrongdoings

of many schools and colleges.

Trigger point: Once pronouncing a judgement, Justice Singh asked him, "have you

ever run a school?" He replied, "is this a challenge or a suggestion." Justice Singh

replied that he could take it either way. Since then he has not filed a single PIL.


Prof Sandeep Desai

Indian Education: Taking the train

less travelled


Dipankar Mitra


24September 2013


Begging: the unique Desai way to fund schools Begging for a cause: Prof Desai applied his knowledge of marketing strategy in

focusing on a captive audience for raising funds through begging. Initially, he did

not have the courage to take out the box and after two stations he thought 'it's

now or never'.

Lessons learnt in begging: He spoke of the realization that if one can bring down

his ego to ground zero level, communication becomes very easy. In his words, if

we have ego for the little achievements that we have, how much ego the creator

of ever-expanding universe must have! He also considers himself as a product of

common man as they contributed to his funds.

Arrested for begging: Prof Desai was arrested by the railway police force for

begging. Following this, there was a massive media outburst. Hindustan Times

carried a campaign. Oddly, the Rajasthan police came to investigate whether

religious conversions are going on in his institute. Finally, the court imposed a

fine of a paltry sum of INR700, which too was paid by a couple who sat through the

proceedings.

Mission: A hundred schools; Motilal Oswal Foundation signs up; so does aninvestor in AGIC A hundred schools: Prof Desai, a bachelor, now is on a mission to set up 100

schools that would provide good quality English medium schooling to the needy

children.

Many difficulties: The school in Umarkhed would require INR3m in the first phase

(@800 psqf). Land acquisition has become difficult. The cost of each school would

go up to INR10m. The methodology of teaching inculcates not just copying western

techniques but also indigenous and broad-based values.

Motilal Oswal Foundation signs up: Responding to his call to each corporate

adopting a school, Motilal Oswal Foundation announced sponsoring a school. A

noted investor also announced adoption of another school.

Indian Education: Taking the train less travelled

25September 2013


Looking beyond the gloom & doom

Mr Deepak Parekh is the

Chairman of HDFC, India’s

leading housing finance

company. Mr Parekh’s

business acumen and

farsightedness has not

only made HDFC the leader

in mortgages, but has

transformed it into India’s

leading financial services

conglomerate, with

presence in banking, asset

management, insurance,

real estate venture fund

and education finance

company.

Besides HDFC Group

companies, Mr Parekh is on

the board of several

leading companies across

diverse sectors. He is often

referred to as the

government’s unofficial

crisis consultant. Be it his

role as Special Director on

the Satyam Board in 2009 to

revive the company or the

crucial role played during

the Unit Trust of India

fiasco in the late ’90s, he

has shared his ideas to

formulate reform policies

across sectors. He is an

active member of various

high powered economic

groups, government-

appointed committees and

task forces.

Look beyond gloom and doom

Lists six areas of positive development

Problems of India are more self-inflicted than emanating from abroad.

Six areas of positivity in India are i) agriculture, ii) containment of fuel subsidies, iii)

readjustment of interest rates, iv) infrastructure debottlenecking, v) disinvestment, vi)

politics.

Agri to contribute 80-100bp to GDP growth this year, food inflation to come down, concerns

of food security overdone.

Government has increased diesel prices consistently and the finance minister is trying his

best to maintain the deficit targets.

RBI's liquidity tightening measures could be scaled back even though rates are not expected

to ease to prior July 15 levels.

Infrastructure bottlenecks are being addressed. The projects are going to take time.

While usual disinvestment should not be done at this time, the disinvestment of Hindustan

Zinc, Balco and SUUTI would be a success at this juncture.

In 2014, chances of a third front led government is very low. The coming state elections

would give us an indication of things to come in 2014.

Self-inflicted wounds of India The contrarian view is missing: Usually, markets have two views, one being

contrarian. However, in the current circumstances, the market view has converged

to doom and gloom.

Self-inflicted damage: However, according to Mr Deepak Parekh, current woes for

India are more of self-making than due to external factors.

Positivity overlooked: In the present gloom, however, people have forgotten to

take note of the six areas in which positive developments are taking place.

Six areas of positive developments Agriculture remains buoyant: Agriculture is the real silver lining this year, with 9%

more area being sown. With this, agriculture is expected to grow at more than 4%

and foodgrains production expected at 260mt. We have five times the stock of

wheat than the buffer stock norm and three times for rice. As a proof of buoyancy

in agriculture, tractor sales are growing fast even as the auto sector has seen ninth

consecutive months of slowdown. Agriculture to contribute 80-100bp to GDP

growth this year and food inflation will come down. Concerns on Food Security

Bill are overdone as the bill would go up by INR400b and its implementation

would take time.

ThematicPresentationMr Deepak Parekh

Chairman, HDFC



Alpesh Mehta

+91 22 3982 5415

[email protected]

Sunesh Khanna


26September 2013


Fuel subsidy: At present under-recovery in diesel exceeds INR10 and remains

significant in kerosene and cooking gas. The huge depreciation in INR has made it

imperative to raise diesel prices by INR3-5, post Parliament session. Hence,

subsidies would come down and this would give confidence to the international

rating agencies. The savings of INR400b on fuel can go to fund the additional

expenditure on account of Food Security Bill.

Reversal of RBI's tightening measures: RBI's liquidity tightening measures clearly

did not achieve goals as INR continued to be on a free fall and in the bargain

money and bond market went for a toss. AMCs of mutual funds came down to

INR8t from INR12t. The inverted yield curve does not help growth and development

in India. Thus, MSF and LAF related measures should be reversed. While the

Government has asked eight public sector companies to raise USD8b from the

market, we need to borrow from a position of strength than from weakness.

Infra bottlenecks being addressed: Government is trying its best to address the

infrastructure bottlenecks. These projects are going to take time. However, biggest

reforms have happened by way of allowing purchase of imported coal and higher

costs to be pass-through. Also, SEBs restructuring is happening.

Disinvestment to kick off: Hindustan Zinc and Balco's disinvestment is expected

to kick off soon. The sale in SUUTI is also in the process. These disinvestments can

potentially fetch a large part of the stated targets in the budget.

No third front in elections: General Elections of 2014 may not be preponed, as

feared by some. However, chances of a third front are slim. In the upcoming

elections in five states (Rajasthan, Delhi, Madhya Pradesh, Chhattisgarh and

Mizoram), the dominant parties are largely Congress and BJP, unlike other states

dominated by regional parties.

Conclusion: Long term prospects intact Long term prospects: Long term prospects of India remain intact. Just to look at,

the banking sector is likely to see an exponential growth - branches are going to

double to 140,000 by 2020, ATMs five times and mortgages would grow by eight

times. Besides, tele density stands at 73% and would grow further and two-

wheelers would double by 2020.

More pain ahead for EMEs, India to hold steady: However, EMEs may undergo

some more pain before they stabilize. However, a growth of 5-6% is assured in

India. If recovery happens in the US and Europe, it would further strengthen India.

Land bill and real estate: Land would become more expensive but would be

available for industry post implementation of LARR Bill. While there may be some

correction in real estate prices, no real estate player has ever gone belly-up.


27September 2013



Dipankar Mitra


Unleashing human spirit – most & more

Mahatria Ra a.k.a. T T

Rangarajan is considered a

spiritual leader and living

master by his students and

is the founder of Alma

Mater – an organization

dedicated to self-mastery

and holistic personality

development. Alma Mater

is one of the leading

organizations in India that

is spearheading the

spiritual renaissance

raging across the world. It

is a non-political and non-

religious organization that

does not promote any

particular ideology but

with a mission to work for

the betterment of the

individual, society and the

world. It conducts

transformational courses

in the cities of Chennai,

Pune, Bangalore and

Hyderabad in India.

He conducts Higher Deeper

Beyond (HDB) — an

annual spiritual retreat

during which thousands of

students have undergone

deep spiritual transformations

and emerged as better

citizens of the world.

Mahatria is also the Editor

of Infinithoughts (formerly

Frozen Thoughts), a growth

oriented magazine

published monthly by Alma

Mater.

Holistic development of individuals ...

... for corporate success and greater glory of country

Corporate sector is more ethical than high places of religion but has its ownchallenges Corporate sector: It is more ethical than most high places of religion replete with

black money and more stifling hierarchy. While no person has ever been lifted

out of poverty through charity as it only keeps one poor. On the other hand, the

corporate sector provides employment and thus accords constructive charity to

lift the poor.

The gap between early success and later achievement: A lot of people showing

promise at early age did not live up to it. On the other hand, many backbenchers

have made it big in real life. The gap between promise and achievement points to

colossal human waste that is far greater in magnitude than the damage to

environment or ozone layer. Unlike environment, human resources get depleted

when we do not use them.

Inadequacies of curriculum: Our educational curriculum does not teach us

leadership, or equip us to deal with relationships in a heterogeneous group of

people. Neither the values of competitiveness, time management, ways to deal

with failure are taught. Thus, the fear of failure comes in the way of taking

initiatives.

The colonel is ready, army is not: Nearly 80% of the people in every organization

are actually sitting. We keep improving systems, technology, one-day executive

training programme etc, but without the person being ready for it, we still do not

have the peak performing individuals. Change is not successful if not monitored.

Changing the system of annual appraisal (APR) to a quarterly one would usher a

new beginning for the organization. However, many in the organization act as

speed breakers hiding behind the power point presentation. The chair protects a

lot of corporate leaders, 90% of whom feel a sense of incompetence. As demands

of the roles are growing much faster than you, thus the gap between expectation

and delivery increases.

Developing human potential to lead to organizational growth Human beings as a composite individual: We need to see a human being beyond

his degree, skill and attitude and as a composite individual comprising of physical,

mental, intellectual, emotional and spiritual being. Organizations need to harness

these aspects of human potential to grow. Thus, we need to develop organizations

holistically.


Mahatria Ra

Spiritual Guru


28September 2013


Physical: While it may appear trivial at the first instance, but if one does not have

a healthy body, it starts showing up later in the day. It shows in diseases and

medicines and efficiency of the people. Physical fitness is one of the criteria for

APR. The body is designed in such a way that it would take care of you, if you take

care of it. Hence, an hour to the body is essential.

Mental: The education system is designed to develop the conscious part of mind.

However, the conscious comprises only one eighth of the mind - the remaining

seven-eighth being subconscious. The mind does not differentiate between the

positive and negative emotions but can only recognize the shallow and deep

emotions. The duct to which one programmes his deep emotions is programmed

for recurrence of the same. Thus, one becomes the co-author of his own destiny.

There are three ways to correct this. One is that, anything positive, speak in five

sentence and anything negative say once or do not. Second, anything positive get

emotionally involved, anything negative only intellectually analyze. Third and

most importantly, train yourself to experience shallow hurt and deep positive

emotions.

Intellectual: Mahatriya Ra picked up some simple philosophy from his managers

in his early part of professional career. The first one was "Subordinate your likes

and dislike to the purpose of your life. The second one is to seek solutions always

and not the problems captured succinctly in the phrase "there is a way and the

way is on the way".

Emotional: We all experience positive and negative emotions. But there is a

difference. Ordinary men spit their negative emotion, the extraordinary channelize

their emotions. But they channelize it to positive direction by identifying a goal

larger than emotions. The same happened with Mother Teresa and Mahatma Gandhi

who made their negative experience channelize it in right directions. We live our

life with an enormous amount of sensory overload, with a never ending traffic

jam. Hence, some period of non-doing, a period of quietude may help either by

meditation, walk alone, star gazing etc may help.

Conclusion: Two stories and one lesson Conquering Mt Everest: After failing to climb Mt Everest thrice, Sir Edmund Hillary

said to the painting of it, challenged itself that "more and more you reject me,

more and more I become determined that I would climb on top of you ... because

as Mt Everest you cannot grow but as human being I would continue to grow".

Get the man correct, the world would fall in place: The father reading a newspaper

and not wishing to be distracted by his little daughter, tore the pieces of a paper

where lay map of the world as part of an advertisement of a courier company and

gave that as a jigsaw puzzle to the girl as a precondition to play. Within five minutes

the girl got the map right and replied to the bemused father that on the opposite

side was the picture of a man and she just put the eyes, ears and nose together.

Thus, getting the man right would get the world right!

It starts with you: Everything starts with you. First you grow holistically and then

empower everyone through leadership to grow holistically. If we thus feel

responsible to empower the 1.2b people to grow holistically, give us 25 years and

collectively we can put India on top of the world.


29September 2013


The Great India Management of Dabbawala

Dr Pawan Agarwal is the CEO

of renowned Mumbai

Dabbawalas (couriers for

lunch boxes to offices) and

is also a well-known

management guru. He is a

proficient professional

involved in conducting

research and contributing

to the design and delivery

of courses for the entire

educational fraternity and

has received several

awards for his work as a

teacher, including the

“Utkrusht Shikshak

Sanmam” from the Mumbai

National Congress in 2010

and the Rajiv Gandhi

Puraskar in 2007. In 2001,

while he was pursuing a

doctorate for the topic “A

Study & Logistics & Supply

Chain Management of

Dabbawala in Mumbai”, he

had approached the

dabbawalas (Mr Raghunath

and Mr Gangaram).

Mr Agarwal has been

involved in the world of

dabbawalas ever since and

works on an honorary basis

to make presentations. He

has been authorized by the

dabbawalas to present their

work for audiences in

English. Outside India, he

has been invited to unleash

the magic of dabbawalas to

organizations such as Young

President Organisations

(YPO) members in Kenya, YPO

members in Nigeria, British

Telecommunication and

Global Services in London

and First Source Solutions

Ltd in London.

Mumbai Dabbawalas - a lesson in management

Rooted in core principles of hard work, customer satisfaction and human values

The success of Mumbai Dabbawalas is built around a few simple and traditional principles

including i) work is worship, ii) customer is god, iii) no alternate to hard work, iv) importance

of human values.

The great Mumbai Dabbawalas services started in 1890 and have 5,000 employees, with an

average literacy rate of 8th grade schooling. They cover a total area of 60-70kms and carry

nearly 0.2m tiffin boxes, totalling 0.4m transactions, 120m transactions every year.

The dabbawalas have a very simple and flat organizational structure, with 13 members at

the top organizational position, including nine directors. The second layer comprises of 800

mukadams and the rest 5,000 are simply members with all equal status.

The cost of dabbawala service is kept low at INR400-450 per month irrespective of weight,

distance and space because if the prices are raised further, they would face competition

from the local restaurants. In all thus, dabbawalas make INR8,000-9,000 per month. This is

added by supplementary income from odd jobs .

Dabbawalas have never resorted to any strike or got involved in any police/court case since

1890. A strict code of conduct is enforced throughout the organization.

Mumbai Dabbawalas have won many awards and accolades, including Six Sigma performance

and ISO 9001:2000 certification, most notably without applying for it. Lastly, dabbawalas

now perform a role of brand ambassador for the country.

Simple principles behind the success The takeaways: The key takeaways from the working of dabbawalas are their i)

passion, ii) commitments, iii) consistency, iv) execution, v) accuracy, vi) dedication,

vii) time management, and viii) complete customer satisfaction.

Four key principles: The four key principles that guide dabbawalas are i) work is

worship, ii) customer is god, iii) no alternate to hard work, iv) importance of

human values.

Functions and workings: The great Mumbai Dabbawalas services started in 1890

and it was registered as a charitable trust in 1956. At present, they have 5,000

employees, with an average literacy rate of 8th grade schooling. They cover a

total area of 60-70kms and carry near 0.2m tiffin boxes totalling 0.4 transactions,

120m transactions every year. It takes around 8-9 hours for this to accomplish,

including the morning three hours of wartime.

Simple organizational structure: The dabbawalas have a very simple and flat

organizational structure, with 13 members at the top organizational position,

including nine directors. The second layer comprises of 800 mukadams and the

rest 5,000 are simply members with all equal status.

ThematicPresentationDr Pawan Agarwal

Management & Motivational Guru

The Great India Management

of Dabbawala


Dipankar Mitra


30September 2013


Impeccable service at a reasonable cost Charges only @400-450 per month: The cost of dabbawalas service is kept low at

INR400-450 per month, irrespective of weight, distance and space. This is because

if the prices are raised further, they would face competition from the local

restaurants who would supply cooked food to the customers. In all thus

dabbawalas make INR8,000-9,000 per month. Diwali bonus, once a year, amounts

to a month's extra payment. Dabbawalas add this with supplementary income,

including delivery of newspapers in the morning and odd jobs in the evening.

No strike or police/court case: Dabbawalas never resorted to any strike since

1890 as they have seen the results of long strikes in Mumbai mills that never

opened thereafter.

Discipline: A strict code of conduct is enforced throughout the organization that

includes the following, i) no alcohol/smoking during business hours, ii) mandatory

white cap during business hours, iii) carry identity card, and iv) no leave without

prior notice. In case of an emergency absence, it is reported immediately.

Some unique features: The average weight carried by a dabbawala is around 60-

65kg. There is no fuel, modern technology, investment or disputes involved in

the entire service. The performance rating is higher than 99.99%, with 100%

customer satisfaction.

A foolproof coding system: Dabbawalas use a simple but foolproof coding system

that mentions i) residential area code, ii) dabbawala code at residential,

iii) building name, iv) floor no., v) dabbawala code at residential station and

vi) destination station.

Delivery of Six Sigma performances against all odds Crowded trains: The Mumbai trains are overcrowded with 12 coach trains, 4,000

commuters, 8,000 disputes but there is no excuse as duty comes first. The tiffins

are unloaded and rearranged as per destination area and building. The reverse

process follows during return journey from all destination stations.

Awards and facilitation: Documentaries have been made on Mumbai Dabbawala

services by various TV channels in India and abroad. Also, they became celebrated

case studies in various business schools across the world. They receive invitation

for lecture among the world's leading institutes. Dabbawalas received ISO

9001:2000 award on August 1, 2006 that too without application! They are included

among DNA's top 50 entrepreneur list of India.

Achievements: One of the most celebrated success of Mumbai Dabbawalas is

that of Six Sigma performance, with an error rate of one in 16m transactions (i.e.,

99.99966 success rate). Besides, they have got recognition at Guinness Book of

World Record, Ripley's "believe it or not" and many other sources.

Brand ambassador for country and other anecdotes: When Prince Charles visited

the dabbawalas, they had to set the venue and time (Churchgate Station between

11.20 AM to 11.40 AM only on November 4, 2003) as they would otherwise be busy

at serving their customers who are god in their eyes. This relationship extended

further when dabbawalas sent gifts on the second marriage of Prince Charles and

when the latter sent his condolence message after heavy floods in Mumbai on

July 26, 2005.

The Great India Management of Dabbawala

31September 2013


Art of doing business in India – Conquering the chaos

Mr Ravi Venkatesan is a

Director on the boards of

Infosys and AB Volvo and a

Fellow of the Center for

Higher Ambition

Leadership, Boston. He is

an advisor to several family

run business houses and

entrepreneurial ventures.

He is also a member of the

Advisory Board of Bunge

Ltd, the Global Alumni

Board of Harvard Business

School and of Marico

Innovation Foundation. Mr

Venkatesan is a founding

partner and Chairman of

Social Venture Partners,

India, a network of

engaged philanthropists

attempting to address

complex social issues

through venture

philanthropy.

Between 2004 and 2011, Mr

Venkatesan was the

Chairman of Microsoft

India, which under his

leadership became the

company’s second largest

and one of its fastest

growing geographies. He

was instrumental in

helping Microsoft India

create “Shiksha”, a large

computer literacy program

that helped train over 35

million students from weak

backgrounds. Prior to

Microsoft, he spent 16

years with Cummins Inc as

Chairman.

Mr Venkatesan was voted

the most influential MNC

CEO for 2011 by the

Economic Times.

Key takeaways

Core essence: Many companies enter India or other Emerging Markets (EMs), but

all are not successful. Some MNCs such as Nestle, McDonald's, Vodafone, Bosch,

LG, Reckitt Benckiser succeed, while others like GE, Apple are not that successful.

Why does India really matter? Why bother with the 'chaos'?: India is the perfect

litmus test which MNCs should be willing to take due to: (1) country's growing

market (nominal GDP grew by more than 6x from 1995 till date), despite all current

challenges and (2) the growing middle class.

How can you ascertain if a company is succeeding in India?: (1) The company is #1,

#2 or #3 in the industry and growing faster than average, (2) India provides 10-20%

of the incremental global growth of the company and (3) product capabilities and

talent from India are being used to succeed in other markets.

Three differentiators to success Have a long term mindset - Companies should have a strategic view of the business

and not just a financial view for short term.

Adapt to the market, do not expect the market to adapt to you - Product to be

tailored for India offering '70% of the value at 30% of price.' Companies should

have a localized business model that delivers profitability even at crazy price

points. They should have a granular bottom-up approach.

Get the talent right - Corporates should seek people with potential and then give

them huge challenges which display their hunger, courage, ability to take quick

decisions. Companies should move top talent around globally, especially in

emerging markets.

India - growth spurts followed by periods of slowdown: Empirical evidence proves

that India has always been a place where growth happens in spurts, followed by

periods of slowdown (three to four good years followed by four to five tough

years), despite slack policy-making. Thus, if MNCs are able to adapt during the

tough periods of slowdown, they will reap the benefits during a good run.

Broad recipe for MNCs to win Indian markets Pick a few big markets like China, India, Indonesia to go deep, rather than smear

investments across many.

Look past the short term challenges of these markets. Play the long game and stay

on the course. Sacrifice short term profitability for market leadership.

Send the best leaders for these markets and for five years or more.

Empower the local team to make most operating decisions do not micromanage.


Ashish Gupta


ThematicPresentationMr Ravi Venkatesan

Ex-Chairman, Microsoft (I), Cummins (I)

Art of doing business in India –

Conquering the chaos

32September 2013


Panel Discussion



Mr Ramesh IyerMD & CEO

M&M Financial Services

Mr Ramesh RamanathanFounder, Chairman,

Janalakshmi Microfinance

Mr Romesh SobtiMD & CEO

IndusInd Bank

Mr Vikram LimayeCEOIDFC

Mr Tamal BandopadhyayDeputy Editor MINT

Author

MODERATOR

India Banking – Beginning of a New Era

Consensus of 6-8 new banking licenses to be given

Panelists for the discussion were (1) Mr Vikram Limaye, MD & CEO, IDFC, (2) Mr Romesh

Sobti, MD & CEO, IndusInd Bank, (3) Mr Ramesh Iyer, MD & CEO, Mahindra & Mahindra

Financial Services, and (3) Mr Ramesh Ramanathan, Chairman, Janalakshmi. The moderator

was Mr Tamal Bandyopadhyay, Deputy Managing Editor, Mint.

The panelists agreed that the medium to longer term opportunity remains large despite

the current gloom in the environment. While India needs a bank of global size, there is also

need for small and specialized branches, given the fragmented economics in different parts

of the country.

On financial inclusion, three panelists believed that banking is the correct business model,

while one was of the view that NBFCs are already helping achieve financial inclusion without

a banking license.

6-8 new banking licenses are expected to be awarded if corporate houses are included.

Financial inclusion and use of technology will be the USPs of the new banks.

Background for the panel discussion

Post liberalization, we have seen structural changes in the Indian economy and

Financials have been at the forefront. 1993 saw the emergence of new private

sector banks (10 licenses in 1993 and two more in 2003), which transformed the

competitive landscape, increased financial penetration and improved customer

service levels. The adoption of newer technology reduced intermediation cost,

which in turn reduced overall lending rates in the system without impacting

profitability.

Post the NBFC debacles in the late 1990's and early 2000's, some focused players

emerged stronger and capitalized on the weakness of the banking business model.

Strong growth in the last decade has also seen the emergence of mono-line NBFCs

like IFCs, MFIs and gold financiers.

Discussion focus areas were: (1) Opportunities and Challenges for Banks and NBFCs

in the New Era, (2) How Technology is Playing an Important Role, and (3) Banking

License: (a) Is the banking space getting overcrowded or is the pie big enough to

accommodate 5-6 new players?, (b) Outlook on standalone NBFCs in the longer

term, considering challenges on the liability side and increasing competition in

their niche areas.

Views from Janalakshmi

India has 30m MSMEs officially. There are also ~30m micro-MSMEs, which are

excluded from formal banking channels. These particularly include rural

inhabitants and migrants in urban/metropolitan areas. Overall banking

penetration is not even 5%. The total requirement is INR30t.

With a banking license, Janalakshmi would look at the financial inclusion

opportunity in the MSME segment. It would use an innovative distribution strategy

and technology for financial inclusion.

PANELISTS

33September 2013


India Banking – Beginning of a New Era

Views from MMFS

MMFS is not applying for a banking license, as the conditions do not provide

opportunity for co-existence of NBFC and Bank, and the transition time to convert

from NBFC to Bank.

Lending in the rural markets and financial inclusion requires interactive lending,

execution excellence, and the capability to scale up where NBFC platform is

required.

It does not see itself losing out on any opportunities if it does not turn into a Bank.

Customers would be fine dealing with a Bank/NBFC as long as they get good

service and convenience.

Views from IDFC

IDFC was formed with the mandate of tapping the opportunity in the fast growing

Infrastructure segment. However, being focused on only one lending segment

leads to significant volatility and increases the risk to the business model. IDFC

will incrementally look to diversify its lending business, though Infrastructure

will remain the key focus area.

From a longer term perspective, the Banking business provides a good platform

for diversification of assets and liabilities. Mr Limaye pointed out that while India

needs BIG banks, it also needs MORE banks to increase penetration. Diversification

of assets and liabilities is important from a risk and growth prospective. Hence,

applying for a banking license makes sense.

Views from IndusInd Bank

For a new bank to be successful in a highly competitive market, a niche presence

and focused strategy are essential. The Indian market is big enough to

accommodate 6-8 new players.

Both the NBFC and Banking business models have their pros and cons. NBFCs are

doing a great job of financial inclusion, and the RBI will not be against that business

model. However, as the NBFC industry is becoming bigger, regulations are also

likely to become more stringent. This will increase regulatory and operating

expenses, which will impact profitability.

34September 2013


Company Connect

Automobiles

Eicher Motors ................................... 35

Hero MotoCorp ................................. 36

Mahindra & Mahindra ................... 37

Maruti Suzuki ................................... 38

Tata Motors ...................................... 39

Capital Goods

Havells India ................................... 40

Larsen & Toubro ............................... 41

Cement

ACC ...................................................... 42

Ambuja Cements ............................. 43

Grasim Industries/Ultratech ........ 44

Consumer

Dabur ................................................. 45

Emami ................................................ 46

Godrej Consumer Products ............ 47

Hindustan Unilever ........................ 48

I T C ..................................................... 49

Marico ................................................ 50

McLeod Russel ................................. 51

Mrs Bector's Food ........................... 52

Parag Milk Foods ............................. 53

United Breweries ............................ 54

Financials

Aditya Birla Nuvo ............................ 55

Axis Bank .......................................... 56

Bajaj Finance ................................... 57

Bajaj Finserv ..................................... 58

Bank of Baroda ................................ 59

Chola Investment ............................ 60

City Union Bank ............................... 61

H D F C ............................................... 62

HDFC Bank ........................................ 63

ICICI Bank .......................................... 64

I D F C ................................................. 65

Indiabulls Housing Finance ......... 66

Indusind Bank ................................. 67

ING Vysya Bank ................................ 68

Kotak Mahindra Bank ..................... 69

LIC Housing Finance ....................... 70

M&M Financial Services ................ 71

Shriram Transport Finance ............ 72

State Bank of India ......................... 73

Union Bank of India ....................... 74

Yes Bank ............................................ 75

Healthcare

Biocon ................................................ 76

Dr Reddy's Laboratories ................ 77

Glenmark Pharmaceuticals ........... 78

IPCA Laboratories ............................ 79

Lupin .................................................. 80

Ranbaxy Laboratories .................... 81

Sun Pharmaceuticals Industries .. 82

Media

D B corp ............................................. 83

Hathway Cable ................................. 84

Sun TV Network ................................ 85

Zee Entertainment .......................... 86

Metals

Hindalco Industries ....................... 87

Jindal Steel & Power ...................... 88

JSW Steel .......................................... 89

Oil & Gas

B P C L ................................................. 90

O N G C ............................................... 91

Reliance Industries ........................ 92

Real Estate

Prestige Estates Projects ............... 93

Sobha Developers ........................... 94

Retail

Future Retail .................................... 95

Shoppers Stop .................................. 96

Titan Industries ............................... 97

Tribhuvandas Bhimji Zaveri .......... 98

Technology

HCL Technologies ............................ 99

Info Edge (India) ........................... 100

Infosys ............................................. 101

Tech Mahindra ............................... 102

Wipro ............................................... 103

Telecom

Bharti Airtel/Bharti Infratel ........ 104

Reliance Communications .......... 105

Utilities

C E S C ............................................... 106

Coal India ....................................... 107

N T P C .............................................. 108

Powergrid ........................................ 109

Others

Just Dial .......................................... 110

MCX ................................................... 111

TTK Prestige .................................... 112

Sector, Company Page Sector, Company Page

Other companies: Au F inancier, Container Corporation of India, Janlakshmi

Microfinance, Motherson Sumi Systems , Motilal Oswal Financial Services, Tata

Steel | Note: All stock prices as on 6 September 2013.

35September 2013


Eicher Motors

Sector: Automobiles

Bloomberg Code EIM IN

Rating Buy

CMP (INR) 3,192

Mcap (USD b) 1.3

52-Wk Range (INR) 3,980/2,053

1, 6, 12 Rel Perf (%) -6/16/44

Year Net Sales PAT EPS EPS P/E P/BV RoE RoCE EV/ Div.

End (INR b) (INR b) (INR) Gr (%) (x) (x) (%) (%) EBITDA Yld (%)

12/12A 63.9 3.2 120.1 5.0 26.4 5.2 20.8 23.0 21.6 0.6

12/13E 70.0 3.9 145.5 21.1 21.8 4.5 22.2 22.3 14.7 0.8

12/14E 88.4 4.9 180.1 23.8 17.6 3.8 23.3 23.6 10.4 0.9

12/15E 109.2 6.5 242.3 34.5 13.1 3.1 26.0 28.4 7.2 1.1

Company Represented By:Mr Lalit Malik, CFO

Covering Analyst(s):Jinesh K Gandhi+91 22 3982 [email protected]

Chirag Jain+91 22 3982 [email protected]

Key Takeaways

Royal Enfield's (RE) incremental bookings remain robust and the company has

maintained its guidance of 175k/250k units for CY13/CY14. Dealership expansion,

particularly in tier-3/4 cities, new launches and exports to emerging markets would

be the key growth drivers in the medium term. Launch of new CV range (developed

with Volvo inputs) would commence from the end of CY13.

RE on track to maintain strong growth; maintains CY13/14 volume guidance

RE's incremental bookings remain robust - over 50% of the monthly production

run-rate of ~16,000 units. As a result, waiting period still remains high at ~6

months, though lower than the peak of 8 months.

With the new plant becoming operational, RE expects to sell 175k/250k units

in CY13/CY14. The company would plan for next round of capacity expansion

in CY14; the new plant can be scaled up to 500,000 units.

Top 10-12 cities, contribute ~50% of RE volumes, indicating significant potential

in mid-size towns/cities. It intends to add 50-70 dealers per year over the next

2-3 years. Its geographical expansion is focused on tier-3/4 cities, as these

cities currently account for just ~35% of volumes.

With capacity expansion, RE is also focusing on increasing exports, particularly

to emerging markets apart from traditional markets of US, UK and Europe.

Benefits of cost savings driven by new plant would be invested in developing

new products and new export markets.

CV demand outlook remains weak; launch of new CV range from CY13-end

In line with the weak macroeconomic environment, outlook for the CV

segment remains weak, with no visible signs of recovery.

Launch of new range of CVs (developed with Volvo inputs) would commence

from the end of CY13 across the entire range of products.

Medium Duty Engine Project (MDEP) has commenced operations. Current

capacity stands at 25,000 units, expandable up to 100,000 units. Currency gains

from INR depreciation against Swedish Krona (SEK) will be shared.

VECV is better placed among new entrants, given the alliance of Volvo's

technological strength with Eicher's local market expertise.

Post JV with Volvo, VECV's market share has improved across segments,

particularly in HDs from ~2% to 5%. VECV is yet to tap 60% of the addressable

market - small operators, owing fewer than four trucks.

JV with Polaris on track; to launch first product in CY15

Eicher's 50:50 JV with Polaris Industries is on track, with production targeted

to commence by 2015.

36September 2013


Hero MotorCorp

Bloomberg Code HMCL IN

Rating Buy

CMP (INR) 1,929

Mcap (USD b) 5.9

52-Wk Range (INR) 2,088/1,434

1, 6, 12 Rel Perf (%) 1/13/-3

Sector: Automobiles

Year Net Sales PAT EPS EPS P/E P/CE P/BV EV/ RoE RoCE

End (INR m) (INR m) (INR) Gr. (%) (X) (X) (X) EBITDA (%) (%)

3/12A 233,681 23,781 119.1 18.4 16.2 14.6 9.0 10.6 65.6 49.9

3/13A 235,827 21,182 106.1 -10.9 18.2 16.1 7.7 11.3 45.6 43.6

3/14E 253,956 22,290 111.6 5.2 17.3 15.0 6.7 9.9 41.6 52.6

3/15E 293,976 30,654 153.5 37.5 12.6 10.6 5.4 8.4 47.7 62.7

Company Represented By:Mr Surendra Chabbra,VP - Finance



Key Takeaways

Hero MotoCorp (HMCL) expects recovery in two-wheelers, starting with the festive

season on good monsoons, and has guided 5-6% industry growth for FY14. HMCL

will launch 5-6 variants in FY14, while complete new models will be showcased in

Auto Expo (February 2014). Cost management projects would yield 400-500bp

margin benefit (excluding royalty) over 18-24 months.

Guides FY14 industry growth of 5-6%; scooters to grow 10-15% over 2-3 years

HMCL expects recovery in the two-wheeler industry, starting with the festive

season on good monsoons, and has guided 5-6% industry growth for FY14.

HMCL's FY14-YTD retail volumes have grown ~7%, driven by 18% growth in the

North. Performance in the South and West has been relatively weak.

Scooters would continue to outperform the two-wheeler industry over 2-3

years, with expected growth of 10-15%. In top cities, scooters enjoy ~40%

share as against ~15% in small towns (~23% overall).

To launch 5-6 variants in FY14; to showcase complete new range in Auto Expo

HMCL will launch 5-6 models/variants of existing models in FY14. Complete

new models are likely to be showcased during Auto Expo (February 2014).

It plans a scooter and motorcycle launch with new engines in mass segment.

Cost management projects to yield 4-5pp margin benefit over 18-24 months

Cost management projects would yield 4-5pp benefit over 18-24months, driven

by (a) value engineering/re-engineering of components (~65% sourced from

associates), (b) outbound logistics (driven by customized fleets and new

Gujarat plant), and (c) optimizing marketing spend.

However, it would need to invest in (a) R&D (to increase from 0.4% in FY13,

0.7% in FY14, and 1.3-1.8% in FY15), and (b) export markets.

Expect net savings of 2-3% (ex-royalty) and ~2% royalty from June 2014.

Captive finance arm to support sales where organized financing inadequate

HMCL has launched its captive retail financing arm in the NCR and plans to

extend to 200/450 dealerships by March 2014/March 2015. Currently ~14% of

its sales are financed.

Other highlights

HMCL has ~12% import content (50% in USD, 50% in JPY). The management

indicated marginal impact on profit margins due to forex movement.

HMCL has started exports to 6-7 new markets. Primary focus would be on

Africa and Latin America (ex Brazil).

37September 2013


Mahindra & Mahindra

Bloomberg Code MM IN

Rating Buy

CMP (INR) 771

Mcap (USD b) 7.3

52-Wk Range (INR) 1,026/742

1, 6, 12 Rel Perf (%) -13/-12/-9

Sector: Automobiles

Year Net Sales S/A PAT * S/A EPS * Cons. Con. EPS P/E Cons. RoE RoCE EV/ EV/

End (INR m) (INR m) (INR) EPS (INR) Gr (%) (x) P/E (x) (%) (%) Sales EBITDA

3/12A 318,535 28,888 48.3 51.2 6.6 16.0 15.1 23.0 23.1 0.0 0.0

3/13A 404,412 36,344 60.7 60.9 18.9 12.7 12.7 22.4 23.2 0.7 5.9

3/14E 404,949 35,682 59.6 71.5 17.4 12.9 10.8 20.3 21.8 0.7 5.4

3/15E 454,535 42,087 70.3 89.6 25.3 11.0 8.6 19.9 22.3 0.5 3.9

* S/A including MVML

Company Represented By:Mr K Chandrasekar,Sr. V P - Corp. Finance

Ms Sandhya Sharma,Sr GM - Corp Finance

Mr Rajen Kavadia,Manager - IR & Corp Finance

Ms Gayatri Udeshi,Manager - IR & Corp Finance



Key Takeaways

Mahindra & Mahindra (MM) has maintained its tractor growth guidance of 10-12%

for FY14. Led by good monsoon and healthy water reservoirs, both the crop seasons

(Kharif and Rabi) are likely to be strong. Improvement in the macro environment

would be imperative for improvement in performance of UV portfolio. Election

spending could be a near-term positive trigger for UVs.

Maintains tractor growth guidance; pressure on UV portfolio to remain

Led by good monsoon and healthy water reservoirs, both the crop seasons

(Kharif and Rabi) are likely to be strong, with consequent higher cash flows.

MM has maintained its tractor industry growth guidance at 10-12% for FY14

v/s marginal decline in FY13. It expects to launch a brand new tractor in FY14

(prior major launch was in 2001).

However, pressure on UV portfolio would remain, considering the weak

macroeconomic environment, increase in excise duty (SUV tax) and higher

competitive pressures. Election spending could be the near-term positive

trigger for UVs.

Post four launches in the past 15 months in the Auto division, there would be

no new platform launches over the next 15-18 months.

In the meantime, MM would focus on launching variants/refreshes of existing

products to keep consumer interest alive.

MM is working on three brand new products (one along with Ssangyong R&D)

but these are likely to be launched only after FY15.

Ssangyong reports PAT after 23 quarters, expects 2H to be better

In 2QCY13, Ssangyong reported PAT after 23 quarters, with operating margins

(after depreciation) at 0.4%. The management has guided better 2H, driven by

introduction of improved models such as the New Korando C.

It has guided volumes of 149k units for CY13 (v/s 120k units in CY12).

2W subsidiary aims at market share of 8-10% over two years with 10 launches

MM's 2W subsidiary intends to launch 10 more models/variants over the next

two years, with an aim to garner 8-10% market share. Its Centuro has received

over 30,000 bookings since launch in July 2013.

Other highlights

The management has maintained its capex guidance at INR100b (including

INR25b for investments) excluding large acquisitions, if any.

Considering slower economic growth, demand for trucks remains weak, with

no signs of revival in the near term.

38September 2013


Maruti Suzuki

Bloomberg Code MSIL IN

Rating Buy

CMP (INR) 1,290

Mcap (USD b) 6.0

52-Wk Range (INR) 1,773/1,173

1, 6, 12 Rel Perf (%) -6/-8/-2

Sector: Automobiles

Year Total Inc. PAT Con. EPS EPS Con. P/E P/CE P/BV EV/ RoE RoCE

End (INR m) (INR m) (INR) Gr. (%) (x) (x) (X) EBITDA (%) (%)

3/12A 355,872 16,353 58.2 -29.4 - - - - 10.8 13.2

3/13A 435,879 23,921 80.2 37.8 16.1 9.1 2.1 7.7 12.9 15.5

3/14E 434,673 25,774 86.7 8.1 14.9 8.2 1.9 6.5 12.4 16.0

3/15E 502,723 33,791 111.9 29.1 11.5 6.7 1.6 4.8 14.2 17.9

* SPIL merger w.e.f 1st April 2012

Company Represented By:Mr Ajay Seth, CFO

Mr Vivek Kumar, Manager(Corporate Planning & IR)

Mr Rishabh Jain,Manager (Finance)



Key Takeaways

Maruti Suzuki (MSIL) indicated that demand remains weak, with lead indicators

reflecting falling footfalls and conversions. Discounts have reached an all-time

high to INR18k/unit in 2Q (v/s INR13.5k/unit in 1Q). Recent INR weakening would

negate the benefits from localization and cost management initiatives. On the

positive front, rural demand remains strong (10-15% growth). The management

maintained its flat export volume guidance for FY14.

Demand remains weak; discounts at all-time high levels

Demand continues to be weak with falling footfalls and conversions.

Discounts have reached an all-time high to ~INR18k/unit (v/s INR13.5k/unit in

1Q) with introduction of discounts on diesel portfolio June 2013 onwards.

The diesel portfolio constitutes 52% of total volumes. With declining diesel

vehicle sales, this could fall to 40% (v/s 30% before the petrol-diesel price

disparity began to widen, driving the preference for diesel vehicles).

Rural demand robust; flat export volume guidance maintained for FY14

While urban demand remains weak, rural markets continue to show strong

growth of 10-15%. MSIL derives ~30% of its volumes from rural markets.

MSIL maintained its flat export volume guidance for FY14, as the process of

homologation in several key markets has been conducted.

INR depreciation improves competitiveness within the Suzuki network, though

competitiveness v/s Indian exporters (Hyundai) is unchanged.

Margins to decline from 1Q levels

With lower demand, utilization has hit a low of 75% (v/s 85-90% normal

operating rate), resulting in negative operating leverage. Falling diesel vehicle

demand has also led to fall in SPIL utilization, resulting in surplus of 70k units.

Higher EBITDA/diesel vehicle (due to higher realizations), coupled with

adverse mix change will result in bigger fall in EBITDA v/s volumes.

Recent INR weakening would negate the benefits from localization and cost

management initiatives. Localization would have resulted in import content

falling from 20% in FY13 to 16% in FY14 (with eventual target of 11-12% of sales

ex royalty). However, INR/JPY depreciation has taken it back to 20%.

Other highlights

Recent change in SBI's income eligibility norms could impact MSIL's annual

volumes by 30-40k, as SBI has 15-17% market share of financing for MSIL (~70%

of domestic volumes are financed). This would be though a short-term issue,

as other banks could eventually cater to this market.

39September 2013


Tata Motors

Bloomberg Code TTMT IN

Rating Buy

CMP (INR) 318

Mcap (USD b) 13.3

52-Wk Range (INR) 337/225

1, 6, 12 Rel Perf (%) 8/7/25

Sector: Automobiles

Year Sales Adj. PAT Adj. EPS Norm. P/E Norm. RoE RoCE EV/ EV/

End * (INR m) (INR m) (INR) EPS (INR) ^Ratio P/E (x) (%) (%) Sales EBITDA

3/12A 1,656,545 125,568 39.0 22.9 8.2 13.9 38.4 24.1 0.7 5.1

3/13A 1,888,176 103,286 32.1 12.4 9.9 25.5 27.4 21.7 0.7 4.8

3/14E 2,149,420 105,482 32.8 9.1 9.7 34.9 22.2 20.8 0.6 4.0

3/15E 2,472,077 128,858 40.0 12.3 7.9 25.9 21.6 21.4 0.5 3.4

* Consolidated; ^ Normalized for capitalized expenses

Company Represented By:Mr Vijay Somaiya,Head (Treasury & IR)

Mr Prakash Pandey,Sr Manager (Treasury & IR)



Key Takeaways

JLR momentum remains intact, led by strong demand for recently launched

products, with ~6 months order backlog for new RR, new RR Sport and F-type.

Inventory and discounts are under control across geographies. China volume

growth would remain healthy, driven by dealer penetration beyond top-10 cities

and commissioning of Chery JV by the end of CY14. Domestic business remains

weak with no signs of recovery.

JLR business on track to meet guidance of 410k volumes and 15% margins

JLR business momentum remains strong, driven by strong demand for new

Range Rover (RR), F-Type and encouraging response to new RR Sport. New RR

Sport has ~6 months waiting; retails start from September 2013. Even new RR

and F-Type have ~6 months backlog across geographies. Inventory and variable

marketing spend are under control in all the markets.

The management maintained its guidance of over 410k volumes and 15% EBITDA

margin, driven by 20-30% growth in China and double-digit growth in US.

China demand remains strong; dealership expansion to drive growth

Demand environment in China remains robust (though growth normalizing to

20-30%). Growth would be driven by further penetration of JLR in China;

currently top-10 cities contribute over 85% of volumes for JLR. Dealership

would be expanded from 108 to 150 by FY14-end and 200 by FY15-end.

Chery JV - to improve JLR's positioning in China

Chery JV would be operational by the end of CY14, with initial capacity of

130k. It would manufacture entry-level models such as Jaguar XF, FreeLander

in China (~40% of volumes), while others would continue to be imported.

It is confident of fully utilizing China capacity of 130k in two years from

commissioning with price reduction from duty savings. Based on other luxury

car experience, it would pass on 15pp of the ~50pp savings in duties. Even

after sharing profits with JV partner (50:50 JV), JV would be PAT accretive.

Strong product actions lined up in JLR over next few years

Product launches planned for the next 15 months in JLR are: (a) Evoque upgrade

in CY14, (b) Baby Jaguar by end-CY14, (c) Hybrid RR by end-CY13, and (d) Hybrid

RR Sport in CY14.

Domestic business - no signs of recovery

There are no signs of recovery in both CV and PV businesses. Inventory levels

for CVs remain under control at ~4 weeks. It has a new PV strategy in place

running up to 2020, with new product platforms from 2015 onwards.

40September 2013


Havells India

Sector: Capital Goods

Company Represented By:Mr Sushil SinghalDGM - Investor Relations

Ms Saurabhya SarwalSr Exec - Investor Relations

Covering Analyst(s):Satyam Agarwal+91 22 3982 [email protected]

Nirav Vasa


Key Takeaways

Management reiterated expectations of ~10% revenue growth in FY14, despite

slowdown in consumption spending. During FY14, Havells India (HAVL) plans to

commence manufacturing of water heaters and also launch 'pumps' - a new product

category. Sylvania is planning cautious expansion into Asean and African countries,

while any signs of demand recovery in Europe will be an important driver, given

the meaningful operating leverage.

1QFY14 revenue growth impacted by base effect; strengthening the 'economic

moat'

1QFY14 standalone revenue growth of just 1.8% was an aberration and FY14

growth is expected at ~10%. Cables business is also expected to report a

modest revenue growth, compared to a decline of 15% in 1Q. Given the higher

share of in-house manufacturing (outsourcing component just 15% of revenue),

company is better positioned to manage the currency volatility.

HAVL had focused its business model on dealers, which enabled it to introduce

new products. Company is also making attempts to strengthen the connect

with electricians and consumers. Galaxy stores (12% of consumer revenue)

and Reo (Tier 3 cities) will further deepen the penetration. During FY14, HAVL

plans to commence manufacturing of water heaters and also launch 'pumps' -

a new product category.

Possibilities exist that exports under the Havells brand could show exciting

growth potential. CFL exports, largely to Latam and Asean region, are likely to

improve in FY13.

Sylvania: Europe shows initial signs of demand recovery; currency volatility in

Latam, a timing issue

Macro environment in Europe suggests initial signs of demand recovery, and

we note that the business has a large operating leverage, given that staff costs

are ~25% of revenue. Hence, trends will be closely watched.

Latam, particularly Brazil and Argentina, is being impacted by the sharp currency

volatility. Medium term revenue growth expectations continue to remain at

7-8%.

Sylvania is planning cautious expansion into Asean and African countries. Key

factors to monitor will be: increasing share of fixtures, particularly in Europe.

Recovery in profitability would be aided by the shift towards LED in Europe.

For Sylvania, management expects flat revenue in FY14 (largely supported by

Latam) and EBITDA margin at 5% (v/s 5.3% in FY13).

Bloomberg Code HAVL IN

Rating Neutral

CMP (INR) 611

Mcap (USD b) 1.2


1, 6, 12 Rel Perf (%) -2/-1/0

Year Net Sales PAT* EPS* EPS* P/E P/BV RoE RoCE EV/ EV/

End (INR m) (INR m) (INR) Gr. (%) (X) (X) (%) (%) Sales EBITDA

3/12A 65,182 4,252 34.1 64.6 17.9 8.0 44.5 26.4 0.9 8.9

3/13E 72,478 4,296 34.4 1.0 17.7 6.2 29.8 21.4 1.1 11.9

3/14E 76,135 4,429 35.5 3.1 17.2 4.4 25.5 19.9 1.0 11.7

3/15E 81,591 4,905 39.3 10.7 15.5 3.7 23.5 19.2 0.9 9.8

*Consolidated nos, pre exceptionals

41September 2013


Larsen & Toubro

Bloomberg Code LT IN

Rating Buy

CMP (INR) 754

Mcap (USD b) 10.7

52-Wk Range (INR) 1,146/678

1, 6, 12 Rel Perf (%) -8/-22/-25

Sector: Capital Goods

Year Order Intake Net Sales PAT* EPS* EPS P/E* P/BV RoE RoCE EV/ EV/

End (INR m) (INR m) (INR m) (INR) Gr. (%)* (X) (X) (%) (%) Sales EBITDA

3/12A 705,740 531,705 47,730 52.0 13.1 18.5 3.5 18.0 14.3 1.7 14.3

3/13A 880,410 608,733 49,327 53.4 2.8 18.3 3.1 16.2 14.4 1.5 14.4

3/14E 891,415 658,329 44,420 48.1 -9.9 15.7 2.2 14.2 12.2 1.1 11.1

3/15E 958,370 738,245 53,985 58.5 21.5 12.9 1.9 14.9 12.8 1.0 9.7

* Consolidated; EPS is fully diluted

Company Represented By:Mr Arnob MondalVP - Investor Relations

Mr Nishit DaveDGM - Investor Relations

Covering Analyst(s):Satyam Agarwal+91 22 3982 [email protected]

Nirav Vasa


Key Takeaways

Order intake is supported by overseas projects and PSU capex in India. Large project

commissioning in roads and power to impact near term performance, while the

attempt in medium term is to improve return ratios. Disciplined capital allocation

and correcting the capital structure are important priorities.

Order intake to be supported by overseas projects, PSU capex Overseas projects (both infrastructure and hydrocarbons) are expected to

contribute 25% of the intake in FY14. The large infrastructure projects under

bidding includes: Doha Metro project (Phase 2), Ethiad Rail, Water

Infrastructure, Highways / Interchanges, Power T&D, etc. In Hydrocarbons,

the commissioning of the Kattupalli yard has opened up opportunities in SE

Asia. Hydrocarbon sector is also showing good prospects with pick-up in refinery

capex in ME; ongoing investments in pipelines and upstream projects in ME,

and SE Asia.

In India, order intake is being supported by PSU capex (Hydrocarbons, Power,

etc), Buildings and Factories (Residential, Commercial) and Infrastructure

(Water, Power T&D, Metros, Railways, etc).

L&T is favourably positioned in few large tenders (also from media articles):

Malwa EPC 1320MW, NTPC Tanda 1320MW Boiler, Power T&D in Qatar, few

road projects in ME, Fertilizer project in India, etc.

Subsidiaries performance impacted by macro, impact near term ROEs In Power BTG, the attempt is maintain capacity utilization of ~50-60% and to

optimize the cost structure. Toll receipts have been below estimates, and are

impacted by contraction in goods movement; impacting project IRRs. Kattupalli

port performance is being impacted by poor connectivity and slowdown in

container traffic.

Rajpura power Unit 1 of 660MW to be operational in early 2014; and recent

APTEL order for fuel cost pass-through is a comfort. Hyderabad metro

construction is progressing on full swing, with approvals in place. Large scale

project commissioning in roads and power to impact near term profitability.

Attempt to improve medium term return ratios; correcting capitalstructure An important part of Lakshya internal plan is to improve the ROEs to 20% from

current levels of 15%. This is being targeted through increased focus on asset

sweating vs asset creation, no further development projects, attempt for fund

raising / monetization of development portfolio, restricting NWC at 15-20% of

revenues, and continued profitable growth in the parent company.

Fund raising / asset monetization in development business is impacted by the

macro environment. However, the company continues to be in discussions.

42September 2013


ACC

Bloomberg Code ACC IN

Rating Neutral

CMP (INR) 963

Mcap (USD b) 2.8

52-Wk Range (INR) 1,515/912

1, 6, 12 Rel Perf (%) -20/-22/-39

Sector: Cement

Year Net Sales PAT EPS EPS P/E P/BV RoE RoCE EV/ EV/Ton

End (INR m) (INR m) (INR) Gr. (%) (X) (X) (%) (%) EBITDA (USD)

12/11A 94,296 11,544 61.4 13.9 15.7 2.5 16.9 15.6 8.8 73

12/12A 111,305 12,918 68.7 11.9 14.0 2.5 17.7 17.4 7.4 72

12/13E 111,003 10,118 53.8 -21.7 17.9 2.3 13.3 11.5 9.0 67

12/14E 128,946 14,276 76.0 41.1 12.7 2.1 17.6 17.4 5.7 60

Company Represented By:Mr Ajeet ModiVice President - CorporateFinance



Key Takeaways

Flattish volume guidance; industry growth at 2-3%; East best performing

The management expects the industry to grow 2-3% in FY14; volume growth

for ACC would be 1% up or down.

Market share would revive post Jamul expansion in CY15. Visibility on near-

term volume recovery remains weak.

Among key regions, the East has been best-performing. In the North and West,

utilization has been good, but demand and pricing remain weak. The South

has been seeing decent demand and pricing, despite low utilization.

New capacity, restructuring synergies to drive higher profitability

ACC's 5MT Jamul capacity would add 3.5MT to EBITDA and INR200-300/ton

uptick in profitability on 1.5MT, as 1.5 MT of old capacity will be replaced with

new plants.

Restructuring and synergies (post takeover by ACEM) would lead to distance

reducing by 70-80km on 60% of the capacity (45-50km on full capacity), which

we estimate to be equivalent to INR2b of logistics cost savings. However,

savings on fixed cost would take time.

Recently announced expansion of 4.5MT at Tikaria and Ametha would require

capex of INR25b (all land in place) and commence by CY17.

Coal blocks to commence by mid-CY15, although limited cost benefit

Of the four coal blocks in MP in JV with the state government, two mines will

get operational by mid-CY15, and have potential to generate 1MT coal annually

(20% of total requirement) at INR2,700-3,000/ton (mining plus royalty cost).

Overall potential of the four blocks is 2-2.5MT/annum.

The two blocks that would be operational by CY15 have E-grade coal, which

would be used in CPP and could be blended with high grade coal in the kiln.

While regulatory clearances are in place for two blocks, the other two blocks

are undergoing clearance process.

Valuation and view

Pan-India presence and very strong brand equity makes ACC one of the best

proxies on the Indian Cement industry.

Restructuring and synergies (post takeover by ACEM) would improve ACC's

operating efficiencies, especially considering its high operating leverage.

The stock trades at an EV of 5.5x CY14E EBITDA and USD58/ton. While valuations

are turning attractive, we would await further clarity on the timeline for

accretion of potential synergies. Maintain Neutral with a target price of

INR1,225 (EV of ~8x CY14E EBITDA).

43September 2013


Ambuja Cements

Bloomberg Code ACEM IN

Rating Neutral

CMP (INR) 172

Mcap (USD b) 4.1


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

Sector: Cement


End (INR m) (INR m) (INR) GR. (%) (X) (X) (%) (%) EBITDA (USD)

12/11A 85,043 12,547 8.2 0.6 21.0 3.3 16.3 23.2 11.9 125

12/12A 96,749 15,435 10.0 22.4 17.2 3.0 18.3 27.6 9.0 118

12/13E 94,241 12,598 8.2 -18.4 21.1 2.8 13.9 20.1 12.1 116

12/14E 108,976 16,600 10.8 31.8 16.0 2.6 17.0 24.4 9.0 109

Company Represented By:Mr Onne Van Der WeijdeManaging Director

Mr Bernhard A FuchsHolcim Group,Head - InvestorRelations

Mr AnantharamGopalkrishnanVice President - Treasury &Investor Relations

Ms Michelle FalcaoInvestor Relations



Key Takeaways

Industry growth outlook moderated at 3.4%

Industry volume growth outlook remains subdued at 3-4% in CY13. Higher

growth is likely in 2H, given lower base. ACEM expects 7-8% YoY growth in 2H.

Volumes have improved in August as compared with June-July.

Better monsoon would help revival in the West, which is currently witnessing

subdued demand.

Infrastructure demand visibility is not strong yet. Anecdotal evidence indicates

pick-up in pre-election demand six months from elections.

Cost efficiency and synergy key focus areas

ACEM aims to increase the share of pet coke and alternative fuel (AFR)

gradually, and reduce dependence on imported coal. It has already entered

into long-term contracts for indigenous pet coke.

Cost of raw materials like gypsum and fly ash has increased, but ACEM has

benefited from shift towards higher domestic pet coke usage in both kiln and

CPP (up to 30.5% in 1HCY13 from 13.4% 1HCY12). Blended cost per ton of fuel is

down 12% YoY and 7% YoY for the kiln and CPP, respectively, despite

unfavorable currency.

Accelerated capex is equally aimed at improving fuel compatibility (pet coke

and alternative fuel) of plants.

The management reiterated that acquisition of ACC has been done at arm's

length. The synergy benefits would be recovered over the next two years.

Other takeaways

Holcim's hurdle rate for investments in India is ~15%.

For Holcim, India is the only exception, where it has two listed companies.

Valuation and view

ACEM offers favorable market mix (negligible exposure to the weak South

India market), diversified fuel mix and efficient operations, translating into

above average profitability.

The stock trades at an EV of 8.8x CY14E EBITDA and USD107/ton.

We would await further clarity on the timeline for accretion of potential

synergies from restructuring.

Maintain Neutral with a target price of INR173 (EV of ~9x CY14E EBITDA).

44September 2013


Grasim Industries/Ultratech Cement

Bloomberg Code GRASIM IN

Rating Buy

CMP (INR) 2,373

Mcap (USD b) 3.3

52-Wk Range (INR) 3,511/2,121

1, 6, 12 Rel Perf (%) -6/-20/-30

Sector: Cement


End (INR m) (INR m) (INR) Gr. (%) (X) (X) (%) (%) EBITDA (USD)

03/12A 249,836 26,475 288.6 16.2 8.2 1.3 16.7 17.5 5.0 70

03/13E 276,397 25,580 278.7 -3.4 8.5 1.1 13.9 15.3 5.5 84

03/14E 269,833 28,783 313.6 12.5 7.6 1.0 13.7 13.8 5.4 71

03/15E 314,173 33,693 367.1 17.1 6.5 0.9 14.2 16.0 3.8 56

Consolidated; * Demerger of cement business assumed w.e.f. 1 October 2009

Company Represented By:Mr V SwaminathanPresident - Finance

Mr Sharad AgarwalAsst Vice President - Finance

Mr Shirin SanchetiInvestor Relations



Key Takeaways

Cement: Expect industry growth at 5-6%; focus on maintaining market share

Strong growth is likely in 2HFY14 due to low base and good monsoon. There

has been some momentum in infrastructure projects, with projects of

~INR1,000b (Delhi-Mumbai Corridor, metro projects, etc) getting cleared by

regulators and projects of ~INR300b receiving issuance.

Excluding Andhra Pradesh, the southern states (especially Tamil Nadu) have

been witnessing better volume trends. For UltraTech, weakness in the North

might be partially offset by the South.

The management does not expect utilization to decline from current levels

despite 5-6% growth anticipation in FY14.

Maintaining capacity market share would be a key focus area. The management

expects the industry to add 60MT in the next three years (v/s 12MT for

UltraTech). However, it believes medium-term demand growth would outpace

capacity additions, resulting in higher utilization over the next 2-3 years.

Freight cost could result in overall cost escalation, going forward. The impact

of unfavorable currency movement was offset by commensurate decline in

international coal prices.

VSF: Taken price increase on the back of favorable import parity

Grasim has taken some price increase in the VSF segment in August, as import

parity price has risen in line with INR depreciation. However, due to decline in

July 2013, it expects 2QFY14 realizations to be flattish QoQ.

International prices seem to have bottomed out, though there might be a

minor downside based on the dynamics of marginal players in China. However,

visibility on pricing uptrend is still weak.

With Chinese players operating at 65-70% utilizations, capacity addition is

likely to moderate from FY15 due to prevailing weak profitability. Demand

growth should be decent, driven by (1) prosperity in emerging markets, and

(2) cotton prices being much higher than VSF.

The VSF segment would be a net beneficiary of INR depreciation.

Valuation and view

Grasim trades at 6x FY15E consolidated EPS and 0.8x FY15E BV, and at an implied

cement valuation of ~USD50/ton. Maintain Buy with a target price of INR3,692

(SOTP-based, valuing economic interest in Cement at 9x EV/EBITDA and 20%

holding company discount, and VSF at 4x EV/EBITDA).

UltraTech trades at an EV of 6.3x FY15E EBITDA and USD104/ton. Maintain Buy

with a target price of INR2,076 (EV of 9x FY15E EBITDA).

45September 2013


Dabur India

Bloomberg Code DABUR IN

Rating Buy

CMP (INR) 163

Mcap (USD b) 4.4


1, 6, 12 Rel Perf (%) -1/23/17

Sector: Consumer

Year Net Sales PAT EPS EPS P/E P/BV RoE RoCE EV/

End (INR b) (INR b) (INR) Gr. (%) (X) (X) (%) (%) EBITDA

3/12A 52.8 6.4 3.7 13.2 47.3 17.7 37.4 30.0 36.1

3/13A 61.5 7.7 4.4 19.3 39.7 13.9 35.1 38.1 30.6

3/14E 71.8 9.4 5.4 22.7 32.4 11.4 35.3 40.7 24.9

3/15E 83.7 11.3 6.5 20.4 26.9 9.4 35.1 40.8 20.9

Company Represented By:Mr Sunil Duggal - CEO

Ms. Gagan Ahluwalia - GM, IR


Key Takeaways

Dabur India's (DABUR) management alluded to significant urban slowdown and

margin pressures due to currency depreciation and impact on raw materials.

Urban slowdown; rural growth is 2x urban

Urban growth rates have dropped to 7-8% and rural is now almost growing at

2x of urban. Rural may continue to hold due to better monsoons.

Volume growth of 9-10% for FY14. Rural distribution expansion undertaken in

FY12 will help.

Premiumization theme has almost evaporated.

Management believes it is possible to grow revenue at 20% CAGR over next

five years with existing business and without entering new categories.

Hair Oils: It is deepening its presence into Almond Hair oil category and will

enter a new sub-category soon in the light hair oil space.

Shampoos: Company has seen a massive increase in rural franchisee, with

Vatika shampoo being the largest distributed brand for the company.

Oral Care: Zero impact of Oral B so far as it was a low key launch. DABUR's Red

is a therapeutic product.

Currency depreciation impact: ~35% imported RM content

Company has 12% direct imports in RM and 24% indirect.

At INR65 v/s USD, as per DABUR, P&L impact is INR200m, which can be managed

with price hikes/cost containment. Beyond INR65, profits will be impacted. It

may reduce ASP spends by 100bp and another 100bp of savings in SG&A can be

squeezed.

Management is confident of implementing ~5% price hikes.

FY14 operating margin expansion should be marginal (~50bp).

International business

Worst is over in Namaste. Supply chain is being ironed out and expects the

turnaround to strengthen in FY15.

70 per cent of debt is USD debt and meant for international subsidiaries only.

Further, 60 per cent of international revenue is in dollar terms, the cash flow

of which are used to repay dollar debt. So no impact from that.

Valuation and view

DABUR trades at a P/E of 30x FY14E and 25x FY15E EPS. Strong rural franchise,

supported by distribution enhancement can buffer any untoward impact of urban

slowdown. Maintain Buy.

46September 2013


Emami

Bloomberg Code HMN IN

Rating Not Rated

CMP (INR) 449

Mcap (USD b) 1.6


1, 6, 12 Rel Perf (%) -6/14/22

Sector: Consumer

Company Represented By:Mr Mohan GoenkaDirector

Mr Rajesh SharmaVP - Accts, Fin & IR


Key Takeaways

Emami's (HMN) management lowered its revenue growth guidance to 14-15%,

while maintaining profit growth guidance at 20%.

Volume growth softens

Growth slowdown is well entrenched. Better monsoons may not necessarily

mean good news as excess monsoons have spoilt the crops in some states.

Revenue growth guidance has been lowered to 14-15% v/s earlier guidance of

17-18% growth.

Profit growth guidance remains unchanged at 20% YoY growth in FY14.

Zandu, despite being a rural brand, is struggling with 7-8% growth, while Fair

& Handsome, primarily an urban brand, is growing ~20%. Thus, segregating

growth in the rural-urban basket is difficult.

Navratna Oil is growing at 10% and constitutes 30% of revenue.

Distribution expansion supports growth

Distribution reach has increased from 4.5 lakh to 6 lakh in 2.5 years and the

company is planning to reach 8 lakh outlets in the next three years.

Navratna reaches 4m outlets, while F&H is present in 3m. Even if Trai's

proposals on reduction in ad-inventory are implemented, industry has enough

clout to manage price inflation in media.

Mentha Oil locked in for FY14; should support margin expansion

Profit growth guidance stays at 20% as it has locked Mentha Oil requirement

for FY14 at current prices.

~300bp gross margin expansion. HMN may try to curtail ad-spends as it may

postpone new launches/re-launches in the weak demand environment.

Capex guidance of INR800m each in FY14 and FY15.

Valuation and view

Stock trades at a P/E of 25.3x FY14E and 21.9x FY15E consensus EPS estimates. Not

Rated.

47September 2013


Godrej Consumer Products

Bloomberg Code GCPL IN

Rating Neutral

CMP (INR) 816

Mcap (USD b) 4.3


1, 6, 12 Rel Perf (%) -6/3/9

Sector: Consumer



3/12A 48.5 5.3 15.5 5.7 55.4 10.4 18.7 20.7 35.4

3/13A 63.9 6.7 19.6 26.7 43.7 9.1 20.9 24.8 30.5

3/14E 78.3 8.4 24.7 26.0 34.7 8.0 23.2 28.4 24.2

3/15E 91.5 10.4 30.5 23.3 28.1 6.8 24.3 30.2 20.1

Company Represented By:Mr Adi GodrejGroup Chairman

Mr Vivek GambhirCEO

Mr P Ganesh,CFO

Mr Sameer ShahIR


Key Takeaways

Godrej Consumer Products' (GCPL) management indicated healthy traction in

domestic categories, while a mixed bag in international business.

Healthy traction in domestic categories

Though urban consumption is soft, rural is holding up and should do extremely

well on the back of good monsoons.

For GCPL, domestic revenue should grow at 18-20% in FY14.

Home Insecticide is not vulnerable in this kind of slowdown as excellent

monsoons mean more mosquitoes, which drives growth in HI category. Expect

high teen's growth in Home Insecticide to sustain.

Hair Color is growing ahead of the market as Creme launch has been a success.

Creme is priced at 2x powder. GCPL has provided a ladder for premiumization

in the category as competitors basic crème product is ~2-3x GCPL's creme.

Soaps: Godrej No.1 is a INR10b brand now. Cinthol is the under-leveraged

brand and GCPL is focusing on better exploitation of its equity. In Deodorants,

it met with limited success. But category is growing fast and is now a bigger

play than Talcum powder.

International business: mixed bag

Indonesia - price hikes have been taken to offset the employee cost increase

due to revision in minimum wages. Margins should improve QoQ and normalize

by 3QFY14. In the long term, wage hikes should aid consumption growth in the

economy.

Darling - 65-70 per cent of integration is done and most of the important

geographies are covered.

Africa - margins should be 16-18% on full year basis.

Currency impact: at multiple levels

Recent rupee depreciation can impact GCPL at multiple levels: a) payables to

suppliers - RM costs due to dollar linked pries of palm oil and packaging

materials, b) revaluation of inter-company loans and c) foreign currency debt,

impact of which is routed through balance sheet.

Quarterly interest payments are hedged.

Valuation and view

Stock trades at a P/E of 34.7x FY14E and 28.1x FY15E EPS. We like GCPL's execution

in international acquisitions as indeed its ability to maintain the revenue

momentum despite the moderation witnessed by sector peers. However, we

believe current valuations reflect the positives and leave little room for error.

Maintain Neutral.

48September 2013


Hindustan Unilever

Bloomberg Code HUVR IN

Rating Se l l

CMP (INR) 617

Mcap (USD b) 20.5


1, 6, 12 Rel Perf (%) -1/43/6

Sector: Consumer



3/12A 217.4 25.9 12.0 23.4 51.3 37.8 73.8 95.4 39.3

3/13A 252.1 33.1 15.3 27.8 40.1 28.6 71.4 94.2 31.9

3/14E 281.3 35.4 16.4 6.9 37.5 23.0 61.3 83.5 27.8

3/15E 320.5 38.9 18.0 9.8 34.2 19.6 57.5 81.8 24.0

Company Represented By:Mr Dinesh Thapar, GM - IR


Key Takeaways

Consumer demand remains sluggish for Hindustan Unilever (HUVR), with market

deterioration in discretionary segments.

Discretionary demand remains weak; high inflation impacts staples

Food inflation impacts discretionary demand substantially. Anecdotal evidence

of higher fuel inflation is impacting consumer wallets.

As per Nielson, growth is moderating in both urban and rural; however, HUVR

is seeing higher rural growth v/s urban.

Premiumization trend is slowing, except in Oral Care. Premium categories,

which earlier used to grow at 2-3x of average category growth are now growing

in line with average.

Skin Care category has seen market deterioration due to de-growth in Fair &

Lovely, which is 60% plus of Skin Care revenue.

F&L issues being addressed already in the market and F&L market shares have

been maintained. Barring F&L, rest of the Skin Care segment is performing

well.

Growth has come off in Soaps, Detergents and Tea but moderation is not as

pronounced as in discretionary categories.

Beverages - tea is seeing pricing-led growth due to inflation in RM.

Foods - attractive long term opportunity; will take time to play out. Kissan is

seeing healthy growth; however, Ice Cream has slowed down significantly.

Rupee depreciation led RM inflation will be offset by price hikes

Significant portion of RM (50%+) will be impacted by INR depreciation due to

PFAD, LAB, Packaging materials linkage with dollar.

Judicious and calibrated price hikes will be taken to neutralize the RM impact.

Last quarter's material price hike was in June 2012. Also, it has taken off

promotions selectively.

Media inflation due to proposed TRAI guidelines can be managed with HUVR's

scale. Guidelines are likely to be postponed to November 2014.

Valuation and view

HUVR trades at a P/E of 37.5x FY14E and 34.2x FY15E EPS. Slowing consumption

demand, with rising risks to gross margins due to currency weakness place our

modest earnings growth estimates at risk. Thus, at 34.2x, we believe valuations

are rich (trading closer to its 10-year peak multiple), with unfavorable risk-reward

equation. Maintain Sell.

49September 2013


ITC

Bloomberg Code ITC IN

Rating Neutral

CMP (INR) 316

Mcap (USD b) 38.3


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

Sector: Consumer



3/12A 248.0 49.9 7.9 22.3 45.8 14.9 32.8 45.4 30.4

3/13A 296.1 61.6 9.5 20.4 37.8 13.6 36.1 50.2 25.1

3/14E 337.5 74.2 11.0 15.9 32.6 12.4 38.0 54.2 21.2

3/15E 387.9 86.0 12.8 16.6 28.0 11.2 40.0 56.4 18.3


Key points

Consecutive years of high teens excise increase impacts industry

Consecutive years of high teens excise increase is not good for the industry as

it creates roadblocks for shift towards legitimate industry.

Currently, illegal and contraband segment remains at 10-11% of volumes.

Cigarette price hikes are a function of portfolio laddering strategy, apart from

excise and cost dynamics.

64mm segment can help industry prevent a share shift towards contraband

and illegal market.

We believe ITC has taken ~15-16% price hikes post budget.

State taxation risks is challenging as it leads to additional element of

uncertainty in the business model.

GST - no clarity on timelines. All taxes, excluding excise, will get subsumed in

GST.

Weak macros impacts consumption in FMCG categories

Weaker economy is having an impact on consumption spending in FMCG

categories. Growth in non-FMCG categories has moderated.

In foods, biscuits continue to outperform with the company now a leader in

cream segment with 25% market share. ITC continues to premiumize the biscuit

portfolio by launching new variants. Atta also continues to do well.

In personal care, Soaps as a category has slowed, while Skin care category is

facing challenges due to dilution in the appeal of fairness plank. In Stationery,

it has scaled down copier paper due to low margins and is using the capacity

for paper boards business.

Rupee depreciation will have a lagged minor adverse impact on paper margin.

Valuation and view

ITC trades at a P/E of 28.3x FY14E and 24.3x FY15E EPS. Strong pricing power in

cigarettes will drive our expected 16% PAT CAGR for FY13-15E.

We model ~2% cigarette volume decline for FY14E. ITC offers the best earnings

visibility in our coverage universe and is insulated from headwinds faced by

other consumer peers — RM inflation, currency depreciation, heightened

competitive intensity. However, valuations look fair to us.

Retain Neutral and reiterate as the top pick in large cap FMCG. Policy related

uncertainties (VAT, excise) and measures to curtail cigarette consumption

remain the key risk factors.

50September 2013


Marico

Bloomberg Code MRCO IN

Rating Buy

CMP (INR) 207

Mcap (USD b) 2.1


1, 6, 12 Rel Perf (%) -3/-2/-9

Sector: Consumer



3/12A 39.7 3.2 5.2 34.2 39.9 11.2 28.0 30.5 27.5

3/13A 45.8 3.9 6.0 15.6 34.5 6.8 19.6 28.8 22.3

3/14E 51.9 4.8 7.5 24.4 27.7 5.6 20.1 30.0 18.0

3/15E 60.3 5.5 8.6 14.9 24.1 4.6 19.2 29.9 14.8

Company Represented By:Mr Anubhav Rastogi - IR


Key Takeaways

Marico's (MRCO) management indicated a mixed outlook, with sustenance of rural

consumption and slackening of urban growth rates.

Domestic volumes moderate; may still remain in double digits

Rural demand holding up well so far and with the arrival of harvest in second

half, it may provide buffer to any further slackening in urban consumption.

Rural distribution expansion helps. Added 150,000 outlets in three years and

now reach at 900,000.

Marico will grow distribution at 6-7% per annum.

Volume growth guidance - Saffola to grow ~10%, Hair oils 15-18% volumes.

Parachute 6-8%. Youth brands expected to deliver 20-25% growth.

Competitive intensity continues to remain high in Saffola. Price hikes will not

impact existing customers but prevent up-trading.

Raw materials stable as of now; <20% of RM has import parity

Less than 20% of RM impacted due to INR depreciation. Copra prices have

moved up 6-8% v/s FY13 average. Marico keeps max 90 days of inventory.

Enough leeway exists to implement price hikes as Parachute has not seen

price hikes in the recent past.

Domestic margins may trend in 19-20% band, while international margins to

move up to 12-13% band. Consolidated margins to remain in 14-15% range.

International business: may revert to 18% growth in FY14

International business should see currency benefit but percentage margin

expansion guidance is unchanged.

Situation in Egypt is concerning (3% of consolidated sales) and has impacted

August and September sales. Currently, there is no M&A pipeline, but intent

is there to participate in South East Asia and Africa.

Valuation and view

MRCO trades at a P/E of 28x FY14E and 24.4x FY15E EPS. We like its dominance in

the core categories and strong new product basket. Revival in volume growth will

sustain in our view and an improvement in international margins will provide

margin kick, driving ~20% EPS CAGR over FY13-15E. Reiterate Buy.

51September 2013


McLeod Russel

Bloomberg Code MCLR IN

Rating Not Rated

CMP (INR) 264

Mcap (USD b) 0.4


1, 6, 12 Rel Perf (%) -5/-23/-31

Sector: Consumer

Company Represented By:Mr Aditya Khaitan,Managing Director

Mr Kamal Kishore Baheti,Director Finance


Key Takeaways

Global Tea Market

Total tea production for 2012 at 4.4b kgs, of which black tea (India, Kenya, and

Sri Lanka) is 2.8b kgs and green tea (China, Japan) is 1.6b kgs.

Key concerns: plantation of tea is likely to be stagnant due to: 1) high gestation

period (five years), 2) no significant addition of land in last three to four years.

However, consumption of black tea is growing at 2% p.a. (60m kgs) globally.

Since supply is unlikely to match demand, prices will continue to be on a

secular uptrend.

Indian Tea Market

Total tea production of 1,110m kgs - concentrated in North East (870m kgs) and

South India (240m kgs). This includes bought leaf production of 380m kgs (North

East 300m kgs; South India 80m kgs).

McLeod - Outlook

Annual expected production of ~115m kgs in FY14 (102m kg in FY13), of which

25-26m kgs is produced in Vietnam (7), Uganda (17) and Rwanda (2.2). McLeod

Russel India (MCLR) is the largest Indian black tea exporter globally, with annual

exports of 26-27m kgs.

Strong domestic price outlook due to negative carry forward stock and normal

production. Quality will fetch premium on rising demand.

Export demand is expected to remain steady on recovery of production in

Kenya.

Expect realizations to increase by INR5-7 in FY14.

Next tripartite wage agreement in January 2015.

Wage increase for FY14 to be 5%.

Cash flows expected to improve, as compared to FY13.

2Q and 3Q to be better compared to last year.

International operations to maintain EBITDA in dollar terms.

Inorganic growth to continue as opportunities exist in African countries.

MCLR is looking to buy more gardens based on profile matching.

Improvement of plantation and processing capabilities in existing gardens is a

focus area.

Valuation and view

MCLR trades at 9.4x trailing FY13 EPS. Not Rated.

52September 2013


Mrs Bector's Food Specialties

Sector: Consumer

Company Represented By:Mr PK Goel,Executive Director


Key Takeaways

The management presented an overview of the business and indicated lucrative

growth opportunities in its areas of presence.

INR5b turnover; 10% operating margins

One of the leading biscuit players in North India, Mrs Bector's Food Specialties

enjoys a market share of ~11% in its traditional strongholds such as Jammu &

Kashmir, Punjab and Himachal Pradesh. It offers a wide range of biscuits at

various price points under the "Mrs Bector's - Cremica" brand.

The consumer business accounts for ~70% of its revenues and has grown at a

CAGR of 19% since FY09.

Its current turnover is INR5b, with 7% from contract manufacturing for ITC and

Kraft (Oreos). Total revenues have grown at a CAGR of 26% in the last decade.

Volume sales mix: 75% biscuits, 15% bakery (premium end breads), 7% contract

manufacturing, and 3% shredding. In terms of value, 90% is from biscuits.

Bakery has registered 50%+ CAGR over the last four years.

Within biscuits, it has least presence in the glucose category and is planning to

move into crackers.

Its current operating margin is 10-11%.

The company exports to the UK and USA, and exports glucose to South Africa.

Its plants have a combined manufacturing capacity of ~120,000 tonnes of

biscuits (including job work), 50m units of bread and ~400m buns per annum.

With substantial unconstructed area at most of its locations, the company has

the ability to quickly ramp up production.

Capex details: A new line would cost ~INR250m to put up. Each line contributes

an average 1,200 tons/month (depending on the type of biscuit). Annual

revenue per line is ~INR1b; higher for crackers (INR1.5b-2b).

Current net worth is INR3b, debt INR0.75b, and PAT is INR200m.

The management is looking to list the company in the next few years.

53September 2013


Parag Milk Foods

Sector: Consumer

Company Represented By:Mr Shirish Upadhyay,Sr VP -Strategic Planning

Ms Kiran Agarwal,VP - Corporate Affairs


Key Takeaways

The management gave an overview of the business and indicated lucrative growth

opportunities in its areas of presence.

INR10b turnover; 10% operating margin

The total dairy market in India is US$60b, with 4% volume growth and 20%

value growth (due to inflation in milk prices) in FY13. The organized market is

23-24% of the total market.

Parag Milk Foods is one of the largest players in the private dairy space, with

a unique selling proposition of 100% cow milk.

It has annual revenues of INR10b - milk contributes ~20%, cheese ~23% and

ghee ~30%, with the balance from dahi (curd), etc.

Parag operates at ~10% operating margins and 2% PAT margins. Though cheese

has higher margins than milk, the working capital requirement for cheese is

nine months, as it requires ripening. In contrast, the milk business operates at

negative 7 days' working capital.

Its retail network encompasses 70 super stockists, 1,700 distributors, and

140,000 retail outlets. It also caters to 95% of the modern trade.

Parag has two major brands: Gowardhan (milk, ghee, cheese, dairy whitener)

and Go (fruit yoghurt, UHT milk, slim milk) targeted at the kids and youth

segment.

Parag has an integrated dairy farm, with 3,000 cows and milk processing

capacity of 2m liters per day.

Its new cheese plant is operating at 75% capacity utilization. This plant was

commissioned in 2010.

It has recently launched a beverage brand, Topp Up.

According to the management, the size of the pie is huge and there is a play in

terms of demand as well as distribution.

54September 2013


United Breweries

Bloomberg Code UBBL IN

Rating Not Rated

CMP (INR) 793

Mcap (USD b) 3.2

52-Wk Range (INR) 1,023/537

1, 6, 12 Rel Perf (%) 6/15/15

Sector: Consumer

Company Represented By:Mr Hans van Zon -CFO


Key Takeaways

Unequivocal focus on market share

United Breweries' (UBBL) longer term strategy is to maintain the leadership

position in the market and gain incremental market share.

While it aspires for better margins/profitability, between the two it, will choose

volumes and market share gains. In emerging markets like India, beer market

growth is a function of GDP growth.

Price hikes have been difficult to come by and should broadly offset inflation.

For example, Andhra Pradesh has not granted a price hike for four to five

years.

In an environment of stringent price regulations, it is looking to improve

realizations through mix improvement and reintroduction of SKU's at a higher

price points after changing the formulation.

Heineken is a small brand as of now and is growing well through the distribution

expansion. Currently, it is available in major cities. Not looking to compromise

on price/packaging/premium imagery attributes.

It believes entry of foreign players per se will not impact the markets due to

difficulties in building brand and market share in India.

Involvement of UB group is fairly low in the company from financial and strategic

viewpoint.

Supply of glass ceases to be an issue

No issue of glass as a new supplier has come onboard.

Capacity expansion has been difficult as some states have stopped giving

licences for the same - especially those with water shortages like Rajasthan

etc.

Capex guidance of INR3b, 75% of which will be spent on capacity expansion. It

is in the midst of getting land and licence in Bihar.

Cash flows were impacted due to worsening of working capital, which in turn

was due to higher receivables from government markets.

Valuation and view

UBBL trades at a consensus FY14E P/E of 76.1x. Not Rated.

55September 2013


Aditya Birla Nuvo

Company Represented By:Mr Romi Talwar,Investor Relations


Sunesh Khanna


Alpesh Mehta

+91 22 3982 5415

[email protected]

Bloomberg Code ABNL IN

Rating Not Rated

CMP (INR) 1,115

Mcap (USD b) 2.1

52-Wk Range (INR) 1,271/744

1, 6, 12 Rel Perf (%) -3/6/37

Sector: Financials

Key Takeaways

Life Insurance

Growth outlook for the Insurance business is likely to remain muted for another

coupled of quarters; as all products have to be re-filed by September 2013,

this will require fresh training for the entire sales force and market

acceptability.

The management is focusing on augmenting product offerings and

strengthening sales relationships to gain market share besides focusing on

distribution efficiency, persistency and expense management. The life

insurance business is profitable and does not require fresh capital infusion.

NBFC

The NBFC business continued to scale up its lending book while keeping risk

under control; loan book grew 98% YoY to INR84b in 1QFY14. ABNL plans to

infuse INR4b capital in the NBFC in FY14; of this, it has already infused INR1.25b.

Capital investment stands at INR10b and it generates RoE of 14.4% and GNPA/

NNPA stands at 1.8/1.2%. ABNL has applied for a new bank license and it obtains

the license, it will convert the NBFC into a bank.

Telecom

Idea continues to do well and has been consistently outperforming the

industry; its pan India revenue market share stands improved at 15.7%.

Idea will be raising fresh capital through qualified institutional placement

(QIP) of INR30b. ABNL will not participate in the offering, and subsequently,

its stake in Idea will fall. However, it will retain management control.

Fashion & Lifestyle

Lifestyle retail presence expanded to 1,518 EBOs / stores spanning 3.8msf.

Madura Fashion & Lifestyle is generating strong free cash flows after meeting

its growth requirements.

Pantaloon got listed in July and ABNL's shareholding stands at 68%; currently

Pantaloon is in investment phase and its performance will remain weak for

the next two years.

The management also indicated that there are no plans of merging Madura

and Pantaloons currently. However, once Pantaloons' operations stabilize, it

might consider merging Pantaloon with Madura.

IT-ITeS

Aditya Birla Minacs' operational performance is good and the company is

generating cash flows to fund its capex and repay debt.

56September 2013


Axis Bank

Company Represented By:Mr Sanjeev Gupta,President & CFO

Mr R Rajagopal,DVP - Finance & Accounts



Bloomberg Code AXSB IN

Rating Buy

CMP (INR) 953

Mcap (USD b) 6.9

52-Wk Range (INR) 1,549/764

1, 6, 12 Rel Perf (%) -15/-30/-11

Sector: Financials

Year Net Income PAT EPS EPS P/E BV P/BV P/ABV RoAA RoAE

End (INR m) (INR m) (INR) Gr. (%) (X) (INR) (X) (X) (%) (%)

3/12A 134,380 42,422 102.7 24.4 - 547 - - 1.6 20.3

3/13A 162,174 51,794 110.7 7.8 8.6 700 1.4 1.4 1.7 18.5

3/14E 188,438 58,254 124.5 12.5 7.7 804 1.2 1.2 1.6 16.4

3/15E 222,104 69,472 148.5 19.3 6.4 928 1.0 1.1 1.7 17.0

Key Takeaways

Retail at core of strategy; building granularity in balance sheet

AXSB expects to grow its loan book by a few percentage points above the

industry growth rate, led by retail loans (especially secured loans).

In the last two years, incremental share of retail loans has been ~50% (partially

driven by cross-sell to internal liability customers), where comfort is higher

and also bodes well for risk-adjusted NIM.

On the liabilities side, the proportion of retail term deposits has increased to

27% from 17% in FY11. Thus, efforts to achieve granularity and diversification

in balance sheet are visible.

Retail fees (30%+ growth in FY13, helped AXSB to achieve fee income growth

of 17% in FY13. Going forward, retail fees would be the key driver, as the

opportunity to earn corporate fees is limited.

FY14 NIM to be near 3.5%, upper end of guidance

In 1QFY14, reported NIM improved to 3.9%, helped by full benefit of ~INR55b

capital raised in February 2013. With recent tightening measures, incremental

cost of funds has increased, which may lead to moderation in NIM (from an

elevated level) in the ensuing quarters.

Healthy traction in CASA deposits and 25bp increase in base rate, however

would partially neutralize the impact of elevated cost of funds.

Assuming that current liquidity tightening will prevail, the management has

guided for NIMs of ~3.5% (upper end of its guidance of 3.25-3.5%).

Persisting economic challenges may increase asset quality risk

Macroeconomic challenges have increased further, post RBI's liquidity

tightening measures. Expectations of economic growth and systemic loan

growth have declined to 4.8-5% and 12-13% from 5.5% and 15%, respectively.

Asset quality guidance of gross stress addition of INR50b and credit cost of 85-

90bp for FY14 remains static, however management stated that upside risk

has increased as economic growth continues to falter.

Valuation and view

AXSB is well placed for the next growth cycle, with recent capital infusion and

strong branch expansion. Core PPP is expected to remain healthy at 2.7/2.8%

of average assets, compared to 2.6% over FY09-13.

We would closely monitor the threats arising out of the macroeconomic

environment on AXSB's exposure. We model credit cost of 0.9% over FY14-15.

However, healthy return ratios and valuations of 1x FY15E BV (price in

negatives) make it a good bet. Maintain Buy.

57September 2013


Bajaj Finance

Company Represented By:Mr Rajeev Jain, CEO

Mr Sandeep Jain,Investor Relations


Sunesh Khanna


Alpesh Mehta

+91 22 3982 5415

[email protected]

Sector: Financials

Key Takeaways

Growth to remain healthy but outlook cautious

The management continues to target 20%+ AUM growth in FY14. However, it

indicated that the situation remains fluid, as the macro environment is not

showing any signs of picking up. If there is further deterioration, it will cut its

growth expectations for the SME and Commercial segments.

BAF expects the LAP / mortgages portfolio to grow comfortably at ~25%, as the

opportunity remains large, despite stiff competition. The Consumer business

continues to do well. The management believes that the slowdown in two-

wheelers is only cyclical and not structural.

The management expects competition from banks to increase in retail home

and auto loan segments due to risk aversion in other segments.

BAF has forayed into rural business and has started operations in Maharashtra,

Punjab and Gujarat. Its target segment is the rural affluent and it is offering

gold loans, consumer durable loans and loans against free assets. Its rural

foray will be helpful in case BAF obtains banking license.

Asset quality remains healthy, but a key monitorable

Asset quality remains healthy, with GNPA/NNPA (1.14/0.25%) at historic lows.

Both the consumer and SME segments continue to hold up well.

The management remains cautious about asset quality in commercial

businesses such as Infra and Equipment Financing. It has already moderated

growth in these segments, but asset quality remains a key monitorable.

Other highlights

BAF raised INR7.5b in January 2013, which will take care of its growth plans for

the next three years.

Bank license: If BAF obtains a bank license, its RoE is unlikely to fall below 16%

(from existing 25%) and should remain 16-18% for 2-3 years.

Though return ratios in 1QFY14 remained strong, with RoA of 4%+ and RoE of

~25%, the management indicated that in the long term, return ratios are likely

to moderate. Sustainable RoA/RoE would be ~3%/18-20%.

Valuations

Superior margins, focused fee income strategy and control over cost ratio will

keep core operating profitability strong. Strong loan growth momentum

coupled with stable asset quality and low credit costs would drive BAF's

earnings at 21% CAGR over FY14- 16. We expect RoA/RoE to remain strong at

over 3.4%/21% during FY14-16. The stock trades at 1.2x FY14E and 1x FY15E BV.

Maintain Buy.

Bloomberg Code BAF IN

Rating Buy

CMP (INR) 1,102

Mcap (USD b) 0.8

52-Wk Range (INR) 1,591/966

1, 6, 12 Rel Perf (%) 5/-12/-3

Year Net Income PAT EPS EPS P/E BV P/BV RoE RoA P/ABV

End (INR m) (INR m) (INR) Gr. (%) (X) (INR) (X) (%) (%) (X)

3/12A 14,257 4,064 98.4 45.9 11.1 487.0 2.2 24.0 3.8 2.2

3/13A 14,257 5,913 118.8 20.8 9.2 676.4 1.6 21.9 3.8 1.6

3/14E 24,439 7,471 150.1 26.4 7.3 800.2 1.4 20.3 3.7 1.4

3/15E 30,126 9,013 181.1 20.6 6.0 949.4 1.2 20.7 3.5 1.2

58September 2013


Bajaj Finserv

Company Represented By:Mr S Sreenivasan,President - Finance


Sunesh Khanna


Alpesh Mehta

+91 22 3982 5415

[email protected]

Bloomberg Code BJFIN IN

Rating Not Rated

CMP (INR) 578

Mcap (USD b) 1.4


1, 6, 12 Rel Perf (%) -4/-26/-37

Sector: Financials

Key Takeaways

Life insurance industry going through challenging phase; focus remains on

profitable growth

Bajaj Finserv (BJFIN) is one of the few life insurance companies in India to

have become profitable on a cumulative basis.

The management indicated that the life insurance industry is going through a

tough phase on account of both a challenging macro environment and severe

regulatory changes impacting business growth and profitability.

All products have to be re-filed by September 2013. This will require fresh

training for the entire sales force and market acceptability. Surrenders are

likely to continue and this would restrict renewal premium growth and profit

growth (surrender charges now capped). Expect negligible growth in FY14,

given uncertainty on acceptability of new products.

In 1QFY14, new business premium declined 9% YoY, led by slowdown in group

and micro insurance products. For the full year, the management has indicated

5% new business premium growth.

In the medium term, premium growth is likely to be in line with the nominal

GDP growth. However, the mix will be challenging.

Nearly 40% of the business is contributed by the agency force (v/s 55% earlier).

Bancassurance contributes only 20% of the premium for BJFIN v/s much larger

share for players like ICICI Prudential and HDFC Life.

Margins unlikely to improve considerably

BJFIN's new business margins have moderated to 10-12%. On a steady state

basis, margins are likely to remain in the region of 13-14%.

Unit-linked products are high margin products, but incrementally, growth is

being driven by traditional products due to regulatory constraints and poor

performance of equity markets. In 1QFY14, traditional products contributed

80%+ of new business premium.

Other highlights

General insurance business remains highly profitable, barring the motor pool

losses. On a pre-tax basis, INR1.2b remains to be written off in FY14, of which

INR300m was written off in 1QFY14.

Bajaj Allianz General Insurance Company (BAGIC) has industry leading

combined ratios (101.9%including pool and 93.4% ex pool in FY13; loss ratio of

62% in FY13).

BJFIN has applied for a new banking license and is one of the key contenders

for the same; if obtains a banking license, BJFIN will convert into a bank.

59September 2013


Bank of Baroda

Company Represented By:Mr S Mundra, CMD

Ms Rupa Nitsure,Chief Economist



Bloomberg Code BOB IN

Rating Neutral

CMP (INR) 489

Mcap (USD b) 3.2


1, 6, 12 Rel Perf (%) -3/-31/-31

Sector: Financials



3/12A 137,393 50,070 121 12.4 - 621 - - 1.2 22.1

3/13A 149,459 44,807 106 -12.7 4.6 707 0.7 0.8 0.9 16.1

3/14E 163,859 41,213 98 -8.0 5.0 784 0.6 0.7 0.7 13.1

3/15E 192,108 49,864 118 21.0 4.1 876 0.6 0.7 0.8 14.2

Key Takeaways

Macro environment challenging, but some positives currently ignored

While challenges in the macro environment have increased, important positive

developments like SEB restructuring, clearance of INR1.6t by the Cabinet

Committee are ignored. Further, good monsoon could drive the rural economy

and consumption demand in 2HFY14.

Domestic loan growth to be near industry average

BOB's growth aspirations are not high and its domestic operations are likely to

grow in line with industry. INR depreciation would push up international loan

growth (30% of portfolio). Overall growth is expected to be 17-18%.

Growth is likely to be well diversified and BOB is cautious in lending to stressed

segments like Power, Roads, etc.

Excess liquidity and reduction in bulk deposits to help NIMs

BOB has excess liquidity on its balance sheet, with domestic CD ratio at ~66%,

and is a net lender in the call money market. This is despite aggressively

reducing the proportion of bulk deposits (shredded INR840b of bulk deposits

in TTM; INR270b in 1QFY14 itself).

Utilization of excess liquidity coupled with sharp reduction in bulk deposits

would be the key NIM driver in the current environment of tight liquidity and

elevated interest rates. Guidance of 3%+ domestic NIM for FY14 maintained.

Confident of improving asset quality trends in 2HFY14

The management remains confident that 2QFY14 would be the last quarter of

high reported slippages and expects these to normalize in 2HFY14.

Restructuring is likely to be high, considering the current environment

(amount not quantified).

Other highlights

BOB is not pushing for capital from the government, considering valuations.

Only 11% of BOB's investment book is in interest sensitive segments and its

duration is 2.8 years, with breakeven yield of 8.15%.

Valuation and view

In the current environment, BoB is relatively better placed than its peers due to

(a) significant liquidity on the balance sheet, (b) AFS portfolio at 11% of overall

investment, with higher cut-off yield, (c) net stress loans (ex SEBs and AI) largely

in line with peers at 6.7% and management confidence/consistency on asset

quality outlook, and (d) strong capitalization, with core tier-I ratio of ~9%.

However, given the continued macroeconomic uncertainty, we maintain Neutral.

60September 2013


Cholamandalam Investment and Finance

Company Represented By:Mr Kushik Banarjee,President - Asset Finance

Mr Arun Selven, CFO


Sunesh Khanna


Alpesh Mehta

+91 22 3982 5415

[email protected]

Bloomberg Code CIFC IN

Rating Not Rated

CMP (INR) 214

Mcap (USD b) 0.5


1, 6, 12 Rel Perf (%) -2/-24/-7

Sector: Financials

Key Takeaways

Growth rates to moderate; focus on asset quality

The management maintains a caution outlook on growth, given the current

environment. It expects growth to moderate to 10-15% in FY14.

Disbursement growth is likely to remain muted at ~5% and the management

indicated that this year the focus will not be on growth but on recovery and on

maintaining healthy asset quality.

Spreads and margins to be maintained

Short-term borrowings (CPs) stood at ~8% of overall liabilities. The

management highlighted that it will not roll over CPs at higher costs. It intends

to replace CPs with bank borrowings.

With the recent increase in short-term rates, the overall cost of funds is likely

to go up by ~20bp; however, the company has raised lending rates by 25bp,

which will help to maintain margins and spreads.

Incrementally, the company is also focusing on high yielding used CV loans

and tractor financing, which will also help support margins.

Capital raising done in the last quarter has helped lower cost of funds.

Improving product mix and presence in LCV segments has helped the company

to sustain margins.

Asset quality unlikely to deteriorate significantly

The company has shifted focus on asset quality and believes that given the

current environment, there will be some increase in NPLs. However, NPLs will

remain manageable.

On 90dpd, NPLs are running high, but with enhanced focus on recovery, 180dpd

NPLs are not alarming. The company is encouraging part payments from

customers.

To cut down some growth and maintain good asset quality, the company has

reduced LTV by ~5% to 70%.

Other highlights

The silver lining for the CV market is good monsoons. Increase in agricultural

production could lead to a positive surprise on growth and asset quality.

Average duration is 30 months on the assets side and 24 months on the

liabilities side.

Branch expansion is on track; the company plans to add 60 branches in FY14.

Cost income ratio would witness some traction in the ensuring quarters.

61September 2013


City Union Bank

Company Represented By:Mr Sundar, CFO & Senior GM


Sohail Halai+91 22 3982 5430

[email protected]

Bloomberg Code CUBK IN

Rating Not Rated

CMP (INR) 42

Mcap (USD b) 0.3


1, 6, 12 Rel Perf (%) -12/-25/-19

Sector: Financials

Key Takeaways

Asset quality to remain manageable

City Union Bank (CUB) has been able to maintain asset quality, with GNPA at

1.3% and NNPA at 0.6%, despite high proportion of riskier MSME and trader

loans (44% of overall loans) in its portfolio.

The management stated that close customer relationships (sole banker to a

large number of its MSME customers) and highly collateralized portfolio has

been the key for managing asset quality even in challenging times. CUB remains

confident of containing slippages going forward as well.

Restructured loan portfolio at the end of 1QFY14 stood at INR2.2b (1.4% of

loans) and the pipeline for further restructuring is insignificant.

Expect margins to remain in narrow range despite cost pressure

CUB has consistently maintained NIM of 3%+, with 1QFY14 NIM of 3.6%.

While short-term rates have increased and are exerting pressure on cost of

funds, CUB's ability to pass on higher cost to borrowers will help it to maintain

NIM in the range of 3-3.5%.

Above industry average growth to continue

CUB's loan portfolio has grown at a CAGR of 28% over FY08-13. Over the years,

it has focused on catering to niche working capital requirements of local traders

with adequate collateral, which has helped it maintain profitable growth and

healthy asset quality.

Gold loans (~22% of loans) have been one of the key drivers of overall growth

in the last few quarters. However, the management expects growth to

moderate in this segment and to stabilize near current levels as a proportion

of overall loans.

CUB remains confident of above industry average growth rates, led by growth

in the SME and retail segments.

62September 2013


HDFC

Company Represented By:Mr Keki Mistry,Vice Chairman

Mr Conrad D'Souza,Member of ExecutiveManagement


Sunesh Khanna


Bloomberg Code HDFC IN

Rating Buy

CMP (INR) 762

Mcap (USD b) 18.1


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

Sector: Financials

Year Net Income PAT EPS EPS P/BV ABV* AP/ABV* AP/AE# RoAA Adj RoE


3/12A 61,975 41,226 27.9 15.8 5.7 100.5 5.4 24.1 2.7 22.3

3/13A 72,567 48,483 31.4 12.3 4.6 108.5 4.8 20.0 2.7 23.8

3/14E 85,224 56,257 36.4 16.0 4.1 127.8 3.8 15.8 2.6 25.6

3/15E 102,045 66,403 42.9 18.0 3.7 148.2 3.0 12.1 2.6 26.1

* Price adj. for value of key ventures. BV is adj. by deducting invt in key ventures from NW

# Price adj. for value of key ventures. EPS is adj. for dividend from key ventures

Key Takeaways

Growth to remain healthy at +20%

The management remains fairly confident of achieving 18-20% loan growth in

FY14. While retail loan growth is likely to be ~22%, corporate loan growth

would be 12-14%.

While growth is being driven mainly by tier-II and tier-III centers, any correction

in property prices would help boost growth further.

Spreads to remain steady

Spreads are likely to remain steady at 2.2-2.3%. HDFC utilized excess liquidity

(INR60b) that it had on the balance sheet during the quarter. Hence, spreads

are moving in the same range as in the previous quarter.

In 2HFY14, the management expects to increase corporate loans and manage

spreads. HDFC has already raised retail lending rates by 25bp and corporate

lending rates by 100bp.

If tightness continues, there may be one more lending rate hike. HDFC is

aggressively focusing on deposits on the liability side. As at 1QFY14, spreads

on retail loans and non-retail loans stood at 2.01% and 2.82%, respectively.

Bulk of the incremental borrowing from bank loans and deposits will return to

bond market once the rates stabilize.

Asset quality remains healthy

Asset quality in the individual segment continues to be healthy.

One large account in the non-retail segment that slipped into NPA in 1QFY14

was technical in nature. Process of resolution is still underway and

management expects recovery in 2HFY14.

Others

RoE for individual and corporate loans is the same, as capital requirements

and risk weights are much higher for developer loans, which negate higher

yields earned on the portfolio.

Valuation and view

The stock trades at 3.8x FY14E and 3x FY15E adjusted earnings. We believe

valuations are reasonable, considering HDFC's growth potential (FY13-15E EPS

CAGR of ~20%), sound business fundamentals, and substantially improved

subsidiaries' performance. Maintain Buy.

63September 2013


HDFC Bank

Company Represented By:Mr Shashidhar Jagdishan,CFO

Mr Bhavin Lakhpatwala, VP



Sector: Financials

Bloomberg Code HDFCB IN

Rating Neutral

CMP (INR) 616

Mcap (USD b) 22.6


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

Year Net Income PAT EPS EPS P/E BV P/BV P/ABV RoA RoE


3/12A 186,682 51,671 22.0 30.4 - 127 - - 1.7 18.7

3/13A 226,637 67,257 28.3 28.4 21.8 152 4.1 4.1 1.8 20.3

3/14E 271,647 87,416 36.7 30.0 16.8 180 3.4 3.5 2.0 22.1

3/15E 329,221 108,974 45.8 24.7 13.5 215 2.9 2.9 2.0 23.1

Key Takeaways

System loan growth to be in low teens; retail to be key driver

The management expects GDP and core systemic loan growth to be in the

range of 4.7-4.8% and 11-12%, respectively. There may be upside of 1-2% in

terms of loan growth on account of substitution effect of ECBs, CP, etc.

The management believes overall retail growth of 18-22% is achievable, led

by growth in unsecured loans, credit cards, agriculture loans, gold loans and

business banking.

Asset quality holding up well but delinquencies inching up from lows

Since April 2012, early signs of delinquency for CV/CE were evident. These

have now stabilized and HDFCB continues to closely monitor this segment.

In other retail segments, while the book is holding up fairly well, the

management stated that early warning signs are emerging.

Given the increased stress in mid-size enterprises, HDFCB has not grown this

portfolio for the last 18 months.

Near-term margins to be impacted due to recent RBI measures

Tight system liquidity would impact NIM (due to higher CRR, MSF rates, etc) in

2Q. However, if the tightened liquidity condition continues, then higher

lending yields (pricing power) will help maintain margins.

The management has already developed its internal strategy assuming that

RBI would continue its measures for six months.

Other highlights

HDFCB is likely to add 250-300 branches in FY14.

The management does not require capital for 18-24 months. However, it may

come to the markets in the next 12-15 months, based on market situation and

expected rush by other banks to raise capital (to meet Basel requirements).

Levers in terms of operating cost and provisions will help ensure near term

profit growth, though the management did not rule out moderation if the

current macro scenario continues.

Valuation and view

HDFCB is best placed in the current environment, with (1) CASA ratio of ~45%,

(2) growth outlook of 1.3x industry growth, (3) improving operating efficiency,

(4) expected traction in income due to strong expansion in branch network,

and (5) best in class asset quality.

While we remain positive on the bank's business, we believe valuations are

rich. Maintain Neutral.

64September 2013


ICICI Bank

Company Represented By:Mr Rakesh Jha, Deputy CFO

Mr Rakesh Mookim, IR



Bloomberg Code ICICIBC IN

Rating Buy

CMP (INR) 959

Mcap (USD b) 17.0

52-Wk Range (INR) 1,237/759

1, 6, 12 Rel Perf (%) 8/-14/-4

Sector: Financials

Year Net Income PAT EPS EPS P/E AP/E* ABV* AP/ABV* RoA Core

End (INR m) (INR m) (INR) Gr. (%) (X) (X) (INR) (X) (%) RoE (%)

3/12A 182,369 64,653 56.1 25.4 - - 409 - 1.4 12.8

3/13A 222,121 83,255 72.2 28.7 13.3 10.7 459 1.7 1.6 14.8

3/14E 256,448 92,141 79.9 10.7 12.0 9.4 516 1.5 1.6 14.1

3/15E 302,740 107,824 93.5 17.0 10.3 7.8 581 1.3 1.7 14.6

*Price adj. for value of key ventures and BV adjusted for investments in those key ventures

Key Takeaways

Balanced approach in tough economic environment

Across business lines, ICICIBC is focusing on a judicious mix of profitability,

growth, and risk management to enhance RoE.

Retail is likely to be a key growth driver in the near term due to soft outlook on

corporate and SME business. ICICIBC is aggressively focusing on leveraging its

distribution network, technology platform and liability customer base to grow

granular retail business and improve fee income.

Having achieved 15% consolidated RoE, ICICIBC is targeting 18% over the next

few years. However, quantifying the time frame for that is difficult due to lack

of clarity on loan growth.

Domestic loan growth to be 2-3% above industry average, led by retail loans

Secured retail disbursements grew 32% YoY and growth remains strong in home

and auto loans. ICICIBC is adopting a calibrated approach towards CV and

unsecured lending.

Growth is likely to be moderate in large and mid corporate segments, with

focus on working capital loans. The share of SME business (currently 5% of

overall loans) is likely to remain low, considering tough macros.

International business growth would be calibrated to global funding needs

and consolidation of international subsidiaries' balance sheet would continue.

Due to INR depreciation, reported growth may be higher.

Corporate watch-list increases; credit cost guidance of 75bp maintained

While the retail and international portfolios continue to perform better than/

in line with expectations, stress has increased in the corporate segment.

The management maintained its guidance of 75bp credit cost, which implies

credit cost of 65bp on domestic corporate and SME portfolio (37% of overall;

assuming 10bp on retail and international portfolio), and already factors higher

stress, in our view. Restructuring pipeline continues to inch up.

Other highlights

While sharp rise in systemic rates would pressurize domestic NIM, led by

improvement in international margins and loan mix, global NIM is likely to

improve. ICICIBC maintained its guidance of 10bp margin expansion in FY14.

Repatriation of capital from international subsidiaries would continue

Valuation and view

Despite the challenging macro environment, ICICIBC has been able to manage

asset quality fairly well and within the guidance. While FY14 will be critical to

see the fate of few large exposures, the bank is confident of tiding over this

without any dent on its profitability. Helped by healthy RoA of 1.6%+ (core

RoA of 1.4-1.5%), core RoE is expected to remain healthy at ~15% in FY15.

65September 2013


IDFC

Company Represented By:Mr Sunil Kakar,CFO

Mr Bimal Giri,Sr Director - Strategy,Corporate Planning, IR


Sunesh Khanna


Bloomberg Code IDFC IN

Rating Buy

CMP (INR) 87

Mcap (USD b) 2.0


1, 6, 12 Rel Perf (%) -18/-43/-41

Sector: Financials

Year Net Inc. PAT EPS EPS P/E ABV AP/ABV RoAA Core

End (INR m) (INR m) (INR) Gr. (%) (x) (INR)* (x) (%) RoE (%)

3/12A 29,788 15,540 10.3 17.1 8.3 72.7 0.9 2.9 16.2

3/13A 34,726 18,362 12.1 18.0 7.0 81.3 0.8 2.9 15.1

3/14E 38,937 19,766 13.0 7.6 6.5 91.0 0.7 2.7 15.7

3/15E 43,496 22,630 14.9 14.5 5.7 102.1 0.6 2.8 16.0

*Adjusted for Investment in subsidaries, prices adjusted for other ventures

Key Takeaways

Growth outlook remains cautious; expects 5-10% growth in FY14

FY14 would be a challenging year; there is no visibility of private sector capex

revival. IDFC is exploring refinancing to AAA corporate accounts and low risk

areas ex-Infrastructure for growth.

Given the current environment, the management expects loan growth of 5-

8% in FY14, with best case growth at 10%. Clearing of projects of over INR 1t by

CCI will have a positive impact, but with a lag.

Spreads to be maintained

The management expects spreads to remain stable if not improve from current

levels.

Bulk of the incremental borrowing from banks at base rates + 25bp will return

to the bond market once the rate stabilizes. The proportion of assets maturing

in FY14 is higher than the proportion of liabilities to be discharged during the

year.

Asset quality manageable; adequate buffer to counter possible shocks

The management maintained a cautious stand on asset quality. It expects GNPL

to increase to 1.5% over the next two years from the existing 0.32%. A corporate

account slipped to NPA in 1QFY14; the management is confident of recovery,

as IDFC is a senior secured lender, with adequate coverage.

Some gas-based projects are facing trouble due to unavailability of raw

material; few of these could get restructured. However, the management

maintained that these projects are viable and the only issue is unavailability

of raw material. Resolution of gas pricing is a step in the positive direction and

gas availability could increase in the next 24-36 months.

Loan loss reserve ratio is likely to increase to over 2% in FY14 from the existing

1.9%. Cumulative provisions stand at over INR14b - INR10.72b for loans and

INR4b for investments.

Valuation and view

IDFC has delivered strong performance on the growth and margin front even during

challenging times. Expected reformatory steps by the government could act as

major catalysts in improving the growth and profitability outlook. Healthy asset

quality and prudent provisioning policy makes IDFC better placed than its peers.

The stock trades at 0.7x FY14E and 0.6x FY15E BV. Maintain Buy.

66September 2013


IndiaBulls Housing Finance

Company Represented By:Mr Ashwini Kumar Hooda,DMD

Mr Pinank Shah,EVP and Head - Finance


Sunesh Khanna


Alpesh Mehta

+91 22 3982 5415

[email protected]

Bloomberg Code IBULL IN

Rating Not Rated

CMP (INR) 272

Mcap (USD b) 1.3


1, 6, 12 Rel Perf (%) -3/4/32

Sector: Financials

Key Takeaways

AUM growth to remain healthy at 20%+

The management expects AUM growth to remain healthy at 20%+ despite a

challenging macro environment. Growth will be predominantly driven by

healthy traction in tier-II and tier-III centers.

Of the overall mortgage loan (71% of AUM) portfolio, 46% is housing loans and

25% is LAP (mainly self-employed customers). Further, 70% of housing loans

are to salaried customers, and 30% to self-employed customers.

Excess liquidity on balance sheet has helped tide over liquidity squeeze

IBHF had excess liquidity on the balance sheet (~INR70b), which has helped

tide over the liquidity squeeze, and protect margins and spreads.

Short-term borrowings (CPs) stood at INR27b, ~8% of overall liabilities. The

management highlighted that it will not roll over CPs at higher costs and let

them run off, as it has sufficient liquidity on balance sheet.1

IBHF intends to continue with its policy of keeping 20% cash balance at any

point of time. It will maintain core liquidity of INR45b. Though maintaining

surplus liquidity has negative carry, it is useful in phases of tight liquidity.

Asset quality remains healthy; no stress on developer loans

GNPA/NNPAs stand at 0.78%/0.34% and have remained stable for six quarters.

With higher share of housing loans, the management expects credit cost to

decline further.

NPLs stood at 24bp on home loans and 28bp on LAP. However, the CV portfolio

saw higher delinquency on 90dpd basis and NPLs stood at 258bp. Provisioning

coverage ratio is comfortable at 163%.

The developer portfolio remains healthy and IBHF does not see any stress in

this portfolio; 70% of the developer portfolio is lease rent discounting.

Other highlights

Dividend payout would remain at 45-50%, translating to a dividend of INR24/

share for FY14 (dividend yield of 10%+).

IBHF has applied for a new banking license and has put its strategic stake sale

on hold.

IBHF is trying to get a triple-A rating, which would help reduce cost of funds.

IBHF continues to maintain healthy liquidity (~20% of liabilities in cash and

equivalents). This would help tide over any unanticipated liquidity crisis.

67September 2013


IndusInd Bank

Company Represented By:Mr Romesh Sobti, MD & CEO

Mr S Mallik,Head - IR & Strategy Planning



Bloomberg Code IIB IN

Rating Buy

CMP (INR) 412

Mcap (USD b) 3.3


1, 6, 12 Rel Perf (%) 11/-4/21

Sector: Financials



3/12A 27,160 8,026 17.2 38.5 - 97 - - 1.6 19.2

3/13A 35,958 10,612 20.3 18.3 20.3 142 2.9 2.9 1.6 17.8

3/14E 47,851 13,909 26.6 31.1 15.5 164 2.5 2.5 1.7 17.4

3/15E 58,112 17,076 32.7 22.8 12.6 191 2.2 2.2 1.8 18.4

Key Takeaways

Market share gain to continue; growth expectation toned down to 20-25%

Given the challenging macro environment , the management expects loan

growth to be in the range of 20-25% rather than 25-30% earlier.

Based on current economic factors, growth in vehicle finance could moderate.

However, products such as loans against property (LAP) would help IIB to clock

growth of low 20's for its Consumer Finance division.

Outlook for the Consumer Finance industry (vehicle finance) could change in

2HFY14, as capacity gets absorbed, better monsoon drives rural demand,

festival season commences and mining ban gets lifted.

NIM may moderate, but could improve, if interest rate reverses

IIB's asset-liability mix is poised in a such a way that (1) in a rising interest rate

regime, it can pass through partial impact of rise in cost of funds to 80% of the

corporate book (i.e. 40% of overall loans); thus, though NIM declines, it is

gradual, and (2) in a falling interest rate scenario, while cost of funds decline,

higher proportion of fixed rate loans aids NIM improvement.

If the current tightening of liquidity and elevated rates continue for the next

two quarters, NIM may decline gradually to 3.2-3.3% by 4QFY14 from the current

level of 3.7%. However, this was the management's expectation prior to the

RBI's steps of attracting FCNR and increase in foreign borrowing limits by banks,

which may ease liquidity, and NIM compression may be lower.

Asset quality stress to remain manageable

In the CV finance portfolio, payment delays have increased marginally and

the watch-list in the mid-corporate segment is increasing. However, overall

GNPAs are likely to be within 10-15bp of the current levels.

Some accounts may get restructured, given the increase in the mid corporate

segment watch-list, (however, in value terms, this may not be significant).

The management expects to contain credit cost within 60bp.

Other highlights

Fee income growth would track/be faster than overall balance sheet growth,

led by traction in forex-related fees. Overall income/loss from trading

activities is expected to be negligible.

Valuation and view

Superior margins, focused fee income strategy and control over C/I ratio will

keep earnings momentum strong (27% CAGR), even as credit cost is likely to

increase. Improving liability franchise and strong management at the helm of

the affairs will help drive valuations. Buy.

68September 2013


ING Vysya Bank

Company Represented By:Mr Janak Desai, MD

Mr Jayant Mehrotra, CFO



Bloomberg Code VYSB IN

Rating Buy

CMP (INR) 490

Mcap (USD b) 1.4


1, 6, 12 Rel Perf (%) -3/-9/20

Sector: Financials



3/12A 18,781 4,563 30.4 15.4 16.1 258.2 1.9 1.9 1.1 14.3

3/13A 22,655 6,130 39.6 30.2 12.4 292.1 1.7 1.7 1.2 14.6

3/14E 26,903 7,016 38.0 -4.1 12.9 375.8 1.3 1.3 1.2 12.2

3/15E 31,141 8,044 43.5 14.6 11.3 412.2 1.2 1.2 1.2 11.0

Key Takeaways

Environment remains challenging - stress to rise if current situation continues

GDP growth continues to moderate, which coupled with recent increase in

systemic interest rate, could lead to higher stress in the economy.

The watch-list in the mid-corporate segment is increasing and the financial

position of some large corporate accounts is weakening as well.

Asset quality holding up well - strategically well placed portfolio

The management mentioned that the bank's SME and large corporate portfolio

is behaving better than the industry. The underlying reasons are:

1. Most of the SME exposure is consumption-driven and VYSB is the sole

banker to 70-75% of its SME customers, which helps in close monitoring. It

has strong collaterals, which has also helped. VYSB's SME customers do

not have any significant forex risk.

2. In the corporate segment, ~80% of the loans are towards working capital

and VYSB's exposure to risky term projects is low.

The management, however, remains cautious and mentioned that if the

current environment elongates/deteriorates, asset quality risk will increase.

Nevertheless, VYSB would utilize the benefit of high PCR, which should provide

cushion to earnings.

NIM to be impacted negatively if yield curve remains elevated and inverted

VYSB's liabilities are being re-priced at 200-250bp higher rates. 70% of its assets

are linked to base rate/will re-price in three months, which should aid NIM.

The management stated that if the current situation prevails for the whole of

FY14, NIM may be impacted by 20-30bp for the bank / system as a whole.

Environment not conducive for growth; focus on SME and consumer banking

Loan growth for the system is likely to be lower than earlier expectation of

15%. The management mentioned that it remains selective and cautious, but

would be able to grow above industry average, led by focus on SME (niche

expertise) and consumer banking.

VYSB is more cautious on the mid corporate segment (turnover of INR1.5b-5b)

as this segment is leading to maximum pain for other banks.

Valuation and view

Risk-adjusted margin (RAM) improved sharply to ~2.9% (v/s 1.8% in FY10) on

strong growth in SME portfolio and better-than-expected asset quality.

Partially led by recent capital infusion of INR18.4b, NIM is expected to remain

stable in FY14, which would compensate for rise in credit cost. RoA is likely to

remain stable at 1.2%.

69September 2013


Kotak Mahindra Bank

Company Represented By:Mr Dipak Gupta - Jt MD

Mr R Sundaraman, EVP



Sector: Financials

Bloomberg Code KMB IN

Rating Neutral

CMP (INR) 677

Mcap (USD b) 8.0


1, 6, 12 Rel Perf (%) 3/3/7

Year PAT EPS EPS P/E BV P/BV P/ABV RoE RoA* Core RoE*

End (INR m) (INR) Gr. (%) (x) (INR) (x) (x) (%) (%) (%)

3/12A 18,322 24.7 16.3 - 174.2 - - 15.4 1.9 15.4

3/13A 21,885 29.3 18.5 23.1 204.3 3.3 3.4 15.5 1.8 16.3

3/14E 24,332 32.6 11.2 20.8 235.9 2.9 2.9 14.8 1.6 14.3

3/15E 28,644 38.4 17.7 17.6 273.1 2.5 2.5 15.1 1.7 14.6

Consolidated; * For standalone Bank

Key Takeaways

Challenging macro environment, KMB to adopt conservative approach

With the macroeconomic scenario being adverse, KMB's strategy in the near

to medium term is to protect profitability rather than chase growth. For the

system as a whole, the management expects growth to be in low teens.

KMB has toned down its growth guidance to 10-15% in FY14. Targeted segments

for growth would be cars, loans against property, agriculture and emerging

and large corporate. Further, rural economy remains a thrust area.

KMB remains cautious on the CV, CE and mid-size corporate segments.

Retail holding up well; maintains credit cost guidance of 60-70bp

So far, the retail segment is holding up well and KMB has not faced major

issues. Credit quality in unsecured loans remains healthy as well, though the

proportion for KMB remains small.

KMB remains cautious on corporate asset quality and if there is any stress, it

will prefer to recognize as NPA rather than restructuring. Despite increasing

challenges in the macroeconomic environment, the bank has kept its guidance

for credit cost unchanged at 60-70bp.

Margin pressure increased, led by rise in cost of funds

Base rate in the system is generally skewed towards short-term rates.

However, with base rate of most banks being lower than prevailing short-

term rates and more towards the longer end, the current inverted yield curve

could get corrected.

There is limited passing of the hike in cost of funds to borrowers and this

would impact the bank's near-term NIM.

Other highlights

KMB intends to continue with its branch expansion plan, irrespective of the

macro environment; a semi-urban branch takes 4-5 years to break even. It has

guided cost-to-income ratio of 50-51%.

Led by liquidity pressure and stagnating demand, real estate prices are likely

to correct. KMB has adequate collateral in case of any adversity.

Valuation and view

Barring 1QFY14, KMB has managed asset quality well. Its cautious guidance on

loan growth (10-15% v/s 15% as at end-1QFY14 and 15-20% as at end-FY13)

reflects concerns on economic growth and asset quality.

RoA is likely to decline from 1.9% in FY12 to 1.6/1.7% over FY14/15. Higher

capitalization (tier-I ratio of 17.6%) will keep RoE at sub-15% over FY14/15.

Maintain Neutral.

70September 2013


LIC Housing Finance

Company Represented By:Mr Sudipto Sil,ACM(Finance) &Investor Relations Manager


Sunesh Khanna


Alpesh Mehta

+91 22 3982 5415

[email protected]

Bloomberg Code LICHF IN

Rating Buy

CMP (INR) 174

Mcap (USD b) 1.3


1, 6, 12 Rel Perf (%) 5/-28/-39

Sector: Financials

Year Net Inc. PAT Adj. PAT EPS EPS P/E BV P/BV RoAA* RoAE*

End (INR m) (INR m) (INR m)* (INR)* Gr. (%) (X) (INR) (X) (%) (%)

3/12A 16,240 9,142 10,011 19.8 -8.4 8.8 113 1.5 1.8 20.3

3/13A 17,343 10,232 10,232 20.3 2.2 8.6 128 1.4 1.5 16.8

3/14E 21,044 13,389 12,221 24.2 19.4 7.2 149 1.2 1.5 17.4

3/15E 25,658 15,181 14,947 29.6 22.3 5.9 173 1.0 1.4 18.4

Key Takeaways

Loan growth to remain healthy at 20%+

LICHF expects loan growth to remain healthy at 20%+ despite the challenging

macro environment. Growth would be predominantly driven by healthy

traction in tier-II and tier-III centers.

LICHF is increasing focus on high yielding LAP and developer loans; it targets

to increase the share of LAP from 3% of the loan book to 5% in FY14.

Most of the new loans are fixed for two years and floating thereafter. Fixed

rate loans constitute 51% of the retail loan book, that is, INR400b.

Margins to improve by 20bp to 2.4% in FY14

The management guided 20bp expansion in margins to 2.4% in FY14.

LICHF completed 1/3rd (INR88b) of its annual borrowing requirement before

15 July at a blended rate of 8.8%. YTD, borrowings stand at INR125b (~45% of

FY14 target borrowings of INR280b).

Borrowing cost on INR88b borrowed before 15 July is 8.8% and INR20b

borrowed after 15 July is 10%+. YTD borrowing cost stands at 9.25%.

LICHF has increased lending rates by 35-75bp for new loans and will shortly

take a decision on increasing rates on the existing book, which should bode

well for margins.

Asset quality remains healthy

Asset quality in the individual segment continues to be healthy.

GNPAs in the developer loans segment include three major accounts and three

minor accounts amounting to INR2.46b; the big accounts are backed by adequate

collateral and action under SARFAESI Act has been initiated.

Provisioning pool stands at INR6.6b on the individual loans portfolio and at

INR0.52b on developer loans.

Others

LICHF has rolled out its retail deposit scheme from 20 branches; initial response

is very encouraging. Outstanding retail deposits stand at INR9b.

Incremental ticket size: INR1.7m.

Prepayment ratio is at 6%, of which half are takeovers by competitors.

Valuation and view

While LICHF continues to deliver well in terms of growth and asset quality, it has

disappointed on the margin front. Improvement in margins holds the key for

further improvement in return ratios. We currently factor in flat margins for FY14.

The stock trades at 1.1x FY14E BV of INR149 and 1x FY15E BV of INR173. Maintain

Buy.

* Adjusted

71September 2013


Mahindra & Mahindra Financial Services

Sector: Financials

Bloomberg Code MMFS IN

Rating Buy

CMP (INR) 267

Mcap (USD b) 2.3


1, 6, 12 Rel Perf (%) 12/27/66

Year Net Income PAT EPS EPS P/E BV P/BV P/ABV RoA on RoAE

End (INR m) (INR m) (INR) Gr. (%) (X) (INR) (X) (X) AUM (%) (%)

3/12A 16,743 6,201 12.1 33.6 21.9 57 4.6 4.7 3.8 22.8

3/13A 22,759 8,673 15.7 29.8 16.9 79 3.3 3.5 3.9 23.4

3/14E 28,935 10,087 17.9 14.3 14.8 92 2.9 3.1 3.4 20.9

3/15E 35,886 12,524 22.2 24.2 11.9 109 2.4 2.6 3.3 22.1

Company Represented By:Mr Ramesh Iyer, MD

Mr Dinesh Prajapati, Sr GM -Treasury & Corporate Affairs

Mr Rakesh Bildani,Manager - Treasury


Sunesh Khanna


Alpesh Mehta

+91 22 3982 5415

[email protected]

Key Takeaways

Product diversification and deeper rural penetration driving growth

Mahindra & Mahindra Financial Services (MMFS) expects its deeper rural

penetration and diversified product portfolio to aid growth. The management

is fairly confident of achieving ~25% AUM growth in FY14, driven by good

monsoons and expected increase in agricultural production. However, MMFS

will not chase growth at the cost of profitability.

Cars, tractors and UVs remain the major growth drivers for the company. The

management maintained its stance of adopting a cautious approach in the

MHCV segment and will continue to focus on the LCV segment.

Margins and spreads to remain stable

Short-term borrowings (cost of funds on short term borrowings has increased

200-300bp) stand at 10% of overall borrowings. Bank borrowings constitute

50% of overall borrowings and the base rate is expected to increase at least

25bp. Hence overall cost of funds is likely to increase 40bp.

MMFS has increased lending rates by 50bp, which will help protect margins. It

is also looking at increasing the share of the high yielding tractor and used

vehicle portfolio. Hence, significant margin contraction is unlikely.

The management expects margins to remain largely stable.

Asset quality to remain healthy

The rural segment is buoyant and there is not much pressure visible on asset

quality; this trend strengthened in 1QFY14. Incremental GNPAs were largely

on account of CV/CE portfolio and marginal losses in Uttarakhand. MMFS will

not chase growth at the cost of profitability.

Good monsoons are comforting for asset quality and the southern states, which

were performing sub-par, have now started performing better.

Valuation and view

MMFS continues to deliver well on the growth front, led by its multi-product

strategy. Within the key segments, car loans (33% of total AUM), auto/UV

loans (28% of AUM) and tractor loans (19% of AUM) are witnessing healthy

traction, helping to maintain healthy growth momentum.

With a favorable rural economy, diverse portfolio, less farm-dependent

customers, and stable LTV of 70%, we expect asset quality to remain healthy.

Return on AUM is likely to be healthy, with RoA of 3.5%+ and RoE of 21%+. We

factor AUM and earnings CAGR of 20%+ over FY14-15. The stock trades at 2.9x

FY14E and 2.4x FY15E BV. Buy.

72September 2013


Shriram Transport Finance

Company Represented By:Mr Sanjay Mundra, VP


Sunesh Khanna


Alpesh Mehta

+91 22 3982 5415

[email protected]

Bloomberg Code SHTF IN

Rating Buy

CMP (INR) 516

Mcap (USD b) 1.8


1, 6, 12 Rel Perf (%) -22/-26/-30

Sector: Financials

Year Net Inc. PAT EPS EPS P/E P/BV P/ABV RoA on AUM R0AE

End (INR m) (INR m) (INR) GR. (%) (X) (X) (X) (%) (%)

3/12A 33,545 12,574 57.8 9.9 8.9 1.9 1.9 2.8 23.1

3/13A 36,530 13,606 64.7 11.9 8.0 1.6 1.6 2.6 20.6

3/14E 42,496 14,790 71.9 11.2 7.2 1.4 1.3 2.4 18.9

3/15E 49,639 17,051 83.1 15.5 6.2 1.2 1.1 2.4 18.5

Key Takeaways

Growth guidance maintained at 15-18% for FY14

SHTF maintains its AUM growth guidance for FY14 at 15-18%, with bulk of the

incremental growth coming from lower aged vehicles (1-5 year old CVs), as

demand is largely from this segment.

While SHTF has guided 15-18% AUM growth for FY14, growth in 1Q was 32%+

and the expected increase in agricultural output could lead to 20%+ growth in

FY14.

Funding costs to increase by 20bp; to maintain margins at 7%+

Margins have been under pressure for the last few quarters due to focus on

lower aged vehicles (1-5 years), where yields are lower. However, the

management is confident of maintaining margins at 7%+.

The management indicated that with the recent increase in short-term rates,

the overall cost of funds is likely to increase ~20bp. However, this scenario is

temporary and will be corrected in a couple of months.

Asset quality unlikely to deteriorate significantly

The management indicated that the asset quality is unlikely to deteriorate

significantly and GNPAs are likely to remain at ~3%.

On the provisioning front, the management expects the existing level of loan

loss provisioning to continue. Credit cost would be contained at 2%.

Other highlights

The silver lining for the CV market is good monsoons. Increase in agricultural

production could lead to positive surprises on growth and asset quality.

SHTF raises funds through NCDs every quarter. However, going forward, it

intends to do so only twice a year.

Valuation and view

Strong growth in an uncertain environment over the last few quarters is

concerning. Increasing share of lower aged and small vehicles, and lower

spreads on securitization will keep yields under pressure.

While SHTF's return ratios have moderated compared to historical trends, we

expect RoA of 2.4% and RoE of 18%+ over FY14-15. The stock trades at 1.4x

FY14E and 1.2x FY15E BV. Maintain Buy.

73September 2013


State Bank of India

Company Represented By:Mr Sunil Pant, CGM

Ms Rita G, DGM



Bloomberg Code SBIN IN

Rating Buy

CMP (INR) 1,633

Mcap (USD b) 17.1

52-Wk Range (INR) 2,550/1,453

1, 6, 12 Rel Perf (%) -3/-24/-23

Sector: Financials

Year Net Income PAT EPS Cons. Cons. Cons. BV Cons. Cons. RoA RoE

End (INR m) (INR m) (INR) EPS (INR)P/E (X)* (INR) P/BV (X)*P/ABV (X)*(%) (%)

3/12A 576,425 117,073 174.5 228.6 - 1,541 - - 0.9 16.0

3/13A 603,661 141,050 206.2 261.9 5.9 1,769 0.9 1.0 1.0 15.9

3/14E 646,297 115,599 169.0 212.4 7.2 1,942 0.8 1.0 0.7 11.6

3/15E 738,706 144,803 211.7 267.4 5.8 2,160 0.7 0.9 0.8 13.2

*Valuation multiples are adjusted for SBI Life's value

Key Takeaways

Endeavor to maintain domestic NIM at around 3.5%

Systemic interest rate has increased. However, SBIN continues to enjoy strong

CASA and retail term deposit flow (proportion of bulk deposits is negligible).

This has helped to contain cost of funds at ~6.5%.

The management believes that base rate hike is not necessary at this level,

though it would continue to monitor the situation.

It has maintained its domestic NIM guidance of 3.5% for FY14.

Growth to be driven by top-rated corporate and retail loans

Demand outlook for new projects is muted. However, there is huge opportunity

for refinancing of top-rated corporate loans.

Further, healthy growth in retail (especially home loan segment) segment

and incremental demand from substitution of CPs and ECBs would help. The

management expects overall loan growth to be ~20%, even as expectation of

systemic growth remains low.

Tough environment; asset quality challenges to persist

Headwinds in mid-corporate and SME segments continue. These segments

would be the key contributors to NPAs.

In 2Q, recoveries from agriculture segment and up-gradation of some accounts

due to restructuring may help contain headline GNPAs.

Restructuring is likely to continue, as the current macroeconomic scenario

does not instill positivity. The management did not give any specific guidance

on restructuring pipeline, but as at the end of 1QY14, it was at INR100b.

Other highlights

SBIN has raised the income limit for auto loans to INR0.6m to reduce risk on

the portfolio. This is the second time in two years that the bank has increased

eligibility criteria/tightened lending process in this segment. While there may

be some moderation in growth, considering that auto loans are just 2-3% of

the overall book, this will not impact overall loan growth meaningfully.

Valuation and view

While near-term macroeconomic headwinds and asset quality challenges

prevail, fundamentals are strong (strong franchise, lowest NSL and adequate

capitalization).

The stock is trading at its near low LPA multiple. We believe valuations largely

factor in the macroeconomic stress. Buy.

74September 2013


Union Bank of India

Company Represented By:Mr K Subramanyam, ED

Mr Mayank Mehta, CFO

Mr Nitesh Ranjan, ChiefEconomist



Bloomberg Code UNBK IN

Rating Under Review

CMP (INR) 108

Mcap (USD b) 1.0


1, 6, 12 Rel Perf (%) -7/-51/-42

Sector: Financials


End (INR m) (INR m) (INR) GR. (%) (X) (INR) (X) (X) (%) (%)

3/12A 92,413 17,871 32.3 -18.5 - 236 - - 0.7 14.8

3/13A 100,949 21,579 36.0 11.5 3.0 263 0.4 0.5 0.7 15.0

3/14E 106,485 18,788 31.3 -13.0 3.5 287 0.4 0.5 0.6 11.4

3/15E 120,739 22,947 38.3 22.3 2.8 316 0.3 0.5 0.6 12.7

Key Takeaways

Loan growth to be in line with industry average

Loan growth is likely to be in line with industry average at 15-16%, with deposit

growth marginally lower at 14-15%.

Loan growth would be driven by retail, SME and agriculture. UNBK would be

conservative on mid-corporate loans, where stress is higher.

The management is confident of maintaining CASA ratio at ~30%.

NIM guidance of 2.8-2.9% maintained despite increasing challenges

UNBK was caught wrong-footed, where it reduced its base rate in June 2013,

post which steps taken by the RBI led to systemic tightening of liquidity and

increase in systemic rates.

In 1QFY14, NIM compressed to 2.6% (led by higher interest income reversals

and lag impact of reduction in base rate in February 2013). While challenges

have increased further, the management has kept its NIM guidance unchanged

at 2.8-2.9% based on recent increase in base rate of 25bp in August-13 and

expectation of lower slippages (translating into lower interest income

reversals will help NIM). However, in our view, downside risk remains.

Normalized slippages to be INR7b-9b; restructuring pipeline high

Looking at the portfolio behavior, the management maintained its guidance

of INR7b-9b of slippages per quarter. However, this does not factor the recent

RBI moves of tightening of liquidity, which could impact asset quality.

Restructuring loan pipeline is INR50b, of which INR23b pertains to SEBs. Of

the existing SEB restructured loan pool of INR29b, 50% is likely to be converted

into bonds.

Other highlights

Interest sensitive investment portfolio is 14%, with average duration of four

years and cut-off yield of 7.6%.

The management mentioned that current capitalization is sufficient till FY15,

given the growth expectation.

Valuation and view

Structural drop in NIM, volatile fee income, expected lower contribution of

trading income in the coming quarter, building of restructuring pipeline,

management change in November 2013 and lower core tier-I capital at ~7.5%

are key concerns.

While the valuations are attractive, UNBK is highly levered to the

macroeconomic environment and till the time it remains uncertain, we expect

volatility in the stock price to continue.

75September 2013


Yes Bank

Company Represented By:Mr Rajat Monga,CFO & Sr Group President

Mr Jaideep Aiyer, PresidentFinancial Management

Mr Aparajit Bhandarkar, Sr.VP and IR



Bloomberg Code YES IN

Rating Buy

CMP (INR) 293

Mcap (USD b) 1.6


1, 6, 12 Rel Perf (%) 4/-38/-22

Sector: Financials



3/12A 24,728 9,770 27.7 32.1 - 132 - - 1.5 23.1

3/13A 34,762 13,007 36.3 31.0 8.1 162 1.8 1.8 1.5 24.8

3/14E 43,891 15,454 43.1 18.8 6.8 197 1.5 1.5 1.4 24.0

3/15E 53,638 18,423 51.4 19.2 5.7 238 1.2 1.2 1.5 23.6

Key Takeaways

NIM to be protected despite rise in cost of funds

Cost of funds has increased by 100-125bp given the tighten liquidity condition.

However, with 90% of the loans linked to base rate/short term in nature and

recent hike in base rate, should help overall yields and protect NIM for 2QFY14.

Management mentioned that in current environment banks do posses pricing

power which should help in managing NIMs.

Investment portfolio prone to MTM, but not as high as street expectation

A large proportion of YES' SLR portfolio is in the HTM category. Hence, MTM

risk is very low on that portion of investments.

Its non-SLR portfolio is INR170b, of which INR30b each is for RIDF/NHB, PTC

(PSL requirement), and CPs and CDs. There would be no MTM on RIDF/NHB

and CPs and CDs. While there could be an MTM impact on account of PTC, it

would be limited and not alter YES' earnings profile significantly.

YES has INR80b in corporate bonds, which have (1) median rating of AA+, (2)

average yield of 10.5%, and (3) modified duration of 3.25 years. Management

also re-stated that credit risk on this portfolio is low.

On MTM on corporate bond portfolio, management mentioned that it has

interest rate swaps of INR35b which would provide cushion against MTM. While

income from swaps would be reflected in non-interest income, MTM impact

would be seen in provisioning line - and thus it would be PBT neutral.

Other highlights

The management would be opportunistic and risk return management would

be the key determinant for incremental loan growth.

Asset quality continues to be healthy and corporate watch-list has not changed

materially. YES has created excess provisions of 40bp on loans (over and above

NPA and standard asset provisioning), which should provide cushion to

earnings even if any asset quality hiccups emerge.

While fees from financial advisory income are likely to moderate sequentially,

healthy traction in retail and transaction banking fees would drive fee income.

Valuation and view

Strong growth, proven execution, resilient margins, diversified fee income

and superior return ratios are key positives for YES. Rapid branch expansion,

acquisition of new customers and deepening of existing customer relationships

should ensure healthy growth across parameters. Any reversal of RBI stance in

terms of easing liquidity will be a key trigger for the stock. Maintain Buy.

76September 2013


Biocon

Company Represented By:Mr MB Chinappa,President - Finance(Syngene Int'l)

Mr Saurabh Paliwal,DGM and Head - InvestorRelations


Alok Dalal

+91 22 3982 5584

[email protected]

Hardick Bora

+91 22 3982 5423

[email protected]

Bloomberg Code BIOS IN

Rating Neutral

CMP (INR) 345

Mcap (USD b) 1.1


1, 6, 12 Rel Perf (%) 5/29/19

Sector: Healthcare

Year Net Sales PAT EPS EPS P/E P/BV RoE RoCE Div. EV/

End (INR m) (INR m) (INR) Gr. (%) (X) (X) (%) (%) Yield (%)EBITDA

03/12A 20,865 3,384 16.9 -7.6 20.4 3.0 14.9 13.0 1.4 11.8

03/13A 24,853 5,088 16.4 -3.4 21.1 2.6 12.1 17.8 2.2 10.9

03/14E 29,603 3,770 18.8 15.3 18.3 2.3 12.8 13.6 1.6 9.8

03/15E 33,988 4,224 21.1 12.0 16.3 2.1 13.1 13.8 1.8 8.8

Key Takeaways

Biocon (BIOS) reiterated its goal of achieving USD1b sales by 2018 (implied CAGR

of 18%), led by improved product mix and increasing contribution from biosimilars.

In the near term, growth will be driven by improved base business performance,

led by insulin, India formulations and contract services. However, near-term

margins could be under pressure due to higher R&D costs to fund biosimilar

programs and capex for the Malaysia plant.

USD 1b sales by 2018

BIOS targets USD1b sales by 2018 (USD0.45b currently), led by improved product

mix. Biosimilars would account for 20% of sales by 2018 (5% today).

The company expects significant traction in biosimilars. By 2015, it aims to

commercialize the glargine in the emerging markets. The company aims to

commercialize its insulin plant in Malaysia by 2015. It aims at commercial launch

of rh-insulin in regulated markets by 2016-17.

Long-term story on global biosimilars

BIOS has partnered with Mylan for developing and commercializing generic

insulins and biosimilar MAbs in regulated markets.

In its effort for harmonized US/EU filing for rh-insulin, BIOS targets dossier

submission sometime in 2015 (v/s earlier target of EU filing in 2013).

BIOS is building a large insulin facility in Malaysia, where it is investing USD160m

in phase-1.

Improvement in base business performance to drive near term growth

BIOS continues to strengthen its base business performance, which is a healthy

mix of insulin, immunosuppresants, domestic formulations and research

services.

Contract services business is likely to see continued momentum over the next

few years. BIOS is looking at a capex of USD100m over a three-year period,

largely for the FTE business.

Growth momentum is likely to continue in the India formulations business.

Over 50% of its brands in India are biologics.

The contribution of statins to overall company revenue is now in single digit.

Valuation and view

Improved base business performance (double-digit growth) would drive near-

term growth, while margins may see some pressure due to high R&D cost for

biosimilars and its own product pipeline.

The biosimilars story is likely to unfold only in the longer run while valuations

adequately capture the company's near-term growth prospects. We maintain

our Neutral recommendation.

77September 2013


Dr Reddy's Laboratories

Company Represented By:Mr Satish Reddy,Vice Chairman and MD

Mr Kedar Upadhye,VP - F inance & InvestorRelations

Mr Saunak Savla,Investor Relations


Alok Dalal

+91 22 3982 5584

[email protected]

Hardick Bora

+91 22 3982 5423

[email protected]

Bloomberg Code DRRD IN

Rating Buy

CMP (INR) 2,284

Mcap (USD b) 6.0

52-Wk Range (INR) 2,401/1,617

1, 6, 12 Rel Perf (%) 1/28/25

Sector: Healthcare


End (INR M) (INR M) (INR) GR. (%) (X) (X) (%) (%) Yield (%)EBITDA

03/12A 96,738 12,109 72.1 12.9 31.7 6.7 21.1 20.5 0.6 16.7

03/13A 116,266 16,150 96.2 33.4 23.7 5.2 22.1 17.2 0.6 16.0

03/14E 132,576 17,922 106.7 11.0 21.4 4.3 20.3 17.8 0.6 13.9

03/15E 147,034 20,423 121.6 14.0 18.8 3.6 19.3 17.8 0.6 12.1

Key Takeaways

Dr Reddy's (DRRD) believes emerging markets are likely to play a significant role

in global pharma market's growth over the next decade. Increased regulatory

risks, consolidation at the trade levels, declining product opportunities in the US

are key challenges. DRRD is well placed to counter these challenges by developing

a high value product portfolio, deeper customer engagement in generic products

and newer channels of growth like OTC and institutional business.

Three pillars of growth over next few years

Product portfolio shifts - differentiated generics including formulations and

APIs by leveraging on vertical integration. DRRD believes it has a strong record

in this area.

Deeper customer engagement - unbranded generics, physician and retailer

relationships in branded business in markets like India and Russia.

OTC and institutional channels in branded markets - scale up on non Rx channels

in Russia and India (OTC and institutional).

US generics to sustain momentum achieved in 1QFY14

US generics reported a strong 33% growth to USD194m YoY in 1QFY14.

DRRD is gaining traction in key limited product opportunities like Propecia

1mg, Geodon, Toprol XL, Boniva.

Recently-launched products like Reclast and Dacogen are yet to realize their

full potential. Company has 65 ANDAs pending approval, which has USD32b of

innovator sales value.

Biosimilars - a long term opportunity, piggyback on India experience

Biosimilars account for ~10% of DRRD India sales. Key product Rituximab is

gaining strong traction.

Tie-up with Merck Serono for biosimilars in the US and Europe. Growth drivers

seen beyond 2016.

Biosimilars opportunity in regulated markets collectively pegged at USD20-

30b.

Valuation and view

Traction in the US generics and sustained growth momentum in international

branded formulations segment will be key growth drivers for DRRD, going

forward.

Estimate core EPS CAGR of 20% for FY13-15E, RoCE at 18-20% and RoE at 20-22%

over the same period.

Management's focus is to create a long term growth model in the US, Russia

and India. We maintain a Buy recommendation on the stock.

78September 2013


Glenmark Pharmaceuticals

Company Represented By:Mr Jason D'Souza,Head - Investor Relations


Alok Dalal

+91 22 3982 5584

[email protected]

Hardick Bora

+91 22 3982 5423

[email protected]

Bloomberg Code GNP IN

Rating Buy

CMP (INR) 529

Mcap (USD b) 2.2


1, 6, 12 Rel Perf (%) -7/6/14

Sector: Healthcare


End (INR m) (INR m) (INR) Gr. (%) (X) (X) (%) (%) Yld (%) EBITDA

03/12A 40,206 3,244 12.0 -8.6 44.1 6.0 13.5 11.4 0.4 16.6

03/13A 50,123 4,992 18.4 53.9 28.7 5.2 18.1 16.1 0.4 15.6

03/14E 59,332 6,811 25.1 36.4 21.0 4.3 20.3 18.0 0.6 13.8

03/15E 70,496 8,740 32.3 28.3 16.4 3.5 21.3 20.1 0.8 11.2

Key Takeaways

Glenmark Pharma's (GNP) action plan over the next three years is to consolidate

its presence in existing markets, focus on improving profitability and generate

FCF, which is likely to be used to retire debt. Importantly, this growth will come

from already spent capex.

Healthy growth expected over next 3 years; to be achieved organically

GNP expects to achieve 22-25% revenue CAGR over the next three years driven

by key emerging markets, India and the US.

Growth will be organic and culminate from already spent capex.

Management does not plan to enter new markets during this phase.

US growth will be led by recent launches; niche segments are long term drivers

Management expects the US run rate to touch USD90m/quarter going forward

(USD77m in 1QFY14), aided by recent launches.

They have retained FY14 growth guidance of 18-20% YoY (in USD terms).

Growth in the long run will be led by differentiated filings; oncology (four

products filed), dermatology and OCs (entire basket filed) are to name a few.

Indian branded business to outgrow industry; immune to pricing policy

Management indicated that primary demand for GNP's products remains strong,

despite slowdown in the industry.

GNP is confident of growing significantly ahead of the market growth rate.

With capacities available at hand, this growth will not require any investment.

Current field force of 3,000 MRs is relatively small (IPCA has 4,000 MRs). Growth

in the long run will also come from field force addition.

Focus on improving profitability and strengthening balance sheet

Management will focus on expanding EBITDA margin further, through realizing

benefits of operating leverage.

This will be led by the improvement in Brazil (broke even in FY13) and Central

Eastern Europe (will break even in FY14).

With low capex requirement, GNP expects to generate free cash flow, which

will be used to retire debt.

Valuation and view

We believe GNP is well placed to deliver strong growth over the next few

years led by the US and emerging markets.

Its R&D pipeline is progressing well and that is an option value for the stock.

We maintain a Buy recommendation on the stock.

79September 2013


IPCA Laboratories

Company Represented By:Mr Ajit K Jain,Managing Director

Mr Harish Kamath,Company Secretary & VP -Legal


Alok Dalal

+91 22 3982 5584

[email protected]

Hardick Bora

+91 22 3982 5423

[email protected]

Bloomberg Code IPCA IN

Rating Buy

CMP (INR) 694

Mcap (USD b) 1.3


1, 6, 12 Rel Perf (%) 3/39/46

Sector: Healthcare

Year Net Sales PAT EPS EPS P/E P/BV RoE RoCE EV/ EV/


03/12A 23,587 2,762 21.9 4.7 31.7 7.0 24.0 24.1 3.9 18.1

03/13A 28,131 3,243 25.7 17.4 27.0 5.6 23.1 25.2 3.3 14.8

03/14E 33,101 4,428 35.1 36.5 19.8 4.6 25.6 27.1 2.8 12.5

03/15E 39,388 6,105 48.4 37.9 14.3 3.7 28.4 30.9 2.3 10.0

Key Takeaways

IPCA Laboratories will focus on five pillars of growth: India formulations,

international branded formulations, international generics, institutional business

and API. The management is confident of maintaining high revenue growth and

expanding profit margins. It has guided sales of INR60b in 2018.

Backward integration: The competitive edge

Focus on backward integration will be of paramount importance, as there is

huge scope to reduce cost in APIs through enhancement in technology.

This alone has helped IPCA to gain market share and generate superior profit

margins in the institutional tender business.

For the US market, IPCA's strategy is to target old, mature products that are

witnessing slow or negative growth.

IPCA holds high 85% market share in certain products in the US.

Institutional business to continue to benefit from backward integrated model

IPCA supplies two products under WHO's malaria program - Arthemeter/

Lumefantrine (AL) and Amodiaquine/Artesunate (AA) tablets.

The overall market is USD300-400m.

The management expects this business to grow 18% in FY14 to INR4.6b and 2x

to INR7.8b by FY18.

Approval of Indore SEZ to resolve capacity constraints for US

The recent approval of the Indore plant will ease capacity constraints and

result in strong growth in the US.

The facility can generate peak sales of USD100m, which can be achieved in

three years from commercialization.

IPCA has filed 36 ANDAs and received 15 approvals, of which it has 5 products.

It aims to file 8-10 ANDAs per year.

Valuation and view

We view IPCA as a structural growth story, with all business segments

contributing. We expect 35%+ CAGR over FY13-15.

The recent re-rating of the stock is likely to sustain over the next two years.

We maintain Buy.

80September 2013


Lupin

Company Represented By:Mr Ramesh Swaminathan,President - Finance

Mr Rajiv Pillai,Manager - Business Finance

Mr Alpesh Dalal,Manager - Investor Relations


Alok Dalal

+91 22 3982 5584

[email protected]

Hardick Bora

+91 22 3982 5423

[email protected]

Bloomberg Code LPC IN

Rating Buy

CMP (INR) 839

Mcap (USD b) 5.8


1, 6, 12 Rel Perf (%) -8/41/27

Sector: Healthcare


End (INR m) (INR m) (INR) GR. (%) (X) (X) (%) (%) Yld (%) EBITDA

03/12A 68,204 7,914 17.7 -8.7 47.4 9.3 21.7 24.6 0.4 32.7

03/13A 93,694 11,228 25.1 41.6 33.4 7.2 24.4 33.3 0.5 19.1

03/14E 110,147 15,707 35.1 39.9 23.9 5.7 26.6 33.7 0.7 15.5

03/15E 126,000 18,348 41.0 16.8 20.5 4.6 24.8 32.4 1.0 13.2

Key Takeaways

Lupin (LPC) envisions sales of USD5b by 2018, with an improving margin profile.

M&A is likely to be a key driver, given the need for generic companies to move

towards a specialty business model. LPC sees opportunities across the globe -

healthcare reforms favoring generics, biosimilars and an ageing population. We

believe LPC has identified its next leg of growth fairly well and is well positioned

to capitalize on the opportunities in US, India, Japan and RoW.

Strong US pipeline to be key earnings driver over FY13-15

Contribution from recent launches like Diovan HCT, Tricor, Yasmin and other

oral contraceptive products planned over the next two years is likely to

increase. LPC expects USD125m from oral contraceptives by FY15.

The company is also slated to launch key products like Trilipix, Nuvigil and

Oracea over the next few years.

India, Japan to be support drivers for US generics

LPC has developed a strong portfolio around fast-growing chronic therapies

like CVS and anti-diabetes. It is also planning to launch its dermatology segment

in FY14.

LPC posted 18.5% revenue CAGR in the segment over the last five years. The

management expects to outpace industry growth. However, growth could be

muted in FY14 due to (1) implementation of the New Pricing Policy, and (2)

growth over a high base of FY13.

LPC is well placed in Japan to outpace the generic industry growth rate.

M&A to be important driver for US branded business and emerging markets

LPC has indicated that it would continue to look for brand acquisitions in the

US to strengthen its presence in this space.

In addition, it is also looking for acquisitions in promising emerging markets

like Brazil and Russia.

LPC's net debt-equity stands at 0.2x.

Valuation and view

We see a lot of promise in LPC's US pipeline and believe that the company is

well placed to grow at a CAGR of 25% in the US over the next few years.

We expect India, Japan and RoW would be support drivers for the US story and

believe that LPC's superior product mix would lead to margin expansion over

the next few years.

We maintain our Buy recommendation.

81September 2013


Ranbaxy Laboratories

Company Represented By:Mr Umang Khurana,Head - Investor Relations

Mr Anand Newar,Manager - Investor Relations


Alok Dalal

+91 22 3982 5584

[email protected]

Hardick Bora

+91 22 3982 5423

[email protected]

Bloomberg Code RBXY IN

Rating Neutral

CMP (INR) 445

Mcap (USD b) 2.9


1, 6, 12 Rel Perf (%) 62/12/-30

Sector: Healthcare


End (INR m) (INR m) (INR) GR. (%) (X) (X) (%) (%) Sales EBITDA

12/11A 81,189 5,955 14.1 -52.8 28.1 5.8 -101.3 20.9 1.9 11.6

12/12A 98,640 5,953 14.1 -0.3 28.2 4.1 31.4 21.0 1.5 9.8

12/13E 115,238 1,893 10.6 -24.6 37.3 4.0 4.5 12.7 2.0 16.2

12/14E 126,657 10,983 13.0 22.1 30.6 3.3 21.9 15.9 1.7 11.3

Key Takeaways

Near-term triggers for Ranbaxy Laboratories (RBXY) will be approval of generic

Diovan in US with a 180 day exclusivity. Over the longer run, US FDA approval for

38 ANDAs pending approval from Mohali and Ohm Labs will drive US base business

growth. Increasing capacity utilization in these units, improving product mix in

India and cost rationalization are key factors that would drive margin expansion.

The management has retained its revenue guidance of INR120b for CY13.

ANDA approvals from Mohali and Ohm hold key

RBXY's pipeline for US can be divided into (1) filing from Mohali+Ohm Labs, (2)

filings from Paonta Sahib+Dewas, and (3) in-licensed or co-developed products.

The company has filed 38 ANDAs from Mohali and Ohm Labs which includes 7-

8 Para IV filings. Ranbaxy expects approvals from these products to drive US

base business sales and result in margin improvement.

The management indicated delay in FTF launch of Valcyte (due in September

2013) while no timelines were given on the Diovan launch.

Outstanding hedges to hurt till mid-CY15

RBXY has USD860m worth of hedges outstanding, booked at an average rate of

INR40-41/USD. It realizes USD105m worth of hedges every quarter.

These hedges will extinguish by mid-CY15 and will continue to impact the P&L

and the balance sheet till then.

Retains CY13 revenue guidance; expects industry level EBITDA margin by CY16

RBXY has retained its revenue guidance of INR120b for CY13 and has achieved

40% of this number in 1HCY13. Guidance includes upside from FTFs.

The management expects to achieve industry-level EBITDA margin by CY16,

aided by (1) increasing capacity utilization at Mohali and Ohm Labs, (2) growing

share of chronic therapies in India sales, and (3) cost rationalization measures.

Consent decree related remediation costs are impacting EBITDA margin by

2.5-3%. The management expects these costs to continue until CY14 after which

they will gradually taper down.

Valuation and view

We believe core margins will continue to remain soft in the near term due to

the loss in sales for products entering price control and remediation costs.

Approvals of pending ANDAs filed from Mohali and Ohm Labs will drive US

base business growth and restore investor confidence.

We maintain our Neutral recommendation as we believe current valuations

adequately reflect near term growth outlook for the company.

82September 2013


Sun Pharmaceuticals

Company Represented By:Mr Nimish Desai,GM - Investor Relations


Alok Dalal

+91 22 3982 5584

[email protected]

Hardick Bora

+91 22 3982 5423

[email protected]

Bloomberg Code SUNP IN

Rating Buy

CMP (INR) 529

Mcap (USD b) 8.4


1, 6, 12 Rel Perf (%) -5/31/51

Sector: Healthcare



03/12A* 80,095 25,914 12.5 42.7 42.2 9.0 21.5 30.4 13.0 32.6

03/12A 74,445 23,270 11.2 65.8

03/13A 103,519 32,775 15.8 40.8 33.4 7.4 24.2 31.7 9.1 20.9

03/14E 153,440 43,218 20.9 31.9 25.3 5.6 25.0 24.0 6.4 14.8

03/15E 176,540 48,754 23.5 12.8 22.5 4.4 22.0 33.2 5.3 12.9*Including Para-IV/one-off upsides

Key Takeaways

Sun Pharma's (SUNP) US sales momentum continues to remain strong as

performance of recently acquired URL Pharma and Dusa Pharma is better-than-

expected. SUNP's own pipeline is showing reasonable growth too. India and

emerging markets continue to support overall growth. SUNP remains comfortable

with its FY14 guidance.

Maintains FY14 sales growth guidance of 18-20%

Company remains comfortable with its FY14 sales growth guidance of 18-20%,

despite a high base of FY13.

SUNP has maintained that some of the price increases for products at Taro and

URL Pharma may not be sustainable.

M&A will continue to remain a key focus area for the company.

US sales growth momentum continues despite moderation in growth from Taro

US sales for 1QFY14 grew 28% YoY despite moderation in growth from Taro.

SUNP's recent acquisitions like Dusa Pharma and URL Pharma are doing better

than expectations, while its own pipeline in the US is showing a meaningful

growth.

SUNP continues to maintain that some of the price increases at Taro and URL

may not be sustainable in the future. Taro's largest product Nystatin/

Triamcinalone is already witnessing incremental competition from the re-entry

of Sandoz.

In July 2013, SUNP launched generic Prandin, with 180-day exclusivity in the

US. Prandin has a market size of USD200m. Company expects entry of at least

three generic players post conclusion of 180-day exclusivity.

Indian branded business to outgrow industry; immune to pricing policy

Company indicated that the new pricing policy will not have more than INR450-

500m impact on domestic formulations sales.

SUNP believes it is well placed to continue to grow ahead of market in India.

Valuation and view

We believe the US will continue to be the core earnings driver for SUNP along

with support from India and RoW markets. SUNP's strong pipeline of over 130

ANDAs pending approval will be a key growth driver over the next few years.

Company's margins and return ratios are likely to remain strong over the next

few years.

We maintain a Buy recommendation on the stock.

83September 2013


DB Corp

Company Represented By:Pradeep DiwediChief Corporate Sales &Marketing Officer

Peter SureshHead, Business IntelligenceUnit

PK PandeyHead, Investor Relations



Bloomberg Code DBCL IN

Rating Buy

CMP (INR) 242

Mcap (USD b) 0.7


1, 6, 12 Rel Perf (%) -2/2/10

Sector: Media



03/12A 14,638 2,021 11.0 -12.3 22.0 4.8 23.0 18.1 3.1 12.7

03/13A 15,923 2,181 11.9 7.9 20.3 4.3 22.3 18.0 2.8 11.9

03/14E 18,573 3,007 16.4 37.8 14.8 3.8 27.4 23.0 2.4 8.3

03/15E 20,798 3,621 19.7 20.4 12.3 3.4 29.2 24.9 2.0 7.1

Key Takeaways

Ad volumes have been sluggish in the current quarter, though yields remain strong.

The management is confident of sustaining double-digit yield improvement every

year for the next 3-4 years, led by price hikes and unbundling strategy. INR

depreciation is a potential headwind, but its impact could be restricted by stringent

cost control, including lowering consumption and changing the mix of newsprint

used.

Ad environment challenging post 1QFY14; yield improvement to the rescue

After strong ad revenue growth of 20% in 1QFY14, ad volumes have been

sluggish in 2QFY14.

However, yield improvement remains on track. Double-digit yield growth

seems sustainable for the next 3-4 years, led by price hikes and 'unbundling

strategy'.

The company expects growth in ad spends, mainly from the FMCG and Auto

sectors during the festive season, largely due to new product launches.

INR depreciation a headwind for newsprint cost

INR depreciation is a headwind and would lead to newsprint cost inflation.

Every 1% change in newsprint price impacts DBCL's earnings by 1.3%.

The management is confident of restricting the impact of higher newsprint

prices by (1) changing the mix of international newsprint (currently ~40%),

and (2) lowering consumption.

Valuation and view

We expect 29% earnings CAGR over FY13-15. The stock trades at 14.8x FY14E

and 12.3x FY15E EPS, and offers dividend yield (FY14E) of 3.3%.

Maintain Buy, with a target price of INR355 (18x FY15E EPS).

84September 2013


Hathway Cable

Company Represented By:Ganapathy SubramaniamChief Financial Officer

Mahesh MevadaAssistant General Manager -MIS



Bloomberg Code HATH IN

Rating Not Rated

CMP (INR) 278

Mcap (USD b) 0.6


1, 6, 12 Rel Perf (%) 10/10/19

Sector: Media



03/10A 7,328 -754 -5.3 NA NA 4.5 -8.5 1.0 5.9 34.5

03/11A 8,827 -313 -2.2 NA NA 4.7 -3.7 1.8 4.8 28.0

03/12A 10,121 -492 -3.4 NA NA 4.9 -6.1 1.8 4.1 24.9

03/13A 11,325 157 1.1 NA NM 4.8 1.9 6.1 4.2 17.1

Key Takeaways

Collection of customer application forms (CAF) is nearing completion in Mumbai/

Delhi (85-95%). In Kolkata, the progress has been slow (~50%). The company

expects net ARPU to increase from ~INR80 to ~INR 100 in the next 2-3 months,

while net payout to broadcasters (content cost less carriage revenue) is likely to

increase from INR15 to INR30 eventually. Post recent equity infusion, HATH is well

funded to digitize up to 15m subscribers (v/s current subscriber base of ~10.5m)

over the next three years without raising further equity.

CAF collection nearing completion in Mumbai/ Delhi; slow progress in Kolkata

Customer application forms (CAF) have been collected from 85-95% of the

subscribers in Mumbai/Delhi post seeding of set top boxes (TRAI deadline

was 2 August 2013).

However, progress has been slow in Kolkata, with ~50% CAF collection (deadline

was 23 August 2013).

Net ARPU to increase in next 2-3 months; payout to broadcaster to increase

HATH is currently billing local cable operators (LCO) on a net basis; it expects

net ARPU to increase from INR80 to INR100 over the next 2-3 months.

Net payout to broadcasters is likely to increase from INR15/subscriber to

~INR30/subscriber, eventually.

Funding in place for complete digitization

HATH is well funded to digitize up to 15m digital subscribers (v/s current

universe of ~10.5m) over the next three years without raising further equity;

it has seeded ~7m boxes, largely in Phase I/II cities.

Box subsidy is currently at ~INR1,000 (cost of INR1,800 less activation income

of INR800).

Valuation and view

The stock trades at an EV of 13.8x FY14E and 9.7x FY15E EBITDA (based on

consensus estimates). Not Rated.

85September 2013


Sun TV Network

Company Represented By:VC UnnikrishnanChief Financial Officer



Bloomberg Code SUNTV IN

Rating Buy

CMP (INR) 390

Mcap (USD b) 2.4


1, 6, 12 Rel Perf (%) -9/-7/17

Sector: Media



3/12A 17,574 6,946 17.6 -10.0 22.1 5.8 26.3 51.2 8.6 10.7

3/13A 18,176 6,835 17.3 -1.6 22.4 5.3 23.6 45.3 8.2 10.9

3/14E 22,086 7,656 19.4 12.0 20.0 4.8 24.1 47.5 6.6 9.3

3/15E 25,769 9,509 24.1 24.2 16.1 4.3 26.7 50.6 5.6 7.7

Key Takeaways

High base effect, economic slowdown could drag ad growth for rest of FY14

Sun TV expects ad growth of 10-12% for FY14 (v/s our estimate of 15%), implying

that ad growth could taper down to single digits in the forthcoming quarters

due to general market slowdown and high base in 2HFY14.

FMCG, Telecom and Auto sectors have been the key growth drivers.

Rationalization in inventory/ad rates to offset 10+2 minutes ad cap

Implementing TRAI's regulation of 10+2 minutes ad cap could lead to ad revenue

disruption for 1-2 months, but Sun TV is confident of pushing through ad rate

hikes to offset the revenue impact.

Domestic subscription revenue growth guidance of 20-25%, led by digitization

Sun TV expects domestic subscription revenue growth of 20-25% (v/s our

estimate of 20%) in FY14, driven by digitization-led incremental subscription

revenue.

Taking a three-year view, domestic subscription revenue could grow from

~INR5b to ~INR15b, led by digitization upside.

Phase-II monetization has started for Sun TV, with agreement with Hathway in

Bangalore. Digitization upside from Hyderabad and Vizag markets is likely to

be captured in the coming quarters, as court stay on digitization has been

vacated recently.

However, uncertainty continues on digitization in Tamil Nadu (Chennai in

Phase-I and Coimbatore in Phase-II) due to issues relating to Arasu Cable.

Other highlights

Directors' remuneration is currently at 10% of PBT. Sun TV has contemplated

changing this to fixed payment, but has not yet provided any clarity on this

issue.

Valuation and view

We expect 18% EPS CAGR over FY13-15, driven by ad & broadcast revenue

CAGR of 13% and domestic subscription revenue CAGR of 22%.

The stock trades at 20x FY14E and 16.1x FY15E EPS, and offers a dividend yield

(FY14E) of 2.7%. Maintain Buy, with a target price of INR515 (18x FY15E EPS plus

INR80/share to incorporate 50% of potential digitization upside).

86September 2013



Company Represented By:Atul DasChief Strategy Officer

Kanwaljeet SinghSenior Manager - CorporateStrategy and BusinessDevelopment



Bloomberg Code Z IN

Rating Neutral

CMP (INR) 222

Mcap (USD b) 3.3


1, 6, 12 Rel Perf (%) -10/2/18

Sector: Media



3/12A 30,406 5,712 5.9 -1.4 37.6 6.4 17.5 25.5 6.6 27.3

3/13A 36,997 7,194 7.5 27.9 29.4 5.5 19.6 29.1 5.4 20.8

3/14E 42,397 8,734 9.2 21.4 24.2 4.8 20.7 31.5 4.6 16.7

3/15E 49,153 10,481 11.0 20.0 20.2 4.1 21.4 31.8 3.9 13.8

Key Takeaways

Ad environment remains uncertain; significant market share gains unlikely

Zee expects industry ad growth of 7-9%. Typically ad growth has been ~2x real

GDP growth.

Ad rate hike taken last year contributed significantly to ad growth till 1QFY14.

On a high base, significant outperformance v/s market growth is unlikely.

While a more challenging ad environment could pose downside risks to our ad

growth estimates of 18/16% in FY14/15, we maintain our estimates, given the

management's conservative guidance track record.

Ad cap regulations could cause short-term disruption, but management confident

of passing on impact

TRAI's regulation of 10+2 minutes ad cap effective October 2013 could lead to

volatility in ad revenue for 1-2 months.

However, given Zee's scale advantage, it is confident of passing on the impact

of lower inventory to advertisers.

Phase-II digitization upside relatively low; Phase-III/IV to contribute post FY15

Digitization-led subscription revenue upside in Phase-II is relatively lower

due to better monetization earlier in the analog regime.

Phase-III/IV would contribute to subscription revenue post FY15, considering

the deadline of September/December 2014 and delayed monetization in

Phase-I/II thus far.

TRAI consultation on aggregators might impact distribution JV, Media Pro, but

any regulatory decision impacting aggregators will have much larger impact

on smaller networks than on a large network like Zee.

Confident of sustaining FY13 margin levels; INR depreciation a headwind for sports

business

INR depreciation remains a concern and could drag the sports business

profitability.

Zee has also recently launched two new channels: & Pictures (youth-focused

movie channel) and Zee Anmol (free-to-air GEC).

The management is confident of sustaining at least FY13 EBITDA margin level

of ~26% in FY14 v/s our estimate of 27.6%.

Valuation and view

We expect PAT CAGR of 21% over FY13-15 led by (1) ad revenue CAGR of 16%,

(2) domestic subscription revenue CAGR of 21%, led by digitization, and (3)

260bp margin expansion, driven largely by incremental subscription revenue.

However, valuations at 24.2x FY14E and 20.2x FY15E EPS adequately reflect the

positive outlook, in our view. Maintain Neutral with a target price of INR242

(22x FY15E EPS).

87September 2013


Hindalco Industries

Sector: Metals

Company Represented By:Mr Praveen MaheshwariCFO

Mr Sagar DhamorikarSenior Vice President



Bloomberg Code HNDL IN

Rating Buy

CMP (INR) 108

Mcap (USD b) 3.2


1, 6, 12 Rel Perf (%) 23/9/-5



3/12A 808,214 33,970 17.7 -2.9 6.1 1.2 20.3 7.3 0.7 6.8

3/13A 801,928 32,485 17.0 -4.4 6.4 1.1 18.0 5.8 0.9 8.5

3/14E 868,185 26,731 12.9 -23.7 8.3 1.0 12.2 5.4 0.8 7.8

3/15E 961,991 26,429 12.8 -1.1 8.4 0.9 10.9 6.3 0.7 6.4

Consolidated

Key Takeaways

Hindalco's (HNDL) cash flows are expected to increase in FY15 due to stabilization

of Utkal Alumina and Mahan smelter. As the capex cycle has peaked, deleveraging

will start during FY15.

Cash flows to improve in FY15

HNDL is selling forward, net LME and forex exposure, to the extent of 50-60%

of primary aluminum production of its Indian smelters to reduce the impact of

LME volatility on earnings. Thus, there will be limited benefit of recent INR/

USD depreciation in the current year.

BS remains stable despite high volatility in INR/USD rates due to negligible

foreign currency loans in the Indian BS. Novelis' debt will be serviced by its

own USD cash flows.

Novelis is still on track to deliver USD1b EBITDA. Once the entire benefit of

USD2b capex is realized over the next two to three years, Novelis is expected

to deliver USD400/ton margin, with volumes of 3.7mt.

Expect strong aluminum demand driven by auto sector

Aluminum has been replacing steel as the preferred choice in automobile

manufacturing. Demand from Auto has posted 25% CAGR in last three years as

environmental and regulatory curbs, such as CAFE standards, accelerated the

replacement process. There are significant cost benefits associated with higher

aluminum usage in automobiles, which overshadows the higher initial cost.

HNDL expects that the new warehousing regulation and demise of inventory

financing deals will not result in panic selling of aluminum and expects the

metal locked in warehouses to come out in a phased manner.

Targets to be at bottom 5-10% percentile of cost curve, post expansion

Cost of production (CoP) of alumina at Utkal will be the lowest in the world

once production is stabilized fully. Aluminum CoP too will be lowest in the

world at Mahan and Aditya once the associated coal blocks start production.

Post successful completion of Mahan and Aditya smelters and Utkal refinery

along with associated coal blocks, HNDL expects to be back at bottom 5-10

percentile of the cost curve (currently at 25-30 percentile from bottom).

Mahan is seeing progressive commissioning, with 32 of 360 and 2X150mw power

capacity (total 6x150mw) commencing operations. Coal block is awaiting stage

II forest clearance and will be operational in next two years.

Utkal Refinery has also been commissioned, while 22-km conveyor bauxite

transport from mines to the refinery is expected by middle of next year.

Aditya smelter is likely to be commissioned by this year-end. Talabira-2 coal

mine for the project is at a nascent stage. Around INR60-70b of capex for various

Indian projects is pending and will be incurred over FY14 & FY15. Maintain Buy.

88September 2013


Jindal Steel & Power

Company Represented By:Mr K RajagopalChief Financial Officer &Director

Ms Pallavi KumariInvestor Relations



Bloomberg Code JSP IN

Rating Neutral

CMP (INR) 233

Mcap (USD b) 3.3


1, 6, 12 Rel Perf (%) 17/-34/-43

Sector: Metals

Key Takeaways

Jindal Steel and Power (JSP) is witnessing flat demand in the domestic market for

long products but believes that INR depreciation provides some room for increasing

prices. Angul expansion is expected to be completed in 2HFY14, while there is no

clarity on Utkal B1 coal block.

Long product demand mostly flat; mulls price hike JSP has not been witnessing any major pick-up in domestic long product

demand. Although there has been a marginal improvement in August.

It is getting some orders for rails due to demand from freight corridors.

Depreciating INR and improvement in global steel prices have provided some

room for domestic producers to increase prices. However, domestic demand

scenario is not very encouraging.

JSP is mulling a price hike of INR1,000-1,500/t, while it has already raised prices

of pellet to INR7,000/t.

Angul expansion to add 0.6mt of plate in FY14; Utkal B1 mine uncertaintycontinues JSPL's 2.5mtpa Angul project is expected to be progressively commissioned

over 2HFY14. The 4.5mtpa pellet plant is expected to be commissioned by

4QFY14.

The 2mtpa Oman expansion into steel makings is expected to be

commissioned by FY14-end.

It expects 0.6mt of incremental plate production and 0.9mt of incremental hot

metal production on account of Angul expansion.

Utkal B1 continues to face delays as there was no clarity on timeline for starting

the mine. Currently, it is undergoing competent GPRS survey.

JSP believes that in the absence of coal block project, EBITDA margin will fall

from 40-42% to 34-35% for the project.

Capex guidance is maintained at INR90b/INR30b for FY14 /FY15 respectively.

3 units of 600mw each to be commissioned in FY14 Three units of the four from 4x600mw Tamnar II is expected to be

commissioned in FY14. The 4th unit is expected in 1QFY15.

JSP has coal linkages for the first two units, while it expects to get linkage for

the remaining two units, post long term PPAs with SEBs. It is also awaiting the

outcome of biddings at UP and Rajasthan.

Currently, it has a long term PPA for Tamnar II with the Tamil Nadu SEB for

400mw at INR4.9/kwh for 15 years. Company is also selling another 200mw to

the Tamil Nadu SEB from Tamnar I. Maintain Neutral.



3/12A 182,086 39,649 42.4 5.6 5.5 1.2 24.6 16.9 2.1 5.7

3/13A 198,068 35,842 38.3 -9.6 6.1 1.2 19.4 13.1 2.3 6.7

3/14E 201,919 25,657 27.4 -28.4 8.5 1.0 12.8 9.2 2.5 8.3

3/15E 269,675 30,589 32.7 19.2 7.1 0.9 13.5 10.2 1.8 5.9

*Consolidated nos

89September 2013


JSW Steel

Sector: Metals

Company Represented By:Mr Pritesh VinayVP - Capital Market& Group IR



Bloomberg Code JSTL IN

Rating Se l l

CMP (INR) 580

Mcap (USD b) 2.1


1, 6, 12 Rel Perf (%) 11/-20/-23



3/12A 343,681 14,844 66.5 -11.6 8.7 0.8 9.1 8.8 1.1 6.4

3/13A 382,097 11,091 49.7 -25.3 11.7 0.8 6.6 8.4 1.1 6.5

3/14E 450,188 14,665 60.7 22.0 9.6 0.8 8.2 9.9 1.1 6.1

3/15E 445,778 16,584 68.6 13.1 8.5 0.7 9.1 9.4 1.1 5.8

*Consolidated nos

Key Takeaways

JSW Steel (JSW) expects its Dolvi unit to turn around in FY15 due to plant level

integration projects coming on stream by the year-end. It is also witnessing

improvement in export oriented demand and had made the first shipments to

China.

Dolvi unit turnaround in FY15 JSW believes that its plant level integration projects will give significant boost

to operating margins at Dolvi.

It is investing ~INR22b in the 55mw WHRB, railway siding, lime calcinations,

1mtpa coke oven plant and 4mtpa pellet plant for its Dolvi units.

1st unit of coke oven battery is expected to be commissioned in December

2013 while 2nd unit is expected by March 2014. Pellet plant is expected to be

commissioned by November 2013.

Around USD150-200m of savings is expected on account of these

improvements, once these facilities are fully operational.

It is not importing iron ore as landed cost of fines from Odisha is less than

imports.

Maintain guidance of 11.55mt of saleable steel in FY14 JSW is targeting to produce 11.55mt of saleable steel and 12mt of crude steel

in FY14.

It is procuring ~2.5mt of iron ore for Karnataka operations from Chhattisgarh

and Odisha to meet the requirements of Vijaynagar unit.

Company believes the gross debt of INR300b (without acceptances) is at its

peak level and is expected to decline going forward due to tapering capex

requirements.

It plans to spend ~INR50b, INR40b and INR17.5b in FY14, FY15 and FY16

respectively.

About 39% is forex debt, which is un-hedged. JSW is also evaluating hedging

policies to reduce volatility in earnings due to USD/INR movement.

INR depreciation improves competitiveness; makes first shipment toChina Company is witnessing an improvement in export oriented demand post

significant depreciation of INR against USD.

It believes that Indian steel is becoming more competitive globally, and made

its first shipment of commodity grade HR to China.

Stock is trading at FY15E EV/EBITDA of 5.8x. Maintain Sell.

90September 2013


BPCL

Company Represented By:Mr J. DinakerED - Corporate Treasury

Ms Shakuntala PendseChief Finance Manager -Pricing and Insurance


Harshad Borawake

+91 22 3982 5432

[email protected]

Kunal Gupta

+91 22 3982 5445

[email protected]

Bloomberg Code BPCL IN

Rating Buy

CMP (INR) 300

Mcap (USD b) 3.3


1, 6, 12 Rel Perf (%) 12/-24/-25

Sector: Oil & Gas

Year Net Sales Adj. PAT Adj. EPS EPS P/E P/BV RoE RoCE Div EV/

End (INR b) (INR b) (INR) Gr. (%) (X) (X) (%) (%) Yield EBITDA

03/12A 2,121 7.8 10.8 -52.2 27.7 1.4 5.0 5.2 1.8 10.8

03/13A 2,422 18.8 26.0 140.9 11.5 1.3 11.5 8.9 3.7 7.3

03/14E 2,485 22.2 30.7 17.9 9.8 1.2 12.6 9.6 2.7 6.4

03/15E 2,575 25.9 35.8 16.8 8.4 1.1 13.5 9.6 3.3 5.7

*Consolidated

Key Takeaways

Bharat Petroleum Corp Ltd's (BPCL) management remains optimistic on its overseas

E&P portfolio and domestic oil sector reforms.

Expect Mozambique FID by 4QFY14; Brazil reserves announcement in CY14

E&P projects are largely on track and the final investment decision (FID) on

Mozambique is expected by 4QFY14. Marketing contracts, an important

milestone for FID, are under negotiation and announcement regarding the

same is expected along with FID.

Company also clarified that reserves from its discoveries in Brazil are likely to

be announced in 1HCY14.

BPCL has already spent ~USD1b on its E&P business and is expected to spend

another USD300m each over the next two years.

Expect no impact from recent RBI directive on USD swap window

BPCL highlighted that recently announced RBI swap arrangement is a six-month

swap (coiuld be rolled over) and the premium of 8% will be absorbed by RBI.

RBI is yet to decide on the forex benefit/impact due to this arrangement.

Post completion of six months, OMCs will be required to buy dollars from the

market and return to SBI (RBI's nominee bank).

Bina breakeven GRM at ~USD10-11/bbl; de-bottlenecking to boost profits

While Bina refinery's 1QFY14 GRM stood at ~USD8/bbl, a minimum GRM of

USD10-11/bbl would be required to break even.

Current capacity utilization is 95% and can go up to ~110%. Likely creeping

expansion to further improve profitability.

Export parity to impact GRMs by ~USD2/bbl, capex of INR140b in next 2 years

BPCL indicated that a shift to export parity pricing would impact its GRM by

~USD2/bbl. Also, many countries operate on an import parity basis.

Expects Kochi refinery expansion from 9.5mmt to 15.5mmt to complete by

March 2016. Total LNG requirement, post expansion, will be 0.6mmtpa.

Capex guidance —INR60b in FY14 and INR80b in FY15.

In line with Government directive, company is likely to raise long term forex

debt of USD1b to meet core working capital requirements (unlike earlier norm

of long term debt only for capex). Current forex debt is USD2.8b (40% hedged).

Valuation and view

While the headline gross D/E stands at ~1.5x, adjusted for subsidy receivables

and oil bonds, BPCL's net debt would stand at ~INR120b (gross debt at

~INR190b), implying adjusted net D/E at 0.7x. We maintain BPCL as our top pick

among OMCs due to its E&P upside. The stock trades at 7.5x FY15E EPS of

INR35.8 and 0.4x FY15E adjusted BV. Maintain Buy with a target price of INR455.

91September 2013


ONGC

Company Represented By:Mr A K SrinivasanGGM - Chief CorporateFinance

Mr S RanganathanChief Manager - F&A


Harshad Borawake

+91 22 3982 5432

[email protected]

Kunal Gupta

+91 22 3982 5445

[email protected]

Bloomberg Code ONGC IN

Rating Buy

CMP (INR) 289

Mcap (USD b) 37.9


1, 6, 12 Rel Perf (%) 5/-9/-6

Sector: Oil & Gas


End (INR b) (INR b) (INR) Gr. (%) (x) (x) (%) (%) BoE EBITDA

03/12A 1,464 260 30.4 24.1 9.5 1.8 20.7 19.4 6.7 3.8

03/13A 1,614 242 28.3 -6.9 10.2 1.6 16.8 15.6 5.0 3.5

03/14E 1,791 248 29.0 2.5 8.6 1.3 15.6 14.9 4.6 3.2

03/15E 2,033 353 41.3 42.2 6.1 1.1 20.0 18.9 4.4 2.3

*Consolidated, EV/BOE in USD on 1P basis

Key Takeaways

Oil & Natural Gas Corp Ltd's (ONGC) management is optimistic on its standalone

oil production growth in the near-to-medium term.

New and marginal fields to contribute to production ramp-up from 2HFY14

ONGC is investing INR342b in 13 new and marginal fields' development, of

which seven are expected to commence production in FY14 and others by

FY16. Of the total gain of 172mmt from IOR/EOR, 80mmt has already been

produced.

Production guidance (including JV): (a) Oil - 28.7mmt - FY15, 28.9mmt - FY16

and 28mmt in FY17 and (b) Gas - 26.5bcm - FY15, 27bcm - FY16; 29bcm in FY17.

Mozambique stake at 15%; OVL to produce >8mmtoe in FY14

As per an earlier arrangement, post ONGC's additional 10% stake purchase

from Anadarko in Mozambique, it will reduce its earlier stake to 5% (from 6%),

resulting in OINL stake increase from 4% to 5%.

OVL is likely to produce >8mmtoe in FY14E (v/s 7.3mmtoe in FY13), helped by

recent Azerbaijan purchase. Myanmar (ONGC stake at 17%) gross gas production

likely to increase from current 2.2 to 14mmscmd by end-FY14.

Demands minimum net realization of USD65/bbl v/s USD47.8/bbl in FY13

ONGC's current cost of oil production is ~USD40/bbl and given the reinvestment

requirement, it expects to get a minimum net realization of USD65/bbl (has

already demanded the same from Government).

It does not expect subsidy sharing exceeding FY13 level of USD56/bbl.

Perspective Plan 2030 targets volume CAGR at 4%

ONGC plans to double production to >130mmtoe by 2030. It aspires to increase

OVL production from current ~8mmt to 60mmt by 2030.

Targets to unlock >450mmtoe yet-to-find (YTF) domestic reserves.

ONGC targets to increase the non-E&P revenue to 30% by 2030.

Gas price hike to benefit FY15 earnings

Believes that the gas price hike from April 2014 (FY15) benefit will be passed

on to ONGC and does not expect it to be revenue neutral.

ONGC does not expect differential gas price hike for private firms and PSUs.

Valuation and view

Near term triggers include likely production increase in 2HFY14 and higher gas

price from April 2014. We factor gas price of USD8.2/mmbtu for FY15E and

Brent price of USD105/bbl for FY14E/FY15E. The stock is attractive: (a) >40%

discount to its global peers on EV/BOE (1P basis) and (b) implied dividend

yield of ~4%. The stock trades at 6.1x FY15E EPS of INR41.3. Our SOTP-based

target price for ONGC is INR401/sh. Maintain Buy.

92September 2013


Reliance Industries

Company Represented By:Mr. Hemen Modi, Vice

President & Head - IR


Harshad Borawake

+91 22 3982 5432

[email protected]

Kunal Gupta

+91 22 3982 5445

[email protected]

Bloomberg Code RIL IN

Rating Neutral

CMP (INR) 868

Mcap (USD b) 42.9


1, 6, 12 Rel Perf (%) 0/4/2

Sector: Oil & Gas

Year Net Sales PAT EPS P/E ADJ. EPS*Adj. P/E Adj. P/B RoE RoCE EV/

End (INR b) (INR b) (INR) (X) (INR) (X) (X) (%) (%) EBITDA

03/12A 3,299 200 61.3 14.2 67.7 12.8 1.5 13.0 12.1 8.4

03/13A 3,603 210 65.0 13.3 71.9 12.1 1.4 12.3 11.6 8.8

03/14E 3,714 228 70.6 12.3 78.0 11.1 1.3 12.1 11.5 8.8

03/15E 3,709 246 75.9 11.4 83.9 10.3 1.2 11.8 11.4 8.2

*Adjusted for treasury shares

Key Takeaways

E&P regulatory environment is slowly turning positive and the gas price hike

decision is expected to rejuvenate RIL's E&P segment. Organized retail business

is targeting 40-50% growth in the coming years.

New projects on track - meaningful addition from FY16/FY17 Polyester expansion: Capacity to commission from 2HFY14.

Petcoke gasification: Procurement of long lead items is ongoing; expect to

complete by FY16. Expects GRM addition of USD2.5/bbl.

Off-gas cracker: Technology suppliers, project management and EPC contractors

finalized; likely to commission by 2016/17.

E&P gathers steam post gas price hike, but benefit back-ended RIL received approval for USD1.2b (gross) capex in FY14 for production

augmentation (through booster compressor and workover/sidetracking wells)

in D1/D3 and MA fields and expects to complete by FY15.

The recent MJ-1 discovery will be appraised in the current year, though

production may take three to four years.

Expect meaningful increase in RIL's domestic gas production in three to five

years, mainly from CBM, satellite/R-series in KG-D6 and NEC-25.

Post the positive PAT in FY13 in shale gas business, RIL expects profitability to

improve in coming years, led by higher volumes.

Core business outlook stable; petchem margins to improve gradually Refining: While the economy is fragile, refining capacity addition largely

matches with the oil demand growth.

Polymer: Expects margins/earnings to improve led by hike in customs duty

from 5% to 7.5% in May 13 and continued double digit domestic demand.

Polyester: While uneconomical polyester capacities are set to shut down,

integrated polyester players like RIL will be better placed.

Valuation and viewEvery 1% INR depreciation results in ~1.2% increase in EPS for RIL. For FY14E/

FY15E, we model a) GRM at USD9.2/bbl, b) KG-D6 gas price at USD4.2/8/mmbtu and

c) KG-D6 volumes at 13/14mmscmd respectively. Meaningful earnings addition is

expected only in FY16E/17E, when its large projects (petcoke gasification/off-gas

cracker) commission, and later in FY18E when its gas volumes increase. RoE to

hover at ~12% in the medium term and core business outlook is unlikely to improve

meaningfully in the near term. On FY15E basis, the stock trades at 11x adj. EPS of

INR84 and EV/EBITDA of 8.8x. Our SOTP-based target price stands at INR943/sh.

Maintain Neutral.

93September 2013


Prestige Estates Projects

Company Represented By:Mr Venkat K Narayana,Executive Director & CFO

Mr Shivaprasad Naik,Sr Vice President - CorporateFinance

Covering Analyst(s):Sandipan Pal+91 22 3982 [email protected]

Bloomberg Code PEPL IN

Rating Buy

CMP (INR) 117

Mcap (USD b) 0.6


1, 6, 12 Rel Perf (%) -7/-31/-14

Sector: Real Estate


End (INR m) (INR m) (INR) Gr (%) (X) (X) (%) (%) Sales EBITDA

3/12A 10,523 826 2.4 -51.7 49.8 1.8 3.8 6.6 5.3 18.7

3/13A 19,476 2,860 8.2 246.2 14.4 1.5 10.4 11.7 3.2 10.7

3/14E 24,073 3,569 10.2 24.8 11.5 1.3 11.7 12.5 2.6 8.5

3/15E 30,787 4,652 13.3 30.3 8.8 1.0 12.5 15.1 1.3 2.6

Key Takeaways

On track to achieve INR5b annual rentals and ~18% yield by 1HFY16

Prestige (PEPL) is on track to achieve its INR5b annualized rental income target

by the end of FY15. Its roadmap comprises INR3.2b of annualized rentals in

FY14 (v/s INR2.3b in FY12).

While overall leasing velocity is not very encouraging, PEPL expects leasing of

8-9msf of office space in the Bangalore market in 2013.

With INR5b of rentals, PEPL would earn ~18% yield on its annuity portfolio.

The next big capex cycle is distant. PEPL plans to moderate annuity capex

meaningfully after achieving INR5b annual rental income. It will distribute

50% of its rental income as dividend and re-invest the balance.

Development business to grow on market share gain and big launches

PEPL's presales volume growth would be driven by (1) gain in market share in

core geography, and (2) diversification into other southern states like Chennai

and Kerala. While its outlook on the Hyderabad market is positive, in its

planned entry, it would be cautious and selective.

It targets 25-30% (v/s 15-17% currently) share of the organized real estate

market in Bangalore and overall annual presales of INR50-55b in the medium

term. It operates in 1/3rd of the micro-markets within Bangalore. Market share

gain hinges on (1) entry into new micro-markets, where demand is strong, and

(2) strengthening presence in existing locations.

Four large projects - Lake Side Habitat, Falcon City, Chennai land, and Sarjapur

land (each with INR30-40b revenue potential) are on launch radar in 15-18

months, with at least two targeted over 2HFY14-QFY15.

Demand for the Chennai Villa project (Silver Spring), launched in 2QFY14, is

strong. PEPL expects 2Q presales run-rate to remain strong at ~INR8b.

Land buying to continue in strong demand corridor; aimed at fast turnaround

Cash outgo towards land acquisition (largely through JDA route) would be

INR4-6b per year, though PEPL's focus would remain on fast turnaround of the

acquired projects, thus returning refundable deposits.

It expects FCFE to turn positive by FY15, with the completion of current annuity

portfolio, which may lead to better payout.

Valuation and view

With a wide product presence across verticals and strong client base, PEPL has

been a key beneficiary of favorable market mix.

The stock trades at 8.8x FY15E EPS, 1.2x FY15E BV, and at 42% discount to our

NAV estimate of INR202. Buy with a target price of INR182.

94September 2013


Sobha Developers

Company Represented By:Mr V Ganesh,CFO

Mr K Bala Murugan,Sr Manager - VC & MD's office

Covering Analyst(s):Sandipan Pal+91 22 3982 [email protected]

Bloomberg Code SOBHA IN

Rating Not Rated

CMP (INR) 248

Mcap (USD b) 0.4


1, 6, 12 Rel Perf (%) -15/-39/-37

Sector: Real Estate


End (INR m) (INR m) (INR) YoY (%) (X) (X) (%) (%) Sales EBITDA

3/10A 11,299 1,341 13.7 -7.5 - - 9.6 7.5 - -

3/11A 13,767 1,824 18.6 36.0 - - 10.2 10.7 - -

3/12A 14,079 2,060 21.0 12.9 11.8 1.2 10.7 13.6 2.5 7.7

3/13A 18,645 2,172 22.2 5.5 11.2 1.1 10.5 14.5 2.0 6.8

Key Takeaways

Bangalore steady, Gurgaon to see product re-sizing due to slowdown

Sobha's core market remains strong, and with market consolidation, the

company is on track to achieve presales guidance of INR26b in FY14, and

subsequently, double-digit volume growth over the next 2-3 years. NRI

demand and enquiries have been strong, with favorable currency trend.

Presales run-rate continues to be strong, with decent response to its 2QFY14

premium launches in (1) Yamlur, Bangalore (Palladian; INR8.5k/sf), and (2)

Calicut (Bella Encosta; INR7.2k/sf).

With slowdown in Gurgaon, Sobha plans to re-size villa area to lower ticket

size. It targets launching 25msf over FY15-16 in addition to 6-8msf in FY14.

JDA preferred route; land buying aimed at quick churn only

Going ahead, Sobha would acquire land largely though joint development

agreements (JDA). It would buy land outright only if it has high conviction on

churning the land within 12-18 months.

Lack of superior execution ability among local developers is the driving force

behind Sobha's plan to foray into the NCR (Noida, Ghaziabad) market. However,

land acquisition would be through JDA.

Foray into commercial a long-term positive; liquidity strong to support capex cycle

The management believes its entry into the commercial vertical is a step in

the right direction. It will add an annuity stream, giving resilience against the

vagaries of the economic cycle. However, it would follow a slow and selective

approach in choosing assets in this vertical.

It has strong conviction in the value accretion potential of the APMC commercial

projects it has entered into recently (which raised investors' concerns). It

expects 13-15% yield on cost of the asset. Capex commitment in this 2msf

project (1msf office space and 1msf retail) would be limited during FY14-15

(INR0.75b in FY14), but would balloon over FY16-18.

Strong cash flow generation in development and contractual business (positive

FCFE) would render resilience to any capex and land outgo without stretching

the balance sheet (net gearing to remain 0.5-0.6x).

Dividend payout would remain at 25-35%, and may increase further, with higher

cash surplus (current yield is 3%+).

Valuation and view

Consistency in core operations is likely to percolate to steady growth in cash

flow and earnings over FY14-15, aiding re-rating potential. Its balance sheet

strength, quality of management and better governance offer comfort.

The stock trades at 10.8x FY13 EPS and 1.1 x FY13 BV. Not Rated.

95September 2013


Future Retail

Bloomberg Code FRL IN

Rating Under Review

CMP (INR) 79

Mcap (USD b) 0.3


1, 6, 12 Rel Perf (%) -2/-43/-38

Sector: Retail



06/11A 110.1 1.9 8.7 7.1 10.3 0.6 6.2 12.1 5.8

06/12A 122.5 1.1 4.8 -45.2 18.8 0.6 3.4 12.0 5.9

06/13E 139.9 1.5 6.7 39.9 13.4 0.6 4.6 13.2 5.2

06/14E 158.0 2.1 9.3 39.0 9.7 0.6 6.2 9.5 4.9

Company Represented By:Mr C.P. Toshniwal, CFOMr Dipayan Baishya,Senior IRMs Reenah Joseph, IR


Key Takeaways

Future Retail (FRL) outlined the possible improvements in operating business

model, post the multiple restructuring/deleveraging steps undertaken in CY12

and CY13.

Ample scope for further de-leveraging FRL has undertaken series of deleveraging steps resulting in reduction in

leverage. It resulted in debt reduction of nearly INR40b; however, cash flows

of INR7b from insurance stake sale is yet to materialize.

Net debt stands at INR54b, including CCD of INR6.8b.

Stake sale in Biba (28% stake) and AND (22% stake) are in final stages and

likely to conclude in 2QFY14.

As per management, there are more assets available for sale - 9.5% stake in

Capital First (erstwhile Future Capital), 19.7% in Future Lifestyle Fashion, 70%

in Future Supply Chain (possible stake sale of 44%), 9.5% in Future Ventures.

Interest cost will remain flat QoQ in September and start declining from

December 2013.

Productivity and efficiency improvement - key focus areas Having largely concluded the restructuring process, FRL is looking at improving

the efficiency and throughput from existing stores to drive operating

profitability.

Big Bazaar's renovation is largely over and benefits of the same are reflected

in improved throughput from the renovated stores, as per management.

Post the divestment of Pantaloon format stores to AB Nuvo group, FRL is driving

margin improvement by focusing on high margin fashion merchandise in Big

Bazaar format through FBB -- Fashion at Big Bazaar stores.

Management has guided for free cash flow generation in FY15.

Valuation and viewWe expect the benefits of recent restructuring and deleveraging steps to manifest

in next 12-18 months -- reduction in interest costs, improvement in working capital

etc. Currently, the stock is Under Review and our indicative SOTP for FRL works

out to INR135/share (we now remove 50% direct stake in FLF from our SOTP as it

has been demerged and value the indirect 20% holding in FLF through FRL with a

25% holding company discount); we value the core retail business at 8x EV/EBITDA

and other investments (Future Logistics, Staples etc) at book value.

96September 2013


Shoppers Stop

Company Represented By:Mr Sanjay Chakravarti, CFO

Mr Manohar KamathChief of Retail Operations


Bloomberg Code SHOP IN

Rating Neutral

CMP (INR) 350

Mcap (USD b) 0.4


1, 6, 12 Rel Perf (%) 0/-12/-10

Sector: Retail



3/12A 19.0 0.6 7.8 -14.5 44.8 4.4 9.9 11.0 20.4

3/13A 22.3 0.4 4.9 -37.9 72.1 4.2 5.9 7.3 23.4

3/14E 26.8 0.6 7.0 43.5 50.2 4.0 7.9 9.9 18.4

3/15E 31.2 0.9 10.6 51.9 33.0 3.6 10.9 13.1 13.9

Key Takeaways

Shoppers Stop (SHOP) management gave a cautiously optimistic outlook.

Festive season is the key; profitability sharply impacted by new stores

Like-to-like sales growth to remain in 8-10% band. Weak discretionary

consumption environment is impacting footfalls and conversion.

Expect a good wedding season in 3QFY14 as number of wedding days is higher.

Breakeven time for new stores has stretched to 18-24 months v/s 12-18 months

earlier.

Festive season, commencing with Ganpati festival, holds the key for FY14

performance.

Like-to-like EBITDA margins are strong at 8.5% - it has lost 3% margins due to

the impact of new stores, which are taking a longer time to mature.

Brands have not shared the benefits of excise reduction with customers/

retailers.

Costs continue to pose a challenge to margins - power cost is up 25-30%, while

employee cost has seen 10% inflation.

Shoppers Stop: Expansion will continue till FY15

No change from the earlier guidance on expansion plans - 12 Shoppers Stop

stores for FY14 and 8 for FY15 and 3 from FY16 onwards.

Debt should peak at INR4.5b by FY15 in Shoppers Stop standalone.

HyperCITY: Series of steps to drive profitability

Looking at space rationalization to boost productivity and profitability.

Will add two to three stores every year and focus on metros like Mumbai and

Bengaluru.

HyperCITY is looking to increase the salience of Apparels in its mix to drive

profit margins. It has defocused on selling CDIT and mobiles.

Valuation and view

Stock trades at a P/E of 50.2x FY14E and 33x FY15E standalone EPS. SHOP has added

~20 stores in the past two years which has impacted the profit margins, as LTL sales

growth has been impacted by poor consumer sentiment. Given the continued

headwinds to discretionary consumption, we see further risks to our estimates

ahead. HyperCITY profitability remains the key concern area. Maintain Neutral.

97September 2013


Titan Industries

Company Represented By:Mr Subramaniam, CFO


Bloomberg Code TTAN IN

Rating Neutral

CMP (INR) 228

Mcap (USD b) 3.1


1, 6, 12 Rel Perf (%) -15/-9/-7

Sector: Retail



3/12A 88.4 6.0 6.8 40.5 33.6 14.0 48.9 66.9 23.2

3/13A 101.1 7.3 8.2 20.1 28.0 10.3 42.5 59.4 19.0

3/14E 120.1 8.3 9.3 13.9 24.6 8.0 32.6 52.6 16.6

3/15E 142.0 9.9 11.2 19.8 20.5 6.3 30.7 49.1 13.6

Key Takeaways

Titan Industries' (TTAN) management presented a very cautious outlook on

Jewellery business.

Jewellery business faces multiple challenges

Gold price spikes from 25,000 to 31,000 per 10gm and has dampened demand.

Discretionary demand is weak and impacting Watches as well.

Flat 15% discount in diamond has helped studded sales but only at the margin

as overall demand environment is subdued.

Gold imports are yet to resume post the July circular of RBI. Currently, TTAN

has enough inventory but if the imports do not resume, it will have problems

ahead. Federation is engaging with authorities to find ways.

If 2nd tranche of gold is allowed to be imported after the receipt of proceeds,

then it can be a big challenge as credit offered is very high in some cases (e.g.

up to 270 days).

Currently, company is sourcing gold from SBI and some other refineries that

had existing stock.

Hedging will be done through three months forwards on MCX and will earn a

premium of ~5%. However, recently futures went into contango, which is

unusual and adds to costs.

Watches sales and margins both are soft. It will need to take price hikes to

pass on the rupee depreciation impact.

Given the weak discretionary demand environment, TTAN sees little value in

expanding Watches network. Eyewear is still showing secular growth as it's a

need based demand.

Diversification strategy

Fragrance launch is imminent and may happen before 2Q.

Helmets will be possibly launched in FY14. Company is trying to leverage its

brand strength in a largely unorganized category, with fragmented competition.

In both these segments, TTAN will outsource manufacturing and focus on

branding and marketing.

Valuation and view

Stock trades at a P/E of 24.6x FY14E and 20.5x FY15E EPS. We see multiple headwinds

for TTAN due to weak discretionary demand for jewellery, regulatory tightening

of gold imports and stoppage of low cost gold-on-lease funding model. Thus,

notwithstanding our long term preference for TTAN's dominant positioning in its

core categories, we maintain Neutral.

98September 2013


Tribhovandas Bhimji Zaveri

Bloomberg Code TBZL IN

Rating Not Rated

CMP (INR) 138

Mcap (USD b) 0.1


1, 6, 12 Rel Perf (%) -19/-37/18

Company Represented By:Mr Prem Hinduja, CFO

Ms Rashi Zaveri, Director


Key Takeaways

The management highlighted new steps to deal with the current challenging

scenario for the Jewelry sector.

Multiple ways to deal with gold shortage

Demand is muted for both gold as well as studded jewelry. 2Q is a seasonally

weak quarter, but gold price spike has aggravated the demand scenario.

TBZ is currently procuring 26% of its gold requirement from its exchange

scheme (exchange of old jewelry). Given the supply shortage prevalent in the

industry, it aims to take the proportion of this segment to 35%.

TBZ has an offer from State Bank of India for supplying gold from its gold

deposit scheme.

Additionally, TBZ is launching a new scheme for procuring gold, whereby

customers can deposit a maximum 100gm of gold (either in coin or bar form)

with TBZ and avail of ~5% interest at the end of 12 months i.e. the customer

will get 105gm at maturity. According to the management, this scheme does

not violate any of the existing rules/regulations. TBZ will restrict procurement

under this scheme to 25% of its current net worth.

Existing gold-on-lease contracts run till December, post which, TBZ may need

debt for procuring gold. It is comfortable with debt-equity of 1.5:1.

No change in expansion plans Despite the challenges surrounding jewelry retailing, TBZ has not changed its

expansion plans.

Its store productivity is the highest in the industry, with mature stores

delivering INR300k/sf/year. New stores start with INR240k/sf/year and reach

maturity in three years.

A typical store breaks even in 6-8 months.

Its Zaveri Bazaar store contributes INR2b in revenue while its Hyderabad store

contributes INR1.8b.

Valuation and viewTBZ trades at 10.8x FY13 EPS and 7.8x FY14E EPS. We see multiple headwinds for

the Jewelry sector, given the high CAD-led regulatory overhang on gold imports

and removal of gold-on-lease funding model for jewelry inventory. Not Rated.

Sector: Retail

99September 2013


HCL Technologies

Company Represented By:Mr Anil Chanana , CFO

Mr Sanjeev Nikore,Sr Corporate VP,President Consumer

Mr Sanjay Mendiratta

Head, IR


Ashish Chopra


Siddharth Vora


Bloomberg Code HCLT IN

Rating Buy

CMP (INR) 1,016

Mcap (USD b) 10.9

52-Wk Range (INR) 1051/548

1, 6, 12 Rel Perf (%) 5/34/68

Sector: Technology

Year Sales PAT* EPS* EPS P/E* P/BV RoE RoCE EV/ EV/


6/12A 210,312 24,556 35.1 52.0 29.0 6.5 25.6 21.2 3.3 17.6

6/13A 257,336 40,250 57.0 62.6 17.8 4.9 32.2 29.1 2.6 11.5

6/14E 315,295 52,606 74.0 29.8 13.7 3.8 36.3 31.4 2.0 8.9

6/15E 345,836 56,437 78.9 6.6 12.9 3.1 30.5 27.6 1.7 8.1

Key Takeaways

On-premise ERP demand slows down; sees shift in demand pattern

Demand environment for software services remains stable-to-positive. ERP market

is not similar to what it was few years ago, and growth in the segment is leveling

out, primarily as licence sales for on-premise ERP are not growing. Mature

outsourcers are now looking to work with select vendors. Secondly, Continental

Europe is a potentially high growth segment, where the outsourcing practice is

one generation behind the US and UK markets. Run-the-business (RTB) segment

is driving growth in the geography. Engineering services growth is looking up in

Europe, which is a positive for software services segment (2/3rd of the company's

revenue, which grew in single digits in FY13). European clients were outsourcing

earlier too, but the bulk of work went to European vendors. That is now changing

and is benefiting companies like HCL Technologies (HCLT).

Growth in Infrastructure should remain strong even after the rebid opportunity

Order book continues to be good in the rebid market, on expected lines.

Opportunity is seen to peak out in 2015. However, penetration in IMS still remains

low and growth potential is huge. Thus, growth in IMS could continue even after

the rebid market cools off. Cloud services are driving the rebid market as well. In

new technologies like cloud, it remains to be seen who will emerge as the winner.

HCLT is approaching the opportunity by addressing the entire ITO space. It

endeavors to provide clear consulting path to give integrated solutions to migrate

to cloud. Today, 80% of the deals in rebid space are containing components

addressing a shift to such platforms. This is offering additional 15-20% savings in

cost.

Reinvestments of currency benefits will be visible once volatility slows

It is too early to decide the course that gains from currency will take. Company

will share some productivity benefits with clients, reinvest some into the business

and also take some of the gains on to its P&L. However, it will let currency stabilize

before deciding on the specific course of future action.

Revenue visibility and limited margins are concerns, valuation still attractive

Currency is a key risk to margins at HCLT as levers to offset headwinds from an

appreciating rupee appear limited. However, HCLT's return ratios and operating

cash flow conversion remain extremely healthy. We expect the company to grow

its USD revenue at a CAGR of 12.8% over FY13-15E and EPS at a CAGR of 17.6%

during this period. Our target price of INR1,100 discounts FY15E EPS by 14x. Maintain

Buy.

100September 2013


Info Edge (India)

Company Represented By:Mr Sanjeev Bikhchandani,Founder & Executive ViceChairman

Mr Ambarish Raghuvanshi,Group Director Finance &CFO


Ashish Chopra


Siddharth Vora


Bloomberg Code INFOE IN

Rating Not Rated

CMP (INR) 297

Mcap (USD b) 0.5


1, 6, 12 Rel Perf (%) -10/-14/-21

Sector: Technology

Key Takeaways

Recruitment vertical: innovating amid perceived threat from LinkedIn

While the hiring environment remains soft, Info Edge India (INFOE) is not seeing

de-growth in its recruitment vertical, like in 2009. However, expectation at the

moment is of only marginal growth. While LinkedIn is not impacting the business

currently, it remains a threat. To combat the same, Naukri.com is looking at multiple

innovations to increase stickiness - like creating recruiter profiles to be tracked by

job seekers, using data for salary benchmarking etc.

99acres.com: high growth but intense competition; to remain in investment mode

While revenue on 99acres.com is growing at a healthy rate, competition is fierce

from five to six players. Thus, INFOE is responding through greater investments in

sales and product development. Also, the site is looking to expand geographically,

an exercise which is made feasible by presence of Naukri.com across the country.

99acres.com is present in 15 cities and the number could go up to 20 by the year-

end. Currently, 60% of the revenue is from builders and the remaining from brokers.

Jeevansathi.com: 1.5 years more before reviewing the course of action

INFOE had chalked out a three-year plan for Jeevansathi.com, approving more

investments and the company is half way through the tenure. It will continue

with its efforts for another year-and-a-half, before reviewing the course of action

that needs to be taken on the same. Investments thus far have yielded results.

The site is looking to attract some communities by offering all the services entirely

free of cost to them.

Other businesses: Zomato.com and Meritnation.com hold most potential

Among other investments, INFOE has exited three and is invested in six. While

Policybazaar.com and Canvera.com have highest revenue among these, the

potential is maximum at Zomato.com and Meritnation.com. The two sites also

account for more than 50% of total investments in these ventures. Zomato is

present in 14 cities in India and 13 cities overseas. The strategy is to increase

coverage in existing cities before expanding to more. Meritnation.com's focus

will remain on students than schools, given the preference for B2C model.

Valuation and view

INFOE trades at 26.8 FY14E and 21.2 FY15E consensus EPS. While the company's

assets enjoy healthy leadership in their respective segments, near term outlook

is clouded by two overhangs: [1] GDP growth, which determines the growth and

profitability for the company and [2] competitive intensity in key ventures -

LinkedIn for Naukri.com, Magicbricks.com among others in the real estate segment

and JustDial.com for Zomato.com. We currently do not have a rating on the stock.



3/10A 2,322 569 5.2 -1.0 57.0 8.5 16.1 21.4 12.2 41.7

3/11A 2,936 840 7.7 47.5 38.6 7.0 19.8 26.3 9.3 28.1

3/12A 3,771 1,230 11.3 46.4 26.4 5.6 23.7 22.6 6.8 17.9

3/13A 2,322 1,315 9.4 -16.9 31.7 4.9 21.2 19.3 6.1 17.7

101September 2013


Infosys

Company Represented By:Mr Rajiv Bansal, CFO

Mr Jayesh Sanghrajka,AVP - Assistant FinancialController Finance


Ashish Chopra


Siddharth Vora


Bloomberg Code INFO IN

Rating Buy

CMP (INR) 3,021

Mcap (USD b) 26.6

52-Wk Range (INR) 3,140/2,190

1, 6, 12 Rel Perf (%) -2/4/14

Sector: Technology



3/12A 337,340 83,160 145.5 21.9 20.8 5.2 28.0 32.9 4.5 14.2

3/13A 403,520 94,206 164.9 13.3 18.3 4.3 25.7 28.5 3.7 12.9

3/14E 486,014 103,680 181.5 10.1 16.6 3.7 23.8 27.4 2.9 10.8

3/15E 528,688 110,925 194.1 7.0 15.6 3.1 23.5 24.4 2.6 9.9

Key Takeaways

Improved momentum could show in numbers next year; some concern for

customers exposed to emerging markets

Momentum is definitely better than last year. While there is no material change

in the environment in the last three to four months, there are lots of large

deals in the pipeline. Many of this traction should show up in numbers in the

next year. If the positive sentiment and momentum remain as it is, without

further improvement, next year should see acceleration in growth.

Customers with exposure to emerging markets will be concerned. These were

the key growth drivers for companies, who are facing a double whammy -

from currency hit in the recent few months and some anticipated slowdown.

AUD is down from 1.07 to 0.89, while INR is down from 54-5 to 67-68.

BFSI demand improves in Europe, US data mixed but sentiment better

While macro data in the US is mixed, sentiment in the geography is definitely

better. However, Europe has learnt to live with the situation. Demand in the

Financial Services and Insurance vertical is picking up in Europe.

Focus on costs as pricing gets aggressive in pursuit of growth

Clients have always appreciated the delivery of Infosys (INFO). However,

winning new orders was impacted by premium pricing strategy followed by

the company. Thus, as INFO seeks to get aggressive in selling traditional

services, optimizing costs is imperative to sustain margins.

Hence, company is looking to cut flab wherever possible, and some of the

measures include: [1] taking utilization higher, [2] reducing onsite-offshore

efforts mix further, [3] improving employee productivity and [4] rebalancing

the employee pyramid in favor of lesser experienced workforce.

In investment mode this year, internal targets high

Internal targets are very high, with Mr Narayana Murthy looking at FY11

revenue growth of 25.7% and EBITDA margin of 32.6% as aspirations.

However, current year may be treated as the year of investments, with results

measurable only after a few quarters.

Revival in progress - Buy

INFO's operating performance in the last three quarters exemplifies the nature

of volatility in its business portfolio. Visibility remained weak, which has held

the management back from upgrading its revenue growth guidance, despite a

meager CQGR required to achieve the higher end of guided band.

Stock trades at 16.6x FY14E and 15.6x FY15E EPS. We expect INFO to grow its

USD revenue at a CAGR of 11% over FY13-15E and EPS at a CAGR of 8.5% during

this period. Our target price of INR3,330 discounts FY15E EPS by 17x. Maintain

Buy.

102September 2013


Tech Mahindra

Company Represented By:Mr Manoj Bhatt, Deputy CFO

Mr Vikas Jadhav, IR


Ashish Chopra


Siddharth Vora


Sector: Technology

Bloomberg Code TECHM IN

Rating Buy

CMP (INR) 1,359

Mcap (USD b) 2.7

52-Wk Range (INR) 1,434/831

1, 6, 12 Rel Perf (%) 7/25/51

Year Net Sales PAT# EPS* EPS P/E P/BV R0E RoCE EV/ EV/


3/12A 54,897 9,299 70.4 29.8 19.3 4.0 26.0 14.3 4.0 19.1

3/13A 143,320 18,214 93.2 32.4 14.6 4.1 32.6 35.3 4.1 8.2

3/14E 175,073 24,805 116.6 25.2 11.6 3.4 32.5 31.5 3.4 6.6

3/15E 190,367 26,998 127.0 8.8 10.7 2.6 28.1 27.7 2.6 5.8

Key Takeaways

Managed Services driving growth in Telecom, no signs of discretionary spend

Managed Services is one of the key growth drivers for Tech Mahindra (TECHM).

Company has come a long way in this offering from its first ever engagement in

2007. Up till two years back, it was engaged with 10 telcos across the emerging

markets, before getting its first opportunity in Australia.

Discretionary spend is overdue in Telecom, as usually the technology refresh cycle

is seven years. But there is no clear visibility of any revival, apart from some

spending picking up on the network side.

30-40% of revenue from BT up for renewal, AT&T continues to be strong

Company envisages gradual and not a sharp decline in BT. Renewal of the current

contract is due in 2014. The portion up for renegotiation is 30-40% of BT revenue.

TECHM's capabilities are very high as they have built most systems for the client.

It expects two to three Indian vendors to be key competition for this pie.

Outside BT, Telecom business is growing well. There are still a lot of untapped

opportunities in its second largest client, AT&T. There is still scope for outsourcing,

contributing to growth along with some discretionary spending.

Looking to expand contribution from BFSI

TECHM is a significantly smaller player in BFSI. This is limiting its access to larger

customers and also implies gap in skill set in certain areas. Currently, the strategy

is to focus on smaller customers, which has been working successfully. The aim is

to significantly improve revenue share from BFSI, for which the company is looking

at the inorganic route.

Favorably placed to address the discretionary spending from NMACS

Among the new technology trends, networks have been a strength area for TECHM,

thanks to its experience of servicing large telecom companies. Secondly,

acquisition of Comviva has also added to the company's capabilities around

mobility, which too is a strength area. Even cloud is TECHM's strength, given that

telecom companies were early adopters of the platform. Analytics capability is

lent by Satyam, given its presence in the enterprise applications space.

Potential re-rating play

Broad-based growth in 1QFY14 and sanguine outlook further alleviate concerns

on sluggish pieces like BT. We expect TECHM to grow its USD revenue at a CAGR of

11.7% over FY13-15E and EPS at a CAGR of 16.7% during this period. Gradual

improvement in the portfolio accompanied with improvement in cash generation

as acquisition spree takes a breather, will compel higher multiple. Our TP of

INR1,580 discounts FY15E EPS by 12x. TECHM is our preferred company in Tier II IT.

103September 2013


Wipro

Company Represented By:Mr Manoj Jaiswal, VPCorporate Treasury, IR

Mr Manish Sharma,Manager - IR


Ashish Chopra


Siddharth Vora


Bloomberg Code WPRO IN

Rating Buy

CMP (INR) 468

Mcap (USD b) 17.7


1, 6, 12 Rel Perf (%) 1/20/28

Sector: Technology



3/12A 318,747 52,325 21.3 -1.3 22.0 4.0 19.9 17.1 3.4 16.3

3/13A 374,256 61,362 25.0 17.3 18.7 4.1 21.6 18.9 2.8 13.5

3/14E 425,730 75,029 30.6 22.3 15.3 3.4 24.1 22.4 2.4 10.7

3/15E 457,899 78,747 32.1 5.0 14.6 2.9 21.5 20.5 2.2 10.1

Key Takeaways

Mining focus broadened to larger set of accounts, multiple factors favor better

growth

Wipro (WPRO) has identified 158 mega-gamma or key accounts, with a view to

broad-basing its focused clients group, following the success in top 10 accounts

strategy. In FY13, while constant currency (CC) revenue growth was 7.4%, top

10 accounts grew 17%. Even in the last quarter, while CC growth was 1.2%

QoQ, top 10 accounts grew 2.5% and top 125 grew 1.8%.

Also, company has 160 hunters chasing new logos, in its attempt to break

through into the Must Have Accounts or MHAs.

Impact coming from doing away with non-strategic tail accounts has reduced

significantly. The company endeavors to exit FY14 with revenue growth in line

with industry.

Win ratios have not improved, pipeline significantly better

WPRO's win ratios have not improved in comparison to last year. However, the

conversion has improved. It is chasing more deals in the pipeline now v/s past,

and that, at same win ratios, is translating to better order signings. The pipeline in

this period has increased by 1.5x, much of which is driven by large deals. Also, the

sales cycles are beginning to get smaller.

Margin improvement (ex-currency) remains a function of growth

Margin benefits from multiple levers will start reflecting once revenue growth

improves. While there are sporadic discount requests from clients, this is not

beyond the normal and the pricing environment for now has remained steady.

Expect to be back in the IMS game

WPRO believes that it should be back in the IMS game. Excluding India, IMS grew

by 18% YoY in FY13, and overall IMS growth was 12%. India is ~20% of the IMS

business, which was impacted by the demand environment and currency. Company

has won a few large deals in the segment, lending confidence of even better

growth, going forward.

Valuation and view

WPRO continues to trade at a discount to top tier peers like Infosys and TCS. While

WPRO's growth revival hopes are based on deal signings and 2Q guidance, its

proportion of business from IT products delimits its multiple. Due to multiple

indicators of a turnaround in WPRO's fortunes, we maintain a Buy, with a target

price of INR520, which discounts FY15E EPS by 16x.

104September 2013


Bharti Airtel

Company Represented By:Mr Gopal VittalJoint MD and CEO (India)

Mr Srikanth BalachanderChief Financial Officer

Mr Harjeet KohliGroup Treasurer

Ms Komal SharanInvestor Relations Manager



Sector: Telecom

Bloomberg Code BHARTI IN

Rating Buy

CMP (INR) 314

Mcap (USD b) 19.2


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


End (INR b) (INR b) (INR) Gr. (%) (X) (X) (%) (%) Sales EBITDA

3/12A 715 43 11.2 -29.6 28.0 2.2 8.1 6.2 2.6 7.9

3/13A 769 23 6.0 -46.6 52.3 2.2 4.2 4.3 2.3 7.8

3/14E 844 36 9.2 53.0 34.2 1.9 6.1 5.3 2.2 7.3

3/15E 917 59 14.7 59.7 21.4 1.8 8.8 6.5 1.9 5.8

Key Takeaways

The Indian wireless sector is undergoing passive consolidation, with ~90% of

incremental revenues accruing to the top-3 incumbents. RPM improvement is

likely to continue, given significant headroom to withdraw discounts, which

currently stand at 30-40% of headline tariffs. Data growth would remain strong,

driven by demographics and increasing smartphone penetration. Bharti is leading

marketing innovations to increase data penetration as well as usage per subscriber.

Regulatory clarity is increasing, with TRAI doing a commendable job of maintaining

a fine balance in its recent pronouncements.

Wireless market consolidating; further headroom for pricing improvement

Top-3 (Bharti, Idea and Vodafone) revenue market share has increased from

66% to 70% in the last 5-6 quarters, implying incremental share of ~90%.

There is still significant room for increase in voice RPM, given huge discounts

of 30-40% currently being offered.

Bharti has enhanced focus on the quality of subscriber acquisitions; it is

equipping the front-end with information based on analysis to improve

effectiveness and acquire/retain high value subscribers.

There is further headroom to improve cost efficiencies by eliminating wasteful

expenditure on sales and distribution as well as by improving network

utilization.

Young demographics a tailwind for data growth

Bharti is driving increased data penetration through marketing innovations

(recently launched INR1/song store) as well as usage by enhancing 3G uptake.

3G data subscribers use 5x data v/s 2G data subscribers.

Regulatory clarity increasing; slowdown unlikely to have significant impact

Regulatory clarity is increasing, with TRAI showing increased appreciation of

industry concerns and looking to devise a balanced approach protecting the

interests of consumers, government and operators.

Economic slowdown is unlikely to impact the wireless sector due to (1) strong

rural growth driven by better monsoons, (2) limited impact on relatively low

ticket-size products/services like telecom, and (3) increased pricing power.

Valuation and view

We expect 16% EBITDA CAGR for Bharti over FY13-15. The stock trades at an EV

of 7.3x FY14E and 5.8x FY15E EBITDA. Maintain Buy with a target price of INR450

based on 9x FY15E EV/EBITDA for India (ex-tower business), 6x FY15E EV/EBITDA

for Africa business, 15% discount to market value for stake in Bharti Infratel

and INR188b (INR47/share) for potential spectrum liability.

105September 2013


Reliance Communications

Company Represented By:Arvind NarangJoint President

J. MukundDeputy General Manager -Investor Relation



Bloomberg Code RCOM IN

Rating Neutral

CMP (INR) 140

Mcap (USD b) 4.4


1, 6, 12 Rel Perf (%) 12/117/171

Sector: Telecom



3/12A 203,424 9,884 4.8 -33.8 29.2 0.9 2.9 2.7 3.2 10.0

3/13A 210,035 1,945 0.9 -80.3 148.5 1.0 0.6 3.3 3.2 10.2

3/14E 219,928 10,430 5.1 436.2 27.7 1.0 3.5 3.8 2.9 8.9

3/15E 236,521 23,407 11.3 124.4 12.3 0.9 7.6 5.6 2.5 7.1

Key TakeawaysPost the strong RPM growth in 1QFY14, RCOM expects the consolidation to

continue, with further possibility of 10% RPM growth in the next 12-18 months,

led by tariff rationalization. However, high leverage and impact of INR depreciation

remain concerns. While RCOM has several asset monetization plans, timelines

remain uncertain.

Potential 10% RPM improvement in next 12-18 months

Post the 4% RPM improvement in 1QFY14, RCOM expects 3-4paise RPM

improvement over the next 12-18 months, led by tariff rationalization, v/s our

estimate of ~2paise improvement.

While its focus would be consolidation in voice business, RCOM would

aggressively compete in postpaid and data business.

High leverage/INR depreciation remains a concern

High leverage remains a concern, with net debt/EBITDA of 5.7x.

Of the net debt of INR385b, ~65% is forex-denominated and would be impacted

by INR depreciation.

Asset monetization plans in place; no specific timelines shared

Asset monetization plans include potential transactions in Global Comm/

Reliance Infratel and securitization of cash flows from tower deal with Reliance

JIO. However, RCOM shared no specific timelines for these deleveraging

transactions.

Tower deliveries to Reliance JIO are likely to be largely completed in FY14,

post which revenue will start accruing.

CDMA ramp-down continues; focus on GSM and data business

Wireless revenue market share loss over the past few years has been driven

by ramp-down in the CDMA business.

GSM and data business now constitutes ~65% of wireless revenue and grew

~6% QoQ in 1QFY14.

Valuation and view

We expect 12% EBITDA CAGR over FY13-15. The stock trades at an EV of 8.9x

FY14E and 7.1x FY15E EBITDA.

Maintain Neutral with a target price of INR110 (EV of 6.5x FY15E EBITDA). Our

target price incorporates (1) upside from the recently announced fiber sharing

deal with Reliance JIO, and (2) potential liability of ~INR35b towards spectrum

payment.

106September 2013


CESC

Company Represented By:Mr B L ChandakExecutive Director

Mr Pankaj KediaChief Manager - InvestorRelations


Nalin Bhatt


Aditya Bahety


Bloomberg Code CESC IN

Rating Buy

CMP (INR) 309

Mcap (USD b) 0.6


1, 6, 12 Rel Perf (%) -7/3/-7

Sector: Utilities

Year Net Sales PAT EPS* EPS* P/E* P/BV RoE RoCE EV/ EV/


03/12A 46,050 5,543 44.1 13.5 7.0 0.8 12.1 10.6 1.2 5.1

03/13A 52,418 6,185 49.2 11.6 6.2 0.7 12.3 10.9 1.2 4.9

03/14E 58,487 6,680 53.2 8.0 5.8 0.7 12.1 10.7 1.0 4.2

03/15E 64,768 7,131 56.8 6.7 5.4 0.6 11.6 10.4 0.8 3.8

* Excl Spencers; fully diluted

Key Takeaways

CESC expects 1.2gw of capacity additions by 3QFY15, and the Chandrapur project

will be commissioned by March 2014. Spencer's EBITDA loss expected to reduce to

INR350m in FY14E, down from INR872m in FY13.

Capacity to double by 3QFY15, Chandrapur commissioning by March 2014

CESC has synchronized 1st unit at Chandrapur (600mw) already, while 2nd unit

will be up by March 2014. Haldia (600mw) is likely by 3QFY15.

On offtake front for its Chandrapur project, it has been shortlisted for 100mw

of LTPPA with Tamil Nadu at a gross tariff of INR4.9/unit (net at INR3.91/unit).

Supply of power is scheduled from October but would start by December.

Until then, power would be supplied by procuring it from short term market.

Management expects its total cost at ~INR4/unit, considering 70:30 mix of

linkage coal and imports. RoE would thus be elusive but would provide

visibility of no cash losses.

CESC is also in talks with Tata Power to sign PPA for 110mw for the short term

and supply would begin from next year. It is also discussing with potential

open access customers, with load/demand of ~50-60mw.

Haldia project is entirely regulated and would supply power to its own

distribution business in Kolkata.

Total capex incurred in Chandrapur is INR34.5b, with a debt-equity of 75:25.

Further capital requirement would be nominal at ~INR1-2b.

Spencer's performance improvement, a key focus area

Spencer's is making an EBITDA loss of ~INR30m/month, which is expected to

reduce to INR350m in FY14, from INR872m in FY13.

Performance in 1QFY14 was even more robust, driven by strong revenue growth

and cost efficiencies. 1QFY14 average sales at Spencer's was up 15.7% YoY to

INR1,332/sft/month. Same stores sales also grew robust at 13% YoY to INR1,357/

sft/month.

CESC targets 25% new capacity additions in Spencer's and plans to develop

only big formats. It would continue to close the small stores.

Store level EBITDA thus improved to INR61/sft/mth in 1QFY14 v/s INR43/sft/

mth in 1QFY13.

Valuation and view

We expect CESC to report standalone PAT of INR6.7b in FY14E (up 8% YoY) and

INR7.1b in FY14 (up 6.7% YoY). The stock quotes at standalone FY15E P/E of 5.2x

and P/B of 0.6x. Maintain Buy.

107September 2013


Coal India

Company Represented By:Mr S Narsing Rao,Chairman


Nalin Bhatt


Aditya Bahety


Bloomberg Code COAL IN

Rating Neutral

CMP (INR) 277

Mcap (USD b) 26.9


1, 6, 12 Rel Perf (%) 5/-11/-34

Sector: Utilities

Year Net Sales* PAT* # EPS# EPS P/E P/BV RoE$ RoCE EV/ EV/

End (INR m) (INR m) (INR) GR (%) (X) (X) (%) (%) Sales EBITDA

FY12A 624,154 161,582 25.6 47.8 10.8 4.3 31.9 57.5 1.9 7.5

FY13A 683,027 176,624 28.0 9.3 9.9 3.6 28.4 56.9 1.7 6.3

FY14E 731,612 194,295 30.8 10.0 9.0 3.1 26.5 56.4 1.5 5.2

FY15E 777,870 203,734 32.3 4.9 8.6 2.7 24.5 50.9 1.4 4.9

* Excl Spencers; fully diluted

Key Takeaways

Coal India Ltd (COAL) is confident of achieving the offtake target and sustaining

earnings growth in FY14 through higher volumes, price increase (despite pressures

from cost), market linked realization and possible lower incentives.

Confident of achieving FY14/12th Plan target

COAL has a production target of 482mt in FY14 and dispatch target of 492mt. In

YTD FY14, production/dispatch stood at 167mt/189mt, implying residual growth

of 8.6/7.1% respectively in the balance seven months.

Land, R&R and evacuation infrastructure remain key bottlenecks. COAL had

planned a contribution of 60mt of volumes in the 12th Plan from coalfields

connected with three new railway lines. However, given muted progress on

these lines, it is unlikely to see any contribution.

Despite this, company remains confident of attaining a production level near

its target for the 12th Plan (615mt), led by additional production from the

brownfield expansion being done.

Realization on market linked volume face downward pressure

Management shared that offtake of high grade coal (Grade A/B) has been

impacted due to lower offtake from steel and sponge iron industries on

slowdown and cost pressure, despite 12% reduction in prices in May 2013.

Similarly, the e-auction offtake and pricing have been seeing muted response

and premium has come off to 45% (v/s 65% over FSA coal YoY).

Earnings sustenance likely, led by higher offtake

Higher wage cost, possibly lower incentives, lower realization from market

linked volumes and diesel cost would pressurize profitability. However, this

would be negated by volume growth and benefit from price hike taken in May

2013. Management believes FY14 would not see an earnings decline.

Possibility of buyback, higher dividend

COAL can buy back shares of INR45b on a standalone basis. However, OFS

cannot follow a buyback within six months.

Management also mentioned that higher dividend is an option for cash

utilization and payout would gradually increase. Stock offers near ~5% dividend

yield at current levels.

Valuation and view

We expect COAL to report net profit of INR194.3b in FY14E (up 10%) and

INR203.7b in FY15E (up 5%).

Stock trades at 7.8x FY15E EPS and 4.2x FY15E EV/EBITDA. Maintain Neutral.

108September 2013


NTPC

Company Represented By:Ms Sangeeta BhatiaGeneral Manager (Finance)



Nalin Bhatt


Aditya Bahety


Bloomberg Code NTPC IN

Rating Buy

CMP (INR) 134

Mcap (USD b) 17.0


1, 6, 12 Rel Perf (%) -3/-8/-33

Sector: Utilities

Year Net Sales PAT * EPS* EPS P/E P/BV RoE RoCE EV/ EV/

End* (INR m) (INR m) (INR) Gr. (%) (X) (X) (%) (%) Sales EBITDA

03/12A 611,449 79,720 9.7 0.2 13.8 1.5 11.3 11.3 2.3 9.6

03/13A 647,024 91,885 11.1 15.3 11.9 1.4 12.0 12.0 2.3 8.4

03/14E 652,080 102,005 12.4 11.0 10.7 1.3 12.2 12.2 2.3 8.7

03/15E 755,030 119,557 14.5 17.2 9.2 1.2 13.3 13.3 2.0 7.5

* Pre-excep. cons. earnings;we have factored in RoE gross-up based on MAT wef FY11 onwards

Key Takeaways

FY14 is an important year for NTPC Ltd (NTPC) on the fuel security front - 98% of

capacity is now covered under FSA and 1st captive mine will start production. It

has a capacity addition target of 1.9gw and generation target of 240bu (up 3.5%

YoY) in FY14.

FY14 capacity addition target at 1.9gw, generation growth of 3.5% YoY

NTPC has maintained its capacity addition target of 1.9gw and is targeting

commercialization of 2gw. It has a target to generate 240bu in FY14, growth of

~3.5% YoY.

In YTD FY14, NTPC registered a generation de-growth of 2% YoY, comprising of

coal-based generation up 2% YoY and gas-based generation decline 40% YoY.

Given lower gas supply, coal-based generation would be a key driver.

FY14 - landmark year for fuel security

FY14 marks an important year for fuel security as pending FSAs for new capacity

(post 2009) are in the process of being concluded. Management indicated that

98% of its existing capacity is covered under LT FSA.

NTPC has contracted a quantity of 125mt under FSAs for plants commissioned

before 2009 (90% trigger level at 112mt). For projects commissioned after

2009, FSA stands for 40mt (80% trigger level at 32mt).

Pakri Barwadih, its first captive mine, is also expected to start in December

2013, while overburden removal has started.

Company is in the last stage of commissioning its jetty to supply imported coal

to Farrakka and Kahalgaon projects. The jetty is ready and barges have been

bought and start-runs would commence in a few days.

Suggests lower normative PAF under new regulation, demand growth to revive

NTPC has suggested reducing the PAF levels in line with coal availability (~80%)

under the new regulation being applicable from 2014. It has also suggested

that O&M escalation rate should be increased and aligned with the current

inflation rate. It expects base RoE (15.5%) to remain intact.

Company expects demand growth in the system to pick up as distribution

reforms have already started like FRP and tariff hike. General elections in the

second half could also be a trigger for higher demand.

Valuation and view

We expect NTPC's earnings to post a CAGR of 14% over FY13-15E. We estimate

FY14E/FY15E net profit at INR102b (up 11%) and INR119.6b (up 17%). The stock

trades at 9x FY15E EPS and at 1.2x FY15E BV. Maintain Buy.

109September 2013


Power Grid Corporation of India

Company Represented By:Mr R. T. Agarwal,Director (Finance)

Mr B. Mishra,ED Corp. Planning & IT


Nalin Bhatt


Aditya Bahety


Bloomberg Code PWGR IN

Rating Buy

CMP (INR) 99

Mcap (USD b) 7.0


1, 6, 12 Rel Perf (%) 3/-8/-29

Sector: Utilities


End (INR m) (INR m) (INR) Gr (%) (X) (X) (%) (%) Sales EBITDA

3/12A 101,643 33,199 7.2 30.6 13.8 1.9 14.8 9.2 9.3 11.1

3/13A 127,579 41,359 8.9 24.6 11.1 1.7 16.6 9.3 8.6 10.0

3/14E 154,564 46,636 8.8 -1.9 11.3 1.5 15.1 8.9 8.1 9.3

3/15E 184,719 53,998 10.1 15.8 9.8 1.3 14.5 9.1 7.2 8.3

Key Takeaways

Power Grid Corp of India Ltd's (PWGR) management continues to remain upbeat

on the capitalization target for FY14 and 12th Plan. FPO is targeted in FY14.

PWGR target capitalization in line with capex

PWGR is targeting to retain its CWIP at the current level through the 12th Plan

and is thus targeting to match capitalization to capex - INR225b pa, given its

12th Plan target capex of INR1.1t.

Company had earlier increased its capex target to INR1.1t from INR1t, led by

addition of new projects and increase in projects cost.

In 1QFY14, PWGR had a capex of INR50b and capitalization stood lower at

INR29.5b, implying capex and capitalization of ~INR175b/195b in the remaining

9 months. We assume capex of INR221.5b in FY14E and capitalization at INR185b,

implying addition of INR171.5b/INR155.5b respectively in the remaining 9

months.

Delay in commissioning of generation projects does not impact PWGR's

revenue. Aggregate revenue required is booked system-wide and the cost is

shared by states on the basis of power consumption/flow.

Green energy corridor, state JVs - new opportunities

PWGR has prepared a detailed report on Green Energy corridor, with a total

opportunity size of INR420b. However, the Phase 1 considered currently is

estimated to present an opportunity of INR60b. Given the requirement to

award all projects under tariff-based bidding, a project being allotted to PWGR

is remote. Management expressed confidence of bagging projects as the base

work is done by them, and also due to sensitivity of international funding

involved, backed by sovereign guarantee.

Company is also working on two state JVs to upgrade/expand intra-state

transmission network. This includes JVs with the governments of Bihar and

Odhisha. The opportunity size for Bihar JV is ~INR63b, while Odhisha JV is

INR25b, totaling to INR88b. Management indicated that this could be taken up

over next five to six years, thus entailing yearly capex of INR15-16b only.

Valuation and view

PWGR is likely to go for a FPO in 4QFY14.

We expect the company to report net profits of INR46.7b in FY14E (up 12.8%)

and INR54b in FY15E (up 16%).

Stock trades at 9.8x FY15E EPS and 1.4x FY15E BV. Maintain Buy.

110September 2013


Just Dial

Company Represented By:Mr Mani, MDMr Ramkumar, CFOMr Sandipan- CTO

Covering Analyst(s):Niket Shah+91 22 3982 [email protected]

Sector: Others - Technology

Key Takeaways

Just Dial (JUST) management's strategy to evolve from a search engine to

e-commerce is likely to create non linear revenue model for the company. It plans

to launch ~20 new products over next six months. Management expects growth at

25-30% in the base business, driven by 200-250bp of margin expansion.

Moving from search engine to e-commerce JUST plans to launch new products like 24x7 food delivery, taxi bookings, movie

ticket bookings, Get quotes (reverse auction), courier services, purchase of

medicines, groceries and wine etc over next six months. This will create a non

linear revenue model for the company, which is not factored in our estimates

currently.

JUST has signed up with 3,000 restaurants for food delivery and hotels booking

product. It expects to sign up ~15,000 restaurants over next six months and

charge 7% commission on order value in the home delivery model.

Currently, company has ~INR5.5b in cash and will maintain a healthy dividend

payout of ~35%. To increase dividend payout as cash levels increase above

INR6b.

Friction-free Evergreen contracts to help improve sign-ups Management has rolled out friction-free campaign within Evergreen contracts

in May 2013, which helps a business become a paid subscriber without paying

initial three months advance (paid subscriber can pay for less than three

months or pay no advance). We believe this measure will help JUST improve

its paid campaign subscriber base significantly over next two years.

However, as most of these sign-ups are through an ECS mandate, it takes ~35

days for the mandate to show up and get cleared. Hence, some spill-over of

revenue has happened to 2QFY14.

Company expects Evergreen contracts to be ~80% of total paid subscriber base

in the next two years, thereby helping in realization improvement.

Management expects to reach the 1m paid subscriber mark in next five to

seven years (currently at 0.22m).

Valuation and viewWe believe that JUST's move to enter the e-commerce segment by leveraging its

existing strength is strategic, and will help it grow at a faster pace over and above

its 25-30% growth in the base business. The stock trades at 44.8x FY14E and 32.8x

FY15E earnings. Given its strong growth visibility, competitive positioning and

improving operating metrics, we believe the premium valuations are justified.

We value JUST at 36x FY15E EPS of INR22.2 and maintain a Buy, with a TP of INR796.


End (INR m) (INR m) (INR) Gr. (%) (X) (X) (%) (%) EBITDA Sales

03/12A 2,621 504 7.8 64.8 93.8 42.4 49.8 70.4 51.4 13.2

03/13A 3,628 702 10.1 30.2 72.1 11.4 26.3 37.5 34.3 9.5

03/14E 4,679 1,128 16.2 60.7 44.8 9.8 24.5 34.8 24.3 7.2

03/15E 6,004 1,544 22.2 36.9 32.8 8.3 28.5 40.5 17.1 5.5

Bloomberg Code JUST IN

Rating Buy

CMP (INR) 728

Mcap (USD b) 0.8


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

111September 2013


MCX

Company Represented By:Mr Hemant Vastani, CFO


Ashish Chopra


Siddharth Vora


Bloomberg Code MCX IN

Rating Buy

CMP (INR) 448

Mcap (USD b) 0.4

52-Wk Range (INR) 1617/238

1, 6, 12 Rel Perf (%) 32/-52/-73

Sector: Technology

Key Takeaways

Might seek more time to pare direct holding in MCX-SXMCX holds 5% directly in MCX-SX. Regulators had directed it to cut this holding to

half by December. However, the NSEL issue has hurt volumes at SX, though volumes

at MCX have thus far not been impacted. Bringing down stake in SX in the current

environment might warrant a distress sale. MCX might seek some extension on

the timelines to cut its stake in MCX-SX.

New SGF guidelines to impact interest incomePost the new guidelines on Settlement Guarantee Fund (SGF), MCX has deposited

5% of its gross revenues over FY08-FY13, amounting to INR1.4b, in addition to the

base minimum capital of members (INR0.87b) and refundable deposits (INR0.95b).

This will result in an INR2.25b decline in cash (the remaining in the form of

guarantees, etc). MCX will no longer earn interest on this cash, impacting its overall

interest income. Of the total cash and equivalents of INR12.5b on MCX's book,

INR7b is MCX's free cash, not going to SGF or emanating from traders' margins.

No penalties levied by FMC on the issue of IBMAIBMA was not an active trading unit on MCX. After the news of related-party entity

trading on the exchange, and FMC's opposition to the same, MCX discontinued

further volumes from the unit. There have been no penalties imposed or any

outstanding created as a result. IBMA was not an active trading body on the

exchange.

If technology provider changes, costs will not be impacted significantlyThe future course of action for FTECH, MCX's promoter, remains uncertain. Not

only is FTECH MCX's promoting group, but also its exclusive technology provider.

While there is no better clarity on what happens to that role, MCX does not count

this among its potential issues. Technology costs are 13-15% of revenues across

exchanges, as is the case with MCX, and this should continue even if MCX chooses

to go with another partner in the future.

Valuation and viewMCX currently trades at 13.5x FY14E and 11.9x FY15E EPS. Globally, emerging market

exchanges have been trading at a median multiple of 20x. However, a number of

factors specific to the exchange and more so the promoter group, have been an

overhang on the company's valuations. Without attributing any value to the stake

in MCX-SX and valuing the commodity futures business at 15x (25% discount), our

target price is INR506, implying 13% upside.

Year Sales PAT EPS EPS P/E P/BV RoE RoCE EV/ EV/


3/12A 5,262 2,862 56.1 65.6 8.0 2.3 31.0 24.8 2.0 3.2

3/13A 4,935 2,800 54.9 (2.2) 8.2 2.0 26.0 24.8 2.1 3.7

3/14E 3,391 1,688 33.1 (39.7) 13.5 1.9 14.2 13.6 2.8 6.1

3/15E 3,610 1,918 37.6 13.7 11.9 1.7 15.1 14.6 2.3 5.1

112September 2013


TTK Prestige

Covering Analyst(s):Niket Shah+91 22 3982 [email protected]

Sector: Others - Consumer Durables

Key Takeaways

TTK Prestige (TTKPT) expects growth to remain at 10-12% in FY14, driven by 25-

30% growth in non-south markets. Company expects a decline in south markets

due to slowdown in induction cooktops and Andhra Pradesh (AP) being affected

due to the political situation. Management believes rural demand will pick up in

2HFY14 due to strong monsoon.

South markets continue to witness slowdown TTKPT continues to face a decline of ~15-20% in south markets, primarily in AP,

Tamil Nadu (TN) and Kerala driven by a slowdown in induction cooktops. Even

Karnataka, which was doing well till last year, is facing slowdown issues. Though

cooktops saw a rapid growth in the last three years, this has become a stable

portfolio now, instead of being a growth driver.

TN power situation has improved but has not translated into demand, while

AP growth has been affected due to adverse political situation.

Expect growth decline to stop in 2HFY14 in south markets due to strong

monsoon, which might lead to higher rural demand.

Growth in non-south markets has slowed to ~40%. However, post 1HFY14,

higher base of non-south will lead to ~25-30% growth in non-south markets

for FY14.

Overall, company expects 10-12% revenue growth for FY14.

Rupee depreciation to affect in 2HFY14 Currency will start impacting in the coming months as TTKPT has inventory till

October.

Management plans to take a price increase of ~5%, but believes that complete

pass-through of currency impact would not be possible.

Company imports ~25% of requirements as its Gujarat capacity goes on stream

in October.

TTKPT expects exports to be lower, compared to last year, due to testing of

new microwave pressure cookers. Management plans to start exports by

October 2013.

Focus on brand building and market share gain Company plans to focus on brand building and expects to increase its ad spends

by 100bp in FY14.

It expects margins to remain in the range of 13-13.8% in FY14.

Will continue to add PSK stores in non-south markets over next two to three

years. Plans to add ~50 PSK stores every year.

Valuation and viewWe believe near term hindrances can affect growth, primarily due to a slowdown

in economy and lower growth in induction cooktops. The stock is trading at 29x

FY13 EPS of INR113.8. We do not have a rating on the stock.

Company Represented By:Mr K Shankaran , GM - Chief

Corporate Finance

Bloomberg Code TTKPT IN

Rating Not Rated

CMP (INR) 3,460

Mcap (USD b) 0.6

52-Wk Range (INR) 3,996/2,870

1, 6, 12 Rel Perf (%) -6/3/-8

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