Kotak - New Release - Strategy - The 100 Billion Dollar Club

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dot Strategy INDIA

INDIA
June 28, 2010
BSE-30:17,575
The 100 Billion Dollar Club. We analyze Indian companies and their attributes such
as (1) IPR (brand and technology), (2) financial and industrial assets and (3) natural
resources that can propel them to US$100 bn market capitalization over a period of
time. We also look at global experience to draw conclusions for India; every decade
throws up new and interesting names. Finally, we assess operating factors that are
required to achieve and sustain US$100 bn market capitalization.
Asset-based companies: A few banks can and will get there
Other than financial services companies, we are skeptical of any other asset-based company
entering the US$100 bn league from India. Asset-based companies require constant
INSIDE
reinvestment to grow and return on invested capital is not high enough in ‘mature’ businesses
SBI, HDFC Bank and
to create meaningful value. Most will trade at and around book value.
ICICI Bank key
IPR-based companies: A rarity in India and will likely remain so candidates to reach
US$100 bn…pg9
Infosys and TCS can make it to the US$100 bn league on a 15-16% CAGR in earnings up to
FY2021E and 14-15X P/E multiple. However, their headcount-led services business could face
issues of (1) scalability, (2) manpower and (3) margin pressure. We don’t see circumstances
Infosys and TCS may
changing meaningfully in India for creation of large IPR-based companies. get there but large
employee additions
Resource-based companies: Few candidates but right policies critical challenging…pg15
RIL and ONGC are obvious candidates to get to US$100 bn market capitalization fairly quickly.
For RIL, the migration to a resource-based company from an asset-based cyclical play would be RIL and ONGC well
critical. RIL’s ROIC has not been very high historically and has been supported by favorable on course to reach
fiscal incentives. For ONGC, a combination of (1) favorable government policies on pricing and US$100 bn…pg18
(2) volume growth from domestic fields (its R/P and RRR are quite high and lend credibility)
and judicious overseas acquisitions could drive its market capitalization to the coveted mark.
Global experience: Banks, IPR, natural resource plays dominate the league
BFSI companies (23), IPR companies (16) and natural resources companies (23) dominate the
Sanjeev Prasad
top-100 global market capitalization companies currently. This list has changed dramatically in sanjeev.prasad@kotak.com
every decade. Not only have the companies in the top-100 list changed over the past three Mumbai: +91-22-6634-1229
decades with (1) new companies from previously closed economies getting listed and (2) asset-
Amit Kumar
backed industrial companies losing prominence, even sectors in the top-100 list have changed amit.ckumar@kotak.com
over the past few decades with the emergence of the IT/media era. Mumbai: +91-22-6634-1392
Sunita Baldawa
sunita.baldawa@kotak.com
Mumbai: +91-22-6634-1325
Kotak Institutional Equities

Research
Important disclosures appear

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India Strategy
TABLE OF CONTENTS
World view: Change is the only constant................................................3
Asset-based companies: A few banks can and will get there ..................9
IPR companies: IT services companies only............................................15
Natural resources companies: Oil companies only.................................18
Appendix 1: Global top-100 market capitalization companies ..............22
Appendix 2: Indian top-100 market capitalization companies...............27
The prices in this report are based on the market close of June 25, 2010.
2 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Strategy India
WORLD VIEW: CHANGE IS THE ONLY CONSTANT

We note that 23 BFSI companies, 16 IPR-based companies and 23 natural resources companies account for the
top-100 companies by market capitalization currently. This list has changed dramatically over the past three
decades with only 19 survivors of 1989 top-100 list appearing in the current top-100 list. We use the global
experience as a framework to shortlist and analyze Indian companies. We caution that companies, which do
not possess long-term competitive advantages, rarely deliver value even in the medium term; their artificial
strengths, such as regulated markets and political affiliations, disappear quickly.
Companies change, sectors change

Our analysis of the top-100 companies by sectors and countries in 1989, 1999, 2004
and 2009 shows a fascinating change in the importance of sectors and countries,
which in turn partly reflects the evolution of new technologies and countries. We use
year-end prices for the years to sort companies by market capitalization. The analysis is not
perfect in that Japanese stock prices were inflated in the late 1980s and technology stocks
all over the world enjoyed frothy valuations in the late 1990s. Nonetheless, the analysis helps
track changes in companies and sectors. Appendix 1 gives the list of top-100 companies by
market capitalization in 1989, 1999, 2004 and 2009.
We make a few observations on our analysis.
` Market capitalization of the top-100 companies. The market capitalization of the top-
100 companies was US$11.8 tn in CY2009 compared to US$12.2 tn in CY1999 and
US$7.1 tn in CY1989.
` Breakdown by sectors. Exhibit 1 gives the breakdown of the top-100 companies by

sectors in 1989, 1999, 2004 and 2009. As can be seen, the BFSI (banking, financial
services and insurance) companies have been fairly consistent with 23 companies in the
2009 top-100 list compared to 27 in 1989.
Exhibit 1: BFSI, IPR-based and natural resources companies dominate the global market capitalization
list
Breakdown of Top-100 market capitalization companies by sectors (#)
2009 2004 1999 1989
Automoblies 2 1 3 9
Banking & Financial Services 21 21 11 25
Chemicals 2 2 1 2
Construction — — — 3
Consumers 10 7 6 4
Diversified 4 4 6 14
Electronics 5 6 10 9
Insurance 2 5 5 2
Media 1 5 5 1
Metals & Mining 5 1 — 4
Oil & Gas 18 8 5 4
Pharmaceuticals 9 14 14 4
Retailing 2 3 4 2
Services — 1 — —
Technology 7 8 12 2
Telecom 9 12 18 7
Transportation — — — 5
Utilities 3 2 — 3
Total 100 100 100 100
Source: FactSet, Kotak Institutional Equities
KOTAK INSTITUTIONAL EQUITIES RESEARCH 3

India Strategy
` Breakdown by geography. Exhibit 2 shows that 24 companies from the US and 28

companies from Japan dominated the league in 1989. This shifted to 37 companies for
the US in 2009 against only 5 from Japan. In the meantime, new countries have emerged
such as China with nine companies and Russia with three. Western Europe has been fairly
consistent with its IPR-based pharmaceutical, consumer products continuing to do well
along with banks, telecom and utilities, which face little threat from companies from
emerging markets.
Exhibit 2: New countries have emerged on the world map

Breakdown of Top-100 market capitalization companies by countries (#)
2009 2004 1999 1989

Argentina — — — 1
Australia 4 1 1 —
Belgium 1 — — —
Brazil 4 — — 1
Canada 1 — 2 1
China 9 — — —
Finland — 1 1 —
France 7 5 3 5
Germany 5 5 5 4
Hong Kong 2 1 2 1
India 1 — — —
Indonesia — — — 1
Italy 1 4 2 5
Japan 5 5 12 28
Netherlands 2 3 4 1
Norway 1 — — 1
Russia 3 1 — —
Saudi Arabia 1 1 — —
South Africa — — — 1
South Korea 1 1 — 9
Spain 3 3 1 2
Sweden — 1 1 —
Switzerland 4 4 4 2
Taiwan — — — 3
Thailand — — — 2
United Kingdom 8 8 8 8
United States 37 56 54 24
Total 100 100 100 100
Lessons for India: How big and how fast?

We use the global list of companies and their corresponding sectors as a framework
to sort and analyze Indian companies. We look at the factors that are the most prevalent
among the large market capitalization companies. Three groups stand out—(1) large asset-
based companies including financial companies, (2) IPR-based companies in IT and media
and (3) resource-based companies. We look at the presence and absence of factors that will
result in creation of large market capitalization companies in India.
` Large size of the economy and likely strong growth in GDP. Exhibit 3 compares the
size of the Indian economy with other major countries and also shows the per capita GDP
(PPP basis) of India relative to other countries. We note that India’s GDP per capita is still
very low compared to developed countries and we see this as an opportunity for Indian
companies.

Strategy India
Exhibit 3: India's GDP-per-capita is the lowest among top-20 global economies but indicates strong growth potential
PPP GDP and GDP per capita of key global economies
PPP GDP (US$ tn) PPP GDP-per-capita (US$)

Economy 1989 1999 2004 2009 Economy 1989 1999 2004 2009
United States 5,482 9,354 11,868 14,256 United States 22,169 33,502 40,451 46,381
China 844 2,721 4,698 8,765 Australia 17,348 26,321 32,293 38,911
Japan 2,119 3,058 3,666 4,159 Canada 19,152 27,203 33,409 38,025
India 658 1,411 2,096 3,526 United Kingdom 16,086 24,325 30,668 34,619
Germany 1,310 2,055 2,416 2,806 Germany 16,905 25,009 29,281 34,212
United Kingdom 918 1,428 1,835 2,139 France 17,092 24,611 29,255 33,679
Russia NA 999 1,549 2,110 Japan 17,226 24,154 28,703 32,608
France 964 1,444 1,777 2,108 Taiwan 8,985 18,919 24,942 31,834
Brazil 786 1,158 1,495 2,013 Spain 13,183 20,999 26,228 29,689
Italy 917 1,319 1,576 1,740 Italy 16,191 23,172 27,434 29,109
Mexico 555 960 1,232 1,466 Korea 6,962 14,964 21,138 27,978
Korea 296 698 1,015 1,364 Poland 6,117 9,624 12,700 18,072
Spain 511 838 1,111 1,361 Russia NA 6,862 10,740 14,920
Canada 521 826 1,066 1,281 Mexico 6,791 9,940 11,830 13,628
Indonesia 248 465 650 962 Turkey 5,009 7,845 9,844 12,476
Turkey 257 470 659 880 Iran 3,703 6,446 8,767 11,172
Australia 292 501 654 851 Brazil 5,457 6,861 8,231 10,514
Iran 197 403 592 828 China 749 2,163 3,614 6,567
Taiwan 181 418 566 736 Indonesia 1,387 2,243 3,005 4,157
Poland 231 372 485 689 India 779 1,376 1,883 2,941
Source: IMF, Kotak Institutional Equities
We expect India’s GDP to grow rapidly over the next several years (see Exhibit 4), which
will result in increased demand for various goods and services. In particular, we see
(1) favorable demographics (see Exhibit 5) and (2) high household savings (see Exhibit 6)
to result in continued strong demand for various financial products. As a corollary, we see
banks, financial services and insurance (BFSI) companies growing rapidly along with the
economy and becoming very large entities with market capitalization topping US$100 bn
in a few cases over the next decade.
Exhibit 4: India’s nominal GDP to grow to US$6 tn by FY2025E

Projected nominal GDP (at current exchange rates) and GDP per capita, March fiscal year-ends, 2010-25E
GDP (US$ bn, LHS) GDP per capita (US$, LHS) Population (mn, RHS)
7,000 1,400
6,000
5,000
1,300
4,000
3,000
1,200
2,000
1,000
0 1,100
2010
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
2024E
2025E
Source: Kotak Institutional Equities estimates

India Strategy
Exhibit 5: 88% of India’s population to be less than 60 years old Exhibit 6: India's high household savings rate to result in
by 2025E massive cumulative savings and opportunities
India’s age profile in 2025E (% of population) Breakdown of household savings rate by financial products (% of
GDP)
100
Currency Deposits
Shares and debentures Claims on government
80 Insurance funds Pension funds
20
60
16
40 12
20 8
4
0
10-14
15-19
20-24
25-29
30-34
35-39
40-44
45-49
50-54
55-59
60-64
65-69
70-74
75-79
80+
0-4
5-9
2010
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
2024E
2025E
Source: National Commission on Population, Kotak Institutional
Equities
` Macro-environment for creation of new technologies and innovation. We do not

see many IPR-based Indian companies becoming really big. The macro-environment just
does not exist, in our view.
The level of investment in high technology and R&D is too small for any real
breakthrough technology to emerge out of India over the next 10 years despite its
smart human capital. Exhibit 7 compares the R&D spending in India with other major
global countries.
The poor quality of education and low ratio of graduates to total intake of
students (see Exhibit 8) restricts the availability of the right talent pool for higher
education (beyond graduation).
Exhibit 7: India's R&D expenditure needs to increase for any Exhibit 8: Low tertiary GER restricts the availability of the right
progress in IPR industries talent pool in India
Research and development expenditure, calendar year-end, 2007 (% Gross tertiary enrolment ratio of key economies, calendar year-end,
of GDP) 2008 (%)
Economy R&D (%) Economy GER (%)
Korea 3.5 Korea 96
Japan 3.4 United States 82
United States 2.7 Australia 75
Germany 2.6 Russia 75
Australia 2.2 Spain 69
France 2.1 Italy 67
Canada 2.0 Poland 67
United Kingdom 1.8 Canada 60
China 1.5 United Kingdom 59
Spain 1.3 Japan 58
Italy 1.1 France 55
Russia 1.1 Germany 46
Turkey 37
Brazil 1.0
Iran 36
India 0.8
Brazil 30
Iran 0.7
Mexico 26
Turkey 0.7
China 22
Mexico 0.6
Indonesia 18
Poland 0.6
India 14
Indonesia NA
Taiwan NA
Taiwan NA
Notes;
Source: World Bank, OECD, Kotak Institutional Equities (a) Tertiary GER is the percentage of primary school passed-out
students enrolling in higher (tertiary) education programs.
Source: World Bank, Unesco, Kotak Institutional Equities

Strategy India
` Presence of natural resources. Exhibit 9 compares India’s reserves of coal, iron ore, gas
and oil with the top-20 respective countries in those resources. Barring coal and iron ore,
India is not really blessed with natural resources. As such, we do not see large Indian
natural resource-based companies dominating the global landscape in the next decade.
We note that the number of oil and gas and metals and mining companies among large
market-capitalization companies has increased sharply over the past two decades with a
steep increase in commodity prices.
Exhibit 9: India does not have sufficient natural resources to support large natural resources-based companies
Reserves of oil, natural gas, coal and iron ore in key global economies
Oil (bn bbls) Natural gas (tcm) Coal (bn tons) Iron ore (bn tons)
Rank Country Reserves Rank Country Reserves Rank Country Reserves Rank Country Reserves
1 Saudi Arabia 265 1 Russia 44.4 1 US 238 1 Russia 14.0
2 Venezuela 172 2 Iran 29.6 2 Russia 157 2 Australia 13.0
3 Iran 138 3 Qatar 25.4 3 China 115 3 Ukraine 9.0
4 Iraq 115 4 Turkmenistan 8.1 4 Australia 76 4 Brazil 8.9
5 Kuwait 102 5 Saudi Arabia 7.9 5 India 59 5 China 7.2
6 UAE 98 6 US 6.9 6 Ukraine 34 6 India 4.5
7 Russia 74 7 UAE 6.4 7 Kazakhstan 31 7 Kazakhstan 3.3
8 Libya 44 8 Venezuela 5.7 8 South Africa 30 8 Venezuela 2.4
9 Kazakhstan 40 9 Nigeria 5.2 9 Poland 8 9 Sweden 2.2
10 Nigeria 37 10 Algeria 4.5 10 Brazil 7 10 United States 2.1
11 Canada 33 11 Indonesia 3.2 11 Colombia 7 11 Iran 1.4
12 US 28 12 Iraq 3.2 12 Germany 7 12 Canada 1.1
13 Qatar 27 13 Australia 3.1 13 Canada 7 13 South Africa 0.7
14 China 15 14 China 2.5 14 Czech Republic 5 14 Mexico 0.4
15 Angola 14 15 Malaysia 2.4 15 Indonesia 4 15 Mauritania 0.4
16 Brazil 13 16 Egypt 2.2 16 Greece 4
17 Algeria 12 17 Norway 2.0 17 Hungary 3
18 Mexico 12 18 Kazakhstan 1.8 18 Pakistan 2
19 Norway 7 19 Kuwait 1.8 19 Bulgaria 2
23 India 6 25 India 1.1 20 Turkey 2
Note:
(a) The Fe (Iron) content is very low in iron ore from Ukraine and China resulting in limited scope for commercial exploitation.
Source: BP Statistical Review, US Geological Survey, Kotak Institutional Equities
` Nature of the market. The structure of the market (nature of the market, number of
players and level of competition) also plays a key role in value creation and market
capitalization eventually. We note the presence of several large gas, power and telecom
utilities (we loosely club them as utilities even though many markets are no longer
regulated) in the list of large market capitalization companies. Many of them started as
regulated monopolies; their large sizes built on near-monopoly positions and incumbent
positions have allowed them to withstand the entry of new players. India may be less
fortunate in this regard.
Power utilities are state-owned and every state has a separate entity. Most of
the distribution of power in India is controlled by the state utilities and there is no
single pan-India utility. Every state has a government-owned utility and the process of
unbundling has resulted in further fragmentation of the erstwhile full utilities into
generation and distribution entities. Private companies exist in a few cities and states
only and the process of privatization, which started in the late 1990s, has largely
stalled. In our view, the opportunity is on the generation side and we expect at least
one company (NTPC), if not others, to eventually reach the US$100 bn market
capitalization figure.

India Strategy
Telecom space is too competitive and fragmented. Exhibit 10 shows the

fragmented nature of the Indian wireless market. An eventual consolidation may result
in some of the stronger players becoming larger through M&A activity but they are
unlikely to create meaningful value, in our view. Wireless penetration levels are already
quite high in India and the nature of competition will likely prevent improvement in
profitability and financial returns meaningfully from current levels. We note that the
business has been reduced to a cost of capital business (asset-based) from a high-
growth, low competition market in its initial years.
The fixed-line market is largely dominated by two incumbent government-owned

companies. However, they are in poor financial condition currently given their bloated
workforce and low productivity and we rule them out as creating meaningful value
given their relatively smaller presence in the newer wireless market.
Exhibit 10: Everyone’s chasing the same consumer in Indian telecom segment
Number of players with spectrum in 2G (GSM, CDMA), 3G and BWA wireless segments (#)
2G (a) Unique
GSM CDMA Total 3G BWA players
Metros + A circles
Delhi 12 4 16 4 3 14
Mumbai 11 4 15 4 3 14
Chennai + TN 11 4 15 4 3 13
Kolkata 10 4 14 4 3 13
Andhra Pradesh 12 4 16 4 3 13
Gujarat 11 4 15 4 3 14
Karnataka 12 4 16 4 3 13
Maharashtra 12 4 16 4 3 13
B circles
Haryana 12 4 16 4 3 14
Kerala 11 4 15 4 3 14
Madhya Pradesh 11 4 15 4 3 14
Punjab 12 5 17 5 3 14
Rajasthan 12 4 16 4 3 14
Uttar Pradesh (east) 11 4 15 4 3 14
Uttar Pradesh (west) 11 4 15 4 3 14
West Bengal and A&N islands 10 4 14 5 3 13
C circles
Assam 10 4 14 4 3 14
Bihar 12 4 16 5 3 14
Himachal Pradesh 11 4 15 5 3 15
North East 10 4 14 4 3 14
Orissa 11 4 15 4 3 14
J&K 10 4 14 5 3 14
Pan-India
Notes:
(a) Including networks not launched yet.
Source: TRAI, Kotak Institutional Equities
Gas-based utilities have to contend with a smaller market opportunity and

bureaucratic issues. We note that India has largely tropical and sub-tropical weather
throughout the 12 months and thus, demand for heating in the winter months is quite
limited. Also, India has chosen to create separate entities for gas distribution in
practically every city, which makes little economic sense, in our view. It will also likely
prevent the creation of large gas-based utilities.

Strategy India
ASSET-BASED COMPANIES: A FEW BANKS CAN AND WILL GET THERE

We expect some of the larger banks to reach a market capitalization of US$100 bn under a favorable set of
conditions. This should not be too surprising since (1) banking and financial companies are an integral part of
any economy, (2) they grow along with an economy and Indian banks will grow for the next several decades
given India’s high GDP growth and (3) the industry has high entry barriers. Among other asset-based
companies, NTPC is an obvious choice; other power companies can also emerge.
Banks can do it
Exhibit 11 shows that State Bank of India (SBI), HDFC Bank and ICICI Bank can reach
a market capitalization of US$100 bn over the next 10 years with SBI likely reaching
it by FY2018E. We give our underlying assumptions regarding (1) credit growth and (2)
market share of credit for some of the larger banks in Exhibit 12. We assume that credit will
grow at 16-21% per annum in FY2011-21E. We may be conservative in our assumptions on
both nominal GDP growth and credit growth.
Exhibit 11: SBI can reach US$100 bn market capitalization by FY2018E, ICICI Bank and HDFC Bank by FY2021E
Key assumptions that may drive growth of banks, March fiscal year-ends, 2011-21E
2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E
Market capitalization (US$ bn)
SBI 32 37 44 63 72 84 97 113 132 155 212
HDFC Bank 19 22 25 29 35 55 62 71 81 93 130
ICICI Bank 20 22 25 28 33 38 45 65 75 87 123
Axis Bank 11 13 14 16 22 25 29 38 43 54 61
PNB 7 9 11 13 18 22 26 31 37 44 54
Credit growth (%)
SBI 23 21 19 20 20 19 18 17 16 15 14
HDFC Bank 25 25 27 27 26 25 25 25 25 25 23
ICICI Bank 19 18 28 27 27 24 24 24 23 23 22
Axis Bank 25 25 30 29 29 26 26 26 26 26 27
PNB 22 21 23 23 23 22 21 20 19 18 17
Market share of credit (%)
SBI 20.0 19.9 19.7 19.5 19.3 19.1 18.9 18.7 18.5 18.3 18.1
HDFC Bank 4.0 4.2 4.4 4.6 4.8 5.0 5.2 5.5 5.9 6.3 6.7
ICICI Bank 5.5 5.4 5.7 6.0 6.3 6.5 6.7 7.0 7.4 7.8 8.2
Axis Bank 3.4 3.5 3.7 4.0 4.2 4.4 4.7 5.0 5.3 5.8 6.3
PNB 5.8 5.9 6.0 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8
Exhibit 12: Credit growth may grow at around 20% for the next 10 years
Key assumptions behind our growth models for banks, March fiscal year-ends, 2010-21E
2010 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E
Current GDP (Rs bn) 59,604 66,756 74,767 83,739 93,787 105,042 117,122 130,005 143,656 158,021 173,033 188,606
Growth estimates (%) 12.0 12.0 12.0 12.0 12.0 11.5 11.0 10.5 10.0 9.5 9.0
Nominal multiplier (X) 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75
Credit growth (%) 21.0 21.0 21.0 21.0 21.0 20.1 19.3 18.4 17.5 16.6 15.8
Credit (Rs bn) 32,147 38,898 47,067 56,951 68,911 83,382 100,163 119,444 141,392 166,136 193,756 224,272
Credit/GDP (%) 54 58 63 68 73 79 86 92 98 105 112 119
Rupee/Dollar (Rs/US$) 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0 45.0
We expect a 12.3% CAGR in nominal GDP to result in cumulative savings of US$10 tn over
the next 15 years (see Exhibit 13). Our thematic research team had discussed these positive
drives in more detail in its May 26 report titled Indian Household Savings: US$10 tn up for
grabs over the next 10 years.

India Strategy
Exhibit 13: We model cumulative savings flow at US$10 tn in FY2010-25E

India's savings flow, March fiscal year-ends, 2010-25E (US$ bn)
Currency Deposits Shares and debentures

Claims on government Insurance funds Pension funds
1,500
1,200
900
600
300
0
2011E
2012E
2013E
2014E
2015E
2016E
2017E
2018E
2019E
2020E
2021E
2022E
2023E
2024E
2025E
2,010
State Bank of India: The elephant will continue to dance

Exhibit 14 gives our key assumption for SBI on credit growth, ROA, leverage and any
dilutions in FY2011-21E. We note that this is a simplified model and does not capture
other nuances of quality of book, movement in interest rates and investments. We make the
simplified but realistic assumption that SBI will continue to earn a certain ROA on its balance
sheet. We assume ROA at about 1% in our forecast period. RoE would continue to remain
at around 15% as regulations will likely become tighter especially for systemically important
players.
We make the following observations that will help SBI meet our projections.
` Franchisee strength unlikely to be broken; still to remain the largest bank. SBI will
likely remain a direct proxy for playing the growth of the country. SBI’s current network
of 12,000 branches (standalone) and 16,000 (group) will enable to stay ahead of its
nearest competitors through the next decade. We assume that SBI will grow its business
at industry-average growth rate of 18.4% CAGR in FY2011-21E. It is currently investing
in growing its international presence (currently contributing less than 20% of assets),
which would be vital to its next leg of growth.
` Building a diversified financial institution; leadership in many products. SBI, similar

to ICICI Bank, is building an integrated financial platform capturing most of the
opportunities in the financial value chain: Banking, insurance (general and life), primary
dealership, institutional broking/investment banking, mutual funds, wealth management
and private equity. The strength of SBI has been its ability to gain leadership positions in
some of these segments (insurance, loans and deposits, loan syndication among others).
` Risks. We identify the following risks. (1) As a public sector bank, changes to top
management will result in frequent change in strategy. (2) Direct proxy to the economy
and affected by the vagaries of growth; however, size (lower concentration risk) and
diversified balance sheet provide some comfort. (3) Market share of the group may
decline unless the bank is able to identify new geographies for growth.

Strategy India
Exhibit 14: SBI can reach US$100 bn market capitalization by FY2018E

Key assumptions behind our SBI model, March fiscal year-ends, 2010-21E (Rs bn)
2010 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E
Market capitalization 1,443 1,687 1,988 2,834 3,257 3,765 4,375 5,101 5,961 6,966 9,551
Market capitalization (US$ bn) 32 37 44 63 72 84 97 113 132 155 212
Implied price/book (X) 1.9 2.0 2.1 1.9 1.9 2.0 2.0 2.1 2.1 2.2 2.0
Implied book value 1,039 1,172 1,330 1,522 2,411 2,242 2,517 2,839 3,214 3,646 4,137 6,302
Credit 6,319 7,763 9,372 11,197 13,411 16,060 19,092 22,528 26,385 30,670 35,382 40,506
Growth (%) 22.9 20.7 19.5 19.8 19.8 18.9 18.0 17.1 16.2 15.4 14.5
Market share (%) 19.7 20.0 19.9 19.7 19.5 19.3 19.1 18.9 18.7 18.5 18.3 18.1
Balance sheet 10,534 12,520 14,664 17,521 20,984 25,130 29,874 35,251 41,286 47,991 55,363 63,381
Net profit 108 126 152 186 227 274 327 389 458 530 609
RoA (%) 0.91 0.94 0.93 0.95 0.97 0.99 1.00 1.01 1.02 1.03 1.03 1.03
RoE (%) 14.8 15.5 15.8 16.8 14.9 14.0 15.1 16.0 16.9 17.5 17.9 15.3
Dividend payout ratio 20 21 22 24 25 27 28 30 31
Movement in net worth
Opening net worth 845 966 1,531 1,708 1,917 2,163 2,448 2,778 3,152
Add: Net profits 152 186 227 274 327 389 458 530 609
Add: Proceeds from new issuances — 418 — — — — — — 1,227
Less: Dividends (30) (39) (50) (64) (82) (103) (128) (156) (186)
Closing net worth 659 744 845 966 1,531 1,708 1,917 2,163 2,448 2,778 3,152 4,801
Growth (%) 13 14 14 58 12 12 13 13 13 13 52
Dilution proceeds
Balance sheet/net worth (X) 16.0 16.8 17.4 18.1 13.7 14.7 15.6 16.3 16.9 17.3 17.6 13.2
Recommeded leverage (X) 17.5 17.5 17.5 17.5 17.5 17.5 17.5 17.5 17.5 17.5 17.5
Requires dilution (Yes or No) NO YES NO NO NO NO NO NO YES
Extent of dilution (X) 0.20 0.20 0.20 0.20 0.20 0.20 0.20 0.20 0.20
Number of shares ( mn) 635 635 635 635 635 762 762 762 762 762 762 762
Fresh shares (mn) — 127 — — — — — — 152
Closing outstanding shares (mn) 635 635 635 635 762 762 762 762 762 762 762 914
Implied book value (1-year forward) 1,172 1,330 1,452 1,599 1,776 1,986 2,231 2,517 2,846 3,220 3,643
Price/book (X) — 1.9 2.0 2.1 1.9 1.9 2.0 2.0 2.1 2.1 2.2
HDFC Bank: Maintenance of high profitability (ROA) key

Exhibit 15 gives our key assumption for HDFC Bank on credit growth, ROA, leverage
and any dilutions in FY2011-21E. We make the following observations that may support
or impede HDFC Bank’s growth towards the US$100 bn market capitalization goal over the
next decade.
` Strong franchise to lead to high and profitable growth. With a liability base that has
nearly 50% CASA and an asset base that focuses on retail (especially unsecured that is
above par versus most of its peers), HDFC Bank is well positioned to participate in the
growth of savings and retail loans over the next decade. We expect its growth to be
above industry-average growth rate given the size of the opportunity relative to its market
share. It also stands to gain from a large distribution opportunity for all third party/wealth
management products; it is already one of the leading distributors of third party.
` Successful inorganic growth: Option to maintain its strong growth trajectory.

With two acquisitions in a span of a decade, HDFC Bank can look at inorganic growth
opportunities actively to propel it to a higher-growth trajectory. Successful integration
and improvement in productivity of Times Bank in 2000 and Centurion Bank of Punjab in
2009 are examples of quick turnaround for the bank.
` Risks. HDFC Bank has specialized in banking/distributing primarily with most of the other
financial products (mutual fund and insurance) being manufactured by its parent, HDFC.
New growth would be led by (1) deeper penetration in existing geographies and
(2) geographical expansion rather than by new products. We do not see meaningful
threat to existing franchise although HDFC Bank would have to ensure high ROAs (1.45%
in FY2010) that would support its high valuations without it taking undue leverage risks.

India Strategy
Exhibit 15: HDFC Bank can reach US$100 bn market capitalization by FY2021E
Key assumptions behind our HDFC Bank model, March fiscal year-ends, 2010-21E (Rs bn)
2010 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E
Market capitalization 864 1,003 1,143 1,311 1,556 2,478 2,799 3,185 3,648 4,202 5,863
Implied book value 470 536 622 731 864 1,026 1,816 1,710 1,945 2,228 2,566 3,978
Credit 1,258 1,573 1,967 2,494 3,155 3,985 4,987 6,234 7,803 9,751 12,147 14,957
Growth (%) 25.0 25.1 26.8 26.5 26.3 25.2 25.0 25.2 25.0 24.6 23.1
Market share (%) 3.9 4.0 4.2 4.4 4.6 4.8 5.0 5.2 5.5 5.9 6.3 6.7
Balance sheet 2,225 2,708 3,329 4,221 5,341 6,744 8,441 10,551 13,208 16,503 20,558 25,315
Net profit 39 51 62 77 96 118 145 178 218 266 322
RoA (%) 1.45 1.56 1.67 1.64 1.61 1.58 1.55 1.52 1.49 1.46 1.43 1.40
RoE (%) 16.1 17.0 19.2 20.0 21.1 22.1 18.1 16.4 17.7 19.0 20.2 17.9
Dividend payout ratio 18.6 18.6 18.6 20 21 23 24 26 27 29 30 32
Opening net worth 285 335 396 470 831 939 1,069 1,224 1,410
Add: Net profits 62 77 96 118 145 178 218 266 322
Add: Proceeds from new issuances — — — 272 — — — — 555
Less: Dividends (12) (16) (22) (28) (37) (48) (62) (80) (102)
Closing net worth 215 245 285 335 396 470 831 939 1,069 1,224 1,410 2,185
Growth (%) 14 16 18 18 19 77 13 14 15 15 55
Dilution proceeds
Recommeded leverage (X) 14 14 14 14 14 14 14 14 14 14 14
Requires dilution (Yes or No) NO NO NO YES NO NO NO NO YES
Number of shares ( mn) 458 458 458 458 458 458 458 549 549 549 549 549
Fresh shares (mn) — — — 92 — — — — 110
Closing outstanding shares (mn) 458 458 458 458 458 458 549 549 549 549 549 659
Implied book value (1-year forward) 536 622 672 733 807 897 1,005 1,134 1,289 1,475 1,696
Price/book (X) - 3.5 3.5 3.4 3.3 3.3 3.0 3.0 3.0 3.0 3.0
ICICI Bank: Right lessons from past may help it make the cut-off
Exhibit 16 gives our key assumption for ICICI Bank on credit growth, ROA, leverage
and any dilutions in FY2011-21E. We make the following observations that may support
or impede ICICI’s growth towards the US$100 bn market capitalization goal over the next
decade.
` Pace of turnaround important after an eventful decade. The new decade offers
significant opportunities to grow after a couple of years of slowdown. In our view, ICICI is
in a good position to start growing again—(1) CASA is at comfortable levels of 40%
(sustainable at a marginally lower level), (2) capital is comfortable with tier-1 at 14%,
(3) credit costs have fallen with lower slippages, and (4) cost-income ratio is at around
40%. ICICI Bank has had a checkered past decade with the first half showing rapid
growth and innovation but the second half of FY2010 saw balance sheet contraction and
partial exits from various products.
` Positive on innovation; another diversified play. ICICI Bank is less of a play on the
economy but more of a play on retail savings and loan growth. Savings and consumption
are its growth areas with (1) savings through insurance, mutual funds and wealth
management services and (2) consumption through housing, auto and credit cards.
Innovation has helped the bank grow rapidly in the past and we continue to see its focus
on bringing technology to a wider audience. The bank led the previous wave that resulted
in (1) higher acceptance amongst its customers to move from branch banking to
online/off branch platform (ATM, debit/credit cards), (2) higher share of customers’ wallet
through 3-in-1 accounts (broking, demat and banking) and (3) wealth management
services (third-party distribution). Its early investments in insurance (general and life),
mutual funds, and venture capital are helping it reap higher valuations.

Strategy India
` Risks. We do not see any major risks to our thesis. (1) ICICI bank is currently well
capitalized and its subsidiaries (especially insurance) would not require any further capital
infusion. (2) ICICI can grow along with natural growth in the Indian economy without
resorting to aggressive tactics seen in the past. However, growth is crucial to leverage
capital and improve RoEs from current levels of below 10%. It is unlikely to trade at a
high P/B (2X or higher) without improvement in its ROEs. (3) Liability franchise has shown
strong improvement although it is still dependent on wholesale segment.
Exhibit 16: ICICI Bank can reach US$100 bn market capitalization by FY2021E
Key assumptions behind our ICICI Bank model, March fiscal year-ends, 2010-21E (Rs bn)
2010 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E
Market capitalization 920 987 1,115 1,274 1,470 1,711 2,010 2,945 3,378 3,907 5,517
Implied book value 463 492 528 574 630 699 783 884 1,439 1,323 1,471 2,308
Credit 1,812 2,156 2,535 3,238 4,125 5,241 6,497 8,034 9,934 12,254 15,066 18,336
Growth (%) 19.0 17.6 27.7 27.4 27.1 23.9 23.7 23.7 23.4 22.9 21.7
Market share (%) 5.6 5.5 5.4 5.7 6.0 6.3 6.5 6.7 7.0 7.4 7.8 8.2
Balance sheet 3,634 3,956 4,484 5,728 7,297 9,272 11,492 14,211 17,573 21,677 26,652 32,436
Net profit 53 65 77 97 120 148 179 217 262 315 376
RoA (%) 1.1 1.4 1.5 1.5 1.5 1.5 1.4 1.4 1.4 1.3 1.3 1.3
RoE (%) 8.0 10.0 11.5 12.6 14.4 16.3 17.9 19.3 16.7 15.5 16.9 14.9
Dividend payout ratio 33 33 33 34 35 36 37 37 37 37 37 37
Opening net worth 589 640 703 780 873 986 1,605 1,770 1,968
Add: Net profits 77 97 120 148 179 217 262 315 376
Add: Proceeds from new issuances — — — — — 483 — — 883
Less: Dividends (26) (34) (43) (55) (66) (80) (97) (117) (139)
Closing net worth 516 549 589 640 703 780 873 986 1,605 1,770 1,968 3,088
Growth (%) 6 7 9 10 11 12 13 63 10 11 57
Dilution proceeds
Recommeded leverage (X) 14 14 14 14 14 14 14 14 14 14 14
Requires dilution (Yes or No) NO NO NO NO NO YES NO NO YES
Number of shares ( mn) 1,115 1,115 1,115 1,115 1,115 1,115 1,115 1,115 1,115 1,338 1,338 1,338
Fresh shares (mn) — — — — — 223 — — 268
Closing outstanding shares (mn) 1,115 1,115 1,115 1,115 1,115 1,115 1,115 1,115 1,338 1,338 1,338 1,605
Implied book value (1-year forward) 492 528 579 642 719 812 925 1,062 1,226 1,425 1,662
Price/book (X) — 1.7 1.7 1.7 1.8 1.9 2.0 2.0 1.8 1.9 2.0
Life Insurance of India: Insurance behemoth will be there provided it lists

Exhibit 17 gives details of LIC’s annual premium income and number of policies.
We note that LIC’s premium has grown quite strongly over the past several years despite
entry of new competition. Exhibit 18 shows LIC’s AUM and growth in the same over the
past several years. We see insurance as a big opportunity in India as highlighted in our May
2010 report on household financial savings.

India Strategy
Exhibit 17: LIC's premium mobilizations have increased rapidly Exhibit 18: LIC has a large investment book
over the years LIC's investment book, March fiscal year-ends, 2002-09
LIC's premia and policies issued, March fiscal year-ends, 2002-09
9.0 AUMs (Rs tn, LHS) 45
Annual premium (Rs bn, LHS) 8.0
1.8 45 YoY (%, RHS)
Policies (mn, RHS) 6.8
1.6
1.5
1.3 6.0 5.5 30

1.2 30 4.7
0.9 3.6
3.0
0.7
0.6 3.0 2.3 15
0.5 1.9
0.6 0.5 15
- -
2002
2003
2004
2005
2006
2007
2008
2009
- -
2002
2003
2004
2005
2006
2007
2008
2009
Source: LIC, Kotak Institutional Equities

Source: LIC, Kotak Institutional Equities
NTPC: Can power ahead to US$100 bn if it executes well

Exhibit 19 shows that NTPC’s market capitalization can reach US$100 bn if it makes
significant investment in incremental power capacities. Our reverse valuation shows
that NTPC will need to achieve installed capacities of about 148 GW (compared to extant
capacity of ~31 GW) of power capacities to achieve a target market capitalization of US$100
bn. We use 2.3X P/B multiple to value NTPC’s businesses.
We justify our 2.3X P/B multiple based on (1) cost of equity of 12% and 4% inflation in the
long term, and (2) sustainable RoE of 22%. The last assumption would depend on
continuation of the current regulations, which allow for 15.5% post-tax RoE and
incremental returns on savings from operational efficiencies. We note that the current net
worth of NTPC of Rs624 bn includes a large proportion of investments in cash and liquid
investments (~Rs249 bn) and capital work in progress (Rs85 bn), which we assume would
convert into operational equity yielding returns of 22%.
Exhibit 19: NTPC will need to increase its net worth by 3X to achieve a market capitalization of
US$100 bn
Capacities required for NTPC to reach US$100 bn market capitalization, FY2014E basis
Key driver
Power capacity
Desired market capitalization (US$ bn) 100
Target share price (Rs) 546
Target P/B multiple (X) 2.3
Target net worth (a) (Rs bn) 2,000
Required capacities (GW) 148
Required RoE (%) 22.0
RoE in FY2014E (%) 18
FY2010 networth (Rs bn) 624
FY2014E networth (b) (Rs bn) 918
Gap in networth (a) - (b) (Rs bn) 1,082
Likely market capitalization on FY2014E networth (US$ bn) 46
Exchange rate (Rs/US$) 45

Strategy India
IPR COMPANIES: IT SERVICES COMPANIES ONLY

We would be positively surprised to see very large IPR-based companies emerging out of India in the next
decade. India does not have the requisite macro-environment currently to support R&D, large investments in
new technologies and innovation. Almost all Indian IT and pharmaceutical companies derive their
competitive advantage from low cost of ‘production’ of IT services or generic pharmaceuticals. Nonetheless,
we see (1) the large size of global IT spending and (2) Indian companies’ relatively small share as providing
certain companies the opportunity to grow for the next decade and likely beyond.
IT services companies offer the only hope

Exhibits 20 and 21 give a set of assumptions under which the two largest Indian IT
companies, TCS and Infosys, can reach a market capitalization of US$100 bn by end-
FY2020. We note that no pure-play IT services company around the world has achieved a
market capitalization of US$100 bn. The challenge for TCS and Infosys to reach US$100 bn
is huge and will require perfect execution on (1) expansion of service offerings, increasing
geographic coverage, increasing non-linearity and building a truly global delivery network
and (2) protecting profitability—an envious task given that super-normal returns earned by
Tier-1 Indian IT companies may erode over a period of time with more competition and
maturity of clients sourcing strategies. On the positive side, the addressable market size
should not be a limiting factor in the path to US$100 bn, in our view.
In our assessment, the US$100 bn target for market capitalization looks achievable for
Infosys and TCS given (1) their small revenue market share of global IT spending currently
and (2) the large opportunity size. However, employee additions may be more challenging.
Exhibit 20: 15% CAGR in earnings should get Infosys to US$100 bn market capitalization by FY2021E
Path to US$100 bn market capitalization by March 2020
Comments
Current share price (Rs/share) 2,778
Shares outstanding (mn) 574
Current market capitalization (Rs bn) 1,594
Current market capitalization (US$ bn) 35
Target market capitalization in 10 years (US$ bn) 100
Market capitalization CAGR (%) 10.9
Total return to shareholders (a) (%) 11.9
Target market capitalization at end-March 2020 (US$ bn) 100
Steady-state PE multiple (X) - 1-year forward 15
Required earnings FY2021E (US$ bn) 6.7
FY2011E earnings (US$ bn) 1.6
10-years earnings CAGR (%) 15.4
What does US$6.7 bn net income mean?

FY2011E net margin (%) 26.3
FY2021E net margin (%) 23.3 Assuming 30 bps per annum net margin decline
Revenues
Required FY2021E revenues (US$ bn) 28.6
FY2011E revenues (US$ bn) 6.1
Required 10-year revenue CAGR (%) 16.8
Total Indian IT services revenues (including domestic, FY2010E, US$ bn) (b) 63.7
Infosys revenue market share of Indian IT services revenues (%, FY2010E) 7.5
Assumed revenue market share for Infosys in FY2021E 10.0
Required Indian IT services revenues FY2021E (US$ bn) 286
Required 11-year Indian IT services revenue CAGR (%) 14.6
Employees
Revenue/employee - FY2011E (based on end-period total employees, US$) 45,675
Revenue/employee - FY2021E (based on end-period total employees, US$) 55,677 Assuming 2% per annum increase in productivity
Required employees at end-FY2021E (#) 513,843 IBM has ~400,000 employees worldwide
end-FY2011E employee base 132,858
Required employee net-adds over 10 years 380,985
Required employee net adds per annum (average) 38,098
Peak single-year employee net adds (FY2007) 19,526
Note:
(a) Including assumed 1% dividend yield.
(b) Nasscom estimate.

India Strategy
Exhibit 21: 15% CAGR in earnings should get TCS to US$100 bn market capitalization by FY2021E; employee additions a challenge
Path to US$100 bn market capitalization by March 2020
Comments
Current share price (Rs/share) 759
Shares outstanding (mn) 1,956
Current market cap (Rs bn) 1,484
Current market cap (US$ bn) 33
Target market capitalization in 10 years (US$ bn) 100
Market cap CAGR (%) 11.7
Total return to shareholders (a) (%) 13.7
Target market cap - end-March 2020 (US$ bn) 100
Steady-state PE multiple (X) - 1-year forward 14
Required earnings FY2021E (US$ bn) 7.1
FY2011E earnings (US$ bn) 1.8
10-years earnings CAGR (%) 14.9
What does US$7.1 bn net income mean?

FY2011E net margin (%) 22.7
FY2021E net margin (%) 18.7 Assuming 40 bps per annum margin decline
Revenues
FY2011E revenues (US$ bn) 7.9
Total Indian IT services revenues (including domestic, FY2010E, US$ bn) (b) 63.7
TCS revenue market share of Indian IT services revenues (%, FY2010E) 10.0
Assumed revenue market share for TCS in FY2021E (%) 13.3
Required Indian IT services revenues FY2021E (US$ bn) 286
Required 11-year CAGR (%) 14.6
Employees
Revenue/employee - FY2011E (based on end-period total employees, US$) 40,981
Revenue/employee - FY2021E (based on end-period total employees, US$) 49,955 Assuming 2% per annum increase in productivity
Required employees at end-FY2021E (#) 764,296 IBM has ~400,000 employees worldwide
end-FY2011E employee base 191,811
Required employee net-adds over 10 years 572,485
Required employee net adds per annum (average) 57,248
Peak single-year employee net adds (FY2009) 32,313
Note:
(a) Including assumed 2% dividend yield.
(b) Nasscom estimate.
We make the following observations on the required parameters for Infosys and TCS to
grow to US$100 bn market capitalization by FY2021E.
` Revenue growth. We compute the implied growth of the Indian IT industry at 14.6%
CAGR for the next 10 years assuming that Infosys and TCS are able to increase their
market share to 10% and 13.3% by FY2021E from the current 7.5% and 10%. We
believe a 14.6% CAGR in IT revenues is achievable given the large opportunity for the
Indian IT industry to grow its market share in the worldwide IT spending market. India’s
current market share is just 4.8% based on current industry revenues of US$64 bn.
We note that the Indian IT industry’s revenues grew at a CAGR of 25% in FY2004-10.
Even during the downturn in the last year, it grew by 5% and NASSCOM has projected
13-15% growth rate for the Indian IT industry (exports only) for FY2011E, which could
turn out to be conservative, in our view.
` Net profit margin assumptions. We model net profit margin of Infosys and TCS to
decline by 300 bps and 400 bps over FY2011-21E to reach 23.3% and 18.7% in
FY2021E compared to FY2011E net profit margin of 26.3% for Infosys and 22.7% for
TCS. We assume that (1) more competition and (2) maturity of certain businesses of their
clients will result in more subdued margins and financial returns over a period of time.

Strategy India
` P/E multiple. We see our 15X and 14X FY2021E net income multiples as reasonable as
we expect revenues and profits of the Indian IT companies to continue to grow beyond
FY2021E.
` Employees. Infosys would require ~510,000 employees by FY2021E (IBM has ~400,000
employees currently) compared to ~130,000 employees at end-FY2011E, to reach our
FY2021E revenue target. It would need to add ~38,000 employees per year during
FY2011-21E versus ~19,000 peak single-year employee net additions. Similarly TCS would
require ~760,000 employees by FY2021E to reach our FY2021E revenue target. This may
be a tough task given that it will likely have ~192,000 employees at end-FY2011E. TCS
would need to add ~57,000 employees per year during FY2011-21E versus ~32,000 peak
single-year employee net additions.
Pharmaceuticals: Generics business unlikely to become very big

We note that most large Indian pharmaceutical companies derive all of their
revenues from generics (see Exhibit 22) and there is hardly any focus on original molecule
research. We see generics as a low value-creation business and in the long run, companies
may find it hard to sustain their competitive advantages. Large Indian pharmaceutical
companies are quite small by global standards and may look at overseas acquisitions to
become larger but this would entail meaningful dilution, which Indian major shareholders
may not want at this stage. On the other hand, we do not rule out Indian major
shareholders selling to global majors as witnessed in the (1) Ranbaxy Laboratories-Daiichi
Sankyo and (2) Piramal Healthcare-Abbot deals.
Some of the Indian pharmaceutical majors are involved with original drug molecule research
and development, which may provide significant upside to their valuation if successful at the
development as well as distribution level; however, this is a likely event risk (positive) that is
very difficult to predict beforehand.
Exhibit 22: Indian pharmaceutical companies derive all of their revenues from generics
Break-up of generic sales revenues of Indian pharmaceutical companies, March fiscal year-ends, 2010 (%)
Market cap Revenues Finished dosage (%)

(US$ mn) (US$ mn) India US/Europe ROW API
Cipla 5,996 1,131 46 43 11
Dr Reddy's Laboratories 5,408 1,445 15 38 17 30
Glenmark Pharmaceuticals 1,610 514 31 36 23 11
Lupin 3,647 1,000 27 38 20 15
Ranbaxy Laboratories 4,160 1,546 19 26 44 11
Sun Pharmaceuticals 7,980 860 45 30 12 13
Source: Company data, Kotak Institutional Equities

India Strategy
NATURAL RESOURCES COMPANIES: OIL COMPANIES ONLY

We believe RIL and ONGC can reach US$100 bn market capitalization fairly quickly led by a combination of
(1) their large extant sizes; RIL’s current market capitalization is US$68 bn and ONGC’s US$58 bn, (2) large
cash flows that can be used to create value through successful exploitation of E&P assets, (3) potential
addition to E&P reserves and (4) favorable pricing policy for ONGC in the medium term that may allow it to
realize global crude oil prices as compared to US$50-55/bbl over the past few years. NMDC is the other
candidate that can reach US$100 bn market capitalization if it ramps up production from its considerable
reserves.
RIL: Transformation to resource company from asset-based company critical

Exhibit 23 shows that RIL’s market capitalization can reach US$100 bn if it makes
significant oil and gas discoveries. Our reverse valuation shows that RIL will need to show
additional reserves of about 63 tcf of recoverable gas reserves or 3 bn bbls of recoverable oil
reserves by FY2014E for it to achieve a target market capitalization of US$100 bn. We use
10X P/E multiple on our FY2014E EPS to value RIL’s extant businesses including its two
refineries, chemical businesses and extant producing oil and gas assets (KG D-6, PMT,
Yemen).
We justify our 10X P/E multiple based on (1) cost of equity of 12.5% and 2% inflation in the
long term, (2) mid-cycle refining margin of US$10.9/bbl in FY2014E, (3) mid-cycle chemical
margins and (4) profits of the E&P business sustaining in perpetuity. The last assumption
would depend on RIL discovering more oil and gas reserves and bringing the same under
production once cash flows from its extant oil and gas assets start declining due to (1) lower
share of profit petroleum at higher levels of investment multiples (IM), (2) decline in
production due to finite life of fields and (3) higher taxation.
Exhibit 23: RIL will need to convert its large cash into high-yielding assets to reach US$100 bn market
capitalization
Oil and gas reserves required for RIL to reach US$100 bn market capitalization, FY2014E basis
Key driver
Gas reserves Oil reserves
Desired market capitalization (US$ bn) 100 100
Target share price (Rs) 1,511 1,511
Target P/E multiple (X) 10.0 10.0
Target net profit (a) (Rs bn) 450 450
FY2010 net profit (Rs bn) 162 162
FY2014E net profit (b) (Rs bn) 297 297
Gap in net profit (a) - (b) (Rs bn) 153 153
Likely market capitalization on FY2014E net profit (US$ bn) 66 66
Value of other businesses 1 1
Gap in market capitalization (US$ bn) 32 32
Valuation of 1 bn boe of gas reserves or 1 bn bbls of oil reserves (US$/bbl) 3 10
Required bn bbls of oil equivalent of gas or oil reserves (bn bbls) 11 3.2
Required tcf of proven gas reserves (tcf) or oil reserves (bn bbls) 63 3.2
Exchange rate (Rs/US$) 45 45
Exhibit 24 shows that RIL’s market capitalization can reach US$100 bn by FY2014E if RIL
(1) confirms 35 tcf of gas reserves in NEC-25, KG D-3, KG D-9 and MN D-4 blocks assumed
by us and (2) invests its Rs420 bn (US$9.3 bn) of net cash as of end-FY2014E in assets that
create value. In our exercise, we have valued the cash on RIL’s balance sheet as cash and our
SOTP-based fair valuation comes to US$88 bn. The amount of value creation from the large
cash flow generation over the next few years (we model US$32 bn in FY2011-14E) would
depend on the use of cash—(1) E&P assets may generate likely higher IRRs and value,
(2) petrochemical and refining assets will likely not generate much value and (3) overseas
acquisitions, if any, are unlikely to create much value in the short term given that assets are
unlikely to be available cheap currently. RIL has identified power and telecom as other
growth areas but we see them as unnecessary diversifications.
Strategy India
Exhibit 24: RIL's market capitalization can reach US$100 bn by FY2014E

Sum-of-the-parts valuation of Reliance Industries, FY2014E basis (Rs)
Valuation base (Rs bn) Multiple (X) EV Valuation

Other EBITDA Multiple EV/EBITDA (Rs bn) (Rs/share)
Chemicals 104 6.5 677 227
Refining & Marketing 170 6.5 1,102 370
Oil and gas—producing (PMT and Yemen) 20 5.0 98 33
Gas—producing and developing (DCF-based) (a) 1,123 1,123 377
KG D-6 389 389 130
NEC-25 171 171 57
CBM 53 53 18
KG D-3 157 157 53
KG D-9 196 196 66
MN D-4 158 158 53
Oil—KG-DWN-98/3 (b) 81 81 27
Investments other than valued separately 105 105 35
Loans & advances to affiliates 4 4 1
Cash with subsidiary from sale of treasury shares 86 86 29
Retailing 52 80% 42 14
SEZ development 30 80% 24 8
Total enterprise value 3,342 1,122
Net debt adjusted for 50% of C-WIP of E&P assets (599) (201)
Implied equity value 3,940 1,331
Note:
(a) We value KG D-6, NEC-25, CBM, KG D-3, KG D-9 and MN D-4 blocks on DCF.
(b) 180 mn bbls of recoverable reserves based on gross OOIP of 0.5 bn bbls.
(c) We use 2.978 bn shares (excluding treasury shares) for per share computations.
We would caveat that RIL’s historical returns on its traditional asset-based businesses have
not been high, which makes us somewhat skeptical about meaningful creation from the
‘traditional’ use of cash. Exhibit 25 shows RIL’s ROACE and CROCI for FY1996-2010 has
averaged 16% and 17%. We exclude other income adjusted for tax from the numerator and
cash, investment and C-WIP from the denominator for computing its core ROACE and
CROCI. We also note that (1) RIL’s historical profits have been boosted by a combination of
fiscal incentives such as sales tax incentives and income tax exemption and (2) high tariff
protection on its chemical and refining businesses in the 1990s and early 2000s.
Exhibit 25: RIL's ROACE and CROCI have averaged 16% and 17% in FY1996-2010
RoACE and CROCI for RIL, March fiscal year-ends, 1996-2010 (%)
(%) RoACE CROCI

25
20
15
10
0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: Company, Kotak Institutional Equities estimates

India Strategy
ONGC: Favorable policy action will get it there fairly easily and quickly
Exhibit 26 shows that ONGC’s market capitalization can reach US$100 bn if (1) it
receives crude oil price of US$81/bbl or (2) it receives crude oil price of US$77/bbl
and natural gas price of US$6/mn BTU in FY2014E. Our base-case crude price
assumption for FY2014E is US$80/bbl (Dated Brent basis) but our realized crude price
assumption is US$57/bbl only after factoring in discount on crude oil of Rs175 bn
(US$23/bbl) pertaining to the subsidy-sharing system.
Exhibit 26: ONGC would need a favorable pricing/subsidy regime to reach US$100 bn market
capitalization
Oil and gas prices required for ONGC to reach US$100 bn market capitalization, FY2014E basis
Key driver
Oil prices Oil & gas prices
Required crude oil price (US$/bbl) 81 77
Required natural gas price (US$/mn BTU) 4.2 6.0
Net realized crude oil price in FY2014E (US$/bbl) 57 57
ONGC’s market capitalization can increase faster if the government was to deregulate
pricing of auto fuels over the next few months and compensate the downstream oil
companies for their under-recoveries on cooking fuels fully from the budget. ONGC and two
other state-owned entities have borne about 30% of the gross under-recoveries on auto
and cooking fuels in FY2008-10. This ratio has largely remained constant over the past three
years but the government has not explicitly defined a subsidy-sharing formula. An
Empowered Group of Ministers (EGoM) is reviewing the pricing system in India currently in
order to tackle the fuel subsidy issue. We model ONGC’s net realized price at US$54-57/bbl
in FY2011-14E assuming that the government is unable to deregulate prices (see Exhibit 27).
Exhibit 27: We assume net realized price at US$54-57/bbl over the next four years
Key assumptions, March fiscal year-ends, 2010-2014E
2010 2011E 2012E 2013E 2014E
Macro assumptions
Rs/US$ rate 47.4 45.0 45.3 45.3 45.3
Subsidy share scheme loss (Rs bn) 115.5 154.3 146.2 175.3 175.3
Import tariff on crude oil (%) 0.4 5.2 5.2 5.2 5.2
Pricing and volumes assumptions
Crude price
Crude price, Bonny Light (US$/bbl) 67.1 75.0 75.0 80.0 80.0
Net crude price, ONGC-India (US$/bbl) 55.9 54.1 55.4 57.0 57.0
Natural gas price
Ceiling natural gas price, India (Rs/cu m) 3.20 6.78 7.50 7.50 7.50
Ceiling natural gas price, India (US$/mn BTU) 1.80 4.03 4.43 4.43 4.43
International operations
Net natural gas price, OVL-Vietnam (Rs/cu m) 3.3 3.2 3.2 3.2 3.2
Net crude price, OVL-Sudan (Rs/ton) 10,173 10,782 10,842 11,557 11,557
Net crude price, OVL-Russia (Rs/ton) 10,448 11,087 11,148 11,892 11,892
Sales volumes—Domestic fields (a)
Crude oil (mn tons) 22.3 24.1 25.1 26.5 26.5
Natural gas (bcm) 20.6 20.4 19.9 20.4 20.7
Sales volumes—Overseas fields
Crude oil (mn tons) 4.7 4.6 5.1 5.3 5.3
Natural gas (bcm) 2.9 3.0 3.0 3.0 3.0
Total sales
Crude oil (mn tons) 27.0 28.8 30.2 31.8 31.8
Natural gas (bcm) 23.5 23.4 22.9 23.4 23.7
Total sales (mn toe) 48.0 49.7 50.7 52.7 52.9
Total sales (mn boe) 350 363 370 385 387
(a) Includes ONGC's share of production from joint venture fields.

Strategy India
ONGC would be hard-pressed to achieve US$100 bn market capitalization without a more

favorable pricing system. We would caution that the government may increase the royalty
on crude oil and gas from ONGC’s nominated blocks that account for the bulk of ONGC’s
oil and gas production. ONGC currently pays a royalty of 10% on offshore crude (20% on
onshore crude) on the realized price of crude oil and a cess of Rs2,575/ton (US$7.8/bbl),
which is quite favorable versus (1) sharing of profit petroleum in production-sharing
contracts (PSCs) signed for blocks under the New Exploration and Licensing Policy (NELP) and
(2) royalty/PSC regimes in other countries.
ONGC’s other option is to make large oil and gas discoveries to bridge the gap between
US$100 bn market capitalization and US$75 bn of market capitalization possible under the
‘as-is’ scenario (see Exhibit 28). However, the market may not accord significant value to
ONGC’s new discoveries unless ONGC can increase production of oil and gas over the next
few years. The market will likely treat the new discoveries as replacement reserves required
to sustain cash flows in perpetuity. This has been the case over the past few years with the
market largely ignoring a very high reserve replacement ratio (RRR), about 1.46X in FY2007-
10 and 1.73X in FY2010.
Exhibit 28: ONGC would need to add 2.3 bn bbls of oil reserves to reach US$100 bn market
capitalization
Oil and gas reserves required for ONGC to reach US$100 bn market capitalization, FY2014E basis
Key driver
Gas reserves Oil reserves
FY2010 net profit (Rs bn) 196 196
Gap in net profit (a) - (b) (Rs bn) 114 114
Value of other assets 3 3
Gap in market capitalization (US$ bn) 23 23
Valuation of 1 bn boe of gas reserves or 1 bn bbls of oil reserves (US$/bbl) 3 10
Required bn bbls of oil equivalent of gas or oil reserves (bn bbls) 8 2.3
Required tcf of proven gas reserves (tcf) or oil reserves (bn bbls) 44 2.3

India Strategy
APPENDIX 1: GLOBAL TOP-100 MARKET CAPITALIZATION COMPANIES

Exhibits 29 -32 list the top-100 companies in the world by market capitalization in 2009, 2004, 1999 and 1989.
We have used year-end prices to compute market capitalization and have removed certain companies in
countries with hyperinflation and fixed official exchange rates. We also give (1) the domicile of the
companies (in most cases, the home market) although many of the top-100 companies are large global
companies with operations in several countries and (2) the sectors in which they operate. The lists are quite
fascinating and show the emergence of sectors and countries.

Strategy India
Exhibit 29: Top-100 companies by market cap as on December 2009

Market cap
Company Name Country Industry (US$ mn)
1 Petrochina China Oil & Gas 353,140
2 Exxon Mobil Corp. United States Oil & Gas 323,717
3 Microsoft Corp. United States Technology 270,636
4 Industrial & Commercial Bank of China China Banking & Financial Services 268,957
5 Wal-Mart Stores Inc. United States Retailing 203,654
6 China Construction Bank Corp. China Banking & Financial Services 201,436
7 BHP Billiton Australia Metals & Mining 201,248
8 HSBC Holdings PLC United Kingdom Banking & Financial Services 199,255
9 Petrobras Brazil Oil & Gas 199,108
10 Apple Inc. United States Technology 189,801
11 China Mobile Ltd. Hong Kong Telecom 188,471
12 Royal Dutch Shell United Kingdom Oil & Gas 186,618
13 BP PLC United Kingdom Oil & Gas 181,806
14 Johnson & Johnson United States Pharmaceuticals 177,714
15 Nestle S.A. Switzerland Consumers 177,248
16 Procter & Gamble Co. United States Consumers 177,145
17 International Business Machines Corp. United States Technology 171,951
18 JPMorgan Chase & Co. United States Banking & Financial Services 171,053
19 AT&T Inc. United States Telecom 165,405
20 General Electric Co. United States Diversified 161,097
21 Sinopec China Oil & Gas 159,263
22 Chevron Corp. United States Oil & Gas 154,463
23 Bank of China China Banking & Financial Services 153,957
24 Berkshire Hathway United States Diversified 153,624
25 Total S.A. France Oil & Gas 151,548
26 Google Inc. United States Technology 150,655
27 Roche Holding AG Switzerland Pharmaceuticals 147,497
28 Pfizer Inc. United States Pharmaceuticals 146,785
29 Novartis AG Switzerland Pharmaceuticals 144,165
30 Toyota Motor Corp. Japan Automoblies 143,705
31 Vale Brazil Metals & Mining 143,524
32 Gazprom Russia Oil & Gas 142,985
33 Wells Fargo & Co. United States Banking & Financial Services 137,995
34 Cisco Systems Inc. United States Electronics 137,717
35 Banco Santander S.A. Spain Banking & Financial Services 136,363
36 China Life Insurance China Insurance 133,462
37 Coca-Cola Co. United States Consumers 132,079
38 Bank of America Corp. United States Banking & Financial Services 130,280
39 Telefonica S.A. Spain Telecom 127,821
40 Rio Tinto Australia Metals & Mining 124,297
41 Oracle Corp. United States Technology 122,925
42 Vodafone Group PLC United Kingdom Telecom 122,079
43 Hewlett-Packard Co. United States Technology 121,778
44 Intel Corp. United States Electronics 112,649
45 Merck & Co United States Pharmaceuticals 111,611
46 Samsung Electronics Co. Ltd. South Korea Electronics 111,363
47 GlaxoSmithKline PLC United Kingdom Pharmaceuticals 110,575
48 Electricite de France S.A. France Utilities 110,245
49 Sanofi-Aventis S.A. France Pharmaceuticals 103,996
50 ENI S.p.A. Italy Oil & Gas 102,291
51 China Shenhua Energy China Metals & Mining 100,765
52 GDF Suez S.A. France Utilities 98,212
53 BNP Paribas S.A. France Banking & Financial Services 94,972
54 PepsiCo Inc. United States Consumers 94,875
55 Citigroup United States Banking & Financial Services 94,155
56 Verizon Communications Inc. United States Telecom 93,957
57 Philip Morris International Inc. United States Consumers 91,787
58 Unilever Netherlands Consumers 91,450
59 Itau Unibanco Brazil Banking & Financial Services 90,039
60 Rosneft Russia Oil & Gas 88,121
61 Goldman Sachs Group Inc. United States Banking & Financial Services 86,798
62 Siemens AG Germany Electronics 84,221
63 E.ON AG Germany Utilities 83,917
64 Anheuser-Busch InBev Belgium Consumers 83,723
65 Abbott Laboratories United States Pharmaceuticals 83,508
66 Statoil ASA Norway Oil & Gas 79,926
67 Schlumberger Ltd. United States Oil & Gas 78,158
68 Qualcomm Inc. United States Electronics 77,269
69 Reliance Industries Ltd. India Oil & Gas 76,447
70 ConocoPhillips United States Oil & Gas 75,772
71 Commonwealth Bank of Australia Australia Banking & Financial Services 75,683
72 ArcelorMittal Netherlands Metals & Mining 72,068
73 CNOOC Ltd. Hong Kong Oil & Gas 70,281
74 Mitsubishi UFJ Financial Group Inc. Japan Banking & Financial Services 68,694
75 Banco Bilbao Vizcaya Argentaria Spain Banking & Financial Services 68,454
76 Royal Bank of Canada Canada Banking & Financial Services 68,239
77 AstraZeneca PLC United Kingdom Pharmaceuticals 68,151
78 Westpac Banking Corp. Australia Banking & Financial Services 67,662
79 McDonald's Corp. United States Consumers 67,384
80 L'Oreal S.A. France Consumers 66,972
81 Saudi Basic Industries Corp. Saudi Arabia Chemicals 66,587
82 Bayer AG Germany Chemicals 66,394
83 France Telecom France Telecom 66,235
84 Occidental Petroleum Corp. United States Oil & Gas 66,029
85 United Technologies Corp. United States Diversified 65,075
86 British American Tobacco PLC United Kingdom Consumers 65,010
87 Deutsche Telekom AG Germany Telecom 64,389
88 Bank of Communicatons China Banking & Financial Services 62,313
89 Sberbank Russia Banking & Financial Services 61,845
90 Nippon Telegraph & Telephone Corp. Japan Telecom 61,717
91 Honda Motor Co. Ltd. Japan Automoblies 61,296
92 NTT DoCoMo Inc. Japan Telecom 61,184
93 BG Group PLC United Kingdom Oil & Gas 61,100
94 Ping An Insurance China Insurance 61,061
95 Walt Disney Co. United States Media 60,147
96 Credit Suisse Group AG Switzerland Banking & Financial Services 58,673
97 3M Co. United States Diversified 58,527
98 Bradesco Brazil Banking & Financial Services 58,440
99 Amazon.com Inc. United States Retailing 58,245
100 SAP AG Germany Technology 58,047

India Strategy

Market cap
4 Citigroup Inc. United States Banking & Financial Services 250,042
8 Royal Dutch Shell Netherlands Oil & Gas 201,874
13 American International Group Inc. United States Insurance 171,042
19 Total S.A. France Oil & Gas 138,192
21 Berkshire Hathway United States Insurance 135,280
24 Altria Group Inc. United States Consumers 125,413
27 Sanofi-Aventis S.A. France Pharmaceuticals 111,272
28 Royal Bank of Scotland Group Plc United Kingdom Banking & Financial Services 105,738
30 Wells Fargo & Co. United States Banking & Financial Services 105,150
31 Dell Inc. United States Technology 104,689
32 Roche Switzerland Pharmaceuticals 101,980
34 ENI S.p.A. Italy Oil & Gas 100,260
36 UBS AG Switzerland Banking & Financial Services 94,369
37 Home Depot Inc. United States Retailing 93,855
38 Telefonica S.A. Spain Telecom 93,365
40 PepsiCo Inc. United States Consumers 87,930
41 Time Warner Inc. United States Media 85,750
42 SBC Communications United States Telecom 85,438
43 Wachovia United States Banking & Financial Services 84,365
45 Amgen Inc. United States Pharmaceuticals 81,479
47 Ebay Inc. United States Retailing 77,123
50 Nokia Corp. Finland Technology 73,662
51 Comcast United States Media 73,189
53 Barclays PLC United Kingdom Banking & Financial Services 72,335
54 BHP Billiton Australia Metals & Mining 72,012
55 Tyco International Ltd. United States Diversified 71,895
58 American Express Co. United States Banking & Financial Services 70,755
59 Samsung Electronics Co. Ltd. South Korea Electronics 70,686
60 Saudi Basic Industries Corp. Saudi Arabia Chemicals 70,070
62 Fannie Mae United States Banking & Financial Services 68,924
64 China Mobile Ltd. Hong Kong Telecom 66,689
65 Mitsubishi Tokyo Financial Japan Banking & Financial Services 66,431
66 ING Groep N.V. Netherlands Insurance 65,746
67 Gazprom OAO Russia Oil & Gas 65,347
68 Eli Lilly & Co. United States Pharmaceuticals 64,221
69 BNP Paribas S.A. France Banking & Financial Services 64,095
70 Telecom Italia Mobile Italy Telecom 64,091
71 Hewlett-Packard United States Technology 63,945
72 3M Co. United States Diversified 63,894
73 HBOS United Kingdom Banking & Financial Services 63,781
74 News Corp United States Media 63,368
75 E.ON AG Germany Utilities 63,074
76 Viacom United States Media 62,137
77 Telecom Italia Italy Telecom 61,030
78 Morgan Stanley United States Banking & Financial Services 60,771
79 Banco Bilbao Vizcaya Argentaria S.A. Spain Banking & Financial Services 60,148
80 Mizuho Financial Group Inc. Japan Banking & Financial Services 60,130
81 Medtronic Inc. United States Pharmaceuticals 60,037
82 Enel S.p.A. Italy Utilities 59,982
83 ConocoPhillips United States Oil & Gas 59,933
84 AstraZeneca PLC United Kingdom Pharmaceuticals 59,661
85 U.S. Bancorp United States Banking & Financial Services 58,479
86 UnitedHealth Group Inc. United States Insurance 57,539
87 Genentech United States Pharmaceuticals 57,141
88 Wyeth United States Pharmaceuticals 56,823
89 Walt Disney United States Media 56,803
90 Sap Germany Technology 56,252
91 Merrill Lynch United States Banking & Financial Services 55,504
92 DuPont E I de Nemours & Co. United States Chemicals 52,986
93 United Technologies Corp. United States Diversified 52,816
94 Yahoo! Inc. United States Technology 51,803
95 Ericsson Sweden Electronics 51,556
96 United Parcel Services United States Services 51,372
97 L'Oreal S.A. France Consumers 51,323
98 Allianz SE Germany Insurance 51,176
99 Freddie Mac United States Banking & Financial Services 51,142
100 BellSouth United States Telecom 50,905

Strategy India

Market cap
9 Lucent Technologies United States Technology 237,668
11 Nokia Corp. Finland Technology 208,077
14 BP Amoco United Kingdom Oil & Gas 190,088
16 America Online United States Technology 176,267
17 Citigroup Inc. United States Banking & Financial Services 169,917
18 AT&T United States Telecom 163,746
19 American International Group Inc. United States Insurance 152,695
22 British Telecommunications United Kingdom Telecom 151,549
23 SBC Communications United States Telecom 150,423
24 Vodafone Airtouch United Kingdom Telecom 150,082
25 Home Depot Inc. United States Retailing 142,171
26 Mci Worldcom United States Telecom 140,498
30 Ericsson Sweden Electronics 129,559
31 Nortel Networks Canada Electronics 129,205
32 Sun Microsystems United States Technology 125,345
33 Seven-Eleven Japan Japan Retailing 125,228
35 SONY Japan Media 123,252
36 Dell Inc. United States Technology 119,601
38 Bristol Myers Squibb United States Pharmaceuticals 118,030
39 Mannesmann Germany Diversified 117,316
40 Yahoo! Inc. United States Technology 116,615
43 EMC United States Electronics 110,642
44 Softbank Japan Media 109,602
45 Hewlett-Packard United States Technology 108,563
46 Roche Switzerland Pharmaceuticals 108,390
48 Glaxo Wellcome United Kingdom Pharmaceuticals 100,725
49 Motorola United States Electronics 97,775
50 Total Fina France Oil & Gas 94,606
51 China Telecom (Hong Kong) Hong Kong Telecom 92,083
52 Bell Atlantic United States Telecom 90,062
53 Fujitsu Japan Technology 89,246
54 Bellsouth United States Telecom 83,861
55 Telefonica Spain Telecom 80,662
57 Time Warner Inc. United States Media 80,530
58 Texas Instruments United States Electronics 80,439
59 Berkshire Hathway United States Insurance 78,887
61 DaimlerChrysler Germany Automoblies 75,626
63 AstraZeneca United Kingdom Pharmaceuticals 71,276
64 Morgan Stanley Dean Witter United States Banking & Financial Services 71,055
65 Telecom Italia Mobile Italy Telecom 71,006
67 Telecom Italia Italy Telecom 70,946
68 Smithkline Beecham United Kingdom Pharmaceuticals 69,639
69 Eli Lilly & Co. United States Pharmaceuticals 68,968
70 Telstra Australia Telecom 68,775
71 Warner-Lambert Co United States Pharmaceuticals 68,156
72 AT&T Liberty Media United States Media 67,804
73 DuPont E I de Nemours & Co. United States Chemicals 67,804
74 American Express United States Banking & Financial Services 66,992
75 Disney (Walt) United States Media 65,720
76 Lloyds TSB United Kingdom Banking & Financial Services 65,068
77 Aegon Netherlands Insurance 64,066
78 NTT Data Japan Technology 63,818
79 GTE United States Telecom 63,653
80 Tyco International Ltd. United States Diversified 62,593
81 Bank of Tokyo-Mitsubishi Japan Banking & Financial Services 62,466
82 Wells Fargo United States Banking & Financial Services 60,970
83 Carrefour France Retailing 60,721
84 Amgen United States Pharmaceuticals 59,494
85 Fannie Mae United States Banking & Financial Services 59,118
86 ING Groep N.V. Netherlands Insurance 58,324
87 Matsushita Electric Ind. Japan Electronics 58,008
88 Chase Manhattan United States Banking & Financial Services 57,961
89 Ford Motor United States Automoblies 57,562
90 Hutchison Whampoa Hong Kong Telecom 57,310
91 UBS Switzerland Banking & Financial Services 56,802
92 Hikari Tsushin Japan Diversified 56,657
93 Schering-Plough United States Pharmaceuticals 55,890
94 BCE Canada Diversified 55,016
95 Chevron United States Oil & Gas 54,880
96 Philip Morris United States Consumers 54,655
97 Hitachi Japan Diversified 54,614
100 McDonald's Corp. United States Consumers 52,554

India Strategy

Market cap
1 SsangYong Motor Co. Ltd. South Korea Automoblies 539,251
2 S&T Dynamics Co. Ltd. South Korea Automoblies 527,678
3 Banco de Galicia y Buenos Aires S.A. Argentina Banking & Financial Services 445,607
4 Banco do Brasil S/A Brazil Banking & Financial Services 400,960
5 Lotte Midopa Co. Ltd. South Korea Retailing 217,260
6 Edison S.p.A Italy Diversified 216,889
7 Hyundai Engineering & Construction Co. Ltd. South Korea Construction 159,636
9 Bakrie & Brothers Indonesia Diversified 150,943
10 Cathay Financial Holding Co. Ltd. Taiwan Banking & Financial Services 142,347
11 Telecom Italia S.p.A. Italy Telecom 135,257
12 Kia Motors Corp. South Korea Automoblies 131,461
13 Shieldtech PLC United Kingdom Diversified 128,606
15 Chiquita Brands International Inc. United States Consumers 109,368
16 AT&T Inc. United States Telecom 94,359
17 Nomura Holdings Inc. Japan Banking & Financial Services 88,946
18 SK Networks Co. Ltd. South Korea Diversified 87,287
19 Hua Nan Financial Holdings Co. Ltd. Taiwan Banking & Financial Services 83,524
20 Haseko Corp. Japan Diversified 82,602
22 Mizuho Trust & Banking Co. Ltd. Japan Banking & Financial Services 74,533
23 Ford Motor Co. United States Automoblies 72,761
24 First Financial Holding Co. Ltd. Taiwan Banking & Financial Services 72,535
25 Lloyds Banking Group PLC United Kingdom Banking & Financial Services 67,643
26 Bank of Ayudhya PCL Thailand Banking & Financial Services 62,596
28 Service Point Solutions S.A. Spain Diversified 61,679
29 Bull S.A. France Electronics 58,771
31 Tokyo Electric Power Co. Inc. Japan Utilities 56,513
32 Sprint Nextel Corp. United States Telecom 55,975
33 Daiei Inc. Japan Retailing 53,185
34 Sumitomo Mitsui Construction Co. Ltd. Japan Construction 52,815
35 Fiat SpA Italy Automoblies 52,143
36 Royal Bank of Scotland Group Plc United Kingdom Banking & Financial Services 50,992
38 Norman Broadbent PLC United Kingdom Diversified 49,693
39 Daimler AG Germany Automoblies 49,213
40 Nissan Motor Co. Ltd. Japan Automoblies 46,201
42 Hitachi Ltd. Japan Diversified 45,471
44 Mitsubishi Motors Corp. Japan Automoblies 43,506
45 Sanyo Electric Co. Ltd. Japan Electronics 41,357
46 Merck & Co Inc United States Pharmaceuticals 40,277
48 Panasonic Corp. Japan Electronics 39,566
49 Shinsei Bank Ltd. Japan Banking & Financial Services 39,391
50 US Airways Group Inc. United States Transportation 38,882
51 Alcatel-Lucent France Electronics 38,821
52 Georgia Gulf Corp. United States Chemicals 37,726
53 Nippon Steel Corp. Japan Metals & Mining 37,528
54 Toshiba Corp. Japan Electronics 37,415
55 DnB NOR ASA Norway Banking & Financial Services 37,012
56 All Nippon Airways Co. Ltd. Japan Transportation 36,278
57 UBS AG Switzerland Banking & Financial Services 34,462
59 NEC Corp. Japan Electronics 33,863
60 Vivendi S.A. France Diversified 33,393
61 Schneider Electric S.A. France Diversified 33,335
62 Sumitomo Trust & Banking Co. Ltd. Japan Banking & Financial Services 33,307
64 Kansai Electric Power Co. Inc. Japan Utilities 32,059
66 Unicredito Italiano Spa Italy Banking & Financial Services 30,016
67 Siam City Bank PCL Thailand Banking & Financial Services 29,569
68 Deutsche Bank AG Germany Banking & Financial Services 29,546
69 Altria Group Inc. United States Consumers 28,896
70 Air France-KLM France Transportation 28,842
71 Sumitomo Metal Industries Ltd. Japan Metals & Mining 28,634
72 YRC Worldwide Inc. United States Transportation 28,221
74 Assicurazioni Generali S.p.A. Italy Insurance 27,763
75 Daiwa Securities Group Inc. Japan Banking & Financial Services 27,748
76 Sony Corp. Japan Technology 27,492
77 Dow Chemical Co. United States Chemicals 27,477
78 Hanchang Corp. South Korea Electronics 27,193
79 GS Global Corp. South Korea Diversified 27,039
80 Mitsubishi Heavy Industries Ltd. Japan Diversified 26,973
81 BT Group PLC United Kingdom Telecom 26,895
82 Anam Electronics Co. Ltd. South Korea Electronics 26,736
83 Foster Wheeler AG United States Construction 26,460
84 AngloGold Ashanti Ltd. South Africa Metals & Mining 26,277
85 Brookfield Properties Corp. Canada Banking & Financial Services 26,101
87 Chubu Electric Power Co. Inc. Japan Utilities 25,591
91 Bristol-Myers Squibb Co. United States Pharmaceuticals 24,075
92 Mitsubishi Estate Co. Ltd. Japan Banking & Financial Services 24,069
93 Tokyu Corp. Japan Transportation 23,718
94 Mitsubishi Corp. Japan Diversified 23,710
95 American International Group Inc. United States Banking & Financial Services 23,564
97 Comcast Corp. United States Media 23,074
98 Capital Estate Ltd. Hong Kong Banking & Financial Services 22,817
99 Von Roll Holding AG Switzerland Metals & Mining 22,798

Strategy India
APPENDIX 2: INDIAN TOP-100 MARKET CAPITALIZATION COMPANIES

Exhibits 33 -36 list the top-100 companies in India by market capitalization in 2009, 2004, 1999 and 1989.
We have used year-end prices to compute market capitalization. The list provides remarkable insights in the
ascent and decline of companies and sectors in India. Several strong companies of the 1980s and even the
1990s who failed to adapt to a more competitive environment have been relegated to obscurity. If history is
any guide, we expect the same to continue over the next decade and beyond.

India Strategy

Market cap
Company name Industry (US$ mn)
1 Reliance Industries Oil & Gas 68,239
2 ONGC Oil & Gas 54,048
3 NTPC Utilities 41,705
4 MMTC Metals & Mining 36,961
5 NMDC Metals & Mining 35,963
6 Infosys Technologies Technology 32,065
7 TCS Technology 31,489
8 State Bank of India Banking & Financial Services 30,919
9 Bharti Airtel Telecom 26,791
10 BHEL Industrials 25,275
11 Larsen & Toubro Industrials 21,632
12 Wipro Technology 21,396
13 SAIL Metals & Mining 21,330
14 ICICI Bank Banking & Financial Services 20,937
15 ITC Consumers 20,430
16 HDFC Bank Banking & Financial Services 16,611
17 HDFC Banking & Financial Services 16,426
18 IOCL Oil & Gas 15,959
19 Sterlite Industries Metals & Mining 15,539
20 Jindal Steel Metals & Mining 14,061
21 DLF Property 13,155
22 Hindustan Unilever Consumers 12,565
23 Tata Steel Metals & Mining 11,758
24 Cairn India Oil & Gas 11,453
25 GAIL India Oil & Gas 11,245
26 Hindustan Zinc Metals & Mining 10,998
27 Power Grid Corporation Utilities 9,944
28 Maruti Suzuki Automobiles 9,670
29 Tata Motors Automobiles 9,256
30 NHPC Ltd Utilities 8,988
31 Axis Bank Banking & Financial Services 8,564
32 Reliance Power Utilities 7,977
33 Reliance Communications Telecom 7,658
34 Hero Honda Automobiles 7,356
35 Sesa Goa Metals & Mining 7,230
36 Tata Power Utilities 7,014
37 Sun Pharma Pharmaceuticals 6,699
38 JP Associates Diversified 6,689
39 Hindalco Industries Metals & Mining 6,602
40 M&M Automobiles 6,490
41 Power Finance Corporation Banking & Financial Services 6,431
42 Oil India Oil & Gas 6,397
43 Punjab National Bank Banking & Financial Services 6,136
44 Kotak Mahindra Bank Banking & Financial Services 5,982
45 Cipla Pharmaceuticals 5,782
46 Nalco Metals & Mining 5,780
47 Reliance Infrastructure Utilities 5,544
48 Neyveli Lignite Metals & Mining 5,508
49 Hindustan Copper Metals & Mining 5,500
50 Bajaj Auto Automobiles 5,470
51 HCL Technologies Technology 5,367
52 Nestle India Consumers 5,272
53 GMR Infrastructure Infrastructure 5,245
54 BPCL Oil & Gas 4,909
55 Grasim Industries Cement 4,875
56 Mundra Port Infrastructure 4,755
57 Ranbaxy Labs Pharmaceuticals 4,668
58 Adani Enterprises Diversified 4,642
59 Adani Power Utilities 4,636
60 Reliance Capital Banking & Financial Services 4,518
61 Rural Electrification Corp Banking & Financial Services 4,487
62 Bank of India Banking & Financial Services 4,339
63 IDFC Banking & Financial Services 4,287
64 Unitech Property 4,219
65 Siemens Industrials 4,212
66 Oracle Financial Services Technology 4,168
67 Dr Reddy's Labs Pharmaceuticals 4,144
68 JSW Steel Metals & Mining 4,065
69 Bank of Baroda Banking & Financial Services 4,027
70 Idea Cellular Telecom 3,872
71 Essar Oil Oil & Gas 3,789
72 Asian Paints Consumers 3,697
73 Container Corporation of India Infrastructure 3,651
74 ACC Cement 3,511
75 ABB Industrials 3,489
76 Canara Bank Banking & Financial Services 3,438
77 Jaybharat Textiles Diversified 3,402
78 United Spirits Consumers 3,393
79 Ambuja Cements Cement 3,391
80 Crompton Greaves Industrials 3,350
81 Bharat Electronics Industrials 3,321
82 Torrent Power Utilities 3,268
83 MphasiS Technology 3,257
84 Bosch Automobiles 3,117
85 Suzlon Energy Industrials 3,018
86 Lanco Infratech Industrials 2,986
87 Dabur India Consumers 2,953
88 MRPL Oil & Gas 2,932
89 Glaxosmithkline Pharma Pharmaceuticals 2,926
90 Sun TV Network Media 2,905
91 Union Bank of India Banking & Financial Services 2,862
92 HPCL Oil & Gas 2,845
93 Lupin Pharmaceuticals 2,842
94 HDIL Property 2,677
95 Tech Mahindra Technology 2,598
96 Satyam Computer Technology 2,473
97 UltraTech Cements Cement 2,445
98 RNRL Oil & Gas 2,436
99 Zee Entertainment Media 2,391
100 Shriram Transport Banking & Financial Services 2,214
Source: Capitaline, Kotak Institutional Equities

Strategy India

Market cap
3 NTPC Utilities 16,481
4 TCS Technology 14,672
8 Bharti Airtel Telecom 9,144
12 ICICI Bank Banking & Financial Services 6,243
17 HDFC Banking & Financial Services 4,343
20 HDFC Bank Banking & Financial Services 3,402
23 Maruti Suzuki Automobiles 3,050
26 Nalco Metals & Mining 2,963
28 Neyveli Lignite Metals & Mining 2,799
29 Grasim Industries Cement 2,774
30 Bajaj Holdings Banking & Financial Services 2,620
32 HCL Technologies Technology 2,492
33 Punjab National Bank Banking & Financial Services 2,460
34 Sun Pharma Pharmaceuticals 2,354
35 MTNL Telecom 2,233
36 Reliance Infrastructure Utilities 2,227
37 MRPL Oil & Gas 2,178
39 NMDC Metals & Mining 2,147
40 Canara Bank Banking & Financial Services 1,995
41 Tata Power Utilities 1,770
43 IDBI Bank Banking & Financial Services 1,640
44 Bank of Baroda Banking & Financial Services 1,627
47 Sterlite Industries Metals & Mining 1,516
48 Dr Reddy's Labs Pharmaceuticals 1,515
49 Tata Communications Telecom 1,508
50 Hindustan Zinc Metals & Mining 1,477
51 Oriental Bank Banking & Financial Services 1,477
53 Bosch Automobiles 1,404
54 Piramal Health Pharmaceuticals 1,389
55 ACC Cement 1,384
56 Container Corporation of India Infrastructure 1,364
57 Nestle India Consumers 1,290
58 Bharat Electronics Industrials 1,204
59 Biocon Pharmaceuticals 1,163
60 Corporation Bank Banking & Financial Services 1,158
61 Union Bank of India Banking & Financial Services 1,146
62 SCI Shipping 1,110
63 Patni Computer Technology 1,098
64 Oracle Financial Services Technology 1,090
65 Tata Teleservices Maharashtra Telecom 1,056
66 Bank of India Banking & Financial Services 1,051
67 IPCL Oil & Gas 1,044
68 Siemens Industrials 1,003
69 Axis Bank Banking & Financial Services 987
70 Bharat Forge Automobiles 972
71 IOB Banking & Financial Services 971
72 UltraTech Cements Cement 969
73 ABB Industrials 941
74 Wockhardt Pharmaceuticals 882
75 Cadila Healthcare Pharmaceuticals 846
76 Matrix Labs Pharmaceuticals 839
77 Andhra Bank Banking & Financial Services 818
78 Tata Chemicals Agrochemicals 814
79 CPCL Oil & Gas 784
80 Kotak Mahindra Bank Banking & Financial Services 780
81 JP Associates Diversified 766
82 GE Shipping Shipping 727
83 Vijaya Bank Banking & Financial Services 723
84 Kochi Refineries Oil & Gas 719
85 Sundaram Clayton Automobiles 712
86 Asian Paints Consumers 703
87 Aventis Pharma Pharmaceuticals 696
88 Syndicate Bank Banking & Financial Services 684
89 UCO Bank Banking & Financial Services 682
90 Hindustan Copper Metals & Mining 681
91 Ashok Leyland Automobiles 664
92 Glenmark Pharma Pharmaceuticals 657
93 Jindal Steel Metals & Mining 633
94 Lupin Pharmaceuticals 630
95 HCL Infosystems Technology 623
96 Castrol India Oil & Gas 616
97 Nirma Consumers 615
98 Dabur India Consumers 609
99 Tata Tea Consumers 609
100 Allahabad Bank Banking & Financial Services 599

India Strategy

Market cap
2 Pentamedia Graphics Media 12,267
7 Vatsa Corporation Banking & Financial Services 6,110
8 Reliance Petroleum Oil & Gas 5,843
11 Tata Communications Telecom 3,951
14 NIIT Technology 2,946
16 MTNL Telecom 2,795
20 ICICI Banking & Financial Services 1,661
21 Flextronics Technology 1,589
29 VisualSoft Technologies Technology 1,178
30 Silverline Technologies Technology 1,117
35 HFCL Telecom 1,007
37 ACC Cement 976
38 Nestle India Consumers 953
39 Novartis India Pharmaceuticals 937
40 Nalco Metals & Mining 937
41 Bajaj Holdings Banking & Financial Services 903
42 Dr Reddy's Labs Pharmaceuticals 878
44 Hewlett-Packard Technology 843
45 HDFC Banking & Financial Services 783
46 Carol Info Services Pharmaceuticals 774
47 Dabur India Consumers 774
48 Hindustan Copper Metals & Mining 772
49 Centurion Bank of Punjab Banking & Financial Services 757
50 GTL Telecom 752
51 HDFC Bank Banking & Financial Services 743
52 Mastek Technology 732
53 Polaris Software Technology 692
54 Information Technologies Technology 682
55 Grasim Industries Cement 678
56 Colgate-Palmolive Consumers 669
57 IPCL Oil & Gas 627
58 PVP Ventures Property 615
59 Sun Pharma Pharmaceuticals 607
60 Reliance Infrastructure Utilities 605
62 IDBI Bank Banking & Financial Services 568
63 Nirma Consumers 562
64 Aventis Pharma Pharmaceuticals 549
65 GlaxoSmithKline Consumers 540
66 Cummins India Industrials 521
67 Engineers India Industrials 516
68 Rolta India Technology 515
69 HCL Infosystems Technology 513
70 Hexaware Technologies Technology 508
71 Gillette India Consumers 497
72 Sonata Software Technology 492
73 Punjab Tractors Automobiles 484
74 Neyveli Lignite Metals & Mining 483
75 Piramal Healthcare Pharmaceuticals 477
76 Adani Enterprises Diversified 465
77 Britannia Industries Consumers 445
78 Bosch Automobiles 437
79 Bank of Baroda Banking & Financial Services 434
80 Siemens Industrials 417
81 Lupin Labs Pharmaceuticals 411
82 Cadbury India Consumers 411
83 Uniphos Enterprises Agrochemicals 398
84 DSQ Software Technology 388
85 Tata Infotech Technology 374
86 Container Corporation of India Infrastructure 366
87 Sterlite Industries Metals & Mining 359
88 Reliance Capital Banking & Financial Services 342
90 P & G Hygiene Consumers 341
91 McDowell & Company Consumers 337
92 Indian Hotels Hotels 329
93 Sundaram Clayton Automobiles 321
95 Corporation Bank Banking & Financial Services 306
96 MRPL Oil & Gas 305
97 Indo Gulf Corporation Oil & Gas 299
98 Trigyn Technologies Technology 297
99 Morepen Labs Pharmaceuticals 288
100 Torrent Pharma Pharmaceuticals 288

Strategy India

Market cap
2 Ferro Alloys Metals & Mining 3,491
3 Aventis Pharma Pharmaceuticals 1,140
5 Voltas Industrials 804
6 Reliance Industries Oil & Gas 802
7 SIV Industries Textiles 764
8 Standard Industries Oil & Gas 720
9 Hindustan Unilever Consumers 613
10 GSFC Agrochemicals 483
11 Century Textiles Textiles 446
12 Bajaj Holdings Banking & Financial Services 432
13 Indian Aluminium Metals & Mining 378
14 Grasim Industries Cement 370
15 Colgate-Palmolive Consumers 358
16 Larsen & Toubro Industrials 335
17 Tata Chemicals Agrochemicals 330
18 Century Enka Textiles 329
19 NOCIL Oil & Gas 326
20 Hindalco Industries Metals & Mining 285
21 Brooke Bond Consumers 284
22 Nestle India Consumers 263
23 ITC Consumers 257
24 GNFC Agrochemicals 248
25 GlaxoSmithKline Consumers 227
26 Ingersoll-Rand Industrials 222
27 GE Shipping Shipping 210
28 SKF India Automobiles 208
29 Wimco Consumers 193
31 Bosch Automobiles 185
32 Escorts Automobiles 171
34 Novartis India Pharmaceuticals 150
35 J K Synthetics Textiles 143
36 CEAT Tyres 140
37 Bombay Dyeing Textiles 139
38 Aditya Birla Nuvo Textiles 136
39 SPIC Agrochemicals 131
40 Britannia Industries Consumers 131
41 Mukand Metals & Mining 126
43 Glaxosmit Pharma Pharmaceuticals 121
44 ACC Cement 118
45 Siemens Industrials 117
46 Assam Company Consumers 116
47 Cummins India Industrials 108
48 Exide Industries Automobiles 106
49 McLeod Russel Consumers 105
50 Akzo Nobel Consumers 104
51 M&M Automobiles 104
52 Reckitt Benckinser Consumers 102
53 Oswal Agro Mills Agrochemicals 102
54 Excel Industries Oil & Gas 101
55 KSB Pumps Industrials 99
56 Raymond Textiles 98
57 Premier Industrials 92
58 EIH Hotels 88
59 Essar Shipping Shipping 86
60 Dunlop India Tyres 85
61 Pond's Consumers 85
62 Gujarat Alkalies Oil & Gas 83
63 ITC Bharat Paper Diversified 77
65 Indian Hotels Hotels 76
66 Modi Xerox Technology 76
67 Bharat Forge Automobiles 76
68 MRF Tyres 75
69 Baroda Rayon Textiles 74
70 Oswal Chemicals & Fertilizers Agrochemicals 70
71 Cadbury India Consumers 70
72 India Glycols Oil & Gas 69
73 Birla Corporation Cement 66
74 Pfizer Pharmaceuticals 66
75 Ispat Industries Metals & Mining 66
76 JK Tyre & Industries Tyres 64
77 OTIS Elevator Industrials 63
78 Smith B P Pharmaceuticals 62
79 JK Lakshmi Cements Cement 61
80 Oil Country Tubular Oil & Gas 60
81 Harrisons Malayalam Consumers 56
82 Futura Polyester Textiles 56
83 Tata Power Utilities 53
84 Mahindra Scooters Automobiles 52
85 Nalwa Sons Investments Banking & Financial Services 52
86 Alfa Laval India Industrials 51
87 Parke Davis Pharmaceuticals 50
88 Orkay Industries Textiles 50
89 Clariant India Oil & Gas 49
90 Finolex Cables Cables 49
91 Zuari Industries Agrochemicals 46
92 Modi Rubber Tyres 46
93 Windsor Machines Industrials 45
94 Jubilant Organosys Pharmaceuticals 44
95 Goodyear India Tyres 44
96 Apeejay Tea Consumers 44
97 Whirlpool India Consumers 42
98 Hindustan Motors Automobiles 41
99 Garware Polyester Chemicals 39
100 Brabourne Enterprises Pharmaceuticals 39

India
Exhibit 37: Kotak Institutional Equities: Valuation summary of key Indian companies
32
O/S Target
25-Jun-10 Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X) Dividend yield (%) RoE (%) price Upside ADVT-3mo
Company Price (Rs) Rating (Rs mn) (US$ mn) (mn) 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E (Rs) (%) (US$ mn)
Automobiles
Ashok Leyland 63 ADD 83,143 1,796 1,330 2.8 3.9 5.0 84.5 37.5 29.7 22.1 16.1 12.4 13.2 10.1 8.5 2.1 2.0 1.8 2.4 1.6 1.6 11.1 12.7 15.0 60 (4.0) 9.9
Bajaj Auto 2,414 ADD 349,208 7,544 145 117.5 159.9 173.2 159.8 36.1 8.3 20.5 15.1 13.9 13.0 10.4 9.4 11.0 7.0 5.0 0.8 0.8 0.8 66.6 54.8 39.8 2,330 (3.5) 11.7
Hero Honda 2,056 SELL 410,603 8,871 200 111.8 121.5 135.7 74.1 8.7 11.7 18.4 16.9 15.2 11.9 11.2 9.6 11.4 7.8 5.8 1.5 1.6 1.8 59.1 56.6 43.8 1,800 (12.5) 23.8
Mahindra & Mahindra 613 BUY 354,761 7,664 578 34.9 40.7 48.7 132.5 16.5 19.7 17.6 15.1 12.6 11.6 9.9 8.2 4.4 3.5 2.8 1.5 1.5 1.6 30.0 25.8 24.6 680 10.9 28.0
Maruti Suzuki 1,397 ADD 403,675 8,721 289 86.4 94.1 104.2 104.9 8.9 10.8 16.2 14.8 13.4 8.8 8.1 7.0 3.4 2.8 2.3 0.4 0.5 0.5 23.3 20.6 18.9 1,400 0.2 19.9
Tata Motors 769 ADD 458,403 9,904 596 23.9 27.2 35.5 138.9 13.5 30.6 32.1 28.3 21.7 12.7 12.7 11.2 2.2 2.0 1.8 0.7 0.7 0.7 8.1 7.5 8.6 900 17.1 100.3
Automobiles Cautious 2,059,794 44,501 118.1 17.3 15.7 20.2 17.2 14.9 11.6 10.5 9.1 4.0 3.3 2.7 1.0 1.0 1.1 19.9 19.2 18.4
Banks/Financial Institutions
Andhra Bank 134 BUY 64,917 1,403 485 21.0 21.1 25.4 56.1 0.6 20.0 6.4 6.3 5.3 — — — 1.4 1.2 1.0 3.1 3.2 3.8 24.4 20.2 20.7 160 19.5 6.0
Axis Bank 1,249 ADD 506,103 10,934 405 62.1 77.4 98.5 22.7 24.7 27.3 20.1 16.1 12.7 — — — 3.2 2.7 2.3 1.0 1.2 1.5 18.9 18.1 19.9 1,360 8.9 52.3
Bank of Baroda 693 BUY 253,439 5,475 366 83.7 89.8 111.0 37.3 7.3 23.6 8.3 7.7 6.2 — — — 1.8 1.6 1.3 2.2 2.3 2.9 24.4 21.8 22.6 825 19.0 10.9
Bank of India 344 REDUCE 181,099 3,913 526 33.1 42.7 56.7 (42.1) 28.9 32.8 10.4 8.1 6.1 — — — 1.4 1.2 1.1 2.0 2.6 3.5 14.2 16.4 19.1 360 4.5 5.9
Canara Bank 433 ADD 177,489 3,835 410 73.7 77.0 93.6 45.8 4.5 21.4 5.9 5.6 4.6 — — — 1.4 1.2 1.0 1.8 2.3 2.8 23.0 19.6 20.1 500 15.5 6.6
Corporation Bank 513 BUY 73,569 1,589 143 81.6 86.7 100.3 31.1 6.3 15.7 6.3 5.9 5.1 — — — 1.3 1.1 0.9 3.2 3.4 4.0 21.9 19.9 19.8 650 26.7 1.2
Federal Bank 325 BUY 55,509 1,199 171 27.2 38.7 48.0 (7.2) 42.3 24.2 11.9 8.4 6.8 — — — 1.2 1.1 0.9 1.5 2.2 2.7 10.3 13.4 14.8 360 10.9 5.4
HDFC 2,935 ADD 842,783 18,208 287 98.4 118.2 143.7 22.7 20.1 21.5 29.8 24.8 20.4 — — — 5.5 4.9 4.3 1.2 1.4 1.7 20.0 21.0 22.4 3,200 9.0 41.0
HDFC Bank 1,948 BUY 891,524 19,261 458 64.4 84.1 110.4 22.1 30.6 31.2 30.2 23.1 17.6 — — — 4.1 3.6 3.1 0.6 0.8 1.1 16.1 16.7 19.1 2,200 13.0 32.4
ICICI Bank 857 REDUCE 954,959 20,631 1,115 36.1 46.5 58.0 6.9 28.9 24.7 23.7 18.4 14.8 — — — 1.9 1.8 1.6 1.4 1.8 2.2 8.1 9.8 11.5 980 14.4 95.4
IDFC 169 ADD 219,219 4,736 1,301 8.2 9.2 11.2 41.1 12.9 21.9 20.6 18.3 15.0 — — — 3.1 2.8 2.4 0.9 1.0 1.2 16.1 16.0 17.1 195 15.7 19.5
India Infoline 96 BUY 29,933 647 312 8.1 8.9 10.0 59.2 9.8 12.5 11.8 10.8 9.6 — — — 1.9 1.6 1.3 3.3 2.0 2.4 16.4 15.9 16.1 140 45.8 3.7
Indian Bank 219 BUY 94,163 2,034 430 35.1 35.5 43.8 25.5 1.1 23.6 6.2 6.2 5.0 — — — 1.4 1.2 1.0 2.8 2.8 3.5 24.0 20.3 21.2 280 27.8 4.2
Indian Overseas Bank 105 BUY 56,986 1,231 545 13.0 15.4 26.4 (46.7) 18.9 71.3 8.1 6.8 4.0 — — — 0.9 0.8 0.7 3.9 4.3 4.7 9.6 10.6 16.3 120 14.7 3.9
J&K Bank 803 BUY 38,918 841 48 105.7 112.3 140.6 25.1 6.3 25.2 7.6 7.1 5.7 — — — 1.4 1.2 1.1 2.7 2.9 3.6 17.3 16.9 18.5 850 5.9 0.5
LIC Housing Finance 1,016 ADD 96,510 2,085 95 69.7 93.2 104.2 11.4 33.8 11.7 14.6 10.9 9.8 — — — 3.0 2.5 2.1 1.5 2.0 2.2 23.6 23.8 22.4 1,050 3.3 22.1
Mahindra & Mahindra Financial 458 BUY 43,934 949 96 35.7 42.6 49.8 59.3 19.3 16.8 12.8 10.7 9.2 — — — 2.6 2.2 1.9 1.7 2.0 2.3 21.4 21.7 21.6 500 9.3 1.1
Oriental Bank of Commerce 323 ADD 80,799 1,746 251 45.3 52.8 58.6 25.3 16.5 11.0 7.1 6.1 5.5 — — — 1.2 1.0 0.9 2.8 3.3 3.7 14.1 15.4 15.3 400 24.0 4.7
PFC 281 REDUCE 322,007 6,957 1,148 20.5 22.5 25.9 53.5 9.9 15.1 13.7 12.5 10.8 — — — 2.5 2.2 1.9 1.8 2.0 2.3 18.8 18.0 18.2 240 (14.5) 2.6
Punjab National Bank 1,049 BUY 330,784 7,146 315 123.8 128.0 156.5 26.3 3.4 22.2 8.5 8.2 6.7 — — — 2.0 1.7 1.4 2.1 2.4 3.0 26.4 22.7 23.3 1,150 9.6 7.7
Reliance Capital 769 ADD 189,309 4,090 246 13.8 16.1 14.1 (64.9) 17.0 (12.4) 55.7 47.6 54.4 — — — 2.8 2.7 2.6 0.8 0.8 0.7 5.0 5.7 4.8 875 13.8 35.8
Rural Electrification Corp. 299 ADD 295,180 6,377 987 20.3 24.6 30.7 23.2 21.2 24.9 14.7 12.2 9.7 — — — 2.7 2.3 2.0 2.2 2.5 3.1 22.0 20.5 22.2 300 0.4 14.5
Shriram Transport 579 ADD 129,220 2,792 223 39.2 49.1 62.4 30.1 25.4 27.2 14.8 11.8 9.3 — — — 3.5 3.0 2.5 2.0 2.5 3.2 28.4 26.1 27.8 600 3.6 4.6
SREI 82 NR 9,518 206 116 8.3 7.9 9.9 17.8 (4.8) 25.8 9.9 10.4 8.2 — — — 0.8 0.8 0.7 1.5 1.5 1.5 11.1 10.5 12.3 — — 4.3
State Bank of India 2,301 BUY 1,460,732 31,558 635 144.4 178.1 223.0 0.5 23.4 25.2 15.9 12.9 10.3 — — — 2.2 2.0 1.7 1.7 1.8 1.9 14.8 16.1 17.8 2,700 17.4 98.2
Union Bank 304 BUY 153,430 3,315 505 41.1 45.8 57.3 20.2 11.5 25.0 7.4 6.6 5.3 — — — 1.7 1.4 1.2 1.8 2.2 2.8 26.2 23.7 24.3 380 25.1 4.8
Banks/Financial Institutions Attractive 7,644,507 165,156 14.7 17.5 24.2 15.2 12.9 10.4 — — — 2.4 2.1 1.8 1.5 1.8 2.1 15.5 16.1 17.4
Cement
ACC 862 SELL 161,896 3,498 188 83.2 61.8 63.4 47.9 (25.7) 2.6 10.4 13.9 13.6 5.6 6.5 5.7 2.5 2.2 2.0 2.7 2.7 2.7 29.3 19.4 17.7 830 (3.7) 9.0
Ambuja Cements 117 SELL 178,346 3,853 1,522 8.0 7.9 8.1 11.4 (1.8) 2.6 14.6 14.9 14.5 8.2 8.5 7.7 2.6 2.3 2.0 1.6 1.8 1.8 19.3 16.7 15.3 98 (16.3) 6.3
Grasim Industries 1,799 ADD 164,918 3,563 92 301.0 240.1 282.0 26.1 (20.2) 17.5 6.0 7.5 6.4 3.9 3.9 3.0 1.3 1.1 1.0 1.9 1.9 1.9 22.9 16.4 16.7 2,150 19.5 9.2
India Cements 108 SELL 33,266 719 307 10.0 10.4 11.3 n/a 3.1 9.1 10.8 10.5 9.6 5.5 5.5 5.3 0.8 0.7 0.7 2.0 2.9 2.9 8.2 7.7 8.0 110 1.5 3.7
Shree Cement 2,025 BUY 70,545 1,524 35 208.0 221.1 242.5 19.0 6.3 9.7 9.7 9.2 8.4 4.8 4.6 3.7 3.9 2.7 2.1 0.5 0.5 0.5 48.0 35.0 28.1 2,550 25.9 0.8
UltraTech Cement 932 SELL 115,981 2,506 124 88.2 67.1 77.2 12.0 (23.9) 15.0 10.6 13.9 12.1 5.5 6.2 5.1 2.1 1.9 1.6 0.9 0.9 0.9 26.6 16.8 16.7 940 0.9 2.7
Cement Neutral 724,953 15,662 19.3 (15.5) 10.4 9.4 11.2 10.1 5.1 5.4 4.5 1.9 1.7 1.5 1.7 1.8 1.8 20.5 15.1 14.6
Consumer products
Asian Paints 2,399 BUY 230,155 4,972 96 71.6 82.1 98.1 85.4 14.7 19.5 33.5 29.2 24.4 20.9 18.0 14.7 14.2 11.3 9.2 1.1 1.4 1.7 51.6 44.5 42.5 2,300 (4.1) 2.6
Colgate-Palmolive (India) 848 REDUCE 115,302 2,491 136 29.7 33.0 37.6 37.6 11.1 13.9 28.6 25.7 22.6 21.2 18.7 15.9 36.1 28.2 22.6 2.4 2.6 3.0 150.2 122.2 109.9 760 (10.4) 2.4
Dabur India 201 BUY 174,038 3,760 866 5.8 6.8 8.2 28.1 17.6 20.8 34.7 29.5 24.4 25.7 20.7 17.1 16.5 13.6 11.2 1.5 1.8 2.1 54.3 51.1 50.7 200 (0.4) 2.3
GlaxoSmithkline Consumer (a) 1,818 ADD 76,438 1,651 42 55.4 70.0 82.9 23.6 26.5 18.4 32.8 26.0 21.9 18.2 15.4 12.6 8.5 7.1 5.9 1.0 1.3 1.5 27.9 29.6 29.2 1,800 (1.0) 0.9
Godrej Consumer Products 342 NR 105,324 2,275 308 8.7 9.8 11.6 29.7 13.2 18.2 39.4 34.8 29.4 27.9 24.9 21.0 9.0 7.9 7.8 1.2 1.2 1.2 30.7 24.1 27.8 — — 3.5
Hindustan Unilever 266 REDUCE 580,282 12,537 2,179 9.7 10.4 11.8 1.7 7.3 14.0 27.5 25.6 22.5 18.6 17.5 14.7 22.7 19.6 16.9 2.9 3.2 3.6 91.6 82.2 80.8 230 (13.6) 14.7
ITC 301 BUY 1,136,047 24,544 3,769 10.8 12.4 14.5 24.4 15.4 16.9 28.0 24.2 20.7 17.2 15.2 12.8 8.0 6.9 5.9 3.3 1.8 2.0 29.9 32.2 32.1 315 4.5 23.2
Jubilant Foodworks 305 REDUCE 19,776 427 65 5.5 7.7 9.7 340.6 39.3 25.3 55.1 39.5 31.5 29.7 20.8 14.7 16.8 11.8 8.6 — — — 46.6 35.1 31.5 290 (4.9) 13.9
Jyothy Laboratories 262 ADD 19,013 411 73 11.0 12.9 15.3 99.6 17.0 18.3 23.8 20.3 17.2 18.3 13.9 11.3 4.7 4.0 3.4 1.8 1.3 1.8 18.6 20.2 20.5 230 (12.2) 1.2
KOTAK INSTITUTIONAL EQUITIES RESEARCH
Nestle India (a) 2,908 REDUCE 280,334 6,056 96 74.4 87.0 105.5 27.0 17.0 21.3 39.1 33.4 27.6 25.8 22.9 19.7 48.2 38.3 30.3 1.7 2.1 2.5 136.0 127.8 122.7 3,000 3.2 2.2
Tata Tea 1,179 BUY 72,888 1,575 62 66.2 73.5 83.7 23.4 11.1 13.8 17.8 16.0 14.1 11.4 9.3 8.3 1.5 1.4 1.3 1.8 2.0 2.3 10.9 11.4 12.0 1,250 6.1 3.5
Consumer products Attractive 2,809,596 60,700 23.4 13.8 16.9 29.6 26.0 22.2 19.0 16.8 14.1 10.0 8.7 7.5 2.5 2.1 2.4 34.0 33.4 33.8
Constructions
IVRCL 184 BUY 49,023 1,059 267 7.8 10.3 12.4 (7.7) 32.4 19.7 23.5 17.7 14.8 12.3 10.1 8.6 2.4 2.1 1.9 0.2 0.2 0.2 10.9 12.8 13.5 215 17.1 8.1
Nagarjuna Construction Co. 189 BUY 48,379 1,045 257 7.1 11.5 14.3 6.1 61.1 24.1 26.4 16.4 13.2 12.7 9.6 7.9 2.2 2.0 1.7 0.8 1.1 1.1 9.3 12.5 13.9 210 11.4 4.0
Punj Lloyd 129 REDUCE 43,665 943 339 (12.9) 9.8 12.0 79.2 (175.4) 22.4 (10.0) 13.2 10.8 36.3 7.1 6.5 1.4 1.3 1.2 (0.1) 0.3 0.8 (15.8) 10.3 11.4 140 8.7 13.2
Sadbhav Engineering 1,230 BUY 18,443 398 15 43.1 62.0 84.0 (15.8) 43.9 35.5 28.5 19.8 14.6 16.1 10.4 8.5 4.4 3.0 2.5 0.3 0.5 0.5 13.3 14.1 17.4 1,450 17.9 0.4
Construction Attractive 159,510 3,446 (96.9) 14,481 24.4 2,355.9 16.2 13.0 16.8 8.7 7.6 2.1 1.8 1.6 0.3 0.5 0.7 0.1 11.3 12.5
Source: Company, Bloomberg, Kotak Institutional Equities estimates
Strategy
Strategy
Kotak Institutional Equities: Valuation summary of key Indian companies
O/S Target
Energy
Bharat Petroleum 621 ADD 224,408 4,848 362 63.5 54.3 67.6 208.2 (14.5) 24.5 9.8 11.4 9.2 5.5 5.7 4.8 1.6 1.4 1.3 2.3 2.9 3.6 16.0 12.3 13.9 660 6.3 12.4
Cairn india 311 SELL 589,862 12,744 1,897 5.3 28.5 40.0 — 433 40.5 58 11 7.8 45.5 7.4 5.3 1.7 1.5 1.3 — — 4.8 3.0 14.6 18.1 250 (19.6) 18.4
Castrol India (a) 430 REDUCE 106,207 2,295 247 15.4 19.6 20.6 44.6 27.0 5.3 27.9 21.9 20.8 16.5 13.4 12.6 23.1 21.6 19.9 2.9 3.6 3.7 83.8 101.6 99.2 365 (15.0) 1.3
GAIL (India) 484 ADD 614,135 13,268 1,268 24.8 26.2 38.8 11.7 5.8 48.0 19.6 18.5 12.5 11.0 11.4 8.9 3.4 3.0 2.6 1.5 1.8 2.6 17.4 16.3 21.1 495 2.2 18.4
GSPL 100 REDUCE 56,076 1,212 562 7.4 8.9 9.1 234.7 21.5 1.3 13.6 11.2 11.0 7.0 5.9 5.3 3.3 2.6 2.3 1.0 2.2 3.6 27.3 26.3 22.5 80 (19.8) 4.1
Hindustan Petroleum 402 ADD 136,350 2,946 339 54.7 45.0 62.0 222.7 (17.9) 38.0 7.3 8.9 6.5 2.8 3.2 2.5 1.0 0.9 0.8 3.0 3.5 4.8 13.9 10.3 13.0 500 24.3 11.3
Indian Oil Corporation 378 ADD 917,644 19,825 2,428 49.9 34.0 37.4 406.8 (31.9) 10.0 7.6 11.1 10.1 5.1 6.1 5.0 1.7 1.6 1.4 3.4 2.7 3.0 22.7 13.8 14.0 410 8.5 8.5
Oil India 1,360 BUY 326,934 7,063 240 115.1 130.7 152.0 — 13.5 16.3 11.8 10.4 8.9 5.0 4.0 3.2 2.2 2.0 1.7 2.5 3.2 3.7 16.7 17.8 18.2 1,440 5.9 3.6
Oil & Natural Gas Corporation 1,263 BUY 2,702,270 58,381 2,139 91.4 124.9 141.1 1.3 36.7 12.9 13.8 10.1 9.0 5.0 4.2 3.4 2.0 1.8 1.6 2.6 3.3 3.8 14.6 17.9 18.0 1,450 14.8 31.5
Petronet LNG 78 REDUCE 58,688 1,268 750 5.4 6.2 7.9 — 14.9 28.0 14.5 12.6 9.9 9.2 7.6 6.6 2.3 2.0 1.7 2.2 2.6 3.5 15.9 15.9 17.6 82 4.8 4.2
Reliance Industries 1,063 SELL 3,163,339 68,343 2,976 49.6 62.9 80.2 (1.8) 26.6 27.5 21.4 16.9 13.3 10.8 8.1 6.8 2.1 1.9 1.8 1.4 1.8 2.1 11.4 13.2 15.3 985 (7.3) 123.7
Energy Cautious 8,895,911 192,192 33.5 20.5 21.4 14.8 12.3 10.1 7.2 6.1 5.0 2.0 1.8 1.7 2.0 2.4 3.1 13.8 15.0 16.3
Industrials
ABB 873 REDUCE 185,070 3,998 212 16.7 23.3 37.2 (35.2) 39.2 59.8 52.2 37.5 23.5 29.9 22.1 13.7 7.6 6.5 5.2 0.2 0.4 0.4 15.6 18.8 24.7 840 (3.8) 7.5
BGR Energy Systems 700 BUY 50,432 1,090 72 16.0 28.0 39.7 32.2 74.6 41.9 43.7 25.0 17.6 24.6 14.2 10.4 9.0 7.2 5.5 0.4 1.0 1.1 22.3 31.8 35.1 800 14.2 2.8
Bharat Electronics 1,710 REDUCE 136,828 2,956 80 93.9 111.8 127.4 (9.6) 19.1 13.9 18.2 15.3 13.4 8.7 7.0 5.8 3.1 2.7 2.3 1.5 1.5 1.5 17.9 18.7 18.5 1,790 4.7 3.0
Bharat Heavy Electricals 2,452 ADD 1,200,254 25,931 490 92.0 115.8 136.2 44.1 25.8 17.7 26.6 21.2 18.0 14.9 11.6 9.5 7.4 5.8 4.7 0.8 1.0 1.2 30.8 30.7 28.9 2,500 2.0 32.1
Crompton Greaves 255 BUY 163,627 3,535 642 12.8 13.3 15.8 46.5 3.2 19.0 19.9 19.2 16.2 11.5 10.5 8.7 6.2 4.9 3.9 0.7 0.7 0.8 36.8 28.5 26.8 290 13.7 8.2
Larsen & Toubro 1,759 BUY 1,057,196 22,840 601 58.1 71.2 90.4 16.0 22.4 27.0 30.3 24.7 19.5 16.2 13.7 11.3 4.7 4.0 3.3 0.6 0.7 0.8 18.6 17.5 18.7 1,900 8.0 56.1
Maharashtra Seamless 391 BUY 27,581 596 71 40.2 43.6 49.8 12.1 8.5 14.2 9.7 9.0 7.8 5.2 4.5 3.5 1.7 1.5 1.3 1.5 2.0 2.5 19.3 17.9 17.7 450 15.1 0.5
Siemens 730 REDUCE 246,026 5,315 337 25.0 29.6 34.3 55.2 18.6 16.0 29.2 24.7 21.2 17.3 14.1 11.9 7.2 5.9 4.9 0.7 0.8 0.9 27.3 26.3 25.1 635 (13.0) 7.4
Suzlon Energy 58 REDUCE 92,126 1,990 1,594 (5.9) 0.3 5.3 (182.3) (104.4) 1,931.8 (9.7) 222.8 11.0 16.9 8.7 5.7 0.8 0.9 0.8 — — 0.3 (8.8) 0.4 7.5 70 21.1 28.2
Thermax 713 BUY 84,972 1,836 119 21.7 29.4 37.6 (10.4) 35.4 27.7 32.8 24.2 19.0 17.5 13.6 10.7 7.8 6.4 5.3 0.5 1.2 1.5 24.9 29.1 30.5 750 5.2 0.9
Voltas 196 REDUCE 64,873 1,402 331 10.9 11.3 12.6 57.4 3.8 12.1 18.0 17.4 15.5 10.6 9.4 8.0 6.1 4.9 4.1 1.6 1.7 1.9 38.3 31.3 28.8 200 2.0 4.5
Industrials Attractive 3,308,985 71,489 3.7 33.5 27.4 30.5 22.9 17.9 15.3 12.1 9.6 4.9 4.2 3.5 0.7 0.9 1.0 16.2 18.4 19.7
Infrastructure
Container Corporation 1,298 REDUCE 168,753 3,646 130 61.1 74.3 85.9 0.3 21.7 15.6 21.3 17.5 15.1 15.0 12.1 10.1 3.9 3.3 2.9 1.1 1.3 1.5 19.6 20.6 20.5 1,250 (3.7) 1.6
GMR Infrastructure 57 ADD 209,569 4,528 3,667 0.4 0.2 0.1 (43.8) (48.9) (40.0) 132.6 259.6 432.3 23.4 15.1 14.1 2.0 1.7 1.7 — — — 2.4 1.2 0.7 65 13.7 6.2
GVK Power & Infrastructure 44 BUY 69,722 1,506 1,579 0.8 1.1 1.4 6.7 33.5 32.4 54.3 40.6 30.7 18.5 16.9 17.3 2.2 2.1 2.0 — 0.7 0.7 4.7 5.3 6.7 54 22.3 6.1
IRB Infrastructure 267 RS 88,708 1,916 332 9.7 12.6 12.1 83.8 29.2 (3.7) 27.4 21.2 22.1 13.0 11.6 10.8 3.8 2.9 2.4 — — — 15.6 15.7 11.9 — — 4.8
Mundra Port and SEZ 699 REDUCE 282,100 6,095 403 15.1 24.1 35.7 40.8 59.5 48.4 46.3 29.0 19.6 29.9 19.2 13.6 7.7 6.0 4.5 — — — 18.5 23.2 26.1 725 3.7 12.9
Infrastructure Attractive 818,852 17,691 12.7 29.5 24.1 40.7 31.4 25.3 20.5 15.1 13.0 3.4 2.9 2.6 — — 0.4 8.4 9.2 10.2
Media
DB Corp 241 ADD 43,766 946 181 10.6 12.9 15.7 276.4 21.0 22.3 22.7 18.8 15.3 12.5 10.4 8.2 6.3 5.0 4.3 0.8 1.7 2.5 38.2 29.6 29.9 280 16.1 0.4
DishTV 45 ADD 48,066 1,038 1,063 (2.5) (1.2) 0.5 (62.6) (49.9) (141.4) (18.4) (36.7) 88.8 59.9 21.8 11.9 11.6 16.9 14.2 — — — 250.2 (37.4) 17.4 47 4.0 3.4
HT Media 151 NR 35,426 765 235 6.1 7.8 9.4 623.3 27.0 20.9 24.7 19.4 16.1 12.4 10.2 8.4 3.6 3.2 2.9 0.7 1.3 2.7 15.6 17.6 19.2 — — 0.3
Jagran Prakashan 121 ADD 36,547 790 301 5.8 6.4 7.5 91.9 9.5 16.7 20.8 19.0 16.3 12.5 11.0 9.4 6.0 5.4 4.8 2.9 2.9 3.3 30.0 29.8 31.0 130 7.1 0.7
Sun TV Network 412 REDUCE 162,184 3,504 394 13.1 17.9 22.8 44.8 36.0 27.5 31.3 23.0 18.1 17.7 13.2 10.5 8.4 7.1 5.8 1.8 1.8 2.2 28.4 33.5 35.5 420 2.1 1.7
Zee Entertainment Enterprises 291 REDUCE 126,099 2,724 434 10.5 12.0 14.7 24.4 14.4 22.2 27.7 24.2 19.8 20.5 16.2 12.9 3.4 3.3 3.1 0.8 1.0 1.2 13.0 14.1 16.4 265 (8.8) 9.4
Media Neutral 452,088 9,767 185.0 40.2 36.2 37.2 26.5 19.5 17.9 13.7 10.6 5.4 5.0 4.4 1.3 1.4 1.8 14.6 18.7 22.8
Metals
Hindalco Industries 149 ADD 284,221 6,140 1,914 5.7 12.6 15.1 (64.5) 122.5 19.4 26.2 11.8 9.9 7.8 8.3 8.5 1.3 1.2 1.1 0.9 0.9 0.9 10.3 10.4 11.2 185 24.6 42.6
Hindustan Zinc 963 BUY 406,856 8,790 423 95.6 117.5 133.2 48.2 22.8 13.4 10.1 8.2 7.2 6.1 4.2 2.7 2.2 1.7 1.4 0.6 0.6 0.6 24.2 23.5 21.4 1,400 45.4 4.4
Jindal Steel and Power 642 SELL 595,351 12,862 928 38.5 48.7 50.8 17.2 26.5 4.3 16.7 13.2 12.6 10.5 8.4 7.9 5.2 3.7 2.9 0.2 0.2 0.2 37.3 33.0 25.7 575 (10.4) 32.6
JSW Steel 1,043 REDUCE 207,289 4,478 199 80.4 106.4 136.9 447.0 32.3 28.7 13.0 9.8 7.6 8.2 7.0 5.6 1.8 1.5 1.2 0.9 0.5 0.5 15.4 16.4 17.3 1,150 10.2 54.6
National Aluminium Co. 426 SELL 274,476 5,930 644 10.1 28.0 27.7 (49.0) 178.6 (1.2) 42.3 15.2 15.4 18.7 7.4 6.8 2.5 2.2 1.9 0.5 0.5 0.5 6.1 15.4 13.3 320 (24.9) 1.6
Sesa Goa 367 REDUCE 326,877 7,062 890 29.6 61.4 62.4 32.2 107.6 1.8 12.4 6.0 5.9 10.1 3.7 3.0 4.2 2.5 1.8 0.8 0.8 0.8 36.7 48.0 34.1 420 14.3 81.9
Sterlite Industries 168 ADD 564,254 12,190 3,362 12.0 16.9 20.8 21.9 40.6 23.2 14.0 9.9 8.1 10.6 7.8 5.8 1.6 1.4 1.2 2.1 2.1 2.1 13.2 15.0 16.4 220 31.1 49.9
Tata Steel 490 BUY 434,871 9,395 887 3.2 78.7 93.5 (97.1) 2,331.6 18.7 151.3 6.2 5.2 17.2 5.8 4.9 1.7 1.4 1.1 1.6 1.6 1.6 1.1 24.7 23.8 700 42.8 110.5
Metals Cautious 3,094,194 66,849 (28.9) 89.6 13.7 17.3 9.1 8.0 10.5 6.5 5.5 2.2 1.8 1.5 1.0 1.0 1.0 12.4 19.4 18.3
Pharmaceutical
Biocon 321 BUY 64,210 1,387 200 14.7 18.3 22.4 212.6 24.8 22.7 21.9 17.5 14.3 12.5 10.5 8.5 3.6 3.1 2.6 — — 0.1 17.9 19.3 20.3 345 7.5 3.9
Cipla 341 REDUCE 274,037 5,920 803 13.5 12.8 15.6 35.9 (4.9) 21.9 25.3 26.6 21.8 18.8 17.6 14.8 4.6 4.1 3.5 0.7 0.7 0.7 19.9 16.3 17.4 280 (18.0) 11.2
Cadila Healthcare 640 REDUCE 130,947 2,829 205 24.7 29.6 34.9 66.9 20.0 17.6 25.9 21.6 18.3 16.7 14.0 12.2 8.1 6.3 5.0 0.8 0.9 1.1 36.1 32.8 30.3 535 (16.3) 1.5
Dishman Pharma & chemicals 216 BUY 17,600 380 81 14.4 17.2 28.8 (19.7) 19.4 67.0 15.0 12.6 7.5 10.8 9.0 6.3 2.2 1.9 1.5 — — — 15.5 16.3 22.7 300 38.6 0.8
Divi's Laboratories 768 ADD 101,446 2,192 132 25.8 34.3 43.9 (18.3) 33.3 27.9 29.8 22.4 17.5 22.2 16.4 12.6 6.8 5.5 4.5 — — — 24.8 27.2 28.4 800 4.2 3.5
Dr Reddy's Laboratories 1,484 REDUCE 251,350 5,430 169 48.1 66.7 70.8 48.3 38.8 6.1 30.9 22.2 21.0 17.0 12.9 12.0 6.7 5.3 4.3 0.5 0.5 0.6 22.2 26.3 22.6 1,150 (22.5) 14.9
GlaxoSmithkline Pharmaceuticals (a) 2,175 REDUCE 184,191 3,979 85 59.1 69.1 79.2 8.1 17.0 14.5 36.8 31.5 27.5 21.3 18.2 15.6 10.3 8.8 7.5 — — — 29.8 30.2 29.5 1,800 (17.2) 1.7
Glenmark Pharmaceuticals 273 NR 74,822 1,617 274 12.7 17.4 19.2 14.3 37.4 10.2 21.5 15.7 14.2 13.0 9.3 8.9 3.2 2.7 2.3 — — — 16.8 18.5 — — — 5.9
Jubilant Organosys 339 BUY 53,872 1,164 159 26.5 33.7 39.3 49.0 27.1 16.7 12.8 10.1 8.6 9.4 8.3 6.9 2.4 2.0 1.6 0.6 0.7 0.9 26.3 22.0 21.1 400 17.9 2.5
Lupin 1,914 ADD 169,517 3,662 89 76.9 104.1 122.5 27.8 35.3 17.6 24.9 18.4 15.6 21.2 15.4 12.1 7.3 5.5 4.2 0.7 0.8 0.8 36.6 34.4 30.7 1,920 0.3 6.8
Piramal Healthcare 494 REDUCE 103,152 2,229 209 23.4 13.4 11.0 35.5 (42.9) (17.6) 21.1 36.9 44.8 15.6 5.9 4.1 6.1 1.1 0.9 1.1 1.2 0.7 32.1 141.2 16.6 490 (0.7) 31.4
Ranbaxy Laboratories 451 SELL 193,337 4,177 428 7.1 28.0 11.7 (128.4) 297.1 (58.3) 64.0 16.1 38.6 15.7 9.4 18.7 4.9 3.9 3.6 — 0.9 0.9 6.9 24.6 9.1 220 (51.3) 11.4
Sun Pharmaceuticals 1,791 REDUCE 370,879 8,013 207 65.2 67.7 77.6 (25.7) 3.8 14.6 27.5 26.4 23.1 20.8 18.8 15.8 4.5 3.9 3.4 0.8 0.8 0.8 17.8 16.2 16.2 1,560 (12.9) 8.9
Pharmaceuticals Attractive 1,989,360 42,979 44.6 26.6 6.1 27.7 21.9 20.6 17.2 13.3 12.5 5.2 3.8 3.2 0.5 0.6 0.6 19.0 17.3 15.6
India
33
India
Kotak Institutional Equities: Valuation summary of key Indian companies
34
O/S Target
Property
DLF 286 ADD 488,797 10,560 1,708 9.6 16.3 25.1 (64.0) 69.4 53.8 29.7 17.5 11.4 19.2 12.2 9.1 1.8 1.7 1.5 1.0 1.0 1.7 6.4 9.9 13.8 340 18.8 55.5
Indiabulls Real Estate 153 RS 61,488 1,328 401 1.6 4.0 8.0 109.7 151.7 101.7 96.6 38.4 19.0 (58) 29.6 7.6 0.7 0.7 0.7 — — — 0.8 1.8 3.5 285 86.0 21.9
Mahindra Life Space Developer 458 ADD 19,278 416 42 18.9 20.3 27.5 82.4 7.3 35.8 24.3 22.6 16.7 20.3 16.9 9.3 2.0 1.9 1.8 0.8 0.8 0.8 8.4 8.5 10.7 540 17.8 1.5
Phoenix Mills 210 BUY 30,439 658 145 5.1 7.7 8.7 2.5 51.0 13.5 41.3 27.3 24.1 31.8 20.4 17.0 2.0 1.9 1.8 0.5 0.7 1.0 4.8 7.0 7.5 260 23.7 1.0
Puravankara Projects 105 REDUCE 22,399 484 213 6.4 8.2 8.1 (5.2) 28.4 (2.0) 16.4 12.7 13.0 20.7 13.9 13.8 1.6 1.4 1.3 1.9 1.9 1.9 10.0 11.9 10.7 110 4.8 0.7
Sobha 282 ADD 27,664 598 98 14.4 17.5 24.7 (4.8) 21.1 41.6 19.6 16.2 11.4 14.9 11.9 7.3 1.6 1.5 1.3 0.7 1.4 1.4 9.8 9.4 12.2 325 15.2 2.3
Unitech 73 SELL 192,158 4,151 2,616 3.4 4.3 5.6 (54.2) 26.3 30.2 21.8 17.2 13.2 19.6 13.4 8.5 1.8 1.5 1.4 — — 2.0 9.7 9.4 11.1 72 (2.0) 58.6
Property Cautious 842,223 18,196 (52.9) 57.8 46.6 29.2 18.5 12.6 19.9 12.9 9.1 1.6 1.5 1.4 0.7 0.7 1.6 5.5 8.0 10.8
Retail
Titan Industries 2,264 ADD 100,497 2,171 44 62.7 76.1 96.2 41.5 21.3 26.5 36.1 29.8 23.5 25.6 20.1 15.6 12.7 9.5 7.2 0.4 0.5 0.6 40.7 36.6 34.8 2,400 6.0 4.0
Retail Neutral 100,497 2,171 41.5 21.3 26.5 36.1 29.8 23.5 25.6 20.1 15.6 12.7 9.5 7.2 0.4 0.5 0.6 35.2 32.0 30.5
Sugar
Bajaj Hindustan 113 SELL 21,633 467 191 9.7 9.9 8.9 — 2.2 (10.4) 11.6 11.4 12.7 6.9 5.7 5.4 0.9 0.8 0.8 0.6 0.6 0.6 8.1 7.5 6.3 99 (12.4) 7.5
Balrampur Chini Mills 79 ADD 20,245 437 257 3.7 10.4 7.0 — 183.7 (32.7) 21.5 7.6 11.2 9.2 5.2 5.7 1.5 1.3 1.2 0.6 0.6 0.6 7.0 18.1 11.0 92 16.7 7.2
Shree Renuka Sugars 66 BUY 44,408 959 670 9.9 7.6 7.8 196.4 (23.2) 3.1 6.7 8.7 8.5 4.6 5.2 4.5 1.8 1.4 1.2 0.6 0.5 0.5 32.0 18.1 15.7 76 14.6 17.2
Sugar Cautious 86,286 1,864 96.1 2.5 (9.4) 9.1 8.9 9.9 6.0 5.4 5.0 1.4 1.2 1.1 0.6 0.6 0.6 14.9 13.3 10.8
Technology
HCL Technologies 359 REDUCE 247,365 5,344 690 17.8 25.1 28.5 2.0 40.6 13.6 20.1 14.3 12.6 10.2 8.8 7.2 3.9 3.2 2.7 1.1 1.1 1.7 20.8 24.9 23.3 370 3.2 13.4
Hexaware Technologies 76 REDUCE 10,939 236 144 9.3 5.1 9.4 127.7 (45.4) 84.0 8.1 14.9 8.1 4.0 8.2 4.4 1.3 1.2 1.1 1.3 1.3 1.3 17.8 8.4 14.0 72 (5.4) 2.8
Infosys Technologies 2,778 BUY 1,594,400 34,446 574 108.3 125.2 150.5 5.7 15.6 20.2 25.6 22.2 18.5 18.7 15.3 12.4 6.9 5.7 4.7 0.9 1.2 1.5 30.1 28.2 28.0 3,100 11.6 70.4
Mphasis BFL 570 REDUCE 118,933 2,569 208 43.6 49.0 45.6 207.5 12.5 (7.0) 13.1 11.6 12.5 10.4 9.3 8.4 5.1 3.6 2.9 0.6 0.7 0.8 48.1 36.4 25.8 550 (3.6) 9.8
Mindtree 555 REDUCE 22,827 493 41 52.2 38.9 51.6 294.3 (25.5) 32.6 10.6 14.3 10.7 9.1 8.8 6.2 3.4 2.8 2.3 0.4 0.7 0.9 35.2 21.4 23.1 550 (0.8) 2.7
Patni Computer Systems 511 REDUCE 68,092 1,471 133 36.6 42.3 38.6 36.4 15.6 (8.7) 14.0 12.1 13.2 7.3 6.4 5.6 1.9 1.8 1.6 1.4 1.7 1.5 18.2 15.8 12.8 450 (12.0) 6.4
Polaris Software Lab 181 SELL 18,061 390 100 15.4 19.1 18.6 16.9 24.3 (2.7) 11.8 9.5 9.7 5.9 7.5 6.4 2.1 1.8 1.6 1.9 2.0 2.2 18.6 20.1 17.0 180 (0.6) 3.4
TCS 759 BUY 1,484,536 32,073 1,957 35.1 41.1 46.3 32.8 16.9 12.8 21.6 18.5 16.4 16.6 13.4 11.1 7.1 5.9 4.9 2.6 2.2 2.4 37.6 34.8 32.8 900 18.7 33.0
Wipro 389 ADD 952,487 20,578 2,447 18.9 21.9 25.0 22.1 16.2 14.4 20.7 17.8 15.5 15.6 12.8 10.5 4.9 4.0 3.3 0.9 1.1 1.4 26.5 24.6 23.2 465 19.4 16.2
Technology Attractive 4,517,640 97,602 22.9 16.7 14.2 21.6 18.5 16.2 15.7 13.0 10.8 5.8 4.8 4.0 1.5 1.5 1.8 26.7 25.8 24.6
Telecom
Bharti Airtel 263 REDUCE 998,959 21,582 3,798 24.0 21.4 24.2 7.5 (10.8) 13.2 11.0 12.3 10.8 6.2 5.8 4.9 2.3 1.9 1.7 1.1 1.5 1.9 24.1 17.0 16.5 290 10.2 46.5
IDEA 57 REDUCE 186,604 4,031 3,300 2.7 1.3 2.3 (5.8) (51.7) 71.9 20.7 42.8 24.9 7.4 7.4 6.0 1.6 1.6 1.5 — — — 7.2 3.8 6.3 50 (11.6) 9.2
MTNL 64 SELL 40,604 877 630 (15.6) (10.4) (9.1) (750.8) (33.7) (11.9) (4.1) (6.2) (7.0) (0.4) (0.5) (0.7) 0.4 0.4 0.4 — — — (8.5) (6.1) (5.7) 50 (22.4) 2.6
Reliance Communications 192 SELL 410,084 8,860 2,133 22.1 14.1 18.2 (30.2) (36.2) 29.1 8.7 13.7 10.6 7.7 8.6 6.5 1.1 1.0 0.9 0.4 — — 11.7 7.4 8.9 175 (9.0) 34.7
Tata Communications 257 REDUCE 73,245 1,582 285 14.0 15.2 15.7 3.2 8.2 3.5 18.3 17.0 16.4 7.5 6.9 6.6 1.0 1.0 1.0 2.5 2.9 3.3 5.2 5.5 5.5 225 (12.5) 1.4
Telecom Cautious 1,709,494 36,933 (15.1) (19.8) 20.7 12.0 14.9 12.4 7.0 6.9 5.7 1.5 1.4 1.3 0.9 1.0 1.3 12.7 9.3 10.2
Utilities
Adani Power 120 ADD 262,145 5,664 2,180 0.8 4.9 16.4 — 524.1 235.3 153.5 24.6 7.3 120.5 16.6 6.0 4.8 4.0 2.6 — — — 4.4 17.8 43.0 130 8.1 3.5
CESC 374 ADD 46,726 1,009 125 35.2 42.2 45.7 9.3 19.6 8.4 10.6 8.9 8.2 6.8 6.2 7.0 1.1 1.0 0.9 1.2 1.4 1.5 11.1 11.7 11.4 439 17.4 2.0
Lanco Infratech 67 BUY 161,015 3,479 2,405 2.0 3.6 4.5 35.1 82.2 26.4 34.1 18.7 14.8 20.3 8.6 8.4 4.7 3.8 3.0 — — — 15.8 20.6 21.0 70 4.6 10.0
NTPC 196 REDUCE 1,616,111 34,915 8,245 10.6 12.4 14.7 7.8 16.8 18.9 18.5 15.9 13.3 14.4 12.2 10.2 2.5 2.3 2.1 2.0 2.4 2.8 14.2 15.3 16.6 200 2.0 12.0
Reliance Infrastructure 1,167 ADD 287,190 6,205 246 61.8 62.7 80.3 (1.5) 1.6 28.0 18.9 18.6 14.5 20.2 19.4 13.2 1.5 1.4 1.3 0.7 0.8 0.9 6.3 7.3 10.1 1,100 (5.8) 46.1
Reliance Power 168 SELL 402,535 8,697 2,397 2.5 3.1 5.1 — 24.4 66.1 68.2 54.8 33.0 — — — 2.8 2.7 2.5 — — — 4.2 5.0 7.8 128 (23.8) 18.6
Tata Power 1,310 BUY 323,328 6,985 247 60.2 76.1 95.3 20.1 26.4 25.2 21.8 17.2 13.7 13.7 11.6 10.0 2.5 2.2 2.0 0.9 1.1 1.1 12.9 13.6 15.2 1,500 14.5 10.6
Utilities Attractive 3,099,049 66,954 15.3 25.2 36.3 23.2 18.5 13.6 19.1 14.5 10.9 2.5 2.3 2.0 1.2 1.4 1.7 10.8 12.4 15.0
Others
Aban Offshore 754 ADD 32,786 708 43 94.5 172.3 103.6 (2.5) 82.3 (39.8) 8.0 4.4 7.3 8.2 6.0 6.6 1.5 0.8 0.8 0.5 0.5 0.5 21.7 20.8 11.1 900 19.4 45.5
Havells India 625 SELL 37,587 812 60 5.3 31.6 45.0 3.7 497.9 42.6 118.2 19.8 13.9 16.5 10.2 8.3 10.3 6.8 4.6 0.4 0.4 0.4 6.6 41.6 39.7 480 (23.2) 9.3
Jaiprakash Associates 129 BUY 275,044 5,942 2,129 1.5 5.9 7.9 (27.2) 305.4 34.4 88.7 21.9 16.3 22.1 14.0 10.3 3.2 2.9 2.5 — — — 4.1 13.9 16.3 183 41.6 35.5
Jindal Saw 204 ADD 60,050 1,297 294 27.5 19.3 17.9 121.9 (29.8) (7.2) 7.4 10.6 11.4 5.3 6.1 5.9 1.6 1.3 1.2 0.5 0.4 0.4 20.5 12.9 11.1 243 19.0 6.5
PSL 131 BUY 6,985 151 53 22.9 25.4 28.2 3.3 10.6 11.0 5.7 5.1 4.6 3.2 2.7 2.9 0.7 0.7 0.6 5.0 5.0 5.4 12.6 11.7 12.0 175 33.9 0.6
Sintex 314 BUY 42,873 926 136 24.1 29.8 34.3 0.5 23.5 15.1 13.0 10.6 9.2 9.5 7.2 6.0 2.0 1.6 1.4 0.4 0.4 0.4 15.1 15.6 15.2 380 21.0 4.0
Tata Chemicals 326 ADD 79,383 1,715 243 28.6 30.1 35.9 7.4 5.1 19.3 11.4 10.9 9.1 6.5 5.8 4.9 1.7 1.5 1.3 2.7 2.8 2.8 17.2 17.3 17.9 340 4.2 3.3
Welspun Gujarat Stahl Rohren 237 REDUCE 48,645 1,051 205 25.1 23.0 24.4 44.9 (8.1) 5.8 9.4 10.3 9.7 5.2 5.4 4.7 1.7 1.4 1.2 0.8 0.9 0.9 20.6 14.8 13.5 245 3.5 9.4
United Phosphorus 192 BUY 88,674 1,916 463 11.9 15.6 19.0 18.8 30.2 22.1 16.0 12.3 10.1 9.2 7.7 6.2 2.6 2.2 1.8 0.8 1.0 1.0 17.7 19.0 19.5 250 30.4 8.3
Others 672,027 14,519 21.0 42.1 11.0 18.2 12.8 11.6 10.6 8.6 7.4 2.3 1.9 1.7 0.6 0.7 0.7 12.7 14.9 14.4
KS universe (b) 42,984,968 928,672 13.2 23.1 20.7 18.4 15.0 12.4 11.3 9.2 7.7 2.7 2.4 2.1 1.4 1.5 1.9 14.9 16.0 16.9
KS universe (b) ex-Energy 34,089,056 736,479 7.6 24.1 20.5 19.7 15.9 13.2 13.6 10.9 9.0 3.0 2.6 2.3 1.2 1.3 1.5 15.3 16.4 17.1
KS universe (d) ex-Energy & ex-Commodities 30,269,909 653,968 14.1 18.2 22.2 20.5 17.4 14.2 15.1 12.6 10.4 3.2 2.8 2.4 1.3 1.3 1.6 15.5 16.0 17.0
Note:
(1) For banks we have used adjusted book values.
(2) 2010 means calendar year 2009, similarly for 2011 and 2012 for these particular companies.
(3) EV/Sales & EV/EBITDA for KS universe excludes Banking Sector.
Strategy
(4) Rupee-US Dollar exchange rate (Rs/US$)= 46.29

Strategy India
"I, Sanjeev Prasad, hereby certify that all of the views expressed in this report accurately
reflect my personal views about the subject company or companies and its or their securities.
I also certify that no part of my compensation was, is or will be, directly or indirectly, related
to the specific recommendations or views expressed in this report."

India Strategy
Kotak Institutional Equities Research coverage universe

Distribution of ratings/investment banking relationships
Percentage of companies covered by Kotak Institutional Equities,
70% within the specified category.
60%
Percentage of companies within each category for which Kotak
Institutional Equities and or its affiliates has provided investment
50%
banking services within the previous 12 months.
40% * The above categories are defined as follows: Buy = We expect

33.6% this stock to outperform the BSE Sensex by 10% over the next 12
29.5%
30% months; Add = We expect this stock to outperform the BSE
23.5% Sensex by 0-10% over the next 12 months; Reduce = We expect
this stock to underperform the BSE Sensex by 0-10% over the
20%
13.4% next 12 months; Sell = We expect this stock to underperform the
BSE Sensex by more then 10% over the next 12 months. These
10% 6.7% ratings are used illustratively to comply with applicable
2.7% 2.0% regulations. As of 31/03/2010 Kotak Institutional Equities
0.7%
0% Investment Research had investment ratings on 149 equity
securities.
BUY ADD REDUCE SELL
Source: Kotak Institutional Equities As of March 31, 2010
Kotak Securities’ company-specific disclosures
Kotak Securities Limited and or its affiliates have received during the last 12 months
compensation for Investment Banking services from the following companies: Mahindra &
Mahindra, HDFC Bank, Mahindra & Mahindra Financial Services, SREI, Nagarjuna
Construction and CESC
Kotak Securities Limited and or its affiliates were Lead Managers for the public /right
offerings/institutional placements for the following companies: State Bank of India,
Centurion Bank of Punjab, Central Bank of India, Punj Lloyd, Consolidated Construction
Co.Ltd, Jyothy Laboratories, BGR Energy Systems, GMR Infrastructure, DLF, HDIL, IVR Prime
Urban Developers, IDFC and Puravankara Projects.

Disclosures
RATINGS AND OTHER DEFINITIONS/IDENTIFIERS

Definitions of ratings
BUY. We expect this stock to outperform the BSE Sensex by 10% over the next 12 months.
ADD. We expect this stock to outperform the BSE Sensex by 0-10% over the next 12 months.
REDUCE. We expect this stock to underperform the BSE Sensex by 0-10% over the next 12 months.
SELL. We expect this stock to underperform the BSE Sensex by more than 10% over the next 12 months.
Other definitions
Coverage view. The coverage view represents each analyst’s overall fundamental outlook on the Sector. The coverage view will consist of one
of the following designations: Attractive, Neutral, Cautious.
Other ratings/identifiers
NR = Not Rated. The investment rating and target price, if any, have been suspended temporarily. Such suspension is in compliance with
applicable regulation(s) and/or Kotak Securities policies in circumstances when Kotak Securities or its affiliates is acting in an advisory capacity in
a merger or strategic transaction involving this company and in certain other circumstances.
CS = Coverage Suspended. Kotak Securities has suspended coverage of this company.
NC = Not Covered. Kotak Securities does not cover this company.
RS = Rating Suspended. Kotak Securities Research has suspended the investment rating and price target, if any, for this stock, because there is
not a sufficient fundamental basis for determining an investment rating or target. The previous investment rating and price target, if any, are no
longer in effect for this stock and should not be relied upon.
NA = Not Available or Not Applicable. The information is not available for display or is not applicable.
NM = Not Meaningful. The information is not meaningful and is therefore excluded.

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Tel: +91-22-6634-1100 Tel: +44-20-7977-6900 / 6940 Tel:+1-914-997-6120
Copyright 2010 Kotak Institutional Equities (Kotak Securities Limited). All rights reserved.
1. Note that the research analysts contributing to this report may not be registered/qualified as research analysts with FINRA; and
2. Such research analysts may not be associated persons of Kotak Mahindra Inc and therefore, may not be subject to NASD Rule 2711 restrictions on
communications with a subject company, public appearances and trading securities held by a research analyst account.
Kotak Securities Limited and its affiliates are a full-service, integrated investment banking, investment management, brokerage and financing group. We along with
our affiliates are leading underwriter of securities and participants in virtually all securities trading markets in India. We and our affiliates have investment banking
and other business relationships with a significant percentage of the companies covered by our Investment Research Department. Our research professionals
provide important input into our investment banking and other business selection processes. Investors should assume that Kotak Securities Limited and/or its
affiliates are seeking or will seek investment banking or other business from the company or companies that are the subject of this material and that the research
professionals who were involved in preparing this material may participate in the solicitation of such business. Our research professionals are paid in part based on
the profitability of Kotak Securities Limited, which include earnings from investment banking and other business. Kotak Securities Limited generally prohibits its
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the analysts cover. Additionally, Kotak Securities Limited generally prohibits its analysts and persons reporting to analysts from serving as an officer, director, or
advisory board member of any companies that the analysts cover. Our salespeople, traders, and other professionals may provide oral or written market commentary
or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may
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This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would
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dot Strategy INDIA

Asset-based companies: A few banks can and will get there

Kotak Institutional Equities

Important disclosures appear

World view: Change is the only constant................................................3

IPR companies: IT services companies only............................................15

Natural resources companies: Oil companies only.................................18

Appendix 1: Global top-100 market capitalization companies ..............22

Appendix 2: Indian top-100 market capitalization companies...............27

2 KOTAK INSTITUTIONAL EQUITIES RESEARCH

WORLD VIEW: CHANGE IS THE ONLY CONSTANT

Companies change, sectors change

We make a few observations on our analysis.

` Breakdown by sectors. Exhibit 1 gives the breakdown of the top-100 companies by

Source: FactSet, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3

` Breakdown by geography. Exhibit 2 shows that 24 companies from the US and 28

Exhibit 2: New countries have emerged on the world map

2009 2004 1999 1989

Source: FactSet, Kotak Institutional Equities

Lessons for India: How big and how fast?

4 KOTAK INSTITUTIONAL EQUITIES RESEARCH

PPP GDP (US$ tn) PPP GDP-per-capita (US$)

Source: IMF, Kotak Institutional Equities

Exhibit 4: India’s nominal GDP to grow to US$6 tn by FY2025E

Source: Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 5

` Macro-environment for creation of new technologies and innovation. We do not

Source: World Bank, Unesco, Kotak Institutional Equities

6 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Source: BP Statistical Review, US Geological Survey, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 7

 Telecom space is too competitive and fragmented. Exhibit 10 shows the

The fixed-line market is largely dominated by two incumbent government-owned

Source: TRAI, Kotak Institutional Equities

 Gas-based utilities have to contend with a smaller market opportunity and

8 KOTAK INSTITUTIONAL EQUITIES RESEARCH

ASSET-BASED COMPANIES: A FEW BANKS CAN AND WILL GET THERE

Source: Kotak Institutional Equities estimates

Source: Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 9

Exhibit 13: We model cumulative savings flow at US$10 tn in FY2010-25E

Currency Deposits Shares and debentures

Source: Kotak Institutional Equities estimates

State Bank of India: The elephant will continue to dance

` Building a diversified financial institution; leadership in many products. SBI, similar

10 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Exhibit 14: SBI can reach US$100 bn market capitalization by FY2018E

Source: Kotak Institutional Equities estimates

HDFC Bank: Maintenance of high profitability (ROA) key

` Successful inorganic growth: Option to maintain its strong growth trajectory.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 11

Source: Kotak Institutional Equities estimates

12 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Source: Kotak Institutional Equities estimates

Life Insurance of India: Insurance behemoth will be there provided it lists

KOTAK INSTITUTIONAL EQUITIES RESEARCH 13

1.3 6.0 5.5 30

Source: LIC, Kotak Institutional Equities

NTPC: Can power ahead to US$100 bn if it executes well

Source: Kotak Institutional Equities estimates

14 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Telecom space is too competitive and fragmented. Exhibit 10 shows the

Gas-based utilities have to contend with a smaller market opportunity and