PRIVATE CLIENT RESEARCH

PRE-BUDGET ANALYSIS
JANUARY 23, 2018

PRE-BUDGET ANALYSIS PRE-BUDGET ANALYSIS – JANUARY 2018

Research Team This year’s budget assumes importance because it will be the last full budget of
+91 22 6218 5409 the government before next year’s Lok Sabha election. The Finance Minister has a
tough task of trying to balance fiscal discipline with populist measures to appease
the mass voters. Since there is a gap of 15 months between the budget and central
elections we expect the government to take a mid-path and come out with a
balanced budget. Government is finding it difficult to meet the revenue targets in
FY18 due to less than expected collection of GST. There could be small slippage in
FY18 fiscal deficit target (i.e. 3.4% instead of 3.2% target). Going forward the rise
in crude prices could pose a threat to the government’s fiscal target of FY19E. In
this background it would be important to understand the details of revenue
assumptions (i.e. GST, Direct Taxes and Divestments). We build in gross revenue
growth of 8.2% for FY19E on the back of 12% nominal GDP growth. There is
Expected sectoral impact high probability of government increasing FY19E Fiscal Deficit target marginally to
3.1% (instead earlier FRBM path of 3%).
Positive: Construction,
Metals & Minings and Oil On the expenditure side, the government may focus on capital expenditure and
higher spend on housing & rural welfare schemes. It needs to follow its target of
& Gas.
raising farm incomes by the year 2022. Hence, higher capital expenditure would
Neutral: FMCG go towards rural infrastructure build-up. Government could also look at non-
budgetary support to fund its broad infrastructure targets in roads, railways &
water projects.
On the indirect taxes we don’t expect any major changes as most of the items
have come under GST where the GST council decides the changes. We don’t
expect any relief for corporates on the direct tax front but there could be a some
benefits for individuals on the direct tax front. In 2017 there were seven state
election and in 2018 there are eight state elections. In Gujarat state elections the
BJP got a set back from the rural areas. Considering that most of the states going
in for elections in 2018 are more rural in nature this could have its influence in the
budget speech.
From market sentiment and performance perspective, both bond and equity
investors would keenly watch the Fiscal Deficit number. Equities run the risk of
potential changes in long term capital gains (either in the form of change in tenure
or tax rate). The three key things to watch out in FY19 budget would be the any
change in long term capital gains, Fiscal Deficit target (i.e.3.1% expected ) and net
G-Sec borrowing (i.e. Rs.4.6 trillion expected).
Market movement - one month before and after budget

12% Pre-budget Post-budget

8%

4%

0%
Disclaimer: We do not have any information
other than information available to general
public with regard to budget proposals. The -4%
industry expectations are based on information
got from sources like respective industry
associations, FICCI, CII, companies, media and -8%
other public sources. This report contains
budget expectations of our experts and its -12%
impact on specific sectors and companies,
which may or may not come true.

Source: Bloomberg

Kotak Securities Limited has two independent equity research groups: Institutional Equities and Private Client Group. This report has been prepared by the Private Client Group. The
views and opinions expressed in this document may or may not match or may be contrary with the views, estimates, rating, target price of the Institutional Equities Research Group
of Kotak Securities Limited.
 PRE-BUDGET ANALYSIS January 23, 2018

Sensex performance
36,000

31,000

26,000

21,000

16,000

11,000

6,000
Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18

Source: Bloomberg

FY19 budget: Fiscal prudence vs electoral opportunity

We opine that the FY19 union budget could target 3.1% of fiscal deficit. FM has
indicated in past that slower gliding path towards FRBM target could be adopted.
We expect FRBM Act to target 3% by 2020. FY18 budget had targeted for 3.2%
fiscal deficit, which in all likelihood would be missed. We expect FY18 fiscal deficit
to be higher by 20 bps from the budget estimates at 3.4%. This is expected and
acceptable on account of slower than expected economic recovery,
demonetization effect, and introduction of GST regime.
In FY19E, the FM will not have the benefit of telecom licenses auction revenues
and also will not have the cushion of higher excise revenues on petroleum
products. On the other hand, he will have to spend on infrastructure and social
causes, to support the economic growth.

Nominal GDP growth target could be set at 12%

GDP growth (%)
We expect FY19 budget to estimate FY19 nominal GDP to grow at 12% from
10 9.6 lower base. Expecting real GDP to grow at 7.5%, and deflator at 4.5%. The higher
9.3
8.9
fiscal deficit for FY18 could be explained by 1) Lower nominal GDP: FY18 Budget
9 9.5 8.6
had estimated nominal GDP to grow by 11%, while recent CSO estimated the
8
nominal GDP growth of 9.5% in FY18, 2) lower transfer from RBI, 3) lower indirect
7.2 7.6 tax collections due to introduction of GST regime. Although higher than budgeted
7 6.7
7.1 divestment proceeds are expected to provide some help in meeting fiscal deficit
6.7 6.6 6.5 targets.
6
This budget (FY19) is more like baptism by fire from the FM, as the global investors
5 5.1 would keenly watch the fiscal consolidation path, while addressing politically
4
sensitive rural distress. We believe fiscal deficit target higher than 3.2% in FY19
could raise concerns on possibility of credit rating upgrade from other rating
agencies. The FM would have to present achievable budget targets, while
stimulating the economic revival and looking after electoral responsibility.
Source: Source: CSO; GDP data till FY14 is based
on 2005-06 prices
Infrastructure to continue to get higher allocation
Government is expected to further boost its allocation towards infrastructure
sector in the upcoming budget. The Gross Fixed capital Formation in infrastructure
is still hovering around 5.5% as against government’s plan to take it to 9% of
GDP. This shortfall is likely to be bridged by higher allocations for the sector and
increasing private participation in the upcoming projects.
With a large number of infrastructure projects in pipeline such as Bharatmala,
Sagarmala, Bullet train, Housing for all, Smart City development etc, we expect
Budget to increase allocation towards roads, railways, housing and urban
development via major programmes such as NHAI allocation,Pradhan Mantri Gram
Sadak Yojana, Pradhan Mantri Awas Yojana, AMRUT, Namami Gange etc.
Sagarmala project requires an investment of Rs 10-12 trn while Bharatmala would
require a total investment of Rs 6.93 trn. The Bullet Train project which was
announced in partnership with Japan will need at least Rs 1.1 trn of investment
during the 2017-22 period. Funding for these projects is likely to be a mix of
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 PRE-BUDGET ANALYSIS January 23, 2018

government support, market borrowings, private partnership as well as asset

monetization. Thus, enhanced allocation from government is expected for these
projects in the upcoming budget. The government may give some clarity on GST
rates for Real Estate sector in the budget. Industry players are expecting
rationalization of the GST rates from the current 12% to 6%. Pre-GST, service tax
was around 4.5% and VAT 1%, resulting in total tax outgo of 5.5%. Hence the
reduction in rates would neutralize the impact of GST. Further there are demand
related to bringing stamp duty under the ambit of GST.
Apart from this, there are expectations of relaxation in the eligibility criteria for
affordable housing in order to meet government’s objective to achieve ‘Housing
for all by 2022’. As per KPMG’s estimate, total (urban+rural & Government
+private) 110 mn houses are required to be constructed by 2022 to meet the
affordable housing demand with USD 2 trn investment. Industry players expects
extension of provisions of section 80IBA (income tax exemption) to housing units
up to 150 sqm carpet area from present upto 60 sqm area.
Industry also expects setting up of a land bank corporation in order to ease land
acquisition related bottlenecks. Also, in order to ease long term financing for
projects, IIFCL should be allowed the status of Development Financial Institution
as other alternative instruments such as Bonds, InVITs, REITs and Debt Funds still
have not reached levels of full maturity.

Rural Economy
Quarterly Gross Valued Added (GVA) at basic prices for Q2 of FY18 from
‘agriculture, forestry and fishing’ sector slowed down to a mere 1.7% as compared
to growth of 4.1% in Q2 of FY17. The production of food grains during the Kharif
season of agriculture year 2017-18 declined by 2.8% as compared to the growth
of 10.7% during the same period in 2016-17. In view of this slowdown in the rural
economy, there is an urgent need for government intervention through favourable
measures. Accordingly, we expect the government to increase allocation to various
rural welfare schemes with a view to provide further impetus to these schemes to
ensure rural upliftment, employment, education, agricultural growth and public
health. We expect allocation to rural welfare schemes to be hiked by 25% in
FY19E. The industry is expecting appropriate policies and allocations to ensure
good prices for farmer’s crops. Industry is also asking for implementation of
electronic National Agriculture Market (eNAM) seamlessly over all markets and
commodities.
Trend in allocation on Rural Welfare
Rs bn 2016 2017RE 2018BE 2019E
Mahatma Gandhi National Rural Employment Prog 373 475 480 586
Pradhan Mantri Gram Sadak Yojna 183 190 190 219
Pradhan Mantri Awas Yojana-Rural 101 160 230 345
National Livelihood Mission 25 30 45 50
National Social Assistance Program 86 95 95 105
Others 5 11 14 15
Total rural welfare 774 961 1054 1318
Source: Union Budget and Kotak Institutional Equities

Financial and physical progress in Pradhan Mantri Awas Yojana (Urban)

Till Jan-2018
Financial progress
Central assistance involved (Rs bn) 577
Central assistance released (Rs bn) 131
Physical progress (mn)
Houses involved 3.7
Houses grounded for construction 1.7
Houses completed 0.31
Source: Union Budget and Kotak Institutional Equities

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 PRE-BUDGET ANALYSIS January 23, 2018

Defence
India continues to face challenges from its neighbours and hence there is an urgent
need to beef up defence preparedness. An important weakness with India is the
high reliance on imports for meeting our defence needs. In our view,
indigenization of defence imports is important from self-reliance standpoint as
well as for creating the much needed jobs for the citizens. We therefore expect
the government to increase its allocation on capital expenditure on the defence
sector.
Capital Expenditure on Defence (Rs bn)

1000

800

600

400

200

0
FY13 FY14 FY15 FY16 FY17RE FY18BE

Source: indiabudget.nic.in

Revenues
On the revenue front, we expect the FM to budget for a 7-8% increase in revenue
receipts, on the back of 8% rise in net tax receipts. We expect the growth in direct
tax revenues to be pegged at 8%.
Government had earlier indicated that if petrol/diesel prices start to pinch hard,
then government would look at reducing these tax, and ruled out reversion to fuel
subsidy. An expected improvement in economic activity post demonetization and
various reforms will justify the higher growth target. We expect nominal GDP
growth to be pegged at 12% in FY19.
The projection of GST revenue estimate could be complicated given the limited
‘experience’ in GST collections. The budget is unlikely to make any announcements
regarding GST rates since it has to be taken independently by the GST Council. To
that extent, the tax-related levers in the budget will be more through the direct
taxes route.
We expect GST revenue to jump in FY19 on increased compliance levels to Rs.6tn
in FY19 from Rs.3.8tn in FY18 (For 9 months), assuming 18% growth rate in GST
collection in FY19.
FM is likely to announce a disinvestment target of Rs.800bn in the Budget, similar
to Rs.725bn of FY18E but lower than the expected amount of Rs.900bn for the
fiscal. The potential divestment of stakes in SUUTI companies should help the
Government in achieving the target.
FY19 will not see any revenues from the telecom frequencies auctions, which
brought in Rs.330bn in FY17. We also believe that, the Government may look at
selling some of its non-core assets and privatization of few public sector companies
to raise funds for infrastructure.
Expenditure
We expect greater focus on capital expenditure in the budget. The private sector
is burdened with high debt and is also not operating at full capacity utilization
levels. Thus, it is imperative for the government to support infrastructure spends.
We expect the FM to budget for a 14% increase in capital expenditure. Allocations
to important infrastructure sectors like Roads, Ports, Railways, and Rivers among
others will likely be enhanced, in line with the PM’s goals. The focus will be on

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 PRE-BUDGET ANALYSIS January 23, 2018

stricter and time-bound implementation of these budgets. Also, in line with the
recent indications, we expect allocations for defense to be higher.
Subsidies account for about 15% of the government’s revenue expenditure. FY19
is expected to see marginal increase in subsidies on food, fertilizers, fuel and
housing. Higher crude prices and higher consumption may increase fuel subsidies
to Rs.275bn in FY19BE. We have assumed food subsidies to increase from
Rs.1.5trn to Rs.1.6trn. Fertilizer subsidies will likely be projected at Rs.700bn for
FY19BE.
We expect the government to project an overall fiscal deficit of Rs.5.9tn in FY19,
an increase of Rs.440bn over FY18BE. Compared with our estimated fiscal deficit
in FY18E, this implies an increase of around Rs.180bn. Gross borrowing of central
government is likely to remain higher, as Rs.2.4trn of G-sec is due for redemption
in FY19E.

Direct Taxes
For Corporates: The government had shown intention of bringing down the
corporate taxes by 500 bps to 25% in its first budget in FY15. However, due to
fiscal constraints this has not materialized for broader companies. In the FY18
Budget the Finance Minister reduced corporate tax by 500 bps for companies
having revenue below Rs.50 cr. In FY19 budget the government could look to
lower taxation for companies with less than Rs.100 cr revenue. There could be one
time amnesty schemes for smaller companies (i.e. no scrutiny of previous years
accounts) to enable them to come in the formal economy and comply with the
new GST regime. In the 2016 Budget the Finance Minister phased out many
exemptions and deductions. However the MAT rate of 18.5% seems very high in
light of removal of most exemptions. MAT has impacted significantly cash flow of
companies who otherwise have low taxable income or have incurred tax losses.
For larger companies we do not expect tax rate of MAT rate going down in the
forthcoming budget.
The ICAI has suggested removal of surcharge on tax and DDT as it makes the cost
of doing business in India significantly high. At present the surcharge is 12% for
companies having total income of more than Rs.10 cr. The higher tax rates in India
could deter global companies to come for ‘Make in India’ program. Recently the
US has cut tax rates from 35% to 21%. Post US, if few more countries reduce
corporate tax rates in their home country then that can put pressure on low cost
manufacturing countries like India.
For Individuals: We do not expect any changes in tax rates for individuals. The
government may increase the limit under section 80C from Rs.1.5 lac to Rs.2 lac
or increase the exemption limit for individuals from Rs.2.5 lac to Rs.3 lac. There
could be some clarity on the taxation structure of NPS as it does not have the
Exempt-Exempt-Exempt (EEE) status like EPF and PPF. It will be interesting to see if
the government changes or removes the surcharge on individuals. Currently, there
is a surcharge of 10% on individuals having total income exceeding Rs.50 lac but
not exceeding Rs.1 cr. Individuals with income above Rs.1 cr are subject to
surcharge @ 15% on tax.
Existing FICCI Recommendation
Slab Tax rate Slab Tax rate
0 - 2.5 lac NIL 0 - 3 lac NIL
2.5 – 5 lac 5% 3 – 10 lac 10%
5 – 10 lac 20% 10 – 20 lac 20%
Beyond 10 lac 30% Beyond 20 lac 30%
Source: FICCI & Budget document

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 PRE-BUDGET ANALYSIS January 23, 2018

As per media articles the government may consider either 1) introduce long term
capital gains tax of 10-15% instead of current ‘NIL’ rate or 2) increase the holding
period of long term capital gains from 1 year to either 2 or 3 years. Introducing
long term capital gains tax when STT is already in place will be double whammy
for equity investors. Slightly higher STT could be a better alternative to any change
in long term capital gains structure. Either of the above changes in long term
capital gains could be negative for equity markets in the short term. However, over
period of time investors would get accustomed to it.

Divestments
Government will be able to far exceed its FY18 divestment target of Rs.725 bn due
to last minute transfer of its holding in HPCL to ONGC. Till date the Government
has raised Rs.535 bn by way of divestment. The transfer of its 51% stake in HPCL
to ONGC should fetch Rs.~370 bn. Hence total divestment figure for FY18E could
reach ~Rs.905 bn. In FY19 the government could look at expediting strategic
divestment of PSUs to raise non-tax revenues for funding various development
expenditures. We are assuming divestment target to be ~Rs.800 bn in FY19BE out
of which ~Rs.100-150 bn could be through stake sale in non-government
companies.

Conclusion
From market sentiment and performance perspective, both bond and equity
investors would keenly watch the Fiscal Deficit number. Equities run the risk of
potential changes in long term capital gains (either in the form of change in tenure
or tax rate). The three key things to watch out in FY19 budget would be any
change in long term capital gains, Fiscal Deficit target (i.e.3.1% expected ) and net
G-Sec borrowing (i.e. Rs.4.6 trillion expected). Rising oil prices could inflate India’s
oil import bill thereby putting pressure on trade deficit. However, robust capital
inflows and healthy forex reserves can help manage the balance of payments. The
recent lowering of GST rates on several products could have implication on the
revenue front in FY19E.
The budget could be less relevant after 2-3 months as focus would again shift to
global events, macroeconomics and earnings. Global growth and macroeconomics
are favourable and could remain so in this calendar year. Global earnings growth
is also likely to be strong in this calendar year. Globally, valuations and rising bond
yields are the main concerns. In India, macros are slightly deteriorating mainly led
by high crude prices. We feel Indian macros could remain under check till the time
crude does not above USD 70/bbl mark and stays there for long period of time.
The street is already building in decent earnings CAGR of 20% for Nifty and ~30%
for the Mid Cap Index. Consensus valuations of Nifty at 18.4x one year Fw PE looks
expensive and but no way close to the bubble zone of 22-23x on Fw basis.
However, the Mid Cap Index at 23.6x one year Fw PE (on consensus estimates)
looks very expensive and in bubble zone. Earnings revival is absolutely critical for
the rich valuations to sustain. Given valuations and risk-reward matrix we prefer
large caps over mid-caps on a broader basis. Nonetheless, The universe of mid and
small caps is very vast so handpicking a basket of few selects stocks in this space
is not so challenging. At this juncture, our preference is for sound management
backed companies that have room for further expansion in valuations and
improving earnings trajectory.
Sectors to watch
Budget expectation Sectors
Higher Rural spend Automobiles, Cement
Higher Infra spend EPC, Construction & cement
PSU Bank recap PSU Banks
Focus on Housing Housing Finance Companies and Paints.
Higher Disposable income Consumer Discretionary and Auto
Source: Kotak Securities – Private Client Research

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 PRE-BUDGET ANALYSIS January 23, 2018

Budget estimates
(Rs bn) FY16 FY17 FY18 FY18 FY19
Actual RE BE Kotak Est. Kotak Est.
Revenue Receipts 11,950 14,236 15,158 14,802 15,878
Gross Tax Revenue 14,596 17,032 19,116 19,730 21,350
Direct taxes 7,560 8,514 9,847 9,740 10,550
Corporation tax 4,530 4,939 5,387 5,450 6,000
Income tax 2,991 3,532 4,413 4,250 4,500
Other taxes 39 43 47 40 50
Indirect taxes 7,036 8,519 9,269 9,990 10,800
Central GST 3,821 6,000
Customs duty 2,095 2,170 2,450 1,850 2,050
Excise duty 2,841 3,874 4,069 2,947 2,500
Service tax 2,100 2,475 2,750 1,372 250
Transfers to states, UTs and national funds 5,062 6,080 6,746 6,905 7,473
Tax Revenue (Net to Centre) 9,438 10,888 12,270 12,824 13,878
Non-Tax Revenue 2,513 3,348 2,888 1,978 2,000
Capital Receipts 5,958 5,908 6,310 7,091 7,273
Recoveries of Loans 208 111 119 110 120
Other Receipts (Incl. Divestments) 421 455 725 1,257 1,250
Borrowing and Other Liabilities 5,328 5,343 5,465 5,724 5,903
Total Receipts 17,908 20,144 21,467 21,893 23,151
Scheme Expenditure 7,251 8,698 9,451 9,250 10,050
On Revenue Account 5,456 6,315 6,741 6,350 6,750
On Capital Account 1,795 2,383 2,710 2,900 3,300
Expenditure on Other than Schemes 10,657 11,446 12,017 12,643 13,100
On Revenue Account 9,921 11,030 11,629 12,324 12,700
of which, Interest Payments 4,417 4,831 5,231 5,582 5,800
of which, Subsidies 2,641 2,605 2,723 2,742 2,900
Food Subsidy 1,394 1,352 1,453 1,485 1,575
Fertilizers Subsidy 724 700 700 620 700
Petroleum Subsidy 300 275 250 312 275
Other Subsidy 223 278 319 325 350
On Capital Account 735 415 388 319 400
Total Expenditure 17,908 20,144 21,467 21,893 23,150
On Revenue Account 15,378 17,346 18,369 18,674 19,450
Of which, Grants in Aid 1,318 1,715 1,954 1,700 2,000
On Capital Account 2,530 2,798 3,098 3,219 3,700
Revenue Deficit 3,427 3,110 3,212 3,872 3,573
as % of GDP -2.5% -2.0% -1.9% -2.3% -1.9%
Fiscal Deficit 5,328 5,343 5,465 5,724 5,903
as % of GDP -3.9% -3.5% -3.2% -3.4% -3.1%
Primary Deficit 911 512 235 142 103
as % of GDP -0.7% -0.3% -0.1% -0.1% -0.1%
Source: Budget documents 2017-18 and Kotak Securities - Private Client Research

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 PRE-BUDGET ANALYSIS January 23, 2018

SECTORAL EXPECATIONS
Sectoral expectations
Sector Broad Expectations Impact Companies impacted

Automobiles 1) Focus on improving farm income Positive for two wheeler and tractor Hero MotoCorp, Escorts and M&M
segment
2) Steps to boost electric vehicles Marginally positive Tata Motors and M&M
3) Incentive to scrap old commercial vehicles Positive for commercial vehicle segment Ashok Leyland, Tata Motors,
Eicher Motors

Capital Goods 1) 12-15% Increase in budgetary allocation
Towards Infrastructure spending-roads,
railways, defense, oil & Gas, power
distribution and smart cities.
2) Initiatives to boost rural income
Positive L&T, EIL, VA Tech, Maharashtra
Seamless, Siemens, ABB, CG Power
Positive for companies having Eveready, Bajaj Electricals,
significant rural exposure Havells, Crompton Consumer

Cement 1) Higher allocation on infrastructure Improve Demand ACC, Ambuja Cement, Shree
Cement, Ultratech Cement,
India Cement
2) Focus on reviving rural econmy Drive rural demand
3) Reduction in import duty on pet coke Reduce costs

Construction 1) Increased allocation towards roads, railways, Higher order inflows for companies Dilip Buildcon, IRB, NCC, Simplex
housing and urban development via major Infra, KNR, PNC Infra, Vascon
programmes such as NHAI allocation, Engineers
Pradhan Mantri Gram Sadak Yojana,
Pradhan Mantri Awas Yojana, AMRUT,
Namami Gange etc.
2) Extension of provisions of section 80IBA Positive for players focused Vascon Engineers, NCC,
(income tax exemption) to housing units on low cost housingSimplex Infra
up to 150 sqm carpet area from present
upto 60 sqm area.
3) Industry players are expecting rationalization Bring more clarity Vascon Engineers
of the GST rates from the current 12 per on GST rates for the
cent to 6 per cent for real estate sector sector

FMCG (Cigarettes) 1) Hikes in cigarette indirect taxes to be <10% Neutral ITC

Logitisics 1) Healthy allocation for transport Expected to make transport infra
infrastructure efficient and reliable which is vital
for fostering rapid economic
growth
2) `Decentralising Indian Railways Decentralising railways would lead
to accountability, empowerment,
quick and rational decision making
3) Healthy allocation to Dedicated It would lower the turnaround time
Freight Corridor for rail companies, increase container
volumes and decongest the roads.
Allcargo, GDL, Concor, VRL,
TCI, Gati and Bluedart
Concor, GDL and Arshiya
International
Concor, GDL, Arshiya International
and Allcargo

Metals & Mining 1) Increase in custom duty on aluminium Positive National Aluminum, Vedanta
to 10% from 7.5% and Hindalo
2) Removal of custom duty on coking coal Positive All Steel companies
(2.5%)

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 PRE-BUDGET ANALYSIS January 23, 2018

Oil and Gas 1) Inclusion of Natural Gas within Positive ONGC, IGL, MGL, Gujarat Gas
GST framework
2) Petroleum Products be included in the Positive Refining companies (like IOCL,
GST regime BPCL, HPCL)
3) Clarity on rate of GST applicable on time Positive Refining companies
charter vessel

Paints 1) Housing for all in rural areas Would create demand for decorative
paints along with job creation
2) Reforms for Infra push Would create demand for industrial
paints directly and decorative paints
indirectly
3) Speedy implementation of smart city Improved demand for paints across
mission segments
Asian Paints, Berger, Kansai Nerolac
and Akzo Nobel
Asian Paints, Berger, Kansai Nerolac
and Akzo Nobel
Asian Paints, Berger, Kansai Nerolac
and Akzo Nobel

Shipping 1) Subsidy allocation for Indian shipbuilding Positive as it will enable the Cochin Shipyard, Reliance Defence
industry shipbuilding companies to become
competitive and attract more orders

Source: Kotak Securities – Private Client Research; Industry

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 PRE-BUDGET ANALYSIS January 23, 2018

RATING SCALE
Definitions of ratings
BUY – We expect the stock to deliver more than 12% returns over the next 9 months
ACCUMULATE – We expect the stock to deliver 5% - 12% returns over the next 9 months
REDUCE – We expect the stock to deliver 0% - 5% returns over the next 9 months
SELL – We expect the stock to deliver negative returns over the next 9 months
NR – Not Rated. Kotak Securities is not assigning any rating or price target to the stock. The report has been prepared for
information purposes only.
RS – Rating Suspended. Kotak Securities has suspended the investment rating and price target for this stock, either because there
is not a Sufficient fundamental basis for determining, or there are legal, regulatory or policy constraints around publishing,
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.
NOTE – Our target prices are with a 9-month perspective. Returns stated in the rating scale are our internal benchmark.

FUNDAMENTAL RESEARCH TEAM

Sanjeev Zarbade Ruchir Khare Amit Agarwal Nipun Gupta K. Kathirvelu
Capital Goods, Engineering Capital Goods, Engineering Logistics, Paints, Transportation Information Technology Production
sanjeev.zarbade@ kotak.com ruchir.khare@ kotak.com agarwal.amit@ kotak.com nipun.gupta@ kotak.com k.kathirvelu@ kotak.com
+ 91 22 6218 6424 + 91 22 6218 6431 + 91 22 6218 6439 + 91 22 6218 6433 + 91 22 6218 6427

Teena Virmani Ritwik Rai Jatin Damania Jayesh Kumar

Construction, Cement FMCG, Media Metals & Mining Economy
teena.virmani@ kotak.com ritwik.rai@ kotak.com jatin.damania@ kotak.com kumar.jayesh@ kotak.com
+ 91 22 6218 6432 + 91 22 6218 6426 + 91 22 6218 6440 + 91 22 6218 5373

Arun Agarwal Sumit Pokharna Pankaj Kumar Ashini Shah

Auto & Auto Ancillary Oil and Gas Midcap Midcap
arun.agarwal@ kotak.com sumit.pokharna@ kotak.com pankajr.kumar@ kotak.com ashini.shah@ kotak.com
+ 91 22 6218 6443 + 91 22 6218 6438 + 91 22 6218 6434 + 91 22 6218 5438

TECHNICAL RESEARCH TEAM

Shrikant Chouhan Amol Athawale
shrikant.chouhan@ kotak.com amol.athawale@ kotak.com
91 22 6218 5408 + 91 20 6620 3350

DERIVATIVES RESEARCH TEAM

Sahaj Agrawal Malay Gandhi Prashanth Lalu Prasenjit Biswas, CMT
sahaj.agrawal@ kotak.com malay.gandhi@ kotak.com prashanth.lalu@ kotak.com prasenjit.biswas@ kotak.com
+ 91 79 6607 2231 + 91 22 6218 6420 + 91 22 6218 5497 + 91 33 6625 9810

Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 10
 PRE-BUDGET ANALYSIS January 23, 2018

Disclosure/Disclaimer
Kotak Securities Limited established in 1994, is a subsidiary of Kotak Mahindra Bank Limited. Kotak Securities is one of India's largest brokerage and distribution house.
Kotak Securities Limited is a corporate trading and clearing member of Bombay Stock Exchange Limited (BSE), National Stock Exchange of India Limited (NSE), Metropolitan
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Kotak Securities Limited is also a depository participant with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). Kotak
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We hereby declare that our activities were neither suspended nor we have defaulted with any stock exchange authority with whom we are registered in last five years.
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Kotak Securities – Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 11