10 February 2011 India Daily

INDIA DAILY
February 10, 2011 India 9-Feb 1-day1-mo 3-mo
Sensex 17,593 (1.0) (8.5) (15.7)
Nifty 5,254 (1.1) (8.8) (16.3)

Contents Global/Regional indices
New release Dow Jones 12,240 0.1 5.2 7.8

Nasdaq Composite 2,789 (0.3) 3.0 8.2
Strategy: Day 1 takeaways from Chasing Growth, KIE's annual global investor conference
FTSE 6,052 (0.6) 1.6 4.0
Results Nikkie 10,614 (0.0) 0.7 8.0
Mahindra & Mahindra: Maintain margins despite sharp spike in raw material costs Hang Seng 23,016 (0.6) (2.2) (6.1)
Rural Electrification Corporation: Lower growth though margins surprise, retain KOSPI 2,036 (0.5) (2.2) 3.4
REDUCE Value traded – India
BPCL: Positive net income given cash bounty Cash (NSE+BSE) 195 163 70
Derivatives (NSE) 1,459 1,600 1,149

United Spirits: In line results; mixed outlook
Deri. open interest 1,410 1,343 1,640
Update
Telecom: 2G spectrum pricing report - from known unknown to better known known
Forex/money market
Change, basis points
9-Feb 1-day 1-mo 3-mo
News Round-up Rs/US$ 45.5 5 20 124

10yr govt bond, % 8.2 (1) (1) 13
` Telecom regulator Trai has proposed that mobile phone cos. be charged a one-time Net investment (US$mn)
fee of USD 1.01bn for every unit of airwave they hold beyond the contracted limit, in 8-Feb MTD CYTD
what may be a further blow to dipping profits & revenues of the sector. The move is FIIs (117) 42 (1,345)
set to impact all incumbent GSM based operators & calculations by ECNT reveal that MFs (4) 84 (282)
the industry will have to shell out USD 3.89bn if the govt. accepts the regulator's
Top movers -3mo basis
recommendations. (ECNT)
Change, %
` Car sales hit a record high in Jan. up 26%, pushed by a growing middle class, easier Best performers 9-Feb 1-day 1-mo 3-mo
access to loans & a wider choice of new models, but rising fuel prices & interest rates HCLT IN Equity 462.7 (0.6) (0.5) 14.2
SIEM IN Equity 847.6 (0.2) 9.8 2.4
are likely to moderate growth in next few months. (ECNT)
BHARTI IN Equity 332.2 (0.3) (2.0) 1.6
` The environment ministry has given SAIL (SAIL IN) the go-ahead to divert 595 hectare INFO IN Equity 3130.7 1.1 (7.8) 1.6
of forest land in Chiria. (BSTD) TCS IN Equity 1098.3 (2.4) (2.9) 0.5
Worst performers
` Falling gas production has prompted Reliance Industries Ltd (RIL IN) to seek help from UT IN Equity 37.7 (8.3) (36.4) (58.0)
US oil major Shell International to rectify technical glitches in its D6 block in the IVRC IN Equity 63.4 (12.0) (45.4) (57.1)
Krishna-Godavari basin on the country's eastern coast. (BSTD) HDIL IN Equity 128.4 (6.8) (24.3) (51.6)
IBREL IN Equity 106.7 (6.1) (11.7) (49.4)
` Coal India (COAL IN) may by a stake of up to 15% in US-based Peabody Energy RELI IN Equity 531.7 (19.3) (34.2) (49.4)
Corp's Australian assets early in the next financial year for an estimated USD 100 mn.
(BSTD)
` Coal India (COAL IN) plans to start exploratory drilling in Mozambique by June & has
invited bids from coal exploration cos. for the blocks it has acquired in the country.
(ECNT)
` M&M (MM IN) approved the acquisition of 38% equity in EPC Industries, a listed
company engaged in micro irrigation systems, for USD 9 mn. (BSTD)
` DLF (DLFU IN) approach apex court against order to demolish Gurgaon SEZ. The
Punjab and Haryana high court had ruled that the land was acquired for other
purpose and not for SEZ. (BSTD)
` Natco Pharma (NTCPH IN) said its abbreviated new drug application for the generic
version of Oseltamivir Phosphate capsules had been accepted by the USFDA. (BSTD)
Source: ECNT= Economic Times, BSTD = Business Standard, FNLE = Financial Express, THBL = Business Line.
For Private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES.
REFER TO THE END OF THIS MATERIAL.
Strategy.dot
INDIA
Strategy
FEBRUARY 9, 2011
NEW RELEASE
BSE-30: 17,593
Day 1 takeaways from Chasing Growth, KIE’s annual global investor conference.
Feb 9, the first day of our conference saw eight expert speakers and 21 companies rivet
our institutional investors. Our speakers today included Arun Shourie, Varad Pande, Dr.
Narendra Jadhav, Mani Shankar Aiyar, Labanyendu Mansingh, Adi Godrej, TN Ninan
and YM Deosthalee. More on their insights and our takeaways inside. Watch this space
for today’s speakers – six more experts will take the stage and 39 more companies will
meet investors in an action-packed day.
Day 1 – Feb 9 companies at KIE’s Chasing Growth conference
`1. Axis Bank 12. Kotak Mahindra Bank
2. Bharat Forge 13. NTPC
3. Bharti Airtel 14. Oil & Natural Gas Corporation
4. CESC 15. Power Grid Corporation
5. Dish TV 16. Reliance Capital
6. Godrej Consumer Products 17. Sesa Goa
7. HCL Technologies 18. Shriram Transport Finance Company
8. HDFC 19. Tata Chemicals
9. IRB Infrastructure 20. Tech Mahindra / Mahindra Satyam
10. ITC 21. Yes Bank
11. Jindal Steel and Power
For private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES, REFER TO THE END OF THIS MATERIAL.
Strategy India
SPEAKER SESSIONS: CRYSTAL ROOM, THE TAJ MAHAL PALACE
1. ARUN SHOURIE: Getting things done in a parliamentary democracy
Former Union Key takeaways

Minister, Scholar
` Removal of “dead hand” of the government in the early 1990s led to faster growth in the
and Writer
economy; reforms have taken place in spurts and not on a sustained basis
` The next two years will be difficult as the opposition will likely become more
confrontational as the government is in disarray; elections will play an important role in
determining policies of the government over the next two years; disarray in government is
not democracy
` Leadership is a problem at every level in India; how we select the right leaders is
important; the parliamentary system has not delivered the kind of leadership that is
important for taking the country forward
` Race with China is important for India; China can learn from India three things—(1) de-
fanging secessionism, (2) respect for basic life and (3) innovation in a free world is more
than in a state-controlled regime; India can learn from China several things—(1) sourcing
of resources from various parts of the world with promise of Chinese aid, (2) national
strength and (3) exercise of power
` Freedom is not going to solve things automatically; it is just as an add-on; the system has
to deliver; entrepreneurs and middle-class professionals have to keep on doing the right
things; otherwise, we will fall into the middle-income class trap
2. VARAD PANDE: Ecology and economy: the twain shall meet

Officer on Special Key takeaways
Duty to the Minister
` Five main laws that determine the policies of the government of India; forest cover in
of Environment &
India has increased as a result of strict implementation of the Forest Conservation Act,
Forests, 1980
Mr. Jairam Ramesh
` Current context—pressure on ecology, a perception that the system can be “managed”,
judicial activism, growing environmental movement; the ministry has been working on a
culture of compliance
` Core principles of the MoEF—(1) inclusiveness (based on national consultations), (2)

objectivity and (3) transparency (decisions put on the website immediately)
` Approach of the MoEF—(1) a clear ‘No’ for certain projects or ideas, (2) over 90% of the
projects are approved and within stipulated timelines, (3) find solutions that work for all
stakeholders (POSCO, Navi Mumbai airports are good examples)
` Proactive domestic agenda—reduce emissions intensity of GDP (reduce by 20-25%

between 2005 and 2020), eight missions on climate change; the ministry is also working
on institution building (National Environmental Assessment and Monitoring Authority, or
NEAMA, an autonomous body for assessing projects and National Green Tribunal)
KOTAK INSTITUTIONAL EQUITIES RESEARCH 3

India Strategy
3. DR. NARENDRA JADHAV: Inclusive growth in the context of India’s demographic surge
Member, Key takeaways
Planning Commission
` Dr Jadhav had a new definition of LPG in the context of economic reforms—liberalization,
privatization and globalization
` The three key achievements of the Indian economy in the past two decades since LPG
began have been—(1) distinct improvement in the rate of economic growth, (2) the
number of people below the poverty line has come down to 27% currently, (3) forex
reserves have increased significantly; at US$300 bn, India is the seventh-largest forex
holder in the world; India is a net lender to the IMF
` The three major negatives or challenges facing the Indian economy—(1) poor ranking by
most social indicators, (2) benefits of reforms have not been uniform and (3) inflation; it is
the most iniquitous form of taxation
` The positives of Indian economy are favorable demographics; average age is 24 years and
average in 2020 will be 29; in the same year, median age of China and USA will be 37
years,
` Areas of development are (1) gross enrolment ratio (access to college education) is 12.4%
in FY2007; expenditure on education is about 3.5% of GDP, (2) 10% of people have
access to proper training, (3) health sector; expenditure on health is about 1% of GDP
4. MANI SHANKAR AIYAR: Why is India prospering but Indians are not?
Member of Key takeaways
Parliament,
` 17% of the GDP is contributed by the agriculture sector, which employs 65% of India’s
Rajya Sabha
population
` The process of growth has become very skewed; the fruits of growth are being cornered
by a small section of the population
` Government’s capacity to spend on anti-poverty programs has increased due to a

spectacular increase in government’s revenues; in the past 15 years (1994-2009),
expenditure on social welfare programs has increased 15X; however, India’s rank in HDI
has not improved much (it’s #134 currently)
` The size of the unaccounted economy has grown to 43% from 27% in 1991 of GDP
` Empowerment of people took place immediately after independence; middle class sought
its entitlement and secured it and this resulted in enrichment; the rural population has not
felt the benefits though; so far, the rural class has sought to show its dissatisfaction
through changing the government in elections; however, it could lead to more radical
forms of dissatisfaction and it could be in the form of insurgency and armed rebellion
` It is important for basic services to be provided to the rural population, which will lead to
true empowerment of these people; there are 3.2 mn elected representatives in local
bodies out of which 1.2 mn are women representatives—a little known fact that is not
lauded enough
4 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Strategy India
5. LABANYENDU MANSINGH: Development of the gas market in India

Chairperson, PNGRB Key takeaways
` 8 EOIs received for additional long-distance pipelines; four pipelines put through bidding
process after public consultation
` 73 EOIs received for building city gas distribution networks; PNGRB has identified 243
cities additionally for building CGDs
` Currently there are 0.7 mn CNG vehicles but this could rise to 2.5 mn in the next three
years and 3.3 mn in the next five years; the number of city gas distribution networks
could increase to 125 in the next five years from 25 currently
` In PNGRB’s view, a competitive market would lead to price discovery, optimal use of
scarce energy resource, optimization of infrastructure and lead to flow of investment for
E&P, development of infrastructure for transportation and distribution
6. ADI GODREJ: Understanding the Indian multinational

Chairman, Key takeaways
Godrej Group
` 470 mn Indians use at least one Godrej product daily
` 35% of Godrej Consumer Products Ltd comes from outside India; it has a very sizeable
presence in Indonesia
` Godrej Properties has projects in 11 cities in India; it has a joint development model,
which results in an asset-light model
` Overseas strategy driven by desire to grow faster than what is available in India (about
15% CAGR in revenues on an organic basis); acquisitions can add another 10% to the
growth per annum but the acquisitions have to make strategic sense
` Godrej group has ambitions to grow the palm oil business, which is a cooperation model
with farmers; farmers grow the crops on behalf of Godrej and Godrej purchases the fruit
from farmers

India Strategy
7. T. N. NINAN: Can India make the journey from functional anarchy to future global power?
Chairman & Editorial Key takeaways
Director,
` India’s per capital income can increase to US$4,000 by FY2021; growth is underwritten
Business Standard
by a high savings rate
` Key vulnerabilities include areas such as (1) institutional including among others weak
regulators, scarcely functional parliament and judicial delays, (2) political including
populist politics, weak reforms impulse and corruption and (3) economical such as twin
deficits with combined fiscal deficit of 7.7% and CAD of 3.7%, high public debt
` Some East Asian economies grew rapidly driven by openness, high savings and
investment, stable macro-economy, good leadership and administration and commitment
to growth and inclusion
` India could easily get to a middle-income economy (US$4,000 per capita) over the next
10 years but transformation to a high-income economy may be more difficult since this
would require moving up the value chain, specialization and transformation to a
knowledge economy
` Escaping the middle-income trap for India would require skills acquisition, infrastructure
development (electricity, highways, and telecom connectivity), focus on soft infrastructure;
Mr. Ninan highlighted that certain changes such as RTI, UIDAI, rise of ‘BIMARU’ sites,
growth of manufacturing (frugal engineering and innovation) could lead to stronger
performance
` India likely to be a great power (one among a few)
8. Y. M. DEOSTHALEE: Overcoming India’s infrastructure deficit

Whole-time Director Key takeaways
& Chief Financial
` Infrastructure development would require strong government, monetary and fiscal
Officer,
policies
Larsen & Toubro
` Globally, infrastructure has been developed by governments; in India, 50% of the
investment in infrastructure development has been left to private companies but they are
handicapped due to procedural issues (land, demolition) and other issues
` Processes need to be strengthened in the areas of award of coal blocks, highways and
other infrastructure projects; also, project preparation can be higher before inviting
private sector participation
` Availability of skilled manpower is a big issue; it is just not about engineers but also
manual labor such as welders and carpenters; only 25% of the population entering the
construction sector is properly trained
` Long-term funding is also a big issue for developing infrastructure projects; banks have
short-term deposits typically with only one-third of their deposits under the long-term
category; thus, bank funding is not appropriate for long-term infrastructure projects,
which require loans of 10-15 years; long-term corporate debt market is virtually absent
currently; India can facilitate investment through fiscal measures

Strategy India
BRIEF TAKEAWAYS FROM COMPANY MEETINGS
AXIS BANK: FEB 9, 2011

Key takeaways
` Margins outlook remains stable with a marginal negative bias. Full impact of recent
hikes (December—50 bps PLR and 25 bps base rate and January—25 bps of base rate
and PLR). Pricing power remains with banks on the backdrop of relatively strong credit
growth. However, the bank would continuously evaluate margins and asset quality.
` Trends on loan growth improving. There is a perceptible shift towards working capital
requirements apart from infrastructure (which led credit growth in recent quarters) in
3QFY11. Credit growth is relatively weak only in the SME segment. In retail, expectations
of a price decline are driving down home loan volume growth.
` 1HFY11 saw peak slippages for the bank. Barring any episodic events, the bank is not
witnessing any concern in any of the sectors within its loan portfolio.
` Investments in new branches to continue at similar trends levels. The bank will look
to close FY2011E at about 1,250-1,300 branches and a further 250-300 branches in
FY2012E. The bank is looking at maintaining CASA ratio at 40% levels (average CASA
ratio) and would calibrate growth, if needed.
BHARAT FORGE: FEB 9, 2011

Key takeaways
` Demand outlook is very buoyant. The company guided for very strong demand
outlook on US and European exports driven by new TARP projects which are being
executed in US and new order wins in European market. Company expects to double
standalone revenues in the next three years, driven by (1) strong growth in non-auto
revenues and (2) sharp increase in US and European exports.
` Capacity utilization expected to improve. The company indicated that capacity

utilization in India is at around 75% for the automotive business, 40-45% for the non-
auto business, 65-70% for China operations and 55% for the European operations. The
company plans to increase machining capacities by 50% over the next few years to
increase the value-added content of the product.
` Subsidiaries expected to report profits in FY2012E: The company indicated that

subsidiaries are expected to report profits in FY2012E driven by improvement in demand,
increase in machining mix in the product mix. The company guided that EBITDA margins
in subsidiaries should improve from 5% to 10% in the next 2 years.
` Update on Alstom joint venture. The company indicated that the Bharat Forge-Alstom
joint venture of turbine gensets will start commercial production from FY2013E and
company plans to achieve full utilization of capacity by FY2017E. The company has also
received letter of intent from NTPC for supplying turbine gensets for 5X 660 MW orders
that the Bharat Forge-Alstom JV won recently.

India Strategy
BHARTI AIRTEL: FEB 9, 2011

Key takeaways
` India markets. The company is comfortable with the competitive scenario in the Indian
wireless markets. The company believes that the new players do not have the balance
sheet strength to sustain the price wars and some of them will struggle for even a
graceful exit from the market. Bharti’s India wireless strategy continues to revolve around
revenue market share protection with a focused eye on EBITDA market share.
` Recent events. The company does not see MNP changing the competitive dynamics
much in the Indian wireless industry beyond some price rationalization in the post-paid
segment. The company sees the TRAI recommendations on spectrum pricing as just the
start of a long process of telecom policy reformulation in the country. The company
believes that their balance sheet strength places them in the relatively better position to
absorb any spectrum related charges compared to peers. 3G to be rolled out in 25-30
cities by end March 2011 and to around 100 cities in the next 12 months.
` Africa – three-pronged strategy. (1) driving affordability-led penetration; Bharti

believes that current unique subscriber penetration in their African markets is just about
25%, (2) gaining subscriber and revenue market share from competitors through smart
pricing and distribution management and (3) EBITDA margin expansion driven by ironing
out inefficiencies in the cost structure.
` Capex for India business. Excluding towercos, this is pitched in the range of US$1.8-2
bn for the next 2-3 years, Africa capex to be in the vicinity of US$800 mn for the next 2-3
years.

Strategy India
CESC: FEB 9, 2011

Key takeaways
` CESC has a current operational portfolio of 1,225 MW all of which caters to its Kolkata
distribution business. CESC plans to add another 2,520 MW by end-FY2015E which
includes 600 MW at Dhariwal (likely commissioning in FY2013E), 600 MW Haldia (likely
commissioning by FY2014E) and 1,320 MW at Orissa (likely commissioning by FY2015E).
` Status of the power projects
Dhariwal (660 MW). Construction is in progress and management has indicated

likely commissioning by FY2013E. Dhariwal has already tied up 220 MW at a
levelized tariff of Rs3.3/kwh and plans to tie up another 220 MW. Depending on the
status of merchant tariffs, CESC will sell the balance 220 MW on a merchant basis.
Haldia (660 MW). BTG supplier has been shortlisted and construction work is likely
to commence by March 2011E. The management has indicated commissioning by
FY2014E. Haldia will sell 450 MW to CESC’s Kolkata distribution arm while balance
will be free for merchant sale.
Orissa (1,320 MW). Project has achieved key milestone and has applied for coal
linkage. The project has been recommended by CEA to Ministry of Coal for linkage
and secured 90 points—significantly higher than competing projects. Management
has indicated that construction could start by end-FY2012E with likely
commissioning by FY2016E.
` Total capex requirement for these three projects will be Rs130 bn—of which equity
funding would be Rs31 bn. CESC has already infused Rs5 bn of equity and internal
accruals will likely fund another Rs16 bn. For the balance Rs10 bn of equity funding, the
company will likely look for private equity investment.
` ICML (a group company of RPG Enterprises) has acquired 10% stake in Resource
Generation Ltd (Australia) for a consideration of AU$10.5 mn. The company has access to
proven reserves of 600 mn tons (South African coal) and mining operations are expected
to start by FY2013E. CESC was not directly involved in the transaction and has just
entered into a supply agreement with ICML. CESC has secured a supply of 1 mn tons for
the first three years followed by 2 mtpa for next 20 years.
` CESC continues to make corporate level losses in its retail business though the retail
business has moved into positive store level EBITDA in 2HFY11. However, it will take
another 2.5 years for CESC to break into corporate level profitability. CESC’s store level
EBITDA was Rs21/sq. ft in 2QFY11 while total loss was Rs117 mn in 2QFY11.
` Management has indicated that to move into corporate level profitability, CESC needs to
achieve scale and add on to its current store area of 0.9 mn sq. ft. CESC plans to add 0.3
mn sq. ft in FY2012E capex which will be funded by the parent entity. However, long-
term plans are to achieve operational efficiencies through calling up of business, to be
funded through private equity placement.

India Strategy
DISH TV INDIA: FEB 9, 2011

Key takeaways
` Volume growth momentum remains strong. Dish TV expected growth momentum to

slacken a tad post the festival period but subscriber additions remain robust. Dish TV has
added >300K subscribers in January and is on course for another >1 mn quarter in
4QFY11E, led by the upcoming ICC Cricket World Cup. Dish TV would be advertising
heavily during the event though largely its HD service. Dish TV was confident of the
industry crossing 60 mn gross subscriber mark by end-FY2013E (~32 mn gross subscriber
base currently, ~15% of the same may be inactive). A significant chunk of subscribers
(~75%) are coming from beyond the top-100 cities, with conversion of cable-dark, weak
cable and DD Direct TV subscribers as key drivers.
` ARPU growth may be modest though key focus area. Dish TV expects ARPU in
4QFY11 to be ~Rs145-150, marginally below the guidance given at the start of the year.
However, the company noted the land grab stage of the market and stronger-than-
expected subscriber volumes (~3.5 mn in FY2011E versus ~2.5 mn guidance given at the
start of the year). Dish TV highlighted (1) ongoing pass-through of prices hikes taken in
September 2010, (2) improving mix of packages (proactive marketing) and (3) value-
added services and add-on packages as key driver of continued traction in ARPUs, even
though it may be range-bound (4-5%) for some time.
` Positive operating leverage as cost structure remains in control—taxes are the bête-
noir. Dish TV noted that 19% yoy growth in 3QFY11 programming and other costs was
on account of retrospective payments due to delayed renegotiation with one broadcaster
and otherwise, content cost inflation will remain within guidance (~10%). Some of the
content deals come up for renegotiation in FY2012E (one broadcaster) and FY2013E (two)
but (1) rising and highest DTH subscriber base, (2) continued fragmentation in the
broadcasting segment and (3) TAM ratings system taking cognizance of DTH platforms in
their panel implies greater negotiating power. Tax incidence at ~30% of revenues is a
bigger issue (Service tax, VAT, Entertainment tax and License fees).
` HD-DTH service would be another key focus area. The company re-iterated renewed
focus on HD-DTH services, also as an important piece of arsenal in the strategy to diversify
away from low-value subscribers and break into high-value subscribers (in the top 100
cities). The company plans to utilize a significant proportion of the recently added
transponder capacity to add HD content to the platform. The company’s strategy would
unfold with the upcoming ICC Cricket World (let’s not spoil the surprise), and Dish TV
would aggressively market its revamped HD-DTH service during the event. (1) Long lead
time in securing transponder capacity and (2) need to align new capacity with existing
satellite makes it harder for competition to follow. Dish TV noted existing base of 4 mn
high-end LCD TV household base in India.
` Dismal state of C&S regulations in India but impact of Dish TV/DTH minimal
henceforth. Dish TV expressed continued disappointment with the state of affairs as
regards C&S regulation in India. Most notably, regulations related to License fee reduction
(from high level of 10% of revenues), content costs (revised DTH rate cap at 35% of non-
CAS cable channel rates versus 50% previously) and digitization (public and political
pressure may preclude speedy implementation) remain under the cloud. Nonetheless,
Dish TV/DTH being a B2C-oriented business and with strong volume growth will likely
have limited incremental impact of regulation. A majority of the states have already
implemented Entertainment tax as well, resulting in stable payout (~6% of revenues);
GST may subsume E-tax though there is limited clarity on the same.

Strategy India
GODREJ CONSUMER: FEB 9, 2011

Key takeaways
` Category growth expectations – soaps ~8%, household insecticides ~20% and hair color
~15%. GCPL likely to grow ahead of market growth in soaps and household insecticides
and in line with market growth in hair color.
` The company is having forward covers for palm oil till April/May 2011. Full impact of
inflation in palm oil will likely be seen in 2QFY12E. Company has implemented a price
increase of 4% in soaps in January 2011.
` The company is in the process of appointing Mr. Vivek Mathur as Head of domestic
business (he has earlier worked with GHPL and Godrej Hershey’s). GCPL will also appoint
a new Head for international business.
` The company is likely to revisit the marketing mix for hair color in India in 1QFY12E.
` It is targeting organic growth of 15-20% CAGR and inorganic growth of ~10% CAGR.
HCL TECHNOLOGIES: FEB 9, 2011

Key takeaways
` Different approach to client engagement delivery to partly blame for the margin
weakness. The company expressed that its cost base is higher as it uses higher proportion
of laterals for project delivery. The company does not want to broaden its pyramid for
project delivery as it believes that using higher proportion of laterals increases their win-
rate in new deals and also leads to higher customer satisfaction.
` Pricing for HCL Tech is quite similar to its peers; the company refuted resorting to
aggressive pricing tactics to win deals in the market.
` The company expects the client budgets for CY2011 to be more or less flat with
increased off-shoring. The clients are still spending cautiously on smaller size projects.
More spends would be on the change-the-business kind of projects as clients have spent
most of their budgets in the past 2 years on run-the-business.
` HCL Tech uses its near-shore delivery centers mainly to cater to local clients in nearby
geographies (centers in Brazil and Mexico to cater to Latam market).
` The company derives 12% of its revenues from non-linear projects.

India Strategy
HOUSING DEVELOPMENT FINANCE CORPORATION: FEB 9, 2011

Key takeaways
` Loan growth target of about 25%. HDFC expects to grow its loan book (gross) by
25% by FY2011E. The share of developer loans will likely be about 32% of total (as
against its long term target of 35%) on the back of sharp growth in the retail segment in
1HFY11.
` Stable margins. HDFC is confident of maintaining spreads of 2.2% in the medium term.
HDFC has raised home loan rates three times in last six months- 50 bps in September, 75
bps in January and 25 bps in February. In last two months, HDFC has raised developer
loan rates by about 1.25%. A tight liquidity environment and the bribes-for-loan scam
has affected the ability of developers to raise funds in the current environment; this will
likely augur well for HDFC.
` Mix view on real estate markets. Real estate prices in Mumbai are above historic peaks
and will likely remain under pressure. In NCR, prices have risen in certain pockets. Gujarat,
Bangalore and Chennai continue to be buoyant markets.
` Education loans – an untapped opportunity. HDFC has acquired a majority in Credilia,

an education loan company having loan book of Rs2 bn. HDFC believes that education
sector will provide a big opportunity. The opportunity could be in providing education
loans and/or developing and managing schools. Most cities have a deficit of good quality
schools. Several developers set up schools in residential complexes but do not have the
competencies to manage these schools. HDFC is currently working on planning its
business model in this segment.

Strategy India
IRB INFRASTRUCTURE DEVELOPERS: FEB 9, 2011

Key takeaways
` About Rs20 bn of equity remains to be invested in existing projects in the portfolio of the
company. IRB invested about Rs7 bn as equity in projects in FY2011 so far. The company
would meet this requirement thought internal accruals. The management also indicated
that the company has the ability to take on new projects to the tune of about Rs40-50 bn
without the need to raise capital.
` NHAI likely to award four large projects in the near-term (RFP/RFQ stage)—(1) four-laning
of Beawar–Pali–Pindwara in Rajasthan worth Rs23 bn (244 km), (2) four laning of Kota–
Darah–Jhalawar, Rajasthan worth Rs5.1 bn (88 km), (3) Rs22 bn (102 km) project in
Gujarat for six-laning of Ahmedabad-Vadodara, and (4) Rs17.5 bn (213 km) project in AP
for six-laning of Iccahpuram–Srikakulam–Anandapuram section. Management expects
NHAI projects to the tune of about 5,000 km potentially to be awarded over the next 3-4
months.
` Has achieved financial closure of most projects in the portfolio except for Tumkur-
Chitradurg. Has already started execution of the Amritsar-Pathankot, Jaipur-Tonk-Deoli
and Talegaon-Amritsar projects and expects to start execution of the Panaji-Goa project in
the next month.
` Likely reduction in Surat-Dahisar project cost to the tune of about Rs5-7 bn (from Rs28.4
bn to about Rs23-25 bn) based on savings on construction materials. This would help in
offsetting potential disappointment in traffic levels (toll collections of about Rs10.5 mn
per day versus estimate of about Rs11.5 mn).
` Management attributed strong margins in the construction arm (of about 18-120%) to
high proportion of in-house works and strong asset base (own mining set-up, ready mix
concrete plant, hot mix plant etc.). Expects to maintain these margins level going forward
as well.
` Bids for projects based on an equity IRR benchmark of about 16-20%—key assumptions
in bidding include (1) traffic growth of about 5-7%, (2) interest rate of 10-11% and (3)
cost of capital of 12%.

India Strategy
ITC: FEB 9, 2011

Key takeaways
` Company has implemented a price increase of ~4% in cigarettes in January 2011.
` Cigarette business can grow at >5% in volumes if the excise increase is moderate (in low
single digits, in our view).
` Most of the stringent global regulations on tobacco usage control are already
implemented in India (due to India being a signatory to WHO charter). Hence, it is likely
that regulatory regime for cigarettes could potentially remain stable.
` Foods business has achieved break even in FY2011, all business lines are profitable except
Bingo snacks. Breakeven in overall FMCG segment is likely to be achieved in FY2013E.
` ITC has achieved a market share of ~6% in soaps and ~3% in shampoo. Revisit of
marketing mix is underway in shampoo.
JINDAL STEEL AND POWER: FEB 9, 2011

Key takeaways
` Company articulated three growth drivers for FY2012 - (1) expects sale of 2 mn pellets in
FY2012 vs 500-600K in FY2011. At current pellet prices the company expects to generate
US$275 mn of EBITDA in FY2012, (2) commissioning of captive power plants – at least 4
X 135 MW units would be available in FY2012E, (3) increase in finished steel sales likely at
2.5 mn tons vs 1.8 mn in FY2011.
` Company has started mining and extracted ~400K tons of iron ore (iron ore grade is
~55% Fe) from Bolivian mines. Company expects shipments of 2 mn tones of iron ore in
FY2012E which will increase to 3 mn tones in FY2013E. Company has invested in
requisite logistics to carry the ore up to the Argentinean port. Company expects
extraction cost of US$15 and transportation cost of US$25 taking the total FOB cost
US$40.
` JSPL expects average merchant tariff Rs3.5- 4 / KWH in FY2012 versus Rs4+ in FY2011.
Company indicated that it can get into a one-year contract at a rate of Rs3.8/KWh.
` The company has outlined aggressive capex plans for the next three years for JSPL
standalone business. Company expects to spend Rs50 bn in FY2011E, Rs70 in FY2012E
and Rs75 bn in FY2013E. For the power business, company has outlined capex of Rs40
bn in FY2012E and Rs50 bn in FY2013E.
` Shadeed HBI plant is running at 80% capacity. Total cost of production at the current iron
prices is US$370 per ton comprising of pellet cost of US$300/ ton (1.5 tons of pellets are
required per ton of HBR, cost of pellets is US$200/ ton), gas cost at US$10/ ton, other
variable costs of US$20/ton and other fixed cost at US$40/ton

Strategy India
NTPC: FEB 9, 2011

Key takeaways
` NTPC has a current operational capacity of 32,194 MW (including JVs) and has a portfolio
of another 15,700 MW under construction likely to commission by end-FY2014E which
would take the total operational capacity to ~48 GW. The regulated equity base of the
company stands at Rs250 bn. NTPC has a CWIP of Rs370 bn out of which 30% is the
equity contribution.
` Management has guided for commissioning of 3,150 MW in FY2011E of which 1,490

MW (including 500 MW Korba Super Thermal Power Station, 490 MW Dadri and 500
MW of Jhajjar) are already operational.
` Management has guided for a capex of Rs157 bn in FY2011E and Rs270 bn in FY2012E.
` NTPC will sell 15% of power from 500 MW units under construction at Farakka and
Kahalgaon in the merchant market implying a total merchant sale of 150 MW upon
commissioning of these units.
` Management has indicated that NTPC has limited risk to state SEBs backing down on
purchase of power (a trend witnessed in last few months) as they would continue to
receive payment linked to availability. Management has highlighted that most of the SEBs
are currently drawing power only to the extent of their financial strength and that has
resulted in some SEBs backing down on purchase.
` In terms of payment-related risk from SEBs, management highlighted that their

receivables are under check and have not faced any difficulties in payment. Further, NTPC
has signed additional escrow which gives them the first right on receivables from SEBs.
` NTPC has signed PPAs worth 100 GW which includes the PPAs for extant capacities.
Entire 100 GW PPA is on a CERC-determined tariff arrangement thus reducing the
likelihood of NTPC aggressively pursuing competitively bid projects.
` NTPC has a portfolio of eight coal mining blocks with geological reserves of 5.7 bn tons,
of which two coal blocks with reserves of 2 bn tons are being developed under a joint
venture with Coal India Ltd (CIL).
For Pakri Barwadih, Kerandari and Chatti Bariatu, NTPC is in advance stages of land
acquisition. Environmental clearances have been received for these mines and
production is expected to commence by FY2012E.
Management has guided for production of 15 mtpa by FY2012E from Pakri

Barwadih.
NTPC plans to attain a peak production of 47 mtpa by FY2017E from all these mines.

India Strategy
OIL & NATURAL GAS CORPORATION: FEB 9, 2011

Key takeaways
` Increase in oil and gas production. ONGC has guided to an increase in oil and gas
production to 28 mn tons and 72 mcm/d by FY2014E from 24.7 mn tons and 63.3
mcm/d in FY2010. The company expects the increase in oil and gas production to come
from the discovered fields under development which includes Cluster-7, WO series, B-193,
B-1, B-22, G-1 & GS-15. The company also expects incremental gas production from
Tripura, Daman and North Tapti region.
` Subsidy burden. ONGC highlighted oil ministry’s statement that subsidy burden on
upstream companies will be restricted to one-third of overall under-recoveries. The
subsidy losses for upstream companies have been restricted to one-third of gross under-
recoveries in 9MFY11 and the company doesn’t expect it to change.
` Royalty on Rajasthan block. ONGC has officially communicated to government that

royalty issue for Rajasthan block needs to be addressed before the ministry gives in-
principle approval for Cairn-Vedanta deal. The inclusion of royalty as part of the project
cost has been stated as one of the pre-conditions set by the government for approval of
Cairn-Vedanta transaction.
` Development in KG-DWN-98/2. ONGC has submitted the declaration of commerciality

to DGH for approval. The company has the required technology for development of the
Northern region in the block and is likely to start production by FY2015-16. The company
is also seeking technology partner for Southern region of the block, which has discoveries
below 2,800 m of water depth.
` Gas price. The company highlighted that government has authorized ONGC to sell gas
from nominated fields at market price with prior approval from government. ONGC is
currently selling gas produced from C-Series fields at US$5.25/mn BTU as approved by the
government.
` Tripura power project. ONGC has a50% stake in ONGC Tripura Power Company (OTPC)
which is currently executing power project to commission two units of 726 MW each. The
project is scheduled to complete by April-May 2012. The company plans to increase gas
production from Tripura to 6 mcm/d from 1.5 mcm/d once the power plant is fully
operational.

Strategy India
SESA GOA: FEB 9, 2011

Key takeaways
` The company reiterated its FY2013 exit iron ore capacity of 40mn tons comprising of
30MT in Goa and 10MT in Karnataka. Approvals for Karnataka expansion (current
capacity of 6MT and FY2011E shipments of 3.4MT) to 10MT is at an advanced stage and
will likely come through by FY2012. The time frame for Goa capacity expansion is
uncertain and contingent on announcement of new mineral policy by the Goa Government.
` The company has started making investments in logistics infrastructure to meet its
capacity expansion targets. Company has invested in private road corridor, barges and
transhippers to facilitate movement of iron ore to the port of export.
` The cost of production has increased by ~US$10/ton (excluding export duties). The cost
increase comprise of US$4/ ton for demurrage, US$4/ton for royalty and US$2/ton for
other costs. Increase in cost attributed to demurrage is non-recurring in nature; note that
heavy monsoons increased the turnaround time of the ships at the port in this year.
` The company expects significant increase in reserves and resources for at least the next
two years based on the current iron ore cut off grade of 50% iron ore content.
` The government in Karnataka recently increased the freight rates by Rs550/ton – this
takes the rail transportation cost to Rs2,000/ton from Karnataka. The company expects
the total cost of iron ore to increase to US$80/ ton on FOB basis from Karnataka mines
versus an average of US$37/ton for 9MFY10 and US$61/ton in 9MFY11.
SHRIRAM TRANSPORT FINANCE: FEB 9, 2011

Key takeaways
` Loan growth of 20-22%. Shriram Transport Finance (STFC) proposes to grow its loan
book by 20-22% CAGR over the next two years. The company expects to have a achieve
loan book of Rs500 bn by March 2013 as compared to current loan book Rs333 bn. Loan
assets outside balance sheet (securitized loans) will likely be about 30-35% of its overall
loan book. About 75% of the loan book will comprise of used vehicles.
` Loan sell-down to support NIM. STFC sells down (securitizes) loans to banks These
loans can be classified as ‘priority sector loans’ by banks and are rated ‘AAA’ due to the
credit enhancement provided by STFC. Hence, the company can raise fund through this
route at about 1.3% lower than bonds raised on its balance sheet.
` Loan sell down augurs well in ALM management as well. STFC raises bank loans,
bonds, retail bonds. Typically, bank loans are linked to base rate (PLR in the past) and
hence have a risk of being priced upwards in a rising rate scenario; the auto loan portfolio
however does not have a provision of passing on interest rate hike thereby putting
pressure on NIM in a rising rate scenario. In case of loan sell-down transaction, the rate of
discount is generally a fixed rate and as such these instruments do not increase interest
rate risk on its balance sheet.
` CE business commences operations. STFC has just commenced operations of its

construction equipment finance business. The company has recruited a separate
management to run the same. About 30% of the vehicles in this loan book will likely be
used vehicles. The management believes the CE industry provides immense opportunities
and some of the larger players like GE and ICICI Bank have reduced their focus in this
segment thereby making it easier for STFC. The company proposes to earn ROE of about
18% in this business.

India Strategy
TATA CHEMICALS: FEB 9, 2011

Key takeaways
` Urea plant running at peak capacity of 3,600 ton/day, but on refurbished converter. TCL
plans to hook up the new converter by mid March 2011. Since it takes at least a month
to hook up a new converter, the plant will run sub-optimally in March-April.
` Due to a lack of clarity in government policy on gas allocation/pricing/lifting of cap-collar

rate on urea pricing for debottlenecked capacity, TCL is evaluating setting up urea plant
overseas in locations where gas cost is low. However, since this will imply increased cost
(by at least 30% to US$1.3 bn), TCL may explore partnerships for overseas Greenfield
projects
` TCL feels the government has been aggressive in the recent subsidy cut for NPK fertilizers
under NBS regime. With increasing global demand for NPKs, the fertilizer output and
input prices are likely to remain high. In order to protect margin, TCL may take a (1) price
increase; however, full price increase at farmer’s end to compensate for cost increase is
not likely or (2) it may curtail DAP production in FY2012E.
` 100,000 ton capacity expansion at GCIP will come on stream by end-2011E which will
take GCIP capacity to 2.6 mn tones. Further expansion of 400,000 tons per annum is
being considered. This will require significant capex and may happen over next three years.
` Future areas of growth are (1) debottlenecking of capacity at GCIP as above, (2) increase
in high-margin branded salt capacity to 800,000 tons from 500,000 tons, some of which
will come on stream by end FY2011E, (3) customized plant, 2 more to be set up after the
first plant at Babrala, (4) small SSP plant at Haldia, (5) evaluating setting up additional
capacity at IMACID.
TECH MAHINDRA / MAHINDRA SATYAM: FEB 9, 2011

Key takeaways
` The management expects demand recovery to happen in 2HCY11 for the Tech Mahindra
business.
` Tech Mahindra expects the attrition to come down in the coming quarters at both Tech
Mahindra as well as Mahindra Satyam.
` The telecom vertical for IT services has been impacted as upgrade cycle of networks /
transformation of networks was stopped suddenly during the recession. Generally the
trend is that total IT spends for telecom companies come down with increased offshoring.
` Revenues from the top client have been stable at GBP72 mn for the past 7-8 quarters.
Although the entire BT IT spend has come down, Tech M has been able to increase its
share within the BT account.
` Emerging markets is growing robustly for Tech M and now contributes ~15% of revenues.
Tech M has helped 15 telco’s launch operations in the past three years.
` Mahindra Satyam – the organization is geared for growth, most of the cost alignment has
been done and further increase in margins would be driven by revenue growth.
` Most of the liabilities regarding the Satyam dispute have been taken care of apart from
the class action law suits which could take anywhere between six months and three years
to settle.

Strategy India
YES BANK: FEB 9, 2011

Key takeaways
` Near-term pressure on margins to ease as liquidity improves (management expects by

4QFY11E). With expenditure from government visible, overall pressure in liquidity to
gradually ease from current levels. This would result in lower borrowing costs for short
term deposits.
` Loan growth to remain near 2X of industry average. No near-term concern on asset

quality including sensitive sectors like microfinance (less than 1% of loans) and telecom
(about 7% of loans).
` Fee income growth to improve from current levels. Importantly, the bank is witnessing
granularity in fee income especially in segments like transaction banking.
` Target remains unchanged on Version 2.0. The bank will open 750 branches by FY2015E.
Productivity of these branches would be important. With presence in important business
centers, the bank is looking at a concentrated approach in key geographies.

BUY
Mahindra & Mahindra (MM)
Automobiles FEBRUARY 09, 2011
RESULT
Coverage view: Cautious
Maintain margins despite sharp spike in raw material costs. Mahindra and Price (Rs): 655
Mahindra maintained EBITDA margins at 15% in 3QFY11, in line with last two quarters Target price (Rs): 800
driven by price increases, improvement in product mix and cost reduction efforts which
BSE-30: 17,593
allays some street concerns on pressure on margins due to hike in rubber and steel
costs. We maintain BUY rating on the stock but cut our target price to Rs800 (from
Rs850) as we build higher raw material expenses going forward.
Company data and valuation summary

Mahindra & Mahindra
Stock data Forecasts/Valuations 2011 2012E 2013E
52-week range (Rs) (high,low) 827-474 EPS (Rs) 42.4 47.7 53.8
Market Cap. (Rs bn) 403.0 EPS growth (%) 25.2 12.5 12.8 QUICK NUMBERS
Shareholding pattern (%) P/E (X) 15.4 13.7 12.2
Promoters 25.8 Sales (Rs bn) 233.5 270.8 311.9 • 3QFY11 adjusted
FIIs 28.2 Net profits (Rs bn) 26.1 29.4 33.1
profits miss
MFs 4.7 EBITDA (Rs bn) 35.2 39.4 44.8
Price performance (%) 1M 3M 12M EV/EBITDA (X) 11.7 10.4 9.0 estimates by 13%
Absolute (11.5) (16.1) 32.4 ROE (%) 27.6 24.5 23.0 but EBITDA miss
Rel. to BSE-30 (0.9) (0.2) 20.7 Div. Yield (%) 1.4 1.5 1.7
was only 4.4%
• Company maintains
3QFY2011 EBITDA was 4.4% below our estimates EBITDA margins of
15% despite raw
` 3QFY2011 EBITDA of Rs 9.23 bn was 4.4% below estimates driven by higher–than-expected material pressures
raw material expenses. Automotive EBIT margins declined by 1.5% qoq while tractor EBIT
margins increased by 20 bps qoq (key positive in our view) which led to a overall decline of 20 • Maintain BUY but
bps qoq in the EBITDA margins. reduce target price
to Rs800 (from
` Automotive segment revenues grew by 7% qoq while tractor revenues were up 27% qoq
Rs850)
which led to an improvement in product mix and offset the impact of escalating raw material
cost pressures. Tractor revenues as a % of parent revenues increased to 43% in 3QFY11 vs
39% in 2QFY11.
` Company also reported a one-time gain of Rs 1,175 mn due to sale of their investment in
Owens Corning India Limited. Tax rate increased to 25.3% in 3QFY11 vs 24.7% in 2QFY11.
` Company has taken a 5% price increase in tractors in 9MFY11 while utility vehicle prices have
been increased by 3% during this period. Company also took a 0.5-2% increase in prices on
utility vehicles while no price increase was taken on tractors. Company guided that raw material
cost escalation on tractor business increased by 8-9% during 9MFY11.
` Ssangyong Motors has received formal approval from creditors for Mahindra’s bid to acquire
the company. Creditors have taken a $100 mn haircut on the amount owed to them. M&M will
acquire a 70% stake in Ssangyong Motors for a consideration of US$463 mn.
Maintain BUY rating but reduce target price to Rs800
We maintain our BUY rating on the stock but reduce our target price to Rs800 (factoring in a 4-6%
cut in earnings over FY2011-2013E due to higher-than-expected raw material cost pressures). Our
valuation is based on sum of parts valuation methodology. We ascribe Rs632/share value to parent
business (14X PER on our FY2012E EPS) and Rs 169/share value to subsidiaries.
Mahindra & Mahindra Automobiles
3QFY2011 results: 13% below estimates

3QFY11 adjusted profit of Rs6,172 mn (was 13% below estimates) driven by lower EBITDA
margins, lower other income and higher tax rate. EBITDA margins of 15.1% were 80 bps
below estimates driven by higher raw material expenses. Automotive EBIT margins declined
by 1.5% qoq while tractor EBIT margins increased marginally by 20 bps qoq driven by price
increases. Company also reported a one time gain of Rs1,175 mn due to sale of their
investment in Owens Corning India Limited. Tax rate increased to 25.3% in 3QFY11 vs
24.7% in 2QFY11.
Automotive segment revenues grew by 7% qoq while tractor revenues were up 27% qoq
which led to an improvement in product mix and offset the impact of escalating raw
material cost pressures. Tractor revenues as a % of parent revenues increased to 43% in
3QFY11 vs 39% in 2QFY11.
Automotive EBIT margins came in at 12.3% (-1.5% qoq) while tractor EBIT margins were
18.5% (+20 bps qoq).
Key highlights in the conference call hosted by the management were:
1) Company increased its tractor market share by 1.6% qoq. Yuvraj is selling at 800
units/month run rate.
2) Company has taken a 5% price increase in tractors in 9MFY11 while utility vehicle
prices have been increased by 3% during this period. Company also took a 0.5-2%
increase in prices on utility vehicles while no price increase was taken on tractors.
Company guided that raw material cost escalation on tractor business increased by 8-
9% during 9MFY11.
3) Maxximo has gained a 25% market share in the less than 1 ton segment. It is currently
selling at 4,000 units/month run rate. Gio’s monthly run rate is ~1,000 vehicles/month.
Company’s new offering Xylo pick up will be positioned for captive business purposes
which is 45% of the pick-up market.
4) Ssangyong Motors has received formal approval from creditors for Mahindra’s bid to
acquire the company. Creditors have taken a $100 mn haircut on the amount owed to
them. M&M will acquire a 70% stake in Ssangyong Motors for a consideration of
US$463 mn. 10% of the amount has been paid already while rest 90% will be paid in
next couple of days. We have not incorporated Ssangyong Motors financials in our
estimates due to lack of clarity on product development expenses likely to be incurred in
that business.
5) Powerol engine business which supplies gensets to telecom segment is under pressure
according to the management. Despite which tractor EBIT margins have been stable.
6) Company indicated that raw material cost pressures are a major concern but expected
volume growth to remain between 15-18% for utility vehicle industry and 10-12% for
the tractor industry for FY2012E.

Automobiles Mahindra & Mahindra
3QFY2011 Quarterly Performance

March fiscal year-ends
3QFY2011 3QFY2010 2QFY2011 % YoY chg % QoQ chg 9MFY2011 9MFY2010 % YoY chg Kotak est % variance
Volumes 148,631 112,706 131,285 31.9 13.2 407,215 324,280 25.6 148,631 —
Net realisations 411,832 399,012 408,402 3.2 0.8 408,701 407,827 0.2 409,840 0.5
Net sales 61,211 44,971 53,617 36.1 14.2 166,429 132,250 25.8 60,915 0.5
Inc/dec in stock (323) (475) 2,408 1,390 2,020 (550)

Raw materials 42,034 29,665 38,901 41.7 8.1 116146.3 89503.4 29.8 41,055 3.0
% of net sales 69.2 67.0 68.1 69.0 66.2 68.3
Staff costs 3,475 3,300 3,582 5.3 (3.0) 10,195 9,324 9.3 3,797 (8.5)
% of net sales 5.7 7.3 6.7 6.1 7.1 6.2
Other expenses 6,140 4,837 5,318 26.9 15.5 16,261 15,071 7.9 5,849 5.0
% of net sales 10.0 10.8 9.9 9.8 11.4 9.6
Total expenses 51,973 38,276 45,394 35.8 14.5 141,213 111,879 26.2 51,251 1.4
% of net sales 84.9 85.1 84.7 84.8 84.6 84.1
EBITDA 9,238 6,695 8,223 38.0 12.3 25,217 20,371 23.8 9,664 (4.4)
% of net sales 15.1 14.9 15.3 15.2 15.4 15.9
Other income 419 244 1,998 72.0 (79.0) 2,621 1,812 44.6 500 (16.3)
Interest expense (27) 82 (91) (133.0) (70.1) (345) 269 (228.3) (95) (71.5)
Depreciation expense 1,022 984 970 3.9 5.3 2,968 2,760 7.5 1,000 2.2
Extraordinary income 1,175 727 1,902 1,632
Extraordinary exp — — — —
Profit before tax 9,837 5,873 10,068 67.5 (2.3) 27,117 20,786 30.5 9,259 6.2
Tax expense 2,490 1,736 2,483 43.4 0.3 6,560 5,612 16.9 2,129 16.9
Profit after tax 7,347 4,137 7,585 77.6 (3.1) 20,557 15,174 35.5 7,129 3.1
Adj PAT 6,172 4,137 7,076 49.2 (12.8) 18,873 14,478 30.4 7,129 (13.4)
No of shares 615 596 596 615 596 615

EPS 11.9 6.9 12.7 33.4 25.5 11.6
Source: Company, Kotak Institutional Equities
Segmental EBIT margins (%)

23 Automotive Tractor
21
19
17
15
13
11
9
7
5
1QFY2010
2QFY2010
3QFY2010
4QFY2010
1QFY2011
2QFY2011
3QFY2011

Mahindra & Mahindra Automobiles
Earnings revision table

We have revised our volume estimates upwards by 4-5% over FY2011-2013E due to strong
volume growth expected in 4QFY11E while we have cut our EBITDA margin estimates by
4.4-5.8% over the same period to factor in higher raw material cost pressures.
Earnings Revision Table

FY2011E FY2012E FY2013E

Old New % change Old New % change Old New % change
Volumes 547,775 572,512 4.5 632,610 656,939 3.8 721,382 746,920 3.5
Net sales 227,127 233,478 2.8 263,046 270,813 3.0 301,954 311,870 3.3
EBITDA 36,108 35,166 (2.6) 40,825 39,373 (3.6) 46,061 44,805 (2.7)
EBITDA margin (%) 15.9 15.1 15.5 14.5 15.3 14.4
Profit after tax 27,525 26,322 (4.4) 31,085 29,364 (5.5) 34,663 33,110 (4.5)
EPS FD 44.9 42.9 (4.4) 50.7 47.9 (5.5) 56.5 54.0 (4.5)
EPS FD ex dividends from subs 42.8 40.9 (4.4) 47.9 45.1 (5.8) 53.4 50.9 (4.7)
M&M: Sum of parts valuation table

Value per
EPS Multiple share Comment
(Rs/share) (X) (Rs)
M&M standalone business 45.1 14.0 632 Based on 14X FY2012E EPS less dividend income from subs
Subsidiaries 169
Tech Mahindra 57 Based on KIE target price of Rs 720/share
Mahindra Holidays 31 Based on current price of Rs342/share
M&M Financial Services Ltd 58 Based on KIE target price of Rs750/share
Mahindra Lifespace Developers Ltd 12 Based on KIE target price of Rs435/share
Mahindra Forgings 4 Based on current price of Rs67/share
Mahindra Navistar Automotive 5 Based on FY2010 book value at 51% stake
Mahindra two wheelers 2 Based on FY2010 book value
SOTP-based value 801
Target price 800
Source: Kotak Institutional Equities

Automobiles Mahindra & Mahindra
Financial Summary: 2009-2013E

2009 2010 2011E 2012E 2013E

Profit model (Rs mn)
Net sales 130,937 186,021 233,478 270,813 311,870
EBITDA 10,926 29,552 35,166 39,373 44,805
Other income 2,703 1,994 3,396 3,914 4,239
Interest (453) (278) 510 808 895
Depreciaiton (2,915) (3,708) (4,034) (4,942) (5,792)
Profit before tax 10,262 27,560 35,039 39,152 44,147
Current tax (585) (7,493) (8,760) (9,788) (11,037)
Deferred tax (1,412) (97) (175) - -
Net profit 8,368 20,878 28,006 29,364 33,110
Adjusted earnings per share (Rs) 14.8 33.9 42.8 47.7 53.8
Adjusted earnings per share ex subs dividends (Rs) 12.6 32.5 40.9 45.1 50.9
Balance sheet (Rs mn)
Equity 52,621 80,671 108,654 131,154 156,713
Total Borrowings 40,528 28,802 18,677 18,293 18,293
Current liabilities 47,978 52,000 63,095 70,730 79,354
Total liabilities 141,126 161,473 190,427 220,177 254,359
Net fixed assets 32,143 37,027 47,993 58,051 67,259
Investments 57,864 63,980 78,636 86,136 93,636
Cash 15,744 17,432 8,868 12,224 20,002
Other current assets 35,249 42,992 54,902 63,738 73,434
Miscellaneous expenditure 126 41 28 29 29
Total assets 141,126 161,473 190,427 220,178 254,359
Free cash flow (Rs mn)
Operating cash flow excl. working capital 10,395 23,409 26,407 29,585 33,769
Working capital changes 5,918 (45) (815) (1,201) (1,073)
Capital expenditure (9,152) (9,607) (15,000) (15,000) (15,000)
Free cash flow 7,161 13,758 10,592 13,383 17,696
Ratios
Operating margin (%) 8.3 15.9 15.1 14.5 14.4
PAT margin (%) 6.4 11.2 12.0 10.8 10.6
Debt/equity (X) 0.8 0.4 0.2 0.1 0.1
Net debt/equity (X) 0.5 0.1 0.1 0.0 (0.0)
Book Value (Rs/share) 89.1 135.4 176.6 213.2 254.7
RoAE (%) 17.1 30.0 27.6 24.5 23.0
RoACE (%) 10.6 19.9 21.7 20.8 20.0

REDUCE
Rural Electrification Corp. (RECL)
Banks/Financial Institutions FEBRUARY 09, 2011
RESULT
Coverage view: Attractive
Lower growth though margins surprise, retain REDUCE. REC reported PAT of Rs6.6 Price (Rs): 246
bn, up 40% yoy and 10% above estimates. Business traction was somewhat lower— Target price (Rs): 275
flat disbursements, loan growth at 20% as compared to 27-29% in the past though
BSE-30: 17,593
lower borrowings cost supported margins for the quarter. We tweak estimates, retain
REDUCE with price target of Rs275 (Rs300 earlier).

Rural Electrification Corp.
52-week range (Rs) (high,low) 414-205 EPS (Rs) 25.5 29.2 33.3
Market Cap. (Rs bn) 243.3 EPS growth (%) 25.9 14.5 13.8
Promoters 66.8 NII (Rs bn) 32.6 37.5 42.8
MFs 3.1 BVPS 128.7 147.7 169.3
Price performance (%) 1M 3M 12M P/B (X) 1.9 1.7 1.5
Absolute (8.5) (34.1) 7.3 ROE (%) 21.2 21.2 21.0
Rel. to BSE-30 2.4 (21.6) (2.1) Div. Yield (%) 3.1 3.6 4.1
Growth moderated qoq
REC’s reported NII was up 37% yoy to Rs9 bn on the back of 20% loan growth and higher
margins. Loan approvals were up 2% yoy while disbursements were down 1% yoy. While
disbursements to T&D segment picked up in 3QFY11, a high base of short-term loans in 3QFY10
pulled down growth. We believe that infrastructure finance business tends to be lumpy and
challenging to track on a qoq basis; However, consistent decline in loan growth is a cause of
concern. Notably, REC’s loan growth has reported a declining trend—29% in 4QFY10, 27% in
1QFY11, 25% in 2QFY11 and 20% in 3QFY11. We believe that growth at REC will moderate to
about 20-22% levels from 27% loan book CAGR between FY2007 and FY2010 likely due to high
base and lower traction in the T&D segment.
Spreads surprise during the quarter, trend in spreads crucial
REC reported margins of 4.8% during the quarter, somewhat above 4.6% in 2QFY11 and 4.3% in
3QFY10. Spreads, as per KIE estimates, were up to 3.3% versus 3.1% in 2QFY11.
While REC’s loan yields were stable qoq at 11.1%, its borrowings cost declined by 17 bps boosting
its spreads. Marginal borrowings cost was up to 7.8% in 3QFY11 from 7.4% in 2QFY11.
However, repayment of some of the high-priced borrowings and converting floating rate liabilities
into fixed rate liabilities has boosted spreads during the quarter. The company has un-hedged
forex debt of about US$270 mn on which the company booked marginal capital gains—included
in other income.
We believe that rise in bulk borrowings rates will likely be reflected in REC’s financials in the near
term. We are modeling 40 bps spread compression in our model in light of the following risks:
` In FY2011E, about Rs100 bn of REC’s loan assets are due for re-pricing as compared to Rs50-60
bn of borrowings—favorable re-pricing of assets as compared to liabilities supported REC’s
spreads, the benefit is unlikely to extend in FY2012E.
Banks/Financial Institutions Rural Electrification Corp.
` Higher share of private sector business (in the XII 5- year Plan) will likely increase
competition for these companies and put pressure on margins.
` Lending rates have been stable for last few quarters, the company has the option to raise
its PLR to support spreads—this provides some upside risk.
Asset quality performance stable, standard asset provisions pose downside risk
REC’s gross NPLs remained stable at 0.03%. Consequently, NPL cost was nil. The RBI
notification dated Jan 17, 2011, requires banks to make provisions of 25 bps on all standard
assets. REC has not made this provisions during the quarter. According to the company,
Government-owned NBFCs (like PFC and REC) do not need to follow most norms applicable
to other NBFCs, as such REC may not have to make this provision though we still don’t have
full clarity on this. REC will need to make provisions of Rs2 bn, i.e. 25% of 4QFY11E PBT in
case the company has to comply with the same, we are not factoring standard asset
provisions in our estimates.

Rural Electrification Corp. Banks/Financial Institutions
Rural Electrification Corporation - Quarterly data

(Rs mn)
Actual vs KS
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 YoY (%) 3Q11E (%)
Income statement
Interest income 14,494 15,330 16,532 17,959 18,771 19,877 20,860
Other income 480 410 345 360 225 555 560
Interest costs 8,735 9,413 10,279 10,685 11,012 12,076 12,380
Net interest income 6,239 6,327 6,598 7,634 7,984 8,356 9,040 37 8,225 10
Other operational income 115 490 185 377 292 390 360 95 275 31
Net total income 6,354 6,817 6,783 8,011 8,275 8,746 9,400 39 8,500 11
Provisioning expenses 1 — — — — 1 — — — —
Net income (post provisions) 6,353 6,817 6,783 8,011 8,275 8,744 9,400 39 8,500 11
Operating expenses 300 351 338 482 343 385 390 15 375 4
Staff expenses 252 282 265 373 261 260 390 47 265 47
Other operating expenses 45 65 70 98 75 118 — (100) 100 (100)
Depreciation expenses 4 4 4 11 7 8 — (100) 10 (100)
PBT before extraordinaties 6,053 6,466 6,445 7,529 7,933 8,360 9,010 40 8,125 11
Extraordinary expenses — — — — — — — — — —
PBT post extraordinaries 6,053 6,466 6,445 7,529 7,933 8,360 9,010 40 8,125 11
Tax 1,598 1,628 1,705 1,917 2,059 2,178 2,370 39 2,112 12
Provision for DTL (263) (107) — — — — — — — —
PAT 4,718 4,945 4,741 5,612 5,874 6,182 6,640 40 6,012 10
EPS (Rs) 5.5 5.8 5.8 5.8 6.0 6.3 6.7 16.8
Tax rate (%) 22 24 26 25 26 26 26 —
Balance sheet
Assets
Loans 547,510 586,650 636,310 664,520 697,910 735,433 764,550 20 769,935 (1)
Loan book — — — — — — — —
Accrued interest on loans — — — — — — — —
Investments 10,040 10,040 9,570 9,100 9,330 10,321 8,850 (8)
Fixed assets 810 860 890 900 890 889 880 (1)
Current assets (13,810) (310) (12,370) (4,310) (16,590) 18,123 (16,560) 34
Total assets 544,550 597,240 634,400 670,210 691,540 764,766 757,720 19
Liabilities
Borrowings 468,370 516,020 530,000 559,480 574,930 604,277 632,245 19
Deferred tax liability 9,560 (70) (70) (70) (70) (77) — (100)
Current liabilities and provisions — 70 21,530 — — 37,707 — (100)
Total liabilities 477,930 516,020 551,460 559,410 574,860 641,907 632,250 15
Shareholders funds 66,620 81,220 82,940 110,800 116,680 122,859 125,470 51
Key operating parameters (%)
Approvals (Rs bn) 151 164 106 33 228 103 108
YoY(%) 26 8 69 -53 51 (37) 2
Disbursements (Rs mn) 36 55 60 60 46 56 60
YoY(%) 35 16 14 14 28 1 (1)
Interest yield (KS - calc) 10.59 10.81 10.81 11.04 11.02 11.09 11.13
Interest cost (KS- calc) 7.61 7.65 7.86 7.85 7.77 7.96 7.79
Spreads (KS- calc) 2.97 3.16 2.95 3.20 3.26 3.14 3.34
NIMs (KS- calc) 4.36 4.46 4.32 4.69 4.69 4.66 4.82 4.37
Opex/ net income (post provisions) 4.72 5.14 4.98 6.01 4.14 4.40 4.15
Incremental yields 12.23 11.52 11.72 — — — —
Incremental borrowings 6.66 7.89 7.54 7.75 6.12 7.41 7.84
Incremental spreads 5.57 3.63 4.18 (7.75) 4.00 — —
Yield on loans 11.13 11.01 10.96 11.03 11.10 11.20 11.24
Borrowings cost 7.61 7.66 7.70 7.67 7.75 7.95 7.80
NIMs 4.42 4.25 4.15 4.45 4.59 4.40 4.56
Reported spreads 3.52 3.35 3.26 3.36 3.35 3.25 3.44
Gross NPLs (Rs mn) 320 210 200 200 200 200 200
Net NPLs (Rs mn) 20 20 20 20 20 20 20
Gross NPLs (%) 0.06 0.04 0.03 0.03 0.03 0.03 0.03
Net NPLs (%) 0.03 0.00 0.00 0.00 0.00 0.00 0.00
Debt/ equity (X) 7.03 6.35 6.39 5.05 4.93 4.92 5.04
RoE (reported) 29.37 26.76 23.10 23.17 20.66 20.65 21.39
Source: Company, Kotak Institutional Equities estimates

REC- Quarterly data

(Rs mn)
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 YoY (%)

Other loan book details
Loan book 535,300 578,940 627,910 659,790 692,170 728,990 757,440 21
Generation 205,270 194,950 223,980 239,580 285,490 306,620 314,620 40
T&D 292,290 340,590 344,750 367,230 353,370 372,610 391,590 14
Short term loan 37,740 43,400 59,180 52,980 53,310 49,760 51,230 (13)
State 452,790 485,740 528,890 555,740 595,050 626,710 633,100 20

Central 48,770 55,000 58,480 61,450 51,340 54,070 55,350 (5)
Private 33,740 38,200 40,540 42,600 45,780 48,220 68,990 70
Disbursements 36,180 55,040 60,240 59,860 46,440 55,470 60,080 (0)
Generation 19,930 20,290 18,170 25,100 32,390 27,590 21,850 20
T&D 12,250 22,950 22,970 31,760 12,050 19,880 25,230 10
Short term loan 4,000 11,800 19,100 3,000 2,000 8,000 13,000 (32)
Approvals 151,370 163,390 105,880 32,930 228,820 103,880 105,910 0
Generation 111,820 79,200 43,440 5,860 111,770 47,960 63,250 46
T&D 33,650 67,690 46,940 24,070 112,050 44,920 32,660 (30)
Short term loan 5,900 16,500 15,500 3,000 5,000 11,000 10,000 (35)
Borrowings o/s 468,370 516,020 545,910 559,480 574,930 604,280 632,349 16
Capital gains 145,280 112,250 116,500 99,490 108,390 102,650 105,410 (10)
Institutional bonds 191,580 269,380 288,130 309,090 319,300 338,800 369,970 28
Banks 92,910 99,610 96,860 105,640 102,700 107,640 110,350 14
Foreign currency 15,650 16,830 18,670 20,760 21,540 40,690 44,020 136
Commercial paper 22,950 17,950 25,750 24,500 23,000 14,500 2,599 (90)
Average cost (%) 7.61 7.66 7.71 7.75 7.76 7.96 7.8 -
Funds raised
Capital gain bonds
Amt 5,080 5,260 6,660 13,580 9,250 10,930 11,160
Rate (%) 6.3 6.3 6.3 6.3 6.0 6.0 6
Taxable bonds
Amt 9,270 82,090 19,390 24,540 12,500 20,000 38,040
Rate (%) 7.2 8.3 8.3 8.2 6.9 7.8 8.65
Banks, FIs etc
Amt 14,300 17,410 15,050 21,590 9,000 22,000 11,260
Rate (%) 6.4 6.6 6.6 6.4 5.1 8.1 8.52
Foreign currency
Amt 700 1,190 2,070 2,100 1,000 19,420 3,580
Rate (%) 7.6 6.7 6.6 7.0 6.1 7.0 3
Total
Amt 29,350 105,950 43,170 61,810 31,750 72,350 64,040
Rate (%) 6.7 7.9 6.6 7.2 6.1 7.4 7.84
Source: Company

REC, old and new estimates

March fiscal year-ends, 2011-2013E (Rs mn)
Old estimates New estimates % change

2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E
Net interest income 32,805 38,531 44,811 32,594 37,474 42,810 (1) (3) (4)
Loan growth (%) 25 23 23 21 21 21
NIM (%) 4.4 4.1 3.9 4.4 4.2 4.0 2.2 1.8
NPL provisions 3 3 4 3 3 4
Other operational income 2,927 3,362 3,870 2,927 3,362 3,870
Other income (forex etc) — — — — — —
Operating expenses 1,678 1,943 2,252 1,678 1,943 2,252 — — —
Employee 1,323 1,522 1,750 1,323 1,522 1,750 (0) — —
Others 355 422 502 355 422 502 (0)
PBT 34,051 39,946 46,425 33,840 38,889 44,424 (1) (3) (4)
Tax 8,683 10,286 12,071 8,629 10,014 11,550 (1) (3) (4)
PAT 25,368 29,660 34,355 25,211 28,875 32,874 (1) (3) (4)
Source: Kotak Institutional Equities estimates
Rural Electrification Corporation – Rolling PBR and PER

March 2008-February 2011 (X)
15 3.0
Rolling PER (X) (LHS) Rolling PBR (X) (RHS)
12 2.4
9 1.8
6 1.2
3 0.6
- -
Mar-08
Jul-08
Sep-08
Sep-10
May-08
Nov-08
Jan-09
Mar-09
Jul-09
Sep-09
Mar-10
Jul-10
May-09
Nov-09
Jan-10
May-10
Nov-10
Jan-11

Rural Electrification Corporation, Key ratios, March fiscal year-ends, 2008-2013E (%)
2008 2009 2010E 2011E 2012E 2013E

Growth in key parameters (%)
Interest income 28.5 32.6 37.9 26.8 24.1 17.2
Interest costs 17.5 39.8 35.0 25.2 30.2 19.0
Net interest income 48.5 22.4 42.5 29.4 15.0 14.2
PAT 30.3 47.9 57.3 26.0 14.5 13.8
Disbursements 19.3 34.0 24.9 4.0 21.3 21.5
Loans 22.5 30.7 29.3 20.5 20.9 21.3
Borrowings 13.2 31.1 24.5 20.8 21.4 21.8
Shareholders funds 33.8 15.3 79.0 14.8 14.7 14.6
Key ratios (%)
Interest yield 9.85 10.29 10.92 11.13 11.44 11.08
Interest cost 6.42 7.31 7.75 7.93 8.53 8.34
Spreads 3.43 2.97 3.16 3.20 2.92 2.73
NIMs 4.05 3.90 4.28 4.45 4.24 3.99
Tax rate 29 26 24 26 26 26
Debt/ equity+DTL (X) 5.5 6.3 5.1 5.3 5.6 6.0
Du Pont analysis
(% of average assets)
Net interest income 3.7 3.6 4.0 4.2 4.0 3.8
Other income 0.1 0.5 0.4 0.4 0.4 0.3
Credit costs 0.1 0.0 — — — —
Operating expneses 0.3 0.2 0.2 0.2 0.2 0.2
PBT post extraordinaries 3.3 3.9 4.2 4.3 4.1 3.9
1-tax rate 0.7 0.7 0.8 0.7 0.7 0.7
RoA 2.2 2.6 3.1 3.2 3.1 2.9
Average assets / average equity (X) 8.4 8.6 7.4 6.6 6.9 7.2
RoE 18.3 22.0 23.2 21.2 21.1 21.0

Rural Electrification Corporation, Key financials, March fiscal year-ends, 2008-2013E (Rs mn)
2008 2009 2010E 2011E 2012E 2013E

Income statement (Rs mn)
Interest income 35,174 46,650 64,309 81,568 101,259 118,725
Interest costs (20,728) (28,970) (39,112) (48,975) 63,785 75,915
Net interest income 14,447 17,680 25,197 32,594 37,474 42,810
Other income 202 2,660 2,768 2,927 3,362 3,870
Fees 177 1,740 1,189 1,427 1,712 2,055
Net total income 14,649 20,340 27,965 35,521 40,836 46,680
Provisioning expenses (400) (20) (2) (3) 3 4
Net income (post provisions) 14,249 20,320 27,962 35,518 40,833 46,676
Operating expneses (1,119) (1,120) (1,470) (1,678) 1,943 2,252
PBT before extraordinaties 13,130 19,200 26,492 33,840 38,889 44,424
Extraordinary income (6) — — — — —
PBT post extraordinaries 13,124 19,200 26,492 33,840 38,889 44,424
Tax (3,749) (5,070) (6,473) (8,629) 10,014 11,550
Provision for DTL (774) (1,410) (5) - - 1
PAT 8,602 12,720 20,014 25,211 28,875 32,873
PAT (add. back DTL) 9,376 14,130 20,019 25,211 28,875 32,874
EPS (adding back DTL) (Rs) 11 16 20 26 29 33
BVPS (adding back DTL) (Rs) 72 83 112 129 148 169
ABVPS (adding back DTL) (Rs) 69 83 112 129 148 169

Assets
Loans 393,165 513,810 664,520 800,931 968,687 1,174,805
Investments 11,474 10,060 9,100 9,100 9,100 9,100
Fixed assets 779 810 900 1,035 1,190 1,369
Current assets 23,725 34,890 37,876 42,419 47,791 54,151
Total assets 429,143 559,570 712,396 853,485 1,026,769 1,239,424
Liabilities
Borrowings 342,828 449,360 559,480 675,763 820,173 999,334
Deferred tax liability 8,170 9,570 (70) (70) (70) (69)
Current liabilities and provisions 24,468 38,740 42,186 50,623 60,747 72,897
Total liabilities 375,466 497,670 601,596 726,315 880,851 1,072,162
Share capital 8,586 8,586 9,874 9,874 9,874 9,874
Reserves and surplus 45,090 53,314 100,926 117,295 136,044 157,389
Shareholders funds 53,676 61,900 110,800 127,169 145,918 167,262

BUY
Bharat Petroleum (BPCL)
Energy FEBRUARY 09, 2011
RESULT
Coverage view: Neutral
Positive net income given cash bounty. BPCL reported 3QFY11 net income at `1.9 Price (Rs): 584
bn versus our estimate of -`9.3 bn; the positive variance reflects compensation of `18.1 Target price (Rs): 740
bn from the government in 3QFY11 versus nil assumed by us. We maintain our BUY
BSE-30: 17,593
rating with a revised target price of `740 (`860 previously). We see the recent
announcement of gas discovery in its Mozambique block as giving greater confidence
of the potential of BPCL’s overseas E&P portfolio. Key downside risk to earnings stems
from higher-than-expected net under-recoveries.

Bharat Petroleum
52-week range (Rs) (high,low) 840-488 EPS (Rs) 58.6 52.9 49.5 QUICK NUMBERS
Market Cap. (Rs bn) 211.5 EPS growth (%) 230.2 (9.7) (6.4)
Shareholding pattern (%) P/E (X) 10.0 11.1 11.8 • 3QFY11 refining
Promoters 54.9 Sales (Rs bn) 1,202.2 1,458.4 1,561.9 margin at
MFs 8.2 EBITDA (Rs bn) 32.6 38.9 37.6 US$4.6/bbl versus
Price performance (%) 1M 3M 12M EV/EBITDA (X) 10.1 8.7 8.8 US$2.8/bbl in
Absolute (5.2) (21.4) 4.4 ROE (%) 14.9 12.4 10.7 2QFY11
Rel. to BSE-30 6.1 (6.5) (4.8) Div. Yield (%) 2.4 2.8 2.8
• Change of US$1/bbl
Compensation from government boosts earnings
in refining margin
BPCL reported 3QFY11 EBITDA at `7.5 bn versus `24.9 bn in 2QFY11 and `6.4 bn in 3QFY10; our impacts FY2012E
estimate was at -`8.2 bn. The stronger-than-expected performance was due to compensation of EPS by 28%
`18.1 bn from the government in 3QFY11 versus nil assumed by us. We note that BPCL has borne
`23.3 bn as net under-recovery in 9MFY11. However, we would not extrapolate the subsidy- • 26% potential
sharing arrangement for 9MFY11 to estimate FY2011E earnings as the final subsidy-sharing upside from current
arrangement will not be known until 4QFY11 results. levels
Refining margins improve; sales volumes increased 5.7% yoy
BPCL’s 3QFY11 refining margin was US$4.6/bbl versus US$2.8/bbl in 2QFY11 and US$1.3/bbl in
3QFY10. The qoq improvement in refining margins reflects adventitious gains in 3QFY11 versus
adventitious/inventory loss in 2QFY11. 3QFY11 sales volumes (domestic) increased 5.7% yoy to
7.4 mn tons. The yoy growth in sales was led by strong growth in gasoline, diesel, LPG and ATF
sales which was partially offset by decline in sales of fuel oil and naphtha.
Fourth gas discovery in Mozambique gives greater confidence on potential of BPCL’s E&P portfolio
We see the announcement of fourth successful gas discovery (net gas pay > 110 feet) at Tubarao
exploration well in Area 1 in Mozambique as giving confidence about the prospectivity of the
block. The company has not yet disclosed the reserves but the value of the E&P portfolio could be
meaningful in the context of BPCL’s current market capitalization of US$4.7 bn. We believe
visibility on the development of BPCL’s E&P discoveries will likely boost sentiment for the stock
which has been subdued due to (1) the recent surge in crude oil prices, (2) lack of clarity on the
subsidy-sharing scheme and (3) delay in diesel deregulation.
Revised earnings; stock offering good upside to current target price
We retain our BUY rating on the stock noting 26% upside to our revised target price of `740
(`860 previously) based on 11X FY2012E EPS plus value of investments. We have revised our
FY2011-13E EPS to `53 (-2.5%), `50 (-19.6%) and `66 (-0.6%) to reflect (1) higher net under-
recoveries in FY2011-12E, (2) delay in diesel deregulation to FY2013E, (3) modestly higher refining
margins and (4) other minor changes.
Bharat Petroleum Energy
Key financial and operating details of 3QFY11 results

Exhibit 1 gives key highlights of BPCL’s 3QFY11 results and compares the same on yoy and
qoq basis. We do not see significant merit in comparison of quarterly results given high
volatility in the timing and quantum of compensation from the government of India and
contribution from upstream companies.
Interim results of BPCL, March fiscal year-ends (Rs mn)
(% chg.) yoy
3QFY11 3QFY11E 3QFY10 2QFY11 3QFY11E 3QFY10 2QFY11 9MFY11 9MFY10 (% chg.)
Net sales 366,859 348,384 321,829 354,348 5.3 14.0 3.5 1,063,532 847,896 25.4
Increase/(decrease) in stock (8,362) (7,155) 21,187 16,056 32,988
Raw material (147,450) (152,644) (141,267) (156,616) (3.4) 4.4 (5.9) (457,391) (355,904) 28.5
Trading purchase (178,431) (193,130) (149,852) (166,127) (7.6) 19.1 7.4 (524,750) (450,459) 16.5
Staff cost (5,696) (4,750) (3,982) (4,526) 19.9 43.0 25.8 (15,634) (13,757) 13.7
Other expenses (19,433) (6,082) (13,129) (23,401) 219.5 48.0 (17.0) (63,518) (47,600) 33.4
Total expenditure (359,371) (356,605) (315,385) (329,483) 0.8 13.9 9.1 (1,045,238) (834,732) 25.2
EBITDA 7,488 (8,221) 6,444 24,865 (191) 16 (70) 18,294 13,164 39.0
Other income 3,103 4,050 4,656 5,336 (23.4) (33.4) (41.8) 11,648 15,679 (25.7)
Interest (2,747) (2,900) (2,513) (2,780) (5.3) 9.3 (1.2) (7,851) (8,051) (2.5)
Depreciation (3,700) (4,050) (3,816) (4,019) (8.6) (3.0) (7.9) (11,726) (9,215) 27.2
Pretax profits 4,144 (11,121) 4,771 23,402 (137) (13) (82) 10,365 11,577 (10.5)
Extraordinary item (1,050) — — — (1,050) —
Tax (1,220) 2,217 (980) (1,980) (3,200) (3,233)
Deferred tax — (389) — — — —
Net income 1,874 (9,294) 3,791 21,422 (120) (51) (91) 6,115 8,344 (26.7)
Adjusted net income 2,924 (9,294) 3,791 21,422 (131) (23) (86) 7,165 8,344 (14.1)
EPS (Rs) 8.1 (25.7) 10.5 59.3 19.8 23.1
Tax rate (%) 29.4 16.4 20.5 8.5 30.9 27.9
Volume data
Crude throughput (mn tons) 5.0 5.3 5.6 5.6 (9.4) (10.2) 16.2 14.7 10.1
Domestic sales volume (mn tons) 7.4 7.0 7.0 6.6 5.7 12.1 21.5 20.4 5.2
Exports sales volume (mn tons) 0.6 0.9 0.9 (33.0) (26.7) 1.9 1.8 4.3
Refining margin (US$/bbl) 4.6 3.3 1.3 2.8 253.8 63.8 3.6 2.7 34.4
Inventory gain/(loss) 3,190 3,626 1,000 (780) 7,120 7,000
Gross subsidy gain/(loss) (35,120) (39,201) (29,914) (24,630) (106,250) (63,094)
Receipt from upstream companies 11,706 13,067 11,214 8,214 35,415 21,618
Receipt of oil bonds/cash from govt 18,099 — 15,107 29,479 47,577 15,107
Net under-recovery (5,316) (26,134) (3,594) 13,062 (23,258) (26,370)
Exchange gain/(loss) (181) 1,278 2,989 (575) 3,619
` Compensation (cash) from the government and discounts from the upstream oil
companies. BPCL received `18.1 bn as compensation from the government in 3QFY11.
BPCL received `11.7 bn of discounts from the upstream companies in 3QFY11 compared
to `8.2 bn in 2QFY11. Its net under-recovery was `5.3 bn compared to over-recovery of
`13.1 bn in 2QFY11 and under-recovery of `3.6 bn in 3QFY10.
` Refining margins improve sharply qoq. BPCL’s 3QFY11 refining margin was
US$4.6/bbl versus US$2.8/bbl in 2QFY11 and US$1.3/bbl in 3QFY10. The qoq
improvement in margins was higher than improvement in global refining margins
reflecting high adventitious gains. The company reported adventitious gains of `3.2 bn in
3QFY11 versus a loss of `0.8 bn in 2QFY11.
` Refining throughput lower; sales volumes increased moderately yoy. BPCL’s two
refineries processed 5 mn tons of crude in 3QFY11 compared to 5.6 mn tons in 2QFY11
and 3QFY10. The decline in crude throughput reflects shutdown of crude distillation unit
at its Mumbai refinery. BPCL’s sales volume was 7.4 mn tons for 3QFY11 (+5.7% yoy,
+12.1% qoq).

Energy Bharat Petroleum
` Employee cost increases sharply qoq. The company reported a 26% qoq increase in
employee cost at `5.7 bn versus `4.5 bn in 2QFY11. The management attributed higher
cost to the pay revision of its employees and expects it to continue at similar levels.
` Other income lower qoq and yoy. BPCL reported a sharp decline in other income to
`3.1 bn versus `5.3 bn in 2QFY11 and `4.7 bn in 3QFY10.
` Prior-period tax expense. BPCL reported one-off tax expense of `1.05 bn as provision
for previous years.
E&P portfolio could be meaningful

Exhibit 2 gives details of discoveries in BPCL’s E&P assets. The available data is quite sketchy
currently for us to ascribe value to BPCL’s E&P assets. However, the value of the E&P
portfolio could be meaningful in the context of BPCL’s current market capitalization of
US$4.7 bn. Preliminary estimates put gross resource potential of over 300 mn bbls oil in BM-
C-30 block in the Campos basin in Brazil (BPCL’s stake: 12.5%) and over 10 tcf of gas in
Area 1 in the Rovuma basin in Mozambique (BPCL’s stake: 10%).
BPCL has reported a slew of discoveries in the past two years

Details of BPCL's discoveries
BPCL's stake
Block (%) Discovery Discovery details Resource
BM-C-30, Campos Oil (Oct-2008) >195 ft of net oil pay Estimated gross resource
12.5
basin, Brazil Oil (Nov-2009) >90 ft of net oil pay potential >300 mn bbls (a)
Gas (Feb-2010) >555 ft of net gas pay

Area 1, Rovuma Gas (Oct-2010) >416 ft of net gas pay Estimated gross resource
10
basin, Mozambique Gas (Nov-2010) >550 ft of net gas pay potential >10 tcf (b)
Gas (Feb-2011) >110 ft of net gas pay
Nunukan PSC, Oil & gas (Oct-

12.5 >133 ft of net oil & gas pay
Indosnesia 2010)
Note:
(a) Data taken from Anadarko press release dated April 6, 2010.
(b) Data taken from an article in Upstream dated October 1, 2010.
Earnings revisions and key assumptions behind earnings model

We have revised our FY2011E, FY2012E and FY2013E EPS estimates to `52.9, `49.5 and
`66.5 from `54.3, `59.9 and `66.8. We discuss key assumptions behind our earnings model
below.
` Compensation from government and discount from upstream companies. We

assume the government will restrict the amount of net under-recoveries at around `70 bn
for FY2011E and `75 bn for FY2012E (higher than `56 bn in FY2010) for the
downstream oil companies. We model BPCL to receive compensation of `96.5 bn,
`105.7 bn and `60.8 bn from the government in FY2011E, FY2012E and FY2013E. We
assume BPCL to receive discount of `56.4 bn for FY2011E, `61.6 bn for FY2012E and
`37.8 bn for FY2013E from the upstream companies.
` Refining margins. We model refining margin for BPCL at US$3.9/bbl in FY2011E,

US$4.3/bbl in FY2012E and US$4.8/bbl in FY2013E compared to US$3/bbl in FY2010.
Exhibit 3 gives our key assumptions for BPCL’s refining division. We assume adventitious
gains at `7 bn in FY2011E in line with 9MFY11’s `7.1 bn and nil gains or losses for the
future years.

Bharat Petroleum Energy
BPCL refining assumptions, March fiscal year-ends, 2007-2014E
2007 2008 2009 2010 2011E 2012E 2013E 2014E

Rs/US$ 45.3 40.3 45.8 47.4 45.6 45.5 44.0 44.0
Weighted average duty on products (%) 6.7 6.6 3.3 2.6 5.9 5.9 5.9 5.9
Import tariff on crude (%) 5.1 5.2 0.9 0.4 5.2 5.2 5.2 5.2
Import 'tariff' on domestic crude (%) 2.6 2.6 0.5 0.2 2.6 2.6 2.6 2.6
Effective duty protection (%) 1.6 1.4 2.4 2.2 0.7 0.7 0.7 0.7
Refinery yield (US$/bbl) 71.5 89.6 97.5 73.2 93.8 97.3 97.8 97.8
Cost of crude (US$/bbl)
-Imported 64.0 78.8 90.0 69.8 85.8 88.8 88.8 88.8
-Domestic 68.7 84.1 94.9 70.8 86.8 89.8 89.8 89.8
Landed cost of crude (US$/bbl) 68.3 84.0 92.4 70.3 89.8 93.0 93.0 93.0
Net refining margin (US$/bbl) 3.2 5.6 5.2 2.9 3.9 4.3 4.8 4.8
Crude throughput (mn tons) 19.8 20.9 20.0 20.4 21.6 22.0 22.3 22.3
-Imported 13.5 13.9 13.1 14.1 15.3 15.7 16.0 16.0
-Domestic 6.3 7.0 6.8 6.3 6.3 6.3 6.3 6.3
Production of main products 17.9 19.0 18.1 18.6 19.7 20.1 20.3 20.3
Production of other products 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.6
Fuel and loss 1.3 1.4 1.3 1.2 1.3 1.3 1.3 1.3
Fuel and loss (%) 6.6 6.6 6.6 5.9 5.9 5.9 5.9 5.9
Sales volume (mn tons) 24.5 26.7 27.8 29.3 31.6 32.9 34.4 36.0
Marketing margins (Rs/ton) (1,140) (3,010) (5,944) 511 (1,542) (1,405) 1,647 1,646
` Crude throughput. We model crude throughput at 21.6 mn tons in FY2011E and 22

mn tons in FY2012E versus 20.4 mn tons in FY2010.
` Marketing margins. We model marketing margin on gasoline and diesel at –`2,525/ton

and –`2,154/ton in FY2011E and `1,350/ton and -`2,892/ton in FY2012E compared to –
`3,929/ton and `1,113/ton and in FY2010. We expect diesel prices to be deregulated by
April 1, 2012 with the easing of inflationary concerns. We do not assume any increase in
LPG and kerosene retail prices throughout our forecast period.
` Exchange rate. We assume `/US$ exchange rate for FY2011E, FY2012E and FY2013E at
`45.6/US$, `45.5/US$ and `44/US$.
Stock offers 26% potential upside to our fair valuation of BPCL

Fair valuation of BPCL (`)
Valuation based on P/E multiple

Profit after tax for FY2012E (Rs mn) 17,914
Less: income from investments valued separately (Rs mn) 1,319
Adjusted profit after tax for FY2012E (Rs mn) 16,595
Adjusted EPS for FY2012E 46
P/E multiple (X) 11
Fair value on P/E (without value of investments) (A) 505
Add: Value of investments (Rs mn) 83,896

KRL treasury shares 24,959
Numaligarh 13,606
Indraprastha Gas 7,812
Oil India Ltd 7,972
Petronet LNG 7,875
Other equity 21,672
Value of investments (Rs) (B) 232
Total equity value (A) + (B) 737
Current stock price 584

Potential upside (%) 26

Energy Bharat Petroleum
Earnings sensitivity of BPCL to refining margins and marketing margins, March fiscal year-ends (` mn)
Fiscal 2011E Fiscal 2012E Fiscal 2013E

Downside Base case Upside Downside Base case Upside Downside Base case Upside
Refining margins
Refining margins (US$/bbl) 2.9 3.9 4.9 3.3 4.3 5.3 3.8 4.8 5.8
Net profits (Rs mn) 13,120 18,080 23,040 12,859 17,914 22,970 19,084 24,030 28,975
EPS (Rs) 36.3 50.0 63.7 35.6 49.5 63.5 52.8 66.5 80.1
% upside/(downside) (27.4) 27.4 (28.2) 28.2 (20.6) 20.6
Marketing margins
Auto fuels marketing margin (Rs/ton) (2,383) (2,233) (2,083) (2,123) (1,973) (1,823) 1,594 1,744 1,894
Net profits (Rs mn) 17,900 18,080 18,260 17,338 17,914 18,491 21,919 24,030 26,140
EPS (Rs) 49.5 50.0 50.5 48.0 49.5 51.1 60.6 66.5 72.3
% upside/(downside) (1.0) 1.0 (3.2) 3.2 (8.8) 8.8
Profit model, balance sheet, cash model of BPCL, March fiscal year-ends, 2007-2014E (` mn)
2007 2008 2009 2010 2011E 2012E 2013E 2014E

Profit model (Rs mn)
Net sales 965,569 1,102,081 1,340,734 1,202,170 1,458,389 1,561,925 1,596,726 1,662,148
EBITDA 35,362 28,472 27,507 32,635 38,878 37,644 47,353 48,507
Other income 7,332 13,954 15,087 22,402 15,740 14,644 12,951 11,306
Interest (4,774) (6,725) (22,699) (10,110) (10,294) (10,967) (9,143) (7,045)
Depreciation (9,041) (10,982) (10,755) (12,423) (15,678) (14,496) (15,180) (15,754)
Pretax profits 28,879 24,719 9,141 32,505 28,645 26,825 35,982 37,014
Extraordinary items (68) — — (8,290) — — — —
Tax (9,286) (9,059) (5,103) (11,317) (7,785) (8,499) (11,379) (12,133)
Deferred taxation (268) (1,108) 2,421 3,033 (1,730) (412) (573) (162)
Adjusted net profits 18,100 15,806 6,324 20,830 19,130 17,914 24,030 24,719
Earnings per share (Rs) 50.1 43.7 17.5 57.6 52.9 49.5 66.5 68.4

Total equity 102,735 116,768 121,281 130,867 142,007 153,045 167,851 183,081
Deferred taxation liability 13,826 14,814 12,392 8,593 10,323 10,735 11,308 11,470
Total borrowings 108,292 150,224 211,714 221,952 201,950 171,450 129,950 91,450
Currrent liabilities 112,767 145,803 128,313 171,312 168,033 176,763 178,398 182,898
Total liabilities and equity 337,620 427,608 473,701 532,724 522,313 511,993 487,506 468,899
Cash 8,640 9,616 4,416 3,424 1,557 1,885 2,128 2,424
Current assets 127,698 187,457 148,469 232,416 241,595 252,223 253,646 259,143
Goodwill — — — — — — — —
Total fixed assets 118,334 127,354 140,033 161,871 172,147 175,872 174,718 173,555
Investments 82,949 103,182 180,784 135,013 107,013 82,013 57,013 33,777
Total assets 337,621 427,608 473,701 532,724 522,313 511,993 487,506 468,899
Free cash flow (Rs mn)

Operating cash flow, excl. working capital 29,920 22,988 19,717 22,972 18,605 16,960 26,036 28,958
Working capital 11,451 (25,161) 20,585 (48,542) (13,033) (1,897) 211 (997)
Capital expenditure (17,908) (20,665) (23,323) (33,698) (24,811) (17,002) (13,232) (14,219)
Investments (45,481) (21,684) (82,456) 35,270 28,000 25,000 25,000 23,237
Other income 4,337 6,434 6,655 13,694 16,315 14,644 12,951 11,306
Free cash flow (17,682) (38,088) (58,822) (10,304) 25,076 37,705 50,967 48,284
Ratios (%)
Debt/equity 105.4 128.7 174.6 169.6 142.2 112.0 77.4 50.0
Net debt/equity 97.0 120.4 170.9 167.0 141.1 110.8 76.2 48.6
RoAE 16.3 12.7 4.8 11.3 12.4 11.3 14.0 13.2
RoACE 10.9 7.3 7.2 7.9 7.3 7.3 9.4 9.9
Key assumptions (standalone until FY2005)

Crude throughput (mn tons) 19.8 20.9 20.0 20.4 21.6 22.0 22.3 22.3
Effective tariff protection (%) 1.6 1.4 2.4 2.2 0.7 0.7 0.7 0.7
Net refining margin (US$/bbl) 3.2 5.6 5.2 2.9 3.9 4.3 4.8 4.8
Sales volume (mn tons) 24.5 26.7 27.8 29.3 31.6 32.9 34.4 36.0
Marketing margin (Rs/ton) (1,140) (3,010) (5,944) 511 (1,542) (1,405) 1,647 1,646
Subsidy under-recoveries (Rs mn) (10,400) (33,354) 2,728 (12,375) (16,369) (17,497) (14,834) (14,899)

ADD
United Spirits (UNSP)
Consumer products FEBRUARY 10, 2011
RESULT
Coverage view: Cautious
In-line results; mixed outlook. UNSP delivered good volume growth of 14% in 3Q. It Price (Rs): 1,057
reported adjusted net sales of Rs15.7 bn (+17%, KIE Rs15.7 bn), EBITDA of Rs2.7 bn Target price (Rs): 1,550
(KIE Rs2.7 bn, +24%) and PAT of Rs1.13 bn (KIE Rs1.18 bn, +13%). While the stock
BSE-30: 17,593
has underperformed BSE-30 index by 25% over the last six months, there are few
incremental worries, (1) increase in net debt (Rs9 bn yoy to Rs62 bn), (2) it is in the
process of refinancing the debt in W&M books which entails a new repayment schedule
with a longer tenor, (3) it plans to invest in further backward integration (for the key
packing material glass as well) and (4) other subsidiaries (difference between standalone
+ W&M and consolidated) loss of Rs1.3 bn in 9MFY11.

United Spirits
52-week range (Rs) (high,low) 1,688-992 EPS (Rs) 33.1 47.0 62.3
Market Cap. (Rs bn) 132.7 EPS growth (%) 21.5 41.9 32.4
Promoters 29.2 Sales (Rs bn) 66.7 77.0 84.9
MFs 4.4 EBITDA (Rs bn) 12.9 15.6 18.0
Price performance (%) 1M 3M 12M EV/EBITDA (X) 14.2 11.7 9.9
Absolute (22.6) (29.3) (17.4) ROE (%) 10.5 13.3 15.4
Rel. to BSE-30 (13.4) (15.9) (24.7) Div. Yield (%) 0.2 0.3 0.4
Highlights of the quarter
` Net debt has increased by Rs2 bn qoq and Rs9 bn (Rs2.5 bn due to acquisition of Pioneer
Distilleries, Rs5 bn due to higher working capital requirements, Rs0.5 bn due to exchange
difference and the balance due to capex) yoy to Rs62 bn.
` It is in the process of refinancing the debt in W&M books which entails a new repayment
schedule with a longer tenor (a seven year loan with a 3 year moratorium). This is in light of
likely lower cash flows in W&M in near-term due to defocus on bulk sales. This could result in
interest costs going up by 50-100 bps for this loan and also a refinancing cost.
` Whyte & Mackay (W&M) delivered an EBITDA of GBP23 mn in 9MFY2011 (GBP53 mn in base).
The lower EBITDA is due to the defocus on bulk scotch sales. W&M is having a scotch inventory
of 104 mn liters valued at GBP 430 mn as of December 31, 2010 (value has remained flat over
2QFY11).
` Company expects cost of wet goods to decline ~5% in 1HCY2011E (over 3QFY11) as the full
impact of a good sugarcane crop will be seen in molasses prices in 1HCY2011E.
` Company plans to invest in further backward integration (for the key packing material glass as
well).
` Other subsidiaries (difference between standalone + W&M and consolidated) loss of Rs1.3 bn in
9MFY11.
Consumer products United Spirits
3QFY11: Good volume growth of 14%

UNSP reported adjusted net sales of Rs15.7 bn (+17%, KIE Rs15.7 bn), EBITDA of Rs2.74 bn
(KIE Rs2.71 bn, +24%) and PAT of Rs1.13 bn (KIE Rs1.18 bn, +13%).
The company had merged Balaji Distilleries (a tie-up unit in Tamilnadu) with itself during the
quarter and the full impact of 9MFY2011 financials is considered in 3QFY2011 (and hence
the reported numbers are not comparable). 3QFY2011 reported financials are sales Rs19.6
bn (+45%), EBITDA Rs2.8 (+25%) and PAT Rs1.1 bn (+7%).
Like-to-like sales growth for 3Q was 21% driven by 14% volume growth (to 30.3 mn cases),
3% mix improvement and 4% due to price increases.
The cost of wet goods per case declined 6% yoy to Rs143/case. EBITDA margin expanded
100 bps to 17.4% despite 29% increase in adspends during the quarter (launch expenses of
McDowell’s Platinum Whisky and McDowell’s VSOP brandy of Rs200 mn).
Recommend ADD
The underperformance of the UNSP stock (25% versus BSE-30 index over the past six
months) provides an entry point into the stock, in our view. We believe that UNSP operates
in an industry with large potential (though lower than Street perception) with opportunity
for secular consumer uptrading. Entry barriers are real and it is increasing. We will revisit our
estimates after a meeting with management. Key risk is lower-than-expected benefit of
input cost correction and potential impact of higher interest rates.
Interim results of United Spirits, March fiscal year-ends (Rs mn)
3QFY11 (% chg)
With Balaji W/o Balaji 3QFY11E 3QFY10 2QFY11 3QFY11E 3QFY10 2QFY11
With Balaji W/o Balaji With Balaji W/o Balaji With Balaji W/o Balaji
Net sales 19,601 15,780 15,694 13,468 13,542 25 1 46 17 45 17
Total expenditure (16,840) (13,040) (12,984) (11,256) (11,351)
Material cost (11,571) (9,080) (8,936) (7,625) (7,215)
Staff cost (1,074) (856) (737) (822)
Advertising and promotion (1,940) (1,550) (1,729) (1,199) (1,558)
Other expenditure (2,255) (2,410) (1,463) (1,695) (1,757)
EBITDA 2,761 2,740 2,709 2,212 2,191 2 1 25 24 26 25
OPM (%) 14.1 17.4 17.3 16.4 16.2
Other income 114 201 113 113
Interest (1,038) (960) (988) (747) (983)
Depreciation (126) (120) (117) (93) (104)
Pretax profits 1,711 1,660 1,806 1,484 1,217 (5) (8) 15 12 41 36
Tax (650) (531) (622) (488) (387)
Net income 1,061 1,129 1,183 996 830 (10) (5) 7 13 28 36
Extraordinary 238 151 - (28) (84)
Reported net income 1,300 1,280 1,183 968 746
Income tax rate (%) 38.0 32.0 34.5 32.9 31.8
Cost as a % of sales
Material cost 59.0 57.5 56.9 56.6 53.3
Staff cost 5.5 - 5.5 5.5 6.1
Advertising and promotion 9.9 9.8 11.0 8.9 11.5
Other expenditure 11.5 15.3 9.3 12.6 13.0

United Spirits Consumer products
Profit model, balance sheet, cash model of United Spirits, March fiscal year-ends, 2008-2013E
2008 2009 2010 2011E 2012E 2013E

Profit model
Net revenues 46,275 54,681 63,623 66,667 77,041 84,934
EBITDA 9,642 9,853 11,123 11,739 14,291 16,598
Other income 1,063 1,038 849 1,120 1,300 1,390
Interest (expense)/income (5,448) (7,176) (6,069) (5,470) (5,429) (5,305)
Depreciation (741) (926) (950) (1,177) (1,345) (1,514)
Pretax profits 4,516 2,790 4,952 6,213 8,817 11,169
Tax (2,661) (916) (1,932) (2,050) (2,909) (3,351)
Net income 1,855 1,875 3,021 4,162 5,907 7,819
Earnings per share (Rs) 21.5 18.2 27.3 33.1 47.0 62.3
Balance sheet
Total shareholder's equity 19,806 23,123 37,287 41,133 46,591 53,724
Total borrowings 66,041 78,036 58,506 55,389 52,272 49,156
Deferred tax liability 18 (918) (715) (715) (715) (715)
Minority interest 1,992 63 85 85 85 85
Total liabilities and equity 87,858 100,304 95,164 95,892 98,233 102,250
Net fixed assets 11,163 16,558 18,194 20,684 23,006 25,158
Goodwill 53,260 44,738 42,444 42,444 42,444 42,444
Investments 2,119 9,501 1,265 1,265 1,265 1,265
Cash 5,438 4,490 7,686 4,500 2,191 2,356
Net current assets 15,878 25,016 25,574 27,000 29,328 31,026
Total assets 87,858 100,304 95,164 95,892 98,233 102,250
Free cash flow
Operating cash flow, excl. working capital 2,596 1,864 4,175 5,339 7,252 9,332
Working capital changes (9,990) (3,540) (4,743) (1,425) (2,329) (1,698)
Capital expenditure (6,713) (6,321) (2,586) (3,667) (3,667) (3,667)
Free cash flow (14,108) (7,997) (3,154) 247 1,257 3,968
Ratios
Net debt/equity (%) 352 310 154 121 107 89
Net debt/EBITDA (X) 629 701 426 408 333 270
Return on equity (%) 11 8 10 10 13 15
Book value per share (Rs) 241 232 341 331 375 431
ROACE (%) 17 11 11.3 12.4 14.8 16.4

CAUTIOUS
Telecom
India FEBRUARY 09, 2011
UPDATE
BSE-30: 17,593
2G spectrum pricing report – from known unknown to better known known.

TRAI has submitted a report to the DoT on ‘market prices’ of 2G spectrum. We note
that these prices, if accepted by the DoT, would be used to determine (1) the one-time
levy on operators holding more than 6.2 MHz of 2G spectrum, and (2) spectrum fee on
renewal for all operators, adjusted for inflation. While noting that these are still just
recommendations and subject to DoT’s acceptance, we estimate the total NPV hit (one-
time + renewal) of Rs33/share for Bharti, Rs25/share for Idea, and Rs16/share for
RCOM. Remain Cautious.
Background to the spectrum pricing report
The Telecom Regulatory Authority of India (TRAI), in its May 11, 2010 recommendations to the
Department of Telecommunications on ‘Spectrum management and licensing framework’ had
recommended a one-time excess-spectrum levy on operators holding more than 6.2 MHz of 2G
GSM spectrum and charging a market-linked spectrum price on license renewals. The TRAI had
then suggested using the auction-determined 3G spectrum price as the base market price for the
computation of these charges, while also stating that it would initiate a separate study on
determining the ‘current market price of 2G spectrum’. The new report is the outcome of this
study. The TRAI had appointed four academicians from reputed engineering and management
institutes in India to undertake the spectrum pricing exercise.
Key highlights from the report
` The study suggests differential pricing for spectrum up to 6.2 MHz and spectrum beyond 6.2
MHz. Prices have been determined per MHz of spectrum for a period of 20 years. Exhibit 1
depicts the spectrum ‘market price’ suggested for the two buckets.
` It suggests using the determined market price of spectrum for (1) one-time spectrum levy on
spectrum beyond 6.2 MHz using April 1, 2010 as the base date; this charge would be
applicable on a prorated basis from April 1, 2010 till the end-date of license validity in various
circles for various operators, and (2) spectrum charge on license renewals – note that the report
clearly marks the determined prices as 2010 prices and suggests an inflation adjustment at the
time of renewal. Exhibit 2 depicts the current GSM license validity for the listed players.
` Determined market prices for up to 6.2Mhz spectrum are 53% of the auction-determined 3G
spectrum price on a per MHz basis; for beyond 6.2 MHz, it is 136% of the 3G price. This clearly
reflects the experts’ view that the marginal spectral efficiency or commercial value of 2G
spectrum beyond 6.2 MHz is higher than the value of 3G spectrum. This is logical given the
coverage advantage that 3G spectrum provides over 3G; higher quantum of 2G spectrum
compensates for the 2G capacity disadvantage.
` Interestingly, the TRAI’s letter to the DoT mentions 6.2 MHz as the contracted spectrum. From
the letter ‘the report determines the value of 1800 MHz spectrum in two tranches—price of
contracted spectrum, i.e. up to 6.2 MHz and price of incremental spectrum, i.e. beyond 6.2
MHz’. We note that the recent Justice Shivraj Patil Committee report on issues around grant of
2G licenses/spectrum mentions 4.4 MHz as the contracted spectrum and beyond that as excess.
` We note that while the report talks about the ‘value of spectrum in the 1800 MHz band’,
presence of 900 MHz spectrum in the system has been baked into the computations.
Telecom India
Differences from TRAI’s May 2010 recommendations
` Use of independently determined fair value of 2G spectrum instead of using the auction-
determined 3G spectrum prices as a proxy for the same.
` Determination of a blended spectrum price per MHz – the May 2010 recommendations
had suggested using the 3G price as the base and making adjustments for (1) spectrum in
the 900 MHz band, and (2) spectrum beyond 8 MHz.
` Remaining validity of the license to be used for computation of pro-rated levy for excess
spectrum held. The earlier recommendations had suggested using a minimum period of 7
years in case the remaining license validity was less than 7 years.
Impact – one-time short-term, and recurring long-term

Even as the one-time levy for excess spectrum for operators holding >6.2 MHz spectrum in
various circles works out to be a substantial number (3% of CMP for Bharti, 5% of CMP for
Idea, meaty sums for BSNL, MTNL, Vodafone, and Aircel as well), we would advise focusing
on the long-term recurring impact of these recommendations. Essentially, the operators
would now need to pay spectrum charges on every license renewal. Current 2G licenses for
various operators come up for renewal starting CY2014 (see Exhibit 2 for circle-wise license
validity of listed players). We note that while the current licenses have an extended 20 year
validity, licenses would be renewed for a period of 10 years in the future – meaning a
recurring spectrum payment for operators every 10 years.
Exhibits 3 and 4 depict our computation of the one-time levy for excess spectrum on Bharti
and Idea, respectively. For Bharti, we estimate a liability of Rs36.7 bn or Rs10/share, while
for Idea, the same works out to Rs13.3 bn or Rs4/share. Note that the excess spectrum levy
on RCOM is a negligible Rs0.8 bn.
Exhibits 5, 5, and 7 depict our computation of the NPV impact of spectrum renewal charges
on Bharti, Idea, and RCOM respectively. We estimate a per share impact of Rs24 for Bharti,
Rs21 for Idea, and Rs16 for RCOM. We note that (1) we have assumed the differential
pricing structure as suggested for spectrum up to 6.2 MHz and spectrum beyond, (2) we
have assumed that TRAI’s recommendations on maximum spectrum to be allocated are
accepted – TRAI had recommended a maximum spectrum allocation of 10 MHz in
Mumbai/Delhi and 8 MHz in other circles; we have assumed that any excess spectrum
beyond these levels is returned, (3) we have assumed that the operators do not return any
2G spectrum at the time of renewal; we note that the operators may choose to do so if the
cost-benefit analysis is unfavorable and (4) we have made the inflation adjustment as per
recommendations.
The two (one-time levy and renewal charges) have an NPV impact of (1) Rs33/share
for Bharti (10% of CMP), (2) Rs16/share for RCOM (17% of CMP), and (3) Rs25/share
for Idea (37% of CMP).
Regulatory uncertainty of a few areas still remains

We note that the new report on spectrum pricing is just a recommendation from TRAI to
DoT and has to be ratified by the DoT to become a regulation.
In addition, there are a few more areas where regulatory uncertainty remains, the key ones
being – (1) M&A regulations, (2) spectrum re-farming, (3) changes to revenue share
mechanism on annual spectrum and license charges, and (4) license fee applicability for
towercos and VAS players. We also note that the recent 2G spectrum allocation
investigation involving new players is a separate issue. This may lead to cancellation of a few
licenses and more spectrum could become available. The recent report suggests a 2G
spectrum auction in circles where enough spectrum becomes available.

India Telecom
Exhibit 1: Spectrum market price suggested by TRAI
Entry fee Estimated price of 1800 MHz spectrum 3G clearing

in 2001 in 2010 (per MHz for 20 years)(Rs mn) prices
Circle (Rs mn) upto 6.2 MHz beyond 6.2 MHz (Rs mn)
Andhra Pradesh 166 1,538 4,320 13,731
Assam 8 104 313 415
Bihar 16 510 1,537 2,035
Chennai and Tamil Nadu 376 1,874 4,261 14,649
Delhi 275 1,498 2,497 33,169
Gujarat 176 1,499 3,554 10,761
Haryana 35 145 1,079 2,226
Himachal Pradesh 2 93 281 372
J&K 3 76 229 303
Karnataka 334 1,362 3,459 15,799
Kerala 65 740 2,322 3,125
Kolkata 126 495 476 5,443
Madhya Pradesh 28 877 2,545 2,584
Maharashtra 305 1,171 3,745 12,578
Mumbai 329 1,011 1,573 32,471
North East 3 106 320 423
Orissa 8 243 733 970
Punjab 245 729 1,806 3,220
Rajasthan 52 1,060 2,788 3,210
UP (East) 73 1,518 3,188 3,646
UP (West) 49 601 2,526 5,140
West Bengal 2 448 2,170 1,236
Total 2,675 17,698 45,719 167,506
Source: TRAI, Kotak Institutional Equities
Exhibit 2: Licence validity for listed telecom players
Bharti Idea RCOM

Andhra Pradesh Dec-15 Dec-15 Jul-21
Assam Jul-24 Jan-28 Dec-15
Bihar Feb-24 Dec-26 Dec-15
Chennai and Tamil Nadu Sep-21 Jan-28 Sep-21
Delhi Nov-14 Sep-21 Jul-21
Gujarat Sep-21 Dec-15 Sep-17
Haryana Sep-21 Dec-15 Jul-21
Himachal Pradesh Dec-15 Sep-21 Dec-15
J&K Feb-24 Jan-28 Sep-24
Karnataka Feb-16 Apr-16 Jul-21
Kerala Sep-21 Dec-15 Jul-21
Kolkata Nov-14 Jan-28 Jul-21
Madhya Pradesh Sep-21 Dec-15 Dec-15
Maharashtra Sep-21 Dec-15 Jul-21
Mumbai Sep-21 Nov-26 Jul-21
North East Dec-15 Jan-28 Dec-15
Orissa Feb-24 Jan-28 Dec-15
Punjab Dec-15 Apr-16 Jul-21
Rajasthan Apr-16 Sep-21 Jul-21
UP (East) Feb-24 Sep-21 Jul-21
UP (West) Sep-21 Dec-15 Jul-21
West Bengal Feb-24 Jan-28 Dec-15
Source: DoT, Kotak Institutional Equities

Telecom India
Exhibit 3: One-time excess spectrum charge on Bharti
Period Spectrum Excess spectrum Price per MHz for Payout for
License remaining excess excess spectrum
valid till (years) (MHz) (MHz) spectrum(Rs mn) (Rs mn)
Andhra Pradesh Dec-15 5.7 10.0 3.8 4,320 4,668
Assam Jul-24 14.3 6.2 — 313 —
Bihar Feb-24 13.9 9.2 3.0 1,537 3,195
Chennai and Tamil Nadu Sep-21 11.5 9.2 3.0 4,261 7,341
Delhi Nov-14 4.7 10.0 3.8 2,497 2,207
Gujarat Sep-21 11.5 6.2 — 3,554 —
Haryana Sep-21 11.5 6.2 — 1,079 —
Himachal Pradesh Dec-15 5.7 6.2 — 281 —
J&K Feb-24 13.9 6.2 — 229 —
Karnataka Feb-16 5.9 10.0 3.8 3,459 3,855
Kerala Sep-21 11.5 6.2 — 2,322 —
Kolkata Nov-14 4.7 8.0 1.8 476 199
Madhya Pradesh Sep-21 11.5 8.0 1.8 2,545 2,631
Maharashtra Sep-21 11.5 8.2 2.0 3,745 4,302
Mumbai Sep-21 11.5 9.2 3.0 1,573 2,711
North East Dec-15 5.7 6.2 — 320 —
Orissa Feb-24 13.9 8.0 1.8 733 914
Punjab Dec-15 5.7 7.8 1.6 1,806 822
Rajasthan Apr-16 6.0 8.2 2.0 2,788 1,687
UP (East) Feb-24 13.9 7.2 1.0 3,188 2,209
UP (West) Sep-21 11.5 6.2 — 2,526 —
West Bengal Feb-24 13.9 6.2 — 2,170 —
Total 45,719 36,740
Note:
(a) Period remaining is computed from 1 April, 2010.
Source: DoT, TRAI, Kotak Institutional Equities

India Telecom
Exhibit 4: One-time excess spectrum charge on Idea
Spectrum Excess spectrum Price per MHz for Payout for

License valid Period remaining excess excess spectrum
till (years) (MHz) (MHz) spectrum(Rs mn) (Rs mn)
Andhra Pradesh Dec-15 5.7 8.0 1.8 4,320 2,219
Assam Jan-28 17.8 4.4 — 313 —
Bihar Dec-26 16.7 4.4 — 1,537 —
Chennai and Tamil Nadu Jan-28 17.8 4.4 — 4,261 —
Delhi Sep-21 11.5 8.0 1.8 2,497 2,586
Gujarat Dec-15 5.7 6.2 — 3,554 —
Haryana Dec-15 5.7 6.2 — 1,079 —
Himachal Pradesh Sep-21 11.5 4.4 — 281 —
J&K Jan-28 17.8 4.4 — 229 —
Karnataka Apr-16 6.0 6.2 — 3,459 —
Kerala Dec-15 5.7 8.0 1.8 2,322 1,188
Kolkata Jan-28 17.8 4.4 — 476 —
Madhya Pradesh Dec-15 5.7 8.0 1.8 2,545 1,303
Maharashtra Dec-15 5.7 9.8 3.6 3,745 3,834
Mumbai Nov-26 16.7 4.4 — 1,573 —
North East Jan-28 17.8 4.4 — 320 —
Orissa Jan-28 17.8 4.4 — 733 —
Punjab Apr-16 6.0 7.8 1.6 1,806 869
Rajasthan Sep-21 11.5 6.2 — 2,788 —
UP (East) Sep-21 11.5 6.2 — 3,188 —
UP (West) Dec-15 5.7 8.0 1.8 2,526 1,293
West Bengal Jan-28 17.8 4.4 — 2,170 —
Total 13,291
Note:
(a) Period remaining is computed from 1 April, 2010.
Source: DoT, TRAI , Kotak Institutional Equities estimates

Telecom India
Exhibit 5: NPV of recurring spectrum renewal charges for Bharti
Spectrum held Spectrum post Licence validity Spectrum charge

(MHz) renewal (MHz) till (Rs mn)
Andhra Pradesh 10.0 8.0 Dec-15 10,124
Assam 6.2 6.2 Jul-24 537
Bihar 9.2 8.0 Feb-24 4,748
Chennai and Tamil Nadu 9.2 8.0 Sep-21 14,274
Delhi 10.0 10.0 Nov-14 10,560
Gujarat 6.2 6.2 Sep-21 6,877
Haryana 6.2 6.2 Sep-21 665
Himachal Pradesh 6.2 6.2 Dec-15 339
J&K 6.2 6.2 Feb-24 377
Karnataka 10.0 8.0 Feb-16 8,580
Kerala 6.2 6.2 Sep-21 3,395
Kolkata 8.0 8.0 Nov-14 2,207
Madhya Pradesh 8.0 8.0 Sep-21 7,415
Maharashtra 8.2 8.0 Sep-21 10,364
Mumbai 9.2 9.2 Sep-21 8,133
North East 6.2 6.2 Dec-15 385
Orissa 8.0 8.0 Feb-24 2,263
Punjab 7.8 7.8 Dec-15 4,332
Rajasthan 8.2 8.0 Apr-16 7,052
UP (East) 7.2 7.2 Feb-24 10,084
UP (West) 6.2 6.2 Sep-21 2,758
West Bengal 6.2 6.2 Feb-24 2,223
Total 117,694
Total impact (NPV) 90,441

Per share impact 23.8
Current market price 332
As % of current market price 7.2
Note:
(a) Spectrum renewal charge is in nominal terms in the year of renewal.
(b) Spectrum renewal charges adjusted for inflation of 4%.
(c) On spectrum renewal, we have assumed that maximum of 10MHz of spectrum renewed in
Mumbai/Delhi and 8MHz in other circles
(d) NPV of total impact is computed by discounting spectrum renewal charge in each of the circles.
Source: DoT, TRAI, Kotak Institutional Equities estimates

India Telecom
Exhibit 6: NPV of recurring spectrum renewal charges for Idea

Andhra Pradesh 8.0 8.0 Dec-15 10,124
Assam 4.4 4.4 Jan-28 429
Bihar 4.4 4.4 Dec-26 2,022
Chennai and Tamil Nadu 4.4 4.4 Jan-28 7,721
Delhi 8.0 8.0 Sep-21 10,200
Gujarat 6.2 6.2 Dec-15 5,435
Haryana 6.2 6.2 Dec-15 526
Himachal Pradesh 4.4 4.4 Sep-21 304
J&K 4.4 4.4 Jan-28 313
Karnataka 6.2 6.2 Apr-16 5,135
Kerala 8.0 8.0 Dec-15 5,127
Kolkata 4.4 4.4 Jan-28 2,039
Madhya Pradesh 8.0 8.0 Dec-15 5,860
Maharashtra 9.8 8.0 Dec-15 8,191
Mumbai 4.4 4.4 Nov-26 4,006
North East 4.4 4.4 Jan-28 437
Orissa 4.4 4.4 Jan-28 1,003
Punjab 7.8 7.8 Apr-16 4,505
Rajasthan 6.2 6.2 Sep-21 4,865
UP (East) 6.2 6.2 Sep-21 6,964
UP (West) 8.0 8.0 Dec-15 4,839
West Bengal 4.4 4.4 Jan-28 1,846
Total 91,892

Note:

Telecom India
Exhibit 7: NPV of recurring spectrum renewal charges for RCOM

Andhra Pradesh 4.4 4.4 Jul-21 3,958
Assam 6.2 6.2 Dec-15 604
Bihar 8.0 8.0 Dec-15 5,341
Chennai and Tamil Nadu 4.4 4.4 Sep-21 7,721
Delhi 4.4 4.4 Jul-21 4,878
Gujarat 4.4 4.4 Sep-17 3,857
Haryana 4.4 4.4 Jul-21 373
Himachal Pradesh 6.2 6.2 Dec-15 429
J&K 4.4 4.4 Sep-24 313
Karnataka 4.4 4.4 Jul-21 3,645
Kerala 4.4 4.4 Jul-21 1,904
Kolkata 6.2 6.2 Jul-21 2,873
Madhya Pradesh 6.2 6.2 Dec-15 3,181
Maharashtra 4.4 4.4 Jul-21 3,015
Mumbai 4.4 4.4 Jul-21 4,006
North East 6.2 6.2 Dec-15 616
Orissa 6.2 6.2 Dec-15 1,413
Punjab 4.4 4.4 Jul-21 1,950
Rajasthan 4.4 4.4 Jul-21 3,453
UP (East) 4.4 4.4 Jul-21 4,942
UP (West) 4.4 4.4 Jul-21 1,547
West Bengal 6.2 6.2 Dec-15 2,601
Total 62,618

Note:
Exhibit 8: Total impact on Bharti, Idea and RCOM (Rs mn)
Bharti Idea RCOM

One time excess spectrum charge 36,740 13,291 787
NPV of spectrum renewal charge 90,441 68,478 33,920
Total 127,181 81,769 34,707
Per share impact 33.5 24.8 16.3
Current market price 332 66 95

As % of current market price 10.1 37.4 17.2

India Telecom
Exhibit 9: Total one-time excess spectrum payout for various operators (Rs mn)
Operator Payout for excess spectrum

BSNL 65,280
MTNL 9,487
Bharti 36,740
Vodafone 17,511
Idea 13,291
RCOM 787
Aircel 3,568
Loop 1,391
Total 148,054
Exhibit 10: 2G + 3G spectrum details
Bharti Reliance BSNL/MTNL Vodafone/Essar Idea Aircel TTSL

Metro and Circle A 2G 3G Total 2G 3G Total 2G 3G Total 2G 3G Total 2G 3G Total 2G 3G Total 2G 3G Total
Calcutta 8.0 — 8.0 6.2 5.0 11.2 10.0 5.0 15.0 9.8 5.0 14.8 4.4 — 4.4 4.4 5.0 9.4 4.4 — 4.4
Chennai and TN 9.2 5.0 14.2 4.4 — 4.4 10.0 5.0 15.0 8.0 5.0 13.0 4.4 — 4.4 9.8 5.0 14.8 4.4 — 4.4
Delhi 10.0 5.0 15.0 4.4 5.0 9.4 12.4 5.0 17.4 10.0 5.0 15.0 8.0 — 8.0 4.4 — 4.4 4.4 — 4.4
Mumbai 9.2 5.0 14.2 4.4 5.0 9.4 12.4 5.0 17.4 10.2 5.0 15.2 4.4 — 4.4 4.4 — 4.4 4.4 — 4.4
Andhra Pradesh 10.0 5.0 15.0 4.4 — 4.4 10.0 5.0 15.0 6.2 — 6.2 8.0 5.0 13.0 4.4 5.0 9.4 4.4 — 4.4
Gujarat 6.2 — 6.2 4.4 — 4.4 7.4 5.0 12.4 9.8 5.0 14.8 6.2 5.0 11.2 4.4 — 4.4 4.4 5.0 9.4
Karnataka 10.0 5.0 15.0 4.4 — 4.4 10.0 5.0 15.0 8.0 — 8.0 6.2 — 6.2 4.4 5.0 9.4 4.4 5.0 9.4
Maharashtra 8.2 — 8.2 4.4 — 4.4 10.0 5.0 15.0 6.2 5.0 11.2 9.8 5.0 14.8 4.4 — 4.4 4.4 5.0 9.4
Circle B
Haryana 6.2 — 6.2 4.4 — 4.4 10.0 5.0 15.0 6.2 5.0 11.2 6.2 5.0 11.2 4.4 — 4.4 4.4 5.0 9.4
Kerala 6.2 — 6.2 4.4 — 4.4 10.0 5.0 15.0 6.2 — 6.2 8.0 5.0 13.0 4.4 5.0 9.4 4.4 5.0 9.4
Madhya Pradesh 8.0 — 8.0 6.2 5.0 11.2 10.0 5.0 15.0 4.4 — 4.4 8.0 5.0 13.0 4.4 — 4.4 4.4 5.0 9.4
Punjab 7.8 — 7.8 4.4 5.0 9.4 6.2 5.0 11.2 6.2 — 6.2 7.8 5.0 12.8 4.4 5.0 9.4 4.4 5.0 9.4
Rajasthan 8.2 5.0 13.2 4.4 5.0 9.4 8.0 5.0 13.0 6.2 — 6.2 6.2 — 6.2 4.4 — 4.4 4.4 5.0 9.4
Uttar Pradesh (E) 7.2 — 7.2 4.4 — 4.4 10.0 5.0 15.0 8.2 5.0 13.2 6.2 5.0 11.2 4.4 5.0 9.4 4.4 — 4.4
Uttar Pradesh (W) 6.2 5.0 11.2 4.4 — 4.4 10.0 5.0 15.0 6.2 — 6.2 8.0 5.0 13.0 4.4 — 4.4 4.4 5.0 9.4
West Bengal 6.2 5.0 11.2 6.2 5.0 11.2 8.0 5.0 13.0 6.2 5.0 11.2 4.4 — 4.4 4.4 5.0 9.4 4.4 — 4.4
Circle C
Assam 6.2 5.0 11.2 6.2 5.0 11.2 10.0 5.0 15.0 4.4 — 4.4 4.4 — 4.4 6.2 5.0 11.2 4.4 — 4.4
Bihar 9.2 5.0 14.2 8.0 5.0 13.0 10.0 5.0 15.0 4.4 — 4.4 4.4 — 4.4 4.4 5.0 9.4 4.4 — 4.4
Himachal Pradesh 6.2 5.0 11.2 6.2 5.0 11.2 10.0 5.0 15.0 4.4 — 4.4 4.4 5.0 9.4 4.4 — 4.4 4.4 — 4.4
North East 6.2 5.0 11.2 6.2 5.0 11.2 10.0 5.0 15.0 4.4 — 4.4 4.4 — 4.4 4.4 5.0 9.4 4.4 — 4.4
Orissa 8.0 — 8.0 6.2 5.0 11.2 10.0 5.0 15.0 4.4 — 4.4 4.4 — 4.4 4.4 5.0 9.4 4.4 — 4.4
J&K 6.2 5.0 11.2 4.4 5.0 9.4 8.0 5.0 13.0 4.4 — 4.4 4.4 5.0 9.4 4.4 5.0 9.4 4.4 — 4.4
Source: DoT

December 2010: Results calendar
49
Mon Tue Wed Thu Fri Sat

7-Feb 8-Feb 9-Feb 10-Feb 11-Feb 12-Feb
Fortis Healthcare Adani Power BPCL Gujarat State Petronet Aban Offshore Adani Enterprises
Lanco Infratech Power Grid GMR Infra CESC Aditya Birla Nuvo Hindalco Industries
Mundra Port & SEZ Rashtriya Chemicals and Fertilizers IL&FS Transportation Networks IOCL Apollo Tyres IVRCL Infra
Punj Lloyd Mahindra & Mahindra Educomp Solutions
Shipping Corporation of India Patni Computer GE Shipping
Rural Electrification Corp HDIL
HPCL
MTNL
Pantaloon Retail
Piramal Healthcare
Tata Motors
Pipavav Shipard
14-Feb 15-Feb 16-Feb
Tata Power Hexaware Technologies
GSK Pharma
Religare Enterprises
Source: BSE, Kotak Institutional Equities
India Daily Summary - February 10, 2011

KOTAK INSTITUTIONAL EQUITIES RESEARCH
Kotak Institutional Equities: Valuation summary of key Indian companies

O/S Target
9-Feb-11 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) 2010 2011E 2012E 2010 2011E 2012E 2010 2011E 2012E 2010 2011E 2012E 2010 2011E 2012E 2010 2011E 2012E 2010 2011E 2012E (Rs) (%) (US$ mn)
Automobiles
Ashok Leyland 49 SELL 65,184 1,431 1,330 2.8 4.3 4.7 84.5 53.5 8.1 17.4 11.3 10.5 10.7 7.8 7.4 1.6 1.4 1.3 3.1 2.0 2.0 10.9 13.6 13.4 56 14.3 8.0
Bajaj Auto 1,204 ADD 348,481 7,652 289 58.8 90.3 100.0 160.2 53.4 10.8 20.5 13.3 12.0 13.3 9.5 8.5 11.9 7.5 5.3 1.7 2.1 2.1 70.9 68.5 50.6 1,500 24.6 22.6
Bharat Forge 311 ADD 74,453 1,635 239 0.1 12.1 19.6 (98.7) 11,693 61.5 3,026.4 25.7 15.9 23.4 11.1 7.5 4.8 3.5 2.9 — — — 5.2 8.0 16.2 405 30.1 3.8
Hero Honda 1,441 REDUCE 287,678 6,317 200 111.8 99.0 109.8 73.9 (11.4) 10.9 12.9 14.6 13.1 7.7 8.9 7.5 8.0 6.0 4.6 2.1 2.1 2.1 59.0 48.8 39.5 1,485 3.1 33.7
Mahindra & Mahindra 655 BUY 402,987 8,849 615 33.9 42.4 47.7 125.8 25.2 12.5 19.3 15.4 13.7 13.1 10.7 9.5 5.0 3.7 3.1 1.4 1.4 1.5 30.0 27.6 24.5 800 22.1 37.1
Maruti Suzuki 1,154 BUY 333,402 7,321 289 86.4 78.4 91.8 105.0 (9.3) 17.0 13.3 14.7 12.6 6.9 7.4 6.1 2.8 2.4 2.0 0.5 0.5 0.6 23.3 17.4 17.3 1,460 26.5 9.9
Tata Motors 1,074 ADD 713,419 15,666 665 18.5 133.2 143.8 (141.1) 621.6 7.9 58.1 8.1 7.5 12.0 5.9 5.4 8.5 3.4 2.4 1.2 0.5 0.5 15.3 60.7 37.4 1,235 15.0 115.4
Automobiles Cautious 2,225,605 48,871 351.4 93.7 11.1 22.5 11.6 10.4 11.0 7.5 6.7 5.5 3.6 2.8 1.3 1.2 1.2 24.4 30.8 26.5
Banks/Financial Institutions
Andhra Bank 136 BUY 65,960 1,448 485 21.6 25.9 28.0 60.1 20.2 8.2 6.3 5.2 4.9 — — — 1.5 1.2 1.0 3.7 4.4 4.8 26.0 25.8 23.4 190 39.7 4.8
Axis Bank 1,161 BUY 470,265 10,326 405 62.1 81.7 99.9 22.7 31.6 22.3 18.7 14.2 11.6 — — — 2.9 2.5 2.2 1.0 1.4 1.7 19.2 19.1 20.1 1,600 37.9 57.2
Bank of Baroda 816 BUY 298,124 6,546 366 83.7 108.0 120.5 37.3 29.1 11.6 9.7 7.6 6.8 — — — 2.2 1.8 1.5 1.8 2.4 2.6 24.4 25.8 23.7 1,200 47.1 9.1
Bank of India 398 ADD 209,261 4,595 526 33.1 51.4 64.4 (42.1) 55.1 25.5 12.0 7.7 6.2 — — — 1.6 1.4 1.2 1.8 2.7 3.4 14.2 19.5 21.0 560 40.7 15.2
Canara Bank 531 ADD 217,874 4,784 410 73.7 98.7 102.0 45.8 34.0 3.3 7.2 5.4 5.2 — — — 1.7 1.4 1.1 1.9 1.9 2.3 22.5 24.6 20.9 700 31.7 20.7
Corporation Bank 536 ADD 76,911 1,689 143 82.0 89.3 97.9 31.8 8.9 9.7 6.5 6.0 5.5 — — — 1.3 1.1 1.0 3.1 3.3 3.7 22.0 20.4 19.3 700 30.5 1.2
Federal Bank 338 ADD 57,852 1,270 171 27.2 34.3 44.5 (7.1) 26.3 29.7 12.4 9.9 7.6 — — — 1.3 1.2 1.0 1.5 1.9 2.4 10.3 11.9 14.0 450 33.0 5.8
HDFC 608 REDUCE 873,245 19,175 1,436 19.7 24.3 27.4 22.7 23.4 12.7 30.9 25.0 22.2 — — — 5.7 5.1 4.5 1.2 1.4 1.6 20.0 21.5 21.3 690 13.4 43.6
HDFC Bank 2,022 ADD 925,694 20,327 458 64.4 86.2 111.8 22.1 33.8 29.8 31.4 23.5 18.1 — — — 4.3 3.8 3.2 0.6 0.8 1.0 16.1 17.1 19.2 2,400 18.7 46.1
ICICI Bank 957 ADD 1,101,459 24,187 1,151 36.1 45.8 58.0 6.9 26.7 26.8 26.5 20.9 16.5 — — — 2.1 2.0 1.8 1.2 1.4 1.8 8.0 9.9 11.6 1,230 28.5 116.9
IDFC 123 ADD 179,815 3,949 1,458 8.4 9.1 10.9 44.9 8.3 19.5 14.7 13.6 11.4 — — — 2.6 1.7 1.4 1.1 1.4 1.7 16.6 15.0 13.9 175 41.9 26.7
India Infoline 65 BUY 19,542 429 299 8.1 7.4 8.0 59.2 (9.0) 8.1 8.0 8.8 8.2 — — — 1.2 1.1 0.9 5.1 4.8 2.9 14.7 13.2 13.8 100 52.9 4.8
Indian Bank 202 ADD 86,921 1,909 430 35.1 37.9 43.5 25.5 8.1 14.6 5.8 5.3 4.7 — — — 1.3 1.1 0.9 3.2 3.4 3.9 24.1 21.7 21.0 320 58.2 2.9
Indian Overseas Bank 119 BUY 64,641 1,419 545 13.0 17.6 24.1 (46.7) 35.3 37.1 9.1 6.8 4.9 — — — 1.0 0.9 0.8 2.9 3.2 3.6 9.6 12.1 14.9 180 51.7 3.5
J&K Bank 738 ADD 35,799 786 48 105.7 123.5 136.6 25.0 16.9 10.6 7.0 6.0 5.4 — — — 1.2 1.0 0.9 3.0 3.5 3.9 18.2 18.5 17.8 850 15.1 1.0
LIC Housing Finance 171 ADD 81,288 1,785 475 13.9 19.3 21.4 11.5 38.5 10.9 12.3 8.9 8.0 — — — 2.5 2.0 1.7 1.8 2.4 2.7 23.6 24.6 22.8 206 20.4 73.1
Oriental Bank of Commerce 313 ADD 78,507 1,724 251 45.3 59.1 64.9 25.3 30.5 9.8 6.9 5.3 4.8 — — — 1.1 0.9 0.8 2.9 3.8 4.2 14.5 16.9 16.4 450 43.6 8.7
PFC 256 REDUCE 293,427 6,443 1,148 20.5 24.1 28.2 54.0 17.5 17.0 12.4 10.6 9.1 — — — 2.3 1.9 1.7 1.8 1.9 2.2 19.0 19.3 19.5 300 17.3 4.2
Punjab National Bank 994 BUY 313,537 6,885 315 123.9 138.2 166.1 26.4 11.5 20.3 8.0 7.2 6.0 — — — 1.9 1.6 1.3 2.2 2.8 3.4 26.2 23.9 24.0 1,500 50.8 9.7
Reliance Capital 412 REDUCE 101,455 2,228 246 13.7 13.0 14.5 (65.2) (4.7) 11.5 30.1 31.6 28.4 — — — 1.5 1.4 1.4 1.6 1.3 1.4 5.2 4.6 5.0 800 94.1 23.1
Rural Electrification Corp. 246 REDUCE 243,342 5,343 987 20.3 25.5 29.2 23.2 25.9 14.5 12.2 9.7 8.4 — — — 2.2 1.9 1.7 2.6 3.1 3.6 22.0 21.2 21.2 275 11.6 19.9
Shriram Transport 681 ADD 152,059 3,339 223 39.2 55.8 65.9 30.1 42.5 18.1 17.4 12.2 10.3 — — — 4.1 3.4 2.9 1.7 2.5 2.9 28.4 29.3 28.7 800 17.4 7.3
SKS Microfinance 633 REDUCE 46,605 1,023 74 26.9 24.2 36.5 61.1 (10.3) 50.9 23.5 26.2 17.3 — — — 4.9 2.5 2.1 — — — 21.7 12.6 13.5 700 10.7 16.4
SREI 72 NR 8,414 185 116 8.3 7.9 9.9 17.8 (4.8) 25.8 8.7 9.2 7.3 — — — 0.7 0.7 0.6 1.7 1.7 1.7 11.1 10.5 12.3 — — 4.1
State Bank of India 2,581 BUY 1,638,632 35,982 635 144.4 175.2 225.2 0.5 21.3 28.6 17.9 14.7 11.5 — — — 2.5 2.2 1.9 1.2 1.2 1.3 14.8 15.8 17.7 3,400 31.7 216.7
Union Bank 318 BUY 160,476 3,524 505 41.1 40.9 53.8 20.2 (0.4) 31.6 7.7 7.8 5.9 — — — 1.8 1.5 1.2 1.7 1.7 2.3 26.2 21.4 23.3 420 32.2 5.6
Yes Bank 236 BUY 80,195 1,761 340 15.0 21.4 26.4 46.7 42.4 23.5 15.7 11.1 9.0 — — — 2.6 2.1 1.8 0.6 0.9 1.1 20.3 21.3 21.7 370 56.7 22.2
Banks/Financial Institutions Attractive 7,941,482 174,385 15.0 24.5 20.5 15.7 12.6 10.5 — — — 2.4 2.1 1.8 1.4 1.7 1.9 15.5 16.7 17.4
Cement
ACC 939 SELL 176,401 3,874 188 83.2 51.7 54.5 47.9 (37.9) 5.4 11.3 18.2 17.2 6.0 8.3 6.6 2.8 2.6 2.4 2.9 2.5 2.5 29.3 16.4 15.8 920 (2.0) 9.3
Ambuja Cements 119 SELL 181,315 3,981 1,522 8.0 7.9 7.9 11.4 (0.7) (0.1) 14.9 15.0 15.0 8.2 7.9 7.0 2.6 2.3 2.1 1.6 1.7 1.9 19.3 16.8 15.0 108 (9.3) 5.1
Grasim Industries 2,252 ADD 206,500 4,534 92 301.0 224.3 261.1 26.1 (25.5) 16.4 7.5 10.0 8.6 4.5 5.2 4.1 1.6 1.5 1.3 1.5 1.5 1.5 22.9 15.4 15.7 2,600 15.4 3.3
India Cements 87 SELL 26,770 588 307 10.0 5.3 7.9 (43.5) (47.6) 49.8 8.7 16.6 11.1 5.2 7.7 5.8 0.6 0.6 0.6 2.4 3.7 3.7 8.2 4.1 6.0 95 9.0 2.6
Shree Cement 1,539 REDUCE 53,597 1,177 35 208.0 84.0 161.7 19.0 (59.6) 92.6 7.4 18.3 9.5 3.6 6.2 3.4 2.9 2.6 2.2 0.7 0.7 0.7 48.0 15.2 25.0 1,680 9.2 0.7
UltraTech Cement 897 REDUCE 245,867 5,399 274 88.2 42.3 79.7 12.0 (52.1) 88.6 10.2 21.2 11.3 11.8 9.5 5.5 4.5 2.0 1.7 0.3 0.4 0.4 25.9 11.9 19.3 1,030 14.8 7.5
Cement Neutral 890,450 19,553 19.3 (23.8) 30.2 11.6 15.2 11.7 6.2 7.1 5.2 2.4 1.9 1.7 1.4 1.5 1.5 20.6 12.4 14.2
Source: Company, Bloomberg, Kotak Institutional Equities estimates

India Daily Summary - February 1
50
O/S Target
51
Consumer products
Asian Paints 2,475 ADD 237,421 5,213 96 71.5 82.6 100.4 85.3 15.5 21.5 34.6 30.0 24.7 21.3 18.7 15.1 14.8 11.7 9.5 1.1 1.4 1.7 51.8 44.9 43.5 3,000 21.2 5.5
Colgate-Palmolive (India) 817 SELL 111,120 2,440 136 31.1 31.0 36.0 44.2 (0.5) 16.2 26.3 26.4 22.7 21.5 19.6 17.1 34.1 29.4 25.4 2.4 2.8 3.3 156.1 119.7 120.3 800 (2.1) 3.3
Dabur India 91 ADD 157,106 3,450 1,731 2.9 3.2 3.8 28.1 11.7 17.9 31.3 28.0 23.8 23.7 19.4 16.2 16.6 11.5 8.9 1.1 1.2 1.5 57.4 49.0 42.7 110 21.2 5.1
GlaxoSmithkline Consumer (a) 2,079 ADD 87,448 1,920 42 55.4 71.9 84.1 23.6 29.8 17.1 37.6 28.9 24.7 21.1 18.2 15.6 9.8 9.1 7.4 0.9 2.4 1.3 27.9 32.4 33.0 2,400 15.4 1.1
Godrej Consumer Products 346 ADD 111,914 2,457 324 11.3 13.6 17.1 69.5 20.0 26.1 30.5 25.4 20.2 24.1 18.1 14.2 11.6 6.2 5.7 1.1 0.9 0.9 44.6 31.9 29.6 440 27.2 1.9
Hindustan Unilever 276 SELL 603,018 13,242 2,182 9.4 9.6 11.4 (0.9) 2.2 17.9 29.3 28.7 24.3 20.1 20.8 17.6 23.3 20.3 17.7 2.7 2.9 3.4 71.1 75.9 77.8 250 (9.6) 16.4
ITC 154 ADD 1,177,419 25,855 7,651 5.3 6.5 7.8 22.6 22.8 19.0 29.0 23.6 19.8 17.6 15.0 12.4 7.9 6.6 5.8 3.2 1.8 2.4 29.2 32.1 32.4 185 20.2 28.2
Jubilant Foodworks 482 SELL 30,807 676 64 5.6 11.5 14.5 347.1 104.4 26.3 85.9 42.0 33.3 46.0 24.9 16.9 26.2 16.2 10.9 — — — 47.3 47.6 39.1 450 (6.7) 14.6
Jyothy Laboratories 194 ADD 14,857 326 77 11.0 11.4 13.7 99.6 3.8 19.4 17.6 16.9 14.2 13.8 10.4 8.2 3.6 2.1 1.9 2.3 1.9 2.5 14.8 12.8 14.6 270 39.2 0.4
Marico 114 ADD 69,412 1,524 612 4.4 5.0 5.6 32.9 12.2 12.8 25.5 22.7 20.2 17.5 16.0 13.3 10.4 7.6 5.9 0.6 0.8 0.9 48.9 39.2 33.3 140 23.3 2.0
Nestle India (a) 3,201 REDUCE 308,612 6,777 96 74.4 88.4 108.0 27.0 18.8 22.1 43.0 36.2 29.6 28.4 24.3 20.1 53.1 41.4 32.0 1.5 1.9 2.3 136.0 128.5 121.8 3,100 (3.2) 2.9
Tata Global Beverages 88 ADD 54,326 1,193 618 6.1 5.2 5.9 14.5 (14.0) 14.2 14.5 16.9 14.8 6.8 7.4 6.6 1.1 1.1 1.0 2.3 2.0 2.2 10.2 8.4 9.1 110 25.2 3.1
Titan Industries 3,088 ADD 137,074 3,010 44 57.3 107.1 125.9 29.3 87.1 17.5 53.9 28.8 24.5 34.3 21.0 17.3 18.6 11.9 8.3 0.5 0.4 0.4 38.7 50.3 39.8 4,100 32.8 34.4
United Spirits 1,057 ADD 132,715 2,914 126 27.3 33.1 47.0 49.9 21.5 41.9 38.7 31.9 22.5 15.3 14.2 11.7 3.5 3.2 2.8 0.2 0.2 0.3 9.8 10.5 13.3 1,550 46.7 7.6
Consumer products Cautious 3,233,249 70,998 24.8 17.4 19.7 31.3 26.6 22.3 19.4 17.2 14.3 9.7 8.0 7.0 2.2 1.8 2.2 31.0 30.2 31.3
Constructions
IVRCL 63 BUY 16,915 371 267 7.9 7.7 10.3 (6.6) (2.3) 33.7 8.0 8.2 6.1 5.9 6.8 5.6 0.9 0.8 0.7 1.3 0.6 0.6 11.5 10.6 12.7 190 199.9 7.0
Nagarjuna Construction Co. 92 BUY 23,657 519 257 7.1 7.2 9.7 6.1 1.2 34.3 12.9 12.8 9.5 7.6 8.7 7.2 1.1 1.0 0.9 1.5 2.2 2.2 9.3 8.0 10.1 160 73.5 3.9
Punj Lloyd 68 REDUCE 23,245 510 340 (3.4) 1.3 8.5 (52.6) (137.2) 567.0 (20.0) 53.7 8.1 16.9 8.2 5.8 0.8 0.8 0.7 0.2 0.1 1.1 (4.2) 1.4 9.0 90 31.5 10.5
Sadbhav Engineering 95 BUY 14,288 314 150 5.1 6.2 8.7 0.5 20.2 41.0 18.5 15.4 10.9 13.2 8.8 7.3 3.5 2.8 2.6 0.3 6.3 6.3 15.8 17.8 23.9 175 83.7 0.4
Construction Attractive 78,104 1,715 56.2 54.2 79.0 22.8 14.8 8.3 9.8 8.0 6.3 1.0 1.0 0.9 0.8 2.0 2.3 4.5 6.6 10.8
Energy
Aban Offshore 525 BUY 22,823 501 44 94.5 105.2 123.7 (2.5) 11.3 17.5 5.6 5.0 4.2 7.7 6.5 5.9 1.0 1.0 0.9 0.7 0.7 0.8 21.7 26.0 22.6 915 74.4 15.3
Bharat Petroleum 585 BUY 211,483 4,644 362 58.6 52.9 49.5 230.2 (9.7) (6.4) 10.0 11.1 11.8 6.0 6.2 6.4 1.5 1.4 1.3 2.4 2.8 2.8 14.9 12.4 10.7 740 26.5 11.6
Cairn india 312 RS 591,382 12,986 1,897 5.5 25.7 43.9 29.0 364.6 70.4 56.3 12.1 7.1 44.4 7.9 4.7 1.7 1.5 1.3 — — 4.8 3.1 13.3 19.8 — — 15.3
Castrol India (a) 396 SELL 97,997 2,152 247 15.4 21.0 21.7 44.6 36.2 3.5 25.7 18.9 18.2 15.2 11.6 11.1 21.3 20.2 19.2 3.2 4.3 4.4 83.8 109.9 107.9 390 (1.6) 0.8
GAIL (India) 446 ADD 566,123 12,431 1,268 24.8 29.4 37.4 11.7 18.8 27.3 18.0 15.2 11.9 10.1 9.1 8.0 3.1 2.7 2.3 1.7 2.0 2.6 17.4 18.1 19.8 540 21.0 14.4
GSPL 90 SELL 50,592 1,111 562 7.3 7.3 7.3 232.7 (0.4) 0.3 12.3 12.4 12.3 6.4 6.4 5.5 3.0 2.5 2.2 1.1 2.0 3.2 27.1 21.8 18.9 89 (1.1) 4.1
Hindustan Petroleum 338 BUY 114,518 2,515 339 51.6 52.2 48.7 204.2 1.2 (6.7) 6.5 6.5 6.9 2.3 2.3 2.3 0.9 0.8 0.7 3.5 4.8 4.5 13.1 11.9 10.1 585 73.2 10.5
Indian Oil Corporation 316 BUY 766,504 16,831 2,428 49.1 37.9 40.3 399.0 (22.9) 6.2 6.4 8.3 7.8 5.0 5.3 4.8 1.4 1.3 1.2 4.1 3.7 3.8 22.4 15.3 14.8 500 58.4 9.0
Oil India 1,301 ADD 312,807 6,869 240 115.2 135.5 145.1 13.9 17.7 7.1 11.3 9.6 9.0 5.0 3.6 3.2 2.1 1.9 1.6 2.6 3.2 3.5 16.8 18.3 17.3 1,490 14.5 2.5
Oil & Natural Gas Corporation 274 BUY 2,346,787 51,532 8,556 23.0 28.2 32.5 0.9 22.6 15.4 11.9 9.7 8.4 4.3 3.7 3.3 1.8 1.6 1.5 3.0 5.1 4.0 14.8 16.2 17.3 355 29.4 33.0
Petronet LNG 126 SELL 94,200 2,069 750 5.4 8.0 9.1 (22.0) 48.9 13.8 23.3 15.6 13.7 13.0 9.4 8.7 3.7 3.1 2.7 1.4 2.0 2.4 15.9 20.4 19.7 105 (16.4) 6.1
Reliance Industries 914 REDUCE 2,720,957 59,749 2,976 49.6 61.7 70.2 (1.8) 24.2 13.8 18.4 14.8 13.0 9.4 7.2 5.9 1.8 1.7 1.5 0.8 0.9 1.1 11.4 12.9 13.2 1,000 9.4 122.6

Energy Neutral 7,896,171 173,390 36.8 18.1 16.5 13.1 11.1 9.5 6.6 5.5 4.7 1.8 1.6 1.5 2.0 2.7 2.9 13.8 14.8 15.4
Industrials
ABB 617 REDUCE 130,737 2,871 212 16.7 10.8 31.4 (35.2) (35.4) 190.2 36.9 57.1 19.7 20.9 29.6 11.0 5.4 5.1 4.1 0.3 0.5 0.5 15.6 9.2 23.2 725 17.5 1.6
BGR Energy Systems 476 REDUCE 34,243 752 72 28.0 40.9 46.4 74.6 46.3 13.4 17.0 11.6 10.2 9.6 7.3 6.3 4.9 3.7 2.9 1.5 1.7 2.0 31.8 36.0 31.6 600 26.2 7.5
Bharat Electronics 1,658 REDUCE 132,600 2,912 80 96.1 105.6 120.1 (7.4) 9.9 13.7 17.2 15.7 13.8 7.9 6.9 5.8 3.0 2.6 2.3 1.2 1.5 1.5 17.5 17.6 17.6 1,800 8.6 1.7
Bharat Heavy Electricals 2,086 REDUCE 1,020,943 22,419 490 87.9 115.5 140.1 37.7 31.4 21.3 23.7 18.1 14.9 13.1 10.2 8.2 6.4 5.1 4.0 0.9 1.2 1.4 29.8 31.3 30.2 2,400 15.1 32.9
Crompton Greaves 251 BUY 160,696 3,529 642 12.8 14.4 16.2 46.5 12.0 12.5 19.5 17.4 15.5 11.2 10.0 8.3 6.4 4.9 3.8 0.5 0.8 0.8 37.9 31.9 27.8 310 23.8 7.2
Larsen & Toubro 1,482 ADD 896,816 19,693 605 57.9 74.9 86.0 15.6 29.2 14.9 25.6 19.8 17.2 14.8 11.0 9.5 4.0 3.3 2.8 0.8 0.8 0.9 18.6 18.4 17.7 1,850 24.8 62.9
Maharashtra Seamless 335 ADD 23,645 519 71 38.6 44.2 39.3 7.7 14.3 (10.9) 8.7 7.6 8.5 4.4 3.4 3.6 1.0 0.9 0.9 1.7 2.4 2.3 14.8 12.8 10.5 418 24.7 0.4
Siemens 848 REDUCE 285,777 6,275 337 22.4 27.4 33.2 39.5 21.9 21.3 37.8 31.0 25.5 20.2 18.5 15.0 8.8 7.2 5.9 0.6 0.6 0.8 25.2 25.6 25.5 735 (13.3) 9.1
Suzlon Energy 45 REDUCE 71,319 1,566 1,594 (6.2) (3.7) 3.5 (185.4) (40.3) (196.0) (7.3) (12.2) 12.7 13.2 16.5 7.3 1.1 1.0 1.0 — — 0.4 (11.4) (8.6) 7.9 45 0.6 25.3
Thermax 607 BUY 72,270 1,587 119 21.9 32.7 38.4 (9.6) 49.1 17.6 27.7 18.6 15.8 13.8 9.7 8.1 6.7 5.4 4.4 0.8 1.5 1.8 25.2 32.2 30.7 805 32.7 1.6
Voltas 163 REDUCE 53,844 1,182 331 10.9 10.6 12.1 57.4 (2.1) 13.9 15.0 15.3 13.4 8.6 8.0 6.6 4.9 4.1 3.4 1.2 2.0 2.2 37.8 29.0 27.5 200 22.9 4.5
Industrials Cautious 2,882,890 63,305 0.9 31.1 28.9 27.3 20.8 16.1 13.6 11.1 8.8 4.6 3.8 3.2 0.8 1.0 1.2 16.8 18.4 20.0
Infrastructure
Container Corporation 1,104 REDUCE 143,439 3,150 130 60.5 66.9 78.1 (0.6) 10.6 16.6 18.2 16.5 14.1 12.4 10.7 9.0 3.3 2.9 2.5 1.3 1.4 1.6 19.4 18.7 19.0 1,300 17.8 1.1
GMR Infrastructure 32 ADD 116,440 2,557 3,667 0.4 0.2 0.1 (43.7) (49.4) (55.8) 73.5 145.2 328.8 19.2 10.4 9.9 1.4 1.1 1.1 — — — 2.4 1.2 0.5 60 89.0 4.1
Gujarat Pipavav Port 50 BUY 20,987 461 424 (3.7) (1.3) 1.1 28.6 (64.8) (186.1) (13.4) (38.0) 44.2 60.7 23.7 13.9 6.8 2.8 2.6 — — — (75.1) (9.7) 8.5 68 37.2 0.8
GVK Power & Infrastructure 25 BUY 39,243 862 1,579 1.0 1.3 1.5 29.4 27.3 18.1 25.2 19.8 16.7 17.8 13.2 13.0 1.2 1.2 1.1 — 1.2 1.2 5.7 6.1 6.9 42 69.0 5.2
IRB Infrastructure 158 BUY 52,414 1,151 332 11.6 13.5 12.3 119.2 16.3 (8.8) 13.6 11.7 12.8 9.5 7.8 7.1 2.4 1.9 1.5 1.2 — — 19.4 18.1 12.9 270 71.2 7.0
Mundra Port and SEZ 129 BUY 260,251 5,715 2,017 3.3 4.2 6.7 55.7 24.5 61.4 38.6 31.0 19.2 29.5 20.7 14.3 7.3 6.2 4.9 0.6 — — 20.8 21.6 28.3 160 24.0 3.9
Infrastructure Cautious 632,775 13,895 20.1 16.5 30.0 31.0 26.6 20.4 18.6 12.7 10.7 2.9 2.3 2.1 0.6 0.4 0.4 9.3 8.8 10.4


O/S Target
Media
DB Corp 240 BUY 43,515 956 182 10.6 12.6 14.0 286.5 18.8 10.8 22.5 19.0 17.1 12.6 10.7 9.7 6.7 5.5 4.7 0.8 1.7 2.5 40.3 31.8 29.7 325 35.7 0.3
DishTV 57 ADD 60,009 1,318 1,062 (2.5) (1.6) 0.2 (63.1) (33.2) (109.5) (22.9) (34.3) 362.1 66.3 27.7 13.4 15.0 26.7 24.8 — — — 234.3 (56.0) 7.1 66 16.8 5.2
Hindustan Media Ventures 147 ADD 10,765 236 73 2.5 7.9 10.0 NM 220.4 27.5 59.9 18.7 14.7 17.8 13.0 10.5 3.0 2.5 2.1 5.1 5.1 6.8 17.9 23.7 16.4 200 36.3 0.0
HT Media 141 ADD 33,159 728 235 6.1 7.0 8.5 623.3 15.4 21.0 23.1 20.0 16.6 11.9 9.0 7.2 3.3 2.4 2.2 0.3 1.4 2.8 15.3 13.8 13.9 170 20.5 0.3
Jagran Prakashan 112 BUY 33,684 740 301 5.8 6.9 7.8 92.0 18.3 12.4 19.2 16.2 14.4 11.5 9.4 8.3 5.5 5.0 4.6 3.1 3.6 4.5 30.0 32.2 33.0 150 34.1 0.5
Sun TV Network 411 REDUCE 161,849 3,554 394 13.1 18.3 22.7 44.0 39.7 24.1 31.4 22.5 18.1 17.8 13.0 10.5 8.4 7.0 5.9 1.8 1.8 2.4 28.3 34.2 35.5 450 9.6 4.9
Zee Entertainment Enterprises 115 ADD 112,512 2,471 978 5.3 4.8 6.2 26.3 (9.7) 28.4 21.6 23.9 18.6 17.6 14.9 11.4 2.8 2.7 2.7 1.0 1.1 1.3 12.7 11.8 14.7 130 13.0 7.9
Media Cautious 455,491 10,002 195.8 35.9 35.8 36.9 27.2 20.0 17.8 13.3 10.4 5.3 4.6 4.2 1.2 1.4 2.0 14.2 16.8 21.0
Metals & Mining
Coal India 299 ADD 1,886,698 41,429 6,316 15.2 17.8 20.8 363.0 16.8 16.7 19.6 16.8 14.4 11.8 9.5 8.2 6.9 5.5 4.4 1.2 1.8 2.1 40.4 36.4 34.0 345 15.5 -
Hindalco Industries 219 ADD 419,836 9,219 1,914 20.0 15.0 16.9 25.0 (25.1) 12.7 11.0 14.7 13.0 6.2 8.3 8.5 1.9 1.7 1.6 0.6 0.6 0.6 20.4 12.5 12.6 255 16.3 49.0
Hindustan Zinc 1,213 BUY 512,531 11,255 423 95.6 103.7 125.5 48.2 8.4 21.0 12.7 11.7 9.7 8.4 6.9 4.5 2.7 2.2 1.8 0.5 0.5 0.5 25.1 21.7 21.5 1,535 26.5 4.8
Jindal Steel and Power 615 REDUCE 572,290 12,567 931 38.2 41.0 48.0 16.9 7.1 17.3 16.1 15.0 12.8 11.2 10.3 8.5 5.1 3.8 2.9 0.2 0.4 0.4 37.7 29.2 26.0 640 4.1 23.6
JSW Steel 782 REDUCE 194,187 4,264 248 80.4 67.1 99.2 481.1 (16.5) 47.9 9.7 11.7 7.9 8.5 7.4 4.9 1.8 1.1 0.8 0.9 1.2 1.2 16.0 11.6 12.1 1,000 27.8 34.7
National Aluminium Co. 401 SELL 258,239 5,671 644 12.2 18.3 20.5 (37.2) 50.5 12.0 32.9 21.9 19.5 15.3 10.2 8.7 2.5 2.3 2.1 0.6 1.2 1.2 7.8 10.9 11.3 300 (25.1) 0.6
Sesa Goa 298 REDUCE 264,731 5,813 890 29.6 52.6 62.2 23.5 77.9 18.3 10.1 5.7 4.8 8.3 3.4 4.6 3.3 2.0 1.4 1.2 1.2 1.2 35.8 32.9 33.0 315 5.9 26.1
Sterlite Industries 160 BUY 536,184 11,774 3,362 12.0 13.0 19.4 2.8 8.0 49.4 13.3 12.3 8.2 8.5 7.0 4.3 1.4 1.3 1.1 0.6 0.6 0.6 12.9 11.2 14.8 200 25.4 26.9
Metals & Mining Attractive 5,217,653 114,573 9.4 36.1 21.1 17.5 12.9 10.6 9.7 7.6 6.4 3.1 2.5 2.0 0.9 1.2 1.1 17.7 19.1 19.1
Pharmaceutical
Apollo Hospitals 457 BUY 58,796 1,291 129 10.9 15.3 20.5 28.8 40.2 33.6 41.7 29.8 22.3 20.2 14.1 11.1 3.5 3.3 2.8 — — — 8.3 10.7 13.1 580 27.0 1.7
Biocon 319 ADD 63,850 1,402 200 14.8 18.3 22.7 216.4 23.4 24.2 21.5 17.4 14.0 12.4 9.4 7.8 3.6 3.1 2.6 — — — 17.9 19.3 20.5 445 39.4 5.6
Cipla 312 REDUCE 250,190 5,494 803 13.7 12.1 16.0 38.1 (11.9) 32.3 22.7 25.8 19.5 16.3 17.3 13.3 4.2 3.8 3.3 0.6 0.8 0.8 21.1 15.4 17.9 300 (3.7) 14.4
Cadila Healthcare 744 ADD 152,415 3,347 205 24.7 33.3 38.2 66.9 34.9 14.7 30.1 22.3 19.5 19.5 15.3 13.1 9.4 7.0 5.5 0.7 0.9 1.0 36.0 35.9 31.6 880 18.2 1.7
Dishman Pharma & chemicals 112 ADD 9,077 199 81 14.4 15.8 20.7 (19.7) 9.7 30.7 7.7 7.1 5.4 7.1 6.3 4.8 1.1 1.0 0.9 — — — 15.5 15.1 17.0 210 88.2 0.6
Divi's Laboratories 625 REDUCE 82,905 1,820 133 25.8 26.8 37.1 (19.2) 3.9 38.6 24.3 23.4 16.9 17.9 17.3 11.8 5.5 4.7 4.0 — — — 24.7 21.7 25.6 700 12.0 2.7
Dr Reddy's Laboratories 1,518 REDUCE 257,923 5,664 170 48.0 68.4 72.2 48.1 42.6 5.5 31.6 22.2 21.0 17.5 12.6 11.8 6.8 5.4 4.4 0.7 0.5 0.6 22.2 27.0 22.9 1,150 (24.3) 15.4
GlaxoSmithkline Pharmaceuticals (a) 2,198 REDUCE 186,160 4,088 85 59.1 70.2 79.6 8.1 18.7 13.5 37.2 31.3 27.6 21.5 18.2 15.7 10.4 8.9 7.6 — — — 29.8 30.7 29.7 2,000 (9.0) 1.3
Glenmark Pharmaceuticals 288 REDUCE 80,623 1,770 280 12.7 17.6 20.6 14.3 38.3 17.3 22.7 16.4 14.0 14.7 11.0 9.8 3.4 2.9 2.4 — — — 16.4 18.4 18.2 330— — 6.0
Jubilant Life Sciences 195 BUY 30,902 679 159 26.5 17.5 25.2 49.0 (34.2) 44.1 7.3 11.1 7.7 6.6 9.0 6.7 1.4 1.4 1.2 1.0 1.0 1.3 26.3 13.7 17.1 350 79.9 1.3
Lupin 379 ADD 168,341 3,697 445 15.3 17.6 22.4 27.3 15.0 26.9 24.7 21.5 16.9 20.8 17.8 13.8 6.5 5.2 4.2 0.7 0.9 1.2 34.1 27.3 28.0 465 22.8 15.9
Ranbaxy Laboratories 488 SELL 209,209 4,594 428 7.2 24.0 14.6 (128.9) 234.8 (39.4) 68.0 20.3 33.5 16.8 10.9 17.1 5.3 3.8 3.5 — 0.8 0.8 7.0 20.1 10.4 340 (30.4) 12.5
Sun Pharmaceuticals 410 ADD 424,596 9,324 1,036 13.0 17.4 19.7 (25.7) 33.4 13.1 31.4 23.6 20.8 24.8 17.6 14.4 5.3 4.4 3.7 0.7 0.7 0.7 18.2 21.0 19.9 480 17.1 10.0
Pharmaceuticals Cautious 2,062,439 45,289 45.3 20.8 13.7 27.9 23.1 20.4 17.4 13.8 12.0 5.2 3.5 3.0 0.5 0.6 0.6 18.6 14.9 14.6
Property
DLF 242 ADD 414,283 9,097 1,714 10.6 10.0 13.8 (60.1) (5.5) 37.3 22.7 24.1 17.5 17.7 15.1 12.5 1.4 1.3 1.3 0.9 1.2 2.0 6.6 5.5 7.3 265 9.7 46.4
Housing Development & Infrastructure 128 ADD 53,266 1,170 415 15.9 21.6 28.7 (24.4) 35.5 32.9 8.1 5.9 4.5 6.8 6.5 3.6 0.8 0.6 0.5 2.0 3.9 4.1 10.0 11.1 12.7 310 141.5 28.8
Indiabulls Real Estate 107 RS 42,844 941 402 (0.4) 3.1 8.5 (134.9) (865.5) 178.9 (267.4) 34.9 12.5 (42.7) 49.3 14.6 0.4 0.4 0.4 — — — (0.2) 1.0 2.9 — — 22.7
Mahindra Life Space Developer 311 BUY 12,688 279 41 19.2 21.7 30.4 69.7 13.1 40.1 16.2 14.4 10.2 14.4 12.0 7.0 1.3 1.2 1.1 1.1 1.3 1.4 8.6 9.0 11.6 435 39.9 0.4
Oberoi Realty 227 BUY 74,968 1,646 330 13.7 18.7 24.9 57.1 36.9 32.7 16.6 12.1 9.2 14.6 7.8 5.1 4.0 2.2 1.8 0.1 0.4 0.7 27.7 23.3 21.5 305 34.1 1.1
Phoenix Mills 184 BUY 26,644 585 145 4.1 6.1 7.6 (16.7) 48.6 24.2 44.5 29.9 24.1 37.3 22.5 17.2 1.7 1.7 1.6 0.7 0.8 1.1 3.9 5.7 6.7 300 63.1 0.3
Puravankara Projects 104 REDUCE 22,271 489 213 6.8 7.3 8.8 0.6 7.6 19.9 15.3 14.2 11.9 17.9 16.2 11.6 1.6 1.4 1.3 1.9 1.9 1.9 10.5 10.5 11.6 100 (4.2) 0.1
Sobha Developers 201 BUY 19,672 432 98 14.1 18.8 24.0 (7.1) 33.4 27.9 14.3 10.7 8.4 12.7 9.4 7.2 1.1 1.0 0.9 0.5 0.6 0.8 9.7 10.1 11.7 380 89.4 1.5
Unitech 38 SELL 100,520 2,207 2,666 3.0 3.8 5.1 (58.8) 25.0 34.0 12.4 9.9 7.4 15.1 11.0 6.8 1.0 0.8 0.8 0.9 — 4.0 9.0 8.7 10.6 74 96.3 39.2
Property Cautious 767,155 16,846 (44.6) 23.1 39.8 19.5 15.8 11.3 16.0 12.8 9.0 1.1 1.0 1.0 0.8 1.1 2.1 5.9 6.5 8.5

India Daily Summary - February 1
52
O/S Target
53
Sugar
Bajaj Hindustan 72 SELL 13,759 302 191 (7.9) 0.2 6.4 (343.6) (102.5) 3,238.8 (9.1) 372.8 11.2 9.9 6.1 4.4 0.7 0.7 0.6 1.0 1.0 1.0 (7.1) 0.2 5.8 80 11.3 4.8
Balrampur Chini Mills 65 ADD 16,779 368 257 0.8 8.3 8.4 (89.9) 974.0 1.0 84.3 7.9 7.8 11.5 5.0 3.8 1.2 1.1 1.0 0.7 0.7 0.7 1.5 14.8 13.1 90 37.7 4.1
Shree Renuka Sugars 88 REDUCE 58,808 1,291 670 8.8 5.1 5.8 164.2 (42.4) 15.1 10.0 17.3 15.0 6.0 8.0 7.1 2.3 1.9 1.6 0.5 0.4 0.4 29.1 13.0 13.1 90 2.5 26.1
Sugar Cautious 89,346 1,962 (4.4) 21.2 31.0 19.4 16.0 12.2 7.9 6.6 5.3 1.5 1.3 1.2 0.6 0.5 0.5 7.7 8.3 9.7
Technology
HCL Technologies 463 REDUCE 323,890 7,112 700 17.5 22.8 29.6 0.2 30.3 29.4 26.4 20.3 15.7 13.0 12.2 9.6 4.6 4.1 3.5 0.9 1.6 1.7 19.3 21.7 24.5 440 (4.9) 10.3
Hexaware Technologies 99 BUY 14,157 311 144 9.3 5.1 10.4 127.7 (45.6) 104.3 10.5 19.4 9.5 5.6 12.5 6.2 1.7 1.5 1.3 1.0 1.0 1.0 17.8 8.2 15.0 125 26.8 6.0
Infosys Technologies 3,131 BUY 1,797,022 39,460 574 108.3 120.0 155.2 5.7 10.8 29.3 28.9 26.1 20.2 21.3 18.1 14.0 7.8 6.9 5.7 0.8 1.9 1.5 30.1 28.1 30.9 3,700 18.2 74.2
Mahindra Satyam 57 REDUCE 66,856 1,468 1,176 2.5 2.7 4.1 (190.7) 7.2 55.0 22.9 21.3 13.8 10.0 10.0 6.3 3.6 3.6 3.4 — — — 58.5 16.9 25.4 70 23.1 15.9
Mindtree 399 REDUCE 16,417 360 41 52.2 27.1 41.5 294.3 (48.1) 53.1 7.6 14.7 9.6 6.5 7.8 4.9 2.4 2.1 1.8 0.5 0.7 1.0 35.2 15.4 19.9 500 25.3 0.7
Mphasis BFL 643 SELL 135,579 2,977 211 43.6 51.8 48.9 207.6 18.8 (5.5) 14.8 12.4 13.1 11.9 10.6 9.2 5.8 4.1 3.2 0.5 0.6 0.7 48.1 38.6 27.4 610 (5.2) 6.0
Polaris Software Lab 168 SELL 16,775 368 100 15.4 19.5 19.5 16.9 26.8 0.3 10.9 8.6 8.6 5.3 6.8 5.7 1.9 1.6 1.4 2.1 2.2 2.3 18.6 20.5 17.7 175 4.0 4.4
TCS 1,098 BUY 2,149,593 47,202 1,957 35.1 44.4 54.0 32.8 26.4 21.6 31.3 24.7 20.3 23.9 18.3 14.2 10.3 8.4 6.9 1.8 1.6 2.0 37.6 37.4 37.2 1,350 22.9 42.6
Tech Mahindra 583 REDUCE 72,246 1,586 124 65.1 65.1 65.9 (9.6) (0.1) 1.3 9.0 9.0 8.8 7.4 8.0 7.5 2.5 2.0 1.7 0.6 0.3 0.3 34.5 26.3 22.1 720 23.5 3.0
Wipro 424 ADD 1,037,631 22,785 2,447 18.9 21.7 25.6 22.1 15.2 17.7 22.5 19.5 16.6 17.0 14.3 11.5 5.3 4.3 3.6 0.8 1.0 1.3 26.5 24.4 23.7 525 23.8 17.7
Technology Attractive 5,706,769 125,313 24.6 17.2 21.2 25.9 22.1 18.2 18.7 15.8 12.5 6.8 5.8 4.8 1.2 1.7 1.6 26.1 26.3 26.4
Telecom
Bharti Airtel 332 REDUCE 1,261,373 27,698 3,798 23.6 17.1 21.3 5.8 (27.7) 24.6 14.1 19.4 15.6 8.0 9.4 7.4 3.0 2.6 2.2 — — — 24.4 14.3 15.3 305 (8.2) 40.8
IDEA 66 REDUCE 218,612 4,800 3,300 2.7 2.4 1.2 (5.8) (11.2) (48.9) 24.2 27.3 53.4 8.4 9.3 8.1 1.9 1.8 1.7 — — — 7.2 6.9 3.5 55 (17.0) 6.7
MTNL 41 SELL 25,704 564 630 (15.6) (10.4) (9.1) (750.8) (33.7) (11.9) (2.6) (3.9) (4.5) 1.2 1.5 2.0 0.2 0.2 0.3 — — — (8.5) (6.1) (5.7) 50 22.5 1.4
Reliance Communications 95 SELL 201,843 4,432 2,133 21.8 7.0 9.2 (23.0) (67.7) 30.8 4.3 13.4 10.3 6.3 7.8 6.6 0.5 0.4 0.4 0.9 — — 11.0 3.4 4.3 125 32.1 21.2
Tata Communications 217 REDUCE 61,717 1,355 285 14.0 15.2 15.7 3.2 8.2 3.5 15.5 14.3 13.8 6.4 5.9 5.6 0.9 0.8 0.8 3.0 3.5 3.9 5.2 5.5 5.5 225 3.9 0.8
Telecom Cautious 1,769,248 38,850 (12.7) (38.5) 20.5 12.5 20.4 16.9 7.7 9.1 7.3 1.5 1.4 1.3 0.2 0.1 0.1 12.3 7.0 7.8
Utilities
Adani Power 115 ADD 251,681 5,527 2,180 0.8 2.8 16.5 NM 252.0 500.1 147.3 41.9 7.0 125.4 30.5 6.5 4.4 3.9 2.5 — — — 4.2 9.9 44.1 140 21.3 3.9
CESC 272 BUY 33,958 746 125 34.6 36.6 42.7 8.5 5.8 16.8 7.9 7.4 6.4 5.0 4.6 5.4 0.8 0.7 0.7 1.6 1.7 2.0 10.8 10.2 10.8 480 76.6 1.3
Lanco Infratech 33 BUY 79,245 1,740 2,405 2.1 3.6 4.9 46.6 67.4 36.6 15.5 9.2 6.8 11.0 7.9 6.1 2.4 1.9 1.5 — — — 17.4 21.0 22.5 80 142.8 8.0
NHPC 23 REDUCE 277,997 6,104 12,301 1.9 1.5 1.7 74.9 (19.4) 15.6 12.2 15.1 13.1 8.6 9.3 7.4 1.1 1.1 1.0 2.4 1.8 2.0 9.7 7.1 7.8 28 23.9 4.5
NTPC 171 REDUCE 1,412,860 31,025 8,245 10.5 10.1 11.9 6.8 (3.2) 17.6 16.3 16.9 14.4 12.6 12.8 11.7 2.2 2.1 1.9 2.2 2.0 2.4 14.1 12.6 13.7 195 13.8 11.8
Reliance Infrastructure 532 BUY 142,214 3,123 267 62.0 50.2 62.3 (1.0) (19.1) 24.1 8.6 10.6 8.5 8.6 7.1 5.7 0.7 0.6 0.6 1.2 1.7 1.9 6.5 7.0 8.3 1,060 99.4 26.8
Reliance Power 112 SELL 268,916 5,905 2,397 2.9 3.9 5.3 179.7 36.6 34.9 39.3 28.8 21.3 (270.2) 215.9 31.4 1.9 1.7 1.6 — — — 4.8 6.3 7.9 135 20.3 16.4
Tata Power 1,216 ADD 300,077 6,589 247 60.2 69.2 88.5 20.1 15.0 27.8 20.2 17.6 13.7 12.5 11.9 10.2 2.3 2.1 1.9 1.0 1.2 1.2 13.0 12.7 14.7 1,420 16.8 6.8
Utilities Cautious 2,766,946 60,759 22.0 2.9 39.0 17.7 17.2 12.4 13.6 13.8 10.1 1.8 1.7 1.5 1.6 1.5 1.7 10.4 9.8 12.4
Others

Havells India 307 ADD 38,262 840 125 6.1 23.2 28.9 141.3 278.2 24.5 49.9 13.2 10.6 14.5 9.2 7.3 9.0 5.6 3.8 0.6 0.8 0.9 14.3 52.1 42.4 425 38.6 1.8
Jaiprakash Associates 72 BUY 159,654 3,506 2,214 1.7 5.1 5.6 (12.7) 188.8 11.6 41.2 14.3 12.8 20.3 11.9 10.5 1.9 1.6 1.5 — — — 5.1 12.2 12.1 135 87.2 30.6
Jet Airways 445 BUY 38,447 844 86 (69.8) 25.6 58.7 (71.7) (136.7) 129.5 (6.4) 17.4 7.6 12.1 7.6 6.3 2.2 2.0 1.6 — — — — 12.0 23.0 850 90.9 22.4
Sintex 148 REDUCE 40,229 883 272 12.1 14.4 16.5 (49.6) 19.3 14.5 12.2 10.3 9.0 11.0 8.4 7.1 1.9 1.6 1.4 0.8 0.9 0.9 15.5 15.7 15.3 180 21.7 6.8
SpiceJet 44 BUY 17,591 386 403 2.5 5.2 6.1 (117.4) 104.4 16.8 17.2 8.4 7.2 20.1 4.1 5.4 (5.1) 4.2 2.6 — — — (15.9) 516.3 44.8 85 94.7 4.2
Tata Chemicals 314 REDUCE 76,297 1,675 243 26.4 26.8 35.4 (27.1) 1.5 31.9 11.9 11.7 8.9 6.3 5.6 4.2 1.6 1.4 1.2 2.9 3.0 3.0 16.0 16.9 19.3 370 18.0 3.9
United Phosphorus 131 BUY 60,747 1,334 462 11.9 12.9 17.6 18.1 8.3 37.3 11.1 10.2 7.4 6.0 5.2 3.9 2.0 1.6 1.3 1.4 1.5 1.5 19.1 17.5 19.4 220 67.5 7.0
Others 431,228 9,469 (539.8) 140.7 29.0 29.8 12.4 9.6 12.4 8.8 7.5 2.1 1.8 1.5 0.8 0.9 0.9 7.2 14.2 15.7
KS universe (b) 45,047,001 989,174 21.4 20.6 21.1 18.2 15.1 12.5 10.8 9.2 7.6 2.8 2.4 2.1 1.3 1.6 1.7 15.2 15.8 16.7
KS universe (b) ex-Energy 37,150,830 815,785 17.2 21.3 22.6 19.8 16.3 13.3 13.0 11.1 9.0 3.1 2.6 2.3 1.2 1.3 1.5 15.8 16.1 17.1
KS universe (d) ex-Energy & ex-Commodities 31,042,727 681,658 18.8 20.7 22.7 20.7 17.1 14.0 14.7 12.5 10.1 3.2 2.7 2.4 1.2 1.3 1.5 15.2 15.7 16.8
Notes:
(a) For banks we have used adjusted book values.
(b) 2010 means calendar year 2009, similarly for 2011 and 2012 for these particular companies.
(c) EV/Sales & EV/EBITDA for KS universe excludes Banking Sector.
(d) Rupee-US Dollar exchange rate (Rs/US$)= 45.54

"Each of the analysts named below hereby certifies that, with respect to each subject company and its securities for which the analyst is
responsible in this report, (1) all of the views expressed in this report accurately reflect his or her personal views about the subject companies
and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or
views expressed in this report: Sanjeev Prasad, Kawaljeet Saluja, Indranil Pan, Manish Karwa, Lokesh Garg, Manoj Menon, Akilesh Tilotia,
Ajay Mathrani, M.B. Mahesh, Nischint Chawathe, Gundeep Singh, Rohit Chordia, Murtuza Arsiwalla, Hitesh Goel, Amit Kumar, Jasdeep
Walia, Anmol Ganjoo, Priti Arora, Suvodeep Rakshit."
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

32.1% 33.3% this stock to outperform the BSE Sensex by 10% over the next 12
30% months; Add = We expect this stock to outperform the BSE
23.1% 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%
next 12 months; Sell = We expect this stock to underperform the
11.5% BSE Sensex by more then 10% over the next 12 months. These
10% 5.1% 5.1% ratings are used illustratively to comply with applicable
3.2% regulations. As of 30/09/2010 Kotak Institutional Equities
0.6%
0% Investment Research had investment ratings on 156 equity
securities.
BUY ADD REDUCE SELL
Source: Kotak Institutional Equities As of September 30, 2010
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.
Our target price are also on 12-month horizon basis.
Other definitions
Coverage view. The coverage view represents each analyst’s overall fundamental outlook on the Sector. The coverage view will consist of one of the following
designations: Attractive, Neutral, Cautious.
Other ratings/identifiers
NR = Not Rated. The investment rating and target price, if any, have been suspended temporarily. Such suspension is in compliance with applicable
regulation(s) and/or Kotak Securities policies in circumstances when Kotak Securities or its affiliates is acting in an advisory capacity in a merger or strategic
transaction 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
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NM = Not Meaningful. The information is not meaningful and is therefore excluded.

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INDIA DAILY

February 10, 2011 India 9-Feb 1-day1-mo 3-mo

Sensex 17,593 (1.0) (8.5) (15.7)

Nifty 5,254 (1.1) (8.8) (16.3)

New release Dow Jones 12,240 0.1 5.2 7.8

Derivatives (NSE) 1,459 1,600 1,149

News Round-up Rs/US$ 45.5 5 20 124

Day 1 – Feb 9 companies at KIE’s Chasing Growth conference

`1. Axis Bank 12. Kotak Mahindra Bank

2. Bharat Forge 13. NTPC

3. Bharti Airtel 14. Oil & Natural Gas Corporation

4. CESC 15. Power Grid Corporation

5. Dish TV 16. Reliance Capital

6. Godrej Consumer Products 17. Sesa Goa

7. HCL Technologies 18. Shriram Transport Finance Company

8. HDFC 19. Tata Chemicals

9. IRB Infrastructure 20. Tech Mahindra / Mahindra Satyam

10. ITC 21. Yes Bank

11. Jindal Steel and Power

SPEAKER SESSIONS: CRYSTAL ROOM, THE TAJ MAHAL PALACE

1. ARUN SHOURIE: Getting things done in a parliamentary democracy

Former Union Key takeaways

2. VARAD PANDE: Ecology and economy: the twain shall meet

` Core principles of the MoEF—(1) inclusiveness (based on national consultations), (2)

` Proactive domestic agenda—reduce emissions intensity of GDP (reduce by 20-25%

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3

` Government’s capacity to spend on anti-poverty programs has increased due to a

4 KOTAK INSTITUTIONAL EQUITIES RESEARCH

5. LABANYENDU MANSINGH: Development of the gas market in India

6. ADI GODREJ: Understanding the Indian multinational

KOTAK INSTITUTIONAL EQUITIES RESEARCH 5

` India likely to be a great power (one among a few)

8. Y. M. DEOSTHALEE: Overcoming India’s infrastructure deficit

6 KOTAK INSTITUTIONAL EQUITIES RESEARCH

BRIEF TAKEAWAYS FROM COMPANY MEETINGS

AXIS BANK: FEB 9, 2011

BHARAT FORGE: FEB 9, 2011

` Capacity utilization expected to improve. The company indicated that capacity

` Subsidiaries expected to report profits in FY2012E: The company indicated that

KOTAK INSTITUTIONAL EQUITIES RESEARCH 7

BHARTI AIRTEL: FEB 9, 2011

` Africa – three-pronged strategy. (1) driving affordability-led penetration; Bharti

8 KOTAK INSTITUTIONAL EQUITIES RESEARCH

CESC: FEB 9, 2011

` Status of the power projects

 Dhariwal (660 MW). Construction is in progress and management has indicated

KOTAK INSTITUTIONAL EQUITIES RESEARCH 9

DISH TV INDIA: FEB 9, 2011

` Volume growth momentum remains strong. Dish TV expected growth momentum to

10 KOTAK INSTITUTIONAL EQUITIES RESEARCH

GODREJ CONSUMER: FEB 9, 2011

HCL TECHNOLOGIES: FEB 9, 2011

` The company derives 12% of its revenues from non-linear projects.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 11

HOUSING DEVELOPMENT FINANCE CORPORATION: FEB 9, 2011

` Education loans – an untapped opportunity. HDFC has acquired a majority in Credilia,

12 KOTAK INSTITUTIONAL EQUITIES RESEARCH

IRB INFRASTRUCTURE DEVELOPERS: FEB 9, 2011

KOTAK INSTITUTIONAL EQUITIES RESEARCH 13

ITC: FEB 9, 2011

` Company has implemented a price increase of ~4% in cigarettes in January 2011.

JINDAL STEEL AND POWER: FEB 9, 2011

14 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Dhariwal (660 MW). Construction is in progress and management has indicated

Management has guided for production of 15 mtpa by FY2012E from Pakri