india daily, september 15, 2011 - kotak securities · additional gross under-recovery of ~`70 bn...

For Private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES. REFER TO THE END OF THIS MATERIAL.

INDIA DAILYSeptember 15, 2011 India 14-Sep 1-day1-mo 3-mo

Sensex 16,710 1.5 (0.8) (7.8)

Nifty 5,013 1.4 (1.2) (8.0)

Global/Regional indices

Dow Jones 11,247 1.3 (2.1) (5.5)

Nasdaq Composite 2,573 1.6 0.7 (2.2)

FTSE 5,227 1.0 (2.3) (9.0)

Nikkie 8,661 1.7 (4.7) (9.5)

Hang Seng 19,202 0.8 (5.2) (14.1)

KOSPI 1,785 2.0 (0.5) (14.5)

Value traded – India

Cash (NSE+BSE) 134 134 138

Derivatives (NSE) 1,310 1,238 729

Deri. open interest 1,357 1,388 1,311

Forex/money market

Change, basis points

14-Sep 1-day 1-mo 3-mo

Rs/US$ 47.6 (0) 230 289

10yr govt bond, % 8.3 4 6 -

Net investment (US$mn)

13-Sep MTD CYTD

FIIs (78) 300 354

MFs (13) (183) (282)

Top movers -3mo basis

Change, %

Best performers 14-Sep 1-day 1-mo 3-mo

IDEA IN Equity 98.3 (0.7) 5.0 32.4

MM IN Equity 793.5 1.5 7.2 19.5

BJAUT IN Equity 1629.3 1.8 12.0 19.0

HUVR IN Equity 352.6 3.3 11.9 11.3

ACEM IN Equity 145.9 0.2 11.2 10.6

Worst performers

EDSL IN Equity 228.6 6.0 (20.5) (46.7)

IVRC IN Equity 42.5 1.4 (11.9) (42.7)

CRG IN Equity 156.9 4.6 7.5 (42.5)

HDIL IN Equity 101.1 1.4 (13.7) (41.5)

RPWR IN Equity 78.6 0.8 (13.9) (32.2)

Contents

Special Reports

Strategy

Strategy: If cash is king, Whizdom is the grand Vizier

Daily Alerts

Sector

Energy: A weakening rupee is largely positive

Industrials: Outlook clouded by new competition, ordering binge and fuel concerns

Economy

Economy: August WPI: No respite yet

News Round-up

After a gap of nine months, the RBI intervened in the foreign exchange market to support the falling rupee, which drifted close to a two-year low in early trade today. Rupee closed at a 16-month low of 47.65 against the dollar, having touched 48.01 during the day. (BSTD)

Foreign funds invested nearly USD 391.30mn in the Indian stock & debt market during the first nine trading sessions this month, according to capital market regulator SEBI. (ECNT)

Roaming charges paid by mobile users when travelling within India could be abolished, bringing down the monthly bills of frequent travelers but at the same time denting the revenues of telecom cos. (ECNT)

Inflation scores 9.78%, has accelerated to a 13 month high, making yet another rate increase al but certain even as some in the govt. & industry hope against hope the RBI will do the unexpected this time by not raising rates. (ECNT)

LIC lines up USD 6.52bn for Infra play this year, insurer to increase exposure by 3% to 15% through IDF & takeout financial schemes. (ECNT)

The oil ministry will consider Reliance Ind. (RIL IN) USD 1.52bn plan to develop satellite fields in its KG-D6 block, which may deliver about 10 mmscmd of natural gas in five year. The plan, if approved, will help Reliance reverse the decline in output from deep-sea block. (ECNT)

Cairn India (CAIR IN) got shareholders' nod for acceptance of government conditions, setting the stage for the completion of a transfer of its majority stake to mining MNC Vedanta Resources. The oil and gas exploration company will now seek a no-objection certificate from ONGC (ONGC IN), partner in three producing blocks, including one at Rajasthan's Barmer. (BSTD)

Bharti Airtel (BHARTI IN) plans tower firm in Africa. Expects USD 5 bn revenue from Africa ops by 2013. To apply Indian business model in Africa. (FNLE)

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.

Whizdom: The framework in brief

Whizdom is a decision support tool which builds primarily on a three-stage DCF valuation model. Analyst estimates for terminal year financials and the hyper-growth phase are consolidated for a universe of 111 stocks. The framework comprises of two main building blocks – one involves observing the distribution of the intrinsic value of a stock across time in order to decipher where the value of growth resides; the second involves comparing the implied growth rate in perpetuity (derived from current market prices) with the reasonable terminal growth estimates as specified by our analysts. Whizdom’s rule-based decision tool uses these two observations as inputs and recommends potential stock actions for its universe.

Key recommendations from Whizdom: Book profit for 49% of the universe

On the basis of the rule-based decision support tool, Whizdom is currently generating positive results for only 46% of the total universe of stocks. While Reliance Industries, Coal India and ONGC feature amongst the 14 ‘Value holding’ recommendations, Whizdom has a ‘Book profit’ recommendation for most of the Consumer products companies under our coverage. Implied growth rate in perpetuity for many of these companies is significantly higher than reasonable growth estimates specified by our analysts. Wipro, Infosys, Sun Pharma and Maruti are some of the ‘Growth holding’ recommendations. Out of the five ‘Rerating’ candidates, IOC and BPCL are the most prominent. Three of the four ‘Indecisive’ recommendations were from the mid-cap IT space featuring Mahindra Satyam, Patni Computers and Polaris Software.

Limitations and benefits – Keeping Whizdom interactive

One of the key limitations of the Whizdom framework is that it critically depends on analyst assumptions of near-term, medium-term and terminal-year financials. Hence, the results of the framework will only be as good as the input assumptions. In order to offer Whizdom as a decision-support tool, we provide a dashboard in which users can model their own business assumptions like cost of capital, hyper growth phase and terminal year estimates. The dashboard is also capable of conducting sensitivity analysis for some of the business assumptions like risk-premium, risk-free rate, beta and reasonable growth in perpetuity. While the Whizdom Interactive dashboard is currently available in an excel template, it will soon be available on KINSITE as a web-based application. Please feel free to ask for the interactive excel template.

Strategy.dot

Strategy Whizdom

If cash is king, Whizdom is the grand Vizier. Whizdom is KIE’s proprietary decision support tool using a discounted cash flow valuation methodology at its core. The rule-based tool recommends unbiased stock actions for its universe of stocks by identifying whether current market prices imply a reasonable growth rate in perpetuity along with the distribution of the stock’s intrinsic value.

INDIA

SEPTEMBER 15, 2011

NEW RELEASE

BSE-30: 16,710

QUICK NUMBERS

• Whizdom recommends book profit in 49% of universe

• ‘Value holding’: RIL, ONGC, COAL

• ‘Growth holding’: INFO, WPRO, SUNP, MSIL

• ‘Book profit’ recommendation for 12 companies in our Consumer universe


Increase in gross under-recoveries due to weakening rupee

A weakening of the rupee against the US dollar would result in higher gross under-recoveries as the domestic prices of diesel, LPG and kerosene are regulated. A `1/US$ depreciation will result in additional gross under-recovery of ~`70 bn for the industry on an annualized basis (at US$110/bbl). Exhibit 1 shows that gross under-recoveries will increase to `1.15 tn from `1.04 tn, if we were to assume average exchange rate of `47.5/US$ for the remaining period in FY2012E.

Higher crude price realizations to offset higher subsidy losses for ONGC

The upstream oil companies (Cairn India and ONGC) will benefit from a weakening of the rupee due to higher crude price realizations. However, the positive impact on ONGC will be offset to some extent by a higher subsidy burden due to the increase in gross under-recoveries. A `1/US$ increase would increase ONGC’s FY2012E EPS by 1% after considering the negative impact of higher subsidy burden. Cairn India will benefit from a weakening rupee due to higher realizations; our FY2012E and FY2013E EPS for Cairn India will increase by ~3% to `47 and `51.2 for a `1/US$ increase in exchange rate.

Impact on downstream companies is a bit more complicated

We highlight that the impact of a weakening rupee on downstream oil companies (BPCL, HPCL and IOCL) is slightly convoluted given that the prices of some of its products are regulated by the government. We note that a weakening of the rupee would lead to higher refining margins for the refining segment of downstream companies. Thus, the companies would stand to gain on the unregulated products. However, the losses on regulated products will increase, which would result in higher gross under-recoveries. The net impact from rupee depreciation will depend on the quantum of increase in net under-recoveries to be borne by downstream companies.

RIL will benefit from higher chemical and refining margins, E&P will also benefit

We expect RIL to benefit from a weakening of the Rupee across all its segments. We highlight that the prices of its products and raw materials are linked to the landed cost of imports; it gets export prices in case of exports of products (refined products primarily). We note that the net impact on margins would be positive as a weaker Rupee would result in higher prices in Rupee terms for both products and raw materials. We also expect RIL’s E&P segment to benefit from a weakening rupee given higher realization. A `1/US$ increase would increase RIL’s FY2012E and FY2013E EPS to `70 and `77.4, respectively, from our base-case EPS estimates of `67.4 and `74.9.

Castrol will be negatively impacted due to higher raw material costs

A depreciation in the value of the Rupee versus the US dollar would be negative for Castrol as it will increase the cost of raw materials (LOBS and additives), which comprise a significant portion of its overall costs. Castrol imports its entire requirement of LOBS and additives, the prices of which are linked to dollar prices. A `1/US$ increase would reduce Castrol’s CY2011E and CY2012E EPS to `21.3 and `21.7, respectively, from our base case estimate of `21.9 and `22.3.

Energy India

A weakening rupee is largely positive. We see the recent weakening of the Indian Rupee versus the US Dollar resulting in (1) higher gross under-recoveries for the oil sector, (2) positive impact on ONGC’s EPS as higher realizations offset higher subsidy loss, (3) positive impact on the earnings of Cairn India and Reliance Industries and (4) negative for the earnings of Castrol India. The rupee has depreciated sharply by 8% since August 1, 2011 led by large FII outflows of US$1.6 bn.

NEUTRAL

SEPTEMBER 14, 2011

UPDATE

BSE-30: 16,710

QUICK NUMBERS

• 3-4% increase in RIL’s EPS from `1/US$ depreciation

• 1% increase in EPS for ONGC from rupee depreciation

• 3% negative impact on Castrol’s EPS from `1/US$ depreciation

India Energy

4 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Gross under-recovery will increase as Rupee depreciates Subsidy loss breakdown assuming rupee depreciation versus base case, March fiscal year-end, 2012E (` bn)

Base case Scenario AExchange rate (Rs/US$) 44.8 46.4 Dated Brent crude oil price (US$/bbl) 110 110 LPG 353 372Kerosene 270 282Diesel 415 491Auto fuels 415 491Cooking fuels 624 654Total subsidy loss 1,039 1,145

Notes:(a) We assume exchange rate at Rs47.5/US$ for the remaining period in Scenario A.

Source: Kotak Institutional Equities estimates

Impact of Rupee depreciation on energy sector companies Earnings sensitivity to exchange rate, March fiscal year-ends, 2012-13E (`)

2012E 2013EExchange rate (Rs/US$) 44.8 45.8 (% chg.) 45.6 46.6 (% chg.)BPCL 58.9 60.0 2.0 58.9 60.3 2.2 Cairn India 45.8 47.0 2.8 49.7 51.2 3.0 Castrol 21.9 21.3 (3.0) 22.3 21.7 (2.8) HPCL 26.3 26.5 0.6 39.3 39.7 1.1 IOCL 33.1 33.4 0.8 35.7 36.0 1.1 Oil India 171.7 171.4 (0.2) 190.1 189.6 (0.3) ONGC 37.2 37.5 0.8 40.8 41.1 0.7 Reliance Industries 67.4 70.0 3.8 74.9 77.4 3.3

Notes:(a) We assume no change in net under-recoveries for downstream companies.(b) Data for Castrol corresponds to calendar year-ends.

Source: Kotak Institutional Equities estimates


Bulk tender: New competitor queers the pitch, –ve even as price seems reasonable

Doosan is L1 in the 9X800 MW NTPC bulk tender (slated to get five) as L&T, BGR and Thermax miss out. BHEL would get four units at L1 price. L&T and BGR were only 4% and 8% away from the Doosan bid. BHEL kept its cards close (quoted price seemed out of range) on minimum assured volumes. The entry of new competition is negative as (1) Doosan is a highly credible competitor and post setting up capacity in India, is slated to become an even bigger contender, (2) entrants like L&T/BGR may quote more aggressively as they attempt to fill up capacities (L&T) and build a business case (BGR/Thermax). The latter two have already spent considerable sums on the BTG venture. The turbine tender is to be decided today and would be split among three players as 4:3:2 units.

Price: Challenging given NTPC specs, independent benchmarks, commodity escalations

Rs14 bn per 800 MW (Rs17.5 mn per MW) seems reasonable but has to seen in light of (1) stiff NTPC conditions (that reduce sourcing, manufacturing and design flexibility), (2) previous independent benchmarks (Rs28mn/MW in Bara of JPA in Nov-09 and Rs33 mn/MW in Karchana for L&T in Aug-10; we add a turbine price of Rs12.5 mn/MW [Bharat-Forge Alstom quote] for this analysis even though that was in 660 MW unit tender), (3) commodity escalation since then as well as factoring in a likely longer lead time of delivery in this tender.

Quantum of projects awarded may constrain supply, linkage coal dependence to affect execution

Our analysis of the XII Plan coal-based thermal projects suggests about 80 GW of power plants have already been awarded (not including NTPC bulk tender). In addition, another 28 GW of projects are designated as XI Plan projects. We have not included projects with some doubts such as Krishnapatnam, Tilaiya, Kawai which may actually make progress. High dependence on linkage coal (69% of projects) underscores fuel availability concerns (no linkage, uncertain supply). We believe incremental ordering over next two years can be extremely low as ordering binge of past 3-4 years adjusts itself in face of unraveling of assumptions on fuel availability, merchant price and offtake issues. SEBs may shed load rather than buy expensive power and payment security. Order inflows and execution remain at risk.

Lower estimates, retain REDUCE on BHEL (Rs1,800 vs Rs2,000 earlier) and SELL on BGR

We cut our estimates on BHEL to Rs126.6 and Rs137.4 (from Rs134.8 and Rs145.4) for FY2012E and FY2013E, reflecting lower inflows. Retain REDUCE rating (TP: Rs1,800 from Rs2,000 earlier). We reduce our estimates for BGR to Rs40 and Rs39 (from Rs46 and Rs44) for FY2012E and FY2013E) on lower incremental equipment ordering. We retain our SELL (changed from REDUCE as part of our changeover to an absolute rating system) with a target price of Rs315 (8X FY2013E) versus Rs410 (10X FY2013E) earlier.

Industrials India

Outlook clouded by new competition, ordering binge and fuel concerns. Bulk tender sees a new credible contender (Doosan) and triggers more aggressive bids in coming tenders as L&T, BGR, Thermax, (L2, L3 and L4) fight for business. The price per unit may look good but it has to factor in stiff NTPC conditions, scope and commodity escalation and longer lead time for delivery (higher inflation) in these tenders. High quantum (106 GW) of projects already in the works along with fuel concerns may constrain incremental orders. Dependence on linkage coal (69%) raises execution concerns. In addition to sectoral woes, BHEL stands to lose business to keen competition (50% XII plan share vs. 55% in XI plan). Revise estimates of BHEL (TP: 1,875 from Rs2,000) and BGR (TP:315 vs. Rs410) on slowdown in utility capex.

CAUTIOUS

SEPTEMBER 15, 2011

UPDATE

BSE-30: 16,710

QUICK NUMBERS

• 106 GW of projects awarded for benefits in XI/XII Plans

• 69% of all coal based thermal plants depend on linkage coal

• BHEL’s share in XII Plan reduces to 50% from 55% in XI Plan

India Industrials


800 MW boiler bulk tender: Doosan emerges L1; negative in long-term even though near-term price seems reasonable

Our interaction with industry participants suggests that Doosan has emerged as the L1 bidder in the NTPC bulk tender for 9X 800 MW tender of NTPC. This tender would be divided between two players i.e. Doosan (5 units) and BHEL (4 units) and other contenders such as L&T, BGR Energy and Thermax would not get any share form this tender. The tender for the turbine units is to be decided today and would be split among three players as 4:3:2 units.

Doosan price of Rs14 bn per 800 MW unit (Rs17.5 mn/MW) seems reasonable; price a temporary comfort as Doosan’s entry is a LT negative

Doosan bid at a price of about Rs14 bn per 800 MW boiler units, which implies about Rs17.5 mn/MW. This is slightly higher versus supercritical tenders placed in the past - even higher than recent turbine order placed by NTPC for the Mouda power project (at a realization of about Rs12 mn/MW). The industry participants attribute it to two factors: (1) NTPC conditions were stiff in terms of sourcing and manufacturing reducing flexibility to reduce costs and (2) some auxiliaries were also in scope of the tender.

Bid levels for recent supercritical tenders

Price Capacity RealizationProject Sector (Rs bn) (MW) (Rs mn/MW) Component DateNTPC bulk tender9X800 MW NTPC bulk tender - Boiler Centre 70 4,000 18 Boiler Sep-11

11X660 MW NTPC bulk tender - Turbine Centre 43 3,300 13 STG Nov-10BTG component in bulk tender 31 BTGBHEL supercritical ordersBajaj Hindustan (Lalitpur Power Generation Company) Private 55 1,980 28 BTG Mar-11Raichur Power Co. Ltd, JV of KPCL and BHEL (Edlapur) State 32 800 39 EPC 4QFY11Raichur Power Co. Ltd, JV of KPCL and BHEL (Yerasmus) State 63 1,600 39 EPC Apr-10Bara project, Prayagraj, UP, Jaiprakash Associates Ltd Private 56 1,980 28 BTG Nov-09Barh II, NTPC Ltd Centre 15 1,320 11 STG Oct-08

Krishnapatnam, Andhra Pradesh Power Dev Co Ltd State 25 1,600 16 Boiler Aug-08Barh II, NTPC Ltd Centre 29 1,320 22 STG FY2008L&T supercritical ordersJaiprakash Group - Karchana power project Private 65 1,980 33 BTG Aug-10Mahagenco - Koradi power plant State 69 1,980 35 EPC Nov-09Jaypee Group - Jaypee Nigrie Super TPP Private 20 1,320 15 BTG Aug-09

Source: Kotak Institutional Equities, Company

We believe that price being reasonable is only a temporary comfort; however, the entry of a new player is a long-term negative as (1) Doosan is a highly credible competitor and having set up capacity in pursuance of this tender, it would be more regular and aggressive competitor in the Indian market, and (2) entrants like L&T and BGR would quote more aggressively as they have not won in this tender and would still need to fill up capacities (in L&T’s case) and build a business case (in case of BGR Energy). Both Thermax and BGR who have not won in this tender have already spent significant amounts of money (as per FY2011 annual report) in pursuing this business.

Price difference versus L2 (L&T) is 4% and L3 (BGR) is 8%; BHEL bid not revealed considering minimum assured volume

L&T had placed the second highest bid (L2) for the tender with a price difference of 4% against Doosan, while BGR Energy (L3 bidder) had a price difference of about 8% against Doosan. Thermax was L4 with a price difference of about 25% against Doosan.

Industrials India

KOTAK INSTITUTIONAL EQUITIES RESEARCH 7

BHEL was L5 with a much larger price difference. BHEL seems to have bid with a view that it does not need to compete on the price considering that it has been assured a minimum volume of business from this tender. Hence for an incremental upside of one more unit (five boilers against four), it need not to show its best hand, in terms of price, right away. BHEL though would have to accept the tender at Doosan’s price.

Scope of the project does not differ significantly from standard NTPC boiler order

We note that the scope of the bulk tender boiler/ turbine orders does not vary significantly from standard NTPC BTG orders. Below is a brief summary of the scope of the boiler component of the 9X800 MW bulk tender:

Design, engineering, manufacture, fabrication, preassembly, testing of equipment at site, complete services of construction of the equipment/system of Steam Generator and its associated auxiliaries including all associated electrical, control & instrumentation and structural works

Each unit shall include but not be limited to: complete steam generator set, auxiliary steam piping, steam generator integral pipings, flash tanks, chemical dozing system, draft fans, air preheaters, coal pulverizers and raw coal feeders, mill bunker building, TPs, conveyor galleries and its supporting trestles, air fans, coal burners, mill reject handling system, pulverized fuel piping, ducting and dampers, fuel oil system, passenger and goods elevators, refractory’s and insulation, complete control and instrumentation system for steam generator and auxiliaries, power cycle piping, equipment cooling water system for steam generator and auxiliaries, plant & instrument air compressors, plant performance analysis, diagnosis and optimization (PADO) System, auxiliary boiler, etc.

Phased manufacturing program

The exhibit below summarized the various milestones associated with the phased manufacturing program, completion schedule and weightage factor for levying LDs.

India Industrials


Phased manufacturing program

To be established by Weightage for LDEquipment Indicative facilities requirement (Months from Date of Award) (%)BoilersPressure parts - Straight tube butt welding facility 36 35(straight water wall - Automatic welding facility for panel processing& spiral water wall) - NDT facilities

- Hydro testing- Continuous heat treatment furnace- Gang/ panel bending facility

Pressure parts - System bend facility 42 30(economiser, - Welding facility for coilssuperheater and - NDT facilitiesreheater coils and - Hydro testingpanels) - Continuous heat treatment furnace

- Jigs & fixtures for assembly and layout checking facility- Portable equipment for material/ grade identification

Pressure parts - Welding 42 20(headers) - Machining and drilling

- Heat treatment- Hydraulic testing- NDT facilities- Pressing facility for end caps and tees- Material identification facility- Facility for high alloy (P5 and above) continuous welding

Separator - Rolling facility/ pressing facility 48 15(Shell & dished ends) - Machining and drilling

- Welding- Heat treatment- Hydraulic testing- NDT facilities- Pressing arrangement for dished ends

TurbinesTurbine casings and - LP outer casing fabrication 36 20valves machining - HP/ IP/ LP casing machining and blading

- Heat treatment/ stress relieving- Turbine valve machining and assembly testing

Turbine rotor - Rotor machining including grooves & Fir tree machining 42 20machining - Rotor assembly and balancing

- Turbine assemblyRotating blades machining - Rotating blade machining and finishing 52 20Generator core and - Core stamping, fabrication facility 40 20stator manufacturing - Heat treatment/ stress relieving

- Generator stator fabrication and core building facility- Stator bar manufacturing and heavy machining facility

Generator rotor - Rotor machining including slotting 42 15- Rotor assembly and balancing- Exciter manufacturing and testing- Rotor winding facility

Generator assembly Generator assembly and testing 48 5

Source: Ministry of Power

Quantum of projects already awarded may constrain incremental ordering

We highlight that about 80 GW of coal-based thermal projects have been awarded, a majority of which are already under construction and likely for benefit in the XII Plan (2012-17). Such a high quantum of projects which are already awarded could constrain ordering. We also expect another 26 GW of coal-based power plants to get commissioned in the next couple of years as they are designated as a part of XI Plan and have not been commissioned yet.

Industrials India


About 80 GW of thermal projects for XII Plan already awarded Coal based thermal projects under construction for XI and XII Plan

Under construction for XIth plan (MW) Under construction for XIIth plan (MW)

Supercritical Subcritical Total Supercritical Subcritical TotalCentre 1,320 8,475 9,795 Centre 1,980 6,140 8,120State — 6,040 6,040 State 6,680 10,350 17,030Private 5,560 4,470 10,030 Private 24,220 31,080 55,300Total 6,880 18,985 25,865 Total 32,880 47,570 80,450

Coal Coal

Source: CEA, news flows , Kotak Institutional Equities estimates

Cautious on selecting projects for likely XII Plan benefits

We have not included projects amounting to 36 GW, which include 8 GW of ordered projects (Obra, Krinapatnam UMPP, Bhavanpadu). Of the remaining 28 GW, 13 GW of unordered projects include (1) Reliance Power (8 GW – Chitrangi, Tilaiya) and (2) Adani Power (2.6 GW - Kawai and Chhindwara). Additional capacities from these projects may not lead to significant domestic business (past history of awards to Chinese players) and can further limit ordering. The remaining 14 GW account for NTPC bulk tendering (boiler component of the 11X660 MW tender and turbine component of 8X900 MW tender).

About 36 GW of projects not included for XII “Plan benefits List of projects not included in XII Plan benefits

Agency Project Sector Awarded toCapacity

(MW) LinkageUPRVUNL Obra S BHEL 1,600 LinkageRRVUNL Chhabra S Not ordered 1,320 BlockAdani Power Kawai P Not ordered 1,320 PendingAdani Power Chhindwara P Not ordered 1,320 PendingReliance Power Krishnapattam UMPP P SEC 3,960 Imported coalR K M Powergen R.K.M. Powergen P Non-BHEL 1,400 BlockEast Coast Energy Bhavanapadu TPP P DEC 1,320 Imported coalLanco Vidarbha unit 1 P Not ordered 660 LinkageLanco Vidarbha unit 2 P Not ordered 660 PendingReliance Power Chitrangi P Not ordered 3,960 BlockReliance Power Tilaiya UMPP P Not ordered 3,960 BlockNTPC Bulk tender (11X660 MW) C Not ordered (boilers) 7,260 LinkageNTPC Bulk tender (9X800 MW) C Not ordered (turbine) 7,200 BlockTotal capacity 35,940

Source: Company, Kotak Institutional Equities estimates

High dependence on linkage coal raises execution concerns

Of the total XI and XII Plan ordering (under construction) of about 106 GW about 73 GW of projects depend on linkage coal. Of these, about 15 GW have linkages pending. We are cautious on the execution of such projects given our concerns regarding (1) pending coal linkage, (2) uncertainty of supply despite having LoA (letter of assurance) and (3) lack of clarity on go/no-go policy which could negatively impact utility capex.

India Industrials


69% of projects under construction dependent on linkage coal Linkage for projects under construction for XI and XII Plan

Linkage PendingImported

Coal Block TotalXI Plan 17,575 1,200 4,240 2,350 25,365XII plan 40,730 13,440 8,100 18,180 80,450Total 58,305 14,640 12,340 20,530 105,815

XI/XII Plan Linkage summary (106 GW)

Block19%

Imported Coal12%

Pending14%

Linkage55%

Source: Ministry of Coal, News flows, Kotak Institutional Equities

Sedate 1Q ordering reflects impact of capex slowdown on industrial companies

Ordering activity for key industrial companies suggests that order inflows declined 13% yoy in 1QFY12. Key disappointments in the quarter include (1) BHEL (44% yoy decline), (2) Crompton (28% decline) and (3) Voltas (66% drop). This reflects the extent of the impact of capex slowdown on the business on industrial companies. Our sample includes equipment suppliers for thermal power plants (BHEL, Thermax, Crompton, Areva, Siemens) as well as for construction (L&T) and EMP projects (Voltas).

Quarterly order inflow trend for key industrial companies, 2QFY08-1QFY12 (Rs mn)

-

100

200

300

400

500

600

Sep-

07

Dec

-07

Mar

-08

Jun-

08

Sep-

08

Dec

-08

Mar

-09

Jun-

09

Sep-

09

Dec

-09

Mar

-10

Jun-

10

Sep-

10

Dec

-10

Mar

-11

Jun-

11

(Rs bn)

(40)

(20)

-

20

40

60

80(%)Order Inflows Yoy growth (%)

Source: Kotak Institutional Equities, Company

Declining inflows to squeeze revenue growth over the medium term

We expect a slowdown in quantum of projects being ordered over the next 1-2 years as other structural (coal linkage) and cyclical issues (high interest rates, liquidity crunch) to limit utility capex over next few years. An increase in supply (L&T-Mitsubishi, BGR-Hitachi) over such a timeframe, coupled with restrained ordering, may lead to a significant decline in BHEL’s inflows. We, however, do believe that some of these issues (coal linkage, interest rates) would get resolved in medium term.

Increasing competition reflects in loss of market share

Industrials India


We highlight that BHEL accounts for about 29 GW of total ordering of 54 GW for the XI Plan benefits, implying for 55% of the market share. This share has dropped to 50% for the under-construction projects likely for XII Plan benefits.

134 GW of ordering for combined XI and XII Plans XI and XII Plan equipment ordering for coal based thermal power plants

Under construction/commissioned for XIth plan (MW) BHEL's share BHEL's share (%)

Supercritical Subcritical Total Supercritical Subcritical Total Supercritical Subcritical TotalCentre 1,980 16,605 18,585 Centre — 15,405 15,405 Centre — 93 93State 5,560 13,363 18,923 State — 1,500 1,500 State — 11 11Private — 16,435 16,435 Private — 12,935 12,935 Private 79 79Total 7,540 46,403 53,943 Total — 29,840 29,840 Total — 64 55

Under constructionfor XIIth plan (MW) BHEL's share BHEL's share (%)

Supercritical Subcritical Total Supercritical Subcritical Total Supercritical Subcritical TotalCentre 1,980 6,140 8,120 Centre — 6,140 6,140 Centre — 100 100State 6,680 10,350 17,030 State 4,700 9,150 13,850 State 70 88 159Private 24,220 31,080 55,300 Private 3,960 16,430 20,390 Private 53 53Total 32,880 47,570 80,450 Total 8,660 31,720 40,380 Total 26 67 50

Total awards for benefit in XI/XII plan (MW) BHEL's share BHEL's share (%)

Supercritical Subcritical Total Supercritical Subcritical Total Supercritical Subcritical TotalCentre 3,960 22,745 26,705 Centre — 21,545 21,545 Centre — 193 193State 12,240 23,713 35,953 State 4,700 10,650 15,350 State 70 100 170Private 24,220 47,515 71,735 Private 3,960 29,365 33,325 Private — 132 132Total 40,420 93,973 134,393 Total 8,660 61,560 70,220 Total 21 66 52

Coal Coal Coal

Coal Coal

Coal

Coal

Coal Coal

Source: CEA, news flows, Kotak Institutional Equities

We factor in about 11GW of project wins for BHEL for FY2011-13E and 13-14 GW over the next two years. Even assuming improvement in execution of the power projects as the backlog matures leads to single-digit revenue growth for BHEL’s power segment over FY2011-15E.

India Industrials


Segment-wise inflow and execution for BHEL (Rs bn), March fiscal year-ends, 2009-2015E

2009 2010 2011 2012E 2013E 2014E 2015EPowerUtility order inflow (GW) 17.0 16.5 15.1 11.0 11.0 13.0 14.0Realization (Rs mn / MW) 26.1 24.3 28.0 27.0 27.0 27.0 28.0

Utility order inflow 444 401 422 297 297 351 392Spare orders 28 19 21 26 31 37 45International orders 33 36 37 41 45 50 55

Orders received during the year 504 456 481 364 373 438 491% growth 16.3 (9.7) 5.5 (24.3) 12.0 10.0 10.0

Revenues 213 269 348 376 413 441 479% growth 34.1 25.8 29.5 8.1 9.7 6.9 8.5

Order backlog - year end 1,034 1,221 1,354 1,341 1,302 1,299 1,311% growth 39.2 18.1 10.9 (0.9) (2.9) (0.2) 1.0

Order execution days 1,270 1,405 1,281 1,313 1,187 1,077 990IndustryOrders received during the year 103 144 114 131 147 165 184

% growth 30.5 40.1 (20.6) 15.0 12.0 12.0 12.0Revenues 72 79 92 105 125 141 158

% growth 20.6 8.7 16.6 13.8 19.9 12.5 12.4Order backlog - year end 126 191 213 240 261 285 311

% growth 31.3 51.4 11.6 12.5 9.0 9.0 9.1Order execution days 484 584 759 744 699 677 657TotalOrders received during the year 607 599 595 495 520 602 676

% growth 18.4 (1.3) (0.7) (16.8) 5.1 15.8 12.1

Revenues 286 347 440 481 538 582 637% growth 30.4 21.5 26.6 9.3 11.9 8.2 9.5

Order backlog - year end 1,160 1,412 1,567 1,581 1,563 1,584 1,622% growth 38.3 21.7 11.0 0.9 (1.1) 1.3 2.4

Order execution days 1,071 1,219 1,172 1,190 1,073 981 907

11 GW inflow in FY11E-13E from XIIth Plan orders based on sector-wise break up of likely remaining orders and assuming a reasonably optimistic success rate for BHEL

Realizations inline with historicals

20% CAGR in spares and 10% CAGR in export inflows over FY11E-13E. Exports to small countries with potentially limited scale-up opportunity

Assume improvement in execution days as the order backlog matures over time

Expect 12% CAGR in industry orders, moderate upside post strong growth in FY2009-10.

Lack of substantial upside to order inflow would meaningfully squeeze growth prospects in the medium-term

Order inflow growth expected to significanly lag revenue growth impacting visbility


Our DCF valuation over FY2011-31E assumes a revenue CAGR of 7.5% and decline in EBIT margin to 16.5% by FY2015 (19.4 in FY2011), further stabilizing at 14% over the longer term. Factoring in a 10% capex as proportion of change in sales leads to free cash flow CAGR of 11.5% over FY2011-31E and discounted cash flow value of Rs1,800 (Mar-12).

Industrials India


DCF valuation of BHEL, March fiscal year-ends, 2011-31E (Rs bn)

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2026 2031Key assumptionsPower segmentMW execution 12 12 13 14 15 15 15 16 16 17 17 20 22 Increase in per MW realization (%) 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 Industrial segmentIndustrials revenue growth (%) 15.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 10.0 10.0 10.0 Key ratio assumtionsEBIT margin 19.4 18.1 17.5 17.1 16.5 16.5 16.0 16.0 15.0 14.0 14.0 14.0 14.0 Effective tax rate 33.0 33.0 33.0 33.0 33.0 33.0 33.0 33.0 33.0 33.0 33.0 33.0 33.0

PowerGW execution 12 12 13 14 15 15 15 16 16 17 17 20 22 Per GW realization 25 26 27 27 27 27 27 28 29 30 31 36 41 Domestic power execution 289 309 336 354 379 398 410 450 464 507 523 713 909 Spare orders 21 26 31 37 45 47 49 52 54 57 60 76 97 International 37 41 45 50 55 57 60 63 67 70 73 94 119 Power Total 348 376 413 441 479 502 519 565 584 634 656 883 1,126 IndustrialRevenues 92 105 125 141 158 177 199 223 249 279 307 495 796 Total gross revenues 440 481 538 582 637 679 718 788 834 913 963 1,377 1,922 EBIT 85 87 94 100 105 112 115 126 125 128 135 193 269 EBIT*(1-tax rate) 57 58 63 67 70 75 77 84 84 86 90 129 180 Depreciation / Amortisation 11 10 9 8 8 8 7 10 (Incr)/Decr in Working Capital (28) (10) (14) (11) (14) (11) (10) (17) (11) (20) (12) (27) (27)

Capital Expenditure (12) (6) (1) (3) (2) (4) (4) (7) (5) (8) (5) (11) (11) Free Cash Flows 17 42 47 53 55 71 73 69 76 65 81 99 152 Years discounted - 0.0 0.5 1.5 2.5 3.5 4.5 5.5 6.5 7.5 8.5 13.5 18.5Discount factor 1.0 1.0 0.9 0.8 0.7 0.7 0.6 0.5 0.5 0.4 0.4 0.2 0.1 Discounted cash flow 17 42 45 44 40 46 42 35 34 26 29 19 16

WACC usedTerminal gorwth rate NPV CalcCapitalisation rate Sum of free cash flow 581

Terminal value 208 Terminal value Calc Enterprise value 789 Cash flow in terminal year Add Investments 1 Terminal value Net debt (95) Discount period (years) Net present value-equity 885 Discount factor Shares o/s 0

Discounted value NPV /share(Rs) 1,807


Revise estimates on lower ordering expectations

We revise our earnings estimates for BHEL to Rs126.6 and Rs137.4 from Rs134.8 and Rs145.4 for FY2012E and FY2013E, respectively. The earnings revision reflects a 9% change in order inflows to Rs495 bn and Rs520 for FY2012E and FY2013E, respectively, coupled with a marginal improvement (50-60 bps) in EBITDA margin. We maintain our REDUCE rating on (1) coal availability concerns affecting execution of current backlog and (2) potential slowdown in utilities capex which may also increase competitive intensity as industry supply grows. Our target multiple of 13X FY2013E (14X FY2013E earlier) underpins our target price of Rs1,800 (Rs2,000 earlier).

India Industrials


Revised estimates for BHEL, March fiscal year-ends, 2012E-13E (Rs mn

FY2012E FY2013E FY2012E FY2013E FY2012E FY2013EOrder inflow 495 520 544 571 (8.9) (8.9)

Revenues 454 508 470 524 (3.6) (3.1)EBITDA 83 90 88 96 (6.5) (5.8)EBITDA margin (%) 18.2 17.8 18.8 18.3 Other income 17.5 19.3 17.3 19.1

PBT 93 101 99 107 (6.1) (5.6)PAT 62 67 66 71 (6.1) (5.6)EPS (Rs) 126.6 137.4 134.8 145.4 (6.1) (5.6)

yoy growth (%)Order inflow (16.8) 5.1 (10.2) 5.0

Revenues 9.1 11.9 13.1 11.4 EBITDA 4.5 9.1 9.9 8.2 EPS 3.0 8.5 9.8 7.9

New estimates Old estimates % change


Industrials India


Abridged financials for BHEL, March fiscal year-ends, 2008-15E (Rs mn)

2008 2009 2010 2011E 2012E 2013E 2014E 2015EIncome StatementTotal net revenues 193,046 262,123 328,614 415,661 453,649 507,515 550,287 602,496Cost of goods sold (159,868) (225,078) (274,348) (336,609) (371,011) (417,367) (454,659) (502,145)EBIDTA 33,178 37,046 54,266 79,052 82,638 90,148 95,627 100,351Other income 14,448 14,974 16,483 17,011 17,546 19,314 21,025 23,566Interest (354) (307) (335) (547) (196) (196) (196) (196)Depreciation (2,972) (3,343) (4,580) (5,441) (7,231) (8,612) (9,464) (10,394)Pre-tax Profit 44,299 48,370 65,834 90,074 92,757 100,654 106,993 113,327Tax (15,711) (17,106) (22,800) (29,945) (30,795) (33,417) (35,522) (37,625)PAT 28,589 31,263 43,034 60,130 61,962 67,237 71,471 75,702Balance sheetShareholders' equity 107,742 129,388 159,174 201,538 248,010 298,437 352,041 408,817Loan funds 952 1,494 1,278 1,634 1,634 1,634 1,634 1,634Total source of funds 108,694 130,882 160,451 203,172 249,643 300,071 353,674 410,451Net block 9,813 14,704 24,154 34,009 52,400 53,788 56,324 57,929WIP 6,580 11,570 15,296 17,622 5,000 5,000 5,000 5,000Investments 83 523 798 4,392 4,392 4,392 4,392 4,392Net current assets (excl cash) (5,021) (17,465) 7,030 29,212 41,039 85,207 111,777 141,978Cash and bank balance 83,860 103,147 97,901 96,302 125,178 130,049 154,546 179,517Deferred Tax Assets 13,379 18,403 15,272 21,636 21,636 21,636 21,636 21,636Total applications 108,694 130,882 160,451 203,172 249,643 300,071 353,674 410,451Cash flow statementNet profit before tax and extraordinary items 44,299 48,370 65,834 90,074 92,757 100,654 106,993 113,327Add: Depreciation / amortisation / non-cash prov 2,972 3,343 4,580 5,441 7,231 8,612 9,464 10,394Tax paid (19,738) (22,130) (19,669) (36,308) (30,795) (33,417) (35,522) (37,625)Operating profit before working capital changes 27,533 29,582 50,745 59,208 69,193 75,849 80,935 86,097Change in working capital / other adjustments 13,361 12,444 (24,495) (22,182) (11,826) (44,169) (26,570) (30,201)Net cashflow from operating activites 40,894 42,026 26,250 37,026 57,367 31,680 54,365 55,896Fixed Assets (6,639) (12,803) (17,279) (17,022) (13,000) (10,000) (12,000) (12,000)Investments 0 (441) (275) (3,593) — — — —Net cashflow from investing activites (6,639) (13,244) (17,554) (20,616) (13,000) (10,000) (12,000) (12,000)Free cash flow 34,255 28,782 8,696 16,410 44,367 21,680 42,365 43,896Issue of share capital 6 (9) 72 0 — — — —Borrowings 59 542 (216) 356 — — — —Dividend paid (8,734) (9,727) (13,321) (17,747) (15,490) (16,809) (17,868) (18,926)Net cashflow from financing activites (8,670) (9,194) (13,465) (17,391) (15,490) (16,809) (17,868) (18,926)Cash generated /utilised 25,584 19,707 (4,768) (999) 28,876 4,871 24,498 24,970Net cash at end of year 83,860 103,147 97,901 96,302 125,178 130,049 154,546 179,517Ratios (%)EBITDA margin 17.2 14.1 16.5 19.0 18.2 17.8 17.4 16.7PAT margin 14.8 11.9 13.1 14.5 13.7 13.2 13.0 12.6RoE 29.2 26.4 29.8 33.3 27.6 24.6 22.0 19.9RoCE 29.2 26.3 29.7 33.3 27.4 24.5 21.9 19.8Net current assets (excl cash) as days of sales (9.5) (24.3) 7.8 25.7 33.0 61.3 74.1 86.0EPS (Rs) 58.4 63.9 87.9 122.8 126.6 137.4 146.0 154.6


BGR Energy: Downgrade to SELL with revised target price of Rs315

We reduce our estimates for BGR on expectations of lower incremental equipment ordering impacting its BoP business. We highlight the key assumptions for the Power projects division for BGR over FY2011-13E in the exhibit below. We expect one BoP project win for FY2012 (Rs16 bn) and two incremental BoP order wins (Rs24 bn) in FY2013. We also factor in Rs65 bn (2X 660 MW) worth EPC order each in FY2012 and FY2013E.

India Industrials


Segmental estimates of new orders for BGR Energy (Rs mn), March fiscal year-ends

2008 2009 2010 2011 2012E 2013EBOP orders Order booking 24,770 — 32,650 21,680 26,000 24,000 Existing orders 24,770 — 32,650 — — —New orders NA NA NA 21,680 26,000 24,000

Gayatri Projects — — — 21,680 BOP order I — — — — 10,000 —BOP order I — — — — 16,000 BOP order II — — — — — 8,000 BOP order III — — — — — 16,000

Order backlog 26,870 14,170 39,410 48,040 52,540 48,040 Existing orders 26,870 14,170 39,410 26,860 13,360 3,360 New orders NA NA NA 21,180 39,180 44,680

Gayatri Projects — — — 21,180 16,180 9,180 BOP order I — — — — 9,000 6,000 BOP order II — — — — 14,000 8,500 BOP order III — — — — — 7,000 BOP order IV — — — — — 14,000

Execution details 9,060 12,700 7,410 13,050 21,500 28,500 Existing orders 9,060 12,700 7,410 12,550 13,500 10,000 New orders NA NA NA 500 8,000 18,500

Gayatri Projects — — — 500 5,000 7,000 BOP order I — — — — 1,000 3,000 BOP order II — — — — 2,000 5,500 BOP order III — — — — — 1,000 BOP order IV — — — — — 2,000

EPC ProjectsOrder booking 80,000 — — 65,000 65,000 Existing orders 80,000

Mettur 31,000 Kalisindh 49,000

New orders NA NA — 65,000 65,000 EPC order I — — — 65,000 EPC order II — — — — 65,000

Order backlog 74,040 52,690 23,140 58,500 102,375 Existing orders 74,040 52,690 23,140 — —

Mettur 29,450 18,470 6,070 — —Kalisindh 44,590 34,220 17,070 — —

New orders NA NA — 58,500 102,375 EPC order I — — — 58,500 42,250 EPC order II — — — — 60,125

Execution 5,960 21,350 29,550 29,640 21,125 Existing orders 5,960 21,350 29,550 23,140 —

Mettur 1,550 10,980 12,400 6,070 —Kalisindh 4,410 10,370 17,150 17,070 —

New orders NA NA — 6,500 21,125 EPC order I — — — 6,500 16,250 EPC order II — — — — 4,875

Includes Vijayawada, Kakatiya, Kaperkheda, Konaseema and Kothagudem orders

Chandarpur and Marwa projects

Expect the company to win 2X660 MW order each in FY2012E and FY2013E


We revise our earning estimates to Rs40.2 and Rs38.8 from Rs45.8 and Rs44.3 for FY2012E and FY2013E, respectively, on lower ordering booking for FY2012 (Rs83 bn versus 93 bn earlier). We retain SELL rating on the stock (changed from REDUCE as part of change to an absolute rating system) with target price of Rs315 (8X FY2013E) versus Rs410 (10X FY2013E) earlier.

Industrials India


Revised estimates of BGR Energy, March fiscal year-ends ,2012-13E (Rs mn)

% revisionFY2012E FY2013E FY2012E FY2013E FY2012E FY2013E

Revenues 48,903 50,380 53,653 53,555 (8.9) (5.9)

EBITDA 5,413 5,605 5,918 5,975 (8.5) (6.2)EBITDA margin (%) 11.1 11.1 11.0 11.2 0.4 (0.3)Interest expense (1,500.0) (1,785.0) (1,300.0) (1,365.0) 15.4 30.8

PBT 4,371 4,213 4,976 4,811 (12.2) (12.4)PAT 2,901 2,797 3,302 3,193 (12.2) (12.4)EPS (Rs) 40.2 38.8 45.8 44.3 (12.2) (12.4)yoy growth (%)Revenues 3.0 3.0 12.6 (0.2)EBITDA 0.9 3.5 7.7 1.0EPS (10.2) (3.6) 2.2 (3.3)

New estimates Old estimates


Consolidated financials of BGR Energy, March fiscal year-ends, 2006-12E (Rs mn)

2005 2007 2008 2009 2010 2011 2012E 2013EIncome statementOperating income 2,993 7,900 15,177 19,314 30,779 47,498 48,903 50,380 Total operating expenses (2,704) (7,018) (13,623) (17,225) (27,292) (42,135) (43,490) (44,775) EBITDA 289 882 1,553 2,089 3,487 5,363 5,413 5,605 Other income (1) 3 52 317 205 223 678 676 Interest expense (61) (180) (254) (579) (538) (605) (1,500) (1,785) Depreciation (32) (89) (55) (75) (103) (173) (219) (283) Pre-tax profit 190 613 1,296 1,752 3,051 4,808 4,371 4,213 Tax (54) (213) (411) (596) (1,037) (1,577) (1,471) (1,418) Net profits (1) (2) (11) (1) 1 1 1 2 EPS (Rs) 12.6 4.0 12.1 16.0 28.0 44.8 40.2 38.8 Balance sheetShareholders funds 431 825 4,732 5,633 7,057 9,514 11,737 13,878

Equity share capital 108 108 720 720 720 722 722 722 Reserves and surplus 323 717 4,012 4,913 6,337 8,793 11,015 13,156

Loan funds 562 889 2,464 5,027 7,090 9,336 13,373 17,500 Secured 505 831 2,405 4,992 6,360 5,314 8,604 17,000 Unsecured 57 58 59 35 730 4,023 4,769 500

Total sources of funds 1,323 3,304 10,141 13,498 17,973 26,484 32,371 34,549 Net fixed assets 336 414 538 1,031 1,557 2,840 3,253 4,170 Investments 1 3 1,514 5 5 5 3,325 5,825 Net current assets (excl. cash) 801 1,958 5,019 6,310 6,130 13,190 14,100 14,646 Cash 185 929 3,070 6,152 10,280 10,449 11,693 9,907 Total application of funds 1,323 3,304 10,141 13,498 17,973 26,484 32,371 34,549 Free cash flowNet profit before tax and extraordinary items 190 613 1,296 1,752 3,051 4,808 4,371 4,213 Add: Depreciation / amortisation / non-cash prov 30 132 2,645 75 103 173 219 283 Tax paid (54) (213) (148) (205) (519) (961) (1,441) (1,380) Operating profit before Wcap. changes 165 531 3,793 1,622 2,635 4,020 3,149 3,116 Change in working capital / other adjustments (392) (1,157) (3,060) (1,292) 180 (7,060) (909) (547) Net cashflow from operating activites (226) (626) 732 330 2,815 (3,040) 2,240 2,569 Fixed Assets (121) (167) (179) (568) (629) (1,455) (633) (1,200) Investments — (2) (1,511) 1,509 - - (3,320) (2,500) Cash (used) / realised in investing activities (121) (169) (1,691) 941 (629) (1,455) (3,953) (3,700) Free cash flow (347) (795) (958) 1,271 2,186 (4,495) (1,713) (1,131) RatiosEBITDA margin (%) 9.7 11.2 10.2 10.8 11.3 11.3 11.1 11.1 Net debt/equity 0.9 (0.0) (0.1) (0.2) (0.5) (0.1) 0.1 0.5 RoAE (%) 35.9 42.4 21.2 22.3 31.8 39.0 27.3 21.8 RoACE (%) 16.2 14.9 10.5 13.0 15.1 16.3 13.2 11.9


India Industrials


APPENDIX

Ordering details of XII Plan coal based thermal projects

Agency Project Sector Awarded toXIIth plan capacity (MW) Linkage status

Abhijeet Infra Matrishri Usha Jayaswal P BHEL 540 LinkageAdhunik Power Saraikela Unit I ,2 P BHEL 540 BlockAPGENCO Krishnapatnam S BHEL 1,600 Imported coalAPGENCO Kakatiya II S BHEL 600 BlockAvantha Jhabua Power, Seoni Unit I P BHEL 600 LinkageCoastal Energen Tuticorn P Harbin 1,200 Imported coalCSEB Marwa S BHEL 1,000 LinkageCSEB Korba West S BHEL 500 LinkageDB Power Janjgir P BHEL 1,200 LinkageDVC BOKARO Replacement C BHEL 500 PendingEssar Power Salaya P Harbin, Siemens 1,200 Imported coalUPRVUNL Obra S BHEL 1,600 LinkageEssar Power Mahan P Harbin, Siemens 1,200 BlockGayatri Projects Krishnapatnam P Chinese player 1,320 BlockGMR Energy Kamlanga P Sepco 1,050 LinkageGPCL Pipavav, Videocon P BHEL 1,200 Imported coalRRVUNL Chhabra S Not ordered 1,320 Tapering LinkageGSECL Sikka Extn S BHEL 500 Imported coalGVK Goindwal Sahib P BHEL 540 LinkageHPGCL Jhajjar P China Light & Power 1,320 LinkageIndia Bulls Amravati P BHEL 1,350 LinkageIndia Bulls Nashik P BHEL 1,350 LinkageIndia Bulls Amravati P BHEL 1,350 LinkageIndia Bulls Nashik P BHEL 1,350 LinkageJaiprakash Bina P BHEL 500 LinkageJaiprakash Group Karchana P L&T 1,980 LinkageJaiprakash Group Bara P BHEL 1,980 LinkageJindal India Thermal Power Angul P BHEL 1,200 BlockJindal Power Raigarh - extn P BHEL 1,200 LinkageJP Group JP Nigrie P L&T 1,320 BlockKPCL Raichur S BHEL 1,600 PendingKPCL Bellary S BHEL 700 PendingKWPCL Korba West (Avantha Bhandar) P BHEL 300 LinkageL&T Nabha, Rajpura P L&T 2,020 PendingMAHGENCO Koradi S L&T 1,980 PendingMAHAGENCO Chandrapur S BHEL 1,000 BlockMonnet Angul, Malibrahmani P BHEL 1,050 BlockMPGENCO MALWA S BHEL 1,200 LinkageEssar Power/Navbharat Malaxmi P Harbin 1,050 LinkageNLC Tuticorin JV C BHEL 1,000 LinkageNTPC BARH-I C TPE, Russia 1,980 LinkageNTPC Ennore JV C BHEL 1,000 LinkageNTPC Rihand C BHEL 500 LinkageNTPC Nabinagar C BHEL 1,000 LinkageNTPC Vindhyachal STPP C BHEL 500 LinkageNTPC MAUDA C BHEL 500 LinkagePSU JVs BECL, Bhavnagar S BHEL 500 BlockReliance Power Sasan UMPP P-UMPP R-Infra/SEC 3,300 BlockRRVUNL KALISINDH S BGR/Dongfang 1,200 LinkageSterlite Energy Talwandi Sabo P Sepco 1,980 LinkageTata Power Mundra UMPP U3-5 P-UMPP Doosan, Toshiba 2,400 Imported coalUPRVUNL ANPARA - D S BHEL 500 Linkage


Industrials India


Ordering details of XII Plan coal based thermal projects (continued)

Agency Project Sector Awarded toXIIth plan capacity (MW) Linkage status

Visa Power Raigarh P BHEL 1,200 BlockRRVUNL Chhabra II U-3, 4 S BHEL 500 LinkageNTPC Vallur Phase 2 C BHEL 500 LinkageSurana Group Surana Power, Raichur P BHEL 420 PendingNTPC Muzaffarpur, KBUNL C BHEL 390 PendingIdeal Energy Adhunik, Bela village P BHEL 270 LinkageIdeal Energy Adhunik, Bela village P BHEL 270 PendingMPGENCO Satpura Extn S BHEL 250 LinkageNLC BARSINGSAR Ext C BHEL 250 LinkageWBPDCL DPL U8 S BHEL 250 LinkageAPGENCO Rayalseema S BHEL 600 LinkageWBPDCL Sagardighi S BHEL 1,000 BlockBajaj Group Lalitpur P BHEL 1,980 PendingBESB Barauni extn S BHEL 500 PendingAdani Power Tiroda III P SichuanMachinery 1,320 PendingAdani Power Tiroda 1/II P SichuanMachinery 660 LinkageMAHGENCO Parli Unit-3, Mah. S BHEL 250 BlockInd Barath Power Ltd. Ind Barath Energy P Cethar Vessels 700 BlockDhariwal Infrastructure Dhariwal Infrastructure P SEC 300 LinkageDhariwal Infrastructure Dhariwal Infrastructure P SEC 300 LinkageLanco Lanco Babandh P Chinese 660 LinkageEMCO EMCO Warora P SEC 300 LinkageEMCO EMCO Warora P SEC 300 PendingLanco Amarkantak Power LtdLanco Amarkantak U-3,4 P DEC/ HEC 1,320 LinkageBajaj Hindustan Multiple plants P Siemens 450 LinkageWardha Power Wardha Power P SEC 1,800 LinkageWardha Power Wardha Power P SEC 1,800 BlockLanco Lanco Banandh P China 660 PendingEssar Power Tori TPS-Jharkhand P Harbin Power 1,200 BlockMeenakshi Energy Meenakshi Energy P Thermax 300 LinkageSimhapuri Energy Simhapuri. A.P P CHINA 300 LinkageMeenakshi Energy Meenakshi Energy P Cethar Vessels 600 LinkageSterlite Balco P SEPC 600 LinkageKPCL Raichur (Edlapur) S BHEL 800 Pending


India Industrials


Details of under construction thermal projects for XI Plan

Agency Project Sector Awarded toXIth plan capacity (MW)

Linkage status

NTPC BONGAIGAON C BHEL 750 LinkageNTPC SIPAT U2,3 C KOREA+ Russia 1320 LinkageGSECL UKAI Ext. S BHEL 490 BlockIPP Mundra STPP PH 1,2 P SCMEC, China 660 Imported CoalIPP Mundra TPP PH 3 P SEPCO III, China 1980 Imported CoalIPP Mundra UMPP P Doosan and Toshiba 1600 Imported CoalNTPC Indira Gandhi - Aravali PowerC BHEL 1000 LinkageDVC KODERMA U1&2 (Delhi) C BHEL 1000 LinkageDVC MAITHON RBC C BHEL 525 LinkageKPCL BELLARY TPS U2 S BHEL 500 LinkageNTPC MAUDA C BHEL 500 LinkageMAHAGenco KHAPERKHEDA Ext. S BHEL 500 LinkageMahaGenco BHUSAWAL S BHEL 1000 LinkageIPP Tiroda TPP, Ph 1 P SCMEC, China 660 LinkageIPP Tiroda TPP, Ph 2 P SCMEC, China 660 LinkageNTPC Vindhyachal STPP C BHEL 500 LinkageMPGENCO SATPURA Extn S BHEL 250 LinkageLANCO ULTRA Mega Sasan P Reliance energy 660 BLOCKIPP Sterlite TPP Energy P SEPCO III, China 1200 PendingIPP Jallipa Kapurdi, Raj West PowP Dongfang 810 LinkageNLC NEYVELI - II C BHEL 500 LigniteTNEB NORTH Chennai Ext S BHEL 1200 LinkageTNEB METTUR S BGR 600 LinkageNTPC Vallur Phase I C BHEL 1000 LinkageUPRVUNL PARICHHA Stg II S BHEL 500 LinkageUPRVUNL HARDUAGANJ S BHEL 500 LinkageUPRVUNL ANPARA-D S BHEL 500 LinkageLANCO ANPARA-C P Dongfang 1200 LinkageNTPC Rihand C BHEL 500 LinkageIPP Rosa (Ph.-II) P Shanghai Electric 600 LinkageDVC DURGAPUR Steel C BHEL 1000 LinkageDVC Raghunathpur C REL-Chinese 1200 Block


For Private Circulation Only.

Demand-related inflationary pressures remain strong

Manufactured products inflation rose to 7.79% in August from 7.49% in July, with the index rising by 0.44% mom. The break-up of manufactured products suggest a continued pass-through of firm global commodity prices onto domestic prices as segments such as ‘base metals and alloys and metal products’, ‘chemical and chemical products’, ‘textiles’ etc. continue to experience high rates of inflation. As a result, non-food manufactured inflation, which is closely tracked by the RBI to gauge demand-side pressures, rose to 7.74% in August from 7.48% in July. With much of the August decline in global commodity prices being reversed, and INR also sharply weaker, there is unlikely to be any immediate comfort on commodity-related inflation.

Primary articles inflation firms, so does fuel inflation

As indicated by the weekly inflation data, primary articles inflation rose to 12.58% in August from 11.30% in July, with the index rising by 0.86% mom. Trends in food articles inflation remain worrisome, with inflation firming to 9.6% from 8.2% in July. While inflation in protein-related food items has remained stubbornly high owing to the structural factors, the somewhat benign trends that had appeared in pulses as well as vegetable (combined weight 17% in food articles) have reversed over the past two months. Earlier today, Agriculture Secretary Mr. P.K. Basu indicated that the output of lentils in 2011-12E could drop, which could result in renewed price pressures. Non-food articles inflation also accelerated in August to 17.75% from 15.51% in July, on the back of a 37% rise in fibres index (jumped by 5.8% mom after declining by 29% in the past 3 months) and a 16.3% rise in oilseeds index (rose by 3% mom).

Fuel and power index rose to 12.84% in August from 12.04% in July, as a result of an upward revision in the non-administered fuel basket.

RBI to retain its anti-inflation stance, hike repo rate on September 16

Headline inflation has risen to a 13-month high in August and although we expect this to be the peak in inflation, headline inflation will in all probability remain above 9% till November and moderate gradually thereafter. This first big dose of moderation will likely be on account of a favorable base effect and the hope that late rains such as that of the last year do not pose damage to some key crop items such as fruits and vegetables. Our model also assumes that global commodity prices will remain range-bound. However, the risk in this assumption is that further monetary policy easing by developed economy central banks could boost commodity prices, and negate some of the positive impact of a high base. Additionally, downside risks to growth seem exaggerated to us, as tax collections remain buoyant and service sector indicators remain steady. In the July policy review, the RBI had indicated that its stance will change once a sustainable downturn in inflation is seen. There is no such sign immediately and hence, we do not expect any change in the RBI’s anti-inflationary policy stance. We thus continue to look for a 25 bps hike by the RBI on September 16, 2011 and thereafter being on an extended pause.

Economy.dot

Economy Inflation

August WPI: No respite yet. Headline inflation for August was at 9.78%, in line with our expectations and higher than the July number of 9.22%. Encouragingly, the June inflation rate was revised only modestly to 9.51% from the provisional reading of 9.44%, in contrast to the earlier trends of sharp revisions. However, from the RBI’s policy perspective, the current print offers no comfort as demand-related pressures appear to stay intact. Non-food manufacturing inflation edged up to 7.74% from 7.48% in July. Our calculations indicate that inflation could have peaked in August, though pressures are unlikely to come off immediately. We continue to expect the RBI to raise the repo rate by 25 bps on September 16.

INDIA

SEPTEMBER 14, 2011

UPDATE

BSE-30: 16,710

QUICK NUMBERS

• August WPI at 9.78% from 9.22% in July but likely to have peaked

• Non-food manufacturing inflation accelerates to 7.74% from 7.48% in July

• Containing inflationary pressures to remain the focus of RBI; repo rate likely to go up by 25 bps in September 16 policy meeting

India Economy

22 KOTAK ECONOMIC RESEARCH

Exhibit 1: Headline inflation has been exceptionally sticky in the 9+ range since June 2008 Headline WPI and its main components, growth rates (% yoy)

(15)

(10)

(5)

0

5

10

15

20

25

Apr

-07

Aug

-07

Dec

-07

Apr

-08

Aug

-08

Dec

-08

Apr

-09

Aug

-09

Dec

-09

Apr

-10

Aug

-10

Dec

-10

Apr

-11

Aug

-11

WPI Primary articles Fuel Manufactured products

Source: CEIC, Kotak Economic Research

Exhibit 2: With downside to global commodity prices appearing limited, domestic manufactured goods inflation is likely to stabilize Non-food manufacturing index (LHS, % yoy), CRB Index (RHS, monthly average % yoy)

(2)

0

2

4

6

8

10

Apr

-05

Aug

-05

Dec

-05

Apr

-06

Aug

-06

Dec

-06

Apr

-07

Aug

-07

Dec

-07

Apr

-08

Aug

-08

Dec

-08

Apr

-09

Aug

-09

Dec

-09

Apr

-10

Aug

-10

Dec

-10

Apr

-11

Aug

-11

(50)

(40)

(30)

(20)

(10)

0

10

20

30

40

50Non food manufacturing (LHS) CRB Index (RHS)

Source: CEIC, Bloomberg, Kotak Economic Research

Economy

KOTAK ECONOMIC RESEARCH 23

Exhibit 3: RBI is likely to continue with its anti-inflation policy stance as demand related inflationary pressures remain intact Repo rate (LHS, %), Non-food manufacturing inflation (RHS, % yoy)

5

6

7

8

9

10

Apr

-06

Aug

-06

Dec

-06

Apr

-07

Aug

-07

Dec

-07

Apr

-08

Aug

-08

Dec

-08

Apr

-09

Aug

-09

Dec

-09

Apr

-10

Aug

-10

Dec

-10

Apr

-11

Aug

-11

(3)

(1)

1

3

5

7

9Repo rate (LHS) Non food manufactured products (RHS)

Source: CEIC, Kotak Economic Research

Exhibit 4: Headline WPI is likely to have peaked in August; inflation to remain sticky till November before easing from December on a favorable base Monthly WPI inflation trajectory, (%)

6.2

9.78

7.3

(2)

0

2

4

6

8

10

12

Apr

-07

Jul-0

7

Oct

-07

Jan-

08

Apr

-08

Jul-0

8

Oct

-08

Jan-

09

Apr

-09

Jul-0

9

Oct

-09

Jan-

10

Apr

-10

Jul-1

0

Oct

-10

Jan-

11

Apr

-11

Jul-1

1

Oct

-11

Jan-

12

Inflation (without fuel price hikes) Inflation (with fuel price hikes)

Note: (1) Our scenario without fuel price increases assumes no change in prices of regulated fuels through FY2012E.(2) Our scenario on fuel price increase assumes (a) Rs3/liter price increase in diesel in November 2011, (b) Rs50/cylinder increase in LPG prices in November 2011 and (c) Rs2/liter increase in kerosene prices in November 2011. Source: CEIC, Kotak Economic Research estimates

KO

TAK INSTITUTIO

NAL EQ

UITIES RESEARCH 24

In

dia D

aily Sum

mary - Sep

temb

er 1

Ind

ia Daily Su

mm

ary - Septem

ber 15, 2011

Kotak Institutional Equities: Valuation summary of key Indian companies

14-Sep-11 Mkt cap.O/S

shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) RoE (%)Target price Upside ADVT-3mo

Company Price (Rs) Rating (Rs mn) (US$ mn) (mn) 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E (Rs) (%) (US$ mn)

Automobiles

Ashok Leyland 26 SELL 68,912 1,446 2,661 2.4 2.1 2.4 68.1 (11.9) 12.8 10.9 12.4 11.0 7.6 8.0 7.2 1.5 1.5 1.4 3.9 3.9 3.9 21.8 17.4 18.2 26 0.4 4.4

Bajaj Auto 1,629 SELL 471,519 9,897 289 90.4 102.5 113.5 43.9 13.5 10.7 18.0 15.9 14.3 13.7 12.4 11.5 9.5 7.2 5.6 2.5 2.5 2.5 84.9 51.6 43.7 1,590 (2.4) 13.9

Bharat Forge 279 ADD 66,124 1,388 237 12.5 16.4 20.3 1,402.1 30.8 23.5 22.2 17.0 13.7 10.4 8.4 7.1 3.0 2.5 2.1 1.2 — — 8.2 14.1 15.2 320 14.8 3.0

Exide Industries 131 SELL 111,648 2,343 850 7.5 6.8 7.9 18.0 (8.9) 17.0 17.6 19.4 16.5 12.7 13.8 12.0 4.1 3.5 3.0 1.1 1.0 1.0 25.5 19.4 19.5 120 (8.6) 6.0

Hero Honda 2,194 SELL 438,072 9,194 200 99.3 111.3 128.2 (11.1) 12.1 15.1 22.1 19.7 17.1 15.8 14.7 12.0 9.4 9.6 9.2 4.8 3.2 3.2 56.5 63.6 60.2 1,795 (18.2) 20.7

Mahindra & Mahindra 793 ADD 487,178 10,225 614 41.7 46.9 52.2 22.7 12.5 11.2 19.0 16.9 15.2 14.6 12.3 10.9 4.6 3.8 3.2 1.4 1.2 1.2 27.3 24.5 22.6 900 13.4 31.0

Maruti Suzuki 1,095 BUY 316,230 6,637 289 79.2 79.9 100.3 (8.4) 0.9 25.5 13.8 13.7 10.9 8.5 8.1 6.0 2.3 2.0 1.7 0.7 0.7 0.7 17.6 15.4 16.7 1,475 34.8 11.5

Tata Motors 143 ADD 473,813 9,945 3,325 27.2 23.1 23.9 737.9 (15.0) 3.6 5.2 6.2 6.0 4.1 4.7 4.5 2.4 1.8 1.4 2.7 2.0 2.0 66.1 34.2 27.3 180 26.3 54.8

Automobiles Cautious 2,433,495 51,076 88.4 (2.3) 10.7 12.1 12.4 11.2 8.1 8.2 7.3 3.9 3.2 2.6 2.4 1.9 1.9 31.7 25.6 23.6

Banks/Financial Institutions

Andhra Bank 120 BUY 66,870 1,404 560 22.6 24.2 27.5 5.0 6.9 13.5 5.3 4.9 4.3 — — — 1.0 0.9 0.8 4.6 4.9 5.6 23.2 19.4 19.2 190 59.0 2.0

Axis Bank 1,089 BUY 446,961 9,381 411 82.5 98.9 119.7 33.0 19.8 21.1 13.2 11.0 9.1 — — — 2.4 2.0 1.7 1.3 1.5 1.9 19.3 19.7 20.3 1,700 56.1 48.5

Bank of Baroda 751 BUY 295,018 6,192 393 108.0 109.5 129.1 29.1 1.4 17.9 7.0 6.9 5.8 — — — 1.5 1.3 1.1 2.6 2.6 3.1 25.9 20.4 20.5 1,250 66.4 7.3

Bank of India 325 BUY 177,600 3,728 547 45.5 54.0 70.7 37.4 18.7 30.9 7.1 6.0 4.6 — — — 1.1 1.0 0.8 2.5 3.0 3.9 17.3 17.2 19.5 470 44.8 6.4

Canara Bank 425 BUY 188,253 3,951 443 90.9 86.3 108.7 23.3 (5.0) 25.9 4.7 4.9 3.9 — — — 1.0 0.9 0.7 2.6 2.8 2.8 23.2 17.7 19.0 600 41.2 8.0

Corporation Bank 443 BUY 65,577 1,376 148 95.4 93.4 114.1 16.3 (2.1) 22.2 4.6 4.7 3.9 — — — 0.9 0.8 0.7 4.5 4.4 5.4 21.9 18.1 19.2 630 42.3 0.8

Federal Bank 369 BUY 63,168 1,326 171 34.3 44.5 56.2 26.3 29.8 26.1 10.8 8.3 6.6 — — — 1.3 1.1 1.0 2.3 3.0 3.8 12.0 14.2 16.0 500 35.4 4.5

HDFC 645 REDUCE 946,297 19,861 1,467 24.1 27.8 31.9 22.4 15.6 14.6 26.8 23.2 20.2 — — — 5.5 4.8 3.7 1.4 1.6 1.9 21.7 22.1 21.5 730 13.2 39.5

HDFC Bank 479 ADD 1,113,983 23,381 2,326 16.9 21.9 27.6 31.0 29.5 26.5 28.4 21.9 17.3 — — — 4.4 3.8 3.3 0.7 0.9 1.1 16.7 18.6 20.2 560 16.9 34.6

ICICI Bank 864 BUY 995,230 20,888 1,152 44.7 58.0 63.1 23.9 29.7 8.8 19.3 14.9 13.7 — — — 1.8 1.7 1.6 1.6 2.0 2.2 9.7 11.7 11.8 1,100 27.3 81.5

IDFC 110 BUY 165,426 3,472 1,509 8.8 9.9 12.0 4.6 12.8 21.6 12.5 11.1 9.1 — — — 1.6 1.3 1.2 2.0 1.8 2.2 14.7 13.1 13.9 150 36.8 26.0

India Infoline 72 SELL 23,406 491 327 7.4 4.8 6.5 (9.3) (34.5) 33.8 9.7 14.8 11.1 — — — 1.4 1.2 1.1 4.3 1.4 1.9 12.9 8.7 10.3 70 (2.2) 1.4

Indian Bank 204 BUY 87,738 1,841 430 38.8 42.0 50.9 10.5 8.2 21.2 5.3 4.9 4.0 — — — 1.1 0.9 0.8 3.7 3.9 4.7 22.3 20.4 21.0 300 47.0 1.7

Indian Overseas Bank 101 BUY 62,494 1,312 619 17.3 21.1 30.8 33.6 22.0 45.4 5.8 4.8 3.3 — — — 0.8 0.7 0.6 4.9 4.2 4.6 12.7 13.3 17.0 190 88.1 1.6

IndusInd Bank 260 BUY 120,941 2,538 466 12.4 15.2 18.2 45.2 22.6 19.9 20.9 17.1 14.3 — — — 3.3 2.9 2.5 0.8 0.9 1.1 20.8 17.7 17.9 325 25.2 3.7

J&K Bank 812 ADD 39,359 826 48 126.9 141.8 152.8 20.1 11.8 7.7 6.4 5.7 5.3 — — — 1.1 1.0 0.9 3.2 3.6 3.9 19.0 18.4 17.3 950 17.0 0.7

LIC Housing Finance 204 ADD 97,104 2,038 475 20.5 22.9 27.5 47.2 11.4 20.4 10.0 8.9 7.4 — — — 2.5 2.1 1.7 2.2 2.4 2.9 25.8 23.7 23.9 260 27.2 22.4

Mahindra & Mahindra Financial 640 BUY 65,590 1,377 102 45.2 56.4 69.2 26.1 24.8 22.7 14.2 11.3 9.3 — — — 2.7 2.3 2.0 1.6 1.9 2.4 22.0 21.4 22.3 825 28.9 1.3

Muthoot Finance 173 ADD 64,069 1,345 371 15.7 19.0 24.5 108.4 20.5 29.0 11.0 9.1 7.0 — — — 4.8 2.2 1.7 — — — 51.5 33.0 26.8 220 27.5 —

Oriental Bank of Commerce 294 BUY 85,749 1,800 292 51.5 55.6 65.4 13.7 8.0 17.6 5.7 5.3 4.5 — — — 0.8 0.7 0.7 3.5 3.8 4.5 15.5 13.9 14.7 430 46.3 3.8

PFC 144 BUY 190,203 3,992 1,320 22.8 23.4 28.3 11.1 2.4 21.3 6.3 6.2 5.1 — — — 1.3 0.9 0.8 2.8 3.2 3.9 18.4 17.0 16.7 225 56.1 16.4

Punjab National Bank 958 BUY 303,633 6,373 317 140.0 163.0 201.5 13.0 16.5 23.6 6.8 5.9 4.8 — — — 1.5 1.3 1.1 2.3 3.5 4.3 24.4 23.5 24.2 1,500 56.5 7.0

Reliance Capital 414 REDUCE 101,836 2,137 246 9.3 16.5 24.8 (25.3) 77.0 50.4 44.5 25.1 16.7 — — — 1.5 1.4 1.3 0.9 1.6 2.4 3.3 5.7 8.3 470 13.6 20.1

Rural Electrification Corp. 171 BUY 168,942 3,546 987 26.0 29.0 32.5 28.1 11.5 12.3 6.6 5.9 5.3 — — — 1.3 1.2 1.0 4.4 4.9 5.5 21.5 20.8 20.4 240 40.3 12.4

Shriram Transport 669 REDUCE 149,258 3,133 223 55.1 65.6 75.3 40.8 19.0 14.8 12.1 10.2 8.9 — — — 3.1 2.6 2.2 1.0 2.0 2.3 28.1 26.8 25.2 700 4.6 8.7

SKS Microfinance 284 RS 20,915 439 74 15.7 (39.1) 3.9 (41.8) (349.4) (109.9) 18.1 (7.3) 73.2 — — — 1.2 1.4 1.3 — — — 8.3 (17.4) 1.9 — — 9.3

State Bank of India 1,827 BUY 1,159,984 24,346 635 130.2 195.6 256.1 (9.9) 50.3 30.9 14.0 9.3 7.1 — — — 1.8 1.6 1.3 1.9 2.0 2.1 12.6 17.8 20.0 2,750 50.5 111.6

Union Bank 228 BUY 119,653 2,511 524 39.5 50.2 60.4 (3.9) 27.1 20.5 5.8 4.5 3.8 — — — 1.1 0.9 0.8 4.1 5.2 6.2 20.9 21.9 22.5 425 86.2 4.9

Yes Bank 277 BUY 96,004 2,015 347 21.5 26.2 32.3 43.2 22.1 23.3 12.9 10.5 8.6 — — — 2.5 2.1 1.7 0.9 1.1 1.4 21.7 21.7 22.2 420 51.9 16.6

Banks/Financial Institutions Attractive 7,481,259 157,021 20.1 19.8 23.0 12.2 10.2 8.3 — — — 2.0 1.7 1.5 1.8 2.1 2.4 16.0 16.6 17.5

Cement

ACC 1,047 SELL 196,786 4,130 188 55.6 60.1 72.7 (33.2) 8.2 20.9 18.9 17.4 14.4 11.5 9.7 7.6 2.9 2.6 2.3 3.4 2.2 2.2 17.5 17.3 18.1 980 (6.4) 5.9

Ambuja Cements 146 SELL 222,115 4,662 1,522 7.9 7.8 9.8 (1.5) (0.5) 25.5 18.5 18.6 14.8 11.3 10.3 7.9 2.8 2.6 2.3 1.4 1.5 1.6 16.6 14.8 16.9 135 (7.5) 6.2

Grasim Industries 2,212 BUY 202,827 4,257 92 233.3 259.5 289.3 (22.5) 11.2 11.5 9.5 8.5 7.6 6.1 5.2 4.3 1.4 1.2 1.1 1.6 1.6 1.6 15.8 15.3 15.0 2,900 31.1 3.7

India Cements 73 ADD 22,362 469 307 1.9 8.3 9.2 (81.2) 339.0 10.4 38.5 8.8 7.9 14.2 5.7 5.1 0.5 0.5 0.5 2.2 4.4 4.4 1.4 6.2 6.5 82 12.6 1.6

Shree Cement 1,686 REDUCE 58,734 1,233 35 57.2 83.1 132.9 (72.5) 45.5 59.8 29.5 20.3 12.7 6.6 6.2 4.3 3.1 2.8 2.5 0.6 0.6 0.6 10.7 14.5 20.7 1,730 2.6 1.3

UltraTech Cement 1,102 ADD 302,074 6,340 274 44.9 73.1 85.9 (49.2) 63.0 17.5 24.6 15.1 12.8 12.0 8.0 6.7 2.4 2.1 1.8 0.5 0.5 0.5 16.7 17.3 17.3 1,220 10.7 3.5

Cement Neutral 1,004,897 21,091 (23.5) 23.6 18.8 17.1 13.9 11.7 9.1 7.2 5.9 2.1 1.9 1.7 1.5 1.4 1.4 12.3 13.5 14.2

Price/BV (X) Dividend yield (%)

Source: Company, Bloomberg, Kotak Institutional Equities estimates

In

dia D

aily Sum

mary - Sep

temb

er 15, 2011

25

KOTAK IN

STITUTIO

NAL EQ

UITIES RESEARCH



shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X) RoE (%)Target price Upside ADVT-3mo


Consumer products

Asian Paints 3,128 SELL 300,071 6,298 96 80.8 94.6 111.4 13.0 17.1 17.7 38.7 33.1 28.1 25.8 21.0 17.2 14.6 11.3 9.1 1.0 0.9 1.1 43.9 40.0 36.8 2,900 (7.3) 5.4

Colgate-Palmolive (India) 977 SELL 132,892 2,789 136 29.6 34.1 38.8 (4.9) 15.0 14.1 33.0 28.7 25.2 28.7 25.1 21.0 34.6 35.2 28.1 2.3 3.0 2.8 113.4 121.6 124.2 900 (7.9) 2.3

Dabur India 108 SELL 187,700 3,940 1,740 3.3 3.7 4.4 12.8 14.1 18.8 33.0 28.9 24.4 26.6 21.9 18.4 14.3 11.1 8.7 1.1 1.2 1.4 51.2 43.8 40.6 110 2.0 3.0

GlaxoSmithkline Consumer (a) 2,377 ADD 99,981 2,098 42 71.3 83.2 104.0 28.8 16.7 25.0 33.3 28.6 22.9 23.9 20.6 17.3 10.7 9.1 7.7 2.1 1.6 1.9 32.2 33.5 35.5 2,900 22.0 1.0

Godrej Consumer Products 426 ADD 137,688 2,890 324 14.9 18.4 22.7 31.3 23.4 23.8 28.6 23.2 18.7 24.3 17.0 13.0 8.0 5.7 4.5 1.2 0.8 0.8 35.9 28.7 27.0 510 19.9 2.7

Hindustan Unilever 353 ADD 761,417 15,981 2,159 9.9 11.3 13.3 4.8 14.1 17.7 35.7 31.3 26.6 30.4 26.6 21.8 28.9 25.0 21.6 2.2 2.7 3.1 66.3 85.9 87.5 370 4.9 19.3

ITC 199 ADD 1,531,910 32,153 7,681 6.4 8.0 9.1 20.7 24.9 13.1 31.1 24.9 22.0 20.6 16.8 14.6 9.1 7.8 6.8 2.2 1.9 2.3 33.2 35.5 34.4 230 15.3 34.0

Jubilant Foodworks 885 SELL 57,883 1,215 65 11.2 16.6 24.1 99.6 48.6 45.1 79.0 53.2 36.6 48.2 29.5 20.6 30.2 19.3 12.6 — — — 46.6 44.2 41.6 750 (15.2) 32.7

Jyothy Laboratories 170 ADD 13,732 288 81 10.5 9.4 11.8 (5.0) (10.1) 25.2 16.3 18.1 14.4 13.6 12.2 10.2 2.0 1.9 1.8 3.4 2.7 3.4 12.3 11.1 12.9 220 29.2 0.4

Marico 160 ADD 97,543 2,047 612 4.2 5.4 7.1 10.9 27.3 32.6 37.8 29.7 22.4 25.1 20.3 15.5 10.4 8.1 6.3 0.5 0.6 0.8 32.8 31.3 32.2 185 16.0 1.3

Nestle India (a) 4,274 SELL 412,052 8,648 96 86.8 103.6 123.2 16.7 19.3 18.9 49.2 41.3 34.7 32.8 26.8 22.1 48.2 35.0 26.4 1.1 1.4 1.7 116.5 98.3 86.8 3,500 (18.1) 2.1

Tata Global Beverages 92 ADD 56,893 1,194 618 4.0 6.0 7.1 (34.6) 52.6 17.6 23.2 15.2 13.0 9.0 7.7 6.4 1.1 1.1 1.1 2.2 3.3 3.9 6.5 9.6 10.8 120 30.4 4.6

Titan Industries 212 ADD 188,255 3,951 888 4.9 7.4 8.8 71.7 51.5 17.8 43.1 28.5 24.2 31.5 19.8 16.2 17.3 12.3 9.3 0.6 1.1 1.4 47.8 50.5 44.0 240 13.2 27.8

United Spirits 877 ADD 110,165 2,312 126 29.5 39.2 50.6 8.3 32.8 29.0 29.7 22.4 17.3 15.5 11.9 10.2 2.5 2.3 2.0 0.4 0.3 0.4 9.1 10.7 12.5 1,100 25.4 5.3

Consumer products Cautious 4,088,181 85,805 16.3 21.8 17.2 34.2 28.0 23.9 23.8 19.3 16.2 10.5 8.9 7.7 1.7 1.8 2.1 30.8 31.9 32.0

Constructions

IVRCL 43 BUY 11,348 238 267 5.9 5.7 6.6 (25.2) (4.1) 15.6 7.2 7.5 6.5 6.0 5.8 5.6 0.6 0.5 0.5 0.9 0.9 0.9 8.2 7.3 7.9 75 76.5 5.4

Nagarjuna Construction Co. 65 BUY 16,729 351 257 6.4 5.9 7.7 (29.7) (7.8) 30.8 10.2 11.1 8.5 8.2 7.8 7.2 0.7 0.7 0.6 3.1 3.1 3.1 7.1 6.3 7.8 100 53.4 1.4

Punj Lloyd 60 REDUCE 20,426 429 340 (1.5) 5.5 7.4 (56.6) (467.8) 34.9 (40.5) 11.0 8.2 13.1 5.8 5.1 0.7 0.6 0.6 (0.1) 0.8 1.1 (1.7) 6.1 7.7 65 8.1 8.9

Sadbhav Engineering 136 BUY 20,368 427 150 7.8 10.8 11.9 51.0 38.9 10.6 17.5 12.6 11.4 10.4 8.3 7.6 3.2 2.6 2.1 0.4 0.4 0.4 18.1 20.4 18.6 180 32.5 0.2

Construction Attractive 68,871 1,446 (1.1) 67.6 23.4 17.8 10.6 8.6 9.0 6.6 6.0 0.9 0.8 0.7 1.0 1.3 1.3 4.8 7.6 8.7

Energy

Aban Offshore 393 BUY 17,101 359 44 116.2 95.3 107.2 9.0 (18.0) 12.4 3.4 4.1 3.7 6.7 6.7 6.4 0.8 0.7 0.6 0.9 1.0 1.1 29.2 19.4 18.0 700 78.1 9.2

Bharat Petroleum 660 ADD 238,761 5,011 362 45.7 58.9 58.9 (20.7) 28.9 0.1 14.5 11.2 11.2 10.1 6.8 6.7 1.6 1.5 1.3 2.1 2.9 2.9 10.8 12.8 11.8 800 21.1 7.9

Cairn india 288 REDUCE 548,323 11,509 1,902 33.3 45.8 49.7 501.1 37.4 8.6 8.7 6.3 5.8 6.3 4.5 3.6 1.3 1.2 1.1 — 1.7 5.2 16.9 19.8 19.2 295 2.3 13.9

Castrol India (a) 507 SELL 125,284 2,630 247 19.8 21.9 22.3 28.5 10.8 1.6 25.6 23.1 22.7 16.4 15.4 15.0 24.3 22.1 21.0 3.0 3.4 3.6 100.2 100.2 94.7 425 (16.1) 1.9

GAIL (India) 416 BUY 527,497 11,071 1,268 28.2 34.3 36.0 13.8 21.8 4.9 14.8 12.1 11.6 9.3 8.9 7.9 2.5 2.2 1.9 1.8 2.2 2.4 17.5 18.4 16.5 560 34.7 9.9

GSPL 108 SELL 60,871 1,278 563 9.0 8.5 8.4 23.1 (6.1) (0.1) 12.0 12.8 12.8 7.6 7.4 7.2 2.7 2.2 2.0 0.9 1.6 2.3 25.5 19.1 16.4 92 (15.0) 5.5

Hindustan Petroleum 367 ADD 124,434 2,612 339 45.7 26.3 39.3 (11.4) (42.4) 49.5 8.0 14.0 9.3 3.2 3.8 3.1 0.8 0.8 0.7 3.8 2.2 3.3 10.1 5.3 7.4 460 25.3 8.7

Indian Oil Corporation 320 BUY 777,551 16,320 2,428 31.8 33.1 35.7 (35.4) 4.4 7.6 10.1 9.7 9.0 8.0 7.0 5.9 1.3 1.2 1.1 3.0 3.2 3.4 12.9 12.5 12.4 420 31.1 4.4

Oil India 1,315 BUY 316,168 6,636 240 120.0 171.7 190.1 4.2 43.1 10.7 11.0 7.7 6.9 5.5 3.1 2.5 1.9 1.6 1.4 2.9 4.2 4.6 16.2 20.1 19.4 1,750 33.1 1.7

Oil & Natural Gas Corporation 261 BUY 2,231,279 46,831 8,556 24.7 37.2 40.8 7.4 50.8 9.7 10.6 7.0 6.4 4.0 3.0 2.4 1.5 1.3 1.2 3.4 4.6 5.4 14.3 19.1 18.3 380 45.7 27.1

Petronet LNG 177 SELL 132,900 2,789 750 8.1 11.5 11.4 50.3 41.3 (0.7) 21.9 15.5 15.6 12.5 10.0 10.2 4.4 3.6 3.0 1.1 1.7 1.7 20.9 24.6 20.2 125 (29.5) 10.9

Reliance Industries 825 BUY 2,460,517 51,643 2,981 62.0 67.4 74.9 24.8 8.8 11.0 13.3 12.2 11.0 7.3 6.5 5.6 1.5 1.3 1.2 1.0 1.1 1.2 13.0 12.7 12.6 1,045 26.6 91.0

Energy Neutral 7,560,687 158,688 11.8 25.6 9.5 11.2 9.0 8.2 6.1 5.0 4.2 1.6 1.4 1.2 2.1 2.7 3.3 13.8 15.4 15.1

Industrials

ABB 870 SELL 184,435 3,871 212 3.0 21.1 27.3 (82.2) 606.1 29.6 291.7 41.3 31.9 213.0 27.9 20.9 7.6 6.6 5.6 0.2 0.4 0.4 2.6 17.1 19.1 700 (19.6) 1.6

BGR Energy Systems 322 SELL 23,237 488 72 44.8 40.4 39.0 60.0 (9.7) (3.5) 7.2 8.0 8.3 4.9 4.4 4.1 2.4 2.0 1.7 3.1 2.5 2.4 39.0 27.4 21.9 315 (2.2) 3.9

Bharat Electronics 1,572 ADD 125,788 2,640 80 107.3 121.7 135.5 11.6 13.5 11.3 14.7 12.9 11.6 6.7 5.6 4.1 2.4 2.1 1.9 1.4 1.6 1.6 18.2 17.6 17.1 1,875 19.2 1.4

Bharat Heavy Electricals 1,733 REDUCE 848,314 17,805 490 122.8 126.6 137.4 39.7 3.0 8.5 14.1 13.7 12.6 9.5 8.7 7.9 4.2 3.4 2.8 1.8 1.6 1.7 33.3 27.6 24.6 1,875 8.2 31.9

Crompton Greaves 157 BUY 100,651 2,113 642 14.3 10.6 13.5 11.5 (25.8) 26.7 11.0 14.8 11.7 7.1 8.2 6.2 3.1 2.6 2.2 1.5 1.0 1.2 31.7 19.1 20.5 210 33.8 17.5

Larsen & Toubro 1,609 REDUCE 979,427 20,557 609 67.7 79.6 98.2 18.1 17.5 23.4 23.8 20.2 16.4 16.5 12.5 10.7 3.7 3.1 2.6 0.9 0.9 0.9 17.0 16.6 17.2 1,800 11.9 58.8

Maharashtra Seamless 370 BUY 26,086 547 71 46.1 41.6 46.7 19.3 (9.7) 12.3 8.0 8.9 7.9 4.3 4.4 3.6 1.0 0.9 0.9 2.2 2.2 2.5 13.3 11.1 11.5 460 24.4 0.1

Siemens 847 SELL 285,676 5,996 337 22.4 28.9 32.5 39.5 28.8 12.3 37.8 29.3 26.1 22.3 18.8 16.3 8.8 7.2 5.9 0.6 0.7 0.8 25.2 26.9 24.8 830 (2.0) 3.1

Suzlon Energy 39 SELL 68,250 1,432 1,746 (6.0) 1.8 3.2 (4.6) (129.2) 80.6 (6.5) 22.2 12.3 20.1 7.5 6.5 1.0 1.0 0.9 - 0.5 0.5 (15.8) 4.4 7.7 40 2.3 20.0

Tecpro Systems 240 ADD 12,101 254 50 27.0 29.4 32.7 24.2 8.9 11.4 8.9 8.2 7.3 5.6 5.7 5.0 1.8 1.6 1.3 — — — 26.8 20.5 19.6 300 25.1 0.2

Thermax 497 REDUCE 59,241 1,243 119 31.6 33.0 35.1 44.3 4.4 6.3 15.7 15.1 14.2 10.5 9.5 8.8 4.5 3.8 3.2 1.8 2.0 2.0 31.5 27.2 24.3 550 10.6 1.8

Voltas 117 ADD 38,796 814 331 9.8 9.7 10.5 (14.3) (1.1) 8.8 12.0 12.1 11.1 7.2 6.9 5.7 2.8 2.5 2.0 1.7 2.6 (0.0) 26.1 21.6 19.9 150 27.9 4.0

Industrials Cautious 2,752,002 57,761 25.5 20.5 16.0 20.9 17.3 14.9 13.2 10.7 9.3 3.7 3.1 2.7 1.2 1.1 1.2 17.7 18.0 17.8

Infrastructure

Container Corporation 915 ADD 118,893 2,495 130 63.5 70.0 77.9 4.9 10.3 11.2 14.4 13.1 11.7 9.3 8.1 7.1 2.4 2.1 1.8 1.6 1.8 2.0 17.6 16.9 16.6 1,150 25.7 0.8

GMR Infrastructure 28 RS 101,404 2,128 3,667 (0.0) (0.4) 0.5 (102.0) 3,980.8 (243.5) (3,190.0) (78.2) 54.5 12.8 11.0 8.9 0.9 0.9 0.9 — — — (0.0) (2.0) 2.8 — — 2.5

Gujarat Pipavav Port 67 BUY 28,378 596 424 (1.2) 1.2 2.6 (65.8) (201.6) 115.2 (55.8) 54.9 25.5 28.6 16.9 11.4 3.9 3.6 3.2 — — — (9.1) 9.4 13.6 78 16.4 0.6

GVK Power & Infrastructure 17 RS 26,847 563 1,579 1.0 1.0 0.3 (0.6) 1.6 (73.4) 17.3 17.1 64.1 18.1 16.6 19.6 0.8 0.8 0.8 — 1.8 2.1 4.7 4.6 1.2 — — 3.3

IRB Infrastructure 167 ADD 55,538 1,166 332 13.6 11.3 11.0 17.4 (16.9) (2.6) 12.3 14.8 15.2 8.2 8.2 7.0 2.2 1.6 1.3 1— — — 19.3 12.6 9.6 185 10.7 6.3

Mundra Port and SEZ 149 ADD 300,701 6,311 2,017 4.6 6.8 10.5 36.3 50.3 53.2 32.8 21.8 14.2 26.5 17.8 12.6 6.9 5.5 4.2 — — — 23.2 28.0 33.5 175 17.4 5.4

Infrastructure Cautious 631,760 13,260 12.1 19.6 39.6 27.5 23.0 16.5 15.2 12.4 10.1 2.3 2.1 1.9 0.4 0.4 0.5 8.5 9.2 11.6

Dividend yield (%)


KO

TAK INSTITUTIO

NAL EQ

UITIES RESEARCH 26

In

dia D

aily Sum

mary - Sep

temb

er 1

Ind

ia Daily Su

mm

ary - Septem

ber 15, 2011





Media

DB Corp 225 BUY 41,183 864 183 14.1 13.0 16.1 32.7 (8.1) 24.2 15.9 17.3 14.0 10.3 10.2 8.2 5.0 4.4 3.9 1.8 2.7 3.6 35.0 26.9 29.5 330 46.9 0.8

DishTV 76 ADD 80,348 1,686 1,062 (1.8) 0.0 1.3 (27.5) (101.9) 3,944.0 (42.3) 2,284.0 56.5 37.6 17.3 11.6 38.2 37.6 22.6 — — — (62.3) 1.7 49.9 100 32.2 8.2

Eros International 236 ADD 22,907 481 97 11.8 15.8 19.9 19.0 34.0 25.9 20.0 15.0 11.9 14.0 10.6 7.7 3.4 2.7 2.2 — — — 24.9 20.2 20.5 250 5.8 2.4

Hindustan Media Ventures 143 BUY 10,501 220 73 7.3 9.0 12.1 198.7 22.8 35.0 19.5 15.9 11.8 9.5 8.3 6.0 2.6 2.2 2.0 — — 2.1 22.3 15.1 17.7 220 53.7 0.2

HT Media 142 ADD 33,323 699 235 7.7 8.9 11.0 26.3 15.3 23.6 18.4 15.9 12.9 8.6 7.3 5.6 2.4 2.2 2.1 1.4 2.8 4.2 15.0 14.4 16.6 190 34.0 0.5

Jagran Prakashan 106 BUY 33,465 702 316 6.8 7.0 8.4 17.2 1.7 20.5 15.5 15.2 12.6 9.3 8.6 7.1 4.8 4.3 3.9 3.1 3.8 4.7 31.5 30.0 32.7 160 51.2 0.5

Sun TV Network 291 BUY 114,500 2,403 394 19.6 21.6 25.4 48.6 10.0 17.9 14.8 13.5 11.4 8.8 7.9 6.7 4.7 4.2 3.8 3.0 4.1 5.5 36.6 34.7 36.6 440 51.4 14.1

Zee Entertainment Enterprises 114 BUY 111,142 2,333 978 5.8 6.2 7.7 10.0 6.4 23.3 19.4 18.3 14.8 12.9 11.9 9.4 2.6 2.5 2.4 1.2 1.2 1.4 14.2 14.3 16.9 160 40.8 6.0

Media Neutral 447,368 9,390 50.5 19.3 27.6 22.7 19.1 14.9 12.1 10.3 8.1 4.1 3.8 3.4 1.6 2.1 2.8 18.1 19.8 23.0

Metals & Mining

Coal India 378 ADD 2,386,322 50,085 6,316 17.3 25.5 29.4 13.6 47.6 15.1 21.8 14.8 12.9 13.1 9.2 7.8 6.8 5.3 4.2 1.4 2.0 2.3 35.1 40.3 36.4 470 24.4 32.0

Hindalco Industries 145 ADD 277,852 5,832 1,915 12.8 18.3 17.6 (36.0) 43.3 (4.0) 11.4 7.9 8.3 6.1 6.0 6.3 1.0 0.9 0.8 1.0 1.0 1.0 9.7 11.4 10.0 175 20.6 28.0

Hindustan Zinc 132 BUY 556,221 11,674 4,225 11.6 13.1 14.7 21.8 12.7 11.8 11.3 10.0 9.0 7.4 5.7 4.2 2.5 2.0 1.7 0.8 0.8 0.8 24.3 22.2 20.4 160 21.5 2.9

Jindal Steel and Power 542 REDUCE 506,624 10,633 934 40.2 43.5 52.9 5.1 8.2 21.6 13.5 12.5 10.3 10.0 9.3 7.9 3.6 2.8 2.2 0.3 0.3 0.3 30.9 25.5 24.4 595 9.7 19.6

JSW Steel 684 SELL 154,539 3,244 226 78.6 70.2 107.5 (2.2) (10.7) 53.1 8.7 9.7 6.4 6.5 6.8 5.8 0.9 0.9 0.8 1.8 1.8 1.8 13.6 9.3 12.9 660 (3.5) 33.2

National Aluminium Co. 65 SELL 166,361 3,492 2,577 4.1 5.0 4.8 36.3 20.5 (4.1) 15.6 12.9 13.5 7.3 5.7 5.5 1.5 1.4 1.3 2.3 2.3 2.3 9.9 11.1 10.0 65 0.7 0.6

Sesa Goa 223 SELL 199,831 4,194 895 47.0 40.1 41.6 59.8 (14.6) 3.7 4.8 5.6 5.4 3.9 4.1 3.3 1.6 1.2 1.0 1.8 1.8 1.8 36.8 22.1 17.9 230 3.0 16.1

Sterlite Industries 127 BUY 425,696 8,935 3,361 15.2 17.0 19.0 26.2 12.0 11.5 8.3 7.5 6.7 5.2 3.9 3.3 1.0 0.9 0.8 0.9 0.9 0.9 13.0 13.0 12.8 185 46.1 17.5

Tata Steel 470 BUY 456,077 9,572 971 75.3 68.7 76.9 (2,258.1) (8.8) 12.0 6.2 6.8 6.1 5.9 6.2 5.2 1.3 1.0 0.9 2.5 1.7 1.7 24.7 15.5 15.7 625 33.1 49.5

Metals & Mining Attractive 5,129,523 107,661 39.1 16.1 12.9 12.4 10.7 9.4 7.8 6.7 5.8 2.4 2.0 1.7 1.3 1.5 1.7 19.0 18.5 17.8

Pharmaceutical

Apollo Hospitals 520 ADD 72,281 1,517 139 13.2 17.8 21.4 21.0 34.5 19.9 39.3 29.2 24.4 17.9 13.6 11.2 3.8 2.8 2.5 — — — 9.8 10.7 10.5 650 24.9 1.0

Biocon 333 BUY 66,660 1,399 200 18.4 19.4 21.4 23.9 5.6 10.3 18.1 17.2 15.6 10.4 9.9 9.0 3.2 2.9 2.6 — — — 19.4 17.9 17.4 445 33.5 3.3

Cipla 282 REDUCE 226,584 4,756 803 12.3 14.5 16.5 (10.0) 17.5 13.7 22.9 19.5 17.1 19.8 14.1 11.6 3.4 3.0 2.7 1.0 1.1 1.2 15.4 16.0 16— 310 9.9 8.5

Cadila Healthcare 821 ADD 168,088 3,528 205 34.7 39.4 47.7 40.6 13.4 21.0 23.6 20.8 17.2 20.4 17.0 13.2 7.7 6.0 4.8 0.8 1.0 1.2 37.5 32.5 30.9 1,045 27.3 2.4

Dishman Pharma & chemicals 63 REDUCE 5,112 107 81 9.8 8.0 8.7 (31.8) (18.3) 8.0 6.4 7.8 7.2 8.2 6.2 5.7 0.6 0.5 0.5 — — — 9.6 7.2 7.3 70 11.4 0.2

Divi's Laboratories 724 ADD 96,091 2,017 133 32.4 36.7 45.0 25.7 13.5 22.4 22.4 19.7 16.1 18.4 14.1 11.6 5.3 4.6 3.9 — — — 25.9 25.0 26.2 830 14.6 2.8

GlaxoSmithkline Pharmaceuticals (a) 2,044 REDUCE 173,120 3,634 85 68.3 78.2 88.6 15.5 14.6 13.3 29.9 26.1 23.1 19.8 17.6 15.1 8.9 8.2 7.5 2.0 2.4 2.8 30.9 32.6 33.9 2,220 8.6 1.4

Glenmark Pharmaceuticals 320 ADD 86,669 1,819 270 17.0 26.2 23.5 33.6 54.5 (10.3) 18.9 12.2 13.6 21.0 14.0 12.0 4.3 3.2 2.6 — — — 20.6 29.8 21.2 395 23.3 4.6

Jubilant Life Sciences 213 REDUCE 33,867 711 159 14.4 16.5 22.7 (45.6) 14.5 37.6 14.7 12.9 9.4 11.4 9.1 7.7 1.5 1.4 1.2 0.9 0.9 1.4 12.3 11.7 14.2 205 (3.6) 1.3

Lupin 480 ADD 215,110 4,515 448 19.2 20.6 26.3 25.6 7.2 27.5 24.9 23.3 18.2 20.9 18.1 13.4 6.5 5.3 4.3 0.6 0.7 0.9 29.5 25.3 26.2 530 10.4 10.1

Ranbaxy Laboratories 484 SELL 204,849 4,299 423 40.6 16.9 20.8 475.0 (58.3) 22.7 11.9 28.6 23.3 14.6 24.8 19.3 3.6 3.2 2.8 — — — 34.5 11.9 12.8 435 (10.2) 7.7

Sun Pharmaceuticals 490 ADD 507,237 10,646 1,036 17.5 20.4 24.3 34.4 16.3 19.2 27.9 24.0 20.1 23.8 19.1 15.5 4.9 4.2 3.5 0.7 0.8 1.0 21.0 20.2 20.7 560 14.3 10.6

Pharmaceuticals Cautious 2,178,421 45,722 30.2 3.5 3.6 22.7 21.9 21.2 17.2 14.7 13.9 3.6 3.1 3.0 0.7 0.8 0.8 16.0 14.2 14.0

Property

DLF 200 BUY 342,743 7,194 1,715 9.1 11.9 15.7 (14.5) 31.3 31.8 22.0 16.8 12.7 15.2 12.0 9.1 1.3 1.2 1.1 1.0 1.2 1.5 5.4 7.5 9.2 270 35.1 37.3

Housing Development & Infrastructure 101 BUY 44,968 944 445 19.8 28.7 34.3 24.0 44.8 19.7 5.1 3.5 2.9 5.2 3.6 3.1 0.5 0.4 0.4 — 1.0 1.5 10.0 12.3 12.7 150 48.4 19.9

Indiabulls Real Estate 78 RS 31,174 654 402 4.0 8.5 15.4 (1,095.5) 114.1 81.5 19.5 9.1 5.0 13.7 11.0 4.8 0.3 0.3 0.2 — 0.6 0.9 1.4 2.9 5.0 — — 8.9

Mahindra Life Space Developer 298 BUY 12,155 255 41 24.9 30.8 37.5 30.2 23.7 21.6 11.9 9.7 7.9 9.0 6.5 4.8 1.2 1.1 1.0 1.7 1.5 1.7 10.4 11.6 12.7 450 51.1 0.2

Oberoi Realty 220 BUY 72,397 1,520 330 15.7 20.0 28.0 14.8 27.6 39.7 14.0 11.0 7.8 10.1 7.0 4.3 2.2 1.8 1.5 0.5 0.7 1.1 19.9 18.2 21.3 315 43.4 0.3

Phoenix Mills 216 BUY 31,301 657 145 6.3 7.4 10.7 53.0 17.2 44.1 34.2 29.1 20.2 25.2 21.1 15.8 2.0 1.9 1.7 0.8 0.9 0.9 5.8 6.6 8.9 300 38.8 0.3

Puravankara Projects 68 ADD 14,417 303 213 5.5 9.0 10.9 (18.9) 62.8 21.5 12.2 7.5 6.2 17.2 9.5 8.0 0.9 0.9 0.8 1.5 2.2 3.0 8.0 12.0 13.1 80 18.4 0.0

Sobha Developers 217 BUY 21,241 446 98 18.8 20.6 27.2 33.8 9.2 32.2 11.5 10.5 8.0 10.6 9.5 6.7 1.1 1.0 0.9 1.4 1.6 1.8 10.2 10.3 12.4 370 70.8 0.9

Unitech 27 RS 69,463 1,458 2,616 2.3 2.6 2.7 (23.4) 12.8 4.9 11.4 10.1 9.7 13.4 10.9 8.9 0.6 0.6 0.5 — 0.8 1.1 5.4 5.7 5.4 — — 18.0

Property Cautious 671,540 14,095 5.3 44.3 29.6 15.7 10.9 8.4 12.8 9.1 6.8 1.0 0.9 0.8 0.8 1.1 1.4 6.1 8.1 9.5

Dividend yield (%)


In

dia D

aily Sum

mary - Sep

temb

er 15, 2011

27

KOTAK IN

STITUTIO

NAL EQ

UITIES RESEARCH





Sugar

Bajaj Hindustan 52 REDUCE 11,774 247 228 1.9 3.7 1.6 (28.7) 90.5 (57.3) 26.7 14.0 32.8 17.6 5.9 5.7 0.4 0.4 0.4 1.1 1.1 1.1 1.7 2.7 1.1 60 16.4 1.6

Balrampur Chini Mills 51 BUY 12,668 266 247 6.7 4.0 7.7 111.0 (40.5) 94.0 7.7 12.9 6.6 10.9 8.7 5.8 0.8 0.8 0.7 1.5 1.5 1.5 11.6 6.5 11.9 80 55.9 1.6

Shree Renuka Sugars 60 BUY 40,122 842 670 10.5 6.4 5.0 214.7 (39.4) (21.0) 5.7 9.4 11.9 8.5 6.6 5.5 1.6 1.4 1.3 1.7 1.7 1.7 34.4 16.1 11.4 75 25.3 9.6

Sugar Cautious 64,564 1,355 122.4 (24.7) (7.4) 8.0 10.6 11.5 10.8 6.6 5.6 0.9 0.9 0.8 1.5 1.5 1.5 11.6 8.1 7.0

Technology

HCL Technologies 395 SELL 278,616 5,848 705 22.9 29.5 32.8 30.4 28.9 11.3 17.3 13.4 12.1 10.5 8.1 7.2 3.3 2.8 2.4 1.9 2.0 2.0 21.0 22.6 21.7 375 (5.1) 10.2

Hexaware Technologies 76 ADD 22,201 466 290 3.0 7.5 7.3 (36.8) 154.4 (3.4) 25.9 10.2 10.5 19.1 8.7 7.4 2.3 2.1 1.9 1.9 3.9 4.3 9.3 21.3 18.6 80 4.6 2.9

Infosys Technologies 2,352 BUY 1,349,847 28,331 574 119.7 134.3 160.3 10.5 12.1 19.4 19.6 17.5 14.7 13.2 11.6 9.5 5.2 4.4 3.7 2.5 1.8 2.1 28.0 27.1 27.2 2,900 23.3 77.3

Mahindra Satyam 67 SELL 78,792 1,654 1,176 4.2 6.7 7.0 68.9 58.4 4.7 16.0 10.1 9.6 11.3 5.8 4.4 4.6 3.1 2.4 — — — 27.6 37.1 28.2 70 4.5 10.8

Mindtree 346 ADD 14,246 299 41 24.7 35.2 37.2 (52.7) 42.4 5.8 14.0 9.8 9.3 7.8 6.0 4.8 1.8 1.6 1.4 0.7 1.0 3.2 14.4 17.2 16.1 375 8.3 2.2

Mphasis BFL 342 SELL 72,067 1,513 211 51.8 38.6 30.0 18.8 (25.5) (22.2) 6.6 8.9 11.4 5.6 6.7 7.2 2.2 1.8 1.6 1.2 1.3 1.5 38.6 22.3 14.8 300 (12.3) 3.6

Patni Computer Systems 279 ADD 37,196 781 133 42.6 25.9 27.2 16.5 (39.3) 5.2 6.6 10.8 10.3 3.4 3.6 2.4 1.2 1.1 1.0 23.6 1.9 1.9 18.4 8.2 10.2 300 7.4 1.5

Polaris Software Lab 133 REDUCE 13,215 277 100 19.3 18.8 19.0 25.7 (2.6) 0.7 6.9 7.0 7.0 3.8 2.9 2.5 1.3 1.1 1.0 2.8 2.9 3.1 20.2 16.8 14.8 130 (1.9) 2.3

TCS 1,015 ADD 1,986,754 41,699 1,957 44.5 52.8 61.1 26.8 18.6 15.6 22.8 19.2 16.6 17.2 14.1 11.7 7.9 6.5 5.4 1.8 2.1 2.4 37.8 36.9 35.2 1,160 14.3 46.5

Tech Mahindra 628 SELL 79,166 1,662 126 48.8 72.1 75.5 (25.2) 47.8 4.7 12.9 8.7 8.3 8.8 8.9 7.8 2.4 2.0 1.8 0.6 0.6 1.6 20.5 26.0 23.8 600 (4.5) 3.7

Wipro 342 ADD 840,250 17,636 2,454 21.6 22.4 24.5 14.5 3.9 9.1 15.9 15.3 14.0 11.6 10.3 9.1 3.5 3.0 2.6 1.3 1.4 1.6 24.3 21.1 19.7 370 8.1 11.9

Technology Attractive 4,772,350 100,165 17.1 13.1 13.0 18.6 16.4 14.5 13.3 11.4 9.7 4.9 4.1 3.5 2.0 1.8 2.1 26.2 24.9 23.8

Telecom

Bharti Airtel 377 ADD 1,433,024 30,077 3,798 15.9 18.2 28.0 (32.6) 14.5 53.7 23.7 20.7 13.5 10.2 7.9 6.0 2.9 2.6 2.2 — — — 13.3 13.3 17.4 460 21.9 50.5

IDEA 98 ADD 324,549 6,812 3,303 2.7 2.7 5.1 (0.5) (1.4) 89.2 36.1 36.6 19.4 11.4 8.7 6.6 2.6 2.5 2.2 — — — 7.6 7.0 12.0 115 17.0 19.4

MTNL 35 SELL 21,987 461 630 (10.4) (9.1) (8.4) (33.7) (11.9) (8.1) (3.4) (3.8) (4.2) 0.6 0.8 1.0 0.2 0.2 0.2 — — — (6.1) (5.7) (5.5) 35 0.3 0.8

Reliance Communications 82 SELL 174,653 3,666 2,133 6.3 2.6 5.2 (71.1) (59.4) 103.2 13.0 32.0 15.7 6.1 6.6 5.6 0.4 0.4 0.4 — — — 3.2 1.3 2.7 80 (2.3) 17.9

Tata Communications 205 REDUCE 58,311 1,224 285 15.2 15.7 15.9 8.2 3.5 1.5 13.5 13.0 12.8 6.3 5.9 5.6 0.8 0.8 0.8 3.7 4.2 4.4 5.5 5.5 5.4 205 0.2 1.4

Telecom Cautious 2,012,525 42,240 (42.4) 2.1 62.3 25.0 24.5 15.1 9.4 7.8 6.0 1.7 1.6 1.4 0.1 0.1 0.1 6.8 6.5 9.5

Utilities

Adani Power 84 REDUCE 201,148 4,222 2,393 2.4 11.0 15.0 200.7 368.5 35.8 35.7 7.6 5.6 36.0 7.5 4.9 3.2 2.1 1.5 — — — 8.5 33.5 31.8 100 19.0 3.7

CESC 275 BUY 34,401 722 125 37.7 42.5 51.3 9.1 12.7 20.8 7.3 6.5 5.4 5.4 5.7 5.5 0.7 0.7 0.6 1.8 1.9 2.2 10.5 10.7 11.5 440 59.8 2.0

JSW Energy 57 REDUCE 93,398 1,960 1,640 5.1 4.8 4.7 12.9 (6.2) (1.8) 11.1 11.8 12.0 12.0 8.0 6.3 1.6 1.4 1.3 (1.8) — — 16.1 13.0 11.3 60 5.4 1.7

Lanco Infratech 17 BUY 38,458 807 2,223 2.0 3.0 3.4 (5.8) 47.2 16.6 8.6 5.9 5.0 8.5 7.9 7.5 1.0 0.8 0.7 — — — 12.2 15.0 14.6 45 160.1 9.1

NHPC 25 ADD 301,983 6,338 12,301 1.3 1.8 2.1 (27.2) 36.0 16.3 18.2 13.4 11.5 13.3 10.1 8.1 1.1 1.0 1.0 1.7 2.0 2.3 6.3 8.0 8.8 30 22.2 2.4

NTPC 164 REDUCE 1,353,493 28,408 8,245 11.0 11.2 12.0 5.3 1.4 6.8 14.9 14.7 13.7 12.4 12.0 11.3 2.0 1.8 1.7 2.3 2.0 2.2 13.7 12.8 12.6 180 9.7 10.0

Reliance Infrastructure 456 BUY 120,874 2,537 265 58.0 64.1 76.3 (6.5) 10.5 19.0 7.9 7.1 6.0 7.7 4.1 3.0 0.5 0.5 0.5 2.1 2.3 2.5 6.4 11.2 12.2 920 101.9 15.6

Reliance Power 79 SELL 220,339 4,625 2,805 2.7 2.9 2.9 (5.0) 7.6 (0.5) 29.0 26.9 27.1 159.0 68.1 14.3 1.4 1.3 1.2 — — — 4.9 4.9 4.7 88 12.0 6.1

Tata Power 959 BUY 236,813 4,970 247 76.5 75.9 87.6 21.5 (0.7) 15.4 12.5 12.6 10.9 10.3 8.6 7.9 1.6 1.5 1.3 1.5 1.6 1.8 13.8 12.3 12.9 1,350 40.7 7.9

Utilities Cautious 2,600,907 54,589 5.1 18.9 13.4 15.1 12.7 11.2 13.8 10.4 8.6 1.5 1.4 1.3 1.6 1.6 1.7 10.1 10.9 11.3

Others

Carborundum Universal 308 SELL 28,822 605 93 18.3 18.9 21.0 67.7 3.7 10.6 16.9 16.3 14.7 12.2 10.3 9.1 3.4 2.9 2.5 1.2 1.3 1.4 20.7 18.4 17.8 290 (6.0) 0.2

Havells India 350 REDUCE 43,696 917 125 24.5 25.8 28.8 334.1 5.1 11.5 14.3 13.6 12.2 9.5 8.8 7.6 6.2 4.4 3.3 0.7 0.8 0.9 53.9 37.6 30.9 370 5.7 3.8

Jaiprakash Associates 68 BUY 145,343 3,051 2,126 6.0 6.3 7.2 230.2 3.9 15.6 11.4 10.9 9.5 11.6 10.0 9.6 1.3 1.2 1.1 — — — 13.3 11.7 12.3 115 68.3 21.1

Jet Airways 271 BUY 23,395 491 86 (10.1) (43.4) 16.9 (91.0) 331 (139.0) (27.0) (6.2) 16.0 9.4 10.0 7.0 1.4 1.8 1.7 — — — (5.0) (11.7) 10.9 650 139.9 12.0

SpiceJet 25 BUY 10,156 213 403 2.2 2.1 4.3 (12.4) (4.3) 101.0 11.3 11.8 5.9 9.8 13.6 7.7 3.3 2.6 1.8 — — — (466) 24.8 36.2 65 157.9 2.7

Tata Chemicals 330 REDUCE 83,955 1,762 255 26.2 32.9 38.8 (0.7) 25.4 17.9 12.6 10.0 8.5 7.6 5.3 4.5 1.5 1.4 1.2 3.0 3.6 4.6 16.9 18.6 19.5 365 10.8 2.8

United Phosphorus 146 BUY 67,262 1,412 462 12.3 15.9 19.8 3.9 28.8 24.3 11.8 9.2 7.4 7.2 5.0 4.2 1.8 1.6 1.3 1.4 2.1 2.4 18.0 18.5 19.8 220 51.0 3.9

Others 402,629 8,451 232.5 10.1 38.5 14.2 12.9 9.3 10.0 8.5 7.6 1.7 1.5 1.4 1.0 1.3 1.5 12.0 12.0 14.5

KS universe (b) 44,300,980 929,814 18.2 17.8 16.3 15.1 12.8 11.0 9.8 8.2 7.0 2.3 2.0 1.8 1.6 1.8 2.0 15.4 15.9 16.3

KS universe (b) ex-Energy 36,740,293 771,126 20.3 15.5 18.5 16.2 14.0 11.8 11.4 9.6 8.1 2.6 2.3 2.0 1.5 1.6 1.8 16.0 16.1 16.7

KS universe (d) ex-Energy & ex-Commodities 30,605,873 642,373 18.8 15.1 19.8 17.0 14.8 12.4 12.8 10.7 9.0 2.7 2.3 2.0 1.5 1.6 1.8 15.5 15.7 16.5

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$)= 47.65

Dividend yield (%)



Disclosures

Kotak Institutional Equities Research coverage universe (IMP: Our ratings definitions have changed as of September 6, 2011)Distribution of ratings/investment banking relationships

Source: Kotak Institutional Equities As of June 30, 2011

* The above categories are defined as follows: 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 then 10% over the next 12 months. These ratings are used illustratively to comply with applicable regulations. As of 30/06/2011 Kotak Institutional Equities Investment Research had investment ratings on 166 equity securities.

Percentage of companies covered by Kotak Institutional Equities, within the specified category.

Percentage of companies within each category for which Kotak Institutional Equities and or its affiliates has provided investment banking services within the previous 12 months.

11.4%

34.3%

27.1% 27.1%

4.8%1.8%

3.6%0.0%

0%

10%

20%

30%

40%

50%

60%

70%

BUY ADD REDUCE SELL

Ratings and other definitions/identifiers

Definitions of ratings

BUY. We expect this stock to deliver more than 17.5% returns over the next 12 months.

ADD. We expect this stock to deliver 7.5-17.5% returns over the next 12 months.

REDUCE. We expect this stock to deliver 0-7.5% returns over the next 12 months.

SELL. We expect this stock to deliver less than 0% returns over the next 12 months.

Our target prices are also on a 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 and should not be relied upon.

NA = Not Available or Not Applicable. The information is not available for display or is not applicable.

NM = Not Meaningful. The information is not meaningful and is therefore excluded.

Corporate Office Overseas Offices

Kotak Securities Ltd.

Bakhtawar, 1st Floor

229, Nariman Point

Mumbai 400 021, India

Tel: +91-22-6634-1100

Kotak Mahindra (UK) Ltd

6th Floor, Portsoken House

155-157 The Minories

London EC 3N 1 LS

Tel: +44-20-7977-6900 / 6940

Kotak Mahindra Inc

50 Main Street, Suite No.310

Westchester Financial Centre

White Plains, New York 10606

Tel:+1-914-997-6120

Copyright 2011 Kotak Institutional Equities (Kotak Securities Limited). All rights reserved.

1. Note that the research analysts contributing to this report may not be registered/qualified as research analysts with FINRA; and

2. Such research analysts may not be associated persons of Kotak Mahindra Inc and therefore, may not be subject to NASD Rule 2711 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Kotak Securities Limited and its affiliates are a full-service, integrated investment banking, investment management, brokerage and financing group. We along with our affiliates are leading underwriter of securities and participants in virtually all securities trading markets in India. We and our affiliates have investment banking and other business relationships with a significant percentage of the companies covered by our Investment Research Department. Our research professionals provide important input into our investment banking and other business selection processes. Investors should assume that Kotak Securities Limited and/or its affiliates are seeking or will seek investment banking or other business from the company or companies that are the subject of this material and that the research professionals who were involved in preparing this material may participate in the solicitation of such business. Our research professionals are paid in part based on the profitability of Kotak Securities Limited, which include earnings from investment banking and other business. Kotak Securities Limited generally prohibits its analysts, persons reporting to analysts, and members of their households from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. Additionally, Kotak Securities Limited generally prohibits its analysts and persons reporting to analysts from serving as an officer, director, or advisory board member of any companies that the analysts cover. Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additionally, other important information regarding our relationships with the company or companies that are the subject of this material is provided herein.

This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. We are not soliciting any action based on this material. It is for the general information of clients of Kotak Securities Limited. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any advice or recommendation in this material, clients should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the investments referred to in this material and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. Kotak Securities Limited does not provide tax advise to its clients, and all investors are strongly advised to consult with their tax advisers regarding any potential investment.

Certain transactions -including those involving futures, options, and other derivatives as well as non-investment-grade securities - give rise to substantial risk and are not suitable for all investors. The material is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only. We endeavor to update on a reasonable basis the information discussed in this material, but regulatory, compliance, or other reasons may prevent us from doing so. We and our affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of this material, may from time to time have “long” or “short” positions in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. For the purpose of calculating whether Kotak Securities Limited and its affiliates holds beneficially owns or controls, including the right to vote for directors, 1% of more of the equity shares of the subject issuer of a research report, the holdings does not include accounts managed by Kotak Mahindra Mutual Fund. Kotak Securities Limited and its non US affiliates may, to the extent permissible under applicable laws, have acted on or used this research to the extent that it relates to non US issuers, prior to or immediately following its publication. Foreign currency denominated securities are subject to fluctuations in exchange rates that could have an adverse effect on the value or price of or income derived from the investment. In addition, investors in securities such as ADRs, the value of which are influenced by foreign currencies affectively assume currency risk. In addition options involve risks and are not suitable for all investors. Please ensure that you have read and understood the current derivatives risk disclosure document before entering into any derivative transactions.

This report has not been prepared by Kotak Mahindra Inc. (KMInc). However KMInc has reviewed the report and, in so far as it includes current or historical information, it is believed to be reliable, although its accuracy and completeness cannot be guaranteed. Any reference to Kotak Securities Limited shall also be deemed to mean and include Kotak Mahindra Inc.

india daily, september 15, 2011 - kotak securities · additional gross under-recovery of ~`70 bn...

Documents