India Strategy | Get on
June
please !
track
2015
India Strategy
FY03-08:
25% CAGR
FY93-96:
45% CAGR
FY96-03:
1% CAGR
FY93-FY15:
14% CAGR
FY08-15:
8% CAGR
FY15-17E:
20% CAGR
Getting on track!
Research Team (Rajat@MotilalOswal.com)

Contents
India Strategy - Getting on track!
.................................................................................................
1-72
1QFY16 Highlights & Ready Reckoner
......................................................................................
73-85
Sectors & Companies
...............................................................................................................
86-320
1.
Automobiles
Amara Raja Batteries
Ashok Leyland
Bajaj Auto
Bharat Forge
Eicher Motors
Exide Industries
Hero MotoCorp
Mahindra & Mahindra
Maruti Suzuki India
Tata Motors
TVS Motor
2. Capital Goods
ABB
BHEL
Bharat Electronics
Crompton Greaves
Cummins India
Havells India
Larsen & Toubro
Siemens
Thermax
Voltas
3. Cement
ACC
Ambuja Cement
Grasim Industries
India Cements
Ramco Cement
Shree Cement
UltraTech Cement
4. Consumer
Asian Paints
Britannia Industries
Colgate Palmolive
Dabur India
Emami
Godrej Consumer Products
GSK Consumer
Hindustan Unilever
ITC
Jyothy Labs
Marico
Nestle India
Pidilite Industries
Radico Khaitan
United Spirits
5a. Financials - Banks
Axis Bank
Bank of Baroda
Bank of India
DCB Bank
Federal Bank
HDFC Bank
ICICI Bank
Indian Bank
IndusInd Bank
Kotak Mahindra Bank
Punjab National Bank
State Bank of India
Union Bank
87-101
91
92
93
94
95
96
97
98
99
100
101
102-115
106
107
108
109
110
111
112
113
114
115
116-126
120
121
122
123
124
125
126
127-144
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145-163
150
151
152
153
154
155
156
157
158
159
160
161
162
Yes Bank
5b. Financials - NBFC
Bajaj Finance
Dewan Housing
HDFC
IDFC
Indiabulls Housing
LIC Housing Finance
M & M Financial Services
Power Finance Corporation
Repco
Rural Electricfication
Shriram Transport
6. Healthcare
Alembic Pharma
Aurobindo Pharma
Biocon
Cadila Healthcare
Cipla
Divi’s Laboratories
Dr Reddy’s Labs.
Glenmark Pharma
GSK Pharma
IPCA Laboratories
Lupin
Sanofi India
Sun Pharmaceuticals
Torrent Pharma
7. Media
D B Corp
Dish TV
Hathway Cable
HT Media
Jagran Prakashan
PVR
Siti Cable
Sun TV Network
Zee Entertainment
8. Metals
Hindalco
Hindustan Zinc
JSW Steel
Nalco
NMDC
Sesa Sterlite
SAIL
Tata Steel
9. Oil & Gas
BPCL
Cairn India
GAIL
Gujarat State Petronet
HPCL
IOC
Indraprastha Gas
MRPL
Oil India
ONGC
Petronet LNG
Reliance Industries
163
164-176
166
167
168
169
170
171
172
173
174
175
176
177-194
181
182
183
184
185
186
187
188
189
190
191
192
193
194
195-207
199
200
201
202
203
204
205
206
207
208-222
215
216
217
218
219
220
221
222
223-239
228
229
230
231
232
233
234
235
236
237
238
239
10. Real Estate
DLF
Godrej Properties
Indiabulls Real Estate
Mahindra Lifespaces
Oberoi Realty
Phoenix Mills
Prestige Estate Projects
Sobha Developers
11. Retail
Jubilant Food
Shoppers Stop
Titan Company
240-252
245
246
247
248
249
250
251
252
253-258
256
257
258
259-274
264
265
266
267
268
269
270
271
272
273
274
275-283
280
281
282
283
284-297
288
289
290
291
292
293
294
295
296
297
298-316
298
299
300
301
302
303
304
305
306
307
308
309
310
311
312
313
314
315
316
12. Technology
Cognizant Technology
HCL Technologies
Hexaware Technologies
Infosys
KPIT Technologies
Mindtree
MphasiS
Persistent Systems
TCS
Tech Mahindra
Wipro
13. Telecom
Bharti Airtel
Bharti Infratel
Idea Cellular
Reliance Communication
14. Utilities
CESC
Coal India
JSW Energy
NHPC
NTPC
Power Grid Corp.
PTC India
Rattanindia Power
Reliance Infrastructure
Tata Power
15. Others
Arvind
Bata India
Castrol India
Concor
Coromandel International
Dynamatic Tech
Gateway Distripark
Gujarat Pipavav Port
Info Edge
Inox Leisure
Jain Irrigation
Just Dial
Kaveri Seeds
Monsanto India
Sintex Industries
Tata Elxsi
TTK Prestige
UPL
V-Guard Industries
Note:
All stock prices and indices for companies as on 30 June 2015, unless otherwise stated
Investors are advised to refer through disclosures made at the end of the Research Report.

India Strategy | Getting on track!
India Strategy
BSE Sensex: 27,574
S&P CNX: 8,329
Getting on track!
Inflation, INR, Deficits well in control now; Govt spending to drive capex
recovery; Earnings to rebound in FY16/17
1QFY16 PREVIEW: Another quarter of decline! Worst is likely over! |
1QFY16 performance of MOSL Universe: Third consecutive quarter of PAT
de-growth
Motilal Oswal values your
support in the Asiamoney
Brokers Poll 2015 for India
Research, Sales and Trading
team. We
request your ballot.
Our bottom-up estimates indicate a 1% YoY decline in aggregate PAT for the
MOSL Universe (ex-RMs). Sales would remain flat and EBITDA would grow
moderately (4%). The fall in global commodities, delay in revival of the
investment cycle and muted rural consumption continue to impact growth of
corporate India.
Only seven sectors are expected to witness double-digit PAT growth—Media
(36%), Telecom (23%), Capital Goods (18%), Private Banks (17%), Consumer
(14%), Oil (11%) and Retail (11%). Six sectors would likely report PAT de-
growth—Healthcare (-1%), Auto (-7%), Real Estate (-11%), PSU Banks (-27%),
Cement (-33%) and Metals (-52%).
Nifty PAT (ex-BPCL) is likely to remain flat YoY—an improvement over 11% de-
growth in 4QFY15. Sales would marginaly decline (-1%) in 1QFY16 (v/s -6% in
4QFY15).
About one-fourth of the Nifty constituents would report >15% YoY PAT growth;
however, this would be offset by PAT de-growth in more than one-third of the
constituents. Cyclicals and domestic-facing companies would contribute to PAT
de-growth (14 out of 17 PAT de-growth companies are cyclical).
Top PAT growth companies would be Maruti (77%), Tata Power (63%), Cipla
(+41%), ONGC (+41%), Idea (+36%), Yes Bank (+29%), Indusind Bank (+24%) and
Bharti Airtel (+21).
Top PAT de-growth companies would be Punjab National Bank (-58%), Cairn
India (-57%), Bank of Baroda (-44%), NMDC (-42%), Ambuja Cement (-40%),
Grasim (-38%), Hindalco (-38%) and Tata Motors (-31%).
Exhibit 1:
PAT de-growth in 1QFY16; expect rebound in 2H
39
22
25 24 26
10 14 12
5
19
14
7
7
9
16 13
MOSL Universe
Quarterly PAT Growth
16
YoY (%) LPA: 10%
22
30
2
1
8
6
-6 -8
-1
-14
-9
Source: Company, MOSL
July 2015
1

India Strategy | Getting on track!
FY16-17 ESTIMATES: Expect recovery in 2HFY16 | Government-led capex
and low inflation to lead recovery
Delay in domestic recovery and global commodity fall continue be the
headwinds for earnings growth. Other factors such as muted rural consumption,
continuing asset quality woes in PSU banks and adverse cross currency
movements continue to pull down the aggregate growth of corporate India.
However, we believe government-led capital spending and favorable inflation
leading to lower rates will create conducive environment for earnings growth
recovery.
Our bottom-up estimates suggest aggregate PAT of the MOSL Universe (ex-RMs)
to rebound to 17%/23% in FY16/FY17. Sales growth would increase moderately
to 9% in FY16 before jumping to 13% in FY17.
Expect Sensex EPS to grow 15% to 1,561 in FY16 and 22% to 1,907 in FY17. Since
the last preview, three-fourths of the Sensex companies would see an EPS cut—
led by Tata Steel, Sun Pharma, Hindalco, Tata Motors, Coal India and GAIL. Top
upgrade drivers are Maruti, NTPC, ONGC and Bajaj Auto.
One-third of the Sensex companies would contribute more than two-thirds of
FY16 Sensex EPS expansion. Key contributors to the EPS expansion would be
ONGC, Tata Motors, ICICI Bank, HDFC Bank, Tata Steel and Reliance Ind, M&M,
Axis Bank, HDFC and SBI.
PROFIT POOL: Oil share halves, Technology doubles; Public sector dwarfed
| Profit Pool analysis FY03-15: Some interesting trends from the past
India Inc PerforMeter
CAGR %
FY03-FY15
FY03-FY08
FY08-FY15
FY15-17E
PAT
16
27
9
20
Sensex
20
39
9
??
We expect a pick-up in earnings growth for corporate India from the second half
of FY16; this could well be the beginning of the new earnings cycle. While our
EPS CAGR for the next two years is 20%, the earnings cycle has seen higher and
longer-duration growth.
In Phase-1 (FY03-08) of our FY03-15 analysis, PAT CAGR was 27%; it was only 9%
in Phase-2 (FY08-15).
We present some trends to draw from the last 13 years of earnings cycle and
pick where reversion to mean can lead to a change in growth trends.
#1 PUBLIC v/s PRIVATE SECTOR:
The ultimate case study of value migration
#2 CYCLICALS:
Change in PAT orbit
#3 OIL & GAS:
PAT share halves to 17% in the best era of crude prices
#4 FINANCIALS:
Private sector cashes in on public banks' slip
#5 CONSUMER:
Only a foul-weather friend? Not quite
Based on the above, we expect some of the following potential themes to play
out going forward:
#1 FY15-17 PAT GROWTH:
Expect acceleration in growth from 2HFY16, CAGR of
20% over FY15-17.
#2 PRIVATE BANKS, CONSUMER:
Two large profit pools, which can only get
bigger and better (thereby creating several growth opportunities).
#3 OIL & GAS:
Reforms can normalize earnings, resulting in significant growth.
#4 CEMENT:
Early-bird cyclical turnarounds?
#5 CAPITAL GOODS:
Book-to-bill ratio on the rise; govt spending to trigger
growth.
July 2015
2

India Strategy | Getting on track!
Exhibit 2:
FY03-15 India Inc PAT performance: Sector-wise highlights
Sector
PAT (INR b)
PAT CAGR (%)
ROE (%)
(No of Companies) FY03 FY08 FY15 FY17E FY03-15 FY03-08 FY08-FY15 FY15-17E FY03 FY08 FY15 FY17E
Auto (11)
21 85 292 492
24
32
19
30
19 26 22
23
Capital Goods (12)
15 80
99 174
17
40
3
32
12 25 10
14
Cement (14)
7
97
60 146
20
69
-7
56
8
30
6
12
Consumer (15)
48 75 209 304
13
9
16
21
38 35 33
37
Financials (31)
141 341 951 1,395
17
19
16
21
30 14 15
16
Banks-Private (10) 25 90 376 540
26
30
23
20
18 11 15
17
Banks-PSU (10)
87 192 313 491
11
17
7
25
25 18 10
13
NBFC (11)
29 58 263 363
20
15
24
18
48 14 18
19
Healthcare (14)
17 51 169 280
21
25
19
29
25 21 20
22
Media (11)
3
5
21
46
18
10
24
47
25
7
14
22
Metals (9)
27 303 295 283
22
62
0
-2
15 26 10
9
Oil & Gas (12)
265 529 638 1,004
8
15
3
25
25 19 10
13
Real Estate (10)
1
91
26
47
30
142
-16
35
13 30
4
7
Retail (3)
0
2
10
15
41
61
28
23
7
24 22
23
Technology (11)
39 159 548 692
25
32
19
12
36 32 27
25
Telecom (4)
-4 133 110 129
L to P L to P
-3
8
-3 22
8
8
Utilities (10)
67 173 346 457
15
21
10
15
12 14 14
17
Others (25)
6
23
62 107
21
29
15
31
15 17 15
20
MOSL (192)
653 2,146 3,836 5,569
16
27
9
20
20 20 14
16
MOSL Univ. PAT Share (%)
FY03 FY08 FY15 FY17E
3
4
8
9
2
4
3
3
1
5
2
3
7
3
5
5
22
16
25
25
4
4
10
10
13
9
8
9
4
3
7
7
3
2
4
5
0
0
1
1
4
14
8
5
40
25
17
18
0
4
1
1
0
0
0
0
6
7
14
12
-1
6
3
2
10
8
9
8
1
1
2
2
100 100 100 100
Source: Company, MOSL
ECONOMICS: A strong macro at early stage of recovery to create a virtuous
investment cycle | Revenue buoyancy on growth to accelerate fiscal
correction
Tax-GDP ratio increased by around 400bp in the previous upcycle between FY02
to FY08. The current phase of fiscal consolidation is being achieved on the back
of expenditure compression and increased tax effort. However, a repeat of tax
buoyancy seen in the previous upcycle would allow accelerated reduction in
fiscal deficit to as low as 2% by FY20.
Higher revenue, besides fiscal correction, would allow a jump in government
expenditure. Together with an expenditure switch towards capex spend away
from subsidy this would act as a big booster to investments in general.
While many private infrastructure companies came up in the previous cycle
ploughing sizable investments in the economy; the winners of the current cycle
are likely to be those well positioned to benefit from the direction of the
economy that the government is seeking to give in the next five years.
The fiscal discipline and macro stability should bring in its wake a revision in the
rating of India several notches higher than the current investment grade,
particularly when the criteria laid out by S&P in its Sep-14 rating outlook
upgrade have all been satisfied by a comfortable margin and countries with
comparable macro parameters and credit history enjoy much higher ratings.
On the inflation front, government has taken a multitude of measures to ensure
that the backbone of food inflation is broken through a series of intervention
aimed at curbing prices, providing subsidy and other forms of support, improved
co-ordination with the states and smoothing the supply chain to ensure higher
food availability. Other drivers of inflation viz., global commodity and food
prices, rural wage have all eased.
July 2015
3

India Strategy | Getting on track!
The structural decline in inflation can take rates and bond yields to a level even
lower than the low point of previous cycle particularly when net market
borrowing by the government is slated to decline releasing a good deal of
financial savings to be channelized into other forms of investments.
After the bouts of volatility during late 2013, INR has returned to stability to
emerge as one of the best performing currencies. The external stability
parameters have also strengthened on the back of increased capital flows.
Greenshoots of a capex recovery on the back of higher public spend towards
infrastructure are visible already with CMIE capex data, recovery of IIP capital
goods and sectors facing the focus areas of the government showing an
uptrend. However, the biggest silver lining comes from a marked improvement
in credit quality and some decline in the indebtedness of infra companies that
makes them lendable again. With interest rate cycle headed south and selective
push from the government this indeed is a more surefooted recipe for
investment recovery.
Exhibit 3:
Revenue buoyancy of 400bp in FY02-08 economic upcycle – an equivalent jump now would take deficit to new low
Fiscal deficit to GDP (%)
14
12
10
8
6
4
2
0
6.0
11.9
10.3
A period of
stagnation on fiscal
management
Gross tax to GDP (%)
14.1
9.9
8.0
6.0
Rising revenue
helped to correct
the deficit
Post crisis
10.0
Expanding tax net
kept collection
steady and helped
correct deficit too
5.8
4.1
As corporate profit
and buoyancy recovers
tax collections would
spike and deficit to
reach new low
2.5
2.0
Source: Government, MOSL
Exhibit 4:
Government would be a significant catalyst for coming capex cycle
Manohar
Parikkar
Minister of
Defense
(USD250b)
Suresh Prabhu
Minister of Railways
(USD94b)
Drivers of
upcoming
capex cycle
Piyush Goyal
Miniter of
Power and
Coal
(USD78b)
Venkaiah Naidu,
Minister of Urban
Development
(USD31b)
Nitin Gadkari
Minister of Road
Transport and
Highways
(USD78b)
Figures in USDb indicate capex planned over next 5 years
Source: Government, MOSL
July 2015
4

India Strategy | Getting on track!
Exhibit 5:
Credit quality has improved noticeably
4.0
3.0
2.0
1.0
0.0
Credit ratio
Modified credit ratio (RHS)
1.2
1.1
1.0
0.9
0.8
Exhibit 6:
Indebtedness of infra cos. on a decline now
1.2
1.0
0.8
0.6
0.4
0.2
0.0
Net Debt to Equity (x)
D/E (x)
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
Source: RBI, Government, MOSL
Source: RBI, Government, MOSL
MARKETS & FLOWS: Indian equities have delivered positive returns for 3
consecutive years
Indian equities have delivered positive returns for three consecutive years, and
positive returns in five out of the last six years.
Sectoral performances have been very divergent in CY15YTD. Telecom was the
top performer with 14% return and significantly outperformed the Nifty (1%
return); it was followed by Capital Goods (+13%) and Healthcare (+13%). PSU
Banks (-22%) and Metals (-13%) were the top underperformers.
Lupin was the best-performing Sensex stock (32% return) for CY15, followed by
Maruti Suzuki (21%) and HUL (21%). Hindalco, Tata Steel, Sesa Sterlite, Hero
Motocorp, SBI, ITC, ICICI Bank, GAIL and Tata Motors were the top
underperformers (delivering negative returns of 10-30%).
Valuations of Indian equities are near the long-term averages; need growth to
pick-up. The Sensex trades at 16.9x P/E (slightly above its long-period average of
16.2x) and near its 10-year average P/B of 2.8x.
Domestic MFs have turned big buyers in Indian equities for 14 consecutive
months. DII (ex MFs) have also turned net buyers by pumping in USD1.3b in
three months after 13 months of outflows.
FIIs invested another USD6.2b in the first half of CY15 compared with USD16.2b
in CY14. However, FIIs have been net sellers in recent months.
FII holding in BSE-200 companies is at an all-time high of 25.6% compared with
DII at 10.9%. FIIs have bought USD 169b in 23 years. Since Jan 2000, FIIs bought
USD158b compared with DIIs’ USD8.8b. We expect this trend to stabilize as
domestic flows have turned positive now.
Financial savings to increase; higher share toward equities likely.
STRATEGY:
ECONOMIST:
Rajat Rajgarhia
(Rajat@MotilalOswal.com)
Dipankar Mitra
(Dipankar.Mitra@MotilalOswal.com)
Sources of exhibits in this section include RBI, CMIE, Bloomberg, IMF, UN, Rogers International, Industry, Companies, and MOSL database
July 2015
5

India Strategy | Getting on track!
1QFY16 PREVIEW
Another quarter of decline! Worst is likely over!
1QFY16 performance of MOSL Universe: Third consecutive quarter of PAT
de-growth
Our bottom-up estimates indicate a 1% YoY decline in aggregate PAT for the MOSL
Universe (ex-RMs). Sales would remain flat and EBITDA would grow moderately (4%).
The fall in global commodities, delay in revival of the investment cycle and muted
rural consumption continue to impact growth of corporate India.
Only seven sectors are expected to witness double-digit PAT growth—Media (36%),
Telecom (23%), Capital Goods (18%), Private Banks (17%), Consumer (14%), Oil (11%)
and Retail (11%). Six sectors would likely report PAT de-growth—Healthcare (-1%),
Auto (-7%), Real Estate (-11%), PSU Banks (-27%), Cement (-33%) and Metals (-52%).
Nifty PAT (ex-BPCL) is likely to remain flat YoY—an improvement over 11% de-growth
in 4QFY15. Sales would marginaly decline (-1%) in 1QFY16 (v/s -6% in 4QFY15).
About one-fourth of the Nifty constituents would report >15% YoY PAT growth;
however, this would be offset by PAT de-growth in more than one-third of the
constituents. Cyclicals and domestic-facing companies would contribute to PAT de-
growth (14 out of 17 PAT de-growth companies are cyclical).
Top PAT growth companies are Maruti (77%), Tata Power (63%), Cipla (+41%), ONGC
(+41%), Idea (+36%), Yes Bank (+29%), Indusind Bank (+24%) and Bharti Airtel (+21).
Top PAT de-growth companies would be Punjab National Bank (-58%), Cairn India (-
57%), Bank of Baroda (-44%), NMDC (-42%), Ambuja Cement (-40%), Grasim (-38%),
Hindalco (-38%) and Tata Motors (-31%).
Aggregate PAT to decline 1% YoY; sales to remain flat
MOSL Universe’s (ex-RMs) sales and EBITDA would grow marginally (1% each).
Aggregate PAT would decline 1% YoY.
1QFY16 would be the third consecutive quarter of PAT de-growth. Such
consecutive PAT de-growth was last witnessed in Sep-09.
Several domestic cyclicals like Auto, Cement and PSU Banks would de-grow.
Global sectors such as Metals and Healthcare would continue to report PAT
decline; Technology would report one of the lowest PAT growth (7% YoY).
Large sectors that would report growth include Consumer, Private Banks,
NBFCs, Utilities, Oil and Technology.
EBITDA margins (ex-Financials & RMs) would expand ~70bps YoY to 20%, near
its LPA of 20.2%—despite Cap Goods, Cement, Metals well below the LPA level.
This quarter would see continued impact of fall in global commodities and a
consequent negative WPI impact.
MOSL Universe Quarterly PAT
Growth YoY (%) LPA: 10%
Exhibit 7:
PAT de-growth in 1QFY16; expect rebound in 2H
39
22
25 24 26
10 14 12
5
19
14
7
7
9
22
30
16 13 16
2
1
8
-6 -8
-1
6
-14
-9
Source: Company, MOSL
July 2015
6

India Strategy | Getting on track!
Exhibit 8:
Sales to remain muted during 1H
27 26
17
22 21
25 26
21 23
19
MOSL Universe
Quarterly Sales Growth
YoY (%) LPA: 13%
16
19
9
13
10
14 14 12 14
6
5
5
1
0
-5
4
-6 -4
Source: Company, MOSL
Exhibit 9:
1QFY16 EBITDA margin (ex-Financials& RMs) would expand 70bps to 20%; shows signs of bottoming out
23.2
22.3
MOSL Universe EBITDA
Margin LPA: 20.2%
20.7
22.1 22.2 22.0
22.1 21.8
20.0
21.4
19.3
20.7
20.6
20.4
19.7 19.9
19.6
19.9
19.6
19.4
19.4
19.1
19.0 18.8
19.2 19.3
19.1 19.0
19.0
18.8
18.7
18.6
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
Source: Company, MOSL
Exhibit 10:
1QFY16 PAT margin (ex-Financials & RMs) to expand 50bps to 10.5%
14.7
13.3
12.3
MOSL Universe PAT Margin
LPA: 11.3%
10.9 11.0
13.1
12.6
12.6
11.0
12.2
12.211.9
11.9
10.4
10.5
11.8
11.4
10.0
11.2
11.1
10.810.5
10.3
10.7
10.2
10.310.110.610.010.210.5
9.4
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
Source: Company, MOSL
July 2015
7

India Strategy | Getting on track!
Exhibit 11:
Sector-wise 1QFY16 performance of the MOSL Universe
Sector
(No of companies)
High growth sectors
Media (9)
Telecom (4)
Others (18)
Capital Goods (10)
Private Banks (8)
Med/Low growth sectors
Consumer (15)
Oil Excl. RMs (9)
Retail (3)
NBFC (11)
Utilities (10)
Technology (11)
PAT de-growth sectors
Healthcare (14)
Auto (11)
Real Estate (8)
PSU Banks (6)
Cement (7)
Metals (9)
MOSL Excl. RMs (163)
MOSL Ex Oil & Metals (145)
Sensex (30)
Sensex Ex Oil & Metal (24)
Nifty Ex BPCL (49)
Nifty Ex Oil & Metal (41)
Sales
Mar- Var % Var %
15
YoY QoQ
1,131
54
418
171
291
198
3,371
388
1,433
42
120
658
729
2,990
306
1,130
48
273
167
1,066
7,492
4,993
4,812
2,955
5,564
3,660
8
15
7
11
0
18
-1
8
-13
6
16
7
14
0
12
3
8
2
1
-6
1
7
-1
6
-1
7
-13
8
4
-4
-39
3
12
6
23
10
-3
4
5
-3
8
-2
-6
-2
0
-7
1
-2
0
-5
0
-3
EBITDA
Mar- Var % Var %
15
YoY QoQ
387
15
152
29
25
166
841
83
278
4
111
188
178
616
73
167
16
185
25
152
1,845
1,416
1,135
809
1,403
1,051
16
18
15
14
7
18
11
12
6
8
14
19
10
-9
4
-1
-4
0
-14
-29
4
9
5
7
3
8
-9
21
6
4
-60
-6
7
6
21
7
-5
1
3
0
33
12
8
-17
-18
2
1
-2
1
-6
1
-5
Net Profit
PAT
Delta
EBITDA
Margin
Chg bp
YoY
Mar- Var % Var %
Share % Share %
15
YoY QoQ
168
6
30
17
18
96
530
58
166
2
68
97
140
244
46
83
6
57
11
42
943
735
612
455
737
556
19
36
23
18
18
17
10
14
11
11
9
9
7
-25
-1
-7
-11
-27
-33
-52
-1
3
5
4
0
1
-13
28
10
6
-60
-3
6
4
24
-11
-2
-1
0
16
21
40
0
9
-25
2
4
1
7
-2
7
0
18
1
3
2
2
10
56
6
18
0
7
10
15
26
5
9
1
6
1
4
100
363
23
77
37
37
188
630
96
223
3
75
105
128
-1,093
-7
-88
-10
-284
-76
-629
100
222
67
235
45
50
-38
278
85
354
16
-155
292
-102
-220
-177
-64
-388
-83
-240
-453
81
45
136
40
89
33
Source: Company, MOSL
Mixed bag in terms of sectoral performance: Share of global commodities in
aggregate PAT to increase, led by Oil & Gas; Metals drag
Overall, seven sectors would report double-digit PAT growth and six sectors
would report PAT de-growth.
Financials would report PAT de-growth of 1%, a first, primarily driven by poor
performance of PSU banks
PSUs will account for a 37% share in the sector’s profits in 1QFY16 v/s 49%
in 1QFY15
Technology would continue to report mid-single digit growth (7%) for the
second consecutive quarter; Healthcare would continue to witness negative
growth (-3% YoY)
Capital Goods would report 18% growth after 11 consecutive quarters of PAT
decline, thus giving indication of early signs of revival in investment cycle.
Auto, Cement and Metals would continue to report PAT de-growth.
Sectors with record PAT:
Consumer and Telecom would report multi-quarter high PAT numbers
Metals would report its lowest PAT in eight years
Share of commodities in the aggregate PAT would increase in 1QFY16—a
reversal from the last few quarters, primarily led by Oil. Metals would continue
to drag
8
July 2015

India Strategy | Getting on track!
Exhibit 13:
Contribution of global businesses^ would reduce
Exhibit 12:
MOSL Universe ex-Global Commodities PAT gr (%) to 48% in 1QFY16 and to 45% by FY16-end
MOSL Universe Ex Global Commodities PAT growth (%)
18
15
12
12
10
6
3
3
45
-2
44
Global business PAT Share (%)
Others PAT share (%)
55
56
52
55
48
45
Source: Company, MOSL
^ Global businesses include IT, Healthcare, Metals, Oil (Ex
RMs), JLR
Source: Company, MOSL
Exhibit 14:
Sectoral quarterly PAT trend (INR b)
FY12
FY13
FY14
FY15
FY16E
Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar
Auto
50 52 63 80
56 50 47 76
50 71 81 77
89 74 75 59
83 94 99 103
Capital Goods
23 28 34 65
26 27 28 60
17 22 26 55
15 20 22 44
18 25 31
57
Cement
19 12 16 23
25 19 16 20
19 11 11 18
17 14
9
15
11 10 14
20
Consumer
33 36 38 38
40 42 46 44
45 48 52 49
50 54 58 55
58 64 69
66
Financials
129 151 163 193 179 180 190 205 202 182 194 213 223 213 209 222 221 239 265 291
Private Banks
42 45 52 57
54 57 67 71
70 72 80 85
82 85 95 100
96 101 113 119
PSU Banks
51 65 71 91
80 74 71 73
75 52 52 64
78 63 48 52
57 63 72
87
NBFC
36 41 40 45
45 49 51 60
57 58 61 64
62 65 66 69
68 74 79
84
Healthcare
20 22 21 23
22 28 28 31
34 41 45 43
45 52 33 37
44 54 54
61
Media
4
4
4
3
4
5
5
4
5
5
6
5
5
5
8
6
7
7
9
8
Metals
90 72 63 72
78 57 45 78
62 61 61 76
68 74 63 34
25 34 34
50
Oil & Gas
56 38 284 367
-251
342 217 403 95 203 137 346 187 153 71 247 207 209 211 222
Oil & Gas Ex RMs 150 178 139 139 154 173 166 133 139 174 175 165 149 149 95 134 166 155 153 171
Real Estate
6
6
5
6
5
4
6
4
5
4
4
5
5
4
5
5
5
4
9
6
Retail
2
2
2
2
2
2
3
2
2
2
2
3
2
3
2
3
2
3
3
3
Technology
66 67 80 82
89 91 95 95 104 119 127 132 130 135 142 140 140 144 152 159
Telecom
16 15 15 16
12 11
6
6
13 12 12 18
20 24 24 22
25 24 25
27
Utilities
42 41 42 50
50 47 50 48
50 51 52 50
50 51 48 58
56 62 56
62
Others
12 10 10 11
12 10 10 11
12 11 13 14
14 12 14 16
17 16 18
20
MOSL Univ Excl RMs 661 696 696 802 753 745 741 817 760 814 862 922 885 883 808 848 877 935 990 1,103
Comparable Universe, excludes Coal India, Just Dial, Prestige Estate, Bharti Infratel, Alembic Pharma, Vedanta due to merger, RattanIndia
Power, Hathway and Repco Home Fin.
Source: Company, MOSL
Sector
July 2015
9

India Strategy | Getting on track!
Exhibit 15:
Sectoral quarterly PAT growth trend (%)
FY16E
FY12
FY13
FY14
FY15
Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar
Jun Sep Dec Mar
-7
Auto
7
4
30 52
12 -3 -25 -5
-12 41 71
2
79 4
-24
-7 27 32 75
12 -4 -18 -8
Capital Goods
4
1
4
30
-33 -21 -6 -9 -13 -6 -16 -19
18 24 42 30
Cement
5
73 53 15
28 63
-2 -14 -26 -44 -33 -11 -10 26 -12 -16
-33 -25 44 32
14 18 19 19
Consumer
15 19 17 22
24 15 23 18
13 17 12 11 11 12 11
13
-1 12 27 31
Financials
1
18 13 57
39 19 16 6
13
1
2
4
10 17
8
4
17 18 19 20
Private Banks
31 28 27 29
30 27 28 25
29 26 20 20 18 19 19
17
PSU Banks
-22 9
6 124 56 14
0 -19
-6 -30 -27 -12
4 21 -9
-18
-27 1 51 66
9 15 20 22
NBFC
17 23 11 18
23 20 29 34
26 18 20
6
10 11
7
9
Health Care
15
4
8
8
9
27 35 34
57 50 58 42 34 25 -25 -14
-3 4 62 64
32 36 15 36
Media
14
8
-8 -34
-2
8
22 25
26 12 21 13
-5 3
31
17
4
Metals
14
2 -12 -24 -13 -22 -29 8
-20
8 37 -3
9 22
-55
-64 -55 -46 46
Oil & Gas
60 -84 61 96
PL 812 -24 10 -138 -41 -37 -14 97 -25 -48 -29
10 36 197 -10
Oil & Gas Ex RMs
43 25 -11 9
3
-3
19 -4
-10
1
6
24
8 -14 -46 -19
11 4 60 28
Real Estate
-4 -10 -37 -8
-5 -31 11 -29
-6 -10 -34 20
8 -2 16 -11
-17 14 94 29
11 7 32 29
Retail
68 17 13 52
6
14 22 24
15
5 -12 12
-6 24
5
-2
7 7
7 13
Technology
20 13 24 26
35 35 19 15
17 30 34 39 25 13 11
6
25 1
1 24
Telecom
-26 -38 -30 -13 -26 -25 -57 -58
10 13 95 170 53 91 99
26
12 21 16 6
Utilities
8
6
13
3
18 14 19 -4
2
9
4
4
0 1
-8
16
18 39 25 25
Others
30 -10 -1
-6
-1
1
8
-4
2
13 26 30 20 8
11
14
-1 6 22 30
MOSL Univ Excl RMs
14 12
5
19
14
7
7
2
1
9 16 13 16 8
-6
-8
Comparable Universe, excludes Coal India, Just Dial, Prestige Estate, Bharti Infratel, Alembic Pharma, Vedanta due to merger, RattanIndia
Power, Hathway and Repco Home Fin.
Source: Company, MOSL
Sector
Distribution of PAT growth to improve slightly
Nearly one-fifth (21%) of the companies would report >30% PAT growth,
roughly same as in the previous quarter. Companies reporting >15% growth
would increase to 22% from 17% in 4Q.
Less than one-third of the companies would report PAT de-growth, a welcome
change from nearly 40% in 4Q.
Exhibit 16:
Broadbasing of high PAT growth companies
Earnings Growth
>30%
>15-30%
>0-15%
<0%
Ex RMs (%)
55 36 34 25 15 24 26 20 -8 -15 -15 -11 23 42 26 22 24 9 13 11 4 18 11 8 5 0 -2 8 13 10 17 7 -7 -9 -1 6 2231
11 17 14 14
13 13
21 24 23 26
25 24 31
26
28 26
30
11
32 35 31 27 30 27
34
35 39
39 39 42 40 36 37 44 37
11 15
42 41
42 40
11
19 18
14
19
19 24
9 9 10 20 18 18
19 23
22
14 14
26
27
23
28
13
24 19
27
21
28 26
25
17 16 18 21 22 24
17
23
11
18
16 13
22
24
18 23
17
22
18
21
22 10
18
26
21
14
16 15
24 25 18 22 18 16
22
10
60 54
19 21
22 17
19 16 18
52 48
51
44 45
41 43
39 44
38 32 39 35
35 30
32
26 27
21 21 24 25 25 27 26 24 20 26 24 20 19 26 18 20 21 26
PAT Growth Ex RMs (%)
Source: Company, MOSL
July 2015
10

India Strategy | Getting on track!
Nifty PAT would remain flat; de-growth in sales to continue
While Nifty PAT (ex-BPCL) is likely to remain flat YoY, it marks an improvement
over 11% de-growth in 4QFY15. Sales would marginaly decline (-1%) in 1QFY16
(v/s -6% in 4QFY15).
Cyclicals and domestic-facing companies would contribute to PAT de-growth (14
out of 17 PAT de-growth companies are cyclical)
Most of the top PAT growth companies—Tata Power (+63%), Idea (+36%), Cipla
(+41%), ONGC (+41%)—were aided by lower base.
Top PAT growth companies would be Maruti (77%), Tata Power (63%), Cipla
(+41%), ONGC (+41%), Idea (+36%), Yes Bank (+29%), Indusind Bank (+24%) and
Bharti Airtel (+21).
Top PAT de-growth companies would be Punjab National Bank (-58%), Cairn
India (-57%), Bank of Baroda (-44%), NMDC (-42%), Ambuja Cement (-40%),
Grasim (-38%), Hindalco (-38%) and Tata Motors (-31%).
38
LPA: 15%
3
-10
-14
-20
-24
12 11
24
7
16
7 8
-3 -4
10
15 11 18
21
6
-9-11
0
6
Exhibit 17:
1Q Nifty PAT to remain flat YoY—an improvement from de-growth in 3Q/4Q, but significantly below LPA of 15%
36 37 45 51
29
44
20
7
-6
23 26
30 30
23
24 21
21
23 28 25
33
13 14
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
Source: Company, MOSL
Exhibit 18:
Nifty sales to de-grow 1% in 1QFY16—the third consecutive quarter of de-growth
22
26 30 24
32 30 31
19 19
14
19
22
31 31 31 37 31 31
17
8
-2
27 25
21 19 22
25
21 23
LPA: 18%
19
16
12
8
5 2
13 14 12 15
4
-1
-1
3
-6
18
9
-8 -6
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
Source: Company, MOSL
Exhibit 19:
Expect 1QFY16 Nifty (ex-RMs) EBITDA margin to improve and move above LPA of 25.4%
31.3
30.2
30.3 30.5
29.5
27.8
28.9
27.1 26.2
26.0
25.7
25.9
25.4
LPA: 25.4%
26.2
25.4 25.2
25.3 25.4 25.5
25.0 25.0
24.7 24.3
24.0
24.3
25.3
23.6 23.6
25.1
23.122.7 23.323.6 23.9
24.8
23.8
24.1
23.4
23.2
22.5
23.0 22.8
22.3
22.5
27.726.9
27.0 26.6
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
Source: Company, MOSL
July 2015
11

India Strategy | Getting on track!
Exhibit 20:
1QFY16E performance of Nifty companies (INR b)
Sales
EBITDA
PAT
Jun-15 Var % YoY
Jun-15 Var % YoY
Jun-15 Var % YoY
High PAT Growth (12)
1,205
11
458
18
202
31
Maruti Suzuki
132
16
22
62
13
77
Tata Power
95
9
26
46
4
63
Cipla
33
23
7
33
4
41
ONGC
235
8
133
6
67
41
Idea Cellular
89
17
32
29
10
36
Yes Bank
10
40
9
41
6
29
IndusInd Bank
10
22
9
16
5
24
Bharti Airtel
238
4
85
10
13
21
HDFC Bank
63
22
46
20
27
20
Axis Bank
39
17
35
20
20
18
Bajaj Auto
59
11
11
22
9
17
NTPC
202
12
43
31
24
17
Med/Low PAT Growth (20)
2,444
-3
613
11
400
8
Asian Paints
36
8
6
15
4
14
Hero MotoCorp
69
-1
8
16
6
13
TCS
258
17
73
14
57
12
Kotak Mahindra Bank
17
15
11
13
6
12
GAIL
140
5
12
15
7
12
Power Grid Corp.
46
18
40
19
13
12
ICICI Bank
51
15
51
13
30
12
Hind. Unilever
85
11
15
16
11
12
Reliance Inds.
752
-22
89
18
62
10
Larsen & Toubro
109
5
12
7
8
9
Wipro
124
11
28
9
22
7
Dr Reddy’ s Labs
38
9
9
12
6
6
Coal India
190
7
47
11
43
6
ITC
93
0
33
1
23
5
Infosys
141
10
38
9
30
4
Bosch
26
10
5
7
3
2
HDFC
20
16
20
2
14
1
HCL Technologies
97
16
23
3
19
1
State Bank
138
4
92
5
34
1
Zee Entertainment
13
22
3
-10
2
0
Negative PAT Growth (17)
1,915
-4
332
-21
134
-37
Tech Mahindra
62
22
9
1
6
-5
BHEL
45
-12
2
-21
2
-8
Lupin
32
-2
8
-21
6
-10
Vedanta
172
1
43
-24
17
-14
Mahindra & Mahindra
93
-6
11
-20
7
-20
Ultratech Cement
61
7
10
-4
5
-27
ACC
30
0
3
-24
2
-27
Sun Pharma
67
6
17
-8
10
-28
Tata Motors
636
-2
95
-14
37
-31
Hindalco
255
6
22
7
4
-38
Grasim Industries
14
-3
1
-17
1
-38
Ambuja Cements
25
-8
4
-38
2
-40
NMDC
19
-45
12
-50
11
-42
Bank of Baroda
33
0
24
-2
8
-44
Cairn India
27
-39
14
-57
12
-57
Punjab National Bank
40
-8
28
-10
6
-58
Tata Steel
304
-16
27
-36
0
PL
NIFTY Ex BPCL (49)
5,564
-1
1,403
3
737
0
Note: For Financials, Sales represents Net Interest Income, and EBITDA represents Operating Profit
Company
PAT Contbn
(%)
27
2
1
1
9
1
1
1
2
4
3
1
3
54
1
1
8
1
1
2
4
2
8
1
3
1
6
3
4
0
2
3
5
0
18
1
0
1
2
1
1
0
1
5
1
0
0
2
1
2
1
0
100
EBITDA margin
Jun-15 Var (bp)
38
226
16
461
27
688
22
162
57
-104
36
325
86
106
89
-464
36
211
74
-78
90
238
19
167
21
303
25
304
17
107
12
173
28
-58
66
-116
8
70
86
68
99
-138
18
86
12
397
11
23
23
-32
24
50
25
97
36
16
27
-22
18
-51
100
-1,274
23
-298
67
32
21
-750
17
-368
15
-311
4
-43
26
-612
25
-829
12
-209
16
-183
10
-315
26
-410
15
-223
9
9
8
-124
14
-704
63
-650
73
-137
52
-2,174
70
-136
9
-279
25
89
Source: Company, MOSL
July 2015
12

India Strategy | Getting on track!
Some interesting sectoral trends in 1QFY16 earnings
Key PAT growth sectors
All
Capital Goods
companies (except BHEL and Voltas) would report PAT growth.
Except L&T (9%), all companies would report double-digit PAT growth.
All
Consumer and Retail
companies (except United Spirits) would report PAT
growth
All
Pvt Banks and NBFCs
(except DCB Bank) would report PAT growth
Key PAT de-growth sectors
All
PSU Banks
(except SBI and Indian Bank) would report PAT de-growth
All
Metal
companies would report PAT de-growth
All
Cement
companies (except India Cement and Ramco Cement) would report
PAT de-growth
Exhibit 22:
1QFY16 sectoral PAT growth (%)
36
23 18
14 11 11
Exhibit 21:
1QFY16 sectoral sales growth (%)
15 14
12
10
8
8
7
7
6
3
1
1
0
9
7
-1
-1
-1 -7 -11
-33
-52
-6
-13
Source: Company, MOSL
Source: Company, MOSL
Exhibit 23:
1QFY16 sectoral EBITDA margin (%)
36.5 32.5
28.6 27.9
24.4 23.7
Exhibit 24:
1QFY16 sectoral PAT margin (%)
19.2
21.3 20.0 19.4
14.9 14.8 14.7
14.8 14.7 14.2
9.3 8.4
12.0 12.0 11.6
10.5
7.3 7.3 6.7 6.1
5.4 4.0
Source: Company, MOSL
Source: Company, MOSL
July 2015
13

India Strategy | Getting on track!
Other sector
highlights
AUTOS
After an initial spurt last year post elections, demand recovery is losing
momentum, with no improvement in the underlying economic environment.
M&HCV volumes continued to recover in 1QFY16 (third consecutive quarter of
recovery, after nine quarters of decline), with ~15% YoY growth; PV volumes
were up by ~7%. However, other segments witnessed muted demand, with 2W
and LCVs volumes flat YoY.
Margins for our auto OEM (ex JLR) coverage universe are expected to expand
180bp YoY (50bp QoQ) to 11.5%, driven primarily by AL (+460bp) and MSIL
(+460bp), partially offset by MM (-210bp). EBITDA is likely to grow ~31% YoY
(~2.2% QoQ) for our coverage universe (ex JLR), translating into ~19% growth in
PAT. While AL is expected to report its fourth consecutive quarter of PAT at
INR1.4b (v/s ~INR479m loss in 1QFY15), TVS PAT is likely to grow ~46% and EIM
PAT 54%. MM’s PAT is estimated to decline by ~20% YoY. We expect margins to
improve over the next two years, driven by demand recovery-led discount
moderation, soft commodity prices and operating leverage.
Exhibit 25:
EBITDA margin (ex JLR) recovery to continue from
troughs of 4QFY14
Exhibit 26:
Auto aggregate PAT growth constrained by JLR
18
15
12
7
9
-3
6
-25
-5 -12
4
30
52
12
41
2
4
-7
-24
-7
Aggregate (excld JLR)
Aggregate (incl JLR)
Auto PAT growth YoY (%)
Auto Ex JLR PAT growth YoY (%)
112
71
79
Source: Company, MOSL
Source: Company, MOSL
Exhibit 27:
Market share of BJAUT to improve in FY16, driven by CT-100 launch
Economy - MS (%)
Lack of self-start (SS) option in Platina hurt Bajaj Auto
as SS grew tp ~50% of Economy segment
CT100 & Platina Self
40
Start launch
34
30
25
25
24
25
21
27
33
Source: Company, MOSL
CAPITAL GOODS
Managements are expected to guide for cautious optimism, as improved
business sentiment is yet to result in increased tenders, leading to slower pace
of order finalization. For 1QFY16, we expect 2% revenue growth and EBITDA
14
July 2015

India Strategy | Getting on track!
margins improving 80bp to 9%. Order inflows for 1QFY15 would be muted, as
ordering activity from domestic customers is yet to pick up.
Project executing companies are restructuring their balance sheets and infusing
capital to prepare for the next level of growth.
ABB continues to invest in localization initiatives, Voltas continues to bid
cautiously. For Cummins, exports would remain the key growth driver, which
would support operating leverage (current capacity utilization ~50-55%). There
remains a sense of guarded optimism on the near term outlook.
Exhibit 28:
Revenue to witness muted growth led by
constrained execution
Sales (INR b)
Growth (%) YoY
Exhibit 29:
EBITDA margin to improve by 80bps YoY
EBITDA Margin (%)
Source: Company, MOSL
Source: Company, MOSL
Exhibit 30:
Capital Goods revenues flat led by constrained execution; BTB stable at 3.1x
Capital Goods Sales growth (%)
BTB (X)
2.9
3.0
3.1 3.1
2.9 2.8
2.6
2.3 2.3
11
17
2.2 2.2
2.1
6
-5
-2
2.3
2.3 2.4
0
2.3
2.6
15
19
16
0
-4
-1
-4
-4
-7
-13
-7
Source: Company, MOSL
July 2015
15

India Strategy | Getting on track!
CEMENT
Demand momentum slowly improved within 1QFY16 after decline in April, 2-3%
growth in May and a mixed bag trend in June (0-5%) based on regional intensity
of rainfall (lower rainfall in the north led to better volumes than west in June).
Overall, north and east are expected to post relatively better volume growth in
1QFY16 v/s west and south (south showing weakest volume trend with near-
double digit de-growth). We estimate ~1.5% YoY growth for the industry, while
MOSL cement universe to grow by ~3.4% YoY (+5.5% QoQ) due to multiple
instance of new capacity commencement viz. Shree Cement, JK Lakshmi and
Dalmia Bharat. Effective utilizations stood at ~70% (-3pp YoY, -1pp QOQ).
Cement prices (ex-south) are down 4-8% QoQ in 1QFY16—the west and the
north were worst affected, with 7-8% decline QoQ (though select pockets saw
INR10-30/bag uptick during June). East and central regions posted 3-4%QoQ dip
in average prices, while production discipline in south continues to hold prices
QoQ. We are factoring in INR150-200/ton (~4%) QoQ drop in realizations of
MOSL coverage universe, including largely flattish (0-1% QoQ dip) for southern
players. We are factoring in for INR10/INR17 per bag (5%/9%) YoY rise in
realizations in FY16/FY17.
Sharp decline in realization would hurt profitability by INR150-200/ton (4pp
QoQ dip in margins). Cost should remain flattish amidst (a) 3-4% QoQ decline in
imported coal and pet coke prices, (b) 2.7% rise in rail freight and ~3% diesel
cost , (c) rise in packaging cost as crude revived, and (d) marginal positive
operating leverage QoQ.
We expect MOSL universe EBITDA/ton at INR660 in 1QFY16 (-INR189 QoQ, -
INR117 YoY) with southern players likely to post EBITDA/ton of INR900-1,200
(~1pp QoQ dip in margins). We factor in for EBITDA/ton of INR818/1,096 per ton
in FY16/FY17 as against ~INR727 in FY15.
Exhibit 32:
MOSL universe cement volumes to grow 4.7% YoY
in 1QFY16
Aggregate Vol (m ton)
13.8
10.4
9.4
8.4
4.0
3.3
2.7 1.9
1.5
0.4
(2.0)
Volume growth (%)
9.1
5.3 4.4
4.7
Exhibit 31:
Volume growth trend (%) signifies weakness in
cement demand in 1QFY16 (%)
15
10
5
0
-5
-10
MOSL Universe
IIP data
6.1
(5.8)
35 34 36 42 38 35 37 41 38 36 37 43 42 38 39 41 44
Source: Company, MOSL
Source: Company, MOSL
CONSUMER
We expect our Consumer universe to post 7.5% revenue growth and 13.8% PAT
growth in 1QFY16. Broadly, consumption trends continue to remain sluggish
across categories and geographies (rural growth>urban despite incremental
pressure on rural wage growth, given lower salience in overall revenue
July 2015
16

India Strategy | Getting on track!
contribution). We expect clear trends in rural to emerge only post monsoons
and a possible pick-up in government spending.
1QFY16 should see continued benefit of raw material easing. While competitive
intensity has picked up marginally in certain HPC categories, organized players
have been proactive in pre-empting and tackling competition. However, we
believe the price cuts/discounts have not yet changed the volume trajectory
materiall. We expect EBITDA to grow at 12% in 1QFY16 for our coverage.
Exhibit 33:
EBITDA to grow 12% in 1QFY16 aided primarily by
RM softening
Exhibit 34:
Consumer ex-ITC PAT growth healthy
Sales Growth (%)
21.1
20.2
19.8
20.5 20.5
20.2
EBITDA margins (%)
21.3
20.4 20.5
21.6
21.3 21.3
26
17
10
12
19
10
24
Consumer Ex ITC PAT grw YoY (%)
16
9
18
9
5
8
9
12
19
21
21.0 21.2 21.2
19.3 20.3 15.0 16.7 16.4 13.6 10.6 10.3 11.0 11.1 14.6 12.3 7.8 6.6 7.5
Source: Company, MOSL
Source: Company, MOSL
FINANCIALS
PSU banks:
PSU banks’ PPP/PAT is expected to grow 0%/-27% YoY on account of
lower balance sheet growth and continued asset quality troubles. Higher-than-
expected NPAs (especially relapse from RL) will be a drag on earnings. Over the
last year, Indian banks, mainly PSUs, have sold ~INR600b worth assets to ARCs;
we believe write-downs and resultant MTM provisioning for the same (as per
RBI guidelines) would begin over the next one/two quarters.
SBIN
remains our
top pick to play revival in Indian economy.
Private sector banks:
For private banks, healthy core operating performance
and one off income (repatriation of capital) will help to manage earnings. We
expect PPP and PAT growth of ~18% YoY and ~17% YoY. Our top picks are
HDFCB, AXSB, YES and DCBB
in private sector.
Exhibit 35:
Higher opex and provisions would be a drag on
PSU bank’s profitability; healthy growth in profitability for
Private banks to continue (PAT growth % YoY)
Private Banks
29.3
-5.9
-29.7 -26.8
25.8
20.0
19.7
-12.1
18.0
3.5
PSU Banks
20.6
18.6
18.6
-8.9
17.1
-18.3
16.8
Exhibit 36:
Share of PSUs in sector profits will be down to
37% in 1QFY16 vs 49% in 1QFY15
PVT Banks PAT Share (%)
PSU Bank PAT Share (%)
42 40 43 49 42 33 34 37
55 59 58 61 60 56 52 51 52
58 60 57 51 58 67 66 63
45 41 42 39 40 44 48 49 48
-26.8
Source: Company, MOSL
July 2015
Source: Company, MOSL
17

India Strategy | Getting on track!
NBFCs:
We expect the NBFCs under our coverage to deliver 8.8% YoY PAT
growth. For retail NBFCs, the quarter would be marred by seasonal weakness,
translating into lower growth and margin contraction. However, timely onset of
monsoon and sharper focus on recoveries would lead to above trend-line
performance on asset quality. Improving macroeconomic environment, stable
liquidity, easing wholesale rates and reduction in repo rate by the RBI are the
key positives. While incremental data points indicate bottoming-out of the
cycle, growth and asset quality outlook is expected to improve gradually for
NBFCs. Top picks are
IDFC and MMFS.
Exhibit 37:
PAT growth for NBFCs universe expected at 8.8%
28.8
23.4
20.3
32.1
24
15.7
18.8
6.7
9.4
10.9
5.7
8.7
8.8
Source: Company, MOSL
HEALTHCARE
We estimate 14.2% growth in sector revenue in 1Q, supported by strong
performance in domestic market. However, weak quarter in US for few large cap
companies is likely to pull down overall EBITDA margins to 23.7% (-180bp). PAT
is expected to remain flat, mainly on account of higher deprecation during the
quarter. We believe Cipla, Cadila, Torrent Pharma and Alembic Pharma are
likely to deliver strong operational performance in 1Q.
Slow pace of approvals in US and increased pricing pressure is expected to
impact larger players like – Sun Pharma, Lupin and Dr Reddy’s. However, Cipla is
likely to benefit from gNexium supply to its partner Teva (sole gneric player). In
domestic business, all large cap companies are expected to post double digit
growth aided by price increase undertaken in April and continued traction in
specialty therapies. According to NPPA, Indian pharma companies are allowed
to take 3.6% price hike on NLEM products and 10% price hike on Non NLEM
products from April 2015.
In Mid Caps, apart from IPCA, most of the other companies are expected to
benefit from recent surge in ANDA approvals for their US filings. Alembic and
Torrent are expected to deliver strong US numbers on account of gAbilify
launch. Aurobindo and Glenmark are also likely to benefit from recent drug
launches in US market. Cadila would continue to gain from price hike in HCQ and
expected to report good growth in US.
We expect Sun pharma to post muted numbers in 1Q on the back of (1) Ongoing
supply constrains at Halol plant, (2) Lack of approvals in US, (3) Price erosion in
some of the Taro products and (4) Difficulties in Ranbaxy merger.
July 2015
18

India Strategy | Getting on track!
The INR depreciated 8% YoY against the USD in 1QFY16 (63.5 v/s 59 in 1QFY15).
Hence, 1QFY16 net sales of export-oriented companies may be higher than
witnessed in the last 2-3 quarters.
However, emerging market currency crisis will affect companies such as Dr
Reddy’s, Torrent Pharma and Glenmark in our coverage. Similarly, some
negative impact of Euro depreciation would be visible in companies such as
Aurobindo, Torrent Pharma and Cipla, which have a higher proportion of Euro
sales in the overall revenue.
Exhibit 38:
Healthcare: EBITDA Margin to contract by 180bp
EBITDA Margin (%)
22.9
20.7
22.1 22.4
23.0
21.3
23.0
23.7 24.2 24.0
25.5
26.4
24.0
23.7
21.6 22.0
19.4
*4QFY15(excluding sun pharma): 21%
Source: Company, MOSL
MEDIA
We expect 14% aggregate PAT growth in 1QFY16 but 23% growth ex-ZEE.
Earnings growth is expected to be divergent. Among the print companies, DB
corp is expected to see pressure on its advertising revenue led by continued
weakness in demand from key segments. This coupled with increased launch
and start-up expenses are expected to keep PAT under pressure. Print
companies (ex-DB Corp) are also expected to see a flat bottom-line YoY. Benign
newsprint prices will provide some solace. While ZEE’s earnings would be
impacted by increased &TV and sports losses. Earnings are expected to remain
flat for SUNTV led by likely escalation in content costs. Pay TV operators (DISHTV
and HATH) are expected to report improved profitability in the form of lower
losses in the case of Hathway. Dish too is expected to continue its PAT +ve
streak after its PAT turnaround in 4Q.
We expect our universe ad revenue growth to recover to 9% YoY vs 7% each in
4QFY15 and FY15. ZEE would be the only media company to report more than
20% ad growth on the back of its new channel launch. Our industry interactions
indicate that growth remained soft for most of 1QFY16, with likely pick-up in 2H.
July 2015
19

India Strategy | Getting on track!
Exhibit 39:
Media: Quarterly PAT (INR b)
7.4
4.3
4.7
5.3
5.8
4.6
5.9
4.8
4.9
5.6
5.3
5.8
6.4
Source: Company, MOSL
METALS
Although steel demand is gradually improving with single digit growth, the
continuous pressure of imports has been shrinking market for domestic mills.
Post a poor 4QFY15, we expect our Metals coverage universe to post another
weak quarter, with aggregate EBITDA declining 32% YoY (growing 7% QoQ)
amidst lower metal prices (ex-Zinc) and persisting imports.
We have cut EBITDA estimates for steel companies by 3-10% on lower
realizations.
While LME aluminum was largely unchanged QoQ (at USD1,800/ton), spot
premiums came under significant pressure.
Zinc prices were supportive in the quarter, up 5% QoQ / 6% YoY to USD2,192.
Volumes would be up ~30% YoY, but due to more than tripling of royalty YoY
(due to DMF), we expect EBITDA to increase by just 12% YoY for Hindustan Zinc.
We cut our LME (aluminum) assumption from USD1,900/ton to USD1,800/ton
for FY16, and from USD1,950/ton to USD1,900/ton for FY17. Thus, our EBITDA
estimates for Hindalco and Nalco are cut by 5% for FY16 and by 25% for FY17.
Our target prices are cut from INR206 to INR179 for Hindalco, and from INR77 to
INR72 for Nalco. For Vedanta, we cut our EBITDA estimates for FY16 and FY17 by
1%, and trim our target price from INR209 to INR177 on lower aluminum LME
and spot aluminum/zinc premiums, offset by higher INR/USD assumptions.
Exhibit 41:
Steel sales volume to increase
SAIL
9.4
2.4
3.2
2.3
Tata Steel
7.8
2.6
2.6
2.0
8.9
3.1
3.0
2.0
8.9
3.1
3.0
2.1
SAIL
9.7
3.1
3.5
2.4
JSW Steel
8.5
2.9
2.8
2.1
8.8
3.1
2.9
2.1
JSPL
8.7
3.0
2.9
2.1
9.4
3.1
3.2
2.4
9.3
3.0
3.3
2.1
Exhibit 40:
India steel – EBITDA/ton (INR)
Average
20,000
15,000
10,000
5,000
0
JSW Steel
Tata Steel
JSPL
Source: Company, MOSL
Source: Company, MOSL
July 2015
20

India Strategy | Getting on track!
OIL & GAS
Including DBTL, expect 1QFY16 under recoveries at INR91b (-68% YoY). While
the DBTL component will be compensated by government, sharing of non-DBTL
and kerosene subsidy is not yet clear.
Regional benchmark, Reuters Singapore GRM was up 40% YoY but down 6%
QoQ to average at USD8.1/bbl led by higher gasoline cracks.
In petchem, polymer (PE, PP, PVC) as well as polyester (POY, PSF) spreads were
up YoY and QoQ, however polyester QoQ increase was marginal.
OMC’s demonstrate pricing power by tweaking marketing margins, lower QoQ.
While upstream PSU’s are expected to report strong numbers led by almost nil
subsidy, still await clarity on long term subsidy sharing
RIL’s standalone PAT is expected to be up 10% YoY to ~INR62b led by higher
petchem margin and GRM, partly negated by lower E&P profits.
Exhibit 43:
Reuters Singapore GRM was up 40% YoY but down
6% QoQ to average at USD8.1/bbl
Reuters Singapore GRM (USD/bbl)
120
105
90
75
60
45
30
15
0
10
9
8
7
6
5
4
3
2
1
0
1QFY04 1QFY06 1QFY08 1QFY10 1QFY12 1QFY14 1QFY16
Exhibit 42:
Diesel into over recovery zone post deregulation
Diesel (under)/over recovery (INR/ltr)
Brent crude price (USD/bbl) - RHS
6
3
0
(3)
(6)
(9)
(12)
(15)
Jun-12 Dec-12
Jul-13
Jan-14 Aug-14 Feb-15
Source: Bloomberg, MOSL
Source: Bloomberg, MOSL
REAL ESTATE
Economic recovery overhang delays realty pick-up
Over 1QFY16, the BSE Realty index underperformed the broader index by ~14%, as
the muted macro outlook and slow pace of on-ground recovery continued as major
overhangs. Affordability remains a dampener in most markets, led by (a) higher
price, (b) mismatch in product proposition, and (c) delay in economic revival.
Investor participation is weak and the end-consumers’ decision making time is yet to
contract. Prices are range-bound and time correction is underway.
Launch momentum slow; presales to weaken
Launch momentum was slow in 1QFY16; developers continue to wait for approvals
under new regulations (Mumbai, Chennai) or demand pick-up. Select launches by
Godrej Properties (Prime,
Icon
in Mumbai), Sobha Developers (Dream
Acres
in
Bangalore), Lodha (Central in Thane, Mumbai) did well. Broader presales
momentum is slow in all market including Bangalore. QoQ, we expect lower presales
for our coverage universe.
July 2015
21

India Strategy | Getting on track!
The NCR market showed marginal improvement on the residential front, with
approval for Dwarka Expressway expected to drive demand. DLF’s
Camellia
would
post stable momentum. Discount schemes and innovative offerings are in full swing.
Developers like Tata Housing resorted to online property auctions and sales to
offload inventory. Operating cash flows for most companies would remain sub-
normal, resulting in rise in gearing levels.
PE activities strong; commercial market picking up gradually
Though private equity (PE) players remain upbeat on Indian real estate, the quarter
witnessed the exit of key PE players like ASK group and Milestone in certain projects.
The commercial asset class is showing positive signs towards recovery in the NCR
and Bangalore markets, with rentals picking up and demand outpacing supply.
Exhibit 44:
Quarterly Trend in Presales value (INR b)
Presales (INR b)
FY11 FY12 FY13 FY14
NCR Centric developers
102.6 90.9
DLF
59.4 52.9
Unitech
43.2 38.1
Mumbai Centric developers
79.1 39.6
IBREL
48.4 19.5
HDIL
20.7 10.6
ORL
10.1 9.5
Bangalore Centric developers 32.4 46.8
Sobha
10.9 17.4
PEPL
13.8 20.6
Purva
7.6
8.8
Brigade
Diversified
16.9 18.9
MAHLIFE
7.0
6.0
GPL (own stake)
10.0 12.8
66.3
38.2
28.1
38.7
30.0
-
8.7
68.2
22.2
31.1
14.9
7.9
18.8
4.4
14.4
1Q
2Q
FY15
3Q
4Q
21.5
19.8
1.7
21.8
5.5
4.0
12.3
21.2
6.3
10.1
1.3
3.5
4.2
2.5
1.7
FY15 YoY, %
46.9
38.6
8.3
52.1
20.3
14.1
17.7
86.6
21.0
43.7
14.2
14.3
17.7
7.0
10.7
-36
-22
-64
1
-48
89
247
-23
-39
-15
-45
-29
-33
16
-47
55.8 6.5 11.1 7.9
40.7 3.1 9.2 6.5
15.1 3.4 1.9 1.4
39.7 10.0 8.3 12.0
30.7 5.6 4.0 5.2
5.6
3.0 3.3 3.8
3.4
1.4 1.0 3.0
75.7 21.4 23.2 20.9
23.4 4.8 5.6 4.3
36.3 13.1 12.9 7.6
16.0 3.5 4.7 4.8
13.4 2.5 4.1 4.2
16.3 4.1 3.9 5.4
3.7
0.5 0.9 3.1
12.6 3.6 3.0 2.3
TECHNOLOGY
We expect aggregate reported USD revenue growth of 2.6% QoQ across top tier
IT companies in 1QFY16, with TCS leading organic growth at 4.1% QoQ in CC
terms. Energy segment at WPRO and Telecom at TECHM will drag the
performance across those two companies. Tier II IT companies are expected to
fare in a similarly polarized fashion, with aggregate growth estimated at 2.4%
QoQ. PSYS, KPIT, CYL and MPHL all face specific headwinds to their portfolio.
While INR appreciation of ~2.%+ QoQ along with relatively stable global
currencies is a tailwind to margins, wage hikes at TCS, INFO and WPRO, and
growth issues in TECHM will offset the impact from the same. Only HCLT in tier-I
should see expansion in margins.
Across tier I, our aggregate estimate for PAT growth is 7% YoY, led by TCS (12%).
TECHM should lag with YoY decline of 5% due to lower margins. Tier II IT
universe is expected to report a PAT growth of 12% YoY, led by HEXW (+41%
YoY) and MTCL (+18% YoY). KPIT is expected to lag (-17% YoY).
July 2015
22

India Strategy | Getting on track!
Exhibit 45:
WPRO, TECHM to lag peers; expect TCS, CTSH to
benefit from 1Q seasonality
9
7
5
3
1
-1
4.1
3.0
2.7
0.8
(0.1)
TCS
Infosys
Wipro
Exhibit 46:
Tier-II IT performance impacted by several client
specific issues during the quarter
Persistent Systems Hexaware
KPIT Tech.
Mindtree
Mphasis
8.5
7.8
5.6
5.0
4.2 4.1
3.6
4.0
1.4
1.5
1.2
0.3 0.1
0.9
0.6
0.5
-0.4
-3.4
2QFY15
-3.2
-5.6
3QFY15
4QFY15
1QFY16E
Source: Company, MOSL
Source: Company, MOSL
Exhibit 47:
Ex-TECHM, CC YoY revenue growth is not expected
Exhibit 48:
Technology growth is expected to be one of the
to witness deceleration
lowest ever
3QFY15
4QFY15
1QFY16E
Technology PAT grw YoY (%)
35 35
20
13
24 26
19
30
15 17
34
39
25
13 11
6
7
TCS
INFO
WPRO
HCLT
TECHM
CTSH
Source: Company, MOSL
Source: Company, MOSL
TELECOM
YoY earnings rebound to remain strong, with PAT for Bharti/Idea growing
21%/36% YoY. PAT growth for Bharti Infratel should remain healthy at 16%.
We expect ~19/29% YoY India mobile EBITDA growth for Bharti/Idea supported
by wireless traffic growth and continued momentum in data business. Voice
RPM is likely to be under pressure
Exhibit 49:
Telecom: Quarterly PAT (INR b)
Bharti (India)
Idea
19.4
13.9
8.9
2.3
2.1
2.4
2.5
2.3
2.5
10.8
3.8
2.9
14.8
4.9
3.6
14.0
4.5
4.7
5.9
4.7
7.3
4.6
7.6
4.7
7.7
5.1
9.4
23.8
Bharti Infratel
21.8
23.0
25.6
25.5
24.7
15.8
9.9
5.4
2.8 4.1
5.6
Source: Company, MOSL
July 2015
23

India Strategy | Getting on track!
UTILITIES
In April-May 2015, all-India generation grew 3% YoY, led by similar 3% YoY
growth in coal generation, while gas based generation de-grew by 14% YoY.
Generation growth for the month of April stood at 0.3% YoY, while on set of
summer led to rather better generation of 6% YoY in the month of May 2015.
Coal project PLF has remained range-bound at ~63%.
Power demand stood flat YoY for the period April-May 2015, comprising of
demand de-growth in the month of April to the tune of 3.5% YoY offset by 2.3%
YoY improvement in demand in May 2015. Subdued demand growth is partly
led by poor DISCOMs financials, while our interaction with industry indicates
real slowdown too impacting demand. Over the same period, power supply
increased by 1.1% YoY, leading to base deficit of 2.3%, vs 4.1% YoY.
We expect Utilities companies in our coverage to report revenue growth of 7.2%
YoY and PAT growth of 8.7% YoY in 1QFY16. Aggregate PAT would be negatively
impacted by de-growth in PAT for JSW energy, and higher losses for RattanIndia
Power. However, NTPC (up 17% YoY), Powergrid (up 12% YoY), Coal India (up 6%
YoY) and Tata Power (up 63% YoY) would report robust PAT growth.
Exhibit 51:
Monthly generation appears flattish
All India Generation (BUs)
27
13
4 6
6 7
0
1
6 7
0
5
12
16
7
1113
4
Gr (YoY, %)
14 11
6
Exhibit 50:
Coal project PLFs remain range-bound
Coal Generation (BUs)
PLF (%)
10
3
-7
6
0
Source: CEA
Source: CEA
Exhibit 52:
Power demand remain muted (BUs)
FY14
2.3%
FY15
YTDFY16
Gr (%)
Exhibit 53:
Base deficit remains subdued (%)
12
9
6
3
YTD FY16
FY13
FY14
FY15
-3.5%
0
April May June July Aug Sept Oct Nov Dec Jan Feb Mar
Source: CEA
2.2
2.4
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
Source: CEA
July 2015
24

India Strategy | Getting on track!
Exhibit 54:
Peak deficit too trends lower (%)
16
13
10
7
4
1
-2
3.5
2.3
YTDFY16
FY13
FY14
FY15
Exhibit 55:
ST prices cool remain soft (INR/unit)
Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
Source: CEA
Source: IEX
July 2015
25

India Strategy | Getting on track!
Intra-sector 1QFY16 earnings divergence (%)
Sectors
Sector
Growth (%)
+30% Growth
15-30% growth
0-15% growth
-ve earnings
growth (%)
Earnings
momentum
High growth sectors
Media
36
Telecom
Capital Goods
Banks - Private
23
18
17
PVRL: 152%, SUNTV: 40%
DITV: LP
IDEA: 36%
SIEM: 878%, BHE: 117%,
TMX: 54%
JAGP: 27%
Z: 0%
BHARTI: 21%,
BHIN: 16%
ABB: 28%,
CRG: 14%, HAVL: 11%,
KKC: 19%
LT: 9%
YES: 29%, IIB: 24%, FB: 15%, KMB: 12%,
HDFCB: 20%,
ICICIBC: 12%
AXSB: 18%
PIDI: 30%,
DABUR: 26%,
SKB: 19%,
CLGT: 16%
DBCL:-15%,HTML:-49%, 3
1
1
4
HATH:Loss,SCNL:Loss
RCOM: -4%
1
2
0
1
VOLT: -6%,
BHEL: -8%
DCBB: -3%
3
2
3
2
0
4
3
1
Medium/Low growth sectors
Consumer
14
JYL: 59%, GCPL: 52%,
BRIT: 48%, UNSP: LP
Retail
NBFC
11
9
SHOP: 335%,
JUBI: 51%
MRCO: 14%, APNT: 14%,
RDCK: 13%, HUVR: 12%,
HMN: 6%, ITC: 5%,
NEST: 1%
TTAN: 3%
4
4
7
0
2
0
1
0
Utilities
9
Oil & Gas
(Ex Rms)
Technology
7
7
MMFS: 27%,
RECL: 9%, POWF: 7%,
IHFL: 25%,BAF: 24%, SHTF: 4%, HDFC: 1%,
LICHF: 20%,DEWH: 18%,
IDFC: 1%
REPCO: 18%
TPWR: 63%
PTCIN: 28%,
CESC: 14%, PWGR: 12%,
JSW: -24%,
NTPC: 17%
COAL: 6%,NHPC: 3%,
RTPOW: Loss
RELI: 0%
HPCL: 1399%, ONGC: 41%,
GUJS: 25%,
GAIL: 12%, RIL: 10%, IOCL: -9%,BPCL : -11%,
MRPL: LP
OINL: 18%
PLNG: 4%
IGL: -13%, CAIR: -57%
HEXW: 41%
TELX: 21%,
TCS: 12%, WPRO: 7%,
PSYS: -3%,
MTCL: 18%
MPHL: 6%, INFO: 4%,
TECHM: -5%,
HCLT: 1%
KPIT: -17%
ALPM: 126%, CDH: 50%,
CIPLA: 41%, GLXO: 36%
MSIL: 77%, BHFC: 54%,
EIM: 54%, TVSL: 46%,
AL :LP
IBREL: 60%,
OBER: 54%
TRP: 25%,
DIVI: 21%
AMRJ: 19%,
BJAUT: 17%
GPL: 22%,
PEPL: 21%
0
6
5
0
1
2
5
2
3
2
3
4
5
3
1
2
PAT degrowth sectors
Healthcare
-1
Autos
-7
GNP: 10%, DRRD: 6%, SANL:-3%,LPC:-10%,
4
2
ARBP: 6%, BIOS: 1% SUNP:-28%,IPCA:-78%
HMCL: 13%,
MM: -20%,
EXID: 8%
TTMT: -31%
5
2
PHNX: 5%
4
4
2 2
Real Estate
-11
Banks - PSU
-27
Cement
-33
Metals
-52
Earnings momentum:
SOBHA: -5%,
2
2
1
3
DLFU: -14%,
MLIFE: -81%
INBK: 4%,
BOB: -44%,
0
0
SBIN: 1%
UNBK: -48%,
2
4
BOI: -49%, PNB: -58%
TRCL: 234%
UTCEM/ACC: -27%,
1
0
GRASIM: -38%,
0
6
SRCM:-79%ACEM:-40%,
ICEM: Loss
HZ: -3%, VEDL: -14%,
NACL:-18%,HNDL:-38%, 0
0
0
9
NMDC:-42%,JSTL:-90%,
JSP: PL, SAIL: PL,
TATA: PL
Represents number of companies in each of the growth brackets; PL: Profit to Loss; LP: Loss to Profit
July 2015
27

India Strategy | Getting on track!
FY16-17 estimates
Expect recovery in 2HFY16
Government-led capex and low inflation to lead recovery
Delay in domestic recovery and global commodity fall continue be the headwinds for
earnings growth. Other factors such as muted rural consumption, continuing asset
quality woes in PSU banks and adverse cross currency movements continue to pull
down the aggregate growth of corporate India.
However, we believe government-led capital spending and favorable inflation leading
to lower rates will create conducive environment for earnings growth recovery.
Our bottom-up estimates suggest aggregate PAT of the MOSL Universe (ex-RMs) to
rebound to 17%/23% in FY16/FY17. Sales growth would increase moderately to 9% in
FY16 before jumping to 13% in FY17.
Expect Sensex EPS to grow 15% to 1,561 in FY16 and 22% to 1,907 in FY17. Since the
last preview, three-fourths of the Sensex companies would see an EPS cut—led by
Tata Steel, Sun Pharma, Hindalco, Tata Motors, Coal India and GAIL. Top upgrade
drivers are Maruti, NTPC, ONGC and Bajaj Auto.
One-third of the Sensex companies would contribute more than two-thirds of FY16
Sensex EPS expansion. Key contributors to the EPS expansion would be ONGC, Tata
Motors, ICICI Bank, HDFC Bank, Tata Steel and Reliance Ind, M&M, Axis Bank, HDFC
and SBI.
FY16 Earnings cut—‘Murphy still at Work’
Since March 2014, earnings have seen a 13% downgrade and earnings growth
has been cut by 2pp.
Earnings cuts were driven by factors such as fall in commoditiy prices, delay in
revival of investment cycle, muted rural consumption, continued asset quality
issues at PSU banks and adverse cross currency movements that impact global
businesses.
Exhibit 56:
Corporate earnings have seen a 13% downgrade
since March 2014…
FY16 EPS (INR)
21.4
17.5
FY16 EPS Growth YoY (%)
19.9
2pp cut in FY16
EPS growth since
Mar 2014
Exhibit 57:
… driven by
#1
#2
#3
#4
Fall in commodity prices
Delay in revival of the investment cycle
Muted rural consumption
Persisting asset quality issues , esp. with the PSU banks
Adverse cross currency movements
Factors specific to companies
Source: MOSL
18.4
15.3
1,793
Mar 14
1,875
Sep 14
1,761
Dec 14
1,662
Mar 15
1,561
June 15
#5
#6
Source: MOSL, Company
#1 – Fall in commodity prices led to severe downgrades
Since Apr-14, global commodities (represented by CRB commodity index) have
fallen ~15% (one-year fall of ~14%). Oil, during a similar period, has corrected
by ~44% (one-year fall of 45%)
July 2015
27

India Strategy | Getting on track!
Global cyclicals contributed 31.6% of total Nifty earnings in the Mar-14 preview.
However, a 21% cut in earnings estimates has brought down the global cyclicals
earnings contribution to 28.2% (a drop of 334bp)
Major cuts were led by Tata Steel (63%), Cairn India (61%), NMDC (46%),
Hindalco (27%), Coal India (21%) and ONGC (18%)
Exhibit 59:
… led to unprecedented revision in estimates in
global cyclical since March 2014
FY16E revision (%)
15.4
FY16E growth rate (%)
11.5
17.0
Exhibit 58:
Fall in global commodities …
105
95
85
75
65
55
74
64
CRB Commodity Index (USD)
Rogers Intl. Comm. Index (USD)
-12.1
-20.7
Nifty ex RMs
Global cyclicals
-7.0
Nifty ex global
cyclicals
Source: MOSL, Company
Source: MOSL, Bloomberg
Exhibit 60:
Earnings cut was led by Tata Steel (63% cut in PAT estimates), Cairn India (61%)
and NMDC (46%)
FY16E revision (%)
-27
-46
-63
Tata Steel
-61
Cairn India
-21
-18
NMDC
Hindalco
Coal India
ONGC
Note: Global cyclicals include Metals, Energy (ex RMs) and Coal India
Source: MOSL, Company
#2 - Delay in revival of the investment cycle
Manufacturing IIP has remained weak (average of 2.3% post 2014 genreal
elections). However, IIP has shown resilience at ~4% since Jan-15.
Projects completed (as a % of projects under implementation) remains at low
levels of 4.1%; this has impacted the virtuous cycle of cash flow generation in
the system.
Project execution remains sluggish due to regulatory, financing and viability
constraints.
This has led to steep cuts in our estimates for Cement and Capital Goods; ACC
leads the pack with 49% cut in FY16 estimates, followed by Grasim (41%),
Ultratech (33%), L&T (22%), BHEL (20%) and Ambuja (18%).
July 2015
28

India Strategy | Getting on track!
Exhibit 61:
Manufacturing IIP remains at baseline levels (%
YoY, 3mma)
Manufacturing IIP % YoY 3mma
10
8
6
4
2
0
-2
Manufacturing IIP average
post Modi govt. is 2%
Exhibit 62:
Weak execution results sub-optimal number of
projects completed (as % of projects under implementation)
(ttm)
15.0%
12.0%
9.0%
6.0%
3.0%
Projects completed had consistently remained
at 7%+ of projects under implementation
Projects Completed ttm, as % of Prj under Impl
Execution impacted given regulatory,
financing and viability constraints
Average 6.4%
Source: MOSL, Govt.
Source: MOSL, CMIE
Exhibit 63:
Slow domestic recovery and lower capacity utilization result in steep cuts in
FY16 earnings
FY16E revision (%)
-22
-33
-41
-49
ACC
Grasim Inds
Ultratech
Cement
L&T
-20
-18
BHEL
Ambuja Cem
Source: MOSL, Company
#3 – Muted rural demand and growth
MSP price increase was a mere 3% during FY16; this was post a new low of 2% in
FY15.
Rural wage growth has also moderated steeply from ~10% in FY14 to 6% in FY15
Forecast of poor monsoons in 2015, following a deficit rain in 2014, also has an
impact on rural demand.
Exhibit 65:
… along with this, rural wage growth has
moderated and is the lowest in almost a decade
Simple avg wage rate for all rural occupations (%)
NDA-
II Avg:
2%
7
2 3
9
8
12
19
16
19
Exhibit 64:
Second successive year of very low hike in MSP
(%)…
UPA-I
Avg: 9%
10
NDA-I
6 6
2
27
UPA-II
Avg: 12%
19
16
12
7
18
8
6
8
4 3 3
10
6
Source: MOSL, Govt.
July 2015
Source: MOSL, Govt.
29

India Strategy | Getting on track!
Exhibit 66:
FY15 Volumes estimate for 2Ws and Tractor has
seen downgrades…
2Ws
2.1%
0.0%
-4.0%
-3.3%
Tractor
Exhibit 67:
…also reflecting in FY16 earnings revision
FY16E revision (%)
-6.5%
-11.0%
Sep-14
Dec-14
Mar-15
Source: MOSL, SIAM, Company
-28
M&M
-17
-15
Hero Moto
Bajaj Auto
Source: MOSL, Company
Exhibit 68:
HUVR volume growth has been sub-5% in the past two years, with 30-35%
volumes from rural India
HUL Volume growth (%)
13.0
9.3
6.8
3.3
4.8
4.0
4.8
8.0
Source: MOSL, Company
#4 - Asset quality issues: Lower credit growth and asset quality leading to
huge cute in estimates
Credit growth stands at a four-year low at 10% in FY15 v/s an average credit
growth of ~15%.
Weaker-than-expected domestic recovery leading to continued rise in stress
loans for PSU banks.
Slippages are likely to go up as the banks are likely to grapple with the no
restructuring forbearance window
GNPA’s jumped from 2.2% of loan book in FY11 to 4.6% of the loan book in
FY15. We expect GNPAs to up further in 1HFY16.
Exhibit 70:
... leading to downgrades in earnings estimates
since Mar-14
FY16E revision (%)
Exhibit 69:
Credit growth remains weak while GNPAs &
restructured loans are near highs…
GNPA
21.5
19.6
Restructured Loans
17.0
6.2
3.0
17.5
7.1
4.9
System credit growth
8.4
10.0
4.5
8.8
9.7
15.9
7.3
3.9
14.0
7.2
3.8
13.9
7.5
4.4
4.1
2.2
3.5
3.0
-21
4.6
-41
BOI
PNB
-18
BOB
Source: MOSL, Company
30
Source: MOSL; Company
July 2015

India Strategy | Getting on track!
#5 – Tech: Adverse cross currencies and weak global demand restricts PAT
growth
Major global currencies like EUR, GBP, JPY and AUD have all depreciated 8-18%
since 1QFY15; however, INR has depreciated by only ~5% . This impacted USD
revenues of companies cutting revenue estimates by 400-600bp in FY15/16
across top-tier IT companies
Weakness in specific segments in global markets has led many IT companies to
guide for muted growth. This follows a disappointing growth in 4QFY15.
Contribution of Technology to overall PAT seems to have peaked at 14.3% in
FY15. We estimate PAT growth of only 9% in FY16, lowest ever for the sector.
Exhibit 71:
Major global currencies depreciated 10-18% v/s USD since 1QFY15 (%) …
18.6%
18.3%
17.3%
8.1%
5.4%
EUR
GDP
AUD
JPY
INR
Source: MOSL, Bloomberg
Exhibit 72:
… resulting in PAT growth to come down to 9%
45
28
47
Technology PAT growth (%)
23% CAGR PAT
32
27
growth
19
16 18 17 15
Exhibit 73:
Technology contribution may have peaked at
14.2% in FY15
Technology PAT as % of MOSL PAT universe
10.4
7.9 7.4
6.7 7.4
8.3 8.5 8.4 8.4
12.9
14.3
13.2 12.4
11
16
9
Source: MOSL, Company
Source: MOSL, Company
#6 – Company-specific factors resulting in cut in estimates
ITC:
Cigarettes has seen ~17% excise duty hike every year on an average in the
past four years, creating huge pressure on cigarette volumes. Accordingly,
volumes are expected to see a decline in FY16.
HDFC:
Increase in tax rate from 26% to 31% due to creation of deferred tax
liabilities on special reserve (as per NHB guideline) and lower-than-expected
growth led to cut in estimates by 3% for FY16/17
Tata Motors:
Volumes have been disappointing for JLR on several issues. This
has also impacted the margin estimates, leading to severe cut in earnings
growth.
July 2015
31

India Strategy | Getting on track!
Exhibit 74:
FY13-FY16 has seen steep excise duty hikes in cigarettes
FY09
Excise increase in budget (%)
0
FY10
0
FY11
9-18
FY12
0
FY13
18-23
FY14
18
FY15
16
FY16
13
Source: MOSL, Govt.
Exhibit 75:
ITC saw steep volume de-growth in FY15/FY16 …
7.6
6.4
Volume Growth (%)
1.5
-0.9
Exhibit 76:
… resulting in subdued PAT growth and earnings
downgrades
ITC PAT growth (%)
25
24
20
18
-4
11
-7
13
Earnings revision since Mar 14 (%)
23
-2.9
-2.8
-7.9
-9.8
Source: MOSL, Company
Source: MOSL, Company
Exhibit 77:
HDFC sees cut due to jump in tax rate and lower-
than-expected growth
HDFC PAT growth (%)
24
25
17
18
12
10
Earnings revision since Mar 14 (%)
-3
16
-3
18
Exhibit 78:
Tata Motors saw ~37% earnings cut in FY16 on
delayed recovery in JLR volumes
Earnings revision since Sep 14 (%)
-36.9
-37.3
FY16E
Source: Company, MOSL
FY17E
Source: Company, MOSL
Expect rebound in PAT growth in FY16/FY17; sales growth to increase
moderately in FY16, rebound in FY17
We expect rebound in aggregate PAT growth in FY16, led by continued reforms,
government-led capital spending and fall in rates. The growth will be aided by
the realization of full impact of reduction in raw material prices, thus improving
margin profile.
Expect MOSL Universe (ex-RMs) to report FY16/FY17 PAT growth of 17%/23%.
PAT growth would be led by Cement, Cap Goods, Auto, Healthcare, Consumer
and Oil & Gas.
Two-thirds of FY15-17 PAT delta would be contributed by just four sectors—
Financials (27%), Auto (12%), Oil (ex-RMs, 16%) and Technology (9%).
Sales growth would pick up moderately and rise to 9% in FY16 and to 13% in
FY17.
July 2015
32

India Strategy | Getting on track!
Exhibit 79:
Sales to grow 9% in FY16, to rebound to double
digit in FY17
37
28
20
8
23
MOSL Ex RMs Sales growth (%)
25
11
11
3
13
Exhibit 80:
PAT growth expected to rebound in FY16/FY17
35
29
22
MOSL Ex RMs PAT growth (%)
Long period
avg of 16%
14
6
5
0
17
23
9
11
6
Source: Company, MOSL
Source: Company, MOSL
Exhibit 81:
Financials, Autos, Oil (ex-RMs) and Technology
rd
contribute 2/3 of FY15-17 PAT delta
16
12 11
10 9
PAT delta (FY15-17): % Share
7
7
6
6
Exhibit 82:
Growth would be broadbased
56
47
PAT CAGR FY15-17 (%)
35 32
30 29
25 23 22
21 20 20 18
15 12
8
5
5
2
1
1
0
-1
-2
Source: Company, MOSL
Source: Company, MOSL
July 2015
33

India Strategy | Getting on track!
Exhibit 83:
FY15-17 estimates: Expect FY15-17 aggregate PAT CAGR at 20%
Sales Sales Gr. / EBIDTA
(INR b) CAGR (%) CAGR (%)
(No of Companies)
FY15
(FY15-17) (FY15-17)
High PAT CAGR*
21,035
12
18
Cement (14)
1,209
21
38
Media (11)
221
18
27
Real Estate (10)
262
16
19
Capital Goods (12)
1,566
11
16
Others (25)
775
14
21
Auto (11)
4,854
16
17
Healthcare (14)
1,148
16
23
Oil & Gas (12)
15,674
-1
21
Excl. RMs (9)
6,703
5
19
Retail (3)
169
19
23
Financials (31)
2,649
15
16
PSU Banks (10)
1,470
12
13
Private Banks (10)
737
19
19
NBFC (11)
441
18
17
Consumer (15)
1,479
13
18
Medium PAT CAGR #
4,906
13
15
Utilities (10)
2,185
12
17
Technology (11)
2,721
14
14
Low PAT CAGR ^
6,288
6
7
Metals (9)
4,714
4
4
Telecom (4)
1,574
10
13
MOSL Excl. RMs (189)
32,228
11
16
MOSL (192)
41,199
8
16
Sensex (30)
10,535
10
15
Nifty (50)
12,754
10
15
* (>20%) # (10-20%) ^ (up to 10%)
Sector
EBIDTA
Margin (%)
FY15 FY16E FY17E
24.0
25.4
26.8
15.2
16.4
19.7
26.0
28.0
29.9
34.0
34.4
36.0
11.0
11.1
11.8
15.7
17.0
17.8
14.6
14.7
14.9
23.7
25.1
26.8
8.1
11.2
12.0
15.2
18.0
19.6
9.0
9.4
9.8
79.4
79.3
80.4
70.1
70.1
71.8
87.4
86.3
86.6
96.9
96.2
95.9
21.0
22.1
22.7
26.4
26.8
27.3
27.8
29.0
30.3
25.2
25.0
25.1
21.5
20.8
22.3
17.2
15.1
17.0
34.7
36.2
36.4
23.9
24.8
26.1
19.3
21.3
22.5
22.2
23.1
24.2
22.5
23.1
24.3
PAT
(INR b)
FY15
2,429
60
21
26
99
62
292
169
638
530
10
951
313
376
263
209
894
346
548
405
295
110
3,728
3,836
1,166
1,445
PAT Gr. / CAGR (%)
FY16E
25
36
52
34
29
33
32
28
36
27
20
19
21
19
16
23
11
14
9
-21
-33
14
17
18
18
15
PAT delta
Sh. (%)
FY17E (FY15-17) FY15-17
25
25
84
80
56
5
43
47
2
35
35
1
35
32
5
28
31
3
28
30
12
29
29
7
16
25
22
18
22
16
27
23
0
23
21
27
30
25
11
21
20
10
19
18
6
18
21
6
16
13
16
16
15
7
16
12
9
28
1
0
44
-2
-1
2
8
1
23
20
100
23
20
NA
22
20
NA
22
18
NA
Source: Company, MOSL
Exhibit 84:
Domestic plays to outperform global plays during FY15-17 in terms of PAT growth
SECTOR
FY03 FY08
PAT (INR B)
PAT Contribution (%)
PAT CAGR (%)
P/E (x)
FY14 FY15 FY16E FY17E FY03 FY08 FY14 FY15 FY16E FY17E FY03-08 FY08-14 FY15-17 FY16E 10-Yr Avg
Domestic Plays
Financials
Private Banks
PSU Banks
NBFC
Consumer
Auto Ex Tata Motors
Telecom
Consumer
Non-Consumer
Utilities
Capital Goods
Cement
Real Estate
Others
Global Plays
Cyclical
Oil & Gas ex RMs
Metals
Tata Motors
Non-Cyclical
Technology
Healthcare
MOSL Universe ex RMs
308 1,084 1,936 2,046