Week in a Nutshell : Real Estate 4QFY15 Preview: Operational Weakness Persists

WEEK IN A NUTSHELL

WIN-dow to the week that was

Week in a Nutshell (WIN)

Week

ended

17th Apr

2015

Nifty (-2%) WoW

Indian benchmark Nifty lost ~2% this week- Bank Nifty was down 2.7%, CNX

IT was down 4% and CNX Pharma lost 4%. All IT stocks ended the week,

down from the previous week. In Pharma, Lupin lost 12%, Sun Pharma was

down 7% and Cipla 5.5%. Gainers were an unlikely lot- ONGC and OIL

(media speculation that subsidy burden may be restricted to one product)

and RIL (in run up to results, on expectations of strong GRMs). Among

midcaps, Bayer CropScience gained after providing aggressive guidance for

new product launches in Indian markets in CY15 and the next 3-4 years.

The result season kicked off with uninspiring results & commentary from

TCS and Mindtree that saw most IT stocks lose ground- Infosys was by and

large unhurt as Investors look forward to Dr Sikka’s commentary when

Infosys reports on April 24. ACC’s sales volumes for 1QCY15 declined 10%

yoy, more than the expected 7% decline- but for better than expected cost

savings, performance would have been quite sub-par. The stock was down

6% for the week. IndusInd Bank performance was in line, outlook for

growth and margins were robust. Risk Weighted Assets grew 32% vs asset

growth of 25%, on higher corporate and off-balance sheet growth- expect a

capital raising in another few quarters. Also we upgraded MMFS to BUY as

we do not see any further deterioration in asset quality.

Our expectation of aggregate profit growth for the March’15 Quarter is very

muted- we expect profits for our Coverage Universe (Ex RMs) remain flat

YoY and that for Sensex to grow a mere 4%.

Skymet, India’s largest weather monitoring and agri-risk solutions company,

forecasts normal Monsoon for India in 2015- which would be a relief, as

growth in other pockets of the economy is quite weak. Cement prices have

corrected in most regions, barring Southern markets on weak demand.

Fund Folio Tracker

WWW – WIN Weekend Wisdom

“Generally, the greater the stigma or revulsion, the better the

bargain.”

WIN – Week In a Nutshell

Apr 17

2015

WEEK IN A NUTSHELL

[W]INside this week’s edition

WIN-TERESTING DATA POINTS ................................................................................................................................................. 3

WIN- RESEARCH HIGHLIGHTS OF THE WEEK ............................................................................................................................. 4

CONSUMER 4QFY15 PREVIEW: DEMAND TRENDS SOFT; RURAL CONSUMPTION CATALYST ABSENT; SUBDUED DEMAND

CONTINUES, MARGIN TAILWINDS TO REFLECT IN 4Q .......................................................................................................................4

REAL ESTATE 4QFY15 PREVIEW: OPERATIONAL WEAKNESS PERSISTS; ONLY SELECTIVE SUCCESSES; STRONG PRIVATE EQUITY

MOMENTUM CONTINUES .................................................................................................................................................................4

METALS 4QFY15 PREVIEW: LOWER METAL PRICES - A NEW REALITY; ROLL OVER TARGET PRICES TO FY17 ...................................5

ECOSCOPE: IIP GAINS TRACTION TO GROW AT 5% IN FEB-15; ACCELERATION IN INDUSTRY WOULD AID PICK-UP IN GDP ............5

JK LAKSHMI: TAKEAWAYS FROM MGMT MEETING...........................................................................................................................6

ACC 1QCY15: BEATS ESTIMATES; LOWER FIXED COST BOOSTS PROFITABILITY, AMIDST WEAKEST 1Q VOLUME SINCE CY11 .........6

DCB BANK: 4QFY15 RESULTS FIRST CUT; PBT/NET INCOME INLINE; TAX WRITE BACK BOOST PROFITABILITY; STRONG GROWTH

CONTINUES; ASSET QUALITY STABLE QOQ........................................................................................................................................7

VRL LOGISTICS (IPO NOTE): PAN-INDIA SURFACE EXPRESS LOGISTICS PLAYER, SUPERIOR MARGINS ..............................................8

METALS: SPREAD DYNAMICS TURNING FAVORABLE FOR INDIAN STEEL MILLS; BUY TATA STEEL AND JSW STEEL..........................8

REAL ESTATE: TIME CORRECTION PERSISTS; EXPECT RECOVERY TO BE GRADUAL; MCHI EXPO FAILS TO GARNER EXCITEMENT ....8

CEMENT: DEMAND-PROFITABILITY DICHOTOMY IN SOUTH; CAPACITY ADDITION APPROACHING INTERIM PAUSE .......................9

MAHINDRA FINANCIAL SERVICES: CYCLICAL HEADWINDS; STRUCTURAL STORY INTACT; LONG TERM PROSPECT REMAINS

EXCITING ............................................................................................................................................................................................9

LUPIN: GENERIC COMPETITION TO SUPRAX – EXPECT 2-3% EPS HIT; EARNINGS IMPACT COULD BE LIMITED ON LIKELY COST

SAVINGS, LIFECYCLE MANAGEMENT ...............................................................................................................................................10

ECOSCOPE – WPI DISINFLATION DEEPENS TO -2.3%; CONCERNS ON UNSEASONAL RAINS ALLAYED; CORE WPI TURNS NEGATIVE

TATA MOTORS: JLR MARCH-15 WHOLESALE GREW ~16% YOY (ABOVE EST); LAND ROVER VOLUMES GREW 19%, WHILE

JAGUAR’S GREW ~2% ......................................................................................................................................................................11

RBI DATA: CREDIT GROWTH PICKS UP TO 12.6% - HIGHEST EVER INCREMENTAL CREDIT GROWTH DURING A FORTNIGHT ........11

TCS 4QFY15: CONFIDENCE (THAN GUIDANCE) OF ABOVE-INDUSTRY GROWTH; BET IS ON DIGITAL .............................................12

INDUSIND BANK 4QFY15: IN-LINE - ROBUST BUSINESS GROWTH, ONE-OFF MISS ON ASSET QUALITY .........................................12

MINDTREE 4QFY15: BELOW ESTIMATES; UTILIZATION, FOREX LOSS DRIVE EARNINGS MISS ........................................................12

AUTO BRANDWISE – MARCH 2015: GROWTH ACROSS SEGMENT IN 2WS FOR FY15 BARRING EXECUTIVE; PVS MINI DECLINES IN

FY15; COMPACT AND MID-SIZE REPORT STRONG GROWTH...........................................................................................................12

WIN-SIGHT OF THE WEEK ........................................................................................................................................................13

NIFTY VALUATIONS AT A GLANCE ...........................................................................................................................................16

WIN – Week In a Nutshell

Apr 17

2015

WEEK IN A NUTSHELL

WIN-teresting data points

10-Apr-15

Last

week

28879

19908

27272

18058

7090

17-Apr-15

Current

week

28442

19653

27653

18106

7003

WoW

change

(%)

-1.51

-1.28

1.40

0.27

-1.22

Global Indices

Sensex

Nikkei

Hang Seng

Dow Jones

FTSE 100

P/E Valuations

20.00

22.22

11.64

15.63

23.85

Commodities

Oil(US$/Bbl)

Precious Metals

Gold ($/OZ)

Sectoral Indices

Bank Nifty

CNX IT

BSE Oil

18801

12295

9679

18346

11803

9810

-2.42

-4.00

WoW

change

(%)

-0.08

-0.03

17.78

20.85

10.33

Silver ($/OZ)

Metals

Copper(US$/MT)

Zinc(US$/MT)

Alluminium(US$/MT)

Bond yields-

India

1 Year

10 Year

Last

Friday

7.90

7.80

Spread Vs US

10 yrs

7.71

5.94

Currency

Rs Vs Dollar

62.32

62.37

0.07

6056

2203

1770

6068

2222

1837

0.19

0.89

3.76

1204

1206

0.17

0.28

Last

week

57.34

This week

61.11

WoW change

(%)

6.57

This week

7.90

7.80

Top Gainers

Company Name

Gujarat Gas

Selan Exploration

Bayer CropSciences

Amtek India

Ess Dee Aluminium

Godfrey Phillips

BSE 500 – Key Movers

Top Losers

% Change

Company Name

Trinity Tradelink

19%

17%

15%

13%

Rolta

PMC FinCorp

Global Off

Mindtree

Blue Dart

% Change

18%

16%

15%

13%

WIN – Week In a Nutshell

Apr 17

2015

WEEK IN A NUTSHELL

Win- RESEARCH HIGHLIGHTS OF THE WEEK

CONSUMER 4QFY15 PREVIEW: DEMAND TRENDS SOFT; RURAL CONSUMPTION CATALYST ABSENT; SUBDUED

DEMAND CONTINUES, MARGIN TAILWINDS TO REFLECT IN 4Q

Click here to access detailed report

Expect 9.2% sales growth, 15.4% PAT growth for our Consumer coverage on soft demand environment

Improved urban confidence, lower inflation, election outcome sentiment boost – yet to materially manifest

On the hard lower rural wage growth, low MSPs, unseasonal rains – weighs on sentiments in rural market. Clear

trends to emerge only post monsoons

4QFY15 should see major impact of softening in RM prices. Palm Oil (corrected >10% YTD). Ti02, PFAD, Kardi Oil

and LLP – Showing deflationary trend

Competition from local players rose but from branded players remains under check - thus several cos initiatied

price cuts to retain market share. However no material change in volume trajectory visible

Our top picks –

·Britannia

(Still room for expansion in margins)

·United

Spirits

(turnaround potential, multi-year play on IMFL growth story)

·Emami

(Distribution expansion, aggressive launch calendar)

·Colgate

(Improvement in volume growth trends from softening competition)

REAL ESTATE 4QFY15 PREVIEW: OPERATIONAL WEAKNESS PERSISTS; ONLY SELECTIVE SUCCESSES; STRONG

PRIVATE EQUITY MOMENTUM CONTINUES

Click here to access detailed report

Regulatory fac tors lik e proposed c hanges i n Mumbai d evelopment p lan & i ntroduction of l ower i ncome

group/economically weaker sections) norms in Bangalore could be dampeners for approval cycle

Commercial rentals bottoming out leading to gradual improvement in commercial asset classes

Operational weakness continues – No uptick in housing demand hence slow new launches & offtake

Various subvention schemes, freebies offered, and o nline sales have been the key trends, getting moderate to

good success in recent times

We expect cash flows for Oberoi, Prestige, and Phoenix Mills to improve on the back of better presales in 4QFY15.

However gearing level for the Real Estate companies under MOSL coverage should increase QoQ

Expect commercial asset class is poised for a growth phase and has further re-rating scope with several tailwinds

in place

Our top picks –

WIN – Week In a Nutshell

Apr 17

2015

WEEK IN A NUTSHELL

·Sobha

(valuation discount post recent corrections)

·Prestige/Brigade

(Bangalore and commercial play)

·Oberoi

(Mumbai benefits and improvement in operating cycle)

METALS 4QFY15 PREVIEW: LOWER METAL PRICES - A NEW REALITY; ROLL OVER TARGET PRICES TO FY17

Click here to access detailed report

Amid weaker pricing across metals, tepid domestic demand and surging imports in case of steel – MOSL Universe

is expected to post one of the worst quarterly performances in 4QFY15

Hindalco –

Will outperform the lot with EBITDA growth of 6% QoQ (9% YOY) due to surge in Aluminum volumes,

Steel C ompanies –EBITDA

d ecline 16% Qo Q ( -28% Y oY) d ue t o c orrection i n s teel p rices (-6% Qo Q) & V olume

decline 6% YoY

Steel –

Avg price re alization t o decline further in FY16 compared t o 4QFY15, despite w eak global prices Indian

prices to s tabilize due to stricter quality norms, anti-dumping m easures. Tata Steel & JSW Steel to benefit from

falling RM prices. SAIL likely to be most impacted from falling steel prices to sticky ore prices. Hence, there is a cut

in EBITDA by 3-9% across for FY16E/17E for steel companies.

We e xpect that t he falling iron ore p rices will eventually re duce the amount of ro yalties b y nearly 50%, t hus

offsetting the impact of DMF. We roll over the target prices to FY17

Aluminum –

We have cut LME aluminum estimates to USD1,900/t and USD1,950/t for FY16E/17E from

USD2,000/t each. EBITDA for Hindalco/Nalco is cut by 3%/14% for FY16E, For FY17E, impact of lower LME is offset

by weaker INR hence driving 1-3% EBITDA increase

For HZL, DMF and lower LME drove EBITDA cut of 23%/15% for FY16E/17E

SLT’s EBITDA is cut by 14%/3% for the impact of DMF and lower crude oil prices

Hindalco, Vedanta and Nalco receive 3-4mtpa coal each through linkages from Coal India – Move to auctioning

the linkages to impact margins

ECOSCOPE: IIP GAINS TRACTION TO GROW AT 5% IN FEB-15; ACCELERATION IN INDUSTRY WOULD AID PICK-UP

IN GDP

Click here to access detailed report

Feb-15 IIP at 5% was well ahead of expectations. This was partly aided by a favorable base

15 out of 22 industry groups in manufacturing saw growth, also mining turned black & electricity did well too

Use-based classification shows acceleration in basic and continued high growth in capital goods

Latest acceleration and data revision in IIP has taken the YTDFY15 figures to 2.8% from 2.5% a month back

Capital goods showed high growth, however consumers remain –ve despite turnaround in non durables

We h ave p laced our F Y16 I IP estimate at 5.5%, p redicated on c ontinued r ecovery o f c apex c ycle a nd return o f

growth in durables on a low base

WIN – Week In a Nutshell

Apr 17

2015

WEEK IN A NUTSHELL

JK LAKSHMI: TAKEAWAYS FROM MGMT MEETING

1HFY16 to be weak due to unseasonal rains and lack of recovery in investment cycle

Post entire expansion, JKLC would have capacity of ~12mt (10.3mt in JKLC + 1.7mt in UCW) - funded

through internal accruals. It plans to keep debt under 1:1, despite brownfield expansion

Having limestone and with land and regulatory clearances in place - by FY17, it has plans to add ~5mt

brownfield capacity

Volume targets -

FY15: 6mt (v/s est 6.17mt), FY16: 7mt (v/s est 7.47mt), FY17: 8mt (v/s est 8.2mt)

UCW: For time being remain ~75% sub due to several benefits like: a) unabsorbed depn at ~INR1b, b)

sales tax exemption for 7 years (due to BIFR case), c) Land Tax deferment (due to tax deferment), d)

wage subsidy etc

UCW would have ~INR200/ton of higher EBITDA due to a) INR50/ton sales tax exemption, b)

~INR50/ton on freight cost saving for North markets and c) ~INR100/ton fixed cost savings due to using

JKLC's resources

UCW would retain all marketing profits, depsite marketing done by JKLC, due to unabsorbed depreciation.

ACC 1QCY15: BEATS ESTIMATES; LOWER FIXED COST BOOSTS PROFITABILITY, AMIDST WEAKEST 1Q VOLUME

SINCE CY11

Click here to access detailed report

Dispatch v olume declined 10.2% Yo Y (+1% Q oQ) to 5.82 m t m uch wo rse than expected decline o f 7 % YoY.

Realization improvements +5.5%YoY (+2.1% QoQ) to INR 4,535 in line with out estimates

Cost/ton in 1QCY15 was down by 5% QoQ (v/s estimates of 2.5%) led by lower fixed costs, moderation in energy

& RM costs & impact of lower crude price on packaging costs

Profitability improves on – 1) Cost savings and 2) One offs like sales tax incentive. EBITDA grew 13% YoY (+131%

QoQ) to INR4.1b (v/s est of INR3.1b), translating into margins of 14.3% ) v/s estimates of 10.5%. EBITDA/ton stood

at INR711 (v/s estimates of INR512), +INR147 YoY/-INR400 QoQ

Raising CY15E/CY16E E PS by 3%/2% t o I NR56/84.3 on lo wer fix ed c osts & higher R MC revenues. E BITDA/t

estimates have also been revised upwards by 11.6%/8.4% for CY15E/16E

Maintain Bu y on t he b ack o f h igh v aluation d iscount ( 30% d iscount to larg e c ap av erage).

TP I NR1,875 ( at

USD160/ton or implied EV/EBITDA 13x CY16E EV/EBITDA)

WIN – Week In a Nutshell

Apr 17

2015

WEEK IN A NUTSHELL

DCB BANK: 4QFY15 RESULTS FIRST CUT; PBT/NET INCOME INLINE; TAX WRITE BACK BOOST PROFITABILITY;

STRONG GROWTH CONTINUES; ASSET QUALITY STABLE QOQ

(DCBB IN, Mkt. Cap USD0.5b, CMP INR115, Buy)

DCBB reported 54% beat on profits helped by tax reversals of INR93m (tax rate of 21.3% assumed)

Income growth (32% YoY) continues to outpace the opex (30% YoY) growth leading to fall in cost to income ratio

YoY. PBT remains in line with expectations

Loan growth remains strong at (10% QoQ and 29% YoY) led by Mortgages and Agri. Core retail deposits share

remains healthy at 80% (up from 77% in 4QFY14)

While reported asset quality remains stable QoQ (GNPA at 1.8% and NNPA at 1%), we await clarification

regarding SME and Corporate NPLs (expect some reclassification) and sale to ARCs

We largely maintain our earnings estimates. Expect PBT CAGR of ~36% over FY15-18, However 24% CAGR in PAT

on rising tax rate & improved ROA from 1.5% to 1.8% led by strong operating leverage

Earnings call at 3.30PM IST, Wednesday, 15

April 2015. Dial In numbers +91-22-6746 5833/3938 1003

We reiterate Buy with the target price of INR155 (2.2x FY17)

WIN – Week In a Nutshell

Apr 17

2015

WEEK IN A NUTSHELL

VRL LOGISTICS (IPO NOTE): PAN-INDIA SURFACE EXPRESS LOGISTICS PLAYER, SUPERIOR MARGINS

(VRL Logistics, Price Band: INR195-205, View: Subscribe)

Click here to access detailed report

• VRL Logistics is a pan-India surface express logistics service provider, 75% revenue from less-than-full-truckload

operations (owns 3546 trucks & operates through 624 branches & 326 agencies) 20% revenue from passenger bus

operations (with 455 buses primarily in S-W India)

• USPs – a) VRL owns most of its trucks b) multiple in house operations enable it to earn superior margins & ROE

• Key challenges - (a) maintaining consistent driver availability, (b) improving utilization while balancing scheduled

routes, and (c) timely freight hikes to adjust fuel price increases

• Investment View - We recommend Subscribe. We expect VRL to report volume growth of >10%, led by GDP

uptick, and expect it to maintain its EBITDA margins at 15-17%.

• Key Triggers – a) GST bill will shift business to organized players like VRL b) GDP uptick c) Transport bill (for its

passenger bus operations)

METALS: SPREAD DYNAMICS TURNING FAVORABLE FOR INDIAN STEEL MILLS; BUY TATA STEEL AND JSW STEEL

Click here to access detailed report

Steel prices & demand – Have been key drivers of margins & cash flows (over last 10-15 years) as steel prices used

to move ahead of RM prices

In the last 12-18 months, however, steel mill spreads rather than steel prices have become the center of focus

But now, cost of the raw material basket has started to move ahead of steel prices. Leading to expansion of

spreads in this supply glut environment. Exchange rate and import duties are additional drivers of spreads

Dynamics of spreads for Indian steel mills have turned favorable. This augurs well for Tata Steel and JSW Steel

REAL ESTATE: TIME CORRECTION PERSISTS; EXPECT RECOVERY TO BE GRADUAL; MCHI EXPO FAILS TO GARNER

EXCITEMENT

Click here to access detailed report

We visited the recently concluded 24th edition of the MCHI-CREDAI Property Expo at BKC (Mumbai). Participation

by both developers and prospective buyers was sedate; many usual developers were absent.

Time correction continues, with lack of demand being the key deterrent. Discounts were limited, possibly due to

no major success in the past. However, there were out-of-the-box marketing attempts, which drove footfalls.

Interest rates on home loans are headed down, with HFCs guiding sub-10% rates.

WIN – Week In a Nutshell

Apr 17

2015

WEEK IN A NUTSHELL

CEMENT: DEMAND-PROFITABILITY DICHOTOMY IN SOUTH; CAPACITY ADDITION APPROACHING INTERIM PAUSE

Click here to access detailed report

Demand continues to decline in South india with TN being the largest damperner. Fund constrainst with SG is

delaying the recovery cylce

However production discipline has enbaled prices to be resilient in SOuth. In 4QFY15 realizations for southern

plants were higher by INR20-25/bag QoQ thus driving EBITDA north of INR 1,000 -1,200/t

Dalmia’s 2.7mt capacity at Belgaum and Orient Cement’s 3mt capacity at Chittapur (serving mainly

Karnataka/South Maharashtra) are up for production in March and May 2015 respectively. With this Southern

capacity additions comes to a pause(only 6-7 mt over FY16-18)

We maintain Buy on Dalmia and Ramco, and Neutral on Orient and India Cement. Among non-south players, we

prefer UltraTech in large caps and JK Cement and JK Lakshmi in midcaps

Dalmia Bharat -TP of ~INR697 (USD85-90/ton FY17E pro-rata capacity of 18.6mt or implied 7.3x FY17E

EV/EBITDA)

Ultratech – TP of ~INR 3,475 (USD230/ton FY17 Capacity)

MAHINDRA FINANCIAL SERVICES: CYCLICAL HEADWINDS; STRUCTURAL STORY INTACT; LONG TERM PROSPECT

REMAINS EXCITING

(MMFS IN, Mkt Cap USD2.4b, CMP INR262, TP INR325, 24% upside, Upgrade to Buy)

Click here to access detailed report

Best rural-lending franchise, deepening reach (65% increase in branches since FY13) and stabilization of

rural economy will put MMFS in a position to capture upturn

Reported NPLs are likely to remain at 6-7% till 2HFY16, we view this as a cyclical adjustment and not a structural

breakdown. Further deterioration unlikely

The management targets AUM of INR900b by 2020, implying 20% CAGR over the next six years

At 12.2x FY17E EPS and 2x FY17E BV, Time/price correction offers opportunity to buy the stock (delivered just 7%

return over the last one year versus 97% for the peer group)

TP INR325 (2.5x FY17E BV INR 128)

WIN – Week In a Nutshell

Apr 17

2015

WEEK IN A NUTSHELL

LUPIN: GENERIC COMPETITION TO SUPRAX – EXPECT 2-3% EPS HIT; EARNINGS IMPACT COULD BE LIMITED ON

LIKELY COST SAVINGS, LIFECYCLE MANAGEMENT

(LPC IN, Mkt Cap USD14b, CMP INR1948, TP INR2275, 17% Upside, Buy)

Click here to access detailed report

Aurobindo Pharma (ARBP) received USFDA approval to launch the generic version of Lupin’s (LPC) brand Suprax

which accounts for 90% of its US branded sales in suspension form

Suprax suspension accounts for ~65% of the US branded sales, ~2% of overall revenue and 4-5% of profit for LPC.

The concentration risk in this product was brought down over previous 5 years with effective life cycle

management

We believe EPS impact to be limited to 2-3% due to launch of Authorized Generic & Rationalization of field force.

EPS revision remains pending on clarity on company’s strategy

Given deep & differentiated pipeline of 95 ANDAs pending approval US generic business has full potential of

recuperating this loss thereby limiting earnings downgrade

Maintain Buy TP INR 2275 27x FY17E EPS INR 23

ECOSCOPE – WPI DISINFLATION DEEPENS TO -2.3%; CONCERNS ON UNSEASONAL RAINS ALLAYED; CORE WPI

TURNS NEGATIVE

Click here to access detailed report

Mar-15 WPI showed continued and very strong disinflationary trend at -2.3%. 5

consecutive month of

disinflation

The extent of disinflation was even severe than the crisis period pattern, it withstood both an adverse base effect

& impact of unseasonal rains

While the WPI index increased MoM by 0.2%, mainly due to due to reversal in international oil prices

WIN – Week In a Nutshell

Apr 17

2015

WEEK IN A NUTSHELL

Allaying the concerns expressed on account of unseasonal rains, vegetable prices actually continued to decline for

the seventh consecutive month

We expect RBI to cut rates by 25bp on its June 2, 2015 policy meet

TATA MOTORS: JLR MARCH-15 WHOLESALE GREW ~16% YOY (ABOVE EST); LAND ROVER VOLUMES GREW 19%,

WHILE JAGUAR’S GREW ~2%

(TTMT IN, Mkt Cap USD28b, CMP INR540, TP INR722, 34% upside, Buy)

Click here to access detailed report

JLR’s March 2015 wholesales grew ~16% YoY (up 30% MoM) to 50,093 units (est. 43,616 units), driven by ~19%

YoY growth in Land Rover

Land Rover grew by ~19% YoY to 41,761 units (est. 36,231 units), while Jaguar grew by ~2% YoY to 8,332 units

(est. 5,639 units)

With most of the transitory events behind it, JLR volumes are expected to start normalizing from May 2015

onwards, with XE launch and ramp-up in China JV production

Maintain

Buy

with a

target price of INR722 (FY17E SOTP-based)

for ordinary shares and INR504 for DVR (~30%

discount to target price for ordinary shares)

RBI DATA: CREDIT GROWTH PICKS UP TO 12.6% - HIGHEST EVER INCREMENTAL CREDIT GROWTH DURING A

FORTNIGHT

Credit growth picked up to 12.6% YoY for the period ending 3rd April 2015 (from 9.5% YoY as on 20th March

2015)

INR2,663b - Highest ever incremental credit growth during a fortnight (next best is INR1,231b during the fortnight

ending 23rd March 2012)

Similarly, deposit growth increased to 12.8% YoY led by 25% YoY growth in demand deposits ((Highest ever

deposit mobilization during a fortnight)

WIN – Week In a Nutshell

Apr 17

2015

WEEK IN A NUTSHELL

Balance sheet re-alignment from Investments to Loans – SLR ratio declined 100bp to 26.5%

This data indicates the March-end horizons rigorously. Also this fortnight accounted for 35% of the credit growth

during the year

TCS 4QFY15: CONFIDENCE (THAN GUIDANCE) OF ABOVE-INDUSTRY GROWTH; BET IS ON DIGITAL

Click here to access detailed report

Results Summary:

CC growth of 1.6% QoQ led disappointing vol growth of 1.42% QoQ .EBIT margin at 27.2%,

+20bp QoQ, was in line with our estimate. PAT grew 8.5% QoQ to INR59.1b, above our estimate of INR54.8b, due

to forex gains of INR6.63b

Management Insights/Comments:

Confident of beating NASSCOM’s band of 12-14%, BUT this is NO GUIDANCE

Our View:

The hesitation in sharing an outlook with more numeric color may stem from an eventual miss in the

FY15 performance. Implied CQGR of ~4% to beat upper end of growth. Outperformance to industry peers should

continue to cool off in FY16. Maintain NEUTRAL

INDUSIND BANK 4QFY15: IN-LINE - ROBUST BUSINESS GROWTH, ONE-OFF MISS ON ASSET QUALITY

Click here to access detailed report

Results Summary:

Healthy loan growth (+8% QoQ and +25% YoY), stable NIM QoQ (3.7%), strong fee income

growth (+29% YoY), PAT (+25% YoY) at INR4.95b. SA (+31% YoY) and pick-up in CV loans (+4% QoQ v/s largely

flattish in last two years) were key highlights

Management Comments on Asset Quality

GNPA albeit down 20 bps QoQ was

LED BY

led by ~INR4.2b asset sale

to ARCs for which a 2.6bn loss will be booked to be amortized over 2 years. Guided for 25% CV growth in FY16. To

raise capital towards the end of CY2015

Our View: -

Maintain estimates for FY15-18E earnings CAGR of 25%+ with 22% Average ROE. BUY

MINDTREE 4QFY15: BELOW ESTIMATES; UTILIZATION, FOREX LOSS DRIVE EARNINGS MISS

Click here to access detailed report

Results Summary:

4Q USD @ 148 mn in line , CC flat QoQ . EBITDA margin declined 100bp QoQ to 19.5%

explained by drop in utilization including trainees by 160bp QoQ to 70.2

Management Comments:

Will beat NASSCOM 12-14% but extent of beat will be lower than what was anticipated

in Jan.

Our View:

We have cut our revenue estimates for FY16E/FY17E by 3.7%/3.2% and our earnings estimates by 4.7%

/ 2.4%. Maintain Neutral

AUTO BRANDWISE – MARCH 2015: GROWTH ACROSS SEGMENT IN 2WS FOR FY15 BARRING EXECUTIVE; PVS

MINI DECLINES IN FY15; COMPACT AND MID-SIZE REPORT STRONG GROWTH

Click here to access detailed guidelines

Scooterization continues with ~31% share in FY15 (v/s 46% in FY14), cannibalizing Executive segment (41%

share in FY15 v/s 46% in FY14), however Hero was able to gain a 4 pp market share in Exectuive

Premium segment (ex Royal Enfield) grew 11% in FY15, with Bajaj Auto’s Pulsar growing by 14% and TVS’s Apache

growing by ~39%

4% volume growth in PV in FY15 driven mainly by new launches (large part of this growth comes in compact

sedan & UV segment

WIN – Week In a Nutshell

Apr 17

2015

WEEK IN A NUTSHELL

WIN-sight of the Week

FIVE QUESTIONS ON INDIA'S CREDIT

There are many problems with India's credit and banking system, but it turns out that size is not one of them. Using

existing domestic and international data along five dimensions, we argue that Indian credit and banking are neither

too big nor too small - Goldilocks would think it just right. However, there may well be a problem of composition

and competition especially with respect to private banks.

First, is India credit-addled? We analyze the evolution of credit-gross domestic product (-GDP) ratios in India and

select other countries over time (figure 1). The graph uses the World Bank's domestic credit to private sector,

defined as "financial resources provided to the private sector by financial corporations, such as through loans,

purchases of non-equity securities, and trade credits and other accounts receivable that establish a claim for

repayment". The level of credit in India is consistently lower than the average value of low- and middle-income

countries. Moreover, the rate of increase of India's credit-GDP ratio is also in line with emerging market standards.

No, India is definitely not drowning in excessive credit.

Second, does India's credit match its level of development? We undertake a cross-country comparison plotting the

ratio of credit to GDP against a country's level of development using the log of per capita GDP in purchasing power

parity (PPP) terms as a proxy (figure 2). As countries become richer, they tend to see a rise in credit, which is

WIN – Week In a Nutshell

Apr 17

2015

WEEK IN A NUTSHELL

reflected in the upward sloping trend line (note that the trend line is drawn for the entire set of 176 countries in

the World Bank data set). India is close to this trend line; for its level of development, credit levels are reasonable.

Third, has the Indian banking and financial system been especially irresponsible? Was it imprudent during and after

the recent growth phase? We plot the evolution of credit-GDP in "take-off time" (figure 3). For each country, the

starting point is when its growth started to accelerate. The graph shows that India's credit bubble was not worse

than the experience of countries during comparable times. Countries such as Japan and China saw faster credit

growth during "boom years". In this last phase of rapid credit growth during the 2000s, the Indian financial system

was no more unduly irresponsible than those around the world.

Fourth, is India over-banked? In figure four, we plot the share of banking in total credit in the economy against a

country's level of development. As defined by the Bank for International Settlements, this consists of "credit to

non-financial corporation’s (both private-owned and public-owned), households and non-profit institutions serving

households as defined in the System of National Accounts 2008". The trend line is downward sloping, which

indicates that banking should shrink in size over the course of development relative to other sources of funding

(such as capital markets). Again, India is close to the trend line; for its level of development, it is neither over-

banked nor under-capitalized by markets. Of course, this is no guarantee that the required shift towards greater

reliance on capital markets, especially via corporate bonds, will take place.

Finally, if size is not a problem, is there a lack of sufficient competition between banks? We explore the rise of

private banks in India. Private Banks started cementing their presence in the mid-1990s. It is important to note that

India's approach was not to privatize public sector banks; rather it was based on encouraging entry of private

WIN – Week In a Nutshell

Apr 17

2015

WEEK IN A NUTSHELL

banks. This strategy worked reasonably well in the telecommunication and civil aviation sectors, but the results in

banking have been mixed.

Figures 5A and 5B show that India saw a slow but steady rise in the share of private sector banks until 2007, both in

terms of deposit and lending indicators. Thereafter, the process slowed considerably, and in the aftermath of the

Lehman crisis, there was a flight to safety toward the public sector banks.

The share of the private sector in overall banking aggregates barely increased at a time when the country

witnessed its most rapid (and arguably private-sector-driven) growth - a paradox of recent banking history. Even

allowing for the irrational exuberance of public sector banks that financed this growth phase, the reticence of the

private sector was striking.

One of the key messages of this analysis is that size of banking and credit are not the problem in India. The real

problems lie elsewhere: in policies that create financial repression, in ownership structure and in making exit

difficult. While size of credit and banking in India is captured by the Goldilocks metaphor, its composition and the

policies therein may not.

WIN – Week In a Nutshell

Apr 17

2015