12 July 2018

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Asiamoney Brokers Poll 2018 for India

Research, Sales and Trading team.

We

request your ballot.

Today’s top research

theme

NBFC — Ind-AS: A new, contemporary look

Entering an era of transparent reporting and enhanced disclosure practices



Indian NBFCs are all set to adopt Ind-AS from FY19. This will bring in more

transparency in the system and ensure disclosures are in line with global

standards. It will also change the way companies conduct their business in

terms of structuring their loans, liabilities, employee compensation,

securitization/assignment, etc.



We believe the impact on reserves for most NBFCs will be neutral to positive,

given (a) largely mono-line businesses with a proven track record, near-zero

any other form of stressed loans (besides NPA) and high provisioning and (b)

reversal of DTL recognized on special reserves.



Companies having ZCBs, structured debt, preference shares, a higher share of

lumpy fees and higher ESOP cost would be adversely impacted.



We believe that HFCs are best placed, while corporate lenders will be adversely

impacted.

Market snapshot

Equities - India

Close

Chg .%

Sensex

36,266

0.1

Ni fty-50

10,948

0.0

Ni fty-M 100

18,555

-0.5

Equities-Global

Close

Chg .%

S&P 500

2,774

-0.7

Na s daq

7,717

-0.5

FTSE 100

7,592

-1.3

DAX

12,417

-1.5

Ha ng Seng

10,658

-1.5

Ni kkei 225

21,932

-1.2

Commodities

Close

Chg .%

Brent (US$/Bbl)

73

-6.1

Gol d ($/OZ)

1,242

-1.1

Cu (US$/MT)

6,130

-3.0

Al mn (US$/MT)

2,098

-0.9

Currency

Close

Chg .%

USD/INR

68.8

-0.1

USD/EUR

1.2

-0.6

USD/JPY

112.0

0.9

YIELD (%)

Close

1MChg

10 Yrs G-Sec

7.9

-0.03

10 Yrs AAA Corp

8.5

-0.03

Flows (USD b)

11-Jul

MTD

FIIs

0.09

-0.1

DIIs

0.00

0.5

Volumes (INRb)

11-Jul

MTD*

Ca s h

331

296

F&O

7,905

7,272

Note: YTD i s ca lendar year, *Avg

YTD.%

6.5

4.0

-12.2

YTD.%

3.8

11.8

-1.2

-3.9

-9.0

-3.7

YTD.%

9.9

-4.7

-14.9

-7.0

YTD.%

7.7

-2.8

-0.6

YTDchg

0.5

0.6

YTD

-0.8

10.0

YTD*

357

8,249

Research covered

Cos/Sector

NBFC

FoE – Economy

Tata Chemicals

Key Highlights

Ind-AS: A new, contemporary look; Entering an era of transparent

reporting and enhanced disclosure practices

Higher domestic savings must to increase potential output

Restructuring could be win-win for all

India Life Insurance Private players’ new business WRP growth recovers to 15.5% in Jun-18

Results Expectation CYL

Piping hot news

India replaces France as world’s 6th biggest economy

India has become the world’s sixth-biggest economy, pushing France into seventh

place, according to updated World Bank figures for 2017.

Chart of the Day: NBFC – Ind-AS: A new, contemporary look

NBFC: Impact from Ind-AS transition

Deferment of Fee Amortization of Expected Credit

Employee

Income

loan origination

Loss (ECL)

Benefit

expenses

model

Expenses

HDFC

●●

●●

●●●

●●●

Indiabulls Housing Finance

●●

●●

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●

PNB Housing Finance

●●

●●

●●●

●●

Dewan Housing Finance

●●

●●

●●●

●●

REPCO

●

●●

●●●

●

LIC Housing Finance

●

●●

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●

Gruh Finance

●

●●

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●

L&T Finance Holdings

●

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●

Mahindra Finance

●●

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Shriram Transport Finance

●●

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Shriram City Union Finance

●

●

●

●

Cholamandalam Invest.&Finance

●●

●●

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●

Bajaj Finance

●

●

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●●

Impact:

Positive

●●●

l

Marginally Positive

●●

l

Neutral

●

l

Marginally Negative

●●

l

Negative

●●●

NBFCs

Interest on ZCCB / Upfront gain Reversal of DTL

Deep Dis. Bonds / recognition on

on special

Pref Dividend direct assignment

reserve

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Source: MOSL

Research Team (Gautam.Duggad@MotilalOsw al.com)

Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Investors are advised to refer through important disclosures made at the last page of the Research Report.

In the news today

Kindly click on textbox for the detailed news link

1

SEBI may require firms to raise

25% of financing needs from

bond market

SEBI may make another attempt

at building a vibrant market for

trading in corporate bonds. On

Wednesday, SEBI Chairman Ajay

Tyagi said the regulator would

soon issue a consultation paper on

making it mandatory…

2

The National Highways Authority of India (NHAI), which will begin to invite

bids for the second package of toll-operate-transfer rights (TOT) auction

within the week, is likely to set the base price at $1 billion (₹6,800 crore), a

person aware of the development said. The auction for the second bundle,

which features seven stretches of operational toll roads totaling 566km

across Tamil Nadu, Telangana, Rajasthan and Gujarat is likely to feature a

few new names, including Cube Highways (a Singapore-based joint venture

between I Squared Capital and International Finance Corp.) and the

Canada Pension Plant Investment Board (CPPIB)…

NHAI likely to set base price for TOT rights auction at $1 billion

3

Iranian oil imports dip 25 per

cent in June

India's oil 1.52 % imports from

Iran showed a decline of over 25

per cent in June, but some

shipments loaded last month are

expected to arrive this month,

government and industry officials

said today…

4

Panel shuns sugar cess

proposal to clear sugarcane

dues

A group of ministers, tasked by

the Goods and Services Tax

Council, on Wednesday rejected

the idea of imposing cess on sugar

to help clear dues to sugarcane

farmers, on the back of declining

sugarcane arrears…

5

LIC-IDBI Bank deal likely to

conclude by September

After getting a go-ahead from

regulator Insurance Regulatory

and Development Authority of

India (IRDAI), Life Insurance

Corporation of India (LIC) is

preparing to complete the 51%

acquisition of debt-ridden IDBI

Bank Ltd by the end of

September, people familiar with

the matter said…

6

Drug regulator orders recall

of Novartis’s painkiller

diclofenac

India’s drug regulator has

ordered the withdrawal of the

popular diclofenac painkiller

injection marketed by Novartis

India Ltd and made by Themis

Medicare Ltd, following safety

concerns raised by a a health

ministry panel…

7

Telecom Commission

approves new telecom policy,

backs net neutrality

Net neutrality, a controversial

issue around the world, has

emerged a winner in India. In a

heavy-duty meeting on

Wednesday, the Telecom

Commission, the highest

decision-making body in the

Department of

Telecommunications…

12 July 2018

2

Thematic |

July 2018

10

July 2018

1QFY19 Results Update | Sector: Technology

NBFC

Ind-AS: A new, contemporary look

Entering an era of transparent reporting and enhanced disclosure practices









Motilal Oswal values your

support in the Asiamoney

Brokers Poll 2018 for India

Research, Sales and Trading

team. We

request your ballot.



Indian NBFCs are all set to adopt IFRS-converged Indian Accounting Standards (Ind-AS)

from FY19. This will bring in more transparency in the system and ensure disclosures

are in line with global standards. Moreover, it will change the way companies conduct

their business in terms of structuring their loans (upfront fees v/s yields), liabilities,

employee compensation, and securitization/assignment, amongst others.

In the absence of any circular from the RBI, NBFCs will follow accounting policies

based on Ind-AS, but continue with older norms for regulatory reporting.

We believe the impact on reserves for most NBFCs will be neutral to positive, given (a)

largely mono-line businesses with a proven track record, near-zero any other form of

stressed loans (besides NPA) and high provisioning and (b) reversal of DTL recognized

on special reserves.

Companies having ZCBs, structured debt, preference shares, a higher share of lumpy

fees and higher ESOP cost would be adversely impacted.

We believe that HFCs are best placed to face the transition, while corporate lenders

will be adversely impacted.

Transition to Ind-AS means much more than just accounting change





Ind-AS will bring more transparency in accounting and disclosures. It will also

change the way companies conduct their business in terms of employee

compensation, structuring of loans, securitization/assignment of loans, issuance

of liabilities, etc.

In our view, the migration to the new norms will lead to major differences in the

presentation of financials on account of recognition of (a) fee income/loan

origination expenses, (b) interest income on impaired assets, (c) impairment

provision, (d) fair valuation of ESOP, (e) interest expense on ZCBs/deep discount

bonds/preference shares, (f) securitized loans, (g) gains on assignment, (h) DTL

on special reserve and (i) investment classification and valuation, as well as

consolidation of entities based on control.

HFCs will see a benefit in the form of provisioning and reversal of DTL. Most

large HFCs have a proven track record of low LGDs and PDs, and carry

additional/contingent provisioning on balance sheet. Processing fees on core

housing loans may be replaced by legal and other charges, and thus, not impact

the income statement. DSA expense amortization and a reduction in credit cost

are added benefits for HFCs. However, companies in the affordable housing

segment with a limited track record and a higher share of fee income could see

some impact. Companies with ZCCBs/structured liabilities/ESOPs are likely to

see higher expenses getting charged through the income statement.

Corporate financers may witness higher provisioning, deferment of fee income

and a rise in employee expenses. Vehicle financers may see an impact on their

securitization activity (awaiting final regulation on this) and a minimal impact on

provisioning.

Overall, the impact of Ind-AS convergence on our NBFC coverage universe will

be neutral to positive.

3

HFCs to witness gains; corporate financiers most impacted







12 July 2018

Several opportunities, but challenges remain







Ind-AS is likely to bring in more transparency in the system and ensure

disclosures are in line with global standards. Since Ind-AS is based on the

principle of ‘substance over form’ and ‘fair valuation’, it is likely to present a

more contemporary picture of the state of affairs of the companies.

Under Ind-AS, companies would need to (a) prepare an opening balance sheet

on the transition day, (b) recognize assets and liabilities based on the new

norms and (c) route the difference through the reserves. This will imply a

material change in networth. We believe that investors need to be watchful of

adjustments made by companies during the migration.

We believe that several migration-related challenges still remain. These include

(a) clarification from the regulators on implementation of ECL, securitization,

etc., (b) high dependence on management’s estimate, (c) lack of expertise on

fair valuation, (d) varying level of corporate preparedness and (e) a separate set

of financial statement required for filings with the regulator.

NBFC: Impact from Ind-AS transition

NBFCs

Deferment of Amortization of

Interest on ZCCB Upfront gain Reversal of DTL

Expected Credit Employee

Fee Income loan origination

/ Deep Discount recognition on

on special

Loss (ECL) modelBenefit Expenses

expenses

Bonds / Pref

direct

reserve

Dividend

assignment

HDFC

Indiabulls

Housing

Finance

PNB Housing Finance

Dewan Housing Finance

REPCO

LIC Housing Finance

Gruh Finance

L&T Finance Holdings

Mahindra Finance

Shriram

Transport

Finance

Shriram

City

Union

Finance

Cholamandalam

Investment and Finance

Bajaj Finance

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Impact:

Pos i tive

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l

Ma rgi nally Positive

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Neutra l

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l

Ma rgi nally Negative

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l

Nega tive

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Source: MOSL

12 July 2018

4

F

UEL

R

E

NGINES

11 Jul y 2018

F

RIEND

O

F

T

HE

E

CONOMY

Higher domestic savings must to increase potential output

Household savings in FY17 at two-decade low

According to official data, household savings have dropped by almost one third from 23.6% of GDP in FY12 to 16.2% in FY17.

Not only have household savings fallen to the lowest level in two decades, but the fall of this magnitude is also

unprecedented in India’s post-independence history. Such a decline in household savings in one of the youngest countries –

with median age of only ~27 years – in the world is puzzling. Still, it has not received its due share of attention. While we keep

hearing of various measures to boost consumption and investments in the economy, one rarely hears about measures to

boost household savings in the economy. We highlight three factors that have led to limited discussion on domestic savings.

First,

the fall in total domestic savings (from 34.6% of GDP in FY12 to 30% in FY17) is lower than that in household savings

(down by more than 7 percentage points). This is because private corporate savings have increased to a record high and

public sector savings have remained unchanged.

Second,

the share of (net) financial savings in households’ total savings

increased from ~31% in FY12 to ~50% in FY17, easing the concerns. This, however, does not necessarily present a rosy picture

for the entire economy.

Third,

household savings may have increased in FY18; however, total domestic savings likely to have

fallen further to 29.1% of GDP. In the absence of higher domestic savings, the Indian economy is unlikely to grow at 8% or

higher without creating imbalances. Pushing domestic savings higher is the most potent and effective measure to increase

the economy’s potential and actual output.

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2018 for India Research, Sales and

Trading team.

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request your ballot.

In this note, we discuss

some reasons for such

obliviousness about total

domestic savings in general

and household savings in

particular

Although India’s real GDP growth slowed to the five-year slowest level of 6.7% in

FY18, it would not be unfair to assume that 8% growth is the minimum desirable

level among the Indian authorities. We believe that one of the pre-conditions for

achieving such high growth is through pushing domestic savings rate higher.

Household savings – which accounted for more than two thirds of total savings – in

India declined by almost a third from 23.6% of GDP in FY12 to 16.2% in FY17 (the

recent official data available). Not only have household savings fallen to the lowest

level in almost two decades

(Exhibit 1),

but this is also the unprecedented fall in

India’s post-independence history. Since demographic profile is one of the major

determinants of the savings rate in an economy, such a decline in India’s household

savings with median age of only ~27 years is also puzzling. Surprisingly though, we

believe that it has not received its due share of attention. Accordingly, while we

keep hearing of various measures to boost consumption and investments in the

economy, one rarely hears about measures to boost household savings in the

economy. In this note, we discuss some reasons for such obliviousness about total

domestic savings in general and household savings in particular.

Households' total savings

Exhibit 1:

Household savings in the post-liberalization period

(% of GDP)

Source: Central Statistics Office (CSO), CEIC, MOSL

12 July 2018

5

Sector Update | 12 July 2018

India Life Insurance

I

nsurance

T

racker

Motilal Oswal values your

support in the Asiamoney

Brokers Poll 2018 for India

Research, Sales and Trading

team. We

request your ballot.

Private players’ new business WRP growth recovers to 15.5% in Jun-18

Private players’ new business WRP growth improved to 15.5% (v/s +5.5% YoY in May-18),

even as industry growth remains muted at 5.6% YoY (8.7% YoY in May-18). Among private

players, growth was led by robust trends for Birla Sunlife, Tata AIA and Kotak Life, while

Max Life and PNB Life also reported healthy growth. Larger listed players SBI Life, ICICI

PruLife and HDFC Life reported tepid WRP growth of 8%, 13% and (1%) YoY, respectively.

LIC’s new business WRP declined 3.5% YoY – its market share, thus, shrank 467bp MoM to

47.8%. While the year has started on a softer note for private players (FY19YTD growth of

9% YoY), we expect growth to recover to 16% YoY in FY19 (as the base effect wanes),

driving their WRP market share to ~53% (51% in FY18).

Private players’ market share improves to 52.2% (50.9% in FY19YTD)

.

Private players’ share in total WRP increased to 52.2% in Jun-18 (+467bp MoM), led

by a recovery in aggregate WRP growth to 15.5%; LIC reported a 3.5% YoY decline.

Private players’ market share on an individual WRP basis stood at 55.9% (+487bp

MoM). Among private players, IPRU remains the largest with a WRP market share of

20.5%, followed closely by SBILIFE (20.3%).

Top-five private players now account for ~64% of total private industry

The market share of top-five private players – SBI Life, ICICI Prudential Life, HDFC

Life, Max Life and Kotak Life – stands at ~64%, pointing toward continued

polarization of the industry. However, a few other players like Tata AIA and more

recently Birla SunLife have been showing healthy trends. Among key listed players,

on a WRP basis…



HDFCLIFE reported 13% YoY growth (27% during FY19YTD) – largely in line with

our estimate.



SBILIFE reported 8% YoY growth (6% during FY19YTD) – significantly below its

historical run-rate.



IPRU reported a 1% YoY decline (25% YoY decline in Apr/May each, 17% decline

in FY19YTD).



Max Life reported 22% YoY growth (18% in FY19YTD).

Mutual fund AUM increases 1.2% MoM to INR22.9t

Mutual fund AUM rose 1.2% MoM to INR22.9t, led by growth of ~15% MoM in

money market, ~1.7% in ELSS schemes and ~1% in infra debt funds. On the other

hand, AUM of gold ETFs/equity/balanced schemes declined ~5%/1%/2% MoM.

12 July 2018

6

Tata Chemicals

BSE SENSEX

36,266

S&P CNX

10,948

11 July 2018

Update | Sector: Chemicals

CMP: INR705

TP: INR959 (+36%)

Buy

Motilal Oswal values your support in

the Asiamoney Brokers Poll 2018 for

India Research, Sales and Trading

team. We

request your ballot.

Restructuring could be win-win for all

Expect value unlocking for TTCH’s shareholders



Media reports indicate that the Tata group is evaluating the separation of Tata

Chemicals’ (TTCH) salt and branded lentils businesses and merging them into Tata

Global Beverages (TBGL). The group is also considering the merger of Tata Coffee

(TCO), which owns coffee plantations and tea gardens, with TGBL.

While there is no certainty on if and when the aforementioned strategy would be

executed, we have evaluated the possibilities of execution of such a strategy and the

effect it could have on the existing shareholders of TTCH as per current scenario.



Stock Info

Bl oomberg

Equi ty Sha res (m)

52-Week Ra nge (INR)

1, 6, 12 Rel . Per (%)

M.Ca p. (INR b)

M.Ca p. (USD b)

Avg Va l , INRm

Free fl oa t (%)

TTCH IN

254.8

787 / 558

-6/-12/-5

179.6

2.8

630.0

69.2

Expected deal scenario: Equity swap or part-cash-part equity transaction

We believe that the speculated deal would either be a complete equity swap or a

part-cash-part-equity transaction. We value TTCH’s consumer business at 22x FY18

EBITDA (~30% premium to its trading EV/EBITDA), and TCO at 15x FY18 EBITDA

(~15% premium to its trading EV/EBITDA). For an

equity swap,

we estimate that

TGBL would have to issue 320.9m shares for TTCH’s consumer business and

146.7m shares for TCO. However, for a

‘50% equity - 50% cash’

deal, the additional

shares to be issued would be 160.5m for TTCH’s consumer business and 73.3m for

TCO. Additionally, for ‘50% equity - 50% cash’ deal, TGBL would have to raise debt

of INR43.4b for TTCH’s consumer business and INR19.8b for TCO.

Financials Snapshot (INR b)

2018 2019E 2020E

Y/E Mar

Net Sa les

102.7 114.6 126.1

EBITDA

21.9

25.0

27.9

PAT

12.3

12.2

14.5

EPS (INR)

48.2

47.7

56.9

Gr. (%)

39.7

-1.0

19.1

BV/Sh (INR)

435.7 469.3 510.5

RoE (%)

24.9

10.6

11.6

RoCE (%)

9.4

8.5

9.6

P/E (x)

14.6

14.8

12.4

P/BV (x)

1.6

1.5

1.4

Shareholding pattern (%)

Mar-18 Dec-17 Mar-17

As On

Promoter

30.8

30.8

30.8

DII

32.4

31.5

26.0

FII

11.1

11.5

17.4

Others

25.8

26.2

25.8

FII Includes depository receipts

Stock Performance (1-year)

Win-win for all

Tata Global Beverages (TGBL)



TGBL to bag a re-rating business:

TTCH’s consumer business contributes ~41%

to the overall revenue of the standalone entity and ~14% to consolidated

revenue. At EBITDA level, the contribution to standalone entity stands at ~42%,

while the contribution to consolidated EBITDA stands at ~18%. As per our

estimates, the market values consumer business at ~17x FY18 EV/EBITDA, at

~10% discount to TGBL and over 50% discount to other FMCG giants.

However, given the high margin (~28%), high RoCE nature of the consumer

business, we believe the business deserves valuations comparable to its peers,

which is not being realized, as it is being consolidated with TTCH’s commodities

business. Merger with TGBL will unleash its full value potential.



Enhanced EPS despite dilution:

In FY18, TGBL’s adjusted earnings were

INR5,115m, while the earnings of TTCH’s consumer business were INR2,995m

(as per our estimates).

If the deal is a complete equity swap,

the number of

shares of the combined entity would rise to 952m, while the combined

earnings would be INR8,111m. This would result in an increase of 5% in EPS to

INR8.5 (refer exhibit 3).

However, if TTCH’s consumer business as well as TCO are merged into TGBL,

the number of shares of the combined entity would rise to 1,098.7m as per our

estimates, while the combined earnings would stand at INR9,270m. This would

result in an increase of 4% in EPS to INR8.4 (refer exhibit 5).

12 July 2018

7

If the deal is 50% equity – 50% cash,

the total debt of the combined entity

would increase and so would the interest cost. If TTCH’s consumer business is

merged into TGBL, the number of shares of the combined entity would rise to

791.5m as per our estimates; however, the EPS would shrink by 20% to INR6.5

(refer exhibit 6) considering interest rate of 9% for incremental debt. If we

assume interest rate at TGBL’s existing interest rate (4%), EPS would rise 6% to

INR8.6. If TTCH’s consumer business as well as TCO are merged into TGBL, the

number of shares of the combined entity would rise to 864.9m as per our

estimates; however, EPS would shrink by 32% to INR5.5 (refer exhibit 8)

considering interest rate of 9% for incremental debt. Assuming interest rate at

TGBL’s existing interest rate (4%), EPS would increase 3% to INR8.4.

Tata Chemicals (TTCH)



Value unlocking for TTCH’s existing shareholders:

While TTCH would lose its

high-margin, high-RoCE consumer business, as well as an estimated 33% of its

EV in FY18, the existing shareholders of TTCH would get 320.9m shares of TGBL

in case of equity swap and 160.4m shares of TGBL at ‘50% equity - 50% cash’.

The total equity value of TTCH at present stands at INR179.6b. Post the deal, at

complete equity swap, the total equity value of TTCH would shrink to

INR109.1b. However, the additional 320.9m shares of TGBL would provide

additional value of INR86.7b. The collective value for the existing shareholders

of TTCH would be 9% higher than now. Similarly, for ‘50% equity - 50% cash’

deal, TTCH would get additional cash of INR43.4b and its total equity value

would shrink to INR152.4b. However, the 160.4m shares of TGBL would provide

additional value of INR43.4b. The collective value, hence, would again increase

by 9%.

Valuation and view

The speculated restructuring is expected to unleash value for TTCH’s consumer

business and generate an additional value of 9% for the existing shareholders in the

worst case (as per current scenario without taking into account synergy benefits).

Once the consumer business de-merges from TTCH, the company would no longer

remain a re-rating candidate for the mid-term. However, going forward, its foray

into specialty products of HDS and Nutraceuticals would drive growth and re-rating,

as TTCH invests free cash flows generated from commodities into high RoCE

businesses. We largely maintain our estimates and value TTCH on SOTP basis,

arriving at a TP of INR959 (36% upside). Maintain

Buy.

12 July 2018

8

June 2018 Results Preview | Sector: Technology

Cyient

Bl oomberg

Equi ty Sha res (m)

M. Ca p. (INR b)/(USD b)

52-Week Ra nge (INR)

1,6,12 Rel Perf. (%)

CYL IN

113.0

83 / 1

887 / 475

2 / 23 / 27



CMP: INR734



TP: INR800 (+9%)

Neutral

Financial Snapshot (INR b)

y/e June

2017 2018 2019E 2020E

Sa l es

EBITDA

PAT

EPS (INR)

EPS Gr. (%)

BV/Sh. (INR)

RoE (%)

RoCE (%)

Pa yout (%)

Valuation

P/E (x)

P/BV (x)

EV/EBITDA (x)

Di v yl d (%)

24.4

4.0

15.7

1.4

19.5

3.5

13.5

1.7

18.2

3.2

11.5

2.6

15.8

2.9

9.2

3.0

36.1

4.9

3.7

30.6

(0.2)

16.2

15.9

34.3

39.2

5.5

4.3

38.2

24.8

18.1

17.5

34.0

47.0

6.3

4.6

40.9

7.1

17.6

17.2

48.0

54.6

7.6

5.3

47.3

15.6

18.4

17.9

48.0









188.7 211.2 232.5 257.1

We expect CYL’s USD revenue to decline 1.8% QoQ in 1QFY19. In

the core services business, CYL’s revenue is expected to increase

by 2.1% QoQ (3.4% QoQ CC).

However, pent-up bookings took revenue for Rangsons to

USD22m in 4QFY18. A normalization of this has led to our

estimate of decline in revenue to USD16m.

Margins are expected to contract 100bp QoQ to 13.1%, as

investments in the NBA program would commence in this

quarter.

Additionally, partial wage hikes would also cause headwinds,

which the INR depreciation wouldn’t be able to mitigate.

Our PAT estimate of INR1.1b represents a decline of 6.1% QoQ,

primarily led by the decline in Rangsons and by investments.

The stock trades at 18.2x FY19E and 15.8x FY20E EPS. Neutral.

Key issues to watch for



Update on trajectory of top customer



Health and performance expectations of top customers



Outlook for Rangsons

Quarterly Performance

Y/E March

Revenue (USD m)

QoQ (%)

Revenue (INR m)

YoY (%)

GPM (%)

SGA (%)

EBITDA

EBITDA Margin (%)

EBIT Ma rgi n (%)

Other i ncome

ETR (%)

PAT

QoQ (%)

YoY (%)

EPS (INR)

Headcount

Uti l i ncl . tra i nees (%)

Attri ti on (%)

Offs hore rev. (%)

E: MOSL Es ti ma tes

1Q

141

0.0

9,070

8.6

34.9

22.1

1,160

12.8

9.9

350

31.2

876

11.6

18.4

7.8

12,201

74.1

16.6

40.4

FY18

2Q

150

6.5

9,654

5.7

35.4

20.8

1,410

14.6

11.9

407

28.0

1,116

27.4

14.7

9.9

12,537

75.9

14.2

41.2

3Q

152

1.3

9,834

7.2

35.6

21.1

1,431

14.6

11.8

273

18.3

1,086

-2.7

15.5

9.7

12,799

78.6

16.8

42.8

4Q

165

8.3

10,618

12.8

34.8

20.8

1,492

14.1

11.6

409

21.3

1,181

8.7

50.4

10.5

13,087

76.7

16.9

44.0

1Q

162

-1.8

10,842

12.3

35.8

22.7

1,424

13.1

10.7

346

23.0

1,109

-6.1

-0.6

9.9

13,237

78.0

44.0

FY19

2Q

173

7.1

11,777

19.8

35.3

21.8

1,590

13.5

11.2

192

23.0

1,111

0.2

2.3

9.9

13,737

78.0

44.0

3Q

174

0.6

11,975

12.8

35.1

21.9

1,586

13.2

10.9

265

23.0

1,161

4.5

-1.7

10.4

14,137

76.0

44.0

4Q

179

2.5

12,361

14.0

35.5

21.9

1,685

13.6

11.3

238

23.0

1,214

4.5

9.4

10.9

14,337

77.0

44.0

FY18

608

13.0

39,176

8.6

35.2

21.2

5,493

14.0

11.3

1,439

24.4

4,291

16.0

38.2

13,087

(INR m)

FY19E

688

13.2

46,955

19.9

35.4

22.1

6,286

13.4

11.0

1,042

23.0

4,595

7.1

40.9

14,337

12 July 2018

9

In conversation

1. TCS : Should see a very broad-based growth this year; Rajesh

Gopinathan, CEO & MD; N Ganapathy Subramanian, COO & ED; V

Ramakrishnan, CFO; K Krithivasan, President BFSI Unit &

Ajoyendra Mukherjee, EVP & HR Head









Purple patches are not really for a couple of quarters. Yes, company is now in a

good position. There are always a few areas of weakness. But this year,

definitely should see a very broad-based growth.

Company is extremely focussed on getting back to double digit growth. What

has changed in the last three-four quarters is really about top leadership

framework on business which drives growth and transformation. Company is so

fixated about driving business outcomes because of end to end capabilities that

company has built and leveraged a suite of digital technologies and offerings.

Results of Q1 has set company very nicely on path of double digit growth.

The deal booking is very strong. Have announced $4.9 billion of order bookings

in Q1 and the deal pipeline looks good and it is very broad-based. America is

growing. It has grown by 3 odd percent, UK is firing on all cylinders, continental

Europe is growing, Asia Pacific is growing and across verticals company sees

opportunities across both traditional as well as digital services.

The most important aspect is company’s ability to stitch together composite

deals all the way from core engineering to front end interactive work.

This quarter company had the 180 bps impact due to the normal increases

which happens in Q1 but were also able to recover about 70 bps from the

operational efficiencies.

Company is generating close to around Rs 26,000-27,000 crore of free cash flow

and will also see if there are inorganic opportunities. Focussed on most of the

free cash flow returning to shareholders either in the form of dividends or

buybacks.

Regarding BFSI, do not want to say that it is a new growth cycle. Europe has

always been on growth path. The softness was primarily in North America.

Believe that it is coming back to normal.

Total attrition is at 11.7% and have been maintaining that very well.









2. SHRIRAM GROUP : No decision on merging shriram city and

shriram transport finance; R Thyagarajan, Founder









Shriram Group promoters stand behind the venture 100% and will pay whatever

needs to be paid. Shriram Group will do what is best for shareholders of all

entities and concerns will be taken on board very seriously.

Company has not reached any conclusion on merging Shriram City Union

Finance and Shriram Transport Finance. However, the company has been

looking at possibility of merging similar businesses for the last five years.

Doing extremely well in group’s insurance ventures. In about 2-3 years’ time, the

general insurance company will be making a pre-tax profit of more than 1000

crores. In life insurance, fairly confident and growing very steadily. Feel

confident and predict that Shriram Life Insurance company will reach an annual

premium equivalent of around 1000 crores in about 2-3 years. Valuation could

be 8000-9000 crores at the time.

It is important to grow business but in a very healthy manner.

12 July 2018

10

3. INDUSIND BANK : Aiming to sustain 25-30% loan growth;

Ramesh Sobti, MD & CEO















Aiming to sustain 25-30 percent loan growth.

Cost of money has risen and is likely to remain elevated.

Margins are expected to remain in the range of 3.9 to 4 percent.

Loan growth was robust despite the firm selling assets worth Rs 8000 crore.

Corporate loan growth was at 30 percent and vehicle financing growth was at 28

percent.

Seeing some shift in market share in bank’s favour.

Vehicle financing will be in a bull phase for the coming years.

Capital adequacy ratio will go up post completion of merger. Firm doesn’t plan

to raise capital over the next 18 months.

4. KEC INTERNATIONAL : Eyeing 20% growth in order inflows for

FY19; Vimal Kejriwal, CEO

















Company is in focus after bagging turnkey orders worth Rs 1,234 crore.

The company is eyeing a growth of 20 percent in order inflows for FY19 over

FY18.

Out of Rs 1,357 crore orders, Rs 1,234 crore are from the transmission &

distribution (T&D) sector.

After a long time, 90 percent of the orders have come from T&D sector and 75

percent of orders are from international market.

The overall order book along with these orders stands at around Rs 17,000 crore

of which T&D sector would be 70 percent and railways would be around 27

percent and rest would be civil and cables.

Exports contributed around 45 percent out of the total revenues of the

company.

In FY19, the topline growth would be around 15 percent and both exports and

domestic would growth more or less in the same range.

Regarding railways, got Rs 800 crore orders in FY18 and expect Rs 1,500 crore in

FY19. The current order of railways is Rs 5,000 crore.

12 July 2018

11

From the think tank

1. Can India turn into an electronics giant?



On Monday, Prime Minister Narendra Modi and South Korean President Moon

Jae-in, both wreathed in smiles, snipped a ribbon and opened Samsung India’s

vastly expanded factory in Greater Noida that will be able to turn out over 120

million mobile phones annually. That’s double current capacity and will make the

Noida plant Samsung’s biggest mobile-phone manufacturing site globally. The

plant will also make TVs and air-conditioners and serve as a key Samsung export

hub. Does Samsung’s ambitious blueprint for the Indian market mean India’s

electronics industry is starting to catch up to rest of the world? As always, this

country is a pile of contradictions. At one level, India’s legendary love for gold has

been overtaken by its yen for shiny toys like mobile phones, iPads, cameras,

automobiles and consumer durables such as washing machines and air purifiers

that now come loaded with electronics. The result of this new ardour is that

India’s electronics import bill has doubled in five years to $57 billion. By contrast,

India’s dollar spend on gold imports amounted to just $34 billion in the last fiscal

year, having shrunk 40 per cent from a $56-billlion peak in 2012.

2. Incorrect liquidation value equals suboptimal resolution

process



Discussions on insolvency have gathered momentum over the past few months

and we see reams of newsprint being spent deliberating on this vital topic. We

are starting to see the resolution process coming to a close for the initially

admitted cases with a mixed bag of results. A steel firm is acquired by a reputed

Indian conglomerate for Rs 35,000 crore; another being acquired by a global

conglomerate for Rs 5,000 crore; yet another Indian conglomerate bidding Rs

5,000 crore for a leading textiles firm. There is one concept pivotal to all these

situations—the liquidation value. So, what is this liquidation value concept and

what is its relevance to the insolvency process? How to determine liquidation

value? Are other concepts like fair value of business relevant? The liquidation

value concept is central to most insolvency laws for settling dues of operational

creditors and dissenting financial creditors prior to financial creditors who

approve the resolution plan. The code defines it as “the estimated realisable

value of assets of the corporate debtor if the corporate debtor were to be

liquidated on the insolvency commencement date”.

3. Simultaneous elections are a bad idea



In recent weeks, the push by Prime Minister Narendra Modi and his government

for simultaneous elections at the Centre and the states has gathered pace. Recall

that as long as a year ago, a paper put out by NITI Aayog argued in favour of the

proposal, essentially reiterating the arguments that Modi himself had made. It

was suggested that imposing a uniform calendar on elections for the Centre and

the states and holding these synchronized elections every five years would involve

saving money and administrative expense, would avoid “policy paralysis” caused

by elections constantly being fought somewhere or the other under the Election

Commission’s model code of conduct, and other similarly themed practical and

logistical arguments. More recently, the Law Commission invited political parties

to a consultation on the simultaneous elections proposal. While enshrining

simultaneous elections into India’s political structure would require a slew of

12

12 July 2018

constitutional amendments, a practical start in this direction could come as early

as the next few months—when, so the speculation goes, a clutch of upcoming

state assembly elections could be either advanced or delayed to synchronize with

next year’s general election, due no later than May. It appears that the idea is

gaining traction. If Modi and his government are returned to power at the Centre,

one should fully expect that the necessary constitutional reforms will be set in

motion.

International

4. Trade barriers will not stop China’s rise



There are widespread worries that US President Donald Trump’s protectionism

will erode the long-term benefits of global trade. There are also hopes, mostly

among Trump’s supporters – including many US companies – that tough policies

can prevent China from becoming America’s technological equal. But worries

about the long-term impact of reduced global trade may be exaggerated, and

the hope of keeping China down has no chance of being fulfilled. Trade occurs

for three reasons. For starters, countries have different inherent resources:

some have oil, others copper; some grow bananas, others wheat. If that trade

were stopped, global prosperity would suffer. But trade in commodities and

agricultural goods actually counts for a minor share of total trade, and will

undoubtedly continue to do so. Trade also reflects differences in labor costs.

Low-cost countries produce labor-intensive manufactured goods, using

machinery imported from high-labor-cost countries. As economists such as

MIT’s David Autor have shown the impact of this in developed countries can be

both bad for some workers and good for company profits. But it can be

extremely good for any developing country that fosters a fruitful balance of

inward investment and local entrepreneurship and uses the proceeds of export-

led growth to invest in infrastructure and skills. China’s dramatic economic

success would have been impossible without trade initially driven by labor-cost

differences.

12 July 2018

13

Click excel icon

for detailed

valuation guide

Valuation snapshot

Company

Automobiles

Ama ra Ra ja

As hok Ley.

Ba ja j Auto

Bha ra t Forge

Bos ch

CEAT

Ei cher Mot.

Endura nce Tech.

Es corts

Exi de Ind

Hero Moto

M&M

Ma ruti Suzuki

Mothers on Sumi

Ta ta Motors

TVS Motor

Aggregate

Banks - Private

Axi s Ba nk

DCB Ba nk

Equi ta s Hol d.

Federa l Ba nk

ICICI Ba nk

Indus Ind

J&K Ba nk

Kota k Ma h. Bk

RBL Ba nk

South Indi a n

Yes Ba nk

Aggregate

Banks - PSU

BOB

BOI

Ca na ra

Indi a n Bk

PNB

SBI

Uni on Bk

Aggregate

NBFCs

Adi tya Bi rl a Ca p

Ba ja j Fi n.

Ca pi ta l Fi rs t

Chol a ma n.Inv.&Fn

Dewa n Hs g.

GRUH Fi n.

HDFC

HDFC Sta nd. Li fe

ICICI Pru Li fe

Indi a bul l s Hs g

L&T Fi n Hol di ngs

LIC Hs g Fi n

MAS Fi na nci a l

M&M Fi n.

Reco

Buy

Buy

Buy

Buy

Neutra l

Buy

Buy

Buy

Neutra l

Buy

Neutra l

Buy

Buy

Buy

Buy

Neutra l

CMP TP % Upside

EPS (INR)

EPS Gr. YoY (%)

P/E (x)

P/B (x)

ROE (%)

(INR) (INR) Downside FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY18 FY19E FY18 FY19E

820

133

3154

637

17638

1281

28178

1282

879

269

3541

931

9389

292

268

579

945

175

3562

754

19017

1678

34264

1483

973

300

3839

1053

10455

414

459

572

15

31

13

18

8

31

22

16

11

12

8

13

11

42

71

-1

27.6

5.4

151.3

17.7

469.8

64.0

553.2

29.1

39.5

8.2

185.1

40.2

266.7

8.2

22.9

13.9

31.9

6.9

171.1

23.9

579.1

81.2

986

36.6

50.7

10.4

202.4

50.5

337.5

11.4

40.1

17.6

37.8

9.2

197.9

30.2

704.3

104.9

1,289

49.4

64.9

12.7

230.1

55.2

429.6

16.6

45.0

25.7

-1.5

23.9

7.3

37.9

-0.7

-31.5

-12.1

23.8

88.0

0.4

9.5

46.9

7.3

5.9

15.7

18.7

12.9

-92.8

13.8

-82.3

-1.3

-34.3

25.2

LP

21.3

27.3

-25.5

26.3

-12.9

15.5

29.0

13.1

35.2

23.3

26.9

78.2

26.0

28.2

27.3

9.3

25.4

26.5

40.3

75.2

26.5

35.7

1,853

26.4

471.3

21.3

48.5

36.0

74.1

33.5

33.0

61.4

29.0

64.7

18.6

33.1

15.7

26.2

21.6

29.2

30.8

35.0

28.1

21.8

13.7

9.5

27.3

44.6

12.1

45.5

20.4

69.9

23.3

78.8

42.4

41.0

32.2

19.7

26.8

42.8

23.2

29.2

40.8

29.7

24.8

20.8

36.0

37.5

20.0

50.9

44.1

22.2

32.8

19.1

23.1

35.2

35.8

11.7

41.5

26.5

482.9

22.5

153.1

17.2

24.3

31.8

13.3

42.5

38.3

11.9

20.2

80.8

NM

NM

NM

13.2

NM

NM

NM

0.0

34.8

50.7

15.7

25.2

16.3

68.7

45.6

84.8

32.4

12.7

22.7

12.6

29.6

32.9

25.7

19.2

18.4

26.6

30.5

15.8

28.6

35.0

17.3

25.7

17.5

18.4

27.8

25.5

6.7

32.8

19.5

24.7

17.8

26.8

14.2

16.4

23.4

7.7

31.8

28.8

7.4

15.6

49.1

19.8

67.9

29.3

10.3

NM

14.4

NM

21.4

24.6

37.8

11.7

23.3

13.4

57.0

39.6

68.7

27.3

10.6

16.5

11.0

23.2

23.4

4.8

5.4

4.8

6.4

5.4

2.0

10.9

8.3

3.5

4.2

6.0

3.7

6.8

6.6

1.0

9.6

4.0

2.2

2.1

2.1

1.3

1.7

4.9

0.5

5.2

3.6

0.8

3.3

6.6

0.7

0.5

0.5

1.0

0.5

1.1

0.4

0.8

3.3

8.3

2.0

4.8

2.2

20.2

5.2

6.2

2.8

3.8

2.5

2.0

4.4

3.2

4.1

4.6

4.3

5.4

4.9

1.8

8.4

7.0

3.0

3.8

5.3

3.3

5.9

5.6

0.8

7.9

3.5

2.0

1.9

2.0

1.2

1.6

4.2

0.5

4.5

3.4

0.7

2.8

5.9

0.7

0.4

0.6

0.9

0.6

1.0

0.3

0.9

2.6

7.0

1.7

4.1

2.0

16.6

4.5

5.1

2.4

3.3

2.2

1.8

3.9

2.9

17.0

23.7

24.2

18.8

15.3

10.3

24.4

21.0

18.3

12.9

33.8

14.2

18.5

19.5

10.1

25.1

15.2

0.5

10.9

1.4

8.3

6.8

16.5

3.8

12.5

11.6

6.6

17.7

8.1

-5.8

-17.8

-12.2

8.3

-29.6

-3.5

-23.7

-8.0

12.4

20.7

13.4

20.8

14.1

32.6

18.6

22.0

16.1

30.7

13.4

17.0

21.2

10.5

17.2

26.1

24.5

22.0

16.8

11.9

33.2

21.7

18.7

14.7

32.3

15.1

20.8

23.7

13.3

26.3

17.9

8.4

11.5

7.7

9.0

10.1

19.4

6.7

12.7

12.2

10.0

19.5

12.1

3.5

0.6

1.8

9.8

-8.1

7.4

-2.1

4.1

12.1

20.1

15.7

18.9

15.4

31.9

17.5

21.2

17.4

33.2

14.1

17.2

17.7

12.9

Buy

Neutra l

Buy

Buy

Buy

Buy

Buy

Under Revi ew

Buy

Buy

Buy

537 600

179 185

142 175

82

110

269 360

1915 2250

50

100

1382

-

579 655

22

34

371 444

12

3

23

34

34

18

99

13

53

20

1.1

8.0

0.9

4.8

11.1

60.2

3.8

32.5

15.1

1.9

18.4

21.7

10.1

5.3

5.8

16.4

81.8

6.5

43.4

20.1

3.0

23.8

36.9

12.4

9.5

8.2

23.2

108.2

7.8

55.1

28.7

3.7

30.7

Buy

Neutra l

Neutra l

Buy

Neutra l

Buy

Neutra l

116

86

244

347

76

259

79

150

112

266

385

85

365

97

29

30

9

11

13

41

23

-9.8

-43.2

-63.5

26.2

-50.3

-5.3

-56.5

5.9

1.3

8.3

33.6

-11.4

17.9

-4.3

12.6 PL

LP 114.6

4.2 Los s LP 230.0

39.9 PL

LP 378.2

47.4 -10.4 28.1 41.3

5.9

PL Los s

LP

30.6 PL

LP 70.4

3.5

PL Los s

LP

PL

LP 136.3

7.5

83.1

55.6

80.1

65.9

7.1

57.9

8.4

15.0

131.5

13.9

53.5

30.7

26.2

NA

45.6

34.3

35.5

26.2

21.9

6.2

23.7

-3.8

31.5

29.5

3.0

27.5

104.9

41.5

33.9

33.4

8.2

21.4

20.6

15.2

23.4

18.7

20.6

37.4

14.3

27.7

40.6

42.1

33.4

26.0

18.9

45.3

19.6

18.9

23.6

12.2

20.9

49.3

18.7

25.3

28.4

Buy

Under Revi ew

Buy

Buy

Buy

Neutra l

Buy

Under Revi ew

Buy

Buy

Buy

Neutra l

Buy

Buy

131 215

2355

-

519 960

1571 1930

609 765

341 320

1928 2225

469

-

366 480

1148 1650

154 240

495 525

568 750

477 600

65

85

23

26

-6

15

31

44

56

6

32

26

3.8

46.5

33.1

62.3

37.4

5.0

42.3

5.5

11.3

90.2

6.8

39.4

19.2

14.5

5.3

62.3

44.2

67.4

45.4

6.0

48.7

6.8

13.4

108.8

9.3

45.0

24.5

20.4

12 July 2018

14

Click excel icon

for detailed

valuation guide

CMP

(INR)

408

1232

592

1948

1206

TP % Upside

(INR) Downside

460

13

1750

42

710

20

2700

39

1550

29

EPS (INR)

FY18 FY19E FY20E

43.0 44.8 48.9

49.9 65.7 87.3

32.9 37.7 44.3

100.8 138.1 163.9

69.1 119.4 140.8

EPS Gr. YoY (%)

FY18 FY19E FY20E

45.6 4.1

9.2

57.7 31.8 32.9

13.1 14.3 17.5

19.5 37.1 18.7

24.7 72.8 17.9

25.2 25.4 24.2

8.1

-8.8

64.1

17.0

14.3

-29.8

-11.2

14.8

30.8

17.4

51.1

22.4

10.9

18.2

-1.2

27.6

11.9

15.2

30.5

31.3

-30.5

109.9

-15.4

-38.1

5.8

-12.3

LP

288.2

LP

29.5

1.1

-12.3

-0.3

1.9

13.5

18.6

7.2

-8.5

Los s

11.7

6.6

24.7

5.5

-26.7

2.0

13.2

37.7

8.4

29.5

31.5

20.5

59.3

17.7

4.4

64.4

29.2

9.5

10.4

32.0

18.6

60.8

38.8

11.3

17.0

33.9

28.1

98.4

13.5

113.6

54.7

72.3

22.5

148.6

367.3

101.0

77.5

22.4

41.6

57.5

17.7

17.9

30.8

28.1

21.9

9.8

19.9

17.7

12.5

19.1

31.1

20.8

20.6

27.4

28.0

14.5

11.0

20.8

17.9

31.4

24.9

54.4

19.5

47.7

71.6

27.3

62.2

41.3

39.7

35.9

36.0

40.0

31.1

Valuation snapshot

P/E (x)

P/B (x)

FY18 FY19E FY18 FY19E

9.5 9.1 2.1 1.8

24.7 18.8 3.3 2.9

18.0 15.7 2.9 2.4

19.3 14.1 2.3 2.1

17.4 10.1 2.2 1.8

31.8 25.4 4.7 4.1

62.9

18.9

32.2

45.5

45.4

20.6

28.3

20.7

38.1

50.5

19.0

24.6

50.4

46.0

50.2

15.8

31.1

29.8

33.3

28.7

35.9

38.8

17.1

31.2

47.1

27.7

51.8

95.4

32.3

22.8

43.5

46.9

35.5

45.7

17.4

24.9

34.6

37.6

13.0

24.1

19.8

23.2

39.1

17.4

22.3

38.2

38.8

31.2

11.4

27.9

25.5

24.9

22.4

18.1

34.2

8.0

20.2

27.3

22.6

20.8

20.4

16.1

12.8

35.6

33.1

22.6

7.3

3.4

0.8

7.9

18.6

1.0

4.6

3.8

6.2

9.5

4.4

3.2

4.6

9.4

4.3

1.8

4.6

3.3

2.0

2.7

1.6

3.8

1.5

0.6

2.8

3.7

2.2

5.2

2.0

1.2

6.6

4.2

3.1

6.5

3.0

0.8

7.1

14.8

0.9

4.3

3.5

5.3

8.3

3.6

3.0

4.3

7.9

3.9

1.6

4.1

3.0

ROE (%)

FY18 FY19E

24.1 21.4

14.3 16.5

16.9 16.7

12.7 15.5

13.2 19.7

14.9 16.0

11.6

18.0

2.5

18.1

48.7

4.5

18.3

15.7

17.3

18.7

23.1

13.7

9.1

21.9

8.8

12.4

15.9

11.0

14.3

17.5

3.2

21.6

43.9

7.3

18.5

17.3

24.5

21.2

20.8

13.8

11.2

22.0

13.0

15.2

15.4

11.9

Company

Muthoot Fi n

PNB Hous i ng

Repco Home

Shri ra m Ci ty Uni on

Shri ra m Tra ns .

Aggregate

Capital Goods

ABB

Bha ra t El ec.

BHEL

Bl ue Sta r

CG Cons . El ec.

CG Power & Indu.

Cummi ns

Engi neers Indi a

GE T&D

Ha vel l s

K E C Intl

L&T

Si emens

Sol a r Ind

Therma x

Va Tech Wa b.

Vol ta s

Aggregate

Cement

Ambuja Cem.

ACC

Bi rl a Corp.

Da l mi a Bha ra t

Gra s i m Inds .

Indi a Cem

JK La ks hmi Ce

Ra mco Cem

Ori ent Cem

Pri s m Johns on

Sa ga r Cements

Sa nghi Inds .

Shree Cem

Ul tra tech

Aggregate

Consumer

As i a n Pa i nts

Bri ta nni a

Col ga te

Da bur

Ema mi

Future Cons umer

Godrej Cons .

GSK Cons .

HUL

ITC

Jyothy La b

Ma ri co

Nes tl e

Reco

Neutra l

Buy

Buy

Buy

Buy

Sel l

Buy

Sel l

Neutra l

Buy

Neutra l

Buy

Buy

Neutra l

Buy

Neutra l

Buy

Neutra l

Neutra l

Buy

Buy

Neutra l

1246

108

71

686

234

60

666

129

286

566

341

1275

996

1122

1030

379

538

1060

150

70

715

275

59

830

160

306

640

410

1540

1095

1100

1350

575

570

-15

38

-1

4

17

-1

25

24

7

13

20

21

10

-2

31

52

6

19.8

5.7

2.2

15.1

5.2

2.9

23.5

6.3

7.5

11.2

17.9

51.8

19.8

24.4

20.5

24.1

17.3

27.3

6.2

2.8

19.8

6.2

4.6

27.7

6.5

12.3

14.5

19.6

57.2

26.1

28.9

33.0

33.4

19.2

32.1

7.3

3.7

25.4

7.6

5.0

33.2

7.7

13.9

17.3

25.7

69.1

31.5

36.8

42.3

38.2

21.4

Neutra l

Neutra l

Buy

Buy

Neutra l

Neutra l

Buy

Buy

Buy

Buy

Not Ra ted

Buy

Buy

Buy

202

1361

712

2337

980

109

347

661

112

101

812

85

16921

3951

222

1461

942

2794

1056

108

451

826

170

137

-

111

18933

4696

10

7

32

20

8

-1

30

25

52

36

31

12

19

6.1

47.4

19.8

60.2

57.4

3.5

7.4

23.9

2.2

1.1

25.2

3.7

388.6

84.3

8.1

60.7

39.3

68.4

122.6

5.4

12.7

29.2

5.4

5.0

50.6

6.6

475.7

119.3

9.6

79.8

49.1

105.6

146.5

8.0

21.8

37.2

8.7

7.0

70.6

9.0

647.1

167.1

1.9 6.1 7.8

2.6 9.8 11.9

1.5 4.6 8.7

3.4 10.3 10.5

1.2 8.6 16.9

0.6 2.1 3.2

2.6 6.1 9.8

3.3 14.2 15.4

2.0 4.4 10.3

4.2 5.5 22.8

1.8 6.5 12.0

1.1 6.9 9.8

5.7 16.3 17.2

3.8 9.3 12.0

2.8 8.6 12.2

Neutra l

Buy

Buy

Buy

Buy

Buy

Neutra l

Neutra l

Buy

Neutra l

Neutra l

Neutra l

Neutra l

1358

6353

1143

379

534

48

1325

6384

1714

276

221

344

10167

1340

7300

1440

455

690

75

1235

6590

1925

290

225

365

9425

-1

15

26

20

29

57

-7

3

12

5

2

6

-7

21.1

83.6

25.2

7.8

12.1

-0.2

21.1

166.5

24.5

8.9

4.1

6.4

140.0

25.6

107.4

29.2

9.0

14.8

0.3

24.4

187.8

28.9

10.0

5.5

7.6

189.3

30.4

133.2

34.6

10.4

17.8

1.1

28.3

215.6

35.2

11.3

6.5

9.0

209.0

21.1 18.9 64.3 53.0 15.5 14.2 25.3 27.9

28.4 24.0 76.0 59.2 22.4 19.8 32.9 35.5

16.0 18.5 45.4 39.1 20.4 19.2 49.0 50.6

16.0 15.5 48.7 42.0 11.7 10.6 25.9 26.5

21.9 20.4 44.0 36.1 12.0 10.6 29.2 31.3

LP 284.7 NM 170.1 7.9 7.6 -2.8 4.6

15.7 16.0 62.8 54.3 14.4 11.3 24.9 23.3

12.8 14.8 38.3 34.0 7.7 6.9 21.2 21.4

18.1 21.8 70.0 59.3 52.4 50.0 78.1 86.4

12.9 13.4 31.1 27.6 6.5 6.1 22.3 22.8

32.7 19.4 53.7 40.5 7.0 6.8 13.4 17.1

18.3 18.2 53.6 45.3 17.5 15.2 34.0 35.8

35.2 10.4 72.6 53.7 28.7 25.5 40.3 50.2

12 July 2018

15

Click excel icon

for detailed

valuation guide

CMP

(INR)

28369

1084

10287

141

1187

621

TP % Upside

(INR) Downside

32200

14

1335

23

9390

-9

-

1555

31

685

10

EPS (INR)

FY18 FY19E FY20E

311.1 423.2 564.5

18.1 20.8 23.7

131.3 162.1 187.8

3.5 6.4 9.7

14.9 18.8 23.9

6.7 11.1 14.4

EPS Gr. YoY (%)

FY18 FY19E FY20E

30.3 36.0 33.4

8.1 14.8 14.3

-1.2 23.4 15.8

-2.0 83.8 52.1

71.7 25.8 27.2

26.1 64.3 29.9

10.4 18.7 17.6

2.5

-21.1

-7.5

8.7

-39.2

19.1

28.8

-17.3

-10.9

PL

-27.5

-21.8

14.4

18.1

23.3

-10.9

-17.4

9.8

-0.7

-65.1

-48.5

-2.6

-18.5

14.3

29.3

-2.6

8.4

74.4

7.4

25.0

33.0

68.0

LP

3.4

12.2

44.9

58.1

37.3

72.1

-22.5

13.9

79.6

42.6

41.5

-7.3

22.1

12.7

31.4

25.9

8.0

83.1

13.7

20.3

19.7

22.3

234.2

20.9

37.2

9.3

31.0

15.9

25.8

32.5

16.1

23.4

75.0

31.7

34.1

25.1

Valuation snapshot

P/E (x)

P/B (x)

FY18 FY19E FY18 FY19E

91.2 67.0 37.3 29.2

59.9 52.2 15.4 12.5

78.3 63.5 41.3 34.9

40.5 22.0 1.9 1.8

79.6 63.3 11.8 10.1

92.1 56.1 18.0 11.9

52.1 43.9 13.8 12.4

24.2

32.2

19.6

14.3

100.8

22.0

31.3

33.9

35.6

NM

20.4

16.1

72.2

38.3

16.0

29.6

19.3

38.5

32.9

34.0

41.7

27.2

30.2

21.2

24.9

20.2

13.2

57.8

20.5

25.0

25.5

21.2

96.5

19.8

14.4

49.8

24.2

11.6

17.2

24.9

33.8

18.3

23.9

29.5

29.3

24.7

201.0

8.6

16.8

17.1

14.7

4.5

4.7

4.5

3.1

7.2

4.3

3.5

5.0

3.0

1.6

3.2

1.8

11.7

3.4

2.8

3.3

3.1

6.2

3.2

1.4

3.5

5.3

3.8

14.2

1.2

2.8

2.7

2.1

3.9

4.1

3.8

2.5

6.7

3.9

3.2

4.8

2.6

1.5

2.8

1.7

12.9

3.0

2.3

2.8

2.8

5.7

2.7

1.3

3.3

4.5

3.4

10.0

1.1

2.4

2.4

1.9

1.3

3.1

2.9

1.9

2.3

3.6

2.0

1.0

0.6

1.9

2.6

5.3

6.2

5.9

3.7

ROE (%)

FY18 FY19E

41.0 43.6

26.1 26.4

57.0 59.7

4.9 8.5

15.8 17.2

19.6 21.2

26.5 28.2

19.6

15.1

26.0

23.8

7.2

22.1

11.3

15.5

8.6

-2.3

15.6

12.2

16.2

9.3

18.9

11.9

15.8

16.1

10.3

3.9

8.7

20.3

12.6

-30.2

14.6

26.5

12.5

12.8

9.5

9.1

8.9

-2.1

18.4

3.8

-8.7

14.0

12.8

14.3

9.0

12.2

25.2

19.6

12.1

19.3

17.4

20.4

20.9

11.5

20.1

12.9

19.3

13.4

1.6

14.1

11.9

26.0

13.3

21.5

17.8

11.8

16.8

15.6

5.7

11.6

16.7

13.8

5.8

13.4

15.5

14.8

12.8

9.9

13.4

12.3

4.9

18.2

7.7

-8.2

12.4

9.1

18.4

11.8

14.8

28.4

19.4

14.3

Company

Reco

Pa ge Inds

Buy

Pi di l i te Ind.

Buy

P&G Hygi ene

Neutra l

Pra bha t Da i ry

Not Ra ted

Uni ted Brew

Buy

Uni ted Spi ri ts

Neutra l

Aggregate

Healthcare

Al embi c Pha r

Neutra l

Al kem La b

Buy

Aja nta Pha rma

Buy

Aurobi ndo

Buy

Bi ocon

Neutra l

Ca di l a

Buy

Ci pl a

Neutra l

Di vi s La b

Neutra l

Dr Reddy’s

Neutra l

Forti s Hea l th

Buy

Gl enma rk

Neutra l

Gra nul es

Buy

GSK Pha rma

Neutra l

IPCA La bs

Buy

Jubi l a nt Li fe

Buy

La urus La bs

Buy

Lupi n

Buy

Sa nofi Indi a

Buy

Shi l pa Medi ca re

Buy

Stri des Sha s un

Buy

Sun Pha rma

Buy

Torrent Pha rma

Neutra l

Aggregate

Infrastructure

As hoka Bui l dcon

Buy

IRB Infra

Neutra l

KNR Cons tructi ons Buy

Sa dbha v Engi neeri ng Buy

Aggregate

Logistics

Al l ca rgo Logi s ti cs

Buy

Concor

Buy

Aggregate

Media

Di s h TV

Buy

D B Corp

Buy

Ent.Network

Buy

Ha thwa y Ca bl e

Buy

Hi nd. Medi a

Neutra l

HT Medi a

Neutra l

Ja gra n Pra k.

Buy

Mus i c Broa dca s t

Buy

PVR

Buy

Sun TV

Buy

Zee Ent.

Buy

Aggregate

531

1895

1041

610

625

372

625

1119

2303

138

582

91

2837

726

729

469

901

5454

422

383

561

1460

500

2400

1560

750

600

460

540

1200

2275

171

535

130

2500

825

1110

586

865

5600

593

481

610

1350

-6

27

50

23

-4

24

-14

7

-1

24

-8

42

-12

14

52

25

-4

3

40

25

9

-8

21.9

58.9

53.0

42.7

6.2

16.9

20.0

33.0

64.7

-2.3

28.5

5.7

39.3

19.0

45.6

15.8

46.8

141.7

12.8

11.3

13.5

53.7

25.0

76.1

51.6

46.3

10.8

18.2

24.9

43.9

108.7

1.4

29.4

6.3

56.9

30.0

62.6

27.3

36.2

161.5

23.1

16.1

19.0

49.8

28.2

100.0

65.0

50.0

19.8

20.7

30.0

52.6

132.9

4.8

35.6

8.7

62.3

39.3

72.5

34.3

48.0

187.4

28.5

28.1

25.1

66.8

239

212

232

295

290

260

320

385

21

23

38

30

-6.3 1.2 3.9 Los s LP 231.0 NM

23.9 24.6 26.5 17.5 3.0

7.8 8.9

19.4 13.8 18.3 61.8 -28.7 32.6 12.0

12.9 17.3 17.4 17.5 34.2 0.7 23.0

16.7

7.3 8.2 10.6 -23.1 13.2

17.1 26.7 32.3 13.4 56.5

4.7 48.8

-0.4

17.6

6.9

-0.9

23.9

13.2

9.6

9.1

26.7

27.7

14.5

1.8

20.5

14.9

-0.8

23.9

10.5

12.6

13.2

36.5

35.0

16.5

5.5

24.9

22.0

-0.6

26.3

11.5

15.3

17.3

49.3

40.5

19.7

PL

-13.8

-39.9

Los s

-7.5

78.9

-9.5

41.1

29.9

11.6

8.4

6.5

LP

16.4

117.1

Los s

0.1

-20.8

31.0

45.1

36.8

26.1

14.1

29.4

116

647

148

777

27

20

28.8 16.0 14.2 1.5

21.0 37.9 24.2 3.4

22.0 35.4 23.8 3.2

201.8

21.5

47.3

Los s

10.2

10.4

21.6

31.8

35.0

15.9

19.0

32.4

NM

15.9

103.4

NM

8.6

5.6

13.7

33.7

52.1

28.8

37.3

33.3

40.1

13.7

47.6

NM

8.5

7.1

10.5

23.2

38.1

22.9

32.7

25.7

2.0

2.7

3.8

1.8

1.1

0.7

2.0

2.9

6.0

6.8

6.9

4.0

73

100

280 324

710 810

18

47

204 237

74

81

132 180

305 469

1389 1760

800 1100

541 690

37

16

14

166

16

10

36

54

27

38

28

12 July 2018

16

Click excel icon

for detailed

valuation guide

Valuation snapshot

Company

Metals

Hi nda l co

Hi nd. Zi nc

JSPL

JSW Steel

Na l co

NMDC

SAIL

Ra i n Indus tri es

Veda nta

Ta ta Steel

Aggregate

Oil & Gas

Aegi s Logi s ti cs

BPCL

GAIL

Guja ra t Ga s

Guja ra t St. Pet.

HPCL

IOC

IGL

Ma ha na ga r Ga s

MRPL

Oi l Indi a

ONGC

PLNG

Rel i a nce Ind.

Aggregate

Retail

Jubi l a nt Food

Ti ta n Co.

Aggregate

Technology

Cyi ent

HCL Tech.

Hexa wa re

Infos ys

KPIT Tech

Mi ndtree

Mpha s i s

NIIT Tech

Pers i s tent Sys

Ta ta El xs i

TCS

Tech Ma h

Wi pro

Zens a r Tech

Aggregate

Telecom

Bha rti Ai rtel

Bha rti Infra tel

Idea Cel l ul a r

Ta ta Comm

Aggregate

Utiltites

Reco

Buy

Neutra l

Buy

Buy

Buy

Buy

Neutra l

Buy

Buy

Neutra l

CMP TP % Upside

EPS (INR)

EPS Gr. YoY (%)

P/E (x)

P/B (x)

ROE (%)

(INR) (INR) Downside FY18 FY19E FY20E FY18 FY19E FY20E FY18 FY19E FY18 FY19E FY18 FY19E

221

274

218

313

61

103

77

197

218

556

343

296

327

394

104

178

85

240

274

634

55

8

50

26

70

73

10

22

26

14

18.9

21.1

-8.5

23.3

5.0

13.1

0.3

23.7

21.3

71.9

24.1

23.1

-0.1

30.9

8.1

13.6

8.5

32.1

23.6

93.0

27.2

26.4

3.9

30.5

7.8

14.6

7.1

34.3

28.8

67.4

120.5

7.2

Los s

57.5

35.3

31.5

LP

238.1

40.7

76.5

74.8

64.5

3.0

20.5

32.0

34.6

-12.4

11.0

16.5

21.5

-13.3

-1.2

-9.9

21.8

20.7

5.6

27.7

9.7

Los s

32.4

61.1

4.1

3,187

35.4

10.9

29.4

32.2

47.9

-11.0

27.4

35.6

2.7

-9.7

-16.8

13.2

-9.8

-13.8

61.3

34.4

19.3

20.3

12.1

13.0

14.0

LP

-1.4

-3.4

6.8

-15.7

6.8

21.8

-27.5

1.8

32.7

10.0

21.0

39.7

0.2

9.6

9.1

13.6

7.7

8.8

5.8

18.7

16.6

10.9

13.1

11.7

13.0

NM

13.4

12.1

7.9

300.8

8.3

10.2

7.7

12.6

40.1

7.4

17.5

36.7

15.1

5.6

6.5

25.9

16.8

6.0

9.5

7.8

15.9

17.0

11.1

9.2

11.8

NM

10.1

7.5

7.6

9.2

6.1

9.2

6.0

9.6

27.1

8.3

13.7

27.1

14.7

6.2

7.8

22.9

18.6

7.0

5.9

5.8

13.3

14.1

9.9

1.3

3.2

0.7

2.7

1.1

1.3

0.9

1.7

1.4

1.2

1.5

6.6

2.0

2.0

5.8

2.0

1.6

1.3

5.2

3.8

1.2

0.9

1.0

3.4

2.1

1.7

1.3

2.8

0.7

2.2

1.0

1.2

0.8

1.3

1.3

1.0

1.3

5.6

1.8

1.8

4.9

1.8

1.4

1.2

4.4

3.4

1.1

0.8

0.9

2.9

1.8

1.5

12.8

26.7

-2.7

22.5

9.1

17.7

0.3

22.9

13.4

17.8

11.8

19.4

29.0

11.8

16.7

14.0

31.0

21.0

20.8

24.3

21.3

9.4

13.0

23.3

13.0

14.9

14.4

25.2

0.0

24.2

13.4

17.0

9.1

24.3

14.6

17.9

14.0

22.2

22.4

13.9

19.7

12.8

23.8

16.0

20.8

19.4

16.5

14.7

16.2

23.7

13.8

14.9

Buy

Buy

Neutra l

Buy

Neutra l

Buy

Buy

Buy

Buy

Neutra l

Buy

Buy

Buy

Buy

238 308

368 534

357 352

777 975

179 196

265 430

155 259

261 386

814 940

77

112

210 318

158 221

221 311

1036 1211

30

45

-1

26

10

62

67

48

16

45

51

40

41

17

5.9

49.8

20.4

21.2

11.9

47.4

23.9

10.1

48.4

12.8

22.2

20.2

13.9

60.9

8.8

44.3

26.0

28.7

12.2

42.8

19.9

11.4

43.7

11.1

35.8

27.1

16.5

73.3

11.6

48.7

31.4

40.1

12.2

46.9

21.7

12.9

47.0

12.0

37.9

32.2

19.3

81.3

Neutra l

Buy

1426 1310

811 1130

-8

39

14.9 20.9 27.4 180.6 40.5

12.6 16.2 20.5 39.5 28.8

50.9 30.5

38.2

62.6

16.6

64.8

12.7

34.4

44.0

45.6

40.4

38.7

66.0

42.6

18.9

52.8

40.9

69.6

19.9

74.0

16.8

47.5

54.7

57.1

48.4

45.4

81.9

44.7

18.4

70.7

47.3

78.2

23.5

86.1

19.0

60.0

64.3

70.7

59.9

52.9

93.5

53.0

21.1

92.2

24.8

4.5

21.2

3.1

6.4

38.0

13.2

19.8

7.2

37.7

-1.0

38.1

11.8

1.3

5.3

7.1

11.2

20.0

14.3

32.4

38.1

24.2

25.4

19.8

17.3

24.1

4.8

-2.5

34.0

10.2

31.2 95.9 68.3 19.4 15.9 20.3 23.3

26.1 64.3 50.0 14.1 12.7 23.9 26.7

26.9 70.3 53.9 15.3 13.5 21.7 25.0

15.6

12.4

17.8

16.3

13.2

26.3

17.6

23.7

23.8

16.4

14.1

18.7

14.2

30.5

14.3

19.2

15.9

29.4

20.4

23.0

30.5

26.1

24.7

20.9

37.3

30.0

15.3

14.4

23.4

22.0

18.0

14.3

24.5

17.8

17.3

22.1

21.0

19.7

17.5

31.8

24.2

14.6

14.8

17.5

19.9

3.5

3.8

7.4

4.6

3.5

6.3

4.0

3.9

3.3

12.4

8.7

3.1

2.5

3.4

5.3

3.2

3.4

6.3

4.1

2.9

5.3

3.7

3.5

3.2

9.9

8.4

2.7

2.2

2.9

4.9

18.1

25.0

26.9

24.1

15.4

18.8

14.6

16.2

16.7

37.6

29.4

21.5

17.0

15.3

24.2

2.4

15.6

-16.0

9.4

0.1

17.6

24.9

27.6

24.0

18.5

26.2

18.4

18.6

19.2

34.6

34.9

19.6

15.9

18.0

24.5

0.8

15.7

-22.5

31.1

-2.0

Neutra l

Neutra l

Sel l

Buy

Under Revi ew

Buy

Neutra l

Neutra l

Buy

Buy

Neutra l

Buy

Neutra l

Buy

736

995

488

1320

291

1047

1149

1127

844

1444

1980

654

273

1235

800

1020

400

1550

-

1150

1030

1060

950

1600

1950

800

300

1500

9

3

-18

17

10

-10

-6

13

11

-1

22

10

21

Buy

Neutra l

Buy

Buy

362

316

54

609

510

326

70

730

41

3

29

20

4.1 1.4 5.3 -63.3

13.6 14.1 14.6 -8.1

-9.6 -12.7 -10.6 Los s

3.5 6.5 20.2 -67.2

-98.8

-66.7 288.2 88.8 266.9 2.1 2.1

3.5

3.1 23.2 22.4 3.5 3.6

Los s Los s NM NM 0.9 1.1

86.3 212.9 175.7 94.4 34.8 25.4

PL

LP 2,924 -111 2.1 2.2

12 July 2018

17