8 April 2019
Market snapshot
Equities - India
Sensex
Nifty-50
Nifty-M 100
Equities-Global
S&P 500
Nasdaq
FTSE 100
DAX
Hang Seng
Nikkei 225
Commodities
Brent (US$/Bbl)
Gold ($/OZ)
Cu (US$/MT)
Almn (US$/MT)
Currency
USD/INR
USD/EUR
USD/JPY
YIELD (%)
10 Yrs G-Sec
10 Yrs AAA Corp
Flows (USD b)
FIIs
DIIs
Volumes (INRb)
Cash
F&O
Note: *Average
Close
38,862
11,666
18,246
Close
2,893
7,939
7,447
12,010
11,692
21,808
Close
70
1,292
6,385
1,864
Close
69.2
1.1
111.7
Close
7.4
8.4
5-Apr
0.12
-0.05
5-Apr
329
6,238
Chg .%
0.5
0.6
0.8
Chg .%
0.5
0.6
0.6
0.2
0.0
0.4
Chg .%
1.6
0.0
-0.8
-0.4
Chg .%
0.1
0.0
0.1
1MChg
0.01
0.01
MTD
1.41
-0.14
MTD*
387
10,487
CYTD.%
7.7
7.4
2.1
CYTD.%
15.4
19.6
10.7
13.7
15.5
9.0
CYTD.%
31.6
0.7
7.3
0.1
CYTD.%
-0.8
-2.2
1.9
CYTDchg
0.0
-0.1
CYTD
8.14
-1.89
CYTD*
357
10,074
Today’s top research theme
India Strategy | 4QFY19 Preview—India's PE movement: Politics to
Economy; Banks dominate the earnings revival
The 4QFY19 earnings-report season will be a repeat of 3QFY19, with Financials
driving the performance singlehandedly. Global Cyclicals - the driver of earnings
growth over the last few quarters - have decelerated sharply and are expected to
post decline of 14% in profit.
Corporate banks will account for entire growth in the Nifty and the broader
MOFSL Universe's earnings performance.
We expect MOFSL Universe PAT to grow 29% YoY. Defensives are expected to
post flat profits YoY, whereas Domestic Cyclicals will post 4x YoY jump in PAT.
We expect Nifty sales, EBITDA and PAT to increase by 11%, 2% and 15% on a base
of 16%, 22% and 8% growth, respectively. Ex-Corporate Banks, Nifty profits are
expected to decline 2.7% YoY. Our Nifty EPS estimates for FY19/20 have been cut
by 2.1%/3.6% to INR486/INR606 (prior: INR496/INR629), building in EPS growth
of 6.8%/24.8% for the Nifty for FY19/20.
Our top ideas: Large-Caps: ICICI Bank, SBI, Maruti, Titan, Coal India, Bharti Airtel,
L&T, Infosys,ACC. Mid-Caps: Federal Bank, Shriram Transport, Godrej Agrovet,
Indian Hotels, Marico, IGL, Exide, Jindal Steel, Alkem Labs.
Research covered
Cos/Sector
India Strategy -
4QFY19 Preview
Indiabulls Hsg. Fin
HDFC Bank
Financials
Gujarat Gas
NIIT Tech.
Key Highlights
India's PE movement: Politics to Economy; Banks dominate the
earnings revival
Announces amalgamation with LVB- a marriage of convenience
Advances in line; Deposit growth improves sequentially
Decoding FY19 – The turning point!
Strong volume growth outlook
Baring Private Equity Asia to acquire NIIT Ltd’s 30% stake
Chart of the Day: Nifty EPS – expect 16% CAGR over FY18-20, significantly higher than the
5% CAGR over FY08-18
Research Team (Gautam.Duggad@MotilalOswal.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
Baring PE Asia to acquire 30%
stake in NIIT Tech for $381
million
Baring Private Equity Asia (BPEA)
has agreed to buy a 30% stake in
software services company NIIT
Technologies Ltd for about
₹2,627 crore ($381 million).
Funds affiliated with BPEA have
signed definitive agreements to
purchase the stake totalling
18.85 million shares…
2
Britannia eyes ₹500 crore from 3 new snack products
Britannia Industries Ltd. (BIL) is aiming to generate ₹500-crore
turnover from three new non-biscuit snack products it launched
recently, Jayant Kapre, Business Head, Adjacencies and New Business,
said. Talking to The Hindu after the launch of Treat Croissant, a
centre-filled snack made under joint venture with Greek company
Chipita, he said, “The new products are cream-wafers, salted snacks
and croissants. We are looking at a turnover of ₹500 crore [from nil
now] in three years,” he said…
3
The long-awaited commissioning
of the Kochi-Mangaluru natural
gas pipeline is likely to miss the
target date of May because of
the reported delay in carrying
out river-crossing works at the
Chandragiri and Netravati rivers
in Kasargodu and Mangaluru.
Earlier it was the public protests
in the Malabar region that had
held up the project…
4
New FAME-II rules to impact e-
scooter manufacturers the
most
More than 95 per cent of the
electric two-wheeler models
being produced now won’t be
eligible for incentives under the
new scheme announced by the
Ministry of Heavy Industry and
Public Enterprise…
GAIL’s Kochi-Mangaluru
pipeline hits roadblock again
5
Will examine merger plan of
Indiabulls and LVB, says RBI
The Reserve Bank of India (RBI)
has clarified that its nominee
directors on the board of
Lakshmi Vilas Bank (LVB) had no
views on the merger proposal
with Indiabulls Housing Finance
and that the banking regulator
would examine the proposal as
and when received…
6
Irdai mulls offering
installment mode of
insurance claim settlement
for certain policies
7
Jet delays bank payments, puts
‘own planes’ in danger
In the latest ominous turn of
events in the Jet Airways saga, the
troubled airline has delayed
repayments worth more than $18
million to global lenders including
Citibank that financed its purchase
of Boeing 777 planes. Soon after it
missed the due date in end March,
Jet reached out to the MNC banks
with the hope they would not pull
the trigger…
Regulator Irdai is mulling giving
policy holders an option to
receive payment of claims in
installments under certain
policies like personal accident
(PA) and benefit-based health
insurance…
8 April 2019
2

India Strategy
BSE Sensex: 39,057
S&P CNX: 11,713
India's PE movement: Politics to Economy
Banks dominate the earnings revival
Politics to dominate 1QFY20 narrative; Ex-Banking 4QFY19 earnings
expected to be weak
As we step into the new fiscal FY20, the backdrop for markets is dominated by
politics. The previous five years have seen the first government with full
majority after 1989. India votes over the next 50 days and high-decibel political
noise will occupy the market’s attention as it struggles to figure out if the 17
th
Lok Sabha will have another majority government or a coalition government
with one of the two national parties as a dominant partner or a coalition
government of regional parties backed by one of the national party. Once the
dust settles on politics in 1QFY20, we expect the market’s focus to revert to
fundamentals. Narratives like earnings revival led by banking, global growth and
central bank policies, rural consumption trends given the predictions of below-
normal monsoons, and the inter-play of crude and currency will dominate the
discourse, in our view.
The market’s performance has been impressive so far in CY19, with the Nifty
and the Nifty Mid-cap 100 delivering 7.4% and 2.1% returns, respectively. The
sharp underperformance of mid- and small-caps over Dec’17-Feb’19 has also
been arrested in Mar’19, with USD4.8b of FII inflows in the month. What is
relatively more comforting is the participation of broader markets in the rally, as
against a very narrow nature of consolidation seen in Nifty over Dec’17-Feb’19,
a point discussed in greater detail in one of our
previous note.
The 4QFY19 earnings-report season will be a repeat of 3QFY19, with Financials
driving the performance singlehandedly. Global Cyclicals – the driver of earnings
growth over the last few quarters – have decelerated sharply.
Corporate banks will account for entire growth in the Nifty and the broader
MOFSL Universe’s earnings performance. PSU Banks will benefit from a benign
YoY comparison due to a loss of INR241b in 4QFY18, even as profits stay flat
sequentially. IT is likely to post the fifth straight quarter of double-digit profit
growth, aided by momentum in deal activity. NBFCs might face significant
deceleration in profit growth, but still post a respectable double-digit number.
We expect MOFSL Universe PAT to grow 29% YoY, led by Financials and dragged
by Metals. Global Cyclicals are likely to post a decline of 14% in profit, while
Defensives are expected to post flat profits YoY. Domestic Cyclicals will post 4x
YoY jump in PAT. MOFSL ex-OMC and PSU Banks PAT growth is estimated at 2%.
We expect Nifty sales, EBITDA and PAT to increase by 11%, 2% and 15% on a
base of 16%, 22% and 8% growth, respectively. Ex-Corporate Banks, Nifty profits
are expected to decline 2.7% YoY. Our Nifty EPS estimates for FY19/20 have
been cut by 2.1%/3.6% to INR486/INR606 (prior: INR496/INR629). We are now
building in EPS growth of 6.8%/24.8% for the Nifty for FY19/20. Excluding
corporate banks, FY20 Nifty profits are expected to grow 14%.
8 April 2019
3

Top Picks
Large-Caps: ICICI Bank, SBI, Maruti, Titan, Coal India, Bharti Airtel, L&T, Infosys,
ACC.
Mid-Caps: Federal Bank, Shriram Transport, Godrej Agrovet, Indian Hotels, Marico,
IGL, Exide, Jindal Steel, Alkem Labs.
Key sectoral trends/highlights
Auto
Universe is expected to report a 28% YoY PAT decline on a modest base
(6% YoY growth in base quarter) – a fourth consecutive quarter of double-digit
PAT decline. Even after excluding Tata Motors, the Auto Universe is expected to
post PAT decline of 16% YoY. We expect EBITDA margin to shrink by 180bp YoY
to 11.4%, impacted by weak operating leverage (volumes continue softening
across the board in 4QFY19) and higher variable marketing spend.
Technology
will post another healthy set of numbers, with sales/EBITDA/PAT
growth of 17.7%/18.1%/12.6%. This will be the fifth consecutive quarter of
double-digit PAT growth. There is significant revenue acceleration amid strong
momentum in deal activity; however, INR appreciation can act as a headwind.
TCS is expected to account for 43% of incremental PAT of our Technology
Universe.
Private Banks
are expected to report a strong set of numbers (79% PAT growth
– a multi quarter high), driving 20% of the entire PAT delta of our universe.
Entire universe, barring IndusInd Bank (-45% YoY) and Yes Bank (-18% YoY), is
expected to report double-digit earnings growth, with Axis Bank (loss to profit),
Federal Bank (143% YoY) and ICICI Bank (112% YoY) leading the pack.
NBFCs
are likely to post another quarter of double-digit growth (13% YoY),
slowest since Mar’17. In recent times, 4QFY19 was one of the toughest quarters
for most NBFCs under our coverage. While liquidity started improving toward
end-3QFY19, a number of events (Cobrapost, Essel Group related, etc.) led to it
tightening once again. Bajaj Finance is expected to post another strong quarter,
with 40%+ profit growth. SHTF (81%), LTFH (46%), LIC HF (25%) and PNB HF
(26%) are expected to deliver healthy profit growth, while MMFS, Chola,
Indiabulls Housing Finance and Repco are expected to post subdued growth in
profitability.
PSU Banks
are expected to report second consecutive quarter of profit (led by
lower slippages and a decline in provisioning requirement) after four
consecutive quarters of losses, while Telecom is expected to report a loss for the
seventh straight quarter. PSU Banks had posted a loss of INR241b in 4QFY18,
and are now accounting for the entire profit growth of MOFSL Universe in
4QFY19.
Consumer
Universe profits are expected to grow 7.8% YoY on a strong base
(base quarter profits grew by 17% YoY), with United Spirits (-21% YoY), Pidilite (-
6% YoY) and Godrej Consumer (-6% YoY) expected to post de-growth. United
Breweries (24%), Marico (23%), Asian Paints (18%) and Britannia (13%) are
expected to post a strong set of numbers. Management commentaries suggest a
slight moderation in the demand environment. In Retail, Titan is expected to
deliver another solid quarter (25% YoY).
Metals
are expected to post PAT de-growth (-34% YoY) for the first time after
eight quarters. Within our coverage universe, barring Hindalco, every other
4
8 April 2019

company is expected to report an earnings decline. Metals had a stellar run in
the last three years and profitability of our Metals Universe has more than
tripled from INR135b in FY16 to INR459b in FY19.
Oil & Gas
is expected to report a flattish profit, driven by a significant YoY
decline at OMCs owing to lower GRM. ONGC is expected to report 26% PAT
growth. Ex-OMCs, we expect 15% YoY growth in O&G profits.
Cement
is expected to post 9% YoY profit growth on a strong base (24% YoY
growth in 4QFY18), after delivering 18% growth in 3QFY19, with ACC (44%), JK
Cement (39%) and Ramco Cements (19%) likely to lead the pack.
Capital Goods
are expected to report sales/EBITDA/PAT growth of
9.6%/9.3%/9.3%, with Bluestar/Thermax/BHEL expected to lead the pack
delivering 82%/29%/27 PAT growth. ABB, Bharat Electronics and Voltas are
expected to post 40%/15%/9% PAT decline YoY.
Utilities
sector is expected to report (-5%) PAT de-growth. Utilities ex Coal India
is expected to post growth (1.6% YoY), with NHPC posting the biggest decline
(53%) in our universe. Coal India is expected to post PAT de-growth after five
quarters, dragging growth of the entire universe, whereas JSW Energy is
expected to post a loss.
Healthcare
is expected to deliver 15.8% PAT growth in 4QFY19 on a low base
(5% YoY decline in 4QFY18). Large cap Cipla is expected to post flat YoY profit,
while Dr. Reddy, Lupin and Sun are expected to report 36%, 19% and 7% YoY
profit growth.
Model portfolio
Improvement in the market sentiment led by strong FII flows in Feb-Mar’19 has
corrected the underperformance of beaten-down ‘value ’stocks to an extent.
While the macro environment remains stable, the recent up-move in markets
has made valuations somewhat expensive. Weak high frequency data and
election risk ahead keep us calibrated in our portfolio stance. Our model
portfolio continues to reflect our bias for earnings visibility and growth. Overall,
we continue favoring Private Financials (with more emphasis on Corporate
Banks), Consumer Discretionary, Industrials and select quality Mid-caps. We had
highlighted the divergence of mid-caps v/s large-caps in our
recent strategy
report,
and have turned incrementally more positive on mid-caps since then.
BFSI:
We stay overweight on corporate banks and remain positive on ICICI Bank
and Axis Bank. As a reflection of our confidence in the credit cycle having
turned, we raise further weights in SBI. Credit cycle is showing clear recovery
signs, as evident in the declining NPL formation (SBIN’s 3QFY19 slippage was the
lowest in the past 13 quarters). The size of SMA-1&2 accounts at INR170.5b
(<1% of advances) and the steady trends in core portfolio will drive a further
improvement in asset quality over FY20/21, and hence, earnings. Amongst mid-
size banks, our preferred picks are Ratnakar Bank and Federal Bank.
In
NBFC,
we replace
LIC Housing Finance with Shriram Transport
after the
former’s sharp run-up. SHTF’s growth and return ratios have rebounded after
three years of regulatory pain (due to NPL migration) and some impact of
demonetization and GST. The company has managed its margins and asset
quality well. It has navigated the stressed liquidity situation comfortably. Bulk of
the loans generated is eligible for priority-sector lending, and hence, the
8 April 2019
5

company should be able to generate liquidity through sell-downs. ROEs have
already improved to ~17% v/s the average of 12% over the past three years.
Consumer:
We retain
HUL and Titan
in the model portfolio, given our structural
positive view on both the names. We also maintain our positive view on
Marico.
Information Technology:
In IT, we maintain our positions in Infosys and Tech
Mahindra. Valuations remain reasonable given the underlying cash return policy
to shareholders. It also serves as defensive bastion in volatile markets.
Cement and Capital Goods:
We are replacing Shree Cements with ACC. The
profitability gap between ACC and its peers has narrowed significantly over the
last few quarters. The company has also done well to manage costs through
efforts such as increasing the proportion of linkage coal, reducing the lead
distance and route optimization. The stock trades at an attractive valuation of
7.7x CY 20 EV/EBITDA. We are replacing
Thermax with Siemens
as increasing
share of product business offers scope for margin improvement over the next
five years. Valuations provide comfort as SIEM trades at a discount to its
historical trading average as well as peers – 30% discount to its LTA.
Metals & Utilities:
In Utilities, we are adding
Coal India
and replacing
Power
Grid with NTPC. Coal India
has delivered 35% average earnings growth over
FY17-19, driven by price hike, annual volume growth of 5% and operating
leverage. Quality and wage hike related issues are now behind. Volume growth
of 5-6%, operating leverage due to natural attrition and an increase in the share
of e-auction volumes will drive up earnings over the next few years. Valuations
are compelling at EV/EBITDA of 4x and P/E of 8x xFY20E, which is at a discount
of ~40% to its historical trend. Dividend yield of 8% is quite attractive too. For
NTPC,
the CERC regulations 2019-24 have been very constructive and provide
visibility for the next five years. Most of the issues that dragged the stock
performance in the last 2-3 years have been addressed. Strong pipelines of
projects provide visibility for earnings growth. We expect earnings CAGR of 19-
20% along with 300bp improvement in RoE to 13% over FY19-21. The stock
trades at attractive P/BV of 1.1x and P/E of 9.8x FY20.
Mid-caps:
We are introducing
Godrej Agrovet, Torrent Pharma and Alkem Labs
in our model portfolio. In Torrent Power, we expect EBITDA CAGR of ~12% over
FY19-21, led by Renewables and DF business. Torrent Power’s balance sheet
position is comfortable (net debt: equity: ~1x) and it is well poised to capitalize
on opportunities stemming from distribution privatization, thrust on RE, and
consolidation in the conventional generation sector.
Godrej Agrovet
sights
holistic growth going forward, driven by (a)
crop protection
– 10 expected
product launches over 3-5 years and capacity expansion in triazole chemistry,
(b)
palm oil
– to tap the opportunity arising out of GoI’s focus on promoting
cultivation and (c)
animal feed
– low compound feed penetration and a decline
in fodder availability to drive industry growth.
Alkem
Labs is in the process of
ramping-up business from the chronic portfolio in the domestic formulation
market. We expect ALKEM to deliver 15% CAGR in sales over FY19-21 in
domestic branded business. With US business having reached breakeven, new
launches would enable improved operating leverage, driving better profitability
from the US business.
8 April 2019
6

Indiabulls Housing Finance
BSE SENSEX
38,862
S&P CNX
11,666
8 April 2019
Update | Sector: Financials - NBFC
CMP: INR903
Under Review
Announces amalgamation with LVB- a marriage of convenience
RBI’s approval a key; can set stage for further sector consolidation
Y/E March
2019E 2020E 2021E
Net Fin inc
61.2 66.3 74.6
PPP
61.1 65.5 73.8
PAT
41.6 46.0 52.6
EPS (INR)
97.6 107.9 123.3
EPS Gr. (%)
8.2 10.6 14.3
BV/Sh. (INR)
396
446
503
RoA on AUM (%)
3.3
3.5
3.6
RoE (%)
26.1 25.6 26.0
Payout (%)
45.0 45.0 45.0
Valuations
P/E (x)
9.2
8.4
7.3
P/BV (x)
2.3
2.0
1.8
P/ABV (x)
2.3
2.0
1.8
Div. Yield (%)
4.9
5.4
6.1
Financials & Valuation (INR b)
Indiabulls Housing Finance (IHFL) and Lakshmi Vilas Bank (LVB) have announced
amalgamation, setting the stage for another NBFC (HFC) marriage with a bank. For LVB
shareholders, for every 100 shares, they will get 14 shares of IHFL. This implies a 36%
th
premium to the closing price of LVB as of 5 Apr’19 and ~63% premium to the last six
months’ average price. The scheme of arrangement would lead to a 10.5% dilution. The
deal is subject to all regulatory/shareholder approvals (RBI’s approval remains the
most significant one and will involve multiple considerations). If all approvals come,
deal could get consumed in 3 quarters.
The merger is a win-win deal for both IHFL and LVB. IHFL gets access to banking
platform, essentially the liability franchisee and provides longevity to its lending
business on a consistent basis. LVB, though a 9 decade old bank, has struggled to make
mark in a growing banking industry, lost market share and has been constrained for
capital. The amalgamated bank will also benefit from the efficiency of IHFL, which
operates on a very low C/I ratio of 12.7% (as on FY18) backed by a strong technology
architecture. This deal, though a significant long-term positive for IHFL, will have some
adverse transition impact on the near-term return ratios. We do not have a coverage
on LVB and will incorporate the impact of this transaction in our estimates of IHFL. Our
estimates and valuation framework will change accordingly due to this event. We put
our rating ‘UNDER REVIEW’ for IHFL.
We see a bigger impact of this event on the financial sector. We had highlighted in our
th
report titled
“Rising significance of Liability franchise,”
published on 13 Mar’19, that
the recent funding issues in the financial sector have once again stressed the need of a
strong liability franchisee, and this consideration will drive M&As, going forward. Over
the last two years, we have already seen BHAFIN, GRUH and CAPITAL FIRST adopting this
route. We expect larger NBFCs (as and when they fulfill all the criteria related to on-tap
banking license) to adopt a similar route for banking license. This makes old-generation
private sector banks (struggling with low profitability, lack of scale and capital
constraint) attractive opportunities. RBI’s stance on this event will be keenly awaited for
further consolidation in the sector.
Providing long-term funding stability, albeit at a higher cost
Based on the share swap ratio, IHFL has paid a premium of 36% to LVB’s
shareholders (as per the closing price of 5
th
Apr'19). This is despite a 46% increase in
the price of LVB in the run up to this merger announcement over the past 10 days
(v/s 27% rally in IHFL’s stock price over the similar period). However, given the
smaller size of LVB (24%/8% of IHFL's loan book and market cap) and still cheaper
valuations, the merger will entail only 10.5% dilution for IHFL and will be slightly
book accretive. The merged entity will have a Tier-1/CAR ratio of 14.4%/20.6% vs
5.6%/7.7% for LVB standalone.
Scale, diversification and stability
Unprecedented volatility in the bond-markets post the IL&FS fiasco has again proved
the vulnerability of the Indian financial wholesale funding market and resultant
impact on business model of NBFCs. The amalgamation allays IHFL’s concerns
related to both liability side (ability to raise retail deposits and access to RBI window
in case of liquidity distress) and asset side (increased supervision and diversification,
8 April 2019
7

putting rest to concentration and other concerns related to loan book). Further, the
dependence on a single-product lending business will come down, as it gains
opportunity to earn income via fees (apart from processing fees – cross-sell, forex
business and guarantees will be the new avenues).
How IHFL can reduce the impact on return ratio post transition to bank?
A) IHFL has proved its ability to assign the portfolio to banks at attractive rates – in
order to reduce the PSL/refinancing liability related impact, IHFL may accelerate
the assignment process before amalgamation.
B) LVB on a core operating profits basis has historically made core PPoP to average
assets of ~1.4%. Thus, reducing the credit cost will help improve overall
profitability of LVB. We expect IHFL to further (a) Clean up the LVB book at time
of amalgamation thus taking a hit on profits/net-worth, (b) Infuse more capital,
and (c) aggressively focus on recovery (20% of LVB’s NPAs contributed by 4/5
borrowers).
What are the key things to watch out for?
A) IHFL has a borrowing base of INR1.08t, contributed by bank loans of INR412b,
CP of INR46.7b, NCDs of INR568b and ECB of INR49b. Management remains
confident about grandfathering of these liabilities; however, as and when these
come up for repayment, replacing them with newer liabilities may come at a
higher cost (considering the large requirement on a growing balance sheet).
Fast scale-up of retail liabilities will be a key for long-term stability of
earnings.
B) The RBI’s view on the real estate business and other financial services business
with the same promoter.
C) The company has non-mortgage exposure of INR236b (15-16% of the combined
loan book) – the RBI’s stance to continue or wind down this book will be a key
monitorable. This is a significantly RoA-accretive business for IHFL.
D) IHFL operates on a cost-to-income ratio of 16-18%. Under the banking set-up,
this ratio is likely to increase, especially with branch network scale up.
Consolidation has become overarching theme in banking
We have recently published two thematic notes on "Rising
significance of liability
franchise
– paving way for banking consolidation" and "The
changing face of private
banks
– focused on private banks CEO succession". We believe that these will
remain the big themes in the banking sector over the coming years. While the
government has stepped up the pace of consolidation in PSUs (SBI & its associates
followed by the trio merger of Bank of Baroda/Vijaya/Dena Bank), we note that the
private sector is also witnessing consolidation at an unprecedented pace. Over the
past two years alone, we have seen mergers of IIB/BHAFIN, CAPF/IDFCB,
BANDHAN/GRUH and now the impending merger of IHFL/LVB.
We believe that while more NBFCs (particularly the larger ones) will try to enter the
banking space by merging with smaller/regional banks, the regulator will also
reassess its stance in offering fresh universal on-tap banking licenses, particularly as
IHFL was not selected earlier to be awarded the banking license. Please refer
exhibit-15, which has a list of banking license applicants when the last licenses were
offered in Dec’14.
Besides bank-NBFC mergers, we expect the merger activity amongst private
banks to be a subject of active consideration as systemic deposit growth
remains muted and several mid-cap private banks with strong deposit franchise
are facing growth challenges and trading at inexpensive valuations (refer exhibit
13).
8 April 2019
8

8 April 2019
Update
| Sector: Financials - Bank
HDFC Bank
Buy
BSE SENSEX
38,685
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
S&P CNX
11,598
HDFCB IN
2,720
6268.4 / 90.4
2332 / 1884
3/4/5
5803
78.6
CMP: INR2302
TP: INR2650 (+15%)
Advances in line; Deposit growth improves sequentially
HDFC Bank released the quarterly update highlighting the key financials
for 4QFY19. Key highlights
Financials Snapshot (INR b)
Y/E MARCH
FY19E FY20E FY21E
NII
484.0 586.5 706.8
OP
399.5 490.6 599.5
NP
210.0 254.1 309.2
NIM (%)
4.3
4.2
4.2
EPS (INR)
79.2
93.9 114.3
EPS Gr. (%)
16.8
18.5
21.7
BV/Sh. (INR)
542.6 618.4 713.4
ABV/Sh. (INR) 516.1 587.7 675.6
RoE (%)
16.6
16.2
17.2
RoA (%)
1.8
1.8
1.8
Payout (%)
20.8
19.2
16.9
Valuations
P/E(X)
29.0
24.5
20.1
P/BV (X)
4.2
3.7
3.2
P/ABV (X)
4.4
3.9
3.4
Div. Yield (%)
0.7
0.8
0.8
We expect the margins to expand by ~10bp QoQ to 4.4% and thus expect NII to
grow in line with the loan growth (off setting the impact of higher CoF)
We expect the opex growth (+ 17% YoY) to trail the total income growth (+22%
YoY) and thus expect the CI ratio to come down by 150bp YoY to 39.14%. We
expect the bank to report PAT of INR58b (+21%/ 4% YoY/QoQ) .
Valuation and View:
HDFCB has been consistently gaining market share across
retail product segments (personal loans, business banking, credit cards and
auto loans). Strong capitalization and liquidity levels should enable HDFCB to
sustain this growth momentum over the next few years. Operating expenses
have been under control and digital initiatives have aided consistent decline in
the C/I ratio. We maintain our Buy rating with TP of INR2,650 (3.7x FY21E ABV).
FY18
2Q
97,521
22.0
36,059
133,580
55,401
78,179
29.8
74,620
14,762
63,417
21,907
41,510
20.1
16.5
22.3
6,893
6,049
77.0
1.3
26.0
0.4
66.3
FY19E
2Q
117,634
20.6
40,156
157,790
62,991
94,800
21.3
95,128
18,200
76,600
26,543
50,057
20.6
20.9
24.1
8,334
7,508
101.0
1.3
30.3
0.4
70.0
FY18
400,949
21.0
152,203
553,152
226,904
326,248
26.8
311,013
59,275
266,973
92,106
174,867
20.2
22.5
18.7
7,888
6,583
86.1
1.3
26.0
0.4
69.8
FY19E
483,979
20.7
176,556
660,535
261,035
399,500
22.5
375,396
78,946
320,554
110,591
209,963
20.1
21.0
23.4
9,544
8,124
115.2
1.4
34.2
0.4
70.3
The advances base grew by 24.5%/4.9% YoY/ QoQ to INR8.2t - 1% ahead of our
estimates.
The deposit base of the bank grew to INR9.2t (+17% YoY / 8.3% QoQ). While the
growth is relatively better in a seasonally strong quarter (muted 2% QoQ growth in
3QFY19, 13% QoQ growth in 4QFY18) it still has come in slightly lower than our est.
CASA ratio for the bank has however improved 130bp QoQ to 42% (40.7% in 3QFY1).
As a result CASA deposits increased to INR3.9t (+13% YoY/ 12% QoQ).
During the quarter, the Bank purchased loans aggregating to INR19.2b through the
direct assignment route from HDFC Ltd.
Quarterly Snapshot
Net Interest Income
% Change (Y-o-Y)
Other Income
Total Income
Operating Expenses
Operating Profit
% Change (Y-o-Y)
Core Operating Profit
Provisions
Profit before Tax
Tax
Net Profit
% Change (Y-o-Y)
Operating Parameters
Deposit Growth (%)
Loan Growth (%)
Deposit (INR b)
Loan (INR b)
Asset Quality
Gross NPA (INR B)
Gross NPA (%)
Net NPA (INR B)
Net NPA (%)
PCR
1Q
93,707
20.4
35,167
128,874
53,675
75,199
29.2
71,885
15,588
59,612
20,673
38,938
20.2
17.0
23.4
6,714
5,810
72.4
1.2
25.3
0.4
65.1
3Q
103,143
24.1
38,692
141,835
57,322
84,513
27.9
81,919
13,514
70,999
24,573
46,426
20.1
10.1
27.5
6,990
6,312
82.3
1.3
27.7
0.4
66.3
4Q
106,577
17.7
42,286
148,863
60,506
88,357
21.4
88,137
15,411
72,946
24,953
47,993
20.3
22.5
18.7
7,888
6,583
86.1
1.3
26.0
0.4
69.8
1Q
108,136
15.4
38,181
146,316
59,839
86,478
15.0
89,310
16,294
70,184
24,169
46,014
18.2
20.0
22.0
8,058
7,086
95.4
1.3
29.1
0.4
69.5
3Q
125,768
21.9
49,210
174,978
67,193
107,784
27.5
103,044
22,115
85,669
29,810
55,859
20.3
22.0
23.7
8,525
7,810
109.0
1.4
33.0
0.4
69.7
4QE
132,442
24.3
49,009
181,451
71,012
110,439
25.0
110,439
22,337
88,102
30,069
58,033
20.9
17.0
24.5
9,230
8,195
115.2
1.4
34.2
0.4
70.3
8 April 2019
9

Sector Update | 5 April 2019
Financials
Decoding FY19 – The turning point!
Corporate banks consensus earnings CAGR (FY19-21) at 39%
FY19 was an eventful year for the BFSI space. The year began with the impact of the RBI’s
revised circular on the recognition of stressed assets, which led to a significant uptick in
bad loans and credit cost. The sharp deterioration in asset quality/divergence performance
in the prior year was also somewhere responsible for the multiple management changes at
private banks. Further, the liquidity crisis post the IL&FS default dented overall sentiment,
and later emerged as a full-blown crisis for lenders (mainly for NBFCs), the ripple effects of
which are still being felt. However, as we move forward, the impact of these issues seems
to be subsiding, and the operating environment is becoming conducive for banks (credit
growth and credit cost).
While FY20 appears optimistic, we look back at FY19 to assess the trends in EPS, consensus
ratings, price performance, etc., for the Indian banking and insurance space and follow it
up with our top sector ideas. Our key observations:
NIFTY BANK has returned ~25%
over the past one year v/s 17%
return by Sensex
130
123
116
109
102
95
Nifty Bank
Sensex
FY19 – the year of corporate banks revival:
In FY19, the Nifty Bank index delivered a
return of ~25% v/s 17% returns by the Sensex.
Among private banks, AXSB
delivered the highest return of 52% in the fiscal, followed by ICICIBC (44%).
Among
PSU banks,
SBIN delivered the highest return of 28% over the same period.
Among
the key stocks under our coverage, SIB/HDFCLIFE declined the most at 27.6%/16.7%,
followed by J&K Bank and IPRU. Among PSU banks, BOB declined the most by 9.6%.
Decline in consensus earnings continues; FY20/21 estimate implies robust earnings
growth:
Corporate/PSU banks witnessed continued downward revision in their
FY19/20 earnings estimates. However, with a revival in credit growth, moderation in
bond yields, healthy resolutions under the IBC and a decline in NPL formation,
earnings appear set for a recovery over FY20/21.
Consensus earnings estimates for PSU banks
have increased sharply for FY19-
21, though on a low base (as a few banks are likely to report losses for FY19). A
few banks such as BOB and CBK are already breaking away from the earlier
trend, with their FY20 consensus earnings witnessing upgrades of 1.6% and
2.4%, respectively, over the past three months.
Among private banks,
corporate banks have witnessed maximum earnings
downgrades. ICICIBC’s FY19 earnings over the past 1Y/6M/3M have been cut by
56%/33%/28%, while AXSB has seen downgrades of 41%/15%/4%. IIB saw a cut
of ~15% in its earnings estimates owing to its large exposure toward IL&FS,
while YES saw a cut of ~19%. Over FY19-21, the consensus earnings CAGR
estimate for private banks works out to be ~38%, the highest being for ICICIBC.
Among SFBs,
AUBANK/Ujjivan witnessed a downgrade of 8.5%/13.9% in their
FY19 earnings estimate, while Equitas saw an uptick of 3%. For FY20, all the
three SFBs have seen similar earnings downgrade of ~10%; however, EQUITAS
has seen earnings upgrade of 8% over the past three months. Consensus
earnings CAGR for SFBs stands at ~42% over FY19-21.
Source: MOFSL, Company
8 April 2019
10

In life insurance,
overall earnings were dented by downgrades in IPRU on the
back of weak premium growth, a decline in operating leverage and higher strain
from the rising share of the protection business. IPRU saw a decline of
27%/15%/6% in its FY19 EPS over the past 1Y/6M/3M.
Only a few names (EQUITAS, KMB, DCBB and SBILIFE) witnessed earnings upgrade
We note that over the past year, only a handful of banks/insurance companies
witnessed an earnings upgrade.
Equitas, SBILIFE, KMB and DCBB are the
companies witnessing earnings upgrade
for either FY19 or FY20.
PSU banks,
particularly BOI and PNB, have witnessed significant downgrades in
their FY19/20 EPS over the past one year.
Among private banks,
ICICIBC and
AXSB witnessed the highest earnings downgrades of 56% and 41%, respectively,
for FY19. Among life insurers, IPRU saw an earnings downgrade of 26% for FY20.
MOFSLe: (+) v/s consensus on IIB, RBK and DCBB; (-) on ICICIBC, KMB and SBIN
A comparison of our EPS estimates with consensus shows that we are slightly
conservative on ICICIBC, KMB, SBIN and BOB,
while our earnings estimates are
higher than consensus for IIB, RBK and DCBB.
Among SFBs,
we are conservative on AUBANK, while our estimates are higher
than consensus for EQUITAS. In life insurance, we are conservative on IPRU.
We expect earnings CAGR of 85% over FY19-21 for our coverage stocks, with
private banks CAGR of 44% (led by ICICIBC and AXSB).
Corporate banks witnessing upgrades in analyst ratings:
In 2HFY18, corporate banks
saw significant downgrades in analyst ratings. However, the trend now appears to
have reversed, with corporate banks beginning to see significant rating upgrades since
FY19.
AXSB, followed by SBIN, witnessed the highest rating upgrades
in FY19.
ICICIBC (50 out of 53 are BUY ratings) and HDFCB (51 out of 55 are BUY ratings)
are consensus BUYs. In comparison, AXSB has 36 BUYs and 17 HOLD/SELL
ratings.
Among emerging private banks, RBL Bank witnessed maximum rating
upgrades
in FY19.
PSU banks – led by PNB – saw significant downgrades
and a drop in its
coverage counts.
SBIN saw the maximum upgrades
(44 out of 49 are BUY
ratings).
Coverage count:
Among old private banks, RBK and CUBK saw an increase in
their coverage count, while all others witnessed a decline in coverage. YES saw
its coverage count declining by 4, while downgrades also increased significantly.
Maintain preference for AXSB, ICICIBC and HDFCB:
The outlook for corporate banks
is improving, given moderation in slippages, a reduction in stressed loans and
improving profitability. Revival in credit growth, along with improved pricing power,
will help drive faster NII growth, while moderation in NPL formation will facilitate a
gradual decline in provisioning expenses. Consensus earnings estimate implies a
73% earnings CAGR over FY19-21 for the banking sector, led by a sharp pick-up in
PSU/corporate banks. Private Banks’ earnings estimates imply a CAGR of ~39%,
largely driven by AXSB and ICICIBC.
Within our coverage universe, we maintain our
preference for ICICIBC, AXSB and HDFCB.
8 April 2019
11

Gujarat Gas
BSE SENSEX
38,685
S&P CNX
11,598
5 April 2019
Update
| Sector:
Oil & Gas
CMP: INR153
TP: INR183 (+19%)
Buy
Strong volume growth outlook
We recently met the management of Gujarat Gas (GUJGA); key highlights:
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
GUJGA IN
688
102.8 / 1.5
183 / 116
16/9/-29
180
39.1
Closure/dismantling of all coal gasifiers at Morbi boosts volumes
Financials Snapshot (INR b)
Y/E March
2019E 2020E 2021E
Sales
78.2
95.9 108.9
EBITDA
9.8
10.5
11.9
PAT
3.9
4.7
5.3
EPS (INR)
5.9
6.8
7.6
EPS Gr. (%)
38.9
15.4
12.4
BV/Sh.(INR)
31.2
36.5
42.3
RoE (%)
20.3
20.1
19.4
RoCE (%)
19.5
20.5
22.9
Payout (%)
22.9
22.9
22.9
Valuations
P/E (x)
25.1
21.7
19.3
P/BV (x)
4.7
4.0
3.5
EV/EBITDA (x)
12.2
11.0
9.4
Div. Yield (%)
0.7
0.9
1.0
Shareholding pattern (%)
As On
Dec-18 Sep-18 Dec-17
Promoter
60.9
60.9
60.9
DII
3.4
3.3
2.6
FII
14.0
13.4
14.3
Others
21.6
22.4
22.2
FII Includes depository receipts
Stock Performance (1-year)
In early 2019, sales volumes were down to ~2.1-2.2mmscmd, but the closure of
coal gasifiers has boosted current sales volumes to ~3mmscmd at Morbi.
Although ceramic manufacturers have shifted, they have not come forward to
sign term contracts.
Peak potential at Morbi is ~6mmscmd. Although we have witnessed sudden
increase in sales volume, sustainability of the increase depends on whether the
judiciary leaves the order unchanged, amidst protests from ceramic
manufacturers.
The NGT order would also influence future investments
Newer investments in Morbi and nearby areas are increasingly from larger,
organized players. The National Green Tribunal (NGT) order should also bring a
structural shift in investment projects towards greener fuels.
Impact could be a precursor for other regions; the chemical/pharma belt of
Ankleshwar-Bharuch-Vapi is equally polluting.
Competition from coal caused sales at Surat to decline from earlier peak of
1.8mmscmd to 0.8mmscmd. Emphasis on cleaner fuels should propel sales
across the state.
Strong volume outlook
GUJGA has won six geographical areas in the recently concluded tenth round of
City Gas Distribution (CGD) bidding and should aid long-term volume growth
for the company.
GUJGA has already commissioned 35 new CNG stations in FY19E and the
number is likely to hit 60 by FY19-end. The company aims to open ~100 CNG
stations each year, which would drive CNG volume for the company.
Current breakdown across regions — Morbi (3mmscmd), Ankleshwar
(1mmscmd), Vapi (0.5mmscmd), Surat (0.8mmscmd), Rajkot (0.5mmscmd),
Surendranagar (0.2mmscmd) and additional 0.5mmscmd from other areas.
Valuation and recommendation
GUJGA is trading at 19.3x FY21 EPS of INR7.6. We raise our volume assumption
to 7.4mmscmd /8.2mmscmd in FY20/21 from our earlier assumption of
7.1mmscmd/7.9mmscmd. We assume EBITDA/scm of INR3.9/4.0. Valuing the
company at 24x (unchanged) FY21 EPS of INR7.6, we reiterate our
Buy
recommendation with a target price of INR183 (earlier: INR165).
8 April 2019
12

NIIT Technologies
BSE SENSEX
38,685
S&P CNX
11,598
7 April 2019
Update
| Sector:
Technology
CMP: INR153
TP: INR183 (+19%)
Buy
Baring Private Equity Asia to acquire NIIT Ltd’s 30% stake
And make an open offer
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
Baring Private Equity to buy NIIT Tech promoter stake at INR1,394/share
NITEC IN
61
83.4 / 1.2
1425 / 872
-4/3/38
1466
69.4
Financials Snapshot (INR b)
Y/E March
FY19E FY20E FY21E
Sales
36.9
42.0
47.5
EBITDA
6.5
7.4
8.7
PAT
4.1
4.6
5.5
EPS (INR)
66.2
74.5
89.9
EPS Gr. (%)
45.4
12.6
20.7
BV/Sh (INR)
312.4 360.6 418.1
RoE (%)
22.0
22.2
23.1
RoCE (%)
20.8
21.8
22.2
Payout (%)
52.9
29.5
30.0
Valuation
P/E (x)
20.4
18.1
15.0
P/BV (x)
4.3
3.7
3.2
EV/EBITDA (x)
12.0
10.1
8.2
Div Yield (%)
2.6
1.6
2.0
Shareholding pattern (%)
As On
Dec-18 Sep-18 Dec-17
Promoter
30.6
30.6
30.7
DII
18.4
15.2
17.0
FII
37.8
41.1
39.5
Others
13.3
13.1
12.8
FII Includes depository receipts
Stock Performance (1-year)
NIIT Technologies (NITEC) and Baring Private Equity Asia (BPEA) have signed
definitive agreements to purchase approximately 18.85 million NIIT
Technologies Limited shares (approximately 30% shareholding on a fully
diluted basis in NIIT Technologies)
The selling entities are promoter entities of NITEC: [1] NIIT Ltd (23.1%), [2]
Thadani Family Trust (3.53%) and [3] Pawar family Trust (3.53%)
BPEA is buying the ~30% promoter stake for INR26.3b, at INR1,394/share. This
is 3.3% upside to CMP.
BPEA will make an open offer to the public shareholders of NIIT Technologies
to purchase up to 26% additional shareholding at a price of INR1,394/share
This will take aggregate consideration of the purchase to INR48.9b, for 56%
stake.
Based on our FY19/20/21 Earnings estimates of INR66.2/74.5/89.9, the deal
price implies PE multiple of 21.1/18.7x/15.5x. In fundamental terms, we
believe there is limited room for error at these valuations for the company,
which also drove our Neutral stance.
Barings already hold 62.66% stake in Hexaware as well, and there has been
accompanying media speculation of the likely merger of two companies
eventually. That would result in USD1.2b IT Services company with 40%+
revenues from BFSI and ~17% revenues from Transportation.
Clarity on the prospects of that will be essential to NITEC’s stability in the
interim in our view, from the point of view of senior management stability,
Open offer for another 26% stake at INR1,394/share
Our thoughts: A merger with Hexaware on the cards?
A couple of business developments in parallel
NITEC acquires Whishworks
NITEC acquired Whishworks IT Consulting Private Ltd., a Hyderabad based firm
specializing in Mulesoft and Big Data technologies. It works with Mulesoft,
Salesforce, MapR and Cloudera.
The valuation of 100% stake in the company is INR2.87b, of which NITEC will
acquire 52.67% at first close and the remaining stake over the next two years.
Whishworks has 250 employees and its revenues as per Indian GAAP have
increased from INR587m in FY18 to INR991m in FY18 (30% CAGR).
NITEC to sell its GIS subsidiary for INR897m
NITEC signed a definitive agreement for the sale of its entire 89% stake in ESRI
India Technologies Ltd (Formerly NIIT GIS Ltd.).
ESRI India Technologies Ltd has been an exclusive distributor of ESRI Inc. GIS
products in India . The distribution agreement was expiring on 31st March 2019
and Esri Inc expressed its desire to directly manage the distribution of its
products in India.
GIS was ~4% of revenues as on 9MFY19. Total consideration for the same is
INR897m.
8 April 2019
13

In conversation
1. BAJAJ ELECTRICALS: OUR CONSUMER DURABLE BUSINESS
HAS GROWN 22-23%; Shekhar Bajaj, CMD
Not finding much of a slowdown. Company’s growth has been anything 22-23%
in consumer durable. The consumer durables space -- that is appliances and fans
- has grown even faster. It is the lighting segment which is slightly slower and in
the military canteen it is slow. But otherwise, as far as the trade is concerned, it
is more than 25%.
Expect 20-25% growth to continue in the future because the penetration levels
in India are very low and the demand in the rural markets will be very high.
The only entry barrier (I can see) which company has been working on for the
last two, three years is distribution strategy.
Had about 1,200 SKUs about three years back. Have brought it down to about
600.
Last year, the commodity prices were going up continuously in the third quarter.
This was hurting company margins but from the fourth quarter onwards, seeing
that the commodity prices are under control, especially in EPC business.
2. INDOSTAR : DEAL MOSTLY IN USED CVS, FALL IN NEW
VEHICLE SALES WON’T IMPACT US; R Sridhar, MD & CEO
As a company which has been focussing on used vehicle financing, have not
been impacted by the cyclical nature of the new vehicle sales.
The total population of 5- to 12-year vehicles are quite large. It is around 7 to 8
million vehicles and today NBFCs have penetrated only 30% or 35%. So, there is
a large market out there which can be funded. Company is strategically
focussing on the mid segment of customers which has truck owners who already
have two or three vehicles. Company is financing around 70-75% of the total in
the CV business in used vehicles and around 25% in new vehicles.
In the retail segments, commercial vehicle financing is the engine. Have opened
about 150 branches and have generated Rs 1,200-1,300 crore business in the
last one year.
Run rate in commercial vehicle financing is around Rs 200 crore per month but
with the addition now, have purchased about Rs 4,000 crore of book.
From day one, company’s capacity for financing CVs will go up. Hope that
lending capacity will increase at least two times going forward. The engine of CV
financing is very profitable and gives company around 7% to 8% NIM.
Marginal cost of funding for company also has gone up by 50 to 75 basis points
and in some cases even 100 basis points. But fortunately, since before October
2018, cost of funds were between 9% and 9.5%.
If the marginal cost of funding continues to be higher, naturally company’s
average cost will also go up. Hope that from 9.5%, in next one year it will move
to around 10.5%. In all four segments of financing -- corporate lending, vehicle,
SME as well as in affordable housing, company has increased lending rate by 100
to 150 basis point to ensure that it retains the net interest margin.
The company’s NPL itself is less than 1% and the acquisition that it has done is
net of credit losses.
8 April 2019
14

3. DLF: SHOULD BE ALMOST DEBT-FREE BY JUNE; Ashok Tyagi,
Group CFO
On December 31,st net debt was about Rs 7,000 odd crore which with the QIP
and the residual promoters contribution will be a number which will almost be
about 2000 odd crore. There will be some additional liabilities towards land.
Debt equity now is a number which realistically by June end should be less than
0.1:1 which frankly is almost zero.
Going forward company will launch projects. Will begin launching for
construction but the launching for sale will only happen at a late stage which is
on or close to the entire completion happening.
Next is company’s Central Delhi project which is now in a JV with GIC. For the
next three odd years, company has the existing inventory of about Rs 12,000
crore. Believe that the Rs 12,000-crore inventory should liquidate in a three-four
year period.
On the commercial leasing front, continue to grow aggressively. Company has a
project in Delhi and a project in Chennai which is near commissioning this year.
Have lined up the next round of projects and believe that between Hyderabad,
Chennai and Gurgaon, should be doing about 10 odd million sq ft of projects in
the next three to four years.
Company has in excess of 200 million sq ft area.
Have been averaging about Rs 600 crore of sales a quarter which is a base
coming back from almost a zero a year and a half back, is a decent
improvement. Expect it to sustain and improve across the next couple of
quarters.
4. RAYMOND: RAYMOND REALTY TO BEGIN FIRST PROJECT IN
THANE; K Mukund Raj, CEO of Raymond Realty
Company will start its first project in Thane. The real estate unit will start
development of a 14-acre land parcel in Thane where they will make a 3,000
residential unit project.
Company has a 120 acre land parcel in Thane, in the prime location of Thane -
with the best of the connectivity and with the best of the ecosystem. In the first
phase, company is taking up development of 20 acre land parcel out of which 14
acres it is developing a district.
Need to bring an investment of Rs 250 crore maximum from the parent firm as
the land is owned by the real estate company.
Company initially launched two towers within internal stakeholders about three
weeks back after getting the Real Estate (Regulation and Development) Act
(RERA) registrations and all done and subsequently looking at the response,
have launched the third tower. Plan to handover these three towers in about 48
months.
8 April 2019
15

From the think tank
1. SCOPE FOR FURTHER EASING RESTRICTED TO 25-50 BPS IN
2019-20
Acting on expected lines, the monetary policy committee (MPC) cut the repo rate
by 25 basis points to 6%. This is the first instance of a back-to-back rate cut by the
MPC, following a similar rate action in the February meeting. With this move,
monetary tightening carried out over the first half of the previous fiscal year has
been fully reversed. The decision to cut the repo rate was supported by four out
of the six MPC members. With Consumer Price Index (CPI) inflation prints
remaining benign and below the Reserve Bank of India’s (RBI’s) projections in the
last quarter of FY19, along with growth losing steam in the second half, some
more monetary stimulus to support growth was expected. In fact, considering the
recent data on growth and inflation, the underlying forecasts for both have been
revised lower for this fiscal. Further, in a bid to improve transmission of lower
policy rates to bank lending rates, RBI has allowed an additional 2% of net
demand and time liabilities (NDTL) carve-out from banks’ statutory liquidity ratio
(SLR) to qualify as high quality liquid assets for meeting the liquidity coverage ratio
(LCR) requirement over the next one year. Banks, by the end of the fiscal 2019-20,
will be able to use 15% of their NDTL under the facility to avail liquidity for LCR
from 13% at present. That would help increase the net lendable funds available
with banks and enhance the flow of credit.
2. DISRUPTIVE INNOVATION: HOW PROFIT POOLS WILL SHIFT
BETWEEN NOW AND 2035
Recently, I was part of a discussion with a senior leader of a global automotive
company on how the industry will evolve as four great forces—growing role of
geopolitics and economic nationalism, digital technologies, China’s rise as the
second economic pole shaping global rules, and the globally connected customer
transcending national boundaries—collide to transform, perhaps, the most visible
and global industry. The discussion was intense and eye-opening with important
implications for countries like India which are at the cusp of the big push from
low- to medium-income and are struggling for sustainable strategies to drive
growth and jobs. A significant part of the discussion centred around one slide in
our presentation that showed how the profit pools will shift between now and
2035. Today, pretty much the entire profit in the industry comes from what we
call the classic profit pools, consisting of components, sales of cars, after-sales
activities, financing and insurance. By 2035, the share of classic pools could go
down from 99% to about 60% as new profit pools emerge, driven by three major
shifts in the industry. The first is electrification of cars. New components’ software
and fully built electric vehicles (EVs) can grow to contribute 10-12% of the total
industry profits.
8 April 2019
16

3. THE TRANSATLANTIC REGULATION RIFT
US President Donald Trump made his intentions on financial regulation clear from
the very start of his administration. He issued an executive order requiring that,
for every new regulation imposed, at least two should be targeted for repeal. No
such deregulatory zeal is evident in Europe. The Economic Growth, Regulatory
Relief, and Consumer Protection Act, signed by Trump in May 2018, has, in
practice, emphasized the second part of its title over the third. According to a set
of regulatory principles issued by the administration, regulators must consider the
competitiveness of US firms and advance American interests in international
financial forums. The Treasury was instructed to produce four reports, covering
banks, capital markets, asset management and insurance, and non-banks and
fintech, to show how the principles could be realized through a variety of
deregulatory initiatives. All four reports have now been issued. For a time, this
political activity seemed to be rhetorical, with few significant changes to the
regime affecting big banks. The early focus was on relieving smaller lenders of
some of the burdens of reporting and capital regulation – rules that arguably were
not well designed for them.
8 April 2019
17

MOSL Universe stock performance
Company
Automobiles
Amara Raja
Ashok Ley.
Bajaj Auto
Bharat Forge
Bosch
CEAT
Eicher Mot.
Endurance Tech.
Escorts
Exide Ind
Hero Moto
M&M
Maruti Suzuki
Motherson Sumi
Tata Motors
TVS Motor
Banks - Private
AU Small Fin. Bank
Axis Bank
DCB Bank
Equitas Hold.
Federal Bank
HDFC Bank
ICICI Bank
IndusInd
Kotak Mah. Bk
RBL Bank
South Indian
Yes Bank
Banks - PSU
BOB
BOI
Canara
Indian Bk
PNB
SBI
Union Bk
NBFCs
Aditya Birla Cap
Bajaj Fin.
Cholaman.Inv.&Fn
HDFC
HDFC Life Insur.
Indiabulls Hsg
L&T Fin.Holdings
LIC Hsg Fin
M&M Fin.
Muthoot Fin
MAS Financial Serv.
ICICI Pru Life
PNB Housing
Repco Home
Shriram City Union
Shriram Trans.
Capital Goods
ABB
Bharat Elec.
1 Day (%)
0.7
0.2
-0.2
0.9
0.6
1.3
2.2
0.0
-0.2
1.3
-0.8
0.5
-0.1
0.7
-0.2
-0.6
-0.1
0.0
1.8
-1.4
4.0
0.8
0.5
1.4
0.8
3.3
5.7
-0.4
-0.4
-0.1
-0.6
-0.3
-0.5
-1.5
0.8
1.4
2.2
2.2
0.7
2.0
0.5
1.7
2.9
0.6
1.8
0.9
0.9
-2.6
4.4
-2.2
1.1
3.7
-0.5
1M (%)
-7.4
-3.3
-1.6
-2.6
-4.8
-0.6
-2.5
-7.2
7.8
-2.1
-6.4
0.2
-0.1
-7.6
6.1
-1.1
2.9
4.1
5.6
4.2
11.1
9.2
7.8
14.6
7.6
10.5
22.3
12.6
16.4
11.4
10.8
15.4
12.8
14.8
15.4
-0.1
15.4
15.3
10.5
2.7
22.2
12.3
13.3
-4.0
8.3
9.3
11.1
1.4
5.0
6.7
-0.7
11.4
7.6
12M (%)
-15.4
-40.3
1.8
-29.5
-8.1
-31.6
-29.3
-9.4
-13.8
-7.6
-30.8
-14.7
-22.1
-32.9
-43.4
-25.2
-8.6
51.4
18.6
-10.9
5.7
20.7
40.5
-3.6
19.8
35.0
-28.5
-14.6
-11.7
-8.9
-1.2
-13.7
-4.2
22.7
-7.2
-36.1
62.4
-2.6
12.8
-22.5
-32.5
-11.4
-2.4
-14.7
42.8
-5.0
-7.6
-27.5
-26.0
-21.7
-20.5
7.8
-33.3
Company
BHEL
Blue Star
CG Cons. Elec.
Cummins
Engineers India
GE T&D
Havells
K E C Intl
L&T
Siemens
Solar Ind
Thermax
Va Tech Wab.
Voltas
Cement
Ambuja Cem.
ACC
Birla Corp.
Grasim Inds.
India Cem
J K Cements
JK Lakshmi Ce
Ramco Cem
Orient Cem
Prism Johnson
Sanghi Inds.
Shree Cem
Ultratech
Consumer
Asian Paints
Britannia
Colgate
Dabur
Emami
Future Consumer
Godrej Cons.
GSK Cons.
HUL
ITC
Jyothy Lab
Marico
Nestle
Page Inds
Parag Milk
Pidilite Ind.
P&G Hygiene
United Brew
United Spirits
Healthcare
Alembic Phar
Alkem Lab
Ajanta Pharma
Aurobindo
Biocon
Cadila
Cipla
Divis Lab
Dr Reddy’s
1 Day (%)
-0.4
-0.7
-0.5
-0.3
1.1
-0.9
-0.9
0.5
0.3
0.2
-0.9
-0.1
0.2
0.6
0.6
2.2
0.5
1.7
2.3
1.0
1.6
0.3
-1.6
0.9
-0.4
1.3
2.6
-0.3
-1.6
-1.7
-1.2
0.5
0.7
-0.6
0.1
-0.5
0.1
6.3
0.5
0.3
-2.2
-1.8
-0.1
0.0
-0.4
-0.4
0.1
0.4
0.6
0.5
0.0
0.2
2.3
0.9
-0.6
1M (%)
7.9
7.0
6.2
-0.3
4.7
-9.0
5.4
5.9
5.1
11.5
1.8
-4.9
-2.4
2.4
1.0
8.7
-2.6
5.0
13.9
14.1
7.2
5.8
13.3
7.6
2.5
10.6
5.6
8.1
-2.4
-0.9
-9.4
3.3
-7.4
-3.3
-2.8
-3.7
4.2
5.3
6.1
4.7
5.0
0.1
12.5
-2.7
3.0
-5.5
-2.1
-0.2
2.9
6.8
-2.3
4.1
-2.7
3.5
4.0
12M (%)
-16.5
-13.1
-1.8
-3.7
-28.2
-29.5
48.5
-30.2
3.4
1.9
-0.9
-13.8
-36.9
-3.3
-6.0
7.3
-34.1
-22.5
-28.7
-13.2
-17.5
-4.6
-37.9
-16.6
-46.3
13.9
5.6
32.3
18.4
12.4
19.1
-25.7
-20.1
-7.4
14.4
20.2
13.5
2.6
10.1
31.0
0.0
-2.2
33.0
10.9
43.2
-17.6
-2.0
-5.8
-26.5
31.2
1.2
-12.5
-4.8
53.9
30.6
8 April 2019
18

MOSL Universe stock performance
Company
Glenmark
Granules
GSK Pharma
IPCA Labs
Jubilant Life
Lupin
Sanofi India
Shilpa Medicare
Strides Pharma
Sun Pharma
Torrent Pharma
Infrastructure
Ashoka Buildcon
IRB Infra.Devl.
KNR Construct.
Sadbhav Engg.
Logistics
Allcargo Logistics
Concor
Media
D B Corp
Ent.Network
Jagran Prak.
Music Broadcast
PVR
Sun TV
Zee Ent.
Metals
Hindalco
Hind. Zinc
JSPL
JSW Steel
Nalco
NMDC
Rain Industries
SAIL
Vedanta
Tata Steel
Oil & Gas
Aegis Logistics
BPCL
GAIL
Gujarat Gas
Gujarat St. Pet.
HPCL
IOC
IGL
Mahanagar Gas
MRPL
Oil India
ONGC
PLNG
Reliance Ind.
Retail
Jubilant Food
Titan Co.
1 Day (%)
-1.3
1.0
0.4
-0.4
-1.4
0.1
0.4
0.7
-0.4
-0.7
-3.2
3.4
-0.1
-1.0
-1.0
1.1
-0.8
4.8
0.6
2.0
2.0
1.2
1.5
-1.4
2.1
1.9
2.9
2.4
2.2
0.2
0.5
1.8
2.4
3.4
5.8
1.0
0.4
2.6
1.4
1.6
2.1
1.1
1.0
1.3
0.6
0.8
-0.1
0.1
-0.9
0.0
1M (%)
6.7
3.3
-2.6
9.8
-9.1
0.6
1.8
-8.8
13.1
1.5
3.8
3.8
-4.5
14.6
8.5
4.4
8.9
9.4
0.7
23.0
4.3
10.2
1.5
-15.1
8.2
6.3
11.3
1.3
0.9
-0.1
-3.0
7.8
9.5
5.1
4.4
-1.3
0.7
25.2
9.2
6.8
2.9
2.4
11.3
2.4
-1.0
1.0
5.4
9.6
11.4
7.2
12M (%)
15.9
2.6
16.3
42.8
-14.2
0.4
15.0
-31.1
-22.0
-8.9
39.0
-22.9
-40.1
-14.4
-39.7
-27.1
6.0
-36.8
-24.1
-28.9
-26.5
33.6
-27.3
-29.9
0.5
-7.9
-20.8
-4.3
-21.3
-10.7
-73.7
-21.2
-33.9
-5.6
-20.5
-15.1
4.9
-10.5
-5.3
-24.4
-8.8
5.8
-1.3
-35.6
-17.4
-11.7
2.6
49.4
21.5
20.3
Company
Technology
Cyient
HCL Tech.
Hexaware
Infosys
L&T Infotech
Mindtree
Mphasis
NIIT Tech
Persistent Sys
Tata Elxsi
TCS
Tech Mah
Wipro
Zensar Tech
Telecom
Bharti Airtel
Bharti Infratel
Idea Cellular
Tata Comm
Utiltites
Coal India
CESC
JSW Energy
NHPC Ltd
NTPC
Power Grid
Tata Power
Torrent Power
Others
Avenue Super.
Brigade Enterpr.
BSE
Castrol India
Coromandel Intl
Delta Corp
Godrej Agrovet
Indian Hotels
Interglobe
Info Edge
Kaveri Seed
MCX
Navneet Educat.
Oberoi Realty
Phoenix Mills
PI Inds.
Piramal Enterp.
Quess Corp
SRF
S H Kelkar
Tata Chemicals
Team Lease Serv.
Trident
UPL
1 Day (%)
2.3
-0.4
-0.9
1.1
-1.2
1.1
0.1
1.5
1.4
0.2
1.8
0.7
1.2
0.7
0.0
0.2
7.6
0.9
-0.1
0.7
-0.1
-0.6
-0.7
-1.5
1.2
0.8
0.1
1.0
0.5
3.2
0.1
1.9
-0.7
1.4
-0.9
-0.4
2.9
-1.0
-0.2
0.5
-0.9
1.7
-0.1
0.1
0.1
1.0
0.5
-0.7
0.6
1.0
1M (%)
-8.2
3.8
0.1
3.2
-1.5
3.9
-3.1
2.7
-8.0
4.3
3.2
-3.7
-3.9
13.2
15.8
6.8
-9.7
0.2
-2.4
4.2
7.3
3.0
9.8
7.3
4.0
6.0
-1.8
22.8
1.6
7.3
-1.1
2.6
2.0
12.1
19.9
4.0
13.1
6.2
1.6
10.6
4.1
9.9
6.2
-2.2
7.4
-0.2
4.8
5.7
5.3
7.7
12M (%)
-7.3
13.5
-10.5
32.1
18.4
18.3
11.9
53.5
-7.7
-5.6
38.7
26.4
22.5
24.2
-9.5
-6.5
-65.0
-8.3
-15.2
-5.4
-11.9
-15.5
-4.4
-0.1
-14.1
8.9
3.3
-6.1
-24.5
-17.5
-14.4
-5.6
-22.5
13.9
-2.0
52.9
-5.3
4.6
-25.2
8.1
10.8
17.1
2.9
-32.7
24.0
-39.4
-15.2
32.1
-0.4
24.5
8 April 2019
19

NOTES
8 April 2019
20

THEMATIC/STRATEGY RESEARCH GALLERY

REPORT GALLERY
RECENT INITIATING COVERAGE REPORTS
.
Rs

DIFFERENTIATED PRODUCT GALLERY

Explanation of Investment Rating
Investment Rating
BUY
SELL
NEUTRAL
UNDER REVIEW
NOT RATED
Expected return (over 12-month)
>=15%
< - 10%
> - 10 % to 15%
Rating may undergo a change
We have forward looking estimates for the stock but we refrain from assigning recommendation
Strategy
* In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.
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as per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore.
Persons in Singapore should contact MOCMSPL in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”, of which some of
whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such
Singapore Person must immediately discontinue any use of this Report and inform MOCMSPL.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced
in any form, without prior written consent. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in
this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of
independent judgment by any recipient. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document
(including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including
those involving futures, options, another derivative products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy,
completeness or fairness of the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the
views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval.
MOSL, its associates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform
investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct and independent of each other. The recipient should take this
into account before interpreting the document. This report has been prepared on the basis of information that is already available in publicly accessible media or developed through analysis of MOSL. The views expressed are those of the analyst, and
the Company may or may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or
published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such
distribution, publication, availability or use would be contrary to law, regulation or which would subject MOSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all
jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or representatives shall
be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.
The person accessing this information specifically agrees
to exempt MOSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSL
or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022-3980 4263; www.motilaloswal.com. Correspondence Address: Palm Spring Centre, 2nd Floor, Palm
Court Complex, New Link Road, Malad (West), Mumbai- 400 064. Tel No: 022 3080 1000. Compliance Officer: Neeraj Agarwal, Email Id:
na@motilaloswal.com,
Contact No.:022-30801085.
Registration details of group entities: MOSL: SEBI Registration: INZ000158836 (BSE/NSE/MCX/NCDEX); CDSL: IN-DP-16-2015; NSDL: IN-DP-NSDL-152-2000; Research Analyst: INH000000412. AMFI: ARN 17397. Investment Adviser:
INA000007100.Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670) offers PMS and Mutual Funds products. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.: INP000004409)
offers wealth management solutions. *Motilal Oswal Securities Ltd. is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs, Insurance and IPO products. * Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. offers Real Estate
products. * Motilal Oswal Private Equity Investment Advisors Pvt. Ltd. offers Private Equity products
*MOSL
has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National Company Law Tribunal, Mumbai Bench. The existing registration no(s) of
MOSL would be used until receipt of new MOFSL registration numbers.
Disclosure of Interest Statement
Analyst ownership of the stock
Companies where there is interest
No
February 2019
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