Initiating Coverage | 16 April 2019
Sector: Financials - NBFCs
IndoStar Capital Finance
A New Beginning
Research Analyst:Piran Engineer
(Piran.Engineer@MotilalOswal.com); +91 22 6129 1539
| Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com); +91 22 6129 1526
Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com); +91 22 6129 1542
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
 Motilal Oswal Financial Services
IndoStar Capital Finance
Contents | IndoStar Capital Finance: A New Beginning
Summary ............................................................................................................. 3
Story in charts ...................................................................................................... 5
Corporate lending the ‘cash cow’ .......................................................................... 6
SME Lending – A fast growing business ............................................................... 11
Full throttle on retail lending diversification........................................................ 15
Well-diversified liability mix ............................................................................... 19
Return ratios to improve from FY21 .................................................................... 20
Bull & Bear case ................................................................................................. 25
Key risks............................................................................................................. 26
Initiate coverage with a Buy rating...................................................................... 27
Company overview ............................................................................................. 28
Key Management Personnel ............................................................................... 29
Financials and Valuation ..................................................................................... 31
16 April 2019
2
 Motilal Oswal Financial Services
IndoStar Capital – NBFC
Initiating Coverage | Sector: FinancialsFinance
IndoStar Capital Finance
BSE Sensex
38,906
S&P CNX
11,690
CMP: INR411
TP: INR525 (+28%)
Buy
A New Beginning
Retail lending to be 75%+ of overall book by FY22
Stock info
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1,6,12 Rel.Perf.(%)
M.Cap. (INR b)
M.Cap. (USD b)
12M Avg Val (INR M)
Free float (%)
INDOSTAR IN
91.1
607/275
16/22/--
37.9
0.5
108
39.7
Financial Snapshot (INR b)
2019E 2020E 2021E
Y/E March
NII
5.1
8.9 11.9
Total Income
6.3
10.5 14.2
PPoP
3.9
6.6
9.4
PAT
2.3
3.6
5.0
EPS (INR)
24.7
39.2 54.4
EPS Gr. (%)
5
58
39
BV (INR)
335
377
433
BVPS Gr. (%)
23
12
15
RoA (%)
2.1
2.3
2.5
RoE (%)
8.7
11.0 13.4
Payout (%)
0.0
0.0
0.0
Valuations
P/E (x)
16.6
10.5
7.6
P/BV (x)
1.2
1.1
0.9
Shareholding pattern (%)
As On
Promoter
DII
FII
Others
IndoStar Capital Finance (INDOSTAR) commenced operations in 2011 with a
significant capital commitment (INR9b) by the promoter, Everstone Capital. The
company started out as a wholesale lender, and over time utilized the profits from
this segment to build new businesses – SME, housing and vehicle finance. It hired Mr
Sridhar as Executive VC & CEO in 2017.
Over the next three years, INDOSTAR aims to make vehicle finance (VF) its key
portfolio contributor. While it has organically built a VF portfolio of ~INR10b over
the past year, it recently acquired the commercial vehicles (CV) portfolio (~INR36b)
of India Infoline Finance. With a special focus on it, vehicle finance book should
grow at ~40% CAGR over FY19-22, in our view.
As a result, the share of retail and SME finance will increase from the current 42%
(9MFY19) to 77% by FY22. If this ‘retailization’ strategy is executed well, INDOSTAR
will have a healthy mix of high-RoE businesses (corporate and vehicle finance) and
highly scalable businesses (SME and housing finance). This strategy will also provide
three key benefits: (i) improvement in credit rating, (ii) increasing pool of assets
eligible for PSL sell-downs and (iii) ability to increase leverage.
However, the near-term RoE is likely to be modest at 9-11% due to (a) heavy
investment in branch expansion (150 branches opened in the past one year) and (b)
low leverage (Tier-I capital of 30%). Over the medium term, its RoE is expected to
improve to 13-15% as INDOSTAR’s branches mature, and its long-term sustainable
RoE is likely to be 16%. We believe that at the stock’s current valuations of 1.1x
FY20E BV and 10x FY20E EPS, the risk-reward for INDOSTAR is favorable. We, thus,
initiate coverage on the stock with a Buy rating and a TP of INR525 (1.2x FY21E BV).
Vehicle finance to comprise 50% of INR250b+ loan book by FY22
Traditionally a wholesale lender, INDOSTAR hired Mr Sridhar as Executive VC &
CEO to lead its retail lending foray. Mr Sridhar had been instrumental in building
Shriram Transport Finance into the largest CV financier in India. Over the past few
years, retail lending has gained traction and accounts for 42% of INDOSTAR’s
overall loan book.
Also, in 4QFY19, INDOSTAR purchased IIFL’s CV business
comprising INR36b AUM and 161 branches. In our view, over the next three
years, vehicle finance will be the key growth driver for INDOSTAR and account
for 50% of its AUM by FY22.
Dec-18
60.3
11.3
10.9
17.5
A New Beginning
Well-maintained asset quality despite high share of wholesale finance
In the corporate finance segment, INDOSTAR’s focus has remained on ~50 clients
over the past few years, which has helped in better monitoring of accounts.
Currently, it has only one corporate account worth INR134m that is non-
performing. However, in its SME lending book, INDOSTAR has witnessed an
increase in the GNPL ratio to 3.2%. Nevertheless, management expects SARFAESI
to assist in recoveries. The company’s other two businesses, vehicle and housing
finance, have only commenced in last one year, and thus, yet to see the impact of
Piran Engineer
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16 April 2019
3
 Motilal Oswal Financial Services
IndoStar Capital Finance
seasoning of portfolio. These businesses have negligible NPLs.
In the last seven
years, the GNPL ratio has never exceeded 1.5% and cumulative write-offs
amount to only ~INR40m.
However, as the vehicle finance book scales up, we
expect the GNPL ratio to reach 2% and credit costs of ~1%.
Well-managed liquidity and ALM
INDOSTAR has a policy of ALM matching in the sub-one year bucket. Hence,
despite the tight liquidity environment, it was able to reduce the share of CPs
outstanding from 25% to 10% in 3QFY19. At the same time, the company also
increased its liquidity buffer – liquid assets increased from INR9b to INR15b QoQ.
We believe the company is better placed now and can focus on growth.
In
addition, it is gradually building a large, PSL-compliant vehicle finance book, bulk
of which can be sold down to generate liquidity.
Near-term RoE to be subdued due strong investment in retail business
With its grand plans for retail lending, especially vehicle finance, INDOSTAR has
opened over 150 branches across 17 states over the past few quarters. Almost
90% of these branches are devoted to vehicle finance. This has resulted in its
cost-to-income ratio more than doubling from 18% in FY17 to 39/40% in
FY18/9MFY19.
These start-up expenses are likely to weigh on its overall
profitability until the branches mature (which takes 12-18 months on average).
However, the business acquired from IIFL is already profitable and should help
improve INDOSTAR’s overall profitability.
Hence, we expect the company’s C/I
ratio to gradually decline from 39% in FY18 to 32% in FY22. This should result in
a gradual improvement in its RoE from 9% in FY19 to 15% in FY22.
Favorable risk-reward; Initiate with Buy
INDOSTAR is at the beginning of its ‘second innings’.
Its ongoing business
diversification will help drive growth, improve credit rating and also enable it to
enjoy greater leverage.
While its RoE is expected to be subdued at 9-11% in the
near term, it is likely to improve to 13-15% over the medium term. Over the long
term, the RoE could improve to 16%+. With a capital adequacy ratio of 30%, it is
well capitalized and will not require any further dilution over the medium term.
We believe the risk-reward is favorable at current valuations of 1.1x FY20E BVPS.
We, thus, initiate coverage on INDOSTAR with a
BUY rating and a target price of
INR525 (1.2x FY21E BV).
Exhibit 1: Key financials – Transformation from FY18 to FY21E
AUM (INR b)
AUM mix (%)
Wholesale
SME
Vehicle
Housing
PAT (INR b)
RoA (%)
RoE (%)
FY18
62.1
73.7
23.4
2.1
0.8
1.8
2.9
9.2
FY22E
261.8
23.1
15.8
50.7
10.4
6.3
2.4
14.7
Source: MOFSL, Company
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IndoStar Capital Finance
Story in charts
Exhibit 2: Loan mix to change meaningfully from FY18 (LHS) to FY22 (RHS)
Housing, Vehicle,
1%
2%
SME, 23%
Vehicle,
51%
Corporate,
23%
SME, 16%
Corporate,
74%
Housing,
10%
Source: MOFSL, Company
Exhibit 3: Corporate loan growth to be calibrated
18.1
13.5
Loans outstanding (INR b)
Growth (%)
12.1
17.2
Exhibit 4: Vehicle finance to be the key growth driver
Vehicle finance loan book (INR b)
-0.3
40.4
FY16
45.9
FY17
45.7
FY18
0.4
45.9
FY19E
0.2
46.0
FY20E
51.5
FY21E
60.4
FY22E
1.3
FY18
50.0
FY19E
76.0
FY20E
103.8
FY21E
132.7
FY22E
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 5: C/I ratio to gradually decline FY21 onwards…
Cost-to-income ratio (%)
3.1
2.6
1.5
Cost-to-avg loans ratio (%)
2.8
2.6
Exhibit 6: …resulting in a strong pick up in PAT
PAT (INR b)
58
22
10
1.8
-12
FY18
39
27
growth (%)
2.4
17.8
FY17
39.0
FY18
38.3
FY19E
37.6
FY20E
33.5
FY21E
31.5
FY22E
2.1
FY17
2.3
FY19E
3.6
FY20E
5.0
FY21E
6.3
FY22E
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 7: Return ratios to improve meaningfully
RoA (%)
13.6
12.3
9.2
8.7
RoE (%)
13.4
11.0
14.7
Exhibit 8: Well-capitalized to sustain growth
Tier I ratio
41.1
32.3
33.8
33.4
30.0
28.0
4.4
FY16
4.1
FY17
2.9
FY18
2.1
FY19E
2.3
FY20E
2.5
FY21E
2.4
FY22E
Source: MOFSL, Company
Source: MOFSL, Company
16 April 2019
5
 Motilal Oswal Financial Services
IndoStar Capital Finance
Corporate lending the ‘cash cow’
5%+ RoA business; Profits invested in building other businesses
Corporate lending was the first business started by INDOSTAR back in 2011. The
business is divided into two segments: (a) Real Estate Lending, and (b) Non-Real
Estate Lending.
In Real Estate Lending, INDOSTAR lends at the project level during the construction
phase. As of 9MFY19, the company has an exposure to 10 developers.
In Non-Real Estate Lending, INDOSTAR provides financing by means of senior secured
debt, structured finance, promoter finance, and special situations. In this segment, it
has loans outstanding with 45 customers as of 9MFY19.
Since the number of clients has been largely stable over the past four years, the
company has been able to focus on asset monitoring better. Asset quality has been
good - it currently has one non-performing account in this segment. Given its high
margins and good asset quality, this segment generates high returns (RoA of 5%+),
which are used to build new businesses.
Corporate loans
outstanding stood at
INR45b (58% of total loans)
as of 3QFY19
Largely equal mix of real estate and non-real estate lending
Corporate lending primarily consists of (i) Lending to mid-to-large corporates in the
manufacturing, services and infrastructure industries by way of senior secured
debt, structured financing, promoter financing, and special situation funding, and
(ii) lending to real estate developers, mainly at the project-level, for the
construction of residential properties, equity buy-backs and take-outs. The
company provides lending solutions to mid-to-large corporates against secured
collateral as well as security in other forms, such as charge on operating cash flows.
Exhibit 9: Corporate Lending – a snapshot
What?
Ticket size
Sectors
Products
Type of financing
Sourcing
Team Size
Average yield
Tenure
Fee Income
Other Info
GNPL ratio
RoA
Key competitors
Description
INR1.5-1.75b in real estate lending and INR1-1.25b in non-real estate lending
Real Estate, Cement, Power, Media & Entertainment, Dairy, Financial Services and Infrastructure
Senior secured debt, Structured finance, Promoter finance, Special situations, Construction finance, Take out finance
Cash flow-based; Less land financing and low approval risk
In-house
20-25
Real Estate: 15-16%; Non-real estate: 12-13%
2-3 years in real estate lending (due to pre-payment); 3-4 years in non-real estate lending
1-2%
Company encourages pre-payments and does not charge a pre-payment penalty.
0.3% (one account classified as NPL)
5%+ (9MFY19)
Mumbai
Yes, IIB, PIEL, HDFC, PNBHF
Source: MOFSL, Company
Head Office location
Fee income amounts to
~2% of disbursements in
the corporate finance
segment
Focus on fee income generation
One of the key drivers of high RoA in the corporate finance segment is the fee
income generation. Fee income more than covers all the operating expenses of
the segment.
6
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IndoStar Capital Finance
The company earns fees from loan origination, loan syndication, advisory, etc.
Another unique source of fee income generation is by bringing a builder and a
landowner together in a Joint Development Agreement (JDA).
Exhibit 11: Fee income as % of disbursements
Exhibit 10: Trend in fee income
Fee Income (INR m)
22
-10
Growth (%)
52
Fee income % of disbursements
2.2
1.8
1.9
1.5
614
FY15
749
FY16
673
FY17
1,020
FY18
FY15
FY16
FY17
FY18
Source: MOFSL, Company; Note: Numbers as under I-GAAP
Source: MOFSL, Company
Taking senior lending
position with multiple
collaterals
Taking senior lending position with multiple collaterals
INDOSTAR primarily takes a senior lending position with multiple collaterals.
In
order to avoid conflict of interests, the sourcing, credit and operations teams are
kept separate.
Exhibit 12: Process flow in Corporate Lending segment
Source: MOFSL, Company
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 Motilal Oswal Financial Services
IndoStar Capital Finance
Exhibit 13: Cash flows via Escrow account
Source: MOFSL, Company
Exhibit 14: Customized solutions catering to borrower’s needs; Focus on collateral before
loan disbursement
Source: MOFSL, Company
Number of corporate clients
has been ~50 over the past
three years as the company
has focused on maintaining
asset quality
Calibrated growth over past few years
In order to maintain strong asset quality, INDOSTAR is quite particular about the
number of clients and its quality of underwriting. Over the past three years, the
number of clients in this segment has remained largely stable at ~50. The company
does not believe in loan book growth at the cost of quality.
Its disbursements in Corporate Lending grew from INR29b in FY13 to INR44b in
FY17 (11% CAGR). However, as loan demand dried up in the aftermath of
demonetization, coupled with de-leveraging by corporates, disbursements declined
9% to INR39bin FY18.
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 Motilal Oswal Financial Services
IndoStar Capital Finance
Exhibit 15: Number of wholesale clients largely stable
Real Estate lending
Non-Real Estate lending
30
Exhibit 16: Disbursements to be subdued in FY19 and FY20
Disbursements (INR b)
16
14
-
-9
-30
Growth (%)
20
20
31
28
25
30
27
9
FY13
14
FY14
18
FY15
23
FY16
18
FY17
24
FY18
38
FY16
44
FY17
39
FY18
28
9MFY19
28
FY20E
33
FY21E
40
FY22E
Source: MOFSL, Company
Source: MOFSL, Company
Share of corporate lending
is expected to decline from
58% currently to 23%by
FY22
Post the liquidity crunch in September 2018, management decided to calibrate
growth in this segment and instead focus on retail segments. Even with liquidity
normalizing, the annual disbursement run-rate in this business should be INR25-
30b, which is significantly below the peak of INR44b in FY17.
As a result, the share
of corporate lending in the company’s portfolio should decline from the current
58% to 23% by FY22.
Exhibit 17: Loan growth in corporate lending to be calibrated
18.1
13.5
Loans outstanding (INR b)
Growth (%)
17.2
12.1
-0.3
40.4
FY16
45.9
FY17
45.7
FY18
0.4
45.9
9MFY19
0.2
46.0
FY20E
51.5
FY21E
60.4
FY22E
Source: MOFSL, Company
Only one corporate NPL
amounting to ~INR134m
currently in the portfolio
Pristine asset quality
In real estate financing, at the screening stage itself, INDOSTAR focuses on a) Well-
established developers b) project generating operating cash flows c) no pending
approval risk d) no holding company financing, and e) developers who understand
the micro market. In non-real estate corporate lending, INDOSTAR focuses on a)
Bigger groups b) avoiding sectors linked to government linkages, and c) no
Greenfield financing.
INDOSTAR also ensures additional security cover via promoter guarantee, cash flow
from other projects and control on cash flow through the escrow mechanism.
Hence, despite providing high-yield loans, INDOSTAR has maintained a good asset
quality over the years on account of its strong underwriting standards.
INDOSTAR
has only one corporate NPL amounting to ~INR134m in its portfolio.
16 April 2019
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 Motilal Oswal Financial Services
IndoStar Capital Finance
Exhibit 18: Yields consistent at 13-14%
Yield on loans (%)
14.6
14.1
14.3
14.6
14.1
13.6
0.6
0.2
0.8
0.3
Exhibit 19: Healthy asset quality over time
GNPA ratio (%)
1.5
FY13
FY14
FY15
FY16
FY17
FY18
FY15
FY16
FY17
FY18
9MFY19
Source: MOFSL, Company
Source: MOFSL, Company
NIM + fees in the corporate
lending segment at 9-10%
High margins and low opex make corporate lending a high-RoE business
In the corporate lending business, INDOSTAR earns a margin of 9-10%
(including fees), given the high yields in both, builder finance and structured
credit.
With staff strength of only ~20 employees in this segment, the C/I ratio is sub-
10%. Also, given the well-maintained asset quality, credit costs are negligible.
This translates into 5%+ RoA and 18%+ RoE on average.
Exhibit 20: DuPont Analysis of the corporate segment
(%)
Revenue from Operations
Net Interest Income
Operating Expenses
Cost / Income
Profit before Credit Costs
Credit Costs
ROAA
Leverage (x)
ROAE
2QFY18
16.8
11.1
0.8
7.0
10.3
-1.9
8.0
2.7
21.5
3QFY18
15.5
9.9
0.7
7.4
9.2
0.8
5.9
2.7
16.3
4QFY18
14.7
8.9
0.5
5.6
8.4
-0.4
5.4
3.1
17.0
1QFY19
13.4
7.4
0.4
5.0
7.0
0.1
4.5
3.2
14.4
2QFY19
3QFY19
16.7
15.7
10.4
9.3
0.5
0.2
4.9
2.1
9.9
9.1
0.1
-0.5
6.6
6.4
3.2
3.3
21.0
20.9
Source: MOFSL, Company
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 Motilal Oswal Financial Services
IndoStar Capital Finance
SME Lending – A fast growing business
Providing scale and granularity
In FY15, the company commenced its SME Lending business, targeting small
businessmen, traders, self-employed professionals, etc. Its SME lending book has
grown well to ~INR19b.
The business is carried out from 10 branches across India, and management intends
to continue with this business operation for the medium-term.
All lending is collateralized- collateral is generally self-occupied residential property.
The average ticket size in this segment is INR12m with an LTV of ~65%. 50% of the
book qualifies for PSL.
The SME Lending business achieved breakeven in FY18 and is expected to become a
more meaningful contributor to the company’s PAT over the next few years.
SME loans with average
ticket size of INR12m
provided in 10 locations
across India
First step into retail financing
INDOSTAR commenced SME lending in FY15, primarily involving loans for business
against property to small and medium size enterprises, including businessmen,
traders, manufacturers, and self-employed professionals. The type of property
securing these loans is typically residential or commercial. INDOSTAR provides SME
loans in 10 key locations across eight states in India – Chennai, Hyderabad,
Bengaluru, Jaipur, Surat, Ahmedabad, Mumbai, Pune, Delhi and Indore.
The average ticket size of the loans is INR12m. Around 50% of the SME loans are
qualified as priority sector lending. All SME loans are secured, with an average LTV
ratio of ~65% and have a monthly interest servicing requirement. All of the
outstanding loans are provided on a floating interest rate basis.
INDOSTAR’s distribution network comprises ~210 personnel in its in-house sales
team and ~648 third-party direct sales associates (DSAs), and other third-party
intermediaries empanelled with the company.
Exhibit 21: SME Lending – a snapshot
What?
Clientele
Ticket size
Key characteristics
Collateral
Sourcing mix
Average yield
Average LTV
Other Info
Description
SMEs, businessmen, traders, manufacturers and SEPs
INR12m
Secured loans at floating rate with monthly interest servicing
Mostly self-occupied residential or commercial property
Almost 100% is DSA-sourced; DSA commission at 1.4%
13-14%
65%
~50% of loans qualify for PSL
Source: MOFSL, Company
Separate verticals for business, credit and operations
Unlike some companies that have a common vertical for business and credit,
INDOSTAR has segregated these verticals in order to minimize any potential conflict
of interests. Hence, there is no overlap/convergence among these verticals, even at
higher levels.
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IndoStar Capital Finance
Separation of verticals to
minimize conflict of
interests
Exhibit 22: Organizational structure – Separation of verticals to minimize conflict of interests
BUSINESS HEAD
NATIONAL CREDIT
MANAGER
NATIONAL OPS
HEAD
REGIONAL HEAD
REGIONAL HEAD
SME, HL, VF OPS
AREA HEAD
AREA CREDIT
MANAGER
BRANCH MANAGER
BRANCH CREDIT
MANAGER
OPERATIONS TEAM
FILED OFFICER
CREDIT TEAM
Source: MOFSL, Company
Exhibit 23: Process flow in the retail finance segment
Source: MOFSL, Company
SME loan book grew to
INR18.6b in 9MFY19 and
expected to grow at 27%
CAGR over FY19-22
Gaining traction in SME Lending segment
Over the past three years, the company has grown its client base in this segment to
~1,500 customers. Consequently, disbursements in the SME lending segment more
than quadrupled to INR13b over FY16-18. However, given the recent liquidity
crunch, the company has scaled back disbursements in this segment.
We expect
INR11b disbursements in FY20E vs INR13b in FY18.
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 Motilal Oswal Financial Services
IndoStar Capital Finance
Exhibit 24: Expanding customer franchise
Number of clients
Disbursements (INR b)
12.6
8
5.5
2.7
4
0.1
143
FY16
426
FY17
1,079
FY18
1,495
9MFY19
Source: MOFSL, Company
FY15
Share of SME lending to
remain largely stable at
~16%
Consequently, the loan book increased from INR2.2b in FY16 to INR14.5b in FY18.
We expect it to grow at 27% CAGR over the next three years (FY19E-FY22E) to
reach INR41b in FY22E.
Its share in the total loan book will remain largely stable at
16%.
Exhibit 25: Disbursements decline in FY19 due to the tight
liquidity situation
Disbursements (INR b)
127
Growth (%)
Exhibit 26: SME loan book to surpass INR40b in FY22
Loans outstanding (INR b)
124
Growth (%)
9.4
-25
12.6
FY18
FY19E
20
20
20
40
14.5
FY18
20.3
FY19E
31
26.6
FY20E
26
33.5
FY21E
24
41.5
FY22E
Source: Company
11.3
FY20E
13.6
FY21E
16.3
FY22E
Source: Company
High delinquencies in loans
disbursed during first year
of operations; improved
underwriting standards to
yield results
Initial challenges in maintaining asset quality; Improved underwriting
model and SARFAESI license expected to yield results
INDOSTAR’s SME lending book has largely been built over the past three years, and
almost 90% of the outstanding book comprises loans disbursed in the past two
years. During the first year of its SME lending operations, the company disbursed
several large ticket size loans (loans exceeding INR50m). There were a few
delinquent accounts in this pool of loans.
In fact, 30-35% of the current NPLs stem
from four large accounts disbursed during the initial days of the business.
To
address this problem, the company not only overhauled its underwriting method,
but also put a cap on the ticket size (INR30m).
In addition, in September 2018,
INDOSTAR was authorized with using SARFAESI for bad loan recovery.
While the
GNPL ratio still remains elevated at 3.2%, we expect increased recoveries going
forward as SARFAESI resolutions play out.
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 Motilal Oswal Financial Services
IndoStar Capital Finance
Multiple levers for RoE
improvement including
reduction in share of DSA
sourcing, reduction in credit
costs and increase in
leverage
Business achieves breakeven in FY18; low leverage leads to single-digit RoE
The SME lending segment achieved breakeven in FY18 and currently generates
~5% RoE.
In our view, there are multiple levers for an RoE improvement in this business
Gradually reducing DSA payouts
Reduction in credit costs from the current level of 1.4%
Increase in leverage from the current level of 3x
We believe that, with its strong execution, INDOSTAR will be able to improve
the RoE of its SME lending business to 12-15% over the next two years.
Exhibit 27: DuPont Analysis (%)
(%)
Revenue from Operations
Net Interest Income
Operating Expenses
Cost / Income
Profit before Credit Costs
Credit Costs
ROAA
Leverage
ROAE
GNPA
NNPA
2QFY18
12.8
7.1
3.3
47.0
3.8
2.9
0.6
2.7
1.6
2.5
2.3
3QFY18
11.8
6.1
3.0
49.6
3.1
1.7
1.0
2.8
2.7
2.5
2.2
4QFY18
10.8
4.8
1.9
39.4
2.9
0.5
1.5
3.1
4.7
2.1
1.8
1QFY19
11.2
5.2
1.9
37.5
3.2
1.2
1.3
3.2
4.3
2.6
2.3
2QFY19
12.4
5.9
1.8
30.4
4.1
1.7
1.6
3.0
4.9
2.4
1.9
3QFY19
13.0
6.4
1.3
20.8
5.0
1.3
2.5
3.1
7.6
3.2
2.3
Source: MOFSL, Company
16 April 2019
14
 Motilal Oswal Financial Services
IndoStar Capital Finance
Full throttle on retail lending diversification
Vehicle Finance to be the key growth driver
INDOSTAR commenced its vehicle finance business in November 2017 and has already
opened nearly 150 branches as well as hired over 1,000 people to grow this business.
The company is focusing more on the used CV segment (5-12 years, target 80% of
vehicle finance book) and customer segments such as small fleet operators or first
time buyers. In March 2019, it purchased the vehicle finance portfolio (AUM of
INR36b) of India Infoline Finance.
The company also ventured into affordable housing finance in 2017 and retail housing
finance in 2018. It aims to provide retail housing finance in Tier I geographies, while
affordable housing finance will be offered in Tier II and III geographies.
We believe that these two segments will not only help INDOSTAR scale up its loan
book, but also provide it with much-needed diversification. This, in turn, will help
improve INDOSTAR’s credit rating and enable it to enjoy greater leverage. Vehicle
finance, if executed well, will be a high-RoE scalable business and become a
meaningful PAT contributor in the next 2-3 years.
Recruitment of vehicle
finance executives
previously employed with
peers such as SHTF, CIFC
and SUF
Vehicle Finance – increased focus on used CVs
INDOSTAR intends to focus more on used CVs, particularly in the range of 5-10
years, which are expected to comprise 80% of the segment’s loan book.
The
business is headquartered in Chennai and carried out in 15 states across India.
The
company has recruited executives who were previously employed with its peers
such as Shriram Transport Finance, Cholamandalam Investment and Finance,
Sundaram Finance and Hinduja Leyland Finance.
The company also expects to
leverage its DSA/DMA network and has targeted sourcing 25% of loans through this
network.
As of 9MFY19, INDOSTAR had 142 branches, 1,010 employees and
~16,000 customers.
The business has an outstanding AUM of INR10b.
Exhibit 28: Vehicle Finance – Snapshot
What?
Type of lending
Sourcing
Sourcing strength
Headquarters
Average yield
Average ticket size
Key competitors
Business model
Distribution reach
Underwriting
Description
Largely used CV with 5-12 year vintage
75% In-house, 25% through DSA/DMA
1,000+ employees
Chennai
16-17% IRR - a must for field staff
~INR0.7m
CIFC, SHTF, Equitas
15 states across South, West and North India
Hub and spoke; Separate teams for sourcing, credit and collection
142 branches as of 9MFY19. Additional 161 branches from IIFL acquisition
Power lies with area credit manager, not branch manager; Field officer will be responsible for collection as well
Source: MOFSL, Company
Geographical reach
NBFCs’ market share in
vehicle finance has
increased from 36% to 40%
over the past five years
NBFCs gaining market share from banks in vehicle finance
Vehicle finance has largely been the forte of banks, although NBFCs have been
consistently gaining market share. Our analysis reveals that the market share of
NBFCs in vehicle finance has increased from 36% to 40% in the past five years. In
addition, NBFCs are more prominent in the CV and tractor financing space than in
15
16 April 2019
 Motilal Oswal Financial Services
IndoStar Capital Finance
passenger car financing. Given below are some of the key metrics of NBFCs
operating in the vehicle finance market, along with their FY18 DuPont analysis.
NBFCs gain substantial
market share in vehicle
finance from banks in past
decade
Exhibit 29: NBFCs gain market share in vehicle finance from banks
Market share of NBFCs (%)
30
30
33
36
37
39
38
39
40
26
15
17
26
Source: MOFSL
Exhibit 30: Profile of top vehicle finance players in India
AUM (FY18, INR b)
Disbursements (FY18, INR b)
Top 3 states as % of AUM
Number of branches
Disb/branch (INR m)
AUM/branch (INR m)
SHTF
953
517
TN - 15%,
Kar - 11%,
MH - 10%
1,213
426
786
MMFS
551
268
MH - 18%,
UP - 10%,
MP - 6%
1,284
209
429
CIFC
315
205
MH -13%,
Raj - 9%,
TN - 8%
873
235
361
SUF
247
156
622
251
398
Source: MOFSL, Company
Vehicle finance could be a
2.5-3% RoA business if
executed well
Exhibit 31: DuPont analysis of some of the largest vehicle finance players
FY18 DuPont (%)
Interest Income
Interest Expended
Net Interest Income
Other Income
Net Income
Operating Expenses
Operating Income
Provisions
PBT
Tax
Reported PAT
Leverage
RoE
SHTF
14.0
6.9
7.1
1.8
8.9
1.9
7.0
4.0
3.0
1.0
2.0
6.3
12.7
MMFS
14.4
6.9
7.5
0.5
8.0
3.2
4.8
1.3
3.5
1.3
2.2
5.6
12.5
CIFC
13.9
6.4
7.5
1.0
8.5
3.6
4.9
1.0
4.0
1.4
2.5
7.7
19.5
Source: MOFSL, Company; Note: MMFS and SHTF migrated to 90dpd in FY18
While INDOSTAR has a
strong presence in South
India, IIFL has a strong
presence in West and North
India
IIFL business acquisition gives INDOSTAR a ready platform
Along with an AUM of INR36b, INDOSTAR also gets the branches and employees
of IIFL readily. IIFL has a network of 161 branches, 1,000+ employees and 50,000+
customers. Also, note that while INDOSTAR has a strong presence in South India,
IIFL has a strong presence in West and North India.
Our interaction with
management suggests that this book is profit-making. We believe this is a good deal
for INDOSTAR as the profits from the erstwhile IIFL book would partially offset the
high set-up costs of INDOSTAR’s branch network.
16 April 2019
16
 Motilal Oswal Financial Services
IndoStar Capital Finance
A vehicle finance branch
has average AUM of
INR300m-700m upon
maturity
How big can the Vehicle Finance book become in three years?
With the acquisition of IIFL’s CV business, INDOSTAR’s branch network adds up to
~300 branches.
Over half of these branches are running at sub-optimal capacity –
it would take at least 2-3 years for all these branches to run at full capacity. For a
typical vehicle finance player, the AUM per branch is INR300m-700m.
We look at a
few different possibilities of how much the vehicle finance book can scale up to in a
period of three years.
Exhibit 32: Scenario analysis of size of vehicle finance book three years from now
Scenario 1
Number of branches
AUM/branch (INR m)
Total AUM (INR b)
300
300
90
Scenario 2
300
400
120
Scenario 3
300
500
150
Source: Company
Hence, over the next three years, the vehicle finance book could scale up to
anywhere between INR90b and INR150b. Our estimated loan book of the vehicle
finance business as of FY22E stands at INR133b.
Targeting affordable
housing finance and retail
housing finance
Housing Finance – focusing on affordable as well as mass housing
The Housing Finance segment comprises two business lines: (i) Affordable housing
finance, which commenced operations in September 2017, and (ii) retail housing
finance. The housing finance business is conducted through its wholly-owned
subsidiary, IndoStar Home Finance Private Limited. In retail housing finance,
INDOSTAR is focusing on the self-employed population residing in the outskirts of
urban markets and Tier II locations. This business is a mix of pure home loans as
well as LAP. As of 9MFY19, INDOSTAR had 56 branches with 370 employees and
3,500+ customers in this business. The total AUM of this business was INR4b as of
9MFY19.
Exhibit 33: Housing Finance – a snapshot
What?
Products offered
Sourcing
Team
Number of branches
Ticket size
Target segment
Yields
Description
Affordable housing finance, retail housing finance and LAP
75-80% in-house; 20-25% through DSAs
370 employees
56 branches as of 9MFY19, most of which are co-located with SME/VF
<INR1m in affordable housing finance, INR3m+ in retail housing finance
Focusing primarily on self-employed customers; Offering several surrogate income programs
Affordable housing: 12.5-13%, Retail housing: 10.25-10.5%
Source: MOFSL, Company
16 April 2019
17
 Motilal Oswal Financial Services
IndoStar Capital Finance
Exhibit 34: DuPont analysis of key affordable housing finance players
(FY18, %)
Interest Income
Interest Expended
Net Interest Income
Non-Interest Income
Other Income
Net Income
Operating Expenses
Cost to Income Ratio (%)
Employee Expenses
Other Expenses
Operating Profit
Provisions/write offs
PBT
Tax
Tax Rate (%)
Reported PAT
Leverage
RoE
CanFin
10.19
6.70
3.48
0.39
0.43
3.87
0.59
15.21
0.32
0.35
3.28
0.15
3.13
1.07
34.12
2.06
12.08
24.91
Repco
11.33
6.82
4.51
0.32
0.32
4.83
0.82
17.00
0.51
0.31
4.01
0.70
3.31
1.14
34.42
2.17
7.81
16.93
GRUH
11.44
6.92
4.52
0.45
0.38
4.96
0.73
14.78
0.38
0.35
4.23
0.27
3.96
1.40
35.47
2.55
12.75
32.58
Aavas
12.55
6.03
6.52
1.32
0.71
8.56
3.97
46.43
2.34
1.63
4.58
0.06
4.52
1.56
34.44
2.97
3.77
11.16
Source: MOFSL, Company
16 April 2019
18
 Motilal Oswal Financial Services
IndoStar Capital Finance
Well-diversified liability mix
Adequately capitalized to maintain strong credit rating
INDOSTAR always maintained low leverage which has helped it attain AA- credit
rating despite its promoters lacking a lending business track record.
The company has strong relationships with banks, MFs and other financial
institutions. INDOSTAR has a diversified borrowing mix with a largely equal share of
banks and market borrowings.
Even prior to the liquidity crisis in 2018, it had a policy of ALM matching in sub-one
year bucket. This has held the company in good stead over the past few months. In
addition, the company shored up its liquidity buffer from INR10b in 2QFY19 to INR15b
in 3QFY19. The share of CPs has also been reduced from 26% in FY18 to 10% in
9MFY19.
Reducing dependence on
commercial paper
INDOSTAR has a diversified liability mix comprising bank loans, NCDs and
commercial paper.
While the company has reduced its dependence on bank
borrowings over the past few years (share down from 60% to 46% over FY15-
9MFY19), it has increased the numbers of banks it borrows from.
This helped the
company in 3QFY19 when the capital markets almost dried up for NBFCs. We
expect its share of bank borrowings to increase in the near-term until the liquidity
situation improves.
Exhibit 35: Trend in borrowing mix (%) – dependence on bank borrowings reduced over the
past few years
Banks
12
24
9
24
13
27
NCDs
13
35
21
33
CP & Others
31
25
10
45
64
67
60
52
46
44
FY18
46
9MFY19
FY13
FY14
FY15
FY16
FY17
Source: MOFSL, Company
Exhibit 36: Number of relationships
Banks
MF
Others
Exhibit 37: ALM profile (1HFY18)
58
Cumulative inflow
Cumulative outflow
5,346
4,223
2,676
26
FY17
32
2,581
40
33
19
-
9
-
12
2
16
22
FY15
45
2
18
50
4
20
4
22
6,274
6,274
10
FY13
21
FY14
25
FY16
1HFY18
Upto 1 year
Upto 5 years
> 5 years
Source: MOFSL, Company
Source: MOFSL, Company
16 April 2019
19
 Motilal Oswal Financial Services
IndoStar Capital Finance
Return ratios to improve from FY21
Elevated opex to keep RoE subdued till FY20
From being predominantly a corporate lender, INDOSTAR is expected to witness a
meaningful change in its loan mix over the next three years, with Retail+SME growing
to 77% of its total loans vs. the current 42%, in our view. The company will then have
a balanced mix of retail/wholesale as well as high-RoE/scalable businesses.
The housing finance and vehicle finance businesses are currently loss-making due to
their high start-up expenses. With the scaling up of these businesses, we expect the
overall C/I ratio to improve from 39% in FY18 to 32% in FY22E.
With the increasing share of vehicle finance, we expect credit cost to be higher and
rise to ~1%. All these factors together will result in the RoE improving to 15% by
FY22E as compared to 9% in FY18.
Vehicle finance loan book to
grow to INR130b+ by FY22,
comprising 51% of total
AUM
Loan mix to change meaningfully over the next 2-3 years
With new products taking off coupled with the recent CV book acquisition, we
expect INDOSTAR’s loan book mix to change significantly over the next few years.
We expect the vehicle finance book to grow to INR130b+ by FY22 – making it the
largest segment comprising 51% of total AUM. On the other hand, the corporate
lending book is expected to remain largely stable, while the SME lending book is
likely to grow at ~25% CAGR.
Exhibit 38: Loan mix to change drastically from FY18 (LHS) to FY22 (RHS)
Housing,
1%
SME, 23%
Vehicle,
2%
Vehicle,
51%
Corporate,
23%
SME, 16%
Corporate,
74%
Housing,
10%
Source: MOFSL, Company
Exhibit 39: Corporate Lending book to remain largely stable
Loans outstanding (INR b)
17.2
13.5
12.1
Exhibit 40: Trend in SME Lending
124
Loans outstanding (INR b)
Growth (%)
-0.3
45.9
FY17
45.7
FY18
0.4
45.9
9MFY19
0.2
46.0
FY20E
51.5
FY21E
60.4
FY22E
14.5
FY18
40
20.3
FY19E
31
26.6
FY20E
26
33.5
FY21E
24
41.5
FY22E
Source: MOFSL, Company
Source: MOFSL, Company
16 April 2019
20
 Motilal Oswal Financial Services
IndoStar Capital Finance
Exhibit 41: VF loan book to surpass INR100b by FY21
Vehicle finance loan book (INR b)
Exhibit 42: Housing Finance loan book to scale up to ~INR27b
Housing finance loan book (INR b)
1.3
FY18
50.0
FY19E
76.0
FY20E
103.8
FY21E
132.7
FY22E
0.5
FY18
5.5
FY19E
11.8
FY20E
19.0
FY21E
27.3
FY22E
Source: MOFSL, Company
Source: MOFSL, Company
Share of corporate lending
to decline to 27% by FY22E
from 74% in FY18
Exhibit 43: Loan mix to change meaningfully over the next three years
Corporate lending (%)
-
12.4
0.8
2.1
23.4
SME lending (%)
4.5
41.1
16.7
37.7
FY17
FY18
FY19E
7.4
47.4
16.6
28.7
FY20E
Vehicle finance
9.1
49.9
16.1
24.8
FY21E
Housing
10.4
50.7
15.8
23.1
FY22E
87.6
73.7
Source: MOFSL, Company
NIM to remain largely
stable at 6.7% over the next
two years
Margins to remain largely stable despite spike in cost of funds
Over FY15-18, INDOSTAR did an impressive job of improving its spreads from 2.7%
to 4.2%, despite increasing its SME lending share, which is lower yielding. The
company benefited from a secular decline in cost of funds.
However, post the recent liquidity crisis, the cost of funds trajectory is reversing.
We believe that INDOSTAR will be able to offset this by – (a) Increasing yields across
all products and (b) increasing the share of vehicle finance, which is higher-yielding
Exhibit 44: Spreads increasing consistently
9.7
Interest spread (%)
7.8
7.0
7.2
NIM (%)
7.0
6.6
4.2
Exhibit 45: Trend in net interest margin (NIM)
NIM (%)
7.8
7.0
7.2
7.0
6.6
6.5
6.5
5.6
6.3
1.7
2.1
2.7
3.6
3.6
FY13
FY14
FY15
FY16
FY17
FY18
Source: Company
Source: Company
16 April 2019
21
 Motilal Oswal Financial Services
IndoStar Capital Finance
Average annual cost of
running a vehicle finance
branch stands at INR5-6m
Branch expansion impacts opex in FY18 and FY19; likely to moderate going
forward
Over the past six quarters, the company opened nearly 150 branches in the vehicle
finance business.
Typically, the running cost for a vehicle finance branch is INR5-
6m per year – this implies a breakeven period of 12-15 months for a vehicle
finance branch.
We expect these branches to breakeven in 2HFY20. However, with
the acquisition of IIFL’s CV book, the company already gets a set of branches
running at higher capacity. This will help moderate the overall expense ratio for its
vehicle finance business.
Exhibit 46: Operating expenses to rise sharply over FY18-20 due to branch investments
Operating expenses (INR m)
410
FY15
582
FY16
727
FY17
1,758
FY18
2,415
FY19E
3,960
FY20E
4,752
FY21E
5,703
FY22E
Source: Company
C/I ratio to decline from
39% in FY19 to 32% in FY22
Exhibit 47: Cost-to-income surges in FY18, but expected to decline gradually
Cost-to-income ratio (%)
3.1
2.6
1.5
1.5
Cost-to-avg loans ratio (%)
2.8
2.6
2.4
1.4
15.2
FY15
16.4
FY16
17.8
FY17
39.0
FY18
38.3
FY19E
37.6
FY20E
33.5
FY21E
31.5
FY22E
Source: Company
Credit costs to rise to ~1%
by FY21
Stable asset quality, but SME lending a concern
Over FY14-FY18, INDOSTAR maintained a GNPA ratio of 0.2-1.4% and NNPA
ratio of 0.2-1.2%. Credit costs have historically ranged between 10-25bp due to
strong asset quality.
However, the SME lending book recently witnessed a meaningful spike in its
GNPL ratio from 0.9% in FY17 to 3.2% in 9MFY19. This is a key monitorable for
the management.
Given the asset quality deterioration in its SME lending business, coupled
with an increase in the share of vehicle finance, we expect credit costs to
increase from 0.2% in FY18 to ~1% by FY21.
It must be noted that vehicle
financiers typically have 1.5-2.5% credit costs on a run-rate basis.
16 April 2019
22
 Motilal Oswal Financial Services
IndoStar Capital Finance
Exhibit 48: Segment-wise asset quality trend
Corporate
SME
Vehicle
Housing
3.2
2.1
1.5
0.6
0.9
0.2
FY15
FY16
FY17
FY18
1.1
0.3
0.1 0.1
9MFY19
Source: Company
GNPL ratio to increase to
2.4% by FY22E
Exhibit 49: GNPLs to increase as the book seasons and share of VF increases
GNPL (INR m)
GNPL ratio (%)
2.0
1.4
1.6
1.2
1.1
2.4
0.6
0.2
194
FY15
100
FY16
727
FY17
768
FY18
1,313
FY19E
2,624
FY20E
4,242
FY21E
6,295
FY22E
Source: Company
Exhibit 50: Coverage ratio to improve…
PCR (%)
58
41
20
10
15
17
23
75
Exhibit 51: ..leading to uptick in credit costs
Credit costs (%)
0.7
0.1
0.1
0.1
0.3
0.3
0.9
1.1
-0.2
Source: MOFSL, Company; Note: PCR as defined under IGAAP
Source: MOFSL, Company; Note: FY18 numbers as MOFSL estimates
under Ind-AS
RoA/RoE to improve to
2.4%/15% by FY22
RoE to improve to 15% by FY22 as new branches mature and financial
leverage increases
INDOSTAR has consistently maintained a RoA in excess of 3% over FY13-FY18
(under IGAAP). However, its RoE has remained in the low double-digits as the
leverage on its balance sheet has been low. Additionally, over FY18-19, INDOSTAR
began investing heavily in branch expansion which kept its C/I ratio at elevated
levels. In our view, the company’s C/I ratio will decline gradually as the effect of
operating leverage plays out. This, coupled with increasing leverage, will drive an
improvement in its RoE to ~15% by FY22.
16 April 2019
23
 Motilal Oswal Financial Services
IndoStar Capital Finance
Exhibit 52: Trend in profit after tax
PAT (INR b)
58
39
22
10
1.8
-12
FY18
2.3
FY19E
3.6
FY20E
5.0
FY21E
6.3
FY22E
4.4
FY16
4.1
FY17
2.9
FY18
2.1
FY19E
2.3
FY20E
2.5
FY21E
2.4
FY22E
27
growth (%)
13.6
Exhibit 53: Trend in RoA/RoE
RoA (%)
RoE (%)
13.4
9.2
11.0
8.7
14.7
12.3
2.1
FY17
Source: MOFSL, Company; Note: FY18 onwards, numbers as of Ind-
AS
Source: MOFSL, Company; Note: Ind-AS numbers FY18 onwards
30% Tier I capital ratio;
well-capitalized to sustain
growth over the next three
years
Well-capitalized for the next few years
INDOSTAR’s Tier-I capital ratio stands at 30% and has generally remained north of
30%. However, since credit rating agencies look at leverage from the asset-to-
equity perspective rather than from the CRAR % perspective, we believe that it is
imperative to look at the future trend in assets/equity. In our view, rating agencies
will be comfortable with a leverage of 6-7x if the company’s balance sheet becomes
skewed towards a higher share of retail assets. As per our estimates, INDOSTAR will
achieve a leverage of 6x only in FY22. Hence, until then, the company is well-
capitalized for growth.
Exhibit 55: Comfortable leverage for next three years
Assets/Equity (x)
4.5
3.1
3.0
2.9
3.4
5.2
5.8
6.2
Exhibit 54: Tier-I capital ratio (%)
Tier I ratio
41.1
32.3
33.8
33.4
28.0
30.0
Source: Company
Source: Company
16 April 2019
24
 Motilal Oswal Financial Services
IndoStar Capital Finance
Bull & Bear case
Bull Case
In our bull case, we assume the total AUM to grow to INR297b by FY22 (vs
INR262 in the base case)
Margins would increase 160bp over FY19-22 to 7.2%.
We expect significant cost control, with the cost-to-income ratio declining to
28% by FY22 as compared to 32% in our base case.
This translates into a PAT of INR8.3b by FY22 resulting in RoA/RoE of 2.9%/18%.
Based on the above assumptions, we value the stock at INR772 (2.0x FY20E
BVPS) – an upside of 91%.
Bear Case
In our bear case, we expect the total AUM to grow to INR210b by FY22 (vs
INR262b in the base case)
We expect margins to improve only 70bp over FY19-22 to 6.3%.
Cost-to-income ratio is likely to increase to 42% by FY22 as compared to 32% in
our base case.
Asset quality is likely to worsen with GNPL ratio of 3.2% by FY22 vs 2.4% in our
base case
This translates into a PAT of INR2.8b by FY22, with RoA/RoE of 1.3%/7.4%
Based on the above assumptions, we value the stock at INR294 (0.8x FY20E
BVPS) - a downside of 27%.
Exhibit 56: Scenario analysis – Bull case
Bull Case
Total Income
Opex
Provisions
PBT
PAT
NIM (%)
RoA (%)
RoE (%)
EPS
BV
Target multiple (FY20E)
Target price (INR)
Upside (%)
FY20E
12,240
4,220
1,056
6,964
4,457
7.3
2.8
13.6
48.9
386
2.0
772
91%
FY21E
16,817
5,064
1,808
9,945
6,365
7.3
3.0
16.6
69.8
458
FY22E
21,952
6,077
2,903
12,972
8,302
7.2
2.9
18.1
91.1
549
Exhibit 57: Scenario analysis – Bear case
Bear Case
Total Income
Opex
Provisions
PBT
PAT
NIM (%)
RoA (%)
RoE (%)
EPS
BV
Target multiple (FY20E)
Target price (INR)
Upside (%)
FY20E
10,055
4,220
1,431
4,405
2,819
6.4
1.9
8.8
30.9
368
0.8
294
-27%
FY21E
12,207
5,064
2,525
4,618
2,956
6.4
1.6
8.4
32.4
403
FY22E
14,475
6,077
3,994
4,405
2,819
6.3
1.3
7.4
30.9
433
Source: Company, MOFSL
16 April 2019
25
 Motilal Oswal Financial Services
IndoStar Capital Finance
Key risks
Large wholesale book
Around 58% of the loan book comprises wholesale lending. While its asset quality
has remained healthy so far, even a few accounts slipping into NPL could worsen
the company’s asset quality as a whole.
Increasing GNPL ratio in SME lending
Over the past four quarters, asset quality in the SME lending book worsened – the
GNPL/NNPL ratio increased from 2.5%/2.2% to 3.2%/2.3%. While the company
recently got the license to use SAFAESI, one has to wait and see how the recovery
pans out over the near term.
Dependence on external sourcing partners
INDOSTAR is dependent on external sourcing partners for all its three retail
segments – SME Finance, Housing Finance, and Vehicle Finance. This would not
only be more expensive but also be prone to higher levels of churn, as witnessed in
the housing finance industry.
Downturn in the CV cycle
INDOSTAR is betting strongly on the vehicle finance segment. The company has
invested in opening nearly 150 branches and has also purchased IIFL’s CV book.
However, recent CV sales numbers have not been very encouraging and a
continuation of this trend could lead to subdued profitability for the company.
16 April 2019
26
 Motilal Oswal Financial Services
IndoStar Capital Finance
Initiate coverage with a Buy rating
Favorable risk-reward
INDOSTAR has a strong track record of growth with quality. Given its adequate
capital, focus on qualitative growth and business diversification (unlike other
monoline businesses), we believe that INDOSTAR is improving the quality of its
business.
While the company’s near-term RoE is expected to be at 9-11%, it does not fully
factor in the long-term business profitability. In the medium-term, we expect the RoE
to rise to 13-15% (with the effects of operating leverage and efficiency kicking in)
while the long-term, sustainable RoE is likely to be 16%.
INDOSTAR’s employees will hold a 10%+ stake on a fully diluted basis in the company
through ESOPs – this should ensure retention of talent and alignment of employee
and shareholder interests.
In the near term, strong growth and successful execution of business strategy will
drive re-rating. Over the longer-term, the re-rating will be driven by an improvement
in the company’s RoE.
We believe current valuations of 1.1x PBV FY20, INDOSTAR offers an attractive risk
reward ratio. We initiate coverage with an RI-based target price of INR525 (1.2x FY21
BV). Our key assumptions are - RF of 7.5%, Beta of 1.1x and Risk premium of 5%. We
have used a three-stage growth model with very high growth rates until FY23,
followed by a moderation in growth rates and a terminal rate of 6%.
Exhibit 58: DuPont Analysis
%
Interest Income
Interest Expended
Net Interest Income
Fee Income
Other Income
Net Income
Operating Expenses
Operating Income
Provisions
PBT
Tax
Reported PAT
Leverage
RoE
2015
13.05
7.21
5.84
1.68
0.03
7.55
1.15
6.41
0.08
6.32
2.15
4.17
2.95
12.31
2016
13.00
6.66
6.34
1.83
0.00
8.17
1.34
6.83
0.08
6.75
2.34
4.41
3.07
13.56
2017
12.64
6.13
6.52
1.48
0.02
8.02
1.43
6.59
0.24
6.35
2.20
4.14
2.97
12.30
2018
11.00
5.09
5.91
1.00
0.15
7.06
2.75
4.31
-0.21
4.52
1.63
2.89
3.18
9.17
2019E
9.97
5.14
4.84
0.78
0.28
5.91
2.30
3.61
0.30
3.30
1.22
2.08
4.07
8.47
2020E
13.11
7.12
5.99
0.81
0.19
6.99
2.68
4.31
0.64
3.67
1.32
2.35
4.86
11.41
2021E
13.42
7.27
6.14
0.91
0.18
7.23
2.50
4.73
0.82
3.91
1.41
2.50
5.46
13.65
2022E
13.57
7.44
6.14
0.91
0.17
7.22
2.37
4.86
1.00
3.86
1.39
2.47
5.99
14.79
Source: MOFSL, Company
16 April 2019
27
 Motilal Oswal Financial Services
IndoStar Capital Finance
Company overview
Founded and promoted by Everstone Capital
AA- long term rating by
CARE and India Ratings
Indostar Capital Finance (INDOSTAR) is a systemically important, non-deposit-taking
NBFC in India. The company was founded by Everstone Capital, which infused
INR9b as equity capital on Day-1. In June 2018, INDOSTAR came out with an IPO of
INR18.4b (6.8x subscribed), out of which INR7b was fresh issue and the balance was
OFS. The company operates in four business lines – corporate lending, SME lending,
vehicle finance, and housing finance. It has two subsidiaries, IndoStar Asset
Advisory Pvt. Ltd. and IndoStar Housing Finance Ltd. Its long-term debt is presently
rated CARE AA- Stable and IND AA-/Stable.
Exhibit 59: Company history
Year
2011
2012
2014
2015
2017
2017
2018
2019
Milestone
Received investment from Indostar Capital, Mauritius. Commenced wholesale
finance
Received AA- credit rating from CARE
PAT crossed INR1b mark
Commenced SME finance
Mr. R. Sridhar appointed as Vice-Chairman & CEO
Commenced vehicle finance and affordable housing finance
Commenced retail housing finance
Acquired IIFL’s CV financing business
Source: MOFSL, Company
Shareholding pattern
INDOSTAR is majority-owned by Indostar Capital, Mauritius (ICM), which in turn, is
owned by Indostar Everstone (42.54%) and other investors. The promoters’ stake of
~59% in the company is locked in for one year and 20% is locked in for three years.
Exhibit 60: Shareholding pattern (%)
Promoter
- Indostar Capital
- Everstone Capital Partners II LLC
Banks/MFs/FIs
FPI
Others
Total
58.3
57.1
1.2
9.3
13.1
19.3
100.0
Source: MOFSL, Company
Some mutually-agreed upon terms among IndoStar Capital’s (parent)
shareholders
Up to 39 months from the date of allotment, a share sale can take place only
via a block trade and there has to be a six-month gap after every trade.
Post 39 months (August 2021), a stake sale can take place only after providing
an advance notice of 90 days.
16 April 2019
28
 Motilal Oswal Financial Services
IndoStar Capital Finance
Key Management Personnel
Brief profiles of the Board of Directors and Key Management Personnel:
Dhanpal Jhaveri, Chairman
Mr. Dhanpal Jhaveri, aged 49 years, is the Chairman and Non-Executive Director,
and has been associated with the company as Director since September 2, 2010. He
holds a Bachelor‘s Degree in Commerce from the University of Mumbai and a
Master’s Degree in Business Administration from Babson College. He has several
years of experience in the fields of investing, corporate strategy, mergers and
acquisitions, and investment banking. He has previously worked with Vedanta
Group, ICICI Securities and Finance Company Limited, KPMG India Private Limited,
and Everstone Capital Advisors Private Limited.
R Sridhar, Vice Chairman & CEO
Mr. R Sridhar, aged 59 years, is the Executive Vice Chairman and Chief Executive
Officer, and has been associated with the company as Director since April 18, 2017.
He has previously been associated with various entities forming part of the Shriram
Group and held the position of Managing Director at Shriram Transport Finance
Company Limited. He holds a Bachelor’s degree in Science from the University of
Madras and is a Chartered Accountant from the Institute of Chartered Accountants
of India.
Shailesh
Shirali,
Managing Director, Head – Corporate Lending and Markets
Mr. Shailesh Shirali, aged 48 years, is Managing Director and Head – Corporate
Lending and Markets since November 5, 2012. He has several years of experience in
the financial services sector and has previously worked at Future Capital Holdings.
He holds a Bachelor’s degree in Commerce from the University of Mumbai and is a
Chartered Accountant from the Institute of Chartered Accountants of India.
Pankaj
Thapar,
Chief Financial Officer
Mr. Pankaj Thapar, aged 56 years, is the Chief Financial Officer and has been
associated with the company since November 1, 2011. He has more than 30 years
of experience in various fields with Indian and international entities, such as
Everstone Capital, Dentsu Marcom Private Limited, Coca-Cola India, ANZ Grindlays
Bank, Citibank India, and ICICI. He holds a Bachelor’s degree in Commerce and a
Master’s Degree in Business Administration from the University of Delhi.
Prashant Joshi, Chief Operating Officer
Mr. Prashant Joshi, aged 46 years, is the Chief Operating Officer and has been
associated with the company since August 1, 2016. He has over 20 years of
experience across small and medium enterprises, and corporate banking. He has
held senior positions at Deutsche Bank AG, Standard Chartered Bank, IDBI Bank,
and ICICI. He holds a Bachelor’s degree in Commerce from the University of
Bombay and a Master’s Degree in Business Administration from the Indian Institute
of Management Calcutta.
16 April 2019
29
 Motilal Oswal Financial Services
IndoStar Capital Finance
Exhibit 61: Organizational structure
Source: Company
16 April 2019
30
 Motilal Oswal Financial Services
IndoStar Capital Finance
Financials and Valuation
Income Statement
Y/E March
Interest Income
Interest Expended
Net Interest Income
Change (%)
Fee Income
Other Income
Net Income
Change (%)
Operating Expenses
Operating Income
Change (%)
Provisions and W/Offs
PBT
Tax
Tax Rate (%)
PAT
Change (%)
Proposed Dividend (Incl Tax)
2015
4,667
2,579
2,087
22.6
602
12
2,701
31.8
410
2,291
34.3
30
2,260
770
34.1
1,490
32.9
0
2016
5,644
2,893
2,751
31.8
796
1
3,548
31.3
582
2,966
29.5
34
2,932
1,016
34.6
1,916
28.6
0
2017
6,436
3,118
3,317
20.6
756
8
4,081
15.0
727
3,354
13.1
123
3,230
1,122
34.7
2,108
10.0
0
2018
7,031
3,255
3,776
13.8
637
99
4,512
10.6
1,758
2,754
-17.9
-133
2,887
1,042
36.1
1,845
-12.5
0
2019E
10,551
5,418
5,133
35.9
827
350
6,310
39.9
2,415
3,895
41.4
319
3,575
1,323
37.0
2,253
22.1
0
2020E
20,263
11,346
8,917
73.7
1,270
350
10,537
67.0
3,960
6,577
68.9
1,001
5,576
2,007
36.0
3,569
58.4
0
(INR Million)
2021E
26,614
14,709
11,905
33.5
1,841
420
14,166
34.4
4,752
9,414
43.1
1,663
7,751
2,791
36.0
4,961
39.0
0
2022E
34,104
18,877
15,227
27.9
2,348
504
18,079
27.6
5,703
12,376
31.5
2,564
9,812
3,532
36.0
6,279
26.6
0
Balance Sheet
Y/E March
Equity Share Capital
Reserves & Surplus
Net Worth
Borrowings
Change (%)
Other liabilities
Total Liabilities
Investments
Change (%)
Loans and Advances
Change (%)
Net Fixed Assets
Other Assets
Total Assets
E: MOFSL Estimates
2015
683
12,169
12,852
25,738
35.6
1,327
39,916
546
-10.3
33,858
31.2
9
5,503
39,916
2016
734
14,684
15,418
30,009
16.6
1,506
46,933
0
-100.0
42,779
26.3
38
4,117
46,933
2017
784
18,084
18,868
33,733
12.4
2,287
54,888
1,870
N.A
51,549
20.5
88
1,381
54,888
2018
787
20,584
21,371
48,228
43.0
3,365
72,964
7,931
324.2
62,073
20.4
616
2,344
72,964
2019E
911
29,629
30,540
103,478
114.6
4,038
138,056
8,724
10.0
121,738
96.1
923
6,670
138,056
2020E
911
33,437
34,348
137,925
33.3
4,846
177,119
8,724
0.0
160,378
31.7
1,385
6,632
177,119
(INR Million)
2021E
911
38,588
39,499
181,838
31.8
5,815
227,152
8,724
0.0
207,815
29.6
2,078
8,535
227,152
2022E
911
44,867
45,779
233,041
28.2
6,978
285,797
8,724
0.0
261,844
26.0
3,116
12,113
285,797
Note: FY18 numbers have been restated by MOFSL under Ind-AS as per our best estimates.
16 April 2019
31
 Motilal Oswal Financial Services
IndoStar Capital Finance
Financials and Valuation
AUM Details
Y/E March
AUM (INR Bn)
AUM Mix
Corporate
Retail
SME
Vehicle
Housing
2015
34
99.8
0.2
0.2
0.0
0.0
2016
43
94.8
5.2
5.2
0.0
0.0
2017
52
87.6
12.4
12.4
0.0
0.0
2018
62
73.7
26.3
23.4
2.1
0.8
2019E
122
37.7
62.3
16.7
41.1
4.5
2020E
160
28.7
71.3
16.6
47.4
7.4
(INR Million)
2021E
208
24.8
75.2
16.1
49.9
9.1
2022E
262
23.1
76.9
15.8
50.7
10.4
Ratios
Y/E March
Spreads Analysis (%)
Yield on Portfolio
Cost of Borrowings
Interest Spread
Net Interest Margin
Profitability Ratios (%)
RoE
RoA (on balance sheet)
Debt: Equity (x)
Average Leverage (x)
Efficiency Ratios (%)
Int. Expended/Int.Earned
Op. Exps./Net Income
Empl. Cost/Op. Exps.
Fee income/Net Income
Asset quality
GNPA
NNPA
GNPA %
NNPA %
PCR %
2015
14.2
11.5
2.7
7.0
2016
13.9
10.4
3.6
7.2
2017
13.4
9.8
3.6
7.0
2018
12.1
7.9
4.2
6.6
2019E
11.3
9.7
1.6
5.6
2020E
14.2
9.4
4.8
6.3
2021E
14.3
9.2
5.1
6.5
2022E
14.4
9.1
5.3
6.5
12.3
4.2
2.0
3.0
13.6
4.4
1.9
3.1
12.3
4.1
1.8
3.0
9.2
2.9
2.3
3.2
8.7
2.1
3.4
4.1
11.0
2.3
4.0
4.9
13.4
2.5
4.6
5.5
14.7
2.4
5.1
6.0
55.3
15.2
68.4
22.3
51.3
16.4
67.8
22.4
48.5
17.8
66.3
18.5
46.3
39.0
60.6
14.1
51.3
38.3
60.4
13.1
56.0
37.6
58.9
12.0
55.3
33.5
58.9
13.0
55.4
31.5
58.9
13.0
194
175
0.6
0.5
10.0
100
80
0.2
0.2
20.0
727
620
1.4
1.2
14.8
768
640
1.2
1.0
16.7
1,313
1,006
1.1
0.8
23.4
2,624
1,544
1.6
1.0
41.1
4,242
1,780
2.0
0.9
58.0
6,295
1,604
2.4
0.6
74.5
Valuation
Book Value (INR)
BV Growth (%)
Price-BV (x)
EPS (INR)
EPS Growth (%)
Price-Earnings (x)
Dividend per share
Dividend Yield (%)
E: MOFSL Estimates
188.1
13.2
21.8
32.9
0.0
210.2
11.7
26.1
19.8
0.0
240.8
14.6
26.9
3.0
0.0
271.6
12.8
1.5
23.4
-12.9
17.5
0.0
0.0
335.1
23.4
1.2
24.7
5.4
16.6
0.0
0.0
376.9
12.5
1.1
39.2
58.4
10.5
0.0
0.0
433.4
15.0
0.9
54.4
39.0
7.6
0.0
0.0
502.3
15.9
0.8
68.9
26.6
6.0
0.0
0.0
16 April 2019
32
 Motilal Oswal Financial Services
REPORT GALLERY
RECENT INITIATING COVERAGE REPORTS
.
Rs
 Motilal Oswal Financial Services
Explanation of Investment Rating
Investment Rating
BUY
SELL
NEUTRAL
UNDER REVIEW
NOT RATED
*
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.
Disclosures:
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
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
IndoStar Capital Finance
Motilal Oswal Securities Ltd. (MOSL)
*
is a SEBI Registered Research Analyst having registration no. INH000000412. MOSL, the Research Entity (RE) as defined in the Regulations, is engaged in the business of providing Stock broking services,
Investment Advisory Services, Depository participant services & distribution of various financial products. MOSL is a subsidiary company of Motilal Oswal Financial Service Ltd. (MOFSL). MOFSL is a listed public company, the details in respect of
which are available on
www.motilaloswal.com.
MOSL is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock Exchange of India Ltd. (NSE) and BSE Limited (BSE), Multi Commodity
Exchange of India (MCX) & National Commodity & Derivatives Exchange Ltd. (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) & National Securities Depository Limited (NSDL) and is
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MOSL, it’s associates, Research Analyst or their relative may have any financial interest in the subject company. MOSL and/or its associates and/or Research Analyst may have actual/beneficial ownership of 1% or more securities in the subject
company at the end of the month immediately preceding the date of publication of the Research Report.
MOSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short
position in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in
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there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
Research Analyst may have served as director/officer, etc. in the subject company in the last 12 month period. MOSL and/or its associates may
have received any compensation from the subject company in the past 12 months.
In the last 12 months period ending on the last day of the month immediately preceding the date of publication of this research report, MOSL or any of its associates may have:
a)
managed or co-managed public offering of securities from subject company of this research report,
b)
received compensation for investment banking or merchant banking or brokerage services from subject company of this research report,
c)
received compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company of this research report.
d)
Subject Company may have been a client of MOSL or its associates during twelve months preceding the date of distribution of the research report.
MOSL and it’s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report. To enhance transparency, MOSL has incorporated a Disclosure of Interest Statement in
this document. This should, however, not be treated as endorsement of the views expressed in the report. MOSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result,
the recipients of this report should be aware that MOSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant banking, investment banking or
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This report has been prepared by MOSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be altered in any way, transmitted to, copied or distributed, in part
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Research Analyst views on Subject Company may vary based on Fundamental research and Technical Research. Proprietary trading desk of MOSL or
its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOSL research activity and therefore it can have an independent view with regards to subject company for which Research Team have
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For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities and Futures Commission (SFC) pursuant to the Securities
and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong)
Private Limited for distribution of research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only
available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from
registration. The Indian Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOSL is not a registered
investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption
under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional
Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional
investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule
15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S.,
MOSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of
this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and therefore, may not be subject
to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets services license and an exempt financial adviser in Singapore,
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.:022-38281085.
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
IndoStar Capital Finance
No
15 April 2019
34