Thematic
September 2015
Good-to-Great
Trideep Bhattacharya (Trideep.Bhattacharya@MotilalOswal.com);
+91 22 3982 5584

Thematic | Good-to-Great
Contents
Investment Framework: Static & Dynamic Value
The Static and Dynamic Value Framework
The theme: Good-to-Great
Applying Good-to-Great theme to our Framework
Static Value Applications
Dynamic Value Applications
Annexure I: Static Value Picks
Annexure II: Dynamic Value Picks
Annexure III: The Backtest
3
4
12
15
17
22
28
45
74
Investors are advised to refer through disclosures made at the end of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
September 2015
2

Thematic | Good-to-Great
Good-to-Great
Investment Framework: Static & Dynamic Value
Identifying companies migrating from Good-to-Great
In this report, we introduce our proprietary Static and Dynamic Value framework of
investing and use the Good-to-Great theme to identify the top large capitalization
investment opportunities within our coverage universe.
Our studies indicate that combining our framework and the Good-to-Great theme has
generated 1,500%+ outperformance over three years in Static Value stocks and ~500%
outperformance over 10 years in Dynamic Value stocks.
The Framework: Static and Dynamic Value
Our Static and Dynamic Value framework of investing finds academic support from
the residual income model and revolves around the central concept of Intrinsic
Value (IV). While Static Value hinges upon deep discount to IV, Dynamic Value is
driven by growth in IV.
Using a set of quantitative filters on our coverage universe that reflect the
characteristics of static and dynamic value, we arrive at the shortlist of attractive
stocks.
The theme: Good-to-Great
We adapt Jim Collins’ ‘Good-to-Great’ theme to Indian equities to identify
businesses that have used the economic downturn over the last 2-3 years to
transform themselves from ‘good’ to ‘great’. We believe these businesses could
reap disproportionate benefits in an economic up-cycle.
We apply this theme to narrow down our shortlist to top attractive investment
opportunities.
Our top Static Value picks:
From our coverage universe, our top static value picks
are Tata Motors, IOCL, ICICI Bank and IDFC.
Our top Dynamic Value picks:
Within our coverage universe, our top Dynamic
Value picks are Maruti Suzuki, Larsen & Toubro, Ultratech Cement, Zee
Entertainment, IndusInd Bank, ITC and United Spirits.
September 2015
3

Thematic | Good-to-Great
The Static and Dynamic Value Framework
The theory
To illustrate the Static and Dynamic Value framework, we start with the concept of
‘margin of safety’.
"A margin of safety is achieved when securities are purchased at prices sufficiently
below underlying value to allow for human error, bad luck, or extreme volatility in a
complex, unpredictable and rapidly changing world."
-
Seth Klarman
‘Margin of safety’ is the key to investment returns on a stock. From an investment
point of view, narrowing of price discount to underlying value or Intrinsic Value of
the stock leads to superior investment returns.
Hence, estimating Intrinsic Value is a core area of analysis. Intrinsic Value is defined
as net present value of cash flows of a firm available to equity investors. While
Intrinsic Value is central to find attractive stocks, it is subjective, as it is highly
dependent on analyst assumptions.
“Intrinsic value is an all-important concept that offers the only logical approach to
evaluating the relative attractiveness of investments and businesses. Intrinsic value
can be defined simply: It is the discounted value of the cash that can be taken out of
a business during its remaining life.
The calculation of intrinsic value, though, is not so simple. As our definition suggests,
intrinsic value is an estimate rather than a precise figure, and it is additionally an
estimate that must be changed if interest rates move or forecasts of future cash
flows are revised. Two people looking at the same set of facts, moreover – and this
would apply even to Charlie and me – will almost inevitably come up with at least
slightly different intrinsic value figures.”
-
Warren Buffett (Berkshire Hathaway’s 2014 Annual Report, page 123)
Of various approaches to estimate Intrinsic Value, we prefer the residual income
model. This is mainly due to its relatively low dependence on future assumptions
compared with other approaches like DCF. We reclassify the two key elements of
intrinsic value from residual income model as highlighted below:
Intrinsic Value (IV) = Static Value + Dynamic Value
Wherein,
Static Value = Starting Book Value + Terminal Value, and
(������������
����
− ����)
���������������������������� �������������������� = �
����
����
(���� + ����)
����
����−����
����=����
September 2015
4

Thematic | Good-to-Great
Academic Derivation: Static & Dynamic Value
As per our Residual Income model,
����−1
����=1
(������������
����
− ����)
��������
����
������������������������������������ ��������������������, �������� = ����
����
+ �
����
����
+ �
(1 + ����)
����
(1 + ����)
����
∞
������������ − ����
������������������������ �������������������� = ����
����
+ �
� ����
����
���� − ����
���������������������������� �������������������� = �
����=����
����−����
Where,
B
= Book Value (at time = m)
RI
t
= Residual Income (at time = t)
r
= Cost of Capital
=
����
����
+
�
����=����
����−����
(������������
����
− ����)
������������ − ����
����
����
+
�
�
����
����
(���� + ����)
����
���� − ����
����=����
Intrinsic Value = Static Value + Dynamic Value
(������������
����
− ����)
����
����
(���� + ����)
����
As Warren Buffett says in the annual report:
“Our long-term economic goal (subject to some qualifications later) is to maximize
Berskshire’s annual rate of gain in intrinsic business value on a per-share basis.”
In the context our framework, he is pointing to his intention to grow the Dynamic
Value of Berkshire Hathaway over time. More specifically, the characteristics of the
two groups as defined above are:
(a)
Static Value:
This component of the equation is relatively stable over time and is
easier to calculate for a stock. For purposes of our analysis, we have used our in-
house calculation of IV as a proxy for the same.
(b)
Dynamic Value:
This component of the equation varies over time, is more
subjective and derives from growth in Intrinsic Value of the firm.
Static Value: From an investor perspective
Static Value is typically created by a negative stock/sector/market specific event,
which leads to indiscriminate selling, thus creating a steep valuation discount
compared to its Intrinsic Value.
While industry dynamics may not be in their favor over the long term, as investors,
we can look to capitalize on this anomaly, as the sequence of negative events
normalizes over a period of time.
September 2015
5

Thematic | Good-to-Great
Case Study 1: State Bank of India
For example, in mid-2013, as the rate-rise scare hit equity markets globally, Indian
banking stocks, particularly, State Bank of India (SBIN) corrected about 40% over 3-4
months, creating Static Value. A reasonably well-timed purchase decision would
have led to strong gains over the next 6-9 months, as the stock bounced back by
about 70% during this period.
It is worth noting that the long-term business dynamics are not in favor of Indian
public sector (PSU) banks, as they are likely to lose market share to private sector
banks. In the context of our framework, we would say that we do not expect the
Intrinsic Value to grow over time.
Exhibit 1:
State Bank of India – price performance
340
280
220
160
100
Source: MOSL, Company
Case Study 2: Bharti Airtel
During November 2014-March 2015, the stock corrected by ~20% from the peak, led
by concerns on the spectrum auction scheduled in March 2015. Despite overbidding
in the spectrum auction, the stock price rallied back by March 25, 2015, when the
spectrum auction concluded.
Exhibit 2:
Bharti Airtel – price performance
460
420
380
340
300
Concerns on Spectrum Auction
Auction concludes
March 25th
Auction
starts
March
4th
Source: MOSL, Company
September 2015
6

Thematic | Good-to-Great
Case Study 3: BATA
The stock had fallen 24% in the short-term, driven by supply chain issues due to
migration to SAP in March 2015 quarter, thus creating Static Value. BATA resolved
these issues in the subsequent quarter, leading to a rebound in sales growth as well
as share-price performance of about 30% over the following months. This is also
adequately captured in Exhibit 3.
Exhibit 3:
Bata – price performance
Supply chain issues led to loss of
sales
Bata
Supply chain issues were
resolved and growth recovered
1,250
1,150
1,050
950
Source: MOSL, Company
Case Study 4: Tata Steel
Tata Steel’s stock-price almost halved during 1H CY13 due to negative events like
weak Indian steel prices and overall under-performance of the Indian stock market
on fiscal/current account deficit concerns, thus creating static value. However, the
stock doubled over the next 6-9 months as the extremely severe macro-fears didn’t
materialize by 2H2013. The share-price chart highlighted below captures this time-
frame adequately.
Exhibit 4:
Tata Steel – price performance
640
490
340
190
Weak steel prices and
Indian stock market
under-performance
Slight recovery in global steel demand
and INR depreciation created a window
for export opportunities and pricing
power Indian market.
Source: MOSL, Company
Dynamic Value: From an investor perspective
As seen from the equation, Dynamic Value is typically created by a company that
generates higher returns on capital employed / equity (RoCE / RoE) than the cost of
capital and is able to grow by reinvesting its earnings to generate higher incremental
returns.
As a corollary, Dynamic Value is typically associated in businesses wherein the
industry attractiveness is high in the form of under-penetrated markets or a
favorable market structure. Also, it is particularly advantageous for companies with
an industry leading position to capitalize on the industry dynamics.
September 2015
7

Thematic | Good-to-Great
Case Study 1: HDFC Bank
For example, we expect 18%+ CAGR in banking industry loans over the medium
term, driven by industry tailwind of low credit penetration of 52% versus 90% in
other emerging markets. With its strong positioning amongst private sector banks,
HDFC Bank has leveraged its position to create strong Dynamic Value for investors
over the last 10 years as shown in Exhibit 6.
Exhibit 5:
Aggressive expansion into India’s hinterland led to
doubling of savings deposit m/s over last decade
HDFCB Savings Dep. Market Share (%)
4.8 4.9
4.3 4.6
4.1
5.2
Exhibit 6:
HDFCB - 25% CAGR returns over FY05-15
1000
750
500
250
0
392
HDFC Bank
Sensex-Rebased
900
2.0
2.4
2.8 2.9
3.2
3.6
Source: Company, MOSL
Source: Company, MOSL
Case Study 2: Amara Raja Batteries
Amara Raja Batteries has created dynamic value by being a successful challenger to
the incumbent, Exide since 2000. In this process, AMRJ has garnered 38% share of
OEM market and 28% share of the after-market, mainly through technological
innovations, witty advertising, and unique franchisee-based distribution model
supported with competitive pricing. This led to improving margins and strong stock-
price performance over long-term as shown in Exhibit below.
Exhibit 7:
EBITDA margin to expand from 16.8% in FY15
to 19.2% by FY17 on back of lower commodity prices
EBITDA Margins (%)
19.2
17.9
16.3
14.6
FY11
15.2
14.4
FY12
FY13
FY14
FY15
FY16E
FY17E
Source: Company, MOSL
16.8
Exhibit 8:
Stock generated return of 84% CAGR over
FY11-FY15
1400
1200
1000
800
600
400
200
0
151
Amara Raja Batt.
Nifty
1184
Source: Company, MOSL
Case Study 3: Emami
Emami has created dynamic value over long-term by gaining market-share in niche
and under-penetrated categories through innovations, coupled with aggressive
advertising and promotion strategy. This has resulted in an meaningful
improvement in ROE from 23% to 45% over the last 8 years as shown in exhibit
below. The subsequent stock-price performance is also highlighted below.
September 2015
8

Thematic | Good-to-Great
Exhibit 9:
Consistently improving RoE (%)
Emami's RoE (%)
42.4
35.8
31.1
23.3
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Source: Company, MOSL
38.8
34.8
37.1
47.1
44.9
Exhibit 10:
Performance of Emami v/s Sensex
2550
2050
1550
1050
550
50
226
Emami
Sensex
2105
Source: Company, MOSL
Case Study 4: Lupin
Lupin has created dynamic value over longer-term by improving its product mix
from lower margin API revenue stream towards higher margin revenue streams.
This has resulted in an improvement in its RoE from 13% to 26.1% over the last
decade. Subsequently, the stock has out-performed the benchmark meaningfully
over the last 10 years as highlighted in the exhibit 11.
Exhibit 11:
Outperformance of LPC vs. Sensex
LPC (Price index)
Sensex (Price Index)
2479
17.2 18.6 17.8 17.3
14.6 16.1
13.3
21.3
Exhibit 12:
Superior RoEs over time
RoE (%)
24.2
26.1
100
433
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Source: IMS, MOSL
Source: IMS, MOSL
September 2015
9

Thematic | Good-to-Great
From theory to practice: The shortlist
With the above background, we looked through our coverage universe to find
investment opportunities that score high on Static Value or on Dynamic Value. A few
observations on Static and Dynamic Value from a practical viewpoint:
(a) Stocks with high Static Value are ones with high valuation discount, while
underlying business may not necessarily have favorable dynamics over the
medium term.
(b) Stocks with high Dynamic Value are ones, wherein returns classified as RoE or
RoCE are higher than cost of capital and are on an upward slope over time.
With the above objective in mind, we set out quantitative filters to get to the right
catchment area for static and dynamic value stocks within our coverage universe, as
highlighted in exhibit below.
Exhibit 13: THE THEME APPLIED TO OUR FRAMEWORK
STATIC VALUE
213
cos
213
cos
DYNAMIC VALUE
MCAP > USD2.5b
Focus: High discount to IV
IV gr.: Not necessarily High
94 cos
Discount to IV >=30%
Weak relative stock performance
20 cos
94 cos
MCAP > USD2.5b
MARGIN OF SAFETY
Narrow discount to IV
Focus: High IV growth
RoCE/WACC>1 for each 5 years
RoE/COE>1 for each 5 years
QUANTITATIVE FILTER
40 cos
As a result of this exercise, we narrow down our coverage universe of 213
companies to a shortlist of about 60 companies with the following characteristics:
(a)
Static Value shortlist:
The shortlist of stocks with high Static Value comprises of
about 20 companies that satisfy our screening criteria of meaningfully high
discount of 30% to our estimate of Intrinsic Value, trading at valuation discount
to their history, and have suffered weak stock performance in the past.
(b)
Dynamic Value shortlist:
The shortlist of stocks with high Dynamic Value
comprises of about 40 companies that satisfy our screening criteria of strong
industry dynamics and high returns on capital over each of the last five years.
We reckon that high returns on capital over meaningfully long-period brings out
strong company positioning and lessens the impact of economic cycle.
September 2015
10

Thematic | Good-to-Great
How are the characteristics of Static & Dynamic Value stocks different?
As elaborated in the previous sections, the characteristics of the stocks in each of
the categories are material different from each other. A brief summary of such
differences in encapsulated in the exhibit below:
Exhibit 14:
Comparison of Static Value and Dynamic Value stocks on valuation, growth and return parameters
P/B (x)
FY15 FY16E FY17E
Static Value stocks
Dynamic Value stocks
1.2
6.7
1.1
5.6
1.0
5.0
P/E (x)
FY15 FY16E FY17E
10.5 8.4
31.4 26.7
7.7
21.4
EPS growth (%)
FY15 FY16E FY17E
(3.6) 13.3
10.0 22.4
16.5
24.3
ROE (%)
FY15 FY16E FY17E
13.0
22.3
14.8
24.9
15.7
25.3
ROCE/ROA (%)
FY15 FY16E FY17E
7.2
7.6
8.2
19.8 23.2 26.3
Source: MOSL, company
As seen above, the contrasting features are clearly visible between Static Value and
Dynamic Value stocks. For example:
The static value stocks have material valuation discount…..
a) The median FY17E P/B(x) of Static Value stocks is nearly one-fifth that of
Dynamic Value stocks.
b) Also, median FY17E P/E(x) for Static Value stocks is nearly one-third of Dynamic
Value stocks, clearly indicating that Static Value stocks trade at deep discount.
c) Also, static Value stocks under our coverage offer ~50% target price upside
compared with ~20% in case of Dynamic Value stocks.
….While dynamic value stocks have materially higher growth and returns
d) Similarly, Dynamic Value stocks have much higher growth forecasts and return
ratios as visible in median FY17E EPS growth differential of almost 800bps.
e) Also, the return ratios of dynamic value stocks are materially higher, namely,
1,000bps in the case of RoE and 2,000bps in the case of RoCE.
The complete list of 60 companies along with key metrics can be seen in
Exhibit 16.
Now, we apply the Good-to-Great theme to cull out our list of most attractive
investment opportunities.
September 2015
11

Thematic | Good-to-Great
The theme: Good-to-Great
What is Good-to-Great?
In the early 2000s, Jim Collins and his research team undertook a 5-year research
project to find an answer to the following question:
Can a
Good
company become a
Great
company and if so, how? Could the findings be
generalized to form a timeless, universal framework that can be applied by any
organization?
They encapsulated their findings in the form of a generalized framework highlighted
below and noticed that their sample size of such Good-to-Great businesses that
made the final cut averaged cumulative stock returns that are 6.9x the general
market over the 15 years following their transition point.
The theme: Good-to-Great
Industry Attractiveness
Disciplined Thought
GOOD
-TO-
GREAT
Disciplined Management
Disciplined Action
Expected Results
We have summarized our understanding of the key blocks below:
a)
Disciplined management:
We refer this as quality of management with regards
to capital allocation policies, shareholder focus and a strong drive to succeed.
For example, UltraTech Cement’s focus on consistent growth and cost
leadership has ensured that it has had no year of revenue decline during the last
decade despite being in a cyclical industry.
Post Diageo’s assuming control, United Spirits is focusing more on compliance
and business ethics, translating into better capital allocation. Also, after 15 years
September 2015
12

Thematic | Good-to-Great
of underinvestment, its power brand portfolio of 14 brands is set to receive
significant jump in brand investments.
Larsen & Toubro has incubated and grown service businesses like IT and finance.
By creating independent companies for different businesses and listing
subsidiaries, it has kept business structure simple and promoted managerial
talent.
b)
Disciplined thought:
We looked for businesses wherein management has set
out clear goals to widen their moat during the downturn.
For example, having learnt its lessons during the previous deregulation period
(2004-06), Indian Oil Corporation has focused on (a) expanding its retail reach,
and on (b) improving service/fuel quality at its outlets to levels at par with global
standards. This makes it better prepared to stand up to competition from the
private sector as and when the industry is fully deregulated.
Maruti Suzuki is focusing on being future-ready by adding more premium
products to its bouquet of offerings. Tata Motors has focused on filling gaps in
its domestic and overseas product portfolios. ICICI Bank is focusing on capital
management to improve return ratios and enhance shareholder value.
c)
Disciplined action:
We focus on those companies that have converted their
thoughts into detailed action plan and are in the process of executing the same.
For example, Indian Oil Corporation has (a) almost doubled its outlets (>24,000
now), and (b) automated retail outlets having monthly sales of over 200KL.
UltraTech has been targeting 20-25% of its annual capex on garnering land and
limestone reserves, which give it the ability to add 20-25m tons of capacity in a
relatively short period.
With the
Ciaz
launch tasting good success, Maruti Suzuki intends to launch
several other premium products (S-Cross, a premium hatchback, and a compact
SUV) over the next 15 months. It has launched
Nexa
dealerships, focusing on
premium products.
Tata Motors has planned two launches per annum under JLR, along with several
refreshes. Similarly, its India business has also planned two launches per annum
till 2020.
ICICI Bank has regularly repatriated capital (USD2b till date) from overseas
subsidiaries and increased dividend payout from domestic subsidiaries (INR29b
over FY13-15).
d)
Expected results:
We narrow down on those businesses that have translated all
the management strategy and action points into improving market-share,
operating margins or returns on capital employed over the next 3 years.
For example, we expect Indian Oil Corporation’s profit to more than double by
FY18, led by lower interest cost and higher marketing margins and RoE should
sustain at >15%.
For IDFC, we expect RoE to be healthy at 11-12% in the first full year of
operations as a bank and then steadily rise to ~18% in the next four years.
September 2015
13

Thematic | Good-to-Great
Larsen and Toubro’s consolidated RoE is likely to increase from 14% to 20% over
the next three years.
Maruti Suzuki’s market share should increase by ~200bp to ~48% over FY15-18.
For United Spirits, we look for EBITDA margin of 20% by 2020 against our
estimate of 12.6% for FY17. Its market share in the Prestige+ segment should
inch up by 100-150bp per annum. We also expect its net debt to halve by FY18.
Has Good-to-Great worked in Indian equities?
We back-test the theme to understand and illustrate that following this theme has
been a fruitful investing experience within Indian equities in the past.
In this context, we present our thoughts on Britannia and Eicher Motors as examples
of Static Value and reflect on their performance over the last three years.
Britannia:
Following seven years of stagnant profits, Varun Bery, the newly-
appointed CEO, generated a thought of premiumization. He chose five brands to
focus on and concentrated advertising spending in these brands.
This resulted in revenue CAGR of 12%, EBITDA margin expansion of 500bp, and
RoCE expansion from 16% to 54% over the next three years. During this process,
the stock outperformed the local benchmark by 750%.
Eicher Motors:
Following its initial success, the management of Eicher Motors
generated a thought of extending its dominant position in leisure bikes and
followed this up by action of tripling capacity over three years, expanding the
target segment through model launches, and entering multiple countries.
This resulted in a volume CAGR of 63%, EBITDA margin expansion of 1,300bp,
while returns improved by 1,500bp over the next three years. During this
process, the stock outperformed the local benchmark by 1,400%.
Also, we highlight HDFC Bank as an example of Dynamic Value stock over 10-year
period.
HDFC Bank:
HDFC Bank set out a three-pronged thought of growing its retail
banking franchise, lowering its cost of funds, and focused expansion almost a
decade ago. With a stable management team, the bank achieved flawless and
disciplined execution on all these counts.
This has resulted in an earnings CAGR of 33% since inception, along with
industry leading RoA of 2%. Over the last 10 years, the stock has outperformed
the local benchmark by 129%.
A detailed account of the industry dynamics, key elements of management strategy
along with the actions and the results are presented in annexure-III.
September 2015
14

Thematic | Good-to-Great
Applying Good-to-Great theme to our Framework
From shortlist to top picks
We put together all the concepts discussed earlier in the following exhibit to
illustrate our process to get to our top picks within our coverage universe.
Exhibit 15: THE THEME APPLIED TO OUR FRAMEWORK
STATIC VALUE
213
cos
213
cos
DYNAMIC VALUE
MCAP > USD2.5b
Focus: High discount to IV
IV gr.: Not necessarily High
94 cos
Discount to IV >=30%
Weak relative stock performance
94 cos
MCAP > USD2.5b
MARGIN OF SAFETY
Narrow discount to IV
Focus: High IV growth
QUANTITATIVE FILTER
RoCE/WACC>1 for each 5 years
RoE/COE>1 for each 5 years
Theme: Good to Great
Industry Attractiveness
Disciplined Management
Disciplined Thought
Disciplined Action
Expected Results
20 cos
40 cos
QUALITATIVE FILTER:
GOOD TO GREAT
Theme: Good to Great
Industry Attractiveness
Disciplined Management
Disciplined Thought
Disciplined Action
Expected Results
4 cos
7 cos
TOP PICKS
Tata Motors
IOCL
ICICI Bank
IDFC
Maruti Suzuki
Larsen & Toubro
Ultratech Cement
Zee Entertainment
IndusInd Bank
ITC
United Spirits
Post our initial screening driven by quantitative filters, we sieve through the list of
about 60 companies with a fine comb to look for those companies have all
attributes of our Good-to-Great theme. A summary of our key observations during
this process is highlighted below:
September 2015
15

Thematic | Good-to-Great
(a)
Industry attractiveness is a key differentiating factor between Static and
Dynamic Value:
We note 84% of companies rich in Dynamic Value score high on
favorable industry dynamics, while only 48% of the companies in the Static
Value shortlist have similar dynamics.
(b)
While most companies had disciplined thought, winners followed this up by
disciplined action.
We note that 70-80% of the companies in the shortlist had
disciplined thought, but only 50% followed up with disciplined action.
A brief description of how our top picks across each of the elements of Good-to-
Great theme is summarized below.
September 2015
16

Thematic | Good-to-Great
Static Value Applications
Industry Attractiveness: Drives Intrinsic Value Growth
Tata Motors
The global luxury car industry has grown at a CAGR of ~17% over CY10-14,
driven by a CAGR of ~26% in China. While Chinese luxury car demand has cooled
off, with ~3% growth in 1HCY15, the long-term growth potential of Chinese
markets remains intact.
JLR is a niche player in the global luxury car market, with ~8% share. While it
enjoys strong brand equity in SUVs, it is yet to enjoy similar success with
Jaguar
in luxury cars.
India CV business is expected to benefit from cyclical recovery. However,
increasing competitive intensity would result in pressure on market share /
margins.
IOC
Per capita consumption to move towards world average: At 160 liters, India’s
per capita petroleum consumption is significantly lower than the world average
of 730 liters. Increasing vehicle population led by per capita GDP growth would
boost India’s per capita petroleum consumption.
Oligopolist market: Three players control 99% of market (IOCL’s share at ~46%).
IOCL well placed for next 2-3 years led by (a) higher volume growth (1x of GDP),
(b) negligible private player presence, and (c) pricing power, led by auto fuel
deregulation.
ICICI Bank
India presents a huge opportunity for banks. Only 40% of the population has
access to banking. Credit-to-GDP is just ~52% against an average of ~90% for
emerging markets and ~100% for developed markets.
Deepening financial penetration, increasing urbanization, and expansion of
private banks into rural and semi-urban areas would drive retail loan growth.
Consumer loans-to-GDP stands at just 15% against 20%+ for major economies.
IDFC
India presents a huge opportunity for banks. Only 40% of the population has
access to banking. Credit-to-GDP is just ~52% against an average of ~90% for
emerging markets and ~100% for developed markets.
The industry is likely to grow at a CAGR of 18%+ over the next five years.
Incumbent state-owned banks still have 75%+ market share. In this digital era,
private sector banks should continue to gain share, with superior products and
services.
September 2015
17

Thematic | Good-to-Great
Disciplined Management: Credibility builds over time
Tata Motors
Recently, Mr Cyrus Mistry took over as Chairman of Tata Motors (TTMT).
Further, TTMT appointed Mr Mayank Pareek (ex-Marketing Head of Maruti
Suzuki) as Head – PV Business, to revive its lost franchise in PVs.
Since TTMT’s acquisition of JLR, it has been investing aggressively in building
capabilities in products, capacity and global footprint.
India business has seen significant pressure on balance sheet due to continued
investments in products, impacting medium-term capital efficiency.
IOC
Effective capital allocation: Besides focusing on its core business of marketing
and refining, IOCL has also invested meaningfully in petrochemicals and
pipelines.
High payouts: While government (69% ownership) policies have influenced its
profitability, IOCL has rewarded minority shareholders with high dividend
payout.
Diversified earnings: Though refining margins are volatile, IOCL’s investments in
petchem (6% of EBITDA) and pipelines (~20% of EBITDA) ensure earnings
stability.
ICICI Bank
Since Ms Kochhar took charge in 2009, ICICI Bank (ICICIBC) has focused on
improving profitability (16% PAT CAGR over FY10-15), with structural changes in
ALM profile (helping NIM to expand ~100bp) and strong cost control (700bp
decline in cost-to-income ratio to 37%, the lowest since 2002), leading to RoA
improvement (from 1% in FY09 to 1.6%).
Growth consolidation and profit focus has helped improve subsidiaries’
performance. From a loss of INR6.7b in FY08, they posted a PAT of INR33.7b in
FY15.
Focus on subsidiaries is now bearing fruits - have now started throwing back
capital
IDFC
IDFC is an infrastructure financier, generating RoE of 12-15%. Despite the
infrastructure segment going through tough times, IDFC has maintained healthy
profitability while creating floating provisions on the balance sheet.
Corporate governance levels are best in class; this has helped IDFC to become
one of the two from 26 contenders to get a banking license from the RBI.
September 2015
18

Thematic | Good-to-Great
Disciplined Thought: Leveraging the economic down-turn
Tata Motors
Focus on products: JLR has been focusing on filling gaps in its product portfolio.
Similarly, India PV business is focused on correcting under-investment in
products.
Focus on modular platform: JLR is focused on improving its platform efficiency
by increasing model to platform ratio, in turn reducing capital intensity.
Focus on diversification of manufacturing footprint: JLR’s manufacturing base is
entirely located in UK, resulting in high cost structure and forex volatility on
imports.
IOC
Geared to counter private competition: Having learnt its lessons during the
previous deregulation period (2004-06), IOCL (a) has almost doubled its outlets
(>24,000 now) to ensure wide reach, and (b) is focusing on improving
service/fuel quality at its outlets to levels at par with global standards.
Financial cost control in difficult times: While debt levels were high (peak D/E of
1.4x) in an era of high under-recoveries (FY11-14), the management significantly
increased the share of overseas loans to cut interest costs.
ICICI Bank
The management is focusing on secured loans to augment loan market share
and maintain healthy credit quality. The retail segment remains a key focus
area.
It is focusing on capital management to improve return ratios and enhance
shareholder value, in which subsidiaries would play a major role.
To sustain dilution-free growth, ICICIBC is focusing on core profitability. It has
enhanced margins and operating leverage, and is keeping a check on credit cost.
IDFC
Focus on long-term shareholder value creation even at the cost of immediate
profitability
Diversification: Considering the challenges in infrastructure financing, the
management focused on diversification of assets and liabilities.
For the banking business, IDFC is focusing on innovation, technology and cross-
selling to existing customers to increase profitability
.
September 2015
19

Thematic | Good-to-Great
Disciplined Action: Putting Strategy to Work
Tata Motors
Focus on products: JLR has planned two launches per annum, along with several
refreshes. This will help to fill gaps in its portfolio and expand addressable
market manifold. Similarly, India business has also planned two launches per
annum till 2020.
Focus on modular platform: Modular platform strategy is on track, with target of
four cars per platform by FY18-19 (currently, two cars per platform).
Focus on diversification of manufacturing footprint: JLR now has plants in China
and Brazil (upcoming), and is planning a plant in East Europe (Slovakia).
IOC
Continuous capex to match volume growth: With 6-8% auto fuel volume growth,
IOCL will continue its retail network expansion to grow market share from the
current ~46%.
Focus on low cost expansions: Post 15mmt greenfield refinery at Paradeep,
medium-term expansions will be brownfield, and hence, cost effective.
Improving retail network efficiency: (a) Automated retail outlets with >200KL
per month – ready for differential pricing, (b) increased pipeline network –
lowers logistics cost.
ICICI Bank
Healthy retail loan growth: Retail loans have grown at a CAGR of 24% over FY13-
15. The share of the retail segment has increased from 37% in FY12 to 42% in
FY15. By moderating growth in loans to sensitive sectors (3% CAGR over FY13-
15), ICICIBC has gradually lowered its exposure to these sectors to ~16%.
ICICIBC has regularly repatriated capital (USD2b till date) from overseas
subsidiaries and increased dividend payout from domestic subsidiaries (INR29b
over FY13-15).
Focus on operating leverage: Employees/branch have halved to 16 since 2008,
CASA ratio has doubled, and share of retail fees has grown from 33% in 2011 to
52%.
IDFC
During the troubled times of FY12-15, IDFC’s loan CAGR was just 2%. It created
provisions of ~4% of loans though reported NPAs were lower at <0.5%. Further,
it also created provisions of 60bp on disbursements.
IDFC is one of the two from 26 contenders to receive a banking license.
Operating under the banking model would enhance sustainable RoE by ~500bp.
September 2015
20

Thematic | Good-to-Great
Expected Results: Strong improvement in returns
Tata Motors
Success of
Jaguar XE
and
F-Pace
should result in ~2% market share gain for JLR
in the luxury vehicle segment, and drive benefits of operating leverage for JLR.
JLR’s margins would see step-down due to (a) normalization of margins in China
business, and (b) accounting for JV. We expect JLR’s reported EBITDA margin to
decline 380bp by FY18 (as compared with FY15).
However, strong volume growth in JLR (~13% CAGR incl JV) and sharp India
business recovery would drive ~16% EPS CAGR over FY15-18.
IOC
IOCL’s profit is likely to more than double, led by fall in interest cost and higher
marketing margins (we model an increase from INR1.4/liter to INR2.4/liter by
FY18). RoE should sustain at >15%.
While refining margins would be governed by global demand-supply; likely
higher marketing margins provide predictability to its earnings and should lead
to re-rating, in our view. Fair value of INR570 implies 44% upside. The stock
trades at 7.2x FY17E EPS.
ICICI Bank
In the medium term, we expect loan growth to continue being driven by the
retail segment (25%+ CAGR), with funding from relatively low cost retail
liabilities.
Cost control and productivity gains should continue. Focus on core profitability
would lead to further improvement in core RoE (~17% in FY17, up 150bp from
FY15).
Release of capital from subsidiaries would ensure dilution-free growth till FY18.
IDFC
RoE is expected to be healthy at 11-12% in the first full year of operations as a
bank and then steadily rise to ~18% in the next four years.
IDFC would command significantly higher value as a bank (with higher retail
deposits and loans) than as an infrastructure financier.
Investors are likely to focus more on the expected improvement in business,
higher and sustainable RoE, strong management team, and good corporate
governance.
September 2015
21

Thematic | Good-to-Great
Dynamic Value Applications
Industry Attractiveness: Enables Intrinsic Value Growth
IndusInd Bank
Low Credit-to-GDP is just ~52% against an average of ~90% for emerging
markets and ~100% for developed markets presents tailwind.
With consumer loans-to-GDP stands at just 15%, industry loan growth is
expected to be at 18%+CAGR over medium-term.
ITC
Lower per capita cigarette consumption in India of 1/18th of China, 1/10th of
USA, leaves ample scope for growth.
ITC has an effective monopoly, with ~84% value share in organized segment.
While industry volumes have grown at ~1.5% over FY95-15, ITC’s volumes have
grown at a CAGR of 2.4%.
Larsen & Toubro
With Infrastructure spending (as % of GDP) having declined to 3-4% from peak
levels of 7-8%, we expect meaningful traction as large projects in segments like
urban infrastructure, water & irrigation, railways, and power T&D pick up.
Manufacturing segments like defense, power generation, and forgings provide
strong opportunities. Another important driver is industrial capex – particularly
hydrocarbons, metals, and fertilizers – both in India and overseas.
Maruti Suzuki
After muted volumes in last 4 years, India’s personal vehicle (PV) industry is
poised for strong growth of 15%+ CAGR, driven by economic recovery,
increasing penetration and muted fuel inflation (vs. 13% CAGR over last 5 years).
As an industry leader in domestic PV market, with ~46% share, we expect MSIL
to benefit disproportionately over medium-term.
UltraTech Cement
With half per capita cement usage in India compared with global average leaves
material scope of expansion. The industry is also cyclically poised for recovery
after prolonged weakness. We expect 8-10% growth in FY17/18.
In a consolidated market, UTCEM is the industry leader, enjoys 15-30% market
share across regions and hence, could benefit in an economic uptick.
United Spirits
Lower per capita consumption of 0.9 in India vs. world average of 4.6 liters, up-
trading from country liquor to branded ones presents significant opportunity.
We expect the industry to post healthy double-digit value CAGR.
United Spirits (UNSP) enjoys a dominant position, with ~42% volume market
share and several first mover advantages in a regulated industry.
Zee Entertainment
Ongoing digitization of analog cable platform would drive incremental lucrative
yearly subscription opportunity, implying 22% revenue CAGR till FY2020.
ZEE is uniquely positioned as one of the only two networks having a leading GEC
across Hindi/major regional markets along with presence across all relevant
genres.
September 2015
22

Thematic | Good-to-Great
Disciplined Management: Credibility builds over time
IndusInd Bank
IndusInd Bank (IIB) is a classic case of management change (Mr Sobti and his
team took charge in 2008) scripting a turnaround in fortunes.
The management targets to be a forerunner in terms of profitability (RoA best in
class at 1.9% in FY15; up from 35bp in FY08), productivity (profit/employee up
4x over FY08-15), and efficiency (C/I ratio down from 68% in FY08 to 46%).
ITC
ITC has consciously diversified its business in last decade – non-cigarette FMCG,
with INR90b sales, now contributes 18% of gross revenue vs. 4% a decade ago.
ITC has demonstrated excellence in managing its core cigarettes business, with
12 consecutive years of margin expansion, despite punitive legislative actions.
Dividend payout ratio in last 5 years has been ~60% against ~40% over 2000-10.
Larsen & Toubro
L&T has continuously evolved by building new skill sets and competencies to
effectively benefit from emerging trends. It has incubated and grown service
businesses like IT and finance and expanding share of manufacturing businesses
like power BTG, defense, and forgings.
By creating independent companies for different businesses and listing
subsidiaries, it has kept its structure simple and promoted managerial talent.
Marusti Suzuki
The management has been focused on increasing localization and reducing
imports (from ~27% to 15-16% of net sales) over the last two years.
They plan to outsource manufacturing to the parent on cost basis to reduce
capital intensity, and improve FCFF and RoIC profile without diluting low cost
structure.
UltraTech Cement
UTCEM has an impressive track record, with focus on consistent growth and cost
leadership. It has had no year of revenue decline during the last decade.
UTCEM has prudently used the economic downturn to add capacity headroom
and critical resources like land and limestone for future growth.
United Spirits
After Diageo transaction, complexion of the company is set to change with clear
focus on value growth, right brand investments and balance sheet deleveraging.
Disproportionate focus on compliance and ethics means better allocation of
capital, a key improvement vis-à-vis the erstwhile management.
Zee Entertainment
ZEE has a young and dynamic management team in place. Post Mr Punit Goenka
taking over as the MD in 2010, ZEE went through a restructuring process.
Inter group balance sheet exposures were largely eliminated so as to bring forth
discipline in capital allocation.
The entire entertainment business was brought into one fold, with the merger
of the fast growing regional business with ZEE
September 2015
23

Thematic | Good-to-Great
Disciplined Thought: Leveraging the economic down-turn
IndusInd Bank
In the current Three-year planning cycle (2014-17), management plans to:
a) Focus on loan growth at double that of industry by capitalizing on niche areas
(vehicle loans).
b) Build at least 15 home markets (5%+ branch share) to sustain savings accounts.
ITC
Despite four consecutive years of 15%+ excise duty hikes, ITC continues to pass
on duty hikes to consumers through price increases and use its wide product
portfolio (presence across segments) to retain market-share in cigarettes.
It plans to become a FMCG player by entering into various Home & Personal
care and Foods categories. Notably, it has set target of INR1t for FMCG-others
by 2030 from the current INR90b.
Larsen & Toubro
L&T intends to increase opportunity set in its core E&C business by building
competencies in emerging segments and build manufacturing businesses in long
term (including from privatization of defense and entry into power BTG).
It plans to improve capital allocation through various initiatives and thus
improve consolidated RoE.
Maruti Suzuki
Focus on rural markets: To offset the cyclical downturn in urban markets, MSIL
has started to develop underpenetrated rural markets.
Focus on product portfolio expansion: During downturn, MSIL has focused on
launching new products to retain freshness in model-cycle.
Focus on premiumization: MSIL is focusing on being future-ready by adding
more premium products to its bouquet of offerings.
UltraTech Cement
Ultratech plans meaningful capacity addition and attenuate growth constraints
though backward integration to remain prepared for an industry upcycle.
Cost leadership:
UTCEM continues to focus on optimizing energy mix, logistics
and synergies to widen profitability gap vs. peers (10-15% above Ambuja now).
United Spirits
Drive premiumization through power brand portfolio of 14 brands is the key
priority and represents a strategic departure from the past.
Cost leadership: To drive cost cuts across all P&L line items – RM, PM,
overheads. Notably, it has appointed AT Kearney to identify areas of cost saving.
Deleveraging: Over next 3 years, UNSP plans to raise INR20b by divesting non-
core assets.
Zee Entertainment
Grow market leadership: ZEE aims to be amongst top global media
conglomerates and is targeting 4-5x growth in viewership and content
consumption by the year 2020.
High cost discipline to drive superior margins: With best-in-class cost
management and margin focus, we believe target EBITDA margin of 30%+ is
achievable.
September 2015
24

Thematic | Good-to-Great
Disciplined Action: Putting Strategy to Work
IndusInd Bank
Management plans to focus on high yielding retail loan portfolio by capitalizing
on strong presence in vehicle loans and addition of new retail products.
Increase share of low cost CASA deposits (15.5% in FY08 to 34%) through
focused branch expansion and improving brand image.
Gain forex MS (from 1% in FY08 to ~4%) from state-owned banks, driven by
lower turnaround time.
ITC
To counter the impact of higher price points, ITC is tactically driving 64mm
segment to capture down-trade from 69mm with similar percentage margins.
Inorganic initiatives like acquisition of brands like
B-Natural, Savlon
and
Shower
to Shower
to aid INR1t FMCG-others revenue target by 2030.
Larsen & Toubro
L&T has expanded offerings across segments, with competency additions in
power T&D, water, smart cities, and renewables among others.
It has invested ~INR100b in setting up manufacturing businesses (defense,
power BTG, forgings), which are difficult to replicate.
It is focusing on improving RoE through monetization of mature assets, exiting
non-core activities, and fund infusion (including listing of subsidiaries).
Maruti Suzuki
It plans to ramp its rural presence and focus on select customer groups not
impacted by slowdown like government employees, teachers, priests.
The parent, Suzuki is planning to launch 20 new models globally in 5 years, large
part of which would be launched in India.
Following on from success of
Ciaz,
MSIL plans to launch several premium
products (S-Cross, a premium hatchback, and a compact SUV) and
Nexa
dealerships, focusing on premium products over next 15 months.
UltraTech Cement
Growing capacity, gaining market share: Capacity is likely to grow 45% over
FY14-16, aided by both organic and inorganic initiatives.
Cost optimization underway: Initiatives like higher pet coke mix, waste heat
recovery, logistics enhancements have begun showing cost benefits.
United Spirits
Re-launching premium brands: New look
Royal Challenge
has already been
rolled out. Next brands to hit the market –
McDowell No 1, Antiquity, Signature.
Cost leadership: High cost plants have been closed in West Bengal and Kerala.
UNSP sold direct operations in Tamil Nadu and plans to replicate this in Kerala.
Divestment of non-core assets to help pay off debt.
Zee Entertainment
Expanded channel portfolio: Almost 1/3rd of ZEE’s channel portfolio has been
launched since FY12, including biggest launch ‘&TV’, aimed at non-ZEE viewers.
Continued operating leverage: ZEE is confident of flat margins in FY16 despite
higher investments, implying continued operating leverage in existing portfolio.
September 2015
25

Thematic | Good-to-Great
Expected Results: Strong improvement in returns
IndusInd Bank
Healthy core revenues (5.6% of assets – best in industry), strong growth, high
margins and productivity gains should enable steady-state RoA of 2%+ and ~30%
earnings CAGR over FY15-18.
Recent capital infusion would result in >600bp increase in tier-I ratio – sufficient
for 3-4 years of 25%+ loan growth.
CASA ratio is expected to improve by 500bp+ to ~40% over FY15-18
ITC
We expect operating margins to expand from 37.4% in FY15 to 39.2% in FY17.
RoE and RoCE should remain steady at 33-34% and 40-42%, respectively.
We view ITC as a medium-term play, given its dominance in its core franchise,
relatively cheap valuations in consumer universe, and muted expectations.
Larsen & Toubro
Core E&C revenue could double over next three years, as domestic intake in
FY15 was INR943b while revenue was INR460b.
‘Portfolio churn’ in concession portfolio and service segments would aid value
unlocking. Manufacturing business would be an important growth driver.
We expect consolidated RoE to improve from 14% to 20% over next 3 years.
Infotech / Tech Services IPO is expected by July 2016.
Maruti Suzuki
We expect MSIL’s market share increase (of ~200bp), coupled with better mix
would drive ~20% revenue CAGR in FY15-18.
Discount moderation (+150bp over FY15), weak commodity prices (~100bp), and
operating leverage (50bp) could improve margins, leading to EPS CAGR of ~42%
over FY15-18.
We expect RoE to improve by ~6pp to 22.6%, RoIC by 33.7pp to 59.3% by FY18.
UltraTech Cement
Growth outperformance: UTCEM would have ~18% capacity market share by
FY18, aiding industry leading volume growth (11-12%) and strong operating
leverage.
Significant margin/RoE expansion: Cost initiatives and increase in pricing power
would drive 7-8pp margin and RoE expansion over FY16-18.
Self-sustaining growth: FCFE generation of INR40b-45b per year from FY18
would help annual capacity growth of ~8% using only internal accruals.
United Spirits
We expect EBITDA margin to expand to 12.6% by FY17, as initial rounds of cost
saving kick in. We build in 20% EBITDA margin by 2020.
We expect UNSP’s market share to remain steady in the Popular segment, but
inch up 100-150bp per annum in the Prestige+ segment.
We also expect net debt to halve by FY18 from the existing INR46b [D/E of 1.3x].
A detailed account of the industry dynamics, key elements of management strategy
along with the actions and the results is presented in annexures.
September 2015
26

Thematic | Good to great
Exhibit 16: The complete list of 60 companies along with key metrics
Static Dynamic
Industry
Disciplined
Company
Sector
Value
Value Attractiveness Management
Bajaj Auto
Auto
Y
N
Y
Tata Motors
Auto
Y
Y
Y
ACC
Cement
Y
Y
Y
Cadila Health
Healthcare
Y
Y
N
Hindustan Zinc
Metals
Y
N
N
Cairn India
Oil & Gas
Y
N
N
HPCL
Oil & Gas
Y
Y
Y
IOC
Oil & Gas
Y
Y
Y
Oil India
Oil & Gas
Y
N
Y
ONGC
Oil & Gas
Y
N
Y
DLF
Real Estate
Y
N
N
NTPC
Utilities
Y
N
N
Power Grid Corp.
Utilities
Y
N
N
Axis Bank
Banking
Y
Y
Y
ICICI Bank
Banking
Y
Y
Y
IndusInd Bank
Banking
Y
Y
Y
State Bank
Banking
Y
Y
N
IDFC
NBFCs
Y
Y
Y
Power Finance Corp NBFCs
Y
N
N
Rural Electric. Corp.
NBFCs
Y
N
N
Shriram Transport Fin. NBFCs
Y
Y
N
* ROE/ROA for IDFC Bank; scheduled to start operations in 2HFY16
Eicher Motors
Auto
Y
Y
Y
Maruti Suzuki
Auto
Y
Y
Y
Bajaj Auto
Auto
Y
N
Y
Mahindra & Mahindra Auto
Y
Y
N
Bharat Forge
Auto
Y
Y
Y
Havells India
Capital Goods
Y
Y
Y
Bharat Electronics
Capital Goods
Y
Y
Y
Cummins India
Capital Goods
Y
Y
Y
Larsen & Toubro
Capital Goods
Y
Y
Y
ACC
Cement
Y
Y
Y
Ultratech Cement
Cement
Y
Y
Y
Colgate
Consumer
Y
N
Y
Godrej Consumer
Consumer
Y
Y
Y
Marico
Consumer
Y
Y
Y
Hind. Unilever
Consumer
Y
Y
Y
Pidilite Inds.
Consumer
Y
Y
Y
Asian Paints
Consumer
Y
Y
Y
GSK Consumer
Consumer
Y
N
Y
ITC
Consumer
Y
Y
Y
Dabur
Consumer
Y
Y
Y
United Spirits
Consumer
Y
Y
Y
GSK Pharma
Healthcare
Y
Y
Y
Cadila Health
Healthcare
Y
Y
N
Divis Labs
Healthcare
Y
Y
Y
Glenmark Pharma
Healthcare
Y
Y
N
Cipla
Healthcare
Y
Y
N
Dr Reddy’ s Labs
Healthcare
Y
Y
Y
Zee Entertainment
Media
Y
Y
Y
Oil India
Oil & Gas
Y
N
Y
Reliance Inds.
Oil & Gas
Y
Y
N
GAIL
Oil & Gas
Y
N
Y
Coal India
Utilities
Y
N
N
Axis Bank
Banking
Y
Y
Y
IndusInd Bank
Banking
Y
Y
Y
LIC Housing Fin
NBFCs
Y
Y
N
Shriram Transport Fin. NBFCs
Y
Y
N
Indiabulls Housing
NBFCs
Y
Y
N
Disciplined Disciplined Expected
Thought
Action
Results
Y
Y
Y
Y
Y
Y
Y
N
N
N
N
N
Y
Y
N
N
N
N
Y
Y
Y
Y
Y
Y
Y
N
N
Y
N
N
N
N
N
Y
Y
N
Y
Y
N
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
N
N
N
N
N
N
N
N
N
Y
Y
Y
Y
Y
Y
N
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
N
Y
Y
N
Y
Y
Y
N
Y
Y
Y
Y
N
N
Y
Y
Y
Y
Y
Y
Y
N
Y
Y
N
Y
Y
N
Y
Y
Y
Y
Y
Y
Y
Y
Y
N
Y
Y
N
Y
Y
N
Y
N
Y
Y
Y
N
N
Y
Y
Y
Y
N
Y
Y
Y
Y
Y
N
Y
Y
Y
N
N
N
N
Y
Y
N
Y
Y
N
Y
Y
N
Y
Y
N
N
N
N
Y
Y
N
N
Y
Mkt Cap
(USD B)
9.5
15.8
3.9
5.7
7.8
3.5
3.9
13.8
3.9
29.2
2.6
14.2
10.3
17.2
23.4
7.5
27.5
3.0
3.9
3.3
2.8
7.5
19.3
9.5
11.6
3.9
2.3
3.8
4.4
22.7
3.9
11.7
4.0
6.3
3.8
27.7
4.2
12.1
3.7
38.5
7.2
6.8
4.3
5.7
4.4
4.6
7.6
10.3
5.2
3.9
40.2
5.2
31.9
17.2
7.5
3.2
2.8
3.8
P/B (x)
FY15 FY16E FY17E FY18E
6.0
5.2
4.4
3.8
1.8
1.4
1.1
0.9
3.1
3.0
2.9
2.6
8.8
6.7
5.0
3.8
1.3
1.2
1.1
1.0
0.5
0.5
0.4
0.4
1.7
1.4
1.3
1.1
1.4
1.3
1.1
1.0
1.2
1.1
1.0
0.9
1.0
1.0
0.9
0.8
0.7
0.7
0.7
0.7
1.2
1.2
1.1
1.0
1.7
1.5
1.4
1.3
2.5
2.1
1.8
1.6
2.2
2.0
1.7
1.5
4.3
2.9
2.5
2.2
1.1
1.0
0.9
0.8
1.2
1.1
1.0
0.8
0.7
0.6
0.5
0.9
0.8
0.7
0.6
2.1
1.9
1.6
1.4
19.5
5.2
6.0
3.4
7.3
8.8
3.3
10.1
3.8
3.1
4.2
33.3
9.4
14.3
48.2
11.5
16.4
12.0
8.3
14.9
14.1
15.6
8.8
8.3
9.3
4.8
6.2
9.8
1.2
1.1
1.2
5.4
2.5
4.3
2.7
2.1
3.9
16.0
4.5
5.2
3.0
6.0
7.6
2.9
9.1
3.5
3.0
3.8
30.2
7.9
10.2
47.0
9.7
13.9
10.2
7.3
12.1
12.4
16.1
6.7
7.1
7.1
4.1
5.1
8.2
1.1
1.0
1.1
5.2
2.1
2.9
2.3
1.9
3.5
10.6
3.7
4.4
2.5
4.9
6.4
2.6
8.0
3.1
2.9
3.3
27.0
6.6
8.6
46.9
8.3
11.5
8.6
6.5
10.0
10.2
16.6
5.0
6.1
5.4
3.6
4.3
6.6
1.0
0.9
1.1
5.0
1.8
2.5
1.9
1.6
3.0
5.3
3.0
3.8
2.2
3.9
5.4
2.3
6.9
2.7
2.6
2.8
22.6
5.5
7.2
39.6
6.7
9.4
7.1
5.7
8.1
8.1
16.1
3.8
5.1
4.1
3.1
3.6
5.1
0.9
0.8
1.0
4.8
1.6
2.2
1.6
1.4
2.5
FY15
21.0
7.4
29.5
31.2
6.9
6.1
9.7
30.5
10.5
10.8
38.4
10.4
12.7
15.1
13.4
24.8
9.9
11.5
4.3
4.5
18.9
P/E (x)
FY16E FY17E FY18E
16.9 13.1 12.0
7.5
6.0
4.6
32.4 19.0 12.9
23.3 17.4 13.5
8.2
8.0
7.8
8.6
9.8
8.1
8.0
7.4
6.5
7.8
7.4
6.4
7.4
6.6
6.2
7.7
6.3
5.9
23.4 19.7 15.2
9.8
8.6
6.8
11.3
9.2
8.8
12.8 10.8
9.1
11.8 10.0
8.4
20.1 16.1 12.6
8.8
7.1
5.6
13.1 11.1
3.8
3.3
2.9
3.7
3.1
2.7
13.1 10.6
8.4
28.5
16.2
13.1
11.4
19.5
21.5
16.7
28.3
22.2
19.0
22.7
32.2
28.2
29.6
34.6
35.5
33.8
29.3
21.1
32.8
56.6
45.2
17.4
22.7
23.3
23.9
21.3
23.8
6.6
8.4
9.2
12.5
10.8
16.1
9.7
10.6
9.6
17.9
12.6
12.0
9.0
15.1
17.2
16.6
24.3
15.8
12.9
15.2
27.4
24.0
25.5
30.5
31.0
29.4
24.9
19.2
28.7
38.4
38.5
13.5
18.4
17.4
20.0
18.1
18.0
6.2
7.0
8.1
11.2
9.1
12.6
8.3
8.4
8.0
EPS growth (%)
FY15 FY16E FY17E FY18E
-6.0 23.9 29.0
9.2
-1.1 -1.0 25.3 30.0
-5.3 -9.1 70.9 47.4
45.5 33.7 34.3 28.7
18.0 -16.4
3.1
1.5
-63.3 -28.7 -11.9 20.7
57.6 21.9
8.2 13.0
-39.2 289.9
5.8 15.2
-15.8 40.6 13.0
6.6
-32.0 40.6 22.7
5.9
-16.5 64.0 19.0 29.8
-8.9
6.8 13.9 25.7
13.1 13.1 21.8
4.9
17.3 18.3 18.7 18.6
13.5 13.2 17.8 18.9
26.5 23.5 24.5 27.8
19.9 12.0 23.9 27.3
-6.1 -12.6 18.5
12.1 13.3 15.3 15.8
7.6 20.4 19.4 16.3
-24.3 44.0 24.1 25.8
55.6 61.2
32.9 41.7
-6.0 23.9
-34.2 50.4
64.8 31.5
-4.7 12.9
25.4 12.9
15.9 22.4
11.5
7.8
-5.3 -9.1
-2.9 26.9
13.9 11.7
19.6 38.9
18.1 22.6
6.4 15.3
9.9 32.3
15.8 31.4
-13.5 23.2
8.5 13.3
15.7 22.2
426.4 -165.6
11.1
7.9
45.5 33.7
10.1 21.0
-37.8 100.4
-14.8 72.8
4.5 22.3
9.7 11.5
-15.8 40.6
3.2
9.3
-31.6 -4.9
-14.1
7.9
17.3 18.3
26.5 23.5
12.1 28.1
-24.3 44.0
14.2 17.1
73.9
40.9
29.0
35.9
33.0
27.6
17.9
23.4
32.4
70.9
37.6
27.8
21.4
25.1
19.1
16.6
23.4
20.5
10.4
17.1
82.2
10.5
34.3
23.5
25.9
6.7
19.5
33.5
13.0
17.9
35.9
18.0
18.7
24.5
25.2
24.1
19.9
59.5
29.0
9.2
26.9
29.0
25.2
0.5
16.6
40.0
47.4
49.7
17.4
17.7
16.0
13.3
14.5
15.0
17.5
9.6
14.2
47.3
17.6
28.7
23.4
33.3
19.5
17.8
32.7
6.6
20.2
13.5
12.0
18.6
27.8
17.0
25.8
19.9
FY15
30.0
23.1
10.7
30.8
20.1
12.0
17.6
4.7
11.7
10.0
1.9
10.8
13.9
17.8
15.2
19.0
11.9
10.9
20.7
22.7
14.1
ROE (%)
FY16E FY17E FY18E
33.0 36.5 34.2
21.9 21.2 22.3
9.5 15.8 21.6
34.7 34.8 32.3
14.9 13.9 12.9
5.3
4.5
5.3
19.3 18.4 18.5
17.2 16.1 16.7
15.3 15.9 15.5
13.1 14.7 14.2
3.0
3.5
4.4
12.2 13.8 16.0
14.3 15.8 15.0
18.0 18.4 18.7
15.0 15.6 16.3
18.0 16.8 18.5
12.1 13.4 15.2
10.1 11.4 13.9
20.3 20.2 20.2
22.9 22.9 22.3
14.7 16.5 17.9
FY15
42.7
24.2
13.4
24.9
22.5
12.2
11.0
6.4
12.8
9.3
5.7
8.4
8.0
1.7
1.8
1.8
0.7
2.3
3.1
3.2
2.0
ROCE/ROA (%)
FY16E FY17E FY18E
46.5 49.1 47.1
18.0 18.5 19.6
12.2 20.4 27.7
31.2 33.3 33.2
16.9 16.5 15.5
6.0
6.4
7.4
14.5 14.2 14.8
16.4 15.5 16.5
17.6 18.3 18.3
10.9 12.3 12.1
6.9
7.3
8.0
9.7 11.3 13.3
8.3
9.0
9.0
1.8
1.8
1.8
1.8
1.8
1.8
2.0
2.1
2.2
0.7
0.8
0.8
1.1
1.5
1.6
3.1
3.1
3.1
3.2
3.2
3.2
2.2
2.5
2.7
79.9 49.6
32.4 22.9
21.0 16.9
23.3 15.5
34.2 26.0
31.0 27.5
22.2 19.6
42.8 35.0
31.7 29.4
29.5 32.4
39.7 31.3
45.9 41.1
47.6 34.2
45.4 37.0
47.5 41.2
54.7 41.3
54.8 41.7
43.5 35.3
26.4 23.3
47.0 38.5
-67.7 103.2
53.9 50.0
31.2 23.3
33.9 28.1
58.7 29.3
44.2 25.6
31.2 25.5
35.5 31.8
10.5
7.4
10.8
9.8
11.9 12.5
16.0 14.8
15.1 12.8
24.8 20.1
15.5 12.1
18.9 13.1
13.5 11.5
26.9 35.4 44.7 34.3
15.7 19.2 22.7 23.8
30.0 33.0 36.5 34.2
15.9 16.9 18.0 17.2
24.1 25.4 27.7 28.7
28.4 27.6 29.9 31.2
14.7 14.7 15.3 14.1
23.6 25.9 28.3 28.3
12.9 13.3 15.1 17.5
10.7
9.5 15.8 21.6
11.2 12.8 15.6 19.9
81.6 77.1 88.8 89.9
21.4 24.2 25.5 25.0
36.0 32.1 31.5 30.6
108.1 115.6 135.8 140.8
23.1 25.5 25.2 23.3
32.4 36.1 37.2 35.2
29.7 31.2 31.8 31.2
33.7 33.3 32.7 31.5
35.5 34.8 33.4 31.2
-21.7 12.8 19.8 21.1
23.1 32.3 36.8 41.8
30.8 34.7 34.8 32.3
26.4 27.3 28.8 30.2
15.8 24.3 23.0 23.4
11.0 16.2 15.0 15.4
19.9 20.2 20.0 19.6
31.2 28.0 30.5 32.0
11.7 15.3 15.9 15.5
11.0 11.0 11.9 12.8
10.8
9.4 11.9 12.4
34.0 35.4 40.1 43.0
17.8 18.0 18.4 18.7
19.0 18.0 16.8 18.5
17.5 20.3 21.4 21.1
14.1 14.7 16.5 17.9
30.8 32.3 33.5 34.3
27.6 38.3 52.5 43.8
20.8 26.5 30.1 31.6
42.7 46.5 49.1 47.1
16.3 18.7 20.2 19.5
22.0 26.5 30.6 34.0
27.7 35.7 40.0 43.3
18.5 18.5 19.2 17.6
22.2 24.3 27.3 28.4
11.9 12.1 13.5 15.6
13.4 12.2 20.4 27.7
14.1 15.5 18.6 21.8
111.3 107.3 124.7 125.7
18.9 21.7 23.9 23.7
35.6 35.3 35.2 34.8
137.6 153.5 179.4 186.1
28.2 33.1 32.7 30.9
34.6 39.2 41.3 38.7
36.4 37.1 37.7 36.2
41.8 41.1 40.6 39.3
29.7 30.7 30.8 29.7
0.7 14.8 20.4 25.3
35.3 47.4 54.0 61.4
24.9 31.2 33.3 33.2
33.0 34.8 36.8 38.6
14.4 22.0 25.4 26.4
14.1 20.1 18.9 19.6
16.9 19.5 19.9 20.7
27.3 27.3 31.8 36.4
12.8 17.6 18.3 18.3
10.2 10.2 11.2 12.8
11.1 10.9 13.9 14.7
54.3 56.7 63.3 66.9
1.7
1.8
1.8
1.8
1.8
2.0
2.1
2.2
1.4
1.5
1.6
1.5
2.0
2.2
2.5
2.7
4.0
3.9
3.8
3.6
Source: MOSL, Company
September 2015
27

Thematic | Good-to-Great
Annexure I: Static Value Picks
BSE Sensex: 25,202
S&P CNX: 7,655
4 September 2015
Annexure I: Static Value Picks
Tata Motors
IOCL
ICICI Bank
IDFC
September 2015
28

Thematic | Good-to-Great
Tata Motors
CMP: INR323
Industry Attractiveness
TP: INR488 (+51%)
Buy
The global luxury car industry has grown at a CAGR of ~17% over CY10-14, driven by a
CAGR of ~26% in China. While Chinese luxury car demand has cooled off, with ~3%
growth in 1HCY15, the long-term growth potential of Chinese markets remains intact.
JLR is a niche player in the global luxury car market, with ~8% share. While it enjoys
strong brand equity in SUVs, it is yet to enjoy similar success with
Jaguar
in luxury cars.
India CV business is expected to benefit from cyclical recovery. However, increasing
competitive intensity would result in pressure on market share / margins.
Disciplined Management
Recently, Mr Cyrus Mistry took over as Chairman of Tata Motors (TTMT). Further, TTMT
appointed Mr Mayank Pareek (ex-Marketing Head of Maruti Suzuki) as Head – PV
Business, to revive its lost franchise in PVs.
Since TTMT’s acquisition of JLR, it has been investing aggressively in building
capabilities in products, capacity and global footprint.
India business has seen significant pressure on balance sheet due to continued
investments in products, impacting medium-term capital efficiency.
Disciplined Thought
Focus on products: JLR has been focusing on filling gaps in its product portfolio.
Similarly, India PV business is focused on correcting under-investment in products.
Focus on modular platform: JLR is focused on improving its platform efficiency by
increasing model to platform ratio, in turn reducing capital intensity.
Focus on diversification of manufacturing footprint: JLR’s manufacturing base is entirely
located in UK, resulting in high cost structure and forex volatility on imports.
Disciplined Action
Focus on products: JLR has planned two launches per annum, along with several
refreshes. This will help to fill gaps in its portfolio and expand addressable market
manifold. Similarly, India business has also planned two launches per annum till 2020.
Focus on modular platform: Modular platform strategy is on track, with target of four
cars per platform by FY18-19 (currently, two cars per platform).
Focus on diversification of manufacturing footprint: JLR now has plants in China and
Brazil (upcoming), and is planning a plant in East Europe (Slovakia).
Expected Results
Success of
Jaguar XE
and
F-Pace
should result in ~2% market share gain for JLR in the
luxury vehicle segment, and drive benefits of operating leverage for JLR.
JLR’s margins to see step-down due to (a) normalization of margins in China, and (b)
accounting for JV, reflecting in 330bp decline in margins to 15.6% by FY18 (over FY15).
We lower our FY16/17E EPS by 17%/6% to INR43/54 to factor in for transitory issues.
However, strong volume growth in JLR (~13% CAGR incl JV) and sharp India business
recovery would drive ~17% EPS CAGR over FY15-18.
29
September 2015

Thematic | Good-to-Great
Exhibit 17:
China market huge potential to grow (Luxury car
as % of total car volumes)
Germany
29.6
UK
Italy
24.5
13.5
11.7
7.2
7.2
France
USA
Russia
China
India
Exhibit 18:
JLR to launch 9 new products (incl. replacement)
over next 5 years
Model Name
Segment
XE
Premium Compact (P)
XF replacement
Mid Size (M)
XE Cross (F-Pace)
Luxury SUV/Crossover (S)
Evoque convertible
Sportscar (Sp)
Discovery
FY16
Luxury SUV/Crossover (S)
replacement
FY17
Evoque XL
Luxury SUV/Crossover (S)
FY17
XJ replacement
High End (H)
Defender
FY18
Luxury SUV/Crossover (S)
replacement
FY18
XJ Coupe
Sportscar (Sp)
FY20
Super Mini
Premium Compact (P)
* Category (Audi, Daimler, BMW and JLR)
Timeline
1QFY16
2QFY16
3QFY16
4QFY16
Seg. Size*
‘000 units
1,171
1,262
1,706
42
1,706
1,706
284
1,706
42
1,129
25.9
3.1
Exhibit 19:
No. of platforms v/s no. of models
# of Platforms
10
8
11
9
7
6
5
# of Models
13
13
14
Exhibit 20:
Share of volumes of models on modular platform
to be ~92% by FY17
% of volumes from modular platform
87
67
32
69
92
95
8
9
FY09
FY14
FY15
FY16E
FY17E
FY18E
FY09
FY14
FY15
FY16E
FY17E
FY18E
Exhibit 21:
JLR EBITDA margins to remain healthy at 14-15% levels (post impact of JV)
EBITDA (GBP m)
14.7
14.8
17.5
18.9
15.4
14.8
15.6
EBITDA margin (%)
FY12
FY13
FY14
FY15
FY16E
FY17E
FY18E
Exhibit 22:
S/A profitability to improve sharply
EBITDA (INR b)
7.0
4.2
EBITDA margin (%)
7.8
5.7
8.4
Exhibit 23:
TTMT’s consolidated RoEs to remain stable (%)
ROCE
ROE
23.4
37
19
-1.4
(5)
FY12
FY13
FY14
-2.2
(8)
FY15
FY16E
FY17E
FY18E
25
44
57
28.3 25.7 27.5
24.2 23.1
18.0
21.9
22.3
18.5 21.2 19.6
FY13
FY14
FY15
FY16E
FY17E
FY18E
September 2015
30

Thematic | Good-to-Great
Financials and Valuations: TATA MOTORS (Consolidated)
Income Statement (Consolidated)
Y/E March
Total Income
Change (%)
Expenditure
EBITDA
% of Net Sales
Depreciation
EBIT
Product Dev. Exp.
Interest
Other Income
PBT
Effective Rate (%)
Adj. PAT
Change (%)
2011
1,221,279
32.0
1,043,129
178,150
14.6
46,555
131,595
9,976
23,853
4,295
104,372
11.7
92,736
492.4
2012
1,656,545
35.6
1,419,540
237,005
14.3
56,254
180,751
13,892
29,822
6,618
135,339
-0.3
119,008
28.3
2013
1,888,176
14.0
1,622,487
265,689
14.1
75,693
189,996
20,216
35,533
8,115
136,335
27.7
99,560
-16.3
2014
2,328,337
23.3
1,954,308
374,029
16.1
110,782
263,248
25,652
47,338
8,286
188,690
25.3
141,986
42.6
2015
2,627,963
12.9
2,206,825
421,138
16.0
133,886
287,252
28,752
48,615
8,987
217,026
35.2
140,465
-1.1
2016E
2,687,092
2.2
2,292,539
394,553
14.7
164,020
230,533
30,995
34,218
13,246
193,261
24.8
146,775
4.5
(INR Million)
2017E
3,167,870
17.9
2,712,358
455,512
14.4
178,488
277,024
34,140
29,286
10,521
224,120
24.2
183,873
25.3
2018E
3,579,512
13.0
3,041,632
537,879
15.0
206,388
331,491
37,929
25,079
9,971
278,454
23.8
239,090
30.0
Balance Sheet (Consolidated)
Y/E March
Share Capital
Reserves
Net Worth
Loans
Deferred Tax
Capital Employed
Gross Fixed Assets
Less: Depreciation
Net Fixed Assets
Capital WIP
Goodwill
Investments
Curr.Assets
Inventory
Sundry Debtors
Cash & Bank Bal.
Loans & Advances
Current Liab. & Prov.
Sundry Creditors
Other Liabilities
Net Current Assets
Appl. of Funds
E: MOSL Estimates
2011
6,377
185,338
191,715
303,622
14,638
512,440
715,231
396,987
318,245
117,289
35,848
25,443
506,995
140,705
65,257
114,096
178,422
491,378
279,031
112,776
15,616
512,440
2012
6,348
320,638
326,985
471,490
-23,743
777,803
897,791
495,125
402,667
159,458
40,937
89,177
711,679
182,160
82,368
182,381
249,952
626,116
366,863
130,835
85,564
777,803
2013
6,381
369,992
376,373
557,223
-24,094
913,206
1,205,654
570,818
634,836
60,000
41,024
90,577
829,538
209,690
109,427
211,127
280,739
742,769
447,801
134,250
86,769
913,206
2014
6,438
649,597
656,035
549,545
-7,748
1,202,038
1,329,282
688,154
641,128
332,626
49,788
106,867
1,046,103
272,709
105,742
297,118
273,241
974,474
573,157
199,707
71,629
1,202,038
2015
6,438
556,181
562,619
692,115
-13,900
1,245,167
1,582,066
744,241
837,825
286,401
46,970
153,367
1,034,685
292,723
125,792
321,158
256,948
1,114,081
574,073
328,305
-79,396
1,245,167
2016E
6,792
773,411
780,203
699,031
-13,900
1,470,759
2,111,367
908,260
1,203,106
70,000
46,970
155,979
1,040,093
294,476
125,152
318,953
261,948
1,045,389
588,952
235,581
-5,296
1,470,759
(INR Million)
2017E
6,792
950,352
957,144
685,947
-13,900
1,635,892
2,432,982
1,086,748
1,346,234
70,000
46,970
171,305
1,233,814
347,164
147,545
431,094
266,948
1,232,432
694,328
277,731
1,382
1,635,892
2018E
6,792
1,178,417
1,185,209
667,863
-13,900
1,847,339
2,776,505
1,293,136
1,483,369
70,000
46,970
199,594
1,439,983
392,275
166,717
566,479
271,948
1,392,577
784,550
313,820
47,406
1,847,339
September 2015
31

Thematic | Good-to-Great
Financials and Valuations: TATA MOTORS (Consolidated)
Ratios
Y/E March
Basic (INR)
EPS
EPS Fully Diluted
Cash EPS
Book Value (Rs/Share)
DPS
Payout (Incl. Div. Tax) %
Valuation (x)
Consolidated P/E
Normalized P/E
EV/EBITDA
EV/Sales
Price to Book Value
Profitability Ratios (%)
RoE
RoCE
Turnover Ratios
Debtors (Days)
Inventory (Days)
Creditors (Days)
Asset Turnover (x)
Leverage Ratio
Debt/Equity (x)
1.6
1.4
1.5
0.8
1.2
0.9
0.7
0.6
20
42
83
2.4
18
40
81
2.1
21
41
87
2.1
17
43
90
1.9
17
41
80
2.1
17
40
80
1.8
17
40
80
1.9
17
40
80
1.9
48.4
26.5
45.9
29.0
28.3
23.4
27.5
25.7
23.1
24.2
21.9
18.0
21.2
18.5
22.3
19.6
29.1
28.8
43.7
60.1
4.0
15.8
37.5
37.0
55.2
103.0
4.0
12.4
31.2
30.9
54.9
118.0
2.0
7.4
44.1
44.1
78.5
203.8
2.0
5.3
7.3
18.2
3.2
0.5
1.6
43.6
43.6
85.2
174.8
0.0
0.0
7.4
23.0
3.0
0.5
1.8
43.2
43.2
91.5
229.7
1.0
2.8
7.5
33.7
3.3
0.5
1.4
54.1
54.1
106.7
281.9
3.0
6.7
6.0
17.3
2.6
0.4
1.1
70.4
70.4
131.2
349.0
4.0
6.8
4.6
9.8
1.9
0.3
0.9
2011
2012
2013
2014
2015
2016E
2017E
2018E
Cash Flow Statement
Y/E March
OP/(Loss) before Tax
Int/Div. Received
Depreciation
Direct Taxes Paid
(Inc)/Dec in WC
Other Items
CF from Op Activity
Extra-ordinary Items
CF after EO Items
(Inc)/Dec in FA+CWIP
(Pur)/Sale of Invest.
CF from Inv Activity
Issue of Shares
Inc/(Dec) in Debt
Interest Paid
Dividends Paid
CF from Fin Activity
Inc/(Dec) in Cash
Add: Beginning Bal.
Closing Balance
2011
92,736
4,115
46,510
-13,912
-40,484
29,639
118,604
-7,773
110,830
-81,128
4,158
-76,970
32,550
-11,677
-24,691
-10,195
-14,013
19,848
67,920
87,768
2012
135,165
5,376
56,209
-17,679
-22,801
24,401
180,670
8,549
189,219
-137,829
-72,976
-210,804
1,386
113,054
-33,737
-15,031
65,672
44,087
104,244
148,330
2013
98,926
8,062
75,648
-22,231
-680
64,617
224,343
4,342
228,684
-187,203
-54,984
-242,188
7
45,082
-46,560
-15,087
-16,558
-30,061
153,550
123,488
2014
139,910
6,933
110,736
-43,083
57,744
88,983
361,223
7,221
368,444
-269,252
-36,611
-305,863
1
30,092
-61,706
-7,220
-38,832
23,749
142,531
166,280
2015
139,863
7,777
133,864
-41,940
-36,718
136,570
339,415
20,191
359,606
-315,396
-37,570
-352,966
0
122,288
-63,070
-7,204
52,014
58,655
152,629
211,283
2016E
146,775
13,246
164,020
-48,006
-76,304
1,091
200,822
0
200,822
-312,900
-2,611
-315,511
74,901
6,916
-34,218
-4,092
43,508
-71,182
211,283
140,101
(INR Million)
2017E
183,873
10,521
178,488
-54,297
105,462
1,276
425,323
0
425,323
-321,616
-15,326
-336,942
5,344
-13,084
-29,286
-12,276
-49,302
39,079
140,101
179,181
2018E
239,090
9,971
206,388
-66,188
89,362
1,465
480,088
0
480,088
-343,522
-28,289
-371,812
5,344
-18,084
-25,079
-16,368
-54,188
54,089
179,181
233,270
September 2015
32

Thematic | Good-to-Great
IOCL
CMP: INR408
Industry Attractiveness
TP: INR570 (+40%)
Buy
Per capita consumption to move towards world average: At 160 liters, India’s per capita
petroleum consumption is significantly lower than the world average of 730 liters.
Increasing vehicle population led by per capita GDP growth would boost India’s per
capita petroleum consumption.
Oligopolist market: Three players control 99% of the market (IOCL’s share at ~46%).
IOCL well placed for next 2-3 years led by (a) higher volume growth (1x of GDP), (b)
negligible private player presence, and (c) pricing power, led by auto fuel deregulation.
Disciplined Management
Effective capital allocation: Besides focusing on its core business of marketing and
refining, IOCL has also invested meaningfully in petrochemicals and pipelines.
High payouts: While government (69% ownership) policies have influenced its
profitability, IOCL has rewarded minority shareholders with high dividend payout.
Diversified earnings: Though refining margins are volatile, IOCL’s investments in
petchem (6% of EBITDA) and pipelines (~20% of EBITDA) ensure earnings stability.
Disciplined Thought
Geared to counter private competition: Having learnt its lessons during the previous
deregulation period (2004-06), IOCL (a) has almost doubled its outlets (>24,000 now) to
ensure wide reach, and (b) is focusing on improving service/fuel quality at its outlets to
levels at par with global standards.
Financial cost control in difficult times: While debt levels were high (peak D/E of 1.4x) in
an era of high under-recoveries (FY11-14), the management significantly increased the
share of overseas loans to cut interest costs.
Disciplined Action
Continuous capex to match volume growth: With 6-8% auto fuel volume growth, IOCL
will continue its retail network expansion to grow market share from the current ~46%.
Focus on low cost expansions: Post 15mmt greenfield refinery at Paradip, medium-
term expansions will be brownfield, and hence, cost effective.
Improving retail network efficiency: (a) Automated retail outlets with >200KL per
month – ready for differential pricing, (b) increased pipeline network – lowers logistics
cost.
Expected Results
IOCL’s profit is likely to more than double, led by fall in interest cost and higher
marketing margins (we model an increase from INR1.4/liter to INR2.4/liter by FY18).
RoE should sustain at >15%.
While refining margins would be governed by global demand-supply; likely higher
marketing margins provide predictability to its earnings and should lead to re-rating, in
our view. Fair value of INR570 implies 43% upside. The stock trades at 7.3x FY17E EPS.
33
September 2015

Thematic | Good-to-Great
Exhibit 24:
Auto fuel retail market share (%): IOCL operating
in an oligopolistic market
3
47
9
44
25
22
6
45
HPCL
BPCL
1
3
46
47
48
IOCL
Private
47
46
46
46
Exhibit 25:
IOCL has well-diversified earnings (%)
Refining
Pipelines
Petchem
Marketing
48
57
-
17
26
HPCL
57
-
7
37
BPCL
41
6
27
23
26
22
27
24
28
25
27
25
28
24
28
25
29
25
29
25
29
26
24
29
IOCL
Source: Company, MOSL
FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Source: PPAC, MoPNG, MOSL
Exhibit 26:
IOCL has almost doubled its retail network in the
last few years (number)
Exhibit 27:
IOCL’s balance sheet to strengthen with lowering
of leverage
D/E Ratio
1.0
0.9
1.3
1.3
1.2
1.0
0.7
0.7
0.6
FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Source: Company, MOSL
FY09
FY10
FY11
FY12
FY13
FY14
FY15 FY16E FY17E
Source: Company, MOSL
Exhibit 28:
Reforms give pricing power and scope to
increase marketing margins
22
14
44
49
32
7
18
8
22
5
13
EPS (INR)
20
12
37
0.0
FY10 FY11 FY12 FY13 FY14 FY15
52
RoE (%)
17
18
55
20
61
21
67
Exhibit 29:
Expect RoE to sustain at high levels
EPS (INR)
21.9
14.2
20.2
7.2
44
49
32
FY10
FY11
FY12
18
FY13
22
FY14
13
FY15 FY16E FY17E FY17E
Source: Company, MOSL
8.2
4.7
52
55
RoE (%)
17.2
16.1
16.7
63
0.5
1.0
1.5
2.0
FY16E
Addl. mktg margin
(INR/ltr)
Source: Company, MOSL
September 2015
34

Thematic | Good-to-Great
Financials and Valuations: IOCL
Income Statement (Consolidated)
(INR Million)
Y/E March
2010
2011
2012
2013
2014
2015
2016E
2017E
2018E
Net Sales
2,501,053 3,081,315 4,072,314 4,607,497 4,872,595 4,483,152 3,056,179 3,375,281 3,644,027
Change (%)
-12.6
23.2
32.2
13.1
5.8
-8.0
-31.8
10.4
8.0
Finished Gds Pur.
1,007,775 1,275,911 1,572,508 1,555,286 1,560,457 1,408,174 1,224,966 1,045,748 1,100,858
Raw Materials Cons
1,158,063 1,445,071 2,041,610 2,590,820 2,767,619 2,583,039 1,255,663 1,745,272 2,036,362
Other Operating Costs
206,462
235,028
277,923
334,015
384,808
398,514
323,602
317,692
207,978
EBITDA
128,753
125,305
180,273
127,377
159,711
93,424
251,948
266,568
298,829
% of Net Sales
5.1
4.1
4.4
2.8
3.3
2.1
8.2
7.9
8.2
Depreciation
35,552
49,326
53,093
56,915
63,600
52,190
51,897
63,730
74,222
Interest
17,262
29,803
58,947
70,835
59,079
41,746
29,880
36,584
32,984
Other Income
74,547
54,964
48,797
45,416
45,278
53,975
32,455
37,654
40,382
Excep/Prior period items
0
0
-77,078
0
17,468
16,681
16,725
0
0
PBT
150,486
101,140
39,953
45,042
99,778
70,143
219,351
203,908
232,006
Tax
40,499
20,284
-2,700
8,770
30,113
21,426
75,812
68,074
77,100
Rate (%)
26.9
20.1
-6.8
19.5
30.2
30.5
34.6
33.4
33.2
PAT
109,987
80,856
42,653
36,273
69,666
48,718
143,539
135,834
154,905
Minority interest
-2,855
-2,549
-393
8,217
1,190
402
-1,022
-892
-848
Group net profit
107,132
78,307
42,260
44,490
70,856
49,120
142,517
134,942
154,058
Adj. net profit
107,132
78,307
119,338
44,490
53,388
32,439
125,792
134,942
154,058
Change (%)
312.1
-26.9
52.4
-62.7
20.0
-39.2
287.8
7.3
14.2
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Minority interest
Loans
Deferred Tax
Capital Employed
Gross Fixed Assets
Less: Depreciation
Net Fixed Assets
Capital WIP
Investments
Goodwill
Cash & Bank Balance
Inventory
Debtors
Loans & Advances
Other assets
Curr. Assets, L & Adv.
Liabilities
Provisions
Net Current Assets
Application of Funds
E: MOSL Estimates
532,911
2010
2011
2012
2013
2014
2015
2016E
24,280
24,280
24,280
24,280
24,280
24,280
24,280
500,344
551,473
579,454
606,092
654,851
664,043
761,109
524,623
575,752
603,734
630,372
679,130
688,323
785,389
18,330
19,930
19,437
12,618
11,706
10,733
11,755
494,726
578,376
800,153
867,894
889,325
581,541
601,551
54,170
70,282
59,696
63,323
64,228
68,356
100,680
1,091,849 1,244,341 1,483,020 1,574,207 1,644,389 1,348,952 1,499,376
(INR Million)
2017E
2018E
24,280
24,280
847,759
947,844
872,039
972,123
12,647
13,494
601,551
529,071
102,670
104,935
1,588,908 1,619,625
788,886 1,008,694 1,076,256 1,151,002 1,269,522 1,375,223 1,478,123 1,911,023 2,003,923
334,111
382,229
430,447
484,133
544,856
608,119
660,015
723,745
797,967
454,775
626,465
645,809
666,869
724,666
767,104
818,107 1,187,277 1,205,956
227,678
142,842
154,496
272,400
380,609
403,781
403,781
73,781
73,781
214,298
224
15,984
410,765
56,062
152,070
15,264
186,469
235
15,374
549,171
76,546
233,573
15,060
175,879
244
8,220
638,510
115,518
436,202
23,387
173,508
870
12,198
666,043
125,021
456,188
44,148
158,950
878
37,045
723,394
125,517
470,905
44,484
160,687
705
12,211
499,174
76,448
385,358
31,487
160,687
705
79,200
463,147
79,968
363,996
31,802
160,687
705
134,604
505,269
86,887
364,062
32,120
160,687
705
152,804
535,014
92,156
364,128
32,441
351,658
532,103
561,218
619,702
751,018
707,229
623,426
677,893
719,458
103,612
69,291
154,028
223,335
271,040
280,773
278,590
278,590
278,590
194,874
288,330
506,591
460,560
379,287
16,676
116,097
166,459
178,497
1,091,849 1,244,341 1,483,020 1,574,207 1,644,389 1,348,952 1,499,376 1,588,908 1,619,625
September 2015
35

Thematic | Good-to-Great
Financials and Valuations: IOCL
Ratios
Y/E March
Basic (INR)
Adj. EPS
Reported EPS
Cash EPS
Book Value
Dividend
Payout (incl. Div. Tax.)
Valuation (x)
P/E
Cash P/E
EV / EBITDA
EV / Sales
Price / Book Value
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
Turnover Ratios
Debtors (No. of Days)
Asset Turnover (x)
Leverage Ratio
Debt / Equity (x)
Cash Flow Statement
Y/E March
OP/(Loss) before Tax
Depreciation
Interest Paid
Direct Taxes Paid
(Inc)/Dec in WC
Other op activities
CF from Op. Activity
(Inc)/Dec in FA & CWIP
Free Cash Flow
(Pur)/Sale of Investments
CF from Inv. Activity
Inc / (Dec) in Debt
Dividends Paid
Interest Paid
CF from Fin. Activity
Inc / ( Dec) in Cash
Add: Opening Balance
Closing Balance
E: MOSL Estimates
2010
44.1
44.1
58.8
216.1
13.0
36.1
2011
32.3
32.3
52.6
237.1
9.5
38.4
12.7
7.8
11.7
0.5
1.7
2.3
21.9
16.0
7.6
3.4
0.9
14.2
11.2
7.9
3.4
1.0
20.2
12.9
8.6
3.9
1.3
7.2
7.6
9.5
4.1
1.4
2012
49.2
17.4
71.0
248.7
5.0
12.2
2013
18.3
18.3
41.8
259.6
6.2
35.2
2014
22.0
29.2
48.2
279.7
8.7
35.2
18.6
8.5
11.1
0.4
1.5
2.1
8.2
8.8
9.4
4.0
1.3
2015
13.4
20.2
34.9
283.5
6.6
52.0
30.5
11.7
16.1
0.3
1.4
1.6
4.7
6.4
8.2
3.4
0.8
2016E
51.8
58.7
73.2
323.5
16.0
36.9
7.8
5.5
5.9
0.5
1.3
3.9
17.1
16.3
9.3
2.1
0.8
2017E
55.6
55.6
81.8
359.2
17.0
36.5
7.3
5.0
5.4
0.4
1.1
4.2
16.3
15.6
9.0
2.0
0.7
2018E
63.5
63.5
94.0
400.4
19.0
35.7
6.4
4.3
4.5
0.4
1.0
4.7
16.7
16.5
9.0
1.9
0.5
2010
150,486
35,677
17,263
-27,296
-182,446
-9,774
-16,090
-138,236
-154,325
174,184
35,948
21,257
-10,907
-24,276
-13,925
5,933
10,052
15,985
2011
101,140
49,529
29,832
-40,032
-50,193
-19,684
70,592
-137,164
-66,572
53,856
-83,308
83,652
-38,124
-33,418
12,110
-606
15,985
15,379
2012
39,953
49,839
59,016
-4,066
-132,204
-20,192
-7,654
-170,184
-177,838
39,652
-130,532
222,728
-28,057
-63,643
131,028
-7,158
15,379
8,221
2013
45,042
57,103
71,184
-11,690
-44,530
-23,715
93,395
-127,995
-34,600
1,153
-92,936
96,681
-14,922
-78,240
3,519
3,978
8,221
12,199
2014
99,779
63,691
59,101
-18,956
54,506
-16,081
242,040
-218,243
23,797
-1,889
-185,944
55,975
-18,501
-68,722
-31,248
24,847
12,199
37,046
2015
70,144
51,904
41,746
-23,442
348,952
-29,542
459,762
-131,590
328,172
-1,918
-101,770
-304,857
-26,090
-51,879
-382,827
-24,835
37,046
12,212
2016E
219,351
51,897
29,880
-43,488
-32,432
0
225,209
-102,900
122,309
0
-102,900
20,010
-45,451
-29,880
-55,321
66,988
12,212
79,200
(INR Million)
2017E
2018E
203,908
232,006
63,730
74,222
36,584
32,984
-66,084
-74,836
5,042
6,162
0
0
243,180
270,537
-102,900
140,280
0
-102,900
0
-48,292
-36,584
-84,876
55,405
79,200
134,605
-92,900
177,637
0
-92,900
-72,480
-53,973
-32,984
-159,437
18,200
134,605
152,805
September 2015
36

Thematic | Good-to-Great
ICICI Bank
CMP: INR258
Industry Attractiveness
TP: INR450 (+74%)
Buy
India presents a huge opportunity for banks. Only 40% of the population has access to
banking. Credit-to-GDP is just ~52% against an average of ~90% for emerging markets
and ~100% for developed markets.
Deepening financial penetration, increasing urbanization, and expansion of private banks
into rural and semi-urban areas would drive retail loan growth. Consumer loans-to-GDP
stands at just 15% against 20%+ for major economies.
Disciplined Management
Since Ms Kochhar took charge in 2009, ICICI Bank (ICICIBC) has focused on improving
profitability (16% PAT CAGR over FY10-15), with structural changes in ALM profile (helping
NIM to expand ~100bp) and strong cost control (700bp decline in cost-to-income ratio to
37%, the lowest since 2002), leading to RoA improvement (from 1% in FY09 to 1.6%).
Growth consolidation and profit focus has helped improve subsidiaries’ performance. From
a loss of INR6.7b in FY08, they posted a PAT of INR33.7b in FY15.
Disciplined Thought
The management is focusing on secured loans to augment loan market share and
maintain healthy credit quality. The retail segment remains a key focus area.
It is focusing on capital management to improve return ratios and enhance shareholder
value, in which subsidiaries would play a major role.
To sustain dilution-free growth, ICICIBC is focusing on core profitability. It has enhanced
margins and operating leverage, and is keeping a check on credit cost.
Disciplined Action
Healthy retail loan growth: Retail loans have grown at a CAGR of 24% over FY13-15. The
share of the retail segment has increased from 37% in FY12 to 42% in FY15. By
moderating growth in loans to sensitive sectors (3% CAGR over FY13-15), ICICIBC has
gradually lowered its exposure to these sectors to ~16%.
ICICIBC has regularly repatriated capital (USD2b till date) from overseas subsidiaries
and increased dividend payout from domestic subsidiaries (INR29b over FY13-15).
Focus on operating leverage: Employees/branch have halved to 16 since 2008, CASA
ratio has doubled, and share of retail fees has grown from 33% in 2011 to 52%.
Expected Results
In the medium term, we expect loan growth to continue being driven by the retail segment
(25%+ CAGR), with funding from relatively low cost retail liabilities.
Cost control and productivity gains should continue. Focus on core profitability would
lead to further improvement in core RoE (~17% in FY17, up 150bp from FY15).
Release of capital from subsidiaries would ensure dilution-free growth till FY18.
37
September 2015

Thematic | Good-to-Great
Exhibit 30:
Strong focus on core profitability would lead to
further improvement in core RoA (1.8%+) and RoE (15%+)
RoA
11.5
9.1
9.6
1.84
1.62 1.73 1.80 1.81 1.82
1.34 1.44
RoE
12.8
15.6 16.3
14.8 15.2 15.2 15.0
Exhibit 31:
Retail loan growth is back to 25% levels (highest
since FY08) - will remain a key focus area
39
1,277
Retail Loans (INR b)
1,317
Growth YoY (%)
1,644
1,320
1,074
964
25
23
15
11
1,070
790
837
6
0.96 1.08
3
-19
-26
Source: Company, MOSL
Source: Company, MOSL
Exhibit 32:
Contribution from retail segment now accounts
for 17% of overall PBT v/s 6% in FY12
Wholesale
6
24
8
32
Others
Treasury
13
38
2
71
58
47
FY14
Retail
17
41
3
39
FY15
Exhibit 33:
Dividend income and capital repatriation from
subsidiaries remains a key focus area
Dividend & Repatriation income as % of PBT
11
8
7
7
6
FY11
FY12
FY13
FY14
FY15
8
14
FY12
FY13
FY09
FY10
Source: Company, MOSL
Source: Company, MOSL
Exhibit 34:
In-line performance v/s Sensex…
ICICI Bank
170
140
110
80
50
141
131
Sensex-Rebased
Exhibit 35:
…and BSE100
200
160
120
80
40
ICICI Bank
BSE 100- Rebased
145
131
Source: Company, MOSL
Source: Company, MOSL
September 2015
38

Thematic | Good-to-Great
Financials and Valuations: ICICI Bank
Income Statement
Y/E March
Interest Income
Interest Expended
Net Interest Income
Change (%)
Other Income
Net Income
Change (%)
Operating Exp.
Operating Profits
Change (%)
Provisions & Cont.
PBT
Tax
Tax Rate (%)
PAT
Change (%)
Dividend (Including Tax)
Core PPP*
Change (%)
*Core PPP is (NII+Fee income-Opex)
Balance Sheet
Y/E March
Share Capital
Equity Share Capital
Preference Capital
Reserves & Surplus
Net Worth
Of which Equity Net Worth
Deposits
Change (%)
Of which CASA Deposits
Change (%)
Borrowings
Other Liabilities & Prov.
Total Liabilities
Current Assets
Investments
Change (%)
Loans
Change (%)
Net Fixed Assets
Other Assets
Total Assets
Asset Quality
GNPA (INR m)
NNPA (INR m)
GNPA Ratio
NNPA Ratio
PCR (Excl Technical write off)
E: MOSL Estimates
2010
257,069
175,926
81,144
-3.0
74,777
155,920
-2.4
58,598
97,322
9.0
43,869
53,453
13,203
24.7
40,250
7.1
15,020
85,512
0.8
2011
259,741
169,572
90,169
11.1
66,479
156,648
0.5
66,172
90,475
-7.0
22,868
67,607
16,093
23.8
51,514
28.0
18,170
92,625
8.3
2012
335,427
228,085
107,342
19.0
75,028
182,369
16.4
78,504
103,865
14.8
15,830
88,034
23,382
26.6
64,653
25.5
21,228
103,995
12.3
2013
400,756
262,092
138,664
29.2
83,457
222,121
21.8
90,129
131,992
27.1
18,025
113,967
30,712
26.9
83,255
28.8
25,996
127,042
22.2
2014
441,782
277,026
164,756
18.8
104,279
269,034
21.1
103,089
165,946
25.7
26,264
139,682
41,577
29.8
98,105
17.8
28,336
155,776
22.6
2015
490,911
300,515
190,396
15.6
121,761
312,157
16.0
114,958
197,199
18.8
39,000
158,199
46,446
29.4
111,754
13.9
31,729
180,269
15.7
2016E
542,208
328,285
213,923
12.4
137,791
351,714
12.7
130,777
220,937
12.0
41,502
179,434
52,933
29.5
126,501
13.2
36,179
202,314
12.2
(INR Million)
2017E
2018E
625,289 742,776
370,681 437,920
254,608 304,856
19.0
19.7
157,528 183,336
412,137 488,192
17.2
18.5
153,253 179,604
258,884 308,588
17.2
19.2
47,524
57,177
211,360 251,411
62,351
74,166
29.5
29.5
149,009 177,245
17.8
18.9
42,617
50,692
238,399 286,054
17.8
20.0
(INR Million)
2017E
2018E
15,097
15,097
11,597
11,597
3,500
3,500
989,411 1,115,964
1,004,508 1,131,061
1,001,008 1,127,561
5,386,187 6,548,418
21.5
21.6
2,148,858 2,430,502
14.5
13.1
2,029,978 2,226,575
424,408 491,121
8,845,080 10,397,174
569,779 678,209
2,045,797 2,301,521
12.5
12.5
5,533,709 6,656,065
20.2
20.3
49,076
49,987
646,719 711,391
8,845,080 10,397,174
(%)
179,873
54,519
2.7
0.8
69.7
2010
14,649
11,149
3,500
505,035
519,684
516,184
2,020,166
-7.5
842,158
34.4
939,136
155,012
3,633,997
388,737
1,208,928
17.3
1,812,056
-17.0
32,127
192,149
3,633,997
2011
15,018
11,518
3,500
539,391
554,409
550,909
2,256,021
11.7
1,016,465
20.7
1,092,043
159,864
4,062,337
340,901
1,346,860
11.4
2,163,659
19.4
47,443
163,475
4,062,337
2012
15,028
11,528
3,500
592,525
607,552
604,052
2,555,000
13.3
1,110,194
9.2
1,398,149
329,987
4,890,688
362,293
1,595,600
18.5
2,537,277
17.3
46,147
349,371
4,890,688
2013
15,036
11,536
3,500
655,523
670,560
667,060
2,926,136
14.5
1,225,763
10.4
1,449,915
321,336
5,367,947
414,175
1,713,936
7.4
2,902,494
14.4
46,471
290,871
5,367,947
2014
15,050
11,550
3,500
720,583
735,633
732,133
3,319,137
13.4
1,423,784
16.2
1,544,091
347,555
5,946,416
415,296
1,770,218
3.3
3,387,026
16.7
46,781
327,094
5,946,416
2015
15,097
11,597
3,500
792,697
807,794
804,294
3,615,627
8.9
1,643,799
15.5
1,720,673
317,199
6,461,293
423,046
1,581,292
-10.7
3,875,221
14.4
47,255
534,479
6,461,293
2016E
15,097
11,597
3,500
883,019
898,115
894,615
4,431,595
22.6
1,876,717
14.2
1,857,719
366,744
7,554,173
495,612
1,818,486
15.0
4,603,983
18.8
48,166
587,927
7,554,173
94,807
38,411
5.1
2.1
59.5
100,343
24,074
4.5
1.1
76.0
94,753
18,608
3.6
0.7
80.4
96,078
22,306
3.2
0.8
76.8
105,058
32,980
3.0
1.0
68.6
150,947
62,555
3.8
1.6
58.6
159,819
61,852
3.4
1.3
61.3
167,953
58,897
3.0
1.1
64.9
September 2015
39

Thematic | Good-to-Great
Financials and Valuations: ICICI Bank
Ratios
Y/E March
Spreads Analysis (%)
Avg. Yield - Earning Assets
Avg. Yield on loans
Avg. Yield on Investments
Avg. Cost-Int. Bear. Liab.
Avg. Cost of Deposits
Interest Spread
Net Interest Margin
Profitability Ratios (%)
RoE
Adjusted RoE
RoA
Int. Expended/Int.Earned
Other Inc./Net Income
Efficiency Ratios (%)
Op. Exps./Net Income*
Empl. Cost/Op. Exps.
Busi. per Empl. (INR m)
NP per Empl. (INR lac)
* ex treasury
Asset-Liability Profile (%)
Loan/Deposit Ratio
CASA Ratio %
Invest./Deposit Ratio
G-Sec/Invest. Ratio
CAR
Tier 1
Valuation
Book Value (INR)
BV Growth (%)
Price-BV (x)
ABV (for Subsidaries) (INR)
ABV Growth (%)
Price-ABV (x)
ABV (for Subs Invst & NPA) (INR)
Adjusted Price-ABV (x)
EPS (INR)
EPS Growth (%)
Price-Earnings (x)
Adj. Price-Earnings (x)
Dividend Per Share (INR)
Dividend Yield (%)
E: MOSL Estimates
2010
7.9
8.7
5.8
5.2
5.5
2.7
2.5
2011
7.7
8.3
6.2
4.8
4.7
2.9
2.7
2012
8.5
9.4
6.6
5.6
5.9
2.8
2.7
2013
8.8
10.1
6.7
5.7
6.2
3.0
3.0
2014
8.7
10.0
6.6
5.5
5.7
3.2
3.2
2015
8.9
9.8
6.3
5.5
5.9
3.5
3.47
2016E
8.9
9.3
6.5
5.3
5.5
3.6
3.5
2017E
8.7
9.2
6.1
5.1
5.3
3.6
3.5
2018E
8.7
9.3
6.1
5.1
5.4
3.6
3.6
8.0
9.6
1.1
68.4
48.0
9.7
11.5
1.3
65.3
42.4
11.3
12.8
1.4
68.0
41.1
13.3
14.8
1.62
65.4
37.6
14.4
15.2
1.73
62.7
38.8
15.0
15.2
1.80
61.2
39.0
15.3
15.0
1.81
60.5
39.2
16.1
15.6
1.82
59.3
38.2
17.0
16.3
1.84
59.0
37.6
40.7
32.9
99.8
9.8
41.7
42.6
72.4
9.0
43.0
44.8
81.6
11.1
41.5
43.2
88.0
13.4
39.8
40.9
86.8
13.6
38.9
41.3
104.6
16.5
39.3
40.7
112.5
17.2
39.1
40.3
128.7
19.2
38.6
39.9
147.7
21.7
89.7
41.7
59.8
56.6
19.4
14.4
95.9
45.1
59.7
47.6
19.5
13.2
99.3
43.5
62.5
54.5
18.5
12.7
99.2
41.9
58.6
53.9
18.7
12.8
102.0
42.9
53.3
53.8
17.7
12.8
107.2
45.5
43.7
66.8
17.0
12.8
103.9
42.3
41.0
68.7
16.2
12.4
102.7
39.9
38.0
72.4
15.6
12.2
101.6
37.1
35.1
76.6
15.0
12.0
92.6
5.1
70.7
6.6
65.9
7.2
6.9
95.7
3.4
74.1
4.8
71.2
8.9
23.9
2.4
2.8
103.3
7.9
2.5
81.7
10.2
2.7
79.5
2.8
11.2
25.4
23.0
19.5
3.3
1.3
113.2
9.6
2.3
91.9
12.5
2.4
89.2
2.4
14.4
28.7
17.9
15.0
4.0
1.6
122.9
8.5
2.1
102.1
11.1
2.1
98.1
2.2
17.0
17.7
15.2
12.5
4.6
1.8
135.2
10.0
1.9
116.1
13.7
1.7
108.5
1.9
19.3
13.5
13.4
10.5
5.0
1.9
150.8
11.5
1.7
131.7
13.4
1.5
124.2
1.6
21.8
13.2
11.8
8.9
5.7
2.2
169.1
12.2
1.5
150.0
13.9
1.2
142.9
1.3
25.7
17.8
10.0
7.2
6.7
2.6
191.0
12.9
1.4
171.8
14.5
1.0
165.3
1.0
30.6
18.9
8.4
5.7
7.9
3.1
September 2015
40

Thematic | Good-to-Great
IDFC
CMP: INR128
Industry Attractiveness
TP: INR213 (+66%)
Buy
India presents a huge opportunity for banks. Only 40% of the population has access to
banking. Credit-to-GDP is just ~52% against an average of ~90% for emerging markets
and ~100% for developed markets.
The industry is likely to grow at a CAGR of 18%+ over the next five years.
Incumbent state-owned banks still have 75%+ market share. In this digital era, private
sector banks should continue to gain share, with superior products and services.
Disciplined Management
IDFC is an infrastructure financier, generating RoE of 12-15%. Despite the infrastructure
segment going through tough times, IDFC has maintained healthy profitability while
creating floating provisions on the balance sheet.
Corporate governance levels are best in class; this has helped IDFC to become one of the
two from 26 contenders to get a banking license from the RBI.
Disciplined Thought
Focus on long-term shareholder value creation even at the cost of immediate
profitability
Diversification: Considering the challenges in infrastructure financing, the management
focused on diversification of assets and liabilities.
For the banking business, IDFC is focusing on innovation, technology and cross-selling
to existing customers to increase profitability.
Disciplined Action
During the troubled times of FY12-15, IDFC’s loan CAGR was just 2%. It created
provisions of ~4% of loans though reported NPAs were lower at <0.5%. Further, it also
created provisions of 60bp on disbursements.
IDFC is one of the two from 26 contenders to receive a banking license. Operating
under the banking model would enhance sustainable RoE by ~500bp.
Expected Results
RoE is expected to be healthy at 11-12% in the first full year of operations as a bank and
then steadily rise to ~18% in the next four years.
IDFC would command significantly higher value as a bank (with higher retail deposits
and loans) than as an infrastructure financier.
Investors are likely to focus more on the expected improvement in business, higher and
sustainable RoE, strong management team, and good corporate governance.
September 2015
41

Thematic | Good-to-Great
Exhibit 36:
Leverage of IDFC Bank to increase gradually; RoE
to be similar to peers, led by higher core profitability (%)
RoA
8.5
13.6
RoE
Leverage
9.0
14.5
9.2
16.2
9.4
17.8
Exhibit 37:
Steady diversification of loan portfolio
Infrastructure loans (INR b)
88
88
82
79
76
74
% of loans
7.9
11.2
1.6
FY17
1.6
FY18
1.7
FY19
1.8
FY20
1.9
FY21
460
FY16
529
FY17
627
FY18
742
FY19
879
FY20
1,041
FY21
Source: Company, MOSL
Source: Company, MOSL
Exhibit 38:
Cost efficiency to be key differentiator for IDFC
Bank (opex; % of assets)
IDFCB
YES, KMB (in initial years)
3.9
3.5
3.3
2.2
1.1
Year 1
1.1
Year 2
1.1
Year 3
1.2
Year 4
1.2
Year 5
1.2
Year 6
Private Banks average
Exhibit 39:
Stress loans adequately provided for; unlikely to
be a drag in banking setup
GNPA
Restructured loans
Outstanding provisions
5.3
3.0
0.6
1QFY15
6.1
3.5
0.6
2QFY15
6.1
3.8
0.7
3QFY15
4.3
0.7
4QFY15
4.7
1.5
1QFY16
(% of loans)
7.8
7.0
3.3
3.1
2.6
4.5
2.3
0.6
4QFY14
Source: Company, MOSL
Source: Company, MOSL
Exhibit 40:
Stock has underperformed Sensex…
160
130
100
70
40
91
IDFC
Sensex-Rebased
141
Exhibit 41:
…and BSE100 post banking announcement
IDFC
160
130
100
70
40
91
145
BSE 100- Rebased
Source: Company, MOSL
Source: Company, MOSL
September 2015
42

Thematic | Good-to-Great
Financials and Valuations: IDFC
Income Statement (Consolidated)
Y/E March
Interest Income*
Interest Expended
Net Interest Income
Change (%)
Other Income
Fees Based income
Principal Invt (Incl Carry Inc)**
Fixed income gains and others
Net Income
Change (%)
Operating Expenses
Operating Income
Change (%)
Other Provisions
PBT
Tax
Tax Rate (%)
PAT
Change (%)
(MI)/Associate profit
Consolidated PAT
Change (%)
Proposed Dividend
*Includes debt trading gains; **
Excludes debt trading gains
2010
30,797
19,535
11,262
21.4
9,829
6,182
3,330
317
21,091
35.6
5,526
15,566
30.9
1,283
14,283
3,666
25.7
10,617
40.1
5.2
10,623
41.7
1,951
2011
40,276
23,875
16,401
45.6
9,054
6,413
2,260
382
25,455
20.7
5,321
20,135
29.4
2,346
17,788
4,998
28.1
12,791
20.5
25.7
12,817
20.7
2,925
2012
55,679
34,562
21,117
28.8
8,672
4,587
3,890
195
29,788
17.0
5,216
24,572
22.0
2,846
21,726
6,219
28.6
15,508
21.2
32.0
15,540
21.2
3,478
2013
72,279
46,758
25,521
20.9
9,205
5,807
2,060
1,339
34,726
16.6
5,294
29,432
19.8
3,496
25,936
7,511
29.0
18,424
18.8
-62.3
18,362
18.2
3,938
2014
77,384
50,552
26,831
5.1
10,516
5,991
3,280
1,245
37,348
7.5
5,438
31,910
8.4
6,283
25,627
7,385
28.8
18,242
-1.0
-215.1
18,027
-1.8
3,942
2015
84,562
56,556
28,006
4.4
12,235
5,092
4,067
3,075
40,241
7.7
6,338
33,903
6.2
8,500
25,403
7,367
29.0
18,036
-1.1
-300.0
17,736
-1.6
3,902
(INR Million)
2016E
90,391
62,707
27,685
-1.1
13,700
6,457
3,917
3,325
41,385
2.8
10,760
30,625
-9.7
8,061
22,564
6,769
30.0
15,795
-12.4
-300.0
15,495
-12.6
3,409
2017E
102,396
71,734
30,662
10.8
15,216
7,824
4,017
3,375
45,879
10.9
11,928
33,950
10.9
7,664
26,286
7,623
29.0
18,663
18.2
-300.0
18,363
18.5
4,040
Balance Sheet
Y/E March
Capital
Reserves & Surplus
Net Worth
Borrowings
Change (%)
Total Liabilities
Investments
Change (%)
Loans
Change (%)
Goodwill
Net Fixed Assets
Deferred Tax Assets
Net current Assets
Total Assets
E: MOSL Estimates
2010
13,006
57,097
70,103
265,439
12.7
335,605
46,554
-28.4
250,311
21.5
11,596
4,415
1,755
20,974
335,605
2011
14,609
89,475
104,084
371,439
39.9
475,526
69,611
49.5
376,523
50.4
11,638
4,469
2,480
10,804
475,526
2012
15,124
107,733
122,856
472,750
27.3
595,784
75,339
8.2
481,846
28.0
9,668
4,165
3,180
21,587
595,784
2013
15,147
121,682
136,829
542,270
14.7
679,353
110,042
46.1
557,370
15.7
9,568
3,445
3,938
-5,008
679,353
2014
15,163
135,241
150,404
565,650
4.3
716,456
113,087
2.8
585,450
5.0
9,571
3,285
4,875
188
716,456
2015
15,893
157,703
173,596
673,164
19.0
847,161
294,026
160.0
526,905
-10.0
9,571
3,449
4,875
8,334
847,161
(INR Million)
2016E
15,893
169,226
185,119
742,987
10.4
928,508
352,831
20.0
553,250
5.0
9,571
3,622
4,875
4,358
928,508
2017E
15,893
182,883
198,776
879,497
18.4
1,078,675
423,398
20.0
636,238
15.0
9,571
3,803
4,875
791
1,078,675
September 2015
43

Thematic | Good-to-Great
Financials and Valuations: IDFC
Ratios
Y/E March
Spreads Analysis (%)
Avg. Yield - Infra. loans
Avg. Yield - Earning Assets
Avg. Cost-Int. Bear. Liab.
Interest Spread on loans
Net Interest Margin
Profitability Ratios (%)
RoE
Core RoE
RoA
Int. Expended/Int.Earned
Other Income./Net Income
Efficiency Ratios (%)
Total Assets/Equity(x)
Debt/Equity (x)
Fee income/Net Income
Op. Exps./Net Income
Empl. Cost/Op. Exps.
Asset Quality and capitalization (%)
Gross NPAs
Gross NPAs to Adv.
Net NPAs
Net NPAs to Adv.
2010
11.3
10.7
7.8
2.9
3.0
2011
11.0
11.0
7.5
3.5
3.8
2012
11.2
11.1
8.2
2.9
3.7
2013
12.3
11.9
9.2
2.7
3.8
2014
11.8
11.4
9.1
2.2
3.6
2015
12.0
11.1
9.1
2.0
3.3
2016E
11.5
10.4
8.9
1.6
2.9
2017E
11.5
10.4
8.8
1.6
2.8
16.1
17.6
3.4
63.4
46.6
14.7
17.8
3.2
59.3
35.6
13.7
16.2
2.9
62.1
29.1
14.1
15.1
2.9
64.7
26.5
12.6
13.1
2.6
65.3
28.2
10.9
11.4
2.3
66.9
30.4
8.6
8.8
1.7
69.4
33.1
9.6
9.8
1.8
70.1
33.2
4.8
3.8
29.3
26.2
55.8
4.6
3.6
25.2
20.9
55.6
4.8
3.8
15.4
17.5
58.4
5.0
4.0
16.7
15.2
55.1
4.8
3.8
16.0
14.6
53.0
4.9
3.9
12.7
15.8
55.6
5.0
4.0
15.6
26.0
50.0
5.4
4.4
17.1
26.0
50.0
797
0.2
389
0.1
1,483
0.3
714
0.1
851
0.2
289
0.1
3,330
0.6
2,206
0.4
3,576
0.7
1,196
0.2
9,899
1.8
5,019
0.9
18,197
2.8
10,817
1.7
Valuation
Book Value (INR)
53.9
71.2
81.2
Price-BV (x)
1.6
Adjusted BV (INR)*
42.1
60.6
72.7
Price-ABV (x)
1.5
EPS (INR)
8.2
8.8
10.3
EPS Growth (%)
41.1
7.4
17.1
Price-Earnings (x)
12.5
OPS (INR)
12.0
13.8
16.2
OPS Growth (%)
30.4
15.2
17.9
Price-OP (x)
7.9
Dividend per Share (INR)
1.5
2.0
2.3
Dividend Yield (%)
1.8
E: MOSL Estimates; *Adj. for Inv. in subsidiaries, Prices adj. for other ventures
90.3
1.4
81.3
1.3
12.1
18.0
10.6
19.4
19.6
6.6
2.6
2.0
99.2
1.3
89.5
1.2
11.9
-1.9
10.8
21.0
8.3
6.1
2.6
2.0
109.2
1.2
99.9
1.0
11.2
-6.1
11.5
21.3
1.4
6.0
2.5
1.9
116.5
1.1
107.2
0.9
9.7
-12.6
13.1
19.3
-9.7
6.6
2.1
1.7
125.1
1.0
115.8
0.9
11.6
18.5
11.1
21.4
10.9
6.0
2.5
2.0
September 2015
44

Thematic | Good-to-Great
Annexure II: Dynamic Value Picks
BSE Sensex: 25,202
S&P CNX: 7,655
4 September 2015
IndusInd Bank
ITC
Larsen & Toubro
Maruti Suzuki
UltraTech Cem.
United Spirits
Zee Ent.
Annexure II: Dynamic Value Picks
September 2015
45

Thematic | Good-to-Great
IndusInd Bank
CMP: INR840
Industry Attractiveness
TP: INR1,140 (+36%)
Buy
India presents a huge opportunity for banks. Only 40% of the population has access to
banking. Credit-to-GDP is just ~52% against an average of ~90% for emerging markets
and ~100% for developed markets.
Deepening financial penetration, increasing urbanization, and expansion of private banks
into rural and semi-urban areas would drive retail loan growth. Consumer loans-to-GDP
stands at just 15% against 20%+ for major economies.
Disciplined Management
IndusInd Bank (IIB) is a classic case of management change (Mr Sobti and his team took
charge in 2008) scripting a turnaround in fortunes. The bank’s workforce has grown 6.6x
over FY08-15 to 19k+ and the top management team remains intact.
The management targets to be a forerunner in terms of profitability (RoA best in class at
1.9% in FY15; up from 35bp in FY08), productivity (profit/employee up 4x over FY08-15),
and efficiency (C/I ratio down from 68% in FY08 to 46%).
Disciplined Thought
Three-year planning cycle (2014-17)
a) Focus on outpacing system growth (loan CAGR of 25-30% v/s ~15% for industry) by
capitalizing on niche areas (vehicle loans)
b) Building at least 15 home markets (5%+ branch share) to sustain savings accounts
c) Core fee growth to outpace loan growth, supporting RoA; focus remains on gaining
forex market share and strong investment banking revenues
Disciplined Action
Focusing on high yielding retail loan portfolio (42% of book) by capitalizing on strong
presence in vehicle loans and addition of new retail products. Expect 30-35% CAGR in
this portfolio. IIB’s loan market share (MS) doubled over FY08-15 to 1%.
Increased share of low cost CASA deposits (15.5% in FY08 to 34%) through focused
branch expansion and improving brand image. SA MS: 54bp in FY15 v/s 29bp in FY12)
Gaining forex MS (from 1% in FY08 to ~4%) at the cost of state-owned banks, driven by
lower turnaround time. Fees to assets improved to 2.2% (+100bp from FY08).
Expected Results
Healthy core revenues (5.6% of assets – best in industry), strong growth, high margins
(due to high yielding loans and low cost deposits), and productivity gains should enable
IIB to report steady-state RoA of 2%+ and ~30% earnings CAGR over FY15-18.
Recent capital infusion would result in >600bp increase in tier-I ratio – sufficient for 3-4
years of 25%+ loan growth. (FY16/17 RoE would be impacted by the capital raising).
CASA ratio is expected to improve by 500bp+ to ~40% over FY15-18.
September 2015
46

Thematic | Good-to-Great
Exhibit 42:
Management aims to double the balance sheet
over next three years
Loans (INR b)
30
23
19
3
23
15
34
27
26 24 25 27 27 27
Loan growth (%)
Exhibit 43:
Focused branch expansion and savings de-
regulation key enablers - Expect CASA ratio to rise 500bp over
FY15-18E
CA ratio (%)
SA ratio (%)
5.9
7.2
8.9
16.4 17.5
11.1 13.0
20.1 20.3 19.9
18.3 16.2 16.3 16.2 16.7 18.5 19.0 19.4
13.4 16.5
Source: Company, MOSL
Source: Company, MOSL
Exhibit 44:
Structural improvement in IIB’s core income (% of
Exhibit 45:
IIB to be first mid-size bank to demonstrate
average assets); higher than HDFCB’s
sustainable RoA improvement
Core income % of assets
ICICIBC
8.0
6.5
5.0
3.5
2.0
4.3
7.1 6.9
ROA (%)
HDFCB
AXSB
IIB
ROE (%)
19.5 19.3 19.2
11.7
17.8 17.5 19.0 18.0 16.8 18.5
0.2 0.4 0.3 0.6 1.1 1.4 1.6 1.6 1.8 1.8 2.0 2.1 2.2
Source: Company, MOSL
Source: Company, MOSL
Exhibit 46:
Massive outperformance v/s Sensex…
460
360
260
160
60
Indusind Bank
Sensex-Rebased
Exhibit 47:
…and BSE100
430
345
141
330
230
130
30
145
Indusind Bank
BSE 100- Rebased
345
Source: Company, MOSL
Source: Company, MOSL
September 2015
47

Thematic | Good-to-Great
Financials and Valuations: IndusInd Bank
Income Statement
Y/E March
Interest Income
Interest Expense
Net Interest Income
Change (%)
Non Interest Income
Net Income
Change (%)
Operating Expenses
Pre Provision Profits
Change (%)
Provisions (excl tax)
PBT
Tax
Tax Rate (%)
PAT
Change (%)
Equity Dividend (Incl tax)
Core PPP*
Change (%)
*Core PPP is (NII+Fee income-Opex)
Balance Sheet
Y/E March
Equity Share Capital
Reserves & Surplus
Net Worth
Of which Equity Networth
Deposits
Change (%)
of which CASA Dep
Change (%)
Borrowings
Other Liabilities & Prov.
Total Liabilities
Current Assets
Investments
Change (%)
Loans
Change (%)
Fixed Assets
Other Assets
Total Assets
Asset Quality
GNPA (INR m)
NNPA (INR m)
GNPA Ratio
NNPA Ratio
PCR (Excl Tech. write off)
E: MOSL Estimates
2010
27,070
18,206
8,864
93.1
5,534
14,399
57.3
7,360
7,039
91.1
1,709
5,330
1,827
34.3
3,503
136.1
865
5,827
129.9
2011
35,894
22,129
13,765
55.3
7,137
20,902
45.2
10,085
10,817
53.7
2,019
8,798
3,025
34.4
5,773
64.8
932
9,764
67.6
2012
53,592
36,549
17,042
23.8
10,118
27,160
29.9
13,430
13,730
26.9
1,804
11,927
3,900
32.7
8,026
39.0
1,196
12,680
29.9
2013
69,832
47,504
22,329
31.0
13,630
35,958
32.4
17,564
18,395
34.0
2,631
15,764
5,152
32.7
10,612
32.2
1,838
17,325
36.6
2014
82,535
53,628
28,907
29.5
18,905
47,812
33.0
21,853
25,960
41.1
4,676
21,283
7,203
33.8
14,080
32.7
2,154
23,327
34.6
2015
96,920
62,717
34,203
18.3
24,039
58,241
21.8
27,259
30,982
19.3
3,891
27,092
9,155
33.8
17,937
27.4
2,552
28,232
21.0
2016E
114,203
70,129
44,073
28.9
31,475
75,549
29.7
33,976
41,573
34.2
5,037
36,536
12,239
33.5
24,296
35.5
3,397
37,073
31.3
(INR Million)
2017E
2018E
134,950 167,668
80,135
97,886
54,815
69,782
24.4
27.3
38,754
47,645
93,570 117,427
23.9
25.5
41,694
51,168
51,876
66,259
24.8
27.7
6,397
8,124
45,479
58,135
15,235
19,475
33.5
33.5
30,243
38,660
24.5
27.8
4,228
5,405
46,626
60,259
25.8
29.2
(INR Million)
2017E
2018E
5,807
5,807
190,708 223,900
196,515 229,707
196,515 229,707
1,101,563 1,398,984
27.0
27.0
432,788 549,351
29.1
26.9
247,935 283,110
53,730
64,651
1,599,743 1,976,452
94,402 110,968
328,765 378,080
15.0
15.0
1,109,485 1,409,046
27.0
27.0
11,909
12,140
55,182
66,218
1,599,743 1,976,452
2306%
2355%
(%)
7,022
10,089
2,499
3,495
0.6
0.7
0.2
0.2
64.4
65.4
2010
4,107
19,866
23,972
23,972
267,102
20.8
63,217
48.6
49,343
13,278
353,695
26,032
104,018
28.7
205,506
30.3
6,448
11,691
353,695
2011
4,660
35,842
40,502
40,502
343,654
28.7
93,309
47.6
55,254
16,948
456,358
40,246
135,508
30.3
261,656
27.3
5,965
12,983
456,358
2012
4,677
42,740
47,417
47,417
423,615
23.3
115,631
23.9
86,820
18,108
575,961
55,396
145,719
7.5
350,640
34.0
6,568
17,638
575,961
2013
5,229
71,074
76,303
76,303
541,167
27.7
158,674
37.2
94,596
21,000
733,065
68,487
196,542
34.9
443,206
26.4
7,561
17,269
733,065
2014
2015
2016E
5,256
5,295
5,807
85,173 101,151 164,755
90,430 106,445 170,562
90,430 106,445 170,562
605,023 741,344 867,372
11.8
22.5
17.0
196,909 252,996 335,187
24.1
28.5
32.5
147,620 206,181 217,349
27,187
37,190
44,684
870,259 1,091,159 1,299,967
67,694 107,791
84,652
215,630 248,594 285,883
9.7
15.3
15.0
551,018 687,882 873,610
24.3
24.8
27.0
10,164
11,576
11,677
25,753
35,316
44,145
870,259 1,091,159 1,299,967
1914%
6,208
1,841
1.1
0.3
70.4
5,629
2,105
0.8
0.3
62.6
5,050
1,524
0.6
0.2
69.8
2,555
1,018
1.2
0.5
60.1
2,659
728
1.0
0.3
72.6
3,471
947
1.0
0.3
72.7
4,578
1,368
1.0
0.3
70.1
September 2015
48

Thematic | Good-to-Great
Financials and Valuations: IndusInd Bank
Ratios
Y/E March
Spreads Analysis (%)
Avg. Yield-Earning Assets
Avg. Yield on loans
Avg. Yield on Investments
Avg. Cost-Int. Bear. Liab.
Avg. Cost of Deposits
Interest Spread
Net Interest Margin
Profitability Ratios (%)
RoE
RoA
Int. Expense/Int.Income
Fee Income/Net Income
Non Int. Inc./Net Income
Efficiency Ratios (%)
Cost/Income*
Empl. Cost/Op. Exps.
Busi. per Empl. (INR m)
NP per Empl. (INR lac)
* ex treasury and RWO
Asset-Liability Profile (%)
Loans/Deposit Ratio
CASA Ratio
Investment/Deposit Ratio
G-Sec/Investment Ratio
CAR
Tier 1
Valuations
Book Value (INR)
Change (%)
Price-BV (x)
Adjusted BV (INR)
Price-ABV (x)
EPS (INR)
Change (%)
Price-Earnings (x)
Dividend Per Share (INR)
Dividend Yield (%)
E: MOSL Estimates
2010
9.7
11.6
6.0
6.4
6.4
3.2
3.2
2011
9.9
12.1
6.1
6.2
6.0
3.7
3.8
2012
11.5
13.8
7.7
8.0
8.0
3.4
3.6
2013
11.7
14.1
7.5
8.3
8.3
3.4
3.7
2014
11.3
13.3
7.2
7.7
7.6
3.5
3.9
2015
10.8
12.5
7.2
7.4
7.7
3.4
3.8
2016E
10.4
11.6
6.8
6.9
7.1
3.5
4.0
2017E
10.1
11.0
6.7
6.6
6.6
3.5
4.1
2018E
10.1
11.0
6.7
6.5
6.4
3.6
4.2
19.5
1.1
67.3
30.0
38.4
19.3
1.4
61.7
30.1
34.1
19.2
1.6
68.2
33.6
37.3
17.8
1.6
68.0
34.5
37.9
17.5
1.8
65.0
33.7
39.5
19.0
1.8
64.7
35.8
41.3
18.05
2.0
61.4
35.1
41.7
16.8
2.1
59.4
35.3
41.4
18.5
2.2
58.4
35.1
40.6
55.8
39.5
88.4
0.7
50.3
37.9
87.0
0.9
51.3
36.1
84.2
1.0
50.6
37.7
84.3
1.0
48.6
37.0
79.0
1.0
49.5
36.0
74.5
1.0
48.1
35.8
78.0
1.2
47.4
36.2
84.5
1.3
46.1
36.5
89.6
1.4
76.9
23.7
38.9
82.0
15.3
9.7
76.1
27.2
39.4
74.0
15.9
12.3
82.8
27.3
34.4
81.7
13.9
11.4
81.9
29.3
36.3
71.8
15.4
13.8
91.1
32.5
35.6
71.3
13.8
12.7
92.8
34.1
33.5
72.0
12.1
11.2
100.7
38.6
33.0
70.2
16.1
15.4
100.7
39.3
29.8
74.2
15.1
14.5
100.7
39.3
27.0
78.3
14.2
13.8
52.7
31.1
51.1
8.5
104.2
1.8
82.1
55.7
81.1
12.4
45.3
2.0
96.7
17.8
8.7
95.4
8.8
17.2
38.5
48.9
2.2
0.3
141.9
46.7
5.9
140.2
6.0
20.3
18.3
41.4
3.0
0.4
164.5
15.9
5.1
162.2
5.2
26.8
32.0
31.4
3.5
0.4
193.7
17.7
4.3
191.1
4.4
33.9
26.5
24.8
4.0
0.5
287.1
48.3
2.9
285.4
2.9
41.8
23.5
20.1
5.0
0.6
331.9
15.6
2.5
329.1
2.6
52.1
24.5
16.1
6.3
0.7
389.2
17.3
2.2
385.3
2.2
66.6
27.8
12.6
8.0
1.0
September 2015
49

Thematic | Good-to-Great
ITC
CMP: INR316
Industry Attractiveness
TP: INR360 (+14%)
Buy
Per capita cigarette consumption in India is 1/18
th
of China, 1/10
th
of USA, 2/3
rd
of
Bangladesh and 1/5
th
of Pakistan.
ITC enjoys an unchallenged monopoly, with ~84% value share in the organized segment.
While industry volumes have grown at ~1.5% over FY95-15, ITC’s volumes have grown at
a CAGR of 2.4%.
Disciplined Management
ITC has consciously diversified its business in the last decade – non-cigarette FMCG,
with INR90b sales, now contributes 18% of gross revenue against 4% a decade ago.
ITC has demonstrated excellence in managing its core cigarettes business, with 12
consecutive years of margin expansion, despite punitive legislative actions.
Dividend payout ratio has improved in the last five years despite continued capex. The
average payout in the last five years has been ~60% against ~40% over 2000-10.
Disciplined Thought
ITC’s cigarette business is currently facing challenges due to four consecutive years of
15%+ excise duty hikes. However, underlying shares and profitability are intact.
ITC passes on duty hikes to consumers through price increases. Its wide product
portfolio (presence across segments) helps it to retain customers.
It has set a target of INR1t for FMCG-others by 2030 from the current INR90b. To
achieve this, it has entered various Home & Personal Care and Foods categories.
Disciplined Action
Despite the harsh taxation regime, ITC has gained share due to its brand strength,
unparalleled distribution, and products straddling price points.
ITC is tactically driving the 64mm segment to capture any downtrading from 69mm.
The 64mm segment contributes ~10% of volumes and has similar percentage margins.
Inorganic initiatives to aid INR1t FMCG-others revenue target by 2030: ITC has already
acquired brands like
B-Natural, Savlon
and
Shower to Shower.
Expected Results
We expect ITC’s operating margins to expand from 37.4% in FY15 to 39.2% in FY17.
RoE and RoCE should remain steady at 33-34% and 40-42%, respectively.
Near-term modest growth notwithstanding, we see ITC as a good medium-term play,
given its dominance in its core franchise, relatively cheap valuations in the consumer
universe, and muted expectations.
September 2015
50

Thematic | Good-to-Great
Exhibit 48:
Good scope to grow per capita cigarette consumption in India
India
Bangladesh
Pakistan
USA
China
Japan
Russia
2,786
1,711
1,028
96
India
154
Bangladesh
468
1,841
Pakistan
USA
China
Japan
Russia
Exhibit 49:
Mid-teens cigarette EBIT growth over last decade
Cigarettes EBIT growth (%)
18.3
17.1
18.0
14.6 15.1
16.8
11.8
19.8 20.5 20.3
Exhibit 50:
Consistent expansion in cigarette margins
Cigarettes EBIT margin (%)
29.1
27.7 28.6
31.0 32.0
34.4
36.8
23.9 24.7
26.3
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Source: Company, MOSL
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Source: Company, MOSL
Exhibit 51:
Non-cigarette FMCG revenues gaining scale
Non-Cig FMCG revenues( INRb)
70
36
45
55
81
90
Exhibit 52:
Non-cigarette FMCG EBIT turned positive last year
Non-CIG FMCG EBIT (INR M)
0.2 0.3
-0.8
-2.6
-4.8
-2.0
-3.5
-3.0
10
17
25
30
-1.2
-1.7 -2.0 -1.7 -2.0
Source: Company, MOSL
Source: Company, MOSL
PMI (Marlboro)
Others
Exhibit 53:
Gained market share in cigarettes in an adverse tax regime
ITC
GPI
VST
73
73
79
78
78
78
80
80
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
Source: Company, MOSL
September 2015
51

Thematic | Good-to-Great
Financials and Valuations: ITC
Income Statement
Y/E March
Net Sales
Operational Income
Total Revenue
Change (%)
Total Expenditure
EBITDA
Change (%)
Margin (%)
Depreciation
Int. and Fin. Charges
Other Inc. - Recurring
Profit before Taxes
Change (%)
Margin (%)
Tax
Deferred Tax
Tax Rate (%)
Profit after Taxes
Change (%)
Margin (%)
Reported PAT
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Loans
Deferred Liability
Capital Employed
Gross Block
Less: Accum. Depn.
Net Fixed Assets
Capital WIP
Investments
Current
Non-current
Curr. Assets, L&A
Inventory
Account Receivables
Cash and Bank Balance
Others
Curr. Liab. and Prov.
Account Payables
Other Liabilities
Provisions
Net Current Assets
Application of Funds
E: MOSL Estimates
2010
181,532
2,392
183,924
16.4
120,619
63,305
24.8
34.9
6,087
820
3,756
60,153
24.7
33.1
20,286
-822
32.4
40,689
24.7
22.4
40,689
2011
211,676
2,914
214,590
16.7
140,467
74,123
17.1
35.0
6,560
679
5,798
72,682
20.8
34.3
22,804
2
31.4
49,876
22.6
23.6
49,876
2012
247,984
3,490
251,475
17.2
162,788
88,687
19.6
35.8
6,985
980
8,253
88,975
22.4
35.9
26,777
574
30.7
61,624
23.6
24.8
61,624
2013
296,056
2,957
299,013
18.9
192,543
106,470
20.1
36.0
7,956
1,059
9,387
106,842
20.1
36.1
29,348
3,310
30.6
74,184
20.4
25.1
74,184
2014
328,826
3,560
332,386
11.2
207,631
124,755
17.2
37.9
8,999
236
11,071
126,591
18.5
38.5
37,911
828
30.6
87,852
18.4
26.7
87,852
2015
360,832
4,242
365,074
9.8
230,128
134,946
8.2
37.4
9,617
785
15,431
139,975
10.6
38.8
40,210
3,688
31.4
96,077
9.4
26.6
96,077
2016E
387,792
4,666
392,458
7.5
241,500
150,958
11.9
38.9
10,806
490
18,128
157,790
12.7
40.7
45,128
3,787
31.0
108,875
13.3
28.1
108,875
(INR Million)
2017E
422,024
5,133
427,157
8.8
261,860
165,297
9.5
39.2
11,956
440
21,360
174,262
10.4
41.3
49,839
4,182
31.0
120,241
10.4
28.5
120,241
2010
3,818
136,826
140,644
160
7,850
148,654
119,679
38,255
81,424
10,090
57,269
46,982
10,287
81,279
45,491
8,581
11,263
15,945
81,408
34,449
8,777
38,182
-129
148,654
2011
7,738
151,795
159,533
343
8,019
167,894
127,658
44,208
83,451
13,334
55,547
42,189
13,358
97,901
52,692
8,851
22,432
13,926
82,338
39,685
8,219
34,435
15,563
167,894
2012
7,818
180,101
187,919
119
8,727
196,765
138,033
48,197
89,837
23,923
63,166
43,633
19,533
112,957
56,378
9,824
28,189
18,565
93,117
46,989
10,945
35,183
19,840
196,765
2013
7,902
214,977
222,879
113
12,037
235,029
165,884
54,698
111,186
15,786
70,603
50,594
20,009
142,600
66,002
11,633
36,150
28,815
105,146
50,571
13,091
41,485
37,454
235,029
2014
7,953
254,667
262,620
155
12,970
275,745
181,756
62,269
119,487
23,598
88,234
63,113
25,122
160,975
73,595
21,654
32,894
32,832
116,549
54,498
14,332
47,719
44,426
275,745
2015
8,016
299,341
307,357
143
16,316
323,816
209,908
72,136
137,771
25,155
84,055
59,638
24,416
194,976
78,368
17,224
75,886
23,498
118,140
53,817
14,226
50,097
76,835
323,816
(INR Million)
2016E
2017E
8,016
8,016
338,155
381,021
346,171
389,037
143
143
12,217
7,690
358,531
396,870
234,908
82,942
151,966
25,155
105,774
78,916
26,858
207,985
82,367
21,249
77,558
26,811
132,350
57,876
14,593
59,881
75,636
358,530
259,908
94,898
165,010
25,155
127,157
97,613
29,544
226,154
89,652
23,125
84,405
28,973
146,606
64,377
16,097
66,132
79,548
396,870
September 2015
52

Thematic | Good-to-Great
Financials and Valuations: ITC
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout %
Valuation (x)
P/E
Cash P/E
EV/Sales
EV/EBITDA
P/BV
Dividend Yield (%)
Return Ratios (%)
RoE
RoCE
Working Capital Ratios
Debtor (Days)
Asset Turnover (x)
Leverage Ratio
Debt/Equity (x)
Cash Flow Statement
Y/E March
OP/(loss) before Tax
Int./Div. Received
Depreciation and Amort.
Interest Paid
Direct Taxes Paid
Incr in WC
Diff in dep
CF from Operations
Extraordinary Items
Incr Decr in FA
Free Cash Flow
Pur of Investments
CF from Invest.
Issue of shares
Incr in Debt
Interest Income
Interest Paid
Dividend Paid
Others
CF from Fin. Activity
Incr of Cash
Add: Opening Balance
Closing Balance
E: MOSL Estimates
2010
10.7
12.3
36.8
10.0
93.8
2011
6.4
7.3
20.6
4.5
69.0
2012
7.9
8.8
24.0
4.5
57.1
2013
9.4
10.4
28.2
5.3
55.9
2014
11.0
12.2
33.0
6.0
54.3
2015
12.0
13.2
38.3
6.3
52.1
2016E
13.6
14.9
43.2
7.5
55.0
2017E
15.0
16.5
48.5
8.3
55.0
28.6
25.9
7.3
19.3
9.6
1.9
26.4
24.0
6.6
17.6
8.2
2.0
24.0
21.8
6.3
16.1
7.5
2.3
21.7
19.8
5.7
14.5
6.7
2.5
29.3
38.6
33.2
42.7
35.5
44.8
36.1
45.6
36.2
45.3
33.7
41.8
33.3
41.1
32.7
40.6
15
1.2
15
1.3
14
1.3
13
1.3
18
1.2
20
1.1
18
1.1
19
1.1
0.0
2010
60,153
3,756
6,087
820
19,464
-35,642
700
80,183
0
12,041
68,142
28,891
-40,933
7,207
-1,616
3,756
820
13,965
-32,860
-38,298
953
10,310
11,263
0.0
2011
72,682
5,798
6,560
679
22,806
4,522
607
47,402
0
11,224
36,178
-1,722
-9,502
5,220
183
5,798
679
38,182
929
-26,731
11,170
11,263
22,432
0.0
2012
88,975
8,253
6,985
980
27,352
-1,480
2,996
65,811
1
20,964
44,847
7,619
-28,582
7,650
-224
8,253
980
34,435
-11,737
-31,472
5,757
22,432
28,189
0.0
2013
106,842
9,387
7,956
1,059
32,658
9,654
1,454
65,612
2
19,714
45,898
7,437
-27,149
9,223
-6
9,387
1,059
35,183
-12,864
-30,502
7,961
28,189
36,150
0.0
2014
126,591
11,071
8,999
236
38,739
10,228
1,428
77,217
3
23,684
53,532
17,631
-41,313
6,911
43
11,071
236
41,485
-15,464
-39,160
-3,256
36,150
32,894
0.0
2015
139,975
15,431
9,617
785
43,898
-10,583
-250
101,381
0
29,709
71,673
-4,180
-25,529
9,788
-12
15,431
785
47,719
-9,563
-32,859
42,993
32,894
75,887
0.0
0.0
(INR Million)
2016E
2017E
157,790
174,262
18,128
21,360
10,806
11,956
490
440
48,915
54,021
-2,872
-2,934
0
0
104,915
114,210
0
25,000
79,915
21,719
-46,719
0
0
18,128
490
50,097
-24,064
-56,523
1,672
75,886
77,558
0
25,000
89,210
21,383
-46,383
0
0
21,360
440
59,881
-22,020
-60,981
6,846
77,558
84,404
September 2015
53

Thematic | Good-to-Great
Larsen & Toubro CMP: INR1,534
Industry Attractiveness
TP: INR2,150 (+40%)
Buy
Infrastructure spending as a percentage of GDP has declined meaningfully to just 3-4%
from peak levels of 7-8%. We expect meaningful traction, as large projects in segments
like urban infrastructure, water & irrigation, railways, and power T&D pick up.
Manufacturing segments like defense, power generation, and forgings provide strong
opportunities. Another important driver is industrial capex – particularly hydrocarbons,
metals, and fertilizers – both in India and overseas.
Disciplined Management
L&T has continuously evolved by building new skill sets and competencies to effectively
benefit from emerging trends. Portfolio rationalization is an important priority.
It has incubated and grown service businesses like IT and finance. It is also expanding
the share of manufacturing businesses like power BTG, defense, and forgings.
By creating independent companies for different businesses and listing subsidiaries, it
has kept business structure simple and promoted managerial talent.
Disciplined Thought
L&T intends to increase the opportunity pie in its core E&C business by building
competencies in emerging segments and emerge as the E&C partner of choice in India.
It believes manufacturing businesses present interesting possibilities in the longer term
(including from privatization of defense and entry into power BTG).
It is attempting to correct capital allocation through various initiatives and improve
consolidated RoE.
Disciplined Action
L&T has expanded offerings across business / geographic segments, with competency
additions in buildings & factories, power T&D, water, smart cities, and renewables
among others.
It has invested ~INR100b in setting up manufacturing businesses (defense, power BTG,
forgings), which are difficult to replicate and L&T is positioned as a dominant player.
It is focusing on improving RoE through monetization of mature assets, exiting non-core
activities, and fund infusion (including listing of subsidiaries).
Expected Results
Core E&C revenue could double over the next three years, as domestic intake in FY15
was INR943b while revenue was INR460b.
‘Portfolio churn’ in concession portfolio and service segments would aid value
unlocking. Manufacturing business would be an important growth driver.
We expect consolidated RoE to improve from 14% to 20% over the next three years.
Infotech / Tech Services IPO is expected by July 2016.
54
September 2015

Thematic | Good-to-Great
Exhibit 54:
Core standalone RoE robust, despite challenging macro environment
Core E&C RoE (%)
Standalone Reported RoE (%)
Source: Company, MOSL
Exhibit 55:
Diversified business/geographic presence has
Exhibit 56:
Revenue CAGR of 19% over FY05-15 reflects strong
ensured robust order inflow momentum
execution skill sets in a constrained environment
Order inflow (INR b)
50
40
28
Growth YoY
1,570
41
639 601 597 767 32
(6)
(1)
28
1,011 1,227
21
28
113
38
16
113 131
0
190
Revenue (INR b)
48
44
14
280 318
465
23
29
7
(3)
12
28
Growth YoY
597 642 622
377
18
697
894
29
12
454
10
252 354
117 131 196
Source: MOSL, Company
Source: MOSL, Company
Exhibit 57:
Net project addition in negative zone for over two years, indicating constrained macro environment
30,000
20,000
10,000
0
-10,000
Net Projects added (INR b, ttm)
Source: Company, MOSL
September 2015
55

Thematic | Good-to-Great
Financials and Valuations: Larsen & Toubro
Income Statement
Y/E March
Net Revenues
Growth Rate (%)
Manufacturing Expenses
Staff Cost
S G &A Expenses
EBITDA
Change (%)
Adj EBIDTA
EBITDA Margin (%)
Depreciation
EBIT
Net Interest
Other Income
Non-recurring Other Income
Profit before Tax
Tax
Effective Tax Rate (%)
Reported Profit
EO Adjustments
Adjusted Profit
Growth (%)
Cons. Profit (Reported)
Cons. Profit (Adj)
Growth (%)
2010
370,348
9.1
285,374
23,791
13,789
47,394
21.6
47,394
12.8
3,797
43,597
5,053
7,422
2,280
48,259
16,409
34.0
43,760
11,910
31,850
17.6
54,507
37,110
23.5
2011
439,059
18.6
334,681
28,301
19,778
56,299
18.8
56,299
12.8
5,905
50,394
6,193
9,106
2,369
55,686
19,436
34.9
39,580
3,329
36,250
13.8
44,562
42,416
14.3
2012
531,705
21.1
410,224
36,661
22,182
62,639
11.3
64,639
12.2
6,807
55,831
6,661
11,748
1,635
62,553
18,538
29.6
44,565
550
45,375
25.2
46,937
47,730
12.5
2013
516,110
-2.9
402,048
38,609
20,857
54,595
-12.8
57,445
11.1
7,141
47,454
9,548
16,364
2,509
56,779
15,478
27.3
43,845
2,544
41,861
-7.7
52,056
49,327
3.3
2014
565,989
9.7
433,464
46,624
19,320
66,581
22.0
67,161
11.9
7,835
58,746
10,761
18,558
251
66,794
17,748
26.6
54,931
5,885
50,718
21.2
49,019
40,244
-18.4
2015
595,213
5.2
443,966
41,508
19,822
89,918
35.1
64,879
11.4
10,082
79,836
14,190
22,834
0
88,480
16,450
18.6
72,029
0
47,705
-5.9
47,648
44,867
11.5
2016E
635,099
6.7
491,432
45,659
25,645
72,364
-19.5
72,364
11.4
10,754
61,610
13,000
25,468
0
74,078
19,631
26.5
54,447
0
54,447
14.1
48,389
48,389
7.8
2017E
2018E
819,957 1,108,675
29.1
35.2
645,803
883,447
50,225
55,248
33,109
44,768
90,819
25.5
90,819
11.1
12,304
78,516
12,000
28,968
0
95,484
25,781
27.0
69,703
0
69,703
28.0
64,086
64,086
32.4
125,213
37.9
125,213
11.3
15,016
110,198
12,000
28,968
0
127,166
34,335
27.0
92,831
0
92,831
33.2
89,746
89,746
40.0
(INR Million)
Balance Sheet
Y/E March
Equity Capital
Reserves and Surplus
Net Worth
Debt
Deferred Tax Liability
Capital Employed
Gross Fixed Assets
Less : Depreciation
Add : Capital WIP
Net Fixed Assets
Investments
Inventory
Sundry Debtors
Cash & Bank
Loans & Advances
Other Current Assets
Current Assets
Current Liabilities
Net Current Assets
Capital Deployed
E: MOSL Estimates
2010
1,204
181,912
183,116
68,008
774
251,899
72,901
17,916
8,742
63,727
137,054
14,154
111,584
14,319
60,365
63,532
263,883
212,765
51,118
251,899
2011
1,218
217,245
218,463
71,611
2,635
292,708
89,465
23,025
7,713
74,153
146,848
15,772
124,276
17,296
82,253
110,501
350,099
278,392
71,707
292,708
2012
1,225
251,005
252,230
98,958
1,328
352,516
105,544
29,495
7,587
83,636
158,719
17,766
187,169
17,781
90,616
120,636
433,968
323,807
110,162
352,516
2013
1,231
290,196
291,427
88,342
2,420
382,190
119,856
36,806
5,968
89,018
161,034
20,642
226,130
14,557
94,128
118,730
474,187
342,049
132,138
382,191
2014
1,854
334,764
336,618
114,589
4,099
455,307
116,632
39,884
5,624
82,372
192,146
19,825
215,388
17,829
100,672
154,814
508,527
327,739
180,788
455,306
2015
1,854
369,166
371,020
120,000
4,099
495,119
128,756
50,160
4,500
83,096
219,714
21,096
222,368
35,442
97,449
154,575
530,929
338,621
192,308
495,119
2016E
1,854
408,975
410,829
120,000
4,099
534,928
148,756
60,913
4,500
92,343
230,297
25,404
254,040
60,663
104,043
165,754
609,903
397,614
212,289
534,928
2017E
1,854
459,939
461,793
120,000
4,099
585,892
(INR Million)
2018E
1,854
527,812
529,666
120,000
4,099
653,765
168,756
188,756
73,217
88,232
4,500
4,500
100,039
105,024
303,451
211,605
30,748
41,575
311,584
421,297
29,408
137,905
124,275
138,410
205,617
277,797
701,632 1,016,983
519,230
679,847
182,402
337,137
585,892
653,765
September 2015
56

Thematic | Good-to-Great
Financials and Valuations: Larsen & Toubro
Ratios
Y/E March
Basic (INR)
Standalone EPS Adj
Growth (%)
Consolidated EPS Adj
Growth (%)
Cash EPS
Book Value
Dividend Per Share
Div. Payout (Incl. Div Tax ) %
Valuation (x)
P/E (Standalone)
P/E (Consolidated)
Price / CEPS
EV/EBITDA
EV/ Sales
Price / Book Value
Dividend Yield
Return Ratio (%)
RoE
RoCE
Turnover Ratios
Debtors (Days)
Inventory (Days)
Asset Turnover (x)
Leverage Ratio
Current Ratio (x)
D/E (x)
2010
35.3
14.3
41.1
20.1
39.9
202.7
8.3
27.6
2011
39.7
12.6
46.4
13.0
46.3
239.2
9.7
28.4
2012
49.4
24.4
52.0
11.9
57.0
274.6
11.0
25.0
2013
45.3
-8.2
53.4
2.8
53.2
315.7
12.3
27.9
2014
54.7
20.7
43.4
-18.7
63.3
363.2
14.3
25.5
2015
51.5
-5.9
48.4
11.5
62.3
400.3
16.2
32.0
2016E
58.7
14.1
52.2
7.8
70.3
443.2
14.7
26.9
2017E
75.2
28.0
69.1
32.4
88.5
498.2
18.8
26.9
2018E
100.2
33.2
96.8
40.0
116.4
571.4
25.0
26.9
17.7
22.2
24.2
14.3
1.7
2.7
1.5
30.6
32.5
24.6
22.8
2.6
3.9
1.0
26.1
29.4
21.8
19.6
2.2
3.5
1.0
20.4
22.2
17.3
15.4
1.7
3.1
1.2
15.3
15.8
13.2
10.3
1.2
2.7
1.6
17.4
14.0
16.6
13.9
18.0
14.3
14.4
12.9
15.1
13.0
12.9
11.9
13.3
12.1
15.1
13.5
17.5
15.6
109.0
13.8
1.5
102.4
13.0
1.5
127.1
12.1
1.5
158.1
14.4
1.4
137.5
12.7
1.3
141.0
13.4
1.2
144.6
14.5
1.2
137.4
13.6
1.4
137.4
13.6
1.7
1.2
-0.1
1.3
-0.1
1.3
0.1
1.4
0.1
1.6
0.2
1.6
0.1
1.5
0.0
1.4
-0.1
1.5
-0.3
Cash Flow Statement
Y/E March
PBT before EO Items
Add : Depreciation
Interest
Less : Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
(Inc)/Dec in FA
Free Cash Flow
(Pur)/Sale of Investments
Investment in subs
Advances to subs
CF from Investments
(Inc)/Dec in Net Worth
(Inc)/Dec in Debt
Less : Interest Paid
Dividend Paid
CF from Fin. Activity
Inc/Dec of Cash
Add: Beginning Balance
Closing Balance
E: MOSL Estimates
2010
48,259
4,159
5,053
16,409
11,407
52,469
-15,940
36,529
-26,536
-27,880
-1,366
-71,722
23,851
2,448
5,053
7,338
13,908
6,566
7,753
14,319
2011
55,686
6,003
6,193
19,436
-9,338
39,107
-16,429
22,678
6,812
-16,607
-9,598
-35,822
7,927
3,603
6,193
8,973
-3,636
2,979
14,319
17,298
2012
63,103
7,005
6,661
18,538
-34,430
23,801
-16,487
7,313
4,968
-16,839
-4,703
-33,061
-978
27,347
6,661
9,962
9,746
485
17,296
17,781
2013
59,323
7,277
9,548
15,478
-27,542
33,127
-12,660
20,467
12,065
-14,380
1,217
-13,758
8,687
-10,616
9,548
11,119
-22,595
-3,226
17,781
14,555
2014
72,679
7,924
10,761
17,748
-43,718
29,899
-1,278
28,621
14,334
-46,457
-2,393
-35,794
5,924
26,247
10,761
12,243
9,167
3,272
14,557
17,828
2015
67,012
10,082
14,190
16,450
-772
74,061
-10,806
63,255
-18,527
-8,030
3,681
-33,682
0
5,411
14,190
13,987
-22,766
17,613
17,829
35,441
2016E
74,078
10,754
13,000
19,631
6,762
84,963
-20,000
64,963
0
-10,583
0
-30,583
0
0
13,000
16,160
-29,160
25,221
35,442
60,663
2017E
95,484
12,304
12,000
25,781
-5,469
88,538
-20,000
68,538
-55,000
-18,154
0
-93,154
0
0
12,000
14,638
-26,638
-31,255
60,663
29,408
(INR Million)
2018E
127,166
15,016
12,000
34,335
-52,456
67,391
-20,000
47,391
0
91,846
0
71,846
0
0
12,000
18,740
-30,740
108,497
29,408
137,905
September 2015
57

Thematic | Good-to-Great
Maruti Suzuki
CMP: INR4,069
Industry Attractiveness
TP: INR5,290 (+30%)
Buy
After muted volumes in the last four years, India’s personal vehicle (PV) industry is
poised for strong growth of over 15% CAGR, driven by economic recovery, increasing
penetration, and muted fuel inflation (against 13% CAGR over the last five years).
PV penetration in India is just 1.7% against 11.3% in China and 81% in the US.
Maruti Suzuki (MSIL) is the leader in the domestic PV market, with ~46% share.
We expect competitive intensity in the PV industry to remain stable, with top-5 players
controlling ~80% market share.
Disciplined Management
The management has been focused on increasing localization and reducing imports
(from ~27% of net sales to 15-16% of net sales) over the last two years.
Plans to outsource manufacturing to the parent on cost basis would reduce capital
intensity, and improve FCFF and RoIC profile without diluting low cost structure.
MSIL enjoys significant competitive advantage due to (a) wide product portfolio, (b)
widest distribution network, and (c) lowest total cost of ownership.
Disciplined Thought
Focus on rural markets: To offset the downturn in urban markets due to economic
headwinds, MSIL has started to develop underpenetrated rural markets.
Focus on product portfolio expansion: During the downturn, MSIL has focused on
launching new products to create excitement in the market.
Focus on premiumization: MSIL is focusing on being future-ready by adding more
premium products to its bouquet of offerings.
Disciplined Action
Increasing rural presence: Having ramped up its rural presence to ~125k villages as at
the end of FY15, MSIL plans to expand to 150k villages by the end of FY16. It has also
focused on select customer groups not impacted by the slowdown (for example,
government employees, teachers, priests).
Strong new product pipeline: The parent, Suzuki is planning to launch 20 new models
globally in five years, a large part of which would be launched in India as well.
Premiumization drive: With the
Ciaz
launch tasting good success, MSIL plans to launch
several premium products (S-Cross, a premium hatchback, and a compact SUV) over
the next 15 months. It has launched
Nexa
dealerships, focusing on premium products.
Expected Results
We expect MSIL’s market share to increase by ~200bp to ~48%, led by ~16.5% volume
CAGR over FY15-18. This coupled with better mix would drive ~20% revenue CAGR.
We expect EBITDA margin of 18% in FY18 driven by discount moderation along with a
few other factors. We estimate EPS CAGR of ~42% over FY15-18.
We expect RoE to improve by ~6pp to 22.6% and RoIC by 33.7pp to 59.3% by FY18.
58
September 2015

Thematic | Good-to-Great
Exhibit 58:
Estimate 16% volume CAGR, of which 8% driven
Exhibit 59:
Product mix improves as new launches are in
by new models
premium segment
MSIL Average Monthly Volumes (Rs000 Units)
8% CAGR
40
108
3
4
5
4
5
170
Upto 400k
Price 600-800k
2
10
19
2
11
22
1
23
23
0
24
24
3
23
26
Price 400-600k
Price 800k and above
6
23
25
45
FY16
7
27
24
42
FY17
7
28
24
42
FY18
New models contributes 8pp to
16% volume CAGR (FY15-18)
69
65
52
52
48
FY15
FY11
Source: Company, MOSL
FY12
FY13
FY14
Source: Company, MOSL
Exhibit 60:
EBITDA margin could be 18% v/s estimate of 17%
18.5
13.4
1.6
1
1
0.5
1
Exhibit 61:
FCF generation would be substantial, as capacity-
related capex to be incurred by Suzuki
CFO
Capex
64
31.7
FCF
80
50.3
116
86.4
26
-4.0
-29.6
FY12
Source: Company, MOSL
44
5.7
49
14.1
-38.1
FY13
-34.9
FY14E
-32.4
FY15E
-30.0
FY16E
-30.0
FY17E
Source: Company, MOSL
Exhibit 62:
RoIC to improve, driven by strong operating performance and lower capex intensity (%)
ROIC
80.0
59.3
40.5
18.3
30.6
13.6
16.8
17.7
40.8
25.6
FY09
FY10
FY11
FY12
FY13
FY14
FY15E
FY16E
FY17E
FY18E
Source: Company, MOSL
September 2015
59

Thematic | Good-to-Great
Financials and Valuations: Maruti Suzuki
Income Statement
Y/E March
Total Op. Income
Change (%)
Total Cost
EBITDA
Change (%)
EBITDA Margins (%)
Depreciation
EBIT
Interest
Other Income
PBT
Effective tax Rate (%)
PAT
Change (%)
Adj. PAT
Change (%)
2010
296,231
41.7
256,883
39,348
92.0
13.3
8,250
31,098
335
4,998
35,925
30.5
24,976
104.9
25,068
88.0
2011
369,199
24.6
333,363
35,837
-8.9
9.7
10,135
25,702
244
5,665
31,088
26.4
22,886
-8.4
23,101
-7.8
2012
355,872
-3.6
330,741
25,130
-29.9
7.1
11,384
13,747
552
8,268
21,463
23.8
16,353
-28.5
16,353
-29.2
2013
435,879
22.5
393,583
42,296
68.3
9.7
18,612
23,684
1,898
8,124
29,910
20.0
23,921
46.3
23,921
46.3
2014
437,918
0.5
386,047
51,871
22.6
11.8
20,844
31,027
1,759
7,317
36,585
23.9
27,830
16.3
27,830
16.3
2015
499,706
14.1
432,577
67,129
29.4
13.4
24,703
42,426
2,060
8,316
48,682
23.8
37,112
33.4
37,112
33.4
2016E
582,929
16.7
487,318
95,611
42.4
16.4
27,693
67,918
1,750
6,594
72,762
27.5
52,752
42.1
52,752
42.1
(INR Million)
2017E
725,858
24.5
603,400
122,458
28.1
16.9
30,252
92,205
1,750
8,736
99,191
25.0
74,393
41.0
74,393
41.0
2018E
855,986
17.9
710,120
145,866
19.1
17.0
32,231
113,635
1,750
16,080
127,965
25.0
95,974
29.0
95,974
29.0
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Loans
Deferred Tax Liability
Capital Employed
Net Fixed Assets
Capital WIP
Investments
Curr.Assets, Loans
Inventory
Sundry Debtors
Cash & Bank Balances
Loans & Advances
Others
Current Liab. & Prov.
Sundry Creditors
Provisions
Net Current Assets
Appl. of Funds
E: MOSL Estimates
2010
1,445
116,906
118,351
8,214
1,370
127,935
50,247
3,876
71,766
37,724
12,088
8,099
982
15,707
848
35,678
29,365
6,313
2,046
127,935
2011
1,445
137,230
138,675
3,093
1,644
143,412
55,294
14,286
51,067
63,563
14,150
8,933
25,085
13,722
1,673
40,798
35,540
5,258
22,765
143,412
2012
1,445
150,429
151,873
11,749
3,025
166,647
75,207
9,419
61,474
76,922
17,965
9,376
24,362
21,193
4,027
56,376
49,391
6,985
20,546
166,647
2013
1,510
184,279
185,790
14,928
4,087
204,805
97,992
19,422
70,783
78,683
18,407
14,237
7,750
23,940
14,349
62,076
53,335
8,741
16,608
204,805
2014
1,510
208,270
209,781
16,851
5,866
232,498
107,904
26,214
101,179
70,061
17,060
14,137
6,298
28,895
3,672
72,860
64,103
8,757
-2,800
232,497
2015
1,510
235,532
237,043
1,802
4,810
243,655
122,593
18,828
128,140
65,949
26,150
10,698
183
25,221
3,698
91,856
75,326
16,530
-25,907
243,654
2016E
1,510
273,760
275,271
1,802
4,810
281,883
133,728
10,000
128,140
106,202
25,553
17,568
34,163
25,221
3,698
96,187
72,415
23,772
10,015
281,883
(INR Million)
2017E
1,510
328,183
329,693
1,802
4,810
336,305
133,476
10,000
128,140
181,490
31,818
21,875
98,878
25,221
3,698
116,800
85,337
31,463
64,690
336,305
2018E
1,510
402,371
403,881
1,802
4,810
410,493
131,245
10,000
128,140
274,099
37,523
25,797
181,861
25,221
3,698
132,991
97,102
35,888
141,109
410,493
September 2015
60

Thematic | Good-to-Great
Financials and Valuations: Maruti Suzuki
Ratios
Y/E March
Basic (INR)
Adjusted EPS
EPS Growth (%)
Consol EPS
Cash EPS
Book Value per Share
DPS
Div. payout (%)
Valuation (x)
Consol. P/E
Cash P/E
EV/EBITDA
EV/Sales
P/BV
Dividend Yield (%)
Profitability Ratios (%)
ROIC
RoE
RoCE
Turnover Ratios
Debtors (Days)
Inventory (Days)
Creditors (Days)
Work. Cap. (Days)
Asset Turnover (x)
Leverage Ratio
Debt/Equity (x)
2010
86.7
88.0
90.8
115.3
409.5
6.0
8.1
2011
79.9
(7.8)
82.4
115.0
479.8
7.5
11.0
2012
56.6
(29.2)
58.2
96.0
525.7
7.5
15.4
2013
79.2
39.9
81.7
143.4
615
8.0
11.7
2014
92.1
16.3
94.4
163.4
694
12.0
15.2
43.1
24.9
21.9
2.7
5.9
0.3
40.5
21.1
28.4
9
17
48
-21
2
0.1
30.6
16.5
22.1
8
15
45
-21
3
0.0
13.6
10.8
13.2
9
20
64
-35
2
0.1
16.8
12.9
15.5
11
17
60
-32
2
0.1
17.7
13.3
16.5
11
16
75
-48
2
0.1
2015
122.9
33.4
127.5
209.3
785
25.0
24.5
31.9
19.4
16.4
2.3
5.2
0.6
25.6
15.7
20.8
7
22
78
-49
2
0.0
2016E
174.6
42.1
179.5
271.1
911
40.0
27.5
22.7
15.0
11.2
1.9
4.5
1.0
40.8
19.2
26.4
10
19
67
-37
2
0.0
2017E
246.3
41.0
251.5
351.6
1,091
55.0
26.8
16.2
11.6
8.2
1.4
3.7
1.4
59.3
22.6
30.0
10
19
63
-34
2
0.0
2018E
317.7
29.0
323.3
430.0
1,337
60.0
22.7
12.6
9.5
6.3
1.1
3.0
1.5
80.0
23.8
31.6
10
19
61
-31
2
0.0
Cash Flow Statement
Y/E March
OP/(Loss) before Tax
Int./Div. Received
Depreciation
Direct Taxes Paid
(Inc)/Dec in WC
CF from Oper.Activity
CF after EO Items
(Inc)/Dec in FA
Free Cash Flow
(Pur)/Sale of Invest.
CF from Inv. Activity
Inc/(Dec) in Debt
Interest Paid
Dividends Paid
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Op. Balance
Closing Balance
2010
31,020
4,103
8,250
-10,279
1,327
34,421
34,421
-14,593
19,828
-38,787
-53,380
1,881
-319
-1,011
551
-18,408
19,390
982
2011
26,437
3,595
10,135
-10,240
4,171
34,098
34,098
-24,114
9,984
21,253
-2,861
-5,123
-278
-1,733
-7,134
24,103
982
25,085
2012
21,462
-7,003
11,384
-2,509
2,265
25,599
25,599
-29,630
-4,032
-1,328
-30,958
8,758
-426
-2,167
6,165
806
25,085
25,891
2013
29,910
-4,470
18,612
-5,333
5,123
43,842
43,842
-38,100
5,742
2,359
-35,741
-5,493
-2,003
-2,167
-9,663
-1,562
24,362
22,799
2014
36,585
-7,636
20,844
-8,320
7,562
49,035
49,035
-34,927
14,108
-14,002
-48,929
3,373
-1,615
-2,417
-659
-553
7,750
7,197
2015
48,682
-7,228
24,703
-10,407
8,356
64,106
64,106
-32,386
31,720
-12,613
-44,999
-13,898
-2,098
-3,625
-19,621
-514
6,298
5,784
2016E
67,918
6,594
27,693
-20,009
-1,941
80,254
80,254
-30,000
50,254
0
-30,000
0
-1,750
-14,524
-16,274
33,980
183
34,163
2017E
92,205
8,736
30,252
-24,798
10,040
116,435
116,435
-30,000
86,435
0
-30,000
0
-1,750
-19,971
-21,721
64,715
34,163
98,878
(INR Million)
2018E
113,635
16,080
32,231
-31,991
6,564
136,519
136,519
-30,000
106,519
0
-30,000
0
-1,750
-21,786
-23,536
82,983
98,878
181,861
September 2015
61

Thematic | Good-to-Great
Ultratech
CMP: INR2,917
Industry Attractiveness
TP: INR3,704 (+27%)
Buy
Per capita cement usage in India is sub-normal at ~200kg v/s the global average of
~400kg. The top-5 cement groups control ~50% of the pan-India market.
UTCEM is the industry leader, with ~17% capacity market share (71m tons by FY16) and
enjoys 15-30% market share across regions (#1 in South & West; #2 in North & East).
The industry is poised for recovery after prolonged weakness (~4% CAGR over FY12-15
v/s normal demand CAGR of 8%). We expect 5% growth in FY16 and 8-10% in FY17/18.
Disciplined Management
UTCEM has an impressive track record, with focus on consistent growth and cost
leadership. It has had no year of revenue decline during the last decade.
Cash PAT CAGR of ~30% over the past 10 years was well harmonized with doubling of
payout ratio from 7% in FY07 to 14% in FY15.
UTCEM has prudently used the economic downturn to add capacity headroom and
critical resources like land and limestone for future growth.
Disciplined Thought
Gaining market share and bridging regional weak links ahead of demand up-cycle.
UTCEM targets capacity of 100m tons by 2020 (1.5x next largest group). It would lead
to strong utilization levers, higher pricing power, and logistics synergies across regions.
Cost leadership: UTCEM continues to focus on optimizing energy mix, logistics and
synergies to widen the profitability gap with peers (10-15% above Ambuja now).
Attenuate growth constraints: Garnering land and limestone (20-25% of annual capex)
before competition makes it better prepared to face macro / regulatory headwinds.
Disciplined Action
Growing capacity, gaining market share: Capacity is likely to grow 45% over FY14-16,
aided by both organic and inorganic initiatives. Market share would grow from 15% to
18% by FY17-18 (20-22% by FY19-20 assuming merger of BK Birla group assets).
Cost optimization underway; benefits visible: Initiatives like higher pet coke mix (70%
v/s 45% a year ago), waste heat recovery (5-6% mix), logistics enhancements (bulk
terminus, jetty) have begun showing cost benefits over 1QCY15, ahead of peers.
Better placed to tackle supply constraints: UTCEM has the ability to add 20-25m tons of
capacity in a relatively short period, given its current land and limestone reserves.
Expected Results
Growth outperformance: UTCEM would have ~18% capacity market share by FY18,
aiding industry leading volume growth (11-12%) and strong operating leverage.
Significant margin/RoE expansion: Cost initiatives and increase in pricing power would
drive 7-8pp margin and RoE expansion over FY16-18.
Self-sustaining growth: FCFE generation of INR40b-45b per year from FY18 would give
it the ability to execute annual capacity growth of ~8% using only internal accruals.
62
September 2015

Thematic | Good-to-Great
Exhibit 63:
UTCEM has delivered consistent performance over
Exhibit 64:
Consistent addition of capacity aids strong levers
the last 10 years (FY05-15 CAGR, %)
to ramp up utilization and drive up market share
38
24
24
27
15
7
33
UTCEM Capcity (mt)
18
UTCEM capacity market share (%)
16
16
17
18
15
15
15
11
17
11
17
11
18
12
22
11
23
49
49
49
51
54
62
66
71
Revenue EBITDA
PAT
BV
Market Payout
Cap
FY06
Payout
FY15
Exhibit 65:
Created capacity faster than peers (m tons)
71
49
31
20
31 32
16
6
UTCEM
ACC
ACEM
27 30
14
FY07
FY12
FY16
Exhibit 66:
UTCEM’s market share in different regions (%)
shows the strong pricing power it is gaining
FY14 Market share (Volume)
28
17
18
28
FY16E Market share (Capacity)
31
22
16
24
19
18
8
SRCM
North
East
West
Central
South
Source: Company, MOSL
Source: Company, MOSL
Exhibit 67:
UTCEM steadily emerging as profit leader among
Exhibit 68:
UTCEM could record 4x scale-up in EBITDA over
peers, led by cost measures and strong price resilience (INR/t) next five years assuming 100mt by 2020 (INR b)
UTCEM
ACEM
SRCM
ACC
47
40
39
10
14
9
72
8
167
Period of narrowing margin
gap with Ambuja
1400
1050
700
350
0
UTCEM to enjoy better
margins here on
Source: Company, MOSL
Source: Company, MOSL
September 2015
63

Thematic | Good-to-Great
Financials and Valuations: UltraTech Cement
Income Statement
Y/E March
Net Sales
Change (%)
Total Expenditure
% of Sales
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income - Rec.
PBT
EO Expense/(Income)
PBT after EO expense
Tax
Tax Rate (%)
Reported PAT
Adj PAT
Change (%)
Margin (%)
2010
70,497
10.4
50,786
72.0
19,711
28.0
3,881
15,830
1,175
1,227
15,882
0
15,882
4,949
31.2
10,932
10,932
11.9
15.5
2011
132,062
87.3
106,465
80.6
25,597
19.4
7,657
17,939
2,725
2,619
17,833
0
17,833
3,791
21.3
14,042
14,042
28.4
10.6
2012
181,664
37.6
141,625
78.0
40,039
22.0
9,026
31,013
2,239
4,568
33,343
-666
34,009
9,467
27.8
24,542
24,062
71.4
13.2
2013
199,991
10.1
155,045
77.5
44,946
22.5
9,454
35,492
2,097
4,620
38,015
0
38,015
11,700
30.8
26,315
26,315
9.4
13.2
2014
200,779
0.4
164,619
82.0
36,160
18.0
10,523
25,637
3,192
5,310
27,755
-956
28,711
7,266
25.3
21,445
20,731
-21.2
10.3
2015
226,565
12.8
187,411
82.7
39,153
17.3
11,331
27,822
5,475
6,515
28,863
0
28,863
8,715
30.2
20,147
20,147
-2.8
8.9
2016E
248,544
9.7
203,783
82.0
44,761
18.0
13,851
30,910
6,154
5,000
29,756
0
29,756
8,927
30.0
20,829
20,829
3.4
8.4
2017E
311,589
25.4
245,508
78.8
66,080
21.2
18,373
47,708
10,061
6,000
43,646
0
43,646
12,221
28.0
31,425
31,425
50.9
10.1
(INR Million)
2018E
370,829
19.0
283,007
76.3
87,823
23.7
19,053
68,770
9,772
8,000
66,998
0
66,998
19,429
29.0
47,568
47,568
51.4
12.8
Balance Sheet
Y/E March
Equity Share Capital
Reserves
Net Worth
Deferred liabilities
Secured Loan
Unsecured Laon
Loans
Capital Employed
Goodwill
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Capital WIP
Investments
Curr. Assets
Inventory
Debtors
Cash & Bank Bal
Others
Curr. Liability & Prov.
Creditors
Provisions
Net Current Assets
Appl. of Funds
E: MOSL Estimates
2010
1,245
44,842
46,087
8307
16,045
16,045
70,439
80,781
31,365
49,417
2,594
16,696
14,724
8,217
2,158
837
3,511
12,991
11,381
1,610
1,733
70,439
2011
2,740
103,920
106,660
17301
26,373
26,373
150,334
179,423
65,420
114,003
6,831
37,303
41,809
19,565
6,023
1,448
14,773
49,612
43,877
5,735
-7,803
150,334
2012
2,741
125,858
128,598
17378
41,529
41,529
187,505
190,138
73,797
116,342
18,965
37,888
56,257
20,359
7,660
1,896
26,342
41,947
33,740
8,207
14,310
187,505
2013
2,742
149,606
152,348
19059
54,085
54,085
225,493
213,822
82,599
131,224
35,054
51,087
56,723
23,505
10,172
1,427
21,619
48,595
37,903
10,692
8,128
225,493
2014
2,742
168,233
170,975
22958
51,993
51,993
245,927
250,778
92,059
158,718
20,384
53,917
64,489
23,684
12,810
2,775
25,220
51,614
41,884
9,730
12,875
245,927
2015
2,744
185,833
188,576
27920
74,142
74,142
290,638
325,662
105,044
200,212
30,000
52,088
69,850
27,514
12,032
2,139
28,165
61,511
48,481
13,030
8,339
290,638
2016E
2,744
203,001
205,745
29408
74,142
74,142
309,295
375,662
118,896
256,767
15,000
24,500
77,718
30,642
13,619
2,814
30,642
64,689
51,071
13,619
13,028
309,295
2017E
2,744
229,644
232,388
30936
123,142
123,142
386,465
29,000
423,162
137,269
285,894
22,500
29,500
96,402
38,415
15,366
4,206
38,415
76,830
64,025
12,805
19,572
386,465
(INR Million)
2018E
2,744
271,634
274,377
33950
118,142
118,142
426,469
29,000
433,162
156,322
276,840
27,500
34,500
144,987
45,719
18,287
35,262
45,719
86,358
71,118
15,240
58,629
426,469
September 2015
64

Thematic | Good-to-Great
Financials and Valuations: UltraTech Cement
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
EV/Ton (Cap-USD)
Dividend Yield (%)
Return Ratios (%)
RoIC
RoE
RoCE
Working Capital Ratios
Fixed Asset Turnover (x)
Debtor (Days)
Creditor (Days)
Inventory (Days)
Wkg. Capital Turnover (Days)
Leverage Ratio
Current Ratio
Interest Cover Ratio
Debt/Equity
2010
87.8
119.0
370.2
6.0
8.0
2011
51.2
79.2
389.2
6.0
13.6
2012
87.8
120.7
469.2
8.0
10.4
2013
96.0
130.5
556
9.0
11.0
2014
75.6
114.0
623
9.0
13.5
2015
73.4
114.7
687
9.0
14.2
2016E
93.2
138.6
767
11.0
13.7
2017E
128.3
193.8
878
15.0
13.6
2018E
191.9
261.4
1,050
17.5
10.6
38.6
25.6
4.7
3.9
21.4
223
0.3
39.7
25.4
4.2
3
20.2
200
0.3
31.3
21.1
3.8
3
16.6
195
0.4
22.7
15.1
3.3
2.7
11.9
189
0.5
15.1
11.1
2.8
2.2
8.5
178
0.6
17.2
26.6
28.5
13.0
18.4
21.1
15.7
20.5
23.5
14.2
18.7
21.3
9.1
12.8
14.4
7.1
11.2
14.1
8.2
12.8
15.5
9.4
15.6
18.6
12.8
19.9
21.8
1.1
11
59
43
9
1.4
17
121
54
-22
1.0
15
68
41
29
1.1
19
69
43
15
1.2
23
76
43
23
1.4
19
78
44
13
1.5
20
75
45
24
1.3
18
75
45
32
1.2
18
70
45
71
1.1
13.5
0.3
0.8
6.6
0.2
1.3
13.9
0.3
1.2
16.9
0.4
1.2
8.0
0.3
1.1
5.1
0.4
1.3
6.3
0.4
1.4
5.4
0.5
1.9
7.8
0.4
Cash Flow Statement
Y/E March
Op. Profit/(Loss) before Tax
Interest/Dividends Recd.
Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
EO expense
CF from Operating incl EO Exp.
(inc)/dec in FA
Free Cash Flow
(Pur)/Sale of Investments
CF from investments
Issue of Shares
(Inc)/Dec in Debt
Interest Paid
Dividend Paid
CF from Fin. Activity
Inc/Dec of Cash
Add: Beginning Balance
Closing Balance
E: MOSL Estimates
2010
19,692
562
-3,891
-642
15,721
2
15,719
-2,741
12,979
-5,776
-8,517
1
-4,547
-1,459
-1,405
-7,410
-208
1,045
837
2011
25,635
1,223
-5,190
-925
20,743
0
20,743
-12,169
8,574
-4,321
-16,489
14
-664
-2,930
-728
-4,309
-55
1,503
1,448
2012
41,304
478
-7,340
158
34,600
22
34,578
-31,575
3,003
2,159
-29,416
16
83
-2,907
-1,905
-4,714
448
1,448
1,896
2013
46,244
566
-7,165
-3,887
35,759
32
35,727
-32,676
3,051
-10,349
-43,025
79
12,557
-3,268
-2,539
6,829
-469
1,896
1,427
2014
2015
2016E
2017E
72,302
6,000
-12,315
-5,188
60,799
0
60,799
-84,000
-23,201
-5,000
-89,000
0
49,000
-10,061
-4,782
34,156
5,955
6,410
12,365
(INR Million)
2018E
36,160
5,310
-3,367
-3,399
34,704
-956
35,660
-23,348
12,312
-2,830
-26,178
69
-2,092
-3,192
-2,887
-8,102
1,380
1,427
2,775
39,153
6,515
-3,753
3,900
45,815
0
45,815
-62,440
-16,625
1,829
-60,611
323
22,149
-5,475
-2,869
14,128
-668
2,775
2,139
49,909
5,000
-9,132
-4,095
41,682
0
41,682
-55,406
-13,725
27,588
-27,819
-154
0
-5,931
-3,507
-9,592
4,271
2,139
6,410
94,991
8,000
-18,171
-10,106
74,715
0
74,715
-15,000
59,715
-5,000
-20,000
0
-5,000
-9,772
-5,579
-20,351
34,364
12,365
46,729
September 2015
65

Thematic | Good-to-Great
United Spirits
CMP: INR3,191
Industry Attractiveness
TP: INR4,250 (+33%)
Buy
The Indian liquor industry offers tremendous potential. Per capita consumption in India
is just 0.9 liters against the world average of 4.6 liters. Uptrading from country liquor to
branded IMFL also presents a significant opportunity.
United Spirits (UNSP) enjoys a dominant position, with ~42% volume market share and
several first mover advantages in an industry characterized by a plethora of regulations.
We expect the industry to post healthy double-digit value CAGR.
Disciplined Management
After the Diageo transaction, the complexion of the company is set to change with
clear focus on value growth, right brand investments, and balance sheet deleveraging.
Disproportionate focus on compliance and ethics means better allocation of capital, a
key improvement vis-à-vis the erstwhile management.
After underinvestment for 15 years, the key identified power brand portfolio of 14
brands (e.g.
Royal Challenge)
is set to receive significant jump in brand investments.
Disciplined Thought
Driving premiumization through power brand portfolio of 14 brands is the key priority
and represents a strategic departure from the past.
Cost leadership: To drive cost cut in every P&L line item – RM, PM, overheads. Towards
this goal, it has already appointed AT Kearney to identify areas of cost saving.
Deleveraging: Over the next three years, UNSP plans to raise INR20b by divesting non-
core assets. This would help bring down debt from the existing INR46b [D/E of 1.3x].
Disciplined Action
Re-launching premium brands: New look
Royal Challenge
has already been rolled out.
Next brands to hit the market –
McDowell No 1, Antiquity, Signature.
Cost leadership: Several high cost plants have been closed in West Bengal and Kerala.
UNSP has sold direct operations in Tamil Nadu and is looking to replicate this in Kerala.
Divestment: UNSP has already commenced with divestment of non-core assets – UBL
stake has been sold recently for INR8.7b and the receipts would help pay off debt.
Expected Results
We expect EBITDA margin to expand to 12.6% by FY17, as initial rounds of cost saving
kick in. We build in 20% EBITDA margin by 2020.
We expect UNSP’s market share to remain steady in the Popular segment, but inch up
100-150bp per annum in the Prestige+ segment.
We also expect net debt to halve by FY18 from the existing INR46b [D/E of 1.3x].
September 2015
66

Thematic | Good-to-Great
Exhibit 69:
Per capita liquor consumption in India is a fraction of even developing market
peers
9.5
Russia
8.5
Brazil
Thailand
USA
UK
World
India
5.0
4.7
4.5
4.6
0.9
Russia
Brazil
Thailand
USA
UK
World
India
Source: Company, MOSL
Exhibit 70:
IMFL industry expected to post healthy double-digit value CAGR
INR m
Spirits
Brandy and Cognac
Rum
Whiskies
Gin
Vodka
2013
994.7
164.2
115.1
666.9
6.9
41.5
2014
1,110.3
185.8
125.0
745.1
6.8
47.5
2015E
1,227.2
207.8
134.6
824.2
6.7
53.8
2016E
1,345.8
229.7
144.4
904.6
6.7
60.4
2017E
1,463.7
250.5
154.8
984.7
6.6
67.1
CAGR
12.5
13.7
9.7
13.3
3.3
25.0
Source: Industry Sources, Company, MOSL
Exhibit 71:
Significant EBITDA margin decline over the years
EBITDA Margin (%)
15.7
10.2
5.2
5.6
5.5
18.8
15.3
15.7
15.1
12.6
12.5
9.1
7.0
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
Source: Company, MOSL
Exhibit 72:
Excise duty as a % of gross sales has gone up substantially
Excise duty as a % of gross sales
48.5
52.3
54.6
57.3
60.8
61.2
46.2
34.5
37.1
36.5
44.4
45.1
47.3
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
Source: Company, MOSL
September 2015
67

Thematic | Good-to-Great
Financials and Valuations: United Spirits
Income Statement
Y/E March
Net Sales
Other Operating Inc
Total Revenue
Change (%)
Total Expenditure
EBITDA
Change (%)
Margin (%)
Depreciation
Int. and Fin. Charges
Other Income - Recurring
Profit before Taxes
Change (%)
Margin (%)
Tax
Tax Rate (%)
Minority Interest
Adjusted PAT
Change (%)
Margin (%)
Non-rec. (Exp)/Income
Reported PAT
Balance Sheet
Y/E March
Share Capital
Reserves
Minority Interest
Net Worth
Loans
Deffered Tax Liabilities
Capital Employed
Gross Block
Less: Accum. Depn.
Net Fixed Assets
Capital WIP
Goodwill
Investments
Foregin Monetary term
Curr. Assets, L&A
Inventory
Account Receivables
Cash and Bank
Bank Deposit
Others
Curr. Liab. and Prov.
Account Payables
Other Liabilities
Provisions
Net Current Assets
Msc Expenses
Application of Funds
2010
58,530
5,093
63,623
16.4
-52,500
11,123
12.9
17.5
-950
-6,069
849
4,952
77.5
7.8
1,932
39.0
-4.9
3,026
61.4
4.8
-3,253
-227
2010
1,207
36,529
85
37,820
58,504
-715
95,610
23,745
-6,493
17,251
943
42,444
1,265
1,413
49,490
17,462
13,401
3,189
4,497
10,940
17,644
10,280
4,516
2,848
31,846
448
95,610
2011
68,586
5,175
73,762
15.9
-63,109
10,653
-4.2
14.4
-1,023
-4,985
904
5,549
12.1
7.5
2,098
37.8
-11.9
3,463
14.5
4.7
2,238
5,701
2011
1,259
40,527
175
41,961
67,107
-325
108,743
26,972
-7,573
19,399
1,291
44,320
1,544
-
61,842
21,168
14,825
4,944
1,426
19,479
20,102
13,304
5,026
1,771
41,741
448
108,742
2012
86,372
5,493
91,865
24.5
-81,262
10,603
-0.5
11.5
-1,474
-7,773
2,106
3,461
-37.6
3.8
1,481
42.8
-7.2
1,988
-42.6
2.2
-108
1,880
2012
1,259
45,359
146
46,764
75,231
-592
121,403
29,620
-9,432
20,188
1,080
58,618
2,358
-
75,729
27,548
17,737
2,690
942
26,812
36,570
16,792
17,328
2,451
39,159
-
121,403
2013
98,524
5,591
104,115
13.3
-94,078
10,037
-5.3
9.6
-1,784
-8,861
1,446
838
-75.8
0.8
1,781
212.4
-38.3
-904
-145.5
-0.9
-108
-1,012
2013
1,259
46,614
111
47,984
72,517
-589
119,911
31,026
-10,721
20,305
1,312
58,386
2,179
-
82,059
25,112
24,170
1,115
1,701
29,960
44,330
15,653
24,864
3,812
37,729
-
119,911
2014
99,116
5,894
105,009
0.9
-96,298
8,711
-13.2
8.3
-2,026
-12,771
7,550
1,463
74.5
1.4
2,762
188.8
3.1
-1,302
44.1
-1.2
-43,589
-44,891
2014
1,453
28,869
7
30,330
81,563
-967
110,927
35,317
-13,413
21,905
1,097
35,099
2,380
-
87,129
29,351
22,652
1,063
5,984
28,078
36,683
14,267
16,275
6,141
50,447
(1)
110,927
2015
91,594
1,756
93,350
-11.1
-85,677
7,673
-11.9
8.2
-2,229
-6,873
-4,904
-6,333
-532.8
-6.8
520
-8.2
0.0
-6,854
426.4
-7.3
-10,020
-16,873
2015E
1,453
31,385
7
32,845
41,563
-905
73,504
31,317
-14,884
16,433
1,097
20,099
2,380
-
68,535
22,549
18,751
1,500
3,187
22,549
35,040
13,055
15,428
6,557
33,495
73,504
2016E
93,868
7,034
100,903
8.1
-90,687
10,215
33.1
10.1
-2,472
-4,059
3,025
6,709
-205.9
6.6
2,214
33.0
0
4,495
-165.6
4.5
0
4,495
2016E
1,453
35,877
7
37,338
36,063
-794
72,607
35,317
-17,357
17,961
1,097
20,099
2,380
-
71,917
23,498
21,839
1,500
1,582
23,498
40,846
16,587
17,969
6,291
31,070
72,607
2017E
108,904
7,706
116,609
15.6
-101,910
14,699
43.9
12.6
-2,752
-3,050
3,328
12,224
82.2
10.5
4,034
33.0
0
8,190
82.2
7.0
0
8,190
(INR Million)
2018E
128,593
8,492
137,085
17.6
-118,711
18,374
25.0
13.4
-1,971
-2,056
3,660
18,007
47.3
13.1
5,942
33.0
12,065
47.3
8.8
0
12,065
(INR Million)
2017E
2018E
1,453
1,453
44,064
55,702
7
7
45,525
57,163
30,063
22,563
-592
-295
74,996
79,431
39,317
-20,109
19,208
1,097
20,099
2,380
-
78,788
28,753
23,961
1,500
614
23,961
46,577
19,169
20,766
6,642
32,212
74,996
43,317
-22,080
21,238
1,097
20,099
2,380
-
90,980
32,675
28,168
1,500
469
28,168
56,362
24,412
24,412
7,538
34,618
-
79,431
September 2015
68

Thematic | Good-to-Great
Financials and Valuations: United Spirits
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout %
Valuation (x)
P/E
Cash P/E
EV/Sales
EV/EBITDA
P/BV
Dividend Yield (%)
Return Ratios (%)
RoE
RoCE
Working Capital Ratios
Debtor (Days)
Asset Turnover (x)
Leverage Ratio
Debt/Equity (x)
Cash Flow Statement
Y/E March
OP/(loss) before Tax
Int./Div. Received
Depreciation and Amort.
Interest Paid
Direct Taxes Paid
Incr/Decr in WC
CF from Operations
Extraordinary Items
(Incr)/Decr in FA
Free Cash Flow
(Pur)/Sale of Investments
Msc Exp
CF from Invest.
Issue of Shares
(Incr)/Decr in Debt
Dividend Paid
Others
CF from Fin. Activity
Incr/Decr of Cash
Add: Opening Balance
Closing Balance
E: MOSL Estimates
2010
25.8
32.9
313.4
2.5
9.7
2011
28.3
36.7
342.8
2.5
8.8
2012
16.2
28.3
382.0
2.5
15.4
2013
-7.4
7.2
392.0
2.5
-33.9
2014
-9.0
5.0
208.7
2.5
-27.9
2015
-47.2
-31.8
226.0
0.0
0.0
2016E
30.9
47.9
256.9
0.0
0.0
2017E
56.4
75.3
313.3
0.0
0.0
2018E
83.0
96.6
393.3
2.5
3.0
-356.2
640.4
4.7
56.9
15.3
0.1
-67.7
-100.3
4.9
59.3
14.6
0.0
106.6
68.8
4.5
45.4
12.8
0.0
58.5
43.8
3.8
31.1
10.5
0.0
39.7
34.1
3.2
24.5
8.4
0.1
9.8
11.5
8.7
9.7
4.5
9.3
-1.9
8.1
-3.3
12.8
-21.7
0.7
12.8
14.8
19.8
20.4
21.1
25.3
77
0.7
73
0.7
70
0.8
85
0.9
79
0.9
73
1.3
79
1.4
75
1.6
75
1.7
1.5
2010
4,952
-849
6,069
-1,932
-4,741
3,500
-3,253
815
1,063
8,236
-285
5,513
14,494
-19,532
-366
-413
-5,817
3,197
4,490
7,687
1.6
2011
5,549
-904
4,985
-2,098
-11,211
-3,679
2,238
-5,452
-6,893
-279
0
-3,493
-1,179
8,603
-381
-1,186
5,856
-1,316
7,686
6,370
1.6
2012
3,461
-2,106
7,773
-1,481
-156
7,492
-108
-16,736
-9,352
-814
-448
-18,106
3,303
8,124
-379
-3,172
7,876
-2,738
6,370
3,632
1.5
2013
838
-1,446
8,861
-1,781
614
7,086
-108
-1,406
5,572
179
0
-1,335
2,611
-2,714
-379
-6,085
-6,568
-816
3,632
2,816
2.7
2014
1,463
-7,550
12,771
-2,762
-8,487
-4,564
-43,589
19,211
-28,942
-201
-1
-24,580
27,278
9,047
-41
-2,910
33,375
4,231
2,816
7,047
1.3
2015
-6,333
4,904
6,873
-520
14,591
19,515
-10,020
19,000
28,495
0
1
8,981
19,389
-40,000
0
-10,245
-30,856
-2,361
7,047
4,686
1.0
2016E
6,709
-3,025
4,059
-2,214
820
6,349
0
-4,000
2,349
0
0
-4,000
-3
-5,500
0
1,549
-3,954
-1,605
4,687
3,081
0.7
0.4
(INR Million)
2017E
2018E
12,224
18,007
-3,328
-3,660
3,050
-4,034
-2,109
5,804
0
-4,000
1,804
0
0
-4,000
-3
-6,000
0
3,231
-2,772
-968
3,082
2,113
2,056
-5,942
-2,551
7,910
0
-4,000
0
0
-4,000
-3
-7,500
-424
4,888
-3,039
871
2,114
2,985
September 2015
69

Thematic | Good-to-Great
Zee Entertainment
CMP: INR361
TP: INR475 (+32%)
Buy
Industry Attractiveness
India’s advertising-spending-to-GDP ratio is only 0.33% against the global average of
0.66%. A 10bp increase led by higher discretionary spending would imply 5-year CAGR of
19% in advertising spending against a CAGR of 13% in nominal GDP.
Ongoing mandatory digitization of the analog cable platform would drive an incremental
yearly subscription opportunity of ~USD2b for broadcasters by FY20, implying 22%
revenue CAGR.
Disciplined Management
ZEE has a young and dynamic management team in place. Post Mr Punit Goenka taking
over as the MD in 2010, ZEE went through a restructuring process.
Inter group balance sheet exposures were largely eliminated so as to bring forth
discipline in capital allocation.
The entire entertainment business was brought into one fold, with the merger of the
fast growing regional business with ZEE.
Disciplined Thought
Grow market leadership: ZEE aims to be amongst the top global media conglomerates
and is targeting 4-5x growth in viewership and content consumption by the year 2020.
High cost discipline driving superior margins: ZEE has historically avoided high cost
celebrity/non-fiction shows, which bring in TRPs but lack RoI. With best-in-class cost
management and margin focus, we believe target EBITDA margin of 30%+ is achievable.
Improve shareholder returns: ZEE has committed payout to shareholders.
Disciplined Action
Expanded channel portfolio: Almost one-third of ZEE’s channel portfolio was launched
post FY12, including its biggest launch ‘&TV’, aimed at non-ZEE viewers.
Continued operating leverage: ZEE is confident of holding flat margins in FY16 despite
higher investments. This implies continued operating leverage in the existing portfolio.
Committed payout: ZEE paid INR12b (~32% of cumulative PAT) in dividend / buyback
during FY10-15 and committed INR20b in the form of bonus preference shares.
Expected Results
20% revenue CAGR: We expect 22% CAGR in advertising revenue and 24% CAGR in
domestic subscription revenue over FY15-18, led by market share gains in a rebounding
ad market and increase in broadcasters’ share of subscription revenue.
25%+ EBITDA / PAT CAGR: We expect EBITDA / PAT to double over FY15-18 (our
estimates are 10-20% above consensus). EBITDA margin is likely to reach ~30% by FY18,
though we model 170bp margin decline in FY16 due to first-year losses for &TV.
RoE / RoCE of 30%+: We expect RoE of 30%+; RoCE is likely to increase from 27% to
36% over FY15-18.
70
September 2015

Thematic | Good-to-Great
Exhibit 73:
Ad/GDP ratio: Global comparison (%)
1.1
0.8
0.5
0.3
0.6
0.7
0.9
Exhibit 74:
Pay TV ARPU: Global comparison (USD)
75
65
55
15
3
5
18
India
China
Brazil
Global
Japan
UK
US
India
China Malaysia Thailand
Brazil
UK
USA
Exhibit 75:
FY15-18 incremental ad revenue analysis for Zee
Exhibit 76:
Analysis of Broadcaster’s share of Pay TV
subscription revenue
FY15
FY18E
66
463
529
7
139
146
10
30
28
Pay TV subscription rev (INR b)
-Analog
-Digital
Total
Broadcaster's share (INR b)
-Analog
-Digital
Total
Broadcaster's share ( %)
-Analog
-Digital
Total
8
6
27
5
4
49
132
213
346
13
65
79
10
31
23
FY15 ad
revenue
&TV
Regional Hindi GEC
ex-&TV
Others
FY18E ad
revenue
Exhibit 77:
EPS impact of &TV launch
ZEE EPS excl '&TV'
&TV EPS contribution
ZEE EPS incl '&TV'
Exhibit 78:
EBITDA margin trajectory
20.1
19.7
Consolidated EBITDA margin
Non sports EBITDA margin (incl &TV)
Non sports EBITDA margin (excl &TV)
38.6
33.5
32.5
25.8
34.6
32.3
30.1
0.5
25.7
24.3
27.2
25.7
35.7
28.7
23.9
36.4
31.9
27.2
37.7
34.8
30.4
10.8
10.2
-0.6
13.1
11.4
-1.8
FY16E
15.8
15.2
-0.7
FY15E*
FY17E
FY18E
FY11
FY12
FY13
FY14
FY15
FY16E FY17E FY18E
Exhibit 79:
We are meaningfully ahead of consensus
FY16E
Revenue (INR b)
MOSL
Consensus
MOSL vs Consensus (%)
EBITDA (INR b)
MOSL
Consensus
MOSL vs Consensus (%)
57.6
56.7
1.5
13.8
14.3
-3.3
FY17E
69.4
66.0
5.1
18.9
18.1
4.2
FY18E
83.8
76.7
9.3
25.5
22.3
14.6
EBITDA margin (%)
MOSL
Consensus
MOSL vs Consensus (bp)
EPS (INR)
MOSL
Consensus
MOSL vs Consensus (%)
FY16E
23.9
25.1
-118bp
11.4
10.4
9.4
FY17E
27.2
27.4
-24bp
15.2
13.2
FY18E
30.4
29
140bp
20.1
16.6
14.7
21.2
Source: Company, MOSL
September 2015
71

Thematic | Good-to-Great
Financials and Valuations: Zee
Income Statement
Y/E March
Advertisement Revenues
Subscription Revenues
Other Sales & Sevices
Net Sales
Change (%)
Total Income
Total Expenses
EBITDA
Change (%)
% of Net Sales
Depreciation
EBIT
Other Income
Interest & Finance Charges
PBT
Tax
Effective Rate (%)
PAT
Minority Interest
Adj. PAT
Change (%)
2012
15,841
13,245
1,320
30,406
3.4
30,406
23,010
7,396
-2.3
24.3
323
7,073
1,384
50
8,407
2,500
29.7
5,907
-15
5,892
-7.5
2013
19,639
16,234
1,123
36,997
21.7
36,997
27,452
9,545
29.0
25.8
399
9,146
1,461
86
10,521
3,337
31.7
7,184
14
7,198
22.2
2014
23,800
18,022
2,395
44,217
19.5
44,217
32,175
12,042
26.2
27.2
501
11,541
1,807
158
13,191
4,291
32.5
8,900
21
8,921
23.9
2015
26,603
17,944
4,299
48,846
10.5
48,846
36,299
12,547
4.2
25.7
673
11,874
2,278
103
14,049
4,284
30.5
9,765
20
9,785
9.7
2016E
33,737
19,741
4,084
57,561
17.8
57,561
43,778
13,783
9.9
23.9
730
13,054
3,189
113
16,130
5,242
32.5
10,888
20
10,908
11.5
2017E
41,188
24,148
4,089
69,425
20.6
69,425
50,572
18,854
36.8
27.2
792
18,062
3,603
113
21,552
7,004
32.5
14,548
20
14,568
33.6
(INR Million)
2018E
48,857
30,867
4,094
83,817
20.7
83,817
58,318
25,499
35.2
30.4
860
24,639
4,083
123
28,598
9,295
32.5
19,304
20
19,324
32.6
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Preference capital
Minority Interest
Loans
Other non-current liabilities
Capital Employed
Net Fixed Assets
Goodwill
Capital WIP
Investments
Deferred tax assets (net)
Other non-current assets
Curr. Assets, Loans&Adv.
Program Films
Sundry Debtors
Cash & Bank Balances
Loans & Advances
Other Current assets
Current Liab. & Prov.
Sundry Creditors
Other Current Liabilities
Provisions
Net Current Assets
Appl.of Funds
E: MOSL Estimates
2012
959
33,349
34,308
0
14
21
0
34,343
2,305
6,894
201
675
337
314
32,428
7,339
8,660
11,100
4,975
354
8,820
3,872
3,015
1,933
23,608
34,343
2013
954
38,161
39,115
0
33
28
174
39,350
2,779
7,127
69
651
288
329
39,500
8,745
9,890
13,100
7,430
335
11,404
5,172
3,445
2,787
28,096
39,350
2014
960
26,247
27,207
20,170
61
29
324
47,791
3,108
7,625
997
2,941
298
361
44,987
11,736
10,281
15,300
6,788
882
12,538
5,050
3,842
3,646
32,449
47,791
2015
960
34,449
35,410
20,170
4
22
288
55,894
3,490
7,887
878
1,464
531
378
55,431
11,878
10,692
20,480
11,053
1,328
14,256
4,204
4,980
5,072
41,153
55,894
2016E
960
41,465
42,426
20,170
4
22
288
62,910
3,295
7,887
828
1,464
531
378
64,519
15,266
12,358
25,081
10,512
1,302
15,993
5,591
5,330
5,072
48,527
62,910
2017E
960
51,967
52,927
20,170
4
22
288
73,411
3,086
7,887
778
1,464
531
378
76,957
17,451
14,905
30,352
12,679
1,571
17,669
6,449
6,148
5,072
59,288
73,411
(INR Million)
2018E
960
66,934
67,895
16,136
4
22
288
84,345
2,858
7,887
728
1,464
531
378
90,001
19,835
17,994
34,968
15,307
1,896
19,502
7,388
7,043
5,072
70,499
84,345
September 2015
72

Thematic | Good-to-Great
Financials and Valuations: Zee
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
EPS (excl '&TV' loss)
Book Value per Share
DPS
Payout (Incl. Div. Tax) %
Valuation
P/E
P/E (excl '&TV' loss)
EV/EBITDA
EV/Sales
Price/Book Value
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
Turnover Ratios
Debtors (No. of Days)
Inventory (No. of Days)
Creditors (No. of Days)
Asset Turnover (x)
Leverage Ratio
Debt/Equity (x)
2012
6.1
6.4
6.1
35.4
1.5
24.4
2013
7.5
7.9
7.5
40.9
2.0
26.5
2014
9.3
9.8
9.3
28.5
2.0
21.5
2015
10.2
10.9
10.8
36.9
2.3
22.1
2016E
11.4
12.1
13.1
44.2
2.1
18.5
2017E
15.2
16.0
15.8
55.1
2.3
14.8
2018E
20.1
21.0
19.7
70.7
2.5
12.4
35.4
33.4
27.6
7.1
9.8
0.6
31.8
27.5
24.8
5.9
8.2
0.6
23.8
22.8
17.9
4.8
6.6
0.6
17.9
18.4
12.9
3.9
5.1
0.7
18.0
25.8
19.6
28.8
26.9
30.6
31.2
27.3
28.0
27.3
30.6
31.8
32.0
36.4
104
162
78
0.9
98
169
69
1.0
85
181
66
1.0
80
201
53
0.9
78
201
53
1.0
78
201
53
1.0
78
201
53
1.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Cash Flow Statement
Y/E March
EBITDA
Other Inc/excep. items
Interest paid
Direct Taxes Paid
(Inc)/Dec in Wkg. Capital
Preference dividend paid
CF from Oper. Activity
(Inc)/Dec in FA + CWIP
(Pur)/Sale of Invest.
CF from Invest. Activity
Issue of Shares
Inc/(Dec) in Debt
Dividends Paid
Others
CF from Finan. Activity
Inc/(Dec) in Cash
Add: Beginning Balance
Closing Balance
E: MOSL Estimates
2012
7,396
1,384
-50.0
-2,645.0
-4,622.2
1,463
-1,617
-52
-1,669
606
4
-1,683
-120
-1,193
-1,399
12,500
11,100
2013
9,545
1,461
-85.5
-3,288.0
-3,837.9
3,794
-974
24
-950
1,348
7
-2,232
33
-844
2,000
11,100
13,100
2014
12,042
1,807
-157.8
-4,301.0
-462.0
8,929
-2,256
-2,290
-4,546
-20,159
20,171
-2,244
49
-2,183
2,200
13,100
15,300
2015
12,547
2,278
-102.6
-4,517.0
-5,132.4
5,072
-1,198
1,477
279
2,472
-7
-2,601
-37
-173
5,179
15,300
20,480
2016E
13,783
3,189
-112.6
-5242.4
-4114.2
7,504
-485
0
-485
0
0
-2,439
20
-2,419
4,600
20,480
25,081
2017E
18,854
3,603
-112.6
-7004.4
-6944.4
8,395
-532
0
-532
0
0
-2,613
20
-2,593
5,270
25,081
30,352
(INR Million)
2018E
25,499
4,083
-122.6
-9294.5
-8049.2
12,115
-583
0
-583
0
-4,034
-2,903
20
-6,917
4,615
30,352
34,968
September 2015
73

Thematic | Good-to-Great
Annexure III: The Backtest
BSE Sensex: 25,202
S&P CNX: 7,655
4 September 2015
Britannia Inds.
Eicher Motors
HDFC Bank
Annexure III: The Backtest
September 2015
74

Thematic | Good-to-Great
Britannia
CMP: INR2,985
Industry Attractiveness
TP: INR3,600 (+21%)
Buy
Biscuits industry is the largest processed foods industry in India at INR250bn.
Britannia is the second largest player (~30% market share), close on the heels of leader
Parle (32%). On a monthly basis, it has crossed Parle as leader now in value terms.
Though the industry is witnessing a slowdown (4-5% value growth for the last two years),
Britannia has outperformed with 13-14% revenue growth.
Disciplined Management
Mr. Varun Berry was appointed the COO in 2013 and MD in 2014.
Before Mr. Berry’s appointment, profit growth was stagnant at 2.3% CAGR over FY05-
12; margins collapsed from 12% to 5% due to RM inflation and heightened competition.
Shareholder Focus: Mr. Berry brought about the following changes in approach a) focus
on value growth in Biscuits instead of only volumes, b) leveraging distribution (direct +
indirect reach of 4mn outlets), c) leveraging scale to bring in cost efficiencies.
Disciplined Thought
Premiumization: Value segment of the industry was flattish over CY10-12; as a result,
the company decided to focus on top 5 power brands in Biscuits and expand the reach
of its portfolio.
Cost containment: Cost cutting in manufacturing, distribution, logistics and conversion
were outlined as priority areas.
Innovation: As value segment (Glucose) of the industry was stagnant (2.5% CAGR
decline over CY10-12), Britannia used innovation.
Disciplined Action
Premiumization: The company restricted its advertisement investments in top 5 brands
and implemented split-route strategy in select urban markets to drive penetration.
Cost containment: 300 projects were implemented in the supply chain to save costs;
the proportion of in-house manufacturing increase from 33% to 60% over FY13-15.
Innovation: It sped up innovation and launched 6 new products (all in premium
segments) in the last 12 months.
Expected Results
Share gains: Britannia posted revenue CAGR of 12% over FY12-15 v/s industry’s ~7-8%
CAGR over the similar period.
Premiumization: Gross margins improved from 34% to 39.7% while EBITDA margins
expanded from 4.7% to 10% over FY12-15, implying an Impressive EBITDA CAGR of 38.
Capital efficiency: RoCE expanded from 16.1% in FY11 to 54% in FY15.
75
September 2015

Thematic | Good-to-Great
Exhibit 80:
Gross margin improved from 34% to 39.7% over
Exhibit 81:
…while EBITDA margins expanded from 4.7% to
FY11-FY15
10% over the same period
41.1 41.3
39.0
35.8
Gross Margin (%)
38.9
36.1
34.0
37.1
35.3
5.8
39.7
12.3
11.7
8.5
7.0
4.3
4.7
5.2
6.0
EBITDA Margin (%)
10.0
8.0
38.1
Source: Company, MOSL
Source: Company, MOSL
Exhibit 82:
RoCE consistently improving over FY11-FY15
55.6
36.7
22.6
17.4
22.9
RoCE (%)
48.7
30.5
15.9
10.8
16.1
54.3
Exhibit 83:
Innovations in the past one year
Source: Company, MOSL
Source: Company, MOSL
Exhibit 84:
Massive outperformance v/s Sensex….
1050
800
550
300
50
143
Britannia Inds.
Sensex-Rebased
907
Exhibit 85:
…and BSE100
Britannia Inds.
1020
770
520
270
20
147
BSE 100- Rebased
907
Source: Company, MOSL
Source: Company, MOSL
September 2015
76

Thematic | Good-to-Great
Financials and Valuations: Britannia
Income Statement
Y/E March
Net Revenues
Change (%)
Gross Profit
Margin (%)
Other Expenditure
EBITDA
Change (%)
Margin (%)
Depreciation
Int. and Fin. Charges
Financial Other Income
Operating Other Income
PBT
Tax
Deferred Tax
Tax Rate (%)
PAT
Change (%)
Margin (%)
Non-rec. (Exp.)/Income
Reported PAT
Balance Sheet
Y/E March
Share Capital
Reserves
Networth
Loans
Capital Employed
Gross Block
Less: Accum. Depn.
Net Fixed Assets
Goodwill on consolidation
Capital WIP
Investments
Current
Non-current
Deferred Liability
Currents Assets
Inventory
Account Receivables
Cash and Bank Balance
Others
Curr. Liab. & Prov.
Account Payables
Other Liabilities
Provisions
Net Current Assets
Net Assets
E: MOSL Estimates
2010
37,729
10.3
13,614
36.1
8,976
1,629
-31.6
4.3
582
235
547
36
1,394
216
-160
4.0
1,338
6.9
3.5
-307
1,032
2011
45,897
21.6
15,621
34.0
10,123
2,170
33.3
4.7
649
436
472
314
1,871
409
120
28.3
1,342
0.3
2.9
0
1,343
2012
54,608
19.0
19,280
35.3
12,221
2,863
31.9
5.2
618
416
584
253
2,666
650
19
25.1
1,997
48.8
3.7
0
1,996
2013
61,359
12.4
22,746
37.1
13,691
3,711
29.7
6.0
732
413
514
504
3,584
934
52
27.5
2,599
30.1
4.2
0
2,595
2014
68,293
11.3
26,583
38.9
15,108
5,438
46.5
8.0
832
83
336
834
5,693
1,775
-39
30.5
3,957
52.3
5.8
0
3,953
2015
77,751
13.8
30,833
39.7
16,510
7,806
43.5
10.0
1,445
39
880
833
8,035
2,553
-260
28.5
5,743
45.1
7.4
1,142
6,886
2016E
89,157
14.7
37,857
42.5
18,151
12,217
56.5
13.7
1,513
31
950
923
12,545
3,889
0
31.0
8,656
50.7
9.7
0
8,656
(INR Million)
2017E
103,905
16.5
44,528
42.9
21,059
14,845
21.5
14.3
1,671
32
1,140
973
15,256
4,729
0
31.0
10,526
21.6
10.1
0
10,526
(INR Million)
2017E
240
23,392
23,632
1,499
25,131
19,565
-11,915
7,650
1,107
484
12,054
11,859
195
-234
22,034
6,234
1,808
7,609
6,383
18,431
8,312
4,893
5,227
3,603
25,131
2010
239
2,589
2,828
6,570
9,419
9,247
-5,112
4,135
858
102
3,664
2,776
889
-61
6,313
3,042
733
427
2,111
5,714
1,614
3,163
936
599
9,419
2011
239
3,021
3,260
6,188
9,469
9,691
-5,498
4,193
856
128
3,885
2,461
1,424
58
7,126
3,470
810
769
2,078
6,661
2,680
2,700
1,280
465
9,470
2012
239
3,853
4,092
6,042
10,155
11,211
-5,912
5,300
944
1,113
2,485
1,064
1,421
76
8,579
4,318
1,130
613
2,518
8,189
3,870
2,748
1,570
390
10,156
2013
239
5,269
5,508
3,800
9,401
12,893
-6,517
6,376
992
1,473
1,082
729
353
128
8,912
3,747
1,228
1,029
2,908
9,306
3,935
3,722
1,649
-394
9,401
2014
240
7,698
7,938
1,498
9,503
14,930
-7,524
7,406
1,070
1,071
1,979
1,629
350
89
9,543
4,203
1,087
1,091
3,163
11,477
5,567
3,799
2,111
-1,934
9,503
2015
240
12,176
12,415
1,451
13,926
16,065
-8,731
7,334
1,107
484
5,179
4,859
321
-234
13,596
4,040
1,358
2,263
5,934
14,007
7,034
4,273
2,700
-411
13,926
2016E
240
17,147
17,387
1,499
18,886
17,565
-10,244
7,321
1,107
484
8,554
8,359
195
-234
17,402
5,349
1,561
4,433
6,058
16,214
7,345
4,571
4,298
1,187
18,886
September 2015
77

Thematic | Good-to-Great
Financials and Valuations: Britannia
Ratios
Y/E March
Basic (INR)
EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
EV/Sales
EV/EBITDA
P/BV
Dividend Yield
Return Ratios (%)
RoE
RoCE
Working Capital Ratios
Debtor (Days)
Asset Turnover (x)
Leverage Ratio
Debt/Equity (x)
Cash Flow Statement
Y/E March
OP Profit
Dep
Financial Other Income
Interest Paid
Direct Taxes Paid
Inc in WC
CF from Operations
Extraordinary Items
(Inc)/Dec in FA
(Pur.)/Sale of Investments
Other Non Rec Exp
CF from Investments
Issue of Shares
Inc in Debt
Dividend Paid
Other Item
CF from Fin. Activity
Inc/Dec of Cash
Add: Beginning Balance
Closing Balance
E: MOSL Estimates
2010
11.2
23.7
5.0
44.6
2011
11.2
27.3
6.5
57.9
2012
16.7
34.3
8.5
50.8
2013
21.7
46.1
8.5
39.1
2014
33.0
66.2
12.0
36.4
96.3
5.3
69.8
45.5
0.4
26.7
10.8
7
4.0
2.3
44.1
16.1
6
4.8
1.9
54.3
22.9
8
5.4
1.5
54.1
30.5
7
6.5
0.7
58.9
48.7
6
7.2
0.2
1.45111
2015
47.9
103.5
16.0
33.4
66.4
4.6
48.1
29.1
0.5
56.4
54.3
6
5.6
0.1
1.50732
2016E
72.2
145.0
25.3
35.0
44.0
3.9
30.3
21.9
0.8
58.1
65.2
6
4.7
0.1
1.21608
2017E
87.8
197.0
30.7
35.0
36.2
3.3
24.4
16.1
1.0
51.3
59.9
6
4.1
0.1
(INR Million)
2017E
15,256
1,671
-1,140
-32
4,729
-760
11,849
2010
1,394
582
-547
-235
216
-427
1,875
2011
1,871
649
-472
-436
409
-475
2,550
2012
2,666
618
-584
-416
650
81
2,385
2013
3,584
732
-514
-413
934
-1,200
4,481
2014
5,693
832
-336
-83
1,775
-1,602
6,099
2015
8,035
1,445
-880
-39
2,553
350
5,736
2016E
12,545
1,513
-950
-31
3,889
-572
9,822
-504
109
307
-87
0
3,821
1,118
4,752
-2,049
-261
688
428
-470
-221
0
-690
0
-381
696
441
-1,519
341
427
769
-2,505
1,400
0
-1,105
0
-146
902
387
-1,436
-155
769
613
-2,042
1,403
0
-639
0
-2,242
1,180
4
-3,426
416
613
1,029
-1,634
-897
0
-2,531
1
-2,302
1,189
15
-3,506
62
1,029
1,091
-548
-3,201
-1,142
-4,891
0
-47
1,684
-2,058
327
1,172
1,091
2,263
-1,500
-3,375
0
-4,875
0
48
2,309
516
-2,777
2,170
2,263
4,434
-2,000
-3,500
0
-5,500
0
0
3,520
-347
-3,173
3,175
4,433
7,609
September 2015
78

Thematic | Good-to-Great
Eicher Motors
CMP: INR18,147
Industry Attractiveness
TP: INR24,137 (+33%)
Buy
Eicher’s key product Royal Enfield (RE) was part of the nascent leisure biking industry,
which was estimated to contribute ~1% of domestic 2W volumes in CY12.
RE enjoyed virtual monopoly in the leisure biking segment, with ~78% market share of
the segment.
The Leisure biking segment in India posted ~54% CAGR over CY12-14E, restricted by
capacity constraints with Royal Enfield.
Disciplined Management
After witnessing initial success with UCE-based engine for Royal Enfield, Eicher
channelized its energy toward expanding production capacity and improving
efficiencies.
More importantly, it worked on its marketing strategy—with focus on creating
experiential marketing and building community of RE riders.
Eicher has a majority ownership in VECV JV with Volvo but its management is focused
just on RE, leaving VECV’s management to Volvo.
Disciplined Thought
Focus on building capacity: With strong demand and consistent waiting period of over
six months for RE, the entire focus of the management was on building capacity.
Subsequently it worked to expand its distribution network.
Focus on developing products: To ensure continued success of RE, Eicher’s next step
was to broadbase product portfolio and expand addressable market.
Focus on developing export markets: With an eye on global mid-level motorcycle
segment and noticeable gap in leisure segment in the 250-750cc category, Eicher was
focused on replicating its India success globally.
Disciplined Action
Expanding capacity: Eicher expanded capacity from 100k in CY12 to ~300k in CY14 and
~600k in CY15. Subsequently, it expanded its capacity from ~180 dealers in CY11 to
~400 in CY14 and ~500 in CY15.
Focus on developing products: Eicher launched Thunderbird and Continental GT on its
existing platform. It plans to launch two platforms over the next two years.
Focus on developing export markets: Apart from its existing export markets in the
developed world, Eicher has started working on developing export markets in LatAm
and Southeast Asia.
Expected Results
RE’s volumes posted 60% CAGR over CY12-15E, driven by new capacities and products.
New capacities also led to improvement in efficiencies, driving S/A gross margin and
EBITDA margin expansion of 7.3pp/13pp over CY12-15E.
As a result, RoEs improved ~15.4pp to 35.4% in CY15E.
79
September 2015

Thematic | Good-to-Great
Exhibit 86:
EPS and EPS growth (%)
800
600
400
200
0
CY10
CY11
CY12
CY13
CY14 CY15E CY16E
EPS (INR)
EPS Growth (%)-L.H.S
80
60
40
20
0
Exhibit 87:
RoE and RoCE (%)
60
45
30
15
0
CY10
CY11
CY12
CY13
CY14
CY15E CY16E
RoE
RoCE
Exhibit 88:
Gross margins and EBITDA margins
Gross Margins (%)
60
45
30
15
0
CY10
CY11
CY12
CY13
CY14 CY15E CY16E
EBITDA Margins (%) - L.H.S
40
30
20
10
0
Exhibit 89:
Capacity and sales
Capacity
Sales
CY10
CY11
CY12
CY13
CY14
CY15E
CY16E
Exhibit 90:
Eicher Motors outperform Sensex
2,000
1,500
1,000
500
0
134
BSE Sensex
Eicher Motors
1,586
September 2015
80

Thematic | Good-to-Great
Financials and Valuations: Eicher Motors
Income Statement (Consolidated)
Y/E December
Net Sales
Change (%)
EBITDA
EBITDA Margin (%)
Depreciation
Interest cost
Other Income
PBT
Tax
Effective Rate (%)
PAT
Change (%)
Less: Minority Interest
Adj. PAT
Change (%)
2010
43,971
49.6
3,811
8.6
573
95
1,034
4,177
1,108
26.5
3,068
137.0
1,179.3
1,889
126.6
2011
56,775
29.1
6,037
10.5
640
77
1,281
6,602
1,628
24.7
4,974
62.1
1,886.3
3,088
63.4
2012
63,299
11.5
5,490
8.6
822
38
1,366
5,997
1,249
20.8
4,749
-4.5
1,505.9
3,243
5.0
2013
66,858
5.6
7,137
10.5
1,300
79
953
6,711
1,452
21.6
5,259
10.8
1,314.4
3,945
21.7
2014
85,987
28.6
11,148
12.8
2,198
98
1,074
9,926
2,909
29.3
7,017
33.4
863.8
6,154
56.0
2015E
120,418
40.0
19,052
15.6
3,375
78
685
16,284
4,854
29.8
11,430
62.9
1,508.5
9,921
61.2
2016E
170,426
41.5
32,478
18.8
4,243
78
1,218
29,374
8,744
29.8
20,630
80.5
3,376.3
17,254
73.9
(INR Million)
2017E
209,646
23.0
41,863
19.7
5,197
78
2,315
38,903
11,550
29.7
27,353
32.6
4,480.1
22,873
32.6
Balance Sheet (Consolidated)
Y/E December
Share Capital
Net Worth
Minority Interest
Deferred Tax
Loans
Capital Employed
Application of Funds
Gross Fixed Assets
Less: Depreciation
Net Fixed Assets
Capital WIP
- of which Goodwill
Investments
Curr.Assets, L & Adv.
Inventory
Sundry Debtors
Cash & Bank Balances
Loans & Advances
Others
Current Liab. & Prov.
Sundry Creditors
Other Liabilities
Provisions
Net Current Assets
Application of Funds
E: MOSL Estimates
2010
269
12,321
6,774
249
956
20,301
8,113
4,269
3,844
703
223
4,586
20,500
3,265
2,609
12,457
1,814
355
9,332
7,596
346
1,391
11,168
20,301
2011
270
14,931
8,377
645
504
24,456
9,887
4,843
5,044
4,128
223
5,126
23,501
4,280
3,434
11,973
3,391
424
13,343
11,238
608
1,497
10,157
24,456
2012
270
17,549
9,485
1,232
384
28,649
15,260
5,342
9,918
5,044
223
6,385
23,368
4,888
4,459
8,035
5,503
483
16,066
14,356
6
1,704
7,302
28,649
2013
270
20,554
10,397
1,805
839
33,595
22,993
6,431
16,561
4,636
223
8,255
23,914
5,268
5,125
6,826
6,163
532
19,771
17,612
0
2,159
4,143
33,595
2014
271
25,159
10,851
2,394
584
38,986
31,374
8,280
23,093
4,188
223
10,777
26,018
6,455
5,622
4,806
8,578
557
25,089
21,876
0
3,213
928
38,987
2015E
271
30,815
12,359
2,647
584
46,405
43,243
11,655
31,588
1,250
223
9,171
34,390
8,893
5,332
12,453
6,837
875
29,994
22,057
4,602
3,336
4,396
46,405
2016E
271
46,401
15,735
3,146
584
65,865
53,243
15,898
37,345
1,250
223
9,171
60,340
12,583
7,346
29,674
9,507
1,231
42,241
31,287
6,814
4,141
18,099
65,865
(INR Million)
2017E
271
67,424
20,215
3,806
584
92,029
64,493
21,095
43,398
1,250
223
9,171
90,259
15,442
8,776
52,851
11,689
1,501
52,049
38,492
8,727
4,830
38,210
92,029
September 2015
81

Thematic | Good-to-Great
Financials and Valuations: Eicher Motors
Ratios (Consolidated)
Y/E December
Basic (INR)
EPS
EPS Growth (%)
Cash EPS
Book Value per Share
DPS
Payout (Incl. Div. Tax) %
Valuation (x)
P/E
Cash P/E
EV/EBITDA
EV/Sales
Price to Book Value
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
RoIC
Turnover Ratios
Debtors (Days)
Inventory (Days)
Creditors (Days)
Working Capital (Days)
Asset Turnover (x)
Fixed Asset Turnover
Leverage Ratio
Debt/Equity (x)
2010
70.1
6.5
91.4
457.4
11.0
18.3
2011
114.4
63.1
138.1
553.2
16.0
16.3
2012
120.1
5.0
150.5
650.0
20.0
19.5
2013
145.9
21.5
194.0
760.1
30.0
24.1
124.4
93.5
88.6
10.6
23.9
0.2
16.4
22.4
35.0
22
27
63
-14
2.2
22.7
29.8
40.0
22
27
72
-22
2.3
20.0
22.7
20.0
25
28
82
-29
2.2
20.7
21.8
19.5
27
28
94
-39
2.0
2014
227.1
55.6
308.2
928.4
35.0
27.5
79.9
58.9
51.0
7.8
19.5
0.2
26.9
27.6
25.7
23
27
91
-41
2.2
2015E
366.1
61.2
490.6
1,137.1
40.0
12.8
49.6
37.0
29.0
5.4
16.0
0.2
35.4
38.3
39.2
16
27
66
-23
2.6
2016E
636.7
73.9
793.2
1,712.2
45.0
8.3
28.5
22.9
16.8
3.6
10.6
0.2
44.7
52.5
63.3
15
27
66
-24
2.6
2017E
844.0
32.6
1,035.8
2,488.0
50.0
6.9
21.5
17.5
12.5
2.8
7.3
0.3
40.2
49.4
74.5
15
26
66
-24
2.3
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Cash Flow Statement (Consolidated)
Y/E December
Profit before Tax
Depreciation & Amort.
Direct Taxes Paid
(Inc)/Dec in Working Capital
Interest/Div. Received
Other Items
CF from Oper. Activity
(Inc)/Dec in FA+CWIP
Free Cash Flow
(Pur)/Sale of Invest.
CF from Inv. Activity
Issue of Shares
Inc/(Dec) in Debt
Interest Paid
Dividends Paid
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Beginning Balance
Closing Balance
E: MOSL Estimates
2010
4,177
573
-831
374
1,039
-933
4,399
-1,315
3,084
-1,645
-2,960
88
-307
-118
-351
-689
750
11,707
12,457
2011
6,602
640
-1,668
-234
1,316
-1,305
5,351
-4,173
1,178
-540
-4,713
24
-453
-84
-609
-1,122
-484
12,457
11,973
0
2012
5,997
822
-1,077
391
1,351
-1,308
6,177
-7,820
-1,644
-1,263
-9,083
4
-43
-40
-895
-974
-3,880
11,915
8,035
0
2013
6,706
1,300
-1,504
1,491
1,023
-819
8,197
-7,054
1,143
-1,879
-8,933
17
610
-80
-1,020
-474
-1,209
8,035
6,826
0
2014
9,926
2,198
-2,810
2,020
950
-1,809
10,475
-9,682
793
-1,190
-10,872
79
-255
-98
-1,348
-1,622
-2,020
6,826
4,806
0
2015E
16,284
3,375
-4,600
-1,968
685
5,541
19,316
-8,932
10,385
1,606
-7,326
-2,996
0
-78
-1,268
-4,343
7,648
4,806
12,454
0
2016E
29,374
4,243
-8,245
3,527
1,218
-1,148
28,968
-10,000
18,968
0
-10,000
-242
0
-78
-1,427
-1,747
17,221
12,454
29,675
(INR Million)
2017E
38,903
5,197
-10,890
2,916
2,315
-2,087
36,354
-11,250
25,104
0
-11,250
-264
0
-78
-1,585
-1,928
23,177
29,675
52,852
0
0
September 2015
82

Thematic | Good-to-Great
HDFC Bank
CMP: INR996
Industry Attractiveness
TP: INR1,350 (+36%)
Buy
Only 40% of the population has access to banking. Credit-to-GDP is lowest at ~52% v/s
~90% for emerging market average and ~100% for the developed market
The industry is expected to grow at 18%+ CAGR over the next five years; retail loans-to-
GDP stands at just 15% and is a key growth driver.
The incumbent state-owned banks still have 75%+ MS in the industry. In this digital era,
private banks will continue to gain market share with superior product and services.
Disciplined Management
Mr. Aditya Puri (MD since inception) is widely credited for the success of HDFC Bank, which
has the highest market capitalization among private banks in India.
Under his leadership, the bank reported earnings and loan CAGR of 20%+ for ~80
consecutive quarters.
Most of the senior management has been with the bank since its inception in 1994; the
board boasts of best-in-class corporate governance practices.
Disciplined Thought
Built expertise in secured retail segment like Home and Auto to gain loan and profit
MS—avoided risky/high-yielding segments like Infrastructure and Iron & Steel.
Building a strong retail liability franchise through aggressive branch network expansion
and digital offerings to ensure stable cost of funds.
Focus on long-term shareholder value creation by maintaining best-in-class return
ratios—internal accruals a key source of growth capital.
Disciplined Action
Retail loans largely secured, form 50% of the book; exposure to sensitive sectors (<10%)
is significantly lower than peers—net stressed loans remain at just 50bp.
Consistently maintained best-in-class CASA ratio of >40%—thrust on the Indian rural
sector will continue to pay rewards.
Equity capital raised by HDFCB since inception forms ~40% of the net worth, lowest
amongst peers—showcasing the bank’s strong accruals; despite sporadic capital
infusions, the bank has maintained T1 ratio 300-400bp more than the regulatory
requirements.
Expected Results
Since inception, average RoE has stood at 19.9% and EPS CAGR at 33%; considering
overall growth of ~20%+ and RoE of 20%, we expect internal accruals to take care of
the next 4-5 years of growth.
SA market share gains to continue, led by aggressive expansion in rural and competitive
digital offerings.
Cost control and productivity gains to continue. Focus on core profitability would lead
to 20%+ earnings CAGR over FY15-18E; RoA to remain healthy at 1.9-2%.
83
September 2015

Thematic | Good-to-Great
Exhibit 91:
Focus remains on granular retail book—largely
secured
Kissan gold Others, 5.1
cards, 9.4
Gold loans,
2.3
Home
loans, 14.0
Business
Bkg, 10.9
Credit
Cards, 9.3
Loan
against
securities,
0.8
Com. Vehle
& const
equip, 7.4
Auto Loans,
23.4
Exhibit 92:
Share of retail deposits continues to improve,
demonstrating power of strong liability franchise (Deposits
mix %)
11
45
Saving Dep.
Retail term dep.
10
11
38
22
30
37
22
30
9
42
18
30
Current Dep.
Corp. term dep.
5
7
45
18
30
50
17
28
5
51
16
28
Personal
Loans, 14.9
Two
wheeler,
2.4
Source: Company, MOSL
20
24
Source: Company, MOSL
Exhibit 93:
Strong cost control; productivity gains continue
3.8
3.2
C/I ratio (%)
3.1
3.0
Opex to assets (%)
3.0
2.7
2.6
Exhibit 94:
Healthy core operating performance and low
delinquencies to sustain RoA near the current levels
RoA
17.7
19.5
17.7
RoE
18.7
16.9
16.1 16.7
20.3
21.3
19.4
18.4
19.2 19.9
1.8 1.9 1.9 1.9 1.9 1.8
1.6 1.7
1.4 1.4 1.4 1.4 1.5
60
2009
55
2010
54
2011
54
2012
54
2013
50
2014
48
2015
Source: Company, MOSL
Source: Company, MOSL
Exhibit 95:
Massive outperformance v/s Sensex….
1,000
750
500
250
0
392
HDFC Bank
Sensex-Rebased
900
Exhibit 96:
…and BSE100
1,000
750
500
250
0
388
HDFC Bank
BSE 100- Rebased
900
Source: Company, MOSL
Source: Company, MOSL
September 2015
84

Thematic | Good-to-Great
Financials and Valuations: HDFCB
Income Statement
Y/E March
2010
Interest Income
164,679
Interest Expense
77,863
Net Interest Income
86,816
Change (%)
13.1
Non Interest Income
45,736
Net Income
132,553
Change (%)
16.5
Operating Expenses
64,757
Pre Provision Profits
67,795
Change (%)
25.0
Provisions (excl tax)
24,904
PBT
42,891
Tax
13,404
Tax Rate (%)
31.3
PAT
29,487
Change (%)
31.3
Equity Dividend (Incl tax)
6,414
Core PPP*
52,167
Change (%)
24.6
*Core PPP is (NII+Fee income-Opex)
2011
203,808
93,851
109,957
26.7
49,452
159,409
20.3
77,800
81,609
20.4
23,422
58,187
18,923
32.5
39,264
33.2
8,948
68,179
30.7
2012
278,742
149,896
128,846
17.2
57,836
186,682
17.1
92,776
93,906
15.1
18,774
75,132
23,461
31.2
51,671
31.6
11,749
79,428
16.5
2013
350,649
192,538
158,111
22.7
68,526
226,637
21.4
112,361
114,276
21.7
16,770
97,506
30,249
31.0
67,257
30.2
15,360
97,607
22.9
2014
411,355
226,529
184,826
16.9
79,196
264,023
16.5
120,422
143,601
25.7
15,880
127,721
42,937
33.6
84,784
26.1
19,275
122,227
25.2
2015
484,699
260,742
223,957
21.2
89,964
313,920
18.9
139,875
174,045
21.2
20,758
153,287
51,128
33.4
102,159
20.5
24,142
150,674
23.3
2016E
595,995
324,277
271,718
21.3
108,593
380,311
21.1
172,469
207,843
19.4
21,476
186,366
63,364
34.0
123,002
20.4
28,659
177,943
18.1
2017E
704,552
378,990
325,563
19.8
126,398
451,960
18.8
204,653
247,307
19.0
27,525
219,782
71,429
32.5
148,353
20.6
34,566
213,588
20.0
(INR Million)
2018E
863,899
465,423
398,475
22.4
147,234
545,709
20.7
246,952
298,757
20.8
35,032
263,725
85,711
32.5
178,014
20.0
41,477
260,704
22.1
Balance Sheet
Y/E March
Equity Share Capital
Reserves & Surplus
Net Worth
Deposits
Change (%)
of which CASA Dep
Change (%)
Borrowings
Other Liabilities & Prov.
Total Liabilities
Current Assets
Investments
Change (%)
Loans
Change (%)
Fixed Assets
Other Assets
Total Assets
2010
4,577
210,648
215,225
1,674,044
17.2
871,039
37.5
129,157
206,159
2,224,586
299,424
586,076
-0.4
1,258,306
27.3
21,228
59,551
2,224,586
2011
4,652
249,140
253,793
2,085,864
24.6
1,099,083
26.2
143,941
289,929
2,773,526
296,688
709,294
21.0
1,599,827
27.1
21,706
146,011
2,773,526
2012
4,693
294,553
299,247
2,467,064
18.3
1,194,059
8.6
238,465
374,319
3,379,095
209,377
974,829
37.4
1,954,200
22.2
23,472
217,216
3,379,095
2013
4,759
357,383
362,141
2,962,470
20.1
1,405,215
17.7
330,066
348,642
4,003,319
272,802
1,116,136
14.5
2,397,206
22.7
27,031
190,144
4,003,319
2014
4,798
429,988
434,786
3,673,375
24.0
1,646,214
17.2
394,390
413,444
4,915,995
395,836
1,209,511
8.4
3,030,003
26.4
29,399
251,246
4,915,995
2015
5,013
615,081
620,094
4,507,956
22.7
1,984,921
20.6
452,136
324,845
5,905,031
363,315
1,664,599
37.6
3,654,950
20.6
31,217
190,949
5,905,031
2016E
5,013
709,423
714,436
5,499,707
22.0
2,421,603
22.0
524,290
405,668
7,144,101
433,880
1,914,289
15.0
4,532,138
24.0
34,654
229,139
7,144,101
2017E
5,013
823,210
828,223
6,819,636
24.0
3,027,004
25.0
613,534
506,844
8,768,237
513,773
2,297,147
20.0
5,665,173
25.0
40,091
252,053
8,768,237
(INR Million)
2018E
5,013
959,747
964,760
8,456,349
24.0
3,783,755
25.0
724,051
633,314
10,778,474
617,645
2,756,577
20.0
7,081,466
25.0
45,528
277,258
10,778,474
Asset Quality
Y/E March
GNPA (INR m)
NNPA (INR m)
GNPA Ratio
NNPA Ratio
PCR (Excl Tech. write off)
2010
18,168
3,921
1.4
0.3
78.4
2011
16,943
2,964
1.0
0.2
82.5
2012
19,994
3,523
1.0
0.2
82.4
2013
23,346
4,690
1.0
0.2
79.9
2014
29,893
8,200
1.0
0.3
72.6
2015
34,384
8,963
0.9
0.2
73.9
2016E
43,263
12,374
0.9
0.3
71.4
2017E
61,840
20,458
1.1
0.4
66.9
2018E
90,584
32,335
1.3
0.5
64.3
(%)
September 2015
85

Thematic | Good-to-Great
Financials and Valuations: HDFCB
Ratios
Y/E March
Spreads Analysis (%)
Avg. Yield-Earning Assets
Avg. Yield on loans
Avg. Yield on Invt
Avg. Cost-Int. Bear. Liab.
Avg. Cost of Deposits
Interest Spread
Net Interest Margin
Profitability Ratios (%)
RoE
RoA
Int. Expense/Int.Income
Fee Income/Net Income
Non Int. Inc./Net Income
Efficiency Ratios (%)
Cost/Income*
Empl. Cost/Op. Exps.
Busi. per Empl. (INR m)
NP per Empl. (INR lac)
* ex treasury
Asset-Liability Profile (%)
Loans/Deposit
CASA Ratio
Investment/Deposit
CAR
Tier 1
75.2
52.0
35.0
17.4
13.3
76.7
52.7
34.0
16.2
12.2
79.2
48.4
39.5
16.5
11.6
80.9
47.4
37.7
16.8
11.1
82.5
44.8
32.9
16.1
11.8
81.1
44.0
36.9
16.8
13.7
82.4
44.0
34.8
15.6
13.0
83.1
44.4
33.7
14.4
12.2
83.7
44.7
32.6
13.3
11.4
50.2
35.4
51.2
0.6
48.6
36.5
61.5
0.7
49.2
36.6
66.5
0.8
49.9
35.3
72.4
1.0
45.8
34.7
87.9
1.2
47.0
34.0
102.7
1.4
47.8
33.1
116.5
1.6
47.7
33.4
138.8
1.8
47.6
33.8
166.6
2.1
16.1
1.5
47.3
27.4
34.5
16.7
1.6
46.0
27.5
31.0
18.7
1.7
53.8
29.3
31.0
20.3
1.8
54.9
27.3
30.2
21.3
1.9
55.1
27.2
30.0
19.4
1.9
53.8
24.5
28.7
18.4
1.9
54.4
24.1
28.6
19.2
1.9
53.8
23.9
28.0
19.9
1.8
53.9
23.4
27.0
9.1
11.0
6.8
4.7
4.5
4.4
4.8
9.4
10.9
7.2
4.7
4.3
4.7
5.1
10.4
11.9
7.7
6.1
5.6
4.4
4.8
10.6
12.3
7.5
6.4
6.0
4.2
4.8
10.3
11.7
7.8
6.2
5.7
4.1
4.6
9.9
11.1
7.4
5.8
5.7
4.1
4.6
9.9
10.9
7.5
5.9
5.9
4.0
4.5
9.5
10.4
7.4
5.6
5.6
3.9
4.4
9.5
10.2
7.4
5.6
5.6
3.9
4.4
2010
2011
2012
2013
2014
2015
2016E
2017E
2018E
Valuation
Book Value (INR)
Change (%)
Price-BV (x)
Adjusted BV (INR)
Price-ABV (x)
EPS (INR)
Change (%)
Price-Earnings (x)
Dividend Per Sh (INR)
Dividend Yield (%)
E: MOSL Estimates
2.4
94.0
32.9
10.6
92.8
10.7
12.9
22.1
109.1
16.0
9.1
108.2
9.2
16.9
31.0
59.0
3.3
0.3
127
16.8
7.8
126.4
7.9
22.0
30.4
45.2
4.3
0.4
152
19.4
6.5
150.7
6.6
28.3
28.4
35.2
5.5
0.6
181
19.2
5.5
178.9
5.6
35.3
25.0
28.2
6.9
0.7
247
36.5
4.0
244.9
4.1
40.8
15.3
24.4
8.0
0.8
285
15.2
3.5
281.6
3.5
49.1
20.4
20.3
9.8
1.0
330
15.9
3.0
324.7
3.1
59.2
20.6
16.8
11.8
1.2
385
16.5
2.6
375.9
2.6
71.0
20.0
14.0
14.2
1.4
September 2015
86

Motilal Oswal India Strategy Gallery

This document has been prepared by Motilal Oswal Securities Limited (hereinafter referred to as Most) to provide information about the company(ies) and/sector(s), if any, covered in the
| Good-to-Great
Thematic
report and may be distributed
by it and/or its affiliated company(ies). This report is for personal information of the selected recipient/s and does not construe to be any investment, legal or taxation advice to you. This research report does not
constitute an offer, invitation or inducement to invest in securities or other investments and Motilal Oswal Securities Limited (hereinafter referred as MOSt) is not soliciting any action based upon it. This report is not for
public distribution and has been furnished to you solely for your general information and should not be reproduced or redistributed to any other person in any form. This report does not constitute a personal
recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any advice or recommendation in this material, investors should consider
whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the investments referred to in this material and the income from them may go down as well as
up, and investors may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur.
MOSt and its affiliates are a full-service, integrated investment banking, investment management, brokerage and financing group. We and our affiliates have investment banking and other business relationships with a
some companies covered by our Research Department. Our research professionals may provide input into our investment banking and other business selection processes. Investors should assume that MOSt and/or
its affiliates are seeking or will seek investment banking or other business from the company or companies that are the subject of this material and that the research professionals who were involved in preparing this
material may educate investors on investments in such business. The research professionals responsible for the preparation of this document may interact with trading desk personnel, sales personnel and other
parties for the purpose of gathering, applying and interpreting information. Our research professionals are paid on the profitability of MOSt which may include earnings from investment banking and other business.
MOSt generally prohibits its analysts, persons reporting to analysts, and members of their households from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.
Additionally, MOSt generally prohibits its analysts and persons reporting to analysts from serving as an officer, director, or advisory board member of any companies that the analysts cover. Our salespeople, traders,
and other professionals or affiliates may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary
trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all of the foregoing
among other things, may give rise to real or potential conflicts of interest. MOSt and its affiliated company(ies), their directors and employees 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 the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with
respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations
made by the analyst(s) are completely independent of the views of the affiliates of MOSt even though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report
Reports based on technical and derivative analysis center on studying charts company's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as
such, may not match with a report on a company's fundamental analysis. In addition MOST has different business segments / Divisions with independent research separated by Chinese walls catering to different set
of customers having various objectives, risk profiles, investment horizon, etc, and therefore may at times have different contrary views on stocks sectors and markets.
Unauthorized disclosure, use, dissemination or copying (either whole or partial) of this information, is prohibited. The person accessing this information specifically agrees to exempt MOSt or any of its affiliates or
employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSt or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOSt 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. The information contained herein is
based on publicly available data or other sources believed to be reliable. Any statements contained in this report attributed to a third party represent MOSt’s interpretation of the data, information and/or opinions
provided by that third party either publicly or through a subscription service, and such use and interpretation have not been reviewed by the third party. This Report is not intended to be a complete statement or
summary of the securities, markets or developments referred to in the document. While we would endeavor to update the information herein on reasonable basis, MOSt and/or its affiliates are under no obligation to
update the information. Also there may be regulatory, compliance, or other reasons that may prevent MOSt and/or its affiliates from doing so. MOSt or any of its affiliates or employees shall not be in any way
responsible and liable for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. MOSt or any of its affiliates or employees do not provide, at any time,
any express or implied warranty of any kind, regarding any matter pertaining to this report, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement.
The recipients of this report should rely on their own investigations.
This report is intended for distribution to institutional investors. Recipients who are not institutional investors should seek advice of their independent financial advisor prior to taking any investment decision based on
this report or for any necessary explanation of its contents.
Most and it’s associates may have managed or co-managed public offering of securities, may have received compensation for investment banking or merchant banking or brokerage services, may have received any
compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months.
Most 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.
Subject Company may have been a client of Most or its associates during twelve months preceding the date of distribution of the research report
MOSt and/or its affiliates and/or employees may have interests/positions, financial or otherwise of over 1 % at the end of the month immediately preceding the date of publication of the research in the securities
mentioned in this report. To enhance transparency, MOSt 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.
Motilal Oswal Securities Limited is registered as a Research Analyst under SEBI (Research Analyst) Regulations, 2014. SEBI Reg. No. INH000000412
There are no material disciplinary action that been taken by any regulatory authority impacting equity research analysis activities
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be
directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report. The research analysts, strategists, or research associates principally responsible for preparation
of MOSt research receive compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues
Disclosure of Interest Statement
Analyst ownership of the stock
Served as an officer, director or employee
Companies where there is interest
No
No
Disclosures
A graph of daily closing prices of securities is available at www.nseindia.com and http://economictimes.indiatimes.com/markets/stocks/stock-quotes
Regional Disclosures (outside India)
For U.S.
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law,
regulation or which would subject MOSt & its group companies to registration or licensing requirements within such jurisdictions.
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
Motilal Oswal Capital Markets Singapore Pte Limited is acting as an exempt financial advisor under section 23(1)(f) of the Financial Advisers Act(FAA) read with regulation 17(1)(d) of the Financial Advisors
Regulations and is a subsidiary of Motilal Oswal Securities Limited in India. This research is distributed in Singapore by Motilal Oswal Capital Markets Singapore Pte Limited and it is only directed in Singapore to
accredited investors, as defined in the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time.
In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:
Kadambari Balachandran
Email : kadambari.balachandran@motilaloswal.com
Contact : (+65) 68189233 / 65249115
Office Address : 21 (Suite 31),16 Collyer Quay,Singapore 04931
September 2015
Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025
Phone: +91 22 3982 5500 E-mail: reports@motilaloswal.com
Motilal Oswal Securities Ltd
88