INDIA DAILY

September 3, 2010 India 2-Sep 1-day1-mo 3-mo

Sensex 18,238 0.2 0.7 7.1

Nifty 5,486 0.3 0.9 7.4

Contents Global/Regional indices

Updates Dow Jones 10,320 0.5 (3.0) 0.6

Nasdaq Composite 2,200 1.1 (3.7) (4.5)
Adani Power: Window of opportunity closes in, factored in our earnings
FTSE 5,371 0.1 (0.5) 3.1
Economy: Incredible? India revises GDP numbers
Nikkie 9,098 0.4 (6.2) (8.2)
Energy: India Energy Monthly, September 2010 Hang Seng 20,882 0.1 (2.7) 5.5

Automobiles: Mixed sales trends continue in August KOSPI 1,779 0.2 (0.6) 7.1

Value traded – India

Cash (NSE+BSE) 182 190 176

News Round-up
Derivatives (NSE) 841 617 735
` The government is set to make tariff-based bidding mandatory for allocation of Deri. open interest 1,641 1,290 1,141
power projects from next January, in a move that is expected to bring down the price
of electricity to the consumer. However, NTPC (NATP IN) and Damodar Valley
Corporation (DVC) might feel the heat, because with their limited ability to cut costs,
Forex/money market
they could easily be outbid by large private players. (FNLE)
Change, basis points

` The new direct taxes code could bring a large number of global Indians under the tax 2-Sep 1-day 1-mo 3-mo
Rs/US$ 46.7 (9) 71 (26)
net as it does away with a provision that allowed individuals to escape tax in any
10yr govt bond, % 8.0 2 11 46
country citing double tax avoidance. (ECNT)
Net investment (US$mn)

` The marketing agreement between GAIL (India) Ltd (GAIL IN) Reliance Industries Ltd 1-Sep MTD CYTD

(RIL IN) to sell D6 gas stands inoperative due to a Government policy that does not FIIs 112 - 12,881
MFs 34 - (282)
allow RIL to sell gas independently. (THBL)

` Sugar Industries ready to support ethanol-blending drive. Offers 1,000 mn litres Top movers -3mo basis

ethanol to OMCs. Even though the next sugarcane crushing season. will begin in Change, %

October, some companies have carry-over stocks and can begin immediate supply of Best performers 2-Sep 1-day 1-mo 3-mo
HPCL IN Equity 529.7 (0.9) 19.8 45.7
ethanol. (BSTD)
TCOM IN Equity 346.9 (0.8) 25.5 41.6
` Tata Power (TPWR IN) in consortium with Origin Energy and PT Supraco Indonesia, BOI IN Equity 458.0 1.4 4.8 37.6

have been declared successful bidder for the Sorik marapi geothermal project in BPCL IN Equity 779.0 0.0 19.1 34.3
BHFC IN Equity 359.0 0.8 8.9 33.5
northern Sumatra, Indonesia. (THBL)
Worst performers
` BEML Ltd (BEML IN) has signed a memorandum of agreement with an aerospace RNR IN Equity 38.5 0.8 (2.5) (29.1)

product design company, CADES Digitech P. Ltd to jointly work on 'design to build,' SESA IN Equity 323.2 (0.8) (12.7) (15.3)

'build to print' programmes of global aerospace majors. (THBL) HH IN Equity 1695.7 (3.9) (8.9) (14.3)
IVRC IN Equity 155.7 (1.7) (13.6) (12.1)
` Cipla (CIPLA IN) to buy 25% in South Africa unit. (BSTD) ABB IN Equity 780.9 (0.1) (2.4) (9.1)

` SAIL (SAIL IN) has raised USD 64 mn by selling a short-term commercial paper to SBI
to meet temporary cash needs. (BSTD)

` M&M (MM IN) will launch a passenger vehicle variant under the Maxximo platform
over the next 12 months. (BSTD)

` Petronet (PLNG IN) plans USD 489 mn expansion at LNG terminal. (BSTD)

` HPCL (HPCL IN) plans to invest about USD 3.19 bn in setting up a 9 million tons-a-
year refinery on the western coast. (FNLE)

` GVK Power (GVKP IN) to raise USD 300 mn via stake sale. (FNLE)
` DLF (DLFU IN) has put on hold its plan to sell its non-core assets including ultra-luxury
hotel chain Aman Resorts & wind energy business for the next three quarters. (ECNT)

Source: ECNT= Economic Times, BSTD = Business Standard, FNLE = Financial Express, THBL = Business Line.

For Private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES.
REFER TO THE END OF THIS MATERIAL.
 ADD
Adani Power (ADANI)
Utilities SEPTEMBER 03, 2010
UPDATE
Coverage view: Attractive

Window of opportunity closes in, factored in our earnings. Gujarat Electricity Price (Rs): 133
Regulatory Commission (GERC) has asked Adani Power (APL) to honor its PPA with Target price (Rs): 143
GUVNL, thus bringing to an end speculation over the possibility of a merchant sale from
BSE-30: 18,238
Mundra 3. Our earnings estimates already factor in the sale of power to GUVNL,
though we remain watchful of the impact of a higher tax incidence on APL and
maintain our rating pending clarity on the taxation issues pertaining to Mundra.

Company data and valuation summary

Adani Power
Stock data Forecasts/Valuations 2010 2011E 2012E
52-week range (Rs) (high,low) 145-90 EPS (Rs) 0.8 4.3 17.4
Market Cap. (Rs bn) 290.5 EPS growth (%) (5,707.2) 455.1 300.9
QUICK NUMBERS
Shareholding pattern (%) P/E (X) 170.1 30.6 7.6
Promoters 73.5 Sales (Rs bn) 4.3 30.3 106.0 • Incidence of MAT
FIIs 8.5 Net profits (Rs bn) 1.7 9.5 38.0 on Mundra projects
MFs 1.7 EBITDA (Rs bn) 2.4 18.7 71.4 could cut Rs14/share
Price performance (%) 1M 3M 12M EV/EBITDA (X) 147.7 23.1 6.9
from our target
Absolute (0.8) 11.4 0.0 ROE (%) 4.4 15.9 45.5
Rel. to BSE-30 (1.5) 4.0 0.0 Div. Yield (%) 0.0 0.0 0.0 price.

• 90% of overall
GERC comes down on APL, already factored in our estimates project cost already
GERC has directed APL to honor its PPA for the supply of1,000 MW of power to GUVNL at incurred at Mundra
Rs2.35/kwh for a period of 25 years. APL had previously terminated the PPA on the grounds that 1.
Gujarat Mineral Development Corporation (GMDC) had been unable to supply coal from the
Morga coal block, a condition precedent to the PPA. Our earnings estimate had not previously
assigned the benefit of APL terminating the PPA with GUVNL, and hence, the ruling does not
impact our earnings and fair value estimate.

Capex at Mundra encouraging, Tiroda lags

We are encouraged by the brisk pace of execution at APL’s Mundra facility and note that APL has
incurred significant capex for its Mundra power projects, signaling timely commissioning of the
power plant. However, capex at Tiroda has been muted so far, with only 24% and 5% of overall
capex incurred at Tiroda 1 and Tiroda 2, respectively. We marginally revise the commissioning
schedule for the Tiroda project, and highlight that a delay in commissioning would have a
magnified downward impact on APL’s earnings as it would narrow down the pre-PPA window for
the sale of power in the short-term market.. We note that a six-month delay in all the three units
could erode Rs7/share from our target price.

Direct Tax Code – tax liability under the lens again

Payment of tax on book profits, which APL may be liable for under the DTC, could erode
Rs14/share from our current target price of Rs143/share. APL currently enjoys the benefits of zero
tax as per extant norms as it is acting as the co-developer of Mundra Port SEZ. We remain
watchful of the impact of a higher tax incidence on APL and maintain our rating pending clarity on
the taxation issues pertaining to Mundra.

Maintain ADD with a target price of Rs143/share

We maintain our ADD rating on APL with a revised target price of Rs143/share as we adjust for
minor commissioning delays. Our target price implies a P/B of 2.8X on FY2012E net worth. Our
target price includes value for 7,920 MW of power projects under implementation.

For private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES, REFER TO THE END OF THIS MATERIAL.
 Adani Power Utilities

Exhibit 1: Our SOTP-based target price of APL is Rs143/share

SOTP APL

Capacity Cost Equity Ownership Value CoE

Project Type (MW) (Rs bn) (Rs mn / MW) (%) Invested To be invested (%) (Rs bn) (%)
Mundra 1&2 Thermal 1,320 44 33 16 6 1.0 100 78 12
Mundra 3 Thermal 1,320 58 44 24 10 3.7 100 51 12
Mundra 4 Thermal 1,980 110 55 20 11 11.3 100 75 12
Tiroda 1 Thermal 1,320 66 50 20 7 5.9 74 47 12
Tiroda 2 Thermal 660 27 41 20 1 4.7 74 25 12
Tiroda 3 Thermal 1,320 67 50 20 - 13.3 74 9 15
Total 7,920 370 273 17 34.6 40.0 286
Cash 25
Post money value 311
No. of Shares 2
Value per share 143

Source: Company, Kotak Institutional Equities estimates

Capex – robust for Mundra projects, muted at Tiroda

APL has incurred significant capex for its Mundra power projects signaling brisk execution
and timely commissioning. However, capex at Tiroda has been comparatively muted with
~24% and ~5% of overall capex incurred at Tiroda 1 and Tiroda 2, respectively. We
highlight that any delay in commissioning would have a magnified downward impact on
APL’s earnings as it would narrow down the pre-PPA window for sale of power in the short-
term market. We note that a six-month delay in commissioning of the three units at Tiroda
1&2 will reduce our FY2013E EPS by 9% (from Rs22.9/share to Rs20.8/share) and erode
Rs7/share from our target price. Exhibit 2 highlights the details of capex incurred as of
March 2010 on various projects.

Exhibit 2: Strong capex at Mundra, Tiroda needs to step up pace of execution

Detail of capex incurred as of March 2010

As of March 2010 (Rs mn) Total cost Incurred

Debt Equity Total capex (Rs mn) (%)
Mundra 1&2 32,875 6,043 38,918 43,500 89.5
Mundra 3 31,024 10,070 41,094 57,960 70.9
Mundra 4 28,107 10,613 38,720 109,600 35.3
Tiroda 1 8,534 7,210 15,744 65,600 24.0
Tiroda 2 649 703 1,352 27,030 5.0
Tiroda 3 — — — 66,600 —
Total 101,189 34,638 135,827 370,290 36.7

Source: Company, Kotak Institutional Equities estimates

Highlights of FY2010 annual report

Working capital – receivables high, loans and advances funding project SPVs

APL’s net current assets (exc. cash) at the standalone level increased to Rs3.5 bn, primarily
due to a sharp increase in receivables and loans and advances. We analyze these two items
in detail:

` Receivables at Rs2.6 bn imply 88 days of sales (assuming five months of sale in FY2010).
We believe that receivables close to almost three months of sale is high compared to
other pure play generation companies — a case in point being NTPC that generally
operates at receivables amounting to 30 days of sales.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3

Utilities Adani Power

` Loans and advances at standalone level jumped sharply to Rs13.4 bn primarily due to
Rs6.7 bn of advances to subsidiaries. Exhibit 3 highlights the advances extended to
various subsidiaries.

Exhibit 3: Loan to Adani Shipping is subordinated and non interest bearing

Advances extended to subsidiaries of APL (Rs mn)

Advance
Subsidiary (Rs mn)
Adani Power Rajasthan Ltd. 1,101
Adani Power Dahej Ltd 1,363
Adani Shipping 2,893
Adani Power PTE Ltd. 1,354
Kutchh Power Generation 6
Adani Pench (Adani Power MP) 1
Total 6,717

Source: Company, Kotak Institutional Equities

We also highlight that APL included the sum of Rs230 mn paid as customs duty for sale of
power outside SEZ area in loans and advances. Under the provisions made in the Union
Budget FY2011, a power plant located in SEZ is liable to pay customs duty of 16% on power
sold outside the SEZ. APL paid in protest a sum of Rs230 mn, which it has shown as
recoverable from the government. APL has filed a petition with Gujarat High Court and
management has indicated that a stay has been obtained allowing APL to stop payment of
customs duty on power sold outside the SEZ.

4 KOTAK INSTITUTIONAL EQUITIES RESEARCH

 Adani Power Utilities

Exhibit 6: Profit model, balance sheet, cash model of APL, March fiscal year-ends, 2009-15E (Rs mn)

2009 2010E 2011E 2012E 2013E 2014E 2015E

Profit model
Net revenues — 4,349 30,461 109,557 160,164 173,650 166,034
EBITDA (28) 2,446 18,988 75,448 102,142 103,693 92,776
Other income — 319 323 1,344 6,006 12,205 18,322
Interest (expense)/income — (377) (3,823) (15,175) (27,704) (28,195) (26,113)
Depreciation — (354) (2,899) (9,605) (12,148) (12,148) (12,148)
Pretax profits (28) 2,035 12,589 52,012 68,297 75,555 72,837
Tax — — — (1,981) (4,352) (6,277) (4,615)
Deferred taxation — (327) (2,155) (6,875) (7,501) (8,027) (6,329)
Minority interest 2 — — (1,547) (3,907) (5,514) (3,987)
Net income (26) 1,708 10,434 41,609 52,537 55,737 57,906
Extraordinary items — — — — — — —
Reported profit (26) 1,708 10,434 41,609 52,537 55,737 57,906
Earnings per share (Rs) (0.0) 0.8 4.8 19.1 24.1 25.6 26.6
Balance sheet
Paid-up common stock 18,420 21,800 21,800 21,800 21,800 21,800 21,800
Total shareholders' equity 22,743 57,780 68,214 109,824 162,361 218,098 276,005
Deferred taxation liability — 120 2,515 9,390 16,891 24,918 31,246
Minority interest 703 1,023 3,067 7,105 12,629 19,091 23,078
Total borrowings 49,897 105,705 182,997 261,160 289,145 291,023 268,903
Total liabilities and equity 73,343 164,628 256,793 387,479 481,025 553,130 599,232
Net fixed assets 3,368 27,871 75,260 233,301 284,717 339,170 327,022
Capital work-in progress 65,845 127,691 149,159 75,225 50,784 2,433 2,433
Investments — — — — — — —
Goodwill — — — — — — —
Cash 5,585 11,654 25,121 60,693 119,843 183,788 242,912
Net current assets (excl. cash) (1,456) (2,587) 7,253 18,260 25,681 27,740 26,865
Net current assets (incl. cash) 4,129 9,066 32,374 78,953 145,524 211,527 269,778
Total assets 73,343 164,628 256,793 387,479 481,025 553,130 599,232
Free cash flow
Operating cash flow, excl. working capital (28) 2,389 15,488 59,636 76,093 81,425 80,369
Working capital changes (1,142) 1,131 (9,840) (11,007) (7,421) (2,059) 875
Capital expenditure (44,709) (86,923) (71,756) (93,712) (39,123) (18,248) —
Free cash flow (45,879) (83,403) (66,108) (45,083) 29,549 61,118 81,244
Ratios
Net debt/equity (%) 189.0 159.9 221.5 171.4 96.7 45.2 8.7
Return on equity (%) (0.1) 4.2 16.6 46.7 38.6 29.3 23.4
Book value per share (Rs) 12.3 26.6 32.4 54.7 82.2 111.5 140.9
ROCE (%) (0.1) 1.4 5.0 14.0 14.0 13.1 11.5

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 5

Economy.dot
INDIA
Economy
National Accounts SEPTEMBER 02, 2010
UPDATE
BSE-30: 18,206

Incredible? India revises GDP numbers. Government yesterday night agreed that
1QFY11 GDP numbers were faulty, accepting the glaring difference between 8.8%
from supply side and 3.7% from demand side. It has now revised the demand side
growth to 10% by jacking up most demand side components. We think the revision is
broadly reasonable, but it may still not settle the dust as some problems remain in the
data. A comprehensive revision with more clarifications would have been better.

India revises demand side growth by changing all components of aggregate demand

In an unprecedented event, Government took note of the widespread criticism of the 1QFY11
GDP numbers (see our Economy note of August 31, 2010, ‘1QFY11 GDP numbers raise serious
methodological issues’), and accepted that the data was faulty and revised the data the next day QUICK NUMBERS
of the release.
• Demand side GDP
` The revision has been only in real GDP at market prices. Nominal GDP, both in factor cost and growth revised to
market prices, as also real GDP at factor cost estimates have been left untouched. 10% from 3.7%,
supply side
` The real GDP at market prices have been revised upwards by 6.1%. This improves real growth unchanged at 8.8%
by 6.4 ppt from demand side. This implies that demand side (GDP at market price) deflator now
gives a 13.4% inflation rate instead of 20.5% earlier. • Government
consumption
` The CSO in its corrigendum released today, it merely stated that inadvertently it had used revised to 14.2%
inappropriate deflators in converting current price GDP from expenditure (i.e. demand) side to from (-)0.6%
constant price GDP (expenditure/demand side).
• Private consumption
We think the speedy revision within a day is bound to raise more questions than it can settle,
revised to 3.8%
unless the CSO comes out with a detailed cogent explanation. The revisions are large and spread
from 0.3%
across all components of aggregate demand (see Exhibit 1). Some problems remain even in the
new data (see Exhibit 2). India’s 1QFY11 double digit growth from the demand side was needed, • Fixed investment
but the extent and manner thereof would only add to credibility loss, unless officials come out revised to 7.6%
with a detailed explanation thereof. In our view questions may remain if current price (nominal)
from 3.7%
estimates of GDP market price were correct. We think it is time to revisit the entire methodology
of estimating India’s GDP. Most countries estimate GDP from the demand side and not supply
side. So why is India’s methodology on the demand side so weak?

Private consumption deflator still suggests an alarming 21.9% inflation

We had pointed out that the 1QFY11 GDP numbers released on August 31 suggested a whopping
26% inflation that the consumers seemed to have faced in their private consumption (PFCE). WPI
inflation was 11% in 1Q, while CPI inflation was 13.7%. So either the GDP estimation was wrong
or the WPI and CPI indices no longer captured the true inflation. The revised set of aggregate
demand side GDP data has lowered the deflator and the inflation base thereupon, but even this
lower deflator suggests that consumers face a 21.9% inflation rate. So even in the revised data,
either the nominal PFCE appears overestimated, or the real PFCE appears to be underestimated
(even both may be true) or otherwise the CPI is biased downwards and has yielded a low inflation
of 13.7%. Either of these have huge policy ramifications, impacting how monetary and fiscal
policies might respond on demand management front. We reiterate such data errors can cause
avoidable policy mistakes. Monetary policy is already framed under considerable uncertainty arising
data lags, data revisions, missing data, especially in terms of employment, sampling and non-
sampling errors in data and long and variable monetary transmission path.

For private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES,REFER TO THE END OF THIS MATERIAL.
 Economy

Govt consumption revised growth of 15% in 1QFY11 may be broadly reasonable

Government Final Consumption Expenditure (GFCE) has been increased by a stark 15%
from the initial release, thus revising its yoy growth, in real terms, to 14.2% from (-)0.6%. In
nominal terms GFCE has increased 23.3%. We know that government’s revenue
expenditure had increased 17.2% and total expenditure by 23% in 1QFY11. So in our
assessment, this revision essentially corrects the mistake. Since part of capital expenditure is
of a revenue nature, we do not find the nominal numbers unreasonable. In the revised data,
the GFCE deflator stands revised downwards to 8% from 24% earlier. This may look to be a
sharp revision, but then it is not illogical to believe that government may have faced lower
inflation than individuals given the discounts it can get in its bulky centralized spending.
What is trifle surprising is why have the community, social and personal services’ numbers
on the demand side not changed as there is a considerable overlap in these two numbers
and their deflators (see Exhibit 3). However, deflator for this head on supply side is 15.3%.

Investment side also has some of its puzzles

Gross fixed capital formation (GFCF) in constant prices has been revised up to 7.6% from
3.7%. Since constant price estimates are to a large extent moved on the basis of growth in
capital goods component of IIP and as also construction numbers on the supply side, GFCF
was clearly underestimated. IIP for capital goods grew 34% in 1QFY11 and construction still
grew at 7.5% in 1QFY11. So GFCF growth of 7.6% still appears to have been an
underestimate. The negative deflator for change in stocks is also a bit of a puzzle. A more
glaring problem with the data is that valuables yield a negative deflator, that too in a quarter
where gold and silver prices grew about 7.3% each qoq and over 22% yoy. Some problems
also persist with net indirect taxes and net exports data as have been highlighted by us in
Exhibit 2.

Time to revisit and revise estimation methodology, in our view

We do not think that overall the demand side GDP numbers are biased upwards; if anything
they could be biased downwards. So the moral of the story is that “India’s growth story
seems intact”. The data errors, however, would erode credibility of the data and it is time
to stitch the tear. In our view, the Government should set up an Expert Group to revisit the
estimation methodology, especially from the demand side. It should also induct more
macroeconomists and national accounting experts in their professional set-up and perhaps
set up an independent office on lines of Office for National Statistics in the UK.

Exhibit 1: GDP by market prices revised significantly as growth rate moves from 3.7% to 10.02%
GDP components from aggregate demand side, March fiscal year end, amounts in Rs crore (100 crore=1 bn)
1QFY10 1QFY11 % change 1QFY10 1QFY11 % change 1QFY11 % revision
(initial) (initial) (yoy) (revised) (revised) (yoy) revision in 1Q data
Private final consumption expenditure 658,856 661,123 0.3 658,856 683,794 3.8 22671 3.4
Government final consumption expenditure 126,171 125,425 -0.6 126,171 144,087 14.2 18662 14.9
Gross capital formation 370,299 388,828 5.0 370,299 399,374 7.9 10,546 2.7
Gross fixed capital formation 342,912 355,452 3.7 342,912 369,035 7.6 13583 3.8
Change in stocks 14,449 15,125 4.7 14,449 15,460 7.0 335 2.2
Valuables 12,938 18,251 41.1 12,938 14,879 15.0 -3372 -18.5
Net exports -52,801 -57,601 9.1 -52,591 -63,376 20.5 -5,775 10.0
Exports 234,311 224,162 -4.3 233,380 246,633 5.7 22471 10.0
Imports 287,112 281,763 -1.9 285,971 310,009 8.4 28246 10.0
Discrepancies -2,872 22,092 -869.2 -3,082 46,009 -1592.8 23917 108.3
GDP at market prices 1,099,653 1139867 3.7 1,099,653 1209888 10.0 70021 6.1
net indirect taxes 58,704 7,089 -87.9 58,704 77,110 31.4 70021 987.7

Source: CSO and Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 7

 India Economy

Exhibit 2: Some data inconsistencies remain even in the revised GDP at current market price numbers

Compoenent Obersvations Possible data bias in our view

Private final consumption PFCE growth at current prices is 26.5% Deflator based inflation is still high; should broadly be a
expenditure (PFCE) PFCE growth at constant prices is 3.8% weighted average of 3:1 of CPI and WPI inflation.
Deflator based inflation works out to 21.9%, Nominal PFCE may be overestimated.

Gross fixed capital formation Revised growth is 7.6% in constant and 10.3% in GFCF appears understaimated and its real growth
(GFCF) current prices. We know, the IIP use based capital should have been much higher at >15%; with the
goods growth is 34%, and construction growth at known trend in prices of investment goods, its growth
constant prices is 7.5% in nominal terms should have been >25%. As such, the
revised growth also appears to be underestimated

Valuables revised growth at constant prices it is 15%, but at The deflator is negative, which is absurd given >22%
current prices it is 13.1% growth in bullion prices
Growth rates of change in reviused growth at constant prices it is 7%, but at Here too the deflator is negative, which also seems
stocks current prices it is 5% incorrect
Net indirect taxes The net indirect taxes (difference between GDPmp The growth rate in net indirect taxes is 31.4% at
and GDPfc) is Rs. 771.1 bn at constant prices and Rs. constant prices, but a whopping 94.9% at current
1,123.9 bn at current prices prices. This gives rise to a deflator growth of 48.4%,
way above any inflation rates.

Exports and imports Exports have grown 5.7% and imports 8.4% in There appears to be a bit of under-estimation in both
nominal terms in GDP data. DGCIS data shows that exports and imports. Deflator still seems high at 13.9%
exports grew 31.5% and imports grew 25.7% in and the same deflator has been applied on both exports
rupee terms. and imports.

Source: Kotak Institutional Equities

Exhibit 3: GFCE from demand side now in alignment with social and personal services from supply
side

64
Social & personal services Government final consumption expenditure
54

44

34

24

14

(6)

(16)
Jun-05

Sep-05

Mar-06

Jun-06

Sep-06

Mar-07
Dec-05

Dec-06

Jun-07

Sep-07

Mar-08
Dec-07

Jun-08

Sep-08

Mar-09

Sep-09
Dec-08

Jun-09

Mar-10
Dec-09

Jun-10

Source: Kotak Institutional Equities

8 KOTAK INSTITUTIONAL EQUITIES RESEARCH

 Economy

Exhibit 4: Inflation based on GDP deflators far more reasonable; but question mark remains on PFCE deflator in relation to CPI

GDP CPI-IW Pvt. Govt.

deflator WPI inflation inflation Consumption Consumption GFCF Inventories Valuables Exports Imports
Jun-05 5.2 5.3 4.0 2.4 4.2 6.7 5.8 5.2 -0.3 -1.7
Sep-05 4.1 4.0 3.7 2.1 3.8 4.8 3.6 4.0 -1.1 -2.3
Dec-05 5.0 4.5 5.0 3.5 5.3 4.4 3.9 4.5 -0.2 -1.4
Mar-06 4.4 4.0 4.9 3.3 5.2 4.1 2.9 -0.9 -0.7 -1.8
Jun-06 4.9 4.6 6.3 5.5 6.1 3.1 2.4 4.6 4.7 4.5
Sep-06 5.2 5.1 6.6 5.8 6.5 3.6 3.8 5.1 4.9 4.6
Dec-06 5.7 5.6 6.9 6.0 6.6 5.0 5.0 5.6 5.5 5.3
Mar-07 6.4 6.5 7.0 6.2 6.6 6.1 6.3 2.3 6.3 6.2
Jun-07 6.4 5.4 6.3 4.1 5.5 6.5 5.5 5.4 7.2 7.3
Sep-07 3.8 4.1 6.7 4.5 5.7 5.7 4.5 4.1 5.5 5.5
Dec-07 4.0 3.4 5.5 3.3 4.6 4.2 3.9 3.4 4.4 4.4
Mar-08 6.3 5.7 6.3 4.1 5.9 4.2 5.1 6.5 7.0 7.2
Jun-08 8.2 9.6 7.8 5.6 7.2 9.9 10.1 9.6 8.5 8.0
Sep-08 12.0 12.5 9.1 6.9 8.5 11.1 12.1 12.5 11.2 10.8
Dec-08 8.0 8.6 10.2 8.0 9.6 8.6 8.7 8.6 8.8 8.7
Mar-09 2.4 3.2 9.4 7.2 8.5 4.7 4.9 1.3 3.2 3.0
Jun-09 0.4 0.6 8.9 2.9 2.8 0.4 4.6 0.5 4.5 6.6
Sep-09 0.1 -0.1 11.8 3.5 3.2 -0.4 3.3 -0.1 1.2 1.7
Dec-09 5.2 5.0 13.3 7.4 7.3 2.6 6.9 5.0 6.4 7.1
Mar-10 8.8 10.2 15.3 11.3 11.2 6.7 10.5 13.4 10.0 10.6
Jun-10 (initial) 20.4 11.0 13.7 26.0 24.0 14.6 0.3 -19.9 25.5 25.3
Jun-10 (revised) 13.4 11.0 13.7 21.9 8.0 10.3 -1.9 -1.7 14.1 13.9

Source: Kotak Institutional Equities

Exhibit 5: Inflation rates based on GDP factor cost deflators remain unchanged in revised data

Finance,
insurance, real
Electricity, gas Trade, hotel, estate and Social &
GDP WPI CPI-IW Mining & & water transport & business personal
deflator inflation inflation Agriculture quarrying Manufacturing supply Construction comm. services services
Jun-05 5.2 5.3 4.0 6.1 15.1 7.0 1.0 6.7 4.7 1.7 4.7
Sep-05 4.2 4.0 3.7 7.8 7.2 4.8 4.6 5.4 3.3 0.4 3.8
Dec-05 5.1 4.5 5.0 9.4 8.8 5.1 2.3 5.9 3.8 0.6 4.6
Mar-06 4.4 4.0 4.9 10.1 8.8 4.0 2.4 5.4 2.9 -0.3 4.3
Jun-06 4.9 4.6 6.3 7.2 10.2 3.6 2.3 5.7 4.3 3.0 6.3
Sep-06 5.2 5.1 6.6 6.7 8.1 5.1 0.4 6.2 4.6 3.3 6.8
Dec-06 5.7 5.6 6.9 7.4 2.7 6.2 5.4 6.7 5.0 3.5 7.1
Mar-07 6.4 6.5 7.0 8.9 1.5 7.5 2.8 7.6 5.5 4.1 7.7
Jun-07 6.6 5.4 6.3 11.7 11.2 5.3 2.0 8.4 4.1 5.7 6.9
Sep-07 5.0 4.1 6.7 10.5 0.8 4.3 0.6 7.1 2.5 4.4 6.2
Dec-07 4.1 3.4 5.5 7.2 -1.3 3.6 -2.0 6.3 1.9 3.5 5.3
Mar-08 6.4 5.7 6.3 7.9 33.8 4.9 -0.1 8.7 3.6 5.8 6.9
Jun-08 8.8 9.6 7.8 7.3 8.7 9.1 0.6 12.7 7.6 11.3 9.3
Sep-08 11.6 12.5 9.1 9.2 22.4 11.1 0.6 15.7 10.3 14.3 11.5
Dec-08 8.7 8.6 10.2 10.0 17.8 7.8 0.6 11.7 6.2 9.8 9.7
Mar-09 3.2 3.2 9.4 7.0 -16.6 4.0 -0.8 6.2 0.3 3.8 6.4
Jun-09 0.9 0.6 8.9 6.0 -7.7 1.4 -2.6 -1.4 -1.0 -0.3 3.6
Sep-09 0.7 -0.1 11.8 8.6 -10.3 0.1 0.4 -2.0 -1.7 -0.9 4.8
Dec-09 5.8 5.0 13.3 13.6 -1.4 3.7 1.9 2.9 3.3 4.9 8.5
Mar-10 9.7 10.2 15.3 16.5 9.9 7.2 2.8 7.6 7.8 9.7 12.1
Jun-10 11.8 11.0 13.7 9.6 17.9 4.5 11.2 4.2 16.8 15.2 15.3

Source: Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 9

Sector.dot
CAUTIOUS
Energy
India SEPTEMBER 3, 2010
UPDATE
BSE-30: 18,238

Crude oil prices: Plummet from highs in early August

Global refining margins: Remain subdued

India marketing margins: Increase in global prices results in higher marketing

losses

Crude oil prices: Plummet from highs in early August

QUICK NUMBERS
Crude oil prices rose modestly (+2.6% mom) in early-August led by—(1) reduced supplies due to
planned summer maintenance from British and Norwegian oil fields and (2) adverse geopolitical • Singapore complex
developments in the Middle East. However, crude prices plunged by over U$10/bbl from the highs gross refining
of early August led by (1) higher-than-expected increase in crude oil inventory and (2) growing margins at
concerns of slowdown in global economic recovery which could impact crude oil demand. We
US$0.7/bbl
expect crude oil prices to remain in the US$70-80/bbl range in the near term as (1) large OPEC
spare capacity of ~6 mn b/d despite slippages in new projects and (2) high level of inventories will • India marketing
likely offset the increase in global crude oil demand. Natural gas price (Henry Hub) declined to margins declined
US$4.3/mn BTU in the recent month versus US$4.6/mn BTU in July 2010. for diesel at –
Global refining margins: Remain subdued Rs0.6/liter and
gasoline at
We compute Singapore complex gross refining margins at US$0.7/bbl in August 2010 versus –Rs1/liter
US$0.8/bbl in July 2010. The refining margins declined modestly as an expansion in the product
cracks—(1) naphtha cracks to –US$0.8/bbl (versus –US$3.2/bbl in July 2010), (2) diesel cracks to
US$13/bbl (versus US$12/bbl in July 2010), (3) fuel oil cracks to –US$3.2/bbl (versus –US$3.3/bbl in
July 2010) and (4) kerosene cracks to US$12.9/bbl (versus US$12.6/bbl in July 2010), was
mitigated by a sharp contraction in gasoline cracks to US$8.4/bbl (versus US$9.8/bbl in July 2010) .
We expect refining margins to remain subdued given large supply-demand imbalance. We
estimate India refining margins to increase modestly to US$3.2/bbl in September 2010 versus
US$3.1/bbl in August 2010.

India marketing margins: Increase in global prices results in higher marketing losses

We estimate moderately higher marketing losses on auto fuels in September 2010 due to increase
in global product prices. We compute marketing margins assuming unchanged domestic prices for
diesel at –Rs0.6/liter (versus Rs0.04/liter in August 2010 and +Rs0.9/liter in FY2010) and for
gasoline at –Rs1/liter (versus –Rs0.9/liter in August 2010 and –Rs2.9/liter in FY2010). We compute
subsidy losses on LPG and kerosene to be Rs221/cylinder and Rs16.1/liter for September 2010
versus Rs185/cylinder and Rs15.9/liter in August 2010.

We have included some key exhibits here. For more details, please refer our India Energy Monthly,
September 2010.

For private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES, REFER TO THE END OF THIS MATERIAL.
Energy India

Crude oil prices rise modestly in the recent month

WTI and Dated Brent spot prices (US$/bbl)

(US$/bbl)
150
WTI spot price (US$/bbl) Dated Brent spot price (US$/bbl)
120

90

60

30

0
Jan-95

Jan-96

Jan-97

Jan-98

Jan-99

Jan-00

Jan-01

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

Jan-10
Source: Kotak Institutional Equities

Light-heavy differential have improved from recent lows

Light-heavy differential (US$/bbl)

(US$/bbl)
Dated Brent (RHS) Brent versus Arab Heavy (LHS)
20 150
Brent versus Dubai (LHS) Arab Light versus Arab Heavy (LHS)

16 120

12 90

8 60

4 30

0 0
Jul-02

Jan-03

Jul-03

Jan-04

Jul-04

Jan-05

Jul-05

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

(4) (30)

Source: Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 11

 India Energy

Refining margins remained stable in the recent month

Singapore refining margins (US$/bbl)

(US$/bbl)
16
Singapore simple refining margins Singapore complex refining margins

12

0.7
0 0.7
Feb-91 Feb-93 Feb-95 Feb-97 Feb-99 Feb-01 Feb-03 Feb-05 Feb-07 Feb-09

(4)

Simple refining margins, March fiscal year-ends (US$/bbl) Complex refining margins, March fiscal year-ends (US$/bbl)
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 YTD 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 YTD
1Q 1.3 0.5 0.3 1.0 1.7 3.0 2.5 2.3 2.4 (1.5) (0.9) 1Q 1.9 1.3 0.8 1.2 4.6 4.9 6.2 6.6 4.3 (0.1) (0.1)
2Q 2.5 0.4 0.1 1.2 3.1 2.8 (0.7) 1.0 1.7 (1.3) 0.5 2Q 4.0 0.6 0.1 2.3 5.8 6.1 2.5 2.9 0.7 (0.7) 0.8
3Q 1.7 1.1 1.4 1.6 6.5 2.2 (1.2) 2.3 1.3 (2.5) 3Q 2.3 1.2 1.6 3.2 9.0 3.9 1.0 3.9 1.0 (2.7)
4Q 0.2 (0.0) 3.0 2.9 2.1 1.1 1.2 0.2 0.7 (0.3) 4Q 1.6 0.6 3.7 5.4 5.0 2.8 4.1 2.8 2.4 0.8
Average 1.4 0.5 1.2 1.7 3.3 2.3 0.5 1.5 1.5 (1.4) (0.3) Average 2.4 0.9 1.5 3.1 6.1 4.4 3.4 4.0 2.1 (0.7) 0.3

Weekly margins Weekly margins

Current -1 Wk -2 Wk -3 Wk -4 Wk Current -1 Wk -2 Wk -3 Wk -4 Wk
0.9 0.6 0.7 0.5 1.1 0.8 0.7 0.7 0.6 1.4

Source: Bloomberg, Kotak Institutional Equities

Gross refining margins for a typical Indian refinery based on Arab Gulf fob prices (US$/bbl), Prices (US$/ton)

Quarterly averages, fiscal year-end

Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 3QFY10 4QFY10 1QFY11 2QFY11
Product prices
LPG 565 611 688 720 732 652 676 691 689 624 564 618 621 701 685 602
Naphtha 584 605 664 673 688 657 703 727 674 636 607 637 618 673 701 627
Gasoline 630 650 682 672 724 713 753 784 708 696 686 689 654 703 748 691
Jet fuel 573 613 656 637 651 632 675 734 675 666 659 664 614 640 695 663
Kerosene 573 613 656 637 651 632 675 734 675 666 659 664 614 640 695 663
Diesel 543 575 610 589 611 600 643 695 642 627 620 635 576 600 660 627
Fuel oil 416 433 458 452 466 446 451 475 444 426 429 438 436 454 457 431
Bitumen 426 443 468 462 476 456 461 485 454 436 439 448 446 464 467 441
Crude oil prices
Crude oil-Brent 494 534 562 545 558 542 579 620 557 546 546 560 530 548 585 551
Crude oil-Dubai 496 535 567 551 559 537 565 607 561 540 530 542 532 549 578 537
Refining margins on fob basis
Weighted average product price 533 561 599 587 607 589 623 664 615 596 587 601 564 594 634 595
Crude oil--Brent & Dubai 33:67 mix 495 535 565 549 559 539 569 611 560 542 535 548 532 549 580 542
Gross refining margin (US$/ton) 37 26 33 38 49 50 54 53 55 54 52 54 32 46 54 53
Gross refining margin (US$/bbl) 5.1 3.6 4.6 5.2 6.7 6.8 7.4 7.3 7.5 7.4 7.1 7.3 4.4 6.2 7.4 7.3
Net refining margin 0.4 (1.5) (0.8) (0.1) 1.3 1.7 1.9 1.4 2.2 2.2 1.9 2.1 (0.7) 1.0 1.8 2.1
Tariff protected refining margins in India plus freight
Weighted average product price 589 559 588 626 614 635 637 673 717 664 644 635 650 591 629 685 643
Crude oil--Brent & Dubai 50:50 Mix 533 504 544 575 559 568 576 609 653 598 580 573 586 541 568 620 580
Gross refining margin (US$/ton) 56 54 44 51 56 67 60 64 64 66 64 62 64 50 61 65 64
Gross refining margin (US$/bbl) 7.7 7.4 6.0 7.0 7.6 9.2 8.3 8.8 8.7 9.0 8.8 8.6 8.8 6.8 8.4 8.9 8.7
Net refining margin (7% internal
2.5 2.6 0.8 1.5 2.3 3.7 2.8 3.0 2.5 3.3 3.3 3.1 3.2 1.6 2.9 2.9 3.2
consumption)

Source: Kotak Institutional Equities estimates

12 KOTAK INSTITUTIONAL EQUITIES RESEARCH

 Energy India

Marketing margins have declined in the recent month

Calculation of marketing margins/subsidy of key products

Average (Fiscal years)

Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 2008 2009 2010 2011
International price (US$/ton)
LPG 545 565 611 688 720 732 652 676 691 689 624 564 618 667 666 551 644
Gasoline 684 630 650 682 672 724 713 753 784 708 696 686 689 753 795 625 719
Kerosene 609 573 613 656 637 651 632 675 734 675 666 659 664 710 858 573 679
Diesel 577 543 575 610 589 611 600 643 695 642 627 620 635 668 801 538 644
India IPP price (incl. transport) (a)
LPG (Rs/cylinder) 478 477 507 558 572 584 523 528 552 558 518 476 511 480 529 472 524
Gasoline (Rs/liter) 26.7 23.9 24.5 25.7 25.0 27.0 27.1 28.0 29.9 27.6 27.5 27.0 27.1 25.7 28.9 24.1 27.8
Kerosene (Rs/liter) 25.8 23.5 25.0 26.6 25.6 26.3 25.1 26.2 29.1 27.3 27.1 26.7 26.9 24.9 33.1 23.8 27.2
Diesel (Rs/liter) 25.2 23.0 24.2 25.6 24.4 25.5 25.5 26.7 29.6 27.9 27.7 27.3 27.9 25.3 32.2 23.1 27.8
India retail price without taxes
LPG (Rs/cylinder) 256 256 256 256 256 256 256 256 256 261 291 291 291 232 267 256 274
Gasoline (Rs/liter) 21.9 21.9 21.9 21.9 21.9 22.0 23.2 23.2 23.2 23.6 26.1 26.1 26.1 20.4 23.9 21.2 24.7
Kerosene (Rs/liter) 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.4 10.8 10.8 10.8 8.0 8.0 8.0 9.5
Diesel (Rs/liter) 24.4 24.4 24.4 24.4 24.4 24.5 25.6 25.6 25.6 25.9 27.3 27.3 27.3 21.7 24.6 24.0 26.5
Marketing margin or (subsidy) (b)
LPG (Rs/cylinder) (223) (221) (251) (302) (316) (328) (267) (272) (296) (297) (227) (185) (221) (248) (262) (216) (250)
Gasoline (Rs/liter) (4.8) (2.0) (2.6) (3.8) (3.1) (5.0) (4.0) (4.8) (6.7) (4.0) (1.4) (0.9) (1.0) (5.3) (5.0) (2.9) (3.1)
Kerosene (Rs/liter) (17.8) (15.5) (17.0) (18.6) (17.6) (18.3) (17.1) (18.2) (21.1) (18.9) (16.3) (15.9) (16.1) (16.9) (25.1) (15.9) (17.7)
Diesel (Rs/liter) (0.8) 1.4 0.2 (1.2) (0.0) (1.0) 0.1 (1.0) (3.9) (2.0) (0.4) 0.0 (0.6) (3.6) (7.6) 0.9 (1.3)
Note:
(a) Selling prices include transport costs estimated at Rs1.2/l for diesel and Rs1.3/l for gasoline.
(b) Portion of subsidy on kerosene and LPG reimbursed by the government.

Source: Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 13

 CAUTIOUS
Automobiles
India SEPTEMBER 02, 2010
UPDATE
BSE-30: 18,238

Mixed sales trends continue in August. August continued to be another

unimpressive sales month with volumes largely flat from July. Hero Honda was hit by
tougher comparisons as sales were up only 2% yoy. M&M’s tractor volumes continue to
show robust growth while the 10% YTD growth in passenger UVs is a bit worrisome.
Maruti and Tata Motors’ volumes were in line.

Maruti Suzuki sales in line with estimates, domestic sales grew 32% yoy

Maruti reported total sales of 104,791 units for August, which were up 24% yoy. Total sales were
up 4% from July. Domestic sales came in line with expectations at 92,674 units and were up 32%
yoy and 3% from July. Exports volumes totaled 12,117 units, down 18% yoy and up 13% from
July. Within segments, the A2 hatchback segment was up 26% yoy and 3% sequentially. The A3
sedan segment sales were up 34% yoy and 1% from July. The van segment sales were up 115%
yoy and 4% sequentially. Fiscal year-to-date sales are up 26% yoy compared to the 17% we have
modeled for FY2011E.

M&M sales for August slightly below estimates

M&M reported total sales of 40,264 units, 4% below expectations. The downside was largely
driven by the auto division. Auto division sales were up 28% yoy and 4% from July. Tractors sales
totaled 13,435 units, up 26% yoy and down 8% from July. On a fiscal year-to-date basis, tractor
sales are up 17% compared to the 12% we have modeled for FY2011E. Auto division sales are up
26% fiscal year-to-date compared to the 33% we have modeled for FY2011E. The key risk to our
volume growth could come from passenger UVs that are up only 10% fiscal year-to-date
compared to the 15% we have modeled.

CVs: Tata Motors and Ashok Leyland CV volumes largely in line

Tata Motors reported total sales of 65,938 units, up 32% yoy and down 3% from July. Domestic
M&HCV sales for August totaled 14,851 units, down 2.6% from July. LCV domestic sales totaled
20,734 units, flat from July. Domestic passenger car sales totaled 22,312 units, down 9% from
July. Fiscal year-to-date sales were up 43% yoy compared to the 33% we have modeled for
FY2011E.

Ashok Leyland reported total volumes of 7,480 units, up 56% yoy and 11% from July. Fiscal year-
to-date sales are up 115% compared to the 41% we have modeled for FY2011E.

Hero Honda sales disappoint with 2% yoy growth

Hero Honda reported total sales of 424,617 units, up 2.3% yoy and 1% sequentially. We typically
see a 5-10% sequential pick-up in sales in August. On a fiscal year-to-date basis, sales are up 10%
compared to the 15% growth we have modeled for FY2011E. The company’s sales would have to
grow at a 19% rate for the balance of the year to hit our volume estimates. Bajaj reported in-line
motorcycle volumes of 289,176 units, up 58% yoy and 3% from July. Motorcycle volumes are up
68% fiscal year-to-date versus the 40% we have modeled for FY2011E. Comparisons for the
company would start getting tougher going forward.

For private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES, REFER TO THE END OF THIS MATERIAL.
 Automobiles India

Monthly sales for Aug'10

Growth
Aug'10 Aug'10E Aug'09 yoy% Jul'10 mom% YTD% FY2011E%
Two-wheelers
Bajaj Auto 289,176 294,162 183,051 58 279,781 3 68 40
Hero Honda 424,617 470,455 415,137 2 427,686 (1) 10 15

Four-wheelers
Ashok Leyland
M&HCV 5233 5,675 3,203 63 4,935 6 137 33
LCV 54 88 84 (36) 60 (10) -4 -17
Buses 2193 1,883 1,497 46 1,752 25 78 -6
Total 7,480 7,646 4,784 56 6,747 11 115 41

Tata Motors
M&HCV 16,716 20,235 12,266 36 18,564 (10) 48 20
LCV 23,022 22,103 19,596 17 20,852 10 26 14
UV 2,993 3,370 2,662 12 3,333 (10) 19 20
Passenger cars 23,207 26,786 15,286 52 25,050 (7) 64 68
Total 65,938 72,494 49,810 32 67,799 (3) 43 33

M&M
UVs 14,222 na 12,096 18 18,016 na 10 na
Pickups and LCVs 7,533 na 5,188 45 na na 57 na
Tractors 13,435 13,725 10,646 26 14,592 (8) 17 12
3 wheelers 5,074 na 3,652 39 7,824 na 37 100
Total 40,264 42,046 31,582 27 40,432 (0) 24 25

Maruti Udyog
Domestic 92,674 92,817 69,961 32 90,014 3 27 19
Exports 12,117 11,000 14,847 (18) 10,743 13 16 2
Total 104,791 103,817 84,808 24 100,757 4 25 17

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 15

 Kotak Institutional Equities: Valuation summary of key Indian companies

India Daily Summary - September 3, 2010

O/S Target
2-Sep-10 Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X) Dividend yield (%) RoE (%) price Upside ADVT-3mo
Company Price (Rs) Rating (Rs mn) (US$ mn) (mn) 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E (Rs) (%) (US$ mn)
KOTAK INSTITUTIONAL EQUITIES RESEARCH

Automobiles
Ashok Leyland 74 ADD 99,040 2,120 1,330 2.8 4.3 5.9 84.5 52.3 37.5 26.4 17.3 12.6 15.1 11.4 9.0 2.5 2.2 2.0 2.0 1.3 1.3 10.9 13.5 16.7 78 4.8 7.4
Bajaj Auto 2,783 ADD 402,751 8,621 145 117.7 169.0 189.5 160.1 43.6 12.2 23.7 16.5 14.7 15.3 11.6 10.2 13.7 8.0 5.4 0.7 0.7 0.7 70.9 61.4 44.0 2,650 (4.8) 16.1
Bharat Forge 359 ADD 85,834 1,837 239 0.7 12.4 19.7 (92.0) 1,705.4 59.1 522.3 28.9 18.2 26.5 12.4 8.8 2.3 2.2 2.0 — — — 0.9 0.4 0.1 360 0.3 4.9
Hero Honda 1,696 SELL 338,631 7,248 200 111.8 115.3 130.1 74.1 3.1 12.8 15.2 14.7 13.0 9.6 9.5 8.0 9.4 6.5 4.9 1.8 1.8 2.1 59.1 52.5 42.8 1,800 6.2 20.5
Mahindra & Mahindra 626 BUY 372,914 7,982 595 33.9 44.1 51.7 125.8 30.1 17.3 18.5 14.2 12.1 12.2 10.2 8.6 4.6 3.7 3.0 1.5 1.5 1.6 30.0 29.0 27.3 760 21.4 24.3
Maruti Suzuki 1,277 REDUCE 368,966 7,897 289 86.4 77.6 88.3 104.9 (10.2) 13.9 14.8 16.5 14.5 7.9 8.3 7.1 3.1 2.6 2.2 0.5 0.4 0.5 23.3 17.3 16.7 1,200 (6.0) 21.2
Tata Motors 1,017 ADD 636,825 13,631 626 27.4 94.8 109.2 (182.5) 246.1 15.2 37.1 10.7 9.3 13.2 6.9 6.0 4.1 2.9 2.2 1.3 0.5 0.5 8.7 11.9 11.1 1,150 13.1 88.7
Automobiles Cautious 2,304,961 49,336 276.0 57.2 16.1 22.1 14.0 12.1 12.1 8.7 7.4 4.6 3.6 2.8 1.2 0.9 1.0 20.9 25.3 23.3
Banks/Financial Institutions
Andhra Bank 156 BUY 75,757 1,622 485 21.6 22.9 26.7 60.1 6.4 16.4 7.2 6.8 5.8 — — — 1.7 1.5 1.2 3.2 3.4 4.0 26.0 23.1 22.7 180 15.2 5.3
Axis Bank 1,388 ADD 562,402 12,038 405 62.1 78.1 98.3 22.7 25.9 25.9 22.4 17.8 14.1 — — — 3.5 3.0 2.6 0.9 1.1 1.4 19.2 18.3 19.9 1,500 8.1 39.5
Bank of Baroda 833 BUY 304,302 6,513 366 83.7 95.1 115.7 37.3 13.7 21.7 9.9 8.8 7.2 — — — 2.2 1.8 1.5 1.8 2.0 2.5 24.4 23.0 23.3 950 14.1 8.6
Bank of India 458 REDUCE 240,843 5,155 526 33.1 49.9 58.1 (42.1) 50.9 16.4 13.8 9.2 7.9 — — — 1.9 1.6 1.4 1.5 2.3 2.7 14.2 19.0 19.2 460 0.4 9.1
Canara Bank 524 ADD 214,881 4,599 410 73.7 82.2 98.3 45.8 11.6 19.5 7.1 6.4 5.3 — — — 1.7 1.4 1.1 1.5 1.9 2.3 22.4 20.8 20.8 580 10.7 6.9
Corporation Bank 607 BUY 87,024 1,863 143 82.0 88.0 102.6 31.8 7.3 16.6 7.4 6.9 5.9 — — — 1.5 1.3 1.1 2.7 2.9 3.4 22.0 20.2 20.2 700 15.4 1.2
Federal Bank 347 ADD 59,323 1,270 171 27.2 36.4 49.0 (7.2) 34.1 34.4 12.8 9.5 7.1 — — — 1.3 1.1 1.0 1.4 1.9 2.6 10.3 12.6 15.2 360 3.8 5.5
HDFC 633 ADD 908,057 19,436 1,436 19.7 23.2 27.8 22.7 17.9 19.6 32.1 27.2 22.8 — — — 6.0 5.3 4.7 1.1 1.3 1.5 20.0 20.6 21.7 690 9.1 40.2
HDFC Bank 2,187 BUY 1,001,291 21,432 458 64.4 87.2 113.8 22.1 35.4 30.5 34.0 25.1 19.2 — — — 4.7 4.1 3.5 0.5 0.7 1.0 16.1 17.3 19.5 2,400 9.7 32.8
ICICI Bank 1,004 REDUCE 1,119,237 23,956 1,115 36.1 45.2 57.3 6.9 25.3 26.6 27.8 22.2 17.5 — — — 2.2 2.0 1.9 1.2 1.5 1.9 8.0 9.5 11.3 1,000 (0.4) 78.3
IDFC 181 ADD 264,180 5,655 1,458 8.4 9.4 11.2 44.9 12.4 18.7 21.6 19.2 16.2 — — — 3.8 2.5 2.0 0.7 1.0 1.2 16.6 15.5 14.3 205 13.2 23.5
India Infoline 95 BUY 29,621 634 312 8.1 7.2 8.7 59.2 (11.9) 21.6 11.7 13.3 10.9 — — — 1.9 1.6 1.3 3.3 1.6 2.1 16.4 12.9 14.4 120 26.3 4.4
Indian Bank 252 ADD 108,452 2,321 430 35.1 32.4 44.1 25.5 (7.7) 36.2 7.2 7.8 5.7 — — — 1.6 1.4 1.2 2.6 2.3 3.1 24.1 18.8 21.7 280 11.0 4.3
Indian Overseas Bank 134 BUY 73,139 1,565 545 13.0 16.7 24.8 (46.7) 29.0 48.4 10.3 8.0 5.4 — — — 1.2 1.0 0.9 2.6 2.9 3.2 9.6 11.6 15.4 160 19.2 4.8
J&K Bank 759 Under Review 36,827 788 48 105.7 119.3 139.6 25.0 12.9 17.1 7.2 6.4 5.4 — — — 1.2 1.1 1.0 2.9 3.3 3.8 18.2 17.9 18.3 - (100.0) 1.7
LIC Housing Finance 1,203 REDUCE 114,316 2,447 95 69.7 100.7 109.9 11.5 44.5 9.1 17.3 11.9 11.0 — — — 3.5 2.9 2.5 1.2 1.8 2.0 23.6 25.5 23.2 1,250 3.9 23.6
Mahindra & Mahindra Financial 596 BUY 57,240 1,225 96 35.9 46.4 56.2 60.0 29.4 21.2 16.6 12.8 10.6 — — — 3.4 2.8 2.4 1.3 1.7 2.0 21.5 23.5 23.8 590 (1.0) 2.2
Oriental Bank of Commerce 439 ADD 109,987 2,354 251 45.3 57.8 66.8 25.3 27.6 15.5 9.7 7.6 6.6 — — — 1.5 1.3 1.1 2.1 2.6 3.1 14.5 16.5 16.9 430 (2.1) 6.4
PFC 347 SELL 398,104 8,521 1,148 20.5 22.9 27.6 53.5 11.9 20.3 16.9 15.1 12.6 — — — 3.1 2.7 2.4 1.5 1.7 2.0 18.8 18.3 19.2 275 (20.7) 4.2
Punjab National Bank 1,213 BUY 382,304 8,183 315 123.9 133.4 163.3 26.4 7.7 22.4 9.8 9.1 7.4 — — — 2.3 1.9 1.6 1.8 2.2 2.7 26.2 23.2 23.7 1,300 7.2 8.9
Reliance Capital 775 NR 190,712 4,082 246 12.9 13.7 9.8 (67.3) 6.5 (28.6) 60.3 56.6 79.3 — — — 2.8 2.7 2.7 0.8 0.7 0.5 4.7 4.8 3.4 — — 40.0
Rural Electrification Corp. 328 ADD 323,864 6,932 987 20.3 25.3 31.2 23.2 24.5 23.4 16.2 13.0 10.5 — — — 2.9 2.6 2.2 2.0 2.3 2.9 22.0 21.0 22.5 325 (0.9) 10.1
Shriram Transport 747 ADD 166,686 3,568 223 39.2 53.4 64.8 30.1 36.4 21.3 19.1 14.0 11.5 — — — 4.5 3.8 3.2 1.6 2.1 2.6 28.4 28.2 28.4 700 (6.3) 5.5
SREI 90 NR 10,484 224 116 8.3 7.9 9.9 17.8 (4.8) 25.8 10.9 11.4 9.1 — — — 0.9 0.8 0.8 1.3 1.3 1.3 11.1 10.5 12.3 — — 4.1
State Bank of India 2,759 BUY 1,751,705 37,494 635 144.4 177.7 211.2 0.5 23.1 18.8 19.1 15.5 13.1 — — — 2.7 2.3 2.0 1.1 1.2 1.2 14.8 16.0 16.7 3,100 12.4 98.4
Union Bank 345 BUY 174,215 3,729 505 41.1 45.7 56.9 20.2 11.3 24.5 8.4 7.5 6.1 — — — 2.0 1.6 1.3 1.6 1.8 2.2 26.2 23.7 24.1 400 16.0 5.1
Yes Bank 318 BUY 108,014 2,312 340 15.0 17.7 22.5 46.7 18.2 26.6 21.2 17.9 14.2 — — — 3.5 3.0 2.5 0.4 0.6 0.7 20.3 18.0 19.3 350 10.1 20.0
Banks/Financial Institutions Attractive 8,872,967 189,918 14.8 20.3 22.1 17.6 14.7 12.0 — — — 2.7 2.4 2.1 1.3 1.5 1.8 15.5 16.2 17.2
Cement
ACC 896 ADD 168,256 3,601 188 83.2 66.0 72.4 47.9 (20.7) 9.8 10.8 13.6 12.4 5.7 6.4 5.1 2.6 2.3 2.0 3.0 2.6 2.6 29.3 20.0 19.2 920 2.7 7.2
Ambuja Cements 126 SELL 191,058 4,089 1,522 8.0 8.4 8.9 11.4 5.3 5.1 15.7 14.9 14.2 8.7 8.2 7.1 2.7 2.4 2.2 1.5 1.6 1.7 19.3 17.8 16.5 108 (13.9) 4.8
Grasim Industries 2,089 ADD 191,563 4,100 92 301.0 229.0 273.3 26.1 (23.9) 19.4 6.9 9.1 7.6 4.3 4.7 3.6 1.5 1.3 1.2 1.6 1.6 1.6 22.9 15.7 16.3 2,200 5.3 6.3
India Cements 107 SELL 32,745 701 307 10.0 8.7 10.6 (43.5) (13.1) 21.1 10.6 12.2 10.1 5.9 7.3 5.0 0.8 0.7 0.7 2.0 3.0 3.0 8.2 6.7 7.7 95 (10.9) 2.4
Shree Cement 1,900 BUY 66,175 1,416 35 208.0 221.1 242.5 19.0 6.3 9.7 9.1 8.6 7.8 4.5 4.3 3.4 3.6 2.6 1.9 0.6 0.6 0.6 48.0 35.0 28.1 2,550 34.2 1.2
UltraTech Cement 928 ADD 115,558 2,473 124 88.2 66.9 75.1 12.0 (24.2) 12.4 10.5 13.9 12.4 5.5 6.7 5.6 2.1 1.9 1.6 0.6 0.9 0.9 25.9 16.7 16.3 985 6.1 3.1
Cement Neutral 765,355 16,382 19.3 (15.4) 12.7 10.0 11.8 10.5 5.4 5.9 4.7 2.1 1.8 1.6 1.7 1.7 1.7 20.6 15.2 15.0
India Daily Summary - September

Source: Company, Bloomberg, Kotak Institutional Equities estimates

16
 Kotak Institutional Equities: Valuation summary of key Indian companies
O/S Target
2-Sep-10 Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X) Dividend yield (%) RoE (%) price Upside ADVT-3mo
17

Company Price (Rs) Rating (Rs mn) (US$ mn) (mn) 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E (Rs) (%) (US$ mn)
Consumer products
Asian Paints 2,798 BUY 268,336 5,743 96 71.5 89.0 107.1 85.3 24.4 20.4 39.1 31.4 26.1 24.2 19.6 16.1 16.7 13.0 10.4 1.0 1.3 1.6 51.8 47.9 45.4 3,000 7.2 6.6
Colgate-Palmolive (India) 829 REDUCE 112,684 2,412 136 31.1 34.5 39.6 44.2 10.9 14.6 26.6 24.0 20.9 21.8 17.8 15.2 34.6 29.4 25.2 2.4 3.1 3.6 156.1 132.3 129.4 830 0.2 2.4
Dabur India 213 REDUCE 184,780 3,955 866 5.8 6.8 8.2 28.1 17.6 20.8 36.8 31.3 25.9 27.3 22.0 18.2 17.5 14.4 11.9 1.4 1.7 2.0 54.3 51.1 50.7 210 (1.5) 4.8
GlaxoSmithkline Consumer (a) 1,772 ADD 74,522 1,595 42 55.4 68.6 81.3 23.6 23.9 18.6 32.0 25.8 21.8 17.7 15.3 12.5 8.3 6.9 5.8 1.0 1.3 1.5 27.9 29.0 28.7 2,000 12.9 0.6
Godrej Consumer Products 374 ADD 121,055 2,591 324 11.3 13.5 18.0 69.5 18.9 33.4 33.0 27.8 20.8 26.2 19.9 14.9 12.6 6.8 6.1 1.0 0.9 0.9 44.6 31.9 31.1 420 12.3 1.8
Hindustan Unilever 270 REDUCE 588,837 12,604 2,182 9.4 10.2 12.0 (0.9) 8.4 17.5 28.6 26.4 22.5 19.6 18.8 15.3 22.8 19.7 17.0 2.8 3.1 3.6 71.1 80.2 81.3 250 (7.4) 11.2
ITC 165 BUY 1,265,782 27,093 7,651 5.3 6.3 7.3 22.6 18.2 15.8 31.2 26.4 22.8 18.9 16.6 14.0 8.5 7.2 6.2 3.0 1.7 1.8 29.2 31.1 30.5 165 (0.3) 22.0
Jubilant Foodworks 516 REDUCE 32,918 705 64 5.5 9.7 12.1 340.6 75.7 24.6 93.0 52.9 42.5 49.5 30.0 21.0 28.0 18.3 12.8 — — — 46.6 41.8 35.4 370 (28.2) 14.5
Jyothy Laboratories 271 NR 19,666 421 73 11.0 12.9 15.3 99.6 17.0 18.3 24.6 21.0 17.8 19.0 14.4 11.8 4.8 4.1 3.5 1.7 1.3 1.7 18.6 20.2 20.5 — — 1.2
Nestle India (a) 3,130 REDUCE 301,738 6,458 96 74.4 86.6 104.8 27.0 16.4 20.9 42.1 36.1 29.9 27.8 24.2 20.5 51.9 41.4 33.0 1.5 1.9 2.3 136.0 127.5 122.9 3,000 (4.1) 2.8
Tata Global Beverages 122 ADD 75,692 1,620 618 6.6 7.4 8.4 23.4 11.1 13.8 18.5 16.6 14.6 11.8 9.6 8.6 1.5 1.4 1.3 1.8 2.0 2.2 10.9 11.4 12.0 125 2 4.0
Consumer products Attractive 3,121,710 66,817 24.2 16.6 17.9 31.8 27.3 23.1 20.5 17.8 14.9 10.8 9.0 7.7 2.3 1.9 2.2 33.9 32.9 33.4
Constructions
IVRCL 156 BUY 41,573 890 267 7.9 9.1 11.6 (6.7) 15.0 27.9 19.7 17.1 13.4 10.1 9.6 7.6 2.1 1.8 1.6 0.3 0.3 0.3 11.0 11.3 12.9 205 31.7 6.8
Nagarjuna Construction Co. 158 BUY 40,656 870 257 7.1 9.2 11.8 6.1 29.6 27.8 22.2 17.1 13.4 11.2 9.6 8.0 1.8 1.7 1.5 0.9 1.3 1.3 9.3 10.2 11.9 210 32.5 3.5
Punj Lloyd 109 REDUCE 36,887 790 339 (12.9) 9.8 12.0 79.2 (175.4) 22.4 (8.4) 11.1 9.1 33.2 6.5 5.9 1.2 1.1 1.0 (0.1) 0.4 1.0 (15.8) 10.3 11.4 140 28.6 11.0
Sadbhav Engineering 1,481 BUY 22,215 475 15 42.8 61.8 87.2 (16.3) 44.3 41.0 34.6 24.0 17.0 19.0 12.7 9.8 5.5 3.6 3.0 0.2 0.4 0.4 15.8 15.1 17.8 1,750 18.2 0.4
Construction Attractive 141,332 3,025 (91.1) 4,528 27.2 724.1 15.6 12.3 15.0 8.5 7.2 1.8 1.6 1.5 0.3 0.6 0.8 0.3 10.4 11.9
Energy
Aban Offshore 788 ADD 34,284 734 43 94.5 154.1 139.3 (2.5) 63.0 (9.6) 8.3 5.1 5.7 8.3 6.6 6.4 1.5 1.4 1.2 0.5 0.5 0.5 21.7 33.1 22.9 935 18.6 44.3
Bharat Petroleum 779 ADD 281,640 6,028 362 62.1 57.4 65.7 201 (8) 14.5 13 14 11.9 6.6 6.4 5.8 2.0 1.8 1.6 1.8 2.4 2.8 15.6 13.0 13.5 690 (11.4) 35.1
Cairn india 336 RS 636,909 13,632 1,897 5.5 20.5 36.6 29.0 270.1 78.3 60.6 16.4 9.2 47.6 9.8 6.0 1.9 1.7 1.5 — — 4.5 3.1 10.7 17.2 — — 27.6
Castrol India (a) 498 REDUCE 123,133 2,636 247 15.4 20.7 21.2 45 34 2.4 32 24 23.5 19.3 14.9 14.4 26.7 25.1 23.8 2.5 3.3 3.4 83.8 107.4 103.7 380 (23.7) 1.8
GAIL (India) 460 BUY 583,120 12,481 1,268 24.8 27.2 40.2 11.7 10.1 47.4 18.6 16.9 11.4 10.4 10.4 8.4 3.2 2.8 2.4 1.6 1.8 2.7 17.4 17.0 21.6 550 19.6 16.6
GSPL 118 SELL 66,256 1,418 562 7.4 7.2 8.0 235 (3) 12.1 16 16 14.7 8.1 7.9 6.6 3.9 3.2 2.9 0.8 1.5 2.7 27.3 21.4 20.8 83 (29.5) 4.8
Hindustan Petroleum 530 ADD 179,574 3,844 339 52.6 53.5 58.6 210.1 1.8 9.5 10.1 9.9 9.0 3.6 3.6 3.3 1.3 1.2 1.1 2.3 3.2 3.5 13.3 12.2 12.1 535 1.0 41.9
Indian Oil Corporation 424 ADD 1,030,179 22,050 2,428 49.9 38.8 41.1 407 (22) 5.9 9 11 10.3 5.7 5.7 5.1 1.9 1.7 1.6 3.1 2.8 2.9 22.7 15.6 15.1 415 (2.2) 19.0
Oil India 1,445 BUY 347,433 7,436 240 115.1 133.6 153.4 13.8 16.1 14.8 12.6 10.8 9.4 5.4 4.2 3.6 2.3 2.1 1.8 2.4 3.0 3.5 16.7 18.1 18.3 1,550 7.3 7.3
Oil & Natural Gas Corporation 1,321 BUY 2,826,325 60,495 2,139 91.4 116.6 136.1 1 27 16.7 14 11 9.7 5.3 4.5 3.6 2.1 1.9 1.7 2.5 3.2 3.6 14.6 16.8 17.6 1,480 12.0 35.0
Petronet LNG 112 REDUCE 83,888 1,796 750 5.4 6.5 7.9 (22.0) 20.5 21.8 20.7 17.2 14.1 11.8 10.1 8.8 3.3 2.8 2.5 1.6 1.8 2.5 15.9 16.7 17.6 88 (21.3) 7.4
Reliance Industries 937 REDUCE 2,789,851 59,714 2,976 49.6 57.7 74.4 (2) 16 28.9 19 16 12.6 9.6 7.6 6.2 1.9 1.7 1.5 0.7 0.9 1.1 11.4 12.1 13.9 1,015 8.3 108.9
Energy Cautious 8,982,592 192,264 38.2 15.5 22.8 14.9 12.9 10.5 7.3 6.2 5.1 2.1 1.9 1.7 1.7 2.0 2.7 13.8 14.4 15.8

India Daily Summary - September 3, 2010

Industrials
ABB 781 REDUCE 165,469 3,542 212 16.7 18.3 33.1 (35.2) 9.3 80.7 46.7 42.7 23.6 26.7 24.4 13.6 6.8 6.0 4.9 0.3 0.4 0.4 15.6 15.0 23.0 725 (7.2) 4.7
BGR Energy Systems 809 BUY 58,237 1,247 72 16.0 28.0 39.7 32.2 74.6 41.9 50.5 28.9 20.4 28.3 16.5 11.8 10.3 8.3 6.3 0.4 0.9 1.0 22.3 31.8 35.1 950 17.5 4.2
Bharat Electronics 1,725 REDUCE 137,972 2,953 80 93.9 107.3 122.4 (9.6) 14.3 14.1 18.4 16.1 14.1 8.8 7.3 6.2 3.1 2.7 2.4 1.4 1.4 1.4 17.9 18.0 17.9 1,835 6.4 2.3
Bharat Heavy Electricals 2,398 REDUCE 1,173,722 25,122 490 87.9 114.3 135.5 37.7 30.0 18.5 27.3 21.0 17.7 15.2 11.8 9.8 7.4 5.8 4.7 0.8 1.0 1.2 29.8 31.1 29.3 2,600 8.4 24.6
Crompton Greaves 301 BUY 193,316 4,138 642 12.8 14.0 16.3 46.5 9.0 16.6 23.5 21.5 18.5 13.6 12.1 10.1 7.7 5.9 4.7 0.4 0.6 0.7 37.9 31.1 28.2 320 6.2 7.5
Larsen & Toubro 1,841 ADD 1,108,861 23,734 602 57.9 71.7 89.0 15.6 23.8 24.1 31.8 25.7 20.7 17.8 14.0 11.7 5.0 4.1 3.5 0.7 0.7 0.8 18.6 17.7 18.5 2,075 12.7 49.2
Maharashtra Seamless 380 BUY 26,777 573 71 40.2 43.6 49.8 12.1 8.5 14.2 9.4 8.7 7.6 5.0 4.3 3.4 1.7 1.5 1.3 1.6 2.1 2.6 19.3 17.9 17.7 450 18.5 0.4
Siemens 699 REDUCE 235,607 5,043 337 25.2 27.0 31.9 56.4 7.3 18.0 27.8 25.9 21.9 16.8 15.2 12.6 6.9 5.7 4.8 0.7 0.8 0.9 27.6 24.2 23.8 635 (9.1) 5.6
Suzlon Energy 51 REDUCE 81,758 1,750 1,594 (6.2) (0.8) 3.3 (185.4) (86.8) (504.1) (8.3) (63.2) 15.6 14.1 11.7 7.8 1.2 1.1 1.1 — — 0.4 (11.4) (1.8) 6.9 55 7.2 20.6
Thermax 765 ADD 91,174 1,951 119 21.7 29.5 39.7 (10.4) 35.9 34.4 35.2 25.9 19.3 18.1 14.2 10.5 8.5 7.0 5.6 0.7 1.1 1.5 25.0 29.5 32.2 865 13.0 1.2
Voltas 209 REDUCE 69,140 1,480 331 10.9 11.8 13.4 57.4 8.2 14.3 19.2 17.8 15.6 11.4 9.9 8.3 6.5 5.2 4.3 1.5 1.6 1.9 38.3 32.5 30.2 225 7.6 4.7
Industrials Attractive 3,342,033 71,533 1.4 33.1 26.8 31.5 23.7 18.7 15.8 12.7 10.3 5.4 4.5 3.8 0.7 0.8 1.0 17.1 18.9 20.1

Source: Company, Bloomberg, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH
 Kotak Institutional Equities: Valuation summary of key Indian companies
O/S Target

India Daily Summary - September 3, 2010

2-Sep-10 Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X) Dividend yield (%) RoE (%) price Upside ADVT-3mo
Company Price (Rs) Rating (Rs mn) (US$ mn) (mn) 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E (Rs) (%) (US$ mn)
KOTAK INSTITUTIONAL EQUITIES RESEARCH

Infrastructure
Container Corporation 1,301 REDUCE 169,123 3,620 130 61.1 74.3 85.9 0.3 21.7 15.6 21.3 17.5 15.1 15.0 12.2 10.2 3.9 3.3 2.9 1.1 1.3 1.5 19.6 20.6 20.5 1,250 (3.9) 1.7
GMR Infrastructure 58 ADD 211,403 4,525 3,667 0.4 0.2 0.1 (43.8) (48.9) (40.0) 133.8 261.9 436.1 23.5 15.2 14.2 2.0 1.7 1.7 — — — 2.4 1.2 0.7 65 12.7 6.5
GVK Power & Infrastructure 47 BUY 74,144 1,587 1,579 0.8 1.1 1.4 6.7 33.5 32.4 57.7 43.2 32.6 19.3 17.5 17.9 2.3 2.3 2.1 — 0.6 0.6 4.7 5.3 6.7 54 15.0 5.7
IRB Infrastructure 283 RS 94,142 2,015 332 9.7 12.6 12.1 83.8 29.2 (3.7) 29.1 22.5 23.4 13.6 12.1 11.2 4.1 3.1 2.5 — — — 15.6 15.7 11.9 — — 11.8
Mundra Port and SEZ 763 REDUCE 307,843 6,589 403 16.7 21.9 34.1 55.7 31.0 56.1 45.7 34.9 22.3 34.2 22.4 16.1 8.7 7.4 5.8 (0.5) — — 20.8 22.9 28.9 750 (1.7) 5.6
Infrastructure Attractive 856,655 18,336 16.3 21.2 26.0 41.2 34.0 27.0 21.6 16.0 13.8 3.6 3.1 2.8 — — 0.4 8.7 9.1 10.3
Media
DB Corp 250 BUY 45,468 973 182 10.6 13.0 15.7 286.5 22.4 21.0 23.5 19.2 15.9 13.1 10.8 8.9 7.0 5.7 4.9 0.8 1.2 1.6 40.3 32.6 33.2 290 15.9 0.3
DishTV 54 ADD 57,583 1,233 1,063 (2.5) (1.8) 0.1 (62.0) (28.8) (107.4) (21.7) (30.5) 414.0 71.0 28.4 15.0 14.0 25.9 24.4 — — — 249.3 (59.7) 6.1 47 (13.2) 4.0
HT Media 173 NR 40,702 871 235 6.1 7.7 9.2 623.3 25.9 19.8 28.4 22.5 18.8 14.2 11.9 9.9 4.2 3.7 3.4 0.6 1.2 2.3 15.6 17.5 18.9 — — 0.4
Jagran Prakashan 130 BUY 39,288 841 301 5.9 6.6 7.7 92.3 12.3 17.8 22.3 19.9 16.9 13.5 11.6 9.9 6.4 5.9 5.4 2.7 3.1 3.8 30.1 30.8 33.3 140 7.3 1.5
Sun TV Network 491 REDUCE 193,592 4,144 394 13.1 18.0 22.5 44.8 36.9 25.2 37.4 27.3 21.8 21.2 15.7 12.7 10.0 8.4 7.0 1.5 1.5 1.8 28.4 33.7 35.1 420 (14.5) 2.7
Zee Entertainment Enterprises 285 REDUCE 123,976 2,654 435 10.6 11.8 14.4 25.0 12.0 21.5 27.0 24.1 19.9 20.0 15.9 12.7 3.4 3.2 3.1 0.9 1.0 1.3 13.1 13.8 16.0 270 (5.3) 8.1
Media Neutral 500,608 10,715 185.5 35.8 37.2 41.2 30.4 22.1 19.8 15.2 12.0 6.0 5.6 5.0 1.1 1.3 1.7 14.7 18.4 22.8
Metals
Hindalco Industries 174 ADD 332,357 7,114 1,914 5.7 13.6 15.5 (64.5) 139.5 14.2 30.6 12.8 11.2 7.8 7.8 8.1 1.5 1.4 1.2 0.8 0.8 0.8 10.3 11.1 11.5 200 15.2 36.9
Hindustan Zinc 1,084 BUY 457,813 9,799 423 95.6 102.5 116.0 48.2 7.2 13.1 11.3 10.6 9.3 7.3 5.8 4.1 2.4 2.0 1.6 0.6 0.6 0.6 24.1 20.8 19.4 1,240 14.4 4.0
Jindal Steel and Power 699 REDUCE 650,560 13,925 931 38.4 50.9 56.0 17.3 32.7 9.9 18.2 13.7 12.5 12.6 9.0 7.6 5.8 4.0 3.0 0.2 0.3 0.3 37.8 34.9 28.0 625 (10.5) 22.8
JSW Steel 1,179 REDUCE 297,380 6,365 252 80.4 68.5 108.5 481.1 (14.8) 58.5 14.7 17.2 10.9 10.9 9.2 6.2 2.7 1.7 1.3 0.6 0.8 0.8 16.0 12.0 13.3 1,075 (8.8) 41.1
National Aluminium Co. 403 SELL 259,367 5,552 644 12.6 14.3 17.3 (34.9) 13.3 20.5 31.9 28.1 23.3 15.2 12.5 10.3 2.5 2.4 2.2 0.6 1.2 1.2 8.1 8.6 9.8 260 (35.4) 1.6
Sesa Goa 323 REDUCE 287,507 6,154 890 29.6 58.6 46.3 23.5 98.4 (21.0) 10.9 5.5 7.0 9.0 3.8 3.7 3.6 2.2 1.7 1.1 1.1 1.1 35.8 41.5 23.7 340 5.2 57.8
Sterlite Industries 161 ADD 540,050 11,559 3,362 12.0 14.2 19.3 2.8 18.4 35.5 13.4 11.3 8.3 8.5 7.5 4.7 1.5 1.3 1.1 0.6 0.6 0.6 12.9 12.2 14.6 200 24.5 37.2
Tata Steel 544 REDUCE 497,485 10,648 914 (3.6) 63.4 65.5 (103.6) (1,880.2) 3.4 (152.8) 8.6 8.3 10.5 5.8 5.5 2.2 1.7 1.4 1.4 1.5 — (1.5) 22.0 18.7 550 1.1 89.6
Metals Cautious 3,322,519 71,116 (30.6) 72.5 11.3 19.0 11.0 9.9 9.8 7.0 5.9 2.3 1.9 1.6 0.7 0.8 0.6 12.3 17.1 15.9
Pharmaceutical
Biocon 343 BUY 68,690 1,470 200 14.8 17.8 22.0 216.4 19.8 23.7 23.1 19.3 15.6 13.4 11.2 9.3 3.8 3.3 2.8 — — — 17.9 18.8 20.0 400 16.5 5.0
Cipla 305 REDUCE 245,172 5,248 803 13.7 14.0 16.6 38.1 1.9 19.2 22.3 21.9 18.4 16.0 14.7 12.4 4.1 3.6 3.1 0.7 0.8 0.8 21.1 17.6 18.2 295 (3.4) 8.6
Cadila Healthcare 624 REDUCE 127,753 2,734 205 24.7 33.2 37.7 66.9 34.2 13.7 25.3 18.8 16.5 16.5 12.6 11.2 7.8 5.9 4.6 0.8 1.1 1.2 36.0 35.8 31.3 580 (7.0) 1.5
Dishman Pharma & chemicals 193 ADD 15,685 336 81 14.4 17.8 22.8 (19.7) 23.7 28.0 13.4 10.8 8.4 10.0 8.1 6.3 2.0 1.7 1.4 — — — 15.5 16.8 18.3 230 19.3 0.6
Divi's Laboratories 745 REDUCE 97,313 2,083 131 26.1 34.0 44.9 (18.2) 30.4 32.1 28.6 21.9 16.6 21.2 16.2 11.6 6.4 5.3 4.3 — — — 24.7 26.4 28.5 800 7.4 2.6
Dr Reddy's Laboratories 1,377 REDUCE 233,317 4,994 169 48.1 66.7 70.8 48.3 38.8 6.1 28.7 20.6 19.5 15.8 12.0 11.1 6.2 4.9 4.0 0.5 0.6 0.6 22.2 26.3 22.6 1,150 (16.5) 16.5
GlaxoSmithkline Pharmaceuticals (a) 1,907 REDUCE 161,503 3,457 85 59.1 69.7 79.2 8.1 18.0 13.5 32.3 27.3 24.1 18.3 15.6 13.4 9.0 7.7 6.6 — — — 29.8 30.4 29.4 1,880 (1.4) 1.6
Glenmark Pharmaceuticals 290 NR 79,441 1,700 274 12.7 19.2 20.3 14.7 50.6 5.6 22.8 15.1 14.3 14.5 9.4 9.0 3.4 2.8 2.4 — — — 16.7 19.9 17.6 — — 4.5
Jubilant Organosys 347 BUY 55,079 1,179 159 26.5 31.8 38.9 49.0 19.8 22.4 13.1 10.9 8.9 9.5 8.6 6.9 2.5 2.0 1.7 0.6 0.7 0.9 26.3 21.7 21.1 400 15.3 2.6
Lupin 360 ADD 159,398 3,412 442 15.4 19.8 25.5 27.9 28.7 28.7 23.4 18.2 14.1 20.0 14.5 11.5 6.9 6.5 5.7 3.6 4.0 4.3 36.6 37.2 43.6 400 11.0 7.3
Piramal Healthcare 506 REDUCE 105,750 2,263 209 22.4 13.3 9.5 29.7 (40.4) (28.9) 22.6 37.9 53.3 16.4 7.0 5.2 6.3 1.2 1.0 1.1 1.2 0.7 30.7 140.7 16.5 490 (3.2) 21.7
Ranbaxy Laboratories 504 SELL 215,914 4,621 428 7.1 27.0 11.6 (128.4) 282.7 (57.0) 71.3 18.6 43.3 17.4 10.6 20.4 5.5 3.9 3.7 — 0.8 0.8 6.9 22.6 8.3 255 (49.4) 9.5
Sun Pharmaceuticals 1,733 REDUCE 358,991 7,684 207 65.2 90.4 87.4 (25.7) 38.6 (3.3) 26.6 19.2 19.8 20.1 13.9 13.5 4.3 3.6 3.1 0.8 0.8 0.8 17.8 21.0 17.3 1,835 5.9 6.0
Pharmaceuticals Attractive 1,924,006 41,182 45.5 33.7 3.2 26.6 19.9 19.3 16.6 12.4 11.7 5.1 3.6 3.1 0.7 0.9 0.9 19.0 18.2 16.1
Property
DLF 312 ADD 532,697 11,402 1,708 10.7 16.3 25.1 (60.0) 53.1 53.8 29.3 19.1 12.4 20.4 13.0 9.8 2.0 1.8 1.6 1.0 1.0 1.6 7.1 9.9 13.8 340 9.0 42.6
Housing Development & Infrastructure 260 ADD 100,040 2,141 385 12.4 14.2 16.7 (41.2) 14.2 17.9 21.0 18.3 15.6 10.5 11.9 7.9 1.4 1.2 1.2 1.1 1.9 1.9 10.0 9.3 9.9 318 22.3 32.9
Indiabulls Real Estate 176 RS 70,697 1,513 401 0.3 2.5 7.4 (62.7) 777.3 195.3 618.8 70.5 23.9 (26.2) (282.2) 12.0 0.8 0.8 0.8 — — — 0.1 1.1 3.2 285 61.7 18.2
Mahindra Life Space Developer 465 ADD 19,659 421 42 20.1 23.6 35.8 77.8 17.6 51.5 23.2 19.7 13.0 20.5 14.7 7.3 2.0 1.9 1.7 0.8 0.8 0.8 8.9 9.7 13.4 540 16.1 0.7
Phoenix Mills 249 BUY 36,037 771 145 4.1 6.6 7.6 (16.7) 59.0 15.6 60.2 37.8 32.7 48.2 26.5 22.2 2.3 2.2 2.1 0.4 0.6 0.8 3.9 6.0 6.7 260 4.5 0.9
Puravankara Projects 112 REDUCE 23,989 513 213 6.8 8.2 8.0 0.6 20.1 (1.9) 16.5 13.7 14.0 18.9 14.3 14.1 1.7 1.5 1.4 1.8 1.8 1.8 10.5 11.6 10.5 110 (2.1) 0.5
India Daily Summary - September

Sobha 345 ADD 33,857 725 98 14.1 17.0 26.2 (7.1) 20.8 54.0 24.6 20.3 13.2 18.1 14.1 9.3 2.0 1.8 1.6 0.3 0.3 0.5 9.7 9.2 12.8 372 7.7 2.2
Unitech 79 SELL 209,838 4,491 2,666 3.0 3.8 5.1 (58.8) 25.0 34.0 26.0 20.8 15.5 25.9 18.7 12.1 2.0 1.7 1.6 — — 1.9 9.0 8.7 10.6 74 (6.0) 47.3
Property Cautious 926,774 19,837 (51.9) 49.2 50.1 31.5 21.1 14.1 22.7 14.8 10.5 1.8 1.6 1.5 0.7 0.6 1.5 5.6 7.7 10.7

Source: Company, Bloomberg, Kotak Institutional Equities estimates

18
 Kotak Institutional Equities: Valuation summary of key Indian companies
O/S Target
19

1-Sep-10 Mkt cap. shares EPS (Rs) EPS growth (%) PER (X) EV/EBITDA (X) Price/BV (X) Dividend yield (%) RoE (%) price Upside ADVT-3mo
Company Price (Rs) Rating (Rs mn) (US$ mn) (mn) 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E 2010E 2011E 2012E (Rs) (%) (US$ mn)
Retail
Titan Industries 2,956 ADD 131,226 2,803 44 57.3 83.4 110.2 29.3 45.6 32.2 51.6 35.4 26.8 32.8 23.9 18.2 17.8 12.7 9.1 0.5 0.4 0.5 38.7 41.8 39.4 3,000 1.5 7.6
Retail Neutral 131,226 2,803 29.3 45.6 32.2 51.6 35.4 26.8 32.8 23.9 18.2 17.8 12.7 9.1 0.5 0.4 0.5 34.5 35.8 33.8
Sugar
Bajaj Hindustan 116 SELL 22,264 476 191 4.9 9.9 8.9 52.3 101.0 (9.9) 23.7 11.8 13.1 8.2 5.9 5.6 1.0 0.9 0.8 0.6 0.6 0.6 4.2 7.9 6.5 99 (14.9) 4.8
Balrampur Chini Mills 86 ADD 21,965 469 257 4.3 10.4 7.0 (43.2) 140.4 (32.7) 19.7 8.2 12.2 9.1 5.5 6.0 1.6 1.4 1.3 0.5 0.5 0.5 8.2 17.9 10.9 93 8.7 4.1
Shree Renuka Sugars 65 BUY 43,704 934 670 9.9 7.7 8.1 195.3 (21.9) 4.7 6.6 8.5 8.1 4.1 4.7 4.0 1.5 1.3 1.1 0.6 0.5 0.5 22.4 17.0 14.8 76 16.5 11.0
Sugar Cautious 87,934 1,878 80.0 12.4 (8.4) 10.2 9.0 9.9 6.2 5.4 5.0 1.3 1.2 1.0 0.6 0.5 0.5 13.1 12.8 10.5
Technology
HCL Technologies 386 REDUCE 266,409 5,691 690 17.5 24.5 30.1 0.2 39.7 23.0 22.0 15.8 12.8 10.7 9.4 7.6 3.8 3.2 2.8 1.0 1.0 1.6 19.3 22.0 21.2 390 1.0 12.3
Hexaware Technologies 68 REDUCE 9,775 209 144 9.3 5.0 9.4 127.7 (46.3) 87.7 7.3 13.5 7.2 3.4 8.0 4.0 1.2 1.1 1.0 1.5 1.5 1.5 17.8 8.2 14.0 72 5.8 1.8
Infosys Technologies 2,776 BUY 1,593,510 34,038 574 108.3 124.1 150.0 5.7 14.5 20.9 25.6 22.4 18.5 18.7 15.3 12.4 6.9 5.7 4.7 0.9 1.3 1.5 30.1 28.0 28.0 3,100 11.7 53.4
Mphasis BFL 627 REDUCE 132,134 2,822 211 43.6 50.3 45.6 207.5 15.5 (9.3) 14.4 12.5 13.7 11.6 9.9 9.4 5.6 4.0 3.2 0.6 0.6 0.7 48.1 37.5 25.8 550 (12.3) 7.4
Mindtree 503 REDUCE 20,716 442 41 52.2 32.6 51.6 294.3 (37.5) 58.1 9.6 15.4 9.8 8.3 8.8 5.7 3.1 2.6 2.1 0.4 0.6 1.0 35.2 19.2 23.7 550 9.3 0.9
Patni Computer Systems 460 REDUCE 61,252 1,308 133 36.6 41.3 37.5 36.4 12.8 (9.1) 12.6 11.1 12.3 6.2 5.4 4.4 1.7 1.6 1.4 1.5 1.8 1.6 18.2 15.1 12.4 450 (2.1) 14.0
Polaris Software Lab 168 SELL 16,725 357 100 15.4 19.1 18.8 16.9 24.3 (1.7) 10.9 8.8 8.9 5.3 6.9 5.9 1.9 1.6 1.4 2.1 2.2 2.3 18.6 20.1 17.2 180 7.3 4.4
TCS 858 BUY 1,680,060 35,887 1,957 35.1 42.1 48.2 32.8 19.8 14.5 24.4 20.4 17.8 18.5 14.9 12.3 8.0 6.6 5.5 2.3 2.0 2.2 37.6 35.6 33.9 965 12.4 28.8
Wipro 404 ADD 987,352 21,091 2,447 18.9 22.3 25.7 22.1 18.1 15.6 21.4 18.1 15.7 16.2 13.0 10.7 5.0 4.1 3.4 0.9 1.1 1.3 26.5 25.0 23.7 465 15.2 12.1
Technology Attractive 4,848,072 103,558 20.4 16.7 15.4 22.4 19.2 16.7 16.1 13.5 11.2 5.9 4.9 4.1 1.4 1.4 1.7 26.4 25.5 24.6
Telecom
Bharti Airtel 338 REDUCE 1,282,260 27,390 3,798 23.6 20.0 20.7 5.8 (15.6) 3.9 14.3 16.9 16.3 8.1 8.8 7.2 3.0 2.6 2.2 — — — 24.4 16.5 14.7 305 (9.7) 47.1
IDEA 72 REDUCE 237,916 5,082 3,300 2.7 2.2 1.5 (5.8) (19.7) (30.8) 26.4 32.9 47.5 8.9 9.7 8.3 2.1 2.0 1.9 — — — 7.2 6.2 4.2 55 (23.7) 11.0
MTNL 63 SELL 39,501 844 630 (15.6) (10.4) (9.1) (750.8) (33.7) (11.9) (4.0) (6.0) (6.9) (0.3) (0.4) (0.5) 0.4 0.4 0.4 — — — (8.5) (6.1) (5.7) 50 (20.3) 3.0
Reliance Communications 164 SELL 349,733 7,471 2,133 22.1 6.0 9.4 (30.2) (72.8) 56.1 7.4 27.3 17.5 6.9 9.5 7.9 0.9 0.9 0.8 0.5 — — 11.7 3.2 4.9 150 (8.5) 41.3
Tata Communications 350 REDUCE 99,636 2,128 285 14.0 15.2 15.7 3.2 8.2 3.5 25.0 23.1 22.3 10.1 9.3 8.9 1.4 1.4 1.3 1.9 2.1 2.4 5.2 5.5 5.5 225 (35.6) 3.1
Telecom Cautious 2,009,046 42,915 (15.9) (33.1) 9.5 14.2 21.2 19.3 8.2 9.2 7.6 1.8 1.7 1.5 0.2 0.1 0.1 12.8 7.9 8.0
Utilities
Adani Power 138 ADD 301,276 6,435 2,180 0.8 4.3 17.4 — 455.1 300.9 176.4 31.8 7.9 134.6 23.5 6.9 5.5 4.7 2.9 — — — 4.4 15.9 45.5 146 5.6 3.5
CESC 383 ADD 47,807 1,021 125 35.2 37.3 44.3 9.3 5.7 18.9 10.9 10.3 8.6 6.9 5.8 6.3 1.1 1.0 0.9 1.2 1.2 1.5 11.1 10.4 11.3 466 21.8 2.0
Lanco Infratech 68 BUY 162,578 3,473 2,405 2.0 3.7 5.0 35.1 87.6 34.9 34.4 18.3 13.6 20.3 8.6 8.1 4.7 3.8 3.0 — — — 15.8 21.2 22.7 77 13.9 7.0
NHPC 30 REDUCE 374,558 8,001 12,301 1.9 1.3 1.6 74.9 (27.5) 20.6 16.4 22.7 18.8 10.6 11.4 8.8 1.5 1.4 1.4 1.8 1.2 1.4 9.7 6.4 7.4 28 (8.0) 5.5
NTPC 198 REDUCE 1,628,891 34,794 8,245 10.8 12.5 14.7 9.6 16.2 17.4 18.4 15.8 13.5 14.0 12.3 10.3 2.6 2.3 2.1 2.0 2.4 2.8 14.5 15.4 16.6 210 6.3 7.6
Reliance Infrastructure 1,023 ADD 251,648 5,375 246 61.8 65.0 84.5 (1.5) 5.3 30.0 16.6 15.7 12.1 17.8 15.8 11.1 1.3 1.2 1.1 0.8 0.9 1.0 6.3 7.3 10.1 1,160 13.4 41.6

India Daily Summary - September 3, 2010

Reliance Power 155 SELL 372,096 7,948 2,397 2.9 3.1 5.3 179.7 9.8 70.0 54.4 49.6 29.1 (511.4) 226.4 35.4 2.6 2.4 2.3 — — — 4.8 5.1 8.1 135 (13.0) 19.2
Tata Power 1,239 ADD 305,828 6,533 247 60.2 69.2 88.5 20.1 15.0 27.8 20.6 17.9 14.0 13.3 12.0 10.3 2.3 2.1 1.9 1.0 1.1 1.2 12.9 12.5 14.3 1,420 14.6 9.6
Utilities REDUCE 3,444,681 73,581 23.5 15.6 37.5 21.8 18.9 13.7 17.2 14.4 10.6 2.3 2.1 1.9 1.3 1.4 1.7 10.6 11.3 13.9
Others
Havells India 801 SELL 48,183 1,029 60 5.3 31.6 45.0 3.7 497.9 42.6 151.6 25.4 17.8 20.0 12.4 10.2 13.3 8.7 5.9 0.3 0.3 0.3 6.6 41.6 39.7 497 (37.9) 10.6
Jaiprakash Associates 110 BUY 233,958 4,997 2,129 1.5 5.5 7.4 (27.2) 279.8 34.1 75.5 19.9 14.8 20.4 15.1 10.8 2.7 2.4 2.1 — — — 4.1 12.8 14.9 170 54.7 23.6
Jindal Saw 206 ADD 60,520 1,293 294 25.0 18.6 17.9 110.8 (25.4) (4.0) 8.2 11.0 11.5 5.4 6.1 5.9 1.6 1.3 1.2 0.5 0.4 0.4 20.5 12.9 11.1 256 24.4 3.2
PSL 125 BUY 6,707 143 53 22.9 25.4 28.2 3.3 10.6 11.0 5.5 4.9 4.5 3.1 2.6 2.8 0.7 0.7 0.6 5.2 5.2 5.6 12.6 11.7 12.0 182 45.1 0.6
Sintex 365 BUY 49,875 1,065 136 24.1 28.3 33.3 0.5 17.4 17.5 15.2 12.9 11.0 12.5 8.4 7.2 2.4 2.0 1.7 0.3 0.4 0.4 15.5 15.3 15.2 380 4.0 4.6
Tata Chemicals 396 REDUCE 96,440 2,060 243 26.4 33.2 37.5 (27.1) 25.8 12.7 15.0 11.9 10.6 7.6 6.5 5.5 2.0 1.8 1.6 2.2 2.3 2.3 16.0 18.7 18.3 360 (9.2) 4.6
Welspun Corp 239 ADD 49,128 1,049 205 32.0 27.0 25.6 85.2 (15.7) (5.4) 7.5 8.8 9.4 4.3 4.7 4.4 1.5 1.3 1.1 1.0 0.9 0.9 24.8 15.6 12.8 286 19.6 4.4
United Phosphorus 187 BUY 86,430 1,846 463 11.9 13.8 17.4 18.8 15.8 25.9 15.6 13.5 10.7 9.0 8.2 6.5 2.5 2.2 1.9 0.8 1.1 1.1 17.7 17.2 18.3 225 20.4 8.4
Others 631,241 13,484 16.3 32.3 17.6 18.8 14.2 12.1 11.0 9.8 8.1 2.3 2.0 1.7 0.7 0.7 0.7 12.4 14.0 14.3
KS universe (b) 46,143,048 985,647 15.3 21.4 20.4 19.5 16.1 13.4 11.5 9.7 8.0 2.9 2.5 2.2 1.2 1.3 1.6 14.9 15.7 16.5
KS universe (b) ex-Energy 37,101,807 792,520 9.1 23.4 19.6 21.1 17.1 14.3 13.9 11.4 9.4 3.2 2.8 2.4 1.1 1.2 1.4 15.3 16.2 16.8
KOTAK INSTITUTIONAL EQUITIES RESEARCH

KS universe (d) ex-Energy & ex-Commodities 33,028,673 705,515 16.3 19.7 21.3 21.9 18.3 15.1 15.6 12.9 10.6 3.4 2.9 2.6 1.2 1.2 1.4 15.5 16.1 17.0

Note:
(1) For banks we have used adjusted book values.
(2) 2010 means calendar year 2009, similarly for 2011 and 2012 for these particular companies.
(3) EV/Sales & EV/EBITDA for KS universe excludes Banking Sector.
(4) Rupee-US Dollar exchange rate (Rs/US$)= 46.82

Source: Company, Bloomberg, Kotak Institutional Equities estimates

 Disclosures

Kotak Institutional Equities Research coverage universe

Distribution of ratings/investment banking relationships
Percentage of companies covered by Kotak Institutional Equities,
70% within the specified category.

60%
Percentage of companies within each category for which Kotak
Institutional Equities and or its affiliates has provided investment
50%
banking services within the previous 12 months.

40% * The above categories are defined as follows: Buy = We expect

32.0% this stock to outperform the BSE Sensex by 10% over the next 12
29.3% months; Add = We expect this stock to outperform the BSE
30% 27.3%
Sensex by 0-10% over the next 12 months; Reduce = We expect
this stock to underperform the BSE Sensex by 0-10% over the
20%
next 12 months; Sell = We expect this stock to underperform the
11.3% BSE Sensex by more then 10% over the next 12 months. These
10% 5.3% ratings are used illustratively to comply with applicable
4.7%
2.7% regulations. As of 30/06/2010 Kotak Institutional Equities
0.0%
0% Investment Research had investment ratings on 150 equity
securities.
BUY ADD REDUCE SELL

Source: Kotak Institutional Equities As of June 30, 2010

Ratings and other definitions/identifiers

Definitions of ratings

BUY. We expect this stock to outperform the BSE Sensex by 10% over the next 12 months.

ADD. We expect this stock to outperform the BSE Sensex by 0-10% over the next 12 months.

REDUCE. We expect this stock to underperform the BSE Sensex by 0-10% over the next 12 months.

SELL. We expect this stock to underperform the BSE Sensex by more than 10% over the next 12 months.

Our target price are also on 12-month horizon basis.

Other definitions

Coverage view. The coverage view represents each analyst’s overall fundamental outlook on the Sector. The coverage view will consist of one of the following
designations: Attractive, Neutral, Cautious.

Other ratings/identifiers

NR = Not Rated. The investment rating and target price, if any, have been suspended temporarily. Such suspension is in compliance with applicable
regulation(s) and/or Kotak Securities policies in circumstances when Kotak Securities or its affiliates is acting in an advisory capacity in a merger or strategic
transaction involving this company and in certain other circumstances.

CS = Coverage Suspended. Kotak Securities has suspended coverage of this company.

NC = Not Covered. Kotak Securities does not cover this company.

RS = Rating Suspended. Kotak Securities Research has suspended the investment rating and price target, if any, for this stock, because there is not a sufficient
fundamental basis for determining an investment rating or target. The previous investment rating and price target, if any, are no longer in effect for this stock
and should not be relied upon.

NA = Not Available or Not Applicable. The information is not available for display or is not applicable.

NM = Not Meaningful. The information is not meaningful and is therefore excluded.

KOTAK INSTITUTIONAL EQUITIES RESEARCH 20

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not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only. We endeavor to update on a reasonable basis
the information discussed in this material, but regulatory, compliance, or other reasons may prevent us from doing so. We and our affiliates, officers, directors, and
employees, including persons involved in the preparation or issuance of this material, may from time to time have “long” or “short” positions in, act as principal in,
and buy or sell the securities or derivatives thereof of companies mentioned herein. For the purpose of calculating whether Kotak Securities Limited and its affiliates
holds beneficially owns or controls, including the right to vote for directors, 1% of more of the equity shares of the subject issuer of a research report, the holdings
does not include accounts managed by Kotak Mahindra Mutual Fund. Kotak Securities Limited and its non US affiliates may, to the extent permissible under
applicable laws, have acted on or used this research to the extent that it relates to non US issuers, prior to or immediately following its publication. Foreign currency
denominated securities are subject to fluctuations in exchange rates that could have an adverse effect on the value or price of or income derived from the
investment. In addition, investors in securities such as ADRs, the value of which are influenced by foreign currencies affectively assume currency risk. In addition
options involve risks and are not suitable for all investors. Please ensure that you have read and understood the current derivatives risk disclosure document before
entering into any derivative transactions.

This report has not been prepared by Kotak Mahindra Inc. (KMInc). However KMInc has reviewed the report and, in so far as it includes current or historical
information, it is believed to be reliable, although its accuracy and completeness cannot be guaranteed. Any reference to Kotak Securities Limited shall also be
deemed to mean and include Kotak Mahindra Inc.