CMP: INR254 TP: INR240(-6%) Neutral

Transcription

1 BSE SENSEX S&P CNX 28,095 8,636 Motilal Oswal values your support in the Asiamoney Brokers Poll 2016 for India Research, Sales and Trading team. We request your ballot. Bloomberg CBK IN Equity Shares (m) M.Cap.(INRb)/(USDb) / Week Range (INR) 360 / 156 1, 6, 12 Rel. Per (%) 14/23/-9 12M Avg Val (INR M) 821 Free float (%) 33.7 Financials & Valuations (INR b) Y/E Mar E 2018E NII OP NP NIM (%) EPS (INR) EPS Gr. (%) NM NM 37.1 BV/Sh. (INR) ABV/Sh. (INR) RoE (%) RoA (%) P/E (x) P/BV (x) P/ABV (x) July QFY17 Results Update Sector: Financials Canara Bank CMP: INR254 TP: INR240(-6%) Neutral Weak core operating performance continues; NSL increases 40bp QoQ Canara Bank (CBK) reported a 41% PAT miss, led by weak core PPoP growth (- 59% YoY) and elevated credit costs (1.8%), partly offset by high trading gains (186% of PBT). Gross slippages moderated to INR38.8b (4.8% of loans, annualized) vs. INR146b (17.7%) in 4QFY16. More importantly, net slippages decreased to 2.5% (annualized) v/s 16.8% a quarter ago. Management expects the strong trends in upgrades/recoveries (INR18.4b) to continue with a full-year target of INR80-100b. Overall GNPA increased 2% QoQ, and GNPA ratio stood at 9.7%. Net stressed loans increased 40bp QoQ to 10.9%. OSRL ratio increased to 4.2% (+14bp QoQ) and, excluding SEB/aviation, it now stands at 3.7% of loans. Relapse from restructured loans was INR860m. In 1QFY17, CBK refinanced INR2.9b under the 5:25 scheme (all standard accounts), and converted ~INR15b into equity under SDR (all standard restructured). Further, five accounts were referred under the S4A scheme amounting to INR23.7b. Cumulative stock under 5:25 refinancing, SDR and S4A now stands at 4.7% of loans (largely standard). Other highlights: (a) Loan growth remained muted (-1% YoY), (b) Opex grew 28% YoY albeit on a lower base and (c) CET 1 ratio stood at 8.21%. Valuation and view: Overall, we expect CBK s stress addition to remain elevated in FY17, and an improvement in the economic environment holds the key to its growth (infrastructure accounts for 17% of total loans). A large proportion of stressed loans (in various forms), moderate PCR ratio (33.5%) and weak capital position (CET1 at 8.2%) remain the key concerns. We cut earnings by ~18% for FY17-19E led by lower core income growth and higher credit costs. The stock s headline valuation appears attractive, although the gap between BV and ABV remains significant. Remain Neutral with a target price of INR240 (0.46x FY18 BV). Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com); Krishnan ASV (A.Krishnan@MotilalOswal.com); / Dhaval Gada (Dhaval.Gada@MotilalOswal.com); Investors are advised to refer through important disclosures made at the last page of the Research Report. Motilal Oswal research is available on Bloomberg, Thomson Reuters, Factset and S&P Capital.

2 Exhibit 1: Quarterly Performance: Actual v/s Estimates Y/E March 1QFY17A 1QFY17E Var. (%) Comments Net Interest Income 23,074 25,436-9 % Change (YoY) -8 1 Both NIMs and loan growth below expectation Other Income 15,847 12, Strong trading gains Net Income 38,921 37,610 3 Operating Expenses 20,732 19,199 8 Opex above expectation Operating Profit 18,189 18,411-1 % Change (YoY) -9-8 Other Provisions 14,929 13, Credit costs above expectation Profit before Tax 3,260 5, Tax Provisions 970 1, Net Profit 2,290 3, Weak core operations performance (-59% YoY) and higher % Change (YoY) credit costs lead to 41% miss, partly offset by high trading gains Other highlights CASA deposits grew 17% YoY (+4% QoQ) led by both CA and SA which saw 17% YoY growth. CASA ratio improved to 27.6% v/s 25.8% in 4QFY16 (23.2% in 4QFY16). Loans de-grew by 1% YoY led by de-growth in infrastructure (-18% YoY); overall retail loans grew by 34% YoY with housing loans growing at 51% YoY. Share of LAP remains low at 5% of overall housing loans. Reported NIMs declined 5bp QoQ to 2.12% led by 56bp sequential decline in yield on advances (9.15% v/s 9.71%) partly offset by lower cost of funds (5.86% v/s 6.31%). Core fee income grew 5% YoY v/s -7% YoY in 4QFY16. 1QFY17 conference call highlights Guidance GNPA ratio 8% by Mar-17, (b) NIM -5%, (c) Credit growth 10-12% with 7-8% corporate credit growth Asset Quality Related Upgradation / Recovery performance below management expectation; expect INR80-100b in FY17 Bank has recovered INR1b+ from four accounts during the quarter Recoveries / Upgradation to be greater than slippages Slippages in the current quarter from MSME, textile and steel sector LC devolvement was from large corporate steel sector Interest reversal during the quarter was INR220m Stock of SDR INR65b (9 accounts, all standard) most of them from restructured book Stock of 5:25 refinancing: INR 63b (all standard exposure) S4A: Five standard accounts amounting to INR23.67b 50% standard restructured Relapse from restructured loans INR860m Stock of SMA2 accounts stood at INR98b 25 July

3 Provisions include INR889m of excess provision write-back against Punjab Food Corp. SRs outstanding: INR19.47b against which bank holds INR7.71b provisions Other highlights Have made organizational structure changes; two tier sanctioning for large corporate and regional office (under circle office) for faster TAT for retail lending LAP book is very small (~5% of housing book) Maintain Neutral rating with target price of INR240 (0.46x FY18 BV) Valuation and view Over last six years, CBK s profitability has declined significantly led by compression in core revenues and higher provisioning costs. While we expect stress addition to decrease in FY17; it is likely to remain elevated. Improvement in economic environment remains the key. Sensitivity of earnings to risk-adjusted NIMs has increased significantly. With every (1) 10bp NIM expansion, earnings could see an upgrade of ~20%, and (2) 10bp decline in credit cost, earnings could see an upside of ~15%. RBI has allowed various tools apart from normal restructuring (5:25, SDR, S4A, sale to ARC-leading to security receipts etc.) to tackle the stress loans. Hence, actual overall stress loans have been significantly higher than reported NNPAs. Difference between reported BV and ABV (NNPA at 70%) is high at ~40%.Until the improvement in economic growth and resolution of key sectors problems (Infra and Iron and Steel) comes through markets would focus on adjusted P/BV. We have cut estimates by 13-23% for FY17/18/19E to factor in lower core income growth and high credit costs partly offset by higher than expected trading gains. We expect ROEs to remain around 5-7%. CET1 at 8.2% remains a key concern. Remain Neutral with a target price of INR240 (0.46x FY18 BV) based on RI model. We assume CoE of 15.7% (7.5% risk free rate, Beta of 1.4 and 6% market risk premium) and 5% growth. Exhibit 2: We cut earnings estimate by 13-23% for FY17-19E led by higher credit costs INR b Old Est Revised Est Change (%) FY17 FY18 FY19 FY17 FY18 FY19 FY17 FY18 FY19 Net Interest Income Other Income Total Income Operating Expenses Operating Profits Provisions PBT Tax PAT Margins (%) Credit Cost (%) RoA (%) RoE (%) Source: MOSL, Company 25 July

4 Exhibit 3: One year forward P/BV Exhibit 4: One year forward P/E PB (x) Peak(x) Avg(x) Min(x) 21 PE (x) Peak(x) Avg(x) Min(x) Negative Earnings Cycle 6.6 Jul-06 Oct-07 Jan-09 Apr-10 Jul-11 Oct-12 Jan-14 Apr-15 Jul-16 Jul-06 Oct-07 Jan-09 Apr-10 Jul-11 Oct-12 Jan-14 Apr-15 Jul-16 Exhibit 5: Improvement in margins or lower credit costs key to sharp rise in profitability (%) Y/E MARCH FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E FY19E Net Interest Income Fee income Fee to core Income (%) Core Income Operating Expenses Cost to Core Income Employee cost Other operating expenses Core operating Profits Trading and others Operating Profits Provisions NPA provisions Other Provisions PBT Tax Tax Rate RoA Leverage (x) RoE Company, MOSL 25 July

5 Story in charts Exhibit 6: Loan growth continues to remain muted (%) (1) 0 Loans (INR b) YoY gr. (%) (2) (1) Exhibit 7: Strong traction in CASA deposits (+17% YoY) CASA Ratio (calc,%) CASA YoY gr. (%) (1) (4) 2,150 2,179 2,176 2,325 2,256 2,158 2,182 2,422 2,499 2,811 2,877 3,011 3,030 3,109 3,123 3,300 3,241 3,231 3,319 3,247 3,213 1QFY12 1HFY12 9MFY12 FY12 1QFY13 1HFY13 9MFY13 FY13 1QFY14 1HFY14 9MFY14 FY14 1QFY15 1HFY15 9MFY15 FY15 1QFY16 1HFY16 9MFY16 FY16 1QFY Exhibit 8: Reported global NIMs (cumulative basis) remain stable Exhibit 9: Credit costs moderate yet remain elevated (%) 1QFY12 1HFY12 9MFY12 FY12 1QFY13 1HFY13 9MFY13 FY13 1QFY14 1HFY14 9MFY14 FY14 1QFY15 1HFY15 9MFY15 FY15 1QFY16 1HFY16 9MFY16 FY16 1QFY17 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 4QFY16 1QFY QFY12 1HFY12 9MFY12 FY12 1QFY13 1HFY13 9MFY13 FY13 1QFY14 1HFY14 9MFY14 FY14 1QFY15 1HFY15 9MFY15 FY15 1QFY16 1HFY16 9MFY16 FY16 1QFY Exhibit 10: Absolute GNPA up 2% QoQ; PCR (cal.) declined 70bp QoQ to 33.5% Gross NPA (%) Net NPA (%) Exhibit 11: NSL increased ~50bp QoQ to 10.9% (%) NNPA (%) OSRL (%) 1QFY12 1HFY12 9MFY12 FY12 1QFY13 1HFY13 9MFY13 FY13 1QFY14 1HFY14 9MFY14 FY14 1QFY15 1HFY15 9MFY15 FY15 1QFY16 1HFY16 9MFY16 FY16 1QFY QFY11 2QFY12 4QFY12 2QFY13 4QFY13 2QFY14 4QFY14 2QFY15 4QFY15 2QFY16 4QFY July

6 Exhibit 12: Quarterly Snapshot FY15 FY16 FY17 Variation (%) INR m 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q QoQ YoY Profit and Loss Net Interest Income 24,293 23,678 23,805 24,861 25,165 26,465 22,266 23,738 23, Other Income 10,269 10,213 11,762 13,258 11,130 12,105 11,686 13,832 15, Trading profits 909 1,440 3,010 5,090 1,980 2,950 1,610 3,360 6, Forex Income 2,630 2,060 2, ,020 1,650 2,090 1,930 2, Recoveries 1, ,100 1,610 1, Core Fees 5,550 5,813 5,312 6,758 6,030 5,895 6,576 7,582 6, Total Income 34,562 33,891 35,567 38,120 36,295 38,570 33,952 37,570 38, Operating Expenses 16,612 17,636 17,594 20,794 16,259 19,129 18,427 21,104 20, Employee 10,381 10,358 10,379 11,625 10,588 11,078 10,398 12,395 12, Others 6,231 7,278 7,215 9,169 5,672 8,050 8,030 8,709 8, Operating Profits 17,950 16,255 17,973 17,325 20,036 19,441 15,524 16,466 18, Provisions 7,881 8,137 8,413 10,096 13,597 12,123 14,289 63,315 14, NPA provisions 11,250 9,120 9,520 7,820 13,140 9,790 14,320 58,830 14, Provisions on Invst. -4, , , , NM -87 Others ,253 2, ,693-1,582 5, NM PBT 10,069 8,118 9,560 7,230 6,438 7,318 1,236-46,850 3,260 NM -49 Taxes 2,000 1,850 3,000 1,100 1,650 2, , NM -41 PAT 8,069 6,268 6,560 6,130 4,788 5, ,055 2,290 NM -52 Asset Quality GNPA 81,595 91, , , , , , , , NNPA 61,501 71,703 75,559 87,401 88,881 93, , , , GNPA (%) NNPA (%) PCR (Calculated, %) PCR (Reported, %) Slippages 25,950 31,780 22,920 28,050 25,190 22,010 54, ,020 38, Slippage Ratio (%) Credit Cost (%) Restructured loans* 209, , , , , , , , , % to Loans Ratios (%) Fees to Total Income Cost to Core Income Tax Rate CASA (cal) Loan/Deposit CAR Tier I Margins - Cumulative (%) Yield on loans Yield On Investments Cost of Deposits Margins -4-6 Balance sheet (INR b) Loans 3,030 3,109 3,123 3,300 3,241 3,231 3,319 3,247 3, Retail Loans Deposits 4,290 4,612 4,624 4,738 4,719 4,852 4,906 4,798 4, CASA Deposits 983 1,040 1,050 1,135 1,097 1,160 1,181 1,235 1, Savings Deposits ,037 1, Current Deposits July

7 Financials: Valuation metrics 66Rating CMP Mcap EPS (INR) P/E (x) BV (INR) P/BV (x) RoA (%) RoE (%) (INR) (USDb) FY17 FY18 FY17 FY18 FY17 FY18 FY17 FY18 FY17 FY18 FY17 FY18 ICICIBC* Buy HDFCB Buy 1, AXSB Buy KMB* Buy YES Buy 1, IIB Buy 1, IDFC Bk Buy FB Neutral DCBB Buy JKBK Neutral SIB Buy Private Aggregate SBIN (cons)* Buy PNB Neutral BOI Neutral BOB Buy CBK Neutral UNBK Buy OBC Neutral INBK UR ANDB Buy Public Aggregate Banks Aggregate HDFC* Buy 1, LICHF Buy IHFL Buy GRHF Buy REPCO Buy DEWH Buy Housing Finance RECL Neutral POWF Neutral Infra Finance SHTF Buy 1, MMFS Buy BAF Buy 8, ,631 1, MUTH Buy SKSM Buy Asset Finance NBFC Aggregate Financials *Multiples adj. for value of key ventures/investments; For ICICI Bank and HDFC Ltd BV is adjusted for investments in subsidiaries 25 July

8 Financials and Valuations Income Statement (INR Million) Y/E March E 2018E 2019E Interest Income 308, , , , ,221 4,34,530 4,72,070 5,22,076 Interest Expense 231, , , , ,588 3,36,179 3,61,353 3,96,620 Net Interest Income 76,893 78,790 89,442 96,637 97,634 98,352 1,10,717 1,25,456 Change (%) Non-Interest Income 29,276 31,530 39,328 45,503 48,752 58,670 66,107 74,376 Net Income 106, , , , ,386 1,57,021 1,76,824 1,99,832 Change (%) Operating Expenses 46,737 51,420 60,810 72,636 74,919 81,003 89,715 99,276 Pre Provision Profits 59,432 58,900 67,960 69,504 71,467 76,018 87,109 1,00,556 Change (%) Provisions (excl tax) 18,605 22,179 37,330 34, ,324 57,646 60,114 63,527 PBT 40,827 36,721 30,630 34,976-31,858 18,372 26,995 37,028 Tax 8,000 8,000 6,250 7,950-3,730 4,593 8,098 11,108 Tax Rate (%) PAT 32,827 28,721 24,380 27,026-28,128 13,779 18,896 25,920 Change (%) Pref. Dividend (Incl tax) Profits for Equity SH 32,827 28,721 24,380 27,026-28,128 13,779 18,896 25,920 Change (%) Equity Dividend (Incl tax) 5,673 6,740 5,936 6, ,889 4,403 6,039 Core PPP* 48,166 44,488 50,376 46,392 48,797 46,885 54,666 64,554 Change (%) *Core PPP is (NII+Fee income-opex) Balance Sheet (INR Million) Y/E March E 2018E 2019E Equity Share Capital 4,430 4,430 4,613 4,752 5,430 5,430 5,430 5,430 Reserves & Surplus 222, , , , ,602 3,21,880 3,36,761 3,57,030 Net Worth 226, , , , ,032 3,27,310 3,42,191 3,62,460 Deposits 3,270,537 3,558,560 4,207,228 4,738,401 4,797,916 52,29,728 58,57,295 66,77,317 Change (%) of which CASA Dep 796, ,613 1,032,794 1,135,322 1,235,422 13,58,964 15,17,678 17,25,355 Change (%) Borrowings 155, , , , ,733 2,76,961 2,91,511 3,07,516 Other Liabilities & Prov. 88, , , , ,927 1,68,145 1,92,767 2,21,351 Total Liabilities 3,741,602 4,123,426 4,919,219 5,480,006 5,529,608 60,02,143 66,83,764 75,68,643 Current Assets 281, , , , ,337 5,45,642 5,80,416 6,60,913 Investments 1,020,574 1,211,328 1,268,283 1,420,614 1,423,093 15,65,402 17,53,251 19,63,641 Change (%) Loans 2,324,898 2,421,766 3,010,675 3,300,355 3,247,148 35,71,863 40,00,487 45,60,555 Change (%) Fixed Assets 28,575 28,627 66,416 69,494 71,981 72,781 73,582 74,382 Other Assets 85, , , , ,049 2,46,455 2,76,029 3,09,153 Total Assets 3,741,602 4,123,426 4,919,219 5,480,006 5,529,608 60,02,143 66,83,764 75,68,643 Asset Quality (%) GNPA (INR M) 40,318 62,602 75, , ,380 3,20,685 3,15,147 3,01,372 NNPA (INR M) 33,862 52,780 59,654 87, ,928 1,90,386 1,64,948 1,28,387 GNPA Ratio NNPA Ratio PCR (Excl Tech. write off) PCR (Incl Tech. Write off) E: MOSL Estimates 25 July

9 Financials and Valuations Y/E March E 2018E 2019E 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 Asset-Liability Profile (%) Loans/Deposit Ratio CASA Ratio Investment/Deposit Ratio G-Sec/Investment Ratio CAR Tier Valuation 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 25 July

10 Corporate profile Company description Set up in 1906, Canara Bank (CBK) it one of the oldest banks in the India. The government nationalized the bank in Over the years bank has made several acquisitions, major one being Lakshmi Commercial Bank which gave significant presence in northern India. As of June 2016, the bank had a network of 5,855 branches and 9,657 ATMs spread across India. The bank also has several overseas branches and subsidiaries / joint ventures (Can Fin Homes Limited, Canara Robeco AMC, Canara HSBC Oriental Life Insurance Company amongst others). Exhibit 1: Sensex rebased Source: MOSL/Bloomberg Exhibit 2: Shareholding pattern (%) Jun-16 Mar-16 Jun-15 Promoter DII FII Others Note: FII Includes depository receipts Source: Capitaline Exhibit 3: Top holders Holder Name % Holding Lic Of India and their Schemes 13.8 Hdfc Trustee Company Limited 2.9 Source: Capitaline Exhibit 4: Top management Name Thothala Narayanasamy Manoharan Rakesh Sharma Dina Bandhu Mohapatra Harideesh Kumar B Pradyuman Singh Rawat B Nagesh Babu Designation Chairman (Non-Executive) Managing Director & CEO Executive Director Executive Director Executive Director Company Secretary Exhibit 5: Directors Name G V Manimaran Sairam Mocherla Rajinder Kumar Goel Uma Shankar Name Sanjay Jain Sunil Hukumchand Kocheta Pankaj Jain Source: Capitaline *Independent Exhibit 6: Auditors Name J L Sengupta & Co J Singh & Associates Ram Raj & Co S C Vasudeva & Co V K Niranjan & Co Type Statutory Statutory Statutory Statutory Statutory Source: Capitaline Exhibit 7: MOSL forecast v/s consensus EPS MOSL Consensus (INR) forecast forecast Variation (%) FY FY Source: Bloomberg 25 July

11 N O T E S 25 July

12 Disclosures Canara Bank 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 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 twin parameters of performance & profitability of MOSt. 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, SEBI Reg. No. INH Pending Regulatory inspections against Motilal Oswal Securities Limited: SEBI pursuant to a complaint from client Shri C.R. Mohanraj alleging unauthorized trading, issued a letter dated 29th April 2014 to MOSL notifying appointment of an Adjudicating Officer as per SEBI regulations to hold inquiry and adjudge violation of SEBI Regulations; MOSL replied to the Show Cause Notice whereby SEBI granted us an opportunity of Inspection of Documents. Since all the documents requested by us were not covered we have requested to SEBI vide our letter dated June 23, 2015 to provide pending list of documents for inspection. List of associate companies of Motilal Oswal Securities Limited -Click here to access detailed report 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 CANARA BANAK Analyst ownership of the stock No Served as an officer, director or employee No A graph of daily closing prices of securities is available at and Regional Disclosures (outside India) 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. For Hong Kong: This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) SFO. As per SEBI (Research Analyst Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH ) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of research report in Kong Kong. This report is intended for distribution only to Professional Investors as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only available to professional investor and will be engaged only with professional investors. Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in Hong Kong. For U.S Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by MOSL, including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement. The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account. For Singapore 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: Varun Kumar Kadambari Balachandran Varun.kumar@motilaloswal.com kadambari.balachandran@motilaloswal.com Contact : (+65) (+65) / Office Address:21 (Suite 31),16 Collyer Quay,Singapore Motilal Oswal Securities Ltd Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai Phone: reports@motilaloswal.com 25 July