Kotak Mahindra Bank. CMP: INR689 TP: INR685 (-1%) Neutral

Transcription

1 BSE SENSEX S&P CNX 26,657 8,066 Bloomberg KMB IN Equity Shares (m) M.Cap. (INR b) / (USD b) 1,257.2/ Week Range (INR) 744 / 532 1, 6, 12 Rel. Per (%) 2/5/28 Avg Val(INR m)/vol Free float (%) 66.2 Financials & Valuation (INR b) Y/E Mar 2016E 2017E 2018E NII OP NP Cons. NP NIM (%) Cons. EPS (INR) EPS Gr. (%) Cons. BV. (INR) Cons. RoE (%) RoA (%) Valuations P/E(X) (Cons.) P/BV (X) (C ) Div. Yield (%) * Proforma merged (KMB+EIVBL ) 31 October QFY16 Results Update Sector: Financials Kotak Mahindra Bank CMP: INR689 TP: INR685 (-1%) Neutral Strong beat on lending biz; improving performance at subsidiaries KMB s consolidated adj. PAT (for one off integration cost) grew by ~5% QoQ to INR10.9b led by strong loan growth (+8% QoQ), improved margins (+12bp QoQ) and strong control over costs. Integration with ING Vyasa Bank Limited (eivbl) is well on track with the traction seen in SB deposits growth, favorable response to new product launches in eivbl branches and no fresh negative surprise on asset quality. During 2QFY16, there was INR620m one-off fee income reversal on account of a credit event; adj. Non interest income growth was healthy at 14% QoQ. Banking business: Due to merger, previous period numbers are not comparable for the bank. On pro-forma merged basis, 2QFY16 PAT declined 3% YoY (see exhibit 1). While, loans/deposits increased 13%/12 YoY. CASA ratio improved 560bp YoY to 36.2%. NSL increased to 1.5% v/s 1.3%. PCR remains largely stable. Strong loan growth across segments: Personal loans and credit cards (10% QoQ, now at 180+ eivbl branches), auto loan (9% QoQ, 300+ eivbl branches) and agri loans (12% QoQ) were the key drivers of the growth. Management sounded more confident of ~20% YoY growth v/s earlier guidance of 15-20% for FY16. NIM improved QoQ (12bp) led by robust CASA growth (11% QoQ, 32% YoY v/s 27% YoY in 1Q on proforma basis) and fall in cost of funds. Other highlights: (1) ING related one off cost in the quarter were INR2.8b (INR7.4b in 1Q) a) integration cost of INR120m (INR630m) b) additional interest on savings deposits of INR300m (INR300m) c) Provision cost of INR2.4b (INR3.05b) and d) HR related cost NIL (INR3.39b). (2) Absolute GNPA for the merged bank increased 10% QoQ; GNPA ratio stood at 2.35% (+4bp QoQ) and OSRL remained stable QoQ (0.4%). Valuation and view: Merger with eivbl places KMB in a sweet spot, with strong presence across geographies and products, and continued healthy capitalization (T1 of ~15%). The merged entity is India s fourth-largest private sector bank, with a loan book of INR1.3t and loan market share of 1.8%+. KMB s premium multiples are likely to sustain, considering the strong growth and operating leverage available across businesses. While we are positive on the business, at 3.3x consolidated BV and 26.4x EPS, upside is limited. Reiterate Neutral; our SOTP-based TP is INR685. Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com); Dhaval Gada (Dhaval.Gada@MotilalOswal.com); Investors are advised to refer through disclosures made at the end of the Research Report. Motilal Oswal research is available on Bloomberg, Thomson Reuters, Factset and S&P Capital.

2 Exhibit 1: Proforma Quarterly Performance 2QFY16 1QFY16 QoQ (%) 2QFY15 Growth YoY (%) (INR m) Kotak+ING Kotak+ING Reported Kotak ING Kotak+ING Proforma Reported Interest earned 40,057 39, ,525 13,997 37, Interest expenses 23,269 23, ,136 9,366 22, Net interest income 16,787 15, ,389 4,631 15, Non-Interest income 6,157 5, ,665 2,276 6, Fees and Services 4,570 4, ,210 1,959 5, Treasury Income 910 1, , Others Total Income 22,945 21, ,054 6,907 21, Operating expenses 12,497 15, ,717 3,767 11, Employee cost 6,230 9, ,545 2,233 5, Others 6,267 6, ,172 1,534 5, Pre-provision profits 10,448 5, ,336 3,140 10, Provisions 1,764 3, ,008 1, NA PBT 8,684 2, ,800 2,132 8, Taxes 2,989 1, , , Profit After Tax 5,695 1, ,445 1,434 5, Asset quality GNPA 26,554 24, ,654 9,287 20, NNPA 11,676 10, ,115 3,316 9, Gross NPA % Net NPA % Provisions Coverage (%) Restructured loans 4,030 4, ,615 5,200 6, % of loans Balance Sheet (INR b) Current deposits Savings deposits CASA deposits CASA ratio (%) Deposits 1,232 1, , Borrowings Investments Advances 1,117 1, Branches 1,269 1, , ATM 1,934 1, , , October

3 Exhibit 2: Quarterly performance v/s our estimates and reasons for deviation (INR m) Kotak Bank (standalone) 2QFY16A 2QFY16E v/s Est. Comments Net Interest Income 16,787 16,450 2 Loan growth better than expectation % Change (Q-o-Q) Operating Profit 10,448 9,908 5 Despite one off income reversals of INR620m, strong cost control led to PPP beat % Change (Q-o-Q) Net Profit 5,695 5, Lower than expected provisions and better operating % Change (Q-o-Q) performance led to the beat Other Businesses Kotak Prime 1,270 1,225 4 Kotak Mah. Investments Kotak Mah. Capital Co Kotak Securities International subs Kotak Mah. AMC & Trustee Co Kotak Investment Advisors NM Kotak OM Life Insurance Con.adj and MI Consol. PAT 9,435 8, Better than expected performance all-around % Change (Q-o-Q) K-Sec market share decreased 20bp to 2.7% in 1QFY16 Healthy growth in most non-lending businesses Asset management business reported PAT of INR230m vs. loss of INR10m in 2QFY15 (INR200m in 1QFY16). PAT of international subsidiaries improved to INR320m (+146% YoY and +28% QoQ) led by strong AUM growth (+10% QoQ and +93% YoY) Capital market related business PAT was at INR8.5b (16% beat) driven by improved profitability in the securities division. K-sec net profit was +16% QoQ at INR780m (+18% YoY) and its market share remained stable QoQ at 2.7%. Overall AUM increased 2% QoQ to INR960b. Within which domestic AUM increased 49% YoY (-2% QoQ). Equity AUMs +128% YoY, 2% QoQ basis. Life insurance profit decreased 8% YoY and -27% QoQ to INR4.8b. 31 October

4 Exhibit 3: KMPL: Loan growth remains muted (+6.3% YoY) led by 13% YoY de-growth in non-auto portfolio Auto Loans (INR b) Other Loans (INR b) Exhibit 4: Offshore funds now accounts for 25% of overall AUMs Debt Equity PMS Offshore Funds Alternate assets Insurance QFY12 1HFY12 9MFY12 FY12 1QFY13 1HFY13 9MFY13 FY13 1QFY14 1HFY14 9MFY14 FY14 1QFY15 1HFY15 9MFY15 FY15 1QFY16 1HFY16 1QFY14 1HFY14 9MFY14 FY14 1QFY15 1HFY15 9MFY15 FY15 1QFY16 1HFY16 Exhibit 5: K-Sec : QoQ profitability improves (INR b) Tot. Inc. PAT PATM (%) Exhibit 6: K-Sec market share remains stable QoQ (%) QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 Exhibit 7: Investment Banking: Earnings trend (INR m) QFY QFY12 3QFY12 Tot. Inc. PAT QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY QFY QFY QFY16 2QFY16 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 Exhibit 8: Kotak AMC: Strong improvement in offshre AUMs Eq. AUM PMS AUM Offshore AUM QFY12 1HFY12 9MFY12 FY12 1QFY13 1HFY13 9MFY13 FY13 1QFY14 1HFY14 9MFY14 FY14 1QFY15 1HFY15 9MFY15 FY15 1QFY16 1HFY16 31 October

5 2QFY16 Conference call highlights Integration updates Optimal branch productivity benchmarking for eivbl branches will start once the entire integration process is over. Significant low hanging fruits available to improve productivity in the near term Savings deposit growth on eivbl network is 23% YoY vs % a quarter ago and 10-12% before integration. On a QoQ basis, it grew ~7% YoY Underlying transaction banking fee growth on a combined basis is 15-20% YoY Identified 75 overlapping branches between eivbl and KMB. Has already run the pilot project on 4 branches (2 each in Mumbai and Chennai) for relocation which has been successful For any product to be rolled out on eivbl depends upon the comfort level of product manager. eivbl was already doing Home Loan, Personal loan and LAP thus those KMB products introduced first in those branches. Missing link of eivbl portfolio Auto and Credit Cards have also been introduced now Of the branch network of eivbl a) 312 branches started selling Auto loans b) 183 branches of eivbl started selling credit cards All branches of eivbl have now started selling Kotak life insurance About 6500 employees of eivbl are being trained on various technologies Loan growth related Healthy pick up is happening on the consumer side. CV growth is showing strong signs of revival with MHCV growing at a healthy rate. CV loans disbursement grew 80% YoY in 1H largely from MHCV segment Loan growth for the merge entity is expected to be 15-20% (near to 20%) led by consumption related loans followed by working capital requirement of corporate Retail and SME business is showing strong traction and wholesale banking is expected to improve in 2H Seeing LAP as stable growing business without any compromise on credit standards. Portfolio credit quality remains stable In the agri business focus is mainly on a) Crop (dedicated agri focused branches), b) tractor financing (soft market and it is down 20% YoY, KMB has 8% MS) and c) other agri. Home loan and LAP mix is 50:50 largely similar that of pre-merger KMB Others Strong improvement in domestic financial savings is helping to drive growth across businesses eivbl s SME loans were 75% is non-manufacturing trading loans (20-25bp credit cost, 1% GNPA) and largely focused on working capital loans Plans to reach 1400 branches by March 2017 INR620m derivative transaction related income reversal is where client has not paid on 90dpd basis CASA+deposit less than INR50m is 72% of overall deposits 0.8lacs customer accounts added during the quarter Have rationalized some exposure of ING as combined exposure was large 31 October

6 Excess capitalisation is leading to (tier-i ratio of ~15%) relatively lower RoE of ~13% over FY16/18 Our SOTP-based target price is INR685 (3.3x FY17 consol. BV) Valuation and view Merger with eivbl places KMB in a sweet spot with strong presence across geographies, products and healthy capitalization (T1 of ~15%). The merged entity is the fourth largest private sector bank with a loan book of ~INR1.3t and market share of 1.8%+ of loans. Further, KMB s conglomerate structure places it in a very sweet position to ride the up-cycle across financial services. Improvement in macro-economic environment coupled with healthy capitalisation leaves KMB in a strong position to lever on growth opportunities in the economy. To leverage on its geographical expansion, the management is focusing on product penetration, with higher emphasis on Agriculture (will help in priority sector loans), small business loans (untapped opportunity; creating niche for itself) and mortgage loan. CV loans are bottoming out and likely to show traction in ensuing quarters. We upgrade estimates by 3-6% to factor in better loan CAGR (incl. eivbl ) of ~22% over FY15/18. PAT CAGR is expected to be ~18%. Post-merger with eivbl, share of lending business in steady state profitability is likely to increase to ~83% vs. 81%. Improvement in capital market related business profitability is encouraging. Capital light nature of these businesses can provide upside to ROE if there is a strong improvement in business cycle. Our SOTP is INR685 (based on pro-forma merger with eivbl ) 3.3xFY17E cons. BV. Backed by higher capitalization, diversified business loan book, strong risk management and presence across financial services KMB historically traded at a premium multiples to peers despite relatively lower ROE. While we are positive on the business, valuations at 3.3x/26.4x Cons BV/EPS (pro-forma merged basis) limits the upside. Maintain Neutral. Exhibit 9: Kotak Mahindra: SOTP Valuation (FY17-based) Value (INR B) Value (USD B) INR per share % To Total Rationale Lending Business 1, Kotak Mahindra Bank x FY17E Core NW, ~1.5% RoA and ~14% Core RoE Kotak Prime (Car and other loans) x FY17E Net Worth, ~15% Core RoE Kotak Investment Company (LAS) x FY17E Net Worth Asset Management Business Domestic Mutual Fund % of FY17E Avg. AUM of INR775b Alternative Assets % of FY17E AUM of INR68b Offshore Funds % of FY17E AUM of INR315b Capital Markets related Business Kotak Securities x FY17E Earnings; Implied 2.1.x Core BV Kotak Investment Banking (KMCC) x FY17E Free Networth Kotak Life Insurance x FY17E NBAP, APE CAGR of ~15% in FY15-18 Target Value 1, Implied 3.3x PBV; ROE of ~13% Current market cap. 1, Upside (%) October

7 Exhibit 10: We increase our earnings estimates by 3-6% led by improved loan growth in standalone entity INR b Old Est. Revised Est. Change (%) FY16 FY17 FY18 FY16 FY17 FY18 FY16 FY17 FY18 Net Interest Income Other Income Total Income Operating Expenses Operating Profits Provisions PBT Tax Standalone PAT Consolidated PAT Loans 1,241 1,514 1,877 1,284 1,566 1, Deposits 1,439 1,741 2,141 1,439 1,726 2, Margins (%) SA RoA (%) Core RoE (%) Exhibit 11: Lending and AMC business driving estimates higher INR b Old Est. Revised Est. Change (%) FY16 FY17 FY18 FY16 FY17 FY18 FY16 FY17 FY18 Kotak Mahindra Bank (Standalone) Kotak Mahindra Prime Kotak Mahindra Investments Lending Business International subsidiaries Kotak Mahindra AMC & Trustee Co Kotak Investment Advisors Asset Management Business Kotak Securities Kotak Mahindra Capital Company Capital Market Business Consol. PAT excluding Kotak Life Kotak OM Life Insurance Consolidation Adjust Consol. PAT Including Kotak Life October

8 Exhibit 12: KMB Group: Earnings Estimates (INR m) FY11 FY12 FY13 FY14 FY15E FY16E FY17E FY18E Kotak Mahindra Bank (Standalone) * 11,367 15,414 19,737 21,603 24,250 20,583 30,234 39,967 Kotak Mahindra Prime 3,179 3,849 4,307 4,907 5,077 5,114 5,817 6,650 Kotak Mahindra Investments ,060 1,460 2,025 2,586 Lending Business 14,786 19,415 24,380 26,930 30,387 27,158 38,076 49,203 International subsidiaries ,500 1,700 1,900 Kotak Mahindra AMC & Trustee Co ,185 1,422 Kotak Investment Advisors Asset Management Business 1, ,445 2,935 3,422 Kotak Securities 1,819 1,258 1,145 1,603 2,900 3,100 3,852 4,622 Kotak Mahindra Capital Company Capital Market Business 2,338 1,318 1,312 1,743 3,030 3,366 4,140 4,954 Consol. PAT excluding Kotak Life 18,133 21,137 26,093 29,333 33,897 32,969 45,152 57,579 YoY Growth (%) Kotak OM Life Insurance 1,014 2,030 1,900 2,390 2,280 2,280 2,508 2,759 Consolidation Adjust Consol. PAT Including Kotak Life 18,853 22,885 28,014 31,228 36,571 35,099 47,535 60,213 YoY Growth (%) *Including ING Vysya Bank Exhibit 13: Kotak Group Earnings Snapshot (% of total) FY11 FY12 FY13 FY14 FY15E FY16E FY17E FY18E Kotak Mahindra Bank (Standalone) * Kotak Mahindra Prime Kotak Mahindra Investments Lending Business International subsidiaries Kotak Mahindra AMC & Trustee Co Kotak Investment Advisors Asset Management Business Kotak Securities Kotak Mahindra Capital Company Capital Market Business Consol. PAT excluding Kotak Life Kotak OM Life Insurance Consol. PAT Including Kotak Life *Including ING Vysya Bank 31 October

9 Exhibit 14: Financials: Valuation metrics 66 Rating CMP Mcap EPS (INR) P/E (x) BV (INR) P/BV (x) RoA (%) RoE (%) (INR) (USDb) FY16 FY17 FY16 FY17 FY16 FY17 FY16 FY17 FY16 FY17 FY16 FY17 ICICIBC* Buy HDFCB Buy 1, AXSB Buy KMB* Neutral YES Buy IIB Buy DCBB Sell FB Neutral JKBK Neutral SIB Buy Private Aggregate SBIN (cons)* Buy PNB Buy BOI Neutral BOB Buy CBK Buy UNBK Buy OBC Buy INBK Buy CRPBK Neutral ANDB Buy IDBI Neutral DBNK Neutral Public Aggregate HDFC* Under Review 1, LICHF Buy DEWH Buy IHFL Buy GRHF Buy REPCO Buy IDFC Buy RECL Buy POWF Buy SHTF Buy MMFS Buy BAF Buy 5, ,351 1, MUTH Buy NBFC Aggregate October

10 Financials and valuations (KMB+EIVBL - Proforma-merged) Income Statement (INR Million) Y/E March E 2017E 2018E Interest Income 100, , , , , , ,110 Interest Expense 63,162 81,598 84,991 94,007 96, , ,877 Net Interest Income 37,208 47,443 54,731 61,455 68,834 78,784 96,233 Change (%) Non-Interest Income 16,471 18,875 22,668 27,853 27,536 34,842 42,990 Net Income 53,679 66,318 77,399 89,307 96, , ,223 Change (%) Operating Expenses 29,450 34,825 40,353 48,236 55,176 59,713 70,186 Pre Provision Profits 24,229 31,493 37,046 41,071 41,194 53,913 69,037 Change (%) Provisions (excl tax) 1,688 2,758 4,545 4,399 9,769 7,754 8,019 PBT 22,541 28,735 32,501 36,673 31,425 46,159 61,018 Tax 7,127 8,998 10,898 12,423 10,842 15,925 21,051 Tax Rate (%) PAT 15,414 19,737 21,603 24,250 20,583 30,234 39,967 Change (%) Consolidated PAT (incl EIVBL ) 22,885 28,014 31,228 36,571 35,099 47,535 60,213 Change (%) Balance Sheet (INR Million) Y/E March E 2017E 2018E Net Worth 123, , , , , , ,330 Deposits 737, ,628 1,002,891 1,240,148 1,438,571 1,726,285 2,106,068 Change (%) of which CASA Dep 244, , , , , , ,279 Change (%) Borrowings 222, , , , , , ,618 Other Liabilities & Prov. 46,828 51,542 57,905 67,119 79,200 93, ,147 Total Liabilities 1,126,673 1,385,301 1,479,986 1,732,672 1,980,306 2,352,125 2,829,163 Current Assets 58,651 65, ,060 96, , , ,453 Investments 342, , , , , , ,998 Change (%) Loans 678, , ,565 1,069,718 1,283,661 1,566,066 1,941,922 Change (%) Fixed Assets 9,508 9,640 16,315 16,204 16,452 16,700 16,948 Other Assets 37,532 36,508 34,994 36, , , ,840 Total Assets 1,126,673 1,385,301 1,479,986 1,732,672 1,980,306 2,352,125 2,829,163 Asset Quality (%) GNPA (INR m) 11,771 13,283 17,037 22,884 31,338 31,639 34,644 NNPA (INR m) 2,899 3,205 6,756 10,722 13,319 12,656 13,858 GNPA Ratio NNPA Ratio PCR (Excl Tech. write off) E: MOSL Estimates 31 October

11 Financials and valuations (KMB+EIVBL - Proforma-merged) Ratios Y/E March E 2017E 2018E 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 Consolidated ROE Other Ratios (%) Int. Expense/Int.Income Non Int. Inc./Net Income Cost/Income Empl. Cost/Op. Exps Loans/Deposit Ratio CASA Ratio Investment/Deposit Ratio Valuation Standalone Book Value (INR) Change (%) Consolidated BV (INR) Change (%) Price-BV (x) Consolidated EPS (INR) Change (%) Price-Earnings (x) Dividend Per Share (INR) Dividend Yield (%) E: MOSL Estimates 31 October

12 Corporate profile: Kotak Mahindra Bank Company description Kotak Mahindra Bank (KMB) is part of the larger Kotak Mahindra Group led by Mr. Uday Kotak, Founder and Managing Director of the Bank. The group has a strong presence across financial services value chain. Notably, KMB is the only bank in India s corporate history to be converted into a bank from a non-banking finance company. The bank has pan-india presence with 1269 branches and 1,934 ATMs as on September 30, Recently, KMB merged with EIVBL in an all-stock deal. Exhibit 15: Sensex rebased Exhibit 16: Shareholding pattern (%) Jun-15 Mar-15 Jun-14 Promoter DII FII Others Note: FII Includes depository receipts Exhibit 18: Top management Name Designation Uday Kotak Executive Vice Chairman & MD C Jayaram Joint Managing Director Dipak Gupta Joint Managing Director Jaimin Bhatt CFO Shanti Ekambaram CPresident Corporate and IB Exhibit 17: Top holders Holder Name % Holding ING Mauritius Investments I 6.4 Europacific Growth Fund 4.8 Canada Pension Plan Investment Board - Managed 3.9 Sumitomo Mitsui Banking Corporation 3.6 National Westminster Bank Plc As Depositary Of First 2.0 Exhibit 19: Directors Name Shankar Acharya* C Jayaram Dipak Gupta Asim Ghosh* Amit Desai* Name Prakash Apte* N P Sarda Uday Kotak S Mahendra Dev* Farida Khambata *Independent Exhibit 20: Auditors Name S B Billimoria & Co Type Statutory Exhibit 21: MOSL forecast v/s consensus EPS (INR) MOSL forecast Consensus forecast Variation (%) FY FY FY October

13 N O T E S 31 October

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