Chartbook Economic Survey 2018

Transcription

1 Chartbook Economic Survey 208 January 208 Ashutosh Datar (9 22) Amit Tiwari (9 22) January 208

2 Economic Survey 208 Key takeaways The Economic Survey is a much awaited document every year. Released just before the union budget, a part of the document reviews the performance of the economy and thus offers hindsight perspective. However, another part looks at key issues facing the economy and possible policy measures to take the economy ahead. Although this year s Economic Survey is no different in that sense, it offers a fresh perspective on many issues. Three chapters in particular are noteworthy in our view: o o o The chapter titled Investment and Saving Slowdowns and Recoveries: Cross-Country Insights for India highlights the urgency to resolve the NPA problem in India. Countries that have faced balance-sheet-driven investment slowdowns tend to have very gradual recovery. What is especially disconcerting is the absence of automatic mean reversion, implying that the deeper the downdraft, the shallower the recovery. The chapter titled Ease of Doing Business Next Frontier: Timely Justice draws attention to a subject often talked about, but ignored, from a policy perspective of improving the business environment. Some statistics that stuck with us: there are currently million writ petitions pending at the six High Courts, which alone constitute over half of the backlog. A lot of this increase is due to the gradual widening of their ambit by the courts. Further, the Government of India itself is a major litigant with very poor success rate. The chapter titled Industry and Infrastructure : Even as the government talks about implementing its ambitious Housing for All policy, we have a curious problem of vacant houses. At an all-india level, in 8 houses in urban areas are vacant with some cities having as much as 20% vacant houses! What s cooking? We bring 36 charts/tables/excerpts from the Economic Survey, which we believe make substantive points regarding the Indian economy and have medium-term policy implications. All charts/tables are sourced from Economic Survey 208 ( January 208 2

3 GST Insights into the economy January 208 3

4 Increase in income tax base New Tax Filers (mn).8m additional income tax return filers (~3% of existing base) in the 3 months since demonetisation. However, most of them have returned income of close to the threshold of ~Rs2.5m so no material tax revenue gain from them. Yet. Source : Department of Revenue (CBDT), Survey calculations, Economic Survey A rigorous assessment of the impact of demonetization, however, must account for the pre-existing trend growth in new tax filers. To address this, a regression analysis is undertaken. Taking seasonality into account it is found that there is a 0.8% monthly trend increase in new tax filers (annual growth of ~0%). The level of tax filers by November 207 was 3% greater than what this trend would suggest, a statistically significant difference. This translates roughly into about.8 million additional tax payers due to demonetization-cum-gst, representing 3% of existing taxpayers. Further analysis suggests that new filers reported an average income, in many cases, close to the income tax threshold of Rs. 2.5 lakhs, limiting the early revenue impact. As income growth over time pushes many of the new tax filers over the threshold, the revenue dividends should increase robustly. January 208 4

5 GST has resulted in a 50% increase in indirect tax base Number of Indirect Tax Registrants, Pre- and Post-GST (mn) GST Registrants Where GST Registrants Came From Type of GST Registration Total New Old Excise Services VAT New Composition Regular Source : Survey calculations based on GST data, Economic Survey Note: A company can have multiple registrations if the company operates across the states Estimated Turnover and its Type of the New Filers Under GST B2B B2C Exports Nil Total Share of turnover under different categories 34.0% 6.8% 29.8% 9.4% 00.0% Source : Survey calculations based on GST data, Economic Survey Note: NIL category includes supplies that are outside the scope of the GST such as petroleum, health, education, and electricity. Almost 2/3rds of the new registrants are in B2B or Export category January 208 5

6 Share of states in GST has corresponded to state GDP Share in GST Base and GSDP Share in GST Base and Manufacturing GSDP Source : Survey calculations based on GST data and CSO. Source Survey calculations based on GST data and CSO. January 208 6

7 B2B transactions dominate GST turnover so far Monthly Turnover Distribution by Transaction Type and Turnover Group Source : Survey calculations based on GST data B2B B2C Exports Nil Total Share of Filed Returns Share in Tax Liability Below-Threshold 0.2% 0.2% 0.0% 0.0% 0.4% 32.2% 0.9% Composition.2%.% 0.0% 0.% 2.4% 36.0% 4.4% SME 3.8% 2.3% 0.% 0.5% 6.8% 22.0% 0.5% Medium 5.5% 4.3%.5% 2.8% 24.% 9.2% 29.8% Large 36.5% 4.9% 7.7% 7.% 66.2% 0.6% 54.4% Total 57.3% 2.8% 9.4% 20.5% 00.0% 00.0% 00.0% January 208 7

8 Twin Balance-sheet Problem tracking Insolvency code January 208 8

9 The urgency to solve the balance-sheet problem What tends to happen to investment rates in the aftermath of balance sheet episodes? Allen et. al. (2002), Chamon et. al. (200), Rosenberg et. al. (2005), and Chen et. al. (205) discuss episodes of crises and balance sheet effects in emerging economies. Some of these episodes () are also captured as investment slowdown episodes in the sample.20 The aftermath of these are then contrasted to episodes of slowdowns that are not primarily related to balance sheet difficulties (Figure below). Since India is now years past its investment peak, investment rates are measured as deviations from peak levels for years, 4, and 7 after the peak dates. Extent of Investment Recovery after Slowdowns (percentage point fall from peak level, number of years after peak)# Investment declines flowing from balance sheet problems are much more difficult to reverse. In these cases, investment remains highly depressed, even 7 years after the peak, whereas in case of non-balance-sheet slowdowns the shortfall is smaller and tends to reverse. India s investment decline so far (8.5 percentage points) has been unusually large when compared to other balance sheet cases. Note: #T is the peak time period : The graph shows that even after 4 years of attaining the peak investment remains depressed by about 6 percentage points in case of balance sheet - related slow downs. In contrast, in non balance sheet - related cases it remains depressed by 2 ppt January 208 9

10 The urgency to solve the balance-sheet problem (contd) Count and Extent of Recovery India-type Investment Decline* Historically, median country has recovered only 25% of the fall in investment rate 4 years from the peak and only about 40% of the fall in investment rate 7 years from the peak. If India achieves median performance, then its investment rate will increase by only around 3.5ppt in the next 6 years Note: *T is the peak time period *: A 50% recovery implies that the country attained an investment rate that reversed half of the 8.5 percentage point fall. The dots imply the percentage of the total fall that the median country managed to reverse. January 208 0

11 Over 500 cases admitted under IBC Status of cases admitted for Corporate Insolvency Resolution Process Status of CIRP Number of Corporates CIRP in progress 442 of which* < 30 days days days 67 >80 days 7 Resolution plans approved 0 Liquidation order passed 30 Closed by appeal/review 36 Total CIRP petitions admitted 525 Source: IBBI. Note: *: For a few corporates, orders are still awaited, hence the totals might not be exact. January 208

12 Almost half the IBC cases are from Steel Sector-wise Analysis of Admitted Cases under IBC, 206 Total Underlying Number of Corporates Default (Rs. cr) CIRP In Resolution Plan Liquidation Closed By Appeal/ Progress Approved Order Passed Review Total Steel 57, Retail 2, Capital Goods-Non Electrical Equipment 4, Textiles 4, Trading 4, Chemicals 4, Ship Building 4, Construction 4, Computer Education 2,909 Mining & Mineral Products 2, Others 26, Total 28, Source: IBBI, Note: The details are from the orders uploaded on the NCLT website on or before 6 January, 208 for petitions dated till 3 December 207. This data is tentative, and might change as new orders are updated. January 208 2

13 Average haircut of 65% in sample cases under IBC Companies That Underwent Resolution Under IBC % Whether Realisation Under Insolvency Approval of Total Liquidat Resolution % To Erstwhile Commencement Resolution By Initiated Claims ion Amount - Recovery Liquidation Name of Corporate Debtor BIFR Date NCLT By Of FCs* Value* FCs* For FCs Value Synergies Doorey Automotive Yes 23-Jan-7 2-Aug-7 CD % 669% Shree Metalik NA. 30-Jan-7 7-Nov-7 FC, % 25% Kamineni Steel & Power India Yes 0-Feb-7 27-Nov-7 CD, % 79% Chhaparia Industries. Yes 24-Feb-7 22-Sep-7 CD % 20% Jekpl Private NA. 7-Mar-7 5-Dec-7 CD % 73% Hotel Gaudavan NA. 3-Mar-7 3-Dec-7 FC % 22% Prowess International NA. 20-Apr-7 7-Oct-7 OC 3 NA. 3 00% NA. West Bengal Essential Commodities Supply Corp. NA. 29-May-7 20-Nov-7 FC 359 N.A % NA. Shirdi Industries Yes 8-May-7 2-Dec-7 CD % 70% Nandan Hotels NA. 7-Aug-7 4-Dec-7 OC NA NA N.A. NA. Source: IBBI Notes: *: Amounts are in ` Crores. FC : Financial Creditors January 208 3

14 Status of the first list of 2 cases referred under IBC First Twelve Defaulters As Notified By RBI Company Sector Claims Admitted 80 days period Current Status of CIRP (Rs. cr) ends on Alok Industries Textiles 29,92 4-Jan-8 Applied for extension of 90 days Amtek Auto Auto component 2, Jan-8 Applied for extension of 90 days ABG Shipyard Ship building 8, Jan-8 CoC approved extension of 90 days Bhushan Steel Steel 55, Jan-8 In process Bhushan Power and Steel Steel & Power Generation 48, Jan-8 Extension up to 22 April, 208 Electrosteel Steels Steel 3,302 6-Jan-8 Extension up to 7 April, 208 Essar Steel Steel 50, Jan-8 Applied for extension of 90 days Jyoti Structures Power Transmission 8,078 3-Dec-8 Extension up to 3st Mar, 208 Jaypee Infratech Infrastructure Development 3,322 4-Feb-8 Applied for extension of 90 days Lanco Infratech Power Generation 5,505 3-Feb-8 Applied for extension of 90 days Monnet Ispat and Energy Steel 0,42 3-Jan-8 Applied for extension of 90 days Total 32,947 Source: IBBI. Note: # Era Infra Engineering Ltd. has not yet been admitted to CIRP. January 208 4

15 Ease of doing business the judicial challenge! January 208 5

16 Pending cases with all courts/tribunals have increased Pending Cases: Stock Source: Data from 6 Appellate Tribunals and Daksh., as on Pending Economic Cases: Stock January 208 Pending Cases: Flow ( 000s) Source: Data from 6 Appellate Tribunals and Daksh, as on Pending Economic Cases: Flow ( 000s) Source: Data from 5 High Courts and Daksh. Source: Data from 5 High Courts, as as on ) on Burden from Expansion of Discretionary Jurisdictions One reason for the rising pendency of economic cases at the High Courts could simply be the generalized overload of cases. Further, economic and commercial cases are usually complex, require economic expertise in their handling and disposal, and hence, require more judicial time. In some instances, however, this increased overload is due to the expansion of discretionary jurisdictions by Courts, without any countervailing measures that either balance the scope of other jurisdictions or improve overall administration and efficiency. For example, Articles 226 and 227 of the Constitution of India empower High Courts with carefully circumscribed writ jurisdiction.6 In practice, however, High Courts have permissively and expansively interpreted this provision over a period of time, which has resulted in a substantial increase in Article 226 cases.7 There are currently one million Writ Petitions pending at the 6 High Courts studied, constituting between 50-60% of the Court backlog, with average pendency fluctuating between 3-0 years (See Annex IV). Data available for for 5 High Courts captures the continued rise in the pendency of Writ Petitions even in recent years, which is crowding out judicial time for other cases 6

17 in part because the courts are widening their ambit Percentage Share of SLP Jurisdiction in SC s Admission Docket Supreme Court admits Special Leave Petitions under Article 36 of the Constitution increased from around 25% in 2008 to nearly 40% in 206. In contrast, the Supreme Court of the United States of America and Canada admit 3% and 9% respectively of the cases filed before it. This rising tendency to grant special leave has fundamentally altered the nature of the Court and created a high level of pendency, nearly 85% of which are SLP cases. The Court s SLP jurisdiction does not include other cases like transfer and review petitions, each of which occupies nearly 4-6% of the Court s docket. Simultaneously, the share of writ cases has gone down from 7% in 993 to under 2% in 20. Source: Supreme Court of India and Robinson ( 203). January 208 7

18 Increased litigation has tangible costs to the economy Pending IPR Cases- Stock (Delhi HC) Category Total Cases Stayed Cases % of Stayed Cases Average Age of Pending Cases- Stock (Stayed and Final Disposal IPR Cases, Delhi High Court, as on ) Copyright % Patents % Trademarks, % Others % Total, % Source: High Court of Delhi Source: High Court of Delhi January 208 8

19 Government is a big litigant itself, with low success rate Direct Taxes, as on Indirect Taxes, as on Source: Survey Calculations Source: Survey Calculations Petition Rate and Success Rate of the Tax Department, as on Direct Tax Cases Indirect Tax Cases Court Success Rate Petition Rate Success Rate Petition Rate Supreme Court 27% 87% % 63% High Courts 3% 83% 46% 39% ITAT/CESTAT 27%* 88%* 2% 20% Source: Survey Calculations. Note: * Provisional Estimates January 208 9

20 Housing the problem of vacant houses! January

21 Surprisingly large number of houses are vacant! Break-up of census houses and vacant houses in urban India Type In mn Total number of vacant census houses []. Total number of census houses for Residence [2] 76. Total number of census houses for Residence-cum-other use [3] 2.4 Total Residential Stock [+2+3=4] 89.6 Vacant census houses of the total residential stock (%) [ 4] 2.4% Source: Census of India (20) & IDFC Institute (207). The problem of Vacant Housing Despite the shortage of housing in urban India (more than 8 million households in 202) (MHUPA, 206), there is also a trend increase in vacant houses: from 6.5 million in 200 to. million in 20. According to the national census, vacant houses constitute around 2 per cent of the share of the total urban housing stock Even as the government focusses on housing for all, it is worth noting that in 8 houses in urban areas is vacant! January 208 2

22 Vacant houses across major cities Vacant Census Houses in some cities in India Source: Census of India (20) & IDFC Institute (207). January

23 In some cities, almost 20% of houses are vacant! Vacant Urban Housing as a Per cent of Total Census Urban Housing Stock in the Mumbai Metropolitan Region 200 and 20. Source: Census of India (20) & IDFC Institute (207). January

24 Agriculture and climate change January

25 Agricultural growth has trended up in the last decade Real Agricultural GVA Growth in India, (%, 5 Yr Moving Average) Source: Survey calculations. Note: Numbers represent average agricultural growth rates for each period in percent. January

26 Cultivation is still the dominant source of farm incomes Sources of Farm Incomes, and Source: National Sample Survey Organisation, and January

27 Climate is changing - average temperature has increased while rainfall decreased Average Annual Temperature Temperature and Rainfall: Comparison of Indian & International Data Average Annual Rainfall Source: Survey calculations from IMD and University of Delaware data. Note: For temperature, the annual average is estimated for each grid point, and then averaged across all grid points to obtain the all-india average. For rainfall, the total rainfall for each grid point is averaged across all grid points to obtain the all-india average. January

28 Climate change will significantly reduce yields and farm incomes, especially for unirrigated areas Impact of Weather Shocks on Agricultural Yields (percentage decline in response to temperature increase and rainfall decrease) Extreme Temperature Shocks Extreme Rainfall Shocks Average Kharif 4.0% 2.8% Kharif, Irrigated 2.7% 6.2% Kharif, Un-Irrigated 7.0% 4.7% Average Rabi 4.7% 6.7% Rabi, Irrigated 3.0% 4.% Rabi, Un-Irrigated 7.6% 8.6% Source: Survey calculations Impact of Weather Shocks on Farm Revenue Extreme Temperature Shocks Extreme Rainfall Shocks Average Kharif 4.3% 3.7% Kharif, Irrigated 7.0% 7.0% Kharif, Un-Irrigated 5.% 4.3% Average Rabi 4.% 5.5% Rabi, Irrigated 3.2% 4.0% Rabi, Un-Irrigated 5.9% 6.6% Source: Survey calculations If temperature in a district is in top 20 percentile of its historic range, it reduces Kharif yield by 4% and Rabi yield by 5% with higher decline if the district is unirrigated. Similarly, if rainfall in a district is in the bottom 20 percentile of its historic range, it reduces Kharif yield by 3% and Rabi yield by 7% with significantly higher impact if the district is unirrigated. January

29 Education January

30 Pupil-Teacher ratio in India is amongst the highest PTR in Primary Education Source : Data extracted from on 8 January, 208 Note : 204 data used in respect of Bhutan, Brazil, Russian Federation and South Africa January

31 However the Pupil-teacher ratio has improved in almost all the states State-wise Primary Schools with PTR > 30% Source: Elementary Education in India and Flash Statistics (UDISE) January 208 3

32 Gender parity has been achieved in primary and secondary education enrolment Gender Parity Index in Enrolment Source: Educational Statistics at a Glance, 206, Ministry of Human Resource Development, Government of India (website: Note: * Figures related to School Education are provisional. January

33 Local governments Revenues and Expenditure January

34 Local government spending is small fraction of Central and State governments Per capita Expenditure at Central, State and RLG levels (In rupees) Source: For RLGs, Survey calculations based on data from Andhra Pradesh, Karnataka, Kerala and Uttar Pradesh. Note: The calculations assume that expenditure of RLGs is equal to their receipts. ULG information has been sourced from the Annual Survey of Indian City-Systems, Janaagraha, based on 9 (8 in 203-4) major cities of India. January

35 Roads is the largest component of rural local body (Gram Panchayat) expenditure Sectoral Share of GP Expenditure out of Devolved Funds (204-6) Source: Survey calculations based on information furnished by Karantaka, Kerala and Uttar Pradesh January

36 Urban local bodies generate half of their revenues; Rural local bodies depend primarily on transfers from States Own Revenue Generation* (Share of total receipts) Source: For RLGs, Survey calculations based on data from Andhra Pradesh, Karnataka, Kerala and Uttar Pradesh. ULG information has been sourced from the Annual Survey of Indian City-Systems, Janaagraha, based on 9 (7 in 203-4) major cities of India. Note: *: Other receipts include devolution from State and Central Governments, including schematically tied transfers. January

37 Land revenue collection is significantly below potential States Land Revenue Collection Relative to Potential (In %) Source: Survey calculations RLGs House Tax Collection Relative to Potential (in %) Source: Survey calculations Note : Figures for Tamil Nadu are for and only for house tax. It is clear that state and local governments in India (federal tiers 2 and 3) do not conform to the crosscountry trends discussed in the first section. In comparison with their counterparts in some other federal countries, they rely much more on devolved resources and much less on their own tax resources, and they collect less direct taxes. And the reason does not seem to be so much that they don t have enough taxation power. Rather, the bigger problem is that they are not fully utilizing the taxation powers they already possess. January

38 Global growth convergence and protectionism January

39 Global growth continues to broaden with the trend accelerating Convergence With a Vengeance; Catch-Up with the United States Period 960 and and 207 Broadening: % of countries growing faster than US 43.7% 68.6% Acceleration: Average excess growth rate over the US.4%.7% Countries in sample 2 53 Source: Maddison Project; IMF World Economic Outlook. Notes: Sample excludes oil exporters and small countries (defined as population< mn. in 200). India s own move up the development ranks is instructive to track. In 960, India was a low income country with a per capita income (in 20 purchasing power parity (PPP) terms) of $,033. This was equivalent to about 6% of U.S. per capita income at the time. However, India attained lower middle-income status in 2008 and today has a per capita income of $6,538, which is 2% of the U.S.. If per capita income in India grows at 6.5% per year, India would reach upper-middle income status by the mid -to-late 2020s. January

40 Protectionist policies could be an impediment to faster growth by poorer countries World Exports of Goods & Services, (% of GDP) Source: World Bank A back-of-the-envelope calculation gives a sense of the challenge. If the current process of convergence continues and adds another country equivalent, the distribution of world output will become even more dispersed, resulting in an additional increase in the world s trade-gdp ratio of percentage point. The question is whether politics, especially in advanced economies and China, might be able to sustain such an increase in trade. Recall that politics in advanced countries is moving defacto in the direction of seeking and forcing lower trade- GDP ratios. January

41 Miscellaneous January 208 4

42 Formal employment could be as much as 50% of non- Agriculture employment (much larger than thought) Formal Non-Farm Payroll by Social Security and Tax Definitions Enrolled in EPFO/ESIC No. of Firms/Enterprises (lakhs) Employees (cr) Yes No Total Yes No Total Registered Under GST Yes No The table shows that from a social security perspective formal employment amounts to 6 cr, to which we must add an estimated.5 cr of government workers (excluding defense), for a total of 7.5 cr. Since the non-agricultural workforce (again adding government to the figure in the table) is estimated at 24 cr according to the 68th Round (20) of the NSSO Employment-Unemployment Survey, formal employment under this definition is equivalent to 3% of the nonagricultural workforce. Meanwhile, from a tax perspective formal employment is.2 cr; adding government employment yields a total count of 2.7 cr. This implies that nearly 54 %of the non-agricultural workforce is in the formal sector. Of course, not all the firms that pay GST are formal, in the common-use sense of the term. As Chapter 2 shows, many small, below-thethreshold firms have registered for the GST so they can secure tax credits on their purchases. Against this, the figure excludes many formal workers in sectors outside the GST such as health and education. Notwithstanding the caveats regarding the specific numbers, the broad conclusion is likely to be robust: formal payrolls may be considerably greater than currently believed. January

43 Share of road in freight transport is not abnormally high in India Modal Share of Road in Inland Freight Transport (per cent) Source: World Road Statistics, International Road Federation January

44 Forest cover in India is actually increasing! Annual change in forest cover (per cent) Source: World Development Indicators, World Bank January

45 Two-thirds of households do not have access to clean cooking Share of population without access to clean cooking Source: World Energy Outlook Special Report: Energy Access Outlook 207, OECD/IEA, 207 January

46 Eastern states fare extremely poorly in access to electricity Percentage of rural households electrified Source: Saubhagya Portal of Rural Electrification Corporation January

47 Tangible benefits of ending open defecation Annual Benefits of 00 per cent Toilet Use (per cent and Rs.).8 Rs. 8,24 Value of time savings 25.4 Rs. 7, Rs. 24,646 Property value (oneoff benefit) Value of saved lives Medical costs averted Rs. 8, Source: UNICEF. January

48 Thank you Disclosure : Published in 208, India Infoline Ltd 208 India Infoline Group (hereinafter referred as IIFL) is engaged in diversified financial services business including equity broking, DP services, merchant banking, portfolio management services, distribution of Mutual Fund, insurance products and other investment products and also loans and finance business. India Infoline Ltd ( hereinafter referred as IIL ) is a part of the IIFL and is a member of the National Stock Exchange of India Limited ( NSE ) and the BSE Limited ( BSE ). IIL is also a Depository Participant registered with NSDL & CDSL, a SEBI registered merchant banker and a SEBI registered portfolio manager. IIL is a large broking house catering to retail, HNI and institutional clients. It operates through its branches and authorised persons and sub-brokers spread across the country and the clients are provided online trading through internet and offline trading through branches and Customer Care. a) This research report ( Report ) is for the personal information of the authorized recipient(s) and is not for public distribution and should not be reproduced or redistributed to any other person or in any form without IIL s prior permission. The information provided in the Report is from publicly available data, which we believe, are reliable. While reasonable endeavors have been made to present reliable data in the Report so far as it relates to current and historical information, but IIL does not guarantee the accuracy or completeness of the data in the Report. Accordingly, IIL or any of its connected persons including its directors or subsidiaries or associates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained, views and opinions expressed in this publication. b) Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment of its original date of publication by IIFL and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. The value of securities and financial instruments is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities or financial instruments. c) The Report also includes analysis and views of our research team. The Report is purely for information purposes and does not construe to be investment recommendation/advice or an offer or solicitation of an offer to buy/sell any securities. The opinions expressed in the Report are our current opinions as of the date of the Report and may be subject to change from time to time without notice. IIL or any persons connected with it do not accept any liability arising from the use of this document. d) Investors should not solely rely on the information contained in this Report and must make investment decisions based on their own investment objectives, judgment, risk profile and financial position. The recipients of this Report may take professional advice before acting on this information. e) IIL has other business segments / divisions with independent research teams separated by 'Chinese walls' catering to different sets of customers having varying objectives, risk profiles, investment horizon, etc and therefore, may at times have, different and contrary views on stocks, sectors and markets. f) This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to local law, regulation or which would subject IIL and its affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this Report may come are required to inform themselves of and to observe such restrictions. g) As IIL along with its associates, are engaged in various financial services business and so might have financial, business or other interests in other entities including the subject company(ies) mentioned in this Report. However, IIL encourages independence in preparation of research report and strives to minimize conflict in preparation of research report. IIL and its associates did not receive any compensation or other benefits from the subject company(ies) mentioned in the Report or from a third party in connection with preparation of the Report. Accordingly, IIL and its associates do not have any material conflict of interest at the time of publication of this Report. h) As IIL and its associates are engaged in various financial services business, it might have:- (a) received any compensation (except in connection with the preparation of this Report) from the subject company in the past twelve months; (b) managed or co-managed public offering of securities for the subject company in the past twelve months; (c) received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (d) received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (e) engaged in market making activity for the subject company. i) IIL and its associates collectively do not own (in their proprietary position) % or more of the equity securities of the subject company mentioned in the report as of the last day of the month preceding the publication of the research report. j) The Research Analyst engaged in preparation of this Report or his/her relative:- (a) does not have any financial interests in the subject company (ies) mentioned in this report; (b) does not own % or more of the equity securities of the subject company mentioned in the report as of the last day of the month preceding the publication of the research report; (c) does not have any other material conflict of interest at the time of publication of the research report. k) The Research Analyst engaged in preparation of this Report:- (a) has not received any compensation from the subject company in the past twelve months; (b) has not managed or co-managed public offering of securities for the subject company in the past twelve months; (c) has not received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (d) has not received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (e) has not received any compensation or other benefits from the subject company or third party in connection with the research report; (f) has not served as an officer, director or employee of the subject company; (g) is not engaged in market making activity for the subject company. L) IIFLCAP accepts responsibility for the contents of this research report, subject to the terms set out below, to the extent that it is delivered to a U.S. person other than a major U.S. institutional investor. The analyst whose name appears in this research report is not registered or qualified as a research analyst with the Financial Industry Regulatory Authority ( FINRA ) and may not be an associated person of IIFLCAP and, therefore, may not be subject to applicable restrictions under FINRA Rules on communications with a subject company, public appearances and trading securities held by a research analyst account. We submit that no material disciplinary action has been taken on IIL by any regulatory authority impacting Equity Research Analysis. January

49 A graph of daily closing prices of securities is available at and (Choose a company from the list on the browser and select the three years period in the price chart). Name, Qualification and Certification of Research Analyst: Ashutosh Datar (Chartered Accountant), Amit Tiwari(MBA) India Infoline Limited (Formerly India Infoline Distribution Company Limited ), CIN No.: U99999MH996PLC32983, Corporate Office IIFL Centre, Kamala City, Senapati Bapat Marg, Lower Parel, Mumbai 40003Tel: (9-22) Fax: (9-22) , Regd. Office IIFL House, Sun Infotech Park, Road No. 6V, Plot No. B-23, MIDC, Thane Industrial Area, Wagle Estate, Thane Tel: (9-22) Fax: (9-22) mail@indiainfoline.com Website: Refer for detail of Associates. National Stock Exchange of India Ltd. SEBI Regn. No. : INB / INF / INE , Bombay Stock Exchange Ltd. SEBI Regn. No.:INB / INF / BSE-Currency, MCX Stock Exchange Ltd. SEBI Regn. No.: INB / INF / INE , United Stock Exchange Ltd. SEBI Regn. No.: INE , PMS SEBI Regn. No. INP , IA SEBI Regn. No. INA , SEBI RA Regn.:- INH Key to our recommendation structure BUY - Stock expected to give a return 0%+ more than average return on a debt instrument over a -year horizon. SELL - Stock expected to give a return 0%+ below the average return on a debt instrument over a -year horizon. Add - Stock expected to give a return 0-0% over the average return on a debt instrument over a -year horizon. Reduce - Stock expected to give a return 0-0% below the average return on a debt instrument over a -year horizon. Distribution of Ratings: Out of 2 stocks rated in the IIFL coverage universe, 09 have BUY ratings, 5 have SELL ratings, 7 have ADD ratings and 26 have REDUCE ratings Price Target: Unless otherwise stated in the text of this report, target prices in this report are based on either a discounted cash flow valuation or comparison of valuation ratios with companies seen by the analyst as comparable or a combination of the two methods. The result of this fundamental valuation is adjusted to reflect the analyst s views on the likely course of investor sentiment. Whichever valuation method is used there is a significant risk that the target price will not be achieved within the expected timeframe. Risk factors include unforeseen changes in competitive pressures or in the level of demand for the company s products. Such demand variations may result from changes in technology, in the overall level of economic activity or, in some cases, in fashion. Valuations may also be affected by changes in taxation, in exchange rates and, in certain industries, in regulations. Investment in overseas markets and instruments such as ADRs can result in increased risk from factors such as exchange rates, exchange controls, taxation, and political and social conditions. This discussion of valuation methods and risk factors is not comprehensive further information is available upon request. January