Wipro Ltd (WIPRO) 295

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1 Result Update Rating matrix Rating : Hold Target : 300 Target Period : 12 months Potential Upside : 2% What s Changed? Target Changed from 285 to 300 EPS FY18E Changed from 18.1 to 19.0 EPS FY19E Changed from 20.2 to 20.1 Rating Unchanged * Adjusted for bonus issue Quarterly Performance Q2FY18 Q2FY17 YoY (%) Q1FY18 QoQ (%) Revenue 13,469 13,894 (3.1) 13,626 (1.2) EBIT 2,305 2, , EBIT (%) bps bps PAT 2,191 2, , Key Financials Crore FY16 FY17 FY18E FY19E Net Sales 51,244 55,040 54,698 59,274 EBITDA 11,171 11,458 9,716 10,647 Net Profit 8,886 8,490 8,577 9,069 EPS ( ) Valuation summary FY16 FY17 FY18E FY19E P/E Target P/E EV / EBITDA P/BV RoNW (%) RoCE (%) Stock data Particular Amount Market Capitalization ( Crore) 145,641.5 Total Debt ( Crore) 14,241.2 Cash and Investments ( Crore) 5,271.0 EV ( Crore) 124, week H/L 304 / 205 Equity capital Face value 2 Price performance (%) 1M 3M 6M 12M TCS Infosys 6.6 (2.1) (4.6) (7.5) Wipro (5.0) HCL Tech Research Analysts Deepak Purswani, CFA deepak.purswani@icicisecurities.com Deepti Tayal deepti.tayal@icicisecurities.com Strength in BFSI vertical continues... October 18, 2017 Wipro Ltd (WIPRO) 295 IT services US$ revenues grew 2.2% QoQ to $ million, above our expectation of 1.5% growth at $ million mainly on account of cross currency benefits Constant currency (CC) revenues grew 0.3%, largely in line with our expectation of 0.5% growth Consolidated revenues declined 1.5% QoQ to 13,423.9 crore, below our expectation of crore. The decline was led by revenue decline in IT products (52.9% QoQ). In the IT service business, rupee revenues grew 1.1% sequentially to 13,168.9 crore At 17.3%, IT services EBIT margins improved 50 bps QoQ despite wage hike and was well above our estimate of 16.5% Reported PAT of crore was above our 2,041.7 crore estimate, mainly due to upbeat margin performance in the IT business Wipro has guided that its Q3FY18E IT services revenues would be in the range of $ million, translating to 0-2% QoQ growth in a seasonally weak quarter BFSI, Top 10 clients continue to show strength Wipro reported constant currency revenue growth at 0.3% QoQ in Q2FY18. Among verticals, growth in reported terms was led by the BFSI vertical (3.3% QoQ) and manufacturing & hi-tech verticals (1.9% QoQ). We also highlight that Wipro s BFSI vertical has grown for three consecutive quarters in excess of 3% in CC terms, much better than its peers. Furthermore, its Top 10 clients have grown at 5.1% in reported currency in Q2FY18 on top of 4.4% growth witnessed in Q1FY18. Continues its stand on industry matched growth in Q4FY18 Wipro s commentary continues to turn positive on an incremental basis. It sees strength in the BFSI vertical and stable demand in the consumer verticals as these two verticals are adopting digital ahead of the industry. In terms of healthcare division, though it remains volatile, it expects the vertical to bottom out in Q3FY18. The management is firm on its expectation of reaching industry growth rates by Q4FY18. Going ahead, we expect IT services US$ revenues to grow 6.0% in FY17-19E. Expects IT service EBIT margin to remain in narrow band of FY17 level Wipro s IT services EBIT margins improved 50 bps QoQ at 17.1% despite the wage hike impact of two months due to an improvement in productivity and automation (freed up 2500 person month). In Q3FY18, it expects its IT service margin to come down due to the seasonal impact of the business. Overall, Wipro expects its FY18 EBIT margin to remain in a narrow band of FY17 level on a constant currency basis. Wipro reported IT service EBIT margin of 17.9% in FY17. Overall, we expect IT services EBIT margin to remain at 17.0%, 17.2% in FY18E, FY19E, respectively. Positives seem to be priced in; maintain HOLD Wipro reported a strong margin performance and key matrix such as BFSI vertical and Top 10 clients. Secondly, the management commentary is turning positive on an incremental basis. They expect to match industry growth by Q4FY18. However, we believe these positives are already priced in the stock. It has run up ~20% in the past 12 months and is already trading at 14.7x FY19 EPS. Hence, we maintain our HOLD rating on the stock with a revised target price of 300/share (15x FY19E). ICICI Securities Ltd Retail Equity Research

2 Variance analysis Q2FY18 Q2FY18E Q2FY17 YoY (%) Q1FY18 QoQ (%) Comments Revenue 13, , , , Employee expenses 8, , , , Decline was led by revenue decline in IT products (52.9% QoQ). In IT services, $ revenues grew 2.2% sequentially mainly on account of cross currency benefits Gross Margin 4, , , , Gross margin (%) bps bps Selling & marketing costs , G&A expenses EBITDA 2, , , , EBITDA Margin (%) bps bps Depreciation EBIT 2, , , , EBIT Margin (%) bps bps Other income PBT 2, , , , Tax paid At 17.3%, IT services EBIT margins improved 50 bps QoQ despite wage hike and was well above our expectation of 16.5% PAT 2, , , , PAT was above our estimates mainly on upbeat margin performance in IT services Key Metrics Closing employee Count 163, , , , TTM voluntary Attrition (%) bps bps Utilisation ex trainees (%) bps bps Average $/ Change in estimates FY18E FY19E ( Crore) Old New % Change Old New % Change Comments Revenue 55,110 54, ,356 59, EBITDA 10,435 9, ,718 10, EBITDA Margin (%) bps bps PAT 8,166 8, ,103 9, EPS ( ) Tweak estimates to incorporate Q2FY18 results Assumptions Current Earlier Current Earlier FY15 FY16 FY17 FY18E FY18E FY19E FY19E Closing employee Count 158, , , , , , ,482 TTM voluntary Attrition (%) Utilisation ex trainees (%) Average $/ ICICI Securities Ltd Retail Equity Research Page 2

3 Conference call highlights: Management guidance: Wipro has guided that its Q3FY18E IT services revenues would be in the range of $ million, translating to 0-2% QoQ growth in a seasonally weak quarter. The management continues to maintain its commentary of reaching industry growth rates by Q4FY18 Margins: IT services EBIT margins improved 50 bps QoQ at 17.1% despite the wage hike impact of two months. In Q3FY18, Wipro expects its IT service margin to come down due to seasonal impact of the business. Overall, Wipro plans to achieve FY18 EBIT margin in a narrow band of FY17 IT service EBIT margin on a constant currency basis. Wipro reported IT service EBIT margin of 17.9% in FY17 Vertical wise demand outlook: The management highlighted that it sees strength in the BFSI vertical and stable demand in the consumer verticals as these two verticals are adopting digital ahead of the industry. The energy & utilities vertical continues to remain stable though it got impacted in Q2FY18 by the holiday season in the Middle East. On the healthcare vertical, the management expects it continue to be volatile due to concerns around Affordable Care Act although it is hopeful of it bottoming out in Q3FY18. In terms of communication business, it witnessed challenges due to customer specific ramp down and mentions that it has now bottomed out in Q2FY18 Digital revenues: Digital revenues now account for 24.1% of total services revenue vs. 22.5% in Q1FY17. In October, 2017, Wipro acquired Cooper, which would enhance its design and advisory capability in North America. With growing demand in digital, the company continues to augment its workforce with digital skills and has now reached 80,000 technical employees trained on digital IT products: In the IT product business, the management focus has turned to profitability. It will focus on the IT product business only to gain market share in the service business. Consequently, its IT product business declined 52.9% sequentially to crore. It is expected to remain at similar levels in coming quarters. This has helped the company turn profitable in the IT products business in Q2FY18. The IT product business EBIT margin improved to 2.9% vs. 0.5% in Q1FY18. The division had also reported losses of crore in FY17 Employee details: The company s closing employee count in IT services is at 163,759 vs. 166,790. The company could free up 2500 person month through improvement in productivity and automation. Consequently, its utilisation (ex-trainees) improved 40 bps QoQ at to 82.5% in Q2FY18. In terms of voluntary TTM attrition rate, it declined 20 bps QoQ to 15.7% Local hiring in US: Wipro mentioned that locals now form ~52% of US employees to offset the concerns of H-1B visa issues ICICI Securities Ltd Retail Equity Research Page 3

4 Company Analysis Operating highlights Among verticals, reported currency revenue growth was led by BFSI (27.6% of revenue), which grew 5.1% QoQ and manufacturing & technology (22.8% of revenue), which grew 3.4% sequentially. On the other hand, communications (6.5% of revenue) and healthcare & lifesciences (13.7% of revenue) declined 1.8% and 5.2% QoQ, respectively. The management is witnessing strong traction in BFSI and stable demand in consumer verticals as these two are adopting digital ahead of the industry. On the healthcare vertical, the management expects it to continue to be volatile due to concerns around Affordable Care Act although it is hopeful of it bottoming out in Q3FY18. In terms of communication business, it witnessed challenges due to customer specific ramp down and mentions it has now bottomed out in Q2FY18. Among geographies, quarterly growth was led by APAC and Other Emerging Markets (11.4% of revenue), which grew 7.4% sequentially followed by Europe (25.1% of revenue), which grew 5.8% QoQ. Americas (53.6% of revenue) grew 0.5% while India and Middle East business (9.9% of revenue) declined 3.2% sequentially. Among services, in reported terms global infrastructure services analytics (28.4% of revenue) grew 3.5% followed by BPO (12.2%, 1.2%) product engineering services (6.9%, 1%) and application services (45.5%, 1.4%). Exhibit 1: Dollar revenues may grow at 5.8% CAGR in FY17-19E vs. 7.1% during FY $ million % FY11 FY12 FY13 FY14 FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 FY17 Q1FY18 Q2FY18 FY18E FY19E Dollar revenue Growth, YoY ICICI Securities Ltd Retail Equity Research Page 4

5 FY11 FY12 FY13 FY14 FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 FY17 Q1FY18 Q2FY18 x Exhibit 2: Wipro vs Nasscom guidance % FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E Growth, YoY NASSCOM guidance Clients contributing > $1 million grow to 624 vs. 565 in Q1FY17 Clients contributing >$100 million remain unchanged at nine since Q3FY17 while three clients transitioned to >$50 million category. The >$10 million bucket was increased by seven to 170 while eight clients were added in >$5 million. Furthermore, Wipro s revenues from the top client (3.1% of revenue) also grew strongly 9.2% QoQ after a long time. Revenues from top five (11% of revenue) and top 10 (18% of revenue) also witnessed decent growth of 9.1% and 5.1%, respectively. The active customer base is now at 1274 (vs in Q1FY18) with the addition of 41 new customers during the quarter. Exhibit 3: Sequentially, clients contributing >$1 million in revenues increased by 59 YoY $1 million+ clients We build in EBIT margin of 17.2% in FY19 Wipro s IT services EBIT margins improved 50 bps QoQ at 17.1% despite wage hike impact of two months due to improvement in productivity and automation (frees up 2500 person month). In Q3FY18, it expects its IT service margin to come down due to seasonal impact of the business. Overall, Wipro expect its FY18 EBIT margin to remain in a narrow band of FY17 level on a constant currency basis. Wipro reported IT service EBIT margin of 17.9% in FY17. Overall, we expect IT services EBIT margin to remain at 17.0%, 17.2% in FY18E, FY19E, respectively. ICICI Securities Ltd Retail Equity Research Page 5

6 % % FY11 FY11 FY12 FY12 FY13 FY13 FY14 FY14 FY15 FY15 Q1FY16 Q1FY16 Q2FY16 Q2FY16 Q3FY16 Q3FY16 Q4FY16 Q4FY16 FY16 FY16 Q1FY17 Q1FY17 Q2FY17 Q2FY17 Q3FY17 Q3FY17 Q4FY17 Q4FY17 FY17 FY17 Q1FY18 Q1FY18 Q2FY18 Q2FY18 FY18E FY18E FY19E FY19E [ Exhibit 4: IT services margin at 16.8% EBIT margin (IT services) Net utilisation improves to 82.5% Utilisation (ex-trainees) improved 40 bps QoQ to 82.5%. Gross utilisation also improved 90 bps at 72.9% In terms of attrition rate, at 15.7%, voluntary attrition TTM declined 20 bps and still remains at slightly elevated levels than its peers. Exhibit 5: At 15.9%, attrition declines QoQ continues to be at elevated levels TTM voluntary Attrition ICICI Securities Ltd Retail Equity Research Page 6

7 FY11 FY12 FY13 FY14 FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 FY17 Q1FY18 Q2FY18 FY18E FY19E % Exhibit 6: Utilisation drops to 80.3% Utilisation ex support (%) ICICI Securities Ltd Retail Equity Research Page 7

8 Annual report key takeaways: Wipro chose Be The New, as the theme of the annual report, and had set a goal to transform into a future focused company that harnesses the power of digital and Artificial Intelligence (AI) to serve its clients. In May 2017, Wipro introduced the new brand identity of Wipro and rearticulated its values, the Spirit of Wipro With the growing demand for digital services, digital revenue now makes up 22.1% of revenue in Q4FY17 from 17.5% in Q1FY17 Wipro s venture capital arm, Wipro Ventures, has made four new start-up investments in FY17 to bring its clients new technologies that are reshaping the future of enterprises, especially in Cybersecurity, Customer Care Automation, Business Process Automation and Big Data Lifecycle Management In the last 18 months, the company has invested over US$1 billion in acquisitions. In FY17, Wipro completed the acquisition of Appirio, a leader in cloud application services. In April 2017, it acquired Infoserver, a Brazilian technology service firm company enhancing its footprint in Latin America Wipro mentioned immense progress in localisation in all key markets was observed. In FY17, the company recruited over 3,000 locals in US, leading to total workforce of 14,000 in US. Also, the company witnessed good progress on localisation initiatives in UK, Singapore, Middle East and other parts of the world Wipro has allotted 243 crore equity shares of 2/- each as fullypaid up bonus equity shares, in the ratio of 1:1 to eligible members as on June 14, 2017, record date for this purpose Operating cash flow registered growth of 17.6% YoY to 9,277 crore primarily due to improved working capital management. FCF grew 50% to 3,952 crore owing to substantial payments towards acquisitions. Subsequently, FCF, PAT grew to 46% from 29% in FY16 ICICI Securities Ltd Retail Equity Research Page 8

9 Outlook and valuation Wipro reported better-than-expected IT service EBIT margins in Q2FY18. For Q3FY18E, it came out with revenue guidance of $ million, which implies growth of 0-2% in a seasonally weak quarter. Reported currency revenue growth was led by BFSI (grew 5.1% QoQ), manufacturing & technology (grew 3.4% QoQ) and consumer business unit (grew 3.3% QoQ) among verticals. Geography wise, APAC and other Emerging Markets led the growth (grew 7.4% sequentially) followed by Europe (grew 5.8% QoQ). Wipro reported a strong margin performance and key matrix such as BFSI vertical and Top 10 clients. Secondly, the management commentary is turning positive on an incremental basis and is expected to match industry growth by Q4FY18. However, we believe these positives are already priced in the stock. It has run up ~20% in past 12 months and is already trading at 14.7x FY19 EPS. Hence, we maintain our HOLD recommendation on the stock with a revised target price of 300/share (15x FY19E). Exhibit 7: One year forward rolling PE Oct-07 Apr-08 Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16 Apr-17 Oct-17 Price Exhibit 8: Valuation Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE ( cr) (%) ( ) (%) (x) (x) (%) (%) FY16 51, (35.7) FY17 55, (22.7) FY18E 55, FY19E 60, ICICI Securities Ltd Retail Equity Research Page 9

10 Recommendation History vs. Consensus ( ) Oct-15 Dec-15 Feb-16 May-16 Jul-16 Oct-16 Dec-16 Mar-17 May-17 Jul Oct-17 (%) Price Idirect target Consensus Target Mean % Consensus with BUY Source: Bloomberg, Company, ICICIdirect.com Research Key events Date Apr-17 Jun-17 Jun-17 Jul-17 Jul-17 Sep-17 Sep-17 Sep-17 Oct-17 Event Wipro completes its acquisition of InfoServer, a Brazilian technology service firm and financials would start consolidating from Q1FY18. The deal size of the acquisition was $8.7 million Wipro increases its stake in IT consulting and software services firm Drivestream to 26.1% after exercising an optionally-convertible note for about US$809,690. Established in 2001, Drivestream is a management and IT consulting firm specialised in Oracle cloud and ERP solutions. Wipro collaborates with world's leading provider of open source solutions Red Hat to set up a cloud application factory. Using Red Hat OpenShift Container Platform, Wipro could develop new cloud based applications without having to rewrite their legacy applications According to media sources, Wipro Infrastructure Engineering, part of Wipro Enterprises Ltd announces a strategic alliance with Israel Aerospace Industries (IAI) to make composite aerostructure parts and assemblies in India for the global market. Wipro Infrastructure Engineering will set up a manufacturing facility in India in partnership with IAI to meet the requirements of global aircraft OEMs and Tier-1 suppliers. Wipro enters into a partnership with Hewlett Packard Enterprise (HPE) to offer IT infrastructure solutions in a consumption-based or pay-per-use business model for the enterprises. In this partnership, Wipro will leverage HPE Flexible Capacity to offer flexible and scalable IT infrastructure services in a consumption-based IT model, accelerate growth and enable digital transformation for its customers. Wipro wins a five year IT applications management contract from Outokumpu, global leader in stainless steel. Wipro would provide applications management services for Outokumpu SAP landscape along with legacy applications support Wipro bags a seven year contract from European energy company, innogy SE to manage the data centre and cloud services Wipro enters into a partnership with CloudGenix, a leading provider of Software defined Wide Area Networking (SD-WAN) products. Under the partnership, Wipro would offer its customers end to end managed WAN services. Wipro Digital signs a definitive agreement to acquire Cooper, design and business strategy consultancy. Wipro Digital is the digital business unit of Wipro. Acquisition is expected to be closed in Q3FY18. Top 10 Shareholders Rank Name Latest Filing Date % O/S Position (m) Change (m) 1 Premji (Azim Hasham) 30-Jun % 2, Azim Premji Trust 30-Jun % Life Insurance Corporation of India 30-Jun % ICICI Prudential Asset Management Co. Ltd. 31-Aug % Stewart Investors 31-Jul % BlackRock Institutional Trust Company, N.A. 30-Sep % The Vanguard Group, Inc. 31-Aug % Azim Premji Philanthropic Initiatives Pvt. Ltd. 30-Jun % T. Rowe Price International (UK) Ltd. 30-Jun % Norges Bank Investment Management (NBIM) 31-Dec % Source: Reuters, ICICIdirect.com Research Shareholding Pattern (in %) Dec-16 Mar-17 Jun-17 Promoter Public Others Total Recent Activity Buys Sells Investor name Value Shares Investor name Value Shares Life Insurance Corporation of India 86.5m 21.6m APG Asset Management -38.1m -9.6m First State Investments (Singapore) 3.3m 0.8m ICICI Prudential Asset Management Co. Ltd m -4.9m Axis Asset Management Company Limited 3.3m 0.7m Lyxor Asset Management -17.9m -4.3m Grantham Mayo Van Otterloo & Co LLC 3.0m 0.7m Unigestion -13.3m -3.2m T. Rowe Price International (UK) Ltd. 2.5m 0.6m Somerset Capital Management, L.L.P m -2.9m Source: Reuters, ICICIdirect.com Research ICICI Securities Ltd Retail Equity Research Page 10

11 Financial summary Profit and loss statement Crore FY16 FY17 FY18E FY19E Total Revenues 51,244 55,040 55,110 60,356 Growth (%) COGS 35,672 39,154 39,357 42,897 Other Expenditure 4,787 5,214 5,065 5,487 EBITDA 11,171 11,458 10,435 11,718 Growth (%) (8.9) 12.3 Depreciation 1,485 2,070 2,039 2,233 Other Income 2,338 2,166 2,819 2,946 Exchange difference F.income (558) (518) (577) (577) Pft. from associates PBT 11,466 11,036 10,638 11,854 Growth (%) 2.7 (3.8) (3.6) 11.4 Tax 2,531 2,521 2,447 2,726 PAT before Minority int, 8,935 8,514 8,191 9,127 Minority int PAT 8,886 8,490 8,166 9,103 EPS EPS (Growth %) (35.7) (22.7) Cash flow statement Crore FY16 FY17 FY18E FY19E PAT before minority int. 8,941 8,514 8,191 9,127 Depreciation 1,497 2,311 2,039 2,233 (inc)/dec in Current Assets (1,212) 1,269 (1,338) (2,003) (inc)/dec in current Liabilities 597 (815) (139) 2,783 Taxes paid (2,694) (2,548) (2,447) (2,726) CF from operations 7,887 9,277 6,512 9,771 Other Investments (12,498) (10,014) 2,819 2,946 (Purchase)/Sale of Fixed Assets (1,317) (1,965) (2,088) (2,287) CF from investing Activities (13,816) (11,628) Inc / (Dec) in Equity Capital Inc / (Dec) in sec.loan Funds 3,525 1, Dividend & Divendend tax (3,684) (1,073) (1,636) (1,636) CF from Financial Activities (159) (2,275) (12,636) (1,636) Exchange rate differences 55 (141) - - Opening cash balance 15,871 9,905 5,271 (122) Closing cash 9,905 5,271 (122) 8,673 Balance sheet Crore FY16 FY17 FY18E FY19E Liabilities Equity Reserves & Surplus 46,023 51,544 47,720 55,764 Networth 46,517 52,030 48,138 56,182 Minority Interest Debt - long term 1,736 1,961 1,961 1,961 Debt - short term 10,786 12,280 12,296 13,466 Deffered Tax Liability Other liabilities & provisions 1,559 1,505 1,514 1,514 Source of funds 61,331 68,677 64,834 74,073 Assets Goodwill 10,199 12,580 12,589 12,589 Intangible Assets 1,584 1,592 1,596 1,599 PPE 6,495 6,979 7,025 7,075 O.non current assets 3,213 3,201 3,201 3,200 Investments Debtors 10,099 9,884 10,650 11,839 Cash & Cash equivalents 9,905 5,271 (122) 8,673 Investments - short term 20,979 30,178 30,178 30,178 O.current assets 9,437 8,957 9,529 10,342 Trade Payable 6,819 6,549 6,391 7,713 OCL & Provisions 4,251 4,126 4,129 4,420 Application of funds 61,331 68,677 64,834 74,073. Key ratios FY16 FY17 FY18E FY19E Per share data ( ) EPS BV DPS Operating Ratios EBIT Margin PAT Margin Debtor days Creditor days Return Ratios (%) RoE RoCE RoIC Valuation Ratios (x) P/E EV / EBITDA EV / Net Sales Market Cap / Sales Price to Book Value Solvency Ratios Debt/EBITDA Debt / Equity Current Ratio Quick Ratio ICICI Securities Ltd Retail Equity Research Page 11

12 ICICIdirect.com coverage universe (IT) CMP M Cap EPS ( ) P/E (x) EV/EBITDA (x) RoCE (%) RoE(%) Sector / Company ( ) TP( ) Rating ( Cr) FY16 FY17P FY18E FY16 FY17P FY18E FY16 FY17P FY18E FY16 FY17P FY18E FY16 FY17P FY18E Cyient (INFENT) Hold 5, Eclerx (ECLSER) 1,290 1,145 Sell 5, Firstsource (FIRSOU) Buy 2, HCL Tech (HCLTEC) Buy 119, Infosys (INFTEC) 972 1,040 Hold 222, KPIT Tech (KPISYS) Hold 2, Mindtree (MINCON) Hold 8, NIIT Technologies (NIITEC) Hold 1, Persistent (PSYS) Buy 4, TCS (TCS) 2,399 2,400 Hold 469, Tech Mahindra (TECMAH) Buy 42, Wipro (WIPRO) Hold 66, ICICI Securities Ltd Retail Equity Research Page 12

13 RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more; Pankaj Pandey Head Research pankaj.pandey@icicisecurities.com ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai research@icicidirect.com ICICI Securities Ltd Retail Equity Research Page 13

14 ANALYST CERTIFICATION We /I, Deepak Purswani, CFA MBA (Finance), Deepti Tayal, MBA, Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Terms & conditions and other disclosures: ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. 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