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: price: ABV: How does our one year outlook change? We retain our positive outlook on KVB, led by an improving margin profile and cost containment kicking in, while our key thesis - a proven sole banking model with a high yield granular SME book, low slippages/loss given default and retail funding bias remains intact. Maintain with a TP of at 1.5x FY17E ABV. We estimate FY16 loan growth at a modest 10% yoy (FY15 at 6%) led by continuing weakness in the SME (up 6% yoy) and gold loan segments (down 17% yoy). For FY17, we expect SME and retail to clock ~13% growth rates, corporate at ~10% and agri at ~12%, translating into a loan book growth of 13%. Expect corporate and SME loans to account for 35% and 33% of the portfolio respectively by end FY17. Marginally decrease our slippage estimates to ~1.9% for FY17 (2.1% in FY16) with GNPAs settling at ~1.9%; PCR to remain at 75%. Estimate FY17 credit costs at 103bps (115bps in FY15). We expect cost to income ratios to decline in FY17 settling at ~48%, led by controlled expansion in FY17; (estimate opex to increase ~11% yoy). Estimate a 10bps reduction in NIM at 3.3% for FY17 factoring in the transition to MCLR; (continue to estimate FY16 NIM tat 3.4% an expansion of ~35bps over FY15). We expect RoA of 1.2% for FY17, RoE at 15%, with tax rates at 28%. Expect KVB to exit FY17 with tier 1 CRAR of 12.7%,leverage at 12x. How does our 3 year Outlook change? Operating leverage, stable margins and a return to growth remain the key triggers over a 3 year outlook. We expect cost to income ratios to decline to 46% by FY18 from 54% in FY15, with credit costs averaging ~99bps (137bps currently) helping RoAs to 1.3% with RoEs of ~17% by FY18. On the business front, we expect a material change in the loan book profile, with SME accounting for ~40% of the loan portfolio, corporate loans at 32% while on the liabilities side we expect CASA ratio to average ~22%; the NIM profile is expected to remain in a 3.2-3.3% range. However, a return to 20% plus credit growth rates is only likely by FY19. Average age of employees is expected to touch sub 30 over this period, nullifying union issues and enhancing productivity. Financial summary Year 3QFY16 Update Promoters 2.2 Institutions 45.0 Public 52.9 % 1m 3m 12m KVB 4 4-19 Sensex -2-7 -9 Bankex -5-11 -17 Key estimate revision NII (Rs. mn) PAT (Rs. mn) FY16E Bloomberg Shares o/s Market Cap FY17E Old New Change Old New Change NII 17,441 17,501 0% 19,584 18,930-3% NIM% 3.39% 3.44% 5 bps 3.35% 3.34% -1 bps PAT 5,907 5,980 1% 7,148 7,214 1% ROA% 1.05% 1.07% 2 bps 1.12% 1.15% 3 bps ABV 353 354 0% 395 397 1% EPS 48 49 2% 59 59 0% All figures in Rs. mn, except ABV and EPS, which is in Rs. 15 Jan, 2015 KVB IN 121mn Rs. 57bn 52-wk High-Low Rs. 619-412 3m Avg. Daily Vol Index Rs. 56mn BSE500 ROE (%) ROA (%) ABV (Rs.) P/ABV (x) FY15 14,659 4,566 12.1 0.9 326 1.4 FY16E 17,501 5,980 13.4 1.1 354 1.3 FY17E 18,930 7,214 14.6 1.2 397 1.2 FY18E 21,408 9,057 16.3 1.3 455 1.0 FY19E 24,981 11,524 18.1 1.4 531 0.9 ABHINESH VIJAYRAJ abhinesh@sparkcapital.in +91 44 4344 0006 NAVIN BABU E S navin@sparkcapital.in +91 44 4344 0065 NISHANT RUNGTA nishant@sparkcapital.in +91 44 4344 0033 Find Spark Research on Bloomberg (SPAK <go>), Thomson First Call, Reuters Knowledge and Factset Page 1

Quarterly Financial Statements Standalone financial results Rs. mn\period 3QFY16 3QFY15 yoy Growth 2QFY16 qoq Growth FY15 FY16E yoy Growth Interest Earned 13,524 13,647-0.9% 13,645-0.9% 53,959 54,405 0.8% Interest Expended 9,042 9,736-7.1% 9,271-2.5% 39,300 36,903-6.1% Net Interest Income 4,482 3,911 14.6% 4,374 2.5% 14,659 17,501 19.4% Other Income 1,728 1,471 17.4% 2,057-16.0% 5,808 7,458 28.4% Fee Income 1,080 957 12.9% 1,160-6.9% 3,973 5,254 32.2% Trading Gains 350 379-7.6% 750-53.3% 1,149 1,407 22.4% Total Income 6,210 5,382 15.4% 6,432-3.4% 20,467 24,959 21.9% Operating Expenses 2,954 2,755 7.2% 2,879 2.6% 11,035 11,978 8.5% Pre-Provision Profit 3,256 2,627 23.9% 3,553-8.4% 9,433 12,982 37.6% Provisions 927 1,062-12.6% 1,260-26.4% 4,805 4,366-9.1% PBT 2,328 1,565 48.7% 2,292 1.6% 4,637 8,616 85.8% PAT 1,528 1,139 34.2% 1,422 7.4% 4,566 5,980 31.0% EPS (Rs.) 14 11 34.2% 13 7.4% 38 49 30.7% NIM% 3.51% 3.13% 38 bps 3.42% 9 bps 3.04% 3.44% -39 bps CASA% 23.4% 21.4% 197 bps 23.4% 4 bps 22.0% 23.0% -101 bps ROA% 1.1% 0.8% 24 bps 1.0% 5 bps 0.9% 1.1% -19 bps Gross NPA % 1.9% 1.9% 6.0% 2.0% -1.5% 1.9% 1.9% 142.8% Net NPA % 1.0% 0.7% 40.1% 1.0% 1.4% 0.8% 0.9% 100.8% Advances 3,78,720 3,57,460 5.9% 3,69,686 2.4% 3,61,089 3,95,638 9.6% Deposits 4,73,360 4,51,160 4.9% 4,67,151 1.3% 4,46,903 4,94,548 10.7% Page 2

Financial Summary Abridged Financial Statements Key Metrics Rs.mn FY15 FY16E FY17E FY18E FY15 FY16E FY17E FY18E Profit & Loss Growth ratios Net Interest Income 14,659 17,501 18,930 21,408 ABV per share 9.7% 8.5% 12.4% 14.5% Other Income 5,808 7,458 8,683 10,240 Advances 6.2% 9.6% 13.5% 16.0% Fee Income 3,973 5,254 6,808 8,393 Deposits 2.1% 10.7% 12.1% 14.6% Treasury Income 710 1,037 875 847 NII 14.2% 19.4% 8.2% 13.1% Total Income 20,467 24,959 27,613 31,648 PAT 6.3% 31.0% 20.6% 25.6% Operating Expenses 11,035 11,978 13,241 14,783 EPS -6.3% 30.7% 20.6% 25.6% Pre-Provision Profit 9,433 12,982 14,373 16,865 Asset Quality Provisions 4,805 4,366 4,354 4,286 Gross NPA (Rs.mn) 6,778 7,428 8,320 9,318 PBT 4,637 8,616 10,019 12,579 Gross NPA 1.9% 1.9% 1.9% 1.8% PAT 4,566 5,980 7,214 9,057 Net NPA 0.8% 0.9% 0.8% 0.7% Balance Sheet Slippage 1.8% 2.1% 1.9% 1.7% Networth 42,460 46,648 52,009 59,070 Coverage 58.5% 52.1% 56.8% 60.9% Deposits 4,46,903 4,94,548 5,54,382 6,35,240 Growth in Gross NPA 142.8% 9.6% 12.0% 12.0% CASA 98,422 1,13,906 1,29,725 1,48,646 Asset-Liability Profile Borrowings & Current Liabilities 42,162 50,262 56,042 67,487 Leverage (x) 11.3 11.5 11.5 11.7 Total Liabilities & Networth 5,31,525 5,91,457 6,62,432 7,61,797 CD ratio 80.8% 80.0% 81.0% 82.0% Cash with RBI & other banks 27,491 38,009 32,148 36,878 CASA 22.0% 23.0% 23.4% 23.4% Advances 3,61,089 3,95,638 4,49,049 5,20,897 Tier I CAR 13.6% 12.7% 12.7% 12.5% Investments 1,27,730 1,31,379 1,52,072 1,71,696 Profitability and Efficiency Fixed & Current Assets 15,215 26,431 29,162 32,326 Net Interest Margin 3.0% 3.4% 3.3% 3.3% Total Assets 5,31,525 5,91,457 6,62,432 7,61,797 ROA 0.9% 1.1% 1.2% 1.3% Other Information ROE 12.1% 13.4% 14.6% 16.3% Shares outstanding (mn) 122 122 122 122 Valuation Current market price (Rs.) 465 465 465 465 Book Value per share (Rs.) 349 383 427 485 Market capitalisation (Rs. mn) 56,558 56,558 56,665 56,665 Adj Book Value per share (Rs.) 326 354 397 455 Earnings per share (Rs.) 37.5 49.1 59.2 74.3 P/ABV (x) 1.4 1.3 1.2 1.0 Dividend per share (Rs.) 13 13 13 14 P/E (x) 12.4 9.5 7.9 6.3 Page 3

Spark Disclaimer Rs. 3 Year Price and History 800 600 400 200 0 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Price Report Date Price Reco. 14/Dec/15 441 593 Buy 19/Oct/15 429 593 Buy 04/Aug/15 478 610 Buy 04/May/15 482 609 Buy 06/Feb/15 575 674 Buy 11/v/14 524 604 Buy 11/Sep/14 509 587 Buy 30/May/14 446 525 Buy 03/Feb/14 324 404 Buy 19/v/13 334 401 Buy 10/Sep/13 312 471 Buy 19/Aug/13 323 471 Buy Report Date Price Reco. 29/May/13 469 575 Buy 06/Feb/13 512 591 Buy 01/v/12 471 586 Buy Spark Capital Advisors (India) Private Limited (Spark Capital) and its affiliates are engaged in investment banking, investment advisory and institutional equities and infrastructure advisory services. Spark Capital is registered with SEBI as a Stock Broker and Category 1 Merchant Banker. We hereby declare that our activities were neither suspended nor we have defaulted with any stock exchange authority with whom we are registered in the last five years. We have not been debarred from doing business by any Stock Exchange/SEBI or any other authorities, nor has our certificate of registration been cancelled by SEBI at any point of time. Absolute Interpretation Stock expected to provide positive returns of >15% over a 1-year horizon ADD Stock expected to provide positive returns of >5% <15% over a 1-year horizon REDUCE Stock expected to provide returns of <5% -10% over a 1-year horizon SELL Stock expected to fall >10% over a 1-year horizon Spark Capital has a subsidiary Spark Investment Advisors (India) Private Limited which is engaged in the services of providing investment advisory services and is registered with SEBI as Investment Advisor. Spark Capital has also an associate company Spark Infra Advisors (India) Private Limited which is engaged in providing infrastructure advisory services. This document does not constitute or form part of any offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. thing in this document should be construed as investment or financial advice, and nothing in this document should be construed as an advice to buy or sell or solicitation to buy or sell the securities of companies referred to in this document. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. 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 law, regulation or which would subject Spark Capital and/or 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 a certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such applicable restrictions. This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. Spark Capital makes no representation or warranty, express or implied, as to the accuracy, completeness or fairness of the information and opinions contained in this document. Spark Capital, its affiliates, and the employees of Spark Capital and its affiliates may, from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Page 4

Disclaimer (Cont d) This report has been prepared on the basis of information, which is already available in publicly accessible media or developed through an independent analysis by Spark Capital. While we would endeavour to update the information herein on a reasonable basis, Spark Capital and its affiliates are under no obligation to update the information. Also, there may be regulatory, compliance or other reasons that prevent Spark Capital and its affiliates from doing so. Neither Spark Capital nor its affiliates or their respective directors, employees, agents or representatives shall be responsible or liable in any manner, directly or indirectly, for views or opinions expressed in this report or the contents or any errors or discrepancies herein or for any decisions or actions taken in reliance on the report or the inability to use or access our service in this report or for any loss or damages whether direct or indirect, incidental, special or consequential including without limitation loss of revenue or profits that may arise from or in connection with the use of or reliance on this report. Spark Capital and/or its affiliates and/or employees may have interests/positions, financial or otherwise in the securities mentioned in this report. To enhance transparency, Spark Capital has incorporated a disclosure of interest statement in this document. This should however not be treated as endorsement of views expressed in this report: Disclosure of Interest Statement Analyst financial interest in the company Group/directors ownership of the subject company covered Investment banking relationship with the company covered Spark Capital s ownership/any other financial interest in the company covered Associates of Spark Capital s ownership more than 1% in the company covered Any other material conflict of interest at the time of publishing the research report Receipt of compensation by Spark Capital or its Associate Companies from the subject company covered for in the last twelve months: Managing/co-managing public offering of securities Investment banking/merchant banking/brokerage services Products or services other than those above In connection with research report Whether Research Analyst has served as an officer, director or employee of the subject company covered Whether the Research Analyst or Research Entity has been engaged in market making activity of the Subject Company; Yes/ Analyst Certification of Independence The views expressed in this research report accurately reflect the analyst s personal views about any and all of the subject securities or issuers; and no part of the research analyst s compensations was, is or will be, directly or indirectly, related to the specific recommendation or views expressed in the report. Additional Disclaimer for US Institutional Investors This research report prepared by Spark Capital Advisors (India) Private Limited is distributed in the United States to US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Auerbach Grayson, LLC, a broker-dealer registered in the US (registered under Section 15 of Securities Exchange Act of 1934, as amended). Auerbach Grayson accepts responsibility on the research reports and US Institutional Investors wishing to effect transaction in the securities discussed in the research material may do so through Auerbach Grayson. All responsibility for the distribution of this report by Auerbach Grayson, LLC in the US shall be borne by Auerbach Grayson, LLC. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is not directed at you if Spark Capital Advisors (India) Private Limited or Auerbach Grayson, LLC is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Auerbach Grayson, LLC and Spark Capital Advisors (India) Private Limited are permitted to provide research material concerning investment to you under relevant legislation and regulations. Page 5