( IN) Rating: BUY CMP: Rs2,029 TP: Rs2,287 July 30, 2018 Q1FY19 Result Update Change in Estimates Target Reco Change in Estimates Current Previous FY19E FY20E FY19E FY20E Rating BUY BUY Target Price 2,287 2,228 NII (Rs.) 133,225 158,043 135,686 162,112 % Chng. (1.8) (2.5) PPoP (Rs.) 153,126 177,636 153,333 179,749 % Chng. (0.1) (1.2) EPS (Rs.) 40.1 46.2 40.4 47.4 % Chng. (0.9) (2.5) Key Financials FY17 FY18 FY19E FY20E Net Int. Inc. 99,540 111,797 133,225 158,043 Growth (%) 14.5 12.3 19.2 18.6 Op. Profit 114,267 170,458 153,126 177,636 PAT 74,427 121,209 102,875 118,622 EPS (Rs.) 30.1 47.5 40.1 46.2 Gr. (%) 1.0 57.8 (15.7) 15.3 DPS (Rs.) - - - - Yield (%) - - - - Margin (%) 4.3 4.2 4.2 4.3 RoAE (%) 20.2 24.0 15.3 15.5 RoAA (%) 2.4 3.3 2.4 2.4 PE (x) 67.3 42.7 50.6 43.9 P/BV (x) 12.7 8.4 7.2 6.5 P/ABV (x) 13.5 9.0 7.0 6.4 Key Data.BO IN 52-W High / Low Rs.2,053 / Rs.1,638 Sensex / Nifty 37,494 / 11,320 Market Cap Rs.3,428bn/ $ 49,916m Shares Outstanding 1,690m 3M Avg. Daily Value Rs.9601.67m Shareholding Pattern (%) Promoter s - Foreign 72.89 Domestic Institution 16.01 Public & Others 11.10 Promoter Pledge (Rs bn) Stock Performance (%) 1M 6M 12M Absolute 6.3 4.7 13.6 Relative 0.4 0.6 (2.1) Pritesh Bumb priteshbumb@plindia.com 91-22-66322232 R Sreesankar rsreesankar@plindia.com 91-22-66322214 Vidhi Shah vidhishah@plindia.com 91-22-66322242 IND-AS transition dampens performance Quick Pointers New disclosure under IND-AS shows stress assets (gross stage 3) at 3.7% including weak standard accounts of 2.5% of loans page 2 Positive flow through has been lower while charge on opex from ESOPs & CSR has seen higher bearing on earnings than expectations s loan asset growth of 19% YoY was better than expectations of 18% YoY driven from both individual & non-individual but same was visible in NII growth of 21% YoY as (i) impact from IND-AS accounting on interest expenses (Rs1.1bn of impact) and (ii) slightly lower spreads on individual loan book. under the IND-AS accounting recognized certain weak standard assets under the Gross Stage 3 exposure (2.5% of assets) leading to utilizing the floating provisions to maintain PCR at 28%. The standard stressed assets remain paying in Ltd book, but either is financially weak or NPAs in other institutions. Additional disclosures are slightly negative but given strong capabilities, we don t see large risks. We see slight spread pressure in near term but has already taken increase in PLRs keeping spreads in tight band and asset growth is expected to be better. Maintain BUY with TP of Rs2,287 (up from Rs2,228) based on SOTP valuation with valued at 2.9x. Slower operational performance under IND-AS: NII growth was lower at 21% YoY (PLe: 27% YoY) as borrowing costs increased (lower under IND-AS last year) despite some gains on investment income and slight spreads coming off in the quarter by 1bps to 2.28% mainly in individual book. Management expects spreads to improve as increase in rates should benefit eventually on both individual & non-individual. Operating performance (adjusting to dividend income) was also impacted from CSR expenses recognized from P&L and ESOPs valued at market price compared to last year (under IND-AS). Improvement in assets growth: Loan growth was up 19% YoY as individual loan continued to benefit from lower base and improvement in volumes especially in lower ticket size. Non individual loan book also grew well at 18% YoY but improved lending towards LRD assets. Spreads improved in the nonindividual book by 4bps QoQ to 3.14% as took rate hikes much earlier on this segment, while individual book spreads were at 1.91% down 1bp QoQ on lag in pricing of loans for legacy portfolio. Increase in stress assets slight negative: Under the IND-AS disclosures, recognized additional 2.5% of assets as weak standard accounts from both individual & wholesale book, which is slightly higher, in our view. These accounts are paying but has seen weaknesses in these accounts and hence exposure at default (EAD) was at 3.7% of loans v/s GNPA of 1.18% (which is included in EAD) leading to utilization of floating provisions. Assumptions for LGDs on individual book was assumed at 8.3% and 21.9% on non-individual book. July 30, 2018 1
Total Under IND-AS, has classified assets based on Exposure at Default: Stage 1: Performing Assets Stage 2: Under Performing Assets Stage 3: (a) Performing but identified as assets having some degree of stress; (b): Non-Performing Assets Ltd disclosed the Stage 3 Standard but stressed asset which was at 2.5% v/s 1.49% YoY but has come off significantly Total EAD on stage 3 is 3. on portfolio basis Exhibit 1: Stage 3 exposure at Default has come off QoQ under IND-AS Exposure at Default (EAD) % Q1FY19 Q1FY18 Chg. YoY Q4FY18 Chg. QoQ Stage 1 94.76% 94.90% (14)bps 94.17% 59bps Stage 2 1.54% 2.50% (96)bps 1.48% 6bps Stage 3 (a): Standard, stressed assets 2.52% 1.49% 103bps 3.24% (72)bps Stage 3 (b): Non Performing Loans 1.18% 1.11% 7bps 1.11% 7bps Total Stage 3 EAD 3. 2.60% 110bps 4.35% 65bps The NPAs have slightly deteriorated Exhibit 2: Utilized floating provisions for considering the standard stressed assets As gross stage 3 assets increased, utilized the floating provisions on these weak standard assets to maintain its PCR at 28%. Asset Quality as per IND AS (Rs mn) Q1FY19 Q1FY18 Chg. YoY Gross Stage 3 138,660 82,220 68.6% ECL Provision Stage 3 38,630 23,960 61.2% Net Stage 3 100,030 58,260 71.7% Coverage Ratio% Stage 3 28% -1.0% Gross Stage 1 & 2 3,607,380 3,083,010 17.0% ECL Provision Stage 1 & 2 5,650 5,860-3.6% Net Stage 1 & 2 3,611,730 3,077,150 17.4% ECL Provision % Stage 1 & 2 0.16% 0.19% 0.0% July 30, 2018 2
Exhibit 3: Q1FY19 Financials IND-AS accounting impacts NII & opex leads to lower than expected earnings IND-AS IND-AS I-GAAP P&L (Rs m) Q1FY19 Q1FY18 YoY gr. (%) Q4FY18 QoQ gr. (%) Interest on advances 88,588 77,570 14.2 85,415 3.7 Other interest income 4,410 4,265 3.4 3,804 15.9 Total interest income 92,999 81,835 13.6 89,219 4.2 Interest expense 63,527 57,543 10.4 57,109 11.2 Net Interest Income 29,472 24,292 21.3 32,110 (8.2) Capital Gains 2 18 (88.0) 3,006 (99.9) Total other income 6,519 1,047 522.9 4,177 56.1 Total income 35,993 25,357 41.9 39,293 (8.4) Operating expenses 5,096 3,497 45.7 2,321 119.6 -Staff expenses 3,243 2,075 56.3 959 238.0 -Other expenses 1,853 1,422 30.3 1,361 36.1 Operating profit 30,897 21,860 41.3 36,972 (16.4) Core operating profit 30,895 21,841 41.5 33,966 (9.0) Total provisions 197 1,636 (88.0) 1,800 (89.1) Profit before tax 30,700 20,224 51.8 35,172 (12.7) Tax 8,800 5,979 47.2 6,710 31.1 Profit after tax 21,900 14,245 53.7 28,462 (23.1) Balance Sheet (Rs m) Loan composition 3,719,880 3,135,730 18.6 3,594,420 3.5 -Individual loans (%) 69.1 68.8 70.0 -Corporate loans (%) 29.3 29.6 28.5 - Others (%) 1.6 1.5 1.6 Borrowings composition 3,325,260 2,863,750 16.1 3,206,560 3.7 -Term loans (%) 16.0 11.6 14.6 -Bonds/ Deb./ CPs (%) 54.1 58.6 56.6 -Deposits (%) 29.9 29.8 28.8 Ratios (%) Spreads (Cumulative) 2.28 2.29 (1) 2.29 (1) - Individual Loan Spreads 1.91 1.90 1 1.92 (1) - Non-individual Loan Spreads 3.14 3.18 (4) 3.10 4 NIMs 3.50 3.40 10 4.00 (50) Asset quality Gross NPL 1.2 1.1 6 1.1 7 Coverage ratio 33.0 26.4 661 31.9 114 Others / Ratios Cost-income ratio 14.2 13.8 37 5.9 825 Tier-I 15.0 12.1 290 17.3 (230) Note QoQ numbers not comparable July 30, 2018 3
Exhibit 4: Overall loan growth contributed from both individual & non-individuals Exhibit 5: Loan mix broadly remains towards individual lending Individual loan gr YoY Non-Individual loan gr YoY Individuals Corporates Others 25% 20% 15% 10% 5% 0% 3Q14 4Q14 31% 28% 28% 28% 68% 68% 68% 71% Exhibit 6: Deposit share moves up on mobilization Exhibit 7: Post some reclassification Bond mix is up 36% 35% Deposits Share 100% Term loans Bonds Deposits 34% 80% 33% 32% 31% 60% 40% 28% 2Q14 3Q14 4Q14 20% 0% 4Q14 Exhibit 8: Overall spreads very marginally weaker Exhibit 9: Spreads slightly came off in individual book NIM Spread Profile (RHS) Spread - Individual Biz Spread - Non-Individual Biz 4.2% 4.0% 3.8% 3.6% 3.4% 3.2% 3.0% 2.35% 2.33% 2.31% 2. 2.27% 2.25% 3.20% 3.00% 2.80% 2.60% 2.40% 2.20% 2.00% 1.80% 4Q14 Note Q1FY18 & Q1FY19 on IND-AS July 30, 2018 4
Exhibit 10: Slight movement upwards in GNPLs 1.2% 1.1% 1.0% 0.9% 0.8% 0.7% 0.6% 0.5% 0.4% 0.3% Net NPLs Gross NPLs Exhibit 11: both in individual and non-individual 2.6% 2.4% 2.2% 2.0% 1.8% 1.6% 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% Gross NPL - Individual Gross NPL - Non Individual Exhibit 12: Earnings Change Table We factor in slightly weaker spreads, higher opex from CSR & ESOPs and AMC stake sale gain (Rs mn) Old Revised % Change FY19E FY20E FY19E FY20E FY19E FY20E Net interest income 135,638 161,981 133,225 158,043 (1.8) (2.4) Operating profit 152,233 178,439 153,126 177,636 0.6 (0.4) Net profit 103,082 120,813 102,875 118,622 (0.2) (1.8) EPS (Rs) 60.9 70.6 60.7 69.3 (0.2) (1.8) ABVPS (Rs) 425.5 470.5 425.4 469.1 (0.0) (0.3) Price target (Rs) 2,228 2,287 5.5 Recommendation BUY BUY Exhibit 13: SOTP valuation table based on Mar-20 SOTP valuation Stake (%) Value per share (Rs) Basis Parent (A) 1,222 Avg. of EVA and twostage GGM, 2.9x P/ABV & 17.6x P/E Mar-20E Subsidiaries / Associates Bank 21.0 831 Value of stake in Bank as per our fair value Life insurance 51.9 252 Appraisal value & NBP AMC 53.3 66 6.0% of AUM General Insurance 50.9 16 20x forward earnings Others 89 Total subs/associates (B) @10% discount 1,065 Fair value (A+B) 2,287 Contribution of subs to total (%) 47 July 30, 2018 5
Exhibit 14: We revise our TP upwards to Rs2,287 (from Rs2,228) mainly on increase from Bank valuations PT calculation and upside Fair price - EVA 1,228 Fair price - P/ABV 1,216 Average of the two 1,222 Target P/ABV 2.9 Target P/E 17.6 Value of subs/associates 1,065 Fair value of consol. entity 2,287 Current price, Rs 2,028 Upside (%) 13% Dividend yield (%) 1% Total return (%) 14% Source: PL Research Exhibit 15: Ltd 1 year forward P/ABV trends P/ABV 3 yr avg. avg. + 1 SD avg. - 1 SD 6.0 5.5 5.0 4.5 4.0 3.5 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 July 30, 2018 6
Income Statement (Rs. m) Int. Inc. / Opt. Inc. 308,502 337,246 399,126 470,281 Interest Expenses 208,962 225,449 265,901 312,238 Net interest income 99,540 111,797 133,225 158,043 Growth(%) 14.5 12.3 19.2 18.6 Non-interest income 23,095 69,122 33,817 35,102 Growth(%) (20.0) 199.3 (51.1) 3.8 Net operating income 122,634 180,918 167,041 193,145 Expenditures Employees 3,888 5,175 7,606 8,518 Other Expenses 3,920 4,804 5,837 6,593 Depreciation 560 482 473 397 Operating Expenses 8,368 10,460 13,915 15,509 PPP 114,267 170,458 153,126 177,636 Growth(%) 5.6 49.2 (10.2) 16.0 Provisions 7,000 20,300 5,105 6,957 Profit Before Tax 107,267 150,158 148,021 170,679 Tax 32,840 28,949 45,146 52,057 Effective Tax rate(%) 30.6 19.3 30.5 30.5 PAT 74,427 121,209 102,875 118,622 Growth(%) 4.9 62.9 (15.1) 15.3 Balance Sheet (Rs. m) Source of funds Equity 3,177 3,352 3,424 3,424 Reserves and Surplus 392,766 610,674 724,761 799,695 Networth 395,943 614,025 728,184 803,119 Growth (%) 16.2 55.1 18.6 10.3 Loan funds 2,797,322 3,199,121 3,721,765 4,329,143 Growth (%) 17.7 14.4 16.3 16.3 Deferred Tax Liability - - - - Other Current Liabilities 120,792 127,520 133,896 140,591 Other Liabilities 25,125 52,742 55,379 58,148 Total Liabilities 3,339,182 3,993,409 4,639,225 5,331,000 Application of funds Net fixed assets 6,423 6,445 6,767 7,038 Advances 2,957,338 3,594,420 4,259,698 5,016,862 Growth (%) 14.3 21.5 18.5 17.8 Investments 204,101 305,325 265,233 291,259 Current Assets 116,124 55,057 74,723 (17,618) Net current assets (4,668) (72,463) (59,173) (158,209) Other Assets 55,706 32,161 32,804 33,460 Total Assets 3,339,693 3,993,408 4,639,225 5,331,000 Growth (%) 16.0 19.6 16.2 14.9 Business Mix AUM 2,477,288 2,907,863 3,366,192 3,983,849 Growth (%) 17.5 17.4 15.8 18.3 On Balance Sheet - - - - % of AUM - - - - Off Balance Sheet - - - - % of AUM - - - - Profitability & Capital (%) NIM 4.3 4.2 4.2 4.3 ROAA 2.4 3.3 2.4 2.4 ROAE 20.2 24.0 15.3 15.5 Source: Company Data, PL Research Quarterly Financials (Rs. m) Y/e Mar Q2FY18 Q3FY18 Q4FY18 Q1FY19 Int. Inc. / Operating Inc. 81,449 84,744 89,219 92,999 Income from securitization - - - - Interest Expenses 55,341 55,457 57,109 63,527 Net Interest Income 26,108 29,287 32,110 29,472 Growth (%) 13.7 13.7 12.6 21.3 Non-Interest Income 6,161 38,960 7,183 6,521 Net Operating Income 32,269 68,247 39,293 35,993 Growth (%) 12.9 138.4 19.9 41.9 Operating expenditure 2,130 2,274 2,196 4,966 PPP 30,021 65,852 36,972 30,897 Growth (%) (16.1) (14.9) (8.6) 9.4 Provision 950 950 1,800 197 Exchange Gain / (Loss) - - - - Profit before tax 29,071 64,902 35,172 30,700 Tax 8,060 8,200 6,710 8,800 Prov. for deferred tax liability - - - - Effective Tax Rate 27.7 12.6 19.1 28.7 PAT 21,011 56,702 28,462 21,900 Growth 15 233 39 54 AUM 3,702,55 6 3,857,27 8 3,983,84 9 4,161,84 9 YoY growth (%) 19.0-18.3 16.2 Borrowing 3,002,96 0 3,079,78 0 3,199,12 1 3,325,26 0 YoY growth (%) 17.5 16.9 14.8 16.1 Key Ratios CMP (Rs) 2,029 2,029 2,029 2,029 EPS (Rs) 30.1 47.5 40.1 46.2 Book value (Rs) 160 241 284 313 Adj. BV(Rs) 151 225 289 318 P/E(x) 67 43 51 44 P/BV(x) 13 8 7 6 P/ABV(x) 13 9 7 6 DPS (Rs) - - - - Dividend Payout Ratio(%) 7.5 31.2 40.1 36.8 Dividend Yield(%) - - - - Asset Quality Gross NPAs(Rs m) 23,363 40,258 30,670 34,616 Net NPA(Rs m) 15,983 27,432 (8,972) (9,199) Gross NPAs to Gross Adv.(%) 0.8 1.1 0.7 0.7 Net NPAs to net Adv.(%) 0.5 0.8 (0.2) (0.2) NPA coverage(%) 31.6 31.9 129.3 126.6 Du-Pont NII 3.2 3.0 3.1 3.2 NII INCI. Securitization 3.2 3.0 3.1 3.2 Total income 3.9 4.9 3.9 3.9 Operating Expenses 0.3 0.3 0.3 0.3 PPOP 3.7 4.6 3.5 3.6 Total Provisions 0.2 0.6 0.1 0.1 RoAA 2.4 3.3 2.4 2.4 Avg. Assets/Avg. net worth 8.4 7.3 6.4 6.5 RoAE 20.2 24.0 15.3 15.5 Source: Company Data, PL Research July 30, 2018 7
Price Chart Recommendation History (Rs) 2025 1774 1524 1273 1022 Aug-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 No. Date Rating TP (Rs.) Share Price (Rs.) 1 9-Oct-17 Accumulate 1,843 1,740 2 30-Oct-17 BUY 2,000 1,706 3 10-Jan-18 BUY 2,000 1,736 4 30-Jan-18 BUY 2,160 1,953 5 13-Apr-18 BUY 2,222 1,837 6 30-Apr-18 BUY 2,228 1,885 7 10-Jul-18 BUY 2,228 1,920 PL s Recommendation Nomenclature (Absolute Performance) Buy : > 15% Accumulate : 5% to 15% Hold : +5% to -5% Reduce : -5% to -15% Sell : < -15% Not Rated (NR) : No specific call on the stock Under Review (UR) : Rating likely to change shortly July 30, 2018 8
ANALYST CERTIFICATION (Indian Clients) We/I, Ms. Pritesh Bumb- MBA, M.com, Mr. R Sreesankar- B.Sc, Ms. Vidhi Shah- CA 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. (US Clients) The research analysts, with respect to each issuer and its securities covered by them in this research report, certify that: All of the views expressed in this research report accurately reflect his or her or their personal views about all of the issuers and their securities; and No part of his or her or their compensation was, is or will be directly related to the specific recommendation or views expressed in this research report. DISCLAIMER Indian Clients Prabhudas Lilladher Pvt. Ltd, Mumbai, India (hereinafter referred to as PL ) is engaged in the business of Stock Broking, Portfolio Manager, Depository Participant and distribution for third party financial products. PL is a subsidiary of Prabhudas Lilladher Advisory Services Pvt Ltd. which has its various subsidiaries engaged in business of commodity broking, investment banking, financial services (margin funding) and distribution of third party financial/other products, details in respect of which are available at www.plindia.com. This document has been prepared by the Research Division of PL and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of PL. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, PL has not independently verified the accuracy or completeness of the same. Neither PL nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient's particular circumstances and, in case of doubt, advice should be sought from an independent expert/advisor. Either PL or its affiliates or its directors or its employees or its representatives or its clients or their relatives may have position(s), make market, act as principal or engage in transactions of securities of companies referred to in this report and they may have used the research material prior to publication. PL may from time to time solicit or perform investment banking or other services for any company mentioned in this document. PL is in the process of applying for certificate of registration as Research Analyst under Securities and Exchange Board of India (Research Analysts) Regulations, 2014 PL submits that no material disciplinary action has been taken on us by any Regulatory Authority impacting Equity Research Analysis activities. PL or its research analysts or its associates or his relatives do not have any financial interest in the subject company. PL or its research analysts or its associates or his relatives do not have actual/beneficial ownership of one per cent or more securities of the subject company at the end of the month immediately preceding the date of publication of the research report. PL or its research analysts or its associates or his relatives do not have any material conflict of interest at the time of publication of the research report. PL or its associates might have received compensation from the subject company in the past twelve months. PL or its associates might have managed or co-managed public offering of securities for the subject company in the past twelve months or mandated by the subject company for any other assignment in the past twelve months. PL or its associates might have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months. PL or its associates might 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 twelve months PL or its associates might have received any compensation or other benefits from the subject company or third party in connection with the research report. PL encourages independence in research report preparation and strives to minimize conflict in preparation of research report. PL or its analysts did not receive any compensation or other benefits from the subject Company or third party in connection with the preparation of the research report. PL or its Research Analysts do not have any material conflict of interest at the time of publication of this report. It is confirmed that Ms. Pritesh Bumb- MBA, M.com, Mr. R Sreesankar- B.Sc, Ms. Vidhi Shah- CA Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. The Research analysts for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report. The research analysts for this report has not served as an officer, director or employee of the subject company PL or its research analysts have not engaged in market making activity for the subject company Our sales people, 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 o the foregoing, among other things, may give rise to real or potential conflicts of interest. PL and its associates, their directors and employees may (a) from time to time, have a long or short position in, and buy or sell the securities of the subject company or (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 subject company or act as an advisor or lender/borrower to the subject company or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions. US Clients This research report is a product of Prabhudas Lilladher Pvt. Ltd., which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S. regulated broker-dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker-dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances and trading securities held by a research analyst account. This report is intended for distribution by Prabhudas Lilladher Pvt. Ltd. only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and interpretations thereof by U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a 6(a)(2). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any U.S. person, which is not the Major Institutional Investor. In reliance on the exemption from registration provided by Rule 15a-6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain business with Major Institutional Investors, Prabhudas Lilladher Pvt. Ltd. has entered into an agreement with a U.S. registered broker-dealer, Marco Polo Securities Inc. ("Marco Polo"). Transactions in securities discussed in this research report should be effected through Marco Polo or another U.S. registered broker dealer. Prabhudas Lilladher Pvt. Ltd. 3rd Floor, Sadhana House, 570, P. B. Marg, Worli, Mumbai-400 018, India Tel: (91 22) 6632 2222 Fax: (91 22) 6632 2209 www.plindia.com Bloomberg Research Page: PRLD <GO> July 30, 2018 9