Union Budget 2013-14 Review

Table of Contents
Index Union Budget 2013-14: Prudence over populism Sectoral Impact Automobile Banking Capital Goods Cement FMCG Infrastructure IT Media Metals Oil & Gas Pharmaceutical Power Real Estate Telecom Page No. 2-5 6 7 8 9 9 10 11 12 12 13 14 15 15 16 16

February 28, 2013

Please refer to important disclosures at the end of this report

Union Budget 2013-14 Review

Union Budget 2013-2014

Prudence over populism
The Finance Minister has delivered on one of the most important aspects in this Budget - fiscal consolidation. The budgeted fiscal deficit for FY2014 at 4.8% of GDP is in line with our and market expectations. In terms of the fiscal deficit for FY2013, the Finance Minister has exceeded expectations and reined it at 5.2% and it is slightly lower than the government's own estimate of 5.3% of GDP In addition, the actual FY2012 headline deficit has also . narrowed to 5.7% of GDP from 5.9% of GDP . Overall, we believe that the FY2014 Budget is responsible and more credible since it seeks to narrow the fiscal deficit by increasing revenues as well as reprioritizing expenditure. Although the Finance Minister has refrained from announcing any big bang reformist measures (as expected by the market) in the Budget, he has also abstained from 'playing to the galleries' and resorting to major populist policies ahead of the election year and we view that as a positive. expenditure during the period by 17.6%. However, for FY2014BE the Finance Minister has increased the allocation to plan expenditure by 29.4% (to `5.55lakh cr) over FY2013RE. On the revenue side, we believe that overall the budgeted estimates look optimistic particularly since buoyancy in revenues is linked to revival of economic activity. The Budget estimates a 21.2% rise in revenue receipts to `10.5lakh cr over the revised estimates of FY2013 with a 35.8% rise in service tax in FY2014BE over FY2013RE as it has limited the services exempt from taxes. The Budget also estimates a steep 74.6% rise in non debt capital receipts to `66,468cr over the revised estimates of FY2013. This can be mainly attributed to upping of the disinvestment target to `40,000cr in FY2014BE from `30,000cr BE and `24,000cr RE in the previous fiscal year. In addition, the Budget also seeks to divest government's stake in non-PSUs to garner `14,000cr. Overall, despite the over-estimation in receipts we believe that the fiscal deficit number looks credible. We believe that the government would stick to its fiscal deficit target of 4.8% of GDP in FY2014 and akin to the previous fiscal year, any shortfall in revenues is likely to be offset by similar compression on the plan expenditure side. We believe that it spells positively for the economy to avert a sovereign ratings downgrade by credit ratings agencies. The narrowing of the fiscal deficit is also a positive for the interest rate environment in the economy as monetary policy is expected to adopt a more accommodative stance to support growth in the wake of fiscal consolidation by the government.

Balancing revenues and expenditure

We believe that the Finance Minister has calibrated fiscal policy towards a good growth mix. Non plan expenditure is expected to moderate to 9.8% of GDP in FY2014BE from the revised estimate of 10.0% of GDP in FY2013RE. Plan expenditure, on the other hand is expected to inch upwards to 4.9% of GDP in FY2014BE as compared to 4.3% of GDP in FY2013RE. On the expenditure front, the government has clearly bitten the bullet. The total expenditure in FY2013RE is 4.0% lower than the FY2013BE and this has been achieved by squeezing plan

Exhibit 1: Key fiscal indicators (%)

FY2011 Tax revenue / GDP Total receipts / GDP Plan expenditure / GDP Non plan expenditure /GDP Subsidies /GDP Total expenditure / GDP Gross fiscal deficit /GDP Revenue deficit / GDP Effective revenue deficit Primary deficit / GDP
Source: Budget documents, Angel Research

FY2012 9.9 14.5 4.6 9.9 2.4 14.5 5.7 4.4 4.4 2.7

FY2013BE 10.6 14.7 5.1 9.5 1.9 14.7 5.1 3.4 3.4 1.9

FY2013RE 10.4 14.3 4.3 10.0 2.6 14.3 5.2 3.9 3.9 2.0

FY2014BE 10.9 14.6 4.9 9.8 2.0 14.6 4.8 3.3 3.3 1.5

10.2 15.4 13.4 10.5 2.2 15.4 4.8 3.2 2.1 1.8

February 28, 2013

Please refer to important disclosures at the end of this report

Union Budget 2013-14 Review

Exhibit 2: Budget FY2014 at a glance (` in cr) `

Change (% yoy) FY2012 1 2 2.a 2.a.i Revenue Receipts (2.c+3) Gross Tax Revenue (a+b) Direct Taxes Corporation Tax 751,437 889,177 496,732 322,816 170,343 3,573 392,445 149,328 145,608 97,509 629,765 121,672 36,938 18,850 18,088 531,980 1,304,365 891,990 273,150 217,941 400,899 412,375 1,304,365 1,145,785 158,580 515990 394,348 394,348 242,840 FY2013BE 935,685 1,077,611 572,567 373,227 195,786 3,554 505,044 186,694 194,350 124,000 771,071 164,614 41,650 11,650 30,000 513,590 1,490,925 969,900 319,759 190,015 460,126 521,025 1,490,925 1,286,109 204,816 513,590 350,424 350,424 193,831 FY2013RE 871,828 1,038,037 568,491 358,874 206,095 3,522 469,546 164,853 171,996 132,697 742,115 129,713 38,073 14,073 24,000 526,075 1,430,825 1,001,638 316,674 257,654 427,310 429,187 1,430,825 1,263,072 167,753 520,924 391,244 391,245 204,250 FY2014BE 1,056,330 1,235,870 670,867 419,520 247,639 3,708 565,003 187,308 197,554 180,141 884,078 172,252 66,468 10,654 55,814 542,499 1,665,297 1,109,975 370,684 231,084 508,207 555,322 1,665,297 1,436,169 229,128 542,499 379,839 379,838 171,815 FY14BE/FY13RE 21.2 19.1 18.0 16.9 20.2 5.3 20.3 13.6 14.9 35.8 19.1 32.8 74.6 (24.3) 132.6 3.1 16.4 10.8 17.1 (10.3) 18.9 29.4 16.4 13.7 36.6 4.1 (2.9) (2.9) (15.9) FY13RE/FY12A 16.0 16.7 14.4 11.2 21.0 (1.4) 19.6 10.4 18.1 36.1 17.8 6.6 3.1 (25.3) 32.7 (1.1) 9.7 12.3 15.9 18.2 6.6 4.1 9.7 10.2 5.8 1.0 (0.8) (0.8) (15.9) FY13RE/FY13BE (6.8) (3.7) (0.7) (3.8) 5.3 (0.9) (7.0) (11.7) (11.5) 7.0 (3.8) (21.2) (8.6) 20.8 (20.0) 2.4 (4.0) 3.3 (1.0) 35.6 (7.1) (17.6) (4.0) (1.8) (18.1) 1.4 11.6 11.6 5.4

2.a.ii Taxes on Income 2.a.iii Others 2.b 2.b.i Indirect taxes Customs

2.b.ii Union Excise Duties 2.b.iii Service Tax 2.c 3 4 4.a 4.b 5 6 7 7.a 7.b 7.c 8 9 Net tax revenue Non tax revenue Non debt capital Receipts (a+b) Recoveries of Loans Other Receipts (incl disinvestment) Borrowings and other liabilities Total receipts (1+4+5) Non plan expenditure (a+b+c) Interest payments Subsidies Others Plan expenditure Total expenditure (6+7) of which revenue expenditure of which capital expenditure 10 11 Gross fiscal deficit (9-(1+4)) Revenue deficit Effective revenue deficit 12 Primary deficit
Source: Budget documents, Angel Research

February 28, 2013

Please refer to important disclosures at the end of this report

Union Budget 2013-14 Review

Exhibit 3: Breakup of Plan expenditure (` in cr)

Particulars Agri/Rural Railways Road Education Health/Welfare/Water supply Housing N.E Areas Gen. Econ. Serv. Energy Science Technology & Environment Other plan Central plan Central Assist. for State & UT Plans Total plan
Source: Budget documents, Angel Research

2012 A 54,186 23,013 40,143 50,657 49,795 10,248 109 19,686 8,581 11,735 40,206 308,359 104,016 412,375

2013 RE 51,855 24,265 24,155 50,664 50,085 8,385 22,313 21,004 7,254 12,119 45,085 317,185 112,002 429,187

2014 BE 62,596 26,000 41,304 59,394 62,801 14,111 29,966 31,587 12,850 17,587 60,872 419,068 136,254 555,322

CAGR 2012-14 CAGR 7.5 6.3 1.4 8.3 12.3 17.3 1554.8 26.7 22.4 22.4 23.0 16.6 14.5 16.0

Subsidy estimates appear credible

Exhibit 4: FY2014 subsidy estimated to be 10.3% lower than FY2013RE (` in cr) `
FY2012 Subsidies Food Fertilizer Oil Other subsidies
Source: Budget documents, Angel Research

FY2013BE 190,015 75,000 60,974 43,580 10,461

FY2013RE 257,654 85,000 65,974 96,880 9,800

FY2014BE 231,084 90,000 65,972 65,000 10,112

FY14BE/FY13RE (10.3) 5.9 (0.0) (32.9) 3.2

FY13RE/FY12A 18.2 16.7 (5.8) 41.5 48.0

FY13RE/FY13BE 35.6 13.3 8.2 122.3 (6.3)

217,941 72,822 70,013 68,484 6,622

The budgeted subsidy burden for FY2014 is expected to decelerate to 2% of GDP as compared to FY2013RE of 2.6% of GDP and suggests a decline of 10.3% yoy. Food subsidy, a major component of the total subsidy, is estimated to rise by 5.9% in FY2014BE as against FY2013RE. The Finance Minister has set aside a moderate quantum of the subsidy ( `10,000cr) for

implementing the National Food Security Bill in the run-up to the elections. The rise in food subsidy bill is expected to be offset by holding a tight leash over fuel and petroleum subsidies. The 32.9% decline estimated in the petroleum subsidy for FY2014 over FY2013RE is not unrealistic since the government had set in place the momentum for reducing the petroleum subsidy since September 2012.

Market borrowings in line with expectations

Exhibit 5: FY2013RE for market borrowings lower than budgeted (` in cr) `
FY2012 Gross market borrowings Net market borrowings Net short term borrowings
Source: Budget documents, Angel Research

FY2013BE 569,616 479,000 9,000

FY2013RE 558,000 467,384 45,746

FY2014BE 629,009 484,000 19,844

509,796 436,211 126,866

As far as market borrowings are concerned, the government has successfully kept gross as well as net market borrowings in check for FY2013. The revised estimates for FY2013 indicate

lower gross market borrowing of `5.58lakh cr as against the budgeted estimated of `5.69lakh cr. Even the FY2014 budgeted estimate for market borrowings is in line with expectations and we expect it to be positive for bond yields.
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February 28, 2013

Please refer to important disclosures at the end of this report

Union Budget 2013-14 Review

Union Budget 2013-2014

Tax proposals
The Finance Minister did not give any noteworthy relief to the tax payer except a nominal tax credit of `2,000 to persons with total income up to `5 lakh and additional deduction of `1lakh on home loans below `25lakhs. On the contrary, the surcharge on corporate tax, taking the effective tax rate to 34%, is expected to be negative for earnings estimates of companies. The increase in surcharge (from 5% to 10%) on dividend distribution tax taking it effectively to 17% from 16.25% is also a negative for the corporate sector. In addition, the surcharge of 10% on persons whose taxable income exceeds `1cr per year is also sentimentally negative. The Finance Minister also proposed to increase the rate of tax on technical services to non-residents from 10% to 25%. While the reduction in STT is positive for the markets, the levy of CTT on non-agricultural commodities futures contracts is a dampener. The Finance Minister expressed hope on bringing the DTC Bill in the parliament before end of the Budget session but there is clarity on the roadmap for its implementation. As regards the GST `9,000cr has been allocated for shortfall in Central Service Tax compensation for the States, indicating that the government is closer to attaining a consensus on the bill which is expected to broaden the tax base and add to GDP growth. One of the major reasons for the negative reaction in the markets after the budget was on account of the amendment to the requirements for claiming the benefit of DTAA (double taxation avoidance agreement). Furnishing of TRC (tax residency certificate) was made a necessary but not sufficient condition to qualify for the benefits. Moreover, this was made applicable retrospectively from FY2013. The finance minister post budget explained that the substance of the amendment was that not only residency but also beneficial ownership was necessary to claim the benefit under DTAA, which unnerved the market regarding transactions routed through tax haven Mauritius. However, the government in our view has done everything to attract dollars into the country in order to plug the precarious current account gap. So, it needs to be seen whether in the coming days, sooner rather than later, there may be clarifications to calm the investors nerves on this issue.

economy and it widened to 10.8% of GDP during the first half of FY2013. In light of this, we were expecting a boost for the export-oriented sectors in the Budget. However in this regard, the Finance Minister refrained from providing sops to export related sectors and merely expressed optimism in the foreign trade policy to be announced next month. Incentivizing investment: To encourage investments, the Budget has proposed a 15% investment allowance for new high value investments (`100cr or more) in plant and machinery and the Finance Minister also laid stress on 'improving communication policy' to ensure certainty to investors. While these measures are sentimentally positive for the corporate sector, we believe that they are considerably lacking to revival of the capex cycle in the economy as the gross fixed capital formation rate has decelerated to 2.4% in FY2013 from 16.2% in FY2008. Savings: The savings rate in the economy plummeted to 30.8% of GDP in FY2012 from its peak of 36.8% in FY2008. The Budget increased the income eligibility limit for RGESS to `12lakh from `10 lakh, and provided an additional deduction of `1lakh on home loans below `25lakh. Further, it suggested introduction of inflation-indexed bonds to augment the savings rate and attract households' savings in financial assets as against nonproductive assets like physical gold. We however believe that no big bang measures have been announced to increase savings.

Conclusion
We believe that the Finance Minister has delivered a budget that suggests economic stability supersedes political considerations. We regard it as a prudent but non-reformist budget. Despite the many misses, delivering on the fiscal deficit target is a key positive. We believe that it is crucial for averting a sovereign rating downgrade and thereby ensuring stability of capital flows to finance the current account deficit. Credibly lower fiscal deficit target for FY2014 is also expected to provide monetary policy with more headroom to ease policy rates and crowd in private sector investment. Going forward, we believe that maintaining the momentum on reforms beyond the Budget is pertinent to tackle structural supply side constraints in the economy, particularly in the mining and power sector, for revival of growth in the economy.

And now, the misses

Exports: In addition to the rise in imports, weak export performance is also leading to a surge in the trade deficit of the

February 28, 2013

Please refer to important disclosures at the end of this report

Union Budget 2013-14 Review

Sectoral Impact

February 28, 2013

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Union Budget 2013-14 Review

Automobile
Announcement
Status-quo on basic excise duty for small cars, large cars (ex. SUVs), commercial vehicles (ex. chassis fitted), two-wheelers, three-wheelers and tractors. Excise duty on SUVs intended for non-taxi use increased to 30% from the current rate of 27%.

Neutral

Impact
In-line with our expectations. Broadly Neutral for OEMs.

Marginally negative for Mahindra and Mahindra and Tata Motors as higher excise duty will be passed on to the customers which may impact demand. Marginally positive for Tata Motors and Ashok Leyland.

Reduction in excise duty on chassis fitted trucks to 13% from 14% earlier. Purchase of 10,000 buses under JNNURM.

Positive for Tata Motors and Ashok Leyland as it will revive demand for buses. No material impact on stocks in our coverage universe.

Increase in basic customs duty on motorcycles (with engine capacity of 800cc or more) to 75% from 60% earlier and on luxury cars/SUVs to 100% from 75% earlier. Period of concession available for specified parts of electric/hybrid vehicles extended up to March 31, 2015. Continued interest rate subvention scheme for farmers and higher allocation to rural credit at `7lakh cr (`5.75lakh cr earlier).

This would promote the manufacture, sale and usage of such vehicles in the country. The increase in allocation under rural development program is positive for OEMs having strong rural presence, such as Mahindra and Mahindra, Maruti Suzuki and Hero MotoCorp. No major impact on Maruti Suzuki (royalty at 5.2% of sales in FY2012) as applicable rate will be the rate of tax stipulated in the DTAA with Japan, which stands at 10%.

Proposal to increase tax rate on royalty paid to foreign companies from 10% to 25%. However, the applicable rate will be the rate stipulated in the Double Tax Avoidance Agreement (DTAA).

February 28, 2013

Please refer to important disclosures at the end of this report

Union Budget 2013-14 Review

Banking
Announcement
Capital infusion of `14,000cr in PSU banks, in-line with expectations.

Neutral

Impact
It will enable PSU banks to grow at a healthy rate and move progressively towards meeting the more stringent tier-I CAR requirements of Basel-III. It will create a level playing field for private banks and encourage them to lend in these segments. However it remains to be seen whether they will actually lend, considering the risks of high NPLs in such categories. Apart from being a positive for the insurance companies (as they will be able to push their products through multiple banks, as against the current practice of a tie-up with one bank only), it will also slightly aid the fee income profile of banks. This will aid retail loan growth of these companies (particularly for companies operating in lower ticket sizes of loans like LIC Housing Finance, GIC Housing Finance (not rated), Dewan Housing Finance (not rated) etc.

Interest subvention for short-term crop loans retained for PSU banks, RRBs and Co-operative banks and has also been extended for private banks.

Banks have now been permitted to act as insurance brokers.

An additional deduction of `1lac (over and above `1.5lakh) under Sec 24 will be available for a person taking loan upto `25lakh for his first home from a bank or a housing finance company.

1) Budget Fine-print: Treatment of NPA deductions

Earlier, the interpretation of Section 36(1)(viia) and 36(1)(vii), taken together was as follows: Taking a hypothetical example, if a bank had `1,000 worth of rural advances, it would get a deduction for provision made u/s 36(1)(viia) at 10% of advances or 7.5% of gross total income, whichever is lower (assuming an amount of `100 is allowable under that section). Further, if it had made actual write-offs of `120 (divided into `60 each for urban and rural advances), then the total amount of deduction for the bank would be `100 u/s 36(1)(viia) and `20 u/s 36(1)(vii) ie the benefit u/s 36(1)(vii) was restricted to the amount of total write-offs including towards rural and urban advances, to the extent they exceeded the benefit u/s 36(1)(viia) availed by the bank. However, in a judgment announced in case of Catholic Syrian Bank, the Supreme Court adjudged that `60 write-offs for urban advances will be allowed apart from the `100 deduction for provision made for rural advances; and in case of `60 write-offs for rural advances, since it is lower than the provision made, it was disallowed. Thus a total of `160 was allowed on account of this judgment. Taking advantage of this provision and as well as due to other reasons, many mid-PSU banks like Syndicate Bank, Oriental Bank of Commerce, Uco Bank and Corporation Bank reported significantly lower effective tax rates during 9MFY2013. Now, the finance bill introduced today has reverted back to earlier understanding of tax authorities and clarified that only `120 would be allowed as deduction for tax purpose and not `160, as adjudged by SC. The clarification is prospective in nature and would take effect from FY2014. So, at the very least, effective tax rates for these banks in FY2014 are likely to be higher. Further, clarity would be needed to see if the benefit taken inFY2013 would also have to be reversed, though at this point it appears that the clarification is only prospective. 2) Further, there was a wide expectation going into the budget, that some measures to encourage savings into financial instruments would be introduced, but the budget disappointed on these fronts with no announcements. From the fiscal deficit point of view, despite being a pre-election budget, the government refrained from having any significant populist measures and the market borrowings number came largely on the expected lines and would be a sigh of relief for the banking sector.
February 28, 2013 Please refer to important disclosures at the end of this report 8

Union Budget 2013-14 Review

Capital Goods
Announcement
High value investments (ie greater than `100cr) in plant and machinery, during the period April 1, 2013 to March 31, 2015; will be eligible for deduction of investment allowance of 15% (of the total investment). This will be in addition to the current rates of depreciation.

Positive

Impact
It would encourage companies to revive stalled projects and make new investments; thus positive for all companies in the Capital Goods sector.

In other announcements, faster clearances for stuck-up projects (via CCI) will benefit capital goods companies who have been witnessing slow execution on account of delay in clearences.

Cement
Announcement
Basic customs duty on bituminous coal to be reduced from 5% to 2%. Counter veiling duty on bituminous coal to be reduced from 6% to 2%. For home loans upto `25,00,000 taken in 2013-14, additional Income tax deduction of `1,00,000 towards interest is allowed for one year. Tax on royalty paid by Indian subsidiaries to foreign parent companies increased from 10% to 25%. However, the applicable rate will be the rate stipulated in the Double Tax Avoidance Agreement (DTAA).

Positive

Impact
Reduction in customs duty on bituminous coal is marginally positive for cement companies, as it would reduce fuel costs. This announcement is positive for the Cement sector, as it is expected to boost cement demand from the housing segment. Not to impact ACC and Ambuja, which are covered by DTAA.

February 28, 2013

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Union Budget 2013-14 Review

FMCG
Announcement
The Budget has increased the allocation to rural development programs by 46% to `80,194cr.

Neutral

Impact
This is favourable for FMCG players like HUL, Dabur India, Marico etc as it would increase income in the hands of rural consumers, thereby boosting consumption Cigarette makers have in the past exhibited ability to increase prices whenever there was an hike in excise duty. Thus, a hike in SED on cigarettes is not expected to impact the profitability of cigarette manufacturing companies like ITC, although it might affect volumes in the near term. Not to impact HUL, Colgate, Nestle and GSK Consumer which are covered by DTAA.

SED on cigarettes has been increased by 18%.

Tax on royalty paid by Indian subsidiaries to foreign parent companies increased from 10% to 25%. However, the applicable rate will be the rate stipulated in the Double Tax Avoidance Agreement (DTAA).

February 28, 2013

Please refer to important disclosures at the end of this report

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Union Budget 2013-14 Review

Infrastructure
Announcement
Issuance of tax-free bonds amounting to `50,000cr (vs `25,000cr raised in FY2012-13) through various institutions for financing infrastructure projects has been proposed over FY2013-14. The government had targeted awarding road projects spanning 8,800km in FY2013. However, only ~1,200km have been awarded till date. In the Budget, the FM mentioned of awarding road projects spanning 3,000km across various states such as Gujarat, Maharashtra, Rajasthan, Madhya Pradesh, Rajasthan and Uttar Pradesh in 1HFY2014. To overcome various headwinds such as financial stress, enhanced construction risk and contract management issues faced by the road sector, the Budget proposes to form a regulatory authority for the road sector. Allocation to Ministry of Drinking Water and Sanitation is being stepped up by 17.4% to `15,260cr for FY2013-14. Rate of withholding tax on interest payments on external commercial borrowings is maintained at 5% for infrastructure sector companies across power, roads and bridges, housing and ports segments. If required, the Delhi Mumbai Industrial Corridor (DMIC) would be provided additional funds during FY2013-14 within the share of the Government of India in the overall outlay. Construction work on two cities - Dholera (Gujarat) and Shendra Bidkin (Maharashtra) to be started in FY2013-14. The government plans to establish two major ports in West Bengal (Sagar) and Andhra Pradesh which would add 100mn tonne capacity.

Neutral

Impact
Positive for all E&C players as it would boost infrastructure development across railways, ports, housing and highways, by facilitating fund raising for various government bodies that award infrastructure projects. Positive for all road developers (IRB Infrastructure Developers [IRB], IL&FS Transportation Networks [ITNL], Sadbhav Engineering and Ashoka Buildcon) as it would provide more opportunities on the order inflow front to them.

Positive for all road developers (IRB, ITNL, Sadbhav and Ashoka Buildcon).

Positive for E&C companies such as IVRCL and Va Tech Wabag (not rated), as it would create more opportunities in the water and irrigation segment. Would help reduce borrowing costs for companies and hence, would help fuel infrastructure projects with lowcost funds.

Positive for E&C companies such as Larsen & Toubro (L&T), IVRCL, NCC, etc as it would create more opportunities in the segment.

Positive for E&C companies such as Simplex Infrastructure, HCC (not rated), Gammon India (not rated) as it would enhance order inflows.

To ease access of credit for infrastructure projects, India Infrastructure Finance Company Ltd (IIFCL), in partnership with the Asian Development Bank, has been put in place a structure for credit enhancement and takeout finance. All these measures are positive for infrastructure development; however, the implementation remains the key as infrastructure companies continue to face persistent headwinds such as slower-than-anticipated revival in industrial capex, high interest rate environment clearances and land acquisition issues.
February 28, 2013 Please refer to important disclosures at the end of this report 11

Union Budget 2013-14 Review

IT
Announcement
Plan allocation for general education has been increased by 17% to `65,867cr for FY2013-14 from `56,200cr in FY2012-13. Under Sarva Shiksha Abiyan, `27,258cr has been allocated, which is 7% higher than that allocated in the FY2012-13 budget.

Neutral

Impact
Higher allocation to the education sector would boost business opportunities for education companies.

This will provide growth opportunities for companies focused towards formal and vocational education such as Educomp Solutions, Everonn Education, Core Education Technologies and NIIT, in terms of ICT and PPP in K-12 and vocational segments.

Initiatives to modernize the Postal network are currently ongoing at an overall cost of `4,909cr. An additional outlay of `532cr has been provided to make post offices part of the Core Banking Solution and offer real time banking services.

This will spur opportunities for Indian software companies in the e-Governance space in the domestic market, going forward.

Media
Announcement
Government proposes to add 839 new FM radio channels covering 294 cities. Their auction is to be conducted in FY2013-14. Custom duty on set top boxes (STB) has been increased from 5% to 10%.

Positive

Impact
Positive for radio operators such as Entertainment Network India (ENIL), Sun TV etc.

Positive for domestic STB manufacturers. However, it is marginally negative for cable and DTH operators as they mostly import STBs.

February 28, 2013

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Union Budget 2013-14 Review

Metals
Announcement
Public-Private Partnership (PPP) with Coal India, to raise production

Neutral

Impact
This would be positive for Coal India over the medium to long-term as it could help Coal India to increase the production and offtake rate of coal. This would be positive for metal and mining companies such as Hindalco, Electrosteel Castings etc, whose projects have been held up for lack of timely environmental and forest clearances. This would be slightly negative for Hindustan Zinc. Marginally positive for Sterlite Industries as it increases domestic availability of bauxite for producing aluminium.

Fast track project approvals via Cabinet Committee on Investments (CCI)

Proposal to levy 4% excise duty on silver production Proposal to levy 10% export duty on bauxite

Union Budget 2013-14 was broadly a non-event for the Metals and Mining sector. The announcement to allow PPP to boost coal production is positive for Coal India as it will help it to raise production at a faster pace. Also, faster clearances for stuck-up projects (via CCI) is expected to expedite environmental and forest clearances for various mining projects which have faced significant delays.

February 28, 2013

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Union Budget 2013-14 Review

Oil & Gas

Announcement
Clarity on natural gas pricing

Positive

Impact
Any increase in domestic natural gas price would be positive for oil and gas producers including Reliance Industries (RIL), ONGC, Oil India and Cairn India. This will provide predictability for government's share of earnings from gas blocks; it could potentially speed up new projects. This would be positive for gas producers including RIL, ONGC, Oil India and Cairn India. This would be positive for companies like ONGC and RIL whose 22 and 15 blocks, respectively, are stuck up due to pending environmental and defense clearances.

Move to revenue sharing model for gas from profit sharing model

Issue a policy on shale gas exploration and production

Fast track clearances of NELP blocks via Cabinet Committee on Investments (CCI)

The Budget is positive for the Oil & Gas sector. Three things have been announced for the Oil & Gas sector, all of which are positive for the companies in the sector a) The government aims to provide clarity on natural gas pricing which intends to align domestic natural gas prices with international prices. b) A move to a revenue sharing model for gas projects is aimed by the government which could potentially speed up new exploration projects. c) The government plans to issue a policy on shale gas exploration and production. All these measures are positive for oil explorers and producers such as RIL, ONGC, Cairn India and Oil India over the medium to long term. The Budget pegged the government's share of petroleum subsidy at `96,880cr (in line with our expectations) for FY2013, although overshooting its target by `28,396cr. For FY2014, the government's share of petroleum subsidy is budgeted at `65,000cr. We expect the government to raise diesel prices by at least `0.40-0.50/litre per month over the coming year in order to avoid overshooting of its petroleum subsidy over `65,000cr for FY2014.

February 28, 2013

Please refer to important disclosures at the end of this report

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Union Budget 2013-14 Review

Pharmaceutical
Announcement
The Health and Family Welfare Ministry has been allotted `37,330cr. Of this, the new National Health Mission that combines the rural mission and the proposed urban mission will get `21,239cr, an increase of 24.3% over the Revised Estimate. The Finance Minister also proposed an allocation of `4,727cr for medical education, training and research. 15% allowance for investments in plant and machinery above `100cr.

Positive

Impact
Will benefit all the companies in the sector.

Will benefit all the companies in the sector

The Budget is positive for the pharmaceutical sector. Though much of the demands haven't been met, the allocation and focus on the sector continues.

Power
Announcement
Extension of tax exemption under Section 80-IA for power generation companies until FY2014

Positive

Impact
As per Section 80-IA, power plants are eligible for a tax holiday of 10 years from the year of commissioning. The exemption under this section was applicable to power plants commencing operations before FY2013; the same has now been extended to FY2014. However, companies have to pay tax under MAT provisions. Extension of 80-IA benefits would have a positive impact on power generation companies. Positive for companies which are into wind power generation

Generation-based incentive for wind energy projects and allocation of `800cr to Ministry of Non-Renewable Energy for the same has been proposed. Basic customs duty on steam coal to be increased from NIL to 2%. Counter veiling duty on steam coal to be increased from 1% to 2%. Public-Private Partnership (PPP) with Coal India to raise production

Negative for imported coal based power plants, since it will increase the cost of imported coal.

Medium to long term positive for the power generation companies

In other announcements, Government will provide low interest bearing funds from the National Clean Energy Fund (NCEF) to IREDA to lend to viable renewable energy projects. The scheme will have a life span of five years. The objective of the scheme is to provide cheaper funds to encourage investments in renewable energy.
February 28, 2013 Please refer to important disclosures at the end of this report 15

Union Budget 2013-14 Review

Real Estate
Announcement
Imposed a TDS of 1% on the value of the transfer of immovable properties (exempt for agricultural land) with tick size of over `50,00,000. An additional deduction of `1lac under Sec 24 (over and above `1.5lakh) will be available for an individual taking loan upto `25lakh for his first home from a bank or a housing finance company. Rate of abatement to reduce from 75% to 70% for homes and flats having a) carpet area of 2,000 sqft or more, b) value of `1cr or more, and c) on high-end construction projects.

Neutral

Impact
There will be no material impact.

This would continue to benefit developers such as HDIL, Anant Raj and Prestige Estates Projects (all of which are not under our coverage) having low-cost affordable housing projects. This would only marginally affect developers such as DLF , Mahindra Lifespace Developers, etc. having projects in these segments.

Measures announced in the Budget were more in favor of boosting affordable housing projects in Tier II and III cities by announcing additional deduction of `1lac under sec 24 and maintaining withholding tax on interest payment on ECBs. Since most of the listed companies have limited exposure to the affordable housing segment, the budget is Neutral for the real estate sector.

Telecom
Announcement
The Budget indicated that the government expects to have revenue receipts of ~`40,850cr overall through the telecom sector, out of which ~`23,000cr is expected to be raised from spectrum auctions.

Neutral

Impact
This is broadly in line with the estimates and is not aggressive as compared to ~`58,220cr outlined in the Union Budget FY2012-13. Going ahead, the government is considering auction of spectrum in the 800MHz, 900MHz and 1800MHz bands. But most of it is already factored in the stock prices.

Excise duty on mobile phones priced above `2,000 raised to 6% from 1% currently.

This could lead to a marginal increase in mobile handset prices.

February 28, 2013

Please refer to important disclosures at the end of this report

16

Union Budget 2013-14 Review

Stock Watch

February 28, 2013

Please refer to important disclosures at the end of this report

17

Watch Stock Watch | February, 2013

Company Name Reco CMP (`) 113 116 271 83 22 329 1,972 214 8,771 92 125 1,522 1,668 104 871 1,357 196 25 287 39 138 92 1,343 703 320 53 416 71 399 89 494 760 626 1,040 89 177 70 Target Price (`) 170 323 97 28 242 9,570 163 1,923 165 1,019 1,563 209 35 326 47 160 1,678 850 350 56 463 465 107 536 666 1,302 106 208 85 Mkt Cap (` cr) 2,205 5,125 4,632 4,181 5,907 497 57,052 4,976 27,540 313 10,612 2,529 33,304 426 53,481 39,195 11,534 152 76,607 1,834 6,900 5,126 62,731 28,898 18,367 3,119 18,431 5,252 5,906 3,116 8,439 117,385 148,409 119,632 11,340 7,611 5,571 Sales (` cr) FY13E FY14E 1,466 8,421 2,983 13,066 12,910 934 20,775 5,973 9,973 4,822 6,016 1,619 23,990 7,169 40,060 43,381 25,769 1,296 184,201 7,019 6,509 4,795 15,959 14,889 12,793 3,720 10,783 7,158 4,919 3,090 2,667 7,446 21,724 22,317 8,196 5,716 7,231 1,686 9,263 3,477 14,503 14,836 1,103 23,889 6,707 11,320 5,403 7,026 1,879 27,038 7,929 46,301 52,411 29,010 1,476 209,642 7,827 7,264 5,475 18,660 17,393 14,823 4,268 12,000 8,217 5,634 3,462 2,920 8,923 26,578 26,217 9,305 6,362 8,369 OPM (%) FY13E FY14E 14.8 16.5 16.1 11.5 8.8 10.2 18.5 14.4 17.8 8.2 12.7 16.0 13.8 6.9 11.5 7.5 7.1 9.8 12.4 6.0 2.7 3.0 3.2 2.5 2.3 2.9 2.1 2.4 2.1 2.7 3.2 3.5 4.3 2.9 1.9 3.2 2.4 14.8 16.5 16.1 11.8 9.6 10.7 19.0 15.2 18.0 8.3 14.4 16.6 14.6 7.1 11.7 8.9 7.5 9.8 13.5 6.3 2.8 3.0 3.2 2.6 2.4 2.8 2.3 2.6 2.2 2.7 3.2 3.5 4.3 3.0 2.1 3.2 2.5 EPS (`) FY13E FY14E 7.0 15.0 18.5 13.0 1.5 24.5 107.6 13.3 396.2 29.8 5.8 108.6 105.8 40.4 55.3 65.6 10.2 3.4 28.0 4.3 28.2 21.8 119.2 108.2 49.5 10.9 64.8 13.1 96.7 25.6 49.1 32.2 28.7 72.0 15.4 37.7 10.2 8.1 17.0 21.6 14.5 2.2 34.3 126.4 18.6 455.7 40.8 7.8 130.7 120.2 41.3 64.3 97.7 13.1 5.0 36.3 5.3 33.5 21.9 139.0 134.0 65.1 13.0 82.2 20.1 99.9 24.6 51.4 38.5 36.1 84.6 22.3 41.1 20.2 PER (x) FY13E FY14E 16.2 7.7 14.6 6.4 15.0 13.4 18.3 16.0 22.1 3.1 21.4 14.0 15.8 2.6 15.8 20.7 19.3 7.5 10.2 9.1 4.9 4.2 11.3 6.5 6.5 4.9 6.4 5.4 4.1 3.5 10.1 23.6 21.8 14.4 5.8 4.7 6.8 14.0 6.8 12.6 5.7 10.0 9.6 15.6 11.5 19.2 2.2 15.9 11.6 13.9 2.5 13.5 13.9 15.0 5.0 7.9 7.3 4.1 4.2 9.7 5.2 4.9 4.1 5.1 3.6 4.0 3.6 9.6 19.7 17.3 12.3 4.0 4.3 3.5 P/BV (x) FY13E FY14E 3.4 1.1 4.2 1.2 2.0 1.7 7.5 2.1 4.2 0.4 3.1 2.4 6.4 0.5 3.6 2.3 4.9 0.5 2.3 1.4 0.7 0.7 2.1 0.9 0.9 0.7 0.9 0.8 0.7 0.6 1.3 4.8 4.2 1.8 0.6 0.8 0.5 2.9 1.0 3.2 1.0 1.8 1.5 6.0 1.8 3.5 0.4 2.7 2.0 5.1 0.4 3.0 2.0 3.8 0.5 1.8 1.2 0.6 0.6 1.8 0.8 0.8 0.6 0.8 0.6 0.6 0.5 1.2 4.3 3.5 1.7 0.5 0.7 0.5 RoE (%) FY13E FY14E 22.6 15.6 32.9 21.0 9.3 13.2 45.8 13.6 18.8 14.5 15.4 18.8 44.3 20.5 24.5 11.8 28.1 7.2 24.6 16.4 13.8 15.4 20.3 15.3 13.6 16.2 13.2 10.3 16.2 19.2 13.9 35.4 20.7 14.9 10.7 16.9 7.3 22.5 15.5 29.1 19.4 13.3 16.9 42.8 16.9 18.2 17.0 18.2 19.1 40.9 18.0 23.8 15.6 28.3 10.1 25.4 18.0 14.7 13.8 20.1 16.7 16.0 16.9 15.0 14.3 14.9 15.9 13.1 32.6 22.1 15.9 14.1 16.2 13.4 EV/Sales (x) FY13E FY14E 1.6 0.8 1.5 0.5 0.5 0.6 2.4 1.0 2.4 0.3 1.5 1.3 1.1 0.4 1.1 0.7 0.6 0.4 0.5 0.2 1.4 0.7 1.3 0.4 0.5 0.5 2.0 0.8 2.0 0.2 1.2 1.1 0.9 0.3 0.9 0.6 0.5 0.4 0.4 0.2 -

Agri / Agri Chemical Rallis Neutral United Phosphorus Buy Auto & Auto Ancillary Amara Raja Batteries Buy Apollo Tyres Buy Ashok Leyland Buy Automotive Axle# Neutral Bajaj Auto Neutral Bharat Forge Accumulate Bosch India* Accumulate CEAT Buy Exide Industries Neutral FAG Bearings* Neutral Hero Motocorp Buy JK Tyre Buy Mahindra and Mahindra Buy Maruti Buy Motherson Sumi Accumulate Subros Buy Tata Motors Accumulate TVS Motor Buy Financials Allahabad Bank Buy Andhra Bank Neutral Axis Bank Buy Bank of Baroda Buy Bank of India Accumulate Bank of Maharashtra Accumulate Canara Bank Accumulate Central Bank Neutral Corporation Bank Buy Dena Bank Buy Federal Bank Accumulate HDFC Neutral HDFC Bank Accumulate ICICI Bank Buy IDBI Bank Buy Indian Bank Buy IOB Buy

Please refer to important disclosures at the end of this report.

Watch Stock Watch | February, 2013

Company Name J & K Bank LIC Housing Finance Oriental Bank Punjab Natl.Bank South Ind.Bank St Bk of India Syndicate Bank UCO Bank Union Bank United Bank Vijaya Bank Yes Bank Capital Goods ABB* BGR Energy BHEL Blue Star Crompton Greaves Jyoti Structures KEC International LMW Thermax Cement ACC Ambuja Cements India Cements J K Lakshmi Cements Madras Cements Shree Cements^ UltraTech Cement Construction Ashoka Buildcon Consolidated Co IRB Infra ITNL IVRCL Infra Buy Neutral Buy Buy Buy 205 11 115 190 26 268 164 225 35 1,077 212 3,809 3,696 789 20,466 2,262 3,843 6,564 3,773 23,017 2,522 4,212 7,054 6,706 22.5 5.9 43.1 27.2 6.9 22.5 6.3 43.6 27.4 8.4 24.3 0.9 16.8 26.3 (3.9) 27.0 1.6 17.8 29.0 2.9 8.4 12.5 6.8 7.2 (6.6) 7.6 7.4 6.4 6.6 8.9 1.0 0.3 1.2 1.1 0.4 0.9 0.3 1.0 1.0 0.4 12.3 2.7 18.3 17.0 (5.4) 12.1 4.5 17.0 16.3 4.1 0.2 0.4 3.1 2.7 0.9 0.2 0.4 3.4 2.7 0.6 Neutral Neutral Neutral Accumulate Neutral Neutral Neutral 1,271 192 84 131 243 4,358 1,870 143 23,864 29,587 2,591 1,607 5,777 15,180 51,274 11,358 9,730 4,439 2,119 3,960 5,678 20,466 12,366 11,221 4,789 2,478 4,270 6,251 23,017 19.9 25.6 16.6 22.9 27.4 29.0 23.3 19.6 25.0 17.2 22.3 27.0 28.6 24.3 75.1 10.2 6.8 20.3 18.6 288.1 100.0 74.9 11.3 9.1 22.8 21.1 334.0 117.1 16.9 18.8 12.4 6.5 13.1 15.1 18.7 17.0 16.9 9.3 5.8 11.5 13.0 16.0 3.2 3.4 0.7 1.1 2.4 4.2 3.4 2.9 3.1 0.7 1.0 2.0 3.3 2.9 19.4 18.7 5.9 17.9 19.7 31.7 19.6 18.1 19.0 7.7 17.7 18.9 28.4 19.5 1.8 2.6 1.0 0.9 2.1 2.1 2.4 1.6 2.2 0.9 1.1 1.8 1.7 2.3 Reduce Neutral Neutral Buy Buy Buy Buy Neutral Neutral 571 209 201 171 91 33 51 1,989 581 487 238 129 49 75 12,097 1,507 49,246 1,540 5,822 267 1,302 2,241 6,927 8,073 3,412 47,801 2,748 12,136 2,802 6,909 2,369 5,529 9,052 4,104 43,757 2,896 13,790 3,074 7,723 2,727 5,798 5.5 13.0 18.0 4.4 3.8 9.5 6.2 11.7 9.0 7.2 11.6 17.1 5.6 6.3 9.8 7.2 11.7 9.6 11.3 24.6 24.1 6.8 3.3 7.7 5.4 143.4 27.1 17.4 26.2 20.8 9.3 6.9 10.9 8.4 166.0 30.3 50.7 8.5 8.4 25.2 27.5 4.2 9.4 13.9 21.4 32.8 8.0 9.7 18.4 13.2 3.0 6.0 12.0 19.2 4.4 1.2 2.5 3.5 1.6 0.4 1.1 2.3 3.7 4.0 1.1 2.1 3.0 1.5 0.3 1.0 2.1 3.3 8.9 30.7 32.9 14.5 5.8 9.6 17.0 17.4 18.5 12.8 25.7 23.6 17.5 11.5 12.1 22.8 18.4 18.2 1.5 0.8 0.9 0.7 0.5 0.3 0.3 0.5 1.1 1.3 0.7 1.0 0.6 0.5 0.3 0.3 0.3 1.0 Reco CMP (`) 232 276 788 25 2,085 117 57 212 62 50 473 Target Price (`) 1,406 257 314 957 30 2,514 135 256 75 54 526 Mkt Cap (` cr) 6,131 11,706 8,038 26,724 3,360 139,940 7,028 3,772 11,680 2,240 2,465 16,919 Sales (` cr) FY13E FY14E 2,784 1,722 6,360 19,202 1,583 60,594 6,673 5,388 10,006 3,549 2,342 3,364 2,932 2,080 7,004 22,040 1,789 70,439 7,644 6,262 11,558 3,814 2,763 4,260 OPM (%) FY13E FY14E 3.7 2.2 2.6 3.2 3.0 3.3 2.9 2.4 2.8 2.5 1.9 2.8 3.7 2.2 2.8 3.4 2.9 3.3 3.0 2.6 2.8 2.7 2.1 3.0 EPS (`) FY13E FY14E 229.2 19.9 48.1 146.7 3.5 221.9 32.0 9.0 36.4 12.0 8.0 36.3 199.6 24.6 59.4 167.9 4.1 257.4 27.9 14.9 47.0 21.4 10.9 42.6 PER (x) FY13E FY14E 5.5 11.6 5.7 5.4 7.2 9.4 3.6 6.3 5.8 5.2 6.2 13.0 6.3 9.4 4.6 4.7 6.2 8.1 4.2 3.8 4.5 2.9 4.6 11.1 P/BV (x) FY13E FY14E 1.2 1.8 0.7 1.0 1.2 1.6 0.7 0.8 0.8 0.5 0.7 2.9 1.1 1.6 0.6 0.8 1.0 1.3 0.7 0.7 0.7 0.5 0.6 2.4 RoE (%) FY13E FY14E 24.6 16.6 12.1 17.6 19.1 17.4 22.0 9.1 14.6 10.1 10.1 24.6 18.2 17.9 13.5 17.5 17.7 17.7 16.5 13.8 16.6 16.3 12.6 23.6 EV/Sales (x) FY13E FY14E -

Accumulate 1,265 Accumulate Accumulate Buy Buy Buy Buy Neutral Buy Buy Accumulate Accumulate

Please refer to important disclosures at the end of this report.

10

Watch Stock Watch | February, 2013

Company Name Jaiprakash Asso. Larsen & Toubro Nagarjuna Const. Punj Lloyd Sadbhav Engg. Simplex Infra Unity Infra FMCG Asian Paints Britannia Colgate Dabur India GlaxoSmith Con* Godrej Consumer HUL ITC Marico Nestle* Tata Global IT HCL Tech^ Hexaware* Infosys Infotech Enterprises KPIT Cummins Mahindra Satyam Mindtree Mphasis& NIIT Persistent TCS Tech Mahindra Wipro Media D B Corp HT Media Jagran Prakashan PVR Sun TV Network Reco Buy Buy Buy Neutral Buy Buy Buy Neutral Buy Neutral Neutral Neutral Neutral Neutral Neutral Neutral Neutral Neutral CMP (`) 70 1,366 38 41 108 152 31 4,290 480 1,276 126 3,957 723 444 295 214 4,753 125 Target Price (`) 97 1,788 44 157 197 58 564 765 113 184 134 125 396 36 1,205 276 113 125 Mkt Cap (` cr) 15,456 84,049 962 1,350 1,632 752 228 41,154 5,741 17,348 22,039 16,639 24,612 95,974 232,758 13,768 45,825 7,742 50,341 2,553 166,873 1,884 2,067 13,954 3,562 7,854 381 2,202 296,470 13,394 102,576 4,263 2,447 3,080 773 16,278 Sales (` cr) FY13E FY14E 14,243 60,666 5,863 11,892 1,642 6,026 2,180 11,198 5,580 3,120 6,196 3,084 6,386 25,350 29,148 4,747 8,302 7,272 25,325 1,948 40,746 1,881 2,234 7,711 2,357 5,531 1,048 1,297 62,954 6,789 43,514 1,583 2,061 1,511 820 1,942 16,382 69,525 6,576 13,116 2,642 7,135 2,455 13,319 6,417 3,588 7,183 3,617 7,743 28,974 34,191 5,402 9,739 7,998 28,476 2,136 44,283 1,987 2,477 8,683 2,580 5,874 1,161 1,433 70,871 7,609 47,304 1,787 2,205 1,698 1,307 2,237 OPM (%) FY13E FY14E 26.2 10.6 8.1 10.2 9.7 9.1 13.7 15.9 4.8 20.2 16.3 15.2 15.7 13.3 35.7 13.6 22.0 9.1 21.7 20.9 28.9 17.9 15.8 21.6 21.0 17.6 9.1 25.6 29.0 21.0 20.1 23.9 14.0 23.2 17.3 77.2 26.1 11.2 8.2 10.2 10.1 9.3 13.4 15.7 5.0 21.1 16.8 16.3 17.0 13.5 36.1 13.6 21.5 9.5 20.7 18.3 28.8 17.4 15.2 20.2 19.3 17.5 10.9 24.1 28.9 19.6 19.4 25.4 15.1 23.4 17.3 75.5 EPS (`) FY13E FY14E 3.2 71.8 3.1 (0.4) 3.2 14.1 12.9 122.1 18.1 38.4 4.5 103.9 20.8 15.1 9.4 6.3 110.7 6.9 51.0 10.9 162.6 18.5 10.9 8.7 84.4 35.4 4.1 46.5 71.6 95.8 26.6 11.8 6.6 6.4 11.1 17.6 4.3 85.0 4.1 3.0 7.2 24.6 14.8 147.1 21.7 45.0 5.5 123.0 27.1 16.9 11.1 7.8 130.8 8.1 52.8 10.1 172.9 19.4 12.8 11.3 86.8 37.7 6.2 54.0 79.1 110.7 27.7 14.5 7.8 7.3 17.8 19.1 PER (x) FY13E FY14E 21.7 19.0 12.2 (95.4) 33.7 10.8 2.4 35.1 26.6 33.3 28.1 38.1 34.7 29.4 31.5 33.7 42.9 18.3 14.2 7.9 17.9 9.1 9.8 13.6 10.2 10.6 5.6 11.8 21.2 10.9 15.7 19.6 15.7 15.1 23.9 23.5 16.1 16.1 9.2 13.7 15.0 6.2 2.1 29.2 22.2 28.3 23.1 32.2 26.7 26.2 26.6 27.3 36.3 15.4 13.7 8.5 16.8 8.7 8.4 10.5 9.9 9.9 3.7 10.2 19.1 9.5 15.1 16.0 13.3 13.3 15.0 21.6 P/BV (x) FY13E FY14E 1.2 2.9 0.4 0.5 1.9 0.6 0.3 11.9 9.6 30.9 11.6 12.2 7.5 23.4 10.5 6.9 25.5 1.9 3.8 2.1 4.2 1.4 2.1 3.2 2.7 1.5 0.6 2.2 7.0 2.6 3.1 3.9 1.5 3.8 1.1 5.7 1.1 2.6 0.4 0.5 1.7 0.5 0.2 9.3 7.7 24.8 9.0 10.1 6.1 16.7 8.7 5.6 18.3 1.8 3.1 1.7 3.6 1.2 1.7 2.5 2.1 1.3 0.5 1.8 5.7 2.1 2.6 3.3 1.4 3.4 1.0 5.1 RoE (%) FY13E FY14E 5.4 14.4 3.2 6.0 5.6 12.1 37.7 38.7 104.6 43.4 34.9 23.7 85.7 35.9 26.0 69.5 8.9 26.8 27.2 23.5 14.8 22.2 30.6 26.8 14.7 10.3 18.5 33.2 24.3 19.7 21.4 10.3 25.9 9.7 25.8 7.0 15.2 4.2 3.8 12.1 9.2 12.5 35.7 38.7 97.0 44.0 34.3 26.3 74.3 35.7 22.6 58.6 9.8 22.9 21.0 21.3 13.6 20.5 23.7 21.7 13.5 14.1 18.0 29.7 22.3 17.9 22.4 11.0 26.6 10.8 25.2 EV/Sales (x) FY13E FY14E 2.5 1.6 0.6 0.5 1.2 0.5 0.5 3.6 0.9 5.4 3.6 4.9 4.0 3.6 7.7 3.0 5.6 1.0 1.9 1.1 3.5 0.6 0.9 1.4 1.2 0.9 0.2 1.4 4.5 2.0 2.0 2.6 0.8 2.2 1.0 7.9 2.3 1.4 0.5 0.5 0.8 0.5 0.4 3.0 0.8 4.6 3.0 4.2 3.3 3.1 6.5 2.5 4.6 0.9 1.6 0.9 3.1 0.5 0.7 1.2 1.0 0.8 0.1 1.1 3.9 1.7 1.7 2.2 0.7 1.9 0.6 6.8

Accumulate 725 Buy 86 Neutral 2,906 Accumulate 169 Buy 107 Accumulate 119 Neutral 858 Accumulate 374 Buy 23 Neutral 550 Neutral 1,515 Buy 1,047 Neutral 417 Buy Accumulate Buy Neutral Neutral 232 104 97 267 413

Please refer to important disclosures at the end of this report.

11

Watch Stock Watch | February, 2013

Company Name Metal Bhushan Steel Coal India Electrosteel Castings Hind. Zinc Hindalco JSW Steel MOIL Monnet Ispat Nalco NMDC SAIL Sesa Goa Sterlite Inds Tata Steel Sarda Prakash Industries Godawari Power Oil & Gas Cairn India GAIL ONGC Reliance Industries Gujarat Gas* Indraprastha Gas Petronet LNG Gujarat State Petronet Pharmaceuticals Alembic Pharma Aurobindo Pharma Aventis* Cadila Healthcare Cipla Dr Reddy's Dishman Pharma GSK Pharma* Indoco Remedies Ipca labs Lupin Ranbaxy* Sun Pharma Reco CMP (`) 462 310 20 115 99 738 242 235 44 137 71 155 94 342 101 33 90 298 333 313 815 277 256 141 65 Target Price (`) 368 28 149 318 181 183 110 443 148 52 112 383 357 179 95 208 817 419 1,859 155 78 559 655 Mkt Cap (` cr) 10,454 195,997 687 48,760 19,021 16,471 4,066 1,496 11,379 54,317 29,368 13,428 31,557 33,250 363 449 287 56,922 42,190 268,086 263,008 3,555 3,589 10,564 3,655 1,569 4,703 5,391 15,542 28,965 29,887 557 17,873 596 6,276 26,187 16,059 82,977 Sales (` cr) FY13E FY14E 10,746 66,666 1,984 12,002 80,205 39,072 933 2,287 6,630 9,674 43,438 2,412 43,185 142,732 1,442 2,512 2,367 17,394 48,077 144,089 362,700 3,707 3,365 32,210 1,079 1,490 5,463 1,482 6,148 8,151 10,696 1,280 2,651 642 2,850 8,426 12,253 10,111 13,982 70,292 2,074 13,759 88,987 40,493 954 2,883 8,357 11,536 56,199 3,911 45,442 146,575 1,494 2,816 2,425 17,034 55,815 158,065 380,031 3,850 3,700 41,362 983 1,714 6,279 1,682 7,386 9,130 11,662 1,536 2,993 784 3,474 10,082 11,400 12,563 OPM (%) FY13E FY14E 30.8 25.7 10.6 49.7 9.0 16.5 46.9 21.8 11.4 75.2 12.0 30.8 23.3 7.4 19.0 12.4 14.2 76.4 15.3 32.8 8.8 11.7 22.8 6.1 91.8 16.2 15.0 17.5 15.3 25.8 20.7 20.2 31.7 14.2 21.0 19.7 14.1 42.6 31.1 27.3 11.6 50.8 9.2 18.2 45.5 21.8 14.5 76.6 12.2 33.1 23.7 9.9 19.1 13.7 13.7 72.3 15.3 34.7 8.9 12.4 23.4 5.8 91.9 17.1 15.0 16.6 18.0 24.8 21.0 20.2 31.2 15.2 21.0 20.0 12.5 42.6 EPS (`) FY13E FY14E 43.3 24.2 1.8 14.7 13.4 82.4 25.8 35.3 2.1 16.0 6.5 29.6 16.8 7.2 29.2 10.0 33.3 60.8 34.9 28.6 68.1 23.7 25.3 15.4 8.7 7.4 12.4 82.9 24.6 20.2 83.7 12.1 76.0 5.7 29.9 26.1 31.2 28.9 55.4 26.6 2.6 16.3 13.8 90.3 26.1 40.7 3.3 18.6 8.5 31.8 17.9 34.7 31.7 12.6 33.5 55.1 35.9 34.4 71.5 25.7 26.6 15.6 7.8 9.5 14.0 87.8 39.5 21.6 92.9 15.5 82.4 7.8 37.3 31.1 21.6 29.8 PER (x) FY13E FY14E 10.7 12.8 11.3 7.8 7.4 9.0 9.4 6.7 20.8 8.6 10.9 5.2 5.6 47.7 3.5 3.4 2.7 4.9 9.5 10.9 12.0 11.7 10.1 9.2 7.4 11.3 13.0 28.2 30.9 17.9 21.0 5.7 27.8 11.4 16.6 22.4 12.2 27.8 8.3 11.7 7.6 7.1 7.2 8.2 9.3 5.8 13.5 7.4 8.4 4.9 5.2 9.9 3.2 2.7 2.7 5.4 9.3 9.1 11.4 10.8 9.6 9.0 8.3 8.8 11.5 26.7 19.2 16.7 19.0 4.5 25.6 8.3 13.3 18.8 17.6 26.9 P/BV (x) FY13E FY14E 1.1 3.8 0.4 1.5 0.6 0.9 1.5 0.6 1.0 1.9 0.7 0.8 0.6 0.8 0.4 0.2 0.3 1.0 1.7 1.8 1.3 3.3 2.4 2.4 1.2 3.1 1.7 4.4 5.8 3.2 4.3 0.5 8.0 1.4 4.0 5.2 3.9 5.6 1.0 3.1 0.1 1.3 0.5 0.8 1.3 0.5 0.9 1.6 0.7 0.7 0.6 0.7 0.4 0.2 0.3 0.9 1.5 1.6 1.2 2.8 2.0 2.0 1.1 2.3 1.4 3.6 4.7 2.7 3.6 0.5 7.1 1.2 3.2 4.2 3.4 4.8 RoE (%) FY13E FY14E 11.4 33.1 3.5 21.1 7.9 10.7 16.7 9.6 4.6 23.6 6.6 16.3 11.6 1.6 12.2 7.2 12.9 21.9 19.0 17.0 12.4 29.6 26.0 29.1 17.8 30.7 18.8 16.3 18.4 19.4 22.4 10.0 20.1 12.9 26.7 25.8 37.9 22.3 12.6 29.1 5.1 19.8 7.6 10.7 15.1 10.2 6.9 23.0 8.2 15.4 11.2 7.5 11.9 8.4 11.2 17.0 17.0 18.2 11.8 28.2 22.6 24.1 14.1 30.2 17.8 14.8 25.1 17.6 20.8 11.6 26.3 16.4 26.4 24.7 20.6 19.2 EV/Sales (x) FY13E FY14E 3.1 2.0 0.5 2.1 0.6 0.8 1.9 1.8 1.0 3.4 0.9 7.0 0.7 0.5 0.6 0.5 0.6 2.4 0.6 1.6 0.7 0.8 1.2 0.4 3.1 1.2 1.4 3.4 2.9 3.3 3.1 1.1 5.9 1.1 2.4 3.2 1.2 7.6 2.4 1.7 0.5 1.5 0.5 0.8 1.8 1.4 0.9 2.7 0.7 4.4 0.6 0.5 0.6 0.4 0.5 2.1 0.5 1.4 0.6 0.8 1.0 0.3 3.4 1.0 1.2 2.9 2.4 2.9 2.7 1.0 5.2 1.0 2.0 2.7 1.3 5.9

Neutral Buy Buy Buy Neutral Neutral Neutral Buy Neutral Buy Neutral Buy Buy Buy Buy Buy Buy Buy Neutral Accumulate Neutral Neutral Neutral Buy Neutral

Accumulate 83 Buy 162 Neutral 2,341 Accumulate 759 Buy 361 Accumulate 1,761 Buy 69 Neutral 2,110 Buy 65 Accumulate 497 Accumulate 585 Neutral 380 Neutral 803

Please refer to important disclosures at the end of this report.

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Watch Stock Watch | February, 2013

Company Name Power GIPCL NTPC Real Estate DLF MLIFE Telecom Bharti Airtel Idea Cellular Rcom Others Abbott India Bajaj Electricals Cera Sanitaryware Cravatex CRISIL Finolex Cables Force Motors Goodyear India Greenply Industries Hitachi Honeywell Automation* Styrolution ABS India* ITD Cementation Jyothy Laboratories MCX MRF Page Industries Relaxo Footwears Sintex Industries Siyaram Silk Mills S. Kumars Nationwide SpiceJet TAJ GVK Tata Sponge Iron TTK Healthcare TVS Srichakra United Spirits Vesuvius India Reco CMP (`) 72 151 277 403 324 117 61 Target Price (`) 78 163 446 350 1,590 217 495 545 61 550 360 309 2,842 744 334 167 1,440 13,416 887 79 332 43 108 379 643 276 Mkt Cap (` cr) 1,089 124,300 47,020 1,647 122,869 38,867 12,622 2,891 1,795 523 91 6,757 727 522 657 831 301 2,299 1,085 232 2,548 5,839 4,874 3,679 763 1,721 248 269 1,717 412 475 333 162 24,075 659 Sales (` cr) FY13E FY14E 1,502 72,809 7,953 786 80,521 22,087 21,087 1,629 3,450 460 272 982 2,304 2,027 1,494 1,925 905 2,117 1,059 1,455 816 553 13,030 856 989 4,751 1,048 6,765 5,720 300 782 374 1,461 10,473 560 1,535 81,951 9,699 888 87,160 23,927 22,067 1,886 3,929 596 308 1,136 2,552 2,299 1,607 2,235 1,025 2,491 1,116 1,630 979 624 14,405 1,046 1,148 5,189 1,157 7,393 6,599 319 818 425 1,591 11,939 611 OPM (%) FY13E FY14E 32.1 23.4 34.6 26.3 30.5 26.6 31.8 11.8 4.5 16.4 7.2 34.3 9.9 4.6 6.4 10.6 4.8 8.1 8.5 12.4 14.5 65.3 10.3 19.1 10.6 16.3 11.3 18.1 5.3 35.8 16.5 7.9 5.6 15.0 16.1 31.9 24.1 37.0 26.7 30.5 27.7 31.9 13.3 7.4 16.2 7.3 34.3 9.1 5.0 7.8 10.9 6.0 7.8 9.5 12.6 14.9 66.3 10.6 19.6 11.7 16.6 12.0 18.0 6.8 36.2 17.0 9.5 7.1 15.8 17.0 EPS (`) FY13E FY14E 11.4 12.2 4.4 31.0 6.4 2.9 2.6 60.8 10.0 34.7 37.5 34.3 8.2 35.3 23.9 29.6 7.7 140.5 36.0 29.8 5.2 62.5 1,418.1 101.1 41.7 13.6 58.7 6.4 3.6 7.9 61.8 24.1 6.9 30.4 24.7 12.5 13.6 6.0 36.3 10.4 3.9 4.0 79.5 15.5 45.0 45.4 40.0 10.1 50.0 33.0 44.1 12.4 157.9 42.0 40.5 6.0 72.0 1,677.0 127.3 55.5 15.8 66.5 7.5 5.4 9.1 65.4 32.7 39.4 56.9 28.8 PER (x) FY13E FY14E 6.3 12.4 63.3 13.0 50.6 40.1 23.3 22.4 18.0 11.9 9.4 28.0 5.8 11.3 11.9 11.6 17.1 18.5 17.1 6.8 30.7 18.3 8.1 32.6 15.2 4.0 4.5 1.4 9.8 8.3 5.0 17.8 30.6 60.5 13.2 5.8 11.1 46.4 11.1 31.1 30.1 15.3 17.1 11.6 9.2 7.8 24.1 4.7 8.0 8.6 7.8 10.6 16.5 14.7 5.0 26.3 15.9 6.9 25.9 11.5 3.5 4.0 1.2 6.6 7.2 4.7 13.1 5.4 32.3 11.3 P/BV (x) FY13E FY14E 0.7 1.5 1.8 1.3 2.3 2.8 0.3 4.6 2.3 2.9 2.2 12.7 0.8 0.4 1.9 1.9 1.6 2.8 2.5 0.5 3.5 5.0 1.4 16.7 3.5 0.5 0.8 0.1 14.2 1.1 0.7 1.2 4.6 2.0 0.7 1.4 1.7 1.2 2.2 2.5 0.3 3.8 2.0 2.3 1.8 10.1 0.7 0.4 1.6 1.5 1.4 2.4 2.2 0.5 3.3 4.4 1.2 12.4 2.7 0.5 0.7 0.1 4.5 1.0 0.7 1.0 2.9 1.7 RoE (%) FY13E FY14E 7.6 12.2 3.1 10.1 4.6 6.9 1.5 22.0 13.0 27.7 23.7 50.9 13.7 3.9 16.5 16.8 9.9 16.3 15.4 8.1 8.8 27.5 19.1 58.5 25.5 12.9 18.9 6.1 13.9 15.7 19.7 3.8 10.8 15.8 11.9 12.5 3.8 10.8 7.0 8.4 2.2 24.4 17.4 27.8 22.7 46.9 14.7 5.3 20.1 21.0 14.4 15.8 16.0 9.8 10.1 27.4 18.7 54.9 26.3 13.2 18.3 6.7 14.4 14.7 22.5 20.6 12.3 16.2 EV/Sales (x) FY13E FY14E 1.2 2.3 8.0 2.4 2.4 2.3 2.3 1.6 0.5 1.2 0.4 6.5 0.3 0.1 0.2 0.7 0.4 1.0 1.1 0.6 3.4 7.6 0.5 4.4 0.9 0.7 0.5 0.6 0.4 1.7 0.2 0.7 0.3 3.0 1.1 1.0 2.2 6.3 2.1 2.1 2.1 2.1 1.3 0.5 1.0 0.4 5.4 0.2 0.1 0.2 0.6 0.3 0.8 1.0 0.6 2.7 6.2 0.4 3.6 0.8 0.6 0.5 0.6 0.3 1.4 0.2 0.6 0.3 2.3 0.9

Accumulate Accumulate Neutral Accumulate Accumulate Neutral Neutral

Buy 1,361 Buy 180 Buy 413 Buy 354 Neutral 962 Buy 48 Buy 401 Buy 285 Reduce 344 Neutral 131 Accumulate 2,600 Buy 617 Buy 201 Accumulate 158 Buy 1,145 Buy 11,491 Neutral 3,298 Buy 636 Buy 55 Buy 264 Neutral 9 Buy 35 Buy 66 Buy 308 Buy 428 Buy 212 Neutral 1,841 Neutral 325

Source: Company, Angel Research, Note: *December year end; #September year end; &October year end; ^June year end; Price as on February 28, 2013

Please refer to important disclosures at the end of this report.

13

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Ratings (Returns) :

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

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Research Team Fundamental: Sarabjit Kour Nangra Vaibhav Agrawal Bhavesh Chauhan Viral Shah Sharan Lillaney V Srinivasan Yaresh Kothari Ankita Somani Sourabh Taparia Bhupali Gursale Vinay Rachh Amit Patil Shareen Batatawala Twinkle Gosar Tejashwini Kumari Technicals: Shardul Kulkarni Sameet Chavan Sacchitanand Uttekar Derivatives: Siddarth Bhamre Institutional Sales Team: Mayuresh Joshi Hiten Sampat Meenakshi Chavan Gaurang Tisani Akshay Shah Production Team: Tejas Vahalia Dilip Patel Research Editor Production Incharge tejas.vahalia@angelbroking.com dilipm.patel@angelbroking.com VP - Institutional Sales Sr. A.V.P- Institution sales Dealer Dealer Sr. Executive mayuresh.joshi@angelbroking.com hiten.sampat@angelbroking.com meenakshis.chavan@angelbroking.com gaurangp.tisani@angelbroking.com akshayr.shah@angelbroking.com Head - Derivatives siddarth.bhamre@angelbroking.com Sr. Technical Analyst Technical Analyst Technical Analyst shardul.kulkarni@angelbroking.com sameet.chavan@angelbroking.com sacchitanand.uttekar@angelbroking.com VP-Research, Pharmaceutical VP-Research, Banking Sr. Analyst (Metals & Mining) Sr. Analyst (Infrastructure) Analyst (Mid-cap) Analyst (Cement, FMCG) Analyst (Automobile) Analyst (IT, Telecom) Analyst (Banking) Economist Research Associate Research Associate Research Associate Research Associate Research Associate sarabjit@angelbroking.com vaibhav.agrawal@angelbroking.com bhaveshu.chauhan@angelbroking.com viralk.shah@angelbroking.com sharanb.lillaney@angelbroking.com v.srinivasan@angelbroking.com yareshb.kothari@angelbroking.com ankita.somani@angelbroking.com Sourabh.taparia@angelbroking.com bhupali.gursale@angelbroking.com vinay.rachh@angelbroking.com amit.patil@angelbroking.com shareen.batatawala@angelbroking.com gosar.twinkle@angelbroking.com tejashwini.kumari@angelbroking.com

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