GAIL (India) (GAIL)

Energy
RESULT

BUY
JANUARY 23, 2012

Coverage view: Attractive

Waiting for gas. GAIL reported 3QFY12 net income at `10.9 bn (+12.8% yoy and 0.3% qoq), in line with our estimate of `10.8 bn. EBITDA increased 7.1% qoq and 34.6% yoy to `17.9 bn, higher versus our estimate of `16.5 bn. The qoq improvement in EBITDA reflects (1) higher profitability of gas transmission and trading segments and (2) lower provisional subsidy burden. We maintain our BUY rating on the stock noting large potential upside of 31% to our revised SOTP-based target price of `485 (`535 previously).
Company data and valuation summary GAIL (India) Stock data 52-week range (Rs) (high,low) 486-360 Market Cap. (Rs bn) 468.6 Shareholding pattern (%) Promoters 57.3 FIIs 14.3 MFs 3.6 Price performance (%) 1M 3M 12M Absolute (5.5) (11.7) (18.4) Rel. to BSE-30 (11.3) (11.5) (7.5)

Price (Rs): 369 Target price (Rs): 485 BSE-30: 16,752

Forecasts/Valuations EPS (Rs) EPS growth (%) P/E (X) Sales (Rs bn) Net profits (Rs bn) EBITDA (Rs bn) EV/EBITDA (X) ROE (%) Div. Yield (%)

2011 28.2 13.8 13.1 324.6 35.7 59.9 7.5 17.5 2.0

2012E 30.1 6.8 12.3 390.4 38.2 64.3 8.2 16.3 2.2

2013E 31.0 3.2 11.9 479.8 39.4 71.4 7.8 14.7 2.3

QUICK NUMBERS 119 mcm/d of gas transmission volumes in 3QFY12 `25/share of reported EPS in 9MFY12 31% potential upside from current levels

Higher EBIT of gas transmission and trading segments; surprisingly lower subsidy burden qoq GAIL reported 3QFY12 EBITDA at `17.9 bn (+7.1% qoq and +34.6% yoy), higher versus our expected `16.5 bn with the variance largely coming from lower subsidy burden. We are surprised by the reported qoq decline in subsidy burden for GAIL given higher estimated gross underrecoveries at `321 bn versus `214 bn in 2QFY12. The qoq improvement in EBITDA reflects (1) higher profitability of the gas transmission segment with reported EBIT at `6.2 bn (+11.6% qoq), (2) higher EBIT of the gas trading segment at `3.2 bn (+12.7% qoq) and (3) lower provisional subsidy burden at `5.4 bn (-5.4% qoq). Weak performance of petrochemical and LPG segments led by lower sales volumes GAIL reported 4.1% qoq decline in EBIT of petrochemical segment to `3.9 bn led by sharp decline in polymers sales volumes to 113,000 tons (-12.4% qoq). This was partially offset by higher realization of the petrochemical segment at `77.7/kg versus `72.7/kg in 2QFY12 led by a weaker Rupee at `51/US$ versus `45.8/US$. The company reported 13.2% decline in EBIT of the LPG and liquid hydrocarbons business at `3.1 bn despite lower subsidy burden qoq reflecting lower sales volumes of LPG and liquid hydrocarbons at 361,000 tons (-4.5% qoq). Maintain BUY rating with a revised SOTP-based target price of `485 We maintain our BUY rating on GAIL given 31% potential upside to our revised SOTP-based target price of `485 (`535 previously) based on FY2013E estimates. We rule out meaningful downside risks to our gas transmission volumes estimates for FY2013E and FY2014E at 125 mcm/d and 135 mcm/d. We note that GAIL would benefit from (1) start of LNG terminals at Dabhol (4QFY12) and Kochi (3QFY13) and (2) incremental gas production from ONGCs marginal fields. Revise earnings for (1) higher subsidy and (2) weaker Rupee We have revised our FY2012-14E estimates to `30.1, `31 and `33.2 versus `31.8, `33.8 and `36.2 to reflect (1) higher subsidy burden for FY2013-14E, (2) lower marketing margins, (3) weaker Rupee, (4) higher crude prices and (5) other minor changes. Key downside risk stems from (1) higher-than-expected subsidy burden and (2) complete removal of marketing margins.

Sanjeev Prasad
sanjeev.prasad@kotak.com Mumbai: +91-22-6634-1229

Gundeep Singh
gundeep.singh@kotak.com Mumbai: +91-22-6634-1286

Tarun Lakhotia
tarun.lakhotia@kotak.com Mumbai: +91-22-6634-1188

Kotak Institutional Equities Research kotak.research@kotak.com Mumbai: +91-22-6634-1100 For private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES RATING SYSTEM AND OTHER DISCLOSURES, REFER TO THE END OF THIS MATERIAL.

Energy

GAIL (India)

3QFY12 results highlights

Exhibit 1 gives details of GAILs 3QFY12 results and compares the same with 2QFY12 and 3QFY11 results. We discuss key highlights below.
GAIL interim results, March fiscal year-ends (` mn)
(% chg.) 3QFY12E 3QFY11 2QFY12 10.3 34.7 16.1 10.6 34.7 18.0 8.3 10.9 13.0 5.9 8.5 (83.3) (55.1) 1.2 3.8 40.3 1.2 35.8 16.4 23.6 16.9 34.6 (88.8) 26.0 23.0 18.7 66.9 12.8 17.1 4.1 11.5 (1.8) 7.1 (81.6) (8.4) (1.6) 1.9 (22.2) (0.3) yoy 9MFY12 9MFY11 (% chg.) 299,096 236,276 26.6 248,619 193,829 28.3 (846) (1,090) 205,269 158,446 29.6 18,678 15,926 17.3 5,544 4,776 16.1 19,974 15,771 26.7 50,476 42,447 18.9 2,020 3,882 (48.0) 641 487 31.6 5,764 4,831 19.3 46,091 41,011 12.4 14,876 10,329 44.0 (491) 2,902 31,705 27,781 14.1 25.0 21.9 31.2 32.3

Sales Total expenditure (Increase)/decrease in stock Purchase Raw material Staff cost Other expenditure EBITDA Other income Interest Depreciation Pretax profits Tax Deferred Net income EPS (Rs) Tax rate (%) Volume data Gas sales (mcm/d) Gas transmission (mcm/d) LPG transported ('000 tons) LPG production ('000 tons) LPG sales ('000 tons) Other liquids production ('000 tons) Other liquids sales ('000 tons) Polymers ('000 tons)-production Polymers ('000 tons)-sales Subsidy payment Segment revenue (Sales/Income) Transmission services (1) Natural gas (2) LPG Natural gas trading Petrochemicals LPG and liquid hydrocarbons Other segment Total Less: Inter-segment revenue Sales/Income from operations Segment results (Profit before tax and interest) Transmission services (1) Natural gas (2) LPG Natural gas trading Petrochemicals LPG and liquid hydrocarbons Telecom and other segments Total Less: Interest Less: Other unallocable exp (net) Total PBT Capital employed Transmission services (1) Natural gas (2) LPG Petrochemicals LPG and liquid hydrocarbons Telecom and other segments Total

3QFY12 112,942 94,993 1,941 77,229 6,574 1,983 7,265 17,949 214 207 1,975 15,980 5,013 53 10,914 8.6 31.7

3QFY12E 102,402 85,863 71,317 5,929 1,755 6,861 16,540 1,275 462 1,951 15,402 3,572 1,049 10,781 8.5 30.0

3QFY11 83,836 70,505 179 56,863 5,647 1,604 6,212 13,331 1,906 165 1,605 13,467 3,004 787 9,676 7.6 28.1

2QFY12 97,264 80,509 (912) 65,926 6,316 1,779 7,400 16,755 1,160 226 2,008 15,682 6,447 (1,709) 10,944 8.6 30.2

2012E 390,449 329,959 270,215 24,508 7,677 27,558 60,491 3,774 939 7,832 55,494 13,132 4,210 38,152 30.1 31.3

85 119 870 281 283 78 78 117 113 (5,361)

119 850 291 75 113 (6,206)

83 120 893 265 263 67 68 102 81 (4,177)

84 119 796 298 298 81 80 111 129 (5,666)

2.0 (1.0) (2.6) 6.0 7.6 16.4 14.7 14.7 39.5 28.4

1.2 0.3 9.3 (5.7) (5.0) (3.7) (2.5) 5.4 (12.4) (5.4)

84 118 2,483 849 849 239 239 337 330 (17,846)

82 117 2,480 809 811 221 223 294 276 (12,095)

1.8 1.0 0.1 4.9 4.7 8.1 7.2 14.6 19.6 47.5

118 3,350 1,135 315 440 (35,406)

10,872 1,216 91,495 8,780 9,654 344 122,361 9,763 112,598

10,008 1,292 67,728 5,713 7,283 151 92,176 8,526 83,650

9,800 1,098 75,754 9,376 9,887 257 106,173 9,183 96,990

8.6 (5.9) 35.1 53.7 32.6 127.8 32.7 14.5 34.6

10.9 10.7 20.8 (6.4) (2.4) 33.8 15.2 6.3 16.1

30,061 3,456 239,303 24,525 27,680 821 325,846 27,585 298,262

28,771 3,569 185,139 19,298 22,465 446 259,686 24,036 235,650

4.5 (3.2) 29.3 27.1 23.2 84.2 25.5 14.8 26.6

6,208 775 3,230 3,875 3,055 (436) 16,707 207 520 15,980

6,657 844 2,059 1,954 1,501 (167) 12,848 165 (784) 13,467

5,562 722 2,866 4,041 3,521 (818) 15,894 226 (14) 15,682

(6.7) (8.2) 56.9 98.3 103.6 160.7 30.0

11.6 7.4 12.7 (4.1) (13.2) (46.7) 5.1

18.7

1.9

18,291 2,187 9,227 10,349 8,861 (1,589) 47,326 641 594 46,091

20,269 2,365 5,240 7,516 5,586 (666) 40,308 487 (1,190) 41,011

(9.8) (7.5) 76.1 37.7 58.6 138.7 17.4

12.4

140,996 7,956 16,190 9,303 (1,441) 173,003

95,636 132,061 8,267 8,119 17,680 15,448 9,345 11,258 (348) (736) 130,580 166,151

140,996 95,636 7,956 8,267 16,190 17,680 9,303 9,345 (1,441) (348) 173,003 130,580

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH

GAIL (India)

Energy

Operating highlightsweak sales volumes for petchem and LPG businesses. GAILs gas transmission volumes remained flat qoq at 119 mcm/d (-1% yoy). LPG and other liquid sales volume were at 361,000 tons compared to 378,000 tons in 2QFY12 and 331,000 tons in 3QFY11. GAIL sold 113,000 tons of polymers in 3QFY12 versus 129,000 tons in 2QFY12 and 81,000 tons in 3QFY11. Gas transmission segment. GAILs gas transmission EBIT increased 11.6% qoq to `6.2 bn reflecting foreign exchange loss of ~`500 mn accounted in 2QFY12; the company has capitalized exchange fluctuation loss of `1.1 bn on foreign-currency loans in 3QFY12. GAIL reported gas transmission volume at 119 mcm/d versus 119 mcm/d in 2QFY12 and 120 mcm/d in 3QFY11; our estimate was 119 mcm/d. Petrochemicals segment. GAILs petchem segments EBIT declined 4.1% qoq to `3.9 bn (+98.3% yoy) led by decline in polymer sales volumes. The sales volumes for polymer segment declined 12.4% qoq (+39.5% yoy) to 113,000 tons. The decline in profitability of petchem segment was partially offset by higher realizations supported by a weaker Rupee. We note that the realization of the petrochemical segment was at `77.7/kg versus `72.7/kg in 2QFY12 and `70.5/kg in 3QFY11. LPG and liquid hydrocarbons production segment. The LPG and liquid hydrocarbons segments EBIT declined 13.2% qoq to `3.1 bn due to lower LPG sales volumes. GAIL sold 283,000 tons of LPG in 3QFY12 versus 298,000 tons in 2QFY12 and 263,000 tons in 3QFY11. Sales volumes of other liquid hydrocarbons were at 78,000 tons versus 80,000 tons in 2QFY12 and 68,000 tons in 3QFY11. Subsidy burden. GAIL has reported provisional subsidy burden at `5.4 bn in 3QFY12 (`5.7 bn in 2QFY12 and `4.2 bn in 3QFY11) versus our expected `6.2 bn. We are surprised by reported decline in subsidy burden qoq given our higher estimates of gross under-recoveries at `321 bn for 3QFY12 versus `214 bn in 2QFY12. Other expenditure. GAIL reported other expenditure at `7.3 bn versus `7.4 bn in 2QFY12. The company reported lower survey expenses and write-off of dry well expenditure at `580 mn versus `939 mn in 2QFY12. Other income. GAIL reported sharp decline in other income to `0.2 bn versus `1.2 bn in 2QFY12 and `1.9 bn in 3QFY11.

Lower utilization of gas transmission pipelines factored in our estimates

We do not rule out delays in the commissioning of new gas pipelines of GAIL given slowerthan-expected ramp-up in domestic gas production. Exhibit 2 gives our gas supply model for India with projections until FY2017E. We expect domestic gas production in India to increase modestly to 135 mcm/d by FY2014E and 163 mcm/d by FY2017E. We do see a significant jump in supply of imported LNG led by (1) higher volumes at PLNGs Dahej terminal and (2) start of new LNG terminals at Dabhol and Kochi.

KOTAK INSTITUTIONAL EQUITIES RESEARCH

Energy

GAIL (India)

We see modest increase in domestic gas production over the next few years Supply of natural gas in India, March fiscal year-ends, 2008-17E (mcm/d)

Mumbai High Gujarat North-East Rajasthan TN/AP Eastern offshore KG-D6 (RIL-Niko) NEC-25 (RIL-Niko) Deen Dayal (GSPC) ONGC PY-3 Ravva Western offshore Lakshmi Panna-Mukta Tapti LNG and CBM Petronet LNG - Dahej Petronet LNG - Kochi RGPPL - Dabhol Shell Total LNG - Hazira CBM gas Total gas supply

2008 45 8 9 1 7 0 2 1 6 9 24 8 120

2009 46 7 9 1 8 0 2 1 5 12 24 6 119

2010 48 7 9 1 7 39 0 1 1 5 8 30 3 160

2011 48 7 9 1 7 56 0 2 1 4 7 33 4 178

2012E 48 7 10 1 7 43 2 0 1 1 6 7 40 1 8 1 181

2013E 48 7 10 1 7 38 3 0 1 0 5 7 40 3 2 11 2 186

2014E 48 7 11 1 7 38 3 5 0 1 0 5 6 39 10 6 14 3 203

2015E 48 7 11 1 7 45 5 5 0 1 5 6 47 16 8 14 3 227

2016E 48 7 11 1 7 50 6 5 0 1 4 6 48 18 15 14 3 243

2017E 48 7 11 1 7 60 6 6 5 0 1 4 5 48 18 18 14 3 261

Source: Company, Kotak Institutional Equities estimates

We rule out meaningful downside risks to our estimates of gas transmission volumes for GAIL at 125 mcm/d for FY2013E and 135 mcm/d for FY2014E versus current volumes of ~119 mcm/d. We expect modest ramp-up in GAILs transmission volumes from (1) higher LNG imports and (2) incremental gas production from ONGCs new and marginal fields.

Earnings estimates and key assumptionsbeing as conservative as possible

Exhibit 3 gives our key assumptions for GAIL. We have revised our FY2012E-14E EPS estimates to `30.1, `31 and `33.2 from `31.8, `33.8 and `36.2 to reflect (1) higher subsidy burden for FY2013-14E, (2) lower marketing margins, (3) weaker Rupee, (4) higher crude prices and (5) other minor changes. We note that GAIL has already clocked `25 bn of net profits in 9MFY12. We discuss the key assumptions behind our earnings model below.

KOTAK INSTITUTIONAL EQUITIES RESEARCH

GAIL (India)

Energy

Key assumptions behind GAIL model, March fiscal year-ends, 2007-14E

2007 Volumes Natural gas transportation, gross (mcm/day) HBJ pipeline Dahej-Vijaypur-GREP upgradation Dadri-Bawana-Nangal (transmitted and sold) Dadri-Bawana-Nangal (transmitted) Chainsa-Jhajjar-Hissar (transmitted and sold) Chainsa-Jhajjar-Hissar (transmitted) Other pipelines (transmitted) Other pipelines Regassified LNG Dahej-Vijaipur pipeline (transmitted and sold) Dahej-Vijaipur pipeline (transmitted) Dahej-Uran pipeline (transmitted and sold) Dahej-Uran pipeline (transmitted) Panvel-Dabhol pipeline (transmitted and sold) Panvel-Dabhol pipeline (transmitted) Dabhol-Bangalore pipeline Kochi-Bangalore/Mangalore pipeline Elimination of double-counted volumes (a) Total gas transmission Total gas sales LPG (000 tons) Sold Transported Petrochemicals (000 tons) Polyethylene Domestic sales Exports Total petrochemicals Prices Natural gas (Rs/cubic meter) Natural gas ceiling price Regassified LNG including transportation Transmission plus marketing charges HBJ pipeline, Dahej-Vijaipur pipeline (from FY2007) Dahej-Vijaypur-GREP upgradation Dadri-Bawana-Nangal Chainsa-Jhajjar-Hissar Dahej-Vijaipur, Dahej-Uran, Panvel-Dabhol pipeline Dabhol-Bangalore pipeline Kochi-Bangalore/Mangalore pipeline Other pipelines LPG LPG (US$/ton) Transmission charges (Rs/ton) Jamnagar-Loni Vizag-Secunderabad Other assumptions Polyethylene, HDPE (US$/ton) Import tariff, Polyethylene Import tariff, LPG Exchange rate (Rs/US$) Subsidy losses 2008 2009 2010 2011 2012E 2013E 2014E

32

32

32

32 1

32 2 1 2 1 16 39 13 13 6 6 3 5

39 6 4

40 9 6 6 4

39 9 6 9 6

49 15 10 12 8

32 4 3 4 2 3 16 35 13 12 6 6 3 5

32 9 3 7 6 5 16 35 13 13 6 6 3 5 2 2 (37) 125 91 1,165 3,350

32 13 5 10 5 10 16 35 13 13 6 6 3 5 5 5 (46) 135 101 1,165 3,350

(3) 77

(15) 82

(18) 83

(21) 107

(20) 118 83 1,073 3,337

(26) 118 84 1,135 3,350

1,037 2,490

1,039 2,754

1,092 2,744

1,101 3,160

337 10 347

381 10 391

423 423

410 410

420 420

440 440

445 445

480 480

4.21 6.93 0.99

4.21 6.44 0.96

4.59 7.05 1.05

5.75 11.09 0.99 1.95 0.78 0.54 1.04

7.55 12.59 0.99 1.95 0.78 0.54 0.95

7.71 16.96 0.99 1.95 0.78 0.54 0.89

7.71 22.98 0.99 1.95 0.78 0.54 0.89 2.13 1.55 0.46 849 1,522 1,450 1,375 5% 0% 52.5 34,348

7.71 25.74 0.99 1.95 0.78 0.54 0.89 2.13 1.55 0.46 810 1,522 1,450 1,385 5% 0% 51.0 29,224

0.99

1.03

1.04

0.40 531 1,522 1,450 1,315 5% 0% 45.3 14,880

0.42 702 1,522 1,450 1,500 5% 0% 40.3 13,137

0.44 685 1,522 1,450 1,360 5% 0% 45.8 17,812

0.44 612 1,522 1,450 1,340 5% 0% 47.4 13,267

0.46 749 1,522 1,450 1,415 5% 0% 45.6 21,112

0.46 865 1,522 1,450 1,525 5% 0% 48.7 35,406

Note: (a) Gas transported through the HVJ or DV pipeline and then to smaller pipelines.

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH

Energy

GAIL (India)

Subsidy burden. We model subsidy burden on GAIL for FY2012E, FY2013E and FY2014E at `35.4 bn, `34.3 bn and `29.2 bn. We assume that upstream companies will bear 45% of total under-recoveries for FY2012E and GAIL will bear 5.6% of subsidy burden on upstream companies. We believe that the government will likely increase the subsidy burden on upstream companies in 4QFY12E given its fiscal constraints. We assume upstream companies to bear 40% in FY2013-14E. We assume GAILs share of subsidy burden on upstream companies at 6.2% in FY2013E and 6.5% in FY2014E. The rising share reflects the fact that GAIL bears subsidy on kerosene and LPG only and we expect the share of these two fuels to rise disproportionately as a share of overall underrecoveries on fuels. We clarify that we do not assume any increase in retail prices of regulated fuels in FY2013E and thus, we see downside risks to our subsidy estimates for the industry and for GAIL. Gas transmission volumes. We estimate GAILs transmission volumes for FY2012E at 118.5 mcm/d versus 118.3 mcm/d in 9MFY12 and 118 mcm/d in FY2011. We model transmission volumes for FY2013E and FY2014E at 125 mcm/d and 135 mcm/d led by (1) increased supply from higher LNG imports and (2) incremental gas production from ONGCs marginal fields. Crude oil and LPG price assumptions. We have increased our FY2012E, FY2013E and FY2014E crude oil (Dated Brent) price assumptions to US$113/bbl, US$105/bbl and US$100/bbl from US$110/bbl, US$100/bbl and US$95/bbl previously. Rupee-Dollar exchange rate assumptions. We have revised our exchange rate assumptions for FY2012E, FY2013E and FY2014E to `48.7/US$, `52.5/US$ and `51/US$ versus `48.27/US$, `49.75/US$ and `48.5/US$ previously.
We value GAIL stock at `485 per share Sum-of-the-parts valuation of GAIL, FY2013E basis (` bn)

Valuation base (Rs bn) Other EBITDA Natural gas transportation HVJ pipeline DV pipeline DUPD pipeline DBN pipeline CGJH pipeline DV GREP pipeline DB pipeline KBM pipeline Short distance pipelines Total natural gas transportation Other businesses LPG transportation LPG production Petrochemicals Natural gas trading Total other business segments Investments ONGC shares Others Investments Total Net debt/(cash) Implied value of share (Rs/share)
Source: Kotak Institutional Equities estimates

Multiples (X) Other EV/EBITDA

EV (Rs bn) EBITDA Other basis 41 32 30 38 19 154 68 46

EV (Rs/share) 32 25 24 30 15 122 54 36 22 359 18 38 55 20 131 46 29 75 565 80 485

41 32 30 38 19 154 68 46 5.5 5.0

27

3.7 9.6 14.0 8.5

6.0 5.0 5.0 3.0

22 48 70 25

73 45 118

0.8 0.8 0.8

58 36 95 101 193 101

KOTAK INSTITUTIONAL EQUITIES RESEARCH

GAIL (India)

Energy

GAIL (India) Ltd: Profit model, balance sheet, cash model of GAIL, March fiscal year-ends, 2007-14E (` mn)
2007 Profit model (Rs mn) Net sales EBITDA Other income Interest Depreciation Pretax profits Tax Deferred taxation Net profits Earnings per share (Rs) Balance sheet (Rs mn) Total equity Deferred taxation liability Total borrowings Current liabilities Total liabilities and equity Cash Other current assets Total fixed assets Investments Total assets Free cash flow (Rs mn) Operating cash flow, excl. working capital Working capital changes Capital expenditure Investments Other income Free cash flow Ratios (%) Debt/equity Net debt/equity ROAE (%) ROACE (%) Key assumptions Gas transmission volumes (mcm/d) Petrochemical sales volumes (000 tons) LPG sales volumes (000 tons) LPG transmission volumes (000 tons) Subsidy losses (Rs mn) 160,472 30,649 5,450 (1,071) (5,754) 29,274 (7,941) (190) 24,619 19.4 2008 180,082 39,275 5,564 (796) (5,710) 38,333 (12,525) (10) 26,015 20.5 2009 237,760 40,647 7,966 (870) (5,599) 42,144 (13,941) (62) 28,037 22.1 2010 249,964 46,688 5,411 (700) (5,618) 45,781 (13,750) (636) 31,398 24.8 2011 324,586 54,718 5,186 (829) (6,503) 52,572 (14,352) (2,437) 35,611 28.1 2012E 390,449 60,491 3,774 (939) (7,832) 55,494 (13,132) (4,210) 38,152 30.1 2013E 479,777 67,808 3,586 (3,393) (11,459) 56,542 (10,799) (6,381) 39,362 31.0 2014E 575,849 77,049 3,721 (5,970) (13,829) 60,970 (12,552) (6,282) 42,137 33.2

113,929 13,187 13,379 45,512 186,007 26,604 50,851 93,913 14,638 186,007

130,049 13,197 12,659 60,604 216,509 44,730 59,370 97,500 14,909 216,509

147,696 13,259 12,001 81,548 254,505 34,562 87,804 114,767 17,373 254,505

167,990 13,896 14,804 103,784 300,473 41,715 95,412 142,616 20,730 300,473

192,533 16,332 23,100 88,149 320,115 21,314 90,148 182,827 25,825 320,115

218,891 20,542 88,400 79,883 407,717 12,277 103,656 265,959 25,825 407,717

245,722 26,923 120,700 90,093 483,439 13,207 115,334 329,072 25,825 483,439

273,854 33,205 99,500 100,862 507,421 12,997 122,894 345,704 25,825 507,421

23,920 (10,151) (20,449) (205) 3,884 (3,002)

33,692 (388) (12,419) (270) 4,042 24,658

30,456 (5,573) (25,535) (2,464) 5,243 2,127

33,480 12,454 (35,702) (3,358) 4,705 11,580

42,110 (12,420) (46,322) (5,095) 4,090 (17,637)

42,665 (21,773) (87,208) 3,774 (62,542)

48,526 (1,468) (69,483) 3,586 (18,839)

55,968 3,209 (27,902) 3,721 34,996

10.5 (10.4) 20.5 16.1

8.8 (22.4) 19.2 17.8

7.5 (14.0) 18.4 17.5

8.1 (14.8) 18.3 17.2

11.1 0.9 18.2 16.9

36.9 31.8 17.0 13.9

44.3 39.4 15.4 11.6

32.4 28.2 14.5 11.6

77 347 1,037 2,490 14,880

82 391 1,039 2,754 13,137

83 423 1,092 2,744 17,812

107 410 1,101 3,160 13,267

118 420 1,073 3,337 21,112

118 440 1,135 3,350 35,406

125 445 1,165 3,350 34,348

135 480 1,165 3,350 29,224

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH

Disclosures

"I, Sanjeev Prasad, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report."

Kotak Institutional Equities Research coverage universe

Distribution of ratings/investment banking relationships 70% 60% 50% 42.5% 40% 30% 20% 10% 0% BUY ADD REDUCE SELL 6.6% 26.9% 17.4% 13.2% 4.2% 3.0% Percentage of companies within each category for which Kotak Institutional Equities and or its affiliates has provided investment banking services within the previous 12 months. * The above categories are defined as follows: Buy = We expect this stock to deliver more than 17.5% returns over the next 12 months; Add = We expect this stock to deliver 7.5-17.5% returns over the next 12 months; Reduce = We expect this stock to deliver 0-7.5% returns over the next 12 months; Sell = We expect this stock to deliver less than 0% returns over the next 12 months. Our target prices are also on a 12-month horizon basis. These ratings are used illustratively to comply with applicable regulations. As of 31/12/2011 Kotak Institutional Equities Investment Research had investment ratings on 167 equity securities. As of December 31, 2011 Percentage of companies covered by Kotak Institutional Equities, within the specified category.

2.4%

Source: Kotak Institutional Equities

Ratings and other definitions/identifiers

Definitions of ratings
BUY. We expect this stock to deliver more than 17.5% returns over the next 12 months. ADD. We expect this stock to deliver 7.5-17.5% returns over the next 12 months. REDUCE. We expect this stock to deliver 0-7.5% returns over the next 12 months. SELL. We expect this stock to deliver less than 0% returns over the next 12 months. Our target prices are also on a 12-month horizon basis.

Other definitions
Coverage view. The coverage view represents each analysts overall fundamental outlook on the Sector. The coverage view will consist of one of the following designations: Attractive, Neutral, Cautious.

Other ratings/identifiers
NR = Not Rated. The investment rating and target price, if any, have been suspended temporarily. Such suspension is in compliance with applicable regulation(s) and/or Kotak Securities policies in circumstances when Kotak Securities or its affiliates is acting in an advisory capacity in a merger or strategic transaction involving this company and in certain other circumstances. CS = Coverage Suspended. Kotak Securities has suspended coverage of this company. NC = Not Covered. Kotak Securities does not cover this company. RS = Rating Suspended. Kotak Securities Research has suspended the investment rating and price target, if any, for this stock, because there is not a sufficient fundamental basis for determining an investment rating or target. The previous investment rating and price target, if any, are no longer in effect for this stock and should not be relied upon. NA = Not Available or Not Applicable. The information is not available for display or is not applicable. NM = Not Meaningful. The information is not meaningful and is therefore excluded.

KOTAK INSTITUTIONAL EQUITIES RESEARCH

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