Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
tonnes next season. It belies expectation of a bumper crop, as farmers Value traded (Rs cr)
have not increased the areas while sugarcane sowing has come to an end. 26 May 17 % Chg - Day
(FC)
Cash BSE 3,634 12.5
Corporate News Cash NSE 26,557 (24.4)
Derivatives - -
Reliance Industries Ltd is targeting doubling its market share in fuel
retail in the next two-three years. RIL currently has a 5% share of India's Net inflows (Rs cr)
fuel retail market. (Mint) 25 May 17 % Chg MTD YTD
Mercator has been awarded a contract by the New Mangalore Port Trust FII 789 120.0 9,583 51,594
for maintenance dredging at the New Mangalore Port for a period of Mutual Fund 288 (60.4) 6,725 27,408
three years. The aggregate value of the contract is Rs. 980 mn. The order
FII open interest (Rs cr)
has been won against domestic and international bidders. (BL)
25 May 17 % Chg
Zydus Cadila has received approval from the US health regulator to
FII Index Futures 17,310 (4.9)
market Acamprosate calcium delayed-release tablets used for
FII Index Options 52,850 13.3
maintenance of abstinence from alcohol in the US market. Zydus Cadila
FII Stock Futures 68,214 3.8
has received the final approval from the United States Food and Drug FII Stock Options 2,657 2,616.4
Administration (USFDA) to market Acamprosate calcium delayed-release
tablets, 333 mg. The drug will be produced at the group's formulations Advances / Declines (BSE)
manufacturing facility at Baddi. (FE) 26 May 17 A B T Total % total
The Mumbai Metropolitan Regional Development Authority (MMRDA) Advances 237 830 94 430 25
selected Larsen and Tubro to develop a Rs 13.29 bn water supply scheme Declines 60 266 50 1135 65
in the megapolis. (ET) Unchanged 2 19 15 170 10
1735 100
Indian Hotels Co has approved the amalgamation of Tifco Holdings, a
wholly owned subsidiary of the Company, with the Company, by way of a Commodity % Chg
scheme of amalgamation. (BS)
26 May 17 1 Day 1 Mth 3 Mths
Bank of Baroda plans to raise Rs. 90 bn through various instruments,
including follow-on public offer (FPO), to fund growth during this fiscal. Crude (US$/BBL) 49.7 (0.2) 0.8 (7.9)
Gold (US$/OZ) 1,267.3 0.9 0.0 0.9
(BL)
Silver (US$/OZ) 17.3 0.7 0.5 (5.7)
Jindal Steel and Power Limited (JSPL), India's leading steel and power
major has commissioned its 6 MTPA Integrated Steel Plant at Angul. (ET) Debt / forex market
26 May 17 1 Day 1 Mth 3 Mths
Sensex
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Increased debt in the standalone business (debt taken to retire overseas debt in
FY17) led to higher interest charge at Rs 558 mn vis--vis Rs 191 mn in Q4FY16.
CG has been accumulating debt at standalone level to fund losses in overseas
subsidiaries. This has led to PAT growth lower than the EBITDA growth of the
company. In FY17, CG sales grew by 12.7% YY with 32% YY EBITDA growth due
to margin expansion (low commodity cycle also aided to CG profitability). PBT,
however declined 18% due to sharp increase in debt.
Impairment of sizable amount of loans and advances and equity earlier has led
to write-offs which qualify for tax set-offs. This resulted in tax expense that
came down sharply in the standalone entity (reported negative figure).
Other Highlights
CG has been trying to divest its stake individually in various geographies.
Crompton has been exploring options for divesting units in Ireland, Belgium,
Hungary and Indonesia individually.
CG has received an offer for acquisition of the company's US business
(comprised in its subsidiary, CG Power systems USA Inc). The proposed di-
vestment is a part of company's strategy of debt reduction and focusing on
its core operations and core market in India.
Management stated that ZIV divestment (deal EV at Euro 120 mn) is on
track. As of now CG has received Rs 7 Bn as proceeds from the sale of ZIV.
Most of the low margins power systems orders in domestic business are
over. Management highlighted that the company would focus only on high
value added orders with better margin profile. Management believes that
operating margins should improve from Q1FY18 onwards.
Valuation & Recommendation
We roll forward out target price on FY19; ascribe a PER of 17x (20x FY18 earlier)
and arrive at a target price of Rs 84 (Rs 76.5 earlier) on company's stock. In view
of downside to our target price (stock price appreciated 32% since our previous
We recommend SELL on CG
Power and Industrial Solution Ltd
update post Q3FY17 result), we move recommendation to 'SELL' from 'ACCU-
with a price target of Rs.84 MULATE' earlier. We however note that the stock movement would track suc-
cessful divestment of international business (including US power business) in
near/medium term.
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Source: Company,
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Source: Company,
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and 2.7% yoy basis, reflecting marginal increase in gas sales volume and
higher net realization. Combined gas sales volume has decreased by 0.2%
qoq to 235.93 mmscm. Blended average realization has increased 3.8% qoq
to Rs.24.43/scm (+2.5% yoy) mainly due to increase in PNG prices.
Sales Volume: During Q4FY17, MGL sold ~127.74 mn kg of CNG thereby
registering a marginal growth of 0.2% on sequential basis. MGL sold 62.4
mmscm of PNG in Q4FY17 showing growth of 0.4% qoq.
Segment wise revenue analysis: In Q4FY17, CNG segment registered a
revenue of Rs.4.1 bn, up 1.8% qoq and 1.5% yoy due to both higher sales
volume and higher realization. Similarly, PNG segment has registered a rev-
enue of Rs.1.62 bn resulting in a revenue growth of 9.4% qoq and 9.4%
yoy supported by both volume growth (marginal) and significant realization
growth.
Raw Material Cost: The raw material cost has increased 7% qoq but down
8% yoy basis to Rs.2.6 bn. The raw material cost as a percentage of rev-
enue is up 140 bps qoq but down 500 bps yoy to 45.2%. In order to meet
the rising domestic demand of natural gas, MGL not only sources KG-D6
gas and Administered price mechanism (APM) gas but also sources higher
priced long-term RLNG as well as spot RLNG. Decline in RLNG and domestic
gas prices yoy basis led to decline in raw material cost. We would like to
highlight here that the gas supplied by RIL and ONGC is fixed by govern-
ment in US dollar terms. Hence, any rupee depreciation increases the cost
for MGL and vice-a-versa.
Employee expenses: In absolute terms, employee cost has increased
11.9% qoq to Rs.160 mn (+2% yoy). We believe staff cost is within accept-
able range.
Other expenses: Other expenses has increased 7% qoq and 9.9% yoy to
Rs.854 mn presumably due to higher maintenance activity and higher vol-
umes.
Operating profit: In absolute terms, EBIDTA stands at Rs.1.63 bn down
2.4% qoq but up 21.1% yoy mainly due to higher raw material cost, higher
employee cost and higher other expenses. Another important factor to
monitor is EBIDTA per unit of sales. The same has decreased 2.6% qoq
(partly base effect) to Rs.6.91/scm (+20.9% yoy).
Operating Margins: In Q4FY17, the EBIDTA margin stood at 28.3%, which
is down 190 bps qoq but up 430 bps sequentially.
Result Table
Ratio's (%) Q4FY17 Q4FY16 YoY (%) QoQ (%)
Source: Company,
Other income of the company has increased 4.4% qoq (partly base effect)
but down 10.9% qoq to Rs.130 mn. Other income consist of interest income
and tax-free dividend.
Non-cash charges: The depreciation cost has gone up 22% yoy basis and
3.8% qoq to Rs.257 mn. Net fixed assets stands at Rs.13 bn as on 31st
March'17 as against Rs.11.6 bn as on 31st March16.
PBT for Q4FY17 is at Rs.1.51 bn up 17.8% yoy but down 2.5% on a sequen-
tial basis mainly on account of lower operating profit and higher deprecia-
tion.
Bottom line for Q4FY17 is at Rs. 995 mn up 17.9% yoy but flat sequentially
thereby translating into Q4FY17 EPS of Rs.10.1 and CEPS of Rs.12.7.
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Source: Company,
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Future Prospects
We have tweaked our FY18 and FY19 estimates. We have assumed the ru-
pee to be at 66.5 / USD in FY18 and 67.5 / USD in FY19.
On an overall basis, we expect USD revenue to growth by 6.5% in FY18 and
grow by about 8% in FY19.
Consequently, PAT is expected to be at Rs.8.6bn in FY18 and Rs.9.3bn in
FY19. EPS works out to Rs.44.4 in FY18 and Rs.48.4 in FY19.
Valuations
Mphasis has been scaling up its core Direct International business over the
past several quarters. This has led to higher-than-industry growth in this
business.
However, DR revenues are expected to remain muted going forward. HP
business should also grow at a muted pace in FY18 atleast and these will
drag down the overall growth rates of Mphasis.
Demand generating efforts may bring in more business, going ahead. We
will watch out for further progress on these over the next few quarters.
At the CMP, our FY19 estimates are discounted by about 12.1 x, which, we
feel, are adequate, looking at the muted revenue growth.
We maintain SELL with a Target Price of Rs.544.
Risk and Concerns
A delayed recovery in the developed economies may impact our projections.
A sharp acceleration in rupee from the current levels may impact our earnings
estimates for the company.
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Sales 5,54,485 6,01,283 6,57,945 Revenue from Operations 150088 141388 6.2% 135700 10.6%
Growth (%) 7.5 8.4 9.4
Expenses
EBITDA 145780 166926 185577
EBITDA margin (%) 26.3 27.8 28.2
Raw Material Expenses 46828 35672 31.3% 33766 38.7%
PBT 155030 179583 203357 Excise Duty 38833 43821 -11.4% 43216 -10.1%
Net profit 102009 118525 134216 Employee Expenses 5714 5547 3.0% 5723 -0.2%
EPS (Rs) 8.4 9.8 11.05
Other Expenses 19960 20298 -1.7% 17531 13.9%
Growth (%) 10.3 16.2 13.24
CEPS (Rs) 9.3 10.7 12.0 EBITDA 38754 36051 7.5% 35464 9.3%
Book value (Rs/share) 26.2 30.9 36.2 Margin 25.8% 25.5% 26.1%
DPS (Rs) 4.8 4.8 5
Depreciation and Amortization 2418 2465 -1.9% 2665 -9.3%
ROE (%) 31.5 34.2 36.2
ROCE (%) 25.7 29.0 28.6 EBIT 36336 33586 8.2% 32799 10.8%
Net cash (debt) 95158 138354 198752 Other Operating Income
nwc(Days) 193 207 210
Other Income 4021 3712 8.3% 6879 -41.6%
P/E (x) 36.8 31.7 27.9
P/BV (x) 11.8 10.0 8.5
Interest Expenses -115 123 -193.4% 136 -184.3%
EV/Sales (x) 9.1 8.3 7.6 Profit before Tax 40471 37175 8.9% 39542 2.4%
EV/EBITDA (x) 25.1 21.7 19.5 Tax Expenses 13777 13369 3.1% 13075 5.4%
Source: Company, Kotak Securities - Pri- Profit from Ordinary Act. After Tax 26695 23807 12.1% 26467 0.9%
vate Client Research
Source: Company Reports
Raw material expenses rose sharply during the quarter, for categories such as
juices, dairy, chocolates, and coffee, affecting margins of the other FMCG seg-
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Sun TV Network reported revenues Rs 5.82 Bn, in line with our estimates. For
the quarter, advertising and slot sales declined 7% y/y, as regional markets con-
tinued to witness pressure (likely to a greater extent than natinoal markets), on
account of demonetization. Advertising revenue growth came in below our ex-
pectations. Cable revenues witnessed stronger growth than expected, while
most other revenue lines were broadly in line with expectations.
Cost of programming registered 34% y/y growth, as the company has: a/ relied
more heavily on comissioned programming in non-Tamil markets, b/ comissioned
more expensive programming in order to compete well in several markets. Other
expenses too rose sharply as a result of CSR expenses during the quarter, and
on account of new show launches. The management said explicitly that other
expenses did not have any one-off components.
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Depreciation and amortization expenses, which include (to a larger degree) the
expenses in movies telecast during the quarter, registered a sharp decline in the
quarter, as the company is making attempts to shift its focus to fiction/ non-fic-
tion programming from film-based programming. The management believes that
the decline witnessed in FY17 (in the amortization line) is sustainable.
Reported EBIT margin declined by 2 ppt, as advertising revenues were weak and
costs of programming escalated sharply. Reported PAT was flattish; adjusted
PAT registered 8.5% y/y growth (exceptional items in 4QFY16 amounting to Rs
180 mn).
As of now, for the year, the company has paid out dividend of Rs 5/ share. The
management has said that the company continues to evaluate whether paying
out dividend is the best method of returning cash to the shareholders.
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Source: Company
Lower realisation offset volume benefit QoQ: The 5.4% QoQ increase in net
sales is attributed to higher chemical sales volume (includes Dyes, Dye interme-
diates and Basic Chemicals) which grew 23% QoQ. But the benefit of the same,
was offset by a decline in realisation (seasonal in nature) In FY17, a major por-
tion of the revenue growth was contributed by higher realisation, as volume
grew by 8% YoY. Going ahead, we expect realisation to sustain in the near term
and volume will be the key earnings driver.
Volume to be key earnings driver: With the Dyestuff expansion, commission-
ing of LABSA and liquid dyestuff is on track, we expect volume growth trajectory
to continue for the next two years and with increasing dyestuff manufacturing
Kotak Securities Limited has two independent equity research groups: Institutional Equities and Private Client Group. This report has
been prepared by the Private Client Group. The views and opinions expressed in this document may or may not match or may be contrary
with the views, estimates, rating, target price of the Institutional Equities Research Group of Kotak Securities Limited.
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Source: Company
Realisation and volume boost revenue: NMDC has managed to register higher
sales volume over the last couple of quarters led by higher offtake Chhattisgarh,
Karnataka mines (JSW Steel) and higher export sales (increase in global iron ore
prices).Iron ore sales volume during the quarter stood at 9.74MT. In addition to the
volume, NMDC took the average price hike of Rs358/tonne during the quarter. This,
along with a e-auction premium in Karnataka, helped NMDC to garner average
realisation of Rs2,907/tonne, up 66%/18% YoY/QoQ. Both these factors led to
87.7%/15% YoY/QoQ jump in net sales to Rs28.72bn.
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Operational Performance
4QFY17 4QFY16 % YoY 3QFY17 % QoQ
Sponge Iron
Sales Volume (Tonnes) 9.74 8.49 14.7 10.1 (3.1)
Realisation (Rs/T) 2,907 1,749 66.2 2,456 18.4
Source: Company
...however higher other expenses restricted benefit: EBITDA during the quar-
ter declined 9.2% QoQ to Rs9.32 bn, lower than our estimates for Rs14.4bn. This
was largely due to 42.5%/50.7%YoY/QoQ jump in other expenses to Rs10.28bn,
which offset the benefit of higher realisation. Other expenses during the quarter
included Rs2.5 bn towards mine closure obligation under MMDR Amendment
Act, Rs500 mntowards service tax liability and Rs600 mn towards expected
credit loss on trade receivables. As a result, EBITDA/t declinedto Rs 957/t vs
Rs1,021/tonne in Q3FY17. With the sharp fall in global iron prices in recent weak
backed by increasing supply and weak demand in China, we expect NMDC to
cut iron ore prices in the coming months, which should put pressure on margin.
Maintain SELL: After the run up all through FY16, global iron ore prices have de-
clined from highs of US$96/t in mid-February to US$60/t at present. Increase in iron
We recommend SELL on NMDC ore supply by big miners from Australia and Brazil would keep seaborne iron ore
with a price target of Rs.110 market oversupplied and keep prices under check. Besides this, increase in domestic
supply by merchant iron ore price would put domestic iron ore prices under pressure.
Hence, we think the pricing action is likely to be negative over the long term. We
continue to maintain our negative stance on the company, due to weak iron ore
prices. The company currently trades at 11.8x FY18E and FY19E earnings and on EV/
EBITDA, it trades at 7.6x/7.5x FY18E/FY19E EBITDA, which in our view is expen-
sive. Hence, we continue to maintain our SELL rating on NMDC, with a target
price of Rs110. We have assigned value to the investment in steel plant at 50%
discount.
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Source: Company
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Revision in estimates
Particulars Previous Actual Revised New % Change
(Rs Mn) FY17E FY18E FY17 FY18E FY19E FY17E FY18E
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Source: Company
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Source: Company
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fiscal.
Consolidated Order backlog stands at Rs 80 bn, 10% on a yoy basis. The rev-
enue visibility provided by order book is adequate at 30 months of trailing four
quarter revenues.
Other highlights
The management indicated in Mumbai there are seven sewage treatment projects
that are to be tendered out. However, movement has been sluggish on these
projects.These should get tendered out in next fiscal.
On Namami Gange, the management indicated that the government is keen to
kickstart the project and it expects few of them of the size of Rs 3.0- 7.0 bn each to
be tendered out on a PPP model basis.
Earnings Revision
FY18 Estimates
Rs mn Earlier Revised
Source: Company
Management Guidance
Revenue guidance of Rs 38-40 bn
We recommend Accumulate on Order intake guidance of Rs 43-45 bn
VA Tech Wabag with a price
The company continue to remain positive on the EBITDA margins outlook.
target of Rs.731
Valuation -MaintainAccumulate
VAW is trading at 20.3x and 18.0x, FY18 and FY19 earnings respectively. We
have been positive on the stock in view strong order book of the company
coupled with relative under-performance in stock price in H1FY17. However, in
CYTD 2017, the stock has rallied strongly by 40% and is trading closer to revised
target price of Rs 711, based on 21x FY18 earnings (earlier Rs 555, based on 20x
FY18 earnings).
We have a positive view on the water and sewage treatment sector in view of
long term drivers like urbanization, smart cities, water reclamation, industrial
effluent treatment and Namami Gange. Hence, we retain our positive outlook
on the company but revise rating to "Accumulate" from "BUY" earlier in view of
the modest upside. Investors should consider buying the stock on declines.
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Zinc demand-supply
(MT) 1QCY16 1QCY17
Source: ILZSG
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Source: ILZSG
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Source: BSE
Gainers
TATASTEEL 511.3 5.49 NA 27.4
GAIL India 242.25 4.15 NA 9.3
Sun Pharma 198.25 4.04 NA 4.1
Losers
Bajaj Auto 565.75 -4.36 NA 12.0
BPCL 425.9 -2.97 NA 3.1
Tata Steel 491.25 -2.53 NA 1.4
Source: Bloomberg
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RATING SCALE
Definitions of ratings
BUY We expect the stock to deliver more than 12% returns over the next 9 months
ACCUMULATE We expect the stock to deliver 5% - 12% returns over the next 9 months
REDUCE We expect the stock to deliver 0% - 5% returns over the next 9 months
SELL We expect the stock to deliver negative returns over the next 9 months
NR Not Rated. Kotak Securities is not assigning any rating or price target to the stock. The report has been prepared for information purposes
only.
RS Rating Suspended. Kotak Securities has suspended the investment rating and price target for this stock, either because there is not a suffi-
cient fundamental basis for determining, or there are legal, regulatory or policy constraints around publishing, 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.
NOTE Our target prices are with a 9-month perspective. Returns stated in the rating scale are our internal benchmark.
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Disclosure/Disclaimer
Kotak Securities Limited established in 1994, is a subsidiary of Kotak Mahindra Bank Limited. Kotak Securities is one of India's largest brokerage and
distribution house.
Kotak Securities Limited is a corporate trading and clearing member of Bombay Stock Exchange Limited (BSE), National Stock Exchange of India Limited (NSE),
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(CDSL). Kotak Securities Limited is also registered with Insurance Regulatory and Development Authority as Corporate Agent for Kotak Mahindra Old Mutual
Life Insurance Limited and is also a Mutual Fund Advisor registered with Association of Mutual Funds in India (AMFI). We are registered as a Research Analyst
under SEBI (Research Analyst) Regulations, 2014.
We hereby declare that our activities were neither suspended nor we have defaulted with any stock exchange authority with whom we are registered in last
five years. However SEBI, Exchanges and Depositories have conducted the routine inspection and based on their observations have issued advise/warning/
deficiency letters/ or levied minor penalty on KSL for certain operational deviations. We have not been debarred from doing business by any Stock Exchange
/ SEBI or any other authorities; nor has our certificate of registration been cancelled by SEBI at any point of time.
We offer our research services to clients as well as our prospects.
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information of clients of Kotak Securities Ltd. It does not constitute a personal recommendation or take into account the particular investment objectives,
financial situations, or needs of individual clients.
We have reviewed the report, and in so far as it includes current or historical information, it is believed to be reliable though its accuracy or completeness
cannot be guaranteed. Neither Kotak Securities Limited, nor any person connected with it, accepts any liability arising from the use of this document. The
recipients of this material should rely on their own investigations and take their own professional advice. Price and value of the investments referred to in this
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Opinions expressed are our current opinions as of the date appearing on this material only. While we endeavor to update on a reasonable basis the
information discussed in this material, there may be regulatory, compliance or other reasons that prevent us from doing so. Prospective investors and others
are cautioned that any forward-looking statements are not predictions and may be subject to change without notice. Our proprietary trading and investment
businesses may make investment decisions that are inconsistent with the recommendations expressed herein.
Kotak Securities Limited has two independent equity research groups: Institutional Equities and Private Client Group. This report has been prepared by the
Private Client Group. The views and opinions expressed in this document may or may not match or may be contrary with the views, estimates, rating, target
price of the Institutional Equities Research Group of Kotak Securities Limited.
We and our affiliates/associates, officers, directors, and employees, Research Analyst(including relatives) worldwide may: (a) from time to time, have long or
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business group in any manner. The investor is requested to take into consideration all the risk factors including their financial condition, suitability to risk
return profile and take professional advice before investing.
The analyst 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.
No part of this material may be duplicated in any form and/or redistributed without Kotak Securities' prior written consent.
Details of Associates are available on our website ie www.kotak.com
Research Analyst has served as an officer, director or employee of subject company(ies): No
We or our associates may have received compensation from the subject company(ies) in the past 12 months.
We or our associates have managed or co-managed public offering of securities for the subject company(ies) in the past 12 months: No
We or our associates may have received compensation for investment banking or merchant banking or brokerage services from the subject company(ies) in
the past 12 months. We or our associates may have received any compensation for products or services other than investment banking or merchant banking
or brokerage services from the subject company(ies) in the past 12 months. We or our associates may have received compensation or other benefits from the
subject company(ies) or third party in connection with the research report. Our associates may have financial interest in the subject company(ies).
Research Analyst or his/her relative's financial interest in the subject company(ies): No
Kotak Securities Limited has financial interest in the subject company(ies) at the end of the month immediately preceding the date of publication of Research
Report: No
Our associates may have actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding
the date of publication of Research Report.
Research Analyst or his/her relatives has actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month
immediately preceding the date of publication of Research Report: No
Kotak Securities Limited has actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding
the date of publication of Research Report: No
Subject company(ies) may have been client during twelve months preceding the date of distribution of the research report.
"A graph of daily closing prices of securities is available at www.nseindia.com and http://economictimes.indiatimes.com/markets/stocks/stock-quotes. (Choose
a company from the list on the browser and select the "three years" icon in the price chart)."
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Kotak Securities - Private Client Research Please see the Disclosure/Disclaimer on the last page For Private Circulation 33