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INSTITUTIONAL EQUITY RESEARCH

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AU Small Finance Bank Quality, with growth INDIA | SMALL FINANCE BANK | IPO Note

28 June 2017

AU Small Finance Bank (AUSFB) is the only asset‐financing NBFC to receive a small‐finance bank license so far. It evolved from being a mono‐line product company to a diversified NBFC, to a small‐finance bank. As an NBFC, it has been offering three products – vehicle finance (50%), MSME (30%), and SME (20%), primarily to low‐ and middle‐income customers and businesses that have limited or no access to formal banking and finance channels. It is now extending its range to include retail‐banking products. Its AUM CAGR in FY13‐17 was 30% to touch Rs 107bn+. Though the bank is gradually increasing its footprint across states, its current operations are largely concentrated in Rajasthan (50%), Gujarat, Maharashtra, and MP, with ~90% of its branch network of 269 confined to these states. Its strong asset quality (1.6% GNPA) and unflinching growth speaks volumes about its management’s capabilities. Focus on the under‐served segment + strong risk management = Quality growth A large part of the India’s population residing in rural and semi‐urban areas lack formal credit access, but are credit worthy. This is the customer segment that AUSFB has always targeted. As the risks are also high in these regions, it has put in place a robust risk‐management process, which has ensured quality growth. Its AUM CAGR is 30% over the last five years. As a policy, AUSFB only lends for productive assets with collateral – almost 99% of its AUM is secured, whichis why its GNPA (at 1.6%) is one of the lowest among peers (5‐9%). As it transitioned into an SFB, it strengthened its risk‐management practices (in line with banking standards) while retaining its DNA. Products expansion helped growth; SFB license to accelerate momentum AUSFB began operations in 1996 with vehicle finance as its only product. Over the last 10 years, it has diversified into other product segment such as MSME and SME loans. This not only reduced its dependence on one product, but also accelerated balance‐sheet growth (vehicle finance CAGR of 16%, MSME/SME at 55% and 78%). The share of vehicle finance in its AUM has come down to 50%, from about 80% in FY13. After becoming an SFB, apart from regular liability products, it also offers asset products such as working‐capital facility, gold loans, agriculture‐related term loans, and Kisan credit cards. We believe its new product range will accelerate its growth as it cross sells products to existing and new customers. Leveraging existing infrastructure and relationships to ensure smooth transition into a SFB AUSFB has an extensive network of 269 branches and 121 asset centres in India, spread over 10 states and one union territory with about 8,500 employees and 280,349 live customer accounts. The company will leverage its existing capability – including branch network, customer base, technology, low‐cost hub‐and‐spoke model, and local know‐how in geographical areas – to build and grow its business as a small‐finance bank. Its operational experience as an asset‐finance NBFC will enable it to develop its SFB operations to create a single platform for multiple financial products and services. Valuation At the upper end of the price band (Rs355‐358), the issue is valued at 3.7x FY19 ABV. While the valuations look expensive vs. peers, we believe strong asset quality and superior execution skills of the management justify premium valuations. Hence, we recommend investors subscribe to this issue.

Subscribe COMPANY DATA ISSUE OPENS 28th June 2017ISSUE CLOSES 30thJune 2017PRICE BAND Rs 355‐358PRE‐ ISSUE EQUITY SHARES 284 mnPOST‐ ISSUE EQUITY SHARE 284 mnFRESH SHARES TO BE ISSUED 0 mnOFFER FOR SALE 53 mnISSUE SIZE Rs 19.1bnMKT CAP (at upper band) Rs 101.8bn Pre‐IPO SHARE HOLDING PATTERN, % Promoter (mn) 102 36%Others (mn) 182 64%Total (mn) 284 100.0%

Financials Y/E Mar, Rs mn FY17 FY18e FY19eNII 9,167 11,767 14,624PAT 3,619 3,625 4,728NETWORTH 19996 23621 28349 ABVPS 67.9 79.1 96.9EPS 12.7 12.8 16.6

P/ABVPS @Rs 358 5.3 4.5 3.7P/E@358 28.1 28.1 21.5

Pradeep Agrawal (+ 9122 6246 4113) Manish Agarwalla (+ 9122 6246 4125) Paresh Jain (+ 9122 6246 4114)

Comparative valuation ____Loan Book Rs bn____ ________RoA %________ ________RoE %________ ________ABV Rs________ ________P/ABV________

FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19EAU SFB 107 140 177 4.5 3.1 2.9 24.1 16.6 18.2 67.9 80.0 97.7 5.3 4.5 3.7SCUF 231 271 334 2.5 3.0 3.0 12.0 15.0 15.0 700 726 837 3.5 3.3 2.9MMFS 468 546 659 0.9 1.9 2.1 6.0 14.0 16.0 86 94 116 4.0 3.7 3.0CIFC 342 412 510 2.5 2.6 2.7 18.0 19.0 20.0 219 283 347 4.9 3.8 3.1


AU SMALL FINANCE BANK IPO NOTE

Company Background • Began operations in 1996 in Jaipur, Rajasthan. • Registered as an NBFC with the RBI in 2000. • Remained focused only on vehicle finance for a decade. • Included MSME loans in 2007, housing finance in 2011 (sold in FY17), and SME

loans in 2012. • Vehicle finance still its largest segment (50% of AUM) followed by MSME (30%)

and SME (20%). • Received a license from the RBI to set up a small finance bank on December 20,

2016; began SFB operation from April 19, 2017. • As of May, AUSFB had a network of 269 branches and 121 asset centres across

India; 90% of its branches are concentrated in Rajasthan, Gujarat, Maharashtra, and Madhya Pradesh.

Key Management Name Designation Profile Mr Sanjay Agarwal Managing Director & CEO • Promoter.

• 21+ years of experience in finance, accounting, strategic planning, and credit risk management. • Bachelor’s degree in commerce from the Government College, Ajmer. • Chartered accountant • Rajasthan Entrepreneur and Excellence Award ‐ Personality of the year (finance category) 2016 • “Our Business Leader of the Year” at the Institute of Chartered Accountants of India Awards, 2017.

Mr Uttam Tibrewal Whole‐time Director • With the company since 2003 as the head of business operations. • Whole‐time director since February 2008. • 13 years of experience in the non‐banking finance industry.

Mr Deepak Jain Chief Financial Officer • With the company since 2010 as CFO. • Was a practicing chartered accountant. • 18+ years of experience in financial, treasury operations, and audit.

Source: RHP, Company, PhillipCapital India Research

Offer for sale • Selling shareholders are making this offer; no fresh issue by AU SFB. • Company will not receive any portion of the funds raised by the sale of equity

shares. • Primary objective: To benefit from listing. Divestment of equity shares by selling

shareholders. Selling shareholders‐18.8% of total equity on offer for sale As % of total equity Category Selling Shareholders Total Holding prior to IPO Offered Shares in IPO Total Holding post IPO

PE Investor

Redwood 21.0 5.2 15.8IFC 10.7 2.7 8.0Labh 7.9 4.0 4.0Ourea 7.4 3.6 3.8Kedaara 0.3 0.2 0.2

Promoter

Mr.SanjayAgarwal 20.6 0.9 19.7Ms.JyotiAgarwal 5.0 0.8 4.2Ms.ShakuntalaAgarwal 5.0 0.8 4.2Mr.ChiranjiLalAgarwal 2.9 0.5 2.4

Promoter Group MYS Holdings Private Limited 2.6 0.2 2.4 As % of total Equity 83.4 18.8 64.6Source: RHP, Company, PhillipCapital India Research



Product and client Matrix as an NBFC Parameter Vehicle Loans MSME Loans SME Loans Clientele First Time users /buyers Micro, small manufacturing & service

enterprises Manufacturing, trading and service units

SRTO Agriculture based units Medium size NBFC / HFC / MFI Self‐employed individuals Small builders for development of

affordable units Target Segment Rural, Semi‐urban & low income urban masses Turnover > Rs 1mn and < Rs 10mn Turnover > Rs 10mn Loan Amount Ticket Size Up to Rs 2.5mn (avg. Rs 0.3‐0.4mn) Up to Rs 5mn (avg. Rs 0.9‐0.1mn) Rs 5mn ‐ Rs 200mn (avg. Rs 20‐25mn) Tenure 36‐60 months 60‐120 months 36‐84months Security Vehicle Property Property / Receivables Purpose Income / Revenue Generation Business expansion working capital

requirement equipment purchase Business expansion working capital

AUM Mix (%) ~50 ~30 ~20 Source: RHP, Company, PhillipCapital India Research

Deep penetration along with focus on underserved customers offers huge potential for growth Since incorporation, AUSFB’s focus has been low‐ and middle‐income customers, which remain underserved or un‐served by the mainstream financial institutions because of lack of credit history. Customers in rural and semi urban markets are an opportune target segment for the company. As of 31st March 2017, about 50% of the company’s total network of 301 branches was in these markets. Understanding the local characteristics of these markets and customers (due to local hiring) has helped AUSFB to address the needs of low‐ and middle‐income customers. We believe that with branches close to customers and strong risk‐management practices, the company is well placed for quality growth. Proposed branch spread (430 branches across 19 states) Branch largely concentrated in four states


Metropolitan, 13%

Urban, 25%

Semi Urban, 32%

Rural, 29%

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AUM to see a CAGR of 28%


Well laid structure and risk management ensured superior asset quality As on 31st March 2017, the company’s branch network was structured along a two‐tiered hub‐and‐spoke model with 55 branches classified as hubs and 246 as spokes. It follows a decentralised model, where the sourcing person is responsible for collections as well, ensuring quick turnaround time and filtration of bad cases right at the onset, as is evident from superior asset quality. Its GNPA was 1.6% in March 2017 vs. 5‐9% for peers like Mahindra Finance, Shriram City Union Finance, Cholamandalam, and Magma. Its structure has also helped generate cost efficiency. Its cost‐to‐income ratio was 37.5% as on FY17 vs. 40‐43% for peers like Mahindra Finance, Cholamandalam, and Shriram City Union Finance. After its conversion into an SFB, it has centralised some of its administrative and other functions to benefit from economies of scale and uniformity in operations, even as it has retained a large part of its decentralized structure. AUSFB has leveraged its existing branch network to set up 269 bank branches, 121 asset centres, one central‐processing centre, and 10 offices (as of May 31, 2017). The management plans to add 162 branches and seven central processing centres in FY18. Asset quality is the best among peers


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FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20

FY13‐17 cagr 30%

FY17‐FY19 cagr 28%

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FY13 FY14 FY15 FY16 FY17

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Ujjivan AU SFB Equitas CIFC SCUF STFC MMFS



Robust risk management processes

Strong sourcing process

• Separate credit teams for all three business lines • Independent verification of customers through in‐

house field investigation officers • Evaluation of business and financing needs • Analysing ability to repay loans

Robust collections management system

• Collection control room centrally manages allocations among collection executives

• Uses analytics for optimum allocation of cases to the collections team

• Specialised collections team to manage cases where collections are overdue for a certain period

Risk‐management in SFB • Asset Liability Management Committee and a Credit

Risk and NPA Committee for retail and wholesale banking


Access to diversified funding sources; SFB license widens scope As an NBFC, the company had diverse funding sources – 50% NCDs, 33% term loans, about 7% commercial paper, about 5% in subordinated debt borrowings, and about 6% from working‐capital facilities. After conversion into an SFB, the scope has widened – it will be able to access funds such as savings accounts, current accounts, and term deposits. It will also be able to raise funds from liquidity adjustment facility and RBI’s market stabilisation fund, refinance facilities from financial institutions, capital market borrowings such as infrastructure bonds, tier‐2 bonds, and perpetual bonds. Its average cost of borrowing in FY17 was 10.13%, a significant reduction over 12.61% in FY13, helped by improvement in credit rating, stable credit history, and conservative risk‐management policies. Credit rating Rating Agency Term Credit rating as of March 2013 Current credit ratings CRISILRatings LongTerm CRISILA/ Stable CRISILA+/ Stable ShortTerm CRISILA1 ‐ ICRA LongTerm [ICRA]A(Stable) [ICRA]A+(Stable) ShortTerm ‐ [ICRA]A1+ India Ratings LongTerm ‐ INDA+(Positive) ShortTerm ‐ INDA1+ CARE Ratings LongTerm CARE A CARE A+/ Stable ShortTerm CARE A1 ‐ Brickwork Ratings LongTerm ‐ BWR AA/ Stable ShortTerm ‐ ‐ Source: RHP, Company, PhillipCapital India Research

Source of funding


NCD, 50%

Term Loans, 33% Commercial Paper, 7%

subordinated debt , 5%

working capital facilities, 6%



NIMs to compress as it has to comply with statutory ratios: AUSFB has enjoyed robust NIMs of 9.5‐10.0% as an NBFC. However, after becoming a bank from April 2017, it now needs to comply with the statutory ratios – SLR and CRR. As a result, its NIMs will compress by around 50‐70bps to 9% by FY19. NIMs to compress in FY18/19


Key management strategies as an SFB • To leverage existing capabilities and customer base: Intends to leverage its

existing capabilities including branch network, customer base, technology, low‐cost hub‐and‐spoke model, and local know‐how in geographical areas to build and grow its business as an SFB. Its operational experience as an asset‐ finance NBFC will enable it to develop its SFB operations to create a single platform for multiple financial products and services.

• To expand branch network: Though the company has a largely concentrated

presence (80% of its branches are in Rajasthan, Gujarat and Maharashtra), it is gradually increasing its network in newer markets such as Madhya Pradesh, Punjab, Haryana, the National Capital Region, and Himachal Pradesh. The management intends to continue expanding its branch network to drive greater and deeper penetration in the western and northern states of India in which they operate, focusing on low‐ and middle‐income individuals and businesses that have limited or no access to formal banking and finance channels, spread across rural, semi‐urban, and urban markets. AUSFB has converted 121 of its NBFC branches into asset centres where it only offers vehicle finance, MSME, and SME loans. In addition to its existing branches and asset centres, it intends to gradually open 162 additional branches, to reach 431 branches and 121 asset centres at the end of FY18. This proposed branch expansion plan also includes opening 23 branches in tier‐1 centres beyond the 10 states and one union territory in which it is currently present, thereby expanding its geographic reach into new states and regions.

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Proposed branch network break up for FY18

State Metropolitan Urban ______Semi Urban______ _____Rural______

TotalTier I Tier I Tier 2 Tier 3 Tier 4 Tier 5 Tier 6Rajasthan 13 26 22 45 19 17 56 198 Maharashtra 12 16 7 2 2 3 15 57 Gujarat 9 20 4 6 3 2 12 56 Madhya Pradesh 5 16 7 10 ‐ 2 11 51 Punjab# 1 12 4 2 ‐ ‐ 5 24 Haryana 1 10 1 1 ‐ ‐ 4 17 Chhattisgarh 1 3 1 ‐ ‐ ‐ ‐ 5 Delhi 5 ‐ ‐ ‐ ‐ ‐ ‐ 5 Uttar Pradesh 3 1 ‐ ‐ ‐ ‐ ‐ 4 Himachal Pradesh ‐ 1 1 2 ‐ ‐ ‐ 4 Tamil Nadu 2 ‐ ‐ ‐ ‐ ‐ ‐ 2 Telengana 1 ‐ ‐ ‐ ‐ ‐ ‐ 1 Goa ‐ ‐ 1 ‐ ‐ ‐ ‐ 1 Uttarakhand ‐ 1 ‐ ‐ ‐ ‐ ‐ 1 West Bengal 1 ‐ ‐ ‐ ‐ ‐ ‐ 1 Andhra Pradesh ‐ 1 ‐ ‐ ‐ ‐ ‐ 1 Kerala ‐ 1 ‐ ‐ ‐ ‐ ‐ 1 Karnataka 1 ‐ ‐ ‐ ‐ ‐ ‐ 1 Orissa ‐ 1 ‐ ‐ ‐ ‐ ‐ 1 Total 55 109 48 68 24 24 103 431 Source: RHP, Company, PhillipCapital India Research

• To provide complete range of banking services: After becoming an SFB, AUSFB

has already begun offering a broad range of banking and financing products and services. Apart from earlier products, it now offers asset products such as working‐capital facilities, gold loans, agriculture‐related term loans, Kisan credit cards for farmers, and loans against securities. It intends to add unsecured business loans and housing finance loans in FY18. On the liability side, product offerings include current accounts, savings accounts, term deposits, recurring deposits, payment wallets, customized prepaid instruments, and collection and payment solutions for MSMEs and SMEs.

Additional product offerings under SFB Asset Products Liability Products Other Products and servicesTwo‐wheeler loans targeted primarily towards mass market customers

Current accounts Sale of third‐party investment products such as mutual funds, insurance, and risk‐management products

Secured business loans for MSME and SME customers

Savings accounts Financial advisory and education programs for individuals and new entrepreneurs

Housing finance loans Term deposits and recurring deposits

Gold loans Payment wallets and customized prepaid instruments

Agriculture‐related term loans and Kisan credit cards for farmers in the mass market and unbanked areas

Collections and payments solutions for MSME and SME customers

Loan against securities Source: RHP, Company, PhillipCapital India Research



Risks Geographical concentration risk: As of March 31, 2017, about 80% of its gross AUM came from three states – Rajasthan, Gujarat, and Maharashtra; Rajasthan accounted for 54% of its total AUM. Any significant social, political, or economic disruption, or natural calamities or civil disruptions in this region, or changes in the policies of the state or local governments, could disrupt AUSFB’s business operations. Inability to successfully transition from an NBFC to an SFB: Successful transition from an NBFC to a small bank would require leveraging of its existing customers and branches to build an asset‐liability franchise. Failure or inability to cross‐sell new products could impact its profitability. Valuation At the upper end of the price band (Rs 355‐358), the issue is valued at 3.7x FY19 book value. While the valuations look expensive vs. peers, we believe strong asset quality and superior execution skills of the management justify premium valuations. Recommend subscribe to this issue. Key charts NII Growth remain healthy ....driving earnings growth

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Profitability Ratios AUM break‐up segment‐wise

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Vehicle Finance MSME SME


Valuation Summary

___Loan Book Rs bn___ _______RoA %_______ _______RoE %_______ _______ABV Rs_______ _______P/ABV_______ FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19E FY17 FY18E FY19EAU SFB 107 140 177 4.5 3.1 2.9 24.1 16.6 18.2 67.9 80.0 97.7 5.3 4.5 3.7SCUF 231 271 334 2.5 3.0 3.0 12.0 15.0 15.0 700 726 837 3.5 3.3 2.9MMFS 468 546 659 0.9 1.9 2.1 6.0 14.0 16.0 86 94 116 4.0 3.7 3.0CIFC 342 412 510 2.5 2.6 2.7 18.0 19.0 20.0 219 283 347 4.9 3.8 3.1Source: RHP, Company, PhillipCapital India Research



Appendix Key differences between universal banks and SFBs guidelines Parameters Universal Banks Small Finance Banks Minimum Net Worth Rs 5 billion Rs1 billion

Promoters Shareholding

Non‐operative Financial Holding Company (“NOFHC”) shall hold a minimum of 40% of the paid‐up voting capital of the bank, which shall be locked in for a period of 5 years

Minimum promoter shareholding of 40%,which will be locked in for a period of five years. If the existing NBFCs, MFIs or LABs have diluted the promoter shareholding, it should be at least above 26%.

Time frame for Dilution of Promoters’ Equity

Shareholding of NOFHC to be brought down to 20% of the paid‐up voting equity capital within a period of 10 years and to 15% within 12 years

If the initial shareholding by promoter in the bank is above 40%, it should be brought down to 40% within a period of 5 years, 30% within a period of 10 years, and to 26% within 12 years

Maximum Foreign Shareholding

Cannot exceed 49% of the paid‐up voting equity capital for the first 5 years from the date of licensing of the bank. After 5 years, it will be as per FDI policy for private sector banks

Aggregate foreign investment in an SFB will be allowed up to a maximum of 74% (automatic up to 49% and approval route beyond 49 % to 74%)

Maximum Shareholding of Entities Other than Promoter or NOFHC

No single entity or group of related entities, shall have directly or indirectly in excess of 10% of the voting equity capital of the bank

No single entity or group of related entities shall have shareholding in excess of 10% of the paid‐up equity capital of the bank. In case of existing NBFCs, MFIs or LABs converting into an SFB, where there is shareholding in excess of 10% of the paid‐up equity capital by entities other than the promoters, RBI may consider providing up to 3 years for the shareholding to be brought down to 10%

Listing Requirement Within 3 years of commencement of business by the bank.

After the SFB reaches the net worth of `5billion,listing will be mandatory within three years

Capital Adequacy Norm 13% for first three years of commencement of operations

15% (under Basel II standardized approach for credit risk)

Tier 1 Capital 7% 7.50%

Exposure Norms

Single borrower: 15% (additional 5% for infrastructure) Borrower group: 40%/50% (additional 10% for infrastructure) Additional 5% exposure allowed post board approval For Oil Marketing Companies: 25%of capital funds

Single borrower: 10% of capital funds Group Borrower: 15% of capital funds Further,at least 50% of the loan portfolio should constitute loans and advances of upto `2.5million

Priority Sector Lending 40% of the adjusted net bank credit must be extended to sectors eligible for classification as PSL.

75%of the adjusted net bank credit must be extended to sectors eligible for classificationas PSL

CRR/SLR Requirements CRR: 4.0% of NDTL SLR: 21.5% of NDTL

CRR: 4.0% of NDTL SLR: 21.5% of NDTL



Financials Profit and loss Balance sheet (Year Ending Mar 31) FY16 FY17 FY18E FY19E (Year Ending Mar 31) FY16 FY17 FY18E FY19ENet interest income 6,517 9,167 11,767 14,624 Equity 441 2843 2843 2843Other income 50 135 159 174 Reserves 9566 17153 20778 25506Net Income 6,567 9,302 11,926 14,797 Net worth 10007 19996 23621 28349Operating expenses 2,538 3,489 5,280 6,315 Borrowings/ Deposits 47826 70710 107500 155621Preprovision profit 4,029 5,813 6,646 8,483 Current liab & others 4897 7471 7471 7471Provisions 257 767 1,235 1,426 Total liabilities 62730 98176 138591 191441Profit before tax 3,772 11,749 5,411 7,057 Net block 246 2758 2922 3122Tax 1,301 3,322 1,786 2,329 Investments 2316 21503 23758 31150Tax rate 34.5 28.3 33.0 33.0 Loans 58192 66983 100617 141979Adjusted Profit after tax 2,472 3,619 3,625 4,728 Current assets & others 1976 6931 11295 15190 Total assets 62730 98176 138591 191441 Dupont (as % of Assets) Key ratios (Year Ending Mar 31) FY16 FY17 FY18E FY19E (Year Ending Mar 31) FY16 FY17 FY18E FY19EInterest Income 20.4 17.6 16.2 14.6 NIM (%) 12.7 11.4 9.9 8.9Interest Expense 7.7 6.2 6.2 5.7 NIM (%) ‐ on AUM 9.5 9.7 9.5 9.2Net Interest Income 12.7 11.4 9.9 8.9 Cost/ Income (%) 38.6 37.5 44.3 42.7Other income total 0.1 0.2 0.1 0.1 Credit cost (%) 0.5 1.0 1.0 0.9Net Income total 12.8 11.6 10.1 9.0 RoA(%) 4.8 4.5 3.1 2.9Operating expenses total 5.0 4.3 4.5 3.8 RoE (%) 28.0 24.1 16.6 18.2Pre‐provision profit 7.9 7.2 5.6 5.1 Leverage (x) 5.8 5.4 5.4 6.4Provisions 0.5 1.0 1.0 0.9 CAR (%) 15.8 19.9 17.3 16.5Profit before tax and exceptional items 7.4 6.3 4.6 4.3 No of shares (mn) 44.1 284.3 284.3 284.3Profit before tax 7.4 14.6 4.6 4.3 Gross NPA (%) 0.6 1.6 1.5 1.3Tax total 2.5 4.1 1.5 1.4 Net NPA (%) 0.4 1.1 1.1 0.6 Profit after tax 4.8 10.5 3.1 2.9 Provision coverage (%) 40.2 35.3 25.0 55.0 Growth (%) Valuation ratios (Year Ending Mar 31) FY16 FY17 FY18E FY19E (Year Ending Mar 31) FY16 FY17 FY18E FY19ENet interest income 60.9 40.7 28.4 24.3 FDEPS (Rs) 56.1 12.7 12.8 16.6Net Income total 61.2 41.6 28.2 24.1 PER (x) 6.4 28.1 28.1 21.5Pre‐provision profit 57.4 44.3 14.3 27.6 Book value (Rs) 227.0 70.3 83.1 99.7Profit before tax 82.0 211.5 ‐53.9 30.4 P/BV (Rs) 1.6 5.1 4.3 3.6Profit after tax 77.2 241.0 ‐57.0 30.4 Adjusted book value (Rs) 222.0 67.9 79.1 96.9Loan 64.0 15.1 50.2 41.1 P/ABV (Rs) 1.6 5.3 4.5 3.7Disbursement 66.4 19.8 40.0 40.0 P/ PPP 3.9 17.5 15.3 12.0AUM 47.7 30.6 30.2 26.8Source: RHP, Company, PhillipCapital India Research



Rating Methodology We rate stock on absolute return basis. Our target price for the stocks has an investment horizon of one year. Rating Criteria Definition

BUY >= +15% Target price is equal to or more than 15% of current market price

NEUTRAL ‐15% > to < +15% Target price is less than +15% but more than ‐15%

SELL <= ‐15% Target price is less than or equal to ‐15%.

Management Vineet Bhatnagar (Managing Director) (91 22) 2483 1919 Kinshuk Bharti Tiwari (Head – Institutional Equity) (91 22) 6246 4101 Jignesh Shah (Head – Equity Derivatives) (91 22) 6667 9735 Research Automobiles IT Services Pharma & Specialty Chem Dhawal Doshi (9122) 6246 4128 Vibhor Singhal (9122) 6246 4109 Surya Patra (9122) 6246 4121 Nitesh Sharma, CFA (9122) 6246 4126 Shyamal Dhruve (9122) 6246 4110 Mehul Sheth (9122) 6246 4123 Banking, NBFCs Infrastructure Strategy Manish Agarwalla (9122) 6246 4125 Vibhor Singhal (9122) 6246 4109 Naveen Kulkarni, CFA, FRM (9122) 6246 4122 Pradeep Agrawal (9122) 6246 4113 Paresh Jain (9122) 6246 4114 Logistics, Transportation & Midcap Telecom Consumer & Retail Vikram Suryavanshi (9122) 6246 4111 Naveen Kulkarni, CFA, FRM (9122) 6246 4122 Naveen Kulkarni, CFA, FRM (9122) 6246 4122 Media Manoj Behera (9122) 6246 4118 Jubil Jain (9122) 6246 4117 Manoj Behera (9122) 6246 4118 Technicals Preeyam Tolia (9122) 6246 4129 Metals Subodh Gupta, CMT (9122) 6246 4136 Cement Dhawal Doshi (9122) 6246 4128 Production Manager Vaibhav Agarwal (9122) 6246 4124 Ganesh Deorukhkar (9122) 6667 9966 Economics Mid-Caps & Database Manager Editor Anjali Verma (9122) 6246 4115 Deepak Agarwal (9122) 6246 4112 Roshan Sony 98199 72726 Shruti Bajpai (9122) 6246 4135 Oil & Gas Sr. Manager – Equities Support Engineering, Capital Goods Sabri Hazarika (9122) 6667 9756 Rosie Ferns (9122) 6667 9971 Jonas Bhutta (9122) 6246 4119 Vikram Rawat (9122) 6246 4120 Sales & Distribution Corporate Communications Ashvin Patil (9122) 6246 4105 Sales Trader Zarine Damania (9122) 6667 9976 Shubhangi Agrawal (9122) 6246 4103 Dilesh Doshi (9122) 6667 9747 Kishor Binwal (9122) 6246 4106 Suniil Pandit (9122) 6667 9745 Bhavin Shah (9122) 6246 4102 Ashka Mehta Gulati (9122) 6246 4108 Execution Archan Vyas (9122) 6246 4107 Mayur Shah (9122) 6667 9945

Contact Information (Regional Member Companies)

SINGAPORE: Phillip Securities Pte Ltd 250 North Bridge Road, #06‐00 RafflesCityTower,

Singapore 179101 Tel : (65) 6533 6001 Fax: (65) 6535 3834

www.phillip.com.sg

MALAYSIA: Phillip Capital Management Sdn Bhd B‐3‐6 Block B Level 3, Megan Avenue II,

No. 12, Jalan Yap Kwan Seng, 50450 Kuala Lumpur Tel (60) 3 2162 8841 Fax (60) 3 2166 5099

www.poems.com.my

HONG KONG: Phillip Securities (HK) Ltd 11/F United Centre 95 Queensway Hong Kong Tel (852) 2277 6600 Fax: (852) 2868 5307

www.phillip.com.hk

JAPAN: Phillip Securities Japan, Ltd 4‐2 Nihonbashi Kabutocho, Chuo‐ku

Tokyo 103‐0026 Tel: (81) 3 3666 2101 Fax: (81) 3 3664 0141

www.phillip.co.jp

INDONESIA: PT Phillip Securities Indonesia ANZTower Level 23B, Jl Jend Sudirman Kav 33A,

Jakarta 10220, Indonesia Tel (62) 21 5790 0800 Fax: (62) 21 5790 0809

www.phillip.co.id

CHINA: Phillip Financial Advisory (Shanghai) Co. Ltd. No 550 Yan An East Road, OceanTower Unit 2318

Shanghai 200 001 Tel (86) 21 5169 9200 Fax: (86) 21 6351 2940

www.phillip.com.cn THAILAND: Phillip Securities (Thailand) Public Co. Ltd.

15th Floor, VorawatBuilding, 849 Silom Road, Silom, Bangrak, Bangkok 10500 Thailand

Tel (66) 2 2268 0999 Fax: (66) 2 2268 0921 www.phillip.co.th

FRANCE: King & Shaxson Capital Ltd. 3rd Floor, 35 Rue de la Bienfaisance

75008 Paris France Tel (33) 1 4563 3100 Fax : (33) 1 4563 6017

www.kingandshaxson.com

UNITED KINGDOM: King & Shaxson Ltd. 6th Floor, Candlewick House, 120 Cannon Street

London, EC4N 6AS Tel (44) 20 7929 5300 Fax: (44) 20 7283 6835

www.kingandshaxson.com UNITED STATES: Phillip Futures Inc.

141 W Jackson Blvd Ste 3050 The Chicago Board of TradeBuilding

Chicago, IL 60604 USA Tel (1) 312 356 9000 Fax: (1) 312 356 9005

AUSTRALIA: PhillipCapital Australia Level 10, 330 Collins Street

Melbourne, VIC 3000, Australia Tel: (61) 3 8633 9800 Fax: (61) 3 8633 9899

www.phillipcapital.com.au

SRI LANKA: Asha Phillip Securities Limited Level 4, Millennium House, 46/58 Navam Mawatha,

Colombo 2, Sri Lanka Tel: (94) 11 2429 100 Fax: (94) 11 2429 199

www.ashaphillip.net/home.htm INDIA

PhillipCapital (India) Private Limited No. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel West, Mumbai 400013 Tel: (9122) 2300 2999 Fax: (9122) 6667 9955 www.phillipcapital.in



Disclosures and Disclaimers PhillipCapital (India) Pvt. Ltd. has three independent equity research groups: Institutional Equities, Institutional Equity Derivatives, and Private Client Group. This report has been prepared by Institutional Equities Group. The views and opinions expressed in this document may, may not match, or may be contrary at times with the views, estimates, rating, and target price of the other equity research groups of PhillipCapital (India) Pvt. Ltd.

This report is issued by PhillipCapital (India) Pvt. Ltd., which is regulated by the SEBI. PhillipCapital (India) Pvt. Ltd. is a subsidiary of Phillip (Mauritius) Pvt. Ltd. References to "PCIPL" in this report shall mean PhillipCapital (India) Pvt. Ltd unless otherwise stated. This report is prepared and distributed by PCIPL for information purposes only, and neither the information contained herein, nor any opinion expressed should be construed or deemed to be construed as solicitation or as offering advice for the purposes of the purchase or sale of any security, investment, or derivatives. The information and opinions contained in the report were considered by PCIPL to be valid when published. The report also contains information provided to PCIPL by third parties. The source of such information will usually be disclosed in the report. Whilst PCIPL has taken all reasonable steps to ensure that this information is correct, PCIPL does not offer any warranty as to the accuracy or completeness of such information. Any person placing reliance on the report to undertake trading does so entirely at his or her own risk and PCIPL does not accept any liability as a result. Securities and Derivatives markets may be subject to rapid and unexpected price movements and past performance is not necessarily an indication of future performance.

This report does not regard the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors must undertake independent analysis with their own legal, tax, and financial advisors and reach their own conclusions regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realised. Under no circumstances can it be used or considered as an offer to sell or as a solicitation of any offer to buy or sell the securities mentioned within it. The information contained in the research reports may have been taken from trade and statistical services and other sources, which PCIL believe is reliable. PhillipCapital (India) Pvt. Ltd. or any of its group/associate/affiliate companies do not guarantee that such information is accurate or complete and it should not be relied upon as such. Any opinions expressed reflect judgments at this date and are subject to change without notice.

Important: These disclosures and disclaimers must be read in conjunction with the research report of which it forms part. Receipt and use of the research report is subject to all aspects of these disclosures and disclaimers. Additional information about the issuers and securities discussed in this research report is available on request.

Certifications: The research analyst(s) who prepared this research report hereby certifies that the views expressed in this research report accurately reflect the research analyst’s personal views about all of the subject issuers and/or securities, that the analyst(s) have no known conflict of interest and no part of the research analyst’s compensation was, is, or will be, directly or indirectly, related to the specific views or recommendations contained in this research report.

Additional Disclosures of Interest: Unless specifically mentioned in Point No. 9 below: 1. The Research Analyst(s), PCIL, or its associates or relatives of the Research Analyst does not have any financial interest in the company(ies) covered in this

report. 2. The Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively do not hold more than 1% of the securities of the

company (ies)covered in this report as of the end of the month immediately preceding the distribution of the research report. 3. The Research Analyst, his/her associate, his/her relative, and PCIL, do not have any other material conflict of interest at the time of publication of this

research report. 4. The Research Analyst, PCIL, and its associates have not received compensation for investment banking or merchant banking or brokerage services or for

any other products or services from the company(ies) covered in this report, in the past twelve months. 5. The Research Analyst, PCIL or its associates have not managed or co‐managed in the previous twelve months, a private or public offering of securities for

the company (ies) covered in this report. 6. PCIL or its associates have not received compensation or other benefits from the company(ies) covered in this report or from any third party, in

connection with the research report. 7. The Research Analyst has not served as an Officer, Director, or employee of the company (ies) covered in the Research report. 8. The Research Analyst and PCIL has not been engaged in market making activity for the company(ies) covered in the Research report. 9. Details of PCIL, Research Analyst and its associates pertaining to the companies covered in the Research report: Sr. no. Particulars Yes/No

1 Whether compensation has been received from the company(ies) covered in the Research report in the past 12 months for investment banking transaction by PCIL

No

2 Whether Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively hold more than 1% of thecompany(ies) covered in the Research report

No

3 Whether compensation has been received by PCIL or its associates from the company(ies) covered in the Research report No4 PCIL or its affiliates have managed or co‐managed in the previous twelve months a private or public offering of securities for the

company(ies) covered in the Research report No

5 Research Analyst, his associate, PCIL or its associates have received compensation for investment banking or merchant banking or brokerage services or for any other products or services from the company(ies) covered in the Research report, in the last twelve months

No

Independence: PhillipCapital (India) Pvt. Ltd. has not had an investment banking relationship with, and has not received any compensation for investment banking services from, the subject issuers in the past twelve (12) months, and PhillipCapital (India) Pvt. Ltd does not anticipate receiving or intend to seek compensation for investment banking services from the subject issuers in the next three (3) months. PhillipCapital (India) Pvt. Ltd is not a market maker in the securities mentioned in this research report, although it, or its affiliates/employees, may have positions in, purchase or sell, or be materially interested in any of the securities covered in the report.

Suitability and Risks: This research report is for informational purposes only and is not tailored to the specific investment objectives, financial situation or particular requirements of any individual recipient hereof. Certain securities may give rise to substantial risks and may not be suitable for certain investors. Each investor must make its own determination as to the appropriateness of any securities referred to in this research report based upon the legal, tax and accounting considerations applicable to such investor and its own investment objectives or strategy, its financial situation and its investing experience. The value of any security may be positively or adversely affected by changes in foreign exchange or interest rates, as well as by other financial, economic, or political factors. Past performance is not necessarily indicative of future performance or results.



Sources, Completeness and Accuracy: The material herein is based upon information obtained from sources that PCIPL and the research analyst believe to be reliable, but neither PCIPL nor the research analyst represents or guarantees that the information contained herein is accurate or complete and it should not be relied upon as such. Opinions expressed herein are current opinions as of the date appearing on this material, and are subject to change without notice. Furthermore, PCIPL is under no obligation to update or keep the information current. Without limiting any of the foregoing, in no event shall PCIL, any of its affiliates/employees or any third party involved in, or related to computing or compiling the information have any liability for any damages of any kind including but not limited to any direct or consequential loss or damage, however arising, from the use of this document.

Copyright: The copyright in this research report belongs exclusively to PCIPL. All rights are reserved. Any unauthorised use or disclosure is prohibited. No reprinting or reproduction, in whole or in part, is permitted without the PCIPL’s prior consent, except that a recipient may reprint it for internal circulation only and only if it is reprinted in its entirety.

Caution: Risk of loss in trading/investment can be substantial and even more than the amount / margin given by you. Investment in securities market are subject to market risks, you are requested to read all the related documents carefully before investing. You should carefully consider whether trading/investment is appropriate for you in light of your experience, objectives, financial resources and other relevant circumstances. PhillipCapital and any of its employees, directors, associates, group entities, or affiliates shall not be liable for losses, if any, incurred by you. You are further cautioned that trading/investments in financial markets are subject to market risks and are advised to seek independent third party trading/investment advice outside PhillipCapital/group/associates/affiliates/directors/employees before and during your trading/investment. There is no guarantee/assurance as to returns or profits or capital protection or appreciation. PhillipCapital and any of its employees, directors, associates, and/or employees, directors, associates of PhillipCapital’s group entities or affiliates is not inducing you for trading/investing in the financial market(s). Trading/Investment decision is your sole responsibility. You must also read the Risk Disclosure Document and Do’s and Don’ts before investing.

Kindly note that past performance is not necessarily a guide to future performance.

For Detailed Disclaimer: Please visit our website www.phillipcapital.in

For U.S. persons only: This research report is a product of PhillipCapital (India) Pvt Ltd., which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S.‐regulated broker‐dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker‐dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances, and trading securities held by a research analyst account.

This report is intended for distribution by PhillipCapital (India) Pvt Ltd. only to "Major Institutional Investors" as defined by Rule 15a‐6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and interpretations thereof by the U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a 6(a)(2). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated, and/or transmitted onward to any U.S. person, which is not a Major Institutional Investor. In reliance on the exemption from registration provided by Rule 15a‐6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain business with Major Institutional Investors, PhillipCapital (India) Pvt Ltd. has entered into an agreement with a U.S. registered broker‐dealer, Decker & Co, LLC. Transactions in securities discussed in this research report should be effected through Decker & Co, LLC or another U.S. registered broker dealer. If Distribution is to Australian Investors This report is produced by PhillipCapital (India) Pvt Ltd and is being distributed in Australia by Phillip Capital Limited (Australian Financial Services Licence No. 246827). This report contains general securities advice and does not take into account your personal objectives, situation and needs. Please read the Disclosures and Disclaimers set out above. By receiving or reading this report, you agree to be bound by the terms and limitations set out above. Any failure to comply with these terms and limitations may constitute a violation of law. This report has been provided to you for personal use only and shall not be reproduced, distributed or published by you in whole or in part, for any purpose. If you have received this report by mistake, please delete or destroy it, and notify the sender immediately. PhillipCapital (India) Pvt. Ltd. Registered office: No. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel West, Mumbai 400013

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