India Daily

April 22, 2024 NIFTY50 [Apr 19]: 22,147

Contents

Daily Alerts
Results
HDFC Bank: An improved quarter with fewer negative surprises
Wipro: Cost optimization aids margin improvement
Hindustan Zinc: Strong metal prices offset weak FY2025 volume guidance
HDFC AMC: One miss outweighs multiple hits
Change in Reco
GSPL: A harsh tariff order; downgrade to REDUCE with FV of Rs360
Company Alerts
Dixon Technologies: Forging new alliances
Sector Alerts
Insurance: TP down, OD and health hold on
Insurance: Weak on high base
Economy Alerts
Economy: RBI MPC minutes: Wait and watch

Private Circulation Only.

This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities A ct of 1933
 RESULT

HDFC Bank (HDFCB) BUY

Banks
CMP(₹): 1,531 Fair Value(₹): 1,750 Sector View: Attractive NIFTY-50: 22,147 April 21, 2024

An improved quarter with fewer negative surprises Company data and valuation summary
HDFC Bank reported earnings print, which had several one-offs, but overall Stock data
performance was fairly stable. NIM was stable qoq at 4.3%, while growth has
CMP(Rs)/FV(Rs)/Rating 1,531/1,750/BUY
slowed, as focus has shifted to strengthening back its liability franchise. We
52-week range (Rs) (high-low) 1,758-1,363
maintain BUY with FV at Rs1,750 (unchanged), valuing the bank at 2.3X book
Mcap (bn) (Rs/US$) 11,633/139.3
for RoEs at ~16% level.
ADTV-3M (mn) (Rs/US$) 38,187/457.4

Earnings continue to see a few one-offs Shareholding pattern (%)

Key highlights for HDFC Bank’s result were: (1) NIM was flat qoq at 3.4%, (2)
0.0
5.2
tax rate was negative, (3) treasury gains were strong, led by a stake sale in HDFC 11.3
Credila Financial Services, (4) fee income has grown 20% yoy and (5) loan loss
7.9
provisions were higher due to contingent provisions, but partly offset by
58.8
reversal of AIF provisions. RoA was at 1.9% and RoE ~16%. Loan growth was 16.8

2% qoq, but deposit growth was stronger at ~7% qoq (borrowings saw a decline
qoq). The cost-income ratio was at 38%. CASA ratio was flat at 38%. NPL ratios
Promoters FPI s MFs BFIs Retail Others
were stable, with the gross NPL ratio at 1.2% and net NPLs at 0.3% of loans.
Slippages were lower at ~1.2% and credit cost stood at ~50 bps.

Private Circulation Only. This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities A ct of 1933
Price performance (%) 1M 3M 12M
Absolute 6 4 (8)
Actions turning favorable, but need to be cautious to extrapolate Rel. to Nifty 4 2 (34)
Unlike the previous few quarters when there were several negative outcomes Rel. to MSCI India 3 0 (43)

on earnings or the balance sheet, the performance in this quarter has been
Forecasts/Valuations 2024 2025E 2026E
comfortable on most metrics. We are less worried on the addition to the floating
EPS (Rs) 80.0 90.9 106.8
provision buffer and concur with management’s explanation of it being prudent.
EPS growth (%) 1.3 13.5 17.6
Our recent interactions with channel partners have also confirmed that asset
P/E (X) 19.1 16.8 14.3
quality for the industry is in good shape. Overall, we see that the bank is taking
P/B (X) 2.7 2.4 2.1
the right steps on slowing down loan growth and shifting focus on improving
BVPS (Rs) 571.6 639.0 717.9
NIM through better loan pricing and/or improving liability mix. Management has
RoE (%) 16.9 14.8 15.5
alluded that the performance is likely to be volatile, given the nature of the
Div. yield (%) 1.3 1.4 1.7
business (2H is usually stronger than 1H) and competitive intensity that prevails Nll (Rs bn) 1,085 1,309 1,577
in this period. It has avoided providing timelines or guidance of future PPOP (Rs bn) 944 1,057 1,266
performance, which is the right approach, given the uncertainties that are Net profits (Rs bn) 608 690 812
extraneous to management control. We prefer to be a bit cautious than
Source: Bloomberg, Company data, Kotak Institutional Equities estimates
extrapolate the current quarter. The path to normalization of several metrics is
unlikely to be a straightforward one. We are likely to see quarters where the Prices in this report are based on the market close of
April 19, 2024
expectations are running ahead of execution, especially on the two key
variables, i.e., deposits and NIM progression.

Maintain BUY—relatively not the best, but comfortable on absolute basis

We maintain BUY with FV at Rs1,750 (unchanged). At our FV, we value the bank at
2.3X book and ~15X FY2026 EPS for RoEs at 16% levels and 15% CAGR (adjusted
for merger). The stock is inexpensive at these levels, as we do believe that the
medium-term outlook on the business looks extremely comfortable to report as
~15% CAGR. However, on relative basis, the risk reward is still not compelling, even
as it trades at a discount to ICICI Bank. We would prefer for a wider discount, as
the current relative valuation does not give any headroom for disappointment in
execution, which is not the best outcome.
Full sector coverage on KINSITE

M B Mahesh, CFA Nischint Chawathe Ashlesh Sonje, CFA Abhijeet Sakhare Varun Palacharla
[email protected] [email protected] [email protected] [email protected] [email protected]
+91-22-4336-0886 +91-22-4336-0887 +91-22-4336-0889 +91-22-4336-1240 +91-22-4336-0888
 3

HDFC Bank trades at 2.4X one-year forward book HDFC Bank now trades at a discount to ICICI Bank
1-year forward PER and PBR 1-year forward PBR for frontline private banks

Rolling PER (X) (LHS) Rolling PBR (X) (RHS) ICICI Bank Axis Bank HDFC Bank
35 6.0 4.5

30 4.8 3.6

25 3.6 2.7

20 2.4 1.8

15 1.2 0.9

10 0.0 -

Apr-16

Apr-17
Apr-13

Apr-14

Apr-15

Apr-18

Apr-19

Apr-20

Apr-21

Apr-22

Apr-23

Apr-24
2011

2016

2022
2006
2007
2008
2009
2010

2012
2013
2014
2015

2017
2018
2019
2020
2021

2023
2024

Source: Bloomberg, Company, Kotak Institutional Equities estimates Source: Bloomberg, Company, Kotak Institutional Equities estimates

Building an immediate outperformance argument needs a few favorable outcomes

Over the period of an underlying issue (corporate NPL cycle or the merger-related issues of HDFC Bank),
the loss in investor value from a relative perspective is usually restricted to differential in RoE and book
value, assuming there is some degree of capital raising (the stronger bank can raise at a substantial
premium to book value as compared with the weaker bank). The rest of the difference in valuation
between the two institutions is usually built on an extrapolation of the prevailing narrative. The ability to
challenge the narrative usually results in the outperformance/underperformance argument.

HDFC Bank is currently trading at ~10% discount to ICICI Bank and investors have been looking to see
whether the multiples adequately capture the difference in underlying business performance. The
relative difference in RoEs is an addressable issue and hence, there is a strong case that the multiples
have strong headroom to converge. However, the question is usually around the timelines and execution
on the ground. We do have an approximate time period, which looks to be under five years, but this is
subject to the choice of loan growth, prevailing interest rates and quality of deposits that is likely to come
through this period. When we look at the RoE differential, there are two areas where there has to be a
convergence as follows:

Net interest margin. Net interest margin is ~100 bps lower today, but needs support from loans and
deposits. There is a ~50 bps differential in lending yields and ~75 bps differential in cost of funds. We
do not think that the mix would sufficiently explain this differential. We do believe that the bank would
have to improve the lending yields in this portfolio to capture it. Our recent channel checks indicate
that the bank has started to take measures to increase the lending yields across segments. Note that
the bank is looking to grow its loans slower than previously forecasted, which enables them to capture
the improvement faster than previously envisaged. We still are yet to fully assess the impact of PSL
and we should be able to understand by 4QFY25. On the deposits side, there are two issues—(1)
deposits needed for normal business growth and (b) deposits needed to replace borrowings and high-
cost deposits, if any. As the bank is looking to slow down loan growth, the impact on mobilizing large
deposits should be lower. However, loan growth aspiration still appears to be closer to ~10-12%, which
implies that the deposit growth required would remain high. Finally, the impact of NIM through the
deposit channel is subject to interest rates and quality of deposit raises. We are in a period where the
CASA growth momentum is still weak. This would imply that bulk of the deposits is coming through
term deposits as compared with a higher contribution of current and savings account balances.
Importantly, the rates need to be stable for a few years if the bank continues to have a higher
preference to retain its borrowings. For example, the differential in term deposits and borrowings has
significantly narrowed in recent quarters. However, if rates soften, there is a high probability that the
fixed-rate long-term borrowings could result in slower softening of interest rates.

HDFC Bank
Banks India Research
 4

There is a difference in cost ratios. We note that there is a ~40-50 bps differential in operating
expenses to assets ratios, with HDFC Bank currently operating at a better ratio than ICICI Bank. We
are choosing to use this ratio over the cost-to-income ratio, as it adjusts for the relative differences in
NIMs and largely focuses on the nature of assets and liabilities. We are not too sure if the current
differential can sustain. It is quite possible that the headroom to tighten cost growth is available with
ICICI Bank, as revenue growth comes under pressure.

Investors who are wanting to build a favorable near-term outperformance argument or building a
convergence of return ratios also would need a strong view on the above variables. The current
differential in valuation probably captures the relative RoE differences better, but the room for some
specific disappointments, especially on execution would result in this discount to prevail. We would
prefer the discount to widen more to be lot more comfortable on a relative basis.

HDFC Bank’s quarterly result, March fiscal year-ends, 4QFY23-4QFY24 (Rs mn)
(% chg.) Calc. Calc.
4QFY24 4QFY24E 4QFY23 3QFY24 4QFY24E 4QFY23 3QFY24 2024 2023 (% chg.) 2025E 2024 (% chg.) 2026E
Income statement (Rs mn)
Interest income 714,728 730,623 451,194 705,826 (2.2) 58.4 1.3 2,583,406 1,615,855 59.9 3,093,838 2,583,406 19.8 3,558,668
Interest on advances 581,450 585,935 356,428 567,726 (0.8) 63.1 2.4 2,072,200 1,270,959 63.0 2,473,836 2,072,200 19.4 2,773,447
Interest on investments 115,978 128,509 83,764 122,158 (9.8) 38.5 (5.1) 443,643 313,112 41.7 543,198 443,643 22.4 698,762
Other interest 17,300 16,179 11,001 15,943 6.9 57.3 8.5 67,563 31,785 112.6 76,804 67,563 13.7 86,459
Interest expense 423,959 439,083 217,675 421,113 (3.4) 94.8 0.7 1,498,081 747,433 100.4 1,785,214 1,498,081 19.2 1,982,081
Net interest income 290,768 291,539 233,518 284,713 (0.3) 24.5 2.1 1,085,325 868,422 25.0 1,308,624 1,085,325 20.6 1,576,586
Non interest income 181,663 161,975 87,312 111,370 12.2 108.1 63.1 492,410 312,148 57.7 488,450 492,410 (0.8) 523,196
- fee income 79,900 75,471 66,281 69,400 5.9 20.5 15.1 281,560 238,440 18.1 317,489 281,560 12.8 363,781
- exchange income 11,400 11,582 10,105 12,100 (1.6) 12.8 (5.8) 48,800 40,819 19.6 54,656 48,800 12.0 62,308
- sale of invts. 75,900 59,370 (377) 14,700 27.8 NM 416.3 106,530 (11,312) NM 60,000 106,530 (43.7) 40,000
Non treasury income 105,763 102,605 87,689 96,670 3.1 20.6 9.4 385,880 323,460 19.3 428,450 385,880 11.0 483,196
Total income 472,431 453,514 320,830 396,084 4.2 47.3 19.3 1,577,735 1,180,570 33.6 1,797,075 1,577,735 13.9 2,099,782
Op. expenses 179,688 167,675 134,621 159,611 7.2 33.5 12.6 633,860 476,521 33.0 739,642 633,860 16.7 834,067
Employee cost 69,362 56,740 43,621 53,518 22.2 59.0 29.6 222,402 155,124 43.4 250,407 222,402 12.6 291,896
Other cost 110,326 110,936 91,001 106,093 (0.5) 21.2 4.0 411,458 321,397 28.0 489,235 411,458 18.9 542,171
Operating profit 292,742 285,838 186,209 236,473 2.4 57.2 23.8 943,874 704,050 34.1 1,057,433 943,874 12.0 1,265,715
Provisions and cont. 135,116 20,171 26,854 42,166 569.9 403.2 220.4 234,921 119,197 97.1 141,900 234,921 (39.6) 189,389
PBT 157,626 265,667 159,355 194,307 (40.7) (1.1) (18.9) 708,953 584,853 21.2 915,532 708,953 29.1 1,076,326
Tax (7,493) 67,338 38,881 30,581 (111.1) (119.3) (124.5) 100,830 143,766 (29.9) 225,221 100,830 123.4 264,776
Net profit 165,119 198,329 120,475 163,725 (16.7) 37.1 0.9 608,123 441,087 37.9 690,311 608,123 13.5 811,549
Tax rate (%) (4.8) 25.3 24.4 15.7 -3010 bps -2915 bps -2049 bps 14.2 24.6 -1036 bps 24.6 14.2 1038 bps 24.6
Op.profit excl treasury gains 216,842 226,468 186,586 221,773 (4.3) 16.2 (2.2) 837,344 715,361 17.1 997,433 837,344 19.1 1,225,715
EPS (Rs) 22 26 22 22 (16.9) 0.7 0.8 86 79 8.5 91 86 6.0 107
Key balance sheet items (Rs bn)
Total deposits 23,798 23,809 18,834 22,140 (0.0) 26.4 7.5 28,464 23,798 19.6 33,994
Savings deposits 5,987 5,625 5,799 6.4 3.2 7,445 5,987 24 9,232
Current deposits 3,100 2,735 2,558 13.3 21.2 3,558 3,100 15 4,249
Term deposits 14,711 10,474 13,783 40.5 6.7 17,460 14,711 19 20,513
CASA ratio (%) 38.2 44.4 37.7 -620 bps 44 bps 38.66 38.18 47 bps 39.66
Investment 7024.1 7,372 5170.0 6749.3 (4.7) 35.9 4.1 8,988 7,024 28.0 11,610
Loans 24,849 24,894 16,006 24,461 (0.2) 55.2 1.6 27,911 24,849 12.3 31,885
Retail ex rural and agri 12,612 6,172 12,188 104.3 3.5
Mortgages 7,728 1,788 7,432 332.1 4.0
Personal loans 1,846 1,717 1,815 7.5 1.7
Auto 1,311 1,174 1,280 11.6 2.4
Payment products 1,002 861 971 16.4 3.2
Commercial and rural ex agri 7,003 5,648 6,801 24.0 3.0
Agriculture 1,053 817 930 28.9 13.2
Corporates 5,075 4,097 5,352 23.9 (5.2)
Asset quality (Rs bn)
Gross NPL 312 180 310 73.0 0.5 361.9 311.7 16.1 445.6
Net NPL 81 44 77 85.2 5.6 94.4 80.9 16.6 113.5
Gross NPL (%) 1.2 1.1 1.3 12 bps -2 bps 1.3 1.2 4 bps 1.4
Net NPL (%) 0.3 0.3 0.3 6 bps 2 bps 0.3 0.3 1 bps 0.4
PCR (%) 74 76 75 -171 bps -124 bps 73.9 74.0 -12 bps 74.5
Capital adequecy (%)
CAR 18.8 19.3 18.4 -50 bps 40 bps
Tier- I 16.8 16.4 16.8 40 bps 0 bps
Key calculated ratios (%)
Yield on advances 9.4 9.2 9.5 26 bps -7 bps 10.1 8.6 158 bps 9.4 10.1 -77 bps 9.3
Yield on investment 6.3 5.9 6.6 47 bps -28 bps 6.6 6.4 19 bps 6.8 6.6 15 bps 6.8
Yield on funds 8.5 8.1 8.6 44 bps -11 bps 9.0 7.5 150 bps 8.4 9.0 -65 bps 8.2
Cost of funds 5.7 4.3 5.8 134 bps -11 bps 5.8 3.9 196 bps 5.4 5.8 -41 bps 5.2
NIM 3.5 4.2 3.5 -71 bps -1 bps 3.8 4.1 -25 bps 3.5 3.8 -25 bps 3.6
Cost-income 38.0 42.0 40.3 -393 bps -226 bps 40.2 40.4 -19 bps 41.2 40.2 98 bps 39.7
Cost to average assets 2.0 2.3 1.8 -24 bps 17 bps 2.1 2.1 -2 bps 1.9 2.1 -19 bps 1.8
CD ratio 104.4 85.0 110.5 1943 bps -607 bps 104.4 85.0 1943 bps 98.1 104.4 -636 bps 93.8
Credit cost 2.2 0.7 0.7 150 bps 149 bps 1.2 0.8 33 bps 0.5 1.2 -65 bps 0.6
RoA 1.9 2.0 1.9 -17 bps -4 bps 2.0 1.9 5 bps 1.8 2.0 -23 bps 1.8
RoE 15.3 17.6 15.8 -228 bps -52 bps 16.9 17.0 -7 bps 14.8 16.9 -208 bps 15.5
Other key parameters (#)
Branch 8,738 7,821 8,091 11.7 8.0 9,088 8,738 4.0 9,438
ATM 20,938 19,727 20,688 6.1 1.2 21,938 20,938 4.8 22,938
Employees 213,527 173,222 208,066 23.3 2.6 231,168 213,527 8.3 249,509

Source: Company, Kotak Institutional Equities estimates

HDFC Bank
Banks India Research
 5

Loan growth was modest qoq (~1.6%) and led by agri, retail and CRB
Overall, loan growth (gross) was ~1.9% qoq (including IBPC/BRDS) and ~1.6% qoq (excluding
IBPC/BRDS). The sequential growth was led by agri (up 13% qoq), retail (up 3.5% qoq) and CRB (up ~3%
qoq). On the other hand, the wholesale loan book declined ~5% qoq. Erstwhile HDFC Ltd’s non-individual
loan book saw a sequential decline of 18% qoq.

Retail segment’s growth has seen healthy trends in the past few quarters. Retail mortgages grew
~4% qoq, while the non-mortgages retail portfolio grew ~3% qoq. Within the non-mortgages retail
portfolio, personal loans portfolio grew ~2% qoq, auto loans grew 2% qoq, payment products grew 3%
qoq, 2-wheeler portfolio grew 4% qoq and gold loans grew 5% qoq.

Commercial and rural segment. This segment continues to show modest growth (up 3% qoq). This
portfolio is also an important source of PSL assets for the bank and is, hence, likely to show very
strong credit growth. This should further benefit the bank in accomplishing its PSL requirements as a
merged entity.

We expect the bank to deliver ~12-14% loan growth (on balance sheet) in the medium term, driven by
higher focus toward balance sheet management. Management indicated that it does not intend to grow
for the sake of growth itself and growth aspiration will be driven by liability mobilization. Management
has indicated willingness to let go of business volume, if it does not make economic sense. While it is
likely that the bank might not gain advances market share or even lose some over the next few years,
management indicated that the strength of the franchise remains intact. Management is optimistic
about its ability to grow at a much more robust pace after the liability side of the balance sheet is in a
better shape. Management indicated that the franchise has the strength to continue to nibble away
market share in the banking system over the longer term, despite the institution’s large size.

Loan growth stood at ~23% yoy (adjusted for the merger and IBPC/BRDS)
Loan growth for HDFC Bank, March fiscal year-ends (% yoy)

Net loans Gross loans (incl. IBPC/ BRDS)

Gross loans (excl. IBPC/ BRDS) Gross loans (excl. IBPC/ BRDS, adj. for merger)
75

60

45

30 25 23
16 18
15

-
1QFY23

2QFY23

4QFY23

1QFY24

2QFY24

4QFY24
4QFY22

3QFY23

3QFY24

Note:
(a) For 2QFY24 onward, we have used fortnightly credit/deposit data from the RBI to estimate loan contribution from erstwhile HDFC Ltd.

Source: Company, RBI, Kotak Institutional Equities

HDFC Bank
Banks India Research
 6

Share of mortgage loans now stands at ~30% of overall loans for HDFC Bank
Loan segment breakup according to revised reporting format, March fiscal year-ends, 4QFY21-4QFY24 (Rs bn)
4QFY21 1QFY22 2QFY22 3QFY22 4QFY22 1QFY23 2QFY23 3QFY23 4QFY23 1QFY24 2QFY24 3QFY24 4QFY24 YoY QoQ
Break-up of loan book (Rs bn)
Retail ex rural and agri 4,617 4,583 4,829 5,058 5,318 5,579 5,805 5,913 6,172 6,578 11,802 12,188 12,612 104.3 3.5
Personal loans 1,193 1,205 1,264 1,334 1,401 1,479 1,548 1,646 1,717 1,767 1,787 1,815 1,846 7.5 1.7
Auto 921 919 952 964 1,005 1,040 1,088 1,124 1,174 1,217 1,255 1,280 1,311 11.6 2.4
Home loans 702 722 758 790 831 882 931 976 1,021 1,085 7,171 7,432 7,728 657.1 4.0
Payment products 674 631 678 733 768 801 820 833 861 904 909 971 1,002 16.4 3.2
LAP 512 517 544 577 622 651 693 724 768 789
Two wheelers 103 95 97 93 93 92 96 98 99 104 110 113 118 18.8 4.4
Gold loans 82 82 81 82 84 88 94 100 108 117 126 131 138 27.3 5.3
Other retail 430 411 456 484 515 544 536 411 424 595 445 446 469 10.6 5.2
Commercial and rural ex agri 3,205 3,362 3,590 3,842 4,202 4,365 4,745 5,176 5,648 5,632 6,339 6,801 7,003 24.0 3.0
Emerging corporates 1,296 1,364 1,478 1,528 1,646 1,706 1,832 1,878 2,060 2,212 2,168 18.4 (2.0)
Business banking 1,598 1,736 1,916 1,992 2,180 2,320 2,535 2,590 2,850 3,068 3,217 26.9 4.9
Commercial transportation 696 741 808 845 919 997 1,108 1,164 1,238 1,313 1,374 24.0 4.6
Agriculture 512 501 560 560 645 616 703 709 817 796 905 930 1,053 28.9 13.2
Corporates 3,099 3,146 3,124 3,262 3,640 3,639 3,968 3,923 4,097 4,046 5,309 5,352 5,075 23.9 (5.2)
Total 11,433 11,592 12,104 12,722 13,805 14,199 15,221 15,721 16,735 17,052 24,355 25,271 25,743 53.8 1.9

Break-up of loan book (%) 4QFY21 1QFY22 2QFY22 3QFY22 4QFY22 1QFY23 2QFY23 3QFY23 4QFY23 1QFY24 2QFY24 3QFY24 4QFY24
Retail ex rural and agri 40.4 39.5 39.9 39.8 38.5 39.3 38.1 37.6 36.9 38.6 48.5 48.2 49.0
Personal loans 10.4 10.4 10.4 10.5 10.2 10.4 10.2 10.5 10.3 10.4 7.3 7.2 7.2
Auto 8.1 7.9 7.9 7.6 7.3 7.3 7.1 7.2 7.0 7.1 5.2 5.1 5.1
Home loans 6.1 6.2 6.3 6.2 6.0 6.2 6.1 6.2 6.1 6.4 29.4 29.4 30.0
Payment products 5.9 5.4 5.6 5.8 5.6 5.6 5.4 5.3 5.1 5.3 3.7 3.8 3.9
LAP 4.5 4.5 4.5 4.5 4.5 4.6 4.6 4.6 4.6 4.6
Two wheelers 0.9 0.8 0.8 0.7 0.7 0.6 0.6 0.6 0.6 0.6 0.4 0.4 0.5
Gold loans 0.7 0.7 0.7 0.6 0.6 0.6 0.6 0.6 0.6 0.7 0.5 0.5 0.5
Other retail 3.8 3.5 3.8 3.8 3.7 3.8 3.5 2.6 2.5 3.5 1.8 1.8 1.8
Commercial and rural ex agri 28.0 29.0 29.7 30.2 30.4 30.7 31.2 32.9 33.8 33.0 26.0 26.9 27.2
Emerging corporates — — 10.7 10.7 10.7 10.8 10.8 10.9 10.9 11.0 8.5 8.8 8.4 31
Business banking — — 13.2 13.6 13.9 14.0 14.3 14.8 15.1 15.2 11.7 12.1 12.5 46
Commercial transportation — — 5.8 5.8 5.8 6.0 6.0 6.3 6.6 6.8 5.1 5.2 5.3 20
Agriculture 4.5 4.3 4.6 4.4 4.7 4.3 4.6 4.5 4.9 4.7 3.7 3.7 4.1
Corporates 27.1 27.1 25.8 25.6 26.4 25.6 26.1 25.0 24.5 23.7 21.8 21.2 19.7
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Note:
(a) The bank has aggregated the reporting for “LAP” within the “Home loans” category from 2QFY24.

Source: Company

HDFC Bank
Banks India Research
 7

Loan growth has been robust across segments over the past two years; commercial and rural has been leading
Loan growth across segments, March fiscal year-ends, 2QFY21 onward (%)
Overall Retail (ex agri and rural)

Advances (Rs bn) Yoy growth (%, RHS) Advances (Rs bn) Yoy growth (%, RHS)
30,000 125 15,000 125

24,000 100 12,000 100

18,000 75 9,000 75

12,000 50 6,000 50

6,000 25 3,000 25

- 0 - 0
2QFY21
3QFY21
4QFY21
1QFY22

4QFY23
1QFY24
2QFY24
3QFY24
4QFY24
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23

2QFY21
3QFY21
4QFY21

3QFY23
4QFY23
1QFY24
2QFY24
3QFY24
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23

4QFY24
Commercial and rural (ex-agri) Corporates

Advances (Rs bn) Yoy growth (%, RHS) Advances (Rs bn) Yoy growth (%, RHS)
7,500 35 7,500 35

6,000 28 6,000 28

4,500 21 4,500 21

3,000 14 3,000 14

1,500 7 1,500 7

- 0 - 0
2QFY21
3QFY21

3QFY22
4QFY22

3QFY23
4QFY23

4QFY24
4QFY21
1QFY22
2QFY22

1QFY23
2QFY23

1QFY24
2QFY24
3QFY24
3QFY21
4QFY21

3QFY22
4QFY22

4QFY23
1QFY24

4QFY24
2QFY21

1QFY22
2QFY22

1QFY23
2QFY23
3QFY23

2QFY24
3QFY24

Agri
Advances (Rs bn) Yoy growth (%, RHS)
1,500 35

1,200 28

900 21

600 14

300 7

- 0
2QFY21

2QFY22
3QFY22

2QFY23
3QFY23

3QFY24
4QFY24
3QFY21
4QFY21
1QFY22

4QFY22
1QFY23

4QFY23
1QFY24
2QFY24

Source: Company

HDFC Bank
Banks India Research
 8

Loan growth has been robust across retail segments, except the vehicle portfolio and personal loans
Loan growth across segments within retail, March fiscal year-ends, 2QFY21 onward (%)
Overall retail (ex agri and rural) Personal loans Payment products

Advances (Rs bn) Yoy growth (%, RHS) Advances (Rs bn) Yoy growth (%, RHS) Advances (Rs bn) Yoy growth (%, RHS)
15,000 125 2,000 50 2,000 50

12,000 100 1,600 40 1,600 40

9,000 75 1,200 30 1,200 30

6,000 50 800 20 800 20

3,000 25 400 10 400 10

- 0 - 0 - 0

1QFY23

3QFY23

1QFY24

3QFY24

3QFY21

1QFY22

3QFY22

1QFY23

3QFY23

1QFY24

3QFY24
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22

2QFY23

4QFY23

2QFY24

4QFY24

2QFY21

4QFY21

2QFY22

4QFY22

2QFY23

4QFY23

2QFY24

4QFY24
2QFY21

3QFY22
4QFY22

2QFY24
3QFY24
3QFY21
4QFY21
1QFY22
2QFY22

1QFY23
2QFY23
3QFY23
4QFY23
1QFY24

4QFY24

Home loans (incl. LAP) Gold loans Co

Advances (Rs bn) Yoy growth (%, RHS) Advances (Rs bn) Yoy growth (%, RHS)
7,500 350 150 50

6,000 280 120 40

4,500 210 90 30

3,000 140 60 20

1,500 70 30 10

- 0 - 0
3QFY21

2QFY22

1QFY23

4QFY23

3QFY24

2QFY22

4QFY22

2QFY23

3QFY24
2QFY21

4QFY21
1QFY22

3QFY22
4QFY22

2QFY23
3QFY23

1QFY24
2QFY24

4QFY24

2QFY21
3QFY21
4QFY21
1QFY22

3QFY22

1QFY23

3QFY23
4QFY23
1QFY24
2QFY24

4QFY24
Auto loans 2W loans Other retail
Advances (Rs bn) Yoy growth (%, RHS) Advances (Rs bn) Yoy growth (%, RHS) Advances (Rs bn) Yoy growth (%, RHS)
1,500 36 150 36 1,000 36

1,200 24 120 24 800 24

900 12 90 12 600 12

600 0 60 0 400 0

300 (12) 30 (12) 200 (12)

- (24) - (24) - (24)

3QFY21

3QFY22

3QFY23

3QFY24
4QFY24

3QFY21

3QFY22

2QFY23

1QFY24

4QFY24

4QFY21

4QFY22

4QFY23

4QFY24
2QFY21

4QFY21
1QFY22
2QFY22

4QFY22
1QFY23
2QFY23

4QFY23
1QFY24
2QFY24

2QFY21

4QFY21
1QFY22
2QFY22

4QFY22
1QFY23

3QFY23
4QFY23

2QFY24
3QFY24

2QFY21
3QFY21

1QFY22
2QFY22
3QFY22

1QFY23
2QFY23
3QFY23

1QFY24
2QFY24
3QFY24
Source: Company

HDFC Bank
Banks India Research
 9

Exposures to consumer loans have increased qoq from ~22% to ~33%

Industry-wise distribution of exposures for HDFC Bank, March fiscal year-ends (% of overall exposure: fund-based and non-
fund-based)
4QFY17 4QFY19 4QFY20 4QFY21 4QFY22 4QFY23 1QFY24 2QFY24 3QFY24
% of total
Agriculture Production - Food 3.8 3.1 2.5 2.4 2.0 2.0 1.9 1.5 1.4
Agriculture Production - Non food 2.7 1.8 1.4 1.1 1.0 0.9 0.8 0.6 0.6
Agriculture - Allied 1.7 1.8 1.8 1.8 1.8 2.1 2.1 1.7 1.6
Agriculture Produce - Trade 0.0 1.2 0.8 1.1 0.6 0.6 0.6 0.4 0.4
Animal husbandry 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.3
Automobile & Auto Ancillary 4.1 3.6 3.1 3.1 2.9 2.6 2.7 2.1 1.9
Banks and Financial Institutions 4.2 4.3 5.0 5.8 8.3 9.7 9.4 7.5 5.3
Business Services 2.2 2.3 2.1 1.9 1.8 1.7 1.9 1.5 1.5
Capital Market Intermediaries 0.7 0.8 0.5 0.5 0.7 0.8 0.8 0.7 0.7
Cement & Products 0.8 0.9 1.2 1.0 0.8 0.8 0.7 0.5 0.5
Chemical and Products 0.8 0.8 0.9 1.0 1.1 1.1 1.1 0.9 0.8
Coal & Petroleum Products 2.4 2.3 2.3 3.0 3.2 2.5 2.0 1.4 1.2
Construction and developers (infra) 2.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Consumer Durables 0.7 0.7 0.7 0.7 0.8 1.0 1.0 0.8 0.8
Consumer Loans 21.0 23.4 24.7 23.7 22.4 21.3 21.7 33.0 33.0
Consumer Services 3.8 3.4 3.3 3.1 2.8 3.4 3.2 2.5 2.7
Drugs and Pharmaceuticals 0.6 0.7 0.8 0.8 0.8 0.8 0.8 0.7 0.7
Engineering 2.6 2.6 3.1 2.1 2.1 2.1 2.2 1.7 1.7
Fertilisers & Pesticides 1.2 0.9 1.1 0.8 0.3 0.3 0.3 0.0 0.0
FMCG & Personal Care 0.4 0.3 0.3 0.4 0.4 0.4 0.4 0.3 0.3
Food and Beverage 2.4 2.2 2.3 2.6 2.7 3.0 3.0 2.2 2.4
Gems and Jewellery 1.1 1.0 0.7 1.0 0.8 0.5 0.5 0.8 0.7
Housing Finance Companies 2.0 1.8 1.6 1.9 1.8 1.8 1.8 1.4 1.5
Information Technology 0.6 0.4 0.5 0.4 0.5 0.5 0.5 0.4 0.4
Infrastructure Development 0.0 2.0 2.2 2.6 3.0 2.2 3.0 2.8 2.6
Iron and Steel 1.9 2.2 2.2 2.2 2.4 2.1 2.1 1.8 1.9
Mining and Minerals 0.9 0.8 0.7 1.0 0.8 0.7 0.7 0.5 0.5
NBFC / Financial Intermediaries 4.9 4.5 4.1 4.3 4.0 4.1 4.3 4.3 6.8
Non-ferrous Metals 1.1 1.0 1.0 1.1 0.9 1.0 1.0 0.7 0.6
Paper, Printing and Stationery 0.5 0.4 0.4 0.5 0.6 0.6 0.6 0.5 0.5
Plastic & Products 0.5 0.5 0.5 0.6 0.6 0.6 0.6 0.4 0.5
Power 2.3 2.6 4.3 5.2 4.6 3.7 3.1 2.4 2.7
Real Estate & Property Services 2.6 2.7 2.6 2.4 2.5 2.5 2.5 4.6 4.3
Retail Trade 4.4 4.3 4.4 3.9 3.6 4.8 4.7 4.0 3.8
Road Transportation 3.3 3.6 3.1 2.6 2.4 2.8 3.1 2.3 2.3
Telecom 2.0 2.7 2.2 1.9 2.2 1.6 1.7 1.5 1.3
Textiles & Garments 1.8 2.0 1.9 2.0 2.2 2.1 2.1 1.9 1.8
Wholesale Trade - Non Industrial 3.4 2.0 2.1 2.3 2.6 2.7 2.7 1.7 1.7
Wholesale Trade - Industrial 2.7 2.0 2.0 2.2 2.4 2.4 2.5 1.9 1.9
Other Industries* 5.7 6.1 5.8 5.0 5.5 5.7 5.7 6.2 6.0

Source: Company

HDFC Bank
Banks India Research
 10

Profitability was impacted due to the creation of floating provision

Segmental revenues and profitability, March fiscal year-ends (Rs bn)
Retail revenue Wholesale revenue
750 750

600 600

450 450

300 300

150 150

0 0

2QFY17
4QFY17
2QFY18
4QFY18
2QFY19
4QFY19
2QFY20
4QFY20
2QFY21
4QFY21
2QFY22
4QFY22
2QFY23
4QFY23
2QFY24
4QFY24
2QFY17

4QFY18
2QFY19
4QFY19

2QFY21
4QFY21

2QFY23
4QFY23
2QFY24
4QFY17
2QFY18

2QFY20
4QFY20

2QFY22
4QFY22

4QFY24

Retail PBT Wholesale PBT

100 100

80 80

60 60

40 40

20 20

0 0
4QFY18
2QFY19
4QFY19
2QFY20

2QFY22
4QFY22
2QFY23
4QFY23
2QFY17
4QFY17
2QFY18

4QFY20
2QFY21
4QFY21

2QFY24
4QFY24

2QFY17
4QFY17

2QFY19
4QFY19

4QFY21
2QFY22

2QFY24
4QFY24
2QFY18
4QFY18

2QFY20
4QFY20
2QFY21

4QFY22
2QFY23
4QFY23
Source: Company

No concern on asset quality; bank added to floating provision buffer during the quarter
NPLs and coverage. Gross NPL ratio (1.2%) and net NPL ratio (~0.3%) for the bank were broadly
stable qoq. The bank carries a provision coverage ratio (PCR) of 74% (lower qoq by ~130 bps).

Slippages and recoveries. Annualized slippages ratio was at ~1.2% for the quarter (~Rs73 bn)
compared with 1.2% in the previous quarter. Recoveries/upgradations amounted to ~Rs45 bn (~70
bps of net advances, annualized) for 4QFY24, while write-offs amounted to ~Rs26 bn (~40 bps of net
advances, annualized). The bank did not sell any NPAs during the quarter.

Provisions. Credit cost for the quarter stood at ~220 bps (annualized), up from ~70 bps (annualized)
during the previous quarter. Excluding the two one-offs for the quarter (listed below), the core credit
cost stood at ~45 bps (annualized).

 The bank has added ~Rs109 bn of floating provision, taking the total outstanding floating provision
to ~Rs124 bn.

 The bank has also reversed a part of the provisions (~Rs1.85 bn out of ~Rs12.2 bn made during
3QFY24) toward AIF investments.

HDFC Bank
Banks India Research
 11

Management has utilized the one-time gain from the sale of its stake in HDFC Credila to strengthen
prudent provision buffers. It has clearly articulated that the credit environment continues to be benign
and early warning indicators do not indicate any reason to worry, as of now.

Gross NPA ratio was flat qoq overall, but saw ~100 bps decline in the agri book
Gross NPA ratio across segments, March fiscal year-ends (%)
Retail Agri CRB ex-agri Corporate and other wholesale Overall
7.5

6.0

4.5

3.0

1.5

-
3QFY21

4QFY21

1QFY22

2QFY22

3QFY22

4QFY22

1QFY23

2QFY23

4QFY24
3QFY23

4QFY23

1QFY24

2QFY24

3QFY24
Source: Company

NIM (reported) was flat qoq

Headline NIM. NIM (reported) was broadly flat qoq at 3.4%. Yield on loans (calc.) and cost of funds
(calc.) were both marginally lower by ~10 bps qoq.

Liquidity. CD ratio stood at 104% (down ~600 bps qoq), while LCR ratio stood at 115% (up ~500 bps
qoq), as of 4QFY24.

Management indicated that it had recently increased the yield thresholds on several asset products. This
along with a shift in loan mix away from corporate helped the overall yield for the bank to some extent.
At the same time, management indicated that the potential for a further hike in disbursement yield seems
limited. However, pass-through of higher yields (already taken) on incremental disbursements can
support further improvement in the yield, going forward.

Management has indicated that it is currently not anchored to delivering a particular target NIM, given
the competitive environment. There would be high focus on managing the cost of deposits better. As a
consequence, any further NIM progression from here will be a function of the shift in the liability mix (as
higher cost bonds come up for maturity), potential improvement in CASA ratio and shift in business mix
toward higher-yielding assets.

HDFC Bank
Banks India Research
 12

NIM (reported, on average assets) has been depressed post-merger, but is expected to gradually inch up
Trend in margin metrics, March fiscal year-ends (%)
NIM (reported, on assets) Yield on funds (calc.) Cost of funds (calc.)
5.0 10.0

4.0 8.0

3.0 6.0

2.0 4.0

1.0 2.0

- -

2QFY19

4QFY19

2QFY20

4QFY20

2QFY21

4QFY21

2QFY22

4QFY22

2QFY23

4QFY23

2QFY24

4QFY24
4QFY21

4QFY24
2QFY19

4QFY19

2QFY20

4QFY20

2QFY21

2QFY22

4QFY22

2QFY23

4QFY23

2QFY24

Source: Company

Treasury gains (sales of shares of HDFC Credila) boosted non-interest income

Non-interest income was up ~110% yoy and ~60% qoq, supported by healthy treasury income
(~Rs73.4 bn gain from sale of shares of HDFC Credila). Fee income grew ~20% yoy (15% qoq).

Retail fees constituted ~94% of overall fees (92-94% in the past few quarters) for the bank.
Retail business makes up >90% of fees for HDFC Bank
Breakup of fee income for HDFC Bank, March fiscal year-ends (%)

Wholesale Retail liabilities TPP business Retail assets Payments

100

29 32 30 33 33 33 34 33 35 34
80

60 20 21 20 19
20 20 20 21 20 19

40 23 21
23 21 21 26 19 20 22 26

20 20
20 18 19 19 20 17 17
16 15
7 6 8 7 7 6 7 8 6 6
-
3QFY22

4QFY22

1QFY23

2QFY23

3QFY23

4QFY23

1QFY24

2QFY24

3QFY24

4QFY24

Source: Company

Cost ratios saw an improvement, led by higher treasury income

Overall cost for the bank grew 33% yoy (13% qoq), led by ~60% yoy (~30% qoq) growth in staff cost
and ~21% yoy (~4% qoq) growth in non-staff cost. Staff cost saw a sharp decline qoq due to provision
for ex-gratia payment to staff amounting to ~Rs15 bn.

Cost-income ratio for the bank stood at ~38% (down qoq from ~40%). This was helped by higher
treasury income (gain from sale of shares of HDFC Credila) and offset to some extent by the provision
for ex-gratia payment to staff.

HDFC Bank
Banks India Research
 13

NII growth was at 25% yoy as against 55% yoy loan growth
Comparison of yoy growth in loans, NII, PPOP and PAT, March fiscal year-ends (%)

Loan growth (LHS) NII growth PPOP growth PAT growth

70

56

42

28

14

0
2QFY17

4QFY17

2QFY19

4QFY19

4QFY20

2QFY21

4QFY22

2QFY23

2QFY24

4QFY24
4QFY16

2QFY18

4QFY18

2QFY20

4QFY21

2QFY22

4QFY23
Source: Company

Conversion of operating profit to net profit has improved

Trend in operating profit, net profit, net NPL and net worth, March fiscal year-ends (Rs bn)
Operating profit Net profit Net profit/ Operating profit (%)
1,500 100

1,200 80

900 60

600 40

300 20

- -
2024E

2026E
2008

2014
2004

2006

2010

2012

2016

2018

2020

2022

2024E

2026E
2012

2022
2004

2006

2008

2010

2014

2016

2018

2020

Net NPL/ Operating profit (%) Net NPL/ Net worth (%)
15 5

12 4

9 3

6 2

3 1

- -
2024E

2026E
2004

2006

2008

2010

2012

2014

2016

2018

2020

2022
2024E

2026E
2008

2020

2022
2004

2006

2010

2012

2014

2016

2018

Source: Company, Kotak Institutional Equities estimates

HDFC Bank
Banks India Research
 14

Deposit growth momentum picked up, but is likely supported by some transient deposits
Deposit growth in 4QFY24 stood at ~26% yoy (7% qoq), led by stronger ~40% yoy growth in term
deposits. Deposit growth was meaningfully higher than loan growth sequentially. However,
management articulated that the sequential deposit accretion involved transitory involuntary inflows,
which were higher than management’s expectation. As a consequence, we are unlikely to see the
same level of momentum in deposit accretion sustain in the coming quarters.

CASA deposits grew 9% yoy (9% qoq). CASA ratio improved marginally by ~50 bps qoq to ~38%.
~84% of total deposits of the bank come from retail.
LCR for the quarter stood at ~115% (up from ~110% in the previous quarter).
Management had earlier indicated that it expects deposit growth to outpace loan growth by 300-400
bps over the medium term. However, during the 4QFY24 earnings call, management has explicitly
refrained from giving any guidance or keeping the guidance shared earlier.

Growth in CASA deposits continues to meaningfully lag the growth in term deposits
Trends in deposit growth, March fiscal year-ends (%)
Total deposits Term deposits
Deposits (Rs bn) Growth (% yoy, RHS) Deposits (Rs bn) Growth (% yoy, RHS)
25,000 50 25,000 50

20,000 40 20,000 40

15,000 30 15,000 30

10,000 20 10,000 20

5,000 10 5,000 10

- 0 - 0
2QFY19

2QFY23

4QFY24
4QFY18

4QFY19
2QFY20
4QFY20
2QFY21
4QFY21
2QFY22
4QFY22

4QFY23
2QFY24
2QFY22

4QFY23
4QFY18
2QFY19
4QFY19
2QFY20
4QFY20
2QFY21
4QFY21

4QFY22
2QFY23

2QFY24
4QFY24

CA deposits SA deposits
Deposits (Rs bn) Growth (% yoy, RHS) Deposits (Rs bn) Growth (% yoy, RHS)
7,500 40 7,500 40

6,000 32 6,000 32

4,500 24 4,500 24

3,000 16 3,000 16

1,500 8 1,500 8

- 0 - 0
4QFY21

2QFY23

4QFY24
4QFY18
2QFY19
4QFY19
2QFY20
4QFY20
2QFY21

2QFY22
4QFY22

4QFY23
2QFY24
2QFY20
4QFY20

4QFY23
2QFY24
4QFY18
2QFY19
4QFY19

2QFY21
4QFY21
2QFY22
4QFY22
2QFY23

4QFY24

CASA deposits Deposit mix (%)

Deposits (Rs bn) Growth (% yoy, RHS) CA deposits SA deposits Term deposits
10,000 40 100

8,000 32 80

6,000 24 60

4,000 16 40

2,000 8 20

- 0 0
4QFY18

2QFY20

4QFY21

2QFY23

4QFY24
2QFY19
4QFY19

4QFY20
2QFY21

2QFY22
4QFY22

4QFY23
2QFY24

4QFY18

2QFY19

4QFY19

2QFY20

4QFY20

2QFY21

4QFY21

2QFY22

4QFY22

2QFY23

4QFY23

2QFY24

4QFY24

Source: Company

HDFC Bank
Banks India Research
 15

Share of retail has been at ~90% for CASA deposits and ~80% for term deposits
Share of retail in deposit base for HDFC Bank, March fiscal year-ends (%)

Deposits Term deposits CASA deposits

100

93 91 93 91 91
89 88 90 89 89
80

60

40 83 81 82 83 84 83 83 83 84 84

20

78 75 73 77 79 78 75 78 80 80
-
4QFY22

1QFY23

2QFY23

3QFY23

2QFY24

3QFY24

4QFY24
3QFY22

4QFY23

1QFY24
Source: Company, Kotak Institutional Equities

Share of retail deposits in potential gross cash outflows has been broadly stable
LCR disclosure on breakup of potential gross cash outflows (un-weighted) over a 30-day stress
period, March fiscal year-ends (%)
Retail deposits Unsecured wholesale
Secured wholesale Additional funding req.
Other contractual funding obligation Other contingent funding obligation
100
2 1 2 2 2
10 7 8 7 9
- - - -
80 -
1
25 28 27 27 27 8 1 1 1 1 1 1 1 2 1
- 7 7 8 8 8 8 1 6- 8
- - - - - - 7 - 8
60 - -
21
20 20 19 19 18 18 17 18 18 18
40
57 57 58 58 57
20 46 43 43 43 43 44 44 43 44 43 42

-
4QFY20

1QFY21

2QFY21

3QFY21

4QFY21

1QFY22

2QFY22

3QFY22

4QFY22

1QFY23

2QFY23

3QFY23

4QFY23

1QFY24

2QFY24

3QFY24

Source: Company, Kotak Institutional Equities

HDFC Bank
Banks India Research
 16

HDFC Bank has had the lowest LCR among peers

Liquidity coverage ratio for select large banks, March fiscal year-ends (%)

Axis Bank HDFC Bank ICICI Bank IndusInd Bank SBI

175

160

145

130

115

100
4QFY20

3QFY21

2QFY22

1QFY23

4QFY23

4QFY24
1QFY21

2QFY21

4QFY21

1QFY22

3QFY22

4QFY22

2QFY23

3QFY23

1QFY24

2QFY24

3QFY24
Source: Company, Kotak Institutional Equities

A large chunk of the redemptions of NCDs (overall ~Rs3 tn) are rear-ended
Maturity profile of domestic NCDs outstanding for HDFC Bank as on March 18, 2024 (Rs bn)

NCD maturity (Rs bn) Cumulative NCD maturity (%, RHS)

1,000 100

843
800 80

600 60

392
372

400 40
292
281

275
232

100

200 20
90
55
40

- -
2024

2025

2028

2029

2031

2032

2033
2026

2027

2030

2034

Source: Company, Kotak Institutional Equities

Other key highlights

Capital. The bank’s overall CAR stands comfortable at ~18.8%, in line with Basel-3 guidelines. CET-1
ratio stood at ~16.3%. RWA growth at ~3% qoq was marginally higher than advances growth (~1.6%
qoq, net of IBPC), likely driven by a reduction in share of the corporate loan book.

Branch network. The bank has been rapidly expanding footprint in semi-urban areas and rural areas,
which now account for ~52% of the total banking outlets. It expects this to assist in meeting PSL
requirements for the merged entity. However, management indicated that it would also focus on
improving branch productivity, along with mere branch additions over the next few years.

HDFC Bank
Banks India Research
 17

Merger has helped HDFC Bank report better growth

Comparison of key metrics reported by HDFC Bank and industry, March fiscal year-ends (% yoy growth)
Net interest income Revenues Operating profits

HDFC Bank Consolidated Large Private HDFC Bank Consolidated Large Private HDFC Bank Consolidated Large Private
35 40 60

28 32 40

21 24 20

14 16 -

7 8 (20)

- - (40)

4QFY20
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23
1QFY24
2QFY24
3QFY24
4QFY24
4QFY20
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23
1QFY24
2QFY24
3QFY24
4QFY24

4QFY20
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23
1QFY24
2QFY24
3QFY24
4QFY24
Provisions PAT Total deposits

HDFC Bank Consolidated Large Private HDFC Bank Consolidated Large Private HDFC Bank Consolidated Large Private
500 100 80
400 80 70
60 60
300
50
40
200 40
20
100 30
- 20
- (20) 10
(100) (40) -
4QFY20
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23
1QFY24
2QFY24
3QFY24
4QFY24

4QFY22

1QFY23

2QFY23

3QFY23

4QFY23

1QFY24

2QFY24

3QFY24

4QFY24

2QFY21
1QFY22

2QFY22

3QFY22

4QFY20
1QFY21

3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23
1QFY24
2QFY24
3QFY24
4QFY24
Source: Company, Kotak Institutional Equities estimates

HDFC Bank—changes in estimates, March fiscal year-ends (Rs mn)

New estimates Old estimates % change
2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E
Net loan growth (%) 55.2 12.3 14.2 59.2 15.8 15.6 -394 bps -343 bps -132 bps
Total assets 36,176,231 41,861,868 48,941,329 36,207,075 41,766,241 48,377,791 (0.1) 0.2 1.2
Total income 1,577,735 1,797,075 2,099,782 1,551,425 1,816,188 2,092,176 1.7 (1.1) 0.4
Net interest income 1,085,325 1,308,624 1,576,586 1,088,670 1,323,156 1,560,725 (0.3) (1.1) 1.0
NIM (%) 3.8 3.5 3.6 3.8 3.6 3.6 1 bps -1 bps 4 bps
Other income 492,410 488,450 523,196 462,755 493,032 531,451 6.4 (0.9) (1.6)
Fee income 281,560 317,489 363,781 277,131 317,489 363,781 1.6 - -
Expenses 633,860 739,642 834,067 621,606 738,267 834,497 2.0 0.2 (0.1)
Employee cost 222,402 250,407 291,896 209,780 247,937 289,431 6.0 1.0 0.9
Other cost 411,458 489,235 542,171 411,826 490,331 545,066 (0.1) (0.2) (0.5)
Loan loss provisions 234,921 131,900 179,389 113,166 133,664 182,256 107.6 (1.3) (1.6)
PBT 708,953 915,532 1,076,326 809,153 936,757 1,067,923 (12.4) (2.3) 0.8
PAT 608,123 690,311 811,549 635,185 706,315 805,214 (4.3) (2.3) 0.8
PBT-treasury+provisions 837,344 997,433 1,225,715 849,819 1,017,921 1,217,679 (1.5) (2.0) 0.7
EPS (Rs) 80 91 107 84 93 106 (4.5) (2.5) 0.6
Adjusted BVPS (Rs) 572 639 718 555 625 702 3.0 2.2 2.3
Slippage ratio (%) 2.5 1.8 1.8 1.8 1.6 1.8 72 bps 20 bps 0 bps
Gross NPA (%) 1.2 1.3 1.4 1.3 1.3 1.5 -3 bps -2 bps -10 bps
Credit cost (%) 1.2 0.5 0.6 0.6 0.5 0.6 60 bps 0 bps 0 bps
Cost-income ratio (%) 40.2 41.2 39.7 40.1 40.6 39.9 11 bps 51 bps -16 bps

Source: Company, Kotak Institutional Equities estimates

HDFC Bank
Banks India Research
 18

SoTP valuation for HDFC Bank (merged entity) as of March 2025, March fiscal year-ends (%)
Value of
HDFC Bank's companies (Rs Value per
Business/ subsidiaries holding (%) mn) share (Rs) Comments
HDFC Bank standalone 1,600 Based on residual growth model; 2.3X book
Value of subsidiaries and associates 144
HDFC AMC 52.6 572,538 36 KIE's FV, 10% holding-company discount
HDFC Life 50.3 1,426,015 85 KIE's FV; 10% holding-company discount
HDFC ERGO 50.0 394,753 23 35X FY2026E PAT; 10% holding-company discount
Equity investments 6
Others 100 45,209 6
Total value per share 1,750

Source: Company, Kotak Institutional Equities estimates

HDFC Bank
Banks India Research
 19

RoA to stay in the range of 1.8-2.0% over the medium term

HDFC Bank’s growth rates and key ratios for the pro forma merged entity, March fiscal year-ends
Standalone Proforma merged
2016 2017 2018 2019 2020 2021 2022 2023 2024E 2025E 2026E
Growth rates (%)
Net loan 27.1 19.4 18.7 24.5 21.3 14.0 20.8 16.9 55.2 12.3 14.2
Customer assets growth 28.3 23.1 21.3 21.8 20.0 18.0 19.8 15.4 52.8 12.0 13.9
Retail loans to Customer assets 47.6 48.9 51.5 50.4 48.1 43.5 36.6 36.8 49.3 51.4 52.0
Net fixed assets (20.3) 54.5 (0.5) 11.7 10.0 10.8 23.9 31.8 90.7 (10.4) (10.0)
Cash and bank balance 7.1 25.8 151.1 (33.8) 6.5 37.9 27.5 27.2 13.1 28.1 16.9
Total Asset 25.5 16.6 23.2 17.0 23.0 14.1 18.4 19.2 46.7 15.7 16.9
Deposits 21.2 17.8 22.5 17.0 24.3 16.3 16.8 20.8 26.4 19.6 19.4
Current 20.2 30.7 3.2 19.5 22.3 21.8 12.8 14.3 13.3 14.8 19.4
Savings 22.9 7.9 33.2 19.4 24.6 8.5 12.3 29.6 40.5 18.7 17.5
Fixed 18.4 30.9 15.6 11.1 24.8 30.0 26.8 9.9 6.4 24.4 24.0
Net interest income 23.2 20.1 21.0 20.3 16.5 15.5 11.0 20.6 25.0 20.6 20.5
Loan loss provisions 30.9 33.3 54.6 27.9 62.3 32.8 (0.8) (18.9) 92.4 (43.9) 36.0
Total other income 19.5 14.4 23.8 15.8 32.0 8.4 17.1 5.8 57.7 (0.8) 7.1
Net fee income 17.8 13.6 29.3 21.2 18.3 (1.0) 20.8 22.0 18.1 12.8 14.6
Net capital gains 25.8 55.5 (18.8) (57.5) 391.9 99.9 (41.0) (149.6) (1,041.8) (43.7) (33.3)
Net exchange gains 19.4 2.9 20.6 12.9 25.2 13.2 60.3 4.5 19.6 12.0 14.0
Operating expenses 21.4 16.0 15.2 15.1 17.5 6.6 14.4 27.3 33.0 16.7 12.8
Employee expenses 20.0 13.7 5.0 14.0 22.7 8.8 16.1 28.9 43.4 12.6 16.6
Key ratios (%)
Yield on average earning assets 9.6 9.1 8.7 8.9 8.6 7.6 7.0 7.5 9.0 8.4 8.2
Yield on average loans 10.8 10.2 10.3 10.5 10.1 8.9 7.9 8.6 10.1 9.4 9.3
Yield on average investments 8.1 7.8 7.1 7.5 6.1 5.6 5.8 6.4 7.3 6.8 6.8
Average cost of funds 5.7 5.3 4.9 5.2 5.0 4.0 3.4 3.9 5.8 5.4 5.2
Interest on deposits 5.9 5.3 4.6 4.8 4.9 4.0 3.4 3.6 5.4 5.1 5.0
Difference 3.9 3.9 3.9 3.8 3.6 3.6 3.5 3.7 3.2 3.0 3.0
Net interest income/earning assets 4.4 4.4 4.4 4.4 4.2 4.1 3.9 4.1 3.8 3.5 3.6
New provisions/average net loans 0.6 0.7 0.9 1.0 1.3 1.4 1.2 0.8 1.2 0.5 0.6
Interest income/total income 72.0 72.9 72.5 73.2 70.7 72.0 70.9 73.6 68.8 72.8 75.1
Fee income to total income 20.2 19.4 20.6 21.0 20.6 17.9 19.2 20.2 17.8 17.7 17.3
Fees income to PBT 41.6 39.8 42.7 42.9 44.6 38.8 39.9 40.8 39.7 34.7 33.8
Net trading income to PBT 3.8 5.2 3.3 1.2 5.3 9.3 4.7 (1.9) 15.0 6.6 3.7
Exchange inc./PBT 6.6 5.7 5.7 5.3 5.9 5.9 8.0 7.0 6.9 6.0 5.8
Operating expenses/total income 44.3 43.4 41.0 39.7 38.6 36.3 36.9 40.4 40.2 41.2 39.7
Operating expenses/assets 2.6 2.5 2.4 2.3 2.2 2.0 2.0 2.1 2.1 1.9 1.8
Operating profit /AWF 2.9 2.8 2.8 2.9 2.6 2.4 2.6 2.8 2.1 2.3 2.4
Tax rate 34.0 34.3 34.5 34.5 28.3 25.3 24.6 24.6 14.2 24.6 24.6
Dividend payout ratio 19.5 19.4 19.3 19.4 — — 23.3 24.0 24.4 24.4 24.4
Share of deposits
Current 16.2 18.0 15.1 15.4 15.2 15.9 15.3 14.5 13.0 12.5 12.5
Fixed 56.8 52.0 56.5 57.6 57.8 53.9 51.8 55.6 61.8 61.3 60.3
Savings 27.1 30.1 28.4 26.9 27.0 30.2 32.8 29.9 25.2 26.2 27.2
Loans-to-deposit ratio 85.0 86.2 83.5 88.8 86.6 84.9 87.8 85.0 104.4 98.1 93.8
Equity/assets (EoY) 9.8 10.4 10.0 12.0 11.2 11.7 11.6 11.4 12.2 11.8 11.3
Asset quality trends (%)
Gross NPL 0.9 1.1 1.3 1.4 1.3 1.3 1.2 1.1 1.2 1.3 1.4
Net NPL 0.3 0.3 0.4 0.4 0.4 0.4 0.3 0.3 0.3 0.3 0.4
Slippages 1.6 1.5 2.3 2.2 2.1 1.6 2.4 1.8 2.5 1.8 1.8
Provision coverage (ex writeoff) 69.9 68.7 69.8 71.4 72.0 69.8 72.7 75.8 74.1 73.9 74.5
Dupont analysis (%)
Net interest income 4.1 4.1 4.2 4.2 4.0 4.0 3.8 3.8 3.6 3.4 3.5
Loan loss provisions 0.4 0.4 0.6 0.6 0.8 0.9 0.8 0.5 0.8 0.3 0.4
Net other income 1.6 1.5 1.6 1.5 1.7 1.5 1.5 1.4 1.6 1.3 1.2
Operating expenses 2.6 2.5 2.4 2.3 2.3 2.0 2.0 2.1 2.1 1.9 1.9
Invt. depreciation — — — — — — — — — — —
(1- tax rate) 66.0 65.7 65.5 65.5 71.7 74.7 75.4 75.4 85.8 75.4 75.4
ROA 1.8 1.8 1.8 1.8 1.9 1.9 1.9 1.9 2.0 1.8 1.8
Average assets/average equity 9.9 9.9 9.8 9.0 8.7 8.7 8.6 8.7 8.4 8.4 8.7
ROE 18.3 17.9 17.9 16.5 16.4 16.6 16.7 17.0 16.9 14.8 15.5

Source: Company, Kotak Institutional Equities estimates

HDFC Bank
Banks India Research
 20

HDFC Bank—key financials, March fiscal year-ends (Rs bn)

Standalone Proforma merged
2016 2017 2018 2019 2020 2021 2022 2023 2024E 2025E 2026E
Income statement
Total interest income 602 693 802 990 1,148 1,209 1,278 1,616 2,583 3,094 3,559
Loans 448 521 627 775 918 948 985 1,271 2,072 2,474 2,773
Investments 141 159 162 200 206 232 260 313 444 543 699
Cash and deposits 13 13 14 14 24 28 32 32 68 77 86
Total interest expense 326 362 401 507 586 560 557 747 1,498 1,785 1,982
Deposits from customers 292 313 328 411 508 501 489 615 1,147 1,344 1,571
Net interest income 276 331 401 482 562 649 720 868 1,085 1,309 1,577
Loan loss provisions 27 36 55 70 114 152 151 122 235 132 179
Net interest income (after prov.) 249 296 346 412 448 497 569 746 850 1,177 1,397
Other income 108 123 152 176 233 252 295 312 492 488 523
Net fee income 78 88 114 138 163 162 195 238 282 317 364
Net capital gains 7 11 9 4 19 39 23 (11) 107 60 40
Net exchange gains 12 13 15 17 22 24 39 41 49 55 62
Operating expenses 170 197 227 261 307 327 374 477 634 740 834
Employee expenses 57 65 68 78 95 104 120 155 222 250 292
Depreciation on investments 0 (0) 0 0 0 (0) — — — — —
Other Provisions 0 0 4 5 7 5 (0) (3) — 10 10
Pretax income 186 221 267 322 366 417 490 585 709 916 1,076
Tax provisions 63 76 92 111 103 105 121 144 101 225 265
Net Profit 123 145 175 211 263 311 370 441 608 690 812
% growth 20.4 18.3 20.2 20.5 24.6 18.5 18.8 19.3 37.9 13.5 17.6
Operating profit 206 246 317 394 468 535 618 715 837 997 1,226
% growth 22.5 19.3 28.7 24.3 18.9 14.3 15.5 15.8 17.1 19.1 22.9
Balance sheet
Assets
Cash and bank balance 389 490 1,229 813 866 1,195 1,523 1,938 2,191 2,807 3,282
Cash 56 43 75 74 92 107 112 132 146 160 176
Balance with RBI 245 336 971 394 630 866 1,188 1,039 1,641 2,159 2,504
Balance with banks 9 12 10 3 3 8 3 17 25 38 57
Net value of investments 1,968 2,145 2,422 2,906 3,918 4,437 4,555 5,170 6,985 8,988 11,610
Govt. and other securities 1,577 1,624 1,884 2,397 3,230 3,511 3,665 4,374 6,114 8,077 10,700
Shares 1 1 1 4 4 4 5 5 5 5 5
Debentures and bonds 49 195 348 287 265 618 647 583 583 583 583
Net loans and advances 4,646 5,546 6,583 8,194 9,937 11,328 13,688 16,006 24,849 27,911 31,885
Fixed assets 23 36 36 40 44 49 61 80 153 137 123
Net Owned assets 23 36 36 40 44 49 61 80 153 137 123
Other assets 381 422 369 492 539 459 858 1,467 1,998 2,018 2,041
Total assets 7,408 8,638 10,639 12,445 15,305 17,469 20,685 24,661 36,176 41,862 48,941
Liabilities
Deposits 5,464 6,436 7,888 9,231 11,475 13,351 15,592 18,834 23,798 28,464 33,994
Borrowings and bills payable 923 907 1,313 1,241 1,522 1,479 1,979 2,186 6,763 6,721 6,876
Other liabilities 293 400 375 481 598 602 713 839 1,213 1,753 2,533
Total liabilities 6,681 7,744 9,576 10,953 13,595 15,431 18,284 21,859 31,774 36,937 43,403
Paid-up capital 5 5 5 5 5 6 6 6 8 8 8
Reserves & surplus 722 889 1,058 1,487 1,704 2,032 2,395 2,796 4,395 4,917 5,531
Total shareholders' equity 727 895 1,063 1,492 1,710 2,037 2,401 2,802 4,402 4,925 5,538

Source: Company, Kotak Institutional Equities estimates

HDFC Bank
Banks India Research
 RESULT

Wipro (WPRO) SELL

IT Services
CMP(₹): 453 Fair Value(₹): 440 Sector View: Neutral NIFTY-50: 22,147 April 20, 2024

Cost optimization aids margin improvement Company data and valuation summary
Wipro reported in-line revenues, aided by Capco and the healthcare vertical. Stock data
Both 1QFY25 guidance and 4QFY24 TCV disappointed and indicated another
CMP(Rs)/FV(Rs)/Rating 453/440/SELL
weak year ahead. The margin improvement was ahead of expectations and
52-week range (Rs) (high-low) 546-359
provided some solace. The new CEO will follow a similar strategy as Thierry
Mcap (bn) (Rs/US$) 2,366/28.3
Delaporte, with greater emphasis on execution, which is easier said than
ADTV-3M (mn) (Rs/US$) 3,782/45.3
done. The strong execution on margin improvement leads to an upgrade in
margin estimates, leading to a 1-2% increase in FY2025-26E EPS. The FV Shareholding pattern (%)
increases to Rs440 due to the EPS increase and rollover to June. The stock
trades at full valuation. We expect the underperformance to continue. 7.6 2.4
Maintain SELL. 4.8
3.2
9.1
Reports in-line growth aided by Capco and healthcare vertical
72.9
Wipro reported revenue growth of 0.1% in US$ terms to US$2,657 mn. On a c/c
basis, the revenue decline of 0.3% was in line with our estimates and included
~10 bps contribution from Aggne acquisition. Growth was driven by (1) Capco , Promoters FPIs MFs BFI s Retail Others

which grew 6.6% qoq and drove 2.1% growth in BFSI and (2) the healthcare

Private Circulation Only. This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities A ct of 1933
Price performance (%) 1M 3M 12M
vertical, which grew 1.2% qoq. These offset sharp declines in technology (down
Absolute (9) (7) 25
6% qoq) and telecom (down 4.8% qoq). IT services EBIT margin increased 40
Rel. to Nifty (10) (9) (0)
bps to 16.4%, ahead of our estimate of 16%, aided by further operational Rel. to MSCI India (11) (11) (9)
efficiencies such as utilization, subcon and offshoring. Net profit of Rs28.3 bn
grew 5.2% qoq and declined 7.8% and missed our estimate by 1.9% due to a Forecasts/Valuations 2024 2025E 2026E
G&A charge of Rs965 mn and a higher-than-expected tax rate. EPS (Rs) 20.9 23.6 25.3
EPS growth (%) 1.1 12.6 7.6
New CEO takes charge; sticks to similar strategy with emphasis on execution P/E (X) 21.7 19.2 17.9

Srini Pallia indicated five areas of focus: (1) accelerating large-deal momentum; P/B (X) 3.2 2.7 2.5

(2) strengthening relationships with large accounts, accounts that have the EV/EBITDA (X) 12.4 11.1 10.0

potential to become large and key partners; (3) leading with industry-specific RoE (%) 14.3 15.2 14.6

solutions, led by consulting and infused with AI; (4) scaling up the talent base; Div. yield (%) 0.2 0.2 2.0
Sales (Rs bn) 898 901 956
and (5) continuing to simplify the operating model and executing with vigor and
EBITDA (Rs bn) 170 179 189
speed. At its core, the strategy is the same. Srini will build on the foundation
Net profits (Rs bn) 110 123 133
laid by Thierry, with a focus on sharper execution to achieve better growth
without compromising on profitability. Source: Bloomberg, Company data, Kotak Institutional Equities estimates

Prices in this report are based on the market close of

Several challenges to confront; expect flat revenue in FY2025 April 19, 2024

Several indicators point to a tough FY2025 ahead: (1) 1QFY25 guidance of -1.5%
to 0.5% qoq growth is lower than our expectations of growth of -0.5% to 1.5%;
(2) a lack of sufficient new deals to reinvigorate growth. 4QFY24 TCV declined
15% yoy, while overall TCV declined 5.5% in c/c; (3) broad-based
underperformance—Wipro has underperformed TCS or Infosys in verticals,
accounting for 75% of revenue in FY2024; (4) patchy track record in account
management—# of US$50 mn accounts has declined sharply; and (5) loss of
several senior leaders. Srini needs to keep the remaining flock together,
including those hired under Thierry. We expect flat revenue in FY2025.

Full sector coverage on KINSITE

Kawaljeet Saluja Sathishkumar S Vamshi Krishna

[email protected] [email protected] [email protected]
+91-22-4336-0860 +91-22-4336-0879 +91-22-6166-1801
 22

Maintain SELL rating—stock not attractive despite recent correction

We cut FY2025-26 revenue estimates by 0-1%. Our tweak our margin assumptions a tad. Our EPS
estimates increase by 1-2%. Wipro faces multiple challenges, including structural factors that are difficult
to dislodge. We value the stock at an unchanged 17X Jun 2026E EPS, leading to FV of Rs440 (Rs435
earlier). We maintain our SELL rating.

New CEO faces several key challenges

Leadership retention. Exhibit 15 details key hires and exits in the last three years. A significant
number of old Wipro leaders have resigned. The current leadership has many Thierry hires. Wipro
cannot afford another leadership exodus. The retention and unification of the team are critical.

Future of consulting. The US$1.45 bn acquisition of CAPCO was Thierry’s big bet. We don’t think that
the acquisition has been fruitful and has realized synergies. Lance Levy stepped down as CAPCO’s
CEO in March 2024 and was replaced by CAPCO old-timer Ann-Marie Lowland. The consulting
acquisitions have not worked well for Indian IT.

Faltering execution. These signs are visible in the increasing gap in deal wins and growth (run-off in
the existing book of business), a lack of mega-deal wins since 2020, and a few instances of wallet
share losses. Of course, the growth deterioration and weak margin profile capture the challenges.

The new CEO has a difficult job of turning around a multi-year underperforming ship in a weak demand
environment at a time of high leadership churn.

Weak TCV pares down hope of growth in FY2025

4QFY24 TCV of US$3.6 bn declined 15% yoy, while full-year TCV of US$14.9 bn declined 5.5% yoy in c/c.
The decline in ACV would be sharper. Large-deal TCV increased 17.4% yoy in c/c in FY2024. To its credit,
Wipro did win a couple of close to half a billion-dollar TCV deals with a couple of large accounts in
2QFY24, which likely aided growth in healthcare in 2HFY24. However, the decline in overall TCV when
peers such as TCS and Infosys report strong growth indicates a lack of sufficient new deals and/or loss
of share in renewals.

Broad-based underperformance poses significant challenge

Wipro does have a high exposure to discretionary services, courtesy consulting and ERD exposure, which
makes it vulnerable to cuts in discretionary spending. Despite the financial pressure, ERD investments
have held up relative to IT services. Consulting is under pressure, but the impact should have been
restricted largely to the BFSI vertical. However, the company has severely underperformed peers across
a broad range of verticals. Exhibit 13 indicates the extent of underperformance in FY2024 w.r.t TCS and
Infosys. BFSI, retail, telecom, manufacturing and E&U, accounting for 75% of revenue, have
underperformed. Arresting broad-based underperformance will be a tough task for the new CEO.

Patchy track record in account management needs to be addressed

The number of US$50 mn accounts has declined to 45 from 53 in the Mar-23 quarter. This is in contrast
with an increase in US$100 mn accounts by 3 to 22 in the same time frame. Wipro seems to be doing a
relatively decent job with top 20-30 accounts but struggling with accounts in the US$50-75 mn range.
Top 10 declined 0.6% in FY2024, while ex-top 10 declined 4.7%. Defending the share in key accounts is
critical to reduce revenue leakage.

Tightening of operations yields margin improvement to 16.4%

Despite a lack of leverage from growth and two months’ incremental impact of wage hike, Wipro
improved margins by 40 bps qoq to 16.4%, aided by several cost optimization measures: (1) utilization
bumped up to 86.9%, (2) reduction in subcon usage, (3) increase in offshoring, (4) rationalizing of tail
accounts and low margin business, especially in APMEA and (5) optimization of high-cost resources.
Some of the levers, such as utilization, are close to being maxed out. Subcon costs as a % of revenue is
at a multi-year low of 11%. Tight control on costs will continue in the near term until spending improves.
We expect 16.6% IT services EBIT margin in FY2025 (from 15.9% in FY2024) and 16.7% in FY2026.

Wipro
IT Services India Research
 23

Expect healthy EPS growth in FY2025 aided by absence of non-recurring charges

Wipro reported a G&A charge of Rs965 mn in 4QFY24, largely toward separation cost of Thierry. Overall
Wipro reported US$65 mn of non-recurring charges toward restructuring, rationalization and separation
costs in FY2024. These are unlikely to repeat in FY2025. We expect overall EBIT margin (including
products) to improve from 15.2% in FY2024 to 16.5% in FY2025. We estimate rupee EPS growth of 12.9%
in FY2025, followed by 7.2% growth in FY2026.

Sharp headcount decline; attrition a tad higher than peers at 14.2%

Wipro’s net headcount declined by 6,180 or 2.6% qoq to 234,054. In FY2024, Wipro’s headcount declined
by 24,516 or 9.5%, above c/c revenue decline of 4.4%. The current utilization rate is very high and
unsustainable. Growth in headcount is necessary for incremental revenue growth. The attrition rate was
flat qoq at 14.2%. The attrition rate is higher than TCS and Infosys.

FY2024 roundup–revenues impacted by demand weakness; healthy margin improvement

IT services revenues declined 4.4% in c/c in FY2024 due to a challenging demand environment and the
weakness in consulting businesses. Manufacturing, consumer, BFSI and communications verticals
declined by ~4-14% c/c yoy, while technology and ENU verticals declined at 0.8% and 1.6% c/c yoy,
respectively. Healthcare stood out with a healthy 8.6% c/c revenue growth in FY2024. Among geos,
APMEA, Americas 2 and Europe declined in 4.5-7.0% range in c/c, while Americas 1 eked out 0.2%
growth. Overall deal bookings stood at US$14.9 bn, down 5.5% in c/c. Wipro signed 56 large deals
(US$30 mn+ TCV deals), with a cumulative TCV of US$4.6 bn, up 17.4% in c/c.

Healthy increase in clients in US$100 mn+ and US$75 mn+ buckets by 3 each to 22 clients and 32 clients,
respectively. However, US$50 mn+ clients declined by 8 clients to 45 clients.

Reported EBIT margin (IT services) was up 50 bps to 16.1%, aided by (1) higher utilization ex-trainees
(up 360 bps to 84.8%); (2) focus on pruning low-margin engagements in APMEA; and (3) operational
excellence. Employee headcount declined by 24.5k employees to 234k employees (down 9.5% yoy). TTM
voluntary attrition (IT services ex DOP) was moderated to 14.2% (down 520 bps).

Cash generation was robust, with CFO at Rs176.2 bn, up 34.9% yoy and FCF at Rs169.7 bn, 45.9% growth
yoy. FCF/PAT was 152.7%.

Key highlights from earnings call

Srini’s commentary. Wipro will focus on leading with AI. It will expand on foundational base: (1) a
more global and diverse organization, (2) consulting exposure, driven by bold acquisitions such as
Capco and Rizing, and (3) a simplified operating model. Will invest by building capabilities and making
acquisitions.

Geo-wise commentary. Americas 2 was aided by Capco, BFSI and hi-tech. Germany and the UK were
impacted in Europe, while Switzerland and Southern Europe saw growth. In APMEA, Wipro is focusing
on high-value projects and is reducing low-margin accounts.

Consulting will be a strategic advantage. Will be the tip of the spear in BFSI. Wipro will provide end-
to-end services from consulting to managed services. Internal collaboration will be between Capco
and Wipro will be stronger.

Positive outlook for Capco. Capco’s revenue grew 6.6% qoq, while the order book grew 43.6%. Uptick
is secular across geos and service offerings and is broad based. Strong growth follows a few tough
quarters. Growth in 4Q was aided by low base due to furloughs.

Demand environment. Macro has not changed. Weak discretionary spending continues. Existing
programs are not replenishing at the same pace. Buoyancy of smaller deals has slowed down.

Large deals. Won 18 large deals versus 14 in the previous quarter. The focus is to increase the size
and frequency of large deals. Wipro will be more proactive in shaping deals.

Top client. Top client has changed to a different account and accounts for 3.8% of revenue. Growth
is driven by an account where Wipro won close to a US$500 mn deal in 2QFY24.

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Vertical-wise commentary. Capco will help BFSI. Consumer continues to be impacted by macro.
Growth momentum in healthcare will continue. Recovery in E&U and manufacturing requires
conversion of deals in the pipeline.

Capital allocation policy. Will return 45-50% of net profit over a cumulative 3-year period.

Exhibit 1: Wipro 4QFY24 results (IFRS) (Rs mn)

% chg.
4QFY24 4QFY24E 4QFY23 3QFY24 KIE yoy qoq FY2024 FY2023 % chg. FY2025E % chg.
IT services revenues (US$ mn) 2,657 2,641 2,823 2,656 0.6 (5.9) 0.0 10,805 11,160 (3.2) 10,793 (0.1)
- IT Services 220,796 219,562 231,762 221,508 0.6 (4.7) (0.3) 893,816 897,478 (0.4) 896,564 0.3
- IT Products 1,159 1,154 1,131 805 0.5 2.5 44.0 4,127 6,047 (31.8) 4,210 2.0
- reconciling items — — — — — — —
Total revenues 221,955 220,716 234,211 222,313 0.6 (5.2) (0.2) 900,664 910,118 (1.0) 900,773 0.3
Operating Income 35,373 35,146 37,577 32,865 0.6 (5.9) 7.6 136,098 139,606 (2.5) 148,681 9.2
- IT Services 36,195 35,135 37,666 35,426 3.0 (3.9) 2.2 141,827 140,783 0.7 148,512 4.7
- IT Products 143 12 (59) 114 (342.4) 25.4 (371) 265 (240.0) 168 (145.4)
- reconciling items (965) — (30) (2,675) (5,358) (1,442) —

Other income/ (expense) 3,451 2,767 2,603 2,660 24.7 32.6 29.7 11,344 8,108 39.9 16,931 49.3
Extraordinaries —
PBT 38,824 37,914 40,180 35,525 2.4 (3.4) 9.3 147,442 147,714 (0.2) 165,612 12.3
Income taxes (10,040) (9,099) (9,249) (8,515) 10.3 8.6 17.9 (36,089) (33,992) 6.2 (41,404) 14.7
PAT 28,784 28,814 30,931 27,010 (0.1) (6.9) 6.6 111,353 113,722 (2.1) 124,208 11.5
Equity in earnings of affiliates (202) 71 4 (4) (233) (57) —
Minority interest (236) — (190) (64) (669) (165) (736)
Net income 28,346 28,885 30,745 26,942 (1.9) (7.8) 5.2 110,451 113,500 (2.7) 123,228 11.6
EPS (Rs/share) 5.4 5.5 5.6 5.2 (2.0) (3.4) 5.0 20.9 20.7 0.9 23.6 12.6
Operating margin
IT Services 16.4 16.0 16.3 16.0 15.9 15.7 16.6
IT Products 12.3 1.0 (5.2) 14.2
Net Income Margin 12.8 13.1 13.1 12.1 12.3 12.5 13.7
Tax rates (%) 25.9 24.0 23.0 24.0 24.5 23.0 25.0

Notes:
(a) Wipro has guided for sequential IT services revenue decline of 1.5% to growth of 0.5% in Mar 2024 quarter

Source: Company, Kotak Institutional Equities estimates

Exhibit 2: Wipro: Key changes to FY2025-27 estimates

New Old Change (%)
Rs mn 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E
IT Services revenues (US$ mn) 10,793 11,294 12,014 10,797 11,408 (0.0) (1.0)
Revenue growth (%) (0.1) 4.6 6.4 0.1 5.7
IT services c/c revenue growth (%) (0.1) 4.6 6.4 0.1 5.7
IT services organic c/c revenue growth (%) (0.3) 4.6 6.4 (0.1) 5.7

Rupee/ US$ rate 83.1 84.3 85.0 83.5 84.5 (0.5) (0.3)
EBITDA margin (%) 19.9 19.8 19.5 19.6 19.6
EBIT margin (%) 16.6 16.7 16.6 16.3 16.5
EPS (Rs/share) 23.6 25.3 27.3 23.0 25.0 2.2 1.2

Source: Kotak Institutional Equities estimates

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Exhibit 3: Growth rates across verticals, geographies and service lines (Mar 2024)
Growth (%) Contribution to C/C growth (%)
Mar-24 QoQ YoY revenues (%) QoQ YoY
Revenues (US$ mn) 2,657 0.1 (6.4) 100.0 (0.3) (6.6)
Vertical split of revenues
Communications 101 (4.1) (20.1) 3.8 (4.8) (19.6)
Consumer 497 (0.4) (7.3) 18.7 (0.6) (7.4)
Energy, Natural Resources & Utilities 316 0.5 (9.2) 11.9 (0.3) (9.7)
Finance Solutions 890 2.6 (8.9) 33.5 2.1 (9.4)
Healthcare, Life Sciences & Services 375 1.3 9.0 14.1 1.2 9.0
Manufacturing 175 (1.0) (11.5) 6.6 (0.6) (10.8)
Technology 303 (5.9) (2.2) 11.4 (6.0) (2.1)
Strategic market units mix (%)
Americas 1 808 (1.7) — 30.4 (1.8) —
Americas 2 816 2.3 (5.7) 30.7 1.9 (6.0)
Europe 739 0.2 (11.3) 27.8 (0.1) (12.4)
APMEA 295 (1.5) (11.5) 11.1 (2.2) (9.4)
Customer concentration
Top customer 101 26.7 11.1 3.8
Top 5 customers 356 10.8 0.3 13.4
Top 10 customers 585 7.4 1.9 22.0
Non top 10 2,073 (1.8) (8.5) 79.5

Source: Company, Kotak Institutional Equities

Exhibit 4: Growth rates across verticals, geographies and service lines, FY2024
Growth (%) Contribution to C/C growth (%)
FY2024 YoY revenues (%) YoY
Revenues (US$ mn) 10,805 (3.8) 100.0 (4.4)
Vertical split of revenues
Communications 454 (14.7) 4.2 (14.5)
Consumer 2,031 (4.6) 18.8 (5.3)
Energy, Natural Resources & Utilities 1,275 (0.8) 11.8 (1.6)
Finance Solutions 3,609 (8.2) 33.4 (8.9)
Healthcare, Life Sciences & Services 1,426 8.9 13.2 8.6
Manufacturing 746 (3.8) 6.9 (4.3)
Technology 1,264 (0.4) 11.7 (0.8)
Strategic market units mix (%)
Americas 1 3,242 0.2 30.0 0.2
Americas 2 3,252 (6.0) 30.1 (6.1)
Europe 3,069 (4.3) 28.4 (7.0)
APMEA 1,243 (6.9) 11.5 (4.5)
Customer concentration
Top customer 324 (9.8) 3.0
Top 5 customers 1,405 (3.1) 13.0
Top 10 customers 2,312 (0.6) 21.4
Non top 10 8,493 (4.7) 78.6

Source: Company, Kotak Institutional Equities

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Exhibit 5: Strong revenue growth in top account; revenue decline in non-top 10 accounts
4 qtr CQGR
Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 Dec-23 Mar-24 (%)
Revenue(US$ mn)
Top client 84 87 88 90 90 91 86 81 80 101 2.7
Top 5 clients 335 351 356 366 375 355 347 334 321 356 0.1
Top 10 clients 533 558 573 586 598 574 570 559 545 585 0.5
ex- Top 10 clients 2,106 2,164 2,183 2,231 2,223 2,266 2,209 2,154 2,112 2,073 (2.2)
Growth (qoq %)
Top client 5.6 3.1 1.3 2.2 0.1 0.6 (5.2) (5.5) (2.1) 26.7
Top 5 clients 4.0 4.7 1.3 3.0 2.5 (5.4) (2.1) (3.9) (3.7) 10.8
Top 10 clients 2.8 4.6 2.7 2.2 2.1 (4.1) (0.7) (1.9) (2.6) 7.4
ex- Top 10 clients 2.2 2.7 0.9 2.2 (0.4) 1.9 (2.5) (2.5) (2.0) (1.8)
Client buckets
US$ 100 mn+ 17 19 20 19 19 19 21 22 22 22
US$ 75 mn+ 29 29 30 29 29 29 28 28 31 32
US$ 50 mn+ 47 50 50 52 52 53 51 51 46 45

Notes
(a) IT services segment has been reclassifed and includes ISRE business from Jun-22 quarter

Source: Company, Kotak Institutional Equities

Exhibit 6: IT services EBIT margin increased 40 bps sequentially to 16.4%

25

23

21

19

17
16.4
15

13
Jun-14

Jun-16

Jun-18

Jun-20

Jun-22

Jun-23
Jun-13

Jun-15

Jun-17

Jun-19

Jun-21
Dec-13

Dec-14

Dec-15

Dec-16

Dec-17

Dec-18

Dec-20

Dec-22
Dec-19

Dec-21

Dec-23

Source: Company, Kotak Institutional Equities

Sharp difference in margin profile of Europe and APMEA versus Americas geos
Exhibit 7: Business unit-wise margin performance (Mar 2024)
Mar-24 EBIT Change (bps) C/C growth Contribution
Strategic business units margin (%) QoQ YoY QoQ YoY to revenues (%)
Americas 1 20.9 (305) 71 (1.8) — 30.4
Americas 2 23.3 50 73 1.9 (6.0) 30.7
Europe 12.9 7 (338) (0.1) (12.4) 27.8
APMEA 13.9 10 275 (2.2) (9.4) 11.1

Source: Company, Kotak Institutional Equities

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Revenue declines by 6.6% yoy

Exhibit 8: Revenue growth trend yoy, %

YoY constant currency revenue growth (%)

35
28.828.528.5
30
25 21.3
20 17.2
12.9
15 9.5 10.4
7.8 7.2 6.2 7 6.9 5.9 6.5
10 6.3 5.2 5.1
3.4 2.8 3 2.5 2.4 3.8 3.3 2.6
5 0.5
-2 -2.8
0 -4.4-3.4 -4.8
-6.9-6.6
(5)
(10)
Jun-16

Jun-19

Jun-21

Jun-22
Jun-17

Jun-18

Jun-20

Jun-23
Sep-17

Sep-19

Sep-22
Sep-16

Sep-18

Sep-20

Sep-21

Sep-23
Dec-15

Dec-17

Dec-20

Dec-22
Dec-16

Dec-18

Dec-19

Dec-21

Dec-23
Mar-16

Mar-18

Mar-19

Mar-21

Mar-23

Mar-24
Mar-17

Mar-20

Mar-22
Source: Company, Kotak Institutional Equities

TCV of US$1,191 mn increased 10% yoy in US$ terms

Exhibit 9: Trend in large deal TCV

Large deal TCV (US$ mn) YoY growth (%)

1,600 200
1,400 167.4
1,400 1,300
1,200 1,198 1,191 150
1,200 1,123 1,083
978 100
1,000 909

800 715 713 82.3 50

580 600 57.1 63.0
600
405 22.9 0
400 6.7 10.0
(7.1)
(50)
200
(50.0)
- (71.1) (100)
Jun-22
Jun-21

Jun-23
Sep-21

Sep-22

Sep-23
Dec-20

Dec-21

Dec-23
Dec-22
Mar-21

Mar-23
Mar-22

Mar-24

Source: Company, Kotak Institutional Equities

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Total TCV of US$3.6 bn declined 15% in c/c terms on yoy basis

Exhibit 10: Trend in total TCV

Total TCV (US$ mn) Quarterly book-to-bill

5,000 1.60
4,333 4,172
4,500 1.55
3,724 3,800 3,791
4,000 3,607
1.5 1.50
3,500
3,000 1.45
1.5
2,500 1.40
1.4
2,000 1.4 1.35
1,500 1.4
1.3 1.30
1,000
500 1.25
- 1.20

Jun-23

Sep-23
Dec-22

Dec-23
Mar-23

Mar-24
Source: Company, Kotak Institutional Equities

BFSI vertical revenue declined 9.4% yoy despite strong qoq growth in Capco
Exhibit 11: BFSI: Revenue growth trend

BFSI c/c yoy growth (%)

60
47.448.7
50 42.9
40 31.3
30 24.3
17.515.9
20 14.514.514.4 16 14.4
10.8 11.2 9.6
7.8 8.1 5.9
10 5.5 2.8 4.3 3.6
1 -1.3 0.6
-3.3 -2.5 -4.3
0 -6.9
-9.5 -9.4
-13.2
(10)

(20)
Jun-18

Jun-21
Jun-16

Jun-17

Jun-19

Jun-20

Jun-22

Jun-23
Sep-16

Sep-18

Sep-19

Sep-21

Sep-22
Sep-17

Sep-20

Sep-23
Dec-16

Dec-19

Dec-22

Dec-23
Dec-17

Dec-18

Dec-20

Dec-21
Mar-17

Mar-18

Mar-20

Mar-21

Mar-24
Mar-19

Mar-22

Mar-23

Source: Company, Kotak Institutional Equities

Wipro has underperformed TCS or Infosys in FY2024 in multiple verticals aggregating to 75% of revenue
Exhibit 12: Comparison of vertical-wise revenue growth in FY2024 across Wipro, TCS and Infosys
C/C revenue growth in FY2024 Wipro
Verticals Infosys TCS Wipro revenue mix (%)
BFSI (6.5) (1.0) (8.9) 33.4
Retail 2.2 1.8 (5.3) 18.8
Telecom (3.5) (2.6) (14.5) 4.2
Manufacturing 13.4 7.3 (4.3) 6.9
Healthcare 9.7 4.8 8.6 13.2
E&U 3.6 12.6 (1.6) 11.8
Technology 1.9 (2.3) (0.8) 11.7

Source: Company, Kotak Institutional Equities

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Consumer vertical will be slow to recover due to macro pressures

Exhibit 13: Consumer: Revenue growth trend

Consumer BU c/c yoy growth (%)

50
37.737.9
40 33.5 34.6

30 24.422.2

14.8 16.8
20 12.1 11.1
6.9 5.6 7.7 10 7.7 6.1 6.4
10 3.7 2.9 4.5 4.8 2.9
0.5 1.4 2.2 1.5
-2.5 -2.1 -3.6
0 -6.7 -8.1 -7.4

(10)

(20)
Jun-17

Jun-18

Jun-21

Jun-22
Jun-16

Jun-19

Jun-20

Jun-23
Sep-18

Sep-19

Sep-22

Sep-23
Sep-16

Sep-17

Sep-20

Sep-21
Dec-16

Dec-19

Dec-20

Dec-23
Dec-17

Dec-18

Dec-21

Dec-22
Mar-17

Mar-18

Mar-21

Mar-24
Mar-19

Mar-20

Mar-22

Mar-23
Source: Company, Kotak Institutional Equities

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Healthcare in Americas 2 and BFSI in APMEA are the only bright spots among various geo-vertical
combinations yoy
Exhibit 14: Geo-vertical revenue performance analysis, Mar-24 quarter
US$ revenues Americas 1 Americas 2 Europe APMEA Total
BFSI 6 496 279 108 889
Health 311 0 49 14 375
Consumer 306 19 127 46 498
Communications 30 4 32 36 102
Energy, Utilities and Resources 8 132 119 56 315
Manufacturing 0 90 72 14 176
Technology 149 74 60 22 304
Total 810 816 739 295 2,659
% revenues Americas 1 Americas 2 Europe APMEA Total
BFSI 0.2 18.7 10.5 4.1 33.4
Health 11.7 0.0 1.9 0.5 14.1
Consumer 11.5 0.7 4.8 1.7 18.7
Communications 1.1 0.1 1.2 1.3 3.8
Energy, Utilities and Resources 0.3 5.0 4.5 2.1 11.9
Manufacturing 0.0 3.4 2.7 0.5 6.6
Technology 5.6 2.8 2.3 0.8 11.4
Total 30.4 30.7 27.8 11.1 100.0
% QoQ growth Americas 1 Americas 2 Europe APMEA
BFSI (1.6) 1.9 3.9 1.4
Health 3.4 (29.7) (8.0) 0.5
Consumer 1.3 14.7 (2.8) (5.6)
Communications (15.6) (0.3) 2.3 2.2
Energy, Utilities and Resources 92.4 4.9 (1.8) (9.3)
Manufacturing 25.5 (2.1) (1.1) 11.9
Technology (14.0) 4.1 3.9 6.1
Total (1.4) 2.3 0.4 (1.1)
US$ QoQ incremental revenues Americas 1 Americas 2 Europe APMEA
BFSI (0) 9 11 2 21
Health 10 (0) (4) 0 6
Consumer 4 2 (4) (3) (0)
Communications (6) (0) 1 1 (4)
Energy, Utilities and Resources 4 6 (2) (6) 2
Manufacturing 0 (2) (1) 2 (1)
Technology (24) 3 2 1 (18)
Total (12) 19 3 (3) 6
% YoY growth Americas 1 Americas 2 Europe APMEA
BFSI (43.7) (6.2) (13.1) 6.1
Health 15.0 (44.2) (14.4) 6.1
Consumer (8.9) 35.9 (1.2) (12.4)
Communications (18.0) (9.0) (25.8) (16.6)
Energy, Utilities and Resources 291.2 (1.8) (8.6) (27.4)
Manufacturing (52.5) (10.9) (15.1) 33.4
Technology (4.3) (4.8) 3.6 19.3
Total (0.2) (5.3) (10.3) (6.5)
US$ YoY incremental revenues Americas 1 Americas 2 Europe APMEA Total
BFSI (5) (33) (42) 6 (73)
Health 41 (0) (8) 1 33
Consumer (30) 5 (1) (7) (33)
Communications (7) (0) (11) (7) (25)
Energy, Utilities and Resources 6 (2) (11) (21) (29)
Manufacturing (0) (11) (13) 4 (20)
Technology (7) (4) 2 3 (5)
Total (1) (45) (85) (21) (152)

Source: Company, Kotak Institutional Equities

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Exhibit 15: Key personnel exits and key external hires in the last several quarters
Period Name Designation Previous Role
Key exits at Wipro
Apr-24 Thierry Delaporte Not available CEO
Apr-24 Lance Levy Strategic Advisor, Capco CEO, Capco
Dec-23 Mahesh Raja Chief Growth Officer, Global Industries, Ness Engineering SVP, BU head, Financial Services, Americas
Dec-23 Barath Narayanan Global head, BFSI unit and Europe region, Persistent Global head, Wipro digital and cloud services
Dec-23 Stephanie Trautman Not available Chief Growth Officer
Sep-23 Jatin Dalal CFO, Cognizant CFO, Wipro
Sep-23 Turki Bin Nader Country head, Saudi Arabia, Capgemini Country head, GM, Arabia
Aug-23 Hari Raja Partner, EY Global Salesforce practice head
Jun-23 Mohammed Haque SVP, Global Large Deals Lead and BU Head, Life Sciences, Cognizant Head, Healthcare and Medical devices
Jun-23 Ashish Saxena President and SBU head, Retail, manufacturing, Innova Head, Manufacturing & hi-tech
Mar-23 Satya Easwaran Partner, Arthur D. Little Country head, India, Wipro
Feb-23 Rajan Kohli CEO, CitiusTech President, iDEAS service line
Feb-23 Nithin V. Jaganmohan CFO, Xoriant CFO, Americas Two
Jan-23 Kamini Shah CFO, Birlasoft CFO, Americas One
Oct-22 Angan Guha CEO, Birlasoft Head, Americas, Wipro
Sep-22 Sanjeev Singh CEO, CMS IT services COO, Wipro
Sep-22 Douglas Silva Head, Latin America Financial Services, AWS Country head, Brazil, Wipro
Sep-22 Tomaoki Takeuchi Individual consultant Country head, Japan, Wipro
Sep-22 Sarah Adam-Gedge Non executive Director, Kinetic IT Country head, ANZ, Wipro
Sep-22 Mohammed Areff Director, Global SI alliance, MEA, Microsoft Country head, Middle East, Wipro
Key external hires
Dec-23 John van Geel SVP, Head of Wipro Digital and Cloud SVP, Global COO, Eviden
Aug-23 Brijesh Singh SVP, Global AI head AI strategy offering leader, Deloitte
Jul-23 Caroline Monfrais Head of consulting, Europe Chief Strategy Officer, EMEA, FTI Consulting
Apr-23 Anil Chenchah CEO, APMEA CEO, Capgemini Business Services
Apr-23 Sanjeev Jain Head, Business Operations Head, Workforce Management & Academy, Kyndryl
Apr-23 Ritesh Talapatra SVP, head, Capital markets and insurance, NA Managing Director, Optum, ex-Capgemini
Feb-23 Ajit Mahale Chief Delivery Officer SVP, Delivery head for multiple verticals
Nov-22 Ankush Saigal Head, Telecom, Southeast Asia Sales leader, CMT, Accenture
Nov-22 Simmi Dhamija COO, APMEA Chief Transformation Officer, Tech Mahindra
Nov-22 Warren Zambelli Country Head, MD, Africa Advisors Division Lead, Sub-Saharan Africa, Mastercard
Nov-22 Frederic Abecassis Head, BFSI, Southeast Asia Strategic deals leader, Capgemini Invent
Nov-22 Christopher Smith Country Head, MD, ANZ Executive, Telstra Purple
Oct-22 Amit Choudhary COO COO and VP, Financial services, Capgemini
Sep-22 Dhruv Anand Country Head, MD, Japan Head, Manufacturing & hi-tech, Japan, TCS
Aug-22 Tejal Patil SVP, General Counsel Senior Legal Advisor, OYO
Aug-22 Wagner Jesus Country head, GM, Brazil Internal promotion, Wipro, ex-TCS

Source: Company, Kotak Institutional Equities

Exhibit 16: Travel expense as a % of revenue reduces a tad to 1.5%

Travel expense (Rs bn) Travel expense as a % of revenues

6.0 4.0
3.4
3.2 3.2
5.0
3.2 3.1 3.0 3.1 3.0 3.2 3.5
2.9 2.8
2.5 3.0
4.0
2.5
2.0
1.8 1.8
3.0 1.6 1.6 1.5 2.0
1.4 1.3
4.7 4.6 5.0 4.6 4.2
4.5 4.4 4.5 4.5 1.1 1.5
2.0 4.4 4.1 4.4 4.2 4.0 0.9 0.9 4.0
0.8 0.9 0.8 0.8 0.8 3.8 3.5 3.3
3.1 3.0 1.0
1.0 2.3 2.0
1.3 1.3 1.4 1.3 1.4 1.6 0.5
- -
Jun-18

Jun-20

Jun-21

Jun-23
Jun-17

Jun-19

Jun-22
Sep-19

Sep-22
Sep-17

Sep-18

Sep-20

Sep-21

Sep-23
Dec-17

Dec-20

Dec-23
Dec-18

Dec-19

Dec-21

Dec-22
Mar-19

Mar-20

Mar-22

Mar-23
Mar-18

Mar-21

Mar-24

Source: Company, Kotak Institutional Equities

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Exhibit 17: Subcontracting costs as a% of revenue declined 60 bps sequentially to 11%

Subcontracting costs as a % of revenue

18
17
16
15
14
13
12
11 11.0
10
9
8
Jun-14

Jun-15

Jun-17

Jun-19

Jun-20

Jun-22

Jun-23
Jun-13

Jun-16

Jun-18

Jun-21
Dec-14

Dec-16

Dec-17

Dec-19

Dec-20

Dec-21

Dec-22
Dec-13

Dec-15

Dec-18

Dec-23
Source: Company, Kotak Institutional Equities

Exhibit 18: Voluntary attrition flat qoq to 14.2% on LTM basis

Voluntary Attrition (ttm %, excluding BPO)

25
23.8
22.7 23 22.9
22
21.2
20.5
19 19.4
17.6 17.3
17
16 15.5
15.7 15.5
14.7
14.2
14.2
13 13
12.1
11 11
10
Jun-20

Jun-22
Jun-19

Jun-21

Jun-23
Sep-19

Sep-21

Sep-23
Sep-20

Sep-22
Dec-20

Dec-22
Dec-19

Dec-21

Dec-23
Mar-21

Mar-23
Mar-20

Mar-22

Mar-24

Source: Company, Kotak Institutional Equities

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Exhibit 19: List of acquisitions by Wipro since 2012

Date Target Country Business Description Consideration (mn) Sales (mn) Price/Sales
1 Feb-24 Aggne (60% stake) US Duck Creek implementation specialist US$66 US$17.9 6.1
2 Apr-22 Rizing US SAP consulting firm US$540 US$200 2.6
3 Apr-22 Convergence Acceleration Solutions US Telecom consulting and program management $80.0 $28.1 2.8
4 Dec-21 Edgile US Cybersecurity consulting provider US$230 $44.1 5.2
5 Dec-21 LeanSwift US Infor System Integrator US$21 $18.0 1.2
6 Apr-21 Ampion Australia Cybersecurity, DevOps & quality eng services US$117 US$85.5 1.4
7 Mar-21 Capco UK Global management and technology consultancy US$1450 US$720 2.0
8 Oct-20 Encore Theme India Finastra trade finance solutions' implementation INR 950 INR 545 1.7
9 Oct-20 Eximius Design US VLSI and systems design engineering services US$80 US$35 2.3
10 Jul-20 4C Belgium Salesforce services EUR 68 EUR 31.8 2.1
11 Jul-20 IVIA Brazil IT services provider in Brazil US$22.4 US$13.5 1.7
12 Feb-20 Rational Interaction USA CRM, digital marketing US$52 NA NA
13 Jun-19 International TechneGroup US Engineering services firm US$45 US$23.2 1.9
14 Dec-18 Syfte Australia Strategic design consultancy NA NA NA
15 Oct-17 Cooper Software Inc US Design and User Experience firm US$8.5 US$8 1.1
16 Jun-17 IBM IP deal US IP partnership US$90 US$30 3.0
17 Jan-17 InfoSERVER Brazil A specialized IT services provider for BFSI in Brazil US$8.7 US$11 0.8
18 Oct-16 Appirio US Cloud services provider US$500 US$196 2.6
19 Feb-16 HealthPlan Services US BPaaS provider US$460 US$223 2.1
20 Dec-15 celllent AG Germany IT services $73.5 $87.0 0.8
21 Jul-15 Designit Denmark Strategic design firm $85.0 $27.0 3.1
22 Mar-15 Drivestream Inc US Consulting in Oracle cloud services US$5 NA NA
23 Jan-14 Opus Capital Markets Consultants US Risk management solutions for mortgage industry US$75 $43.0 1.7
24 Apr-12 Promax Applications Group Australia Trade promotion planning and optimization US$36.75 US$16.8 2.2

Source: Company, Kotak Institutional Equities

Exhibit 20: Key model assumptions, March fiscal year ends, 2020-27E
2020 2021 2022 2023 2024E 2025E 2026E 2027E
INR/USD rate 72.0 74.5 75.5 80.4 82.7 83.1 84.3 85.0
Revenues (US$ mn) 8,541 8,358 10,563 11,307 10,855 10,844 11,345 12,066
IT services revenues (US$ mn) 8,256 8,137 10,356 11,160 10,805 10,793 11,294 12,014
% growth 0.8 (1.4) 27.3 7.8 (3.2) (0.1) 4.6 6.4
C/c revenue growth (%) 3.9 (2.3) 26.9 11.5 (3.6) (0.1) 4.6 6.4
C/c revenue growth (organic %) 3.7 (3.2) 14.2 7.2 (3.9) (0.3) 4.6 6.4
IT services EBITDA margin (%) 21.4 24.8 21.5 19.4 19.7 19.9 19.8 19.5
IT services EBIT margin (%) 17.9 20.3 17.5 15.7 15.9 16.6 16.7 16.6
Headcount 182,886 197,997 248,455 271,136 234,054 244,364 260,785 280,588
Employee addition 11,461 15,111 50,458 22,681 (37,082) 10,310 16,421 19,803

Source: Company, Kotak Institutional Equities estimates

Wipro
IT Services India Research
 34

Exhibit 21: Key operating metrics

Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 Dec-23 Mar-24
IT services revenues (US$ mn) 2,756 2,817 2,821 2,840 2,779 2,713 2,656 2,657
Vertical split of revenues (%)- including ISRE
Communications 4.9 4.8 4.6 4.5 4.6 4.3 4.0 3.8
Consumer 18.6 19.0 19.0 18.9 18.7 18.7 18.8 18.7
Energy, Natural Resources & Utilities 11.1 11.2 11.4 12.2 12.0 11.6 11.8 11.9
BFSI 35.5 35.3 35.0 34.4 33.9 33.6 32.7 33.5
Healthcare, Life Sciences & Services 11.4 11.4 11.9 12.1 12.2 12.7 13.9 14.1
Manufacturing 6.7 6.9 6.9 7.0 7.3 7.0 6.7 6.6
Technology 11.7 11.5 11.2 10.9 11.3 12.1 12.1 11.4
Strategic market units mix (%) - including ISRE
Americas 1 28.7 28.8 29.1 28.5 28.8 29.8 31.0 30.4
Americas 2 31.1 31.1 30.6 30.5 30.0 29.9 30.0 30.7
Europe 28.2 28.0 28.8 29.3 29.5 28.6 27.7 27.8
APMEA 12.0 12.1 11.5 11.7 11.7 11.7 11.3 11.1
Client metrics- including ISRE
Customer size distribution (TTM)
Million dollar clients of which 719 745 755 766 769 774 750 741
> US$100 mn 20 19 19 19 21 22 22 22
>US$75 mn 30 29 29 29 28 28 31 32
>US$50 mn 50 52 52 53 51 51 46 45
>US$20 mn 120 122 119 117 123 122 121 116
>US$10 mn 196 199 204 210 207 207 203 205
>US$5 mn 313 314 312 315 319 313 305 301
>US$3 mn 427 434 440 436 444 437 430 409
>US$1 mn 719 745 755 766 769 774 750 741
Revenue from new customers
Repeat business (%) 98.7 97.4 96.9 96.6 99.6 99.1 98.8 97.8
New client additions 164 128 82 63 65 49 55 60
Total active customers 1,475 1,514 1,530 1,479 1,444 1,393 1,349 1,371
Customer concentration (%)- including ISRE
Top customer 3.2 3.2 3.2 3.2 3.1 3.0 3.0 3.8
Top 5 customers 12.9 13.0 13.3 12.5 12.5 12.3 12.1 13.4
Top 10 customers 20.8 20.8 21.2 20.2 20.5 20.6 20.5 22.0

Employees- including ISRE

Employees (IT services) 262,049 262,626 262,109 258,570 249,758 244,707 240,234 234,054
Sales and support (IT servuces) 17,831 16,664 17,089 16,999 16,942 16,778 15,833 15,601

Total bookings TCV (US$ mn) 4,333 4,172 3,724 3,800 3,791 3,607
Large deal TCV (US$ mn) 1,123 713 978 1,083 1,198 1,300 909 1,191
Utilization (%) (a)
Global IT Services Gross (b) 72.7 72.3 72.3 74.0 NA NA NA NA
Global IT Services excl IFOX-Net 83.8 79.8 79.7 81.7 83.7 84.5 84.0 86.9
Attrition (%)- including ISRE
IT services excluding DOP (ttm) 23.0 22.9 21.2 19.4 17.3 15.5 14.2 14.2
DOP (Post training quarterly) 11.4 10.3 8.7 9.0 9.2 9.8 8.3 8.9
Revenues by project type (%) - including ISRE
Fixed price 59.9 58.7 59.4 59.6 59.7 58.4 59.9 58.9
Time and material 40.1 41.3 40.6 40.4 40.3 41.6 40.1 41.1
Onsite-offshore revenue split (%)- including ISRE
Onsite 41.1 40.9 40.8 40.1 40.5 40.1 40.2 39.6
Offshore 58.9 59.1 59.2 59.9 59.5 59.9 59.8 60.4

Notes:
(a) Excluding DOP, Designit, Cellent, Cooper, InfoServer, Topcoder, Rational, ITI, IVIA, 4C, Eximius, Encore, Capco, Ampion, Edgile, LeanSwift,
CAS and Rizing

Source: Company, Kotak Institutional Equities

Wipro
IT Services India Research
 35

Exhibit 22: Profit model, balance sheet, cash model of Wipro Limited, March fiscal year-ends, 2020-27E (Rs mn)
2020 2021 2022 2023 2024E 2025E 2026E 2027E
Profit model
Revenues 614,545 622,344 797,475 909,348 897,942 900,773 955,775 1,025,579
Cost of revenues (including depreciation) (436,085) (423,205) (555,872) (645,446) (631,496) (624,275) (662,529) (710,683)
Gross profit 178,460 199,139 241,603 263,902 266,446 276,498 293,247 314,896
SG&A expenses (including depreciation) (72,730) (76,085) (101,316) (124,296) (130,349) (127,817) (134,141) (145,108)
EBIT 105,730 123,054 140,287 139,606 136,097 148,681 159,106 169,788
Other income 16,753 15,824 10,932 8,108 11,344 16,931 21,443 25,793
Pre-tax profits 122,483 138,878 151,219 147,714 147,441 165,612 180,548 195,581
Provision for tax (24,799) (30,345) (28,946) (33,992) (36,089) (41,404) (46,943) (51,829)
PAT 97,684 108,533 122,273 113,722 111,352 124,208 133,606 143,752
Equity in earnings of affiliates, minority interest (net) (466) (586) (81) (222) (902) (981) (1,066) (1,160)
PAT from continuing operations 97,218 107,947 122,192 113,500 110,450 123,228 132,539 142,592
EPS (Rs) 16.6 19.1 22.3 20.7 20.9 23.6 25.3 27.3
Dividend per share (Rs ) 1.0 1.0 6.0 1.0 1.0 1.0 9.0 9.0
Balance Sheet
Shareholders funds 557,458 553,095 658,158 781,164 749,883 867,880 953,341 1,048,855
Borrowings 17,478 20,971 71,640 77,225 76,262 76,262 76,262 76,262
Minority interest 1,875 1,498 515 589 1,340 2,076 2,885 3,776
Other liabilities 23,858 25,830 40,540 49,091 72,516 72,516 72,516 72,516
Total liabilities 600,669 601,394 770,853 908,069 900,001 1,018,734 1,105,005 1,201,409
Net fixed assets 97,868 101,612 109,768 107,361 99,563 101,368 101,993 104,575
Goodwill & intangibles 147,374 152,212 290,544 351,015 348,750 342,073 336,508 332,057
Cash and bank balances 343,436 356,076 364,600 421,832 429,753 551,294 635,705 725,297
Net current assets excluding cash (24,627) (47,996) (28,303) (6,906) (5,875) (3,616) 2,466 10,180
Other assets 36,618 39,490 34,244 34,767 27,810 27,616 28,333 29,300
Total assets 600,669 601,394 770,853 908,069 900,001 1,018,734 1,105,005 1,201,409
Cashflow statement
Operating profit before working capital changes 127,829 150,456 173,817 175,515 175,094 178,776 188,975 199,385
Tax paid (6,384) (24,915) (25,686) (30,218) (15,360) (41,404) (46,943) (51,829)
Change in working capital/other adjustments (23,855) 22,922 (36,488) (14,556) 18,051 (2,309) (7,056) (8,951)
Capital expenditure (22,227) (18,824) (19,417) (14,288) (6,488) (25,223) (24,930) (27,728)
Acquisitions (2,544) (9,873) (129,846) (47,339) (5,775) — — —
Other income 19,603 16,293 8,840 7,656 9,658 16,931 21,443 25,793
Free cash flow 92,422 136,059 (28,780) 76,770 175,180 126,771 131,489 136,670
Margins and ratios
Consolidated gross profit margin (%) 29.0 32.0 30.3 29.0 29.7 30.7 30.7 30.7
Consolidated EBIT margin (%) 17.2 19.8 17.6 15.4 15.2 16.5 16.6 16.6
IT services EBIT margin (%) 17.9 20.3 17.5 15.7 15.8 16.6 16.7 16.6
RoAE (%) 17.3 19.4 20.2 15.8 14.4 15.2 14.6 14.2
RoACE (%) 15.0 17.3 18.7 14.9 13.4 13.8 12.9 12.5

Source: Company, Kotak Institutional Equities estimates

Wipro
IT Services India Research
 RESULT

Hindustan Zinc (HZ) SELL

Metals & Mining
CMP(₹): 399 Fair Value(₹): 310 Sector View: Cautious NIFTY-50: 22,147 April 20, 2024

Strong metal prices offset weak FY2025 volume guidance Company data and valuation summary
HZ’s 4QFY24 operating earnings came in marginally ahead of our estimates, Stock data
led by lower costs. Zinc-adjusted CoP further decreased to US$1,051/ton
CMP(Rs)/FV(Rs)/Rating 399/310/SELL
(down 13% yoy and 4% qoq) on higher linkage coal supply, better metal
52-week range (Rs) (high-low) 438-285
grades and operating leverage. FY2025 operational guidance suggests
Mcap (bn) (Rs/US$) 1,685/20.2
muted volume growth and no incremental cost reduction. We upgrade our
ADTV-3M (mn) (Rs/US$) 751/9.0
zinc price assumptions as supply curtailments have pushed the market
balance in deficit for CY2024E. We increase EBITDA estimates by 9.2%/7.5% Shareholding pattern (%)
for FY2025/26E and FV to Rs310 on higher metal prices. Maintain SELL.

4QFY24 earnings: Lower costs lead to improved earnings 29.8

HZ’s 4QFY24 EBITDA of Rs36.5 bn (down 14% yoy, up 3.6 qoq) was higher than
our estimate of Rs35.2 bn on account of lower costs. EBITDA margin increased 1.7
2.9 64.9
0.0
0.7
10 bps sequentially to 48.3%, led by lower costs on better grades, lower
commodity prices and higher supply of linkage coal, partially offset by lower
zinc and lead prices in 4QFY24. Zinc/silver volumes improved by 2.3%/3.8%, Promoters FPIs MFs BFI s Retail Others

but lead volumes declined by 1.9% yoy. Zinc-adjusted CoP further decreased to

Private Circulation Only. This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities Act of 1933
Price performance (%) 1M 3M 12M
US$1,051/ton (down 13.4% yoy and 4% qoq), owing to lower input commodity
Absolute 36 27 23
prices, better grades, soft coal prices and higher linkage coal supply.
Rel. to Nifty 34 24 (3)
Rel. to MSCI India 33 22 (12)
Muted guidance for FY2025
Management has guided for mined metal volumes of 1.088 mn tons (at mid- Forecasts/Valuations 2024 2025E 2026E
point), suggesting an underwhelming 5% yoy growth after flat volumes yoy in EPS (Rs) 18.4 23.3 23.4
FY2024. Further, silver volume guidance suggests a mere 2.2% yoy volume EPS growth (%) (26.2) 26.8 0.3

increase in FY2025E. The cost guidance at US$1,075/ton versus US$1,051/ton P/E (X) 21.7 17.1 17.1

in 4QFY24 suggests that cost tailwinds are now in the base. The fumer project P/B (X) 11.1 11.1 11.1

and the alloy plant are gradually stabilizing and are expected to ramp up to rated EV/EBITDA (X) 12.2 10.1 9.8

capacity in FY2025E. We are building in volume growth of 4.6%/4.2% yoy for RoE (%) 55.2 64.8 65.0

FY2025/26E. Div. yield (%) 3.3 5.8 5.9

Sales (Rs bn) 289 328 338
Zinc: Supply curtailments to shift the market balance to deficit in CY2024 EBITDA (Rs bn) 137 167 171

Zinc has seen multiple supply-side curtailments in the last few months, pushing Net profits (Rs bn) 78 98 99

the CY2024 market balance into a mild deficit versus a surplus earlier. Mine Source: Bloomberg, Company data, Kotak Institutional Equities estimates
supply has seen cuts due to lower prices in 1QCY24, whereas a few key projects,
Prices in this report are based on the market close of
such as Ozernoye, have resulted in lower refined output. We estimate a 0.4% April 19, 2024
yoy reduction in refined metal production in CY2024 and 1.6% yoy demand
growth to result in a 70k ton deficit for the zinc market in CY2024 versus a 200k
ton surplus in CY2023. However, with recovery in supply and the smelter ramp-
up, we forecast the market to return to surplus in CY2025. We increase our Zinc
LME price forecast by 8%/5% to US$2,700/2,625/ton for FY2025/26E, but lower
than the spot price at US$2,850/ton. Related Research

→ Hindustan Zinc: Cost-led earnings beat

We increase Fair Value to Rs310 (from Rs270); maintain SELL
→ Hindustan Zinc: In-line 2Q, muted metal prices
We increase HZ’s EBITDA by 9.2%/7.5% for FY2025/26E, mainly led by higher
keep earnings
→ Hindustan range-bound
Zinc: In-line quarter; muted
commodity prices, partly offset by lower volumes. We increase our FV to Rs310
commodity prices to stagnate earnings
(from Rs270) on higher earnings and adjusted for dividends at an unchanged
7X EV/EBITDA. Maintain SELL, given expensive 9.8X EV/EBITDA FY2026E. Full sector coverage on KINSITE

Sumangal Nevatia Siddharth Mehrotra

[email protected] [email protected]
+91-22-4336-0861 +91-22-4336 0863
 37

Exhibit 1: Interim results of HZ, March fiscal year-ends, 4QFY24 (Rs mn)
(% chg.)
4QFY24 4QFY24E 4QFY23 3QFY24 KIE yoy qoq FY2024 FY2023 (%chg) FY2025E FY2024 (%chg)
Net sales 75,490 75,809 85,090 73,100 (0.4) (11.3) 3.3 289,320 340,980 (15.2) 327,910 289,320 13.3
Total expenditure (39,000) (40,536) (42,540) (37,890) (3.8) (8.3) 2.9 (152,760) (165,920) (7.9) (161,110) (152,760) 5.5
Inc/(Dec) in stock 2,070 — 2,530 480 — — — —
Mining and manufacturing (16,430) (18,336) (19,630) (16,170) (10.4) (16.3) 1.6 (63,600) (77,790) (18.2) (66,434) (63,600) 4.5
Staff cost (2,270) (1,970) (2,180) (1,970) 15.2 4.1 15.2 (8,280) (8,450) (2.0) (8,860) (8,280) 7.0
Other expenditure (22,370) (20,230) (23,260) (20,230) 10.6 (3.8) 10.6 (80,880) (79,680) (85,816) (80,880)
EBITDA 36,490 35,273 42,550 35,210 3.5 (14.2) 3.6 136,560 175,060 (22.0) 166,800 136,560 22
OPM (%) 48.3 46.5 50.0 48.2 47.2 51.3 50.9 47.2
Other income 2,730 2,960 3,540 2,960 (7.8) (22.9) (7.8) 10,740 13,790 (22.1) 9,547 10,740 (11.1)
Interest (2,620) (2,430) (1,760) (2,430) 7.8 48.9 7.8 (9,550) (3,330) (8,069) (9,550)
Depreciation (9,370) (9,050) (9,280) (9,050) 3.5 1.0 3.5 (34,680) (32,640) 6.3 (36,757) (34,680) 6.0
Pretax profits 27,230 26,753 35,050 26,690 1.8 (22.3) 2.0 103,070 152,880 (32.6) 131,521 103,070 28
Tax (6,850) (6,688) (9,220) (6,410) 2.4 (25.7) 6.9 (25,480) (47,770) (46.7) (33,104) (25,480) 30
Adjusted profits 20,380 20,065 25,830 20,280 1.6 (21.1) 0.5 77,590 105,110 (26.2) 98,417 77,590 27
Adjusted EPS (Rs) 4.8 4.7 6.1 4.8 1.6 (21.1) 0.5 18.4 24.9 (26.2) 23.3 18.4 27
Ratios
EBITDA margin (%) 48.3 46.5 50.0 48.2 47.2 51.3 (8.1) 50.9 47.2 7.8
ETR (%) 25.2 25.0 26.3 24.0 24.7 31.2 (20.9) 25.2 24.7 1.8
Other details
Mined metal production (tons) 299,000 299,000 301,000 271,000 — (0.7) 10.3 1,101,561 1,068,207 3.1 1,122,846 1,101,561 1.9
Sales volumes
Zinc (tons) 221,000 224,400 216,000 203,000 (1.5) 2.3 8.9 817,000 821,000 (0.5) 859,285 817,000 5.2
Lead (tons) 53,000 54,060 54,000 56,000 (2.0) (1.9) (5.4) 216,000 211,000 2.4 221,133 216,000 2.4
Silver -saleable (kgs) 189,000 189,000 182,000 197,000 — 3.8 (4.1) 746,000 714,000 4.5 768,166 746,000 3.0
Zinc Cop (US$/ton) 1,051 1,214 1,095 (13.4) (4.0) 1,117 1,257 (11.1) 1,165 1,117 4.3
Zinc Cop (Rs/ton) 87,284 99,824 91,180 (12.6) (4.3) 92,488 101,388 (8.8) 96,794 92,488 4.7
Average prices (US$/ton)
LME Zinc (US/ton) 2,440 2,440 3,122 2,508 (21.8) (2.7) 2,483 3,416 (27.3) 2,700 2,483 8.7
Lead (US$/ton) 2,077 2,077 2,120 2,127 (2.0) (2.4) 2,122 2,104 0.8 2,106 2,122 (0.8)
Silver (US$/oz) 23.5 23.5 22.6 23.4 3.7 0.3 23.6 21.5 9.9 27.0 23.6 14

Source: Company, Kotak Institutional Equities estimates

Key takeaways from the conference call

Volume guidance. Given the improved zinc prices, the company will focus on zinc production over
lead, implying lower volume growth for silver.

▪ Refined metal production stood at 1.033 mn tons for FY2024. The company has guided in the
range of 1.075-1.1 mn tons for FY2025E, implying yoy growth in the range of 4.1-6.5%.

▪ Silver production stood at 746 mn tons for FY2024. HZ has guided in the range of 750-775
tons for FY2025E, implying yoy growth in the range of 0.5-3.9%.

▪ Domestic zinc consumption grew 20% yoy in FY2024 and is expected to remain strong on the
back of robust steel demand growth in FY2025E.

▪ The current refined metal production capacity stands at 1.123 mtpa. Debottlenecking projects
over the next 18 months are expected to increase the capacity to 1.25 mtpa

Cost guidance. The guidance for FY2025 is in the range of US$1,050-1,125/ton (Zinc CoP ex-
royalty). CoP for 4QFY24 stood at US$1,051/ton. Management expects costs to move toward
US$1,000/ton in the medium term.

▪ Cost reduction in the quarter was led by 1)softer coal and input raw material prices, 2) better
availability of linkage coal (46%) and 3) better grades: 7.62% in 4QFY24 (7.36% in 3QFY24)

▪ The cost guidance for FY2025E assumes linkage coal availability of ~40% and international coal
prices at current levels.

Hindustan Zinc
Metals & Mining India Research
 38

Reserves & Resources. Total R&R as of FY2024 stood at 456.3 mn tons, with a total metal content of
30.8 mn tons, underpinning an overall life of 25+ years.

▪ HZ incorporated Hindmetal Exploration Services Limited (wholly owned subsidiary) in 4QFY24 to

explore, discover, develop and tap mineral resources.

▪ Management expects the government to come up with an exploration scheme, wherein a part of
the exploration expenditure will be subsidized.

▪ The company expects to bid for mineral blocks, including critical minerals, basis exploration
data gathered.

Bamnia Kalan mine. The company has received all regulatory approvals for the Bamnia Kalan mine
in 4QFY24.

▪ The mine is expected to be ramped up over the next two years. HZ is in the process of finalizing
the business partner to start site activities.

▪ The mine has ~1 mn ton of resource in metal dump and ~700 tons of silver. The company
expects potential annual revenue/EBITDA of Rs10/4 bn from it in the medium term.

Lease validity. The lease for Rampura Agucha and Zawar mines expires in FY2030. These two
mines contribute ~65% of total output and ~50% of profits for Hindustan Zinc.

▪ Auctions for deep seated brownfield minerals has not occurred in the past. This makes
exploration results difficult to verify for other players looking at mines expiring in FY2030.

▪ Lease expiries of other mines are as follows: Sindesar Khurd – FY2048, Bamnia Kalan – FY2035,
Kayad – FY2048.

Price guidance. Management expects the current buoyancy in zinc prices to sustain and expect
prices to increase to ~US$3,000-3,200/ton by December 2024.

▪ Hindustan Zinc has a potential of recovering ~1 mn tons of metal and ~3,000 tons of silver from
its accumulated waste stockpile. External technology partner has been finalized, and technical
evaluation for the same is currently underway.

Project updates

▪ Fumer project: Volumes in FY2024 (post commissioning in 2QFY24) stood at 3 tons.

Management expects streamlining of the Fumer project to lead to additional silver volumes of
30 tpa from FY2025E.

▪ Alloy plant (30 ktpa). The plant commenced operations from 3QFY24, and is expected to
enhance the VAP proportion to ~25% in FY2025E (~20% in FY2024).

▪ Hindustan Zinc Fertilizers Private Limited (HZFPL): Progress for main process package for
Phase 1 of 510 ktpa is on track to be completed by FY2026.

▪ New roaster at Debari (160 ktpa): Expected to come online by end-FY2025.

▪ Renewable energy: HZ entered into power delivery agreements with Serentica Renewables for
Dariba (200 MW) and Chanderiya (250 MW). Phased completion and commissioning for the
same will begin in phases from April 2024 to June 2025.

Hindustan Zinc
Metals & Mining India Research
 39

Net debt and dividends. Gross debt for Hindustan Zinc stood at Rs84.5 bn. Net cash stood at
Rs17.3 bn. Total dividend per share in FY2024 stands at Rs13/share.

Capex. Growth capex guidance for FY2025 is US$270-335 mn. Sustenance capex is expected in the
range of US$300-400 mn.

▪ Most of the growth capex will be for Debari roaster, fertilizer plant, renewable power and zinc
capacity debottlenecking.

Corporate structure review. The government is looking to divest its stake of ~29% in the company;
the demerger process is currently on hold. Management expects the silver division demerger to
unlock significant value.

HZ's cost of production decreased 4% qoq in 4QFY24

Exhibit 2: Mined metal production and costs, March fiscal year-ends, 4QFY19-24 ('000 tons, US$/ton)

Mined metal production (000' tons, LHS) Production costs (US$/ton, RHS)
350 1,400

300 1,300
1,200
250
1,100
200
1,000
150
900
100
800
50 700
0 600
4QFY19
1QFY20
2QFY20
3QFY20

2QFY24
3QFY24
4QFY24
4QFY20
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23
1QFY24

Source: Company, Kotak Institutional Equities estimates

HZ has depleted its cash reserves with high dividends in FY2023

Exhibit 3: Cash reserves and other income of HZ, March fiscal year-ends, 4QFY19-24 (Rs bn)

Net Cash (Rs bn, LHS) Other income (Rs bn, RHS)
250 8

200
6
150

100 4

50
2
0

(50) 0
4QFY19
1QFY20
2QFY20
3QFY20

3QFY21
4QFY21
1QFY22
2QFY22
3QFY22

3QFY23
4QFY23
1QFY24
2QFY24
3QFY24
4QFY20
1QFY21
2QFY21

4QFY22
1QFY23
2QFY23

4QFY24

Source: Company, Kotak Institutional Equities estimates

Hindustan Zinc
Metals & Mining India Research
 40

We forecast a ~6% dividend yield over FY2025-27E

Exhibit 4: DPS and dividend yield (%) for HZ, March fiscal year-ends, 2019-27E (Rs per share, %)

DPS (Rs/Share) (LHS) Dividend yield (%)

80 18.9 20

70 18
16
60
14
50 12
40 10

30 8
5.3 5.8 5.9 5.7
5.0 4.5
4.1 6
20
3.3 4
10 2
0 0
2019 2020 2021 2022 2023 2024 2025E 2026E 2027E

Source: Company, Kotak Institutional Equities estimates

We forecast a deficit market in CY2024E

Exhibit 5: Zinc market demand-supply, December calendar year-ends, 2021-26E (‘000 tons, %)
ILZSG KIE
2021 2022 2023 2024E 2025E 2026E CAGR (2023-2026)
Total world mine production (A) 12,757 12,427 12,258 12,301 13,039 13,365 2.9%
YoY change (%) 4.1 (2.6) (1.4) 0.4 6.0 2.5
Total world smelter production 13,894 13,353 13,863 13,808 14,429 14,790 2.2%
YoY change (%) 0.8 (3.9) 3.8 (0.4) 4.5 2.5
Total world zinc consumption (B) 14,023 13,426 13,659 13,878 14,266 14,551 2.1%
YoY change (%) 5.5 (4.3) 1.7 1.6 2.8 2.0
Surplus/ (Deficit)—refined metal 51 (73) 204 (70) 163 238

Source: Company, Kotak Institutional Equities estimates

Exhibit 6: Hindustan Zinc, changes in estimates, March fiscal year-ends, 2025-27E

Revised estimate Previous estimate % change

2025E 2026E 2027E 2025E 2026E 2025E 2026E
Price (US$/ton)
Zinc 2,483 2,625 2,550 2,500 2,500 (0.7) 5.0
Lead 2,106 2,100 2,040 1,938 1,938 8.7 8.4
Silver (US$/ozt) 27.0 26.0 26.0 22.0 22.0 22.7 18.2
Volumes (tons)
Total Metal 1,080,417 1,125,377 1,145,689 1,102,463 1,125,377 (2.0) —
Zinc ingots 859,285 893,815 908,399 875,098 893,815 (1.8) —
Lead ingots 221,133 231,562 237,290 227,365 231,562 (2.7) —
Refined silver 768 804 813 806 828 (4.7) (2.8)
Earnings estimates (Rs mn)
Revenues 327,910 338,016 341,050 310,437 321,103 5.6 5.3
EBITDA 166,800 171,280 171,568 152,694 159,399 9.2 7.5
PAT 98,417 98,733 95,737 85,122 87,654 15.6 12.6
EPS 23.3 23.4 22.7 20.1 20.7 15.6 12.6
Re/US$ rate 83.1 84.3 85.1 83.5 84.5 (0.5) (0.3)

Source: Company, Kotak Institutional Equities estimates

Hindustan Zinc
Metals & Mining India Research
 41

Exhibit 7: Hindustan Zinc, key assumptions, March fiscal year-ends, 2019-27E (Rs mn)
2019 2020 2021 2022 2023 2024 2025E 2026E 2027E
LME-assumptions (US$/ton)
Zinc 2,743 2,402 2,422 3,260 3,416 2,483 2,700 2,625 2,550
Lead 2,121 1,952 1,868 2,280 2,104 2,122 2,106 2,100 2,040
Silver (US$/oz) 15.5 16.5 22.9 24.6 21.5 23.6 27.0 26.0 26.0
Rs/US$ rate 70.1 70.9 74.2 74.5 80.7 82.9 83.1 84.3 85.1
Volumes (tons)
Zinc 707,000 680,000 724,000 777,000 821,000 817,000 859,285 893,815 908,399
Lead 197,802 180,000 216,000 192,000 211,000 216,000 221,133 231,562 237,290
Silver 674 586 735 647 714 746 768 804 813
Zinc CoP (US$/ton) (ex royalty) 1,008 1,047 954 1,122 1,257 1,117 1,165 1,138 1,126
EBITDA (Rs bn)
Zinc and Lead 88 70 81 128 140 93 119 123 122
Silver 19 19 36 34 36 44 48 49 50
Total EBITDA 107 88 117 162 175 137 167 171 172
Silver as % of total 18% 21% 31% 21% 20% 32% 28% 28% 29%

Source: Company, Kotak Institutional Equities estimates

We increase our Fair Value to Rs310 (from Rs270) on March 2026E financials
Exhibit 8: HZ’s valuation details, March 2026E basis

Multiple Enterprise Value

(Rs bn) (X) (Rs bn) (Rs/ share)
EBITDA 171 7.0 1,199 286
Less: Net debt (dividend adjusted) (101) (24)
Arrived market capitalization 1,300 310
Fair Value (Rs/share) 310

Source: Company, Kotak Institutional Equities estimates

Hindustan Zinc
Metals & Mining India Research
 42

Exhibit 9: HZ, profit model, balance sheet and cash flow model, March fiscal year-ends, 2019-27E (Rs mn)
2019 2020 2021 2022 2023 2024 2025E 2026E 2027E
Profit model (Rs mn)
Net sales 211,180 185,610 226,290 294,400 340,980 289,320 327,910 338,016 341,050
EBITDA 106,700 88,470 116,720 162,260 175,060 136,560 166,800 171,280 171,568
Other income 17,820 19,340 18,190 12,160 13,790 10,740 9,547 8,947 8,512
Interest (1,130) (1,120) (3,860) (2,900) (3,330) (9,550) (8,069) (8,331) (8,541)
Depreciaiton (18,830) (22,790) (25,310) (29,170) (32,640) (34,680) (36,757) (39,953) (43,598)
Profit before tax 104,560 83,900 105,740 141,010 152,880 103,070 131,521 131,943 127,940
Taxes (25,000) (15,850) (25,940) (44,710) (47,770) (25,480) (33,104) (33,210) (32,202)
Net profit 79,560 68,050 79,800 96,300 105,110 77,590 98,417 98,733 95,737
Earnings per share (Rs) 18.8 16.1 18.9 23.0 24.9 18.4 23.3 23.4 22.7
Balance sheet (Rs mn)
Equity 336,051 403,101 323,131 342,821 129,321 151,950 151,943 151,936 151,929
Borrowings 25,380 6,110 64,730 28,230 118,410 84,560 96,560 101,560 101,560
Current liabilities 52,060 48,020 57,150 53,819 71,120 66,310 69,119 69,855 70,075
Total liabilities 424,581 469,750 457,271 446,710 354,671 338,950 353,752 359,480 359,694
Net fixed assets 170,320 189,580 187,300 194,710 198,590 198,470 211,574 215,852 216,927
Investments 194,880 203,290 129,570 150,520 98,500 98,740 98,740 98,740 98,740
Cash 230 19,180 93,760 57,630 14,120 1,750 673 1,397 317
Other current assets 20,611 25,660 22,350 31,680 35,420 25,760 28,536 29,263 29,481
Deferred tax assets 19,290 13,820 13,711 12,170 6,591 12,780 12,780 12,780 12,780
Total assets 424,581 469,750 457,271 446,710 354,671 338,950 353,752 359,481 359,695
Net debt (169,730) (216,360) (158,600) (179,920) 5,790 (15,930) (2,853) 1,423 2,503
Free cash flow (Rs mn)
Operating cash flow (excl. work cap.) 81,700 72,620 90,780 117,550 127,290 111,080 133,696 138,070 139,365
Working capital changes 6,710 (11,170) 6,380 (11,990) 5,570 14,070 33 9 3
Net finance cost/ income 16,690 18,220 14,330 9,260 10,460 1,190 1,477 616 (30)
Cash flow from operations 105,100 79,670 111,490 114,820 143,320 126,340 135,207 138,695 139,338
Capital expenditure (33,410) (36,180) (24,810) (29,980) (35,750) (38,150) (49,860) (44,231) (44,674)
Free cash flow 71,690 43,490 86,680 84,840 107,570 88,190 85,347 94,464 94,664
Ratios
Debt/equity (X) 0.1 0.0 0.2 0.1 0.9 0.6 0.6 0.7 0.7
EV/EBITDA 14.2 16.6 13.1 9.3 9.7 12.2 10.1 9.8 9.8
P/B 5.3 4.4 5.4 4.9 13.2 11.2 11.2 11.2 11.2
P/E 21.2 24.8 21.1 17.3 16.0 21.7 17.1 17.1 17.6
FCF yield (%) 3.3 2.0 5.5 6.1 7.6 5.4 5.1 5.6 5.6
Dividend yield (%) 5.0 4.1 5.3 4.5 18.9 3.3 5.8 5.9 5.7
Net debt/EBITDA (1.6) (2.4) (1.4) (1.1) 0.0 (0.1) (0.0) 0.0 0.0
Net debt/equity (X) (0.5) (0.5) (0.5) (0.5) 0.0 (0.1) (0.0) 0.0 0.0
RoAE (%) 24.3 19.4 22.9 29.4 44.7 55.7 65.4 65.6 63.6
RoACE (%) 56.1 39.9 42.5 48.9 48.9 37.0 46.0 43.0 41.1
Cash as % of market cap 10.1 12.8 9.4 10.7 (0.3) 0.9 0.2 (0.1) (0.1)

Source: Company, Kotak Institutional Equities estimates

Hindustan Zinc
Metals & Mining India Research
 RESULT

HDFC AMC (HDFCAMC) REDUCE

Diversified Financials
CMP(₹): 3,708 Fair Value(₹): 3,650 Sector View: Attractive NIFTY-50: 22,147 April 20, 2024

One miss outweighs multiple hits Company data and valuation summary
HDFC AMC’s 4QFY24 headline results were strong, but core earnings growth Stock data
(~30% yoy) missed estimates due to a sharper decline in yields (partly
CMP(Rs)/FV(Rs)/Rating 3,708/3,650/REDUCE
reversed in April). The company continued to report strong operational
52-week range (Rs) (high-low) 4,067-1,728
performance in terms of growth outperformance versus the industry, SIP
Mcap (bn) (Rs/US$) 792/9.5
growth, fund performance, etc. However, the stock has fairly priced most
ADTV-3M (mn) (Rs/US$) 1,864/22.3
positives at ~36X FY2025E EPS. Retain REDUCE with a Rs3,650 FV (Rs3,750
earlier). Shareholding pattern (%)

Core earnings growth of ~32% yoy 8.4 1.9

HDFC AMC reported ~32% yoy earnings growth, driven by ~30% yoy revenue 7.5

growth, ~60% yoy other income growth and ~18% yoy expense growth. 11.7
52.5
Quarterly AAUM was up 36% yoy (11% qoq), with equity AUM up 58% yoy (16%
qoq) and debt AUM up 16% yoy (down 1% qoq). Staff costs were up ~21% yoy, 18.0

whereas other costs (incl. business development) grew ~16% yoy. The cost-
income ratio (ex-other income) was down ~100 bps qoq to 19%. Promoters FPIs MFs BFI s Retail Others

Private Circulation Only. This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities A ct of 1933
Price performance (%) 1M 3M 12M
Sharper decline in yields, partly reversed Absolute 1 7 110
Blended 4Q revenue yield declined ~7% qoq (-6% yoy) to ~45 bps. The sharper Rel. to Nifty (0) 4 84

yield decline is a result of year-end adjustments (true-ups) to align direct TER Rel. to MSCI India (1) 2 75

to commission payouts. While we anticipated this effect to play out, its impact
Forecasts/Valuations 2024 2025E 2026E
has been higher than expected. The yield decline reversed, partly in April, with
EPS (Rs) 91.0 103.6 114.9
a starting base of ~47 bps yield. The strong equity AUM growth has led to a
EPS growth (%) 36.4 13.8 10.9
decline in equity yields to ~59 bps in 4Q (versus ~69/67/63 bps in 1Q/2Q/3Q). P/E (X) 40.7 35.8 32.3
Debt and liquid yields were around 27-28 bps and 12-13 bps, respectively. We
P/B (X) 11.2 10.5 9.9
build in 5-7% annual yield compression in equity yields over FY2025-26E. BVPS (Rs) 331.4 352.1 375.1
RoE (%) 29.5 30.3 31.6
Operating metrics: Strong and stable
Div. yield (%) 1.9 2.2 2.5
HDFC AMC’s operating performance maintained its strong and steady Nll (Rs bn) 26 31 35
performance. The fund performance across larger categories remained strong, PPOP (Rs bn) 19 24 27
with a large share of AUM in the top-2 quartiles for 1Y and 3Y returns. The Net profits (Rs bn) 19 22 25
customer acquisition pace continued to be strong, with ~45% share in net adds
Source: Bloomberg, Company data, Kotak Institutional Equities estimates
in the past 1Y. Monthly SIP flows (~70% yoy; 11% qoq) have grown at a
Prices in this report are based on the market close of
significant premium to industry (~35% yoy; ~9% qoq). The current run-rate of April 19, 2024
SIP flows would imply ~10% equity AUM growth in a year. While the company
is seeing flow traction across channels, growth is relatively stronger in the
direct and national distributor channel.

Executing well but positives fairly priced in; retain REDUCE

We revise FV to Rs3,650 (from Rs3,750), valuing the stock at ~32X March 2026E
Related Research
EPS for an earnings CAGR of ~16% over FY2025-27E. We cut earnings by 2-3%,
largely due to lower-than-expected yields. The yield trajectory for the next few → AMCs: Waiting for better risk-reward
quarters will be a key monitorable, given the starting base. The company has been
a major beneficiary of performance revival amid strong growth tailwinds for the
industry. However, given the strong re-rating in the past year, incremental upside
is increasingly linked to market returns and retail equity driving earnings surprises.
Full sector coverage on KINSITE

Abhijeet Sakhare Nischint Chawathe M B Mahesh, CFA Varun Palacharla Ashlesh Sonje, CFA
[email protected] [email protected] [email protected] [email protected] [email protected]
+91-22-4336-1240 +91-22-4336-0887 +91-22-4336-0886 +91-22-4336-0888 +91-22-4336-0889
 44

HDFC AMC - quarterly results summary

Exhibit 1: March fiscal year-ends, 4QFY23-4QFY24 (Rs mn)
Change (%)
4QFY24 4QFY24E 4QFY23 3QFY24 4QFY24E 4QFY23 3QFY24 2024 2023 Change (%) 2025E 2024 Change (%) 2026E
Income statement (Rs mn)
Revenue from operations 6,954 7,207 5,410 6,713 (4) 29 4 25,844 21,668 19 31,298 25,844 21 35,028
Other income 1,558 1,217 969 1,429 28 61 9 5,790 3,158 83 5,582 5,790 (4) 6,028
Total income 8,513 8,424 6,378 8,142 1 33 5 31,634 24,826 27 36,879 31,634 17 41,056
Operating expenses 1,724 1,783 1,461 1,773 (3) 18 (3) 6,884 6,126 12 7,779 6,884 13 8,785
Employee expense 867 913 719 906 (5) 21 (4) 3,541 3,127 13 4,055 3,541 15 4,704
Depreciation expense 133 140 133 131 (5) 1 2 523 533 (2) 549 523 5 577
Other expenses 724 730 610 737 (1) 19 (2) 2,820 2,466 14 3,174 2,820 13 3,505
Profit before tax 6,788 6,641 4,918 6,368 2 38 7 24,750 18,701 32 29,101 24,750 18 32,271
Taxes 1,380 1,593 1,156 1,489 (13) 19 (7) 5,323 4,467 19 6,984 5,323 31 7,745
Profit after tax 5,408 5,048 3,762 4,879 7 44 11 19,427 14,234 36 22,117 19,427 14 24,526
Core PBT 5,230 5,424 3,949 4,940 (4) 32 6 19,431 15,944 22 23,719 19,431 22 26,543
Tax rate (%) 20 24 24 23 22 24 -238 bps 24 22 249 bps 24
QAAUM mix (Rs bn)
Equity 3,861 3,843 2,447 3,342 0 58 16
Debt 1,367 1,425 1,178 1,351 (4) 16 1
Liquid 674 648 729 623 4 (7) 8
Others 227 199 144 193 14 58 17
Overall 6,129 6,116 4,498 5,515 0 36 11
QAAUM mix (%)
Equity 63 54 61 860 bps 240 bps
Debt 22 26 25 -390 bps -220 bps
Liquid 11 16 11 -520 bps -30 bps
Others 4 3 4 50 bps 20 bps
Closing AUM (Rs bn)
MF AUM 6,073 4,367 5,750 39 6 6,073 4,367 39 6,946 6,073 14 8,095
PMS and SMA AUM 24 18 25 33 (4) 24 18 33 31 24 30 41
Overall closing AUM 6,097 4,385 5,775 39 6 6,097 4,385 39 6,978 6,097 14 8,135
Closing MF AUM mix (Rs bn)
Equity 3,972 2,454 3,669 62 8 3,972 2,454 62 4,629 3,972 17 5,533
Debt 1,342 1,227 1,340 9 0 1,342 1,227 9 1,450 1,342 8 1,565
Liquid 540 546 552 (1) (2) 540 546 (1) 595 540 10 654
Others 219 140 196 56 12 219 140 56 273 219 25 342
Overall 6,073 4,367 5,750 39 6 6,073 4,367 39 6,946 6,073 14 8,095
Closing MF AUM mix (%)
Equity 65 56 64 920 bps 160 bps 65 56 920 bps 67 65 124 bps 68
Debt 22 28 23 -600 bps -120 bps 22 28 -600 bps 21 22 -123 bps 19
Liquid 9 13 10 -360 bps -70 bps 9 13 -360 bps 9 9 -34 bps 8
Others 4 3 3 40 bps 20 bps 4 3 40 bps 4 4 33 bps 4
Key ratios
Overall yields (bps) 45.4 47.1 48.1 48.7 -2 bps -3 bps -3 bps 49.5 49.8 0 bps 48.1 49.5 -1 bps 46.6
Core PBT (bps) 35.2 36.5 35.5 35.9 -1 bps 0 bps -1 bps 37.1 37.3 0 bps 36.3 37.1 -1 bps 35.1
RoAAUM (bps) 36.4 33.8 33.8 35.4 3 bps 3 bps 1 bps 37.1 33.3 4 bps 33.8 37.1 -3 bps 32.5
Cost-to-income 19.1 19.5 21.7 20.2 -43 bps -258 bps -111 bps 20.3 23.1 -3 bps 20.5 20.3 28 bps 20.7

Source: Company, Kotak Institutional Equities

HDFC AMC: Strong fund performance in 1/3/5Y buckets

Exhibit 2: Share of active equity AUM (covering ~80% of active equity AUM across quartiles of performance (%)
Rolling 1Y returns Rolling 3Y returns Rolling 5Y returns Rolling 10Y returns
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
100 100 100 100

80 80 80 80

60 60 60 60

40 40 40 40

20 20 20 20

- - - -
4QFY19
1QFY20
2QFY20
3QFY20
4QFY20
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23
1QFY24
2QFY24
3QFY24
4QFY24

4QFY19
1QFY20
2QFY20
3QFY20
4QFY20
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23
1QFY24
2QFY24
3QFY24
4QFY24

4QFY19
1QFY20
2QFY20
3QFY20
4QFY20
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23
1QFY24
2QFY24
3QFY24
4QFY24

4QFY19
1QFY20
2QFY20
3QFY20
4QFY20
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23
1QFY24
2QFY24
3QFY24
4QFY24

Source: AMFI, Kotak Institutional Equities

HDFC AMC
Diversified Financials India Research
 45

Core PBT ratio lower qoq

Exhibit 3: Key ratio for HDFC AMC, March fiscal year-ends, 1QFY21-4QFY24 (bps of AUM)

Yields (LHS) Core PBT ratio (RHS) RoAAUM (RHS)

70 45

56 41
38.2 37.8
36.9 37.1 40.6
36.1 36.3 36.0 36.3 35.9
42 35.7 35.5 35.2 37
34.6 35.0 35.1
37.7
37.0
36.4
35.2 35.4
28 34.8 34.8 33
33.8 34.0
33.1 33.5
32.2 31.9
31.4
14 30.7 30.6 29

46.2 48.6 49.5 48.4 48.7 49.4 49.2 47.8 50.2 50.8 50.3 48.1 47.3 49.0 48.7 45.4
0 25
1QFY21

2QFY21

4QFY21

2QFY22

3QFY22

1QFY23

3QFY23

4QFY23

2QFY24

4QFY24
3QFY21

1QFY22

4QFY22

2QFY23

1QFY24

3QFY24
Source: Company, Kotak Institutional Equities

HDFC AMC’s market share has improved to ~13%

Exhibit 4: Actively-managed equity oriented MAAUM market share, March fiscal year-ends, 2014-24 (%)
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Market share in equity oriented MAAUM
Aditya Birla Sun Life 6.0 7.2 7.7 8.7 9.2 8.8 7.7 7.2 6.4 5.5 4.8
Axis AMC 1.5 2.3 3.1 3.3 3.6 4.6 6.8 8.0 8.4 7.1 5.6
Bandhan AMC 4.0 3.8 2.9 2.2 2.1 2.2 2.6 2.0 1.6 1.5 1.6
DSP Mutual Fund 4.5 4.1 3.7 4.4 4.4 3.9 3.9 4.1 3.8 3.4 3.1
Franklin Templeton 7.1 6.8 7.5 7.5 5.6 5.2 4.3 3.7 2.8 2.6 2.5
HDFC AMC 19.9 18.5 15.1 15.8 16.2 15.6 14.4 13.0 11.4 12.2 12.9
ICICI Prudential AMC 11.2 13.5 14.2 15.2 15.0 14.3 13.5 12.5 12.4 13.0 13.2
Kotak AMC 1.8 2.5 3.2 3.7 4.7 5.1 6.4 6.7 7.0 7.0 7.2
Mirae AMC 0.3 0.5 0.7 1.2 1.5 2.2 3.5 4.7 4.9 4.9 4.4
Nippon Life India AMC 12.3 12.2 11.2 9.7 9.2 8.9 7.4 6.9 6.3 6.4 6.8
SBI AMC 7.3 6.1 7.0 8.0 7.9 8.9 9.7 10.2 12.0 12.6 12.8
Tata AMC 2.2 2.0 2.5 2.1 1.7 2.3 2.3 2.5 2.9 2.8 2.8
UTI AMC 10.6 8.7 7.4 6.3 4.8 4.7 4.4 4.8 4.8 4.5 3.9
Total of above players 88.8 88.1 86.4 88.2 86.1 86.5 86.9 86.3 84.7 83.5 81.6
Top 10 85.2 83.3 80.2 82.7 80.7 79.9 78.5 78.0 77.4 76.6 74.7

Source: AMFI, Kotak Institutional Equities

HDFC AMC
Diversified Financials India Research
 46

Healthy growth qoq in individual live accounts

Exhibit 5: Individual live accounts, March fiscal year-ends, 2013-2024

Individual live accounts (LHS) Unique investors (LHS) YoY (RHS)

(# mn) (%)
18.0 16.3 50.0
14.8
14.4 13.5 37.5
12.1
11.3
10.8 9.3 9.8 25.0
9.1 8.9
8.0
7.2 5.5 6.2 12.5

3.6 0.0
5.3 5.8 6.6 7.1 7.9 8.7 9.6
0.0 (12.5)
2017

2019

2021

2022
2016

2018

2020

2023

1QFY24

3QFY24
2QFY24

4QFY24
Source: Company, Kotak Institutional Equities

SIPs increased ~11% qoq in March 2024

Exhibit 6: Monthly systematic inflows (for respective periods), March fiscal year-ends, September 2013-
March 2024

29.3
30.0
26.3
25.0 22.4

20.0 18.9
17.1
15.7
14.3
15.0

10.0

5.0

0.0
Jun-18

Jun-19

Jun-21

Jun-22
Jun-20

Jun-23
Sep-15

Sep-16

Sep-17

Sep-19

Sep-20

Sep-22

Sep-23
Sep-13

Sep-14

Sep-18

Sep-21
Dec-18

Dec-21

Dec-22
Dec-17

Dec-19

Dec-20

Dec-23
Mar-14

Mar-15

Mar-18

Mar-20

Mar-21

Mar-23

Mar-24
Mar-16

Mar-17

Mar-19

Mar-22

Source: Company, Kotak Institutional Equities

HDFC AMC
Diversified Financials India Research
 47

Market share in SIP inflows improved qoq

Exhibit 7: Market share in SIP inflows (average), March fiscal year-ends, 1QFY20-4QFY24 (%)

SIP market share (%) SIP AUM market share (%)

20

16 15.3 15.3
13 13 13 13 14.3
12 12 12 12 13 13 12.6 13.0
16 15
15
12 12.9
13 13 13.1 12.8
12 12 12
12 12 11 11
11 11 10 11
8

0
4QFY20

1QFY21

2QFY21

3QFY21

4QFY21

1QFY22

2QFY23

3QFY23

4QFY23

1QFY24

2QFY24

3QFY24
1QFY20

2QFY20

3QFY20

2QFY22

3QFY22

4QFY22

1QFY23

4QFY24
Source: Company, Kotak Institutional Equities

HDFC AMC’s equity AUM growth has started to outpace industry

Exhibit 8: YoY equity QAAUM growth, 4QFY21-4QFY24 (%)

Industry HDFC AMC

78
58
60 51 51 53

38 40
42 36
29 27 48
22 21
35 32 32 17 18
24 29
21 26
21 16
6 15 16 13
7

(12)

(30)
1QFY22

2QFY22

4QFY22

1QFY23

3QFY23

4QFY23

3QFY24
4QFY21

3QFY22

2QFY23

1QFY24

2QFY24

4QFY24

Source: Company

HDFC AMC
Diversified Financials India Research
 48

Top-3 funds contribute nearly ~50% of equity AUM

Exhibit 9: Equity AUM mix (%)

Balanced
Others, 651 , 19% advantage , 717 ,
21%

Tax saver , 128 ,

4%

Large & mid cap ,

144 , 4%
Mid cap , 547 , 16%
Hybrid equity , 219
, 6%

Small cap , 262 ,

8% Flexi cap , 447 ,
Large cap , 294 , 13%
9%

Source: Company

HDFC Bank has the lowest share of commissions from captive AMC
Exhibit 10: Commission share earned from captive AMC funds (%)
2020 2021 2022 2023
Axis Bank
MF commissions earned by the bank 4,159 4,020 5,378 5,422
Commission earned from Axis MF 2,480 2,539 3,189 2,923
% share of bank 60 63 59 54
HDFC Bank
MF commissions earned by the bank 2,941 3,484 5,806 6,693
Commission earned from HDFC MF 967 919 1,397 1,593
% share of bank 33 26 24 24
ICICI Bank
MF commissions earned by the bank 1,856 2,288 3,556 3,978
Commission earned from ICICI Pru MF 1,265 1,580 2,409 2,736
% share of bank 68 69 68 69
SBI
MF commissions earned by the bank 3,749 4,887 7,347 9,055
Commission earned from SBI MF 3,639 4,774 7,118 8,736
% share of bank 97 98 97 96

Source: Company, Kotak Institutional Equities

HDFC AMC
Diversified Financials India Research
 49

Share of AUM from HDFC Bank is stable qoq Share of equity AUM from direct channels continue to inch up
Exhibit 11: Channel-wise breakdown of MF MAAUM for HDFC Exhibit 12: Channel-wise breakdown of equity MF MAAUM for
AMC, March fiscal year-ends, 2018-24 (%) HDFC AMC, March fiscal year-ends, 2018-24 (%)

HDFC bank Other banks HDFC bank Other banks

MFDs National distributors MFDs National distributors
Direct Direct
100 100
17.5 17.2 19.2 20.2 21.9 23.1
34.1 25.0
80 38.3 41.6 40.5 38.4 80
47.8 46.5
24.2 24.8 24.8 23.9 23.3 23.8
60 60 24.9
21.0
20.0 20.1 20.1 21.3
18.1 17.6
40 40 39.2 41.1 40.3 41.7 41.3
27.6 39.9 37.0
27.5 28.7 29.1
23.4 25.9 27.8
20 20
7.0 7.0 6.2 5.8
5.6 5.1 4.6 4.8 5.1 5.0 4.9 5.2 5.5
10.3 8.6 4.4 12.1 10.7 9.9 9.2 8.6
5.6 5.6 5.9 5.9 6.1 8.1 7.6
0 0

2018

2019

2020

2021

2022

2023

2024
2018

2019

2020

2021

2022

2023

2024

Source: Company, Kotak Institutional Equities Source: Company, Kotak Institutional Equities

We expect ~16% AUM CAGR over FY2025-27E

Exhibit 13: Closing AUM across categories, March fiscal year-ends, 2018-27E
2018 2019 2020 2021 2022 2023 2024 2025E 2026E 2027E
Closing MF AUM
Equity (active) 1,449 1,643 1,201 1,669 2,047 2,370 3,857 4,474 5,324 6,389
Passive (equity) 48 10 22 32 48 84 115 155 210 283
Debt 1,054 997 1,047 1,522 1,308 1,227 1,342 1,450 1,565 1,691
Liquid 359 743 868 638 550 546 540 595 654 719
Others 9 45 53 94 122 140 219 273 342 427
Total MF AUM 2,919 3,438 3,190 3,955 4,076 4,367 6,073 6,946 8,095 9,509
Non-MF 65 98 85 97 92 18 24 31 41 53
Total AUM 2,984 3,536 3,275 4,052 4,168 4,385 6,097 6,978 8,135 9,561

YoY (%)
Equity (active) 13 (27) 39 23 16 63 16 19 20
Passive (equity) (78) 108 48 50 75 37 35 35 35
Debt (5) 5 45 (14) (6) 9 8 8 8
Liquid 107 17 (26) (14) (1) (1) 10 10 10
Others 400 19 77 30 14 56 25 25 25
Total MF AUM 18 (7) 24 3 7 39 14 17 17
Non-MF 51 (13) 15 (5) (80) 33 30 30 30
Total AUM 18 (7) 24 3 5 39 14 17 18

Mix (%)
Equity (active) 49 46 37 41 49 54 63 64 65 67
Passive (equity) 2 0 1 1 1 2 2 2 3 3
Debt 35 28 32 38 31 28 22 21 19 18
Liquid 12 21 27 16 13 12 9 9 8 8
Others 0 1 2 2 3 3 4 4 4 4
Total MF AUM 98 97 97 98 98 100 100 100 100 99
Non-MF 2 3 3 2 2 0 0 0 0 1
Total AUM 100 100 100 100 100 100 100 100 100 100

Source: Company, Kotak Institutional Equities estimates

HDFC AMC
Diversified Financials India Research
 50

Yield decline to continue going ahead

Exhibit 15: Yields across various MF product classes, March fiscal year-ends, 2016-25E (bps)

140

108
112 103
96 93
86
84 78
68 66
64
60 59
51 52 51 4948
56
38 34 39
33 30 30 30 30
27 27 25
28 20 20 20 18
10 10 10 10 10 12 12 12 7 7 10 9 9
12 12 12

-
2018
2019

2022

2020
2021

2023

2019

2022

2018

2020
2021

2019

2022
2023

2018
2019

2022
2020
2021

2023

2018
2019

2022

2018

2020
2021

2023

2019

2022
2023

2018

2020
2021

2020
2021

2023
2025E

2024E

2025E

2024E

2025E
2024E

2025E

2024E

2025E

2024E

2024E
Active equity Passive equity Debt Liquid Others Overall

Source: Company, Kotak Institutional Equities estimates

Core PBT ratio to decline to ~35 bps

Exhibit 16: Du-pont, March fiscal year-ends, 2015-26E (%)
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024E 2025E 2026E
Revenue from operations 0.77 0.89 0.73 0.66 0.59 0.59 0.51 0.51 0.51 0.49 0.48 0.46
Investment management fees 0.69 0.75 0.70 0.65 0.58 0.58 0.50 0.51 0.51 0.49 0.48 0.46
Portfolio management and other advisory fees 0.08 0.14 0.03 0.01 0.01 0.01 0.00 0.00 0.00 0.00 0.00 0.00
Other income 0.03 0.03 0.05 0.04 0.06 0.04 0.10 0.08 0.07 0.11 0.09 0.08
Total income 0.80 0.93 0.78 0.70 0.64 0.63 0.60 0.59 0.58 0.60 0.56 0.54
Operating expenses 0.33 0.49 0.39 0.30 0.22 0.14 0.12 0.14 0.14 0.13 0.12 0.12
Employee expenses 0.10 0.09 0.08 0.07 0.06 0.06 0.06 0.08 0.07 0.07 0.06 0.06
Other expenses 0.23 0.39 0.30 0.23 0.15 0.07 0.05 0.05 0.06 0.05 0.05 0.05
MF expenses/ brokerage/ incentives/ fees 0.13 0.28 0.21 0.14 0.08 0.01 0.00 0.01 0.00 — — —
Businee promotion 0.02 0.02 0.03 0.03 0.01 0.01 0.00 0.01 0.01 0.01 0.01 0.01
Others 0.08 0.09 0.07 0.06 0.07 0.05 0.04 0.04 0.05 0.05 0.04 0.04
Depreciation and amorization expenses 0.01 0.01 0.01 0.00 0.00 0.01 0.02 0.01 0.01 0.01 0.01 0.01
PBT 0.47 0.44 0.39 0.40 0.42 0.49 0.48 0.45 0.44 0.47 0.45 0.43
(1-tax rate) 0.67 0.67 0.69 0.68 0.68 0.76 0.76 0.75 0.76 0.78 0.76 0.76
RoAUM 0.31 0.30 0.27 0.27 0.29 0.37 0.36 0.34 0.33 0.37 0.34 0.32
Core PBT 0.41 0.34 0.34 0.36 0.37 0.44 0.38 0.39 0.37 0.37 0.36 0.35
Comparable earnings 0.52 0.56 0.55 0.49 0.44 0.45 0.39 0.39 0.38 0.37 0.36 0.35

Source: Company, Kotak Institutional Equities estimates

HDFC AMC
Diversified Financials India Research
 51

HDFC AMC trades at ~36X 1Y forward earnings

Exhibit 17: Consensus 1Y forward PE (X)

12M fwd PE Average

60

48

36

24

12

Jun-22

Nov-23
Nov-19

Nov-22

Nov-23
Sep-18

Sep-19

Sep-22

Sep-23
Sep-23
Dec-18

Dec-21

Dec-23
Dec-23
May-20

May-23
Jul-21

Jul-23
Jul-23
Apr-21

Oct-21

Apr-24
Oct-23
Feb-19

Feb-23

Feb-24
Feb-20

Jan-21

Jan-24
Jan-24

Feb-24
Mar-22

Aug-23
Aug-23

Mar-24
Source: Bloomberg

HDFC AMC - change in estimates

Exhibit 17: March fiscal year-ends, 2025-2027E
New estimates (Rs mn) Old estimates (Rs mn) Change (%)
2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2026E
Revenue from operations 31,298 35,028 39,970 32,387 36,132 41,257 (3.4) (3.1) (3.1)
Other income 5,555 5,944 6,360 5,261 5,682 6,136 5.6 4.6 3.6
Total income 36,853 40,972 46,329 37,647 41,813 47,394 (2.1) (2.0) (2.2)
Operating expnses 7,779 8,785 9,731 7,786 8,862 9,817 (0.1) (0.9) (0.9)
Employee expenses 4,055 4,704 5,204 4,028 4,696 5,195 0.7 0.2 0.2
Other expenses 3,723 4,081 4,527 3,759 4,167 4,622 (0.9) (2.0) (2.1)
PBT 29,074 32,187 36,599 29,861 32,951 37,577 (2.6) (2.3) (2.6)
Tax 6,978 7,725 8,784 7,167 7,908 9,018 (2.6) (2.3) (2.6)
PAT 22,096 24,462 27,815 22,694 25,043 28,558 (2.6) (2.3) (2.6)
Core PBT 23,719 26,543 30,539 24,780 27,569 31,741 (4.3) (3.7) (3.8)
MF AUM (Rs bn) 6,946 8,095 9,509 6,994 8,146 9,566 (0.7) (0.6) (0.6)
Core yields (bps) 48 46 45 49 47 46 -1 bps -1 bps -1 bps
Core PBT ratio (bps) 36 35 35 38 36 36 -1 bps -1 bps -1 bps
RoAAUM (bps) 34 32 31 34 33 32 -1 bps -1 bps -1 bps
EPS (Rs) 104 115 130 106 117 134 (2) (2) (2)
BVPS (Rs) 352 375 401 340 369 402 4 2 (0)
Cost-to-income (%) 21.1 21.4 21.0 20.7 21.2 20.7 42 bps 25 bps 29 bps

Source: Company, Kotak Institutional Equities estimates

HDFC AMC
Diversified Financials India Research
 52

HDFC AMC-key growth rates and ratios

Exhibit 19: March fiscal year-ends, 2019-27E (%)
2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E
Key growth rates
Revenue from operations 8.8 4.6 (7.5) 14.2 2.4 19.3 21.1 11.9 14.1
Investment management fees 9.2 3.7 (6.4) 14.3 2.7 19.5 21.1 11.9 14.1
Portfolio management and advisory fees (15.0) 91.9 (65.7) (6.9) (50.3) (61.8) 31.4 78.2 30.0
Other income 68.9 (22.8) 149.1 (9.0) (0.6) 83.3 (4.1) 7.0 7.0
Total income 12.3 2.2 2.7 10.5 2.0 27.4 16.5 11.2 13.1
Operating expenses (10.3) (32.1) (7.7) 27.6 6.0 12.4 13.0 12.9 10.8
Employee expenses 17.9 4.1 5.6 37.7 0.2 13.2 14.5 16.0 10.6
Other expenses (18.7) (55.2) (24.3) 24.2 16.4 14.4 12.6 10.4 11.9
MF expenses/brokerage/incentives/fees (33.1) (89.2) (63.5) 114.5 NA NA NA NA NA
Business promotion expenses (54.5) (24.7) (44.2) 84.1 37.9 5.2 - 10.0 10.0
Depreciation expenses 12.3 292.0 10.0 (2.8) (0.9) (1.9) 5.0 5.0 5.0
PBT 29.4 20.2 5.8 6.1 0.8 32.3 17.5 10.7 13.7
PAT 29.0 35.7 5.0 5.1 2.2 36.5 13.7 10.7 13.7
Core PBT 24.9 26.8 (7.0) 13.8 (0.4) 21.9 22.1 11.9 15.1
Key calculated ratios
Investment management fees/total income 90.4 91.7 83.5 86.4 87.0 81.6 84.8 85.4 86.1
Operating expenses/total income 34.4 22.9 20.6 23.8 24.7 21.8 21.1 21.4 21.0
Employee expenses/operating expenses 28.6 43.8 50.1 54.0 51.0 51.4 52.1 53.5 53.5
MF expenses/operating expenses 34.1 5.4 2.1 3.6 2.0 - - - -
Core PBT margin (of total income) 56.9 70.6 63.9 65.8 64.2 61.4 64.4 64.8 65.9
PAT margin (of total income) 44.4 58.9 60.2 57.3 57.3 61.4 60.0 59.7 60.0
Tax rate 32.3 23.6 24.2 24.9 23.9 21.5 24.0 24.0 24.0
Payout ratio 54.7 47.2 54.6 64.3 72.0 76.9 80.0 80.0 80.0
ROE (%) 35.6 35.6 30.1 27.0 24.5 29.5 30.3 31.5 33.6
Return ratios (% of average of period-ending overall AUM)
Revenue from operations 0.59 0.59 0.51 0.51 0.51 0.49 0.48 0.46 0.45
Investment management fees 0.58 0.58 0.50 0.51 0.51 0.49 0.48 0.46 0.45
Portfolio management and other advisory fees 0.01 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Other income 0.06 0.04 0.10 0.08 0.07 0.11 0.08 0.08 0.07
Total income 0.64 0.63 0.60 0.59 0.58 0.60 0.56 0.54 0.52
Operating expenses 0.22 0.14 0.12 0.14 0.14 0.13 0.12 0.12 0.11
Employee expenses 0.06 0.06 0.06 0.08 0.07 0.07 0.06 0.06 0.06
Other expenses 0.15 0.07 0.05 0.05 0.06 0.05 0.05 0.05 0.04
MF expenses/brokerage/incentives/fees 0.08 0.01 0.00 0.01 0.00 - - - -
Business promotion 0.01 0.01 0.00 0.01 0.01 0.01 0.01 0.01 0.01
Depreciation and amortization expenses 0.00 0.01 0.02 0.01 0.01 0.01 0.01 0.01 0.01
PBT 0.42 0.49 0.48 0.45 0.44 0.47 0.44 0.43 0.41
Core PBT 0.37 0.44 0.38 0.39 0.37 0.37 0.36 0.35 0.35
(1-tax rate) 0.68 0.76 0.76 0.75 0.76 0.78 0.76 0.76 0.76
RoAUM 0.29 0.37 0.36 0.34 0.33 0.37 0.34 0.32 0.31

Source: Company, Kotak Institutional Equities estimates

HDFC AMC
Diversified Financials India Research
 53

HDFC AMC-financial summary

Exhibit 20: March fiscal year-ends, 2019-27E (Rs mn)
2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E
Income statement
Revenue from operations 19,152 20,033 18,525 21,154 21,668 25,844 31,298 35,028 39,970
Investment management fees 18,954 19,653 18,395 21,032 21,608 25,821 31,267 34,974 39,900
Portfolio management fees 198 380 130 121 60 23 30 54 70
Other income 1,816 1,402 3,492 3,178 3,158 5,790 5,555 5,944 6,360
Total income 20,968 21,434 22,017 24,332 24,826 31,634 36,853 40,972 46,329
Operating expenses 7,221 4,904 4,528 5,779 6,126 6,884 7,779 8,785 9,731
Employee expense 2,063 2,147 2,268 3,122 3,127 3,541 4,055 4,704 5,204
Other expenses 5,030 2,253 1,706 2,119 2,466 2,820 3,174 3,505 3,921
MF expenses/brokerage/incentives/fees 2,466 266 97 208 120 - - - -
Business promotion 357 269 150 276 380 400 400 440 484
Others 2,207 1,718 1,459 1,634 1,965 2,420 2,774 3,065 3,437
Depreciation and amortization expenses 129 504 554 539 533 523 549 577 606
PBT 13,747 16,531 17,490 18,553 18,701 24,750 29,074 32,187 36,599
Tax 4,441 3,906 4,232 4,622 4,467 5,323 6,978 7,725 8,784
PAT 9,306 12,624 13,258 13,931 14,234 19,427 22,096 24,462 27,815
Tax rate (%) 32 24 24 25 24 22 24 24 24
Core PBT 11,931 15,129 14,071 16,008 15,944 19,431 23,719 26,543 30,539
EPS 44 59 62 65 67 91 104 115 130
BVPS 144 189 224 259 286 331 352 375 401
DPS 24 28 34 42 48 70 83 92 104
Balance sheet
Share capital 1,063 1,064 1,065 1,066 1,067 1,067 1,067 1,067 1,067
Reserves and surplus 29,644 39,229 46,697 54,234 60,011 69,683 74,102 78,994 84,557
Shareholders' funds 30,707 40,293 47,762 55,300 61,078 70,750 75,169 80,062 85,625
Trade payables 474 467 421 292 357 390 429 471 519
Provisions 10 73 79 118 126 164 164 164 164
Other liabilities 1,047 2,254 2,685 3,093 3,801 4,235 4,658 5,124 5,636
Total liabilities 1,530 2,793 3,185 3,503 4,283 4,788 5,251 5,759 6,319
Total equity and liabilities 32,238 43,086 50,947 58,804 65,361 75,539 80,420 85,821 91,944
Investment 29,350 39,445 47,533 55,702 60,762 71,560 76,570 81,929 87,664
Advances 1,191 894 1,009 860 1,079 1,275 1,275 1,275 1,275
Current assets 1,349 917 861 886 1,994 1,168 963 924 1,227
Fixed assets 348 1,613 1,544 1,356 1,526 1,535 1,612 1,692 1,777
Deferred tax assets — 217 — — — — — — —
Net assets 32,238 43,086 50,947 58,804 65,361 75,539 80,420 85,821 91,944

Source: Company, Kotak Institutional Equities estimates

HDFC AMC
Diversified Financials India Research
 CHANGE IN RECO.

GSPL (GUJS) REDUCE

Gas Utilities
CMP(₹): 378 Fair Value(₹): 360 Sector View: Cautious NIFTY-50: 22,147 April 21, 2024

A harsh tariff order; downgrade to REDUCE with FV of Rs360 Company data and valuation summary
In a much-delayed tariff order, PNGRB has cut GSPL’s HP network by sharp Stock data
47% to Rs18.1/mmbtu (from Rs34/mmbtu). Approved tariff is ~64% lower
CMP(Rs)/FV(Rs)/Rating 378/360/REDUCE
versus the Rs51/mmbtu tariff sought by GSPL. We believed that there was a
52-week range (Rs) (high-low) 407-255
case for a tariff cut of 20-30% due to higher actual volumes (versus the last
Mcap (bn) (Rs/US$) 213/2.6
tariff order) and delays (revision due from April 2021). PNGRB’s assumption
ADTV-3M (mn) (Rs/US$) 708/8.5
of a much higher future volumes divisor is rather perplexing and contrary to
past practices. We expect GSPL to challenge this order. A 47% tariff cut Shareholding pattern (%)
reduces our FY2025/26E earnings by 28%/37%, but will impact the unified
tariff by a nominal ~4%. With the sharp tariff cut, RoCE will decline sharply to 14.7
11-12% (versus ~24% on average over FY2019-23). Downgrade to REDUCE.
7.2 37.6
2.2
A much delayed and rather harsh tariff order
22.3
For GSPL, the HP network tariff revision was due from April 2021; though public
16.0
consultation commenced in July 2021, this has seen a lot of delays. GSPL’s
approved tariff of Rs18.1/mmbtu effective May 1, 2024, is 47% lower versus the Promoters FPI s MFs BFIs Retail Others

existing tariff (Rs34/mmbtu) and one-third of the tariff sought (Rs51-

Private Circulation Only. This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities Act of 1933
Price performance (%) 1M 3M 12M
54/mmmbtu).
Absolute 11 18 42
Rel. to Nifty 10 16 17
Historically, compared with relatively harsh tariff orders for GAIL, GSPL’s tariff
Rel. to MSCI India 9 14 8
orders were rather benign. This seems to have been reversed now. GAIL’s
integrated tariff issued in March 2023 was in line with our expectation and its Forecasts/Valuations 2024 2025E 2026E
realized tariff has been 18-20% higher (versus approved due to better zonal EPS (Rs) 22.8 13.2 12.3
volume distribution). For GSPL, due to much higher volumes (versus assumed EPS growth (%) 36.1 (42.2) (6.9)
in the last order) and delays in deciding tariff, we expected a 20-30% tariff cut. P/E (X) 16.6 28.7 30.8

Our interaction with the company suggests that it also expected a maximum of P/B (X) 2.1 2.1 2.0

a ~25% tariff cut and is surprised with the sharper cut. EV/EBITDA (X) 9.7 16.1 18.1
RoE (%) 13.3 7.3 6.6
High future volume divisor perplexing; GSPL likely to challenge tariff order Div. yield (%) 2.2 2.4 2.4

Moderation of optimistic capex/opex assumptions in tariff order do not Sales (Rs bn) 21 15 14

surprise us. PNGRB appointed EIL to determine GSPL’s HP network capacity. EBITDA (Rs bn) 15 9 8

Determined capacity of 36 mmscmd is 5.4% higher versus GSPL’s submission Net profits (Rs bn) 13 7 7

(34.2 mmscmd). EIL also expects capacity to gradually increase to 37.5 Source: Bloomberg, Company data, Kotak Institutional Equities estimates

mmscmd in FY2030. Prices in this report are based on the market close of
April 19, 2024
However, volume divisor assumptions are perplexing. Unlike the past practice
(higher of entity’s projected volumes or 75% of pipeline capacity), PNGRB has
taken a volume divisor of 31.7 mmscmd over FY2025-2032E (based on the
average of FY2020 to February 2024). This assumption is ~22% higher versus
GSPL’s volume projection and versus the 2018 tariff order. Importantly, volume
divisor assumed is 85-94% of the revised capacity considered by PNGRB. Related Research
Effectively, rather than using the higher of 75% of EIL’s determined capacity → GSPL: 3Q below on higher opex; retain BUY
or GSPL’s projections, PNGRB has used its own higher volume projections
→ GAIL: realized tariff ~20% higher versus
(based on past volumes).
approved
→ Gas tariff
Utilities: Unified tariff revised up 5-15%

Full sector coverage on KINSITE

Anil Sharma Aditya Bansal

[email protected] [email protected]
+91-22-4336-0875 +91-22-4336-0876
 55

We expect GSPL to challenge this tariff order. We note PNGRB would review this tariff in the next fiscal
year, in case there is a large variation in actual volume flow versus that considered by PNGRB in its tariff
order. With this provision, it may be prudent for GSPL to keep near-term volumes lower, in our view. This
may lead to PNGRB revising the tariff upward next year. Most revenue loss (on lower than 31.7 mmscmd
volumes) will be offset as the next tariff review will take actual numbers. Ironical, but such tariff orders
will discourage entities to grow volumes, in our view.

Standalone earnings decline sharply, downgrade to REDUCE with revised FV of Rs360

A sharper 47% reduction in tariff (versus our assumption of 20% cut) lowers our FY2025-26E earnings
by 28%/37% and RoCE to 11-12% (versus ~24% on average over FY2019-23). We lower our SoTP-based
FV to Rs360 on lower standalone valuation after the sharp tariff cut and higher 40% holdco discount on
the GujGa stake (versus 35% earlier). We expected the much-awaited tariff order to reduce overhang on
stock and reduce mispricing. However, this tariff order is disappointing and increases regulatory
uncertainty, in our view. We downgrade GSPL to REDUCE (from BUY).

GSPL’s HP network tariff has been cut by sharp ~47% Revised tariff is ~64% lower versus that sought by GSPL
Reconciliation of GSPL’s HP pipeline’s current tariff Reconciliation of GSPL’s HP pipeline’s revised tariff
versus revised tariff (Rs/mmbtu) versus tariff sought by GSPL (Rs/mmbtu)
(Rs/mmbtu) Impact Tariff Rs/mmbtu Impact Tariff
Current tariff (Rs/mmbtu) 34.0 Tariff sought by GSPL (from April-2024) 50.8
Impact of key parameters Impact of key parameters
Economic life extension (4.7) 29.3 Capex (13.8) 37.0
Capex 4.8 34.1 Opex (8.7) 28.3
Opex 1.4 35.5 Volume divisor (10.9) 17.4
Volume divisor (6.1) 29.5 Others 0.7 18.1

Prospective implementation (11.1) 18.3 Tariff determined 18.1

Change (versus sought) % (64.3)
Others (0.2) 18.1
Tariff determined 18.1
Source: PNGRB, Kotak Institutional Equities
Change (versus current) % (46.8)

Source: PNGRB, Kotak Institutional Equities

Historically, tariff orders for GSPL were benign, but this one is rather harsh; impact magnified due to 3-year
delay in deciding tariff (revision due from April 2021)
Transmission tariffs submitted by GSPL and approved by PNGRB (Rs/mmbtu)

Applicable Submitted Increase Determined Prevailing

from by GSPL sought % by PNGRB tariff Change %
Earlier Tariff orders
September 11, 2012 Nov-08 39.6 44 24.0 27.4 (12)
February 19, 2014 Jul-12 26.6 24.0 11
September 27, 2018 Apr-18 64.7 143 34.0 26.6 28

Ongoing tariff review

Sought by GSPL (PCD in July 2021) Apr-21 54.1 59
Sought by GSPL (Dec 2023) May-24 50.8 49 18.1 34.0 (47)

Source: Company, PNGRB, Kotak Institutional Equities

GSPL
Gas Utilities India Research
 56

Volume divisor assumption is perplexing; it is about 22% higher versus those projected by GSPL; volume divisor much higher versus
75% of capacity determined by EIL; earlier, volume divisor was taken as higher of entity’s projected volume or 75% capacity
GSPL HP network actual and projected volume, capacity and volume divisor assumed by PNGRB (mmscmd, %)
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 FY2024E FY2025E FY2026E FY2027E FY2028E FY2029E FY2030-32E
GSPL proposed 30.0 31.4 32.3 31.8 29.8 28.5 26.0 26.0 26.0 26.0 26.0 26.0 26.0
Considered by PNGRB 31.4 33.3 35.2 32.8 29.8 28.5 34.5 31.7 31.7 31.7 31.7 31.7 31.7
Considered versus proposed 1.5 1.9 2.8 1.0 — — 8.5 5.7 5.7 5.7 5.7 5.7 5.7
% 4.9 5.9 8.8 3.0 — — 32.6 21.8 21.8 21.8 21.8 21.8 21.8

As per 2018 tariff order 29.1 29.1 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0 26.0
New versus 2018 tariff order 2.3 4.1 9.2 6.8 3.8 2.5 8.5 5.7 5.7 5.7 5.7 5.7 5.7
Change % 7.9 14.2 35.2 26.0 14.7 9.6 32.6 21.8 21.8 21.8 21.8 21.8 21.8

Capacity considered 30.1 30.2 32.9 33.1 33.1 33.1 33.1 33.6 36.0 36.5 36.5 36.5 37.5
75% of capacity 22.6 22.7 24.6 24.8 24.8 24.8 24.8 25.2 27.0 27.4 27.4 27.4 28.1
Versus considered 9.7 6.5 4.7 4.3 4.3 4.3 3.6
% 39.1 25.9 17.3 15.8 15.8 15.8 12.6

Volume as % of capacity 104.3 94.4 88.0 86.8 86.8 86.8 84.5

Source: Company, PNGRB, Kotak Institutional Equities

EIL has determined HP network capacity at 36 mmscmd; this is PNGRB’s volume divisor much higher than 75% of capacity,
projected to increase to 37.5 mmscmd by 2030 despite increases in determined capacity itself
HP network capacity revision by EIL and capacity Tariff volume divisor as % of capacity considered by
considered by PNGRB (mmscmd) PNGRB (%)

As per Assessed Change Considered versus Volume divisor as % of capacity

(mmscmd) GSPL by EIL (%) by PNGRB GSPL (%) 96 94
FY2018 28.3 30.1 6.4 30.1 6.4
94
FY2019 29.6 30.2 2.0 30.2 2.0
92
FY2020 32.1 32.2 0.2 32.9 2.2
FY2021 35.2 36.0 2.2 33.1 (6.2) 90 88
FY2022 35.2 36.0 2.2 33.1 (6.1) 88 87 87 87
FY2023 34.2 36.0 5.4 33.1 (3.3) 86 84
FY2024 34.2 36.0 5.4 33.1 (3.3) 84
FY2025 34.2 33.6 (1.8) 82
FY2026 34.2 36.0 5.4
80
FY2027 34.2 36.5 6.8
78
FY2028 34.2 36.5 6.8

FY2030-32E
FY2025E

FY2026E

FY2027E

FY2028E

FY2029E
FY2029 34.2 36.5 6.8
FY2030 34.2 37.5 9.7

Source: PNGRB, Kotak Institutional Equities

Source: PNGRB, Kotak Institutional Equities

GSPL
Gas Utilities India Research
 57

Volume divisor assumption taken by regulator is rather too harsh and not in line with past practices
GSPL’s HP network actual volume, company projections, 75% capacity and volume divisor taken
by regulator in 2018 and 2024 tariff orders

GSPL proposal 75% of capacity New tariff order

2018 tariff order Actual volumes
38
35
32
29
26
23
20

FY2030-32E
FY2013

FY2014

FY2015

FY2016

FY2017

FY2018

FY2019

FY2020

FY2021

FY2022

FY2023

FY2028E

FY2029E
FY2024E

FY2025E

FY2026E

FY2027E
Note:
For FY2018-21, the regulator has also included the additional volume flow for GSPL’s arrangement for using PIL’s compression.
GSPL had sought 50% relief on additional volumes.

Source: Company, PNGRB, Kotak Institutional Equities

GSPL’s RoCE to decline sharply after the revised tariff

Comparison of GSPL’s RoCE with GAIL’s transmission RoCE and RoCE allowed in line with
regulations (%)

GAIL GSPL ROCE as per regulations

30

25

20

15

10

-
2012

2013

2016

2017

2019

2020

2021

2023

2024E

2026E
2014

2015

2018

2022

2025E

Source: Companies, Kotak Institutional Equities estimates

GSPL
Gas Utilities India Research
 58

GSPL’s transmission volume has been ~30 mmscmd in recent GSPL’s realized tariff higher at ~Rs43/mmbtu (versus approved
quarters Rs34/mmbtu) on favorable mix and lower unified tariff deficit
GSPL's transmission volumes, March fiscal year- GSPL's realized tariffs, March fiscal year-ends
ends (mmscmd) (Rs/mmbtu)

(mmscmd) (Rs/mmbtu) Tariff

Volume (mmscmd)
45 45
40 44.5
43.9 43.2
40
40.4 41.4 40.1
35 35 38.1
37
30 30 33.4

25 29 293029 25
25 25 20
20 22
15
15
10
10
5
5
0
0

1QFY19
2QFY19
3QFY19
4QFY19
1QFY20
2QFY20
3QFY20
4QFY20
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23
1QFY24
2QFY24
3QFY24
1QFY21

3QFY21

1QFY22

3QFY22

1QFY23
1QFY19

3QFY19

1QFY20

3QFY20

3QFY23

1QFY24

3QFY24

Source: Company, Kotak Institutional Equities estimates

Source: Company, Kotak Institutional Equities estimates

Key assumptions for GSPL, March fiscal year-ends, 2018-26E

2018 2019 2020 2021 2022 2023 2024E 2025E 2026E
Volume (mcm/d) 31.5 34.6 37.8 36.6 33.9 25.4 29.5 31.0 32.5
yoy change % 27 10 9 (3) (7) (25) 17 5 5

Approved HP network tariff (Rs/mmbtu) 26.6 34.0 34.0 34.0 34.0 34.0 34.0 19.4 18.1
Tariff change % — 27.9 — — — — — (43) (7)

Realised avg. tariff (Rs/mmbtu) 29.6 36.3 34.7 33.5 34.9 42.4 41.5 25.4 22.1
Impact of LP network and ship-or pay etc 3.1 2.3 0.7 (0.5) 0.9 8.4 7.5 6.0 4.0

Realised tariffs (Rs/scm) 1.13 1.37 1.31 1.26 1.31 1.60 1.56 0.96 0.83
change % 2 22 (4) (4) 4 22 (2) (39) (13)

Source: Company, Kotak Institutional Equities estimates

After the sharp tariff cut, GSPL’s holdco discount on Gujga stake reduced to ~35% (versus ~65% earlier); we
expect the holdco discount to increase once again, as stock will likely correct on harsh tariff order
Derivation of implied hold-co discount (%)
Rs/share Rs bn
GSPL CMP 378 213
Transmission business EV 97 55
Value of investments 21 12
Net debt (19) (11)
Implied value of Gujarat Gas stake 240 135
Equity value of Gujarat Gas stake at CMP 361 204
Implied holdco discount % 34 34

Source: Bloomberg, Company, Kotak Institutional Equities estimates

GSPL
Gas Utilities India Research
 59

Discounted cashflow valuation for GSPL’s standalone transmission business

2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E 2032E 2033E 2034E
EBITDA 15,192 8,922 7,800 8,143 8,290 8,434 8,573 8,706 8,715 8,709 8,446
Adjusted tax expense (2,885) (1,629) (1,336) (1,402) (1,387) (1,403) (1,418) (1,395) (1,378) (1,363) (1,278)
Change in working capital (536) 322 31 (52) (31) (47) (33) (50) (27) 234 (321)
Operating cash flow 11,770 7,615 6,495 6,688 6,872 6,983 7,121 7,260 7,309 7,580 6,847
Capital expenditure (1,837) (1,808) (1,729) (1,651) (1,674) (1,496) (1,518) (1,340) (1,361) (1,282) (1,319)
Free cash flow 9,933 5,807 4,766 5,037 5,199 5,487 5,603 5,920 5,948 6,298 5,527
Discounted cash flow-1 year forward 5,807 4,255 4,015 3,700 3,486 3,178 2,999 2,690 2,542 1,992

+ 1-year
Discount rate (%) 12.0
Total PV of free cash flow 34,665
Terminal value assumption
Growth to perpetuity (%) 2.0 Sensitivity of 12-month fair value to WACC and perpetual growth
FCF in 2034E 5,527 Perpetual growth (%)
Exit FCF multiple (X) 10.2 97 - 1.0 2.0 3.0 4.0
Exit EV/EBITDA multiple (X) 6.7 WACC (%) 11.0 98 102 107 113 120
Terminal value 56,377 11.5 94 98 102 107 113
PV of terminal value 20,318 12.0 91 94 97 102 107
Total value of operating business 54,983 12.5 88 90 93 97 102
Shares outstanding (mn) 564 13.0 85 87 90 93 97
EV of Gujarat pipeline network (Rs) 97

Source: Company, Kotak Institutional Equities estimates

We compute Fair Value of GSPL at Rs360/share, including investments and dividends

SoTP valuation of GSPL (Rs mn)
Fair value
Valuation basis (Rs mn) (Rs/share)
Gujarat state pipeline network DCF valuation 54,983 97
Gujarat Gas (54.2% stake) 0.6X CMP 122,265 217
Sabarmati Gas (27.5% stake) 2,696 5
Other investments 9,273 16
Net debt (10,869) (19)
Fair value of GSPL including dividends (Rs) 202,907 360

Source: Kotak Institutional Equities estimates

GSPL
Gas Utilities India Research
 60

Standalone financial summary of GSPL, March fiscal year-ends, 2018-26E (Rs mn)
2018 2019 2020 2021 2022E 2023 2024E 2025E 2026E
Profit model (Rs mn)
Net sales 13,317 18,772 23,686 20,794 20,200 17,618 20,786 14,835 14,179
EBITDA 11,478 15,426 15,749 14,733 13,976 12,587 15,192 8,922 7,800
Other income 735 594 649 693 1,045 1,684 3,196 3,263 3,760
Interest (354) (2,192) (1,645) (929) (313) (47) (45) 0 0
Depreciation (1,750) (1,800) (1,966) (2,030) (1,960) (1,939) (1,958) (2,252) (2,310)
Pretax profits 10,108 12,028 12,786 12,467 12,748 12,286 16,384 9,933 9,250
Extraordinaries — — 1,400 — — — — — —
Current tax (3,156) (3,819) (2,829) (3,042) (2,879) (2,823) (3,563) (2,451) (2,282)
Deferred tax (268) (262) (270) (118) (78) (13) 40 (50) (46)
Adjusted net profits 6,684 7,947 9,687 9,307 9,791 9,450 12,862 7,433 6,922
Adjusted EPS (Rs) 11.9 14.1 17.2 16.5 17.4 16.7 22.8 13.2 12.3

Balance sheet (Rs mn)

Total equity 50,650 57,440 67,226 75,450 84,429 92,732 100,957 103,342 105,097
Deferred tax liability 4,984 5,226 4,081 4,218 4,250 4,238 4,198 4,248 4,294
Total borrowings 30,578 23,660 16,303 10,260 877 — — — —
Currrent liabilities 3,272 3,173 3,419 3,799 3,843 3,913 3,636 3,471 3,449
Total liabilities and equity 89,485 89,500 91,029 93,728 93,400 100,883 108,791 111,061 112,840
Cash 3,645 1,583 957 877 864 6,917 12,186 15,387 17,800
Current assets 3,926 4,876 5,732 5,907 5,013 6,457 6,716 6,230 6,176
Total fixed assets 40,101 40,269 38,229 36,883 35,785 35,809 35,688 35,244 34,664
Investments 41,814 42,772 46,111 50,062 51,737 51,700 54,200 54,200 54,200
Deferred expenditure — — — — — — — — —
Total assets 89,485 89,500 91,029 93,728 93,400 100,883 108,791 111,061 112,840

Free cash flow (Rs mn)

Operating cash flow, excl. working capital 8,061 9,560 11,031 10,804 10,616 9,931 11,584 6,472 5,518
Working capital changes 508 (8,255) 893 684 (202) (274) (536) 322 31
Capital expenditure (2,895) (2,165) (1,073) (1,126) (804) (1,982) (1,837) (1,808) (1,729)
Investments (29,793) 1,476 (2,594) (3,846) (149) (6,264) (2,500) — —
Other income 749 563 558 586 912 1,137 3,196 3,263 3,760
Free cash flow 6,423 (297) 11,409 10,948 10,523 8,813 12,407 8,249 7,580

Ratios (%)
Debt/equity 55.0 37.8 22.9 12.9 1.0 — — — —
Net debt/equity 35.5 27.4 18.6 11.4 1.0 — — — —
RoAE 12.7 13.4 14.5 12.3 11.6 10.2 12.7 7.0 6.4
RoACE 10.1 11.2 13.3 11.4 11.3 10.2 12.7 7.0 6.4
CROCI 15.0 17.5 19.5 17.5 17.0 14.6 16.9 9.2 7.7

Key assumptions
Volumes (mcm/d) 31.5 34.6 37.8 36.6 33.9 25.4 29.5 31.0 32.5
Average tariff (Rs/scm) 1.13 1.37 1.31 1.26 1.31 1.60 1.56 0.96 0.83

Source: Company, Kotak Institutional Equities estimates

GSPL
Gas Utilities India Research
 UPDATE

Dixon Technologies (DIXON) SELL

Electronic Manufacturing Services
CMP(₹): 7,532 Fair Value(₹): 5,800 Sector View: Cautious NIFTY-50: 22,147 April 20, 2024

Forging new alliances Company data and valuation summary

Dixon’s partnership with Longcheer to undertake the production of Stock data
smartphones will help the company gain a foothold with the BBK Group. In
CMP(Rs)/FV(Rs)/Rating 7,532/5,800/SELL
our view, the Longcheer partnership will translate into additional revenue of
52-week range (Rs) (high-low) 7,986-2,766
Rs34 bn for Dixon in FY2025, and we now expect Dixon to manufacture ~17%
Mcap (bn) (Rs/US$) 451/5.4
of all India volumes in FY2025. Further, the partnership could help Dixon
ADTV-3M (mn) (Rs/US$) 2,470/29.6
increase wallet share with other customers, and also gain additional volumes
in IT hardware and wearables in the medium term. We raise FY2025-26E Shareholding pattern (%)
estimates by 8% and 11% and increase our FV to Rs 5,800 (11% change). We
retain our SELL rating on Dixon. 11.9

10.8 33.6
Gaining a foothold with BBK Group
8.9
Dixon’s partnership with Longcheer to undertake the production of smart
phones helps the company gain a foothold with the BBK Group (Oppo, Vivo, One 17.4 17.4
Plus, Realme and iQOO). Dixon will be using designs provided by Longcheer to
manufacture ~4.5 mn smartphones in FY2025 for one of the sub-brands of BBK Promoters FPIs MFs BFI s Retail Others

Group, which we believe will translate into additional revenue of ~Rs34 bn.

Private Circulation Only. This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities A ct of 1933
Price performance (%) 1M 3M 12M
Dixon’s partnership with Longcheer implies the company will be manufacturing
Absolute 8 23 150
~6.5% of BBK’s India volumes in FY2025 and ~17% of all-India volumes. Rel. to Nifty 7 21 124
Longcheer is one of the leading ODM (Original Design Manufacturers), with Rel. to MSCI India 6 19 115
~25% global ODM volume share as of 1HFY23 (as per Counterpoint Research),
although ODM firms have a relatively lower share in the overall mobile phone Forecasts/Valuations 2024 2025E 2026E
manufacturing industry. Longcheer’s other key customers include Samsung EPS (Rs) 66.8 126.5 163.1

and Xiaomi; hence, Dixon’s partnership can help it further increase its presence EPS growth (%) 55.5 89.2 28.9

in the mobile segment. Beyond mobiles, Longcheer’s portfolio includes IT P/E (X) 112.7 59.6 46.2

hardware products, hearables and wearables and auto electronics, which could P/B (X) 26.6 18.0 12.7
EV/EBITDA (X) 62.2 34.4 26.6
be other longer-term opportunities for Dixon. Dixon’s current facilities will help
RoE (%) 26.7 36.1 32.3
it manufacture these additional volumes without any additional capex.
Div. yield (%) 0.0 0.0 0.0

Focus now shifts toward volume ramp-up Sales (Rs bn) 182 324 406
EBITDA (Rs bn) 7 13 16
Dixon, in the last 18 months, has tied up with Xiaomi, Transsion, Compal and
Net profits (Rs bn) 4 8 10
now Longcheer, all of which will help the company command a dominant
position in the mobile segment, aided by the mobile PLI scheme. The near-term Source: Bloomberg, Company data, Kotak Institutional Equities estimates

focus for Dixon now remains ramping up volumes from these new partnerships. Prices in this report are based on the market close of
April 19, 2024
In the medium term, the focus should shift toward higher value addition per
phone and trying to gain incremental share in exports. Among other segments,
we see IT hardware as a key focus segment for FY2025, driven by its recent tie-
up with Lenovo and Acer.

Raise mobile segment estimates; increase FV by 11% to Rs5,800

We raise our FY2025/26 estimates by 8%/11%, owing to the ramp-up expected
in the mobile segment, driven by the Longcheer partnership. We raise our FV by
11% to Rs 5,800, implying 36X P/E on March 2026 earnings.

Full sector coverage on KINSITE

Deepak Krishnan Aditya Mongia Sai Siddhardha P

[email protected] [email protected] [email protected]
+91-22-4336-0866 +91-22-4336-0884 +91-22-4336-0883
 62

76% of global ODM smartphone shipments are dominated by three companies, with Longcheer having ~25%
share
Exhibit 1: Global Smartphone ODM/IDH Vendors’ Shipment Shares as of 1HCY2023 (%)

Others, 24.4%
Huaqin, 30.5%

Wingtech, 20.2%

Longcheer, 24.9%

Source: Counterpoint Research, Kotak Institutional Equities

BBK Group holds ~45% share in the domestic smartphone market via its five brands (Oppo, Vivo, One Plus, Realme and iQOO)
Exhibit 2: India smartphone market share data, December calendar year-ends, 2022-23 (mn units and %)
Indian Smartphone market unit market share
CY20222 volumes CY2023 volumes
Brands (in mn) (in mn) Comments
Samsung 26.2 24.8 Dixon does final assembly for select model
Vivo 20.4 22.2
Realme 21.0 18.3
Xiaomi 25.7 18.1 Dixon's smartphone client from 2HFY24 onwards
OPPO 17.2 15.0
Apple 6.6 9.3
One Plus 5.9 8.9
Poco 4.6 7.2
Infinix 3.3 4.5 Dixon's smartphone client from FY2025 (part of Itel)
Tecno 3.5 4.2 Dixon's smartphone client from FY2025 (part of Itel)
Others 10.1 13.4 Motorola is Dixon customer for both domestic and international market
Total 145 146

CY2022 market share CY2023 market share

Brands (%) (%)
Samsung 18.1% 17.0%
Vivo 14.1% 15.2%
Realme 14.5% 12.5%
Xiaomi 17.8% 12.4%
OPPO 11.9% 10.3%
Apple 4.6% 6.4%
One Plus 4.1% 6.1%
Poco 3.2% 4.9%
Infinix 2.3% 3.1%
Tecno 2.4% 2.9%
Others 7.0% 9.2%

Source: IDC, Kotak Institutional Equities

Dixon Technologies
Electronic Manufacturing Services India Research
 63

We see mobile segment revenue reaching Rs260 bn by FY2026E, driven by Xiaomi, Transsion, Longcheer
and Compal
Exhibit 3: Mobile segment volume and revenues, March fiscal year-ends, 2021-26E (mn units and Rs mn)

Phones sold (mn units) 2021 2022 2023 2024 2025 2026
Feature phones 2 3 6 38 21 19
Smart phones 1 3 4 7 25 32
Samsung Feature phone 20 11 8 0 0 0
Samsung smart phone 1 8 9 9 9 9

Mobile revenue (Rs mn) 6,836 28,162 43,009 94,000 209,000 259,663

Source: Company, Kotak Institutional Equities estimates

We raise FY2025/26 estimates by 8%/11% owing to ramp-up expected in the mobile segment driven by the Longcheer deal
Exhibit 4: Change in estimates for Dixon, March calendar year-ends, 2020-26E (Rs mn)
New estimates Old estimates % change
2020 2021 2022 2023 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E
Revenues 44,001 64,482 106,971 121,920 182,043 323,915 405,728 182,043 290,165 351,316 — 12 15
Consumer electronics 20,952 38,426 51,609 42,780 44,048 49,226 55,036 44,048 49,226 55,036 — — —
Lighting products 11,397 11,037 12,841 10,550 7,913 9,827 12,206 7,913 9,827 12,206 — — —
Home appliances 3,963 4,312 7,088 11,430 13,332 20,699 27,462 13,332 20,699 27,462 — — —
Mobile & EMS 5,369 8,398 31,383 52,240 110,979 237,393 303,085 110,979 203,643 248,672 — 17 22
Security systems 2,164 2,176 3,964 4,920 5,771 6,770 7,941 5,771 6,770 7,941 — — —
EBITDA 2,231 2,866 3,791 5,128 7,267 12,968 16,480 7,267 11,650 14,436 — 11 14
EBITDA margin (%) 5.1 4.4 3.5 4.2 4.0 4.0 4.1 4.0 4.0 4.1 0 bps -1 bps -5 bps
Other income 52 16 38 56 100 252 300 100 252 300 — — —
Interest cost (350) (274) (442) (606) (510) (517) (509) (510) (517) (509) — — —
PBT 1,568 2,170 2,548 3,432 5,332 10,727 13,896 5,332 9,410 11,852 — 14 17
Recurring PAT 1,205 1,598 1,904 2,551 3,967 7,506 9,678 3,967 6,935 8,686 — 8 11
Recurring EPS (Rs) 57.9 58.6 59.4 59.4 66.8 126.5 163.1 66.8 116.8 146.3 — 8 11

Revenues 47 66 14 49 78 25 49 59 21
Consumer electronics 83 34 (17) 3 12 12 3 12 12
Lighting products (3) 16 (18) (25) 24 24 (25) 24 24
Home appliances 9 64 61 17 55 33 17 55 33
Mobile & EMS 56 274 66 112 114 28 112 83 22
Security systems 1 82 24 17 17 17 17 17 17
EBITDA 28 32 35 42 78 27 42 60 24
Recurring PAT 33 19 34 56 89 29 56 75 25

Source: Company, Kotak Institutional Equities estimates

Dixon Technologies
Electronic Manufacturing Services India Research
 64

We expect revenues to see a CAGR of 49% in FY2023-26E, with mobile and EMS contributing a larger proportion
Exhibit 5: Segment-wise revenue, EBITDA and EBITDA margin for Dixon (consolidated), March fiscal year-ends, FY2018-26E (Rs mn, %)
CAGR (%)
Revenue 2018 2019 2020 2021 2022 2023 2024 2025 2026 FY2018-23 FY2023-26E
Consumer Electronics 10,735 11,937 20,952 38,426 51,609 42,780 44,048 49,226 55,036 31.9 8.8
Lighting Products 7,742 9,194 11,397 11,037 12,841 10,550 7,913 9,827 12,206 6.4 5.0
Home Appliance 2,503 3,744 3,963 4,312 7,088 11,430 13,332 20,699 27,462 35.5 33.9
Mobile & EMS division 6,698 3,549 5,369 8,398 31,383 52,240 110,979 237,393 303,085 50.8 79.7
Security Systems 5 1,120 2,164 2,176 3,964 4,920 5,771 6,770 7,941 298.4 17.3
Reverse logistics 734 302 156 133 86 — — — —
Total 28,416 29,845 44,001 64,482 106,971 121,920 182,043 323,915 405,728 34 49

CAGR (%)
EBITDA 2018 2019 2020 2021 2022 2023 2024 2025 2026 FY2020-23 FY2023-26E
Consumer Electronics 231 249 504 1,028 1,246 1,310 1,437 1,920 2,312 38 21
Lighting Products 469 660 977 974 881 910 680 845 1,050 (2) 5
Home Appliance 307 370 461 397 541 1,090 1,454 2,146 2,855 33 38
Mobile & EMS division 65 74 191 396 971 1,670 3,551 7,834 10,002 106 82
Security Systems (9) 12 72 61 152 148 144 223 262 27 21
Reverse logistics 58 (17) 26 10 — — — — — — —
Total 1,120 1,349 2,231 2,866 3,791 5,128 7,267 12,968 16,480 32 48

EBITDA margin (%) 2018 2019 2020 2021 2022 2023 2024E 2025E 2026E
Consumer Electronics 2.1 2.1 2.4 2.7 2.4 3.1 3.3 3.9 4.2
Lighting Products 6.1 7.2 8.6 8.8 6.9 8.6 8.6 8.6 8.6
Home Appliance 12.3 9.9 11.6 9.2 7.6 9.5 10.9 10.4 10.4
Mobile & EMS division 1.0 2.1 3.6 4.7 3.1 3.2 3.2 3.3 3.3
Security Systems (185.7) 1.1 3.3 2.8 3.8 3.0 3.8 3.8 3.8
Reverse Logistics 7.8 (5.7) 16.9 7.4
Total 3.9 4.5 5.1 4.4 3.5 4.2 4.0 4.0 4.1

Source: Company, Kotak Institutional Equities estimates

We arrive at valuation of Rs5,800/share for Dixon Technologies

Exihibit 6: DCF valuation of Dixon (consolidated), March fiscal year-ends, 2020-45E (Rs bn)
(March fiscal year-ends, Rs bn) 2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2035E 2040E 2045E
Free cash flow calculation
Revenue 44 64 107 122 182 324 406 490 566 653 754 1,542 3,156 6,460
yoy growth (%) 47 66 14 49 78 25 21 15 15 15 15 15 15
EBIT (excl. other income) 2 2 3 4 6 11 14 17 19 22 25 50 101 200
EBIT margin (%) 4.2 3.8 2.8 3.3 3.2 3.4 3.5 3.5 3.4 3.4 3.3 3.3 3.2 3.1
Effective tax rate (%) 23 26 25 26 26 26 26 26 26 26 26 26 26 26
NOPAT 1 2 2 3 4 8 10 13 14 16 19 37 75 149
Change in working capital (excl. cash) — (1) (1) 3 (2) (1) (0) (0) (0) (0) (0) (0) (0) (0)
Depreciation — — 1 1 2 2 2 3 3 4 4 8 16 31
Capex (1) (2) (4) (5) (5) (4) (4) (4) (4) (4) (5) (10) (21) (43)
OCF 2 1 2 7 4 10 13 15 18 20 23 45 91 179
FCFF 1 (0) (2) 2 (1) 6 9 11 14 16 18 35 70 136

Post tax cost of debt (%) 7.1 Fair value WACC

Risk free rate (%) 7.0 5,800 11.3 11.8 12.3 12.8 13.3
Terminal growth

Risk premium (%) 4.9 5.0 6,500 5,700 5,000 4,500 4,000
Beta 1.3 5.5 7,100 6,100 5,400 4,700 4,200
rate

Cost of equity 13.1 6.0 7,700 6,600 5,800 5,100 4,500

FY2023 debt 2,149 6.5 8,500 7,200 6,200 5,400 4,800
FY2023 equity 12,849 7.0 9,500 8,000 6,800 5,900 5,100
WACC (%) 12.3
Terminal growth rate (%) 6.0

March 2025E-based Fair value (Rs/share) 5,800

Source: Company, Kotak Institutional Equities estimates

Dixon Technologies
Electronic Manufacturing Services India Research
 65

Exhibit 7: Summary financials of Dixon Technologies (consolidated), March fiscal year-ends, 2014-26E (Rs mn)
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024E 2025E 2026E
Income statement
Net revenues 10,971 12,031 13,912 24,570 28,416 29,844 44,001 64,482 106,971 121,920 182,043 323,915 405,728
Total operating expenses (10,732) (11,691) (13,424) (23,658) (27,296) (28,496) (41,771) (61,616) (103,180) (116,793) (174,776) (310,947) (389,248)
EBITDA 239 340 487 912 1,120 1,349 2,231 2,866 3,791 5,128 7,267 12,968 16,480
Depreciation & Amortization (53) (69) (84) (107) (152) (217) (365) (437) (840) (1,146) (1,525) (1,975) (2,375)
EBIT 186 271 403 805 968 1,132 1,865 2,429 2,952 3,981 5,741 10,992 14,105
Other income 34 18 18 14 42 56 52 16 38 56 100 252 300
Interest expense (112) (98) (131) (155) (128) (250) (350) (274) (442) (606) (510) (517) (509)
PBT 107 190 290 664 882 938 1,568 2,170 2,548 3,432 5,332 10,727 13,896
Tax expense (80) (80) (80) (188) (273) (305) (363) (572) (644) (897) (1,365) (2,746) (3,557)
Net profit 27 110 209 476 609 634 1,205 1,598 1,904 2,535 3,967 7,981 10,338
Reported PAT 27 110 209 476 609 634 1,205 1,598 1,904 2,551 3,967 7,506 9,678
Recurring EPS 2 7 13 9 11 11 21 27 32 43 67 126 163
Balance sheet
Shareholders' funds 736 848 1,228 1,971 3,150 3,782 5,413 7,373 9,968 12,849 16,815 24,796 35,135
Share capital 31 31 31 110 113 113 116 117 119 119 119 119 119
Reserves & surplus 705 817 1,197 1,861 3,036 3,669 5,298 7,256 9,849 12,730 16,697 24,678 35,016
Debt 869 799 771 430 406 1,361 828 1,561 4,983 2,149 2,452 1,952 1,952
Deferred tax liabilities 60 62 72 (3) 41 144 148 184 201 224 224 224 224
Minority interest and other liabilities 21 30 — — — 5 10 9 155 158 158 158 158
Total sources of funds 1,685 1,739 2,070 2,398 3,597 5,292 6,399 9,127 15,307 15,380 19,650 27,131 37,469
Net fixed assets 842 970 1,125 1,385 1,950 2,597 4,155 6,144 9,953 13,330 16,805 18,830 20,454
Net working capital (ex-cash) 797 700 760 859 1,094 2,252 1,161 1,259 1,817 (987) 867 1,426 1,461
Investments — — 111 — 111 76 82 1,034 1,713 745 745 745 745
Cash and bank balances and current investments 46 69 75 153 441 367 1,002 689 1,823 2,292 1,233 6,130 14,809
Total application of funds 1,685 1,739 2,070 2,398 3,597 5,292 6,399 9,127 15,307 15,380 19,650 27,130 37,469
Free cash flow
Operating profit before wcap. changes 275 341 616 920 1,151 1,427 2,380 2,993 3,908 5,314 7,367 13,220 16,780
Change in working capital / other adjustments (196) 146 (107) (237) (272) (1,275) 423 (743) (640) 2,764 (1,854) (559) (35)
Net cashflow from operating activites 104 445 422 529 679 (31) 2,374 1,701 2,728 7,258 4,148 9,914 13,188
Capex 4 (213) (263) (379) (724) (790) (1,081) (1,680) (4,173) (4,502) (5,000) (4,000) (4,000)
Free cash flow (CFO + net capex) 108 232 159 150 (45) (820) 1,293 22 (1,445) 2,755 (852) 5,914 9,188

Growth (%)
Revenue growth 9.7 15.6 76.6 15.7 5.0 47.4 46.5 65.9 14.0 49.3 77.9 25.3
EBITDA growth 42.0 43.4 87.2 22.8 20.4 65.4 28.5 32.3 35.2 41.7 78.5 27.1
Recurring PAT growth 305.8 90.1 127.6 27.9 4.0 90.2 32.6 19.2 33.1 56.5 101.2 29.5
Key ratios
EBITDA margin (%) 2.2 2.8 3.5 3.7 3.9 4.5 5.1 4.4 3.5 4.2 4.0 4.0 4.1
Net debt/equity (X) 1.1 0.9 0.6 0.1 (0.0) 0.3 (0.0) 0.1 0.3 (0.0) 0.1 (0.2) (0.4)
Net debt/EBITDA (X) 3.4 2.1 1.4 0.3 (0.0) 0.7 (0.1) 0.3 0.8 (0.0) 0.2 (0.3) (0.8)
Book value per share (Rs) 47 55 79 36 56 67 94 126 168 216 283 418 592
RoAE (%) 4.0 13.9 20.1 29.8 23.8 18.3 26.2 25.0 22.0 22.3 26.7 36.1 32.3
RoACE (%) 3.0 9.6 16.0 26.3 22.4 17.6 25.2 23.6 18.5 19.8 24.9 35.5 32.9
RoAIC (%) 3.3 10.4 18.2 30.5 27.4 20.8 32.9 38.5 31.2 36.2 42.5 58.4 65.1

Source: Company, Kotak Institutional Equities estimates

Dixon Technologies
Electronic Manufacturing Services India Research
 UPDATE

Insurance
India
Sector View: Attractive NIFTY-50: 22,147 April 21, 2024

TP down, OD and health hold on

Quick Numbers
The non-life industry’s GWP growth moderated to 13% in FY2024 from 16%
in FY2023, but still higher than 5-11% reported in FY2019-22. Business
composition has changed though, with health being the largest driver (up 20% Overall, gross premium for general insurers (ex-crop)
up 10% yoy in March 2024
yoy, including 38% of GWP from 24% in FY2018), likely reflecting increased
focus, higher appetite and rising tariffs. Pick-up in new vehicle sales Industry GWP growth was moderate at 13% in FY2024
supported motor OD growth in FY2024 (up 17% yoy); the rise in vehicle prices
Motor OD’s growth remains strong at 17% in FY2024
also augmented. Motor TP growth was moderate at 10%, likely on a decline
in renewal rates. Remain positive on health opportunity in India; look forward
to developing competitive dynamics in the motor and commercial lines.

March was weak

GWP growth (ex-crop) was moderate at 10% yoy in March 2024, lower than 15%
growth for the full-year FY2024. Retail and group health reported strong yoy
growth of 18% and 19%, respectively, in March 2024. Motor OD growth was
moderate at 10% in March 2024 compared with 17% for FY2024. Motor TP
growth was muted at 5% in March 2024 compared with 10% for FY2024. SAHI

Private Circulation Only. This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities Act of 1933
players continue to grow faster at 26%, while private GI players posted muted
9% growth in March 2024 (Exhibit 3).

Growth in FY2024, led by motor OD and health

Growth in the non-life industry has moderated to 13% in FY2024 from 16%
FY2023; still higher than 5-11% growth reported during FY2019-22. Health and
motor OD continues to grow at a fast pace of 20% (23% in FY2023) and 17%
(17% in FY2023), respectively. Motor TP growth was moderate at 10% likely due
to a decline in renewal rates.

Health business (38% of GWP in FY2023) continues to grow at 20% (up 23% in
FY2023), driven by increased penetration by SAHI players in the retail segment
and expansion of group health. Retail health GWP growth has picked up to 19%
in FY2024 from 15% in FY2023, driven by SAHI players (up 24% yoy). The market
share of SAHI players is now at 56%—up from 54% in FY2023. Group business
(up 20% yoy) is still dominated by GI players (85% market share in FY2024).

Pick-up in new vehicle sales supported motor OD growth during FY2023-24; rise
in vehicle prices also augmented. The benefit of vehicle price increases will
likely taper off in FY2025E, dampening the growth in the segment. ICICI
Lombard highlighted that the competitive intensity in the segment is cooling off
and has revised its combined ratio guidance down 50 bps. Large players may
gain market share in the segment.

Multi-year motor TP policies were bundled with new vehicle sales, leading to
elevated renewal rates during FY2019-23. As the base has now adjusted,
renewals are tapering off, leading to a drag in the segment. There was no
benefit on the pricing front, as TP tariffs were flat yoy in FY2024.

Full sector coverage on KINSITE

Nischint Chawathe M B Mahesh, CFA Varun Palacharla Abhijeet Sakhare Ashlesh Sonje, CFA
[email protected] [email protected] [email protected] [email protected] [email protected]
+91-22-4336-0887 +91-22-4336-0886 +91-22-4336-0888 +91-22-4336-1240 +91-22-4336-0889
 67

Unlisted players gain share in motor insurance

While private players continue to gain share in motor insurance (up to 72% from 71% in FY2023), the
growth is largely fueled by unlisted players. Listed players such as ICICI Lombard and Bajaj Allianz
reported 10 bps and 20 bps declines in market share to 10.5% and 6.4% in FY2024, respectively. Go Digit
continues to gain share (up to 6.0% in FY2024 from 4.9% in FY2023 and 0.1% in FY0218). Implementation
of EoM guidelines and listing of fast-growing players may lead to moderation of competitive intensity in
the segment.

Smaller SAHIs are gaining share

While the market share of SAHIs in the retail health segment has increased to 56% in FY2024 from 54%
in FY2023, Star Health’s market share declined 60 bps to 33.1% in FY2024. Smaller players such as Niva
Bupa and Care reported 30% and 46% GWP growth in the segment, respectively. These players currently
hold a 9% market share each—up from 4% in FY2018.

Growth in commercial lines was muted

Growth in commercial lines was muted at 8% in FY2024, down from 13-24% during FY2020-23. The
removal of tariffs has likely tightened the supply of reinsurance in the segment. Smaller players have cut
back on growth, leading to moderation for the entire industry. Concerns about rising competition from
smaller insurers to offset the pressure from EoM limits continues to weigh on the segment.

Overall, gross premium for general insurers (ex-crop) up 10% yoy in March 2024
Exhibit 1: Segment-wise gross direct premium, March fiscal year-ends, March 2023-March 2024 (Rs mn)
Mar-24 Mar-23 yoy growth (%) 2023 2023 yoy growth (%)
Fire 16,029 16,933 (5) 256,587 239,335 7
Marine 4,344 3,656 19 50,799 50,578 0
Marine hull 1,657 935 77 13,944 12,991 7
Marine cargo 2,687 2,721 (1) 36,854 37,588 (2)
Motor 90,159 84,317 7 917,813 812,917 13
Motor OD 35,202 32,035 10 373,260 317,835 17
Motor TP 54,958 52,282 5 544,553 495,082 10
Engineering 5,525 5,761 (4) 54,005 42,814 26
Health 102,901 86,719 19 1,090,068 906,677 20
Retail health 56,175 47,521 18 422,004 354,349 19
Group health 41,782 34,984 19 550,207 457,640 20
Government schemes 3,942 3,492 13 105,770 84,974 24
Overseas medical 1,002 722 39 12,087 9,713 24
Aviation 819 835 (2) 10,522 8,894 18
Liability 3,735 3,235 15 48,246 48,629 (1)
PA 5,742 6,461 (11) 77,447 70,135 10
Other 36,919 34,715 6 386,208 389,143 (1)
Crop insurance 27,942 26,433 6 301,465 320,156 (6)
Credit insurance 2,062 2,149 (4) 17,955 16,874 6
Others 6,915 6,134 13 66,785 52,113 28
Total 266,173 242,632 10 2,891,694 2,569,121 13
Total ex crop 238,231 216,199 10 2,590,229 2,248,965 15

Source: IRDA, GI Council, Kotak Institutional Equities

Insurance
India Research
 68

Retail health up 18% yoy and motor up 7% yoy in March 2024

Exhibit 2: Segment-wise gross direct premium yoy growth, March fiscal year-ends, March 2023-March 2024 (%)
Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24
Fire 21 7 6 3 12 2 6 10 10 11 14 7 (5)
Marine 5 6 (2) (7) 2 (9) (0) 1 (4) 4 (4) (3) 19
Marine hull (17) 17 (2) (14) 10 (30) (2) (5) 49 24 (7) (5) 77
Marine cargo 16 4 (3) (5) (3) (1) 0 4 (15) (5) (3) (2) (1)
Motor 14 23 23 17 15 16 11 9 12 9 12 10 7
Motor OD 19 24 27 17 22 19 18 12 21 13 18 16 10
Motor TP 12 23 21 18 11 14 7 7 7 6 8 7 5
Engineering 52 71 27 20 22 29 3 44 23 36 33 28 (4)
Health 17 24 21 17 33 15 33 10 13 23 17 16 19
Retail health 16 19 18 18 18 20 18 23 17 19 22 21 18
Group health 15 22 32 16 19 14 53 (8) 10 24 23 15 19
Government schemes 62 42 (82) 12 93 (68) (24) 51 14 67 (3) (9) 13
Overseas medical 25 24 24 23 44 23 17 12 11 34 27 14 39
Aviation 80 9 23 9 45 188 48 (4) 19 (25) 33 5 (2)
Liability 1 4 (23) (4) (15) (7) (5) 6 (5) 8 15 21 15
PA (20) 32 24 23 (14) 39 22 (8) 2 (9) 39 12 (11)
Other (4) 43 24 18 (18) (37) 56 59 (14) 8 (34) 13 6
Crop insurance (8) 345 34 20 (24) (40) 58 72 (27) 4 (43) 5 6
Credit insurance 6 4 5 (1) 13 (25) 24 40 (10) 7 15 14 (4)
Others 11 22 21 18 14 24 44 28 37 37 40 56 13
Total 12 20 18 15 13 (4) 28 13 9 13 7 13 10
Total ex crop 15 20 18 14 20 15 20 10 12 15 16 13 10

Source: IRDA, GI Council, Kotak Institutional Equities

Private insurers reported muted 9% yoy growth in March 2024

Exhibit 3: Company-wise gross direct premium, March fiscal year-ends, March 2022-March 2023 (Rs mn)
Mar-24 Mar-23 yoy growth (%) 2024 2023 yoy growth (%)
General insurers
Acko General 1,814 1,735 5 18,703 15,094 24
Bajaj Allianz 16,627 11,189 49 204,727 153,367 33
Cholamandalam MS 6,804 5,845 16 75,329 61,560 22
Go Digit 6,844 6,686 2 79,411 61,601 29
HDFC ERGO General 21,087 19,643 7 185,676 166,358 12
ICICI -Lombard 18,401 15,586 18 247,761 210,251 18
IFFCO -Tokio 7,087 9,941 (29) 98,351 98,710 (0)
New India 29,019 29,055 (0) 370,352 344,872 7
Reliance General 9,040 7,957 14 116,888 103,390 13
Royal Sundaram 3,229 3,394 (5) 36,372 33,794 8
SBI General 12,245 12,214 0 125,536 108,284 16
Shriram General 3,205 2,594 24 30,361 22,658 34
Tata-AIG 14,042 13,787 2 150,909 131,760 15
United India 19,131 15,281 25 198,517 176,433 13
Universal Sompo 2,701 2,273 19 46,222 41,031 13
Others 40,797 36,685 11 447,656 407,783 10
Total 213,919 195,339 10 2,448,641 2,148,286 14
Total (PSU) 78,613 71,511 10 903,421 828,871 9
Total (private) 135,306 123,828 9 1,545,220 1,319,415 17
Standalone health insurers .
Niva Bupa 7,085 5,523 28 56,076 40,730 38
Religare 7,586 5,450 39 68,645 51,415 34
Star Health 21,391 18,189 18 152,511 129,509 18
Others 1,883 1,649 14 16,915 13,598 24
Total 43,169 34,284 26 331,159 262,423 26
Specialised insurers
AIC (Crop) 7,429 11,276 (34) 99,186 146,437 (32)
ECGC (Export & Credit) 1,656 1,733 (4) 12,708 11,975 6
Total 9,085 13,009 (30) 111,894 158,413 (29)
Industry total 266,173 242,632 10 2,891,694 2,569,121 13

Source: IRDA, GI Council, Kotak Institutional Equities

Insurance
India Research
 69

SAHI players up 26% yoy and private GI players up 9% yoy in March 2024
Exhibit 4: Player-wise gross direct premium growth yoy, March fiscal year-ends, March 2023-March 2024 (%)
Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24
General insurers
Acko General 53 29 66 8 31 7 13 22 43 29 31 25 5
Bajaj Allianz 11 29 12 23 51 64 51 50 (9) 18 18 39 49
Cholamandalam MS 17 36 37 18 30 37 37 19 10 13 12 13 16
Digit 35 40 19 30 42 31 31 31 36 25 36 32 2
HDFC ERGO General 11 13 18 3 4 9 8 40 3 13 20 5 7
ICICI -Lombard 7 17 21 20 22 16 13 5 17 20 14 39 18
IFFCO -Tokio 22 49 26 2 (0) (10) 13 5 (0) (7) (7) (24) (29)
New India 11 10 10 5 9 3 12 15 (1) 14 3 4 (0)
Reliance General (6) 16 13 15 15 15 12 13 17 10 10 8 14
Royal Sundaram 14 23 4 4 4 11 5 1 (1) 10 23 13 (5)
SBI General 16 4 12 21 61 (17) 31 56 37 50 23 (14) 0
Shriram General 43 45 45 31 22 23 37 37 43 44 41 29 24
Tata-AIG 23 35 29 33 11 26 31 7 9 3 1 5 2
United India (11) 12 3 4 14 7 10 7 7 19 15 25 25
Universal Sompo (21) 33 22 12 38 34 7 20 10 6 (26) 10 19
Total 10 19 17 13 18 13 23 12 6 14 11 12 10
Total (PSU) 4 11 13 7 5 7 31 (4) 0 13 6 10 10
Total (private) 13 25 21 17 26 16 19 22 9 15 15 12 9
Standalone health insurers
Niva Bupa 46 52 43 35 37 38 37 42 46 39 34 35 28
Care 13 38 31 29 36 40 24 40 25 29 32 37 39
Star Health 12 25 16 19 17 19 15 18 17 15 18 19 18
Total 22 34 23 23 24 26 23 29 23 26 29 29 26
Specialised insurers
AIC (Crop) 20 NM 60 220 (57) (69) 91 7 NM (21) (63) (9) (34)
ECGC (Export & Credit) (1) - 9 (1) 1 (16) 36 20 (5) 4 12 22 (4)
Total 17 162 27 84 (54) (69) 87 9 154 (19) (60) (7) (30)
Industry total 12 20 18 15 13 (4) 28 13 9 13 7 13 10

Source: IRDA, GI Council, Kotak Institutional Equities

GWP growth was moderate at 13% in FY2024

Exhibit 5: Industry GWP, March fiscal year-ends, 2008-2024 (Rs bn, %)

(Rs bn) Gross written premium (Rs bn) YoY growth (%) (%)
3,200 72

2,560 28 28 31
23 36
17 13 17 16 13
11 9 12 9 9 11 11
1,920 5

-
2,892
1,280 2,569
2,208
1,890 1,987
1,566 1,700 (36)
640 1,342
904 1,024
683 743 830
335 373 437 535
- (72)
2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

Source: IRDA, GI Council, Kotak Institutional Equities

Insurance
India Research
 70

Motor growth has moderated in FY2024

Exhibit 6: Motor GWP, March fiscal year-ends, 2007-2024 (Rs bn, %)

(Rs bn) Motor (LHS) YoY (RHS) (%)

1,000 918 40
33
813
800 30
22 690 678 704
20 645
19 18 592
600 14 517 15 15 20
13 14 13
10 438
9 383 9
400 348 7 10
306 4
250
188 (2)
200 138 156 -
107 127

- (10)
2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024
Source: IRDA, GI Council, Kotak Institutional Equities

Motor OD growth remains strong at 17% in FY2024

Exhibit 7: Motor OD GWP, March fiscal year-ends, 2007-2024 (Rs bn, %)

(Rs bn) Motor OD (LHS) YoY (RHS) (%)

400 373 40

318
320 23 30
24 277
265 267 263 272
251
18 227 17 17
240 20
14 196 207
181 10 11 10
153 8
160 124 6 10
9 3
100 1 1
82 88
7
75 (2)
80 -

- (10)
2007

2008

2009

2010

2011

2012

2013

2020

2021

2022

2023

2024
2014

2015

2016

2017

2018

2019

Source: IRDA, GI Council, Kotak Institutional Equities

Insurance
India Research
 71

Motor TP growth has moderated in FY2024

Exhibit 8: Motor TP GWP, March fiscal year-ends, 2007-2023 (Rs bn, %)

(Rs bn) Motor TP (LHS) YoY (RHS) (%)

600 545 73
495
480 52 58
422 415 433
380
40 329
360 43
29 266
26
22 210 24
240 28
176 19
14 152 16 15 14
12 10 125 11
97 10
120 64 4 13
45 51 56
32 (2)
- (2)
2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024
Source: IRDA, GI Council, Kotak Institutional Equities

Health premium growth has moderated to 20% in FY2024

Exhibit 9: Health GWP, March fiscal year-ends, 2007-2024 (Rs bn, %)

(Rs bn) Health premium (LHS) YoY (RHS) (%)

1,100 52 55

880 44
37
31
660 33
26 25 26 26
23
21 22 20
440 17 17 22
15
14 13
8
220 11

33 51 66 84 115 135 157 196 226 275 345 420 455 516 586 736 907 1,090
- -
2008

2009

2010

2011

2012

2013

2014

2023

2024
2007

2015

2016

2017

2018

2019

2020

2021

2022

Source: IRDA, GI Council, Kotak Institutional Equities

Insurance
India Research
 72

Share of health insurance up to 38% in FY2024 from 27% in FY2020

Exhibit 10: Product mix for non-life industry, March fiscal year-ends, 2008-2023 (%)
Fire Engineering Marine cargo Marine Hull
Motor OD Motor TP Aviation Health
PA Liability Miscellaneous+crop
100

80 15 18 19 21 20 21 22 23 24
23 24 27 27 29 33 35 38
60 20 20 19 18 23 17 19 20 21
40 20 21
25 24 22 22 21 20 19 19
23 23 22 24 24 23 22
20 19 18 13 12
16 14 12 13

2013

2014

2015

2016

2017

2018

2019
2008

2009

2010

2011

2012

2020

2021

2022

2023

2024
Source: IRDA, GI Council, Kotak Institutional Equities

Market share of private players has inched up in 2024

Exhibit 11: GWP market share of GI players, March fiscal year-ends, 2018-2024 (%)
2018 2019 2020 2021 2022 2023 2024
Private 43 48 48 49 50 51 53
Acko 0.0 0.1 0.2 0.2 0.4 0.6 0.6
Bajaj Allianz 6.3 6.5 6.8 6.3 6.2 6.0 7.1
Cholamandalam MS 2.7 2.6 2.3 2.2 2.2 2.4 2.6
Go Digit 0.1 0.7 1.0 1.2 2.1 2.4 2.7
HDFC ERGO General 4.8 5.1 4.9 6.2 6.1 6.5 6.4
ICICI -Lombard 8.2 8.5 7.0 7.0 8.1 8.2 8.6
IFFCO -Tokio 3.7 4.1 4.2 4.2 3.8 3.8 3.4
Reliance General 3.4 3.6 3.9 4.2 4.3 4.0 4.0
SBI General 2.4 2.8 3.6 4.2 4.2 4.2 4.3
Tata-AIG 3.6 4.6 3.9 4.0 4.5 5.1 5.2
Public 45 40 39 36 34 32 31
National 10.8 8.8 8.0 7.1 5.9 5.9 5.2
New India 15.1 14.1 14.1 14.3 14.8 13.4 12.8
Oriental 7.6 7.8 7.2 6.3 6.2 6.1 6.3
United 11.6 9.6 9.3 8.4 7.1 6.9 6.9

Source: IRDA, GI Council, Kotak Institutional Equities

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Market share of private players has inched up in 2024

Exhibit 12: GWP (ex-crop) market share of GI players, March fiscal year-ends, 2018-2024 (%)
2018 2019 2020 2021 2022 2023 2024
Private 43 46 49 50 50 51 53
Acko 0.0 0.1 0.2 0.3 0.5 0.7 0.7
Bajaj Allianz 6.1 6.8 6.6 6.0 6.1 5.6 6.8
Cholamandalam MS 2.9 2.8 2.8 2.6 2.5 2.7 2.7
Go Digit 0.1 0.7 1.2 1.4 2.4 2.7 3.1
HDFC ERGO General 4.1 4.6 4.6 5.8 5.6 5.9 5.9
ICICI -Lombard 8.0 8.5 8.5 8.3 9.1 9.0 9.1
IFFCO -Tokio 3.6 3.6 3.9 4.1 3.9 3.8 3.2
Reliance General 3.1 3.3 3.6 3.4 3.3 3.2 3.1
SBI General 2.3 2.3 2.9 3.6 3.6 3.6 3.8
Tata-AIG 4.0 4.6 4.4 4.8 5.2 5.9 5.7
Public 50 45 42 40 38 37 34
National 11.7 10.0 8.4 7.7 6.8 6.7 5.9
New India 16.8 16.0 15.8 16.4 16.5 15.3 14.3
Oriental 8.5 8.0 7.4 7.0 6.8 6.9 6.4
United 12.7 10.8 9.9 9.4 8.2 7.7 7.4

Source: IRDA, GI Council, Kotak Institutional Equities

Motor TP tariffs were flat in FY2024

Exhibit 13: Motor TP rates, March fiscal year-ends, 2018-2024 (Rs)

2018 2019 2020 2023 2024

Cars
<1000cc 2,055 1,850 2,072 2,094 2,094
1000-1500cc 2,863 2,863 3,221 3,416 3,416
>1500cc 7,890 7,890 7,890 7,897 7,897
Two wheelers
<75cc 569 427 482 538 538
75-150cc 720 720 752 714 714
150-350cc 887 985 1,193 1,366 1,366
>350cc 1,019 2,323 2,323 2,804 2,804
CVs
<7500kg 14,390 14,390 15,746 16,049 16,049
7500-12000kg 19,667 24,190 26,935 27,186 27,186
12000-20000kg 28,899 32,367 33,418 35,313 35,313
20000-40000kg 31,626 39,849 43,037 43,950 43,950
>40000kg 33,024 38,308 41,561 44,242 44,242

Source: IRDA, MoRTH, Kotak Institutional Equities

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Smaller players have slowed down in commercial lines

Exhibit 14: GWP growth in fire insurance, March fiscal year-ends, 2019-2024 (%)

2019 2020 2021 2022 2023 2024

General insurers
Bajaj Allianz 15 30 35 16 13 11
Cholamandalam MS (19) 28 31 11 33 8
Go Digit (19) 28 31 11 33 8
HDFC ERGO General 16 36 20 13 29 5
ICICI -Lombard 24 47 40 11 11 11
IFFCO -Tokio 19 62 54 13 2 3
New India 7 37 23 5 7 4
Reliance General 19 61 25 7 7 11
Royal Sundaram 7 49 22 7 2 2
SBI General 20 26 18 (4) 20 12
Shriram General (13) 13 14 40 43 12
Tata-AIG 8 27 52 14 15 10
United India (8) 33 14 3 2 11
Universal Sompo 3 22 8 8 6 11
Total 9 35 27 7 11 7
Total (PSU) 1 33 20 1 4 4
Total (private) 16 37 32 11 15 9
Source: IRDA, GI Council, Kotak Institutional Equities

Unlisted players gain share in the motor segment

Exhibit 15: Market share in motor segment, March fiscal year-ends, 2018-2024 (%)
2018 2019 2020 2021 2022 2023 2024
General insurers
Acko General 0.0 0.1 0.3 0.4 0.7 0.8 0.9
Bajaj General 7.0 7.5 7.6 7.0 6.9 6.6 6.4
Cholamandalam MS 4.5 4.7 4.7 4.6 4.9 5.3 5.4
Go Digit 0.1 1.3 2.4 2.9 4.3 4.9 6.0
HDFC ERGO 3.9 4.7 4.9 5.0 5.0 5.7 5.7
ICICI -Lombard 10.7 11.7 12.0 12.4 11.8 10.6 10.5
IFFCO -Tokio 5.1 5.1 5.1 5.5 5.3 5.1 4.8
Magma HDI 0.7 1.2 1.5 1.4 1.9 2.3 2.3
National 11.9 9.5 8.3 7.2 6.6 6.3 5.5
New India 15.4 13.7 12.9 13.0 11.7 11.0 10.4
Oriental 7.4 7.0 6.1 5.5 4.8 4.5 4.6
Reliance General 4.2 4.4 4.5 5.3 5.5 5.0 4.8
Royal Sundaram 3.4 3.2 3.0 2.9 2.9 3.0 2.8
SBI General 1.7 1.4 2.3 3.2 3.6 3.3 3.9
Tata-AIG 4.7 5.9 5.9 6.4 7.3 8.2 8.1
United India 12.0 10.5 9.5 8.6 7.8 7.4 7.7
Universal Sompo 1.1 1.1 1.3 1.5 1.9 2.2 2.3
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Total (PSU) 46.5 40.7 36.8 34.2 30.9 29.2 28.1
Total (private) 53.5 59.3 63.2 65.8 69.1 70.8 71.9

Source: IRDA, GI Council, Kotak Institutional Equities

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SAHIs and private GI players gained share at the expense of PSUs

Exhibit 16: Health insurance market share of GI and SAHI players, March fiscal year-ends, 2008-2024 (%)

Public Private Standalone

100 3 8 13 13 12 11 11 13 15 17 20 24 27 26 27 28 30
80 35
33 28 26 27 28 30 27 25 23
25
25
60 26 28 28 29
33

40
62 58 59 60 60 61 59 60 60 60 55 52 48 47 45 43
20 38

-
2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024
Source: IRDA, GI Council, Kotak Institutional Equities

SAHIS continue to gain share in the retail health segment

Exhibit 17: Retail health insurance market share across players, March fiscal year-ends, 2018-2024 (%)
2018 2019 2020 2021 2022 2023 2024
General insurers
Bajaj General 3.3 3.3 3.4 3.1 2.7 2.5 2.3
Cholamandalam MS 1.4 1.3 1.2 0.9 1.1 1.4 1.3
Future Generali 0.3 0.3 0.4 0.6 0.5 0.5 0.5
HDFC ERGO 4.9 2.9 3.1 10.4 10.0 9.7 9.4
ICICI -Lombard 6.9 5.4 2.9 2.9 2.9 2.9 2.9
IFFCO -Tokio 0.8 0.8 0.8 0.8 0.6 0.5 0.5
National 9.4 8.9 8.5 7.9 7.3 6.2 5.5
New India 13.5 12.8 11.5 9.9 8.7 7.6 7.3
Oriental 8.9 8.3 7.6 7.1 5.6 4.9 4.3
Reliance General 0.5 0.5 0.5 0.5 0.6 0.9 1.0
Royal Sundaram 1.1 1.1 1.1 0.7 0.7 0.6 0.5
SBI General 0.6 1.0 1.4 1.3 1.4 1.6 1.3
Tata-AIG 1.6 2.4 0.9 1.2 1.6 1.9 2.1
United India 6.4 5.8 5.9 5.2 4.5 3.9 3.7
Total 60.5 55.5 50.0 53.8 49.3 46.2 44.0
Total (PSU) 38.3 35.8 33.5 30.1 26.2 22.6 20.9
Total (private) 22.2 19.7 16.4 23.7 23.1 23.6 23.1
Standalone health insurers
Aditya Birla 0.5 1.1 1.7 2.1 2.2 2.4 2.7
Niva Bupa 4.0 4.0 4.2 5.2 7.0 8.4 9.1
Care 3.9 4.7 5.6 6.2 7.1 7.7 9.4
Star Health 22.9 25.5 28.6 31.3 32.9 33.7 33.1
Total 39.5 44.5 50.0 46.2 50.7 53.8 56.0

Source: IRDA, GI Council, Kotak Institutional Equities

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Private GI players and SAHIs gained share in the group health business
Exhibit 18: Group health insurance market share across players, March fiscal year-ends, 2018-2024 (%)
2018 2019 2020 2021 2022 2023 2024
General insurers
Acko General 0.0 0.1 0.4 0.4 1.1 1.6 1.5
Bajaj General 4.4 6.0 4.6 4.1 3.9 4.1 5.0
Cholamandalam MS 0.2 0.2 0.3 0.7 0.3 0.2 0.3
Go Digit - 0.0 0.1 0.6 1.1 1.5 2.2
HDFC ERGO 1.1 3.0 2.5 3.6 3.4 3.6 3.6
ICICI -Lombard 4.6 7.4 9.3 8.2 7.1 8.2 9.0
IFFCO -Tokio 2.5 2.9 3.6 3.6 3.4 3.4 1.5
Magma HDI 0.0 0.4 0.1 0.2 0.2 0.4 0.8
National 18.6 10.3 7.8 10.7 9.0 8.5 7.5
New India 22.0 22.3 25.3 27.7 28.8 25.7 22.6
Oriental 11.9 11.4 10.8 9.6 10.4 9.7 9.5
Reliance General 2.1 2.8 2.3 2.0 1.8 2.0 2.1
Royal Sundaram 0.6 0.7 0.7 0.5 0.5 0.5 0.6
SBI General 2.1 1.6 1.8 3.3 3.5 3.8 4.2
Tata-AIG 0.8 0.9 2.6 2.7 2.6 3.0 3.1
United India 18.4 15.8 12.9 8.7 7.8 6.6 6.1
Universal Sompo 0.1 0.2 0.2 0.5 0.4 0.4 0.6
Total 91.3 89.0 88.0 89.3 87.7 86.3 84.5
Total (PSU) 70.8 59.8 56.8 56.7 55.9 50.5 45.6
Total (private) 20.5 29.2 31.2 32.7 31.8 35.8 38.8
Standalone health insurers
Aditya Birla 0.9 1.1 1.6 2.2 2.5 3.8 4.2
Cigna TTK 0.6 1.0 1.0 1.3 1.4 1.6 1.7
Max Bupa 0.6 0.8 1.2 1.1 1.6 2.2 3.0
Care 1.7 2.4 2.4 2.5 3.4 4.3 4.7
Star Health 2.2 2.9 3.3 3.6 3.3 1.8 2.0
Total 8.7 11.0 12.0 10.7 12.3 13.7 15.5

Source: IRDA, GI Council, Kotak Institutional Equities

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Large players maintain stable yoy market share in March 2024

Exhibit 19: Player-wise gross direct premium (ex-crop) market share, March 2023-March 2024 (%)
Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24
General insurers
Acko General 0.8 0.5 0.9 0.7 0.6 0.8 0.7 0.7 0.8 0.8 0.7 0.7 0.8
Bajaj General 5.2 6.5 5.6 5.9 15.3 5.6 6.1 6.7 5.6 6.0 6.9 5.5 4.9
Cholamandalam MS 2.7 2.5 2.9 2.7 2.4 3.0 2.6 2.7 2.9 2.6 2.5 3.2 2.9
Go Digit 3.1 3.2 3.2 3.0 2.7 3.4 3.0 3.5 3.4 2.7 2.7 3.1 2.9
HDFC ERGO 7.0 5.9 5.7 5.0 5.1 5.7 5.3 6.4 5.9 6.2 5.9 6.4 7.0
ICICI -Lombard 7.2 10.8 9.7 9.1 7.7 9.1 7.7 10.0 10.2 8.6 9.5 9.3 7.7
IFFCO -Tokio 3.2 3.9 4.0 3.8 2.9 3.7 4.0 3.4 3.2 2.7 2.9 2.2 2.1
Magma HDI 0.9 0.9 0.9 1.1 1.0 1.0 0.9 1.3 1.3 1.1 1.7 1.5 1.2
National 6.9 4.7 5.5 7.2 4.8 7.2 10.5 4.5 7.5 4.4 4.2 4.6 6.0
New India 13.4 19.9 13.6 15.0 13.7 12.5 13.1 14.7 12.0 18.5 13.1 12.1 12.2
Oriental 5.6 6.0 7.8 6.6 6.6 5.2 8.8 5.7 5.6 6.4 6.1 6.1 5.7
Reliance General 2.3 4.4 2.9 3.1 2.7 3.0 3.0 4.0 3.6 3.0 2.7 2.8 2.2
Royal Sundaram 1.6 1.3 1.2 1.3 1.3 1.6 1.3 1.5 1.4 1.5 1.5 1.5 1.4
SBI General 3.8 2.4 3.3 3.2 2.9 3.9 3.5 4.0 4.1 4.0 4.8 4.9 4.8
Tata-AIG 6.4 6.2 6.3 6.1 5.4 6.0 5.2 5.7 5.8 5.5 5.2 5.9 5.7
United India 7.7 7.2 8.2 6.8 7.8 7.0 5.9 6.8 7.3 6.5 9.1 8.1 7.7
Universal Sompo 1.0 1.2 1.3 1.4 1.3 1.6 1.2 1.3 1.1 1.2 0.9 1.1 0.9
Total 83.3 91.5 87.7 86.6 88.4 85.7 87.0 88.0 86.9 86.2 86.3 84.4 81.2
Total (PSU) 33.7 37.8 35.1 35.6 32.8 31.9 38.4 31.6 32.3 35.8 32.5 31.0 31.6
Total (private) 49.7 53.7 52.6 51.1 55.6 53.8 48.7 56.4 54.5 50.4 53.9 53.5 49.6
Standalone health insurers
Aditya Birla 1.6 1.0 1.0 1.8 1.1 1.2 1.4 1.2 1.3 1.4 1.9 1.5 2.2
Niva Bupa 2.6 1.4 2.1 2.0 1.8 2.3 2.1 1.9 2.2 2.6 2.2 2.5 3.0
Care 2.5 2.0 2.5 2.6 2.4 3.3 2.5 2.5 2.7 2.7 2.6 3.1 3.2
Star Health 8.4 3.2 5.6 5.8 5.3 6.6 5.7 5.2 5.8 6.1 5.7 7.1 9.0
Total 15.9 8.2 11.8 12.8 11.2 14.0 12.2 11.5 12.6 13.3 13.2 15.0 18.1
Specialised insurers
AIC (Crop) — 0.0 0.0 0.0 0.0 (0.0) 0.0 0.0 0.0 0.0 0.0 0.0 0.0
ECGC (Export & Credit) 0.8 0.3 0.5 0.5 0.4 0.3 0.7 0.5 0.5 0.5 0.4 0.6 0.7
Total 0.8 0.3 0.5 0.5 0.4 0.3 0.7 0.5 0.5 0.5 0.4 0.6 0.7

Source: IRDA, GI Council, Kotak Institutional Equities

ICICI Lombard reports strong growth in the motor segment

Exhibit 20: Player-wise motor premium growth yoy, March 2023-March 2024 (%)
Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24
Acko General 33 37 23 18 11 17 12 18 36 40 34 37 28
Bajaj Allianz 20 26 31 21 14 18 10 5 9 2 7 (0) (9)
Cholamandalam MS 21 55 38 17 13 17 11 8 4 2 3 8 20
Go Digit 49 63 64 46 67 52 38 24 40 41 29 35 (5)
HDFC ERGO General 22 19 15 (5) (10) 1 5 3 9 27 50 47 12
ICICI -Lombard (8) (2) 6 11 10 15 7 (2) 10 11 8 76 17
IFFCO -Tokio 23 53 45 43 31 23 16 4 2 (9) (3) (40) (31)
New India 11 18 17 20 16 10 (1) 3 5 (1) 4 1 (5)
Reliance General (16) 9 14 17 16 5 10 3 12 12 1 (3) 9
Royal Sundaram 15 14 20 15 12 7 (2) (6) (9) 1 12 12 (8)
SBI General (30) (31) (24) (21) (9) 35 79 125 75 51 68 (24) 164
Shriram General 39 41 40 26 20 21 34 37 44 45 41 30 27
Tata-AIG 36 47 51 38 27 21 9 7 12 (2) (11) (1) (11)
United India 16 19 19 19 19 18 16 20 23 13 15 19 14
Universal Sompo 25 1 (10) 4 22 33 3 12 31 46 50 18 5
Total 14 23 23 17 15 16 11 9 12 9 12 10 7
Total (PSU) 16 24 23 18 15 13 6 9 7 (0) 5 4 (0)
Total (private) 14 23 23 17 15 18 13 9 14 13 15 13 10

Source: IRDA, GI Council, Kotak Institutional Equities

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ICICI Lombard gains share in the motor segment

Exhibit 21: Player-wise motor insurance market share, March 2023-March 2024 (%)
Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24
General insurers
Acko General 0.7 0.8 0.8 0.8 0.8 0.9 0.9 0.9 1.0 1.1 1.0 0.9 0.9
Bajaj General 7.1 7.1 7.1 6.9 6.6 6.6 6.4 6.2 6.1 6.1 6.0 5.9 6.0
Cholamandalam MS 5.1 6.5 5.8 5.3 5.3 5.3 5.3 5.0 5.0 5.0 5.4 5.7 5.7
Go Digit 6.4 6.5 6.2 6.0 6.4 6.5 6.4 6.2 6.0 5.5 5.1 5.5 5.6
HDFC ERGO 4.9 4.8 4.8 4.7 4.8 5.6 6.0 6.5 6.4 6.7 6.5 6.3 5.1
ICICI -Lombard 10.4 9.8 9.7 10.0 9.8 9.8 9.8 11.1 11.9 10.7 10.4 10.8 11.3
IFFCO -Tokio 5.1 5.5 5.8 5.7 5.3 5.4 5.4 5.1 4.8 4.6 4.3 3.0 3.3
Magma HDI 1.8 1.7 1.8 2.0 1.9 1.9 2.1 2.3 2.5 2.4 2.6 2.7 2.7
National 6.5 6.8 7.0 6.1 5.6 5.6 5.6 5.3 4.7 4.8 5.0 5.1 5.1
New India 10.7 10.9 10.8 11.4 11.2 10.8 10.2 9.7 9.7 10.4 10.4 10.1 9.5
Oriental 4.7 4.3 4.3 4.3 4.3 4.4 4.7 4.5 4.6 4.8 4.9 4.9 4.9
Reliance General 4.2 4.0 4.2 4.6 4.6 4.3 5.0 5.2 5.8 5.2 5.0 4.5 4.2
Royal Sundaram 3.1 2.6 2.7 2.9 2.9 2.9 2.8 2.8 2.6 3.0 2.9 2.8 2.7
SBI General 2.3 2.3 2.2 2.4 2.7 3.2 4.0 4.0 4.3 4.6 4.6 5.0 5.7
Shriram General 2.8 2.3 2.6 2.9 3.0 3.1 3.4 3.0 3.1 3.2 3.1 3.1 3.3
Tata-AIG 9.9 9.5 9.3 9.0 8.6 8.0 7.7 7.7 7.6 7.4 7.4 7.8 8.2
United India 7.4 7.1 7.3 7.3 7.3 7.4 7.7 7.4 8.0 7.9 8.2 8.4 7.9
Universal Sompo 1.8 1.8 2.3 2.7 3.1 3.2 2.7 2.5 1.9 2.1 2.0 1.9 1.7
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Total (PSU) 29.3 29.1 29.4 29.1 28.4 28.2 28.3 26.9 27.0 28.0 28.4 28.4 27.4
Total (private) 70.7 70.9 70.6 70.9 71.6 71.8 71.7 73.1 73.0 72.0 71.6 71.6 72.6

Source: IRDA, GI Council, Kotak Institutional Equities

ICICI Lombard growth in the motor OD segment has picked up

Exhibit 22: Player-wise motor OD premium growth yoy, March 2023-March 2024 (%)
Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24
Acko General 46 67 50 38 30 34 31 35 53 58 49 55 40
Bajaj Allianz 34 33 42 35 21 26 19 8 17 4 10 0 (10)
Cholamandalam MS 27 70 51 25 19 24 21 9 13 5 3 12 25
Go Digit 80 72 79 58 60 54 54 38 54 43 31 32 19
HDFC ERGO General 30 21 17 (1) (4) 9 14 9 19 38 63 70 56
ICICI -Lombard (6) (0) 11 15 11 17 17 4 22 15 14 20 21
IFFCO -Tokio 33 67 59 61 39 30 25 7 6 (4) (0) (26) (38)
New India 26 29 36 42 35 21 8 2 8 (1) 5 (1) (13)
Reliance General (17) (9) 5 0 4 7 (2) 9 26 22 23 41 24
Royal Sundaram 11 18 17 19 15 1 (2) (14) (11) (24) (17) (18) (26)
SBI General (27) (32) (15) (11) (0) 46 124 130 137 111 136 114 114
Shriram General 48 51 59 46 34 32 44 44 61 53 50 42 46
Tata-AIG 32 32 40 29 22 23 18 11 24 12 5 13 2
United India 30 25 29 29 27 24 27 25 36 17 13 15 15
Universal Sompo (6) (18) (24) (15) (8) 7 (23) 0 25 21 48 20 3
Total 19 24 27 17 22 19 18 12 21 13 18 16 10
Total (PSU) 32 36 39 12 54 19 13 8 10 (2) 3 1 (5)
Total (private) 15 20 24 19 14 19 19 13 25 19 23 22 15

Source: IRDA, GI Council, Kotak Institutional Equities

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ICICI Lombard gains share in the motor OD segment

Exhibit 23: Player-wise motor OD insurance market share, March fiscal year-ends, March 2023-March 2024 (%)
Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24
General insurers
Acko General 0.7 0.7 0.7 0.7 0.7 0.8 0.8 0.9 0.9 1.0 0.9 0.9 0.9
Bajaj General 8.3 8.0 8.2 8.1 7.5 7.6 7.3 6.9 6.9 6.9 6.7 6.6 6.8
Cholamandalam MS 5.1 7.1 6.2 5.2 5.3 5.2 5.3 4.7 4.8 4.8 5.2 5.8 5.8
Go Digit 4.8 5.2 5.3 5.0 5.2 5.5 5.6 5.6 5.4 5.1 4.9 4.9 5.3
HDFC ERGO 5.9 5.3 5.3 5.3 5.6 6.5 7.0 7.4 7.5 8.2 8.1 8.3 8.4
ICICI -Lombard 12.5 11.4 11.7 12.0 11.7 11.7 12.1 12.9 14.4 13.3 12.9 13.4 13.8
IFFCO -Tokio 6.2 7.1 7.2 7.3 6.6 6.6 6.6 6.0 5.4 5.4 4.9 4.3 3.5
Magma HDI 1.2 1.2 1.2 1.3 1.3 1.3 1.5 1.6 1.8 1.7 1.8 1.9 1.9
National 5.7 6.1 6.0 4.9 4.4 4.3 4.2 4.3 3.3 3.6 3.8 3.8 3.9
New India 9.8 10.1 9.9 11.2 11.2 10.2 9.2 8.8 8.7 9.2 9.2 8.7 7.8
Oriental 3.4 3.2 3.0 3.2 3.2 3.3 3.4 3.3 3.4 3.5 3.6 3.6 3.5
Reliance General 4.2 4.2 4.3 4.3 4.4 4.3 4.8 5.2 5.7 5.3 5.0 5.0 4.7
Royal Sundaram 3.2 2.9 3.0 3.2 3.1 3.0 2.7 2.6 2.4 2.4 2.2 2.0 2.2
SBI General 2.9 2.6 2.7 3.0 3.3 3.9 5.2 5.0 5.0 5.2 5.2 5.5 5.6
Shriram General 1.5 1.2 1.4 1.6 1.6 1.6 1.8 1.6 1.7 1.7 1.7 1.7 2.0
Tata-AIG 10.2 9.5 9.5 9.2 9.3 9.1 8.8 8.7 8.8 8.7 8.4 8.7 9.5
United India 5.4 5.1 5.0 5.2 5.3 5.3 5.4 5.5 6.1 5.7 5.9 5.8 5.6
Universal Sompo 2.1 2.0 2.6 3.0 3.0 3.1 2.5 2.8 2.2 2.2 2.5 2.2 2.0
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Total (PSU) 24.3 24.5 24.0 24.5 24.1 23.1 22.3 21.9 21.4 21.9 22.5 22.1 20.9
Total (private) 75.7 75.5 76.0 75.5 75.9 76.9 77.7 78.1 78.6 78.1 77.5 77.9 79.1

Source: IRDA, GI Council, Kotak Institutional Equities

ICICI Lombard gains share in the motor TP segment

Exhibit 24: Player-wise motor TP insurance market share, March 2023-March 2024 (%)
Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24
General insurers
Acko General 0.8 0.9 0.9 0.9 0.9 1.0 0.9 1.0 1.0 1.1 1.0 0.9 0.9
Bajaj General 6.4 6.5 6.3 6.1 6.0 5.9 5.9 5.8 5.5 5.5 5.4 5.4 5.5
Cholamandalam MS 5.1 6.1 5.5 5.3 5.3 5.4 5.2 5.1 5.1 5.1 5.5 5.7 5.6
Go Digit 7.3 7.4 6.7 6.8 7.3 7.1 7.1 6.6 6.4 5.7 5.3 5.9 5.9
HDFC ERGO 4.3 4.4 4.4 4.3 4.3 4.9 5.2 5.8 5.6 5.6 5.5 4.9 3.1
ICICI -Lombard 9.0 8.6 8.3 8.6 8.4 8.5 8.3 9.8 10.2 8.9 8.7 9.1 9.7
IFFCO -Tokio 4.4 4.3 4.7 4.6 4.4 4.6 4.5 4.4 4.4 4.1 3.8 2.2 3.2
Magma HDI 2.1 2.1 2.3 2.4 2.4 2.3 2.5 2.9 3.0 3.0 3.1 3.3 3.1
National 7.0 7.4 7.6 7.0 6.5 6.5 6.6 6.1 5.7 5.7 5.8 5.9 5.9
New India 11.2 11.4 11.4 11.5 11.3 11.3 10.9 10.3 10.4 11.3 11.1 10.9 10.6
Oriental 5.6 5.2 5.2 5.0 5.0 5.2 5.5 5.3 5.4 5.7 5.7 5.8 5.8
Reliance General 4.2 3.9 4.2 4.8 4.8 4.3 5.1 5.2 5.9 5.1 5.0 4.2 4.0
Royal Sundaram 3.1 2.3 2.5 2.7 2.8 2.9 2.9 2.9 2.8 3.4 3.4 3.4 3.0
SBI General 2.0 2.1 1.9 2.0 2.2 2.6 3.2 3.4 3.7 4.2 4.3 4.6 5.8
Shriram General 3.6 3.0 3.4 3.8 4.0 4.1 4.4 3.9 4.0 4.3 4.0 4.0 4.2
Tata-AIG 9.8 9.5 9.1 8.9 8.1 7.2 6.9 7.1 6.8 6.4 6.7 7.2 7.4
United India 8.6 8.5 9.0 8.8 8.6 8.9 9.3 8.8 9.3 9.4 9.6 10.0 9.3
Universal Sompo 1.6 1.7 2.1 2.5 3.2 3.3 2.8 2.3 1.6 2.1 1.7 1.6 1.6
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Total (PSU) 32.4 32.4 33.2 32.2 31.4 32.0 32.3 30.4 30.8 32.2 32.3 32.6 31.6
Total (private) 67.6 67.6 66.8 67.8 68.6 68.0 67.7 69.6 69.2 67.8 67.7 67.4 68.4

Source: IRDA, GI Council, Kotak Institutional Equities

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 80

SAHI grow faster than GI players in March 2024

Exhibit 25: Player-wise health premium growth yoy, March fiscal year-ends, March 2023-March 2024 (%)
Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24
General insurers
Acko General 68 17 98 (6) 48 (4) 28 38 48 15 31 18 (10)
Bajaj Allianz (12) 42 (26) 31 887 28 13 48 48 97 103 29 32
Cholamandalam MS 13 35 50 12 28 45 57 24 30 14 29 4 16
Go Digit 111 160 103 105 110 19 65 42 49 (4) 93 27 76
HDFC ERGO General 18 18 16 9 10 16 26 28 22 15 16 18 14
ICICI -Lombard 33 40 47 27 21 26 14 22 29 22 28 30 26
IFFCO -Tokio (70) 125 (8) (24) (45) (56) (29) (20) (56) (54) (37) (63) (47)
New India 60 6 21 6 11 (3) 33 22 (7) 23 2 (2) 4
Reliance General 22 45 28 7 51 (2) 35 183 11 (0) 4 15 6
Royal Sundaram 6 17 (23) 7 18 22 45 99 51 88 40 10 25
SBI General (6) 65 35 33 8 33 20 42 33 52 35 (13) 3
Shriram General 211 (3,500) 73 50 54 (36) (10) (14) (30) (50) (19) 18 (46)
Tata-AIG 36 40 20 44 21 54 14 56 (1) 22 15 18 17
United India (14) 23 (7) 2 (16) (7) (2) 13 48 7 15 41 9
Universal Sompo 40 42 114 87 244 68 (25) 86 213 67 164 3 55
Total 13 21 20 13 36 9 36 3 8 21 13 9 14
Total (PSU) 19 6 16 7 (13) (0) 51 (19) (3) 18 (4) 5 11
Total (private) 7 50 25 24 131 21 16 44 26 27 36 15 17
Standalone health insurers
Niva Bupa 46 52 44 36 37 38 37 43 46 39 34 35 29
Care 23 46 38 33 39 44 29 47 31 34 36 40 41
Star Health 12 25 16 19 17 19 15 18 17 15 18 19 18
Total 24 36 24 25 25 27 24 31 24 27 29 30 26
Industry total 17 24 21 17 33 15 33 10 13 23 17 16 19

Source: IRDA, GI Council, Kotak Institutional Equities

SAHIs’ share in overall health insurance up to 41% in March 2024

Exhibit 26: Player-wise health insurance market share, March fiscal year-ends, March 2022-March 2023 (%)
Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24
General insurers
Acko General 1.1 0.6 1.3 0.8 0.7 1.0 0.8 0.8 0.9 0.7 0.7 0.8 0.9
Bajaj General 2.6 3.9 2.9 3.2 24.1 3.5 5.3 5.3 3.6 4.3 6.0 3.0 2.9
Cholamandalam MS 0.6 0.7 0.8 0.7 0.6 1.0 0.7 0.7 0.8 0.6 0.6 0.8 0.6
Go Digit 0.7 2.1 1.4 1.0 0.9 1.0 1.1 1.2 1.3 0.7 1.2 1.2 1.0
HDFC ERGO 9.7 5.8 5.4 5.0 4.1 5.7 4.3 5.2 5.4 5.8 5.3 6.3 9.3
ICICI -Lombard 4.2 7.7 8.4 5.7 4.1 6.9 4.5 6.0 6.4 4.9 6.3 6.1 4.4
IFFCO -Tokio 1.1 3.2 1.8 1.3 1.1 1.3 2.7 1.1 0.6 0.5 1.5 0.5 0.5
Magma HDI 0.3 0.6 0.4 0.5 0.4 0.5 0.4 0.5 0.4 0.4 0.5 0.6 0.4
National 6.3 4.2 4.2 9.1 3.5 8.0 15.9 3.6 11.8 4.1 3.5 4.1 5.8
New India 12.5 27.5 14.7 17.5 15.8 12.6 15.1 19.1 13.4 24.5 15.7 12.5 10.9
Oriental 5.2 6.0 10.9 7.9 6.7 5.7 11.1 6.6 6.6 8.4 4.9 7.5 5.7
Reliance General 1.0 3.1 2.0 1.8 1.4 1.6 1.4 3.5 1.4 1.1 1.1 1.3 0.9
Royal Sundaram 0.4 0.5 0.5 0.5 0.4 0.7 0.4 0.7 0.4 0.7 0.6 0.4 0.4
SBI General 3.3 1.7 2.9 2.4 1.6 2.9 1.8 2.7 2.3 2.4 4.7 3.4 2.9
Tata-AIG 3.1 2.1 2.9 3.3 2.3 3.4 2.4 3.0 2.5 2.6 2.2 3.0 3.1
United India 7.4 9.6 8.1 5.8 7.0 5.9 4.4 6.9 7.1 5.1 11.0 8.2 6.8
Universal Sompo 0.2 0.7 0.3 0.6 0.5 0.5 0.4 0.4 0.5 0.3 0.3 0.3 0.3
Total 61.3 70.7 71.2 69.2 77.1 65.3 74.6 69.9 68.4 68.7 71.3 63.0 58.9
Total (PSU) 31.4 47.4 38.0 40.3 33.0 32.1 46.4 36.2 39.0 42.0 35.1 32.3 29.3
Total (private) 30.0 23.3 33.3 28.9 44.1 33.2 28.2 33.7 29.3 26.6 36.2 30.7 29.6
Standalone health insurers
Aditya Birla 3.8 2.2 2.3 4.1 2.2 2.7 2.9 3.1 3.1 3.2 4.0 3.5 4.8
Niva Bupa 6.2 3.3 5.2 4.9 3.7 5.8 4.4 5.0 5.6 6.1 4.8 6.2 6.8
Care 6.1 4.6 6.0 6.2 4.9 8.1 5.1 6.4 6.7 6.2 5.7 7.7 7.2
Star Health 20.7 7.6 13.8 14.2 11.1 16.4 11.8 13.7 14.7 14.5 12.4 17.6 20.5
Total 38.7 18.9 28.8 30.8 22.9 34.7 25.4 30.1 31.6 31.3 28.7 37.0 41.1

Source: IRDA, GI Council, Kotak Institutional Equities

Insurance
India Research
 81

Growth in retail health strong at 18%, driven by SAHI players up 23% in March 2024
Exhibit 27: Player-wise retail health premium growth yoy, March fiscal year-ends, March 2023-March 2024 (%)
Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24
General insurers
Acko General (3) 1,409 1,482 1,187 1,329 1,310 1,013 919 602 431 290 250 372 316
Bajaj Allianz 18 10 17 9 10 9 5 10 15 18 14 16 6
Cholamandalam MS 19 59 33 4 25 42 (9) 21 13 8 19 (7) 4
Go Digit 57 43 26 44 43 31 11 30 1 1 10 18 32
HDFC ERGO General 17 16 11 10 12 13 17 17 12 19 15 18 19
ICICI -Lombard 27 23 25 21 20 19 18 18 14 17 28 26 14
IFFCO -Tokio (1) 25 14 26 22 44 6 25 16 19 31 (4) 18
New India 2 7 7 4 11 19 17 21 18 16 20 20 15
Reliance General 85 51 50 56 69 72 48 48 26 33 24 29 25
Royal Sundaram 10 2 5 4 2 3 (5) 7 9 (8) (2) (4) (6)
SBI General 16 21 19 8 15 2 5 9 (9) (10) 2 (18) (27)
Tata-AIG 41 32 22 21 31 39 36 42 20 29 29 32 28
United India 1 (0) 23 39 13 4 (1) 11 (0) 11 20 21 15
Universal Sompo (3) (14) (2) (1) (2) 4 (12) 4 (19) (7) 21 (10) (10)
Total 13 12 13 12 14 15 11 18 10 13 16 14 12
Total (PSU) 2 3 9 9 10 10 8 17 8 9 14 14 10
Total (private) 22 22 18 14 18 20 15 19 12 16 18 15 14
Standalone health insurers
Niva Bupa 35 22 26 22 23 25 28 30 24 32 45 37 31
Care 35 37 44 43 47 56 49 60 42 41 39 48 45
Star Health 12 25 15 19 16 18 16 18 17 16 16 17 14
Total 19 26 21 23 22 25 23 27 22 24 26 26 23
Industry total 16 19 18 18 18 20 18 23 17 19 22 21 18

Source: IRDA, GI Council, Kotak Institutional Equities

SAHIs’ share in retail health up to 58% in March 2024

Exhibit 28: Player-wise retail health insurance market share, March fiscal year-ends, March 2023-March 2024 (%)
Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24
General insurers
Bajaj General 2.5 2.4 2.5 2.4 2.4 2.4 2.5 2.4 2.3 2.3 2.2 2.3 2.3
Cholamandalam MS 1.0 2.0 1.5 1.3 1.5 1.5 1.1 1.5 1.5 1.3 1.4 1.2 0.9
Go Digit 0.1 0.1 0.1 0.1 0.2 0.2 0.1 0.1 0.2 0.1 0.1 0.1 0.1
HDFC ERGO 11.0 9.8 9.2 8.9 8.9 8.8 9.1 8.9 9.1 9.8 9.1 9.4 11.1
ICICI -Lombard 3.0 3.1 3.1 3.0 2.9 2.9 2.9 2.9 2.9 2.8 3.0 3.0 2.9
IFFCO -Tokio 0.4 0.6 0.6 0.6 0.6 0.7 0.6 0.6 0.5 0.5 0.5 0.4 0.4
Magma HDI 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.1 0.1 0.1 0.1 0.1 0.1
National 5.1 6.5 5.9 5.5 5.7 5.7 5.4 5.4 5.6 5.4 5.5 5.6 4.7
New India 6.6 8.7 6.9 6.9 7.6 7.7 7.5 7.4 7.3 7.5 7.5 7.6 6.4
Oriental 4.2 5.5 4.9 4.5 4.6 4.5 4.3 4.2 4.2 4.3 4.1 4.2 3.4
Reliance General 1.0 1.0 0.9 1.0 1.0 1.0 1.1 1.1 1.1 1.0 1.0 1.0 1.0
Royal Sundaram 0.5 0.6 0.6 0.6 0.5 0.5 0.5 0.5 0.5 0.4 0.4 0.4 0.4
SBI General 1.6 1.3 1.6 1.5 1.5 1.5 1.6 1.5 1.4 1.2 1.1 1.2 1.0
Tata-AIG 2.2 2.0 2.0 2.0 2.0 2.1 2.1 2.0 1.9 2.1 2.0 2.1 2.4
United India 3.4 4.1 4.2 4.7 3.7 3.5 3.4 3.5 3.4 3.6 3.7 3.7 3.4
Universal Sompo 0.2 0.3 0.3 0.3 0.3 0.3 0.2 0.3 0.2 0.2 0.2 0.2 0.2
Total 44.0 46.0 45.6 44.5 44.7 44.6 43.7 43.6 43.4 43.8 43.1 43.7 41.6
Total (PSU) 19.3 24.9 21.9 21.6 21.6 21.3 20.6 20.5 20.6 20.8 20.9 21.1 17.9
Total (private) 24.6 21.2 23.7 22.9 23.1 23.3 23.1 23.1 22.8 23.0 22.3 22.6 23.7
Standalone health insurers
Aditya Birla 2.3 2.4 2.4 2.5 2.5 2.5 2.7 2.6 2.4 2.9 2.8 2.9 3.0
Niva Bupa 8.4 8.6 9.3 8.7 8.6 8.7 9.3 9.2 8.9 9.6 9.9 8.7 9.3
Care 7.9 9.2 8.6 8.8 9.1 9.3 9.3 9.8 9.2 9.5 9.8 10.0 9.7
Star Health 35.7 29.3 32.4 33.8 33.3 33.1 33.2 33.0 34.4 32.5 32.6 32.9 34.5
Total 56.0 54.0 54.4 55.5 55.3 55.4 56.3 56.4 56.6 56.2 56.9 56.3 58.4

Source: IRDA, GI Council, Kotak Institutional Equities

Insurance
India Research
 82

Star Health has grown faster in the group health segment on a low base
Exhibit 29: Player-wise group health premium growth yoy, March fiscal year-ends, March 2023-March 2024 (%)

Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24
General insurers
Bajaj Allianz 3 50 22 48 107 42 35 12 68 47 45 42 52
Cholamandalam MS (31) 3 143 55 44 54 385 20 93 44 27 86 164
HDFC ERGO General 19 21 27 7 5 24 58 57 50 7 16 18 6
ICICI -Lombard 40 44 55 29 18 31 13 24 34 23 29 32 36
IFFCO -Tokio (23) (3) (11) (31) (51) (63) (74) (26) (65) (70) (50) (74) (54)
New India 2 (0) 25 6 (0) (15) 37 20 (12) 20 (3) (9) (1)
Reliance General (18) 57 45 22 50 8 7 30 16 (18) (5) (10) (22)
Royal Sundaram (1) 24 (38) 12 31 39 144 221 117 209 63 30 85
SBI General (2) 79 41 44 5 48 28 55 58 83 39 (12) 14
Tata-AIG 31 42 15 65 20 64 5 71 (9) 8 1 8 9
United India 12 29 15 (24) 1 40 14 10 9 13 (26) 67 11
Universal Sompo 191 52 373 129 534 110 (28) 153 695 236 95 12 (47)
Total 9 19 32 14 17 11 57 (14) 6 22 20 10 15
Total (PSU) 1 2 25 4 8 0 82 (42) (9) 21 1 5 11
Total (private) 20 49 42 31 30 24 22 36 36 23 32 14 19
Standalone health insurers
Niva Bupa 95 167 114 82 93 82 67 88 108 53 10 30 22
Care 1 59 34 26 33 35 9 35 21 26 32 28 35
Star Health 16 35 32 18 35 37 9 26 18 8 46 61 72
Total 48 59 34 30 34 33 28 41 28 37 36 41 38
Industry total 15 22 32 16 19 14 53 (8) 10 24 23 15 19

Source: IRDA, GI Council, Kotak Institutional Equities

GI players still dominate the group health segment

Exhibit 30: Player-wise group health insurance market share, March fiscal year-ends, March 2023-March 2024 (%)
Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24
General insurers
Acko General 2.8 0.9 2.1 1.4 1.6 1.8 1.2 1.6 1.6 1.2 1.4 1.5 1.9
Bajaj General 2.6 5.1 2.9 3.7 7.3 4.1 7.1 6.4 4.7 3.4 6.8 3.8 3.3
Cholamandalam MS 0.1 0.4 0.3 0.3 0.3 0.6 0.5 0.3 0.4 0.1 0.2 0.4 0.3
Go Digit 1.5 3.3 2.2 1.8 2.0 1.8 1.7 2.5 2.4 1.2 2.6 2.5 2.3
HDFC ERGO 9.0 3.7 3.0 2.7 3.2 3.1 2.0 3.9 3.3 3.1 4.4 3.8 8.0
ICICI -Lombard 5.9 11.0 11.9 8.1 7.4 10.0 5.5 10.4 9.5 6.7 11.0 10.1 6.7
IFFCO -Tokio 1.7 2.1 2.6 2.0 2.3 1.9 0.7 2.1 0.9 0.5 1.9 0.7 0.7
Magma HDI 0.5 0.9 0.6 0.9 0.8 0.9 0.5 1.0 0.7 0.6 1.0 1.1 0.7
National 4.9 4.3 3.3 7.9 7.3 10.1 23.2 3.4 11.9 3.4 2.3 3.0 4.7
New India 22.1 30.4 20.6 28.2 17.9 17.6 20.7 16.9 19.9 39.9 14.9 19.7 18.3
Oriental 4.1 6.0 14.4 8.1 11.6 6.8 13.2 10.9 9.4 9.5 7.3 11.8 5.9
Reliance General 1.0 4.4 2.5 2.5 2.6 2.1 1.3 2.5 1.8 1.0 1.5 1.3 0.7
Royal Sundaram 0.4 0.6 0.4 0.5 0.7 0.8 0.4 1.0 0.5 0.9 1.0 0.5 0.5
SBI General 6.1 2.3 3.8 3.4 2.9 4.3 2.1 4.7 3.3 3.6 9.3 6.3 5.8
Tata-AIG 4.1 2.3 2.8 3.9 3.5 3.8 2.3 4.3 2.8 2.4 2.7 3.7 3.8
United India 10.9 7.8 11.1 3.8 10.0 7.5 3.5 4.3 4.8 4.7 2.6 3.4 10.1
Universal Sompo 0.2 1.0 0.4 0.9 1.1 0.7 0.5 0.6 0.7 0.4 0.3 0.5 0.1
Total 80.6 85.8 87.9 83.4 86.0 82.8 89.2 81.7 82.8 85.4 81.4 79.8 77.6
Total (PSU) 41.9 48.5 49.4 48.0 46.7 41.9 60.7 35.5 45.9 57.5 27.1 37.9 39.0
Total (private) 38.7 37.3 38.6 35.4 39.3 40.8 28.5 46.2 36.9 27.8 54.3 41.9 38.6
Standalone health insurers
Aditya Birla 6.4 2.7 2.3 6.0 3.2 3.0 3.3 4.6 4.1 3.8 6.4 4.6 7.8
Cigna TTK 2.2 1.3 1.4 1.5 1.4 1.7 1.0 2.5 1.6 1.2 2.6 2.4 1.9
Niva Bupa 4.0 1.9 2.5 2.8 2.6 3.4 2.1 3.3 3.9 3.8 2.8 4.2 4.1
Care 4.1 3.6 4.1 4.8 4.9 7.1 3.2 5.6 5.6 4.1 4.7 6.0 4.6
Star Health 2.8 0.9 1.8 1.6 1.9 2.1 1.3 2.3 2.0 1.8 2.1 3.0 4.0
Total 19.4 14.2 12.1 16.6 14.0 17.2 10.8 18.3 17.2 14.6 18.6 20.2 22.4

Source: IRDA, GI Council, Kotak Institutional Equities

Insurance
India Research
 83

Bajaj’s premium (ex-crop) up 4% yoy in March 2024

Exhibit 31: Segment-wise gross direct premium growth yoy for Bajaj Allianz, March fiscal year-ends, March
2024 (Rs mn)
Gross direct premium
(Rs mn) YoY growth (%) % of total
Mar-24 2024 Mar-24 2024 Mar-24 2024
Fire 1,368 23,849 (2) 11 8 12
Marine 177 3,002 (8) 5 1 1
Marine hull (6) 208 320 (30) — —
Marine cargo 184 2,794 (5) 9 1 1
Motor 5,429 58,478 (9) 9 33 29
Motor OD 2,389 26,991 (10) 15 14 13
Motor TP 3,040 31,487 (9) 5 18 15
Engineering 264 4,080 7 37 2 2
Health 2,966 67,130 32 114 18 33
Retail health 1,275 9,899 6 11 8 5
Group health 1,372 27,640 52 46 8 14
Government schemes 178 27,696 1,041 1,325 1— 14
Overseas medical 141 1,894 6 16 1 1
Aviation 15 177 277 47 — —
Liability 339 6,151 8 21 2 3
PA 110 2,300 (46) (0) 1 1
Other 5,961 39,562 902 18 36 19
Crop insurance 4,924 27,953 (28,894) 1 30 14
Credit insurance 24 206 174 22 — —
Others 1,013 11,403 68 95 6 6
Total 16,627 204,727 49 33 100 100
Total (ex-crop) 11,704 176,774 4 41

Source: IRDA, GI Council, Kotak Institutional Equities

Chola’s premium (ex-crop) up 16% yoy in March 2024

Exhibit 32: Segment-wise gross direct premium growth yoy for Chola, March fiscal year-ends, March 2024
(Rs mn)
Gross direct premium
(Rs mn) YoY growth (%) % of total
Mar-24 2024 Mar-24 2024 Mar-24 2024
Fire 533 7,149 (14) 8 8 9
Marine 60 1,311 (9) 7 1 2
Marine hull 13 173 11 33 — —
Marine cargo 47 1,138 (13) 3 1 2
Motor 5,130 49,635 20 14 75 66
Engineering 32 373 (19) 23 — 0
Health 617 7,523 16 28 9 10
Retail health 511 5,662 4 16 8 8
Group health 105 1,846 164 69 2 2
Government schemes — — NM (100) — —
Overseas medical 1 15 (50) 46 — —
Aviation — — NM NM — —
Liability 23 213 87 (8) — —
PA 305 3,519 38 15 4 5
Other 105 5,606 24 596 2 7
Crop insurance - 4,656 (100) (22,273) - 6
Credit insurance — — NM NM — —
Others 105 950 (1) 15 2 1
Total 6,804 75,329 16 22 100 100
Total (ex-crop) 6,804 70,673 16 15

Source: IRDA, GI Council, Kotak Institutional Equities

Insurance
India Research
 84

Go Digit’s premium (ex-crop) up 2% yoy in March 2024

Exhibit 33: Segment-wise gross direct premium growth yoy for Go Digit, March fiscal year-ends, March 2024
(Rs mn)
Gross direct premium
(Rs mn) YoY growth (%) % of total
Mar-24 2024 Mar-24 2024 Mar-24 2024
Fire 200 4,870 (0) 17 3 6
Marine 16 373 (34) 8 — 0
Marine hull — 21 NM NM — —
Marine cargo 16 352 (34) 2 — 0
Motor 5,076 54,713 (5) 37 74 69
Engineering 70 850 (21) 34 1 1
Health 1,023 12,879 76 70 15 16
Retail health 68 599 32 22 1 1
Group health 948 12,193 81 73 14 15
Government schemes — — NM NM — —
Overseas medical 7 88 3 16 — —
Aviation — — NM NM — —
Liability 87 1,310 (27) (80) 1 2
PA 265 3,177 11 83 4 4
Other 107 1,240 63 116 2 2
Crop insurance — — NM NM — —
Credit insurance — — NM NM — —
Others 107 1,240 63 116 2 2
Total 6,844 79,411 2 29 100 100
Total (ex-crop) 6,844 79,411 2 29

Source: IRDA, GI Council, Kotak Institutional Equities

HDFC ERGO’s premium (ex-crop) up 11% yoy in March 2024

Exhibit 34: Segment-wise gross direct premium growth yoy for HDFC ERGO, March fiscal year-ends, March
2024 (Rs mn)
Gross direct
premium (Rs mn) YoY growth (%) % of total
Mar-24 2024 Mar-24 2024 Mar-24 2024
Fire 839 17,960 (38) 5 4 10
Marine 133 1,864 (2) (15) 1 1
Marine hull 15 163 43 (18) — —
Marine cargo 118 1,701 (6) (15) 1 1
Motor 4,633 52,754 12 14 22 28
Engineering 123 2,567 (15) 28 1 1
Health 9,598 59,749 14 17 46 32
Retail health 6,233 39,642 19 15 30 21
Group health 3,338 19,778 6 20 16 11
Government schemes — — NM NM — —
Overseas medical 26 329 60 10 — —
Aviation 18 196 NM 6 — —
Liability 309 6,325 21 18 1 3
PA 488 5,633 19 (6) 2 3
Other 4,947 38,629 3 8 23 21
Crop insurance 4,296 34,038 (6) 1 20 18
Credit insurance 26 957 97 19 — 1
Others 625 3,635 166 135 3 2
Total 21,087 185,676 7 12 100 100
Total (ex-crop) 16,791 151,638 11 14

Source: IRDA, GI Council, Kotak Institutional Equities

Insurance
India Research
 85

ICICI Lombard’s premium (ex-crop) up 17% yoy in March 2024

Exhibit 35: Segment-wise gross direct premium growth yoy for ICICI Lombard, March fiscal year-ends, March
2024 (Rs mn)
Gross direct premium
(Rs mn) YoY growth (%) % of total
Mar-24 2024 Mar-24 2024 Mar-24 2024
Fire 1,040 33,683 27 10 6 14
Marine 346 7,638 (11) 3 2 3
Marine hull 27 679 (15) (12) — —
Marine cargo 320 6,959 (11) 4 2 3
Motor 10,204 96,337 17 12 55 39
Motor OD 4,854 47,397 21 14 26 19
Motor TP 5,350 48,939 13 10 29 20
Engineering 561 8,938 16 36 3 4
Health 4,559 64,012 26 28 25 26
Retail health 1,604 12,445 14 20 9 5
Group health 2,820 49,267 36 32 15 20
Government schemes — — NM NM — —
Overseas medical 135 2,300 (2) 8 1 1
Aviation 32 1,957 (62) 11 0 1
Liability 538 9,050 36 12 3 4
PA 463 7,156 (14) 20 3 3
Other 657 18,991 26 35 4 8
Crop insurance 79 11,749 (461) 34 0 5
Credit insurance 45 656 32 5 0 —
Others 533 6,586 5 40 3 3
Total 18,401 247,761 18 18 100 100
Total (ex-crop) 18,322 236,012 17 17

Source: IRDA, GI Council, Kotak Institutional Equities

SBI General’s premium (ex-crop) up 41% yoy in March 2024

Exhibit 36: Segment-wise gross direct premium growth yoy for SBI General, March fiscal year-ends, March
2024 (Rs mn)
Gross direct
premium (Rs mn) YoY growth (%) % of total
Mar-24 2024 Mar-24 2024 Mar-24 2024
Fire 1,584 18,177 1 12 13 14
Marine 66 830 15 (1) 1 1
Marine hull — — NM NM — —
Marine cargo 66 830 15 (1) 1 1
Motor 5,173 35,601 164 31 42 28
Engineering 145 1,356 139 85 1 1
Health 2,984 28,804 3 24 24 23
Retail health 554 5,678 (27) (2) 5 5
Group health 2,428 23,115 14 33 20 18
Government schemes — — NM NM — —
Overseas medical 1 12 62 (53) — —
Aviation — 1 NM (222) — —
Liability 69 986 23 59 1 1
PA 1,041 11,189 5 15 8 9
Other 1,183 28,591 (74) (4) 10 23
Crop insurance 785 26,398 (81) (5) 6 21
Credit insurance 32 404 (8) 29 — —
Others 365 1,789 (26) 2 3 1
Total 12,245 125,536 0 16 100 100
Total (ex-crop) 11,459 99,137 41 23

Source: IRDA, GI Council, Kotak Institutional Equities

Insurance
India Research
 86

Tata AIG’s premium (ex-crop) down 2% yoy in March 2024

Exhibit 37: Segment-wise gross direct premium growth yoy for Tata AIG, March fiscal year-ends, March 2024
(Rs mn)

Gross direct premium

(Rs mn) YoY growth (%) % of total
Mar-24 2024 Mar-24 2024 Mar-24 2024
Fire 1,004 20,750 4 10 7 14
Marine 521 6,763 12 (1) 4 4
Marine hull 5 332 125 28 — —
Marine cargo 517 6,432 12 (2) 4 4
Motor 7,435 74,375 (11) 11 53 49
Engineering 304 2,853 28 58 2 2
Health 3,165 29,181 17 25 23 19
Retail health 1,327 8,768 28 30 9 6
Group health 1,571 16,952 9 21 11 11
Government schemes — — NM NM — —
Overseas medical 268 3,461 28 33 2 2
Aviation 116 1,496 (50) 64 1 1
Liability 256 5,835 1 13 2 4
PA 273 2,157 30 (51) 2 1
Other 968 7,499 187 106 7 5
Crop insurance 497 2,722 NM (907,567) 4 2
Credit insurance 117 931 (18) (9) 1 1
Others 355 3,846 82 47 3 3
Total 14,042 150,909 2 15 100 100
Total (ex-crop) 13,545 148,187 (2) 12

Source: IRDA, GI Council, Kotak Institutional Equities

Insurance
India Research
 UPDATE

Insurance
India
Sector View: Attractive NIFTY-50: 22,147 April 21, 2024

Weak on high base Company data and valuation summary

A high base has marred growth for private players in March 2024 (down 10% ICICI Life HDFC Life SBI Life Max Life
yoy) and 4QFY24 (up 4% yoy). SBI Life saw the least impact from the high 6

base, but reported muted growth, likely reflecting moderation at the parent.
5
ICICI Prudential Life and Max Life likely capitalized on demand for ULIPs and
reported 11-13% yoy APE growth in 4QFY24. With pressure on margins, we 4
forecast 1-32% VNB declines for 4QFY24E.
3
High base affected APE growth in March 2024 and 4QFY24
2
The high base has affected most private players, leading to a 10% yoy decline
in APE in March 2024; even the top-4 players reported 9% declines. Sunset 1

Apr-19

Apr-20

Apr-21

Apr-22

Apr-23

Apr-24
Oct-19

Oct-20

Oct-21

Oct-22

Oct-23
period sales of high-ticket size policies in March 2023 led to 53% yoy APE
growth for private players, leading to an elevated base; the private sector
reported an 18% APE two-year CAGR. Among listed players, HDFC Life and Max Source: Bloomberg, Company data, Kotak Institutional Equities estimates

Life had the highest base, with 60-94% APE growth in March 2023. HDFC Life
Prices in this report are based on the market close of
reported a 27% decline (up 13%, adjusting one-off of Rs10 bn) in March, leading April 19, 2024
to a 19% two-year CAGR, while Max Life restricted the decline to 8% (up 19%,

Private Circulation Only. This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities A ct of 1933
adjusting one-offs of Rs3.5 bn), leading to 21% two-year CAGR. SBI Life reported
Quick Numbers
1% decline in APE, despite not having an inflated base (APE up 13% yoy in March
2023). ICICI Prudential and Bajaj Allianz fared better, reporting 1% and 6% yoy
APE growth, respectively, in March 2024, translating into two-year CAGRs of 26 APE declined 10% yoy for private players in March
2024
and 28%.
VNB margin to compress for most players by 250-
1,200 bps yoy in 4QFY24E
A similar trend is visible in 4QFY24, with private players reporting muted 4% yoy
APE growth at a two-year CAGR of 18%. Trends for listed players are mixed. SBI Market share of top-4 players is at 36% in the
Life fared better than peers, reporting 17% yoy APE growth (13% two-year CAGR), individual segment
while ICICI Prudential Life and Max Life reported 11-13% yoy growth (21-23% two-
year CAGR).

Mixed trends for listed players

HDFC Life reported muted 2% APE growth in FY2024, reflecting a slowdown in
the agency network; bancassurance was up 18% yoy. Demand for ULIPs was
strong; while other players capitalized on this to deliver better APE growth,
HDFC Life capped ULIP growth for most of FY2024. Margin pressure was better
contained, with a 120 bps margin compression in FY2024.

ICICI Prudential Life reported 8% APE growth in FY2024. While growth was weak
in 9MFY24 (up 5% yoy) growth picked up 4QFY24 (up 13%), despite an elevated
base. However, we expect a sharp margin compression (down 1,200 bps in
4QFY24E and 800 bps in FY2024E), reflecting a shift to ULIPs and pressure from
higher payouts.

Max Life reported strong 17% APE growth in FY2024, likely driven by a pick-up
in agency channel (up 44% in 9MFY24). The product mix has also shifted toward
ULIPs and par from non-par, likely leading to 497 bps margin compression in
FY2024E. Margin compression in 4QFY24E will likely be lower at 250 bps yoy
due to a low base (down 156 bps yoy in 4QFY23).

Full sector coverage on KINSITE

Nischint Chawathe M B Mahesh, CFA Varun Palacharla Abhijeet Sakhare Ashlesh Sonje, CFA
[email protected] [email protected] [email protected] [email protected] [email protected]
+91-22-4336-0887 +91-22-4336-0886 +91-22-4336-0888 +91-22-4336-1240 +91-22-4336-0889
 88

SBI Life reported 16% growth in FY2024—a tad lower than the guidance of 18%. Growth was strong
in 1HFY24 at 18% for SBI Life, but the company moderated down to 15% in 2HFY24. With a decline in
share of non-par, the margin will likely decline (down 330 bps yoy in 4QFY24 and 199 bps in FY2024),
though lower than peers.

APE growth of (-)8% to 11% yoy in 4QFY24 for listed players

APE, March fiscal year-ends, 2020-2024E, 4QFY23-4QFY24E
APE (Rs bn) YoY (%) APE (Rs bn) YoY (%)
4QFY23 1QFY24 2QFY24 3QFY24 4QFY24E 4QFY23 1QFY24 2QFY24 3QFY24 4QFY24 2020 2021 2022 2023 2024 2023 2024
HDFC Life (merged) 52 23 30 32 47 69 13 7 (2) (8) 74 84 98 133 132.9 37 (0)
ICICI Prudential Life 33 15 21 19 36 26 (4) 3 5 10 74 65 77 86 90.5 12 5
Max Life 25 11 17 18 27 38 10 39 19 7 41 50 56 62 72.9 12 17
SBI Life 46 30 52 61 51 11 4 33 13 11 108 115 143 168 194.6 18 16

Source: Company, LI Council, Kotak Institutional Equities estimates

VNB margin to compress for most players by 250-1,200 bps yoy in 4QFY24E
VNB margin, March fiscal year-ends, 2020-2024E, 4QFY23-4QFY24E
VNB margin (%) YoY (bps) VNB margin (%) YoY (bps)
4QFY23 1QFY24 2QFY24 3QFY24 4QFY24E 4QFY23 1QFY24 2QFY24 3QFY24 4QFY24E 2020 2021 2022 2023 2024E 2023 2024E
HDFC Life (merged) 29.3 26.2 26.3 26.8 26.1 (8) 111 (71) (2) (317) 25.9 26.1 27.4 27.5 26.3 14 (121)
ICICI Prudential Life 32.0 30.0 28.0 22.9 20.0 226 (101) (308) (1,106) (1,200) 21.7 25.1 28.0 32.0 24.0 403 (798)
Max Life 30.3 22.2 25.2 27.2 27.8 (156) 108 (615) (1,203) (250) 21.6 25.2 27.3 31.2 26.2 385 (497)
SBI Life 31.3 28.8 28.5 27.4 28.0 269 (154) (300) (42) (330) 18.7 20.3 25.9 30.1 28.1 416 (199)

Notes:
Figures for HDFC Life are actuals.

Source: Company, Kotak Institutional Equities estimates

1-32% yoy VNB decline for listed players

VNB, March fiscal year-ends, 2020-2024E, 4QFY23-4QFY24E
VNB (Rs bn) YoY (%) VNB (Rs bn) YoY (%)
4QFY23 1QFY24 2QFY24 3QFY24 4QFY24E 4QFY23 1QFY24 2QFY24 3QFY24 4QFY24E 2020 2021 2022 2023 2024E 2023 2024E
HDFC Life (merged) 15 6 8 9 12 69 18 4 (2) (18) 19 22 27 37 35 37 (5)
ICICI Prudential Life 11 4 6 4 7 36 (7) (7) (29) (32) 16 16 22 28 22 28 (21)
Max Life 8 2 4 5 8 31 16 12 (18) (1) 9 12 15 19 19 28 (2)
SBI Life 14 9 15 17 14 21 (1) 21 11 (1) 20 23 37 51 55 37 8

Notes:
Figures for HDFC Life are actuals.

Source: Company, LI Council, Kotak Institutional Equities estimates

Insurance
India Research
 89

We expect margins compression for most players in FY2024E

APE, VNB and VNB margins, March fiscal year-ends, 2021-2026E
Key metrics (Rs bn/%) YoY (%)
2021 2022 2023 2024E 2025E 2026E 2021 2022 2023 2024E 2025E 2026E
APE (Rs bn)
HDFC Life 84 97.6 133 133 153 176 100 17 37 (0) 15 15
ICICI Prudential Life 65 77.3 86 91 104 120 (2) 20 12 5 15 15
LIC 422 504 567 555 567 578 NA 19 12 (2) 2 2
Max Life 50 55.9 62 73 84 96 88 13 12 17 15 15
SBI Life 115 143.0 168 195 228 266 70 25 18 16 17 17
VNB margin (%)
HDFC Life 26.1 27.4 27.5 27.3 27.5 27.8 414 bps 131 bps 14 bps -25 bps 25 bps 25 bps
ICICI Prudential Life 25.1 28.0 32.0 24.0 25.0 26.0 1503 bps 289 bps 403 bps -804 bps 100 bps 100 bps
LIC 9.9 15.1 16.2 17.3 17.7 17.6 NA 524 bps 103 bps 116 bps 43 bps -13 bps
Max Life 25.2 27.3 31.2 26.1 26.8 27.5 629 bps 215 bps 385 bps -505 bps 64 bps 69 bps
SBI Life 20.3 25.9 30.2 28.1 28.4 28.6 494 bps 555 bps 426 bps -210 bps 39 bps 10 bps
VNB (Rs bn)
HDFC Life 22 27 37 36 42 49 138 22 37 (1) 16 16
ICICI Prudential Life 16 22 28 22 26 31 143 33 28 (22) 20 20
LIC 42 76 92 96 101 102 NA 83 20 5 5 1
Max Life 12 15 19 19 22 26 150 22 28 (2) 18 18
SBI Life 23 37 51 55 65 76 125 59 37 8 19 17
Notes:
Figures for HDFC Life are actuals.

Source: Company, Kotak Institutional Equities estimates

APE declined 10% yoy for private players in March 2024

APE, March fiscal year-ends, March 2024 (Rs mn)
Mar-24
Individual yoy growth (%) Group yoy growth (%) Total yoy growth (%)
Aviva Life 457 (21) 17 (44) 474 (22)
Bajaj Allianz Life 11,765 5 720 44 12,485 6
Bharti Axa Life 1,097 (29) 12 (42) 1,108 (29)
Aditya Birla Sun Life 5,592 (25) 729 79 6,321 (20)
Canara HSBC 3,345 (14) 62 14 3,407 (14)
Pramerica Life 285 41 118 25 403 36
Future Generali Life 1,193 (3) 36 91 1,229 (2)
HDFC Life 18,618 (28) 2,298 (18) 20,916 (27)
ICICI Prudential Life 15,006 (1) 1,555 34 16,560 1
Aegas Federal Life 968 22 39 17 1,007 21
India First Life 1,102 (53) 104 18 1,206 (51)
Max Life 14,136 (8) 188 23 14,324 (8)
Reliance Life 1,944 12 27 198 1,971 13
SBI Life 16,265 (7) 2,148 81 18,412 (1)
Shriram Life 1,952 32 116 72 2,069 34
Star Union Dai-chi Life 1,838 (3) 114 9 1,953 (3)
Tata AIA Life 14,016 (19) 70 (13) 14,086 (19)
Private players 121,968 (12) 9,189 23 131,157 (10)
Private (ex-Top 4) 57,944 (11) 3,000 38 60,945 (9)
LIC 54,596 (16) 27,252 48 81,848 (2)
Total Premium 176,564 (13) 36,440 41 213,005 (7)
Note:
Top-4 players are HDFC Life, ICICI Prudential Life, SBI Life and Max Life

Source: LI Council, Kotak Institutional Equities

Insurance
India Research
 90

Private sector reported 4% growth in 4QFY24

APE, March fiscal year-ends, 4QFY24 (Rs mn)
4QFY24

yoy yoy
growth yoy growth growth
Individual (%) Group (%) Total (%)
Aegon Religare 51 805 44 529 95 652
Aviva 792 (18) 32 (30) 825 (19)
Bajaj Allianz 23,309 17 1,494 27 24,803 18
Bharti Axa 2,024 (26) 24 (58) 2,048 (27)
Birla Sunlife 11,004 (8) 1,506 38 12,510 (4)
Canara HSBC 6,647 (3) 142 (22) 6,789 (4)
DHFL Pramerica 638 42 284 23 922 36
Future Generali 1,838 (2) 117 72 1,954 1
HDFC Life 41,326 (7) 4,443 (11) 45,769 (7)
ICICI Prudential 30,004 12 3,070 26 33,073 13
IDBI Federal 2,089 30 99 29 2,188 30
India First 2,874 (45) 228 9 3,103 (43)
Max Life 26,753 10 501 65 27,254 11
Reliance Life 3,647 8 36 71 3,683 9
SBI Life 44,496 9 6,168 156 50,664 17
Shriram Life 3,473 46 239 56 3,713 47
Star Union Daichi 4,780 8 577 81 5,357 13
Tata AIA 26,718 (8) 195 (2) 26,913 (8)
Private players 254,575 2 21,093 36 275,668 4
LIC 117,987 (4) 56,129 56 174,116 10
Total Premium 372,563 0 77,221 50 449,784 6

Source: LI Council, Kotak Institutional Equities

FY2024 APE growth low at 9% for private players

APE, March fiscal year-ends, 2024 (Rs mn)
2024
Individual yoy growth (%) Group yoy growth (%) Total yoy growth (%)
Aviva Life 2,227 3 128 13 2,356 3
Bajaj Allianz Life 63,248 21 4,648 (7) 67,895 19
Bharti Axa Life 6,247 (18) 141 (34) 6,388 (19)
Aditya Birla Sun Life 30,747 2 4,554 9 35,301 3
Canara HSBC 17,024 3 1,051 (43) 18,075 (2)
Pramerica Life 1,874 23 916 70 2,789 35
Future Generali Life 3,917 2 211 (32) 4,128 (0)
HDFC Life 113,764 1 15,127 5 128,891 2
ICICI Prudential Life 72,135 7 9,229 16 81,364 8
Aegas Federal Life 6,061 28 310 28 6,371 28
India First Life 13,761 (19) 1,157 23 14,918 (17)
Max Life 69,608 16 1,766 102 71,374 17
Reliance Life 11,026 10 95 2 11,122 10
SBI Life 172,344 13 14,406 66 186,751 16
Shriram Life 8,911 37 932 95 9,843 41
Star Union Dai-chi Life 15,007 8 1,749 7 16,756 8
Tata AIA Life 74,133 5 669 18 74,802 5
Private players 738,705 8 62,624 19 801,329 9
Private (ex-Top 4) 310,854 7 22,095 6 332,950 7
LIC 351,041 (1) 164,926 (5) 515,966 (2)
Total Premium 1,089,746 5 227,549 1 1,317,295 4

Source: LI Council, Kotak Institutional Equities

Private sector ends with 2-year CAGR of 16%, up 8% on a high base

Private sector life insurance companies delivered 8% individual APE growth in FY2024, with 5% growth
for the overall sector (private sector and LIC). The weakness largely reflects a 10% decline in March 2024
and muted 1% growth in April 2024 on 53% growth in March 2023 due to sales of over Rs0.5 mn policies
in the sunset tax period. Growth was moderate at a two-year CAGR 16%. The five-year CAGR was a tad
lower at 13%.

Insurance
India Research
 91

Among large players, Bajaj reported a 31% two-year CAGR and 29% five-year CAGR (up 21% in FY2024);
this was followed by Tata AIA at 29% and 27%, respectively (slowing down up to 5% in FY2024). Aditya
Birla SL was moderate at 18% and 13%, respectively (up just 2% in FY2024), though it was a key
beneficiary of securing a bancassurance partnership with HDFC Bank. HDFC Life was moderate at a two-
year CAGR of 13% and five-year CAGR of 15% (up just 1% yoy in FY2024). SBI Life reported a two-year
CAGR of 16% and five-year CAGR of 14%. Notably, SBI Life, despite not having a high March 2023 base,
reported 13% individual APE growth and 16% overall APE growth in FY2024, lower than its guidance of
~18% growth. Max Life was a tad lower at a two-year CAGR of 13% and five-year CAGR of 12%. ICICI
Prudential Life was up 7% on 2-year basis (7% both years), flat in five years.

APE declined for most listed players due to high base

APE growth yoy, March 2023-March 2024 (%)
HDFC Life ICICI Prudential Life Max Life SBI Life
200

150

100

50

(50)

(100)
Jun-21

Jun-22

Jun-23
Sep-22
Sep-21

Sep-23
Dec-21

Dec-22

Dec-23
Mar-22
Mar-21

Mar-23

Mar-24
Source: IRDA, LI Council, Kotak Institutional Equities

ICICI Prudential lags peers on APE growth, tier II players grew at 2X industry growth
Individual APE growth for life insurers, March fiscal year-ends, 2014-2024 (%)
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2 yr CAGR 5 yr CAGR
Bajaj Allianz (19) (23) (8) 41 38 25 11 28 49 41 21 31 29
Birla Sunlife (19) (12) (8) 35 15 60 0 14 14 37 2 18 13
Canara HSBC (23) 18 35 39 34 12 7 7 32 21 3 11 13
HDFC Life (24) 25 12 9 31 6 17 14 17 27 1 13 15
ICICI Prudential Life (2) 41 8 29 16 (5) (6) (18) 15 7 7 7 0
India First (37) 5 38 82 43 18 25 5 50 27 (19) 1 15
Kotak 1 33 52 28 31 6 (1) 11 16 29 3 16 11
Max Life 17 10 8 25 22 21 5 19 12 11 16 13 12
PNB MetLife 3 23 29 11 20 12 (5) 12 21 24 6 15 11
Reliance Life 15 7 (26) (23) 5 21 2 1 5 7 10 8 5
SBI Life 18 11 37 39 31 15 9 5 26 18 13 16 14
Star Union Daichi 23 19 (9) 64 (5) (2) (2) 25 48 36 8 21 22
Tata AIA (19) (4) 159 73 33 60 21 27 30 59 5 29 27
Private sector (1) 16 14 27 24 12 5 8 22 24 8 16 13
LIC (3) (26) 3 15 13 5 8 (3) 7 9 (1) 4 4
Total (3) (10) 8 21 19 9 6 3 16 19 5 12 10

Source: LI Council, Kotak Institutional Equities

Insurance
India Research
 92

ICICI Prudential lags peers on APE growth, tier II players grew at 2X industry growth
APE growth for life insurers, March fiscal year-ends, 2014-2024 (%)
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2 yr CAGR 5 yr CAGR
Bajaj Allianz (19) (23) (8) 41 38 22 10 27 47 36 19 27 27
Birla Sunlife (19) (12) (8) 35 15 58 (1) 16 16 36 3 18 13
Canara HSBC (23) 18 35 39 34 12 6 11 31 24 (2) 10 13
HDFC Life (24) 25 12 9 31 8 17 14 18 25 2 13 15
ICICI Prudential Life (2) 41 8 29 16 (3) (4) (16) 15 10 8 9 2
India First (37) 5 38 82 43 26 11 6 47 23 (17) 1 12
Kotak 1 33 52 28 31 7 5 7 17 29 5 17 12
Max Life 17 10 8 25 22 21 5 20 12 11 17 14 13
PNB MetLife 3 23 29 11 20 13 (4) 11 22 25 7 15 12
Reliance Life 15 7 (26) (23) 5 20 1 2 6 4 10 7 5
SBI Life 18 11 37 39 31 17 10 7 25 17 16 16 15
Star Union Daichi 23 19 (9) 64 (5) 2 (5) 27 53 41 8 24 23
Tata AIA (19) (4) 159 73 33 60 20 27 31 59 5 29 27
Private sector (1) 16 14 27 24 14 5 8 22 24 9 16 13
LIC (3) (26) 3 15 13 6 16 (2) 8 13 (2) 5 6
Total (3) (10) 8 21 19 10 10 3 16 19 4 11 10

Source: LI Council, Kotak Institutional Equities

APE declined for most players in March 2024

Overall, APE yoy growth, March fiscal year-ends, March 2023-March 2024, 1QFY24-4QFY24 (%)
2 yr CAGR
Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 1QFY24 2QFY24 3QFY24 4QFY24 Mar-24 4QFY24
Bajaj Allianz 54 7 2 3 21 34 37 30 21 18 33 30 6 4 31 22 18 28 28
Aditya Birla Sun Life 73 37 9 47 7 (4) (12) 27 (22) 14 23 16 (20) 30 (4) 3 (4) 18 21
Canara HSBC 47 (21) (8) (14) 24 (1) 16 36 14 (27) 29 (6) (14) (13) 13 (5) (4) 13 10
HDFC Life 94 6 14 21 (5) 18 13 15 (7) (3) 14 25 (27) 15 10 (0) (7) 19 20
ICICI Prudential Life 56 (27) (1) 16 12 9 (3) 20 (0) 11 20 35 1 (2) 5 10 13 26 21
India First 8 11 (1) 4 6 4 (6) (16) (2) (38) (22) (48) (51) 4 1 (20) (43) (27) (19)
Kotak 39 4 9 1 8 19 (2) 16 4 (5) 3 31 (3) 5 8 3 6 16 21
Max Life 60 (3) 3 18 21 49 30 39 9 16 52 35 (8) 8 33 19 11 21 23
Reliance Life 26 13 2 22 20 12 3 20 (12) 11 7 1 13 13 11 6 9 20 8
SBI Life 13 (6) 15 (1) 40 31 17 20 (4) 20 33 28 (1) 3 29 13 17 6 13
Star Union Daichi 51 (32) 7 23 7 (1) 6 21 (5) 18 26 23 (3) 3 4 10 13 21 24
Tata AIA 96 14 22 23 21 7 15 23 (13) 16 19 (0) (19) 20 14 8 (8) 26 26
Private sector 53 1 10 12 18 20 12 21 (2) 10 23 22 (10) 8 16 9 4 17 18
Top 4 54 (6) 10 11 20 25 14 21 (3) 13 28 30 (11) 6 19 10 7 17 18
Private (ex-Top 4) 53 11 9 15 15 12 10 20 (2) 7 15 12 (9) 12 12 7 1 18 19
Select tier-II players 77 10 11 13 21 19 25 27 1 17 25 13 (9) 12 22 14 3 27 27
LIC (9) (25) (6) 3 (21) (16) (13) 1 (21) 31 14 32 (2) (7) (17) 2 10 (6) 1
Total 23 (11) 3 8 (2) 4 1 12 (11) 17 19 25 (7) 1 1 6 6 7 11

Source: LI Council, Kotak Institutional Equities

Similar trend is visible in Individual APE

Individual APE yoy growth, March 2023-March 2024, 1QFY24-4QFY24 (%)
2 yr CAGR
Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 1QFY24 2QFY24 3QFY24 4QFY24 Mar-24 4QFY24
Bajaj Allianz 68 8 18 17 33 33 30 27 27 20 32 34 5 15 32 24 17 33 32
Aditya Birla Sun Life 88 27 33 35 9 (3) (1) 21 (19) 10 36 9 (25) 32 1 2 (8) 19 21
Canara HSBC 48 (20) (20) (14) 21 (9) 14 37 13 19 28 (2) (14) (17) 9 21 (3) 13 11
HDFC Life 95 7 10 18 (7) 16 13 17 (4) (5) 17 28 (28) 12 8 0 (7) 19 21
ICICI Prudential Life 59 (31) 4 12 8 12 (5) 21 (3) 13 22 34 (1) (4) 4 10 12 25 20
India First 9 14 0 (17) 3 5 (2) (16) (1) (40) (24) (50) (53) (4) 2 (21) (45) (28) (20)
Max Life 60 (4) 2 12 19 49 29 38 8 15 51 34 (8) 5 32 18 10 21 22
Reliance Life 28 13 4 24 20 12 3 21 (12) 11 7 2 12 14 11 6 8 20 9
SBI Life 12 (5) 8 5 31 34 16 16 (3) 20 17 26 (7) 3 26 13 9 2 8
Star Union Daichi 52 (37) 33 7 10 20 9 11 (3) 21 30 7 (3) 0 12 10 8 21 22
Tata AIA 97 14 21 22 21 7 15 23 (14) 17 18 0 (19) 20 14 8 (8) 27 27
Private sector 56 (1) 10 12 16 21 12 20 (1) 11 20 20 (12) 8 16 9 2 17 18
Top 4 54 (7) 7 11 15 27 13 20 (1) 12 22 30 (13) 5 18 10 5 16 16
Private (ex-Top 4) 58 7 15 14 16 12 11 19 (1) 10 17 10 (11) 13 13 9 (0) 19 19
Select tier-II players 85 11 20 20 26 18 21 25 2 18 24 14 (9) 17 22 15 2 29 29
LIC 10 (5) (1) (11) 14 3 5 2 (9) 2 7 13 (16) (6) 7 (2) (4) (4) 1
Total 38 (3) 6 3 15 14 10 13 (4) 9 15 18 (13) 2 13 6 0 9 11

Source: LI Council, Kotak Institutional Equities

Insurance
India Research
 93

Market share of top-4 players is at 36% in the individual segment

Trends in individual APE market share, March fiscal year-ends, March 2023-March 2024, 2020-2024 (%)
Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 2020 2021 2022 2023 2024
Bajaj Allianz 6 6 6 6 5 6 6 6 6 5 5 6 7 2.6 3.3 4.2 5.0 5.8
Canara HSBC 2 1 1 1 2 1 2 2 2 2 2 2 2 1.3 1.4 1.6 1.6 1.6
HDFC Life 13 10 11 11 8 11 10 9 11 10 11 12 11 9.0 10.0 10.1 10.8 10.4
ICICI Prudential 7 5 6 7 6 6 6 6 6 5 7 9 8 9.0 7.2 7.2 6.5 6.6
Kotak 4 2 2 2 2 2 2 2 2 2 3 4 4 2.2 2.4 2.4 2.6 2.6
Max Life 8 5 5 6 5 6 6 6 6 6 6 7 8 5.5 6.4 6.2 5.8 6.4
Met Life 2 2 2 2 2 2 2 2 2 2 2 2 2 2.6 3.3 4.2 5.0 5.8
Reliance Life 1 2 1 1 1 1 1 1 1 1 1 1 1 1.2 1.2 1.1 1.0 1.0
SBI Life 9 15 15 15 17 18 17 17 18 25 16 12 9 13.3 13.5 14.7 14.6 15.8
Tata AIA 8 7 7 7 6 6 7 7 6 7 6 6 8 3.7 4.5 5.1 6.8 6.8
Private sector 68 64 63 66 63 68 68 67 68 73 67 69 69 57.2 59.7 62.9 65.8 67.8
Top 4 players 36 36 36 38 37 41 40 39 40 46 40 40 36 36.9 37.2 38.2 37.7 39.3
Private (ex-top 4) 32 28 27 28 27 27 29 28 28 27 27 30 33 20.3 22.5 24.7 28.0 28.5
Select tier-II players 14 13 12 12 12 12 12 12 12 12 12 13 15 6.3 7.8 9.3 11.8 12.6
LIC 32 36 37 34 37 32 32 33 32 27 33 31 31 42.8 40.3 37.1 34.2 32.2

Source: LI Council, Kotak Institutional Equities

Group business market share of private players down to 25% in March 2024
Trends in group business market share, March fiscal year-ends, March 2023-March 2024, 2020-2024 (%)
Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24 2020 2021 2022 2023 2024
Bajaj Allianz 1.9 4.0 2.3 1.6 1.5 2.7 3.4 2.3 1.5 1.2 1.8 2.0 2.0 2.0 2.3 2.7 2.2 2.0
Aditya Birla Sun Life 1.6 3.6 2.2 2.0 1.4 2.4 1.8 2.9 1.3 1.8 0.9 2.9 2.0 1.2 1.5 1.7 1.9 2.0
HDFC Life 10.9 14.1 7.4 5.4 6.4 9.6 6.9 7.5 6.7 6.1 5.1 5.4 6.3 5.7 6.2 6.8 6.4 6.6
ICICI Prudential 4.5 6.5 3.6 2.6 6.0 4.5 3.9 4.5 4.8 3.2 3.7 3.7 4.3 2.8 3.2 3.1 3.5 4.1
Kotak Life 2.1 4.9 2.2 1.1 1.9 2.8 1.6 1.7 1.9 1.6 1.6 2.7 1.8 1.7 1.4 1.5 1.6 1.9
Max Life 0.6 1.0 0.7 1.2 0.7 0.8 0.7 0.8 0.8 0.8 0.7 0.8 0.5 0.3 0.4 0.4 0.4 0.8
Reliance Life 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.1 0.0 0.0 0.0 0.0 0.1 0.0 0.1 0.2 0.0 0.0
SBI Life 4.6 4.1 7.0 3.3 12.9 7.1 4.5 5.8 3.1 3.2 15.0 4.8 5.9 3.4 4.9 4.7 3.8 6.3
Private sector 29 47 29 22 35 35 26 30 23 21 32 27 25 19 22 24 23 28
LIC 71 53 71 78 65 65 74 70 77 79 68 73 75 81 78 76 77 72

Source: LI Council, Kotak Institutional Equities

Ticket sizes declined yoy in March 2024 due to inflated base

Average ticket size of individual non-single policies, March 2023-March 2024 (Rs)
Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24
Average ticket size (Rs)
Bajaj Allianz 120,794 77,708 69,714 68,866 74,177 83,128 88,283 90,438 76,288 97,889 83,101 94,187 94,187
Birla Sun Life 185,604 79,427 104,975 109,185 97,768 106,543 102,623 101,765 103,179 118,956 108,699 111,194 111,194
HDFC Life 153,896 93,576 89,871 93,594 81,596 104,999 102,982 80,352 97,506 105,284 108,624 108,114 108,114
ICICI Prudential 161,275 77,477 93,469 104,244 100,486 108,158 105,054 109,560 117,372 134,325 134,337 125,556 125,556
Max Life 131,179 75,841 76,814 87,559 88,987 81,511 91,131 88,927 102,085 116,489 75,500 98,421 98,421
Reliance 116,051 67,272 61,791 58,301 48,501 49,734 51,050 53,875 59,711 74,058 64,233 58,324 58,324
SBI Life 59,469 58,881 62,612 65,821 75,414 77,721 79,412 74,625 79,627 98,307 86,543 69,004 69,004
Tata AIA 161,044 73,285 93,429 98,283 87,821 97,990 100,761 100,037 101,894 89,719 89,429 103,355 103,355
Private sector 113,728 70,940 69,230 76,217 76,865 82,575 84,411 79,372 82,755 95,517 88,100 88,371 88,371
LIC 15,634 20,405 19,609 18,314 17,635 15,888 18,680 17,363 17,771 19,151 16,050 17,110 17,110
YoY growth (%)
Bajaj Allianz 37 2 2 (10) (4) 3 12 10 (3) 14 12 15 (22)
Birla Sun Life 67 (17) 11 17 (7) (17) (11) (5) (23) (6) 5 (17) (40)
HDFC Life 63 0 (7) (0) (20) (8) (0) (9) (5) (5) 7 6 (30)
ICICI Prudential 48 (18) 7 11 1 7 (6) 10 11 26 21 1 (22)
Max Life 38 (1) (9) 8 1 (6) 2 (10) 6 7 (12) 8 (25)
Reliance 57 (12) 22 12 (9) (9) (16) (8) (11) 1 (10) (11) (50)
SBI Life 1 (5) (1) 6 18 15 15 5 6 13 13 16 16
Tata AIA 66 2 15 16 (5) (6) 5 7 (7) (17) (13) (17) (36)
Private sector 42 (2) (1) 7 1 3 6 2 (2) 4 5 4 (22)
LIC 34 12 9 3 18 (0) (7) (17) (2) 13 (1) 7 9

Source: LI Council, Kotak Institutional Equities

Insurance
India Research
 94

Share of single premium up to 44% in March 2024

Share of single premium to total premium, March fiscal year-ends, March 2023-March 2024 (%)
Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 Nov-23 Dec-23 Jan-24 Feb-24 Mar-24
Bajaj Allianz 32 29 35 48 40 46 56 46 30 26 39 39 39
Aditya Birla Sun Life 38 53 62 69 56 60 59 70 49 54 43 66 59
HDFC Life 55 68 66 69 66 64 63 69 60 59 56 54 61
ICICI Prudential 29 51 46 42 36 48 47 46 49 45 43 41 32
Kotak Life 34 68 53 56 57 48 56 58 55 48 54 42 38
Max Life 22 40 40 53 40 34 37 36 36 33 35 42 33
Reliance Life 2 3 5 2 3 4 3 3 4 2 3 4 2
SBI Life 50 50 64 55 66 49 42 53 41 35 68 55 62
Private sector 37 49 53 53 52 48 48 51 43 39 51 46 44
LIC 77 67 82 90 79 77 81 84 84 85 76 84 83
Total 59 57 70 78 67 64 67 70 68 67 65 69 68

Source: LI Council, Kotak Institutional Equities

ICICI Prudential Life—change in estimates, March fiscal year-ends, 2024-26E

New estimates Old estimates New versus old (%)
2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E
Opening Embedded value (EV) 356 409 470 356 410 472 - (0.2) (0.4)
Methodology/ assumption changes 0 0 0 0 0 0
VNB 22 26 31 23 27 32 (4.0) (3.7) (3.7)
Expected return in force 29 34 39 29 34 39 - (0.2) (0.4)
Operating variance 2 3 1 2 3 1 - - -
Economic/investment variance 3 3 3 3 3 3 - - -
Dividend payout (3) (4) (4) (3) (4) (4) NM NM NM
Closing EV 409 470 540 410 472 543 (0.2) (0.4) (0.6)
EVOP 53 62 71 54 63 72 (1.7) (1.7) (1.9)
RoEV (%) 14.8 15.0 14.8 15.0 15.2 15.0 -25 bps -23 bps -23 bps
Operating RoEV (%) 14.9 15.2 15.0 15.1 15.4 15.3 -25 bps -23 bps -23 bps
APE 90.5 104.1 119.7 86.8 99.9 114.8 4.3 4.3 4.3
VNB post overrun 21.7 26.0 31.1 22.6 27.0 32.3 (4.0) (3.7) (3.7)
VNB margins post overrun (%) 24.0 25.0 26.0 26.0 27.0 28.1 -206 bps -207 bps -216 bps

Source: Company, Kotak Institutional Equities estimates

Max Life—change in estimates, March fiscal year-ends, 2024-26E

New estimates (Rs bn) Old estimates (Rs bn) Change (%)
2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E
Opening embedded value 163 198 237 163 198 237 - 0.0 0.2
VNB 19 22 26 19 22 26 0.4 1.9 2.0
Expected return in force 14 17 21 14 17 21 - 0.0 0.2
Operating variance 1 1 1 1 1 1 - - -
Investment varinace 4 1 1 4 1 1
Dividend payout (2) (2) (2) (2) (2) (2) NM NM NM
Closing embedded value 198 237 283 198 237 282 0.0 0.2 0.4
EVOP 34 40 48 34 40 47 0.2 1.1 1.2
RoEV (%) 21.9 19.6 19.6 21.8 19.4 19.4 5 bps 21 bps 20 bps
Operating RoEV (%) 20.9 20.4 20.2 20.9 20.2 20.0 5 bps 21 bps 20 bps
APE (Rs bn) 73 84 96 71 82 95 3.4 2.5 1.6
VNB margin 26.1 26.8 27.5 26.9 27.0 27.4 -78 bps -16 bps 11 bps

Source: Company, Kotak Institutional Equities estimates

Insurance
India Research
 95

SBI Life—change in estimates, March fiscal year-ends, 2024-26E

New estimates Old estimates (% change)
2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E
APE 194.6 227.7 266.4 196.7 232.1 273.9 (1.1) (1.9) (2.7)
Opening EV 460.6 560.8 671.7 460.6 561.3 673.5 - (0.1) (0.3)
VNB 54.6 64.8 76.0 55.1 66.0 78.2 (0.9) (1.9) (2.7)
Expected return 38.7 47.1 55.1 38.7 47.2 55.2 - (0.1) (0.3)
Operating variance
Expenses 0.5 - - 0.5 - - NM NM NM
Persistency 0.5 2.0 2.0 0.5 2.0 2.0 - - -
Others - - - - - - NM NM NM
EVOP 95.3 113.9 133.1 95.8 115.2 135.4 (0.5) (1.1) (1.7)
Non-operating variance
Economic assumption change 8.0 1.0 1.0 8.0 1.0 1.0 - - -
Dividend payouts (3.0) (4.0) (5.0) (3.0) (4.0) (5.0) NM NM NM
Closing EV 560.8 671.7 800.8 561.3 673.5 804.9 (0.1) (0.3) (0.5)
RoEV (%) 21.8 19.8 19.2 21.9 20.0 19.5 -11 bps -21 bps -29 bps
Operating RoEV (%) 20.7 20.3 19.8 20.8 20.5 20.1 -11 bps -21 bps -29 bps
VNB margin (%) 28.1 28.4 28.6 28.0 28.4 28.6 5 bps 0 bps 0 bps

Source: Company, Kotak Institutional Equities estimates

One-year forward rolling P/EV for life insurers, March fiscal year-ends, April 2019-April 2024 (X)

ICICI Life HDFC Life SBI Life Max Life

6

1
Jul-19

Jul-20

Jul-21

Jul-22

Jul-23
Jan-20

Jan-21

Jan-22

Jan-23

Jan-24
Apr-19

Apr-20

Apr-21

Apr-22

Apr-23

Apr-24
Oct-19

Oct-20

Oct-21

Oct-22

Oct-23

Source: Company, Bloomberg, Kotak Institutional Equities estimates

Valuation summary, March fiscal year-ends, 2023-2026E

EVOP CAGR
FV Price Market cap. Embedded value (Rs bn) Price/EV (X) Price/VNB (X) (2023-26E) Operating RoEV (%)
Rating (Rs) (Rs) (Rs bn) (US $bn) 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E (%) 2023 2024E 2025E 2026E
HDFC Life BUY 775 606 1,303 16 395 476 557 651 3.3 2.7 2.3 2.0 35 36 31 27 14 21.6 17.8 17.3 17.2
ICICI Prudential Life BUY 625 603 868 10 356 410 472 543 2.4 2.1 1.8 1.6 31 38 32 27 10 17.4 15.1 15.4 15.3
LIC BUY 1,300 961 6,079 73 5,822 7,330 7,949 8,609 1.0 0.8 0.8 0.7 66 63 60 60 6 10.9 9.2 8.9 8.8
LIC core 483 3,058 37 2,794 3,302 3,921 4,581 1.1 0.9 0.8 0.7 33 32 30 30 6 NA NA NA NA
Max FS BUY 1,200 1,005 347 4 163 199 238 285 3.0 2.4 2.0 1.7 25 25 21 18 16 22.1 21.2 20.6 20.3
SBI Life BUY 1,675 1,457 1,459 17 461 561 673 805 3.2 2.6 2.2 1.8 29 26 22 19 14 22.9 20.8 20.5 20.1

Source: Company, Bloomberg, Kotak Institutional Equities estimates

Insurance
India Research
 UPDATE

Economy
Monetary Policy
April 19, 2024

RBI MPC minutes: Wait and watch Summary of key macro metrics for India
The April RBI MPC meeting minutes continued to signal caution on the 2023 2024E 2025E 2026E
Real economy
inflation trajectory. Members highlighted the headroom to maintain policy
Real GDP growth (%) 7.0 7.6 6.6 6.5
rate given the resilient growth prospects. While retaining our view of rate cuts Nominal GDP growth (%) 14.2 9.1 10.8 10.7
CPI Inflation (avg., %) 6.7 5.4 4.5 4.2
starting in 3QFY25, we note that increasing global risks could delay the
Public finance
monetary easing. Center's GFD/GDP (%) 6.4 5.8 5.1 4.5
Monetary policy
Repo Rate (%, eop) 6.50 6.50 6.00 5.50
Inflation concerns remain for most MPC members SDF Rate (%, eop) 6.25 6.25 5.75 5.25
CRR (%, eop) 4.5 4.5 4.5 4.5
Most MPC members reiterated the cautious tone on inflation from the February External sector
minutes and in the April policy. While drawing comfort from easing core Current Account Balance (% of GDP) (2.0) (0.8) (1.1) (1.1)
Brent crude oil price (avg., USD/bbl) 95.4 83.0 85.0 80.0
inflation and anchored inflationary expectations, the members noted the upside USD/INR (avg.) 80.3 82.8 83.1 84.3

risks to inflation from supply-side shocks emanating from adverse weather

Source: CEIC, Bloomberg, RBI, Kotak Economics Research estimates
conditions and geopolitical tensions. The members re-emphasized the need for
vigilance to ensure a durable drift toward the 4% inflation target. Given the
uncertainties, the Governor noted that “these considerations call for monetary
policy actions to tread the last mile of disinflation with extreme care.”

Private Circulation Only. This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities A ct of 1933
Members comfortable on growth prospects and market’s alignment to policy
On the growth front, almost all members highlighted their comfort from the
resilient economy led by the robust investment cycle, manufacturing and
service sector. Dr Patra noted that the output gap has closed. The reference of
maintaining vigil on financial stability risks by Dr Patra in an environment
engulfed with uncertainties further signals the room for a prolonged wait and
watch approach. Notably, Governor Das and Dr Ranjan noted that Indian market
expectations are well aligned to the MPC’s assessment and hence they do not
expect much volatility.

A couple of members continue with a more dovish tone

Dr Varma continued to highlight that current real policy rate of 2% is excessive.
He stated that real rate of 1-1.5% would be sufficient to drive inflation to the 4%
target. Dr Goyal, while voting for keeping rates and stance unchanged, opined
that real interest rates are higher than the neutral interest rate. According to
her, even if repo rate cuts happen, the policy will still remain contractionary.

Maintain call of 50 bps rate cut from 3QFY25; global risks could delay easing
The minutes of the April MPC meeting reiterated the commitment to align
headline inflation to the 4% target on a durable basis. We expect headline
inflation to average 4.5% in FY2025, but the risks are skewed on the upside amid
(1) a volatile food inflation, (2) higher crude oil prices and (3) recent upturn in
the non-energy commodity prices. These risks could continue to pose a
challenge to the last mile disinflation. While we maintain our call for 50 bps rate Related Research
cut in 2HFY25, we note increasing risks of further delays to the RBI’s rate cuts → Economy: RBI Policy: Staying put
from (1) rising crude oil prices, (2) a further push-back to the timing of the US → Economy: MPC minutes: Hawkish tone
Fed’s rate easing cycle and (3) a volatile food inflation.
→ retained
Economy: RBI Policy: Staying the course

Full sector coverage on KINSITE

Upasna Bhardwaj Suvodeep Rakshit Anurag Balajee

[email protected] [email protected] [email protected]
+91-22-6166-0531 +91-22-4336-0898 +91-22-6166-1547
 97

Most MPC members remain hawkish

Summary of MPC members' views and policy decision
Member Rationale for action Stance / Vote

- ...success in the disinflation process should not distract us from the vulnerability of the inflation trajectory to the frequent incidences of
supply side shocks, especially to food inflation due to adverse weather events and other factors.
- Lingering geo-political tensions and their impact on commodity prices and supply chains are also adding to uncertainties in the inflation trajectory.
These considerations call for monetary policy actions to tread the last mile of disinflation with extreme care .
Shri Shaktikanta Das Hawkish / Pause
- The growth prospects of the Indian economy in 2024-25 look bright .
- Given these growth inflation dynamics, I believe that the extant monetary policy setting is well positioned.
- The strong growth momentum, together with our GDP projections for 2024-25, give us the policy space to unwaveringly focus on price
stability.

- Recent inflation prints and high frequency data on salient food prices indicate that food inflation risks remain elevated .
- Downward pressure on inflation must be maintained until a better balance of risks becomes evident and the layers of uncertainty clouding
the near-term clear away.
- Domestic demand is expanding, and the output gap has closed .
Dr Michael D. Patra Hawkish / Pause
- Supply responses are also improving, but they will be contingent on a normal monsoon; an upturn in the private investment cycle to boost
manufacturing sales and ease capacity constraints; and on sustaining the trend growth of services.
- Nevertheless, financial stability risks to macroeconomic outcomes in India have to be closely and continuously monitored , and pre-
emptively headed off.

- ... while monetary policy seems to be on the right track, it is too early to ease guard against inflation . It is important that we gain more
confidence on our macro numbers for 2024-25 and their nuances.
- ... led by global developments, input prices are showing signs of an uptick, which needs to be watched .
- We need to utilise the space provided by stronger growth to focus on inflation .
Dr Rajiv Ranjan Hawkish / Pause
- During this transition phase, the three Cs – Caution, Consistency and Credibility – have been the hallmark . While ‘caution’ entails waiting for
more data to confirm our conviction, ‘consistency’ eliminates backpedalling in policy decision and ‘credibility’ facilitates firm anchoring of inflation
expectations.
- Instead of haste for policy action, patience is the need of the hour .

- ... commodity shocks were transient in 2023. This transience suggests it is not necessary to keep rates high because of expected future
shocks. Moreover, even reaching 4% is no warranty inflation will stay at 4% if there are large shocks such as the pre and post pandemic ones.
- In term of current and expected core inflation, real interest rates are now higher than the natural or neutral interest rate (NIR)
compatible with keeping inflation at target and output at potential.
- But there has to be a limit to squeezing core inflation to compensate for periodic headline shocks . Core sustaining below 4% implies
real policy rates are in the contraction zone .
Dr Ashima Goyal - But real rates rise as inflation falls and if they sustain above neutral rates lagged effects of monetary policy will start reducing growth Dovish / Pause
after some months.
- Inflation approaching the target suggests the absence of over-heating so growth is below potential and the NIR has not risen .
- Core sustaining near target inflation and average headline below 5 implies a credible approach to target, since research for the FIT period
suggests long-run causality continues to be from core to headline inflation despite the pandemic shocks .
- Despite a cut in repo rates policy will still be contractionar y. In the current situation of many types of uncertainty, however, maintaining
stability must have priority.

- Despite an uptick in crude oil prices, the outlook for inflation continues to be benign , and I remain convinced that a real interest rate of 1-
1.5% would be sufficient to glide inflation to the target of 4% .
Prof. Jayanth R. Varma Dovish / Cut
- This unwarrantedly high real rate imposes significant costs on the economy because of the short run Phillips curve.
- Monetary policy should try to reduce this sacrifice while ensuring that inflation (a) remains within the band and (b) glides towards the target.

- The favourable outlook for the short-term is, therefore, conditioned by the continuation of the present growth and inflation trends .
- The prevailing macroeconomic conditions point to a continuation of the strong growth momentum into 2024-25 .
- A favourable monsoon is also crucial in bringing down the present high levels of food inflation rates , which would also support
consumption demand in the rural economy.
Dr Shashanka Bhide Hawkish / Pause
- While the projected inflation trends point to further moderation in inflation rate in 2024-25, they also indicate an upturn well above the
target rate of 4 per cent in the second half of the year.
- Given the strong momentum of growth at this juncture, it is necessary to maintain monetary policy focus on aligning the inflation trends
with the target.

Notes:
(a) Stance is our interpretation of the members' views in the minutes.
(b) Emphasis in text is our addition.

Source: RBI, Kotak Economics Research

Economy
India Research
 98

March 2024: Results calendar

Mon Tue Wed Thu Fri Sat Sun
22-Apr 23-Apr 24-Apr 25-Apr 26-Apr 27-Apr 28-Apr
Hatsun Agro 360 ONE AU Small Finance Bank Aavas Financiers ABSL AMC Craftsman Automation
Mahindra Logistics Cyient DLM Axis Bank ACC Atul ICICI Bank
Rallis India ICICI Prudential Life Dalmia Bharat Bajaj Finance Bajaj Finserv IDFC Bank
Reliance Industries Mahindra & Mahindra Financial DCB Bank Coromandel International Bajaj Holdings & Investment L&T Finance
Tamilnad Mercantile Bank MCX India Equitas Small Finance Bank Cyient Bank of Maharashtra RBL Bank
Tejas Networks Tata Consumer Products Hindustan Unilever Glenmark Life Sciences CSB Bank SBFC
Tata Elxsi Indian Hotels IndusInd Bank HCL Technologies Yes Bank
LTIMindtree L&T Technology Services KSB
Macrotech Developers Laurus Labs Mahindra Holidays
Maharashtra Scooters MphasiS Mahindra Lifespace Developers
MAS Financial Services Nestle India Maruti Suzuki
Nippon AMC Schaeffler India Mastek
Oracle Financial Tanla Platforms Motilal Oswal Financial Services
Supreme Petrochem Tata Teleservices SBI Cards and Payment Services
Syngene International Tech Mahindra SBI Life Insurance
UTI AMC Shriram Finance
Welspun Living Supreme Industries
Zensar Technologies Usha Martin
Utkarsh Small Finance Bank
VST Industries
29-Apr 30-Apr 1-May 2-May 3-May 4-May 5-May
Birlasoft Castrol India Ambuja Cements Blue Star Aptus Value Housing Finance Kansai Nerolac
Gillette India Cholamandalam Orient Cement CIE Automotive Carborundum Universal Kotak Mahindra Bank
Kfin Technologies Exide Industries SIS Coal India HFCL
KPIT Technologies Five Star Business Finance Coforge Tata Technologies
PNB Housing Indus Towers Dabur India
Poonawalla Fincorp IOCL P&G Health
Tata Chemicals Nuvoco Vistas Corp.
Trent P&G Hygiene
UltraTech Cement Sona BLW Precision
Star Health and Allied Insurance
6-May 7-May 8-May 9-May 10-May 11-May 12-May
Grindwell Norton Dr Reddy's Laboratories Capri Global Alembic Pharmaceuticals ABB J K Cement
Gujarat Gas Latent View GSPL Alkyl Amines Cholamandalam Financial
Marico Max Financial Services Tata Power Asian Paints Cipla
Navin Fluorine CAMS Kalyan Jewellers
Pidilite Industries Escorts Kubota Tata Motors
Rain Industries TCI Expresss
13-May 14-May 15-May 16-May 17-May 18-May 19-May
Aditya Birla Capital BASF India Biocon GlaxoSmithkline Pharma
Shree Cement Endurance Technologies JSW Steel
Motherson Sumi Wiring
20-May 21-May 22-May 23-May 24-May 25-May 26-May
Gujarat State Fertilizers & Chemicals Jubilant Foodworks Bikaji Foods Bosch
Esab India HEG
Hindalco Industries
27-May 28-May 29-May 30-May 31-May
Amara Raja Energy & Mobility Cummins India
Medplus Health Services Samvardhana Motherson
TTK Prestige

Source: BSE, NSE, Kotak Institutional Equities

India Research
 99

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

Price (Rs) Fair Value Upside Mkt cap. O/S shares EPS (Rs) P/E (X) P/B (X) EV/EBITDA (X) RoE (%) Dividend yield (%) ADV-3M (US$ mn)
Company Rating 19-Apr-24 (Rs) (%) (Rs bn) (US$ bn) (mn) 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E Traded Delivered
Automobiles & Components
Apollo Tyres SELL 473 375 (21) 301 3.6 638 29 27 28 16 17 17 2.1 1.9 1.8 7 7 7 14 12 11 1.1 1.3 1.5 13 5
Ashok Leyland REDUCE 169 170 0 497 6.0 2,936 9 10 9 18 18 18 4.8 4.1 3.6 11 11 11 28 25 21 2.2 2.3 2.2 35 18
Bajaj Auto SELL 8,805 6,200 (30) 2,458 29 279 268 289 311 33 30 28 9.9 9.3 8.7 26 24 22 30 31 32 0.9 2.6 2.8 55 23
Balkrishna Industries SELL 2,348 1,950 (17) 454 5.4 193 66 76 89 35 31 27 5.3 4.7 4.2 20 18 15 16 16 17 0.7 0.8 0.9 10 5
Bharat Forge SELL 1,193 850 (29) 555 6.7 466 22 33 39 55 36 30 7.5 6.4 5.5 24 19 17 14 19 20 0.5 0.6 0.6 19 10
CEAT SELL 2,475 1,670 (33) 100 1.2 40 173 158 139 14 16 18 2.5 2.3 2.1 7 7 7 19 15 12 1.7 1.6 1.4 8 4
CIE Automotive ADD 485 465 (4) 184 2.2 378 21 24 27 23 20 18 3.1 2.7 2.5 13 12 10 14 14 15 1.0 1.2 1.4 4 2
Eicher Motors SELL 4,344 3,100 (29) 1,189 14.2 272 147 154 166 29 28 26 7.7 6.7 5.8 25 22 20 28 25 24 1.0 1.2 1.4 37 19
Endurance Technologies SELL 1,859 1,500 (19) 261 3.1 141 45 56 66 41 33 28 5.3 4.7 4.2 20 17 14 13 14 15 0.5 0.7 0.8 3 2
Escorts Kubota SELL 3,107 2,150 (31) 343 4.1 111 94 104 112 33 30 28 3.7 3.3 3.0 28 25 23 11 11 11 0.5 0.5 0.5 10 4
Exide Industries SELL 444 270 (39) 378 4.5 850 12 15 17 36 30 27 3.1 2.9 2.6 20 17 15 9 10 10 0.6 0.6 0.6 37 15
Hero Motocorp SELL 4,214 3,675 (13) 842 10.1 200 213 233 249 20 18 17 4.7 4.4 4.1 13 12 11 25 25 25 3.5 3.9 4.1 40 19
Mahindra & Mahindra ADD 2,083 1,800 (14) 2,590 31.0 1,159 89 85 93 23 25 22 4.6 4.0 3.5 20 18 16 22 17 17 0.6 0.6 0.7 76 44
Maruti Suzuki SELL 12,711 8,900 (30) 3,996 47.9 314 405 399 428 31 32 30 5.9 5.3 4.8 22 22 19 20 17 17 1.3 1.3 1.3 77 42
MRF SELL 129,158 90,000 (30) 548 6.6 4 5,234 4,846 5,004 25 27 26 3.3 2.9 2.7 12 12 11 14 12 11 0.3 0.3 0.3 22 7
Samvardhana Motherson ADD 127 125 (2) 861 10.3 6,776 3 5 6 37 24 21 3.6 3.2 2.8 11 9 9 10 14 14 0.6 0.6 0.7 36 18
Schaeffler India ADD 3,276 3,000 (8) 512 6.1 156 58 65 75 57 50 43 10.7 9.5 8.5 38 33 29 20 20 21 0.1 0.1 0.0 2 2
SKF ADD 4,580 4,400 (4) 226 2.7 49 107 132 150 43 35 31 8.4 7.3 6.3 31 25 22 20 21 21 0.7 0.8 1.0 2 1
Sona BLW Precision REDUCE 681 550 (19) 400 4.8 583 9 12 14 76 58 48 14.7 12.3 10.3 44 34 29 21 23 24 0.3 0.4 0.5 16 8
Tata Motors ADD 963 950 (1) 3,689 44.2 3,829 64 71 79 15 13 12 5.4 3.8 2.9 7 6 5 44 33 27 0.2 0.3 0.3 139 56
Timken ADD 3,043 2,800 (8) 229 2.7 75 47 60 76 64 50 40 9.6 8.2 6.8 43 33 27 16 18 19 0.1 0.1 0.0 3 2
TVS Motor SELL 1,899 1,180 (38) 902 10.8 475 44 47 53 43 40 36 12.0 9.9 8.3 27 23 21 31 27 25 0.6 0.6 0.7 23 11
Uno Minda ADD 725 660 (9) 416 5.0 571 15 17 19 49 43 38 8.4 7.2 6.1 28 24 21 17 17 16 0.3 0.3 0.4 5 3
Varroc Engineering ADD 509 500 (2) 78 0.9 153 37 26 33 14 20 15 4.2 3.5 2.8 12 9 7 30 17 18 — — — 3 1
Automobiles & Components Cautious 22,195 265.9 25.9 24.5 22.3 5.6 4.8 4.1 14.2 12.8 11.6 22 19.6 18.6 0.8 1.1 1.1 688 320
Banks
AU Small Finance Bank ADD 615 600 (2) 457 5.5 667 23 33 43 27 19 14 3.4 2.9 2.5 — — — 13 17 18 — — — 30 13
Axis Bank BUY 1,029 1,225 19 3,177 38.1 3,077 78 82 94 13 12 11 2.2 1.9 1.7 — — — 18 16 16 1.1 1.2 1.4 145 80
Bandhan Bank BUY 174 270 56 280 3.3 1,611 20 26 29 9 7 6 1.4 1.2 1.0 — — — 15 17 17 1.7 2.3 2.5 37 17
Bank of Baroda ADD 257 280 9 1,329 15.9 5,178 33 30 31 8 9 8 1.3 1.2 1.1 — — — 16 13 12 2.6 2.3 2.5 63 24
Canara Bank REDUCE 579 530 (8) 1,050 12.6 1,814 81 78 86 7 7 7 1.5 1.3 1.1 — — — 18 16 15 2.9 2.8 3.0 61 22
City Union Bank ADD 154 155 0 114 1.4 740 14 14 16 11 11 10 1.5 1.3 1.2 — — — 13 12 12 1.8 1.8 2.1 8 4
DCB Bank BUY 121 160 32 38 0.5 312 17 19 24 7 6 5 0.9 0.8 0.7 — — — 11 11 13 1.4 2.0 2.9 3 2
Equitas Small Finance Bank ADD 98 115 18 111 1.3 1,131 8 9 11 13 11 9 2.0 1.7 1.5 — — — 15 16 18 — — — 5 3
Federal Bank BUY 152 185 22 370 4.4 2,419 15 15 18 10 10 9 1.3 1.2 1.1 — — — 15 12 13 2.0 2.0 2.3 30 13
HDFC Bank BUY 1,531 1,750 14 11,633 139.3 7,597 80 91 107 19 17 14 2.7 2.4 2.1 — — — 17 15 16 1.3 1.4 1.7 457 280
ICICI Bank BUY 1,066 1,220 14 7,490 89.7 6,984 57 57 62 19 19 17 3.3 2.9 2.6 — — — 18 16 15 1.1 1.1 1.2 216 115
IndusInd Bank BUY 1,482 1,800 21 1,154 13.8 776 111 126 143 13 12 10 1.9 1.7 1.5 — — — 15 15 15 1.1 1.2 1.4 70 36
Karur Vysya Bank BUY 190 195 3 152 1.8 802 19 20 23 10 9 8 1.6 1.4 1.3 — — — 16 16 16 2.5 2.8 3.1 7 3
Punjab National Bank SELL 128 105 (18) 1,412 16.9 11,011 7 12 13 18 11 10 1.5 1.4 1.2 — — — 8 12 12 1.6 2.6 2.9 101 28
SBI Cards and Payment Services BUY 732 900 23 696 8.3 946 25 30 44 30 25 17 5.8 4.8 3.8 — — — 21 21 25 0.4 0.5 0.6 17 9
State Bank of India BUY 750 850 13 6,697 80.2 8,925 60 63 69 13 12 11 2.0 1.8 1.5 — — — 15 14 14 1.6 1.6 1.6 181 73
Ujjivan Small Finance Bank ADD 53 65 23 104 1.2 1,929 6 7 7 8 8 7 1.7 1.5 1.3 — — — 24 20 18 2.4 2.5 2.7 8 3
Union Bank ADD 141 155 10 1,074 12.9 7,634 19 23 24 7 6 6 1.2 1.1 0.9 — — — 17 17 15 3.3 3.9 4.1 50 21
Utkarsh Small Finance Bank BUY 55 65 18 60 0.7 1,098 4 5 6 13 11 9 2.0 1.7 1.4 — — — 19 17 18 0.0 0.0 0.0 4 2
YES Bank REDUCE 24 19 (21) 689 8.3 31,315 0 1 1 71 27 17 1.7 1.6 1.5 — — — 2 6 9 0.0 0.0 0.0 127 36
Banks Attractive 38,086 456.2 14.7 13.5 12.0 2.1 1.9 1.7 14.3 13.9 13.9 1.4 1.5 1.7 1,618 785

Source: Company, Bloomberg, Kotak Institutional Equities estimates

India Research
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Kotak Institutional Equities: Valuation summary of KIE Universe stocks

Price (Rs) Fair Value Upside Mkt cap. O/S shares EPS (Rs) P/E (X) P/B (X) EV/EBITDA (X) RoE (%) Dividend yield (%) ADV-3M (US$ mn)
Company Rating 19-Apr-24 (Rs) (%) (Rs bn) (US$ bn) (mn) 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E Traded Delivered
Building Products
Astral SELL 1,944 1,600 (18) 522 6.3 269 21 28 33 92 69 58 16.4 13.6 11.4 54 43 37 19.2 21 21 0.2 0.2 0.3 18 8
Building Products Cautious 522 6.3 92.3 69.1 58.3 16.3 13.6 11.3 54.4 42.8 36.8 17.7 19.7 19.4 0.2 0.2 0.3 18 8
Capital goods
ABB REDUCE 6,293 4,600 (27) 1,333 16.0 212 59 72 84 107 87 75 22.4 18.2 14.9 86 70 60 23 23 22 0.0 0.1 0.1 35 14
Bharat Electronics SELL 233 130 (44) 1,705 20.4 7,310 5 5 6 49 45 39 11.1 10.0 9.0 36 31 27 24 24 24 1.0 1.0 1.2 75 36
BHEL SELL 255 70 (73) 886 10.6 3,482 (1) (2) 1 NM NM 192 3.3 3.4 3.3 NM 2,022 57 NM NM 2 0.0 0.1 (0.1) 105 33
Carborundum Universal REDUCE 1,251 1,140 (9) 238 2.9 190 24 31 39 52 40 32 7.5 6.5 5.6 32 26 21 15 17 19 0.4 0.5 0.6 3 2
CG Power & Industrial SELL 534 370 (31) 815 9.8 1,527 6 7 8 96 75 64 27.6 21.9 17.6 70 54 46 29 29 28 (0.3) (0.4) (0.5) 23 13
Cochin Shipyard SELL 1,099 540 (51) 289 3.5 263 27 24 30 40 46 37 5.9 5.5 5.0 31 32 24 15 12 14 0.6 0.7 0.8 42 12
Cummins India BUY 3,038 2,750 (9) 842 10.1 277 56 66 77 54 46 39 14.1 12.6 11.2 50 43 36 28 29 30 1.0 1.2 1.4 23 11
G R Infraprojects SELL 1,321 920 (30) 128 1.5 97 65 58 89 20 23 15 2.2 2.0 1.8 13 14 10 11 9 13 0.0 0.0 0.0 3 2
IRB Infrastructure ADD 66 65 (2) 399 4.8 6,039 1 2 3 52 30 25 3.0 3.0 3.0 16 14 12 6 10 12 2.4 3.0 3.5 27 11
Kalpataru Projects ADD 1,206 1,050 (13) 196 2.3 160 35 66 83 34 18 14 3.7 3.1 2.6 13 9 8 11 18 20 0.3 0.4 0.4 6 2
KEC International REDUCE 697 630 (10) 179 2.1 257 17 34 45 41 21 16 4.3 3.6 3.0 15 11 9 11 19 21 0.3 0.5 0.7 8 3
L&T SELL 3,518 3,100 (12) 4,837 57.9 1,373 98 115 140 36 31 25 6.7 5.9 5.2 24 20 18 18 21 22 0.8 0.9 1.1 114 69
Siemens SELL 5,590 3,950 (29) 1,991 23.8 356 65 79 94 86 71 59 13.5 11.8 10.3 68 56 47 17 18 19 0.3 0.4 0.4 17 8
Thermax ADD 4,812 3,550 (26) 573 6.9 113 54 62 77 89 78 62 12.4 11.1 9.7 74 59 44 15 15 17 0.2 0.3 0.3 6 3
Capital goods Cautious 14,413 172.6 54.0 45.1 36.1 7.8 7.1 6.3 33.5 28.2 23.7 14.5 15.7 17.4 0.6 0.7 0.8 #N/A 219
Commercial & Professional Services
SIS REDUCE 463 500 8 67 0.8 147 20 26 31 23 18 15 2.6 2.3 2.0 12 10 9 12 13 14 0.0 0.0 0.0 1 0
TeamLease Services REDUCE 3,270 2,500 (24) 55 0.7 17 69 93 119 47 35 27 6.7 5.6 4.6 41 30 24 14.2 17.3 18.5 — — — 2 1
Commercial & Professional Services Neutral 122 1.5 29.3 22.6 18.4 3.5 3.0 2.6 17.3 14.1 11.8 12.0 13.5 14.2 0.0 0.0 0.0 3 1
Commodity Chemicals
Asian Paints REDUCE 2,809 3,100 10 2,694 32.3 959 58 60 62 48 47 45 14.4 12.6 11.2 33 32 31 32 29 26 1.1 1.2 1.3 49 30
Berger Paints SELL 505 485 (4) 588 7.0 1166 10 11 12 49 46 44 11.4 10.0 8.8 30 29 28 25 23 21 0.9 0.9 0.9 7 3
Indigo Paints REDUCE 1,312 1,400 7 62 0.7 48 33 37 40 40 35 33 6.9 6.0 5.4 24 21 20 19 18 17 0.5 0.7 1.0 1 1
Kansai Nerolac REDUCE 273 290 6 221 2.6 808 9 9 9 32 31 29 4.4 4.1 3.8 20 19 19 14 14 14 1.2 1.6 1.7 2 1
Tata Chemicals SELL 1,104 820 (26) 281 3.4 255 45 32 36 24 34 31 1.4 1.3 1.3 9 10 10 6 4 4 1.5 1.1 1.2 48 16
Commodity Chemicals Cautious 3,847 46.1 43.7 43.9 41.9 7.6 7.0 6.5 26.9 26.7 25.3 17.5 16.0 15.5 1.1 1.1 1.2 108 51
Construction Materials
ACC REDUCE 2,405 2,160 (10) 452 5.4 188 92 112 131 26 21 18 2.9 2.6 2.4 14 11 9 12 13 14 0.8 0.9 1.1 14 5
Ambuja Cements SELL 610 395 (35) 1,340 16.0 2,463 13 17 19 46 35 32 3.0 2.8 2.6 18 14 12 8 8 9 0.3 0.4 0.5 27 12
Dalmia Bharat ADD 1,943 2,100 8 364 4.4 187 40 65 88 48 30 22 2.2 2.1 1.9 13 11 9 5 7 9 0.3 0.5 0.7 10 6
Grasim Industries REDUCE 2,273 2,135 - 1,519 18.2 658 115 127 134 20 18 17 1.7 1.6 1.5 10 9 7 9 9 9 0.4 0.6 0.6 23 12
J K Cement SELL 4,152 2,800 (33) 321 3.8 77 101 131 152 41 32 27 6.0 5.1 4.4 17 15 13 16 17 17 0.4 0.4 0.4 8 5
Nuvoco Vistas Corp. ADD 327 340 4 117 1.4 357 3 10 14 109 34 24 1.3 1.3 1.2 10 8 8 1 4 5 0.0 0.0 0.0 2 1
Orient Cement REDUCE 198 210 6 41 0.5 205 8 12 14 24 17 15 2.3 2.1 1.9 10 8 6 10 13 14 1.0 1.0 1.0 2 1
Shree Cement SELL 24,369 19,000 (22) 879 10.5 36 647 739 804 38 33 30 4.3 3.9 3.5 19 17 15 12 13 12 0.5 0.5 0.6 12 6
The Ramco Cements SELL 800 630 (21) 189 2.3 236 16 25 34 49 33 24 2.6 2.4 2.2 15 13 11 5 8 10 0.2 0.3 0.4 7 3
UltraTech Cement SELL 9,364 7,000 (25) 2,703 32.4 289 241 326 361 39 29 26 4.5 4.0 3.6 22 17 15 12 15 15 0.4 0.5 0.3 39 23
Construction Materials Cautious 7,925 94.9 32.9 26.2 23.4 2.9 2.7 2.4 14.7 12.3 10.7 8.9 10.2 10.5 0.4 0.5 0.5 145 74

Source: Company, Bloomberg, Kotak Institutional Equities estimates

India Research
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Kotak Institutional Equities: Valuation summary of KIE Universe stocks

Price (Rs) Fair Value Upside Mkt cap. O/S shares EPS (Rs) P/E (X) P/B (X) EV/EBITDA (X) RoE (%) Dividend yield (%) ADV-3M (US$ mn)
Company Rating 19-Apr-24 (Rs) (%) (Rs bn) (US$ bn) (mn) 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E Traded Delivered
Consumer Durables & Apparel
Aditya Birla Fashion and Retail REDUCE 232 220 (5) 235 2.8 998 (7) (5) (3) NM NM NM 5.7 4.9 5.2 18 13 10 NM NM NM — — — 19 8
Campus Activewear ADD 235 275 17 72 0.9 304 3 4 6 93 55 42 11.4 9.4 8.0 36 26 21 13 19 20 — — 0.6 5 2
Cello World ADD 853 950 11 181 2.2 212 16 18 21 55 47 40 15.7 12.7 10.3 36 29 25 44 30 29 — 1— 0.8 4 3
Crompton Greaves Consumer ADD 297 300 1 191 2.3 640 7 8 10 44 35 28 6.4 5.6 4.9 27 23 19 15 17 18 0.8 0.8 0.8 13 8
Eureka Forbes BUY 490 680 39 95 1.1 208 5 7 10 101 73 48 2.4 2.4 2.2 50 39 27 2 3 5 — — — 4 3
Havells India SELL 1,502 1,130 (25) 941 11.3 628 19 24 29 80 63 53 13.0 11.8 10.6 53 42 35 17 20 21 0.5 0.6 0.8 19 11
Page Industries SELL 35,391 31,000 (12) 395 4.7 11 569 615 712 62 58 50 23.5 19.8 16.8 40 37 32 42 37 37 0.9 1.0 1.2 12 6
Polycab SELL 5,290 4,060 (23) 795 9.5 150 115 125 144 46 42 37 10.1 8.6 7.4 32 28 25 24 22 22 0.5 0.6 0.6 38 15
TCNS Clothing Co. REDUCE 389 420 8 25 0.3 69 (30) (5) 2 NM NM 228 6.1 6.0 5.4 (29) 21 14.3 NM NM 2 — — — 1 0
Vedant Fashions REDUCE 918 950 3 223 2.7 248 17 19 22 55 48 41 13.9 11.7 9.8 33 28 24 27 26 26 — — — 4 3
Voltas SELL 1,301 930 (28) 430 5.2 331 12 24 30 113 54 43 7.6 6.9 6.2 83 42 36 7 13 15 0.3 0.6 0.7 26 11
Whirlpool SELL 1,460 1,090 (25) 185 2.2 127 18 25 36 83 59 41 5.0 4.7 4.3 42 31 22 6 8 11 0.2 0.3 0.4 12 7
Consumer Durables & Apparel Cautious 3,767 45.1 82.8 60.1 47.6 9.1 8.1 7.3 38.7 29.9 24.9 11.0 13.4 15.3 0.4 0.5 0.6 157 77
Consumer Staples
Britannia Industries ADD 4,668 5,225 12 1,124 13.5 241 89 101 113 52 46 41 28.5 25.3 22.5 36 32 29 57 58 57 1.7 1.9 2.1 20 11
Colgate-Palmolive (India) REDUCE 2,650 2,425 (8) 721 8.6 272 49 54 59 55 49 45 39.4 37.2 35.1 38 34 31 75 77 80 1.7 1.9 2.1 10 5
Dabur India ADD 504 600 19 893 10.7 1,772 11 12 14 46 41 36 9.0 8.1 7.2 36 32 28 21 21 21 1.1 1.2 1.4 14 9
Godrej Consumer Products BUY 1,169 1,375 18 1,196 14.3 1,023 19 24 27 61 49 43 7.9 7.2 6.6 40 34 30 13 15 16 0.6 0.9 1.1 18 11
Hindustan Unilever ADD 2,232 2,725 22 5,243 62.8 2,350 43 49 55 51 46 41 10.2 9.9 9.5 36 32 29 20 22 24 1.7 1.9 2.2 58 39
ITC ADD 425 460 8 5,303 63.5 12,428 16 18 19 26 24 22 7.5 7.2 6.9 20 18 17 28 29 31 3.3 3.5 3.8 136 83
Jyothy Labs SELL 410 420 2 151 1.8 367 10 11 13 39 36 32 8.5 7.6 6.8 30 27 24 23 22 22 1.1 1.3 1.5 7 3
Marico REDUCE 505 545 8 654 7.8 1,290 12 12 14 44 40 37 14.4 12.3 10.6 32 29 26 36 33 31 1.2 1.3 1.4 10 6
Nestle India ADD 2,438 2,550 5 2,350 28.2 964 31 36 41 78 68 60 76.0 52.0 39.0 53 46 40 108 91 74 0.7 0.9 1.0 29 18
Sula Vineyards ADD 554 640 16 47 0.6 84 11 13 15 51 44 37 7.8 6.8 6.1 27 24 21 16 17 17 0.5 0.6 0.8 9 4
Tata Consumer Products NR 1,138 - - 1,084 13.0 929 15 18 20 78 64 56 6.3 6.1 5.8 48 41 36 8 10 11 0.8 0.9 1.0 25 14
United Breweries ADD 1,834 1,875 2 485 5.8 264 18 30 38 103 62 49 11.4 10.4 9.6 61 39 31 12 18 20 0.7 1.2 1.5 5 2
United Spirits ADD 1,123 1,160 3 817 9.8 727 16 19 22 71 58 52 11.5 10.5 9.6 47 39 35 17 19 19 0.2 0.9 1.1 12 7
Varun Beverages ADD 1,396 1,400 0 1,814 21.7 1,299 16 21 26 88 68 53 26.1 19.5 14.8 52 38 31 34 33 32 0.2 0.2 0.2 39 24
Consumer Staples Attractive 21,882 262.1 45.6 40.7 36.4 11.1 10.3 9.6 33.1 29.0 25.7 24 25 26 1.6 1.8 2.1 391 236
Diversified Financials
360 One BUY 791 750 (5) 284 3.4 355 21 24 30 37 33 27 8.2 7.7 7.2 — — — 24 24 28 2.0 2.3 2.8 4 3
Aavas Financiers BUY 1,548 2,025 31 123 1.5 79 60 74 90 26 21 17 3.3 2.8 2.4 — — — 14 15 15 0.0 0.0 0.0 11 7
ABSL AMC ADD 504 500 (1) 145 1.7 288 26 28 29 19 18 17 5.2 4.6 4.2 — — — NM NM NM 3.1 3.3 3.5 1 1
Aptus Value Housing Finance ADD 316 370 17 158 1.9 498 12 14 17 26 22 18 4.2 3.5 3.0 — — — 17 17 17 1.3 0.0 0.0 4 2
Bajaj Finance ADD 7,120 7,800 10 4,407 52.8 617 233 306 381 31 23 19 5.8 4.8 3.9 — — — 22 23 23 0.4 0.5 0.7 113 60
Bajaj Finserv ADD 1,619 1,800 11 2,583 30.9 1,593 68 84 101 24 19 16 4.7 4.0 3.4 — — — 22 23 23 0.1 0.1 0.1 28 14
Cholamandalam BUY 1,128 1,350 20 948 11.4 839 39 50 60 29 23 19 5.1 4.3 3.4 — — — 20 20 19 0.2 0.3 0.4 25 14
Computer Age Management Services REDUCE 3,152 3,100 (2) 155 1.9 49 71 86 99 45 37 32 16.9 14.5 12.4 — — — 41 42 42 1.5 1.8 2.0 14 7
CRISIL SELL 4,345 3,700 (15) 318 3.8 73 90 101 114 48 43 38 15.8 14.1 12.7 — — — 33 32 32 1.2 1.5 1.7 4 2
Five Star Business Finance ADD 692 875 26 202 2.4 291 28 35 42 24 20 16 3.9 3.3 2.7 — — — 17 18 18 — — — 5 3
HDFC AMC REDUCE 3,708 3,650 (2) 792 9.5 213 91 104 115 41 36 32 11.2 10.5 9.9 — — — 29 30 32 1.9 2.2 2.5 22 10
Home First Finance BUY 880 1,200 36 78 0.9 88 34 40 50 26 22 18 3.7 3.2 2.8 — — — 15 16 17 — — 0.6 2 1
ICRA REDUCE 5,248 5,150 (2) 51 0.6 10 153 175 198 34 30 27 4.8 4.5 4.2 — — — 14 15 16 — — 0 0 0
India Shelter BUY 586 685 17 63 0.8 106 25 30 39 24 19 15 2.7 2.4 2.0 — — — 14 13 14 — — — 2 1
Kfin Technologies REDUCE 616 620 1 105 1.3 169 14 17 20 42 36 31 9.8 7.9 6.9 — — — 18 19 20 — 0.8 1 6 3
L&T Finance SELL 161 120 (25) 401 4.8 2,480 10 11 13 16 14 12 1.8 1.7 1.6 — — — 11 12 13 3.7 3.5 4.1 11 5
LIC Housing Finance BUY 643 725 13 354 4.2 550 86 84 83 7 8 8 1.4 1.2 1.1 — — — 16 14 12 2.2 2.1 2.1 19 9
Mahindra & Mahindra Financial ADD 283 310 9 350 4.2 1,234 15 19 25 19 15 11 2.0 1.8 1.7 — — — 10 12 14 1.1 1.4 1.8 11 5
Muthoot Finance ADD 1,652 1,620 (2) 663 7.9 401 101 120 143 16 14 12 2.7 2.4 2.0 — — — 18 18 19 1.2 1.5 1.7 14 6
Nippon AMC ADD 561 510 (9) 354 4.2 623 16 18 19 34 31 29 9.7 9.4 9.6 — — — 29 30 33 2.6 2.9 3.1 6 3
SBFC REDUCE 88 80 (9) 94 1.1 1,091 2 3 4 41 30 23 3.9 3.4 3.0 — — — 11 11 13 0.0 0.0 0.0 4 2
Shriram Finance BUY 2,367 2,850 20 889 10.7 374 189 237 282 13 10 8 1.8 1.6 1.4 — — — 15 17 17 1.2 1.5 1.8 48 27
UTI AMC REDUCE 900 880 (2) 115 1.4 127 55 43 44 16 21 20 2.9 2.8 2.7 — — — 18 13 13 4.9 3.8 3.9 2 1
Diversified Financials Attractive 13,629 163.2 23.5 19.4 16.2 4.0 3.5 3.0 17.0 17.9 18.2 0.8 0.9 1.1 356 185

Source: Company, Bloomberg, Kotak Institutional Equities estimates

India Research
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Kotak Institutional Equities: Valuation summary of KIE Universe stocks

Price (Rs) Fair Value Upside Mkt cap. O/S shares EPS (Rs) P/E (X) P/B (X) EV/EBITDA (X) RoE (%) Dividend yield (%) ADV-3M (US$ mn)
Company Rating 19-Apr-24 (Rs) (%) (Rs bn) (US$ bn) (mn) 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E Traded Delivered
Electric Utilities
CESC SELL 141 115 (18) 187 2.2 1,326 10 12 13 13 11 11 1.3 1.3 1.2 7 7 6 11 12 12 3.2 3.0 3.3 12 5
JSW Energy SELL 627 235 (63) 1,095 13.1 1,640 10 15 19 65 41 33 5.2 4.7 4.1 24 18 16 8 12 13 0.3 0.3 0.3 27 11
NHPC SELL 87 60 (31) 876 10.5 10,045 4 5 6 22 17 14 2.3 2.1 2.0 24 11 9 11 13 14 2.4 3.1 3.6 172 48
NTPC SELL 351 270 (23) 3,399 40.7 9,895 20 22 24 17.9 15.6 15 2.1 2.0 1.8 11 10 9 12 13 13 2.0 2.3 2.4 75 41
Power Grid SELL 282 240 (15) 2,620 31.4 9,301 18 18 19 15.7 15.3 14 2.9 2.7 2.5 9 8 8 19 18 18 3.7 3.8 4.1 77 43
Tata Power SELL 428 240 (44) 1,368 16.4 3,196 11 10 13 40 43 32 4.2 3.9 3.5 16 16 14 11 9 11 — — — 97 32
Electric Utilities Cautious 9,545 114.3 20.5 18.5 16.7 2.7 2.5 2.3 11.9 10.5 9.5 13.0 13.3 13.6 2.1 2.2 2.4 460 181
Electronic Manufacturing Services
Amber Enterprises ADD 3,646 4,000 10 123 1.5 34 50 80 104 73 46 35 5.9 5.2 4.5 27 20 17 8 12 14 0.0 0.0 0.0 10 4
Avalon Technologies SELL 518 410 (21) 34 0.4 65 4 10 14 119 52 38 6.0 5.4 4.7 54 32 22 5 11 13 0.0 0.0 0.0 1 1
Cyient DLM SELL 661 570 (14) 52 0.6 79 8 16 20 82 42 33 5.6 4.9 4.3 44 30 22 7 12 13 0.0 0.0 0.0 3 2
Dixon Technologies SELL 7,532 5,800 (23) 451 5.4 59 67 126 163 112.7 59.6 46 26.6 18.0 12.7 62 34 27 27 36 32 0.0 0.0 0.0 30 10
Kaynes Technology ADD 2,632 2,850 8 168 2.0 58 24 31 49 108.8 85.3 54 6.1 5.6 5.1 62 45 30 9 8 11 0.0 0.0 0.0 8 5
Syrma SGS Technology REDUCE 466 500 7 83 1.0 176 7 11 16 63 41 28 4.9 4.4 3.8 39 25 18 8 11 14 — — — 4 2
Electronic Manufacturing Services Cautious 911 10.9 94.6 55.1 40.9 9.6 8.2 6.8 48.9 31.1 23.5 10.2 14.9 16.7 0.0 0.0 0.0 56 23
Fertilizers & Agricultural Chemicals
Bayer Cropscience SELL 5,717 5,190 (9) 257 3.1 45 181 204 226 32 28 25 9.1 8.6 8.2 22 19 18 29 32 33 2.7 3.0 3.4 1 1
Godrej Agrovet ADD 546 600 10 105 1.3 192 18 23 30 31 24 18 3.6 3.3 2.9 18 14 11 12 14 17 1.3 1.8 2.3 1.2 0.7
Rallis India SELL 280 220 (22) 55 0.7 195 8 11 12 34 27 23 3.0 2.8 2.6 17 15 13 9 11 12 1.2 1.4 1.6 6 2
UPL SELL 488 390 (20) 366 4.4 751 (18) 8 28 NM 59 18 1.4 1.4 1.3 13 8 6 NM 3 8 1.0 1.0 1.0 27 12
Fertilizers & Agricultural Chemicals Cautious 782 9.4 567.2 33.4 19.6 2.4 2.3 2.2 15.6 10.3 8.2 0.4 6.9 11.0 1.6 1.8 2.0 35 15
Gas Utilities
GAIL (India) SELL 202 150 (26) 1,328 15.9 6,575 14 14 15 14 14 14 2.2 2.1 1.9 11 10 10 16 15 14 3.7 4.0 4.2 56 24
GSPL REDUCE 378 360 (5) 213 2.6 564 23 13 12 17 29 31 2.1 2.1 2.0 10 16 18 13 7 7 2.2 2.4 2.4 8 4
Indraprastha Gas SELL 436 375 (14) 305 3.7 700 29 28 29 15 16 15 3.7 3.3 3.0 11 11 11 27 22 21 2.3 2.4 2.5 15 7
Mahanagar Gas SELL 1,391 1,050 (25) 137 1.6 99 131 93 90 11 15 15 2.7 2.5 2.2 7 9 9 28 17 15 3.1 2.3 2.3 12 5
Petronet LNG SELL 300 190 (37) 450 5.4 1,500 24 21 22 12 14 14 2.5 2.2 2.0 7 9 9 22 17 15 3.3 1.7 0.8 29 13
Gas Utilities Cautious 2,434 29.2 13.7 14.9 14.7 2.4 2.2 2.1 10.0 10.3 10.2 17.5 14.9 14.0 3.3 3.1 3.1 121 53
Health Care Services
Apollo Hospitals ADD 6,170 6,860 11 887 10.6 144 64 95 133 97 65 46 12.7 10.8 9.0 37 29 23 14 18 21 0.1 0.2 0.3 39 21
Aster DM Healthcare ADD 521 480 (8) 260 3.1 498 7 13 17 70 39 31 5.5 4.9 4.3 15 12 10 8 13 15 — — — 13 7
Dr Lal Pathlabs ADD 2,209 2,360 7 184 2.2 83 43 51 58 51 44 38 10.0 9.0 8.1 29 25 21 21 22 22 1.0 1.2 1.4 7 3
Global Health REDUCE 1,404 1,160 (17) 377 4.5 268 18 22 28 77 64 50 13.2 11.3 9.5 43 36 29 18 19 20 0.2 0.2 0.3 10 6
KIMS ADD 1,968 2,275 16 157 1.9 80 41 54 68 48 37 29 7.9 6.5 5.3 26 20 16 18 19 20 0.0 0.0 0.0 3 2
Max Healthcare REDUCE 773 705 (9) 751 9.0 971 13 16 20 58 49 38 8.0 6.9 5.9 39 32 26 15 15 17 0.2 0.2 0.2 34 22
Metropolis Healthcare REDUCE 1,740 1,600 (8) 89 1.1 51 27 41 49 65 43 35 8.3 7.3 6.5 31 23 19 13 18 20 0.5 0.7 0.9 8 3
Narayana Hrudayalaya ADD 1,242 1,365 10 254 3.0 204 41 43 51 30 29 24 8.5 6.6 5.2 21 18 15 33 26 24 — — — 7 4
Rainbow Children's Medicare ADD 1,302 1,215 (7) 132 1.6 102 21 26 30 62 49 43 10.7 9.1 7.7 31 25 22 19 20 19 0.3 0.4 0.4 4 2
Health Care Services Neutral 3,092 37.0 62.4 48.6 38.2 9.4 8.0 6.8 30.5 24.8 20.1 15.0 16.5 17.7 0.2 0.2 0.3 125 70
Hotels & Restaurants
Chalet Hotels ADD 880 900 2 192 2.3 218 13 21 32 68 42 28 6.8 5.8 4.8 35 23 17 13 15 19 0.0 0.0 0.0 4 2
Devyani International ADD 161 178 11 194 2.3 1,204 1 1 2 176 172 106 17.9 17.1 15.8 32 23 19 11 10 15 0.0 0.0 0.0 7 4
Indian Hotels ADD 597 620 4 850 10.2 1,420 10 16 19 59 38 31 9.1 7.4 6.0 35 24 19 17 21 22 0.1 0.1 0.1 26 12
Jubilant Foodworks REDUCE 436 480 10 287 3.4 660 4 5 6 112 91 68 12.4 11.3 10.0 26 22 19 11 13 16 0.3 0.3 0.5 19 11
Lemon Tree Hotels REDUCE 135 130 (4) 107 1.3 792 2 5 6 55 27 22 11.5 9.2 7.4 22 13 11 22 38 38 1.0 1.3 1.6 8 4
Restaurant Brands Asia REDUCE 100 105 5 50 0.6 495 (1) (1) (1) NM NM NM 2.7 2.8 2.8 20 16 13 NM NM NM 0.0 0.0 0.0 4 2
Samhi Hotels BUY 198 270 37 43 0.5 218 (8) 6 10 NM 34 20 4.3 3.8 3.2 22 13 11 NM 12 17 0.0 0.0 0.0 6
Sapphire Foods BUY 1,479 1,730 17 94 1.1 64 5 4 8 272 351 182 7.3 7.1 6.9 20 18 15 3 2 4 0.0 0.0 0.0 4 2
Westlife Foodworld REDUCE 814 745 (8) 127 1.5 156 5 5 8 174 175 105 20.3 18.6 16.3 34 31 25 12 11 17 0.0 0.0 0.0 2 1
Hotels & Restaurants Attractive 1,944 23.3 89.6 53.2 39.6 9.1 7.9 6.7 30.0 21.6 17.4 10.2 14.9 17.0 0.1 0.2 0.2 80 38

Source: Company, Bloomberg, Kotak Institutional Equities estimates

India Research
 103

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

Price (Rs) Fair Value Upside Mkt cap. O/S shares EPS (Rs) P/E (X) P/B (X) EV/EBITDA (X) RoE (%) Dividend yield (%) ADV-3M (US$ mn)
Company Rating 19-Apr-24 (Rs) (%) (Rs bn) (US$ bn) (mn) 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E Traded Delivered
Insurance
HDFC Life Insurance BUY 602 775 29 1,294 15.5 2,020 7 9 10 82 66 58 8.8 8.3 7.8 — — — 11 13 14 0.3 0.4 0.4 36 20
ICICI Lombard REDUCE 1,690 1,550 (8) 833 10.0 493 39 50 60 43 34 28 7.0 5.9 5.0 — — — 17 19 19 0.4 0.5 0.5 20 12
ICICI Prudential Life BUY 588 625 6 847 10.1 1,439 6 7 8 99 87 73 7.9 7.3 6.8 — — — 8 9 10 0.5 0.5 0.5 17 9
LIC BUY 973 1,300 34 6,156 73.7 6,325 55 50 53 18 19 18 8.5 6.4 5.1 — — — 59 37 31 — — — 66 25
Max Financial Services BUY 1,022 1,200 17 353 4.2 345 2 2 2 616 548 477 — — — — — — 1 1 1 — — — 14 8
PB Fintech ADD 1,197 950 (21) 540 6.5 450 1 7 13 1,088 180 92 — — — 1 5 9 — — — 35 20
SBI Life Insurance BUY 1,448 1,675 16 1,450 17.4 1,004 19 20 21 77 74 68 11.2 9.9 8.8 — — — 15 14 14 0.2 0.2 0.2 24 13
Star Health and Allied Insurance ADD 566 600 6 331 4.0 582 14 19 23 41 30 24 5.3 4.5 3.8 — — — 14 16 17 — — — 7 4
Insurance Attractive 11,804 141.4 28.1 29.2 26.7 8.3 6.8 5.7 30 23 21 0.1 0.1 0.1 217 111
Internet Software & Services
Cartrade Tech SELL 679 480 (29) 32 0.4 51.5 8 11 12 80 64 56 1.7 1.6 1.6 47 33 26 2.1 2.6 2.9 0.0 0.0 0.0 2 1
FSN E-commerce Ventures ADD 168 165 (2) 480 5.8 2,875.0 0 1 2 759 197 107 33.8 28.9 22.8 145 79 52 4.5 15.8 24 — — — 13 7
Indiamart SELL 2,526 2,400 (5) 152 1.8 60.7 57 68 81 44 37 31 8.1 6.6 5.5 36 28 23 17.6 19.5 19.1 0.1 0.1 0.1 7 3
Info Edge ADD 5,712 5,800 2 739 8.9 129.0 65 69 83 88 83 69 6.4 6.1 5.7 73 68 55 7.5 7.5 8.5 0.3 0.3 0.4 21 10
Just Dial BUY 1,066 1,150 8 91 1.1 85.0 43 55 63 25 19 17 2.3 2.0 1.8 21 13 9 9.4 11.1 11.2 — — — 6 2
Zomato BUY 189 210 11 1,669 20.0 9,131 0 2 4 551 95 48 8.5 7.7 6.5 2,010 99 46 1.6 8.5 14.8 0.0 0.0 0.0 128 70
Internet Software & Services Attractive 3,162 37.9 161 82 51 7.7 7.0 6.2 147 72 44 4.8 8.6 12.1 0.1 0.1 0.1 177 93
IT Services
Cyient BUY 1,972 2,400 22 219 2.6 111 67 85 98 29 23 20 4.9 4.4 3.9 16 14 12 19 20 21 1.8 2.4 2.7 9 6
HCL Technologies ADD 1,448 1,730 20 3,928 47.1 2,714 58 64 72 25 23 20 5.8 5.5 5.2 15 14 13 24 25 27 3.5 3.8 4.0 56 34
Infosys BUY 1,411 1,750 24 5,858 70.2 4,146 59 63 71 24 23 20 6.6 6.2 5.7 16 15 13 30 28 30 3.3 3.3 3.8 136 86
KPIT Technologies SELL 1,409 1,000 (29) 386 4.6 273 21 28 36 66 50 39 17.4 13.7 10.8 38 29 24 30 31 31 0.4 0.6 0.7 24 11
L&T Technology Services SELL 5,232 4,700 (10) 553 6.6 106 123 142 164 43 37 32 9.6 8.4 7.4 28 24 21 24 24 25 0.8 1.0 1.2 10 4
LTIMindtree REDUCE 4,661 5,050 8 1,380 16.5 296 156 176 206 30 27 23 7.2 6.3 5.4 20 18 15 26 25 26 1.5 1.7 1.9 35 21
Mphasis REDUCE 2,280 2,380 4 431 5.2 188 82 91 105 28 25 22 5.1 4.9 4.5 18 16 14 19 20 22 2.6 2.9 3.1 17 8
Persistent Systems REDUCE 3,885 3,760 (3) 598 7.2 154 73 91 113 53 43 34 13.0 10.9 9.0 34 28 22 26 28 29 0.7 0.8 1.0 29 12
RateGain ADD 659 900 37 78 0.9 113 13 16 22 52 40 30 5.1 4.7 4.0 36 27 19 13 12 14 0.0 0.0 0.0 5 2
Tata Elxsi SELL 7,451 5,400 (28) 464 5.6 62 130 143 168 58 52 44 19.0 16.6 14.6 42 38 32 36 34 35 1.0 1.2 1.4 14 7
Tata Technologies SELL 1,041 700 (33) 422 5.1 406 17 21 25 60 50 41 12.6 11.2 9.9 43 35 28 22 24 25 0.8 1.0 1.2 19 10
TCS ADD 3,826 4,300 12 13,844 165.8 3,595 130 142 157 30 27 24 14.9 13.5 12.1 21 19 17 50 53 52 1.5 3.0 3.3 148 87
Tech Mahindra REDUCE 1,194 1,260 6 1,050 12.6 890 28 47 64 42 25 19 3.8 3.8 3.6 20 14 11 9 15 20 2.1 3.2 3.4 33 17
Wipro SELL 453 440 (3) 2,366 28.3 5,293 21 24 25 22 19 18 3.2 2.7 2.5 12 11 10 14 15 15 0.2 0.2 2.0 45 18
IT Services Neutral 31,577 378.2 28.3 25.3 22.4 7.8 7.1 6.5 18.4 16.6 14.7 27.7 28.2 29.1 1.9 2.7 3.1 579 322
Media
PVR INOX ADD 1,429 1,500 5 140 1.7 98 11 28 43 129 51 33 1.7 1.6 1.6 21 16 12 1 3 5 0.1 0.2 0.3 11 6
Sun TV Network BUY 597 725 21 235 2.8 394 49 52 55 12 11 11 2.3 2.1 1.9 8 7 7 20 19 19 4.2 4.6 5.0 5 2
Zee Entertainment Enterprises SELL 143 150 5 137 1.6 960 7 7 9 22 19 16 1.3 1.3 1.2 13 11 9 6 7 8 2.1 2.8 2.8 72 31
Media Attractive 513 6.1 19.2 16.9 14.8 1.8 1.7 1.6 11.7 10.0 8.7 9.1 9.9 10.7 2.5 2.9 3.1 88 38
Metals & Mining
Gravita India BUY 969 1,200 24 67 0.8 69 35 44 52 27 22 19 8.4 6.4 4.9 19.1 16.3 13.4 35 33 30 0.5 0.7 0.8 3 1
Hindalco Industries ADD 615 535 (13) 1,381 16.5 2,220 44 44 46 14 14 13 1.3 1.2 1.1 6.8 6.7 6.3 10 9 9 0.7 0.7 0.7 57 29
Hindustan Zinc SELL 399 310 (22) 1,685 20.2 4,225 18 23 23 22 17 17 11.1 11.1 11.1 12.2 10.1 9.8 55 65 65 3.3 5.8 5.9 9 5
Jindal Steel and Power BUY 927 900 (3) 946 11.3 1,020 49 62 86 19 15 11 2.2 1.9 1.7 9.8 8.4 6.4 12 14 17 0.3 0.7 1.4 24 9
JSW Steel REDUCE 865 860 (1) 2,115 25.3 2,417 48 66 85 18 13 10 2.8 2.3 2.0 9.3 7.5 6.2 16 19 21 0.8 1.1 1.5 26 11
National Aluminium Co. SELL 185 90 (51) 339 4.1 1,837 8 8 8 23 22 22 2.4 2.3 2.1 12.5 11.8 11.2 11 11 10 1.8 1.8 1.8 62 21
NMDC SELL 236 195 (17) 691 8.3 2,931 22 18 19 11 13 12 2.7 2.4 2.2 7.2 8.5 8.0 26 20 19 4.6 3.9 4.1 59 25
SAIL SELL 146 70 (52) 603 7.2 4,130 4 6 7 33 25 22 1.1 1.0 1.0 10.1 9.4 9.1 3 4 5 1.1 1.4 1.6 88 29
Tata Steel REDUCE 162 140 (14) 2,024 24.2 12,224 4 10 16 43 17 10 2.0 1.8 1.6 11.6 8.4 6.5 5 11 17 0.6 1.5 2.4 102 39
Vedanta SELL 386 255 (34) 1,435 17.2 3,717 17 20 23 23 19 17 3.4 3.3 3.2 6.6 6.1 5.5 15 18 19 3.9 4.6 5.0 63 27
Metals & Mining Cautious 11,285 135.2 20.6 15.9 12.9 2.4 2.2 2.0 9.0 7.8 6.8 11.5 13.6 15.2 1.7 2.4 2.8 493 195

Source: Company, Bloomberg, Kotak Institutional Equities estimates

India Research
 104

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

Price (Rs) Fair Value Upside Mkt cap. O/S shares EPS (Rs) P/E (X) P/B (X) EV/EBITDA (X) RoE (%) Dividend yield (%) ADV-3M (US$ mn)
Company Rating 19-Apr-24 (Rs) (%) (Rs bn) (US$ bn) (mn) 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E Traded Delivered
Oil, Gas & Consumable Fuels
BPCL SELL 586 440 (25) 1,271 15.2 2,129 133 52 54 4 11 11 1.9 1.7 1.6 3.3 7.1 6.9 47 16 15 10.3 4.0 4.2 81 30
Coal India SELL 435 335 (23) 2,683 32.1 6,163 49 35 35 9 12 12 3.7 3.4 3.2 8.8 13.1 12.8 47 29 27 5.7 5.7 5.7 77 31
HPCL SELL 478 320 (33) 679 8.1 1,419 104 59 60 5 8 8 1.9 1.6 1.5 5.1 8.2 8.2 46 22 19 8.7 5.0 5.0 57 20
IOCL SELL 167 115 (31) 2,353 28.2 14,121 30 16 15 5 11 11 1.5 1.4 1.3 3.9 6.3 6.4 29 14 12 9.1 4.7 4.6 81 31
Oil India REDUCE 600 475 (21) 650 7.8 1,084 63 62 66 10 10 9 1.7 1.5 1.4 8.0 7.4 6.8 19 17 16 2.6 3.4 3.8 49 15
ONGC REDUCE 275 250 (9) 3,463 41.5 12,580 41 42 40 7 7 7 1.1 1.0 0.9 3.8 3.8 3.7 17 16 14 4.4 4.9 4.6 74 32
Reliance Industries ADD 2,940 2,900 (1) 19,894 238.3 6,766 101 128 140 29 23 21 2.6 2.3 2.1 14.1 11.7 10.2 9 11 10 — 0.3 0.3 216 123
Oil, Gas & Consumable Fuels Neutral 30,993 371.2 12.8 14.8 14.4 2.1 1.9 1.8 7.9 8.6 7.9 16.6 13.0 12.2 2.5 1.9 1.9 636 283
Pharmaceuticals
Aurobindo Pharma REDUCE 1,087 1,000 (8) 637 7.6 586 56 67 77 19 16 14 2.2 2.0 1.8 11 9 8 12 13 13 1.4 1.7 2.0 36 17
Biocon REDUCE 262 260 (1) 314 3.8 1,202 2 8 15 111 34 17 1.4 1.3 1.3 16 12 9 1 4 7 1.2 1.0 2.0 23 9
Blue Jet Healthcare ADD 392 410 5 68 0.8 173 10 13 16 38 29 24 8.4 6.9 5.7 27 21 17 24 26 26 0.6 0.9 1.0 1
Cipla ADD 1,346 1,545 15 1,087 13.0 806 52 57 64 26 24 21 4.0 3.6 3.2 16 15 13 16 16 16 0.9 1.0 1.1 29 15
Concord Biotech REDUCE 1,593 1,450 (9) 167 2.0 105 30 37 47 54 43 34 10.9 9.2 7.6 38 31 24 22 23 25 0.5 0.6 0.7 2 1
Divis Laboratories SELL 3,672 3,025 (18) 975 11.7 265 60 79 101 61 46 36 7.3 6.8 6.2 43 32 25 12 15 18 1.0 1.1 1.3 23 13
Dr Reddy's Laboratories REDUCE 5,943 5,825 (2) 991 11.9 166 347 356 335 17 17 18 3.5 2.9 2.6 11 10 10 22 19 15 0.7 0.8 0.8 29 15
Gland Pharma SELL 1,764 1,400 (21) 290 3.5 164 51 63 70 35 28 25 3.3 3.0 2.6 19 16 14 10 11 11 - - - 11 6
Glenmark Life Sciences ADD 797 710 (11) 98 1.2 123 45 49 53 18 16 15 4.1 3.6 3.2 12 11 10 24 24 23 3.1 3.1 3.1 2 1
Laurus Labs SELL 426 300 (30) 230 2.8 536 4 9 13 107 50 32 5.4 4.9 4.2 29 21 16 5 10 14 - - - 12 5
Lupin SELL 1,548 1,375 (11) 705 8.4 455 45 51 62 35 30 25 5.0 4.4 3.8 18 16 13 15 15 16 0.5 0.6 0.7 23 12
Mankind Pharma ADD 2,337 2,275 (3) 936 11.2 401 46 56 69 51 41 34 10.6 8.9 7.4 37 30 24 22 23 24 0.5 0.6 0.7 20 13
Sun Pharmaceuticals ADD 1,523 1,455 (4) 3,654 43.8 2,399 39 48 56 39 32 27 5.8 5.1 4.4 26 21 18 16 17 17 0.6 0.6 0.7 50 31
Torrent Pharmaceuticals REDUCE 2,539 2,325 (8) 859 10.3 338 47 62 77 54 41 33 11.3 9.2 7.5 25 22 18 23 25 25 0.3 0.4 0.5 8 4
Pharmaceuticals Neutral 11,011 131.9 34.4 28.6 24.6 4.8 4.2 3.7 20.6 17.4 14.9 13.8 14.7 15.0 0.5 0.6 0.7 270 143
Real Estate
Brigade Enterprises ADD 1,016 1,025 1 235 2.8 231 13 27 35 81 38 29 6.8 5.8 4.9 27 15 12 9 17 18 0.2 0.2 0.2 5 2
Brookfield India Real Estate Trust ADD 255 290 14 112 1.3 439 0 10 15 1,241 26 17 1.1 1.2 1.3 17 12 11 NM 3 5 7.5 9.1 9.9 1 1
DLF ADD 856 840 (2) 2,118 25.4 2,475 10 16 23 84 53 38 5.3 4.9 4.4 114 80 46 7 10 12 0.2 0.2 0.2 52 23
Embassy Office Parks REIT ADD 365 385 5 346 4.1 948 10 14 18 38 25 21 1.5 1.6 1.6 16 13 12 4 6 8 5.9 7.0 8.0 5 4
Godrej Properties SELL 2,501 1,525 (39) 695 8.3 278 21 45 51 119 56 49 7.1 6.3 5.6 (303) 171 228 6 12 12 — — — 24 9
Macrotech Developers ADD 1,171 1,080 (8) 1,165 13.9 964 17 48 54 67 24 22 7.9 6.0 4.7 45 18 16 12 28 24 — — — 16 10
Mindspace REIT ADD 342 380 11 203 2.4 593 9 11 13 39 30 26 1.4 1.4 1.5 15 13 12 4 5 6 6.1 6.5 7.0 1 1
Nexus Select Trust ADD 131 145 10 199 2.4 1,515 4 5 6 30 26 23 6.8 8.8 12.2 15 14 13 25 29 45 7.0 7.1 7.6 1 0
Oberoi Realty REDUCE 1,395 1,245 (11) 507 6.1 364 47 54 90 30 26 16 3.6 3.2 2.7 20 17 10 13 13 19 0.1 0.1 0.1 15 7
Phoenix Mills REDUCE 3,122 2,495 (20) 558 6.7 179 62 84 97 50 37 32 5.9 5.1 4.5 27 19 17 12 15 15 0.1 0.1 0.1 20 11
Prestige Estates Projects ADD 1,231 1,160 (6) 493 5.9 401 31 11 17 40 109 71 4.4 4.3 4.1 29 22 17 12 4 6 0.1 0.1 0.1 14 8
Signature Global SELL 1,249 1,175 (6) 175 2.1 141 13 38 27 98 33 46 21.1 12.8 10.0 76 26 32 41 49 25 — — — 8 2
Sobha SELL 1,578 1,050 (33) 150 1.8 95 15 50 45 104 31 35 5.8 4.9 4.4 40 17 18 6 17 13 0.2 0.3 0.3 8 3
Sunteck Realty BUY 429 550 28 63 0.8 140 19 22 60 22 19 7 2.0 1.8 1.4 19 15 6 9 10 22 0.2 0.2 0.2 4 2
Real Estate Attractive 7,019 84.1 59.7 37.4 29.1 4.4 4.1 3.7 37.1 24.1 18.8 7.4 11.0 12.8 0.9 1.0 1.1 173 84
Retailing
Avenue Supermarts SELL 4,696 3,650 (22) 3,056 36.6 651 40 51 64 119 92 74 16.4 13.9 11.7 74 59 47 15 16 17 — — — 22 14
Metro Brands REDUCE 1,069 1,125 5 291 3.5 272 12 16 20 88 67 54 16.4 14.0 11.8 40 33 27 20 23 23 — 1— 0.6 5 3
Titan Company ADD 3,563 3,750 5 3,163 37.9 888 41 50 62 87 72 57 33.4 25.4 19.3 60 47 38 34 40 38 0.4 0.4 0.5 46 25
Trent ADD 4,159 3,800 (9) 1,478 17.7 356 30 43 62 139 97 67 40.4 28.6 20.0 77 56 41 34 34 35 — — — 46 24
Retailing Neutral 6,510 95.7 105.1 82.5 64.4 23.8 19.2 15.3 66.2 51.5 41.2 23 23 24 0.2 0.2 0.2 119 65

Source: Company, Bloomberg, Kotak Institutional Equities estimates

India Research
 105

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

Price (Rs) Fair Value Upside Mkt cap. O/S shares EPS (Rs) P/E (X) P/B (X) EV/EBITDA (X) RoE (%) Dividend yield (%) ADV-3M (US$ mn)
Company Rating 19-Apr-24 (Rs) (%) (Rs bn) (US$ bn) (mn) 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E Traded Delivered
Specialty Chemicals
Aarti Industries SELL 723 480 (34) 262 3.1 363 11 15 20 64 48 36 5.0 4.6 4.2 30 23 19 8 10 12 0.2 0.3 0.6 16 6
Atul SELL 5,901 4,050 (31) 174 2.1 29 134 167 203 44 35 29 3.5 3.2 3.0 24 20 17 8 9 11 0.3 0.5 0.7 4 2
Castrol India SELL 208 180 (13) 205 2.5 989 9 10 11 24 21 19 9.7 8.8 8.0 16 14 13 43 45 44 3.6 3.9 4.1 17 7
Clean Science & Technology ADD 1,298 1,540 19 138 1.7 106 22 30 51 58 43 25 11.4 9.4 7.2 42 31 19 22 24 32 0.3 0.4 0.7 2 1
Deepak Nitrite REDUCE 2,272 2,190 (4) 310 3.7 136 56 65 81 40 35 28 6.5 5.6 4.7 28 26 22 17 17 18 0.3 0.3 0.4 8 3
Navin Fluorine REDUCE 3,223 3,120 (3) 160 1.9 50 44 72 104 73 45 31 6.7 5.9 5.1 41 26 19 9 14 18 0.4 0.4 0.5 10 5
Pidilite Industries ADD 2,831 3,075 9 1,440 17.2 508 37 44 51 77 64 55 17.6 15.6 14.0 52 44 38 24 26 27 0.6 0.9 1.1 20 12
PI Industries ADD 3,709 3,830 3 563 6.7 152 108 114 128 34 33 29 6.5 5.5 4.8 27 24 21 21 18 18 0.3 0.4 0.5 17 10
SRF BUY 2,529 2,660 5 750 9.0 296 45 64 95 56 39 27 6.6 5.8 4.9 29 22 16 12 16 20 0.5 0.5 — 16 9
Vinati Organics SELL 1,649 1,100 (33) 170 2.0 104 29 38 48 56 43 34 6.5 5.8 5.0 37 29 23 13 14 16 0.3 0.3 0.4 2 1
Specialty Chemicals Neutral 4,170 50.0 51.9 42.3 33.6 8.1 7.1 6.2 33.2 27.0 22.0 15.6 16.9 18.5 0.6 0.7 0.8 111 56
Telecommunication Services
Bharti Airtel ADD 1,289 1,200 (7) 7,660 91.8 5,967 21 39 52 60 33 25 8.8 6.7 5.5 11 9 7 15 23 24 0.4 0.4 0.5 100 64
Indus Towers ADD 351 245 (30) 947 11.3 2,695 20 22 14 17 16 25 3.6 2.9 2.9 7 6 7 23 20 12 0.4 3.7 2.1 85 39
Vodafone Idea RS 13 — — 647 7.7 48,680 (7) (4) (4) NM NM NM NM NM NM 18 16 15 NM NM NM — — — 92 21
Tata Communications SELL 1,755 1,525 (13) 500 6.0 285 42 47 64 42 37 28 28.0 19.0 12.9 14 12 10 73 61 56 1.0 1.1 1.4 20 9
Telecommunication Services Attractive 9,754 116.8 NM 632.4 102.4 98 27 26 12.0 9.9 8.6 NM 4.2 26 0.4 0.7 0.6 297 133
Transportation
Adani Ports and SEZ BUY 1,310 1,520 16 2,830 33.9 2,160 43 53 64 30 25 20 5.3 4.4 3.7 20 16 14 19 19 20 0.2 0.3 0.5 66 26
Container Corp. SELL 927 720 (22) 565 6.8 609 21 25 29 44 37 32 4.8 4.5 4.3 27 23 20 11 13 14 1.1 1.3 1.5 25 11
Delhivery BUY 453 570 26 334 4.0 739 (3) (0) 2 NM NM 197 3.6 3.6 3.5 228 67 39 NM NM 2 — — — 17 11
Gateway Distriparks ADD 103 119 16 51 0.6 500 5 6 7 19 17 14 2.6 2.4 2.1 14 12 10 14 15 16 1.6 1.8 2.0 1 1
GMR Airports SELL 81 63 (22) 487 5.8 6,036 (1) (0) 1 NM NM 139 NM NM NM 28 15 12 NM NM 25 — — — 39 16
Gujarat Pipavav Port REDUCE 205 167 (19) 99 1.2 483 8 10 11 25 20 18 4.1 3.9 3.7 15 13 11 17 19 21 2.7 3.2 3.7 20 7
InterGlobe Aviation BUY 3,560 4,300 21 1,374 16.5 383 198 190 211 18 19 17 102.8 15.9 4.3 7 5 4 NM 146 64 — — — 64 35
JSW Infrastructure SELL 239 185 (23) 502 6.0 2,100 6 8 9 42 31 27 6.3 5.4 19.4 26 21 19 20 19 19 0.2 0.6 0.7 17 8
Mahindra Logistics SELL 454 300 (34) 33 0.4 71 (1) 8 16 NM 56 28 5.9 5.5 4.8 17 11 9 NM 10 18 — — — 2 1
Transportation Attractive 6,275 75.2 33.1 28.0 23.2 7.0 5.7 4.7 16.7 13.1 11.0 21 20 20 0.3 0.4 0.5 251 116
KIE universe 280,647 3,362 25.3 23.2 20.4 4.0 3.6 3.2 15.1 13.8 12.2 15.9 15.5 15.7 1.2 1.4 1.5

Notes:
(a) We have used adjusted book values for banking companies.
(b) 2024 means calendar year 2023, similarly for 2025 and 2026 for these particular companies.
(c) Exchange rate (Rs/US$)= 83.5

Source: Company, Bloomberg, Kotak Institutional Equities estimates

India Research
 106

DISCLAIMERS, DISCLOSURES & LEGAL

“Each of the analysts named below hereby certifies that, with respect to each subject company and its securities for which the analyst is
responsible in this report, (1) all of the views expressed in this report accurately reflect his or her personal views about the subject companies
and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or
views expressed in this report: “Kawaljeet Saluja, Sathishkumar S., Vamshi Krishna, M.B. Mahesh, Nischint Chawathe, Abhijeet Sakhare, Ashlesh
Sonje, Varun Palacharla, Aditya Mongia, Deepak Krishnan, Sai Siddhardha P, Anil Sharma, Aditya Bansal, Sumangal Nevatia, Siddharth Mehrotra,
Suvodeep Rakshit, Upasna Bhardwaj, Anurag Balajee.”

Distribution of ratings/investment banking relationships

Kotak Institutional Equities Research coverage universe

Percentage of companies covered by Kotak Institutional

70%
Equities, within the specified category.

60%
Percentage of companies within each category for which
Kotak Institutional Equities and or its affiliates has
50%
provided investment banking services within the previous
12 months.
40% * The above categories are defined as follows: Buy = We
31.9% 33.1% expect this stock to deliver more than 15% returns over
30% the next 12 months; Add = We expect this stock to deliver
5-15% returns over the next 12 months; Reduce = We
19.0% expect this stock to deliver -5-+5% returns over the next
20% 16.0% 12 months; Sell = We expect this stock to deliver less than
-5% returns over the next 12 months. Our target prices
10% 5.7% are also on a 12-month horizon basis. These ratings are
3.8% used illustratively to comply with applicable regulations. As
1.9% 1.9%
of 31/03/2024 Kotak Institutional Equities Investment
0%
Research had investment ratings on 263 equity securities.
BUY ADD REDUCE SELL

Source: Kotak Institutional Equities

As of March 31, 2024

Ratings and other definitions/identifiers

Definitions of ratings

BUY. We expect this stock to deliver more than 15% returns over the next 12 months.
ADD. We expect this stock to deliver 5-15% returns over the next 12 months.
REDUCE. We expect this stock to deliver -5-+5% returns over the next 12 months.
SELL. We expect this stock to deliver <-5% returns over the next 12 months.
Our Fair Value estimates are also on a 12-month horizon basis.Our Ratings System does not take into account short-term volatility in stock prices related
to movements in the market. Hence, a particular Rating may not strictly be in accordance with the Rating System at all times.

Other definitions
Coverage view. The coverage view represents each analyst’s 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 fair value, 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 fair value, if any, for this stock, because there is not a
sufficient fundamental basis for determining an investment rating or fair value. The previous investment rating and fair value, 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.

India Research
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