21_india asset financing nbfcs – resilient rural model
TRANSCRIPT
India – Asset financing NBFCsResilient rural model
India – Asset financing NBFCsResilient rural model
Clyton Fernandes+9122 6626 6744
India I Equities
26 March 2014
Kaitav Shah+9122 6626 6545
2
Summary AUM growth still resilient, multi-product NBFCs fare better■ MMFS, Bajaj Finance and Chola displayed resilient AUM growth, led by a combination of
diversified product mix and deeper penetration
■ Disbursement growth for NBFCs slowing down, led by the M&H CV sector
NIM stable, likely to improve■ While NIM declined, yoy and qoq, on account of the implementation of liquidity-tightening
measures by the RBI, they are still high
■ Partial rollback of extraordinary measures by the RBI combined with a 25-50bps likely fall in interest rates in 2HCY14 is likely to curtail a further fall in NIM
Asset quality slips, high capital adequacy provides buffer■ Asset quality of most NBFCs slips given the sharp slowdown in the CV sector. However, we
expect pace of NPA formation to abate with the recent stabilization in freight rates .
■ High capital adequacy of most NBFCs is unlikely to constrain business growth and offers assurance against further delinquencies.
Prefer■ We expect NBFCs with a diversified asset mix, higher operating leverage and sufficient NPA
coverage to tide over the challenging asset-quality cycle
■ Top Buy: Bajaj Finance ,Chola Finance Top Sell: Shriram Transport
Anand Rathi ResearchSummarySummary
Anand Rathi Research
India Economy - Inflation likely to soften further
■ GDP growth in India further slowed to 4.7% in Q3 (vs 4.8% in Q2)
■ IIP in December came at 0.6%, with no clear signs of growth bottoming out .
■ Inflation (CPI and WPI) has considerably eased. We expect WPI and CPI below 5% in the latter part of CY14
■ Systemic liquidity is in the RBI’s comfort zone
■ Given the slowing growth and softening of inflation, we expect a 25-50bps rate cut in 2HCY14
GDP growth slowing down
Source: MOSPI
IIP growth yet to bottom out
Source: MOSPI
Inflation coming off
Source: MOSPI
Multi product Multi product NBFCsNBFCs fare betterfare better
Liquidity
Source: Bloomberg
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Jun-
05
Dec
-05
Jun-
06
Dec
-06
Jun-
07
Dec
-07
Jun-
08
Dec
-08
Jun-
09
Dec
-09
Jun-
10
Dec
-10
Jun-
11
Dec
-11
Jun-
12
Dec
-12
Jun-
13
Dec
-13
(Gro
wth
, %)
GDP
-2500
-2000
-1500
-1000
-500
0
500
1000
1500
Apr-1
3
May
-13
Jun-
13
Jul-1
3
Aug-
13
Sep-
13
Oct
-13
Nov
-13
Dec
-13
Jan-
14
(`bn)
Liquidity
-10.0
-5.0
0.0
5.0
10.0
15.0
Jan-
09
May
-09
Sep-
09
Jan-
10
May
-10
Sep-
10
Jan-
11
May
-11
Sep-
11
Jan-
12
May
-12
Sep-
12
Jan-
13
May
-13
Sep-
13
Jan-
14
(Gro
wth
) %
IIP
4.0
5.0
6.0
7.0
8.0
9.0
Mar
-12
Apr-1
2M
ay-1
2Ju
n-12
Jul-1
2Au
g-12
Sep-
12O
ct-1
2N
ov-1
2D
ec-1
2Ja
n-13
Feb-
13M
ar-1
3Ap
r-13
May
-13
Jun-
13Ju
l-13
Aug-
13Se
p-13
Oct
-13
Nov
-13
Dec
-13
Jan-
14Fe
b-14
(Infla
tion)
%
7.0
8.0
9.0
10.0
11.0
12.0
(Inflation) %
WPI CPI(RHS)
3
Anand Rathi Research
Vehicle sales - Structural slowdown
■ M&H CVs are likely to continue in the midst of a cyclical slowdown in FY14
■ LCVs saw a 22% CAGR in the past 10 years, but this was inflated by the creation of the SCV segment in FY05
■ Since Sep’12 diesel prices have risen faster than truck rentals, impacting breakeven for long-haul fleet operators
■ However, channel checks over the last two months suggest that truck rentals have bottomed out and are looking up
M&H CV prolonged cyclical slowdown
Source: Bloomberg
LCV sales tapering off
Source: Bloomberg
Diesel price rises faster than fleet rental, delaying breakeven for operators
Source: Bloomberg
Multi product Multi product NBFCsNBFCs fare betterfare better
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
Jan-
08Ap
r-08
Jul-0
8O
ct-0
8Ja
n-09
Apr-0
9Ju
l-09
Oct
-09
Jan-
10Ap
r-10
Jul-1
0O
ct-1
0Ja
n-11
Apr-1
1Ju
l-11
Oct
-11
Jan-
12Ap
r-12
Jul-1
2O
ct-1
2Ja
n-13
Apr-1
3Ju
l-13
Oct
-13
Jan-
14
(Nos.)
M&HCV
10,000
20,000
30,000
40,000
50,000
60,000
Jan-
08Ap
r-08
Jul-0
8O
ct-0
8Ja
n-09
Apr-0
9Ju
l-09
Oct
-09
Jan-
10Ap
r-10
Jul-1
0O
ct-1
0Ja
n-11
Apr-1
1Ju
l-11
Oct
-11
Jan-
12Ap
r-12
Jul-1
2O
ct-1
2Ja
n-13
Apr-1
3Ju
l-13
Oct
-13
Jan-
14
(Nos.)
Light commercial vehicles
4
15,000
17,500
20,000
22,500
25,000
27,500
30,000
Jun-
08
Sep-
08
Dec
-08
Mar
-09
Jun-
09
Sep-
09
Dec
-09
Mar
-10
Jun-
10
Sep-
10
Dec
-10
Mar
-11
Jun-
11
Sep-
11
Dec
-11
Mar
-12
Jun-
12
Sep-
12
Dec
-12
Mar
-13
Jun-
13
(`/9ton)
30
35
40
45
50
55
(`/ltr)
Delhi to Mumbai India diesel prices (RHS)
Anand Rathi Research
Tractor, two wheelers save the day…
■ Utility vehicle growth slows down. Rural growth still resilient.
■ The long-term trend for passenger vehicles indicates a sustained growth trajectory from FY02, with a tapering growth rate in the past two years
■ Tractor growth has been healthy; however, ahead it is expected to soften
■ Rising rural disposable incomes driving two-wheeler demand
Passenger vehicles slowing
Source: CSO
Tractors - Structurally better
Source: CSO
Utility vehicles: High base effect playing out
Source: CSO
Two-wheelers – Continuing rural demand
Source: CSO
Multi product Multi product NBFCsNBFCs fare betterfare better
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Jan-
08Ap
r-08
Jul-0
8O
ct-0
8Ja
n-09
Apr-0
9Ju
l-09
Oct
-09
Jan-
10Ap
r-10
Jul-1
0O
ct-1
0Ja
n-11
Apr-1
1Ju
l-11
Oct
-11
Jan-
12Ap
r-12
Jul-1
2O
ct-1
2Ja
n-13
Apr-1
3Ju
l-13
Oct
-13
Jan-
14
(Nos.)
Passeger vehicles
15,000
24,000
33,000
42,000
51,000
60,000
Jan-
09
Apr-0
9
Jul-0
9
Oct
-09
Jan-
10
Apr-1
0
Jul-1
0
Oct
-10
Jan-
11
Apr-1
1
Jul-1
1
Oct
-11
Jan-
12
Apr-1
2
Jul-1
2
Oct
-12
Jan-
13
Apr-1
3
Jul-1
3
Oct
-13
Jan-
14
(Nos.)
Utility vehicles
500,000
700,000
900,000
1,100,000
1,300,000
1,500,000
1,700,000
1,900,000
Jan-
08Ap
r-08
Jul-0
8O
ct-0
8Ja
n-09
Apr-0
9Ju
l-09
Oct
-09
Jan-
10Ap
r-10
Jul-1
0O
ct-1
0Ja
n-11
Apr-1
1Ju
l-11
Oct
-11
Jan-
12Ap
r-12
Jul-1
2O
ct-1
2Ja
n-13
Apr-1
3Ju
l-13
Oct
-13
Jan-
14
(Nos.)
Two wheelers
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
FY09
FY10
FY11
FY12
FY13
FY14
e
-5
0
5
10
15
20
25
30
Tractor production Growth
Nos (%)
5
Anand Rathi Research
AFCs: AUM growth better, yet…
■ Despite the prolonged cyclical slowdown in CV markets, AUM growth for most asset-financing companies has been stable. This is on account of a niche model focused on rural and semi-rural areas where consumption is yet healthy
India NBFC : AUM growth
Source: RBI
Multi product Multi product NBFCsNBFCs fare betterfare better
■ A sharp slowdown in M&H CV sales has dried up financing opportunities in the segment. As a result, disbursement growth of most NBFCs is slowing from their past pace. We expect this trend to continue over the next two quarters
Indian NBFC: Disbursement growth slowing down
Source: RBI
-20-10
01020304050607080
2QFY
12
3QFY
12
4QFY
12
1QFY
13
2QFY
13
3QFY
13
4QFY
13
1QFY
14
2QFY
14
3QFY
14
(%)
Bajaj Finance Chola FinanceMagma Finance Mahindra FinanceShriram City Union Finance Shriram Transport
AUM
-30-15
0153045607590
2QFY
12
3QFY
12
4QFY
12
1QFY
13
2QFY
13
3QFY
13
4QFY
13
1QFY
14
2QFY
14
3QFY
14
(%)
Chola Finance Magma FinanceMahindra Finance Shriram City Union FinanceShriram Transport
6
Anand Rathi Research
AFCs diversifying into home, gold loans
■ However, most AFCshave diversified their product profiles and are no longer captive financiers
■ Further AFCs have been consistently investing in their branch networks and deepening their penetration levels
■ Multiple products and deepening penetration are driving AUM, and disbursement is faster than the system
Product-mix charts
Source: CSO
Branches
Source: CSO
Multi product Multi product NBFCsNBFCs fare betterfare better
Product presence Bajaj Finance Chola Finance Magma Finance Mahindra Finance Shriram City Union Shriram Transport Capital First
Commercial vehicles
Tractors
Utility vehicles
Passenger cars
Used Car
LAP
Home loans
Consumer durable
Two/Three wheeler
Gold loan
0
200
400
600
800
Bajaj Finance Chola Finance Magma Finance Mahindra Finance Shriram CityUnion Finance
Shriram Transport
Mar'11 Sep'13 7
Anand Rathi Research
NIM stabilizes, further erosion unlikely
■ NIM of most AFCs was lower during the quarter on account of the tight liquidity environment created by the RBI’s extraordinary measures to protect the rupee
■ NBFCs preferred to borrow from banks than from money markets.
NIM falls during the quarter
Source: RBI
NiMNiM stable,likelystable,likely to improveto improve
■ While banks have raised base rates, reversal of the extraordinary measures is likely to offset the higher base rate, protecting further erosion in interest spreads
■ A fall in interest rates, by 25-50bps in H2 CY14 is likely to provide some impetus to spreads
Share of credit to NBFCs by banks at all-time high
Source: RBI
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Dec
-10
J an -
11Fe
b -1 1
Mar
-11
A pr- 1
1M
ay-1
1J u
n -11
Jul -1
1Au
g-1 1
S ep -
11O
ct-1
1N
o v-1
1D
ec- 1
1Ja
n -12
Feb -
1 2M
a r-1
2A p
r- 12
May
- 12
Jun -
12Ju
l -12
Aug-
1 2Se
p -12
Oct
-12
Nov
-12
Dec
-12
Jan-
13Fe
b -13
Ma r
-13
Apr-1
3M
ay-1
3Ju
n-13
J ul -1
3Au
g -1 3
Sep-
13
(`bn)
0
1
2
3
4
5
6
7
(%)
Banks lending to NBFCs % of overall credit (RHS)
0
3
6
9
12
15
18
2QFY
12
3QFY
12
4QFY
12
1QFY
13
2QFY
13
3QFY
13
4QFY
13
1QFY
14
2QFY
14
3QFY
14
(%)
Bajaj Finance Chola FinanceMagma Finance Mahindra FinanceShriram City Union Finance Shriram Transport
8
Anand Rathi Research
Operating leverage playing out, to support RoAs
■ Over FY10-13, most listed NBFCs invested in their branch networks, strengthened their employee base and introducing hand-held devices, increasing costs
■ However, over the last three quarters operating leverage of all NBFCs apart from Shriram Transport has been playing out
Cost-to-assets declining
Source: RBI
NiMNiM stable, likely to improvestable, likely to improve
■ Cost-income for Chola, Bajaj, Magma continues to trend downwards, with scope for further improvement.
■ A combination of more products and deeper penetration has led to better operating leverage, driving improvement in cost-to-assets
Cost-income – improving trend for most
Source: RBI
0.0
1.5
3.0
4.5
6.0
7.5
9.0
2QFY
12
3QFY
12
4QFY
12
1QFY
13
2QFY
13
3QFY
13
4QFY
13
1QFY
14
2QFY
14
3QFY
14
(%)
Bajaj Finance Chola FinanceMagma Finance Mahindra FinanceShriram City Union Finance Shriram Transport
0
10
20
30
40
50
60
70
80
2QFY
12
3QFY
12
4QFY
12
1QFY
13
2QFY
13
3QFY
13
4QFY
13
1QFY
14
2QFY
14
3QFY
14
(%)
Bajaj Finance Chola FinanceMagma Finance Mahindra FinanceShriram City Union Finance Shriram Transport
9
Anand Rathi Research
Higher stressed assets, comfort of high tier-I capital
■ Asset quality saw some pain during the quarter with GNPA of all asset-financing companies increasing
■ NBFCs provided conservatively and shored up NPA coverage.
■ Credit costs to be high as asset-quality headwinds persist. However, with fleet rentals stabilizing, the pace of NPA formation is likely to abate.
■ High tier-1 capital offers assurance against further delinquencies
GNPA of all NBFCs rises
Source: Companies, Anand Rathi Research
Credit costs increase
Source: Companies, Anand Rathi Research (*annualized)
To shore up NPA coverage
Source: Companies, Anand Rathi Research
High capital adequacy for most is comforting
Source: Companies, Anand Rathi Research
0
1.5
3
4.5
6
2QFY
12
3QFY
12
4QFY
12
1QFY
13
2QFY
13
3QFY
13
4QFY
13
1QFY
14
2QFY
14
3QFY
14
(%)
Bajaj Finance Chola FinanceMagma Finance Mahindra FinanceShriram City Union Finance Shriram Transport
0.0
1.5
3.0
4.5
2QFY
12
3QFY
12
4QFY
12
1QFY
13
2QFY
13
3QFY
13
4QFY
13
1QFY
14
2QFY
14
3QFY
14
(%)
Bajaj Finance Chola FinanceMagma Finance Mahindra FinanceShriram City Union Finance Shriram Transport
0
20
40
60
80
100
120
2QFY
12
3QFY
12
4QFY
12
1QFY
13
2QFY
13
3QFY
13
4QFY
13
1QFY
14
2QFY
14
3QFY
14
(%)
Bajaj Finance Chola FinanceMagma Finance Mahindra FinanceShriram City Union Finance Shriram Transport
0
4
8
12
16
20
2QFY
12
3QFY
12
4QFY
12
1QFY
13
2QFY
13
3QFY
13
4QFY
13
1QFY
14
2QFY
14
3QFY
14
(%)
Bajaj Finance Chola FinanceMagma Finance Mahindra FinanceShriram City Union Finance Shriram Transport
10
Anand Rathi Research
India NBFCs: Historical PBV Standard Deviation
Chola Finance
Source: Bloomberg, Anand Rathi Research
Mahindra Finance
Source: : Bloomberg, Anand Rathi Research
Shriram City Union Finance
Source: : Bloomberg, Anand Rathi Research
Shriram Transport
Source: : Bloomberg, Anand Rathi Research
Bajaj Finance
Source: Bloomberg, Anand Rathi Research
Magma Fincorp
Source: : Bloomberg, Anand Rathi Research
CIF +1SD
+2SD
-1SD
-2SD
Mean
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Mar
-08
Jun-
08Se
p-08
Dec
-08
Mar
-09
Jun-
09Se
p-09
Dec
-09
Mar
-10
Jun-
10Se
p-10
Dec
-10
Mar
-11
Jun-
11Se
p-11
Dec
-11
Mar
-12
Jun-
12Se
p-12
Dec
-12
Mar
-13
Jun-
13Se
p-13
Dec
-13
Mar
-14
+1SD
+2SD
- 1SD
- 2SD
Mean
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Mar
-08
Sep-
08
Mar
-09
Sep-
09
Mar
-10
Sep-
10
Mar
-11
Sep-
11
Mar
-12
Sep-
12
Mar
-13
Sep-
13
Mar
-14
MAGMA
+1SD
+2SD
-1SD
-2SD
Mean
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Mar
-08
Jul-0
8N
ov-0
8M
ar-0
9Ju
l-09
Nov
-09
Mar
-10
Jul-1
0N
ov-1
0M
ar-1
1Ju
l-11
Nov
-11
Mar
-12
Jul-1
2N
ov-1
2M
ar-1
3Ju
l-13
Nov
-13
Mar
-14
STFC+1SD
+2SD
- 1SD
- 2SD
Mean
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Mar
-08
Sep-
08
Mar
-09
Sep-
09
Mar
-10
Sep-
10
Mar
-11
Sep-
11
Mar
-12
Sep-
12
Mar
-13
Sep-
13
Mar
-14
SCUF+1SD
+2SD
- 1SD
- 2SD
Mean
1.0
1.2
1.4
1.6
1.8
2.0
2.2
2.4
2.6
2.8
Mar
-07
Sep-
07
Mar
-08
Sep-
08
Mar
-09
Sep-
09
Mar
-10
Sep-
10
Mar
-11
Sep-
11
Mar
-12
Sep-
12
Mar
-13
Sep-
13
Mar
-14
BAF
0.0
0.5
1.0
1.5
2.0
2.5
Jun-
08Se
p-08
Dec
-08
Mar
-09
Jun-
09Se
p-09
Dec
-09
Mar
-10
Jun-
10Se
p-10
Dec
-10
Mar
-11
Jun-
11Se
p-11
Dec
-11
Mar
-12
Jun-
12Se
p-12
Dec
-12
Mar
-13
Jun-
13Se
p-13
Dec
-13
Mar
-14
+2SD
+1SD
-1SD
-2SD
Mean
11
Anand Rathi Research
India NBFCs: Historical PBV Chart
Chola Finance
Source: Bloomberg, Anand Rathi Research
Mahindra Finance
Source: : Bloomberg, Anand Rathi Research
Shriram City Union Finance
Source: : Bloomberg, Anand Rathi Research
Shriram Transport
Source: : Bloomberg, Anand Rathi Research
Bajaj Finance
Source: Bloomberg, Anand Rathi Research
Magma Fincorp
Source: : Bloomberg, Anand Rathi Research
BAF
0.5x
1.0x
1.5x
2.0x
0
500
1,000
1,500
2,000
2,500
Mar
-08
Sep-
08
Mar
-09
Sep-
09
Mar
-10
Sep-
10
Mar
-11
Sep-
11
Mar
-12
Sep-
12
Mar
-13
Sep-
13
Mar
-14
CIF
0.5x
1.0x
1.5x
2.0x
0
50
100
150
200
250
300
350
400
Mar
-07
Sep-
07
Mar
-08
Sep-
08
Mar
-09
Sep-
09
Mar
-10
Sep-
10
Mar
-11
Sep-
11
Mar
-12
Sep-
12
Mar
-13
Sep-
13
Mar
-14
MMFS
1.0x
1.7x
2.5x
3.2x
0
50
100
150
200
250
300
350
Mar
-08
Jun-
08Se
p-08
Dec
-08
Mar
-09
Jun-
09Se
p-09
Dec
-09
Mar
-10
Jun-
10Se
p-10
Dec
-10
Mar
-11
Jun-
11Se
p-11
Dec
-11
Mar
-12
Jun-
12Se
p-12
Dec
-12
Mar
-13
Jun-
13Se
p-13
Dec
-13
Mar
-14
0.7x
1.0x
1.3x
1.6x
0
20
40
60
80
100
120
140
160
180
Mar
-07
Jun-
07Se
p-07
Dec
-07
Mar
-08
Jun-
08Se
p-08
Dec
-08
Mar
-09
Jun-
09Se
p-09
Dec
-09
Mar
-10
Jun-
10Se
p-10
Dec
-10
Mar
-11
Jun-
11Se
p-11
Dec
-11
Mar
-12
Jun-
12Se
p-12
Dec
-12
Mar
-13
Jun-
13Se
p-13
Dec
-13
Mar
-14
1.0x
1.6x
2.2x
2.8x
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Mar
-07
Jun-
07Se
p-07
Dec
-07
Mar
-08
Jun-
08Se
p-08
Dec
-08
Mar
-09
Jun-
09Se
p-09
Dec
-09
Mar
-10
Jun-
10Se
p-10
Dec
-10
Mar
-11
Jun-
11Se
p-11
Dec
-11
Mar
-12
Jun-
12Se
p-12
Dec
-12
Mar
-13
Jun-
13Se
p-13
Dec
-13
Mar
-14
SHTF
1.0x
1.6x
2.2x
2.8x
0
200
400
600
800
1,000
1,200
1,400
Mar
-08
Jun-
08Se
p-08
Dec
-08
Mar
-09
Jun-
09Se
p-09
Dec
-09
Mar
-10
Jun-
10Se
p-10
Dec
-10
Mar
-11
Jun-
11Se
p-11
Dec
-11
Mar
-12
Jun-
12Se
p-12
Dec
-12
Mar
-13
Jun-
13Se
p-13
Dec
-13
Mar
-14
12
Anand Rathi Research
India NBFCs: Historical PE Chart
Chola Finance
Source: Bloomberg, Anand Rathi Research
Mahindra Finance
Source: : Bloomberg, Anand Rathi Research
Shriram City Union Finance
Source: : Bloomberg, Anand Rathi Research
Shriram Transport
Source: : Bloomberg, Anand Rathi Research
Bajaj Finance
Source: Bloomberg, Anand Rathi Research
Magma Fincorp
Source: : Bloomberg, Anand Rathi Research
BAF
6x
9x
12x
15x
0
500
1,000
1,500
2,000
2,500
Mar
-08
Sep-
08
Mar
-09
Sep-
09
Mar
-10
Sep-
10
Mar
-11
Sep-
11
Mar
-12
Sep-
12
Mar
-13
Sep-
13
Mar
-14
CIF
6x
9x
12x
15x
0
100
200
300
400
500
600
Apr-0
7Ju
l-07
Oct
-07
Jan-
08Ap
r-08
Jul-0
8O
ct-0
8Ja
n-09
Apr-0
9Ju
l-09
Oct
-09
Jan-
10Ap
r-10
Jul-1
0O
ct-1
0Ja
n-11
Apr-1
1Ju
l-11
Oct
-11
Jan-
12Ap
r-12
Jul-1
2O
ct-1
2Ja
n-13
Apr-1
3Ju
l-13
Oct
-13
Jan-
14
MMFS
5x
10x
15x
20x
0
50
100
150
200
250
300
350
400
Mar
-07
Sep-
07
Mar
-08
Sep-
08
Mar
-09
Sep-
09
Mar
-10
Sep-
10
Mar
-11
Sep-
11
Mar
-12
Sep-
12
Mar
-13
Sep-
13
Mar
-14
MAGMA
5x
8x
11x
14x
0
20
40
60
80
100
120
140
160
180
200
Mar
-07
Sep-
07
Mar
-08
Sep-
08
Mar
-09
Sep-
09
Mar
-10
Sep-
10
Mar
-11
Sep-
11
Mar
-12
Sep-
12
Mar
-13
Sep-
13
Mar
-14
SCUF
5x
8x
11x
14x
100
300
500
700
900
1,100
1,300
1,500
1,700
Mar
-08
Jun-
08Se
p-08
Dec
-08
Mar
-09
Jun-
09Se
p-09
Dec
-09
Mar
-10
Jun-
10Se
p-10
Dec
-10
Mar
-11
Jun-
11Se
p-11
Dec
-11
Mar
-12
Jun-
12Se
p-12
Dec
-12
Mar
-13
Jun-
13Se
p-13
Dec
-13
Mar
-14
SHTF
3x
7x
11x
15x
0
200
400
600
800
1,000
1,200
1,400
Mar
-08
Jul-0
8
Nov
-08
Mar
-09
Jul-0
9
Nov
-09
Mar
-10
Jul-1
0
Nov
-10
Mar
-11
Jul-1
1
Nov
-11
Mar
-12
Jul-1
2
Nov
-12
Mar
-13
Jul-1
3
Nov
-13
Mar
-14
13
Anand Rathi Research
Company section
14
Structural issues; Downgrade to sell■Shriram Transport improved AUM growth to more than 20% AUM growth in 9MFY14. This was largely led by increasing rural penetration and the change in consumer preferences to used CVs (between 3- 5yr-old vehicles).
■However ,the higher growth however was offset by lower NIM, down 94bps yoy to 6.7%, on the higher cost of funds and lower securitization income.
■ Shriram’s productivity has been deteriorating with cost-to-income increasing by 400 bps yoy to 25% . Increasing rural penetration would further cap any productivity gains.
■ Asset quality has deteriorated, with GNPA at 3.6% of advances, the highest in the last three years. A weak macro-economic environment is likely to keep credit costs (200bps on AUM) higher than in the past.
■ At our Mar’15 price target of `655, the stock would trade at 1.6x FY15e and 1.4x FY16e BV. We expect Shriram to continue facing structural challenges. Downgrade the stock to a Sell. Our target is based on the
two-stage DDM (CoE: 15.7%; beta: 1.1; Rf: 8%). Risks:A higher-than-expected NIM could lead to higher income.
Anand Rathi Research
Shriram Transport (Sell)
Source: Company, Anand Rathi Research
Source: Company, Anand Rathi Research
Income statement Year end 31 March FY12 FY13 FY14e FY15e FY16e
Net interest income 33,312 34,588 37,546 42,303 48,882
NII growth (%) 12.6 3.8 8.6 12.7 15.6
Non-interest inc 1,015 1,885 2,227 2,672 3,207
Total income 34,327 36,473 39,773 44,975 52,089
Total income growth (%) 9 6.3 9.0 13.1 15.8
Op. expenses 7,835 7,860 9,815 11,029 12,377
Operating profit 26,492 28,613 29,958 33,946 39,712
- 10 8.0 4.7 13.3 17.0
Provisions 7,683 8,451 11,280 11,563 11,821
PBT 18,809 20,162 18,677 22,383 27,891
Tax 6,235 6,556 5,603 7,386 9,483
PAT 12,574 13,606 13,074 14,997 18,408
+(Associates–Minorities) - - - - -
Consolidated PAT 12,574 13,606 13,074 14,997 18,408
PAT growth (%) 2.2 8.2 (3.9) 14.7 22.7
FDEPS (Rs/share) 55.6 60.0 57.6 66.1 81.1
DPS (Rs/share) 6.5 9.0 11.0 13.0 14.0
Key Ratios Year end 31 March FY12 FY13 FY14e FY15e FY16e
NIM (%) 7 7 6 6 6
Other inc / Total inc (%) 3.0 5.2 5.6 5.9 6.2
Cost-Income (%) 23 22 25 25 24
Provision coverage (%) 86 76 70 70 67
Dividend Payout (%) 14 17.6 22.3 23.0 20.2
Borrowings-loans (%) 105 98 99 98 98
Gross NPA (%) 3 3.2 3.8 4.1 4.2
Net NPA (%) 0 1 1 1 1
BV (Rs) 265 317 362 413 478
Adj BV (Rs) 260 306 343 389 445
CAR (%) 24 20 19 18 19
Tier 1 17 17 15 14 13
RoE (%) 23 21 17 17 18
RoA (%) 3.7 3.4 2.7 2.7 2.8
- Tier 1 (%) 17.3 17.0 15.0 14.2 13.4
Dividend Yield (%) 0.9 1.3 1.6 1.9 2.0
15
Strong parentage, diversified product ■ Diversified loan mix and a diversified customer segment to help drive 23% loan growth over the next two years
■ Customer profile changing; less dependent on agri-income
■ A well-recognized brand in rural and semi-rural areas, along with strong support from the parent to help sustain its high NIM above 9.5%
■ Productivity improvement to continue, with cost-assets to slip to 3.2% by FY15, from 3.4% at present
■ Asset quality slips, with GNPA increasing to 4.8% of NPAs. However, Q4 FY14 is likely to result in greater recoveries on a seasonally good quarter when rural cash flows are highest.
■ High capital adequacy of 18.6% (tier-1: 15.7 %) provides impetus against further delinquencies.
■ We expect the company’s niche rural presence, strong parentage and diversified product mix to support a 3.2%+
RoA over FY15/16.. At our price target of `291, it would trade at 2.8x FY15e and 2.4x FY16e PBV. Our valuation is based on the two-stage DDM (CoE: 15%; beta: 1.1; Rf: 8%) Risks.More than- expected credit growth and delinquencies.
Anand Rathi Research
Mahindra Finance (Buy)
Source: Company, Anand Rathi Research
Source: Company, Anand Rathi Research
Income statement Year end 31 March FY12 FY13 FY14e FY15e FY16e
Net interest income 16,478 22,380 27,940 34,658 42,408
NII growth (%) 25.4 35.8 24.8 24.0 22.4
Non-interest inc 265 1,022 360 420 339
Total income 16,743 23,402 28,300 35,078 42,747
Total income growth (%) 24 39.8 20.9 23.9 21.9
Op. expenses 5,920 7,420 9,390 11,645 14,569
Operating profit 10,823 15,982 18,911 23,433 28,177
Operating profit growth (%) 26 47.7 18.3 23.9 20.2
Provisions 1,570 3,190 5,592 6,014 5,810
PBT 9,253 12,792 13,319 17,419 22,368
Tax 3,051 3,965 4,462 5,835 7,493
PAT 6,201 8,827 8,857 11,584 14,875
PAT growth (%) 33.9 42.3 0.3 30.8 28.4
FDEPS (Rs/share) 12.1 15.7 15.7 20.6 26.4
DPS (Rs/share) 2.8 3.6 4.0 5.0 5.5
Key Ratios Year end 31 March FY12 FY13 FY14e FY15e FY16e
Interest spread (%) 7 7 7 8 8
NIM (%) 10.2 9.6 9.3 9.2 9.1
Other inc / Total inc (%) 2 4 1 1 1
Cost-Income (%) 35 32 33 33 34
Provision coverage (%) 78 65.9 46.7 57.6 72.3
Dividend Payout (%) 23 23 25 24 21
Borrowings-loans (%) 80 79 81 82 83
Gross NPA (%) 3 3 4 4 3
Net NPA (%) 1 1 2 2 1
BV (Rs) 57 79 90 105 125
Adj BV (Rs) 55 75 77 93 117
CAR (%) 16 19 18 17 17
- Tier 1 (%) 14 16 15 15 15
RoE (%) 23.2 25.2 18.6 21.1 23.0
ROA (%) 3.9 4.2 3.0 3.2 3.2
16
Rural foray, high NIM, stable asset quality■ Likely RoE improvement, shored up by stable margins, improving share of fees and stable credit costs
■ High capital adequacy of 17.4% (tier-1: 12.1%) provides impetus for more-than-past credit growth
■ NIM protection in FY14, estimated at 3% over FY14-15, helped by CASA share sustained at over 40%
■ Led by improving business growth across customer segments, we estimate fee-to-average-earning-assets to be higher – 1.5% in FY14 and 1.6% in FY15, compared with ~1.4% over FY10-13
■ Adequate NPA coverage (75.4%); we expect stable credit costs,~64bps over FY14-15, to aid profitability.
■We expect the healthy loan growth, rising proportion of secured lending and high NPA coverage to drive a sustainable RoA of more than 3.3% over FY13-16. At our price target of `1,905 the stock would trade at 2x FY15e BV and 1.8x FY16e BV. Our target is based on the two-stage DDM (CoE: 15.5%; beta: 1.04; Rf: 8.5%) Key risks:Slowdown in the economy
Anand Rathi Research
Bajaj Finance (Buy)
Source: Company, Anand Rathi Research
Source: Company, Anand Rathi Research
Income statement Year end 31 March FY12 FY13 FY14e FY15e FY16e Net interest income 12,983 17,191 23,394 28,851 34,731 NII growth (%) 36.1 32.4 36.1 23.3 20.4 Non-interest inc 1,011 1,866 1,553 1,928 2,313 Total income 13,994 19,057 24,948 30,778 37,045 Total inc growth (%) 38.6 36.2 30.9 23.4 20.4 Op. expenses 6,691 8,523 11,196 13,631 16,710 Operating profit 7,303 10,534 13,751 17,147 20,335 Op profit growth (%) 33.0 44.2 30.5 24.7 18.6 Provisions 1,281 1,818 2,853 3,203 4,163 PBT 6,022 8,716 10,898 13,944 16,171 Tax 1,958 2,803 3,651 4,950 5,385 PAT 4,064 5,913 7,247 8,994 10,786 PAT growth (%) 64.6 45.5 22.6 24.1 19.9 FDEPS (Rs/share) 98.4 118.8 145.6 180.7 216.7 DPS (Rs/share) 12.0 14.0 16.0 20.0 25.0
Key Ratios Year end 31 March FY12 FY13 FY14e FY15e FY16e
Interest spread (%) 12 9 10 10 10
NIM (%) 13.0 11.6 11.9 11.6 11.0
Other inc / Total inc (%) 7 10 6 6 6
Cost-Income (%) 48 45 45 44 45
Provision coverage (%) 89.4 82.6 83.5 84.0 84.3
Dividend Payout (%) 12 12 11 11 12
Borrowings-loans (%) 83 78 80 82 84
Investment-Deposit (%) - - - - -
Gross NPA (%) 1 1 1 2 2
Net NPA (%) 0 0 0 0 0
BV (Rs) 492 676 806 967 1,158
Adj BV (Rs) 488 670 796 952 1,137
CAR (%) 17 22 19 17 18
- Tier 1 (%) 17 19 17 15 15
RoE (%) 24.0 21.9 19.6 20.4 20.4
RoA (%) 3.8 3.8 3.6 3.5 3.3
Dividend Yield (%) 0.8 0.9 1.0 1.3 1.6
17
Rurally entrenched, multi-product play■ AUM growth set to pick up, with improved prospects of the gold-loan financing business. Other products such as SME finance, two-wheeler loans, etc., continue to augment growth. Additionally, SCUF is poised to benefit from customer-sourcing from Shriram Chits. This is likely to drive the 18% loan CAGR over the next two years
■ NIM is likely to improve given the greater share of higher-yielding assets such as SME finance and two-wheeler finance than gold loans
■ Productivity has been stable despite the slowdown in AUM growth. Ahead, we expect expenses to grow in line with asset growth, with cost-to-AUM stable at 4.1%
■ While asset quality has deteriorated, GNPA at 2.5% is lower than peers. Additionally, a 73% NPA coverage ratio is likely to provide a sound cushion against additional delinquencies
■ At our price target of `1,184, the stock would trade at 2.1x FY15e and 1.9x FY16e BV. Our target is based on the two-
stage DDM (CoE: 16%; beta: 1.1; Rf: 8.5%). Risks. Below-expected growth and higher NPA.
Anand Rathi Research
Shriram City Union Finance (Buy)
Source: Company, Anand Rathi Research
Source: Company, Anand Rathi Research
Income statement Year end 31 March FY12 FY13 FY14e FY15e FY16e
Net interest income 11,033 16,289 18,784 21,516 25,340
NII growth (%) 43.9 47.6 15.3 14.5 17.8
Non-interest inc 229 397 476 596 715
Total income 11,261 16,686 19,261 22,112 26,055
Total inc growth (%) 46 48.2 15.4 14.8 17.8
Op. expenses 4,236 6,189 7,549 8,807 10,319
Operating profit 7,025 10,497 11,712 13,304 15,736
Op profit growth (%) 47 49.4 11.6 13.6 18.3
Provisions 1,783 3,840 3,914 3,832 4,442
PBT 5,242 6,656 7,798 9,472 11,294
Tax 1,816 2,160 2,597 3,154 3,761
PAT 3,425 4,496 5,201 6,318 7,533
Extra-ordinary - - - - -
Consolidated PAT 3,425 4,496 5,201 6,318 7,533
PAT growth (%) 42.4 31.3 15.7 21.5 19.2
FDEPS (Rs/share) 65.4 81.1 87.7 106.5 127.0
DPS (Rs/share) 6.5 8.5 10.0 12.0 13.0
Key Ratios Year end 31 March FY12 FY13 FY14e FY15e FY16e
Interest spread (%) 9 9 10 10 10
NIM (%) 10.4 11.8 11.8 12.2 12.1
Other inc / Total inc (%) 2 2 2 3 3
Cost-Income (%) 38 37 39 40 40
Provision coverage (%) 75 63.3 62.2 63.0 63.8
Dividend Payout (%) 10 10 11 11 10
Borrowings-loans (%) 90 95 94 93 94
Investment-Deposit (%) - - - - -
Gross NPA (%) 2 2 3 4 4
Net NPA (%) 0 1 1 1 1
BV (Rs) 331 406 483 576 687
Adj BV (Rs) 326 387 465 552 659
CAR (%) 19 18 16 16 17
- Tier 1 (%) - - - - -
RoE (%) 23.2 22.5 20.3 20.1 20.1
RoA (%) 3.1 3.1 3.1 3.4 3.4
Dividend Yield (%) 0.6 0.8 1.0 1.2 1.3
18
Multi product, high operating leverage■ The NBFC has diversified its product profile over the last two years. Tractor and used CVs now form 36% of the vehicle portfolio, compared to 29% two years back
■ Core earnings to be strong, driven by its multi-product strategy and strong branch-network expansion. The branch network has recorded more than a 40% CAGR over FY10-13
■ NIM likely to improve given the greater share of higher-yielding assets such as tractors and used CVs. The NBFC also does not run any asset-liability mismatch
■ Cost-to-assets has improved from 3.8% in FY11 to 3.3%, still higher than peers. The high operating leverage is likely to help drive improvement in RoAs to 2.3% by FY16
■ While asset quality has deteriorated, GNPA at 1.7 % is lower than peers. We build in higher than past credit costs to factor in a weak macro-economic environment.
■ At our price target of `325, the stock would trade at 1.6x FY15e and 1.4x FY16e BV. Our target is based on the two-stage DDM (CoE: 16%; beta: 1.1; Rf: 8.5%). Risks: Slowdown in the rural economy could lead to lower-than-expected growth and more-than-expected NPA.
Anand Rathi Research
Chola Finance (Buy)
Source: Company, Anand Rathi Research
Source: Company, Anand Rathi Research
Income statement Year end 31 March FY12 FY13 FY14e FY15e FY16e
Net interest income 7,421 11,014 14,684 17,575 21,269
NII growth (%) 24.7 48.4 33.3 19.7 21.0
Non-interest inc 428 367 286 342 412
Total income 7,848 11,381 14,970 17,917 21,681
Total income growth (%) 27 45.0 31.5 19.7 21.0
Op. expenses 4,216 5,630 6,587 7,884 9,323
Operating profit 3,632 5,751 8,383 10,034 12,358
Operating profit growth (%) 21 58.3 45.8 19.7 23.2
Provisions 731 1,243 2,718 2,814 2,691
PBT 2,901 4,508 5,665 7,220 9,667
Tax 1,176 1,443 1,813 2,274 3,045
PAT 1,725 3,065 3,852 4,946 6,622
+(Associates–Minorities) - - - - -
Consolidated PAT 1,725 3,065 3,852 4,946 6,622
PAT growth (%) 177.4 77.7 25.7 28.4 33.9
FDEPS (Rs/share) 13.0 21.4 26.9 34.5 46.3
DPS (Rs/share) 2.3 3.3 3.7 4.5 6.0
Key Ratios Year end 31 March FY12 FY13 FY14e FY15e FY16e
Interest spread (%) 6 6 6 6 6
NIM (%) 6.7 7.2 7.5 7.1 7.0
Other inc / Total inc (%) 5 3 2 2 2
Cost-Income (%) 54 49 44 44 43
Provision coverage (%) 63 73.9 75.9 76.9 77.4
Dividend Payout (%) 18 15 14 13 13
Debt / Equity (x) 9 9 10 10 10
Borrowing-Loans (%) 93 92.0 90.6 92.2 91.9
Investment-Deposit (%) n.a n.a n.a n.a n.a
Gross NPA (%) 1 1 1 1 1
Net NPA (%) 0 0 0 0 0
BV (Rs) 107 137 160 189 229
Adj BV (Rs) 104 134 156 185 223
CAR (%) 17 18 18 17 17
- Tier 1 (%) 10.9 11.4 11.3 10.6 10.4
RoE 13.9 18.1 18.1 19.8 22.1
RoA 1.5 1.9 1.9 2.0 2.1
Dividend Yield (%) 0.9 1.3 1.4 1.8 2.3
19
Diversifying product, inexpensive valuations■ Magma has diversified its product profile over the last two years. Tractor and used CVs now form 36% of its vehicle portfolio compared to 29% two years ago
■ The NBFC underwent a change in accounting norms, which led to RoAs dipping to 0.5% in FY13. Since then the RoA has improved to 1.3% in 9MFY14 .This would stabilize at 1.6% in FY16
■ NIM is likely to improve given the increasing share of higher-yielding assets such as tractors and SCVs. The NBFC heavily depends on banks for financing and is more sensitive to favorable interest-rate movements
■ While asset quality has deteriorated, GNPA at 1.7% is lower than peers. A more conservative NPA recognition policy is likely to keep credit costs higher than in the past
■ At our price target of `89, the stock would trade at 1.0x FY15e and 0.8x FY16e BV. Our target is based on the two-stage DDM. (CoE: 18.5%; beta: 1.2; Rf: 8.5%). Risks: Rural slowdown, leading to higher-than-expected credit cost and lower-than-expected growth.
Anand Rathi Research
Magma Finance (Buy)
Source: Company, Anand Rathi Research
Source: Company, Anand Rathi Research
Income statement Year end 31 March FY12 FY13 FY14e FY15e FY16e
Net interest income 3,712 5,531 7,775 9,397 11,550
NII growth (%) 23.6 49.0 40.6 20.9 22.9
Non-interest inc 663 2,220 1,849 2,051 2,324
Total income 4,375 7,751 9,623 11,448 13,873
Total income growth (%) (16) 77.2 24.2 19.0 21.2
Op. expenses 3,020 4,661 5,582 6,296 7,353
Operating profit 1,355 3,090 4,042 5,151 6,520
Operating profit growth (%) (38) 128.0 30.8 27.5 26.6
Provisions 318 966 1,955 2,012 2,106
PBT 1,037 2,124 2,087 3,139 4,414
Tax 259 675 522 942 1,280
PAT 778 1,449 1,565 2,198 3,134
+(Associates–Minorities) 38 41 85 104 119
Consolidated PAT 740 1,408 1,480 2,094 3,015
Key Ratios Year end 31 March FY12e FY13e FY14e FY15e FY16e
NIM (%) 5.5 5.4 5.7 5.6 5.5
Other inc / Total inc (%) 15 29 19 18 17
Cost-Income (%) 69 60 58 55 53
Provision coverage (%) 100 37.3 41.2 49.3 50.7
Dividend Payout (%) 15 11 13 11 8
Debt / Equity (x) 8 9 10 11 12
Borrowing-Loans (%) 90 97.3 93.1 93.8 96.6
Investment-Deposit (%) n.a n.a n.a n.a n.a
Gross NPA (%) - 2 4 4 4
Net NPA (%) - 1 3 2 2
BV (Rs) 58 74 80 90 104
Adj BV (Rs) 58 66 62 68 79
CAR (%) 21 17 16 16 16
RoE 9.2 11.6 10.7 13.6 17.0
RoA 1.1 1.4 1.1 1.2 1.4
Dividend Yield (%) 0.9 1.2 1.5 1.8 1.8
20
Anand Rathi Research
Valuation matrix
FinancialsFinancials
Source: Bloomberg, Anand Rathi Research
21
Bloomberg code
Price M-cap Target Upside Rating FY13-15 EPS CAGR
Bank Rs Rs bn Rs (Downside) % FY14e FY15e FY14e FY15e FY14e FY15e FY14e FY15e FY14e FY15e FY14e FY15e
HDFC 871.7 1,348.0 965 10.7 Hold 14.9 2.8 2.5 3.1 2.8 2.7 2.4 3.0 2.7 24.6 21.1 21.0 22.1
POWF 185.4 244.7 187 0.9 Buy 12.9 0.9 0.8 0.9 0.8 0.9 0.8 0.9 0.8 4.6 4.3 20.4 18.8
RECL 217.8 215.0 231 6.1 Buy 15.7 1.1 0.9 1.2 1.0 1.0 0.9 1.1 0.9 4.9 4.2 22.9 21.9
IDFC 112.2 169.9 148 32.0 Buy 16.1 1.1 1.0 1.5 1.3 1.1 1.0 1.5 1.3 8.0 6.9 14.7 15.4
SHTF 701.7 159.2 655 (6.7) Sell 5.0 2.0 1.8 1.9 1.7 1.9 1.7 1.8 1.6 12.2 10.6 17.0 17.1
MMFS 252.4 142.1 291 15.3 Buy 14.6 3.3 2.7 3.8 3.1 2.8 2.4 3.2 2.8 16.0 12.3 18.6 21.1
BAF 1,657.0 83.0 1,905 15.0 Buy 23.3 2.1 1.8 2.4 2.0 2.1 1.7 2.4 2.0 11.5 9.2 19.6 20.4
SCUF 1,044.0 57.9 1,184 13.4 Buy 14.6 2.2 1.9 2.5 2.1 2.2 1.8 2.5 2.1 11.9 9.8 20.3 20.1
CIFC 256.8 36.8 325 26.6 Buy 29.6 1.6 1.4 2.1 1.7 1.6 1.3 2.0 1.7 9.5 7.1 18.1 20.5
Magma 67.1 12.7 89 32.7 Buy 21.9 1.1 1.0 1.4 1.3 0.8 0.7 1.1 1.0 8.6 6.1 10.1 13.0
PFCIF 13.7 7.7 19 35.0 Buy 31.2 0.6 0.5 0.8 0.7 0.6 0.5 0.8 0.7 3.9 4.3 15.3 12.6
P/E(x) RoE(%)P/ABV(x) Target P/ABV P/BV(x) Target P/BV
Anand Rathi ResearchAppendix
Analyst Certification
The views expressed in this Research Report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. The research analysts are bound by stringent internal regulations and also legal and statutory requirements of the Securities and Exchange Board of India (hereinafter “SEBI”) and the analysts’ compensation are completely delinked from all the other companies and/or entities of Anand Rathi, and have no bearing whatsoever on any recommendation that they have given in the Research Report.The research analysts, strategists, or research associates principally responsible for the preparation of Anand Rathi Research have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment banking revenues.
Anand Rathi Ratings Definitions
Analysts’ ratings and the corresponding expected returns take into account our definitions of Large Caps (>US$1bn) and Mid/Small Caps (<US$1bn) as described in the Ratings Table below:
Other Disclosures
This report has been issued by ARSSBL which is a SEBI regulated entity, and which is in full compliance with all rules and regulations as are applicable to its functioning and governance. The investors should note that ARSSBL is one of the companies comprising within ANAND RATHI group, and ANAND RATHI as a group consists of various companies which may include (but is not limited to) its subsidiaries, its affiliates, its group companies who may hold positions, views, stakes and may service the companies covered in this report independent of ARSSBL. Investors are cautioned to be aware that there could arise a potential conflict of interest in the views held by ARSSBL and other companies of Anand Rathi who maybe affiliated, connected or catering to the companies mentioned in the Research Report; even though, ARSSBL and Anand Rathi are fully complaint with all procedural and operational regulatory requirements. Thus, investors should not use this as a sole basis for making their investment decision and should consider the recommendations mentioned in the Research Report bearing in mind the aforementioned.
Further, the information herein has been obtained from various sources which we believe is reliable, and we do not guarantee its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes an offer, or an invitation to make an offer, to buy or sell any securities or any options, futures or other derivatives related to such securities (hereinafter referred to as “Related Investments”). ARSSBL and/or Anand Rathi may trade for their own accounts as market maker / jobber and/or arbitrageur in any securities of the companies mentioned in the Research Report or in related investments, and may be on taking a different position from the ones which haven been taken by the public orders. ARSSBL and/or Anand Rathi and its affiliates, directors, officers, and employees may have a long or short position in any securities of the companies mentioned in the Research Report or in Related Investments. ARSSBL and/or Anand Rathi, may from time to time, perform investment banking, investment management, financial advisory or any other services not explicitly mentioned herein, or solicit investment banking or other business from, any entity and/or company mentioned in this Research Report; however, the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the other companies of Anand Rathi, even though there might exist an inherent conflict of interest.
Furthermore, this Research Report is prepared for private circulation and use only. It does not have regard to the specific investment objectives, financial situation and the specific financial needs or objectives of any specific person who may receive this Research Report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this Research Report, and, should understand that statements regarding future prospects may or may not be realized, and we can not guarantee the same as analysis and valuation is a tool to enable investors to make investment decisions but, is not an exact and/or a precise science. Investors should note that income from such securities, if any, may fluctuate and that each security's price or value may rise or fall. Past performance is not necessarily a guide to future performance. Foreign currency rates of exchange may adversely affect the value, price or income of any security or relatedinvestments mentioned in this report.
Other Disclosures pertaining to distribution of research in the United States of America
This material was produced by ARSSBL, solely for information purposes and for the use of the recipient. It is not to be reproduced under any circumstances and is not to be copied or made available to any person other than the recipient. It is distributed in the United States of America by Enclave Capital LLC (19 West 44th Street, Suite 1700, New York, NY 10036) and elsewhere in the world by ARSSBL or an authorized affiliate of ARSSBL (such entities and any other entity, directly or indirectly, controlled by ARSSBL, the “Affiliates”). This document does not constitute an offer of, or an invitation by or on behalf of ARSSBL or its Affiliates or any other company to any person, to buy or sell any security. The information contained herein has been obtained from published information and other sources, which ARSSBL or its Affiliates consider to be reliable. None of ARSSBL or its Affiliates accepts any liability or responsibility whatsoever for the accuracy or completeness of any such information. All estimates, expressions of opinion and other subjective judgments contained herein are made as of the date of this document. Emerging securities markets may be subject to risks significantly higher than more established markets. In particular, the political and economic environment, company practices and market prices and volumes may be subject to significant variations. The ability to assess such risks may also be limited due to significantly lower information quantity and quality. By accepting this document, you agree to be bound by all the foregoing provisions.1. ARSSBL or its Affiliates may or may not have been beneficial owners of the securities mentioned in this report.2. ARSSBL or its affiliates may have or not managed or co-managed a public offering of the securities mentioned in the report in the past 12 months.3. ARSSBL or its affiliates may have or not received compensation for investment banking services from the issuer of these securities in the past 12 months and do not expect to receive compensation for investment banking services from the issuer of these securities within the next three months.4. However, one or more of ARSSBL or its Affiliates may, from time to time, have a long or short position in any of the securities mentioned herein and may buy or sell those securities or options thereon, either on their own account or on behalf of their clients.5. As of the publication of this report, ARSSBL does not make a market in the subject securities.6. ARSSBL or its Affiliates may or may not, to the extent permitted by law, act upon or use the above material or the conclusions stated above, or the research or analysis on which they are based before the material is published to recipients and from time to time, provide investment banking, investment management or other services for or solicit to seek to obtain investment banking, or other securities business from, any entity referred to in this report.Enclave Capital LLC is distributing this document in the United States of America. ARSSBL accepts responsibility for its contents. Any US customer wishing to effect transactions in any securities referred to herein or options thereon should do so only by contacting a representative of Enclave Capital LLC.© 2013 Anand Rathi Shares and Stock Brokers Limited. All rights reserved. This report or any portion thereof may not be reprinted, sold or redistributed without the prior written consent of Anand Rathi Shares and Stock Brokers Limited. Additional information on recommended securities/instruments is available on request