dussehra special top picks

TOP PICKSDUSSEHRA SPECIAL

Date - September 30, 2021

DUSSEHRA SPECIAL : TOP PICKS

These picks out of our coverage stocks can be bought for a minimum horizon of 6-12 months. During the next two months buying can be done in lumpsum or preferably in SIP way. These lists include 2 category of stocks - Well known large Caps and Lesser known mid & small caps.

The table gives out the basic financial details of the 12 Well known Large Cap Stocks

Sr No Company Industry Equity Latest FV CMP Mkt cap

Book Value latest

Net Sales FY21

Change in sales

y-o-y

PAT FY21

Change in PAT y-o-y

EPS TTM

P/E TTM P/BV

Last Div %.

Dividend Yield

1 ACC Cement - Major - North India 187.8 10 2300.3 43,196 723.2 13486.8 -12.1% 1549.7 12.5% 111.6 20.6 3.2 140 0.6% 2 GAIL (India) Gas Distribution 4,440.4 10 159.5 70,824 119.8 57371.9 -20.9% 6136.4 -312.6% 17.2 9.3 1.3 50 3.1% 3 H P C L Refineries 1,418.6 10 291.6 41,365 268.2 232164.2 -13.3% 10662.9 199.8% 73.4 4.0 1.1 227.5 7.8% 4 ICICI Bank Banks - Private Sector 1,386.8 2 717.2 497,265 230.0 89162.7 5.1% 18384.3 92.2% 28.9 24.8 3.1 100 0.3% 5 Infosys Computers - Software - Large 2,129.5 5 1687.1 718,549 153.8 100472.0 10.7% 19351.0 16.6% 47.7 35.4 11.0 540 1.6% 6 ITC Cigarettes 1,232.0 1 237.8 292,915 49.0 48952.8 -0.1% 13161.2 -14.6% 11.3 21.0 4.9 1075 4.5% 7 Larsen & Toubro Engineering - Turnkey Services 280.9 2 1737.2 244,009 540.1 135979.0 -6.5% 13495.8 41.3% 109.1 15.9 3.2 1800 2.1% 8 M & M Automobiles - passenger cars 621.6 5 806.1 100,208 335.0 74277.8 -1.5% 2534.4 251.9% 24.4 33.0 2.4 175 1.1% 9 O N G C Oil Exploration / Allied Services 6,290.1 5 142.2 178,892 175.7 360572.3 -15.2% 15606.5 -15.4% 17.0 8.4 0.8 72 2.5%

10 Reliance Industries Refineries 6,339.4 10 2548.1 1,615,321 1041.5 466924.0 -21.9% 43710.3 2.5% 75.0 34.0 2.4 70 0.3% 11 St Bk of India Banks - Public Sector 892.5 1 444.9 397,055 291.8 278115.5 3.1% 21393.2 31.2% 28.0 15.9 1.5 400 0.9% 12 Tata Steel Steel - Large 1,203.0 10 1281.0 154,094 608.2 153308.4 4.9% 8107.3 85.4% 181.2 7.1 2.1 250 2.0%

Source: Capitaline Database, All figures in Rs. except for Equity, Sales FY21 and PAT FY21, CMP is as of September 28 2021, EPS is adjusted for extraordinary items, Past dividend yield may not necessarily sustain in future

• ACC has 8% market share in the cement industry in India and over 8+ decades of strong brand recall in India. ACC has a total installed capacity of 34.5 million tonnes per annum (mtpa) (post commissioning of Sindri plant) with a large marketing infrastructure, pan-India presence with ~56,000 channel partners, ~11,000 dealers and strong operational linkages with Ambuja Cements and LafargeHolcim as a parent.

• The company has continuous focus on improvement in profitability with control over cost. Parvat is an efficiency optimization programme initiated in 2019 to bring radical changes in the cost structure and to improve delivered cost. In 2020, about 500 initiatives were implemented successfully in manufacturing alone. This move helped ACC achieve cost saving of Rs.110/T resulting in cost savings of over Rs.250 cr in CY20.

• ACC continued to reduce average clinker factor across the full range of cement portfolio. During the year, the company increased the blended cement portfolio from 89% to 90%. All these initiatives helped in significant reduction of average clinker factor by 1.37%.

ACC Ltd (M Cap Rs 43,196 cr)


• The company plans to add 24MW of WHRS by Q2CY22, which would reduce its blended power costs. It is also adding wet flyash dryers at three locations, which will reduce its flyash cost. Over the next 10 years, it plans to increase waste material consumption by 5x. It is also implementing direct dispatches to lower handling costs.

• On the project front, the company has commissioned the new grinding unit at Sindri in the state of Jharkhand, which is one of the fastest capex projects to be implemented despite the challenges posed due to COVID-19. The new facility will add 1.4 MTPA of cement capacity to its existing 3 MTPA unit at this site.

• The industry has a higher dependence on real estate and infra sector. Any slowdown in these industries will affect volume growth, bring down capacity utilization and that may result into softening of cement prices and affect prospects of cement companies.

• GAIL (India) Ltd (GAIL) is an integrated natural gas company, with a presence in transmission, gas processing, and downstream petrochemicals (which use natural gas as a primary input). Apart from these businesses, GAIL also has interests in the Liquefied Natural Gas (LNG) business through Petronet LNG Ltd, Konkan LNG Ltd, and in city gas distribution projects both in India (Mahanagar Gas Ltd and Indraprastha Gas Ltd) and overseas (Natgas and Fayum Gas in Egypt). GAIL enjoys a dominant position in the natural gas transmission business with a market share of ~70%, catered to by its large pipeline network covering ~13,340 km.

• The gas transmission business of GAIL is likely to be in a sweet spot owing to (1) increase in domestic gas production, (2) increase in demand of RLNG, (3) completion of major pipelines in eastern and southern part of India. GAIL with its dominant position in gas pipeline infrastructure should be the largest beneficiary. GAIL expects gas transmission volumes to grow at 7-8% YoY over the next 3-4 years, with further upside after the completion of the national gas grid. Increased demand will primarily be from commissioning of fertilizer plants, ongoing refinery and petchem expansions, and development of CGDs (under IX-X round).

• GAIL is in the process of executing 71 projects worth Rs 47,500 cr over three–five years across businesses. That would add 9–10mmscmd of incremental volumes each year from Dec-21, and we believe transmission volume would increase by 35–40mmscmd, an aggregate uptick of 35% by CY23. GAIL is planning for expansion in petrochemicals, specialty chemicals and renewables to supplement growth in its core business of natural gas marketing and transportation.

• GAIL is also expanding city gas distribution (CGD) networks for retailing of CNG to automobiles and piped natural gas to household kitchens and focused on expansion of petrochemical plants. GAIL is looking to put up 400 CNG stations and give out a record 10 lakh piped natural gas (PNG) connections to household kitchens in the next three-five years. PNGRB has authorised GAIL to lay CGD network in Varanasi, Patna, Ranchi, Bhubaneshwar, Jamshedpur and Cuttack in order to ensure healthy utilisation. Demand for gas is expected to grow faster due to the inherent advantages of gas as a fuel over other fossil fuels and infrastructural bottlenecks.

• Economic slowdown, volatility in oil and gas prices and regulatory changes could impact its growth story in near future. The changing macro-economic scenario can have an impact on the growth plans of the Company.

GAIL (India) Ltd (M Cap Rs 70,824 cr)


• Hindustan Petroleum Corporation Ltd (HPCL) has dominant market position as one of India's top-three oil marketing companies. HPCL owns and operates two refineries, one in Mumbai with a production capacity of 7.5 million metric tonnes per annum (MMTPA) and one in Visakhapatnam with a production capacity of 8.3 MMTPA. HPCL has a 49% stake in a JV with Mittal Energy Investments Pte Limited for operating an 11.3-MMTPA refinery in Bhatinda (Punjab).

• HPCL plans to commission 5,000 electric vehicle (EV) charging stations over the next three years. Currently, it has 84 EV charging stations. Over the past few months, HPCL has tied up with three entities--Convergence Energy Services Ltd (CESL), Tata Power and Magenta EV Systems--for setting up charging infrastructure at its retail outlets. HPCL is also actively reviewing green power and green hydrogen opportunities. It has envisaged a capital expenditure of about Rs 65,000 crore over next five years for various projects.

• HPCL has reported refinery utilisation above 100% in the past. The company’s GRMs have remained stable in recent years driven by operational efficiencies and effective crude procurement strategies. The GMR stood at $3.86/bbl in FY21 over $1.03/bbl in FY20 as crude oil prices improved during the year because of production cuts undertaken by OPEC+ nations and stimulus measures announced by various countries.

• HPCL’s strong operational profile driven by dominant market position supported by established marketing and distribution network and scale-up in refining capacity provides comfort. On the refining side, margin has bottomed out and GRMs could grow going forward.

• Economic slowdown, volatility in oil and gas prices and regulatory changes in Oil and Gas industry could impact its growth story in the near future. The changing macro-economic scenario can have an impact on the growth plan of the Company.

• ICICI Bank is a large private sector bank in India offering a diversified portfolio of financial products and services to retail, SME and corporate customers. For FY2021, on a standalone basis, the bank has reported a net profit of Rs. 16,193 Cr on total assets of Rs. 12.30 lakh Cr. As of March 31, 2021, the bank had 5,266 branches and 14,136 ATMs.

• ICICI Bank has transformed itself from a corporate focused bank to a retail bank in the last 5 years. The focus of the management has shifted to lower risk retail loans to increase granularity in the lending book. Along with expansion of the physical presence, the bank is leveraging technology to expand its customer base and improve services. This has led to a significant moderation in gross slippages and helped company in improving CASA Ratio and NIMs.

• Focus towards portfolio quality and strengthening of underwriting credit processes could restore the prudent growth path for the Bank and result in better long-term value creation. The current MD’s focus is mainly on achieving superior RoEs via strong core operating performance. The Bank is well capitalized which will act as a cushion against further asset quality shocks and lower CASA growth if any. The bank has very strong retail loan book composition and PCR is also at industry best level. This indicates that ICICI Bank is better placed than peers to deal with the anticipated stress due to COVID-19.

• ICICI Bank’s digital offerings for its retail segment are now maturing in terms of customer penetration, adoption and hyper-personalisation reflecting in speedier customer acquisition and better productivity. Incrementally, the bank’s comfort and confidence in kick-starting growth in its corporate portfolio holds a gradual re-rating potential on the back of reducing concentration risk from a single growth/profit engine.

• The possibility of third wave and fresh lock downs could hurt the business on multiple fronts i.e. liquidity, asset quality, loan growth, collections etc.

HPCL (M Cap Rs 41,365 cr)

ICICI Bank Ltd (M Cap Rs 497,265 cr)


• Infosys is a leading provider of consulting, technology, outsourcing and next-generation digital services, enabling clients to execute strategies for their digital transformation. Company has established position across verticals and service lines, enabling clients in 46 countries. Its employee strength stood at 267,953 as on 30 June, 2021.

• Its multi-year growth in digital technology is due to its digital prowess and its ability to provide an end to end solution. This, coupled with increase in outsourcing in the US and Europe, vendor consolidation opportunities, captive carve outs and cost takeout deals will further boost revenues. In addition, healthy deal wins could help the company to report a steady improvement in financials in coming quarters.

• Infosys has raised FY22E constant currency revenue growth forecast to 14-16% from 12-14% earlier and operating margin guidance for FY22 continues to be in the range of 22-24%. Investments made by Infosys in digital transformation, analytics, cloud, cyber security and AI will help the company to serve emerging demands of clients in these areas going forward. Infosys is also actively looking for acquisitions, especially in digital areas like cloud and data science in new geographies. Significant growth opportunity in Digital space will continue to drive company’s performance in the near to medium-term.

• Infosys signed 22 large deals in Q1FY22, with Total Contract Value (TCV) of US$ 2,570mn vs. US$ 2111mn in Q4FY21 and US$ 1,744mn in Q1FY21. The book-to bill ratio stood at 0.7x in Q1FY22 vs. 0.6x in Q4FY21. The company’s deal wins and client investment towards cloud computing, artificial intelligence and internet of things, the company is looking to expand its hiring program for college graduates to ~35,000 globally.

• Rupee appreciation against the USD, pricing pressure, strict immigration norms as well as ban on US H-1B and L1 visa, and adverse observations or findings from the ongoing investigations by US regulators and government agencies into the whistle-blower complaints are key concerns.

• ITC has a diversified presence in cigarettes, FMCG, hotels, packaging, paperboards & specialty papers and agri-business. In Q1FY22, ITC delivered a healthy performance with marginal surprises across most segments. Cigarettes grew by 33% YoY and volume grew 30-31%, while organic FMCG grew ~5% YoY, albeit on a high base (19% YoY). In other segments, paper was an outlier both in terms of revenue and margin and clocked revenue/EBIT growth of 54/145% YoY. Hotel occupancy was hit at the onset of the second wave, which has seen respite since June 2021.

• ITC has a diversified presence in cigarettes, FMCG, hotels, packaging, paperboards & specialty papers and agri-business. • In Q1FY22, ITC delivered a healthy performance with marginal surprises across most segments. Cigarettes grew by 33% YoY and volume grew 30-31%, while organic FMCG grew ~5% YoY,

albeit on a high base (19% YoY). In other segments, paper was an outlier both in terms of revenue and margin and clocked revenue/EBIT growth of 54/145% YoY. Hotel occupancy was hit at the onset of the second wave, which has seen respite since June 2021.

• ITCs FMCG business is shaping up well for a K-shape acceleration with scale driving margin expansion even as capital intensity falls. Over the past four years, its FMCG business margin has risen 640bps. Going ahead there are also multiple margin levers with its improving sales mix towards the value-add segment, shrinking incubation costs, a turnaround in the personal care business, operating leverage benefits and the ability to enter adjacencies with limited incremental investment.

Infosys Ltd (M Cap Rs 718,549 cr)

ITC Ltd (M Cap Rs 292,915 cr)


• With the Cigarettes business likely to contribute over 82% to ITC's overall EBIT even in FY23E (from 85% in FY20), there is no material reduction in the dependence on this segment –which is beset by concerns of a) weak EBIT growth for several years now, b) the overhang of a possible GST increase going forward, and c) ESG-related issues over tobacco, leading to a reduction in valuation multiples.

• The dividend payout policy has already been revised and payout ratio will be around 80-85%, which provides cushion to major downside. At the current prices, the company has healthy dividend yield of ~4%. The stock trades at ~16x FY23E EPS compared to industry peers trading at >45x FY23E EPS, hence the risk reward ratio seems favourable.

• Larsen & Toubro (L&T) is the foremost player in Infrastructure and Engineering space in India and holds interests in technology and financial services as well. L&T has wide presence all over the world covering over 30 countries. L&T addresses critical needs in key sectors such as Hydrocarbon, Infrastructure, Power, Process Industries and Defence.

• An investment cycle is to start taking shape in India, after a long gap. Capital expenditure (capex) over the next 3-4 in core sectors ̶ cement, metals, oil refining and power (esp. renewables) ̶ can be double that in the preceding 3-4 years. Also, the government’s production linked incentives (PLI)–led capex should be large in other sectors such as consumer durables, pharmaceuticals and automobiles. Household spend on residential property, and Govt. infrastructure spend should also see large rise. Governments globally are looking to spend large sums on infrastructure, to recover from the COVID-19-led economic challenges. L&T among the industrial companies could be a key beneficiary of the above.

• For FY21, order inflow de-grew by 6% YoY to Rs 1.76 lakh cr. Order book now stands at Rs 3.3 lakh cr providing three years of revenue visibility for the EPC business. Infrastructure at 77% constitutes major share of the pipeline, followed by hydrocarbon at 17%. Order inflow guidance is also pegged at low to mid-teens. Recovery in key international markets, continuous focus on infrastructure by the government, and rebound in crude oil prices augur well for L&T. Going ahead sectors like Metro, Roads and Expressways, Water, Renewables and Power T&D are expected to drive growth. Further, it is exploring the opportunities in African market for Power T&D and Water segment.

• According to a National Infrastructure Pipeline (NIP) report, the Indian government has planned Rs 111 lakh cr in FY20 to be spent over the next six years. NIP indicated that the next few years would likely see spends on water, metro rail, roads, renewable energy, power T&D as well as urban infrastructure. L&T with its wide reach across different segments will get the benefit from the substantial spending by Government of India. L&T’s diverse presence and unique capabilities across segments of Transportation Infra, Power, Urban & Rural infra, Water & Irrigation will aid the company to get maximum benefit of NIP’s projects. Management has guided for the steady margins in FY22. 60% of the contracts are variable price contracts so it would protect against higher commodity prices. For the rest 40% fixed price contract, management believes there is enough cushion to protect the margin against sustained higher commodity prices.

• In FY20 annual report, the Chairman’s letter states, ‘going forward, we are confident that the contribution of the services businesses will exceed 40 per cent of group turnover (from 25%+ in FY20)’. This points to rising capital allocation and importance to Services (IT /ITES and Financial services) over the long term, Monetisation of existing assets in DP, possibly starting with reduction of 51% stake in L&T IDPL, followed by sale of 1.4GW Nabha, Hyderabad metro stake sale (via InvIT route, strategic investor entry; over 3 years) could all lead to better return ratios.

• Concerns: Deep global recession, slower than expected recovery, Weakness in domestic investment and slower than expected project execution in domestic & international markets pose a downside risk.

Larsen & Toubro Ltd (M Cap Rs 244,009 cr)


• M&M is the world’s largest tractor manufacturer and the third largest passenger vehicle manufacturer in India. M&M’s refreshed SUV portfolio including XUV300, Thar, Bolero Neo, XUV700 etc. has a healthy order book. It has strong product pipeline in UVs and tractors to help outperform industry.

• The management has guided for single-digit growth in FY22 due to a demanding base effect, as sales had started accelerating from Q2 last year. The tractor market share has risen to 41.8% (vs 38% QoQ) due to improving supplies.

• Growth momentum in exports continued with sale of 3,180 vehicles in August-2021, registering an increase of 172%. • The company has taken three price hikes between Jan-21 and Jun-21 to pass on the increased material cost. • Write offs due to SsangYong are over and the company is focused on improving the performance of its subsidiaries. • Weaker monsoon, chip shortage, commodity price inflation are key risks going forward.

• ONGC is the country’s largest oil and gas producer with a share of nearly 73% in India’s total production of crude oil and natural gas (including share of JVs). It is also a significant producer of value-added products such as liquefied petroleum gas (LPG), superior kerosene oil (SKO), naphtha and C2/C3. The company has developed significant onshore and offshore production facilities, subsea and land pipelines, gas processing, drilling and work-over rigs, storage facilities and other infrastructure.

• ONGC has completed various aggressive investment plans in the past and made E&P expenditure of about Rs 1,50,000cr in last 5 years. ONGC is planning for capex of Rs 29,800 crore in FY22 to boost oil and gas output. Capex in FY22 is expected to be funded partially from debt and internal accruals. The company expects to maintain its production dominance, contributing >65% of India’s projected output in next three years. ONGC is given a target to achieve 28 MMT of oil and 35 BCM of gas production by March 31, 2024.

• ONGC may explore creating separate entities for drilling, well services, logging, work-over services and data processing entities. In line with the Atmanirbhar Bharat policy, the government has decided to reduce India’s over-reliance on imported oil. It has set production targets of 40 million metric tons (MMT) of crude oil, and 50 billion cubic meters (BCM) of gas by 2023-24 where ONGC is tasked to contribute 70%. Thus, restructuring proposals could help to boost ONGC’s output.

• ONGC enjoys a dominant market position in the domestic crude oil and natural gas production business with large proven reserves, globally competitive cost structure, and stable performance of its subsidiary ONGC Videsh Ltd. (OVL). Any value unlocking from subsidiaries and other investments & lower holding company discount on investments can be positive for the stock. The company also has excellent financial flexibility arising from its moderate gearing, large liquid investments, its significant sovereign ownership and strategic importance.

• Economic slowdown, volatility in oil and gas prices and regulatory changes in Oil and Gas industry could impact its growth story in the future. The changing macro-economic scenario can have an impact on the growth plan of the company.

ONGC (M Cap Rs 178,892 cr)

Mahindra & Mahindra Ltd (M Cap Rs 100,208 cr)


• Reliance Industries (RIL) is one of the largest private sector companies in India with businesses in telecommunication, petrochemicals, refining, textiles and retail. It has strong market position and operates its petrochemical plants at full capacity. RIL has market capitalisation of more than Rs 16 lac crore, becoming the first Indian company to reach the milestone. The company is hiving off its oil-to-chemical (O2C) business into a separate subsidiary — Reliance O2C Ltd.

• RIL’s net debt free status post large fund raising program, dominant leadership position in the petrochemical segment, massive scale of downstream business with highly complex refinery asset which leads to better GRMs than benchmark Singapore GRM, plans to expand its fuel retail business in a joint venture with British energy major BP, enjoying highest revenue market share of 36% in Reliance Jio, and dominant market position in organized retail segment are key growth drivers in revenue as well as profitability.

• RIL is looking to expand into multiple new digital products and services. It is building capabilities at scale toward: (a) AI-based products – education platforms, computer analytics tools, speech and language recognition products, (b) 5G technology, along with its technology partner Qualcomm, and (c) applications for video conference – JioMeet, digital payment – JioUPI, connectivity – Jio STB, and Jio Fiber, among others. Besides, RIL and BP announced a partnership with BluSmart, India's first and largest all-electric, ride-hailing platform to set up a network of commercial large scale EV charging stations.

• RIL is India's largest retailer by revenue and profitability. The company's strong market position is reflected in its leadership position across several formats and has been supported by consistent growth. The company has been expanding its presence across tier-2 and 3 cities, resulting in more than 12,803 stores as on June 30, 2021. RIL is reportedly in discussion with quick service restaurant (QSR) brand Subway Inc to acquire its India franchise for $200-250 million (about Rs 1,488-1,860 crore). RIL is in talks to buy a stake in Indian mobile content provider Glance InMobi Pte. RIL is considering investing about $300 million in the unicorn backed by Google.

• Steep decline in demand for the refining as well as petrochemicals businesses due to on-going pandemic, volatility in crude oil prices, competitive intensity associated with the telecom segment, and fluctuations in foreign exchange rates are key concerns.

• SBI is the largest public sector bank in terms of assets, deposits, branches, number of customers, and employees with pan-India presence. SBI has demonstrated a strong improvement in asset quality, with GNPAs declining by 43% over the past three years, while PCR increased to 68% currently from 40% four years back.

• The management expects recovery of over Rs 100bn in FY22 as the IBC process gathers pace after a long pause due to the COVID-19 outbreak. • The bank appears well positioned to report strong uptick in earnings, led by moderation in credit cost from FY22. This, along with an expected uptick in core operating performance, will

further propel earnings growth. • SBIN’s subsidiaries – SBI MF, SBI Life Insurance, SBI General Insurance, and SBICARD – have displayed robust performances and turned market leaders in their respective segments. The

contribution of subsidiaries to SoTP has increased significantly. • Among PSU Banks, SBIN remains the best play on a gradual recovery in the Indian economy, with a healthy PCR (~68%), Tier I of ~11.3%, a strong liability franchise, and improved core operating

profitability.

State Bank of India (M Cap Rs 397,055 cr)

Reliance Industries Ltd (M Cap Rs 1,615,321 cr)


• Increasing NPAs from the Retail/MSME segment, delays in IBC recovery and disruption due to Covid are key risks for the bank.

• Tata Steel Group is among the top global steel companies with an annual crude steel capacity of 34 million tonnes per annum (MnTPA). The company’s Indian operations enjoy highest EBITDA/t in the industry due to captive iron ore mines and better product mix.

• The Company possesses and operates captive mines that ensure cost-competitiveness and production efficiencies through an uninterrupted supply of raw material. Tata Steel’s iron ore mines in Jharkhand and Odisha enable 100% captive iron ore usage and the coal mines in West Bokaro & Jharia ensure ~30% captive coal usage in operations. Tata Steel additionally has a dolomite mine, a chromite mine and manganese mines that ensures steady and cost-efficient supply of raw materials to its ferro alloy plants. Presence across the value chain helps the company achieve higher economic efficiencies and customer satisfaction standards which is one of the best in the industry. These captive iron ore mines give company immunity from any sort of disruption in the iron ore market.

• Steel companies of India are in a sweet spot in global metal markets. Southeast Asian markets are large importers of steel and imported 75 MT in 2019 of which 48% came from China and 28% Japan. Chinese supply contraints would reduce the availability of Chinese manufactured steel in Southeast countries. The market of Southeast would remain tight until new ASEAN facilities commercialise by FY25. It will provide significant opportunities to Indian steel players and create room to supply to this market. Global decarbonisation initiatives and Chinese environmental policies (Chinese crackdown) are now providing growth opportunities to the Indian steel sector as they have competitive advantages of low conversion cost, iron ore cost tend to be lower and significant brownfield potential.

• During FY21, Tata Steel Europe steel production was at 9.55 mn tons as compared to 10.26 mn tons in FY20. The transformation programme was launched in order to improve the performance of business, productivity of the business, better product mix and various cost savings initiatives. Going forward, we believe that in spite of the various initiatives taken by the management for Tata Steel Europe, it will continue to drag the overall profitability of the company. We believe that the positive numbers from European operations could be big trigger for the company as increase in spot price in Europe would gradually reflect Tata Steel Europe(TSE)’s realisation in the next few quarters and TSE pre-paid a debt of EUR 0.5 bn in Q1FY22.

• Due to rising uncertainties and high leverage, Tata Steel has scaled-down its capacity target to 25 mn t by FY25 vs 30 mn t. This means that it will focus on enhancing cost leadership and market share in chosen segments. Tata Steel will focus on completing the 5mtpa TSK expansion at Kalinganagar to help downstream value addition, increase the long products portfolio, drive synergies across acquisitions and enhance cost leadership under its Shikhar25 programme. Consolidated reported net debt fell ~Rs 1400 cr to Rs 74000 cr in Q1FY22. TTM net debt-to-EBITDA ratio stood at 1.9x. The company reduced its gross debt by Rs 5890 cr in Q1FY22. The management is targeting a net debt/EBITDA ratio and interest coverage of 2x and 4x on a sustainable basis, respectively.

• Concerns: The slowdown in the demand of the steel and over supply from international market, price volatility of coking coal, European business continues to making loss and underperform, and downturn in metal cycle.

Tata Steel Ltd (M Cap Rs 154,094 cr)


The table gives out the basic financial details of the 12 Mid/Small cap Stocks

Sr No Company Industry Equity Latest FV CMP Mkt cap

Book Value latest

Net Sales FY21

Change in sales

y-o-y

PAT FY21

Change in PAT y-o-y

EPS TTM

P/E TTM P/BV

Last Div %.

Dividend Yield

1 Birla Corpn. Cement - Major - North India 77.0 10 1316.6 10,139 605.4 6785.5 -1.9% 681.0 34.8% 98.0 13.4 2.2 100 0.8% 2 BSE Miscellaneous - Medium / Small 9.0 2 1271.8 5,723 553.6 630.5 3.5% 158.4 68.9% 39.9 31.8 2.3 1050 1.7% 3 C D S L Miscellaneous - Medium / Small 104.5 10 1306.3 13,651 83.9 343.7 52.7% 200.3 88.7% 20.9 62.6 15.6 90 0.7% 4 Crompton Gr. Con Electric Equipment - General - Large 125.6 2 470.9 29,569 30.8 4803.5 6.3% 616.7 24.2% 10.1 46.4 15.3 275 1.2% 5 G R Infraproject Construction - Factories / Offices / Commercial 48.3 5 1872.1 18,099 411.6 7844.1 23.1% 953.2 19.0% NA NA 4.5 0 0.0% 6 GHCL Chemicals - Inorganic - Large 95.4 10 430.9 4,108 260.6 2900.1 -12.3% 326.1 -17.8% 43.6 9.9 1.7 55 1.3% 7 Mahindra CIE Forgings - Large 379.1 10 230.7 8,743 132.7 6050.1 -23.5% 106.4 -70.1% 8.4 27.4 1.7 0 0.0% 8 NRB Bearings Bearings - Large 19.4 2 140.4 1,360 53.4 762.4 -1.7% 54.1 68.5% 8.7 16.1 2.6 25 0.4% 9 SBI Life Insuran* Life Insurance 1,000.2 10 1210.3 121,055 105.8 49768.3 23.4% 1455.9 -15.4% 12.9 94.0 11.4 25 0.2%

10 Sun TV Network Entertainment - Electronic Media 197.0 5 498.6 19,649 179.0 3176.9 -9.7% 1525.0 10.1% 41.4 12.0 2.8 100 1.0% 11 Tata Power Co. Power Generation And Supply 319.5 1 140.1 44,750 65.2 32488.1 11.5% 1484.1 74.1% 4.5 30.9 2.1 155 1.1% 12 Tech Mahindra Computers - Software - Large 484.9 5 1414.1 137,123 256.9 37855.1 2.7% 4428.0 9.8% 49.6 28.5 5.5 900 3.2%

Source: Capitaline Database, *= standalone nos, All figures in Rs. except for Equity, Sales FY21 and PAT FY21, CMP is as of September 28 2021, EPS is adjusted for extraordinary items, Past dividend yield may not necessarily sustain in future

• Birla Corp (BCL) has a significant presence in Central (Madhya Pradesh), Northern regions (Uttar Pradesh & Rajasthan), West Bengal and Maharashtra. It has 4.2% of the market share in the Indian cement industry.

• The company has finalized a plan to scale up its capacity to 25 MTPA by 2025 from current capacity of 15.6 MTPA which provides strong visibility of future growth. • BCL has a network of 1250 marketing staff, 300 sales staff and more than 10,000 dealers. Birla Corp has a strong presence on the retail front owing to its distribution network and focus on

trade sales, which has a share in excess of 80% of total volume sales. Further, the company has been pushing more of premium cement via its trade channels and higher ad spends. This has led premium products to form ~53% of trade sales.

• Increase in sale in blended cement implies higher absorption of fly ash, which reduces clinker consumption, and in turn, boosts profitability. Fly-ash and captive coal consumption is estimated to lower down costs by ~Rs.30/MT. BCL has undertaken an organization-wide supply chain improvement exercise, which is expected to contribute ~Rs. 50/MT in cost reduction FY23E onwards.

• Concerns: uncertainty on promoter front, fall in demand of cement that could lead to lower realisations and higher raw material price impact on margins are the key concerns.

Birla Corporation Ltd (M Cap Rs 10,139 cr)


• BSE is one of oldest and largest stock exchanges globally in terms of number of listed companies. Over the years, it has become one the most valuable franchise in the duopolistic equity exchange market in India.

• Indian Markets lag behind global peers in various parameters like Market Cap/GDP ratio, cash turnover velocity and free float etc. With high under penetration of investment in financial assets mainly in equity markets across demographic landscape of India, there’s a sizeable long term opportunity for an exchange like BSE.

• The exchange is trying to rebuild the derivatives volume, whose current market share is only ~6.5%; it is expected to support cash volumes and is a potential revenue driver. New initiatives like the insurance platform, power, and spot exchange are promising.

• The future revenue growth will be led by continued growth in transaction volume, StAR MF and stable listing revenue. INX, which is growing exponentially, can be a revenue driver if BSE starts charging.

• Any adverse regulatory changes, high competition from NSE or delay in pickup of new business initiatives could hurt the business.

• CDSL is a long term growth story on Indian Financial inclusion theme. It is one of the two depositories in India and the only one in the listed space. Given the high risk of data pilferage, we believe there is limited scope for any other depository to be set up. Despite being a late entrant in the market, CDSL has been gaining market share from NSDL and today it has become market leader.

• We like the business of CDSL because of its asset light model, no additional capex requirement to fund growth, duopolistic nature and diversified revenues base. New growth engines like demat of unlisted public companies, insurance and e-warehouse receipts will drive additional revenue.

• CDSL has a diversified revenue stream; which is both annuity in nature and market linked (Transaction, IPO/corporate action and KYC). This indicates a continuous and stable revenue generation capability of the company.

• We believe that with (1) Increasing retail participation (2) Steady inflows in MFs (3) Greater penetration of capital market products (4) Use of mobile trading platforms (5) Plans for divestment (6) Rising free float levels and (7) Rising investor confidence, the depository business in India is poised to grow at a healthy pace.

• Any rise in competition from other depository or entry of new player/s can result in risk of market share loss. Even permission of opening of the depository market to corporates by SEBI will increase competition.

Central Depository Services (India) Ltd (M Cap Rs 13,651 cr)

BSE Ltd (M Cap Rs 5,723 cr)


• Crompton Greaves Consumer is one of the leading players in fan & residential pump market in India having a market share of 27% in fan and 28% in pumps (double the size of the second player) segment. The company is working on an increasing revenue share of premium products which will help to improve the profitability of the company. We expect changing customer preferences and up-trading by existing customers to drive growth of premium fan category for the company.

• The company continuously focusses on an increasing revenue share of the premium products. Share of premium fans (as % of total fans revenue) has gone up from 10% in FY16 to 30% in FY21.

• Company has started expanding distribution reach beyond Tier 1 and 2 cities and increasing market presence in untapped markets under the Go-To-Market strategy. This strategy will further boost the growth of the company. The company has a nationwide network with more than 3000 distributors and over 1 lakh retailers and strong after-sales support of over 500 service centres.

• Crompton has a net debt-free balance sheet. Also, it has a strong cash flow from operating activities which helps to repay debt and keep the balance sheet strong. This situation helps Crompton to survive during tough times.

• Concern: PE Promoters have reduced their stake from 34.36% in September-2019 to 5.99% in June-21. These shares have been picked up by FIIs and DIIs.

• GR Infra Ltd (GRIL) is an Engineering Procurement and Construction company engaged in commissioning of state and national highways, bridges, culverts, flyovers, airport runways, tunnels and rail over-bridges, in high-density areas or rugged or steep terrains. It is present in 15 states across India. GRIL also has manufacturing activities, under which it processes bitumen, manufactures electric poles, road signages and metal crash barriers. GRIL is now a No. 1 pureplay roads EPC player in India (in terms of profitability).

• The company has maintained a lean balance sheet with enough funds, low borrowings, and projects funded through internal accruals. GRIL is expected to grow its equity investments in the HAM portfolio to Rs 3,700 crore by FY24E (vs. Q1FY22 – Rs 1,100 crore), along with mid-teen equity IRRs. It’s likely InvIT/monetisation may lead to substantial cash flow realisation. GRIL enjoys the lowest interest rate vs. peers and hence is able to optimise interest costs. For the current order book, GRIL has Rs 260 crore of mobilisation advances, which in terms of its order book and size is only comparable to KNR. Debentures form a large part of the debt construct, and it raises low-cost debentures from mutual funds, banks, and financial institutions.

• Over the past 10 years, GRIL has delivered revenue/EBITDA/PAT at a CAGR of 29/30/29% on the back of robust 46% order book CAGR. Even during the worst hit COVID-19, GRIL delivered 19% revenue growth (as of FY21). For Q1FY22, consolidated revenue increased by 66% from Rs 1,364.3 crore to Rs 2,264.5 crore, EBITDA rose by 83.6% from Rs 256.3 crore to Rs 470.4 crore, and PAT was up by 109.6% from Rs 105.6 crore to Rs 221.3 crore. With this regard, the company has AA credit rating, which is two notches below AAA which will enable it to avail lowest cost funds vs its peers.

• As of FY21 the company’s order book stands at Rs 19,025.8 crore, with short-term focus on central government funded roads and railways projects (including high-speed rail, metro, regional rapid transport system). For June 2021, the OB was at Rs 15,058.4 crore, with 38% in EPC, 59% HAM, and railways 3%. Along with sector diversification, the OB is well spread covering the North-Western belt of the country, with almost equal contribution coming from 5 states viz. Uttar Pradesh, Maharashtra, Madhya Pradesh, Gujarat and Bihar. It now has a portfolio of 16 HAM projects, of which seven have achieved PCOD, two are under construction and seven are awaiting an appointed date.

Crompton Greaves Consumer Electricals Ltd (M Cap Rs 29,569 cr)

G R Infraprojects Ltd (M Cap Rs 18,099 cr)


• Various key government programmes especially designed for roads and construction will benefit the company. The following factors bode well for the company: (1) relaxation on FDI norms in construction industry with 100% FDI allowance in townships and settlements; (2) US$ 1 trillion investments in infrastructure targeted in the 12th FYP; (3) 50% contribution from the private sector; (4) new rail corridors such as agri-rail and tourist rail networks creating opportunities requiring real estate for the warehousing. The Government also has suggested investment of Rs 50,00,000 cores (USD 750 Billion) for railways infrastructure from 2018-30 and 2021 budget envisaged an investment of Rs 2.2 lakh crores; (5) the highest-ever allocation for infrastructure development (Rs 3.9 lacs crore); (6) allocation of Rs 2.3 lakh crore to enhance the transport infrastructure; (7) National Infrastructure Pipeline (NIP)’s 7,400 projects out of which 217 projects worth Rs 1.1 Lakh crore were already completed as of 2020. Since government’s push in the infrastructure, in the early 2000s, the company carried out subcontracting work for the then tier-1 developers like ITNL, PWDs, Ashoka Buildcon, etc. The Bharatmala Pariyojna-1 gave a big boost to GRIL’s order book; since then, the average order size has increased from Rs 100 crore to Rs 1,000 crore.

• The company’s OB is mostly skewed towards the Northern-Western barrier of the country creating geographic concentration. In the southern states, the presence has been limited to AP, which has the maximum order book exposure. The company is also mostly into roads, subjecting it to various segment related risk.

• GHCL Ltd is a well-diversified group engaged in primarily two segments consisting of Inorganic Chemicals (mainly manufacturing and sale of soda ash) and Home Textile division (comprising yarn manufacturing, weaving, processing and cutting and sewing of home textiles products).

• GHCL is 2nd the largest manufacturer of soda ash in India with 25% market share, with an installed production capacity of 1.1 million ton per annum (mtpa). The company is the second largest manufacturer of soda ash in India, with 25% market share. It also has captive sources of raw material lignite, limestone and salt, leading to cost competencies. Furthermore, its soda ash division also meets most of its power requirement through captive sources, which makes it one of India’s most cost-efficient player in this industry.

• GHCL is India’s one of the leading integrated textile manufacturers and exporters and is recognized for its premium product development capabilities. Its total spinning capacity stands at 1.85lk spindles while its processing capacity is 45 Mn MTPA. It has unique bedding brands focused on sustainability. These are – REKOOP, CIRKULARITY, MEDITASI and REKOOP 2.0. The company primarily exports home textile products worldwide, to its marquee clients including Kohl’s, Bed, Bath & Beyond, QVC, Dillard’s, Revman International, Sunham, Amazon.com, Walmart.com, Sainsbury’s, Canningvale, etc.

• GHCL approved a proposal to demerge its textile business into a separate entity in March 2020, whereby GHCL’s shareholders will get shares in 1:1 ratio in the new textile entity, and both businesses will be listed as separate business entity. This restructuring will maximize value for all stakeholders, leading to a better focus on the demerged business. The demerger of the Textiles division could result in value unlocking and give each segment the valuations they deserve. The process of demerger could get over in the next few months.

• Competition with Chinese competitors on Soda Ash business, currency fluctuation, volatility in prices of key inputs such as salt and imported coal along with higher freight costs, moderation in soda ash demand from glass segment are some other concerns.

• Mahindra CIE is a multi-technology automotive components supplier, a subsidiary of the CIE Automotive group of Spain.

Mahindra CIE Automotive Ltd (M Cap Rs 8,743 cr)

GHCL Ltd (M Cap Rs 4,108 cr)


• The management expects that the second half of the year will be much stronger in Europe as vaccination process is accelerating and by Sept majority of European citizens will be vaccinated following which restriction are likely to be lifted.

• MHCIE earns ~11-12% of its revenues from exports and it intends to increase the share to 20% over the next few years. It has already been awarded several export projects. It is also looking to produce forgings and gears in India to be finished and delivered from its subsidiaries in Europe.

• MHCIE has amended its dividend distribution policy. As per the amended policy, the company would endeavor to maintain a total dividend payout ratio of up to 25% of the annual consolidated profit after tax.

• CIE’s Plan 2025 (disclosed in June 2021) has an ambitious target of ~48% growth in sales, EBITDA of €1bn at 19% margins, and PAT of €500mn on a cumulative capex of €1bn over the coming five years. The parent plans to increase forgings capacity in its India subsidiary MHCIE through a new plant in Coimbatore for precision parts, and expanding the driveline components for EVs using hot forgings.

• Rise in commodity prices, semiconductor shortage, rapid adoption of EVs and high exposure to EU auto market could impact the company in the near term.

• NRB Bearings is engaged in the business of manufacturing ball and roller bearings having its applications in automotive sector as well as across all mobility applications. • It has witnessed strong recovery post the pandemic led slowdown. It remains a key beneficiary of the strong volume growth witnessed in the automobile segment. According to a report by

Business Wire, the Indian automotive bearings market is projected to grow at a CAGR of over 13% over FY18-FY25. • NRB has done capex of ~Rs 200cr during FY18-FY21, but due to slowdown in the Auto industry and the pandemic, the fruits of this capex are yet to be fully realized. • The company is looking to increase higher margin export contribution which have increased from 20% in FY18 to 26% in FY21. It has also incorporated a subsidiary in UAE for the growth,

consolidation of the global business and for setting up of an Innovation Centre. • The Government’s focus on important economic and policy reforms is likely to boost manufacturing and key initiatives like “Make in India” is paving way for investments in key sectors. The

recently announced scrappage policy is likely to boost demand for new vehicles after removing old unfit vehicles. All these measures would give a boost to bearings demand. • Vulnerability to automobile demand, working capital intensive operations, raw material inflation and rapid adoption of EVs are key concerns for the company.

• SBI Life is one of the leading private life insurers in India. It has a diversified product mix across individual and group insurance products along with a multichannel distribution network comprising of bank assurance, individual agents, insurance brokers, direct sales, etc.

• India has highly underpenetrated insurance market compared to the other parts of the world. This presents immense opportunities to expand the life insurance business given the favourable demographics, rising prosperity, rising household income and the increasing awareness of the need for financial protection. SBI Life is uniquely positioned to tap the vast potential in India’s life insurance sector by harnessing the SBI Group’s large distribution footprint. Management stated that relatively newer tie-ups such as ALBK, Syndicate, Repco, P&S Bank continue to do better than expectations.

SBI Life Insurance Company Ltd (M Cap Rs 121,055 cr)

NRB Bearings Ltd (M Cap Rs 1,360 cr)


• The life insurance industry has witnessed a tremendous pressure due to COVID-19 second wave as the death rates were high this time. There was a 1.43x growth in number of deaths in India from FY21 to Q1FY22. The company has also seen 1.28x increase in number of claims reported from FY21 to Q1FY22. Total number of COVID Claims in Q1FY22 was 8,956. However, as mortality assumptions were strengthened in Q4FY21, SBI Life did not have any negative mortality experience on an overall basis (demonstrating conservative assumptions). It has created additional Rs.4.4 bn additional COVID reserves to protect against any negative surprises.

• We feel that this Covid-19 could be blessing in disguise for the industry as it will create renewed push for insurance coverage by Government and increase need for coverage felt by the general public.

• Rising competition especially via digital disruptors poses pricing and volume risk.

• Sun TV Network, India’s largest media conglomerate with 32 TV Channels in five Indian languages Tamil, Telugu, Kannada, Malayalam and Bengali with the reach of more than 95 mn households in India. It is engaged in producing and broadcasting satellite television and radio software programming in the regional languages of South India and it operates television channels in 4 South Indian languages to viewers in India and to viewers in 27 countries including Sri Lanka, Singapore, Malaysia, the UK, Europe, the Middle East, the US, Australia, South Africa and Canada.

• Sun TV is seeing strong traction in the Bangla market, with its share reaching 5% within 12 months of its launch, despite COVID impact. The company plans to launch a Marathi channel have got delayed due to the pandemic. It expects to achieve a market share of 10-15%. Sun TV, in its key market of Tamil, has improved its prime time fiction market share from 37% to 42% in the last three quarters. Continued market share improvement in Tamil and planned big ticket launches in Telugu and Malayalam will be key for advertisement recovery traction ahead.

• Sun TV is planning a series of non-fiction content across all channels, along with a revamp of fictional content. It gained 4-5% market share and touched 45% viewership in the Prime Time segment. Besides, Sun Next OTT has 23.3m subscribers largely from B2B telcos.

• The company plans to spend Rs 1200cr on movie production over the next 18-24 months. It expects to release five movies (with total budget of Rs 600cr) by Oct 2021. One big ticket movie starring Rajnikant is lined up for release this Diwali (4th Nov’21).

• Media and Entertainment industry is highly regulated which could possibly affect the business model. Delays in collection of accounts receivable could affect the company’s cash flow, with poor follow up potentially leading to delinquency and write-offs.

• Tata Power Ltd (TPL) with 105 years of track record is India’s largest integrated power company with a significant international presence. Along with its subsidiaries it is present across the entire power value chain of conventional and RE (renewable energy) and next generation customer solution. It has successful public-private partnerships in generation, transmission & distribution in India. Tata Power is serving more than 2.6 million distribution consumers in India and has developed the country’s first 4,000 MW Ultra Mega Power Project at Mundra (Gujarat) based on super-critical technology.

• The company had a decent Q1FY22 (consolidated) performance with consolidated revenue up by 54.5% at Rs 9,968 crore YoY led by acquisition of Odisha discoms and strong execution across the solar EPC segment. EBITDA was up by 34.3% YoY at Rs 2,324.5 crore, due to integrated PAT at Mundra plus coal mining business (from the rise in coal prices) and higher EPC revenue. PAT

Tata Power Company Ltd (M Cap Rs 44,750 cr)

Sun TV Network Ltd (M Cap Rs 19,649 cr)


was up by 601% YoY, at Rs 465.7 crore aided by lowered interest expenses, along with higher share from JV companies. However, generation business was down by 13.9% YoY and 12.2% QoQ; RE segment reported a revenue growth of 86.7% YoY, however, was down by 41.1% QoQ; T&D business was up by 95.3% YoY and 25.6% QoQ. Tata Power commenced its operations in Northern Odisha (NESCO) through a Joint Venture with Government of Odisha for distribution and retail supply of electricity in five circles comprising Balasore, Bhadrak, Baripada, Jajpur and Keonjhar serving 2 million consumers.

• Its presence across the value chain of the power sector (generation, transmission and distribution, power trading, as well as fuel supply (imported coal mining and shipping)) cushions it from project-specific issues and helps achieve operating efficiencies and better working capital management at the group level. The company has a network of 600 public charging stations across 110 cities and 27 highways which is already a market share of more than 50%. Along with presence in AC/DC charging, it has setup 80 ultra-high-capacity chargers for public transport buses. Further, it has binding MOUs with Tata Motors, JLR and MG Motors (all market leaders in Electric vehicles) for home charging network.

• The company’s shift from a customary utility company to a B2C business, wherein, it is providing services like, EV charging (~40% market share), home automation, solar roof top/pumps, microgrids, etc, has worked in its favour, especially in EV/rooftop/ pumps category. These budding segments have huge potential and the company has already envisaged an overall opportunity size of $45 bn over the next four years. Further, high coal prices, penetration in distribution space, asset monetisation in the RE space leading to strong FCF generation together bode well for Tata Power. Further, government’s target of 30% EV sales by 2030, will open up various avenues for the company. With this in view, the government has laid out its own plan (for e.g. introduced FAME-II--a subsidy scheme for faster development of EV landscape) to develop public charging facilities with at least one charging station in a 3X3km range across various cities, one station every 25km on both sides of highways and one fast/ rapid charging station every 100km on both sides of highways.

• The EV market is still at nascent in India, where over the past five years the share of EV sales has increased from 0.1% to merely 0.87%. This shift from being a conventional energy company might be a long road to success. Moreover, the charging infrastructure is quite critical in India. When the wattage increases charging would become quite difficult, as general usage of 4W+ vehicles for long distance travel and parking constraints in homes, the necessity for faster public charging stations becomes more commanding.

• Tech Mahindra has established capabilities across verticals – Communication and Enterprise (Manufacturing, BFSI, Technology, Media and Entertainment (TME), Retail, transport and logistics (RTL), healthcare etc.). The company provides technologies and solution to more than one thousand active clients (with a ~96% repeat business in Q1FY22 vs. ~92% in Q4FY21) spread across Americas, Europe and rest of the world. Its leadership in communication vertical could make it a key beneficiary of vendor consolidation in the segment.

• Tech Mahindra won net new deals worth $815 million versus $1,043 million in the previous quarter. Net new deal wins declined sequentially, but were well split between enterprise (down 11% QoQ) and communications (down 32% QoQ), the management said in a post-earnings conference call. Deal wins were aided by a large deal in the healthcare vertical and a large deal in the business process outsourcing space in the communications vertical. Tech Mahindra is seeing good traction in digital transformation among clients and its 5G deal pipeline continues to be strong.

• Tech Mahindra is focused on leveraging next-generation technologies including Blockchain, Cybersecurity, Artificial Intelligence, 5G and more, to disrupt and enable digital transformation, and to build cutting-edge technology solutions and services. Tech Mahindra could see improved spending on network operations, 5G, Cloud, AI and customer experience on the communication side in the longer term.

Tech Mahindra Ltd (M Cap Rs 137,123 cr)


• Tech Mahindra has reported stable and strong revenue growth in the past. The company total revenue grew at a CAGR of 10.5% over the past seven years. We expect consolidated revenue to grow by 13.2% and 13.5% in FY22E and FY23E, respectively. The company has reported operating margin at 15-18.5% band over the past and we expect 18.4% and 19.3% in FY22E and FY23E, respectively, supported by cost rationalisation efforts, and operational efficiencies.

• Indian rupee appreciation against the USD, pricing pressure, retention of the skilled headcount, strict immigration norms and rise in visa costs are key concerns. Besides, unsustainable high utilisation rates are reasons for worry. The attrition rate remained higher at 17% in Q1FY22, up from 13% in Q4FY21.


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Tech Mahindra


Company Name Anaylst Qualification Holding ACC Jimit Zaveri MBA - Finance No Birla Corpn. Jimit Zaveri MBA - Finance No BSE Nisha Sankhala MBA No C D S L Nisha Sankhala MBA No Crompton Gr. Con Jimit Zaveri MBA - Finance No G R Infraproject Debanjana Msc in Economics, PGDM in Finance No GAIL (India) Abdul Karim MBA Yes GHCL Abdul Karim MBA No H P C L Abdul Karim MBA No ICICI Bank Nisha Sankhala MBA No Infosys Devarsh Vakil MBM No ITC Harsh Sheth MCom, No Larsen & Toubro Chintan Patel MSc – Financial Mathematics No M & M Atul Karwa MMS-Finance No Mahindra CIE Atul Karwa MMS-Finance Yes NRB Bearings Atul Karwa MMS-Finance No O N G C Abdul Karim MBA No Reliance Industr Abdul Karim MBA No SBI Life Insuran Nisha Sankhala MBA No St Bk of India Atul Karwa MMS-Finance No Sun TV Network Abdul Karim MBA No Tata Power Co. Debanjana Msc in Economics, PGDM in Finance No Tata Steel Chintan Patel MSc – Financial Mathematics No Tech Mahindra Abdul Karim MBA No

Disclosure: We, Abdul Karim (MBA), Atul Karwa MBA, Chintan Patel MSc – Financial Mathematics, Debanjana Chatterjee Msc in Economics PGDM in Finance, Devarsh Vakil MBM, Harsh Sheth MCom, Jimit Zaveri MBA – Finance, Nisha Sankhala MBA authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. HSL has no material adverse disciplinary history as on the date of publication of this report. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Research Analyst or his/her relative or HDFC Securities Ltd does not have any financial interest in the subject company. Also Research Analyst or his/her relative or HDFC Securities Ltd. or its Associate may have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Further Research Analyst or his/her relative or HDFC Securities Ltd. or its associate does not have any material conflict of interest. Any holding in stock – Yes for GAIL of Abdul Karim. Yes for Mahindra CIE of Atul Karwa HDFC Securities Limited (HSL) is a SEBI Registered Research Analyst having registration no. INH000002475. Disclaimer: This report has been prepared by HDFC Securities Ltd and is meant for sole use by the recipient and not for circulation. The information and opinions contained herein have been compiled or arrived at, based upon information obtained in good faith from sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. This document is for information purposes only. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete and this document is not, and should not be construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments. This report is not directed to, or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity who is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject HSL or its affiliates to any registration or licensing requirement within such jurisdiction. If this report is inadvertently sent or has reached any person in such country, especially, United States of America, the same should be ignored and brought to the attention of the sender. This document may not be reproduced, distributed or published in whole or in part, directly or indirectly, for any purposes or in any manner. Foreign currencies denominated securities, wherever mentioned, are subject to exchange rate fluctuations, which could have an adverse effect on their value or price, or the income derived from them. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies effectively assume currency risk. It should not be considered to be taken as an offer to sell or a solicitation to buy any security. HSL may from time to time solicit from, or perform broking, or other services for, any company mentioned in this mail and/or its attachments. HSL and its affiliated company(ies), their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell the securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions. HSL, its directors, analysts or employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any action taken on basis of this report, including but not restricted to, fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the dividend or income, etc. HSL and other group companies, its directors, associates, employees may have various positions in any of the stocks, securities and financial instruments dealt in the report, or may make sell or purchase or other deals in these securities from time to time or may deal in other securities of the companies / organizations described in this report. HSL or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months. HSL or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from t date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction in the normal course of business. HSL or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither HSL nor Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. HSL may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Research entity has not been engaged in market making activity for the subject company. Research analyst has not served as an officer, director or employee of the subject company. We have not received any compensation/benefits from the subject company or third party in connection with the Research Report. HDFC securities Limited, I Think Techno Campus, Building - B, "Alpha", Office Floor 8, Near Kanjurmarg Station, Opp. Crompton Greaves, Kanjurmarg (East), Mumbai 400 042 Phone: (022) 3075 3400 Fax: (022) 2496 5066 Compliance Officer: Binkle R. Oza Email: [email protected] Phone: (022) 3045 3600 HDFC Securities Limited, SEBI Reg. No.: NSE, BSE, MSEI, MCX: INZ000186937; AMFI Reg. No. ARN: 13549; PFRDA Reg. No. POP: 11092018; IRDA Corporate Agent License No.: CA0062; SEBI Research Analyst Reg. No.: INH000002475; SEBI Investment Adviser Reg. No.: INA000011538; CIN - U67120MH2000PLC152193 Mutual Funds Investments are subject to market risk. Please read the offer and scheme related documents carefully before investing.

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