Torrent i sec (1)

ICICI Securities Limited, ICICI Centre, H.T. Parekh Marg, Churchgate, Mumbai – 400 020, India.
Phone: +91 22 2288 2460/70 Fax: +91 22 2288 2448
ICICI Securities Inc, 461 Fifth Avenue, 16th
Floor, New York, NY 10017.
Phone: +1 212 921 2344 / +1 212 453 6704 Fax: +1 212 453 6710
January 30, 2015
Market data as on Jan 29, 2015
INDICES
% chg
(DoD)
BSE Sensex 29682 0.4
S&P CNX Nifty 8952 0.4
BSE 100 9019 0.3
BSE 200 3685 0.2
OVERSEAS MARKETS#
% chg
(DoD)
Dow Jones 17417 1.3
Nasdaq Comp. 4683 1.0
S&P 500 2021 1.0
Hang Seng 24566 (0.1)
Nikkei 17717 0.6
ADVANCES/DECLINES (BSE)
Group A B S
Advances 132 1001 271
Declines 164 1031 287
Unchanged 4 93 37
FII TURNOVER (BSE+NSE)*
(Rs mn)
Bought Sold Net
74,060 55,450 18,610
NEW HIGHS AND LOWS (BSE)
Group A B S
High 29 70 41
Lows 6 48 25
CURRENCY
US$1 = Rs61.50
*FII turnover (BSE + NSE) as on
Jan28, 2015
India Update
CCoonntteennttss
Page 2 HDFC (Rs1,316): Exactly as expected Add
Page 4 Sesa Sterlite (Rs201): Aluminium production ramp up holds key Add
Page 6 Dr Reddy’s (Rs3,363): EBITDA margin outlook impacted by Russia sales Hold
Page 8 Pidilite Ind (Rs576): Results below estimates, RM benefit still to show up Hold
Page 10 IDFC (Rs171): Preparations on in earnest Buy
Page 12 Torrent Pharma (Rs1,138): Strong outlook for India business Buy
Page 14 Havells (Rs263): Weak domestic sales, one-offs at Sylvania mar results Add
Page 16 Shriram City Union Finance (Rs2,142): Growth returns in parts Reduce
Page 18 OBC (Rs241): On a slippery wicket Reduce
Page 20 GSFC (Rs101): Improving fundamental, correction warrants upgrade Add
Page 22 Results date reckoner
Page 23 Recent reports/updates
HHiigghhlliigghhttss
Sector/event Impact
FINANCIALS –
HDFC: Q3FY15
results review
and earnings
revision
HDFC’s Q3FY15 earnings print lived up to its billing as a ‘no-surprises’
company and were in-line with expectations (PAT grew 11.6% YoY). The
broad business trends were also aligned with our predictions. The loan
book (including off-balance sheet assets) grew at 15.6% YoY, with
individual loans (17.8% growth YoY) remaining the primary growth driver.
Non-individual loan portfolio only increased 1.1% QoQ. Reported NIM
remained stable at 3.93%, a marginal 6bps drop from the corresponding
quarter last year. Stripping out subsidiary valuation, the core mortgage
business currently trades at 4.3x 1-yr fwd P/core BVPS (DTL deduction
from special reserve added back). In our valuation methodology for
housing finance stocks we accord P/B premium in proportion to excess
sustainable RoE over a base CoE of 14%. Our target multiple for the
core business is 4x 1-yr fwd P/core BVPS (increased from 3.5x to reflect
the rate cycle having turned a corner). We roll over from FY16E to
FY17E for subsidiary valuations and factor in a new valuation benchmark
for the life insurance business based on the recent stake sale in HDFC
Life. Life Insurance is valued at Rs117 per share and increases by
almost 75% per share due to change in the valuation benchmark. We
arrive at a SOTP based target of Rs1,380 (Rs1,150 earlier). With HDFC
Bank yet to report numbers we use the target price of Rs968 set for it by
I-Sec Research at the time of its Q2FY15 report. A Rs100 increase in
HDFC Bank target price will increase our HDFC target price by Rs34. We
maintain our ADD recommendation.
Market movement over last fortnight Volumes in Rs mn (BSE and NSE) Advances & Declines ratio (BSE)
0
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19/1 21/1 23/1 25/1 27/1 29/1
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30000
19/1 21/1 23/1 25/1 27/1 29/1
BSE (LHS) NSE (RHS)
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19/1 21/1 23/1 25/1 27/1 29/1

India Update, January 30, 2015 ICICI Securities
2
HDFC (Add) FINANCIALS
Q3FY15 RESULT REVIEW AND EARNINGS REVISION
Exactly as expected Rs,1316
Santanu Chakrabarti (+91 22 6637 7351) santanu.chakrabarti@icicisecurities.com
Yash Modi (+91 22 6637 7314) yash.modi@icicisecurities.com
HDFC’s Q3FY15 earnings print lived up to its billing as a ‘no-surprises’ company and
were in-line with expectations (PAT grew 11.6% YoY). The broad business trends were
also aligned with our predictions. The loan book (including off-balance sheet assets)
grew at 15.6% YoY, with individual loans (17.8% growth YoY) remaining the primary
growth driver. Non-individual loan portfolio only increased 1.1% QoQ. Reported NIM
remained stable at 3.93%, a marginal 6bps drop from the corresponding quarter last
year. Stripping out subsidiary valuation, the core mortgage business currently trades at
4.3x 1-yr fwd P/core BVPS (DTL deduction from special reserve added back). In our
valuation methodology for housing finance stocks we accord P/B premium in proportion
to excess sustainable RoE over a base CoE of 14%. Our target multiple for the core
business is 4x 1-yr fwd P/core BVPS (increased from 3.5x to reflect the rate cycle having
turned a corner). We roll over from FY16E to FY17E for subsidiary valuations and factor
in a new valuation benchmark for the life insurance business based on the recent stake
sale in HDFC Life. Life Insurance is valued at Rs117 per share and increases by almost
75% per share due to change in the valuation benchmark. We arrive at a SOTP based
target of Rs1,380 (Rs1,150 earlier). With HDFC Bank yet to report numbers we use the
target price of Rs968 set for it by I-Sec Research at the time of its Q2FY15 report. A
Rs100 increase in HDFC Bank target price will increase our HDFC target price by Rs34.
We maintain our ADD recommendation.
Table 1: Valuations summary
Y/E
Mar
EPS
(Rs)
P/E
(x)
P/BV
(x)
Price (29/01/15) (Rs) 1,316 2014 34.9 37.7 7.3 M.Cap. (Rs bn) 1,934
52 wk Range (Rs) 1,345/765 2015E 37.0 35.6 6.8 M.Cap (US$ bn) 31.3
Dividend yield FY15E (%) 1.2 2016E 43.6 30.2 6.1 Shares Out (mn) 1470
BSE Sensex 29682 2017E 51.1 25.8 5.5 Free Float (%) 100
Source: Company data, I-Sec Research
• Growth continues to be led by individual loans. Individual loans grew at 4.3%
QoQ, re-iterating the management confidence in the time tested principle that this
segment has best defensive qualities on asset quality in an adverse economic
environment. Despite attractive (yield wise) opportunities aplenty in the developer
finance segment the company has remained cautious in the last few quarters and
has not alluded to any major shift in business outlook in its current commentary.
• History suggests most margin gains beyond threshold likely to be passed on.
Margins remained healthy recording a calculated NIM of 3.43%, a marginal 2bps
drop YoY. Yields at 11.84% were down only 9bps YoY reflecting pricing discipline,
especially as non individual business proportion receded, while borrowing costs
reduced 4bps YoY to 9.27%, thanks to nimble liability management. As policy rates
ease further, the company has much legroom to cut lending rates to boost growth
without compromising on profitability.
• Healthy cushion of capital to leverage into any economic recovery. Tier 1 stood
at 16.5% and leverage at 7.6x. If and when confidence improves the company will
have the option to leverage further/ raise payouts to boost RoE. Typically, leveraging
can happen if non-individual loans pick up from an economic recovery. Even
adjusting for likely ~200bps reduction in tier-1 capital, due to Basel 3 norms requiring
risk capital deduction on account of its stake in HDFC Bank, its position is quite
comfortable even if NBFC guidelines of 10% Tier-1 is adopted for HFCs by NHB.
Target price Rs1,380
Earnings revision
(%) FY15E FY16E FY17E
NII ↑ 0.1 ↓ 0.4 ↓ 0.4
PPP ↓ 0.7 ↓ 0.5 ↓ 0.5
EPS ↓ 1.0 ↓ 0.5 ↓ 0.5
Target price revision
Rs1,380 from Rs1,150

3
Table 2: Q3FY15 results review
(Rs mn, year ending March 31)
Q3FY14 Q2FY15 Q3FY15 % YoY % QoQ
Income statement
Interest income 58,418 63,523 66,044 13.1 4.0
Interest expenses 40,798 44,739 45,878 12.5 2.5
Net interest income 17,620 18,785 20,166 14.4 7.4
Other income 1,891 3,184 2,782 47.1 (12.6)
Net Operating income 19,511 21,968 22,947 17.6 4.5
Employee cost 708 788 833 17.6 5.7
Depreciation 84 116 117 39.8 0.6
Other costs 893 898 903 1.1 0.5
Operating expenses 1,684 1,803 1,853 10.0 2.8
Pre-provisioning profit (PPoP) 17,827 20,166 21,095 18.3 4.6
Provisions & Writeoffs 250 350 450 80.0 28.6
PBT 17,577 19,816 20,645 17.5 4.2
Tax 4,800 6,240 6,390 33.1 2.4
Tax Rate (%) 27.3 31.5 31.0 364 bps -54 bps
PAT 12,777 13,576 14,255 11.6 5.0
EPS (Rs) 8.2 8.6 9.1 10.7 5.0
Key ratios
Loan AUM (Rs mn) 2,084,950 2,331,000 2,410,530 15.6 3.4
Off-book (%) 7.8 8.9 8.8 97 bps -16 bps
Yield on loans (%) 12.1 11.9 11.8 -21 bps -3 bps
Cost of borrowings (%) 9.3 9.3 9.3 -6 bps -8 bps
Spread - Calculated (%) 2.7 2.5 2.6 -16 bps 5 bps
GNPL (% of total loans) 0.77 0.69 0.69 -9 bps 0 bps
Provisions as a % of AUM 0.01 0.02 0.02 0 bps 0 bps
Leverage (x) 7.6 7.7 7.6 4 bps -15 bps
Capital Adequacy 19.1 17.9 19.7 59 bps 180 bps
Tier I 16.6 15.7 16.5 -11 bps 80 bps
Tier II 2.5 2.2 3.2 70 bps 100 bps
Source: Company data, I-Sec research
Details In our report ‘Exactly as expected’ dated January 29, 2015.

4
Sesa Sterlite (Add) METALS
Q3FY15 RESULT REVIEW
Aluminium production ramp up holds key Rs201
Abhijit Mitra (+91 22 6637 7289) abhijit.mitra@icicisecurities.com
Ansuman Deb (+91 22 6637 7312) ansuman.deb@icicisecurities.com
Sesa Sterlite (SSLT) reported consolidated EBITDA beat of 7.5% (Consensus 5%).
Given that Cairn and Hind Zinc numbers have already been disseminated, the beat was
driven by Aluminum operations (Jharsuguda), Zinc international and Copper operations.
Jharsuguda Aluminum EBITDA surprised on account of continued high premiums over
LME that the business continue to gather. Cost of Alumina and Aluminum have shown
meaningful moderation in VAL, apparently driven by lower e-auction coal prices and
lower imported coal prices. Copper TcRc surprised on the upside with guidance pointing
to USc25/lb. Zinc international has mainly surprised on account of lower than expected
CoP. One of the key pointers made in the call is the ability of the management to use the
IPP (Jharsuguda 2400MW) as CPP ex the obligation to GRIDCO. However, there is no
clarity on the process of transfer, on the future state of linkages and/or the strategy they
are going to adopt in the upcoming coal auctions. We would like to highlight that this
conversion would allow the Jharsuguda smelter to achieve full utilisation and would be
one of the value accretive options available to the company. Maintain ADD.
Y/E
Mar
EPS
(Rs)
P/E
(x)
EV/E
(x)
Price (29/01/15) (Rs) 201 2014 21.2 9.5 4.9 M.Cap. (Rs bn) 597
52 wk Range (Rs) 315/172 2015E 23.8 8.4 3.5 M.Cap (US$ bn) 9.7
Dividend yield FY15E (%) 2.0 2016E 27.1 7.4 5.0 Shares Out (mn) 2,965
BSE Sensex 29682 2017E 31.9 6.3 4.1 Free Float (%) 40.8
• The conundrum of IPP to CPP. While the management has always maintained that
they need State government approval to use power generated from IPP for captive
usage in Jharsuguda smelter, Q3FY15 concall witnessed an unexpected change of
stance. Emphasis was laid on the ability for using 1800MW of 2400MW power plant
for captive usage. No clarity was however provided on the i) status of linkage post
the conversion and ii) strategy to be followed in the upcoming coal auction process
(for competitive reasons). One must take notice, that the ability to fully utilise the
CWIP in Jharsuguda Aluminium smelter is dependent on this arrangement and can
unlock value. We currently maintain our valuation framework of valuing IPP
separately with 15% being directed from the IPP to the smelter.
• Ramp up of Aluminum assets will be keenly watched. The company is waiting for
the EC to ramp up Alumina refinery in Lanjigarh to 2mnte, which can support SSLT’s
plans to ramp up Jharsuguda Aluminum smelter to 1-1.1mnte by FY16. This will also
be helped by the arrangement of using power from the current IPP. The BALCO
1200MW power plant has obtained the consent to operate (with 600MW as IPP).
BALCO has ramped up 84 pots and will ramp up all the pots by mid FY16.
• Impact of the arrangement in the upcoming coal blocks bidding? As we have
mentioned in our note titled “Mapping the coal jigsaw-scenarios and winners” dated
December 10, 2014, if SSLT bids for 2400MW as CPP, it will present toughest
competition to Gare Palma IV/1 coal block of JSPL. Lack of clarity in the current
status would create bidding uncertainty for SSLT’s competitors as well.
Target price Rs233

5
Table 2: SSLT’s consolidated Q3FY15 result review
Q3FY15 Q3FY14 % chg YoY Q2FY15 % chg QoQ
Net sales 192,189 195,230 (1.6) 195,494 (1.7)
Cost of material purchased 64,382 76,597 (15.9) 66,449 (3.1)
Purchase of stock in trade 1,370 792 73.0
Changes in inventories (2,128) (4,129) NA
Employee benefit expenses 6,777 7,969 (15.0) 7,736 (12.4)
Power & fuel charges 21,051 13,729 53.3 21,106 (0.3)
Exchange loss/(gain) - (818) NA - NA
Other expenses 39,271 35,370 11.0 37,369 5.1
Total expenditure 130,723 129,509 0.9 132,673 (1.5)
EBITDA 61,466 65,721 (6.5) 62,821 (2.2)
Other income 4,289 3,899 10.0 6,861 (37.5)
Interest 13,293 15,298 (13.1) 14,716 (9.7)
PBDT 52,463 54,322 (3.4) 54,966 (4.6)
Depreciation 23,279 20,041 16.2 20,033 16.2
Extraordinary expenses (3,932) - (2,145)
PBT 33,115 34,281 (3.4) 37,078 (10.7)
Tax 4,776 (1,385) (444.8) 5,601 NA
Reported profit after tax 28,339 35,666 (20.5) 31,477 (10.0)
Minority interest 12,463 16,980 (26.6) 15,284 (18.5)
Share of profit from associate - (3) -
Net Profit after Minority Interest 15,876 18,683 (15.0) 16,193 (2.0)
Adj net profit 12,511 18,683 (33.0) 14,372 (12.9)
Table 3: SSLT’s standalone Q3FY15 result review
Q3FY15 Q3FY14 Q2FY15
Net sales 86,316 82,747 87,353
materials consumed 50,999 64,767 51,980
Purchase of stock in trade 2,330 792 2,541
Changes in inventories (391) (4,771) (362)
Employee benefits 1,451 1,403 1,666
Power and fuel charges 11,256 6,441 12,247
Exchange loss (gain) (1) (1,155) 413
Other expenses 6,168 5,452 5,862
Total Expenses 71,810 72,929 74,347
EBITDA 14,505 9,818 13,006
Finance costs 8,516 9,463 9,964
Other Income 675 7,736 10,245
Profit before dep and taxes 6,665 8,090 13,286
Depreciation 4,071 4,039 4,024
Profit before ex items 2,594 4,052 9,262
Ex items - - 24
Taxes - (4,513) -
Profit after taxes 2,594 8,565 9,238
Details In our report ‘Aluminium production ramp up holds key’ dated January 29,
2015.

6
Dr Reddy’s Lab (Downgrade to Hold) PHARMA
EBITDA margin outlook impacted by Russia sales Rs3,363
Kartik Mehta (+91 22 6637 7230) kartik.mehta@icicisecurities.com
Gagan Borana (+91 22 6637 7480) gagan.borana@icicisecurities.com
Dr Reddy’s Laboratories (Dr Reddy’s) posted a mixed set of numbers for Q3FY15. Net
sales grew 8.8% YoY to Rs38.4bn – higher than our estimate of Rs36.4bn – mainly on
account of 20.7% YoY and 82.3% YoY growth in PSAI and RoW formulation sales,
respectively. Russia sales declined 9% YoY hurt by depreciation in Rouble. Gross margin
dipped 230bps YoY to 58.2% due to adverse currency movement and high base of
Q3FY14 which included sales of limited competition products. EBITDA margin dipped
400bps YoY to 24.1% – lower than our estimate of 24.4% – primarily due to higher R&D
expenses that moved up to 11.2% of net sales in Q3FY15 from 8.4% in Q3FY14. As a
result, adjusted PAT declined 11.2% YoY to Rs5.1bn, which is lower than our estimate of
Rs5.6bn.
US sales, R&D spends and EBITDA margin
Source: Company, I-Sec research
Y/E
Mar
EPS
(Rs)
P/E
(x)
EV/E
(x)
Price (29/01/15) (Rs) 3,363 2014 124.6 27.0 18.3 M.Cap. (Rs bn) 571
52 wk Range (Rs) 3,628/2,286 2015E 124.8 26.9 17.5 M.Cap (US$ bn) 9.3
• We downgrade the stock to HOLD rating (from ADD) with a target price of
Rs3,343/share (unchanged) based on a target PER of 18x (unchanged) our FY17
EPS estimate. The downgrade factors near to medium term concerns on the
profitability of its Russian business due to weak Rouble. We forecast total sales and
earnings for FY14-FY17 to grow at a CAGR of 13.4% and 14.2%, respectively. We
have raised our sales estimate for FY15, FY16 and FY17 by 3.3%, 5.9% and 6%,
respectively, to factor in increase in US generic business.
• Key downside risks: Lower-than-expected sales in the domestic market, delay in
key product launches and lower-than-expected market share gain in the developed
markets.
• Key upside risks: Improved business outlook on its Russian business on the back
of strengthening currency and approval of key products in the US markets.
Earnings revision
Sales ↑ 3.3 ↑ 5.9 ↑ 6.0
EPS 0.0 0.0 0.0
I-Sec vs Bbg* consensus
Sales 0.8 1.0 2.3
Adj. PAT (6.3) (0.3) 2.3
Source: *Bloomberg, I-Sec research

7
Table 2: Q3FY15 result review
Q3FY15 Q3FY14 % Ch YoY Q2FY15 % Ch QoQ
Total revenues 38,431 35,338 8.8 35,879 7.1
Gross profit 22,352 21,391 4.5 20,986 6.5
S G & A 10,572 9,858 7.2 10,125 4.4
R&D exp. 4,316 2,979 44.9 4,113 4.9
Amortization exp. 579 585 (1.0) 548 5.7
Other operating (Inc.)/exp. (341) (177) (265)
Operating Inc. / (Loss) 7,226 8,146 (11.3) 6,465 11.8
Equity in loss of affiliates 47 46 51
Other (exp.)/ Inc. (net) 347 48 178
PBT and minority interests 7,620 8,240 (7.5) 6,694 13.8
Income tax benefit / (exp.) (2,541) (2,521) (1,196)
Adjusted PAT 5,079 5,719 (11.2) 5,498 (7.6)
Extra ordinary income/ (exp.) 666 464 243
Reported PAT 5,745 6,183 (7.1) 5,741 0.1
Gross margins (%) 58.2 60.5 58.5
EBITDA (%) 24.1 28.1 23.5
Details In our report ‘EBITDA margin outlook impacted by Russia sales’ dated
January 29, 2015.

8
Pidilite Industries (Downgrade to Hold) MID-CAP
Q3FY15 RESULT REVIEW AND RECOMMENDATION CHANGE
Results below estimates, RM benefit still to show up Rs576
Nimit Shah (+91 22 6637 7588) nimit.shah@icicisecurities.com
Anand Mour (+91 22 6637 7209) anand.mour@icicisecurities.com
Jeetendra Khatri (+91 22 6637 7416) jeetendra.khatri@icicisecurities.com
Pidilite Industries’ (Pidilite) consolidated revenues in Q3FY15 increased 12.6% YoY to
Rs11.9bn and adjusted PAT grew 17.6% YoY to Rs1.26bn (I-Sec estimate: Rs1.4bn).
Gross margins declined 90bps YoY at 43.9% due to consumption of high cost inventory.
The management commentary suggested a 5% decline in 50% of the raw material (RM)
index in Q3FY15. VAM prices (accounting for around 15% of raw material costs) declined
from US$1500 to US$1350 and, are currently hovering around US$1200.
The impact of lower raw material cost will be partly visible in Q4FY15 while the full impact
will be visible in subsequent quarters. Depreciation cost was higher 40% YoY at
Rs307mn.
We have reduced our earnings estimate for FY15 by 2.1% incorporating lower topline
growth and higher depreciation expenses, but have marginally raised FY16 earnings by
1.8% to factor in the benefit of lower raw material cost. However, we downgrade the
stock to HOLD rating (earlier ADD) with a revised target price of Rs555 (earlier Rs426),
valuing it at 33x FY17E earnings (earlier 28x average FY16 and FY17 earnings). We
have increased the target multiple to reflect the higher earnings growth trajectory. We
now expect earnings CAGR of 24.2% over FY14-FY17.
Y/E
Mar
EPS
(Rs)
P/E
(x)
EV/E
(x)
Dividend yield FY15E (%) 0.6 2016E 13.8 41.7 29.3 Shares Out (mn) 512.6
• Revenues up 12.6% YoY: Consolidated revenues grew 12.6% YoY to Rs11.9bn
mainly on the back of a 3% YoY growth in the consumer and bazaar products
segment. Industrial products segment reported a lower 5.2% YoY growth to
Rs2.03bn. Standalone revenues were up 12.2% YoY to Rs10.75bn. Volumes grew
around 8% in both the consumer & product segment and the industrial products
segment. This implies some price reduction in the industrial products segment. In the
white glue business (around 25% of the consolidated revenues), the company has
however affected a 2% to 3% price increase during the quarter.
• Full benefit of raw material cost decline to be visible in subsequent quarters:
Gross margins shrank 90bps YoY to 43.9% due to consumption of high cost
inventory during the quarter. The management commentary suggested a 5% decline
in 50% of the raw material index in Q3FY15. The impact of the lower raw material
cost will be visible partly in Q4FY15, with the full impact visible in the subsequent
quarters. Depreciation cost was higher by 40% YoY at Rs307mn.
• Downgrade to HOLD; revise estimates marginally: We have cut our earnings
estimate for FY15 by 2.1% incorporating a lower topline growth and higher
depreciation expenses; however, we have marginally raised our FY16 earnings by
1.8%, as we factor in the benefit of lower raw material cost. We however downgrade
the stock to HOLD (earlier ADD) with a revised target price of Rs555 (earlier Rs426),
valuing it at 33x FY17E earnings (earlier 28x average FY16 and FY17 earnings). We
Target price Rs555
Earnings revision
Sales ↓ 3.5 ↓ 5.9 ↓ 4.9
EBITDA ↓ 3.2 ↓ 0.3 ↓ 3.0
PAT ↓ 2.1 ↑ 1.8 ↓ 0.6
Rs555 from Rs426

9
have increased the target multiple to reflect the higher earnings growth trajectory. We
now expect earnings CAGR of 24.2% over FY14-FY17.
• Key risks: Volatility in input costs, delay in turnaround of international subsidiaries,
and unfavorable outcome of the elastomer project.
Table 2: Q3FY15 result review (consolidated)
Q3FY15 Q3FY14 YoY (%) Q2FY15 QoQ (%)
Net revenues 11,963 10,626 12.6 12,486 -4.2
Total expenses (10,088) (9,096) 10.9 (10,484) -3.8
Other operating inc (exp), net 59 62 -6.3 61 -3.8
EBITDA 1,876 1,529 22.7 2,002 -6.3
EBITDA margin (%) 15.7% 14.4% 129 bps 16.0 -35 bps
Depreciation and amortization (307) (213) 44.4 (313) -2.0
EBIT 1,569 1,317 19.1 1,689 -7.1
EBIT Margin (%) 13.1% 12.4% 72 bps 13.5 -41 bps
Net Interest expenses (70) (90) -22.2 (28) 155.3
Other NO income (expense), net 61 71 -13.3 151 -59.3
Earnings before tax 1,618 1,296 24.9 1,873 -13.6
Income taxes (377) (334) 13.0 (500) -24.7
Income tax as % of PBT 23.3% 25.7% -245 bps 26.7 -342 bps
Profits in associate 2 10 17
Earnings after tax 1,244 972 27.9 1,389 -10.5
Non-recurring items 0.0 n.m. 0.0 n.m.
Net income (loss), adjusted 1,258 1,070 17.6 1,389 -9.5
Net Margin (%) 10.5% 10.0% 46 bps 11.0 -54 bps
Shares outstanding 512.6 512.6 512.6
EPS 2.45 2.09 17.6 2.71 -9.5
Details In our report ‘Results below estimates, RM benefit still to show up’ dated
January 29, 2015.

10
IDFC (Buy) FINANCIALS
Preparations on in earnest Rs171
IDFC’s Q3FY15 earnings was in-line with consensus estimates but significantly below
ours on the back of lower than expected other income and higher than expected
provisioning. The key features of the result that stand out are:
• The company continues to provide heavily (31bps of assets provided towards loans
in the quarter) and provisioning has now reached 3.9% of loan assets while GNPA
levels stand stable at 0.68% (6bps QoQ increase in the quarter). Restructured loans
also remained stable at 6.1% of total loans.
• Treasury investments increased 42% QoQ on a high base and stand at Rs254.6bn
(29.5% of balance sheet assets). This should suffice as its entire SLR portfolio in
IDFC bank! Clearly, this is an interest rate view that the company has taken, as the
SLR build need not have been this fast and early.
• Growth remains elusive with loan assets declining 1.9% QoQ. The fact that this
happened while telecom sector loans increased 8.2% QoQ shows that but for such
short term low yield loans, book run-off is even higher. Energy and transportation
sector loan book declined 4.4% and 4.2% respectively. With loan growth no longer
an impediment to bank conversion (given zero regulatory cost of incremental project
loan growth in a post-infra bond regulation dispensation) – the decline clearly points
to a lack of suitable opportunities rather than management willingness.
• Operating costs remain high as expected with other (non-salary) operating costs at
17bps of assets vs earlier run-rate of 9-12bps per quarter. The company is obviously
investing into bank-ready systems and processes.
Y/E
Mar
EPS
(Rs)
P/E
(x)
EV/E
(x)
BSE Sensex 29682 2017E 14.9 11.5 1.5 Free Float (%) 100
• We feel there is a strong case for the bank eventually trading north of 2x 1-yr fwd
P/BVPS given its RoE profile (steady state ~22%) and roll over our TP to Rs225
from Rs220 (maintaining a target multiple of 1.9x 1-yr fwd P/ core BVPS, 10%
holding company discount). Under the de-merger scheme, IDFC shareholders will
get one share of the bank for every share held, residual ownership of the bank with
NOFHC will be 53% (the share count of the bank will therefore be ~2.13x that of
IDFC, the 3% buffer likely being kept for ESOP related dilutions). We maintain our
BUY recommendation.
• New regulations enhance return profile and the freedom to grow. As we tried to
quantify the impact of the infra bond regulation on the return profile of IDFC post
bank conversion, we built in significant conservatism by assuming i) limited usage of
the 7yr+ debt raising ceiling (as defined by the current document) ii) maintained RIDF
deployment at levels that are frankly still ridiculously high (the deployment is a
350bps negative carry trade) and iii) nearly zero benefit of doubt in CASA sourcing,
asset diversification and PSL asset origination. Despite all this the FY21E RoE is
~22% in our calculation. The actual return profile is likely to surprise on the upside in
Target price Rs225
Earnings revision
(%) FY15E FY16E
NII ↑ 1.3 ↓ 22.0
PPoP ↓ 6.6 ↑ 3.1
PAT ↓10.6 ↑ 2.0
Source: I-Sec research
Rs225 from Rs220

11
the absence of any large scale regulatory intervention or massive over-investment
into retail diversification.
Table 2: Q3FY15 result review and variance analysis
Income statement
Interest income 19,320 20,331 21,452 11.0 5.5
Interest expense 12,680 13,851 14,842 17.0 7.2
Net Interest Income 6,640 6,480 6,610 (0.5) 2.0
Other income 1,908 4,544 3,169 66.1 (30.3)
Net income 8,548 11,024 9,779 14.4 (11.3)
Staff cost 775 964 975 25.9 1.2
Other op expenses 540 1020 969 79.5 (5.0)
Operating expenses 1,315 1,984 1,945 47.9 (2.0)
PPoP 7,233 9,040 7,834 8.3 (13.3)
Provisions & Writeoffs 365 2,812 1,532 319.4 (45.5)
PBT 6,868 6,229 6,303 (8.2) 1.2
Tax 1,811 1,833 2,018 11.5 10.1
Tax Rate 26.4 29.4 32.0 21.5 8.8
PAT before minority int 5,057 4,395 4,284 (15.3) (2.5)
Share of Associate company 7 (136) (31) na na
Minority interest 58 45 38 (34.4) (16.8)
Profit after tax 5,007 4,214 4,216 (15.8) 0.0
EPS (Rs) 3.3 2.6 2.6 (19.8) 0.0
Details In our report ‘Preparations on in earnest’ dated January 29, 2015.

12
Torrent Pharma (Buy) PHARMA
Strong outlook for India business Rs1,138
Kartik Mehta (+91 22 6637 7230) kartik.mehta@icicisecurities.com
Gagan Borana (+91 22 6637 7480) gagan.borana@icicisecurities.com
Torrent Pharmaceuticals (Torrent)’s Q3FY15 numbers are in line with our expectations.
Net sales grew 16.8% YoY to Rs11.6bn versus our expectation of Rs11.8bn. Constant
currency sales growth in the US and Brazil was 16% YoY and 19% YoY, respectively,
while India formulation sales (adjusted for Elder Pharmaceuticals’ sales) grew 15% YoY.
EBITDA margin improved 50bps YoY to 19.7%, lower than our estimate of 20.7%.
EBITDA margin was hurt by adverse currency movement which led to lower realisations.
YoY increase in depreciation and interest cost on account of acquisition of Elder
Pharmaceuticals restricted adjusted PAT growth to 6% at Rs1.67bn, which was in line
with our estimate of Rs1.62bn.
Secondary sales (monthly) of acquired Elder portfolio
Source: Company data
Y/E
Mar
EPS
(Rs)
P/E
(x)
EV/E
(x)
• We maintain BUY rating on the stock with a revised target price of Rs1,317/share
(earlier Rs1,102/share) based on a target PER of 17x (earlier 15x) our FY17 EPS
estimate. We have increased our PE multiple mainly on account of improved outlook
on India business arising from synergies from Elder’s brands. We expect sales and
earnings CAGR of 13.5% and 25.5%, respectively, over FY14-FY17. We have
marginally cut our sales estimate for FY15, FY16 and FY17 by 0.4%, 1% and 1.4%,
respectively, while raising our EPS estimate for FY15, FY16 and FY17 by 5.6%,
4.8% and 5.5%, respectively, to factor the improvement in EBITDA margin.
• Key risks: 1) Higher-than-expected pricing pressure in the generics markets of
Brazil, Russia and Germany, 2) lower product launches in the US, and
3) delay in realising synergies with the acquired brands of Elder Pharma and lower-
than-expected domestic sales growth, which will negatively impact the EBITDA
margin.
Earnings revision
Sales (0.4) (1.0) (1.4)
EPS 5.6 4.8 5.5
I-Sec vs Bbg* consensus
Sales (5.7) (9.7) (10.7)
Adj. PAT 1.3 12.4 21.7
Source: *Bloomberg, I-Sec research

13
Table 2: Q3FY15 performance
Q3FY15 Q3FY14 % Ch YoY Q2FY15 % Ch QoQ
Net sales 11,560 9,900 16.8 12,030 (3.9)
EBITDA 2,280 1,896 20.3 2,590 (12.0)
Other income 770 350 120.0 860 (10.5)
PBIDT 3,050 2,246 35.8 3,450 (11.6)
Depreciation 540 210 157.1 560 (3.6)
Interest 500 160 212.5 540 (7.4)
PBT 2,010 1,876 7.1 2,350 (14.5)
Tax 340 300 13.3 370 (8.1)
Minority interest 0 0 0
Adjusted PAT 1,670 1,576 6.0 1,980 (15.7)
Extra ordinary income/ (exp.) 0 0 0
Reported PAT 1,670 1,576 6.0 1,980 (15.7)
EBITDA margin (%) 19.7 19.2 21.5
Details In our report ‘Strong outlook for India business’ dated January 29, 2015.

14
Havells India (Add) MID-CAP
Weak domestic sales, one-offs at Sylvania mar results Rs263
Vikash Mantri (+91 22 6637 7161) vikash.mantri@icicisecurities.com
Jayant Dongre (+91 22 6637 7339) jayant.dongre@icicisecurities.com
Havells India’s (Havells) reported weak numbers with a 5.3%YoY domestic revenue
growth albeit in line with pre-result management commentary on slowdown in the overall
market. Standalone EBITDA margin increased by 20bps YoY to 14.5% driven by strong
cost control and revenue mix enabling better contribution margins from the lighting and
cables division. Major disappointment came from Sylvania owing to various one-time
costs (below EBITDA) which led to EUR10.7mn loss (I-Sec: PAT of EUR0.7mn).
Consumer sentiment on the ground remains weak as evident by similar comments from
companies like TTK Prestige and V-Guard. The Havells management continues to guide
for a similar growth in Q4FY15 but remains hopeful of recovery going forward. We cut our
standalone sales forecasts for Havells on continued weak consumer sentiment and have
reduced our Sylvania estimates to factor increased pension costs, forex-related losses,
other one-offs as well as lower exchange rate (EUR/INR at 72 vs 80 earlier) post-FY16.
We raise our DCF-based target price for the stock to Rs295, as we roll forward to FY16E
which offsets the earnings cut. We maintain our ADD rating on Havells and recommend
buying on dips.
Y/E
Mar
EPS
(Rs)
P/E
(x)
EV/E
(x)
• Standalone India business grew 5.3% YoY as growth slowed across all segments.
EBITDA was marginally ahead of our estimate at Rs1.81bn (I-Sec: Rs1.73bn) mainly
on better contribution due to improved mix (higher sales from domestic cable and
high-margin fixtures). Electric Cons. durables was the only segment that posted
double-digit growth, while the Lighting and Fixtures business was flat YoY as growth
in LED offset decline in traditional luminaries. We have cut our sales growth forecast
to 12.3%, 14.6% and 14.6% for FY15, FY16 and FY17 (earlier 18.4%, 17.4% and
16.5%) respectively.
• Sylvania – one-offs impact results: Sylvania’s revenues at EUR111mn were
marginally weaker than expected. Europe growth slowed to 2.6% YoY after a good
Q2FY15 and Americas growth of 7% YoY was impacted by the weaker euro.
However, adjusted EBITDA margin of 5.0% (I-Sec: 5.1%) was in line with
expectation. EBITDA includes a one-off charge of EUR2.9mn owing to sales return
and rebate in Thailand. Below EBITDA, there were other one-offs: pensions costs
(EUR6.1mn), fixed asset impairment (EUR1.3mn) and retrospective tax assessment
in Italy (EUR2mn). Considering the one-offs and lower EUR/INR, we have reduced
our sales, reported EBITDA and PAT estimates by 11%, 22% and 30% for FY16 and
11%, 17% and 21% for FY17 respectively.
• Raise target price to Rs295, maintain ADD: We increase our target price for
Havells to Rs295/share (earlier Rs278/share) on the back of rollover of DCF to
FY16E, which offset the lower earnings estimates. We value Havells’ standalone at
Rs290, implying a P/E of 24.4x FY17E. We attribute Rs5/share for Sylvania and
maintain our ADD rating. We recommend adding the stock on dips.
Target price Rs295
Earnings revision
Sales ↓ 5.7 ↓ 8.9 ↓ 9.8
EBITDA ↓ 14.9 ↓ 9.9 ↓ 7.9
EPS ↓ 32.2 ↓ 12.1 ↓ 10.0
Rs295 from Rs278

15
Table 2: Havells’ India operations – growth at 5.3% YoY
(Rs mn)
Q3FY15E Q3FY15 Q3FY14 % chg YoY % chg QoQ Q2FY15
Total revenues 13,390 12,474 11,844 5.3 (8.6) 13,651
Expenditure 11,663 10,661 10,145 5.1 (9.8) 11,818
Cost of revenues 8,101 7,513 7,353 2.2 (8.7) 8,233
Employee costs 764 808 527 53.3 3.2 783
Other expenditure 2,799 2,363 2,332 1.3 (16.6) 2,832
EBITDA 1,726 1,813 1,699 6.7 (1.1) 1,833
Other income 115 89 107 (17.0) (22.7) 115
Depreciation 225 230 161 42.3 2.1 225
Finance expenses 59 72 85 (16.0) 21.0 59
PBT 1,557 1,601 1,559 2.6 (3.8) 1,664
Less: Provision for Tax 436 428 345 24.3 (8.4) 468
Adjusted PAT 1,121 1,172 1,215 (3.5) (2.0) 1,196
EBITDA margin (%) 12.9 14.5 14.3 13.4
Gross margin (%) 39.5 39.8 37.9 39.7
Effective tax rate (%) 28.0 26.8 22.1 28.1
NPM (%) 8.4 9.4 10.3 8.8
Source: Company data; I-Sec research
Details In our report ‘Weak domestic sales, one-offs at Sylvania mar results’ dated
January 29, 2015.
All segments saw a
slowdown in growth,
and Havells’ overall
revenue growth stood
at 5.3% YoY
compared to 19% YoY
in H1FY15
Adjusted EBITDA
margin improved
20bps YoY to 14.5%,
as slower growth was
offset by improving
mix and lower input
prices

16
Shriram City Union Finance (Reduce) FINANCIALS
Growth returns in parts Rs2,142
Shriram City Union Finance (SCUF) reported a PAT growth of 10.7%YoY in Q3FY15.
AUM growth, which turned positive in Q1FY15 after five quarters of decline, picked up
some momentum clocking 4% sequential growth, the highest in last nine quarters. But for
auto and gold loans, most other segments contributed strongly. Margin remains high at
14.3% NIM (up 195bps YoY and 95bps QoQ) thanks to i) a loan mix shift in favour of
higher yield products, ii) de-leveraging through the ~Rs7.9bn equity raise from Piramal
Enterprises (10% of post money capital) and iii) some benefit of wholesale easing and
rating upgrade to borrowing costs (11.5%, down 29bps YoY and 12bps QoQ). Operating
cost inflation (op cost to AUM 1.5% for the quarter, up 26bps YoY) has sneaked up on
the company, thanks to muted asset growth in last two years. We continue to build in
acceleration of asset growth from here on as political tensions in erstwhile Andhra
Pradesh subside and base effect kicks in. However, capitalization levels (25.5% Tier-1)
are a huge drag on RoE (14.5% in the quarter, down a whopping 456bps YoY).
Valuations at 2.6xFY16E P/BVPS appear quiet rich to us for a business with ~15-16%
FY16-17E RoE (steady state ~22-23%) and almost zero possibility of enough growth in
FY15-17 to allow the company to lever up. Our 12-month target price increases to
Rs1850 from Rs1340 (target multiple increased to 2x 1-yr fwd P/BVPS from 1.5x due to
improving growth momentum and margin traction). We maintain our REDUCE
recommendation.
Y/E
Mar
EPS
(Rs)
P/E
(x)
P/BV
(x)
52 wk Range (Rs) 1,345/765 2015E 90.3 23.7 2.9 M.Cap (US$ bn) 2.3
• Asset growth gaining momentum…The core SME lending business grew 5.5%
QoQ in the quarter and there seems to be increasing evidence that moving back to
longer duration products is helping asset growth. Two-wheeler loans also clocked a
healthy 6% growth QoQ. Auto loans continue to be a laggard and declined 4.2%
QoQ (fourth consecutive quarter of decline). The company has merged the two gold
loan categories into one in this quarter’s disclosure and on a combined basis they
grew only 1.4% QoQ. The overall benign asset growth situation last year had been
created by i) reduced lending enthusiasm in asset classes that company considers
as non-core ii) impact of political uncertainties on key erstwhile Andhra Pradesh (AP)
geography disbursements and iii) tightened credit policies on account of
macroeconomic uncertainties. As issue ii) gets addressed now, growth should
rebound but cascading effects of a weak rural economy remain a risk, despite the
company being primarily present in trading hubs and urban peripheries.
• … but unlikely to deliver adequate leveraging. We are building in ~23% growth in
both FY16E & FY17E, which is by no means immune to disappointment. Return to
steady state capital productivity (23% RoE, 600-700bps improvement over current)
as well as operating cost rationalization can only be delivered by an asset growth
spurt. Approximately 35% annual asset growth is required for financial leverage to be
optimal in two years, the likelihood of which appears to be low even if we see an
economic recovery.
Earnings revision
NII ↑ 4.0 ↑ 1.5 ↓ 1.1
PPP ↑ 1.5 ↓ 3.2 ↓ 4.6
PAT ↓ 1.7 ↓ 3.3 ↓ 4.7

17
Q3FY14 Q2FY15 Q3FY15 YoY (%) QoQ (%)
Income from operations 7,962 8,482 8,956 12.5 5.6
Other operating income 0 0 0
Total income from operations 7,962 8,482 8,956 12.5 5.6
Interest expense 3,324 3,382 3,283 (1.2) (2.9)
Net interest income 4,639 5,100 5,672 22.3 11.2
Other income 158 207 69 (56.5) (66.7)
Total income 4,797 5,307 5,741 19.7 8.2
Employee benefit expenses 738 1,004 1,108 50.2 10.4
Depreciation & amortization 79 111 98 23.3 (11.9)
Other expenses 1,039 1,035 1,163 11.9 12.3
Total operating expenses 1,856 2,150 2,368 27.6 10.1
Pre-provisioning profits (PPoP) 2,941 3,157 3,373 14.7 6.8
Provisions & write-offs 925 1,089 1,171 26.7 7.6
Profit before tax (PBT) 2,016 2,069 2,202 9.2 6.4
Income taxes 726 691 773 6.5 11.9
Tax rate (%) 36.0 33.4 35.1 -90bps 170bps
Profit after tax (PAT) 1,291 1,378 1,429 10.7 3.7
Paid up share capital 593 659 659 11.2 0.0
Basic EPS 21.8 20.9 21.7 (0.4) 3.7
Details In our report ‘Growth returns in parts’ dated January 29, 2015.

18
Oriental Bank of Commerce (Reduce) BANKING
On a slippery wicket Rs241
Shashin Upadhyay (+91 22 6637 7572) shashin.upadhyay@icicisecurities.com
Parul Gulati (+91 22 6637 7510) parul.gulati@icicisecurities.com
Oriental Bank of Commerce (OBC)’s Q3FY15 performance was marred by continued
stress on asset quality and income reversals on earlier sale of NPAs to ARC. Bad assets
accretion is at all-time high and the outlook continues to remain dim especially given the
rising loan exposure to risky segments. NIM improved sequentially despite higher
slippages, sharp decline in CD ratio and decline in proportion of CASA deposits, and was
aided by higher decline in cost of deposits. Operating performance was further aided by
significantly higher trading gains and lower other expenses, but this is unlikely to remain
a trend. We do not estimate significant pressure on core spreads, partially aided by the
management’s strategy to focus on the same over business growth. However,
improvement in asset quality could take longer time than was earlier estimated, leading
to higher gross slippages and provisioning estimates for FY16E. We maintain REDUCE
rating on the stock due to rising slippages and low RoE at 9.1%/12% in FY15/FY16. Our
target price of Rs266 discounts FY17E P/AdjBV by 0.6x.
Y/E
Mar
EPS
(Rs)
P/E
(x)
P/BV
(x)
Price (29/01/15) (Rs) 241 2014 45.5 3.8 0.4 M.Cap. (Rs bn) 82.3
• Asset quality under scanner again: Total bad assets (gross slippages +
incremental restructuring) spiked to Rs34bn, 10.2% (annualized) of loans, compared
to Rs17bn in Q2FY15. Slippages stood at 3.8% (annualized) of loans, with
restructured loans contributing 54%. Despite higher slippages from the restructuring
book, the outstanding restructured loans came in higher at 9.0%, with incremental
restructuring at 6.2% (annualized) of loans. The asset quality headwinds are unlikely
to abate in near future as – a) improvement in economy is coming with lag, b)
management raising its gross slippage guidance for Q4FY15E to 0.7% of loans, and
c) indicative pipeline for incremental restructuring in Q4FY15E to be at 1.4% of loans.
We therefore raise our gross slippage estimates to 2.7% for FY15E and 1.4% for
FY16E.
• Margins driven by cost control; profit on sale to ARC reversals drive earnings
lower: Despite higher slippages, decline in the CASA proportion to 23.7% and a
sharp decline of 400bps in CD ratio, the NIMs at 2.69% improved by 6bps QoQ,
aided by a 12bps QoQ improvement in core spreads (reported) led by a 15bps
decline in cost of deposits. The NIMs were also impacted by booking of higher
treasury gains, which stood at 0.3% of average investments annualized. The
management’s strategy to focus on maintaining spreads over higher loan growth will
augur well with margins and, we estimate them to improve to 2.5% and 2.6% in
FY16E and FY17E, respectively. OBC has reversed Rs1.37bn of profits booked on
issue of security receipts for sell down of NPAs to ARC, leading to a sharp rise in
provisions to 0.7% of loans. It also has to reverse Rs2.8bn of similar adjustment and
management indicates that it is in consultation with RBI to account for these in
FY16E. We see elevated provisioning for FY15E and FY16E at 1.8% and 1.1% of
total loans, respectively.
Target price Rs266
Earnings revision
(%) FY15E FY16E
Loans ↓ 2.6 ↓ 2.6
Deposits ↑ 1.3 ↑ 1.5
NII ↑ 1.5 ↑ 3.7
PPP ↑ 3.5 ↑ 1.7
PAT ↓15.6 ↓ 7.6
Adj BV ↓10.3 ↓ 8.2

19
• Loan growth muted, with incremental net disbursals to high risk sectors: Loan
growth slipped further to 5.5% YoY, compared to 10.9% YoY for system. Though we
view this slowdown in loans as a positive move especially given the limited Tier I at
8.54%, we are worried on the incremental loan composition. The incremental loans to
relatively higher delinquent Infrastructure and commercial real estate sectors stood
significantly higher at 66% of incremental loans with their respective share at 18%
and 6% of total loans. In case of a slower pick-up in economy, the asset stress could
remain elevated and is a key risk to our estimates.
Income statement
Interest on
- Advances 38,015 36,217 38,055 5.0 -0.1
- Investments 11,375 10,751 11,159 5.8 1.9
- RBI balances and interbank 77 208 143 -63.1 -46.5
- Others 1 56 2 -98.4 -57.1
Total interest income 49,468 47,232 49,359 4.7 0.2
Interest expenses 36,493 34,927 36,896 4.5 -1.1
Net Interest Income 12,975 12,304 12,463 5.4 4.1
Non-interest Income 5,120 3,408 3,927 50.2 30.4
- Fee based income 2,011 1,924 2,385 4.5 -15.7
- Sale of Investment 2,048 324 628 531.8 226.2
Operating income 18,095 15,712 16,389 15.2 10.4
Operating expenses 7,947 7,128 7,841 11.5 1.3
- Employee Exp 4,443 3,937 4,261 12.8 4.3
- Other expenses 3,504 3,191 3,580 9.8 -2.1
Pre-provision profits 10,148 8,584 8,549 18.2 18.7
Provisioning expenses 10,225 5,611 6,412 82.2 59.5
Profit before tax -77 2,973 2,137 -102.6 -103.6
Tax -273 730 -778 -137.3 -65.0
Net Income 196 2,243 2,914 -91.3 -93.3
Balance sheet (Rs bn)
Loans 1,387 1,326 1,382 4.6 0.4
Deposits 1,978 1,825 1,864 8.4 6.1
bps bps
- CASA ratio 23.7 24.2 24.9 -0.54 -1.21
Distribution network
Branches 2,200 2,089 2,161 5.3 1.8
ATMs 2,461 1,829 2,449 34.6 0.5
Ratios bps bps
Cost/income ratio (%) 43.92 45.37 47.84 -1.45 -3.92
NIM (%) 2.69 2.69 2.63 0.00 0.06
RoAA (%) 0.04 0.44 0.55 -0.40 -0.51
Tier I (%) 8.54 8.57 8.81 -0.03 -0.27
CAR (%) 11.26 11.00 10.88 0.26 0.38
Asset quality (Rsmm)
Gross NPA 76,692 51,841 66,438 47.9 15.4
Net NPA 50,804 38,335 45,202 32.5 12.4
bps bps
Gross NPA (%) 5.43 3.87 4.74 1.56 0.69
Net NPA (%) 3.68 2.91 3.29 0.77 0.39
Coverage (%) 33.76 26.05 31.96 7.70 1.79
Details In our report ‘On a slippery wicket’ dated January 29, 2015.

20
Gujarat State Fertliser (Upgrade to Add) FERTILISER
Q3FY15 RESULT REVIEW AND RECOMMENDATION CHANGE
Improving fundamental, correction warrants upgrade Rs101
Prakash Gaurav Goel (+91 22 6637 7373) prakash.goel@icicisecurities.com
Hardik Shah (+91 22 6637 7419) shah.hardik@icicisecurities.com
We upgrade Gujarat State Fertilizers (GSFC) to ADD rating and revise the target price up
to Rs113/share (earlier Rs107/share) valuing the core business at 7x FY17E EPS (from
average FY16E-17E EPS earlier) and 50% discount to investment book mainly due to:
• Possible improvement in Caprolactum segment margin, going forward, with steep fall
in Benzene prices. While, we believe Caprolactum prices should also fall with overall
commodity slowdown, the margin spread will improve from the current level
• Increased P&K capacity and improving macros for NPK business due to improving
fiscal health of the government on account of sharp fall in crude prices and decline in
system NPK inventory
• Recent correction in the stock price (around 17% in one week) and the stock
underperforming the broader markets
Y/E
Mar
EPS
(Rs)
P/E
(x)
EV/E
(x)
Price (29/01/15) (Rs) 101 2014 8.0 12.6 10.1 M.Cap. (Rs bn) 40.3
52 wk Range (Rs) 124/44 2015E 12.5 8.1 7.7 M.Cap (US$ mn) 653
Q3FY15 result review
• PAT came in at Rs1.04bn (up 2.2% YoY), lower than our estimate of ~Rs1.2bn,
mainly due to lower EBIT margins for Caprolactum segment at 8.4% (vs. I-Sec
estimate: 14%). Fertilizer segment reported EBIT margins of 12.4% mainly due to
accounting of subsidy receipt worth Rs472mn, which pertains to escalation in input
cost of urea in earlier period. Adjusting for the same, fertilizer segment's EBIT
margins came lower at 7.2% (vs. I-Sec estimate: 12.5%).
Key highlights
• GSFC has taken a price hike of around 11.5% for non-urea fertilizers on account of
increase in gas price from November 2014. Impact on account of gas price increase
on urea production was about Rs170mn for November-December 2014 (i.e. ~Rs1bn
annually) which will be pass-through but will be accounted once notfied.
• After the limit on Neem coated urea production was lifted, GSFC is entirely producing
Neem coated urea and upped urea price by Rs268/te (contributed Rs41.7mn during
Q3FY15).
• Caprolactam-Benzene spread during the quarter was USD984/te (vs. USD920/te
in Q2FY15), which has now improved to US$1100/te.
• Caprolactam and Melamine plant was shut down for one month during Q3FY15, but
is back to normal now.
• Total receivables as of Q3FY15 end stands at Rs17.1bn (vs. Rs17.7bn at Q3FY14-
end) of which subsidy outstanding accounts for Rs13bn
Target price Rs113
Earnings revision
Sales ↓ 15.0 ↓ 9.1 ↓ 9.5
EBITDA ↓ 7.7 ↓ 1.1 ↓ 2.3
Adj. PAT ↓ 0.9 ↑ 1.7 ↑ 0.4
Rs113 from Rs107

21
Table 2: Q3FY15 result review (stand-alone)
Q3FY15 Q3FY14 YoY (%) Q2FY15 QoQ (%)
Net Sales 13,094 14,584 (10.2) 14,816 (11.6)
Consumption of Raw materials 9,211 10,334 (10.9) 10,849 (15.1)
Employees Cost 933 989 (5.6) 910 2.5
Other Expenditure 1,538 1,887 (18.5) 1,424 8.0
Total Operating Expenditure 11,683 13,210 (11.6) 13,183 (11.4)
EBITDA 1,411 1,374 2.7 1,633 (13.6)
Depreciation 257 378 (32.0) 249 3.3
EBIT 1,155 996 15.9 1,384 (16.6)
Interest (43) (141) (69.4) (39) 11.1
Other Income 353 523 (32.6) 390 (9.7)
PBT 1,464 1,378 6.2 1,736 (15.6)
Tax expenses incl. Def. Taxes (429) (366) 17.2 (493) (12.8)
Reported PAT 1,035 1,012 2.2 1,243 (16.8)
Adj. PAT 1,035 1,012 2.2 1,243 (16.8)
EPS (Rs/sh) 2.6 2.5 2.2 3.1 (16.8)
Details In our report ‘Improving fundamental, correction warrants upgrade’ dated
January 29, 2015.

22
Results date reckoner
January 2015
Sun Mon Tue Wed Thu Fri Sat
1 2 3
4 5 6 7 8 9
Infosys
Bajaj Corp
10
11 12
CMC
13
IndusInd Bank
14
LIC Housing, Yes
Bank, NIIT Tech
15
Bajaj Auto,
Cyient, TCS,
DB Corp
16
Axis Bank, Wipro,
DHFL, Reliance,
NIIT, Oberio
Realty
17
M&M Financials
18 19
GRUH Finance,
MindTree.Info
Edge, HUL,
Hindustan Zinc
20
Kotak Bank,
HMVL
21
TTK Prestige
Zee Enter, ITC
22
AgroTech Foods,
MHRIL, Cairn,
Dish, VST Ind,
Orient Cement,
Muthoot, Prestige
Estate
23
Colgate,
Coromandel Fert,
UltraTech
24
Shriram Transport
Fin, Persistent
25 26 27
GSFC, Maruti,
Idea, UBI
28
Ranbaxy, Torrent
Pharma, Emami,
Just Dial, Pidilite,
Havells, Adani
Power
29
Asian Paints,
HDFC, DRL,
IDFC, Ashok
Leyland, Sesa
Sterlite, SCUF,
Dalmia Bharat,
Karur Vysya,
OBC, Jagran
30
Berger Paints,
Kansai, Eclerx,
TechM, Dabur,
JSW Steel, HCL
Tech, Sun TV,
Hexaware, BoB,
Ashoka Buildcon,
Thermax, NTPC,
Thomas Cook
31
Garsim
February 2015
Sun Mon Tue Wed Thu Fri Sat
1 2
Cummins India,
Redington, Bharat
Forge
3
Hero MotoCorp,
TV Motors, ACC,
PFC, GSK
Consumer , Shree
Cement, Lupin,
PNB, Bharti
Infratel, Crompton
Greaves,
Texmaco Rail,
Marico
4
Tata Power,
Bharti, Canara
Bank, JK Lakshmi
Cement
5
GCPL, Ramco
Cement, JSW
Energy, PTC,
Jubilant Food,
IRB
6
Tata Steel, Tata
Chem, Chambal
Fert, TV Today,
GMDC, NMDC,
GAIL
7
JK Cement
8 9
L&T
10
Cadila , NALCO,
ENIL
11
PFC, BPCL,
Voltas
12
ONGC, Hindalco ,
Bajaj Electricals,
Page Ind, CESC
13
M&M, Mphasis,
Nestle, HPCL
14
15 16 17 18
Ambuja Cement
19 20 21

23
Recent reports/updates
Analyst Company/Sector Date
Santanu / Yash Shriram City Union Finance: Growth returns in parts Jan 29
Shashin / Parul Oriental Bank of Commerce: On a slippery wicket Jan 29
Kartik / Gagan Dr Reddy's Lab: EBITDA margin outlook impacted by Russia sales Jan 29
Santanu / Yash IDFC: Preparations on in earnest Jan 29
Kartik / Gagan Torrent Pharma: Strong outlook for India business Jan 29
Abhijit / Ansuman Sesa Sterlite: Aluminium production ramp up holds key Jan 29
Prakash/Hardik GSFC: Improving fundamental, correction warrants upgrade Jan 29
Santanu / Yash HDFC: Exactly as expected Jan 29
Nimit / Jeetendra Pidilite: Results below estimates, RM benefit still to show up Jan 29
Vikash / Jayant Havells India: Weak domestic sales, one-offs at Sylvania mar results Jan 29
Prakash/Hardik/Vivek Adani Power: Losses continue despite operational improvement Jan 29
Abhijit / Ansuman Sesa Sterlite: Factoring in coal auctions and softer commodities Jan 29
Prakash / Hardik Coromandel Intl: Stock underperformance factors concerns Jan 29
Anand / Sreekanth PVS Agro Tech Foods: Portfolio transformation on course Jan 27
Shashin / Parul Union Bank of India: Asset quality pain persists Jan 27
Kuldeep / Bhrugesh Persistent Systems: Growth at an unreasonable price Jan 27
Anand / Sreekanth PVS Colgate Palmolive India: Strong operating performance Jan 23
Krupal / Jayant UltraTech Cements: Muted quarter, but outlook remains strong Jan 23
Santanu / Yash Shriram Transport Finance: Managing stress well, recovery priced in Jan 23
Sandeep Mathew Prestige Estates Projects: Subdued operational quarter Jan 23
Nimit / Jeetendra Mahindra Holidays & Resorts: Member addition crucial Jan 23
Anand / Sreekanth PVS VST Industries: Volumes decline YoY, but remain flat sequentially Jan 23
Rohit / Vipul Cairn India: Favourable risk-reward Jan 22
Vikash / Jayant Dish TV: ARPU rises, margins expand, additions strong Jan 22
Krupal / Jayant Orient Cement: On strong footing Jan 22
Santanu / Yash Muthoot Finance: Operating leverage dream fading fast Jan 22
Anand / Sreekanth PVS ITC: Unprecedented decline in cigarette volumes Jan 21
Vikash / Jayant TTK Prestige: Consumer sentiment remains weak Jan 21
Vikash / Jayant ZEEL: Inline quarter, rich valuations warrant SELL Jan 21
Shashin / Parul Kotak Mahindra Bank: Fundamentals Intact, tripping on valuations Jan 20
Kuldeep / Bhrugesh Info Edge: 99acres double whammy depresses earnings Jan 20
Kuldeep / Bhrugesh Mindtree: Will an inline print be good enough? Jan 20
Sandeep Mathew Oberoi Realty: Getting back on track Jan 20
Abhijit / Ansuman Hindustan Zinc: Favourable LME prices, volumes aid earnings Jan 19
Anand / Sreekanth PVS Hindustan Unilever: Low volume growth - oral care performance hurts Jan 19
Santanu / Yash MMFS: No end in sight for cyclical pain Jan 18
Santanu / Yash Dewan Housing Finance: Growth remains robust Jan 18
Shashin / Parul Axis Bank: Asset quality show Jan 17
Kuldeep / Bhrugesh Wipro: Good all round execution Jan 16
Rohit / Vipul Reliance Industries: Cyclicals to drive earnings Jan 16
Sanket Maheshwari Bajaj Auto: Some bumps, but motoring along Jan 16
Kuldeep / Bhrugesh TCS: Positive outlook overweighs modest Q3 Jan 16
Kuldeep / Bhrugesh Cyient: Borrowed upside Jan 16
Vikash / Jayant DB Corp: Good cost control, ad revival hopes ahead Jan 15
Nimit Shah Ashoka Buildcon: Poised to benefit from NHAI projects Jan 15
Anand / Sreekanth PVS FMCG quarterly results preview Jan 15
Kuldeep / Bhrugesh NIIT Technologies: Moving in the right direction Jan 15
Santanu / Yash LIC Housing Finance: The loan yield conundrum Jan 14
Shashin / Parul Yes Bank: Growth momentum intact Jan 14
Shashin / Parul IndusInd Bank: In-line performance Jan 14
Sandeep Mathew Real Estate quarterly results preview Jan 14
Prakash/Hardik/Vivek Power quarterly results preview Jan 13
Abhijit / Ansuman Metals: Mining ordinance: Minimising uncertainty at a cost Jan 13
Santanu / Yash Financials (non-banks) quarterly results preview Jan 13
Nimit / Jeetendra Bajaj Corp: Strong volume revival ahead Jan 12
Vivek / Prakash Capital Goods quarterly results preview Jan 12
Sanket Maheshwari Auto quarterly results preview Jan 11
Kuldeep / Bhrugesh Infosys: Better than feared Jan 9
Santanu / Yash LIC Housing Finance: No more a low hanging fruit Jan 8
Rohit / Vipul Oil&Gas quarterly results preview Jan 8
Ravi Sundar / Vinod / Pankaj/
I-Sec equity research
Strategy: 2015 - Year of transforming hope to reality
Jan 7
Abhijit / Ansuman Metals quarterly results preview Jan 7
Vikash / Jayant Media quarterly results preview Jan 6

24
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New I-Sec investment ratings (all ratings based on absolute return)
BUY: >15% return; ADD: 5% to 15% return; HOLD: Negative 5% to Positive 5% return; REDUCE: Negative 5% to Negative 15% return; SELL: < negative 15% return
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CA; Gagan Borana, PGDM; Nimit Shah, CA; Jeetendra Khatri, BMS; Abhijit Mitra, MBA (Finance), BE, Ansuman Deb, MBA, BE; Shashin Upadhyay, MBA; Parul
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