The document provides an analysis of various stocks and their performance in the Indian equity market as of December 2013. It highlights recommendations such as 'buy' for Tech Mahindra and CMC, while advising to 'book profit' for Persistent Systems due to premium valuations. Key insights include earnings growth prospects, client metrics, and management forecasts for companies like Divi's Laboratories and Godrej Consumer Products.

1. IEA-Equity
Strategy
India Equity Analytics
Persistent System : "Persistently innovating.."
23th Dec, 2013
"REDUCED" 23rd Dec 2013
We had initiated this stock at a CMP of Rs 526(on 16th Feb 2013) and now, it achieved its target of Rs 960. Despite better predictability of
growth and attractive visibility of its expansion in new emerging verticals, we advice to book profit on the stock because of its premium
valuation. However, sentiment could take a knock in the short run, since investors may prefer paying a premium for stocks with better earnings
visibility. Our view could be change with management guidance and post earnings of coming quarter................................................... ( Page : 23)
Tech Mahindra : "On a stronger footing.."
"BUY"
23rd Dec 2013
Post merger with Satyam, strong demand traction in Telecom (Non BT) has improved and company's attractive deal win ratios make us
optimistic view on the stock. At a CMP of Rs 1691, relatively the stock is trading at a fair valuation, 12.8x of FY14E earnings (at USD of
Rs60/59.5 for FY14E/FY15E). We maintain “BUY” on the stock with a price target of Rs 2330 (revised from Rs 1875)..................... ( Page : 4-5)
CMC : "On track to deliver"
"BUY"
20th Dec 2013
Considering recent healthy demand environment across the IT space with favorable supply side scenario, we remain confident on the stock for
better earning visibility and stable margin picture. Still, we reiterate our positive stance on the long-term story of CMC due to its focus on high
margin SI and ITES businesses.At a CMP of Rs 1510, stock trades at 14.9X FY14E earnings. We have "BUY" view on the stock and we revise our
target price from Rs1490 to Rs1690.............................. (Page : 6-7)
DIVISLAB : Good Growth Ahead
"BUY"
19th Dec 2013
The company posted strong 2QFY4 results with net sales growing to Rs 566 Cr up by 19.7% YoY on the back of good growth coming from all
business segments. The generic API grew by 18% YoY to Rs 261 Cr for the quarter and CRAMS business segment grew by 20% YoY to Rs 271
Cr............................................. ( Page : 8-10)
AXIS BANK :
"Neutral"
19th Dec 2013
Axis bank is trading at 1.6 times of one year forward book which is almost upper side of bear case valuation band. We are not seeing bank’s
earnings better than expectation as bank’s has significant exposure in riskier sector like infrastructure and power as compare to its peers. We
have taken bank’s valuation multiple in bear case scenario on account of non visibility of ROE improvement and expected muted earnings
growth. We assume loan and deposits growth of 16% and 15% along with margin at 3.5%. Better than expected performance will lead price
performance and valuation multiple............................... ( Page : 11-14)
Godrej Consumer Product : " Strategy Shining"
"BUY"
19th Dec 2013
Its strong 20%+ growth in the domestic household insecticides business is the key growth driver. We expect strong momentum to continue in
its international business led by Megasari and consolidation of Darling business. Despite some concerns related to higher leverage, lost
domestic focus and currency risk, we remain confident of achieving the 20%+ sales growth with strong PAT growth for FY14E & beyond.
........................................... ( Page : 15-16)
BANK OF INDIA :
"BUY"
18th Dec 2013
Bank of India is trading at 0.5 times of one year forward book which is the lowest in valuation band despite of performing better than
expectation largely due to lower CAR and slower economic growth. With the capital infusion to the tune of Rs.1000 cr and improving sign of
asset quality would re-rate the stock as it did previously in our view. The management guided fresh slippage in line with 2QFY and inch up
higher restructure asset for December quarter. We believe that current level is attractive entry point for the investor with time horizon more
than one year with price target of Rs.235.................................... ( Page : 17- 19)
Narnolia Securities Ltd,
402, 4th floor 7/1, Lords Sinha Road Kolkata 700071, Ph 033-32011233 Toll Free no : 1-800-345-4000
email: research@narnolia.com, website : www.narnolia.com

2. Persistent System.
"Book Profit"
23rd Dec' 13
"Persistently innovating.."
Company update
CMP
Target Price
Previous Target Price
Upside
Change from Previous
Market Data
BSE Code
NSE Symbol
52wk Range H/L
Mkt Capital (Rs Crores)
Average Daily Volume
Nifty
Book Profit
1007
960
890
-
533179
PERSISTENT
1023/477
4029
12139
6274
Stock Performance
Absolute
Rel. to Nifty
1M
24.1
23
1yr
105.2
99.4
YTD
91.2
84.6
Share Holding Pattern-%
Current
Promoters
FII
DII
Others
38.96
15.28
21.23
24.53
1 year forward P/E-x
1QFY14 4QFY13
38.96
14.84
19.31
26.89
38.96
12.39
21.59
27.06
th
We had initiated this stock at a CMP of Rs 526(on 16 Feb 2013) and now, it achieved
its target of Rs 960. Despite better predictability of growth and attractive visibility of
its expansion in new emerging verticals, we advice to book profit on the stock because
of its premium valuation. However, sentiment could take a knock in the short run,
since investors may prefer paying a premium for stocks with better earnings visibility.
Persistent Sytem’s management remains confident of FY14 with deal pipeline being
strong and remains focused on increasing the share of IP-led revenues in its portfolio.
They expect to see more than 15% USD revenue growth for FY14E.
With the potential revenue growth, strong deal pipeline and multi-year relationships
with marquee clientele in the Infrastructure vertical, we expect for better earning
visibility across niche IT players.
Recently , Persistent System reported superlative set of numbers during the 2QFY14
with 21%(QoQ) sales growth in INR term and 8.6%(QoQ) growth in USD term led by
38%(QOQ) growth on the intellectual property (IP) revenues. PAT growth was at 6.5%
(QoQ).
Margin ramp up: During the quarter, Its EBITDA margin improved by 180bps to 23.3%,
positively impacted by currency gain(270bps), while during the quarter company wage
hike to its off shore employee at a range of 8-9% was impacted margin by 310 bps
adversely. However, management expects to maintain margin at a range of 24-25% for
FY14E.
Clients Metrics: During the quarter, company added 2 clients at 32 under medium
category( >$1mn to $3mn) and 1 client at 16 from large ( > $ 3Mn) . Revenue from top-1
client was improved from 21.2% (1QFY14) to 22.5% . DSO at 62days, almost 12
quarters low.
Persistent's management suggests that deal pipeline are looking strong and seeing
good activity and traction in the market across the board. Its focus on some of newer
technologies like cloud, analytics and mobility are gaining a lot of traction because of
pickup in demand environment. The emerging themes, (CAMB) Cloud, Analytics,
Mobility, and Big data could also see strong demand traction ahead. Because of
actively investment in these themes, management is very confident to see healthy
growth and also they expressed their confidence to beat the NASSCOM guidance (1214% revenue growth for FY14E).
View and Valuation: The company’s focus is shifting greater proportion to IP led services
and company has marquee clientele in cutting-edge technologies around cloud,
mobility, collaboration and analytics; witnessing faster growth. Considering the
company’s premium valuation, we advice “Book Profit” on the stock. At a CMP of Rs
1007, stock trades at 15.9x FY14E earnings. Our view could be change with
management guidance and post earnings of coming quarter.
Financials
Rs, Crore
2QFY14
1QFY14
(QoQ)-%
2QFY13
(YoY)-%
Revenue
432.37
357.29
21.0
326.86
32.3
EBITDA
100.8
76.8
31.3
89.06
13.2
PAT
60.8
57.1
6.5
44.71
36.0
EBITDA Margin
23.3%
21.5%
180bps
27.2%
(390bps)
PAT Margin
14.1%
16.0%
(190bps)
13.7%
40bps
(Source: Company/Eastwind)
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
2

3. Persistent System.
Financials
Rs, in Cr.
Sales
Employee Cost
Cost of technical professionals
Other expenses
Total expenses
EBITDA
Depreciation
Other Income
EBIT
Interest Cost
Profit (+)/Loss (-) Before Taxes
Provision for Taxes
Net Profit (+)/Loss (-)
Growth-% (YoY)
Sales
EBITDA
PAT
Expenses on Sales-%
Employee Cost
Other expenses
Tax rate
Margin-%
EBITDA
EBIT
PAT
Valuation:
CMP
No of Share
NW
EPS
BVPS
RoE-%
P/BV
P/E
FY10
601.16
368.74
0
86.05
454.79
146.37
33.52
11.23
112.85
0
124.08
9.05
115.03
FY11
775.84
481.62
30.67
105.24
617.53
158.31
42.39
34.44
115.92
0
150.36
10.62
139.74
FY12
1000.3
599.05
41.68
135.2
775.93
224.37
61.1
34.44
163.27
0.00
197.71
55.09
142.62
FY13
1294.5
719
54
218
990.78
303.72
78
34.44
225.44
0.03
259.851
75.37
184.481
FY14E
1657.54
895.07
82.88
290.07
1268.02
389.52
93.54
66.30
295.98
0.00
362.29
108.69
253.60
FY15E
2053.93
1119.39
102.70
379.98
1602.06
451.86
84.18
71.89
367.68
0.00
439.57
131.87
307.70
1.2%
60.2%
74.1%
29.1%
8.2%
21.5%
28.9%
41.7%
2.1%
29.4%
35.4%
29.4%
28.0%
28.3%
37.5%
23.9%
16.0%
21.3%
61.3%
14.3%
7.3%
62.1%
13.6%
7.1%
59.9%
13.5%
27.9%
55.5%
16.9%
29.0%
54.0%
17.5%
30.0%
54.5%
18.5%
30.0%
24.3%
18.8%
19.1%
20.4%
14.9%
18.0%
22.4%
16.3%
14.3%
23.5%
17.4%
14.3%
23.5%
17.9%
15.3%
22.0%
17.9%
15.0%
310
4
639.0
28.8
159.7
18.0%
1.9
10.8
366.7
4
747.1
34.9
186.8
18.7%
2.0
10.5
409.2
4
840.5
35.7
210.1
17.0%
1.9
11.5
541
4
1018.3
46.1
254.6
18.1%
2.1
11.7
1007
4.00
1234.4
63.4
308.6
20.5%
3.3
15.9
1007
4.00
1504.7
76.9
376.2
20.4%
2.7
13.1
(Source: Company/Eastwind)
Rating and Price Target Chart
Updation Detail
Date
16-Feb-13
25-Jun-13
7-May-13
31-Jul-13
18-Sep-13
26-Sep-13
9-Oct-13
22-Oct-13
13-Dec-13
23-Dec-13
Update Detail
Initiation
Company Update
Result Update
Result Update
Company Update
Company Update
Company Update
Result Update
Company Update
Company Update
CMP
526
499
514
522
573
623
682
739
876
1007
View Target Price
BUY
580
BUY
580
BUY
580
BUY
580
BUY
642
BUY
834
BUY
834
BUY
890
BUY
960
Book Profit
(Source: Company/Eastwind)
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
3

4. Tech Mahindra
"BUY"
23rd Dec' 13
"On a stronger footing.."
Company update
CMP
Target Price
Previous Target Price
Upside
Change from Previous
Market Data
BSE Code
NSE Symbol
52wk Range H/L
Mkt Capital (Rs Crores)
Average Daily Volume
Nifty
BUY
1844
2330
1875
26%
24%
532755
TECHM
1872/895
42991
191827
6274
Stock Performance
Absolute
Rel. to Nifty
1M
9.3
6.8
1yr
99
93
YTD
39.2
32.7
Share Holding Pattern-%
Current
1QFY14 4QFY13
Promoters
36.46
47.17 47.41
FII
32.59
26.79 27.34
DII
15.13
15.83
16
Others
15.82
10.21
9.25
1 year forward P/E-x
Broad-based performance with positive outlook, positive view retained;
The company remains confident on demand and expects client budgets to remain at
the same levels in FY15E. It announced 2 large deals in the enterprise solutions
(previously Mahindra Satyam) and has a healthy deal pipeline.
Recently, following the footsteps of other larger giants such as TCS and Infy, Tech
Mahindra revealed its earning story better than street expectations for 2QFY14. Sales
grew by 16.3% (QoQ) in INR term led by healthy growth across all segments, verticals
and geographies. In USD term, sales grew 4.7% (QoQ) better than all nearest peers
barring TCS. PAT was up by 4.7% (QoQ) adversely impacted by lower other income and
forex loss of Rs 26 Cr during the quarter. The company had forex gains of Rs 134 Cr in
the June quarter.
Green flag on Margin front: EBITDA margin expanded 222 basis points sequentially to
23.3% aided by a weaker rupee. Despite sweet flavor on margin front, management is
still cautious for coming quarter due to Furloughs .
Win- Win on all geographies: During the 2QFY14, winning trio was seen across
geographies. US (contributes 33% on sales) grew by 8%, RoW (23% on sales) by 9.4%
(QoQ). While Europe (contributes 44% on sales) was marginally up by 2.4%(QoQ) in USD
term. Post earning management quoted for better outlook in Europe with greater
traction in Australia and Africa in near term.
All-rounder across all verticals: During the quarter, company reported 2.5% growth in
Telecom, 4.7% growth in manufacturing, media including entertainment, BFSI and
others each in USD term. While Retail, Transport and Logistic snapped a larger growth
figure of 22% sequentially. The company is focusing on BFSI, manufacturing and
telecom.
BT on Slide: The management said revenues from British Telecom (BT) continued to
slide. Those were 12% of consolidated revenues in the June quarter. It believes revenues
from BT will be under pressure.
View and Valuation: Recently, company’s management explained its 6-pillar strategy
i.e., selling 6 service lines of IT, infr- management, network management, security
services, value added services and services such as analytics to telcos. Currently, non-IT
services contribute 33% of telecom revenues for the company. Further, it is focusing on
segments that are growing faster such as platforms, enterprise, mobility and NMACS
(networks, mobility, analytics, cloud and security).
Post merger with Satyam, strong demand traction in Telecom (Non BT) has improved
and company's attractive deal win ratios make us optimistic view on the stock. At a
CMP of Rs 1691, relatively the stock is trading at a fair valuation, 12.8x of FY14E
earnings (at USD of Rs60/59.5 for FY14E/FY15E). We maintain “BUY” on the stock with
a price target of Rs 2330 (revised from Rs 1875).
Financials
Rs, Crore
2QFY14
1QFY14
(QoQ)-%
2QFY13
(YoY)-%
Revenue
4771.5
4103.2
16.3
3523.7
35.4
EBITDA
1110.85
864.5
28.5
756.9
46.8
PAT
718.2
686.3
4.6
455.9
57.5
EBITDA Margin
23.3%
21.1%
220bps
21.5%
150bps
PAT Margin
15.1%
16.7%
(160bps)
12.9%
220bps
(Source: Company/Eastwind)
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
4

5. Tech Mahindra.
Operating Metrics
Client contribution to revenue-%
Customer Active
Top 10 clients
Top 5 clients
Top client
Revenue mix - onsite/offshore (%)
Onsite
Offshore
Employee Metrics
Utilisation %
Attrition %
1QFY13
484.00
50.0%
40.0%
17.0%
2QFY13
475.00
51.0%
41.0%
14.0%
3QFY13
475.00
50.0%
39.0%
15.0%
4QFY13
516.00
50.0%
37.0%
13.0%
1QFY14
567.00
49.0%
37.0%
12.0%
2QFY14
576.00
48.0%
36.0%
12.0%
48.0%
52.0%
48.0%
52.0%
48.0%
52.0%
48.0%
52.0%
51.0%
49.0%
51.0%
49.0%
75.0%
17.0%
74.0%
16.0%
76.0%
16.0%
77.0%
16.0%
76.0%
15.0%
75.0%
16.0%
Financials
Rs, Cr
Net Sales(mn)-USD
Net Sales
Employee Cost
Operation and other expenses
Subcontracting Cost
Total Expenses
EBITDA
Depreciation
Other Income
Extra Ordinery Items
EBIT
Interest Cost
PBT
Tax
PAT
Growth-%
Sales-USD
Sales
EBITDA
PAT
Margin -%
EBITDA
EBIT
PAT
Expenses on Sales-%
Employee Cost
Subcontracting Cost
Operation and other expenses
Tax rate
Valuation
CMP
No of Share
NW
EPS
BVPS
RoE-%
Dividen Payout-%
P/BV
P/E
FY12
1157
11702.4
6591.9
2210.1
948.6
9750.6
1951.8
319.0
501.3
36.9
1632.80
107.3
2063.7
228.9
1834.8
FY13
2633
14332.0
8099.5
2287.3
882.0
11268.8
3063.2
389.6
212.2
-160.1
2673.60
92.1
2633.6
647.9
1985.7
FY14E
3124.01
18744.06
10309.24
3373.93
1405.80
13683.17
5060.90
509.54
281.16
-209.39
4551.36
98.04
4525.09
1176.5
3348.6
FY15E
3592.61
21376.04
11756.82
3847.69
1603.20
15604.51
5771.53
581.08
213.76
-238.79
5190.45
91.37
5074.05
1319.3
3754.8
FY16E
4023.73
24343.54
13388.95
4381.84
1947.48
17770.79
6572.76
661.75
243.44
-121.72
5911.00
86.93
5945.79
1545.9
4399.9
2.7%
13.8%
11.9%
11.9%
127.6%
22.5%
56.9%
8.2%
18.6%
30.8%
65.2%
68.6%
15.0%
14.0%
14.0%
12.1%
12.0%
13.9%
13.9%
17.2%
16.7%
14.0%
15.7%
21.4%
18.7%
13.9%
27.0%
24.3%
17.9%
27.0%
24.3%
17.6%
27.0%
24.3%
18.1%
56.3%
8.1%
18.9%
11.1%
56.5%
6.2%
16.0%
24.6%
55.0%
7.5%
18.0%
26.0%
55.0%
7.5%
18.0%
26.0%
55.0%
8.0%
18.0%
26.0%
652.5
23.2
4815.8
79.0
207.3
38.1%
3.2%
3.1
8.3
1081.7
23.2
5529.1
85.5
238.0
35.9%
3.0%
4.5
12.7
1844
23.2
8741.77
144.1
376.31
38.3%
4.1%
4.9
12.79
1844
23.2
12360.68
161.6
532.10
30.4%
3.6%
3.5
11.41
1844
23.2
16624.68
189.4
715.66
26.5%
3.1%
2.6
9.74
(Source: Company/Eastwind)
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
5

6. CMC
"BUY"
20th Dec' 13
"On track to deliver"
Company update
Buy
CMP
Target Price
Previous Target Price
Upside
Change from Previous
1510
1690
1490
12%
13.4%
We believe, CMC will continue with its efforts to enhance revenue contribution of high
margin System Integration and ITES segments. Further, its high focus on education
space will also add margin in near term.
Considering recent healthy demand environment across the IT space with favorable
supply side scenario, we remain confident on the stock for better earning visibility and
stable margin picture. Still, we reiterate our positive stance on the long-term story of
CMC due to its focus on high margin SI and ITES businesses.
Market Data
BSE Code
NSE Symbol
52wk Range H/L
Mkt Capital (Rs Crores)
Average Daily Volume
Nifty
517326
CMC
1560/1107
4575
20884
6167
Stock Performance
1M
15.0
15.4
Absolute
Rel. to Nifty
1yr
29.2
24.6
YTD
54.5
37.1
Share Holding Pattern-%
Promoters
FII
DII
Others
Current
51.12
23.32
17.83
7.73
1 year forward P/E
4QFY13 3QFY13
51.12
51.12
19.87
21.84
20.46
19.05
8.55
7.99
For 2QFY14E earnings, CMC witnessed better Sales and PAT growth with 15% sales
growth driven by the strong growth from the System Integration (29%) coupled with the
good growth from the System Integration (24%) and ITES business (16%) sequentially.
PAT grew by 27%(QoQ) because lower effective tax rate (from 34%, 1QFY14) to 20% of
earning before tax) .
Steady Margin: During the quarter, EBITDA margin was almost unchanged at 15.8% due
to wage hikes (70 bps), but also has positive impact from currency gain (170 bps) which
were reinvested into the business. However, Management is still confident to maintain
the margin in a range of 15-16%.
Deal pipeline: The deal pipeline is in line with the last year. It indicated that pursuing
good number of deals in the Developed and as well emerging markets. Considering
current sound demand environment across geographies (like US and Europe) and
verticals Company is more optimistic for clients acquisition and deal executions ahead.
Now, CMC is focusing on new emerging segments like IMS (Infrastructure
Management Services), Cloud, Big data, Mobility and Analytics. Considering its
impressive client as well as market response, company is expecting to quantify into
revenue. Its new and emerging projects like Mining Management System, GPS System
and Port & Cargo Management System would play a major role for generating
revenue.
View and Valuation: CMC expects the growth momentum to improve in the quarters
ahead and the revenue growth to be higher than the NASSCOM guidance in FY14. The
Company remains a strong with excellent earning visibility led by joint effort of market
strategy by TCS (contributes 59% of sales) in its product and solutions. For a long-term
prospect, we remain positive on the stock, taking its earning visibility and healthy
earnings among the mid-cap IT space (over 25% CAGR in earnings over FY2013-15E). At
a CMP of Rs 1510, stock trades at 14.9X FY14E earnings. We have "BUY" view on the
stock and we revise our target price from Rs1490 to Rs1690.
Financials
Revenue
EBITDA
PAT
EBITDA Margin
PAT Margin
2QFY14
560.75
88.41
67.3
15.8%
12.0%
1QFY14
486.61
77.04
53.12
15.8%
10.9%
(QoQ)-%
15.2
14.8
26.7
110bps
2QFY13
458.64
76.59
49.4
16.7%
10.8%
Rs, Crore
(YoY)-%
22.3
15.4
36.2
(90bps)
(120bps)
(Source: Company/Eastwind)
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
6

7. CMC
Key facts from recent Concall
►CMC continues to target growth ahead of the overall IT industry; the company expects
to grow faster than that in the current financial year
►Expects operating Profit margin between 15 percent and 16 percent for FY14E,
►The Capex expected to be Rs 190 crore (planned is around Rs 230 crore) for FY'14.The
capex will be financed by internal accruals.
►Company’s hiring Plan; a net addition of 400-500 this year
► Notably, it targets revenues of Rs 250-300 crore from Education and Training business
in next two 3-4 years timeline.
Financials;
Rs, Cr
Net Sales
Purchases of stock-in-trade
Employee Cost
Subcontracting and outsourcing cost
Other expenses
Total Expenses
EBITDA
Depreciation
Other Income
EBIT
Interest Cost
PBT
Tax
PAT
Growth-%
Sales
EBITDA
PAT
Margin -%
EBITDA
EBIT
PAT
Expenses on Sales-%
Employee Cost
Subcontracting Cost
Tax rate
Valuation
CMP
No of Share
NW
EPS
BVPS
RoE-%
Dividen Payout ratio
P/BV
P/E
FY10
870.73
99.35
276.16
173.56
159.94
709.01
161.72
9.85
18.75
151.87
3.17
167.45
24.23
143.22
FY11
1084.40
99.28
345.13
262.35
170.17
876.93
207.47
10.46
11.80
197.01
0.22
208.59
32.42
176.17
FY12
1469.34
145.40
440.22
446.11
213.63
1245.36
223.98
21.37
17.46
202.61
0.02
220.05
68.59
151.46
FY13
1927.87
188.56
521.65
679.73
222.88
1612.82
315.05
23.20
13.17
291.85
0.18
304.84
76.76
228.08
FY14E
2239.31
201.54
593.42
794.96
235.13
1825.04
414.27
41.95
22.39
372.33
0.2
394.52
86.79
307.73
FY15E
2600.41
234.04
702.11
923.15
273.04
2132.34
468.07
60.69
26.00
407.38
0.25
433.14
99.62
333.52
-7.4%
27.7%
23.3%
24.5%
28.3%
23.0%
35.5%
8.0%
-14.0%
31.2%
40.7%
50.6%
16.2%
31.5%
34.9%
16.1%
13.0%
8.4%
18.6%
17.4%
16.4%
19.1%
18.2%
16.2%
15.2%
13.8%
10.3%
16.3%
15.1%
11.8%
18.5%
16.6%
13.7%
18.0%
15.7%
12.8%
31.7%
19.9%
14.5%
31.8%
24.2%
15.5%
30.0%
30.4%
31.2%
27.1%
35.3%
25.2%
26.5%
35.5%
22.0%
27.0%
35.5%
23.0%
1340.0
1.50
510.68
95.48
340.45
28.0%
18.6%
3.94
14.03
2079.6
1.50
654.02
117.45
436.01
26.9%
19.9%
4.77
17.71
994.8
3.00
772.19
50.49
257.40
19.6%
23.2%
3.86
19.70
1410.0
3.03
946.26
75.27
312.30
24.1%
19.4%
4.51
18.73
1510
3.03
1192.11
101.56
393.44
25.8%
20.1%
3.84
14.87
1510
3.03
1454.91
110.07
480.17
22.9%
21.2%
2.78
13.72
(Source: Company/Eastwind)
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
7

8. DIVISLAB
"BUY"
19th Dec' 13
Good Growth Ahead
Result Update
BUY
About The Company :
CMP
Target Price
Previous Target Price
Upside
Change from Previous
1186
1350
14%
-
Divi’s Laboratories Limited is an India-based manufacturer of Active Pharmaceutical
Ingredients (APIs) and Intermediates. Divi is engaged in manufacture of generic APIs,
custom synthesis of active ingredients for innovator companies and other specialty
chemicals like peptides and nutraceuticals.
Market Data
BSE Code
NSE Symbol
52wk Range H/L
Mkt Capital (Rs, Cr)
Average Daily Volume
Nifty
532488
DIVISLAB
1189/905
15631
5.43
6217
Stock Performance-%
1M
Absolute
Rel. to Nifty
2.8
0.1
1yr
4.4
-1.3
YTD
1.4
-14.6
Share Holding Pattern-%
Promoters
FII
DII
Others
Current 1QFY14 4QFY1
3
52.1
52.2
52.2
15.8
14.9
14.0
12.5
12.5
13.3
19.5
20.5
20.5
One Year Price vs Nifty
Investment Rationale :
Company is one of the few CRAMS (Contract Research and Manufacturing Services)
players with a superior business mix comprising high-margin custom synthesis of APIs
(Active Pharma Ingredients) and intermediates for innovator companies. The company
collaborates with innovators throughout the product development cycle. Post
commercialization, company is usually the key supplier of APIs and intermediates for these
products to the innovators. In 2012-13, the company added six products to its custom
synthesis portfolio.
The CRAMS business which contributes nearly 45%- 50% of the total revenues have from
Rs 560 Cr in 2009 to Rs 1000 Cr translating CAGR of 15 %.The Generic API business
which contributes another 45-50 % to the total revenues is also well track after witness
some pressure in FY10.As on FY13 this segment contributed Rs 1029 Cr to the total
revenues and this segment to more revenues to the company in the light of upcoming
patent cliff of US and new launches .
The company have one more business segment ‘Nutraceuticals’ relatively smaller and
newer as compared to other business segment can act as growth driver going forward. The
management of the company is quite optimistic for this business segment and has guided
that this business at 40-50% CAGR (albeit on a low base) over the next 2-3 years.
2QFY14 Results Update.
The company posted strong 2QFY4 results with net sales growing to Rs 566 Cr up by
19.7% YoY on the back of good growth coming from all business segments. The generic
API grew by 18% YoY to Rs 261 Cr for the quarter and CRAMS business segment grew by
20% YoY to Rs 271 Cr. The company derives almost 45-50% of revenues each from
CRAMS and generic API business while rest comes from ‘Nutraceuticals’.
The operating EBITDA for the quarter came at Rs 250 Cr and OPM at 43.9 %. Company’s
2QFY14 EBITDA margins were higher than 34.8% reported in Q2FY13 on account of
higher gross margins, lower power cost and forex loss in Q2FY13.The RM cost as % of net
sales stands at 50% for the 2QFY14 while employee cost as % of net sales was 10 %.
Financials
Revenue
EBITDA
PAT
EBITDA Margin
PAT Margin
2QFY14
567
249
205
43.9%
36.2%
1QFY14
517
197
174
38.1%
33.7%
(QoQ)-%
9.7
26.4
17.8
580bps
250bps
2QFY13
474
165
117
34.8%
24.7%
Rs, Crore
(YoY)-%
19.6
50.9
75.2
910bps
1150bps
(Source: Company/Eastwind)
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
8

9. DIVISLAB
Continued…
The net profits for the 2QFY14 came at Rs 205 Cr and NPM came at 36.2%.The net profits
also include forex gain of Rs 31 Cr. The company reports its forex gain under other
income headings and forex loss under its other expenditure head. The tax rate for the
quarter stands at 22%.
Company has capitalized Fixed assets to the tune of Rs120 Cr for H1 FY14. The company
will commercialize DSN SEZ by the end of the year and the FDA inspection post that. The
new DSN SEZ contribution will start in Q1 FY15E and full benefits will fructify only from Q2
FY15E.The existing DSN blocks contributed Rs125 Cr revenues in Q2 FY14 as against
Rs70.8 Cr in Q1 FY14.
Management Guidance
The management of the company after strong 2QFY14results expects that revenue to
grow by 15-20 % (15% guided earlier), with FY15E growth expected above 20%. The
management further indicated that this high level of OPM is not sustainable but reiterated
that 38% levels OPM is quite reachable . On Power shortage ,which declined the OPM in
1QFY14 has been solved and will aid margin expansion going forward. The capex
guidance stands at INR500-600m (apart from INR2b addition from CWIP) and tax rate
guidance remains between 23-24%.
View & Valuation
The company is not only the most profitable company in the CRAMS space, but also
features among the most profitable companies in the Indian healthcare sector with EBIDTA
margin of 35-40% backed by its strong chemistry skills and custom synthesis presence.The
stock is currently trading at CMP of Rs 1186, strong 2QFY14 results ,optimistic
management guidance and better business model in comparison to its peers makes us
confident for the stock. We are positive for the stock and recommend BUY with
target price of Rs 1350.
Graphical Depiction
Revenue Break Up: 2QFY14
(Source: Company/Eastwind)
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
9

10. DIVISLAB
Sales and PAT Trend (Rs)
Net sales growing to Rs 566 Cr up by 19.7%
YoY on the back of good growth coming from
all business segments.
(Source: Company/Eastwind)
OPM %
2QFY14 EBITDA margins were higher than
34.8% reported in Q2FY13 on account of
higher gross margins, lower power cost and
forex loss in Q2FY13.
(Source: Company/Eastwind)
NPM %
The 2QFY14 PAT also include forex gain of Rs
31 Cr. The company reports its forex gain
under other income headings and forex loss
under its other expenditure head.
(Source: Company/Eastwind)
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
10

11. AXIS BANK
Company Update
CMP
Target Price
Previous Target Price
Upside
Change from Previous
NEUTRAL
1286
1325
1247
3
6.3
Market Data
BSE Code
NSE Symbol
52wk Range H/L
Mkt Capital (Rs Cr)
Average Daily Volume
Nifty
532215
AXISBANK
1549/763
39764
2066127
6217
Stock Performance
1M
Absolute
12.9
Rel.to Nifty
12.6
"NEUTRAL "
19th Dec, 2013
Axis bank is trading at 1.6 times of one year forward book which we believe
that it is higher side of our bear case valuation band. We have neither seen
valuation band expansion nor did earnings lead price performance. Axis bank
has significant exposure in infrastructure and power (12.64% in 2QFY14) as
compare to its peer group. Asset quality pressure may persists in coming
quarters which restrict bank’s valuation multiple in the range of 1.4 to 1.6
times of book in our view. We advice our investors to book part profit at the
current level. Our valuation multiples are based upon bank’s present growth
parameters, better than expected performance and visibility of ROE
improvement will expand valuation and multiples.
Healthy NII growth on the back of margin improvement and loan growth
During 2QFY14, Axis bank reported NII growth of 26.2% YoY largely due to 50 bps
YoY improvement of margin and 577 bps YoY increased of credit deposits ratio and
17% increased in loan growth. Axis bank’s interest earnings assets increased by
20% YoY whereas interest bearing liabilities increased by 13% YoY. Total revenue
of the bank grew by 21.3% YoY to Rs.4703 cr. Non- interest income registered
1yr
-5.2
-10.9
YTD
-5.2
-10.9
Share Holding Pattern-%
Current 4QFY13 3QFY1
3
Promoters
33.9
33.9
33.5
FII
40.7 4094.0
39.6
DII
8.8
8.5
10.0
Others
16.6
16.6
17.0
growth of 14% YoY to Rs.1766 cr.
Declined in cost income ratio led robust growth in operating profit
Operating expenses increased by 12.1% YoY to Rs.1953 cr in which employee cost
and other operating cost increased by 11.4% and 12.5% respectively. Cost income
ratio declined by 440 bps to 41.5% from 44.9% in 2QFY13. Employee cost and other
operating cost as a percentage of total assets remain flat at 0.2% and 0.4%
respectively. With the support of healthy NII, fee income and improvement of cost
income, operating profit grew by 29% YoY and -3.3% in QoQ to Rs.2750 cr.
Sequential declined of operating profit was due to gain of treasury income in
1QFY14 which was absent in 2QFY14.
Axis Bank Vs Nifty
Sequentially stable asset quality help to make lower provision
On asset quality front, Axis bank reported 10 bps deterioration in GNPA on
sequential basis to 1.4%. In absolute term GNPA increased by 10% QoQ and
provision increased by 12% QoQ. This led net NPA increased by 6% sequentially. In
percentage term NPA stood at 0.4%, flat on QoQ basis. Provision coverage ratio
(without technical write off) was improved by 100 bps to 69.3% and PCR at technical
write off was 89%. During quarter bank made loan loss provision of Rs.687 cr versus
Rs.712 cr in 1QFY14 and Rs.509 cr in 2QFY13. On sequential basis risky sector
like power and infrastructure exposure remain flat at 12.64% from 12.67% in
1QFY14.
Rs, Cr
Financials
2011
2012
2013
2014E
2015E
NII
6566
8026
9666
12620
14710
Total Income
11238
13513
16217
19715
21804
PPP
6377
7413
9303
11238
12429
Net Profit
3340
4224
5179
6343
6977
EPS
81.4
102.2
110.7
135.2
149.1
(Source: Company/Eastwind)
11
Narnolia Securities Ltd,

12. AXIS BANK
Healthy NII growth and controlled CI ratio along with stable margin help to boost
up profit
With the support of healthy NII growth and controlled operating expenses led net profit of
26% YoY to Rs.1362 cr from Rs.1081 cr. Consequently ROA improved by 12 bps to 1.6%
and ROE declined to 15.3% from 17.5% in 2QFY13 largely due to operating leveraging.
Modest deposits growth and strong traction in loan growth
On business growth parameters, bank’s total business grew by 12% YoY to Rs.4567 bn
as against Rs.4077 bn. Deposits grew by moderate pace with 8% YoY while current
deposits and saving deposits grew by 9% and 18% respectively taking overall CASA ratio
to 42.9%. Bank’s strategy to focus on retail deposits seem well is shaping as share of
retail deposits in term deposits increased continuously to 45.2% from 40.3% in21QFY13.
Loan grew by 17% YoY to Rs.20130 bn. Incremental loan growth came from retail
advance and SME segment. Share of retail loan increased to 30.2% of overall loan from
25.7% in 2QFY13. Bank’s has decreased in share of risky sector (Power & Infrastructure)
exposure to 12.64% from 13.63% in 2QFY13. Credit deposits ratio improved by 577 bps
YoY to 78.8% implying best utilization of excess liquidity in balance sheet.
Sequential declined of margin owing to flat loan yield
During quarter bank reported 7 bps QoQ declined in NIM to 3.79% led by 500 bps
sequentially declined of credit deposits ratio and almost flat of loan yield on QoQ basis.
Loan yield during the quarter was 10.5% and cost of deposits declined from 7.4% to
7.1% sequentially.
Valuation & View
Axis bank delivered good set of numbers during quarter but exposure to stress sector
remain at 12%+ level. Moreover Axis bank has higher exposure in small, medium
enterprises and infra segment in comparison to peers. In challenging macro environment
and tight liquidity situation, Axis bank is more vulnerable among peers. At the current
price of Rs.1286, stock is trading at 1.6 times of one year forward book which is upper
side of bear case valuation band. We advice book part profit at current level. We value
bank at multiple of 1.4 to 1.6 times of one year forward book which implies Rs. price
range of Rs.1247 to Rs.1325.
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
12

13. AXIS BANK
Quarterly Result
Interest/discount on advances / bills
Income on investments
Interest on balances with Reserve Bank of India
Others
Total Interest Income
Fee Income
Trading Income
Miscellaneous Income
Others Income
Total Income
Interest Expended
NII
Other Income
Total Income
Employee
Other Expenses
Operating Expenses
PPP( Rs Cr)
Provisions
PBT
Tax
Net Profit
2QFY14
5394
2143
35
37
7609
1432
5
329
1766
9375
4672
2937
1766
4703
644
1309
1953
2750
687
2062
700
1362
1QFY14
5189
2015
34
39
7278
1317
440
24
1781
9059
4413
2865
1781
4647
643
1160
1803
2844
712
2131
722
1409
2QFY13 % YoY Gr % QoQ Gr
4736
13.9
4.0
1897
13.0
6.3
22
58.9
2.6
32
14.9
-5.5
6687
13.8
4.6
1343
6.6
8.7
207
-97.6
-98.9
0
1270.2
1551
13.9
-0.9
8238
13.8
3.5
4360
7.2
5.9
2327
26.2
2.5
1551
13.9
-0.9
3877
21.3
1.2
578
11.4
0.1
1164
12.5
12.9
1742
12.1
8.3
2136
28.8
-3.3
509
35.0
-3.5
1626
26.8
-3.2
545
28.4
-3.1
1081
26.0
-3.3
Balance Sheet Date ( Rs Bn)
Net Worth
Deposits
Loan
362
2554
2013
349
2384
1982
252
2356
1721
43.6
3.7
8.4
7.1
16.9
1.6
Asset qualtiy( Rs Cr)
GNPA
NPA
%GNPA
%NPA
2734
838
1.4
0.4
2490
790
1.3
0.4
2191
654
1.3
0.4
24.8
9.8
28.1
6.1
Source: Eastwind/Company
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
13

14. AXIS BANK
FINANCIALS & ASSUPTION
Income Statement
2011
2012
2013
2014E
2015E
Interest Income
Interest Expense
NII
Change (%)
Non Interest Income
Total Income
Change (%)
Operating Expenses
Pre Provision Profits
Change (%)
Provisions
PBT
PAT
Change (%)
15155
8589
6566
31.2
4671
11238
25.3
4860
6377
22.4
3033
3345
3340
34.8
21995
13969
8026
22.2
5487
13513
20.2
6100
7413
16.2
3189
4224
4224
26.5
27183
17516
9666
20.4
6551
16217
20.0
6914
9303
25.5
4124
5179
5179
22.6
33243
20622
12620
30.6
7095
19715
21.6
8478
11238
20.8
2176
9062
6343
22.5
38426
23716
14710
16.6
7095
21804
10.6
9376
12429
10.6
2461
9967
6977
10.0
189166
34
77758
18
26268
71788
142408
36
219988
16
91412
18
34072
92921
169760
19
252614
15
112100
23
43951
113738
196966
16
290506
15
124917
11
51266
129873
228481
16
334081
15
143655
15
58956
149354
265037
16
460
1404
3.1
549
1146
2.1
708
1304
1.8
828
1288
1.6
957
1288
1.3
Balance Sheet
Deposits( Rs Cr)
Change (%)
of which CASA Dep
Change (%)
Borrowings( Rs Cr)
Investments( Rs Cr)
Loans( Rs Cr)
Change (%)
Valuation
Book Value
CMP
P/BV
Source: Eastwind/Company
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
14

15. Godrej Consumer Product
"BUY"
19th Dec' 13
" Strategy Shining"
Company update
CMP
Target Price
Previous Target Price
Upside
Change from Previous
BUY
840
960
725
14%
32%
Market Data
BSE Code
NSE Symbol
52wk Range H/L
Mkt Capital (Rs Cr)
Average Daily Volume
Nifty
532424
GODREJCP
977/693
28593
120012
6217
Stock Performance
1M
Absolute
-2.1
Rel. to Nifty
-4.8
1yr
17.6
11.5
YTD
27.0
8.8
Share Holding Pattern-%
Current 1QFY14 4QFY13
Promoters
63.3
63.3
63.5
FII
28.7
28.3
28.2
DII
1.2
1.2
1.2
Others
6.8
7.2
7.1
1 yr Forward P/B
Key facts from recent Management Comments:
▪ Godrej Consumer's management is hopeful of seeing an uptick in the urban demand
and the rural demand is expected to be strong due to good harvest. We expect 20-22%
(YoY) sales growth for 3QFY14.
▪ The company does not see company’s margins coming under pressure going ahead,
due to heavy investments it has made in advertisements. We expect 15-15.5% EBITDA
margin for FY14E and 15.5-16% for FY15E.
▪ On International revenue front, Godrej Consumer could see some threads in certain
areas especially Indonesia (18% of sales) and Nigeria (13% of sales), Indonesia is going
into election next year and in Nigeria, there have been wage hikes.
▪ Godrej Consumer aims to grow 10 times in the next 10 years.
Key updates;
Demand Pickup scenario: On demand side scenario, we expect that the strong
agricultural season leading to strong rural GDP growth would support to improve
demand environment very soon. Considering recent GDP growth and Current Account
Deficit (CAD) numbers, we are expecting that the economy is moving to track and urban
demand will see some picking up.
Strong focus on driving growth with 10x10 strategy: Its strong focus on driving growth
in the domestic and international market by expansion of products and distribution
reach, we expect strong earning in near future. With launching new products in
domestic as well as international mkt, Godrej CP will explore organic & inorganic growth.
Along with its 3x3 strategy, it has 10x10 strategy also, which refers to 10x growth in 10
yrs.
Products strategy: The company continues to gain and enjoy market leader ship position
across all three formats. The company is driving increase in penetration with launch of
"Goodknight Advanced colour play". The company has launched Goodknight aerosol and
coil in Nigeria.
Recent developments: The Company has entered into an agreement on Oct 7, 2013, to
acquire a 30% stake in Bhabani Blunt Hair Dressing Pvt Ltd, a premier hair salon
company with one of the strongest consumer franchises in this space.
View and Valuations: Its strong 20%+ growth in the domestic household insecticides
business is the key growth driver. We expect strong momentum to continue in its
international business led by Megasari and consolidation of Darling business. Despite
some concerns related to higher leverage, lost domestic focus and currency risk, we
remain confident of achieving the 20%+ sales growth with strong PAT growth for FY14E
& beyond. At a CMP of Rs840, stock trades at 5.7x FY15E P/BV. We retain BUY with a
price target of Rs 960.
Financials
Rs, Cr
2QFY14
1QFY14
(QoQ)-%
2QFY13
(YoY)-%
Revenue
1961.7
1724.9
13.7%
1600.32
22.6%
EBITDA
299.8
225.4
33.0%
248.96
20.4%
PAT
195
133
46.6%
159.31
22.4%
EBITDA Margin
15.3%
13.1%
210bps
15.6%
(30bps)
PAT Margin
9.9%
7.7%
220bps
10.0%
(10bps)
(Source: Company/Eastwind)
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
15

16. Godrej Consumer Product
Quaterly snapshot:
Qtrly,
-1
Sales Gr(YoY)
PAT Gr(YoY)
EBITDA Margin
-2 Margin
PAT
2QFY12
23%
-2.6%
18.0%
12.0%
3QFY12
36%
68.3%
20.1%
13.9%
4QFY12
31%
36.0%
18.9%
13.5%
1QFY13
39%
-45.5%
14.5%
12.1%
2QFY13
35%
24.7%
15.6%
10.8%
3QFY13
26%
3.1%
16.8%
11.3%
4QFY13
30%
58.7%
16.2%
13.3%
1QFY14
23.9%
1.8%
13.1%
9.0%
2QFY14
22.6%
22.4%
15.3%
10.9%
3QFY12
20.4%
20.6%
31%
9%
5%
4QFY12
20.2%
20.7%
19.3%
16.3%
10.5%
1QFY13
15.1%
18%
19%
3%
13%
2QFY13
17.6%
19%
16%
4%
9%
3QFY13
18%
20%
20%
8%
5%
4QFY13
16.7%
19%
7%
9%
13%
1QFY14
15.8%
15%
13%
3%
9%
2QFY14
18.9%
17%
14%
7%
10%
Regionwise margin:
Regions
India
Indonesia
Africa
Latin America
Europe
2QFY12
18.9%
19.4%
26.0%
7.4%
11%
Financials and Valuation
Rs, in Cr
Sales
Other Operating Income
Total income from operations
RM Cost
Purchases of stock-in-trade
WIP
Employee Cost
Ad Spend
Other expenses
Total expenses
EBITDA
Depreciation and Amortisation
Other Income
Exceptional Item
EBIT
Interest
PBT
Tax Exp
PAT
Growth-% (YoY)
Sales
EBITDA
PAT
Expenses on Sales-%
RM Cost
Ad Spend
Employee Cost
Other expenses
Tax rate
Margin-%
EBITDA
EBIT
PAT
Valuation:
CMP
No of Share
NW
EPS
BVPS
RoE-%
Div- Payout-%
P/BV
P/E
FY10
2041.2
2.5
2043.7
619.59
367.16
-40.45
151.81
132.8
402.98
1633.89
409.81
23.6
44.81
0
386.21
11.1
419.92
80.33
339.59
FY11
3693.6
28.11
3721.71
1458.28
294.12
-45.22
284.51
352.85
695.96
3040.5
681.21
49.92
24.13
41.14
631.29
43.64
652.92
138.21
514.71
FY12
4866.16
45.93
4912.09
2174.67
356.11
-212.26
391.91
449.86
850.47
4010.76
901.33
64.44
6.07
200.17
836.89
65.84
977.29
226.05
751.24
FY13
6390.79
16.58
6407.37
2640.31
451.03
-118.06
590.68
660.35
1196.46
5420.77
986.6
77
67.78
96.12
909.6
77.45
996.05
179.18
816.87
FY14E
7823.32
20.30
7843.62
3176.67
552.13
-183.50
723.08
902.02
1459.0
6629.4
1214.2
94.3
47.8
78.4
1119.9
61.1
1185.1
225.17
959.9
FY15E
9198.58
23.86
9222.44
3781.20
649.19
-224.07
850.19
1014.47
1689.7
7760.7
1461.7
102.1
56.2
92.2
1359.6
53.2
1454.9
290.98
1163.9
46.3%
95.2%
97.0%
81.0%
66.2%
51.6%
31.7%
32.3%
46.0%
31.3%
9.5%
8.7%
22.4%
23.1%
17.5%
17.6%
20.4%
21.3%
30.3%
6.5%
7.4%
19.7%
19.1%
39.2%
9.5%
7.6%
18.7%
21.2%
44.3%
9.2%
8.0%
17.3%
23.1%
41.2%
10.3%
9.2%
18.7%
18.0%
40.5%
11.5%
9.2%
18.6%
19.0%
41.0%
11.0%
9.2%
18.3%
20.0%
20.1%
18.9%
16.6%
18.3%
17.0%
13.8%
18.3%
17.0%
15.3%
15.4%
14.2%
12.7%
15.5%
14.3%
12.2%
15.8%
14.7%
12.6%
261.0
30.8
954.7
11.0
31.0
35.6%
30.6%
8.4
23.7
365.0
32.4
1725.2
15.9
53.2
29.8%
38.3%
6.9
23.0
559.0
34.0
2815.2
22.1
82.8
26.7%
22.6%
6.8
25.3
836.0
34.0
3313.0
24.0
97.4
24.7%
23.0%
8.6
34.8
840.0
34.0
4073.9
28.2
119.7
23.6%
20.7%
7.0
29.8
840.0
34.0
5038.8
34.2
148.1
23.1%
17.1%
5.7
24.6
(Source: Company/Eastwind)
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
16

17. BANK OF INDIA
Company Update
CMP
Target Price
Previous Target Price
Upside
Change from Previous
BUY
206
235
14
-
Market Data
BSE Code
NSE Symbol
52wk Range H/L
Mkt Capital (Rs Cr)
Average Daily Volume
Nifty
532149
BANKINDIA
393/126
12260
2271804
6139
Stock Performance
1M
Absolute
-14.5
Rel.to Nifty
-13.7
1yr
-32.2
-37.1
YTD
-32.2
-37.1
Share Holding Pattern-%
Current 1QFY14 4QFY1
3
Promoters
64.1
64.1
64.1
FII
13.2
13.6
13.5
DII
15.3
15.6
16.3
Others
7.4
6.7
6.0
BANKINDIA Vs Nifty
"BUY"
18th Dec, 2013
Despite of improving fundamental from past two quarters, Bank of India is
trading at 0.5 times of one year forward book which is the lowest level in our
valuation parameters. We believe that current level is attractive entry point for
the investor with time horizon more than one year. With the capital infusion of
Rs.1000 cr by GoI and improving sign of asset quality would re-rate the stock
in our view as it previously witnessed i.e. 0.8 to 1.2 times of book. The
management has guided fresh slippage of about Rs.1500 cr and restructures
to the tune of Rs.1000-1200 cr in 3QFY14 which is in line with 2QFY14. We
recommend buy with price target of Rs. 235
Shown Improving sign of asset quality with higher recovery and up-gradation
rather than write-off
Most of banks especially PSUs are beaten down by the market on account of slower
economic growth and stress in asset quality. But Bank of India has witnessed
improvement in asset quality in 2QFY14 as fresh slippages were down by 26%
sequentially and 46% Year-on-year basis. Moreover bank reported reduction to the
tune of Rs.1009 cr versus Rs.1338 cr in 1QFY14. Most of reduction was due to
higher recovery and up-gradation rather than write-off. Write-off came down sharply
from Rs.598 cr 1QFY14 to Rs.120 cr in 2QFY14.
Inch up restructure guidance in 3QFY14
As far as restructure loan are concern, bank’s total restructure loan was about 5% of
total loan asset and bank’s management expects Rs.1000-1200 cr of restructure in
December quarter. In 2QFY14, bank sold about Rs.370 cr of bad loan to Asset
Reconstruction Company (ARC) for recovery and during quarters its plan to sell
about Rs.500 cr of bad loan to ARC.
Sequentially improving PCR provide cushion on stress asset
Despite of stable asset quality and lower slippage, Bank of India provided 24% more
provision in sequential basis which improved its provision coverage ratio(Without
technical write off) to 63.3% from 61% in preceding quarter same year. Higher
provision would provide cushion on stress asset without hurting profit going further.
Capital infusion by GoI raise CAR ratio to 8.1% from 7.75%
Bank has lower CAR to 7.75% at the end of 2QFY14 according to Basel 3 norm.
Now Bank of India has approved to initiate process to raise further capital for issue
of 4.63cr Equity Shares to GoI on Preferential basis at a price of Rs. 215.70 per
share. This capital infusion is taking CAR ratio to 8.1% and government holding rise
to 66.7% from 64.1%. Capital infusion to the tune of Rs.1000 cr diluting our FY14E’s
book value by 40 bps.
Rs, Cr
Financials
2011
2012
2013
2014E
2015E
NII
7878
8313
9024
12110
11804
Total Income
10519
11635
12790
16672
16366
PPP
5398
6694
7458
9670
9492
Net Profit
2542
2678
2749
3533
3269
EPS
46.5
46.7
47.9
61.6
57.0
(Source: Company/Eastwind)
17
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.

18. BANK OF INDIA
Quarterly Result
Interest/discount on advances / bills
Income on investments
Interest on balances with Reserve Bank of India
Others
Total Interest Income
Others Income
Total Income
Interest on deposits
Interest on RBI/Inter bank borrowings
Others
Interest Expended
NII
Other Income
Total Income
Employee
Other Expenses
Operating Expenses
PPP( Rs Cr)
Provisions
Net Profit
2QFY14
6631
2129
479
0
9239
1100
10340
5966
414
333
6712
2527
1100
3627
897
628
1525
2102
1232
622
1QFY14
6190
1885
465
0
8541
1181
9722
5401
296
308
6004
2537
1181
3718
963
575
1537
2180
695
964
2QFY13 % YoY Gr % QoQ Gr
5881
12.8
7.1
1835
16.0
12.9
289
65.6
2.9
0
42.9
36.4
8005
15.4
8.2
894
23.1
-6.8
8900
16.2
6.4
5154
15.8
10.5
536
-22.8
40.0
119
179.8
8.2
5810
15.5
11.8
2196
15.1
-0.4
894
23.1
-6.8
3090
17.4
-2.4
700
28.2
-6.8
536
17.1
9.3
1236
23.4
-0.8
1854
13.4
-3.6
1552
-20.6
77.4
302
106.0
-35.5
Balance Sheet Data
Equity Capital
Reserve & Surplus
Deposits
Borrowings
Other liabilities and provisions
Total Liability
Cash in hand
Cash and balances with reserve bank of india
Investment
Advance
Fixed Assets
Others Assets
Total Assets
597
25,686
432,282
41,751
12,727
513,042
24,621
34,658
107,413
332,190
2,957
11,203
513,042
575
21,774
332,695
29,434
11,262
395,739
17,080
19,198
90,147
256,148
2,839
10,327
395,739
575
21,774
332,695
29,434
11,262
395,739
17,080
19,198
90,147
256,148
2,839
10,327
395,739
9873
6156
3.0
1.9
37.6
8765
5947.3
3.0
2.0
32.1
8898
5,228
3.4
2.0
41.2
Asset Quality
GNPA
NPA
GNPA(%)
NPA(%)
PCR(%) Without technical write off
3.9
3.9
18.0
18.0
29.9
29.9
41.8
41.8
13.0
13.0
29.6
29.6
44.2
44.2
80.5
80.5
19.2
19.2
29.7
29.7
4.2
4.2
8.5
8.5
29.6
29.6
11.0
12.6
17.7
3.5
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
18

19. BANK OF INDIA
Financials & Assuption
Interest/discount on advances / bills
Income on investments
Interest on balances with Reserve Bank of India
Others
Total Interest Income
Others Income
Total Income
Interest on deposits
Interest on RBI/Inter bank borrowings
Others
Interest Expended
NII
Other Income
Total Income
Employee
Other Expenses
Operating Expenses
PPP( Rs Cr)
Provisions
Net Profit
2011
2012
2013
2014E
2015E
15570
5195
798
295
21858
2642
24500
12218
813
950
13981
7878
2642
10519
3492
1629
5121
5398
2909
2542
46.0
20241
7142
834
264
28481
3321
31802
17957
1145
1065
20167
8313
3321
11635
3069
1871
4941
6694
4016
2678
5.3
23139
7261
1257
251
31909
3766
35675
20238
1489
1158
22885
9024
3766
12790
3131
2201
5332
7458
4709
2749
2.7
29515
8828
1889
1
40233
4562
44795
25422
1419
1281
28123
12110
4562
16672
4131
3965
7002
9670
5254
3533
28.5
31171
10152
1889
1
43213
4562
47775
28709
1419
1281
31410
11804
4562
16366
4055
3892
6874
9492
5406
3269
-7.5
299559
30
22021
-2
213708
26
86677
27
318216
6
32114
46
248833
16
86754
0
381840
20
35368
10
289367
16
94613
9
434075
14
36854
4
347241
20
110351
17
503527
16
37953
3
366720
6
126904
15
7.3
6.3
6.5
4.1
8.0
4.3
8.1
8.7
7.8
5.6
6.9
5.8
8.0
7.1
7.7
5.2
6.8
5.3
8.5
8.0
8.4
5.7
7.5
6.5
8.5
8.0
8.4
5.6
7.5
6.2
322.7
1.5
10.3
365.3
1.0
7.7
416.9
0.7
6.3
469.4
0.4
3.8
510.4
0.4
4.1
Key Balance Sheet Data
Deposits
Deposits Growth(%)
Borrowings
Borrowings Growth(%)
Loan
Loan Growth(%)
Investment
Investment Growth(%)
Eastwind Calculation
Yield on Advances
Yield on Investments
Yield on Funds
Cost of deposits
Cost of Borrowings
Cost of fund
Valuation
Book Value
P/BV
P/E
Source: Eastwind/Company
Narnolia Securities Ltd,
Please refer to the Disclaimers at the end of this Report.
19

20. Risk Disclosure & Disclaimer: This report/message is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you.
Narnolia Securities Ltd. (Hereinafter referred as NSL) is not soliciting any action based upon it. This report/message is not for public distribution and has been furnished to you solely for your
information and should not be reproduced or redistributed to any other person in any from. The report/message is based upon publicly available information, findings of our research wing
“East wind” & information that we consider reliable, but we do not represent that it is accurate or complete and we do not provide any express or implied warranty of any kind, and also
these are subject to change without notice. The recipients of this report should rely on their own investigations, should use their own judgment for taking any investment decisions keeping
in mind that past performance is not necessarily a guide to future performance & that the the value of any investment or income are subject to market and other risks. Further it will be safe
to assume that NSL and /or its Group or associate Companies, their Directors, affiliates and/or employees may have interests/ positions, financial or otherwise, individually or otherwise in
the recommended/mentioned securities/mutual funds/ model funds and other investment products which may be added or disposed including & other mentioned in this report/message.
20