Standard Chartered is issuing Indian Depository Receipts (IDRs) that will allow Indian investors to invest in the company. The bank stands to benefit from emerging market recovery as Asia accounted for 83% of its profits in 2009. It has a strong presence in growing markets like India, Hong Kong, and Singapore. The bank has superior returns on assets and equity compared to its peers. The IDR issue provides exposure to a globally diversified bank that is well positioned in high-growth emerging markets.

1. IPO Note | Banking
May 25, 2010
Standard Chartered SUBCRIBE
Issue Open: May 25, 2010
An Emerging Market Play Issue Close: May 28, 2010
Standard Chartered Plc's first-ever Indian depository receipt (IDR) will open on Issue Details
May 25, 2010, at a price band of Rs100-115. The company will issue 24 crore
Face Value: US $0.5
IDRs (10 IDRs representing 1 share), accounting for 1.16% of the bank's capital.
The issue of IDRs will allow Standard Chartered to significantly boost its market Present Equity Capital (No. of Shares): 202.9cr
visibility and brand perception in India. The company is already listed in London
Post Equity Capital (No. of Shares): 205.3cr
and Hong Kong. Standard Chartered Bank (SCB) is the main operating entity of
the group. SCB focuses on developing its wholesale and consumer banking business Offer Size: 24cr IDR's
in Asia, Africa and the Middle East, from where it derives 90% of its operating income (10 IDR's =1 Equity Share of FV US $0.5)
and profit. The bank operates a network of over 1,700 branches and outlets (including
Issue size (amount): *Rs2,400cr - **Rs2,760cr
subsidiaries, associates and joint ventures) and employs 73,000 people.
Issue Price Band: Rs100-115
Rationale for our Subscribe recommendation
Well placed to play the emerging market recovery: SCB is well positioned to *at Lower end of the price band
**at Upper end of the price band
benefit from the recovering emerging markets. The bank has well-diversified revenue
Note: 5% discount for retail investors
streams spread across emerging markets such as Hong Kong, Singapore, India,
Korea, the Middle East and Africa. Diversification of the business, capital employed Book Building
and operating income across economies act as a natural hedge and offers the
QIBs At least 50%
bank an opportunity to dynamically and optimally utilise its resources. In 2009,
Non-Institutional At least 20%
Asia accounted for 83% of SCB's profit before tax (PBT), 83% of its loans and 78%
Retail At most 30%
of its assets.
Wholesale Banking and Trading business-The key drivers for Profit: SCB's
wholesale banking business accounts for ~80% of its PBT. Unlike the consumer
banking business, this business does not require any large distribution. The bank
has enhanced its service capabilities (acquisitions and investments in technology),
with relationships increasingly becoming multi-country and multi-product.
RoAs superior to peers and RoEs higher at 18%: From 2007 to 2009, the bank
has been consistently reporting return on assets (ROA) and return of equity (RoE) in
the range of 0.8% and 14-15%, respectively. Subdued RoEs are a result of high
goodwill, which was created on account of acquisitions. If one looks at adjusted
RoEs vis-à-vis price to adjusted book value, the parity is quite attractive with 18%
RoEs. The bank is adequately capitalised with capital adequacy ratio (CAR) at
16.5% (as on December 31, 2009) and a strong core tier-1 ratio of 11.5%.
Outlook and Valuation: SCB's IDR provides Indian investors a vehicle to invest in
a global entity that has a global presence. As a result of its diversified presence
and emerging market focus, SCB came out relatively unscathed from the
Vaibhav Agrawal
sub-prime crisis and is now well poised to benefit from the ongoing recovery in
+91 22 4040 3800 Ext: 333
emerging economies. Hence, the bank is an excellent diversified multinational Email: vaibhav.agrawal@angeltrade.com
banking play, with strategic positioning in high-growth emerging markets. The
stock is currently trading at 1.7x CY2010 P/B vis-a-vis 2.9x and 3.8x FY2010 P/B Amit Rane
for Axis Bank and HDFC Bank, respectively. We recommend Subscribe to +91 22 4040 3800 Ext: 326
Email: amitn.rane@angeltrade.com
the Issue.
Please refer to important disclosures at the end of this report

2. Standard Chartered | IPO Note
Well placed to benefit from the emerging market recovery
In 2009, Asia accounted for 83% of SCB's PBT, 83% of its loans and 78% of its assets.
Hong Kong, South Korea, Singapore and India are the bank's largest markets,
accounting for 61% of PBT and 50% of assets in 2009. The group entered India and
China in 1858, which has helped the group to build a strong customer base and
strengthen its distribution network. In 2009, India and China contributed 12% and
5% to the bank's net income, respectively, while its other key geographies, viz. Hong
Kong, South Korea, Singapore, Asia Pacific and Middle East, contributed 16%, 10%,
11%, 19% and 14%, respectively, to the net income.
The bank is well placed to benefit from Asia's higher growth and rising trade and
income levels. Asia, which accounts for the bulk of the profits, is estimated to have
grown by 2.8% in 2009 on the back of strong growth by emerging Asian economies.
Industrial economies are estimated to have contracted by 4.4% overall, with Japan
contracting the most by 5.4% in 2009. Asia is rebounding fast from the depths of the
global crisis as the world pulls out of the global recession. As international trade and
finance normalises, it is expected to generate an outsized Asian upturn. Asia's recovery
has been aided by the thawing of international capital markets, which has restored
firms' access to critical long-term equity and debt financing. Additionally, Asia's relatively
strong initial conditions have given it the space to cut interest rates sharply and adopt
large fiscal stimulus packages. As a result, overall domestic demand has held up
remarkably well. In line with the global recovery, Asia is expected to grow by 5.8% in
2010, led by China and India and with all major Asian economies showing positive
gross domestic product (GDP) growth. (Source: International Monetary Fund; Regional
Economic Outlook (Asia), October 2009).
Exhibit 1: Geographic breakdown of PBT - 83% in Asia (CY2009)
Source: Annual Report, DRHP
May 25, 2010 2

3. Standard Chartered | IPO Note
Exhibit 2: Geographic breakdown of assets - 78% in Asia (CY2009)
Source: Annual Report, DRHP
Exhibit 3: Growth rate of different countries (%)
GDP FY2008 FY2009 FY2010 FY2011
CHINA 9.6 8.7 10.0 9.9
INDIA 7.3 5.7 8.8 8.4
Hong Kong 2.1 (2.7) 4.6 3.4
Singapore 1.4 (2.0) 5.1 5.0
Malaysia 4.6 (1.7) 5.4 4.0
South Korea 2.3 0.2 5.0 4.0
U.S 0.4 (2.4) 2.8 1.5
Source: IMF
Wholesale banking and trading business: The key driver for profits
Wholesale banking accounted for nearly 80% of SCB's PBT in 2009, up from 52% in
2004. Corporate lending, trade finance, transaction banking and trading have
powered SCB's growth over the last five years. Unlike consumer banking, these
businesses do not need a large distribution network, and the bank is able to leverage
its transcontinental footprint to fund and serve customers across countries. In 2009,
the bank also took advantage of the credit crisis to gain market share as global/
regional banks were constrained. In Hong Kong and Singapore, where system loan
growth was muted, SCB's loan book grew by 20% yoy in 2009.
Trading: Remarkable growth
SCB earned US$3.4bn from trading in 2009, up 4.4x from 2004. The bank's trading
revenue has grown each year since 2004, accounting for 20% of the total income in
2009. The steep yield curve, high volatility and liquidity continue to drive the bank's
trading revenue.
SCB is the largest foreign bank in India in terms of PBT, and overall the fourth largest
bank in India. From 1999 to 2009, SCB's PBT from Indian operations grew 28.6%
annually. With net interest margin (NIM) of 3.8% and pre-tax RoA of 3.3%, SCB's
Indian operations are significantly more profitable than those of its Indian peers, and
the second highest amongst all its geographies. India, together with Hong Kong, is
now the largest contributor to PBT, while remaining one of the most profitable and
one of the fastest-growing regions for the bank.
May 25, 2010 3

4. Standard Chartered | IPO Note
RoAs superior to peers and RoEs higher at 18%
From 2007 to 2009, the bank has been consistently reporting ROA's and RoE in the
range of 0.8% and 14-15%, respectively. The subdued RoEs are also a result of high
goodwill, which was created on account of acquisitions. If one looks at adjusted RoEs
vis-à-vis price to adjusted book value, the parity is quite attractive with 18% RoEs.
Comparing the Indian operations of SCB with its Indian peers, we find that the former's
operations are highly profitable. Despite a small branch network and below-market
loan growth at an 11% compound annual growth rate (CAGR) from 2006 to 2009,
the bank is highly profitable in terms of RoA and has one of the highest NIM when
compared to its peers.
The bank is adequately capitalised with the CAR at 16.5% (as on December 31,
2009) and a strong core tier-I ratio of 11.5%.
Exhibit 4: SCB's pre-tax RoA is significantly higher than that of its Indian peers
Source: Company, Angel Research
May 25, 2010 4

5. Standard Chartered | IPO Note
Financials
NII grew at a 10% CAGR CY2007-2009
The bank's net interest income (NII) grew at a 10% CAGR over 2007-2009 to US$7.6bn,
led by 13% annual growth in advances and NIM's of 1.7-1.9%. Sluggish growth of
just 3% in NII in 2009, on account of the global turmoil, pulled the CAGR for the
period down. Lower growth in NII in 2009 was led by an 8% yoy decline in NII to
US$3.9bn in consumer banking, though NII in wholesale banking grew by a healthy
18% yoy to US$3.7bn.
Exhibit 5: PBT CAGR (2004-2009) at 45%: Second highest among Indian banks
Source: Company, Angel Research
Outlook and Valuation
SCB's IDR provides Indian investors a vehicle to invest in a global entity. As a result of
its diversified presence and emerging market focus, the bank came out relatively
unscathed from the sub-prime crisis and is now well poised to benefit from the ongoing
recovery in the emerging economies. Hence, the bank is an excellent
diversified multinational banking play with strategic positioning in high-growth
emerging markets. At the lower end of the offer price band, the stock is offered at a
~9% discount to its current market price at the Hong Kong Stock Exchange (HKD178
implies a value of Rs109 per IDR; 10 IDRs equal to one equity share). The stock is
currently trading at 1.7x CY2010 P/B vis-a-vis 2.9x and 3.8x FY2010 P/B for Axis
Bank and HDFC Bank, respectively. We recommend Subscribe to the Issue.
May 25, 2010 5

6. Standard Chartered | IPO Note
Company Background
Standard Chartered Plc operates through a number of subsidiaries, including SCB-
one of the leading international banking and financial services company. SCB
particularly focuses on the markets of Asia, Africa and the Middle East. The company
has no significant operations or assets other than its 100% interest in SCB. As on
December 31, 2009, the group operated in nearly 1,700 branches and outlets in
more than 70 countries and employed over 75,000 employees worldwide. The group
has significant operations in the Asian region, which accounted for over 75% of its
US$5,151 million total profit before taxation for the year ended December 31, 2009.
On December 31, 2009, the company had total consolidated assets of US$437 billion,
total consolidated customer loans and advances of US$198,292 million, total
consolidated customer deposits of US$251,244 million and total parent company
shareholders' equity (excluding minority interests) of US$27,340 million. The company's
total capital ratio as on December 31, 2009, was 16.5% and its tier-1 capital ratio
was 11.5%.
The company is headquartered in the U.K., where it is regulated by the Financial
Services Authority. The group's head office provides guidance on governance and
regulatory standards across the group's network. The company operates two business
divisions-consumer banking and wholesale banking. For the year ended December
31, 2009, the consumer banking and wholesale banking divisions contributed 17%
and 79%, respectively, of Standard Chartered's operating profit before taxation and
impairment.
May 25, 2010 6

7. Standard Chartered | IPO Note
Investment concerns
SCB operates in a highly regulated industry. Any changes to bank regulations and
laws and regulations could have an impact on its operations or impair its financial
condition.
 Greater competition from global banks: SCB was one of the few banks to gain
during the credit crisis, as competition from global and regional banks eased. With
weakness in home markets, global banks have increased their focus on Asia and are
likely to compete more aggressively.
 Vulnerable trading revenue: SCB's lower NIM was largely offset by trading gains.
With most Asian central banks looking to raise rates, trading revenue seems to be
vulnerable.
 Higher capital gains and dividend tax: As per the current Indian tax rules,
secondary market trading in IDR is not subject to STT (Securities Transaction Tax) and,
hence, capital gains tax will be applicable on such trading. The lower/concessional
tax rates available on long-term capital gains and dividends on investments in stocks
of Indian companies are not available on IDRs. Dividend distribution tax is not paid
by the issuer company, and hence it will be taxable in the hands of IDR holders.
 Lack of interest from FIIs: FIIs may not be interested in the IDR and domestic
insurance companies are prohibited from investing in IDRs. This reduces the investor
base significantly. However, this may not be a major issue, since the investible stock is
limited and may not be excessive for residual investors such as retail, HNI and MFs.
 Conversion of IDRs into equity shares or vice versa: IDRs can be converted into
underlying equity shares only after one year and with the consent of the Reserve Bank
of India. On such conversion, resident individual investors have to sell them within 30
days of the conversion. IDRs are not two -way fungible. Therefore,
re-conversion of equity shares into IDRs is not permitted.
May 25, 2010 7

8. Standard Chartered | IPO Note
Annexure: IDRs
What is an IDR?
An Indian depositary receipt (IDR) represents ownership in the shares of a foreign
company that trades in the Indian capital market. Each IDR is issued by an Indian
depositary bank and can represent a fraction of a share, a single share or multiple
shares of a foreign stock. An IDR is bought and sold just like a regular stock and is
issued/sponsored by a bank or a brokerage house. The price of an IDR often tracks
the price of the foreign stock in its home market. An IDR enables Indian investors to
buy shares in foreign companies without the hazards or inconveniences of cross-
border and cross-currency transactions.
What are the rights of an IDR holder?
An IDR holder has equivalent rights as an equity shareholder of the issuer company,
which includes voting rights, dividends, bonus, rights issue, split and other distribution
and corporate actions. An IDR holder has rights of legal recourse against the issuer
company and the domestic depository under the deposit agreement.
Can IDR be converted into equity shares?
An IDR holder can convert an IDR into underlying equity shares only after one year of
listing with the prior approval of the Reserve Bank of India. After such conversion, the
investor is allowed to hold the underlying equity shares only for the purpose of sale
within a period of 30 days from conversion.
Is there any fee payable by an IDR holder to the depository?
An IDR holder is required to pay certain fees and charges to the domestic depository
and overseas custodian for their services. The fees and charges are payable for the
conversion of IDR into underlying equity shares, any distribution by the issuer company
and any corporate action by the issuer company.
What are the tax implications for an IDR holder?
Since IDR trading does not fall under the purview of the securities act, it does not
attract securities transaction tax but does attract capital gains tax on trading profit.
The direct tax code aims to bring parity in tax treatment for equity shares and other
securities such as IDR. The dividend distribution tax is not paid by the issuer company
and, hence, is taxable in the hands of the IDR holder.
May 25, 2010 8

9. Standard Chartered | IPO Note
Profit and Loss Account (Consolidated) (US $mn)
Particulars CY2007 CY2008 CY2009
Interest income 16,176 16,378 12,926
Interest expense 9,911 8,991 5,303
Net interest income 6,265 7,387 7,623
Fees and commission income 3,189 3,420 3,824
Fees and commission expense 528 479 454
Net fee income 2,661 2,941 3,370
Net trading income 1,261 2,405 2,890
Other operating income 880 1,235 1,301
Non-interest income 4,802 6,581 7,561
Operating income 11,067 13,968 15,184
Staff costs 3,949 4,737 4,912
Premises costs 592 738 698
General administrative expenses 1,329 1,711 1,822
Depreciation and amortisation 345 425 520
Operating expenses 6,215 7,611 7,952
Pre-provisioning profit 4,852 6,357 7,232
Impairment losses on loans and advances
and other credit risk provisions 761 1,321 2,000
Other impairment 57 469 102
Profit from associates 1 1 21
Profit before taxation 4,035 4,568 5,151
Taxation 1,046 1,224 1,674
Profit for the year 2,989 3,344 3,477
Profit attributable to:
Minority interests 148 103 97
Parent company shareholders 2,841 3,241 3,380
Profit for the year 2,989 3,344 3,477
Earnings per share:
Basic earnings per ordinary share (cents) 176 192.1 167.9
Diluted earnings per ordinary share (cents) 174.2 191.1 165.3
Source: DRHP
May 25, 2010 9

10. Standard Chartered | IPO Note
Balance Sheet (Consolidated) (US $mn)
Particulars CY2007 CY2008 CY2009
Cash and balances at central banks 10,175 24,161 18,131
Financial assets held at fair value 22,958 15,425 22,446
through profit or loss
Derivative financial instruments 26,204 69,657 38,193
Loans and advances to banks 35,365 46,583 50,885
Loans and advances to customers 154,266 174,178 198,292
Investment securities 55,274 69,342 75,728
Other assets 11,011 20,374 17,201
Current tax assets 633 764 203
Prepayments and accrued income 3,857 3,466 3,241
Interests in associates 269 511 514
Goodwill and intangible assets 6,374 6,361 6,620
Property, plant and equipment 2,892 3,586 4,103
Deferred tax assets 593 660 1096
Total assets 329,871 435,068 436,653
Deposits by banks 25,880 31,909 38,461
Customer accounts 179,760 234,008 251,244
Financial liabilities held at fair value 14,250 15,478 14,505
through profit or loss
Derivative financial instruments 26,270 67,775 36,584
Debt securities in issue 27,137 23,447 29,272
Other liabilities 14,742 17,363 16,139
Current tax liabilities 818 512 802
Accruals and deferred income 3,429 4,132 4,113
Subordinated liabilities 15,740 16,986 16,730
Deferred tax liabilities 33 176 193
Provisions for liabilities and charges 38 140 184
Retirement benefit obligations 322 447 506
Total Liabilities 308,419 412,373 408,733
Equity
Share capital 705 948 1,013
Reserves 20,146 21,192 26,327
Total parent shareholders’ equity 20,851 22,140 27,340
Minority interests 601 555 580
Total equity 21,452 22,695 27,920
Total equity and liabilities 329,871 435,068 436,653
Source: DRHP
May 25, 2010 10

11. Standard Chartered
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Ratings (Returns) : Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)
Reduce (-5% to 15%) Sell (< -15%)

12. Standard Chartered
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Tel : (022) 3952 4568 / 4040 3800
Research Team
Fundamental:
Sarabjit Kour Nangra VP-Research, Pharmaceutical sarabjit@angeltrade.com
Vaibhav Agrawal VP-Research, Banking vaibhav.agrawal@angeltrade.com
Vaishali Jajoo Automobile vaishali.jajoo@angeltrade.com
Shailesh Kanani Infrastructure, Real Estate shailesh.kanani@angeltrade.com
Anand Shah FMCG , Media anand.shah@angeltrade.com
Deepak Pareek Oil & Gas deepak.pareek@angeltrade.com
Puneet Bambha Capital Goods, Engineering puneet.bambha@angeltrade.com
Sushant Dalmia Pharmaceutical sushant.dalmia@angeltrade.com
Rupesh Sankhe Cement, Power rupeshd.sankhe@angeltrade.com
Param Desai Real Estate, Logistics, Shipping paramv.desai@angeltrade.com
Sageraj Bariya Fertiliser, Mid-cap sageraj.bariya@angeltrade.com
Viraj Nadkarni Retail, Hotels, Mid-cap virajm.nadkarni@angeltrade.com
Paresh Jain Metals & Mining pareshn.jain@angeltrade.com
Amit Rane Banking amitn.rane@angeltrade.com
Rahul Jain IT, Telecom rahul.j@angeltrade.com
Jai Sharda Mid-cap jai.sharda@angeltrade.com
Sharan Lillaney Mid-cap sharanb.lillaney@angeltrade.com
Amit Vora Research Associate (Oil & Gas) amit.vora@angeltrade.com
V Srinivasan Research Associate (Cement, Power) v.srinivasan@angeltrade.com
Aniruddha Mate Research Associate (Infra, Real Estate) aniruddha.mate@angeltrade.com
Mihir Salot Research Associate (Logistics, Shipping) mihirr.salot@angeltrade.com
Chitrangda Kapur Research Associate (FMCG, Media) chitrangdar.kapur@angeltrade.com
Vibha Salvi Research Associate (IT, Telecom) vibhas.salvi@angeltrade.com
Pooja Jain Research Associate (Metals & Mining) pooja.j@angeltrade.com
Technicals:
Shardul Kulkarni Sr. Technical Analyst shardul.kulkarni@angeltrade.com
Mileen Vasudeo Technical Analyst vasudeo.kamalakant@angeltrade.com
Derivatives:
Siddarth Bhamre Head - Derivatives siddarth.bhamre@angeltrade.com
Jaya Agarwal Derivative Analyst jaya.agarwal@angeltrade.com
Sandeep Patil Jr. Derivative Analyst patil.sandeep@angeltrade.com
Institutional Sales Team:
Mayuresh Joshi VP - Institutional Sales mayuresh.joshi@angeltrade.com
Abhimanyu Sofat AVP - Institutional Sales abhimanyu.sofat@angeltrade.com
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Pranav Modi Sr. Manager pranavs.modi@angeltrade.com
Sandeep Jangir Sr. Manager sandeepp.jangir@angeltrade.com
Ganesh Iyer Sr. Manager ganeshb.Iyer@angeltrade.com
Jay Harsora Sr. Dealer jayr.harsora@angeltrade.com
Meenakshi Chavan Dealer meenakshis.chavan@angeltrade.com
Gaurang Tisani Dealer gaurangp.tisani@angeltrade.com
Production Team:
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Dharmil Adhyaru Assistant Research Editor dharmil.adhyaru@angeltrade.com
Bharat Patil Production bharat.patil@angeltrade.com
Dilip Patel Production dilipm.patel@angeltrade.com
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