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pg 29. INTERVIEW: Mangu Singh pg 32. INTERVIEW: Harsh Dhingra pg 35. Indian Economy – Trend indicators pg 37. PhillipCapital Coverage Universe – Valuation Summary

Ground View - Previous Issues VOL 3 . ISSUE 5 . 1ST - 30TH JUNE 2016 Vineet Bhatnagar- Managing Director and CEO EDITORIAL BOARD Naveen Kulkarni, Manish Agarwalla, Kinshuk Bharti Tiwari COVER & MAGAZINE DESIGN Chaitanya Modak, www.inhousedesign.co.in EDITOR Roshan Sony RESEARCH Banking, NBFCs Manish Agarwalla | Pradeep Agrawal | Paresh Jain Consumer Naveen Kulkarni | Jubil Jain | Priyam Tolia Cement Vaibhav Agarwal Economics Anjali Verma Engineering, Capital Goods Jonas Bhutta Infrastructure & IT Services Vibhor Singhal | Shyamal Dhruve Logistics, Transportation & Midcap Vikram Suryavanshi Midcap Amol Rao Media Manoj Behera | Naveen Kulkarni Metals & Automobiles Dhawal Doshi | Nitesh Sharma | Yash Doshi Oil & Gas Sabri Hazarika Pharmaceuticals Surya Patra | Mehul Sheth Telecom Naveen Kulkarni | Manoj Behera PORTFOLIO STRATEGY Anindya Bhowmik

1st May 2016 Issue 4

1st Apr 2016 Issue 3

1st Mar 2016 Issue 2

1st Jan 2016 Issue 1

1st Dec 2015 Issue 9

1st Dec 2015 Issue 8

TECHNICALS Subodh Gupta PRODUCTION MANAGER Ganesh Deorukhkar MID-CAPS & DATABASE MANAGER Deepak Agrawal SR. MANAGER - EQUITIES SUPPORT Rosie Ferns FOR EDITORIAL QUERIES PhillipCapital (India) Private Limited No. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel West, Mumbai 400 013 SALES & DISTRIBUTION Ashvin Patil, Shubhangi Agrawal, Kishor Binwal, Bhavin Shah, Ashka Gulati, Archan Vyas CORPORATE COMMUNICATIONS Zarine Damania | Bharati Ponda [email protected]

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Letter from the MD

CONTENTS

Most people in the banking industry agree that ‘digital banking’ is the wave of the future. While digital banking is often equated with mobile or online banking, in the banking context, digitisation is mainly the process that all banks need to go through in order to provide better services to customers. Banking customers have been changing their behaviour in line with technological developments and increasing their demand for digital channels. Customers’ disloyalty to banks continues to increase. All of these have created enabling conditions for fin-tech firms to target the traditional financial sector. The big questions are – will fin-tech firm steal a large part of the businesses from traditional banks? Will their efforts result in margin compression across the sector? What strategy would banks adopt to counter the fin-tech onslaught? Will virtual branches replace the traditional brick and mortar

4. COVER STORY: Digitisation in banks – Collaboration, not competition Most banks in India believe that tie ups or collaboration with fin-tech firms would be an appropriate strategy to embrace digitisation

branches? Our cover story on “Digitisation in banks – collaboration not

29. INTERVIEW: Mangu Singh

competition” evaluates the impact of digitisation wave on banks and analyses the strategies of various banks to combat the new wave of digital disruption. Our analyst, Manish Agarwalla, interacted with leading technology consultants in the BFSI space, met up with digital heads of banks, fin-tech firms, and regulators, to understand how prepared banks are to take on fin-tech companies, their strategy in terms of service delivery and product offerings, and their current technology capability. Given the onslaught of fin-tech firms in the world of financial services, banks run the risk of becoming redundant if they do not adopt new technology. Most banks in India believe that tie-ups or collaborations with fin-tech firms

Managing Director of Delhi Metro Rail Corporation (DMRC) talks to us about the evolution of the Delhi metro network

would be an apt strategy to embrace digitisation. Adoption of efficient technology will not only reduce operating costs for banks, but would even open up new streams of revenue. Also in this issue – an interview with Mr. Harsh Dhingra, Chief Country Representative, India, Bombardier Transportation, where he talks of his company’s journey in India and the opportunity he sees in the India railways and the metro segment, and an interview with Mr Mangu Singh, the Managing Director of Delhi Metro Rail Corporation (DMRC),

32. INTERVIEW: Harsh Dhingra Chief Country Representative, India, Bombardier Transportation takes us through the journey of the company in India

35. Indian Economy – Trend indicators

where he talks about evolution of the Delhi Metro network, execution challenges, and about other metro projects in the country. Best Wishes

37. PhillipCapital Coverage Universe: Valuation Summary

Vineet Bhatnagar

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COVER STORY BY MANISH AGRAWALLA

E-CASH THE ‘NEW CURRENCY’

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DIGITISATION IN BANKS – Collaboration, not competition

PAYMENT VIA QR CODES

pg. 6

Digitisation in banking - Brick to click

____________________________ pg. 7

Fin-tech companies -



Unbundling financial services

____________________________ pg. 10

Banks preparedness to combat Fin-tech

- Geared to challenge new waves

of digital disruption

____________________________ pg. 22

Digitisation strategy of banks -



Collaboration with Fin-tech and co-existence



of physical with virtual

____________________________ pg. 25

Challenge – Evolving the digitisation culture

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The fierce invasion of fin-tech companies in the banking space shook up its very foundations. These companies brought about such a global revolution in the sector that the way people bank underwent a drastic change in the last 10 years or so. Banking continues to evolve under the advent of the technological and psychological changes that these fin-tech companies compelled the market to make. While banks quickly adopted digital technologies transactions and payments, they have lagged behind in incorporating these advancements in lending. Several young fin-tech companies have stepped into this gap and made quite a place for themselves by offering efficient lending solutions. However, in general, the trend seems to be more towards collaboration rather than rivalry, especially from the fin-tech companies. They realise that with the support of banks, they can rise to phenomenal heights. Banks will have to forge relationships with these fin-tech companies in order to innovate, and will continue to even invest in some of them. Most banks in India believe that tie-ups or collaboration with fin-tech firms would be an apt strategy to embrace digitisation. For now, multiple payment technologies will coexist in India, as it is a diverse market with different customer segments. Even globally, cards have not completely replaced cash transactions. There will be enough space and opportunity for different players – whether it is mobile wallets, payment banks, or a universal bank. Collaboration between banks and fin-tech companies would enrich customer experience while healthy competition is also necessary to evolve technology. It is clear that the digitisation journey will not be easy. However, by breaking it down into stages and taking a disciplined approach, Indian businesses can go beyond merely doing better. Ultimately, they can transform their businesses by activating new sources of revenue that take full advantage of India’s rapid digital growth. G RO U N D V I EW

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DIGITISATION IN BANKING Most people in the banking industry agree that ‘digital banking’ is the wave of the future. Indeed, many would contend that it is not at all a future wave, but that it is already here. While digital banking is often equated with mobile or online banking– and these do involve digital applications of some sort –in the banking context, digitisation is mainly the process that all banks need to go through in order to provide better services to customers. Digitisation also empowers customers with selfsufficiency. Digital banking is so important because it allows banks to become virtually omnipresent. Challenges often give birth to opportunities –the major

Brick to click

challenge that Indian banks face today is digitisation, and this process has given birth to many opportunities such as netbanking, mobile banking, and insta-pay. Digitisation is enabling banks to meet the needs of its customers across the spectrum of age and gender. Banking customers have been changing their behaviour in line with technological developments and increasing their demand for digital channels. Customers’ disloyalty to banks continues to increase. All of these have created the enabling conditions for start-ups to target the traditional financial sector. Backed by venture funds, many of these start-ups, which in banking parlance are called fin-tech companies, are providing banking products at much lower costs and with a greater degree of convenience. Today, fin-tech businesses are creating ondemand credit, using self-learning models to analyse risk, or making it easier for businesses and individuals to transact. Globally, the financial industry is seeing unbundling of services. The big question is – will fin-tech firm steal a large part of the businesses from traditional banks? Will their efforts result in margin compression across the sector? What strategy would banks adopt to counter the fin-tech onslaught? Will the virtual branch replace the traditional brick and mortar branch? Mr Mahesh Makhija (Partner, Ernst &Young) believes that every part of the financial value chain is under threat from fin-tech companies; entire payment ecosystems have exploded and banks are trying hard to match fin-tech offerings. Even on the lending side, banks are trying to partner with fin-tech on the front-end for customer engagement programmes (need analysis, generating leads). On CASA (current account and savings account) fin-tech companies can be a threat. He does not see a risk to banks in the near term, but in the long term, challenges from fin-tech companies will force banks to collaborate with, acquire, or build these fin-tech companies.

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F I N -T E C H C O M PA N I E S

What are Fin-tech Companies? Unbundling the financial services Capital float LendingKart Idifi

i-lending Faircent Neogrowth

Scripbox Advicesure Coverfox Perfios Medimanage Policybazaar Bluechip FundsIndia Creditseva

Apnapaisa Switchme Homeloan PayTM Mobikwik PayU

Oxigen Remit2India Mwipe

Remitguru Freecharge Citrus

BankBazaar Apna Paisa

Fin-tech is a short form of financial technology. These kinds of companies, usually start-ups, use software to provide fi-

Global Fin-tech financing activity

nancial services. Typically, their purpose is to disrupt incum-

USD BN

Deal Volume

5.7

468

2015

22.3

1108

2014

12.7

871

2013

4.6

772

of these companies is a manifestation of strong customer re-

2012

3.2

610

quirements for specialised and customised services. In 2015

2011

2.5

459

worldwide, fin-tech firms received a total financing of US$

2010

1.8

338

bent financial systems and corporations that rely less on

2016 (Q1)

software. These firms provide specialised services in areas of payment and remittances, lending, personal finance and retail investment, and business infrastructure. The breeding

22.3bn while Indian fin-tech companies received US$ 1.6bn.

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Source: Accenture & KPMG

G RO U N D V I EW

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TYPES OF FIN-TECH COMPANIES Payment and remittance These companies allow individuals and businesses to accept payments over the web and mobiles. These start-ups aim to integrate payment processing into websites and mobile apps without having to maintain merchant accounts. To minimise fraud, transfers are made directly into the bank accounts linked to the payee.

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Lending Many lending-services companies have recently sprung up to service the demand for access to finance from consumers and businesses alike. These lending-service start-ups aim to outwit traditional lending mechanisms and use alternative credit models and data sources to provide faster access to capital.

Personal finance and retail investment Another breed of fin-tech companies help individuals save money and manage and invest their finances. These kinds of companies generally help people to compare different options and enable them to make more informed decisions based on their personal needs.

Banking infrastructure New-age fin-tech companies are solving infrastructure issues for traditional banks, institutions, and start-ups by effectively using technology. These companies have drastically improved access to information, analytics, and digitised data sources – in short, they have done things that weren’t even thought of until a few years ago.

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The major segments that fin-tech companies have “disrupted include mobile payments (PayTM), money transfers(Western Union), loans(Capital Float), and wealth management(Policy Bazar).”

Source: MXV Consulting

Various financial products offered by fin-tech firms are at different stages of their product life cycles. Concepts such as crowd funding and consumer lending are at a nascent stage. These products would need legitimacy and recognition by the regulator and acceptance by customers. RBI’s recent consultation paper on peer-to-peer lending provides legitimacy to the consumer-lending marketplace model. With increased acceptance by customers, P2P lending could gain traction. Ease of transaction and enhanced customer experience has attracted potential buyers of life insurance and general insurance to fin-tech companies like Policy Bazaar and Bank Bazaar. Payment services of fin-tech companies such as Paytm, PayU, or Citrus are widely used to avail services like cabs, utility bill payments, money transfer, shopping, and movie tickets. Payment and remittance gained wide acceptance among customers due to the ease of use and low transaction costs.

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B A N K S P R E PA R E D N E S S T O C O M B A T F I N -T E C H

Payment solutions: Continuous innovation; nothing is sacrosanct

Payment solution provided by banks in India are comparable to the best of fin-tech firms

Safe, secure, sound, and efficient payment

The proportion of these (which includes retail

systems for the country have been the mission

electronic clearing, mobile banking, and pre-

of every regulator. In order to expand the reach

paid payment instruments or PPIs)has increased

of the payment system and encourage product

rapidly to 28.1% in FY16 vs. just 7.4% in FY09.

innovation, the Reserve Bank of India (RBI) estab-

Paper-clearing and even the usage of cards are

lished an umbrella organisation called National

in a decline-mode. Within cards, the fall is mostly

Payment Corporation of India (NPCI) in 2009

in debit card usage at ATMs largely because of

for all retail payment systems in India. There has

increased acceptance of e-money by merchant

been a shift in payment mode to clicks from cards

establishment and efficient and secure payment

– mainly due to new technology, improved IT

systems. Emerging trends suggest that the pro-

infrastructure, and high smartphone penetration.

portion of mobile banking and PPI will increase

Data indicates that the trend is towards paperless

significantly, largely substituting ATM transac-

transactions.

tions.

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Payments are paramount

consumer interactions but also boost the number of charged transactions and the cash flowing through

Payments dominate the average consumer’s banking relationship.

Providing

strong

payment

the banking system (through prepaid, current

solutions

accounts, and consumption-related lending).

(as a part of a larger strategy for digital banking) is imperative for banks. As per McKinsey’s report, the



On the corporate side: Transaction banks that

average customer interacts with his or her bank at

execute well on digital cross-selling can increase

least twice a day for payments-related matters, such as

their market share of corporate deposits and lending.

buying a financial product, checking on a payment, or

By tailoring payments solutions to the under-served

paying a bill. These interactions represent more than

segments (small and informal merchants, youth,

80% of customer interactions with the banks. Making

international travellers, migrants, and low-income

an excellent payments platform is necessary for cross-

customers), banks can shift a bigger share of

selling other financial services.

payments to bank-owned channels.

Digital payments offer good solutions

Banks should leverage data

Digital payments provide banks with a platform to boost

Banks own rich reserves of raw behavioural data. Mobile

fee and interest income, reach out to the underserved

channels enhance this data pool with location and

segment, and extend the value proposition. •

search data, which can provide valuable insights into

On the retail side: Mobile-payments solutions

future customer choices. Banks could leverage their

(mobile

transfers,

data strengths to create new services along the full span

international remittances, small-merchant mobile

of the consumer decision journey, reaching beyond

card readers) not only increase the frequency of

payments transactions to manage their customers’ entire

peer-to-peer

(P2P)

money

RTGS Cards Mobile Banking

Retail Electronic Clearing Prepaid Payment Instruments (PPIs) Paper Clearing

120 100 80 60 40 20 0

2015-16

2014-15

2013-14

2012-13

2011-12

Transaction volume through various payment instruments

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11

Collaboration between banks and fin-tech companies “would enrich customer experience while healthy competition is also necessary to evolve technology.” digital wallet (for example, by optimising loyalty awards and special offers, payments terms, and instruments). If banks cling to their traditional, narrow view of the payments ecosystem, fin-tech firms will not only take the additional revenues from these channels, but will also enjoy prime access to a customers’ ‘digital trail’, including essential transaction information and direct traffic to preferred service providers within the digital sphere.

Private banks are leaders, as always Private banks have initiated their digital banking transformation processes much ahead of their PSB peers. Today, the products and features offered by private banks are very much in line or even better than some of the products offered by fin-tech companies. Mobile banking

Payment solutions have seen a sea change

commands close to double-digit share (10% of overall

The Indian market has seen the advent of fin-tech

transactions) for private banks while for PSB giants such

companies – Paytm, Mobikwik, Oxigen, and Citrus Pay

as SBI, it is just 3%. PSBs are definitely lagging behind

– and the market share of pre-paid payment instrument

in their digital initiatives – the share of mobile banking

(PPIs) in total payment transactions in terms of volume

transactions is almost nil for PNB and BoI.

has increased to 4.8% from virtually nothing five years

Not all is lost– cash is still king

ago. Increasing penetration of smartphones have increased customers’ expectations from their bankers – they demand efficient, safe, and cost-effective payment solutions. Realising the gravity of the situation, most banks now offer mobile and digital payments.

necessarily the worst thing in the world. Mr. PareshRajde (Chairman, Suvidha) pointed out in a GV conference that in India, only 8% of the population transacts electronically and the rest transacts in cash. Even for a developed country like the US, 50% of transactions

Penetration of smart phone %

still happen through cash. In India, around 90% of the

CY13

CY14

CY15

China

43

48

51

North America

57

64

69

9

13

17

India

At this point, not having a strong digital setup is not

population earns their livelihood in cash. Hence, selfservice smartphone-based models cannot replace brick-and-mortar banking models entirely, at least not immediately. To conclude, payment and remittance solutions provided by private banks in India – either through net,

Smartphone shipment and data usage in India

mobile, or phone banking platforms– are comparable to the best of fin-tech firms. These banks have either

Smartphone shipment (mn) Wireless subscriber (mn)

CY12

CY13

CY14

CY15

built technology or partnered with fin-tech firms.

16.3

44.0

81.5

102.6

Moreover, NPCI’s unified payment interface (UPI)

864.7

886.3

944.0

1010.9

platform is all set to provide a payment solution based

Data Usage MB/user

on a virtual address, thus overcoming the need for

Idea

140.0

257.0

490.0

635.0

cumbersome bank account numbers or IFSC codes. Mr

Bharti

152.0

317.0

584.0

793.0

Rajesh Prashad (Head, Rupay – NPCI) believes that card transactions will continue in India for some more time,

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Digital Solutions by Banks AXIS BANK

HDFC BANK

ICICI BANK

KOTAK MAHINDRA BANK

SBI

Digital Banking

Axis Mobile - mobile banking; Ping Pay - wallet; Lime - social wallet

Mobile banking - PAYZAPP / HDFC Bank APP

iMobile/ Pockets

Mobile banking; Hashtag Banking; kaypay

State Bank freedoM

No. of transactions

60 in axis mobile

100 in PAYZAPP

150 services in iMobile

70+ services

na

Share of mobile banking in overall transaction volume

12%

6%

9%

14%

3%

Common Features

1. View account details & transact - deposit / loan / credit card. 2. Money transfer Mobile. 3. DTH connection recharge. 4. Utility bill payment. 5. Wealth management products. 6. Demat account payment. 7. Merchant payment. 8. Account service request.

Special features

Non bank customer can use PingPay to receive / request money & recharge

 Chillr is a mobile wallet can be used by bank and non bank customer

Lime is a social wallet - can be used to send / receive money through social media Expense manager

Apart from standard ser- Hashtag Banking vices, iMobile provides Banking though social features like “Now block media a card, stop a cheque, track your deliverables,“

 Buddy is a wallet

Forex services, Investment & Insurance Manage payees, link accounts, cancel instructions Pocket is a mobile wallet which can be used by bank customer as well as non bank customer also

even though people are moving to mobile technology. Multiple payment technologies will coexist, as India is a diverse market with different customer segments. Cash transactions have not been completely replaced by cards, even in the most advanced countries. There will be enough space and opportunity for different players – whether it is mobile wallets, payment banks, or a universal bank. Unified payment interface can be a challenge to mobile wallets

the UPI platform using a virtual address. A mobile-pin will then be needed to authenticate the transactions. There is NO separate or special app for UPI. It will be an update to existing net banking apps of banks that would provide UPI services. Initially, banks will be allowed to provide UPI services through its net banking apps, but based on that experience, PPIs may be included in the UPI ecosystem. There is lot of debate about survival of wallets with the advent of UPI services. Mr YadvendraTyagi (Director Business development, Citrus) says that the unified

National Payment Corporation of India (NCPI) is set

payment interface will actually help wallets, as customers

to make transactions easier by introducing the Unified

across banking channels would be able to use them.

Payments Interface (UPI). This interface will allow a user

However, their survival would depend on the product

to transfer money to another user in a single step. UPI

quality and customer experience. The survival of a ‘wallet’

users will not need to use their credit/debit cards or net-

company would be at risk if its business model is based

banking credentials to make/authenticate payments

around only money transfers. Fin-tech companies that are

through UPIs. Instead, users will be able to transact on

building their business model around payment solutions

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Digitisation in lending Partnering can create a sea of change Customers have taken to digital channels like ducks

The unique selling propositions of fin-tech companies

to water, compelling financial institutions to provide

include:

the convenience of anywhere, anytime banking. While

1. Convenience: Anywhere, anytime banking

digitisation has transformed transactional banking, it

2. Faster turnaround times: Disbursement in less than a

has not made as big a mark in lending. This has led

week.100% online application. Minimum documentation

to the rise of many online lending companies and non-

(KYC, bank statement, income tax return, VAT return).

bank lenders (Lendingkart, Indifi, Iending, Faircent, and

Use algorithms and sift through data to find hidden

New growth) that capitalise on the inefficient lending

insights in order to make lending decisions quickly. This

process of banks.

ensures fast turnaround.

The growth of these companies also demonstrates that

3. Superior credit evaluation: Use analytics and big data

customers are looking for more convenience, which

scoring to evaluate client’s business. Have supply-

digitisation can provide. The significant rise of non-

chain partnerships, which bring access to borrowers.

bank lenders has led banks to invest more in digital

Transactional data to aid underwriting.

technology, and form partnerships with them to retain

4. Lower operating costs: From application to collection

their positions as leading operators in the lending

(through electronic repayment) the entire process is

market. Fin-techs are increasingly gaining legitimacy,

digitised.

even with regulators, and are expected to gradually

5. Flexible loan structure: Repayments are structured, which suits the cash flow of the borrowers.

gain customer trust.

Lending Solutions by fin-tech Companies Lending

Business model

Capital float NBFC / SME loan market place

Product

loan size

duration

interest rate

Revenue stream

Working capital loan 1lac to 10mn to online seller

90-180 days

16-24%

Spread & fee

Term finance

1lac to 5mn

6 months to 3 years

16-24%

Spread & fee

Invoice finance

1lac to 10mn

30-180 days

16-24%

Spread & fee

lendingkart SME loan market place

Working capital loan

indifi

SME loan market place

Working capital loan

i-lending

P2P personal loan market place

Personal loan

25k to 0.5mn

6-36 months

12%-24%

Registration fee from borrower. Transaction fee from both borrower and lender

Faircent

P2P personal loan market place

Personal loan

50k to 0.5mn

6-36 months

12% -24%

Registration fee from borrower. Transaction fee from both borrower and lender

Neogrowth

NBFC

Working capital loan starting from to online seller 2lac Retailer with EDC/ POS machine

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Retail loan provided online by various banks Loan products

Axis bank

HDFC Bank

ICICI Bank

SBI

Home loan

Home loan

Home loan

Home loan

Two Wheeler/Car loan

Two Wheeler/Car loan

Car loan

Auto loan

Credit Card

Credit Card

Credit Card

Credit Card

Personal Loan

Personal Loan/ Loan against securities

Personal Loan

Personal Loan Loan against property Education loan

Lending game-changers The size of fin-tech companies in the Indian lending market may be insignificant, but the offerings they have are noteworthy. Going forward, these offerings could be game changers. NBFCs have already adopted this changing face of lending into their operations. Even banks have started disbursing some of their retail products online, which offer twin benefits of convenience to customers and lower underwriting costs for the lender. Incrementally, more than 50% of personal loans and credit cards are disbursed online and the underwriting costs are 70-80% lower than branch banking. Even the turnaround time has dropped – to a few hours from a few days in the past.

Non-traditional data gathering

Fin-tech companies believe in symbiosis Most fin-tech companies and banks in India do not believe the disruption theory. They believe that banks and fintech companies need each other’s support to encourage product innovation and provide commercially viable solutions to customers. • Banks need fin-tech companies to improve product delivery and customer experience, and enable them to not only manage increasing compliance costs, but also the risk of non-compliance. • Fin-tech companies need banks for better customer understanding, to manage regulatory risks, and to support continuous innovation. Mr K A Babu (Head Digital Banking, Federal Bank) calls his bank’s digital strategy 3As – Anywhere-Anytime-Any Device. He views digitisation as not just a cost-saving strategy, but also as a new revenue stream. He believes that in order to innovate, banks will collaborate with fintech companies and even invest in some of them in a quest to innovate.

Consumer behaviour and marketing analytics are

The business correspondent model

driving a sustainable competitive advantage in an era of eroding product differentiation, waning customer loyalty, and exploding volume and variety of data. Apart from pulling data from traditional sources such as civil data, bank statements, and verification,

• •

fin-tech companies are also gathering data in non-traditional ways – such as shopping patterns, academic records, and online footprints. Such data is going to make credit decisions more mainstream;



Introduced in India in 2006. Hailed as an innovative way of serving the ‘unbanked’ by allowing banks to reach them through a network of external agents. This model is very different from the conventional brick-and-mortar branch-based banking framework. It has seen varying degrees of success in India.

banks will embrace this approach soon.

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Suvidhaa point offering payment services

Banking with the underbanked – technology can disrupt micro finance The growing influence of technology provides

under

a secure, efficient, and cost-effective solution

assisted unsecured loan distribution may not steal

to the financial world. The much talked-about

a large chunk of the micro-finance market, but will

‘underserved’ segment at the bottom of the pyramid

result in margin compression, which can be negative

is still excluded from formal banking channels as

for micro finance businesses. Data analytics and

costs do not justify returns – the mathematics of high

customer’s financial transaction behaviour provides

product-delivery costs and low volumes makes the

insights into business opportunities for loan products.

risk-reward unfavourable. This model can provide

Technology assistance can improve banks’ outreach

strong competition to micro-finance businesses,

to hinterlands and create disruption in some of the

where lending rates are very high. In fact, banks are

established models such as micro finance.

pressure.

The

business-correspondent-

exploring this opportunity in a big way, as the yields in traditional banking products are continuously

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cost of each transaction at a branch is around “RsAverage 60 while with self-service it is as low as Rs 10” Suvidhaa

Sahaj

Suvidhaa, a PPI, acts as a business correspondent

Just like Suvidhaa, Sahaj (an associate company

for loan products for some large banks such

of Srei Infrastructure) provides digital services to

as Axis Bank. Its Chairman, Mr Paresh Rajde,

rural India through its 6,344 IT-backed common

strongly advocates a collaborative approach with

service centres (CSC) across West Bengal, Bihar,

banks, which can revolutionise loan products for

Odisha, Assam, Uttar Pradesh and Tamil Nadu.

the underserved. This model provides last-mile

Sahaj’s aim is financial inclusion; about 696 of its

connectivity through the agent-assisted model.

CSCs act as business correspondents for banks.

Strong customer database and state-of-the-art technology helps to underwrite unsecured loan products much faster.

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Digitising deposits Defending core competence Deposits and borrowings are any banks’

Important question –do banks require

raw material and a strong franchise in

so many branches?

these determines its ability to withstand competition. Providing a strong payments plan, as part of a comprehensive strategy for

Branches

are

vital

touch

points

for

customers. It acts as a point to on-board

digital banking, is therefore an imperative

the customer, cross-sell new products,

for any efficient and cost-effective deposit

and provides a sense of reliability to

franchisee.

the customer. Globally too, there are

Three factors have driven CASA growth of

contrasting examples – banks follow

late – electronic payments, internet banking,

varied strategies when it comes to building

and cards. The next wave of growth will

customer touch-points. On one end of

be driven by mobile banking. Banks have

the spectrum we have banks like Atom

embraced

deposit

and Fidor, whose strategy is branchless

products very well. Opening a savings

digitisation

in

their

banking; on the other, we have examples

account, to transactions in deposit accounts

of Wells Fargo in the USA, which believes

anytime, anywhere is a reality. Demand from

in the coexistence of both formats, even in

customers for anytime anywhere banking has necessitated the inclusion of self-service features in a deposit account, which has tremendously increased branch productivity and reduced costs. As per Federal bank,

a country where financial literacy is much higher. In the Indian context, banking penetration customer

is

still

ignorance

underdeveloped, about

financial

the average cost of each transaction at a

product is high, and physical presence

branch is around Rs 60 while with self-service

provides a great sense of reliability. In

(internet,mobile,or phone banking), it is as

such a scenario, coexistence of branch and

low as Rs10. As per State Bank of India, “A

digitisation seems to be an ideal strategy,

mobile banking transaction costs about 2%

especially for mid- to small-sized banks.

of the bank branching cost, 10% of ATMbased transaction and 50% of the Internet banking cost”

Banks run the risk of becoming redundant “if they do not adopt new technology”

1 8 GROUN D VI EW

1 - 30 JUNE 2016

From branch-banking to neo-banking The changing phases of the industry As the banking industry goes through a digital evolution, there is a great shift in the way services are rendered to the customers. From only branch banking at brick-andmortar locations, banks are now transforming to a digital platform in order to save on personnel and infrastructure costs and to reduce reliance on service staff. In the US, large banks were, up until recently, consciously reducing the number and size of their branches, as they were adapting to the changing behaviour of their customers, who started increasingly using digital channels for banking. Despite large banks such as Bank of America, Merrill Lynch, JP Morgan Chase, and HSBC rationalising and reducing their

Wells Fargo’s balanced strategy, based on data This San Francisco-based giant

performance. This data suggests that

believes that banks need to leverage

in any given six months, 75% of its

on branch-banking services along with

customers visit a branch; this shows

branches, recent Federal Deposit

digital channels in order to effectively

that branches continue to add value

Insurance corporation (FDIC) data

reach out to customers and increase

to the overall banking experience.

the effectiveness of financial inclusion.

Another interesting aspect of these

Wells Fargo is trying to achieve this

footfalls is that a large chunk of them

by integrating technology between

been growing, given that these

are from ‘millennials’, who are usually

branches, mobiles, online banking

perceived to be tech savvy; but

large banks are setting up branches

apps, ATMs, and call centres.

apparently, they still visit branches to

in unrepresented metropolitan

Wells Fargo holds the view that branch

initiate their financial relationship with

cities. This is in contrast to the

banking continues to be an integral

the bank. Most of its competitors have

part of the services value-chain. In

been encouraging their customers

order to make rational decisions

to open an account through mobile

reveals that per-capita number of branches in the US have actually

generic view that digitisation in the financial services industry would

about branch expansion, it has

applications, but Wells Fargo has a

make branch-banking services

been continuously monitoring data

neutral approach as 85% of its new

redundant.

related to traffic/footfalls and branch

account sales have been through

1 - 30 JUNE 2016

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19

branches. Wells Fargo builds and refines its digital channels and uses them in conjunction with branch banking. It

A few examples of the revolution in the industry

does not treat this as an ‘alternate’

up. Started from scratch, it aims

platform. For example, the bank

to provide a truly innovative and

provides its branch employees with

differentiating customer experience

tablets, which communicate with

that offers a comprehensive suite of

nearby ATMs – the purpose of this is

financial products and services by

to serve customers in case they run

owning the entire infrastructure. The

into any problem while transacting at the ATM. Although customers have

Atom Bank is an example of a

been using the digital channel for

revolution in the banking industry

banking, branches continue to play

and it is challenging the conventional

a pivotal role in rendering the entire

set up of existing banks. The bank

range of services.

received its license in June 2015 and

Neo-banking surges ahead

became UK’s first bank to operate completely through mobiles. The bank has already introduced residential mortgages and by the end of 2016, it will roll out more products such as fixed savings, current accounts,

The banking space is now seeing a remarkable transformation in terms of neo-banking, in which

overdrafts, and debit and credit cards

bank adheres to two main principles of financial innovation: openness and community. Openness is the flexibility and agility that enables banks to create an extensive ecosystem of partners and capabilities, while also leveraging APIs to develop differentiating applications. Community is about bringing users together and solidifying a bond between the bank and its customers, as well as between customers themselves.

in a phased manner, which will all be

The bank is the primary entity in

serviced through the app.

the Fidor Group, which holds two additional entities: FidorTecS and

banks are just a click away, as

Fidor Payment Services. FidorTecS

there are no brick-and-mortar

is the development branch of Fidor

locations. One of the key driving

Group, developing, implementing,

forces for neo banking would be

and maintaining the fidorOS platform

tech-savvy customers who prefer not to visit branches, a higher

and its library of APIs. It employs

number of millennials in the

around 30 developers and has been

customer composition, and greater

a standalone organisation under

penetration of smart devices.

Fidor Bank since 2013. Fidor Payment

Neo-banking aims to simplify

Services, as a strategic business unit

online transactions, while reducing

within Fidor Bank, provides payment

overhead costs and passing on

services for more than 40 payment

these benefits to customers in the

methods worldwide. It is the exclusive

form of lower interest rates or

enabler of Fidor payment products

lower fee charges. On the flip side,

and transaction business. FidorPays

neo-banking poses few challenges

leverages the network to allow users to make payments between accounts,

in terms of large complex transactions, which may require to

Another example of newbanks is Fidor

transact with ‘crypto-currency’, and

be carried out through a branch,

Bank in Germany, which redefines

make real-time payments across the

which neo banks do not have.

traditional banking from the ground

globe.

2 0 GROUN D VI EW

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Wealth management: Fin-tech not yet disrupting, but making inroads Higher customer expectations, unsatisfactory wealth management services from banks, poor

Cross-selling revenue of banks

after-sale services, and lack of expertise has warranted the need for a specialised wealth manager. Globally, financial services saw de-

Fee income on bancassuance, Rs bn

% to PBT

bundling due to a need for specialisation. This

Axis

8.9

7.2

led to grooming of wealth management fin-tech

HDFC BANK

8.2

4.4

10.2

8.4

Induidns

1.5

4.3

a level of insulation from fin-tech disruption

KOTAK

2.9

5.8

due to two key factors – first, wealth and asset

SBI

4.6

3.4

YES

0.6

1.5

companies in India such as Policy Bazar, Coverfox, FundsIndia and Scripbox. Wealth and asset managers have, so far, enjoyed

managers operate in a highly regulated, formal market. As regulators apply continued pressure

ICICI

on increasing fee transparency across the industry, organisations with higher operating costs will

It is too early for fin-tech companies to disrupt

become less attractive to consumers. Winners will

banks’ wealth management businesses. The greatest

be wealth managers who are adaptable, agile,

likelihood in the near-term is the southward movement

and have low-cost models. Wealth management

in fees and commissions on these products. Wealth

products are ‘push products’ where customer

management and cross-selling account for 5% of

interaction is quite essential. A mere digital

profit before tax for private banks. Falling rates

platform may not suffice in a market like India.

may force banks to look out for more cost-effective

Moreover, the penetration level of life insurance

alternate models to remain relevant. Banks that rely

is just 3.9% and share of mutual funds / equity

heavily on cross-selling as part of their overall fee,

funds is just 2.7% of household savings.

could have a tough time.

Personal finance and retail investment by fin-tech

Coverfox

Nature of business

USP

Insurance aggregator

Expert advice and an informed, unbiased opinion Post sale service - renewal to claim process

Policybazar

Insurance aggregator

Expert advice and an informed, unbiased opinion Post sale service - renewal to claim process

Fundsindia

1 - 30 JUNE 2016

Mutual fund and deposit product aggregator

Advisory services & post sale service

G RO U N D V I EW

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DIGITISATION STRATEGIES OF BANKS

Collaboration with fin-tech, coexistence of physical and virtual As banks revaluate their core value propositions

risk of market adoption, they would garner a

and contemplate their digital strategies, they

reputation for innovation and industry leadership.

essentially have a choice between three strategic postures: 1. Followers They have the choice to track other banks’ progress and develop service models that can react to customers’ needs when a new concept

Most banks are comfortable adopting the ‘catalysts’ role…

stabilises. These banks can invest in competitive innovation centres, picking up ideas after they hit

Traditionally, most financial services incumbents

the banking market.

have been comfortable partnering or playing the

2. Catalysts

role of catalyst in their own industry – especially where there is an opportunity to share processes

Under this strategy, banks can invite others

or services that are considered ‘non-core’, and

to innovate while they ensure client security,

which help all collaborators either reduce their

account management, and system stability. One

costs or create new market opportunities. There

way of doing this is by opening the bank’s IT

are many examples of such partnerships in India

platform to a select community of developers, or

– such as CIBIL, where various banks collaborated

by allowing others to provide services under their

to create an entity that provides data about a

client platform.

borrower’s credit history. It helps loan providers

3. Innovators

manage their businesses or help consumers secure credit faster and at better terms. The use

In this strategy, banks can seize the opportunity

of CIBIL’s products has led to a massive change in

to be leaders, competing on innovation not only

the way the credit lifecycle is managed by both

with other banks but also with digital leaders, on

loan providers and consumers. ARCIL is another

banking and non-banking services. Such leaders

example – it helps banks by acquiring stressed

would stand out as delivering comprehensive

assets, subsequently reaching a resolution or

digital solutions, and while they would bear the

undertaking a recovery exercise.

Most banks in India believe that tie ups or “collaboration with fin-tech firms would be an appropriate strategy to embrace digitisation” 2 2 GROUN D VI EW

1 - 30 JUNE 2016

…but in the future, collaboration will need to go a step further

List of bank tie up with fin-tech companies Banks

Fin-tech Companies

Key functions

HDFC Bank

Senseforth Technologies

Artificial Intelligence

Tagnpin

Customer engagement)

Net Vigil Software

QR code based payments)

Bugclipper Technologies

Quality assurance

Tapits Technologies

Biometric payments

MSWIPE

Mobile POS solutions provider

MPAY

Mobile POS solutions provider

appropriate strategy to embrace digitisation.

NOVOPAY

Consumer payment application

There are several examples: ICICI Bank has

Prizm Payments

Mobile POS solutions provider

Vayana Network

End-to-end digital invoicing and payment solution

Fastacash

Multi-social payment app

Chillr

Smartphone application for P2P money transactions

Safe 2 Pay

A point of sale-free payment system

Taptis Technology

A biometric payment company

Tagnpin

Marketing and customer engagement tool

EZETAP

Mobile POS solutions provider

Paytm

Online and Mobile wallet

Bank Bazzar

Online financial product aggregator

PayPal

Digital payments company

Paytm

Online and Mobile wallet

Eko India Financial Services

Prepaid wallet service

Ultracash Technologies

Payments processing through sound waves. 

Eko India Financial Services

Prepaid wallet service

Click & Pay

Mobile-based payment solutions enterprise

Eko India Financial Services

Prepaid wallet service

PayU

Online payment solution

In order to maintain and grow value in these times of change, established players will have to keep looking at collaborating more closely with those in different industries and outlooks. Most banks in India believe that tie ups or

Axis Bank

collaboration with fin-tech firms would be an

tied up with FinoPaytech, State Bank has tied up with Reliance JIO, Kotak Mahindra Bank has tied up with BhartiAirtel. The increasing number of traditional banks tying up with payment banks or fin-tech companies is a

HDFC Bank

testament to the collaborative approach.

Coexistence of physical and virtual branches in India

SBI

Due to financial and social reasons, the concept of branch banking in India cannot be done away with. While setting up and running

ICICI Bank

a physical branch is undoubtedly expensive, the situation in India is not as bad as it is in the US or Europe. In the last few years, Bank

Yes

of America has reduced its branch strength to 4,789 from 5,328 while JPMorgan Chase slashed its branch count by 2% to 5,504. For both organisations, the savings were substantial. While BofA’s workforce came down by roughly 15%, JPMorgan Chase pruned its staff strength by 6,000, leading to savings

IndusInd Bank

worth US$500mnin H1 2015.

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As per State Bank of India, “A mobile banking transaction “costs about 2% of the bank branching cost, 10% of ATMbased transaction and 50% of the In ternet banking cost” Banks in the US or in Europe are facing the heat of dwindling spreads in their intermediation businesses. Moreover, high penetration of smartphones and financially literate customers provide opportunities for fin-tech companies to disrupt the system. This is not the case in India. Another important differentiator is social – in India, people would not be inclined towards trusting a ‘faceless’ bank. They would want to know who their banker is. Therefore, the idea of not having branches and physical presence for assisting customers may not be a wise strategy for this country. However, despite India’s peculiar predispositions, the fact is – the face of traditional branch banking is already seeing a change and will continue to evolve. There can be several innovative formats – from being ‘pure digital’ or ‘pure traditional’, branches could end up being mixed models– where they offer the best of both. For instance, a ‘single-employee’ branch model could work (especially for smaller coverage areas) where most services would be digital, but a person would always be available for support and assistance. Bank branches are not going to totally disappear – but they are going to transform. Multi-formats would most certainly be the way ahead. Here are two examples of co-existence strategies: •

New-age private bank IndusInd believes in the co-existence of the physical and virtual. Physical branches are essential to ‘on-board’ a customer and cross-sell a product, while virtual branches take care of the transactional needs of a customer by providing them the option of anytime and anywhere banking.



DCB Bank has initiated an aggressive branch expansion drive. It plans to add 150 branches in two years, thus doubling its network. This bank believes that a physical footprint is essential to on-board customers and cross-sell new products. From a customer’s perspective, DCB believes that the physical branch’s presence provides a sense of reliability and trust, which is a key factor in banking.

Bank branches are not going to totally disappear “– but they are going to transform. Multi-formats would most certainly be the way ahead” 2 4 GROUN D VI EW

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C H A L L E N G E – E VO LV I N G T H E D I G I T I S AT I O N C U LT U R E

Banks can attract the digital talent needed to evolve their offerings, but do they really have the culture?

Internal structures and processes can often prove to be restrictive, making it hard to innovate from within. Instead, many banks are looking at how they can work in conjunction with external companies by using ‘lab’-type formats – empowering digital teams to develop, experiment, and evolve propositions before integrating them back into the larger corporate structure in a manner that is aligned with the wider digital strategy of the business.

2. Design a digitisation roadmap. Customers should be at the centre of this roadmap. The design should include tactics for using digital technologies to strengthen a bank’s understanding of existing and future customers. In this model, fostering participation of leaders from all ranks, by designing a ‘digital business value tree’ and considering potential digital operating models is important. In this roadmap, technology and skills required to harness the

Rather than piloting a project and then facing

true power of digital assets to deliver the desired

insurmountable obstacles, these experiments

customer value has to be demonstrated.

provide ‘risk-free play grounds’ to try out new technologies and provide the company with

3. Digitise the business model.

the option of mainstreaming them only if they

In this approach, it is necessary to make the

become viable. This significantly reduces the

right choices about customer-value proposition,

risks associated with large-scale changes and

resources, profit formula, and performance

increases the chances of delivering a favourable

metrics, and to nurture capabilities and culture

outcome.

needed to support the business model and

Major consulting firm Accenture suggests following this ‘path’ to profitable digitization: 1.

Awareness

and

ownership

around

digitisation.

transform digitisation into a driver of profitable growth. It is clear that the digitisation journey will not be easy. However, by breaking it down into stages and taking a disciplined approach, Indian

Throughout the organisation, people should

businesses can go beyond merely doing better.

understand what digitalisation is and what

Ultimately, they can transform their businesses by

advantages it offers – this fosters a sense of

activating new sources of revenue that take full

ownership about this process.

advantage of India’s rapid digital growth.

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I N

A

B O X :

A P P - O N L Y

B A N K S

BankMobile • This mobile-only bank was set up in 2009 in the middle of the financial crisis. It quickly established a very different approach to conventional banking, encouraging a two-way conversation about what features to offer and how to improve things. • It was very early into the whole social finance thing too. • Customers can sign in to their accounts via Facebook, but Fidor stresses that the social interaction is all about listening, and not just a gimmick. It’s even launched a ‘like’ interest rate: the more likes the bank gets on its Facebook pages, the higher the interest rate goes. • Last year, Fidor proved its innovative quality again when it teamed up with Ripple to use blockchain-type protocol to power money transfer. The bank has about 300,000 users in Germany, and is also live in Russia. It’s now going to new markets like the UK and US.

• Entirely digital, but not entirely independent, Hello bank!was created by Europe’s BNP Paribas Group in 2013 at a reported cost of €80mn, and is now live in France, Italy, Belgium and Germany. • The mobile-only bank provides a range of dedicated apps supported by extendedhours access to an account manager by video call, online chat, or phone. It offers a fee-free current account and even a savings account that comes with an Amazon voucher for €100. • The app also includes a lot of social and gamification elements – savers can receive contributions from friends and family members through social networks; and there are tools that provide visual representations of an individual’s financial situation. • The bank has said that it want to acquire 1.4 million customers by 2017.

2 6 GROUN D VI EW

• This Berlin-based mobile-only bank received US$2mn in funding last year and is now live (by invitation) in Germany and Austria. It started out as a pre-paid card for kids, but changed its approach when it saw just how many adults sought it out. • Its service is based around an app with a linked Mastercard. • It also supports P2P payments to other mobile users and displays charts to help regulate spending. • Everything is customisable – a user can set limits or even disable payments. Interestingly, it charges no extra fees for paying for overseas goods in foreign currencies.

• US-based BankMobile’s parent, Customers Bank, have 1.2 million student checking accounts. • BankMobile aims to go after Millennials and be the ‘Uber’ of banking. Everything is done through the app, which is powered by Malauzai Software. • Signing up for an account can be done in five minutes with a photo capture of official ID. Bills and cheques can also be photo scanned. • There’s a Venmo-style P2P transfer feature, and customers get an ATM card they can use at 55,000 locations, but they can switch it off from their app as an added security measure. • BankMobile doesn’t charge any fees on checking and savings accounts and offers a personal line of credit (max value of US$5,000).

• Its banking partner is Wirecard Bank, which holds all the appropriate licences.

• The firm says it’s targeting 25,000 customers in a year and 250,000 in five.

• Simple was one of the first pioneers of digital-only banking. It made such an impact that it was sold to Spain’s secondlargest bank, BBVA, in February 2014, for a US$117mn. • By that point, US-based Simple had 100,000 users. • Some of its eye-catching ideasincluded the ‘Goals’ tool, which lets users designate money for desired purchases, and Safeto-Spend, which reveals how much is available to spend without affecting longterm goals.

• France’s AXA Banque responded to the rise of mobile-only banks by starting its own – Soon – in June 2013. • The new bank revolves around a radically re-imagined interface. The main emphasis is on past and future spending, which is illustrated by a vertically scrolling dial. In this way, the app also encourages users to think responsibly about their outgoing. • It also embraces the social side of finances, giving users the chance to take pics of what they’ve brought and reveal them to friends via social media.

• US-based GoBank competes closely with others such as Moven and Simple, but with one big difference – customers can deposit cash at branches of Wal-Mart. • The bank was jointly created by prepaid card pioneer Green Dot Corporation and retail giant Wal-Mart, and launched last year. Shoppers can sign up for the bank in a branch, and deposit cash there too. Otherwise, the bank is entirely mobile. • There are no minimum balance fees, monthly fees, or overdraft charges, provided customers have a minimum of US$500 in the account. Account holders can also use 42,000 ATMs without incurring any fees. • As with other mobile banks, users can send P2P payments, set up alerts, manage their money and gauge spend against income in a user-friendly ‘Balance Bar’.

1 - 30 JUNE 2016

• The mobile-only bank was launched in 2011, well ahead of the competition, and soft launched in mid-2013. • Its features include some of the ideas that every mobile-only bank now deploys – realtime spending alerts, budget visualisations, and linked debit card. Last year, Moven bagged an US$8mn‘Series A’ led by SBT Venture Capital. It is now targeting an international rollout. • In January, Moven confirmed it would roll out wearable banking on the Moto 360 smart watch. It was an example of the US firm’s desire to lead from the front in disruptive banking.

• UK-based Atom was formed in 2014 by Anthony Thomson, the man behind Metro Bank, and Mark Mullen, the former boss of First Direct. • Atom is a low-cost app-based bank. It uses biometric security: face and voice recognition (with fingerprint ID coming soon) to log-in to its app. • Based in Durham, Atom Bank has no branches or vast call centres. All contact with this bank is via an app, through which customers are able to talk to its 30-member service team. • It plans to launch current accounts, loans, and mortgages by the end of 2016.

• A little different from the other banks in the list:Osper is a UK start-up targeted at children. This mobile-only bank service is built around an app and linked prepaid debit card (from MasterCard). • Parents can top up the app with funds and set parameters for how it is used. They can use separate logins too. Kids can use the card for physical spend and the app for digital. • Osper was a ‘graduate’ of the TechStars accelerator and closed a US$10mn (£6mn) funding round last year, led by London’s Index Ventures. The firm has some competition – it is very similar to another UK startup, GoHenry.

Some of the flourishing fin-tech companies globally Name

Sector

Key People

Description

Funding Circle (US)

SME lending market place

Samir Desai • Funding Circle was created with one big idea – to revolutionise the out-dated banking system and secure a better deal for everyone • With offices in the UK, US, Germany, Spain and in the Netherlands, it is the world’s leading marketplace exclusively focused on small businesses, providing a platform where investors can browse businesses that Funding Circle has credit-assessed and approved for lending.

Founded in 2010

• Once approved, businesses post their loan request on the Funding Circle marketplace. Here, investors choose which type of business to lend to, the amount of money they wish to lend, and the interest rate they want to earn. Wealthfront (US)

Wealth management

Adam Nash

• Wealthfront makes it easy for anyone to get access to excellent, long-term investment management without the high fees or steep account minimums.

Founded in 2011

Kreditech (Germany) Founded in 2012

1 - 30 JUNE 2016

• An automated investment service that combines financial expertise and technology to provide sophisticated investment management at prices that are affordable for everyone.

• Its mission is to provide access to the same high-quality financial advice offered by major financial institutions and private wealth managers (such as tax-loss harvesting), without high account minimums or costs. Retail banking

Alexander Graubner Muller

• Kreditech is a technology company that delivers a range of custom-tailored financial services with a focus on under-banked consumers across the globe. • It uses big data, proprietary algorithms, and automated workflows to acquire, identify and underwrite customers within seconds. • Automated processes combined with self-learning algorithms ensure fast and convenient customer service, minimising cost and human error, while continually improving by incorporating new customer data.

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Some of the flourishing fin-tech companies globally Name

Sector

Key People

Avant (US)

Consumer lending market place

Al Goldstein

Founded in 2012

Description • Avant is a fast-growing marketplace-lending platform that is lowering the costs and barriers of borrowing for consumers. • Through big data and machine-learning algorithms, the company offers a unique and highly customised approach to streamlined credit options. • At its core, Avant is a tech company that is dedicated to creating innovative and practical financial products for all consumers.

ZhongAn (China)

Property Insurance

Jack Ma / Pony Ma

Founded in 2013

• ZhongAn is an innovative online property insurance company. It uses big-data technology to assist product design, automatic underwriting, auto claims, precision marketing, and risk management. • It is the first company in China to be issued an internet (online) insurance license. The company is a joint venture between Alibaba Group Holding (an e-commerce company), Tencent Holdings (an online gaming and social networking company), and Ping An Insurance. • ZhongAn offers a wide range of online insurance services to the Chinese market, catering to all socio-economic groups, with a major focus on travel, accident, and health.

Oscar (US)

Health insurance

Joshua Kushner

Founded in 2013

• Oscar is focused on using technology to simplify the entire healthcare experience. • A team of technology and healthcare experts looked at the current state of the US healthcare system and were frustrated by the horrible consumer experience. In response, they decided to reinvent how healthcare is delivered. • They are reinventing how to manage care, process medical claims, control healthcare costs, and provide transparency. • All this complexity will be hidden behind an easy experience for its members. • Oscar is making the healthcare system simple, smart, and friendly.

Qufenqi (China)

Consumer durable finance

Founded in 2014

Min Luo (Co-founder and CEO)

• Electronics retailer that offers monthly instalment payment solutions to students and professionals in China. • Primarily offers smartphones, laptops, and other consumer electronics online, allowing customers to choose their own down-payment option and the period for making regular monthly instalments. • Customers have to close instalments within two years of the purchase. • The business model is tailored for students and young white-collar workers, with the final price and monthly required payments shown transparently on the product page.

2 8 GROUN D VI EW

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In an extensive interview with Mr Mangu Singh, the Managing Director of Delhi Metro Rail Corporation (DMRC), he talks about the evolution of the Delhi metro network, the execution challenges it faced, and also about other metro projects in the country.

Mangu Singh MANAGING DIRECTOR

Delhi Metro Rail Corp

BY VIBHOR SINGHAL Q: DMRC is currently implementing phase-3 of the

central Delhi, we have taken a quantum jump in technology

Delhi Metro, which will make it the fifth largest metro

– we have used new coaches, signalling systems, and

network in the world. For a network that started just

automated driverless trains. (Phase-3 is essentially phase

15 years ago, it has come quite far. What are the key

1 + 2 put together.)

features of this phase?

In phase 3, 90km will be ‘unattended train operations’ –

Phase-3, with its extensions, involves constructing about

where there is no human intervention. Trains operating on

160km of metro network in one go – something that

phase-1 and 2 lines cannot be shifted to driverless trains

probably nobody anywhere in the world has done before.

because that will require technology upgradation. Phase

If you remember, phase-1 was executed over seven years

3 will decongest stations like Rajiv Chowk and Kashmere

and three months while phase-2 took less than five years

Gate. With this phase providing more interchange options,

and covered 125km. In Phase 3, apart from just catering to

congestion at these stations will reduce significantly.

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Q: What is the current passenger traffic and where do you expect it to go after phase-3 is complete?

the site and just placed them on the piers. In phase-3 our focus was primarily on reduction of labour

Current passenger traffic is 2.8mn per day. In 2015, we had

as skilled labour availability is very limited. In the harvesting

crossed 3.2mn in a day. After phase-3 is done, we expect it

season, especially, we did not get any labour; so, we

to rise to 4mn.

mechanised many processes.

Q: What will phase - 4 be about and what is its current status?

Q: DMRC has also been a consultant to all metro projects in the country. How has your experience been with those

The DPR for phase - 4 is ready; it will comprise of 103km and

projects in terms of interference by state governments,

will be concentrated in the central part of the city. It will consist

pace of execution, etc.?

of (1) Azadpur to RK Ashram – covering Sadar Bazar, Karol Bagh – the third line for Old Delhi and (2) criss-crossing from Inderlok to Indraprastha via Paharganj and ITO among others. These two lines will be completely underground and there will be two more lines. Phase-4 will provide more interchange stations. Execution on this phase will start anytime now. We will begin the preliminary work even before funding is secured.

DPRs and first-section tenders of all metro projects were finalised by DMRC. We also built some of these metros (Jaipur and Kochi). We built Jaipur within three years and Kochi in less than four years – we have recently started trials in Kochi. DMRC’s track record has been great. We are also in the process of building Vijaywada and Mumbai Metro 2A. Whenever DMRC takes a new project, we take full

Q: We have seen DMRC slipping into the red over the last two years even though it is still profitable operationally. While this is because of the expansion, do you see DMRC returning to profit after phase-3 is over? As you said, we are still profitable at the operational level; however, our margins are shrinking. DMRC has always been a lean organisation; earlier, we had set a target of employing 40 people per kilometre, which we are further tightening

responsibility for all the decisions about finalisation of tenders, management of contracts, and decision about developers. State support is always needed in areas such as land acquisition, and law and order. The DPR is also prepared in consultation with the state government authorities. Our reputation has resulted in full support from government agencies. Be it Jaipur or Kochi, we have had a complete free hand. We expect this in Mumbai and Vijaywada too.

to 34. We are constantly trying to improve this parameter. Staff cost (salary) is not in our hands as it is decided by the

Q: The DPRs for Chandigarh and Ludhiana prescribe the

government, but we can control the number of people that

use of LRT (Light Rail Transit). How do you see that as an

we employ. We are also concentrating on operational- and

option, especially for tier-2 cities in India?

energy-efficiency to reduce costs.

Fundamentally, there is no difference between LRT and MRT. In Europe, LRT means trams that run on surface. LRT is nothing

Q: DMRC has always been at the forefront of adopting

but a metro – if you run trains at lower frequencies or with

new technologies (incremental launching method, NATM).

lesser coaches, it becomes an LRT. All these terminologies are

Would you like to highlight anything on these lines in

interchangeable.

phase 3?

If you expect lighter traffic, you can have lighter civil structures

Tunnelling is one subject where bookish knowledge doesn’t

– to run fewer trains with lesser coaches. Stations become

work. Every project has something new. For example, in

small, but it is still a metro – there is no fundamental difference.

phase-3, TBMs (tunnel boring machines) were not working

Everything else including power supply remains the same.

in a few places, hence we improvised. We don’t expect

Only if coach sizes are different, then you have a fundamentally

any significant new technology adoption ahead; it is more

different model, but that will give you a maximum saving of

learning-based, gained through experience.

10%, not more than that. However, these coaches are not

Let me give you another example – in phase 3, we used ‘U girders’. We realised that girders that were being cast in casting yards, in a factory environment, were superior to ones assembled at the site. So we transported pre-fabricated ‘pier to pier - U girders’ that were fabricated in casting yards, to 3 0 GROUN D VI EW

upgradable to a higher capacity in the future. So, you cannot run a five-coach train on infrastructure that was designed to run a three-coach one – this is because the power supply and station size would not be adequate. You can only increase the frequency.

1 - 30 JUNE 2016

Q: What about monorail? Monorail is completely different. Its only selling point is that

sufficient delivery capabilities? What is a concern in this area according to you?

you can build it along sharper curves, and connect places

The Delhi metro project was so large that players from

that have narrow roads. But the experience is highly inferior

over the world worked on it; we never had any problem of

because of single wheel. Another argument is that since the

capability deficiency. The problem is that the window of work

structures needed for monorail are sleek, they do not obstruct

is very small – we are building 160km over 3-4 years – they

the skyview. However, the modern concept of life saving

ALL have to work in that time frame.

/ rescue system for passengers means that the certifying

Since the employment of contractors is for a limited period

authorities will insist on a walkway along the monorail

only, once execution on a specific stretch is over, the

corridors for passenger evacuation, thereby defeating the

developer has to wait for the next contract to be awarded.

skyview argument – and we are back to square one. We do

Resources are limited. Even if we want contractors to grow

not consider monorail a proper solution for urban transport.

and become big in this domain, it is difficult, as this is not a

The biggest problem with monorail is the proprietary

regular job for them. They cannot be asked to bring in huge

technology. Therefore, if you want to extend a monorail even

resources in terms of the viability of their contracts.

by 5km, you have to go to the same rolling-stock vendor who

Most of the tunnelling work is done by international players.

has supplied the earlier phase. Even for existing rolling stock,

In phase-2, we saw Indian players taking on important

spare parts can be procured only from the same vendor. On

roles, although in JVs with international players, mainly for

the other hand, metro technology is so open that you can

consumables and spare parts for TBMs that are not available

add as many vendors as you like with the same specifications.

in India and therefore easier to procure with a partner.

Q: Our interaction with many rolling stock manufacturers

Q: In your opinion (personal or professional), does

suggests that the tender-award process in India is quite

investment of this magnitude in metro projects make

different from global norms. Globally, tenders are

sense, especially for tier-2 cities that do not require

awarded on LCC (lifecycle cost), but in India we seem to

metros today?

use only upfront purchase price as the bidding criterion; the fear is that this renders companies with superiorquality coaches (which would be initially expensive, but with lower maintenance costs later) unable to win many contracts. What are your views on this?

If you have the scope to widen roads, there is no question, right? You should do it! Most of our cities – even tier-2 cities – have populations of more than 4-5 million. They are not tier-2 cities in the global sense of the definition. My point is, if you delay making metros for these cities today, and

This is not 100% true. Different practices exist worldwide.

start building them after 10 years, it is just going to be more

For the first five years, rolling stocks do not require any

costly and more difficult to build. I think it is more prudent

major maintenance, largely because specifications are very

to plan a better public transport system today, as the return

stringent. Metros like those in Russia go for complete lifecycle

to society is much higher in terms of man-hours saved, and

cost, but having five or ten years does not make sense

lesser pollution and fuel consumption.

We do not include maintenance cost, as we believe that the

You see, we need to move to an ecosystem where public

vendors’ costs will be much higher than our departmental

will not mind paying for high-quality infrastructure. However,

cost. Our maintenance would be much cheaper.

we have made a system where we don’t charge people

In the last tender for Phase 3 – we included energy consumption

adequately for obvious reasons. Still, our cost of construction

in the bidding process for rolling stock. Anybody proposing

is 50% lower than most metro projects across the world, even

inferior energy consumption was loaded with a penalty on

Kuala Lampur and Shanghai Beijing. While the investment

the submitted bid, and the winner was decided on this basis.

might appear huge in absolute terms, it is still much less

This is going to result in significant cost saving as energy cost

when compared globally.

is 40% of our total operational costs.

Overall, I believe that investment in metro projects has many more tangential benefits than the ones that are easily visible.

Q: How has your experience been with developers

If you include them all, these investments are a very small

– foreign and domestic? Do Indian developers have

price to pay.

1 - 30 JUNE 2016

G RO U N D V I EW

31

Q: Could you talk a bit about Bombardier’s global operations? Bombardier is a Canadian company, headquartered in Montréal. In FY15, we posted revenues of US$ 18.2bn. We are the best in class in the transportation industry with 61 production and engineering sites in 28 countries, and a one-

Harsh Dhingra CHIEF COUNTRY REPRESENTATIVE, INDIA

Bombardier Transportation

stop solutions provider for sustainable modern mobility in the 21st century. We move millions of people every day in countries around the world; today, over 110,000 Bombardier

BY VIBHOR SINGHAL

rail vehicles operate globally. As a global leader in rail technology, we have significant international experience in manufacturing, engineering, technological innovation, services and fleet management – and we plan to bring all of these aspects to India. Q: How about Bombardier’s India operations? Could you

Mr. Harsh Dhingra, Chief Country Representative, India, Bombardier Transportation, takes GV

tell us about those?

through his company’s journey

India is one of the world’s most important railway markets

in India, its operations here, and

for us. In India, we have a well-established manufacturing operation. Additionally, we have engineering capabilities and a supplier and employee base, which consists of over 1900 highly skilled employees. We see huge opportunity in India what with Mass Transit systems planned in over 50 cities by 2050, the modernisation of the Indian Railways’ network, and

talks about the opportunity he sees in the Indian rail segment (railways and metros).

plans for semi high-speed and high-speed trains. In India, we have a railway vehicle manufacturing site and bogie assembly hall at Savli near Vadodara in Gujarat state. Our propulsion systems manufacturing facility is also in Vadodara at Maneja. We have a rail control solutions centre for project delivery and product engineering, and an information services hub near Gurgaon. And we also have an Engineering Centre in Hyderabad. In 2007, we invested ~€ 33mn in a state-of-the-art railwayvehicle manufacturing facility at Savli in Gujarat. Overall, we have invested ~US$ 100mn over the last two decades in Indian manufacturing sites, people, engineering, the local supplier network, and in proven technologies. We are actively contributing to the ‘Make in India’ program by delivering rail vehicles, products, and solutions that are developed locally, for both Indian and foreign markets. We also support the Indian government’s vision on ‘Skill India’ with locally-grown talent now delivering projects, as well as the ‘Clean India Movement’ by regularly arranging clean up drives in Vadodara. Bombardier truly incorporates “Make in India for India” and “Make in India 3 2 GROUN D VI EW

1 - 30 JUNE 2016

“I appreciate the efforts of Bombardier Transportation to invest in India through the FDI route. We acknowledge the contribution of Bombardier in supporting India’s “Make in India” and “Skill India” programme by producing trains for India and for exports from India” – Mr. Narendra Modi, Honourable Prime Minster, India. at a meeting with Bombardier officials in May 2016

for the World”. Q: How has your relationship been with Delhi Metro Rail Corporation (DMRC)?

vendors to set up production facilities, within Gujarat around our sites. This has increased the local content considerably from the time manufacturing started at the site in 2008. Currently the local content is at around 70%.

Bombardier is the Delhi Metro’s largest supplier of

This means an increasing amount of our product is truly

signalling systems and one of its largest suppliers of rolling

Indian, with components available in INR, and not subject

stock with more than US$ 1.2bn worth of orders placed

to the volatility of international currency markets.

since 2007. We have delivered 614 BOMBARDIER MOVIA metro cars and recently we have received an additional order of 162 cars from DMRC – this makes it one of the

Q: What is the competitive landscape like in this segment?

largest operating fleets in the world for Bombardier. We

In terms of manufacturing facilities, three companies

have also delivered signalling solutions for more than

have a base in India – Bombardier, BEML, and Alstom.

120km track length for Lines 5, 6 and 7.

Along with these companies, we compete with Korean,

Q: What has your relationship been with Indian Railways (IR)? Bombardier’s long-standing relationship with IR began

Japanese, Chinese and a host of other European players in the Indian rail market. Q: How have exports been from your Indian factories?

in 1993, with a design-and-build contract for electric

Our Savli site has developed extensive export-oriented

mainline passenger and freight locomotives. We now

activities. We are currently supplying bogie components

supply propulsion equipment to IR for locomotives. In

for Adelaide EMUs, Victoria trains, Riyadh Metro and

June 2016, we completed in-house production for the

São Paulo monorail and 75 six-car trains with bogies

supply of propulsion and electrical equipment to Mumbai

for Queensland New Generation Rolling stock (QNGR)

Railway Vikas Corporation (MRVC) for 72 twelve-car trains.

project. Vehicle assembly and bogie manufacturing for

Q: What is the potential opportunity in India, in the metro segment, over the next five years?

QNGR is taking place at the Savli facility while the Maneja facility is supplying a portion of the propulsion equipment. Three six-car trains have been delivered to date and they

Over the next 5-7 years, various cities in India will procure

are undergoing testing at our Wulkuraka Maintenance

approximately 3000 metro cars and 20 signalling lines. The

Facility in Ipswich, Australia. These trains have travelled

Indian government expects 50 cities to have a population

more than 10,500km by road and sea from Savli to the

of over 2mn each by 2050, and is encouraging them to

Port of Brisbane.

develop mass transit systems. This will generate demand for urban transit solutions, in which we excel. We are focused on projects that we consider strategic with long-term prospects for our operations in India. We are closely pursuing various metro projects in the cities of Delhi, Ahmedabad, Mumbai, Nagpur, Pune, Vijayawada, Vizag, and Bengaluru, along with light rail projects in Kerala state. Q: How much localisation of technology have you achieved at your India plant?

Q: Have you seen any changes with the new government at the centre taking charge since 2014? The Indian government, formed after the 2014 general election, is actively pursuing a long-term vision for sustainable and stable railways in India. Its ambitions are huge and focused, with emphasis on improving safety, expanding rail infrastructure, increasing track capacity, reducing congestion, raising passenger comfort levels, technological innovations, and faster train speeds. Rail is considered a significant engine of inclusive growth

Bombardier’s investment in Gujarat has attracted global 1 - 30 JUNE 2016

G RO U N D V I EW

33

for India, with the potential to contribute up to 2% of GDP, compared to current 1% levels. To maintain historic levels of national growth at 7-8%, railway needs to grow by ~9.5% every year. This will create new jobs, save energy, and improve the environment, while moving people, raw materials, and goods more efficiently nationwide. Q: Where will the money to transform India’s rail transportation come from? The Ministry of Railways has outlined its vision of railways becoming a key provider of connectivity and enablers of economic development, with a proposed US$ 125bn investment over the next five years (2014-2019).

which is a welcome introduction for the commuters. Driverless technology has two parts – rolling stock and signalling, which have to be properly interfaced. For the Phase-3 of the Delhi Metro, 60% of signalling has been done by Bombardier, whereas trains are supplied by Rotem. Q: It has been often cited that standardisation of contracts/specifications is required in India – do you agree with that? Yes, standardisation helps in reducing costs. The Indian market is maturing; things are moving towards standardisation, and we strongly support this. We have also been recommending that the authorities change the

During its initial days in office, the government introduced

bidding parameter to LCC (life-cycle cost) from acquisition

a plan for 100% FDI in the railways. In all, 17 areas have

cost – this will help bring in international practice of

been identified where industry players can invest up to

procurement.

100% from which IR expects to collect around US$ 13bn.

Q: In its last Phase 3 bids, DMRC included a penalty

In funding mass-transit systems, both the state and central

for energy efficiency. How was that received by the

governments contribute ~20-25%, while the rest is funded

industry?

by outside agencies such as Japan’s JICA, Germany’s KfW, the French AFD, European Investment Bank, and Export Import Bank of India.

Yes, the DMRC had proposed levying a penalty in the bid on energy efficiency. Energy efficient products are always preferred and I am sure that the industry welcomes it.

Q: Are you looking to bid for Mumbai Line 3 (MM3);

The understanding on evaluation methodology amongst

what is the timeline that you’re expecting for it?

supplier and buyer is a key.

We are interested in bidding for MM3 for Rolling stock

Q: What is opportunity for a player like Bombardier

and Signalling contracts. We understand civil contracts for

from freight corridors, being developed by Indian

MM3 will be awarded soon. The RFQ for rolling stock is

Railways?

already out and we expect RFQ for signalling shortly. We expect contract finalisation by Q2/2017, with supplies to be made in 2019.

If you see the current Indian Railways network, the average speed of passenger trains on “A” routes (7,000-8,000km, connecting important cities), is very low, due to movement

Q: Have tenders been invited for Phase 2 for the Jaipur

of freight trains. Freight trains move at ~25km/hr while

metro?

passenger trains move at ~40 km/hr (max 75km/hr). With

There are ongoing feasibility and alignment studies for Phase 2 of Jaipur. Once we have more clarity on Phase 2 with detailed specifications, we will be able to comment further. Q: What is the scope of driverless trains, which will be used in DMRC Phase 3? Does it require superior technology? Who, apart from Bombardier, has that

DFC in operation, the freight traffic will migrate to DFC from the “A” routes. This will increase freight movement speeds to 80km/hr and decongest the “A” routes. Hence, IR can not only introduce more passenger trains on the “A” routes, but can also increase their average speeds. This migration will create demand for locomotives, coaches, semi high-speed trains, as well as wagons.

technology? The driverless technology goes back 40 years – Bombardier was among the first companies to start implementing this technology in 1983. The key advantage of driverless technology is that it brings down the headway to 90 seconds from the current levels of around 2 minutes, 3 4 GROUN D VI EW

1 - 30 JUNE 2016

Indian Economy – Trend Indicators Monthly Economic Indicators Growth Rates (%)

Feb-15

Mar-15

Apr-15

May-15

Jun-15

Jul-15

Aug-15

Sep-15

Oct-15

Nov-15

Dec-15

Jan-16

Feb-16

Mar-16

IIP

4.8

2.5

3.0

2.5

4.2

4.3

6.3

3.7

9.9

-3.4

-0.9

-1.5

2.0

0.1

PMI

52.4

51.2

52.1

51.3

52.6

51.3

52.7

52.3

51.2

50.7

50.3

49.1

51.1

51.1

Core sector

2.3

-0.7

-0.4

4.4

3.0

1.1

2.6

3.2

3.2

-1.3

0.9

2.9

5.7

6.4

WPI

-2.1

-2.3

-2.4

-2.2

-2.1

-4.0

-5.1

-4.6

-3.7

-2.0

-0.7

-0.9

-1.0

-0.9

CPI

5.4

5.3

4.9

5.0

5.4

3.7

3.7

4.4

5.0

5.4

5.6

5.7

5.3

4.8

Money Supply

11.2

10.8

10.8

11.0

11.0

11.5

11.3

11.0

10.9

10.7

11.0

11.1

11.3

10.3

Deposit

11.2

10.7

10.7

11.5

11.4

11.8

11.9

11.3

11.1

10.4

10.9

11.1

11.0

9.9 11.3

Credit

7.2

8.7

9.2

8.8

9.5

9.4

9.0

7.5

9.0

9.8

11.1

11.4

11.6

Exports

-13.3

-20.8

-14.0

-20.2

-15.8

-10.3

-20.7

-24.3

-17.5

-24.4

-14.7

-13.6

-5.7

-5.5

Imports

-14.7

-14.2

-7.5

-16.5

-13.4

-10.3

-9.9

-25.4

-21.2

-30.3

-3.9

-11.0

-5.0

-21.6

Trade deficit (USD Bn)

-6.7

-11.4

-11.0

-10.4

-10.8

-12.8

-12.5

-10.5

-9.8

-9.8

-11.7

-7.6

-6.5

-5.1

Net FDI

3.2

2.7

3.3

3.8

1.7

1.7

2.2

2.8

4.9

2.7

3.6

4.1

2.8

1.5

FII (USD Bn)

3.8

2.0

3.1

-2.8

-2.0

-0.7

-3.5

-2.4

4.5

-3.8

-2.6

-1.5

-2.4

4.3

ECB (USD Bn)

2.3

2.7

7.3

2.4

3.2

2.1

0.8

2.6

2.1

3.2

3.0

1.4

1.4

1.5

(USD Bn)

NRI Deposits

61.8

62.5

63.4

63.8

63.7

64.1

66.5

65.6

65.3

66.7

66.2

67.8

68.4

66.2

Dollar-Rupee

338.1

341.4

344.6

352.5

355.2

353.3

355.4

350.0

353.6

351.6

352.1

349.2

346.8

355.6

FOREX Reserves (USD Bn)

295.8

291.9

293.4

296.4

287.9

284.6

280.2

275.5

276.3

283.0

291.3

295.7

292.2

294.4

(USD Bn)

Quarterly Economic Indicators Balance of Payment (USD Bn) Exports Imports Trade deficit Net Invisibles CAD CAD (% of GDP) Capital Account BoP

Q3FY14 79.8 112.9 -33.2 29.1 -4.1 0.9 23.8 19.1

Q4FY14 83.7 114.3 -30.7 29.3 -1.3 0.3 9.2 7.1

Q1FY15 81.7 116.3 -34.6 26.7 -7.9 1.6 19.2 11.2

Q2FY15 85.3 123.9 -38.6 28.5 -10.1 2.0 16.5 6.9

Q3FY15 79.0 118.3 -39.3 30.9 -8.4 1.7 23.6 13.2

Q4FY15 70.8 102.5 -31.7 30.2 -1.5 0.3 30.7 30.1

Q1FY16 68.0 102.2 -34.2 28.0 -6.1 1.2 18.1 11.4

Q2FY16 67.6 105.0 -37.4 29.2 -8.2 1.6 7.2 -0.9

Q3FY16 64.9 98.9 -34.0 26.9 -7.1 1.3 10.5 4.1

GDP and its Components (YoY, %) Agriculture & allied activities Industry Mining & Quarrying Manufacturing Electricity, Gas & Water Supply Services Construction Trade, Hotel, Transport and Communications Finance, Insurance, Real Estate & Business Services Community, Social & Personal Services GDP at FC

Q3FY14 3.8 5.5 4.2 5.9 3.9 8.3 3.8 12.4 5.7 9.1 6.6

Q4FY14 4.4 5.5 11.5 4.4 5.9 5.6 1.2 9.9 5.5 2.4 5.3

Q1FY15 2.6 8.1 4.3 8.4 10.1 8.4 6.5 12.1 9.3 2.8 7.4

Q2FY15 2.8 6.2 7.0 5.8 8.8 9.9 5.3 8.4 12.7 10.3 8.1

Q3FY15 -2.4 3.4 9.1 1.7 8.8 11.7 4.9 6.2 12.1 25.3 6.7

Q4FY15 -1.4 7.2 2.3 8.4 4.2 8.0 1.4 14.1 10.2 0.1 6.1

Q1FY16 1.6 7.1 8.6 7.3 4.0 8.5 6.0 10.5 9.3 6.1 7.2

Q2FY16 2.0 8.4 5.0 9.0 7.5 8.3 1.2 8.1 11.6 7.1 7.5

Q3FY16 -1.0 11.0 6.5 12.6 6.0 8.6 4.0 10.1 9.9 7.5 7.1

1 - 30 JUNE 2016

G RO U N D V I EW

35

Annual Economic Indicators and Forecasts Indicators

Units

FY8

FY9

FY10

FY11

FY12

FY13

FY14

FY15

FY16E

FY17E

Real GDP growth

%

9.3

6.7

8.6

8.9

6.7

4.5

4.7

7.2

6.8

7.5

Agriculture

%

5.8

0.1

0.8

8.6

5.0

1.4

4.7

0.2

2.0

4.0

Industry

%

9.2

4.1

10.2

8.3

6.7

0.9

-0.1

6.6

5.7

6.7

Services

%

10.3

9.4

10.0

9.2

7.1

6.2

6.0

9.4

8.5

8.8

38966

41587

45161

49185

52475

54821

91698

98271

104953

112825

Real GDP

Rs Bn

Real GDP

US$ Bn

Nominal GDP

Rs Bn

Nominal GDP Population

967

908

953

1079

1096

1008

1517

1611

1615

1684

49864

56301

64778

77841

90097

101133

113451

126538

137626

153212

US$ Bn

1237

1229

1367

1707

1881

1859

1876

2074

2117

2287

Mn

1138

1154

1170

1186

1202

1219

1236

1254

1271

1302

Per Capita Income

US$

1087

1065

1168

1439

1565

1525

1518

1655

1666

1757

WPI (Average)

%

4.7

8.1

3.8

9.6

8.7

7.4

6.0

2.0

-2.0

4.0

CPI (Average)

%

6.4

9.0

12.4

10.4

8.3

10.2

9.5

6.0

5.0

5.0

Money Supply

%

22.1

20.5

19.2

16.2

15.8

13.6

13.5

12.0

12.0

13.0

CRR

%

7.50

5.00

5.75

6.00

4.75

4.00

4.00

4.0

4.0

4.0

Repo rate

%

7.75

5.00

5.00

6.75

8.50

7.50

8.00

7.50

6.75

6.25-6.5

Reverse repo rate

%

6.00

3.50

3.50

5.75

7.50

6.50

7.00

6.50

5.75

5.25-5.5

Bank Deposit growth

%

22.4

19.9

17.2

15.9

13.5

14.4

14.6

11.4

12.0

13.5

Bank Credit growth

%

22.3

17.5

16.9

21.5

17.0

15.0

14.3

9.5

10.0

12.0

Centre Fiscal Deficit

Rs Bn

1437

3370

4140

3736

5160

5209

5245

5107

5351

5339

Centre Fiscal Deficit

% of GDP

2.9

6.0

6.4

4.8

5.7

5.2

4.6

4.1

3.9

3.5

Gross Central Govt Borrowings

Rs Bn

1681

2730

4510

4370

5098

5580

5641

5920

5850

6000

Net Central Govt Borrowings

Rs Bn

1318

2336

3984

3254

4362

4674

4536

4531

4406

4252

State Fiscal Deficit

% of GDP

1.5

2.4

2.9

2.1

1.9

2.0

2.5

2.4

2.0

1.5

Consolidated Fiscal Deficit

% of GDP

4.4

8.4

9.3

6.9

7.6

6.9

7.1

6.6

5.9

5.0

Exports

US$ Bn

166.2

189.0

182.4

251.1

309.8

306.6

318.6

316.7

270.0

283.5

YoY Growth

%

Imports

US$ Bn

YoY Growth

%

35.1

19.7

-2.5

26.7

31.1

0.5

-7.2

-1.1

-11.9

5.5

Trade Balance

US$ Bn

-91.5

-119.5

-118.2

-129.9

-189.8

-195.6

-147.6

-144.2

-136.0

-144.8

Net Invisibles

US$ Bn

75.7

91.6

80.0

84.6

111.604

107.5

115.2

116.2

118.8

121.1

Current Account Deficit

US$ Bn

-15.7

-27.9

-38.2

-45.3

-78.2

-88.2

-32.4

-27.9

-17.2

-23.7

CAD (% of GDP)

%

-1.3

-2.3

-2.8

-2.6

-4.2

-4.7

-1.7

-1.4

-0.8

-1.0

Capital Account Balance

US$ Bn

106.6

7.8

51.6

62.0

67.8

89.3

48.8

90.0

50.4

75.5

40.3

45.8

47.4

45.6

47.9

54.4

60.5

61.2

65.0

67.0

Dollar-Rupee (Average)

28.9

13.7

-3.5

37.6

23.4

-1.0

3.9

-0.6

-14.8

5.0

257.6

308.5

300.6

381.1

499.5

502.2

466.2

460.9

406.0

428.3

Source: RBI, CSO, CGA, Ministry of Agriculture, Ministry of commerce, Bloomberg, PhillipCapital India Research

3 6 GROUN D VI EW

1 - 30 JUNE 2016

1 - 30 JUNE 2016

G RO U N D V I EW

37

Sector

Agri Inputs

Agri Inputs

Agri Inputs

Agri Inputs

Agri Inputs

Agri Inputs

Agri Inputs

Agri Inputs

Agri Inputs

Agri Inputs

Automobiles

Automobiles

Automobiles

Automobiles

Automobiles

Automobiles

Automobiles

Automobiles

Automobiles

Capital Goods

Capital Goods

Capital Goods

Capital Goods

Capital Goods

Capital Goods

Capital Goods

Capital Goods

Name of company

Chambal Fertilisers

Zuari Agrochemicals

Rallis India

Tata Chemicals Ltd

Kaveri Seeds

United Phosphorus

Monsanto India

PI Industries

Coromandel Intl

Deepak Fertilisers

Tata Motors

Bharat Forge

Mahindra & Mahindra

Ashok Leyland

Apollo Tyres

Maruti Suzuki

Mahindra CIE

Bajaj Auto

Hero MotoCorp

Cummins India

Engineers India

Siemens

Crompton Greaves

VA Tech Wabag

Voltas

BHEL

Alstom T&D

353

126

326

592

64

1,173

186

865

2,951

2,549

186

3,854

159

104

1,334

774

387

167

228

636

2,407

599

405

411

210

197

64

Rs

CMP

90,333

307,419

107,819

32,275

39,861

417,604

62,653

239,792

589,278

737,611

60,143

1,164,277

80,731

296,398

828,786

180,276

1,258,671

14,752

66,392

87,158

41,553

256,884

27,950

104,590

40,770

8,298

26,760

Rs mn

Mkt Cap

41,950

258,137

55,468

28,942

127,703

103,609

15,978

48,074

283,477

224,979

60,664

557,984

118,404

175,338

383,840

75,839

2,582,235

33,995

98,386

22,849

4,943

128,903

9,247

181,331

16,417

51,046

106,626

FY16E

43,904

295,131

58,401

33,622

142,459

112,998

15,186

56,014

317,012

278,066

68,334

678,681

118,681

212,276

426,543

85,114

2,766,233

n.a.

105,672

27,361

5,764

141,881

11,136

190,743

18,660

54,930

105,340

FY17E

Net Sales (Rs mn)

3,793

-10,904

3,326

2,388

6,220

8,137

1,736

8,184

44,724

48,131

7,519

89,875

19,241

19,077

52,586

15,970

385,505

5,176

7,489

4,477

890

25,315

2,080

23,766

2,433

2,470

8,258

FY16E

4,236

15,208

4,615

2,883

8,709

10,259

2,195

10,074

49,335

59,019

9,345

107,652

18,752

23,825

59,716

17,919

456,242

n.a.

9,763

5,355

1,043

27,296

2,784

26,245

2,934

3,230

8,387

FY17E

EBIDTA (Rs mn)

1,821

-5,473

2,711

1,225

1,486

6,169

2,722

7,992

31,533

37,355

3,171

47,990

10,269

8,908

33,776

8,556

119,825

2,610

3,371

2,871

790

11,375

1,990

8,950

1,323

181

3,619

FY16E

2,096

12,262

3,690

1,483

3,578

8,582

2,803

9,102

34,996

43,542

4,607

67,041

9,107

12,375

39,069

10,428

158,535

n.a.

4,966

3,637

956

13,489

2,842

10,284

1,638

828

3,692

FY17E

PAT (Rs mn)

7

-2

8

23

2

17

8

29

158

129

10

159

20

3

57

37

37

30

12

21

46

27

29

35

7

4

9

8

5

11

27

6

24

8

33

175

150

14

222

18

4

66

45

49

n.a.

17

27

55

31

41

40

8

20

9

FY16E FY17E

EPS (Rs)

40.5

n.a.

-18.5

9.6

-19.3

73.7

-17.6

14.9

24.1

18.4

32.9

29.3

-3.1

280.9

9.4

19.2

-14.9

13.0

-16.8

16.7

-26.9

-3.3

-33.9

11.8

-15.9

-66.8

36.9

15.1

n.a.

36.1

21.0

140.8

39.1

3.0

13.9

11.0

16.6

45.3

39.7

-11.3

38.9

15.7

21.9

32.3

n.a.

47.3

26.7

21.0

18.6

42.8

14.9

23.8

358.3

2.0

49.6

-56.2

39.8

26.2

26.8

67.7

23.0

30.0

18.7

19.7

18.9

24.3

7.8

33.3

23.4

21.1

10.4

5.7

19.7

30.2

52.6

22.6

14.0

11.7

30.8

45.9

7.4

P/B (x)

EV/EBITDA (x)

43.1

25.1

29.2

21.7

11.1

48.6

22.3

26.3

16.8

16.9

13.0

17.4

8.8

24.0

20.2

17.3

7.9

-

13.4

23.9

43.5

19.0

9.8

10.2

24.9

10.0

7.2

6.2

0.9

4.7

3.2

1.0

8.8

2.3

7.5

7.3

5.7

2.7

4.2

1.3

5.1

3.5

4.4

1.8

0.8

2.4

7.6

10.9

4.0

3.1

1.7

4.5

1.0

1.1

5.8

0.9

4.2

2.9

0.9

8.1

2.3

6.8

6.1

4.8

2.3

3.5

1.2

4.3

3.2

3.7

1.5

-

2.1

6.0

11.0

3.6

2.5

1.5

4.1

1.0

1.0

24.0

-14.9

32.1

13.1

9.1

48.2

22.0

29.2

13.1

15.0

9.6

12.9

4.5

16.1

15.9

12.0

4.7

3.7

10.3

19.2

45.9

10.9

12.5

7.1

17.1

11.8

6.9

ROCE (%)

12.4

-1.6

11.8

12.3

3.7

13.0

10.1

25.1

38.9

29.1

14.3

17.3

18.6

15.3

15.2

21.0

17.4

15.2

12.0

25.3

20.6

18.5

22.1

14.6

14.7

2.2

14.4

13.4

3.5

14.3

13.4

8.4

16.6

10.1

25.7

36.1

28.2

17.7

20.0

14.1

17.9

15.6

21.4

18.7

-

16.1

25.3

25.3

19.8

25.7

15.1

16.4

9.5

13.3

12.4

-1.2

12.0

9.8

3.2

10.6

10.2

21.6

38.7

26.6

10.5

17.4

15.8

12.7

12.9

15.4

8.2

11.6

13.7

26.1

17.9

16.0

23.4

8.4

13.3

0.6

6.9

13.1

2.8

14.9

10.6

6.5

13.6

10.3

22.7

36.0

26.5

14.5

20.6

12.3

15.5

13.8

17.3

9.4

-

17.2

26.0

19.8

16.1

27.5

9.2

15.1

2.7

6.9

FY16E FY17E FY16E FY17E

ROE (%)

Note: For banks, EBITDA is pre-provision profit

21.1

12.6

22.6

11.0

6.2

37.3

17.9

23.7

11.8

12.0

7.2

10.5

4.9

12.7

13.8

10.4

4.1

-

7.5

15.6

39.1

10.1

8.9

6.2

14.0

8.5

6.5

FY17E FY16E FY17E FY16E FY17E

P/E (x)

FY16E FY17E FY16E

EPS Growth (%)

PhillipCapital India Coverage Universe: Valuation Summary

3 8 GROUN D VI EW

1 - 30 JUNE 2016

Sector

Capital Goods

Capital Goods

Capital Goods

Capital Goods

Capital Goods

Capital Goods

Cement

Cement

Cement

Cement

Cement

Cement

Cement

Cement

Cement

Cement

Cement

Financials

Financials

Financials

Financials

Financials

Financials

Financials

Financials

Financials

Financials

Name of company

ABB India

Larsen & Toubro

KEC International

Thermax

Inox Wind

Alstom India

Dalmia Bharat Ltd

Shree Cement

Mangalam Cement

OCL India

JK Lakshmi Cement

JK Cement

HeidelbergCement

India Cement

Ambuja Cement

ACC

Ultratech Cement

LIC Housing Finance

DCB Bank

Indusind Bank

Repco Home Finance

Punjab National Bank

Bank of India

Corporation bank

Bank of Baroda

State Bank of India

Union Bank

118

189

158

38

87

79

648

1,066

92

469

3,228

1,462

221

92

99

590

344

507

264

13469

880

618

237

768

131

1,316

1,284

Rs

CMP

81,152

1,463,284

363,251

38,343

71,040

155,811

40,552

634,375

26,122

236,788

885,764

274,559

342,969

28,322

22,412

41,226

40,520

28,820

7,055

469,221

78,178

41,536

52,539

91,524

33,563

1,226,388

272,165

Rs mn

Mkt Cap

82,194

761,480

123,908

43,730

113,051

172,775

2,508

45,347

6,208

124,490

269,193

114,328

217,573

58,814

18,151

34,229

25,754

25,121

8,461

60,803

65,288

23,144

42,332

54,828

87,242

1,017,884

81,403

FY16E

90,635

865,203

144,969

49,080

127,049

195,620

10,987

54,526

7,681

147,147

323,990

126,246

257,518

65,319

20,061

40,965

32,671

29,245

9,655

88,591

80,830

27,900

49,830

51,416

93,074

1,127,411

92,625

FY17E

Net Sales (Rs mn)

58,333

504,778

85,903

32,989

63,902

127,147

2,508

42,493

3,553

25,186

48,321

11,730

28,955

8,224

2,156

4,596

4,009

4,144

513

14,340

13,495

1,174

6,764

4,676

6,769

119,264

7,125

FY16E

63,774

504,629

103,271

36,350

74,176

140,053

3,196

50,352

3,210

29,807

65,056

15,917

41,401

9,926

2,962

6,598

5,450

5,573

1,075

25,234

20,020

1,741

8,519

4,543

7,531

138,973

8,633

FY17E

EBIDTA (Rs mn)

12,762

126,779

-15,488

-1,921

-31,887

31,259

1,492

22,783

1,623

16,280

22,321

7,520

13,506

966

362

638

705

1,878

-187

5,323

1,308

918

4,531

2,825

1,807

44,079

2,999

FY16E

11,365

145,077

35,224

2,648

11,076

43,195

1,901

26,948

1,298

19,248

33,557

9,415

18,531

2,430

989

1,910

1,904

3,025

220

11,146

5,202

1,470

5,715

2,720

2,290

54,793

3,885

FY17E

PAT (Rs mn)

34

24

10

22

-21

16

24

39

6

32

81

40

7

3

2

9

6

33

-7

204

15

14

20

24

7

47

14

-33.8

71.0

21.0

59.4

-0.2

15.8

43

28

17

26

17

21

30

46

5

38

122

50

9

8

4

27

16

53

8

320

19.7

4.2

-33.2

28.4

-182.5

-3.9

20.7

14.1

-15.1

17.4

6.4

-35.3

-29.3

n.a.

n.a.

-48.9

-57.9

38.2

n.a.

66.5

26.8

15.1

65.5

15.1

-178.1

31.7

-

18.3

-20.0

18.2

50.3

25.2

37.2

151.7

173.3

199.5

170.2

61.0

n.a.

57.1

297.7

60.1

26.1

-3.7

26.7

24.3

29.6

3.5

7.9

15.4

1.7

-4.1

5.0

27.2

27.6

15.9

14.6

39.7

36.5

32.5

29.3

61.9

64.6

57.5

15.3

-37.7

66.1

59.7

45.2

11.6

32.4

18.6

27.9

90.8

P/B (x)

EV/EBITDA (x)

2.8

6.8

9.3

1.5

5.3

3.8

21.4

23.3

19.9

12.3

26.4

29.2

23.7

11.7

22.7

21.6

21.3

9.5

32.1

42.1

15.0

28.3

9.2

33.7

14.7

22.5

70.1

0.5

1.0

1.1

0.1

0.6

0.5

4.3

3.7

1.7

2.6

4.2

3.3

2.3

0.8

2.5

2.5

2.9

2.1

1.4

8.2

1.7

3.6

3.0

3.9

2.3

2.8

9.0

0.5

0.9

0.9

0.1

0.5

0.5

0.1

3.3

1.5

2.2

3.7

3.1

2.3

0.7

2.2

2.3

2.6

1.8

1.3

7.0

1.7

2.4

3.7

2.0

2.6

8.5

1.4

2.9

4.2

1.2

1.1

1.2

16.2

14.9

7.4

9.4

20.0

22.3

11.2

6.9

14.5

14.9

14.9

7.0

24.5

32.0

10.6

25.5

8.9

19.9

8.1

18.5

38.2

1.3

2.9

3.5

1.1

1.0

1.1

16.1

12.6

8.1

7.9

14.3

16.7

7.7

5.2

9.8

10.2

10.4

4.7

11.1

17.7

7.1

16.3

7.0

19.6

7.1

15.7

31.5

FY17E FY16E FY17E FY16E FY17E

P/E (x)

FY16E FY17E FY16E

EPS Growth (%)

59 1,205.6

22

26

23

9

59

18

FY16E FY17E

EPS (Rs)

PhillipCapital India Coverage Universe: Valuation Summary ROCE (%)

6.6

7.3

-4.0

-1.8

-11.5

7.9

17.0

16.6

10.0

19.2

10.6

8.9

7.2

2.7

4.0

3.8

5.0

13.5

-3.7

12.4

2.9

8.0

26.1

12.2

12.2

10.0

10.0

5.4

7.6

8.8

2.3

3.8

9.8

18.4

14.6

7.4

19.4

14.1

10.8

9.5

6.0

9.8

10.6

12.4

18.7

4.2

16.7

11.6

26.3

11.0

13.8

11.4

12.1

0.3

0.4

-0.2

-0.1

-0.5

0.5

2.2

1.9

0.9

1.3

8.2

8.1

10.4

4.6

4.2

4.6

5.5

11.1

0.9

11.8

5.0

8.5

18.0

9.6

9.5

4.4

9.5

0.3

0.7

0.5

0.1

0.2

0.6

2.2

1.8

0.6

1.3

11.0

9.7

10.7

6.4

6.8

6.9

8.4

16.5

4.6

17.1

7.7

25.8

18.3

8.6

10.3

4.9

11.0

FY16E FY17E FY16E FY17E

ROE (%)

1 - 30 JUNE 2016

G RO U N D V I EW

39

Sector

Financials

Financials

Financials

Financials

Financials

Financials

Financials

Financials

Financials

Financials

Financials

Financials

Financials

Financials

FMCG

FMCG

FMCG

FMCG

FMCG

FMCG

FMCG

FMCG

FMCG

FMCG

FMCG

FMCG

FMCG

Name of company

Canara Bank

Indian Bank

Oriental Bank of Com

ICICI Bank

Shriram Transport Fin

Shriram City Union Fin

AXIS Bank

CIFC

HDFC Limited

Mah & Mah Fina

HDFC Bank

SKS Microfinance

Andhra Bank

Indian Overseas Bank

Asian Paints

Hindustan Unilever

Bajaj Corp

ITC

Emami

Nestle

Jubilant Foodworks

Marico Industries

Colgate

Agro Tech Foods

Dabur India Ltd

Godrej Consumer Prod

Britannia

2,936

1,439

291

483

837

254

1,178

5,710

1,075

318

393

853

929

30

51

598

1,149

299

1,196

894

493

1,644

1,120

232

84

86

188

Rs

CMP

352,303

490,113

512,614

11,765

227,638

328,091

77,507

550,563

243,877

2,560,621

57,923

1,845,838

890,903

53,495

34,944

76,122

2,906,343

169,919

1,889,252

139,563

1,174,597

108,358

254,029

1,348,040

27,094

41,401

102,272

Rs mn

Mkt Cap

86,929

89,573

84,360

7,802

40,943

61,223

24,320

81,236

26,597

360,747

8,742

317,059

151,051

73,446

52,389

12,614

274,149

31,755

311,386

20,710

163,255

23,845

50,117

211,212

53,538

44,674

91,757

FY16E

99,728

99,180

96,112

8,415

45,004

66,307

28,923

99,957

32,691

404,207

9,500

350,577

172,681

n.a.

59,881

19,290

324,937

35,666

353,656

24,084

192,698

27,169

58,103

243,027

59,126

48,420

99,117

FY17E

Net Sales (Rs mn)

11,999

16,242

15,199

543

9,477

10,655

2,730

16,018

7,171

143,653

2,716

63,333

27,732

48,072

36,449

4,149

223,351

20,160

100,235

12,220

159,084

13,950

36,904

250,632

38,913

31,614

69,458

FY16E

14,270

18,119

17,399

638

10,594

12,687

3,564

21,369

9,652

165,720

2,959

71,861

32,997

n.a.

41,930

6,085

263,567

22,752

114,400

14,700

181,827

15,987

43,284

256,001

41,596

33,215

71,508

FY17E

EBIDTA (Rs mn)

8,528

11,312

12,528

235

6,225

7,250

1,081

10,410

5,737

96,700

2,434

41,131

17,910

11,896

4,814

2,964

124,109

5,509

69,114

5,304

85,465

6,154

13,587

120,868

547

7,386

10,027

FY16E

10,209

12,856

14,317

337

6,681

8,661

1,502

12,236

7,602

111,857

2,577

46,775

21,074

n.a.

9,668

4,301

147,056

7,602

79,030

7,224

99,622

6,884

14,911

130,580

4,262

9,103

14,946

FY17E

PAT (Rs mn)

71

33

7

10

23

6

17

108

25

12

17

19

19

8

14

24

50

10

32

34

34

93

60

21

31

22

48

85

38

8

14

25

7

23

127

33

14

17

22

22

-

18

34

59

13

38

46

37

104

66

22

43

28

65

FY16E FY17E

EPS (Rs)

57.2

24.4

17.5

-36.9

11.4

30.1

-12.3

-12.2

18.2

5.3

10.9

6.7

25.9

72.2

32.4

58.5

21.5

-33.8

17.4

12.5

10.6

10.3

9.8

7.9

86.7

5.3

-15.4

19.7

13.7

14.3

43.4

7.3

19.5

38.9

17.5

32.5

15.7

5.8

13.7

17.7

-

26.6

45.1

18.5

38.0

-

36.2

7.5

11.9

9.7

7.8

38.7

28.6

35.3

41.3

43.3

40.9

50.0

36.6

45.3

71.3

52.9

42.5

26.3

23.8

45.0

49.7

3.5

3.7

25.4

23.2

30.6

37.1

26.2

14.3

17.6

18.7

11.1

2.7

3.9

3.9

P/B (x)

EV/EBITDA (x)

34.5

38.1

35.8

34.9

34.1

37.9

51.3

45.0

32.1

22.7

22.5

39.5

42.3

-

2.9

17.5

19.6

22.2

31.4

19.2

13.3

15.7

17.0

10.3

2.0

3.0

2.9

19.5

9.4

12.3

3.5

27.0

15.2

9.9

22.6

16.6

7.3

12.1

52.3

15.9

0.4

0.4

5.6

4.1

2.8

5.4

3.8

2.5

2.4

112.0

1.7

0.3

0.4

0.5

14.3

7.9

10.4

3.3

24.6

12.7

8.3

21.6

13.7

6.3

12.1

54.4

13.4

-

0.4

4.3

3.5

2.6

4.7

3.2

2.2

2.2

112.0

1.6

0.2

0.4

0.4

29.4

31.3

33.6

21.4

23.7

30.6

28.5

33.9

34.7

17.1

20.8

28.7

32.0

1.1

1.0

18.3

13.0

8.4

18.8

11.4

7.4

7.8

6.9

5.4

0.7

1.3

1.5

24.1

27.7

28.9

17.8

21.1

25.5

21.8

25.3

25.2

14.6

19.0

25.3

26.6

-

0.8

12.5

11.0

7.5

16.5

9.5

6.5

6.8

5.9

5.3

0.7

1.2

1.4

FY17E FY16E FY17E FY16E FY17E

P/E (x)

FY16E FY17E FY16E

EPS Growth (%)

PhillipCapital India Coverage Universe: Valuation Summary ROCE (%)

47.1

21.8

30.2

7.1

73.9

33.6

13.9

42.8

39.1

27.8

50.7

116.4

31.9

7.1

4.9

24.9

18.6

9.5

21.0

15.6

17.7

14.3

13.9

14.3

0.4

5.7

3.7

41.3

20.8

29.0

9.4

72.3

33.5

16.2

48.0

42.8

27.8

53.7

137.6

31.6

-

8.9

27.7

19.1

12.3

21.1

18.2

17.8

14.4

13.5

14.0

3.0

6.7

5.1

50.0

16.5

28.0

7.5

77.2

31.1

14.3

39.5

22.6

23.6

40.6

113.6

32.6

0.3

0.2

4.8

1.9

1.5

2.6

2.1

1.7

3.2

2.1

1.8

0.0

0.4

0.2

44.5

16.9

27.2

9.4

75.6

32.6

17.0

49.1

20.8

24.5

49.9

135.2

31.9

-

0.4

4.2

1.9

1.9

2.6

2.4

1.7

3.2

2.0

1.7

0.2

0.4

0.2

FY16E FY17E FY16E FY17E

ROE (%)

4 0 GROUN D VI EW

1 - 30 JUNE 2016

Sector

FMCG

FMCG

Infrastructure

Infrastructure

Infrastructure

Infrastructure

Infrastructure

Infrastructure

Infrastructure

Infrastructure

Infrastructure

Infrastructure

Infrastructure

IT Services

IT Services

IT Services

IT Services

IT Services

IT Services

IT Services

IT Services

IT Services

Media

Media

Media

Media

Media

Name of company

Apcotex Industries

Glaxo Smithkline Cons

J Kumar Infraprojects

PNC Infratech Ltd

GMR Infrastructure

GVK Power

MBL Infrastructures Ltd

KNR Construction

NCC

ITD Cementation

Ashoka Buildcon

Adani Ports & SEZ

IRB Infrastructure

Mindtree Ltd

Wipro

NIIT Technologies

Infosys Technologies

Tata Consultancy

HCL Technologies

Persistent Systems

KPIT Technologies

Tech Mahindra

Zee Entertainment

DB Corp Limited

Jagran Prakashan

HT Media

Dish TV

96

89

172

330

448

481

165

737

715

2,566

1,210

474

542

660

220

195

139

133

78

518

131

6

12

534

249

6,083

288

Rs

CMP

102,639

20,738

56,327

60,562

429,801

466,907

32,518

58,932

1,008,127

5,056,512

2,788,378

29,012

1,339,868

110,809

77,214

404,146

26,042

20,566

43,168

14,569

5,431

10,107

72,431

27,421

18,829

255,820

5,982

Rs mn

Mkt Cap

30,925

24,898

20,941

20,600

59,367

263,360

32,243

23,123

455,250

1,086,462

624,420

26,810

512,440

46,896

49,104

69,353

26,758

36,304

79,658

10,076

21,433

29,885

108,828

19,512

14,775

42,891

2,765

FY16E

35,240

27,363

23,558

23,356

69,706

285,973

33,766

28,705

498,115

1,188,528

704,536

29,197

560,902

55,710

55,492

71,132

33,201

41,750

83,644

12,594

24,648

48,605

94,388

23,415

18,469

46,973

5,382

FY17E

Net Sales (Rs mn)

9,889

3,077

5,991

5,477

15,545

41,873

4,353

4,171

99,567

306,780

170,790

4,749

111,986

8,299

26,355

46,211

7,950

3,086

7,129

1,511

2,358

18,897

46,076

2,576

2,719

7,104

406

FY16E

11,321

4,074

6,960

6,970

20,346

46,561

4,556

4,608

108,506

328,365

198,583

5,010

117,579

10,163

31,495

49,181

10,989

3,966

7,737

1,889

2,711

28,264

33,267

3,091

3,371

7,953

531

FY17E

EBIDTA (Rs mn)

2,414

1,692

3,242

3,053

9,985

28,668

2,815

2,974

80,661

242,148

134,920

2,788

88,943

6,033

5,904

26,677

963

1,016

2,177

1,160

705

-6,809

-16,983

1,264

1,154

7,023

226

FY16E

3,904

2,431

4,109

4,267

13,143

30,070

2,883

3,274

88,317

264,792

155,443

3,010

91,514

7,272

6,378

29,109

1,393

1,532

3,003

1,124

783

-3,136

-28,985

1,640

1,614

7,970

299

FY17E

PAT (Rs mn)

2

7

10

17

10

30

15

37

57

123

59

46

36

36

17

13

5

7

4

41

17

-4

-3

25

15

167

11

4

10

13

23

14

31

15

41

63

135

68

50

37

43

18

14

7

10

5

40

19

-2

-5

32

21

190

14

FY16E FY17E

EPS (Rs)

-

-5.9

41.1

-3.5

2.1

7.3

16.8

2.3

47.9

22.9

9.4

144.6

3.0

12.3

2.8

15.1

0.3

957.1

94.8

58.9

-56.0

33.8

-46.1

-2.3

4.2

20.4

-8.3

61.8

43.7

26.7

39.7

31.6

4.9

2.4

10.1

9.5

9.4

15.2

8.0

2.9

20.5

8.0

9.1

44.5

50.8

37.9

-3.1

11.1

-53.9

70.7

29.8

39.8

13.5

32.3

42.5

12.3

16.9

19.8

43.0

16.2

11.2

19.8

12.5

20.8

20.5

10.3

15.0

18.3

13.1

15.1

27.0

20.2

19.8

12.6

7.7

-1.5

-3.9

21.7

16.3

36.4

26.6

P/B (x)

EV/EBITDA (x)

26.3

8.5

13.3

14.2

32.7

15.4

10.9

18.0

11.4

19.0

17.8

9.5

14.6

15.2

12.1

13.9

18.7

13.4

14.4

13.0

6.9

-3.2

-2.3

16.7

11.7

32.1

20.1

-142.5

1.0

3.3

4.2

7.9

3.0

2.3

3.6

3.1

6.9

4.5

1.8

2.9

4.6

1.5

3.1

1.3

3.5

1.3

2.1

0.8

0.7

1.0

2.2

1.5

10.3

5.5

32.2

0.8

2.8

3.7

7.1

2.6

1.9

3.1

2.7

5.8

4.0

1.6

2.5

3.8

1.2

2.6

1.3

2.8

1.2

1.8

0.7

0.7

1.7

1.9

1.3

8.9

4.9

11.3

7.8

9.6

10.9

26.7

10.5

7.1

13.8

10.1

16.3

14.3

5.9

12.4

13.1

8.1

12.4

8.5

9.3

8.6

9.8

5.4

12.7

11.1

11.0

6.7

33.2

14.5

9.6

5.2

7.8

8.3

20.2

9.0

6.7

12.4

9.2

15.1

11.8

5.1

11.5

10.3

7.4

11.4

6.1

7.4

7.5

7.9

5.4

8.4

14.7

9.5

6.0

28.9

11.0

FY17E FY16E FY17E FY16E FY17E

P/E (x)

FY16E FY17E FY16E

EPS Growth (%)

PhillipCapital India Coverage Universe: Valuation Summary ROCE (%)

-335.1

7.8

19.8

21.3

18.4

18.3

20.4

18.1

25.1

33.1

21.8

17.7

19.1

25.2

11.2

20.4

5.0

17.2

6.4

18.5

10.4

-45.7

-24.9

12.7

11.1

28.2

20.5

122.6

9.9

21.2

26.1

21.7

16.8

17.5

17.4

23.9

30.4

22.4

16.7

17.4

25.0

10.1

18.5

6.7

20.6

8.1

15.3

10.5

-21.7

-73.7

12.2

11.8

27.8

24.3

671.4

9.0

16.3

18.8

20.8

19.0

17.4

17.6

25.3

35.8

23.0

17.9

19.0

26.5

3.2

10.7

4.5

14.1

10.0

17.4

9.9

1.2

2.2

11.6

10.8

30.3

20.1

87.1

11.0

16.1

23.5

23.5

17.4

17.3

17.3

24.6

32.1

23.6

16.3

17.2

26.3

3.5

11.0

6.1

15.8

10.4

14.6

9.9

3.4

-0.6

11.3

11.4

29.6

23.9

FY16E FY17E FY16E FY17E

ROE (%)

1 - 30 JUNE 2016

G RO U N D V I EW

41

Metals

Metals

Metals

ELECTRICALS

ELECTRICALS

ELECTRICALS

ELECTRICALS

ELECTRICALS

Logistics

Logistics

Hindustan Zinc

Jindal Steel & Power

Hindalco Inds

Havells India Ltd

Finolex Cables Ltd

VGuard Industries Ltd

KEI Industries

Bajaj Electricals Ltd

Allcargo Logistics

VRL Logistics Ltd

Container Corp Of India Logistics

Midcap

Midcap

Midcap

Oil & Gas

Oil & Gas

Oil & Gas

Praj Inds.

The Byke Hospitality

PEBS

Indraprastha Gas

Petronet LNG

Gujarat State Petronet

Midcap

Metals

JSW Steel

Pennar Inds.

Metals

Vedanta Ltd

Midcap

Metals

Tata Steel

KDDL

Metals

SAIL

Midcap

1,339

Metals

NALCO

Sintex Industries

398

Media

Eros International

140

284

569

149

156

96

47

166

82

148

232

110

1,197

292

342

93

64

168

1,283

103

331

43

43

208

270

Media

HMVL

Rs

Sector

Name of company

CMP

79,121

212,738

79,632

5,122

6,253

17,133

5,693

1,672

36,483

260,973

36,338

37,260

23,410

8,500

36,023

44,658

213,765

192,870

58,554

709,854

310,057

305,067

321,084

175,529

111,079

19,473

19,820

Rs mn

Mkt Cap

10,252

281,150

37,007

79,036

2,137

10,833

15,098

4,658

79,036

57,711

17,215

55,366

47,064

24,036

19,436

24,029

52,986

1,004,752

205,664

139,590

428,642

639,312

1,236,774

372,349

65,764

18,247

9,119

FY16E

12,500

272,419

32,238

101,178

2,761

13,920

19,470

5,564

101,178

67,724

19,077

64,113

52,624

27,954

23,087

28,031

62,975

1,055,956

230,731

153,391

544,923

711,343

1,185,401

439,027

71,103

20,035

10,193

FY17E

Net Sales (Rs mn)

8,866

17,250

7,797

13,531

449

1,128

1,593

394

13,531

12,015

2,851

4,983

2,641

2,389

1,535

3,112

7,110

86,301

41,477

66,406

62,073

147,088

64,736

-22,098

8,987

4,447

2,179

FY16E

11,003

20,993

7,971

17,824

580

1,803

2,235

502

17,824

14,912

3,248

6,225

3,166

2,880

1,921

3,802

8,470

106,340

51,159

81,500

116,228

197,007

155,438

19,294

10,506

5,265

2,605

FY17E

EBIDTA (Rs mn)

4,525

10,777

4,241

6,156

241

696

517

89

6,156

8,856

1,166

2,534

906

1,146

902

2,168

3,547

-4,399

-18,148

81,967

930

21,562

3,150

-31,364

6,715

3,190

1,747

FY16E

6,087

10,919

4,463

8,252

329

1,150

835

132

8,252

10,859

1,454

3,189

1,242

1,770

1,142

2,564

6,023

8,081

-10,757

73,084

34,716

47,764

36,915

-13,846

8,444

3,694

2,080

FY17E

PAT (Rs mn)

8

14

31

14

6

4

4

9

14

45

13

10

9

15

30

14

6

-2

-20

19

4

7

3

-8

3

34

24

11

15

32

19

8

6

7

13

19

56

16

13

12

23

38

17

10

4

-12

17

144

16

38

-3

3

40

28

FY16E FY17E

EPS (Rs)

-55.9

25.7

15.8

19.1

10.3

22.1

-0.3

11.8

20.3

52.5

44.0

31.3

11.8

-15.5

33.1

28.1

-749.0

66.4

27.5

23.1

-23.7

-115.7

-386.5

0.2

-95.0

-66.7

34.5

1.3

2.3

34.1

36.7

65.1

61.6

47.3

34.1

22.6

24.8

25.9

37.1

54.4

26.6

18.3

69.8

-283.7

-40.7

-10.8

3,632.7

121.5

17.5

19.7

18.3

10.8

25.9

24.5

11.0

18.7

5.9

29.5

31.2

14.7

25.8

7.4

39.8

20.6

60.2

-43.8

-3.2

13.0

19.5

17.8

8.1

19.0

14.9

6.8

12.7

4.4

24.0

25.0

11.7

18.8

4.8

31.4

17.4

35.5

23.9

-5.4

9.7

8.9

333.4 8.7

6.4

8.7

-12.7

13.2

5.2

9.5

14.1

101.9

-5.6

16.5

6.1

11.3

P/B (x)

EV/EBITDA (x)

2.0

3.3

3.3

#N/A

2.6

1.2

-

-

3.1

-

1.8

-

-

-

-

8.1

0.5

0.3

1.9

1.5

0.7

1.1

0.4

0.9

1.1

2.2

1.8

3.0

2.9

#N/A

2.4

1.1

-

-

2.8

-

1.6

-

-

-

-

7.4

0.5

0.3

1.7

1.3

0.6

1.0

0.5

0.8

0.9

1.8

9.4

13.3

10.2

4.3

13.9

14.1

4.1

7.0

6.6

19.7

13.6

8.1

11.8

5.5

23.6

13.7

28.1

9.2

11.2

5.4

11.6

7.1

16.6

-22.2

7.5

5.1

8.7

7.2

10.9

9.6

3.3

10.6

8.5

3.0

5.9

5.1

15.8

11.8

6.5

9.7

4.6

18.6

10.7

23.2

7.2

8.8

5.4

5.9

5.2

6.5

26.6

6.3

4.2

6.6

FY17E FY16E FY17E FY16E FY17E

P/E (x)

FY17E FY16E

- 1,071.8

-243.8

-42.8

29.1

24.2

FY16E

EPS Growth (%)

PhillipCapital India Coverage Universe: Valuation Summary ROCE (%)

11.4

16.9

18.0

11.7

20.6

10.8

11.0

10.5

11.7

10.5

21.7

12.1

11.9

32.5

20.0

15.0

13.4

-1.2

-8.6

21.9

0.5

4.8

1.0

-7.8

5.2

17.8

19.3

13.6

15.2

16.2

13.7

23.0

16.5

15.6

14.0

13.7

11.8

23.8

13.6

14.3

41.3

20.9

15.6

21.0

2.1

-5.4

17.3

14.9

10.1

11.3

-3.6

6.4

17.3

18.9

9.2

10.0

14.9

7.3

19.3

8.9

15.7

8.0

7.3

10.4

15.1

10.4

10.0

24.5

18.9

15.2

12.3

2.3

3.2

18.7

-0.1

-1.5

1.9

-2.3

5.0

13.9

22.0

11.2

10.2

14.1

8.7

22.5

13.9

19.1

8.8

8.7

11.7

17.6

12.0

11.4

29.3

20.7

15.7

19.1

3.4

1.3

17.1

8.1

7.0

5.0

0.1

5.7

14.0

21.4

FY16E FY17E FY16E FY17E

ROE (%)

4 2 GROUN D VI EW

1 - 30 JUNE 2016

Sector

Oil & Gas

Pharma

Pharma

Pharma

Pharma

Pharma

Pharma

Pharma

Pharma

Pharma

Pharma

Retail

Telecom

Telecom

Telecom

Telecom

Telecom

Utilities

Utilities

Utilities

Utilities

Specialty Che

Specialty Che

Specialty Che

Specialty Che

Specialty Che

Specialty Che

Name of company

Gujarat Gas Ltd

Cadila Healthcare

Sun Pharma

Dr Reddy's Labs.

Aurobindo Pharma

Cipla Ltd

Ipca Laboratories

Divi's Laboratories

Glenmark Pharma

Lupin

Biocon

Titan Company

Bharti Airtel

Idea Cellular

Tata Communications

Bharti Infratel

Reliance Com

Coal India

PTC India

Power Grid Corp

NTPC

Atul Ltd

Camlin Fine Sciences

Meghmani Organics

Vinati Organics

Aarti Industries

SRF Ltd

1,387

522

476

38

100

2,026

141

144

65

284

55

372

435

112

362

374

627

1,616

859

1,064

468

536

801

2,971

804

333

523

Rs

CMP

79,654

43,460

24,578

9,728

9,647

60,101

1,166,321

752,826

19,196

1,792,900

136,023

705,750

124,046

403,078

1,447,459

332,032

125,300

728,529

242,275

282,472

59,086

430,855

468,896

506,749

1,933,899

341,316

72,068

Rs mn

Mkt Cap

46,189

27,182

6,047

12,605

5,044

25,863

725,044

207,959

137,014

773,545

234,448

78,669

210,530

357,974

982,624

118,178

33,578

130,195

73,190

35,701

28,663

14,118

140,096

157,409

283,181

95,789

59,933

FY16E

53,160

32,000

7,189

14,363

6,928

27,678

798,674

253,694

181,612

880,021

n.a.

85,457

223,195

390,485

1,065,703

134,942

38,674

163,081

86,822

41,757

37,896

17,896

158,073

167,520

337,829

103,242

55,787

FY17E

Net Sales (Rs mn)

9,884

5,328

1,701

2,710

872

4,552

177,772

183,327

10,802

163,466

82,810

53,624

33,285

129,395

326,641

10,991

7,894

33,541

16,473

13,584

4,152

2,958

32,418

41,556

85,153

22,747

7,301

FY16E

11,855

6,336

2,049

2,944

1,275

5,010

198,808

225,368

13,079

198,241

n.a.

59,588

36,087

137,572

354,885

12,415

9,609

46,025

20,148

16,076

8,079

3,454

38,570

44,728

120,653

24,139

9,779

FY17E

EBIDTA (Rs mn)

4,320

2,584

994

733

366

2,715

85,711

62,888

3,126

145,174

14,143

22,199

1,714

34,969

51,089

7,834

4,537

21,128

8,555

10,086

1,731

1,835

20,305

25,296

52,444

14,723

1,686

FY16E

5,183

3,169

1,209

850

584

2,969

97,729

75,359

3,371

166,590

n.a.

26,226

2,674

17,126

64,256

9,090

5,536

29,307

11,638

11,935

4,786

2,040

24,219

28,738

80,656

16,509

3,966

FY17E

PAT (Rs mn)

75

31

19

3

4

91

10

12

11

23

7

12

6

10

13

9

23

47

30

38

14

23

35

148

22

14

12

90

38

23

3

6

100

12

14

11

26

n.a.

14

9

5

16

10

28

65

41

45

38

25

42

169

34

16

29

FY16E FY17E

EPS (Rs)

40.6

29.1

-14.2

62.9

-7.0

14.2

2.0

25.1

-12.1

5.8

47.7

11.5

60.9

9.5

-14.6

-4.0

10.1

-12.1

10.3

17.0

-35.3

44.2

23.6

10.9

9.8

24.8

-62.1

20.0

22.6

21.6

16.1

59.7

9.3

14.0

19.8

7.8

14.8

n.a.

18.1

56.0

-51.0

25.8

16.0

22.0

38.7

36.0

18.3

176.5

11.2

19.3

13.6

53.8

12.1

135.2

18.5

16.8

24.7

13.3

26.2

22.1

13.6

12.0

6.1

12.3

8.0

31.7

72.4

11.5

28.4

42.4

27.6

34.4

28.3

28.0

33.9

23.5

23.0

20.0

36.9

23.2

42.7

P/B (x)

EV/EBITDA (x)

15.4

13.7

20.3

11.4

16.4

20.3

11.9

10.0

5.7

10.8

-

26.8

46.4

23.5

22.5

36.5

22.6

24.8

20.8

23.7

12.3

21.1

19.3

17.6

24.0

20.7

18.2

#N/A

#N/A

#N/A

#N/A

#N/A

#N/A

1.3

1.8

0.6

3.9

0.4

4.3

20.5

1.5

2.0

9.2

3.2

6.9

5.1

6.8

2.5

3.4

6.5

3.8

6.5

6.2

3.5

#N/A

#N/A

#N/A

#N/A

#N/A

#N/A

1.2

1.5

0.5

3.4

-

4.5

18.0

1.4

1.7

7.9

2.8

5.5

4.2

5.6

2.1

2.9

4.9

3.2

5.2

5.0

3.0

10.3

9.9

14.5

5.7

12.3

13.4

10.9

9.8

7.5

7.6

5.3

13.2

5.8

6.8

8.1

29.4

15.0

21.4

15.6

20.8

15.7

146.0

15.8

12.6

22.0

15.6

12.8

ROCE (%)

16.0

20.6

19.4

12.2

22.0

21.2

9.8

15.5

9.5

31.4

4.8

13.7

28.3

13.2

7.0

23.5

11.4

19.9

18.1

24.1

7.3

15.0

28.3

18.8

17.7

26.9

8.1

18.2

20.9

19.8

13.0

27.7

19.2

10.4

16.5

9.6

31.4

-

16.8

38.8

6.1

7.4

23.4

12.6

22.3

20.0

23.6

17.2

14.5

25.7

18.1

21.8

24.0

16.6

-

-

10.1

-

6.1

6.2

9.8

33.2

4.2

10.4

4.9

7.0

5.1

24.0

11.0

19.9

12.8

-

5.5

-

25.4

13.1

14.5

19.4

5.6

-

-

11.0

-

6.2

6.7

7.7

33.2

-

11.9

5.6

4.5

5.0

23.9

-

-

14.7

-

13.0

-

26.7

13.0

18.6

19.5

9.3

FY16E FY17E FY16E FY17E

ROE (%)

Note: For banks, EBITDA is pre-provision profit

8.4

8.3

12.1

5.1

9.3

11.8

10.6

8.5

7.1

5.8

-

11.8

5.1

6.2

7.1

25.7

12.2

15.3

12.5

17.5

8.1

125.2

13.0

11.4

15.1

14.5

9.6

FY17E FY16E FY17E FY16E FY17E

P/E (x)

FY16E FY17E FY16E

EPS Growth (%)

PhillipCapital India Coverage Universe: Valuation Summary

Disclosures and Disclaimers PhillipCapital (India) Pvt. Ltd. has three independent equity research groups: Institutional Equities, Institutional Equity Derivatives and Private Client Group. This report has been prepared by Institutional Equities Group. The views and opinions expressed in this document may or may not match or may be contrary at times with the views, estimates, rating, target price of the other equity research groups of PhillipCapital (India) Pvt. Ltd. This report is issued by PhillipCapital (India) Pvt. Ltd. which is regulated by SEBI. PhillipCapital (India) Pvt. Ltd. is a subsidiary of Phillip (Mauritius) Pvt. Ltd. References to "PCIPL" in this report shall mean PhillipCapital (India) Pvt. Ltd unless otherwise stated. This report is prepared and distributed by PCIPL for information purposes only and neither the information contained herein nor any opinion expressed should be construed or deemed to be construed as solicitation or as offering advice for the purposes of the purchase or sale of any security, investment or derivatives. The information and opinions contained in the Report were considered by PCIPL to be valid when published. The report also contains information provided to PCIPL by third parties. The source of such information will usually be disclosed in the report. Whilst PCIPL has taken all reasonable steps to ensure that this information is correct, PCIPL does not offer any warranty as to the accuracy or completeness of such information. Any person placing reliance on the report to undertake trading does so entirely at his or her own risk and PCIPL does not accept any liability as a result. Securities and Derivatives markets may be subject to rapid and unexpected price movements and past performance is not necessarily an indication to future performance. This report does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors must undertake independent analysis with their own legal, tax and financial advisors and reach their own regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. In no circumstances it be used or considered as an offer to sell or a solicitation of any offer to buy or sell the Securities mentioned in it. The information contained in the research reports may have been taken from trade and statistical services and other sources, which we believe are reliable. PhillipCapital (India) Pvt. Ltd. or any of its group/ associate/affiliate companies do not guarantee that such information is accurate or complete and it should not be relied upon as such. Any opinions expressed reflect judgments at this date and are subject to change without notice Important: These disclosures and disclaimers must be read in conjunction with the research report of which it forms part. Receipt and use of the research report is subject to all aspects of these disclosures and disclaimers. Additional information about the issuers and securities discussed in this research report is available on request. Certifications: The research analyst(s) who prepared this research report hereby certifies that the views expressed in this research report accurately reflect the research analyst’s personal views about all of the subject issuers and/or securities, that the analyst have no known conflict of interest and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific views or recommendations contained in this research report. The Research Analyst certifies that he /she or his / her family members does not own the stock(s) covered in this research report. Independence: PhillipCapital (India) Pvt. Ltd. has not had an investment banking relationship with, and has not received any compensation for investment banking services from, the subject issuers in the past twelve (12) months, and PhillipCapital (India) Pvt. Ltd does not anticipate receiving or intend to seek compensation for investment banking services from the subject issuers in the next three (3) months. PhillipCapital (India) Pvt. Ltd is not a market maker in the securities mentioned in this research report, although it or its affiliates may hold either long or short positions in such securities. PhillipCapital (India) Pvt. Ltd does not hold more than 1% of the shares of the company(ies) covered in this report. Suitability and Risks: This research report is for informational purposes only and is not tailored to the specific investment objectives,

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