India Daily

April 03, 2025 NIFTY50 [Apr 02]: 23,332

Contents

Special Reports
Initiating Coverage
Angel One: Scale and execution meet reasonable risk-reward
Niva Bupa Health Insurance: In good health
Strategy
Strategy: Large reciprocal tariffs, large reciprocal impact
Economy
Economy: Reciprocal tariffs: Let the negotiations begin (II)
Theme Report
Capital Markets: Capital markets: Rising through the ups and downs

Daily Alerts
Change in Reco
Five Star Business Finance: Time for relook
Sector Alerts
Automobiles & Components: No signs of pick-up in retail trends
Automobiles & Components: Tariff shock for global auto suppliers
Banks: Microfinance: Peak stress around the corner
Oil, Gas & Consumable Fuels: 4QFY25 Preview: Likely a weak quarter
Pharmaceuticals: Tariffs saga: Exempt for now, yet too early to rejoice

Private Circulation Only.

This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities A ct of 1933
 INITIATING COVERAGE

Angel One (ANGELONE) BUY

Capital Markets
CMP(₹): 2,354 Fair Value(₹): 2,800 Sector View: Cautious NIFTY-50: 23,332 April 02, 2025

Scale and execution meet reasonable risk-reward Company data and valuation summary
We initiate coverage on Angel One, with a BUY rating and DCF-based FV of Stock data
Rs2,800, valuing the business at 21X March 2027E. We build ~15% EPS decline
CMP(Rs)/FV(Rs)/Rating 2,354/2,800/BUY
in FY2026E, reflecting fairly conservative assumptions on client adds and
52-week range (Rs) (high-low) 3,503-1,941
activity levels over the next 12 months. Recovery over the following years,
Mcap (bn) (Rs/US$) 213/2.5
drives ~20% EPS CAGR over FY2027-28E. A wide range of P&L outcomes in the
ADTV-3M (mn) (Rs/US$) 3,557/41.6
near term makes it challenging to build a strong investment thesis. For now,
relatively reasonable valuations along with strong execution track-record Shareholding pattern (%)
underpin our view.
5.5

Initiate with BUY with FV of Rs2,800; build conservative growth assumptions

35.6
We initiate coverage on Angel One with a BUY rating and DCF-based FV of Rs2,800, 33.3

valuing the business at 21X March 2027E. Our estimates assume a weak FY2026E
(~20/10% yoy decline in F&O/total orders), resulting in ~15% earnings decline. 0.7
11.1 13.8
However, moderate recovery in activity levels drive ~20% earnings CAGR over
FY2027-28E. Our base case FY2027E operating margin of 38% is below management Promoters FPIs MFs BFIs Retail Others
guidance of mid-40s in steady state. Given wide range of outcomes, we present a

1933
few scenarios incorporating growth in orders and price hikes. Price hike of Rs5 in Price performance (%) 1M 3M 12M
F&O segment potentially adds Rs30 of EPS and Rs400-500 to FV. Absolute 9 (21) (22)

Private Circulation Only. This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities Act of
Rel. to Nifty 3 (17) (26)
Solid scale and execution record; multiple growth variables at play Rel. to MSCI India 3 (14) (24)

While we like Angel for its execution track record and scale (#3 in users with a ~20%
Forecasts/Valuations 2025 2026E 2027E
volume market share), we note several near-term challenges (largely industry-level):
EPS (Rs) 125.7 105.1 131.4
(1) F&O regulations will render near-term earnings projections quite unpredictable,
EPS growth (%) (5.9) (16.4) 25.0
leading to an unclear handle on fair valuations, (2) a weak industry environment could
P/E (X) 18.7 22.4 17.9
create possibility of price hikes, even though conditions (e.g. price moves by other
large players) that drive it (along with timing) remain uncertain, (3) increased P/B (X) 4.0 3.6 3.2

sensitivity to market levels, given the dependence on cash and margin funding book EV/EBITDA (X) 13.2 15.7 12.6

and (4) expense flexibility could remain constrained due to focus on customer RoE (%) 27.2 16.9 18.8

acquisition and other committed costs (IPL branding, new initiatives). We factor Div. yield (%) 1.9 1.6 2.0
these uncertainties using a higher discount rate (13.5%) compared with other Sales (Rs bn) 0.0 0.0 0.0
companies under coverage (11.5-12%). EBITDA (Rs bn) 16 14 17
Net profits (Rs bn) 11 9.4 12
Early days in the revenue diversification journey
Source: Bloomberg, Company data, Kotak Institutional Equities estimates
Digital brokers such as Angel have seen excellent success in scaling up broking over
Prices in this report are based on the market close of
the past 4-5 years while maintaining attractive unit economics. However, revenue April 02, 2025
diversification is likely to be the first priority for all large brokers over the next few
years (cross-sell, wealth, AMC and lending). Though necessary, it is likely to have a
gradual effect on P&L and subject to initial investments and execution/regulatory
risks. For Angel, we build a share of fee-based income to rise to ~10% by FY2030E
from ~2% currently. See our sector note (Capital markets: Rising through the ups and
downs) for more detailed discussion.
Related Research
Key risks: Markets, regulations and execution → Diversified Financials: Regulating retail F&O:
Key risks are (1) market drawdowns impacting retail participation for a prolonged SEBI publishes consultation paper
period, (2) further rounds of strenuous F&O regulation that extend to other areas
(interest income on client assets, margin funding, day trading), (3) competitive
intensity, (4) longer-than-expected gestation for new verticals and (5) a churn in
senior talent. Full sector coverage on KINSITE

Abhijeet Sakhare Nischint Chawathe M B Mahesh, CFA Ashlesh Sonje, CFA Varun Palacharla

Nikhil Suresh
 3

Financial summary
Angel One: Financial overview
March fiscal year-ends, 2020-28E
Net Net profit EBIT Dividend
revenue YoY PAT YoY EBIT YoY margin margin EPS P/E RoE yield
(Rs mn) (%) (Rs mn) (%) (Rs mn) (%) (%) (%) (Rs) (X) (%) (%)
2020 4,754 (1) 823 3 1,188 (5) 11 25 11 205 15 —
2021 8,971 89 2,968 260 4,112 246 23 46 36 65 34 0.5
2022 16,747 87 6,248 110 8,367 104 27 50 75 31 46 1.2
2023 22,909 37 8,900 42 11,918 42 29 52 107 22 48 1.7
2024 33,301 45 11,224 26 15,106 27 26 45 134 18 43 1.5
2025E 40,860 23 11,297 1 15,381 2 22 38 127 18 28 1.9
2026E 38,096 (7) 9,446 (16) 12,764 (17) 20 34 102 23 16 1.6
2027E 44,718 17 11,808 25 15,956 25 21 36 141 17 20 2.0
2028E 50,683 13 13,918 18 18,808 18 22 37 155 15 20 2.3

Source: Company, Kotak Institutional Equities estimates

Angel One’s summary of key financials

March fiscal year-ends, 2020-28E (Rs mn)
2020 2021 2022 2023 2024 2025E 2026E 2027E 2028E
Growth rates (%)
Net revenues (1) 89 87 37 45 23 (7) 17 13
EBDAT (3) 207 99 43 28 5 (16) 24 17
EBIT (5) 246 104 42 27 2 (17) 25 18
PAT 3 260 110 42 26 1 (16) 25 18
Key ratios
EBDAT margin (%) 29 48 51 53 47 40 36 38 39
EBIT margin (%) 25 46 50 52 45 38 34 36 37
Net profit margin (%) 11 23 27 29 26 22 20 21 22
RoE (%) 15 34 46 48 43 28 16 20 20
Debt/equity (X) 1.5 1.1 1.1 0.7 0.8 0.8 0.8 0.8 0.9
Dividend payout ratio (%) — 36 36 37 26 35 35 35 35
P&L
Net revenues 4,754 8,971 16,747 22,909 33,301 40,860 38,096 44,718 50,683
Employee expense (1,598) (1,718) (2,809) (3,979) (5,565) (9,124) (10,555) (12,467) (14,813)
Other expenses (1,759) (2,957) (5,385) (6,709) (12,130) (15,357) (13,729) (15,183) (15,862)
EBDAT 1,397 4,295 8,554 12,221 15,606 16,379 13,813 17,068 20,009
Depreciation and amortisation (209) (184) (186) (303) (499) (999) (1,049) (1,111) (1,200)
Profit before tax 1,188 4,112 8,367 11,918 15,106 15,381 12,764 15,956 18,808
Tax (320) (1,131) (2,117) (3,016) (3,881) (4,084) (3,319) (4,149) (4,890)
Loss after tax from discontinued operations (44) (12) (3) (2) (1) — — — —
PAT 823 2,968 6,248 8,900 11,224 11,297 9,446 11,808 13,918
EPS (Rs) 12 36 75 107 134 126 105 131 155
Balance sheet
Shareholder's fund 5,914 11,310 15,844 21,616 30,386 52,730 58,869 66,544 75,591
Borrowings 4,909 11,715 12,577 7,872 25,353 34,227 42,784 53,480 64,176
Trade payables 9,395 22,762 40,668 40,715 71,970 86,551 77,901 92,993 109,106
Provisions 67 91 121 163 226 237 249 261 275
Other liabilities 1,617 2,260 2,989 4,411 4,602 4,953 5,330 5,737 6,175
Total liabilities 15,988 36,828 56,356 53,161 102,151 125,968 126,264 152,471 179,731
Cash and cash equivalents 3,618 820 4,221 1,331 10,430 10,961 15,086 20,078 27,665
Bank balances other than cash 10,458 17,954 44,529 53,580 88,013 105,845 95,267 108,307 121,023
Trade receivables 390 2,277 5,653 3,749 4,869 11,167 13,959 17,449 20,938
Loans 2,812 11,296 13,586 10,052 14,841 34,035 42,544 53,180 63,816
Investments 353 55 187 1,095 0 1,000 1,200 1,440 1,728
Fixed & intangible assets 1,107 1,059 1,468 2,431 4,006 4,606 5,225 5,869 6,541
Other assets 3,164 14,677 2,556 2,539 10,378 11,083 11,852 12,692 13,610
Net assets 21,902 48,138 72,199 74,777 132,537 178,698 185,133 219,015 255,322
Cash flow statement
Cash flow from operations 6,433 (9,444) 5,575 8,032 (3,299) (14,989) 3,676 3,890 8,190
Increase in cash and cash equivalents 1,663 (255) 3,401 (2,890) 9,100 531 4,125 4,992 7,587
Ending cash and cash equivalents 6,132 5,877 4,221 1,331 10,430 10,961 15,086 20,078 27,665

Source: Company, Kotak Institutional Equities estimates

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 4

Investment thesis: Solid scale and execution record; near-term remains hazy
We initiate coverage on Angel One, with a BUY rating and DCF-based FV of Rs2,800, valuing the
business at 21X March 2027E. We build ~15% EPS decline in FY2026E, reflecting fairly
conservative assumptions on client adds and activity levels over the next 12 months. Recovery
over the following years, drives ~20% EPS CAGR over FY2027-28E. A wide range of P&L outcomes
in the near term makes it challenging to build a strong investment thesis. For now, relatively
reasonable valuations and strong execution track-record drive our view.

Uncertainty creates favorable risk-reward; initiate with BUY

We assign an FV of Rs2,800 for Angel One using a DCF-based valuation approach, implying a 21X March
2027E EPS. We assume a weak FY2026E due to decline in orders leading to ~15% decline in EPS.
Recovery in retail activity will boost earnings (~20% CAGR) over FY2027-28E. Our long-term forecasts
imply 11% earnings CAGR over the following 10 years. We use a 13.5% cost of capital, given sensitivity
to markets and risks of prolonged slowdown in retail activity during downturns. We compared this with
the 11.5-12% cost of equity we use for rest of the coverage. Given the overhang of F&O regulations over
the next 12 months, our assumptions build the impact of potentially lower activity levels and offsetting
measures that the company can use.

Angel One has evolved into one of India’s largest broking platforms with ~30 mn clients, it ranks third in
terms of active clients and ~20% volume market share in India’s highly competitive broking industry.
This is a result of the company’s timely pivot toward digital/mobile and excellent execution along the
way, further supported by favorable macro environment for broking industry. As discussed in our industry
report (Capital markets: Rising through the ups and downs), India has a seen a phenomenal growth in
retail activity feeding into strong revenue growth for broking companies. Angel has been one of the major
beneficiaries of these trends. However, this growth has also been lopsided (i.e., F&O heavy), which along
with ongoing regulatory and market forces has led to uncertain growth outlook over the near term.

Challenging to build an investment thesis, given the near-term uncertainties. While we like Angel for its
execution track record, there are few considerations to note: (1) F&O regulations will render near-term
earnings projections quite unpredictable, leading to unclear handle on fair valuations; (2) a weak industry
environment could create possibility of price hikes, even though conditions (e.g. price moves by other
large players) that drive it (along with timing) remain uncertain; (3) increased sensitivity to market levels
given the dependence on cash orders along with margin funding book; (4) expense flexibility could
remain constrained until clarity emerges due to focus on customer acquisition and other committed
costs (IPL branding, new initiatives).

We expect EPS decline in FY2026E, followed by recovery Angel trades at 21X/17X on our FY2026E/27E EPS
EPS and yoy growth, March fiscal year-end, 2015-27E 1Y forward PE, December 2020-January 2025 (X)

EPS (Rs) YoY (RHS) FY2026E PE FY2027E PE

170 217 240 35

136 180 28

108 21 20.7
102 120

17.1
68 41 60 14
25 25 18
(2) 3
(6)
(16) 7
34 (32) (31)(26) -
107

126

155
134

105
131
22

11

36
33
22

15

11

75

0
- (60)
Jan-21

Mar-25
Feb-23

May-24
Dec-23
Jun-21

Oct-24
Jul-23
Apr-22
Nov-21

Sep-22
2025E
2026E
2027E
2028E
2017

2019

2021

2023
2015
2016

2018

2020

2022

2024

Source: Company, Kotak Institutional Equities estimates Source: Company, Kotak Institutional Equities estimates

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 5

Our DCF-based valuation implies 19X March 2027E EPS

DCF-valuation for Angel One, March fiscal year-ends, 2021-47E
2021 2022 2023 2024 2025E 2026E 2027E 2028E 2029E 2030E 2031E 2032E 2033E 2034E 2035E 2036E 2047E
Activity-based (broking, depository, ancillary) 7 13 18 26 29 25 29 33 36 39 42 45 48 52 55 59 109
Fund-based (MTF, client funds) 1 3 4 6 10 11 13 14 15 17 18 19 21 22 23 25 44
Fee-based (distribution & new initiatives) 1 1 1 1 1 2 3 4 5 6 7 8 10 11 13 15 61
Total net revenues (Rs bn) 9 17 23 33 41 38 45 51 56 61 67 72 78 85 92 99 214
YoY (%) 86 37 45 23 (7) 17 13 10 9 9 9 8 8 8 8 7
Expenses 5 8 11 18 25 25 29 32 36 39 42 46 49 53 57 61 131
YoY (%) 72 31 66 40 (1) 14 13 9 9 9 8 8 8 8 7 7
PBT (Rs bn) 4 8 12 15 15 13 16 18 20 22 24 27 29 32 35 37 83
PBT margin (%) 46 50 52 45 38 34 36 36 36 36 37 37 37 37 38 38 39
Tax (Rs bn) 1 2 3 4 4 3 4 5 5 6 6 7 8 8 9 10 22
Tax rate (%) 27 25 25 26 27 26 26 26 26 26 26 26 26 26 26 26 26
PAT (Rs bn) 3 6 9 11 11 9 12 13 15 16 18 20 22 24 26 28 61
YoY (%) 107 42 26 0 (16) 25 14 11 10 10 9 9 9 9 9 7
Years discounted 1 2 3 4 5 6 7 8 9 20
Discounting factor 0.9 0.8 0.7 0.6 0.5 0.5 0.4 0.4 0.3 0.1
Discounted cash flow (Rs bn) 12 12 11 11 11 10 10 9 9 5
#REF!
DCF as on 31-Mar-27
Valuation of Angel One
Risk free rate (%) 7.3
Risk premium (%) 5.0 WACC (%)
Beta (X) 1.2 2,757 10.5 11.5 12.5 13.5 14.5 15.5 16.5
Terminal growth rate

Cost of equity (%) 13.5 3.5 4,099 3,469 2,990 2,633 2,317 2,074 1,872
WACC (%) 13.5 4.0 4,225 3,549 3,044 2,670 2,342 2,092 1,885
Terminal growth rate (%) 5.0 4.5 4,372 3,641 3,104 2,711 2,370 2,111 1,899
(%)

Sum of discounted PAT (Rs bn) 179 5.0 4,545 3,748 3,171 2,757 2,401 2,132 1,914
Terminal value (Rs bn) 68 5.5 4,754 3,871 3,249 2,809 2,435 2,156 1,931
Enterprise value (Rs bn) 248 6.0 5,009 4,018 3,339 2,867 2,473 2,182 1,949
Equity value (Rs bn) 248
No. of shares (mn) 90
Equity value per share (Rs) 2,757

Source: Company, Kotak Institutional Equities estimates

We expect share of broking activity-linked revenues to decline in 65% by FY2027E from ~80% in FY20204
Revenue mix (re-classified) across segments, March fiscal year-ends, 2019-27E (Rs mn)

2019-24 2025-27E
2019 2020 2021 2022 2023 2024 2025E 2026E 2027E CAGR CAGR
Activity-based 3,065 3,240 6,993 13,135 18,040 26,271 29,172 24,740 29,194 54 4
Net brokerage 2,595 2,735 5,436 10,234 14,398 21,063 24,603 22,307 26,396 52 8
Depository 325 345 889 1,264 1,001 1,566 2,211 2,432 2,797 37 21
Ancillary 146 160 669 1,637 2,641 3,643 2,357 — — 90 nm
Fund-based 1,332 1,089 1,380 2,932 4,300 6,499 10,448 11,330 12,541 37 24
Margin lending 1,696 1,252 1,273 2,656 2,613 2,821 5,918 6,636 8,009 11 42
Client funds, etc. 327 325 497 997 2,582 5,038 7,517 7,967 8,383 73 19
Interest expense (692) (489) (389) (721) (895) (1,359) (2,986) (3,273) (3,851) 14 41
Fee-based 116 100 155 324 313 414 950 1,787 2,743 29 88
Others 266 326 442 357 256 116 290 240 240 (15) 27
Net revenues 4,779 4,754 8,971 16,747 22,909 33,301 40,860 38,096 44,718 47 10

Source: Company, Kotak Institutional Equities estimates

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 6

Few scenarios around retail activity and price hike

Exhibit 7 shows earnings scenarios in three alternate scenarios: bull base and bear with and without
price hike. We do not assume any pricing actions in our base case. While we believe higher charges
cannot be ruled out, conditions that trigger price hikes remain uncertain. The impact of regulations has
been severe for all the discount brokers. Brokers are likely to consider a mix of internal metrics (margins,
ARPU, etc.) and external conditions (price hikes by others, competitive intensity) before deciding to take
price hikes. We saw some players selectively raising prices after the introduction on ‘true to label’
guidelines, suggesting that external events that permanently impacted revenue generation potential of
the business have led to price actions. Earnings growth is quite sensitive to order growth and price
assumptions. A Rs5 hike in F&O charges drives nearly Rs30 i.e. 20-25% upgrades in earnings.

Scenario analysis indicates wide range of outcomes

Scenario analysis for Angel One based on growth in order, MTF book and per order charges
Bear case-1 Bear case-2
Base case Bull case (no price hikes) (price hike)
Order growth (%)
2026E (10) 10 (20) (20)
2027E 14 20 (10) (10)
MTF book growth (FY2025-27E, %) 25 37 5 5
Net revenue per order (Rs)
2026E 15 15 15 15
2027E 15 15 15 18
Operating margin (%)
2026E 35 35 30 30
2027E 38 45 35 41
EPS (Rs)
2026E 100 117 75 75
2027E 131 193 86 116
FV (Rs) 2,800 3,500 1,800 2,200
FY2027E PE (X) 21 18 21 19
Upside 21 51 -22 -5

Source: Company, Kotak Institutional Equities

Angel trades at lower valuation compared to capital market peers

Our EPS estimates for FY2026-27E are 10-25% below current Bloomberg consensus, likely due to more
cautious stance on volumes/orders. Exhibit 8 captures the valuations and earnings growth of nearly all
capital market stocks (Bloomberg estimates for uncovered stocks). Angel’s discount to other stocks in
capital markets space likely reflects weaker confidence over its earnings growth trajectory (a largely
idiosyncratic risk) over the next 12 months. On the other hand, some other part of the sector (RTAs,
exchanges, wealth) trades at a relatively rich valuations even as they also carry risks due to exposure to
market valuations or activity levels.

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 7

Angel’s headline valuation is lower than capital market peers

2Y forward EPS CAGR (%) vs FY2026E PE multiple (X), March fiscal year-ends, 2025-27E
50
Kfin 44
CDSL 42
BSE 46
40 MCX 38 Protean 37
CAMS 36 CRISIL 37

HDFCAMC 31 Anand
Prudent 37
IEX 32 Rathi 38
30
FY2026 PE (X)

Nippon 25
Angel One 23 360ONE 28
ICRA 27
20 CARE 21
Nuvama 20
UTI 19 ABSL 19
10

Motilal Oswal 11
-
(4) - 4 8 12 16 20 24 28 32 36
EPS CAGR (FY2025-27E)

Source: Company, Bloomberg, Kotak Institutional Equities estimates

Global peers: There is a path towards higher multiples; Angel still in early stages

In Exhibit 9, we compare the long-term average 12M forward PE multiples for some of the large
brokers/investment platforms since listing. Multiples of close to ~20X is not uncommon for these
companies which could be explained by characteristics such as (1) sustained growth visibility given
rising income and supportive markets over the past 10-15 years and (2) healthy profit margins with less
capital consumption. There is varying degree of market-sensitivity or cyclicality across companies due
to different revenue mix. When comparing with business models in other markets, one of the key
learnings is diversity of revenues across broking, asset management (distribution or in-house) and
lending. Angel can potentially trade at higher multiples if it is able to demonstrate (1) sustained
leadership in retail broking leading to strong customer growth, potentially offsetting impact of
regulations; (2) progress towards balanced revenue profile without diluting its margin profile.

Angel’s forward PE multiple is lower than most global investment platforms, partly due to higher share of transactional revenues
1Y forward PE for Angel and select global peers (X)

Mean Mean + 1s.d. Mean - 1 s.d.

40

32

24

16

31.9 23.3 23.1 23.1 21.8 21.7 20.2 20.1 18.7 16.7 16.1 15.6 13.6
0
RobinH Hargreaves Futu Tiger Schwab Avanza Nordnet Fineco Interactive Etrade TD Amer. Angel Flatex
(US) (UK) (China) (China) (US) (EU) (EU) (EU) (US) (US-acqd.) (US-acqd.) (India) (EU)

Notes:
(1) Mean PE and standard deviation are calculated over the trading history; (2) Robinhood: We have only shown the mean PE as mean +/- 1s.d. are not fit for scale.

Source: Company, Bloomberg, Kotak Institutional Equities estimates

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 8

Near-term issues: Regulations, market cycles and mitigating actions

We believe Angel One’s business model over medium-term has potentially promising growth
opportunities given its leadership position in retail broking as well as prospects in WIP businesses such
as asset and wealth management. However, much of the debate around Angel’s earnings and share price
over next 12 months is likely to be focused on impact of regulations. As mentioned above, we incorporate
some these risks through a higher cost of equity.

Revenue realignment underway – near-term earnings unpredictable

Angel’s current revenue mix is skewed towards options even as large part of its customer base trades in
cash. This skewness is likely due for some normalization, in our view (Exhibit 10). While the company
does not disclose this, back of the envelope calculations suggest that ARPU per F&O client is probably
~4-6X of cash client. As this normalization plays out over the next few quarters, Angel’s near-term
projections remain quite unpredictable. While we remain conservative, our assumptions could be subject
to potentially meaningful revisions over next few quarters given the impact of new regulations aimed at
curbing index option volumes as well as overall market levels and volatility.

Revenue profile is skewed towards F&O

Customer mix and broking revenue mix, March fiscal year-ends, 2021-27E (%)

Customer mix (%) Broking revenue mix (%)

Cash only F&O + cash F&O only F&O Cash Others

100 5 6 100
9 5 5 5 7 9 9
12 11 12
80 23 17 18
34 80
47
39
60
60

40 40 83 84 81
72 74 74
59
48 52
20 20

- -
Acquired in 2021 Acquired in 2022
2021

2022

2023

2024

2026E
2025E

2027E
Transacted till 2024

Source: Company, Kotak Institutional Equities estimates

Client growth continues but F&O orders decline

We assume active client base growth to continue, reaching ~9 mn clients by end of FY2027E as
compared to 7.5 mn currently. Our client growth assumptions imply relatively moderate acquisition run-
rate, compared to management’s expectations (do note that active clients are lower than 28 mn reported
client base). We expect F&O orders per client in a year to fall by ~40% to nearly ~130 orders by FY2026-
27E from the peak of ~210 in FY2024. This represents a reversal in client activity levels back to FY2021
levels. We assume stable cash activity levels given the sharp rise in FY2024-1HFY25 was partly reversed
during the correction in 3QFY25.

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 9

We expect growth moderation in NSE active clients We expect sharp decline in F&O activity per client
NSE active clients, March fiscal year-ends, 2020- Orders per client for cash and F&O, March fiscal
27E (# mn) year-ends, 2020-27E (#)

12.0 Orders/client (overall) Orders/client (F&O)

Orders/client (cash)
350
9.6 9.0 300
8.2 278 272
7.7 280 246
241
222
7.2 202
6.1 191
210
163 209
4.8 4.3
3.7 189 126 131
140 171 177
152
2.4 1.6 120
70
0.6 81
63 53 56 53 57
- - 42
2025E

2026E

2027E
2020

2021

2022

2023

2024

2020

2021

2022

2023

2024

2025E

2026E

2027E
Source: Company, Kotak Institutional Equities estimates Source: Company, Kotak Institutional Equities estimates

Levers available to mitigate impact; price hikes are an imperative, but unlikely to be immediate

Angel has multiple options to mitigate the profitability impact of lower volumes. Following the recent
regulations (‘true to label’) that disallowed certain fee income, company introduced charges for cash
delivery trades and interest on cash margin shortfall. We believe company can manage any outsized
impact of F&O regulations by (1) hiking trading charges for F&O trades; (2) cross-selling of other financial
products (loans, insurance) and (3) focus on cost control (variable costs, customer acquisition costs,
etc.).

Angel has indicated its aim to remain around 43-45% operating margin (i.e. EBDAT) band. However, we
believe Angel will likely not rush into major price hikes at the first sign of volume weakness. Company
will likely wait for clearer trends to emerge in terms of (a) trading behavior of existing client base and (b)
acquisition run-rate of new clients. Our assumptions build price hikes in F&O segment from 2HFY26
onwards - calculated revenue per order moving to Rs30 in FY2027E from Rs22 currently. This will take
the operating margin to 43% in FY2027E from ~40% in FY2026E. Broking cost is only a small part of the
overall cost of trading (Exhibits 13-14) and hence unlikely to influence existing customer base to attrite
even though it could potentially impact new acquisitions.

Even though we believe price hikes are a high probability outcome, there are some considerations such
as (a) potentially varying P&L impact of regulations for large players (this will also throw some light on
customer profile differences); (b) willingness and timing of other large players to hike prices weighed
against impact on customer acquisitions. As we show in Exhibit 16, pricing tends to move within a narrow
range for large discount players and hence any price hikes might need broader consensus from the
industry. Also, the traditional brokers are more expensive than discount ones with ad valorem pricing in
some segments. Unlike last few years, we believe there will be much greater focus on acquiring better
quality clients which have higher revenue-generating potential.

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 10

Transactional costs are about 0.5% of premium traded Brokerage contributes nearly half of total transaction costs
Transaction costs (includes brokerage, taxes and Transaction cost break-up, March fiscal year-end,
other charges), March fiscal year-ends, 2022-24 (%) 2024 (Rs bn)
Transaction cost (LHS) Stamp
(Rs bn) (%)
Transaction cost (% of premium, RHS) duty, Rs2
250 0.6 bn
0.5 GST, Rs29
0.5 bn
200 0.4 0.5

150 0.4 STT, Rs35

bn
225 Brokerage,
100 0.2
170 Rs114 bn

50 100 0.1
Exchange
- - fee, Rs45
2022 2023 2024 bn

Source: SEBI, Kotak Institutional Equities Source: SEBI, Kotak Institutional Equities

We expect ~20% decline in F&O orders from FY2025E peak; expect modest growth in cash orders
F&O and cash orders (# mn) and net revenue per order (Rs), March fiscal year-ends, 20202-27E
F&O orders Cash orders Net revenue per order (RHS)
1,300 25
21 1,130
1,080 1,221 1,000
1,040 20
16 16
15 15 15
780 15
15 15
713
520 430 10

487
424
260 385 5
138
276
30 228
187 177
- 90 -
2020 2021 2022 2023 2024 2025E 2026E 2027E

Source: Company, Kotak Institutional Equities estimates

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 11

There is marginal variation in pricing offered by select brokers

Pricing comparison
Angel One Zerodha Groww Motilal Oswal ICICI Securities
Transaction charges Prime 299 plan
Equity delivery Rs20 or 0.1% (lower) Zero 0.20% 0.25%
Rs20 or 0.1% (lower)
Equity intraday Rs20 or 0.03% (lower) Rs20/order or 0.03% (lower) 0.02% 0.025%
Futures Rs20/order or 0.03% (lower) 0.025%
Rs20 per order Rs20 per order Rs20 per contract
Options Flat Rs20/order Rs49 per contract
3-in-1 account with ASBA Delivery & MTF: 0.5%/order
Intraday brokerage: 0.05%/order
Margin trading facility 0.041% per day for borrowing 0.04% per day 0.043% per day for <Rs2.5 mn 0.053% per day 20.49% per annum
0% <Rs100K for first 30 days Brokerage: 0.03% or Rs. 20/order 0.027% per day for <Rs2.5 mn
Account opening Zero Zero Zero Zero Zero
DP charges Rs20 per sell transaction Rs13 per sell transaction Rs18.5 per sell transaction Rs30 per sell transaction Rs20 per sell transaction
(Rs5 CDSL + Rs15 Angel) (Rs3.5 CDSL + Rs9.5 Zerodha) (Rs3.5 CDSL + Rs15 Groww)
Annual a/c charges Rs60/quarter for non-BSDA accounts Rs75/quarter for non-BSDA accounts Zero Rs199 (1st year free) Rs299 per year
Pledging charges Rs20 per pledge request Rs30 per pledge request Rs20 per pledge request Rs20 per pledge request
Square off charges Rs20 per order Rs50 per order Rs50 per order Rs50 per position
Delayed payment charges 18% p.a on the debit amount 18% p.a on the debit amount 0.045% per day 0.06% per day
Call & trade Rs20 per order Rs50 per order NA NA

Source: Company, Kotak Institutional Equities

Longer-term imponderables: Broking and beyond

Please refer to our report on capital markets (link) for a more detailed discussion on broking industry.
We believe broking companies have the potential to evolve into investment platforms with a more
balanced share of volume-driven and recurring revenues. Our points below are more broad-based and
not specific to Angel.

Direct retail participation in markets is still nascent and untested for market cycles

Long-term valuation of broking business requires forming a view on growth in customers and more
importantly their activity levels measured in the form of asset holdings and number of trades. While
market cycles will undoubtedly influence retail behavior, sustained retail participation will mean brokers
are likely to gain greater relevance, leading to growing retail trades and accumulation of assets on the
platforms. A major risk to this is retail-led market bubble (e.g. China in 2015-25, covered in our earlier
report) which shatters investor confidence for many years along with risks of more regulatory
interventions.

We show the long history of data for number of retail trades for the US-based brokers over 1995-2019
(Exhibit 17). We cover data up to 2019 due to large acquisitions thereafter (Schwab acquired TD
Ameritrade and Morgan Stanley acquired E*Trade), leading to data issues. These brokers have grown
retail trades at ~10% CAGR for over ~20 years. We superimpose our long-term assumptions for Angel
to over FY2021-39E to provide a comparison. Further, supportive equity markets have also led to a strong
compounding of customer assets which helps provide visibility for future business (Exhibit 18).

Indian customers have shown growing comfort in using new-age discount brokers with their adoption
sustaining beyond the post-covid acceleration. There is emerging evidence of customers willing to
create and expand their financial lives beyond banking through discount broking apps. Easy-to-use
interface has helped broking apps to build strong customer engagement. While nascent, these are
encouraging behavioral signals which over time can help expand number of products per customer.

For example, Zerodha has not only become a leading broker with custody assets of ~Rs5.5 tn but also
has a sizable presence in MF distribution with AUM of around Rs700 bn. Angel One has quickly raced to
become #2 in terms of incremental SIPs opened. Similarly, Groww being one of the early movers already
has one of the largest MF distribution AUM. As customers stay on the platform and build their financial
journey, the use case and monetization will evolve. Having said so, current engagement on many of these
platforms is trading focused. This will remain a continuous monitorable over the next few years to
develop greater comfort on the robustness of the business model. (Exhibit 19-20)

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 12

US brokers: retail trades growth at ~10% CAGR over ~20 years US brokers: strong compounding of retail assets
Growth in daily average retail trades, 2002-19 Growth in customer assets, 2002-19 (US$ bn)

(# mn) (# bn) 3,500 Schwab:

900 TD Ameritrade: ~11% CAGR 5 12% CAGR
3,000
Schwab: 9% CAGR 4
720
2,500
Angel One
(superimposed, RHS): 3
540 ~7% CAGR over 2021-38E 2,000
2 TD Ameritrade:
1,500 ~25% CAGR
360
E*Trade: ~9% CAGR
2
1,000
180 E*Trade:
1 500 ~25% CAGR

0 - 0
2004
2002
2003

2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Source: Company, Kotak Institutional Equities Source: Company, Kotak Institutional Equities

Zerodha: strong growth in client assets across broking and MFs Angel One: strong growth in SIP registrations
Rs1 cr = Rs10 mn Unique SIPs registered

Source: Company, Kotak Institutional Equities

Source: Company, Kotak Institutional Equities

Revenue diversification journey on the right track but will be slow moving. Broking business exhibits
strong linkage to retail trading volumes and hence carry a risk of volatility in P&L. This also translates
into unpredictability regarding fair valuation multiple for the business. Angel One is building additional
revenue sources such as (a) distribution of financial products (loans, insurance, etc.) which is already
underway and (b) asset management and wealth business where it has already acquired the necessary
licenses and in the process of launch. AMC and wealth are unlikely to be meaningful in the next 1-2 years
but have the potential to add steady recurring revenue streams over medium to long-term. More diverse
revenue profile will augur well for the business to continue investing in customer acquisition and deliver
relatively stable margins and earnings growth over medium to long-term.

We need more clarity on value propositions for the AMC and wealth business. While the AMC will focus
on passive funds, wealth business has a broad strategy to create two verticals: ultra HNI (US$5 mn plus)
and affluent/emerging HNI. Angel’s execution and overall growth environment will be key monitorable.
We are seeing the space already attracting quite a few new and established players, leading to intense
competition for talent and clients.

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 13

For further perspective, we compare (Exhibit 21) the revenue mix for a bunch of similar businesses
across the world. Discount brokers in India have a strong dependence on commission/brokerage
revenues as compared to traditional brokers which have presence in segments such as
wealth/AMC/IB/IE. Amongst global peers as well, we note that contribution of broking revenues is
around 30-40% range, with fund-based i.e. interest income and in some cases recurring fees from other
businesses being the more dominant driver of revenues.

Exhibit 22 shows the revenue mix for Charles Schwab (given long history) over last 30 years. From its
initial years as the disruptor in the broking industry, the revenue mix completely changed to less than
15% from broking as compared to ~70% back in 1980s.

Indian discount brokers have higher share of trading revenues

Revenue mix of select brokers across the world, latest financial year (%)
Trading Fund-based AMC/wealth Others
4- 6 5- 2 4- 2-
8 8 - 9 7
- 16 13
14
1
25 18
47 35 17 18
59 40
50 52 58
64
32
96 13
50 46 83
25
9 68
- 60
42 42 41 41 40
31 28 31
17 21

SCHW HOOD IBKR Futu XP FTK AZA SAVE Selfwealth Angel Groww Zerodha ISEC MOFS
(US) (US) (US) (China) (Brazil) (Europe) (Europe) (Europe) (AUS)

Source: Company, Kotak Institutional Equities

Charles Schwab: share of trading commission-based revenues has steadily declined to <10%
Revenue mix, 1988-2018 (%)
Commissions Principal txns. MF services Asset mgmt. and admin. fees NII Others
100

80

60

40

20

-
1988
1989

1991
1992
1993

1996
1997
1998

2000
2001
2002

2005
2006

2009
2010
2011

2014
2015

2018
1990

1994
1995

1999

2003
2004

2007
2008

2012
2013

2016
2017

Source: Bloomberg, Kotak Institutional Equities

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 14

Business section: A leading broking franchise

Over the past few years, Angel One has built one of the largest retail broking franchises in the
country, driven by a successful shift towards low-cost, digital broking. It currently has a ~25 mn
client base (of which ~8 m are annual active), ~15% client market share and ~20% volume market
share. Angel’s strong revenue growth is underpinned by aggressive open-market customer
acquisition strategy, with payback period of around six months. As it braces to absorb the impact
of new regulations, company is in nascent stages of building out its wealth, AMC and cross-sell
businesses.

A leading broking franchise with ~15% client market share

Angel One’s journey to become one of the largest and fastest growing digital borking players in India is
quite remarkable. From its roots in its traditional broking model, it has seen a successful pivot to
transform the business model in the last five to seven years. This also makes Angel unique among the
discount broking peers such as Groww, Upstox and Zerodha. Angel’s transformation into a dominant
broking franchise is underpinned by its digital process and tech platform, effective client acquisition and
engagement strategy and an attractive pricing model. Excellent execution of its growth strategies
accelerated by macro tailwinds for broking has driven Angel’s active client market share to improve to
~15% currently from 5% at March 2020.

Angel has gained market share over the past few years
Market share in NSE active clients (defined as at least one trade per year), March fiscal year-ends, 2014-25 (%)
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Feb-25
Discount brokers 3.8 3.9 4.7 7.0 11.9 17.4 28.2 47.9 58.8 63.8 66.9 68.4
Groww — — — — — — — 4.1 10.7 18.8 23.4 26.6
Angel One 3.3 3.1 3.3 3.9 4.4 4.7 5.3 8.3 10.1 14.3 15.0 15.6
Zerodha 0.4 0.6 1.2 2.8 6.5 10.4 13.1 19.1 17.4 19.8 17.9 16.3
Upstox 0.1 0.1 0.2 0.3 0.5 1.1 5.7 11.3 14.5 6.7 6.2 5.7
5 Paisa — — — 0.1 0.4 1.2 4.0 4.6 4.9 1.6 1.3 0.9
Paytm Money — — — — — — — 0.5 1.1 2.1 2.0 1.4
Dhan — — — — — — — 0.0 0.1 0.6 1.2 2.0
INDMoney — — — — — — — — — — 0.8 1.7
Bank-owned brokers 26.8 28.4 29.5 30.3 28.8 29.4 26.8 21.5 18.0 15.4 13.2 12.9
Kotak Securities 5.2 5.3 4.8 4.6 4.4 5.0 5.3 3.9 3.5 3.0 3.0 3.0
HDFC Securities 6.5 6.8 7.9 8.1 7.3 7.7 6.7 5.1 3.2 3.2 2.7 3.0
SBICAP Securities 1.6 2.2 2.4 2.8 2.6 2.4 2.3 1.7 1.8 1.9 2.1 2.0
ICICI Securities 11.7 11.7 10.8 10.4 9.6 9.6 10.0 8.4 8.4 6.3 4.5 4.0
Axis Securities 1.8 2.4 3.6 4.4 4.9 4.8 2.5 2.4 1.2 1.0 0.9 0.9
Standalone brokers 18.8 19.4 19.7 16.9 16.4 15.1 13.3 10.0 8.9 7.2 5.9 5.2
Motilal Oswal Securities 2.9 3.0 3.2 3.5 3.7 3.6 3.5 3.0 2.5 2.4 2.2 2.1
Sharekhan 6.4 6.7 6.5 6.2 6.5 5.8 5.1 3.6 2.1 2.0 1.6 1.4
IIFL Securities 5.5 5.6 5.1 3.3 2.7 2.5 2.0 1.5 3.1 1.4 1.1 0.9
Geojit Financial Services 3.5 3.1 3.4 2.7 2.2 1.9 1.5 1.1 0.7 0.7 0.6 0.5
Edelweiss Broking 0.6 0.9 1.5 1.3 1.3 1.4 1.2 0.8 0.5 0.6 0.4 0.3
Others 50.7 48.4 46.1 45.8 43.0 38.1 31.7 20.6 14.3 13.7 14.0 13.5
Industry 100 100 100 100 100 100 100 100 100 100 100 100

Source: NSE, Kotak Institutional Equities

Strong client acquisition capabilities

Angel One has developed strong customer acquisition capabilities using diverse physical and digital
channels. From ~2 mn customers at the start of covid, customer base has grown over 10X to ~25 mn
currently. Company’s customer acquisition run-rate growing to nearly 0.8 mn to 1 mn per month in recent
months from 0.3 mn to 0.4 mn in FY2023. Company does not disclose its channel-wise breakup of
customer additions. (Exhibits 24-27)

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 15

Digital acquisition channels consist of performance marketing, paid referrals and digital influencers.
Performance marketing relies heavily on internet and social media platforms such as Google, Facebook
and YouTube to reach target customer base. Company also has a referral policy where it rewards existing
customers who bring new customers. Lastly, digital influencers bring customers by generating content
on their channels about trading and investment in various financial products. Influencers direct followers
to Angel through links in the content.

Pace of customer acquisitions has been stronger in tier-2 and tier-3 locations over the past few quarters.
Angel One’s reach through digital channels has even greater impact in driving customer acquisitions in
these locations. While we have limited understanding inner workings of the AI/ML techniques, company
has developed models that allow better cohort selection of customers coming through the funnel and
conversion of leads to account opening.

Angel’s overall client base is around 30 mn Angel’s active client base is ~8 mn

Overall client base, March fiscal year-ends, 2020-25 NSE active clients, March fiscal year-ends, 2020-25
(# mn) (# mn)

35 Active clients (# mn)

30 (# mn) (%)
Active to total clients (RHS)
27

7.8
8.5 45

7.4
28
25

6.7
22

6.1
6.8 36
19

5.3
21
17

4.9
15

4.4
4.3
5.1

4.2
27
14

4.0
13

3.7
12

14
10

3.1
2.5
9

3.4 18
8

2.0
7
5

7 1.2
4
3

1.7 9
0.8
3

0.5
2

0.4
2
2
1
1

- - 0
2QFY21

2QFY22
1QFY20
2QFY20
3QFY20
4QFY20
1QFY21

3QFY21
4QFY21
1QFY22

3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23
1QFY24
2QFY24
3QFY24
4QFY24
1QFY25
2QFY25
3QFY25

1QFY20
2QFY20
3QFY20
4QFY20
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23
1QFY24
2QFY24
3QFY24
4QFY24
1QFY25
2QFY25
3QFY25
Source: Company, Kotak Institutional Equities Source: Company, Kotak Institutional Equities

Rapid client additions in recent quarters… …most of them from tier-2 and 3 locations
Client additions, March fiscal year-ends, 2020-25 (# City tier-wise client additions, March fiscal year-
mn) ends, 2020-25 (# mn)

3,200 Tier 1 Tier 2 Tier 3

3,200

2,560
2,560

1,920
1,920

1,280
1,280

640
640

- -
1QFY21

4QFY23
1QFY20
2QFY20
3QFY20
4QFY20

2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23

1QFY24
2QFY24
3QFY24
4QFY24
1QFY25
2QFY25
3QFY25

1QFY21

1QFY25
1QFY20
2QFY20
3QFY20
4QFY20

2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23
1QFY24
2QFY24
3QFY24
4QFY24

2QFY25
3QFY25

Source: Company, Kotak Institutional Equities Source: Company, Kotak Institutional Equities

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 16

Assisted business provides multichannel approach to reach target customers

The assisted channel works like a sub-broking model which has been prevalent in the industry for many
years. This channel is important to reach a section of customer segment which needs service support
and guidance. This channel comprises of individuals either setting up their own trading terminals which
is available for clients to trade or individuals acting as sourcing agents to add clients which are otherwise
missed out from the digital acquisition channels. Angel has close to 10,000 such assistance partners
(AP’s). While Angel incurs cost towards acquiring APs, APs themselves build their network of customers
with income linked to revenue share from trades by their customers.

Angel has both direct and assisted acquisition channel

Schematic of direct and assisted channel

Direct Client Acquisition Authorised Person Acquisition

Lead Generation Lead Generation

Digital Referral
Orangic Paid Leads Orangic Paid Leads Referral Offline
Associates

Offline Authorised
KYC Process Angel Website / Mobile App Online Authorised Person Acquisition
Person Acquisition

DIY Call Center Assistance Authorised Person

Direct Client Acquisition B2B Client Acquisition

Online trading directly through Offline trading through

Mobile App, Web, .Exe Platform Call Center Support Online trading with support from Offline trading through Authorised Person
(99+ trades) (<1% trades) advisory support

Source: Company, Kotak Institutional Equities

Customer growth drives market share in trading volumes

Angel’s rapid client acquisition drives its strong growth in traded volumes. Exhibits 29-30 show its
volume growth in terms of average daily value traded (ADV) in F&O and cash equity segments.
Exponential and unidirectional growth in F&O volumes is indicative of broader industry trends, whereas
cash volumes saw a period of decline over FY2022-23 while growing back to over previous highs by
4QFY24. Decline in cash volumes was a result of regulatory changes that curtailed leverage available for
intraday trades (from ~15X to ~5X), resulting in activity shifting to the options segment. These trends
broadly repeat when we look at number of trades in cash and F&O segment (Exhibit 31).

Industry tailwinds supporting discount broking and F&O volumes has catapulted Angel’s market share in
retail volumes (Exhibit 32). Angel currently contributes nearly 20-25% of industry activity levels. Angel’s
rise also reflects from its notional market share of overall industry growing to ~10% in FY2024 from ~2%
in FY2020.

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 17

F&O ADTO: Angel (and the industry) has seen exponential Cash ADTO: Cash volumes have volatile but have risen sharply
growth in F&O volumes in recent quarters
F&O average daily turnover and orders, March fiscal Cash average daily turnover and orders March fiscal
year-ends, 2020-25 (Rs bn) year-ends, 2020-25 (Rs bn)

(Rs bn) F&O ADV Orders (RHS) (# mn) (Rs bn) Cash ADV Orders (RHS) (# mn)
45,000 400 110 120

36,000 320 88 96

27,000 240 66 72

18,000 160 44 48

9,000 80 22 24

- - - -

1QFY23
1QFY20
3QFY20
1QFY21
3QFY21
1QFY22
3QFY22

3QFY23
1QFY24
3QFY24
1QFY25
3QFY25
1QFY20
3QFY20
1QFY21
3QFY21
1QFY22
3QFY22
1QFY23
3QFY23
1QFY24
3QFY24
1QFY25
3QFY25

Source: Company, Kotak Institutional Equities Source: Company, Kotak Institutional Equities

Growth in orders: F&O orders are nearly 3X of cash Market share: Angel’s market share is up in both F&O and cash
F&O and cash orders, March fiscal year-ends, 2020- Market share in cash and F&O (notional/premium),
25 (# mn) March fiscal year-ends, 2020-25 (Rs bn)

F&O Cash Cash F&O (notional)

F&O (premium)
400 30
2627
355 349 25
23 23
320 24 21 212121212222 22
20 21
309 19
264 1718
240 18 16
18
18

18
12
17
17

17

17
16

15
15
160 12
14

14

117
14

14
14
14

147
14

14

14

13
13

8
13

12

102 7
6
80 47 57 6 4
38 90 3
19
- -
3QFY23
1QFY20

3QFY20

1QFY21

3QFY21

1QFY22

3QFY22

1QFY23

1QFY24

3QFY24

1QFY25

3QFY25

1QFY20

3QFY20

1QFY21

3QFY21

1QFY22

3QFY22

1QFY23

3QFY23

1QFY24

3QFY24

1QFY25

3QFY25

Source: Company, Kotak Institutional Equities Source: Company, Kotak Institutional Equities

Revenue profile is trading-heavy

Reflecting the exponential growth in trading activity, Angel’s revenues have grown at a fast clip. FY2024
net revenues were Rs33 bn compared to a range of ~Rs4.5-5 bn in during FY2018-20 (Exhibit 33). There
are three major revenue lines:

Broking revenues (~65% of net revenues). Broking comprises fees on trades and contributes ~65%
of net revenue. Broking revenues are netted for revenues shared with AP network. Around 75% of net
revenues originate from the AP network. While the AP network can charge ad valorem fees, revenue
basis is largely number of orders and a flat fee per order (~90% of net broking income is based on flat
fees).

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 18

Net interest income (~20% of net revenues). Net interest income consists of (1) interest income
earned on fixed deposits lien marked with the exchanges in lieu of collateral/margins and (2) interest
income on client funding book.

Ancillary income (~15% of net revenues). Largest (~10%) piece here is the spread earned between
volume-based fee charged to clients and fee paid to the exchanges i.e. Angel retains the volume
discounts. Other source is depository fees (~5% of net revenues) earned on cash delivery transactions
(~Rs20 per scrip traded) which partly compensates for depository charges paid to CDSL/NSDL.
Contribution from distribution fee on cross-sell of financial products is very small.

Strong revenue growth in recent years

Net revenues, March fiscal year-ends, 2015-25 (Rs bn)

35 33.3 33.0

28
22.9

21
16.7

14
9.0

7 4.4 4.8 4.8

2.7 2.9 3.2

0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 9MFY25

Source: Company, Kotak Institutional Equities

Brief profile of different revenue sources

Net revenue break-up, March fiscal year-ends, 2019-25 (Rs bn)
% of net
2019 2020 2021 2022 2023 2024 5Y CAGR revenue Description
Gross broking revenue 5,601 5,644 10,778 18,961 24,760 34,792 44 104
Brokerage 5,014 5,039 9,065 15,736 20,805 29,170 42 88 Based on # of orders in F&O and intraday cash
Income from depository operations 325 345 889 1,264 1,001 1,566 37 5 Charged on delivery per scrip
Income from distribution operations 116 100 155 324 313 414 29 1 Commission on third-party financial products
Other operating income 146 160 669 1,637 2,641 3,643 90 11 Net income afterpayout to the exchanges
Fees and commission expense (2,420) (2,304) (3,630) (5,502) (6,407) (8,107) 27 (24) Revenue share with partners
Interest income 2,024 1,577 1,769 3,653 5,195 7,859 31 24
Interest on margin funds 1,696 1,252 1,273 2,656 2,613 2,821 11 8 Interest on margin funding and T+7 trades
Interest on FD under lien with exchanges 327 325 497 997 2,582 5,038 73 15 Interest on FD lien marked with exchanges for collateral/margin
Investment income, others 266 326 442 357 256 116 (15) 0 Gain on FV changes, others
Finance cost (692) (489) (389) (721) (895) (1,359) 14 (4) Borrowings to fund client fund book and margin requirements
Gross revenue 7,891 7,547 12,990 22,971 30,211 42,767 40 128
Net revenue 4,779 4,754 8,971 16,747 22,909 33,301 47 100

Source: Company, Kotak Institutional Equities

Rapid scale-up of customers driving strong revenue growth

Angel has been increasingly acquiring younger customers over the past few years leading to average
age dropping to 29 years from 32-33 years. Company has been acquiring customers at ages of 18-20
years as well i.e. individuals getting their first job or first pocket money and experimenting with markets
for the first time. In few quarterly calls, company disclosed that ~70-85% of clients added were new to
markets. This enables a wider acquisition funnel but comes with the impact of lower revenues in initial
years.

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 19

Angel’s customer acquisition strategy optimizes for customer acquisition cost and the resulting payback
period. Instead of focusing just on revenue per customer in the first year, company focuses on
acquisition cost. As long as incremental customer is able to deliver the target operating margin of 50-
60%. Historically, company has been able to maintain the payback period within six months. A short
payback of acquisition cost is enabling company to have an aggressive stance towards acquiring
customers. This is the key driver towards a strong ramp-up in revenues over the past four years.

Customer acquisition is critical to deliver revenue growth

Given the new cohorts of younger customers whose behavior is building up, it is still unclear what is the
economic life of an active customer today. Angel’s disclosures of customer cohorts reveal meaningful
contribution of every new batch of customers that get added each year. Full year revenue impact of new
customers shows up in the second year due to full year of revenues (Exhibit 35).

We also calculate Angel’s per customer revenue (ARPU) for different cohorts of year of acquisition
(Exhibit 36). There are three main takeaways: (1) ARPU has declined for each new cohort compared to
previous years which is likely to be partly driven by higher share of younger customers in new additions
(Exhibit 37); (2) ARPU tends to stabilize and flatten in 2nd full year after acquisition as certain customers
drop off whereas some others mature to trade more actively from second year.

Strong client additions in recent years have supported revenue contribution from new cohorts
Revenue from client cohorts acquired across years, March fiscal year-ends, 2020-24 (Rs bn)

Pre-2020 2020 2021 2022 2023 2024

37 33.3
(Rs bn)

30 6.2

22.9
7.1
22
3.7
16.7

15 8.2 8.5
4.9
8.9
4.7 6.5 5.8 6.0
7 3.5
1.1 2.1 1.8 1.7 1.9
3.6 3.4 3.6 3.4 3.7
-
Customer
2020 2021 2022 2023 2024
adds (# mn) 0.6 2.4 5.3 4.7 8.8

Source: Company, Kotak Institutional Equities

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 20

ARPU for incremental cohorts has been falling

Average net revenue per client, March fiscal year-ends, 2020-24 (Rs)

3,443
3,157
3,002
2,905 2020 cohort
2,690
2,400 2,515
2021 cohort

1,860 1,601
1,553
1,447 2022 cohort
2023 cohort
922
793
2024 cohort
700

Year 1 Year 2 Year 3 Year 4 Year 5

(2020) (2021) (2022) (2023) (2024)

Source: Company, Kotak Institutional Equities

Client additions remain high for both below and above 25 years of age
Age profile of new client additions, March fiscal year-ends, 2022-24 (# mn)

5
4.6
<25 years >25 years
4.2

3.2
3 2.7

2.1 2.0
2

0
2022 2023 2024

Source: Company, Kotak Institutional Equities

Strong margins: Operating leverage helps offset lower ARPU

While ARPU trends convey one aspect of customer behavior, Angel itself does not focus on ARPU as a
driving KPI. Rather, company optimizes for a range of LTV-to-CAC ratio (6-7X) and operating margin of
45-50%. Hence, as long as company focuses on acquiring large number of customers within a certain
CAC – this helps accelerate revenue growth by going by capturing a high share of new-to-industry
customers. Further, while new customers have generated lower ARPU, company has maintained
operating profit margin of ~50% and breakeven of 5-7 months (Exhibit 38). Angel’s growing volume of
business reflecting in its ability to maintain operating margins of ~50% even with the decline in ARPU
and rise in branding costs.

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 21

Break-even period for new clients is close to has been around six months
Calculation of operating margin and break-even, March fiscal year-ends, 2020-24 (Rs mn)
Client adds
(# mn) 2020 2021 2022 2023 2024
Pre-2020 3,589 3,358 3,606 3,439 3,681
2020 0.6 1,116 2,066 1,801 1,743 1,894
2021 2.4 - 3,472 6,455 5,760 6,037
2022 5.3 - - 4,885 8,233 8,483
2023 4.7 - - - 3,728 7,081
2024 8.8 - - - - 6,156
Total net revenues 4,705 8,896 16,747 22,903 33,332
Less: Opex (ex-branding spend) 3,205 4,436 7,951 10,479 16,817
Margin (ex-branding spend) 1,500 4,460 8,796 12,424 16,515
Margin (%) 32 50 53 54 50
Less: Branding spend 103 165 243 202 878
Operating profit 1,397 4,295 8,553 12,222 15,637
Operating profit margin (%) 30 48 51 53 47
Break-even (months) 5 7 7

Source: Company, Kotak Institutional Equities

Broking: Rise in active clients drives revenue growth; F&O contributes ~85%
Broking business comprises all the trading across equity, derivatives, commodity and currencies.
Company originates business through two main channels – direct and authorized persons (AP). Angel’s
broking revenue growth broadly mirrors the exponential rise in customers over the past four years.
Revenue profile has become significantly concentrated towards F&O segment contributing to ~85% of
broking revenues in recent quarters, up from ~40% in FY2020. Regulatory interventions curbing leverage
in intraday trading, along with retail appeal towards options and introduction of weekly options has
fueled the explosive growth in options volume for Angel (and industry). Post covid, the revenue mix has
also shifted towards the direct channel versus assisted, yet there is marginal increase in assisted over
the past few quarters.

Net broking revenues have grown in-line with active clients

Net broking revenue and NSE active clients, March fiscal year-ends, 2020-25

(Rs bn) Net broking revenue Active clients (RHS) (# mn)

7.5 7.8 8.5
7.4
6.7
6.0 6.1 6.8
5.3
4.9
4.5 4.3 4.4 5.1
4.0 4.2 4.2
3.7
3.1 6.9 6.8 7.0
3.0 6.3 3.4
2.5
2.0 5.2 5.1
1.6 4.2 4.0
1.5 1.0 1.2 3.2 3.2 3.6 3.5 1.7
0.8 2.7
0.4 0.4 0.5 0.6 1.8 2.1
2.3
0.6 0.6 0.7 0.8 1.0 1.3 1.3
- -
3QFY20
4QFY20
1QFY21

3QFY21
4QFY21
1QFY22

4QFY22
1QFY23
2QFY23

1QFY24
2QFY24

1QFY25
2QFY25
3QFY25
1QFY20
2QFY20

2QFY21

2QFY22
3QFY22

3QFY23
4QFY23

3QFY24
4QFY24

Source: Company, Kotak Institutional Equities

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 22

Gross revenue mix has shifted towards F&O in recent years Direct business contributes ~75-80% of net broking revenues
Gross revenue mix, March fiscal year-ends, 2020-25 Net broking revenue mix, March fiscal year-ends,
(%) 2020-25 (Rs)
F&O Cash Com modity Currency Direct Assisted
100 100
8 8 6 4 4 3 4 4 4 5 4 5 4 5 4 5 6 7
14 10

11
11

21
10

11

22
22
8

22
23
11

23

23
23
24

24
24

24
13

24
14

12

26
26
13
12

28
18

29
30
31
22

32
32
33
35
80 26 80
31
33
35
44
50
43

60 60

87

85

85
84
40

84
84

79
78
78

78
77
77

77
82
82

76
77

76

76
76
76
81
81

81

74
74
40

72
78

71
70
69
74

68
68
67
65
69
63
60
56

20
45
41
41

20

-
-

3QFY24
1QFY20
2QFY20
3QFY20
4QFY20
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23
1QFY24
2QFY24

4QFY24
1QFY25
2QFY25
3QFY25
4QFY20

1QFY25
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23
1QFY24
2QFY24
3QFY24
4QFY24

2QFY25
3QFY25

Source: Company, Kotak Institutional Equities Source: Company, Kotak Institutional Equities

A suite of products for traders and investors

Angel has several open APIs that connect with third-party specialist partners that improve experience of
customers. For example, API integration with partner apps like Sensibull and Streak provide tools to
users. APIs are also used by algo traders to automate trading strategies. Similarly, integration with
players like Smallcase, Vested and Market Mojo also complete the offerings for different types of users
(Exhibit 42).

Angel offers a variety of in-house and external tools for clients

Description of various products on the platform

Source: Company, Kotak Institutional Equities

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 23

Breaking down revenue drivers – customer growth a key input

We breakdown the broking revenue growth into growth in active clients, order per client and net revenue
per order (Exhibit 43). Net revenue per order remains largely stable at around Rs15-16, whereas order
per client has some variability between 0.8 to 1.3 orders per day per client. Finally, as we have already
highlighted a few times, rapid customer acquisition has been the key to Angel’s strong revenue growth
post covid. Another aspect to customer activity has been increasing notional amount traded per order
(Exhibit 44). This is a function of greater share of options trading in overall turnover and much higher
leverage offered by the product.

Customer growth is a key driver of revenues so far

Growth in active clients, orders per client and revenue per order, March fiscal year-ends, 2020-25
Active clients (# mn) Order per client per day (#) Net revenue per order (Rs)
7.8

8.5 25
7.4

1.5
1.4
6.7

6.8 1.2 1.2 20

6.1

1.2 22
1.3
5.3

1.2
4.9

0.9 1.1 18
1.1 1.1 1.1 1.1
4.4

5.1 15
4.3
4.2

0.9 1.0 16
4.0

1.0 1.0 15 16 16
15 15 15 14 15
3.7

0.8 0.9 0.9

3.1

3.4 0.6 10
2.5
2.0
1.2

1.7 0.3 5
0.8
0.5
0.4

- - -
1QFY20
3QFY20

1QFY23
3QFY23
1QFY21
3QFY21
1QFY22
3QFY22

1QFY24
3QFY24
1QFY25
3QFY25

1QFY20

1QFY21

3QFY23

3QFY24
3QFY20

3QFY21

1QFY22

3QFY22

1QFY23

1QFY24

1QFY25

3QFY25
3QFY20

1QFY22

3QFY23

1QFY25
1QFY20

1QFY21
3QFY21

3QFY22
1QFY23

1QFY24
3QFY24

3QFY25

Source: Company, Kotak Institutional Equities

ADTO per order growth reflects higher share of options which carry high notional
Orders per client and ADTO per order, March fiscal year-ends, 2020-25

(#) Orders/client per day ADTO/order (RHS) (Rs '000)

1.4
1.5 120
1.2 1.2 103 1.3
1.2 1.1 93 95
1.1 1.1 1.1 1.1 1.1 91 1.1
1.2 96
1.0 0.9 0.9 1.0
1.1 94 95 0.9
0.8 0.9 0.9 88 1.0
0.9 0.9 72
70
64
0.6 48
53
45
0.3 38 39 41 24
33 33
27
14 9 16
- 10 12 13 -
2QFY20
3QFY20

1QFY21

3QFY21
4QFY21

2QFY22
3QFY22

1QFY23

3QFY23
4QFY23

2QFY24
3QFY24

1QFY25

3QFY25
1QFY20

4QFY20

2QFY21

1QFY22

4QFY22

2QFY23

1QFY24

4QFY24

2QFY25

Source: Company, Kotak Institutional Equities

Client funding – a focus area to drive profitability improvement

Client funding business is an interest earning book where broker funds cash delivery trade on behalf of
the client. Client funding comprises of margin trading facility (MTF) and T+7 funding of cash trades. MTF
has a regulatory framework which allows broker to fund up to 80% of purchase value. This product is
risk managed quite well with regulator prescribing which stocks are allowed to be margin funded and
along with margin level.

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 24

Angle overlays additional proprietary risk and exposure parameters leading to a refined list of stocks
(~60% of the eligible ones) which are funded. Prudent exposure limits on stocks and clients along with
incremental risk margins are further imposed (whenever necessary) to insulate the company from being
overexposed.

Angel’s client funding book has grown sharply to reach ~Rs41 bn as of 3QFY25 from ~Rs19 bn a year
ago. Buildup of this book is partly a function of market trends (delivery volumes) and focus to grow the
business given capital requirements (Exhibit 45). Average exposure client is roughly Rs100,000 (Exhibit
46). In FY2023 annual report, company also provided the market cap-wise breakup of funded shares
(Exhibit 47).

Sharp growth in client funding book Funding exposure per client has also increased
Client funding book, March fiscal year-ends, 2020- Funding exposure per client, March fiscal year-ends,
25 (Rs bn) 2020-25 (Rs)

45
41 225,000
39

36
180,000

26
27 135,000
20
17 19
18 15 16 16 14 14 14 90,000
12 13
10 11
8
9 6 6 45,000

0 0
4QFY20
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23
1QFY24
2QFY24
3QFY24
4QFY24
1QFY25
2QFY25
3QFY25

3QFY21

2QFY22
1QFY21
2QFY21

4QFY21
1QFY22

3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23
1QFY24
2QFY24
3QFY24
4QFY24
1QFY25
2QFY25
3QFY25
Source: Company, Kotak Institutional Equities Source: Company, Kotak Institutional Equities

Large part of the MTF book has funded small and midcap stocks About ~80% of clients have exposure below Rs0.1 mn
Break-up of client funding book by market cap. of Break-up of clients using MTF by exposure per
stocks, as of March 2023 (%) client, as of September 2024 (%)

>0.5 mn
Less than 6%
Rs0.1 tn Over Rs1
25% tn 0.1-0.5 mn
32% 10%

Rs0.1-1 tn
<0.1 mn
43%
84%

Source: Company, Kotak Institutional Equities Source: Company, Kotak Institutional Equities

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 25

Ancillary revenues
Volume-based rebates. Largest (~10%) part of ancillary income is the spread earned between
volume-based fee charged to clients and fee paid to the exchanges i.e. Angel retains the volume
discounts it earns from exchanges. Angel also charges customer depository charges for (~5% of net
revenues, but associated cost booked in the expense line), part of which is paid to depository (CDSL),
while retaining the rest. These revenue sources are linked to transaction volume, hence Angel benefits
from its large scale which gives it the benefit of volume-based rebates.

However, the above income lines are likely to get disrupted given recent circular from SEBI (link to
circular) requiring exchanges and depositories to charge flat fees.

Third-party product distribution. Contribution of this line item remains small (~1%). Company earns
commissions from third parties for the distribution of financial products like insurance, bonds, etc.

 As of March 2024, company had MF distribution AUM of Rs49 bn. Given these are direct funds,
there is no revenue from this segment. In recent quarters, company has scaled up its SIP business
with SIP registrations of 2.3 mn make it #2 ranked player in incremental SIPs (in number).

 Company booked ~Rs125 mn revenue from selling insurance products in FY2024 (up 48% yoy).
Lastly, strong IPO markets also generated a small fee of Rs104 mn in FY2024 (up 32% yoy).

Wealth and asset management – early days of build-out

Angel recently hired senior executives to lead to wealth management business. The business is still in
very stages of a build-out. Angel One has infused Rs2.5 bn in the business. The business is currently in
the process of securing regulatory licenses, hiring talent along with developing technology to support
the business. Wealth business has a broad strategy to create two verticals: ultra HNI (US$5 mn plus) and
affluent or emerging HNI. Angel also recently received the license to launch mutual funds. Company will
focus on passive funds.

Angel has built a strong team for its foray in wealth management
Overview of the wealth management opportunity and progress by Angel One

Source: Company

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 26

Angel has recruited a strong team for wealth and AMC business
Senior management team for wealth and AMC busienss

Name Designation Past experience

Angel One Wealth
S. Srikanth Chief Executive Officer & Co-founder CEO, Kotak Cherry & Head, Private Wealth Advisory, Kotak
Shobhit Mathur Co-founder & Chief Business Product Leadership, Kotak Cherry & Fund Manager, Kotak Optimus
Dharmendra Jain Co-founder & Head Business Product Leadership, Kotak Wealth & Head, Investments, ASK Wealth
Nalin Moniz CEO - Alternate Assets CIO, Edelweiss
Rohit Garg Product and Business Strategy VP, 360 One & Kotak
Vishal Rakyan Business Head - Emerging HNI & HNI Ex-leadership, Motilal Oswal, 360 One & Citi
Sudipto Sinha Business Head - UHNI Director, UBS & Kotak
Amit Sharma CTO CTO, Zoomcar & Peritus.ai
Mayank Rathi — Product, Kotak Cherry & Multipie
Angel One AMC
Hemen Bhatia ED & CEO Head-ETF Nippon Life AMC, Goldman Sachs
Mehul Dama Chief Investment Officer Fund manager, Nippon Life AMC, Goldman Sachs
Sameer Desai Chief Business Officer National Lead ETF Retail, Nippon Life AMC, Goldman Sachs

Source: Company, Kotak Institutional Equities

Business has seen increase in funding requirements to support growth

In general, broking business has seen increase in funding requirements largely regulatory driven and
partly to support growth by providing collateral on behalf of clients.

Margin funding regulations require minimum 50% of client margins in cash while other 50% can be in
the form of non-cash collateral (e.g. shares). In order to improve its value proposition, Angel One
allows clients to avail margin facility with only non-cash cash collateral (i.e. no need for cash).
Company, in turn, complies with regulations by providing cash on behalf of the client. This increases
funding requirement for the company.

Post October 2023, SEBI has disallowed creation of bank guarantee out of client funds (link to
circular). This regulation was introduced to remove implicit leverage available to brokers by pledging
client's funds with banks which in turn issued bank guarantees to clearing corporations for higher
amounts.

Other regulations such as segregation of client collateral have also increased working capital
requirements for brokers. Angel and other brokers allow clients to trade instantly with funds received
from selling held shared, even as settlement takes a day to complete. Earlier, brokers used to fund
margins (VAR+ELM margins stipulated by the exchange) on such trades with funds from other clients.
But this has been disallowed with new client collateral segregation rules (effective May 2022), leading
to higher working capital requirement for brokers to keep service levels uninterrupted.

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 27

Risks: Regulations, competition and execution

Key risks for Angel One are: (1) more strenuous F&O regulation if the recently introduced rules fail to
have the desired impact; (2) a drawn-out regulatory process extending to other areas of broking
(interest income on client assets, margin funding, day trading); (3) heightened competitive intensity
for acquiring new clients; (4) longer than expected gestation for new verticals.

F&O regulations: An uncertain end game

Broking business has come under intense regulatory actions over the past few years. Each new round of
regulations has raised concerns on sustainability of growth. The recent series of measures to curb retail
trading in index derivatives can possibly cause a major decline in retail activity and order count. The final
rules remove the overhang of uncertainty even as the eventual impact is yet to be seen. We build this
risk through ~20% decline in F&O orders (~40% decline in F&O orders per client). Beyond the near-term
uncertainties, there could be more strenuous measures in future if regulators continue with the current
thought process and remain unsatisfied if the recently introduced rules fail to have the desired impact.
There have been news reports suggesting that regulators may look at further tightening if any products
by market participants leads to dilution of current measures (link). There is also an open argument on
whether retail participation needs to be seen on a per client basis (given continuous rise on retail trading
accounts) or retail segment as a whole.

Potential areas of regulations: Day trading, interest income on client assets, margin funding
Broking is a highly regulated business. Regulating retail access to financial products has been a
challenge for regulators across countries. The issue of retail participation in markets could remain a
regulatory live wire for a prolonged period due to lack of clarity on how regulators are likely to view higher
retail participation in markets. It is unclear if there could be more areas which attract regulatory actions.
For example, SEBI recently published a report on retail losses in day trading, similar to its report on F&O
(our note on key takeaways).

Brokers make also generate interest income on client margin funds which are converted into fixed
deposits before submitting to clearing houses. SEBI recently also introduced an optional UPI block
mechanism for cash trades which allows for real-time movement of client funds during trade instead of
prior transfer to brokers. We see limited impact of this given that it potentially introduces friction in
trading and likely to cause occasional delays, thus impact experience. However, if this were to be
adopted and later applied for all trades, all brokers including Angel will likely face loss of interest income
on client funds. Interest on client funds contributed ~15% of net revenues in FY2024.

Our growth forecasts would be at risk of downgrades there were regulatory interventions to curb retail
leverage taken through the margin trade funding (MTF) book. While we believe that the MTF product in
India is well-regulated, unbridled growth in MTF could attract regulatory scrutiny, leading to tightening of
rules. This could play out through restriction in number of stocks allowed for margin or entry restrictions
to trade using MTF. We assume ~25% CAGR in margin funding book through FY2026-27E and its
contribution in net revenues is expected to grow to ~15% by FY2027E from 7% in FY2024.

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 28

Few segments of revenues have been impacted by regulatory changes

Break-up of net revenues, March fiscal year-ends, 2024 (%)

Depository/distribution
income
6%
Recent
Exchange rebate
regulation has
income
disallowed
11%
exchange
rebate
Recent
regulations on
Interest on client index
SEBI has funds derivatives to
introduced ASBA 15% impact volumes
for cash segment
but no regulations
Net commission fees
to refund interest
64%
on client funds
NII - MTF
4%

Source: Company, Kotak Institutional Equities

We discussed a few case studies (see Regulating retail F&O: Global learnings and potential options) of
strong and often sudden growth in retail participation across countries such as India, the US, Korea and
China. The key learning is that onerous regulations are easier to implement post-facto, whereas
regulating in anticipation and determining product suitability is the tricky part. Both China and Korea have
seen retail trading booms that ended with onerous regulations in response. The US is going through a
few similar challenges as India, leading to consultations (and enforcement actions) regarding the level
of duty to be placed on self-directed apps and to minimize harm for retail traders.

Competitive intensity in broking

Broking business has become highly competitive in recent years as industry has opened up to lot of new
players, given the benefits of digitization (customer acquisition, account opening, etc.). One of the key
risks for all players is heightened customer acquisition intensity curbing pricing flexibility. While we do
not build any price hikes, this issue could become critical if the industry were to face higher than expected
decline in activity. Client market share trends over the past decade indicates that market shares gains
can be fleeting. It has become relatively easier to ramp up some scale in initial years – some examples
include Dhan (~2% market share in <4 years) and INDMoney (1.5% in <3 years). There have been
examples of companies who gained and lost market share fairly quickly (Upstox, 5 Paisa and PayTM
Money). If regulations were to allow easier portability of demat accounts across brokers, it could
potentially open up competition even further.

Serious technology or cyber-security issues leading to downtimes

Broking business has become increasingly technology-driven with client expectations demanding
seamless and glitch-free experience. Recurring tech glitches could hamper retail experience which could
potentially lead to backlash and impact on existing active traders as well as new acquisitions. A broader
risk to the industry could also emerge through cybersecurity-related challenges.

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 29

Broking industry is fairly competitive with new sometimes gaining (and losing) market share fairly quickly
NSE active client market share, March fiscal year-ends, 2014-25 (%)
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Feb-25
Discount brokers 3.8 3.9 4.7 7.0 11.9 17.4 28.2 47.9 58.8 63.8 66.9 68.4
Groww — — — — — — — 4.1 10.7 18.8 23.4 26.6
Angel One 3.3 3.1 3.3 3.9 4.4 4.7 5.3 8.3 10.1 14.3 15.0 15.6
Zerodha 0.4 0.6 1.2 2.8 6.5 10.4 13.1 19.1 17.4 19.8 17.9 16.3
Upstox 0.1 0.1 0.2 0.3 0.5 1.1 5.7 11.3 14.5 6.7 6.2 5.7
5 Paisa — — — 0.1 0.4 1.2 4.0 4.6 4.9 1.6 1.3 0.9
Paytm Money — — — — — — — 0.5 1.1 2.1 2.0 1.4
Dhan — — — — — — — 0.0 0.1 0.6 1.2 2.0
INDMoney — — — — — — — — — — 0.8 1.7
Bank-owned brokers 26.8 28.4 29.5 30.3 28.8 29.4 26.8 21.5 18.0 15.4 13.2 12.9
Kotak Securities 5.2 5.3 4.8 4.6 4.4 5.0 5.3 3.9 3.5 3.0 3.0 3.0
HDFC Securities 6.5 6.8 7.9 8.1 7.3 7.7 6.7 5.1 3.2 3.2 2.7 3.0
SBICAP Securities 1.6 2.2 2.4 2.8 2.6 2.4 2.3 1.7 1.8 1.9 2.1 2.0
ICICI Securities 11.7 11.7 10.8 10.4 9.6 9.6 10.0 8.4 8.4 6.3 4.5 4.0
Axis Securities 1.8 2.4 3.6 4.4 4.9 4.8 2.5 2.4 1.2 1.0 0.9 0.9
Standalone brokers 18.8 19.4 19.7 16.9 16.4 15.1 13.3 10.0 8.9 7.2 5.9 5.2
Motilal Oswal Securities 2.9 3.0 3.2 3.5 3.7 3.6 3.5 3.0 2.5 2.4 2.2 2.1
Sharekhan 6.4 6.7 6.5 6.2 6.5 5.8 5.1 3.6 2.1 2.0 1.6 1.4
IIFL Securities 5.5 5.6 5.1 3.3 2.7 2.5 2.0 1.5 3.1 1.4 1.1 0.9
Geojit Financial Services 3.5 3.1 3.4 2.7 2.2 1.9 1.5 1.1 0.7 0.7 0.6 0.5
Edelweiss Broking 0.6 0.9 1.5 1.3 1.3 1.4 1.2 0.8 0.5 0.6 0.4 0.3
Others 50.7 48.4 46.1 45.8 43.0 38.1 31.7 20.6 14.3 13.7 14.0 13.5
Industry 100 100 100 100 100 100 100 100 100 100 100 100

Source: NSE, Kotak Institutional Equities

Longer than expected gestation for new verticals

Angel is in the process of launching its wealth as well as asset management business. While both
businesses hold promise of long-term growth, we believe these businesses have long gestation period
and require patience and commitment to build a successful franchise. Angel could deploy an effective
pivot in the broking business on the back of (a) extremely favorable macro environment (covid, strong
market) and (b) execution capabilities that helped it capitalize on the opportunity. We believe wealth and
asset management business are fundamentally much more ‘slow moving’.

Angel’s leadership has demonstrated its ability to work with external talent and provide freedom to
execute. While we are seeing this play out in wealth as well, any lapses in execution could lead to
insufficient progress in developing new businesses. Investment towards new business is having 1.5-2
percent points impact on EBDAT margins. Management has indicated that wealth business is likely to
break-even in ~3 years and AMC in 6-7 years.

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 30

Financial section: Expect slow recovery but price hike is key EPS growth
We build ~15% EPS decline in FY2026E, reflecting fairly conservative assumptions on client adds and
activity levels over the next 12 months. We build ~10% yoy decline in orders, resulting from ~20%
decline in F&O orders. Recovery over the following two years (~12% order CAGR), drives ~20% EPS
CAGR over FY2027-28E. We also expect some progress (albeit lower base) in non-broking fee lines
such as wealth and financial product distribution.

Regulations, market cycles and mitigating actions

We believe Angel One’s business model over medium-term has potentially promising growth
opportunities given growth prospects in retail broking as well as WIP businesses such as asset and
wealth management. However, much of the debate around Angel’s business model and share price is
focused on growth outlook over next 12 months.

High level of uncertainty over next 12 months makes near-term projections less useful. We discuss
our assumptions in more detail below. However, our assumptions are subject to potentially major
revisions over next few quarters given the impact of ‘true-to-label’ regulations already effective and
various other measures being introduced in phased manner in order to curb index option volumes.

Double impact of weak cash and F&O activity. Last six odd months have been challenging for brokers,
given the twin onslaught of F&O regulations along with sharp fall in cash market activity levels due to
fall in equity indices. While March 2025 has indicated some bounce-back, it is early to call recovery.
Angel’s decision to introduce charges for equity delivery trades has only partly offset the impact of
lower number of orders.

Levers available to mitigate impact, but likely to be used with a lag. We build impact on F&O volumes
over the 12 months. Future price hikes, though probable, are subject to various conditions such as
new normal activity levels and resulting profitability; and likely only after clarity on permanent impact
of new regulations.

 Angel has indicated its aim to remain around 43-45% operating margin band. However, we believe
Angel will likely not rush into major price hikes at the first sign of volume weakness. Company will
likely wait for clearer trends to emerge in terms of (a) trading behavior of existing client base and
(b) acquisition run-rate of new clients.

Assume moderate growth in key revenue drivers

Moderation in order growth, led by F&O. We expect Angel’s overall order count to decline ~10% in
FY2026E. This follows ~65% CAGR over FY2020-25E. FY2025E itself is a story of two halves as 2H is
nearly 20% lower than 1H orders. Over FY2027-28E, we expect recovery in orders with growth of 12-
13% CAGR. For F&O specifically, we assume ~18% decline in FY2026E, coming on the back of 25%
decline in 2HFY25 as compared to 1HFY25.

 While volume decline is already evident, any second-order impacts will be visible over the next 6-
12 months. Another round of tightening seems a low-probability scenario for now. However,
fundamentally it is unclear what metrics regulators will see while assessing the impact, i.e., traded
volume or number of active retail participants or pace of growth (discussed in risk section). We
believe, retail sentiment will self-correct due to market weakness, potentially leading to a moderate
pace of growth over the medium term.

 We assume weakness in F&O volumes to be offset by cash equity with order growth of ~13% CAGR
over FY2026-28E, which is lower than ~30% growth in FY2020-25 (period impacted by intraday
margin reduction). Cash equity segment was in an upswing in 1HFY25 but faced decline in 2H due
to weak equity markets. Cash market does not face any imminent regulatory risks currently.

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 31

We expect ~20% decline in F&O orders in FY2026

Order count (total, F&O and cash), March fiscal year-ends, 2020-27E (# mn)
Orders (total) Orders (F&O) Orders (cash)
2,000
1,694 1,733
1,525
1,600 1,409

1,200
926 1,221
1,080 1,130
800 680 1,000

713
345
400
132 430 487
385 424
228 177 276
-
2020 2021 2022 2023 2024 2025E 2026E 2027E

Source: Company, Kotak Institutional Equities estimates

Orders per clients shows the true impact of regulations. In Exhibits 54-55, we show the growth in
clients (measured using NSE active clients i.e. trade at least once a year) and orders per client
(measured as # of orders divided by total clients). We use overall clients to arrive at the ratio as data
on F&O traders is not available for the entire history. Company has given data for customers acquired
during FY2021-22 and traded through FY2024 – this share of F&O traders was ~40-50% of total clients
who traded. Trajectory of orders per client reflects the impact on decline in F&O activity levels that we
build in assumptions.

 Client growth continues, albeit more slowly. We assume active client base growth to continue,
reaching ~9 mn clients by end of FY2027E as compared to 7.5 mn currently. Our client growth
assumptions imply relatively modest acquisition run-rate, compared to management’s
expectations of strong additions per year of over 10 mn clients (do note that active clients are
lower than ~30 mn reported client base).

 ~40% decline in F&O orders per client. We expect F&O orders per client in a year to fall by ~40%
to nearly ~130 orders by FY2026-27E from the peak of ~210 in FY2024. This represents a reversal
in client activity levels back to FY2021 levels. We assume a marginal decline in cash activity levels
given the sharp rise in FY2024-1HFY25.

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 32

We expect customer growth to moderate We expect orders per client to fall sharply for F&O
NSE active clients, March fiscal year-ends, 2020- Order per total active clients, March fiscal year-
27E (# mn) ends, 2020-27E (# mn)

12.0 Orders/client (overall) Orders/client (F&O)

Orders/client (cash)
350
9.6 9.0 300
8.2 278 272
7.7 280 246
241
7.2 222
6.1 191 202
210
163 209
4.8 4.3
3.7 189 126 131
140 171 177
152
2.4 1.6 120
70
0.6 81
63 53 56 53 57
- - 42
2025E

2026E

2027E
2020

2021

2022

2023

2024

2020

2021

2022

2023

2024

2025E

2026E

2027E
Source: Company, Kotak Institutional Equities estimates Source: Company, Kotak Institutional Equities estimates

Net revenue growth of ~10% CAGR over FY2025-27E. Angel’s revenue growth is likely to be quite
unpredictable over the next 6-12 months and needs to be seen along with flexibility to offset any
adverse impact through lower costs. For better clarity, we reshuffle revenue breakup as per underlying
drivers i.e. activity-based, fund-based and fee-based. Exhibit 56 shows the sub-segments.

 We project revenue growth to fall to ~10% over FY2025-27E compared to 47% growth seen over
FY2019-24. As discussed above, large part of the weakness comes from derivatives segment,
which gets partly offset by more stable trends in cash trading along with growth in margin lending.

 Company is seeing growth in nascent businesses such as distribution (insurance, loans) and going
forward in segments like AMC and wealth (currently in incubation). Exhibit 59 shows the breakup
of gross broking income across products – share of cash equities is expected to recover back to
~20% over next few years from ~10% in FY2024.

Price hikes can greatly influence P&L, but tough to predict. We do not assume any pricing actions in
our base case. While we believe it cannot be ruled out, conditions that trigger price hikes remain
uncertain. Brokers are likely to consider a mix of internal metrics (margins, ARPU, etc.) and external
conditions (price hikes by others, competitive intensity) before deciding to take price hikes.

 We saw some players selectively raising prices after the introduction on ‘true to label’ guidelines,
suggesting that external events that permanently impacted revenue generation potential of the
business have led to price actions.

 Transaction costs form about ~50% of overall cost of trading in F&O and much lower in cash due
to higher levies. A Rs5 hike in F&O charges, will likely lead to ~11-12% hike in overall transaction
costs. In our view, impact of this has to be split between (1) churn from existing clients; (2) new
acquisitions. We believe the impact is likely to be negligible in the former while latter could have
higher sensitivity to headline prices.

 In terms of sensitivity, Rs5 hike in F&O charges drives nearly Rs30 i.e. 20-25% upgrades in earnings.

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 33

We expect a sharp drop in 2HFY25E revenues; FY2027E likely to benefit from price hike
Revenue break-up, March fiscal year-ends, 2019-27E (Rs mn)
2019-24 2025-27E
2019 2020 2021 2022 2023 2024 1HFY25 2HFY25E 2025E 2026E 2027E CAGR CAGR
Activity-based 3,065 3,240 6,993 13,135 18,040 26,271 17,387 11,784 29,172 24,740 29,194 54 4
Net brokerage 2,595 2,735 5,436 10,234 14,398 21,063 13,784 10,819 24,603 22,307 26,396 52 8
Depository 325 345 889 1,264 1,001 1,566 1,246 965 2,211 2,432 2,797 37 21
Ancillary 146 160 669 1,637 2,641 3,643 2,357 — 2,357 — — 90 nm
Fund-based 1,332 1,089 1,380 2,932 4,300 6,499 5,228 5,220 10,448 11,330 12,541 37 24
Margin lending 1,696 1,252 1,273 2,656 2,613 2,821 5,918 6,636 8,009 11 42
Client funds, etc. 327 325 497 997 2,582 5,038 7,517 7,967 8,383 73 19
Interest expense (692) (489) (389) (721) (895) (1,359) (2,986) (3,273) (3,851) 14 41
Fee-based 116 100 155 324 313 414 444 506 950 1,787 2,743 29 88
Others 266 326 442 357 256 116 290 240 240 (15) 27
Net revenues 4,779 4,754 8,971 16,747 22,909 33,301 23,118 17,742 40,860 38,096 44,718 47 10

Source: Company, Kotak Institutional Equities estimates

We expect ~20% decline in F&O orders from FY2025E peak; expect steady growth in cash orders
F&O and cash orders (# mn) and net revenue per order (Rs), March fiscal year-ends, 20202-27E
F&O orders Cash orders Net revenue per order (RHS)
1,300 25
21 1,130
1,080 1,221 1,000
1,040 20
16 16
15 15 15
780 15
15 15
713
520 430 10

487
424
260 385 5
138
276
30 228
187 177
- 90 -
2020 2021 2022 2023 2024 2025E 2026E 2027E

Source: Company, Kotak Institutional Equities estimates

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 34

Share of activity-based revenues to decline to ~70% by FY2027E Revenue share of F&O segment to decline to ~60-65%
Net revenue mix, March fiscal year-ends, 2019-27E Broking revenue mix, March fiscal year-ends, 2019-
(%) 27E (%)
Activity-based Fund-based Fee-based F&O Cash Commodity Currency
100 3 2 2 2 1 1 2 5 100 1 1 1 0
6 4 4 4 7
8 9 9
16 18 19 20 11
25 26 12 12
80 30 30 28 23 17 18
80
39
60 60

40 82 80 80 79 40 83 84 81
68 73 72 74 74
65 66 72
52
20 20

- -
2027E
2025E

2026E
2020

2021

2024
2019

2022

2023

2025E

2026E

2027E
2021

2022

2023

2024
Source: Company, Kotak Institutional Equities estimates Source: Company, Kotak Institutional Equities estimates

Cost structure has some flexibility to absorb lower revenue growth

We expect expense growth to moderate to ~14% CAGR over FY2025-27E, coming on the back of fairly
strong 33% CAGR over FY2019-24 (Exhibit 60). FY2025E expense growth reflects spends towards
building new verticals such as wealth management and AMC along with elevated marketing costs. Of
the overall costs, around 30% of costs comprises of commission costs (revenue share with AP’s) and
finance costs – these are linked to growth in broking and lending revenues (Exhibit 61).

While staff costs (30% of costs) are largely fixed with some variable element, advertisement and
publicity costs (~20-25%) are linked to branding spends and customer acquisition. Company became
one of the sponsors of the IPL for a period of five years starting 2024. While the sponsorship deal
itself costs around Rs800 mn annually, Angel One is likely to incur close to Rs1.3-1.5 bn every year
(~3-4% of costs).

Expense growth to moderate, reflecting slower revenue growth and customer acquisitions
Operating expenses, March fiscal year-ends, 2019-27E

(Rs bn) Operating costs (LHS) YoY (RHS) (%)

50 64 70

40
51
40 37 54
36
40
30 28 33 38
25

20 18 22
15 14

9
10 7 6 6
(3)
(4)
- (10)
2019 2020 2021 2022 2023 2024 2025E 2026E 2027E

Source: Company, Kotak Institutional Equities estimates

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 35

Angel has high share of variable costs such as commission and finance costs
Overall cost break-up, March fiscal year-ends, 2019-27E (%)
Staff cost Commission cost Ad & publicity
Finance costs Software, cloud, etc. D&A
Exchange costs Demat charges Others
100

5 7 8 8 8 8
80 4 4 5 5
3 4 5 8 9 10
10 8
9 8 14 21 21
60 27 26 22 22

40 36 36 19
41 38 35 20
29 22

20
25 25 30 31
24 19 19 22 20
-
2019 2020 2021 2022 2023 2024 2025E 2026E 2027E

Source: Company, Kotak Institutional Equities estimates

Commission costs move in tandem with order growth. Angel also spends on customer acquisition
which influences its other expenses. Both these expenses have fair amount of variability and likely to
move in line with growth or decline in the business (Exhibits 62-63).

Commission costs have high correlation with orders Non-staff/finance costs have high correlation with client adds
March fiscal year-ends, 2020-25 March fiscal year-ends, 2020-25
Commission expenses (LHS) Other expenses (LHS)
(Rs mn) Orders (RHS) (# mn) (Rs mn) (# '000)
Client additions (RHS)
2,500 500 5,000 3,000

2,000 400 4,000 2,400

1,500 300 3,000 1,800

1,000 200 2,000 1,200

500 100 1,000 600

- - - -
3QFY23

1QFY24
1QFY20
3QFY20
1QFY21
3QFY21
1QFY22
3QFY22
1QFY23

1QFY24
3QFY24
1QFY25
3QFY25

1QFY20
3QFY20
1QFY21
3QFY21
1QFY22
3QFY22
1QFY23
3QFY23

3QFY24
1QFY25
3QFY25

Source: Company, Kotak Institutional Equities estimates Source: Company, Kotak Institutional Equities estimates

Operating margins: Levers to absorb margin pressure

Angel has enjoyed strong operating margins (EBDAT as % of net revenue), reaching a peak of 53% in
FY2023 compared to ~30% during pre-covid years. Margins fell in FY2024 as a result of higher spends
towards customer acquisition and branding (~3% impact from IPL sponsorship rights). We expect
margin to decline further in FY2026E (36%) before recovering partly to 38% level by FY2027E. Our
margin is below the management’s intention to maintain margin around ~45% levels over next few
years.

In Exhibit 66, we show the cost break-up as a % of net revenue. Costs equivalent to nearly 20-25% of
net revenues are likely to be flexible i.e. discretionary in nature. These costs could come into play in
case revenue pressure is higher-than-expected.

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 36

Operating margin has dropped due to… … expenses for client additions, branding and new initiatives
EBDAT margin (% of net revenue), March fiscal year- PAT margin (% of revenue), March fiscal year-ends,
ends, 2019-27E (%) 2019-27E (%)

60 35
53
51 29
48 47 27
48 28 26
40 23
38 22
36 21
36 21 20
30 29

24 14
10 11

12 7

0 0
2019

2020

2021

2022

2023

2024

2027E

2019

2020

2021

2022

2023

2024

2027E
2025E

2026E

2025E

2026E
Source: Company, Kotak Institutional Equities estimates Source: Company, Kotak Institutional Equities estimates

Approximately 20-25% of net revenues could be discretionary in nature

Share of various cost items (as % of net revenues), March fiscal year-ends, 2025-27E

70
4
3
3
7
56 Fixed + variable
22 Variable
Fixed
42 Fixed + variable

28 26

Largely variable; linked to client

addition + fixed IPL branding cost
14
Largely fixed

-
Staff cost Ad & publicity Software, cloud, D&A Exchange & Others
etc. demat costs

Source: Company, Kotak Institutional Equities estimates

Healthy RoEs but fall due to capital raise; leverage under check
Broking business in recent years has become capital intensive compared to past as increase in volumes
which has led to requirement for funding client margins for short-term as also for products like MTF
where Angel provides an option to fund on behalf of clients. Regulatory changes such as requiring
brokers to provide 50% margin for all bank guarantees created in favor of clearing corporation has also
increasing funding needs. Lastly, opportunity to expand MTF book has led to higher external capital.
Angel raised ~Rs15 bn in March 2024 due to these reasons. As a result, its RoE has declined and
expected to decline further due to P&L pressures. On the positive side, its debt-equity ratio also remains
comfortable despite the assumed growth in MTF book. (Exhibits 67-68)

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 37

Angel’s RoE is expected to decline given recent fund raise Leverage remains under control
RoE, March fiscal year-ends, 2019-27E (%) Debt-equity, March fiscal year-ends, 2019-27E (X)

55 2.5
2.3
48
46
43
44 2.0

34
1.5
33 1.5
27
1.1
1.1
22 19 1.0 0.8 0.8
16 17 0.8 0.8
15 0.7

11 0.5

0 -
2019

2020

2021

2022

2023

2024

2025E

2027E
2026E

2019

2020

2021

2022

2023

2024

2025E

2026E

2027E
Source: Company, Kotak Institutional Equities estimates Source: Company, Kotak Institutional Equities estimates

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 38

Company background:
Founded over 25 years ago, Angel One is one of the leading retail broking houses in India with nearly 28
million clients. Its suite of products and services include equity cash and derivatives, commodity and
currency derivatives broking, margin trading funding, distribution of third party financial products such
as insurance, mutual funds, etc. Its broking and allied services are offered through two business units:
(i) direct business unit, where clients are acquired through digital marketing and social media platforms
and (ii) through Assisted Business unit comprising of a network of over ~11,000 Authorised Persons.
Client acquisition, on-boarding, engagement and delivery of product and services is done digitally across
both business units. About 90% of new customers in FY2024 came from Tier-2, 3 and beyond cities.

Shareholding pattern
As of December 2024 (%)

Entity name/type Shareholding (%)

Promoter group 35.6
Dinesh Thakkar 18.6
Public 64.4
Mutual funds 9.6
Motilal Oswal Large And Midcap Fund 1.1
Nippon India Growth Fund 4.0
Foreign portfolio investors 12.3
Hornbill Orchid India Fund 1.1
Goldman Sachs India Equity Portfolio 1.2
AIFs 2.3
Insurance companies 0.9
Retail 37.1
Others 2.3

Source: BSE

Angel One
Capital Markets India Research

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 39

Board of directors
Name Designation Brief profile
Dinesh has over 30 years of experience in the broking industry. He is also one of the Promoters
Mr. Dinesh Thakkar Chairman and Managing Director
of our Company. He has been a Director on our Board since October 23, 2007.

Ketan has over 30 years of experience in the broking and financial services industry. He holds a
degree of bachelor of commerce from KC College, University of Bombay. Prior to joining our
Mr. Ketan Shah Whole Time Director
Company, he was associated with Kishore Narottamdas Amerchand and KNA Securities
Private Limited. He has been a Director on the Board since May 11, 2018.

Amit has over 20 years of experience in business leadership and strategy heads all the
strategic initiatives in our Company. Prior to joining our Company, he held leadership positions in
Mr. Amit Majumdar Whole Time Director Wellspring Healthcare Private Limited and AGS Transact Technologies Limited. He was also
associated with S.R. Batliboi & Co. LLP, Cho Hung Bank, Rabo India Finance Private Limited and
Ambit Corporate Finance Pte Ltd.

Muralidharan has over 34 years of experience in the technology sector. He holds a B.E. degree
from University of Bombay and a masters degree in financial management from the JBIMS.
Prior to joining Angel One, he was associated with Syntel Private Limited as vice president,
Mr. Muralidharan Ramachandran Independent Director Epicenter Technologies Pvt. Ltd as a chief technology officer, Aditya Birla Management
Corporation Ltd as vice president (corporate information technology), Satyam Computer
Services Ltd. as a senior manager, TCS as senior hardware engineer, etc. He is also currently
associated with Aegis Customer Support Services Private Limited.

Krishna has over 15 years of experience in the information technology sector. He has passed
the final examination held by ICAI and also holds a bachelor of commerce degree from
Mr. Krishna Iyer Non-Executive Director
University of Pune. He is associated with Zentest Software Private Limited and Tejgyan Global
Foundation as a director.

Mala has over 17 years of experience in corporate governance controls. She is a member of
the ICAI and currently hold the position as a partner at M/s. Arun Todarwal & Associates LLP.
Ms. Mala Todarwal Independent Director She is also on the board of directors of companies such as Welspun Sattanthapuram
Nagapattinam Road Private Limited, Welspun Steel Limited, Welspun Investments and
Commercials Limited and IVP Ltd.

Kalyan has over 35 years of experience in the technology sector across Asia Pacific region. He
holds a degree of bachelor of science from the ICFAI University and a post graduate diploma
from National Institute of Information Technology, Hyderabad. Prior to joining Angel, he was
Mr. Kalyan Prasath Independent Director associated with Eastspring Investments (Singapore) as a director – information technology,
ICICI Prudential AMC Limited as a vice president, DGP Windsor India Limited as an assistant
manager – software development and Birla Global Finance Limited as a chief manager-
systems as well as Universal Luggage MFG. Co. Limited

Krishnaswamy has over 28 years of experience in the finance sector. He is a member of ICAI
and holds a bachelor of science degree from Faculty of Science, University of Madras. Prior to
joining Angel, he was associated with Dawnay Day AV Analytics Private Limited, Hexagram
Mr. Krishnaswamy Arabadi Sridhar Independent Director Fintech Private Limited as a chief executive officer, UTI Asset Management Company Limited
as an executive director, UTI International (Singapore) Private Limited as chief executive officer
and executive director, India First Life Insurance as a director, Association of Mutual Funds in
India as a director and ICRA Analytics Limited as an advisor.

He holds a bachelor of science degree from St. Joseph’s College, Tiruchirapalli, Bharathidasan
University and a post graduate honours diploma in personnel management and industrial
relations from XLRI Jamshedpur. Prior to joining Angel, he was associated with UBS Business
Solutions (India) Private Limited as a managing director, Telstra Global Business Services LLP
Mr. Arunkumar Nerur Thiagarajan Independent Director as India delivery and innovation executive and country managing director India, Polaris Software
Lab Limited as senior vice president, Pepsico India Holdings Limited as general manager
(information technology), Dun & Bradstreet Predictive Sciences and Analytics Pvt Ltd as a chief
executive officer, Officer Tiger Database Systems India Private Limited as a senior vice
president (operations) and Citibank N.A as a vice president.

Source: Company, Kotak Institutional Equities

Angel One
Capital Markets India Research

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 40

Senior management profile

Name Designation Brief profile

Ambrish has extensive experience in fintech, e-commerce, and consumer electronics. In his previous role as Vice President and
General Manager at Google Pay APAC, he was instrumental in scaling Google Pay's footprint and advancing the UPI ecosystem
Mr. Ambrish Kenghe Group CEO
in India. He also played a pivotal role in the launch of Chromecast and contributed- significantly to Google TV's development.
Before Google, he served as Chief Product Officer at Myntra. Before Myntra, he has worked with Bain & Co. and Cisco.

Dinesh has over 30 years of experience in the broking industry. He is also one of the Promoters of our Company. He has been a
Mr. Dinesh Thakkar Chairman and Managing Director
Director on our Board since October 23, 2007.
Vineet holds a B.Com. degree from the University of Calcutta. He is an associate of the Institute of Chartered Accountants of
India, an associate of the Institute of Company Secretaries of India and an associate of the Institute of Cost and Works
Accountants of India. He has over 27 years of experience in the manufacturing, financial and telecommunication sectors. He
Mr. Vineet Agrawal Chief Financial Officer
heads the treasury, corporate finance, accounts, secretarial, statutory and management reporting, taxation, audit, business
finance, commercial and controlling teams in Angel. Previously, he has worked with STP Limited, Reliance Infocomm Limited,
Kitply Industries Limited, etc. He has been associated with Angel One since September 22, 2015.

Amit has over 20 years of experience in business leadership and strategy heads all the strategic initiatives in our Company.
Prior to joining our Company, he held leadership positions in Wellspring Healthcare Private Limited and AGS Transact
Mr. Amit Majumdar ED - Strategic Initiatives
Technologies Limited. He was also associated with S.R. Batliboi & Co. LLP, Cho Hung Bank, Rabo India Finance Private Limited
and Ambit Corporate Finance Pte Ltd.
Ravish has been associated with Angel One since September 4, 2023. He holds a bachelor of computer engineering degree
Mr. Ravish Sinha Chief Product and Technology Officer from Mangalore University. Prior to joining Angel, he was associated with Yahoo Web Services India Private Limited as senior
software engineer and Flipkart India Private Limited as senior vice president.

Prateek has been associated with Angel One since November 11, 2022. He holds a bachelor of engineering (technology) degree
from Indian Institute of Technology Bombay and a masters in business administration from Indian Institute of Management
Mr. Prateek Mehta Chief Business Officer Ahmedabad. Prior to joining Angel, he was associated with Sapient Technologies Private Limited, Dell India Private Limited, Dell
International Services, CitiBank, Myntra Designs Private Limited as head – men’s and sports category and Robemall Apparels
Private Limited as president – category.

Jyotiswarup has been associated with Angel since July 26, 2021. He holds a bachelor degree of computer science engineering
from Nagpur University and a masters of computer science degree from Illinois Institute of Technology, Chicago, USA. Prior to
joining our Company, he was associated with Walmart Global Technology Services India Private Limited as a senior
Mr. Jyotiswarup Raiturkar Chief Technology Officer distinguished technical architect, Inutit India Product Development Centre Private Limited as an architect, ibibo Group Private
Limited as chief architect, Samsung Digital Imaging Co. Limited as an assistant development manager, Microsoft India (R&D)
Private Limited as a program manager as well as with Tata Power Company Limited, Honeywell Technology Solutions Private
Limited and 8kpc India Private Limited.
Ankit has been associated with Angel One since February 8, 2021. He holds a bachelor of computer engineering degree from
Sardar Vallabhbhai National Institute of Technology, Surat. Prior to joining Angel, he was associated with Infosys Technologies
Mr. Ankit Rastogi Chief Product Officer Limited, Vriti Infocom Private Limited, MakeMyTrip (India) Private Limited as senior vice president – product management,
Cleartrip Private Limited as vice president - hotels, Inasra Technologies Private Limited as a vice president - marketplace and
ibibo Group Private Limited as business head – hotels and holidays

Deepak has been associated with Angel One since July 14, 2023. He holds a bachelor degree of technology in ceramic
engineering from Banaras Hindu University and a post graduate certificate in business management from Xavier Institute of
Management, Bhubaneshwar. Prior to joining our Company, he was associated with Apple Inc. Infosys Technologies Limited as
Mr. Deepak Chandani Chief Data Officer
senior principal – business consulting group project manager, AppDirect India Private Limited as head of India, Global Logic as
director engineering, BP Business Solutions Private Limited as head of data, business intelligence & analytics, Teradata India
Private Limited, and UBS Business Solutions (India) Private Limited as an executive director in technology department.

Ketan has over 30 years of experience in the broking and financial services industry. He holds a degree of bachelor of
Mr. Ketan Shah Chief Strategy Officer commerce from KC College, University of Bombay. Prior to joining our Company, he was associated with Kishore Narottamdas
Amerchand and KNA Securities Private Limited. He has been a Director on the Board since May 11, 2018.
Nishant has been associated with Angel One since September 1, 2023. He holds a certificate in executive education
programme from Indian Institute of Management, Bangalore and a post raduate diploma in management from Lal Bahadur
Mr. Nishant Jain Chief Business Officer – Assisted Business Shastri Institute of Management, Delhi. Prior to joining our Company, he was associated with Coca Cola India Private Limited as
director - NKA, PepsiCo as vice president GTM solutions, Zomato Media Private Limited as head of sales, BharatPe (Resilient
Innovations Private Limited) as chief business officer – network.

Meenal has been associated with Angel One since February 1, 2024. She holds a bachelor of laws degree from ILS Law College
Pune and has received the Chevening India cyber security fellowship from Cranfield University. She has completed the Oxford
Artificial Intelligence Programme from Said Business School, University of Oxford and has also been recognised as a data
Ms. Meenal Maheshwari ShahGroup General Counsel
protection professional by Foundation of Data Protection Professionals in India. Prior to joining Angel, she was associated with
Lemmatree Pte Ltd as group legal director, Essar Capital Advisory India Private Limited, Bennet, Coleman & Co. Limited (Times
of India) and Khaitan & Co.

Pravin has been associated with Angel One since March 2, 2022. He holds a bachelor degree in law from Asmita College of Law,
University of Mumbai, masters of arts degree in economics from Savitribai Phule College, Pune University and masters in
business administration in marketing and finance from Savitribai Phule College, Pune University and a doctorate of philosophy in
Dr. Pravin Bathe Chief Legal and Compliance Officer
banking and finance from Savitribai Phule College, Pune University. Prior to joining Angel, he was associated with SEBI as an
assistant general manager, Edelweiss Business Services Limited as a senior vice president and CitiGroup Global Markets India
Private Limited as a senior vice president.
Subhash has been associated with Angel One since November 17, 2015. He holds a bachelor’s degree of science from
Mr. Subhash Menon Chief Human Resources Officer University of Mumbai and master of human resources development management from Narsee Monjee Institute of
Management Studies. Prior to joining Angel, he was associated with IndiaFirst Life Company Limited, SBI Life and USV Limited.
Anuprita has been associated with Angel One since January 8, 2024. She holds a bachelor degree of engineering (computer)
Mr. Anuprita Daga Group Chief Information Security Officer from Amravati University. Prior to joining Angel, she was associated with Reliance Capital Limited as chief information security
officer – risk and YES Bank Limited.

Saurabh has been associated with Angel One since November 15, 2022. He holds a bachelor degree of Technology (Honours) in
Computer Science and Engineering from Indian Institute of Technology, Kharagpur and a Post graduate diploma in
Mr. Saurabh Agarwal CXO - New Business management from Indian Institute of Management Society, Lucknow. Prior to joining Angel, he was associated with Nomura
Structured Finance Services Private Limited as an analyst – exotic derivatives, Locon Solutions Private Limited as category
head, plot projects in innovation.

Devendra has been associated with Angel One since October 10, 2018. He holds a bachelor’s degree of engineering from Netaji
Subhas Institute of Technology and a post graduate diploma in management from Indian Institute of Management, Bangalore.
Mr. Devender Kumar Head - Online Revenue
Prior to joining Angel, he was associated with FunOnGo Media and Entertainment LLP as chief technology officer and Motilal
Oswal Financial Services Limited as vice president – corporate planning.

Bhavin has been associated with Angel One since March 5, 2001. He holds a masters of business administration – part time
Mr. Bhavin Parekh Head - Operations, Risk & Surveillance
(finance) from Narsee Monjee Institute of Management Studies.

Source: Company, Kotak Institutional Equities

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 41

Summary of P&L and key ratios

March fiscal year-ends, 2020-27E (Rs mn)
2020 2021 2022 2023 2024 2025E 2026E 2027E 2028E
P&L
Gross revenues 7,547 12,990 22,971 30,211 42,767 52,082 48,414 56,453 63,975
Broking 5,039 9,065 15,736 20,805 29,170 32,840 29,351 34,281 38,157
Interest on margin funding 1,252 1,273 2,656 2,613 2,821 5,918 6,636 8,009 9,268
Interest on customer funds 325 497 997 2,582 5,038 7,517 7,967 8,383 9,664
Depository 345 889 1,264 1,001 1,566 2,211 2,432 2,797 3,217
Distribution, wealth, etc. 100 155 324 313 414 950 1,787 2,743 3,429
Other ancillary 160 669 1,637 2,641 3,643 2,357 — — —
Fees and commission expense (2,304) (3,630) (5,502) (6,407) (8,107) (8,236) (7,044) (7,885) (8,585)
Finance costs (489) (389) (721) (895) (1,359) (2,986) (3,273) (3,851) (4,706)
Net revenues 4,754 8,971 16,747 22,909 33,301 40,860 38,096 44,718 50,683
Operating expenses (3,357) (4,676) (8,194) (10,689) (17,695) (24,480) (24,284) (27,650) (30,674)
Staff costs (1,598) (1,718) (2,809) (3,979) (5,565) (9,124) (10,555) (12,467) (14,813)
Advertisement & publicity (477) (1,281) (3,010) (3,778) (7,395) (9,500) (8,000) (9,000) (9,000)
Software connectivity license, etc. (209) (357) (694) (1,250) (2,187) (2,843) (2,843) (3,127) (3,440)
Other expenses (1,073) (1,319) (1,681) (1,682) (2,549) (3,014) (2,886) (3,056) (3,422)
EBDAT 1,397 4,295 8,554 12,221 15,606 16,379 13,813 17,068 20,009
Depreciation and amortisation (209) (184) (186) (303) (499) (999) (1,049) (1,111) (1,200)
PBT 1,188 4,112 8,367 11,918 15,106 15,381 12,764 15,956 18,808
Tax (320) (1,131) (2,117) (3,016) (3,881) (4,084) (3,319) (4,149) (4,890)
Loss after tax from discontinued operations (44) (12) (3) (2) (1) — — — —
PAT 823 2,968 6,248 8,900 11,224 11,297 9,446 11,808 13,918
EPS (Rs) 11 36 75 107 134 126 105 131 155
Number of shares (# mn) 72.0 81.8 82.9 83.4 84.0 89.9 89.9 89.9 89.9
Growth rates (%)
Net revenues (1) 89 87 37 45 23 (7) 17 13
Net brokerage fees 5 100 87 41 46 17 (9) 18 12
Staff costs (1) 8 63 42 40 64 16 18 19
EBDAT (3) 207 99 43 28 5 (16) 24 17
EBIT (5) 246 104 42 27 2 (17) 25 18
PAT 3 260 110 42 26 1 (16) 25 18
Key ratios
Cost-income (%) 84 68 64 61 65 70 74 72 71
EBDAT margin (%) 29 48 51 53 47 40 36 38 39
EBIT margin (%) 25 46 50 52 45 38 34 36 37
Net profit margin (%) 11 23 27 29 26 22 20 21 22
RoE (%) 15 34 46 48 43 27 17 19 20
Debt/equity (X) 1.5 1.1 1.1 0.7 0.8 0.8 0.8 0.8 0.9
Dividend payout ratio (%) — 36 36 37 26 35 35 35 35
Key assumptions
Orders (# mn) 132 345 680 926 1,409 1,694 1,525 1,733 1,937
F&O 30 138 430 713 1,080 1,221 1,000 1,130 1,243
Cash 90 187 228 177 276 385 424 487 560
Net revenue per order (Rs) 21 16 15 16 15 15 15 15 15
NSE active customers (# mn) 0.6 1.6 3.7 4.3 6.1 7.7 8.2 9.0 9.8
Margin funding book (Rs bn) 2 8 15 15 16 37 46 57 69
Net revenue mix (%)
Broking 58 61 61 63 63 60 59 59 58
Margin lending (NII) 16 10 12 7 4 7 9 9 9
Interest on customer funds 7 6 6 11 15 18 21 19 19
Depository 7 10 8 4 5 5 6 6 6
Distribution, wealth, etc. 2 2 2 1 1 2 5 6 7
Other ancillary 3 7 10 12 11 6 — — —

Source: Company, Kotak Institutional Equities estimates

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 42

Balance sheet
March fiscal year-ends, 2020-27E (Rs mn)
2020 2021 2022 2023 2024 2025E 2026E 2027E 2028E
Share capital 720 818 829 834 840 899 899 899 899
Reserves and surplus 5,194 10,492 15,015 20,781 29,546 51,831 57,970 65,645 74,692
Shareholder's fund 5,914 11,310 15,844 21,616 30,386 52,730 58,869 66,544 75,591
Borrowings 4,909 11,715 12,577 7,872 25,353 34,227 42,784 53,480 64,176
Other financial liabilities 1,305 1,797 2,534 3,879 4,005 4,326 4,672 5,046 5,449
Tax-related liabilities 0 121 10 115 162 170 179 188 197
Trade payables 9,395 22,762 40,668 40,715 71,970 86,551 77,901 92,993 109,106
Provisions 67 91 121 163 226 237 249 261 275
Other liabilities 312 341 445 417 435 457 479 503 529
Total liabilities 15,988 36,828 56,356 53,161 102,151 125,968 126,264 152,471 179,731
Total equity and liabilities 21,902 48,138 72,199 74,777 132,537 178,698 185,133 219,015 255,322
Cash and cash equivalents 3,618 820 4,221 1,331 10,430 10,961 15,086 20,078 27,665
Bank balances other than cash 10,458 17,954 44,529 53,580 88,013 105,845 95,267 108,307 121,023
FD lien with exchanges 6,381 9,551 31,653 23,793 63,021 — — — —
FD against credit facilities of the group 195 6,234 7,613 10,601 8,081 — — — —
FD for bank guarantee 1,204 2,105 4,902 17,535 14,862 — — — —
FD free from charge, interest on FD, others 2,677 64 361 1,651 2,049 — — — —
Trade receivables 390 2,277 5,653 3,749 4,869 11,167 13,959 17,449 20,938
Loans 2,812 11,296 13,586 10,052 14,841 34,035 42,544 53,180 63,816
Investments 353 55 187 1,095 0 1,000 1,200 1,440 1,728
Other financial assets 2,706 14,289 1,947 1,855 8,510 8,935 9,382 9,851 10,343
Fixed assets/CWIP 1,039 1,004 1,402 2,099 3,507 4,007 4,507 5,007 5,507
Intangible assets 68 55 66 332 499 598 718 862 1,034
Other assets 458 387 609 684 1,868 2,148 2,471 2,841 3,267
Net assets 21,902 48,138 72,199 74,777 132,537 178,698 185,134 219,015 255,323

Source: Company, Kotak Institutional Equities estimates

Cash-flow statement
March fiscal year-ends, 2020-27E (Rs mn)
2020 2021 2022 2023 2024 2025E 2026E 2027E 2028E
PBT 1,148 4,101 8,364 11,915 15,137 15,381 12,764 15,956 18,808
Depreciation and amortisation expense 221 189 189 305 500 999 1,049 1,111 1,200
Borrowing cost, net of other income 995 799 757 1,392 2,230 2,696 3,033 3,611 4,466
Working capital changes 4,361 (13,561) (1,520) (2,691) (17,288) (29,981) (9,851) (12,640) (11,395)
Cash taxes paid (293) (972) (2,215) (2,889) (3,877) (4,084) (3,319) (4,149) (4,890)
Cash flow from operations 6,433 (9,444) 5,575 8,032 (3,299) (14,989) 3,676 3,890 8,190
(Purchase)/sale of fixed assets (125) (140) (691) (1,005) (2,073) (1,278) (1,322) (1,381) (1,469)
(Purchase)/sale of investments (179) 386 166 (848) 1,161 (425) (447) (469) (493)
Interest income 22 2 1 1 2 290 240 240 240
Cash flow from investing (281) 248 (524) (1,851) (910) (1,413) (1,529) (1,610) (1,722)
Share issuance of shares and ESOPs — 2,854 229 114 141 15,000 — — —
Interest expense (436) (347) (665) (685) (1,087) (2,986) (3,273) (3,851) (4,706)
Dividends paid (234) (427) (2,089) (3,756) (3,242) (3,954) (3,306) (4,133) (4,871)
Proceeds/Repayment of borrowings (3,819) 6,860 873 (4,746) 17,496 8,874 8,557 10,696 10,696
Cash flow from financing (4,489) 8,941 (1,651) (9,072) 13,309 16,934 1,978 2,713 1,118
Increase in cash and cash equivalents 1,663 (255) 3,401 (2,890) 9,100 531 4,125 4,992 7,587
Cash the beginning of the period 4,470 6,132 820 4,221 1,331 10,430 10,961 15,086 20,078
Cash at the end of the period 6,132 5,877 4,221 1,331 10,430 10,961 15,086 20,078 27,665
Free cash flow 6,242 (9,633) 4,848 6,872 (5,398) (16,267) 2,354 2,508 6,721

Source: Company, Kotak Institutional Equities estimates

Angel One
Capital Markets India Research

k.kathirvelu-kotak.com
 INITIATING COVERAGE

Niva Bupa Health Insurance (NIVABUPA) ADD

Insurance
CMP(₹): 77 Fair Value(₹): 85 Sector View: Attractive NIFTY-50: 23,332 April 02, 2025

In good health Company data and valuation summary

Niva Bupa is well-placed to deliver high (26% GWP CAGR over FY2024-27E) Stock data
growth, continuing its market share gain spree through a diversified retail
CMP(Rs)/FV(Rs)/Rating 77/85/ADD
bouquet offering, focus on the mass affluent segment and a fairly balanced
52-week range (Rs) (high-low) 109-69
distribution mix. Improving operating leverage will drive RoE expansion to the
Mcap (bn) (Rs/US$) 140/1.6
high teens over the medium term, underpinned by its best-in-class claims
ADTV-3M (mn) (Rs/US$) 96/1.1
ratio. Initiate coverage with ADD and an FV of Rs85.
Shareholding pattern (%)
Initiate with ADD
We initiate coverage on Niva Bupa with an ADD rating and FV of Rs85. Niva
26.7
Bupa’s strong growth trajectory on the long retail health insurance runway, its
smooth execution track record, low claims ratios and increasing operating
4.4 56.0
leverage driving profitability improvements are key drivers in commanding 1.2
2.8
premium valuations. 8.9

Niva Bupa: Fast-growing, diversified SAHI, best-in-class claims management Promoters FPIs MFs BFI s Retail Others

We expect Niva Bupa to deliver a 26% gross written premium (GWP) CAGR

1933
Price performance (%) 1M 3M 12M
during FY2024-27E, continuing its market share gain spree (9.6% in 9MFY25 Absolute 5 (7) 0

Private Circulation Only. This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities Act of
from 5.2% in FY2021) in the Indian retail health insurance segment. Its superior Rel. to Nifty (1) (3) 0
risk selection capabilities, leveraging the expertise of its global parent, are Rel. to MSCI India (1) (0) 0
reflected in the lowest claims ratio among peers. A diversified product bouquet
Forecasts/Valuations 2025 2026E 2027E
in the retail segment (68% of GWP in 9MFY25) focused on the mass affluent
EPS (Rs) 1.1 1.9 2.7
segment (one of the highest ATS among peers) is driven by a fairly balanced
EPS growth (%) 80.3 72.0 37.8
distribution mix (12% direct, 30% agency, 29% brokers and 29% banks and
P/E (X) 68.2 39.7 28.8
NBFCs of GWP in 9MFY25).
P/B (X) 4.3 3.9 3.4

Strong growth and RoE trajectory BVPS (Rs) 17.7 19.6 22.3
RoE (%) 7.6 10.4 12.7
We expect Niva Bupa’s high GWP growth trajectory (26% GWP CAGR over
Div. yield (%) 0.0 0.0 0.0
FY2024- 27E) and improving leverage to drive strong earnings growth over the
Nll (Rs bn) 59 76 94
medium term. With consistent investments in growth (41% GWP CAGR over
PPOP (Rs bn) 2.9 4.2 5.4
FY2022-24), the business is currently sub-scale with a combined ratio of 101.9%
Net profits (Rs bn) 2.0 3.5 4.8
and RoE (IFRS) of 6.8% in FY2024. While portfolio aging inches up claims over
Source: Bloomberg, Company data, Kotak Institutional Equities estimates
the medium term, improving operating leverage will gradually drive down the
combined ratio. Coupled with higher investment leverage, IFRS earnings will Prices in this report are based on the market close of
April 02, 2025
accelerate (Rs4.8 bn in FY2027E from Rs1 bn in FY2024). RoE expansion, after
recent capital issuance, may be gradual; RoE (IFRS) of 12.7% by FY2027E and
18.4% by FY2030E.

Key risks: Sluggish growth, medical inflation, dependence on intermediaries

Key risks to Niva Bupa’s business include (1) sluggish retail health insurance
coverage across the industry that poses risk to our high-growth forecasts, (2)
higher-than-expected claims due to increasing healthcare inflation or
epidemics, (3) high dependence on intermediated distribution channels, (4)
aggressive pricing and competition in health insurance and (5) IRDA’s
regulations and expenses of management (EoM) caps.

Full sector coverage on KINSITE

Nischint Chawathe M B Mahesh, CFA Varun Palacharla Abhijeet Sakhare Ashlesh Sonje, CFA

Nikhil Suresh
 44

Niva Bupa Health Insurance: Overview

Niva Bupa Health Insurance – IFRS financial summary, March fiscal year-ends, 2022-28E
Other
Gross written Insurance Profit Net Claims Acquisition expense Combined Investment
premium YoY revenue YoY after tax worth EPS BVPS PER PBR ratio expense ratio CISR ratio ratio yield RoE
(Rs bn) (%) (Rs bn) (%) (Rs bn) (Rs bn) (Rs) (Rs) (X) (X) (%) (%) (%) (%) (%) (%) (%)
2023 41 NA 30 NA 0.1 9 0.1 6 1,356 12.7 59.9 28.9 88.8 13.8 102.6 6.6 1.1
2024 56 38 44 46 1.1 22 0.6 13 122 5.9 62.8 29.5 92.3 9.6 101.9 7.0 6.8
2025E 74 32 59 34 2.0 32 1.1 18 68 4.3 63.0 30.5 93.5 7.7 101.2 7.3 7.6
2026E 92 24 76 28 3.5 36 1.9 20 39 3.9 63.0 30.0 93.0 6.5 99.5 7.0 10.4
2027E 112 22 94 24 4.8 40 2.7 22 29 3.4 63.0 30.0 93.0 5.6 98.6 6.8 12.7
2028E 134 20 113 20 6.3 45 3.5 25 22 3.1 64.0 29.0 93.0 4.9 97.9 6.6 14.8
2029E 158 18 133 18 8.2 51 4.5 28 17 2.7 64.5 28.3 92.8 4.4 97.2 6.5 17.0
2030E 187 18 157 18 10.1 59 5.6 33 14 2.3 65.3 27.5 92.8 4.0 96.7 6.4 18.4

Notes:
(1) Claims ratio: Incurred claims and expenses / Insurance revenue.
(2) Acquisition expense ratio: Deferred acquisition cost / Insurance revenue.
(3) Combined insurance service ratio (CISR): Claims ratio + Acquisition expense ratio.
(4) Other expense ratio: Other expenses / Insurance revenue.
(5) Combined ratio: CISR + Other expense ratio.

Source: Company

Niva Bupa Health Insurance

Insurance India Research

k.kathirvelu-kotak.com
 45

Key growth rate and ratios under IFRS for Niva Bupa IFRS financial summary of Niva Bupa Health
Health Insurance, March fiscal year-ends, 2024-27E (%) Insurance, March fiscal year-ends, 2024-27E (Rs mn)
2024 2025E 2026E 2027E 2024 2025E 2026E 2027E
Key growth rates (%) Income statement (Rs mn)
Income statement Insurance revenue 44,179 59,408 75,968 93,980
Gross written premium 38 32 24 22 Insurance service expenses 40,770 55,547 70,650 87,401
Insurance revenue 46 34 28 24 Deferred acquisition cost 13,012 18,120 22,790 28,194
Insurance service expenses 51 36 27 24 Incurred claims and expenses 27,758 37,427 47,860 59,207
Incurred claims and expenses 53 35 28 24 Net expenses from reinsurance 483 998 1,117 1,184
Deferred acquisition cost 49 39 26 24 Reinsurance premium 9,228 12,476 15,953 19,736
Insurance service result 9 (2) 47 28 Reinsurance commission 3,434 4,491 5,584 6,908
Investment income 63 53 20 15 Incurred claims 5,311 6,986 9,253 11,644
Other expenses 2 8 7 6 Insurance service result 2,925 2,863 4,201 5,394
Profit before tax 1,090 91 72 38 Total investment income 3,081 4,710 5,655 6,530
Profit after tax 1,150 92 72 38 Other income 37 25 25 25
Balance sheet Other operating expenses 4,262 4,603 4,925 5,220
Cash and cash equivalents 40 20 20 20 Finance costs 352 270 268 268
Investments 65 36 19 19 Proft before tax 1,429 2,726 4,689 6,461
Reinsurance contract assets 43 30 25 20 Income tax 366 686 1,180 1,626
Total assets 56 35 20 19 Profit after tax 1,064 2,040 3,509 4,835
Insurance contract liabilities 34 31 26 23 Balance sheet (Rs mn)
Total liabilities 33 29 25 22 Cash and cash equivalents 1,428 1,714 2,057 2,468
Total equity 142 46 11 14 Investments 54,437 73,896 87,689 104,366
Key ratios (%) Reinsurance contract assets 5,774 7,506 9,383 11,260
Claims ratio 62.8 63.0 63.0 63.0 Deferred tax assets 498 648 810 972
Acquisition ratio 29.5 30.5 30.0 30.0 PPE 959 1,247 1,558 1,870
CISR 92.3 93.5 93.0 93.0 Intangible assets 343 446 558 670
Other expense ratio 9.6 7.7 6.5 5.6 Other assets 2,624 3,411 4,264 5,117
Combined ratio 101.9 101.2 99.5 98.6 Total assets 66,064 88,868 106,319 126,722
Investment yield 7.0 7.3 7.0 6.8 Insurance contract liabilities 34,438 45,107 56,737 69,994
Dupont (% of assets) Borrowings 2,538 2,500 2,500 2,500
Insurance revenue 81 77 78 81 Other liabilities 7,112 9,246 11,558 13,869
Incurred claims and expenses (51) (48) (49) (51) Total liabilities 44,089 56,853 70,795 86,363
Deferred expenses (24) (23) (23) (24) Share capital 16,995 18,076 18,076 18,076
Reinsurance (0.9) (1.3) (1.1) (1.0) Other equity 4,980 13,939 17,447 22,282
Insurance service result 5.4 3.7 4.3 4.6 Total equity 21,975 32,015 35,524 40,359
Investment income 5.7 6.1 5.8 5.6 Total liabilities and equity 66,064 88,868 106,319 126,722
Other opex (7.9) (5.9) (5.0) (4.5)
Finance costs (0.6) (0.3) (0.3) (0.2) Source: Company
PBT 2.6 3.5 4.8 5.5
1-tax rate 0.7 0.7 0.7 0.7
RoA 2.0 2.6 3.6 4.1
Leverage (X) 3.5 2.9 2.9 3.1
RoE 6.8 7.6 10.4 12.7

Notes:
(1) Claims ratio: Incurred claims and expenses / Insurance revenue.
(2) Acquisition expense ratio: Deferred acquisition cost / Insurance revenue.
(3) Combined insurance service ratio (CISR): Claims ratio + Acquisition
expense ratio.
(4) Other expense ratio: Other expenses / Insurance revenue.
(5) Combined ratio: CISR + Other expense ratio.

Source: Company

Niva Bupa Health Insurance

Insurance India Research

k.kathirvelu-kotak.com
 46

Valuations: Banking on tall execution

We initiate coverage on Niva Bupa with an ADD rating and FV of Rs85. Niva Bupa’s strong growth
trajectory on the long retail health insurance runway, its smooth execution track record, low claim
ratios and increasing operating leverage driving profitability improvements are key drivers in
commanding premium valuations.

Niva Bupa trades at 29X FY2027E earnings and 3.4X book

IFRS valuation summary of Niva Bupa Health Insurance, March fiscal year-ends, 2023-28E
Other
Gross written Insurance Profit Net Claims Acquisition expense Combined Investment
premium YoY revenue YoY after tax worth EPS BVPS PER PBR ratio expense ratio CISR ratio ratio yield RoE
(Rs bn) (%) (Rs bn) (%) (Rs bn) (Rs bn) (Rs) (Rs) (X) (X) (%) (%) (%) (%) (%) (%) (%)
2023 41 NA 30 NA 0.1 9 0.1 6 1,356 12.7 59.9 28.9 88.8 13.8 102.6 6.6 1.1
2024 56 38 44 46 1.1 22 0.6 13 122 5.9 62.8 29.5 92.3 9.6 101.9 7.0 6.8
2025E 74 32 59 34 2.0 32 1.1 18 68 4.3 63.0 30.5 93.5 7.7 101.2 7.3 7.6
2026E 92 24 76 28 3.5 36 1.9 20 39 3.9 63.0 30.0 93.0 6.5 99.5 7.0 10.4
2027E 112 22 94 24 4.8 40 2.7 22 29 3.4 63.0 30.0 93.0 5.6 98.6 6.8 12.7
2028E 134 20 113 20 6.3 45 3.5 25 22 3.1 64.0 29.0 93.0 4.9 97.9 6.6 14.8
2029E 158 18 133 18 8.2 51 4.5 28 17 2.7 64.5 28.3 92.8 4.4 97.2 6.5 17.0
2030E 187 18 157 18 10.1 59 5.6 33 14 2.3 65.3 27.5 92.8 4.0 96.7 6.4 18.4

Notes:
(1) Claims ratio: Incurred claims and expenses / Insurance revenue.
(2) Acquisition expense ratio: Deferred acquisition cost / Insurance revenue.
(3) Combined insurance service ratio (CISR): Claims ratio + Acquisition expense ratio.
(4) Other expense ratio: Other expenses / Insurance revenue.
(5) Combined ratio: CISR + Other expense ratio.

Source: Company, Bloomberg, Kotak Institutional Equities estimates

Niva Bupa trades at multiples similar to peers

Valuation comparison of non-life insurers, March fiscal year-ends, 2024-27E
Market
Price cap. EPS (Rs) EPS growth yoy (%) PER (X) BVPS (Rs) PBR (X) RoE (%)
(Rs) (Rs bn) 2024 2025E 2026E 2027E 2025E 2026E 2027E 2024 2025E 2026E 2027E 2024 2025E 2026E 2027E 2024 2025E 2026E 2027E 2024 2025E 2026E 2027E
Go Digit 288 266 2.1 4.6 6.5 8.3 123 40 28 138 62 44 35 36 47 52 60 8.1 6.2 5.5 4.8 5.6 12.5 12.6 15.5
ICICI Lombard 1,830 907 38.9 51.5 60.1 70.4 32 17 17 47 36 30 26 243 286 337 397 7.5 6.4 5.4 4.6 17.2 19.5 19.3 19.2
Niva Bupa 77 140 0.6 1.1 1.9 2.7 80 72 38 122 68 39 29 13 18 20 22 5.9 4.3 3.9 3.4 6.8 7.6 10.4 12.7
Star Health 343 202 14.4 18.4 22.5 27.7 28 22 23 24 19 15 12 108 127 149 177 3.2 2.7 2.3 1.9 14.4 15.7 16.3 17.0
GIC Re 420 737 2.7 7.2 37.0 35.5 165 415 (4) 154 58 11 12 220 341 372 406 1.9 1.2 1.1 1.0 17.2 NA NA NA
NIA 159 262 1.2 6.4 6.9 6.7 442 7 (2) 135 25 23 24 128 207 212 221 1.2 0.8 0.7 0.7 5.2 NA NA NA

Notes:
(1) Niva Bupa’s EPS, BVPS and RoE estimates are based on IFRS accounting.

Source: Companies, Bloomberg, Kotak Institutional Equities estimates

High growth and improving profitability for Niva Bupa

Exhibit 5 shows that Niva Bupa trades at 29X IFRS earnings FY2027E while peers trade at 13-35X IGAAP
earnings FY2027E. PBR of Niva Bupa is at 3.4X IFRS book value FY2027E compared to 2.0-4.9X IGAAP
book value for peers. We believe that Niva Bupa’s IFRS financials are more representative of its
underlying business trends. Niva Bupa’s IGAAP financials are not directly comparable with listed peers
as the company follows 50:50 accounting versus 1/365 followed by others; this is detailed later in the
report.

Niva Bupa’s rich multiples reflect its high-growth trajectory. Exhibit 6 shows that Niva Bupa delivered
33% and 41% premium CAGR (FY2020-24) in retail and overall health segments, respectively, gaining
market share to 9.6% from 7.0% in retail segment and 5.2% from 3.8% in overall health insurance
business. Niva Bupa is the third-largest retail health insurance company after Star Health (32.2%) and
Care Health (10.8%) in 9MFY25; the fourth player HDFC Ergo had 8.8% market share. We expect
incremental growth to moderate yet remain high (26% gross written premium CAGR FY2024-27E) on a
larger base, resulting in market share of ~6% by FY2030E.

Niva Bupa Health Insurance

Insurance India Research

k.kathirvelu-kotak.com
 47

Operating leverage to improve profitability over time. We expect Niva Bupa’s FY2027E IFRS earnings to
increase to Rs4.8 bn in FY2027E from Rs1 bn in FY2024 (IGAAP earnings of Rs819 mn in FY2024). While
the company has best-in-class claims ratio, improvement in profitability reflects operating leverage as
productivity improves over time; compliance with Expense of Management (EOM) will ensure that
expense (including commissions) will need to come down to ~35% in FY2026E from 39% in FY2024. RoE
will likely remain moderate at 12.7% in FY2027E and 14.8% in FY2028E, expanding to 18.4% by FY2030E
as the company achieves optimal scale.

Higher growth at Niva Bupa than most peers in health insurance segment
Peer comparison on health premiums, growth and market share, March fiscal year-ends, 2022-24, 9MFY25
Retail GDPI Retail market Retail share in
GDPI (Rs bn) CAGR (%) Market share (%) (Rs bn) CAGR (%) share (%) GDPI (%)
2024 9MFY25 2022-24 2024 9MFY25 2024 9MFY25 2022-24 2024 9MFY25 2024 9MFY25
SAHIs
Aditya Birla 34 29 48 3.2 3.3 11 10 29 2.7 3.0 33 34
Care Health 65 59 38 6.1 6.6 40 35 35 9.4 10.8 61 60
Manipal Cigna 17 12 31 1.5 1.3 7 6 27 1.8 1.8 45 49
Niva Bupa 55 46 41 5.1 5.2 38 31 33 9.1 9.6 70 68
Star Health 150 115 15 13.9 13.0 140 106 18 33.1 32.2 93 92
General insurers
Bajaj Allianz 65 70 45 6.1 7.9 10 8 9 2.3 2.4 15 11
HDFC Ergo 59 42 17 5.5 4.7 40 29 14 9.4 8.8 67 69
ICICI Lombard 62 54 33 5.7 6.1 12 11 19 3.0 3.2 20 20
National Insurance 70 64 9 6.5 7.3 23 17 2 5.5 5.2 33 26
Tata AIG 26 25 34 2.4 2.8 9 8 34 2.1 2.5 34 32
New India Assurance 183 151 13 17.0 17.1 31 24 7 7.3 7.3 17 16
Industry total 1,078 882 21 422 328 17 39 37

Source: IRDA, Kotak Institutional Equities

Health market share of Niva Bupa to rise further to 6.1% by FY2030E

GWP growth yoy and health market share of Niva Bupa Health Insurance, Mach fiscal year-ends,
2020-30E (%)

GWP growth yoy (LHS) Health market share (RHS)

65 60 7.0

52 45 6.0
41 6.1 6.2 6.1
38 5.9
39 31 5.5 5.0
5.1 5.1
27 27
26 4.5 20 22 4.0
19 17
3.8
13 3.0
3.0
- 2.4 2.0
2020 2021 2022 2023 2024 2025E 2026E 2027E 2028E 2029E 2030E

Notes:
(1) Gross written premium (GWP) growth for FY2025-30E reflects computation as per 1/n rule; as such, these growth ratios are not
comparable with previous periods.

Source: IRDA, Company, Kotak Institutional Equities estimates

Niva Bupa Health Insurance

Insurance India Research

k.kathirvelu-kotak.com
 48

Sharp pickup in profitability over FY2028-30E as operating leverage kicks in

Key IFRS ratios of Niva Bupa Health Insurance, Mach fiscal year-ends, 2024-30E (%)
2024 2025E 2026E 2027E 2028E 2029E 2030E
Claims ratio 62.8 63.0 63.0 63.0 64.0 64.5 65.3
Acquisition ratio 29.5 30.5 30.0 30.0 29.0 28.3 27.5
CISR 92.3 93.5 93.0 93.0 93.0 92.8 92.8
Other expense ratio 9.6 7.7 6.5 5.6 4.9 4.4 4.0
Combined ratio 101.9 101.2 99.5 98.6 97.9 97.2 96.7
Investment yield 7.0 7.3 7.0 6.8 6.6 6.5 6.4
RoA 2.0 2.6 3.6 4.1 4.6 5.0 5.1
RoE 6.8 7.6 10.4 12.7 14.8 17.0 18.4

Notes:
(1) Claims ratio: Incurred claims and expenses / Insurance revenue.
(2) Acquisition expense ratio: Deferred acquisition cost / Insurance revenue.
(3) Combined insurance service ratio (CISR): Claims ratio + Acquisition expense ratio.
(4) Other expense ratio: Other expenses / Insurance revenue.
(5) Combined ratio: CISR + Other expense ratio.

Source: Company, Kotak Institutional Equities estimates

High multiples for well-run, fast-growing companies

Non-life insurance companies are most comparable with Niva Bupa.

Go Digit trades at 35X earnings FY2027E, reflecting high growth (premium CAGR of 30% during
FY2022-24); improving profitability reflects operating leverage playing out over time.

ICICI Lombard trades at 25X earnings FY2027E, reflecting high profitability (18-19% medium-term
RoE) with industry-leading position in motor and a track record of stable operating performance.

Star Health and Niva Bupa being standalone health insurers (SAHIs) are more directly comparable.
Star Health trades at 13X IGAAP earnings FY2027E (10X FY2027E IFRS earnings as per management
guidance) versus 29X IFRS earnings for Niva Bupa. Significant discount for Star Health reflects lower
growth and earnings disappointments due to higher-than-expected claims ratio despite lumpy tariff
hikes and news flows around claim rejections. Niva Bupa’s claims ratio has been among the lowest
in the peer set. Competition from Galaxy Health (promoted by ex-Chairman/MD of Star Health) and
LIC-backed health insurance player (LIC agents drive material part of Star Health’s agency business)
will likely be more pronounced for Star Health versus others.

Star Health accounts for 40% of health insurance complaints with ombudsman versus 14% market share
Share of total complaints received by ombudsman on health insurance, March fiscal year-ends,
2021-24 (%)
Health market Reatil health
share market share
2021 2022 2023 2024 2024 2024
Aditya Birla 1 2 2 4 3 2
Care Health 4 5 10 11 6 5
Manipal Cigna 3 3 2 2 2 1
Niva Bupa 4 5 6 8 5 4
Star Health 17 22 31 40 14 15

Source: Council of insurance ombudsman, Kotak Institutional Equities

Niva Bupa Health Insurance

Insurance India Research

k.kathirvelu-kotak.com
 49

Star Health has higher claims complaint ratio than peers

Claims complaint ratio, March fiscal year-ends, 2021-24 (# per 10,000 claims)

2021 2022 2023 2024

60 56

48
39
36
26
22
24

12

-
Aditya Birla Manipal Cigna Niva Bupa Star Health

Source: Company, Kotak Institutional Equities

Niva Bupa benefits from best-in-class claims ratio; operating leverage helps Star Health
Niva Bupa has lower claims ratio versus most peers. Exhibit 11 shows that Niva Bupa’s claims ratio is
the lowest among compared peers at 62% in 1HFY25 (59% in FY2024). Star Health’s claim ratio was
higher at 70% (66% in FY2024). This reflects Niva Bupa’s strong underwriting and risk management
practices. Notably, the share of group business (which has high claims ratio) is higher for Niva Bupa at
30% as compared to 8% for Star Health; this likely implies that claims ratio in Niva Bupa’s retail health
segment may be lower. However, Niva Bupa benefits from 50:50 accounting of premium (1/365 for Star
Health) and high gross written premium (GWP) growth versus Star Health, both of which tend to suppress
claims ratio. Other SAHIs follow 50:50 accounting and hence are directly comparable with Niva Bupa.

Star Health is player of scale. Star Health is a large player with 32.2% (13% overall) retail market share
in 9MFY25; this compares with 9.6% (5.2% overall) share of Niva Bupa. Star clearly benefits from scale—
the company reported expense + commission ratio of 31% in 9MFY25 (30% in FY2024) as compared to
41% for Niva Bupa (40% in FY2024). Star Health’s gross premium CAGR at 15% (FY2022-24) is lower
than 41% at Niva Bupa; the latter needs to invest in growth as well.

Financial ratios not directly comparable between Niva Bupa and Star Health. Financial ratios of Niva
Bupa and Star Health are not directly comparable. Niva Bupa follows 50:50 method of premium
accounting (i.e. half the premium received during the year is recognized during the same FY and balance
in the next FY), while Star Health follows 1/365 method of premium accounting (i.e. premium recognition
is deferred over the next 365 days). As such, premium income, in a fast-growing company, may appear
higher in the former versus latter, which suppresses claims and combined ratios. We hence prefer to
track IFRS financials of Niva Bupa.

Niva Bupa Health Insurance

Insurance India Research

k.kathirvelu-kotak.com
 50

Niva Bupa fares better than most peers on health claims ratio
Peer comparison on health claims ratios, March fiscal year-ends, 2018-24, 1HFY25 (%)
Share of retail (%) Health claims ratio (%)
2024 2018 2019 2020 2021 2022 2023 2024 1HFY25
SAHIs
Aditya Birla 32 89 59 49 50 70 65 68 75
Care 60 52 55 59 55 65 54 58 65
Manipal Cigna 45 46 62 62 61 76 65 64 75
Niva Bupa 70 50 54 54 56 62 54 59 62
Star Health 93 62 64 66 87 87 65 66 70
Private GIs
Bajaj Allianz 15 82 90 86 82 97 80 89 92
Cholamandalam MS 75 39 40 50 116 174 61 85 88
HDFC ERGO 66 64 80 95 85 92 75 86 91
ICICI Lombard 19 78 81 81 89 100 82 81 87
SBI General 20 42 54 61 79 105 57 99 102
Tata AIG 30 61 79 68 71 90 60 83 85
Public GIs
National 33 116 104 103 101 120 97 91 83
New India 17 104 100 100 95 124 99 107 NA
Oriental 23 110 108 102 114 135 124 108 88
United 20 111 112 102 106 117 86 110 102

Notes:
(1) Share of retail: Retail health premium/total health premium.
(2) For SAHIs, the overall claims ratio is used for comparison as they have single line of business.

Source: Company, Kotak Institutional Equities

Niva Bupa has higher expense ratio due to lower scale

Peer comp on GWP, market share and health expense ratio, March fiscal year-ends, 2018-24,
1HFY25
GWP (Rs bn) Market share (%) Health expense ratio (%)
2024 2024 2018 2019 2020 2021 2022 2023 2024 1HFY25
SAHIs
Aditya Birla 35 3.2 99 89 84 70 57 45 42 37
Care Health 67 6.1 48 40 39 38 38 38 37 36
Manipal Cigna 17 1.5 82 75 64 57 53 50 47 47
Niva Bupa 55 5.1 53 53 48 45 45 43 40 41
Star Health 150 13.8 31 30 27 28 31 30 30 31
Private GIs
Bajaj Allianz 67 6.2 26 26 30 30 26 31 17 16
Cholamandalam MS 8 0.7 39 33 45 47 58 47 34 26
HDFC ERGO 60 5.5 0 2 9 23 21 21 22 25
ICICI Lombard 64 5.9 4 7 11 23 28 26 26 23
SBI General 29 2.6 36 32 29 25 38 31 14 19
Tata AIG 29 2.7 22 10 7 28 26 39 34 29
Public GIs
National 70 6.4 8 7 56 35 28 41 28 28
New India 183 16.8 25 25 22 27 19 19 20 NA
Oriental 79 7.2 7 6 7 8 29 37 19 16
United 79 7.2 26 25 25 29 29 39 22 21

Notes:
(1) Expense ratio: (commission + operating expenses) / net written premium.
(2) For SAHIs, the overall expense ratio is used for comparison as they have single line of business.

Source: IRDA, Company, Kotak Institutional Equities

Niva Bupa Health Insurance

Insurance India Research

k.kathirvelu-kotak.com
 51

The quandary in Indian health insurance sector

The Indian health insurance sector looks attractive with low insurance penetration, large out-of-pocket
expenses and rising medical inflation (see Exhibits 13-14). However, rising hospital tariffs (see Exhibit
15) in general are putting pressure on claims ratio and profitability of the sector. As such, Indian insurers
are consistently hiking tariffs, likely leading to tempering of retail demand (see Exhibit 16). Large policy
push during/post Covid followed by consistent tariff hikes seem to have adversely affected growth in a
number of retail policies in the sector.

Health expenditure (CHE) is lower in India versus select other Share of out-of-pocket expenses high at 50% of health
large economies expenditure in India
Current health expenditure (% of GDP) across Out-of-pocket expenses as % of CHE across
countries, calendar year-end, 2021 (%) countries, calendar year-ends, 2016-21 (%)

USA UK Brazil China Indonesia India India China Indonesia UK USA

20 70 63
17.4
55 53
56 52
49 50
15
12.4
42 36 36 36 35 35 34
9.9
10
39 37
28 36 35
32
5.4 16 17 17 28
15 14
5 3.7 14
3.3 14

12 11 11 11 10 11
0 -
USA UK Brazil China Indonesia India 2016 2017 2018 2019 2020 2021

Source: Redseer, Kotak Institutional Equities Source: Redseer, Kotak Institutional Equities

Sharp 36-135% rise in hospital tariffs since FY2019

ARPOB of select hospitals, March fiscal year-ends, 2017-24, 9MFY25 (Rs)
Apollo Aster (India) KIMS Max
Medanta Narayana (India) Rainbow
80,000

60,000

40,000

20,000

-
2017 2018 2019 2020 2021 2022 2023 2024 9MFY25

Source: Company, Kotak Institutional Equities

Niva Bupa Health Insurance

Insurance India Research

k.kathirvelu-kotak.com
 52

Growth in lives covered was muted at 5.6% in FY2024 for the industry
Retail health premium and lives covered, March fiscal year-ends, 2018-24

Lives covered (LHS) Retail health premium (RHS)

(# mn) (Rs bn)
60.0 600

420
45.0 450
350

30.0 260 300

160
15.0 150

33.3 53.1 52.9 55.9

- -
2018 2021 2023 2024

Source: IRDA, Kotak Institutional Equities

Group health coverage has expanded

Lives covered by insurer, March fiscal year-ends, 2014-24 (# mn)

Government Group Individual

750

573
600 550
499 515 520
482 472 53 56
437 53 52
33 43
450 42
359 32 89 94 119
73 162 199 256
285 70
29
300 57
216 25
48
27 362
34 335 359 357 343
150 273 307 298 261
212
155
-
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Source: IRDA, Kotak Institutional Equities

Initiate with ADD; FV Rs85

We initiate coverage on Niva Bupa with an RGM-based FV of Rs85, i.e. 3.8X book and 32X FY2027E IFRS
PAT. We compare key assumptions in our RGM for Niva Bupa, ICICI Lombard and Star Health (see Exhibit
18). Niva Bupa benefits from higher growth (on low base) as it marches toward optimal profitability over
the next few years; its best-in-class claims ratio is the biggest positive. Star Health has been marred by
consistent pain of higher-than-expected claims and news flows on rising customer complaints. Coupled
with a high base, we are building in lower earnings growth and normalized profitability for Star Health.
We are building in cost of equity for both the SAHIs at 13.5%. ICICI Lombard, though growing slower than
Niva Bupa, benefits from a diversified offering and higher RoEs; its superior management drives
consistency in performance; cost of equity is lower (12.75%) reflecting benefits of diversification.

Niva Bupa Health Insurance

Insurance India Research

k.kathirvelu-kotak.com
 53

We bake in higher near and medium-term EPS growth for Niva Bupa
Assumption in RGM for non-life insurers, March fiscal year-ends, 2024-47E

Target Target Discount Terminal Terminal

PER PBR EPS CAGR (%) Average RoE (%) rate growth rate ROE
(X) (X) FY2024-27E FY2027-37E FY2037-47E FY2025-27E FY2028-37E FY2038-47E (%) (%) (%)
Niva Bupa 32 3.8 62 22 14 11 22 23 13.5 7.0 17.0
Star Health 20 2.8 14 17 13 13 20 22 13.5 7.0 16.0
ICICI Lombard 32 5.6 22 17 16 21 23 23 12.8 7.0 19.0

Notes:
(1) Niva Bupa’s EPS and RoE estimates are based on IFRS accounting.

Source: Company, Kotak Institutional Equities estimates

We value Niva Bupa at Rs80 per share

RGM based valuation of Niva Bupa Health Insurance, March fiscal year-ends, 2027-47E
Niva Bupa Health Insurance
Risk free rate (%) 7.5
Beta (X) 1.2
Risk premium (%) 5.0
Discount rate (%) 13.5
Terminal growth rate (%) 7.0
Dividend payout from FY2031E (%) 30.0

Terminal
2027E 2028E 2029E 2030E 2031E 2032E 2033E 2034E2035E…...2045E 2046E 2047E
year
Year 0 1 2 3 4 5 6 7 8 18 19 20 20
EPS (Rs) 3 4 5 6 7 8 10 12 14 60 68 76 81
Growth (%) 38 31 29 24 23 22 21 20 19 13 12 12 7.0
BVPS (Rs) 22 25 28 33 37 43 50 59 69 318 366 419 477
Growth (%) 14 12 14 15 15 16 16 17 17 15 15 14
BVPS X cost of equity (Rs) 3 3 3 4 4 5 6 7 8 37 43 49 17
Residual income (Rs) 0 0 1 2 2 3 4 5 7 23 25 26 257
Growth (%) NA 2,141 136 53 41 35 29 25 22 9 7 7
RoE (%) 14 16 18 20 21 22 23 24 25 22 21 21 17
PV of residual income (Rs) 0 0 1 1 1 2 2 2 2 2 2 2 20
Current BVPS (Rs) 22
PV of residual income (Rs) 63
Target price (current BVPS + PV of residual income) (Rs) 85
PBR at target price (X) 3.8
PER at target price (X) 32

Source: Company, Kotak Institutional Equities estimates

Niva Bupa Health Insurance

Insurance India Research

k.kathirvelu-kotak.com
 54

Niva Bupa: Fast-growing, diversified SAHI, best in class claims management

We expect Niva Bupa to deliver 26% gross written premium (GWP) CAGR during FY2024-27E
continuing its market share gaining spree (9.6% in 9MFY25 from 5.2% in FY2021) in the Indian
retail health insurance segment. Its superior risk selection capabilities, leveraging expertise of its
global parent, are reflected by the lowest claims ratio among peers. A diversified product bouquet
in the retail segment (68% of GWP in 9MFY25) focused on mass affluent segment (one of the
highest ATS among peers) is driven by a fairly balanced distribution mix (12% direct, 30% agency,
29% brokers and 29% banks and NBFCs of GWP in 9MFY25).

Fast growing SAHI, focused on mass-affluent retail, backed by strong foreign partner
Fast growing SAHI with 26% GWP CAGR FY2024-27E. Niva Bupa will likely deliver strong 26% GWP
growth over FY2024-27E. The company is the third largest player in retail health insurance business
with market share of 9.6% in 9MFY25. Star Health is the market leader with 32% retail market share
but lagged peers on growth (18% versus 27-33% during FY2022-24). Niva Bupa reported 41% GWP
CAGR during FY2022-24; see exhibit 20. Incremental growth may moderate (yet at ~25% CAGR) versus
last few years in light of higher base and focus on complying with expense of management (EoM)
guidelines.

Retail-focused player with diversified sourcing. Niva Bupa is focused on the retail health market
segment, which contributes 68-70% of its overall GWP in FY2024 and 9MFY25. Niva Bupa’s sourcing
is well diversified across agency (30% of GWP in 9MFY25), corporate agents (29%) and brokers (29%).
Contribution of direct business is also higher than peers at 12% in 9MFY25 (4-9% for peers).

Focus on mass affluent segment is reflected in high contribution of policies with sum assured >Rs1
mn, up to 71% in FY2024 from 67% in FY2023 and 63% in FY2022 apart from the higher average-ticket
size (Rs25,029 in FY2024) among peers (Rs16,973-25,768). The company leverages its in-house
engine to determine life time value (LTV) to capture the mass affluent segment.

Foreign promoters experience aids. Niva Bupa is the only health insurance company in India that is
majority owned and controlled by a foreign global healthcare conglomerate. Through its association
with the Bupa Group, Niva Bupa has access to international healthcare insurance experience.
Established in 1947, Bupa is an international healthcare company serving over 50 mn customers
worldwide. It has businesses around the world but, principally, in the UK, Australia and Europe.

High growth at Niva Bupa than most peers in health insurance segment
Peer comparison on health premiums, growth and market share, March fiscal year-ends, 2022-24, 9MFY25
Retail GDPI Retail market Retail share in
GDPI (Rs bn) CAGR (%) Market share (%) (Rs bn) CAGR (%) share (%) GDPI (%)
2024 9MFY25 2022-24 2024 9MFY25 2024 9MFY25 2022-24 2024 9MFY25 2024 9MFY25
SAHIs
Aditya Birla 34 29 48 3.2 3.3 11 10 29 2.7 3.0 33 34
Care Health 65 59 38 6.1 6.6 40 35 35 9.4 10.8 61 60
Manipal Cigna 17 12 31 1.5 1.3 7 6 27 1.8 1.8 45 49
Niva Bupa 55 46 41 5.1 5.2 38 31 33 9.1 9.6 70 68
Star Health 150 115 15 13.9 13.0 140 106 18 33.1 32.2 93 92
General insurers
Bajaj Allianz 65 70 45 6.1 7.9 10 8 9 2.3 2.4 15 11
HDFC Ergo 59 42 17 5.5 4.7 40 29 14 9.4 8.8 67 69
ICICI Lombard 62 54 33 5.7 6.1 12 11 19 3.0 3.2 20 20
National Insurance 70 64 9 6.5 7.3 23 17 2 5.5 5.2 33 26
Tata AIG 26 25 34 2.4 2.8 9 8 34 2.1 2.5 34 32
New India Assurance 183 151 13 17.0 17.1 31 24 7 7.3 7.3 17 16
Industry total 1,078 882 21 422 328 17 39 37

Source: IRDA, Kotak Institutional Equities

Niva Bupa Health Insurance

Insurance India Research

k.kathirvelu-kotak.com
 55

Niva Bupa’s average ticket size is higher than most peers

Peer comparison on ATS in individual agency channel, March fiscal year-ends, 2022-24, 9MFY25
(Rs)

Niva Bupa Manipal Cigna Care Health Aditya Birla Star Health
30,000

25,000

20,000

15,000

10,000
2022 2023 2024 9MFY25

Source: Company, Kotak Institutional Equities

Strong growth in active lives covered drives retail business; focus on SMEs in group
Niva Bupa’s strong GWP growth of 22% yoy in 9MFY25 (30% before 1/n rule; explained in Appendix I)
and 38-45% in FY2023-24 was driven by high growth in lives covered. Lives covered by the company were
up 57% yoy in 9MFY25 and 36-49% during FY2023-24. Notably, the industry has struggled to grow number
of lives covered, reporting muted 2.4-5.6% growth during FY2023-24.

Focus on SMEs in group business. Niva Bupa is focused on SME customers in the group business
through employer-employee group products. SME customers tend to be more profitable as compared to
large corporates due to better access to customer pool data, which facilities the ability to better price
risks. Niva Bupa is also focused on offering affinity-based group products such as benefit and indemnity
hospitalization covers, to non-employer-employee groups including loan customers of banks and other
corporate agent distributors. This led to sharp 60-69% growth in group health during FY2023-24 (up 23%
yoy in 9MFY25).

Niva Bupa GWP growth was driven by active lives, augmented by ATS increase
GWP, ATS and number of lives covered by Niva Bupa, March fiscal year-ends, 2022-24, 9MFY25
YoY (%)
2022 2023 2024 9MFY25 2023 2024 9MFY25
Number of active lives (# mn) 7.3 9.9 14.7 19.8 36 49 57
Active lives per policy (X) 5.8 6.3 7.6 12.6 10 19 29
Number of policies (# mn) 1.3 1.6 1.9 1.6 23 25 22
ATS per policy (Rs) 22,186 26,084 28,797 29,873 18 10 (0)
Contribution of high SA policies to NBP (%) 63 67 71 74 436 bps 335 bps 420 bps
Total GWP (Rs mn) 28,100 40,730 56,076 46,836 45 38 22
Retail GWP (Rs mn) 21,573 29,697 38,397 31,360 38 29 21
Group GWP (Rs mn) 6,526 11,033 17,678 15,476 69 60 23

Notes:
(1) ATS: total gross direct premium/total number of policies.
(2) Contribution of high SA policies: retail health indemnity new business GWP with sum insured ≥Rs1 mn/total retail health indemnity new business GWP.

Source: Company

Niva Bupa Health Insurance

Insurance India Research

k.kathirvelu-kotak.com
 56

Niva Bupa fared better than most peers on profitability, Star Health benefits from higher leverage
Lowest claims ratio helps lower combined ratio. Niva Bupa fared better than most peers (94.9-131.9%)
reporting 98.8% combined ratio in FY2024, largely due to lower claims ratio (59.0% compared to 57.7-
109.7% for peers). Niva Bupa has consistently delivered lower claims ratio compared to peers during
FY2018-24, reflecting better risk selection and higher share of retail. This remains a sustainable
competitive advantage for the company. In 1HFY25, Niva Bupa reported claims ratio of 62% lowest
among compared to peers (see Exhibit 23). Notably, Niva Bupa’s claims ratio is not directly comparable
with Star Health and multi-line general insurance companies due to difference in accounting norms
(50:50 followed by Niva Bupa and most SAHIs versus 1/365 followed by Star Health and most GIs).
Further, share of retail business (that typically has lower claims ratio) also tempers overall claims ratio
for the company.

Lack of scale leads to elevated expense ratio. Health expense ratio (operating expenses + claims) is on
the higher end of peer set (14.4-37.2%) at 39.7% in FY2024. Niva Bupa is a relatively small player with
5.1% market share in overall health insurance business. The expense ratio is the lowest for Star Health
(13.8% market share) among SAHIs at 30.2% in FY2024. GI peers have other lines of business across
which fixed expenses are allocated. Fixed expenses account for 25% of overall expenses for Niva Bupa,
these will likely grow at slower pace than top line, leading to moderation in expense ratio over the medium
term.

Niva Bupa fares better than most peers on health claims ratio
Peer comparison on health claims ratios, March fiscal year-ends, 2018-24, 1HFY25 (%)

Share of retail (%) Health claims ratio (%)

2024 2018 2019 2020 2021 2022 2023 2024 1HFY25
SAHIs
Aditya Birla 32 89 59 49 50 70 65 68 75
Care 60 52 55 59 55 65 54 58 65
Manipal Cigna 45 46 62 62 61 76 65 64 75
Niva Bupa 70 50 54 54 56 62 54 59 62
Star Health 93 62 64 66 87 87 65 66 70
Private GIs
Bajaj Allianz 15 82 90 86 82 97 80 89 92
Cholamandalam MS 75 39 40 50 116 174 61 85 88
HDFC ERGO 66 64 80 95 85 92 75 86 91
ICICI Lombard 19 78 81 81 89 100 82 81 87
SBI General 20 42 54 61 79 105 57 99 102
Tata AIG 30 61 79 68 71 90 60 83 85
Public GIs
National 33 116 104 103 101 120 97 91 83
New India 17 104 100 100 95 124 99 107 NA
Oriental 23 110 108 102 114 135 124 108 88
United 20 111 112 102 106 117 86 110 102

Notes:
(1) Share of retail: Retail health premium / total health premium.
(2) For SAHIs, the overall claims ratio is used for comparison as they have single line of business.

Source: Company, Kotak Institutional Equities

Niva Bupa Health Insurance

Insurance India Research

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Niva Bupa has higher expense ratio due to lower scale

Peer comp on GWP, market share and health expense ratio, March fiscal year-ends, 2018-24,
1HFY25

GWP (Rs bn) Market share (%) Health expense ratio (%)
2024 2024 2018 2019 2020 2021 2022 2023 2024 1HFY25
SAHIs
Aditya Birla 35 3.2 99 89 84 70 57 45 42 37
Care Health 67 6.1 48 40 39 38 38 38 37 36
Manipal Cigna 17 1.5 82 75 64 57 53 50 47 47
Niva Bupa 55 5.1 53 53 48 45 45 43 40 41
Star Health 150 13.8 31 30 27 28 31 30 30 31
Private GIs
Bajaj Allianz 67 6.2 26 26 30 30 26 31 17 16
Cholamandalam MS 8 0.7 39 33 45 47 58 47 34 26
HDFC ERGO 60 5.5 0 2 9 23 21 21 22 25
ICICI Lombard 64 5.9 4 7 11 23 28 26 26 23
SBI General 29 2.6 36 32 29 25 38 31 14 19
Tata AIG 29 2.7 22 10 7 28 26 39 34 29
Public GIs
National 70 6.4 8 7 56 35 28 41 28 28
New India 183 16.8 25 25 22 27 19 19 20 NA
Oriental 79 7.2 7 6 7 8 29 37 19 16
United 79 7.2 26 25 25 29 29 39 22 21

Notes:
(1) Expense ratio: (commission + operating expenses) / net written premium.
(2) For SAHIs, the overall expense ratio is used for comparison as they have single line of business.

Source: IRDA, Company, Kotak Institutional Equities

Niva Bupa’s combined ratio is lower than many peers

Peer comparison on health combined ratios, March fiscal year-ends, 2018-24, 1HFY24-25 (%)
2018 2019 2020 2021 2022 2023 2024 1HFY24 1HFY25
SAHIs
Aditya Birla 188 148 133 120 126 110 110 113 113
Care 100 95 98 93 103 92 95 96 101
Manipal Cigna 128 137 126 119 130 115 110 117 122
Niva Bupa 104 107 101 102 107 97 99 105 103
Star Health 93 94 93 115 118 95 97 98 101
Private GIs
Bajaj Allianz 109 115 116 112 123 111 106 91 108
Cholamandalam MS 78 73 96 163 233 108 119 87 114
HDFC ERGO 65 82 104 108 113 96 108 93 116
ICICI Lombard 81 88 92 112 129 107 107 100 110
SBI General 78 87 91 104 142 87 113 96 120
Tata AIG 83 89 75 99 116 99 117 98 114
Public GIs
National 125 111 159 136 148 138 119 108 112
New India 129 124 122 122 143 118 126 121 NA
Oriental 117 114 109 122 164 161 127 106 104
United 137 137 127 136 146 124 132 129 123

Notes:
(1) For SAHIs, the overall combined ratio is used for comparison as they have single line of business.

Source: Company, Kotak Institutional Equities

Niva Bupa Health Insurance

Insurance India Research

k.kathirvelu-kotak.com
 58

Niva Bupa employs a multi-pronged approach toward distribution

The company aims to maintain a balanced distribution mix across agency (30% of GWP in 9MFY25),
corporate agents like banks and NBFCs (29%) and brokers (29%). Based on its LTV-based approach to
business selection, Niva Bupa engages with the relevant distribution channels to target the appropriate
customers with its portfolio of health insurance products.

Share of agency lower than peers. Agency channel contributes 30% of Niva Bupa’s GWP in 9MFY25.
Peers like Care (38%) and Star Health (80%) have higher contribution of agency channel. Agency
channel is sticky and has lower commissions but has high fixed costs. Niva Bupa has built its
partnership business to quickly gain scale but is focussed on growing the agency channel.

 Tech initiatives to reduce cost boost productivity. The company also operates an e-agency model,
which reduces the need to set up a physical branch (lower fixed costs). Individual agents have
access to the ‘Niva Bupa UNO’ mobile application, which serves as a comprehensive digital
salesforce platform for individual agents, including features to drive agent productivity and the
‘Digital Dukaan’ feature to drive digital engagement and loyalty.

Banca relationships increase reach. Niva Bupa has focused on building strong relationships with
corporate agents (29% of GWP in 9MFY25) such as banks, to gain access to their customer base and
branches across India. Key bank partners are HDFC, Axis, Bandhan, BoB, Federal and IDBI; Bajaj
Finance, Sundaram Finance, Cholamandalam (CIFC), Mahindra Finance are key partners among
NBFCs. To support the corporate agents and brokers, the company has built modular API integration
designed to be customized to integrate with each of their respective core technology systems to
promote ease of selling and increase sales.

Brokers comprise 29% of GWP, growing faster than other channels. Exhibit 27 shows that this is the
fastest growing channel for the company, up 71-136% over FY2022-24 (up 30% in 9MFY25). Niva Bupa
has strong relations with brokers—it is the largest selling non-life insurer on Policybazaar (see Exhibit
28), based on insurance commission paid.

Direct channel drives 12% of GWP. Niva Bupa has the highest contribution of direct channel at 12%
in 9MFY25 compared to 4-9% for peers. The direct channel includes sales made by the sales team as
well as online sales through the company website and ‘Niva Bupa Health’ mobile app. While online
sales are supported by personalized digital marketing, the tele-sales team is provided product
recommendations by in-house ML scoring model.

Niva Bupa has a diversified channel mix as compared to most SAHI peers
Channel mix of standalone health insurers, March fiscal year-ends, 2018, 2024, 9MFY25 (%)
Direct business Individual agents Corporate agents Insurance brokers Others
100 6 5 6
1 5 8
6
31 30 27 29 28
33 21 40 41
75 54 51
68
27 19 18 27 29
76 35
50 82 80 45 24 25
37 29 31
25 30 38 32 30 10 25 23 25
26 15 14
17 12 13 12 14 12 13
8 8 11 9 7 4 8
- 2
9MFY25

9MFY25

9MFY25

9MFY25

9MFY25
2018

2024

2018

2024

2018
2024

2018

2024

2018

2024

Star Health Care Health Niva Bupa Aditya Birla Manipal Cigna

Source: Company, Kotak Institutional Equities

Niva Bupa Health Insurance

Insurance India Research

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High growth in broking channel

Channel mix of Niva Bupa, March fiscal year-ends, 2022-24 (Rs mn)
GWP mix (Rs mn) GWP mix (%) Growth yoy (%)
2022 2023 2024 9MFY25 2022 2023 2024 9MFY25 2023 2024 9MFY25
Direct Sales 5,277 6,388 7,330 5,711 18.8 15.7 13.1 12.2 21 15 9
Officers / Employees 5,112 6,337 7,239 5,637 18.2 15.6 12.9 12.0 24 14 9
Online 165 51 90 74 0.6 0.1 0.2 0.2 (69) 76 26
Individual Agents 10,479 14,670 17,985 13,908 37.3 36.0 32.1 29.6 40 23 16
Corporate Agents 7,704 10,529 15,281 13,462 27.4 25.8 27.3 28.7 37 45 28
Banks 5,224 7,147 10,988 9,613 18.6 17.5 19.6 20.5 37 54 29
Others 2,480 3,382 4,293 3,850 8.8 8.3 7.7 8.2 36 27 24
Brokers 3,754 8,866 15,165 13,597 13.4 21.8 27.0 29.0 136 71 30
Insurance Marketing Firms 55 94 138 146 0.2 0.2 0.2 0.3 71 47 67
Point of Sales Persons 63 143 116 57 0.2 0.4 0.2 0.1 128 (19) (30)
Web Aggregators 769 41 61 55 2.7 0.1 0.1 0.1 (95) 50 33
Total GWP 28,100 40,730 56,076 46,936 45 38 22

Source: Company

Niva Bupa has high share in Policybazaar’s revenue

Share of Niva Bupa in Policybazaar’s insurance revenue, March fiscal year-ends, 2018-24 (Rs
mn)
2018 2019 2020 2021 2022 2023 2024
Total insurance revenue of Policybazaar 1,583 3,103 5,159 6,069 7,888 12,653 27,441
Life insurers 867 1,831 3,210 3,653 4,730 7,984 10,734
Non-life insurers 716 1,272 1,949 2,417 3,158 4,669 16,707
SAHIs 261 460 780 1,033 1,424 2,343 5,974
Niva Bupa 28 55 126 291 467 1,129 2,258
Share of Niva Bupa in Policybazaar's revenue (%) 1.7 1.8 2.4 4.8 5.9 8.9 8.2
among SAHIs 11 12 16 28 33 48 38
among non-life insurers 4 4 6 12 15 24 14

Source: Company, Kotak Institutional Equities

Optimization of product-to-customer group mapping

Niva Bupa uses a lifetime value (LTV) based approach to sell high-LTV products to high-LTV customers
thorough targeted distribution channels to capture the mass affluent customer segment. The company
has developed an in-house recommendation engine to determine LTV. The engine leverages data
analytics based on variables such as cohort-wise loss ratio, medical inflation, future premium change,
cost of acquisition, expenses, investment income, required return on capital, distribution channel and
geography to rate customers on a five-point scale. This exercise is performed across various customer
variables such as the customer profile, claims experience, cost of acquisition and location. The five-point
grid enables the company to determine the appropriate incentives, rewards and product
recommendations based on the LTV profile of a customer. This enables Niva Bupa to strategically focus
the distribution of its products through selected distribution channels to target specific customer groups.

Product innovation at center of Niva Bupa’s customer-centric approach

Niva Bupa identifies customer groups based on various parameters, including, for example, age, income
and health status. Product design is geared to achieve the best customer-product fit based on these
customer groups and the sales process. For example, ‘Reassure’, is aimed at addressing health
insurance needs for upper class/aspiring affluent customers. ‘Reassure’ also targets customers looking
for wellness-focused products and offers features such as “Booster+”, which allows customers to carry
forward the balance sum insured of up to 10 times of the base cover and is sold via Niva Bupa’s sales
advisory process. Recently, the company launched a tiered network product, which allows better control
over claims.

Niva Bupa Health Insurance

Insurance India Research

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Niva Bupa has a bouquet of products catering to different segments of the market
Products of Niva Bupa and their target segments
Criteria Target segment Products
Millennials Aspire Elixir
Age
Senior citizen Senior First
HNI Health Premia
Affluent ReAssure ReAssure 2.0
Income group
Mass affluent Health Pulse
Mass market Arogya Sanjeevni
Wellness focussed ReAssure ReAssure 2.0 Go Active
Features
Disease management Smart Health
Embedded Health Plus Smart Health Xpress Health
Delivery
Advisory Travel Assure Health Plus

Source: Company

Large network of hospitals and PPN allow for better control on claims process
High share of network hospital in cashless claims. Niva Bupa’s strong hospital and preferred partner
network (PPN) enables the company to maintain lower claims ratio than peers. 73% of cashless claims
were settled at network hospitals during 9MFY25 (70% in FY2024) allowing for higher control on payouts.
The company has also launched products with tiered network benefits to incentivize policyholders and
drive volumes to PPN hospitals. These efforts enhance Niva Bupa’s bargaining power with hospitals.

Strong hospital network. Niva Bupa has focused on growing its network hospitals up to 10,460 as of
March 31, 2024, up from 8,562 as of March 31, 2022. Network hospitals play a role in improving customer
experience, by enabling cashless claims and offering better pricing and discounts for any uncovered
portion of the medical expenses. Niva Bupa has 455 Preferred Partner Network (PPN) hospitals, which
provide more favourable discount packages to the company and improve control on the cost of claims.

Improved customer experience at network hospitals. Since 2023, Niva Bupa has strengthened its
relationships with Network Hospitals and entered into special arrangements with PPN Hospitals.
Through these arrangements, Network Hospitals gain access to Niva Bupa’s customer base, and
customer feedback through reviews. The PPN Hospitals provide benefits to customers such as free
ambulance services, designated relationship manager in the facility, discount on pharmacy, diagnostics
and consultations even after discharge.

Wellness initiatives augment

Niva Bupa is focused on enhancing customer experience and promoting customer well-being through
creating a ‘360-degree’ health and wellness ecosystem platform through its mobile application and
website. For instance, through partnerships with select third party healthcare technology platforms, the
company offers digital consultations and access to diagnostic services on health ecosystem platforms.
Niva Bupa also provides customers access to health and wellness related education content published
by Bupa. The health ecosystem platforms also seek to guide customers toward making informed
choices, with healthcare provider ratings and reviews by actual patients, and information about the
quality and infrastructure of a healthcare provider. The ‘Niva Bupa Health’ mobile application also
includes health tracking features such as an activity tracker and BMI calculator. Renewing customers
are offered discounts if a minimum step count is achieved, to encourage healthy living.

Diversified geographical presence

Exhibit 30 shows that a combination of direct and intermediated distribution channels has driven
diversified presence across India for Niva Bupa. During FY202-24, the company has sourced GWP in
every state and union territory in India, with no single state or union territory accounting for more than
20% of GWP. Maharashtra at 15.2% of GWP was the latest state in 9MFY25 (though the share is
declining) followed by Uttar Pradesh at 12.2% and Delhi at 8.8%.

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Top seven states contributed 64.8% of Niva Bupa’s GWP in FY2024

Geographical split of GWP for Niva Bupa, March fiscal year-ends, 2022-24, 9MFY25 (Rs mn)
GWP mix (%)
2022 2023 2024 9MFY25 2022 2023 2024 9MFY25
Andhra Pradesh 711 1,080 1,567 1,472 2.5 2.7 2.8 3.1
Arunachal Pradesh 13 19 32 29 0.0 0.0 0.1 0.1
Assam 234 436 571 528 0.8 1.1 1.0 1.1
Bihar 635 937 1,361 1,058 2.3 2.3 2.4 2.3
Chhattisgarh 268 450 602 503 1.0 1.1 1.1 1.1
Goa 115 144 186 153 0.4 0.4 0.3 0.3
Gujarat 1,633 2,334 2,936 2,348 5.8 5.7 5.2 5.0
Haryana 2,312 3,192 4,398 3,373 8.2 7.8 7.8 7.2
Himachal Pradesh 99 144 205 172 0.4 0.4 0.4 0.4
Jharkhand 263 386 527 421 0.9 0.9 0.9 0.9
Karnataka 2,215 3,469 4,773 4,142 7.9 8.5 8.5 8.8
Kerala 1,201 1,558 2,291 2,179 4.3 3.8 4.1 4.7
Madhya Pradesh 772 1,133 1,594 1,331 2.7 2.8 2.8 2.8
Maharashtra 4,719 6,961 8,925 7,114 16.8 17.1 15.9 15.2
Manipur 14 32 21 20 0.1 0.1 0.0 0.0
Meghalaya 15 25 35 26 0.1 0.1 0.1 0.1
Mizoram 3 19 45 52 0.0 0.0 0.1 0.1
Nagaland 8 14 15 13 0.0 0.0 0.0 0.0
Odisha 475 683 954 753 1.7 1.7 1.7 1.6
Punjab 1,296 1,752 2,295 1,887 4.6 4.3 4.1 4.0
Rajasthan 1,167 1,681 2,027 1,585 4.2 4.1 3.6 3.4
Sikkim 8 12 22 20 0.0 0.0 0.0 0.0
Tamil Nadu 1,206 1,803 2,549 2,440 4.3 4.4 4.5 5.2
Telangana 1,511 2,281 3,247 2,861 5.4 5.6 5.8 6.1
Tripura 23 36 58 57 0.1 0.1 0.1 0.1
Uttarakhand 282 436 579 491 1.0 1.1 1.0 1.0
Uttar Pradesh 2,747 4,206 6,863 5,691 9.8 10.3 12.2 12.2
West Bengal 906 1,288 1,915 1,606 3.2 3.2 3.4 3.4
Andaman and Nicobar Islands 3 6 10 10 0.0 0.0 0.0 0.0
Chandigarh 146 184 220 168 0.5 0.5 0.4 0.4
Dadra and Nagar Haveli 11 18 19 13 0.0 0.0 0.0 0.0
Daman & Diu 6 11 12 11 0.0 0.0 0.0 0.0
Govt. of NCT of Delhi 2,963 3,849 5,009 4,142 10.5 9.4 8.9 8.8
Jammu & Kashmir 91 116 164 127 0.3 0.3 0.3 0.3
Ladakh 4 4 5 1 0.0 0.0 0.0 0.0
Lakshadweep 1 1 1 1 0.0 0.0 0.0 0.0
Puducherry 25 32 40 39 0.1 0.1 0.1 0.1
Total 28,100 40,730 56,076 46,836

Source: Company

Niva Bupa Health Insurance

Insurance India Research

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Technological interventions at various stages have led to superior metrics

Niva Bupa has designed automated and digital self-serve capabilities aimed at enabling customers to
benefit from a seamless, self-serve experience with minimal manual intervention.

Digital onboarding. 99.95% of new policies are being applied for digitally through the company
website and mobile applications (as of March 31, 2024); 52% of retail policies on the digital platform
are auto-decisioned without human intervention.

Automated underwriting. The underwriting decision workflow is also being automated with in-house
auto-underwriting system having features such as the in-house rule engine and reflexive underwriting
questionnaire. Based on the responses to the questionnaire, the underwriting system automatically
makes a wide range of decisions. While the system recommends straight-through processing for
healthy individuals, for others it offers a range of risk adjustments including additional premium
charges, permanent and time-bound exclusions and rejections. This enables the company to price the
risk and minimize human intervention, leading better claims ratios and shorter TAT.

Auto adjudication. Niva Bupa has adopted auto-adjudication capabilities, which processes cashless
claims in a paperless manner with no or minimal human intervention to provide decisioning with a
focus on accuracy and timelines, through its arrangements with Vitraya Technologies. During FY2024,
the company has processed 81.5% of cashless claims under 30 minutes.

 The auto-adjudication claims process uses an automated document digitization algorithm,

categorization of line items in hospital bills, and also adds a layer of data analytics based on
internal claim processing rules, to provide auto-recommendations on claims processing. The
process employs advanced AI-based models that use a combination of natural language
processing and an in-house developed library of diseases, diagnostics tests, medications, and
treatments along with their common variations.

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Key risks: Sluggish growth, medical inflation, dependance on intermediaries

Key risks to Niva Bupa’s business include (1) sluggish retail health insurance coverage across the
industry that poses risk to our high-growth forecasts, (2) higher-than-expected claims due to
increasing healthcare inflation or epidemics, (3) high dependence on intermediated distribution
channels, (4) aggressive pricing and competition in health insurance and (5) IRDA’s regulations
and expenses of management (EoM) caps.

Tall growth forecasts, weak industry-wide momentum in retail life coverage

While health insurance has a promising total addressable market (TAM), overall growth in health
insurance policies under the retail segment has been sluggish. Total retail health policies in India were
23 mn in FY2024, 22 mn in FY2023 and 22 mn in FY2022 (see Exhibit 31). This is on the back of 17%
CAGR during FY2018-21 a high-growth phase during Covid. A high base and consistent tariff hikes have
likely led to sluggish growth in last three years. Average premium paid per life was up to Rs7,430 in
FY2024 from Rs6,573 in FY2023 from Rs4,595 in FY2018 (see Exhibit 32).

We expect Niva Bupa to deliver 26% GWP CAGR during FY2024-27E. We expect high-teen growth to
continue thereafter. While increase in average premium (reflecting higher tariffs and sum assured per
policy) can only drive growth up to a point, growth in underlying industry is crucial in meeting our tall
growth forecasts.

Retail health insurance policies in India, March Average premium per life in retail health insurance,
fiscal year-ends, 2018-24 March fiscal year-ends, 2018-24 (Rs)

Retail policies (LHS) Growth yoy (RHS) 8,000 7,430

(# mn) (%)
6,573
25.0 39.1 45.0
33.0 6,400 5,828

20.0 30.0 4,863

4,595 4,617
4,800 4,166
11.0
15.0 15.0
5.0
0.3 3,200
(4.0)
10.0 -
(12.4)
1,600
5.0 (15.0)

14.1 19.6 17.2 22.8 21.9 22.0 23.1

- (30.0) -
2018 2019 2020 2021 2022 2023 2024 2018 2019 2020 2021 2022 2023 2024

Source: IRDA, Kotak Institutional Equities Source: IRDA, Kotak Institutional Equities

Higher-than-expected claims due to high medical inflation

Niva Bupa’s ability to predict medical expenses/claims is vulnerable to (1) health inflation (increases in
hospital and pharmaceutical costs) and (2) major epidemics, pandemics, or newly emergent viruses
(such as Covid 19), and the resulting physical and mental health costs in broader society. Other factors
include changes in health care regulations and practices and/or the broader competitive landscape;
external factors such as inflation, unemployment, etc.

India has one of the highest rates of healthcare inflations, as highlighted by the inflation values indexed
at 100 in 2016. Since then, India has comparatively seen the highest medical inflation, touching the 150-
mark in 2023, while other countries such as UK, USA, China, and Indonesia hovered between 115- 125 in
2023 (see Exhibit 33).

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Healthcare companies have been focused on profitability improvements; corporatization and listing of
healthcare companies is likely leading to higher focus on Average Revenue Per Operational Bed (ARPOB)
has been matrix focused by analysts and investors; Exhibit 34 shows the trends in ARPOB of large
healthcare companies; the trend clearly shows increase in realization, which indirectly implies higher bills
for insurance companies. IRDA has recently asked insurance companies to negotiate package rates that
are standardized across various hospitals, similar to negotiations made under government health
schemes.

Niva Bupa engages with network hospitals to negotiate tariffs to manage claims cost. Its arrangements
with network hospitals may include costs for procedures based on a pre-agreed tariff rate card, package
rates for certain surgical procedures, and/or a percentage of discount on the cost of procedures for its
customers. The PPN hospital network increased to 455 in 9MFY25 from 326 in FY2024 and 201 in
FY2022; it has network for 10,460 hospitals in cash less network during both the years. Network hospitals
provide improved transparency of billing and negotiation of lower rates for procedures, thereby
enhancing the company’s ability to control claims.

India has one of the highest rates of healthcare inflations

Healthcare inflation across countries, December 2016-Decmeber 2023

Source: Redseer

Sharp rise in hospital tariffs

ARPOB of select hospitals, March fiscal year-ends, 2017-24, 9MFY25 (Rs)
Apollo Aster (India) KIMS Max
Medanta Narayana (India) Rainbow
80,000

60,000

40,000

20,000

-
2017 2018 2019 2020 2021 2022 2023 2024 9MFY25

Source: Company, Kotak Institutional Equities

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Dependency on intermediated distribution channels

Niva Bupa faces risk of dependence on intermediated distribution channels and if they are unable to
develop and grow captive network of distributors. Exhibit 35 shows direct sales comprise 12% of gross
written premium in 9MFY25 and individual agents at 30%. Corporate agents and brokers contribute 29%
each. Niva Bupa is the largest selling non-life insurer on India’s largest online insurance broker/web
aggregator—Policybazaar.com—on the basis of insurance commission paid by insurers to the insurance
broker/web aggregator, accounting for 8.2% of its standalone income. The company has other partners
HDFC Bank, Axis Bank and Bajaj Finance apart from brokers/aggregators like PhonePe, Turtlemint and
NJ Insurance.

Channel mix of Niva Bupa, March fiscal year-end, 9MFY25 (%)

Others, 0.6
Direct Sales, 12.2

Brokers, 29.0

Individual Agents,
29.6

Corporate Agents,
28.7

Source: Company

Intense competition in health insurance

Niva Bupa faces intense competition from non-life as well as other SAHIs. Niva Bupa’s competitors may
also have competitive strengths as a result of a longer operating experience, larger capital base and
greater product diversification. Some of them may offer higher commissions or remunerations, or offer
insurance at lower premium rates.

Competition in digital distribution. In addition, insurance aggregators and other new companies with a
focus on digital distribution are entering the health insurance industry. Such potential competitors may
further increase the competitive pressures. A decline in competitive position could have a material
adverse effect on business, financial condition, results of operations, cash flows and prospects.

Composite license will increase competition. While primary competitors are private as well as public
sector general insurance companies, there have been discussions of a composite license for an insurer
to undertake life, general or health insurance under one entity. If such laws and regulations were
introduced, it would cause the company to face additional competition from life and general insurers.
Further, in case life insurers are allowed to offer indemnity-based health insurance products, it may have
an adverse impact on business due to increased competition in the market. Unconfirmed media reports
(link) suggest that LIC may pick up stake in a health insurance company.

Health insurance is a highly regulated business

Niva Bupa operates in a highly regulated industry and its operations are subject to extensive application
of laws and the active supervision of IRDA and other regulatory and/or statutory authorities of India. Niva
Bupa is subject to regulation by IRDA on multiple aspects. For example: While health insurance tariffs
are controlled by IRDA, the regulator capped annual hike in premium for senior citizens (60 years and
above) to 10%.

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IRDA regulations are in respect of maintenance of solvency ratio, investment asset allocation, among
other things. The company must accurately and timely evaluate and pay claims. In FY2024, 95.3% of
reimbursements claims were paid in 15 days and 81.5% of pre-authorized cashless claims were paid
under 30 minutes. The company reported claim settlement ratio of 91.93% in FY2024.

Expense of Management (EOM) regulations set out by IRDA have allowable limit for expenses of
management on an overall basis. Under these regulations, an insurer carrying on health insurance
business in India is not permitted to spend, in any financial year as expenses of management, an amount
exceeding 35% of the gross premium written by it in India. The regulations also provide for an additional
allowance to the extent of 5% of allowable expenses of management computed in accordance with the
EOM Regulations, toward both insurtech expenses and insurance awareness expenses. In addition to
the above, for any insurer having its principal place of business transacted in India and having branch
outside India or having International Financial Service Centre, Insurance Office, the EOM Regulations also
allow additional expenses up to 10% of the GWP written outside India for head office expenses. The
company expects to comply with these guidelines by FY2026E (detailed calculations in next section).

Several regulations and master circulars recently notified by the IRDA may result in changes to the way
in which the company undertakes business and operations. For instance, the IRDA (Insurance Products)
Regulations, 2024, dated March 20, 2024 reduced the ambit of the moratorium period and the grounds
for contesting claims post the expiry of such moratorium, which may result in the company seeing an
increase of claims post the moratorium period and the Master Circular on IRDA (Insurance Products)
Regulations, 2024, dated May 29, 2024 has included changes to the timing of authorization or rejection
of cashless settlement, which may result in increased cost of claims due to additional charges.

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Strong growth and RoE trajectory

We expect Niva Bupa’s high gross written premium (GWP) growth trajectory (26% GWP CAGR
FY2024-27E) and improving leverage to drive strong earnings growth. With consistent
investments in growth (41% GWP CAGR over FY2022-24), the business is currently sub-scale with
combined ratio of 101.9% and RoE (IFRS) of 6.8% in FY2024. While portfolio aging inches up
claims over the medium term, improving operating leverage will gradually drive down combined
ratio. Coupled with higher investment leverage, IFRS earnings will accelerate (Rs4.8 bn in
FY2027E from Rs1 bn in FY2024). RoE expansion, post recent capital issuance, may be gradual;
RoE (IFRS) of 12.7% by FY2027E and 18.4% by FY2030E.

High growth and earnings

We expect Niva Bupa to deliver 26% GWP CAGR during FY2024-27E; the company has made consistent
investments in growth, driving 41% GWP CAGR during FY2022-24. A higher base, focus on maintaining
expense of management (EoM) and improving profitability will drive its medium-term earnings trajectory.
We expect IFRS earnings of Rs10 bn in FY2030E from Rs4.8 bn in FY2027E and Rs1 bn in FY2024.

We expect high-teen growth and improvement in profitability over the medium term
GWP growth and IFRS PAT of Niva Bupa Health Insurance, March fiscal year-ends, 2024-30E

PAT (LHS) GWP growth yoy (RHS)

(Rs mn) (%)
38
12,000 40
32
9,600 32
24
22
7,200 20 24
18 18

4,800 16

2,400 8
1,064 2,040 3,509 4,835 6,330 8,171 10,101
- -
2024 2025E 2026E 2027E 2028E 2029E 2030E

Source: Company, Kotak Institutional Equities estimates

Gradual RoE expansion to high-teens by FY2030E

We forecast Niva Bupa’s RoE (IFRS) to inch up to 12.6% in FY2027E and 18.4% in FY2030E from 6.8% in
FY2024. Recent capital issuance (Rs8 bn in November 2024; 36% of March 2024 net worth) tempers
investment leverage and near-term RoE expansion. Operating trends continue to trend up. We expect
ratio of other (non-acquisition) expenses to insurance revenues (detailed later in the report) to reduce to
5.6% in FY2027E and 4% in FY2030E from 9.6% in FY2024, largely driving the improvement in profitability.
Combined ratio (IFRS) will moderate to 96.7% in FY2030E from 98.6% in FY2027E and 101.9% in FY2024.
Notably, we are also modelling moderation in investment yield to 6.8% in FY2027E, 6.4% in FY2030E from
7% in FY2024.

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We model high-teen RoE by FY20230E Decline in expense ratio to drive improvement in profitability
IFRS RoE of Niva Bupa, March fiscal year-ends, Combined ratio, claims ratio and expense ratio of
2023-30E (%) Niva Bupa on IFRS, March fiscal year-ends, 2023-30E (%)

20.0 18.4 Claims ratio Expense ratio Combined ratio

17.0
14.8 125.0
16.0 102.6 101.9 101.2 99.5 98.6
12.7 97.9 97.2 96.7
100.0
12.0 10.4
42.6 39.1 38.2 36.5 35.6 33.9 32.7 31.5
7.6 75.0
6.8
8.0

50.0
4.0
1.1
59.9 62.8 63.0 63.0 63.0 64.0 64.5 65.3
25.0
-
2025E

2026E

2027E

2028E

2029E

2030E
2023

2024

2030E
2023

2024

2025E

2026E

2027E

2028E

2029E
Source: Company, Kotak Institutional Equities estimates
Notes:
(1) Claims ratio: incurred claims and expenses / insurance revenue.
(2) Expense ratio: deferred acquisition cost + other expenses / insurance
revenue.
(3) Combined ratio: claims ratio + expense ratio.

Source: Company, Kotak Institutional Equities estimates

We focus on IFRS financials for Niva Bupa; here’s why

Niva Bupa’s IFRS earnings trajectory more accurately reflects the mechanics of its underlying business-
sub-scale operations, low operating leverage that is improving over the medium term. The company has
high (low-20s) share of long-term policies (IGAAP accounting treatment changed from October 2024 for
such policies) and 50:50 accounting of NEP that supresses claims ratios. IFRS smoothens the earnings
volatility for insurance players especially Niva Bupa and most other unlisted health insurance peers that
follow 50:50 accounting and/or have large share of long-term policies (tenure>1 year); till 1HFY25 these
policies were recognized in the year when risk commences.

IFRS defers revenue recognition, on pro-rata basis, over the tenure of the policies. Further, acquisition
costs are deferred over the period of coverage, in congruence with accounting of revenue. IFRS financials
disclose variable (deferred acquisition linked) and other operating expense separately, which helps in
better modelling of operating leverage.

IFRS accounting recognizes premium income on pro-rata basis over the tenure of the policy. Niva
Bupa calculates net earned premium (NEP) under IGAAP, using the 50:50 formula, i.e. average of
current and previous periods premium. Star Health and other general insurance companies calculate
NEP using the 1/365 formula wherein revenue is recognized on pro rata basis over the tenure of the
policy. This results in higher NEP recognition, leading to lower claims ratio for Niva Bupa (and other
SAHI’s) that follow 50:50 formulas compared to Star Health and most GIs. In other words, Niva Bupa’s
claims ratio, as calculated under IGAAP norms, is not directly comparable with Star Health and GI
peers.

Niva Bupa has high share (early-20s) of long-term policies. GWP and commission expenses for long-
term (tenure > 1 year) health products were recognized in full in the FY in which risk commences.
Pursuant to IRDA’s recent 1/n circular, insurance companies are now required to recognize premiums
for long-term health products on a yearly basis and any amount collected in excess of 12 months will
be treated as ‘Premium Deposit’ or ‘Advance Premium’. Similarly, commission expenses will be
recognized in proportion to the premium recognized for the year. This change, implemented from
2HFY25, will lead to distortion in GWP recognition (considered for NEP calculation under IGAAP) for
next three years, till the base normalizes. Niva Bupa’s NEP is calculated using the 50:50 method
leading to lower NEP and sharp rise in claims ratio to 65.5% by FY2026E from 59% in FY2024.

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IRFS provides for deferment of expenses linked to acquisition of business throughout the tenure of
the policies; the same is fully recognized in the FY of sale of the policy in IGAAP. This makes revenue
and expenses recognition congruent versus IGAAP accounting that may trend to upfront expenses
and suppress profitability of high-growth companies.

Clear break up of variable and fixed expenses. Expenses, under IFRS, can be classified under five
broad heads, viz. claims, deferred acquisition costs, net expenses on reinsurance, other (fixed)
operating expenses, and finance costs. While the first three heads are variable in nature and linked to
the volume of business, the latter two grow at slower pace to drive operating leverage and improve
profitability. Thus, impact of change in business momentum can more accurately be modelled under
IFRS.

Clear breakup between variable and fixed expenses in IFRS

Explanation of key line items in IFRS income statement
Nature Details
Insurance revenue Income Gross earned premium, i.e gross written premium adjusted for unearned premium.
Incurred claims and expenses Variable expense Gross claims paid and claims management expenses.
Deferred acquisition cost Variable expense Cost of acquisition deferred over the period of policy.
Net expenses from reinsurance Variable expense Net impact from reinsurance.
Investment income Income Investment income recognized on total investment book.
Other operating expenses Fixed expense Employee expenses and business promotion account for ~80% of other expenses.
Finance costs Fixed expense Interest cost of subordinate debt.

Source: Kotak Institutional Equities

We expect Niva Bupa to deliver normalized premium growth of 26% over FY2024-27E
Niva Bupa will likely deliver 26% CAGR in gross written premium and 29% CAGR in insurance revenue
over FY2024-27E. We expect GWP growth to moderate from 41% CAGR reported during FY2022-24 as
the company toggles between growth, profitability and regulatory constraints (EOM guidelines).
Significant investment in agency and other distribution channels support growth over the medium term.
Pressure by regulator to meet EoM guidelines will likely result in moderation in new business (that carries
higher acquisition cost) for the company. Despite moderation from historical levels, GWP growth will
likely remain strong at 26% over FY2024-27E. The company has a strong agency network (172,505
agents in 9MFY25) and has partnered with 18 banks, 46 NBFCs and 480 brokers.

What is insurance revenue? Revenue is booked on gross earned basis under IFRS, i.e. gross written
premium is adjusted on pro rata basis to account for the period that the risk is underwritten. Unexpired
premium reserve accounts for the portion of risk pending on policies sourced during the year. This results
in normalization of revenue recognition reducing the volatility arising from multi-year policies and
seasonality in business. Adjustment for reinsurance occurs below the top line. Ratio of revenue to GWP
will likely rise to 84% by FY2027E from 79% in FY2024, as the moderation in growth results in lower rise
in UPR reserve.

Niva Bupa to deliver strong top line growth over the medium term
GWP and IFRS insurance revenue of Niva Bupa Health Insurance, March fiscal year-ends, 2023-30E (Rs mn)
2023 2024 2025E 2026E 2027E 2028E 2029E 2030E
Gross written premium 40,730 56,076 74,284 92,112 111,916 134,299 158,473 186,999
UPR adjustment 10,375 11,897 14,876 16,144 17,937 21,524 25,398 29,970
Insurance revenue 30,356 44,179 59,408 75,968 93,980 112,776 133,075 157,029
Insurance revenue (% of GWP) 74.5 78.8 80.0 82.5 84.0 84.0 84.0 84.0
YoY growth (%)
Gross written premium 38 32 24 22 20 18 18
Insurance revenue 46 34 28 24 20 18 18

Notes:
(1) UPR: unearned premium reserve.

Source: Company, Kotak Institutional Equities estimates

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Operating leverage is the key driver of profitability

CISR stable at about 93%. We expect Niva Bupa’s Combined Insurance Service Ratio (CISR) to remain
stable at about 93% during FY2024 and FY2030E (see Exhibit 41). CISR, key profitability measure under
IFRS, reflects aggregation of claims ratio (claim/insurance revenue) and acquisition cost ratio (deferred
acquisition costs/insurance revenue). Aging of portfolio will likely lead to increase in claims expenses
ratio to 65.3% in FY2030E from 63% in FY2024. This may be offset by declining deferred acquisition
ratio to 27.5% in FY2030E from 30.5% in FY2024 and 30% in FY2027E.

Claims ratio to inch up. Claims ratio trajectory of Niva Bupa over the medium term will be determined
by the interplay of (1) rise in claims driven by aging of portfolio, (2) effectiveness of price hikes in
countering the impact of medical inflation and (3) benefits of scale (in claims administration
expenses). We expect net claims ratio to increase to 63% in FY2030E from 60.3% in FY2027E and
59.7% in FY2025E; gross claims ratio (after adding claims administration expenses) will be 65.3% in
FY2030E, 64% in FY2027E and 63% in FY2025E.

 Aging of portfolio to drive inch up of claims ratio. Niva Bupa has grown its portfolio fast in the
past three years and hence the age of portfolio is low. Health claims tend to peak after 3-4 years
of policy as the exclusionary period for pre-exiting diseases expires. In addition, frequency of
claims increases with age of policyholder. We model gradual rise in claims ratio in line with ageing
of portfolio. As per management, claims experience will not be adverse with an aging portfolio due
to their high LTV approach, annual price hikes and efforts on cross-sell and upsell.

 Regular price hikes keep claims inflation at bay. Sharp rise in cost of hospitalization post Covid
has led to concerns of claims inflation for SAHIs. While peers tend to go for lumpy price hikes, Niva
Bupa opts for smaller regular price hikes. Per management, the company typically hikes the prices
by 8-10% every year to counter the impact of claims inflation and mix change, this is in line with
long-term average of medical inflation.

 Claims related expenses will grow at slower pace. Incurred claims and expenses include claims
management expenses that are incurred to run the in-house TPA. Niva Bupa invested early in
building its medical adjudication capabilities, incremental investments will be moderate. Growth of
claims management expenses will likely be lower than top line at 10-15% over the medium term.

Acquisition ratio to moderate over time. Acquisition ratio (deferred acquisition expenses/insurance
revenue) would moderate to 27.5% in FY2030E from 30% in FY2027E and 30.5% in FY2024. Niva Bupa
GWP growth will likely moderate to 18% in FY2029-30E from 20-21.5% in FY2027-28E, 24% in FY2026E
and 32-37% in FY2024-25E. Moderate pace of overall growth reflects slowing new business growth,
assuming no major change in persistency; the company does not share the break-up of new and
renewal business premiums.

 Commissions for new business are typically lower than commissions paid for renewal contracts.
Lower share of new business/overall premium (insurance revenue) will imply lower commission
expenses. This will imply that blended commission ratios will decline over time though the impact
may be lagged due to deferment of the same.

Other expense ratio will likely moderate. Other expenses, related to corporate headquarters and
advertising, account for 9.6% of revenue in FY2024. These expenses are fixed in nature and growth will
likely track inflation (4-6%). Since we build in higher growth in revenues at 26% CAGR over FY2024-27E
the share of other expenses is likely to moderate to 4.9% by FY2028E and 4.0% by FY2030E, leading to
improvement in overall expense ratio.

Combined ratio declines over time. CISR (insurance service results as % of revenue as discussed above)
is used as measure of profitability in IFRS. However, CISR doesn’t take in to account the fixed expenses
leading to a ratio that is much lower than 100%. To make the comparison analogous with IGAAP numbers
we include the other expense (as % of revenue) to calculate combined ratio- the ratio declines to 96.7%
in FY2030E from 97.9% in FY2027E, 101.2% in FY2025E and 101.9% in FY2024.

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Combined ratio is a better measure than CISR

Break-up combined ratio for Niva Bupa, March fiscal year-ends, 2023-30E (% of revenue)
2023 2024 2025E 2026E 2027E 2028E 2029E 2030E
Net claims ratio (1) 55.9 59.0 59.7 60.1 60.3 61.4 62.1 63.0
Claims management expenses (2) 4.0 3.8 3.3 2.9 2.7 2.6 2.4 2.3
Gross claims ratio (3:1+2) 59.9 62.8 63.0 63.0 63.0 64.0 64.5 65.3
Acquisition expense ratio (4) 28.9 29.5 30.5 30.0 30.0 29.0 28.3 27.5
CISR (5:3+4) 88.8 92.3 93.5 93.0 93.0 93.0 92.8 92.8
Other expense ratio (6) 13.8 9.6 7.7 6.5 5.6 4.9 4.4 4.0
Combined ratio (7:5+6) 102.6 101.9 101.2 99.5 98.6 97.9 97.2 96.7

Notes:
(1) All ratios are expressed as a % of insurance revenues.

Source: Company, Kotak Institutional Equities estimates

Ceding rate stable over the medium term

IFRS accounts for ceding separately after insurance expenses unlike adjustment from GWP and gross
commissions made under IGAAP. We assume ceding ratio to remain stable at 21% over the medium
term. Calculated reinsurance commission rate was 35.3-37.2% over FY2023-24; we model 35-36% over
the medium term. Reinsurance claims ratio is lower at 54.3-57.5% than gross claims ratio of 59.9% and
62.8% reported by the company.

Impact of reinsurance under IFRS for Niva Bupa Health Insurance, March fiscal year-ends, 2023-30E (Rs mn)
2023 2024 2025E 2026E 2027E 2028E 2029E 2030E
Assumptions
Ceding ratio (% of GEP) 22.5 20.9 21.0 21.0 21.0 21.0 21.0 21.0
Reinsurance commission ratio (%) 35.3 37.2 36.0 35.0 35.0 35.0 35.0 35.0
Reinsurance claims ratio (%) 54.3 57.5 56.0 58.0 59.0 60.0 60.0 60.0
Net impact of reinsurance
Reinsurance premium 6,838 9,228 12,476 15,953 19,736 23,683 27,946 32,976
Reinsurance commission 2,412 3,434 4,491 5,584 6,908 8,289 9,781 11,542
Incurred claims 3,713 5,311 6,986 9,253 11,644 14,210 16,767 19,786
Net expenses from reinsurance contracts 713 483 998 1,117 1,184 1,184 1,397 1,649

Source: Company, Kotak Institutional Equities estimates

Disciplined investment strategy; we build in moderation in investment yields

Niva Bupa employs a disciplined approach to investment management to protect and grow the cash
flows generated from insurance operations by investing them in securities issued in the Indian market.
The company mainly invests in fixed income securities, which accounted for 98.0% of AUM in FY2024.
As of March 31, 2024, 23.2% (Rs13 bn) of its assets were invested in Indian government securities, 34.0%
(Rs19 bn) in corporate bonds and Additional Tier-1 bonds. Of the corporate bond exposure, 91% (Rs33
bn) were invested in AAA rated bonds rated by all SEBI authorized credit rating agencies.

Investment income will grow at 17% CAGR over FY2025-30E, driven by 19% CAGR in AUM. Niva Bupa has
taken a duration risk by investing in longer-term bonds at higher yields. The decreasing interest rate
environment will be beneficial for Niva Bupa resulting in higher yield of 7.3% in FY2025E compared to
7.0% in FY2024. In later years, we build in moderation in yields to 6.4% as interest rate settle down at
lower level.

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Fixed income securities account for 98% of the AUM

AUM mix by type of investment, March fiscal year-ends, 2022-24 (Rs mn)
AUM mix (%) Growth yoy (%)
2022 2023 2024 2022 2023 2024 2023 2024
Government securities 5,847 8,081 12,666 24.3 24.0 23.2 38 57
Other approved securities 1,952 2,452 4,723 8.1 7.3 8.7 26 93
Bonds 8,442 11,763 18,572 35.2 34.9 34.0 39 58
Other securities 928 438 998 3.9 1.3 1.8 (53) 128
Investments in infrastructure
5,861 8,207 14,969 24.4 24.4 27.4 40 82
and housing
Equity 31 111 85 0.1 0.3 0.2 257 (23)
Mutual funds 876 557 546 3.6 1.7 1.0 (36) (2)
Other than approved securities 76 2,053 2,023 0.3 6.1 3.7 2,610 (1)
Total AUM 24,013 33,661 54,582 40 62

Source: Company

91% of corporate bond exposure is to AAA rated bonds

AUM mix by credit rating, March fiscal year-ends, 2022-24 (Rs mn)
AUM mix (%) Growth yoy (%)
2022 2023 2024 2022 2023 2024 2023 2024
Sovereign 6,986 9,378 16,042 31.6 29.1 30.6 34 71
AAA rated 13,281 20,487 33,102 60.1 63.5 63.1 54 62
AA or better 1,835 2,378 3,279 8.3 7.4 6.3 30 38
Total AUM 22,102 32,242 52,423 46 63

Source: Company

We model 17% CAGR in investment income over FY2025-30E… …driven by 19% CAGR in investment book
IFRS investment income of Niva Bupa Health IFRS investment book of Niva Bupa Health
Insurance, March fiscal year-ends, 2023-30E Insurance, March fiscal year-ends, 2023-30E

Investment income (LHS) YoY growth (RHS) Investments (LHS) YoY growth (RHS)
(Rs bn) (%) (Rs bn) (%)
12.0 63 70 200 65 70
10.2 176
53
9.6 8.8 56 160 147 56
7.5 124
7.2 6.5 42 120 36 104 42
5.7 88
4.7 74
4.8 20 28 80 19 19 19 19 28
3.1 17 16 54 18
15 15
1.9 33
2.4 14 40 14

- - - -
2030E
2023

2024

2025E

2026E

2027E

2028E

2029E
2025E
2023

2024

2026E

2027E

2028E

2029E

2030E

Source: Company, Kotak Institutional Equities estimates Source: Company, Kotak Institutional Equities estimates

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Investment book growth driven by reserves and net worth

There is strong link between investment book, insurance contract liabilities and net worth (see Exhibit
47). While shareholder’s investment pool reflects net worth, the policyholder’s pool is analogous to
insurance contract liabilities. Unearned premium, unpaid claims and deferred expenses drive the
insurance contract liability (see Exhibit 48).

Insurance contract liabilities are key driver of investment book

Key drivers of investment book, March fiscal year-ends, 2022-30E (Rs mn)
2022 2023 2024 2025E 2026E 2027E 2028E 2029E 2030E
Cash and cash equivalents (CCE) 588 1,019 1,428 1,714 2,057 2,468 2,961 3,554 4,264
Investments (INV) 24,038 33,019 54,437 73,896 87,689 104,366 123,651 147,175 175,579
Insurance contract liabilities (ICL) 17,564 25,651 34,438 45,107 56,737 69,994 86,228 105,661 128,934
Net worth (NW) 6,299 9,089 21,975 32,015 35,524 40,359 45,106 51,234 58,810
CCE and INV / ICL and NW (%) 103 98 99 98 97 97 96 96 96

Source: Company, Kotak Institutional Equities estimates

Unearned premium, unpaid claims and deferred expenses contribute to insurance contract liabilities
Movement in insurance contract liabilities of Niva Bupa, March fiscal year-ends, 2024-30E (Rs
mn)
2024 2025E 2026E 2027E 2028E 2029E 2030E
Opening balance 25,651 34,456 45,107 56,737 69,994 86,228 105,661
Change in UPR 11,897 14,876 16,144 17,937 21,524 25,398 29,970
Change in IBNR and IBNER (4,200) (5,722) (6,428) (7,048) (8,176) (9,398) (10,796)
Deferred expenses 1,107 1,497 1,914 2,368 2,887 3,433 4,098
Closing balance 34,456 45,107 56,737 69,994 86,228 105,661 128,934

Source: Company, Kotak Institutional Equities estimates

EoM compliance on track

We expect Niva Bupa to report expense of management (EoM) ratio of 35% in FY2026E, down from 37%
in FY2025E and 39% in FY2024 (see Exhibit 49); all ratios calculated on pre-1/n basis under IGAAP.
Improvement in operating expenses ratio, a combination of higher group business in near-term, business
leverage over medium term, and moderation in commissions will drive the decline, in our view.

EoM ratio to moderate to 35% by FY2026E on pre-1/n basis

EoM ratio of Niva Bupa Health Insurance, March fiscal year-ends, 2023-30E (Rs mn)
2023 2024 2025E 2026E 2027E 2028E 2029E 2030E
Calculation of EoM ratio
Operating expenses 11,802 10,086 10,884 12,371 15,030 18,036 21,533 25,114
Gross commission 4,952 11,944 16,912 19,869 24,140 27,907 32,618 37,972
GWP before 1/n 40,730 56,076 74,284 92,112 111,916 134,299 158,473 186,999
EoM ratio (%) 41.1 39.3 37.4 35.0 35.0 34.2 34.2 33.7
Calculation of gross commissions
Business ceded 8,899 11,866 15,600 19,344 23,502 28,203 33,279 39,270
Commission on ceded business (%) 34.2 37.6 36.0 35.0 35.0 35.0 35.0 35.0
Inward commissions (1) 3,044 4,462 5,616 6,770 8,226 9,871 11,648 13,744
Net commissions before 1/n (2) 1,908 7,482 11,296 13,098 15,914 18,036 20,970 24,228
Gross commissions (3:1+2) 4,952 11,944 16,912 19,869 24,140 27,907 32,618 37,972

Notes:
(1) The ratio is calculated on pre-1/n basis under IGAAP.
(2) Gross commissions: Net commissions + inward commissions.

Source: Company, Kotak Institutional Equities estimates

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Comfortable solvency ratio

Solvency ratio of Niva Bupa is comfortable at 3.03X in 9MFY25. Capital infusion of Rs8 bn (36% of
FY2024 net worth) through IPO has led to sharp rise in solvency to 3.03X from 2.55X in FY2024. In
FY2024, the company had raised capital of Rs11 bn in FY2024 (50% of net worth in FY2024). We expect
solvency ratio to moderate over time but remain above 1.7X till FY2030E. The company has issued
subordinated bonds of Rs2.5 bn (10.7% coupon) redeemable in FY2031E; it has option to raise further
such bonds in order to shore up capital (up to 50% of net owned funds), if required. Management expects
solvency ratio to improve after risk-based solvency norms are rolled out; the guidelines for the same are
not yet finalized in India.

Solvency ratio to remain above 1.7X

Solvency ratio of Niva Bupa, March fiscal year-ends, 2023-30E (X)

Solvency ratio
4.0

3.09
3.0
2.55 2.57
2.16
1.93
2.0 1.79 1.71
1.67

1.0

0.0
2023 2024 2025E 2026E 2027E 2028E 2029E 2030E

Source: Company

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Key growth rate and ratios of Niva Bupa Health Insurance, March fiscal year-ends, 2024-30E (%)
2024 2025E 2026E 2027E 2028E 2029E 2030E
Key growth rates (%)
Income statement
Gross written premium 38 32 24 22 20 18 18
Insurance revenue 46 34 28 24 20 18 18
Insurance service expenses 51 36 27 24 20 18 18
Incurred claims and expenses 53 35 28 24 22 19 19
Deferred acquisition cost 49 39 26 24 16 15 15
Insurance service result 9 (2) 47 28 24 23 18
Investment income 63 53 20 15 15 17 16
Other expenses 2 8 7 6 6 6 6
Profit before tax 1,090 91 72 38 31 29 24
Profit after tax 1,150 92 72 38 31 29 24
Balance sheet
Cash and cash equivalents 40 20 20 20 20 20 20
Investments 65 36 19 19 18 19 19
Reinsurance contract assets 43 30 25 20 20 20 20
Total assets 56 35 20 19 19 19 19
Insurance contract liabilities 34 31 26 23 23 23 22
Total liabilities 33 29 25 22 22 22 21
Total equity 142 46 11 14 12 14 15
Key ratios (%)
Claims ratio 62.8 63.0 63.0 63.0 64.0 64.5 65.3
Acquisition ratio 29.5 30.5 30.0 30.0 29.0 28.3 27.5
CISR 92.3 93.5 93.0 93.0 93.0 92.8 92.8
Other expense ratio 9.6 7.7 6.5 5.6 4.9 4.4 4.0
Combined ratio 101.9 101.2 99.5 98.6 97.9 97.2 96.7
Investment yield 7.0 7.3 7.0 6.8 6.6 6.5 6.4
Dupont (% of assets)
Insurance revenue 81 77 78 81 81 81 80
Incurred claims and expenses (51) (48) (49) (51) (52) (52) (52)
Deferred expenses (24) (23) (23) (24) (24) (23) (22)
Reinsurance (0.9) (1.3) (1.1) (1.0) (0.9) (0.8) (0.8)
Insurance service result 5.4 3.7 4.3 4.6 4.8 5.0 4.9
Investment income 5.7 6.1 5.8 5.6 5.4 5.3 5.2
Other opex (7.9) (5.9) (5.0) (4.5) (4.0) (3.6) (3.2)
Finance costs (0.6) (0.3) (0.3) (0.2) (0.2) (0.2) (0.1)
PBT 2.6 3.5 4.8 5.5 6.1 6.6 6.9
1-tax rate 0.7 0.7 0.7 0.7 0.7 0.7 0.7
RoA 2.0 2.6 3.6 4.1 4.6 5.0 5.1
Leverage (X) 3.5 2.9 2.9 3.1 3.2 3.4 3.6
RoE 6.8 7.6 10.4 12.7 14.8 17.0 18.4

Source: Company, Kotak Institutional Equities estimates

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Financial summary of Niva Bupa Health Insurance, March fiscal year-ends, 2024-30E (Rs mn)
2024 2025E 2026E 2027E 2028E 2029E 2030E
Income statement (Rs mn)
Insurance revenue 44,179 59,408 75,968 93,980 112,776 133,075 157,029
Insurance service expenses 40,770 55,547 70,650 87,401 104,881 123,427 145,644
Deferred acquisition cost 13,012 18,120 22,790 28,194 32,705 37,594 43,183
Incurred claims and expenses 27,758 37,427 47,860 59,207 72,176 85,834 102,461
Net expenses from reinsurance 483 998 1,117 1,184 1,184 1,397 1,649
Reinsurance premium 9,228 12,476 15,953 19,736 23,683 27,946 32,976
Reinsurance commission 3,434 4,491 5,584 6,908 8,289 9,781 11,542
Incurred claims 5,311 6,986 9,253 11,644 14,210 16,767 19,786
Insurance service result 2,925 2,863 4,201 5,394 6,710 8,251 9,736
Total investment income 3,081 4,710 5,655 6,530 7,525 8,802 10,247
Other income 37 25 25 25 25 ― ―
Other operating expenses 4,262 4,603 4,925 5,220 5,534 5,866 6,218
Finance costs 352 270 268 268 268 268 268
Proft before tax 1,429 2,726 4,689 6,461 8,459 10,919 13,498
Income tax 366 686 1,180 1,626 2,129 2,748 3,397
Profit after tax 1,064 2,040 3,509 4,835 6,330 8,171 10,101
Balance sheet (Rs mn)
Cash and cash equivalents 1,428 1,714 2,057 2,468 2,961 3,554 4,264
Investments 54,437 73,896 87,689 104,366 123,651 147,175 175,579
Reinsurance contract assets 5,774 7,506 9,383 11,260 13,512 16,214 19,457
Deferred tax assets 498 648 810 972 1,166 1,400 1,680
PPE 959 1,247 1,558 1,870 2,244 2,692 3,231
Intangible assets 343 446 558 670 804 964 1,157
Other assets 2,624 3,411 4,264 5,117 6,140 7,368 8,841
Total assets 66,064 88,868 106,319 126,722 150,477 179,367 214,209
Insurance contract liabilities 34,438 45,107 56,737 69,994 86,228 105,661 128,934
Borrowings 2,538 2,500 2,500 2,500 2,500 2,500 2,500
Other liabilities 7,112 9,246 11,558 13,869 16,643 19,972 23,966
Total liabilities 44,089 56,853 70,795 86,363 105,371 128,133 155,400
Share capital 16,995 18,076 18,076 18,076 18,076 18,076 18,076
Other equity 4,980 13,939 17,447 22,282 27,030 33,158 40,733
Total equity 21,975 32,015 35,524 40,359 45,106 51,234 58,810
Total liabilities and equity 66,064 88,868 106,319 126,722 150,477 179,367 214,209

Source: Company, Kotak Institutional Equities estimates

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Company background
Niva Bupa Health Insurance Company Limited was originally incorporated in India on September
5, 2008 as Max Bupa Health Insurance Ltd. The company was required to discontinue using the
'Max' brand, pursuant to Max India Limited ceasing to hold equity in the company. Currently the
company is a joint venture between Bupa Singapore Holdings Pte Ltd, Singapore and Fettle Tone
LLP (an entity controlled and managed by True North). As of today, Bupa Singapore Holdings Pte
Ltd is the holding company with 62.9% shareholding. The company underwrites primarily health
insurance business, which includes personal accident, critical illness and travel. The company
obtained regulatory approval to undertake health insurance business on February 15, 2010 from
Insurance Regulatory and Development Authority of India (IRDA) under Section 3(2A) of the
Insurance Act, 1938. The company had started selling policies in March 2010.

Shareholding pattern in Niva Bupa, December 2024

Shares (# mn) Shareholding (%)
Promoters 1,023 56.0
Bupa Singapore Holdings Pte Ltd 1,023 56.0
Other shareholders 804 44.0
Mutual funds 51 2.8
AIFs 105 5.8
Insurance 22 1.2
FPIs 162 8.8
Retail 82 4.5
KMP and directors 14 0.8
Others 368 20.1
Total 1,827

Source: Company

Brief profile of board of directors

Name Designation Education Background Brief profile

He has been associated with Niva Bupa since December 16, 2019. He has several years of experience in the state and
Chairman and
Chandrashekhar B. Alumnus of Jabalpur Engineering College, central administrative services and securities regulation.He has held the position of a senior executive director of SEBI
Independent
Bhave Jabalpur, Madhya Pradesh during the years 1992 to 1996. He has also served as the chairman and managing director of NSDL during the years
Director
1996 to 2008. Further, he has served as the chairman of SEBI during the years 2008 to 2011.

He has been associated with Niva Bupa since April 2020. He has over 24 years of experience across health insurance,
Bachelor’s of technology degree from IIT, Madras
Krishnan Managing healthcare & life sciences industries. Previously, he has been associated with Apollo Munich Health Insurance as their
and holds a post-graduate diploma in
Ramachandran Director and CEO chief executive officer and has been consultant with Deloitte Consulting L.P. and Arthur Andersen. He has also been
management from IIM, Calcutta
associated with Apollo DKV Insurance Company Ltd. as their Chief Operating Officer in 2007.

Bachelor in Engineering from Birla Vishwakarma

Independent Mahavidyalaya, Sardar Patel University and a post- He has twenty-six years of professional experience spanning across a diverse range of consumer product and service
Mohit Gupta
Director graduate diploma in management from the Indian industries. He has previously worked with Pepsico, Makemytrip, and Zomato.
Institute of Management, Calcutta
Bachelor’s degree in commerce from University of
Independent
Geeta Dutta Goel Delhi and a post-graduate diploma in She is presently the managing director, India at the Michael & Susan Dell Foundation.
Director
management from the IIM, Ahmedabad.

Bachelor’s degree in civil engineering from

He has been associated with Niva Bupa since December 2019. Currently, he is associated with True North Managers
Maninder Singh Non-Executive Maharaja Sayajirao University of Baroda and a
LLP as a partner. Previously, he has been associated with Godrej GE Appliances Limited, SRF Finance Limited,
Juneja Director post graduate diploma in management from IIM
Whirlpool of India Limited, ICICI Bank Limited and National Bulk Handling Corporation Private Limited.
Lucknow.

He has been with Bupa since 2014 and commenced in the role of Chief Risk Officer for Bupa in 2017. He is a member
Non-Executive Bachelor’s degree in modern history from Durham of the chief executive committee at Bupa and vice chairman and director of Bupa Arabia. Previously, he was serving as
David Martin Fletcher
Director University, United Kingdom. president director of Bank Permata in Indonesia and served as the group head, internal audit across the Standard
Chartered Group.

First-class honours degree in international She has been with Bupa since 2010 and commenced in the role of Chief Legal Officer for Bupa in 2016, She is a
Non-Executive
Penelope Ruth Dudley business and law from Queensland University of member of the chief executive committee at Bupa and a director of a number of Bupa’s regulated subsidiaries and joint
Director
Technology, Australia. venture companies.

Business administration degree from

He has been with Bupa since 2006 and commenced in the role of chief executive officer for Bupa Global and UK Market
Carlos Jaureguizar Non-Executive Cumplutense University, Madrid and Advanced
Unit in 2021.He is a member of the chief executive committee at Bupa. He previously held roles as chief financial &
Ruiz Jarabo Director Management Program from Harvard Business
strategy officer of Europe & Latin America (ELA) Market Unit and general manager, Bupa Chile.
School.

Source: Company

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Brief profile of key managerial personnel and senior management

Remuneration
Name Designation Education Background (FY2024, Rs mn) Brief profile
He has been associated with Niva Bupa since April 2020. Previously, he has been associated with Apollo Munich
Krishnan Managing Director and Bachelor’s of technology degree from IIT, Madras and holds a Health Insurance as their chief executive officer and has been consultant with Deloitte Consulting L.P. and Arthur
74.4
Ramachandran CEO post-graduate diploma in management from IIM, Calcutta Andersen. He has also been associated with Apollo DKV Insurance Company Ltd. as their Chief Operating Officer in
2007.
Bachelor’s degree in commerce from Chaudhary Charan Singh
University, Uttar Pradesh and is a fellow member of the Institute He joined Niva Bupa on March 24, 2020. Prior to joining the company, he was associated with Apollo Munich Health
Vishwanath
Chief Financial Officer of Cost Accountants of India. He is also a chartered financial 28.4 Insurance Company Limited (later on merged with HDFC Ergo General Insurance Company Limited) and was holding
Mahendra
analyst from CFA Institute, US and a fellow member of Institute position of Chief Actuary at the time of exit. Overall, he has 29 years of experience.
and Faculty of Actuaries, UK and Institute of Actuaries of India.
Bachelor’s degrees in commerce and law from Dr. Bhim Rao
Company Secretary and Ambedkar University, Agra, and a post graduate diploma in
Rajat Sharma 4.3 He joined Niva Bupa on April 6, 2016. Prior to joining the company, he was associated with Vatika Limited.
Compliance Officer management from MDI Gurugram. He is a fellow member of
Institute of Company Secretaries of India.
He joined Niva Bupa on April 9, 2020. Prior to joining the company, he was associated with HDFC Ergo Health
Bachelor’s degree in commerce from University of Delhi and a
Ankur Kharbanda Chief Distribution Officer 20.8 Insurance Company (erstwhile Apollo Munich Health Insurance Company Limited), and Bajaj Allianz General
post graduate diploma from FORE School of Management, Delhi.
Insurance Company Limited.
Director- Claims, He joined Niva Bupa on April 9, 2020. Prior to joining the company, he was associated with TATA AIG Life Insurance
Bachelor’s degree in medicine, M.B.B.S from SCB Medical
Bhabatosh Mishra Underwriting and 16.7 Company Limited, Cholamandalam General Insurance Company Limited, SBI Life Insurance Company Limited, HDFC
College, Cuttack, Orissa, Utkal University
Product Standard Life Insurance Company Limited and Apollo DKV Insurance Company Limited.

Bachelor’s degree in civil engineering from Nagpur University and He joined Niva Bupa on April 9, 2020. Prior to joining the company, he was associated with HDFC Ergo General
Director- Operations and
Padmesh Nair a master’s of science degree in insurance & risk management 16.8 Insurance Company (erstwhile Apollo Munich Health insurance company) from April 2008 and was the chief
Customer service
from Cass Business School, London. executive officer – digital business unit & member EXCO.
Director and Head
Bachelor’s degree in law from Banaras Hindu University and He joined Niva Bupa on October 20, 2016. Prior to joining the company, he was associated with ICICI Prudential Life
Partha Banerjee –Legal, Compliance and 17.8
master’s degree in law from OP Jindal Global University Insurance Company Limited, and ITC Limited.
Chief Compliance Officer
He joined Niva Bupa on March 12, 2018. Prior to joining the company, he was associated with Sistema Shyam
Director and Chief
Masters degree in personnel management and industrial Teleservices Ltd., Aditya Birla Retail Limited, Hindustan Coca’Cola Beverages Private Limited, Nuclear Power
Tarun Katyal Human Resources 20.6
relations from Panjab University, Chandigarh, Punjab. Corporation of India Limited, Arisht Spinning Mills, Auro Spinning Mills, Gontermann- Peipers (India) Limited and
Officer
Bharti Airtel Limited.
Director and Chief Bachelor’s of technology degree in chemical engineering from IIT, He joined Niva Bupa on September 18, 2023. Prior to joining the company, he was associated with Uno Asia Pte Ltd,
Dhiresh Rustogi 17.3
Technology Officer Kharagpur. Citibank N.A. Singapore, Citibank Associate India and Kotak Life Insurance.
Bachelor’s degree in engineering from University Institute of
Executive Vice President He joined Niva Bupa on June 10, 2021. Prior to joining the company, he was associated with Infoedge (Naukri.com)
Nimish Agrawal Technology, Bhopal and a post graduate diploma in management 15.4
and Head of Marketing and Akzo Nobel India Limited.
from IMT, Ghaziabad,
Executive Vice President Bachelor’s degree in commerce from Delhi University, Chartered He joined Niva Bupa on September 2, 2015. Prior to joining the company, he was associated with Quickdel Logistics
Vikas Jain and Chief Investment Accountancy from ICAI and a post graduate programme in 11.3 Private Limted, Max Life Insurance Company Limited, Max India Limited, GE Capital International Services and Global
Officer Management from ISB, Hyderabad. Vantedge Private Limited
Senior Vice President Master’s degree in Statistics from the Delhi University and is a He joined Niva Bupa on January 31, 2021. Prior to joining the company, he was associated with HDFC Ergo (erstwhile
Manish Sen 10.2
and Appointed Actuary fellow member of Institute of Actuaries of India. Apollo Munich), McKinsey Knowledge Centre and Towers Watson India Private Limited.

Senior Vice President Bachelor of commerce honors degree from University of Delhi She joined Niva Bupa on August 9, 2017. Prior to joining the company, she was associated with Genpact India Private
Smriti Manchanda and the Head Internal and she is a qualified chartered accountant from the Institute of 7.7 Limited, CPA Global Support Services India Private Limited., Evolvence Advisory Services Private Limited. (now
Audit Chartered Accountants of India. known as Religare Advisory Services Limited), ICICI Bank Limited and Technovate eSolutions Private Limited.

Bachelor’s degree in Degree in International Relations and

Joanne Elizabeth Chief Risk Officer and She joined Niva Bupa on July 20, 2023. Prior to joining the company, she worked in the capacity of risk & governance
Strategic Studies from Lancaster University, a Level 3 5.0
Woods Senior Vice President director at various office locations of Bupa.
certification from the Chartered Institute of Insurers

Source: Company

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A1
Appendix I: Summary of IGAAP financials
Niva Bupa will likely deliver normalized RoE of 17.8% by FY2030E, up from 5.7% in FY2024;
earnings will grow to Rs7.9 bn in FY2030E from Rs2.2 bn in FY2027E, Rs2.0 bn in FY2025E and
Rs819 mn in FY2024. Improvement in operating leverage and run down of impact of change in
accounting norm (1/n) will lead to sharp earnings growth in FY2028E, partially offset by higher
claims ratio. GWP growth (pre-1/n) moderates to 26% CAGR (FY2024-27E) from 41% CAGR
(FY2022-24).

Growth distorted by 1/n accounting in the near term

Niva Bupa will likely deliver strong 26% GWP growth over FY2024-27E. Niva Bupa reported 41% GWP
CAGR during FY2022-24. A higher base, focus on profitability and complying with expense of
management (EoM) guidelines will likely lead to medium-term moderation in momentum.

Niva Bupa’s near-term growth is distorted by introduction of 1/n rule from October 2024. GWP growth
moderated to 2% in 3QFY25 from 33% in 1HFY25 and 38-45% during FY2023-24. This was largely driven
by impact of delayed recognition of multi-year premiums, as per 1/n rule implemented by IRDA; GWP
growth was likely higher at ~25% in 3QFY25 before implementation of 1/n rule. The impact will play out
over 4QFY25E (16% yoy growth) and 1HFY26E (10% yoy) leading to moderate GWP growth; we expect
normalized growth (excluding impact of new rule) at 24% and 22% in FY2025E and FY2026E, respectively.

1/n rule distorts GWP growth in the near term

Impact of 1/n rule on GWP, March fiscal year-ends, 2024-30E (Rs mn)
2024 2025E 2026E 2027E 2028E 2029E 2030E
GWP before 1/n 56,076 74,284 92,112 111,916 134,299 158,473 186,999
1H 24,357 32,415 40,195 48,837 58,604 69,153 81,600
2H 31,719 41,869 51,917 63,080 75,696 89,321 105,399
GWP (before 1/n) growth yoy (%) 32 24 22 20 18 18
1H 33 24 22 20 18 18
2H 32 24 22 20 18 18
Share of multi year policies (%)
1H 17 17 16 15 15
2H 25 17 17 16 15 15
GWP of multi year policies
1H 6,833 8,302 9,377 10,373 12,240
2H 10,467 8,826 10,724 12,111 13,398 15,810
GWP after 1/n rule 56,076 67,306 85,162 107,941 131,536 156,131 183,385
1H 24,357 32,415 35,639 45,579 57,398 68,130 80,023
2H 31,719 34,891 49,522 62,362 74,138 88,000 103,362
GWP (after 1/n) growth yoy (%) 38 20 27 27 22 19 17
1H 33 10 28 26 19 17
2H 10 42 26 19 19 17

Source: Company, Kotak Institutional Equities estimates

Combined ratio to peak over FY2025-26E

Combined ratio (IGAAP) was high at 98.8% in FY2024 as a consequence of high expense ratio, reflecting
sub-scale nature of operations; the ratio will increase to 101.6% in FY2025E. We expect health expense
ratios (expense and commission to GWP) to improve to 35.2% in FY2027E and 33.6% in FY2030E from
39.7% in FY2024 as operating leverage plays out, reflecting (1) lower acquisition expense/commission
as share of new business (carries higher commissions) in overall premium moderates, (2) lower growth
in other (non-acquisition) expenses and (3) slower (inflation-linked) growth in claims management
expenses. This may be partially offset by increase in claims ratios, reflecting aging of portfolio.

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Lower revenue recognition on multi-year policies will lead to rise in combined ratio over FY2025-
26E. IRDA’s 1/n rule revenue recognition led to lower GWP and NEP though expenses are recognized
upfront. Over FY2027-28E the impact of 1/n rule will taper off leading to sharp drop in combined ratio
to 96.8% by FY2028E. Steady state claims ratio will likely settle at ~63% (59.0% in FY2024) as the
growth moderates and share of older policies’ inches up.

Operating leverage to drive decline in expense ratio. Expense ratio will moderate to 34.2% by
FY2028E from 39.7% driven by operating leverage and moderation in growth of new business. Fixed
expenses likely account for 25% of overall expenses and are likely to grow at inflationary pace while
variable expenses grow in line with GWP. This will result in moderation in expense ratio. In addition,
lower growth in new business (higher commission rates) will also augment.

Combined ratio of Niva Bupa, March fiscal year- RoE of Niva Bupa, March fiscal year-ends, 2023-30E
ends, 2023-28E (%) (%)

Reported Adjusted Reported Adjusted

106.0 20.0

101.6 101.5
102.0 100.2 16.0 14.6
13.3 13.7
98.8 12.4
97.5
98.0 12.0 13.6
98.8
96.7 96.3
94.0 95.5 8.0
95.0 5.7
7.7
90.0 6.8
4.0 5.7
5.0

86.0 -
2024 2025E 2026E 2027E 2028E 2024 2025E 2026E 2027E 2028E
Notes:
Notes:
(1) Adjusted ratio is calculated by reversing the impact of 1/n rule.
(1) Adjusted ratio is calculated by reversing the impact of 1/n rule.

Source: Company, Kotak Institutional Equities estimates

Source: Company, Kotak Institutional Equities estimates

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NEP growth to converge with GWP growth Ceding ratio to remain stable
Yoy growth in GWP, NWP and NEP growth of Niva Ceding ratio and URR/net premium of Niva Bupa,
Bupa, March fiscal year-ends, 2023-30E (%) March fiscal year-ends, 2023-30E (%)

GWP growth yoy NWP growth yoy Ceding ratio URR/net written premium
NEP growth yoy 24 21.8 21.2 21.0 21.0 21.0 21.0 21.0
20.8
64
52
18 16.3
48 43 13.8

45 10.4 10.6
28 12 9.0
32 27 8.5 7.9
38 24 24 7.4
20 18
27 27 6
16 22
20 19 17
-
-

2025E

2026E

2027E

2028E

2029E

2030E
2023

2024
2025E

2026E

2027E

2028E

2029E

2030E
2023

2024

Notes: Notes:

(a) GWP (gross written premium). (a) URR: change in unexpired risk reserve.

(b) NWP (net written premium): GWP + reinsurance accepted - reinsurance

ceded. Source: Company

(c) NEP (net earned premium): NWP – change in URR (unexpired risk reserve).

Source: Company

Investment income up 16% CAGR during FY2025-30E… …driven by 16% CAGR in AUM
Investment income and yoy growth of Niva Bupa, AUM and yoy growth of Niva Bupa, March fiscal
March fiscal year-ends, 2023-30E year-ends, 2023-30E

Investment income (LHS) Growth yoy (RHS) Assets under management (LHS)

(Rs tn) (%) Growth yoy (RHS)

(Rs tn) (%)
12,000 75 200 72
10,028 62
60 58
9,600 52 8,752 60 160
7,580 43 54
40
7,200 6,584 45 120
5,760
4,800 36
80 22
4,800 20 30 19
3,042 16
14 15 15 15 12 12 18
1,903 40
2,400 15
34 55 78 95 114 127 142 164
- -
- -
2025E

2026E

2027E

2028E

2029E

2030E
2023

2024
2025E

2026E

2028E

2029E

2030E
2027E
2023

2024

Source: Company
Source: Company

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Key growth rate and ratios of Niva Bupa Health Insurance, March fiscal year-ends, 2023-30E (%)
2023 2024 2025E 2026E 2027E 2028E 2029E 2030E
Key growth rates (% yoy)
Income statement
Gross written premium 45 38 20 27 27 22 19 17
Net premium 48 39 21 26 27 22 19 17
Net earned premium 52 43 28 24 27 24 20 18
Net incurred claims 32 56 35 30 25 21 20 18
Net commission 58 292 34 18 28 15 17 15
Operating expenses 38 (15) 8 14 22 20 19 17
Underwriting profit/(loss) (53) 32 31 33 (3) (76) (81) (629)
Investment income 52 60 58 20 14 15 15 15
Provisions (53) 77 21 27 21 ― ― ―
Other expenses 40 (39) 17 18 18 19 19 19
PBT (106) 553 141 6 44 118 28 27
PAT (106) 553 141 (21) 44 118 28 27
Balance sheet (% yoy)
Investments 40 62 43 22 19 12 12 16
Fixed assets 12 6 30 25 20 20 20 20
Current assets 58 48 30 25 20 20 20 20
Cash and bank balances 73 40 30 25 20 20 20 20
Advances and other assets 54 51 30 25 20 20 20 20
Total assets 42 60 41 23 19 13 13 16
Current liabilities 33 40 33 26 22 21 20 21
Provisions 48 38 21 26 27 22 19 17
Total liabilities 37 36 38 32 24 14 13 17
Total equity 64 147 49 5 7 10 11 13
Key ratios (%)
Ceding ratio 21.8 21.2 20.8 21.0 21.0 21.0 21.0 21.0
URR/net premium 16.3 13.8 8.5 10.4 10.6 9.0 7.9 7.4
Claims ratio 54.1 59.0 62.3 65.5 64.7 63.2 63.1 63.1
Commission ratio 6.0 16.9 18.8 17.6 17.8 16.9 16.7 16.3
Operating expenses ratio 37.1 22.8 20.4 18.4 17.6 17.4 17.5 17.3
Combined ratio 97.1 98.8 101.6 101.5 100.2 97.5 97.2 96.7
Investment yield 6.7 7.1 7.1 7.1 7.1 7.1 7.1 7.1
RoA 0.4 1.6 2.6 1.6 1.9 3.6 4.1 4.5
RoE 1.9 5.7 7.7 5.0 6.8 13.6 15.7 17.8
Investment leverage (X) 3.7 2.5 2.5 2.9 3.2 3.3 3.3 3.4
Solvency ratio (X) 1.7 2.6 NA NA NA NA NA NA

Source: Company, Kotak Institutional Equities estimates

Niva Bupa Health Insurance

Insurance India Research

k.kathirvelu-kotak.com
 83

Financial summary of Niva Bupa Health Insurance, March fiscal year-ends, 2023-30E (Rs mn)
2023 2024 2025E 2026E 2027E 2028E 2029E 2030E
Income statement (Rs mn)
Gross written premium 40,730 56,076 67,306 85,162 107,941 131,536 156,131 183,385
Net premium 31,831 44,210 53,306 67,278 85,274 103,913 123,343 144,874
Net earned premium 26,628 38,112 48,758 60,292 76,276 94,593 113,628 134,109
Net incurred claims 14,393 22,495 30,398 39,480 49,362 59,812 71,700 84,606
Net commission 1,908 7,482 10,040 11,847 15,199 17,539 20,548 23,577
Operating expenses 11,802 10,086 10,884 12,371 15,030 18,036 21,533 25,114
Policyholder's investment income 1,344 1,667 2,567 3,329 4,158 4,931 5,657 6,452
Contribution from shareholders' account 3,642 2,165 2,597 3,117 3,740 4,488 5,386 6,463
Operating profit/(loss) 3,509 1,880 2,601 3,040 4,583 8,625 10,890 13,727
Shareholder's investment income 560 1,375 2,233 2,431 2,426 2,650 3,095 3,576
Provisions 10 18 22 28 34 34 34 34
Gain/(loss) on foreign exchange fluctation (0) (2) 0 0 0 0 0 0
Interst income on fixed deposits 8 9 0 0 0 0 0 0
Provisions written back 54 24 0 0 0 0 0 0
Other expenses 3,995 2,451 2,865 3,384 4,008 4,756 5,653 6,731
PBT before extraordinary items 125 819 1,971 2,083 2,992 6,510 8,322 10,563
Profit before tax 125 819 1,971 2,083 2,992 6,510 8,322 10,563
Taxes ― ― ― 524 753 1,639 2,095 2,659
Profit after tax 125 819 1,971 1,559 2,239 4,871 6,227 7,904
Balance sheet (Rs mn)
Investments 33,661 54,582 78,002 95,494 113,515 127,130 142,159 164,495
Investments - shareholders 11,554 25,855 35,826 37,385 39,624 44,495 50,722 58,626
Investments - policyholders 22,106 28,728 42,176 58,109 73,892 82,635 91,437 105,869
Fixed assets 556 588 765 956 1,147 1,376 1,651 1,982
Current assets 4,549 6,748 8,773 10,966 13,159 15,791 18,949 22,739
Cash and bank balances 1,019 1,428 1,857 2,321 2,785 3,342 4,010 4,812
Advances and other assets 3,530 5,320 6,916 8,645 10,374 12,449 14,939 17,927
Total assets 38,766 61,919 87,540 107,416 127,821 144,297 162,760 189,216
Current liabilities 11,844 16,637 22,190 28,031 34,060 41,270 49,473 60,070
Provisions 16,141 22,275 26,853 33,839 42,837 52,157 61,872 72,637
Unearned premium 0 0 5,527 11,017 14,158 10,814 7,174 6,889
Borrowings 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500
Fair value change account (30) 9 0 0 0 0 0 0
Total liabilities 30,454 41,421 57,070 75,387 93,554 106,741 121,019 142,096
Share capital 15,107 16,995 18,079 18,079 18,079 18,079 18,079 18,079
Reserves and surplus 3,343 12,820 19,739 19,739 19,739 19,477 23,662 29,041
Total equity 8,311 20,498 30,470 32,028 34,267 37,556 41,741 47,119
Total liabilities and equity 38,766 61,919 87,540 107,416 127,821 144,297 162,760 189,216

Source: Company, Kotak Institutional Equities estimates

Niva Bupa Health Insurance

Insurance India Research

k.kathirvelu-kotak.com
 UPDATE

Strategy

April 3, 2025

Large reciprocal tariffs, large reciprocal impact Key estimates summary

The imposition of very high reciprocal tariffs by the US on its major trading 2025E 2026E 2027E
partners, including India, will likely have large negative consequences for (1) Nifty estimates
global and US GDP growth, (2) global and US inflation and (3) the profitability Earnings growth (%) 6.9 13.8 14.7
of certain sectors and companies in India. The Indian market seemed fairly Nifty EPS (Rs) 1,007 1,145 1,314
sanguine about the ‘tariff’ event. Nifty P/E (X) 23.2 20.4 17.8
Macro data
High ‘reciprocal’ tariffs by the US negative for global growth and inflation Real GDP (%) 6.5 6.5 6.5

The imposition of very high reciprocal tariffs (see Exhibit 1) by the US will likely Avg CPI inflation (%) 4.7 4.1 4.1

lead to (1) lower global and US GDP growth and (2) higher global and US
Source: Company data, Kotak Institutional Equities estimates
inflation. As such, global GDP growth faced headwinds of slowdown in all the
major economic blocs (see Exhibits 2-4) and US inflation stayed at elevated
levels (see Exhibit 5) versus the 2% target of the US Fed. Any imposition of
retaliatory tariffs on US exports by the US’s trading partners could add to global Quick Numbers
inflation, which had turned benign (see Exhibit 6).
26% reciprocal tariff on US imports from India
Engineering goods, pharmaceuticals and specialty chemicals worst impacted

Private Circulation Only. This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities A ct of 1933
Nifty-50 Index is trading at 20.4X FY2026E ‘EPS’ and
The imposition of a uniform 26% reciprocal tariff on India’s exports to the US
17.8X FY2027E ‘EPS’
will likely have a large negative impact on the profitability and possibly volumes
of sectors and companies with a meaningful portion of their revenues from the We expect net profits of the Nifty-50 Index to grow
13.8% in FY2026 and 14.7% in FY2027
US market (see Exhibit 7 for India’s major exports to the US). We doubt
companies will be able to change and/or reroute exports meaningfully, leading
to companies likely having to absorb a decent portion of the higher tariffs. We
see second-order price competition among exporters to the US and other
countries as global trading patterns adjust to high tariffs in the US.

A negative surprise for the Indian market

The Indian market seemed relatively sanguine about the reciprocal tariff issue
based on (1) the behavior of the market and volatility index going into the event
(see Exhibits 8-9) and (2) the high valuations of the affected companies.
Pharmaceutical companies with a relatively high exposure to US exports (LPC,
SUNP among others) had seen a moderate correction from their peak levels but
had rallied in recent days, suggesting they were factoring in moderate import
duty. The pharmaceutical sector has been exempted from reciprocal tariffs, but
the US may impose sector-specific tariffs later based on press reports. The 26%
reciprocal import tariff for the other sectors is a negative surprise.

Risk-off sentiment from risk-on sentiment (again!)

The higher-than-expected reciprocal tariffs and related increased uncertainty
with respect to (1) global growth and inflation and (2) earnings of companies
should logically lead to a more cautious investment environment. We have long
argued for a higher cost of equity and lower multiples to factor in (1) the
increased global geopolitical and macroeconomic uncertainty and (2) the
sector-specific and company-specific disruption risks. The high valuations of
the Indian market and of most sectors and stocks (see Exhibits 10-16) would
suggest that the market has largely ignored the potential risks.
Full sector coverage on KINSITE

Sanjeev Prasad Anindya Bhowmik Sunita Baldawa

 85

US has imposed large reciprocal tariffs on a number of countries including India

Reciprocal tariffs imposed by US on major countries (%)

49
50 46
44

40 37 36
34
32 32 31 30 29
30 26 25 24 24
20
20 17 17

10 10 10 10
10

South Korea

Brazil
Sri Lanka
Cambodia

Thailand

Indonesia
Vietnam

South Africa

Malaysia

UK

Singapore
China

Pakistan

India

Israel
Switzerland

EU

Chile
Bangladesh

Japan

Philippines
Taiwan
Source: Media reports, Kotak Institutional Equities

US economy has weakened in recent months

Trend in key economic variables for the US economy
Jan-24 Feb-24 Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Nov-24 Dec-24 Jan-25 Feb-25 Mar-25
Economic activity
Conference Board consumer confidence (X) 110.9 104.8 104.7 97.5 101.3 97.8 101.9 105.6 99.2 109.6 112.8 109.5 105.3 100.1 92.9
Industrial production (yoy, %) (1.2) (0.1) (0.3) (0.8) 0.2 0.9 (0.7) 0.0 (0.7) (0.5) (0.9) 0.5 1.9
ISM manufacturing (X) 49.1 47.8 50.3 49.2 48.5 48.3 47.0 47.5 47.5 46.9 48.4 49.2 51.2 51.6 49.0
ISM non-manufacturing (X) 53.4 52.6 51.4 49.6 53.5 49.2 51.4 51.6 54.5 55.8 52.5 54.0 52.8 53.5
Personal savings rate (% of disposable income) 5.5 5.4 5.2 5.1 4.9 4.8 4.3 4.2 3.8 4.0 3.7 3.3 4.6
Retail sales excl. automobiles (sa, yoy, %) (0.3) 1.4 3.3 2.3 2.2 1.7 2.8 2.0 2.2 2.4 3.4 3.0
Employment
Average private earnings (yoy, %) 4.4 4.2 4.2 4.0 4.1 3.9 3.6 4.0 3.9 4.0 4.0 3.9 4.1 4.0
Job openings (mn) 8.7 8.8 8.4 8.1 8.2 7.9 7.7 7.9 7.4 7.7 8.1 7.6 7.7
Jobless claims ('000) 214 210 222 209 229 238 250 231 225 218 225 211 219 221
Non-farm payrolls ('000) 119 222 246 118 193 87 88 71 240 44 261 307 125 151
Participation rate (%) 62.5 62.6 62.7 62.7 62.6 62.6 62.7 62.7 62.7 62.6 62.5 62.5 62.6 62.4
Unemployment rate (%) 3.7 3.9 3.9 3.9 4.0 4.1 4.2 4.2 4.1 4.1 4.2 4.1 4.0 4.1
Inflation
Core PCE (yoy, %) 2.9 2.8 2.8 2.8 2.6 2.6 2.6 2.7 2.7 2.8 2.8 2.8 2.6
CPI (yoy,%) 3.1 3.2 3.5 3.4 3.3 3.0 2.9 2.5 2.4 2.6 2.7 2.9 3.0 2.8
Core CPI (yoy, %) 3.9 3.8 3.8 3.6 3.4 3.3 3.2 3.2 3.3 3.3 3.3 3.2 3.3 3.1
Real estate
Housing starts (SAAR, '000) 1,376 1,546 1,299 1,377 1,315 1,329 1,262 1,379 1,355 1,344 1,305 1,526 1,350 1,501
Change in housing starts (yoy, %) 1 10 (3) 1 (17) (6) (14) 6 (1) (2) (14) (3) (2) (3)
New homes sold 664 643 683 736 672 672 707 691 726 623 679 734 657
New home sales (NSA, yoy, %) 3.9 2.9 6.1 7.1 (9.3) 0.9 1.0 6.0 4.6 (7.4) 11.1 12.2 (1.1)
Median price of new homes (US$,'000) 430 421 436 415 414 414 429 406 421 426 396 415 446
S&P house price index (yoy, %) 6.8 7.5 7.5 7.2 6.7 6.4 5.9 5.2 4.6 4.3 4.4 4.5

Quarterly indicators Dec-23 Mar-24 Jun-24 Sep-24 Dec-24

CAD/GDP (%) (2.8) (3.2) (3.3) (3.6)
GFD/GDP (%) (6.5) (5.9) (5.6) (6.3) (6.9)
Real GDP (SAAR, qoq, %) 3.2 1.6 3.0 3.1 2.3

Source: Bloomberg, CEIC, Kotak Institutional Equities

Strategy
India Research

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 86

Chinese economy has been weak in recent months

Trend in key economic variables for China
Monthly indicators Dec-23 Jan-24 Feb-24 Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Nov-24 Dec-24 Jan-25 Feb-25
Economic activity
Consumer confidence (X) 87.6 88.9 89.1 89.4 88.2 86.4 86.2 86.0 85.8 85.7 86.9 86.2 86.4 87.5
Credit growth (yoy, %) 10.6 10.4 10.1 9.6 9.6 9.3 8.8 8.7 8.5 8.1 8.0 7.7 7.6 7.5 7.3
Exports growth (yoy, %) (0.8) 5.3 2.9 (11.4) (1.0) 6.7 7.9 6.7 8.3 1.5 12.5 7.0 10.5 5.5 (2.3)
Fixed assets investment (yoy, %) (12.1) (5.1) (5.1) (6.7) (2.8) (0.4) 0.9 0.6 0.7 1.1 0.9 1.1 2.3 3.5 3.5
Imports growth (yoy, %) 0.1 15.6 (8.4) (2.8) 7.3 0.9 (2.7) 7.3 0.5 0.3 (2.3) (3.9) 1.1 (16.3) 1.6
Money supply M2 growth (yoy, %) 9.7 8.7 8.7 8.3 7.2 7.0 6.2 6.3 6.3 6.8 7.5 7.5 7.3 7.0 7.0
PMI manufacturing (X) 50.8 50.8 50.9 51.1 51.4 51.7 51.8 49.8 50.4 49.3 50.3 51.5 50.5 50.1 50.8
PMI non-manufacturing (X) 50.4 50.7 51.4 53.0 51.2 51.1 50.5 50.2 50.3 50.0 50.2 50.0 52.2 50.2 50.4
Retail sales growth (yoy, %) 7.4 — — 3.1 2.3 3.7 2.0 2.7 2.1 3.2 4.8 3.0 3.7
Total outstanding social financing (yoy, %) 10.4 10.1 9.7 9.2 9.1 8.9 8.8 8.3 8.1 7.8 7.7 7.4 7.2 7.2 7.2
Inflation
CPI (yoy,%) (0.3) (0.8) 0.7 0.1 0.3 0.3 0.2 0.5 0.6 0.4 0.3 0.2 0.1 0.5 (0.7)
Core CPI (yoy, %) 0.6 0.4 1.2 0.6 0.7 0.6 0.6 0.4 0.3 0.1 0.2 0.3 0.4 0.6 (0.1)
House price inflation (yoy, %) (0.4) (0.7) (1.4) (2.2) (3.1) (3.9) (4.5) (4.9) (5.3) (5.7) (5.9) (5.7) (5.3)
Real estate
Real estate climate index (X) 93.4 92.4 92.1 92.1 92.0 92.0 92.1 92.2 92.3 92.4 92.5 92.6 92.8
Residential floor space sold growth (yoy, %) (17.3) (28.6) (28.6) (27.8) (25.7) (24.4) (22.2) (21.2) (20.4) (19.2) (17.7) (16.0) (14.1) (3.7) (3.7)

Quarterly indicators Sep-23 Dec-23 Mar-24 Jun-24 Sep-24 Dec-24

Current account/GDP (%) 1.8 1.5 1.2 1.2 1.6 2.3
Real GDP growth (yoy, %) 4.9 5.2 5.3 4.7 4.6 5.4

Source: Bloomberg, CEIC, Kotak Institutional Equities

Eurozone economy has been weak for the past few months
Trend in key economic variables for Eurozone
Monthly indicators Jan-24 Feb-24 Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Nov-24 Dec-24 Jan-25 Feb-25
Economic activity
Consumer confidence (X) (15.9) (15.4) (14.7) (14.6) (14.2) (13.8) (12.9) (13.3) (12.8) (12.3) (13.6) (14.3) (14.1) (13.6)
Business confidence (X) (0.4) (0.4) (0.3) (0.5) (0.5) (0.5) (0.7) (0.7) (0.8) (0.9) (0.7) (0.9) (0.9) (0.8)
Consumer Credit growth (yoy, %) 2.0 2.0 2.3 2.6 2.2 1.7 2.0 1.9 1.8 1.7 1.5 2.2 1.9 1.7
Exports growth (yoy, %) 1.0 1.2 (8.7) 15.4 (0.6) (5.8) 10.2 (1.3) 0.6 1.6 (1.2)
Imports growth (yoy, %) (18.9) (8.8) (12.0) 1.2 (5.6) (7.5) 4.9 0.3 0.0 3.2 0.1
Private sector credit growth (yoy, %) (0.7) (0.7) (0.4) (0.3) (0.3) 0.1 0.0 0.4 0.5 0.6 0.6 1.2 1.6 1.8
Industrial production (yoy, %) (5.4) (5.4) (3.2) (3.2) (4.5) (4.1) (2.3) (0.6) (2.2) (1.1) (2.0) (1.5) 0.0
Money supply M2 growth (yoy, %) (1.1) (0.6) 0.0 0.0 0.6 1.4 1.2 1.9 1.9 2.3 3.1 2.5 2.9 3.0
PMI non-manufacturing (X) 48.4 50.2 51.5 53.3 53.2 52.8 51.9 52.9 51.4 51.6 49.5 51.6 51.3 50.6
PMI manufacturing (X) 46.6 46.5 46.1 45.7 47.3 45.8 45.8 45.8 45.0 46.0 45.2 45.1 46.6 47.6
Retail sales growth (yoy, %) (0.6) 0.0 0.8 1.0 0.6 (0.6) 0.4 2.7 3.3 2.3 1.8 2.2 1.5
Passenger cars (yoy, %) 12.6 10.9 (4.2) 13.8 (3.1) 3.7 (0.2) (19.5) (7.6) (0.3) (3.4) 3.6 (3.5)
Employment
Unemployment rate (%) 6.5 6.5 6.5 6.4 6.4 6.4 6.4 6.3 6.3 6.2 6.2 6.2 6.2
Inflation
CPI (yoy,%) 2.8 2.6 2.4 2.4 2.6 2.5 2.6 2.2 1.7 2.0 2.2 2.4 2.5 2.3
Core CPI (yoy, %) 3.3 3.1 2.9 2.7 2.9 2.9 2.9 2.8 2.7 2.7 2.7 2.7 2.7 2.6
Real estate
Construction output 1.4 (1.7) (0.1) (1.5) (2.7) (1.5) (2.4) (2.4) (2.3) (0.9) 0.5 0.8 0.0

Quarterly indicators Sep-23 Dec-23 Mar-24 Jun-24 Sep-24 Dec-24

Current account/GDP (%) 2.9 2.2 2.6 2.8 2.8
Real GDP growth (yoy, %) 0.0 0.1 0.5 0.6 0.9 1.2
Wage growth (yoy, %) 5.3 3.4 5.1 4.7 4.6

Source: Bloomberg, CEIC, Kotak Institutional Equities

Strategy
India Research

k.kathirvelu-kotak.com
 87

Inflation has been at elevated levels for US in recent months versus the Fed's target
CPI inflation in major DMs, calendar year-ends, 2008-25 (%)

US
10

Feb-15

Feb-16

Feb-17

Feb-25
Feb-09

Feb-10

Feb-11

Feb-12

Feb-13

Feb-14

Feb-18

Feb-19

Feb-20

Feb-21

Feb-22

Feb-23

Feb-24
(2)

(4)

Source: Bloomberg, Kotak Institutional Equities

Global inflation at risk from high tariffs

CPI inflation in major DMs, calendar year-ends, 2008-25 (%)

Eurozone UK US
12

10

0
Feb-12

Feb-17

Feb-19

Feb-22

Feb-24
Feb-09

Feb-10

Feb-11

Feb-13

Feb-14

Feb-15

Feb-16

Feb-18

Feb-20

Feb-21

Feb-23

Feb-25
(2)

(4)

Source: Bloomberg, Kotak Institutional Equities

Strategy
India Research

k.kathirvelu-kotak.com
 88

India’s exports to the US to be around US$80 bn in FY2025

India's exports to US at a 2-digit HS code, March fiscal year-end, 2025 (US$ mn)

India's exports
to the US Share
(US$ mn) (%)
Beverages, refreshments, and intoxicants 975 0.2
Cereals 563 0.1
Chemicals 3,969 0.9
Electronics 11,903 2.8
Energy 4,366 1.0
Fertilizers 16 0.0
Fruits and vegetables 431 0.1
Furniture 1,143 0.3
Gems and stones 10,434 2.4
Leather and footwear 1,594 0.4
Machinery 6,589 1.5
Meat, fish, eggs and dairy 2,931 0.7
Metals 5,294 1.2
Oils, fats and extracts 1,468 0.3
Pharmaceuticals 8,802 2.0
Plastic 1,670 0.4
Rubber 891 0.2
Textiles 10,373 2.4
Transport 3,446 0.8
Others 3,173 0.7
Total exports to US 80,030 19
Total exports of India 430,962

Notes:
(a) For brevity multiple HS codes have been aggregated across categories.
(b) FY2025 data is annualised based on 9MFY25 actual data.

Source: Ministry of Commerce, Kotak Institutional Equities estimates

Rally in the Indian markets in the past month

Performance of Nifty, Nifty Midcap 100 and Nifty Smallcap 100 indices (Mar-23=100)
230
Nifty Nifty Mid-cap 100 Nifty Small-cap 100
210

190

170

150

130

110

90
Mar-24
Mar-23

Mar-25
Jan-24

Jan-25
May-23

May-24
Jul-23

Jul-24
Nov-23

Nov-24
Sep-23

Sep-24

Source: Bloomberg, Kotak Institutional Equities

Strategy
India Research

k.kathirvelu-kotak.com
 89

The Indian market seemed relatively sanguine about the reciprocal tariff issue
India VIX data, calendar year-ends, 2024-25 (X)
India VIX
30

25

20

15

10

Feb-25
Jun-24

Jan-25
Aug-24

Dec-24
May-24

Mar-25
Nov-24
Apr-24

Apr-25
Jul-24

Oct-24
Sep-24
Source: Bloomberg, Kotak Institutional Equities

Nifty-50 index is trading at high multiples

12-m rolling forward PE of Nifty-50 Index, March fiscal year-ends, 2001-25 (X)
P/E (X) Long term avg. (X) Mean+1SD
Mean-1SD Mean+2SD Mean-2SD
28

24

20

16

12

4
Apr-00
Apr-01
Apr-02
Apr-03
Apr-04
Apr-05
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
Apr-11
Apr-12
Apr-13
Apr-14
Apr-15
Apr-16
Apr-17
Apr-18
Apr-19
Apr-20
Apr-21
Apr-22
Apr-23
Apr-24
Apr-25

Source: Companies, Bloomberg, Kotak Institutional Equities estimates

Strategy
India Research

k.kathirvelu-kotak.com
 90

Most large-cap. consumption stocks are trading at expensive valuations

12-m forward P/E multiple of large-cap. consumption stocks in KIE universe, March fiscal year-ends, 2011-25E
12-m forward P/E multiple (X)
Company Sector Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Mar-24 Current
Bajaj Auto Automobiles & Components 14 14 14 16 15 16 18 17 17 12 19 18 17 30 23
Eicher Motors Automobiles & Components 15 14 16 24 38 33 33 29 21 17 29 25 23 25 29
Hero Motocorp Automobiles & Components 14 15 14 16 16 17 17 18 13 10 16 14 13 20 15
Mahindra & Mahindra Automobiles & Components 14 14 14 15 19 18 20 19 15 9 20 18 16 21 23
Maruti Suzuki Automobiles & Components 14 16 13 17 21 18 22 26 23 18 28 30 23 28 22
Samvardhana Motherson Automobiles & Components 17 13 14 19 28 21 25 25 19 11 25 22 15 20 19
TVS Motor Automobiles & Components 11 7 7 15 22 23 28 30 23 19 32 24 27 40 35
Asian Paints Commodity Chemicals 23 27 33 36 38 38 45 44 51 48 64 65 54 48 49
Berger Paints Commodity Chemicals 17 17 25 27 36 35 45 44 49 58 81 61 49 52 46
Ambuja Cements Construction Materials 18 18 14 24 23 29 34 29 26 16 25 20 26 38 30
Shree Cement Construction Materials NA NA 14 22 46 34 36 31 37 34 44 32 41 34 56
UltraTech Cement Construction Materials 18 18 16 24 23 28 34 31 32 20 32 26 30 31 36
Havells India Consumer Durables & Apparel 13 16 16 20 31 32 42 36 46 32 56 49 49 59 51
Polycab Consumer Durables & Apparel NA NA NA NA NA NA NA NA NA 13 22 31 30 39 32
Britannia Industries Consumer Staples 21 28 24 23 39 33 39 49 53 41 45 41 47 49 49
Colgate-Palmolive (India) Consumer Staples 24 30 28 32 40 32 40 38 40 37 41 38 36 52 41
Dabur India Consumer Staples 23 24 26 29 35 30 33 36 40 43 48 44 44 41 42
Godrej Consumer Products Consumer Staples 20 22 30 31 31 35 37 43 38 29 39 36 45 52 48
Hindustan Unilever Consumer Staples 26 29 28 33 40 39 41 47 50 56 58 47 52 46 46
Marico Consumer Staples 24 26 27 25 35 37 41 42 39 31 40 43 40 39 46
Nestle India Consumer Staples 35 37 34 35 44 41 47 50 51 63 65 62 63 72 61
Tata Consumer Products Consumer Staples 14 18 17 18 19 16 18 26 23 31 50 53 46 61 55
Varun Beverages Consumer Staples NA NA NA NA NA NA 32 36 42 28 36 39 45 67 51
United Spirits Consumer Staples 22 16 37 59 90 57 53 58 43 33 41 53 48 57 58
Apollo Hospitals Health Care Services 25 29 30 31 43 41 40 41 43 33 59 54 50 61 49
Avenue Supermarts Retailing NA NA NA NA NA NA 54 77 73 78 90 100 71 86 74
Titan Company Retailing 30 28 25 28 33 31 41 56 54 44 68 75 57 74 55
Trent Retailing NA 45 43 36 40 27 44 56 53 59 169 112 79 109 92
Pidilite Industries Specialty Chemicals 21 22 27 26 42 34 37 43 54 49 64 74 62 69 59

Source: Companies, Factset, Kotak Institutional Equities

Most mid-cap. consumption stocks are trading at expensive valuations

12-m forward P/E multiple of mid-cap. consumption stocks in KIE universe, March fiscal year-ends, 2011-25E
12-m forward P/E multiple (X)
Company Sector Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Mar-24 Current
Balkrishna Industries Automobiles & Components 6 8 7 9 11 11 17 21 20 15 26 24 24 27 25
Exide Industries Automobiles & Components 17 19 17 19 21 18 24 22 20 12 17 13 14 20 25
Schaeffler India Automobiles & Components 11 14 12 17 31 27 31 29 30 25 35 37 42 41 43
SKF Automobiles & Components 15 15 14 19 28 26 28 26 27 18 30 35 32 33 30
Timken Automobiles & Components NA NA NA NA 40 24 31 34 29 23 39 44 41 49 40
Indigo Paints Commodity Chemicals NA NA NA NA NA NA NA NA NA NA 93 47 32 33 29
Kansai Nerolac Commodity Chemicals 20 19 26 24 31 36 38 43 41 32 47 37 30 27 26
Crompton Greaves Consumer Consumer Durables & Apparel NA NA NA NA NA NA 39 36 31 24 40 33 29 29 32
Page Industries Consumer Durables & Apparel 24 26 26 36 58 46 48 59 54 40 64 72 53 51 57
Voltas Consumer Durables & Apparel 14 13 9 20 24 23 28 31 32 23 44 51 41 49 42
Whirlpool Consumer Durables & Apparel NA 15 14 21 34 28 41 43 38 35 46 42 44 45 30
United Breweries Consumer Staples 47 54 58 68 63 51 51 51 52 35 51 55 56 64 65
Aster DM Healthcare Health Care Services NA NA NA NA NA NA NA NA 22 10 16 16 17 31 53
Dr Lal Pathlabs Health Care Services NA NA NA NA NA 53 39 35 36 38 67 57 44 45 40
Max Healthcare Health Care Services NA NA NA NA NA NA NA NA NA NA 35 34 34 51 57
Metropolis Healthcare Health Care Services NA NA NA NA NA NA NA NA NA 33 50 41 34 49 37
Narayana Hrudayalaya Health Care Services NA NA NA NA NA 136 47 44 37 34 39 39 26 31 37
Chalet Hotels Hotels & Restaurants NA NA NA NA NA NA NA NA NA NA NA 146 29 45 38
Devyani International Hotels & Restaurants NA NA NA NA NA NA NA NA NA NA NA 89 53 86 105
Indian Hotels Hotels & Restaurants 26 23 39 48 66 67 47 51 54 28 100 70 40 51 54
Jubilant Foodworks Hotels & Restaurants 36 48 41 40 54 52 54 58 48 45 75 58 51 69 101
Lemon Tree Hotels Hotels & Restaurants NA NA NA NA NA NA NA NA 64 33 NA 173 39 36 39
Sapphire Foods Hotels & Restaurants NA NA NA NA NA NA NA NA NA NA NA 106 54 88 102
Westlife Foodworld Hotels & Restaurants NA NA NA 119 264 139 120 107 69 49 113 94 67 91 136

Source: Companies, Factset, Kotak Institutional Equities

Strategy
India Research

k.kathirvelu-kotak.com
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Most investment stocks are trading at expensive valuations

12-m forward P/E multiple of investment stocks in KIE universe, March fiscal year-ends, 2011-25E
12-m forward P/E multiple (X)
Company Sector Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Mar-24 Current
ABB Capital Goods 41 48 32 60 67 60 51 43 53 42 64 69 73 87 55
Bharat Electronics Capital Goods 14 12 10 11 22 20 21 18 13 10 15 19 21 35 38
BHEL Capital Goods 15 10 8 16 21 27 26 20 17 7 28 28 28 78 33
Carborundum Universal Capital Goods 13 13 13 17 21 18 23 24 25 13 30 32 37 42 36
Cochin Shipyard Capital Goods NA NA NA NA NA NA NA 16 11 5 NA 6 14 37 44
Cummins India Capital Goods 18 21 18 25 29 26 28 23 24 13 35 32 36 50 38
IRB Infrastructure Capital Goods 13 12 7 7 13 12 11 8 6 4 8 26 17 32 19
Kalpataru Projects Capital Goods 9 8 6 7 15 15 16 19 16 5 10 10 12 20 17
KEC International Capital Goods 8 8 7 9 13 12 15 19 13 7 15 13 18 23 20
L&T Capital Goods 21 16 15 22 28 21 23 23 19 11 19 21 22 31 25
Siemens Capital Goods 28 28 29 53 75 50 50 37 37 30 52 52 59 76 58
Thermax Capital Goods 16 15 18 24 33 28 36 35 27 23 43 48 43 65 48
Amber Enterprises Electronic Manufacturing Services NA NA NA NA NA NA NA 31 19 19 51 43 29 48 59
Avalon Technologies Electronic Manufacturing Services NA NA NA NA NA NA NA NA NA NA NA NA NA 36 51
Cyient DLM Electronic Manufacturing Services NA NA NA NA NA NA NA NA NA NA NA NA NA 49 32
Dixon Technologies Electronic Manufacturing Services NA NA NA NA NA NA NA 37 27 25 64 63 40 70 62
Kaynes Technology Electronic Manufacturing Services NA NA NA NA NA NA NA NA NA NA NA NA NA 75 74
Syrma SGS Technology Electronic Manufacturing Services NA NA NA NA NA NA NA NA NA NA NA NA 25 42 34

Source: Companies, Factset, Kotak Institutional Equities

Most outsourcing stocks are trading at higher multiples, compared to their pre-Covid levels
12-m forward P/E multiple of outsourcing stocks in KIE universe, March fiscal year-ends, 2011-25E
12-m forward P/E multiple (X)
Company Sector Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Mar-24 Current
Coforge IT Services 6 7 7 9 9 10 9 15 16 13 29 32 22 30 37
Cyient IT Services 10 8 8 11 14 12 12 17 14 5 16 18 16 25 17
HCL Technologies IT Services 16 13 14 15 18 13 14 14 14 10 18 21 18 24 22
Infosys IT Services 22 17 16 15 19 18 15 16 18 15 26 30 21 23 21
KPIT Technologies IT Services NA NA NA NA NA NA NA NA NA 4 20 48 52 53 38
LTIMindtree IT Services NA NA NA NA NA NA 12 18 17 15 32 38 27 27 24
L&T Technology Services IT Services NA NA NA NA NA NA 16 23 21 14 31 46 28 38 32
Mphasis IT Services 10 11 10 11 11 13 14 17 15 10 23 36 18 25 24
Persistent Systems IT Services 11 8 10 13 17 18 13 14 12 11 27 42 29 43 46
Tata Elxsi IT Services NA NA 10 21 30 28 22 23 18 14 39 88 44 51 34
Tata Technologies IT Services NA NA NA NA NA NA NA NA NA NA NA NA NA 50 35
TCS IT Services 23 18 20 19 20 18 17 19 22 20 30 31 24 28 24
Tech Mahindra IT Services 11 10 11 13 15 13 12 16 14 11 16 21 16 23 23
Wipro IT Services 18 15 14 15 16 14 14 15 15 11 20 24 15 21 20
Aurobindo Pharma Pharmaceuticals 9 7 7 12 18 17 14 12 15 8 15 12 12 17 15
Cipla Pharmaceuticals 21 18 18 19 30 20 24 20 22 18 24 25 20 27 23
Divis Laboratories Pharmaceuticals 20 17 17 19 23 20 16 25 28 31 39 40 36 44 55
Dr Reddy's Laboratories Pharmaceuticals 19 18 17 18 23 20 21 19 21 21 24 21 18 19 17
Emcure Pharmaceuticals Pharmaceuticals NA NA NA NA NA NA NA NA NA NA NA NA NA NA 23
JB Chemicals & Pharma Pharmaceuticals NA NA NA 8 11 13 15 NA 13 13 22 24 28 36 29
Lupin Pharmaceuticals 18 20 20 20 31 20 20 19 21 21 27 22 24 32 23
Mankind Pharma Pharmaceuticals NA NA NA NA NA NA NA NA NA NA NA NA NA 41 43
Sun Pharmaceuticals Pharmaceuticals 22 23 23 20 29 24 21 25 23 17 23 26 24 35 31
Torrent Pharmaceuticals Pharmaceuticals 14 13 12 15 22 17 21 22 30 29 30 32 33 43 42
SRF Specialty Chemicals 3 3 5 7 14 14 15 16 18 16 24 38 29 37 47

Source: Companies, Factset, Kotak Institutional Equities

Strategy
India Research

k.kathirvelu-kotak.com
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Most banks are trading at reasonable valuations

12 m forward P/B multiple of banks in KIE universe, March fiscal year-ends, 2011-25E
12-m forward P/B multiple (X)
Company Sector Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Mar-24 Current
AU Small Finance Bank Banks NA NA NA NA NA NA NA 7.0 4.6 3.0 5.9 4.6 3.1 2.6 2.1
Axis Bank Banks 2.6 1.8 1.7 1.6 2.6 1.8 2.1 1.9 2.7 1.1 1.9 1.9 1.8 1.9 1.7
Bandhan Bank Banks NA NA NA NA NA NA NA 5.2 4.9 1.7 2.7 2.6 1.4 1.2 0.9
Bank of Baroda Banks 1.7 1.1 0.8 0.9 0.9 1.0 1.2 0.9 0.9 0.4 0.5 0.7 0.8 1.1 0.9
Canara Bank Banks 1.3 0.9 0.7 0.5 0.6 0.5 0.9 0.9 1.3 0.2 0.6 0.6 0.7 1.2 0.8
City Union Bank Banks 1.5 1.4 1.4 1.3 2.0 1.7 2.3 2.6 2.8 1.6 1.9 1.4 1.2 1.1 1.2
DCB Bank Banks 1.3 1.3 1.0 1.2 1.9 1.2 2.2 1.8 2.0 0.8 0.9 0.6 0.7 0.7 0.6
Equitas Small Finance Bank Banks NA NA NA NA NA NA NA NA NA NA 1.8 1.4 1.5 1.6 1.0
Federal Bank Banks 1.3 1.2 1.2 1.1 1.3 0.9 1.7 1.4 1.4 0.5 NA NA NA 1.1 1.3
HDFC Bank Banks 3.8 3.5 3.5 3.5 3.6 3.2 3.8 3.8 3.8 2.5 3.6 3.0 2.8 2.2 2.5
ICICI Bank Banks 2.2 1.6 1.7 1.8 2.1 1.5 1.8 1.7 2.3 1.7 2.5 2.7 2.7 2.9 3.0
Indusind Bank Banks 2.8 2.8 2.5 2.6 3.8 2.9 3.7 4.0 3.4 0.6 1.6 1.4 1.3 1.7 0.7
Karur Vysya Bank Banks 1.7 1.3 1.4 1.1 1.5 1.1 1.4 1.3 1.0 0.3 0.7 0.5 0.9 1.3 1.3
Punjab National Bank Banks 1.6 1.1 0.7 0.8 0.7 0.6 1.0 0.6 1.0 0.4 0.5 0.4 0.6 1.3 0.8
State Bank of India Banks 1.9 1.7 1.4 1.3 1.6 1.2 1.5 1.2 1.4 0.8 1.3 1.5 1.3 1.7 1.5
Ujjivan Small Finance Bank Banks NA NA NA NA NA NA NA NA NA 1.4 1.6 0.9 1.0 1.4 1.0
Union Bank Banks 1.4 0.9 0.8 0.5 0.6 0.6 0.7 0.5 0.6 0.3 0.5 0.4 0.6 1.1 0.8

Source: Companies, Factset, Kotak Institutional Equities

NBFCs are trading at fair valuations

12 m forward P/B multiple of financial stocks in KIE universe, March fiscal year-ends, 2011-25E
Company Sector Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Mar-24 Current
12-m forward P/B multiple (X)
Aavas Financiers Diversified Financials NA NA NA NA NA NA NA NA 4.7 3.9 7.0 6.4 3.4 2.4 3.3
Aadhar Housing Finance Diversified Financials NA NA NA NA NA NA NA NA NA NA NA NA NA NA 2.4
Aptus Value Housing Finance Diversified Financials NA NA NA NA NA NA NA NA NA NA NA 5.2 3.1 3.6 3.0
Bajaj Finance Diversified Financials 1.6 1.4 1.5 1.9 3.5 4.2 5.7 5.3 7.3 3.4 7.1 8.4 5.2 5.0 4.9
Cholamandalam Diversified Financials 1.6 1.6 1.8 1.6 2.6 2.8 3.2 3.8 3.2 1.3 4.1 4.5 3.9 4.3 4.3
Home First Finance Diversified Financials NA NA NA NA NA NA NA NA NA NA 2.7 3.9 3.2 3.3 2.9
L&T Finance Diversified Financials NA 1.6 2.1 1.8 1.4 1.5 2.6 2.8 2.0 0.6 1.2 0.9 0.9 1.6 1.4
LIC Housing Finance Diversified Financials 2.2 2.1 1.5 1.4 2.3 2.3 2.5 1.9 1.6 0.6 1.0 0.8 0.7 1.0 0.8
Mahindra & Mahindra Financial Diversified Financials 2.7 2.0 2.2 2.5 2.3 2.2 2.7 3.1 2.3 0.8 1.6 1.2 1.6 1.7 1.6
Muthoot Finance Diversified Financials NA 1.1 1.3 1.4 1.5 1.2 2.1 1.9 2.4 1.7 2.7 2.5 1.6 2.1 2.8
Shriram Finance Diversified Financials 3.0 1.9 1.8 1.8 2.4 2.0 2.0 2.3 1.7 0.7 1.6 1.1 1.0 1.6 1.9
12-m forward P/E multiple (X)
360 One Capital Markets NA NA NA NA NA NA NA NA NA 22.5 26.4 23 20 27 29
ABSL AMC Capital Markets NA NA NA NA NA NA NA NA NA NA NA 22 13 18 19
Computer Age Management Services Capital Markets NA NA NA NA NA NA NA NA NA NA 37.4 34 29 35 35
CRISIL Capital Markets 19.8 27.4 22.3 30.6 40.9 37.3 33.3 36.2 25.4 21.8 33.6 45 40 50 38
HDFC AMC Capital Markets NA NA NA NA NA NA NA NA 34.0 30.9 40.6 29 23 38 30
ICRA Capital Markets 16.1 18.0 15.8 24.1 41.1 39.2 44.9 33.7 22.4 19.9 35.5 32 27 31 28
Kfin Technologies Capital Markets NA NA NA NA NA NA NA NA NA NA NA NA 25 36 44
Nippon AMC Capital Markets NA NA NA NA NA NA NA 24.7 24.3 24.1 33.8 26 17 27 25
UTI AMC Capital Markets NA NA NA NA NA NA NA NA NA NA 18.9 20 14 15 16

Source: Companies, Factset, Kotak Institutional Equities

Strategy
India Research

k.kathirvelu-kotak.com
 NEW RELEASE

Economy
External sector
April 03, 2025

Reciprocal tariffs: Let the negotiations begin (II) Summary of key macro metrics for India
The US has announced a reciprocal tariff of 26% on Indian exports—relatively 2023 2024 2025E 2026E
lower than most countries. The impact on India’s exports may be muted in Real economy
near-term but global growth and trade slowdown will be negative for India Real GDP growth (%) 7.6 9.2 6.5 6.5
over the medium-term. Sectors such as chemicals, electronics, gems and Nominal GDP growth (%) 14.0 12.0 9.9 10.1
jewelry, etc. face a relatively larger increase in tariffs while pharmaceuticals CPI Inflation (avg., %) 6.7 5.4 4.7 4.1
Public finance
have been kept out of the ambit of tariffs. The bigger concern will be risks of
Center's GFD/GDP (%) 6.4 5.6 4.8 4.4
retaliatory tariffs, which could impact global trade and investment, US and
Monetary policy
global growth and inflation (a 1930s Smoot-Hawley aftermath redux?).
Repo Rate (%, eop) 6.50 6.50 6.25 5.50
SDF Rate (%, eop) 6.25 6.25 6.00 5.25
US levies country-specific reciprocal tariffs CRR (%, eop) 4.5 4.5 4.0 4.0
The US government announced ‘discounted’ single-rate country-specific tariffs External sector

benchmarked against existing tariff and non-tariff rates. India saw tariff of 26% Current Account Balance (% of GDP) (2.0) (0.7) (0.6) (0.9)
Brent crude oil price (avg., USD/bbl) 95.4 82.9 80.0 70.0
(against USTR estimated 52% tariff and non-tariff measures imposed by India);
USD/INR (avg.) 80.3 82.8 84.6 87.6
lower than most countries (see Exhibit 1). We note that the US had announced
sector and country specific tariffs earlier (see Exhibit 2). Some of these such Source: Bloomberg, CEIC, RBI, Kotak Institutional Equities estimates

as steel/aluminum, automobiles and parts, etc. will not have reciprocal tariff .

Private Circulation Only. This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities Act of 1933
Relatively larger increase for chemicals, electronics, gems and jewelry, etc.
India’s export to the US is dominated by textiles (furnishings and apparels),
gems and jewelry (diamonds), pharmaceutical products (medicaments),
electronics (mobile phones), etc. (see Exhibits 3-4). Earlier, at an aggregate
level, the difference between India imposed and US imposed tariff rates ranged
between 6-10% for major exports. After the reciprocal tariffs, most sectors
(except pharma and energy) will uniformly face tariff rate of 26%. The relatively
larger increase will be for sectors such as chemicals, electronics, gems and
jewelry, machinery, etc. (see Exhibit 5). Compared to peers, India is likely to be
better placed in these sectors (see Exhibit 6).

Near-term macro impact could be limited; large in medium term

The reciprocal tariffs are aimed at protecting and boosting the US domestic
manufacturing sector. However, in the near term, the macroeconomic impact
should be minimal for India given the effective tariff being relatively lower.
However, trade disruptions will increase hereon with increasing risks of
retaliatory tariffs and global growth slowdown. Under various scenarios of
exports to the US getting impacted and the degree of that impact, the extent of
slowdown in exports and GDP growth could be around 0.2-10% decline in
exports and 5-100 bps decline in GDP growth (see Exhibit 7).

Way forward: Reducing tariffs and non-tariff barriers

The extent of impact for India will depend on the US-India bilateral agreement Related Research
over the next few months. India will have to look at lowering both tariff as well
→ Reciprocal tariffs: Let the negotiations begin
as taxes and non-tariff barriers such as surcharges on imports from the US in
→ CY2025 Outlook: When the music starts to
sectors such as alcoholic beverages, automobiles, chemicals, electronics, farm
fade…
/livestock, pharma, etc. (see Exhibits 8-9). Lower tariffs could induce higher
competition for domestic companies too. Importantly, services could also be
Full sector coverage on KINSITE
part of discussions given the focus in USTR report on Foreign Trade Barriers.

Suvodeep Rakshit Anindya Bhowmik Swarupjit Palit

 94

India at a relatively better place than other economies

Existing effective tariff and non-tariff rate charged on US exports and reciprocal tariffs on US
imports (%)

Effective tariff + non tariff rate Reciprocal tariffs on US

charged on US exports (%) imports(%)

Cambodia 97 49
Vietnam 90 46
Sri Lanka 88 44
Bangladesh 74 37
Thailand 72 36
China 67 34
Taiwan 64 32
Indonesia 64 32
Switzerland 61 31
South Africa 60 30
Pakistan 58 29
India 52 26
South Korea 50 25
Japan 46 24
Malaysia 47 24
EU 39 20
Israel 33 17
Philippines 34 17
UK 10 10
Brazil 10 10
Singapore 10 10
Chile 10 10

Source: Media reports, Kotak Institutional Equities

Economy
India Research
k.kathirvelu-kotak.com
 95

Multiple countries and sectors had seen increase in tariffs prior to the announcement of the reciprocal tariffs
Select list of tariff announcements prior to reciprocal tariff announcements
Date Initiator Description
1-Feb-25 US 25% tariffs on imports from Canada, Mexico and 10% on Chinese imports announced

1-Feb-25 Canada Two rounds of retaliatory tariffs announced

3-Feb-25 US Canada and Mexico tariffs placed on hold for 30 days

3-Feb-25 US Canada tariffs placed on hold for 30 days

4-Feb-25 US Tariffs on China take effect

4-Feb-25 China New US tariffs applied as part of retaliatory package

5-Feb-25 US Low value duty-free shipments from China restored temporarily

5-Feb-25 US 25 per cent tariffs on aluminium and steel imports announced — expected to take effect from March 12

4-Mar-25 US 25% tariffs on Mexico and Canada take effect

4-Mar-25 US Additional 10% levy on Chinese imports announced

Canada announces retaliatory tariffs of 25% on US$155 bn of US exports (effective immediately on US$30 bn
4-Mar-25 Canada
of US exports)

6-Mar-25 US New executive orders backtrack on sweeping 25 per cent tariffs on Mexico and Canada

11-Mar-25 US US announces additional 25% tariff on steel and aluminium imports from Canada

12-Mar-25 EU Retaliatory tariff measures from EU targets up to €26bn of US exports, set to take effect on April 1

12-Mar-25 Canada Canada levies new retaliatory tariffs on almost US$21 bn of US exports

24-Mar-25 US US announces tariffs against countries that buy Venezuelan oil

26-Mar-25 US US announces imposition of 25% tariffs on foreign-made auto imports

Source: Media reports, Kotak Institutional Equities

Economy
India Research
k.kathirvelu-kotak.com
 96

India exports to the US to be around US$80 bn in FY2025

India's exports to US at a 2-digit HS code, March fiscal year-end, 2025 (US$ mn)
India's export to Share in total
US (US$ mn) exports (%)
Beverages, refreshments, and intoxicants 975 0.2
Cereals 563 0.1
Chemicals 3,969 0.9
Electronics 11,903 2.8
Energy 4,366 1.0
Fertilizers 16 0.0
Fruits and vegetables 431 0.1
Furniture 1,143 0.3
Gems and stones 10,434 2.4
Leather and footwear 1,594 0.4
Machinery 6,589 1.5
Meat, fish, eggs and dairy 2,931 0.7
Metals 5,294 1.2
Oils, fats and extracts 1,468 0.3
Pharmaceuticals 8,802 2.0
Plastic 1,670 0.4
Rubber 891 0.2
Textiles 10,373 2.4
Transport 3,446 0.8
Others 3,173 0.7
Total exports to US 80,030 19
Total exports of India 430,962
Notes:
(a) For brevity multiple HS codes have been aggregated across categories.
(b) FY2025 data is annualized based on 9MFY25 actual data.

Source: Ministry of Commerce, Kotak Institutional Equities estimates

Economy
India Research
k.kathirvelu-kotak.com
 97

Mobile phones, diamonds, medicines, and petroleum products largest contributors to India's exports to US
India's top-10 exports to US at 2-digit and 4-digit HS code classification, March fiscal-year end,
2025 (US$ mn)

Exports (US$ mn)

Electrical machinery, Telecom equipment, etc. 11,903
Mobile Phones 7,029
Semiconductor Devices 1,145
Gemstones, precious metals, etc. 10,434
Diamonds 4,852
Jewelry articles 3,629
Pharmaceutical products 8,802
Medicaments 8,500
Nuclear reactors, boilers, machinery and mechanical appliances 6,589
Transmission shafts 1,070
Turbo jets 704
Mineral fuels, Oils, waxes and bituminous substances 4,366
Petroleum oils 4,204
Iron and steel articles 2,979
Structures 692
Tube or pipe fittings 529
Man-made textile articles (others) 2,930
Furnishing linen 1,285
Other furnishing articles 1,093
Transport equipment 3,458
Motor vehicle parts 2,173
Articles of apparel and clothing accessories (unknitted) 2,404
Womens' apparel 891
Mens' Shirts 364
Organic chemicals 2,530
Hetroyclic compounds with Nitrogen 341
Oxygen-function amino-compounds 151

Source: Ministry of Commerce, Kotak Institutional Equities

Economy
India Research
k.kathirvelu-kotak.com
 98

Relatively larger impact on chemicals, electronics, gems and jewelry, machinery due to reciprocal tariffs
Tariffs imposed by India and by US at a 2-digit HS code classification
Import duty by US Import duty by US
(existing) (reciprocal tariffs) Change in tariff rates
Beverages, refreshments, and intoxicants 7.8 26 (18)
Cereals 5.3 26 (21)
Chemicals 3.8 26 (22)
Electronics 0.5 26 (26)
Energy 0.0 0.0 0.0
Fertilizers 0.0 26 (26)
Fruits and vegetables 5.7 26 (20)
Furniture 2.2 26 (24)
Gems and stones 1.8 26 (24)
Leather and footwear 7.1 26 (19)
Machinery 1.4 26 (25)
Meat, fish, eggs and dairy 0.7 26 (25)
Metals 2.0 26 (24)
Oils, fats and extracts 1.0 26 (25)
Pharmaceuticals 0.0 0.0 0.0
Plastic 4.4 26 (22)
Rubber 2.0 26 (24)
Textiles 9.4 26 (17)
Transport 0.8 26 (25)
Others 2.1 26 (24)
Notes:
(a) For brevity multiple HS codes have been aggregated across categories.

Source: WITS, WTO, Kotak Institutional Equities

Compared to peers India is likely to be better placed in most sectors

Increase in tariffs imposed by US on India and other economies' exports at a 2-digit HS code classification
Change in average tariff imposed by US (%)
India Vietnam China Thailand Malaysia Japan
Beverages, refreshments, and intoxicants 18 45 27 28 22 20
Cereals 21 40 29 31 20 19
Chemicals 22 43 31 35 20 21
Electronics 26 46 33 36 24 23
Energy 0.0 0.0 0.0 0.0 0.0 0.0
Fertilizers 26 46 34 36 24 24
Fruits and vegetables 20 44 29 34 20 19
Furniture 24 46 32 36 24 23
Gems and stones 24 46 33 36 24 23
Leather and footwear 19 32 20 30 18 20
Machinery 25 46 33 36 24 23
Meat, fish, eggs and dairy 25 44 33 32 23 23
Metals 24 44 31 36 22 22
Oils, fats and extracts 25 44 31 36 23 24
Pharmaceuticals 0.0 0.0 0.0 0.0 0.0 0.0
Plastic 22 41 30 36 20 20
Rubber 24 43 31 35 18 21
Textiles 17 33 23 26 13 19
Transport 25 25 25 25 25 25
Others 24 45 32 36 23 23
Notes:
(a) For brevity multiple HS codes have been aggregated across categories.
(b) Pharmaceuticals and energy are not subjected to reciprocal tariffs

Source: WITS, WTO, Kotak Institutional Equities

Economy
India Research
k.kathirvelu-kotak.com
 99

Near-term impact on India's growth and exports may not be significant

Sensitivity of GDP and total exports to various scenarios of exports to US and degree of impact
Impact on GDP growth (bps) Impact on exports growth (bps)
Share of exports to US at risk (%) Share of exports to US at risk (%)
(51) 5 25 50 75 (464) 5 25 50 75

Degree of 5 (1) (3) (5) (8) Degree of 5 (5) (23) (46) (70)
impact on 25 (3) (13) (26) (38) impact on 25 (23) (116) (232) (348)
exports to US 50 (5) (26) (51) (77) exports to US 50 (46) (232) (464) (696)
(%) (%)
75 (8) (38) (77) (115) 75 (70) (348) (696) (1,045)

Source: Ministry of Commerce, CEIC, Kotak Institutional Equities estimates

India imports from the US to be around US$47 bn

India's imports from US at a 2-digit HS code, March fiscal year-end, 2025 (US$ mn)
India's
imports from Share in total
US exports (%)
Beverages, refreshments, and intoxicants 481 0.1
Cereals 4 0.0
Chemicals 3,034 0.4
Electronics 3,200 0.5
Energy 15,073 2.1
Fertilizers 35 0.0
Fruits and vegetables 1,205 0.2
Furniture 89 0.0
Gems and stones 5,823 0.8
Leather and footwear 204 0.0
Machinery 4,262 0.6
Meat, fish, eggs and dairy 47 0.0
Metals 2,819 0.4
Oils, fats and extracts 193 0.0
Pharmaceuticals 411 0.1
Plastic 1,613 0.2
Rubber 281 0.0
Textiles 451 0.1
Transport 3,643 0.5
Others 3,704 0.5
Total imports from US 46,574 6.6
Total imports of India 701,304
Note: (a) For brevity multiple HS codes have been aggregated across categories.
(b) FY2025 data is annualized based on 9MFY25 actual data.

Source: Ministry of Commerce, Kotak Institutional Equities

Economy
India Research
k.kathirvelu-kotak.com
 100

US may want India to increase imports of energy and electronics instead of tariff increases
India's top-10 imports to US at 2-digit and 4-digit HS code classification, March fiscal year-end,
2025 (US$ mn)

Imports (US$ mn)

Mineral fuels, Oils, waxes and bituminous substances 15,073
Crude oil 6,610
Coal 3,488
LNG 2,972
Gemstones, precious metals, etc. 5,669
Diamonds 2,541
Gold 2,456
Nuclear reactors, boilers, machinery and mechanical appliances 4,262
Turbo jets 867
Automatic data processing machines 834
Electrical machinery, Telecom equipment, etc. 3,200
Mobile phones 792
Switches, fuses, etc. 200
Aircraft, spacecraft and parts 1,608
Helicopters, Aeroplanes 1,430
Optical, medical, photographic, etc. instruments 2,031
Medical appliances 639
Polarimeters, refractrometers, etc. 312
Plastics articles 1,613
Ethylene polymers 319
Vinyl chloride polymers 248
Organic chemicals 1,321
Acyclic hydrocarbons 580
Acyclic alcohols 109
Chemical products (misc.) 1,253
Reaction initiators and accelerators 323
Insecticides 287
Edible fruits and nuts, etc. 1,106
Nuts 1,072

Source: Ministry of Commerce, Kotak Institutional Equities

Economy
India Research
k.kathirvelu-kotak.com
 THEME

Capital Markets
India
Sector View: Cautious NIFTY-50: 23,332 April 02, 2025

Capital markets: Rising through the ups and downs Capital market sector PAT has grown over cycles
Indian capital markets are shaping into a decent ecosystem of business (Rs bn) (%)
PAT PAT margin (RHS)
models in varying stages of maturity. We expect the sector’s exhilarating 700 50
42
growth in the last few years to moderate as softer markets and tighter 560
37 37 37 39
40
32
regulations weigh. This report delves into the broking industry and explores 29 28
420 25 25 26 26 404 30
diversification into wealth management – one of the most prominent global 23
278
trends. 280 245 535 20
188
140 101 116 10
Indian capital markets: An emerging ecosystem 34 37 51 51 69 102
- -
Indian capital markets collectively represent nearly Rs1.3 tn of revenue and a

2014

2016
2017

2019

2021

2023
2024
2013

2015

2018

2020

2022

2025E
Rs500 bn profit pool across segments. Over the past decade, aggregate
revenue and profits have reported CAGRs of ~20% and 25%, respectively, with
several factors driving this growth, including (1) strong equity markets, (2) Source: Bloomberg, Company data, Kotak Institutional Equities estimates

improved accessibility for retail and (3) supportive regulations. Growth rates Prices in this report are based on the market close of
will soften, as the market and regulatory forces weigh. More structurally, over April 02, 2025

time, we will see capital markets offering a range of interesting business

models—revenue model (recurring/transactional), asset classes

Private Circulation Only. This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities Act of 1933
Quick Numbers
(equities/commodities, etc.), client segment (retail/HNI/UHNI), etc. While
revenues will be cyclical in nature, we believe growing scale and scope will offer
Indian capital markets: US$15 bn revenue pool with
a useful opportunity space for investors to gain exposure and diversify across ~20% 10Y CAGR…
financial services.
Discount brokers have 45-50% revenue market share…

Broking: Market, regulatory forces to add pressure; drive toward diversification India has nearly US$1 tn in managed assets…
Retail brokers have seen the sharpest revenue growth among all segments of
capital markets in recent years. Following this phenomenal run, a period of
lower-than-expected returns, along with regulatory changes, could weigh down
on retail activity over the next 12 months. However, more structurally, a stable
regulatory regime that balances market development, retail access and
protection would help tide over cycles and build retail confidence in markets
over the long term. In order to offset the impact, we expect to see brokers trying
to diversify revenues (margin funding, wealth, asset management and credit),
which we believe is going to be a slow-moving journey.

Asset/wealth management segments well-placed

Growth prospects for the asset/wealth management business, while linked to
markets, are relatively more attractive, given the higher share of recurring
revenues, along with the supportive regulatory regime for these activities.
However, we see a few considerations from an investor’s standpoint: (1) AMCs
- fund performance plays a major role in stock selection and hence, relatively
more tactical, (2) wealth - wealth firms benefit from much more diversified
revenue sources; while these are more adept for compounding returns, higher
share of transactions and slowdown in monetization activities could weigh over
the next 12 months and (3) service providers (CAMS/Kfin) - expensive
valuations capture quite a bit of potential optionality in the non-MF businesses.

Full sector coverage on KINSITE

Abhijeet Sakhare Nischint Chawathe M B Mahesh, CFA Ashlesh Sonje, CFA Varun Palacharla

Nikhil Suresh
 102

Valuation summary:

Valuation summary for capital market stocks

March fiscal year-ends, 2024-27E
Market ADTV
FV CMP cap. (3M) EPS (Rs) PER (X) RoE (%)
Rating (Rs) (Rs) (US $bn) (US $mn) 2024 2025E 2026E 2027E 2024 2025E 2026E 2027E 2024 2025E 2026E 2027E
Asset managers & intermediaries
Aditya Birla AMC ADD 780 648 2.2 2.8 27 31 33 35 24 21 20 19 27 27 26 25
HDFC AMC ADD 4,300 4,100 10.2 19.6 91 113 129 141 45 36 32 29 29 33 38 39
Nippon AMC ADD 660 590 4.4 7.5 18 20 23 25 34 29 26 24 30 32 34 36
UTI AMC BUY 1,300 1,090 1.6 2.4 60 62 55 59 18 18 20 19 19 18 15 16
CAMS ADD 4,000 3,812 2.2 24.4 72 95 102 119 53 40 37 32 42 46 41 40
KFin Technologies SELL 1,000 1,139 2.3 22.4 14 20 24 27 79 58 48 41 24 28 29 29
Wealth managers & brokers
360 One REDUCE 1,150 979 4.5 11.6 22 26 32 37 44 38 30 26 25 21 19 19
Angel One BUY 2,800 2,337 2.5 42.1 134 126 105 131 17 19 22 18 43 27 17 19
IIFL Capital NC - 213 0.8 3.7 na na na na na na na na 33 na na na
Motilal Oswal NC - 649 4.5 23.3 41 52 55 67 16 12 12 10 19 23 20 19
Nuvama NC - 5,870 2.5 18.3 178 269 291 327 33 22 20 18 24 29 28 28
Prudent Corporate Advisory NC - 2,150 1.0 2.9 34 48 58 75 64 45 37 29 33 35 31 30
Exchanges
BSE NC - 5,529 8.7 166.2 57 91 121 151 98 61 46 37 16 34 40 43
MCX NC - 5,285 3.1 30.5 16 114 141 166 324 47 38 32 7 37 39 39
IEX NC - 176 1.8 14.0 4 5 6 6 45 37 32 28 41 40 41 40
Rating agencies
CARE NC - 1,112 0.4 2.8 34 43 53 60 33 26 21 18 14 17 19 19
CRISIL SELL 4,300 4,139 3.6 4.4 90 94 112 128 46 44 37 32 30 29 30 31
ICRA REDUCE 6,400 5,542 0.6 0.3 158 179 207 235 35 31 27 24 16 17 19 20

Source: Bloomberg, Company, Kotak Institutional Equities estimates

Angel’s headline valuations are lower than capital market peers

Three-year forward EPS CAGR (%) versus FY2026E P/E multiple (X), March fiscal year-ends, 2025-27E
55

Kfin 44
CDSL 42
44 BSE 46
MCX 38 Protean 37
CAMS 36 CRISIL 37
HDFCAMC 31 Anand
33 Prudent 37
FY2026 PE (X)

IEX 32 Rathi 38
Nippon 25
Angel One 23
ICRA 27 360ONE 28
22
Nuvama 20 CARE 21
UTI 19 ABSL 19
11

Motilal Oswal 11
-
(4) - 4 8 12 16 20 24 28 32 36
EPS CAGR (FY2025-27E)

Source: Company, Bloomberg, Kotak Institutional Equities estimates

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 103

Indian capital markets: An emerging ecosystem

Indian capital markets collectively represent nearly Rs1.3 tn of revenue and over Rs500 bn in profits
across segments. Over the past decade, aggregate revenue and profits have reported CAGRs of ~20%
and 25%, respectively, with several factors driving this growth, including (1) strong equity markets, (2)
improved accessibility for retail and (3) supportive regulations. More structurally, over time, we will
see capital markets offering a range of interesting business models, i.e., recurring/transactional,
retail/wholesale, equities/debt/commodities/real estate and HNI/mass retail. While revenues will be
cyclical in nature, we believe growing scale and scope will offer a useful opportunity space for investors
to gain exposure and diversify across financial services.

Indian capital markets: US$15 bn revenue pool with ~20% 10Y CAGR
Indian capital markets have been quite lively for the past few years. While the headline numbers capture
the industry growth, there is now a thriving microcosm of companies across domains that offer exposure
to different parts of the capital markets ecosystem. Exhibit 3 shows companies currently listed (except
NSE and NSDL) across different domains of capital markets. The industry offers a range of business
models, with varying degrees of revenue characteristics such as recurring/transactional,
retail/wholesale, equities/debt/commodities and HNI versus mass retail.

Indian capital markets have enjoyed phenomenal growth over the past decade. The industry is likely to
have revenues of nearly Rs1.3 tn or US$15 bn in FY2025, growing from nearly Rs130 bn or ~US$2 bn in
FY2013. This represents a CAGR of nearly ~20% over the past decade. There are several drivers that
have fueled this growth, including (1) buoyant equity markets, (2) improved accessibility for retail
(internet, mobile) and (3) regulatory actions (easier KYC, new products). While the industry revenue will
be cyclical in nature, we believe industry scale and scope have been reset higher. This offers a useful
opportunity space for investors to gain exposure and diversify across financial services.

Indian capital markets are a growing ecosystem of business models and companies
Broad segmentation and listed companies across capital markets in India

Distributors/wealth Asset managers

Brokers Exchanges Depositories IB/Equities

Investors Issuers

Infrastructure (RTA,
fund a/c, KYC, ratings)

Source: Company, Kotak Institutional Equities

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 104

A note on methodology: Entity-based versus activity-based approach

We believe there are two approaches to size up the industry revenue pools. The first one is the top-down
approach based on regulatory activities. The upside of this approach is that it has a much better chance
of capturing industry revenues. However, the limiting factor is that activity-based disclosures are very
limited. Unlike banking and insurance, there is no consolidated reporting of financials and key metrics
for the broking sector. Estimating revenues based on drivers such as transactional volume or AUM also
pose the challenge of varying revenue models (such as value-based versus order-based).

We find the bottom-up, i.e., entity-based approach of revenue calculation, to be a lot more simplified. It
also considers the impact of cross-subsidization across products. The first disadvantage, however, is
that it only covers the listed and large unlisted players. Secondly, it categorizes companies under one
head, even as they might have a meaningful contribution from other activities (such as Motilal Oswal is
classified as a broker, even though it has healthy revenues contribution from wealth and asset
management). On balance, our bias is toward the second approach, as it is grounded in the reported
financials of key large market players.

Capital market revenue pool is close to Rs1.3 tn as of FY2025

Revenues for a large sample of capital market firms, March fiscal year-ends, 2013-27E (Rs bn)

1,900

1,550
1,520
1,290 1,340

1,140 1,030

750
760 660
500
350 360 360
380 230 270
150 200
140

2025E

2026E

2027E
2013

2019

2020

2021

2022

2023

2024
2014

2015

2016

2017

2018

Source: Company, Capitaline, Kotak Institutional Equities estimates

Broking, asset management, exchanges and wealth are largest revenue pools
Our estimate of Rs1.3 tn industry revenues is arrived at by adding up revenues for large companies in
each sector. Our estimate understates the actual revenues, as we only consider a sample of large 10-15
largest companies in fragmented sectors such as broking and wealth. For wealth, particularly, a large
revenue pool resides within banks, which is difficult to estimate as it includes deposit relationships (see
Exhibit 4).

Unsurprisingly, strong growth in retail participation and transaction volumes has led to broking firms
seeing the sharpest growth in revenues post-Covid, with their revenue share at ~40% in FY2024, up from
~30% in FY2020. Broking firms have grown revenues at a ~30% CAGR over the past decade and ~35%
over the past five years. Strong growth in transactional volumes also shows up revenue growth for
intermediaries such as exchanges and depositories. Wealth firms have also benefited from strong
transactional income in the past few years. (Exhibits 5-7)

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Broking and asset management are the largest segments

Revenue mix across segments, March fiscal year-ends, 2013-24 (%)

AMCs Brokers Wealth RTA Depositors Exchanges Rating agencies

100 4 4 4 3 3 2 2 2 1 1 1 1
16 14 13 14 15 18 16 19 18
20 17
22
80 3 3 2 3 2
3 3 2 2 2
4 9 11 13 13 15 14
4 10 13 13 13
8 8
60
26 27 26 25
24 24 28 27
34 38 41
40 38

20 38 36 41 40 40 41 36
35 29 27 24 23
-
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Source: Company, Capitaline, Kotak Institutional Equities estimates

Revenue growth is spread across players PAT of the entire samples is close to Rs500 bn
March fiscal year-ends, 2013-24 (%) March fiscal year-ends, 2013-25E (Rs bn)

10Y CAGR 5Y CAGR 3Y CAGR (Rs bn) (%)

PAT PAT margin (RHS)
40 36 600 50
535
31 31 42
32 480 37 37 37 39 40
27 26
23 23 24 32
24 21 29 28 404
20 20 20
18 360 25 25 26 26 30
15 15 15 15 23 278
16 13 245
1010 10
7 240 188 20
8 55
102 101 116
120 69 10
-
34 37 51 51
Exchanges
Wealth
AMCs

RTA

Depositors

agencies
Brokers

Total
Rating

- -
2025E
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024

Source: Company, Kotak Institutional Equities estimates Source: Company, Kotak Institutional Equities estimates

Dynamic capital markets are tough to build and offer advantages to the financial system
Various research points toward the important role played by well-developed and well-regulated capital
markets in ensuring the availability and cost of long-term capital. Capital markets help distribute capital
and risks more efficiently. Investors in equities, fixed income and other asset classes are able to place
themselves on the risk spectrum and manage their risks more actively. Capital markets also allow for
the funding of riskier projects compared with the risk-averse banks.

A recent report (link) by Mario Dragi on improving Europe’s competitiveness also makes pertinent points
about the importance of capital markets. The report makes a point, “even though EU households save
more than their US counterparts, their wealth has grown by only a third as much since 2009”. The report
attributes this gap to (1) greater capacity of the US financial system to transform household savings into
high-yielding investments and (2) the fact that US household wealth includes pension assets, whereas
most European households’ pension wealth is in the form of claims on public social security systems.
As a result, financial securities (listed shares, bonds, mutual funds and derivatives) directly held by
households account for 43% of US household wealth, compared with 17% for the EU. Europe also has
much greater reliance on the banking system for debt funding and relatively underdeveloped
securitization markets.
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 106

Huge gap in later-stage financing between the EU and the US Europe relies much more on banking system for funding needs
Venture capital investment by development stage, Total bank assets to GDP: Europe, the US and Japan
US$ bn, 2023 (%)

Source: The Future of European Competitiveness Source: The Future of European Competitiveness

There is also an argument in favor of greater stability from well-functioning markets. One of the research
papers aptly makes the point that ‘capital markets make it more difficult to avoid recognizing economic
or financial problems’ and ‘as a result, pain is borne in real time’. For example, as it relates to debt
markets, asset managers (unlike banks) rarely use leverage, and in acting as agents rather than principal,
they leave the risk and reward to end investors. However, dynamic capital markets also require a few key
ingredients such as stronger legal frameworks as well as stability and effective enforcement of
regulations. Capital markets thrive on information and, hence, require tighter corporate governance rules.
Lastly, they need stability in policies and a more collaborative approach toward rule-making.

Performance of capital market stocks over long term—a look at the US experience
Exhibit 10 plots returns of an index comprising capital market stocks and compares them with the
returns of banks and insurance indices as well as the overall S&P 500. Capital markets being a broad
basket, the index comprises several segments such as asset managers, brokers and exchanges. Exhibit
12 shows the same data with CAGR returns over mid-to-long-term time frames, indicating the
outperformance of the sector. US-based capital market stocks have a market cap of nearly US$1.5 tn
compared with ~US$1.4 tn for US insurers and ~US$2.5 tn for US banks, indicating their presence within
financial services. From a forward valuation standpoint as well, the sector has traded at a rich premium
compared with banks and insurance, but at a discount to the broader S&P 500 (see Exhibit 11).

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 107

US capital market stocks have seen strong returns over decades Capital market stocks on average trade at higher valuations
Indexed returns for stocks in capital markets, 12M forward P/E valuations range across sectors
banks, insurance and overall S&P 500 index (X) and S&P 500 (X)

US capital markets US banks Max Mean Min Current

US insurance S&P 500 30
28
900
24 21
720 22
18 18
20
18
17
540 15 15
12 13 16
12
360
11
6 9
180 8

- -
US capital US banks US insurance S&P 500
Jun-03
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
Jun-18
Jun-19
Jun-20
Jun-21
Jun-22
Jun-23
Jun-24 markets

Source: Bloomberg, Kotak Institutional Equities Source: Bloomberg, Kotak Institutional Equities

Capital market stocks have delivered strong returns over long-term

CAGR total returns across time-frames (%)

20Y CAGR 15Y CAGR 10Y CAGR 5Y CAGR

25
23

20
17
15
15 13
12 12
11 11 11
11
10 9
10 8 8

5
5
2

-
US capital markets US banks US insurance S&P 500

Source: Bloomberg, Kotak Institutional Equities

Capital markets ecosystem is quite broad and deep; valuations reflect growth and structural themes

The US capital markets encompass a wide variety of business models with large enterprises across
segments. Most of the large global companies within sub-segments come from the US. Exhibit 13
divides the entire landscape across segments such as asset managers, brokers and exchanges. We also
show some the major companies from each segment. The sector offers diversity of business models
across dimensions, such with listed equity versus debt, traditional versus alternatives, recurring versus
transactional revenues, capital-light versus capital-consuming, etc.

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 108

Shift to passive and alternatives. Traditional asset managers in the US have struggled to deliver
growth owing to sustained underperformance, resulting in a shift toward passives in the past 10-15
years. Their lower valuations (9X FY2025E P/E, ex-Blackrock) reflect the risks of lower AUM growth
(despite strong markets), along with pressure on active fees as well. Within the space, players such
as Blackrock (21X) have done well at the cost of traditional managers. Alternative asset managers
(~25X) have created large value, benefitting from higher-yielding alternative assets that have the
potential to earn performance fees as well.

Rise of retail trading. Similar to a lot of other markets, the US has also seen strong retail interest in
markets. This has manifested through trading volumes in cash equities as well as single stock and
index options, ETFs and crypto. While trading activity fell in 2023 after the market fall, 2024 has again
seen a rise in retail activity. This trend has perked up growth and profitability of various intermediaries,
such as brokers (Schwab: 20X, Robinhood: 33X and Coinbase: ~40X) and exchanges (CBOE: 23X,
Nasdaq: 24X).

Indirect beneficiaries―index, data, asset servicing. There are players who are indirect beneficiaries
of larger trends. Some examples include index providers such as S&P (30X) and MSCI (35X). There
are also information service providers, such as Transunion (22X), FICO (65X), FactSet (27X) and
Morningstar (37X)—who enjoy strong market presence due to client stickiness and entry barriers,
making them attractive business models.

There are also a set of intermediaries who service the larger capital markets ecosystem through
offerings such as fund administration, transfer agency, trading software and analytics solutions.
These include more legacy providers such as SS&C (14X), Broadridge (27X) and Clearwater (50X).
These businesses enjoy greater operating leverage from asset growth, supported by tailwinds of
higher regulation and tech-driven budgets.

Valuations within the capital markets ecosystem reflect mid-term earnings as well as structural themes
Valuations and growth in operating earnings for global capital market companies

Lower • Pricing power • Operating leverage • Cash-flow generation Higher

2025E PE (X) Information services:

35
11 %, 32 X

Favorable
• Alternatives
Alternative
▪ S&P, Moody's managers: Asset servicing:
30
▪ MSCI, FactSet 21 %, 26 X 22 %, 27 X
Exchanges: ▪ Transunion, FICO
10 %, 26 X
▪ SS&C
25 ▪ Broadridge

• Regulations
Brokers/platforms: ▪ Clearwater

▪ CME, CBOE 14 %, 19 X
Asset managers: ▪ LSE, Tradeweb
▪ Blackstone, KKR
20 3 %, 16 X ▪ HK Ex, Japan Ex ▪ TPG, Ares
▪ Schwab
▪ Robinhood ▪ Partners Group
▪ Blackrock Wealth: ▪ Hargreaves
Unfavorable
• Passives

15 ▪ T Rowe 10 %, 13 X
▪ Schroders ▪ Julius Baer
▪ Raymond James
▪ Ameriprise
10
- 5 10 15 20 25
2021-26E EBIT CAGR (%)

Source: Bloomberg, Kotak Institutional Equities

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 109

India is also seeing non-banks scaling up in select segments

Growth in the financial services industry in India has largely revolved around the large banking groups
and select non-banks. However, in the capital markets ecosystem, we see non-banks creating
meaningful scale. Outside the highly regulated areas with strong entry barriers such as exchanges,
depositories and RTAs, other segments such as broking and wealth are seeing the emergence of large
non-bank companies. Exhibits 14-17 show this for the broking industry (active clients, revenues) as well
as mutual fund distribution and wealth management.

Non-bank firms have the advantage of having a narrower and sharper focus on select product or
customer segments. This has enabled a faster scale-up of businesses, especially during favorable
environments for the business. Within the lending space, we have seen several examples of non-banks
scaling up businesses (microfinance, affordable housing, used CV/gold loans, etc.). While there were a
few examples of traditional outfits doing well in broking/wealth as well, we have seen a mix of new
entrants (Zerodha, Groww) and older businesses reorienting themselves (Angel One) to capture new
growth opportunities and scale rapidly over the past few years.

In wealth management as well, we are seeing firms witnessing strong growth, driven by a highly focused
approach toward particular customer segments, further aided by strong markets in the past few years.
Examples include offshoots of larger firms such as 360 One and Nuvama. Some wealth businesses such
as Motilal Oswal are being built within the holding company. Firms such as Prudent and Anand Rathi are
largely monoline with a focus on mutual fund distribution.

We are also seeing talent movement driven by better alignment of incentives with potential to see
multifold growth in wealth on successful execution. The dependence on external capital is relatively
much lower than lending-based businesses.

Select segments of capital markets are witnessing growing scale of non-bank-owned businesses, driving
market share gains over banks/bank-owned companies. This is most visible in retail broking where non-
banks have generally maintained about 50% revenue market share―but this has increased further to
~65% levels in recent years, driven by discount brokers. Similarly, non-banks have also gathered greater
shares in areas such as mutual fund commission revenues and commitments raised by AIFs.

Discount brokers have rapidly gained client market share Revenue market share has shifted toward non-bank brokers
Active NSE clients market share across segments, Active NSE clients market share across segments,
March fiscal year-ends, 2014-25 (%) March fiscal year-ends, 2014-25, revenue mix (%)
Discount brokers Bank-owned brokers Discount brokers Bank-owned brokers Standalone brokers
Standalone brokers Others
100
100.0
20
26 28 24 21
80 36 35 39 38 37 35
80.0 42

60.0 60 35 35
40
53 44
40.0 40 54 55 52 54 54 54
49
20.0 44 45
20 36
28
22
- 9 11 9 9 9 9 11
-
2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

Dec-24

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

Source: Company, Kotak Institutional Equities Source: Company, Kotak Institutional Equities

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 110

Non-banks have gained revenue share in MF sales commissions Banks are small players in alternative products distribution
Mutual fund commissions market share, March Channel-wise breakup of AIF commitments, March
fiscal year-ends, 2013-24 (%) fiscal year-ends, 2019-23 (%)
PVT banks PSU banks Foreign banks Direct National distributors/others
Large distributors Smaller agents Banks Wealth managers
100 100
14 14 14 14 16 16 17 18 19 20 22 24
27
80 33 36
80 40 42

60 46 49 46 52 46 43 46 11
51 49 50 60 9
48 50 13
12 7
13 14
40 13
7 13
11 9 6 40 8
18 15 10 8 6 5 4 4
2 5 8 3
20 3 2 3 7 9 9 9 9
51 46
26 22 24 25 23 20 40
19 19 18 18 17 17 15 38 36
-
2013

2015

2017

2019

2021

2023
2014

2016

2018

2020

2022

2024
0
2019 2020 2021 2022 2023

Source: AMFI, Kotak Institutional Equities Source: CAMS/Equalifi, Kotak Institutional Equities

Market makers and prop trading firms are also gaining scale
Retail participation and market liquidity have also attracted proprietary trading firms and market makers
to India. These firms use sophisticated algorithms and rely on technology to gain edge in markets and
often take the opposite of trades. These firms have gained decent scale in the past few years. We put
together aggregate financials (see Exhibit 18) of around 10 large firms, where we can source the
financials. Their topline of around Rs150 bn is quite meaningful when compared with Rs400 bn revenue
for the broking industry and Rs250 bn revenue for the AMCs in FY2024.

Prop trading firms have gained scale over the past few years
Revenue, PBT and net worth for a sample of 10 large trading firms, March fiscal year-ends, 2022-
24 (Rs bn)

Revenue PBT Net worth

170
~150
135
136
~110
102 91 92

68
49 ~45
44
33
34

-
2022 2023 2024

Source: Company, Kotak Institutional Equities

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 111

Broking: A play on rising retail exposure to markets

Our cross-country study of household financial assets suggests wide variety of ownership
patterns across large markets. While India scores low on headline metrics, we have seen
spectacular rise in participation over last few years. We believe future growth is likely to moderate
and subject market cycles. Business models and industry structure focused on bringing retail to
markets are in the midst of scaling up over next 3-5 years, making it difficult to call out winners.

Ownership of financial assets: Wide variety across countries

We compare the mix of household financial assets for India with other major countries (see Exhibit 19).
While having a complete view of household assets, including real estate and other physical assets, could
be more informative to compare countries, we find that datasets are quite limited to draw such a
comparison.

We find that countries fall over a broad spectrum in terms of the contribution of various products to
household financial assets. Interestingly, there are both developing (India) and developed (Japan)
countries with high exposure to cash/deposits. Similarly, mutual fund ownership is quite high in some of
the developed countries (US and Sweden) and also in developing ones (Mexico and Brazil). While we are
particularly interested in equities and mutual funds, households in some countries (UK, France and
Korea) could also be assuming exposure to capital markets (equities or fixed income) through pension
and insurance products that offer guaranteed or market-linked returns.

India is among the few countries that have a higher exposure to insurance/pension products compared
with mutual funds/equities. While the recent market rally may have increased the exposure, this
observation is likely to hold true even now. As we show below, this also comes out when looking at the
asset base across different products where households save or invest.

Financial saving patterns exhibit wide variance across countries

Breakup of household financial assets, March fiscal year-end, 2023 (%)

Shares MF Pension Life insurance Cash/deposits

100
17 20 18 19 19
2 32 34
80 7 43 41 39 42
5 11 47 46
56 52 53
24 61 60
29 8 66
60 24 30 3 12
12 6
15 36 15
7 6 15
12 27 29
40 9 7 14 8 6 22
14 38 20
4 13 2 28 15 13
5 6 15
6 5- 6 7
44 1 4 12
20 39 36 36 2 7 13 17
34 30 28 26 26 25 24 5 4 8
23 20 18
12 12 12 10 8
-
Spain

France

Japan

India
Mexico

Chile

China
Sweden

Brazil
Denmark

Portugal

Norway
Italy

Poland

Korea
US

UK
Taiwan

Germany

Notes:
(a) China data as of 2018.

Source: OECD, CEIC, Central banks, Kotak Institutional Equities

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Equity market ownership shows more predictable trends

Exhibit 20 shows ownership of public equities across investor categories. This data is slightly dated, but
has the benefit of uniform categorization given that disclosure norms are different across countries.
Most countries have seen a rise in the retail ownership of equities after Covid. The broad trends are still
relevant to draw a few conclusions, despite the data being dated. Institutional ownership of equities is
generally higher in more developed markets, with retail, on the other hand, having a lower share in
ownership. Conversely, direct retail ownership is higher for emerging markets.

India has high participation of direct retail investors

Stock market ownership, as of 2020 (%)
Institution Public sector Corporate Retail Others
100

25 22 22 21 22 26
33 31 28
80 34 36 39 39
40 41 40 40 41
9 4
11 10 3 2
60 3 6
17 6
60 34 18 17 13 11 6
10 25 8 8 7 3
15 33 6
12 13 43 4
20 15 22
40 13 23 22 30
24 11 6
19 47 7 3 5 68
7 6 12 35 2 60
29 10 11 46
20 2
17 17 30 11 30
25 27 29 27
20 22 18 18
11 1 10 12
8 7 8
0

Japan
Mexico

China

Spain

Australia
France

Indonesia
India

Canada
Philippines

Malaysia
Italy

Hong Kong

Kingdom
Singapore
Thailand

United States
Korea

Germany

United
(China)

Notes:
(a) Others includes strategic individuals and institutions below disclosure thresholds.

Source: OECD, Kotak Institutional Equities

Participation by population varies widely as well

Measuring equity participation by population is challenging, given the lack of data reporting, even though
we get a rough sense from news reports and official data sources. China’s market regulator reports that
there are around 220 mn people investing in stocks, i.e., less than 20% of the adult population (link). The
US, in comparison, has ~160 mn people owning stocks, i.e., about 60% of adults. Korea has about 40%
of adult population invested in stocks. India is likely to have this number at close to 10%, with about 110
mn unique PAN cards registered with the NSE.

Declining income risk, confidence in markets and lower costs drive retail participation
Several studies and data presented above suggest that the growth in per capita income levels leads to
a possibility of households potentially expanding investment options beyond deposit-based savings.
This is logical as the growth in wealth leads to allocation beyond the short-term liquidity needs fulfilled
by bank deposits. Some of the other underlying drivers that form the backdrop for higher retail
participation in market-based investments include strong economic growth, low inflation and corporate
profit growth driving attractive stock returns. Market buoyancy, supported by above factors, leads to low
perceived risks of income loss and consequently higher risk appetite.

Case study: Rapid MF adoption by US in 1990s

Several statistics capture the remarkable rise in retail participation in mutual funds during 1980-90s
in the US: (1) share of US households owning MFs grew to ~45% by 2000 from ~5% in 1980; (2) the
share of MF assets in gross household financial assets increased to ~20% in 1999 from ~5% in 1984;
(3) MFs owned ~20% of US equities in 2000 compared with ~5% in 1984; (4) equity AUM grew to
~US$4 tn by 2000 from ~US$100 bn in 1985 (~20% CAGR); and (5) an exponential growth in mutual
funds and investment accounts during 1990-2000.

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The US households during this period became accustomed to saving and investing with a financial
institution that did not have a branch office in the vicinity. This led to the replacement of deposits,
with initially the money market mutual funds and then a wide array of equity funds. Households also
showed resilience in flows during drawdowns, with the cash position of asset managers stemming
further declines.

Various research points to two underlying factors that drove the wide-scale adoption of MFs during
the period: (1) macro factors: improving investor confidence stemming from lower income risk as a
result of economic growth, moderate inflation and healthy equity returns (~13% CAGR) and (2) micro
factors: mutual funds increasingly became default vehicles for new flows into retirement accounts
(401(k) and IRAs), further aided by declining costs and improved accessibility (see Exhibits 11-12).

US has seen a rapid rise in MF investing in 1980-90s Households increased allocation toward investment funds
Share of households owning a mutual fund product Share of household financial assets in investment
(%) companies (%)

Source: ICI, Kotak Institutional Equities

Source: ICI, Kotak Institutional Equities

Exponential growth in MF AUM during 1990s… …led by strong net inflows, especially in equity funds
MF AUM across equity, bond and hybrid funds, MF net inflows across equity, bond and hybrid
1984-2004 (US$ bn) funds, 1984-2004 (US$ bn)

Equity funds Hybrid funds Bond funds Equity funds Hybrid funds Bond funds
7,000 360

270
5,600

180
4,200
90
2,800
0

1,400
-90

0 -180
1988
1989
1990
1991
1992

1998
1999
2000
2001
2002
1984
1985
1986
1987

1993
1994
1995
1996
1997

2003
2004
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004

Source: ICI, Kotak Institutional Equities Source: ICI, Kotak Institutional Equities

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Sharp rise in household ownership of equities and mutual funds Strong household preference for MFs compared with deposits
Time & saving deposits, mutual fund assets, direct Percentage of total outstanding securities held by
equities as % of household financial assets, (%) mutual funds, (%)

Deposits Mutual fund Equities Change in deposits MF net flows

25
2,326
2,400
20
1,900
15 1,507
1,400 1,161
10
900 758
5
400 295
- (5)
Jul-81

Jul-84

Jul-87

Jul-90

Jul-93

Jul-96

Jul-99

Jul-02
Jan-80

Jan-83

Jan-86

Jan-89

Jan-92

Jan-95

Jan-98

Jan-01
(100)
1971-1980 1980-1990 1990-2003

Source: Federal Reserve Source: Federal Reserve, ICI

India has ~30% share of equity in household financial assets; ~10% in overall household assets

We break down household investments in various financial products (deposits, insurance, pension,
investment funds and direct equity) to see the broad trends. This is not a comprehensive exercise due
to data limitations, but it captures large financial asset pools. While there is a clear shift in the allocation
toward equities (direct and MFs) at the cost of deposits, it is magnified by strong returns in recent years.
We also see this play out in sharp growth in retail participation. Our analysis is somewhat ‘quick and
dirty’ and leaves out some of the asset pools (such as small saving schemes). However, the broader
import is still relevant as it highlights strong retail proclivity toward equities compared with deposits.
What remains to be seen is the underlying retail expectations and the eventual stickiness of equity
allocation when markets go through downturns (see Exhibits 27-28).

When we look at the more comprehensive RBI data on household financial assets and adjust it for one
important missing asset, i.e., direct equity investments (see Exhibit 29), India approximately has 30% of
household financial assets and 10% of overall household assets invested directly or indirectly in equities.
This compares with ~40% of financial assets and ~30% of overall household assets in equities for the
US.

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Household financial assets have higher share of stocks and Surging equity valuations and flows have driven large gains in
MFs, helped by strong markets and flows household wealth in recent years
Breakdown of household assets across products, Change in asset values across investment/saving
March fiscal year-ends, 2014-24 (%) products, March fiscal year-ends, 2014-24 (Rs tn)
CA SA FD Insurance Pension Equities MF PMS/AIF CA SA FD Insurance Pension Equities MF/PMS/AIF
100 1 1 1 1 1 1 1 2 2 2 50
5 6 6 7 8 8
8 8 9 9 11
7 8 7 8 8 8 6
7 9 11 9
80 7 8 8 10 12 40 11
8 9 10
11 12
23 23 12 5
23 22 23 30
60 22 22 22 5 13
21 21 9
21 7 3
20 3 6
3 2 5
40 33 32 32 29 2 1 3 6 5
27 27 28 25 2 4 1
23 24 2 2 3 5 8
23 10 2 1 4 2 3 4 4 5
1 3 2
3 4 3 4 4 2 7
20 3 6 2 7 5 7
1 3 3 3 3 2
21 20 20 22 22 21 22 21 21 - (0) (1) (0)
20 17 (3)
4 4 3 3 3 3 3 3 3 3 2 (1)
- (10)
2014

2015

2019

2020

2024
2016

2017

2018

2021

2022

2023

2017

2018

2019

2022

2023

2024
2015

2016

2020

2021
Notes: Notes:
(1) Equities include ownership classified as retail; do not include promoters (1) Equities include ownership classified as retail; do not include promoters
(2) FY2024 insurance AUM growth assumed at ~15% (3) We have made (2) FY2024 insurance AUM growth assumed at ~15% (3) We have made
certain assumptions to derive HNI share in AIFs (4) PMS AUM reflects listed certain assumptions to derive HNI share in AIFs (4) PMS AUM reflects listed
equity assets (5) We have added EPFO and NPS AUM for pension assets (6) equity assets (5) We have added EPFO and NPS AUM for pension assets (6)
MF AUM includes retail and HNI AUM for equity, bonds and others. MF AUM includes retail and HNI AUM for equity, bonds and others.

Source: RBI, SEBI, EPFO, NPS Trust, IRDAI, Kotak Institutional Equities estimates Source: RBI, SEBI, EPFO, NPS Trust, IRDAI, Kotak Institutional Equities estimates

Estimation of household ownership of equity

March fiscal year-ends, 2021-24 (Rs bn)
2021 2022 2023 2024
HH financial assets (RBI reported) 228,743 254,357 278,450 319,868
Mutual funds 17,305 21,521 23,678 33,872
Share of MF in HH financial assets (RBI) 7.6 8.5 8.5 10.6

MF and equity investments (as per SEBI data) 58,043 79,624 78,121 120,351
Direct equity 39,742 57,101 53,669 84,068
Mutual funds 18,301 22,523 24,452 36,282

Adjusted RBI data on HH financial assets 269,481 312,460 332,893 406,347

Share of MF & equity in HH financial assets (RBI) 21.5 25.5 23.5 29.6
Share of MF & equity in overall HH assets (approx.) 7.5 8.9 8.2 10.4

Notes:
(1) Direct equity includes promoter holdings considered as households as per PAN.

Source: RBI, SEBI, Kotak Institutional Equities estimates

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A brief look at China’s experience with retail investors

China is a good example of heightened retail participation in equities coinciding with strong market
returns. This has played out multiple times, i.e., during the pre-GFC market rally and then much more
stunningly during the 2015 spike in markets. A similar trend was seen later during Covid and in
September-October 2024 after the recent stimulus announcement (data on recent episode is awaited).
China is also peculiar, given its high share of retail in overall cash equities trading volumes. Retail
behavior has also proven to be very short-term focused, with an average holding period of 40 days
compared with ~110 days for institutional investors. Comparatively, the average holding period in the
US (both retail and institutional) is around 90 days (link).

The short-term nature of investing is evident even in indirect investments. An analysis by equity fund
management companies (March 2021) indicated that ~45% held positions for less than three months,
~60% held positions for less than half a year, ~10% held positions for more than three years and only 2%
held positions for more than ten years (link). Another study from the Fund Industry Association shows
that over half of the fund investors hold for less than one year, only less than 40% make profits and most
either lose money or make no profit. The holding period return for fund investors covering 15-year period
ending 2021 has been ~9% compared with ~17% for an index of active funds.

China has seen spike in investor account additions… …at the time of stronger market returns
Investor accounts and additions, 1996-2024 (# mn) Shanghai composite index, 1999-2024

Investor accounts New investor accounts (RHS) 6,500

400 8.0 pre-GFC Market bubble
bull driven by retail
5,200 market leverage
320 6.4

3,900
240 4.8

160 3.2 2,600

80 1.6 1,300

- 0.0 -
Jun-08
Nov-98

Nov-21
Sep-02

Jun-99
Jun-00
Jun-01
Jun-02
Jun-03
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Jun-17
Jun-18
Jun-19
Jun-20
Jun-21
Jun-22
Jun-23
Jun-24
May-10
Dec-96

Dec-19
Jul-06

Apr-12
Oct-00

Oct-23
Feb-16
Mar-14
Aug-04

Jan-18

Source: CEIC, Kotak Institutional Equities Source: Bloomberg, Kotak Institutional Equities

Each securities market is unique—retail participation varies widely

In our previous report, ‘Regulating retail F&O: Global learnings and potential options’, we briefly looked at
some of the large stock markets for their experiences in dealing with sharp increases in retail trading
(often speculative). Each of these markets has different characteristics such as market structure, entry
barriers for retail traders and institutional participation. As an example, there is a wide variation in the
share of retail in cash equities trading (see Exhibit 32). Similarly, there are differences in derivatives
markets as well. For example, the US has an active securities lending/borrowing market and exchange-
traded derivatives market, whereas Korea has banned short selling, but has a more active exchange-
traded market. China has an active securities lending market, but its exchange-traded market lacks
institutional participation when compared with India.

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Wide variation in retail participation in cash equities trading across countries

Share of retail and other participants in cash equities, data over 2021-23 (%)

Retail Prop Foreign Domestic/others

100

80

60

40 86
64
58
20 40 35 35
25 20
12
-
China Korea Taiwan Thailand China India US Japan Indonesia
(A shares) (H shares)

Source: SIFMA, stock exchanges, Kotak Institutional Equities

India’s derivatives market is quite skewed toward index options

Exhibit 33 shows growth in activity levels across broad equity products (cash and derivatives) for the
past ~15 years. An apples-to-apples comparison of volumes across these products is tough, given
different characteristics of these products. Nonetheless, the explosive growth in index options has
completely overshadowed other segments.

We compare the size of various large derivative markets across major equity products in terms of
contracts traded (see Exhibits 34). Although using contracts to compare size has its own challenges and
benefits, it remains one of the most commonly used metrics for reporting trading activity. India has a
disproportionate share of volumes in index options compared with other products such as single stock
options and futures. Despite a very high share in volume traded, India’s share in open interest is
negligible. Some mature markets, such as the US and Europe, have a more balanced mix between options
and futures, which automatically lends itself into higher open interest (see Exhibit 35).

Growth in index options has surpassed all other categories by a wide margin
Summary of volume growth across categories of products at the NSE, March fiscal year-ends, 2010-25
Cash equities Index futures Stock futures Index options Stock options
No. of Premium Notional Premium Notional
trades Turnover Contracts Turnover Contracts Turnover Contracts turnover turnover Contracts turnover turnover
Year (# mn) (Rs bn) (# mn) (Rs bn) (# mn) (Rs bn) (# mn) (Rs bn) (Rs bn) (# mn) (Rs bn) (Rs bn)
2010 6.9 170 0.7 161 0.6 213 1.4 329 0.1 ― 21
2011 6.1 140 0.6 171 0.7 216 2.6 720 0.1 ― 40
2012 5.8 113 0.6 144 0.6 164 3.5 912 0.1 ― 39
2013 5.4 108 0.4 101 0.6 169 3.3 911 0.3 ― 80
2014 5.7 112 0.4 123 0.7 197 3.7 1,106 0.3 ― 96
2015 7.5 178 0.5 169 1.0 341 5.7 1,643 0.4 ― 135
2016 7.5 172 0.6 184 0.9 317 6.6 8 1,982 0.4 1.5 141
2017 8.0 204 0.3 175 0.7 449 4.3 14 2,935 0.4 3.9 246
2018 10 294 0.2 196 0.9 634 6.2 19 5,485 0.5 6.0 392
2019 12 321 0.3 225 1.0 651 11 26 8,198 0.8 8.1 507
2020 13 364 0.4 271 1.0 604 19 44 12,609 0.8 9.3 499
2021 19 618 0.5 363 1.0 727 31 106 23,699 1.3 23 1,059
2022 22 668 0.4 340 1.1 848 71 236 64,899 2.7 42 2,269
2023 19 534 0.4 382 1.1 766 163 440 149,981 3.4 37 2,378
2024 28 817 0.3 302 1.3 1,038 381 562 319,825 4.6 56 3,744
9MFY25 39 1,188 0.5 364 2.1 1,579 496 582 345,650 6.7 81 5,376

Source: NSE, Kotak Institutional Equities

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India’s share in trading volumes is disproportionately higher in index options while its share in open interest remains very small
Share of select large markets in volumes for equity derivative products (% of contracts traded/outstanding)
Index Options Stock Options Futures Open interest (overall)

100 100 100 100

80 80 80 80

60 60 60 60

40 40 40 40

20 20 20 20

- - - -

2010
1997
1999
2002
2004
2006
2008

2012
2014
2016
2018
2020
2022
2015
1997
1999
2001
2003
2005
2007
2009
2011
2013

2017
2019
2021
2023

1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
2023

1999

2011

2023
1997

2001
2003
2005
2007
2009

2013
2015
2017
2019
2021
Source: : World Federation of Exchanges, Kotak Institutional Equities

Trading volumes in India are highly skewed toward index options

Share of equity derivative products in overall contracts traded (%)

Index options Stock options Futures

100 0
12 1
24
6
80 44
57 52

60
91
54 19
99
40 - 82 20

20 43
37
28
22 0
8
-
US Europe China Japan Korea India SG/Taiwan/
HK

Source: World Federation of Exchanges, Kotak Institutional Equities

Margin funding book in India is relatively small despite the recent growth
Stock markets around the world have different levels of margin loans allowed for stock purchases. Stock
purchase on margin is a product generally governed by the exchanges, with regulators laying down the
broad rules. Margin funding attracts a lot of interest during market upcycles, as (1) it allows investors to
borrow and generate higher returns; (2) brokers also benefit from better margins on the product as it
supplements the trading commission revenues; (3) products tends to have reasonable risk management,
given the filtering of stocks available for margin funding, along with haircuts and real-time monitoring of
coverage.

Exhibit 36 compares India’s margin funding book (US$10 bn, i.e., 0.2% of market cap.) with a few other
markets. The US (~US$900 bn, i.e., 1.5% of market cap.), followed by China (US$240 bn, i.e., 2% of market
cap.), have by far the largest margin funding book. Margin availability is likely to vary a lot across
markets. In India, for example, brokers can provide 5X leverage to fund stock purchases. The US
regulations require an initial margin of 50% and a minimum maintenance margin of 25%.

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Margin funding balances in India remain much lower than other Margin funding book in India has grown at a fast pace in recent
large markets years
Margin loans, as of October 2024 (%) Margin finance outstanding, 2017-25 (Rs bn)

Margin loans (US$ bn) Margin loans (% of mcap., RHS) 900

1,080 2.3 2.5
891 720
900
2.0

720 1.5 540

1.5
540 360
0.8 1.0
360 0.6 240 180
0.4
0.5
180 0.2
25 13 14 -
10

Jun-24
Mar-20

Mar-24
Mar-17

Mar-22

Dec-22

Dec-24

Mar-25
Sep-23

Sep-24
- -
India Japan Taiwan Korea US China

Source: NSE, FINRA, CEIC, Kotak Institutional Equities Source: NSE, Kotak Institutional Equities

Market cycle and reforms are key enablers of retail participation

Market access for retail has improved by leaps and bounds in the past five years. This is seen across
market segments such as primary issuances, secondary trading and indirect investment through
investment vehicles such as MFs, PMS and AIFs. We highlight below the commonly sighted measures
of growth in retail participation such as registered investors on the NSE, outstanding demat accounts
and MF investor base (see Exhibits 38-41).

Over the past few years, the efforts of the SEBI, along with market intermediaries such as exchanges,
clearing houses, brokers and RTAs, have ensured a much easier access to capital markets, supported
by continuous efforts to enhance investor protection and ensure market stability. The regulator has also
adopted a more consultative approach toward rule making, along with several measures for the ease of
doing business, ensuring a lower risk of unexpected regulatory disruptions. That said, we believe that
historical market returns and the prospects of attractive future returns are likely to be more, if not equally
influential, in attracting retail interest in markets.

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Strong growth in demat accounts after 2020 Unique registered investors have also grown in line with demat
Demat accounts, March fiscal year-ends, 2010-25 NSE registered investors, March fiscal year-ends,
(# mn) 2010-25 (# mn)

190 120 116

200

151 96 92
160

73
114
120 72
59
90
80 48 40
55 31
41 25 27
32 36 18 20 22
40 22 23 25 28 24 15 16
17 19 20 21 12 13 14

- -

11M'25
2011

2013

2016

2018

2020

2022

2024
2010

2012

2014
2015

2017

2019

2021

2023

10M'25
2010

2012
2013

2015

2017

2019
2020

2022

2024
2011

2014

2016

2018

2021

2023
Source: SEBI, Kotak Institutional Equities Source: NSE, Kotak Institutional Equities

Unique MF investors are nearly half of NSE registered investors Folio count is much higher than unique MF investors
Unique MF investors, March fiscal year-ends, 2018- Mutual fund folio count, March fiscal year-ends,
25 (# mn) 2009-25 (# mn)

55 53 250
225
45
44 200 177
38
34 146
33 150
130
23 97
21
22 18
20 100 82 89
71
48 48 47 46 42 55
47
11 50 39 41

- -
2018
2009
2010
2011
2012
2013
2014
2015
2016
2017

2019
2020
2021
2022
2023
2024
2018

2019

2020

2021

2022

2023

2024

9MFY25
9MFY25

Source: AMFI, Kotak Institutional Equities Source: AMFI, Kotak Institutional Equities

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India has seen a dynamic regulatory environment in the past decade with focus on market stability and investor protection
Key regulatory changes and technology innovations in India in the past decade
Investors Intermediaries Market infra institutions
Issuers, corporates and AMCs Regulator
(retail & institutional) (brokers, etc) (exchanges, CCP, CSD)
Key regulatory changes and technology innovations in India between 2014–2018
Relaxed listing eligibility norms for
startups, SMEs
Guidelines for issuance of green bonds
Streamlined mechanism for tender
offers (buy back / delisting) IPO listing time reduction from T+12 to
Primary markets ASBA for IPO applications via UPI
T+6 for securities allotment
Banks allowed debt-for- equity swap for
defaulting publicly traded borrowers
Additional methods to achieve
minimum public shareholding (MPS)
Introduction of options in the
commodity derivatives market
NRIs permitted to participate in
Exchange Traded Commodities Integration of commodities and
Derivatives (ETCD) segment Introduction of single registration for securities derivative markets by
Secondary markets
Streamlined framework for brokers brokers across all market infra players integrating the participants, brokers,
providing Margin Trading Facility to and operational frameworks
clients
Streamlined FPI entry, KYC and
eligibility norms
Allowing MFs to invest in REITs and
InvITs
Allowing participation of Category III Allowing to use stock exchange infra
Funds (MF, AIF, PMS) AIFs in Commodity Derivatives market Use of e-wallet for investment in MFs for purchase/ redemption of MF (e.g.,
Amendments in AIFs to provide ease of BSE STAR MF and NSE, NMF)
doing business for angel funds and
increase investments in start-ups
Streamlined customer onboarding
Detailed framework on cyber security
through Aadhaar based KYC
and cyber resilience with respect to
Simplified procedures for transmission Standardized account opening MIIs Streamlined investor grievance
All of securities in the event of death of documentation across brokers mechanism
holder Created capacity planning framework
Consolidated Account Statement (CAS) for all market infrastructure institutions
for all securities assets
Key regulatory changes and technology innovations in India between 2019–2023
Option for confidential pre-filing of offer Strengthening of regulatory framework for
documents green bonds and introduction of yellow &
blue bonds
Fastrack IPO clearances/ approvals based
Enablement of e-voting through demat Introduction of “Social Stock Exchange”
on tech enabled process re- engineering at Introduction of Electronic Gold Receipts
accounts for retail investors
SEBI (EGRs)
Reduction in IPO listing time from T+6 to
Primary markets
Reduction in minimum ticket size of T+3 for securities allotment; Reduction in
Facilitating development of REITs and GenAI driven automated compliance
privately placed debt securities (INR listing time of debt securities issued on
InvITs market checks on public disclosures by issuers for
10k) private placement from T+4 to T+3
IPO approvals
Enhancing transparency in IPOs through
disclosures of key performance indicators Standardized XBRL reporting for public
(KPIs) and price per share offer and issue documents

Regulatory framework for online bond

Disclosure of material events to stock Introduction of ASBA for secondary
platforms
exchanges and verification of rumors by markets Introduction of revised pledging/ repledging
listed companies system
Centralized database for corporate bonds/
Automated alerts & disclaimers Shift to T+1, T+0 & real-time settlement
debentures
Strengthening of governance at listed provided at point-of-trade in cash Mandatory rolling settlement with clients on
Secondary markets
companies equities & F&O trading a quarterly/ monthly basis Segregation and monitoring/visibility of
Prevention of inadvertent trading and self
collateral at client level
trading
Business Responsibility and Sustainability Direct market access facility to FPIs to Introduction of peak margins collection and
Reporting (BRSR) disclosures by listed participate in exchange traded reporting regulations
Establishment of Corporate Debt Market
entities on ESG parameters commodity derivatives (ETCD)
Development Fund (CDMDF)

Standardized approach to valuation of

(Proposed) Enablement of low value Reduction of MF redemption timelines to
investment portfolio of Alternative
SIPs T+2
Investment Funds (AIFs) Advanced analytics driven transaction
Funds (MF, AIF, PMS)
level monitoring of mutual funds
MF Central Platform, a one-stop Dematerialization of AIFs to improve
(Proposed) ‘MF Lite’ regulations for
investment management platform transparency
passive funds

Inter-operability among clearing

Streamlined KYC enabled through
corporations
Aadhar-based eKYC , making
customer onboarding seamless & fully Introduction of Regulatory Sandbox and
Two-way portability across clearing
digital Innovation Sandbox
corporations CC through a SaaS module
Enhanced monitoring and surveillance of
All Centralized mechanism to streamline Cyber Incidents Reporting Portal (CIRP)
QSBs Investor Risk Reduction Access (IRRA)
deceased account claim processes for
platform
securities and MFs Streamlined framework for adoption of
cloud services by SEBI registered entities
DLT-enabled unique asset identification
Online dispute resolution system for
and security and covenant monitoring
protecting investor interests.
for non-convertible securities

Source: NSE, SEBI, Kotak Institutional Equities

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Retail activity is cooling off

While the growth in index options itself has been very strong, increasing retail participation has led to
much stronger growth in retail premium traded. Compared with being under 10% of equity cash value
traded, option premiums have grown to nearly match cash values in FY2023 and about 70% of cash in
FY2024 (see Exhibit 45-46). The period after 2020 has been a clear divergence in retail participation,
which has declined in cash markets, but has expanded in options (see Exhibit 43-44). Several factors
could potentially explain this rise—(1) options provide the cheapest leverage of all products, (2) the
introduction of new products with weekly expiries, (3) margin rules have pushed more volume toward
options and (4) ease of account opening and low entry barriers for traders. We have explored this in more
detail in our note, ‘Regulating retail F&O: Global learnings and potential options’

However, activity levels have been falling since their peak in June-July 2024. Large part of retail-focused
F&O regulations are now in force. Retail premium traded in Jan-Feb 2025 has likely declined by ~20% as
compared to the pre-regulation average level (Apr-Oct). Premium decline is higher (~25%) for non-retail
(largely prop) participants. The decline in contracts has been similar for both at ~80%. We see the impact
of regulations (based on Jan 2025 disclosures by NSE) being visible in the distribution of retail investors
based on premium traded: Retail participation at the lower end (<Rs1 mn) has declined more sharply
(~25%) as compared to participation at the higher end (~7%). This is in line with what we have said in
previous notes: A high skewness in trading activity (~25% of traders drive ~95% of options premium)
would imply an unequal impact of regulations between the number versus the value of retail
participation. For prop/institutions, a higher decline in volumes is likely due to higher expiry day margins
on short positions from November onwards. While still in the consultation phase, SEBI’s new proposals
on index position limits can potentially (if implemented) constrain institutional volumes further.

Activity in cash markets has also moderated in recent months from the elevated levels (June-July). Retail
cash ADV has declined to ~Rs300 bn from the peak of ~Rs500 bn, even as these levels are still higher
than previous years. Another measure of activity, i.e., cash delivery volume, has also come off the peak
levels, reflecting weak markets. Lastly, the margin funding book also reflects the weak retail sentiment,
even as the decline is less pronounced as compared to trading volumes.

Retail share in cash volumes has declined in the past five years Retail share in index options has declined in the past five years
Breakdown of cash value traded, March fiscal year- Breakdown of index options premium traded, March
ends, 2016-25 (%) fiscal year-ends, 2016-25 (%)

Corporates DII FPI Individuals Prop Others Corporates FPI Individuals Prop Others
100 3 4 5 6 5 5 100 3 3
7 7 6 7 6 8 9 9 8 8 7 6
21 17 18
80 22 23 25 28 27 28 29 80
44 38 33 39 47
53 44 43 45 49
60 33 36 60
39
39 39 37 36 35
45 41
40 29
40 25 27
21 25 32
23 16 22 34 35
35 35
15 15 15 15 15
20 12 12 20
10 10 11 15 15 21
11 11 11 12 11 14 16
8 9 12 10
10 12 11 10 8 10
0 6 5 5 4 4 6 5 11 10 9 11 9
0 6 6 3 3 5
2023
2016

2017

2018

2019

2020

2021

2022

2024

2025

2017

2025
2016

2018

2019

2020

2021

2022

2023

2024

Source: NSE, Kotak Institutional Equities Source: NSE, Kotak Institutional Equities

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Retail trading activity in cash jumped in 2025 Premium growth has been faster than growth in active traders
Retail options premium turnover (daily average, Retail options premium turnover (daily average,
single-side) and monthly active F&O traders, March fiscal year- single-side) and monthly active F&O traders, March fiscal year-
ends, 2014-25 ends, 2014-25

Retail cash ADV Monthly active cash traders (RHS) Retail options premium ADV (Rs bn)
(# mn) (Rs bn) Monthly active options traders (RHS) (# mn)
(Rs bn)
450 14.3 15 220 4.5 5.0
12.9
176 3.9 3.7 4.0
360 11 12
10

8 2.8
270 9 132 3.0

6 2.0
180 6 88 2.0

3 1.0
3 3
2 44 1.0
90 3 0.5 0.6
0.3 0.4
37 62 57 73 115 125 141 278 272 195 290 398 302 2 2 2 4 5 7 13 33 79 154 197 194 151
- - - -

Feb-25
2014

2016

2019

2021

2023
2015

2017

2018

2020

2022

2024

11M'25
2014

2017

2018

2022

2023
2015

2016

2019

2020

2021

2024

Feb-25
11M'25

Source: NSE, Kotak Institutional Equities Source: NSE, Kotak Institutional Equities

Active traders form only a small share of the overall investor base
Number of demat accounts, unique investors, annual active and monthly active, March fiscal year-ends, 2008-24

April 2020 March 2022 March 2024 Dec 2024

Source: SEBI, NSE, Kotak Institutional Equities

Broking industry―coming of age

Very few segments of financial services have seen the level of disruption such as retail broking. The
industry has seen significant changes in terms of product proposition, pricing and cost structure. While
normally regulations favor incumbents in many industries, in the broking industry, regulations along with
technology have provided massive tailwinds to growth. Globally, the advent of zero-cost or low-cost
trading has revolutionized the broking industry, attracting an unprecedented influx of retail clients.

In India as well, the discount broking industry had already caught the growth wings after demonetization,
with a few key game-changing initiatives/developments. These include accelerated adoption of Aadhaar
following demonetization, followed by KYC reforms by the government and the SEBI. In the context of
market intermediaries, the SEBI’s April 2020 circular on KYC guidelines using technology proved to be
instrumental in enabling fast and frictionless verification and onboarding of new customers. Adopted at
the onset of Covid, new KYC reforms eliminated the need to visit branches and physically complete KYC.
This led to ease of investing, greater convenience, higher efficiency and reduced timelines for onboarding
of clients.

A few features of growth in retail trading

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Recent growth in retail participation exhibits various features and drivers such as instant account
openings, short-term holdings to benefit from intraday movements, low or zero commission trading
augmented with intuitive interfaces and analytical tools and the emergence of social media as a
learning/sharing medium. Not only has the cost of trading reduced, but retail investors are also receiving
more advanced services on the apps, which hitherto were accessible largely to institutional investors
with sophisticated trading systems.

Growing preference for self-directed trading, with improving access to mobile phones and the internet,
has led to companies investing in top technology talent toward developing engaging mobile apps and
improving the trading experience. As a result, the marginal cost of servicing customers has fallen sharply,
thus leading to a decline in the revenue threshold of a profitable customer.

Discount brokers have ~70% client market share and ~45-50% revenue market share
India has nearly ~50 mn active clients on the NSE, growing from ~10 mn during the pre-Covid phase (see
Exhibit 48). While we classify the overall client base within broker segments such as discount, bank-
based and standalone (i.e., rest), in reality, a large part of the industry has moved to a discount broking
model from a pricing point of view. Discount brokers have been major beneficiaries of the ~5X jump in
the active client base, with their market share increasing to ~70% in September 2024, compared with
~30% in March 2020. The market share is measured based on active clients (i.e., at least one trade in
the past year) trading with the NSE (see Exhibit 49).

While the pricing strategy of discount brokers is often seen as a major driver of disruption, the product
experience that is similar to some of the most popular consumer apps has also been a major draw for
many young individuals who have opened accounts in the past 4-5 years. Discount brokers have also
been at the forefront in connecting with the psyche of young mobile users by embedding
learning/educational content in the apps that helps build stickiness. Technology-led discount brokers
have also been beneficiaries and likely growth drivers of retail F&O volumes in India.

Sharp rise in active customers post-Covid

NSE active customers (i.e., trade at least once a year), as of February 2025 (# mn)

55
49

44 41
36
32
33

22 19

11
11 8 9
5 5 6
4

-
Feb-25
2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

Source: NSE, Kotak Institutional Equities

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Discount brokers have rapidly gained client market share

Active clients market share, March fiscal year-ends, 2014-25 (%)
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Feb-25
Discount brokers 3.8 3.9 4.7 7.0 11.9 17.4 28.2 47.9 58.8 63.8 66.9 68.4
Groww — — — — — — — 4.1 10.7 18.8 23.4 26.6
Angel One 3.3 3.1 3.3 3.9 4.4 4.7 5.3 8.3 10.1 14.3 15.0 15.6
Zerodha 0.4 0.6 1.2 2.8 6.5 10.4 13.1 19.1 17.4 19.8 17.9 16.3
Upstox 0.1 0.1 0.2 0.3 0.5 1.1 5.7 11.3 14.5 6.7 6.2 5.7
5 Paisa — — — 0.1 0.4 1.2 4.0 4.6 4.9 1.6 1.3 0.9
Paytm Money — — — — — — — 0.5 1.1 2.1 2.0 1.4
Dhan — — — — — — — 0.0 0.1 0.6 1.2 2.0
INDMoney — — — — — — — — — — 0.8 1.7
Bank-owned brokers 26.8 28.4 29.5 30.3 28.8 29.4 26.8 21.5 18.0 15.4 13.2 12.9
Kotak Securities 5.2 5.3 4.8 4.6 4.4 5.0 5.3 3.9 3.5 3.0 3.0 3.0
HDFC Securities 6.5 6.8 7.9 8.1 7.3 7.7 6.7 5.1 3.2 3.2 2.7 3.0
SBICAP Securities 1.6 2.2 2.4 2.8 2.6 2.4 2.3 1.7 1.8 1.9 2.1 2.0
ICICI Securities 11.7 11.7 10.8 10.4 9.6 9.6 10.0 8.4 8.4 6.3 4.5 4.0
Axis Securities 1.8 2.4 3.6 4.4 4.9 4.8 2.5 2.4 1.2 1.0 0.9 0.9
Standalone brokers 18.8 19.4 19.7 16.9 16.4 15.1 13.3 10.0 8.9 7.2 5.9 5.2
Motilal Oswal 2.9 3.0 3.2 3.5 3.7 3.6 3.5 3.0 2.5 2.4 2.2 2.1
Sharekhan 6.4 6.7 6.5 6.2 6.5 5.8 5.1 3.6 2.1 2.0 1.6 1.4
IIFL Securities 5.5 5.6 5.1 3.3 2.7 2.5 2.0 1.5 3.1 1.4 1.1 0.9
Geojit 3.5 3.1 3.4 2.7 2.2 1.9 1.5 1.1 0.7 0.7 0.6 0.5
Edelweiss Broking 0.6 0.9 1.5 1.3 1.3 1.4 1.2 0.8 0.5 0.6 0.4 0.3
Others 51 48 46 46 43 38 32 21 14 14 14 13
Industry 100 100 100 100 100 100 100 100 100 100 100 100

Source: NSE, Kotak Institutional Equities

Discount brokers operate with much lower ARPU

Discount brokers have increased their revenue share to ~45% in FY2023 from ~20% in FY2020. Given
that FY2024 financials for all players are yet to be disclosed, we estimate revenue share is likely to be
around ~45% (see Exhibit 50-51). It is also worth noting that the revenue mix understates the revenue
market share for discount brokers, as traditional brokers (banks and standalone) include institutional
broking revenues as well. We also plot the broking revenues, client base and revenue per user (ARPU)
for discount and traditional brokers. ARPU levels of traditional brokers are typically 2-5X those of large
discount brokers.

Lower ARPU for discount brokers is also indicative of the broader mix shift toward F&O products in the
past 4-5 years, resulting in a fall in trade amounts (i.e., low options premiums) and low transaction costs.
Discount brokers have been able to capture this trend much more effectively than traditional brokers,
who had historically been more active in more affluent segments.

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Revenue share of discount brokers has risen significantly Broking revenues have grown exponentially after 2020
Revenue breakup for brokers, March fiscal year- Revenues for a sample of large brokers, March
ends, 2008-24 (%) fiscal year-ends, 2008-24 (Rs bn)

Discount brokers Bank-owned brokers Standalone brokers 450 418

100
21 20
26 28 24 360
80 36 35 39 38 37 35
42
287
270 245
35 35
60
40
53 44 169
180
40 54 55 54
49 52 54 54
92 89 98
45 90 66
20 36
44 51 54
28 33 34
22
9 11 9 9 9 9 11
- -

2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024

Source: Company, Capitaline, Kotak Institutional Equities estimates Source: Company, Capitaline, Kotak Institutional Equities estimates

Discount brokers operate at lower ARPU, but have created scale with a large user base
Comparison of active clients, revenues and ARPU, March fiscal year-ends, 2024

8.1
Bubble size = Revenue in Rs billion
7.2
29
64
6.3
Active clients (# mn)

5.4
43 Incumbent
4.5 Discount brokers
3.6 brokers

2.7
12
1.8 29

0.9 20 35
23
6 11
-
- 8,000 16,000 24,000 32,000 40,000
Average revenue per active client (Rs)

Source: Company, Kotak Institutional Equities estimates

Retail brokers have limited avenues for revenues

Unlike brokers of other countries, Indian brokers have limited sources for generating revenues, given
regulatory limitations. As a representation of this, we put together major revenue sources for typical
brokers in India and the US. Among the major differences compared with India, US-based brokers are
able to earn float income on client money, payments for order flow (though offset by the zero-
commission mode), securities lending and more exotic products such as crypto.

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Broking business model offers more ways of generating revenues in the US compared with India
Sources of revenues—India versus US

US India

Wealth/ Payment
for order
AMC flow Wealth/ Lending
AMC products

Client Margin
float Brokerage
funding
Interest on Margin
client Brokerage funding
funds
Securities
lending Crypto Lending
products

Event 24 hours
contracts trading

Source: Kotak Institutional Equities

Indian regulators have been far more conservative, given the focus on investor protection and as a
response to past mishaps, which involved the misuse of client securities. This has led to tighter
regulations over the years, limiting income avenues for brokers. We highlight some of these differences
below (Zerodha has a useful explanation on this topic):

Float income. Brokers around the world earn interest income on the excess, unutilized client funds.
This has allowed brokers to tide over volatility in trading revenues, as clients park excess money with
brokers during times of risk-off. We see this in the financials of Charles Schwab (SCHW) during 2008-
13 and recently with Robinhood during 2021-24. An important caveat here is that not all interest
income is linked to float, as brokers also make interest income on margin funding, treasury and
securities lending.

 Schwab reached a pre-GFC revenue peak of US$5.2 bn in 2008, a year when trading comprised
~20% of revenues. Given the impact of GFC, Schwab was able to cross this level only by 2013
(US$5.4 bn). However, trading revenues were still down ~15% from 2008 levels, but NII was up
~20% on 2008 levels. Schwab’s primary funding source for interest-earning assets is uninvested
client cash balances held in its balance sheet as part of its overall relationship with clients.
Schwab’s clients typically keep ~10% of assets as cash. Assuming a 2% net interest margin yields
a neat 20 bps fee for managing cash, higher than most frontline passive ETFs.

 Robinhood’s 2023 revenues of US$1.9 bn were marginally ahead of 2021 revenues, but during the
period its trading revenues declined ~45% to US$0.8 bn in 2023. However, the impact was more
than offset by higher NII of US$0.9 bn in 2023 compared with US$0.3 bn in 2021.

 Unlike the US, India has rules that require brokers to refund unused funds back to clients’ bank
accounts every quarter or month, according to client preferences. While this benefits customers,
brokers miss out on float income that often helps absorb the volatility faced by the broking
business.

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Schwab: Share of NII has grown over the years Robinhood: NII offset the fall in broking income over 2022-23
Charles Schwab’s revenue breakup, 2005-23 (US$ Robinhood’s revenue mix, 2021-23 (Rs mn)
bn)
Other Net interest revenues Transaction-based revenues
NII Trading revenue Commissions & fees Others 750
22
Thousands

600
18
450
13
300

9
150

4
-

4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q

1Q
2Q
-
2021 2022 2023 2024
2008

2016
2005
2006
2007

2009
2010
2011
2012
2013
2014
2015

2017
2018
2019
2020
2021
2022
2023

Source: Company, Kotak Institutional Equities

Source: Company, Kotak Institutional Equities

Payment for order flow (PFOF). US-based brokers earn rebates from market makers in exchange for
providing them retail trades. Nearly 40% of Schwab’s and almost all of Robinhood’s trading revenues
are earned through order flow. As described by Robinhood, in the case of equities, the fees received
are typically a fixed percentage of the difference between the publicly quoted bid and ask at the time
the trade is executed, while for options, it is on a per contract basis, based on the underlying security.
Unlike in India, the US has multiple order books and each trade does not have to route to the exchange.
As a result, brokers are able to cross retail trades with market makers for a small rebate. The
arrangement is regulated to protect retail investors (Regulation NMS) and mandates trades to be
executed at the venue offering the best price.

 In India, PFOF is not allowed. Brokers were indirectly earning rebates on aggregating retail trades
due to volume discounts by exchanges. Brokers retained the spread between rates paid by clients
and discounted charges paid to exchanges. The recent regulation from the SEBI (‘True to label’
costs) put a complete stop on this line of revenues. It contributed ~10% of revenues for Angel
One and Zerodha. For Zerodha, its share increased to ~10% from ~3% in the past four years
because of the increase in options turnover.

US-based brokers generate substantial income from payment for order flow
Contribution from payment from order flow, 2018-23 (%)

Schwab (% of trading revenues) Robinhood (% of total revenues)

100

75 77
80

62
59
60
49 47 48
44 43 44
40
40

18
20

-
2018 2019 2020 2021 2022 2023

Source: Company, Kotak Institutional Equities

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Securities lending. According to regulations in India, securities are held by depositories and remain
in complete control of clients. Any transactions that involve the movement of securities require client
authorization. In some markets (such as the US), client securities are held by each respective broker
in a common pool, allowing participants such as short sellers to borrow them from brokers. The
arrangement can either be bilateral/OTC or guaranteed through the central clearing house. Brokers
share part of the income with their clients, but these arrangements can vary across brokers.
Robinhood earned ~5% of its net revenues from securities lending in 2023.

Broking wrapped into a bank improves scalability of the business model

Over the past 15 years Schwab has pivoted its tilted its business model towards more capital-heavy i.e.
interest income-based revenues. Realizing that trading income-based revenues will always be more
prone to price cuts and more susceptible to competition, Schwab started sweeping more and more of
its client’s unused cash balances into its own low-cost and sticky deposits. Exhibit 57 shows the mix of
client assets, revenues and realizations for last few years. While most clients come through the door
largely through the trading or advisory/fund-based verticals, clients tend to keep a ~10% of their assets
in cash (Exhibit 58), part of which sweeps either into bank accounts (earning ~2% margin but capital
consuming) or in Schwab’s own money market funds (earnings ~8-10 bps fees).

A diversified model, underpinned by most cost-effective proposition has helped Schwab build a scale
that has proved to be very difficult to compete based on pricing alone. In summary, Schwab turned a
capital light business into capital heavy but highly defensive business. While this has increased rate
sensitivity of the P&L, its core franchise rests with asset-light platform business with negligible credit
losses.

Schwab: Capital light business contributes ~90% of client assets but ~50% of revenues
Client asset mix, revenue mix and realization across broad segments, 2021-23

Client asset mix Revenue mix Revenue yield (%)

100% 100% 2.2

1.98
1.78
80% 80% 1.8
1.45

60% 60% 1.3

40% 0.9
40%

20% 0.37 0.35 0.34

20% 0.4
0.11 0.09 0.13 0.15
0.08 0.06
0%
0% -
2021 2022 2023
2021 2022 2023 2021 2022 2023
Interest-earning assets Mutual funds and ETFs `Net interest income Mutual funds and ETFs Net interest income Mutual funds and ETFs
Advice solutions Other assets Advice solutions Trading revenue Advice solutions Trading revenue

Source: Company, Kotak Institutional Equities

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Clients leave 11-12% of assets unused as cash with Schwab Schwab delivered ~13% RoE and ~10% EPS CAGR since 2009
Unused client cash (% of client assets), 2012-23 (%) RoE, 2005-23 (%)

15 60 55
15
12 50
13 13 13 13
12 12 12
11 11 11 40
11
9
31
30 26
6
20 16 17 18 17
15
12 11 11 12 11 13 13 13
10
3 8 8
10

- -

2022
2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021

2023
Source: Company, Kotak Institutional Equities Source: Company, Kotak Institutional Equities

Nordic investment platforms represent some of the best business models in the space

We have looked at two companies, Avanza and Nordnet. These are primarily investment/saving
platforms but are housed in a banking structure. While there are differences in terms of geographical
presence and revenue mix, both are similar in their broad business model and customer segment. Both
companies benefit from a long-term trend of client migration from incumbent banks to digital platforms.
Compared to other European countries, the Nordic saving market is characterized by wider equity
ownership and high digital adoption of financial services.

We briefly show below with few exhibits the broad trends for Avanza (Exhibits 60-62). Company has seen
exceptional growth in client assets and profitability over the past decade. This is led by strong adoption
of digital platforms coupled with high retention rates leading to attractive unit economics. This has
driven strong earnings compounding along with high RoEs.

We also show a representation of the broad business model (from Nordnet’s investor presentation,
Exhibit 63), which captures the broad drivers of revenues. It shows that trading and investments form
large share of client assets (i.e. savings capital), whereas the deposits book drives high overall
profitability measured as percentage of client assets.

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Avanza: client assets have compounded at 30% CAGR for 15 Avanza: Diversified revenue mix across broking, fund
years commission and net interest income
Client assets, revenue and costs, 2001-24 Revenue mix, 2001-24 (%)
Client assets (RHS) Revenue/client asset Broking Fund commissions Net interest income Others
Opex/client asset 100
(%) (SEK bn)
2.0 1,000
80
1.6 800
60
1.2 600
40
0.8 400
0.44 20
0.4 200
0.14
-
0.0 -

2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024

Source: Company, Kotak Institutional Equities Source: Company, Kotak Institutional Equities

Avanza: Strong RoEs over long-term Avanza: Strong earnings compounding over long-term
RoE, 2001-24 (%) CAGR for income, expenses and PAT (%)

70 Income Expenses PAT

45
57
38
56 50
36
45 43
42 38 27
35 34 36
34 27 25 25
29 31 31 3330 22
27 19
28 24 24 18
20 19 18
14 13
14 10
9
3
-
-
2012
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011

2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024

5Y 10Y 15Y

Source: Company, Kotak Institutional Equities Source: Company, Kotak Institutional Equities

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Nordnet: Trading and funds businesses drive client asset growth while interest income lifts overall profitability
Nordent’s revenue model

Source: Company

Indian discount brokers need to diversify revenue sources

Mature broking businesses gradually evolve from volume-based commission revenues to more sticky
revenues in the form of recurring fees or fund-based income. A good way to understand this comes from
Schwab’s investor day slide (recreated with some modifications in Exhibit 65), where they categorize
revenues as engagement-based (i.e., brokerage), fee-based (i.e., management/trail fee) or cash-based
(i.e., lending or client float).

In Exhibit 66, we compare the revenue mix of Indian brokers with some of the listed global
brokers/investment platforms across the world. Large Indian discount brokers such as Angel, Groww
and Zerodha earn a major share of their income from trading, compared with traditional brokers such as
ICICI Securities and Motilal Oswal. Diversification of revenues for traditional brokers is a result of
ancillary businesses such as financial product distribution, asset management and investment banking.

Revenue sources of discount brokers in India need to be diversified to make the business model more
stable and resilient against market and regulatory risks. The current revenue pool for discount brokers
has significant dependence on F&O trades. With regulatory actions to curb retail trading in F&O, brokers
are likely to face revenue headwinds over the near term. Fund-based income for brokers in India is largely
driven off the margin funding book, which actually moves in line with trading activity and hence, does not
provide a hedge to market volatility.

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Charles Schwab has been able to diversify growth; it diversifies by adding new revenue streams
Charles Schwab’s revenue sources and mix, 1988-2018 (%)

Revenue type Drivers Key components Revenue mix over time (%)

▪ Market returns ▪ Cash equities

Engagement-based Fee-based Fund-based
Engagement- ▪ Volatility ▪ F&O
based 16 17
▪ Leverage ▪ Margin loans
32
8
20 57
▪ Macro environment ▪ Advisory solutions

▪ Wealth creation ▪ Mutual funds & ETFs

Fee-based
▪ Distribution 46
▪ Demographics
76
62
32

▪ Interest rates ▪ Loan against shares

22
▪ Balance sheet lending 11
Cash-based ▪ Cash allocation
▪ Treasury & prop book 1988 1998 2008 2018
▪ Loan demand

Source: Company, Kotak Institutional Equities

Discount brokers in India have higher share of income from broking compared with global peers
Revenue mix, 2023/24 (%)
Trading Fund-based AMC/wealth Others
4- 6 5- 2 4- 2-
8 8 - 9 7
- 16 13
14
1
25 18
47 35 17 18
59 40
50 52 58
64
32
96 13
50 46 83
25
9 68
- 60
42 42 41 41 40
31 28 31
17 21

SCHW HOOD IBKR Futu XP FTK AZA SAVE Selfwealth Angel Groww Zerodha ISEC MOFS
(US) (US) (US) (China) (Brazil) (Europe) (Europe) (Europe) (AUS)

Source: Company, Kotak Institutional Equities

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 134

Transition from discount broker to wealth manager

What makes wealth platforms attractive business models?

Wealth growth is a structural feature across the world. As countries grow their GDP, their citizens
become richer, and they increasingly focus on growing their wealth. People start allocating their
savings toward large discretionary spends (such as education, home and holidays) and relatively more
long-term wealth creation (such as retirement planning). As families accumulate wealth, there is a
greater need for more holistic investment advice. Wealth businesses cater to this structural need for
protecting and growing wealth. Delivery models vary across countries and client segments, and are a
function of wealth levels, behavioral traits and regulations.

Wealth business has a few positive qualities. The wealth business brings to the table a few positive
qualities that make it attractive—(1) a high share of recurring revenues, (2) low capital requirements,
(3) high free-cash flow cash generation and (4) high margins and return on capital, at scale. Customer
trust and longevity of relationships are the heart of the business model, which delivers the above-
mentioned financial qualities. Successful wealth businesses are known to have very sticky customer
relationships that often continue for decades.

Multiple sources of revenues. The wealth business offers multiple revenue generation opportunities
as part of managing the financial lives of customers. These include steady recurring sources of fee
income in the form of advisory fees, trail fees or management fees. Clients also often choose to trade
in equities (listed and unlisted) and fixed income securities, which generates transactional income.
Lending is also an incidental activity that drives meaningful engagement and revenues for most full-
scale wealth managers across the world (see Exhibit 67).

Higher wealth = more advice. Growing wealth requires a more systematic way of managing it. The
market for investments is becoming increasingly complex and difficult to navigate. However, the
availability and independence of advice are not uniform across the wealth pyramid. While multiple
models exist to service clients such as human advisors, technology platforms or a blend of both, the
relevance of wealth management platforms continues to grow.

 The study of consumer finances in mature wealth markets such as the US and the UK shows the
increasing reliance on formal advice for higher-income customers (see Exhibits 68-71).
Furthermore, households typically go through the natural journey of disproportionately allocating
more savings into products that go beyond cash and bank deposits—these include the direct
ownership of stocks or investment funds (see Exhibits 70-71).

Broad sources of revenues and profitability for wealth business across different regions
Revenue mix and return on assets
North America Europe APAC Latin America
Mix RoA Mix RoA Mix RoA Mix RoA
(%) (bps) (%) (bps) (%) (bps) (%) (bps)
Investment assets 77 42 70 60 69 45 89 45
Deposits 12 125 22 74 21 58 6 114
Loans 11 138 8 98 10 87 5 146

Source: BCG report, Kotak Institutional Equities

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US: Clients prefer more advice with higher wealth UK: Clients prefer more advice with higher wealth
Engagement preference across income range, 2022 Engagement preference across income range, 2022
(%) (%)
Strongly self-directed Mostly self-directed No support Information/guidance Regulated advice
Mostly advice-centric Strongly advice-centric 100 2 7 12
100 15
18 26
11 37
17 21 80
27 30
80 13 36
15 40
10 15 60
16
60 15 45
22
17 40 80 48
40 63
67 52
20 45
52
20 41 40 29
15
0
- Nil to 10K to 20K to 50K to 100K to 250K+
<10K 10K to 100K 100K to 1 mn 1 mn+ <10K 20K 50K 100K 250K

Source: Survey of Consumer Finances, Federal Reserve, Kotak Institutional Equities Source: Financial Lives Survey, FCA, Kotak Institutional Equities

US: Ownership of stocks increases with income levels US: Investment in pooled funds increases with income levels
Direct ownership of stocks across income Investment in pooled investment funds across
percentile, 1989-2022 (%) income percentile, 1989-2022 (%)
<20 20-40 40-60 <20 20-40 40-60
60-80 80-90 90-100 60-80 80-90 90-100
70 60

56 48

42 36

28 24

14 12

- -
2019
1989

1992

1995

1998

2001

2004

2007

2010

2013

2016

2022

2007
1989

1992

1995

1998

2001

2004

2010

2013

2016

2019

2022

Source: Survey of Consumer Finances, Federal Reserve, Kotak Institutional Equities Source: Survey of Consumer Finances, Federal Reserve, Kotak Institutional Equities

Monetization journey for discount brokerages is still in early stages

A key strength of the discount broking business is the ability to acquire a large number of customers,
given the lower cost of acquisition along with the natural pull toward trading among younger populations.
These trends have accelerated in the past few years. There are a few broad ways to monetize the
customer pool—(1) trading commissions and ancillary fees, (2) interest income from margin funding
(i.e., MTF), (3) distribution commission (i.e., wealth management) and (4) asset management (cross-sell
in-house products). An ideal wealth manager ideally is able to surround itself around its clients’ financial
lives to the maximum extent as possible.

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 136

Discount brokers are on the journey to diversify the revenue mix and in the process, make the business
less volatile and reduce dependence on growth in trading volumes alone. Margin funding has been one
of the first ways to monetize a small set of customers, leading to improvement in profitability without
increasing the risk profile by a big margin. Typically, <5% of the customer pool will likely qualify for margin
funding. It is relatively easier to migrate customers from broking to margin funding as it allows more
leverage, but it is a lot more difficult to move to the recurring revenue model.

Pivoting to wealth and asset management business is an important hurdle for discount brokers
Representative monetization journey for a discount broking business

Asset management
• Capitalize on distribution
• High operating leverage
Distribution/ • Quick go-to-market with
wealth new products

Margin funding • Relationship-driven

• Improves client stability
• Value-add for clients
• Strong returns to scale
• ROE kicker for firms
Discount broking • Improves stickiness
• Purely flow driven
• Low client stickiness

Source: Kotak Institutional Equities

Asset and wealth management—Rs500 bn recurring revenue pool reported a CAGR of ~15% over five years
In our view, the asset and wealth management space offers one of the most attractive growth
opportunities within capital markets. We estimate the current recurring revenue pool in the asset and
wealth management space to be around Rs500 bn. We categorize the revenue pool into two segments—
(1) by product type (i.e., mutual funds and alternatives) and activity type (i.e., manufacturing and
distribution). Over FY2019-24, the revenue pool has increased at a CAGR of ~15%.

Asset management is a larger revenue pool compared with distribution as (1) part of the retail mutual
fund industry is direct (~25% of equity AUM), which bypasses distribution commissions, (2) a large part
of the AIF investor base is institutional in nature, which does not involve distribution fees and (3) recent
regulations in the alternative space have curbed upfronting of distribution commissions.

Asset and wealth management’s recurring revenue pool is likely to be around ~Rs500 bn across manufacturing and distribution
Revenue pool breakup for asset and wealth management, March fiscal year-end, 2024 (Rs bn)

RTAs & Mutual funds Alternatives

depositories, 43 , 350
3%
Exchanges, 420 , Asset
31% 280 70
management, 310
, 23%
210

Rs1.4 34
trillion 140 32
revenue 240
20
70 145
117
79
Distribution, 179 ,
-
13%
2019 2024 2019 2024
Broking, 400 , 30%
Asset management Distribution

Source: SEBI, AMFI, Company, Kotak Institutional Equities estimates

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 137

Industry gaining maturity with growth in new product and client segments
The wealth management industry is still in its infancy in India, given relatively more recent wealth
creation. Over the next decade, the market will evolve from both sides, i.e., greater client sophistication
and risk appetite, which in turn, drives the penetration of relatively more complex products and multiple
asset classes. Regulatory reforms have improved transparency and investor confidence. These reforms
have encouraged a shift from transactional engagements to portfolio-driven advisory models. Providing
access to these products is an important source of differentiation for wealth managers. Unlike traditional
asset managers which face greater substitution risks, wealth managers benefit from multiple drivers of
revenue.

Wealth management landscape is likely to become more mature and complex over the next decade
Schematic representation of wealth management industry

Mass market Affluent HNI UHNI

NA

Revenues (Rs bn)

Bank Local branch Private banking
Delivery models

Discount broker Trading app Rs200

Full-service broker Trading app Local branch/affiliate Rs200

Wealth manager Private banking Rs140

Need for advice

Mutual Funds

Portfolio Mgmt.

Cat-III AIFs
Services
Listed equities

Unlisted/overseas

Cat-I & Cat-II AIFs

equities

AUM Rs125 Rs55 Rs33 Rs40 Rs1.1 Rs2.2

NA Rs4 tn
(Rs bn) tn tn tn tn tn tn

Source: SEBI, RBI, IRDAI, Kotak Institutional Equities estimates

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 138

The wealth management industry is seeing the expansion of opportunity size, given wealth generation
and income growth across the wealth pyramid. Exhibit 74 shows a broad layout of segments across the
pyramid, typical modes of engagement and major players. The top segment (UHNI) is a very specialized
segment dominated by a few players. Given the large investment corpuses, we are seeing two major
trends in the UHNI segment, i.e., (1) large families setting up family offices to ensure greater control,
which is leading to players focusing on creating a more comprehensive offering and (2) a clear
preference toward a fee-based advisory proposition, which is free from bundle commissions and any
incentive to sell in-house investment products. The top of the mid-market segment, i.e., HNI, has multiple
players, with a few focusing only on wealth management, but a few with origins in the capital
markets/securities business hiring teams to build wealth units. As always, the HNI and affluent verticals
also have participation from the wealth divisions of banks.

There are product-focused players such as MF distributors, who operate across the mass market to the
affluent segment. As we go down the pyramid, there is a shift toward clients more actively doing
investing/trading themselves.

Players are building scale and capabilities organically and through acquisitions

We put together a rough capability map for large wealth players across broad segments such as
transaction-based, fee-based and fund-based (Exhibit 75). We map each of the large player in sub-
segments of these three broad categories of revenues. A full-service bank (along with licensed subs) is
hypothetically the most powerful model given advantages such as (1) greater convenience from
integrated account/MIS across banking and investment services; (2) established relationships/habits
given long-standing vintages of deposit accounts, along with other long-duration/recurring products
such as home loans or credit cards. While some challenges are common across firms, they are more
commonly found in banks and (3) in general, greater focus on compliance versus growth. These include
(1) RM stickiness is historically very poor and for those that stick around, changing product priorities and
KPIs lead to poor relationships; (2) banks often also end up pushing deposits as against higher yielding
investments; (3) banks also tend to lack agility with slower decision-making process.

Business models are evolving for established and aspiring wealth managers
Capability mapping for large wealth firms

Transaction-based Fee-based Fund-based

Investment Institutional Custody & Asset Loan against Structured

Execution Distribution Advisory Banking
banking equities clearing management shares/MTF finance

Bank model 8 8 8 8 8 8 8 6 8 8
360 One 8 0 5 0 8 8 8 8 4 0
Nuvama 8 8 7 8 8 4 4 8 4 0
Motilal 8 8 8 0 8 0 8 8 3 0
ASK 6 0 0 0 8 2 8 7 0 0
Spark 8 0 0 0 8 0 4 8 0 0
Avendus 6 10 8 0 8 0 6 8 4 0
Julius Baer 8 0 0 0 8 7 4 8 0 0

Source: Company, Kotak Institutional Equities

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 139

Building retail advisory platform is likely to be next foray for discount brokers

In our view, building a retail advisory platform is an attractive, though challenging opportunity for
discount brokers to build. Larger platforms such as Angel, Groww and Zerodha have built a client base,
which has grown not only in numbers, but also in terms of aggregate wealth, which is lying in the form
of custody assets or distribution AUM. As this customer base matures and grows its income and
explores more steady ways of building wealth, it becomes imperative for these platforms to also enrich
their service propositions to remain relevant. While these platforms are seeing excellent adoption of
commission-free mutual funds, there is a place to provide more customized offerings to customers
willing to pay a fee. This would likely compete with the traditional engagement channels such as a bank
or MFD, where customers potentially pay higher fees, with risks of misaligned initiatives (paid by MFs
instead of customers).

While specializing in a segment, some players are entering adjacent segments to capture greater growth opportunity
A broad mapping of wealth segments and select players
HH financial Total HH Total
wealth (US$ financial assets households
mn) (US$ bn) (#)
Do-it-for-me

>5 mn ~800 30-35K Few players

UHNI dominate

1-5 mn ~200 ~150K HNI

Help-me-do-it

100K-1 mn ~400 Large & crowded

~2.5mn Affluent segment

50K-100K ~300 ~3.5mn Emerging affluent

Do-it-myself

<50K ~900 ~200mn Mass market Primary segment for

discount broker

Source: 360 One investor presentation (McKinsey study), Kotak Institutional Equities

India’s alternative funds market has taken off in recent years

Alternative assets in India have kept pace with growth in mutual fund AUM. Compared with an MF AUM
of ~Rs65 tn, alternative vehicles have grown meaningfully as well, with PMS assets (ex EPFO) of ~Rs7
tn and AIF investments of ~Rs5 tn. With AIF commitments of ~Rs12 tn, there is nearly ~Rs6 tn of
unutilized commitments, indicating large dry powder available to be deployed. This is not unique to India,
as global data over the past two decades also shows strong growth in AUM across asset classes, along
with a rise in unutilized commitments.

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 140

Share of AIF and PMS has grown in line with MF AUM growth
AUM across mutual fund, AIF and PMS vehicles, March fiscal year-ends, 2002-25 (Rs tn)

MF AUM AIF (funds raised) PMS (equity + advisory)

84
7
70 5

6
56 5

5
42 5 4
3
4 67
2
28 3 3 53
3 1 2
1 39
3
0 38
14 2 31
2
0 0 21 24 22
1- 2
0 18
- - 1- 1- 11 12
- 1- 1- 1- 1- 2- 3- 5 4- 6 6 6 7 8
2003
2004

2006

2008
2009
2010
2011

2013

2015
2016

2018

2020
2021

2023
2002

2005

2007

2012

2014

2017

2019

2022

2024
3QFY25
Source: SEBI, AMFI, Kotak Institutional Equities

AIF commitments have grown strongly over past few years

Category-wise breakup of AIF commitments, investments and unutilized funds, March fiscal year-ends, 2015-25 (Rs tn)
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 3QFY25
Commitments
Cat-I 0.1 0.1 0.2 0.3 0.3 0.4 0.4 0.5 0.6 0.7 0.8
Cat-II 0.1 0.2 0.5 1.1 2.1 2.8 3.6 5.2 6.9 8.8 9.8
Cat-III 0.0 0.0 0.1 0.3 0.4 0.5 0.5 0.7 0.8 1.3 1.8
Total 0.2 0.4 0.8 1.7 2.8 3.7 4.5 6.4 8.3 10.8 12.4
Investments
Cat-I 0.0 0.0 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.4 0.5
Cat-II 0.0 0.1 0.2 0.3 0.7 1.0 1.4 2.0 2.4 2.7 3.4
Cat-III 0.0 0.0 0.1 0.2 0.3 0.4 0.4 0.6 0.7 0.9 1.1
Total 0.1 0.2 0.4 0.6 1.1 1.5 2.0 2.8 3.4 4.0 5.0
Unutilized funds
Cat-I 0.1 0.1 0.1 0.2 0.2 0.2 0.3 0.3 0.3 0.3 0.4
Cat-II 0.1 0.1 0.3 0.7 1.4 1.8 2.2 3.2 4.5 6.2 6.3
Cat-III 0.0 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.1 0.4 0.7
Total 0.2 0.2 0.5 1.0 1.7 2.2 2.5 3.6 5.0 6.9 7.4
Unutilized (%) 67 53 58 63 61 59 56 56 59 63 60

Source: SEBI, Kotak Institutional Equities

Increasing participation from smaller cities; shift toward younger investors

According to the analysis by CAMS/Equalifi, investments in AIFs have major participation from
institutions, contributing nearly 55-60% of commitments, followed by individuals (35- 45% share) and
NRIs/foreigners (5-10%). Individuals have greater allocation toward CatIII (similar to public equities),
whereas institutions allocate a higher share toward CatII (relatively more illiquid). In terms of reach, over
72 cities have investments in excess of Rs500 mn each, while 50 cities have raised over Rs1 bn each,
indicating adoption beyond metros. The share of younger investors (<35 years) has also nearly doubled
in the past few years.

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 141

Distribution: Advisory likely becoming a preferred engagement model

The share of direct channel in AIF fund raising (the sample is covered in the above analysis by
CAMS/Equalifi) has grown to 42% in FY2023 from 27% in FY2019. A greater share of direct is likely driven
by the participation of institutions in fund raising and preference for advisory models as against
commission-based. Among the commission-driven channels, wealth managers have the highest share
at 35-50% of funds raised, followed by banks (~8-13%) and national distributors (5-10%). The share of
direct distribution varies a lot across fund categories—Cat-I has the highest share (67% in FY2023),
followed by Cat-II (~50%) and Cat-III (~20%).

Share of institutions has grown in recent years Share of direct has grown, partly led by shift to advisory
Investor-wise breakup of AIF commitments, March Channel-wise breakup of AIF commitments, March
fiscal year-ends, 2019-23 (%) fiscal year-ends, 2019-23 (%)

Individual Institutional NRI/foreign Wealth managers Banks

100 National distributors Others
9 5 9 6 5
Direct
100
80
27
33 36
80 40 42
45 54
56 62 60 3
60 8 3
60 6 3
12 2
5 10 4
13
13 10
40 13
40 8

46 51 46
20 40 20 40
35 33 35 38 36

0 0
2019 2020 2021 2022 2023 2019 2020 2021 2022 2023

Source: CAMS/Equalifi, Kotak Institutional Equities Source: CAMS/Equalifi, Kotak Institutional Equities

AIFs have raised Rs1 bn each in over 50 cities in India Share of younger investors in AIFs is rising
Number of cities for varying size of fund raise per Age-wise breakup of AIF commitments, March
city fiscal year-ends, 2019-24 (%)

250 Below 35 years Over 60 years

45
200 40 40
200 36
36
31
29 28
150
27

100
18

50 8 9 9
30 25 9 7 7
15 20 5
7
0 0
Rs10 bn Rs5-10 bn Rs1-5 bn Rs0.5-1 bn Rs250-500 <Rs250
mn mn 2019 2020 2021 2022 2023 1HFY24

Source: CAMS/Equalifi, Kotak Institutional Equities Source: CAMS/Equalifi, Kotak Institutional Equities

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 CHANGE IN RECO.

Five Star Business Finance (FIVESTAR) ADD

Diversified Financials
CMP(₹): 696 Fair Value(₹): 890 Sector View: Attractive NIFTY-50: 23,332 April 02, 2025

Time for relook Company data and valuation summary

We believe that most concerns, which led to a sharp correction in Five Star’s Stock data
stock, are being reflected in forecasts or are on the way to being resolved.
CMP(Rs)/FV(Rs)/Rating 696/890/ADD
We are upgrading our rating to BUY from ADD; RGM-based FV remains Rs890.
52-week range (Rs) (high-low) 944-626
Mcap (bn) (Rs/US$) 205/2.4
Sharp correction in Five Star’s stock for a few reasons
ADTV-3M (mn) (Rs/US$) 522/6.1
Five Star’s stock has been marred over the past six months, likely due to a
couple of reasons, including (1) the company’s sharp lending rate cut (200 bps), Shareholding pattern (%)
(2) lowering of its FY2025E growth guidance to 25% from 30%, (3) the RBI’s
20.6 21.5
actions on other NBFCs in October 2024 to desist from disbursements and
most importantly, (4) the risk of contagion from a collapse in the microfinance 6.0
2.1
sector. We believe most of these concerns are either in the price/forecasts or 5.8

are on their way to being resolved. 44.1

Promoters FPIs MFs BFIs Retail Others

Getting incrementally less worried about microfinance
The microfinance industry has shown a sharp increase in stress over the past Price performance (%) 1M 3M 12M
few quarters, driven by industry actions to address over-leverage. The cut in Absolute (9) (13) (7)

Private Circulation Only. This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities A ct of 1933
Rel. to Nifty (14) (9) (11)
disbursements to over-leveraged borrowers resulted in a credit squeeze and
Rel. to MSCI India (14) (6) (8)
elevated flows into delinquency across the board.
Forecasts/Valuations 2025 2026E 2027E
Five Star (in 2QFY25) highlighted that about 0.43 mn borrowers, of which about EPS (Rs) 36.1 41.7 49.9
53K, i.e., ~13%, have more than three loans. The overlap is mostly with gold EPS growth (%) 25.8 15.5 19.6
loans and MFIs (about 30% each), followed by personal, two-wheelers and CVs. P/E (X) 19.3 16.7 14.0
About 1,600 loans of the above are reckoned to be stressed, i.e., 0.4% of the P/B (X) 3.2 2.7 2.3
company’s total borrower base. Having said that, the 3QFY25 performance was BVPS (Rs) 214.4 256.1 306.0
stable with 98% collection efficiency (98-100% in the preceding three quarters). RoE (%) 18.4 17.7 17.7
Div. yield (%) 0.0 0.0 0.0
There have been concerns of a contagion from the microfinance sector stress Nll (Rs bn) 21 25 30
on Five Star. The borrowers of Five Star operate in the same ecosystem as that PPOP (Rs bn) 0.0 0.0 0.0
of microfinance borrowers. Credit/liquidity squeeze at the lower end of the Net profits (Rs bn) 11 12 15
market poses the risk of lower income for its borrowers and hence, an increase
Source: Bloomberg, Company data, Kotak Institutional Equities estimates
in delinquencies. With the early signs of stress/delinquencies peaking in the
Prices in this report are based on the market close of
microfinance segment (as detailed below), the risk of contagion is reduced. April 02, 2025

We see early signs indicating that new stress formation is peaking out in the
microfinance sector as follows: (1) PAR 1-30 bucket declined during 3QFY25,
(2) net forward flow has peaked out and is starting to reduce in early buckets
and (3) the proportion of over-leveraged borrowers and exposure to them is on
a steady downtrend. While we acknowledge these early signs of recovery, we
also note the uncertainty from (1) a further credit squeeze due to
implementation of the three-lender cap starting April 2025 (although we believe
that the incremental impact is unlikely to be very high) and (2) the situation in
Karnataka remains a key monitorable after the implementation of the ordinance
(though lenders have reported a steady gradual improvement). Note that the
visibility of stress peaking out might encourage some microfinance lenders to
upfront the credit cost impact of this cycle.
Full sector coverage on KINSITE

Nischint Chawathe M B Mahesh, CFA Varun Palacharla Abhijeet Sakhare Ashlesh Sonje, CFA

Nikhil Suresh
 143

Lending rate cuts factored in

Five Star has cut lending rates for its borrowers by 200 bps in October 2024. Since the company has a
fixed-rate book, this rate cut will be passed on to incremental loans, reflecting yield compression over
time. We have always factored in yield compression into our forecasts, as we have believed that Five
Star’s high yields (24% IRRs) are not sustainable over the long run. We are currently building in a 25 bps
yield decline in 4QFY25E (versus 2QFY25 levels), a further 60 bps decline in FY2026E and a 45 bps yoy
decline in FY2027E. We build in a moderate 20 bps yoy improvement in cost of funds during FY2025 and
FY2027E, assuming the peaking of borrowing costs in 4QFY25E. We expect Five Star’s RoA to moderate
to 7.1% in FY2027E from 8.2% in FY2024, with RoE ranging 17.5-18.5%—higher than many other lenders.
We model 15-20% earnings growth for FY2026-27E due to a 26% loan book CAGR. An upgrade in growth
guidance or a higher-than-expected decline in funding costs (though may be passed on with a lag to its
borrowers) will provide an upside to our estimates.

Lower growth may be revisited over the next few quarters

Five Star cut its loan growth guidance to 25% from 30% in October 2024. The company chose to
moderate this growth guidance, following regulators’ inclination for NBFCs to go slow, given overheating
in the sector. We expect the company to revisit its guidance over the next few months as comfort with
the book builds up. We model a 24% loan growth in FY2025E, followed by 26-27% over FY2026-27E. A
slowdown of business in Karnataka (5-6% of business) will likely temper the near-term growth. The
regulator may take a more accommodative stance on growth, given building comfort in the unsecured
book and the visible slowdown in credit across the sector.

RBI lifted ban on peer NBFCs

The RBI’s ban on select NBFCs/MFIs in October (due to material supervisory concerns and lack of
conformity to the Fair Practices Code) raised concerns of other NBFCs coming under the regulatory
scanner. The RBI has subsequently raised its ban on these NBFCs.

Sharp rise in stress in MFI portfolio in recent quarters; PAR 1-30 declined in 3QFY25
Portfolio at risk (PAR) for micro finance industry, March fiscal year-ends, 4QFY22-3QFY25 (%)

PAR 1-30 PAR 31-60 PAR 61-90

6.0

1.0
4.8
1.6
1.1 1.6
1.6 1.4
3.6
1.3
1.0 1.3
2.4 0.8 1.5
0.7
0.5 0.6 0.6
0.7 0.6 0.7 0.8
3.0 0.5 0.5
1.2 2.5 0.5
2.1 0.4 0.5 2.1 1.8
1.3 1.0 1.1 1.1 1.2
0.9 0.7
0.0
1QFY23

2QFY23

2QFY24

3QFY24

3QFY25
4QFY22

3QFY23

4QFY23

1QFY24

4QFY24

1QFY25

2QFY25

Source: CRIF Highmark, Kotak Institutional Equities

Five Star Business Finance

Diversified Financials India Research

k.kathirvelu-kotak.com
 144

Net forward flow from current and early buckets has declined recently
Net forward flow (forward flow minus roll-back) across delinquency buckets for micro finance industry, January 2024-
December 2024 (%)
Current 1-30 DPD
Current 1-30 DPD
5.0 75

4.0 60
51 53
49 47
43 45
3.0 2.8 45 40
2.4 2.5 38
35
2.1
1.8 1.9
2.0 1.6 30 26
22
1.2 1.3 1.3
0.9 0.8 12
1.0 15

- -

Feb-24
Feb-24

Apr-24

Apr-24

Oct-24
Jan-24

Jul-24

Oct-24

Jan-24

Jul-24
Jun-24

Jun-24
Mar-24

Sep-24
Mar-24

Sep-24
Aug-24

Aug-24
Dec-24

Dec-24
Nov-24
May-24

Nov-24

May-24
31-60 DPD 61-90 DPD
31-60 DPD 61-90 DPD
100 100

78 78 78 76 76 77
80 74 74 80 75
70 68 68 70 70
66
63 62 62
59 58
60 60 53 51
49

40 40 35

20 20

- -
Jan-24

Jul-24
Feb-24

Feb-24

Apr-24
Jan-24
Apr-24

Oct-24

Jul-24

Oct-24
Jun-24
Jun-24

Aug-24

Sep-24

Sep-24
Aug-24
Mar-24

Mar-24

Dec-24
Dec-24
May-24

Nov-24

May-24

Nov-24
91-180 DPD
91-180 DPD
100 91 91 92
88 89 87 88 90 88
80 82 79
80

60

40

20

-
Feb-24

Jul-24
Jan-24

Apr-24

Oct-24
Jun-24

Sep-24
Aug-24
Mar-24

Dec-24
Nov-24
May-24

Source: CRIF Highmark, Kotak Institutional Equities

Five Star Business Finance

Diversified Financials India Research

k.kathirvelu-kotak.com
 145

Cases of multiple lending increased steadily after removal of two-lender cap on NBFCs and MFIs in April
2022; however, cases of multiple lending have reduced over the past few quarters
Proportion of borrowers associated with four or more lenders, March fiscal year-ends, 3QFY19-
3QFY25 (%)
RJ MH TN OR BR
KL WB KA UP Overall
15

12

0
3QFY19
4QFY19

3QFY20
4QFY20

1QFY22
2QFY22

1QFY23
2QFY23

1QFY24
2QFY24

2QFY25
3QFY25
1QFY20
2QFY20

1QFY21
2QFY21
3QFY21

3QFY22
4QFY22

3QFY23
4QFY23

3QFY24
4QFY24
1QFY25
Source: CRIF Highmark, Kotak Institutional Equities

Proportion of over-leverage on portfolio is declining steadily Over-leverage of customers is declining steadily

Breakup of MFI GLP based on customers' lender Breakup of MFI customer base based on lender
associations, March fiscal year-ends, 1QFY24-3QFY25 (%) associations, March fiscal year-ends, 1QFY24-3QFY25 (%)

<=2 =3 =4 >=5 <=2 =3 =4 >=5

100 100 2.8 2.8 2.5 2.1
9.9 10.1 9.7 9.7 8.2 6.7 4.0 3.6 3.4 3.2
8.2 9.1 7.7 7.3 7.3
10.4 10.3 9.5 9.5 8.7
80 14.9 80
15.7 15.5 15.0
18.0 17.3
60 60

84.2 85.8 86.8 87.4

40 40
65.0 65.4 68.1 70.2
61.7 62.3
20 20

0 0
1QFY24

2QFY24

1QFY25

2QFY25

3QFY25

1QFY24

1QFY25

2QFY25

3QFY25
4QFY24

Source: CRIF Highmark, Kotak Institutional Equities Source: CRIF Highmark, Kotak Institutional Equities

Five Star Business Finance

Diversified Financials India Research

k.kathirvelu-kotak.com
 146

Steady decline in proportion of over-leveraged microfinance borrowers

Breakup of microfinance industry GLP based on borrowers' leverage level, March fiscal year-ends
1QFY24-3QFY25 (% of industry GLP)

<Rs100k Rs100-150k Rs150-200k >Rs200k

100 5 4
6 7 8 7
10 9 9
11 11 11
80
20 21
21 21 20
21
60

40
63 61 62 65 67
60
20

0
1QFY24

2QFY24

4QFY24

1QFY25

2QFY25

3QFY25
Source: CRIF Highmark, Kotak Institutional Equities

MFI portfolio is down 12% from peak in 4QFY24

Gross loan portfolio of micro finance industry, March fiscal year-ends, 4QFY17-3QFY25

(Rs tn) GLP GLP yoy (RHS) (%)

5.0 48

4.0 36

3.0 4.4 24
4.3
4.1
4.1

2.0 12
3.9
3.8
3.6
3.5
3.2
3.0
2.9
2.9
2.6
2.6

2.5
2.4
2.4
2.4
2.3
2.3
2.2

1.0 0
2.0
1.9
1.9
1.7
1.5
1.4
1.3
1.2
1.1
1.1
1.1

0.0 (12)
4QFY17
1QFY18
2QFY18
3QFY18
4QFY18
1QFY19
2QFY19
3QFY19
4QFY19
1QFY20
2QFY20
3QFY20
4QFY20
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23
1QFY24
2QFY24
3QFY24
4QFY24
1QFY25
2QFY25
3QFY25

Source: CRIF Highmark, Kotak Institutional Equities

Five Star Business Finance

Diversified Financials India Research

k.kathirvelu-kotak.com
 147

Five Star’s price corrected sharply over the past 3 months

One-year forward rolling PER and PBR of Five Star, January 2023-April 2025 (X)

Rolling PER (LHS) Rolling PBR (RHS)

30 5.0

26 4.4

22 3.8

18 3.2

14 2.6

10 2.0
Jul-23

Jul-24
Jan-23

Jan-24

Jan-25
Oct-23

Oct-24
Apr-23

Apr-24

Apr-25
Source: Company, Bloomberg, Kotak Institutional Equities estimates

We expect gradual pick-up in loan growth over FY2026-27 Disbursements to pick up over FY2026-27E
AUM, March fiscal year-ends, 2016-2027E Disbursements, March fiscal year-ends, 2017-
2027E
AUM (LHS) YoY (%, RHS)
(Rs bn) 149 (%) (Rs bn) Disbursements (LHS) YoY (RHS)
225 150 (%)
100 150
117
180 110 120 93
104 83
80 100
84 63
135 90 41 44
60 35 32 50

90 60 3
36 39 40 0
24 26 27
45 14 14 30 (48)
20 (50)
2 5 10 21 39 44 51 69 96 119 151 192
0 0 4 7 15 24 12 18 34 49 50 67 89
2025E
2026E
2027E
2016
2017
2018
2019
2020
2021
2022
2023
2024

0 (100)
2025E

2026E

2027E
2017

2018

2019

2020

2021

2022

2023

2024

Source: Company, Kotak Institutional Equities estimates

Source: Company, Kotak Institutional Equities estimates

Five Star Business Finance

Diversified Financials India Research

k.kathirvelu-kotak.com
 148

Repayment rate to remain range bound

Repayment rate, March fiscal year-ends, 2017-2027E (%)

Repayment rate (%)

50

39.2
40 37.4
34.3
31.2 32.0
29.8 30.5 30.0
30 28.0
25.5

20 17.8

10

0
2017 2018 2019 2020 2021 2022 2023 2024 2025E 2026E 2027E

Source: Company, Kotak Institutional Equities estimates

Decline in yields to drive NIM compression over the medium term

Yields, cost of borrowings and NIM, March fiscal year-ends, 2019-2027E (%)

Yield on loans (LHS) Cost of borrowings (LHS) Spread (RHS) NIM (RHS)
30 25

20.0 20.6
19.9 19.3
19.0
24 18.4 20
17.6 17.2 17.5
16.5 16.7
16.1
14.7 15.3 15.2 14.7
18 13.1 15
11.8

12 25.0 24.9 24.3 25.3 25.0 25.6 25.6 24.7 10

24.0

6 5

10.3 13.1 11.2 10.0 7.8 8.9 9.6 9.5 9.4

0 0
2019 2020 2021 2022 2023 2024 2025E 2026E 2027E

Source: Company, Kotak Institutional Equities estimates

Five Star Business Finance

Diversified Financials India Research

k.kathirvelu-kotak.com
 149

We model 1.0-1.1% credit costs over the medium term

Detailed asset quality and credit cost, March fiscal year-ends, 2019-2027E (%)
2019 2020 2021 2022 2023 2024 2025E 2026E 2027E
Gross loans (Rs mn)
Gross stage-1 and 2 20,941 38,390 44,002 50,140 68,209 95,078 117,425 148,364 188,072
Gross stage-1 18,788 34,323 38,960 42,170 61,884 88,802 109,063 137,038 172,750
Gross stage-2 2,153 4,067 5,042 7,971 6,325 6,276 8,362 11,325 15,322
Gross stage-3 187 532 452 531 939 1,328 2,031 2,643 3,447
Overall gross loans 21,128 38,922 44,454 50,671 69,148 96,406 119,455 151,006 191,519
Gross loan mix (%)
Gross stage-1 and 2 99 99 99 99 99 99 98 98 98
Gross stage-1 89 88 88 83 89 92 91 91 90
Gross stage-2 10 10 11 16 9 7 7 8 8
Gross stage-3 0.9 1.4 1.0 1.0 1.4 1.4 1.7 1.8 1.8
Overall ECL provisions (Rs mn)
ECL on stage-1 and 2 126 520 785 844 646 857 1,000 1,454 2,070
ECL on stage-1 28 166 128 145 203 350 414 548 691
ECL on stage-2 99 354 657 699 443 507 585 906 1,379
ECL on stage-3 43 94 81 185 463 721 1,015 1,374 1,896
Overall ECL 169 614 866 1,029 1,109 1,578 2,015 2,828 3,966
ECL covearge (%)
ECL coverage on stage-1 and 2 0.6 1.4 1.8 1.7 0.9 0.9 0.9 1.0 1.1
ECL coverage on stage-1 0.1 0.5 0.3 0.3 0.3 0.4 0.4 0.4 0.4
ECL coverage on stage-2 4.6 8.7 13.0 8.8 7.0 8.1 7.0 8.0 9.0
ECL coverage on stage-3 23.14 17.70 17.97 34.89 49.31 54.29 50.00 52.00 55.00
Overall ECL coverage 0.80 1.58 1.95 2.03 1.60 1.64 1.69 1.87 2.07
Credit cost break-up (% of average of period-ending gross loans)
Overall credit cost 0.5 1.6 0.8 1.0 0.3 0.7 0.9 1.0 1.1
Provision on loans 0.4 1.5 0.6 0.3 0.1 0.6 0.4 0.6 0.7
Write-offs 0.1 0.2 0.2 0.6 0.2 0.1 0.5 0.4 0.4

Source: Company, Kotak Institutional Equities estimates

Cost ratios to moderate over the medium term

Cost ratios, March fiscal year-ends, 2019-2027E (%)

Cost-to-income (LHS) Cost-to-average AUM (RHS) Core cost-to-average AUM (RHS)

40 7.3 7.5
34.7
32.0
6.8 32.0 32.2 31.6 31.6
30.1 6.7 30.9
32 29.5 6.9
6.4 6.8
6.6 6.2
24 6.5 6.0 6.3

5.7 6.1 5.7

16 5.9 5.7
5.7 5.1 5.7 5.6
8 5.1

0 4.8 4.5
2019 2020 2021 2022 2023 2024 2025E 2026E 2027E

Source: Company, Kotak Institutional Equities estimates

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Diversified Financials India Research

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 150

Change in estimates, March fiscal year-ends, 2025-2027E

New estimates Old estimates Change (%)
2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E
Key business parameters
AUM (Rs mn) 119,455 151,006 191,519 120,130 150,277 191,023 (0.6) 0.5 0.3
YoY (%) 24 26 27 25 25 27 -70 bps 132 bps -29 bps
Disbusrements (Rs mn) 50,043 67,388 88,835 50,043 67,388 88,835 - - -
YoY (%) 3 35 32 3 35 32 0 bps 0 bps 0 bps
Repayment rate (%) 28 30 32 27 31 32 70 bps -100 bps 0 bps
Key ratios (%)
Yield on loans 25.6 24.7 24.0 25.4 24.7 24.0 17 bps 0 bps 0 bps
Core yield on loans 25.1 24.3 23.6 25.0 24.3 23.6 17 bps 0 bps 0 bps
Cost of borrowings 9.6 9.5 9.4 9.6 9.5 9.3 0 bps 5 bps 5 bps
Spread 16.1 15.2 14.7 15.9 15.3 14.7 17 bps -5 bps -5 bps
Core spread 15.6 14.8 14.2 15.4 14.8 14.3 17 bps -5 bps -5 bps
NIM 19.3 18.4 17.5 19.2 18.4 17.5 19 bps -3 bps -4 bps
Cost-to-income 31 32 32 31 32 32 -19 bps 4 bps -4 bps
Cost-to-average AUM 6.2 6.0 5.7 6.2 6.0 5.7 2 bps 0 bps -2 bps
Credit cost 1 1 1 1 1 1 -1 bps 2 bps 0 bps
ROA 8 8 7 8 8 7 11 bps -3 bps -1 bps
ROE 18 18 18 18 18 18 18 bps -8 bps 2 bps
Core PBT ratio 11.2 10.6 10.1 11.0 10.6 10.1 13 bps -2 bps -1 bps
Key income statement items (Rs mn)
Net interest income 20,879 24,826 29,957 20,743 24,859 29,921 0.7 (0.1) 0.1
Total income 21,754 25,779 31,007 21,618 25,812 30,971 0.6 (0.1) 0.1
Operating expenses 6,724 8,150 9,796 6,724 8,150 9,796 - - -
Employee expenses 5,189 6,252 7,443 5,189 6,252 7,443 - - -
Others 1,534 1,898 2,352 1,534 1,898 2,352 - - -
Provisions 987 1,410 1,817 998 1,389 1,817 (1.1) 1.6 (0.0)
Profit before tax 14,044 16,218 19,394 13,896 16,273 19,358 1.1 (0.3) 0.2
Profit after tax 10,520 12,149 14,528 10,409 12,189 14,501 1.1 (0.3) 0.2
Core PBT 14,500 17,119 20,711 14,364 17,151 20,675 0.9 (0.2) 0.2
Other data
EPS (Rs) 36 42 50 36 42 50 1.1 (0.3) 0.2
BVPS (Rs) 214 256 306 214 256 306 0.2 0.1 0.1

Source: Company, Kotak Institutional Equities estimates

Five Star Business Finance

Diversified Financials India Research

k.kathirvelu-kotak.com
 151

Five Star—key growth rates and ratios, March fiscal year-ends, 2020-2027E
2020 2021 2022 2023 2024 2025E 2026E 2027E
Key income statement growth rates (%)
Operational revenues 92 33 19 21 44 30 21 23
Interest income 92 36 19 25 41 31 21 23
Net interest income 70 30 31 36 34 27 19 21
Total income 72 27 32 32 37 26 19 20
Operating expenses 62 25 43 43 27 21 21 20
Employee expenses 66 29 44 47 24 21 20 19
Pre-provision operating profit 77 28 27 27 42 28 17 20
Provisions 553 (29) 29 (56) 175 78 43 29
Profit after tax 67 37 26 33 39 26 15 20
Core PBT 75 31 29 26 35 28 18 21
Key balance sheet growth rates (%)
Cash and balances 105 201 (35) 80 6 28 29 29
Loans 83 14 17 34 42 21 26 27
Other assets 56 11 356 (17) 11 18 17 17
Net assets 84 33 9 37 34 22 26 27
Borrowings 146 45 (25) 66 49 24 32 32
Other liabilities 24 12 47 57 52 15 15 15
Total liabilities 142 44 (24) 66 49 24 32 32
Shareholders' funds 42 19 60 17 20 20 19 19
Other key growth rates (%)
AUM 84.2 14.2 14.0 36.5 39.4 23.9 26.4 26.8
Disbursements 62.6 (48.3) 41.1 93.1 43.9 2.5 34.7 31.8
Key ratios (%)
Yield on loans 24.9 24.3 25.3 25.0 25.6 25.6 24.7 24.0
Core yield on loans 23.9 23.9 24.7 24.4 25.0 25.1 24.3 23.6
Cost of borrowings 13.1 11.2 10.0 7.8 8.9 9.6 9.5 9.4
Spread 11.8 13.1 15.3 17.2 16.7 16.1 15.2 14.7
Core spread 10.9 12.6 14.7 16.6 16.1 15.6 14.8 14.2
NIM 17.6 16.5 19.0 20.6 19.9 19.3 18.4 17.5
Cost-to-income 30.1 29.5 32.0 34.7 32.2 30.9 31.6 31.6
Cost-to-average AUM 5.7 5.1 6.4 7.3 6.7 6.2 6.0 5.7
Credit cost (% of AUM) 1.6 0.8 1.0 0.3 0.7 0.9 1.0 1.1
Asset quality details (%)
Gross stage-2 10.4 11.3 15.7 9.1 6.5 7.0 7.5 8.0
Gross stage-3 1.4 1.0 1.0 1.4 1.4 1.7 1.8 1.8
ECL coverage on stage-3 17.7 18.0 34.9 49.3 54.3 50.0 52.0 55.0
Overall ECL coverage 1.6 1.9 2.0 1.6 1.6 1.7 1.9 2.1
Du-pont (% of average assets and assigned loans)
Net interest income 15.8 13.6 14.9 16.4 16.2 16.1 15.4 14.7
Net operational income 17.0 14.3 15.7 16.7 16.8 16.6 15.9 15.1
Total income 17.0 14.3 15.7 16.8 16.9 16.8 16.0 15.2
Operating expenses 5.1 4.2 5.0 5.8 5.4 5.2 5.0 4.8
Employee expenses 3.8 3.2 3.9 4.6 4.2 4.0 3.9 3.6
Others 1.3 1.0 1.1 1.2 1.2 1.2 1.2 1.2
Pre-provision operating profit 11.9 10.1 10.7 11.0 11.5 11.6 10.9 10.4
Provisions 1.5 0.7 0.8 0.3 0.5 0.8 0.9 0.9
Profit before tax 10.4 9.4 10.0 10.7 10.9 10.8 10.0 9.5
(1-tax rate) 0.7 0.8 0.8 0.7 0.7 0.7 0.7 0.7
ROA 7.8 7.1 7.5 8.0 8.2 8.1 7.5 7.1
Leverage 2.0 2.4 2.0 1.9 2.1 2.3 2.4 2.5
ROE 15.8 16.8 15.0 15.0 17.5 18.4 17.7 17.7
Core PBT ratio 11.6 10.1 10.9 11.1 11.1 11.2 10.6 10.1

Source: Company, Kotak Institutional Equities estimates

Five Star Business Finance

Diversified Financials India Research

k.kathirvelu-kotak.com
 152

Five Star—financial summary, March fiscal year-ends, 2020-2027E (Rs mn)

2021 2022 2023 2024 2025E 2026E 2027E
Income statement (Rs mn)
Operational income 10,497 12,541 15,208 21,828 28,359 34,260 42,079
Interest income 10,149 12,038 14,988 21,166 27,634 33,457 41,179
Others 349 503 221 663 725 803 900
Interest expense 3,252 3,006 2,663 4,685 6,755 8,631 11,222
Net interest income 6,897 9,032 12,325 16,481 20,879 24,826 29,957
Net operational income 7,246 9,535 12,546 17,144 21,604 25,629 30,857
Total income 7,261 9,556 12,627 17,266 21,754 25,779 31,007
Operating expenses 2,144 3,058 4,378 5,553 6,724 8,150 9,796
Employee expenses 1,637 2,361 3,464 4,286 5,189 6,252 7,443
Fee and depreciation expense 141 122 173 246 279 334 392
Other expenses 367 575 741 1,021 1,256 1,564 1,960
Pre-provision operating profit 5,116 6,497 8,249 11,713 15,030 17,629 21,211
Provisions 352 455 201 554 987 1,410 1,817
Profit before tax 4,764 6,042 8,047 11,159 14,044 16,218 19,394
Tax 1,174 1,507 2,012 2,800 3,524 4,070 4,867
Profit after tax 3,590 4,535 6,035 8,359 10,520 12,149 14,528
Core PBT 5,120 6,622 8,361 11,302 14,500 17,119 20,711
Balance sheet (Rs mn)
Cash and bank balances 13,557 8,799 15,809 16,717 21,457 27,592 35,538
Loans 43,587 51,024 68,222 96,851 117,440 148,178 187,553
Other assets 791 3,607 2,998 3,320 3,918 4,595 5,380
Net assets 57,936 63,431 87,028 116,888 142,815 180,366 228,471
Borrowings 34,252 25,588 42,473 63,158 78,308 103,406 136,634
Other liabilities 502 739 1,160 1,768 2,026 2,330 2,679
Total liabilities 34,754 26,327 43,633 64,926 80,334 105,736 139,313
Shareholders' funds 23,182 37,104 43,395 51,962 62,481 74,630 89,158
AUM mix (Rs mn)
Overall AUM 44,454 50,671 69,148 96,406 119,455 151,006 191,519
Disbursements and repayments
Overall disbursements (Rs mn) 12,451 17,562 33,915 48,814 50,043 67,388 88,835
Repayment rate (%) 17.8 25.5 30.5 31.2 28.0 30.0 32.0

Source: Company, Kotak Institutional Equities estimates

Five Star Business Finance

Diversified Financials India Research

k.kathirvelu-kotak.com
 UPDATE

Automobiles & Components

India
Sector View: Cautious NIFTY-50: 23,332 April 03, 2025

No signs of pick-up in retail trends

The auto sector reported modest wholesale volume print in PV, CV and 2W
segments led by channel filling, whereas retail demand showed weak trends
with 2W/CV volumes declining by 1-2% yoy in March 2025. PV segment
wholesale volumes grew by low single digit yoy, whereas 2W wholesale
volumes grew by high single digit driven by channel filling and higher
discounting. CV segment wholesale volumes remained flat, driven by
weakness in the LCV segment. The tractor segment continued its uptrend
with >20% yoy growth in March 2025.

Domestic wholesale PV volumes improved by low single digit on a yoy basis

As per our estimates, domestic PV industry wholesale volumes increased by
low single digit on a yoy basis, driven by channel filling, whereas retail sales of
the PV industry increased by ~5% yoy in February 2025, driven by a sharp uptick
during the last week owing to the festive period and higher discounts. MSIL’s
volumes improved by 3.1% yoy led by 0.9% yoy decline in domestic markets and
27% yoy increase in export segment. As per our estimates, MSIL’s wholesales

Private Circulation Only. This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities Act of 1933
market share stood at ~40% (-150 bps yoy). TTML PV volumes increased by
3.1% yoy, whereas M&M’s PV volumes grew by 18% yoy in March 2025. HMI
reported 3% yoy increase and Toyota volumes grew by 13% yoy in March 2025.

Domestic 2W wholesales increased by high single digit yoy in March 2025

Domestic 2W wholesale volumes increased by high single digit yoy due to
channel filling owing to the festive season and upcoming OBD-II Phase-2 (b)
transition. However, retail trends remained muted with 1% yoy decline in March
2025. EV 2W retail sales declined by 6% yoy in March 2025 owing to the higher
base of last year. HMCL’s volumes increased by 12% yoy, whereas TVSL 2W
volumes grew by 17% yoy driven by >20% yoy growth in export volumes and >10%
yoy growth in the domestic segment. Royal Enfield volumes grew by 34% yoy led
by 36% yoy increase in exports and 33% yoy growth in the domestic segment.

CV segment volumes remained flat in March 2025

Domestic CV segment volumes remained flat, driven by weakness in the LCV
segment. TTMT domestic CV volumes declined by 3% yoy, led by 17% yoy
decline in SCV cargo and pick-up segments, partly offset by (1) 4-6% yoy
increase in passenger carriers and ILMCV truck segments and (2) 1% yoy
growth in HCV truck segment. AL reported 5% yoy growth in volumes, whereas
VECV’s volumes increased by 8% yoy in March 2025.

Domestic tractor segment demand remains strong

As per our estimates, domestic tractor volumes increased by >20% yoy in March
2025 led by (1) strong rabi sowing aided by higher water storage levels in major
reservoirs, (2) sustained government support and (3) favorable terms of trade
for farmers. The strong momentum is expected to continue in 1QFY26E as well.
M&M tractor volumes grew by 34% yoy, whereas Escorts Kubota’s tractor
volumes increased by 15% yoy in March 2025.
Full sector coverage on KINSITE

Rishi Vora
 154

Maruti Suzuki total volumes increased by 3% yoy in March 2025; domestic volumes declined by 0.8% on a yoy basis
Maruti Suzuki monthly sales volume, March fiscal year-ends, 2024-25 (units, %)
FY
Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Nov-24 Dec-24 Jan-25 Feb-25 Mar-25 2025 2024
Sales volume (units)
Mini (Alto, S Presso) 11,829 11,519 9,902 9,395 9,960 10,648 10,363 10,687 9,750 7,418 14,247 10,026 11,655 125,570 142,094
Compact (Swift, Baleno, Ritz, Celerio, Dzire, New WagnoR, Ignis) 69,844 56,953 68,206 64,049 58,682 58,051 60,480 65,948 61,373 54,906 82,241 72,942 66,906 770,737 828,015
UV (Ertiga, S-Cross, Brezza, XL6, Grand Vitara, Fronx, Jimny, Invicto) 58,436 56,553 54,204 52,373 56,302 62,684 61,549 70,644 59,003 55,651 65,093 65,033 61,097 720,186 642,296
Van (Omni and Eeco) 12,019 12,060 10,960 10,771 11,916 10,985 11,908 11,653 10,589 11,678 11,250 11,493 10,409 135,672 137,139
Sedan (Ciaz) 590 867 730 572 603 707 662 659 597 464 768 1,097 676 8,402 10,337
Light commercial vehicle 3,612 2,496 2,692 2,758 2,891 2,495 3,099 3,539 2,926 2,406 4,089 2,710 2,391 34,492 33,763
Sales to other OEMs 4,974 5,481 10,490 8,277 10,702 10,209 8,938 10,136 8,660 8,306 7,463 10,878 6,882 106,422 58,612
Total domestic 161,304 145,929 157,184 148,195 151,056 155,779 156,999 173,266 152,898 140,829 185,151 174,179 160,016 1,901,481 1,852,256
Exports 25,892 22,160 17,367 31,033 23,985 26,003 27,728 33,168 28,633 37,419 27,100 25,021 32,968 332,585 283,067
Total volumes 187,196 168,089 174,551 179,228 175,041 181,782 184,727 206,434 181,531 178,248 212,251 199,200 192,984 2,234,066 2,135,323
Yoy change (%)
Mini (Alto, S Presso) 2.1 (18.4) (19.1) (33.2) 3.9 (12.8) 0.1 (26.6) (2.1) 190.1 (10.1) (32.2) (1.5) (11.6)
Compact (Swift, Baleno, Ritz, Celerio, Dzire, New WagnoR, Ignis) (2.8) (24.0) (4.5) (0.7) (12.5) (19.9) (11.8) (18.2) (5.1) 20.0 7.5 1.8 (4.2) (6.9)
UV (Ertiga, S-Cross, Brezza, XL6, Grand Vitara, Fronx, Jimny, Invicto) 57.7 53.9 17.2 20.7 (9.3) 6.7 3.8 19.4 20.4 21.1 4.9 6.2 4.6 12.1
Van (Omni and Eeco) 0.2 14.8 (14.5) 15.1 (1.0) (7.4) 6.8 (10.2) 3.5 16.4 (6.4) (5.4) (13.4) (1.1)
Sedan (Ciaz) 96.7 (14.7) (26.4) (67.2) (55.3) (16.7) (55.6) (5.2) 114.7 (5.1) 111.6 128.1 14.6 (18.7)
Light commercial vehicle (10.2) 13.5 (6.8) (7.8) 13.0 (2.7) 35.1 (9.1) 16.6 40.4 19.8 (13.3) (33.8) 2.2
Sales to other OEMs 57.2 35.7 109.4 128.1 125.5 76.3 56.1 90.3 79.6 98.9 42.7 111.3 38.4 81.6
Total domestic 15.3 1.7 3.7 6.1 (5.3) (5.3) (1.2) (2.3) 8.1 27.3 5.5 3.3 (0.8) 2.7
Exports (14.0) 30.6 (34.4) 57.0 8.0 5.6 23.2 51.1 24.8 39.2 13.3 (13.5) 27.3 17.5
Total volumes 10.1 4.7 (2.0) 12.4 (3.6) (3.9) 1.9 3.6 10.4 29.6 6.5 0.9 3.1 4.6

Source: Company, Kotak Institutional Equities

Automotive volumes increased by 23% yoy in March 2025; total tractor volumes grew by 34% yoy in March 2025
Mahindra & Mahindra monthly sales volume, March fiscal year-ends, 2024-25 (units, %)
FY
Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Nov-24 Dec-24 Jan-25 Feb-25 Mar-25 2025 2024
Sales volume (units)
Passenger UVs (incl. Verito) 40,631 41,008 43,218 40,022 41,623 43,277 51,062 54,504 46,222 41,424 50,659 50,420 48,048 551,487 459,877
Commercial Vehicles 20,930 22,372 19,826 20,594 19,713 21,092 23,706 28,812 22,042 19,502 23,917 23,826 23,951 269,353 262,810
3-wheelers 5,279 5,504 5,967 6,184 3,593 9,326 10,044 9,826 8,043 5,750 7,452 6,395 7,752 85,836 77,589
Exports (Auto sector) 1,573 1,857 2,671 2,597 1,515 3,060 3,027 3,506 2,776 3,092 3,404 3,061 4,143 34,709 24,663
Auto division 68,413 70,741 71,682 69,397 66,444 76,755 87,839 96,648 79,083 69,768 85,432 83,702 83,894 941,385 824,939
Tractors (Dom + Exp) 26,024 37,039 37,109 47,319 27,209 21,917 44,256 65,453 33,378 22,943 27,557 25,527 34,934 424,641 378,386
Total 94,437 107,780 108,791 116,716 93,653 98,672 132,095 162,101 112,461 92,711 112,989 109,229 118,828 1,366,026 1,203,325
Yoy change (%)
Passenger UVs (incl. Verito) 12.9 18.2 31.5 22.8 15.0 16.1 23.7 24.7 15.6 17.7 17.6 18.9 18.3 19.9
Commercial vehicles (6.1) 10.6 (1.2) (1.7) (5.7) (10.7) (1.2) 12.0 (0.8) 9.0 1.9 4.4 14.4 2.5
3-wheelers (7.3) (0.9) 2.0 (3.0) (44.6) 32.4 26.8 4.5 22.5 8.3 31.9 3.8 46.8 10.6
Exports (Auto sector) (25.6) 2.4 2.1 3.7 (40.4) 26.3 25.1 89.1 52.9 70.0 95.0 98.9 163.4 40.7
Auto division 3.5 13.6 16.7 11.2 0.5 9.1 16.2 19.8 12.1 15.9 15.5 14.8 22.6 14.1
Tractors (Dom + Exp) (25.7) 1.7 8.7 6.4 8.1 1.1 2.4 29.7 4.1 19.9 15.1 17.8 34.2 12.2
Total (6.6) 9.2 13.9 9.2 2.6 7.2 11.2 23.6 9.6 16.9 15.4 15.5 25.8 13.5

Source: Company, Kotak Institutional Equities

Tata Motors total volumes increased by 0.5% on a yoy basis in March 2025
Tata Motors monthly sales volume, March fiscal year-ends, 2024-25 (units, %)
FY
Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Nov-24 Dec-24 Jan-25 Feb-25 Mar-25 2025 2024
Sales volume (units)
CVs 42,262 29,538 29,691 31,980 27,042 27,207 30,032 34,259 27,636 33,875 31,988 32,533 41,122 376,903 395,845
PVs 50,297 47,983 47,075 43,624 44,954 44,486 41,313 48,423 47,177 44,289 48,316 46,811 51,872 556,323 573,495
Total sales 92,559 77,521 76,766 75,604 71,996 71,693 71,345 82,682 74,813 78,164 80,304 79,344 92,994 933,226 969,340
Yoy change (%)
CVs (9.7) 31.3 2.4 (6.8) (17.9) (15.2) (23.1) (0.2) (1.4) (0.9) (0.3) (7.3) (2.7) (4.8)
PVs 13.7 1.9 2.4 (7.9) (5.7) (3.2) (8.8) (0.4) 2.2 1.4 (10.6) (8.8) 3.1 (3.0)
Total sales 1.7 11.4 2.4 (7.4) (10.7) (8.1) (15.4) (0.3) 0.9 0.4 (6.8) (8.2) 0.5 (3.7)

Source: Company, Kotak Institutional Equities

Automobiles & Components

India Research

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VECV volumes increased by 7.6% yoy in March 2025

VECV monthly sales volume, March fiscal year-ends, 2024-25 (units, %)
FY
Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Nov-24 Dec-24 Jan-25 Feb-25 Mar-25 2025 2024
Domestic volumes 10,525 4,898 6,304 6,893 6,044 6,028 6,847 6,611 4,957 7,545 7,872 7,357 11,187 82,543 79,367
Export volumes 461 356 415 421 400 255 475 300 402 490 450 552 665 5,181 3,721
Volvo Volumes 256 123 182 110 178 260 287 201 215 289 167 183 242 2,437 2,471
Total sales 11,242 5,377 6,901 7,424 6,622 6,543 7,609 7,112 5,574 8,324 8,489 8,092 12,094 90,161 85,559
Yoy change (%)
Domestic volumes (6.6) (20.3) 7.3 10.7 13.8 2.0 2.0 (6.6) 5.8 1.0 21.1 6.2 6.3 4.0
Export volumes 11.4 38.5 66.0 68.4 (5.9) (23.2) 90.0 49.3 32.7 52.6 26.8 74.7 44.3 39.2
Volvo Volumes 11.8 (26.8) (14.6) (41.5) 26.2 9.7 23.2 (3.4) 4.9 22.5 (19.7) 2.8 (5.5) (1.4)
Total sales (5.6) (18.1) 8.9 11.4 12.7 1.0 5.7 (5.0) 7.3 3.7 20.1 9.0 7.6 5.4

Source: Company, Kotak Institutional Equities

Royal Enfield volumes increased by 34% yoy in March 2025

Royal Enfield monthly sales volume, March fiscal year-ends, 2024-25 (units, %)
FY
Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Nov-24 Dec-24 Jan-25 Feb-25 Mar-25 2025 2024
Sales volume (units)
Royal Enfield 75,551 81,870 71,010 73,141 67,265 73,629 86,978 110,574 82,257 79,466 91,132 90,670 101,021 1,009,900 912,792
Domestic 66,044 75,038 63,531 66,117 61,208 65,623 80,213 100,999 72,236 67,891 81,052 80,799 88,050 902,757 834,855
Exports 9,507 6,832 7,479 7,024 6,057 8,006 7,652 9,575 10,021 11,575 10,080 9,871 12,971 107,143 77,937
Yoy change (%)
Royal Enfield 4.6 11.9 (8.3) (5.1) (8.1) (5.1) 10.7 31.0 2.5 25.4 19.6 19.4 33.7 10.6
Domestic 10.3 8.9 (10.3) (2.0) (7.4) (5.4) 8.0 24.8 (3.9) 18.5 14.9 19.0 33.3 8.1
Exports (23.0) 60.6 12.2 (26.9) (14.1) (2.2) 77.2 175.4 96.0 89.9 79.0 23.2 36.4 37.5

Source: Company, Kotak Institutional Equities

Escorts Kubota volumes increased by 15% on a yoy basis in March 2025

Escorts Kubota monthly sales volume, March fiscal year-ends, 2024-25 (units, %)
FY
Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Nov-24 Dec-24 Jan-25 Feb-25 Mar-25 2025 2024
Sales volume (units)
Escorts Kubota 9,888 8,849 10,276 11,245 6,963 6,652 12,380 18,110 8,974 5,472 6,669 8,590 11,374 115,554 114,382
Domestic 9,355 8,502 9,896 11,011 6,540 6,243 11,985 17,839 8,730 5,016 6,058 7,968 10,775 110,563 108,763
Exports 533 347 380 234 423 409 395 271 244 456 611 622 599 4,991 5,619
Yoy change (%)
Escorts Kubota (4.0) (7.6) (5.3) (4.7) (5.0) (2.7) 2.5 19.8 (9.4) (10.8) (6.7) 11.4 15.0 1.0
Domestic (2.6) (8.2) (4.8) (1.9) (5.5) (3.0) 5.7 22.6 (8.1) (12.5) (10.7) 9.6 15.2 1.7
Exports (24.3) 10.9 (17.9) (59.7) 3.4 3.5 (47.1) (51.9) (39.5) 12.6 66.0 41.4 12.4 (11.2)

Source: Company, Kotak Institutional Equities

TVS Motor’s total volumes increased by 17% yoy in March 2025

TVS Motor monthly sales volume, March fiscal year-ends, 2024-25 (units, %)
FY
Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Nov-24 Dec-24 Jan-25 Feb-25 Mar-25 2025 2024
Sales volume (units)
Motorcycles 171,611 188,110 173,627 152,701 161,074 170,486 229,268 230,822 180,247 144,811 174,388 192,960 196,734 2,195,228 1,989,893
Scooters 131,472 144,126 145,305 128,986 139,995 163,629 186,751 193,439 165,535 133,919 171,111 164,415 166,297 1,903,508 1,569,680
Mopeds 41,363 42,356 40,658 40,481 38,607 44,726 55,773 53,898 46,691 33,272 42,172 34,514 37,089 510,237 485,251
Three-wheelers 10,146 9,023 10,324 11,478 14,464 12,747 10,703 10,856 8,777 9,685 9,952 12,087 14,567 134,663 146,170
Total sales 354,592 383,615 369,914 333,646 354,140 391,588 482,495 489,015 401,250 321,687 397,623 403,976 414,687 4,743,636 4,190,994
Yoy change (%)
Motorcycles 21.5 23.5 7.0 3.0 4.6 11.4 23.0 14.3 4.6 (2.2) 12.1 4.9 14.6 10.3
Scooters 2.1 34.1 19.9 6.3 14.8 14.8 20.3 17.1 21.9 29.8 29.3 24.4 26.5 21.3
Mopeds 10.3 21.3 13.3 16.2 6.0 22.3 23.2 0.7 6.2 (14.4) 0.3 (17.1) (10.3) 5.1
Total three-wheelers 5.8 (21.1) (8.8) (4.4) 5.8 (7.2) (31.4) (23.0) (27.6) (18.2) 3.9 13.9 43.6 (7.9)
Total sales 11.8 25.3 11.9 5.4 8.6 13.2 19.9 12.5 10.2 6.6 17.1 9.6 16.9 13.2

Source: Company, Kotak Institutional Equities

Automobiles & Components

India Research

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Ashok Leyland volumes increased by 5% yoy in March 2025

Ashok Leyland monthly sales volume, March fiscal year-ends, 2024-25 (units, %)
FY
Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Nov-24 Dec-24 Jan-25 Feb-25 Mar-25 2025 2024
Sales volume (units)
LCV 7,304 5,148 5,439 5,421 5,488 5,800 6,156 5,902 4,961 5,483 5,829 6,417 7,022 69,066 69,800
MHCV 15,562 9,123 9,243 9,519 8,440 8,663 11,077 9,408 9,176 11,474 11,384 11,486 17,038 126,031 124,883
Total CVs 22,866 14,271 14,682 14,940 13,928 14,463 17,233 15,310 14,137 16,957 17,213 17,903 24,060 195,097 194,683
Yoy change (%)
LCV 2.1 2.1 11.8 3.1 (0.2) (0.2) (4.6) (11.6) (10.7) (0.7) 1.9 5.3 (3.9) (1.1)
MHCV (7.2) 15.0 11.8 (4.4) (11.8) (11.3) (13.1) (7.6) 8.0 7.9 11.4 (0.4) 9.5 0.9
Total CVs (4.4) 10.0 11.8 (1.8) (7.6) (7.1) (10.3) (9.2) 0.6 5.0 8.0 1.5 5.2 0.2

Source: Company, Kotak Institutional Equities

HMCL reported 12% yoy increase in volumes in March 2025

Hero MotoCorp monthly sales volume, March fiscal year-ends, 2024-25 (units, %)
FY
Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Nov-24 Dec-24 Jan-25 Feb-25 Mar-25 2025 2024
Total sales 490,415 533,585 498,123 503,448 370,274 512,360 637,050 679,091 459,805 324,906 442,873 388,068 549,604 5,899,187 5,621,455
Yoy change (%) (5.6) 34.7 (4.1) 15.2 (5.4) 4.8 18.7 18.1 (6.4) (17.5) 2.1 (17.2) 12.1 4.9

Source: Company, Kotak Institutional Equities

HMI reported 2.6% yoy volume increase in March 2025

HMI monthly sales volume, March fiscal year-ends, 2024-25 (units, %)
FY
Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Nov-24 Dec-24 Jan-25 Feb-25 Mar-25 2025 2024
Sales volume (units)
Hyundai Motor India 65,597 63,701 63,551 64,803 64,563 63,175 64,201 70,078 61,252 55,078 65,603 58,727 67,320 762,052 777,872
Domestic 52,997 50,201 49,151 50,103 49,013 49,525 51,101 55,568 48,246 42,208 54,003 47,727 51,820 598,666 614,717
Exports 12,600 13,500 14,400 14,700 15,550 13,650 13,100 14,510 13,006 12,870 11,600 11,000 15,500 163,386 163,155
Yoy change (%)
Hyundai Motor India 6.7 9.5 6.6 (1.2) (3.2) (11.6) (10.4) 2.0 (6.9) (2.4) (3.0) (2.9) 2.6 (2.0)
Domestic 4.7 1.0 1.1 0.2 (3.3) (8.0) (5.8) 0.8 (2.4) (1.3) (5.4) (4.9) (2.2) (2.6)
Exports 15.6 58.8 30.9 (5.8) (2.8) (22.5) (24.7) 6.7 (20.5) (6.1) 10.5 6.8 23.0 0.1

Source: Company, Kotak Institutional Equities

Automobiles & Components

India Research

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 157

PV retail volumes increased by 5.4% yoy in March 2025

OEM-wise PV retail sales volume, March fiscal year-ends, 2024-25 (units, %)
FY
Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Nov-24 Dec-24 Jan-25 Feb-25 Mar-25 2025 2024
Player-wise retail volumes (units)
Maruti Suzuki 128,736 139,418 123,580 116,254 132,785 127,477 115,857 203,501 129,663 115,847 214,813 120,143 132,565 1,671,903 1,612,081
Hyundai 44,487 49,183 45,442 39,155 44,221 43,374 38,745 69,932 44,827 39,317 61,279 39,073 42,366 556,914 562,183
Mahindra & Mahindra 39,638 38,671 34,459 36,673 39,668 40,334 35,570 61,148 43,728 35,292 54,113 41,403 45,876 506,935 427,499
Tata Motors 46,332 46,679 42,037 38,029 44,402 39,841 32,429 66,243 42,519 38,260 54,776 39,249 48,369 532,833 551,591
Kia Motors 20,063 19,786 19,374 16,804 19,409 19,264 16,009 29,613 18,908 17,370 22,869 19,367 21,915 240,688 226,030
Honda 6,476 6,244 4,904 4,334 5,033 4,958 4,025 7,352 4,591 4,724 7,952 5,312 4,921 64,350 79,631
Toyota 19,430 19,906 19,056 19,300 22,484 23,144 20,404 29,564 20,949 19,027 30,252 22,486 22,996 269,568 209,628
Renault 3,708 4,033 3,663 2,996 3,114 3,020 2,735 4,471 2,974 2,381 3,961 2,538 2,621 38,507 46,561
Nissan 2,128 2,253 2,074 1,600 1,871 2,005 2,163 2,706 2,386 1,643 2,596 1,738 1,750 24,785 27,362
MG Motor 3,792 4,263 4,472 3,835 4,103 4,108 3,056 5,815 5,136 5,340 6,730 4,777 5,133 56,768 49,929
Skoda 5,814 6,720 6,520 5,651 6,463 6,222 5,375 8,892 5,801 6,259 9,469 6,687 8,984 83,043 87,551
Others 5,766 5,603 4,775 4,766 5,470 4,861 5,117 6,865 4,793 3,948 7,050 5,312 6,593 65,153 75,645
Total 326,370 342,759 310,356 289,397 329,023 318,608 281,485 496,102 326,275 289,408 475,860 308,085 344,089 4,111,447 3,955,691
Yoy change (%) (4.8) 18.0 1.2 (4.2) 13.3 (1.4) (17.0) 36.1 (12.9) (3.5) 18.4 (8.4) 5.4 3.9
Market share
Maruti Suzuki 39.4 40.7 39.8 40.2 40.4 40.0 41.2 41.0 39.7 40.0 45.1 39.0 38.5 40.7 40.8
Hyundai 13.6 14.3 14.6 13.5 13.4 13.6 13.8 14.1 13.7 13.6 12.9 12.7 12.3 13.5 14.2
Mahindra & Mahindra 12.1 11.3 11.1 12.7 12.1 12.7 12.6 12.3 13.4 12.2 11.4 13.4 13.3 12.3 10.8
Tata Motors 14.2 13.6 13.5 13.1 13.5 12.5 11.5 13.4 13.0 13.2 11.5 12.7 14.1 13.0 13.9
Kia Motors 6.1 5.8 6.2 5.8 5.9 6.0 5.7 6.0 5.8 6.0 4.8 6.3 6.4 5.9 5.7
Honda 2.0 1.8 1.6 1.5 1.5 1.6 1.4 1.5 1.4 1.6 1.7 1.7 1.4 1.6 2.0
Toyota 6.0 5.8 6.1 6.7 6.8 7.3 7.2 6.0 6.4 6.6 6.4 7.3 6.7 6.6 5.3
Renault 1.1 1.2 1.2 1.0 0.9 0.9 1.0 0.9 0.9 0.8 0.8 0.8 0.8 0.9 1.2
Nissan 0.7 0.7 0.7 0.6 0.6 0.6 0.8 0.5 0.7 0.6 0.5 0.6 0.5 0.6 0.7
MG Motor 1.2 1.2 1.4 1.3 1.2 1.3 1.1 1.2 1.6 1.8 1.4 1.6 1.5 1.4 1.3
Skoda 1.8 2.0 2.1 2.0 2.0 2.0 1.9 1.8 1.8 2.2 2.0 2.2 2.6 2.0 2.2
Others 1.8 1.6 1.5 1.6 1.7 1.5 1.8 1.4 1.5 1.4 1.5 1.7 1.9 1.6 1.9
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Note:
(1) Retail sales do not include sales from Telangana and Lakshadweep

Source: Parivahan Sewa, Kotak Institutional Equities

2W ICE retail volumes declined by 1% yoy in March 2025; EV segment volumes declined by 6% yoy in March 2025
OEM wise 2W ICE retail sales volume, March fiscal year-ends, 2024-25 (units, %)
FY
Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Nov-24 Dec-24 Jan-25 Feb-25 Mar-25 2025 2024
Player-wise retail volumes (units)
Hero MotoCorp 448,629 511,710 444,146 394,740 396,224 355,298 267,798 570,667 909,639 327,970 410,200 384,259 428,543 5,401,194 5,392,884
Bajaj Auto 163,446 188,746 166,272 144,839 143,882 128,601 117,816 191,428 266,341 120,911 147,143 128,386 132,389 1,876,754 2,001,534
TVS Motors 228,922 274,238 252,651 223,409 232,694 219,816 203,956 323,282 395,420 196,922 265,754 237,552 249,846 3,075,540 2,793,496
Honda 356,496 395,494 392,106 352,564 370,029 353,957 334,838 555,980 656,143 316,671 374,307 329,451 355,734 4,787,274 4,094,844
Royal Enfield 65,631 73,511 64,553 56,443 58,634 56,247 58,556 97,710 95,341 54,357 78,524 71,495 75,277 840,648 782,664
Classic Legends 2,546 2,835 2,506 2,094 2,201 2,121 2,173 4,309 4,218 2,352 2,833 2,332 2,245 32,219 30,992
Others 132,422 138,736 141,252 127,616 139,211 135,668 127,940 178,073 165,106 107,728 151,445 126,732 135,601 1,675,108 1,505,318
Total ICE 2W 1,398,111 1,585,306 1,463,520 1,301,751 1,343,004 1,251,965 1,113,758 1,923,550 2,492,303 1,126,911 1,430,206 1,280,207 1,379,635 17,688,737 16,601,732
Yoy change (%) 2.2 35.6 5.0 2.5 13.9 4.5 (11.2) 33.3 15.0 (18.3) 3.4 (6.2) (1.3) 6.5
Tota EV 2W 140,340 65,551 77,329 80,001 107,651 89,069 90,536 140,098 119,671 73,363 98,263 90,072 131,783 1,163,387 948,370
Yoy change (%) 62.5 (2.0) (26.8) 73.5 97.1 41.9 41.3 86.4 30.0 (3.3) 19.6 8.9 (6.1) 22.7
Total domestic 2W 1,538,451 1,650,857 1,540,849 1,381,752 1,450,655 1,341,034 1,204,294 2,063,648 2,611,974 1,200,274 1,528,469 1,370,279 1,511,418 18,855,503 17,550,169
Yoy change (%) 5.7 33.6 2.7 5.0 17.6 6.3 (8.7) 36.0 15.6 (17.5) 4.3 (5.3) (1.8) 7.4
Player-wise retail market share - ICE segment (%)
Hero MotoCorp 32.1 32.3 30.3 30.3 29.5 28.3 24.0 29.5 36.3 29.1 28.7 30.0 31.1 30.5 32.5
Bajaj Auto 11.7 11.9 11.4 11.1 10.7 10.6 11.0 10.5 11.1 10.7 10.3 10.0 9.6 10.6 12.1
TVS Motors 16.4 17.3 17.3 17.2 17.3 17.5 18.2 16.7 15.8 17.5 18.6 18.6 18.1 17.4 16.8
Honda 25.5 24.9 26.8 27.1 27.5 28.2 29.9 28.8 26.2 28.1 26.2 25.7 25.8 27.1 24.7
Royal Enfield 4.7 4.6 4.4 4.3 4.4 4.5 5.2 5.0 3.8 4.8 5.5 5.6 5.5 4.8 4.7
Classic Legends 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2
Others 9.5 8.8 9.7 9.8 10.4 10.8 11.4 9.2 6.6 9.6 10.6 9.9 9.8 9.5 9.1
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Player-wise retail market share - ICE + EV segment (%)
Hero MotoCorp 29.4 31.1 29.0 28.8 27.7 26.8 22.6 28.0 35.1 27.4 26.9 28.2 28.9 28.9 30.8
Bajaj Auto 11.8 11.9 11.4 11.1 11.1 10.8 11.4 10.7 11.2 11.6 11.0 10.9 11.1 11.2 12.0
TVS Motors 16.6 17.1 17.2 17.2 17.4 17.7 18.5 17.1 16.2 17.8 19.0 18.7 18.5 17.6 17.0
Honda 23.2 24.0 25.4 25.5 25.5 26.4 27.8 26.9 25.1 26.4 24.5 24.0 23.5 25.4 23.3
Royal Enfield 4.3 4.5 4.2 4.1 4.0 4.2 4.9 4.7 3.7 4.5 5.1 5.2 5.0 4.5 4.5
Classic Legends 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.1 0.2 0.2
Others 14.6 11.4 12.7 13.1 14.1 13.9 14.7 12.3 8.6 12.0 13.3 12.7 12.8 12.3 12.2
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Note:
(1) Retail sales do not include sales from Telangana and Lakshadweep

Source: Parivahan Sewa, Kotak Institutional Equities

Automobiles & Components

India Research

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 158

2W EV retail volumes declined by 6% yoy in March 2025; Bajaj Auto gained leadership position in March 2025
OEM wise 2W EV retail sales volume, March fiscal year-ends, 2024-25 (units, %)
FYTD
Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Nov-24 Dec-24 Jan-25 Feb-25 Mar-25 2025 2024
Player-wise retail volumes (units)
Ather Energy 17,304 4,143 6,153 6,216 10,218 11,044 12,925 16,233 12,909 10,429 13,086 11,944 15,446 130,746 108,993
Okinawa 681 593 491 374 374 203 146 232 235 184 255 197 264 3,548 20,873
Hero Electric 321 279 279 283 286 194 160 151 158 58 82 49 74 2,053 12,096
Greave Cotton 3,149 2,676 2,061 2,815 3,203 2,928 2,824 4,015 4,490 2,840 3,613 3,703 5,641 40,809 55,060
Revolt 594 746 687 660 871 724 705 955 2,001 994 1,061 761 1,395 11,560 7,346
TVS Motors 26,605 7,762 11,868 14,030 19,655 17,667 18,254 30,187 27,216 17,231 24,019 18,911 30,454 237,254 183,129
Bajaj Auto 18,054 7,559 9,249 9,050 17,765 16,813 19,213 28,416 26,358 18,295 21,460 21,537 34,863 230,578 107,119
Ola Electric 53,643 34,162 37,387 36,858 41,800 27,623 24,748 41,818 29,257 13,770 24,376 25,000 25,000 361,799 329,815
Hero MotoCorp 4,084 956 2,460 3,081 5,066 4,760 4,320 7,352 7,344 1,020 1,625 2,692 7,977 48,653 17,719
Honda — — — — — — — — — — — 6 187 193 —
Others 15,706 6,675 6,694 6,634 8,413 7,113 7,241 10,739 9,703 8,542 8,686 5,272 10,482 96,194 105,943
Total EV two-wheelers 140,340 65,551 77,329 80,001 107,651 89,069 90,536 140,098 119,671 73,363 98,263 90,072 131,783 1,163,387 948,093
Yoy change (%) 62 (2) (27) 74 97 42 41 86 30 (3) 20 9 (6) 23
Market share (%)
Ather Energy 12.3 6.3 8.0 7.8 9.5 12.4 14.3 11.6 10.8 14.2 13.3 13.3 11.7 11.2 11.5
Okinawa 0.5 0.9 0.6 0.5 0.3 0.2 0.2 0.2 0.2 0.3 0.3 0.2 0.2 0.3 2.2
Hero Electric 0.2 0.4 0.4 0.4 0.3 0.2 0.2 0.1 0.1 0.1 0.1 0.1 0.1 0.2 1.3
Ampere 2.2 4.1 2.7 3.5 3.0 3.3 3.1 2.9 3.8 3.9 3.7 4.1 4.3 3.5 5.8
Revolt 0.4 1.1 0.9 0.8 0.8 0.8 0.8 0.7 1.7 1.4 1.1 0.8 1.1 1.0 0.8
TVS Motors 19.0 11.8 15.3 17.5 18.3 19.8 20.2 21.5 22.7 23.5 24.4 21.0 23.1 20.4 19.3
Bajaj Auto 12.9 11.5 12.0 11.3 16.5 18.9 21.2 20.3 22.0 24.9 21.8 23.9 26.5 19.8 11.3
Ola Electric 38.2 52.1 48.3 46.1 38.8 31.0 27.3 29.8 24.4 18.8 24.8 27.8 19.0 31.1 34.8
Hero MotoCorp 2.9 1.5 3.2 3.9 4.7 5.3 4.8 5.2 6.1 1.4 1.7 3.0 6.1 4.2 1.9
Others — — — — — — — — — — — 0.0 0.1 0.0 —
Total EV two-wheelers 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Note:
(1) Retail sales do not include sales from Telangana and Lakshadweep

Source: Parivahan Sewa, Kotak Institutional Equities

Goods vehicle retail volumes remained flat on a yoy basis in March 2025
Goods vehicle retail sales volume, March fiscal year-ends, 2024-25 (units, %)
FY
Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Nov-24 Dec-24 Jan-25 Feb-25 Mar-25 2025 2024
Player-wise retail volumes (units)
Tata Motors 30,262 29,080 25,916 22,132 23,643 21,925 22,416 28,003 25,620 22,001 28,689 24,527 27,008 300,960 329,658
Ashok Leyland 13,301 14,552 11,631 9,686 11,970 10,346 10,775 13,539 11,318 10,099 14,147 12,826 14,188 145,077 150,977
VECV 5,421 5,578 4,919 3,921 4,808 4,768 4,778 5,858 4,612 3,775 6,152 5,299 5,382 59,850 59,538
Daimler 1,789 1,845 1,654 1,345 1,451 1,357 1,365 1,626 1,424 1,449 1,932 1,567 1,690 18,705 19,518
M&M 21,424 20,218 19,286 16,860 18,563 18,100 18,291 27,418 22,834 18,564 27,204 20,875 23,770 251,983 237,133
Others 5,263 4,974 5,015 4,260 5,053 4,827 5,065 7,184 5,572 7,269 6,675 4,694 5,298 65,886 78,943
Total LGV 77,460 76,247 68,421 58,204 65,488 61,323 62,690 83,628 71,380 63,157 84,799 69,788 77,336 842,461 875,767
Yoy change (%) (10.7) (2.6) (0.5) (8.9) 2.2 (9.4) (13.5) 2.9 (7.6) (6.1) 5.3 (9.2) (0.2) (3.8)
Market share (%)
Tata Motors 39.1 38.1 37.9 38.0 36.1 35.8 35.8 33.5 35.9 34.8 33.8 35.1 34.9 35.7 37.6
Ashok Leyland 17.2 19.1 17.0 16.6 18.3 16.9 17.2 16.2 15.9 16.0 16.7 18.4 18.3 17.2 17.2
VECV 7.0 7.3 7.2 6.7 7.3 7.8 7.6 7.0 6.5 6.0 7.3 7.6 7.0 7.1 6.8
Daimler 2.3 2.4 2.4 2.3 2.2 2.2 2.2 1.9 2.0 2.3 2.3 2.2 2.2 2.2 2.2
M&M 27.7 26.5 28.2 29.0 28.3 29.5 29.2 32.8 32.0 29.4 32.1 29.9 30.7 29.9 27.1
Others 6.8 6.5 7.3 7.3 7.7 7.9 8.1 8.6 7.8 11.5 7.9 6.7 6.9 7.8 9.0
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Note:
(1) Retail sales do not include sales from Telangana and Lakshadweep

Source: Parivahan Sewa, Kotak Institutional Equities

Automobiles & Components

India Research

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 159

3W retail volumes declined by 6% yoy in March 2025

3W retail sales volume, March fiscal year-ends, 2024-25 (units, %)
FY
Mar-24 Apr-24 May-24 Jun-24 Jul-24 Aug-24 Sep-24 Oct-24 Nov-24 Dec-24 Jan-25 Feb-25 Mar-25 2025 2024
Player-wise retail volumes (units)
Bajaj Auto 36,668 29,934 35,530 34,238 38,731 37,765 37,423 47,948 39,058 28,995 39,489 34,655 33,841 437,607 418,911
Piaggio 9,457 5,894 7,017 6,856 8,445 7,384 7,776 9,041 8,842 6,468 7,908 6,658 7,066 89,355 94,711
M&M 8,016 3,638 5,151 5,354 7,544 5,671 6,634 8,251 7,824 6,121 6,895 6,481 7,327 76,891 68,500
Atul Auto 2,187 1,764 2,450 2,023 2,376 2,102 2,182 3,212 2,512 2,229 2,748 2,327 2,446 28,371 22,524
TVS Motors 1,807 1,588 1,716 1,747 1,982 2,243 2,009 2,451 2,137 1,909 2,704 2,431 2,954 25,871 18,467
Others 47,206 37,303 46,409 44,113 51,435 50,330 50,495 51,942 47,959 48,166 47,298 41,646 45,740 562,836 542,430
Total 3Ws 105,341 80,121 98,273 94,331 110,513 105,495 106,519 122,845 108,332 93,888 107,042 94,198 99,374 1,220,931 1,165,543
Yoy change (%) 17.2 9.2 19.5 4.9 12.9 1.6 0.7 11.5 4.7 (3.6) 6.9 (1.9) (5.7) 4.8
Market share (%)
Bajaj Auto 34.8 37.4 36.2 36.3 35.0 35.8 35.1 39.0 36.1 30.9 36.9 36.8 34.1 35.8 35.9
Piaggio 9.0 7.4 7.1 7.3 7.6 7.0 7.3 7.4 8.2 6.9 7.4 7.1 7.1 7.3 8.1
M&M 7.6 4.5 5.2 5.7 6.8 5.4 6.2 6.7 7.2 6.5 6.4 6.9 7.4 6.3 5.9
Atul Auto 2.1 2.2 2.5 2.1 2.1 2.0 2.0 2.6 2.3 2.4 2.6 2.5 2.5 2.3 1.9
TVS Motors 1.7 2.0 1.7 1.9 1.8 2.1 1.9 2.0 2.0 2.0 2.5 2.6 3.0 2.1 1.6
Others 44.8 46.6 47.2 46.8 46.5 47.7 47.4 42.3 44.3 51.3 44.2 44.2 46.0 46.1 46.5
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Note:
(1) Retail sales do not include sales from Telangana and Lakshadweep

Source: Parivahan Sewa, Kotak Institutional Equities

Automobiles & Components

India Research

k.kathirvelu-kotak.com
 160

Maruti launched e-Vitara whereas Hyundai launched Creta EV in January 2025

PV launch pipeline, March fiscal year-ends, 2024-25
Manufacturer Model Segment Expected timeline
Tata Motors Punch EV Compact SUV Launched in January 2024
Hyundai New Creta facelift Mid-size SUV Launched in January 2024
Kia New Sonet facelift Compact SUV Launched in January 2024
Mahindra XUV 3XO Compact SUV Launched in April 2024
Maruti Suzuki New Swift Hatchback Launched in May 2024
Nissan X-Trail SUV Launched in July 2024
Tata Motors Curvv EV SUV Launched in August 2024
Mahindra Thar Roxx (5-door) SUV Launched in August 2024
Tata Motors Curvv ICE SUV Launched in September 2024
Hyundai Alcazar refresher Large SUV Launched in September 2024
Maruti Suzuki New Dzire Sedan Launched in November 2024
Mahindra XEV.9e Large SUV Launched in November 2024
Mahindra BE.6E Mid-size SUV Launched in November 2024
Skoda Kylaq Compact SUV Launched in December 2024
Kia Syros Mid-size SUV Launched in December 2024
Hyundai Creta EV Mid-size SUV Launched in January 2025
Maruti Suzuki e-Vitara Mid-size SUV Launched in January 2025
Tata Motors Harrier EV Large SUV To be launched in 1QFY26
Renault Duster Compact SUV To be launched in FY2026
Tata Motors Altroz EV Hatchback To be launched in FY2026
Volkswagen Tayron Large SUV To be launched in FY2026
Maruti Suzuki Y17 Premium SUV To be launched in FY2026
Mahindra eXUV 3XO Compact SUV To be launched in FY2026
Maruti Suzuki Baleno facelift Hatchback To be launched in FY2026
Maruti Suzuki Grand Vitara 7-seater SUV To be launched in FY2026
Skoda Enyaq Compact SUV To be launched in FY2026
BYD Bao 3 SUV To be launched in FY2026
Toyota Urban Cruiser EV SUV To be launched in FY2026
Honda New WR-V Compact SUV To be launched in FY2026
Hyundai Venue facelift SUV To be launched in FY2026
Hyundai Ioniq 6 SUV To be launched in FY2026
Tata Motors Sierra SUV To be launched in FY2026
Tata Motors Avinya EV SUV To be launched in FY2026
Mahindra XEV.e8 Large SUV To be launched in FY2026
Mahindra Thar EV SUV To be launched in FY2026
Maruti Suzuki eMPV MPV To be launched in CY2026
Maruti Suzuki Y43 Micro SUV To be launched in CY2026
Mahindra Global pick-up SUV To be launched in FY2027
Mahindra BE.07 SUV To be launched in FY2027
Hyundai mass market EV Unknown To be launched in FY2027
Maruti Suzuki YDB Micro SUV To be launched in CY2027
Maruti Suzuki YK9 Micro SUV To be launched in CY2027

Source: Company, Kotak Institutional Equities estimates

Automobiles & Components

India Research

k.kathirvelu-kotak.com
 161

Hero launched Xtreme 250R and Vida V2 series in December 2024

2W launch pipeline, March fiscal year-ends, 2024-25
Manufacturer Model Segment Expected timeline
Bikes
Royal Enfield Shotgun 650 Premium Launched in January 2024
Hero Motorcorp Mavrick Premium Launched in January 2024
Hero Motorcorp Xtreme 125 Premium Launched in January 2024
Jawa Perak Premium Launched in April 2024
Bajaj Auto Pulsar (400 cc) Premium Launched in May 2024
Bajaj Auto Freedom 125 Executive Launched in July 2024
Royal Enfield Guerrilla 450 Premium Launched in July 2024
Yezdi Adventure Premium Launched in August 2024
Ola Electric Roadster X Economy Launched in August 2024
Ola Electric Roadster Executive Launched in August 2024
Ola Electric Roadster Pro Premium Launched in August 2024
BSA Gold star 650 Premium Launched in August 2024
Royal Enfield Classic 350 refresh Premium Launched in September 2024
Classic legends Jawa 42 Premium Launched in September 2024
Bajaj Pulsar N 125 Premium Launched in October 2024
Royal Enfield Interceptor Bear Premium Launched in November 2024
Hero MotoCorp Xtreme 250R Premium Launched in December 2024
Yezdi Roadking Premium To be launched in FY2026
Yamaha XSR 155 Premium To be launched in FY2026
Torq Kratos X Electric To be launched in FY2026
Revolt RV1 Electric To be launched in FY2026
Royal Enfiled ElectriK01 Electric To be launched in FY2026
Ola Roadrunner Electric To be launched in FY2026
Ola Roadster Electric To be launched in FY2026
Ola Adventure Electric To be launched in FY2026
Ola Crusier Electric To be launched in FY2026
Scooters
Simple Energy Dot one Electric Launched in December 2023
Kinetic Zulu Electric Launched in December 2023
Bajaj Chetak Urbane Electric Launched in December 2023
Ather 450X Apex Electric Launched in January 2024
Bajaj Chetak premium Electric Launched in January 2024
Ola S1X Electric Launched in January 2024
Ather Ritza Electric Launched in April 2024
Ampere Nexus Electric Launched in April 2024
TVS iQube ST Electric Launched in May 2024
Bajaj Chetak 2901 Electric Launched in June 2024
TVS Jupiter 110 cc Launched in August 2024
Honda Activa e: Electric Launched in Novemeber 2024
Honda QC1 Electric Launched in Novemeber 2024
Ola Electric S1 Z Electric Launched in Novemeber 2024
Ola Electric S1 Gig Electric Launched in Novemeber 2024
Hero Motorcorp Vida V2 Electric Launched in December 2024
Bajaj Chetak 3501 Electric Launched in December 2024
Suzuki Burgman Electric To be launched in FY2026
Hero Destini 125 cc To be launched in FY2026
Yamaha Nmax 155cc To be launched in FY2026
Hero Motorcorp Xoom 160cc To be launched in FY2026

Source: Carwale, AutoCar, Economic Times, Kotak Institutional Equities

Source: Bikedekho, Kotak Institutional Equities

Automobiles & Components

India Research

k.kathirvelu-kotak.com
 162

We expect retail trends to remain muted for 2W/PV/CV segments over the next two quarters
Automobile segment-wise volume growth estimates, March fiscal year-ends, 2022-27E (%)

2022 2023 2024 2025E 2026E 2027E

60.0
49.749.2
50.0

40.0

30.0 26.7
18.9
20.0 15.0 13.4 12.2
8.6 8.5
10.0 6.5 5.8 5.5 6.0 4.9 4.6 6.1 5.4 5.5
4.0
1.6
-

(10.0) (3.3)
(6.4) (7.4)
(9.7)
(20.0)
Passenger vehicles Two-wheelers M&HCV Tractors

Source: Company, Kotak Institutional Equities estimates

Automobiles & Components

India Research

k.kathirvelu-kotak.com
 UPDATE

Automobiles & Components

India
Sector View: Cautious NIFTY-50: 23,332 April 03, 2025

Tariff shock for global auto suppliers

In a recent announcement, the US has imposed 25% tariffs on imported
cars/light trucks and select auto parts sourced from outside of North
America. Reciprocal tariffs on India will not be additive to existing tariffs on
autos. We believe there will dual implications of these tariffs—(1) the US car
market may witness a steep decline as car prices may go up and (2) margins
of suppliers may come under pressure as they may need to partly absorb cost
pressures. TTMT, SONACOMP, BHFC, BKT and SAMIL remain the worst hit.

US to impose 25% tariffs on imported cars/trucks from April 3 onwards

In a recent announcement, President Donald Trump has confirmed imposition of
25% tariffs on imported cars/light trucks, marking a significant shift in trade
policy. The tariffs will apply only to countries outside of North America, as
Canada and Mexico are exempt under the USMCA trade deal. However, major
car-exporting countries such as those from the EU, Japan, South Korea and the
UK will face these duties on vehicle imports to the US. Cars from these countries
almost make up 45-50% of all US auto imports, which will now face 25% tariffs

Private Circulation Only. This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities Act of 1933
(Japan – 18%, South Korea – 8%, Germany – 8%, UK – 3% and others – 8-11%).

US to levy 25% tariffs on select auto parts from May onwards

Apart from import tariffs on cars/light trucks, almost 150 auto parts will face
tariffs from May 3 onwards at the rate of 25%. The list includes tariffs codes
for engines, transmissions, lithium-ion batteries and other major components,
along with less expensive parts such as tires, shock absorbers, spark plug wires
and brakes hoses. The notice said that for vehicles qualifying under the
USMCA's rules of origin, importers can pay the 25% duty on only the non-US
content of the order. Also, the US has imposed 26% reciprocal tariffs on India
from April onwards; however, it would not be additive to already announced 25%
tariffs on vehicles/parts imported into the US market.

Dual implications for companies having exposure to US market

With announcement of 25% tariffs on imported cars (45-50% of overall US car
markets), we believe there will be significant increase in car prices. As per analysis,
if OEMs decide to completely pass on tariffs, new vehicle sales in US can decline
by 15-20%, whereas if OEMs pass on only cost to breakeven, there can still be 10-
15% decline in US car volumes. A few of the automakers could avoid tariff cost by
shifting production to local plants with excess capacity (US assembly plants were
operating at about 70% in CY2024); however, to completely shift their production
in US market would be challenging in the short term. Also, it would be difficult for
suppliers to move their operations because of labor-cost differential between US
and India. Also, 25% tariffs on auto components will weigh on domestic suppliers
as there can be incremental pressures to their margins and low-cost advantage
versus North American suppliers will diminish (structurally negative). It needs to
be seen on how higher tariffs are absorbed across the supply chain (customers,
OEMs and suppliers); however, we believe there will be some impact, which the
suppliers will have to bear, leading to negative implications on margins.
Full sector coverage on KINSITE

Rishi Vora
 164

Implications for auto companies under our coverage

Jaguar Land Rover: The company derives around 25% of its revenues from USA and they export their
cars from EU/UK. JLR’s models will become expensive by 25%, if they choose to pass it on, which will
weigh negatively on the company overall volumes in USA. If the companies decide to pass on the
impact to end-consumers, we believe the company’s volumes in USA can decline by 25-35% (overall
volume impact of 5-10%), which can lead to EPS cuts of around 15-20% for the JLR business.

Sona Comstar: The company derives around 40-43% of its revenues from USA. While majority of the
revenues for the company are derived from local USA brands, which are quite localized and can see
benefit given that they may gain market share in the local market. However, 25% tariffs on auto
components imports can have implication on the margins – assuming their products are on the tariff
list. If OEMs decide to borne half the cost and Sona Comstar has to bear half of the cost, there can be
400-500 bps impact on their overall profitability and >20% impact on their EPS as well.

SAMIL: The company has local plants in USA and has will not direct impact owing to tariffs. However,
due to potential negative implications on overall USA sales (20% of their consolidated revenues) as
well as EU OEMs exporting to USA, there can be an impact on account of that to their overall revenues.

Bharat Forge: The company derives 24-30% of its revenues from USA (majorly from exports out of
India). While decent part of these revenues is derived from Class 8 (where volume implication would
be limited); however, tariffs on auto components can have severe implication for their margins
(assuming their products are on the tariff list), which can lead to mid-teens impact to their overall EPS.

Balkrishna Industries, Timken and CEAT: All of these companies derive around 15-18%, 11-13% and
6-9% of their overall revenues from USA, which will get impacted owing to tariffs on auto components
(assuming their products are on the tariff list).

Other companies, which may have marginal impact on their business includes M&M, Eicher Motors,
Schaeffler India and CIE Automotive India.

JLR, Sona Comstar, SAMIL, Bharat Forge and Balkrishna Industries may be the worst hit due to proposed tariffs
Exposure to auto OEMs/ancillaries to USA markets as a % of their overall revenues, March fiscal year-end, 2024-25 (%)
Exports from India to Exports from Sri Lanka
USA as a % of overall Revenue mix from USA Exports from UK/EU to USA to USA as a % of overall Total exposure
Company revenues (excluding exports) as a % of overall revenues revenues to USA
JLR — — ~25% — ~25%
Mahindra & Mahindra <1% <1% — — <2%
Eicher Motors 2-3% — — — 2-3%
Schaeffler India 1-2% — — — 1-2%
EU exports cars to USA,
SAMIL — 20% where SAMIL also will have — 25-35%
certain exposure
Balkrishna Industries 15-18% — — — 15-18%
Bharat Forge 20-25% 4-5% — — 24-30%
Sona BLW Precision 40-43% — — — 40-43%
Timken 11-13% — — — 11-13%
CIE Automotive India — — 3-5% — 3-5%
CEAT (including Camso acqusition) 1-2% — — 5-7% 6-9%

Source: Companies, Kotak Institutional Equities estimates

Automobiles & Components

India Research

k.kathirvelu-kotak.com
 165

Reciprocal tariffs will not be additive to applied tariffs on auto OEMs/components

Proposed tariffs by USA, March fiscal year-end, 2025 (%)

Country Reciprocal tariffs

Tariffs on countries
European Union 25%
India 26%
UK 10%
Sri Lanka 44%
Japan 24%
Tariffs on car and light truck imports
Excluding Canda and Mexico 25%
Proposed tariffs on auto components from May 3rd
Excluding Canda and Mexico 25%

Note:
(1) No tariffs on Canda and Mexico if complying with terms of USMCA

Source: Companies, Kotak Institutional Equities estimates

Automobiles & Components

India Research

k.kathirvelu-kotak.com
 UPDATE

Banks
India
Sector View: Attractive NIFTY-50: 23,332 April 03, 2025

Microfinance: Peak stress around the corner

3QFY25 update from CRIF Highmark puts microfinance industry loan book at
~Rs3.9 tn (down ~4% yoy). Disbursements declined ~35% yoy with the
implementation of MFIN guardrails. Delinquency levels remain elevated, but
we see early signs of stress peaking out around the corner because forward
flows have begun to decline. The impact from implementation of the 3-lender
cap (beginning April) and the situation in Karnataka remain key monitorables.

Microfinance industry loan book declined ~4% yoy

CRIF’s data shows that business momentum in the microfinance industry
remains weak. Gross loan portfolio (GLP) for the industry declined ~4% yoy to
~Rs3.9 tn (see Exhibit 1) in spite of ~17% yoy growth for the NBFCs. The
number of unique active borrowers grew 2% yoy to ~84 mn (but declined further
sequentially), while average exposure per borrower was down ~6% yoy to
~Rs47,000 (see Exhibits 2, 4). Disbursements in 3QFY25 declined ~35% yoy for
the industry, led by Tamil Nadu, Gujarat, Odisha, Kerala and Bihar, while Assam,
Telangana, AP, Maharashtra and West Bengal have held up better.

Private Circulation Only. This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities A ct of 1933
Asset quality deterioration continues, but early signs of improvement visible
Delinquent portfolio for the microfinance industry continued to inch up during
3QFY25. PAR 31-180 was up ~200 bps qoq from 4.3% to 6.4% led by ~400 bps
qoq increase in Bihar and Odisha, while it was much lower (~100 bps) in West
Bengal, Maharashtra and Madhya Pradesh. However, we see a few signs of
improvement: (1) net forward flow has declined or stabilized across current and
delinquent buckets (see Exhibit 15), (2) PAR 1-30 declined qoq from 2.1% to 1.8%
and (3) the exposure to over-leveraged borrowers has declined (see Exhibits 18-
21). Our on-ground checks suggest that the trend of improvement has continued
during 4QFY25 across states except in ordinance-impacted Karnataka.

Turning positive with a tactical view while monitoring the risks

These early signs of improvement (listed above) are encouraging, but we note
that (1) the fourth quarter tends to be seasonally strong for the microfinance
industry and some trends might soften a bit subsequently, (2) the situation in
Karnataka remains a key monitorable (although it seems to be improving
steadily) and (3) implementation of the 3-lender cap from April 2025 might
elevate delinquencies. However, in our assessment, incremental stress
formation might not be high because (1) large proportion of vulnerable
borrowers with 4-lender associations would have turned delinquent already and
(2) lender appetite to supply liquidity seems to be improving. As a result, we
might be nearing the level of peak delinquency (PAR 1-90) even though
slippages might decline with a lag and credit cost trajectory will depend on the
provision policies of individual lenders. While the pace of improvement remains
uncertain, we see this as a good tactical opportunity to play the microfinance
recovery trade. We prefer to play this initial leg of recovery through a basket of
microfinance lenders where valuation is inexpensive and capital buffer is large
(Bandhan, Ujjivan SFB and Equitas SFB in KIE coverage), but acknowledge that
the weaker lenders might take longer to show full P&L recovery. Full sector coverage on KINSITE

M B Mahesh, CFA Nischint Chawathe Ashlesh Sonje, CFA Abhijeet Sakhare Varun Palacharla

Nikhil Suresh
 167

Microfinance GLP declined ~4% yoy to ~Rs3.9 tn; disbursements down ~35% yoy
Growth trends in MFI GLP and disbursements, March fiscal year-ends (Rs tn, % yoy)

GLP GLP yoy (RHS) Disbursal Disbursal yoy (RHS)

(Rs tn) (%) (Rs tn) (%)
5.0 50 1.25 60

4.0 40 1.00 40

3.0 30 0.75 20

2.0 20 0.50 0

1.0 10 0.25 (20)

0.0 0 0.00 (40)

1QFY20
3QFY20
1QFY21
3QFY21
1QFY22
3QFY22
1QFY23
3QFY23
1QFY24
3QFY24
1QFY25
3QFY25
1QFY18
3QFY18
1QFY19
3QFY19
1QFY20

1QFY22

3QFY24
1QFY18
3QFY18
1QFY19
3QFY19

3QFY20
1QFY21
3QFY21

3QFY22
1QFY23
3QFY23
1QFY24

1QFY25
3QFY25

Source: CRIF Highmark

Number of unique microfinance borrowers declined ~7% yoy Average # of active accounts per borrower has declined in the
past few quarters
Number of MFI borrowers, March fiscal year-ends (#)
Average # of active accounts per borrower, March
Borrowers (LHS) Borrowers YoY (RHS) (%)
(# mn) fiscal year-ends (#)
100 40

2.5
80 30

2.2
60 20
2.0
2.0
2.0
1.9

1.9
1.9

1.9
1.9
1.9
1.9

1.9
1.9
1.9

1.9
1.8

1.8
1.8
1.8

1.9
1.7

1.7
40 10

1.6
20 0

0 (10) 1.3
3QFY18
1QFY19

1QFY20

1QFY21
3QFY21

3QFY22

1QFY24

1QFY25
1QFY18

3QFY19

3QFY20

1QFY22

1QFY23
3QFY23

3QFY24

3QFY25

1.0
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23
1QFY24
2QFY24
3QFY20
4QFY20

3QFY24
4QFY24
1QFY25
2QFY25
3QFY25

Source: CRIF Highmark

Source: CRIF Highmark

Banks
India Research

k.kathirvelu-kotak.com
 168

Average ticket size of disbursement is up ~12% yoy to ~Rs53,000; average exposure/borrower is down ~8% from peak to ~Rs47,000
Granularity metrics: average ticket size of disbursements and average exposure per borrower (Rs, % yoy)

Average ticket size (LHS) Ticket size yoy (RHS) Average exposure/borrower (LHS)
60,000 60 (Rs '000) Exposure yoy (RHS) (%)
(%)
60,000 40
48,000 40
48,000 32 30
22
36,000 20 25
24 18 17
21 36,000 19 1515 14 20
18 16 22 1213
24,000
13
109 912 1212 1114 814 11131112 0 8
9 98 8
7 6 5 6 6
4 24,000 6 4 5 10
1 32
5 0 (1)
12,000 -20 (2)
(14) 12,000 0
(6)
0 (29) -40
0 (10)
3QFY21

3QFY22

3QFY23

3QFY24

3QFY25
1QFY18
3QFY18
1QFY19
3QFY19
1QFY20
3QFY20
1QFY21

1QFY22

1QFY23

1QFY24

1QFY25

1QFY18

1QFY22
3QFY22
3QFY18
1QFY19
3QFY19
1QFY20
3QFY20
1QFY21
3QFY21

1QFY23
3QFY23
1QFY24
3QFY24
1QFY25
3QFY25
Source: CRIF Highmark

Crises leads to decline in borrowers whereas ticket sizes continue to grow

Yoy growth in borrowers and average exposure per borrower, March fiscal year-ends (%)

Borrowers (# mn) Exposure per borrower (Rs) Loan growth

100

75

50

25

(25)
2009

2012

2015

2018

2021

2024
2008

2010

2011

2013

2014

2016

2017

2019

2020

2022

2023

Source: CRIF Highmark

Banks
India Research

k.kathirvelu-kotak.com
 169

The loan mix has been broadly flat over the past year
Breakup of microfinance portfolio across lender categories, March fiscal year-ends (%)

NBFC-MFI Banks SFBs Others

100
12 11 10 11 10 10 9 11 12 10 12 12 8 9 10 10 11 10 11 11 12 13

80 21 19 18 19 19 19 18 17 17 16 17 17 17 17 18 17 17 17 17 19 17 17 17 17 16

60
36 36 34 33 33 32 33 33 32 32 33
30 33 34 41 40 40 42 42 42 42 41 41 38 38

40

20 37 36 37 38 39 39 40 40 38 39 39 40 39 39
30 31 31 31 31 32 31 30 32 33 33

0 4QFY20
1QFY21

4QFY22
1QFY23
2QFY23

4QFY24
1QFY25
2QFY25
4QFY18
4QFY19
1QFY20
2QFY20
3QFY20

2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22

3QFY23
4QFY23
1QFY24
2QFY24
3QFY24

3QFY25
Source: CRIF Highmark

GLP growth has slowed down more sharply for SFBs; but “Other” lender category (predominantly NBFCs)
has grown yoy
Growth in microfinance portfolio across lender categories, March fiscal year-ends (% yoy)

NBFC-MFI Banks SFBs Others

80

60

40

20

(20)
1QFY20

4QFY20

3QFY21

2QFY22

1QFY23

4QFY23

3QFY24

2QFY25
4QFY18
4QFY19

2QFY20
3QFY20

1QFY21
2QFY21

4QFY21
1QFY22

3QFY22
4QFY22

2QFY23
3QFY23

1QFY24
2QFY24

4QFY24
1QFY25

3QFY25

Source: CRIF Highmark

Banks
India Research

k.kathirvelu-kotak.com
 Banks
0
40
80

20
60
100
2QFY18 14 16 8 9 10 7 6 6 24
3QFY18 13 16 8 9 10 7 6 6 25
West Bengal
4QFY18 15 16 9 9 10 8 7 6 21

Source: CRIF Highmark

1QFY19 15 16 9 8 10 7 6 6 22
2QFY19 15 15 9 8 10 7 6 7 23
3QFY19 15 16 9 8 10 7 6 6 23
Tamil Nadu

4QFY19 15 15 10 8 9 6 6 6 26
1QFY20 15 14 10 7 9 6 6 6 27
Bihar

2QFY20 15 15 10 8 9 6 6 6 27
3QFY20 13 15 10 8 9 6 6 6 28
4QFY20 14 14 11 8 8 7 6 6 27
1QFY21 14 14 11 8 8 6 6 6 28
Maharashtra

2QFY21 14 13 10 7 8 6 6 5 30
3QFY21 14 13 10 7 8 6 6 6 30
4QFY21 14 13 11 8 8 7 6 6 28
Microfinance GLP mix by state, March fiscal year-ends (%)
Karnataka

1QFY22 14 13 11 8 8 7 6 6 28
2QFY22 13 13 11 8 9 8 6 6 26
3QFY22 12 14 12 8 9 8 6 6 25
4QFY22 12 14 13 8 9 8 6 6 25
Uttar Pradesh

1QFY23 11 14 13 8 9 9 6 6 24
2QFY23 10 14 13 8 9 9 6 6 24
3QFY23 9 14 14 8 9 9 6 6 24
4QFY23 9 15 14 8 9 10 6 6 24
1QFY24 9 14 14 7 9 10 6 6 25
Madhya Pradesh
Share of Bihar and UP has increased steadily, while West Bengal has lost ~500 bps share from pre-Covid level

2QFY24 8 14 14 8 9 10 6 6 25
3QFY24 9 14 14 8 9 10 6 6 24
4QFY24 9 13 15 8 10 10 6 6 24
Orissa

1QFY25 9 13 15 8 10 11 6 6 23
2QFY25 9 13 15 8 10 11 6 6 23
Others

3QFY25 9 13 15 8 10 11 6 6 24

India Research

k.kathirvelu-kotak.com
170
 171

GLP growth has slowed down sharply across states

Growth trends in MFI GLP across states, March fiscal year-ends (Rs tn, % yoy)
Industry Tamil Nadu Bihar
(Rs bn) GLP (Rs bn) Growth (% yoy) (%) GLP (Rs bn) Growth (% yoy) (%) GLP (Rs bn) Growth (% yoy) (%)
(Rs bn) (Rs bn)
5,000 60 700 60 700 60

4,000 45 560 45 560 45

3,000 30 420 30 420 30

2,000 15 280 15 280 15

1,000 0 140 0 140 0

0 (15) 0 (15) 0 (15)

3QFY21

3QFY23

3QFY19

3QFY23
1QFY19
3QFY19
1QFY20
3QFY20
1QFY21

1QFY22
3QFY22
1QFY23

1QFY24
3QFY24
1QFY25
3QFY25

1QFY19

1QFY20
3QFY20
1QFY21
3QFY21
1QFY22
3QFY22
1QFY23

1QFY24
3QFY24
1QFY25
3QFY25
1QFY19

1QFY20
3QFY19

3QFY20
1QFY21
3QFY21
1QFY22
3QFY22
1QFY23
3QFY23
1QFY24
3QFY24
1QFY25
3QFY25

West Bengal Uttar Pradesh Karnataka

GLP (Rs bn) Growth (% yoy) (%) GLP (Rs bn) Growth (% yoy) (%) GLP (Rs bn) Growth (% yoy)
(Rs bn) (Rs bn) (Rs bn) (%)
700 60 700 60 700 60

560 45 560 45 560 45

420 30 420 30 420 30

280 15 280 15 280 15

140 0 140 0 140 0

0 (15) 0 (15) 0 (15)

1QFY20

3QFY21

3QFY23
1QFY19
3QFY19

3QFY20
1QFY21
3QFY21
1QFY22
3QFY22
1QFY23
3QFY23
1QFY24
3QFY24
1QFY25
3QFY25

1QFY19
3QFY19
1QFY20
3QFY20
1QFY21

1QFY22
3QFY22
1QFY23

1QFY24
3QFY24
1QFY25
3QFY25

1QFY22

1QFY24
1QFY19
3QFY19
1QFY20
3QFY20
1QFY21
3QFY21

3QFY22
1QFY23
3QFY23

3QFY24
1QFY25
3QFY25
Maharashtra Madhya Pradesh Odisha
GLP (Rs bn) Growth (% yoy) GLP (Rs bn) Growth (% yoy) (%) GLP (Rs bn) Growth (% yoy) (%)
(Rs bn) (%) (Rs bn) (Rs bn)
700 60 700 60 700 60

560 45 560 45 560 45

420 30 420 30 420 30

280 15 280 15 280 15

140 0 140 0 140 0

0 (15) 0 (15) 0 (15)

1QFY19
3QFY19
1QFY20
3QFY20
1QFY21
3QFY21
1QFY22
3QFY22
1QFY23
3QFY23
1QFY24
3QFY24
1QFY25
3QFY25

1QFY19
3QFY19
1QFY20
3QFY20
1QFY21
3QFY21
1QFY22
3QFY22
1QFY23
3QFY23
1QFY24
3QFY24
1QFY25
3QFY25
1QFY19
3QFY19
1QFY20
3QFY20
1QFY21
3QFY21
1QFY22
3QFY22
1QFY23
3QFY23
1QFY24
3QFY24
1QFY25
3QFY25

Source: CRIF Highmark

Banks
India Research

k.kathirvelu-kotak.com
 172

NBFC-MFIs, LTFH, Ujjivan SFB and Suryoday SFB have reported high growth in the microfinance segment in the recent past
Growth trends in microfinance loan book across lenders, March fiscal year-ends (% yoy)
4QFY21 1QFY22 2QFY22 3QFY22 4QFY22 1QFY23 2QFY23 3QFY23 4QFY23 1QFY24 2QFY24 3QFY24 4QFY24 1QFY25 2QFY25 3QFY25
Banks
Bandhan 26 12 9 9 7 9 (0) (8) (9) (12) 0 10 10 21 10 (3)
IDFC First (5) (19)
IndusInd 9 12 26 19 16 11 5 8 5 9 16 20 22 16 (5) (9)
RBL 11 (4) (26) (28) (32) (36) (8) 4 23 74 48 36 26 11 3 (4)
Federal 206 141 107 76 50
Yes 27 28

SFBs
Equitas SFB (11) (14) (6) 6 21 28 21 24 34 40 42 32 20 6 (4) (11)
ESAF SFB 31 28 18 6 (14)
Jana SFB (1) 15 15 14 13 1 (7)
Suryoday SFB 36 38 27 15
Ujjivan SFB (1) (14) (7) 12 16 42 51 41 41 37 28 28 20 13 4 (8)
Utkarsh SFB 18 16 15 11 9 16 23 26 17 0

NBFC MFIs
Belstar 41 55 66 82 57 30 4
CreditAccess Grameen (on-book) 34 32 25 15 8
Fusion (GLP) 35 48 33 27 23 23 23 25 14 (2)
IIFL Samasta 43 39 37 39 47 39 31 21 7 (3) (16)
Muthoot Microfin 32 56 56 34 15
Namra 19 (6) (18)
Satin 11 17 (2) (9) (2) (7) (9) 10 24 32 52 40 29 23 13
Spandana 52 57 41 41 34 8 (14)

NBFCs
L&T Finance (10) (8) 1 9 27 40 46 41 37 37 32 32 31 22 14

Notes:
(1) Data for LTFH is based on “micro loans” reported by the company.
(2) Cells highlighted are those where growth rate exceeds 35% yoy.

Source: Companies, Kotak Institutional Equities

Banks
India Research

k.kathirvelu-kotak.com
 173

Disbursements have slowed down much more sharply for SFBs, while the momentum continues for “Others” (predominantly NBFCs)
Growth trends in microfinance disbursements across lender categories, March fiscal year-ends (Rs bn, % yoy)
NBFC MFIs Banks
Disbursements Yoy growth (%, RHS) (%) Disbursements Yoy growth (%, RHS) (%)
(Rs bn) (Rs bn)
500 60 500 60

400 40 400 40

300 20 300 20

200 0 200 0

100 (20) 100 (20)

0 (40) 0 (40)
1QFY21
3QFY21
1QFY22

3QFY21
1QFY22
3QFY22
4QFY18
1QFY20
3QFY20

3QFY22
1QFY23
3QFY23
1QFY24
3QFY24
1QFY25
3QFY25

4QFY18
1QFY20
3QFY20
1QFY21

1QFY23
3QFY23
1QFY24
3QFY24
1QFY25
3QFY25
SFBs Others
Disbursements Yoy growth (%, RHS) (%) Disbursements Yoy growth (%, RHS) (%)
(Rs bn) (Rs bn)
250 60 150 60

200 40 120 40

150 20 90 20

100 0 60 0

50 (20) 30 (20)

0 (40) 0 (40)
4QFY18
1QFY20
3QFY20
1QFY21
3QFY21
1QFY22
3QFY22
1QFY23
3QFY23
1QFY24
3QFY24
1QFY25
3QFY25

4QFY18
1QFY20
3QFY20
1QFY21
3QFY21
1QFY22
3QFY22
1QFY23
3QFY23
1QFY24
3QFY24
1QFY25

Industry Overall industry 3QFY25

Disbursements Yoy growth (%, RHS) NBFC-MFI Banks SFBs Others

(Rs bn) (%) 100
1,250 60 10 8 9 9 8 8 4 8 9 9 8 9 12 8 111111 9 9 101010121311
1415161615201312131318 15 1414141313
80 15 16
16 181516 1814
1,000 40

60
750 20 42 37 3937373640
464846454649 514850554041 363936 3440

40 68
500 0

250 (20) 20 373839363739373836

302930313028 293127 3330353535
23
8
0 (40) -
3QFY21

1QFY22

3QFY24

1QFY25
4QFY18

1QFY20

3QFY20

1QFY21

3QFY22

1QFY23

3QFY23

1QFY24

3QFY25
3QFY20
1QFY21

1QFY23
3QFY23

3QFY25
4QFY18
1QFY20

3QFY21
1QFY22
3QFY22

1QFY24
3QFY24
1QFY25

Source: CRIF Highmark

Banks
India Research

k.kathirvelu-kotak.com
 174

Slowdown in disbursements has been less intense for a few lenders (Satin, CreditAccess Grameen, Jana, L&T Finance and Equitas)
Comparison of disbursements across select microfinance lenders, March fiscal year-ends (Rs bn)
Yoy growth
4QFY22 1QFY23 2QFY23 3QFY23 4QFY23 1QFY24 2QFY24 3QFY24 4QFY24 1QFY25 2QFY25 3QFY25 (3QFY25)
Banks
Bandhan (microfinance) 230 82 128 152 212 80 170 174 228 137 125 123 (29)
IDFC First (microfinance) 43 39 28 29 21 10 (75)
IndusInd (microfinance) 75 97 89 116 84 120 138 85 71 90
RBL (microfinance) 13 0 19 15 25 22 20 20 23 15 11 8 (57)

SFBs
Equitas SFB (microfinance) 10 9 10 13 17 15 14 14 15 10 9 11 (17)
ESAF SFB (microfinance) 13 24 40 30 20 23 31 16 13 13 (44)
Jana SFB 20 16 13 18 (8)
Suryoday SFB (microfinance) 8 11 12 12 11 9 7 (40)
Ujjivan SFB (microfinance) 39 35 38 38 49 40 42 43 49 38 32 28 (35)
Utkarsh SFB (microfinance) 19 24 23 26 19 24 30 37 24 17 15 (51)

NBFC-MFIs
CreditAccess Grameen (overall) 58 21 44 48 72 48 50 53 81 45 44 51 (5)
Fusion (overall) 20 20 21 22 24 23 23 27 30 30 17 12 (57)
IIFL Samasta (microfinance) 25 14 18 27 37 23 31 29 33 11 16 (100)
Muthoot Microfin (overall) 22 24 25 27 26 29 22 27 20 (21)
Namra (overall) 3 3 2 4 5 4 5 5 5 4 3 2 (53)
Satin (overall) 16 16 16 17 25 20 22 27 28 20 23 27 (1)
Spandana Sphoorty (overall) 14 13 14 24 31 17 25 25 40 23 15 14 (43)

NBFCs
L&T Finance (micro loans) 39 38 44 43 44 45 57 55 58 58 54 46 (16)

Source: Companies, Kotak Institutional Equities

PAR 1-90 increased sharply and steadily after 4QFY24

Portfolio at risk (PAR) for the microfinance industry, March fiscal year-ends (% of GLP)

PAR 1-30 PAR 31-60 PAR 61-90

6.0

1.0
4.8
1.6
1.1 1.6
1.6 1.4
3.6
1.3
1.0 1.3
2.4 0.8 1.5
0.7
0.5 0.6 0.6
0.7 0.6 0.7 0.8
3.0 0.5 0.5
1.2 2.5 0.5
2.1 0.4 0.5 2.1 1.8
1.3 1.0 1.1 1.1 1.2
0.9 0.7
0.0
2QFY23

3QFY23

3QFY25
4QFY22

1QFY23

4QFY23

1QFY24

2QFY24

3QFY24

4QFY24

1QFY25

2QFY25

Source: CRIF Highmark, Equifax, MFIN

Banks
India Research

k.kathirvelu-kotak.com
 175

PAR 1-30 declined across all major states (except Karnataka and Tamil Nadu) during 3QFY25
PAR 1-30 in microfinance across states, March fiscal year-ends (%)
Bihar Tamil Nadu Uttar Pradesh
PAR 1-30 PAR 1-30 PAR 1-30
5.0
' 5.0 5.0
4.9
4.0 4.0 4.0

3.0 3.0 3.0

3.1 3.0
2.7
2.0 2.3 2.0 2.3 2.0 2.3
2.2 2.1 2.1
1.8 1.8 1.8
1.6 1.6
1.0 1.4 1.0 1.4 1.4 1.4 1.0 1.3 1.4 1.3
1.2
0.9 1.0 0.9 0.8 0.8 0.9 1.0 0.9
0.8 0.7 0.7
0.6 0.5
0.0 0.0 0.0

4QFY22

1QFY23

2QFY23

3QFY23

4QFY23

1QFY24

2QFY24

3QFY24

4QFY24

1QFY25

2QFY25

3QFY25

4QFY22

1QFY23

2QFY23

3QFY23

4QFY23

1QFY24

2QFY24

3QFY24

4QFY24

1QFY25

2QFY25

3QFY25
4QFY22

1QFY24

1QFY25
1QFY23

2QFY23

3QFY23

4QFY23

2QFY24

3QFY24

4QFY24

2QFY25

3QFY25

Karnataka West Bengal Maharashtra

PAR 1-30 PAR 1-30 PAR 1-30
5.0 5.0 5.0

4.0 4.0 4.3 4.0

3.9
3.6
3.0 3.0 3.0

2.0 2.4 2.0 2.4 2.0 2.3

2.1
1.8 1.8 1.9 1.9
1.0 1.3 1.0 1.0
1.2 1.2 1.1 1.1 1.1 1.2 1.1 1.2 1.2
0.8 0.9 1.0 0.9
0.7 0.6 0.6 0.6 0.6
0.0 0.4 0.4 0.4 0.5 0.3 0.0 0.3 0.0
4QFY22

1QFY23

2QFY23

3QFY23

4QFY23

1QFY24

2QFY24

3QFY24

4QFY24

1QFY25

2QFY25

3QFY25

4QFY22

1QFY23

2QFY23

3QFY23

4QFY23

1QFY24

2QFY24

3QFY24

4QFY24

1QFY25

2QFY25

3QFY25

4QFY22

1QFY23

2QFY23

3QFY23

4QFY23

1QFY24

2QFY24

3QFY24

4QFY24

1QFY25

2QFY25

3QFY25
Madhya Pradesh Odisha Rajasthan
PAR 1-30 PAR 1-30 PAR 1-30
5.0 5.0 5.0

4.0 4.0 4.0

3.0 3.0 3.0

3.0
2.6 2.5
2.0 2.4 2.3 2.3 2.4 2.0 2.0 2.4 2.3
2.2
1.8 1.7 1.7 1.7
1.6 1.6 1.5 1.6 1.6 1.6
1.0 1.4 1.3 1.4 1.0 1.4 1.0 1.4 1.4
1.1 1.2 1.1 1.0 1.0
0.8 0.8 0.8 0.8
0.0 0.0 0.5 0.0
1QFY25

2QFY25

3QFY25
4QFY22

1QFY23

2QFY23

3QFY23

4QFY23

1QFY24

2QFY24

3QFY24

4QFY24

1QFY25

2QFY25

3QFY25

4QFY22

1QFY23

2QFY23

3QFY23

4QFY23

1QFY24

2QFY24

3QFY24

4QFY24

4QFY22

1QFY23

2QFY23

3QFY23

4QFY23

1QFY24

2QFY24

3QFY24

4QFY24

1QFY25

2QFY25

3QFY25
Kerala Overall
PAR 1-30 PAR 1-30
5.0 5.0

4.0 4.5 4.0

3.0 3.4 3.0

2.9 3.0
2.0 2.5
2.0 2.3
2.1 2.1
1.9 1.8 1.9 1.8
1.7 1.6
1.0 1.5 1.0
1.2 1.3 1.2
0.8 0.9 1.0 1.0 1.0
0.7
0.0 0.0
2QFY25

3QFY25
4QFY22

1QFY23

2QFY23

3QFY23

4QFY23

1QFY24

2QFY24

3QFY24

4QFY24

1QFY25
4QFY22

1QFY23

2QFY23

3QFY23

4QFY23

1QFY24

2QFY24

3QFY24

4QFY24

1QFY25

2QFY25

3QFY25

Source: CRIF Highmark, Equifax, Sa-dhan

Banks
India Research

k.kathirvelu-kotak.com
 -

-
-

Banks
1.0
2.0
4.0
5.0

3.0

20
40
60
20
40
60
80

80
100
100
Jan-24 80 Jan-24 63 Jan-24 2.4

Feb-24 82 Feb-24 62 Feb-24 0.9

Source: CRIF Highmark

Mar-24 79 Mar-24 59 Mar-24 0.8

Apr-24 88 Apr-24 70 Apr-24 1.2

May-24 89 May-24 68 May-24 1.3

Jun-24 87 Jun-24 62 Jun-24 1.3

Current

31-60 DPD

91-180 DPD
Jul-24 88 Jul-24 74 Jul-24 1.6
Current

31-60 DPD

91-180 DPD
Aug-24 90 Aug-24 78 Aug-24 1.8

Sep-24 88 Sep-24 78 Sep-24 2.1

Oct-24 91 Oct-24 78 Oct-24 2.8

Nov-24 91 Nov-24 74 Nov-24 2.5

Dec-24 92 Dec-24 76 Dec-24 1.9

-

-
15
30
60
75

45

20
40
60
80
100
Jan-24 53 Jan-24 12

Feb-24 49 Feb-24 26

Mar-24 35 Mar-24 22

Apr-24 68 Apr-24 38

May-24 58 May-24 43
Net forward flow (gross forward flow minus roll-back) across delinquency buckets (%)

Jun-24 51 Jun-24 35
1-30 DPD

61-90 DPD

Jul-24 66 Jul-24 49
1-30 DPD

61-90 DPD

Aug-24 70 Aug-24 45
Net forward flow from the current bucket and early SMA buckets (1-30 DPD and 31-60 DPD) has declined recently

Sep-24 70 Sep-24 51

Oct-24 76 Oct-24 53

Nov-24 75 Nov-24 40

Dec-24 77 Dec-24 47

India Research

k.kathirvelu-kotak.com
176
 177

The underwriting quality of recent cohorts has been weaker for most lenders as shown in early delinquency performance; NBFCs seem
relatively better placed
PAR 30+ for 7-9 MOB across lender types (%)

Source: CRIF Highmark

Collection performance in recent cohorts (allotment year 2023 and 2024) of microfinance loan pools has been weak
Performance of microfinance loan pools rated by CRISIL Ratings across pool allotment cohorts (%)

Note: This data includes loans originated by Spandana Sphoorty, Satin, Muthoot Microfin and some unlisted players (Asirvad, Keertana, Dvara, etc.).

Source: CRISIL Ratings

Banks
India Research

k.kathirvelu-kotak.com
 178

Cases of multiple lending have declined over last few quarters

State-wise proportion of borrowers associated with 4 or more lenders, March fiscal year-ends
(%)

RJ MH TN OR BR
KL WB KA UP Overall
15

12

2QFY25
3QFY25
3QFY19
4QFY19
1QFY20
2QFY20
3QFY20
4QFY20
1QFY21
2QFY21
3QFY21
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23

4QFY23
1QFY24
2QFY24
3QFY24
4QFY24
1QFY25
Source: CRIF Highmark

Instances of multiple lending have been higher in the states of Tamil Nadu, Odisha, Karnataka, Kerala and Bihar
State-wise proportion of borrowers associated with 5 or more lenders, March fiscal year-ends (%)

Tamil Nadu Odisha Karnataka Kerala Bihar Uttar Pradesh

Rajasthan Maharashtra Madhya Pradesh West Bengal Overall
7.5
6.2
5.8

6.0
5.1
4.7

4.5
4.1

4.0
4.0

4.5
3.8

3.7
3.6
3.5

3.5
3.4
3.4

3.3
3.1

3.1
3.0
2.9

2.9

2.8
2.8

2.7
2.5
2.5
2.4
2.3

3.0
2.1

2.1
2.1

1.8

1.8
1.7
1.6

1.5
1.5

1.3
1.3
1.2

1.2
1.0

0.9

1.5
0.6

-
1QFY24 1QFY25 2QFY25 3QFY25

Source: CRIF Highmark

Banks
India Research

k.kathirvelu-kotak.com
 179

Proportion of over-leveraged borrowers (>3 lenders) has declined steadily from the peak of ~20% to ~15%
Break-up of microfinance industry GLP and customer base based on customers' lender associations, March fiscal year-ends
(%)
Breakup of microfinance GLP (%) Breakup of microfinance customers base (%)
<=2 =3 =4 >=5 <=2 =3 =4 >=5
100 100 2.8 2.8 2.5 2.1
9.9 10.1 10.1 9.7 9.7 8.2 6.7 4.0 3.6 3.4 3.2
8.2 9.1 7.7 7.3 7.3
10.4 10.3 10.0 9.5 9.5 8.7
80 14.9 80
15.7 15.5 15.0
18.0 17.3 16.6
60 60

84.2 85.8 86.8 87.4

40 40
65.0 65.4 68.1 70.2
61.7 62.3 63.3
20 20

0 0
1QFY24

1QFY24
2QFY24

3QFY24

4QFY24

1QFY25

2QFY25

3QFY25

1QFY25

2QFY25

3QFY25
Source: CRIF Highmark

Steady decline in over-leveraged microfinance borrowers (>Rs150k leverage) from ~19% to ~12%
Break-up of microfinance industry loan book based on overall microfinance leverage of
borrowers, March fiscal year-ends (% of industry GLP)

<Rs100k Rs100-150k Rs150-200k >Rs200k

100 5 4
6 7 8 8 7
10 9 9
11 11 11 11
80
20 21
21 21 21 20
21
60

40
63 61 62 65 67
60 60
20

0
4QFY24
1QFY24

2QFY24

3QFY24

1QFY25

2QFY25

3QFY25

Source: CRIF Highmark

Banks
India Research

k.kathirvelu-kotak.com
 180

Microfinance borrowers in Bihar and UP have better access to other retail credit as compared to several
other states
Proportion of live microfinance borrowers with active retail loan exposure (%), March fiscal year-
ends (%)

4QFY23 4QFY24
30

24.2
23.4
24

18

10.9
10.9
12

7.9
7.6

7.3

7.3
7.1
6.4

5.8
5.7

5.7
5.6

5.2
5.0

3.9
3.7
6

2.7
2.7
0

RJ
TN

UP
BR

WB

HR
KA

KL

MP
MH
Source: CRIF Highmark

Banks
India Research

k.kathirvelu-kotak.com
 181

Trend on new borrower additions has been better in Bihar and UP

Number of active unique borrowers across states, March fiscal year-ends (#, mn)
Bihar Tamil Nadu Uttar Pradesh
Unique borrowers Growth (% yoy, RHS) Unique borrowers Growth (% yoy, RHS) Unique borrowers Growth (% yoy, RHS)
15.0 45 15.0 45 15.0 45

12.0 30 12.0 30 12.0 30

9.0 15 9.0 15 9.0 15

6.0 0 6.0 0 6.0 0

3.0 (15) 3.0 (15) 3.0 (15)

0.0 (30) 0.0 (30) 0.0 (30)

1QFY23

2QFY23

3QFY23

4QFY23

1QFY24

2QFY24

3QFY24

4QFY24

1QFY25

2QFY25

3QFY25

1QFY23

2QFY23

3QFY23

4QFY23

1QFY24

2QFY24

3QFY24

4QFY24

1QFY25

2QFY25

3QFY25

1QFY23

2QFY23

3QFY23

4QFY23

1QFY24

2QFY24

3QFY24

4QFY24

1QFY25

2QFY25

3QFY25
West Bengal Karnataka Maharashtra
Unique borrowers Growth (% yoy, RHS) Unique borrowers Growth (% yoy, RHS) Unique borrowers Growth (% yoy, RHS)
15.0 45 15.0 45 15.0 45

12.0 30 12.0 30 12.0 30

9.0 15 9.0 15 9.0 15

6.0 0 6.0 0 6.0 0

3.0 (15) 3.0 (15) 3.0 (15)

0.0 (30) 0.0 (30) 0.0 (30)

4QFY23

3QFY23

4QFY24

4QFY23

1QFY25
1QFY23

2QFY23

3QFY23

1QFY24

2QFY24

3QFY24

4QFY24

1QFY25

2QFY25

3QFY25

1QFY23

2QFY23

4QFY23

1QFY24

2QFY24

3QFY24

1QFY25

2QFY25

3QFY25

1QFY23

2QFY23

3QFY23

1QFY24

2QFY24

3QFY24

4QFY24

2QFY25

3QFY25
Madhya Pradesh Odisha Rajasthan
Unique borrowers Growth (% yoy, RHS) Unique borrowers Growth (% yoy, RHS) Unique borrowers Growth (% yoy, RHS)
15.0 45 15.0 45 15.0 45

12.0 30 12.0 30 12.0 30

9.0 15 9.0 15 9.0 15

6.0 0 6.0 0 6.0 0

3.0 (15) 3.0 (15) 3.0 (15)

0.0 (30) 0.0 (30) 0.0 (30)

4QFY23

3QFY23

4QFY24

4QFY23

1QFY25
1QFY23

2QFY23

3QFY23

1QFY24

2QFY24

3QFY24

4QFY24

1QFY25

2QFY25

3QFY25

1QFY23

2QFY23

4QFY23

1QFY24

2QFY24

3QFY24

1QFY25

2QFY25

3QFY25

1QFY23

2QFY23

3QFY23

1QFY24

2QFY24

3QFY24

4QFY24

2QFY25

3QFY25
Kerala Gujarat Jharkhand
Unique borrowers Growth (% yoy, RHS) Unique borrowers Growth (% yoy, RHS) Unique borrowers Growth (% yoy, RHS)
15.0 45 15.0 45 15.0 45

12.0 30 12.0 30 12.0 30

9.0 15 9.0 15 9.0 15

6.0 0 6.0 0 6.0 0

3.0 (15) 3.0 (15) 3.0 (15)

0.0 (30) 0.0 (30) 0.0 (30)

1QFY23

2QFY24

3QFY25

2QFY23

3QFY24

4QFY23

1QFY25
2QFY23

3QFY23

4QFY23

1QFY24

3QFY24

4QFY24

1QFY25

2QFY25

1QFY23

3QFY23

4QFY23

1QFY24

2QFY24

4QFY24

1QFY25

2QFY25

3QFY25

1QFY23

2QFY23

3QFY23

1QFY24

2QFY24

3QFY24

4QFY24

2QFY25

3QFY25

Note: The sharp sequential decline in 2QFY24 was on account of correction for duplication.

Source: MFIN, Kotak Institutional Equities

Banks
India Research

k.kathirvelu-kotak.com
 182

Credit cost has inched up in the last few quarters across all players
Comparison of credit cost for select microfinance lenders, March fiscal year-ends (% of average advances)

1QFY23 2QFY23 3QFY23 4QFY23 1QFY24 2QFY24 3QFY24 4QFY24 1QFY25 2QFY25 3QFY25
Banks (overall) 1.9 2.3 2.3 1.6 1.5 1.7 1.6 2.0 1.6 2.5 2.8
Bandhan 2.8 5.7 6.8 3.0 2.4 2.5 2.6 6.1 1.7 2.0 4.3
IDFC First 1.0 1.3 1.3 1.3 1.2 1.2 1.5 1.5 2.0 3.3 2.4
IndusInd 2.1 1.8 1.6 1.5 1.3 1.3 1.2 1.1 1.2 2.1 1.9
RBL 1.7 1.5 1.5 1.1 1.5 3.3 2.8 1.4 2.2 3.0 5.3

SFBs (overall) 2.4 2.0 1.7 1.4 1.4 1.4 1.7 1.7 2.3 3.0 3.5
AU SFB 1.4 0.7 0.6 0.5 0.4 0.7 1.2 0.8 1.3 1.6 2.1
Equitas SFB 2.8 1.7 0.9 2.0 0.9 0.9 1.2 1.4 3.9 4.0 2.8
ESAF SFB 2.9 4.6 6.4 2.5 3.6 2.8 3.5 5.2 3.7 7.6 9.3
Jana SFB 5.7 5.3 4.3 4.7 4.0 3.2 3.0 3.1 3.3 3.4 2.7
Suryoday SFB 5.8 6.1 3.0 3.6 3.5 1.7 2.2 2.5 2.5 3.1 1.5
Ujjivan SFB 0.7 (0.2) (0.0) (0.0) 0.5 0.8 1.0 1.2 1.6 2.1 3.0
Utkarsh SFB 3.5 3.3 3.0 1.1 2.3 2.4 2.9 1.9 3.0 4.8 9.2

NBFC-MFIs 7.5 4.4 3.8 3.7 2.9 3.1 3.4 4.5 4.8 9.7 13.4
Annapurna 4.1 7.8 6.5 8.5 3.8 4.1 4.2 6.8 3.3 6.8 7.4
Arohan 2.9 6.7 2.4 7.6 7.4 0.4 3.2 2.5 2.4 5.9 6.8
Belstar 4.1 5.1 5.1 0.6 5.2 4.2 5.1 5.4 6.8 9.8 10.8
Chaitanya 1.2 1.6 0.9 1.1 0.8 0.6 1.6 3.8 1.8 2.1 4.2
CreditAccess Grameen 2.8 2.9 2.3 2.4 1.6 1.9 2.3 2.6 2.8 7.0 12.9
Fusion 1.3 3.6 2.7 3.5 3.7 3.6 4.2 4.9 13.8 28.6 26.8
IIFL Samasta 8.2 6.6 6.9 8.1 4.5 5.3 5.3 5.0 4.9 10.1 19.6
Midland 3.6 3.2 4.2 4.0 0.4 2.1 3.6 5.4 0.8 8.4 2.5
Muthoot Microfin 5.1 8.1 2.5 1.4 1.1 2.0 2.3 2.9 3.0 6.5 6.8
Namra 4.5 4.1 3.3 4.1 3.8 2.7 4.0 5.3 9.7 12.9 20.7
Satin 26.9 0.9 4.3 0.4 1.0 1.8 2.1 3.4 3.4 6.6 9.5
Satya 1.0 3.9 2.9 3.1 2.8 1.7 4.4 4.2 3.0 1.8 7.9
Spandana Sphoorty 25.9 1.8 2.7 5.1 1.2 4.1 2.8 3.6 7.9 21.1 31.3
Svatantra 6.3 6.4 9.0 4.2 2.8 5.6 3.3 9.9 1.0 5.5 5.1

NBFCs (overall)
L&T Finance 3.6 2.6 2.7 2.3 2.4 2.6 2.6 2.4 2.4 2.6 2.5

Source: Companies, Kotak Institutional Equities

Banks
India Research

k.kathirvelu-kotak.com
 183

Repayment rate for banks has historically been higher than other lender categories
Repayment rate across lender categories, March fiscal year-ends (%)

NBFC-MFI Banks SFBs Others Overall

200

160

120

80

40

-
4QFY19
1QFY20
2QFY20
3QFY20
4QFY20
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23
1QFY24
2QFY24
3QFY24
4QFY24
1QFY25
2QFY25
3QFY25
Note: Repayment rate = 100* (Disbursements over last four quarters - (current advances - advances 12 months ago))/(advances 12 months
ago)

Source: CRIF Highmark, Kotak Institutional Equities

Banks
India Research

k.kathirvelu-kotak.com
 184

Appendix

~32% of microfinance disbursements in FY2024 were in >24 month tenor

Break-up of microfinance disbursement value by loan tenor, March fiscal year-ends (%)

<12 months 12-18 months 18-24 months 24-36 months Others

100
11 8 10 8
14
12 19
80 14 20 24

60 38
40 45
46 49
40
15
10
10
20 12
25 11
22 18
12 9
0
2020 2021 2022 2023 2024

Source: CRIF Highmark

Rate of transition from “90+ DPD” bucket to “current” bucket tends to be slightly higher during quarter-end months
Roll-forward/roll-backward from respective buckets (as% of loans in that bucket)
Current to 1-30 dpd 1-30 to 31-60 dpd 90+ to 61-90 dpd 90+ to 31-60 dpd
31-60 to 61-90 dpd 61-90 to 90+ dpd 90+ to 1-30 dpd 90+ to current (RHS)
80.0 4.0 9.0

64.0 3.2 7.2

48.0 2.4 5.4

32.0 1.6 3.6

16.0 0.8 1.8

-
- -
Dec-21
Aug-21
May-21

Jun-21

Jul-21

Oct-21

Nov-21
Sep-21

Jun-21

Aug-21
May-21

Dec-21
Jul-21

Oct-21

Nov-21
Sep-21

61-90 to 31-60 dpd 61-90 to 1-30 dpd 61-90 to current 31-60 to 1-30 dpd 31-60 to current 1-30 to current
30.0 20.0

24.0 16.0

18.0 12.0

12.0 8.0

6.0 4.0

- -
Dec-21
Aug-21
May-21

Jun-21

Jul-21

Oct-21

Nov-21
Sep-21

Aug-21
May-21

Dec-21
Jun-21

Jul-21

Oct-21

Nov-21
Sep-21

Source: CRIF Highmark, CRISIL Research

Banks
India Research

k.kathirvelu-kotak.com
 185

Rising share of rural over last few years Growth rate in urban and rural markets has also converged
GLP split by rural and urban, March fiscal year-ends GLP growth yoy for rural and urban geographies,
(%) March fiscal year-ends (%)
Urban Rural Rural Urban
100 60

80 45
52
53
53
54
54
55
55
56
56
56
57
57
57
58
58
59
59
59
60

61
61

61
61
61
60 30

40 15
48
47
47
46
46
45
45
44
44
44
43
43
43
42
42
41

20
41
41
40
0

39
39
39
39
0 39 (15)
4QFY21

2QFY22

4QFY22

2QFY23

4QFY23

2QFY24
4QFY18

2QFY19

4QFY19

2QFY20

4QFY20

2QFY21

4QFY19
1QFY20
2QFY20
3QFY20
4QFY20
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23
1QFY24
2QFY24
3QFY24
Source: CRIF Highmark Source: CRIF Highmark

Share of disbursements to new borrowers (cycle #1) has Share of disbursements to borrowers in lower income buckets
declined steadily over the past year (<Rs10k per month) has been steadily declining
Break-up of disbursements by loan cycle of the Break-up of disbursements by monthly income of
borrower, March fiscal year-ends (% by value) the borrower, March fiscal year-ends (% by value)
Cycle #1 Cycle #2 Cycle #3 <=5k 5k-10k 10k-25k 25k-50k 50k-100k >100k
Cycle #4 Cycle #5 or higher 100
100 5 5 4 4 4
10 9 4 5 6 6 6
11 13 13
7 7 8 8 9 80
80 12 28 31 33
12 12 33 33
12 12
60 20 21 60
22 22 23
40 40
40 42 39 41 40
51 52 47
20 45 43 20 10
9 8 8 7
13 10 10 9 9
0 0
4QFY23

2QFY24

3QFY24

4QFY23

3QFY24

4QFY24
1QFY24

4QFY24

1QFY24

2QFY24

Source: CRIF Highmark Source: CRIF Highmark

Banks
India Research

k.kathirvelu-kotak.com
 186

The probability of roll-back drops sharply after a loan has crossed into 30+ DPD
Transition matrix for microfinance loans (as % of loans in that bucket at the beginning of the month)
Transitions in the month of December 2023
Cumulative
Current 1-30 DPD 31-60 DPD 61-90 DPD 91-120 DPD 121-150 DPD 151-180 DPD 180+ DPD Written off Closed roll-backs
Current 95.0 0.8 0.1 - - - - - - 4.2
1-30 DPD 18.6 50.4 24.5 2.3 0.1 0.1 - - - 3.9 22.5
Delinquency 31-60 DPD 2.8 2.2 49.2 39.4 3.6 0.1 - - 0.2 2.5 7.5
position at 61-90 DPD 3.8 0.5 1.7 48.8 38.0 3.4 0.2 0.1 0.1 3.3 9.3
beginning of 91-120 DPD 3.6 0.2 0.3 1.5 31.5 52.2 6.5 0.2 1.8 2.3 7.9
the month 121-150 DPD 2.1 0.1 0.1 0.2 0.8 28.9 59.0 5.7 1.1 2.0 5.3
151-180 DPD 1.0 0.1 - 0.1 0.2 0.9 34.3 57.9 3.8 1.7 4.0
180+ DPD 0.2 - - - - - - 98.8 0.5 0.5 0.7

Transitions in the month of March 2024

Cumulative
Current 1-30 DPD 31-60 DPD 61-90 DPD 91-120 DPD 121-150 DPD 151-180 DPD 180+ DPD Written off Closed roll-backs
Current 94.7 0.5 0.0 - - - - 0.2 0.0 4.5
1-30 DPD 13.0 46.9 32.1 1.9 0.0 0.0 - 0.1 0.2 5.6 18.6
Delinquency 31-60 DPD 3.1 1.8 38.2 49.7 2.1 0.0 0.0 0.1 0.1 4.8 9.7
position at 61-90 DPD 2.0 0.6 1.7 50.8 38.5 1.3 0.0 0.2 0.1 4.8 9.1
beginning of 91-120 DPD 2.9 0.3 0.3 1.1 19.7 66.7 4.3 0.2 1.8 2.6 7.3
the month 121-150 DPD 2.3 0.1 0.1 0.2 0.6 16.4 71.7 5.1 0.8 2.6 5.9
151-180 DPD 0.4 0.1 0.1 0.1 0.3 0.9 21.6 69.2 5.2 2.0 3.9
180+ DPD 0.0 0.0 - - 0.0 0.0 0.0 97.3 1.8 0.8 0.9

Note: We have included the proportion of loan closures in the calculation of “cumulative roll-backs”.

Source: CRIF Highmark

The probability of loan closure tends to be higher in the SMA-2 bucket as compared to SMA-1
Proportion of loan closures across different delinquency buckets during a month, (as % of loans
in that bucket as at beginning of the month)
Transitions in the month of December 2023 Transitions in the month of March 2024
7.5

6.0 5.6
4.8 4.8
4.5
4.2
4.5 3.9
3.3
3.0 2.5 2.6 2.6
2.3
2.0 2.0
1.7
1.5 0.8
0.5

-
180+ DPD
1-30 DPD
Current

91-120 DPD
31-60 DPD

61-90 DPD

121-150 DPD

151-180 DPD

Source: CRIF Highmark

Banks
India Research

k.kathirvelu-kotak.com
 UPDATE

Oil, Gas & Consumable Fuels

India
Sector View: Neutral NIFTY-50: 23,332 April 02, 2025

4QFY25 Preview: Likely a weak quarter Company data and valuation summary
We expect a muted 4Q for oil & gas. For RIL, we expect a modest 3.5% yoy Price (Rs) Fair Value Upside
Company Rating 02-Apr-25 (Rs) (%)
EBITDA growth, driven by telecom and retail, with O2C/E&P weak. For OMCs, Conglomerate
a 4-5% qoq increase in crude cost in INR terms will impact earnings. Reported Reliance Industries
Upstream
BUY 1,251 1,400 12

GRMs will get weaker. For ONGC, volumes will likely be weak, but respite will ONGC
Oil India
BUY
SELL
251
392
275
320
10
(18)
be from higher oil/gas realizations and a weak INR. For GAIL, core businesses OMCs
BPCL SELL 287 220 (23)
will be weak, but marketing may recover. More APM gas availability in 4Q will HPCL SELL 362 200 (45)
IOCL SELL 131 85 (35)
give CGDs a respite. While margins will recover, they will be weak. We expect Gas utilities
GAIL SELL 184 145 (21)
relatively good results for Castrol and PLNG (on a low base). IGL SELL 203 150 (26)
MGL SELL 1,389 1,030 (26)
PLNG SELL 299 235 (21)

RIL: Overall a muted quarter; retail should recover further GSPL

Speciality Chemicals
RS 294 -

Castrol India ADD 203 200 (1)

We expect consolidated EBITDA to rise a modest 3.5% yoy (flat qoq), mainly
driven by further benefit from the telecom tariff hike and recovery in retail. We Source: Bloomberg, Company data, Kotak Institutional Equities estimates

expect consolidated O2C EBITDA to decline ~11% yoy (up 3.2% qoq, in part due
Prices in this report are based on the market close of
to a weak INR). With the further benefit of the tariff hike, we expect R-Jio’s April 02, 2025
EBITDA to rise 3.3% qoq (17.5% yoy). We assume a blended ARPU of Rs206
(1.5% qoq, ~14% yoy). We expect further recovery for retail. We forecast retail

Private Circulation Only. This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities A ct of 1933
EBITDA to grow ~10% yoy (down 6.5% qoq, high base in 3Q on festive demand).

Upstream: Volumes weak, but realizations likely better; weaker INR helps
We expect ONGC’s EBITDA to rise ~11% yoy (~2% qoq) on higher oil and gas
realizations and a weaker INR. For Oil India, we expect EBITDA to increase
12.6% yoy (flat qoq), driven by higher gas sales and weaker INR, partly offset by
lower oil realizations. Volumes are likely to be weak for both.

OMCs: Higher oil, weaker INR to hurt; reported GRMs likely weak
For OMCs, we expect crude costs to rise 4-5% in INR terms. With retail prices
frozen for diesel, petrol and LPG (account for 80-85% of sales), the overall
margins will be impacted. We expect reported GRMs to be weak yoy and qoq
for OMCs (except IOC, 3Q GRM was too low). With oil prices recovering at end-
March, we do not expect many adventitious gains/losses in 4Q. Reported
numbers will likely look stronger for IOCL (a weak base) and weakest for BPCL.

Gas: Respite for CGDs; ex-marketing weak for GAIL; optically good for PLNG
GAIL: We expect EBITDA to decline ~2% yoy (up 23% qoq on a low base). We
expect transmission, LPG/LHC and petchem to be weak qoq, but marketing
should recover (very weak in 3Q due to one-offs).

CGDs: We expect IGL/MGL’s EBITDA to recover 12-13% qoq (down 10% yoy for
MGL, 22% for IGL). A partial reversal of the APM allocation cut in mid-January
and higher APM availability in March (lower offtake by fertilizer) would help.

PLNG: We expect a ~10% qoq increase in adjusted EBITDA (+19% yoy, low base Related Research
on inventory valuation impact), driven by a 5% annual tariff hike at Dahej.
→ OPEC+ pricing power Trumped?
Castrol: We expect 1QCY25 EBITDA to increase 15% yoy, but decline ~10% qoq → RIL: Risk-reward gets better; upgrade to BUY
(4Q benefited from year-end rebates on term contracts). → ONGC: Stars in favor; maintain BUY

Full sector coverage on KINSITE

Anil Sharma Keshav Soni

 188

4Q likely weak for OMCs and CGDs; muted for RIL, GAIL, ONGC/OIL; better for Castrol, PLNG
4QFY25E earnings summary, March fiscal year-ends (Rs mn, %)
Change (%) Change (%)
EBITDA yoy qoq Net income yoy qoq
Oil, gas & consumable fuels
RIL 440,026 3.5 0.5 186,517 (1.6) 0.6

BPCL 50,101 (46) (34) 24,373 (42) (48)

HPCL 46,787 (2.6) (22) 22,436 (21) (26)
IOCL 73,016 (30) 2.6 20,731 (57) (28)

ONGC 193,105 10.9 1.8 96,787 (1.9) 17.5

OIL 25,475 0.1 12.6 18,502 (8.8) 51
Gas utilities
GAIL 34,966 (1.7) 23 22,193 1.9 (42.6)
GSPL 2,000 (47) 3.9 1,452 (44) 7.1

Petronet LNG 13,570 18.6 10.0 8,275 12.2 (4.6)

IGL 4,081 (21.9) 12.2 3,178 (17.0) 11.2

MGL 3,547 (9.9) 12.8 2,375 (10.4) 5.4
Specialty chemicals
Castrol (a) 3,380 15.1 (10.1) 2,514 16.3 (7.4)

Note:
(a) 1QCY25 for Castrol

Source: Company, Kotak Institutional Equities estimates

Average Brent and Dubai crude prices were qoq higher, despite prices falling to three-year low in early
March
Brent and Dubai crude oil prices, January 2022 onward (US$/bbl)

Brent Dubai
(US$/bbl)
140
130
120
110
100
90
80
70
60
Jan-22

Jan-23

Jan-24

Jul-24

Jan-25
Jul-22

Jul-23
Oct-22

Oct-23

Oct-24
Apr-22

Apr-23

Apr-24

Brent crude price (US$/bbl) Dubai crude price (US$/bbl)

FY2022 FY2023 FY2024 FY2025 FY2022 FY2023 FY2024 FY2025
1Q 68.6 112.9 78.1 84.9 66.3 109.0 77.5 85.1
2Q 73.0 99.5 86.6 80.3 71.4 98.3 86.6 78.7
3Q 79.2 88.3 84.3 74.7 77.8 84.6 83.8 73.7
4Q 99.3 81.4 83.1 75.7 96.3 79.6 81.7 75.8
Average 80.0 95.6 83.0 78.9 77.9 92.9 82.4 78.3

Source: Bloomberg, Kotak Institutional Equities estimates

Oil, Gas & Consumable Fuels

India Research

k.kathirvelu-kotak.com
 189

Share of Russian crude Indian oil imports remained high at … but discounts narrowed to ~US$3/bbl in FY2025 so far versus
~38% in 9MFY25 (21% in FY2023, 36% in FY2024)… ~US$9/bbl in FY2024 and higher US$13/bbl in FY2023.
Monthly petroleum crude imports from Russia, April Price of Russian/ex-Russian oil imports, April 2022
2021 onward (mn ton) onward (US$/bbl)

Imports from Russia volume % (US$/bbl) ex-Russia Russia

10 50 120
9
110
8 40
7 100

6 30 90
5
80
4 20
70
3
2 10 60
1 50
0 -

Oct-22

Oct-23

Oct-24
Apr-24

Jul-24
Apr-22

Jul-22

Apr-23

Jul-23

Jan-24
Jan-23
Apr-21

Apr-22

Apr-23

Apr-24
Jul-24
Jul-21
Oct-21

Jul-22
Oct-22

Jul-23
Oct-23

Oct-24
Jan-22

Jan-23

Jan-24

Source: Commerce Ministry, Kotak Institutional Equities

Source: Commerce Ministry, Kotak Institutional Equities

Since Apr 2022, Russian imports have led to potential savings Compared with Dubai benchmark, India’s average import costs
of ~US$15 bn (versus ex-Russia imports). in 9MFY25 were higher versus even pre Russia-Ukraine conflict
Russia's share of oil imports since April 2022 India's average crude import cost less Dubai crude
(1M lag), March fiscal year-ends, US$/bbl
mn ton US$ bn US$/bbl
Break-up of imports US$/bbl avg import cost less Dubai 1M lag
Russia 200 117 80 5.0 4.4
Ex-Russia 445 294 90
Total 646 411 87 4.0
Russia share % 31.0 28.5 3.0 2.5
2.0 1.5
Savings from Russian imports 0.9
Discount US$/bbl 10.0 1.0 0.3 0.6
0.1
Potential savings US$bn 14.7
-
Source: Commerce Ministry, Kotak Institutional Equities (1.0)
(2.0)
(2.0)
(3.0)
FY2018

FY2019

FY2020

FY2021

FY2022

FY2023

FY2024

FY2025TD

Source: Commerce Ministry, Kotak Institutional Equities

Oil, Gas & Consumable Fuels

India Research

k.kathirvelu-kotak.com
 190

Share of oil imports from the US had declined from 9.1% in Delta between the US and Russian crude import prices
FY2022 to just 3.4% in FY2024; likely to rise now significantly expanded recently; higher US exports likely to hurt
US oil imports and share, March fiscal year-ends, India’s average import prices for Russian and US
2017 onward (mmt, %) crude imports, March fiscal year-ends (US$/bbl)

India's oil imports from US Russia US

100 95.7
mmt % share 92.0
25.0 9.1 10.0
86.7
90
8.0
20.0 8.0 80
6.4 83.6 82.4
15.0 6.0 70 76.7
4.3 4.0
3.4 60
10.0 2.8 20.0 4.0
15.0 15.2
5.0 2.0
50
0.7 9.6 7.9 7.1
6.4
0.0 1.4 40
- -

2021

2022

2023

2024
2020

9MFY25
2017

2018

2019

2021

2022

2023
2020

2024

2025TD

Source: Commerce Ministry, Kotak Institutional Equities Source: Commerce Ministry, Kotak Institutional Equities

Arab light-heavy differential was sequentially flat in 4Q Sharply increased Saudi OSPs will also increase effective cost
for India crude (relative to benchmarks such as Dubai)
Arab light-heavy crude differentials, 1QFY21 onward
Saudi Aramco's OSP differential for Asia, April 2021
(US$/bbl) Light-heavy crude differential
onward (US$/bbl)
4.5
4.0 (US$/bbl) Light Medium Heavy
3.5 10.0
3.0
2.1

2.5 8.0
1.9
1.9

1.9
1.8

1.8
1.5

2.0
1.3

6.0
1.5
1.0 4.0
0.5
2.0
-
(0.5) -
1QFY24
2QFY24
3QFY24
4QFY24
1QFY25
2QFY25
3QFY25
4QFY25
1QFY21
2QFY21
3QFY21
4QFY21
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23

(2.0)

(4.0)
Oct-21

Oct-22
Jan-23

Oct-23
Jan-24

Oct-24
Jan-25
Jul-21

Jan-22

Jul-23
Jul-22

Jul-24
Apr-22

Apr-24
Apr-21

Apr-23

Apr-25

Source: Reuters, Kotak Institutional Equities

Source: Reuters, Kotak Institutional Equities

Oil, Gas & Consumable Fuels

India Research

k.kathirvelu-kotak.com
 191

SG complex margins declined US$1.9/bbl (38%) qoq in 4Q; Indian slate declines were lower by US$1/bbl
(13%)
Refining margins, March fiscal year-ends, January 2021 onward (US$/bbl)

Singapore refining margins Kotak India refining margins

(US$/bbl)
40
35
30
25
20
15
10
5
0
(5)

Mar-23

Mar-25
Mar-21

Mar-22

Mar-24
Jan-22

Jan-23

Jan-24

Jan-25
Jan-21

May-21

May-22

May-23

May-24
Jul-23
Jul-21

Jul-22

Jul-24
Nov-21

Nov-22

Nov-23

Nov-24
Sep-21

Sep-22

Sep-23

Sep-24
Kotak India refining margins (a) (US$/bbl) Singapore refining margins (US$/bbl)
FY2021 FY2022 FY2023 FY2024 FY2025 FY2021 FY2022 FY2023 FY2024 FY2025
1Q 0.8 1.9 23.2 7.3 5.4 (1.0) 2.1 21.5 4.1 3.5
2Q 1.1 3.4 11.4 13.3 5.6 0.0 3.8 7.1 9.6 3.6
3Q 2.3 7.5 16.6 9.3 7.6 1.2 6.1 6.3 5.4 5.0
4Q 2.1 9.0 14.4 11.0 6.6 1.8 8.0 8.3 7.3 3.1
Average 1.6 5.5 16.4 10.2 6.3 0.5 5.0 10.8 6.6 3.8
Notes:
(a) Adjusted for export tax on diesel/petrol from July 1, 2022

Source: Reuters, Kotak Institutional Equities estimates

Diesel cracks were flat qoq Kerosene/ATF cracks declined marginally

Diesel crack spreads, 1QFY20 onward (US$/bbl) Jet-kero crack spreads, 1QFY20 onward (US$/bbl)
(US$/bbl) (US$/bbl)
Diesel cracks 5-year avg. Kerosene cracks 5-year avg.
45 45
40

40
40
34
34

35
28

35
26

30
27
26

23

30
21

25
21

14.9
14.4
20

25
13.4

20
14
14.7
14.6

14
12.9

20
14

14

15
15
10
10
5
5 0
0 (5)
1QFY20

3QFY20

1QFY21

Q3FY21

1QFY24

3QFY24

1QFY25

3QFY25
1QFY22

3QFY22

1QFY23

3QFY23

1QFY23

3QFY23

1QFY24

3QFY24

1QFY25

3QFY25
1QFY20

3QFY20

1QFY21

Q3FY21

1QFY22

3QFY22

Source: Reuters, Kotak Institutional Equities estimates Source: Reuters, Kotak Institutional Equities estimates

Oil, Gas & Consumable Fuels

India Research

k.kathirvelu-kotak.com
 192

Gasoline cracks declined ~US$2/bbl Naphtha cracks declined ~US$1/bbl in 4Q

Gasoline crack spreads, 1QFY20 onward (US$/bbl) Naphtha crack spreads, 1QFY20 onward (US$/bbl)

(US$/bbl) (US$/bbl)
Gasoline cracks 5-year avg. Naphtha cracks 5-year avg.
40
10
35
30 5

25 0

18.7
20 (5)

(2.8)
(3.8)
13.2

(4.1)
11.8

11.4

(5.8)
(6.1)
10.7
15 (10)

9.4

(10)
(11)
10 (15)

(12)
(13)
(13)
5 (20)

(16)
(21)
0 (25)
3QFY20

1QFY21

Q3FY21

1QFY22

1QFY23

1QFY24

1QFY25
1QFY20

3QFY22

3QFY23

3QFY24

3QFY25

3QFY23

1QFY24

3QFY24

1QFY25

3QFY25
1QFY20

3QFY20

1QFY21

Q3FY21

1QFY22

3QFY22

1QFY23
Source: Reuters, Kotak Institutional Equities estimates Source: Reuters, Kotak Institutional Equities estimates

Fuel oil cracks further improved in 4Q LPG cracks, however, declined ~US$3/bbl in 4Q
Fuel oil crack spreads, 1QFY20 onward (US$/bbl) LPG crack spreads, 1QFY20 onward (US$/bbl)

(US$/bbl) (US$/bbl) LPG cracks

Fuel oil cracks 5-year avg.
5 5-year avg.
0
0
(10)
(1.3)

(5)
(2.7)
(5.5)
(5.9)

(6.0)

(10) (20)
(9.3)
(9.9)

(20)
(11)

(15)
(12)

(22)

(23)

(23)
(24)
(30)

(25)
(29)
(16)

(29)

(20)

(32)
(32)
(33)

(40)
(25)
(23)

(39)
(40)
1QFY23 (24)

(30) (50)
1QFY20
3QFY20
1QFY21
Q3FY21
1QFY22
3QFY22
1QFY23
3QFY23
1QFY24
3QFY24
1QFY25
3QFY25
1QFY20

3QFY20

1QFY21

Q3FY21

1QFY22

3QFY22

3QFY23

1QFY24

3QFY24

1QFY25

3QFY25

Source: Reuters, Kotak Institutional Equities estimates Source: Reuters, Kotak Institutional Equities estimates

Oil, Gas & Consumable Fuels

India Research

k.kathirvelu-kotak.com
 193

Retail fuel prices frozen with just 1 cut in 3 years Retail petrol prices also remain frozen
Diesel retail versus international price, since June Petrol retail versus international price, since June
2017 (Rs/liter, US$/bbl) 2017 (Rs/liter, US$/bbl)

(Rs/liter) (US$/bbl) (Rs/liter) (US$/bbl)

Diesel Intl. fuel price Petrol Intl. fuel price
200
135
180 120 160
120
160 105 140
105
140 90 120
90
120 100
75
75 80
100
60
60 80 60
45 40
45 60
30 20
30 40
15 -
15 20

Jan-19

Jan-20

Jan-21

Jan-22

Jan-23

Jan-25
Jan-18

Jan-24
Jul-19

Jul-22

Jul-23
Jul-17

Jul-18

Jul-20

Jul-21

Jul-24
- -
Jan-19

Jan-20

Jan-21

Jan-24

Jan-25
Jan-18

Jan-22

Jan-23
Jul-18

Jul-20

Jul-22

Jul-23

Jul-24
Jul-17

Jul-19

Jul-21

Source: PPAC, Reuters, Kotak Institutional Equities estimates

Source: PPAC, Reuters, Kotak Institutional Equities estimates

With resilient cracks and weaker INR, marketing margins on With weaker cracks, margins on petrol higher versus diesel
diesel moderated but remain high
Gross marketing margins on gasoline, 1QFY22
Gross marketing margins on diesel, 1QFY22 onward onward (Rs/liter)
(Rs/liter)
(Rs/liter)
(Rs/liter) 14
10.5
14 10 8.9 8.7 8.5
9.8 6.8 6.8 5.9 8.9
10 8.5
5.6 5.9 6.7 6 3.6 3.9
4.1
5.5 3.0 3.4
6 3.4 3.5 1.0
2.4 1.9 2
2 0.4
(2) (0.5)
(2) (0.7)
(0.8)
(6) (6)
(5.5)
(10) (10)
(9.5)
(14) (14) (11.5)
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23
1QFY24
2QFY24
3QFY24
4QFY24
1QFY25
2QFY25
3QFY25
4QFY25
(18) (15.3)
2QFY22
3QFY22

1QFY23

4QFY23

3QFY24

1QFY25
2QFY25

4QFY25
1QFY22

4QFY22

2QFY23
3QFY23

1QFY24
2QFY24

4QFY24

3QFY25

Notes:
Notes: (a) From 2QFY23 margins are including impact of export tax
(a) From 2QFY23 margins are including impact of export tax
Source: PPAC, Reuters, Kotak Institutional Equities estimates
Source: PPAC, Reuters, Kotak Institutional Equities estimates

Oil, Gas & Consumable Fuels

India Research

k.kathirvelu-kotak.com
 194

Integrated margins on diesel lower than 3Q, but significantly Integrated margins on petrol are also lower versus 3Q, but
higher than FY2018-23 average higher than historical averages
OMCs’ deltas for diesel over Dubai crude, March OMCs’ deltas for petrol over Dubai crude, March
fiscal year-ends, 2018 onward (US$/bbl) fiscal year-ends, 2018 onward (US$/bbl)

US$/bbl Diesel average US$/bbl Petrol average

35 31.9 35
29.4 30.5
30 27.5 26.6 30 27.8
24.9 23.7 25.9 25.3
25 21.1 22.3 25
20.1 19.3 20.7
18.0
20 16.2 17.4 20 15.8 15.4 14.5
14.2 12.9 14.4
15 15
10 10
5 5
- -
FY2018

FY2019

FY2020

FY2021

FY2022

FY2023

FY2024

1QFY25

2QFY25

3QFY25

4QFY25

FY2018

FY2019

FY2021

FY2022
FY2020

FY2023

FY2024

1QFY25

2QFY25

4QFY25
3QFY25
Source: PPAC, Reuters, Kotak Institutional Equities estimates Source: PPAC, Reuters, Kotak Institutional Equities estimates

Versus average Rs6.5/liter for FY2018-22, OMCs’ gross margins on petrol were up 2.6X at Rs16.6/liter or US$32/bbl in 2024
Petrol gross margin estimates for OMCs, March fiscal year-ends, 2018 onward (Rs/liter)

2018-20 avg. versus

2018 2019 2020 2018-20 avg. 2024 9MFY25 4QFY25E 2024 9MFY25 4QFY25E
Rs/US$ 64.5 69.8 70.7 68.3 82.8 83.8 86.6
Indian crude imports (US$/bbl) 54.6 72.5 61.2 62.8 78.0 78.3 71.4
Built-up of prices (Rs/liter)
Retail price - Petrol 68.8 75.4 72.7 72.3 96.6 94.7 94.7 24.4 22.4 22.4
Crude cost 22.1 31.8 27.2 27.1 40.6 41.3 38.9 13.6 14.2 11.8
Taxes and charges 38.9 38.5 38.8 38.8 39.4 39.2 39.2 0.7 0.5 0.5
Excise duty 20.5 18.7 19.6 19.6 19.9 19.9 19.9 0.3 0.3 0.3
Dealer commission 3.8 3.8 3.8 3.8 3.8 4.0 4.4 0.0 0.2 0.6
VAT 14.6 16.0 15.5 15.4 15.7 15.4 15.4 0.3 0.0 0.0
Gross margin (Rs/liter) 7.8 5.0 6.6 6.5 16.6 14.2 16.6 10.1 7.7 10.1
Gross margin (USS$/bbl) 19.1 11.4 14.9 15.0 31.9 26.9 30.5 19.5 14.7 18.6
Note:
(a) OMC gross margins are our estimation based on average Indian oil import prices and OMCs’ net realizations, excluding taxes and dealer commissions at Delhi.
(b) Indian crude import prices are based on PPAC’s reported Indian crude imports in volume and value.

Source: Company, Kotak Institutional Equities estimates

Oil, Gas & Consumable Fuels

India Research

k.kathirvelu-kotak.com
 195

Versus average Rs9.5/liter for FY2018-22, OMCs’ gross margins on diesel were up 1.8X at Rs17.4/liter or US$33/bbl in 2024
Diesel gross margin estimates for OMCs, March fiscal year-ends, 2018 onward (Rs/liter)
2018-20 avg. versus
2018 2019 2020 2018-20 avg. 2024 9MFY25 4QFY25E FY2024 9MFY25 4QFY25
Rs/US$ 64.5 69.8 70.7 68.3 82.8 83.8 86.6
Indian crude imports (US$/bbl) 54.6 72.5 61.2 62.8 78.0 78.3 71.4
Built-up of prices (Rs/liter)
Retail price - Diesel 58.3 68.2 65.8 64.1 89.5 87.6 87.6 25.4 23.5 23.5
Crude cost 22.1 31.8 27.2 27.1 40.6 41.3 38.9 13.6 14.2 11.8
Taxes and charges 27.5 27.2 27.7 27.5 31.5 31.1 31.1 4.0 3.6 3.6
Excise duty 16.3 14.6 15.5 15.5 15.8 15.8 15.8 0.3 0.3 0.3
Dealer commission 2.6 2.6 2.6 2.6 2.6 2.7 3.0 0.0 0.1 0.4
VAT 8.6 10.0 9.7 9.4 13.1 12.6 12.6 3.6 3.1 3.1
Gross margin (Rs/liter) 8.6 9.2 10.8 9.5 17.4 15.3 17.7 7.8 5.7 8.1
Gross margn (USS$/bbl) 21.3 20.9 24.4 22.2 33.4 28.9 32.4 15.1 10.8 14.9
Note:
(a) OMC gross margins are our estimation based on average Indian oil import prices and OMCs’ net realizations, excluding taxes and dealer commissions at Delhi.
(b) Indian crude import prices are based on PPAC’s reported Indian crude imports in volume and value.

Source: Company, Kotak Institutional Equities estimates

Market share of private fuel marketers is elevated for diesel… … and for petrol
Diesel sales by private players, 1QFY20 onward Petrol sales by private players, 1QFY20 onward
(mmt, % market share) (mmt, % market share)

(mmt) HSD volume (LHS) (%) (mmt) MS volume (LHS) (%)

HSD market share (RHS) MS market share (RHS)
4.0 16.0 1.2 12.0
10.7

9.9
12.5

9.6
12.1

9.4
11.9
11.9
11.8

9.1
9.1
3.5 14.0
11.6
11.6

8.9
11.4

8.3
8.3
10.6
10.4

7.9
3.0 12.0 0.9 9.0

7.5
9.9

7.0
9.1

6.7
2.5 10.0 5.9
7.0

2.0 8.0 0.6 6.0

5.8
5.4

1.5 6.0
3.5

1.0 4.0 0.3 3.0

0.5 2.0
0.0 0.0 0.0 0.0
3QFY20
1QFY21

1QFY22
3QFY22

3QFY23
1QFY24

1QFY25
3QFY25
1QFY20

3QFY21

1QFY23

3QFY24

1QFY20

3QFY20

1QFY21

3QFY21

1QFY23

3QFY23

1QFY24
1QFY22

3QFY22

3QFY24

1QFY25

Source: PPAC, Companies, Kotak Institutional Equities estimates Source: PPAC, Companies, Kotak Institutional Equities estimates

Oil, Gas & Consumable Fuels

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Domestic LPG prices remain frozen Saudi LPG prices declined marginal 1.5% qoq (-2% yoy)
Domestic LPG price in Delhi, January 2020 onward Saudi Aramco’s average LPG prices, from January
(Rs/cylinder) 2020 (US$/ton)

Rs/cylinder domestic LPG (US$/ton) Saudi Aramco's LPG price

1,200 1,000 952
1,100 900
1,000 800 732
900 700 636 609
803.0
800 600
571
700 500
600 400
385
500 300

400 200 236

Jul-20

Jul-21

Jul-22

Jul-23

Jul-24
Jan-20

Jan-21

Jan-22

Jan-23

Jan-24

Jan-25
Jan-21

Jan-23

Jan-25
Jan-20

Jan-22

Jan-24
Jul-20

Jul-22

Jul-24
Jul-21

Jul-23

Source: Reuters, Kotak Institutional Equities estimates Source: Reuters, Kotak Institutional Equities estimates

OMCs are incurring losses on domestic LPG LPG under-recoveries likely Rs120 bn for 4QFY25
Indexed prices of domestic and commercial LPG, LPG under-recovery estimates, from 1QFY24 (Rs
from January 2018 bn)

Domestic LPG Commercial LPG (Rs bn)

180
116 120
125
160
100 85 80
76
140 75 57
50
120 25

100 -
(25) (9)
80 (50)
(75) (53)
60
4QFY25E
1QFY24

2QFY24

4QFY24

2QFY25

3QFY25
3QFY24

1QFY25
Jul-18

Jul-19

Jul-20

Jul-21

Jul-22

Jul-23

Jul-24
Jan-18

Jan-19

Jan-20

Jan-21

Jan-22

Jan-23

Jan-24

Jan-25

Source: Reuters, Kotak Institutional Equities estimates Source: Reuters, Kotak Institutional Equities estimates

Oil, Gas & Consumable Fuels

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India’s petroleum product demand growth was likely flat yoy in 4Q

Petroleum consumption volumes and growth, 1QFY22 onward
1QFY22 2QFY22 3QFY22 4QFY22 1QFY23 2QFY23 3QFY23 4QFY23 1QFY24 2QFY24 3QFY24 4QFY24 1QFY25 2QFY25 3QFY25 4QFY25E
Consumption (mn tons)
MS 3.7 7.9 8.2 7.9 8.8 8.6 8.8 8.7 9.4 9.1 9.3 9.4 10.0 9.8 10.2 9.9
HSD 18.4 17.3 20.4 20.6 22.2 19.2 22.5 22.0 23.9 20.0 22.8 22.9 24.3 20.1 23.9 23.2
LPG 6.5 7.1 7.3 7.4 6.5 7.2 7.4 7.3 6.7 7.4 7.6 7.9 7.1 7.9 8.2 8.3
ATF 0.9 1.1 1.5 1.4 1.7 1.8 1.9 2.0 2.0 2.0 2.1 2.2 2.2 2.2 2.3 2.3
FO & LSHS 1.5 1.5 1.6 1.7 1.6 1.8 1.8 1.8 1.7 1.6 1.6 1.6 1.7 1.6 1.7 1.6
Others 16.3 13.1 14.8 16.5 14.5 13.4 14.7 16.6 15.2 15.2 15.1 17.6 15.8 15.0 14.9 15.4
Domestic consumption 47.3 47.9 53.9 55.6 55.3 52.1 57.2 58.4 58.9 55.3 58.4 61.6 61.2 56.6 61.2 60.7
Growth (%)
MS (26.6) 11.7 2.3 114.0 138.1 9.1 7.7 9.8 6.8 5.7 4.7 8.5 7.1 7.3 9.7 6.0
HSD 22.3 9.0 (3.8) (0.0) 20.4 11.4 10.3 6.7 8.0 4.3 1.0 4.1 1.6 0.1 4.8 2.6
LPG 0.8 4.1 0.2 6.1 0.2 2.5 1.6 (1.8) 3.0 2.3 2.5 8.4 5.3 6.6 7.6 5.6
ATF 142.1 37.5 32.0 6.5 85.5 59.4 23.3 38.0 13.4 13.5 11.0 10.2 11.4 9.4 8.8 8.2
FO & LSHS 19.1 11.8 10.1 11.5 11.7 15.4 9.1 5.4 4.6 (9.5) (10.6) (8.4) 1.3 (0.6) 9.0 (2.6)
Others 28.5 (1.1) (8.8) (12.0) (10.9) 2.9 (0.4) 0.6 4.5 12.7 2.3 5.9 4.2 (0.8) (0.9) (11.4)
Domestic consumption 15.8 6.3 (2.7) 5.0 17.0 8.6 6.1 5.0 6.4 6.3 2.1 5.6 3.9 2.2 4.8 (0.4)

Source: PPAC, Kotak Institutional Equities estimates

With declined oil prices, most petchem prices declined qoq; margins remained weak for key petchem products
Asia petchem margins and prices with one-month lag, 1QFY23 onward (US$/ton)
Change (%)
1QFY23 2QFY23 3QFY23 4QFY23 1QFY24 2QFY24 3QFY24 4QFY24 1QFY25 2QFY25 3QFY25 4QFY25 yoy qoq
Global margins
HDPE – naphtha 322 318 309 320 375 388 337 316 303 317 309 298 (5.6) (3.6)
LLDPE – naphtha 311 301 301 332 358 365 304 299 286 321 333 319 6.8 (4.1)
PP – naphtha 290 285 294 286 300 283 262 244 240 278 272 273 12.1 0.4
PVC – naphtha 501 454 379 424 365 380 359 254 303 367 339 307 20.8 (9.2)
PSF – naphtha 435 524 523 563 575 558 377 323 312 333 314 267 (17.3) (14.9)
PFY – naphtha 628 776 690 703 727 744 625 557 562 533 584 550 (1.1) (5.8)
PSF – 0.85 x PTA – 0.34 x MEG 323 325 304 382 339 297 195 146 149 151 197 148 1.5 (25.0)
PFY – 0.85 x PTA – 0.34 x MEG 516 577 471 521 491 484 443 380 399 351 467 431 13.6 (7.7)
PX – naphtha 283 372 346 310 399 437 372 334 329 318 193 197 (41.1) 2.2
Global prices
HDPE 1,246 1,075 976 987 1,011 965 991 983 992 987 953 942 (4.2) (1.2)
LLDPE 1,235 1,058 968 999 995 943 958 966 976 991 977 963 (0.3) (1.4)
PP 1,214 1,042 961 953 937 860 917 911 929 948 916 917 0.7 0.1
PVC 1,429 1,101 846 879 862 827 820 776 801 842 804 765 (1.5) (4.9)
PSF 1,359 1,281 1,190 1,231 1,212 1,135 1,032 989 1,002 1,003 958 911 (8.0) (4.9)
PFY 1,552 1,533 1,357 1,370 1,363 1,321 1,279 1,223 1,252 1,203 1,228 1,194 (2.4) (2.7)
PX 1,207 1,129 1,013 978 1,036 1,014 1,027 1,001 1,019 988 836 841 (16.0) 0.5

Source: Platts, Kotak Institutional Equities estimates

Oil, Gas & Consumable Fuels

India Research

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APM gas ceiling price raised by US$0.25/mmbtu for 1HFY26 HPHT ceiling price cut by marginal 1.2% for 1HFY26
Domestic gas price trend, March fiscal year-ends, HPHT ceiling price trend, March fiscal year-ends,
2HFY15 onward (US$/mmbtu) 1HFY17 onward (US$/mmbtu)
US$/mmbtu domestic APM gas (GCV) US$/mmbtu
10 HPHT ceiling price
14

12.46
8.57

12.12
8

10.04
12

10.16
9.96
6.50 6.75

9.92

9.87
6.10 10
6
8

6.13
4 6

3.62
2.90
1.79 4
2
2

0 0

1HFY17

1HFY18

1HFY19

1HFY20

1HFY21

1HFY22

1HFY23

1HFY24

1HFY25

1HFY26
2HFY17

2HFY18

2HFY19

2HFY20

2HFY21

2HFY22

2HFY23

2HFY24

2HFY25
2HFY15

2HFY16

2HFY17

2HFY20

2HFY21

2HFY24

2HFY25
2HFY18

2HFY19

2HFY22

2HFY23

Source: Reuters, Kotak Institutional Equities estimates Source: Reuters, Kotak Institutional Equities estimates

HH settlement price further moved up in 4Q Gap between HH indexed and oil linked LNG further declined
Henry Hub settlement prices, from 1QFY22 RasGas and US LNG prices into India (US$/mmbtu)
(US$/mmbtu)
US$/mmbtu QatarGas US LNG
US$/mmbtu HH Settlement price 16.0
9.0 8.2 14.0
8.0 7.2 12.0
7.0 6.3
10.0
6.0
5.0 8.0
3.4 3.7
4.0 6.0
2.9 2.8
3.0 2.6
2.1 2.1 1.9 2.2 4.0
2.0
2.0
1.0
- -
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23
1QFY24
2QFY24
3QFY24
4QFY24
1QFY25
2QFY25
3QFY25
4QFY25
1QFY22
2QFY22
3QFY22
4QFY22
1QFY23
2QFY23
3QFY23
4QFY23
1QFY24
2QFY24
3QFY24
4QFY24
1QFY25
2QFY25
3QFY25
4QFY25

Source: Reuters, Kotak Institutional Equities estimates Source: Reuters, Kotak Institutional Equities estimates

Oil, Gas & Consumable Fuels

India Research

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Spread of QatarGas and US LNG further narrowed in 4Q Spot LNG prices were flat qoq
Spread between QatarGas-US LNG, March fiscal Spot LNG prices, March fiscal year-ends, 1QFY22
year-ends, (US$/mmbtu) onward, (US$/mmbtu)

RasGas - US LNG US$/mmbtu spot LNG

6.0

4.9

46
50

4.4
5.0

4.3
4.3
4.1
40

31.3
3.3
4.0
3.2

2.8

28
3.0 30

15.2
1.6

13.9
13.9
1.5

13.0
12.1
2.0 20

11.2
1.2
1.2

1.1

10.5
1.0

9.3
0.7

1.0 10
-
-
3QFY22(0.7)

3QFY22
4QFY22
1QFY23
2QFY23

2QFY24
3QFY24
4QFY24

4QFY25
1QFY22
2QFY22

3QFY23
4QFY23
1QFY24

1QFY25
2QFY25
3QFY25
(1.0)
1QFY22
2QFY22

4QFY22

2QFY23

4QFY23
1QFY24
2QFY24
3QFY24
4QFY24
1QFY25

3QFY25
1QFY23

3QFY23

2QFY25

4QFY25

Source: Bloomberg, Reuters, CME, Kotak Institutional Equities Source: Reuters, Kotak Institutional Equities

LNG imports moderated from elevated levels in 2H Domestic gas production also subdued in past few months
LNG imports in India, April 2019 onward (mmscmd) Domestic gas production, April 2019 onward
(mmscmd)
LNG import Annual average
120 Domestic production
(mmscmd)
110 110 Annual average

100 100

90
90
80
80
70
70
60
Apr-19

Apr-20

Apr-21

Apr-22

Apr-23

Apr-24
Oct-21

Oct-22

Oct-24
Oct-19

Oct-20

Oct-23

60
Apr-19

Apr-20

Apr-21

Apr-22

Apr-23

Apr-24
Oct-21

Oct-22
Oct-19

Oct-20

Oct-23

Oct-24

Source: PPAC, Kotak Institutional Equities

Source: PPAC, Kotak Institutional Equities

Oil, Gas & Consumable Fuels

India Research

k.kathirvelu-kotak.com
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ONGC’s oil production likely declined ~5% yoy (flat qoq)... … and gas production likely declined ~2% yoy (~1% qoq)
ONGC’s crude production, April 2019 onward ONGC’s domestic gas production, April 2019
(ktoe/d, kb/d) onward (mmscmd)

(ktoe/d) kb/d (mmscmd)

60 Crude oil production 450 70 Natural gas production

58 annual avg 435 annual avg

65
56 420

54 405 60

52 390 55
50 375
50
48 360

46 345 45
Oct-19

Oct-20

Oct-21

Oct-22

Oct-23

Oct-24

Oct-19

Oct-20

Oct-21

Oct-22

Oct-23

Oct-24
Apr-19

Apr-22

Apr-23

Apr-24

Apr-19

Apr-20

Apr-21
Apr-20

Apr-21

Apr-22

Apr-23

Apr-24
Source: MoP&NG, Kotak Institutional Equities Source: MoP&NG, Kotak Institutional Equities

Oil India’s oil production likely increased ~1% yoy (flat qoq)... … and gas production likely rose ~3.5% yoy (down 1% qoq)
Oil India’s crude production, April 2019 onward Oil India’s domestic gas production, April 2019
(ktoe/d, kb/d) onward (mmscmd)

(kt/d) Crude oil production annual avg. kb/d (mmscmd) Natural gas production annual avg.
10 75.0 9.5

9.0
9 67.5 8.5

8.0
8 60.0
7.5

7.0
7 52.5
6.5

6 45.0 6.0
Apr-20

Apr-21

Apr-22

Apr-24

Apr-19

Apr-21

Apr-22

Apr-24
Apr-19

Apr-23

Apr-20

Apr-23
Oct-19

Oct-20

Oct-22

Oct-23

Oct-24

Oct-19

Oct-20

Oct-22

Oct-23
Oct-21

Oct-21

Oct-24

Source: MoP&NG, Kotak Institutional Equities Source: MoP&NG, Kotak Institutional Equities

Oil, Gas & Consumable Fuels

India Research

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Eastern offshore (mainly RIL’s KG-D6 and ONGC’s KG-98/2) declined ~4% yoy (flat qoq) in 4QFY25E
India's eastern offshore gas production trend, April 2015 onward (mmscmd)

35.0
Private (mainly KG-D6) ONGC
30.0

25.0

20.0

15.0

10.0

5.0

-
Dec-15

Dec-16

Dec-17

Dec-18

Dec-19

Dec-20

Dec-21

Dec-22

Dec-23

Dec-24
Apr-17

Apr-20

Apr-23
Apr-15

Apr-16

Apr-18

Apr-19

Apr-21

Apr-22

Apr-24
Aug-15

Aug-18

Aug-21

Aug-24
Aug-16

Aug-17

Aug-19

Aug-20

Aug-22

Aug-23
Source: MoP&NG, Kotak Institutional Equities

Gas-based power generation declined to lowest in recent years LNG/KG-D6 usage in power sector remains low; most of APM
Daily average gas-based power generation, April usage is in stranded power plants
2020 onward (mn units/day) Quarterly breakup of gas usage in power sector
(mmscmd)
(MU/day)
200 (mmscmd) APM KG-D6 LT- LNG Spot LNG
180 40
160 163 35
140
129 30
120
25
100
20
80
82 15
60 56
40 10
20 5
- 0
Jul-20

Jul-23

Jul-24
Jul-21

Jul-22
Jan-21

Jan-23

Jan-24

Jan-25
Jan-22
Oct-20

Oct-23

Oct-24
Oct-21

Oct-22
Apr-20

Apr-21

Apr-23

Apr-24
Apr-22

1QFY21
2QFY21
3QFY21
4QFY21

2QFY22
3QFY22
4QFY22
1QFY23

3QFY23
4QFY23
1QFY24

4QFY24
1QFY25
2QFY25
1QFY22

2QFY23

2QFY24
3QFY24

3QFY25
4QFY25E

Source: National Power Portal, Kotak Institutional Equities

Source: Central Electricity Authority, Kotak Institutional Equities

Oil, Gas & Consumable Fuels

India Research

k.kathirvelu-kotak.com
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CGD's domestic gas availability has seen wide fluctuation in LNG usage by CGDs moderated in 4Q due to better availability of
recent months, driven by flip-flops on APM allocation domestic gas
CGD's domestic gas consumption, from January CGD's LNG consumption, from January 2021
2021 (mmscmd) (mmscmd)

(mmscmd) CGDs: Domestic gas consumption (mmscmd) CGD: LNG consumption

35 20

30
15

25
10
20

5
15

10 0
Oct-21

Oct-22

Oct-23

Oct-24
Jul-21

Jul-24
Jul-22

Jul-23
Apr-22

Apr-23
Apr-21

Apr-24
Jan-21

Jan-24

Jan-25
Jan-22

Jan-23

Apr-21

Apr-22

Apr-23

Apr-24
Oct-21

Oct-22

Oct-23

Jul-24
Oct-24
Jul-21

Jul-22

Jul-23
Jan-21

Jan-22

Jan-23

Jan-24

Jan-25
Source: PPAC, Kotak Institutional Equities Source: PPAC, Kotak Institutional Equities

In 4Q, average oil prices were up 1.3% qoq, while INR depreciated 2.5%; refining and auto fuel margins weakened
Key energy prices/margins quarterly trends, from 1QFY23
Change qoq
1QFY23 2QFY23 3QFY23 4QFY23 1QFY24 2QFY24 3QFY24 4QFY24 1QFY25 2QFY25 3QFY25 4QFY25 value %
Crude price (US$/bbl)
Brent 112.9 99.5 88.3 81.4 78.1 86.6 84.3 83.1 84.9 80.3 74.7 75.7 0.9 1.3
Inventory movement
Last 45 days 118.6 93.0 82.6 79.6 75.3 90.9 79.2 85.3 82.1 76.7 74.0 73.3 (0.7) (0.9)
Last 30 days 120.1 90.3 81.0 78.3 75.0 93.8 78.1 85.5 82.6 74.3 73.8 72.6 (1.2) (1.6)
Last 15 days 116.6 88.3 81.7 75.0 74.9 95.5 79.6 85.9 85.9 74.2 73.6 73.5 (0.1) (0.2)
Exchange rate (Rs/US$)
USD / INR 77.2 80.0 82.1 82.2 82.1 82.7 83.2 83.0 83.4 83.8 84.5 86.6 2.1 2.5
Refining margins (US$/bbl)
Kotak India 22.6 13.6 18.4 14.4 7.3 14.4 10.3 11.0 5.4 5.6 7.6 6.6 (1.0) (13.3)
Reuters Singapore complex 21.2 7.1 6.3 8.2 4.1 9.6 5.4 7.3 3.5 3.6 5.0 3.1 (1.9) (38.3)
Light-heavy differential 1.4 3.2 3.8 4.1 1.9 2.1 2.1 1.8 1.5 1.3 1.9 1.9 (0.0) (2.0)
Marketing margin (Rs/liter)
Diesel (14.9) (9.3) (5.5) 2.4 9.7 (0.2) 1.5 3.4 3.1 6.6 8.9 5.5 (3.4) (38.6)
Gasoline (11.2) (0.1) 8.9 6.8 8.5 3.6 6.8 6.0 3.9 8.4 10.9 8.9 (2.0) (18.4)
Gas price (US$/mmbtu)
APM /Ceiling GCV 6.1 6.1 8.6 8.6 6.7 6.5 6.5 6.5 6.5 6.5 6.5 6.5 - -
HPHT Ceiling GCV 9.9 9.9 12.6 12.6 12.1 12.1 10.0 10.0 9.9 9.9 9.9 10.2 0.3 2.9
RasGas 14.2 15.1 12.9 11.6 11.1 10.8 12.1 11.2 11.6 11.4 10.5 10.3 (0.2) (2.3)
US LNG 12.7 13.9 11.7 10.1 6.9 7.4 7.8 6.9 6.7 7.0 7.7 8.3 0.6 8.2
Spot LNG 28.4 47.9 26.9 16.6 10.5 12.1 15.2 9.3 11.2 13.0 13.9 14.0 0.1 0.4

LPG (US$/ton) 853 713 607 680 612 431 594 626 612 573 618 627 9.0 1.5

Source: Bloomberg, Reuters, PPAC, Kotak Institutional Equities estimates

Oil, Gas & Consumable Fuels

India Research

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RIL's consolidated EBITDA likely to increase modest 3.5% yoy (flat qoq), driven by telecom and retail; O2C/E&P likely weaker yoy
4QFY25E preview for RIL (Rs mn)
Change (%)
4QFY24 3QFY25 4QFY25E yoy qoq Comments
RIL : Consolidated
Net sales 2,365,330 2,399,860 2,462,634 4.1 2.6
EBITDA 425,160 437,890 440,026 3.5 0.5
EBIT 289,470 306,080 307,048 6.1 0.3 We expect RIL’s consolidated EBITDA to rise by 3.5% yoy (+0.5% qoq)
PBT 277,200 286,430 283,214 2.2 (1.1) mainly driven by telecom tariff hike, and improving retail. We expect yoy
Tax + Minorities 87,690 101,030 96,696 10.3 (4.3) weaker numbers for both O2C and E&P.

Reported PAT 189,510 185,400 186,517 (1.6) 0.6

EPS (Rs/share) 14.0 13.7 13.8 (1.6) 0.6
Consolidated segment EBITDA
O2C 167,770 144,020 148,647 (11.4) 3.2 We expect EBITDA for 1) Digital services to increase 3% qoq (up 17% yoy)
Oil & gas 56,060 55,650 52,734 (5.9) (5.2) driven by further flow through of July-2024 tariff hike. 2) Retail to be up
10% yoy (down 6% qoq, high base in 3Q on festive demand) 3) O2C to
Organized retail 58,290 68,400 64,200 10.1 (6.1) decline by 11% yoy (up 3% qoq in part driven by weaker INR), and 4) E&P to
Digital services 146,440 166,400 171,398 17.0 3.0 decline 6% yoy (down 5% yoy) on lower volumes.
RIL : Standalone
Net sales 1,468,320 1,243,810 1,287,615 (12.3) 3.5
We expect RIL’s standalone EBITDA decline 25% yoy (down 0.9% qoq).
EBITDA 200,230 152,130 150,831 (24.7) (0.9) We note benefits of higher retail fuel margins reflect in consolidated
Reported PAT 112,830 87,210 87,240 (23) 0.0 numbers and delta between consolidated and stand-alone EBITDA has
sharply increased in recent quarters.
EPS (Rs/share) 8.3 6.4 6.4 (23) 0.0
R-Jio
Net sales 259,590 293,070 300,982 15.9 2.7
EBITDA 136,120 154,780 159,898 17.5 3.3 We expect EBITDA for R-Jio to further increase ~3% qoq (17% yoy) on
further benefit of tariff hike from July-2024.
EBITDA margin (%) 52.4 52.8 53.1 1 bps 1 bps
PBT 71,640 86,980 88,806 24.0 2.1 We assume blended ARPUs to rise 1.5% to Rs206 (from Rs203 qoq) and
Reported PAT 53,370 64,770 66,160 24.0 2.1 2% increase in quarter end subscribers.
Attributable EPS (Rs/share) 2.6 3.2 3.3 24.0 2.1
Retail
Net sales 766,270 903,300 849,691 10.9 (5.9) We expect EBITDA to increase 10% yoy (down ~7% qoq, high base in 3Q on
EBITDA 56,320 66,320 62,027 10.1 (6.5) festive demand). EBITDA margins are expected to be ~7.3% (flat yoy and
qoq)
EBITDA margin (%) 7.3 7.3 7.3 (5)bps (4)bps
Key Assumptions
O2C
Exchange rate (Rs/US$) 83.0 84.5 86.6 4.3 2.5 Weaker INR will benefit energy buisness.
Refining throughput (mn tons) 18.1 18.5 18.1 (0.2) (2.4)
Refining GRM (US$/bbl) 13.5 10.7 10.8 (20.1) 0.5
E&P
KG-D6 volumes (mmscmd) 33.3 31.6 30.5 (8.5) (3.6)
Gas Price 9.5 9.7 9.7 2.2 0.0
R-Jio
End-period subscriber base (# mn) 481.8 482.1 490.3 1.8 1.7
Average subscriber base (# mn) 476.4 480.5 486.2 2.1 1.2
ARPU (Rs/month) 181.7 203.3 206.3 13.6 1.5

Notes:
(a) Refining throughput and GRMs for past periods are our assumptions

Source: Company, Kotak Institutional Equities estimates

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For OMCs, while refining will be weak, marketing will likely be weaker
4QFY25E preview for oil marketing companies (OMCs) (Rs mn)
Change (%)
4QFY24 3QFY25 4QFY25E yoy qoq Comments
BPCL
Net sales 1,165,551 1,131,358 1,067,651 (8.4) (5.6) We expect 46% yoy and 34% qoq EBITDA decline for BPCL.
EBITDA 92,131 75,804 50,101 (46) (34)
Refining margins will likely be weaker, but bigger impact will
EBIT 74,965 57,763 32,276 (57) (44)
on marketing. While oil prices increased 4-5% qoq in INR
PBT 74,414 61,762 32,571 (56) (47) terms, retail prices for petrol/diesel and domestic LPG
Reported PAT 42,242 46,492 24,373 (42) (48) remained frozen.
EPS (Rs/share) 13.0 10.9 5.7 (56) (48)
Assumptions
Crude throughput (mn tons) 10.4 9.5 10.4 0.4 9.0 We assume

Domestic sales (mn tons) 13.2 13.4 13.4 2.0 0.1 (1) reported GRM of US$4.5/bbl
Reported refining margin (US$/bbl) 12.5 5.6 4.5 (64) (19.6)
Adventious gains/ loss estimates (Rs mn) (1,522) (7,220) - NM NM (2) crude throughput at 10.4 mmt (+9% qoq, flat yoy),

- Refining 6,128 - - NM NM (3) auto fuel over-recovery of ~Rs47 bn

- Marketing (7,650) (7,220) - NM NM
Fuel Over/(under)-recovery (Rs mn) 14,322 43,765 15,037 5 (66) (4) losses on domestic LPG of Rs32 bn (versus Rs31 bn qoq)

- Auto fuels 14,322 74,554 47,012 228 (37) (5) not much adventitious gains or losses.
- LPG - (30,788) (31,975) NM 3.9
HPCL
Net sales 1,145,569 1,105,054 1,112,234 (2.9) 0.6 We expect HPCL’s EBITDA to decline 3% yoy and 22% qoq
EBITDA 48,038 59,702 46,787 (2.6) (22) (both on lower base).
EBIT 31,924 44,605 31,585 (1.1) (29)
Refining margins will likely be weaker, but bigger impact will
PBT 33,121 40,104 29,983 (9.5) (25) on marketing. While oil prices increased 4-5% qoq in INR
Reported PAT 28,427 30,229 22,436 (21) (26) terms, retail prices for petrol/diesel and domestic LPG
EPS (Rs/share) 13.4 14.2 10.5 (21) (26) remained frozen.

Assumptions
Crude throughput (mn tons) 5.8 6.5 6.7 15 3.6 We assume

Domestic sales (mn tons) 11.8 12.3 12.0 2.0 (2.3) (1) reported GRM of US$4.5/bbl.
Reported refining margin (US$/bbl) 7.0 6.0 4.5 (35) (25)
Adventious gains/ loss estimates (Rs mn) (2,504) (8,100) - NM NM (2) crude throughput of 6.7 mmt.

- Refining 3,504 (3,500) - NM NM (3) auto fuel over-recovery of nearly Rs42 bn

- Marketing (6,008) (4,600) - NM NM
Fuel Over/(under)-recovery (Rs mn) 12,394 35,967 8,463 (32) (76) (4) losses on domestic LPG of Rs33.5 bn.

- Auto fuels 12,394 66,948 41,971 239 (37) (5) not much adventitious gains or loss.
- LPG - (30,981) (33,508) NM 8.2
IOCL
Net sales 1,979,782 1,938,995 1,813,109 (8.4) (6.5) We expect IOC’s EBITDA to decline 30% yoy, but rise 3% qoq
EBITDA 104,352 71,166 73,016 (30) 2.6 (weak base, 3Q weakest amongst OMCs).
EBIT 66,987 32,205 34,705 (48) 7.8
Unlike BPCL/HPCL, we assume IOC’s refining GRM to improve
PBT 63,323 27,904 27,705 (56) (0.7) qoq (on weak base), but decline yoy. Marketing will be weaker.
Reported PAT 48,377 28,735 20,731 (57) (28) While oil prices increased 4-5% qoq in INR terms, retail prices
EPS (Rs/share) 3.5 1.6 1.5 (57) (6) for petrol/diesel and domestic LPG remained frozen.

Assumptions
Crude throughput (mn tons) 18.3 18.1 18.5 1.2 2.2 We assume
Domestic sales (mn tons) 23.7 24.8 24.2 2.0 (2.3) (1) reported GRM of US$4.5/bbl
Reported refining margin (US$/bbl) 8.4 2.9 4.5 (46) 53
(2) crude throughput of 18.5 mmt (+1% yoy, +2% qoq),
Adventious gains/ loss estimates (Rs mn) (15,007) (52,000) - NM NM
- Refining (24,125) (41,233) - NM NM (3) auto fuel over-recovery of nearly Rs70 bn
- Marketing 9,118 (10,767) - NM NM
(4) losses on domestic LPG of Rs56 bn (versus losses Rs55
Fuel Over/(under)-recovery (Rs mn) 21,389 59,760 14,580 (32) (76) bn qoq, NIL yoy).
- Auto fuels 21,389 114,309 70,149 228 (39)
- LPG - (54,549) (55,569) NM 1.9 (5) not much adventitious gains or losses.

Source: Companies, Kotak Institutional Equities estimates

Oil, Gas & Consumable Fuels

India Research

k.kathirvelu-kotak.com
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We expect muted 4Q GAIL and GSPL; PLNG may look optically better on lower base yoy and qoq
4QFY25E preview for GAIL, GSPL and PLNG (Rs mn)
Change (%)
4QFY24 3QFY25 4QFY25E yoy qoq Comments
GAIL (India)
Net sales 323,177 349,371 368,459 14.0 5.5
EBITDA 35,578 28,378 34,966 (1.7) 23.2 We expect GAIL's EBITDA to be decline 2% yoy (up
EBIT 23,973 20,056 25,158 4.9 25.4 23% qoq on low base).

PBT 28,418 25,887 29,658 4.4 14.6

We expect transmission, LPG/LHC and petchem
Reported PAT 21,770 38,674 22,193 1.9 (42.6) businesses to be weak qoq, but likely better marketing
Adjusted PAT 21,770 19,909 22,193 1.9 11.5 (very weak 3Q) will more than offset impact.
EPS (Rs/share) 3.3 3.0 3.4 1.9 11.5
Segment EBIT
Transmission - Natural Gas 9,798 13,703 13,537 38.2 (1.2)
Tranmsission - LPG 756 1,400 1,186 56.9 (15.3)
We assume
Marketing 13,887 4,410 12,000 (13.6) 172.1 (1) We assume gas transmission volumes of 128
Petchem 2,623 47 (251) NM NM mmscmd (up 2% qoq, 4% yoy)
LPG-LHC 3,266 3,785 2,686 (18) (29)
(2) petchem sales volume of 215 kt (down 11% yoy,
Assumptions
flat qoq), and realization of Rs96/kg (up 2.5- 3%
Transmission volumes (mmscmd) 123.7 125.9 128.0 3.5 1.6 qoq/yoy),
Gas sales volumes (mmscmd/d) 99.9 103.5 105.3 5.4 1.8
(3) LPG sales volumes lower by ~27% qoq (22% yoy)
Transmission tariff (Rs/scm) 2.37 2.38 2.40 1.3 0.9
on APM de-allocation and realization of Rs56/kg
Transmission tariff (Rs/mmbtu) 62.9 63.1 63.7 1.3 0.9 (+2.5% yoy, +1% qoq); and
Polymers sales ('000 tons) 242 221 215 (11.2) (2.7)
PE realisation (Rs/kg) 93 94 96 3.0 2.5 (4) marketing EBIT of Rs12 bn (versus Rs13.9n yoy,
Rs4.4 bn qoq on one-off impacts).
LPG volumes ('000 tons) 261 282 205 (21.5) (27.3)
LPG-LHC realisation (Rs/kg) 54.6 55.4 56.0 2.5 1.1
GSPL
Net sales 5,068 2,604 2,710 (46.5) 4.1
EBITDA 3,780 1,925 2,000 (47.1) 3.9 We expect EBITDA to increase 4% qoq (- 47% yoy; full
EBIT 3,294 1,413 1,450 (56) 2.6 impact of tariff cut) on qoq higher volumes and higher
PBT 3,571 1,816 1,941 (46) 6.9 realized tariff.

Reported PAT 2,611 1,356 1,452 (44) 7.1

EPS (Rs/share) 4.6 2.4 2.6 (44) 7.1
We assume
Assumptions (1) 1% qoq higher (down 11% yoy) gas transmission
Volumes (mcm/d) 33.4 29.0 30.0 (10) 3.3 volume at 2,700 mmscm (30 mmscmd)
Transmission tariff (Rs/scm) 1.48 0.87 0.90 (39.1) 3.5 (2) realized tariff of Rs24/mmbtu (Rs23/mmbtu qoq,
Rs39/mmbtu yoy).
Transmission tariff (Rs/mmbtu) 39.2 23.1 23.9 (39.1) 3.5
Petronet LNG
Net sales 137,932 121,096 135,988 (1.4) 12.3
We expect ~10% qoq increase in adjusted EBITDA
Use or pay gains - 1,173 -
(+19% yoy, low base on inventory valuation impact)
Adjusted EBITDA 11,443 12,333 13,570 18.6 10.0 driven by 5% annual tariff hike at Dahej terminal and
Use or pay provisions (403) (1,029) (1,286) lower opex (elevated in 3Q).
Reported EBITDA 11,040 12,477 12,284 11.3 (1.5)
We assume ~Rs1.3 bn provision on past period use-or-
EBIT 9,096 10,381 10,184 12.0 (1.9) pay charges (versus Rs1.0 bn qoq).
PBT 9,957 11,691 11,059 11.1 (5.4)
Reported PAT 7,376 8,670 8,275 12.2 (4.6) Reported EBITDA will likely increase 11% yoy, but
decline 2% qoq (CY2024 use or pay gains booked in
EPS (Rs/share) 4.92 5.78 5.52 12.2 (4.6)
3Q).
Assumptions
Total volumes (tn BTUs) 234 228 222 (5.3) (2.9)
Dahej (tn BTUs) 219 213 207 (5.7) (3.1)
We assume overall volumes at 222 tbtu ( down 5%
Kochi (tn BTUs) 15 15 15 0.0 0 yoy, and 3% qoq).
Dahej utilisation % 97 93 92 (4.5) (0.8)
Kochi utilisation % 24 23 23 (0.2) 0.5 We expect Dahej utilization of 92% (versus 93% qoq
and 97% yoy).
Blended gross margin (Rs/mmbtu) 57.9 67.9 71.6 23.8 5.6
EBITDA margins (Rs/mmbtu) 48.9 54.1 61.3 25.3 13.3

Source: Company, Kotak Institutional Equities estimates

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We expect EBITDA margins to recover for IGL/MGL, but remain weak, particularly for IGL; likely good 1Q for Castrol yoy
4QFY25E preview for CGDs and Castrol (Rs mn)
Change (%)
4QFY24 3QFY25 4QFY25E yoy qoq Comments
Indraprastha Gas
Net sales 35,968 37,591 38,985 8.4 3.7
EBITDA 5,226 3,636 4,081 (21.9) 12.2 We expect IGL's EBITDA to recover 12% qoq (down
22% yoy).
EBIT 4,118 2,421 2,831 (31.3) 16.9
PBT 5,187 3,687 4,306 (17.0) 16.8 Part-reversal of APM de-allocation from mid-Jan, and
Tax (1,359) (829) (1,128) (17.0) 36.0 higher availability of APM on lower offtake in fertilsers
Reported PAT 3,828 2,858 3,178 (17.0) 11.2 will give relief.

EPS (Rs/share) 5.5 4.1 4.5 (17.0) 11.2 But, impact will be part-offset by higher LNG prices
Assumptions and weaker INR.
Volumes (mmscmd) 8.7 9.2 9.4 8.2 2.8
CNG sales (mn kgs.) 580 624 618 6.6 (0.9) We assume
CNG (mmscmd) 6.4 6.8 6.9 7.8 1.4
PNG sales (mmscmd) 2.4 2.4 2.6 9.3 7.0 (1) overall volumes of 9.45 mmscmd (+8% yoy, +3%
qoq) and
Domestic PNG 0.7 0.7 0.8 15.5 15.0
Industrial/commercial 1.1 1.2 1.2 9.4 5.0 (2) unit EBITDA margin to recover to Rs4.8/scm
Gross margin (Rs/scm) 13.1 9.7 10.4 (20.5) 8.2 (Rs4.0/scm qoq, Rs6.8/scm yoy) but remain very
weak.
EBITDA margin (Rs/scm) 6.6 4.3 4.8 (27.0) 11.6
Mahanagar Gas
Net sales 15,671 17,576 18,276 16.6 4.0
We expect MGL’s EBITDA to recover 13% qoq (down
EBITDA 3,938 3,144 3,547 (9.9) 12.8 10% yoy).
EBIT 3,163 2,353 2,697 (14.7) 14.6
PBT 3,570 2,782 3,167 (11.3) 13.8 Part-reversal of APM de-allocation from mid-Jan, and
higher availability of APM on lower offtake in fertilsers
Tax (920) (529) (792) (14.0) 49.8
will give relief.
Reported PAT 2,650 2,254 2,375 (10.4) 5.4
EPS (Rs/share) 26.8 22.8 24.0 (10.4) 5.4 But, impact will be part-offset by higher LNG prices
Assumptions and weaker INR. 4Q will also see full impact of Rs3/kg
CNG price hikes taken in 3Q (no hikes in 4Q).
Volumes (mcm/d) 3.78 4.12 4.23 12.0 2.8
CNG sales (mscm) 243 269 268 10.5 (0.2)
We assume
CNG (mmscmd) 2.67 2.92 2.98 11.7 2.0
PNG sales (mmscmd) 1.11 1.20 1.26 12.8 4.9 (1) overall volume of 4.23 mmscmd (12% yoy, 3%
Domestic PNG 0.56 0.55 0.58 3.7 6.0 qoq), with CNG volumes up 12% yoy;
Industrial/commercial 0.55 0.65 0.67 22.1 4.0
(2) unit EBITDA to recover to Rs9.3/scm (Rs8.3/scm
Gross margin (Rs/scm) 17.9 14.6 15.9 (11.2) 8.9 qoq, Rs11.5/scm qoq).
EBITDA margin (Rs/scm) 11.5 8.3 9.3 (18.7) 12.1
Castrol India
Net sales 13,252 13,539 14,340 8.2 5.9
EBITDA 2,937 3,759 3,380 15.1 (10.1) We expect 1QCY25 EBITDA to increase 15% yoy, but
PBT 2,921 3,709 3,375 15.6 (9.0) decline ~10% qoq (4Q benefitted from year-end
Reported PAT 2,162 2,714 2,514 16.3 (7.4) rebates on term contracts).
EPS (Rs/share) 2.2 2.7 2.5 16.3 (7.4)
Assumptions
EBITDA margin (%) 22.2 27.8 23.6 141 bps (419)bps
We model (1) volume at 61 mn liters (up 6% yoy and
Volumes (mn liters) 57.5 59.0 61.0 6.1 3.4
3.5% qoq), and (2) EBITDA margin of 23.6% (27.8%
Realizations (Rs/liter) 230.5 229.5 235.1 2.0 2.4
qoq, 22.2% yoy)
Contribution (Rs/liter) 120.1 109.5 121.4 1.1 10.9

Source: Company, Kotak Institutional Equities estimates

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India Research

k.kathirvelu-kotak.com
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We expect volumes to be weak for ONGC, but oil/gas realizations to improve; for Oil India, likely flat EBITDA yoy
3QFY25E preview for upstream companies (Rs mn)
Change (%)
4QFY24 3QFY25 4QFY25E yoy qoq Comments
ONGC
Net sales 346,367 337,168 346,026 (0.1) 2.6
EBITDA 174,066 189,681 193,105 10.9 1.8 We expect EBITDA to increase ~11% yoy (+2% qoq) driven higher
net oil/gas price realization, weaker INR, and lower opex part-offset
PBT 128,604 110,003 129,343 0.6 17.6 by weaker volumes.
Reported PAT 98,694 82,399 96,787 (2) 17.5
EPS (Rs/share) 7.8 6.5 7.7 (2) 17.5
Assumptions We model
(1) overall crude oil sales volumes 4.58mmt (-2% yoy and -2% qoq)
Total crude sales (mn tons) 4.7 4.7 4.6 (2.2) (1.9)
(2) natural gas sales volumes at 3.8 bcm (-1% yoy and -4% qoq)
Total gas sales (bcm) 3.8 3.9 3.8 (0.9) (3.5) (3) Gross crude price realization of US$74/bbl (-8% yoy and +2%
Gross crude realisation (US$/bbl) 80.8 72.6 74.2 (8.2) 2.2 qoq) and net oil price realization of US$54.3/bbl (+4% yoy, 2% qoq);
and
Net crude realization (US$/bbl) 52.2 53.1 54.3 3.9 2.1
(4) Average gas price realization of US$6.8/mmbtu (+5% yoy,
Windfall tax, royalty and cess (US$/bbl) 28.6 19.4 19.9 (30.3) 2.5 +0.4% qoq) on reclassification of part APM gas to NWG.
Gas price realization (US$/mmbtu) 6.5 6.8 6.8 5.2 0.4
Oil India
Net sales 57,567 52,397 54,704 (5.0) 4.4 We expect EBITDA to be flat yoy (up 13 % qoq). On yoy basis, we
EBITDA 25,442 22,621 25,475 0.1 12.6 expect lower crude volumes, and net realizations to be offset by
EBIT 18,806 16,059 19,225 2.2 19.7 higher gas sales and weaker INR.

PBT 25,244 15,503 24,725 (2.1) 59.5

Extraordinaries - — — NM NM We model
Reported PAT 20,288 12,218 18,502 (8.8) 51.4
(1) overall crude oil sales volumes 817kt (-3% yoy and -1% qoq)
EPS (Rs/share) 12.5 7.5 11.4 (8.8) 51.4
Assumptions (2) natural gas sales volumes at 655 mmscm (up 1% yoy, down 1%
Total crude sales ('000 tons) 840 825 817 (2.7) (0.9) yoy)
Total gas sales (mcm) 650 661 655 0.7 (1.0)
(3) Gross crude price realization of US$76/bbl (down 9% yoy, up
Gross crude realisation (US$/bbl) 83.4 73.8 75.7 (9.3) 2.5 2.5% qoq) and net oil price realization of US$50.7/bbl (down 3.6%
Net crude realization (US$/bbl) 52.5 49.3 50.7 (3.6) 2.8 yoy, up 2.8% qoq). Unlike ONGC, Oil India has not benefitted much
Windfall tax, royalty and cess (US$/bbl) 30.9 24.5 25.0 (18.9) 2.1 from classification of APM to NWG.
Gas price realization (US$/mmbtu) 6.5 6.5 6.5 0 0.0

Source: Company, Kotak Institutional Equities estimates

Oil, Gas & Consumable Fuels

India Research

k.kathirvelu-kotak.com
 UPDATE

Pharmaceuticals
India
Sector View: Neutral NIFTY-50: 23,332 April 03, 2025

Tariffs saga: Exempt for now, yet too early to rejoice Company data and valuation summary
In a temporary relief, the US has exempted the pharma sector from higher Fair Value P/E (X)
reciprocal tariffs (link). We believe it is too early to rejoice given there remains Company Rating (Rs) 2026E 2027E

an overhang that the US would levy sector-specific tariffs for pharma. The
Alivus Life Sciences BUY 1,200 22.2 19.5
key question now after today’s 26% tariff announcement by the US on India
Aurobindo Pharma SELL 1,225 16.3 15.2
is for how long will pharma be exempt. We expect uncertainty to prevail not Biocon REDUCE 315 36.9 25.7
just till the formal announcement on pharma but also post that, as then the Blue Jet Healthcare ADD 550 34.1 29.3

focus will be on trade treaties and subsequent timing/extent of any rollback. Cipla BUY 1,725 22.7 22.3
Concord Biotech ADD 2,050 40.9 32.8
Divis Laboratories SELL 4,000 55.9 43.6
Uncertainty doesn’t end; to prevail even once pharma tariffs are announced Dr Reddy's Laboratories REDUCE 1,295 17.2 19.6
Emcure Pharmaceuticals BUY 1,680 22.3 18.8
While pharma being exempt from the US reciprocal tariffs raises some hopes
Gland Pharma REDUCE 1,625 25.1 20.1
of a permanent reprieve, media articles suggest that the US is evaluating sector- JB Chemicals & Pharma BUY 2,325 29.2 25.3
specific tariffs on pharma. As a result, we believe the overhang of tariffs on the Laurus Labs SELL 370 65.9 51.2
Lupin ADD 2,385 24.0 25.0
sector will continue. Once there is a formal announcement on pharma tariffs,
Mankind Pharma ADD 2,855 43.5 33.5
we expect the Street to pin their hopes on a rollback. If there is a reversal, its Piramal Pharma BUY 300 122.7 56.0
timing and quantum will also create uncertainty. The stock prices of Indian Sai Life Sciences REDUCE 700 81.8 58.6
Sun Pharmaceuticals ADD 2,045 31.5 27.4
generics companies with a decent US exposure have been largely flat since the

Private Circulation Only. This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities A ct of 1933
Syngene International BUY 875 57.9 43.7
US first spoke about levying a “25% or higher” tariff on pharma. Accordingly, the Torrent Pharmaceuticals REDUCE 3,300 43.6 36.7

risk of high tariffs and no subsequent rollback is not being baked in. Pharmaceuticals Neutral 30.6 27.4

Source: Bloomberg, Company data, Kotak Institutional Equities estimates

Our base case stays that potentially high pharma tariffs are unlikely to sustain
Our base case (ditto for companies and investors) is that any high tariffs in Prices in this report are based on the market close of
April 02, 2025
pharma, particularly for generics, are unlikely to sustain, as those will drive
higher outlays for US patients and drug shortages. If push comes to shove and
the tariffs are not rolled back, pharma companies would be forced to prune their Quick Numbers
US portfolio (completely exit in some cases) after exhausting other avenues
such as passing on the higher costs. We expect pharma distributors and payors The US has announced a ‘discounted’ reciprocal tariff
to also bear the burden of any tariffs. On the flipside, if pharma tariffs are of 26% on Indian exports to the US
applicable for all countries, Indian pharma companies could have an edge given However, pharma has been exempt for now
their cost advantage and could very well be the last ones standing. All in all,
In the event of pharma tariffs, within our
several outcomes are possible, with near-term uncertainty being a certainty. generics/biosimilars coverage, BIOS, ARBP and DRRD
will have the highest earnings impact
Varied impact across generic formulations, biosimilars, specialty, API, CRDMO
In Exhibit 2, we assess the impact on Indian pharma companies if a 26% tariff
(hypothetical; similar to country-specific tariffs) is levied on them. Within our
formulations/biosimilars coverage, at 45-50%, ARBP and BIOS have the highest
US EBITDA contribution. Unlike generics, where US has a very high dependency
on India, US is not as dependent on India for biosimilars. Hence, for biosimilars,
it will not be easy to pass on higher tariffs to US patients. Compared to US
generics, SUNP’s specialty portfolio could be more impacted as existing higher
price points could make it more challenging to pass on higher costs. On the Related Research
other hand, limited availability of substitutes for SUNP’s specialty products
→ Indian CRDMOs: A new world order beckons
could prove to be a safeguard. For innovator-focused CRDMOs, we expect the
→ Pharma: The march of alternates continues
tariffs to be at least partially passed on to their clients. Sticking to our base
→ Pharma: Tar-iffs and buts
case of potentially high tariffs unlikely to sustain, we reiterate our positive
stance on generics—SUNP, Cipla, Lupin, JB and Emcure are our top picks.
Full sector coverage on KINSITE

Alankar Garude, CFA Samitinjoy Basak Aniket Singh

 209

US imposes 26% ‘discounted’ reciprocal tariff on Indian exports to the US

The US has announced a baseline reciprocal tariff of 10% on all countries. The US has also singled out
certain nations by levying higher tariffs, albeit lower than the tariffs imposed by these countries on
imports from the US. Being referred to as ‘discounted’ reciprocal tariffs, India has been included in this
list and has been imposed a tariff of 26%. We note the US has exempted pharma from these reciprocal
tariffs for now. While pharma being exempt from the US reciprocal tariffs raises some hopes of a
permanent reprieve, media articles suggest that the US is evaluating sector-specific tariffs on pharma.
As a result, we believe the overhang of tariffs on the pharma sector will continue.

The US has announced different rates across nations, with India getting subject to a 26% ‘discounted’ reciprocal tariff
List of tariffs imposed by the US on different nations, March fiscal year-end, 2026E (%)

Tariffs charged to US (%) Discounted' reciprocal tariffs imposed by US (%)

97
100 90

80 72
67 64 64 61
60 49 52 50
46 47 46
36 39
40 34 32 32 31
26 25 24 24
20
20

0
Thailand

Indonesia
Cambodia

Switzerland

Malaysia
China

South Korea
India

EU
Vietnam

Japan
Taiwan

Source: White House, Kotak Institutional Equities

Assessing the hypothetical scenario of 26% tariffs on pharma

Our base case (ditto for companies and investors) is high tariffs in pharma, particularly for generics, are
unlikely to sustain as those are impractical and will drive higher outlays for US patients. If push comes
to shove and the pharma tariffs are levied but not rolled back, companies would be forced to prune their
US portfolio (completely exit in some cases) after exhausting other avenues such as passing on the
higher costs to patients. Apart from companies and US patients, we expect pharma distributors and
payors to also bear the burden of any pharma tariffs. With several molecules in the US generics portfolios
of Indian companies already yielding minimal margins, companies could be forced to stop selling them
in the US, particularly against the backdrop of the prevailing pricing erosion. This could further
exacerbate the drug shortage challenge in the US.

Given the gestation period involved in setting up a manufacturing facility in the US (policies could change
by the time the US facilities come up) and more importantly, the elevated cost structure, we do not expect
any major efforts by Indian companies to incrementally add manufacturing facilities in the US. In the
worst-case scenario of companies significantly pruning their US generics portfolio, we do not rule out a
domino effect as Indian companies could be forced to be significantly more aggressive in chasing
growth in India and EU/ROW, leading to price wars. In the event of blanket tariffs globally, there would be
a level-playing field and the impact on Indian generics companies could be limited due to their inherent
cost advantage.

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Estimated earnings impact on our pharma coverage assuming a 26% tariff (hypothetical) by the US (assuming nil pass through)
US sales and EBITDA contribution to overall sales for select pharma companies, March fiscal year-end, 2027E (US$ mn, %)
Tariff (%) 26

US FY2027E
EBITDA FY2027E FY2027E PAT
US FY2027E FY2027E US FY2027E contribution EBITDA post- Tariffs Impact with impact of Tariffs Impact
sales as % of EBITDA EBITDA taken for tariff impact on FY2027E FY2027E PAT tariffs (US$ on FY2027E
overall sales margin (%) contribution (%) calculation (%) (US$ mn) EBITDA (%) (US$ mn) mn) PAT (%)
Formulations/biosimilars
Aurobindo Pharma 42 20.7 45-50 50 766 (13) 510 427 (16)
Biocon 43 23.4 45-50 50 517 (13) 234 174 (26)
Cipla 27 23.1 25-30 20 803 (5) 631 597 (5)
Dr Reddy's Laboratories 37 22.0 35-40 40 814 (10) 558 487 (13)
Emcure Pharma - 20.0 - - 222 - 126 126 -
JB Chemicals & Pharma 5 29.0 3-5 5 169 (1) 111 109 (2)
Lupin 34 22.1 35-40 30 621 (8) 420 379 (10)
Mankind Pharma 5 28.1 5-6 6 546 (2) 344 337 (2)
Sun Pharmaceuticals 31 28.8 15-20 12 2,068 (3) 1,718 1,664 (3)
Torrent Pharmaceuticals 11 33.5 (2) (2) 558 0 338 340 0
API/CRDMO
Alivus Life Sciences 22 29.6 25-30 30 100 (8) 76 70 (8)
Concord Biotech 23 40.8 25-30 30 73 (8) 62 57 (7)
Blue Jet Healthcare 4 37.8 5-10 8 70 (2) 54 53 (2)
Divis Laboratories 17 36.1 20-25 25 499 (7) 394 368 (7)
Gland Pharma 52 25.1 50-55 50 191 (13) 143 122 (15)
Laurus Labs 40 23.1 45-50 50 161 (13) 72 54 (25)
Piramal Pharma 35-40 19.2 45-50 30 237 (8) 108 97 (11)
Sai Life Sciences (only CDMO) 35-40 27.8 45-50 50 69 (8) 38 33 (12)
Syngene (only CDMO) 60-65 29.4 60-65 60 162 (6) 97 89 (8)
Notes:
(1) We have considered our FY2027 estimates to assess the more normalized US sales and EBITDA contribution (post gRevlimid exclusivity).
(2) Assuming 40% of the business is US for Laurus Labs (61% total export contribution).
(3) Indirect supplies to US (through partners) for API/CRDMO companies can be much higher than indicated above.

Source: Companies, Kotak Institutional Equities estimates

Barring Cipla and PPL, most Indian pharma companies have a negligible manufacturing footprint in the US
US sites and sales contribution for select pharma companies
US sites count (#) US sites Estimated sales contribution (%)

Alkem 1 California (API plant) NA

Less than 2% of US sales, less than 1% of

total sales. In our view, once the new US
2 Raleigh, Dayton facility comes onstream in 2HFY26, US
supplies can potentially rise to 20-25% at
peak.
Aurobindo Pharma
Less than 5% of US sales, less than 2% of
1 New Jersey
Biocon overall sales
Cipla 3 Fall River, Hauppage, Central Islip 20-25% of US sales, 5-7% of total sales
Dr Reddy's Laboratories 1 Middleburgh (API plant) NA
Minimal; expected to scale up post
1 Monroe
Glenmark regulatory clearance
JB Chemicals & Pharma 0 - -
Lupin 2 Somerset, Coral Springs 8-10% of US sales, 2-3% of total sales
Mankind Pharma 0 - -
Natco Pharma 0 - -
Piramal Pharma 4 Lexington, Riverview, Sellersville, Bethlehem ~40%+ of US sales
Sai Life Sciences 1 Boston ~6% of US sales and 3% of overall sales
Syngene 1 Baltimore (acquired recently) -
Less than 10% of US (generics+specialty)
3 New Jersey, Chattanooga, Billerica
Sun Pharmaceuticals sales, less than 3% of overall sales
Torrent Pharmaceuticals 0 - -
Zydus Life 0 - -

Notes:
(1) For ARBP, Dayton and Raleigh will commercialize in 6-18 months. Currently, at Raleigh, only derma line is commercial.

Source: Companies, Kotak Institutional Equities estimates

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In the event of tariffs, most pharma companies have commented about passing on a large part of the incremental costs
Pharma companies’ comments in earnings calls, interviews and our Chasing Growth 2025 conference on tariffs

Comments on proposed tariffs

The company has a Dayton plant about to be commercialized, along with an already existing Puerto Rico
Aurobindo Pharma plant, which it can commercialize soon with short notice. The company believes it is well prepared to meet
upcoming challenges due to proposed tariffs.
The US tariff changes could have an impact on biosimilars. However, these changes might not have a
Biocon
significant impact on generics, as these are likely to be passed on.
If tariffs are in the range of 5-10%, it might not be very difficult to pass on or to absorb those. For the past
three years, Cipla has been investing in its US facilities and the Invagen facilities already contribute to
Cipla
existing US sales. Cipla’s model is de-risked to a large extent across its portfolio, across DPIs, MDIs and
OSDs.
Internally, the company is waiting and watching. If the tariffs come through, it will be detrimental for
Glenmark Pharma generics. US gross margins for the past seven years have declined due to price erosion. So, tariffs would
be detrimental for the company and industry.
Given ~70% of drugs in the US are imported and ~50% of these imports are from India, any
implementation of tariffs could impact the US generic industry, and cause more product disruption and
drug shortages. In case tariffs are implemented, LPC expects prices of critical care medicines to go up.
Lupin
However, LPC is hoping that pharma and generic drugs, in particular, would be exempted from these
tariffs. Otherwise, it would be looking at other means to mitigate the impact, which might involve a
combination of manufacturing in the US, as well as, adopting cost efficiencies, wherever possible.
Natco is scouting for acquisitions in the US and ROW. Buying front-end manufacturing plants in the US
Natco Pharma
can be a way out.
In the past, tariffs and other trade barriers have not applied to medicines because they could get in the
Novartis way of patients receiving the medicines they need. New US trade policies should be focused on
eliminating unfair trade practices around the world without inadvertently harming patients.
The recent tariffs placed on China, and threatened tariffs on Mexico and Canada, are unlikely to impact
Pfizer, which operates at least 10 plants across Europe, including three in Ireland, alongside 14
Pfizer
manufacturing facilities in the US. Pfizer is waiting to see how that could play out with the tariffs in places
that have not been announced yet.

If the tariffs are levied, most of those will be passed on to the customer. The competitive advantage of
Sun Pharmaceuticals India is long term, it won't go away even if some manufacturing was to start (in the US). In pharma, it takes
5-7 years before one can start producing, so SUNP does not see any short-term impact.

Teva was in no way part of the US 'balance of trade' problem. One in 14 prescriptions in the US is a Teva
Teva Pharmaceuticals
prescription, so the company is an integral part of the healthcare system and the volume is huge.
Torrent Pharmaceuticals If 25% tariffs are imposed, there will be a negative impact. TRP will await further details on the policy.
Wockhardt Tariff on Indian pharma will raise costs for US buyers.
At Zydus, there is a product specific approach. If the proposed tariffs are implemented, the company will
Zydus Lifesciences evaluate each product from a margin prespective. The 25% amount cannot be bourne by the
manufacturers only. This might result in higher prices/shortages.

Source: Companies, Kotak Institutional Equities

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While active drug shortages in the US have been declining over the past three quarters, the quantum still remains elevated
Active drug shortages in the US, December calendar year-ends, 2017-24 (#)

Active drug shortages (#)

350 323
309 305 301
295 301 300
276 282 265264 276 277 271
300 263 265 260 271 264 260
251 246 242
238 236
250 224 220
202
200 176 174174 183

150

100

50

0
3QCY17

1QCY18

3QCY18

4QCY20

2QCY21

4QCY21

1QCY24

3QCY24
1QCY17
2QCY17

4QCY17

2QCY18

4QCY18
1QCY19
2QCY19
3QCY19
4QCY19
1QCY20
2QCY20
3QCY20

1QCY21

3QCY21

1QCY22
2QCY22
3QCY22
4QCY22
1QCY23
2QCY23
3QCY23
4QCY23

2QCY24

4QCY24
Source: University of Utah Drug Information Service, Kotak Institutional Equities

Amid endless possibilities, a fine balancing act could be the way out
It is estimated that US relies on India for ~45% of its generics supplies and 10-15% of biosimilars supplies
by volume. As per a white paper by the API Innovation Center, 83 of the top 100 generics prescribed in
the US have no US API source. While API production in the US has declined 61% in the past decade, there
has been an increase in API production capacities in India and China. We highlight, value-wise, size of
the US generics market is less than 10% of the ~US$600 bn overall US pharma market. Thus, the value
impact of Indian generics on the overall US pharma market is quite low. We highlight the Indian
government has taken steps to demonstrate reciprocity. For instance, in the Union Budget in February-
2025, the Indian government has fully exempted 36 life-saving drugs from basic customs duty. In
addition, customs duty for six additional drugs has been reduced to 5%. Also, 37 additional drugs will be
fully exempt from customs duty under patient assistance programs.

If pharma reciprocity is strictly followed, there may not be a grim outcome

As per the Ministry of Commerce, India’s exports to the US stood at US$8.1 bn, as of FY2024. In contrast,
as per the Ministry of Commerce, imports from the US to India stood ~US$400 mn, as of FY2024.
Currently, there is no import duty levied on Indian drugs supplied to the US. On the other hand, on an
average, India imposes ~5-10% import duty on pharma imports from the US. Hence, if tariffs are levied
strictly on the principle of reciprocity within pharma, the Indian government will have to navigate an
impact of lower custom duties to the tune of less than US$50 mn, which seems reasonably manageable,
in our view.

India’s pharma exports to the US have been generally on a rising trend

India’s pharma export to world and US, March fiscal year-ends, 2017-24 (US$ bn, %)
2017 2018 2019 2020 2021 2022 2023 2024

Total pharma exports (US$ bn) 12.9 13.3 14.8 16.3 19.4 19.4 19.9 22.1
yoy growth (%) 2.5 11.3 10.4 19.0 0.1 2.4 11.3
Exports to US (US$ bn) 5.1 4.7 5.4 6.3 7.2 6.5 6.8 8.1
yoy growth (%) (8.5) 15.5 17.5 13.4 (9.9) 5.7 18.1
US export share (%) 39.4 35.2 36.5 38.9 37.0 33.4 34.4 36.6

Source: Ministry of Commerce, Kotak Institutional Equities

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India’s pharma imports from the US have not grown much in recent years
India’s pharma import from world and US, March fiscal year-ends, 2017-24 (US$ bn, US$ mn, %)
2017 2018 2019 2020 2021 2022 2023 2024

Total pharma imports (US$ bn) 1.7 1.9 2.1 2.3 2.6 3.4 2.6 2.6
yoy growth (%) 10.5 9.8 12.1 9.3 34.8 (24.0) (1.2)
Imports from US (US$ mn) 298 318 279 315 306 545 366 393
yoy growth (%) 6.6 (12.3) 12.9 (2.8) 78.0 (32.9) 7.5
US import share (%) 17.4 16.8 13.4 13.5 12.0 15.8 14.0 15.2

Source: Ministry of Commerce, Kotak Institutional Equities

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Kotak Institutional Equities: Valuation summary of KIE Universe stocks

Price (Rs) Fair Value Upside Mkt cap. O/S shares EPS (Rs) P/E (X) P/B (X) EV/EBITDA (X) RoE (%) Dividend yield (%) ADV-3M (US$ mn)
Company Rating 2-Apr-25 (Rs) (%) (Rs bn) (US$ bn) (mn) 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E Traded Delivered
Automobiles & Components
Amara Raja Energy & Mobility SELL 1,031 950 (8) 189 2.2 183 58 62 68 18 17 15 2.5 2.2 1.9 11 9 8 15 14 14 0.6 0.6 0.7 10 4
Apollo Tyres SELL 428 385 (10) 272 3.2 638 21 26 29 21 17 15 1.8 1.7 1.6 8 7 6 9 11 11 1.4 1.6 1.6 8 3
Ashok Leyland ADD 209 240 15 613 7.2 2,936 11 11 12 20 19 17 5.6 4.7 4.2 12 11 10 31 28 26 2.0 2.2 2.9 22 9
Bajaj Auto SELL 8,073 7,000 (13) 2,254 26 279 303 336 370 27 24 22 8.5 7.9 7.4 20 18 16 33 34 35 3.0 3.3 3.7 43 23
Balkrishna Industries SELL 2,575 2,400 (7) 498 5.8 193 87 92 104 30 28 25 4.9 4.3 3.8 19 16 14 18 16 16 0.7 0.8 0.8 7 3
Bharat Forge SELL 1,153 1,000 (13) 551 6.4 478 22 29 38 52 40 30 7.1 6.3 5.4 22 20 17 14 17 19 0.6 0.7 0.7 16 9
CEAT SELL 2,900 2,600 (10) 117 1.4 40 124 152 162 23 19 18 2.7 2.4 2.2 9 8 7 12 13 13 1.1 1.3 1.4 4 1
CIE Automotive SELL 394 400 2 149 1.7 378 22 24 27 18 16 15 2.3 2.1 1.9 10 10 9 13 13 13 1.8 1.9 2.0 1 1
Eicher Motors SELL 5,356 4,250 (21) 1,468 17.2 272 170 180 198 32 30 27 8.0 6.9 6.0 28 25 22 27 25 24 1.0 1.2 1.3 32 16
Endurance Technologies REDUCE 1,914 1,900 (1) 269 3.1 141 55 65 75 35 29 25 4.8 4.3 3.8 17 15 13 14 15 15 0.6 0.7 0.8 3 2
Escorts Kubota SELL 3,228 2,925 (9) 361 4.2 112 96 106 124 34 30 26 3.5 3.2 2.9 29 25 21 10 10 11 0.4 0.5 0.6 7 3
Exide Industries SELL 372 300 (19) 316 3.7 850 13 15 17 28 24 22 2.2 2.1 1.9 17 15 13 8 9 9 0.7 0.7 0.7 12 5
Hero Motocorp SELL 3,784 3,400 (10) 757 8.9 200 229 240 261 17 16 15 3.9 3.6 3.4 11 10 9 25 24 24 4.2 4.4 4.8 29 15
Hyundai Motor BUY 1,680 2,000 19 1,365 16.0 813 69 79 91 24 21 18 9.0 7.2 5.8 14 12 10 37 34 32 0.8 1.9 2.2 31 19
Mahindra & Mahindra BUY 2,638 3,500 33 3,280 38.4 1,159 105 119 131 25 22 20 4.9 4.1 3.5 19 16 15 21 20 19 0.6 0.7 0.7 113 60
Maruti Suzuki ADD 11,716 13,500 15 3,684 43.1 314 483 530 581 24 22 20 4.0 3.6 3.3 16 14 13 17 17 17 1.6 1.8 2.0 62 35
MRF SELL 115,137 106,500 (8) 488 5.7 4 4,225 5,227 5,917 27 22 19 2.7 2.4 2.1 11 9 8 10 11 12 0.2 0.2 0.2 9 3
Ola Electric REDUCE 54 50 (8) 238 2.8 4,411 (4) (3) (2) NM NM NM 4.2 5.5 6.8 NM NM NM NM NM NM 0.0 0.0 0.0 32 9
Samvardhana Motherson ADD 132 140 6 930 10.9 7,036 5 6 7 25 22 18 2.7 2.5 2.2 10 9 8 12 12 13 0.6 0.7 0.8 26 13
Schaeffler India REDUCE 3,302 3,100 (6) 516 6.0 156 60 68 76 55 49 44 9.7 8.8 7.9 35 31 27 19 19 19 0.1 0.0 0.0 3 1
SKF ADD 3,820 4,150 9 189 2.2 49 100 124 150 38 31 25 6.4 5.7 5.1 29 23 18 17 19 20 1.0 1.2 1.5 2 1
Sona BLW Precision ADD 466 585 26 290 3.4 618 10 12 14 49 38 32 5.1 4.6 4.1 27 22 19 14 13 13 0.4 0.5 0.6 13 7
Tata Motors ADD 672 750 12 2,473 28.9 3,677 58 67 82 12 10 8 2.4 2.0 1.7 5 5 4 23 22 22 1.0 1.5 2.2 119 43
Timken ADD 2,706 3,175 17 204 2.4 75 54 67 84 50 41 32 7.3 6.2 5.3 34 27 22 16 16 18 0.0 0.0 0.0 5 3
TVS Motor REDUCE 2,496 2,200 (12) 1,186 13.9 475 53 63 76 47 40 33 15.6 12.2 9.7 29 24 20 33 35 33 0.5 0.6 0.8 23 12
Uno Minda SELL 882 930 5 506 5.9 572 17 19 21 53 47 42 8.6 7.3 6.3 28 24 21 16 16 15 0.2 0.3 0.3 10 5
Varroc Engineering SELL 433 500 15 66 0.8 153 7 25 33 61 17 13 3.8 2.7 2.3 10 7 6 6 16 17 — — — 3 1
Automobiles & Components Cautious 23,231 271.7 24.7 21.7 18.8 4.5 3.9 3.4 13.2 11.9 10.4 18.1 18.1 18.2 1.2 1.4 1.7 646 301
Banks
AU Small Finance Bank ADD 540 650 20 402 4.7 744 29 36 50 19 15 11 2.4 2.1 1.8 — — — 13 14 17 — — — 23 11
Axis Bank BUY 1,084 1,500 38 3,359 39.3 3,087 84 91 104 13 12 10 2.0 1.7 1.5 — — — 16 15 15 1.2 1.3 1.4 110 73
Bandhan Bank BUY 152 225 48 244 2.9 1,611 18 23 25 9 7 6 1.1 0.9 0.8 — — — 12 15 14 1.8 2.4 2.7 16 6
Bank of Baroda ADD 232 270 17 1,197 14.0 5,178 35 33 33 7 7 7 1.0 0.9 0.8 — — — 15 13 12 3.1 2.9 2.9 29 12
Canara Bank ADD 91 105 15 826 9.7 9,071 17 17 16 5 5 6 0.9 0.8 0.7 — — — 17 14 12 3.8 3.7 3.6 26 11
City Union Bank ADD 161 180 12 119 1.4 741 15 16 19 11 10 9 1.4 1.2 1.1 — — — 13 12 13 1.5 1.6 1.8 5 2
DCB Bank BUY 115 160 40 36 0.4 313 19 22 32 6 5 4 0.7 0.7 0.6 — — — 11 12 15 1.6 2.2 3.7 2 1
Equitas Small Finance Bank BUY 57 85 50 65 0.8 1,139 2 6 9 33 9 6 1.1 1.0 0.9 — — — 3 11 15 — — — 3 2
Federal Bank BUY 192 225 17 472 5.5 2,435 16 17 20 12 11 10 1.5 1.3 1.2 — — — 12 12 13 1.2 1.3 1.5 17 8
HDFC Bank BUY 1,797 1,900 6 13,750 160.8 7,597 87 101 114 21 18 16 2.9 2.5 2.3 — — — 14 15 15 1.2 1.4 1.6 233 158
ICICI Bank BUY 1,331 1,500 13 9,407 110.0 7,023 66 67 74 20 20 18 3.5 3.0 2.7 — — — 18 16 16 1.0 1.0 1.1 164 106
IndusInd Bank REDUCE 702 850 21 547 6.4 778 52 91 113 13 8 6 0.8 0.8 0.7 — — — 6 10 12 1.1 1.9 2.3 106 50
Karur Vysya Bank BUY 213 260 22 170 2.0 804 23 25 28 9 9 8 1.5 1.3 1.2 — — — 18 16 16 2.8 3.0 3.4 5 3
Punjab National Bank ADD 97 110 13 1,119 13.1 11,493 14 13 13 7 7 7 1.0 0.9 0.8 — — — 14 11 11 2.9 2.7 2.8 29 11
SBI Cards and Payment Services BUY 857 850 (1) 815 9.5 951 21 29 39 40 30 22 5.9 5.0 4.2 — — — 16 18 21 0.4 0.4 0.5 18 9
State Bank of India BUY 776 975 26 6,925 81.0 8,925 70 70 87 11 11 9 1.8 1.6 1.4 — — — 16 14 15 1.9 2.0 2.2 101 47
Ujjivan Small Finance Bank BUY 34 50 45 67 0.8 1,935 4 4 6 9 10 6 1.1 1.0 0.9 — — — 13 11 16 2.5 2.3 3.9 5 2
Union Bank BUY 127 155 22 972 11.4 7,634 22 20 21 6 6 6 0.9 0.8 0.8 — — — 16 13 12 3.5 3.2 3.3 18 7
Utkarsh Small Finance Bank ADD 23 30 31 25 0.3 1,102 (2) 1 4 NM 37 5 1.0 0.9 0.8 — — — NM 2 16 — — — 1 0
YES Bank SELL 17 17 (2) 546 6.4 28,768 1 1 2 23 14 10 1.1 1.1 1.0 — — — 5 8 10 — — — 20 8
Banks Attractive 41,062 480.2 14.2 13.4 11.7 2.0 1.8 1.6 14.0 13.2 13.5 1.4 1.5 1.7 929 528

Source: Company, Bloomberg, Kotak Institutional Equities estimates

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Kotak Institutional Equities: Valuation summary of KIE Universe stocks

Price (Rs) Fair Value Upside Mkt cap. O/S shares EPS (Rs) P/E (X) P/B (X) EV/EBITDA (X) RoE (%) Dividend yield (%) ADV-3M (US$ mn)
Company Rating 2-Apr-25 (Rs) (%) (Rs bn) (US$ bn) (mn) 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E Traded Delivered
Capital goods
ABB ADD 5,313 5,350 1 1,126 13.2 212 88 95 102 60 56 52 15.9 13.7 12.1 46 44 41 29 26 25 0.6 0.7 0.8 32 14
Bharat Electronics SELL 282 260 (8) 2,064 24.1 7,310 7 8 9 40 35 30 10.7 9.0 7.7 30 26 22 29 28 27 1.0 1.1 1.3 73 31
BHEL SELL 213 115 (46) 740 8.7 3,482 1 5 11 152 39 19 2.9 2.7 2.3 NM 24 13 2 7 13 (0.0) (0.2) (0.7) 35 11
Carborundum Universal BUY 1,005 980 (3) 191 2.2 190 20 25 33 51 40 30 5.6 5.0 4.4 25 23 18 12 13 16 0.4 0.5 0.7 3 2
CG Power & Industrial SELL 624 520 (17) 953 11.1 1,527 6 8 10 98 74 60 25.7 20.6 16.5 71 54 44 26 28 28 (0.3) (0.4) (0.5) 30 14
Cochin Shipyard SELL 1,412 830 (41) 371 4.3 263 32 31 38 45 45 37 6.6 6.1 5.4 32 30 26 16 14 15 0.7 0.8 0.8 15 6
Cummins India BUY 3,052 3,700 21 846 9.9 277 70 80 93 43 38 33 12.2 10.8 9.5 40 35 30 30 30 31 1.3 1.5 1.7 21 11
G R Infraprojects SELL 1,066 1,090 2 103 1.2 97 72 84 103 15 13 10 1.3 1.2 1.1 12 10 8 9 10 11 0.0 0.0 0.0 2 1
IRB Infrastructure ADD 47 63 34 283 3.3 6,039 2 3 3 29 18 16 1.5 1.4 1.4 10 9 8 6 8 9 3.6 5.0 5.6 11 4
Kalpataru Projects BUY 971 1,260 30 166 1.9 160 44 71 92 22 14 11 2.7 2.3 1.9 10 8 6 13 18 20 0.4 0.6 0.9 7 3
KEC International REDUCE 767 880 15 204 2.4 257 25 43 58 31 18 13 3.6 3.0 2.5 14 10 8 13 19 21 0.4 0.6 0.8 17 7
L&T REDUCE 3,420 3,400 (1) 4,703 55.0 1,375 104 125 151 33 27 23 5.9 5.2 4.5 21 18 15 19 20 21 0.7 0.8 1.0 88 53
Praj Industries BUY 527 740 40 97 1.1 184 12 14 21 44 37 25 6.5 5.5 4.5 — — — 16 16 20 0.0 0.0 0.0 8 3
Siemens REDUCE 5,283 4,700 (11) 1,881 22.0 356 78 92 108 68 58 49 10.8 9.5 8.3 83 71 61 17 18 18 0.4 0.5 0.5 32 15
Thermax ADD 3,548 3,600 1 423 4.9 113 58 75 88 61 48 40 8.1 7.2 6.3 47 37 31 14 16 17 0.4 0.4 0.4 6 3
Capital goods Cautious 14,153 165.5 43.5 34.8 28.1 6.6 5.9 5.1 27.7 22.7 18.7 15.2 16.9 18.3 0.6 0.8 0.9 382 178
Capital Markets
360 One REDUCE 888 1,150 30 349 4.1 391 26 32 37 34 28 24 5.5 4.8 4.3 — — — 21 19 19 1.2 1.4 1.7 12 6
ABSL AMC ADD 649 780 20 187 2.2 288 31 33 35 21 20 19 5.3 4.8 4.3 — — — NM NM NM 2.9 3.1 3.2 3 1
Angel One BUY 2,354 2,800 19 213 2.5 90 126 105 131 19 22 18 4.0 3.6 3.2 — — — 27 17 19 1.9 1.6 2.0 42 8
Computer Age Management Services ADD 3,757 4,000 6 186 2.2 49 95 102 119 40 37 32 16.5 13.8 11.6 — — — 46 41 40 1.5 1.6 1.9 26 10
CRISIL REDUCE 4,241 4,200 (1) 310 3.6 73 94 109 127 45 39 34 12.1 10.9 9.8 — — — 29 29 31 1.3 1.7 1.9 4 2
HDFC AMC ADD 4,075 4,300 6 871 10.2 213 113 129 141 36 32 29 11.5 10.7 10.0 — — — 33 35 36 2.2 2.5 2.8 21 12
ICRA REDUCE 5,524 6,400 16 53 0.6 10 179 207 235 31 27 23 4.8 4.5 38.1 — — — 16 17 34 0.2 0.3 0.3 0 0
Kfin Technologies SELL 1,043 1,000 (4) 179 2.1 171 20 24 28 53 44 37 13.8 12.0 10.3 — — — 22 22 23 0.8 0.9 1.1 18 7
Nippon AMC ADD 594 660 11 377 4.4 630 20 23 25 29 26 24 9.1 8.8 8.5 — — — 32 34 36 3.1 3.4 3.7 8 4
UTI AMC BUY 1,065 1,300 22 136 1.6 127 62 55 59 17 19 18 3.0 2.9 2.8 — — — 18 15 16 4.7 4.1 4.4 2 1
Capital Markets Cautious 2,862 33.5 31.0 28.5 25.3 7.7 6.9 6.5 25 24 26 1.9 2.1 2.3 135 313
Commercial & Professional Services
SIS ADD 335 350 5 48 0.6 147 23 20 23 14 17 15 1.8 1.7 1.5 7 8 7 10 10 11 — — — 0 0
TeamLease Services SELL 1,844 2,500 36 31 0.4 17 76 90 117 24 20 16 3.3 2.9 2.4 18 13 10 14.7 15.1 16.7 — — — 2 1
Commercial & Professional Services Cautious 79 0.9 16.9 17.8 14.8 2.2 2.0 1.7 8.8 9.3 8.0 13.0 11.0 11.6 0.0 0.0 0.0 2 1
Commodity Chemicals
Asian Paints REDUCE 2,307 2,250 (2) 2,213 25.9 959 43 47 52 53 49 44 10.7 9.6 8.7 36 33 31 21 21 21 0.9 1.0 1.2 36 20
Berger Paints SELL 505 465 (8) 589 6.9 1166 10 11 12 50 48 44 9.6 8.6 7.7 31 30 28 20 19 19 0.7 0.8 1.0 5 2
Indigo Paints REDUCE 987 1,200 22 47 0.5 48 29 30 34 34 33 29 4.6 4.2 3.8 19 19 16 14 13 14 0.5 0.7 0.9 1 1
Kansai Nerolac REDUCE 240 250 4 194 2.3 808 8 9 10 29 27 25 3.2 3.1 2.9 17 17 15 12 12 12 1.8 1.9 2.0 1 1
Tata Chemicals SELL 852 750 (12) 217 2.5 255 19 25 27 44 34 31 1.0 1.0 0.9 9 7 7 2 3 3 1.8 1.8 1.8 10 4
Commodity Chemicals Cautious 3,260 38.1 49.0 45.1 40.7 5.8 5.4 5.1 28.1 26.1 24.0 11.8 12.1 12.5 1.0 1.1 1.2 53 28
Construction Materials
ACC REDUCE 1,963 2,025 3 369 4.3 188 70 102 116 28 19 17 2.1 2.0 1.8 14 10 8 8 11 11 0.7 1.0 1.2 7 3
Ambuja Cements SELL 534 370 (31) 1,315 15.4 2,463 9 13 16 59 40 33 2.4 2.3 2.2 24 17 14 5 6 7 0.3 0.3 0.4 16 8
Dalmia Bharat SELL 1,818 1,500 (18) 341 4.0 187 38 50 69 48 36 26 2.0 1.9 1.8 14 12 10 4 5 7 0.3 0.4 0.6 7 4
Grasim Industries REDUCE 2,617 2,500 (4) 1,780 20.8 680 67 97 126 39 27 21 1.9 1.8 1.7 13 11 9 5 7 8 0.5 0.5 0.5 18 10
J K Cement SELL 4,993 2,875 (42) 386 4.5 77 90 118 150 56 42 33 6.5 5.7 5.0 22 18 15 12 14 16 0.3 0.3 0.3 7 3
Nuvoco Vistas Corp. REDUCE 309 350 13 110 1.3 357 (2) 4 7 NM 69 42 1.2 1.2 1.2 12 10 9 NM 2 3 0.0 0.0 0.0 1 0
Shree Cement SELL 30,200 18,000 (40) 1,090 12.7 36 259 400 443 116 76 68 5.1 4.9 4.6 29 24 20 5 7 7 0.1 0.2 0.2 11 5
The Ramco Cements SELL 917 570 (38) 217 2.5 236 9 18 25 98 52 37 2.8 2.6 2.4 19 16 14 3 5 7 0.1 0.2 0.3 5 2
UltraTech Cement SELL 11,251 7,100 (37) 3,315 38.8 295 203 285 357 55 39 32 4.7 4.4 4.0 28 21 17 9 12 13 0.5 0.7 0.9 50 29
Construction Materials Cautious 8,923 104.3 53.9 37.1 29.5 3.0 2.8 2.6 19.2 15.0 12.8 5.6 7.7 8.9 0.4 0.5 0.6 124 65

Source: Company, Bloomberg, Kotak Institutional Equities estimates

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 216

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

Price (Rs) Fair Value Upside Mkt cap. O/S shares EPS (Rs) P/E (X) P/B (X) EV/EBITDA (X) RoE (%) Dividend yield (%) ADV-3M (US$ mn)
Company Rating 2-Apr-25 (Rs) (%) (Rs bn) (US$ bn) (mn) 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E Traded Delivered
Consumer Durables & Apparel
Aditya Birla Fashion and Retail REDUCE 261 250 (4) 319 3.7 1,220 (6) (3) (1) NM NM NM 3.5 3.7 3.7 18 14 11 NM NM NM — — — 9 4
Campus Activewear ADD 235 290 23 72 0.8 304 4 5 6 58 46 38 9.2 8.0 6.8 29 24 20 17 18 19 — 1— 0.6 4 1
Cello World ADD 545 815 50 120 1.4 221 15 18 20 36 31 27 5.7 5.2 4.7 23 20 17 20 18 18 0.9 1.2 1.5 2 1
Crompton Greaves Consumer BUY 339 390 15 218 2.6 643 9 11 13 39 31 26 6.5 5.8 5.1 25 20 17 17 20 21 1.1 1.4 1.7 10 5
Eureka Forbes BUY 519 750 45 100 1.2 209 7 10 14 70 51 37 2.5 2.4 2.2 38 29 22 4 5 6 — — — 2 1
Havells India SELL 1,513 1,450 (4) 949 11.1 628 23 28 34 65 54 44 11.4 10.1 8.9 44 35 29 19 20 21 0.6 0.7 0.9 20 10
Page Industries SELL 43,150 38,000 (12) 481 5.6 11 641 758 890 67 57 48 24.8 20.7 17.5 46 39 33 40 40 39 0.8 1.0 1.2 15 7
Polycab SELL 5,286 4,750 (10) 795 9.3 151 125 144 176 42 37 30 8.3 7.1 6.1 28 24 20 21 21 22 0.6 0.7 0.9 51 20
Vedant Fashions REDUCE 776 950 22 189 2.2 243 18 20 23 44 39 34 10.1 8.7 7.4 26 23 19 25 24 23 — — — 3 2
Voltas SELL 1,345 1,100 (18) 445 5.2 331 26 30 38 51 44 36 6.9 6.2 5.6 39 34 29 14 15 16 0.6 0.7 0.8 34 16
Whirlpool ADD 1,064 1,225 15 135 1.6 127 27 33 39 40 32 27 3.5 3.2 3.0 21 17 14 9 10 11 0.7 0.8 0.9 6 4
Consumer Durables & Apparel Cautious 3,823 44.7 62.3 49.1 39.0 7.4 6.7 6.1 31.2 25.9 21.3 11.9 13.7 15.5 0.6 0.7 0.9 155 71
Consumer Staples
Britannia Industries ADD 5,037 5,025 (0) 1,213 14.2 241 88 96 109 57 53 46 28.3 26.7 24.2 39 36 32 52 52 55 1.7 1.8 2.0 29 16
Colgate-Palmolive (India) REDUCE 2,365 2,600 10 643 7.5 272 53 55 60 44 43 39 33.6 32.9 32.2 32 30 27 77 78 83 2.1 2.3 2.5 16 9
Dabur India ADD 496 540 9 879 10.3 1,772 10 12 13 47 43 38 8.3 7.8 7.2 36 32 28 18 19 20 1.3 1.5 1.7 14 8
Godrej Consumer Products ADD 1,163 1,250 8 1,189 13.9 1,023 19 23 26 62 51 45 8.8 8.1 7.3 40 36 31 15 17 17 0.9 0.9 1.0 19 12
Hindustan Unilever ADD 2,238 2,450 9 5,258 61.5 2,350 43 47 51 52 48 44 10.3 10.4 10.1 36 33 30 20 22 23 2.2 2.0 2.1 49 31
Honasa Consumer ADD 236 250 6 77 0.9 322 2 4 6 120 63 42 6.3 5.6 4.8 118 45 28 6 9 12 0.0 0.0 0.0 3 1
ITC ADD 409 500 22 5,119 59.9 12,428 16 17 19 25 24 22 6.8 6.5 6.2 19 18 16 26 27 29 3.4 3.6 4.0 80 50
Jyothy Labs SELL 335 400 19 123 1.4 367 10 11 12 33 31 28 6.2 5.7 5.2 24 22 20 20 19 19 1.6 1.8 2.1 3 1
Marico REDUCE 656 635 (3) 850 9.9 1,290 13 14 15 52 48 44 20.6 19.2 17.9 39 35 32 41 41 42 1.6 1.7 1.9 13 7
Nestle India ADD 2,211 2,280 3 2,131 24.9 964 31 35 40 71 64 56 54.2 48.7 44.3 46 42 37 83 80 83 1.1 1.4 1.6 21 11
Sula Vineyards ADD 280 400 43 24 0.3 84 8 10 11 33 28 24 3.9 3.6 3.2 16 15 13 12 13 14 0.7 1.1 1.2 2 1
Tata Consumer Products ADD 1,063 1,025 (4) 1,052 12.3 989 13 17 20 82 64 52 5.4 5.2 5.0 42 36 31 7 8 10 0.8 1.0 1.2 21 12
United Breweries REDUCE 1,975 1,875 (5) 522 6.1 264 18 28 36 107 70 55 11.8 10.7 9.8 61 43 34 11 16 19 0.6 0.9 1.2 7 3
United Spirits ADD 1,434 1,480 3 1,043 12.2 727 19 22 25 76 66 57 12.8 11.5 10.3 51 44 39 18 19 19 0.5 0.6 0.8 13 7
Varun Beverages ADD 547 585 7 1,850 21.6 3,382 8 10 11 71 55 48 11.1 9.4 8.1 39 33 29 22 19 18 0.1 0.2 0.3 54 30
Consumer Staples Attractive 21,973 257.0 45.3 40.9 36.7 10.1 9.6 9.1 32.0 28.9 25.8 22 24 25 1.8 1.9 2.1 344 200
Diversified Financials
Aadhar Housing Finance BUY 444 560 26 192 2.2 427 21 27 33 21 16 13 3.0 2.5 2.1 — — — 17 17 17 — — — 3 2
Aavas Financiers BUY 2,085 1,925 (8) 165 1.9 79 74 88 109 28 24 19 3.8 3.3 2.8 — — — 14 15 16 — — — 7 4
Aptus Value Housing Finance ADD 300 370 23 150 1.8 499 15 17 20 20 18 15 3.5 3.1 2.7 — — — 18 18 19 1.4 1.7 2.0 2 1
Bajaj Finance ADD 8,669 9,000 4 5,374 62.8 618 266 334 413 33 26 21 5.9 4.9 4.1 — — — 20 20 21 0.4 0.5 0.6 131 69
Bajaj Finserv ADD 1,931 2,100 9 3,083 36.1 1,593 67 84 103 29 23 19 6.4 5.3 4.4 — — — 24 25 26 0.1 0.1 0.1 47 22
Bajaj Housing Finance REDUCE 122 100 (18) 1,013 11.8 8,318 3 3 4 47 37 29 5.1 4.5 3.9 — — — 13 13 14 0.0 0.0 0.0 18 8
Cholamandalam ADD 1,460 1,500 3 1,228 14.4 840 50 61 76 29 24 19 5.2 4.1 3.4 — — — 19 19 19 0.1 0.3 0.4 32 17
Five Star Business Finance BUY 696 890 28 205 2.4 291 36 42 50 19 17 14 3.2 2.7 2.3 — — — 18 18 18 — — — 6 3
Home First Finance BUY 997 1,375 38 90 1.0 89 44 54 68 23 18 15 3.6 3.0 2.6 — — — 17 18 19 — 0.5 0.7 6 3
India Shelter BUY 821 850 4 89 1.0 107 36 41 48 23 20 17 3.3 2.8 2.4 — — — 15 15 15 — — — 2 1
L&T Finance ADD 152 155 2 379 4.4 2,480 11 13 16 14 12 10 1.5 1.4 1.2 — — — 11 12 13 2.1 2.5 3.1 9 3
LIC Housing Finance BUY 566 750 33 311 3.6 550 100 100 106 6 6 5 0.9 0.8 0.7 — — — 16 14 13 1.8 1.8 1.9 10 4
Mahindra & Mahindra Financial ADD 269 320 19 332 3.9 1,234 19 21 25 14 13 11 1.7 1.6 1.5 — — — 12 13 14 3.2 3.5 4.2 6 2
Muthoot Finance BUY 2,343 2,400 2 941 11.0 401 130 169 193 18 14 12 3.3 2.8 2.4 — — — 20 22 21 1.3 1.7 2.0 17 9
SBFC ADD 93 95 2 101 1.2 1,107 3 4 5 30 24 18 3.6 3.1 2.7 — — — 12 13 14 — — — 2 1
Shriram Finance BUY 639 730 14 1,202 14.1 1,879 53 52 65 12 12 10 2.2 1.9 1.6 — — — 16 16 17 1.2 1.2 1.5 48 24
Diversified Financials Attractive 14,853 173.7 23.3 19.7 16.2 3.9 3.3 2.8 16.7 16.9 17.5 0.5 0.6 0.8 346 175

Source: Company, Bloomberg, Kotak Institutional Equities estimates

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 217

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

Price (Rs) Fair Value Upside Mkt cap. O/S shares EPS (Rs) P/E (X) P/B (X) EV/EBITDA (X) RoE (%) Dividend yield (%) ADV-3M (US$ mn)
Company Rating 2-Apr-25 (Rs) (%) (Rs bn) (US$ bn) (mn) 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E Traded Delivered
Electric Utilities
Acme Solar Holdings BUY 192 320 67 116 1.4 605 5 13 4 40 15 53 2.2 1.9 1.9 - - - 8 14 4 0.0 0.0 0.0 3 2
CESC SELL 154 145 (6) 204 2.4 1,326 10 12 13 15 12 11 1.7 1.5 1.4 8 7 6 12 13 13 2.9 3.1 3.2 10 4
JSW Energy SELL 526 385 (27) 920 10.8 1,744 10 21 27 53 24 19 3.4 3.0 2.6 26 11 9 7 13 15 0.4 0.4 0.4 33 14
NHPC SELL 84 74 (12) 841 9.8 10,045 4 5 7 23 16 13 2.1 1.9 1.7 21 10 8 9 12 14 1.7 2.5 3.2 19 7
NTPC SELL 352 305 (13) 3,411 39.9 9,895 22 24 26 15.8 14.6 14 1.8 1.7 1.6 11 9 9 12 12 12 2.2 2.5 2.5 56 32
Power Grid SELL 287 275 (4) 2,667 31.2 9,301 17 19 21 17.0 14.8 14 2.9 2.6 2.4 9 9 8 17 19 19 3.5 3.9 4.2 46 28
Tata Power SELL 378 330 (13) 1,209 14.1 3,196 13 18 22 29 21 17 3.3 2.9 2.5 13 11 9 12 15 15 — — — 33 12
Electric Utilities Cautious 9,367 109.5 19.1 15.9 14.3 2.3 2.1 1.9 11.3 9.3 8.4 12.1 13.3 13.5 2.1 2.3 2.5 200 96
Electronic Manufacturing Services
Amber Enterprises ADD 6,996 7,800 11 237 2.8 34 79 136 171 89 52 41 10.1 8.4 6.9 33 26 21 12 18 19 — — — 60 11
Avalon Technologies SELL 803 600 (25) 53 0.6 65 10 16 22 83 51 37 8.6 7.3 6.1 49 32 24 11 16 18 — — — 6 2
Cyient DLM REDUCE 452 440 (3) 36 0.4 79 8 13 18 54 35 24 3.7 3.3 2.9 26 20 15 7 10 12 — — — 2 1
Dixon Technologies ADD 13,451 15,000 12 808 9.4 60 162 216 276 82.9 62.3 49 29.1 19.0 13.0 54 34 25 36 37 32 — — — 73 26
Kaynes Technology ADD 5,037 5,270 5 322 3.8 58 44 67 96 115.6 74.9 52 10.6 9.2 7.7 77 50 34 11 14 18 — — — 58 13
Syrma SGS Technology ADD 467 550 18 83 1.0 176 9 13 19 51 35 24 4.6 4.1 3.5 28 19 14 9 12 15 — — — 9 3
Electronic Manufacturing Services Cautious 1,539 18.0 91.7 57.2 43.2 13.7 11.0 8.6 48.2 32.3 24.1 14.9 19.1 20.0 0.0 0.0 0.0 208 56
Fertilizers & Agricultural Chemicals
Bayer Cropscience ADD 4,818 5,400 12 217 2.5 45 113 174 216 43 28 22 7.4 7.1 6.8 34 22 17 17 26 31 2.0 3.1 3.9 2 1
Godrej Agrovet ADD 781 840 7 150 1.8 192 24 27 33 33 29 24 5.0 4.8 4.2 19 17 14 15 17 19 1.5 1.7 2.0 2.4 1.1
Rallis India SELL 223 210 (6) 43 0.5 195 7 9 11 31 26 21 2.3 2.2 2.0 13— 11— 9— 7 9 10 1.3 1.6 1.8 1 1
UPL SELL 654 510 (22) 491 5.7 774 17 26 39 39 25 17 1.7 1.6 1.5 9 7 6 5 8 10 0.2 0.2 0.2 18 9
Fertilizers & Agricultural Chemicals Cautious 901 10.5 34.9 23.2 16.9 2.4 2.1 2.0 11.4 9.1 7.6 6.8 9.2 11.5 0.9 1.2 1.4 24 11
Gas Utilities
GAIL (India) SELL 184 145 (21) 1,210 14.2 6,575 14 12 12 13 15 15 1.7 1.6 1.5 10 10 10 14 11 11 3.3 3.5 3.8 30 15
Indraprastha Gas SELL 203 150 (26) 284 3.3 1,400 11 12 13 18 17 16 3.4 3.5 3.5 15 14 14 19 21 22 5.2 5.4 5.7 15 5
Mahanagar Gas SELL 1,389 1,030 (26) 137 1.6 99 98 90 91 14 15 15 2.4 2.2 2.0 9 9 9 18 15 13 2.5 2.3 2.3 10 3
Petronet LNG SELL 299 235 (21) 448 5.2 1,500 28 28 30 11 11 10 2.2 1.9 1.7 7 7 7 23 19 18 1.7 0.8 1.7 10 5
Gas Utilities Cautious 2,246 26.3 13.3 14.3 14.0 1.9 1.8 1.7 9.6 9.7 9.4 14.5 12.6 12.1 3.0 3.0 3.4 68 31
Health Care Services
Apollo Hospitals BUY 6,732 8,180 22 968 11.3 144 100 132 174 67 51 39 11.8 9.8 7.9 33 26 21 19 21 23 0.2 0.2 0.2 30 17
Dr Lal Pathlabs ADD 2,497 3,275 31 209 2.4 84 53 61 69 47 41 36 10.1 9.1 8.1 28 24 21 23 23 24 1.1 1.3 1.5 7 4
Global Health ADD 1,247 1,285 3 335 3.9 268 19 21 28 67 58 45 10.0 8.8 7.5 37 32 25 16 16 18 0.2 0.3 0.3 5 3
KIMS ADD 610 660 8 244 2.9 400 9 10 16 67 61 39 11.1 9.4 7.6 34 29 21 18 17 22 0.0 0.0 0.0 5 2
Max Healthcare REDUCE 1,095 1,020 (7) 1,064 12.4 971 14 19 25 76 57 43 10.1 8.7 7.3 47 36 28 14 16 18 0.1 0.1 0.1 31 19
Metropolis Healthcare ADD 1,550 2,000 29 79 0.9 51 32 41 51 48 37 30 6.5 5.8 5.1 23 19 16 14 16 18 0.4 0.5 1.0 4 2
Narayana Hrudayalaya ADD 1,684 1,490 (12) 344 4.0 204 38 47 56 44 36 30 9.4 7.4 6.0 28 23 19 24 23 22 — — — 18 7
Rainbow Children's Medicare ADD 1,370 1,500 9 139 1.6 102 24 29 35 57 48 40 9.5 8.2 7.0 27 23 19 18 19 19 0.3 0.4 0.4 3 2
Health Care Services Neutral 3,622 42.4 63.9 50.2 38.6 9.7 8.3 7.0 34.5 27.8 22.2 15.2 16.5 18.0 0.2 0.2 0.3 109 59

Source: Company, Bloomberg, Kotak Institutional Equities estimates

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 218

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

Price (Rs) Fair Value Upside Mkt cap. O/S shares EPS (Rs) P/E (X) P/B (X) EV/EBITDA (X) RoE (%) Dividend yield (%) ADV-3M (US$ mn)
Company Rating 2-Apr-25 (Rs) (%) (Rs bn) (US$ bn) (mn) 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E Traded Delivered
Hotels & Restaurants
Chalet Hotels ADD 864 885 2 189 2.2 218 7 27 42 116 31 21 6.3 5.3 4.3 27 19 13 7 18 23 (0.2) (0.2) (0.3) 4 2
Devyani International ADD 152 175 15 184 2.1 1,204 (0) (0) 0 NM NM 416 17.7 17.8 17.4 24 20 17 NM NM 4 0.0 0.0 0.0 8 3
Indian Hotels ADD 830 860 4 1,182 13.8 1,423 13 17 21 66 50 39 10.5 8.9 7.5 38 28 23 17 19 21 0.3 0.3 0.4 34 19
Jubilant Foodworks ADD 683 680 (0) 450 5.3 660 3 5 7 212 144 102 19.2 17.6 15.5 39 32 26 9 13 16 0.2 0.2 0.3 18 8
Lemon Tree Hotels REDUCE 141 135 (4) 111 1.3 792 2 3 5 57 40 28 10.7 9.5 8.1 20 16 13 20 25 31 0.9 1.1 1.4 6 3
Restaurant Brands Asia REDUCE 67 82 22 39 0.5 495 (2) (2) (1) NM NM NM 1.9 2.0 2.0 15 12 10 NM NM NM — — — 1 1
Samhi Hotels BUY 147 255 73 33 0.4 220 4 8 12 39 19 12 2.9 2.5 2.1 13 11 9 8 15 19 0.0 0.0 0.0 3 2
Sapphire Foods ADD 299 375 26 96 1.1 320 0 1 2 802 306 140 7.1 6.9 6.6 20 17 14 1 2 5 — — — 3 1
Westlife Foodworld REDUCE 700 700 (0) 109 1.3 156 1 4 7 1,270 175 104 18.2 16.8 14.9 28 25 20 2 10 15 — — — 1 0
Hotels & Restaurants Attractive 2,393 28.0 103.4 63.8 46.3 10.2 9.0 7.8 30.4 23.8 19.1 9.9 14.1 16.8 0.2 0.2 0.3 79 38
Insurance
HDFC Life Insurance BUY 696 850 22 1,499 17.5 2,020 8 10 11 82 71 62 9.7 9.1 8.5 — — — 12 13 14 0.3 0.4 0.4 24 14
ICICI Lombard ADD 1,830 2,150 17 907 10.6 493 54 61 70 34 30 26 6.3 5.4 4.6 — — — 20 19 19 0.5 0.5 0.6 15 10
ICICI Prudential Life BUY 563 825 46 814 9.5 1,441 7 9 10 78 66 56 6.9 6.3 5.7 — — — 9 10 11 0.6 0.6 0.6 9 5
LIC BUY 811 1,175 45 5,129 60.0 6,325 67 70 72 12 12 11 4.5 3.5 2.8 — — — 43 34 28 — — — 11 4
Max Financial Services BUY 1,144 1,425 25 395 4.6 345 2 2 3 614 535 456 — — — — — — 1 1 1 — — — 11 6
Niva Bupa Health Insurance ADD 77 85 11 140 1.6 - 1 2 3 68 39 29 — — — — — — 8 10 13 — — — 1 1
PB Fintech ADD 1,582 1,525 (4) 726 8.5 456 7 14 22 230 117 71 — — — 4 9 13 — — — 37 20
SBI Life Insurance ADD 1,560 1,800 15 1,563 18.3 1,005 24 27 29 66 59 54 9.4 8.3 7.4 — — — 15 15 14 0.2 0.3 0.3 22 13
Star Health and Allied Insurance REDUCE 343 425 24 202 2.4 585 10 15 22 33 23 16 2.9 2.6 2.2 — — — 9 12 15 — — — 5 3
Insurance Attractive 11,375 133.0 22.1 20.7 19.4 5.8 4.8 4.0 26 23 21 0.1 0.1 0.1 136 75
Internet Software & Services
Brainbees Solutions BUY 369 540 46 192 2.2 523.4 (3) (4) (0) NM NM NM 4.0 4.0 3.9 76 65 30 NM NM NM — — — 4 2
Cartrade Tech SELL 1,648 900 (45) 78 0.9 51.5 24 27 34 70 61 48 3.9 3.6 3.4 46 37 29 5.7 6.2 7.2 — — — 11 5
FSN E-commerce Ventures REDUCE 180 170 (5) 514 6.0 2,875.0 0 1 2 511 164 91 38.5 31.2 23.2 86 65 44 6.1 21 29 — — — 16 7
Indiamart REDUCE 2,107 2,350 12 126 1.5 59.9 87 99 108 24 21 19 5.9 4.9 4.1 17 14 12 27 25 23 1.2 1.2 1.2 6 3
Info Edge ADD 6,929 8,300 20 898 10.5 129.1 98 95 114 71 73 61 3.4 3.3 3.2 60 62 51 3.9 4.6 5.3 0.3 0.3 0.4 30 15
Just Dial BUY 815 1,330 63 69 0.8 85.0 67 66 72 12 12 11 1.5 1.3 1.2 5 3 1 13.2 11.5 11.2 — — — 4 1
Swiggy BUY 345 400 16 788 9.2 2,489 (13) (11) (6) NM NM NM 8.2 9.9 11.0 (25) (34) (162) NM NM NM 0.0 0.0 0.0 62 18
Zomato BUY 212 270 27 2,046 23.9 9,131 1 1 3 364 147 77 6.4 6.1 5.7 282 121 55 2.1 4.3 7.8 0.0 0.0 0.0 188 86
Internet Software & Services Attractive 4,712 55.1 NM 379 101 5.8 5.6 5.2 410 145 56 NM 1.5 5.2 0.1 0.1 0.1 321 136
IT Services
Coforge BUY 7,762 9,000 16 519 6.1 67 143 209 267 54 37 29 8.6 7.9 7.2 26 20 16 20 23 26 1.0 1.2 2.1 57 27
Cyient REDUCE 1,250 1,300 4 139 1.6 112 56 72 82 22 17 15 2.9 2.6 2.4 11 9 8 13 16 17 2.8 3.5 4.4 16 7
HCL Technologies REDUCE 1,528 1,650 8 4,145 48.5 2,716 64 69 76 24 22 20 5.8 5.4 5.0 15 14 13 25 25 26 3.6 3.8 3.9 64 40
Indegene BUY 579 750 30 139 1.6 240 17 21 25 34 28 23 5.4 4.5 3.8 21 18 15 20 18 18 0.0 0.0 0.0 4 2
Infosys BUY 1,550 2,000 29 6,438 75.3 4,151 64 71 79 24 22 20 6.8 6.3 6.0 16 14 13 29 30 31 3.1 3.4 4.3 145 91
KPIT Technologies SELL 1,312 1,170 (11) 360 4.2 274 28 34 42 47 39 31 12.9 10.4 8.4 28 22 18 31 30 30 0.7 0.8 1.0 19 8
L&T Technology Services REDUCE 4,636 4,750 2 491 5.7 106 122 146 170 38 32 27 8.1 7.1 6.2 24 20 17 23 24 24 1.0 1.2 1.4 11 4
LTIMindtree ADD 4,500 5,300 18 1,333 15.6 296 157 185 214 29 24 21 6.0 5.3 4.7 18 16 14 22 23 24 1.8 2.0 2.4 24 12
Mphasis REDUCE 2,474 2,300 (7) 470 5.5 189 90 102 116 28 24 21 5.0 4.7 4.4 17 15 13 19 20 21 2.6 2.8 3.0 19 10
Persistent Systems SELL 5,318 4,750 (11) 829 9.7 156 91 110 133 58 48 40 14.1 11.9 9.9 39 32 26 26 27 27 0.6 0.7 0.9 39 17
RateGain REDUCE 451 630 40 53 0.6 119 18 19 22 26 23 21 3.2 2.8 2.5 20 17 14 13 13 13 — — — 3 1
Tata Elxsi SELL 5,230 5,100 (2) 326 3.8 62 128 136 163 41 38 32 11.7 10.9 9.9 30 27 22 31 29 32 1.6 1.9 2.2 14 5
Tata Technologies SELL 688 550 (20) 279 3.3 406 17 19 22 41 36 31 7.8 7.1 6.4 28 25 21 20 21 22 1.2 1.4 1.6 12 6
TCS BUY 3,544 4,100 16 12,822 149.9 3,619 136 149 164 26 24 22 12.8 11.8 10.8 18 17 15 51 51 52 3.3 3.5 3.8 114 72
Tech Mahindra ADD 1,423 1,950 37 1,258 14.7 890 46 63 83 31 23 17 4.7 4.5 4.2 17 13 10 15 20 25 2.7 2.8 3.6 35 20
Wipro SELL 264 265 1 2,760 32.3 10,457 12 13 14 21 20 18 3.4 3.2 3.1 13 12 11 17 17 17 2.3 3.6 3.8 45 21
IT Services Neutral 32,362 378.4 26.2 23.5 21.0 7.3 6.8 6.3 17.2 15.4 13.8 27.9 28.8 29.9 2.8 3.1 3.6 621 316

Source: Company, Bloomberg, Kotak Institutional Equities estimates

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 219

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

Price (Rs) Fair Value Upside Mkt cap. O/S shares EPS (Rs) P/E (X) P/B (X) EV/EBITDA (X) RoE (%) Dividend yield (%) ADV-3M (US$ mn)
Company Rating 2-Apr-25 (Rs) (%) (Rs bn) (US$ bn) (mn) 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E Traded Delivered
Media
PVR INOX BUY 968 1,200 24 95 1.1 98 (17) 9 34 NM 106 29 1.2 1.1 1.1 29 14 10 NM 1 4 - 0.0 0.0 8 3
Sun TV Network REDUCE 645 660 2 254 3.0 394 42 44 46 15 15 14 2.2 2.0 1.8 11 9 9 15 14 14 2.2 2.4 2.6 3 1
Zee Entertainment Enterprises REDUCE 102 125 22 98 1.1 960 9 10 11 12 11 10 0.9 0.8 0.8 6 5 5 7 8 8 2.4 2.9 3.4 17 7
Media Neutral 447 5.2 19.4 16.3 14.1 1.4 1.4 1.3 11.1 8.8 7.5 7.4 8.3 9.0 1.8 2.0 2.2 28 12
Metals & Mining
Gravita India ADD 1,770 2,400 36 131 1.5 74 41 59 72 43 30 24 6.2 5.3 4.6 29.8 24.0 19.3 21 19 20 0.3 0.5 1.0 7 3
Hindalco Industries BUY 661 725 10 1,486 17.4 2,220 68 63 65 10 10 10 1.2 1.1 1.0 5.7 5.7 5.5 13 11 10 1.0 1.0 1.0 45 24
Hindustan Zinc SELL 461 385 (16) 1,947 22.8 4,225 25 27 28 19 17 17 14.5 14.6 14.6 11.1 10.1 9.7 73 85 87 6.3 5.8 6.0 9 4
Jindal Steel and Power BUY 910 1,055 16 928 10.8 1,020 42 63 92 22 14 10 1.9 1.7 1.5 10.7 8.2 6.0 9 13 16 0.2 0.3 0.5 25 11
JSW Steel REDUCE 1,056 975 (8) 2,582 30.2 2,445 23 61 80 46 17 13 3.1 2.7 2.3 13.3 9.1 7.4 7 17 19 0.3 0.9 1.1 20 9
National Aluminium Co. REDUCE 174 200 15 320 3.7 1,837 26 22 22 7 8 8 1.8 1.6 1.4 3.9 4.8 4.4 29 21 19 4.4 5.0 5.1 24 8
NMDC SELL 70 55 (22) 617 7.2 8,792 8 7 7 9 10 11 2.1 1.8 1.7 6.3 6.8 7.2 24 20 17 4.4 4.0 3.8 19 7
SAIL SELL 119 60 (49) 490 5.7 4,130 2 8 7 56 15 18 0.8 0.8 0.8 9.5 7.0 7.4 1 5 5 0.5 2.0 1.7 26 8
Tata Steel SELL 155 120 (22) 1,931 22.6 12,486 3 11 14 56 14 11 2.0 1.8 1.6 11.2 7.4 6.5 4 13 16 0.6 1.8 2.3 57 24
Vedanta REDUCE 458 465 2 1,790 20.9 3,913 33 44 49 14 10 9 4.4 3.9 3.4 5.7 4.6 4.2 36 40 38 7.6 6.3 6.8 43 18
Metals & Mining Cautious 12,222 142.9 19.0 13.3 11.6 2.4 2.2 1.9 8.6 7.0 6.2 12.6 16.2 16.6 2.8 2.9 3.1 275 114
Oil, Gas & Consumable Fuels
BPCL SELL 287 220 (23) 1,244 14.6 4,273 30 23 22 9 12 13 1.5 1.4 1.3 5.8 6.8 7.3 16 12 10 3.6 2.8 2.6 36 17
Coal India REDUCE 398 370 (7) 2,450 28.6 6,163 52 57 59 8 7 7 2.5 2.1 1.7 7.5 5.4 5.0 35 32 28 6.3 6.3 6.3 33 16
HPCL SELL 362 200 (45) 771 9.0 2,128 27 29 31 13 12 12 1.7 1.6 1.4 9.3 9.2 8.7 13 13 13 2.2 2.4 2.6 25 10
IOCL SELL 131 85 (35) 1,854 21.7 14,121 5 12 12 28 11 11 1.0 1.0 0.9 8.8 6.0 6.0 4 9 8 1.7 3.8 3.7 22 11
Oil India SELL 392 320 (18) 638 7.5 1,627 39 44 44 10 9 9 1.3 1.2 1.1 7.2 6.5 6.2 14 14 13 3.2 3.9 4.0 18 6
ONGC BUY 251 275 10 3,153 36.9 12,580 40 43 45 6 6 6 0.8 0.8 0.7 3.8 3.3 3.2 14 14 13 4.9 4.8 4.9 39 17
Reliance Industries BUY 1,251 1,400 12 16,932 198.0 13,532 51 59 69 25 21 18 2.0 1.8 1.7 11.7 10.0 8.2 8 9 10 — 0.4 0.5 189 115
Oil, Gas & Consumable Fuels Neutral 27,041 316.2 14.8 12.9 11.9 1.6 1.5 1.3 8.4 7.2 6.4 10.9 11.4 11.2 1.8 2.0 2.0 362 193
Pharmaceuticals
Alivus Life Sciences BUY 1,060 1,360 28 130 1.5 123 39 48 54 27 22 19 4.9 4.3 3.7 19 16 14 19 21 20 1.4 1.5 1.6 2 1
Aurobindo Pharma SELL 1,158 1,145 (1) 672 7.9 586 63 71 76 19 16 15 2.2 2.0 1.8 10 9 8 12 13 12 1.6 1.9 2.3 13 6
Biocon REDUCE 342 360 5 411 4.8 1,202 (1) 9 13 NM 37 26 1.7 1.6 1.5 17 12 11 NM 4 6 0.8 0.9 1.4 18 6
Blue Jet Healthcare ADD 799 710 (11) 139 1.6 173 17 23 27 48 34 29 12.4 9.2 7.1 38 26 21 29 31 27 0.1 0.2 0.2 4 3
Cipla BUY 1,452 1,700 17 1,173 13.7 806 62 64 65 23 23 22 3.8 3.4 3.0 15 14 14 18 16 14 1.0 1.0 1.0 26 15
Concord Biotech ADD 1,697 1,820 7 177 2.1 105 33 41 52 52 41 33 10.0 8.5 7.2 37 29 24 21 22 22 0.5 0.7 0.9 4 2
Divis Laboratories SELL 5,666 4,550 (20) 1,504 17.6 265 82 101 130 69 56 44 10.2 9.2 8.2 50 40 31 15 17 20 0.6 0.8 0.9 25 14
Dr Reddy's Laboratories REDUCE 1,150 1,195 4 960 11.2 832 67 67 59 17 17 20 2.9 2.5 2.3 11 10 11 18 16 12 0.9 0.9 0.9 32 19
Emcure Pharmaceuticals BUY 1,055 1,515 44 200 2.3 189 38 47 56 28 22 19 4.7 4.0 3.5 14 12 10 20 19 20 0.9 1.1 1.3 2 1
Gland Pharma REDUCE 1,535 1,525 (1) 253 3.0 164 46 61 76 34 25 20 2.8 2.6 2.4 18 15 12 8 11 12 1.5 1.7 1.8 6 3
JB Chemicals & Pharma BUY 1,567 2,170 39 244 2.9 157 42 54 62 37 29 25 7.2 6.0 5.0 23 18 16 21 22 22 0.7 0.7 0.7 6 3
Laurus Labs SELL 609 420 (31) 328 3.8 536 6 9 12 105 66 51 7.4 6.6 5.9 34 26 22 7 11 12 - - - 20 7
Lupin ADD 2,010 2,245 12 918 10.7 455 71 84 80 28 24 25 5.4 4.5 3.9 17 14 14 21 21 17 0.6 0.7 0.7 21 11
Mankind Pharma ADD 2,422 2,530 4 999 11.7 412 47 56 72 51 44 33 7.3 6.5 5.7 33 25 21 17 16 18 0.6 0.7 0.9 19 11
Piramal Pharma BUY 228 300 32 302 3.5 1,323 0 2 4 583 123 56 3.8 3.7 3.4 24 19 15 1 3 6 - - - 21 6
Sai Life Sciences REDUCE 745 700 (6) 155 1.8 208 7 9 13 102 82 59 7.5 6.8 6.1 40 32 25 10 9 11 - - - 5 2
Sun Pharmaceuticals ADD 1,714 1,875 9 4,112 48.1 2,399 49 54 62 35 31 27 5.6 4.9 4.3 25 22 20 17 17 17 0.6 0.6 0.7 44 27
Syngene International BUY 724 875 21 291 3.4 402 12 13 17 63 58 44 6.3 5.9 5.3 27 23 18 10 11 13 0.5 0.5 0.6 7 4
Torrent Pharmaceuticals REDUCE 3,207 3,060 (5) 1,085 12.7 338 58 74 87 55 44 37 13.9 11.9 10.1 29 25 22 27 29 30 0.9 1.1 1.2 13 8
Pharmaceuticals Neutral 14,054 164.3 35.7 30.6 27.4 4.9 4.4 3.9 21.2 18.3 16.5 13.7 14.3 14.2 0.6 0.6 0.7 290 147

Source: Company, Bloomberg, Kotak Institutional Equities estimates

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Kotak Institutional Equities: Valuation summary of KIE Universe stocks

Price (Rs) Fair Value Upside Mkt cap. O/S shares EPS (Rs) P/E (X) P/B (X) EV/EBITDA (X) RoE (%) Dividend yield (%) ADV-3M (US$ mn)
Company Rating 2-Apr-25 (Rs) (%) (Rs bn) (US$ bn) (mn) 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E Traded Delivered
Real Estate
Brigade Enterprises BUY 980 1,380 41 239 2.8 244 28 34 48 35 29 20 4.2 3.7 3.1 18 13 9 15 13 17 0.3 0.3 0.3 5 2
Brookfield India Real Estate Trust ADD 287 340 18 174 2.0 608 3 6 9 111 48 33 1.2 1.3 1.4 15 13 12 1 2 3 4.9 5.6 6.0 4 4
DLF BUY 683 1,020 49 1,691 19.8 2,475 17 21 31 39 32 22 4.0 3.7 3.3 101 45 23 11 12 16 0.9 1.0 1.2 33 14
Embassy Office Parks REIT ADD 372 410 — 353 4.1 948 22 9 13 17 39 28 1.5 1.6 1.7 16 13 12 9 4 6 5.9 6.5 7.0 3 3
Godrej Properties SELL 2,147 2,260 5 647 7.6 301 59 57 92 36 38 23 3.6 3.3 2.9 288 97 41 13 9 13 — — — 25 11
Macrotech Developers BUY 1,218 1,360 12 1,215 14.2 995 27 36 48 45 34 26 6.0 5.1 4.3 31 24 17 14 16 18 — — — 23 10
Mindspace REIT ADD 374 410 10 228 2.7 593 10 11 16 38 34 23 1.6 1.6 1.7 16 16 13 4 5 7 5.7 6.3 6.7 1 1
Nexus Select Trust ADD 129 152 18 195 2.3 1,515 3 5 5 39 27 24 1.4 1.4 1.5 16 14 13 3 5 6 6.6 7.0 7.4 3 3
Oberoi Realty REDUCE 1,621 1,850 14 589 6.9 364 61 82 118 26 20 14 3.7 3.1 2.5 19 14 9 15 17 20 0.6 0.7 0.9 17 8
Phoenix Mills REDUCE 1,647 1,600 (3) 589 6.9 357 28 46 50 58 36 33 5.7 5.0 4.3 26 19 17 10 15 14 0.2 0.2 0.2 15 8
Prestige Estates Projects ADD 1,178 1,680 43 507 5.9 408 18 24 44 66 48 27 2.8 2.8 2.6 20 16 11 5 6 10 0.2 0.2 0.3 16 8
Signature Global BUY 1,105 1,520 38 155 1.8 141 7 42 77 167 27 14 21.6 11.9 6.5 221 20 11 14 58 58 — — — 9 1
Sobha ADD 1,227 1,450 18 131 1.5 107 11 36 58 115 34 21 2.9 2.7 2.4 41 18 11 3 8 12 0.3 0.4 0.4 6 2
Sunteck Realty BUY 400 650 63 59 0.7 140 12 40 55 34 10 7 1.7 1.5 1.2 25 8 6 5 16 18 0.3 0.3 0.3 2 1
Real Estate Attractive 6,773 79.2 39.6 32.0 22.4 3.3 3.1 2.8 29.6 21.0 14.8 8.4 9.8 12.7 1.1 1.3 1.4 162 76
Renewable Energy
Premier Energies SELL 890 840 (6) 401 4.7 451 20 30 36 45 29 25 13.2 9.1 6.7 23 15 12 48 37 31 — — — 25 8
Waaree Energies REDUCE 2,280 2,290 0 655 7.7 288 64 101 171 36 23 13 6.7 5.3 3.8 23 14 9 26 27 33 — — — 42 10
Renewable Energy Cautious 7,174 12.4 39.9 24.7 16.2 8.5 6.3 4.5 23.0 14.0 10.0 21 26 28 0.0 0.0 0.0 67 18
Retailing
Avenue Supermarts SELL 4,121 3,450 (16) 2,682 31.4 651 44 52 64 93 79 65 12.4 10.7 9.2 57 49 40 14 15 15 — — — 35 18
Metro Brands REDUCE 1,053 1,130 7 287 3.4 272 13 17 21 83 61 50 13.8 12.0 10.3 37 30 25 18 21 22 1— 0.6 0.7 2 1
Titan Company REDUCE 3,098 3,225 4 2,751 32.2 888 42 50 59 74 62 53 24.0 19.0 15.3 47 40 35 36 34 32 0.5 0.5 0.6 39 21
Trent REDUCE 5,683 5,150 (9) 2,020 23.6 356 46 62 80 122 92 71 35.6 25.6 18.8 75 57 44 34 32 31 — — — 86 37
Vishal Mega Mart ADD 108 110 2 495 5.8 4,727 1 2 2 84 65 53 8.2 7.3 6.4 33 27 23 10 12 13 — — — - 13
Retailing Neutral 5,719 96.3 89.4 73.1 60.0 17.5 14.5 12.0 53.1 44.2 36.9 19.6 19.9 20 0.2 0.2 0.2 161 76
Specialty Chemicals
Aarti Industries SELL 401 380 (5) 145 1.7 363 9 11 16 45 35 25 2.6 2.4 2.3 18 15 12 6 7 9 0.2 0.4 0.6 10 4
Aether Industries ADD 807 890 10 107 1.3 133 12 17 21 66 47 38 4.8 4.4 3.9 46 31 24 8 10 11 - - 0.0 1 0
Atul SELL 5,827 5,140 (12) 172 2.0 29 170 222 257 34 26 23 3.1 2.8 2.6 17 14 12 9 11 12 0.5 0.8 0.9 5 2
Castrol India ADD 203 200 (1) 201 2.3 989 9 11 12 22 19 17 8.8 8.0 7.3 15 13 12 42 44 44 3.9 4.2 4.4 20 7
Clean Science & Technology ADD 1,215 1,490 23 129 1.5 106 25 33 45 48 37 27 9.1 7.7 6.3 33 26 20 21 23 26 0.5 0.6 0.8 2 1
Deepak Nitrite ADD 2,033 2,020 (1) 277 3.2 136 48 55 66 42 37 31 5.1 4.6 4.0 27 25 22 13 13 14 0.2 0.3 0.3 8 3
Navin Fluorine REDUCE 4,247 3,590 (15) 211 2.5 50 56 85 120 76 50 36 8.1 7.2 6.2 44 30 23 11 15 19 0.3 0.4 0.6 13 6
Neogen Chemicals ADD 1,628 1,790 10 43 0.5 26 17 23 42 94 72 39 5.4 5.1 4.0 37 36 19 6 7 12 0.2 0.2 0.4 1 0
Pidilite Industries ADD 2,851 3,125 10 1,450 17.0 509 41 47 54 69 60 53 15.4 14.0 12.7 47 42 37 24 24 25 0.8 1.0 1.2 12 7
PI Industries REDUCE 3,502 3,210 (8) 531 6.2 152 115 126 143 31 28 25 5.2 4.5 3.9 22 20 17 18 17 17 0.4 0.6 0.6 13 7
S H Kelkar and Company BUY 182 360 98 25 0.3 138 8 11 15 22 17 12 1.9 1.8 1.6 10 9 7 9 11 14 1.2 3.0 3.3 1 0
SRF SELL 2,982 2,130 (29) 884 10.3 296 43 61 86 70 49 35 7.1 6.4 5.6 34 26 21 11 14 17 0.4 0.5 0.5 28 13
Vinati Organics SELL 1,568 1,270 (19) 163 1.9 104 37 46 57 43 34 27 5.8 5.1 4.4 30 23 18 14 16 17 0.4 0.4 0.5 2 1
Specialty Chemicals Neutral 4,337 50.7 49.5 40.5 33.2 7.0 6.3 5.6 30.4 25.3 21.2 14.1 15.5 16.7 0.7 0.8 1.0 116 53

Source: Company, Bloomberg, Kotak Institutional Equities estimates

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 221

Kotak Institutional Equities: Valuation summary of KIE Universe stocks

Price (Rs) Fair Value Upside Mkt cap. O/S shares EPS (Rs) P/E (X) P/B (X) EV/EBITDA (X) RoE (%) Dividend yield (%) ADV-3M (US$ mn)
Company Rating 2-Apr-25 (Rs) (%) (Rs bn) (US$ bn) (mn) 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E 2025E 2026E 2027E Traded Delivered
Telecommunication Services
Bharti Airtel ADD 1,755 1,800 3 10,520 123.0 5,753 40 52 68 44 34 26 10.2 8.2 7.1 13 10 8 25 28 29 0.9 1.3 1.6 118 77
Indus Towers SELL 361 355 (2) 953 11.1 2,638 22 24 27 17 15 14 3.0 2.9 2.8 6 6 5 19 19 21 2.1 5.9 6.6 30 15
Vodafone Idea SELL 8 7 (15) 587 6.9 69,645 (4) (4) (3) NM NM NM NM NM NM 16 15 13 NM NM NM — — — 53 15
Tata Communications SELL 1,595 1,600 0 455 5.3 285 41 58 73 39 27 22 17.6 12.0 8.8 12 10 9 53 52 47 1.0 1.4 1.8 8 4
Telecommunication Services Attractive 12,515 146.3 704.8 108.6 50.2 54 35 26 12.5 10.4 8.7 7.6 32 53 0.9 1.5 1.9 209 111
Transportation
Adani Ports and SEZ BUY 1,195 1,570 31 2,582 30.2 2,160 50 60 66 24 20 18 4.2 3.5 3.0 16 14 11 19 19 18 0.6 0.7 0.8 41 17
Container Corp. SELL 709 730 3 432 5.1 609 22 26 32 32 27 23 3.5 3.3 3.1 20 17 14 11 12 14 1.4 1.6 2.0 10 5
Delhivery BUY 259 420 62 193 2.3 747 2 4 5 117 70 51 2.1 2.0 1.9 43 25 18 2 3 4 — — — 8 4
Gateway Distriparks ADD 63 90 44 31 0.4 500 5 5 6 14 12 10 1.5 1.4 1.3 10 8 7 11 12 13 3.0 3.3 3.6 1 0
GMR Airports ADD 79 83 5 832 9.7 6,036 (2) (0) 1 NM NM 156 NM NM NM 30 20 18 NM 14 NM — — — 11 6
Gujarat Pipavav Port REDUCE 141 140 (1) 68 0.8 483 8 9 10 18 15 14 2.7 2.3 2.0 10 9 7 17 16 15 — — — 3 1
InterGlobe Aviation BUY 5,068 6,100 20 1,958 22.9 383 157 253 276 32 20 18 24.2 11.0 5.1 10 7 5 120 75 46 — — — 47 28
JSW Infrastructure REDUCE 322 250 (22) 677 7.9 2,119 6 8 9 51 42 38 7.5 6.6 26.5 31 28 26 16 17 16 0.4 0.5 0.5 8 4
Transportation Attractive 6,775 79.2 35.1 25.3 22.5 6.4 5.2 4.3 15.8 12.5 10.3 18.3 21 19.3 0.4 0.4 0.5 129 64
KIE universe 296,191 3,464 25.3 21.9 19.0 3.6 3.3 2.9 15.3 12.9 11.3 14.3 14.9 15.4 1.3 1.5 1.7

Notes:
(a) We have used adjusted book values for banking companies.
(b) 2024 means calendar year 2023, similarly for 2025 and 2026 for these particular companies.
(c) Exchange rate (Rs/US$)= 85.5

Source: Company, Bloomberg, Kotak Institutional Equities estimates

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DISCLAIMERS, DISCLOSURES & LEGAL

Distribution of ratings/investment banking relationships
Kotak Institutional Equities Research coverage universe

Percentage of companies covered by Kotak Institutional

70%
Equities, within the specified category.

60%
Percentage of companies within each category for which
50% Kotak Institutional Equities and or its affiliates has
provided investment banking services within the previous
12 months.
40%
34.3% * The above categories are defined as follows: Buy = We
expect this stock to deliver more than 15% returns over
30% 27.4% the next 12 months; Add = We expect this stock to deliver
21.3% 5-15% returns over the next 12 months; Reduce = We
20% expect this stock to deliver -5-+5% returns over the next
17.0%
12 months; Sell = We expect this stock to deliver less than
-5% returns over the next 12 months. Our target prices
10% 6.1% 5.4% are also on a 12-month horizon basis. These ratings are
4.0%
1.8% used illustratively to comply with applicable regulations. As
of 31/12/2024 Kotak Institutional Equities Investment
0%
BUY ADD REDUCE SELL Research had investment ratings on 277 equity securities.

Source: Kotak Institutional Equities

As of December 31, 2024

Ratings and other definitions/identifiers

Definitions of ratings

BUY. We expect this stock to deliver more than 15% returns over the next 12 months.
ADD. We expect this stock to deliver 5-15% returns over the next 12 months.
REDUCE. We expect this stock to deliver -5-+5% returns over the next 12 months.
SELL. We expect this stock to deliver <-5% returns over the next 12 months.

Our Fair Value estimates are also on a 12-month horizon basis.Our Ratings System does not take into account short-term volatility in stock prices related
to movements in the market. Hence, a particular Rating may not strictly be in accordance with the Rating System at all times.

Other definitions
Coverage view. The coverage view represents each analyst’s overall fundamental outlook on the Sector. The coverage view will consist of one of the
following designations: Attractive, Neutral, Cautious.

Other ratings/identifiers
NR = Not Rated. The investment rating and fair value, if any, have been suspended temporarily. Such suspension is in compliance with applicable
regulation(s) and/or Kotak Securities policies in circumstances when Kotak Securities or its affiliates is acting in an advisory capacity in a merger or
strategic transaction involving this company and in certain other circumstances.

CS = Coverage Suspended. Kotak Securities has suspended coverage of this company.

NC = Not Covered. Kotak Securities does not cover this company.

RS = Rating Suspended. Kotak Securities Research has suspended the investment rating and fair value, if any, for this stock, because there is not a
sufficient fundamental basis for determining an investment rating or fair value. The previous investment rating and fair value, if any, are no longer in
effect for this stock and should not be relied upon.

NA = Not Available or Not Applicable. The information is not available for display or is not applicable.
NM = Not Meaningful. The information is not meaningful and is therefore excluded.

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all securities trading markets in India. We and our affiliates have investment banking and other business relationships with a significant percentage of the companies covered by our Investment Research Department. Our research professionals
provide important input into our investment banking and other business selection processes. Investors should assume that Kotak Securities Limited and/or its affiliates are seeking or will seek investment banking or other business from the
company or companies that are the subject of this material. Our research professionals are paid in part based on the profitability of Kotak Securities Limited, which includes earnings from investment banking and other businesses. Kotak
Securities Limited generally prohibits its analysts, persons reporting to analysts, and members of their households from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. Additionally,
Kotak Securities Limited generally prohibits its analysts and persons reporting to analysts from serving as an officer, director, or advisory board member of any companies that the analysts cover. Our salespeople, traders, and other
professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make
investment decisions that are inconsistent with the recommendations expressed herein.
In reviewing these materials, you should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additionally, other important information regarding our relationships with the company
or companies that are the subject of this material is provided herein.
This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. We are not soliciting any action based on this material. It is for
the general information of clients of Kotak Securities Limited. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any
advice or recommendation in this material, clients should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the investments referred to in this material and the
income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. Kotak
Securities Limited does not provide tax advise to its clients, and all investors are strongly advised to consult with their tax advisers regarding any potential investment. Certain transactions – including those involving futures, options, and other
derivatives as well as non-investment-grade securities – give rise to substantial risk and are not suitable for all investors. The material is based on information that we consider reliable, but we do not represent that it is accurate or complete,
and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only. We endeavor to update on a reasonable basis the information discussed in this material, but regulatory,
compliance, or other reasons may prevent us from doing so. We and our affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of this material, may from time to time have "long" or "short"
positions in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. Kotak Securities Limited and its non-US affiliates may, to the extent permissible under applicable laws, have acted on or used
this research to the extent that it relates to non-US issuers, prior to or immediately following its publication. Foreign currency-denominated securities are subject to fluctuations in exchange rates that could have an adverse effect on the value
or price of or income derived from the investment. In addition, investors in securities such as ADRs, the value of which are influenced by foreign currencies, affectively assume currency risk. In addition, options involve risks and are not suitable
for all investors. Please ensure that you have read and understood the current derivatives risk disclosure document before entering into any derivative transactions.
Kotak Securities Limited established in 1994, is a subsidiary of Kotak Mahindra Bank Limited.
Kotak Securities Limited is a corporate trading and clearing member of BSE Limited (BSE), National Stock Exchange of India Limited (NSE), Metropolitan Stock Exchange of India Limited (MSE), National Commodity and Derivatives Exchange
(NCDEX) and Multi Commodity Exchange (MCX). Our businesses include stock broking, services rendered in connection with distribution of primary market issues and financial products like mutual funds and fixed deposits, depository services
and portfolio management.
Kotak Securities Limited is also a Depository Participant with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). Kotak Securities Limited is also registered with Insurance Regulatory and
Development Authority and having composite license acts as Corporate Agent of Kotak Mahindra Life Insurance Company Limited and Zurich Kotak General Insurance Company (India) Limited (Formerly known as Kotak Mahindra General
Insurance Company Limited) and is also a Mutual Fund Advisor registered with Association of Mutual Funds in India (AMFI). Kotak Securities Limited is registered as a Research Analyst under SEBI (Research Analyst) Regulations, 2014.
We hereby declare that our activities were neither suspended nor we have defaulted with any stock exchange authority with whom we are registered in last five years. However, SEBI, Exchanges and Depositories have conducted the routine
inspection and based on their observations have issued advise letters or levied minor penalty on KSL for certain operational deviations. We have not been debarred from doing business by any stock exchange/SEBI or any other authorities,
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We offer our research services to primarily institutional investors and their employees, directors, fund managers, advisors who are registered with us. Details of Associates are available on website, i.e. www.kotak.com and
https://www.kotak.com/en/investor-relations/governance/subsidiaries.html.
Research Analyst has served as an officer, director or employee of subject company(ies): No.
We or our associates may have received compensation from the subject company(ies) in the past 12 months.
We or our associates have managed or co-managed public offering of securities for the subject company(ies) or acted as a market maker in the financial instruments of the subject company/company (ies) discussed herein in the past 12
months. YES. Visit our website for more details https://kie.kotak.com.
We or our associates may have received compensation for investment banking or merchant banking or brokerage services from the subject company(ies) in the past 12 months. We or our associates may have received any compensation for
products or services other than investment banking or merchant banking or brokerage services from the subject company(ies) in the past 12 months. We or our associates may have received compensation or other benefits from the subject
company(ies) or third party in connection with the research report.
Our associates may have financial interest in the subject company(ies).
Research Analyst or his/her relative's financial interest in the subject company(ies): No
Kotak Securities Limited has financial interest in the subject company(ies) at the end of the week immediately preceding the date of publication of Research Report: YES. Nature of Financial interest: Holding equity shares or derivatives of the
subject company.
Our associates may have actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date of publication of Research Report.
Research Analyst or his/her relatives have actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date of publication of Research Report: No.
Kotak Securities Limited has actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date of publication of Research Report: No
Subject company(ies) may have been client during twelve months preceding the date of distribution of the research report.
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and select the "three years" icon in the price chart).
First Cut notes published on this site are for information purposes only. They represent early notations and responses by analysts to recent events. Data in the notes may not have been verified by us and investors should not act upon any
data or views in these notes. Most First Cut notes, but not necessarily all, will be followed by final research reports on the subject.
There could be variance between the First Cut note and the final research note on any subject, in which case the contents of the final research note would prevail. We accept no liability of the First Cut Notes.
Analyst Certification
The analyst(s) authoring this research report hereby certifies that the views expressed in this research report accurately reflect such research analyst's personal views about the subject securities and issuers and that no part of his or her
compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in the research report.
This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Firm. Firm Research is disseminated and available primarily electronically, and, in some cases, in printed form.
Additional information on recommended securities is available on request.
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For more information related to investments in the securities market, please visit the SEBI Investor Website https://investor.sebi.gov.in/ and the SEBI Saa₹thi Mobile App.
Derivatives are a sophisticated investment device. The investor is requested to take into consideration all the risk factors before actually trading in derivative contracts. Compliance Officer Details: Mr. Hiren Thakkar. Call: 022 - 4285 8484, or
Email: ks.compliance@kotak.com.
Kotak Securities Limited. Registered Office: 27 BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E), Mumbai 400051. CIN: U99999MH1994PLC134051, Telephone No.: +22 43360000, Fax No.: +22 67132430. Website: www.kotak.com /
www.kotaksecurities.com. Correspondence Address: Infinity IT Park, Bldg. No 21, Opp. Film City Road, A K Vaidya Marg, Malad (East), Mumbai 400097. Telephone No: 42856825. SEBI Registration No: INZ000200137(Member of NSE, BSE,
MSE, MCX & NCDEX), AMFI ARN 0164, PMS INP000000258 and Research Analyst INH000000586. NSDL/CDSL: IN-DP-629-2021. Compliance Officer Details: Mr. Hiren Thakkar. Call: 022 - 4285 8484, or Email: ks.compliance@kotak.com
Details of Contact Person Address Contact No. Email ID
Customer Care/ Complaints Mr. Ritesh Shah Kotak Towers, 8th Floor, Building No.21, Infinity 18002099393 ks.escalation@kotak.com
Head of Customer Care Mr. Tabrez Anwar Park, Off Western Express Highway, Malad (East), 022-42858208 ks.servicehead@kotak.com
Compliance Officer Mr. Hiren Thakkar Mumbai, Maharashtra - 400097 022-42858484 ks.compliance@kotak.com
CEO Mr. Shripal Shah 022-42858301 ceo.ks@kotak.com
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