Federal Bank (FEDBAN) 50

Result Update Rating matrix Rating : Sell Target : 45 Target Period : 12 months Potential Upside : -10% What s Changed? Target Changed from 60 to 45 EPS Changed from 4.7 to 4.0 EPS Changed from 5.4 to 4.9 Rating Changed from Hold to Sell Quarterly Performance Crore Q3FY16 Q3FY15 YoY Q2FY16 QoQ NII 605 587 3.1 608-0.5 Other Income 183 220-16.6 182 0.6 PPP 326 397-18.1 337-3.3 PAT 163 265-38.5 161 0.9 Key Financials crore FY14 FY15 NII 2,229 2,380 2,453 2,755 PPP 1,480 1,628 1,462 1,632 PAT 839 1,006 687 840 Valuation summary FY14 FY15 P/E 10.2 8.5 12.5 10.2 Target P/E 9.2 7.7 11.2 9.2 P/ABV 1.3 1.1 1.2 1.1 Target P/ABV 1.2 1.0 1.1 1.0 RoA 1.2 1.3 0.8 0.8 RoE 12.6 13.7 8.6 9.8 Stock data Market Capitalisation 8392 crore GNPA (Q3FY16) 1684 crore NNPA (Q3FY16) 876 crore NIM (Q3FY16) 3% 52 week H/L 79 /52 Equity capital 171 Crore Face value 2 DII Holding 34.0 FII Holding 34.4 Price performance Return % 1M 3M 6M 12M South Indian Bank -2.0-13.1-18.9-35.4 Federal Bank -8.5-18.4-30.2-29.2 City union Bank 1.4-0.2-11.5-7.4 Research Analyst Kajal Gandhi kajal.gandhi@icicisecurities.com Vishal Narnolia vishal.narnolia@icicisecurities.com Vasant Lohiya vasant.lohiya@icicisecurities.com January 13, 2016 Federal Bank (FEDBAN) 50 Significant slippages shake investor belief On the asset quality front, GNPA slippages remained high at 566 crore of which 200 crore was sold to ARC taking GNPA to 1684 crore. Net addition was 185 crore raising GNPA ratio to 3.15% from 2.9% QoQ. Two large metal accounts slipped in corporate slippages of 190 crore. The rise in NNPA was higher at ~ 201 crore QoQ to 876 crore. Accordingly NPA provisions were higher than expected at 75 crore. Bank does not have any SDR or 5:25 restructuring Credit and Deposit growth was marginally better than estimated at 9.9% YoY to 53538 crore and 14% YoY to 74792 crore respectively. NII came in line with estimate growing 3.1% YoY to 605 crore with margin declining 5bps to 3.05%. PAT declined 38% YoY and flat QoQ to 162.7 crore below our estimate of 175 crore mainly led by higher provisions. NRE deposits strong, Margins to stabilise around 3 to 3.1% The bank s widespread presence in Kerala (595 out of 1252 branches) enables it to mobilise strong NRI deposits (NRE - 28381 crore, 38% of deposits up 1% QoQ). Besides, the CASA ratio of the bank has risen from 26% to 31.9% in the last five years, which is among the best compared to peers. Retail deposit constitutes a staggering ~96.5% of total deposits, which is less sensitive to interest rate risk and poses low liquidity risk. A strong liability franchise has enabled the bank to earn relatively high NIM of ~3.2-3.3% compared to peers and manage lucrative NIM of ~4% in FY09-12 when interest rate charge on NRE deposit was ~4%. However, post NRE rate deregulation in December 2011, the bank started paying ~8%, which increased its CoF. Consequently, NIM has steadily declined from ~4% in FY12 to 3.11% now. Quarterly NIM was at 3.04% and management has guided on NIM to be maintained at ~3.1% levels. Loan traction improved, high rated corporate portfolio rising Federal Bank had raised capital in 2008 while a slowing economy led to low growth at 13.7% CAGR in FY10-15 vs. 26.9% CAGR in FY06-08. The bank maintains one of the best tier-1 ratios of 13.9%. We raise our credit growth estimate for FY16 but maintain at 11% CAGR to 63464 crore by. Corporate credit grew 19% YoY and SME 17% YoY to 15239 crore and 11988 crore respectively. Share of AAA/AA rated has gone up to 52% from 26% QoQ, depicting better corporate growth. Asset quality concerns hit performance The credit book is diversified with corporate exposure of 16680 crore (31.3%), SME - 14033 crore (26.2%), agri - 6062 crore (11.3%) and retail - 16775 crore (31.7%). Slippages have been significantly rising at 566 crore in Q3 vs 405 crore in Q2. GNPA deteriorated from 821 crore in FY10 to 1685 crore in Q3FY16. The GNPA ratio stood at 3.15% while the standard RA book is at 2445 crore (4.2% of credit), including SEB RA. We raised our NPA estimates with GNPA at 1980 crore. Downgrade to Sell, revise target downwards to 45 Slippages from corporate and SME continue to mar performance and thereby have raised provisions and reduced PAT estimates by 15% to 687 crore. Revised GNPA estimates also upwards to 1790 crore at 3.2%. Lower RoE and RoA at 9% and 0.8% respectively are expected to stay. We are now valuing the bank at 1x vs 1.3x. We revised our rating to Sell from Hold and revise target price lower to 45 ( 60 earlier) ICICI Securities Ltd Retail Equity Research

[ Variance analysis Q3FY16 Q3 Q3FY15 YoY Q2FY16 QoQ Comments NII came in lin with estimate with higher growth in advances at 9% YoY but margin pressure. NII 605 597 587 3.1 608-0.5 Writebak of inerest on corporate slippages was also seen NIM 3.04 3.11 3.20-16 bps 3.11-7 bps Lower corporate yield due to writebacks and base rate impacted NIM Other Income 183 190 220-16.6 182 0.6 Net Total Income 789 787 807-2.3 791-0.3 Staff cost 259 261 235 10.0 249 3.9 Other Operating Expenses 204 197 175 17.0 205-0.3 PPP 326 328 397-18.1 337-3.3 Provision 75 67-1 -9,259.8 87-13.9 Higher slippages led to higher-than-expected credit cost PBT 250 262 398-37.1 249 0.4 Tax Outgo 88 86 133-34.3 88-0.4 PAT 163 175 265-38.5 161 0.9 PAT declined 38% YoY and flat QoQ to 162.7 crore below our estimate of 175 crore mainly led by higher provisions Key Metrics GNPA 1,684 1,589 1,067 57.9 1,499 12.4 Fresh slippages continued higher at 571 crore vs 405 crore in Q2FY16 vs. 317 crore seen in Q1FY16 leading to net increase of 185 crore in GNPA. NNPA 876 729 333 163.1 675 29.8 Provision coverage declined further to 71.6% from 76.6% in Q2FY16 Total Restructured assets 2,254 2,455 2,427-7.1 2,445-7.8 Change in estimates ( Crore) Old New % Change Old New % Change Net Interest Income 2,503 2,453-2.0 2,746 2,755 0.3 Lower margin expectation & credit traction led to downward revision in NII Pre Provision Profit 1,561 1,462-6.3 1,681 1,632-2.9 NIM (calculated) 3.1 3.0-7 bps 3.0 3.0-1 bps NIM expected to remain under pressure due to asset quality pressure PAT 811 687-15.3 928 840-9.4 Lower margins, credit growth and higher provision to impact PAT ABV per share ( ) 43.5 42.3-2.8 46.7 45.0-3.7 Assumptions Current Earlier FY14 FY15 Credit growth -1.5 18.1 9.7 12.8 8.9 12.8 High rate corporate credit offtake leads tosurge in FY16 Deposit Growth 3.7 18.6 12.3 14.7 11.6 14.7 CASA ratio 31.2 30.8 32.2 33.6 32.4 33.8 NIM Calculated 3.3 3.3 3.0 3.0 3.1 3.0 NIM expected to remain under pressure due to asset quality pressure Cost to income ratio 49.3 50.0 55.6 55.7 54.0 54.9 GNPA ( crore) 1,087 1,058 1,789 1,980 1,654 1,843 GNPA estimate revised upwards due to higher slippage in FY16 NNPA ( crore) 322 218 1,015 1,221 906 1,091 Slippage ratio 1.2 1.9 2.3 1.8 2.3 1.8 Credit cost 0.6 0.5 0.7 0.6 0.6 0.5 ICICI Securities Ltd Retail Equity Research Page 2

Company Analysis Exhibit 1: Business traction expected to stay in line with industry, going ahead We expect the business to grow at a CAGR of 12% over FY15-17E. The bank is adequately capitalised to grow its credit with tier 1 ratio of 13.97% ( Crore) 175000 150000 125000 100000 75000 50000 86693 88601 85817 91101 101712 98259 99014 99377 103167 106827 113030 114276 122110 121692 124650 128330 135798 154680 25000 0 FY12 Q1FY13 Q2FY13 Q3FY13 FY13 Q1FY14 Q2FY14 Q3FY14 FY14 Q1FY15 Q2FY15 Q3FY15 FY15 Q1FY16 Q2FY16 Q3FY16 Source: Company quarterly presentation and annual report, ICICIdirect.com Research a) Credit growth - The bank has grown its credit at a modest pace of 13.7% CAGR during FY10-15. All sectors including corporate, retail, SME and agri have contributed to overall credit growth. Credit growth witnessed improvement in Q3FY16 vs 5% in Q2FY16. On a YoY basis, the corporate segment surged 19% while SME grew at 17% YoY. Agri and retail grew in the range of 4-7% YoY. Going ahead, we estimate 11% credit CAGR during F16-17E to 63461 crore in line with management guidance. b) Deposit growth Bank has a strong deposit franchise with 32.1% CASA. Deposit growth was higher than estimate at 14.1% YoY to 74792 crore with savings growth remaining healthy at 20% YoY. NRI deposits constitute 38%, up from ~37% of total deposits on a QoQ basis. Exhibit 2: Deposit growth maintained above industry 50,000 32 40,000 30 ( Crore) 30,000 20,000 28 26 24 10,000 0 FY11 FY12 Q1FY13 Q2FY13 Q3FY13 FY13 Q1FY14 Q2FY14 Q3FY14 FY14 Q1FY15 Q2FY15 Q3FY15 FY15 Q1FY16 Q2FY16 Q3FY16 22 20 Current Savings Term CASA (RHS) Source: Company quarterly presentation, ICICIdirect.com Research The CASA ratio improved ~20 bps to 32.1% with CASA deposits increasing 20% YoY to 24005 crore. We expect 13% CAGR in deposits to 91216 crore. ICICI Securities Ltd Retail Equity Research Page 3

Exhibit 3: Q3FY15- break-up of loan book Agri 12% Large corporat e 31% Exhibit 4: Q3FY16- loan book tilted to SME/Corp Agri 11% Large corporat e 31% Retail 32% SME 25% Retail 32% SME 26% Source: Company quarterly presentation, ICICIdirect.com Research Source: Company quarterly presentation ICICIdirect.com Research The loan book of Federal Bank has remained welldiversified over the years The management has guided at maintaining NIM in the range of 3.1-3.15% during Exhibit 5: Margins to remain at in range of 3-3.1% for full year 4.8 3.6 3.6 3.8 3.4 3.6 3.5 3.2 3.1 3.3 3.2 3.3 3.3 3.4 3.2 3.3 3.1 3.1 3.0 3.0 3.0 2.4 1.2 0.0 Q4FY12 FY12 Q1FY13 Q2FY13 Q3FY13 FY13 Q1FY14 Q2FY14 Q3FY14 FY14 Q1FY15 Q2FY15 Q3FY15 FY15 Q1FY16 Q2FY16 Q3FY16, calculated NIM for FY15E and 16E Exhibit 6: Raise our NPA estimates post sharp rise in slippages in FY16 6 90 We have factored in GNPA of 1980 crore and NNPA of 1221 crore by 5 4 3 2 3.0 3.5 3.4 3.6 3.8 3.9 3.4 3.5 3.4 2.8 2.5 2.2 2.1 2.2 2.1 2.6 2.9 3.2 3.1 80 70 60 1 0 FY10 FY11 FY12 Q1FY13 Q2FY13 Q3FY13 FY13 Q1FY14 Q2FY14 Q3FY14 FY14E Q1FY15 Q2FY15 Q3FY15 FY15 Q1FY16 Q2FY16 50 40 GNPA (LHS) NNPA (LHS) PCR* (RHS) Source: Company quarterly presentation, ICICIdirect.com Research Asset quality over the years has remained stable until the past three quarters. On the asset quality front, GNPA slippages remained high at 571 crore of which 200 crore was sold to ARC taking GNPA to 1684 crore. Net addition was 185 crore raising GNPA ratio to 3.15% from 2.9% ICICI Securities Ltd Retail Equity Research Page 4

QoQ. Two large metal accounts slipped in corporate slippages of 190 crore. Retail and SME NPA were 61 crore and 190 crore respectively. The rise in NNPA was higher at ~ 201 crore QoQ to 876 crore. Accordingly NPA provisions were higher than expected at 75 crore. Bank does not have any SDR or 5:25 restructuring. Total standard outstanding restructured assets stood at 2250 crore forming 4.2% of credit. Exhibit 7: Concerns on credit growth, quality to hit return ratios 25.0 1.8 We expect RoA to be below 1% and RoE of 9.8% by 20.0 1.4 1.3 1.4 1.4 1.4 1.3 1.3 1.3 1.2 1.2 1.3 1.4 1.3 1.5 1.2 15.0 10.0 5.0 14.4 14.3 13.1 13.6 14.113.9 14.113.9 12.612.5 13.2 14.0 13.7 0.7 0.6 6.8 7.2 0.8 0.8 0.8 0.8 8.1 8.0 8.6 9.8 0.9 0.6 0.3 0.0 FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 FY13 Q1FY14 Q2FY14 Q3FY14 FY14 Q1FY15 Q2FY15 Q3FY15 FY15 Q1FY16 Q2FY16 Q3FY16 ROE (LHS) ROA (RHS) Source: Company quarterly presentation and annual report, ICICIdirect.com Research Exhibit 8: Consistent lower RoE and now RoA disappoint FY11 FY12 FY13 FY14 FY15 Net interest income/ avg total assets 3.7 3.5 3.0 3.1 3.0 2.8 2.8 Non-interest income/ avg total assets 1.1 0.9 1.0 1.0 1.1 1.0 0.9 Net total income/ avg total assets 4.8 4.4 4.0 4.0 4.1 3.8 3.7 Operating expenses/ avg total assets 1.8 1.7 1.8 2.0 2.1 2.1 2.1 Operating profit/ avg total assets 3.0 2.7 2.2 2.0 2.1 1.7 1.6 Provisions/ avg total assets 1.1 0.6 0.4 0.4 0.1 0.5 0.4 Return on avg assets 1.5 1.4 1.3 1.2 1.3 0.8 0.8 Leverage (avg assets/ avg equity) (x) 9.0 10.4 10.9 10.9 10.7 10.9 11.5 Return on equity 13.5 14.4 13.9 12.6 13.7 8.6 9.8 ICICI Securities Ltd Retail Equity Research Page 5

[ Outlook and valuation Slippages from corporate and SME continue to mar performance and thereby have raised provisions and reduced PAT estimates by 15% to 687 crore. Revised GNPA estimates also upwards to 1790 crore (3.2%). Lower RoE and RoA at 9% and 0.8% respectively are expected to stay. We are now valuing the bank at 1x vs 1.3x earlier, we revised our rating to Sell from Hold and revise target price lower to 45 from 60 earlier. Exhibit 9: Valuation NII Growth PAT Growth PE ABV P/ABV RoA RoE ( cr) ( cr) (x) ( ) (x) FY13 1,975 1.1 838 7.9 10.2 34.7 1.4 1.3 13.9 FY14 2,229 12.9 839 0.1 10.2 38.7 1.3 1.2 12.6 FY15 2,380 6.8 1,006 19.9 8.5 43.9 1.1 1.3 13.7 2,453 3.0 687 (31.7) 12.5 42.3 1.2 0.8 8.6 2,755 12.3 840 22.3 10.2 45.0 1.1 0.8 9.8 ICICI Securities Ltd Retail Equity Research Page 6

Company snapshot 100 90 80 70 Target price: 45 60 50 40 30 20 10 0 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Source: Bloomberg, Company, ICICIdirect.com Research Key events Date Event Jan-06 Acquires Ganesh Bank of Kurundwad FY07 Enters into JV agreement with IDBI Ltd and Fortis Insurance International for incorporating life insurance company May-07 Earnings surprises positively as Federal Bank delivers 23% higher PAT than estimate Oct-07 Issues rights in the ratio of 1:1 at a premium of 240 per share Dec-11 Deregulation of NRE/NRO deposits leads to rise CoF for Federal Bank, leading to a decline in NIM from 4% in Q3FY12 to 3.1% in Q1FY14 as a fair portion of deposits come from same May-13 G-sec yields spike post Fed announcement of its intention to taper QE on May 22 and tight liquidity measures by the RBI. MTM risk and CoF rise Sep-13 Stock recovers as new governor announces measure to tackle rupee volatility, eases liquidity. Risk of further rise in CoF subsides but MTM risk stay Sep-13 With governor's measures easing liquidity, risk of a further rise in CoF subsides while RBI swap window for FCNR deposit helps to ease liquidity and provide cheap rate deposit for Federal Bank. Also, no CRR/SLR requirement on the same. Stock split in 1:10 ratio done Oct-13 Stock split of 10/- per share of the bank into shares of 2/- each May-15 Bonus issued in the ratio of 1:1 Top 10 Shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m) Change (m) (in %) Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 1 Nuvo ChrysCapital Advisors Pvt. Ltd. 30-Jun-15 4.93 84.7 0.0 Promoter - - - - - 2 Reliance Capital Asset Management Ltd. 31-Aug-15 4.73 81.2-0.4 FII 37.7 38.9 35.6 34.4 30.6 3 Templeton Asset Management Ltd. 30-Sep-15 4.52 77.7 0.0 DII 27.1 28.2 32.9 34.0 37.5 4 ICICI Prudential Asset Management Co. Ltd. 31-Aug-15 3.98 68.4-4.4 Others 35.3 32.2 31.5 31.6 32.0 5 Birla Sun Life Asset Management Company Ltd. 31-Aug-15 3.71 63.7 4.7 6 Veetil (Yusuffal Musaliam AB) 30-Jun-15 3.68 63.2 0.0 7 Amansa Capital Pte Ltd. 30-Jun-15 3.03 52.0 1.9 8 UTI Asset Management Co. Ltd. 31-Aug-15 2.85 48.9 0.0 9 HDFC Asset Management Co., Ltd. 31-Aug-15 2.55 43.9-5.7 10 Dimensional Fund Advisors, L.P. 31-Aug-15 2.54 43.7-0.3 Source: Reuters, ICICIdirect.com Research Recent Activity Buys Sells Investor name Value Shares Investor name Value Shares Hasham Investment & Trading Company Pvt. Ltd. 21.38m 18.40m HSBC Global Asset Management (Hong Kong) Limited -14.13m -17.71m Birla Sun Life Asset Management Company Ltd. 4.90m 4.72m World Bank -8.69m -7.48m Manulife Asset Management (Asia) 4.36m 4.40m HDFC Asset Management Co., Ltd. -5.29m -5.72m Franklin Templeton Asset Management (India) Pvt. Ltd. 4.07m 4.40m ICICI Prudential Asset Management Co. Ltd. -4.07m -4.40m Tata Asset Management Limited 3.50m 3.78m Excel Funds Management Inc. -3.37m -3.32m Source: Reuters, ICICIdirect.com Research ICICI Securities Ltd Retail Equity Research Page 7

[ Financial summary Profit and loss statement Crore (Year-end March) FY14 FY15 Interest Earned 6,946.1 7,419.5 7,694.4 8,472.9 Interest Expended 4717.5 5039.1 5241.5 5718.4 Net Interest Income 2,228.6 2,380.4 2,452.8 2,754.5 growth 12.9 6.8 3.0 12.3 Non Interest Income 693.8 878.3 843.4 926.3 Fees and advisory 333.8 381.1 457.4 544.3 Trading Gains 156.2 255.7 127.8 102.3 Other income 203.8 241.5 258.2 279.8 Net Income 2922.5 3258.7 3296.2 3680.8 Staff cost 771.5 892.0 1025.8 1177.6 Other operating Expense 670.5 739.0 808.4 870.8 Operating Profit 1480.4 1627.8 1462.0 1632.5 Provisions 268.4 106.7 425.4 364.9 PBT 1212.0 1521.0 1036.6 1267.5 Taxes 373.1 515.3 349.3 427.2 Net Profit 838.9 1,005.8 687.3 840.4 growth 0.1 19.9-31.7 22.3 EPS ( ) 4.9 5.9 4.0 4.9 Key ratios (Year-end March) FY14 FY15 Valuation No. of Equity Shares (Crores) 171.1 171.3 171.6 171.6 EPS (Rs.) 4.9 5.9 4.0 4.9 BV (Rs.) 40.6 45.2 48.2 52.1 ABV (Rs.) 38.7 43.9 42.3 45.0 P/E 10.2 8.5 12.5 10.2 P/BV 1.2 1.1 1.0 1.0 P/ABV 1.3 1.1 1.2 1.1 Yields & Margins Net Interest Margins 3.3 3.3 3.0 3.0 Yield on assets 10.3 10.2 9.5 9.2 Avg. cost on funds 7.0 7.0 6.8 6.6 Yield on average advances 11.4 11.5 10.6 10.4 Avg. Cost of Deposits 7.2 7.1 6.6 6.4 Quality and Efficiency Cost to income ratio 49.3 50.0 55.6 55.7 Credit/Deposit ratio 72.7 72.4 70.8 69.6 GNPA 2.5 2.1 3.2 3.1 NNPA 0.7 0.4 1.8 1.9 RoE 12.6 13.7 8.6 9.8 RoA 1.2 1.3 0.8 0.8 Balance sheet Crore (Year-end March) FY14 FY15 Sources of Funds Capital 171.1 171.3 171.6 171.6 Reserves and Surplus 6779.5 7568.8 8109.7 8773.6 Networth 6950.6 7740.1 8281.3 8945.2 Deposits 59731.3 70825.0 79521.8 91216.4 Borrowings 5688.0 2308.2 2460.6 2689.2 Other Liabilities & Provisions 2224.3 1979.1 2235.5 2623.9 Total 74,594.2 82,852.4 92,499.2 1,05,474.7 Application of Funds Fixed Assets 425.0 466.6 497.3 556.9 Investments 24117.9 24409.2 28141.9 33059.1 Advances 43436.1 51285.0 56276.2 63464.1 Other Assets 2085.9 1909.7 2444.5 2608.6 Cash with RBI & call money 4529.4 4780.0 5139.3 5786.0 Total 74,594.2 82,850.5 92,499.2 1,05,474.7 Growth ratios (Year-end March) FY14 FY15 Total assets 5.0 11.1 11.6 14.0 Advances -1.5 18.1 9.7 12.8 Deposit 3.7 18.6 12.3 14.7 Total Income 11.8 8.6 2.9 10.1 Net interest income 12.9 6.8 3.0 12.3 Operating expenses 21.7 13.1 12.5 11.7 Operating profit 1.8 10.0-10.2 11.7 Net profit 0.1 19.9-31.7 22.3 Net worth 9.2 11.4 7.0 8.0. ICICI Securities Ltd Retail Equity Research Page 8

ICICIdirect.com coverage universe (Banking) CMP M Cap EPS ( ) P/E (x) P/ABV (x) RoA RoE Sector / Company ( ) TP( ) Rating ( Cr) FY15 FY15 FY15 FY15 FY15 Bank of India (BANIND) 101 116 Sell 7,996 26-3 16 3.9 NA 6.1 0.4 0.8 0.6 0.3 0.0 0.2 6-1 4 Bank of Baroda (BANBAR) 130 172 Hold 29,958 15 16 20 8.5 8.3 6.6 0.9 1.0 0.9 0.5 0.5 0.5 9 9 10 Punjab National Bank (PUNBAN) 97 130 Hold 17,542 17 18 25 5.9 5.5 3.9 0.8 0.7 0.7 0.5 0.5 0.7 8 8 11 State Bank of India (STABAN) 196 300 Buy 146,403 18 19 22 11.2 10.5 9.1 1.5 1.2 1.1 0.7 0.7 0.7 11 10 11 Indian Bank (INDIBA) 99 184 Buy 4,248 21 23 29 4.7 4.3 3.4 0.4 0.4 0.4 0.5 0.5 0.6 7 7 9 Axis Bank (AXIBAN) 396 600 Buy 93,957 31 35 42 12.7 11.4 9.5 2.2 1.8 1.6 1.7 1.7 1.7 18 17 17 City Union Bank (CITUNI) 85 105 Buy 5,085 6 7 8 13.2 12.0 10.4 2.1 1.8 1.6 1.4 1.4 1.5 16 15 15 DCB Bank (DCB) 78 85 Sell 2,015 7 6 4 11.4 13.7 18.8 1.5 1.4 1.3 1.3 0.9 0.6 15 10 7 Federal Bank (FEDBAN) 49 45 Sell 8,392 6 5 5 8.3 10.3 9.0 1.1 1.1 1.0 1.3 0.9 0.9 14 10 11 HDFC Bank (HDFBAN) 1,045 1,220 Buy 261,363 41 49 61 25.7 21.3 17.1 4.3 3.7 3.1 1.9 1.9 1.9 19 18 19 IndusInd Bank (INDBA) 936 1,000 Hold 54,496 34 39 50 27.6 23.7 18.9 4.8 3.2 2.8 1.8 1.9 2.0 18 16 15 Jammu & Kashmir Bk(JAMKAS) 76 95 Hold 3,660 10 17 21 7.2 4.4 3.7 0.8 0.7 0.6 0.7 1.0 1.1 9 13 14 Kotak Mahindra Bank (KOTMAH) 687 677 Hold 125,756 14 11 13 50.4 64.6 53.6 6.0 5.7 5.2 1.5 1.0 1.0 12 9 9 South Indian Bank (SOUIN0) 19 23 Hold 2,570 2 3 3 8.3 7.1 6.1 0.8 0.8 0.7 0.5 0.6 0.6 9 10 11 Yes Bank (YESBAN) 664 850 Buy 27,848 48 57 67 13.8 11.6 10.0 2.4 2.1 1.8 1.6 1.6 1.6 21 19 19 ICICI Securities Ltd Retail Equity Research Page 9

RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more; Pankaj Pandey Head Research pankaj.pandey@icicisecurities.com ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai 400 093 research@icicidirect.com ICICI Securities Ltd Retail Equity Research Page 10

ANALYST CERTIFICATION We /I, Kajal Gandhi, CA, Vasant Lohiya, CA and Vishal Narnolia, MBA Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Terms & conditions and other disclosures: ANALYST CERTIFICATION ICICI Securities Limited (ICICI Securities) is a Sebi registered Research Analyst having registration no. INH000000990. ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking We and /I, is, Kajal inter Gandhi, alia, engaged CA, Vasant in the Lohiya, business CA of and stock Sheetal brokering Ashar, and CA distribution Research Analysts, of financial authors products. and ICICI the names Securities subscribed is a wholly-owned to this report, subsidiary hereby certify of ICICI that Bank all which of the is views India s expressed largest private in this sector research bank report and accurately has its various reflect subsidiaries our views engaged about the in subject businesses issuer(s) of housing or securities. finance, We asset also management, certify that no life part insurance, of our compensation general insurance, was, is, venture or will capital be directly fund or management, indirectly related etc. ( associates ), to the specific the recommendation(s) details in respect or of view(s) which are in this available report. on www.icicibank.com. Terms & conditions and other disclosures: ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking ICICI and other Securities business Limited relationship (ICICI Securities) with a significant is a full-service, percentage integrated of companies investment covered banking by and our Investment is, inter alia, Research engaged Department. in the business ICICI of Securities stock brokering generally and prohibits distribution its of analysts, financial persons products. reporting ICICI Securities to analysts is a and wholly-owned their relatives subsidiary from maintaining of ICICI Bank a financial which interest is India s in the largest securities private or sector derivatives bank of and any has companies its various that subsidiaries the analysts engaged cover. in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. ( associates ), the details in respect of which are available on www.icicibank.com. The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and ICICI meant Securities solely for is the one selected of the leading recipient merchant and may bankers/ not be altered underwriters in any way, of securities transmitted and to, participate copied or in distributed, virtually all in securities part or in trading whole, markets to any other in India. person We and or to our the associates media or reproduced might have in investment any form, banking without and prior other written business consent relationship of ICICI Securities. with a significant While we percentage would endeavour of companies to update covered the information by our Investment herein on Research a reasonable Department. basis, ICICI ICICI Securities Securities is under generally no obligation prohibits to its update analysts, or persons keep the reporting information to analysts current. and Also, their there relatives may be from regulatory, maintaining compliance a financial or interest other in reasons the securities that may or derivatives prevent ICICI of any Securities companies from that doing the so. analysts Non-rated cover. securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this The company, information certain and opinions other circumstances. in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior This report written is consent based on of information ICICI Securities. obtained While from we public would sources endeavour and to sources update believed the information to be reliable, herein but on no a independent reasonable basis, verification ICICI Securitiesis has been made is under nor is no its obligation accuracy to or update completeness or keep guaranteed. the information This current. report and Also, information there may herein be regulatory, is solely for compliance informational other purpose reasons and shall that may not be prevent used or ICICI considered Securities as from an offer doing document so. Non-rated or solicitation securities of offer indicate to buy that or rating sell or on subscribe a particular for security securities has or been other suspended financial temporarily instruments. and Though such disseminated suspension is to in all compliance the customers with simultaneously, applicable regulations not all customers and/or ICICI may Securities receive this policies, report in at circumstances the same time. where ICICI Securities ICICI Securities will not might treat be recipients acting in as an customers advisory by capacity virtue of to their this company, receiving this or in report. certain Nothing other circumstances. in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment This objectives, report financial is based positions on information and needs obtained of specific from public recipient. sources This and may sources not be taken believed in substitution to be reliable, for but the no exercise independent of independent verification judgment has been by made any recipient. nor is its The accuracy recipient or completeness should independently guaranteed. evaluate This report the investment and information risks. The herein value is and solely return for informational on investment purpose may vary and because shall not of be changes used or in considered interest rates, as an foreign offer exchange document rates or solicitation or any other of offer reason. to buy ICICI or Securities sell or subscribe accepts for no securities liabilities or whatsoever other financial for any instruments. loss or damage Though of any disseminated kind arising out to all of the customers use of this report. simultaneously, Past performance not all customers is not necessarily may receive a guide this to report future at performance. the same time. Investors ICICI Securities are advised will to not see treat Risk recipients Disclosure as Document customers to by understand virtue of their receiving risks associated this report. before Nothing investing in in this the report securities constitutes markets. investment, Actual results legal, may accounting differ materially and from tax advice those set or forth a representation in projections. that Forward-looking any investment statements or strategy are is not suitable predictions or appropriate and may be to subject your specific to circumstances. change without The notice. securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the ICICI investment Securities risks. or its The associates value and might return have on managed investment or co-managed may vary because public of offering changes of in securities interest for rates, the foreign subject exchange company rates or might or any have other been reason. mandated ICICI Securities by the subject accepts company no liabilities for any whatsoever other assignment for any loss in the or past damage twelve of months. any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change ICICI Securities without or notice. its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction. ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in ICICI the Securities past twelve or months. its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past twelve months. ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect ICICI Securities of managing encourages or co-managing independence public in offerings, research corporate report preparation finance, investment and strives banking to minimize or merchant conflict banking, preparation brokerage of research services report. other ICICI advisory Securities service or its in analysts a merger did or not specific receive transaction. any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any ICICI material Securities conflict or of its interest associates at the might time of have publication received of any this compensation report. for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past twelve months. It is confirmed that Kajal Gandhi, CA, Vasant Lohiya, CA and Vishal Narnolia, MBA, Research Analysts of this report have not received any compensation from the companies mentioned in the report in the ICICI preceding Securities twelve encourages months. independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any Compensation material conflict of of our interest Research at the Analysts time of is publication not based of on this any report. specific merchant banking, investment banking or brokerage service transactions. ICICI It is confirmed Securities that or its Kajal subsidiaries Gandhi, CA, collectively Vasant Lohiya, or Research CA and Analysts Sheetal do Ashar, not own CA, 1% Research or more Analysts of the equity of this securities report have of the not Company received any mentioned compensation in the report from the as of companies the last day mentioned of the month in the preceding report the publication preceding twelve of the months. research report. Since Compensation associates of our of ICICI Research Securities Analysts are is engaged not based in on various any specific financial merchant service banking, businesses, investment they banking might have or brokerage financial service interests transactions. or beneficial ownership in various companies including the subject company/companies mentioned in this report. ICICI Securities or its subsidiaries collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the It publication is confirmed of the that research Kajal Gandhi, report. CA, Vasant Lohiya, CA and Vishal Narnolia, MBA, Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report. ICICI Since Securities associates may of have ICICI issued Securities other are reports engaged that are in inconsistent various financial with and service reach businesses, different conclusion they might from have the information financial interests presented or in beneficial this report. ownership in various companies including the subject company/companies mentioned in this report. Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report. It is confirmed that Kajal Gandhi, CA, Vasant Lohiya, CA and Sheetal Ashar, CA, Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report. We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities. ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, Neither the Research availability Analysts or use would nor ICICI be Securities contrary to have law, been regulation engaged or which in market would making subject activity ICICI for Securities the companies and affiliates mentioned to any in registration the report. or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to We observe submit such that no restriction. material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. ICICI Securities Ltd Retail Equity Research Page 11