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					November 21, 2011

QUARTERLY EARNINGS SEASON

                                                                                                                                                                                    MORGAN STANLEY RESEARCH
India Strategy                                                                                                                                                                      ASIA

                                                                                                                                                                                    Morgan Stanley India Company Private Limited+
Earnings Final Cut: Tough Quarter
                                                                                                                                                                                    Sheela Rathi
                                                                                                                                                                                    Sheela.Rathi@morganstanley.com
Key takeaways from the earnings season                                                                                                                                              +91 226118 2224
                                                                                     Quarterly Earnings for QE Sep-11 Snapshot
MS coverage (ex-oil PSU), Sensex earnings growth led                                                                                                                                Ridham Desai
                                                                                      YoY Earnings growth           Q3F11      Q4F11      Q1F12     Q2F12E     Q2F12A
broad market (ex-oil PSU) earnings growth.                                                                                                                                          Ridham.Desai@morganstanley.com
                                                                                                                                                                                    +91 22 6118 2222
MS coverage universe (ex-oil PSU) earnings grew at 6%                                 MS coverage                    25%        10%        11%        -9%        -6%

YoY, 1ppt below expectations. Surprise breadth                                        MS coverage ex-oil psu         15%        12%         3%         3%         6%
                                                                                                                                                                                    Amruta Pabalkar
improved marginally QoQ to 47%.                                                                                                                                                     Amruta.Pabalkar@morganstanley.com
                                                                                                                                                                                    +91 2261182225
                                                                                      Broad Market                   25%        14%        15%          -        -23%
The set of 1149 companies for which we track long-term
earnings trends reported a slight deceleration in revenue                                                                                                                           Utkarsh Khandelwal
                                                                                      Broad Market ex-oil psu        17%        14%        12%          -        -4%                Utkarsh.Khandelwal@morganstanley.com
growth at 23% YoY, off its 2-year high from the previous                                                                                                                            +91 226118 2226
quarter of 26% YoY.                                                                   BSE Sensex                     26%         4%         9%         8%        15%

                                                                                      Source: Company data, Capitaline, Morgan Stanley Research
Profits fell across market segments with mega-caps
outperforming. Most of this was caused by forex losses.                               E = Morgan Stanley analyst estimates for 119 companies so far reported
Excluding forex losses, net profit growth for our coverage                            A = Actual earnings for the quarter for 118 companies so far reported
universe was up 15% (ex-oil PSU).
EBITDA margin compression was seen in 8 out of 10
sectors. Gross margins remained at its 11-year low.                                              PLEASE SEE INSIDE FOR DETAILED
Interest cost to sales ratio rose to a 9-year high.                                             BROAD MARKET DATA ON EARNINGS
Sensex earnings growth rose to 15% YoY, a beat of
7ppt. Ex-Bharti and Tata Steel, earnings grew 24%.
Consensus raised earnings for Technology and Staples
during the earnings season. Aggregate F2012 earnings
growth estimates for the Sensex fell 2.7% to 12.6%.


Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the
firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research
as only a single factor in making their investment decision.
For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report.
+= Analysts employed by non-U.S. affiliates are not registered with FINRA, may not be associated persons of the member and may not be subject to NASD/NYSE restrictions on communications with a subject company, public appearances and
trading securities held by a research analyst account.
                                                                                                                            MORGAN STANLEY RESEARCH
                                                                                                                                                  India Strategy
                                                                                                                                              November 21, 2011




Key Takeaways from the September-11 quarter
Narrow market earnings (ex-oil PSU) led the broad market
earnings (ex-oil PSU)                                                             •   Eight out of 10 sectors reported compression in margins with the
                                                                                      exception of Financials and Healthcare.
 •   The set of 1149 companies for which we track long-term earnings
     trends showed a slight deceleration in the September-quarter in revenue • During the quarter, the interest cost to sales ratio rose to a 9-year
     growth at 23% YoY. The growth was off its 2-year high from the previous
                                                                               high while depreciation to sales ratio rose marginally QoQ.
     quarter of 26% YoY.

 •   EBITDA margins fell to a 12-quarter low and net profit growth (ex-oil        •   Gross margins for MS coverage remained at their 11-year lows.
     PSU) fell 3% - for the first since Sep-09.
                                                                                  •   Utilities led the earnings growth charge while Oil PSUs lagged.
 •   Profits fell across market segments. Mega-caps outperformed the other
     cap segments.                                                                    Earnings relative to expectations
 •   For the 3000+ companies (which we track all throughout the earnings
                                                                                  •   Aggregate earnings (ex-oil PSU) growth for the MS coverage
     seasons), three sectors stood out in terms of an earnings fall, namely, oi
     PSU, airlines and telecoms.                                                      universe lagged the analysts’ expectations during the quarter by 1%.
                                                                                      However, earnings surprise breadth slightly rose QoQ to 47% (from
 •   For the MS coverage universe, deceleration in top-line and bottom-line           44%).
     growth were the key highlights. Revenue growth (ex-oil PSU) slowed to
     a 10-quarter low albeit remaining strong at 21% YoY. EBITDA margins          •   Energy sector reported the most number of earnings misses while
     contracted for the fourth consecutive quarter, down 188bps YoY,                  Telecoms and Technology reported the most beats. In terms of
     whereas net profit growth (ex-oil PSU) slowed to a 8-quarter low at 6%           earnings growth, Utilities followed by Materials lagged expectations
     YoY.                                                                             while Telecoms and Industrials came ahead of expectations.
 •   Most of this was caused by forex losses due to the sharp depreciation of
     the currency. Excluding forex losses, net profit growth for our coverage  • Sensex companies reported profit growth of 15%YoY – 7ppt ahead
     universe was up 15% (ex-oil PSU). 45 MS coverage companies reported         of expectations. Ex-ONGC, earnings growth stood at 8% YoY – 4ppt
     a forex loss accounting for 7% of the aggregate EBITDA. The currency        behind expectations.
     ended the quarter at R48.9 vs. USD whereas it averaged Rs45.8/USD
     for the quarter. This has meant that the balance sheet translation losses
     were not fully covered by the currency related revenue gains.




                                                                                                                                                                   2
                                                                                                                                                                                                                                                                                                                                                                   MORGAN STANLEY RESEARCH
                                                                                                                                                                                                                                                                                                                                                                                                                                       India Strategy
                                                                                                                                                                                                                                                                                                                                                                                                                                   November 21, 2011




  Charts You Don’t Want to Miss

  MS Coverage Gross Margins                                                                                                                                                                                                    Earnings Breadth Surprise
  Fall further during the quarter                                                                                                                                                                                              QoQ improvement, below 5-year average
 60%                                        Gros s M argins (ex Ene rgy, Te ch, Financials , Te lecom s)                                                                                                                       75%             Surprise Breadth: % of Com panies Beating MS Expectations
 58%                                                                                                                                                                                                                           70%
 56%                                                                                                                                                                                                                           65%
 54%                                                                                                                                                                                                                           60%
                                                                                                                                                                                                                               55%
 52%
                                                                                                                                                                                                                               50%                                                                                                                                                                                                                                              47%
 50%
                                                                                                                                                                                                                               45%
 48%
                                                                                                                                                                                                                               40%
 46%
                                                                                                                                                                                                                               35%
 44%
                                                                                                                                                                                                                               30%
 42%                                                                                                                                                                                                                           25%
        Jun-00
                 Dec-00
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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                Sep-11
Forex Losses for MS coverage universe                                                                                                                                                                                          Interest Costs
Forex losses hurt earnings during the quarter                                                                                                                                                                                  Interest to sales ratio rises for a third consecutive quarter
                                                                    # of com panies                                                                                   Fore x as %
    MS cove rage (ex-                                                                        Fore x                                 Total                                                                                      90%              Ex Energy                                                                   YoY change in interest costs (LS)                                                                                                                   4%
                                                              Aggre gate                                                                                                 EBITDA                            Net profit
        bank s)                                                                            loss / gain                             revenue
 Consumer Discretionary                                                 18                                  8                              1%                                   7%                                   12%       70%
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                3%
 Consumer Staples                                                       12                                  3                              2%                                   11%                                  18%                                                                                        Interest/sales % (RS)
                                                                                                                                                                                                                               50%
 Energy                                                                 5                                   3                              0%                                   2%                                   3%
 Oil PSU                                                                5                                   2                              2%                                   58%                             -79%
                                                                                                                                                                                                                               30%                                                                                                                                                                                                                                              2%
 Real estate                                                            6                                   0                              0%                                   0%                                   0%
 Healthcare                                                             8                                   0                              0%                                   0%                                   0%        10%
 Industrials                                                            13                                  6                              1%                                   6%                                   13%                                                                                                                                                                                                                                                        1%
 Materials                                                              13                                  7                              2%                                   14%                                  27%       -10%
 Technology                                                             10                                  9                              0%                                   2%                                   2%
 Telecom                                                                6                                   3                              1%                                   3%                                   45%       -30%                                                                                                                                                                                                                                             0%
                                                                                                                                                                                                                                       Jun-99

                                                                                                                                                                                                                                                    Mar-00

                                                                                                                                                                                                                                                                      Dec-00



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                                                                                                                                                                                                                                                                                                                                                                                                                                                Sep-10
 Utilities                                                              7                                   6                              4%                                   19%                                  35%
 Total                                                                  103                            47                                   1%                                  10%                                  23%
 Total ex-ene rgy                                                       98                             45                                   1%                                  7%                                   13%

     Source: Capitaline, Company Data, Morgan Stanley Research                                                                                                                                                                                                                                                                                                                                                                                                                           3
                                                                                                                                                             MORGAN STANLEY RESEARCH
                                                                                                                                                                                   India Strategy
                                                                                                                                                                               November 21, 2011




QE Sep-11 Earnings Season Actual vs. Expected (Morgan Stanley Coverage Universe)
           Total MS                                  Revenue Growth:                                                                                                  EBITDA Margins:
                                                                                                            Sector Profit Growth:                                     Compression across 9
          Coverage:                                     21%YoY for MS                                        Utilities leading the pack
    Accounts for 70% of                             coverage and 19% YoY                                                                                                sectors excluding
                                                                                                                while Oil PSU’s lag                                      Healthcare and
     India’s market cap                              for the Broad Market
                                                                                                                                                                           Financials
                                 YoY change                  MS Es tim ates                                                   Actuals
                # C os                                                                                                                      C hg in
  # Co s                                                                                                                                                N P Growth
               beating                                                   N et      EB IT D A                        N et        EB IT DA   EB IT D A
   Rptd                         M S C o verage      Sales   EB IT D A                          Sales   EB IT D A                                          vs. M S
              earnings                                                  P ro fit   M argins                        P ro fit     M argins    M rgn
 earnings                                                                                                                                               estimates
            expectatio ns                                                                                                                   (bps)
    16            7         Cons. Disc.              18%      8%          3%         14%       19%       6%         1.2%          13%           (167)         -2%
     8            3         Cons. Staples            18%      16%        15%         23%       21%       20%        19%           23%            (13)          4%
     5            0         Energy                   37%      11%        24%         14%       30%       4%         25%           14%           (365)          1%
     4            2         Oil PSU                  19%     -53%       -87%         8%        21%      -39%       -67%           10%         (1,001)         20%
                                                                                                                                                                            NP Growth vs
    27           15         Financials               11%      10%         9%         53%       12%       15%         8%           55%            132           0%           MS Est: leads
     7            3         Healthcare               19%      15%         5%         23%       24%       30%        11%           25%            112           6%            in 6 out of 11
    13            7         Industrials              20%      18%        -5%         16%       26%       19%         3%           16%           (102)          8%               sectors
    14            5         Materials                14%      15%        -6%         18%       21%       5%        -14%           16%           (231)         -8%
    10            6         Technology               21%      16%        14%         24%       19%       13%        11%           24%           (128)         -3%
     6            4         Telecom                  12%      12%       -85%         30%       11%       11%       -66%           30%             (3)         19%
     8            3         Utilities                23%      36%        47%         22%       25%       24%        34%           20%            (23)        -13%
    118          55         Total (M S Cov)          20%       3%        -8%         20%       21%        4%        -6%           20%           (327)          2%
    113          55         Total e x-oil ps u       20%      13%         7%         22%       21%       12%         6%           22%           (188)         -1%
                            Total e x-fin and oil
    86           40         psu                      22%      15%         6%         18%       23%       11%         5%           17%           (192)         -1%
                            Total e x-m ate rials
    104          50         & oil ps u               22%      13%         9%         23%       22%       13%        10%           23%           (179)          1%
                            Total e x-Te le com s
    112          51         & oil ps u               21%      14%        10%         22%       22%       12%         8%           21%           (195)         -1%
    30           16         Sens e x                 21%      13%         9%         23%       23%       14%        15%           23%           (171)          7%
    28           16         Sens e x e x-oil ps u    22%      17%        13%         21%       23%       12%         8%           20%           (198)         -4%
   3273                     Broad m ark e t                                                    19%       -1%        -23%          18%           (352)
                            Broad m ark e t Ex-
   3266                     oil ps u                                                           19%       10%        -4%           21%           (175)


                                                         Sensex Profit                                                                                               Aggregate Earnings
      Earnings Beat:                                                                                        Broad Market (ex-
    Surprise breadth (at                                Growth: up 15%                                                                                               (ex-oil PSU): up 6%
                                                       YoY, 7ppt ahead of                                   oil PSU): earnings                                          YoY, 1ppt below
           46%)                                                                                                      fall 4%
                                                         expectations                                                                                                    expectations



Source: Company data, Capitaline, Morgan Stanley Research. Consumer staples doesn’t include estimates and actual data for sugar companies                                                           4
                                                                                                                                     MORGAN STANLEY RESEARCH
                                                                                                                                                          India Strategy
                                                                                                                                                      November 21, 2011




Snapshot of the Broad Market Earnings: Across the Market Capitalization Segments

                                                                           Revenue Growth: Strong
                                                                           across the cap curve except                                Change in EBITDA
                                                                                 for Nano caps                                     Margins: Margin compression
                                                                                                                                       across the cap curve

                                 Num ber of                                                Ebitda      Change in Contribution to
Based on        Market cap range               Revenue                      Net profit
                                 Com panies               Ebitda Grow th                 Margins for     Ebitda  Aggregate Net
m arket cap       (in US$ m n)                  Grow th                      Grow th
                                  Reported                                               QE-Sep 11      m argins     Profit



Mega Caps      More than US$5bn       49         20%           4%              -7%          22%             (317)      68%


               Betw een US$ 2bn
Large Caps                            46         21%          -27%            -75%          12%             (790)      5%
               and US$ 5bn

               Betw een US$ 250mn
Mid Caps                             295         19%           10%            -13%          21%             (177)      23%
               and US$ 2bn                                                                                                                  Net Profit Growth:
                                                                                                                                              Weak across the
               Betw een US$ 50mn
Small Caps                           421         19%           -9%            -56%          11%             (360)      4%                         board
               and US$ 250mn

               Betw een US$ 25mn
Micro Caps                           246         18%           0%             -34%          11%             (196)      1%
               and US$ 50mn


Nano Caps      Less than US$ 25mn    2212        8%           -19%             NM            7%             (243)      -1%                  EBITDA Margins:
                                                                                                                                            Mega- and Mid-caps
Broad Market                         3273        19%           -1%            -23%          18%             (352)     100%                  report the strongest
                                                                                                                                                  margins
Broad Market
                                     3266        19%           10%             -4%          21%             (175)      NM
(ex-oil psu)

                    Sample Size:
                represents almost 100
                  percent of India’s
                                                                                     EBIDTA Growth: Weak
                     market cap                                                               trends




 Source: Capitaline, Morgan Stanley Research                                                                                                                               5
                                                                                                                          MORGAN STANLEY RESEARCH
                                                                                                                                              India Strategy
                                                                                                                                          November 21, 2011




Snapshot of Earnings by Sector: Across Market Capitalization Segments
Sample of 3273 companies classified under 10 sectors and market cap segments
                                                                                                  Change in EBITDA
YoY Change      No of Companies       Net Sales          PBIDT             PAT    EBITDA Margin       Margin         Key Sector Standouts
                                                  Consumer Discretionary
Mega Caps               5               20%                7%                1%       14%              -169
Large Caps              5               16%               -3%               -5%       21%              -425          •   Revenue growth was robust
Mid Caps               46               22%               11%              -14%       16%              -156              across sectors except for
Small Caps            100               18%               -5%              -33%       11%              -274
Micro Caps             80               16%              -18%              -75%        9%              -383              some scattered weakness in
Nano Caps             537                7%              -38%               NM         6%              -420
Aggregate             773               18%               -1%              -20%       13%              -234              micro- and nano-caps.
                                                    Consumer Staples
Mega Caps               3               18%               21%               21%       28%               76           •   Mega-cap companies in the
Large Caps              5               20%                8%                2%       20%              -222
Mid Caps               20               14%              -21%              -61%       11%              -504              Staples, Financials,
Small Caps
Micro Caps
                       16
                       16
                                        39%
                                        23%
                                                          11%
                                                        1685%
                                                                           -13%
                                                                            NM
                                                                                      11%
                                                                                       6%
                                                                                                       -296
                                                                                                       604
                                                                                                                         Healthcare, Industrials and
Nano Caps             133                6%              137%               NM         9%              503               Utilities sectors have reported
Aggregate             193               17%               11%                2%       16%               -93
                                                         Energy
                                                                                                                         profit growth exceeding 15%
Mega Caps               6               24%              -19%              -35%       14%               -757             YoY.
Large Caps              5               23%               NM                NM        NM                 NM
Mid Caps                4                8%              -60%              -22%        4%               -621
Small Caps             12               25%               20%               39%       24%               -100         •   Earnings fell across the
Micro Caps
Nano Caps
                        2
                       16
                                       -31%
                                        42%
                                                         -48%
                                                           2%
                                                                           -74%
                                                                           -52%
                                                                                      41%
                                                                                       6%
                                                                                                       -1317
                                                                                                        -228
                                                                                                                         capitalization segments for
Aggregate              45               23%              -41%              -73%        8%               -881             Energy, Materials and
                                                       Financials
Mega Caps               9                3%               22%               26%       56%               874
                                                                                                                         Telecom sector companies.
Large Caps              9               20%               13%               -9%       73%               -458             For the Utilities sector,
Mid Caps               56               18%               22%                1%       60%               212
Small Caps             34                1%              -41%               NM        30%              -2081             earnings growth was weaker
Micro Caps             15              -12%              -26%              -56%       58%              -1128
Nano Caps             426              -17%              -41%              -71%       13%               -532
                                                                                                                         for mid-, small- and micro-
Aggregate             549               10%               18%                5%       59%               400              cap companies.
                                                       Health Care
Mega Caps               2               30%               43%               15%       33%              307
Large Caps              4               13%               13%                2%       24%                -5
Mid Caps               20               20%               10%               -2%       20%              -179
Small Caps             24               17%               90%              122%       33%              1266
Micro Caps             13              -22%              -24%               NM        14%               -40
Nano Caps              98               -3%              -12%               NM        11%              -107
Aggregate             161               15%               26%               15%       24%              202



 Source: Capitaline, Morgan Stanley Research                                                                                                                   6
                                                                                                                            MORGAN STANLEY RESEARCH
                                                                                                                                               India Strategy
                                                                                                                                           November 21, 2011




Snapshot of the Sector-Wise Earnings: Across Market Capitalization Segments Contd.
Sample of 3273 companies classified under 10 sectors and market cap segments

YoY Change     No of Com panies      Net Sales          PBIDT             PAT    EBITDA Margin
                                                                                                 Change in EBITDA
                                                                                                     Margin
                                                                                                                    Key Sector Standouts
                                                       Industrials
Mega Caps              5               18%                42%             19%        12%              193           •   The weak earnings for mid- and
Large Caps             4               10%                11%              3%        21%               15
Mid Caps              53               17%               -11%             -39%       15%              -482
                                                                                                                        small-cap Industrials companies
Small Caps
Micro Caps
                      90
                      35
                                       23%
                                       19%
                                                         -11%
                                                         -12%
                                                                          -80%
                                                                           NM
                                                                                     8%
                                                                                     9%
                                                                                                      -299
                                                                                                      -330
                                                                                                                        were driven by airline
Nano Caps             265              16%               -44%             -95%       7%               -700              companies.
Aggregate             452              19%                 1%             -27%       12%              -207
                                                        Materials
Mega Caps              8               21%                3%              -16%       21%              -386
                                                                                                                    •   At the aggregate level, Oil
Large Caps             8               19%                8%               -1%       17%              -184              PSUs, Telecom, and Airline
Mid Caps              59               21%                9%               -6%       13%              -146
Small Caps            109              21%               -25%             -76%       10%              -623              companies reported the worst
Micro Caps            61               26%               -23%             -69%       7%               -436
Nano Caps             551              13%                1%              -77%       8%                -91              earnings during the quarter.
Aggregate             796              21%                -1%             -24%       15%              -312
                                                 Information Technology                                             •   Even as margin compression
Mega Caps              4               21%                18%              9%        27%                -63
Large Caps             1                2%               -40%             -21%       21%              -1479             was the theme across market
Mid Caps              16               21%                27%              31%       13%                65
Small Caps            25                4%                -3%             -40%       13%                -93             cap segments, mega-cap
Micro Caps            17                2%               143%             280%       41%              2374
Nano Caps             164              -13%              -30%              NM        8%                -202
                                                                                                                        companies in the Staples,
Aggregate             227               15%               17%              10%       21%                53              Financials, Healthcare,.
                                                        Telecoms
Mega Caps              2               16%                16%             -38%       32%               12               Industrials and Telecoms
Large Caps             1                -6%               -3%             -43%       34%               87
Mid Caps               7               20%                26%              NM        23%               119              reported margin expansion.
Small Caps             5               -32%               38%              NM        23%              1163
Micro Caps             6               56%                75%              NM        12%               137
Nano Caps             14                5%               109%              NM        7%                339
Aggregate             35                13%               16%             -54%       28%               72
                                                         Utilities
Mega Caps              5                20%               12%             18%        34%              -249
Large Caps             4                38%               35%             26%        23%               -56
Mid Caps              14                13%               10%             -31%       31%              -107
Small Caps             6                24%               27%             -25%       13%               25
Micro Caps             1                55%               4%               -3%       13%              -636
Nano Caps              8               128%               72%             61%        10%              -335
Aggregate             38                22%               14%               9%       30%              -205
                                                 Broad Market Aggregate
Broad Market         3273              19%                -1%             -23%       18%              -352



 Source: Capitaline, Morgan Stanley Research                                                                                                                    7
                                                                                                                                                                                                                                                                              MORGAN STANLEY RESEARCH
                                                                                                                                                                                                                                                                                                                               India Strategy
                                                                                                                                                                                                                                                                                                                           November 21, 2011




QE-Sep11 Earnings: Earnings Growth Slows to Lowest Level Since Sep-08
 Trend for MS coverage
Revenues Growth Ex-Energy                                                                                                                                                               Net Profit Growth (Ex-Energy)
Decelerated to a 10-quarter low – at 19.1% YoY                                                                                                                                          Slows to 8-quarter low – at 2.2% YoY
50%         YoY Re venue Grow th                                                                                                                                                        100%            % YoY Ne t Profit Grow th
                                                                                                                                 All Sectors                                                                                                                                  Ex-Financials
40%                                                                          Ex-Energy                                                                                                   80%
                                                                                                                                                                                         60%                                                                                                        Ex-Ene rgy
30%
                                                                                                                                                                                         40%
20%
                                                                                                                                                                                         20%
10%                                                                                   Ex-Materials                                                                                        0%
                                                                                                                                                                                                                                  Ex-Materials
 0%                                                                                                                                                                                     -20%
                                                                                                     Ex-Financials                                                                                                                                                                 A ll Sectors
-10%                                                                                                                                                                                    -40%

-20%                                                                                                                                                                                    -60%




                                                                                                                                                                                               Dec-00




                                                                                                                                                                                                                    Jun-02

                                                                                                                                                                                                                             Mar-03

                                                                                                                                                                                                                                      Dec-03




                                                                                                                                                                                                                                                          Jun-05

                                                                                                                                                                                                                                                                    Mar-06

                                                                                                                                                                                                                                                                               Dec-06




                                                                                                                                                                                                                                                                                                     Jun-08

                                                                                                                                                                                                                                                                                                                Mar-09

                                                                                                                                                                                                                                                                                                                             Dec-09




                                                                                                                                                                                                                                                                                                                                                   Jun-11
                                                                                                                                                                                                           Sep-01




                                                                                                                                                                                                                                                 Sep-04




                                                                                                                                                                                                                                                                                          Sep-07




                                                                                                                                                                                                                                                                                                                                        Sep-10
       Dec-00




                                  Jun-02

                                              Mar-03

                                                         Dec-03




                                                                             Jun-05

                                                                                        Mar-06

                                                                                                  Dec-06




                                                                                                                        Jun-08

                                                                                                                                      Mar-09

                                                                                                                                                   Dec-09




                                                                                                                                                                               Jun-11
                     Sep-01




                                                                   Sep-04




                                                                                                             Sep-07




                                                                                                                                                                 Sep-10


EBITDA Margins (Ex-Energy)                                                                                                                                                              EBITDA Growth (Ex-Energy)
Continue to fall                                                                                                                                                                        Another fall
  800                YoY EBITDA M argin Change (bps)                                                                                        Ex-Materials                                 70%            % YoY EBITDA Grow th
  600                                                                                                                                                                                    60%
                                                                                                                                                                                                                                                                                         Ex-Financials
  400                                                                                                                                                                                    50%
                                                                                                                                                                                                                                                                                                        Ex-Energy
  200                                                                                                                                                                                    40%

       0                                                                                                                                                                                 30%
                                                                                                                                                                                         20%
 -200                                                                                            Ex-Energy
                                                                                                                                                                                         10%
 -400
                                  Ex-Energy & M aterials                                                                                                                                  0%
 -600
                                                                                                                                                                                        -10%             A ll Sectors                          Ex-Materials
 -800
                                                                                                                      All Sectors                                                       -20%
-1,000
                                                                                                                                                                                        -30%
            Dec-00




                                     Jun-02

                                                Mar-03

                                                          Dec-03




                                                                             Jun-05

                                                                                        Mar-06

                                                                                                 Dec-06




                                                                                                                      Jun-08

                                                                                                                                   Mar-09

                                                                                                                                               Dec-09




                                                                                                                                                                          Jun-11
                         Sep-01




                                                                    Sep-04




                                                                                                           Sep-07




                                                                                                                                                            Sep-10




                                                                                                                                                                                               Dec-00




                                                                                                                                                                                                                    Jun-02

                                                                                                                                                                                                                             Mar-03

                                                                                                                                                                                                                                      Dec-03




                                                                                                                                                                                                                                                           Jun-05

                                                                                                                                                                                                                                                                     Mar-06

                                                                                                                                                                                                                                                                                Dec-06




                                                                                                                                                                                                                                                                                                       Jun-08

                                                                                                                                                                                                                                                                                                                  Mar-09

                                                                                                                                                                                                                                                                                                                               Dec-09




                                                                                                                                                                                                                                                                                                                                                      Jun-11
                                                                                                                                                                                                           Sep-01




                                                                                                                                                                                                                                                 Sep-04




                                                                                                                                                                                                                                                                                           Sep-07




                                                                                                                                                                                                                                                                                                                                          Sep-10
 Source: Company Data, Morgan Stanley Research                                                                                                                                                                                                                                                                                                                 8
                                                                                                                                                                                                                                                                                                                                                                                                MORGAN STANLEY RESEARCH
                                                                                                                                                                                                                                                                                                                                                                                                                                                                           India Strategy
                                                                                                                                                                                                                                                                                                                                                                                                                                                                       November 21, 2011




QE-Sep11 Earnings: Interest to Sales Ratio Rise to a Nine-year High
Trend for MS coverage
Interest Costs                                                                                                                                                                                                                                  Share of Net Financial Income
Interest to sales ratio rises for a third consecutive quarter                                                                                                                                                                                   Falls QoQ
90%             Ex Energy                                                                 YoY change in interest costs (LS)                                                                                                               4%    20%              Net Financial Income as a % of Pre-tax Profits (ex-Financials)

70%                                                                                                                                                                                                                                             15%
                                                                                                                                                                                                                                          3%
                                                                                Interest/sales % (RS)
50%                                                                                                                                                                                                                                             10%

30%                                                                                                                                                                                                                                       2%     5%

10%
                                                                                                                                                                                                                                                 0%
                                                                                                                                                                                                                                          1%
-10%
                                                                                                                                                                                                                                                -5%
                                                                                                                                                                                                                                                                 Net Financial Income as a % of Pre-tax Profits (ex-Financials)
-30%                                                                                                                                                                                                                                      0%                     4Q average
                                                                                                                                                                                                                                                -10%
       Jun-99

                  Mar-00

                              Dec-00



                                                         Jun-02

                                                                           Mar-03

                                                                                         Dec-03



                                                                                                                  Jun-05

                                                                                                                            Mar-06

                                                                                                                                       Dec-06



                                                                                                                                                                 Jun-08

                                                                                                                                                                                   Mar-09

                                                                                                                                                                                                     Dec-09



                                                                                                                                                                                                                                Jun-11
                                           Sep-01




                                                                                                      Sep-04




                                                                                                                                                   Sep-07




                                                                                                                                                                                                                   Sep-10




                                                                                                                                                                                                                                                       Mar-99
                                                                                                                                                                                                                                                                 Oct-99
                                                                                                                                                                                                                                                                             May-00
                                                                                                                                                                                                                                                                                           Dec-00
                                                                                                                                                                                                                                                                                                       Jul-01
                                                                                                                                                                                                                                                                                                                Feb-02




                                                                                                                                                                                                                                                                                                                                               Nov-03
                                                                                                                                                                                                                                                                                                                                                                 Jun-04
                                                                                                                                                                                                                                                                                                                                                                             Jan-05


                                                                                                                                                                                                                                                                                                                                                                                                Mar-06
                                                                                                                                                                                                                                                                                                                                                                                                          Oct-06
                                                                                                                                                                                                                                                                                                                                                                                                                      May-07
                                                                                                                                                                                                                                                                                                                                                                                                                                        Dec-07
                                                                                                                                                                                                                                                                                                                                                                                                                                                    Jul-08

                                                                                                                                                                                                                                                                                                                                                                                                                                                              Feb-09




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              Nov-10
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                Jun-11
                                                                                                                                                                                                                                                                                                                         Sep-02




                                                                                                                                                                                                                                                                                                                                                                                                                                                                        Sep-09
                                                                                                                                                                                                                                                                                                                                   Apr-03




                                                                                                                                                                                                                                                                                                                                                                                       Aug-05




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  Apr-10
Depreciation Expenses                                                                                                                                                                                                                           MS Coverage: Quarterly Earnings Snapshot
Depreciation to sales ratio rises marginally QoQ                                                                                                                                                                                                Revenue and earnings growth decelerates
5.0%                                                                                                                                                                                                                                     55%     55%                                                                                                                           Ebitda Margin Trend (RS)                                                                                                                  32%
                                                                                                                                                                                                                                                                    Ex-energy
                           Depn to Sales (LS)                                                                                                                                                                                                    50%
                                                                                                                                                                                                                                         45%     45%                                                                                                                                                                                                                                                                     30%
                                                                                                                                                                                                                                                                  Net profit grow th (LS)
4.5%
                                                                                                                                                                                                                                                 40%                                                                                                                                                                                                                                                                     28%
                                                                                                                                                                                                                                         35%     35%
4.0%                                                                                                                                                                                                                                             30%                                                                                                                                                                                                                                                                     26%
                                                                                                                                                                                                                                         25%
                                                                                                                                                                                                                                                 25%
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         24%
                                                                                                                                                                                                                                         15%     20%
3.5%
                                                                                                                                                                                                                                                 15%                                                                                                                                                                                                                                                                     22%
                                                                                                                                                                                                                                         5%      10%                                                                                                     Revenue grow th (LS)
3.0%                                                                                                                                                                                                                                              5%                                                                                                                                                                                                                                                                     20%
                                                                                                                                                                                                                                         -5%      0%
                                                             YoY Change in Depn Cost (RS)                                                                                                                                                                                                                                                                                                                                                                                                                                18%
                                                                                                                                                                                                                                                 -5%
2.5%                                                                                                                                                                                                                                     -15%
                                                                                                                                                                                                                                                -10%                                                                                                                                                                                                                                                                     16%
                 Mar-99




                                                                  Mar-02




                                                                                                                   Mar-05




                                                                                                                                                            Mar-08




                                                                                                                                                                                                                       Mar-11
       Jun-98



                           Dec-99

                                       Sep-00

                                                    Jun-01



                                                                                Dec-02

                                                                                             Sep-03

                                                                                                         Jun-04



                                                                                                                            Dec-05
                                                                                                                                     Sep-06

                                                                                                                                                Jun-07



                                                                                                                                                                          Dec-08

                                                                                                                                                                                            Sep-09

                                                                                                                                                                                                          Jun-10




                                                                                                                                                                                                                                                                    Jun-99

                                                                                                                                                                                                                                                                                      Mar-00

                                                                                                                                                                                                                                                                                                    Dec-00



                                                                                                                                                                                                                                                                                                                          Jun-02

                                                                                                                                                                                                                                                                                                                                      Mar-03

                                                                                                                                                                                                                                                                                                                                                        Dec-03



                                                                                                                                                                                                                                                                                                                                                                                      Jun-05

                                                                                                                                                                                                                                                                                                                                                                                                 Mar-06

                                                                                                                                                                                                                                                                                                                                                                                                             Dec-06



                                                                                                                                                                                                                                                                                                                                                                                                                                                 Jun-08

                                                                                                                                                                                                                                                                                                                                                                                                                                                             Mar-09

                                                                                                                                                                                                                                                                                                                                                                                                                                                                         Dec-09



                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       Jun-11
                                                                                                                                                                                                                                                        Sep-98




                                                                                                                                                                                                                                                                                                                Sep-01




                                                                                                                                                                                                                                                                                                                                                                          Sep-04




                                                                                                                                                                                                                                                                                                                                                                                                                               Sep-07




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     Sep-10
 Source: Company Data, Morgan Stanley Research                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 9
                                                                                                                                                                                                                                                                                                                    MORGAN STANLEY RESEARCH
                                                                                                                                                                                                                                                                                                                                                                                                        India Strategy
                                                                                                                                                                                                                                                                                                                                                                                                    November 21, 2011




 QE-Sep11 Earnings: Broad Earnings (Ex-Energy) Growth At a Two-year Low
  Trend for 1149 companies with time series data
  Broad Market Revenue Growth                                                                                                                                              Broad Market Net Profit Growth
  Rises 23% YoY – Decelerates QoQ                                                                                                                                          Earnings growth (ex-oil PSU) falls first time since Sep-09
 45%             Broad market revenue growth (1149                                                                                                                         80%
                                                                                                                                                                                                        Broad market earnings growth (1149 companies)
 40%             companies)
                                                                                                                                                                           60%
 35%
 30%                                                                                                                                                                       40%
 25%
                                                                                                                                                                           20%
 20%
 15%                   Broad market revenue growth (ex-energy)                                                                                                              0%
 10%
                                                                                                                                                                           -20%
  5%
                                                                                                                                                                                                 Broad m arket earnings growth (ex-oil psu)
  0%                                                                                                                                                                       -40%
                  Sep-04




                                                         Sep-06



                                                                             Sep-07




                                                                                                                      Sep-09



                                                                                                                                         Sep-10
        Mar-04



                           Mar-05

                                    Sep-05

                                             Mar-06



                                                                  Mar-07



                                                                                      Mar-08

                                                                                                  Sep-08

                                                                                                           Mar-09



                                                                                                                               Mar-10



                                                                                                                                                   Mar-11

                                                                                                                                                            Sep-11




                                                                                                                                                                                      Mar-04

                                                                                                                                                                                                    Sep-04

                                                                                                                                                                                                                   Mar-05

                                                                                                                                                                                                                                     Sep-05

                                                                                                                                                                                                                                                   Mar-06

                                                                                                                                                                                                                                                                 Sep-06

                                                                                                                                                                                                                                                                               Mar-07

                                                                                                                                                                                                                                                                                                 Sep-07

                                                                                                                                                                                                                                                                                                                   Mar-08

                                                                                                                                                                                                                                                                                                                                     Sep-08

                                                                                                                                                                                                                                                                                                                                                       Mar-09




                                                                                                                                                                                                                                                                                                                                                                                           Mar-10




                                                                                                                                                                                                                                                                                                                                                                                                                               Mar-11

                                                                                                                                                                                                                                                                                                                                                                                                                                                 Sep-11
                                                                                                                                                                                                                                                                                                                                                                         Sep-09




                                                                                                                                                                                                                                                                                                                                                                                                             Sep-10
Sectoral Earnings Trend                                                                                                                                                    Earnings Trajectory
Healthcare leads and telecoms lags                                                                                                                                         Narrow market accelerates while broad market decelerates
        MSCI Sector                           Jun-10                 Sep-10                    Dec-10               Mar-11              Jun-11              Sep-11         650
Consumer Discretionary                                88%                  59%                   46%                     9%                   2%               -13%        600
Consumer Staples                                       3%                   2%                   -1%                  28%                   30%                      1%    550                                                                                                          Broad market (ex -oil ps u)

Energy                                                -68%                 128%                 112%                  37%                   90%                -73%        500
                                                                                                                                                                           450                               Br oad m ar k e t (1149 com panie s )
Financials                                            29%                  25%                   25%                  12%                     1%                     4%
                                                                                                                                                                           400
Health Care                                           32%                  16%                   75%                  13%                   13%                  16%
                                                                                                                                                                           350
Industrials                                            1%                  42%                   14%                  35%                     3%               -22%
                                                                                                                                                                           300
Information Technology                                19%                  14%                   18%                  15%                   22%                  14%       250
                                                                                                                                                                                                                                                                                             BSE Se ns e x
Materials                                             56%                  47%                   18%                  16%                     7%               -23%        200
Telecoms                                              -52%                 -48%                 -59%                 -76%                 -86%                       NM    150
Utilities                                              9%                   8%                    2%                     0%                   9%                     8%    100
                                                                                                                                                                                 Dec-03

                                                                                                                                                                                               Jun-04

                                                                                                                                                                                                              Dec-04

                                                                                                                                                                                                                            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
Total                                                  6%                  40%                   30%                  17%                   10%                -22%
Total (ex oil psu)                                    29%                  29%                   25%                  21%                   11%                      -3%

     Source: Capitaline, Morgan Stanley Research                                                                                                                                                                                                                                                                                                                                                                                                          10
                                                                                                                                                                                                                                                                   MORGAN STANLEY RESEARCH
                                                                                                                                                                                                                                                                                                                                               India Strategy
                                                                                                                                                                                                                                                                                                                                           November 21, 2011




QE-Sep11 Earnings: Weakening Breadth Trends
Trend for 1149 companies with time series data
Revenue Growth                                                                                                                                                 Net Profit Growth:
66% of the companies grow >10% – marginal fall in breadth                                                                                                      35% of the companies grow >15% – breadth weakest since Mar-09
85%            % Companies with >10% Y-o-Y Revenue Growth for Broad Market (1149                                                                               70%              % Companies with >15% Y-o-Y Revenue Growth for Broad Market (1149
80%            companies)                                                                                                                                      65%              companies)

75%                                                                                                                                                            60%
70%                                                                                                                                                            55%
65%                                                                                                                                                            50%
60%                                                                                                                                                            45%
55%                                                                                                                                                            40%
50%                                                                                                                                                            35%
45%                                                                                                                                                            30%
40%                                                                                                                                                            25%
35%                                                                                                                    Mar-10                                  20%




                                                                                                                                           Mar-11
      Mar-04

                Sep-04

                         Mar-05

                                  Sep-05

                                           Mar-06

                                                    Sep-06

                                                             Mar-07

                                                                      Sep-07

                                                                               Mar-08

                                                                                         Sep-08

                                                                                                   Mar-09

                                                                                                             Sep-09




                                                                                                                                 Sep-10




                                                                                                                                                      Sep-11




                                                                                                                                                                                                               Mar-06
                                                                                                                                                                     Mar-04

                                                                                                                                                                                 Sep-04

                                                                                                                                                                                             Mar-05

                                                                                                                                                                                                      Sep-05




                                                                                                                                                                                                                          Sep-06

                                                                                                                                                                                                                                     Mar-07




                                                                                                                                                                                                                                                              Mar-08

                                                                                                                                                                                                                                                                           Sep-08

                                                                                                                                                                                                                                                                                             Mar-09

                                                                                                                                                                                                                                                                                                               Sep-09

                                                                                                                                                                                                                                                                                                                                 Mar-10

                                                                                                                                                                                                                                                                                                                                                   Sep-10

                                                                                                                                                                                                                                                                                                                                                                     Mar-11
                                                                                                                                                                                                                                                 Sep-07




                                                                                                                                                                                                                                                                                                                                                                                       Sep-11
EBITDA Growth                                                                                                                                                  Broad Market Margins
40% See >15% EBITDA growth – breadth weakest since Mar-09                                                                                                      Margins decline below Dec-08 levels
70%            % Companies with >15% Y-o-Y Revenue Growth for Broad Market (1149                                                                               40%                         Broad market EBITDA margin (1149 companies)                                                                                                                                                 6%
               companies)
65%                                                                                                                                                            38%                                                                                                                                                                                                                     4%
                                                                                                                                                               36%
60%                                                                                                                                                                                                                                                                                                                                                                                    2%
                                                                                                                                                               34%
55%                                                                                                                                                            32%                                                                                                                                                                                                                     0%
50%                                                                                                                                                            30%                                                                                                                                                                                                                     -2%

45%                                                                                                                                                            28%                                                                                                                                                                                                                     -4%
                                                                                                                                                               26%
40%                                                                                                                                                                                                                                                                                                                                                                                    -6%
                                                                                                                                                               24%
35%                                                                                                                                                            22%                         YoY Change in EBITDA Margin (RS)                                                                                                                                                            -8%

30%                                                                                                                                                            20%                                                                                                                                                                                                                     -10%
                                           Mar-06




                                                                                                                                                                                                                                                                       Sep-08




                                                                                                                                                                                                                                                                                                                                                                              Sep-11
      Mar-04

                Sep-04

                         Mar-05

                                  Sep-05




                                                    Sep-06

                                                             Mar-07




                                                                               Mar-08

                                                                                        Sep-08

                                                                                                  Mar-09

                                                                                                            Sep-09

                                                                                                                      Mar-10

                                                                                                                                Sep-10

                                                                                                                                          Mar-11




                                                                                                                                                                       Mar-04

                                                                                                                                                                                  Sep-04

                                                                                                                                                                                             Mar-05

                                                                                                                                                                                                      Sep-05

                                                                                                                                                                                                               Mar-06

                                                                                                                                                                                                                        Sep-06

                                                                                                                                                                                                                                   Mar-07

                                                                                                                                                                                                                                              Sep-07

                                                                                                                                                                                                                                                          Mar-08




                                                                                                                                                                                                                                                                                    Mar-09

                                                                                                                                                                                                                                                                                                      Sep-09

                                                                                                                                                                                                                                                                                                                        Mar-10

                                                                                                                                                                                                                                                                                                                                          Sep-10

                                                                                                                                                                                                                                                                                                                                                            Mar-11
                                                                      Sep-07




                                                                                                                                                    Sep-11




 Source: Capitaline, Morgan Stanley Research                                                                                                                                                                                                                                                                                                                                                    11
                                                                                                                                                                                                                                                                        MORGAN STANLEY RESEARCH
                                                                                                                                                                                                                                                                                                                         India Strategy
                                                                                                                                                                                                                                                                                                                     November 21, 2011




Broad Market: Slicing the Earnings Trends Across the Cap Curve
Trend for 1149 companies with time series data
Revenue Growth                                                                                                                                                                Net Profit Growth
Decelerates                                                                                                                                                                   Large cap companies see the steepest fall
6 0%                                               Broa d Ma rk et Rev enue Grow th (114 9 Compa nie s)                                                                                                                      Broad Market PAT Growth (1149 Companies)
5 0%
                                                                                                                                                                              225%                                                                 Mega Caps                                                                       Large Caps

4 0%                                                                                                                                                                          175%                                                                                              Mid Caps                                           Small Caps

3 0%                                                                                                                                                                                                                                                                            Micro Caps
                                                                                                                                                                              125%
2 0%
                                                                                                                                                                               75%
1 0%
                                       Meg a Caps                                        L arg e Caps                                                                          25%
  0%
                                       Mid Ca ps                                         S mal l Ca ps                                                                        -25%
-1 0%
                                       Micro Ca ps
-2 0%                                                                                                                                                                         -75%




                                                                                                                                                                                               Jun-04




                                                                                                                                                                                                                                                                                                                                                Jun-11
                  Jun-04

                             Dec-04




                                                     Dec-05




                                                                                Jun-07

                                                                                            Dec-07




                                                                                                               Dec-08




                                                                                                                                                          Dec-10




                                                                                                                                                                                     Dec-03




                                                                                                                                                                                                         Dec-04

                                                                                                                                                                                                                   Jun-05




                                                                                                                                                                                                                                       Jun-06




                                                                                                                                                                                                                                                           Jun-07

                                                                                                                                                                                                                                                                       Dec-07

                                                                                                                                                                                                                                                                                  Jun-08

                                                                                                                                                                                                                                                                                            Dec-08

                                                                                                                                                                                                                                                                                                      Jun-09

                                                                                                                                                                                                                                                                                                                Dec-09

                                                                                                                                                                                                                                                                                                                          Jun-10

                                                                                                                                                                                                                                                                                                                                      Dec-10
        Dec-03




                                         Jun-05




                                                              Jun-06

                                                                       Dec-06




                                                                                                     Jun-08




                                                                                                                          Jun-09

                                                                                                                                    Dec-09

                                                                                                                                               Jun-10




                                                                                                                                                                     Jun-11




                                                                                                                                                                                                                             Dec-05




                                                                                                                                                                                                                                                 Dec-06
EBITDA Growth                                                                                                                                                                 Margin Trend
Falls across segments                                                                                                                                                         Margin pressure persists
1 40%                                   Meg a Caps                                         Lar ge Cap s                                                                        40%                                 Mega Caps                                         La rge Caps
1 20%                                   Mid Ca ps                                          Sma ll Caps                                                                                                             Mid Caps                                          Sm all Caps
                                                                                                                                                                               35%
1 00%                                   Micro Ca ps                                                                                                                                                                Micro Caps
 80%                                                                                                                                                                           30%
 60%
                                                                                                                                                                               25%
 40%
 20%                                                                                                                                                                           20%

   0%                                                                                                                                                                          15%
- 20%
                                                                                                                                                                               10%
- 40%                                                                                                                                                                                                         Broad Market EBITDA Margin (1149 Companies)
                                Broa d Ma rket E BITDA G row th (11 49 Com panies)
- 60%                                                                                                                                                                           5%
                                                                                                                        Jun-09
         Dec-03

                    Jun-04

                              Dec-04

                                          Jun-05



                                                              Jun-06

                                                                       Dec-06

                                                                                Jun-07

                                                                                            Dec-07

                                                                                                     Jun-08

                                                                                                              Dec-08




                                                                                                                                   Dec-09

                                                                                                                                             Jun-10

                                                                                                                                                        Dec-10

                                                                                                                                                                   Jun-11
                                                     Dec-05




                                                                                                                                                                                                Jun-04




                                                                                                                                                                                                                    Jun-05




                                                                                                                                                                                                                                        Jun-06




                                                                                                                                                                                                                                                            Jun-07




                                                                                                                                                                                                                                                                                   Jun-08




                                                                                                                                                                                                                                                                                                       Jun-09




                                                                                                                                                                                                                                                                                                                           Jun-10




                                                                                                                                                                                                                                                                                                                                                  Jun-11
                                                                                                                                                                                      Dec-03




                                                                                                                                                                                                          Dec-04




                                                                                                                                                                                                                              Dec-05




                                                                                                                                                                                                                                                  Dec-06




                                                                                                                                                                                                                                                                        Dec-07




                                                                                                                                                                                                                                                                                             Dec-08




                                                                                                                                                                                                                                                                                                                 Dec-09




                                                                                                                                                                                                                                                                                                                                       Dec-10
  Source: Capitaline, Morgan Stanley Research                                                                                                                                                                                                                                                                                                              12
                                                                                                                                                                             MORGAN STANLEY RESEARCH
                                                                                                                                                                                                            India Strategy
                                                                                                                                                                                                        November 21, 2011




QE-Sep11 Earnings for MS Coverage Universe: Utilities Lead while Oil PSUs Lag

   •   Utilities saw the fastest year-on-year growth in earnings whereas Oil PSUs reported the most fall in
       earnings.
   •   Seven out of the 10 sectors reported a rise in earnings with the exception of Energy, Telecoms and
       Materials.
   •   Margin contraction in seven out of the 10 sectors with the exception of Financials, Healthcare and
       Staples



Sector Earnings Breakdown: YoY Change for Quarter                                                                      Quarterly Net Profit Growth Trend
Ended Sep 2011 (124 Companies)                                                                                         Narrow Market Leads
                                            Op.        Other                Deprecia-   Pre-tax               Net
            YoY%    Revenues Op. Profit    Margin*    Income     Interest     tion       Profit     Tax      Profit    70%              Quarterly net profit grow th (yoy)                Broad market (ex oil psu)
                                                                                                                       60%           BSE Sensex constituents
Consumer Discretionary   19.4       5.9       (169)       7.8       24.2        26.2        (1.9)    (9.0)      0.2
                                                                                                                       50%
Consumer Staples         16.4     18.0         28       49.3        46.9        20.3       17.7     20.0       16.5
                                                                                                                       40%
Energy                   22.4     (47.1)      (902)     34.3        35.5        (5.5)     (56.6)      5.5     (73.9)
                                                                                                                       30%
Financials               12.1     14.5        114       (49.4)      29.3        12.8        7.1       4.5       7.8    20%
Healthcare               24.2     29.9        112       40.0      (140.8)       30.3       28.4     99.8       10.7    10%
Industrials              26.4     18.6        (102)     34.2        74.7        37.8        1.8       7.2       3.2     0%
                                                                                                                                                      MS coverage (ex-oil psu)
Materials                20.5       5.3       (231)      (0.5)      54.0        15.8        (4.1)     4.5     (14.2)   -10%

Technology               18.9     12.9        (128)    128.2       165.7        19.3       17.1     38.7       11.2
                                                                                                                       -20%
                                                                                                                       -30%
Telecom                  11.4     11.3          (3)     (13.2)     112.4        19.6      (45.9)    10.5      (65.6)
                                                                                                                              1999

                                                                                                                                        2000

                                                                                                                                               2001

                                                                                                                                                       2002

                                                                                                                                                              2003

                                                                                                                                                                     2004

                                                                                                                                                                            2005

                                                                                                                                                                                   2006

                                                                                                                                                                                          2007

                                                                                                                                                                                                 2008

                                                                                                                                                                                                          2009

                                                                                                                                                                                                                 2010
Utilities                25.0     23.6         (23)     40.7        44.1        22.0       23.1       3.3      34.2

Aggregate                20.5      (6.1)      (463)     24.6        54.5         9.9      (15.0)      7.8     (23.7)




Source: Company Data, Capitaline, Morgan Stanley Research                                                                                                                                                                13
                                                                                                                                                                                                                                                                                                                                      MORGAN STANLEY RESEARCH
                                                                                                                                                                                                                                                                                                                                                                 India Strategy
                                                                                                                                                                                                                                                                                                                                                             November 21, 2011




What’s the Consensus View: Technology and Consumer Staples see Upward Revision

 QE Sep-11 Earnings Ahead of MS Expectations                                                                                                                                                                                                                                               Consensus Revisions
 Earnings ahead of expectation first time in 3-quarters                                                                                                                                                                                                                                    Negative revisions across sectors
                                                                                                                                                                                                                                                                                                               F2012                               % no of Companies
30%       Exce s s / (De ficit) of Actual Ne t Profit vs . M S Analys t Es tim ate s for M S                                                                                                                                                                                                                    No. of        Growth
          cove r age unive rs e                                                                                                                                                                                                                                                            Sector             companies       Revision         Downwards           Upwards
20%
                                                                                                                                                                                                                                                                                           Consumer Disc           18          -2.1%                50%                  22%
10%                                                                                                                                                                                                                                                                                        Consumer Staples        12          0.7%                 67%                  25%

 0%                                                                                                                                                                                                                                                                                        Energy                  11          -1.9%                73%                  27%
                                                                                                                                                                                                                                                                                           Financial               27          -2.6%                81%                  11%
-10%
                                                                                                                                                                                                                                                                                           Healthcare              8           -4.6%                63%                  38%
-20%
                                                                                                                                                                                                                                                                                           Industrials             11          -2.8%                82%                  9%
-30%                                                                                                                                                                                                                                                                                       Materials               16          -5.2%                75%                  25%
                                                                                                                                                                                                                                                                                           Technology              11          0.2%                 45%                  55%
-40%
       Jun-06


                            Dec-06
                                        Mar-07
                                                     Jun-07


                                                                                     Dec-07
                                                                                                 Mar-08
                                                                                                            Jun-08


                                                                                                                               Dec-08
                                                                                                                                        Mar-09
                                                                                                                                                 Jun-09


                                                                                                                                                                        Dec-09
                                                                                                                                                                                     Mar-10
                                                                                                                                                                                                       Jun-10


                                                                                                                                                                                                                                  Dec-10
                                                                                                                                                                                                                                             Mar-11
                                                                                                                                                                                                                                                       Jun-11
                 Sep-06




                                                                       Sep-07




                                                                                                                      Sep-08




                                                                                                                                                            Sep-09




                                                                                                                                                                                                                     Sep-10




                                                                                                                                                                                                                                                                Sep-11
                                                                                                                                                                                                                                                                                           Telecom                 6          -14.5%                50%                  33%
                                                                                                                                                                                                                                                                                           Utilities               7           -3.4%                86%                  0%
                                                                                                                                                                                                                                                                                           MS Coverage             127         -2.7%                69%                  23%



 Earnings Breadth Surprise                                                                                                                                                                                                                                                                 Earnings Growth Vs. Difference Between Actuals & Est.
 QoQ improvement, below 5-year average                                                                                                                                                                                                                                                     Mixed bag trends on hits and misses
75%                                                                                                                                                                                                                                                                                         200%                                 YoY Ne t Pr o fit Gr o w th for M S
                 Surpris e Bre adth: % of Com panie s Be ating M S Expe ctations                                                                                                                                                                                                                                                 C ove r ag e C om pan ie s (Y A xis )
70%
                                                                                                                                                                                                                                                                                            150%
65%
60%
                                                                                                                                                                                                                                                                                            100%
55%
50%                                                                                                                                                                                                                                                                               47%         50%
45%
40%                                                                                                                                                                                                                                                                                            0%
35%                                                                                                                                                                                                                                                                                             -200%      -100%         0%    100%         200%          300%           400%
                                                                                                                                                                                                                                                                                             -50%
30%
25%
                                                                                                                                                                                                                                                                                           -100%
        Jun-06



                               Dec-06

                                            Mar-07

                                                              Jun-07



                                                                                              Dec-07

                                                                                                          Mar-08

                                                                                                                     Jun-08



                                                                                                                                        Dec-08

                                                                                                                                                   Mar-09

                                                                                                                                                               Jun-09



                                                                                                                                                                                              Dec-09

                                                                                                                                                                                                                Mar-10

                                                                                                                                                                                                                              Jun-10



                                                                                                                                                                                                                                                      Dec-10

                                                                                                                                                                                                                                                                Mar-11

                                                                                                                                                                                                                                                                         Jun-11
                   Sep-06




                                                                                Sep-07




                                                                                                                               Sep-08




                                                                                                                                                                            Sep-09




                                                                                                                                                                                                                                           Sep-10




                                                                                                                                                                                                                                                                                  Sep-11




                                                                                                                                                                                                                                                                                                                                         % Diffe r e n ce in A ctuals and
                                                                                                                                                                                                                                                                                           -150%                                           M S Es tim ate s (X A xis )

  Source: Company Data, FactSet, IBES, Morgan Stanley Research                                                                                                                                                                                                                                                                                                                  14
                                                                                                                                                                                                  MORGAN STANLEY RESEARCH
                                                                                                                                                                                                                                                            India Strategy
                                                                                                                                                                                                                                                        November 21, 2011




 What’s the Consensus View: Consensus Lowers Sensex Earnings Outlook

 QE Sep-11 Actual Earnings vs. Morgan Stanley                                 Sector Wise: Surprise Breadth
 Expectations for Sensex Components                                                                                                                           Num ber of com panies beating MS analyst estim ates

                                                                                  MS                          # Cos
                                                                                                                                                       2QF12                         1QF12                          4QF11                       3QF11                          2QF11
                       Major      Minor        No        Minor      Major       Coverage                  reported so far

                      Negative   Negative   Surprise    Positive   Positive
                                                                              Cons. Disc.                                 16                              44%                            47%                         56%                           41%                              59%
Jaiprakash Asso
Tata Steel                                                                    Cons. Staples                                8                              38%                            38%                         75%                           29%                              38%

Maruti                                                                        Energy                                       9                              22%                            50%                         56%                           50%                              75%
NTPC                                                                          Financials                                  27                              56%                            33%                         56%                           80%                              70%
Coal India
                                                                              Healthcare                                   7                              43%                            14%                         71%                           29%                              71%
DLF Limited
Jindal Steel                                                                  Industrials                                 13                              54%                            42%                         56%                           42%                              54%

Hindalco                                                                      Materials                                   14                              36%                            62%                         62%                           54%                              46%
Wipro                                                                         Technology                                  10                              60%                            50%                         64%                           67%                              40%
Cipla
                                                                              Telecom                                      6                              67%                            0%                          80%                           67%                              50%
Infosys Tech
                                                                              Utilities                                    8                              38%                            63%                         50%                           43%                              43%
M&M
TCS
Reliance Industries                                                           Sensex Consensus EPS Estimates
HDFC                                                                          Downward growth revision persists
HDFC Bank
                                                                              21%                      BSE Se ns e x cons e ns us EPS gr ow th tr e nd ove r pas t 12M
ICICI Bank
Bajaj Auto Ltd.                                                               20%
SBI                                                                           19%
ITC                                                                           18%
Sterlite Industries
                                                                              17%
Hero Honda                                                                                             F2012E EPS - 1222
                                                                              16%
L&T                                                                                                                                                                                               F2013E EPS (RS) - 1399
Hindustan Lever                                                               15%
Tata Motors                                                                   14%
Sun Pharma                                                                    13%
Bharti
                                                                              12%
Tata Pow er
                                                                                     Feb-10
                                                                                              Mar-10


                                                                                                                 May-10
                                                                                                                          Jun-10
                                                                                                                                   Jul-10




                                                                                                                                                              Oct-10
                                                                                                                                                                       Nov-10
                                                                                                                                                                                Dec-10
                                                                                                                                                                                         Jan-11
                                                                                                                                                                                                  Feb-11
                                                                                                                                                                                                           Mar-11


                                                                                                                                                                                                                             May-11
                                                                                                                                                                                                                                      Jun-11
                                                                                                                                                                                                                                               Jul-11




                                                                                                                                                                                                                                                                           Oct-11
                                                                                                                                                                                                                                                                                     Nov-11
                                                                                                                                                     Sep-10




                                                                                                                                                                                                                                                                  Sep-11
                                                                                                        Apr-10




                                                                                                                                            Aug-10




                                                                                                                                                                                                                    Apr-11




                                                                                                                                                                                                                                                         Aug-11
  Source: Company Data, FactSet, IBES, Morgan Stanley Research                                                                                                                                                                                                                                15
                                                                                                                                                                                                                    MORGAN STANLEY RESEARCH
                                                                                                                                                                                                                                                                             India Strategy
                                                                                                                                                                                                                                                                         November 21, 2011




     What’s the Consensus View: Earnings Revision Breadth Trough?

Earnings Growth Revisions by Sector                                                                            Earnings Revision Breadth
(MSCI India Constituents)                                                                                       30%            Analys t Re vis ions -LS                                                                                                                                             100%
                                                                                                                                                                                                                 MSCI India (yoy, RS)
                  EPS Earnings Grow th (MSCI India constituents)                  Earnings Revision             20%                                                                                                                                                                                 80%
            F12          Current        1W           1M            3M     1W             1M            3M                                                                                                                                                                                           60%
                                                                                                                10%
CD                          4%          5%           6%            9%     -0.3%         -1.3%         -4.5%                                                                                                                                                                                         40%
                                                                                                                0%
CS                         17%         17%           16%           15%    0.1%          1.5%          1.9%
                                                                                                                                                                                                                                                                                                    20%
Energy                     17%         17%           17%           17%    -0.1%         -0.4%         -0.2%    -10%
                                                                                                                                                                                                                                                                                                    0%
Financials                 11%         12%           14%           15%    -1.4%         -2.9%         -4.3%    -20%
                                                                                                                                                                                                                                                                                                    -20%
Healthcare                 11%         15%           16%           11%    -3.6%         -5.0%         -0.2%                                                         Ref lexivity in corporate earnings
                                                                                                               -30%                                                                                                                                                                                 -40%
Industrials                32%         33%           35%           40%    -1.2%         -3.4%         -8.1%                                                         outlook and share price
                                                                                                               -40%                                                                                                                                                                                 -60%
IT                         19%         19%           18%           17%    0.2%          0.6%          1.5%




                                                                                                                      Feb-01




                                                                                                                                                  Nov-02
                                                                                                                                                           Jun-03

                                                                                                                                                                    Jan-04


                                                                                                                                                                                      Mar-05

                                                                                                                                                                                               Oct-05
                                                                                                                                                                                                        May-06

                                                                                                                                                                                                                 Dec-06
                                                                                                                                                                                                                          Jul-07
                                                                                                                                                                                                                                    Feb-08




                                                                                                                                                                                                                                                                Nov-09
                                                                                                                                                                                                                                                                         Jun-10
                                                                                                                                                                                                                                                                                  Jan-11
                                                                                                                               Sep-01




                                                                                                                                                                                                                                              Sep-08
                                                                                                                                         Apr-02




                                                                                                                                                                             Aug-04




                                                                                                                                                                                                                                                       Apr-09




                                                                                                                                                                                                                                                                                           Aug-11
Materials                  -1%          1%           6%            14%    -2.4%         -6.9%         -15.0%
Telecoms                   -36%        -33%         -33%           -14%   -2.9%         -2.2%         -21.5%
Utilities                  10%         10%           11%           14%    0.2%          -1.2%         -3.8%
Total                      12%          13%          14%           16%    -0.8%         -2.2%         -4.3%    …. Still At Levels Which May Hurt Share Price
                  EPS Earnings Grow th (MSCI India constituents)                  Earnings Revision
            F13          Current        1W           1M            3M     1W             1M            3M                                                                                      120%                   Y Axis : M SCI India Y-o-Y Re turns

CD                         14%         14%           13%           14%    -0.3%         0.6%          -0.3%                                                                                    100%
CS                         18%         18%           18%           18%    -0.1%         -0.1%         -0.1%                                                                                     80%
Energy                      8%          9%           9%            10%    -0.4%         -0.4%         -1.7%                                                                                     60%
Financials                 21%         21%           21%           23%    -0.2%         -0.1%         -1.9%                                                                                     40%
Healthcare                 21%         17%           16%           21%    4.0%          4.9%          0.1%                                                                                      20%
                                                                                                                                         Curr e nt Le ve l
Industrials                21%         21%           22%           24%    -0.2%         -0.9%         -2.4%
                                                                                                                                                                                                   0%
IT                         15%         15%           15%           19%    -0.3%         -0.8%         -4.2%     -40%                    -30%               -20%                   -10%                    0%                       10%                 20%                    30%                   40%
                                                                                                                                                                                               -20%
Materials                  18%         18%           17%           18%    0.9%          1.2%          -0.1%                                                                                                                                  X Axis : 3M M A FY1
                                                                                                                                                                                               -40%                                          Analys t Re vis ions
Telecoms                   53%         49%           49%           46%    4.0%          4.6%          7.1%
                                                                                                                                                                                               -60%
Utilities                  16%         16%           17%           18%    -0.6%         -0.9%         -2.3%
                                                                                                                                                                                               -80%

     Source: FactSet, MSCI, IBES, Morgan Stanley Research                                                                                                                                                                                                                                                  16
                                                                 15%
                                                                              20%
                                                                                                  25%
                                                                                                                       30%
                                                                                                                                                 35%
                                                                                                                                                                       40%
                                                                                                                                                                                           45%
                                                                                                                                                                                                                              4%
                                                                                                                                                                                                                                          6%
                                                                                                                                                                                                                                                        8%
                                                                                                                                                                                                                                                                        10%
                                                                                                                                                                                                                                                                                  12%
                                                                                                                                                                                                                                                                                             14%
                                                                                                                                                                                                                                                                                                           16%
                                                                                                                                                                                                                                                                                                                          18%
                                                                                                                                                                                                                                                                                                                                           20%
                                                                                                                                                                                                                                                                                                                                                 22%
                                                       Nov-09                                                                                                                                                    Nov-09
                                                       Jan-10                                                                                                                                                    Jan-10
                                                       Apr-10                                                                                                                                                    Apr-10
                                                       Jun-10                                                                                                                                                    Jun-10




                                                                                                                             F2012E
                                                       Aug-10                                                                                                                                                    Aug-10




                                                                                                                                                                                                                                                                                                        F2012E
                                                       Nov-10                                                                                                                                                    Oct-10




                                                                                    F2013E
                                                       Jan-11                                                                                                                                                    Jan-11




                                                                                                                                                                                                                                                                        F2013E




                                                                                                                                                                                                 Industrials
                                                       Mar-11                                                                                                                                                    Mar-11
                                                       Jun-11                                                                                                                                                    May-11
                                                                                                                                                                                                                                                                                                                                                       Consumer Disc.


                                                       Aug-11                                                                                                                                                    Aug-11
                                                       Oct-11                                                                                                                                                    Oct-11




                                                                 -4%
                                                                              1%
                                                                                                  6%
                                                                                                                       11%
                                                                                                                                              16%
                                                                                                                                                                       21%
                                                                                                                                                                                           26%
                                                       Nov-09




                                                                                                                                                                                                                          14%
                                                                                                                                                                                                                                             15%
                                                                                                                                                                                                                                                             16%
                                                                                                                                                                                                                                                                                 17%
                                                                                                                                                                                                                                                                                             18%
                                                                                                                                                                                                                                                                                                                  19%
                                                                                                                                                                                                                                                                                                                                    20%
                                                                                                                                                                                                                                                                                                                                                 21%




                                                       Jan-10                                                                                                                                                   Nov-09
                                                       Mar-10                                                                                                                                                    Jan-10
                                                       Apr-10                                                                                                                                                   Apr-10
                                                       Jun-10                                                                                                                                                    Jun-10




                                                                                                                                                                                  F2012E
                                                       Aug-10




Source: FactSet, MSCI, IBES, Morgan Stanley Research
                                                                                                                                                                                                                Aug-10
                                                       Oct-10
                                                                                                                                                                                                                 Oct-10
                                                       Dec-10
                                                                                                                                                                                                                                                                                                        F2013E




                                                                                                                                                                                                                 Jan-11




                                                                                                                    F2013E
                                                       Feb-11




                                                                                                                                                                                                 Materials
                                                       Mar-11                                                                                                                                                   Mar-11
                                                                                                                                                                                                                                                               F2012E




                                                       May-11                                                                                                                                                   May-11
                                                        Jul-11
                                                                                                                                                                                                                                                                                                                                                       Consumer Staples




                                                                                                                                                                                                                Aug-11
                                                       Sep-11                                                                                                                                                    Oct-11
                                                       Nov-11




                                                                 14%
                                                                        15%
                                                                                    16%
                                                                                                         17%
                                                                                                                       18%
                                                                                                                                        19%
                                                                                                                                                         20%
                                                                                                                                                                             21%
                                                                                                                                                                                           22%
                                                                                                                                                                                                                          9%
                                                                                                                                                                                                                                             11%
                                                                                                                                                                                                                                                              13%
                                                                                                                                                                                                                                                                                 15%
                                                                                                                                                                                                                                                                                             17%
                                                                                                                                                                                                                                                                                                                  19%
                                                                                                                                                                                                                                                                                                                                    21%
                                                                                                                                                                                                                                                                                                                                                 23%




                                                       Nov-09                                                                                                                                                   Nov-09
                                                       Jan-10                                                                                                                                                    Jan-10
                                                       Apr-10                                                                                                                                                   Apr-10
                                                                                                                                                                                                                                                                                                                                  F2012E




                                                       Jun-10                                                                                                                                                    Jun-10
                                                       Aug-10                                                                                                                                                   Aug-10




                                                                                             F2012E
                                                                                                                                                                                                                 Oct-10
                                                                                                                                                              F2013E
                                                                                                                                                                                                                                                              F2013E




                                                       Nov-10
                                                       Jan-11                                                                                                                                                    Jan-11
                                                                                                                                                                                                                Mar-11
                                                       Mar-11
                                                                                                                                                                                                 Technology
                                                                                                                                                                                                                                                                                                                                                       Energy




                                                                                                                                                                                                                May-11
                                                       Jun-11
                                                                                                                                                                                                                Aug-11
                                                       Aug-11
                                                                                                                                                                                                                 Oct-11
                                                       Oct-11
                                                                                                                                                                                                                        10%
                                                                                                                                                                                                                                   12%
                                                                                                                                                                                                                                                  14%
                                                                                                                                                                                                                                                             16%
                                                                                                                                                                                                                                                                           18%
                                                                                                                                                                                                                                                                                       20%
                                                                                                                                                                                                                                                                                               22%
                                                                                                                                                                                                                                                                                                                 24%
                                                                                                                                                                                                                                                                                                                            26%
                                                                                                                                                                                                                                                                                                                                           28%
                                                                                                                                                                                                                                                                                                                                                 30%




                                                                 -60%
                                                                         -40%
                                                                                        -20%
                                                                                                               0%
                                                                                                                                  20%
                                                                                                                                                       40%
                                                                                                                                                                            60%
                                                                                                                                                                                           80%




                                                       Nov-09                                                                                                                                                  Nov-09
                                                       Jan-10                                                                                                                                                  Jan-10
                                                       Mar-10
                                                                                                                                                                                                               Apr-10
                                                       Apr-10
                                                       Jun-10                                                                                                                                                  Jun-10
                                                                                                                                        F2012E




                                                       Aug-10                                                                                                                                                  Aug-10
                                                       Oct-10                                                                                                                                                  Oct-10
                                                                                                                                                                                                                                                                                               F2013E




                                                       Dec-10
                                                                                                                                                                                                               Jan-11
                                                       Feb-11
                                                                                                                                                                        F2013
                                                                                                                                                                                                                                                                                                                                                                          Consensus Earnings Growth by Sector (MSCI India Constituents)




                                                       Mar-11                                                                                                                                                  Mar-11
                                                                                                                                                                                                 Telecoms
                                                                                                                                                                                                                                                                                                                                                       Financials




                                                       May-11                                                                                                                                                  May-11
                                                                                                                                                                                                                                                               F2012E




                                                        Jul-11
                                                                                                                                                                                                               Aug-11
                                                       Sep-11
                                                                                                                                                                                                               Oct-11
                                                       Nov-11
                                                                                    10%
                                                                                                         12%
                                                                                                                       14%
                                                                                                                                        16%
                                                                                                                                                             18%
                                                                                                                                                                                20%
                                                                                                                                                                                           22%




                                                                 6%
                                                                        8%
                                                                                                                                                                                                                        4%
                                                                                                                                                                                                                                            8%
                                                                                                                                                                                                                                                                12%
                                                                                                                                                                                                                                                                                       16%
                                                                                                                                                                                                                                                                                                         20%
                                                                                                                                                                                                                                                                                                                                 24%
                                                                                                                                                                                                                                                                                                                                                 28%




                                                       Nov-09                                                                                                                                                  Nov-09
                                                       Dec-09
                                                       Feb-10                                                                                                                                                  Jan-10
                                                       Apr-10                                                                                                                                                  Apr-10
                                                       May-10
                                                                                                                                                                                                               Jun-10
                                                        Jul-10
                                                                                                      F2012E




                                                       Sep-10                                                                                                                                                  Aug-10
                                                       Oct-10
                                                                                                                                                                   F2013E




                                                                                                                                                                                                               Oct-10
                                                       Dec-10
                                                       Jan-11                                                                                                                                                  Jan-11
                                                                                                                                                                                                                                                                                                                        F2012E




                                                                                                                                                                                                 Utilities
                                                                                                                                                                                                                                         F2013E




                                                       Mar-11                                                                                                                                                  Mar-11
                                                       May-11
                                                                                                                                                                                                                                                                                                                                                       Healthcare




                                                       Jun-11                                                                                                                                                  May-11
                                                       Aug-11                                                                                                                                                  Aug-11
                                                       Sep-11
                                                       Nov-11                                                                                                                                                  Oct-11
                                                                                                                                                                                                                                                                                                                                                                                                                                                               MORGAN STANLEY RESEARCH


                                                                                                                                                                                                                                                                                                                                                                                                                                          November 21, 2011
                                                                                                                                                                                                                                                                                                                                                                                                                                              India Strategy




   17
                                                                                                                                                                                                                                                                                                                                                                                                              MORGAN STANLEY RESEARCH
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        India Strategy
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    November 21, 2011




Corporate Fundamentals: Lack of Pricing Power Hurts Margins

MS Coverage Operating Leverage                                                                                                                                                                                                                                            MS Coverage Pricing Power
Falls to a 20-quarter low                                                                                                                                                                                                                                                 At Sep-09 levels
38%                                                                                                                                                                                                                                                                       3%
                                                                                                                                    Gross Margin m inus EBITDA M argin
                                                                                                                                                                                                                                                                          2%
36%                                                                                                                                 (ex Energy, Tech, Telecom , Financials)
                                                                                                                                    for MS Coverage                                                                                                                       1%
34%                                                                                                                                                                                                                                                                       0%
                                                                                                                                                                                                                                                                          -1%
32%
                                                                                                                                                                                                                                                                          -2%
30%                                                                                                                                                                                                                                                                       -3%
                                                                                                                                                                                                                                                                          -4%
28%                                                                                                                                                                                                                                                                                                        YoY Change in Gross Margins - ex-Energy, Tech,
                                                                                                                                                                                                                                                                          -5%                              Telecoms, Financials
26%                                                                                                                                                                                                                                                                       -6%
      Jun-00
                  Dec-00
                             Jun-01
                                         Dec-01
                                                    Jun-02
                                                               Dec-02
                                                                           Jun-03
                                                                                      Dec-03
                                                                                                  Jun-04
                                                                                                             Dec-04
                                                                                                                        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




                                                                                                                                                                                                                                                                                Jun-01

                                                                                                                                                                                                                                                                                         Dec-01

                                                                                                                                                                                                                                                                                                  Jun-02
                                                                                                                                                                                                                                                                                                           Dec-02

                                                                                                                                                                                                                                                                                                                       Jun-03

                                                                                                                                                                                                                                                                                                                                       Dec-03

                                                                                                                                                                                                                                                                                                                                                   Jun-04

                                                                                                                                                                                                                                                                                                                                                              Dec-04

                                                                                                                                                                                                                                                                                                                                                                        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
MS Coverage Gross Margins                                                                                                                                                                                                                                                 Growth Dispersion
Fall further during the quarter                                                                                                                                                                                                                                           Seems to be coming off
60%                                                 Gr os s M ar gins (e x Ene r gy, Te ch, Financials , Te le com s )                                                                                                                                                    7.5            Earnings Grow th dispersion for MS Coverage
58%                                                                                                                                                                                                                                                                                      Universe
                                                                                                                                                                                                                                                                          6.5
56%
54%                                                                                                                                                                                                                                                                       5.5                                                                                                                                Consensus
52%                                                                                                                                                                                                                                                                       4.5                                                                                                                                Estimates
50%
                                                                                                                                                                                                                                                                          3.5
48%
46%                                                                                                                                                                                                                                                                       2.5
44%                                                                                                                                                                                                                                                                       1.5
42%                                                                                                                                                                                                                                                                                                                             MS Coverage Universe
         Jun-00
                    Dec-00
                                Jun-01
                                           Dec-01
                                                      Jun-02
                                                                  Dec-02
                                                                             Jun-03
                                                                                         Dec-03
                                                                                                    Jun-04
                                                                                                               Dec-04
                                                                                                                           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




                                                                                                                                                                                                                                                                          0.5
                                                                                                                                                                                                                                                                                1994
                                                                                                                                                                                                                                                                                          1995
                                                                                                                                                                                                                                                                                                    1996

                                                                                                                                                                                                                                                                                                                1997
                                                                                                                                                                                                                                                                                                                                1998

                                                                                                                                                                                                                                                                                                                                                1999
                                                                                                                                                                                                                                                                                                                                                            2000

                                                                                                                                                                                                                                                                                                                                                                       2001
                                                                                                                                                                                                                                                                                                                                                                                 2002

                                                                                                                                                                                                                                                                                                                                                                                           2003
                                                                                                                                                                                                                                                                                                                                                                                                    2004

                                                                                                                                                                                                                                                                                                                                                                                                                2005
                                                                                                                                                                                                                                                                                                                                                                                                                          2006

                                                                                                                                                                                                                                                                                                                                                                                                                                     2007
                                                                                                                                                                                                                                                                                                                                                                                                                                                     2008

                                                                                                                                                                                                                                                                                                                                                                                                                                                                     2009
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 2010

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            2011

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      2012
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               2013
 Source: Company Data, FactSet, IBES, Morgan Stanley Research                                                                                                                                                                                                                                                                                                                                                                                                                                                         18
                                                                                                          MORGAN STANLEY RESEARCH
                                                                                                                           India Strategy
                                                                                                                       November 21, 2011




Earnings for Past 10 Quarters (124 Companies)
(YoY Change %)                    Jun-09        Sep-09    Dec-09    Mar-10    Jun-10    Sep-10   Dec-10     Mar-11    Jun-11     Sep-11
Excluding Energy
Revenues                        24.3              21.0      30.2      35.1     18.2      20.7     22.0        23.5      21.7       19.1
Operating Profit                  1.9              6.3      24.4      33.1     34.3      21.7     20.3        22.2      12.3       13.0
Operating Margin (in bps)     (515.4)           (336.9)   (118.8)    (38.1)   318.5      19.8    (35.5)      (25.9)   (208.6)    (125.7)
Other Income                      4.1             (6.2)      6.2      26.0     36.5      43.3     10.7         5.2      70.8       18.1
Interest                        54.6              44.9       5.7       4.2     43.5       5.0     65.3        72.9      39.0       61.7
Depreciation                    47.9              42.5      39.2      33.2     14.3      25.9     25.9        28.8      27.8       21.6
Pre-tax Profit                   (6.1)            (6.9)     17.4      32.5     35.4      24.7     14.8        18.0      12.2        5.1
Tax                             12.3              13.3      20.5      35.3     27.8      19.4     17.3        24.0      16.4        8.8
Net Profit                     (10.7)            (11.7)     19.5      27.5     36.7      27.2     15.3        13.4       3.0        2.2
Net Profit Margin (bps)       (496.1)           (474.6)   (132.5)    (86.6)   198.7      69.7    (81.4)     (119.0)   (229.1)    (193.4)
Including Energy
Revenues                         (4.1)            0.2       25.5      41.0      24.5     22.9     20.5        23.8      28.8       20.5
Operating Profit                  6.6            23.2       25.6      23.3      13.0     38.2     27.8        16.6      16.3       (6.1)
Operating Margin (in bps)      203.4            353.1        0.8    (293.1)   (188.1)   233.3    116.5      (120.1)   (180.1)    (463.2)
Net Profit                       (1.1)           21.2       14.4       9.9       2.4     48.4     29.0        11.4      10.0      (23.7)
Net Profit Margin (bps)         34.2            174.4     (101.2)   (323.6)   (197.5)   205.6     73.5      (115.3)   (138.1)    (440.5)
Excluding Materials
Revenues                         (8.4)           (3.5)     20.9      38.0       25.9     24.5     21.0       23.5      28.9        20.4
Operating Profit                17.2             37.3      22.9      14.8        4.3     40.2     32.0       17.1      17.3        (7.5)
Net Profit                      13.5             51.9      11.7       1.1      (11.7)    41.2     32.4       11.1      10.9       (25.1)
YoY Change in EBITDA for Key Sectors
Consumer Discretionary          35.3             93.0     244.1     167.9     117.0      55.9     28.8       20.2      10.6         5.9
Consumer Staples                24.7             35.0      28.1      29.4       9.3      12.9      8.9       16.5      20.6        18.0
Energy                          21.3            200.6      29.9       3.4     (42.0)     99.3     54.8        1.5      36.3       (47.1)
Financials                        9.8            11.0       8.3      18.8      33.4      26.8     29.9       13.9      10.0        14.5
Healthcare                        6.1            18.2       6.0      (6.8)     43.3      13.1      9.3       18.7       0.0        29.9
Industrials                     13.9             14.9      43.6      62.5      44.8      38.0     31.7       39.1      19.1        18.6
Materials                      (36.3)           (26.9)     41.6      91.4      78.4      24.5      5.3       13.9      11.7         5.3
Technology                      25.7             13.8       9.1      11.4       7.9      14.5     13.5       18.6      14.2        12.9
Telecom                         11.6              3.1     (19.4)    (46.9)     (8.2)      7.2     34.2      100.1      19.4        11.3
Utilities                       17.5              9.3      28.3      17.2      (1.6)    (13.8)     7.6       24.6       8.3        23.6
YoY Change in Revenues
Consumer Discretionary          47.0              68.8    132.9     112.2      47.6      32.3     26.5       24.6      21.6        19.4
Consumer Staples                13.1              15.9     21.8      38.4      19.7      24.7     23.1       16.7      19.4        16.4
Energy                         (30.8)            (21.1)    19.6      50.5      34.8      26.2     18.5       24.2      38.4        22.4
Financials                      12.8               8.3      8.7      22.1      22.6      29.2     25.3       20.9      14.1        12.1
Healthcare                      13.8              12.3     11.7       4.9      18.3      10.0     20.4       20.6      12.4        24.2
Industrials                     27.6               9.0     10.4      19.3       3.9      14.9     14.4       19.0      22.8        26.4
Materials                       30.5              28.5     63.8      63.1      16.4      13.4     18.0       25.7      27.8        20.5
Technology                      12.0               6.6      4.6       6.9      12.5      20.6     20.3       24.4      23.6        18.9
Telecom                         16.1               5.8     (2.1)     (3.1)      9.5      27.7     33.3       36.0      23.3        11.4
Utilities                       26.0              14.8     (2.0)      8.0       2.7       7.8     21.4       22.8      18.6        25.0
YoY Change in EBITDA Margins (bps)
Consumer Discretionary            (87)             157      475        302      475       225       27        (52)     (135)       (169)
Consumer Staples                 203               320      117       (145)    (187)     (210)    (268)        (5)       19          28
Energy                           649               762       80       (624)    (848)      579      310       (251)      (11)       (902)
Financials                      (141)              133      (18)      (150)     452      (100)     196       (304)     (201)        114
Healthcare                      (152)              117     (125)      (281)     441        66     (215)       (36)     (278)        112
Industrials                     (131)               66      349        417      463       278      236        270       (50)       (102)
Materials                     (1,690)           (1,267)    (342)       374      859       162     (235)      (239)     (311)       (231)
Technology                       290               167      112        108     (109)     (135)    (153)      (123)     (193)       (128)
Telecom                         (148)              (93)    (627)    (1,579)    (590)     (571)      18        902       (98)         (3)
Utilities                       (168)             (118)     632        178     (100)     (484)    (307)        34      (201)        (23)

Source: Company data, Morgan Stanley Research                                                                                              19
                                                                                                                                                                                                                                                                                                                                               MORGAN STANLEY RESEARCH
                                                                                                                                                                                                                                                                                                                                                                                 India Strategy
                                                                                                                                                                                                                                                                                                                                                                             November 21, 2011




Quarterly Revenue/Profit Growth and Change in EBITDA Margins for Sectors
Green dotted Line– Y-o-Y Net profit growth (%) – LS, Red line -Y-o-Y Revenue growth (%) – LS, Blue Line – Operating margin trend (bps)- RS

                              Consumer Disc.                                                                                                 Consumer Staples                                                                                                                   Energy                                      Financials                                    Healthcare
450          %                                                                                    bps               600         45           %                                                                                        bp              400         300       %              bps   1,500           60   %                  bps    800           120                      bps   800
                                                                                                                                                                                                                                      s
400                                                                                                                 500         40                                                                                                                                200                                            50                             600           100                            600
                                                                                                                                                                                                                                                      300                                        1,000
350                                                                                                                 400         35
                                                                                                                                                                                                                                                                  100                                                                           400
300                                                                                                                 300         30                                                                                                                                                                               40                                                                          400
                                                                                                                                                                                                                                                      200                                                                                                        80
                                                                                                                                                                                                                                                                   -                             500                                            200
250                                                                                                                 200         25                                                                                                                                                                               30                                                                          200
                                                                                                                                                                                                                                                      100         (100)                                                                         0                60
200                                                                                                                 100         20
                                                                                                                                                                                                                                                                                                 0               20                                                                          0
150                                                                                                                 0           15                                                                                                                                (200)                                                                         (200)            40
                                                                                                                                                                                                                                                      0
                                                                                                                                                                                                                                                                                                                 10                                                                          (200)
100                                                                                                                 (100)       10                                                                                                                                (300)                          (500)                                          (400)
                                                                                                                                                                                                                                                      (100)                                                                                                      20
 50                                                                                                                 (200)           5                                                                                                                                                                          -                                                                             (400)
                                                                                                                                                                                                                                                                  (400)                                                                         (600)
 -                                                                                                                  (300)       -                                                                                                                                                                (1,000)                                                       -
                                                                                                                                                                                                                                                      (200)       (500)                                        (10)                             (800)                                        (600)
 (50)                                                                                                               (400)           (5)
                                                                                                                                                                                                                                                                  (600)                          (1,500)       (20)                             (1,000)        (20)                          (800)
(100)                                                                                                               (500)       (10)                                                                                                                  (300)




                                                                                                                                                                                                                                                                                                                      Mar-04




                                                                                                                                                                                                                                                                                                                      Mar-07




                                                                                                                                                                                                                                                                                                                      Mar-10




                                                                                                                                                                                                                                                                                                                                                                      Mar-04




                                                                                                                                                                                                                                                                                                                                                                      Mar-07




                                                                                                                                                                                                                                                                                                                                                                      Mar-10
                                                                                                                                                                                                                                                                                                                      Jun-03

                                                                                                                                                                                                                                                                                                                      Dec-04
                                                                                                                                                                                                                                                                                                                      Sep-05
                                                                                                                                                                                                                                                                                                                      Jun-06

                                                                                                                                                                                                                                                                                                                      Dec-07
                                                                                                                                                                                                                                                                                                                      Sep-08
                                                                                                                                                                                                                                                                                                                      Jun-09

                                                                                                                                                                                                                                                                                                                      Dec-10
                                                                                                                                                                                                                                                                                                                      Sep-11
                                                                                                                                                                                                                                                                          Mar-04




                                                                                                                                                                                                                                                                          Mar-07




                                                                                                                                                                                                                                                                          Mar-10




                                                                                                                                                                                                                                                                                                                                                                      Jun-03

                                                                                                                                                                                                                                                                                                                                                                      Dec-04
                                                                                                                                                                                                                                                                                                                                                                      Sep-05
                                                                                                                                                                                                                                                                                                                                                                      Jun-06

                                                                                                                                                                                                                                                                                                                                                                      Dec-07
                                                                                                                                                                                                                                                                                                                                                                      Sep-08
                                                                                                                                                                                                                                                                                                                                                                      Jun-09

                                                                                                                                                                                                                                                                                                                                                                      Dec-10
                                                                                                                                                                                                                                                                                                                                                                      Sep-11
                                                                                                                                                                                                                                                                          Dec-04
                                                                                                                                                                                                                                                                          Sep-05


                                                                                                                                                                                                                                                                          Dec-07
                                                                                                                                                                                                                                                                          Sep-08


                                                                                                                                                                                                                                                                          Dec-10
                                                                                                                                                                                                                                                                          Sep-11
                                                                                                                                                                                                                                                                          Jun-03




                                                                                                                                                                                                                                                                          Jun-06




                                                                                                                                                                                                                                                                          Jun-09
                                                                                                                                                   Mar-04




                                                                                                                                                                                       Mar-07




                                                                                                                                                                                                                           Mar-10
                                                                                                                                          Jun-03


                                                                                                                                                            Dec-04
                                                                                                                                                                     Sep-05
                                                                                                                                                                              Jun-06


                                                                                                                                                                                                Dec-07
                                                                                                                                                                                                         Sep-08
                                                                                                                                                                                                                  Jun-09


                                                                                                                                                                                                                                    Dec-10
                                                                                                                                                                                                                                             Sep-11
                 Mar-04




                                                     Mar-07




                                                                                         Mar-10
        Jun-03


                          Dec-04
                                   Sep-05
                                            Jun-06


                                                              Dec-07
                                                                       Sep-08
                                                                                Jun-09


                                                                                                  Dec-10
                                                                                                           Sep-11




                                   Industrials                                                                                                              Materials                                                                                                       Technology                                    Telecoms                                         Utilities
                 %                                                                                bps 600                   400                    %                                                          bps                       1,500                 70        %                bps     400       150        %              bps       1,500      60          %                bps   800
 900                                                                                                                500     350                                                                                                                                                                  300                                                      50
                                                                                                                                                                                                                                        1,000                 60                                                                               1,000                                         600
                                                                                                                    400     300                                                                                                                                                                  200       100                                            40
 700                                                                                                                                                                                                                                    500                   50                                 100                                           500        30                                 400
                                                                                                                    300     250
                                                                                                                                                                                                                                                                                                 0
                                                                                                                    200     200                                                                                                                                                                            50                                             20
                                                                                                                                                                                                                                        0                     40                                                                               0                                             200
 500                                                                                                                                                                                                                                                                                             (100)
                                                                                                                    100     150                                                                                                                                                                                                                           10
                                                                                                                                                                                                                                        (500)                                                    (200)                                         (500)                                         0
                                                                                                                            100                                                                                                                               30                                           -                                              -
                                                                                                                    0
 300                                                                                                                                                                                                                                                                                             (300)
                                                                                                                            50                                                                                                                                                                                                                            (10)                               (200)
                                                                                                                    (100)                                                                                                               (1,000)               20                                                                               (1,000)
                                                                                                                                                                                                                                                                                                 (400)
                                                                                                                            -                                                                                                                                                                              (50)                                           (20)
 100                                                                                                                (200)                                                                                                                                                                        (500)
                                                                                                                                                                                                                                        (1,500)                                                                                                (1,500)                                       (400)
                                                                                                                                                                                                                                                              10                                                                                          (30)
                                                                                                                    (300)   (50)                                                                                                                                                                 (600)
                                                                                                                                                                                                                                                                                                 (700) (100)                                   (2,000) (40)                                  (600)
(100)                                                                                                               (400) (100)                                                                                                         (2,000)               -




                                                                                                                                                                                                                                                                                                                                                                   Mar-04




                                                                                                                                                                                                                                                                                                                                                                   Mar-07




                                                                                                                                                                                                                                                                                                                                                                   Mar-10
                                                                                                                                                                                                                                                                                                                                                                   Jun-03

                                                                                                                                                                                                                                                                                                                                                                   Dec-04
                                                                                                                                                                                                                                                                                                                                                                   Sep-05
                                                                                                                                                                                                                                                                                                                                                                   Jun-06

                                                                                                                                                                                                                                                                                                                                                                   Dec-07
                                                                                                                                                                                                                                                                                                                                                                   Sep-08
                                                                                                                                                                                                                                                                                                                                                                   Jun-09

                                                                                                                                                                                                                                                                                                                                                                   Dec-10
                                                                                                                                                                                                                                                                                                                                                                   Sep-11
                                                                                                                                                                                                                                                                                                                   Mar-04




                                                                                                                                                                                                                                                                                                                   Mar-07




                                                                                                                                                                                                                                                                                                                   Mar-10
                                                                                                                                                                                                                                                                                                                   Jun-03

                                                                                                                                                                                                                                                                                                                   Dec-04
                                                                                                                                                                                                                                                                                                                   Sep-05
                                                                                                                                                                                                                                                                                                                   Jun-06

                                                                                                                                                                                                                                                                                                                   Dec-07
                                                                                                                                                                                                                                                                                                                   Sep-08
                                                                                                                                                                                                                                                                                                                   Jun-09

                                                                                                                                                                                                                                                                                                                   Dec-10
                                                                                                                                                                                                                                                                                                                   Sep-11
                                                                                                                                          Mar-04



                                                                                                                                          Mar-07




                                                                                                                                          Mar-10




                                                                                                                                                                                                                                                                       Mar-04




                                                                                                                                                                                                                                                                       Mar-07




                                                                                                                                                                                                                                                                       Mar-10
                                                                                                                                          Jun-03

                                                                                                                                          Dec-04
                                                                                                                                          Sep-05
                                                                                                                                          Jun-06

                                                                                                                                          Dec-07
                                                                                                                                          Sep-08
                                                                                                                                          Jun-09

                                                                                                                                          Dec-10
                                                                                                                                          Sep-11




                                                                                                                                                                                                                                                                       Jun-03

                                                                                                                                                                                                                                                                       Dec-04
                                                                                                                                                                                                                                                                       Sep-05
                                                                                                                                                                                                                                                                       Jun-06

                                                                                                                                                                                                                                                                       Dec-07
                                                                                                                                                                                                                                                                       Sep-08
                                                                                                                                                                                                                                                                       Jun-09

                                                                                                                                                                                                                                                                       Dec-10
                                                                                                                                                                                                                                                                       Sep-11
           Mar-04




           Mar-07




           Mar-10
           Jun-03

           Dec-04
           Sep-05
           Jun-06

           Dec-07
           Sep-08
           Jun-09

           Dec-10
           Sep-11




     Source: Company Data, Morgan Stanley Research. Please note for sectors we use MSCI sector classification                                                                                                                                                                                                                                                                                        20
                                                                                                                                  MORGAN STANLEY RESEARCH
                                                                                                                                                          India Strategy
                                                                                                                                                      November 21, 2011




Snapshot of Companies’ Reported Earnings for the Quarter Ended Sep-11
                                                        QE Sep-10                           QE Sep-11A                             YoY
                                                                                                                                                            Miss/Beat
      MS Coverage           Sector        Revenues       EBITDA     Net Profit   Revenues     EBITDA      Net Profit   Revenues   EBITDA      Net Profit
                                                                                                                                                           expectations
Dish TV               Consumer Disc             3,262     497         -452          4,823       1,218          (486)        48%      145%            NM             NM
Ashok Leyland         Consumer Disc         27,140        3,063       1,671        30,946       3,312         1,541         14%          8%         -8%            -6%
SUN TV                Consumer Disc             4,248     3,324       1,676         4,513       3,654         1,801          6%       10%            8%            11%
Hero Honda            Consumer Disc         45,520        6,079       5,056        58,293       7,107         6,036         28%       17%           19%             6%
Indian Hotels         Consumer Disc             3,285      366         -11          3,576         387            18          9%          6%          NM           -93%
M&M                   Consumer Disc         53,618        8,482       7,117        73,606       9,060         7,694         37%          7%          8%            -3%
Maruti                Consumer Disc         91,473        9,603       5,982        78,316       5,702         2,950        -14%      -41%          -51%           -32%
Pantaloon Retail      Consumer Disc         25,814        2,127        428         29,106       2,523           251         13%       19%          -41%           -48%
Tata Motors           Consumer Disc         287,820      41,839      20,819       361,975      48,154        23,459         26%       15%           13%            12%
Titan Industries      Consumer Disc         15,360        1,736       1,278        20,963       2,002         1,482         36%       15%           16%           -10%
TVS Motors            Consumer Disc         16,162        1,075        549         19,918       1,383           765         23%       29%           39%            13%
UTV Sof tw are        Consumer Disc             2,378     439          402          2,309        (147)         (289)        -3%          NM          NM             NM
ZEE                   Consumer Disc             7,116     1,886       1,264         7,184       2,076         1,600          1%       10%           27%            20%
Educomp Solutions     Consumer Disc             2,768     1,038        578          3,198       1,058           128         16%          2%        -78%           -80%
Bajaj Auto            Consumer Disc         43,418        9,122       6,821        52,673      10,574         7,898         21%       16%           16%             3%
Exide                 Consumer Disc         11,272        2,455       1,725        11,761         903           511          4%      -63%          -70%           -65%
Cox & Kings           Consumer Disc             1,073     488          243          1,367         544           293         27%       12%           20%             1%
Colgate               Consumer Staples          5,518     1,297       1,003         6,572       1,390         1,054         19%          7%          5%            -3%
Dabur India           Consumer Staples          9,728     2,129       1,604        12,623       2,449         1,739         30%       15%            8%            -9%
Godrej Consumer       Consumer Staples          9,615     1,726       1,242        11,860       2,147         1,393         23%       24%           12%            -2%
Hindustan Lever       Consumer Staples      46,809        6,469       5,350        55,222       8,267         6,513         18%       28%           22%            11%
ITC                   Consumer Staples      50,835       18,802      12,467        59,742      22,190        15,143         18%       18%           21%             3%
Marico                Consumer Staples          7,758     1,029        743          9,745       1,167           783         26%       13%            5%            -5%
Nestle                Consumer Staples      16,373        3,267       2,175        19,631       4,165         2,685         20%       27%           23%             7%
United Spirits        Consumer Staples      13,542        2,304        746         17,906       2,660           848         32%       15%           14%            -7%
Aban Of fshore        Energy                    8,281     5,563        752          7,626       4,588           795         -8%      -18%            6%           -68%
BPCL                  Energy                354,348      24,865      21,422       423,019      (26,948)     (32,293)        19%          NM          NM             NM
HPCL                  Energy                308,702      24,829      20,898       371,042      (28,697)     (33,644)        20%          NM          NM             NM
Reliance Industries   Energy                574,790      93,960      49,230       785,690      98,440        57,030         37%          5%         16%            -1%
Essar Oil             Energy                109,420       6,120       1,300       130,260       1,370        (1,660)        19%      -78%            NM             NM

Source: Company data, Morgan Stanley Research                                                                                                                             21
                                                                                                                                 MORGAN STANLEY RESEARCH
                                                                                                                                                         India Strategy
                                                                                                                                                     November 21, 2011




Snapshot of Companies’ Reported Earnings for the Quarter Ended Sep-11
                                                        QE Sep-10                           QE Sep-11A                            YoY
                                                                                                                                                           Miss/Beat
      MS Coverage            Sector       Revenues       EBITDA     Net Profit   Revenues     EBITDA     Net Profit   Revenues   EBITDA      Net Profit
                                                                                                                                                          expectations
Oil India              Energy               24,673       13,976       9,160        33,571      19,551       13,866         36%       40%           51%            51%
Coal India             Energy               111,023      20,351      15,444       131,481      27,546       25,931         18%       35%           68%           -28%
Cairn India            Energy               26,864       21,742      15,851        26,522      21,040       21,182         -1%       -3%           34%           283%
AXIS Bank              Financials           26,483       14,864       7,351        32,422      17,756        9,203         22%       19%           25%            -5%
Bank of Baroda         Financials           27,194       16,567      10,193        33,013      21,400       11,661         21%       29%           14%            10%
Bank of India          Financials           23,606       13,796       6,168        27,457      15,515        4,911         16%       12%          -20%           -20%
Canara Bank            Financials           25,029       14,158      10,079        27,900      16,053        8,522         11%       13%          -15%           -12%
Corp Bank              Financials               9,414     5,735       3,517        11,423       7,001        4,011         21%       22%           14%            41%
DLF                    Financials           23,690        9,289       4,117        25,324      11,730        3,682          7%       26%          -11%           -26%
HDFC                   Financials           12,527       11,485       8,075        14,786      13,547        9,707         18%       18%           20%             1%
HDFC Bank              Financials           34,870       18,071       9,121        41,562      21,258       11,994         19%       18%           31%             1%
ICICI Bank             Financials           37,823       22,119      12,363        42,460      23,538       15,032         12%          6%         22%             2%
IDBI                   Financials           16,602       10,256       4,291        15,281       9,335        5,159         -8%       -9%           20%            26%
IDFC                   Financials               6,460     5,234       3,376         8,900       7,590        5,247         38%       45%           55%            52%
Kotak Mahindra Bank    Financials           23,349        5,685       3,641        16,706       6,553        4,326        -28%       15%           19%            -7%
Oriental Bank          Financials           12,912        8,060       3,977        12,669       7,582        1,677         -2%       -6%          -58%           -49%
IBREL                  Financials               3,000     812          509          3,320       1,026          394         11%       26%          -23%           699%
Punjab National Bank   Financials           36,950       21,001      10,746        43,414      25,278       12,050         17%       20%           12%            10%
Reliance Capital       Financials           12,998        1,240       1,014        15,461         724          334         19%      -42%          -67%            -9%
Sobha Developers       Financials               4,257     920          589          3,274         735          409        -23%      -20%          -31%            21%
SBI                    Financials           121,201      63,570      25,014       138,492      74,742       28,103         14%       18%           12%             3%
Union Bank of India    Financials           20,455       11,306       3,034        21,622      12,051        3,525          6%          7%         16%           -27%
Yes Bank               Financials               4,442     2,814       1,760         5,997       3,859        2,350         35%       37%           34%             4%
Indusind Bank          Financials               5,049     2,619       1,332         6,584       3,330        1,931         30%       27%           45%             7%
Jaypee Infra           Financials               7,115     5,117       4,117         7,158       3,933        3,106          1%      -23%          -25%            25%
LIC Housing Finance    Financials               3,696     3,193       2,342         3,916       3,354          984          6%          5%        -58%           -64%
ING                    Financials               4,475     1,842        753          4,661       1,894        1,154          4%          3%         53%            23%
Oberoi Realty          Financials               1,701     1,006        955          2,226       1,156        1,114         31%       15%           17%            35%
Shriram Transport      Financials               7,231     5,665       2,990         8,605       6,818        2,994         19%       20%            0%           -14%
Godrej Properties      Financials               343        15          329          1,395         321          195        307%     2019%          -41%           -15%

Source: Company data, Morgan Stanley Research                                                                                                                            22
                                                                                                                                 MORGAN STANLEY RESEARCH
                                                                                                                                                         India Strategy
                                                                                                                                                     November 21, 2011




Snapshot of Companies’ Reported Earnings for the Quarter Ended Sep-11
                                                        QE Sep-10                           QE Sep-11A                            YoY
                                                                                                                                                           Miss/Beat
    MS Coverage                Sector     Revenues       EBITDA     Net Profit   Revenues     EBITDA     Net Profit   Revenues   EBITDA      Net Profit
                                                                                                                                                          expectations

Biocon                  Healthcare              4,203     1,297        891          5,084       1,334          857         21%          3%         -4%            -1%
Cipla                   Healthcare          16,241        3,666       2,630        18,043       4,376        3,090         11%       19%           17%            -5%
Dr Reddy's              Healthcare          18,704        3,225       2,866        22,679       3,746        3,079         21%       16%            7%            15%
GlaxoSmithKline         Healthcare              6,012     2,160       1,582         6,298       1,830        1,458          5%      -15%           -8%           -18%
Lupin                   Healthcare          14,340        2,987       2,150        17,724       4,040        2,669         24%       35%           24%            14%
Sun Pharmaceuticals     Healthcare          13,314        4,670       5,037        18,946       7,840        5,977         42%       68%           19%            21%
Fortis Healthcare       Healthcare              3,579     499          209          6,101         872         (126)        70%       75%            NM             NM
Aditya Birla Nuvo       Industrials         45,329        5,699       1,977        53,418       7,248        2,143         18%       27%            8%            -5%
NCC                     Industrials         12,013        1,234        460         10,903       1,032          114         -9%      -16%          -75%           -52%
GMR Infra               Industrials         12,217        3,561       -692         18,123       5,014       (1,470)        48%       41%            NM             NM
Great Eastern Shipping Industrials              6,310     2,854       1,689         6,788       2,233          273          8%      -22%          -84%           -59%
IVRCL Inf ra            Industrials         10,750        953          233         10,461         938           81         -3%       -2%          -65%           239%
Jain Irrigation Systems Industrials             6,411     1,395        475          7,711       1,795          513         20%       29%            8%            11%
Jaiprakash Associates Industrials           30,712        7,590       1,127        29,624       5,782          307         -4%      -24%          -73%           -54%
L&T                     Industrials         94,222       10,017       6,565       112,452      11,741        7,984         19%       17%           22%             6%
Shipping Corporation    Industrials             8,764     2,049       2,506         9,068        (124)        (146)         3%          NM          NM             NM
Adani Enterprises       Industrials         57,519        7,259       4,450       100,787      13,927        6,630         75%       92%           49%            29%
IRB Inf ra              Industrials             4,903     2,364        991          7,359       3,215        1,109         50%       36%           12%             9%
Mundra Port             Industrials             4,135     2,737       2,117         6,197       4,106        2,734         50%       50%           29%            15%
ACC                     Materials           16,372        1,599       1,000        21,500       2,204        1,675         31%       38%           67%           -14%
Gujarat Ambuja          Materials           15,644        2,835       1,521        18,092       2,950        1,714         16%          4%         13%             2%
Grasim Industries       Materials           44,440        7,211       3,234        56,492       9,028        4,179         27%       25%           29%            12%
Hindalco                Materials           58,028        6,412       4,339        62,205       6,178        5,025          7%       -4%           16%           -13%
Jindal Steel            Materials           30,780       14,975       8,942        44,066      16,872        8,918         43%       13%            0%           -17%
JSW Steel               Materials           57,128        9,291       4,454        76,251      12,890        6,401         33%       39%           44%           232%
Nalco                   Materials           13,865        2,552       1,558        15,837       1,224        1,393         14%      -52%          -11%           -53%
Sesa Goa                Materials               9,068     2,888       3,850         7,841         202           13        -14%      -93%         -100%          -100%
SAIL                    Materials           108,062      16,948      10,901       108,367      11,842        4,946          0%      -30%          -55%           -44%

Source: Company data, Morgan Stanley Research                                                                                                                            23
                                                                                                                                          MORGAN STANLEY RESEARCH
                                                                                                                                                                   India Strategy
                                                                                                                                                               November 21, 2011




Snapshot of Companies’ Reported Earnings for the Quarter Ended Sep-11
                                                           QE Sep-10                              QE Se p-11A                              YoY
                                                                                                                                                                     Mis s/Beat
    MS Coverage                      Se ctor   Revenue s    EBITDA     Ne t Profit   Re venue s     EBITDA      Ne t Profit   Reve nues   EBITDA      Net Profit
                                                                                                                                                                   e xpe ctations
Sterlite Industries      Materials              60,290      14,736      14,393         101,338        24,202       17,735          68%        64%           23%              5%
Tata Steel               Materials              286,462     36,723      19,788         327,979        27,500        2,124          14%       -25%          -89%            -50%
Ultratech Cement         Materials              32,147       4,078       1,158          39,098         5,816        2,789          22%        43%          141%              7%
United Phosphorus        Materials              12,569       2,326       1,147          17,757         3,255          713          41%        40%          -38%            -42%
NMDC                     Materials              24,600      18,405      13,786          30,623        24,354       19,632          24%        32%           42%              4%
HCL Technologies         Technology             37,081       5,808       3,087          46,513         7,778        4,797          25%        34%           55%              4%
Hexaw are                Technology              2,817        240         420            3,660          686           646          30%       186%           54%             32%
Info edge                Technology               712         214         179              911          322           282          28%        51%           58%              8%
Infosys                  Technology             69,470      23,170      17,370          80,990        25,160       19,060          17%           9%         10%              -5%
MindTree Consulting      Technology              3,844        447         232            4,567          588           545          19%        31%          135%             58%
Patni                    Technology              7,967       1,505       1,281           9,453         1,661          842          19%        10%          -34%             27%
TCS                      Technology             92,864      27,894      21,065         116,335        33,829       24,390          25%        21%           16%              -1%
Tech Mahindra            Technology             15,339       2,818       1,873          13,333         2,042        1,388          -13%      -28%          -26%              -5%
Wipro                    Technology             77,719      16,415      12,849          90,070        16,523       12,999          16%           1%          1%              -6%
Infotech Ent.            Technology              2,955        453         330            3,726          586           307          26%        29%           -7%              6%
Bharti                   Telecom                152,150     51,212      16,589         172,698        58,151       10,270          14%        14%          -38%             36%
Idea Cellular            Telecom                36,592       8,788       1,797          46,199        11,866        1,058          26%        35%          -41%              1%
MTNL                     Telecom                10,536      -1,596       -6,048          8,606        (3,187)       (8,640)        -18%          NM          NM               NM
Reliance Comm            Telecom                51,183      16,595       4,459          50,402        16,051        2,521           -2%       -3%          -43%              -1%
Tata Communications      Telecom                 8,238       2,123        242           10,266         2,955          619          25%        39%          155%             51%
OnMobile Global          Telecom                 1,315        279         220            1,552          325           114          18%        17%          -48%            -10%
Adani Pow er             Utilities               3,952       2,283       1,258          10,284         5,372        2,511         160%       135%          100%            -26%
GAIL                     Utilities              81,282      14,570       9,236          97,264        16,755       10,944          20%        15%           19%              -4%
LANCO Inf ratech         Utilities              20,439       4,189        142           18,966         4,509          (206)         -7%          8%          NM               NM
NTPC                     Utilities              127,882     26,039      13,349         155,292        29,840       16,099          21%        15%           21%            -29%
Reliance Infrastructure Utilities               22,432       2,542        849           39,505         7,097        4,957          76%       179%          484%            146%
Tata Pow er Company      Utilities              16,261       3,120       1,762          19,481         4,190        3,659          20%        34%          108%             75%
JSW Energy               Utilities               8,312       2,963       1,553           9,965         1,102          (317)        20%       -63%            NM               NM
Indiabulls Pow er        Utilities                 0          -93          3               -            (152)         131           NM           NM       4292%           1495%

Source: Company data, Morgan Stanley Research                                                                                                                                       24
                                                                                                                                       MORGAN STANLEY RESEARCH
                                                                                                                                                                India Strategy
                                                                                                                                                            November 21, 2011




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                                                generates earnings.

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                                                                                                                                                                               25
                                                                                                                                     MORGAN STANLEY RESEARCH
                                                                                                                                                             India Strategy
                                                                                                                                                         November 21, 2011




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                                    Coverage Universe           Investment Banking Clients (IBC)

                                                                           % of Total     % of Rating
Stock Rating Category                 Count    % of Total        Count           IBC        Category
Overweight/Buy                         1126        40%           449           44%                 40%
Equal-weight/Hold                      1176        42%           431           42%                 37%
Not-Rated/Hold                          108         4%            23            2%                 21%
Underweight/Sell                        418        15%           115           11%                 28%
Total                                 2,828                     1018
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                                                                                                                                                                             26
                                                                                                                                                       MORGAN STANLEY RESEARCH
                                                                                                                                                                                  India Strategy
                                                                                                                                                                              November 21, 2011




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                                                                                                                                                     MORGAN STANLEY RESEARCH
                                                                                                                                                                                India Strategy
                                                                                                                                                                            November 21, 2011




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                                                                                                                                                  MORGAN STANLEY RESEARCH
                                                                                                                                                                            India Strategy
                                                                                                                                                                        November 21, 2011




Disclosure section (cont.)
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