Citigroup Global Markets India Private Limited

India vs The Virus

April 23, 2020
Topics for Discussion

 How Broad, How Intense, How Long ?

1 The Pandemic – Globally
– In India

 How Deep and Impactful on Indian Macros

2 The Economic Shock
 Policy Response and Creation of a War Chest

 Initial Panic
3 The Market Response
 Scope of Equity and Debt Markets’ Dislocation

 Near Term and Long Term Impact

4 Sector Impact
 Demand Side and Supply Side Dislocation

1
COVID-19 Facts

Testing yield in India at

It took 6 days for
c. 55% of the
number of cases to go
c. 4% one of the from 6k to 12k in India,
economy operational
during the nationwide
lowest in the world(1) higher than the 6 most
lockdown in India(3)
affected countries(2)

Did You
Know ?

83 mn jobs in It took people

non-agricultural 6 Indian companies c.2 yrs
sectors are at are working to develop
immediate risk in after the 1918 Flu to
a COVID-19 vaccine(4)
India(3) socialize at prior levels(5)

Source: (1) Data source Worldometer for 20 most affected countries; Excludes China due to non-availability of data; Testing yield is defined as Number of Positives Cases of Total Tests (2) Ministry of Health and
Family Welfare India and Worldometer (3) Citi (4) Bloomberg (5) Street Research
2
1 The Pandemic
An Evolving Pandemic - Global Perspective
Global Exposure Has Come in Phases Exponential increase in Confirmed Cases in US
and Europe
Phase III: United States Phase II: Europe Phase I: China / Asia
2,400
As of April 21st 485k
Confirmed 2,000
Cases Deaths 801k

Thousands of Cases
China: 3% 3%
1,600
Europe: 46% 60%
US: 31% 24%
1,200
India: 0.8% 0.4%
1,187k
RoW: 19% 13%
800

400

? 0
83k
? 10-Jan 27-Jan 13-Feb 1-Mar 18-Mar 4-Apr 21-Apr

No. of Confirmed Cases: China Europe United States RoW

>100,000
>50,000
? Source: Johns Hopkins data.

>10,000
>5,000
<5,000 ? Basic Unknowns:

Level of Spread
Mode of Transmission
Total Cases Total Deaths People 1918 Flu
(and Counting) (and Counting) Locked Down Deaths Surface Survival Period
Impact of Seasonality / Temperature

2,555,760 177,459 4bn 50mm+ Existing Immunity

Source: Coronavirus Covid-19 Global Cases by Johns Hopkins CSSE as of April 21, 2020.

3
India and The Virus
COVID-19 Cases in India are doubling in every 5-6 days India’s Urbanized Areas have been the Most Affected
25,000 180 0
For Top 5(2) Affected States / UTs:
160 0
Jammu and
• % of Total Cases: 64%
20,000 Confirmed cases added in last 1 week 140 0 Kashmir • % Total GDP Contribution: 39%
380

India: 8,538 120 0 2% Ladakh • % of Total Population: 27%

Cumulative Cases

Cases per Day

18
15,000 0%
China: 493 100 0 Punjab
251 Himachal
1% Pradesh
Europe: 226,602 800 39
10,000 0%
Chandigarh Uttarakhand Arunachal
600 27 Pradesh
US: 196,950 0%
46
1
0%
Haryana 0%
400
5,000 Global: 567,129 254 Delhi
1% 2,156
200 11% Sikkim
Nagaland
Rajasthan Uttar Pradesh Assam 1
0 0 1,801 1,412 Bihar 35 / 0% 0%
Jan-20 Feb-20 Mar-20 Apr -20 9% 7% 126
Meghalaya
1%
12 / 0% Manipur
Daily Cases Cumulative Cases
Jharkhand 2
Tripura 0%
in ‘000s unless Gujarat Madhya Pradesh
45 West
2
specified India Global China US Italy Spain 2,272 1,592
0% Bengal
423 0% Mizoram
11% 8% 2% 1
Confirmed Chhattisgarh 0%
20.5 2,556 83 801 184 208 36
Cases 0%
Odisha
82
0%
No. of Confirmed Cases:
Active Cases 15.9 1,688 1+ 675 107 103 Maharashtra
5,221
26% Telangana >1,000
945
>500
Recovered 4.0 691 77 83 52 83 5%
>100

Andhra <100
Goa Pradesh
Deceased 0.7 177 5 43 25 22 7 % of cases of total cases in India
813
0% 4%
Karnataka
425 Andaman and
Mortality Rate Nicobar Islands
3.2% 6.9% 5.6% 5.3% 13.4% 10.4% 2%
(%) Pondicherry 17
7 0%
Tamil Nadu 0%
1,596
Test Yield(1) 4.6% - - 19.1% 12.7% 21.9% Kerala 8%
427
2%
Tests per Million
291 - - 12,651 23,985 19,896
(#)

Source: Ministry of Health Affairs, Johns Hopkins CSSE, Data as of April 21, 2020.
Note: (1) Test yield is defined as Number of Positives Cases of Total Tests (2) 5 most affected states / UTs include Maharashtra, Delhi, Gujarat, Rajasthan, Tamil Nadu
4
COVID-19 – Triggering a Nationwide Lockdown in India
India’s Quick Response to COVID-19 Outbreak

March 14, 2020 March 24, 2020 March 27, 2020 April 17, 2020
India declared COVID-19 a Prime Minister Modi announced RBI announced slew of measures to RBI announces fresh liquidity
notified disaster 21-day lockdown in India help mitigate impacts of lockdown measures to cushion impact

Jan 30 Now
First case of
COVID-19 in India

March 12, 2020 March 22, 2020 March 26, 2020 April 14, 2020 April 20, 2020
First death was reported in India India observed “Janta Curfew” FM Nirmala Sitharaman announced PM Modi extends nationwide Conditional relaxation
due to COVID-19 for a day $23bn stimulus package lockdown till 3 May, with in certain areas
conditional relaxation post 20 April

India Implements the Strictest Lockdown Decreased Mobility as a Result of Lockdown (Google Mobility Report)(1)

100
100 Retail & Grocery & Transit
90 Pharmacy Parks Work Places Residential
95 95 Recreation Stations
Stringency Index

(80%) (55%) (52%) (69%) (64%) 30%

80
81 81 81

(45%) (7%) (16%) (49%) (38%) 14%

70 71

67 (81%) (32%) (37%) (70%) (57%) 19%

60

(92%) (44%) (85%) (84%) (63%) 26%

50
10 10 20 20 30 30 40 40 50 50 60 60 70 70 80 80 90 90100 110
100+
(86%) (42%) (83%) (78%) (62%) 26%
# of COVID-19 Positive Cases (in ‘000s)
Source: News Reports, Oxford COVID-19 Government Response Tracker, Google Mobility Report
Note: (1) Change from 29 Feb 2020 to 11 April 2020
5
2 The Economic Shock
Fall in Global GDP Growth Estimates Suggesting a Possible Recession
Fall in Global GDP Growth Estimates… …Suggesting a Global Shock and a Possible
Recession
Global United States Europe

“The virus that triggered a supply shock in China

500bps 460bps 960bps
has now caused a global shock. Developing
1.2% 1.2% 1.1%
economies in East Asia and the Pacific (EAP),
2.7% 2.7% 2.5% 2.3%
2.0% 2.0% 1.9% recovering from trade tensions and struggling with
1.3% 1.4%
(0.8)% (1.1)%
COVID-19, now face the prospect of a global
financial shock and recession”
(0.5)%

(1.6)%
(2.3)% - The World Bank
(2.6)%
(8.4)%

2019A 2020E 2020E 2020E 2020E 2020E 2020E 2019A 2020E 2020E 2020E 2020E 2020E 2019A 2020E 2020E 2020E 2020E 2020E
(Jan) (Feb (Mar (Mar (Mar (Apr (Jan) (Feb 27) (Mar 12) (Mar 18) (Apr 10) (Jan) (Feb 27) (Mar 12) (Mar 18) (Mar 25)
27) 12) 18) 25) 07)

“It is very likely that this year the global economy

will experience its worst recession since the Great
India Japan China
Depression, surpassing that seen during the
global financial crisis a decade ago. The Great
420bps 500bps 340bps Lockdown, as one might call it, is projected to
5.9% 5.9%
5.5%
6.2%
5.8% shrink global growth dramatically. A partial
5.3%
4.6%
0.8%
3.7%
recovery is projected for 2021, with above trend
0.3%
0.0%
2.2% 2.4% growth rates, but the level of GDP will remain
1.7%
below the pre-virus trend, with considerable
(1.5)%
(1.9)% uncertainty about the strength of the rebound”

(4.7)%
- International Monetary Fund
2019A 2020E 2020E 2020E 2020E 2020E 2019A 2020E 2020E 2020E 2020E 2020E 2019A 2020E 2020E 2020E 2020E
(Jan) (Feb 27) (Mar 18) (Mar 25) (Apr 15) (Jan) (Feb 27) (Mar 18) (Mar 25) (Apr 08) (Jan) (Feb 27) (Mar 18) (Mar 25)

Source: Citi , World Bank & IMF Reports

6
COVID-19 – Weighing on the Indian Growth Story
COVID-19 is likely to Impact India through the following channels: Resulting in lowering of GDP Growth Estimates

 Weaker global demand

5.2% 1.8% 5.8% 1.9%
 Supply chain disruptions (IMF)
External  Lower Commodity Prices
 Global Financial Shocks 5.3% 2.5%
COVID 6.0% 2.1%
(Economist
19 5.1% 1.8% Intelligence Unit)

 Reduced discretionary spending

Internal  Factory Shutdowns
5.9% 1.7% 2.5% 0.0%
 Travel restrictions

Immediate Impact of COVID-19 on Supply Chain, Exports and Global Demand reflected in the Manufacturing & Services PMI

Manufacturing Purchasing Managers’ Index Services Purchasing Managers’ Index

56 55.3 60
57.5
55 54.5 58
55.5
54 53.3 56
53.3
53 54 52.7
51.8
52 51.2 52
50.6 49.2 49.3
51 50
50 48
49 46
48 44
Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20

India & China likely to be only countries that will not slip into a recession(1)

Source: Citi , BSE, Factset, CMIE

Note: (1) As per a report titled “The COVID-19 Shock to Developing Countries” by United Nations Conference on Trade and Development
7
Lockdown - Severe Short Term Impact on the Economy
CPI Inflation has fallen significantly in Weekly Unemployment Rate has GST Collections hit 5 month low
Mar-20 almost tripled ($ Bn)
(%) (%)

30%
8.0 7.6 26% 14.8
24%
24%
7.0 25% 14.3
14.0
CPI Inflation (in %)

6.0 6.6 23% 13.7 13.7

20%
5.0 5.9
15% 13.1
12.9
4.0
12.7
10% 7% 8% 8% 8%
3.0 7%
Lower food & fuel prices Nationwide
2.0 and fall in demand for 9% 7% lockdown
5% 7% 8%
non-essential items
1.0
0% December January February March
- 26-Jan-20 20-Feb-20 16-Mar-20 10-Apr-20
Dec-18 Feb-19 May-19 Jul-19 Oct-19 Dec-19 Mar-20 FY19 FY20

Electricity Demand remains almost Rail freight is down 36% YoY over Improvement in Air Quality Index
30% below Last Year’s Levels from April 10 – April 17 Across Metro Cities
(YoY Growth) (YoY Change in Tonnage) (AQI Levels)

20%
145
Nationwide
New Delhi 66%
10% lockdown

0% Mumbai 23%
2-Mar 9-Mar 16-Mar 23-Mar 30-Mar 6-Apr 13-Apr

-10%
(17) (24)
(33) (35) (37) (36) Chennai 71%
-20% (49) (50)

(98)
-30% Bengaluru 64%
Food Coal Container Minerals Chemical Petroelum Others Iron & Cement & Total
Manures Products Steel Clinker

-40%

Source: Citi , BSE, Factset, Ministry of Statistics, CMIE, Market data as of April 17, 2020. FX Rate: $1 – INR 75

8
Leading to Slowdown in Trade and Flows in the Near Term
Oil Price Correction to Provide Import Resulting in Significantly Low Trade
Exports down 35% in Mar-20
($ Bn) Bill Relief Deficit
($ / Barrel) ($ Bn)

80
180
337
70 160
153
314
309 60
300
50 112
280
94
40

30
$53Bn 28
Expected Oil
20 Import bill for FY21
– less than half of FY21E:
10 FY20
$26 / Barrel
0
FY17 FY18 FY19 FY20 FY21E Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 FY17 FY18 FY19 FY20 FY21E

Software Services Export Expected to India expected to have first Current

Remittances Expected to Take a Hit
Remain Steady ($ Bn) Account Surplus year in 17 Years
($ Bn) ($ Bn)

70 70
85 14
1 15
83

62 (19)
78
59
56
72 (33) 66
71

(14)

FY20 Lower Lower Lower Oil Lower Lower FY21E

FY17 FY18 FY19 FY20E FY21E FY17 FY18 FY19 FY20E FY21E CAD Exports Invisibles Imports Gold Non-Oil CAD
Imports Imports

Source: Citi , Factset, Market data as of April 17, 2020. FX Rate: $1 – INR 75

9
Low Capital Flows, Weaker Currency and a High Fiscal Deficit
FDI Flows are likely to fall by c.27% in Portfolio Investments expected to Improvement in Balance of Payments
FY21E pickup after Mar-20 outflow driven largely by Lower Trade Deficit
($ Bn) ($ Bn) ($ Bn)

36
22 58
34

47
31 44
30

8 22
25
5

1
(1) (3)

FY17 FY18 FY19 FY20E FY21E FY17 FY18 FY19 FY20E FY21E
FY17 FY18 FY19 FY20E FY21E

Equity Market Selloff Post Lockdown Forcing RBI to drawdown from Forex India’s Fiscal Deficit may shoot to
resulting in Sharp Rupee Fall Reserves to defend the Rupee 8.0% in FY21
(INR / $) ($ Bn) (% of GDP)

FY20: Fiscal deficit at 4.3% of GDP in Feb-20 compared

78 490 482 to target of 3.8%
476 476
77 Expectation: 74-76 FY21: Citi estimates deficit to go up to
8.0% against Govt target of 3.5%
8.0%
76
76.37
460
75

74 437
Biggest weekly fall in
73 427 Forex Reserves
430 since the Global 4.3%
Sharp fall in Rupee 419 Financial Crisis
72 post announcement 3.5% 3.5%
of nationwide 3.4%
lockdown
71
3.8% 3.5%
70 400
Nov-19 Dec-19 Jan-20 Feb-20 Feb-20 Mar-20 Apr-20 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 FY17 FY18 FY19 FY20P FY21E

Source: Citi , Factset, Street Research, Market data as of April 17, 2020. FX Rate: $1 – INR 75

10
Global COVID-19 Dashboard
Rate Cuts Fiscal Cumulative Monetary Policy Rate Cuts vs Fiscal Pledges /
Country / Cases per Lockdown
since 1-Mar Proposal (as Announcements
Government Mn Type (Size of the Bubble denotes Cases per Million)
(Bps) a % of GDP)

Stay at Home 40
2 (75) 0.8%
India since Mar-24
Emerging Economies

20
Stay at Home
59 (30) 2.4%
China since Jan-23
-

Partial Social
93 (50) 2.5%
Brazil Distancing (20)

Cumulative Rate Cuts since 1-Mar (bps)

Stay at Home
26 (50) 0.5% (40)
Mexico since Mar-30

Stay at Home (60)

1,497 (65) 4.3%
U.K. since Mar-23
(80)
Partial Stay at
1,929 (150) 6.1%
U.S. Home
Developed Economies

(100)

2,128 0 3.4% Stay at Home

(120)
European Union

Stay at Home (140)

3,082 0 3.0%
Switzerland since Mar-20

(160)
Stay at Home
361 0 8.9%
Japan since Apr-8
(180)
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%
Partial Social
-- (79) 11.4% Direct Fiscal Proposal as a % of 2019 GDP
Hong Kong Distancing

Source: Citi

11
Strong Global Initiatives to Combat the Crisis
Country / Government Global Monetary Response Global Fiscal Response Illustrative Central Bank Responses
 Liquidity Infusion of $22 bn through Targeted Long Country Rate Cut(2)
4.4%  Announced $23bn relief package to address short Term Repo Operations
Low-End
term needs of people at bottom of pyramid  Additional liquidity of $36 bn through reduction in India 75bps rate cut
Interest Rate
India Cash Reserve Ratio and increase in MSF(1)
Emerging Economies

Australia 50bps rate cut

4.05%  Expectation to unveil additional stimulus measures  Announced to implement $344 bn of mainly fiscal 50bps rate cut
Low-End
Brazil
 Cut reserve ratio to release CNY550bn of liquidity measures
China Interest Rate
Canada 150bps rate cut
 Cut interest rates by 50bps in March, with market
3.75% expectation for 100bps in further cuts Chile 125bps rate cut
Low-End  BRL 220bn aid package is being considered
 Aggressive intervention in FX market, and 125bps rate cut
Interest Rate Czech Republic
Brazil reportedly considering QE program
Denmark 15bps rate increase
 Cut interest rates by 50bps in March and reduced
6.5%
reserve requirements & discount window rate  AMLO announced economic measures will be a 300bps rate cut
Low-End Egypt
Interest Rate  Increased potential NDF auction quota from $20bn maximum of MXN158 bn
Mexico to 30bn for FX intervention Quantitative Easing
Europe
0.25%  Cut interest rates by 150bps in March Indonesia 25bps rate cut
Low-End  Announced unlimited QE, lending and a new FIMA  Announced $2tn stimulus package
U.S. Interest Rate repo facility in March Japan Quantitative Easing
 Announced €750bn debt-buying program to Korea 50bps rate cut
(0.5%) stabilize borrowing costs  Announced €40bn working capital lending & €37bn
Low-End
Interest Rate  Boosted QE authorization by €120bn through year- funding to healthcare systems SMEs, & workers Mexico 50bps rate cut
European Union end
New Zealand 75bps rate cut
Developed Economies

0.1%  Announced £645bn in QE purchases

Low-End  Announced new 4-year lending scheme for SMEs Norway 125bps rate cut
 Cut interest rates by 65bps since March
U.K. Interest Rate
Peru 200bps rate cut
 Announced €750bn stimulus package
 Cut capital buffer for banks from 0.25% to zero  Announced €275mn emergency health care Philippines 100bps rate cut
Germany spending
Poland 100bps rate cut
 Announced €25bn stimulus package
 Intervened in sovereign bond markets to curb
 Expectation for additional debt relief, health & South Africa 200bps rate cut
volatility
Italy emergency spending
Sweden Quantitative Easing
 Announced increase in asset purchases and left  Announced ¥430bn stimulus package and ¥1.6tn
(0.1%) rates unchanged in loans to companies Thailand 25bps rate cut
Low-End
 Temporarily increased purchases of CP and  Expected to soon announce its largest-ever
Interest Rate
Japan corporate bonds stimulus package Turkey 100bps rate cut

0.86% U.K. 65bps rate cut

 Announced HKD120bn stimulus package
Low-End  Cut interest rates by 114bps since March
 Expectation to unveil additional stimulus measures U.S. 150bps rate cut
Hong Kong Interest Rate

Source: Citi , Bloomberg. FX Rate: $1 – INR 75

Note: (1) MSF – Marginal Standing Facility (2) Since March 1, 2020
12
India’s Policy Response So Far… More may be Expected
Monetary Initiatives SEBI Relaxations

75bps cut to 4.4% Induce Demand for Regulatory Extensions Market Intermediaries
Reverse Repo Cut by Credit and encourage
115bps to 3.75% banks to lend
Rate Cut  Trade from home for
45 Relaxation to file Q4 results
for FY20
trading members
Days
Targeted Long $22 billion of additional  Relaxed penal provisions
Term Repo liquidity for purchase for non-maintenance of call
Repo Operations of IG instruments recordings of instructions
Operations from clients till 17 May

CRR cut by 1%
1 Relaxation to file FY20 results
and quarterly Corporate  Penalty for shortfall in
$36 billion of additional Month Governance Report margin collection to apply
MSF increased liquidity infused from May 17 instead of
Liquidity by 1%
Enhancement April 1

3 months
Moratorium
Take care of Immediate
Cash Flow
3 Relaxation for filing
shareholding pattern and
On term and working Weeks investor complaint reports Mutual Funds
Regulatory requirements and
capital loans and NPA
Relaxations relaxation prevent spike in NPAs
 Deadline extended to May
1:
Fiscal Initiatives
21 Relaxation for compliance
and disclosures under – For liquid funds to
implement risk
What’s in the c.$23 billion War Chest created for the Crisis ? Days markets norms
management framework
Purpose Impact ($ billion)
Ex Gratia & LPG Cylinders for Women 6.7
– For application of MTM
valuation
Income Support to Workers & Farmers 7.8
Medical Support 3.6 21 Relaxation for processing
investor requests pertaining to
 Disclosure of commissions
paid to distributors to be
Food Security 4.5 Days physical securities
done till 10 May
Total 22.6
Source: Citi , RBI & SEBI Notifications

13
3 The Market Response
Markets Exhibiting Panic
Asian markets are performing comparatively better then Divergence in Returns across Asset Classes
other Global Equity Markets
U.S. LatAm Europe Asia Nifty
13,000 FY21 Target: 10,100
S&P 500 BOVESPA EURO STOXX HANG SENG
(15%) (32%) (25%) (12%) 11,000
9,267
DJIA MEXBOL FTSE 100 NIKKEI
9,000 (24%)
(17%) (23%) (22%) (15%)
NASDAQ MERVAL DAX SHANGHAI 7,000
19-Feb 4-Mar 18-Mar 31-Mar 17-Apr
(12%) (22%) (23%) (4%)
Treasuries (10 Year)
6.7%
Increased Volatility in Times of Uncertainty
% Daily Change in Nifty 6.5% 6.4%

8.8%
6.6%
6.3% (9 bps)
5.8%

4.2%
3.9%
6.1%

3.8%
3.8%

3.0%
2.5%
1.5%
1.1%

5.9%

0.8%
0.2%
0.2%

0.1%

19-Feb 4-Mar 18-Mar 31-Mar 17-Apr

Gold
(0.3%)
(0.4%)

(0.4%)

(0.5%)

(0.5%)
(0.6%)

(0.8%)
(1.0%)

(1.3%)
(2.1%)

(2.1%)
(2.4%)
(2.5%)

(2.5%)

47,000 INR 47,258

(3.7%)

(4.0%)
(4.4%)

14%
(4.9%)

(5.6%)

44,000
(7.6%)
(8.3%)

41,000
(13.0%)

38,000
19-Feb 4-Mar 18-Mar 31-Mar 17-Apr
19-Feb 26-Feb 3-Mar 9-Mar 16-Mar 20-Mar 26-Mar 1-Apr 9-Apr 17-Apr

Majority of the sectors have seen a downfall except Healthcare

3%

(5%)
(11%)
(20%) (18%) (19%)
(24%) (26%) (26%) (23%)
(29%)
(33%)
Sensex Bankex Industrials Capital Goods Auto IT Oil & Gas Power Energy Telecom FMCG Healthcare

Source: FactSet, Market Data as of April 17, 2020.

Note: Market Peak on February 19, 2020.
14
FPI Selloff Leading to Equity Markets Underperformance
Relative Performance of Indian Equity Markets India Nifty Trading Multiple (TTM) – Below 5 Year Average
(Since Feb 19, 2020)

Outbreak of
30 COVID-19 in India

(5%)
25
(12%) (13%) (15%) (16%) 22.5x
(19%)
(22%) (24%)
(27%) 20
17.9x

China HK Korea Japan US Singapore UK NIFTY 50 NSEMCAP 15

10
Fund Flows Apr-15 Dec-15 Sep-16 May-17 Feb-18 Nov-18 Jul-19 Apr-20

FPIs have been net sellers, selective buyers in the past week Price Earnings Ratio (P/E) Average P/E Multiple
$Bn

8.0
5.4
3.3 2.9 India Volatility Index

(4.6) Reached a high of 83.6% on

(6.7)
(10.2)
90 March 24, 2020, the highest
2015 2016 2017 2018 2019 2020YTD Since Feb 19 80 since GFC
70
60
DIIs have provided strong support, net buyers of over c. $9.3Bn
50
$Bn
40
15.9 30
14.0 Outbreak of
20 COVID-19 in
10.3 9.9 9.3 India
7.9
5.4 10
0
Mar-19 May-19 Aug-19 Oct-19 Dec-19 Feb-20 Apr-20
2015 2016 2017 2018 2019 2020YTD Since Feb 19

Source: Bloomberg, Broker Research Reports

Market Data as of April 17, 2020.
15
Domestic Mutual Funds Provide Critical Support
DMF flows have been robust buoyed by steady SIP inflows Sectoral Trends across AMCs(1)

1.1 34.4%
1.0 1.1 Financials 30.9% 34.9%

Industrials 9.0% 9.8% 4.5%

1.5 1.4 1.5

Materials 9.3% 9.0% 6.7%
1.0

Energy 8.1% 9.7% 11.7%

Mar-19 Jan-20 Feb-20 Mar-20
Inflows into Equity Schemes ($Bn) SIP ($Bn) Cons.
8.8% 9.0% 6.6%
Discretionary

Cash vs Equity AUM Trend remains consistent IT 8.8% 7.7% 13.4%

4.8% 4.8% 4.7% 4.5% 4.8% 5.0% Con. Staples 8.8% 6.7% 12.6%

Healthcare 7.0% 5.3% 4.5%

115 116 118 120 115 Utilities 4.9% 4.6% 2.6%

89

Comm. Services 3.7% 2.8% 3.1%

Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 0.4%
Real Estate 0.0%
Equity AUM ($Bn) Cash as % of Equity AUM
0.5% Current 3 Months BSE100 Weightage

Stocks In Action – DMF reaction to recent triggers

HCQS Opportunity Sharp Correction Travel Ban
Axis MF (+3mm Shares) and Kotak MF SBI MF (+1.5mm Shares), Nippon IPRU MF (+2.0mm Shares), HDFC MF
(+0.8mm) (+1.2mm) and Birla MF (+1.1mm) (+1.5mm) and Franklin MF (+1.5mm)

Sharp Correction SKB Merger Nationwide Lockdown

SBI MF (+17.8mm Shares) and Franklin SBI MF (+1.3mm Shares), Axis MF IPRU MF
Templeton (+11.8mm) (+1.2mm) (+1.9mm Shares)

Source: AceMF and AMFI.

Note: (1) Data denotes sector wise % share of the Overall MF holding for all schemes (excluding arbitrage funds). FX Rate: US / INR = 76.7
16
G3 Debt Markets – Asia Gradually Reviving
Weekly Issuance Volumes ($Bn) Market Statistics
High Quality Household Names Reopened US IG Market Current Monthly ∆ YTD ∆

c.70% higher supply than 2019 Record weekly supply US Treasuries Dec 27
117 5-year UST 0.4% (39 bps) (127 bps)
109
10-year UST 0.7% (52 bps) (120 bps)
63 52 30-year UST 1.3% (52 bps) (107 bps)
30 37
7 3 month Libor 1.1% 2 bps (76 bps)
0
USD Mid Swaps
24-Feb 2-Mar 9-Mar 16-Mar 23-Mar 30-Mar 6-Apr 13-Apr 5-year MS 0.5% (29 bps) (118 bps)
10-year MS 0.7% (33 bps) (110 bps)
Asia Primary Markets Gradually Reopening - Sovereign & High Grade Corporates
India G-Secs
5-year G-Sec 6.2% (7 bps) (22 bps)

10 10-year G-Sec 6.4% 14 bps (6 bps)

7 Overnight Mibor 4.6% (55 bps) (66 bps)
No issuances for 5
3 4 INR Swap
2 three weeks
3-year MIFOR 5.6% (4 bps) (93 bps)
5-year MIFOR 5.8% (14 bps) (90 bps)
24-Feb 2-Mar 9-Mar 16-Mar 23-Mar 30-Mar 6-Apr 13-Apr

Secondary Performance - Massive Selling Pressure Across Investment Grade & High Yield Bonds from Indian Issuers

G ∆ G Spread Yield ∆ Yield

Investment Grade Issuer High Yield Issuer
Spread vs Mar 3 vs Feb 19 YTD (%) vs Mar 3 Vs Feb 19 YTD
Reliance 3.667% ’27 359 192 228 213 JSW Steel 5.375% '25 9.4 3.6% 4.6% 4.2%
ONGC 3.375% ’29 471 280 305 294 DIAL 6.450% '29 7.8 2.2% 2.7% 2.4%
Bharti Airtel 4.375% '25 473 255 274 230 Tata Motors 5.875% '25 9.7 4.2% 4.9% 4.3%
UPL Corp 4.500% '28 808 502 563 546 Future Retail 5.600% '25C'23 38.0 32.0% 32.7% --
Adani Ports 4.375% '29 622 375 412 402 Jubilant Pharma 6.000% '24C'22 7.5 2.5% 2.9% 2.5%
ICICI Bank 3.800% '27 449 277 295 281 Vedanta 6.125% '24C'21 30.2 19.3% 21.4% 22.1%
State Bank of India 4.375% '24 376 219 250 228 ReNew 5.875% '27C'22 9.0 3.0% 3.8% --
EXIM Bank of India 3.250% '30 355 170 205 -- Muthoot Finance 4.400% '23 8.2 3.5% -- --
PFC 3.950% '30 479 225 268 -- STFC 5.100% '23 11.5 6.3% 6.9% --

Source: Citi, Bloomberg, as of April 17, 2020

17
 INR Debt Markets – Easing Yields
Liquidity Adjusted Facility and Rate Movement – Cut in RBI Unprecedented Yield Levels Due To FPI Outflows & MF
Repo Rates to Incentivize Banks Redemptions Are Cooling Off Post RBI Announcements

15,000 AAA 10 Year AA 10 Year 10 Year G-Sec

7.5
9.5
10,000 6.5

Rate (%)
INR Crs

Yield % (p.a.)
8.5
5.5
5,000 7.5
4.5
65bps 6.5
spread
0 3.5
Apr-15 Apr-16 Apr-17 Apr-18 Apr-19 Apr-20 5.5
Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20
Liquidity Adjustment Facility Repo Rate Reverse Repo Rate

Debt FII Investments in INR Corporate Debt Market is at c.39% Revival in INR Bond Issuances in Last 2 Weeks on the Back of
with Outflow of $8 Bn in March 2020 Announced TLTRO of c.$3 bn by RBI

100,000 Net FII Debt Flows Cumulative FII Debt Flows 3000 FIG Corporates

2000 33
80,000

Volume ($ billion)
30 33
21
1000 25
60,000
16
0 14
72
40,000 55 60 62 63
-1000 10
34 41
63
20,000 -2000
Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 2013 2014 2015 2016 2017 2018 2019 2020 YTD

Source: Citi, Bloomberg, as of April 17, 2020

18
4 Sector Impact
Relative Sector Performance
GDP Share Index Multiple
Sector Commentary Multiple(2)
(%) Change(1) Change(1)

 Demand likely to continue to be muted, as this segment is significantly impacted by

market sentiments and consumer purchasing power
Auto 2% ▼ 26% 16x ▼ 2x
 Liquidity & cash crunch has already put a dent in sales of fleet operators, which is
expected to widen in the coming months
 Growth seen for players with essential commodities whereas market likely to crash due
to low discretionary demand for the non-essential
Consumer 11% ▼ 5% 30x ▼ 2x
 Shortage of staff at factories, distribution centres and availability of trucks continue to be
the biggest challenges
 Lower credit growth, asset quality challenges, fall in fee income, compression in Net
Interest Margins & Asset-Liability mismatch issues
FIG 22% ▼ 33% 13x ▼ 6x
 Delinquencies in corporate loan books of banks and NBFCs will depend on the cash
flows of the companies that they have lent to

 Significant drop in regular business with lack of walk-in patients, OPD, inability of regular
doctor hours, staff shortages
Healthcare 1% ▲ 3% 22x ▲ 1x
 High dependence on China for KSM and intermediates

 Growth likely to negatively impacted due to delay in infrastructure capex and demand
weakness in end customer segments
Industrials 14% ▼ 29% 14x ▼ 3x
 Pricing environment likely to be impacted due to supply vs. demand dynamics (eg.
Cement, electrical)

 Travel restrictions will impact high-touch sales and sensitive work

IT 5% ▼ 23% 15x ▼ 3x
 Travel, hospitality, aerospace are most impacted with longer-term impact on financial
institution spend in low interest rate environment

Source: Street Research reports, BSE, Bloomberg

Note: (1) As of 17 March 2020 as compared to 19 Feb 2020 (2) P / NTM EPS as of 17 March 2020
19
Relative Sector Performance (Cont’d)
GDP Share Index Multiple
Sector Commentary Multiple(2)
(%) Change(1) Change(1)

 Global demand environment expected to be weak impacting metal prices in the near
term and including over the next 1-2 years
Metals &
4% ▼ 31% 8x ▼ 1x
Mining
 Significant drop in regular business due to shut down of mining work and smelters in
India

 The sector impact will be palpable mostly at the direct customer and retail end,
which is driven primarily by diesel and petrol demand
Oil & Gas 3% ▼ 20% 8x ▼ 1x
 The fallout on oil markets will further unravel amid a deepening global financial and
economic crisis in short to mid-term

 Already subdued demand will reduce further on account of shutdown of industrial

and commercial activity
Power 2% ▼ 18% 8x ▼ 2x
 Being an essential service power generation is less likely to be impacted

 The housing sector is expected to see muted demand with significant reduction in
the new launches
Real Estate,
10% ▼ 38% 17x ▼ 9x
Hotel & Retail
 Hospitality is one of the early few to have faced the highest impact and possibly
starting at a massive financial and employment losses

 Categorized as an Essential service – Home traffic up while enterprise traffic is

down; overall 25% growth in data traffic due to lock-down
Telecom 2% ▼ 11% NM NM
 Growth in home broadband penetration and accelerated penetration of OTT
services

Source: Street Research reports, BSE, Bloomberg

Note: (1) As of 17 March 2020 as compared to 19 Feb 2020 (2) P / NTM EPS as of 17 March 2020
20
Expect a “New Normal” in the Post COVID-19 World
Consumer Behavior Globalization Geo-Political Implications

Sanitization Borders China Trajectory

Immigration
Social Distancing Nationalist Politics

Travel
Travel & Entertainment Authoritarian Regimes

Supply Chains

Work / Study From Home Surveillance

EMs Growth

E-Commerce Capitalism vs. Welfare

EU / Euro

Health & Wellness USD Strength Environment

Source: Citi

21
How India Could Emerge Stronger
Economic Benefits Diplomatic Wins

Low Oil Prices Mitigates the Shock India – A Friend in Need

India to Benefit from New World Order

Leveraging India’s Pharmaceutical Expertise

Source: Economic Times, Livemint, India Today, The Wire, Twitter

22
Appendix
Sector Impact – Auto
Sector Overview Performance of Key Companies
Auto
Contribution Index
2%
to GDP Market Cap 73,510 22,181 1,914 3,712 6,020
($ mn)
Contribution to
Employment(1) 56mn
(18%)
Share price (26%)
(31%)
Contribution to Performance(2)
(40%)
Market Cap 4%
(51%)
26x 27x
Current and Potential Sector Impact
16x
Near Term 12x
P / NTM EPS(3)
 Significant impact on sales and production volumes
however, recovery expected post lockdown (in Q2)
NM
 Auto players likely to take actions to ramp up
production to support demand Expert Talk
 Diversion capital to shore up continuing operations
severely affecting R&D, technological initiatives
“What particularly we (the auto industry) import from China is electronic parts and
Long Term unfortunately, the Indian electronics industry has not developed at all. So, despite the covid
situation, you still need sources for electronics supplies. It’s not going to develop overnight
 Strategic decision to exit unprofitable markets in India… Investors even if they move out of China will still consider the options available to
them. India is not the only options though the ease of doing business has improved due to
 Rationalization of output / manufacturing capacity government initiatives.”
 Potential restructuring in auto retail sector as dealers
– R. C. Bhargav, Chairman, Maruti Suzuki
are unable to pivot quickly to changing demand
conditions

Source: Factset, Market data as of 17 April 2020, Street Research. FX: USD = INR 75
Note: (1) Contribution to employment for the combined manufacturing sector (2) Since 19 Feb 2020 (3) As of 17 April 2020
23
Sector Impact – Consumer
Sector Overview Performance of Key Companies

Contribution NSE
11% FMCG
to GDP(1)
Market Cap 179.4 68.8 11.5 5.2 22.3 9.1 3.3 5.1
Contribution to ($ Bn)
Employment(1) 47mn
4% 3%
0%
Share price
Contribution to Performance(2) (4%)
(5%)
Market Cap 14% (8%)

(27%) (27%)
Current and Potential Sector Impact 59x
69x

47x 43x
Near Term 34x
38x 37x
30x
 Shortage of staff at factories, distribution centres and P / NTM EPS(3)
availability of trucks continue to be the biggest challenges
impacting supply chain
 Supply constraints for import of materials for which there
is no alternative in India
 Severe Mismatch between Demand and Supply Expert Talk
Long Term
 Discretionary spend may take a long time to recover due In a crisis like this Companies have a big role to play. We are working closely with the
to shrinkage of incomes, job losses and overall negative Governments and our partners to ensure that we overcome this global health crisis
sentiment even post lockdowns and many weaker together.
companies will die down or may need to sell/merge
– Sanjiv Mehta, Managing Director, HUL
 Stronger players likely to emerge even stronger from this
situation in the long-run.

Source: Factset, Market data as of 17 April 2020, Citi , Street Research. FX: USD = INR 75
Note: (1) Includes Retail (2) Since 19 Feb 2020 (3) As of 17 April 2020
24
Sector Impact – FIG
Sector Overview Performance of Key Companies
Banks NBFCs
Contribution
22% S&P BSE
to GDP(1) Finance

Market Cap 367.5 23.0 66.6 30.3 32.5 18.1 38.8 18.5
Contribution to ($ Bn)
Employment(1,4) c.4mn

Contribution to Share price

Market Cap 24% Performance(2)
(26%)
(30%) (31%) (29%)
(33%) (35%)
(40%)

Current and Potential Sector Impact 32x

(53%)

24x
21x
Near Term 16x
13x 15x
 Given, market borrowings of NBFCs are not covered under RBI P / NTM EPS(3) 12x
7x
moratorium, they may face significant mismatch issues
 Excess supply side liquidity with low credit offtake and reduction
in reverse repo may further add to NIM pressure especially for
banks with lower loan-to-deposit ratios
 Insurance stocks have not been impacted as much given no
leverage and technology setup to continue issuing new policies
Expert Talk

Long Term
 Slowdown in Private Final Consumption Expenditure and
Investments likely to result in lower credit growth
 High risk sectors such as Tourism, Aviation, Hospitality and
Electronics may see a spike in delinquencies
 Asset quality challenges would be higher in NBFCs, given their
propensity to cater to unorganized and niche segments, often on
an unsecured basis
The large rate cut, the adjustment in capital conservation buffer, the moratorium on
repayments and the bazooka of conventional CRR cut and unconventional liquidity
measure of incentivising banks to support the CP market will all help financial markets
stabilise,…Our term loan book is fairly large and I think Rs 2-2.5 trillion gets paid every
year, so for three months it would be Rs 50,000-60,000 crore
– Rajnish Kumar, Chairman, State Bank of India

Source: Factset, Market data as of 17 April 2020, Citi , Street Research. FX: USD = INR 75
Note: (1) Includes Financing, insurance, real estate and business services (2) Since 19 Feb 2020 (3) As of 17 April 2020 (4) Estimates by Citi
25
Sector Impact – Healthcare
Sector Overview Performance of Key Companies

Contribution Healthcare
1%
to GDP(1) Index

Market Cap
Contribution to ($ Bn)
111.5 2.6 1.7 1.2 0.8 0.1
Employment(1) 3mn
3%

Contribution to Share price (7%)

Market Cap(1) 7% Performance(2)
(23%) (25%)
(31%)
(37%)
Current and Potential Sector Impact 47x
46x
42x
Near Term 34x

 Significant drop in regular business: Lack of walk-in 22x

P / NTM EPS(3)
patients, OPD, inability of regular doctor hours, staff
shortages
NM
– Lower incidents of road accidents and other travel
related medical help cases
 Offset partially by COVID related testing and Expert Talk
hospitalization

Long Term “With the current covid-19 crisis, the private healthcare sector is faced with a twin
predicament—while the sector is investing additional manpower, equipment, consumables
 Should largely return to normalcy once lockdown and other resources to ensure 100% preparedness for safety in the hospital(s)... eventual
restrictions are fully lifted treatment of patients, when needed... is also experiencing a 90% drop in its revenue with
 Short-term working capital and liquidity challenges sharp drops in out-patient footfalls, elective surgeries and international patients”
may force some smaller/ regional or single-site locations
– Dr Naresh Trehan, chairman, CII Healthcare Council and MD, Medanta hospitals
out of business or be forced to sell

Source: Factset, Market data as of 17 April 2020, Street Research. FX: USD = INR 75
Note: (1) Contribution for Healthcare includes Pharma (2) Since 19 Feb 2020 (3) As of 17 April 2020
26
Sector Impact – Pharmaceutical
Sector Overview Performance of Key Companies

Contribution Healthcare
1% Index
to GDP(1)
Market Cap
Contribution to ($ Bn)
111.5 14.6 8.7 6.4 5.1 5.0 4.6 4.2

Employment(1) 3mn 34%

20% 21%
13% 16%
Contribution to Share price
3%
Market Cap(1) 7% Performance(2) 0%

(10%)
Current and Potential Sector Impact
33x
30x
Near Term 26x 25x
22x 22x 21x
 High dependence on China for KSM and
P / NTM EPS(3)
intermediates: Indian Pharma companies have 3 months 11x
inventory, but a longer disruption can lead to cost inflation
 USFDA Inspections slowdown: Impact on approval
delays (new facility, products); delays in compliance
resolution Expert Talk
 India Branded business: March was positive due to
stocking up but post lockdown will be slow
“Pharmaceutical industry has significantly increased the production of hydroxychloroquine
Long Term (HCQ). 20 crore tablets of HCQ have been produced by the industry this month. We have
 Should largely return to normalcy post COVID sufficient stock available, not only for domestic market, but we would be able to supply to
disruptions, no long-term secular impact expected the world if need arises.”

 Most pharma companies do not have much leverage – Pankaj Patel, CEO of Zydus Cadila
and should be able to weather the storm

Source: Factset, Market data as of 17 April 2020, Street Research. FX: USD = INR 75
Note: (1) Contribution for Pharma includes Healthcare (2) Since 19 Feb 2020 (3) As of 17 April 2020
27
Sector Impact – Industrials
Sector Overview Performance of Key Companies
Industrials
Contribution Index
14%
to GDP(1) Market Cap 121.7 17.5 13.6 9.1 5.7 4.6 4.4 2.9 2.6 1.8 1.4 1.4 1.0
($ bn)
Contribution to
Employment(1) 56mn
Share price
(16%) (15%) (15%)
Performance(2) (18%)
Contribution to (21%) (23%)
(24%) (25%)
(29%) (27%)
Market Cap 7% (32%)
(38%) (38%)

29x
Current and Potential Sector Impact 25x
24x
19x 20x
Near Term EV / 14x 14x
 Growth likely to negatively impacted due to : NTM EBITDA(3) 9x
8x 8x 8x
6x
4x
– Delay in infrastructure capex

– Demand weakness in end customer segments

 Pricing environment likely to be impacted due to supply

vs. demand dynamics (eg. cement, electricals) Expert Talk

Long Term
 Focus on managing liquidity and working capital cycle
 Potential consolidation likely to be driven across
various segments benefiting the organized sector
“We are staring at an unpredictable future. Businesses are shut and capacity additions
suspended. Coronavirus has brought the largest economies of the world to their knees.
Indian businesses are not so strong to battle it out”
– A. M. Naik, Chairman, Larsen & Toubro

Source: Factset, Market data as of 17 April 2020, Street Research. FX: USD = INR 75
Note: (1) Contribution to GDP and employment for the combined manufacturing sector (2) Since 19 Feb 2020 (3) As of 17 April 2020
28
Sector Impact – IT Services
Sector Overview Performance of Key Companies

Contribution IT
5% Index
to GDP
Market Cap 181.8 90.4 35.7 16.5 14.2 6.6 1.8 1.1 0.5 0.2
Contribution to ($ Bn)
Employment 4mn

Contribution to Share price (23%)

(18%)
(21%) (20%)
(25%) (24%) (25%)
Market Cap 11% Performance(1) (32%)
(39%)
(51%)
Current and Potential Sector Impact
21x
Near Term 16x
15x
 Hardware: Quasi-discretionary spend, easy to freeze to 11x 12x
10x
11x 12x
10x
P / NTM EPS(2)
conserve cash 7x

 Software: Perpetual license spend likely on hold, SaaS

delivery models will likely exhibit near-term resiliency
 Services: Travel restrictions will impact high-touch sales Expert Talk
and sensitive work; order backlog to mitigate near-term
impact
 Near term need for data security related services (remote “We’re going to see a contraction in terms of demand in the near term. We cannot predict
how demand will pan out in the short term
working) and continued demand from transition to cloud
We’re in the midst of a fairly challenging time. There are some extremely stressed clients.
Long Term The crisis is going to accelerate applications of digital services including cloud and
automation.
 Staff utilization and longer sales cycle will gradually We are in the midst of a storm. The storm is going to get a lot worse before it gets better,
weigh on top line but it will get better.”
 Managed Services: acceleration in price pressure as – Rajesh Gopinathan, CEO and MD of TCS
clients look for incremental cost efficiencies

Source: Factset, Market data as of 17 April 2020, Street Research. FX: USD = INR 75
Note: (1) Since 19 Feb 2020 (2) As of 17 April 2020
29
Sector Impact – Metals and Mining
Sector Overview Performance of Key Companies
Metals
Contribution
4% Index
to GDP
Market Cap 47.0 5.7 4.4 4.2 3.7 3.3 1.6 1.3
Contribution to ($ Bn)
Employment 2mn

Contribution to Share price

(23%)
Market Cap 12% Performance(1) (31%) (32%) (34%) (32%)
(37%)
(41%)
(51%)
Current and Potential Sector Impact 28x

Near Term
 Global demand environment expected to be weak
P / NTM EPS(2) 10x 10x
impacting metal prices in the near term and including over 8x 8x 7x
6x 6x
the next 1-2 years
 Significant drop in regular business due to shut down of
mining work and smelters in India
 Demand expected to be weak due to likely delay in Expert Talk
infrastructure capex and reduced end customer demand
growth
“Demand is stable at the moment but sentiment is down as people are scared because of
Long Term the virus outbreak.
 Post resumption, risk of oversupply likely to impact pricing Do not expect prices to go up further but not overtly worried. The next one month will be
environment good for exporters.
Lots of enquiries are coming from China”
 Focus on maintaining appropriate liquidity levels and
– V R Sharma, MD of JSPL
opportunistic capital raising to manage balance sheet
profile

Source: Factset, Market data as of 17 April 2020, Street Research. FX: USD = INR 75
Note: (1) Since 19 Feb 2020 (2) As of 17 April 2020
30
Sector Impact – Oil & Gas
Sector Overview Performance of Key Companies
Upstream Downstream
Contribution
3%
to GDP Oil & Gas
Index

Contribution to Market Cap 158.9 103.5 12.8 10.8 10.4 5.4

Employment(1) 0.1mn ($ Bn)

Contribution to Share price

Market Cap 10% Performance(2)
(20%) (19%)

14x (25%) (25%) (24%) (25%)

Current and Potential Sector Impact
10x
8x 7x
Near Term 6x 6x
P / NTM EPS(3)
 The sector impact will be palpable mostly at the direct
customer and retail end, which is driven primarily by
diesel and petrol demand (accounting for 2/3rd demand), Expert Talk
followed by aviation fuel, LPG and NG
 The fallout on oil markets will further unravel amid a
deepening global financial and economic crisis in short to “It’s a chain reaction. If the end consumer loses appetite, the effect will go right up to the
mid-term producer. This is an extraordinary time, and the problem is so widespread that it’s hard for
anybody in the middle to absorb the shock”
Long Term – GAIL Executive
 The crude oil production landscape is further “We have selectively shut wells and will be able to reopen them quickly when demand picks
troublesome as despite significant plummet in price, a up after the lockdown”
collaborative response to immediate supply cut is not – Shashi Shanker, Chairman of ONGC
“Big Oils will consolidate the best assets in the industry and will shed the worst ... when the
expected in the short run even with prevalent COVID-19
industry emerges from this downturn, there will be fewer companies of higher asset quality,
crisis
but the capital constraints will remain”
– Thus, prices are expected to further fall in the next few – Goldman Sachs Analyst
quarters

Source: Factset, Market data as of 17 April 2020, Street Research. FX: USD = INR 75
Note: (1) Permanent employees in PSUs (2) Since 19 Feb 2020 (3) As of 17 April 2020
31
Sector Impact – Power
Sector Overview Performance of Key Companies
Thermal Power Generation Transmission
Contribution
2%
to GDP S&P BSE
Power
Market Cap
Contribution to ($ Bn)
45.0 1.2 1.6 0.9 12.6 1.0 11.7 3.0

Employment 3mn

Contribution to Share price (11%)

(15%) (14%)
Market Cap 2% Performance(1) (18%)

(33%) (34%) (33%)

Current and Potential Sector Impact (47%) 20x

Near Term
P / NTM EPS(2) 8x 7x 7x 7x 7x 8x
 Old high cost power plants are being backed down by
DISCOMs as electricity demand falls NA
 Under construction power plants that have already
ordered panels likely to face construction delay

Long Term Expert Talk

 Long term impact on financial viability of DISCOMs as
demand from high margin industrial customers (22-25% of
total demand) has fallen considerably
 Severe cash crunch experienced by power plants
 Power plants in the early stage of construction likely to
face significant delay as import markets remain shut and
project financing dries up
“This [reduction in power demand] can result in an even higher impact on DISCOM
revenues, since the demand contraction is largely from industrial and commercial custo-
mers who pay higher tariffs. This coupled with delays in collections is expected to cause a
cash shortfall of Rs 30,000-40,000 crore for DISCOMs…This liquidity shortfall will likely
worsen the challenging payment position in the sector”
– Paper published by Power Grid Corporation of India

Source: Factset, Market data as of 17 April 2020, Street Research. FX: USD = INR 75
Note: (1) Since 19 Feb 2020 (2) As of 17 April 2020
32
Sector Impact – Real Estate, Hotel and Retail
Sector Overview Performance of Key Companies
Real Estate Hotel
Contribution Real
10%
to GDP(1) Estate
Index

Contribution to Market Cap 12.2 4.5 3.7 2.3 1.9 1.1 1.0 0.3 1.3 0.6 0.5 0.2
Employment(1) 62mn ($ Bn)

Contribution to (18%)
Market Cap 1% Share price (24%)
Performance(2) (38%) (40%) (37%) (39%) (39%) (41%)
(44%) (47%)
(50%)
Current and Potential Sector Impact
(70%)
Near Term
59x
 The housing sector is expected to see muted demand with
significant reduction in the new launches 45x
39x 40x
 With possible slowdown in the US and European P / NTM EPS(3) 29x 30x
economies, the existing demand for commercial real 23x
17x 17x 14x 13x
estate may either get curtailed or postponed till H2 of 6x
2020
 High possibility of postponement of REIT launching,
which would mean further liquidity pressure on real estate
developers Expert Talk
 Fresh equity investments into country’s real estate
sector would slow down
 Malls and multiplexes will see some temporary “Prices of real estate have to come down, and will come down.
slowdown as consumers will avoid crowded places until
the spread of virus is controlled I believe Naredco’s estimate is around 10-15%. One must be prepared for even 20%.
Long Term Real estate is an immensely important asset class, and the value of global real estate was
 Hospitality is one of the early few to have faced the more than the value of all the stocks and bonds combined.”
highest impact of the pandemic outbreak, with the – Deepak Parekh, Chairman of HDFC
segment possibly starting at a massive financial and
employment losses

Source: Factset, Market data as of 17 April 2020, Street Research. FX: USD = INR 75
Note: (1) Includes construction and airlines (2) Since 19 Feb 2020 (3) As of 17 April 2020
33
Sector Impact – Telecom
Sector Overview Performance of Key Companies
Telecom
Contribution Index
2%
to GDP Market Cap 44,304 1,571 36,524 4,148 1,082
($ mn)
Contribution to 5%
Employment 1mn
Share price (2%)
Contribution to Performance(1) (11%)
(8%)

Market Cap 3%
(25%)

Current and Potential Sector Impact 30x

Near Term
P / NTM EPS(2)
 Categorized as an Essential service – Home traffic up 10x
while enterprise traffic is down NM NM NM

 Overall 25% growth in data traffic due to lock-down

Expert Talk
 Delay in ARPU improvements in India mobility

We understand that your network needs would evolve during this difficult time, as you work
Long Term from home. We have taken several measures to improve your experience – from
 Growth in home broadband penetration in India accelerating our roll outs, upgrading quality of service where possible and advancing our
investments to meet your requirements…We have built a full-fledged contingency plan to
 Accelerated penetration of OTT services - Pipe vs. OTT deal with any event, including, if it comes to it, quarantining any of our critical Network
distinction becomes sharper Operating Centres, Call Centres. We have enabled each of these locations to operate in a
distributed as well as virtual way
 Greater network capacity especially in non-metro cities. – Gopal Vittal, CEO, Bharti Airtel
Positive for towers/ fiber

Source: Factset, Market data as of 17 April 2020, Street Research. FX: USD = INR 75
Note: (1) Since 19 Feb 2020 (2) As of 17 April 2020
34
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