India Opportunities Portfolio

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Macquarie Research | EQUITIES
Macquarie India
Opportunities Portfolio
Aditya Suresh
Macquarie Capital Ltd
+852 3922 1265
aditya.suresh@macquarie.com
December 2020
In preparing this research, we did not take into account the investment objectives, financial situation and particular
needs of the reader. Before making an investment decision on the basis of this research, the reader needs to
consider, with or without the assistance of an adviser, whether the advice is appropriate in light of their particular
investment needs, objectives and financial circumstances. Please see disclaimer.
India Model Portfolio Process and Criteria

•~120 stocks under coverage, 15 analysts
•Senior analysts with ~15yrs avg exp.
•Fundamental bottom-up research style
Macquarie India Coverage •Macquarie Governance and Risk
Scorecards for all stocks
•~75 stocks pass QSG filter

•Growth in EPS or BVPS > 12%
Quality, Sustainability, •ROE > 12% or delta ROE > 5%
•3+ year forecast horizon
Growth Filter
•~40 stocks pass both QSG and valuation filter
•Bottom-up fundamental analyst overlay
•Valuation nuances captured in analyst recommendations
Analyst Overlay
•# of positions = 20-30 (current portfolio 27)

•Hypothetical $1 billion AUM
Model •Position sizing max: (a) 2x ADTV, (b) 10% of AUM. Cash = 0.
•Transaction cost 20 bps
Portfolio •Trackable on Bloomberg (.MACQINDIA Index)
•Selected bottom-up ideas from our model portfolio

•Large-caps >20% upside, SMIDs with ~100% upside
Focus •Analyst conviction
•Time horizon 6-12 months
List
Source: Macquarie Research, December 2020 PAGE 2
India Model Portfolio
Live portfolio trackable on Bloomberg (.MACQINDIA Index)
Source: Bloomberg, Macquarie Research, December 2020 PAGE 3

India Model Portfolio Performance
Bloomberg: .MACQINDIA Index
Source for all charts: Factset, Macquarie Research, December 2020 PAGE 4
India Model Portfolio
.MACQINDIA Index. Hypothetical AUM: $1 billion.
MSCI
Portfolio Active
Mkt Cap ADTV ($, India Price ROE EPS BVPS P/E P/B
Ticker Company Name Weight Weight Price Divi Yield TSR
($, bn) mn) Weight Target FY2 CAGR CAGR FY2 FY2
(%) (%)
(%)
Model Portfolio Aggregate 100% 18% 16% 10% 22.8x 3.2x
Digitization 25.7%
INFO IN Infosys Technologies 65.9 160.7 9.0% 7.6% 1.4% 1,135 1,410 2% 27% 29% 15% 9% 22.0x 6.1x
HCLT IN HCL Technologies 31.4 88.5 5.6% 1.8% 3.7% 859 1,042 2% 23% 22% 15% 18% 16.1x 3.3x
BHARTI IN Bharti Airtel 37.6 152.2 5.8% 1.3% 4.5% 494 690 0% 40% 15% nmf -6% 26.4x 3.8x
SBICARD IN SBI Cards & Payment Services 10.8 23.1 2.2% 0.0% 2.2% 859 950 0% 11% 27% 26% 24% 40.2x 9.6x
MPHL IN Mphasis 3.3 7.3 1.4% 0.0% 1.4% 1,333 1,720 3% 32% 23% 12% 8% 16.8x 3.7x
Z IN Zee Entertainment Enterprises 2.8 82.7 1.7% 0.4% 1.4% 207 245 1% 19% 15% 25% 14% 11.7x 1.6x
Financialisation 19.3%
ICICIBC IN ICICI Bank 47.7 198.5 9.0% 5.1% 3.9% 502 539 1% 8% 10% 28% 8% 24.1x 2.3x
HDFCB IN HDFC Bank 102.2 221.5 7.8% 0.0% 7.8% 1,385 1,489 1% 8% 15% 7% 15% 24.9x 3.3x
HDFCLIFE IN HDFC Standard Life Insurance 17.8 37.0 2.6% 0.9% 1.7% 643 849 0% 32% 22% 20% 16% 70.4x 14.2x
Consumption 14.6%
HUVR IN Hindustan Unilever 71.7 76.3 7.3% 3.6% 3.7% 2,188 N/R N/R N/R 27% 18% 6% 47.3x 12.7x
BJAUT IN Bajaj Auto 13.0 39.6 2.4% 0.5% 1.9% 3,312 3,600 2% 11% 22% 8% 20% 16.1x 3.3x
MSIL IN Maruti Suzuki India 31.6 118.2 2.0% 2.1% -0.1% 7,802 8,000 1% 3% 15% 20% 10% 28.6x 4.0x
TVSL IN TVS Motors 3.3 17.9 1.7% 0.0% 1.7% 498 530 1% 7% 20% 15% 11% 28.6x 5.3x
GCPL IN Godrej Consumer 9.9 14.2 1.3% 0.6% 0.7% 710 N/R N/R N/R 20% 14% 9% 38.2x 7.6x
Value State-Owned Asset Plays 11.2%
BPCL IN Bharat Petroleum 11.6 58.8 5.1% 0.5% 4.6% 392 510 4% 34% 19% 14% 16% 9.1x 1.6x
SBIN IN State Bank of India 32.6 185.8 3.2% 0.9% 2.2% 263 308 1% 17% 9% 12% 4% 9.3x 0.9x
HPCL IN Hindustan Petroleum 4.5 23.6 3.0% 0.3% 2.7% 217 400 6% 91% 18% 15% 15% 4.9x 0.8x
Building India 10.1%
LT IN Larsen & Toubro 22.2 75.1 5.9% 1.6% 4.3% 1,149 1,370 2% 22% 15% 18% 12% 12.7x 1.9x
ACEM IN Ambuja Cements 6.8 18.5 2.3% 0.3% 1.9% 253 300 6% 25% 11% 11% 1% 20.4x 2.1x
SRCM IN Shree Cement 12.2 20.8 1.9% 0.5% 1.4% 24,910 27,043 0% 9% 14% 17% 11% 42.8x 5.5x
Rural and Commercial Vehicle Recovery 6.9%
MMFS IN Mahindra & Mahindra Fin. Services 3.0 31.9 3.6% 0.0% 3.6% 168 170 1% 3% 13% 36% 10% 9.4x 1.2x
MM IN Mahindra & Mahindra 12.7 56.0 2.6% 1.2% 1.4% 750 730 1% -2% 13% 21% 9% 16.6x 2.1x
RALI IN Rallis India 0.8 3.8 0.7% 0.0% 0.7% 289 350 1% 22% 19% 39% 15% 16.9x 3.0x
Make In India 6.6%
DRRD IN Dr. Reddy's Laboratories 11.3 124.3 3.1% 1.1% 2.0% 4,907 5,908 1% 21% 17% 29% 15% 25.4x 4.0x
CIPLA IN Cipla 8.4 83.4 3.5% 0.7% 2.8% 767 936 1% 23% 13% 29% 13% 24.0x 3.0x
Gas Based Economy 5.6%
GAIL IN GAIL India 7.5 24.1 2.7% 0.4% 2.3% 120 170 3% 45% 16% -10% 8% 6.8x 1.0x
MAHGL IN Mahanagar Gas 1.4 15.2 1.6% 0.0% 1.6% 1,037 1,220 2% 20% 24% 3% 13% 12.3x 2.7x
PLNG IN Petronet LNG 5.4 15.1 1.3% 0.4% 0.9% 262 330 5% 30% 26% 11% 12% 11.6x 2.8x
Source for all charts: Factset, Macquarie Research, December 2020. *Consumer Staples stocks not rated and based on Viktor Shvets AxJ QSG portfolio PAGE 5
India Focus Ideas
Large caps >20%, SMIDs ~100% Potential Upside
Large Caps >$10 billion market cap and >20% potential upside
• Infosys – We expect Infosys to post the strongest US$ revenue growth in the large cap Indian IT services space
over FY21-23E aided by strong deal wins. Recent large deal wins like the Vanguard deal help accelerate growth.
• Bharti Airtel – Strong earnings momentum from FY22E with rising ARPU and margins. Africa business potential
under-appreciated. ~7x EV-EBITDA.
• HCL Tech – We expect HCL Tech to benefit significantly in cloud transformation spending globally as enterprises
prepare for cost savings and improving technology adoption. HCLT has been gaining traction, as witnessed in
recent large deal wins.
• L&T – A key play within our coverage on progress made on India’s US$1.4 trillion National Infra Pipeline. L&T
market cap to order book at multi-year lows. Gov't fiscal stimulus targeted on infra and L&T’s divestments
represent optionality.
• HDFC Standard Life Insurance – Sustainability of individual premium (APE) growth, higher sales of protection
products leading to margin expansion and higher absolute VNB (value of new business) growth, long-term
growth headroom.
• BPCL – Gov’t privatization to unlock SOTP value. Our base-bull case is Rs510-690 with 30-80% upside.
• Dr Reddy’s – With strong launch momentum across markets, improving productivity and optionality from its
COVID-19 vaccine contract, DRRD’s earnings can surprise positively (MQ est 24% EPS CAGR over FY20-23E).
Mid Cap with ~100% potential upside

• HPCL – Deep value play at 5x FY22 PE. Operating environment going from ‘awful’ to ‘less bad’ combined with
capacity expansions drives a ~2x earnings expansion by FY23.
PAGE 6
Macro Context: IndiaMacroBeats
Now at Everest base camp
See full high frequency India macro context pack here, updated monthly
Source: CEIC, Bloomberg, Macquarie, December 2020 PAGE 7
Viktor Shvets on India Equity Positioning
See India likely to disappoint but it is not China (Sept-20)
AxJ Core QSG Portfolio
Macquarie’s Asia equity strategist Viktor Shvets carries a 60bps Overweight position on India, Viktor Shvets - Asia Equity Strategist
(down from +80bps in Feb20 and +130bps Dec-19) against China 210 bps O/W. See here for Viktor’s
Ticker Name Reco. Market
latest views on India and his Asia model portfolios on the right (note this is independent of bottom-up 9988 HK Alibaba Group Holding OP Hong Kong
fundamental analysts’ views), in summary: 700 HK Tencent Holdings OP Hong Kong
2330 TT Taiwan Semicon Mfg OP Taiwan
Several Headwinds
005930 KS Samsung Electronics OP South Korea
• Growth below potential. While ’20-21 will reflect an anomalous COVID collapse and recovery, it is HUVR IN Hindustan Unilever N/R India
likely that India’s long-term trajectory will be closer to 5% than to 7%, with erratic policies (albeit 002415 CH Hangzhou Hikvision A OP China
914 HK Anhui Conch Cement H OP Hong Kong
improving and supportive recent reform measures), supply-side bottlenecks and gummed-up banks
BIDU US Baidu ADR Neutral China
preventing India from realizing its full potential. 600031 CH Sany Heavy Industry A OP China
• Significant earnings downgrades ahead. The perpetual optimism is also reflected in EPS expected NEST IN Nestle India N/R India
HCLT IN HCL Technologies OP India
growth rates, with India set for the record 11th year in a row of missing numbers, with wildly optimistic
2382 HK Sunny Optical Technology OP Hong Kong
‘21 & ‘22 estimates of 30%-40% rebounds. 669 HK Techtronic Industries OP Hong Kong
• India is also the most expensive EM with one of the deepest likely downgrade cycles. 1093 HK CSPC Pharmaceutical Group OP Hong Kong
288 HK WH Group OP Hong Kong
The question therefore is why we are not selling, particularly after a strong rally from March-lows? BDMS TB Bangkok Dusit Medical OP Thailand
ATHM US Autohome ADR Neutral China
While over the last two years Viktor has reduced his overweight position in India, he has not yet moved to GCPL IN Godrej Consumer Products N/R India
the next level (i.e. underweight), for the following reasons: HMPRO TB Home Product Center OP Thailand
UNTR IJ United Tractors OP Indonesia
1. A lack of alternatives. We agree with GOOG, FB or AMZN, that India still represents the best very
long-term opportunity in EM outside China (as shown in strong FDI over past 12 months). Also, unlike AxJ 'Localization' Thematic Portfolio
China, India’s business and political climate, while complex, has the backbone of common law, rules 41 stocks, India components shown
and dispersion of power. As a result, the nature of relationship between private and public sectors in Viktor Shvets - Asia Equity Strategist
India is different to China’s, leaving greater room in India for more traditional private sector. Also Ticker Name Reco. Market
unlike ASEAN or Latam, which are largely cyclical, India has a greater secular capacity while its best RIL IN Reliance Industries UP India
corporates are also some of the better ones globally. LT IN Larsen & Toubro OP India
UTCEM IN UltraTech Cement OP India
2. In a world of deglobalization & localization, EMs with large domestic markets have an advantage PWGR IN Power Grid India OP India
over globalized small economies. India’s domestic economy while fragmented, is of continental scale. NTPC IN NTPC OP India
COAL IN Coal India Neutral India
3. India, while not an unconstrained force, has a stronger than average ability to implement more SRCM IN Shree Cement OP India
aggressive MMT policies. ADSEZ IN Adani Ports & SEZ OP India
DIVI IN Divi's Laboratories N/R India
4. India’s role in EMs is likely to rise as more Chinese names are blacklisted by ESG criteria, EIM IN Eicher Motors Neutral India
societal values and trustees of investment funds. JSTL IN JSW Steel OP India
Note: portfolios above as of 21 September 2020
PAGE 8
Source: Macquarie Research, September 2020
MSCI Emerging Markets Fund Flows
Source: Bloomberg, Macquarie, December 2020. Also see EM Fund Flows update. PAGE 9
MSCI Emerging Markets Performance Context

MSCI MSCI
MSCI AC MSCI MSCI MSCI MSCI MSCI MSCI MSCI MSCI MSCI MSCI MSCI
YTD USD Performance South Indonesi
World EM USA China Korea Taiwan India Brazil Russia Thailand Malaysia Turkey
Africa a
Overall 14% 15% 19% 28% 36% 35% 9% -22% -8% -15% -11% 3% -9% -21%
Energy -25% -17% -30% -26% 2% 7% 14% -29% 7% -28% -8% 2% 17% -44%
Materials 18% 19% 17% 25% 79% 4% 17% 17% -4% 16% 2% 22% -16% 0%
Industrials 11% 1% 12% 8% 1% 28% -1% -7% -24% -40% -14% -14% -22% -25%
Consumer Discretionary 33% 38% 10% 53% 26% 9% 10% -18% 21% 4% -16% -21% -14% 28%
Consumer Staples 7% 6% 43% 48% 10% -2% 6% -31% -14% 28% -9% -4% -10% 8%
Healthcare 14% 44% 16% 43% 99% 8% 46% -16% -17% na -14% 132% -9% 28%
Financials -4% -9% -4% 1% -1% 4% -11% -32% -26% -3% -21% -4% -6% -33%
Information Technology 40% 47% 41% 54% 42% 51% 41% -68% -23% na 59% 72% -3% na
Communication Services 23% 27% 27% 36% 71% 4% 7% -33% -7% 0% -11% 2% -16% -11%
Utilities 2% -9% -2% -1% -16% 43% -8% -29% 12% -10% -11% -6% -31% 9%
Real Estate -6% -16% -2% -15% 1% 30% -11% -48% -48% 3% -9% -17% -22% 12%
MSCI MSCI
MSCI AC MSCI MSCI MSCI MSCI MSCI MSCI MSCI MSCI MSCI MSCI MSCI
3-Year USD Performance South Indonesi
World EM USA China Korea Taiwan India Brazil Russia Thailand Malaysia Turkey
Africa a
Overall 35% 21% 52% 32% 25% 71% 15% 1% -15% 34% -3% 0% -3% -42%
Energy -23% 10% -36% -20% -19% 5% 41% 4% 22% 36% 8% 6% -13% -51%
Materials 25% 19% 22% 26% 25% 23% 4% 50% 12% 101% -9% 24% -25% -19%
Industrials 24% -2% 28% 2% -16% 35% -10% 33% -18% -54% 25% -14% -49% -45%
Consumer Discretionary 60% 30% 29% 47% 7% 39% -21% 4% -17% 28% -9% -44% -32% -6%
Consumer Staples 20% 7% 84% 110% -19% 22% 22% -33% -26% -17% -1% 5% -11% -14%
Healthcare 45% 27% 51% 63% 42% -14% 15% -13% -51% na -3% 150% -7% 14%
Financials 2% -2% 9% 4% -18% 31% 3% -5% -23% 15% -34% -2% 25% -54%
Information Technology 99% 72% 115% 66% 55% 96% 92% -89% -65% na 51% 30% na na
Communication Services 40% 27% 54% 46% 116% 18% -33% -24% -19% 25% 13% -9% -21% -36%
Utilities 23% -3% 22% 15% -39% 91% -31% 11% 23% 3% 45% -10% -8% -17%
Real Estate 11% -10% 24% 8% -29% 64% na -37% -62% 14% -17% -31% -43% -52%
Source: FactSet, Macquarie, December 2020. Priced on 8-Dec PAGE 10
MSCI India versus Emerging Markets Performance
Source: FactSet, Macquarie, December 2020. Categories as described by MSCI PAGE 11

MSCI India Valuation Context
10Y
cagr
Source: FactSet, Macquarie, December 2020. Consensus forecasts for 2020-22e PAGE 12
MSCI India Equity Risk Premium
Source: FactSet, Macquarie, December 2020. LTMA – last twelve months moving average, NTMA – next twelve months moving average. PAGE 13
Focus Ideas
Part of Macq India Opportunities Portfolio
Large cap with >20% upside
SMID with ~100% upside
Infosys (INFO IN)

Analyst: abhishek.bhandari@macquarie.com
EQUITIES
Why are we buyers? – Marquee Buy Idea INFO IN Outperform
• Infosys ranks amongst the best in our 5-factor model for rating the Price (as of 07 Dec 2020) Rs 1,134.65
capabilities and competitive positioning of large cap IT companies.
Valuation Rs 1,410.00
• We expect Infosys to post the strongest US$ revenue growth in the large - DCF (WACC 12.4%, beta 0.7, ERP 6, RFR 8%)
cap Indian IT services space over FY21-23E aided by strong deal wins. 12-month target Rs 1,410.00
Upside/Downside % 24.3
Recent large deal wins like the Vanguard deal should help it to accelerate
12-month TSR % 27.1
revenue growth rate to 12.5-13.6% in US$ terms in FY22-23E, in our view. Volatility Index Medium
• With the bulk of investments already done and revenue growth picking up, GICS Sector Information Technology
Market cap US$m 65,398
we expect Infosys margins to improve from hereon.
30-day avg turnover US$m 169.3
• Valuation: Our target price is Rs1,410 set at 26x Sep22E EPS. More Number shares on issue m 4,259
broadly, we expect Infosys to trade at a 20%+ premium to MSCI India in
Investment Fundamentals
view of a ~28-29% ROE outlook (+15pp versus index) and visibility on
Year end 31 Mar 2019A 2020A 2021E 2022E
growth. Infosys is in our Macquarie Marquee list. Revenue m 826,760 907,910 1,001,730 1,138,235
EBIT m 188,741 193,740 239,664 271,294
• Catalysts – strong execution of order book, new deal wins. EBIT growth % 10.1 2.6 23.7 13.2
Reported profit m 158,551 165,950 189,720 217,942
Latest Reports: Stay with the leader, better days ahead; On a roll; Another Adjusted profit m 158,551 165,950 189,720 217,942
acquisition to bolster digital capabilities; GuideVision acquisition to bolster EPS rep Rs 36.5 39.0 44.7 51.3
cloud offerings; Indian IT services – Macq five factors - Gunning for better EPS rep growth % 2.6 7.0 14.5 14.9
days ahead; Bond with the best; adding to Marquee list EPS adj Rs 36.5 39.0 44.7 51.3
EPS adj growth % 2.7 7.0 14.5 14.9
PER -1SD +1SD AVG PER rep x 31.1 29.1 25.4 22.1
27x
PER adj x 31.1 29.1 25.4 22.1
Total DPS Rs 42.0 17.5 32.0 38.0
22x
Total DPS growth % 150.7 -58.3 82.9 18.8
17x
Total div yield % 3.7 1.5 2.8 3.3
ROA % 22.9 21.8 24.7 25.9
12x ROE % 24.4 25.4 27.4 28.8
EV/EBITDA % 22.6 20.6 16.8 14.9
7x Net debt/equity % -30.1 -28.3 -31.0 -33.6
P/BV x 7.6 7.3 6.6 6.1
Source for all charts: FactSet, Macquarie Research, December 2020
PAGE 15
Bharti Airtel (BHARTI IN)

Analyst: nicolas.baratte@macquarie.com
EQUITIES
Why are we buyers?
BHARTI IN Outperform
• Since the share price peak in May the stock had pulled back on technical Price (as of 07 Dec 2020) Rs 493.90
factors (MSCI weight decrease) and concerns on the industry’s ability to
Valuation Rs 690.00
raise APRU with Vodafone-Idea back in the fray and JIO cutting prices in - EV/EBITDA
the postpaid segment. However the big picture for us remains one of strong 12-month target Rs 690.00
incremental earnings momentum and we consider 7x FY22 EV-EBITDA Upside/Downside % 39.7
attractive. The main drivers are – 12-month TSR % 39.7
Volatility Index Medium
• India mobile ARPUs have already recovered by 50% to Rs157 and we GICS Sector Communication Services
believe this can gradually increase to Rs190 in FY23, Rs220 in FY25 on: 1) Market cap US$m 36,460
price discipline and progressive content reduction in prepaid, 2) 4G and 30-day avg turnover US$m 93.0
postpaid migration to larger data packages and content bundles. Number shares on issue m 5,456
• In Africa, we project a ~6% CAGR FY20-23 in both subscribers and ARPU. Investment Fundamentals
Year end 31 Mar 2019A 2020A 2021E 2022E
• We expect the addition of Amazon Web Services (AWS) to be significant as Revenue m 819,151 878,552 1,042,863 1,216,863
Airtel’s Enterprise business today is mostly based on capacity rather than EBIT m 47,626 92,447 176,581 263,555
services, hence an opportunity to up-sell cloud / application services. EBIT growth % -57.0 94.1 91.0 49.3
Reported profit m 4,095 -321,832 -146,641 99,235
• We see EBIT margins improving from 15% (1QFY20) to 20% (FY22) to Adjusted profit m 4,095 -321,832 -146,641 99,235
25% (FY23). EPS rep Rs 0.9 -63.4 -26.9 18.2
Latest Report: India and Africa mobile dual engines EPS rep growth % -63.4 -7109.4 -57.6 -167.7
EPS adj Rs 0.9 -62.8 -26.9 18.2
EPS adj growth % -63.2 -7041.2 -57.2 -167.7
Bharti Airtel EBIT Outlook (Rs, bn)
350 PER rep x 545.9 nmf nmf 27.1
PER adj x 545.8 nmf nmf 27.1
300
Total DPS Rs 0.0 2.0 0.0 3.6
250
Total DPS growth % nmf nmf nmf nmf
200 Total div yield % 0.0 0.4 0.0 0.7
150 ROA % 1.8 2.9 5.1 8.1
100 ROE % 0.6 -43.3 -21.2 15.2
EV/EBITDA % 13.9 11.2 8.8 7.4
50
Net debt/equity % 138.1 129.6 139.3 115.7
0
P/BV x 3.0 3.5 4.4 3.9
PAGE 16
HCL Technologies (HCLT IN)

Analyst: abhishek.bhandari@macquarie.com
EQUITIES
Why are we buyers? HCLT IN Outperform
• We expect HCL Tech to benefit significantly in cloud transformation Price (as of 07 Dec 2020) Rs 858.80
spending globally as enterprises prepare for cost savings and improving
technology adoption. - DCF (WACC 13.7%, beta 0.9, ERP 7.5, RFR 7.5%)
• HCLT ranks strong in our five-factor model for rating the capabilities and 12-month target Rs 1,042.00
competitive positioning of large cap Indian IT companies.
12-month TSR % 23.0
• Products and platforms has strong client traction around ecommerce, Volatility Index Medium
security and collaboration tools. Tracking at an annualised revenue run-rate GICS Sector Information Technology
of ~US$600mn, in-line with its business plan.
• HCL Tech, unlike it peers, has invested significantly in non-linear software Number shares on issue m 2,714
and products businesses in past few years which now form 37% of total
revenues with growth headway.
Year end 31 Mar 2019A 2020A 2021E 2022E
• Valuation: Our target price of Rs1,042 is based on 18x Sep22E Revenue m 604,280 706,780 755,788 865,504
EBIT m 118,215 138,540 156,597 179,394
• Catalysts – deal momentum; revenue growth; margin improvement. EBIT growth % 18.4 17.2 13.0 14.6
Reported profit m 101,435 110,790 124,204 145,235
Latest Reports: On strong footing for cloud business; Acquires DWS in Adjusted profit m 101,432 110,790 124,204 145,235
Australia; Robust 2Q, ahead of its earlier guidance; Indian IT services – Macq EPS rep Rs 36.8 40.8 45.8 53.5
five factors - Gunning for better days ahead; On solid footing for cloud EPS rep growth % 17.0 10.8 12.2 16.9
EPS adj Rs 36.8 40.8 45.8 53.5
business; Another acquisition for its Mode3 offerings
EPS adj growth % 17.1 10.8 12.2 16.9
PER -1SD +1SD AVG PER rep x 23.3 21.0 18.8 16.0
PER adj x 23.3 21.0 18.8 16.0
20x Total DPS Rs 8.0 10.0 14.0 16.0
Total DPS growth % 33.3 25.0 40.0 14.3
15x Total div yield % 0.9 1.2 1.6 1.9
ROA % 22.0 19.5 18.3 19.1
10x ROE % 25.8 23.7 22.0 21.9
EV/EBITDA % 16.2 13.5 11.7 10.5
5x Net debt/equity % -12.3 -6.3 -19.3 -30.3
P/BV x 5.6 4.5 3.8 3.3
PAGE 17
L&T (LT IN)

Analyst: ajinkya.bhat@macquarie.com
EQUITIES
Why are we buyers? LT IN Outperform
• Strong order book and revenue visibility. While order award decisions Price (as of 07 Dec 2020) Rs 1,149.25
are getting deferred during the COVID-led disruption, L&T has mentioned a
strong prospects pipeline of Rs6trn (US$80bn) of tenders over the next 12- - SUM OF PARTS
18 months. In the meantime, existing order book of Rs3trn (US$40bn) 12-month target Rs 1,370.00
provides >2 years of revenue visibility on core EPC business. Upside/Downside % 19.2
12-month TSR % 21.1
• Capital allocation is improving. Divestments of non-core assets is an Volatility Index Medium
ongoing process releasing Rs130bn (~US$1.7bn) of equity capital in the last GICS Sector Industrials
five years. We expect further release of Rs50bn (~US$670mn) of equity Market cap US$m 21,837
capital in the next 2-3 years through divestments of Nabha Power and 30-day avg turnover US$m 109.8
Hyderabad Metro which will improve RoE and shareholder returns. Number shares on issue m 1,404
• Valuation: Our SoTP of Rs1,370 implies 21% total shareholder return over Investment Fundamentals
the next 12 months. Analysis of Bloomberg Consensus estimates and target Year end 31 Mar 2019A 2020A 2021E 2022E
prices implies current HoldCo discount at ~21%, much higher than the Revenue m 1,410,071 1,454,524 1,425,435 1,667,513
EBIT m 142,407 138,667 153,133 193,018
historical average of 4% over last four years. Market Cap to Order Backlog
EBIT growth % 22.3 -2.6 10.4 26.0
also stands at multi-year lows at ~0.5x. Reported profit m 89,051 95,490 136,939 123,994
• Catalysts: Recovery in execution pace and progress on divestments. Adjusted profit m 86,104 88,945 90,969 123,994
EPS rep Rs 63.8 68.4 98.1 88.8
Links to Latest Reports: Business outlook, capital allocation, and strategy, EPS rep growth % 20.8 7.2 43.4 -9.5
Capital allocation back in focus; valuation disconnect an opportunity EPS adj Rs 61.7 63.7 65.1 88.8
EPS adj growth % 18.8 3.3 2.3 36.3
PER rep x 18.0 16.8 11.7 12.9
PER adj x 18.6 18.0 17.6 12.9
Total DPS Rs 21.6 21.6 21.6 21.6
Total DPS growth % -9.5 0.0 0.0 0.0
Total div yield % 1.9 1.9 1.9 1.9
ROA % 5.5 4.7 4.9 5.9
ROE % 14.7 13.8 12.7 15.5
EV/EBITDA % 16.4 16.3 15.2 12.3
Net debt/equity % 164.5 165.1 122.0 109.3
P/BV x 2.6 2.4 2.1 1.9
PAGE 18
HDFC Standard Life (HDFCLIFE IN)

Analyst: suresh.ganapathy@macquarie.com
EQUITIES
Why are we buyers? HDFCLIFE IN Outperform
• Balanced product mix: HDFC life’s balanced product mix coupled with Price (as of 07 Dec 2020) Rs 643.35
constant product innovation which addresses customer’s needs at every
Valuation Rs 849.00
stage of life cycle has enabled it to manage business cycles over the years. - VNB MULTIPLE
We expect HDFC life to deliver 23% / 29% APE / VNB (value of new 12-month target Rs 849.00
business) CAGR over FY20-23E – highest amongst our coverage universe. Upside/Downside % 32.0
12-month TSR % 32.2
• Multiple channels of growth to drive need based selling – HDFC life’s Volatility Index Medium
diversified distribution mix consisting of 300+ partners (incl 50 new GICS Sector Financials
ecosystem partners), supplemented by 420 branches and 106K agents Market cap US$m 17,584
enables it to cater to the wide spectrum of customers across geographies 30-day avg turnover US$m 68.0
Number shares on issue m 2,020
• Quality of earnings: Steady accretion of back book surplus, continued
focus on cost management, early mover in selling high margin products Investment Fundamentals
has enabled HDFC life to deliver robust VNB expansion over years and Year end 31 Mar 2019A 2020A 2021E 2022E
depicts managements focus on profitable growth. We expect HDFC life to Revenue m 388,439 296,992 519,021 656,781
EBIT m 12,688 12,932 13,353 18,572
deliver a 20% PAT CAGR over FY20-23E.
EBIT growth % 13.9 1.9 3.3 39.1
• Valuation: Our TP of Rs849 is based on appraisal value method Reported profit m 12,768 12,953 13,420 18,617
Adjusted profit m 12,768 12,953 13,420 18,617
• Catalysts – VNB growth and margin expansion EPS rep Rs 6.3 6.4 6.6 9.2
EPS rep growth % 14.6 1.2 3.4 38.7
Link to Latest Report: HDFC Life - Balanced Product Mix Drives Growth
EPS adj Rs 6.3 6.4 6.6 9.2
6.5 EPS adj growth % 14.6 1.2 3.4 38.7
HDFC life - P/EV (FY1)
PER rep x 101.5 100.4 97.0 70.0
5.5 PER adj x 101.5 100.4 97.0 70.0
Total DPS Rs 2.0 0.0 1.7 2.3
4.5 Total DPS growth % 20.2 nmf nmf 38.7
Total div yield % 0.3 0.0 0.3 0.4
3.5 ROA % 1.1 1.0 0.9 1.1
ROE % 24.5 20.8 18.4 21.9
2.5 EV/EBITDA % nmf nmf nmf nmf
Jul-18
Jul-19
Jul-20
Jan-18
Jan-19
Jan-20
Nov-17
Sep-18
Nov-18
Sep-19
Nov-19
Sep-20
Nov-20
Mar-18
Mar-19
Mar-20
May-18
May-19
May-20
Net debt/equity % -21.9 -10.0 -19.2 -19.5

P/BV x 23.0 19.2 16.7 14.2
P/EV Average +1 STd. Dev -1 STd. Dev
PAGE 19
Bharat Petroleum (BPCL IN)

Analyst: aditya.suresh@macquarie.com
EQUITIES
Why are we buyers?
BPCL IN Outperform
• We are buyers of BPCL into the upcoming privatization by the gov’t, Price (as of 07 Dec 2020) Rs 392.15
albeit fully acknowledging timing uncertainties.
Valuation Rs 510.00
• We consider five independent valuation approaches to determine potential fair - SOTP
value of the said transaction. 12-month target Rs 510.00
• Our base-case SOTP is Rs510/sh, applying 6x EV-EBITDA for refining 12-month TSR % 32.7
at an average ~$6/bbl GRM over the next five years, 8x EV-EBITDA for Volatility Index High
marketing and pipelines on 3-4% pa steady-state volume growth and GICS Sector Energy
margins, 10% control premium. Our target price implies an Enterprise Market cap US$m 11,511
Value of ~$19bn, 12x PE, 9x EV-EBITDA, 1.9x P/BV on FY23E. The 30-day avg turnover US$m 56.3
valuation range around our base-case assumptions is ~Rs450- Number shares on issue m 2,169
550/sh.
• Our bull-case SOTP is Rs690/sh, assuming $7/bbl refining margin Year end 31 Mar 2019A 2020A 2021E 2022E
and 6x EV-EBITDA for refining, 10x EV-EBITDA for marketing, 8x Revenue m 2,984,681 2,846,152 2,011,107 2,647,861
EBIT m 118,587 23,524 105,717 114,724
EV-EBITDA for pipelines and a subjective 20% control premium. EBIT growth % -3.5 -80.2 349.4 8.5
• From an acquirers perspective the key attractions of BPCL are: (a) the access Reported profit m 77,116 22,470 80,659 85,290
to ~17K fuel retail stations, (b) gas (stake in PLNG, IGL) and LNG Adjusted profit m 74,684 66,056 56,641 85,290
(Mozambique), (c) ability to take control (unlike ONGC-HPCL). EPS rep Rs 35.8 11.4 41.0 43.4
EPS rep growth % -13.8 -68.1 259.0 5.7
Link to Latest Report: BPCL – Key expectations in charts; path to 500+ EPS adj Rs 34.8 33.6 28.8 43.4
EPS adj growth % -7.5 -3.4 -14.3 50.6
BPCL Bear-Bull Skew
650 PER rep x 11.0 34.3 9.6 9.0
PER adj x 11.3 11.7 13.6 9.0
Total DPS Rs 8.0 0.0 10.6 11.2
500
Total DPS growth % -58.4 nmf nmf 6.0
Total div yield % 2.0 0.0 2.7 2.9
ROA % 9.2 1.6 6.9 7.2
350
ROE % 19.8 17.5 14.3 18.7
EV/EBITDA % 8.9 20.1 8.8 8.2
200 Net debt/equity % 103.6 156.7 116.1 107.1
Base Case Refining ($1/b Marketing Bull Case Base Case Refining (5x Marketing (8x E&P (lower Bear Case P/BV x 2.1 2.1 1.8 1.6
higher (10x EV- EV-EBITDA, EV-EBITDA, NAV per boe)
margin) EBITDA) $4/b core 50% margin
GRM) cut)
PAGE 20
Dr Reddy’s (DRRD IN)

Analyst: alankar.garude@macquarie.com
EQUITIES
Why are we buyers?
DRRD IN Outperform
• With new launches across markets and improving productivity, DRRD is Price (as of 07 Dec 2020) Rs 4,907.30
well poised to deliver profitable growth, we forecast 24% EPS CAGR
FY20-23E.
- PER
• Apart from interesting molecules launched recently like gCiprodex and gKuvan, 12-month target Rs 5,908.00
we expect DRRD to launch gRemodulin and gVascepa in the next few months. Upside/Downside % 20.4
12-month TSR % 20.9
• With renewed focus, DRRD has been performing well in India, finally Volatility Index Medium
outperforming IPM after being a consistent underperformer. GICS Sector Health Care
• Driven by portfolio maximisation and higher focus, we expect Europe, PSAI
and China to be strong medium-term growth opportunities for DRRD. Number shares on issue m 166
• Given its superior execution and multi-year earnings visibility post gRevlimid
settlement, we expect the stock to trade above long-term mean. Investment Fundamentals
Year end 31 Mar 2019A 2020A 2021E 2022E
• At CMP, we believe the market is still not fully reflecting DRRD’s steadfast Revenue m 152,051 174,600 190,757 210,218
focus on fortifying ex-US growth and better productivity. EBIT m 19,088 15,993 34,468 40,902
EBIT growth % 60.2 -16.2 115.5 18.7
• Valuation: Our TP incorporates an NPV of Rs500/share from gRevlimid. Reported profit m 16,995 19,498 27,351 32,251
• Catalysts: gVascepa launch, commencement of COVID-19 vaccine supplies Adjusted profit m 16,995 19,498 27,351 32,251
EPS rep Rs 102.3 117.4 164.7 194.2
Link to Latest Report: Dr. Reddy’s Laboratories – Delivering on multiple fronts EPS rep growth % 73.3 14.8 40.3 17.9
EPS adj Rs 102.3 117.4 164.7 194.2
Rs m
70,000 30.0% EPS adj growth % 73.3 14.8 40.3 17.9
26.0% 26.8%
24.9% PER rep x 48.0 41.8 29.8 25.3
60,000 25.0%
61,023
PER adj x 48.0 41.8 29.8 25.3
50,000 54,602 Total DPS Rs 20.0 25.0 25.0 25.0
20.0%
16.3% Total DPS growth % 0.0 25.0 0.0 0.0
40,000 47,568
15.0% Total div yield % 0.4 0.5 0.5 0.5
30,000 ROA % 8.6 7.0 14.3 15.4
28,465 10.0% ROE % 12.8 13.2 16.3 16.7
20,000
5.0% EV/EBITDA % 25.9 28.5 17.2 15.0
10,000
Net debt/equity % 6.7 -5.1 -5.4 -18.6
0 0.0% P/BV x 5.8 5.2 4.6 3.9
FY20 FY21E FY22E FY23E
EBITDA (Rs m) EBITDA margin (%) PAGE 21
Hindustan Petroleum (HPCL IN)

Analyst: aditya.suresh@macquarie.com
EQUITIES
Why are we buyers?
HPCL IN Outperform
• Core EPS to double over the next two years. The key drivers of this include: Price (as of 07 Dec 2020) Rs 201.20
1) a 115% expansion in refining over the next four years, within which 55% will
Valuation Rs 400.00
be done by FY22 related to brownfield expansions at the Mumbai and Vizag
- SOTP
refineries; 2) an improvement in product mix at the expanded 15 mtpa Vizag 12-month target Rs 400.00
refinery (loss making fuel oil cut toward zero); 3) benchmark refining margins Upside/Downside % 95.9
going from awful to less bad as global demand gradually improves; 4) possible 12-month TSR % 101.0
upside from higher-than-modelled marketing margins related to BSVI and Volatility Index Medium
higher exports of lubricants. GICS Sector Energy
• The prize remains fuel retail. HPCL operates ~16k stations pan-India. In 30-day avg turnover US$m 22.4
terms of SOTP contribution, marketing accounts for ~60% of our fair value. Number shares on issue m 1,524
• HPCL’s longer-term capex allocation towards gas (20 city-gas concessions,
LNG/Charra terminal), ethanol, renewables is important from an energy Investment Fundamentals
Year end 31 Mar 2019A 2020A 2021E 2022E
transition standpoint albeit with little earnings impact over the next three years. Revenue m 2,754,734 2,690,915 1,704,336 1,966,722
• What is HPCL worth? Our base-case valuation range for HPCL is Rs400- EBIT m 84,818 17,533 82,207 75,345
550/sh, based on SOTP, peer multiples, own multiples, transaction comps, EBIT growth % 7.7 -79.3 368.9 -8.3
residual income. Of note, the Rs550/bbl outcome is simply the ONGC-HPCL Reported profit m 66,906 16,892 67,518 66,869
Adjusted profit m 61,937 51,239 47,513 68,263
transaction of 2018 adjusted for growth in book value. Our base case SOTP
EPS rep Rs 43.9 11.1 44.3 43.9
assumes 6x EV-EBITDA for refining, 8x for marketing and no control premium. EPS rep growth % -7.3 -74.8 299.7 -1.0
Link to Latest Report: India Fuel Marketing – HPCL our preferred pick EPS adj Rs 40.6 33.6 31.2 44.8
EPS adj growth % -3.7 -17.3 -7.3 43.7
HPCL SOTP Valuation PER rep x 4.9 19.5 4.9 4.9
800
PER adj x 5.3 6.4 6.9 4.8
700 Total DPS Rs 9.4 9.8 11.0 11.3
600 Total DPS growth % -53.0 3.7 13.0 2.4
500 Total div yield % 4.3 4.5 5.1 5.2
400 ROA % 8.6 1.6 6.9 6.1
300 ROE % 22.1 16.7 14.2 17.7
Current price
200 EV/EBITDA % 5.3 14.1 5.1 5.0
100 Net debt/equity % 84.9 126.4 90.9 80.4
0 P/BV x 1.1 1.1 0.9 0.8
Refining Marketing Pipelines Bhatinda Equity Other Net Debt, HPCL
(standalone) (standalone) (standalone) Refinery Holdings Subsidiaries Other Consolidated
(48.99%) (MRPL, OIL) PAGE 22
Macquarie Momentum India Conference 2020

Conference website | Please get in touch for video-on-demand
1-Dec | State of India Macro 2-Dec | Infra & Real Estate 3-Dec | Make in India 4-Dec | India’s Digital Dreams
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Economic Advisor Transport & Highways Niti Aayog with Manish Sabharwal, Chairman and Head of India, SoftBank
Dr Viral Acharya, former Deputy Governor of Hon. Barry O’Farrell, Australian High Teamlease Funding India’s Digital Dreams
Reserve Bank of India Commissioner to India Sharad Sharma, Co-Founder iSPIRIT, ex-CEO • Ashutosh Sharma, Prosus (Naspers) |
Swapan Dasgupta, BJP spokesperson, member Fireside Chat: Amitabh Kant, CEO, Niti Aayog Yahoo! India R&D Shantanu Rastogi, General Atlantic | Bejul
of the Rajya Sabha Dr Niranjan Hiranandani, Co-Founder, Make in India – Autos Somaia, Lightspeed | Anjali Bansal, Avaana
Dr Pronab Sen, ex-Chief Statistician of India, Hiranandani Group • India heads of Daimler, Kia Motors, Haval Disruption Panel
Country Director, IGC Karim Habra, Head of Europe & Asia Pacific, Motor India • Leaders of Portea Medical, Uber India,
Andrew Wood, Director, S&P Global Ratings Ivanhoe Cambridge Make in India – Pharma BharatPe, Stanza Living
Geopolitics: Amb. Vijay Gokhale, Amb. Gautam Pratik Agarwal, CEO, Sterlite Power • Heads of Pharmexcil, Akums Drugs and Offline to Online
Bambawale, Lt. Gen. D.S. Hooda Transmission Pharma, Solara Active Pharma • Leaders of Car Dekho, Jumbotail, Licious
PAGE 23
Key Recent India Research
PAGE 24
Data Diviner Insightbook –
Themes and Trends driving India
• Macquarie, in collaboration with
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PAGE 25
India Research Team
15 Members; Senior Analysts ~15 years avg exp
Aditya Suresh Financials Commodities, I.T., Real Estate Mobility

India HoR Suresh Ganapathy Cons Disc. Abhishek Bhandari Arya Sen
Thematics, Energy Nishant Shah Ashish Jain
Consumer & Retail Healthcare, Internet Telecoms Industrials & Utilities Energy, Chemicals Autos Parts
Avi Mehta Alankar Garude Nicolas Baratte Ajinkya Bhat Abhinil Dahiwale Indarpreet Singh
Associates: Parth Gutka, Poojan Shah, Aditi Garg, Surabhi Bomb

PAGE 26
Important Disclosures:
Recommendation definitions Volatility index definition* Financial definitions
Macquarie – Asia and USA This is calculated from the volatility of historic price All "Adjusted" data items have had the following
Outperform – expected return >10% movements. adjustments made:
Neutral – expected return from -10% to +10% Added back: goodwill amortisation, provision for catastrophe
Underperform – expected return <-10% Very high–highest risk – Stock should be expected to reserves, IFRS derivatives & hedging, IFRS impairments &
move up or down 60-100% in a year – investors should be IFRS interest expense
Macquarie – Australia/New Zealand aware this stock is highly speculative. Excluded: non recurring items, asset revals, property revals,
Outperform – expected return >10% appraisal value uplift, preference dividends & minority
Neutral – expected return from 0% to 10% High – stock should be expected to move up or down at interests
Underperform – expected return <0% least 40-60% in a year – investors should be aware this
stock could be speculative. EPS = adjusted net profit /efpowa*
Note: expected return is reflective of a Medium Volatility stock and ROA = adjusted ebit / average total assets
should be assumed to adjust proportionately with volatility risk Medium – stock should be expected to move up or down ROA Banks/Insurance = adjusted net profit /average total
at least 30-40% in a year. assets
ROE = adjusted net profit / average shareholders funds
Low–medium – stock should be expected to move up or Gross cashflow = adjusted net profit + depreciation
down at least 25-30% in a year. *equivalent fully paid ordinary weighted average number of
shares
Low – stock should be expected to move up or down at
least 15-25% in a year. All Reported numbers for Australian/NZ listed stocks are
* Applicable to select stocks in Asia/Australia/NZ modelled under IFRS (International Financial Reporting
Standards).
Recommendation – 12 months
Note: Quant recommendations may differ from
Fundamental Analyst recommendations
Recommendation proportions – For quarter ending 30 September 2020

AU/NZ Asia USA
Outperform 56.27% 63.55% 63.04% (for global coverage by Macquarie, 4.95% of stocks followed are investment banking clients)
Neutral 29.49% 21.61% 36.96% (for global coverage by Macquarie, 4.25% of stocks followed are investment banking clients)
Underperform 14.24% 14.84% 0.00% (for global coverage by Macquarie, 2.37% of stocks followed are investment banking clients)
PAGE 27
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Macquarie Research | EQUITIES

India Model Portfolio Process and Criteria

•~75 stocks pass QSG filter

•# of positions = 20-30 (current portfolio 27)

•Selected bottom-up ideas from our model portfolio

Source: Bloomberg, Macquarie Research, December 2020 PAGE 3

Mid Cap with ~100% potential upside

MSCI Emerging Markets Fund Flows

MSCI Emerging Markets Performance Context

MSCI India versus Emerging Markets Performance

Source: FactSet, Macquarie, December 2020. Categories as described by MSCI PAGE 11

MSCI India Valuation Context

MSCI India Equity Risk Premium

Infosys (INFO IN)

Bharti Airtel (BHARTI IN)

HCL Technologies (HCLT IN)

L&T (LT IN)

HDFC Standard Life (HDFCLIFE IN)

Net debt/equity % -21.9 -10.0 -19.2 -19.5

Bharat Petroleum (BPCL IN)

Dr Reddy’s (DRRD IN)

Hindustan Petroleum (HPCL IN)

Macquarie Momentum India Conference 2020

Key Recent India Research

• This 195-page one-stop product

Aditya Suresh Financials Commodities, I.T., Real Estate Mobility

Associates: Parth Gutka, Poojan Shah, Aditi Garg, Surabhi Bomb

Recommendation definitions Volatility index definition* Financial definitions

Recommendation proportions – For quarter ending 30 September 2020

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