09september2022 India Daily

INDIA DAILY
September 9, 2022 India 8-Sep 1-day 1-mo 3-mo

Sensex 59,688 1.1 1.4 7.9
Nifty 17,799 1.0 1.6 8.0
Contents Global/Regional indices

Dow Jones 31,775 0.6 (3.1) (1.5)
Special Reports Nasdaq Composite 11,862 0.6 (5.1) 0.9
Initiating Coverage FTSE 7,262 0.3 (3.0) (2.9)

Nikkei 28,228 0.6 0.8 (0.1)
Delhivery: The outperformer
Hang Seng 18,855 (1.0) (5.7) (13.8)
 Past decade of investments make Delhivery well-placed to grow market
KOSPI 2,384 0.3 (4.8) (9.2)
share, margin and TAM
Value traded – India
 Financials: We expect 26% revenue CAGR over FY2022-25E and FCF Cash (NSE+BSE) 670 631 261
generation from FY2026 Derivatives (NSE)
121,59
74,430
65,50
9 5
 Initiate with REDUCE and a DCF-based FV of Rs540 Deri. open interest 12,759 9,385 9,687
 Risks: Slowdown in sectoral growth in e-commerce shipments, acquisition

integration
Forex/money market
Strategy Change, basis points
Strategy: Addressing T(RIL)emma 8-Sep 1-day 1-mo 3-mo
Rs/US$ 79.7 (1) 14 188

 Three issues - structure, succession, segregation
10yr govt bond, % 7.1 (10) (27) (41)
 Structure: Prevent the fate of various holding-cum-operating or holding Net investment (US$ mn)
companies 6-Sep MTD CYTD
FIIs 213 (767) 23,258

 Succession: Prepare RIL for eventual transition to new management
MFs 95 (500) (6,454)
 Segregation: Preclude inter-company linkages Top movers
Change, %
Best performers 8-Sep 1-day 1-mo 3-mo
BJFIN in Equity 17,383 1.9 11.9 39.5
TVSL in Equity 1,045 0.3 9.2 39.1
PIDI in Equity 2,870 2.3 8.3 36.6
GRASIM in Equity 1,770 1.1 11.1 33.6
BOB in Equity 138 3.1 17.0 33.6
Worst performers
ONGC in Equity 132 (0.5) (3.4) (19.3)
VEDL in Equity 262 0.1 2.1 (16.3)
WPRO in Equity 413 1.3 (5.3) (12.2)
HCLT in Equity 931 (0.1) (3.6) (9.6)
GAIL in Equity 93 (0.3) 4.1 (8.9)
kspcg.research@kotak.com
Contact: +91 22 6218 6427
For Private Circulation Only. FOR IMPORTANT INFORMATION ABOUT KOTAK SECURITIES’ RATING SYSTEM AND OTHER DISCLOSURES.
REFER TO THE END OF THIS MATERIAL.
Company Report
Delhivery (DELHIVER) REDUCE
Transportation
September 08, 2022
INITIATING COVERAGE
Sector view: Attractive
The outperformer. Operationally, Delhivery is well-positioned to drive a 26% decadal CMP (`): 574
EBITDA CAGR, much ahead of sectoral volume growth prospects. Its diversified
customer & business mix should protect it strategically from changes in the industry Fair Value (`): 540
structure. The CMP does not factor in a growth moderation in e-commerce sector BSE-30: 59,029
volumes and limitations to the pace of share gains in the PTL business. We initiate
with a REDUCE rating and a DCF-based FV of Rs540.
Past decade of investments make Delhivery well-placed to grow market share, margin and TAM
We expect Delhivery to record an EBITDA CAGR of 26% over FY2025-35E, much ahead of the
sectoral growth prospects in its current segments. We expect such an outperformance to be
driven by a combination of Delhivery gaining market share in its existing lines of work,
growing profitability and entering the large-sized Slow Part Truck Load (PTL) segment. The key
hypotheses are: (1) Delhivery’s ability to continue scaling up its presence; and (2) Delhivery
retaining a part of the incremental cost deflation benefits. On scalability, we rely on Delhivery
benefitting from and sustaining past track record of investments in network infrastructure and
technology. On retaining cost deflation benefits, we rely on factors unique to Delhivery – (1)
ability to mix different loads on the same network infrastructure and transportation leg; and
(2) scale benefits (automation, direct lanes and last mile productivity).
Financials: We expect 26% revenue CAGR over FY2022-25E and FCF generation from FY2026
Adjusted for SpotOn, we see 26% revenue CAGR over FY2022-25E. We are ~6% below
consensus, as we factor in a moderation in sectoral e-com activity and limitations to how fast
Delhivery can grow the PTL business from current scale. We expect adjusted EBITDA margin to
improve to 7.6% from 1% over FY2022-25E, based on (1) Delhivery retaining part of cost
deflation benefits and (2) operating leverage. At 9.8% margin in FY2026E, it will generate FCF.
Initiate with REDUCE and a DCF-based FV of Rs540
In our DCF-based FV, we factor in (1) a healthy ~24%/26% CAGR in revenues/service EBITDA
over FY2025-35E, 10%/11% over FY2035-45E and 5% terminal growth; (2) corporate
overheads growing at a slower 16%/8% CAGR over FY2025-35E/35-45E; and (3) modest
improvements in capex intensity and working capital on incremental sales. We account for an
11% dilution linked to ESOPs on the existing pool of granted + ungranted stock options.
Aditya Mongia
Risks: Slowdown in sectoral growth in e-commerce shipments, acquisition integration
Key risks: (1) a reduction in the impetus from top-3 e-commerce players to burn cash and drive
penetration; (2) an increase in insourcing by e-commerce captives; and (3) a recurrence of Teena Virmani
business transition/integration issues as seen in recent performance.
Company data and valuation summary

Company data Stock data High Low Price performance 1M 3M 12M
Rating: REDUCE 52-week range (Rs) 708 456 Absolute (%) (11.4) 9.9 —
Rel to BSE-30 (%) (12.9) 1.2 —
CMP (Rs) Price of close of 8-Sep-22
569 Capitalization Forcast/valuation 2022 2023E 2024E
Market cap (Rs bn) 413 5.2 EPS (Rs) kspcg.research@kotak.com
(17.0) (5.2) (1.5)
Contact: +91 22 6218 6427
Promoter (%) 0 P/E (X) (33.6) (108.7) (386.9)
Free Float (%) 11 P/B (X) 5.7 4.2 4.1
Shares outstading (# mn) 725 RoE (23.0) (4.8) (1.1)
Source: Bloomberg, Kotak Institutional Equities estimates
For Private Circulation Only. In the US, this document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities Act of 1933. This document is not for public distribution
and has been furnished to you solely for your information and may not be reproduced or redistributed to any other person. The manner of circulation and distribution of this document may be restricted by law or
regulation in certain countries, including the United States. Persons into whose possession this document may come are required to inform themselves of, and to observe, such restrictions.
Delhivery Transportation
FINANCIAL OVERVIEW
Exhibit 1: Key financials of Delhivery, March fiscal year-ends, 2019-26E
Revenues Adjusted EBITDA Adjusted EBITDA margin PAT PAT margin EPS RoACE
(Rs mn) Growth (%) (Rs mn) (%) (Rs mn) (%) (Rs/share) (%)
2019 16,539 (1,876) (11.3) (17,978) (108.7) (30.5)
2020 27,806 68 (2,529) (9.1) (2,689) (9.7) (4.6) (27.2)
2021 36,465 31 (2,537) (7.0) (3,744) (10.3) (6.3) (20.5)
2022 68,823 89 254 0.4 (10,077) (14.6) (17.1) (30.1)
2023E 89,620 30 1,758 2.0 (3,561) (4.0) (4.9) (12.2)
2024E 114,372 28 5,380 4.7 (833) (0.7) (1.1) (7.4)
2025E 146,474 28 11,153 7.6 3,598 2.5 5.0 0.7
2026E 187,332 28 18,385 9.8 6,871 3.7 9.5 6.5
Notes:
(a) We define adjusted EBITDA margin on a pre-Ind AS 116 basis and prior to ESOP charge
(b) Part of the yoy revenue growth in FY2023 is driven by partial impact of Spoton acquisition in FY2022 base (consolidated from August)
Source: Company, Kotak Institutional Equities estimates
Exhibit 2: Condensed consolidated financials of Delhivery, March fiscal year-ends, 2019-26E (Rs mn)
2019 2020 2021 2022 2023E 2024E 2025E 2026E

Profit model
Revenue from contract with customers 16,539 27,806 36,465 68,823 89,620 114,372 146,474 187,332
EBITDA (16,249) (1,719) (1,229) (4,720) 1,525 5,585 11,955 20,024
Adjusted EBITDA (1,876) (2,529) (2,537) 254 1,758 5,380 11,153 18,385
Depreciation and amortisation expense (1,700) (2,557) (3,546) (6,107) (7,542) (9,641) (11,541) (14,056)
EBIT (17,949) (4,276) (4,776) (10,827) (6,017) (4,056) 415 5,968
Other income 410 2,081 1,918 1,561 3,662 4,714 4,842 5,164
Finance costs (438) (492) (886) (995) (1,207) (1,491) (1,658) (1,897)
Profit before tax (17,978) (2,688) (3,744) (10,261) (3,561) (833) 3,598 9,236
Taxation — (1) — 183 — — — (2,364)
PAT (17,978) (2,689) (3,744) (10,077) (3,561) (833) 3,598 6,871
EPS (Rs/share) (30.2) (4.5) (7.0) (17.0) (4.9) (1.1) 5.0 9.5
Balance sheet
Shareholder's funds 10 10 16 642 725 725 725 725
Total borrowings 33,873 31,694 28,352 58,932 98,596 101,310 108,810 119,974
Lease liabilities 3,170 4,978 8,156 7,484 10,852 14,319 18,893 24,930
Total sources of funds 37,989 39,251 39,537 71,218 115,348 121,529 130,604 147,805
Fixed assets (tangible/intangible) 1,741 2,473 2,519 9,785 13,045 12,953 13,610 14,968
Cash and bank balances 16,634 4,087 2,774 2,290 41,081 42,456 45,007 52,381
Goodwill 164 186 186 13,799 13,799 13,799 13,799 13,799
RoU assets 2,975 4,781 7,828 6,941 7,157 8,972 11,247 14,098
Investments 11,551 11,877 11,282 20,907 20,907 20,907 20,907 20,907
Net working capital (ex-cash) 4,318 14,481 12,948 15,346 17,837 20,920 24,513 30,131
Total usage of funds 37,989 39,251 39,537 71,218 115,348 121,530 130,604 147,805
Cash flow
Operating cash flow before working capital changes (1,492) (1,891) (1,494) 2,681 1,758 5,380 11,153 18,385
Working capital changes (1,725) (5,295) (395) (4,954) (2,491) (3,083) (3,593) (5,618)
Cash flow from operations (3,445) (7,638) (2,071) (2,405) (733) 2,297 7,560 10,403
Capital expenditure+acquistions (1,831) (2,172) (2,521) (19,264) (6,239) (5,693) (7,383) (9,397)
Free cash flow (5,276) (9,810) (4,592) (21,670) (6,972) (3,396) 177 1,006
Key ratios/metrics
Yoy revenue growth (%) 68.1 31.1 88.7 30.2 27.6 28.1 27.9
EBITDA margin (%) (98.2) (6.2) (3.4) (6.9) 1.7 4.9 8.2 10.7
Adjusted EBITDA margin (%) (11.3) (9.1) (7.0) 0.4 2.0 4.7 7.6 9.8
RoAE (%) (8.2) (13.8) (23.0) (4.5) (0.8) 3.4 6.0
RoACE (%) (27.2) (20.5) (30.1) (12.2) (7.4) 0.7 6.5
Notes:
(a) We define adjusted EBITDA on a pre-Ind AS 116 basis and prior to ESOP charge.
(b) Fair value loss on financial liabilities drives weakness in reported EBITDA in FY2019 (Rs15 bn impact) and FY2022 (Rs3 bn impact).
KOTAK INSTITUTIONAL EQUITIES RESEARCH 3

Transportation Delhivery
INITIATE COVERAGE WITH REDUCE RATING AND A DCF-BASED FAIR VALUE OF RS540
Our long-term assumptions include (1) ~24%/26% CAGR in revenue/service EBITDA over FY2025-35E, 10%/11%
CAGR in revenue/service EBITDA over FY2035-45E and 5% terminal growth; and (2) corporate overheads
growing at a slower 16%/8% CAGR over FY2025-35E/2035-45E. We account for an 11% dilution effect linked to
ESOPs or of the existing combined pool of granted+ungranted stock options. Our assumptions bake in a
moderation in the pace of e-commerce shipments for the sector to 20% from a 28% CAGR in the past three
years, as we assume top-3 e-commerce players limiting the pace of cash burn. We find it interesting to note that
such a 28% CAGR seen reflects the effect of rise of new players such as Meesho, adjusted for which growth for
incumbents has been weak.
We initiate coverage with a REDUCE rating; Fair Value of Rs540/share

We build in 24%/26% CAGR in revenue/service EBITDA over FY2025-35E, 10%/11%
revenue/service EBITDA CAGR over FY2035-45E and 5% terminal growth thereafter. We
assume corporate overheads (including ESOP charges) to see a lower 16%/8% CAGR versus
the 24%/10% revenue CAGR over FY2025-35E/2035-45E. For the purpose of calculating the
per share FV, we assume a dilution of share count based on the set of granted and ungranted
employee stock options declared by Delhivery, or 11% dilution on top of the post-IPO 725 mn
share count. Our DCF assessment is based on pre-IND-AS 116 accounting regime, and thus
accounts for rental expense as a cost as part of EBITDA.
Exhibit 3: We arrive at a DCF-based one-year forward Fair value of Delhivery of Rs540/share

DCF Valuation of Delhivery, March fiscal year-ends, 2021-35E (Rs mn)
CAGR CAGR CAGR
2021 2022 2023E 2024E 2025E 2035E 2045E (2022-25E) (2025E-35E) (2035E-45E)
Revenues 36,352 67,38 7 8 8 ,155 113,222 145,067 1,246,771 3,233,8 03 29 24 10
Growth (%) 31 85 31 28 28 24 10
Service EBITDA 2,18 1 6,904 9,704 15,270 22,68 7 224,294 58 1,762 48 26 10
Service EBITDA margin (%) 6.0 10.2 11.0 13.5 15.6 18 .0 18 .0
Corporate overheads (including ESOPs charge) (5,440) (9,8 75) (11,978 ) (13,768 ) (15,8 38 ) (70,48 9) (147,928 ) 17 16 8
Pre-IND AS116 EBITDA (including ESOP charge) (3,260) (2,971) (2,273) 1,502 6,8 49 153,8 06 433,8 34 NA 36 11
EBITDA margin (%) (9.0) (4.4) (2.6) 1.3 4.7 12.3 13.4
Depreciation (pre Ind-AS116) 1,567 3,598 4,8 8 7 6,301 7,417 39,8 97 100,248
EBIT (excl. other income) (4,8 27) (6,570) (7,161) (4,799) (568 ) 113,909 333,58 6
EBIT growth (%) 33 11
EBIT margin (%) (13.3) (9.7) (8 .1) (4.2) (0.4) 9.1 10.3
Operating tax 145 (29,161) (112,08 5)
Tax rate (%) 25.6 25.6 33.6
NOPLAT (4,827) (6,570) (7,161) (4,799) (423) 84,748 221,501
Growth (%)
Depreciation 1,567 3,598 4,8 8 7 6,301 7,417 39,8 97 100,248
ESOP charge 723 3,225 3,225 3,548 3,902 8 ,021 13,065
Change in working capital (395) (4,954) (2,316) (3,130) (3,576) (36,197) (44,097)
Capital expenditure (2,509) (5,398 ) (5,8 00) (5,765) (7,324) (43,436) (112,662)
Free cash flow to the firm (5,441) (10,098) (7,164) (3,847) (3) 53,033 178,055
DCF parameters
WACC (%) 12.5
Terminal growth (%) 5.0
DCF valuation (Sep-2024E)

PV of terminal value 133,541
Sum of discounted DCF 241,8 59
Net cash 57,506
DCF-based equity valuation 432,906
Per share FV calculation (Sep-2023E)

Current share count (mn) 725
Diluted share count assuming dilution from existing
804
pool of granted+ungranted options (mn)
Fair value (Rs/share) 540
Notes:
(a) Delhivery defines service EBITDA as pre-IND AS 116 EBITDA prior to common cost overheads.
4 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Sectoral constraints may limit growth prospects for Delhivery

Prognosis for the next
three years  E-commerce – prospects of growth slowdown: We build in the risk of a slowdown from
the current base of e-commerce volumes and note 3PL players being susceptible to it. The
28% CAGR in e-commerce shipments volumes over FY2019-22 has been driven by new
players (especially, Meesho) scaling up their presence. In our assessment, the e-commerce
volumes, excluding Meesho, may have grown closer to or lower than 20% over such a
period. This reflects growth moderation for both Amazon and Flipkart since FY2018 and
FY2019, respectively, coinciding with their cash burn flattening out. In the current context
of Meesho focusing on reducing its monthly cash burn, we see merit in being conservative
on growth in e-commerce shipment volumes in the next 1-2 years. We also note inside the
current base of volumes the positive effects of Covid-19 and Buy Now Pay Later (BNPL)
schemes, the effects of which may also start withering away. Recently released financials for
FY2022 of Amazon Transportation Services suggest that the captives are potentially growing
at a slower pace than the sector – revenues up 12% yoy on a weak base.
We assume a 27% CAGR in e-commerce shipments for Delhivery over FY2022-25E, relying
on share gains to offset lower growth for the sector. While a lot more diversified versus
other players in e-commerce logistics, Delhivery still earns a meaningful ~57% share of its
revenues and a much higher share of its EBITDA from the e-commerce shipments business.
In our assessment, the top-3 ecommerce players (Amazon, Flipkart, Meesho) account for 40-
45% of Delhivery’s e-commerce shipments and slightly lower share of segmental revenues.
Exhibit 4: Periods of flat or weak yoy growth in cash burn have led to moderation in revenue growth for the top-2 e-commerce platforms
Comparison of revenue growth of cash burn for the top-2 e-commerce platforms, March fiscal year-ends, 2015-21
Flipkart group (India) Amazon group (India)

PBT loss per month (US$ mn) Revenue yoy growth (%) PBT loss per month (US$ mn) Revenue yoy growth (%)
120 60 100 224 250
51 51 103
49
100 50 74 76 76
80 200
90
80 40
60 56 150
127
60 55 30
50 47 41
22
40 100
40 29 14 20 56
19
20 50
20 10 17 17
- - - -
2015 2016 2017 2018 2019 2019-21 2015 2016 2017 2018 2019 2019-21
(a) We calculate annual revenue CAGR over 2015-19 and a two year revenue CAGR over 2019-21 to taken volatility in growth over such period.
(b) We take PBT loss as proxy of cash burn.
Source: Companies, Kotak Institutional Equities

Exhibit 5: E-commerce shipments without the rise of Meesho would have grown much lower than the
28% CAGR realized
E-commerce shipments for India, March fiscal year-ends, 2018-1QFY23E (bn)
E-commerce shipments E-commerce shipments (excluding Meesho)

3.0
2.4
2.5
2.0
1.5
1.5
1.0 0.9 0.9
0.5
0.0
2018 1Q23 (annualized)
Notes:
(a) We assume a 25% share of Delhivery in e-commerce shipments volume in 1QFY23.
(b) We assume 2.5 mn shipments per day run-rate of Meesho as quoted in recent news reports.
Exhibit 6: Amazon’s revenues grew by 12% yoy in FY2022 on a weak base impacted by Covid-19
outbreak
Trends in movement of Amazon Transportation Services, March fiscal year-ends, 2018-22
Revenues (Rs bn, LHS) PBT margin (%, RHS)

50 46 -
41
40 (0.5)
30
30 (1.0)
21
20 (1.5)
16
10 (2.0)
0 (2.5)
2018 2019 2020 2021 2022
Source: Company, Kotak Institutional Equities
 PTL – constraints on the pace of growth for Delhivery from current scale. We assume
a 21% CAGR in tonnage for Delhivery over FY2022-25E. Delhivery has breached the Rs15
bn revenue level in FY2022 in the PTL segment, becoming #2 in terms of segmental
revenues. We note constraints that will come in way of it growing very fast in the PTL
segment given the long tail of customers. The pace of winning accounts faster than the
industry entails convincing several small customers of shifting vendors. While Delhivery’s
interplay of loads and scalable business model should help, there would be constraints in
growing much ahead of the market.

We expect Delhivery’s EBITDA CAGR to exceed sectoral volume CAGR for long
Prognosis over the
The key hypothesis that we make in our long-term DCF assumptions is that it grows the
long term
EBITDA for Delhivery’s top two segments (Express Parcel and PTL) faster than the growth in
volumes in its end-markets. These two segments account for >80% share of Delhivery’s
revenues and a higher share of its EBITDA as well.
 Express Parcel (26% decadal EBITDA CAGR over FY2025-35E). For the Express Parcel
segment, we expect the strong sectoral growth to be the key driver of segmental EBITDA
CAGR. Other factors including market share gains and margin improvement should account
for one-fourth of the 26% CAGR in segmental EBITDA in our assessment.
 PTL (28% decadal EBITDA CAGR over FY2025-35E). For the PTL segment, we expect
EBITDA CAGR to be driven more by factors beyond sectoral growth. Note that Delhivery has
grown segmental EBITDA in its Express Parcel segment at 1.8X industry volumes in the past
three years as it increased its market share to 25% from 16% levels. We envisage a similar
2X pace of growth for its PTL business EBITDA for long. We base our assumptions on
(1) small starting market share in the express PTL segment (8%); (2) limited investment
being made by competition in business; and (3) prospects of Delhivery entering the Slow PTL
business over time.
Exhibit 7: We expect both key segments to drive blended EBITDA CAGR of 26% for Delhivery
Drivers of decadal EBITDA CAGR for Delhivery over FY2025-35 (%)
Entry into slow PTL Retaining part of cost deflation Market share gains Sector growth
35
30
28
26
25 - 2
2
4
2
20
7
15
10 20
14
5
-
Express segment PTL
Notes
(a) The above segments account for ~8 0% of Delhivery's business exposure.
(b) For purpose of calculating blended EBITDA CAGR, we assume the remaining 20% of
Delhivery's exposure to grow 20% CAGR.
Source: Kotak Institutional Equities estimates

A decade of strong revenue growth ahead of Delhivery
We arrive at FY2025-35E revenue CAGR of 24% for Delhivery, based on the following key
assumptions.
 Online share of retail in India will increase to 24%/30% by FY2035E/FY2045E, factoring a

20%/10% CAGR in e-commerce activity over FY2025-35/FY2035-45. We note a case of
India reaching somewhere between 15% (and growing) share of e-commerce in retail for
the US and >45% share for China.
 Delhivery will be able to grow its share in e-commerce parcel shipments to 30% by FY2035
versus the current 25% share. Here, we note that Delhivery is well-placed with the top-3 e-
commerce platforms forming less than 45% of its overall volumes and the long tail of small
customers in e-commerce contributing 25% of its volumes. We expect increasing relevance
of Social E-commerce, D2C and Omni Channel e-commerce platforms to increase the share
of 3PL in e-commerce logistics – Delhivery would be a beneficiary of this trend.
 Delhivery will be able to increase its share in the Express PTL business to ~20% from the
current 8%. Its PTL business should also get support from Delhivery’s entry into the large-
sized Slow PTL business.
Exhibit 8: EBITDA CAGR drivers for Delhivery (%)
CAGR (%)
Drivers of EBITDA 2025-35 2035-45 Comment
Express Parcel
Sectoral growth 20 10 Would imply a ~24%/30% online share of retail by 2035/2045 years
Market share gains 2 — Would yield ~30% market share for Delhivery versus current ~25% share
Margin gains 2 — Would imply cost deflation to the extent of 0.5% being retained per annum
EBITDA CAGR 26 10 Compounded effect of the three factors above
PTL segment
Express PTL
Ahead of the historical 12% CAGR over FY2025-35 based on acceleration in shift to
Sectoral growth 14 10
organized from unorganized and to express PTL from slow PTL
Market share gains 7 — Would yield 20% market share for D after ten years in Express PTL segment
Margin gains 4 — Would imply cost deflation to the extent of 0.5% being retained per annum
Slow PTL
We assume modest 5% market share and low profitability over the next decade in a
Entry into slow PTL 2 —
large US$10 bn TAM
EBITDA CAGR 28 10 Compounded effect of the four factors above
Other segments
EBITDA CAGR 20 10 Healthy growth from a low base
Overall Express Parcel+Express PTL+Slow PTL 26 10 Blended in the exposure to Express Parcel, and other segments
Notes:
(a) EBITDA used above does not account for ESOP charges and corporate overheads.
Source: Kotak Institutional Equities estimates
Delhivery will continue to grow scale and improve costing versus peers in the long
term
To arrive at the 26% EBITDA CAGR for Delhivery over FY2025-25E, we factor in a modest 270
bps benefit coming in from Delhivery expanding its margins (prior to cost overheads). We
expect it to retain a reasonable part of its scale advantage over time. Further scale will bring
with it related cost benefits - (1) benefits of automation (labor cost, network infrastructure)
start getting realized faster; (2) increasing density of e-commerce in non-metros, helping
reducing the gap in last mile productivity versus metros; and (3) mixing of B2B and B2C loads
destined for beyond metros enhances the scope of running more direct lanes of transportation.

Delhivery already has a US$900 mn top-line in logistics, meaningfully ahead of the #2 player
Blue Dart. It has invested close to 5% of its revenues every year in technology for the past
three years. It is already gone into different lines of work, limiting the share of revenues from
Express Parcel segment to less than 60% of its top-line. In such a context, Delhivery is much
better-positioned than competitors to continue scaling up its presence at a pace faster than
industry growth.
Exhibit 9: Delhivery has spent 5-6% of annual sales on technology and ~1.3% average on automation
Spending on technology and automation as share of sales for Delhivery, March fiscal year-ends, 2019-9M22 (%)
Spending on technology as share of sales Spending on automation as share of sales

7.0 3.0
6.1 2.7
6.0 5.7
2.5
5.0 5.0
5.0
2.0
4.0
1.5 1.4
3.0 1.2
1.0
2.0 0.6
0.5
1.0
0.0 -
2019 2020 2021 9M22 2019 2020 2021 9M22
Slow growth in corporate overheads to drive further operating leverage benefits
Corporate overheads (including ESOP costs) and are currently ~15% of sales. We expect these
costs to grow at a lower 16-17% CAGR than the revenue CAGR of 24% and thus drive a
faster EBITDA CAGR for Delhivery in the next decade. These costs largely comprise white-collar
employee costs (including ESOP costs), technology costs and SG&A expenses.
We expect the intensity of working capital and capex to marginally improve
The past four years of financials suggest ~20% of incremental sales as an investment each in
capex and working capital. We assume a modest improvement in such intensity to 17-18% of
incremental sales in the next three years, and then static levels for the next decade. The modest
improvement reflects better customer stickiness and more efficient capex spending in right-
sized hubs. On the latter, we note that there were instances of Delhivery having to depreciate
off large parts of capex as it moved from a smaller-sized hub to a larger-sized hub. We expect
limited instances of the same happening from hereon as Delhivery is now largely going for
larger-sized hubs.
Relative valuation: Delhivery deserves a premium multiple

As discussed above, we believe that there are enough enablers for Delhivery to continue to
grow its scale faster than industry growth for long, and thus increase its segmental and overall
profitability over time. Upfront investments made for making a scalable business model lead to
it appearing expensive on near-term EBITDA estimates.

Exhibit 10: Our DCF-based value implies premium multiple on near-term EV/EBITDA multiples to domestic and overseas comparables
Comparison of Delhivery with domestic and overseas peers
PE (X) Sales (US$ mn) EV/EBITDA (x) EBITDA margin (%) EBIT margin (%)
M cap CY21/ CY22/ CY23/ CY24/ CY21/ CY22/ CY23/ CY24/ CY21/ CY22/ CY23/ CY24/F CY21/ CY22/ CY23/ CY24/F CY21/F CY22/F CY23/ CY24/F
Company Country (US$bn) FY22 FY23 FY24 FY25 FY22 FY23 FY24 FY25 FY22 FY23 FY24 Y25 FY22 FY23 FY24 Y25 Y22 Y23 FY24 Y25
Indian players
Transport Corporation of
India 0.7 19 18 16 NA 437 463 525 NA 11 12 10 NA 12.6 12.0 11.9 NA 9.1 8.6 8.8 NA
India
TCI Express India 0.9 54 43 34 27 145 162 191 228 36 32 25 20 16.8 16.8 17.9 19.0 15.9 16.2 17.2 17.9
Container Corporation India 5.3 40 30 24 21 1,027 1,109 1,311 1,506 22 19 15 13 22.9 23.7 24.1 24.1 15.5 17.9 19.1 10.4
Gateway Distriparks India 0.4 15 16 13 10 184 190 215 236 10 9 7 6 26.8 26.8 27.5 28.4 17.5 18.3 19.2 19.8
Mahindra Logistics India 0.4 94 40 26 21 547 640 761 908 19 13 10 8 4.9 5.6 6.0 6.5 1.6 2.9 3.7 3.7
Aegis Logistics India 1.3 29 24 20 15 621 1,090 1,184 1,636 15 14 11 8 11.6 7.8 9.1 8.8 9.8 6.5 7.8 7.6
Blue Dart India 2.5 53 43 40 32 592 644 708 808 17 20 18 15 22.7 20.0 19.7 21.2 13.7 12.7 12.1 13.1
VRL Logistics India 0.7 35 25 18 17 319 367 429 476 12 12 10 9 17.0 17.0 17.8 17.7 9.9 10.9 11.7 12.4
Delhivery India 5.3 NM NM NM NM 882 1,149 1,466 1,878 (87) 248 69 32 (6.9) 1.7 4.9 8.2 (15.7) (6.7) (3.5) 0.3
Global players
SF Holdings China 34.1 36 34 24 19 32,125 39,389 46,521 54,625 14 12 10 8 8.7 7.6 8.0 7.7 3.1 3.9 4.4 4.9
ZTO Express China 20.6 31 23 18 15 4,715 5,272 6,248 7,168 18 13 10 8 25.8 28.8 31.4 33.3 18.1 20.0 22.2 23.4
Old Dominion US 31.9 27 24 23 22 5,256 6,376 6,509 6,755 17 15 15 14 31.8 32.9 32.8 33.8 26.5 28.5 28.5 29.3
XPO Logistics US 6.2 11 9 9 9 12,806 12,930 12,343 13,213 7 6 6 5 10.4 11.2 11.5 11.3 4.8 8.4 7.7 7.2
SAIA Logistics US 5.9 18 16 16 15 2,289 2,819 2,873 2,928 10 9 9 8 22.1 23.1 23.1 24.3 14.6 17.5 17.1 18.1
GXO Logistics US 5.4 17 16 15 14 7,940 9,096 9,937 10,356 8 9 8 7 14.4 8.1 8.1 8.3 1.9 3.7 4.3 4.7
Wisetech Global US 12.0 96 72 56 45 459 534 649 774 37 42 33 26 50.8 51.9 53.7 55.4 40.3 42.7 45.3 48.1
Descartes US 5.9 97 53 45
#N/A N/A 425 481 532 586 29 26 23 20 40.5 43.8 44.3 44.5 24.4 27.6 30.8 26.1
Internet players
Nykaa India 7.9 1,523 480 142 103 507 699 969 1,275 493 206 69 69 4.3 5.6 12.1 9.1 1.8 5.8 11.6 12.1
Zomato India 6.3 NA NA NA 209 553 789 1,084 1,382 (32) (29) (47) (543) (44.7) (24.9) (11.0) (0.7) (48.4) (25.9) (10.5) (2.1)
 Most domestic peers in Express Parcel segment are operating in silos and at a lower
scale. In contrast to Delhivery, our assessment of domestic peers suggests lack of willingness
to put in upfront investments in technology that is required to scale business over time and
bring down unit variable cost. Select Express Parcel peers like Ecom Express have started
struggling to grow beyond a certain scale and most Express Parcel peers have not yet been
able to transition into the PTL space. Due to its investments in technology and automation,
Delhivery continues to grow in scale. It is now the market leader within the 3PL e-commerce
logistics space with its revenues higher than the combined revenues of all 3PL players.
Exhibit 11: Delhivery is well-diversified beyond e-commerce

Share of revenues of 3PL logistics providers beyond the e-commerce business
FY2022E revenues (Rs bn, LHS) Share of revenues beyond e-commerce (%, RHS)
80 75 80
70 70
60 60
50 42 50
40 40
30 30
20 20
10
10 10
0
0 0
Blue Dart Delhivery Xpressbees Ecom-express
Source: Companies, Industry reports, Kotak Institutional Equities estimates

 Most domestic peers in PTL are yet to experiment with automation. Most domestic
peers in the other key segment in PTL have for long followed a strategy of maximizing free
cash flow and growing at a modest pace. Barring exceptions such as TCI Express and Safe
Express, most peers are yet to experiment with automation. Barring VRL Logistics, most
players are not considering moving towards trailers. In such sense, we note prospects of
Delhivery retaining and potentially extending its time advantage over peers. We thus argue
for a premium multiple for Delhivery versus Indian peers.
Exhibit 12: Peers to Delhivery in PTL have been cautious in investing in operations of business (capex,
working capital) and will take much longer versus the Express Parcel counterparts to invest in
technology and automation
Comparison of P&L and cash flow metrics of peers to Delhivery having substantial share of business from PTL
aggregate across peers and across a four-year period, March fiscal year-ends, 2017-21 (Rs bn)
35
30 28 29
25
20
16 17
15
10
-
EBITDA OCF PAT FCF
Notes:
(a) We aggregate financials of six peers of Delhivery.
(b) We exclude Rivigo from the above analysis given it is an outlier.
 Chinese players operate in an adverse ecosystem and thus are not comparable on
valuations. To assess the starting point of competitive intensity for Delhivery, we compare
the ecosystem of Express Parcel in India versus China. The interesting statistic at the market
leader in India in Delhivery is that it has grown its revenues and thus EBITDA in its Express
Parcel segment at 1.8X the pace of the industry volumes over the past three years. The
market leader in an extremely competitive market in China (ZTO) has not been able to grow
its EBITDA CAGR in line with CAGR of industry volumes despite gaining meaningful market
share. This is revealing to us and suggests marked difference in the competitive intensity of
the e-commerce logistics in India and China. We expect these differences to sustain. Please
refer to the Appendix for a more detailed discussion on the differences between Chinese
and Indian ecosystems for e-commerce logistics.

Exhibit 13: India and China are different markets in terms of sector dynamics
CAGR in key operating metrics of ecommerce logistics volumes for the sector and key operating metrics of the market leader in China and India (%)
China - CAGR over CY2016-21 (%) India - CAGR over FY2019-22 (%)
Market leader in Market leader in
40 38 China has just India has grown
been able to grow 70 its EBITDA much
35 its EBITDA along- faster than
with industry 60 58 industry volume
30 28 volume growth growth
25 25 50 47
45
25
40
20 32
30
15
10 20
5 10
0 -
Industry shipments ZTO's shipments ZTO's revenues ZTO's operating Industry's Delhivery's Delhivery's Delhivery's EBITDA
profit shipments shipments revenues
Notes:
(a) We assume Delhivery's segmental EBITDA in the express parcel segment to have broadly broadly grown in sync with its segmental revenues.

LOGISTICS INDUSTRY: LARGE OPPORTUNITY WITH LOW SHARE OF ORGANIZED PLAYERS

The logistics market size in India is large at >US$200 bn, growing at high single-digit pace, with less than 4%
with organized players. It is also one of the few industries where it is possible to be largest, cheapest, fastest,
and highest quality service provider at the same time. Customers are price-sensitive but not quality insensitive
and thus able logistics players can get a meaningful wallet share over time. In such a market, Delhivery has
invested in building a scalable business model. Dominant share of Delhivery’s US$0.9 bn revenues come from a
US$5 bn subset of the logistics market where it is well-placed to participate in the high-teens sectoral growth
opportunity. Its ability to outgrow such subset coupled with success of its nascent endeavors in adjacent
categories (slow PTL, supply chain services, truck load) will determine its overall growth trajectory.
Large total addressable opportunity

This section is sourced from the report ‘Logistics Market in India’, October 27, 2021, prepared
by RedSeer. Total logistics spending in India was ~14% of GDP in FY2020, which is
significantly higher than developed countries such as Germany and the US, where logistics
spend is ~8% of GDP. Indian’s logistics market is expected to grow at 9% CAGR from US$216
bn to US$365 bn over FY2020-26P, per RedSeer. The Indian logistics market is primarily
comprised of transportation and warehousing, of which transportation accounted for 70%, or
US$151 bn in FY2020. Organized players accounted for only ~3.5% (US$6-7 bn) of the
logistics market in FY2020.
Exhibit 14: India’s direct logistics market size, March fiscal year-end (US$ bn)
India's direct logistics market size (US$ bn)

250 Organized players size for road transportation, warehousing and supply chain (US$ bn)
216
196
200
178
150
100
50
6-7
0
FY2018 FY2019 FY2020
Notes:
(a) Direct logistics market includes transportation (road, domestic air express, rail, cross-border), warehousing
and supply chain.
Source: Chamber of Commerce India, Report on Logistics, India Economics Survey 2017-18, 2019-20, RedSeer
Estimates
The Indian logistics industry is characterized by high indirect spends on account of high
inventory carrying costs, pilferage, damage and wastage. Indirect spends were estimated at
US$174 bn in FY2020 and are expected to marginally decline to US$166 bn by FY2026. This
shift is expected to be driven by the superior logistics infrastructure that reduces pilferage and
damage, ability of organized players to offer integrated services, network and scale-driven
efficiencies and larger investments in technology and engineering, resulting in higher share of
wallet with customers.

Fragmented and unorganized market ripe for disruption

Prior to rollout of GST, India’s complex indirect tax regime impeded smooth inter-state
movement of goods. As a result, traditional players remained regional and sub-scale, resulting
in significant inefficiencies. Pre-GST, ~60% of travel time was lost due to onerous paperwork
and tax-compliance procedures at inter-state checkpoints. Similarly, companies focused on tax
savings, instead of cost efficiencies, resulting in building of multiple localized sub-scale warehouses.
 Fragmented and unorganized supply. The road transportation market in India was
estimated to be US$124 bn in FY2020, but is highly fragmented and unorganized. Over 85%
of fleet-owners operate fleets of less than 20 trucks, many of which are typically older 2-axle
rigid-body vehicles, comparatively smaller in size than the trucks in developed markets and
poorly utilized (driving less than 325 kms/day on an average). Indian warehousing is similarly
fragmented and unorganized. The sector is characterized by a large number of small
warehouses (less than 10,000 sq. ft) that account for nearly 90% of the warehousing space
in India.
 Organized share. The top-10 organized players account for ~1.5% of the logistics market
in India, versus ~15% in the US and ~7-10% in China. The largest logistics companies in the
US and China are 20-30X and 10X+ the size of India’s largest logistics companies, while
GDPs are 8X and 5X of India. Also, large US and China logistics players offer integrated
services across the supply chain while Indian players have historically been regional or
vertical-focused and typically provide mono-line services only.
Exhibit 15: Comparison between US, China and India logistics markets and top players
Parameter US China India

GDP (US$ tn) 21.0 14.7 2.7
Logistics market spend (US$ tn) 1.6 2.2 0.39
Total logistics spends (% of GDP) ~8 ~15 ~14
-Direct spends ~7 ~10 ~8
-Indirect spends ~1 ~5 ~6
Per Capita Logistics Spend (US$) ~4,8 60 ~1,540 ~28 0
-Per Capita Direct Logistics Spend ~4,460 ~1,050 ~150
-Per Capita Indirect Logistics Spend ~400 ~490 ~130
Share of top organized players (%) ~15 7-10 ~1.5
Average warehouse size (000 sq.ft.) 100-200 20-50 8 -12
Average truck size (ft.) 48 45 24-32
Average daily distance travelled by trucks (km) 500+ 423 325
Indicative set of listed players
ZTO Express, Best, JD Logistics, SF Holdings,
Express parcel delivery FedEx, UPS, USPS, Amazon Delhivery, Blue Dart
EMS, YTO Expres, STO Express, Yunda
FedEx, UPS, XPO Logistics, Old
Part truck load ZTO Express, Best, Deppon Logistics Delhivery, VRL Logistics, TCI Express, Gati
Dominion, SAIA
FedEx, UPS, Knight Swift Logistics,
Truckload Best Logistics, SF Holdings, Full Truck Alliance Delhivery, TCI, VRL Logistics
JB Hunt, Werner Enterprises
Delhivery, Mahindra Logistics, DHL Supply
Supply Chain Services UPS, GXO Logistics, FedEx JD Logistics, Best Logistics
Chain
Notes:
(a) GDP is for CY2020 for US, China and India.
(b) Logistics market spend is for CY2020 for US and China, FY2020 (March fiscal year-ends) for India.
(c) Share of top-10 organized players is based on domestic road transportation, warehousing and supply chain revenues only.
(d) All players mentioned in the table above other than Delhivery are either listed or unlisted subsidiaries of listed MNCs.
Source: RedSeer Research, RedSeer Estimates

Delhivery present in the express business for B2C and B2B loads
The total road transportation market was estimated at US$124 bn in FY2020. Delhivery is
present in the (1) Express Parcel business (US$2 bn) and (2) Express part of the PTL market
(US$3 bn out of the US$13 bn PTL market). Delhivery is starting to make inroads in the larger
US$10 bn slow PTL business and the US$6 bn integrated supply chain services market. While it
is present in the large US$100 bn full truck load market, inability to differentiate versus
unorganized players would impede its ability to scale business in the segment.
Exhibit 16: Indian road transportation market split, March fiscal year-end (US$ bn)
Express parcel delivery PTL TL

120%
104 113 124 200

100%
80%
60%
60% 8 2% 76%
8 7% 88% 88%
40%
25%
20% 10%
13%
10% 11% 10% 14% 15%
0% 2% 2% 2% 5%
FY2018 FY2019 FY2020 FY2026P US FY2020 China FY2020
Notes:
(a) US$104 bn, US$113 bn, US$124 bn and US$200 bn refer to FY2018-20 and FY2026P total road
transportation market of India, respectively.
Source: RedSeer Research, RedSeer Estimates
E-commerce shipments: Delhivery will benefit from growing market, improving

industry structure and growing relevance
As per KIE estimates on e-tailing, the market excluding grocery would grow at a 19% CAGR to
reach ~US$200 bn by FY2030E. We estimate e-commerce shipments to grow at a slightly
higher 20% CAGR to account for reducing parcel size. We envisage Delhivery to grow faster at
24% CAGR on account of increasing relevance of 3PL players within the ecosystem and
increasing relevance of Delhivery within 3PL players. We expect share of 3PL players in e-
commerce shipments to become 50% from current 43-44% levels. We also expect Delhivery’s
market share within 3PL players to increase to 58% from current 50-51% levels.
Exhibit 17: KIE estimates e-tail excluding grocery to be a US$270 bn market size by 2030; we estimate Delhivery to grow faster than the
20% CAGR in e-commerce shipments at 24%
2018-22E 2022E-30E
2019 2020 2021 2022E 2030E CAGR (%) CAGR (%)
Total e-tail market size (US$ bn) 23 31 40 55 270 34 22
Of which grocery market size (US$ bn) 1 2 5 5 70
E-tail market size excluding grocery (US$ bn) 22 29 35 50 201 32 19
Total e-commerce shipments (bn) 1.2 1.5 1.9 2.7 11.5 30 20

Captive (%) 55 59 58 57 50
3PL (%) 45 41 42 43 50
3PL e-commerce shipments (mn) 540 615 8 00 1,140 5,750 28 22

Delhivery express parcel shipments (mn) 148 225 28 9 58 3 3,362 57 24
Delhivery share of total e-com shipments delivered by 3PL (%) 27 37 36 51 58
Source: RedSeer,, Kotak Institutional Equities estimates

Delhivery is better placed versus competition

Delhivery has shared a 25% market share in the US$2.5 bn e-commerce shipments market and
thus a higher ~50% market share within 3PL players. It has been the fastest growing company
in the e-commerce shipments business over the past three years, including both 3PL and
captives. Its revenues have grown at a 45% CAGR over FY2019-22. With such strong growth,
Delhivery’s segmental revenues are comparable to the overall top-line of Amazon’s captive
transportation business and comparable to the aggregate related revenues of the next three
3PL players (Ecom Express, Xpressbees, Blue Dart).
Exhibit 18: Delhivery has grown the fastest across peers and now has a scale comparable to Amazon Transportation Services
Comparison of revenue CAGR for Express Parcel business of Delhivery and key peers, March fiscal year-ends, 2019-22 (Rs bn)
2019 2020 2021 2022E

100
45% CAGR 23% CAGR 40% CAGR 11% CAGR 30% CAGR 21% CAGR
80
60
40
20
-
Delhivery Ecom Express Xpressbees Blue Dart Amazon Transportation Services Ekart
Notes:
(a) For select companies not having publicaly avaiable 2022 financials (Ekart, Ecom Express, Xpressbees, we have estimated basis news flows
and interaction with industry
(b) Flipkart revenues appear to include revenues from fulfillment
(c) We assume the Blue Dart's revenue share of ecommerce business to be 25% through the period of analysis, at FY2022 levels
Source: Companies, Kotak Institutional Equities estimates
Beyond the scale advantage, Delhivery has been the first among 3PL players to invest in
network infrastructure, setting up its mesh network of gateways and then coming up with an
in-house algorithm to allocate routes for cargo. In the time other peers have taken to imbibe
Delhivery’s best practices, Delhivery has been able to create meaningful presence in businesses
beyond e-commerce shipments business.
Delhivery is in a better position than most 3PL peers in the event of a moderation in growth in
e-commerce shipments. Unlike most of its peers, Delhivery can use the same network
infrastructure to do a combination of B2C and B2B loads. We note risk to peers of Delhivery
from underutilization of their recent capacity expansions in event of a slowdown in e-
commerce shipments.
PTL: Large market of which Express is small but a growing part

PTL freight refers to delivery of consignments with weights of between 10-2,000 kgs. PTL
providers operate a network of pick-up and delivery points and terminals where freight from
different customers that is traveling in similar directions is consolidated. This consolidation
leads to lower transportation costs for individual customers, while providing faster delivery
times and greater flexibility.
The RedSeer report estimates the market size of the PTL market at US$13 bn in FY2020 and
estimates the same to become 2X by FY2026. There are two key segments in this market: (1)
Express PTL (US$3 bn market size) where turnaround times are 3-5 days and consignment sizes
are smaller and (2) slow PTL where turnaround times are slower than Express PTL, the service is
used by relatively time-insensitive shippers and consignments are heavier. RedSeer estimates
imply a higher 20% CAGR over FY2020-26 for the Express PTL business and slower 10%
CAGR for the slow PTL business.

Exhibit 19: PTL market can potentially double over FY2020-26, with express sub-segment driving growth
Assessment of the Part truck Load (PTL market), March fiscal year-ends, 2018-26E
(US$ bn) Part truck load market size

Slow PTL Express PTL Overall PTL
30
26
25
9
20
15 13
12 12
2 2 3
10
18
5 10 10 10
-
FY2018 FY2019 FY2020 FY2026P
Source: RedSeer Analysis, RedSeer Research
Delhivery has scaled up and now commands an 8% market share in Express PTL
After then acquisition of SpotOn, Delhivery commands a healthy 8% market share within the
Express PTL business. In terms of scale it is potentially. It has been growing at 2X the pace of
the fastest peer (Safexpress) and now has a comparable top-line to such peer.
Exhibit 20: Delhivery+SpotOn’s PTL business is closing in on the top-3 logistics players that have large exposure to PTL business
Comparison of revenue CAGR for companies having material exposure to PTL business, March fiscal year-ends, 2017-22 (Rs bn)
2017 2018 2019 2020 2021 2022

30
6% CAGR 8 % CAGR -2% CAGR 15% CAGR 13% CAGR 4% CAGR 2% CAGR 34% CAGR
25
20
15
10
-
VRL Logistics TCI Express Gati Safexpress Rivigo Om Logistics V Trans D+Spoton (PTL)
Supply chain services: key enabler for rapidly changing commerce landscape
Supply chain services refers to integrated warehousing, transportation and technology
solutions created for industry-specific and customer-specific requirements. The Indian supply
chain services market (including warehousing) was estimated to be US$65 bn in FY2020 and is
expected to reach US$109 bn by FY2026. The share of organized players is expected to
increase from US$1.6 bn in FY2020 to US$13-15 bn in FY2026 at a CAGR of 42-45%.
Demand for these complex integrated solutions is driving enterprises to increasingly seek a
single or smaller set of service providers. The overall integrated supply chain services market
size is pegged at ~US$6 bn in FY2020 and expected to reach ~US$17 bn in FY2026, growing
at a CAGR of 20%.

Exhibit 21: Integrated supply chain services market can potentially grow at a 20% CAGR over FY2020-26
Assessment of the supply chain services market, March fiscal year-ends, 2018-26E
(US$ bn) Integrated logistics services market size

20
17
16
12
8
6
4 5
4
-
FY2018 FY2019 FY2020 FY2026P
Notes:
(a) Integrated logistics service includes management of first mile, line-haul, last mile shipment movement and
warehousing, packaging & processing of shipments.
(b) The market includes services by Captive logistics arm and third-party logistics players.
Truck load: Large segment, limited differentiation in offering

TL is the largest segment of road transportation, with a market size of US$109 bn in FY2020
that is expected to reach U$163 bn by FY2026. The share of organized players is low at ~US$1
bn in FY2020. Given limited ability of an organized player to add value, the share of organized
players will grow at a modest pace.
Exhibit 22: TL market can potentially grow at 7% CAGR over FY2020-26, with some increase in share of
organized players
Assessment of the Truck Load (TL) market, March fiscal year-ends, 2018-26E
(US$ bn) Full truck load market size

180
163
150
120 109
99
90
90
60
30
-
FY2018 FY2019 FY2020 FY2026P

DELHIVERY WILL CONTINUE TO GROW IN SCALE AND DEFLATE COST FASTER THAN PEERS
We see most drivers of cost deflation for Delhivery sustaining – (1) growing scale, (2) shift towards tractor-
trailers from trucks, (3) overlaying mid-mile of Express PTL cargo over the Express Parcel network and (4)
efficiency gains in last mile transportation beyond the top eight metros. We do not envisage Delhivery
continuing to share a substantial share of the cost deflation benefits with its customers. Key hypotheses we
build in are (1) limited benefit of an aggressive pricing strategy in Express PTL segment given already dominant
share of Delhivery within 3PL players and (2) Delhivery’s ability to combine e-commerce and B2B part truck
loads to compete with other PTL players on pricing, reach and speed of delivery.
Past decade put in to solve the quintessential problem in logistics, that of scaling up
The quintessential problem in logistics is that of scaling up. Most logistics companies in India
have not been able to scale up given complexities at play for a pan-India logistics service
provider. Essentially, logistics companies have not generated enough cash flows to invest in
network planning, route allocation and combining of different cargo loads for better yields.
Thus, these have focused on copying the long-tested notion of going for a reliable hub-and-
spoke network of terminals and grown at a reasonable double-digit pace before plateauing at
a sub-US$300 mn top-line in most cases. To put things in perspective, the largest logistics
company in India beyond Delhivery is Blue Dart with a US$550 mn top-line after 30 years of
operations in India.
Delhivery has grown quickly over the past decade to become the largest logistics player with
>US$900 mn top-line. It has approached the quintessential problem in a different manner.
Delhivery has attacked the problem of being cheapest, fastest, and highest quality logistics
service provider in the country. It has done so by planning its network of terminals based on its
assessment of origin-destination profile of cargo. Having created a mesh network of terminals
and thus having added complexity, it has then invested for making the process of route
allocation automated. The journey for Delhivery over the past decade has been full of iterations
and has seen several of its terminals getting closed, upgraded and shift to a new location given
size constraints. Over the past two years, Delhivery has started moving to tractor-trailers from
trucks, ensuring better cost economics linked to mid-mile transportation. More recently, it has
started combining loads – (1) lightweight parcel load linked to e-commerce shipments and (2)
heavier weight part truck load linked to B2B. Such combination of loads would yield volumes
good enough to move the mid-mile infrastructure of Delhivery to fuel efficient tractor-trailers
at a pace much faster than that of peers. Most peers are slow to shift towards tractor-trailers
and would likely be able to run such solutions over time only on metro routes. Delhivery,
however, would combine loads in Express Parcel and PTL to run trailers much beyond metro
routes.
This journey of Delhivery is important to share as it brings about the ability of Delhivery to
continue to scale up and better its cost structure over time. The fact that it competes with
peers that are less invested to scale up and operate largely in singular class of logistics will help
Delhivery scale up faster than peers. Delhivery’s mid-mile infrastructure has started to digest
complexities related to mixing of different cargo loads – will only accelerate both deflation in
its cost curve and its ability to retain such benefits.
Deflation in cost curve will eventually make Delhivery expand its TAM by entering low price-
sensitive markets. We note that Delhivery has already put up a team to enter the large US$10
bn Slow PTL market. Such market is larger than the combined US$5-6 bn Express Parcel and
Express PTL market, where Delhivery has a combined market share of ~17%.
Delhivery is growing fast while reducing costs
Delhivery has leveraged the scale-up in business to become profitable – has grown its top-line 4X
over the past four years while turning EBITDA positive in the process. Delhivery also appears to be
bringing down the cost curve in the process. The key question is the ability to continue deflating
costs and growing its profitability over the next three years – we believe the answer is yes.

Exhibit 23: Indicative of declining cost structure, Delhivery has scaled up on margin along with growing revenue scale in spite of its
declining realization
The comparison of revenues and EBITDA margin for Delhivery and realization in the key Express Parcel segment, March fiscal year-ends, 2019-22
Overall Key Express Parcel

Revenues (LHS, Rs bn) Per unit revenue
EBITDA margin on pre Ind-AS116 basis (RHS, %) 100 92
86 88
80 1.0 2
70 80 72
0
60
(2)
60
50
(4)
40
(7.0) (6) 40
30
(9.1) (8)
20 20
10 (11.3) (10)
- (12) 0
2019 2020 2021 2022 2019 2020 2021 2022
Notes:
(a) 2022 financials are proforma based on ful year of Spoton acquistions.
(b) Segmental EBITDA margin does not include effect of overheads (accounted below) coming down on account of sale.
(c) Part of the per parcel decline in pricing is optical and driven by decline in parcel size and weight over time.
Cost curve deflation is significant and can continue, driven by PTL
 Past drivers of cost decline. Delhivery’s decline in cost per parcel at ~8% CAGR over
FY2019-22 is partly optical and driven by reducing size of the e-commerce shipment. A
reasonable part in our view comes in from (1) move towards tractor-trailers from trucks, (2)
meaningful improvement in efficiency in last-mile deliveries and (3) benefits of higher
utilization of network infrastructure. The improvement in per unit cost metrics is meaningful
as it happens at a cost level before corporate overheads and thus reflects improvement in
operational efficiencies. Over the past three years, tractor-trailers are now running close to
20% of Delhivery’s tonnage and higher-tonnage trucks have also gained share – there is a
healthy 20% fuel efficiency for higher tonnage trucks versus lower tonnage trucks and for
tractor-trailers versus higher tonnage trucks. Also over this period, the deliveries per day by
Delhivery’s Field Executives has become 2X in metros to 50 per day and has improved in
non-metros to ~40 per day.
 Cost decline can continue at a slower pace. Factors that will be an overhang to cost
deflation in the near term would be input price inflation (fuel, employee), last mile efficiency
benefits in metros (~25% of Express Parcel tonnage) potentially plateauing and limited last
mile efficiency benefits remaining to be explored in non-metros (operate at modest 20%
lower efficiency levels versus metros). We note drivers of cost deflation that will continue in
(1) increasing movement in mid-mile to tractor-trailers and higher tonnage trucks, (2)
modest efficiency gains in last mile transportation on increasing density of e-commerce
shipments in non-metros (~75% of Express Parcel tonnage), (3) interplay of Express Parcel
and PTL volumes on the same network and (4) higher instances of direct routes over time as
density of cargo movement enhances over time. For most of the above levers, we expect
Delhivery to make meaningful gains relative to peers and thus would be able retain some
share of the related cost benefits. For instance, Delhivery can combine loads across B2B and
B2C segments, accelerating the share of tonnage on higher capacity trucks beyond the
metro routes. It can also start increasing the share of direct lanes in mid-mile transportation,
leveraging the same strength.

Exhibit 24: There is meaningful scope to leverage benefits over running more tonnage on tractor-trailers for a company like Delhivery
that has enough combined loads of Express Parcel and PTL to run trailers much beyond metros
The prospects of bringing down mid-mile cost for Delhivery
Increase in costing and space between 36 feet and 45 feet Monthly usage of tractor-trailers versus trucks (km)
80 tractor-trailer (%)
75 Higher usage also brings
Trucks Tractor-trailers down the effect of fixed
70 Full conversion to
tractor trailer from Usage 8 ,000-12,000 23,000 costs
trucks can make
60 operating cost per unit
Share of tonnage on trailers for D and the markets in which it operates
two-thirds levels
50
50 Delhivery has shifted away
Three years from trucks and now 20% of
ago Current Potential tonnage goes through
40
B2C Nil Nil ~25% tractor-trailers. With it
conbining B2B and B2C
30 B2B Nil Small loads, it can reach a higher
Delhivery Nil ~20% ~60% 60% share
20
Improvement in fuel efficiency for vehicles (%)
10 24 feet truck 36 feet truck

Delhivery has also shifted
versus 36 feet versus 46 feet away from smaller trucks to
0 truck tractor-trailer bigger trucks
Increase in cost (%) Increase in space (%)
Improvement ~20% ~20%
Notes:
(a) The higher 60% potential share of tonnage that can run on tractor-trailers for Delhivery assumes it combining Express Parcel and PTL loads and
thus run trailers much beyond metro routes.
Exhibit 25: There is some scope of efficiency gains in last-mile transportation in non-metros
Drivers of last mile transportation cost for Delhivery’s Express Parcel segment
Deliveries per Field Executive in metros Split of tonnage
Three Top-eight Remaining

years ago Current metros cities/towns
Delhiveries per day by Field Split of
~25 ~50 ~25 ~75
Executive in metros (#) volumes (%)
Delhiveries per day by Field

~40
Executive in metros (#)
Notes:
(a) The cost of employee is the dominant share of cost in last mile transportation.
Revenue curve unlikely to continue falling at pace of cost deflation

Delhivery has ended up sharing most of its cost efficiency gains in Express Parcel segment to
customers. This has been a prudent strategy and has helped grow its segmental EBITDA much
faster than the industry volumes as it grew its market share meaningfully. We expect the future
to be different than the past. The key hypotheses for us are that (1) Delhivery now is as large as
all 3PL players combined space and has less to gain from meaningfully reducing its pricing and
(2) Delhivery is less required to pass on the cost deflation in the PTL segment given that it
derives such benefits from its unique endeavors.
 Delhivery has become large in Express Parcel and has less to gain by sharing all cost
gains. At 25% market share in e-commerce logistics, Delhivery is comparable in size to all
3PL service providers combined. This was not the case in FY2021, when Delhivery averaged
a lower 16% market share. We do not envisage Delhivery repeating its aggressive pricing
strategy in FY2023/24 as we expect modest gains for Delhivery from such a strategy.

Exhibit 26: Delhivery now is as large as all other 3PL players combined at 25% market share
Market share trend and Delhivery in e-commerce logistics, March fiscal year-ends, 2020-22
FY2022 (India)
Others
20% Delhivery
24%
Amazon+
ekart
56%
 Delhivery’s endeavors that will drive cost deflation in PTL unlikely to get shared with
customers. Delhivery expects to deflate its cost structure in PTL at a faster pace when
compared to the Express Parcel segment. Here it is relying on (1) PTL cargo sharing the same
mid-mile network of sortation and transportation of the Express Parcel to lower its cost
structure and (2) improved cost structure with improved scale. Unlike in the Express Parcel
segment, Delhivery’s competitors in PTL will unlikely be benefitting from cost deflation and
thus Delhivery can aim to retain most of the benefits of cost deflation hereon. Most PTL
peers to Delhivery still continue to operate their mid-mile transportation leg at low levels of
efficiency. For instance, the more agile of the peers in TCI Express used to have turnaround
times for trucks closer to 24 hours versus the 8-12 hours it took to load and upload trucks.
Most of the PTL peers are still not embracing the shift towards tractor-trailers.
We share two important takeaways from the financial performance of peers to Delhivery in
PTL business that suggest the DNA and constraints in traditionally built PTL businesses – (1)
the fastest growing company in Safexpress has grown at 15% CAGR over the past five years
while most other peers have grown business at a single-digit pace, and (2) most peers
generate healthy cash flows and spend limited amount in capex and working capital.
Exhibit 27: Most players in PTL have reported modest single-digit revenue growth CAGR over the past five years
Comparison of revenue CAGR for companies having material exposure to PTL business, March fiscal year-ends, 2017-22
2017 2018 2019 2020 2021 2022

30
6% CAGR 8 % CAGR -2% CAGR 15% CAGR 13% CAGR 4% CAGR 2% CAGR 34% CAGR
25
20
15
10
-
VRL Logistics TCI Express Gati Safexpress Rivigo Om Logistics V Trans D+Spoton (PTL)

RISKS: SLOWDOWN IN E-COMMERCE, HIGHER INSOURCING BY CAPTIVES

Key risks are (1) reducing impetus from top-3 e-commerce players to drive penetration, (2) prospects of captives
increasing instances of insourcing by their parent, (3) recurrence of business transition/integration issues as seen
in 1Q, (4) prospects of higher compliance cost due to changes in labor laws and (5) risk of technological
obsolescence.
Prospects of faltering growth in e-commerce volumes and thus logistics from

current high base
The top-2 foreign owned entities in Amazon and Flipkart have majority share of e-commerce
GMV. Our interaction with industry participants suggests a slowdown seen recently in the e-
commerce shipments of Amazon and Flipkart. The growth in e-commerce volumes has yet not
been impacted as other market participants have grown in relevance. We, however, note that
risk of a faltering growth in e-commerce volumes and thus related logistics if the top-2 online
platforms continue to grow at a modest pace.
The above risk has yet not played out as select market participants having gained scale and
broadened the customer segments – Nykaa, AJIO, Meesho, etc. We note the Meesho has
accounted for almost half the CAGR for e-commerce shipments over the past few years.
Meesho has quickly scaled up and accounted for 35% share of e-commerce shipments for 3PL
players in 4QFY22. We also note that Meesho raised its last rounds of funding of US$870 mn a
year or more ago and was recently doing a monthly cash burn of ~US$40 mn. As it aims to
reduce its cash burn to US$25 mn per month and defer the next round of fund raise, we note
risk of Meesho’s and overall sector’s shipment growth faltering. We have accounted for part of
this risk in our FY2022-25E CAGR of 22% for sectoral e-commerce shipments and higher 26%
CAGR for Delhivery’s Express Parcel segment volumes.
Delhivery is much better placed than its peers on e-commerce logistics if such risk were to
playing out – Meesho accounts for potentially ~25-27% of Delhivery’s Express Parcel revenues
in our view. Such~25% revenue share for Delhivery in its Express Parcel segment is still
significant such the segment accounts for 58% of revenue from contracts with customers for
it. The risk from Meesho for peers to Delhivery is higher – more than 50% of revenues in –e-
commerce logistics for Xpressbees and E-com Express comes from Meesho in our view and e-
commerce logistics accounts for dominant share their overall revenues.
Concentration risk from large customers
A significant portion of business is attributable to certain large customers, with top five
customers contributing Rs8.1 bn, Rs11.6 bn, and Rs15.6 bn to revenue from contracts with
customers for FY2019-21, respectively, or 49%, 42%, 43% and 42% of total revenue from
contracts with customers for the same periods, respectively. The company’s success depends
on its ability to generate repeat customer use and increase the size of business from existing
customers. The customer contracts are entered on a short-term basis for a period typically
ranging from 1-3 years. The customer contracts provide termination rights to customers upon
the occurrence of certain events, such as a material breach of the terms of the contracts by
Delhivery and any inability to pay its debts. Also, if its key customers demand lower pricing, the
business could be materially and adversely affected.
Risk of captives increasing instances of insourcing, impacting 3PL players

In our assessment, captives in e-commerce logistics outsource a modest sub-20% of the
volumes of their e-commerce parent to 3PL players. In our assessment, these form 30%/20%
of Express Parcel/overall revenues of Delhivery. Such business is at risk based on the growth
strategy of the top-2 e-commerce platforms. Such risk can play out both positively and
negatively for Delhivery. An additional risk to 3PL players in general is of more e-commerce
platforms considering investing in in-house logistics capacities/capabilities.

Risk of integration from current and future acquisitions

Any acquisition that Delhivery undertakes would require integration at three levels – (1) clients
and teams, (2) systems (technology), and (3) operations. As experienced in case of integrating
SpotOn, such a process can take more-than-expected time, can involve incurring a higher cost
or manpower requirement and can also lead to loss of business from acquired/existing
customers in an endeavor to maintain service standards. Delhivery has a meaningful cash
position after the IPO, which it may endeavor to make further acquisitions beyond SpotOn.
Higher compliance cost due to new labor laws
The engagement of a large contractual workforce requires it to comply with applicable labor
laws. Changes in labor laws, such as minimum wage laws, may also require the company to
incur additional costs, such as raising salaries or increasing contributions to the EPF. For
example, the Social Security Code has introduced the concept of ‘gig workers’ and ‘platform
workers’ and provides for the mandatory registration of such workers in order to enable these
workers to avail themselves of various employment benefits, such as life and disability cover,
health and maternity benefits and old age protection, under schemes framed under the Social
Security Code from time to time. Furthermore, the Wages Code limits the amounts that may
be excluded from being accounted towards employment benefits (such as gratuity and
maternity benefits) to a maximum of 50% of the wages payable to employees. The
implementation of laws enhancing employee benefits may increase employee and labor costs,
thereby adversely impacting results of operations, cash flows, business and financial
performance.
Technological obsolescence risk
The company’s proprietary technology infrastructure powered by self-developed software,
applications and data-science capabilities orchestrates its network. Delhivery also depends on
its technology systems to control own logistics operations, manage inventory, process and bill
shipments, process payments and record cash payments by customers, among other processes.
Accordingly, reliability, availability and consistent performance of its technology infrastructure
is critical to its ability to operate business and deliver high-quality customer service.
Furthermore, any error in the billing system could disrupt operations and impact its ability to
provide or bill for services, retain customers, attract new customers, or negatively impact
overall customer experience. While it has significantly increased investments in technology,
such investments may not be sufficient to fully support existing and future business
requirements. Failure to sufficiently invest in technology systems could put it at a disadvantage
compared to competitors and lead to loss of customers or market share or other economic
losses. In the event that its technology systems are unable to handle the additional business
volume, its service capabilities, operating efficiency and future logistics volume may decline.

FINANCIALS: 26% CAGR IN REVENUES OVER FY2022-25 AND FCF GENERATION FROM FY2026
Adjusted for SpotOn acquisition, we expect 26% revenue CAGR over FY2022-25E. We are ~6% below consensus,
factoring in moderation in e-commerce activity at a sectoral level and limitations to grow PTL business fast from
Delhivery’s current scale. We expect adjusted EBITDA to improve to 7.6% from 1% over FY2022-25 on Delhivery
retaining share of cost deflation benefits and from operating leverage benefits. We expect Delhivery to
generate FCF from FY2026. At Rs9.6% margin FY2026, it will generate FCF.
Exhibit 28: Condensed consolidated financials of Delhivery, March fiscal year-ends, 2019-26E (Rs mn)
2019 2020 2021 2022 2023E 2024E 2025E 2026E

Profit model
EBITDA (16,249) (1,719) (1,229) (4,720) 1,525 5,585 11,955 20,024
Adjusted EBITDA (1,876) (2,529) (2,537) 254 1,758 5,380 11,153 18,385
EBIT (17,949) (4,276) (4,776) (10,827) (6,017) (4,056) 415 5,968
Other income 410 2,081 1,918 1,561 3,662 4,714 4,842 5,164
Finance costs (438) (492) (886) (995) (1,207) (1,491) (1,658) (1,897)
Taxation — (1) — 183 — — — (2,364)
PAT (17,978) (2,689) (3,744) (10,077) (3,561) (833) 3,598 6,871
EPS (Rs/share) (30.2) (4.5) (7.0) (17.0) (4.9) (1.1) 5.0 9.5
Balance sheet
Shareholder's funds 10 10 16 642 725 725 725 725
Total borrowings 33,873 31,694 28,352 58,932 98,596 101,310 108,810 119,974
Fixed assets (tangible/intangible) 1,741 2,473 2,519 9,785 13,045 12,953 13,610 14,968
Goodwill 164 186 186 13,799 13,799 13,799 13,799 13,799
RoU assets 2,975 4,781 7,828 6,941 7,157 8,972 11,247 14,098
Investments 11,551 11,877 11,282 20,907 20,907 20,907 20,907 20,907
Total usage of funds 37,989 39,251 39,537 71,218 115,348 121,530 130,604 147,805
Cash flow
Operating cash flow before working capital changes (1,492) (1,891) (1,494) 2,681 1,758 5,380 11,153 18,385
Working capital changes (1,725) (5,295) (395) (4,954) (2,491) (3,083) (3,593) (5,618)
Cash flow from operations (3,445) (7,638) (2,071) (2,405) (733) 2,297 7,560 10,403
Capital expenditure+acquistions (1,831) (2,172) (2,521) (19,264) (6,239) (5,693) (7,383) (9,397)
Free cash flow (5,276) (9,810) (4,592) (21,670) (6,972) (3,396) 177 1,006
Key ratios/metrics
Yoy revenue growth (%) 68.1 31.1 88.7 30.2 27.6 28.1 27.9
EBITDA margin (%) (98.2) (6.2) (3.4) (6.9) 1.7 4.9 8.2 10.7
Adjusted EBITDA margin (%) (11.3) (9.1) (7.0) 0.4 2.0 4.7 7.6 9.8
RoAE (%) (8.2) (13.8) (23.0) (4.5) (0.8) 3.4 6.0
RoACE (%) (27.2) (20.5) (30.1) (12.2) (7.4) 0.7 6.5
Notes:
(a) We define adjusted EBITDA on a pre-Ind AS 116 basis and prior to ESOP charge.
(b) Fair value loss on financial liabilities drives weakness in reported EBITDA in FY2019 (Rs15 bn impact) and FY2022 (Rs3 bn impact).
Revenue CAGR of 26% over FY2022-25E

Aligned to our longer-term assumptions, we expect the mainstay businesses of Express Parcel
and PTL to continue to grow at ~26% CAGR over FY2022-25 and overall revenues for
Delhivery to grow at a similar pace.

Exhibit 29: We expect 26% revenue CAGR for Delhivery over 2022-25E and we factor in modest decline in realizations
Revenue profile of Delhivery, March fiscal year-ends, 2019-22 (Rs mn)
2019-22 2022 (proforma)-

2022 CAGR 25 CAGR
2019 2020 2021 2022 proforma 2023E 2024E 2025E (%) (%)
Express parcel 13,731 19,289 25,505 41,947 41,947 52,207 64,976 81,695 45 25
Part-truck load (PTL) Freight 1,402 2,307 3,842 13,901 17,061 17,376 22,589 29,366 115 20
Truck load (TL) Freight — 3,659 2,141 2,848 2,848 4,362 5,755 7,594 na 39
Supply chain services 1,320 2,149 3,901 5,509 5,509 8,357 11,537 15,927 na 42
Cross border services 86 344 964 3,182 3,182 7,319 9,514 11,893 233 55
Total revenues from contract with customers 16,539 27,806 36,465 68,822 72,410 89,620 114,372 146,474 61 26
Key operating metrics
Revenues from express parcel (Rs/parcel) 92 86 88 72 72 71 69 68 (8) (2)
Revenues from Part-truck load (PTL) Freight (Rs/ ton) 11,529 9,476 10,276 10,925 10,805 10,925 10,925 10,925 (2) 0
Express parcels volumes (mn) 148 225 289 583 583 740 940 1,194 58 27
Part-truck load (PTL) Freight (000 Ton) 122 243 374 1,272 1,579 1,591 2,068 2,688 119 19
Notes:
(a) Spoton financials are consolidated within PTL financials from August 2021
(b) Proforma financials assume Spoton financials consolidated for full year in 2022
Adjusted EBITDA margin to reach 7.6% levels by FY2025E

We define adjusted EBITDA margin as pre-Ind-AS 116 margin prior to ESOP costs and expect
the same to improve to 7.6% by FY2025 from 1% levels reported in FY2022. This would imply
a ~400 bps margin expansion in service EBITDA over FY2022-25 to ~17% and another 200
bps margin expansion driven by corporate and other unallocable costs growing slower than
business growth. For the 400 bps improvement in segment margin, we are largely relying on a
combination of the below factors.
 Higher share of trailers (200 bps impact). the Delhivery’s share of mid-mile tonnage
transported on tractor trailers increasing to 60% over the next three years from the current
20% levels. Note that 35-37% of the overall revenues of Delhivery get spent on Mid-mile
transportation and trailerization yields meaningful 20-25% cost gains. We assume Delhivery
to retain majority 60% share of the related cost benefits given our assessment of the feeble
ambitions of peers to trailerize.
 Scale-linked cost benefit (100 bps impact). Fixed costs directly attributable to business
lines account for 15-20% of revenues. As Delhivery grows its volumes by more than 20%
CAGR, we expect the benefits in terms of such fixed costs – for example nil increase in
worker count at its hubs as volumes grow.

Exhibit 30: We expect Delhivery to grow its topline at ~26% CAGR and improve margin to ~7.6%
levels by FY2025
Delhivery's revenues and adjusted EBITDA margin profile, March fiscal year-ends, 2019-25E
Revenues (LHS, RS bn) Pre-IND-AS 116 EBITDA margin excluding ESOP costs (RHS, %)
240 7.6 10
4.7
200
5
2.0
1.0
160 (0.3)
0
120 (5.1)
(5)
80 (9.1) 146
(11.3) 114
90 (10)
40 72
63
17 28 36
- (15)
2019 2020 2021 2022 2022 2023E 2024E 2025E
(excluding (including
Spoton) Spoton)
Exhibit 31: We expect benefit from retaining cost deflation and higher scale to drive the
improvement in margin over 2022-25
Key assumptions behind the 620 bps improvement in pre Ind-AS 116 pre ESOP charge margin to ~7.2% in
2025, March fiscal year-ends, 2019-25E
2019-22
Service Reduction Overall

CAGR EBITDA in share of improvemen
CAGR deflation in deflation in margin CAGR common t in EBITDA
unit pricing unit costing improvement in volumes overheads margin
(%) (%) % (%) % %
7 9 6.0 66 5.7 11.7
2022-25E
Service Reduction Overall

CAGR EBITDA in share of improvemen
CAGR deflation in deflation in margin CAGR common t in EBITDA
unit pricing unit costing improvement in volumes overheads margin
(%) (%) % (%) % %
1 3 4.6 26 1.6 6.4
Notes:
(a) The company defines service EBITDA prior to common cost overheads and on a pre-IND-AS 116 basis.
(b) In our assessment a fair share of reduction in cost per parcel over 2019-22 happened on account of
reducing parcel size.
(c) While difficult to ascertain, there are fixed costs accounted for in segmental EBITDA as well.

Exhibit 32: Mid-mile (line haul) spends at ~35% of sales and first+last mile account for a similar 35%
share split across line items (vehicle rental+contractual manpower expenses+rent)
2019 2020 2021 2022 Dominant expsoure

Line haul expenses 28.3 39.3 36.4 34.8 Mid-mile
Vehicle rental expenses 16.3 15.2 18.6 19.7 First and last mile
Contractual manpower expenses 17.1 14.5 13.0 10.9 First , mid and last mile
Rent 4.5 3.8 2.8 2.2 First and last mile
Security expenses 2.3 1.6 1.6 1.1 Common overheads
Power, fuel & water charges 3.8 2.9 2.0 1.8 Common overheads
Packing material 1.8 0.4 0.3 0.3 Common overheads
Stores and spares 0.3 0.3 0.4 0.4 Common overheads
Lost shipment expense (net) 1.3 0.6 1.0 1.0 Common overheads
Operating expenses 75.6 78.5 76.2 72.4
Reported EBITDA margin may reach 8% levels by FY2025

The reported EBITDA margin for Delhivery would improve in FY2023 due to absence of one-off
items in Face value adjustment that impacted margin meaningfully in FY2022. We, however,
build in modest increase in share compensation expense and thus an improvement in reported
EBITDA margin versus adjusted EBITDA margin over FY2022-25.
Exhibit 33: Reported EBITDA margin would reflect a broadly similar 8% levels to adjusted EBITDA on nullifying effects of Ind-AS 116 and
share compensation expense
Calculation of reported adjusted EBITDA of Delhivery, March fiscal year-ends, 2019-22 (Rs mn, unless mentioned)
2019 2020 2021 2022 2023E 2024E 2025E

Revenue from contract with customers 16,539 27,806 36,465 68,823 89,620 114,372 146,474
Adjusted EBITDA (1,876) (2,529) (2,537) 254 1,758 5,380 11,153
Adjusted EBITDA margin (%) (11.3) (9.1) (7.0) 0.4 2.0 4.7 7.6
Share based payment expense 379 488 723 3,225 3,225 3,548 3,902
Freight handling and servicing cost-Rent (878) (1,300) (2,119) (2,732) (2,992) (3,752) (4,705)
Rent waiver on lease liabilities — — (34)
Gain on modification/termination of lease contracts (7) — (100)
(+) Fair value loss on financial liabilties at FV through profit/loss 14,807 — 92 2,997 — — —
EBITDA (16,249) (1,719) (1,229) (4,720) 1,525 5,585 11,955
EBITDA margin (%) (98.2) (6.2) (3.4) (6.9) 1.7 4.9 8.2
Notes:
(a) Revenues from contracts with customers exclude other income.
(b) Adjusted EBITDA represents EBITDA after giving effect to adjustments to exclude the impact of the application of the new Ind-AS 116 accounting
standard on leases and share based payment expenses.
Exhibit 34: We expect employee cost to increase 26%/20% CAGR excluding/including share-based expenses
Details of employee cost of Delhivery, March fiscal year-ends, 2019-25E
2022-25 CAGR
2019 2020 2021 2022 2023E 2024E 2025E (%)
Employee cost excluding share-based expenses (Rs mn) 3,211 4,420 5,38 6 9,908 12,58 5 14,355 16,234 28
Share-based expenses (Rs mn) 379 48 8 723 3,225 3,225 3,548 3,902 10
Total employee cost (Rs mn) 3,591 4,908 6,109 13,133 15,8 10 17,903 20,136 24
Employee cost as percentage of revenue from operations (%) 21.7 17.7 16.8 19.1 17.9 15.8 13.9

We expect FCF breakeven in FY2025 and FCF generation from FY2026

We expect the 7.6% adjusted EBITDA margin level to also drive FCF breakeven for Delhivery in
FY2025 and FCF generation from FY2026. We assume historical levels of sales intensity of
working capital and capex to sustain over FY2022-25.
We put below Delhivery’s journey so far in terms of cash flow deployment. This journey of
Delhivery to a US$920 mn topline has seen it move beyond the period of cash burn over time.
The capex intensity and working capital intensity of sales have been significant at ~19-22% of
sales each and 40% on an aggregate basis.
Exhibit 35: Delhivery has created a Rs72 bn business with Rs5 bn cash burn and a ~40% sales intensity
of capex/working capital
Investment made by Delhivery since FY2012, March fiscal year-ends, 2012-22 (Rs bn)
20
16
16
14 14
12
8
5
-
Operating cash burn Capex Working capital Goodwill
We factor in static intensity of working capital and capex over FY2022-25
We factor in overall working capital at ~18% of sales, slightly lower than the historical level.
Such level factors in operating working capital continuing at end-FY2022 levels and reduction
in other elements of working capital. Beyond the 40 days of working capital, the key elements
of working capital include (1) balance with statutory/government authorities at 15 days of sales
(GST and alike elements), (2) advances to suppliers at 10 days of sales, and (3) other financial
assets at 10 days of working capital.
Exhibit 36: Working capital profile of Delhivery, March fiscal year-ends, 2019-25E (#)
2019 2020 2021 2022 2023E 2024E 2025E

Days of sales
Inventories 5 2 3 1 1 1 1
Trade receivables (incl. unbilled
79 115 96 83 87 87 87
revenues)
Trade payables 35 36 44 44 44 44 44
Operating working capital 48 81 55 40 44 44 44
Margin money+security deposits 52 108 70 33 29 26 24
Net working capital (ex cash) 95 190 130 81 73 67 61

We factor in capex intensity averaging ~25% of incremental sales over FY2022-25, slightly
higher than the rate seen historically. This implies the capex per annual sales reducing to 5%
level by FY2025 from 8% levels seen in FY2022. Our assessment of the historical capex of
Delhivery suggests a broad split between corporate, vehicles and network infrastructure of
33%, 11% and 56% as of end-9M22.
Exhibit 37: Capital expenditure profile of Delhivery, March fiscal year-ends
Capital expenditure (Rs mn, LHS)
8,000 Capital expenditure (% of incremental revenues, RHS) 35

29 30
7,000 30
6,000 23 23 25
5,000 19
17 20
4,000
15
3,000
10
2,000
1,000 5
- -
2019 2020 2021 2022 2023E 2024E 2025E
Exhibit 38: The gross fixed asset base of Delhivery is broadly split 33/11/56 between
corporate/vehicles/network infrastructure
Break-up of gross fixed assets of Delhivery, March fiscal year-ends, 2018-9M22
end-2018 end-2019 end-2020 end-2021 end-9M22

Computers / servers 15 13 11 10 10
Office equipment 19 24 24 26 23
Sub-total (office) 34 36 35 36 33
Vehicles 8 5 9 8 11
Sub-total (vehicles) 8 5 9 8 11
Furniture and fixture 18 22 21 20 16
Plant and equipment 18 16 17 16 21
Land and building — — — — 1
Leasehold improvements 22 20 18 20 18
Sub-total (network infrastructure) 58 59 56 56 56
Total 100 100 100 100 100
Total (Rs mn) 2,271 3,711 5,644 7,088 11,410

We share below detailed financials for Delhivery in the exhibits that follow.
Exhibit 39: Consolidated income statement of Delhivery, March fiscal year-ends, 2019-26E (Rs mn)
2019 2020 2021 2022 2023E 2024E 2025E 2026E

Expenses (32,788) (29,525) (37,695) (73,543) (88,095) (108,787) (134,519) (167,309)
Freight, handling and servicing cost (12,507) (21,838) (27,781) (49,802) (64,628) (81,440) (102,720) (130,269)
Purchase of traded goods — (58) (102) (1,750) — — — —
Change in inventory of traded goods — — — 29 — — — —
Employee benefit expense (3,591) (4,908) (6,109) (13,133) (15,929) (18,039) (20,288) (22,723)
Fair value loss on financial liabilities at FV through
(14,807) — (92) (2,997) — — — —
profit or loss
Other expenses (1,884) (2,722) (3,610) (5,889) (7,538) (9,309) (11,511) (14,317)
EBITDA (16,249) (1,719) (1,229) (4,720) 1,525 5,585 11,955 20,024
EBIT (17,949) (4,276) (4,776) (10,827) (6,017) (4,056) 415 5,968
Other income 410 2,081 1,918 1,561 3,662 4,714 4,842 5,164
Finance costs (438) (492) (886) (995) (1,207) (1,491) (1,658) (1,897)
Taxation — (1) — 183 — — — (2,364)
Profit after tax (17,978) (2,689) (3,744) (10,077) (3,561) (833) 3,598 6,871
Exceptional items — — (413) — — — — —
Share of loss in associates — — — (32) — — — —
Reported PAT (17,978) (2,689) (4,157) (10,110) (3,561) (833) 3,598 6,871
EPS (Rs/share) (30) (5) (7) (17) (5) (1) 5 9
Weighted average number of shares - primary (mn) 595 595 595 595 725 725 725 725
Weighted average number of shares - diluted (mn) 595 595 595 595 725 725 725 725
Growth rates (%)
Revenues 68 31 89 30 28 28 28
EBITDA (89) (29) 284 (132) 266 114 67
PAT (85) 39 169 (65) (77) (532) 91
Key ratios (%)
Freight, handling and servicing expenses as
75.6 78.5 76.2 72.4 72.1 71.2 70.1 69.5
proportion of sales
COGS as proportion of sales — 0.2 0.3 2.5 — — — —
Employee expense as proportion of sales 21.7 17.7 16.8 19.1 17.8 15.8 13.9 12.1
Other expenses as proportion of sales (%) 11.4 9.8 9.9 8.6 8.4 8.1 7.9 7.6
Gross margin (%) 24.4 21.3 23.5 25.1 27.9 28.8 29.9 30.5
EBITDA margin (%) (98.2) (6.2) (3.4) (6.9) 1.7 4.9 8.2 10.7
PAT margin (%) (108.7) (9.7) (10.3) (14.6) (4.0) (0.7) 2.5 3.7
Effective tax rate (%) — (0.0) — 1.8 — — — 25.6

Exhibit 40: Consolidated balance sheet of Delhivery, March fiscal year-ends, 2019-26E (Rs mn)
2019 2020 2021 2022 2023E 2024E 2025E 2026E

Equity and liabilities
Share capital 10 10 16 642 725 725 725 725
Reserves and surplus 33,873 31,694 28,352 58,932 98,596 101,310 108,810 119,974
Shareholders' funds 33,883 31,704 28,368 59,574 99,321 102,035 109,535 120,699
Loan funds 936 2,568 3,013 3,531 5,176 5,176 2,176 2,176
Short-term borrowings 580 1,570 1,697 2,355 4,000 4,000 1,000 1,000
Long-term borrowings 356 998 1,316 1,176 1,176 1,176 1,176 1,176
Net fixed assets 1,610 2,359 2,380 6,225 9,486 9,393 10,051 11,408
Intangible assets 131 114 140 3,560 3,560 3,560 3,560 3,560
Capital work-in-progress 9 267 768 584 584 584 584 584
Intangible assets under development — 48 — 15 — — — —
Goodwill 164 186 186 13,799 13,799 13,799 13,799 13,799
RoU assets 2,975 4,781 7,828 6,941 7,157 8,972 11,247 14,098
Investments 11,551 11,877 11,282 20,907 20,907 20,907 20,907 20,907
Short term 11,304 8,104 7,076 14,612 14,612 14,612 14,612 14,612
Long term 247 3,772 4,206 6,295 6,295 6,295 6,295 6,295
Current assets 6,955 18,804 19,389 26,636 32,784 40,309 49,745 62,401
Inventories 226 178 259 253 330 421 539 689
Trade receivables 2,146 6,013 5,946 9,903 13,754 17,553 22,479 28,750
Other assets 4,582 12,612 13,184 16,480 18,701 22,336 26,727 32,963
Current liabilities 2,637 4,323 6,441 11,290 14,947 19,389 25,232 32,270
Trade payables 1,607 2,735 4,422 8,345 10,867 13,868 17,760 22,715
Other liabilities 853 1,318 1,678 2,355 3,313 4,541 6,217 7,951
Provisions 176 270 341 590 768 980 1,255 1,605
Advance income tax assets 596 1,050 1,232 1,551 1,551 1,551 1,551 1,551
Total use of funds 37,989 39,251 39,537 71,218 115,348 121,530 130,604 147,805
Key metrics/ratios
Days of sales
Current assets 153 247 194 141 134 129 124 122
Inventories 5 2 3 1 1 1 1 1
Trade receivables 47 79 60 53 56 56 56 56
Other assets 101 166 132 87 76 71 67 64
Current liabilities 58 57 64 60 61 62 63 63
Trade payables 35 36 44 44 44 44 44 44
Other liabilities 19 17 17 12 13 14 15 15
Provisions 4 4 3 3 3 3 3 3
Net working capital (ex cash) 95 190 130 81 73 67 61 59
RoAE (%) (8) (14) (23) (4) (1) 3 6
RoACE (%) (27) (21) (30) (12) (7) 1 6
Net debt to EBITDA (X) NM NM NM NM (30.1) (7.9) (3.8) (2.3)
Net debt to equity (X) (0.7) (0.3) (0.1) (0.2) (0.5) (0.4) (0.4) (0.4)

Exhibit 41: Consolidated cash flow statement of Delhivery, March fiscal year-ends, 2019-26E (Rs mn)
2019 2020 2021 2022 2023E 2024E 2025E 2026E

Cash flow from operating activities
Restated loss before tax (17,978) (2,689) (4,157) (10,293) (3,561) (833) 3,598 9,236
Adjustments for:
Depreciation and amortisation expense 1,700 2,556 3,546 6,107 7,542 9,641 11,541 14,056
Finance costs 97 113 199 984 1,207 1,491 1,658 1,897
Gain on sale/fair valuation of investments (35) (528) (426) 3,030 — — — —
ESOP compensation 379 488 723 3,084 3,225 3,548 3,902 4,292
Allowance for expected credit loss 283 457 942 1,184 — — — —
Interest Income (340) (1,459) (1,256) (710) (3,662) (4,714) (4,842) (5,164)
Others - including rent 14,365 (924) (1,066) (706) (2,992) (3,752) (4,705) (5,931)
Operating profit/ (loss) before working capital
(1,492) (1,891) (1,494) 2,681 1,758 5,380 11,153 18,385
changes
Change in working capital (1,725) (5,295) (395) (4,954) (2,491) (3,083) (3,593) (5,618)
(Increase) / decrease in financial assets (447) (2,214) (1,245) (3,874) — — — —
Decrease / (Increase) in non financial assets 62 (17) (303) (559) (552) (479) (456) (1,378)
(Increase) in inventory (57) (28) (81) 6 (76) (91) (118) (150)
(Decrease) / increase in other liabilities (139) 104 305 (50) 957 1,228 1,676 1,734
Increase in provisions 58 86 71 214 178 212 275 350
Increase / (decrease) in trade payables (376) 1,130 1,690 2,625 2,522 3,001 3,892 4,954
Cash generated from/ (used in) operations (3,217) (7,186) (1,889) (2,273) (733) 2,297 7,560 12,768
Direct taxes paid (net of refunds) (228) (452) (182) (132) — — — (2,364)
Net cash generated from/ (used in) operations (3,445) (7,638) (2,071) (2,405) (733) 2,297 7,560 10,403
Purchase of tangible/non-tangible assets (1,566) (2,136) (2,509) (5,398) (6,239) (5,693) (7,383) (9,397)
Proceeds from sale of PPE/non-tangible assets — 0 24 — — — — —
Acquisitions (265) (36) (35) (13,867) — — — —
Purchase of investments (11,905) (45,493) (9,197) (4,368) — — — —
Sale/redemption of investments 2,910 45,696 10,218 (6,642) — — — —
Net proceeds from fixed deposits 1,113 (8,310) 4,128 1,530 — — — —
Interest income 319 954 755 1,322 3,662 4,714 4,842 5,164
Net cash generated/ (used in) investing activities (9,394) (9,325) 3,383 (27,421) (2,577) (979) (2,542) (4,233)
Proceeds from issuance of equity share capital — 15 98 33,960 40,083 (—) — —
Proceeds from issuance of preference share capital
28,901 — 93 956 — — — —
and instruments entirely equity in nature
Proceeds (Repayment) of short term borrowings 386 585 533 (3,234) 1,645 — (3,000) —
Proceeds (Repayment) of long term borrowings 268 642 133 (1,921) 700 445 808 1,367
Principal payment of lease liabilities (93) (109) (205) (743) (327) (388) (276) (163)
Interest on lease liabilities
Interest paid other than interest on lease liabilities
Net cash generated/ (used in) financing activities 29,462 1,133 652 29,018 42,101 57 (2,468) 1,204
Net increase/ (decrease) in cash and cash
16,623 (15,831) 1,964 (808) 38,791 1,375 2,551 7,374
equivalents
Cash and cash equivalents at start of the period/ year (137) 16,482 651 3,098 2,290 41,081 42,456 45,007
Cash and cash equivalents at end of the period/
16,482 651 2,614 2,290 41,081 42,456 45,007 52,381
year
Free cash flow generation (5,011) (9,774) (4,580) (7,803) (6,972) (3,396) 177 1,006

Recent performance impacted by business integration and transition issues

Overall, Delhivery's volumes for 1QFY23 were impacted by the twin transition issues of (1)
integration of SpotOn from an operations perspective and (2) Shopee volumes going out. Both
these led to a qoq decline in volumes for the two key segments in PTL and Express Parcel. The
market share of Delhivery among 3PL players within Express Parcel has otherwise marginally
increased for Delhivery when adjusted for Shopee volumes.
 Express parcel revenue growth came on the back of strong shipment growth of 50% yoy to
102 mn shipments and new client acquisitions. The company on-boarded 500+ new
customers in Express Parcel during the quarter. Express Parcel revenues could have been
more had it not been impacted by Shopee shutting shop.
 Part truck load services revenues declined as the company is in the process of completing
integration of ‘SpotOn’ which has impacted volumes temporarily. PTL freight volumes for
1QFY23 stood at 239,000 tons vs 279,000 tons (pro-forma) in 1QFY22.
The pricing for Delhivery has been stable qoq in the Express Parcel and PTL segment and has
likely gone up adjusted for loss of lower priced Shopee volumes. The overall adjusted EBITDA
metric at negative Rs2.2 bn would have been largely nil if not for these events as per the
company. The company incurred Rs1.5 bn of expense linked to underutilization of capacities as
it had to have higher manpower/infra/technology spends to maintain service levels in PTL in
spite of declining volumes. Another Rs0.6 bn loss came from the loss of Shopee volumes. Lastly
provisions of Rs0.45 bn happened for customers in PTL where service levels could not be
maintained.
As regards to the SpotOn acquisition, the integration is now complete and key gateways in
Tauru and Bhiwandi are operating at satisfactory service levels since end of 1Q. Volumes will
take time to revive and one-time costs linked to integration will continue in 2Q as per the
company. In this regard, the company has refrained from giving guidance on PTL volumes
(whether they will cross FY2022 levels in FY2023) and on overall adjusted EBITDA margin
(whether Delhivery will break even in FY2023).
Exhibit 42: Delhivery’s quarterly express delivery parcel volume (mn)
Express parcel shipments (mn)

200
176
170
160 152
135
120
102
95
82
80 73 73
55 53
43 40
40
-
1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23
Source: Company

Exhibit 43: Delhivery’s quarterly PTL freight tonnage (‘000 tons)
PTL Freight Tonnage (000 Tonnes)

500
456
442
393 401
400
332
300 28 1 28 0
239
200
152
100 66 77
58
42
-
1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23
Notes:
(a) The SpotOn volumes are consolidated on a pro-forma basis from 1Q21 .
Source: Company

DELHIVERY: LARGEST INTEGRATED TECHNOLOGY-LED LOGISTICS PLAYER IN INDIA

Delhivery is India’s largest and fastest growing 3PL express parcel (and heavy parcel) player by volume and
revenue. It had ~50% market share (by volumes) among 3PL express delivery players and 25% in the overall e-
commerce parcel market (including captives) as of 1QFY23 versus 16% a year ago. The company further boasts
of reach in 18,435 PIN codes as of June 30, 2022. Due to its fully integrated stack of services, an asset-light
model and technology-led control of network assets and partners, Delhivery has developed the ability to
address all aspects of the supply chain, thereby catering to a large part of the overall logistics market in India.
Delhivery is the largest and fastest growing fully integrated logistics services player in India by
revenue as of FY2021, as per the RedSeer Report. It operates the fastest growing PTL freight
business by revenue in India as of FY2021 as well. Further, it also operates the largest and
fastest growing third-party (3PL) parcel delivery network in India by revenue and volume with
over 20% market share as of 1QFY22, per the RedSeer Report and has reached ~25% market
share in 4QFY22 as per company.
Delhivery provides supply chain solutions to a diverse base of 29,282 customers such as e-
commerce marketplaces, D2C brands and enterprises and MSMEs across several verticals such
as FMCG, consumer durables, consumer electronics, lifestyle, retail, automotive and
manufacturing, as of June 30, 2022.
 It has delivered more than 1.4 bn shipments since incorporation. In FY2022, Delhivery
fulfilled over 582 mn express parcel orders, carried 1.6 mn MT of PTL freight.
 Its express parcel delivery network, which spans 18,435 PIN codes as of end-June 2022, is
capable of handling consignments of up to 10 kgs with same-day and next-day capabilities
and 48-96 hour delivery for long-distance orders. Delhivery has built a nation-wide network
with a presence in every state, servicing over 96% of the 19,300 PIN codes as per India Post.
 Its network infrastructure includes 123 gateways, 21 automated sort centers, 83 fulfillment
centers, 178 processing centers, 18 mn sq. ft of infrastructure space, 9120 of fleet size and
2,961 direct delivery centers as of March 30, 2022, including SpotOn’s network.
 Its self-delivery network is augmented by 1,224 partner locations that expands its reach and
provides critical flex capacity and redundancy.

Exhibit 44: Key operating metrics of Delhivery, March fiscal year-ends, 2019-22
end-2019 end-2020 end-2021 end-2022 (a) end-1Q23

(b)
Pin-code reach 13,48 5 15,8 75 16,677 18 ,074 18 ,435
Countries served 42 42 42 220+ 220+
(c)
No. of active customers 4,8 67 7,957 16,741 23,613 29,28 2
Infrastructure (in million sq. ft.) 6.0 9.9 12.2 18 .2 18 .9
Gateways 73 83 88 123 96
Automated sort centers 15 21 19 21 21
Processing centers 138 156 129 178 169
Express delivery centers 1,744 2,030 2,098 2,961 2,948
Freight service centers 84 103 95 267 237
(d)
Team size 23,68 9 30,634 33,242 60,373 58 ,045
(e)
Partner agents 5,191 9,78 2 19,8 44 34,360 29,8 08
Partner centers (constellation/BAs) 430 8 40 1,18 9 1,224 1,210
Fleet size – daily average 3,116 3,694 5,095 9,120 11,366
(f)
Revenue/person (Rs mn) 0.7 0.9 1.1 1.2 1.2
(g)
Revenue/sq.ft. (Rs, Transportation) 4,324 4,647 4,397 5,08 9 4,363
(h)
Revenue/sq.ft. (Rs, warehousing) NM 379 344 495 598
Notes:
(a) Figures and calculations for FY2022 on proforma basis assumign Spoton acquisition for the oyear
(b) Out of 19,300 Pin-codes as per India Post
(c) Active Customers for a quarter are those customers on whom an invoice was raised at least once during such quarter. Active Customers for a period are
calculated as the average number of Active Customers for each of the quarters in the period
(d) Includes permanent employees and contractual workers (excluding partner agents, daily wage manpower and security guards) as of the last day of the relevant
period
(e) Count of last mile delivery partner agents in the last month of the relevant period
(f) Derived by dividing revenue from operations by total team size as described in note (d); annualized for 1QFY23
(g) Derived by dividing Express Parcel + PTL freight revenue by total logistics area excluding warehousing area; annualized for 1QFY23
(h) Derived by dividing revenue from warehousing segment of Supply Chain Services by weighted average warehousing area for the year; annualized for 1QFY23
Source: Company
Fully-integrated suite of logistics service offerings drives higher customer retention

Delhivery provides a full range of logistics services, including express parcel delivery, heavy
goods delivery, part-truckload freight (PTL), truckload freight (TL), warehousing, supply chain
solutions, cross border express and freight services and supply chain software, along with
value-added services such as e-commerce return services, payment collection and processing,
installation and assembly services, and fraud detection. In 1HFY22, over 65% of revenues were
from customers who have been transacting with Delhivery for over three years. Customers
have also steadily increased the volume of business they undertake over time.
Operates an asset-light model

Delhivery’s approach is to invest in critical service elements and IP-sensitive areas of the
network, while delivering services through a large number of asset owners (network partners).
Network partners with warehousing, freight (truckload or air) or first/last-mile capacity can sign
up and be discovered via its partner applications. The systems function as managed
marketplaces that match partner capacity with Delhivery internal and third-party client demand
based on partners’ service quality ratings and pricing. This approach has enabled Delhivery to
quickly expand to geographically dispersed locations, optimize loads, improve its cost structure
and to easily create flexible capacity to handle seasonal variations and changes in client
requirements while incurring minimal fixed costs and capital expenditures.

Largest 3PL express parcel delivery network operator

It also operates the largest and fastest growing third-party (3PL) parcel delivery network in India
by revenue and volume with market share of 16%-16.5% as of 1QFY22, per RedSeer. Its
shipment volume grew from 148.5 mn orders in FY2019 to 583 mn orders in FY2022,
representing a CAGR of 57%. Its network is designed to ensure performance under large
volume fluctuations that are a routine occurrence in the e-commerce market and during
month-end periods in the freight market. This is reflected in its peak daily parcel volume that
increased from approximately 0.8 mn parcels in FY2019 to 3.29 mn parcels in 9MFY22.
Strong relationships with diverse customer base

As of June 30, 2022, Delhivery serves a diverse base of 29,282 customers across e-commerce,
consumer durables, electronics, lifestyle, FMCG, industrial goods, automotives, healthcare and
retail, among other industries. Its service quality, reach and efficiency, coupled with deep
integration with customers’ ERP systems and business processes have led to customer stickiness.
In 1HFY22, over 64% of revenues were from customers who have been transacting with
Delhivery for over three years. For the nine months ended December 31, 2021, over 58% of
revenues were from active customers who used at least two of the services offered.
Proprietary and customizable technology stack

Its in-house logistics technology stack has over 80 distributed applications and services,
orchestrated by its platform to govern the end-to-end transaction flows. Its platform provides a
configurable framework and tools to enable both internal and external developers to build
custom applications. Further, it operates 20 fully and semi-automated sortation centers and 96
gateways across India. It has established automated sort capacity of over 3.7 mn shipments per
day as of December 31, 2021 along with automated material handling systems at gateways in
Tauru (Haryana), Bhiwandi (Maharashtra) and Bengaluru (Karnataka). This automation
combined with system-directed floor operations, path expectation algorithms and machine-
vision guided truck loading systems enable the facility staff to be more productive and reduce
errors in their operations.
Data-driven processes leading to improvement in unit economics

Delhivery also collects, structures, stores and processes vast amounts of transaction and
environmental data to guide real-time operational decision making. It has used machine
learning extensively to build intelligent geo-location, network design, route optimization, load
aggregation, ETA prediction, product identification and fraud detection products that enable it
to execute operations with efficiency and precision.
Its logistics platform, data intelligence and automation enable the network to be seamlessly
interoperable, and allow it to share infrastructure and operational capacity across business lines
and set new service standards. Its network structure, quality of engineering and technology
and data intelligence capabilities have helped to establish scale in all of its business lines and
exploit synergies across them. This has driven higher network utilization, resulting in cost
efficiencies, while maintaining service speed and reliability. Powerful flywheels drive network
synergies.
Delhivery’s integrated supply chain solutions are achieved through high quality logistics
infrastructure and network engineering, a vast network of domestic and global partners and
significant investments in automation, all of which are orchestrated by its self-developed
logistics operating system that is guided in real-time by deep sources of proprietary network
and environmental data. Together, these create powerful, intersecting flywheels that drive
strong network synergies within and across its services and enhance the value proposition to
customers.

Exhibit 45: Flywheel illustration of Delhivery
Provide best-in-class Build consumer, product,

customer experience to location, intelligence from
drive stickiness order data
Build products &

Establish highest
Logistics quality infra &
insights to enable Technology +
customers to drive Data
largest reach
sales profitability
Create differential precision &

Use scale to lower cost of efficiency through data driven
fulfillment
operations
Operating system for commerce
Source: Company
Company background: Largest and fastest growing fully-integrated player in India

by revenue.
Delhivery is an asset-light technology-driven logistics player and also the largest and fastest
growing fully-integrated player in India by revenue. The company is on a mission to enable
customers to operate flexible, reliable and resilient supply chains at the lowest costs. It provides
logistics services such as express parcel delivery, TL, PTL, warehousing, supply chain solutions,
cross-border express and freight services and supply chain software, along with value added
services such as e-commerce return services, payment collection and processing, installation
and assembly services and fraud detection.
Delhivery has the largest market share of 50% among 3PL express parcel players by volume. It
started operations by serving e-commerce players in express logistics space. Further, Delhivery
launched PTL freight services focused on the B2B express segment in 2016 after achieving
significant scale in its express parcel network and establishing a full-fledged surface line-haul
network to service its volume. As per RedSeer Report, post the acquisition of SpotOn, they are
the third largest PTL freight business in India in terms of revenue as of FY2021. The shared
network allows Delhivery to offer e-commerce equivalent turnaround times and direct reach
across the entire network to PTL freight customers.
Its truckload (TL) freight brokerage platform, Orion, connects shippers with fleet-owners and
suppliers of truckload capacity across the country via a centralized bidding and matching
engine. In January 2020, Delhivery acquired Roadpiper Technologies, a digital freight broker
with fleet owner, load-matching and pricing applications. This has strengthened its capability
to engage with suppliers of truckload capacity.
It also offers end-to-end supply chain solutions combining the strengths of its warehousing and
transportation operations, infrastructure, network and technology with deep data-science and
business intelligence capabilities.
Delhivery also began providing door-to-door and port-to-port express parcel services to and
from India in 2018 to meet the rising demand for cross-border e-commerce and expanded this
offering to include cross-border air-cargo services in late 2019.

History and promoter background

Delhivery has a strong management team, led by MD and CEO, Sahil Barua, who has
graduated from NIT Karnataka and completed PGDM from IIM Bangalore. Prior to founding
Delhivery, Sahil was a consultant with Bain and Company. The other founders of the company
are Suraj Saharan and Kapil Bharati, both of whom are Executive Directors at Delhivery.
Exhibit 46: Key management personnel of Delhivery
FY2021
Remuneration
Name Designation Education Overall experience (Rs mn)
B.Tech (NIT Karnataka); MBA (IIM He has previously been associated with Bain &
Sahil Barua MD, CEO, Founder 30.3
Bangalore) Company India Private Limited as Consultant.
He has previously served as Founder and Chief

Technology Officer at Athena Information
Executive Director, Chief
Kapil Bharati B.Tech (IIT Delhi) Solutions Private Limited and as Senior 25.0
Technology Officer
Manager Technology at Sapient and Publicis
Sapient.
He was previously associated with Bain &
Sandeep Kumar Executive Director, Chief B.Com (Bond University); MBA
Company India Private Limited as a Vice- 35.8
Barasia Business Officer (LBS)
President (Partner).
He was previously associated with the Lodha
Ajith Pai B.Tech (NIT Karnataka); MBA (IIM
Chief Operating Officer Group as Associate Vice President - 25.0
Mangalore Bangalore)
Procurement.
He was previously associated with Inductis
Amit Agarwal Chief Financial Officer M.Sc. (Chemistry-IIT Kanpur) 14.0
India Private Limited and Insight Guru Inc.
He was previously associated with Bain &
Suraj Saharan Head of New Ventures B.Tech (IIT Bombay) Company India Private Limited and ICICI na
Lombard Insurance Company Limited.
He was previously associated with TNT India

Abhik Mitra MD, CEO, Spoton B.Tech (IIT BHU, Varanasi) Private Limited, RPG Enterprises Limited and 19.1
Hindustan Unilever Limited.
She was previously associated with SAP Labs

India Private Limited, Myntra Designs Private
Pooja Gupta Chief People Officer BA (Bangalore Univ.); MBA (XLRI) na
Limited and Kalaari Capital Advisors Private
Limited.
He was previously associated with Sneha

Member (Institute of Cost and Kinetic Power Projects Private Limited, IDEB
Sunil Kumar Bansal VP, Corporate Affairs Work Accountants of India); Fellow Projects Private Limited, SKS Microfinance na
member (ICSI) Limited, LML Limited, GMR Infrastructure
Limited and Global Health Limited
Source: Company
Employee base
As of December 31, 2021, Delhivery had 15,392 permanent employees worldwide, excluding
SpotOn’s employees. It also engages contractors to provide it with a temporary workforce
including 36,956 contracted workers (excluding daily wage manpower, security guards and
SpotOn). In addition, Delhivery had 33,836 last mile delivery agents in the month of December
2021. Its network partners hire their own employees according to their operational needs.
None of Delhivery’s employees are represented by a labor union.
In addition, SpotOn had 1,831 employees and 261 contract workers as of December 31, 2021.
The following table provides a breakdown of employees (excluding those employed by SpotOn)
by function as of December 31, 2021.

Exhibit 47: Function and location-wise employee count of Delhivery as of December 31, 2021
Employee count by function 31-Dec-21

Operations and engineering 13,355
Sales & business development 598
Engineering, data sciences and product 505
Customer service 432
Other corporate functions 502
Total 15,392
Source: Company
Delhivery raised Rs52.3 bn in the IPO which comprised (1) fresh issue of equity shares for a sum
of Rs40 bn, and (2) an offer for sale (OFS) of up to Rs12.3 bn existing shareholders of the
company.
Post-IPO shareholding pattern
Exhibit 48: Shareholding pattern of Delhivery as of June 30, 2022 with shareholders clubbed by
groups (%)
Softbank Group,
Other investors, 18 .5%
20.8 %
Foreign Portfolio Nexus Venture

Investors, 8 .0% Partners, 9.1%
Royal Group (Abu
Dhabi), 1.3%
Falcon Edge, 2.0% Canada Pension
Plan Investment
GIC, 2.1% Board, 6.1%
Steadview, 2.7%
Tiger Global, 5.2%
Fedex, 2.9%
Alpine Investors, Carlyle, 5.1%
3.4%
The Times group,
Sudasien 5.0%
Investmentfonds, SBI Mutul Fund,
3.1% 4.7%
Source: bseindia.com
ESOP program
Delhivery has a sum of close to 80 mn ESOP on the post IPO base of 725 mn shares. The same
includes a combination of 46 mn time-based options and 33 mn performance-based options.
Of these, the 22 mn performance-based options added recently to the ESOP program relate to
the stock price levels reaching Rs800, Rs1,000 and Rs1,200 price points by January 2027,
January 2028 and January 2029. These would be vested in three equal tranches and will vest
over two years thereafter. The time-based options have a vesting period of 4 years with
schedule of 10%-30%-30%-30%.
Of the total pool of ESOPs, about 35 mn have been granted and another 44 mn are yet to be
granted. The ESOP are spread across four plans including ESOP 2012 (15 mn), ESOP II 2020
(7.7 mn), ESOP III 2020 (8.8 mn) and ESOP IV 2021 (47 mn, largely ungranted apart from 8 mn
granted ESOPs)

Exhibit 49: Calculation of diluted share count for Delhivery based on existing set of granted and
ungranted ESOPs
Quantum
(mn)
Total shares outstanding (A) 725
ESOPs with time-based vesting (B) 46
ESOPs with performance-based vesting (C) 33
Total fully diluted number of shares (A+B+C) 804
Source: Company
Exhibit 50: Details of ESOPs for Delhivery as of June 30, 2022
Quantum Shareholding on fully

(mn) diluted basis (%)
ESOPs granted, of which 35 4.4
Vested 3
Unvested 32
ESOPs ungranted, of which 44 5.5
Performance-based ESOPs 17
Time-based ESOPs 27
Total (granted + ungranted) 79 9.9
Source: Company

APPENDIX I: DIFFERENCES BETWEEN CHINESE AND INDIAN E-COMMERCE LOGISTICS MARKETS

We bring below the key differences between the Indian and Chinese e-commerce logistics
markets.
 Competitive intensity. Competitive intensity in Chinese e-commerce logistics market has
been high with top six firms having 80% stake. The Indian market leader is in a much better
position. The e-commerce logistics market in India is dominated by three players of which
the market leader 3PL player (D) is the lone player making profits at a segmental level in our
assessment. Also, unlike in the Chinese market, the 3PL market leader in India continues to
grow market share in recent years.
Exhibit 51: In India, the e-commerce logistics market is a lot more consolidated versus China
Comparison of the e-commerce logistics market share split for India and China
CY2011 (China) CY2021 (China) FY2022 (India)

ZTO
8% Others ZTO
20% 21% Others
Others 20% Delhivery
32% YTO
17% 24%
SF
10%
YTO
15%
BEST
Amazon+
SF 8%
STO ekart
8% 23% STO 56%
BEST 10%
3% YUNDA YUNDA
9% 17%
Exhibit 52: Delhivery has achieved a much higher market share, versus what the market leader in China is stabilizing at lower levels
Market share trend of ZTO and Delhivery in e-commerce logistics, March fiscal year-ends, 2020-22 (%)
ZTO (China) - market share - December calendar year- Delhivery (India) - market share - March fiscal year-ends
ends 30
24 28
25
22
20 21 25
19
20 21
20
15 15 15
15 12
10
10
5
5
- -
2019 2020 2021 1Q22 Incremental 2019 2020 2021 2022 Incremental
volumes volumes
over 2019- over 2019-
22E 22
Notes:
(a) China, unlike India is dominated with 3PL players in India. 54% of the Indian e-commerce logistics market is captured by captives
(b) We annualize 1QCY22 operating metrics for ZTO to arrive at 2022E levels

 Influence of the ecosystem. The online platform owner in China in Alibaba is a big
influencer for four of the top six Chinese e-commerce logistics firms, as a shareholder (in
four of them) and a platform provider. More it owned the Cainiao that is the technology
provider to ZTO, market leader in e-commerce logistics in China. In contrast, Delhivery owns
its tech platform and has no stake of players inside the ecommerce ecosystem. Also no
single customer forms more than 14% of revenue, which is also split across multiple services.
Exhibit 53: Alibaba has added stakes over the past five years in Chinese ecommerce logistics firms
that have aggregate 54% market share
Principal shareholders for Chinese ecommerce logistics firms from the ecosystem
Alibaba's
year of entry Alibaba's
Market as a shareholding Alibaba's influence on operations beyond direct
share (%) shareholder (%) shareholding
- Meaningful dependence on Alibaba's platform
ZTO 21 2018 9
- Alibaba owned Cainiao is the technology provider to ZTO
YTO 15 2020 23 - Dependence on Alibaba's platform
STO 10 2019 25 - Dependence on Alibaba's platform
BEST 8 2017 47 - Dependence on Alibaba's platform
Total 54
Source: Industry reports, Kotak Institutional Equities

Company Report
Strategy INDIA
INDIA
September 08, 2022
BSE-30: 59,688
Addressing T(RIL)emma. RIL can explore reorganization of the company into three
independent entities for its three different business verticals as it prepares to list its
subsidiaries and induct next-generation members of the founding family into key roles
in RIL. This will help (1) prevent any holding company discount in RIL as and when its
subsidiaries list, (2) prepare for eventual management change and (3) preclude inter-
linkages between entities as and when they become ‘independent’, listed entities.
Three issues—structure, succession, segregation
RIL management and shareholders may consider a reorganization of the company to achieve
three mutually linked objectives of (1) structure, (2) succession and (3) segregation. One option INSIDE
could be to reorganize RIL into three independent listed business verticals (communications, Three may be better than
energy and retailing). This would broadly entail shareholders of RIL eventually becoming four............ pg3
shareholders of the retailing and telecommunications entities other than the minority
shareholders in those entities. Various smaller entities may be ‘clubbed’ into one of the
Structure: Prevent
appropriate verticals to ensure limited overlaps post the restructuring.
potential large holding
Structure: Prevent the fate of various holding-cum-operating or holding companies company discount….pg8
We note that our hypothetical structure of three independent listed entities instead of (1) four
Succession: Prepare for
listed entities (RIL + three listed subsidiaries in communications, energy, retailing) or (2) three
transition to new
listed entities (RIL + two listed subsidiaries in communications and retailing) will prevent
potential large holding company discount for RIL stock relative to the value of its assets in the
management…pg17
parent entity and holdings in various subsidiaries. This has been the fate of several holding-
cum-operating and holding companies. Segregation: Preclude
inter-company
Succession: Prepare RIL for eventual transition to new management linkages…pg19
In our view, the ‘new’ RIL would be in a better positon to manage the ‘new’ world with rapid
changes and disruption as and when RIL enters the next phase of its corporate life under a new
top management. RIL is an incredibly complex entity and its sheer scale and size of operations
across different businesses demonstrates the exceptional management abilities of the founder
family over the past few decades. Nonetheless, growing external challenges (rapid pace of Sanjeev Prasad
technological change and disruption) and internal complexity (RIL is a massive conglomerate)
may require ‘smaller’, specialized entities with separate objectives and operations.
Sunita Baldawa
Segregation: Preclude inter-company linkages
We believe the ‘new’ structure will provide a ‘cleaner’ framework for the retailing and
telecommunications businesses as and when they were to list. Shareholders would presumably Anindya Bhowmik
prefer limited related-party transactions across various listed entities and some may even prefer
‘cleaner’ structures as a precondition for investment. There is significant overlap between the
media, retailing and telecommunications businesses at present.
kspcg.research@kotak.com
Contact: +91 22 6218 6427
For Private Circulation Only. In the US, this document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities Act of 1933. This document is not for public distribution
and has been furnished to you solely for your information and may not be reproduced or redistributed to any other person. The manner of circulation and distribution of this document may be restricted by law or
regulation in certain countries, including the United States. Persons into whose possession this document may come are required to inform themselves of, and to observe, such restrictions.
Strategy India
OVERVIEW: THREE MAY BE BETTER THAN FOUR

In our view, three independent listed entities for RIL in the areas of energy, retailing and telecommunications
may help achieve several objectives—(1) prevent holding company discount, (2) prepare RIL for the future
given inevitable management changes and (3) preclude unnecessary inter-linkages as and when each of RIL’s
major subsidiaries were to list over the next 2-3 years. RIL promoter family may prefer the current structure of
RIL Group from a control perspective but the structure may result in potential large loss of value too.
A ‘new’ RIL versus the ‘old’ RIL

We discuss some of the issues that RIL will have to grapple with over the next 1-2 years as it
prepares to (1) list its retailing and telecommunications subsidiaries and (2) induct members
of the third generation of the founding family into more prominent roles in RIL Group. We
specifically examine the suitability of RIL’s current structure in light of the aforementioned
developments and explore new structures that may be more suited to the forthcoming
changes.
RIL can continue with its current structure with RIL as a holding-cum-operating company
with two (or more) listed subsidiaries or it can look to change the current structure. In our
view, the current structure may not be ideal given possible issues—(1) likely holding
company discount as and when the retailing and telecommunications subsidiaries were to
list, (2) possible conflicts from ‘overlapping’ roles of next-generation founding family
members as managers and owners both (if they were to perform both the roles) and (3)
continued large-interlinkages and related-party transactions between various listed entities
within RIL Group.
We summarize our views below.
 Structure. In our view, three independent listed companies in the energy, retailing and
telecommunications sectors may be better purely from a market capitalization perspective
than the current structure of RIL continuing as a holding-cum-operating company or RIL
becoming just a holding company. We would not rule out a holding company discount in
the case of the current structure as and when RIL was to list its two major subsidiaries in
retailing and telecommunications with only a part of the value of RIL’s holdings in its
retailing and telecommunications subsidiaries reflecting in the market capitalization of RIL.
We assume RIL will list its retailing (Reliance Retail and related entities) and
telecommunications (Jio Platforms and related entities) over the next 2-3 years. Both these
companies have minority shareholders now—15% in the case of Reliance Retail Ventures
Ltd (RRVL) and 35% in the case of Jio Platforms Ltd (JPL).
Almost all holding or holding-cum-operating companies in India have traded at and trade
at meaningful discounts to the fair value of their underlying businesses in the parent
entity (holding company) or in subsidiaries. We have never fully understood the reasons
for the large holding company discount. However, that’s been the historical experience
for the past two decades and we are not sure whether this will change soon. Bajaj
Finserv, HDFC, LT and MM are a few prominent examples of such operating-cum-holding
companies whose stocks have traded at meaningful discounts to the fair value of their
businesses. Exhibit 1 compares their market capitalization with the value of (1) their
businesses in the parent entity (our fair value estimate) and (2) their holdings in
subsidiaries at current market capitalization if the subsidiaries are listed or at our fair value
if the subsidiaries are unlisted.

India Strategy
Exhibit 1: Meaningful holding company discount in the case of holding-cum-operating companies

Market capitalization of holding companies versus value of businesses
Implied
Market cap. Value holding co.
of holding co. of businesses discount
Company (Rs bn) (Rs bn) (%)
Bajaj Finserv 2,769 2,975 (7)
HDFC 4,448 5,515 (19)
L&T 2,774 3,227 (14)
Mahindra & Mahindra 1,532 1,607 (5)
Notes:
(a) Holding company discount will be larger as we have ignored some of the smaller
businesses in the SoTP of the companies.
In fact, we have seen the holding company discount increase as and when the unlisted
subsidiaries of holding companies list—public shareholders can access the subsidiaries
directly on their listing rather being forced to have access through the parent entity.
HDFC is a good case study in hand. Its holding company discount widened when its
various subsidiaries (asset management, life insurance) listed.
It is possible that RIL may have four (or more) listed entities eventually assuming it was to
continue to operate under the current structure. RIL may look to demerge the energy
vertical out of RIL or list its ‘new’ energy business separately. If RIL was to demerge the
energy business into a separate listed entity, RIL would largely become a holding
company. This would be even worse from a stock market perspective as pure holding
companies trade at even larger discounts to the underlying value of their holdings in
various subsidiaries compared to the holding-cum-operating companies. In fact, such
companies tend to be largely ignored by investors. Bombay Burmah and Godrej Industries
are prominent examples of holding companies that trade at massive discounts to the fair
value of their assets and investments (see Exhibit 2).

Strategy India
Exhibit 2: Massive holding company discount in the case of 'pure' holding companies
Holding company discount for Bombay Burmah Trading Corp. and Godrej Industries (%)
Market value Stake Value

(Rs mn) (%) (Rs mn) (Rs/share) Comments
Holding company discount for Bombay Burmah Trading Corp.
Net debt (9,869) (141)
Current value of subsidiaries
Britannia Industries 884,625 44.8 395,958 5,675 Current market price
Bombay Dyeing 21,996 16.9 3,724 53 Current market price
National Peroxide 10,017 1.1 106 2 Current market price
SOTP-based value 389,919 5,588
Current market price 63,862 915
Discount to fair value (%) 84
Holding company discount for Godrej Industries

Net debt (52,456) (156)
Godrej Agrovet 100,308 62.5 62,662 186 Current market price
Godrej Consumer Products 960,240 23.8 228,057 678 Current market price
Godrej Properties 394,357 47.3 186,492 554 Current market price
SOTP-based value 424,755 1,262
Current market price 157,715 469
Notes:
(a) Holding company discount will be larger as we have ignored value of non-subsidiary investments in the parent company.
 Succession. The future structure of RIL may also depend on RIL’s succession plan and role
of the next generation of RIL’s founding members. RIL has been a very promoter-centric
entity with the promoter (or major shareholder) actively involved in all aspects of the
business as a promoter-manager. However, the roles of the next generation of RIL’s
founding family is not yet clear—whether they will continue in the traditional role of
promoter-managers or simply promoters (major shareholders).
In the event of the next-generation family members continuing as traditional promoter-

managers, their roles would have to be very clearly defined as the ‘joint’ management of
a complex entity such as RIL will necessarily entail extraordinary levels of cooperation and
coordination between them. We note that the next generation has three family members
and presumably each of them will be responsible for one vertical only as a promoter-
manager but they will all be on the board of RIL. It would be illogical to assume that each
family member will be equally responsible for all the verticals as promoter-managers.
Based on current announcements, it would appear that each next-generation family
member will be responsible for one vertical.
However, such an arrangement may not be ideal to reconcile any potential differences in
vision, strategy and execution among family members. We are not suggesting this to be a
possibility but merely raise this as a hypothetical situation. In a hypothetical case of each
of the family members heading one business vertical under the current structure, each of
the family members as manager of their respective company or vertical would be
answerable to other family members on the board of RIL for the performance of their
verticals. This may not be an ideal structure, especially if there are differences among
family members (again a hypothetical situation) about the direction of RIL Group.

India Strategy
In the event of the next-generation family members reducing their roles to broad
supervision through board positions in the companies and leaving active management of
the companies to professional managers, the ‘new’ structure of the company may work
better. The family members can be on the boards of the three major operating companies
in energy, retailing and telecommunications and provide the requisite guidance and vision
to the professional managers while safeguarding their financial interests at the same time.
They can do so in the current structure also with board positions in both RIL and the
major operating companies but the current structure may not be the most optimum from
the perspective of shareholders as discussed above.
 Segregation. We believe the ‘new’ structure will also address longstanding investor
concerns (valid or invalid) regarding (1) allocation of capital and (2) large related-party
transactions within the group and outside the group with various promoter entities.
Several investors have highlighted these two concerns for their reasons for being
underweight on RIL stock.
We are not sure if there is much merit in the point on allocation of capital even if RIL has
used the cash flows of one business to fund new and diverse businesses. Investors have
highlighted low free cash flow generation and financial returns to support their point on
capital allocation. However, we would note that RIL has managed to create massive value
in most of its ‘new’ businesses (upstream oil & gas has been the only exception) and
reported financials will not fully reflect the value of new businesses at early stages of
investment. High capital expenditure and investments in a new business relative to
revenue and profit potential of the business will inevitably lead to low FCF relative to PAT
and high CWIP and investments will drag down financial returns.
However, investors may have a point on related-party transactions. As an example,

investors have highlighted the limited disclosures on the transactions between RRL and
Reliance Jio Infocomm (RJio). RRL retails telecom recharges of RJio, which reflects in its
revenues. These revenues are large relative to RRL’s revenues, which raises issues about
the continuity of this revenue and profit stream in the future.
In our view, three independent listed companies with separate boards (even if there is
some overlap with the promoter family being present on all the boards) and different
shareholders may result in either fewer related-party transactions between them or more
disclosures on such related-party transactions. Even if such transactions were to continue,
investors would have more comfort on the arms-length nature of the transactions.
Control versus value

Reliance promoters may have to balance the issue of potential loss of value of their holding
in RIL under the current structure with the issue of control of RIL Group through a single
entity while shareholders will have to deal with potential loss of value of their investment in
RIL once RIL’s retailing and telecommunications (or even ‘new’ energy) businesses were to
list separately.
RIL promoters may want to continue with the current structure as it offers (1) control of the
entire RIL Group with their 50.6% holding in RIL (see Exhibit 3 for shareholding pattern of
RIL) and no direct holding in RIL’s subsidiaries and (2) flexibility to use cash in a fungible
manner across the entire group (use cash flows of chemicals and energy business to seed
and grow the telecommunications business, for example).

Strategy India
Exhibit 3: Promoter group owns 50.6% in RIL

Shareholding pattern of RIL, June 2022
Shares
(mn) (%)
Promoter group 3,323 50.6
FPI 1,726 26.3
MF 370 5.6
BFI 428 6.5
Retail 567 8.6
Others 149 2.3
Total 6,564 100
However, such a structure may lead to meaningful loss of value through a holding company
discount for RIL with only a part of the value of RIL’s holdings in its retailing and
telecommunications subsidiaries reflecting in the market capitalization of RIL. The promoter
family may or may not be perturbed by the loss of value.
However, there may be other merits in looking at a new structure—(1) ‘specialized’ entities
may have more capacity (talent and technology) to deal with rapid technological disruption
and (2) ‘simpler’ companies may have more capability (agility) to deal with a more complex
world, especially as RIL is a very complex organization already and likely to become even
more so with its large ambitions in the ‘new’ energy space (renewables and renewable
equipment manufacturing).

India Strategy
STRUCTURE: PREVENT LARGE HOLDING COMPANY DISCOUNT

RIL can look at restructuring itself into three independent companies to avoid potential holding company
discount, the fate of most holding-cum-operating companies in India. Holding or holding-cum-operating
companies trade at large discounts to the fair value of their various businesses in the parent entity or in
subsidiaries. RIL will look to list its retailing and telecommunications businesses over the next few years. A
demerger of the retailing and telecommunications businesses will achieve several objectives.
‘New’ RIL—three independent, listed companies

Exhibit 4 shows our proposed structure for RIL while Exhibit 5 shows RIL’s current structure.
We focus on the major entities for the purpose of simplicity. In the proposed structure, we
group various entities under one major entity in the broad areas of energy (including
chemicals), retailing and telecommunications, which will also be a listed entity.
Exhibit 4: Three listed companies in proposed structure

Proposed structure of RIL
MDAG MDAG MDAG
50.6% 33.6% 43.1%
RIL 3 (Reliance Retail

RIL1 (energy) RIL 2 (Jio Platforms)
Ventures)
100% 100% 51% 100% 100% 99.9%
Reliance 4IR Realty

Reliance O2C Reliance BP Mobility Reliance New Energy Reliance Jio Infocomm Reliance Retail
Development
100%
100% 100%
Reliance Projects &
Reliance Corporate Property Management Reliance New Solar
IT Park Energy
Services
Exhibit 5: RIL is the holding company for Reliance Industries Group

Structure of Reliance Industries as of March 31, 2022 (%)
Mukesh Dhirubhai 100% Sikka Ports and

Ambani Group (MDAG) Terminals
100%
50.6% Jamnagar Utilities
and Power
Reliance Industries O2C business
66.4% 8 5.1% 100% 51.0% 100% 100% 100%
Reliance Projects &

Jio Platforms Reliance Retail Ventures Reliance 4IR Realty Reliance Industrial
Development Reliance BP Mobility Property Management Reliance New Energy
Investments and Holdings
Services
100% 99.9% 100% 41.8 % 26% 45.4% 100%
Reliance Corporate Jamnagar Utilities Reliance Industrial Reliance New Solar

Reliance Jio Infocomm Reliance Retail Gujarat Chemical Port Energy
IT Park & Power Infrastructure
Sikka Ports and

Terminals

Strategy India
After the complex restructuring exercise, shareholders of RIL will become shareholders of the
chemicals and energy entity in proportion to their shareholding in RIL and shareholders of
RIL will become direct shareholders of the retailing and telecommunications entities in
proportion of their shareholding in RIL in addition to the minority shareholders in Jio
Platforms (JPL) and Reliance Retail Ventures (RRVL).
We assume Jio Platforms and Reliance Retail Ventures will eventually list and be the holding
company for their respective businesses. JPL holds 100% of the main operating company in
the telecommunications business of RIL (Reliance Jio Infocomm or RJio) and RRVL owns
99.9% of the main operating company in retailing (Reliance Retail Ltd or RRL).
 Energy entity. We assume petrochemicals, refining and related businesses (fuel

marketing, textiles, upstream) to be demerged into a separate entity with the
shareholders of RIL receiving shares of the new entity in proportion to their shareholding
in RIL. This would be akin to a ‘vertical’ demerger (mirror shareholdings in both RIL and
the new entity) and should be a relatively straightforward demerger.
We note that RIL had in February 2021 formally filed a scheme of demerger
(reorganization) of its O2C (oil-to-chemicals) business comprising petrochemicals, refining,
downstream fuel marketing (Reliance BP Mobility) and a few smaller related businesses
into a 100% subsidiary with the National Company Law Tribunal (NCLT). This was a
precursor to Saudi Aramco taking a 20% stake in the O2C business. However, it dropped
the plan in November 2021 and withdrew the scheme of demerger from the NCLT. It got
the approval from the NCLT to withdraw the demerger scheme in December 2021.
 Retailing entity. We assume Reliance Retail Ventures (RRVL; 85.1% owned by RIL) as
the listed entity for RIL’s retailing and related businesses. Exhibit 6 shows the main entities
under Reliance Retail Ventures. We do not envisage too many challenges for demerging
the retailing entity from RIL.

India Strategy
Exhibit 6: Reliance Retail is a key subsidiary of Reliance Retail Ventures

Select subsidiaries of Reliance Retail Ventures
Reliance
Industries
Reliance
Retail
Ventures
85.1%
Abraham Actoserba
Aaidea C-Square Dadha
Reliance 7-India and Active Addverb Future Genesis
Solutions Amante Info- Pharma
Retail Convenience Thakore Wholesale Technologies Lifestyles Colors
(Milkbasket) 100% Solutions (Netmeds)
99.9% Retail 100% Exports (Zivame) 56.5% 100% 72.7%
96.5% 81.6% 100%
55.0% 86.1%
Grab a Jaisuryas
GML India Kalanikethan Mesindus
GLB Body GLF Lifestyle Grub Hamleys Intimi Retail Just Dial Kalanikethan
Fashion Fashions Ventures
Care 100% Brands 100% Services 100% 100% Ventures 67.0% Silks 100%
100% 100% 83.3%
82.4% 100%
Reliance Reliance
Reliance Reliance Reliance Reliance
Netmeds NowFloats Reliance Brands Retail and Reliance
Nilgiris Stores Clothing GAS Lifestyle Petro
Marketplace Technologies Brands Luxury Fashion Ritu Kumar
100% India Lifestyle Products Marketing
100% 88.8% 80.0% Fashion Lifestyle 52.2%
100% India 51.0% 100% 100%
99.7% 100%
Shopsense Urban Vitalic Dunzo

Reliance- Shri Kannan Tresara
Retail Tira Beauty Ladder Health Digital
GrandOptical Dept Store Health
Technologies 100% Home Private (associate)
100% 100% 100%
86.7% Décor 70.6% 25.8%
 Different set of shareholders in RRVL and RIL. The proposed scheme of demerger
of RIL would not result in minority shareholders of RRVL being affected in any way
with their shareholding in the new entity being same as their shareholding in RRVL.
The demerger would require the approval of RRVL shareholders including its minority
shareholders but we do not see any issue with the same. Exhibit 7 gives the current
shareholding of RRVL.

Strategy India
Exhibit 7: RIL owns 85.1% in Reliance Retail Ventures

Shareholding pattern of RRVL, March fiscal year-end, 2022 (%)
Vanishree
Commercials, 4.3
PIF, 2.0
Silver Lake, 2.0
Mubadala, 1.3
RIL, 8 5.1 KKR, 1.2
GIC, 1.2
ADIA, 1.2
General Atlantic,
0.8
Infotel Infocomm
TPG, 0.4 Enterprises, 0.5
 Listing of RRVL on demerger from RIL. The demerger of RRVL from RIL will entail an
indirect listing of RRVL with shareholders of RIL becoming shareholders of RRL. This
would require appropriate approvals from SEBI. However, we do not envisage any
issues with such a listing given historical precedents.
 Telecommunications entity. We assume Jio Platforms (JPL; 66.5% owned by RIL) as the
listed entity for RIL’s telecommunications and related businesses. Exhibit 8 shows the
main entities under Jio Platforms. We see the same issues for demerging JPL from RIL. It
may be a bit more challenging but can be presumably done through a court-approved
scheme.
Exhibit 8: Reliance Jio Infocomm is a key subsidiary of Jio Platforms

Subsidiaries of Jio Platforms
Reliance
Industries
Jio Platforms
66.4%
Reliance Jio Jio Haptik Technologies Jio Things (smart Radisys (telecom
Jio Estonia OU Jio Media
Infocomm (AI platform) metering solutions) solutions)
100% 100%
100% 100% 100% 100%
Jio Space Technology Saavn Media Tesseract Imaging (Jio Sankhyasutra Labs Indiavidual Learning
100% 94.8 % glass) ( aerodynamics and (Embibe-education
90.0% multi-physics simulation) provider)
8 6.8 % 8 5.4%
Reverie Language Asteria Aerospace

Jio Satellite NEWJ (content provider) Surajya Services (Easygov-
Technologies (language (drone-based solutions)
Communications 100% 75.0% software solutions) 63.0%
solutions) 8 2.9% 74.6%

India Strategy
 Different set of shareholders in JPL and RIL. As in the case of RRVL, we do not see
this being an issue. The proposed scheme of demerger of RIL would not result in any
change in their shareholding. The shareholding of the minority shareholders in the
‘new’ entity housing the telecommunications business of JPL will be the same as their
current shareholding in JPL. The demerger would require the approval of JPL
shareholders including its minority shareholders but we do not see any challenges to
the same. Exhibit 9 gives the current shareholding of JPL.
Exhibit 9: RIL owns 66.5% in Jio Platforms

Shareholding pattern of Jio Platforms, March fiscal year-end, 2022 (%)
Facebook, 10.0
Google, 7.7
Vista, 2.3
KKR, 2.3
PIF, 2.3
Silver Lake, 2.1
Mubadala, 1.9
General Atlantic,
1.3
ADIA, 1.2
TPG, 0.9
RIL, 66.5 L Catterton, 0.4
Intel Capital, 0.4
Qualcomm
Ventures, 0.2
 Telecom licenses in JPL subsidiary. We note that RIL’s telecom licenses are in a
100% subsidiary of JPL—Reliance Jio Infocomm Ltd. Thus, we do not see any issue in
demerger of JPL from RIL—Jio Infocomm will continue to be the license holder of all of
the company’s licenses for the 22 circles. The government (Department of Telecom)
should have no objection to this, in our view.
 Listing of JPL on demerger from RIL. As in the case of RRVL, the demerger of JPL
from RIL will entail an indirect listing of JPL with shareholders of RIL becoming
shareholders of JPL. This would require appropriate approvals from SEBI and
shareholders.
A few options to demerge subsidiaries

We look at a couple of options to demerge RIL’s communications and retailing businesses.
We note that the restructuring exercise will be complicated but feasible. It will require the
approvals of courts, various regulators and shareholders. However, various companies have
gone through such restructuring under court-approved schemes. Among notable cases, we
highlight Adani Enterprises in 2015 and GMR in 2021. Exhibits 10-12 show the group
structure of for Adani Enterprises and GMR before and after their reorganization.

Strategy India
Exhibit 10: Adani Enterprises was the holding company for Adani Group companies prior to its restructuring in March 2015
Structure of Adani Group (pre-restructuring), March 2015 (%)
Adani Family
75%
Adani Enterprises
6% 69% 75%
Adani Power Adani Ports & SEZ
100% 100% 100%
Adani Transmissions Adani Mining Adani Abbot Point Terminal

(India) (Australia) (Australia)
Exhibit 11: Adani Family directly owns stakes in various Adani listed and unlisted companies
Structure of Adani group (post-restructuring), March 2015 (%)
100% Atulya Resources Ltd

Adani Family
(Cayman Islands)
58 % 75% 56% 75%
Adani Power Adani Enterprises Adani Ports & SEZ Adani Transmission
100% 100%
Adani Mining Adani Abott Terminal P/L

(Australia) (Cayman Islands)

India Strategy
Exhibit 12: Separation of aero and non-aero businesses of GMR

Structure of GMR Infrastructure (pre and post restructuring), March 2021 (%)
Pre-restructuring
Promoter Group Public
GIL
EPC & Urban Infra

Airport Sector Energy Sector Other Sectors
Sector
Post-restructuring
Promoter Group Public Promoter Group Public
GIL (Airport) GPUIL (Non-Airport)

(Listed - Demerged entity) (Listed - Resulting entity)
Energy EPC & Urban Other

Airport Sector
Sector Infra Sector Sectors
 Demerger of all entities. The demerger process would entail (1) demerger of RIL’s
chemical and energy business into a separate entity with shareholders of RIL (promoter
and public) becoming shareholders of the new company and (2) a simultaneous two-
stage process of (a) merger of JPL and RRVL with RIL with minority shareholders of JPL
and RRVL hypothetically ‘receiving’ shares of RIL and (b) demerger of assets and liabilities
and subsidiaries of JPL and RRVL into two separate companies with current shareholders
of RIL (promoter and public) receiving shares of JPL and RRVL in the same proportion of
their holding in RIL at the time of the demerger and no change in the shareholding of
minority shareholders of JPL and RRVL.
 Vertical split of RIL into three entities. The second option could comprise the
following steps—(1) demerger of the assets and liabilities and any other investments
related to the energy business through a vertical demerger into a new entity (RIL 1), (2)
vertical split of remaining RIL into two separate companies (say RIL 2 and RIL 3), one with
JPL as its 66% subsidiary (along with all subsidiaries of JPL) and the other with RRVL as its
85% subsidiary (along with all subsidiaries of RRVL) and (3) merger of JPL with RIL 2 (new
holding company of JPL instead of RIL) and merger of RRVL with RIL 3 (new holding
company of RRVL instead of RIL).
Large holding company discount perhaps inevitable under current structure

We note that almost all Indian holding and holding-cum-operating companies have
historically traded at large discounts to the fair value of their stakes in various businesses in
the parent entity and in subsidiaries. There has been no rational financial reason for the
large discount barring loss of dividend distribution tax (DDT) on dividends paid by
subsidiaries to parent companies. However, even that may not be a real reason as a parent
entity could set off the DDT paid by a subsidiary against the DDT paid by the parent entity
from April 1, 2003 if the parent entity owned >50% stake in the subsidiary. Anyway, DDT
has been abolished from April 1, 2020 with taxability of dividend income moving into the
hands of investors from April 1, 2020. Prior to April 1, 2020, companies had to pay dividend
distribution tax on dividends distributed by them.

Strategy India
The experience of holding companies (Bajaj Finserv as an example) and holding-cum-

operating companies (Bajaj Finserv, HDFC, LT, MM to give a few examples) is quite
illustrative. Exhibits 13-16 show the current holding company discount for a few holding-
cum-operating companies.
Exhibit 13: 7% holding company discount for Bajaj Finserv currently

Holding company discount for Bajaj Finserv, September 2022 (%)

Bajaj Allianz Life Insurance 392,078 74.0 290,138 1,823 2X September 2023E EV
Bajaj Allianz General 511,718 74.0 378,671 2,380 4.6X September 2023E book
Bajaj Finance 4,393,997 52.5 2,306,409 14,493 Current market price
SOTP-based value 2,975,218 18,696
Current market price 2,768,767 17,383
Exhibit 14: About 20% holding company discount for HDFC currently
Holding company discount for HDFC, September 2022 (%)
Value of core business 2,835,311 1,563 Based on residual growth model; 2.6X September 2023E book
Current value of subsidiaries and associates
HDFC Bank 8,335,481 21.0 1,750,544 965 Current market price
HDFC AMC 431,136 52.6 226,768 125 Current market price
HDFC Life Insurance 1,234,883 45.9 566,997 312 Current market price
HDFC ERGO 175,035 51.0 89,268 49 35X FY2022 PAT
Bandhan Bank 470,197 9.9 46,519 26 Current market price
Exhibit 15: About 15% holding company discount for LT currently

Holding company discount for L&T, September 2022 (%)

Value of core E&C business 1,875,241 1,335 Based on 22X September 2023E core EPS
L&T Finance Holdings 197,462 64.0 126,317 90 Current market price
L&T Infotech 793,076 75.0 594,807 423 Current market price
L&T Technology Services 380,745 74.6 284,112 202 Current market price
Mindtree 529,682 60.1 318,127 226 Current market price
IDPL- Roads, Transmission 19,200 51.0 9,792 7 0.8X P/B
Hyderabad Metro (7,698) 100.0 (7,697) (5) (-)0.3X P/B
Power development 26,000 100.0 26,000 19 1X P/B

India Strategy
Exhibit 16: About 5% holding company discount for MM currently

Holding company discount for M&M, September 2022 (%)

Tractor segment 550,393 475 DCF-based methodology
UV segment 266,506 230 Based on 15X EV/EBIT September 2023 multiple
LCV segment 278,093 240 DCF-based methodology
Tech Mahindra 954,876 25.5 243,684 210 Current market price
Mahindra & Mahindra Financial 272,929 52.2 142,360 123 Current market price
Mahindra Logistics 35,240 51.5 18,131 16 Current market price
Mahindra Holidays 57,619 67.3 38,760 33 Current market price
Mahindra Lifespace Developers 81,901 11.4 9,370 8 Current market price
Mahindra CIE Automotive 101,923 58.3 59,370 51 Current market price
The experience of HDFC may track more closely RIL’s future journey if the market starts to
ascribe a similar holding company discount to RIL also. Exhibit 17 shows the implied holding
company discount over a period of time.
Exhibit 17: Large holding company discount in the case of HDFC historically
Implied holding company discount for HDFC, March fiscal year-ends, 2018-22 (%)
40
35
35
30
25
25
19
20 17
15
9
10
0
Mar-18 Mar-19 Mar-20 Mar-21 Mar-22

Strategy India
SUCCESSION: PREPARE FOR NEXT LEG OF CORPORATE JOURNEY

In our view, the succession plan for RIL and the nature of the roles of the next generation of the founding
family may also have a bearing on the structure of the group. The promoter family would have to examine
the relative merits and demerits of (1) management by family member/(s) versus (2) management by
professional managers under active board supervision of the family. RIL has historically been a promoter-run
company.
Promoter management versus professional management

We examine the merits and demerits of RIL continuing with the current structure with
promoter or professional management or implementing the new structure discussed in the
previous section with promoter of professional management. The promoter family will
clearly be actively involved at the board level irrespective of their level of involvement in the
daily operations of the company. For now, the current promoter continues to be main driver
of the Group.
The structure of the company will also depend on the nature of the roles of the next
generation of the family in RIL and other group companies. In our view, the current structure
of RIL may not be ideal for it to have members from the next generation of the promoter
family on the board of RIL and also, as managers of various companies within RIL. We see
certain weaknesses with this model that we discuss later, the chief one being possible
differences in vision, strategy and execution given overlapping roles of the next-generation
family members as members on the board of RIL (presumably all of them will eventually join
the board of RIL) and also, managers of various businesses.
It remains to be seen if RIL and other group companies will continue with the current
practice of promoter-manager or change to professional managers as and when the current
promoter-manager (Mukesh Ambani) makes way for new managers from within the family
or outside. We note that the board of directors of Reliance Jio Infocomm appointed Akash
Ambani (one of the members of the next generation) as the chairman of Reliance Jio
Infocomm. Akash was earlier a non-executive director on the board of RJio Infocomm.
 Current structure with promoter management. In this hypothetical scenario, each of

the three members of the next generation of promoter family may head a particular
vertical (energy, retailing and telecommunications). We assume all the three members of
the next generation will be present on the board of RIL while actively managing a
particular vertical at the same time. The chemicals and energy business may be spun off
into a separate company under RIL for more ‘equitable’ roles for the family members.
We note that such a structure may have certain inherent weaknesses. Each family
member would be responsible for a particular vertical but answerable to members of
board including from the family. We are not sure if this is a good structure as it may
reduce the efficacy of the board in its fiduciary role—it may not be easy for a ‘family’
member on the board of RIL to challenge or question another family member who is a
manager of a company. Also, it may be more difficult to reconcile any potential
differences among the family members about the direction of RIL Group or about the
strategy and performance of any particular company.

India Strategy
 Current structure with professional management. In this scenario, the next-

generation members of the promoter family would have board positions in RIL and in
various important subsidiaries and have broad oversight on the businesses, which will be
run entirely by professionals.
This may be a good outcome for both the promoter and public shareholders as it would
combine the strategic vision of the board with the operational efficiency (and vision) of
the professional managers. We note that RIL and its subsidiaries have world-class
professional managers, a fact that gets overlooked given the aura of the promoter family.
Many of them have decades of experience.
However, this structure may result in holding company discount in RIL’s share price
compared to the fair value of its assets and investment. We had discussed this issue in the
previous section.
 New structure with promoter management. The ‘new’ structure would effectively
create three distinct companies within Reliance Group run by three different members of
the promoter family. Each of managers (member of the family) of a company would be
answerable to the board although the family would continue to hold stakes jointly in all
the companies.
This structure may not be entirely immune to potential differences within the family. As a
hypothetical case, one or two of the companies may do much better than the other one
or two, which may create internal tensions. A wide divergence in performance across
companies may create issues given (1) individual responsibility of a family member for a
particular company but (2) joint ownership of all family members in all the three
companies. We would clarify that this is an entirely hypothetical situation—we are simply
highlighting potential issues with this hypothetical structure.
 New structure with professional management. As in the case above, this structure
would result in three separate companies. However, the three businesses will be run by
professional managers from outside the family. In our view, this structure will possibly
obviate some of the shortcomings of the third scenario (new structure with promoter
management) discussed above.
The family members would be collectively responsible for all the three entities at the
board level and their decisions will not be constrained by having to deal with a family
member as a manager. The family members will not be responsible for day-to-day
management of any company. It would be easier for family members to hold professional
managers accountable for any underperformance versus one or more of them demanding
accountability from one of their own family members.

Strategy India
SEGREGATION: PRECLUDE INTER-LINKAGES WITH ‘CLEANER’ INDEPENDENT ENTITIES

We believe our proposed hypothetical structure will address some of the concerns highlighted by investors—
(1) allocation of capital and (2) related-party transactions. We don’t see allocation of capital being an issue—
if anything RIL has managed it quite well. Nonetheless, the three large entities with different business cycles
and challenges will require more independent capital allocation in the future. Also, related-party transactions
will invite more scrutiny in the future once RIL has three (or four) listed entities.
Address capital allocation issues

We believe our proposed hypothetical structure for RIL Group may address one of the
longstanding concerns of investors regarding allocation of capital. The scope of inter-
company investments and loans will reduce dramatically if the three companies were to be
completely independent entities with different boards (except for the family members) and
shareholders. Thus, investors’ concerns about ‘improper’ allocation of capital will no longer
hold.
Investors have periodically questioned RIL’s capital allocation policy, especially whenever RIL
has embarked on a new initiative—prominent examples include (1) telecommunications in
2010 and (2) petroleum coke gasification and refinery off-gas cracker project announced in
2012 and completed in 2018-19.
Investors have highlighted (1) low FCF of RIL relative to PAT (see Exhibit 18 for PAT, capex
and FCF of RIL over FY2008-22) and (2) modest financial returns (see Exhibit 19 for RoAE
and RoACE over FY2008-22) in support of their argument about ‘poor’ capital allocation
policy of RIL.
Exhibit 18: Reliance's FCF has remained quite low relative to PAT
PAT, capex and FCF of RIL, March fiscal year-ends, 2008-22 (Rs bn)
PAT (Rs bn) Capex (Rs bn) FCF (Rs bn)

1,000
500
(500)
(1,000)
(1,500)
2010
2011
2012
2018
2019
2020
2021
2008
2009
2013
2014
2015
2016
2017
2022

India Strategy
Exhibit 19: Return ratios have declined over a period of time

RoAE and RoACE of RIL, March fiscal year-ends, 2008-22 (%)
RoAE (%) RoACE (%)

20
16
12
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2008
2018
2019
2020
2021
2022
We are less sure about the abovementioned arguments for the following reasons.
 RIL has historically operated in capital-intensive businesses, which require large amounts
of growth and maintenance capex both. RIL’s CWIP has been high as it has had a steady
stream of new projects to drive growth of the company. RIL’s adjusted RoACE is more
reasonable (see Exhibit 20). Also, RIL has followed a strategy of end-to-end integration
and global-scale capacities. Such a strategy naturally requires more capital but it also
reduces risks to the business model and volatility in cash flows even for deep-cyclical
commodity businesses.
Exhibit 20: Adjusted RoACE has been quite reasonable

RoACE of RIL, March fiscal year-ends, 2008-22 (%)
RoACE (%)
20
16
12
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2008
2018
2019
2020
2021
2022
 RIL has invested well ahead of time as it has (1) recognized the potential of various
markets in India (be it plastics or polyester or data) ahead of competition and/or (2)
anticipated regulatory and technological shifts better versus competition. For example, it
had purchased telecom spectrum as early as 2010 even though it started telecom
operations in 2016 only. In the meantime, Reliance Jio Infocomm’s balance sheet
expanded quite dramatically as it invested in fixed assets such as fiber lines, radio
equipment and telecom towers (see Exhibit 21), which pulled down RIL’s overall return
ratios.
Strategy India
Exhibit 21: Reliance Jio Infocomm invested heavily in fixed assets

Select balance sheet items for Reliance Jio Infocomm, March fiscal year-ends, 2014-22 (Rs bn)
2014 2015 2016 2017 2018 2019 2020 2021 2022

Assets
Tangible assets 7 9 9 10 958 746 1,029 1,151 1,324
Plant & Equipment 5 7 7 8 949 709 933 1,064 1,197
Intangible assets 0 0 0 0 598 594 606 560 8 42
Spectrum/License Fees 0 0 0 0 566 552 555 513 797
Intangible assets under development 196 347 414 656 90 36 1 1 8
CWIP 140 376 647 1,124 610 310 212 169 192
Total assets 419 820 1,276 2,009 2,537 1,958 2,417 2,501 3,185
Liablities
Net worth 230 301 372 709 1,029 404 1,710 1,8 30 1,978
Borrowing 143 18 7 326 444 48 5 692 232 111 425
Total liablities 419 820 1,276 2,009 2,537 1,958 2,417 2,501 3,185
 RIL has used cash flows of an extant business to fund new businesses instead of returning
the same to shareholders. We believe this has been a better strategy as RIL has created
significant shareholder value/wealth over a period of time (see Exhibit 22 for movement in
market capitalization and net fixed assets over FY2008-22).
Exhibit 22: RIL has created significant value for investors by reinvesting into businesses
Net fixed assets and market cap of RIL, March fiscal year-ends, 2008-22 (Rs bn)
Tangible + intangible + CWIP/IAUD Market cap
17,8 25
20,000
12,910
16,000
12,000
8 ,641
7,060
5,592
5,18 5
8,000
4,295
4,094
3,513
3,434
3,38 7
3,294
3,18 5
3,008
2,673
2,495
2,458
2,400
2,329
1,8 78
1,8 34
1,8 09
1,772
1,642
1,139
4,000
941
652
352
351
341
0
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
 RIL management has been able to anticipate disruption better than competitors and has
invested the cash flows of its traditional business of chemicals and energy to create more
future-proof businesses in ‘new’ energy, multi-channel retailing and telecommunications.
For example, it started the pivot from ‘old’ energy to ‘new’ energy well before most other
domestic and global chemical and energy companies; most are still not seeing de-
carbonization as a major disruption, if not an existential issue.
Preclude or limit related-party transactions

In our view, our proposed hypothetical structure for RIL Group may address another of the
longstanding concerns of investors regarding large related-party transactions within RIL
Group entities and with promoter entities. The scope of related-party transactions within the
group may be lower if the three companies were to be completely independent entities with
different boards (except for the family members) and shareholders. Thus, investors’ concerns
about related-party transactions may also get addressed.

India Strategy
RIL has had large number of related-party transactions within the group (see Exhibit 23) and
with private companies of the promoters (see Exhibit 24) historically. In particular, investors
have raised issues about revenues of Reliance Retail, which include large revenues from sale
of telecom recharges for Reliance Jio Infocomm. The figures are quite large in the context of
revenues of RRL (see Exhibit 25), which in turn raises issues about long-term revenues and
profits of RRL. Investors have raised concerns about limited clarity on the revenue-sharing
arrangement between RRL and RJIL. In fact, this factor seems to be one of the biggest
reasons holding back certain investors from taking a more positive view of RIL stock.
Exhibit 23: RIL has significant related-party transactions between its subsidiaries
Select related party transactions of key subsidiaries, March fiscal year-ends, 2020-22 (Rs bn)
Amount (Rs bn)

Entity Related party Nature of transaction 2020 2021 2022
RIL — 6.2 10.5
RJIL — 5.0 8 .8
Revenue from operations
Jio Platforms Limited (JPL) RPPMSL — 6.8 9.8
RRL — 5.5 8 .2
RIL Business support services / professional fees — 5.9 8 .0
RIL 18 .2 20.5 27.7
RJIL Revenue from operations 3.2 4.9 5.5
RRL 14.2 2.3 2.8
RPPMSL — 6.6 18 .9
Reliance Corporate IT Park Professional fees
RSMSL 5.7 — —
Limited (RCITPL)
RSMSL Hire charges contracted manpower 6.6 — —
RIL Finance charges 8 .2 12.1 9.6
RRL Rent 10.3 — —
RSMSL Cost of material / services consumed 5.2 — —
RCITPL Infrastructure usages charges/general exp. 1.0 4.9 5.5
Reliance Jio Infocomm
RRL Commission on customer acquisition and recharges 8 .0 13.8 25.8
Limited (RJIL)
RRL Revenue received in advance 576 628 738
RRL 23.9 39.0 8 4.0
RJIL 4.2 6.0 62.8
Revenue from operations
RCITPL 2.0 9.5 18 .9
Reliance Projects & Property RRVL — 2.1 22.6
Management Services RRL Rent 31.0 41.0 —
Limited (RPPMSL) RSMSL Hire charges contract manpower 6.1 5.2 19.8
RSMSL Cost of material / services consumed 2.0 17.0 9.1
RIL 7.5 15.4 23.6
Finance charges
RIIHL 1.5 5.4 13.1
RJIL 11.0 15.0 36.0
RCITPL Revenue from operations 25.1 0.1 0.1
RPPMSL 29.1 42.2 3.7
RJIL Purchases 58 1 630 738
Reliance Retail Limited (RRL)
RRVL Interest cost 0.1 5.1 19.4
RPPMSL Rent including lease rent 3.9 4.9 6.9
JPL Professional fee — 5.5 8 .1
RRVL Warehousing and distribution expenses 1.5 14.6 37.3
Reliance Retail Ventures RRL Revenue from operations 1.9 16.5 37.9
Limited (RRVL) RRL Other income 0.1 5.1 19.4
RCITPL 14.9 — —
Reliance SMS Limited
RRL Revenue from operations 1.4 1.8 6.7
(RSMSL)
RPPMSL 8 .1 22.1 28 .9

Strategy India
Exhibit 24: RIL has had large number of related-party transactions

RIL's related-party transactions, March fiscal year-ends, 2015-22 (Rs mn)
2015 2016 2017 2018 2019 2020 2021 2022

Payments made
East West Pipeline Limited 1,970 2,140 2,030 4,750 7,590 — — —
Reliance Industrial Infrastructure Limited 810 870 980 980 810 710 510 680
Sikka Ports and Terminals Limited 32,960 34,190 35,840 34,340 33,620 36,220 33,830 35,650
Jamnagar Utilities & Power Private Limited 15,790 17,190 24,880 46,570 51,400 48,980 47,670 45,030
RP Chemicals (Malaysia) Sdn Bhd 10,520 7,450 — — — — — —
Reliance Commercial Dealers Limited (a) 2,820 4,180 1,390 — — — — —
Gujarat Chemical Port Terminal Company Limited 1,090 1,500 1,440 1,950 2,230 2,270 2,370 2,080
Others 440 660 1,270 820 480 1,290 2,300 15,320
Total payments 66,400 68,180 67,830 89,410 96,130 89,470 86,680 98,760
Loans and advances balances
Sikka Ports and Terminals Limited 3,530 3,530 3,530 3,530 3,530 3,530 3,530 3,530
Reliance Commercial Dealers Limited 1,550 3,250 — 2,390 2,400 — — —
Jamnagar Utilities & Power Private Limited 1,180 1,180 1,180 1,180 1,180 1,180 1,180 1,180
Gujarat Chemical Port Terminal Company Limited 1,100 1,380 1,470 1,370 1,120 710 480 490
Others 5,900 5,820 5,760 3,710 4,090 5,930 5,930 5,830
Total loans and advances 13,260 15,160 11,940 12,180 12,320 11,350 11,120 11,030
Exhibit 25: A meaningful portion of Reliance Retail's revenues comes from telecom recharges
Total revenues and revenues from telecom recharges for Reliance Retail, March fiscal year-ends, 2017-22
Total revenues of Reliance Retail (Rs bn)

Telecom recharges as a % of total revenues (%, RHS)
2,500 60
50
2,000
46 40
40
1,500 34
33 30
33
1,000
20
500
6 10
0 0
2017 2018 2019 2020 2021 2022
We believe that either (1) such related-party transactions will decline and/or (2) companies
will make more disclosures of such related-party transactions even if the related-party
transactions were to continue in our proposed structure. It is possible that the companies
may continue with such transactions even after listing of JPL and RRVL and not disclose the
same for commercial reasons. Nonetheless, we believe that investors will have more
confidence about the arms-length nature of such related-party transactions once RRVL and
RJIL operate as ‘independent’ listed entities.

Kotak Institutional Equities: Valuation summary of KIE Universe stocks
India Daily Summary - September 9, 2022

Price (Rs) Fair Value Upside Mkt cap. O/S shares EPS (Rs) EPS growth (%) P/E (X) EV/EBITDA (X) P/B (X) RoE (%) Dividend yield (%) ADVT-3M
Company Rating 8-Sep-22 (Rs) (%) (Rs bn) (US$ bn) (mn) 2022 2023E 2024E 2022 2023E 2024E 2022 2023E 2024E 2022 2023E 2024E 2022 2023E 2024E 2022 2023E 2024E 2022 2023E 2024E (US$ mn)
KOTAK INSTITUTIONAL EQUITIES RESEARCH
Automobiles & Components

Amara Raja Batteries SELL 537 48 0 (11) 92 1.2 171 30 37 45 (21) 23 24 18 15 12 9 7 6 2.0 1.8 1.6 12 13 14 0.8 1.4 1.7 3
Apollo Tyres REDUCE 278 220 (21) 176 2.2 638 10 13 16 (20) 25 30 28 22 17 9 7 6 1.5 1.4 1.4 6 7 8 1.0 1.3 1.5 10
Ashok Leyland ADD 164 160 (3) 48 3 6.1 2,936 1 3 7 153 48 5 132 304 52 22 50 24 14 6.3 5.9 5.1 2 12 24 0.6 0.8 1.8 28
Bajaj Auto ADD 3,8 47 4,200 9 1,113 14 28 3 165 207 241 5 25 17 23 19 16 17 14 11 4.2 3.9 3.7 19 21 24 3.6 4.3 5.0 27
Balkrishna Industries SELL 1,98 5 1,650 (17) 38 4 4.8 193 74 75 78 22 1 3 27 26 26 18 16 15 5.5 4.9 4.3 22 20 18 1.4 1.3 1.4 10
Bharat Forge REDUCE 765 720 (6) 356 4.5 466 23 25 34 948 9 36 33 30 22 20 17 14 5.4 4.8 4.1 18 17 20 0.7 0.8 0.9 15
CEAT SELL 1,406 1,000 (29) 57 0.7 40 20 24 75 (8 3) 24 208 72 58 19 11 10 7 1.7 1.7 1.6 2 3 9 0.2 0.9 1.3 2
Eicher Motors SELL 3,426 2,58 0 (25) 937 11.8 272 62 98 124 25 59 27 56 35 28 39 24 21 8 .6 7.4 6.3 16 23 25 0.6 0.7 0.7 35
Endurance Technologies ADD 1,467 1,430 (3) 206 2.6 141 34 42 61 (8 ) 22 45 43 35 24 21 17 13 5.3 4.7 4.1 12 13 17 0.4 0.6 0.9 2
Escorts Kubota SELL 1,995 1,48 0 (26) 220 3.3 111 76 64 82 (12) (15) 28 26 31 24 23 24 19 2.6 2.6 2.4 10 8 10 0.4 0.5 0.6 13
Exide Industries REDUCE 170 155 (9) 144 1.8 8 50 9 10 11 1 15 8 19 16 15 10 10 8 1.4 1.3 1.2 9 8 8 1.2 1.5 1.5 5
Hero Motocorp REDUCE 2,8 57 2,500 (13) 571 7.2 200 124 147 18 0 (17) 19 22 23 19 16 14 11 9 3.6 3.4 3.2 16 18 21 3.3 3.6 4.4 23
Mahindra CIE Automotive SELL 269 235 (13) 102 1.3 378 11 19 21 277 79 9 25 14 13 11 8 7 2.0 1.8 1.6 8 13 13 — — — 2
Mahindra & Mahindra BUY 1,322 1,450 10 1,643 20.6 1,159 44 60 73 54 36 22 30 22 18 23 16 13 3.9 3.4 2.9 14 17 17 0.9 0.7 0.8 60
Maruti Suzuki SELL 8 ,791 8 ,150 (7) 2,655 33.3 302 125 271 336 (11) 117 24 71 32 26 39 18 15 4.9 4.5 4.1 7 14 16 0.7 1.2 1.5 78
Motherson Sumi Systems ADD 123 135 10 556 7.0 4,518 1 2 6 (28 ) 47 220 102 70 22 14 14 9 2.7 2.6 2.4 3 4 12 0.5 0.5 0.5 11
MRF SELL 8 5,396 62,500 (27) 362 4.5 4 1,578 1,607 3,242 (48 ) 2 102 54 53 26 17 16 10 2.6 2.5 2.3 5 5 9 0.2 0.1 0.2 11
Schaeffler India ADD 3,511 2,600 (26) 549 6.9 156 40 57 68 116 42 18 87 62 52 55 40 34 15.0 13.1 11.4 19 23 23 0.1 0.1 0.1 4
SKF SELL 4,999 3,400 (32) 247 3.1 49 80 107 122 33 34 14 63 47 41 44 33 28 13.1 10.7 8 .8 21 23 21 0.2 0.3 0.4 3
Sona BLW Precision REDUCE 525 550 5 307 3.9 58 3 6 7 11 65 17 51 85 73 48 55 42 29 15.3 13.1 10.7 21 19 25 0.1 0.2 0.4 25
Tata Motors BUY 442 500 13 1,693 19.9 3,8 29 (28 ) 7 40 (654) 125 473 NM 63 11 10 6 4 3.8 3.6 2.7 NM 6 28 0.0 0.0 0.0 90
Timken SELL 3,401 2,500 (26) 256 3.2 75 43 64 79 128 47 23 78 53 43 50 35 29 15.4 12.4 10.0 22 26 26 0.0 0.1 0.1 3
TVS Motor SELL 1,045 775 (26) 496 6.2 475 19 30 37 46 62 23 56 34 28 26 19 16 10.3 8 .3 6.7 20 27 26 0.3 0.5 0.6 21
Uno Minda ADD 58 0 550 (5) 332 4.2 571 6 11 14 65 69 35 93 55 41 38 28 22 9.6 8 .2 6.8 10 15 17 0.1 0.2 0.3 3
Varroc Engineering ADD 38 7 400 3 59 0.7 153 (72) 14 19 (76) 120 35 NM 27 20 20 13 9 2.9 2.9 2.5 NM 11 13 — — — 1
Automobiles & Components Cautious 13,998 174.8 (30.1) 161.9 58.6 85.1 32.5 20.5 18.9 13.1 9.9 4.5 4.1 3.6 5.3 12.6 17.5 0.9 1.0 1.3 485
Banks
AU Small Finance Bank SELL 649 550 (15) 432 5.4 630 18 19 25 (4) 5 30 36 34 26 — — — 5.6 4.9 4.1 16 15 16 — — — 17
Axis Bank BUY 78 0 960 23 2,395 30.1 3,070 42 59 72 97 40 21 18 13 11 — — — 2.2 1.9 1.8 12 15 16 0.1 1.1 0.6 71
Bandhan Bank ADD 292 360 23 470 5.9 1,611 1 32 41 (94) 3,944 28 374 9 7 — — — 2.9 2.5 1.9 1 26 26 — 0.5 2.1 25
Bank of Baroda ADD 138 125 (10) 715 9.0 5,178 14 20 27 777 45 32 10 7 5 — — — 1.0 0.9 0.8 10 13 15 2.1 2.9 3.9 39
Canara Bank ADD 245 260 6 444 5.6 1,8 14 31 33 40 102 6 21 8 7 6 — — — 1.0 0.8 0.7 9 9 10 3— 3— 3— 27
City Union Bank ADD 179 170 (5) 132 1.7 740 10 12 14 28 12 20 17 16 13 — — — 2.3 2.0 1.8 12 12 13 0.6 1.3 1.5 7
DCB Bank BUY 100 145 45 31 0.4 311 9 17 21 (14) 80 27 11 6 5 — — — 0.9 0.8 0.7 8 13 15 1.0 2.6 3.3 2
Equitas Small Finance Bank ADD 47 56 19 59 0.7 1,252 2 4 5 (34) 78 33 21 12 9 — — — 1.4 1.3 1.1 7 11 13 — — — 1
Federal Bank BUY 118 120 2 249 3.1 2,103 9 13 14 13 44 10 13 9 8 — — — 1.4 1.2 1.1 11 14 13 1.5 2.2 2.4 19
HDFC Bank BUY 1,498 1,650 10 8 ,335 104.6 5,546 67 76 79 18 14 4 22 20 19 — — — 3.5 3.1 2.5 17 16 16 1.0 1.2 1.2 113
ICICI Bank BUY 8 99 1,025 14 6,259 78 .5 6,950 34 45 46 43 33 3 27 20 20 — — — 3.9 3.4 2.9 15 17 15 0.6 1.0 1.0 116
IndusInd Bank ADD 1,108 1,100 (1) 8 59 10.8 775 60 86 106 62 44 24 19 13 10 — — — 1.8 1.7 1.5 10 13 15 0.8 1.1 1.4 43
Karur Vysya Bank BUY 74 70 (5) 59 0.7 8 00 8 12 16 87 48 29 9 6 5 — — — 0.9 0.8 0.7 9 13 15 2.2 4.4 5.7 4
Punjab National Bank REDUCE 38 30 (22) 422 5.3 11,011 3 4 6 63 37 44 12 9 6 — — — 0.6 0.6 0.5 4 5 7 1.7 2.2 3.2 13
SBI Cards and Payment Services BUY 960 1,150 20 905 11.4 943 17 27 34 64 60 24 56 35 28 — — — 11.7 8 .9 6.8 23 29 27 0.1 0.2 0.2 19
State Bank of India BUY 545 700 29 4,8 61 61.0 8 ,925 35 50 60 55 40 20 15 11 9 — — — 2.0 1.7 1.5 12 15 16 1.3 1.7 2.0 81
Ujjivan Small Finance Bank BUY 24 22 (10) 42 0.5 1,728 (3) 3 4 (4,058 ) 216 33 NM 8 6 — — — 1.7 1.4 1.1 NM 17 19 0.0 0.0 0.0 1
Union Bank ADD 43 45 4 297 3.7 6,8 35 8 8 11 72 (2) 50 6 6 4 — — — 0.6 0.5 0.5 8 7 10 4.4 4.3 6.4 4
YES Bank SELL 18 13 (27) 445 5.6 28 ,751 0 0 0 131 (45) 95 42 75 39 — — — 1.6 1.5 1.4 3 2 3 0.0 0.0 0.0 25
Banks Attractive 27,413 344.0 54.8 33.0 24.5 19.8 14.9 11.9 2.1 1.9 1.6 10.8 12.8 13.2 0.9 1.3 1.5 626
Source: Company, Bloomberg, Kotak Institutional Equities estimates

4
5
Building Products
Astral SELL 2,471 1,530 (38 ) 497 6.2 201 26 31 39 28 18 29 96 81 63 61 52 41 21.4 17.8 14.9 25 24 26 0.2 0.3 0.5 8
Building Products Cautious 497 6.2 28.0 18.5 28.5 95.9 81.0 63.0 60.8 51.5 40.9 21.3 17.8 14.9 22 22 24 0.2 0.3 0.5 8
Capital goods
ABB ADD 3,318 2,900 (13) 703 8 .8 212 19 28 42 140 42 53 171 121 79 121 76 57 17.4 14.8 12.9 11 13 17 0.2 0.2 0.2 14
Bharat Electronics REDUCE 328 250 (24) 8 00 10.0 2,437 10 10 11 14 6 6 33 32 30 22 21 19 6.5 6.0 5.5 21 20 19 0.5 1.5 1.6 27
BHEL SELL 63 32 (49) 220 2.8 3,48 2 1 (0) 2 115 (130) 696 54 NM 30 26 117 13 0.8 0.8 0.8 2 NM 3 0.0 (0.2) 1.1 15
Carborundum Universal ADD 8 41 900 7 160 2.0 190 18 22 28 17 25 30 48 38 30 30 24 18 6.8 5.9 5.1 15 16 19 0.4 0.5 0.7 2
Cochin Shipyard BUY 396 450 14 52 0.7 132 45 32 31 (4) (29) (1) 9 13 13 3 6 5 1.2 1.1 1.1 14 9 9 0.9 3.5 3.6 1
Cummins India BUY 1,233 1,360 10 342 4.3 277 30 34 42 30 14 24 41 36 29 37 34 27 7.0 6.5 6.0 18 19 21 0.9 1.5 1.9 9
G R Infraprojects SELL 1,346 1,200 (11) 130 1.6 97 79 88 99 (3) 11 13 17 15 14 11 10 9 3.0 2.5 2.1 17 16 16 0.0 0.0 0.0 0
IRB Infrastructure BUY 236 320 35 143 1.8 604 6 14 15 208 142 1 39 16 16 10 9 8 1.1 1.1 1.0 4 7 7 0.6 1.1 1.6 4
Kalpataru Power Transmission BUY 422 450 7 63 0.8 164 20 35 44 (36) 75 27 21 12 10 7 5 4 1.6 1.4 1.3 8 12 14 1.5 0.8 1.0 1
KEC International BUY 407 500 23 105 1.3 257 15 19 34 (32) 31 79 28 21 12 14 11 7 2.9 2.6 2.2 11 13 20 0.3 0.5 0.9 3
L&T BUY 1,974 2,000 1 2,774 34.8 1,405 61 75 95 26 22 28 32 26 21 21 18 15 4.0 3.7 3.5 13 15 17 1.1 1.6 2.0 47
Siemens SELL 2,948 2,350 (20) 1,050 13.2 356 38 46 55 27 21 21 79 65 53 52 43 36 9.3 8 .5 7.7 12 14 15 0.3 0.4 0.5 14
Thermax ADD 2,511 2,100 (16) 299 3.8 113 28 37 53 20 33 43 91 68 48 70 49 35 69.6 49.4 35.2 9 12 16 0.4 0.9 1.2 2
Capital goods Attractive 6,840 85.8 52.6 17.9 28.6 40.2 34.1 26.5 23.5 20.5 16.9 4.2 3.9 3.6 10.4 11.5 13.7 0.7 1.1 1.4 140
Commercial & Professional Services
SIS BUY 457 550 20 67 0.8 148 22 23 31 (10) 4 36 21 20 15 14 13 11 3.3 2.9 2.5 17 15 18 1.2 1.2 1.7 1
TeamLease Services REDUCE 3,275 3,735 14 56 0.7 17 23 81 111 (33) 250 38 142 41 29 37 33 24 8 .1 6.7 5.5 5.9 18 .1 21 — — — 1
Commercial & Professional Services
Attractive 123 1.5 (14.2) 30.2 36.4 33.7 25.9 19.0 19.6 17.8 13.8 4.5 3.9 3.3 13.2 15.1 17.6 0.6 0.7 0.9 2
Commodity Chemicals
Asian Paints REDUCE 3,450 2,950 (14) 3,309 41.5 959 33 46 56 0 40 23 105 75 61 68 50 41 24.0 21.3 18 .9 24 30 33 0.6 0.8 1.0 51
Berger Paints REDUCE 665 600 (10) 646 8 .1 971 9 12 14 16 37 19 78 56 48 49 36 31 16.4 14.0 12.0 23 27 27 0.5 0.7 0.9 9
Kansai Nerolac REDUCE 515 460 (11) 277 3.5 539 7 11 14 (31) 64 28 75 45 36 44 29 23 6.6 6.2 5.8 9 14 17 0.4 1.2 1.7 3
Tata Chemicals BUY 1,117 1,240 11 28 5 3.6 255 50 89 83 393 80 (7) 23 12 13 12 7 7 1.6 1.4 1.3 8 12 10 1.1 1.5 1.7 23
Commodity Chemicals Cautious 4,517 56.7 20.6 50.1 14.6 80.5 53.6 46.8 49.5 33.8 29.7 11.2 10.1 9.1 14.0 18.9 19.53 0.6 0.9 1.1 86
Construction Materials
ACC REDUCE 2,421 2,075 (14) 455 5.7 18 8 97 57 110 29 (41) 92 25 42 22 13 20 12 3.2 3.1 2.9 14 7 14 2.4 1.2 2.3 12
Ambuja Cements REDUCE 462 345 (25) 917 11.5 1,98 6 15 11 16 8 (28 ) 49 32 44 29 13 17 11 3.6 3.4 3.1 12 8 11 1.4 0.5 0.7 32

Dalmia Bharat ADD 1,652 1,8 00 9 310 3.9 18 5 62 40 61 (6) (36) 55 27 42 27 13 12 10 1.9 1.9 1.8 8 5 7 1 — 1 5
Grasim Industries ADD 1,770 1,675 (5) 1,165 14.6 658 109 118 138 60 8 18 16 15 13 8 7 6 1.5 1.4 1.3 10 10 10 0.6 0.4 0.4 18
J K Cement SELL 2,938 2,150 (27) 227 2.8 77 89 81 112 (5) (9) 37 33 36 26 17 17 13 5.2 4.7 4.0 17 14 16 0.5 0.3 0.3 4
Nuvoco Vistas Corp ADD 38 0 390 3 136 1.7 357 1 5 16 209 411 259 423 83 23 13 11 8 1.5 1.5 1.4 0 2 6 0.0 0.0 0.0 2
Orient Cement ADD 127 130 2 26 0.3 205 13 8 13 23 (42) 67 10 17 10 5 8 8 1.7 1.6 1.4 19 10 15 2.0 1.6 1.6 1
Shree Cement SELL 24,458 15,8 50 (35) 882 11.1 36 659 500 742 3 (24) 48 37 49 33 24 26 19 5.1 4.7 4.2 15 10 13 0.4 0.3 0.5 11
The Ramco Cements SELL 78 4 575 (27) 18 5 2.3 236 38 18 37 17 (53) 110 21 44 21 17 19 12 2.8 2.6 2.4 14 6 12 0.0 0.2 0.5 4
UltraTech Cement REDUCE 6,920 6,500 (6) 1,998 25.1 28 9 249 242 320 29 (2) 32 28 29 22 18 16 13 4.0 3.6 3.1 15 13 15 0.5 0.5 0.7 34
Construction Materials Cautious 6,301 79.1 26.5 (10.8) 37.3 25.8 28.9 21.1 13.0 12.8 10.0 2.9 2.6 2.4 11.1 9.1 11.4 0.8 0.5 0.7 124



Consumer Durables & Apparel
Crompton Greaves Consumer ADD 413 410 (1) 263 3.3 628 9 11 13 (4) 16 23 44 38 31 35 28 23 10.6 8 .7 7.1 27 25 25 0.6 0.6 0.6 13
Havells India SELL 1,349 1,025 (24) 8 45 10.6 626 19 21 25 15 11 18 71 64 54 47 44 37 14.1 12.6 11.3 21 21 22 0.6 0.6 0.7 14
Page Industries SELL 49,570 42,000 (15) 553 6.9 11 48 1 658 799 58 37 21 103 75 62 70 52 43 50.8 42.2 35.9 54 61 63 0.7 1.0 1.3 11
Polycab REDUCE 2,501 2,105 (16) 374 4.7 149 57 76 86 0 34 14 44 33 29 29 22 20 6.7 5.9 5.2 16 19 19 0.6 0.8 0.9 11
TCNS Clothing Co. SELL 724 500 (31) 45 0.6 69 (1) 10 14 92 1,313 37 NM 70 51 53 22 17.7 7.9 6.7 5.7 NM 10 12 — — — 1
Voltas SELL 976 8 95 (8 ) 323 4.1 331 15 16 22 (4) 2 44 64 63 44 47 46 33 5.9 5.6 5.2 10 9 12 0.6 0.6 0.8 14
Whirlpool SELL 1,8 03 1,460 (19) 229 2.9 127 19 23 41 (31) 22 75 95 78 44 51 41 25 6.8 6.4 5.7 8 8 13 0.3 0.2 0.3 3
Consumer Durables & Apparel Cautious 2,631 33.0 6.9 21.4 24.9 67.3 55.4 44.4 44.9 37.1 29.9 10.7 9.6 8.5 15.9 17.3 19.09 0.6 0.7 0.8 66
Consumer Staples
Britannia Industries ADD 3,673 4,000 9 885 11.1 241 63 70 85 (18 ) 11 21 58 52 43 41 37 30 34.6 34.2 26.7 50 65 69 1.9 1.5 2.0 17
Colgate-Palmolive (India) ADD 1,638 1,650 1 446 5.6 272 40 39 44 4 (0) 12 41 42 37 28 28 25 25.7 25.2 23.9 74 61 66 2.4 2.3 2.6 6
Dabur India ADD 570 605 6 1,011 12.7 1,768 10 11 13 7 9 15 55 51 44 45 42 36 12.0 11.1 10.2 23 23 24 0.9 1.1 1.2 12
Godrej Consumer Products BUY 939 960 2 960 12.0 1,023 18 18 22 2 2 25 54 53 42 40 37 30 8 .3 7.9 7.3 17 15 18 1.0 1.2 1.4 16
Hindustan Unilever ADD 2,576 2,750 7 6,053 76.0 2,350 37 42 51 10 13 21 69 61 51 48 43 35 12.4 12.0 11.4 18 20 23 1.3 1.4 1.7 57
ITC ADD 330 337 2 4,08 8 51.3 12,342 12 14 15 15 15 10 27 24 21 20 17 16 6.6 6.4 6.3 23 26 29 3.5 3.6 4.0 52
Jyothy Laboratories ADD 191 18 5 (3) 70 0.9 367 4 6 8 (26) 34 36 43 32 24 28 22 16 4.9 4.5 4.1 11 15 18 1.3 1.6 1.8 1
Marico REDUCE 522 510 (2) 674 8 .5 1,290 9 11 12 5 12 13 55 49 43 40 34 30 20.1 18 .8 17.5 37 40 42 1.5 1.7 1.9 9
Nestle India ADD 19,124 19,750 3 1,8 44 23.1 96 247 259 314 14 5 21 77 74 61 52 49 41 8 8 .5 78 .0 68 .5 116 112 120 1.0 1.2 1.5 15
Tata Consumer Products ADD 8 19 8 00 (2) 755 9.5 922 11 13 16 11 24 22 76 62 51 43 36 31 5.0 4.8 4.6 7 8 9 0.7 0.8 0.9 19
United Breweries ADD 1,690 1,725 2 447 5.6 264 14 23 35 204 66 52 122 74 48 63 44 31 11.4 10.5 9.4 10 15 21 0.6 1.0 1.5 6
United Spirits ADD 8 01 8 90 11 58 2 7.3 727 13 14 17 112 1 22 59 59 48 38 39 32 11.3 8 .8 8 .0 21 17 17 0.0 0.6 0.9 16
Varun Beverages ADD 1,098 1,025 (7) 713 9.0 650 11 20 25 75 90 23 103 54 44 45 29 24 17.5 13.5 10.5 18 28 27 0.2 0.1 0.2 17
Consumer Staples Attractive 18,528 232.5 12.6 14.1 16.6 50.4 44.1 37.9 35.7 31.2 26.8 10.9 10.3 9.8 22 23 26 1.7 1.8 2.1 243
Diversified Financials
Aavas Financiers REDUCE 2,291 2,250 (2) 18 1 2.3 79 45 52 64 23 15 23 51 44 36 — — — 6.4 5.6 4.9 14 14 15 0.0 0.0 0.0 3
Aptus Value Housing Finance ADD 358 315 — 178 2.2 497 8 9 10 36 22 12 48 39 35 — — — 6.1 5.3 4.6 15 14 14 0.0 0.0 0.0 2
Bajaj Finance SELL 7,258 5,400 (26) 4,394 55.1 603 116 172 194 59 47 13 62 42 37 — — — 10.0 8 .3 6.9 17 21 20 0.3 0.2 0.3 107
Bajaj Finserv REDUCE 17,38 3 14,050 (19) 2,769 34.7 159 28 6 516 633 2 80 23 61 34 27 — — — 6.9 6.6 5.6 12 20 22 0.1 0.1 0.1 76
Cholamandalam ADD 8 01 790 (1) 658 8 .3 8 21 26 30 35 42 15 16 31 27 23 — — — 6.0 5.0 4.2 20 19 19 0.2 0.3 0.3 16
Computer Age Management Services SELL 2,372 2,050 (14) 116 1.5 49 59 55 67 39 (7) 23 40 43 35 — — — 17.9 15.4 13.2 49 38 40 1.6 1.5 1.8 6
HDFC BUY 2,450 2,750 12 4,448 55.8 1,8 13 76 79 94 14 4 19 32 31 26 — — — 3.7 3.4 3.1 12 11 12 0.9 1.0 1.2 82
HDFC AMC ADD 2,021 1,950 (4) 431 5.4 214 65 66 77 5 1 18 31 31 26 — — — 7.8 7.0 6.3 27 24 26 2.1 2.1 2.5 17
Home First Finance BUY 887 970 9 78 1.0 88 21 26 30 85 21 17 42 34 29 — — — 4.9 4.3 3.8 13 13 14 — — — 2
IIFL Wealth BUY 1,795 1,950 9 159 2.0 89 64 68 81 54 6 19 28 26 22 — — — 5.5 5.1 4.8 20 20 22 3.1 2.8 3.4 1
L&T Finance Holdings ADD 80 95 19 197 2.5 2,474 4 5 8 13 14 72 18 16 9 — — — 1.0 0.9 0.8 5 6 9 0.6 0.6 0.6 6
LIC Housing Finance BUY 433 600 39 238 3.0 550 42 65 70 (23) 56 8 10 7 6 — — — 1.2 1.1 1.0 10 14 13 2.0 3.1 3.3 11
Mahindra & Mahindra Financial ADD 221 215 (3) 273 3.4 1,233 8 15 19 193 89 22 28 15 12 — — — 1.8 1.7 1.6 7 12 13 1.6 3.1 1.7 11
Muthoot Finance ADD 1,040 1,200 15 418 5.2 401 99 94 126 6 (5) 35 11 11 8 — — — 2.3 2.0 1.6 24 19 22 1.9 1.8 2.4 14
Shriram City Union Finance BUY 1,948 2,600 33 130 1.6 67 163 178 218 6 9 22 12 11 9 — — — 1.5 1.4 1.2 13 13 14 1.9 1.4 1.7 3
Shriram Transport BUY 1,361 1,675 23 368 4.6 271 100 153 167 2 52 9 14 9 8 — — — 1.5 1.3 1.1 11 15 14 1.5 1.7 1.8 15
Diversified Financials Attractive 15,037 188.7 17.9 28.4 18.6 35.2 27.4 23.1 4.3 3.9 3.4 12.4 14.2 14.8 0.7 0.7 0.8 373

6
7
Electric Utilities
CESC BUY 83 100 20 110 1.4 1,326 10 13 15 2 27 13 8 6 6 6 5 4 0.9 0.8 0.7 11 13 14 5.4 4.7 5.3 2
JSW Energy SELL 352 120 (66) 578 7.3 1,640 7 7 7 36 0 7 53 53 50 20 20 19 3.3 3.2 3.0 7 6 6 0.6 0.6 0.6 7
NHPC ADD 38 38 1 378 4.7 10,045 4 4 4 5 17 1 11 9 9 12 9 8 1.1 1.0 1.0 10 12 11 4.4 6.3 6.4 5
NTPC ADD 167 165 (1) 1,617 20.3 9,8 95 17 18 20 3 7 11 9.9 9.2 8 9 8 7 1.2 1.1 1.0 12 12 13 4.1 4.1 4.6 32
Power Grid BUY 224 250 11 1,565 19.6 6,975 19 21 21 4 8 3 11.7 10.8 10 8 7 6 2.1 1.9 1.8 18 18 18 6.9 5.8 6.0 28
Tata Power SELL 245 230 (6) 78 3 9.8 3,196 7 9 10 84 22 16 33 27 23 16 18 15 3.5 3.1 2.7 11 12 12 — — — 55
Electric Utilities Attractive 5,031 63.1 7.0 9.7 7.6 13.1 11.9 11.1 9.6 8.5 7.8 1.7 1.5 1.4 12.7 12.9 12.9 4.0 3.8 4.0 128
Fertilizers & Agricultural Chemicals
Bayer Cropscience SELL 5,212 4,8 45 (7) 234 2.9 45 134 160 18 9 3 19 18 39 33 28 28 23 19 9.3 7.6 6.2 24 26 25 0.5 0.6 0.7 1
Godrej Agrovet ADD 522 540 3 100 1.3 192 22 20 25 34 (6) 24 24 25 21 17 16 13 3.7 3.4 3.0 16 14 16 1.8 1.8 2.0 1
Rallis India REDUCE 227 210 (7) 44 0.6 195 8 9 11 (26) 12 18 27 24 20 16 14 12 2.6 2.4 2.3 10 11 12 1.3 1.5 1.8 1
UPL ADD 738 8 75 19 554 6.9 751 46 54 64 26 19 18 16 14 12 8 7 6 2.6 2.3 2.0 18 18 19 1.4 1.4 1.9 22
Fertilizers & Agricultural Chemicals
Neutral 932 11.7 20.1 14.7 18.2 19.9 17.3 14.7 10.3 8.8 7.4 3.3 2.9 2.5 16.4 17.0 17.3 1.2 1.2 1.6 25
Gas Utilities
GAIL (India) SELL 93 115 24 609 7.6 4,38 3 23 15 11 115 (36) (26) 4 6 8 5 7 10 0.7 0.7 0.7 20 11 8 10.8 7.6 8 .1 20
GSPL SELL 240 260 9 135 1.7 564 17 10 10 5 (44) 1 14 25 24 6 9 9 1.6 1.5 1.5 12 6 6 1.2 0.9 1.1 2
Indraprastha Gas BUY 415 515 24 290 3.6 700 22 26 29 31 19 11 19 16 14 15 11 10 4.2 3.6 3.2 24 25 24 1.3 1.9 2.4 12
Mahanagar Gas BUY 8 77 1,050 20 87 1.1 99 60 80 83 (4) 32 4 15 11 11 9 7 6 2.4 2.2 2.0 17 21 19 2.9 4.2 4.9 6
Petronet LNG REDUCE 218 225 3 327 4.1 1,500 22 16 20 14 (26) 22 10 13 11 6 7 6 2.4 2.2 2.0 27 18 20 5.3 3.9 4.7 5
Gas Utilities Attractive 1,448 18.2 60.5 (27.4) (7.8) 8.6 11.8 12.8 6.0 7.9 8.5 1.6 1.5 1.5 19.1 12.9 11.3 4.8 3.7 4.2 46
Health Care Services
Apollo Hospitals BUY 4,415 4,8 50 10 635 8 .0 144 53 75 98 749 42 30 83 59 45 30 28 22 11.2 10.1 8 .9 15 18 21 0.7 0.7 0.9 29
Aster DM Healthcare BUY 256 245 (4) 128 1.6 500 9 11 14 220 16 26 27 23 19 10 9 7 3.2 2.9 2.6 13 13 15 — — — 2
Dr Lal Pathlabs SELL 2,559 1,725 (33) 213 2.7 83 44 33 40 26 (25) 21 58 77 63 37 39 34 14.1 12.8 11.6 27 18 19 0.7 0.6 0.7 7
Max Healthcare ADD 379 425 12 367 4.6 970 9 10 12 77 13 13 42 37 32 28 25 21 5.5 4.8 4.2 14 14 14 0.0 0.0 0.0 25
Metropolis Healthcare REDUCE 1,48 2 1,400 (6) 76 1.0 51 39 32 40 7 (19) 27 38 47 37 22 25 21 8 .5 7.6 6.7 25 17 19 0.8 0.6 0.8 5
Narayana Hrudayalaya ADD 706 700 (1) 144 1.8 204 17 19 20 2,490 13 7 42 37 35 22 19 17 9.7 7.7 6.3 26 23 20 — — — 2
Health Care Services Attractive 1,563 19.6 153.3 14.1 21.1 51.7 45.3 37.4 24.3 22.5 19.1 7.7 6.8 6.0 15.0 15.0 15.9 0.4 0.4 0.5 71
Hotels & Restaurants
Devyani International REDUCE 191 179 (6) 230 2.9 1,204 1 2 3 304 40 26 131 93 74 48 32 25 33.5 24.7 18 .5 44 30 28 0.0 0.0 0.0 10

Jubilant Foodworks ADD 607 615 1 401 5.0 660 7 9 10 89 29 19 92 71 60 36 29 25 20.5 16.5 13.2 26 26 24 0.2 0.2 0.2 27
Lemon Tree Hotels ADD 77 74 (4) 61 0.8 791 (1) 1 3 31 225 110 NM 56 27 65 17 13 7.3 7.1 6.4 NM 13 25 0.0 1.2 1.8 5
Restaurant Brands Asia ADD 132 126 (5) 65 0.8 493 (2) (0) 1 57 80 264 NM NM 214 67 30 19 3.3 3.4 3.3 NM NM 2 0.0 0.0 0.0 2
Sapphire Foods BUY 1,430 1,550 8 91 1.1 64 7 14 21 147 96 48 196 100 68 29 20 16 9.0 8 .3 7.4 6 9 12 0.0 0.0 0.0 3
Westlife Development ADD 68 0 640 (6) 106 1.3 156 (0) 7 10 98 6,917 43 NM 93 65 56 28 23 22.9 18 .4 14.3 NM 22 25 0.0 0.0 0.0 1
Hotels & Restaurants Attractive 954 12.0 237.1 131.8 39.2 200.5 86.5 62.1 41.8 27.0 21.4 13.8 12.2 10.4 6.9 14.1 16.7 0.1 0.1 0.2 48



Insurance
HDFC Life Insurance BUY 58 4 710 22 1,235 15.5 2,020 6 7 8 (15) 21 22 102 84 69 — — — 8 .0 7.7 7.3 10 9 11 0.3 0.3 0.4 27
ICICI Lombard REDUCE 1,229 1,300 6 603 7.6 491 26 37 44 (20) 44 19 47 33 28 — — — 6.6 5.8 5.0 15 19 19 0.7 0.8 0.9 13
ICICI Prudential Life BUY 593 650 10 8 53 10.7 1,437 5 6 7 (22) 15 15 113 98 85 — — — 9.3 8 .6 8 .0 8 9 10 0.5 0.5 0.5 9
Max Financial Services BUY 8 06 1,100 36 278 3.5 345 3 11 12 3 28 1 8 271 71 66 — — — — — — — 2 6 6 0.0 0.0 0.0 5
PB Fintech BUY 499 700 40 224 2.8 467 (18 ) (13) (6) (343) 27 54 NM NM NM — — — NM NM NM 0.0 0.0 0.0 10
SBI Life Insurance BUY 1,318 1,600 21 1,319 16.5 1,003 15 17 19 3 14 12 88 77 69 — — — 11.6 10.3 9.1 14 14 14 0.2 0.2 0.2 19
Star Health and Allied Insurance REDUCE 738 700 (5) 425 5.3 576 (18 ) 11 18 (9) 162 58 NM 66 42 — — — 9.2 8 .2 6.9 NM 13 18 0.0 0.0 0.0 7
Insurance Attractive 4,937 62.0 (32.2) 112.0 27.5 166.5 78.6 61.6 8.0 7.4 6.7 4.8 9.4 10.9 0.2 0.2 0.2 90
Internet Software & Services
Cartrade Tech REDUCE 641 690 8 30 0.4 51.5 (26) 6 10 (234) 123 61 NM 107 66 (15) 48 30 1.7 1.6 1.6 NM 1.6 2.5 0.0 0.0 0.0 1
FSN E-commerce Ventures BUY 1,352 1,770 31 641 8 .0 479.2 1 2 6 (36) 18 2 148 1,569 556 225 391 220 119 48 .3 44.5 37.1 4.5 8 .3 18 .0 — — — 8
Info Edge ADD 4,202 4,8 30 15 542 6.8 128 .7 (46) 51 69 (315) 212 34 NM 82 61 112 72 53 3.9 3.7 3.6 NM 4.6 6.0 7.8 0.3 0.4 23
Just Dial BUY 607 880 45 51 0.6 8 3.6 8 9 32 (75) 3 266 72 69 19 (700) 14 7 1.5 1.4 1.3 3.0 2.1 7.2 — — — 3
Zomato BUY 61 85 38 525 6.6 8 ,966 (1) (2) (1) 16 (22) 27 NM NM NM (20) (19) (23) 3.1 2.7 2.9 NM NM NM 0.0 0.0 0.0 111
Internet Software & Services Attractive 1,789 22.5 (945) 60 141 NM NM 600 (115) (168) (161,383) 4.8 4.3 4.2 NM NM 0.7 2.4 0.1 0.1 147
IT Services
HCL Technologies BUY 931 1,165 25 2,527 31.7 2,714 50 52 57 4 4 11 19 18 16 11 11 10 4.1 3.9 3.7 22 22 23 4.7 4.8 5.4 42
Infosys BUY 1,476 1,690 15 6,210 77.9 4,204 52 56 65 15 7 15 28 26 23 19 18 15 8 .3 7.4 6.7 29 30 31 2.1 2.4 3.0 106
L&T Infotech REDUCE 4,523 4,150 (8 ) 793 10.0 176 131 152 173 19 17 14 35 30 26 25 21 18 9.0 7.5 6.2 28 28 26 0.9 0.9 1.0 24
L&T Technology Services REDUCE 3,607 2,8 50 (21) 38 1 4.8 106 91 108 118 44 19 9 40 33 31 25 22 20 9.1 7.7 6.5 25 25 23 0.8 0.7 0.8 16
Mindtree REDUCE 3,212 3,150 (2) 530 6.6 165 100 122 131 49 21 7 32 26 25 23 19 17 9.7 7.9 6.6 34 33 29 1.2 1.5 1.6 28
Mphasis ADD 2,097 2,58 0 23 394 4.9 18 8 76 90 103 17 18 15 28 23 20 18 15 13 5.7 5.2 4.7 21 23 24 2.2 2.6 2.9 17
TCS ADD 3,170 3,400 7 11,598 145.5 3,660 104 113 128 16 9 14 31 28 25 21 19 17 12.8 11.7 10.7 43 43 45 1.4 2.8 3.2 100
Tech Mahindra BUY 1,090 1,200 10 955 12.0 889 63 58 68 23 (8 ) 17 17 19 16 11 11 9 3.6 3.5 3.3 22 19 21 3.5 3.7 3.8 44
Wipro REDUCE 413 410 (1) 2,264 28 .4 5,48 7 22 21 23 17 (5) 10 19 20 18 12 12 10 3.4 3.0 2.7 20 17 16 1.5 1.2 2.2 40
IT Services Attractive 25,652 321.9 14.1 5.3 13.4 26.2 24.9 21.9 17.5 16.2 14.3 7.4 6.7 6.2 28.4 27.1 28.1 1.9 2.6 3.1 418
Media
PVR BUY 1,934 2,200 14 118 1.5 61 (69) 51 59 37 174 17 NM 38 33 (55) 16 14 5.0 4.4 4.0 NM 12 13 (0.4) 0.3 0.3 15
Sun TV Network BUY 510 550 8 201 2.5 394 42 44 52 8 5 18 12 12 10 8 7 6 2.5 2.2 2.0 22 20 21 2.7 3.9 4.9 8
Zee Entertainment Enterprises ADD 257 260 1 247 3.1 960 11 11 14 (2) (1) 26 22 23 18 14 14 11 2.3 2.1 2.0 10 10 11 1.6 1.0 1.2 29
Media Attractive 566 7.1 17.1 34.5 20.8 24.4 18.1 15.0 14.6 11.1 9.1 2.6 2.4 2.2 10.8 13.3 14.6 1.6 1.9 2.3 52
Metals & Mining
Hindalco Industries BUY 421 550 31 945 11.9 2,220 61 43 51 140 (31) 19 7 10 8 4.7 5.2 4.8 1.2 1.1 0.9 19 11 12 1.0 1.0 1.2 62
Hindustan Zinc REDUCE 28 9 265 (8 ) 1,220 15.3 4,225 23 28 21 22 20 (23) 13 10 14 6.4 5.6 6.8 3.6 3.6 3.6 29 34 26 6.2 9.6 7.4 4
Jindal Steel and Power REDUCE 430 400 (7) 438 5.5 1,011 86 40 43 38 (53) 7 5 11 10 3.4 5.8 5.8 1.2 1.1 1.0 26 11 10 0.7 0.5 0.5 24
JSW Steel SELL 68 5 500 (27) 1,657 20.8 2,417 88 41 58 166 (53) 40 8 17 12 5.7 9.4 7.7 2.5 2.2 1.9 37 14 17 2.5 1.0 1.3 30
National Aluminium Co. ADD 80 85 7 146 1.8 1,8 37 17 10 10 217 (43) 1 5 8 8 2.3 4.0 4.2 1.2 1.1 1.0 27 14 13 6.3 3.8 3.8 16
NMDC REDUCE 122 115 (6) 359 4.5 2,931 32 16 13 43 (49) (22) 4 7 10 2.5 5.0 6.5 1.0 1.0 0.9 29 13 10 12.0 6.7 5.2 20
SAIL SELL 82 60 (26) 337 4.2 4,130 30 7 7 208 (75) (3) 3 11 11 2.4 6.1 5.7 0.6 0.6 0.6 25 6 5 4.1 4.1 4.1 28
Tata Steel REDUCE 106 110 4 1,293 16.2 12,224 33 21 12 363 (36) (45) 3 5 9 2.8 3.9 4.9 1.1 0.9 0.9 43 21 10 48 .2 3.0 1.3 105
Vedanta REDUCE 262 230 (12) 975 12.2 3,717 53 39 33 59 (25) (16) 5 7 8 3.0 3.8 4.2 1.5 1.6 1.5 31 23 19 17.2 19.4 8 .3 49
Metals & Mining Cautious 7,369 92.5 128.5 (38.3) (13.7) 5.3 8.6 10.0 3.7 5.2 5.5 1.5 1.4 1.2 27.8 15.7 12.5 13.4 5.6 3.5 338

8
Price (Rs) Fair Value Upside Mkt cap. O/S shares EPS (Rs) EPS growth (%) P/E (X) EV/EBITDA (X) P/B (X) RoE (%) Dividend yield (%) ADVT-3mo
9
Oil, Gas & Consumable Fuels
BPCL SELL 340 245 (28 ) 737 9.3 2,093 42 (43) 6 (37) (203) 114 8 NM 57 5.3 (15.9) 13.0 1.4 1.6 1.6 17 NM 3 4.7 (4.9) 0.7 16
Coal India REDUCE 236 225 (5) 1,457 18 .3 6,163 28 35 22 37 25 (38 ) 8 7 11 7.7 4.8 9.0 3.4 2.8 2.7 44 45 25 7.2 8 .5 8 .5 27
HPCL SELL 251 165 (34) 356 4.5 1,419 44 (79) 12 (45) (279) 115 6 NM 21 8 .1 (9.4) 17.5 0.9 1.3 1.2 17 NM 6 5.6 - 1.9 16
IOCL SELL 73 55 (25) 1,032 12.9 9,18 1 26 (37) 14 2 (240) 137 3 NM 5 3.8 (7.3) 5.9 0.5 0.7 0.6 20 NM 12 17.2 - 9.3 16
Oil India SELL 194 150 (23) 210 2.6 1,08 4 35 29 31 241 (18 ) 9 6 7 6 5.9 6.4 5.7 0.7 0.7 0.6 14 10 10 7.3 6.0 6.5 15
ONGC SELL 132 105 (20) 1,659 20.8 12,58 0 38 32 31 205 (15) (3) 3 4 4 2.9 2.7 2.5 0.6 0.6 0.5 20 15 13 8 .0 9.5 9.8 57
Reliance Industries BUY 2,58 5 2,98 0 15 16,415 206.0 6,352 91 113 135 26 24 19 28 23 19 15.7 11.5 9.6 2.1 1.9 1.8 8 9 10 0.3 0.3 0.3 244
Oil, Gas & Consumable Fuels Neutral 21,866 274.4 36.0 (50.0) 89.6 13.2 26.4 13.9 8.6 11.4 7.4 1.6 1.6 1.5 12.5 6.0 10.5 2.2 1.4 2.0 391
Pharmaceuticals
Aurobindo Pharma ADD 542 630 16 318 4.0 58 6 45 46 51 (19) 3 12 12 12 11 7 6 5 1.3 1.2 1.1 11 10 10 0.8 2.0 2.4 10
Biocon REDUCE 300 325 8 360 4.5 1,202 6 9 14 (2) 47 50 49 33 22 20 15 11 3.8 3.5 3.1 8 10 14 - 1.1 1.6 9
Cipla BUY 1,056 1,215 15 8 52 10.7 8 06 31 41 53 5 33 29 34 26 20 18 14 11 4.0 3.6 3.1 12 14 16 0.4 0.8 1.0 19
Divis Laboratories REDUCE 3,568 3,475 (3) 947 11.9 265 112 96 105 49 (14) 9 32 37 34 24 26 23 8 .1 7.1 6.2 25 19 18 0.6 0.9 1.0 22
Dr Reddy's Laboratories ADD 4,272 4,520 6 711 8 .9 166 18 8 198 256 20 5 29 23 22 17 15 13 10 3.7 3.1 2.7 16 15 16 0.6 0.7 0.8 25
Gland Pharma REDUCE 2,441 2,325 (5) 402 5.0 164 74 73 88 21 (1) 21 33 34 28 24 25 20 5.6 4.8 4.1 17 14 15 — — — 13
Laurus Labs REDUCE 561 510 (9) 302 3.8 536 15 24 25 (16) 53 7 36 24 22 22 15 13 9.0 6.5 5.0 25 27 23 — — — 10
Lupin ADD 667 700 5 303 3.8 450 24 18 37 (13) (25) 108 28 38 18 13 13 9 2.5 2.3 2.1 9 6 12 — 0.4 0.8 10
Sun Pharmaceuticals ADD 8 94 1,040 16 2,146 26.9 2,406 33 34 40 32 4 19 27 26 22 20 17 14 4.5 3.9 3.4 17 15 15 1.0 0.8 0.9 32
Torrent Pharmaceuticals ADD 1,509 1,600 6 511 6.4 338 37 43 54 1 15 27 40 35 28 22 18 15 8 .6 7.1 5.9 21 20 21 1.3 0.5 0.6 5
Pharmaceuticals Neutral 6,852 86.0 13.1 7.0 23.9 28.4 26.5 21.4 17.9 15.7 12.7 4.2 3.7 3.3 14.8 14.0 15.2 0.5 0.5 0.6 154
Real Estate
Brigade Enterprises BUY 564 565 0 130 1.6 230 3 14 15 249 302 7 162 40 37 22 12 10 4.5 4.1 3.8 3 11 10 0.4 0.4 0.4 2
Brookfield India Real Estate Trust ADD 330 335 2 110 1.4 335 8 8 14 88 (6) 77 41 43 24 26 17 14 1.1 1.3 1.3 3 3 5 5.2 4.1 4.7 1
DLF BUY 397 410 3 98 3 12.3 2,475 6 9 18 45 37 103 63 46 23 58 53 33 2.7 2.6 2.3 4 6 11 0.5 0.5 0.5 23
Embassy Office Parks REIT ADD 358 405 13 339 4.3 948 9 11 13 27 18 19 38 33 28 19 16 14 1.3 1.4 1.4 3 4 5 6.1 5.8 6.8 7
Godrej Properties SELL 1,419 1,310 (8 ) 394 4.9 278 13 35 41 28 5 175 17 112 41 35 300 101 276 4.5 4.1 3.7 4 11 11 — — — 12
Macrotech Developers BUY 1,106 1,320 19 533 6.7 48 2 25 36 54 97 43 52 44 31 20 30 23 15 4.4 3.9 3.2 14 13 17 — — — 7
Mindspace REIT ADD 377 38 0 1 224 2.8 593 9 11 13 65 28 23 44 34 28 19 17 15 1.4 1.4 1.5 3 4 5 5.1 5.5 5.9 0
Oberoi Realty ADD 1,030 950 (8 ) 374 4.7 364 29 40 45 41 37 13 36 26 23 33 21 14 3.6 3.2 2.8 11 13 13 0.2 0.2 0.2 8
Phoenix Mills BUY 1,394 1,405 1 249 3.1 179 17 40 52 471 127 31 80 35 27 35 16 12 3.8 3.4 3.1 5 10 12 0.2 0.2 0.3 4

Prestige Estates Projects BUY 472 560 19 18 9 2.4 401 9 18 30 2,615 107 68 55 27 16 13 11 8 2.1 1.9 1.7 4 8 12 0.3 0.3 0.3 3
Sobha BUY 715 880 23 68 0.9 95 12 44 50 84 258 13 58 16 14 10 7 6 2.7 2.4 2.1 5 16 15 1.0 1.0 1.0 4
Sunteck Realty BUY 461 540 17 68 0.8 140 2 18 20 (53) 889 13 258 26 23 78 20 18 2.3 2.1 2.0 1 9 9 0.2 0.2 0.2 3
Real Estate Attractive 3,662 45.9 97.7 58.9 45.3 54.8 34.5 23.7 30.4 21.8 16.4 2.6 2.5 2.3 4.7 7.1 9.7 1.2 1.2 1.4 74
Retailing
Aditya Birla Fashion and Retail BUY 322 38 0 18 303 3.8 965 (1) 5 7 86 541 30 NM 63 49 28 15 12 10.9 7.7 5.3 NM 14 13 — — — 8
Avenue Supermarts SELL 4,406 3,650 (17) 2,8 54 35.8 648 23 39 49 35 69 28 193 114 89 114 72 56 20.9 17.6 14.7 11 17 18 — — — 22
Titan Company ADD 2,627 2,600 (1) 2,332 29.3 888 25 34 42 131 36 22 104 76 63 69 50 41 25.0 20.6 17.0 27 30 30 0.3 0.5 0.6 44
Vedant Fashions SELL 1,391 1,075 (23) 338 4.2 248 13 16 19 137 30 15 110 85 73 67 51 44 31.9 25.3 20.1 29 33 31 — — — 2
Retailing Neutral 5,489 73.1 168.4 64.1 25.0 147.9 90.2 72.1 78.0 51.6 42.0 21.7 17.7 14.2 14.7 19.6 19.7 0.1 0.2 0.2 77



Price (Rs) Fair Value Upside Mkt cap. O/S shares EPS (Rs) EPS growth (%) P/E (X) EV/EBITDA (X) P/B (X) RoE (%) Dividend yield (%) ADVT-3mo
Specialty Chemicals
Aarti Industries SELL 8 55 730 (15) 310 3.9 363 22 23 29 48 4 29 39 38 29 25 22 19 5.2 4.7 4.1 17 13 15 0.4 0.3 — 8
Atul SELL 9,190 8 ,020 (13) 271 3.4 30 204 250 307 (8 ) 23 23 45 37 30 30 25 20 6.1 5.4 4.7 15 16 17 0.3 0.3 0.5 4
Castrol India BUY 116 130 12 115 1.4 98 9 8 9 10 27 14 12 15 13 12 10 9 8 7.0 6.9 6.6 50 52 57 4.7 7.3 7.7 1
Clean Science & Technology REDUCE 1,8 71 1,630 (13) 199 2.5 106 22 26 33 15 20 27 87 73 57 66 51 41 25.9 19.9 15.3 35 31 30 0.2 0.2 0.3 3
Navin Fluorine ADD 4,322 4,300 (1) 214 2.7 50 52 70 111 18 33 60 83 62 39 60 43 27 11.6 10.1 8 .3 15 17 23 0.3 0.3 0.4 11
Pidilite Industries REDUCE 2,8 70 2,450 (15) 1,459 18 .3 508 24 33 43 6 38 29 121 87 67 79 58 46 22.8 20.0 17.0 20 24 27 0.3 0.5 0.6 13
PI Industries ADD 3,242 3,270 1 492 6.2 152 56 77 96 12 39 25 58 42 34 42 31 25 8 .0 6.9 5.8 15 18 19 0.2 0.3 0.4 9
S H Kelkar and Company BUY 150 175 17 21 0.3 138 12 9 11 21 (21) 23 13 16 13 12 10 8 2.1 1.9 1.7 16 12 14 1.7 2.2 2.8 0
SRF BUY 2,648 2,8 30 7 78 5 9.9 296 64 81 95 55 27 18 42 33 28 26 21 17 9.2 7.3 5.9 24 25 24 0.3 0.4 0.5 21
Vinati Organics ADD 2,295 2,305 0 236 3.0 104 34 44 63 29 31 42 68 52 36 54 39 28 12.9 10.2 8 .3 21 22 25 0.3 0.3 0.6 2
Specialty Chemicals Attractive 4,101 51.5 25.2 25.2 25.1 57.9 46.2 36.9 38.3 30.7 24.8 10.6 9.1 7.7 18.4 19.7 20.9 0.4 0.6 0.7 71
Telecommunication Services
Bharti Airtel BUY 770 8 30 8 4,431 55.6 5,759 5 23 41 191 38 5 76 162 33 19 10 8 6 6.5 5.5 4.2 4 18 25 0.4 0.5 0.8 81
Indus Towers ADD 203 215 6 547 6.9 2,695 21 17 22 4 (22) 31 10 12 9 4 5 4 2.5 2.2 2.0 30 19 23 5.4 3.9 5.2 10
Vodafone Idea RS 10 — — 312 3.9 32,119 (9) (8 ) (8 ) NM NM NM NM NM NM 13 12 11 (0.5) (0.4) (0.3) 57 36 24 — — — 15
Tata Communications ADD 1,250 1,150 (8 ) 356 4.5 28 5 53 59 55 24 11 (7) 24 21 23 10 9 9 38 .4 17.9 12.4 28 8 114 64 1.7 1.8 1.7 11
Telecommunication Services Attractive 5,646 70.9 8 59 191 NM NM 82.4 9.4 8.2 6.5 20 31 22 NM NM 27 0.9 0.9 1.3 117
Transportation
Adani Ports and SEZ REDUCE 885 8 10 (8 ) 1,8 70 23.5 2,157 27 33 41 35 24 22 33 27 22 23 17 14 5.0 4.3 3.7 17 17 18 0.6 0.0 0.4 48
Container Corp. REDUCE 732 730 (0) 446 5.6 609 17 24 31 81 35 30 42 31 24 24 19 15 4.1 3.8 3.4 10 13 15 — 0.6 1.3 15
Delhivery REDUCE 569 540 (5) 413 5.2 725 (17) (5) (1) 98 69 72 NM NM NM (8 8 ) 305 71 6.1 4.2 4.1 NM NM NM — — — 6
Gateway Distriparks BUY 67 95 42 34 0.4 500 4 4 5 (41) 0 17 15 15 13 10 8 6 2.0 1.8 1.6 14 13 14 1.1 1.1 1.1 —
GMR Infrastructure BUY 40 43 9 239 3.0 6,036 (0) (1) (2) 58 (152) (50) NM NM NM 22 26 19 (29.2) (18 .4) (11.4) 20 61 57 — — — 5
Gujarat Pipavav Port BUY 87 108 25 42 0.5 48 3 4 5 6 (9) 31 15 21 16 14 8 7 6 2.1 2.1 2.1 10 13 15 4.6 6.0 6.8 1
InterGlobe Aviation BUY 1,941 2,710 40 748 9.4 38 3 (161) 79 132 (12) 149 66 NM 24 15 114 5 4 (12.3) (24.8 ) 3.8 207 NM NM — — — 16
Mahindra Logistics ADD 490 540 10 35 0.4 71 6 11 19 18 91 71 82 43 25 19 13 9 5.9 5.4 4.6 7 13 20 — — — 1
Transportation Attractive 3,826 48.0 89.4 8,398.8 36.7 NM 34.2 25.0 29.0 14.4 11.2 7.3 5.8 4.8 NM 16.9 19.1 0.3 0.2 0.4 93
KIE universe 197,906 2,483 39.6 0.2 28.4 25.4 25.4 19.7 13.4 13.5 11.0 3.4 3.2 2.8 13.5 12.5 14.2 1.7 1.5 1.7
Notes:
(a) We have used adjusted book values for banking companies.
(b) 2022 means calendar year 2021, similarly for 2023 and 2024 for these particular companies.
(c) Exchange rate (Rs/US$)= 79.69

10
Disclosures
Kotak Institutional Equities Research coverage universe

Distribution of ratings/investment banking relationships
Percentage of companies covered by Kotak Institutional
70%
Equities, within the specified category.
60%
Percentage of companies within each category for which Kotak
Institutional Equities and or its affiliates has provided
50%
investment banking services within the previous 12 months.
40% * The above categories are defined as follows: Buy = We expect

34.8%
31.7% this stock to deliver more than 15% returns over the next 12
30% months; Add = We expect this stock to deliver 5-15% returns
over the next 12 months; Reduce = We expect this stock to
18.1% deliver -5-+5% returns over the next 12 months; Sell = We
20% 15.4% expect this stock to deliver less than -5% returns over the next
12 months. Our target prices are also on a 12-month horizon
10% basis. These ratings are used illustratively to comply with
4.8% 4.0%
1.3% 1.8% applicable regulations. As of 30/06/2022 Kotak Institutional
Equities Investment Research had investment ratings on 227
0%
equity securities.
BUY ADD REDUCE SELL
Source: Kotak Institutional Equities As of June 30, 2022
Ratings and other definitions/identifiers

Definitions of ratings
BUY. We expect this stock to deliver more than 15% returns over the next 12 months.
ADD. We expect this stock to deliver 5-15% returns over the next 12 months.
REDUCE. We expect this stock to deliver -5-+5% returns over the next 12 months.
SELL. We expect this stock to deliver <-5% returns over the next 12 months.
Our Fair Value estimates are also on a 12-month horizon basis.
Our Ratings System does not take into account short-term volatility in stock prices related to movements in the market. Hence, a particular Rating may not
strictly be in accordance with the Rating System at all times.
Other definitions
Coverage view. The coverage view represents each analyst’s overall fundamental outlook on the Sector. The coverage view will consist of one of the following
designations: Attractive, Neutral, Cautious.
Other ratings/identifiers
NR = Not Rated. The investment rating and fair value, if any, have been suspended temporarily. Such suspension is in compliance with applicable regulation(s)
and/or Kotak Securities policies in circumstances when Kotak Securities or its affiliates is acting in an advisory capacity in a merger or strategic transaction
involving this company and in certain other circumstances.
CS = Coverage Suspended. Kotak Securities has suspended coverage of this company.
NC = Not Covered. Kotak Securities does not cover this company.
RS = Rating Suspended. Kotak Securities Research has suspended the investment rating and fair value, if any, for this stock, because there is not a sufficient
fundamental basis for determining an investment rating or fair value. The previous investment rating and fair value, if any, are no longer in effect for this stock
and should not be relied upon.
NA = Not Available or Not Applicable. The information is not available for display or is not applicable.
NM = Not Meaningful. The information is not meaningful and is therefore excluded.

Corporate Office Overseas Affiliates
Kotak Securities Ltd. Kotak Mahindra (UK) Ltd Kotak Mahindra Inc
27 BKC, Plot No. C-27, “G Block” 8th Floor, Portsoken House 369 Lexington Avenue
Bandra Kurla Complex, Bandra (E) 155-157 Minories 28th Floor, New York
Mumbai 400 051, India London EC3N 1LS NY 10017, USA
Tel: +91-22-43360000 Tel: +44-20-7977-6900 Tel:+1 212 600 8856
Copyright 2022 Kotak Institutional Equities (Kotak Securities Limited). All rights reserved.
The Kotak Institutional Equities research report is solely a product of Kotak Securities Limited and may be used for general information only. The legal entity preparing this research report
is not registered as a broker-dealer in the United States and, therefore, is not subject to US rules regarding the preparation of research reports and/or the independence of research analysts.
1. Note that the research analysts contributing to this report are residents outside the United States and are not associates, employees, registered or qualified as research analysts with
FINRA or a US-regulated broker dealer; and
2. Such research analysts may not be associated persons of Kotak Mahindra Inc. and therefore, may not be subject to FINRA Rule 2241 restrictions on communications with a subject
company, public appearances and trading securities held by a research analyst.
3. Kotak Mahindra Inc. does not accept or receive any compensation of any kind directly from US institutional investors for the dissemination of the Kotak Securities Limited research
reports. However, Kotak Securities Limited has entered into an agreement with Kotak Mahindra Inc. which includes payment for sourcing new major US institutional investors and
service existing clients based out of the US.
4. In the United States, this research report is available solely for distribution to major US institutional investors, as defined in Rule 15a – 6 under the Securities Exchange Act of 1934. This
research report is distributed in the United States by Kotak Mahindra Inc., a US-registered broker and dealer and a member of FINRA. Kotak Mahindra Inc., a US-registered broker-
dealer, accepts responsibility for this research report and its dissemination in the United States.
5. This Kotak Securities Limited research report is not intended for any other persons in the United States. All major US institutional investors or persons outside the United States, having
received this Kotak Securities Limited research report shall neither distribute the original nor a copy to any other person in the United States. Any US recipient of the research who
wishes to effect a transaction in any security covered by the report should do so with or through Kotak Mahindra Inc. Pease contact a US-registered representative; Vinay Goenka,
Kotak Mahindra Inc., 369 Lexington Avenue, 28th Floor, New York, NY, 10017, Direct +1 212 600 8856, vinay.goenka@kotak.com.
6. This document does not constitute an offer of, or an invitation by or on behalf of Kotak Securities Limited or its affiliates or any other company to any person, to buy or sell any
security. The information contained herein has been obtained from published information and other sources, which Kotak Securities Limited or its affiliates consider to be reliable. None
of Kotak Securities Limited accepts any liability or responsibility whatsoever for the accuracy or completeness of any such information. All estimates, expressions of opinion and other
subjective judgments contained herein are made as of the date of this document. Emerging securities markets may be subject to risks significantly higher than more established
markets. In particular, the political and economic environment, company practices and market prices and volumes may be subject to significant variations. The ability to assess such risks
may also be limited due to significantly lower information quantity and quality. By accepting this document, you agree to be bound by all the foregoing provisions.
This report is distributed in Singapore by Kotak Mahindra (UK) Limited (Singapore Branch) to institutional investors, accredited investors or expert investors only as defined under the
Securities and Futures Act. Recipients of this analysis /report are to contact Kotak Mahindra (UK) Limited (Singapore Branch) (16 Raffles Quay, #35-02/03, Hong Leong Building, Singapore 048581)
in respect of any matters arising from, or in connection with, this analysis/report. Kotak Mahindra (UK) Limited (Singapore Branch) is regulated by the Monetary Authority of Singapore.
Kotak Securities Limited and its affiliates are a full-service, integrated investment banking, investment management, brokerage and financing group. We along with our affiliates are
leading underwriter of securities and participants in virtually all securities trading markets in India. We and our affiliates have investment banking and other business relationships with a
significant percentage of the companies covered by our Investment Research Department. Our research professionals provide important input into our investment banking and other
business selection processes. Investors should assume that Kotak Securities Limited and/or its affiliates are seeking or will seek investment banking or other business from the company or
companies that are the subject of this material. Our research professionals are paid in part based on the profitability of Kotak Securities Limited, which includes earnings from investment
banking and other businesses. Kotak Securities Limited generally prohibits its analysts, persons reporting to analysts, and members of their households from maintaining a financial
interest in the securities or derivatives of any companies that the analysts cover. Additionally, Kotak Securities Limited generally prohibits its analysts and persons reporting to analysts
from serving as an officer, director, or advisory board member of any companies that the analysts cover. Our salespeople, traders, and other professionals may provide oral or written
market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may
make investment decisions that are inconsistent with the recommendations expressed herein.
In reviewing these materials, you should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additionally, other important
information regarding our relationships with the company or companies that are the subject of this material is provided herein.
This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. We are not
soliciting any action based on this material. It is for the general information of clients of Kotak Securities Limited. It does not constitute a personal recommendation or take into account
the particular investment objectives, financial situations, or needs of individual clients. Before acting on any advice or recommendation in this material, clients should consider whether it is
suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the investments referred to in this material and the income from them may go
down as well as up, and investors may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original
capital may occur. Kotak Securities Limited does not provide tax advise to its clients, and all investors are strongly advised to consult with their tax advisers regarding any potential
investment. Certain transactions – including those involving futures, options, and other derivatives as well as non-investment-grade securities – give rise to substantial risk and are not
suitable for all investors. The material is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such.
Opinions expressed are our current opinions as of the date appearing on this material only. We endeavor to update on a reasonable basis the information discussed in this material, but
regulatory, compliance, or other reasons may prevent us from doing so. We and our affiliates, officers, directors, and employees, including persons involved in the preparation or issuance
of this material, may from time to time have "long" or "short" positions in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. Kotak
Securities Limited and its non-US affiliates may, to the extent permissible under applicable laws, have acted on or used this research to the extent that it relates to non-US issuers, prior to
or immediately following its publication. Foreign currency-denominated securities are subject to fluctuations in exchange rates that could have an adverse effect on the value or price of or
income derived from the investment. In addition, investors in securities such as ADRs, the value of which are influenced by foreign currencies, affectively assume currency risk. In addition,
options involve risks and are not suitable for all investors. Please ensure that you have read and understood the current derivatives risk disclosure document before entering into any
derivative transactions.
Kotak Securities Limited established in 1994, is a subsidiary of Kotak Mahindra Bank Limited. Kotak Securities is one of India's largest brokerage and distribution houses.
Kotak Securities Limited is a corporate trading and clearing member of Bombay Stock Exchange Limited (BSE), National Stock Exchange of India Limited (NSE), Metropolitan Stock
Exchange of India Limited (MSE), National Commodity and Derivatives Exchange (NCDEX) and Multi Commodity Exchange (MCX). Our businesses include stock broking, services rendered
in connection with distribution of primary market issues and financial products like mutual funds and fixed deposits, depository services and portfolio management.
Kotak Securities Limited is also a depository participant with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). Kotak Securities Limited
is also registered with Insurance Regulatory and Development Authority as Corporate Agent for Kotak Mahindra Old Mutual Life Insurance Limited and is also a Mutual Fund Advisor
registered with Association of Mutual Funds in India (AMFI). Kotak Securities Limited is registered as a Research Analyst under SEBI (Research Analyst) Regulations, 2014.
We hereby declare that our activities were neither suspended nor we have defaulted with any stock exchange authority with whom we are registered in last five years. However, SEBI,
Exchanges and Depositories have conducted the routine inspection and based on their observations have issued advise letters or levied minor penalty on KSL for certain operational deviations.
We have not been debarred from doing business by any stock exchange/SEBI or any other authorities, nor has our certificate of registration been cancelled by SEBI at any point of time.
We offer our research services to primarily institutional investors and their employees, directors, fund managers, advisors who are registered with us. Details of Associates are available on
website, i.e. www.kotak.com and https://www.kotak.com/en/investor-relations/governance/subsidiaries.html.
Research Analyst has served as an officer, director or employee of subject company(ies): No.
We or our associates may have received compensation from the subject company(ies) in the past 12 months.
We or our associates have managed or co-managed public offering of securities for the subject company(ies) or acted as a market maker in the financial instruments of the subject
company/company (ies) discussed herein in the past 12 months. YES. Visit our website for more details https://kie.kotak.com/kinsiteintra/index.php.
We or our associates may have received compensation for investment banking or merchant banking or brokerage services from the subject company(ies) in the past 12 months. We or our
associates may have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company(ies) in the
past 12 months. We or our associates may have received compensation or other benefits from the subject company(ies) or third party in connection with the research report.
Our associates may have financial interest in the subject company(ies).
Research Analyst or his/her relative's financial interest in the subject company(ies): No
Kotak Securities Limited has financial interest in the subject company(ies) at the end of the month immediately preceding the date of publication of Research Report: YES. Nature of
Financial interest: Holding equity shares or derivatives of the subject company.
Our associates may have actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date of publication of Research Report.
Research Analyst or his/her relatives have actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date of
publication of Research Report: No.
Kotak Securities Limited has actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date of publication of
Research Report: No
Subject company(ies) may have been client during twelve months preceding the date of distribution of the research report.
A graph of daily closing prices of securities is available at https://www.moneycontrol.com/india/stockpricequote/ and http://economictimes.indiatimes.com/markets/stocks/stock-quotes.
(Choose a company from the list on the browser and select the "three years" icon in the price chart).
Kotak Securities Limited. Registered Office: 27 BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E), Mumbai 400051. CIN: U99999MH1994PLC134051, Telephone No.: +22
43360000, Fax No.: +22 67132430. Website: www.kotak.com / www.kotaksecurities.com. Correspondence Address: Infinity IT Park, Bldg. No 21, Opp. Film City Road, A K Vaidya Marg,
Malad (East), Mumbai 400097. Telephone No: 42856825. SEBI Registration No. INZ000200137(Member of NSE, BSE, MSE, MCX & NCDEX). Member Id: NSE-08081; BSE-673; MSE-1024;
MCX-56285; NCDEX-1262. AMFI ARN 0164, PMS INP000000258 and Research Analyst INH000000586. NSDL/CDSL: IN-DP-629-2021. Compliance Officer Details: Mr. Sanjayu Nair. Call:
022 - 4285 8484, or Email: ks.compliance@kotak.com. Investments in securities market are subject to market risks, read all the related documents carefully before investing.
In case you require any clarification or have any concern, kindly write to us at below email ids:
Level 1: For trading-related queries, contact our customer service at ‘service.securities@kotak.com’ and for demat account-related queries, contact us at ks.demat@kotak.com or call us
on: Toll free numbers 18002099191 / 1860 266 9191.
Level 2: If you do not receive a satisfactory response at Level 1 within 3 working days, you may write to us at ks.escalation@kotak.com or call us on 022-42858445 and if you feel you are
still unheard, write to our customer service HOD at ks.servicehead@kotak.com or call us on 022-42858208.
Level 3: If you still have not received a satisfactory response at Level 2 within 3 working days, you may contact our Compliance Officer (Name: Mr. Sanjayu Nair) at
ks.compliance@kotak.com or call on 91- (022) 4285 8484.
Level 4 : If you have not received a satisfactory response at Level 3 within 7 working days, you may also approach Managing Director/CEO (Mr. Jaideep Hansraj) at ceo.ks@kotak.com or
call on 91-(022) 4285 8301.
First Cut notes published on this site are for information purposes only. They represent early notations and responses by analysts to recent events. Data in the notes may not have been
verified by us and investors should not act upon any data or views in these notes. Most First Cut notes, but not necessarily all, will be followed by final research reports on the subject.
There could be variance between the First Cut note and the final research note on any subject, in which case the contents of the final research note would prevail. We accept no liability
of the First Cut Notes.
Analyst Certification
The analyst(s) authoring this research report hereby certifies that the views expressed in this research report accurately reflect such research analyst's personal views about the subject
securities and issuers and that no part of his or her compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in the research report.
This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Firm. Firm Research is disseminated and available primarily electronically, and,
in some cases, in printed form.
Additional information on recommended securities is available on request.

09september2022 India Daily

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

09september2022 India Daily

Uploaded by

Copyright:

Available Formats

INDIA DAILY

September 9, 2022 India 8-Sep 1-day 1-mo 3-mo

Contents Global/Regional indices

Initiating Coverage FTSE 7,262 0.3 (3.0) (2.9)

 Risks: Slowdown in sectoral growth in e-commerce shipments, acquisition

Strategy: Addressing T(RIL)emma 8-Sep 1-day 1-mo 3-mo

Rs/US$ 79.7 (1) 14 188

companies 6-Sep MTD CYTD

FIIs 213 (767) 23,258

Best performers 8-Sep 1-day 1-mo 3-mo

BJFIN in Equity 17,383 1.9 11.9 39.5

TVSL in Equity 1,045 0.3 9.2 39.1

PIDI in Equity 2,870 2.3 8.3 36.6

GRASIM in Equity 1,770 1.1 11.1 33.6

BOB in Equity 138 3.1 17.0 33.6

ONGC in Equity 132 (0.5) (3.4) (19.3)

VEDL in Equity 262 0.1 2.1 (16.3)

WPRO in Equity 413 1.3 (5.3) (12.2)

HCLT in Equity 931 (0.1) (3.6) (9.6)

GAIL in Equity 93 (0.3) 4.1 (8.9)

Initiate with REDUCE and a DCF-based FV of Rs540

Company data and valuation summary

Source: Bloomberg, Kotak Institutional Equities estimates

Source: Company, Kotak Institutional Equities estimates

2019 2020 2021 2022 2023E 2024E 2025E 2026E

Source: Company, Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 3

We initiate coverage with a REDUCE rating; Fair Value of Rs540/share

Exhibit 3: We arrive at a DCF-based one-year forward Fair value of Delhivery of Rs540/share

DCF valuation (Sep-2024E)

Per share FV calculation (Sep-2023E)

Source: Company, Kotak Institutional Equities estimates

4 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Sectoral constraints may limit growth prospects for Delhivery

Flipkart group (India) Amazon group (India)

Source: Companies, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 5

E-commerce shipments E-commerce shipments (excluding Meesho)

1.0 0.9 0.9

Source: Company, Kotak Institutional Equities estimates

Revenues (Rs bn, LHS) PBT margin (%, RHS)

Source: Company, Kotak Institutional Equities

6 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Source: Kotak Institutional Equities estimates

KOTAK INSTITUTIONAL EQUITIES RESEARCH 7

A decade of strong revenue growth ahead of Delhivery

 Online share of retail in India will increase to 24%/30% by FY2035E/FY2045E, factoring a

Exhibit 8: EBITDA CAGR drivers for Delhivery (%)

Source: Kotak Institutional Equities estimates

8 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Spending on technology as share of sales Spending on automation as share of sales

Source: Company, Kotak Institutional Equities

Slow growth in corporate overheads to drive further operating leverage benefits

We expect the intensity of working capital and capex to marginally improve

Relative valuation: Delhivery deserves a premium multiple

KOTAK INSTITUTIONAL EQUITIES RESEARCH 9

Source: Company, Kotak Institutional Equities estimates

Exhibit 11: Delhivery is well-diversified beyond e-commerce

Source: Companies, Industry reports, Kotak Institutional Equities estimates

10 KOTAK INSTITUTIONAL EQUITIES RESEARCH

Source: Companies, Kotak Institutional Equities

KOTAK INSTITUTIONAL EQUITIES RESEARCH 11

Source: Companies, Kotak Institutional Equities