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DOLATCAPITALDolat Research

Tel: (9122) 40969700

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THE FREE FALL The INR has depreciated by over ten percent since May 2, 2013 against the

US Dollar, and eleven ercent a ainst the Euro. While it has witnessed

extreme volatility during the period and may take some more time tostabilise, we believe that this sharp depreciation will impact earnings for

some of the sectors materiall

Based on our quick estimates, we expect IT services and Pharma to benefitthe most while those negatively impacted include companies in the

, .

For IT services, our current estimates are based on average of 54.5 to theUSD for FY14, which if revised to 59 leads to an earnings upgrade of 4-7% for our coverage universe. Similarly for the gas segment, the cost

increases due to currency impact could lead to earnings downgrades of 3-8% for companies in our coverage.

We have not made any revisions to our preferred picks list (refer our notedate 12/06/2013) yet as wait for the currency to stabilise before revising

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HOW MUCH MORE.

48

Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13USD Vs. INR

Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13GBP Vs. INR

50

52

54

75

80

58

60

62

90

95

0.45

Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13

JPY Vs. INR

60

Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13

EUR Vs. INR

0.5

0.55

65

70

0.6

0.65

75

80

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Prices till 20thJune 2013

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Auto & Auto AncillarCompanies Comments Impact

Apollo Tyres & Gains on exports, however, mark to market losses onBharat Forge foreign loans will play a spoiler.

Bajaj Auto~75% of its exports are hedged, so a mark to market on

this hedge will be negative in the short-term. Negative

Exide IndsThe advantage of softening in lead prices which is builtin our assumption may no longer hold valid due tosignificant rupee depreciation.

Negative

Hero Moto Exports have just started and will hardly impact overallEPS. Neutral

M&MNeutral since lower commodity advantage squared off

Neutralaga ns eprec a ng rupee.

Maruti

Advantage of yen will continue to benefit margins.

However, total imports (direct & Indirect) are roughly-

Positive. .

Overall, forex should be on the positive side.

Tata MotorsShould be the biggest beneficiary of the pound1GBP=90 - , our assum tion of GBP is currentl 80 -.

Positive

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ConsumerCompanies Comments Impact

Im orted RM 10% of sales. International business 15% of

s an a n ssales. Price hike likely but with a lag

ega ve

Berger Paints

Imported RM 7% of sales. International business 10% of

sales. Price hike likely but with a lag Negative

Dabur India International business 30% of sales (Namaste group

US). No significant imports Positive

Im orted RM 5% of sales. International business 40% of

o re

Consumer sales (South Africa and Indonesian currency hasdepreciated against Rupee)

Negative

Hindustan Imported RM 4% of sales. Company has a natural hedgeUnilever due to exports 3% of sales

ITC Imported RM 2.7% of sales. Exports 10% of sales. Neutral

Im orted RM 4% of sales. International business 25% ofar co

sales eu ra

PidiliteIndustries

Imported RM 13% of sales. International business 10% ofsales. Price hike likely but with a lag

Negative

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EnerCompanies Comments Impact

Im orts CPVC so raw material costs increase. We ex ectAstral Poly Astral to pass this through price hikes. If not, FY14E

earnings can be impacted by around 5%.Negative

Imports base oil so raw material costs increase. Unlikelyastro to mitigate t is ris . Earnings cou e impacte y

around 8%.Negative

GAIL Uses gas as input for Petrochemicals. Negative

GSPL Due to high prices, spot volumes could reduce. Negativeimpact on earnings of around 3% for FY14. Neutral toNegative

Raw material cost increases. We expect Gujarat Gas

u arat as wou ta e price i es to negate t is. I not earnings canbe reduced by 5 - 6% for CY13.

Negative

Raw material cost increases. We expect IGL would take. ,

earnings can be reduced by 4 - 5% for FY14.

Petronet LNG Spot off-take can reduce. Earnings impact can be around

Negative

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FinancialsCompanies Comments Impact

SBI Gains the most amongst our universe on account of

higher proportion of international business

Neutral

BOB Amongst the top gainers after SBI, led by its higher than

sector average global exposure Neutral

Other PNB,

UBI, Yes, HDFCBank, Axis,ING, KVB, CUB,

No direct impact. However, pressure on borrowersexposed to FX risk can exert some pressure on assetquality of all banks including the above three banks.

Neutral

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IT ServicesCompanies Comments Impact

We ex ect realisation ains of 3 10 for 1 Annual

Mindtree and sustenance of OPM at current levels of 18%. Fx

gains would be lowest among peers due to realtively

higher hedged exposure.

Positive

Mphasis

Would be benefited least due to highest component ofINR denominated revenues among the peers. We expectmoderate realisation gains of 1/5% for Q1/Annualestimates.

Neutral

NIIT Tech

We expect moderate realisation gains of 1.5%/7% forQ1/Annual as most of the recent wins are in Indiamarket. Though the Fx would support its OPM Positivesustenance at over 14%+, leading to potential earningsupgrades

Currency gains would be moderate due to wide range of

OFSSorex ea t, ow ng to g er component o revenues

coming from developing countries. We expectrealisation gains in the range of 2/7% for Q1/Annualperspective.

Neutral

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IT ServicesCompanies Comments Impact

We ex ect realisation ains would be 7-8 as the deal

Persistent size and maturity is smaller and thus quicker

renegotiations. OPM sustenance at about 20%+ which

could lead to potential earnings upgrades of 4%.

Positive

TCS

We expect realisation gains of 2%/9% for Q1/Annualand Fx support to its OPM would lead to sustenance atabout 27%+ which could lead to potential earningsu rades.

Positive

Currency gains would be relatively moderate due tohigher GBP (up 5% YY basis) component versuspeers. We expect reported realisation gains of 2%/7%

for Q1/Annual perspective. OPM would remain at thelevels of 17%, and could lead to further earnings

upgrades.

Wipro

e expect rea sat on ga ns o or nnuaperspective. We believe weak off take in products wouldbe further extended due to likely upward revisions inprices.

Positive

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Midca sCompanies Comments Impact

Im orts constitute 35-40% of the raw material costs.

Supreme

Industries

While price hikes would happen for the piping segment

on immediate basis, the other segments are likely to pass

on the rising input cost only after some lag. Margins thus

Negative

could be negatively impacted

SintexMTM provisioning on FCCB will impact the financials

largely. Financials of two subsidiaries - Wausaukee (US) Negative

& Nief (EU) - will get impacted positively

Time

Imports constitute 60-65% of the raw mat costs. Margins

would thus be ne ativel im acted. However increasin

Technoplast contribution of overseas subsidiaries is likely to negate

the impact to some extent.

Negative

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Midca sCompanies Comments Impact

Uses as as fuel, will thus result in rise in cost of

Kajaria

Ceramics

production. Passing on immediately looks unlikely

considering the current demand scenario. Margins may

thus remain under pressure.

Negative

Greenply

Rising rupee expected to hurt margins of plywood

segment. Impact on laminates segment to be neutral (due

to natural hedge) while for MDF segment import threat

Industries will ease which would result in better pricing power. Inall, being a net importer, margins might get impacted to

a certain extent

ega ve

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Metals and MininCompanies Comments Impact

Positive for e-auctions realisations, but earnin s wouldbe impacted by higher bulk diesel prices

Hindalco

Positive impact on profits in standalone operations as

LME prices are in USD, Novelis earnings in USD , but Positiveva uation get impacte ue to ig er e t

Hindustan Zinc Benefits from Re depreciation as prices are based on

import parity basis Positive

InnoventiveIndustries Net exporter, benefits from higher Re Positive

indal Saw Net exporter of pipes, but has 50% of debt in foregin

Neutralcurrency

Jindal Steel and

Power

Benefits due to higher steel realisations, have only 25%

foreign currency debt Positive

JSW SteelHave USD 2.4bn dollar of unhedged acceptances, butbenefits in terms of higher realisations as prices are onimport parity

Negative

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Metals and MininCompanies Comments Impact

MaharashtraSeamless

,

Ratnamani

Metal Net exporter, benefits from higher Re Positive

SAIL Benefits due to higher steel realisations, and have Rs debt Positive

Sterlite Positive for Cairn India and earnings accretive in Zinc,

Aluminum and Silver operation, but would be hit by Negativehigher forex debt of USD5.5bn

Tata SteelValuations get impacted by higher forex debt at TataSteel Europe, benefits due to Re depreciation at Negatives an a one eve

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PharmaCompanies Comments Impact

Hed es 100% of one ears and 50% of next ears net Neutralforex exposure.

Forex loans of USD 150mn. No forward cover. Near term

negative due to revaluation of Balance sheet in foreign

Neutral

a a ea t currency. However in me ium term, we expect t is s abe more than neutralised due to higher export realisation(50% of sales)

Divi'sunhedged. Negligible forex loan.

Dr. Redd sOutstanding cashflow hedge stood at USD 480mn (18months rate at USD INR 56-59 and balance sheet hed e

Positive

stood at USD 400mn.

Glenmark No hedge on exports. Fx loans of USD 85mn to incurMTM loss. Neutral

Ipca labsFx hedge worth USD 100mn (12 months cover atUSD/INR 56-57). Forex loan of USD 70mn. Exportsconstitute more than 60% of sales.

Positive

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PharmaCompanies Comments Impact

Lupin at USD 330mn. Hedges 50-60% of its net exports for 12months

Positive

Ranbaxy962mn. To realize losses on fair value of derivatives.

Negative

Sun Pharma One year cover of net exports, Negligible Debt Positive

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BUY Upsideabove20%ACCUMULATE Upsideabove5%andupto20%REDUCE Upsideofupto 5%ordownsideofupto 15%

Analyst Sector/Industry/Coverage E-mail Tel.+91-22-4096 9700Amit Khurana, CFA Co-Head Equities and Director - Research amit@dolatcapital.com 91-22-40969745

Amit Purohit Consumer amitp@dolatcapital.com 91-22-40969724

owns eo moret an

Milind Bhangale Pharma milindb@dolatcapital.com 91-22-40969731

Mayur Milak Auto & Auto Ancillary mayurm@dolatcapital.com 91-22-40969749

Nehal Shah Midcaps & Agrochem nehals@dolatcapital.com 91-22-40969753

Priyank Chandra Oil & Gas priyank@dolatcapital.com 91-22-40969737

Rahul ain IT Services rahul@dolatca ital.com 91-22-40969754

Rajiv Pathak Financials rajiv@dolatcapital.com 91-22-40969750

Ram Modi Metals & Mining ram@dolatcapital.com 91-22-40969756

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This report contains a compilation of publicly available information, internally developed data and other sources believed to be reliable. Whileall reasonable care has been taken to ensure that the facts stated are accurate and the opinion given are fair and reasonable, we do not take anyresponsibility for inaccuracy or omission of any information and will not be liable for any loss or damage of any kind suffered by use of orreliance placed upon this information. For Pvt. Circulation & Research Purpose only.