Motilal Oswal Financial Services

22 April 2020

COPE

The Economy Observer

How are states behaving under COVID-19?

Tight financial position demands relaxations from the center



Public health and sanitation, hospitals and dispensaries are part of the 61 items that come under the State List or List-II

in Schedule Seven to the Constitution of India. It is not surprising then that states are at the forefront in the fight

against the Coronavirus (COVID-19) pandemic. Since public health is a state subject, the economic capacity of the state

does play an important role in providing apt health services and facilities to its citizens. Therefore, in this note, we look

at the general trend in fiscal spending on public health by various Indian states and their fiscal position.

On an aggregate basis, all states spent only INR1.3t (or 0.73% of GDP) on medical and public health in FY18, amounting

to ~4.5% of total spending by states. A study of 22 states and union territories (UTs) confirms that Delhi (DL) tops the

list with the highest share of health spending (~12.5% of total spending), followed by Assam (AS) at 6.6%. Telangana

(TS) and Andhra Pradesh (AP) spend the least (~3.5% of total spending) on health sector.

Further, the fiscal position of 18 states suggests that eight states have budgeted for a 3% fiscal deficit of the GSDP

(Gross State Domestic Product) or higher for FY21, only seven states have targeted a surplus on the revenue account

while 10 states have outstanding liabilities of 24% of the GSDP or more for this year. What’s more, for 10 states, the

committed expenditure (interest, salary and pension payments) amounted to more than 53% of the revenue receipts,

as against the average of all states at ~49%.

As per our assessment, Punjab (PB), Rajasthan (RJ), Kerala (KL) and Himachal Pradesh (HP) are the four most fiscally-

stressed states. Three other states – West Bengal (WB), Uttarakhand (UK) and Uttar Pradesh (UP) – also have a tight

fiscal position. In contrast, Maharashtra (MH), which is the worst affected by COVID-19, had one of the best financial

positions; MH had the lowest fiscal deficit and outstanding liabilities in FY19, second only to Odisha (OD).

Not surprisingly then, when Kerala borrowed INR59b in the first week of April (7 Apr’20), accounting for 44% of its

approved limit during Apr-Dec’20, it came at a hefty cost of 7.9%/9% for 10-year/15-year paper. However, Kerala was

not the only state to borrow at such a high rate on 7 Apr’20. Rajasthan (RJ) raised INR10b through 7-year paper at

8.3%, Haryana (HR) paid 8% to raise INR50b via 10-year paper while Himachal Pradesh (HP) and Punjab (PB) did not

accept any bids for their 10-year securities, probably because of higher rates. Even Maharashtra (MH) borrowed at

7.83% for 10-year security. Largest-ever issuance of INR375b in that auction is likely to have played a role in garnering

such high interest rates. Bond yields, however, have softened since then in line with lower issuances. Overall, states

need substantial relaxation in terms of their borrowings and fiscal deficit to fight COVID-19.

States’ total health spending just 0.73% of GDP in FY18:

Public health and

sanitation, hospitals and dispensaries are part of 61 items that come under the State

List or List-II in

Schedule Seven

to the Constitution of India. It is, thus, not surprising

that states are at the forefront in the fight against the COVID-19 pandemic.

All states together spent

INR1.3t on public health in

FY18, amounting to 4.5% of

total spending and 24-year

high of only 0.73% of GDP.

An analysis of health spending by states confirms that all states together spent

INR1.3t on public health in FY18 (the last year for which actual data is available;

have deliberately avoided FY19RE and FY20BE due to substantial differences

between REs/BEs and actuals), amounting to 4.5% of total spending and only 0.73%

of GDP

(Exhibit 1).

What is notable, however, is that health spending by states has

increased consistently during the past decade, from 0.5% of GDP in FY08 to 24-year

high of 0.73% in FY18. A study of 22 states and UTs confirms that the National

Capital Territory of Delhi (DL) tops the list with the highest share of health spending

(12.6% of total spending), followed by Assam (AS) at 6.6%. Telangana (TS) and

Andhra Pradesh (AP) spent the least (~3.5% of total spending) on the health sector

(Exhibit 2).

Nikhil Gupta – Research Analyst

(Nikhil.Gupta@MotilalOswal.com); +91 22 6129 1555

Yaswi Agarwal

– Research Analyst

(Yaswi.Agarwal@motilaloswal.com); +91 22 7193 4196

Investors are advised to refer through important disclosures made at the last page of the Research Report.

Motilal Oswal research is available on

www.motilaloswal.com/Institutional-Equities,

Bloomberg, Thomson Reuters, Factset and S&P Capital.

Exhibit 1:

Total spending by all states together on medical

and public health (% of GDP)

0.9

0.8

0.7

0.6

0.5

0.4

FY91 FY94 FY97 FY00 FY03 FY06 FY09 FY12 FY15 FY18

Actual data for FY18

States' health spending

0.7

Exhibit 2:

Health spending by 22 individual states in FY18 (%

of total spending)

Health spending (% of total spending)

6 6

5 5 5 5 5

4 4 4 4 4 4 4

3 3 4 4 4

Source: Reserve Bank of India (RBI), MOFSL

According to the

National Health Policy 2017,

the government has a target to

double health expenditure from the existing ~1.2% of GDP (including the central

government) to 2.5% by 2025. States’ spending on health was targeted to increase

to ~8% by 2020, which definitely has not happened.

States’ economic capacity, thus, matters:

Since public health is a state subject, the

onus of delivering apt health services and facilities also lies on states. The allocation

of funds to the health sector, thus, is dependent on the overall economic capacity

(resource availability, sectoral priorities, etc.) of states/UTs. Since most states had

presented their 2020-21 Budget before 15

Mar’20, a quick analysis of the financial

position of 18 individual states (accounting for ~84% of cumulative

GDP/receipts/spending of all states together) would help us gauge their ability to

fight COVID-19

(Exhibit 3 on the following page).

The more financially stressed a

state, the weaker is its ability and vice-versa. Key findings are given below:

1. Eight out of 18 states have budgeted for a fiscal deficit of 3% of GSDP or more

for FY21. Another five states have budgeted for a fiscal deficit of 2.5-2.9% of

their respective GSDPs. Only five states (AS, GJ, JH, MH and WB) have budgeted

for a fiscal deficit of <2.5% of GSDP in FY21.

2. Seven out of 18 states have budgeted for a revenue deficit in FY21, while

another four states have targeted a balanced revenue account (=0%). The

remaining seven states have budgeted for a revenue surplus (ranging from 0.4%

to 2.8% of GSDP) this year.

3. Seven out of 18 states had outstanding liabilities of more than 25% of GSDP in

FY19 and one more (UK) has budgeted for >25% debt for FY21. Another two

states (BH and UK) have budgeted for ~24% debt for FY21, while the remaining

eight states (AS, GJ, HR, KA, MH, OD, TN and TS) have lower debt.

4. Finally, it is also important to understand the share of committed (or

mandated/non-discretionary) expenditure, defined as the sum of salary,

pensions and interest payments, in states’ total spending. For all states

together, the share of committed spending was 52% of revenue receipts and

budgeted at 49% for FY21. For individual states, however, the ratio ranges from

32% (AS) to 67% (PB). For 10 out of 18 states, the committed expenditure

amounted to >53% of revenue receipts, which reduces their ability to increase

allocation to other sectors, including health, without deteriorating their financial

position

(Exhibit 4 on the following page).

Eight out of 18 states have

budgeted a fiscal deficit of

>=3% of GSDP for FY21,

only seven states have

targeted a surplus on the

revenue account and 10

states have outstanding

debt of >=24% of GSDP.

For 10 out of 18 states,

the committed

expenditure was >53%

of revenue receipts, as

against ~49% ratio for

all states together.

22 April 2020

Exhibit 3:

Summary of states’ finances during the last four years (% of GDP)

% of GSDP

Assam (AS)

Bihar (BH)

Chhattisgarh (CT)

Gujarat (GJ)

Haryana (HR)

Himachal Pradesh (HP)

Jharkhand (JH)

Karnataka (KA)

Kerala (KL)

Maharashtra (MH)

Odisha (OD)

Punjab (PB)

Rajasthan (RJ)

Tamil Nadu (TN)

Telangana (TS)

Uttar Pradesh (UP)

Uttarakhand (UK)

West Bengal (WB)

18 states

All states#

Fiscal Deficit

FY18

3.2

2.9

2.5

1.6

2.9

3.2

4.3

2.4

3.9

1.0

2.2

2.7

3.0

2.8

3.5

2.0

3.6

2.9

2.4

FY19

1.5

2.7

1.8

3.0

4.4

2.0

3.0

3.4

0.9

2.0

3.1

3.7

2.8

3.1

2.4

3.0

2.4

2.5

FY20RE

5.9

9.5

6.4

1.6

2.8

8.3

2.3

2.4

3.0

2.7

3.4

3.0

3.2

3.0

2.3

3.0

2.5

2.6

3.1

FY21BE

2.3

3.0

3.2

1.8

2.7

5.8

2.1

2.7

3.0

1.7

3.0

2.9

3.0

2.8

3.0

2.6

2.2

2.5

FY18

15.9

23.5

19.3

16.2

21.5

37.6

27.9

17.8

30.7

16.9

17.0

41.5

33.7

21.5

20.2

29.6

23.3

36.5

23.5

25.1

FY19

17.0

24.5

22.0

16.0

21.4

33.0

27.2

19.2

30.1

15.5

16.5

40.6

33.0

20.8

20.3

30.2

23.6

34.8

23.2

24.8

Debt

FY20RE

18.1

23.2

25.3

16.1

21.3

33.8

27.1

18.2

30.1

16.1

17.9

39.8

33.4

21.4

20.6

28.2

24.1

33.3

23.1

24.7

FY21BE

19.5

23.9

27.0

15.7

21.1

33.7

27.0

19.5

29.9

16.2

19.0

38.5

33.1

21.8

20.7

28.8

24.2

32.9

23.3

24.9

FY18

-0.5

3.0

1.2

0.4

-1.6

-0.2

0.7

0.3

-2.5

0.1

3.1

-2.0

-2.2

-1.5

0.5

0.9

-0.9

-1.0

-0.2

-0.1

Revenue balance

FY19

2.0

1.3

0.2

-1.5

-1.1

1.9

0.0

-2.2

0.5

2.9

-2.5

-3.1

-1.4

0.5

1.9

-0.4

-0.9

-0.2

-0.1

FY20RE

0.2

-3.0

-2.9

0.1

-1.8

-4.3

1.9

0.0

-2.0

-1.1

1.2

-2.2

-2.7

-1.4

0.0

1.6

0.0

-0.5

-0.7

-0.6

FY21BE

2.2

2.8

0.7

0.0

-1.6

-2.2

0.5

0.0

-1.6

-0.3

1.6

-1.2

-1.1

-1.0

0.4

1.5

0.0

-0.1

0.0

RE = Revised estimates; BE = Budget estimates

# Based on the share of 18 states in all states in FY18

Source: State Budget documents, RBI, MOFSL

Exhibit 4:

Share of committed expenditure* for 18 individual states and all states together

Committed expenditure* (% of revenue receipts)

59.4

60.2

60.5

60.8

64.4

65.8

66.2

67.0

31.7

34.6

37.5

41.1

45.4

47.7

48.4

48.9

53.1

55.1

Based on 2020-21 budget estimates (BEs)

* Sum of (Salary + Pensions + Interest payments)

Source: State Budget documents, MOFSL

22 April 2020

Punjab (PB), Rajasthan (RJ),

Kerala (KL) and Himachal

Pradesh (HP) are the four

most fiscally-stressed

states.

Odisha (OD), Maharashtra

(MH) and Gujarat (GJ) are

the best financial managed

states.

Ranking 18 states based on their financial position and committed expenditure:

From an investment perspective, it is pertinent to rank individual states based on

their finances. We use four criteria – fiscal deficit (% of GSDP), outstanding liabilities

(% of GSDP), revenue deficit (% of GSDP) and committed expenditure (% of revenue

receipts) – to assess their attractiveness from an investment perspective. The higher

the deficit (fiscal or revenue)/outstanding liabilities/share of committed

expenditure, the more stressed the states’ finances and vice-versa. We assign

weights to each of the four criteria – fiscal deficit (40%), liabilities (30%), revenue

deficit (20%) and committed expenditure (10%) – to estimate the rating of each

state. All 18 states are ranked on all these four criteria from the safest/most

attractive to the most-stressed (least attractive). The overall ranking is provided in

the last column

(Exhibit 5).

This analysis is done on the basis of actual data available

for FY19; however, the broad conclusions do not change much if we assess states on

the basis of FY21BE. Key findings are:

1. The four states of Punjab (PB), Rajasthan (RJ), Kerala (KL) and Himachal Pradesh

(HP) are the most fiscally stressed. They remain the least attractive states even

when ranked with FY21BE numbers;

2. West Bengal (WB), Uttarakhand (UK) and Uttar Pradesh (UP) are the next three

states with tight fiscal positions, irrespective of whether we use FY19 or FY21BE

data.

3. In contrast, Maharashtra (MH), which is the worst affected by the COVID-19

pandemic, is one of the best financially-managed states. It had the lowest fiscal

deficit and outstanding liabilities in FY19, second only to Odisha (OD). Gujarat

(GJ) is another fiscally-sound state.

Exhibit 5:

Ranking of 18 states based on four parameters in FY19 (Provisional)

Fiscal deficit

0.9

1.5

1.8

2.0

2.4

2.7

2.8

3.0

3.1

3.4

3.7

4.4

Outstanding liabilities

15.5

16.0

16.5

17.0

19.2

20.3

20.8

21.4

22.0

23.6

24.5

27.2

30.1

30.2

33.0

34.8

Revenue balance

2.9

2.0

1.9

1.3

0.5

0.2

0.0

-0.4

-0.9

-1.1

-1.4

-1.5

-2.2

-2.5

Committed expenditure

31.7

34.6

37.5

41.1

45.4

47.7

48.4

53.1

55.1

59.4

60.2

60.5

60.8

64.4

65.8

66.2

Overall ranking#

Odisha (OD)

Maharashtra (MH)

Gujarat (GJ)

Karnataka (KA)

Assam (AS)

Bihar (BH)

Chhattisgarh (CT)

Telangana (TS)

Jharkhand (JH)

Tamil Nadu (TN)

Haryana (HR)

Uttar Pradesh (UP)

Uttarakhand (UK)

West Bengal (WB)

Himachal Pradesh (HP)

Kerala (KL)

Rajasthan (RJ)

Ranks

40.6

-3.1

67.0

Punjab (PB)

# Weights assigned are: Fiscal deficit =4, Outstanding liabilities = 3, Revenue balance =2 (inverse), committed expenditure = 1

The lower the ranking, the better it is and vice-versa

Source: State Budget documents, RBI, MOFSL

22 April 2020

States’ borrowing rate spiked in the first auction of Apr’20…:

Recently, the

attention on state finances increased sharply, as Kerala (KL) borrowed at ~9% in the

first week of Apr’20. Careful analysis, however, suggests that KL was neither alone in

paying such a high interest rate on 7

Apr’20, nor was it the worst affected.

The total notified amount

(of INR375b) and accepted

amount (of INR326b) was

the highest-ever raised by

states in any single auction

at least since 2008, which

led to a spike in bond yields.

Details suggest that the cut-off yield for 15-year paper issued by KL was 8.96%,

which made the headlines. Nevertheless, there are at least four other facts to be

noted with this: (a) 15-year securities issued by a state (called State Development

Loans, SDL) is rare. No other state issued a paper with maturity of more than 11

years. Andhra Pradesh (AP) also tried to raise money via 13- and 14-year papers;

however, they didn’t accept any amount, (b) total issuances of INR59b by Kerala

amounted to 44% of the total open market borrowings (OMB) allowed by the

central government, the highest by any large Indian state

(Exhibit 6),

was not the worst hit. Rajasthan (RJ, another highly-stressed state, according to our

assessment) paid 8.31% for a 7-year paper and 7.9% for a 6-year paper. Punjab (PB,

the most stressed state) did not accept any amount in 10-year security and

Maharashtra (MH, one of the most fiscally-prudent states) paid as high as 7.83% for

a 10-year security. In short, no state was spared on 7

Apr’20, and (d) Most

importantly, the total notified amount (of INR375b) and accepted amount (of

INR326b) was the highest-ever raised by states in any single auction, at last since

2008. This latter fact was, we believe, responsible for such high interest rate paid by

almost all states in the first auction of FY21 on 7

Apr’20

(Exhibit 7 on the following

page).

Exhibit 6:

Total borrowings done in the first three weeks of Apr’20 vis-à-vis 9MFY21 targets

(INRb)

Utilization of Apr-Dec'20 net borrowings till now* (%)

100 100

42 44 44

25 27 31 35

10 12 14 15 15 16 17 21

(10)

WB BH CT HP JH MG TR KA GJ PB AS UP UK MP GA MH AP RJ TN MZ TS HR OD NG KL MN AR SK

* Updated up to 22 Apr’20

Source: Ministry of Finance, RBI, MOFSL

…however, it has moderated since then:

The states appear to have learnt from the

first auction. The total amount notified during the next two auctions (on 13

Apr’20

and 21

Apr’20) was much lower at INR131b and INR76b, respectively. The cut-off

yield on 10-year SDL declined to ~7.6% last week and has dropped further to ~7%

this week

(Exhibit 7 on the following page).

Bond yields, thus, have softened since

the first auction, in line with lower issuances.

22 April 2020

Exhibit 7:

Market borrowings by states in Apr’20

April 7, 2020

Amount (INRb)

Andhra Pradesh (AP)

Arunachal Pradesh (AR)

Assam (AS)

Goa (GA)

Gujarat (GJ)

Haryana (HR)

Jammu & Kashmir (JK)

Karnataka (KA)

Kerala (KL)

Madhya Pradesh (MP)

Maharashtra (MH)

Manipur (MN)

Mizoram (MZ)

Nagaland (NL)

Odisha (OD)

Punjab (PB)

Rajasthan (RJ)

Sikkim (SK)

Tamil Nadu (TN)

Telangana (TS)

Uttar Pradesh (UP)

Uttarakhand (UK)

Total borrowings

10.0

4.0

5.0

1.0

20.8

50.0

8.0

20.0

59.3

10.0

50.0

2.0

10.0

16.0

27.5

20.0

10.0

325.6

WAY* (%)

7.9

8.0

7.9

7.8

7.7

7.9

8.1

7.8*

8.0*

5.9*

7.7

8.0

6.3*

6.8*

7.1*

7.7

7.8

1.0

10.0

20.0

7.6

5.9*

7.6

5.8*

7.5

7.5*

7.6

10.0

0.3

April 13, 2020

Amount (INRb)

WAY* (%)

6.6

7.6

20.0

1.0

4.7

20.0

10.0

April 21, 2020

Amount (INRb)

WAY* (%)

6.7*

7.0

7.1

5.6*

6.8*

7.0

121.3

75.7

* weighted average yield for bonds of different maturities

Note: We have taken amount allotted during auction, not amount notified

Source: RBI, MOFSL

Lower state borrowings, however, is not sustainable. Although the RBI has increased

the limit on Ways & Means Advances (WMA) by 60% since 31

Mar’20 (from

aggregate limit of INR322b to INR516b, states like Kerala (KL) and Punjab (PB) would

find it difficult to stay away from the bond market for long because of WMA limit of

only INR20b and INR15b, respectively.

While states’ receipts would

be lower by

at least

INR3-

3.5t than otherwise, higher

spending would lead to

expansion in their deficit,

and therefore, the need to

borrow more.

Tight financial position demands relaxations from the GoI:

With lower tax

collections, the devolution to states would be lower by almost INR1.8-2t compared

to the FY21 budget estimates (BEs). States own taxes, which accounted for ~44% of

states’ total receipts (and amounted to INR12t) in FY19, could also see an adverse

impact of up to 10%. Overall, thus, while states’ receipts would be lower by

at least

INR3-3.5t than otherwise, higher spending would lead to expansion in their deficit,

and therefore, the need to borrow more. Consequently, we believe that the central

government has to relax states’ deficit and borrowings limits for FY21. Otherwise,

states would have to curtail their spending at this difficult time, leading to

humanitarian costs. Further, the states and the RBI would have to manage their

borrowings more actively and carefully, so as to avoid the bunching up of large

issuances.

22 April 2020

Explanation of Investment Rating

Investment Rating

BUY

SELL

NEUTRAL

UNDER REVIEW

NOT RATED

Expected return (over 12-month)

>=15%

< - 10%

> - 10 % to 15%

Rating may undergo a change

We have forward looking estimates for the stock but we refrain from assigning recommendation

*In

case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within following 30

days take appropriate measures to make the recommendation consistent with the investment rating legend.

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brokerage service transactions. Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial

holdings, It does not consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income

from clients which are not considered in above disclosures. Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only.

While calculating beneficial holdings, It does not consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.).

MOFSL also earns DP income from clients which are not considered in above disclosures.

Terms & Conditions:

This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be

altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of MOFSL. The report is

based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in nature. The information is obtained from

publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made

as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The report is prepared solely for informational purpose and does not

constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments for the clients. Though disseminated to all the customers

simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as customers by virtue of their receiving this report.

Analyst Certification

The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research

analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.

Disclosure of Interest Statement

Companies where there is interest

Analyst ownership of the stock

A graph of daily closing prices of securities is available at

www.nseindia.com, www.bseindia.com.

Research Analyst views on Subject Company may vary based on Fundamental research and

Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOFSL research activity

and therefore it can have an independent view with regards to subject company for which Research Team have expressed their views.

Regional Disclosures (outside India)

This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use

would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.

For Hong Kong:

This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities

and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal

Oswal Financial Services Limited(SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of research report in Hong

Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is

only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction

where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in

Hong Kong.

22 April 2020

For U.S:

Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state

laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934

Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by

MOFSL, including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional Investors" as

defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on

by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in

only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and

interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a

chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be

executed within the provisions of this chaperoning agreement.

The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered

broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading

securities held by a research analyst account.

For Singapore:

In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets services

license and an exempt financial adviser in Singapore,

as per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110)

provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL in respect of any matter arising from, or in connection with this

report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”, of which some of whom may consist of "accredited" institutional investors

as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such

Singapore Person must immediately discontinue any use of this Report and inform MOCMSPL.

Disclaimer:

The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or

distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose

and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes

investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions

expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific

recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this document should make such investigations as it deems

necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its

own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including those

involving futures, options, another derivative products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty,

express or implied, is made as to the accuracy, completeness or fairness of the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this

document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior

notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their

directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They

may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities

functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of

information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or may not

subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to

any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of

or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject MOFSL to any

registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in

whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or representatives shall

be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.

The person accessing this information specifically agrees to exempt MOFSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not

to hold MOFSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses,

costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays.

Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263; Website

www.motilaloswal.com.

CIN No.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad(West), Mumbai- 400 064. Tel No: 022

7188 1000.

Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst: INH000000412. AMFI:

ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579 ;PMS:INP000006712. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration

No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.:

INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond,

NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. which is a group company of MOFSL. Private Equity is offered

through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL. Research & Advisory services is backed by proper research. Please read the Risk

Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no assurance or guarantee of the returns. Investment in securities market is subject to market risk,

read all the related documents carefully before investing. Details of Compliance Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.

* MOFSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National Company

Law Tribunal, Mumbai Bench.

22 April 2020