NIIT Technologies - Credit Suisse

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09 May 2012Asia Pacific/IndiaEquity Research

Computer Services & IT Consulting

NIIT Technologies (NITT.NS)

INITIATION

Strong growth at attractive valuations ■ We initiate coverage on NIIT Technologies with an OUTPERFORM

rating and a target price of Rs380, almost 50% above the current share price. This is a midcap IT services company with niche capabilities in the travel and insurance verticals.

■ Niche focus and a revved up sales engine drive growth. Investments in its sales engine over the past year combined with its niche capabilities in the travel and insurance verticals have started yielding results. Its order book was up 44% YoY (as at 31 March 2012), giving confidence on the near-term growth outlook. Demand trends in its main verticals (total 74% of revenues) are healthy. Recent results showed that niche mid-sized IT companies such as NIIT Technologies can grow faster than large caps in a volatile macroeconomic environment.

■ Significant margin upside and healthy cash flows. The company has significant scope to flatten the employee pyramid, as well as increase the proportion of revenue delivered offshore. Strong revenue growth, especially through large deals, should help the company work these margin levers, similar to Hexaware. Given relatively low margins, operating leverage is high. We expect EBIT/EPS to grow 24%/15% over FY12-14. The company also has a good cash conversion ratio�reported FCF was approximately 80% of net income (FY11 and FY12).

■ Valuations are highly attractive. At 7x FY13E EPS, the company trades at more than a 30% discount even to midcap peers. The current enterprise value is 0.6x FY13E sales. We value the stock at 9x FY14E earnings (in line with other midcaps) to arrive at our target price of Rs380. We expect good results over the next three to four quarters to drive a re-rating of the stock. A prolonged recession in Europe is the key risk for this stock.

Share price performance

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Price (LHS) Rebased Rel (RHS)

The price relative chart measures performance against the BSE SENSEX IDX which closed at 16520.06 on 08/05/12 On 08/05/12 the spot exchange rate was Rs53.49/US$1

Performance Over 1M 3M 12M Absolute (%) -3.4 9.6 32.4 Relative (%) 0.7 16.9 43.2

Financial and valuation metrics

Year 3/12A 3/13E 3/14E 3/15ERevenue (Rs mn) 15,764.0 20,059.9 23,024.1 25,920.3EBITDA (Rs mn) 2,683.0 3,561.3 4,098.3 4,612.5EBIT (Rs mn) 2,319.0 3,081.3 3,538.3 3,932.5Net profit (Rs mn) 1,946.0 2,276.4 2,614.5 2,906.3EPS (CS adj.) (Rs) 33.20 38.17 43.84 48.74Change from previous EPS (%) n.a. Consensus EPS (Rs) n.a. 38.0 41.7 45.9EPS growth (%) 7.4 15.0 14.9 11.2P/E (x) 7.7 6.7 5.8 5.2Dividend yield (%) 3.1 3.5 3.9 4.3EV/EBITDA (x) 4.8 3.5 2.9 2.4P/B (x) 1.6 1.4 1.2 1.0ROE (%) 23.5 23.0 22.5 21.4Net debt/equity (%) net cash net cash net cash net cash

Source: Company data, Thomson Reuters, Credit Suisse estimates.

Rating OUTPERFORM* Price (08 May 12, Rs) 255.60 Target price (Rs) 380.00¹ Upside/downside (%) 48.7 Mkt cap (Rs mn) 15,244.8 (US$ 285.0) Enterprise value (Rs mn) 12,632 Number of shares (mn) 59.64 Free float (%) 61.0 52-week price range 272.6 - 167.1 ADTO - 6M (US$ mn) 0.58 *Stock ratings are relative to the relevant country benchmark. ¹Target price is for 12 months.

Research Analysts Sagar Rastogi

91 22 6777 3851 [email protected]

Anantha Narayan 91 22 67773730

[email protected]

09 May 2012

NIIT Technologies (NITT.NS) 2

Focus charts and table Figure 1: NIIT Tech has a niche in travel and insurance verticals

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Note: in the chart on the left, Wipro�s exposure relates to retail and transportation vertical. In the chart on the right, data for NIIT Tech (NITT), TCS, Wipro and Mindtree are approximate; Source: Company data

Figure 2: Strong order book (up 44% YoY) gives us comfort on our expectation of 19% YoY revenue growth (US$)

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Figure 3: Significant scope to improve margins by flattening the employee pyramid and offshoring more

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Figure 4: NIIT Tech trades at a significant discount to midcap peers, many of which are growing at a slower pace CMP Mkt cap EV/sales P/E (x) FY3/12-14 PEG ratio FY12 div.Company (Rs) (US$ mn) FY3/13 FY3/14 FY3/13 FY3/14 EPS CAGR (x) yield %NIIT Technologies 256 285 0.6 0.6 6.7 5.8 15% 0.4 3.1%Mindtree 585 444 0.8 0.7 9.8 8.7 12% 0.9 0.8%Hexaware 121 668 1.5 1.3 10.5 9.2 22% 0.5 4.4%KPIT Cummins* 109 426 1.1 1.0 10.5 8.9 23% 0.5 0.6%Persistent Systems* 369 276 1.0 0.9 9.6 8.7 9% 1.0 1.6%Mahindra Satyam 74 1,624 0.9 0.8 9.5 7.9 5% 1.8 0.0%Tech Mahindra 668 1,592 1.5 1.4 8.6 7.6 9% 1.0 0.7%NIIT Tech vs. average of midcaps (%) -44% -45% -44% -45% -51%

*Note: Consensus estimates for KPIT Cummins, Persistent Systems; Source: Thomson Reuters, CS Est

09 May 2012


Strong growth, attractive valuations NIIT Technologies is a mid-sized IT services company with a niche positioning in travel and insurance verticals. It has not been able to scale like TCS and Infosys despite starting at around the same time. However, recent investments in its sales force have started yielding results with the order book (executable over the next 12 months) up 44% YoY. We also expect margins to improve. This should lead to EBIT and EPS growth of 24% and 15%, respectively, over the next two years.

Further, the stock trades at 7x FY13E earnings�over a 30% discount to even midcap peers. We believe that strong operational performance over the next three to four quarters can lead to a re-rating of the stock and deliver outsized returns to investors. Our target price of Rs380 represents about 50% potential upside. We initiate coverage on NIIT Technologies with an OUTPERFORM rating.

Niche focus and revved up sales engine drive growth NIIT Technologies� recent investments in its sales engine and focus verticals have started delivering results with a 44% YoY increase in the order book executable over the next 12 months (as on 31 March 2012). This gives us comfort on our expectation of 19% YoY top-line growth (USD) in FY13.

NIIT Technologies has a niche in its focus verticals of travel (airlines, travel distributors, airports and cargo handling, surface transport) and insurance (Lloyds� insurance market). It has deep relationships with a number of marquee customers from these industries. The company is seeing healthy demand trends in both these verticals. Its recently strengthened sales team should help it continue to build its order book at a strong pace.

Significant margin upside and healthy cash flows The company has significant scope to flatten the employee pyramid as well as increase the proportion of revenue delivered offshore. Strong revenue growth, especially through large deals should help the company utilise these margin levers. Given relatively low margins, operating leverage is also high. We expect NIIT Technologies� EBIT and EPS to grow 24% and 15%, respectively, over FY12-14.

For instance, we note that Hexaware was able to improve its EBIT margin from 4% in the June-2010 quarter to 21% in the March-2012 quarter as strong revenue growth enabled it to improve its employee pyramid and increase the proportion of revenues delivered offshore.

The company also has a good cash conversion ratio�FCF was approximately 80% of net income in each of FY11 and FY12. FCF yield was 10% in FY12.

Valuations are highly attractive It is a net cash company and the current enterprise value is 0.6x FY13E revenues. FY12 dividend yield of 3% also gives comfort. The promoters and management have a good reputation with respect to corporate governance.

The stock trades at 7x FY13E earnings, more than a 30% discount to even midcap peers. This is probably because the company has not been able to scale like TCS and Infosys despite starting at around the same time. However, the strong order book provides comfort on the near-term growth outlook and we believe that strong operational performance over the next three to four quarters should lead to a re-rating of the stock.

We value the stock at 9x FY14E earnings�a 40% discount to Infosys�s implied P/E and in line with midcap peers. This leads to our target price of Rs380, implying almost 50% upside from the current market price.

Niche positioning in the travel and insurance verticals

Scope to improve employee pyramid, proportion of revenues delivered offshore

FCF was ~80% of net income in FY11 and FY12

09 May 2012


Global IT valuations comparison Figure 5: Global IT valuations comparison Local Mkt cap EPS (loc. curr.) P/E (x) EPS Growth (%) P / Sales (x) Share price perf (%)Company Price US$ mn CY10 CY11 CY12 CY10 CY11 CY12 CY10 CY11 CY12 CY10 CY11 CY12 1m 3m YTDUS-listed Accenture* 59 41,826 3.6 4.0 4.4 16.7 14.7 13.5 23 13 9 1.6 1.4 1.4 -7 3 11Amdocs* 30 5,855 2.4 2.7 3.0 12.6 11.1 10.2 4 13 9 1.8 1.8 1.7 -2 0 6Cognizant Solutions* 60 18,357 2.9 3.4 4.0 21.2 17.9 15.1 20 18 19 3.0 2.5 2.1 -21 -15 -6Computer Sciences* 27 4,187 3.9 3.0 3.0 7.0 9.1 8.9 -21 -23 2 0.3 0.3 0.3 -6 -18 14EXLS* 25 806 1.4 1.5 1.8 18.2 16.4 13.7 58 11 19 2.2 1.8 1.5 -7 2 13Infosys (ADR) 45 25,724 2.6 3.0 3.4 17.3 15.1 13.4 19 15 13 3.8 3.4 3.0 -21 -20 -12Patni (ADR)* 19 1,297 1.7 1.4 1.3 11.0 13.7 15.1 3 -20 -9 7.6 5.6 5.2 -3 1 17Wipro (ADR) 9 22,543 0.4 0.5 0.5 21.9 19.5 16.9 7 12 15 3.0 2.7 2.4 -14 -19 -10Genpact* 16 3,579 1.0 1.0 1.1 16.4 16.8 14.3 32 -2 17 2.2 1.9 1.7 2 3 8WNS* 11 562 1.0 1.0 1.1 10.9 10.9 10.1 -2 0 8 1.3 1.2 1.1 -2 19 25Europe-listed Atos Origin* 45 4,912 3.2 4.0 4.6 14.1 11.4 9.8 2 24 16 0.5 0.4 0.4 7 13 33Capgemini* 29 5,782 3.2 2.5 2.8 9.0 11.5 10.1 29 -22 14 0.4 0.4 0.4 -10 -2 18Indra* 8 1,673 1.1 0.9 1.1 7.1 8.3 7.3 -16 -15 13 0.4 0.4 0.4 -10 -26 -20Logica Plc* 73 1,896 11.3 10.8 11.9 6.4 6.7 6.1 -7 -4 10 0.3 0.3 0.3 -19 -13 18TietoEnator* 13 1,187 1.1 1.3 1.4 11.5 10.1 8.8 -9 14 15 0.5 0.5 0.5 -12 -5 15India-listed HCL Tech 478 6,191 27.5 36.0 42.8 17.4 13.3 11.2 35 31 19 1.6 1.4 1.2 -4 3 23Hexaware 121 668 8.9 11.5 13.1 13.6 10.5 9.2 145 30 14 2.2 1.8 1.5 2 14 62Infosys (local) 2,392 25,552 139.0 159.4 179.9 17.2 15.0 13.3 19 15 13 3.8 3.4 3.0 -15 -15 -13KPIT Cummins* 109 426 7.5 9.8 11.8 14.6 11.1 9.2 33 31 21 1.4 1.1 1.0 39 31 49Mindtree 585 444 46.5 58.1 65.0 12.6 10.1 9.0 46 25 12 1.2 1.0 0.9 16 29 47Mphasis* 380 1,491 38.5 36.5 38.1 9.8 10.4 10.0 -22 -5 5 1.3 1.3 1.3 -7 2 26NIIT Technologies 256 285 32.6 36.9 42.4 7.8 6.9 6.0 14 13 15 0.9 0.8 0.7 -3 10 39OFSS 2,589 4,064 127.5 134.3 149.5 20.3 19.3 17.3 4 5 11 6.0 5.7 5.2 -2 20 40Patni (local)* 511 1,298 46.4 37.3 33.9 11.0 13.7 15.1 3 -20 -9 7.6 5.6 5.2 3 9 15Persistent Systems* 369 276 34.2 37.7 41.4 10.8 9.8 8.9 19 10 10 1.7 1.3 1.1 11 16 12Polaris* 131 244 21.7 24.3 28.0 6.0 5.4 4.7 14 12 15 0.6 0.5 0.5 -18 -17 6Mahindra Satyam 74 1,624 6.0 7.9 9.0 12.3 9.3 8.2 -592 31 13 1.4 1.3 1.2 -7 2 14TCS 1,200 43,921 51.9 63.1 74.6 23.1 19.0 16.1 23 22 18 4.5 3.9 3.4 3 -2 3Tech Mahindra 668 1,592 67.9 76.8 85.2 9.8 8.7 7.8 35 13 11 1.5 1.4 1.3 -6 2 17Wipro (local) 404 18,574 22.4 25.2 29.1 18.0 16.0 13.9 7 12 15 2.4 2.2 2.0 -8 -9 1

Source: Company data, estimates for companies marked with an asterisk (*) are consensus estimates provided by IBES; the rest are CS estimates. Est for Indian ADRs are INR est converted into US$. For HCLT and Patni, US$ estimates are converted to INR using today's exchange rate

09 May 2012


Niche focus and revved up sales engine drive growth NIIT Technologies reported a 44% YoY increase in the order book (executable over the next 12 months) as on 31 March 2012. This gives comfort to our expectation of 19% YoY top-line growth (USD) in FY13.

It has a niche positioning in the travel and insurance verticals and the company is seeing healthy demand trends in both these areas. Its recently strengthened sales team should help it continue to build its order book at a strong pace.

Strong order book and customer metrics give confidence As expected, the company�s revenue growth trajectory lags its order book growth trajectory by one year. Order book executable over the next 12 months had grown 44% YoY as on 31 March 2012. This gives confidence to our FY13 revenue growth assumption of 19% YoY (USD terms). Management has indicated that it would grow significantly faster than the industry.

The company has also seen an over 40% YoY increase in the number of million-dollar customers (customers who did in excess of US$1 mn in business with the company over the past 12 months).

Figure 6: NIIT Technologies has seen a sharp rise in its order book�

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44% YoY growth in orderbook. Over 40% increase in the number of million-dollar customers

09 May 2012


Figure 7: �which gives us confidence on our revenue growth estimate of 19% YoY

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Revved up sales engine The company has increased its sales headcount significantly over the past year and also replaced some old-timers with fresh blood. In addition, it also has hired more domain experts and field practitioners who have the ability to �create demand�, rather than just respond to RFPs. Many of the hires have been poached from rivals.

Further, the company recently formed a special team to pursue large deals. In the March 2012 earnings call, management stated that it is in different stages of negotiations with respect to four large deals (a total contract value over US$25 mn each).

Figure 8: Some recent hires in the sales and marketing function Name Designation Hired in Previous role and company Jyoti Srivastava Head, UK Operations Feb-12 VP, TCS John Pierce Head, Insurance Sep-11 MD, Strategic Technology Architects Deepak Khosla Head, Global Sales and Marketing Jun-11 President, SAARC at Patni Computer Systems Ravi Nimmagadda Head, BFS, North America Jan-11 Senior roles at Wipro, Cognizant and Satyam Sunil Surya Head, Europe Sep-10 Head, Europe at Hexaware

Source: Company data, Credit Suisse Research

Niche in travel and insurance verticals NIIT Tech has strong capabilities in the travel vertical across airlines, travel distributors, airports and cargo handling services as well as surface transport. It is highly rated by industry analysts and has a sufficient number of trained resources in a number of niche technologies in the space.

It is also favourably positioned in the commercial insurance vertical. Its subsidiary, NIIT Insurance Technologies (earlier called ROOM solutions), has a dominant market share among customers of Lloyd�s�the largest general insurance market in the UK. It was also featured in Gartner�s report, �7 vendors dominate the general insurance market in Europe, March 2010. Management estimates that about a third of all transactions in the Lloyd�s general insurance market happen through platforms owned by NIIT Technologies.

The company also has significant Intellectual Property (IP) (13% of FY12 revenues) in verticals which should enable it to differentiate itself and make customer relationships sticky.

Increase in quantity as well as quality of salespeople

Deep relationships with marquee customers

09 May 2012


Figure 9: NIIT Tech has a niche in travel and insurance verticals

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Note: In the chart on the left, Wipro�s exposure relates to retail and transportation vertical. In the chart on the right, data for NIIT Tech, TCS, Wipro and Mindtree are approximate. Source: Company data

Figure 10: NIIT Technologies is advantageously positioned in the commercial insurance market due to a number of proprietary solutions

Source: Company data

Figure 11: NIIT Technologies has a number of marquee customers� Segment Marquee customers Airlines British Airways, Virgin Airlines, Cathay Pacific, Iberia Travel Distributors Sabre Surface transport Deutsche Bahn (German Rail) Airport management and services organisations

Air India, Cathay, PT Jasa (Indonesia), Tan Son Nhat Cargo Services (Vietnam), Evergreen Air Cargo Services (Taiwan). NIIT Technologies has experience deploying IT solutions at leading airports such as Singapore (Changi), Hong Kong (ATT), China (Beijing Airport) and India (Bangalore Airport)

Insurance ING, AXA, Thrivent, Amlin Others SEI Investments Company, Holcim, Toyota, Morris

Note: NIIT Technologies has experience deploying solutions at some of these airports. Source: Company data

09 May 2012


Figure 12: �and has very old relationships with most of them Customer Duration of relationshipSEI Investments Company 16 yearsBritish Airways 16 yearsSATS 11 yearsThrivent 9 yearsSabre 9 yearsDeutsche Bahn 5 years


Healthy demand trends in focus verticals NIIT Technologies derived 37% of revenues each from its focus verticals of BFSI and Travel in FY12.

In FY12, some of NIIT Technologies� customers in the insurance industry were impacted by natural calamities in Asia�the Japan earthquake and Thailand floods�and hence slowed spending. As a result, BFSI segment grew only 10% YoY (USD) versus the overall company growth of 22% (USD). NIIT Technologies management has indicated that these customers have now recapitalised, and expects project ramp-ups starting June�July 2012.

While BFSI has been an area for concern for the large IT companies, we note that the weakness is significant due to the capital markets segment and large US banks�segments to which NIIT Technologies has little exposure. The company focuses mainly on insurance companies and mid-sized banks. These segments are seeing relatively healthy demand trends.

Interestingly, Cognizant�s management virtually echoed NIIT Technologies� management commentary on increasing spending by insurance customers and a greater openness to offshoring by the mid-sized banks in the US and Europe. TCS and Wipro also indicated that insurance was seeing decent growth. Infosys was the only company which saw a deferment of large deals from its insurance clients.

Figure 13: Most companies indicated healthy spending trends by insurance companies and mid-sized banks Company Comment from the March 2012 earnings call NIIT Tech We are seeing spending in insurance go up particular in the P&C segment. In the US and Europe several banking and insurance

customers are adopting offshoring now while they were reluctant earlier. Mid-sized banks and mid-sized insurers prefer to engage with mid-sized players like NIIT Technologies.

TCS Insurance is doing better than retail banks and capital markets. Wipro In retail banking as well as insurance, we are seeing customers spending a lot in terms of growth initiatives, how to launch new

products, new geographies, new channels, etc. Cognizant Our insurance customers saw strong growth of 6% in the first quarter, and we expect continued solid growth both in 2Q and for

the rest of the year. Robust growth among our mid-sized banking clients. Generally, mid-sized banks are not as far along in their transition to a global delivery model, and the industry pressures areserving as a catalyst to accelerate this transition.

Infosys Some of the large deals in the insurance vertical delayed.


In its earnings call, NIIT Technologies� management stated that it was seeing significant traction in the travel and transport segment. IATA, in its revised outlook in March 2012 said that while the aviation industry had been hurt by higher oil prices, higher passenger load factors should lead to higher profits for the industry in 2012.

Mid-sized banks, insurance companies, travel companies are doing well and are expected to increase offshore IT spend

09 May 2012


Niche mid-sized IT companies can grow faster than large caps in a volatile macroeconomic environment Recent results showed that despite the volatile macroeconomic environment, niche-focussed mid-sized IT companies can continue to deliver decent growth. In aggregate, Hexaware, CMC, Mindtree, KPIT Cummins, Polaris, Infotech Enterprises, Persistent Systems and NIIT Technologies delivered organic revenue growth of 19% YoY (USD) in the March 2012 quarter. In contrast, in aggregate, TCS, Infosys, Wipro and HCL Tech delivered organic revenue growth of 14% YoY.

Figure 14: IT midcap companies have been growing at a strong pace...

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Reducing deal size => opportunity for IT midcaps It is difficult for IT companies with revenue run-rates of less than a US$1 bn to bid for contracts with a total contract value (TCV) above US$100 mn. In this context, the current trend of reducing IT contract size should augur well for mid-sized IT companies such as NIIT Technologies.

Figure 15: Deal sizes are becoming smaller

Source: ISG-One TPI 4Q11 Index

Number of deals with total contract value less than US$100 mn increased 3x over 2002�11

09 May 2012


Significant margin upside and healthy cash flows We think that the company has significant potential to improve margins by flattening the employee pyramid and increasing the proportion of offshore revenues. Strong revenue growth, especially from large deals could help the company drive the above two levers�similar to a midcap IT peer, Hexaware.

The company also has a good cash conversion ratio�FCF was approximately 80% of net income in each of FY11 and FY12. The FCF yield was 10% in FY12. It paid out about a quarter of its net income in the form of dividends. The dividend yield was 3% in FY12.

Significant margin upside seen In FY12, margins dipped 250 bp YoY largely due to transition costs related to some large deals won in FY12. Management has guided for higher margins in FY13. We expect margins to rise 80 bp YoY.

About 70% of NIIT Technologies� workforce consists of employees with greater than three years work experience�this is significantly higher than the rest of its peer group. As it reaches scale, it should be able to add a greater proportion of campus hires that cost significantly less, reducing the average wage cost per employee. Management has indicated that this will be one of its key priorities in FY13.

Currently, about 63% of its revenues are delivered onsite�again significantly higher than the rest of its peer group. This is because a number of large project transitions are on-going, this activity typically happens onsite. Also, the company recently acquired a company in Spain, Proyecta, which had all resources based onsite. Over time, the company should be able to move more work offshore enabling better margins.

Both of the above margin levers become available when revenue growth is strong. For instance, we note that another IT midcap company, Hexaware, was able to improve its EBIT margin from 4% in the June 2010 quarter to 21% in the March 2012 quarter as strong revenue growth enabled it to improve its employee pyramid and increase the proportion of revenues delivered offshore.

Figure 16: NIIT Technologies has significant scope to flatten its employee pyramid and offshore more

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About 70% of its workforce has more than three years of work experience

About 63% of revenues are delivered onsite

09 May 2012


Figure 17: Hexaware was able to increase its margins significantly in a period of robust revenue growth

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Healthy cash flows The company also has a good cash conversion ratio. FCF was approximately 80% of net income in each of FY11 and FY12. This compares favourably even with larger IT companies.

Figure 18: The company has a high free cash flow conversion ratio (FCF/net income) even compared to the large IT companies�

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Source: FCF data for NIIT Technologies based on management comment in the March 2012 earnings call. Data for other companies from company releases.

FCF yield was 10% in FY12. The company paid out about a quarter of its net income in the form of dividends. The dividend yield was 3% in FY12.

FCF/net income = ~80% in FY12

09 May 2012


Valuations are highly attractive NIIT Technologies has not been able to scale like TCS and Infosys despite starting at around the same time, which presumably explains why it trades at a 30%+ discount to even midcap peers. However, we believe that its strong order book provides visibility for good growth in FY13.

We value the stock at 9x FY14E earnings (a 40% discount to Infosys�s implied P/E). This leads to our target price of Rs380, implying almost 50% upside.

Over 30% discount to other mid-cap IT services firms The company�s low growth since inception, compared with that of TCS and Infosys that started at around the same time, has led to investors writing off the stock to an extent. The fact that the other group company of the promoters, NIIT Limited (education company), is not doing well has also been an overhang with respect to investor perception.

However, with most of the issues that caused the underperformance now being resolved, we believe that the current 30%-plus discount (on FY13E P/E) that NIIT Technologies trades at to mid-cap Indian IT stocks could get compressed.

Figure 19: NIIT Tech trades at a significant discount to midcap peers, many of which are growing at a slower pace CMP Mkt cap EV/sales P/E (x) FY3/12-14 PEG ratio FY12 div.Company (Rs) (US$ mn) FY3/13 FY3/14 FY3/13 FY3/14 EPS CAGR (x) yield %NIIT Technologies 256 285 0.6 0.6 6.7 5.8 15% 0.4 3.1%Mindtree 585 444 0.8 0.7 9.8 8.7 12% 0.9 0.8%Hexaware 121 668 1.5 1.3 10.5 9.2 22% 0.5 4.4%KPIT Cummins* 109 426 1.1 1.0 10.5 8.9 23% 0.5 0.6%Persistent Systems* 369 276 1.0 0.9 9.6 8.7 9% 1.0 1.6%Mahindra Satyam 74 1,624 0.9 0.8 9.5 7.9 5% 1.8 0.0%Tech Mahindra 668 1,592 1.5 1.4 8.6 7.6 9% 1.0 0.7%NIIT Tech vs. average of midcaps (%) -44% -45% -46% -46% -51%

*Note: Consensus estimates for KPIT Cummins, Persistent Systems Source: Thomson Reuters, CS estimates

Consensus upgrades to continue The stock has seen strong consensus upgrades over the past few months and we expect these to continue. However, we note that the stock is not widely covered and so consensus estimates may not always be accurate.

Discount of over 30% (on FY13 P/E), and discount of over 45% (on FY13 EV/Sales), compared with midcap peers

09 May 2012


Figure 20: We expect consensus upgrades to continue

27

29

31

33

35

37

39

41

Sep-10 Feb-11 Jul-11 Dec-11 May-12

FY13 EPS (Consensus est.) (Rs/share)

Source: Thomson Reuters

Risks to our rating and target price ■ A prolonged recession in Europe.

■ Large deals could negatively impact margins in the short term.

■ Lumpy non-linear revenues could add volatility to quarterly earnings.

■ An expensive acquisition might hurt the company. Please see the appendix for details on its stated acquisition strategy and prior acquisitions.

■ Higher-than-expected wage inflation.

■ A delay or cancellation of large Indian government contracts could impact revenue and net income. Any delay in collection of receivables could also hurt cash flows.

09 May 2012


Appendix Company history NIIT was established in 1981 by Rajendra S. Pawar and Vijay K. Thadani to provide IT education and training in India.

In 1984, management decided to venture into the IT services business as it was an allied business and it thought that more students would be attracted to its training institutes if it could get practical experience of working on live projects within NIIT.

Unfortunately, the IT services business strategy was influenced by which technologies and areas were most attractive for the students of the training business. Hence, for instance, NIIT bid for fewer maintenance projects and Y2K projects, as these were considered low-end work and had a significantly higher share of revenues from e-commerce projects, which disappeared post the dotcom meltdown.

In the meanwhile, some peers such as Infosys and TCS that started at around the same time grew rapidly by not only winning a number of �low-end� projects but also by using the customer access gained through these to move up the value chain and win more business from the same customers.

NIIT was listed in 1993. In 2004, the IT services business was spun off as a separate entity and was renamed as NIIT Technologies. Arvind Thakur, who had been part of the core team of NIIT and led the IT services business since 1985, became the CEO of the new company. He continues in this role even today.

Large deals Below are some of the large deals won by the company

Eurostar

■ Estimated US$40 mn deal.

■ Won in July 2011.

■ Eurostar operates high speed trains between the UK and continental Europe. NIIT Tech has been hired to gear up its IT infrastructure in time for the London Olympics 2012. The company has been asked to provide infrastructure services on a utility basis and in addition, will undertake 17 transformation projects to improve the efficiency of the client organisation.

■ Select Eurostar staff to be absorbed by NIIT Tech in the UK and France.

Morris Communications

■ US$85 mn over five years.

■ Won in July 2011.

■ Morris Communications is a privately held US-based media company diversified across newspaper, magazines, outdoor, radio, book publishing and distribution, and online services. NIIT Tech has been asked to establish a shared service centre (MSTAR) to provide technology and business process services to the group. A JV has been formed (60% held by NIIT Tech, 40% by MSAT) called NIIT Media Technologies LLC (NMTL) for this purpose.

■ NIIT Tech will invest US$3.2 mn and Morris to transfer all IT assets and approx. 100 people. NMTL would incur a one-time charge of US$2.5 mn towards professional fees and transition expenses. Capability to be leveraged for providing similar services to companies in North America.

09 May 2012


Indian Border Security Force - �Intranet Prahari project�

■ Estimated US$45 mn deal over five years (implementation + maintenance).

■ Won in February 2010. Indian minister for Home Affairs minister, P Chidambaram launched the project in January 2012.

■ Awarded by India�s paramilitary organisation called the Border Security Force to interconnect its 237 locations (battalions) and establish a number of data centres (main, disaster recovery centre, mini at frontier HQs).

■ Approximately 55% was hardware, which was frontloaded. Margin on services component was similar to company margins.

Crime and Criminal Tracking Network Systems (CCTNS)

■ Estimated US$60 mn deal over nine years (implementation + maintenance)

■ Won in the December 2011 quarter. NIIT Tech has been selected as system integrator in Tamil Nadu, Jharkhand, Uttar Pradesh (out of 12 states announced so far). The Indian government plans to spend a total of US$400 mn on this nationwide project.

■ Awarded by the Indian Ministry of Home Affairs to build a comprehensive and integrated nationwide system designed to help the police investigate crime and detect criminals. After the implementation of the system throughout the country, over 14,000 police stations spanning 6,000 district police headquarters, fingerprint bureaus and forensic science laboratories will be linked to a common IT platform enabling investigating officials to get the data of any criminal at the click of a mouse.

■ Learning from its experience with the BSF project, the company has negotiated better pricing terms from hardware vendors and also better terms of payment from the Indian government.

Acquisition strategy Management is open to acquisitions. Its criteria for an acquisition target are:

■ It should be in one of NIIT Technologies� focus verticals�travel, insurance or healthcare.

■ It should ideally have some intellectual property.

■ It should ideally have a payback period of three years.

Below are some of the acquisitions that have been done by the company.

Proyecta

■ Acquired in August 2011

■ One of its large clients, British Airways, merged with the Spanish Carrier Iberia to form IAG. The company saw the need for resources that knew the Spanish language and understood the airline IT domain. In this context, Proyecta was an ideal fit as along with fulfilling those criteria, it also had an existing client relationship with Iberia.

■ Revenues of around US$10 mn and 100 employees. Two-thirds of its revenues were derived from the travel vertical, primarily airlines and cruiseships and the remaining one-third was derived from the BFSI vertical.

■ The founder was above 60 years of age and wanted to retire. Total consideration paid was US$7 mn.

09 May 2012


■ EBITDA margin of 9-10% when it was acquired. This has been steadily improving on a QoQ basis and management hopes to bring it close to the company level over the next three to four quarters.

■ The company also helps to use this acquisition to penetrate the Latin American market.

■ This was an EPS accretive transaction.

Preferr or Patient Referral System

■ Acquired in December 2010

■ Cloud-based electronic health records and referral management platform enables collaboration between healthcare providers including physicians, hospitals, diagnostic facilities and laboratories.

Softec

■ Acquired in February 2008

■ German-based specialist revenue accounting and operation solutions provider addressing the airlines segment. This has 40 small-to-medium airlines operating out of Europe, Africa and Asia as its customers.

ROOM Solutions

■ Acquired in May 2006

■ General insurance platform. #3 in terms of no. of installations in the European market.

Hedging policy and accounting policy relating to foreign currency related gains/(losses) The company hedges on a rolling basis�100% of net inflows for the next two quarters, 50% of net inflows in the third quarter, 25% of net inflows for the fourth quarter.

Most of its hedges are effective hedges. The profit/(loss) realised on hedges that expire during the quarter are adjusted against the revenue line while the MTM profit/(loss) on unexpired hedges is routed through the balance sheet.

The company includes gains/(losses) from the MTM translation of foreign-currency denominated assets and liabilities under the head �other income� in the Income Statement.

09 May 2012


Revenue split Figure 21: Revenue split by vertical (FY12) Figure 22: Revenue split by service line (FY12)

Transport37%

Insurance27%

BFS10%

Mfg & Distr7%

Govt6%

Others13%

ADM62%

IP-based13%

Managed Services

13%

SI & PI7%

BPO5%

Source: Company data *SI&PI = System-integration and package implementation. Source: Company data

Figure 23: Revenue split by geography (FY12) Figure 24: Revenue split by delivery location (FY12)

EMEA38%

Americas37%

APAC12%

India13%

Onsite62%

Offshore38%

Note: APAC = Asia Pacific excluding India. EMEA = Europe, Middle-East and Africa. Source: Company data


High contribution of IP revenues In FY13, IP contributed 13% of total revenues. While this is positive over the long term as it provides significant differentiation in the eyes of the customers and also delinks revenue from headcount; it adds to volatility in revenues in the near term.

Figure 25: NIIT Technologies owns a number of IPs in its focus verticals of travel and insurance IP Brief description ROOM Suite of general insurance applications�dominant market share in the Lloyd's reinsurance market. Contributed 10% of

revenues in FY12 Mona Lisa Revenue accounting platform�deployed across 30 airlines. Contributed 1-2% of revenues in FY12 COSYS Cargo Operations Intelligent System�developed and marketed in partnership with Singapore Airport Terminal Services

(SATS) and deployed across. Contributed ~1% of revenues in FY12 Source: Company data, Credit Suisse estimates

09 May 2012


Figure 26: This is good for the long term, but adds volatility to revenues in the near term

6%

7%

8%

9%

10%

11%

12%

13%

Mar-09 Dec-09 Sep-10 Jun-11 Mar-12

ROOM's contribution to total revenues


Good employee metrics The company has increased billable personnel at 27% YoY in FY13. Due to the higher average age of employees (70% of employees have more than three years work experience), attrition is quite low at 12%.

09 May 2012


Financial summary Figure 27: NIIT Technologies: Financial summary Year-end 31 March (Rs mn) FY10A FY11A FY12A FY13E FY14E FY15E Income statement Revenue 9,138 12,323 15,764 20,060 23,024 25,920 CoGS (incl. depreciation) 5,787 8,082 10,240 13,057 14,881 16,804 Gross profit 3,351 4,241 5,524 7,003 8,143 9,117 Gross margin 37% 34% 35% 35% 35% 35% SG&A 1,822 2,152 3,205 3,922 4,605 5,184 EBIT 1,529 2,089 2,319 3,081 3,538 3,933 EBIT margin 16.7% 17.0% 14.7% 15.4% 15.4% 15.2% EBITDA 1,889 2,404 2,683 3,561 4,098 4,613 EBITDA margin 20.7% 19.5% 17.0% 17.8% 17.8% 17.8% Forex gain/(losses) 0 -17 184 0 0 0 Other income -109 106 98 68 68 68 PBT 1,420 2,178 2,601 3,149 3,606 4,001 Tax 144 323 637 819 938 1,040 Tax rate 10% 15% 24% 26% 26% 26% PAT 1,276 1,855 1,964 2,330 2,669 2,960 Minority interest 13 28 18 54 54 54 Net income 1,263 1,827 1,946 2,276 2,615 2,906 EPS (Rs) 22 31 33 38 44 49 Balance sheet Fixed assets 3,140 3,330 4,233 5,153 5,993 6,713 Debtors 1,851 2,871 3,492 4,173 4,790 5,392 Cash and cash equivalents 1,895 1,637 2,871 3,119 3,750 4,727 Other current assets 1,250 2,157 2,459 2,951 3,379 3,782 Current liabilities -2,200 -2,508 -3,533 -4,240 -4,855 -5,433 Deferred tax assets 107 143 207 207 207 207 Total assets 6,043 7,630 9,729 11,363 13,264 15,387 Net worth 5,798 7,478 9,101 10,680 12,527 14,596 Minority Interest 28 43 123 177 231 285 Loans 217 110 506 506 506 506 Total liabilities 6,043 7,631 9,730 11,363 13,264 15,387 *Cash flow statement Net income 1,263 1,827 1,946 2,276 2,615 2,906 Non-cash / non-op adjustments 655 416 229 253 546 666 Change in working capital -1,833 -1,619 102 -466 -430 -427 Cash flow from operation 85 624 2,277 2,063 2,731 3,146 Cash flow from investing -343 -505 -1,267 -1,400 -1,400 -1,400 Free cash flow -258 119 1,010 663 1,331 1,746 Equity dividend -481 -517 -557 -698 -767 -837 Non-op income 46 -109 89 282 68 68 Change in debt and liabilities -131 -107 396 0 0 0 Proceeds from issue of equity 6 65 0 0 0 0 Others 1,127 291 297 0 0 0 Cash flow from financing 567 -376 224 -416 -699 -769 Change in cash 309 -257 1,234 247 631 977

Note: Cash flow statement above may not match with reported cash flow statement due to adjustments related to forex, etc. Source: Company data, Credit Suisse estimates

09 May 2012


Operating metrics Figure 28: NIIT Technologies: Operating metrics summary Year-end 31 March FY10 1QFY11 2QFY11 3QFY11 4QFY11 FY11 1QFY12 2QFY12 3QFY12 4QFY12 FY12Revenue breakdown by geography (%) Americas 33% 36% 36% 35% 37% 36% 37% 37% 37% 37% 37%EMEA 43% 35% 35% 35% 35% 35% 37% 38% 39% 37% 38%APAC 13% 13% 13% 14% 16% 14% 15% 13% 13% 13% 12%India 11% 16% 16% 16% 12% 15% 11% 12% 11% 13% 13% Revenue breakdown by service line (%) ADM NA NA NA NA 58% 53% NA NA 62% 61% 62%IP asset based NA NA NA NA 15% 12% NA NA 13% 11% 13%Managed services NA NA NA NA 12% 12% NA NA 12% 13% 13%SI & PI* NA NA NA NA 11% 19% NA NA 7% 9% 7%BPO NA NA NA NA 4% 4% NA NA 6% 6% 5% Revenue breakdown by verticals (%) BFSI 43% 42% 42% 41% 39% 41% 42% 39% 39% 34% 37%Transportation 31% 30% 31% 32% 35% 32% 35% 36% 36% 39% 37%Mfg & distribution 11% 10% 10% 9% 7% 9% 8% 8% 8% 6% 7%Government 5% 9% 9% 10% 8% 9% 4% 4% 4% 7% 6%Others 10% 9% 8% 8% 11% 9% 11% 13% 13% 14% 13% Client size $1 mn clients NA NA NA NA 43 43 NA NA 56 61 61$ 5 mn clients NA NA NA NA 10 10 NA NA 13 15 15$ 10 mn clients NA NA NA NA 5 5 NA NA 7 7 7 Onsite-offshore effort split (%) Onsite NA 24% 22% 22% 23% NA 22% 22% 24% 24% NAOffshore NA 76% 78% 78% 77% NA 78% 78% 76% 76% NA Employee metrics Headcount (eop) 4,476 4,585 4,994 5,358 5,806 5,806 6,265 6,733 6,978 7,362 7,362Attrition rate (LTM) 16% 18% 19% 18% 18% 18% 16% 13% 13% 12% 12%

*Note: SI & PI = System Integration and Package Implementation. Source: Company data, Credit Suisse estimates

09 May 2012


Companies mentioned (Price as of 8 May 2012) Figure 29: Companies mentioned Name Ticker Currency CMP Rating Target priceInfotech Enterprises INFE.NS INR 164.9 Not rated CMC Limited CMC.BO INR 874.0 Not rated Cognizant CTSH.OQ USD 60.3 Not rated Cathay Pacific Airways 0293.HK HKD 13.4 OUTPERFORM 18.0Evergreen International Storage & Transport Corp 2607.TW TWD 15.4 Not rated ING ING.AS EUR 5.0 OUTPERFORM 10.0AXA AXAF.PA EUR 9.5 OUTPERFORM 17.0Amlin AML.L GBP 319.9 NEUTRAL 4.2SEI Investments SEIC.OQ USD 19.3 Not rated Holcim HOLN.VX CHF 55.1 NEUTRAL 50.0Toyota 7203.T JPY 3,145.0 OUTPERFORM 3,950.0Accenture ACN USD 59.3 NEUTRAL 66.0Amdocs DOX.N USD 30.3 Not rated Cognizant Solutions CTSH USD 60.3 Not rated Computer Sciences CSC USD 27.0 Not rated EXLS EXLS.OQ USD 25.3 Not rated Infosys (ADR) INFY.OQ USD 45.0 NEUTRAL 2,800.0Patni (ADR) PTI.N USD 19.1 Not rated Wipro (ADR) WIT.N USD 9.2 NEUTRAL 420.0Genpact G USD 16.1 Not rated WNS WNS.N USD 11.2 Not rated Atos Origin ATOS.PA EUR 45.3 Not rated Capgemini CAPP.PA EUR 28.6 Not rated Indra IDR.MC EUR 7.9 Not rated Logica Plc LOG.L GBP 72.7 Not rated TietoEnator TIE1V.HE EUR 12.7 Not rated HCL Tech HCLT.BO INR 478.1 OUTPERFORM 11.2Hexaware HEXT.BO INR 120.9 OUTPERFORM 145.0Infosys (local) INFY.BO INR 2,392.0 NEUTRAL 2,800.0KPIT Cummins KPIT.BO INR 108.9 Not rated Mindtree MINT.BO INR 585.3 OUTPERFORM 600.0Mphasis MBFL.BO INR 379.6 Not rated OFSS ORCL.BO INR 2,588.8 Not rated Patni (local) PTNI.BO INR 511.3 Not rated Persistent Systems PERS.BO INR 368.9 Not rated Polaris POLS.BO INR 131.0 Not rated Mahindra Satyam SATY.BO INR 73.8 NEUTRAL 85.0TCS TCS.BO INR 1,200.4 OUTPERFORM 1,400.0Tech Mahindra TEML.BO INR 667.9 NEUTRAL 720.0Wipro (local) WIPR.BO INR 404.2 NEUTRAL 420.0Eurostar Not listed Morris Communications Not listed Thrivent Not listed Tan Son Nhat Cargo Services Not listed Cathay Not listed Air India Not listed Deutsche Bahn Not listed Sabre Not listed Virgin Airlines Not listed Strategy Technology Architect Not listed British Airways Not listed

Source: Thomson Reuters, Credit Suisse research

09 May 2012


Companies Mentioned (Price as of 08 May 12) NIIT Technologies (NITT.NS, Rs255.60, OUTPERFORM, TP Rs380)

Disclosure Appendix Important Global Disclosures Sagar Rastogi & Anantha Narayan each certify, with respect to the companies or securities that he or she analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. See the Companies Mentioned section for full company names. 3-Year Price, Target Price and Rating Change History Chart for NITT.NS NITT.NS Closing

Price Target

Price

Initiation/ Date (Rs) (Rs) Rating Assumption

0

50

100

150

200

250

Closing Price Target Price Initiation/Assumption Rating

Rs

O=Outperform; N=Neutral; U=Underperform; R=Restricted; NR=Not Rated; NC=Not Covered

The analyst(s) responsible for preparing this research report received compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities. Analysts� stock ratings are defined as follows: Outperform (O): The stock�s total return is expected to outperform the relevant benchmark* by at least 10-15% (or more, depending on perceived risk) over the next 12 months. Neutral (N): The stock�s total return is expected to be in line with the relevant benchmark* (range of ±10-15%) over the next 12 months. Underperform (U): The stock�s total return is expected to underperform the relevant benchmark* by 10-15% or more over the next 12 months. *Relevant benchmark by region: As of 29th May 2009, Australia, New Zealand, U.S. and Canadian ratings are based on (1) a stock�s absolute total return potential to its current share price and (2) the relative attractiveness of a stock�s total return potential within an analyst�s coverage universe**, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. Some U.S. and Canadian ratings may fall outside the absolute total return ranges defined above, depending on market conditions and industry factors. For Latin American, Japanese, and non-Japan Asia stocks, ratings are based on a stock�s total return relative to the average total return of the relevant country or regional benchmark; for European stocks, ratings are based on a stock�s total return relative to the analyst's coverage universe**. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10-15% and -10-15% levels in the Neutral stock rating definition, respectively. **An analyst's coverage universe consists of all companies covered by the analyst within the relevant sector. Restricted (R): In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances. Volatility Indicator [V]: A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts� coverage universe weightings are distinct from analysts� stock ratings and are based on the expected performance of an analyst�s coverage universe* versus the relevant broad market benchmark**: Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months. Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months. Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months. *An analyst�s coverage universe consists of all companies covered by the analyst within the relevant sector. **The broad market benchmark is based on the expected return of the local market index (e.g., the S&P 500 in the U.S.) over the next 12 months.

09 May 2012


Credit Suisse�s distribution of stock ratings (and banking clients) is: Global Ratings Distribution

Outperform/Buy* 47% (59% banking clients) Neutral/Hold* 41% (57% banking clients) Underperform/Sell* 10% (52% banking clients) Restricted 2%

*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.

Credit Suisse�s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein. Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties. See the Companies Mentioned section for full company names. Price Target: (12 months) for (NITT.NS) Method: We value NIIT Technologies at 14x FY14E EPS - 40% discount to Infosys implied P/E and in line with other midcap peers Risks: The key risks to our target price of Rs380 for NIIT Technologies are 1) lumpy non-linear revenues could add volatility to quarterly earnings 2) prolonged recession in Europe 3) An expensive acquisition 4) Higher than expected wage inflation 5) Delay or cancellation of Indian government contracts and 6) Delay in collection of receivables in Indian government contracts Please refer to the firm's disclosure website at www.credit-suisse.com/researchdisclosures for the definitions of abbreviations typically used in the target price method and risk sections.

See the Companies Mentioned section for full company names. The subject company (NITT.NS) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse. Credit Suisse provided investment banking services to the subject company (NITT.NS) within the past 12 months. Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (NITT.NS) within the next 3 months. Important Regional Disclosures Singapore recipients should contact a Singapore financial adviser for any matters arising from this research report. The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (NITT.NS) within the past 12 months. Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares. Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report. For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit http://www.csfb.com/legal_terms/canada_research_policy.shtml. As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report. Principal is not guaranteed in the case of equities because equity prices are variable. Commission is the commission rate or the amount agreed with a customer when setting up an account or at anytime after that. Taiwanese Disclosures: This research report is for reference only. Investors should carefully consider their own investment risk. Investment results are the responsibility of the individual investor. Reports may not be reprinted without permission of CS. Reports written by Taiwan-based analysts on non-Taiwan listed companies are not considered recommendations to buy or sell securities under Taiwan Stock Exchange Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers. To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. � Sagar Rastogi, non-U.S. analyst, is a research analyst employed by Credit Suisse Securities (India) Private Limited. � Anantha Narayan, non-U.S. analyst, is a research analyst employed by Credit Suisse Securities (India) Private Limited. For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at www.credit-suisse.com/researchdisclosures or call +1 (877) 291-2683. Disclaimers continue on next page.

09 May 2012

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Indeed, in the case of some investments the potential losses may exceed the amount of initial investment, in such circumstances you may be required to pay more money to support those losses. Income yields from investments may fluctuate and, in consequence, initial capital paid to make the investment may be used as part of that income yield. Some investments may not be readily realisable and it may be difficult to sell or realise those investments, similarly it may prove difficult for you to obtain reliable information about the value, or risks, to which such an investment is exposed. This report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the report refers to website material of CS, CS has not reviewed the linked site and takes no responsibility for the content contained therein. 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