8 November 2023

India Financials
India Financials: Credit on UPI and the US$100 bn consumer
transaction credit opportunity

All the current furor over the growth and asset quality of unsecured loans notwithstanding,
Pranav Gundlapalle
+91 226 842 1407 the consumer transaction credit opportunity in India is large (~US$21bn currently and >US
[email protected] $100bn by FY30E) and under penetrated. We see credit products delivered over the UPI
rails capturing a significant part of this opportunity as they have a clear edge over traditional
Ishan Mittal formats such as credit cards. The introduction of credit line on UPI brings the banks into this
+91 226 842 1442
[email protected] race where payment platforms like PayTM have had a head start. In this note, we outline the
reasons why credit on UPI will emerge as the winner and discuss the likely winners in this
Dhruv Luthra space
+91-226-842-1493
[email protected] How big is the opportunity? We estimate the transactions credit to be a ~$100 bn
credit opportunity by FY30E (from ~US$21bn currently) and credit on UPI could capture
a significant share of this opportunity. This could translate to a profit pool of ~$3-4 bn —
almost as large as the total profit of ICICI bank today.

Why will credit on UPI win vs. Credit cards? Credit on UPI is a more efficient way to
deliver credit (thanks partly to the low cost rails) and allows greater price discrimination
both on the merchants and the consumer side. The lower costs (of acquisition and
transactions) would allow a larger customer base while the ability to price discriminate
amongst the merchants (charge lower MDR for smaller merchants) would allow wider
acceptance vs. cards, which in turn would boost the volume of transactions.

What are the current offerings? Payment platforms like PayTM already offer loans that
are integrated seamlessly into the payment app, mimicking a transaction credit product.
RBI recently approved credit lines to be operated through UPI and this has brought the
banks into the race. The 'Credit line on UPI' product is in a pilot phase for most banks with
product design differences centered around the interest free period, upfront fees, nature
of fees (interest rates vs. flat fees), credit limit etc. For most banks, consumers are the only
source of revenue (zero MDR for merchants), in contrast to the banks' existing "Flexi pay"/
BNPL products where the merchants are the primary source of revenue.

Who would be the winners? Payment platforms like PayTM have the advantage of both
a large consumer and a large acquired merchant base that allows greater flexibility on
the product design vs. having only a large merchant base or only a large consumer base.
However, they have to split economics with the lending partner whereas banks can lend
directly to consumers. In addition to lending directly, banks have the advantage of a large
deposit customer base that they can leverage for this product. However, banks lack the
direct merchant relationships that the payment platforms enjoy and the banks' track record
of pioneering a new lending segment is, at best, patchy. Net, net early to declare winners,
but payment platforms like PayTM have had a headstart and are ahead at this stage.

See the Disclosure Appendix of this report for required disclosures, analyst certifications and other www.bernsteinresearch.com
important information.
First Published: 08 Nov 2023 16:13 UTC Completion Date: 08 Nov 2023 16:13 UTC
Pranav Gundlapalle +91 226 842 1407 [email protected] 8 November 2023

BERNSTEIN TICKER TABLE

8 Nov 2023 TTM Reported EPS P/B (x)
Closing Price Rel.
Ticker Rating Price Target Perf. 2023A 2024E 2025E 2023A 2024E 2025E
AXSB.IN O INR 1,021.70 1,150.00 11.5% INR 31.17 81.00 90.13 2.5 2.1 1.8
HDFCB.IN O INR 1,491.55 2,100.00 (6.6)% INR 79.29 86.97 105.06 3.0 2.5 2.2
ICICIBC.IN M INR 935.75 1,050.00 (3.5)% INR 45.79 53.94 60.46 3.3 2.8 2.5
KMB.IN M INR 1,746.25 2,100.00 (12.7)% INR 55.09 63.31 72.36 4.2 3.6 3.2
PAYTM.IN O INR 896.15 1,100.00 32.1% INR (27.00) (17.29) 12.24 (33.2) (51.8) 73.2
SBICARD.IN U INR 748.45 620.00 (12.7)% INR 23.92 24.67 29.19 31.3 30.3 25.6
SBIN.IN O INR 580.30 710.00 (11.0)% INR 56.29 61.41 66.83 1.4 1.3 1.1
ASIAX 1,115.47 87.11 102.67 123.12 12.80 10.86 9.06
O - Outperform, M - Market-Perform, U - Underperform, NR - Not Rated, CS - Coverage Suspended
PAYTM.IN, SBICARD.IN valuation is Reported P/E (x);
Source: Bloomberg, Bernstein estimates and analysis.

INVESTMENT IMPLICATIONS

We see the transaction credit as a ~$100 Bn lending opportunity by FY30E (~4x increase from current levels) and expect credit
products delivered over the UPI rails to capture a significant part of this opportunity vs. credit cards. Payment platforms like
PayTM have had a headstart in this race but with credit line on UPI, the banks are also in the race now. While it's early to declare
winners, the payment platforms like PayTM have had a headstart and are ahead in the race.

We rate PayTM as Outperform and SBI Cards as Underperform.

OTHER RELEVANT NOTES

3 Nov 2023 - PayTM: A deep-dive into its lending business

21 Oct 2023 - PayTM: Checking all the right boxes

13 Oct 2023 - India Financials Chart of the week: Small credit, not so small profit

11 Oct 2023 - PayTM: Best Idea 4QCY23— All ducks in a row

3 Oct 2023 - The Long View: India Payments — Zero MDR is here to stay

14 Sep 2023 - India payments: Ingredients for the disruption of cards — learnings from UPI

23 Aug 2023 - India Payments: Disruption Playbook - Debit done, credit next... Initiating coverage on PayTM, SBI Cards

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DETAILS

HOW BIG IS THE OPPORTUNITY?

We estimate the consumer transaction credit opportunity to be ~US$100 bn by FY30E.

The growth in cashless spends has typically led to the creation of the consumer transaction credit opportunity in most markets.
In India, the current transaction credit is concentrated in credit card debt (~US$15bn interest bearing debt) and consumer
durables credit (~US$6n). The consumer transaction credit has typically been led by credit cards and the lower penetration of
credit cards (Exhibit 3) has meant an under penetration of the transaction credit market in India.

As the cashless spends growth in the country, we expect the transaction credit opportunity to grow in line whit it. We expect the
cashless transactions to increase ~4x over the next 7 years to ~INR 230 tn by FY30E (Exhibit 1) with UPI payments accounting
for ~80% of those transactions (Exhibit 2). In most markets the transactional credit which comprises primarily of credit card
debt forms ~10% of card transactions (Exhibit 4). Assuming 50% of this to be interest bearing credit, we estimate the size of
transactional credit opportunity in India to be ~INR 11tn by FY30 that would translate to ~US$100 bn (factoring in the INR
depreciation over the next 7 years).

EXHIBIT 1: By FY30, we expect cashless spends to increase ~4x from current levels to ~INR 230 tn of which we
expect UPI to account for ~INR 180 tn

India: Value of cashless payments (INR tn, as % of PFCE)

250 80%

70%
200
60%

150 50%

40%
100 30%

20%
50
10%

- 0%

Credit cards Debit cards UPI (P2M) Others Total (as % of PFCE, RHS)

Source: HAVER, RBI, Bernstein analysis and estimates

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EXHIBIT 2: We expect the share of UPI transactions to increase to ~80% of total cashless spends by FY30E

India: Share of different modes of cashless payments (% of total)

100%
90%
80% 36%
70%
56%
60% 79%
50%
40%
30% 60% 13%

20%
10% 26%
18%
0%

Credit cards Debit cards UPI (P2M) Others

Source: HAVER, RBI, Bernstein analysis and estimates

EXHIBIT 3: Transactional credit remains underpenetrated EXHIBIT 4: Credit card debt remains the primary form of
given the lower penetration of credit cards that have transactional credit in most markets and forms ~10% of
been the traditional mode of providing transactional card spends
credit
Credit card debt to total card spending
Credit Card Spends as % of Private ratio (%)
consumption
14% 13%
90% 82%
80% 12% 11%
10% 10% 11%
70% 10% 9%
60%
50% 8%
6%
38%
40% 6%
28% 29% 29% 29%
30%
20% 4%
12%
6% 7%
10% 3% 2%
0%
0%

Source: HAVER, BIS, Bernstein analysis Source: HAVER, BIS, Bernstein analysis

WHY WILL CREDIT ON UPI WIN VS. CREDIT CARDS?

Credit card's monopoly on consumer transaction credit has largely been due to two factors:

• Being the medium of transactions — The short interest free credit period and the reward points push consumers to
channel large ticket spends through credit cards. This presence at the point of transactions (or the credit cards capturing
a large share of high ticket spends) is part reason for their right to provide credit for some of these transactions. The same

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reason why the auto dealers have a natural "right to win" (in the distribution of loans) in the auto loans segment.

• Instant credit — No process or further approvals are required to avail of credit - it's instant.

Now, both these factors are being weakened.

• UPI payment apps are capturing a larger share of high ticket payments. The value of UPI transactions over INR 2,000 are
more than 50% higher than the total value of credit card transactions (Exhibit 5). The platforms thus obtain the right to
provide credit too. “Do you want to convert the last transaction into an EMI?” or “You are short of funds in deposits,
how about using your credit line” is suddenly possible for the payment platforms too.

• The instant credit option on payment apps as well as the online loans offered by banks are becoming almost instantaneous
(and come with at least 15-20% lower interest rates compared to revolvers), reducing the attractiveness of credit card debt.

Further, the UPI payments + digital loans is simply a cheaper proposition and will win over the more expensive credit cards
option - expensive for both merchants and consumers.

One could think of the cost of a credit transaction as a sum of debit transaction and the cost of credit (funding cost + loan loss
provisions). There is a big difference between cost of a debit transaction through UPI channel vs. card rails (Exhibit 7, Exhibit 8)
and hence the cost of a credit transaction through UPI is significantly cheaper vs. card based credit transaction.

In addition to being cheaper, the UPI + digital credit model enjoys the following advantages

• Better ability to personalize pricing (price discrimination) for both merchants and consumers — PayTM postpaid
for example charges consumers a convenience fee between 0%-3% of transaction value depending on their credit history
and other factors. Similarly, on the merchant front, the company charges an MDR only for ~1mn of the 40 mn merchants
that accept postpaid payments. This ability to price discriminate among consumers allows the large volume of transactions
(the zero convenience fee will bring in the high credit quality spenders that use the postpaid option for its wider acceptance)
while the ability to keep the MDR at zero for a large % of merchants allows a wide acceptance which in turn brings in more
consumers on to the platform.

• Wider acceptance due to the reliance of QR codes based payments — The use of QR code based payments means that
the merchants do not require expensive POS/EDC machines which significantly increases the acceptance of these payments
(Exhibit 6).

• Low cost of acquisition as customers adopt UPI payment apps for non-credit payments (UPI based payment apps have 10x
monthly active users to that of traditional banks).

• Lower starting ticket sizes due to the lower acquisition costs: The lower cost of acquisition in turn allows a lower
starting ticket size which is great from a risk management perspective.

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EXHIBIT 5: UPI is now capturing major share of even high EXHIBIT 6: The total merchant base accepting UPI
ticket size spending payments is much higher than that using POS machines

Number and Value of transactions (FY23, Payment statistics (Mn, Sep'23)

indexed to 100)
60
160
50.0
140 50

120 37.5
40
100

80 30

60
20
40
8.3 8.3
10
20

- 0
Number of transactions Value of transactions Total POS PayTM PayTM Total
machines Soundbox registered merchants
Credit Cards Debit Cards UPI (>2k) devices merchants accepting
UPI

Source: NPCI, RBI, Bernstein analysis

Source: RBI, Company reports, Press reports, Bernstein analysis

EXHIBIT 7: The combined cost, for the various service providers, for an UPI transaction is just 1/6th that of an
equivalent debit card transaction

Cost per debit payment transaction (INR)

14

12
2.04
10

8 4.25

6 12.24

4
5.95 0.48
2 0.56 0.16
2.00
- 0.80

Source: RBI, Bernstein analysis

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EXHIBIT 8: Even as a % of transaction value, UPI payments are significantly cheaper vs. equivalent debit
cardtransactions

Cost per debit payment transaction (as % of average transaction value )

0.8%

0.7%
0.12%
0.6%

0.5%
0.25%
0.4%
0.72%
0.3%

0.2% 0.02% 0.06%

0.35%
0.07% 0.25%
0.1%
0.10%
0.0%

Source: RBI, Bernstein analysis

WHAT ARE THE CURRENT OFFERINGS?

'POSTPAID'/BNPL OFFERINGS FROM PAYMENT PLATFORMS LIKE PAYTM

• Postpaid loan product, offered by PayTM has a typical ticket size of INR 1k-60k (average of ~INR 7k) with a duration of 3
weeks. Unlike credit cards, the credit cannot be revolved and (like BNPL) the entire due is to be paid at the end of the month.

• PayTM's role in the lending business is somewhere between that of a pure distributor (e.g. a loan DSA) and that of a full-
fledged lender (e.g. NBFC). The key revenue and cost lines for PayTM for the postpaid product are detailed here:

• A convenience fee ~1.5% charged to the consumer (The convenience fee varies from 0%-3% for consumer depending on
their tenure with the PayTM platform, the postpaid product offering and also their credit scores).

• Average late fee of ~0.5% charged to the consumer (A fixed fee that varies by the amount outstanding).

• MDR of ~1% earned from the merchant (the MDR is charged selectively to <2-3% of merchants). The 3% revenue pool
gets almost equally shared between PayTM and the lender (Exhibit 10), with both left with a contribution margin of ~1.1%
and 0.3% respectively, post accounting of the respective costs.

• Lender economics: The lending partner earns a contribution margin of 0.3% for a 22-day loan (Exhibit 11) that translates
to an annualized RoA of ~3.5-4%. Total revenue earned is ~3% which is a combination of interchange paid by PayTM,
convenience fee and late fee. Direct costs incurred of ~2.7% which is a combination of cost of funds, sourcing fee paid
to PayTM and expected credit loss (ECL). The difference of ECL and actual credit cost is given as the collection bonus to
PayTM. Overall,

• Total Revenue of 3% = Convenience fee (1.5%) + Late fee (0.5%) + Interchange from PayTM (1%).

• Total Direct Cost (2.7%) = Sourcing fee to PayTM (1.2%) + CoF (0.5%) + Credit cost (0.8%) + Collection bonus to
PayTM (0.2%)

• The economics for PayTM: PayTM earns a contribution margin of 1.1% on the postpaid product (Exhibit 12). Total
revenue earned is ~2.4% which is a combination of MDR earned from the merchants, sourcing fee and collection bonus

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received from the lender. Direct cost incurred is ~1.3%, a combination of interchange paid to the lender and the collection
cost. Overall,

• Total Revenue of 2.4% = MDR (1%) + Sourcing fee from lender (1.2%) + Collection bonus from lender (0.2%)

• Total Direct Cost (1.3%) = Interchange to the lender (1%) + Collection cost (0.3%)

CREDIT LINE ON UPI FROM BANKS

In September this year, RBI allowed the operation of credit lines offered by banks through UPI (link). RBI has currently only
allowed Scheduled commercial banks to provide this line of credit, and it has given the banks the flexibility to decide the ticket
size, interest rates, duration of credit etc.

Several banks like ICICI, Axis, SBI, HDFC have launched a 'credit line on UPI' product (Exhibit 13) though it's largely on a pilot
basis for most banks. The credit limit is typically capped at INR 50k and the primary source of revenue for these products is the
fees/interest charged to consumer. The products differ on other parameters:

- Upfront fees charged : Some Banks charge an upfront fee of ~INR 200-300 for 'activation' of this product

- Interest free periods : Some banks offer an interest free period similar to credit cards whereas others price this closer to
overdraft and hence an interest is charged as soon as the credit limit is utilized

- Interest rate vs. fees - Some banks charge explicit interest based on the amount of credit utilized and the duration for which
its utilized whereas others charge a flat fee based on the value of credit utilized.

EXHIBIT 9: An illustration of customer journey for the Postpaid loan product, with credit limit at INR 60k - a end-
to-end digital process and is completed within the PayTM app

Source: Company application, Bernstein analysis

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EXHIBIT 10: The economics behind the postpaid product - The 3% revenue pool gets almost equally split between
PayTM and the lender

Revenue share of Pospaid Loan between Lender and PayTM

3.5% Total Revenue = Lender's share + PayTM's share
3.0%
0.5% 0.5%
2.5%
1.6% 0.8%
2.0%
1.5%
1.5% 3.0% 0.3%
0.3%
1.0%
1.4%
0.5% 1.0% 1.1%

0.0%

Source: Management discussions, Bernstein analysis

EXHIBIT 11: The lender gets an interchange from PayTM, along with ~2% from the revenue pool, while its key costs
include CoF, sourcing fee and collection bonus to PayTM and credit costs that it incurs on the portfolio

Pospaid Loan economics for lender

3.5%

3.0%
0.5% 0.5%
2.5%

2.0% 1.2%
1.5% 2.7%
1.5% 3.0%
1.0% 0.8%
0.5% 1.0% 0.2%
0.3%
0.0%

Source: Management discussions, Bernstein analysis

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EXHIBIT 12: While PayTM gets 1% from the revenue pool, it gets an additional revenue stream from the lender in
the form of sourcing fee and collection bonus

Pospaid Loan economics for PayTM

3.0%

2.5%
0.2%
2.0%
1.0%
1.3%
1.5% 1.2%

2.4% 0.3%
1.0%

0.5% 1.0% 1.1%

0.0%

Source: Management discussions, Bernstein analysis

EXHIBIT 13: Banks have launched a 'Credit line on UPI' products that get their revenues primarily from interest/fees
charged to the consumer

Source: Company website, Bernstein analysis

WHO WOULD BE THE WINNERS?

It's early to declare winners, but the payment platforms like PayTM have had a headstart and are ahead in the race.

Payment platforms like PayTM have the advantage of both a large consumer and a merchant base that allows greater flexibility
on the product design vs. having only a large merchant base or only a large consumer base. However, they have to split
economics with the lending partner whereas banks can lend directly to consumers. In addition to lending directly, banks
have the advantage of a large deposit customer base that they can leverage for this product. However, banks lack the direct
merchant relationships that the payment platforms enjoy and the banks' track record of pioneering a new lending segment is at

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best patchy.

THE PAYMENT PLATFORMS

The key advantages for payment platforms are :

- Large acquired merchant base: Having directly acquired a large merchant base, PayTM is able to charge an MDR to select
merchants (that accounts for a very healthy 1% of transaction value in its postpaid product), something that is difficult for banks
to do.

- Large, highly engaged user base: The UPI payments have driven high traffic volumes for the payment apps, with their
monthly transacting user base typically being an order of magnitude higher than that of banks.

- The primary focus: The credit opportunity linked to payments is the primary focus and the most clear route to monetization
for these platforms and hence will receive undiluted management attention and execution focus.

- Head start in acquisition and impressive collections track record: PayTM has had a head start disbursing postpaid credit
volumes of over a US$1bn per quarter and has shown strong ability to convert the payment user base into credit customers.
Further, the platform has shown an impressive ability to collect back the dues (even if its in a benign phase of the credit cycle).

The key disadvantages for payment platforms are:

- The need to share economics with lending partners and (eventually) higher cost of funds: In the current format, the
economics are to be shared with a lending partner (~20-30bps of contribution margin) which puts them at a disadvantage.
Obtaining a lending license would partly solve the issue though they would still suffer from a higher cost of funds relative to the
banks.

- Lack of deposit offering: The transactional credit offering is potentially best paired with a deposit (and payment) offering.
While the payment platforms have an edge in payments, they lack the ability to offer a deposit account.

CREDIT LINE ON UPI FROM THE BANKS

The key advantages for the credit line on UPI product are:

- Large (but not necessarily engaged) user base: The banks have large base of deposit customers to whom they could
cross-sell this product. However, with the fintech platforms becoming the popular choice for high frequency transactions, the
user base is not necessarily engaged enough to easily cross-sell a transaction credit product.

- Ownership of the deposit product: The ownership of deposit product provides much greater flexibility on product design/
integration - something fintechs would lack.

The key disadvantages for payment platforms are:

- Lack of a direct relationship with a large merchant base: The absence of a direct acquiring relationship with the
merchants limits the banks ability to charge an MDR from the merchants and hence consumers become the sole source of
revenue. Banks could potentially partner with other companies (acquirers) to build this option but that's not a near term solution
as is evident from the current design of the credit line on UPI product.

- Inability to capture UPI transaction share: While banks retain their hold on deposits, their share of UPI transactions remain
extremely low which weakens their "right to provide credit" for payment transactions.

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DISCLOSURE APPENDIX

I. REQUIRED DISCLOSURES

Autonomous Research US is a unit within Sanford C. Bernstein & Co., LLC , a broker-dealer registered with the U.S. Securities and
Exchange Commission and a member of the Financial Industry Regulatory Authority (www.finra.org) and the Securities Investor
Protection Corporation (see www.sipc.org). When this report contains an analysis of debt securities, such report is intended for
institutional investors and is not subject to all the independence and disclosure standards applicable to debt research for retail
investors under the FINRA rules.

An associate contributing to this report holds a position in HDFC Bank Ltd.

VALUATION METHODOLOGY

India Financials

India is a growth market and investors generally seek growth-based returns in India. We believe all lenders in India trade on what
the market believes to be the sustainable earnings growth momentum. Lenders that have sustained cross-cycle earnings growth
despite sector asset quality concerns trade at a premium. On the other hand, lenders that have been inconsistent in earnings
growth get penalized by the market until they build investor confidence again. We value our coverage on a target P/B multiple
(using the Gordon growth framework) based on one-year forward book value and a PBX multiple that is calibrated by trading
history, our expectation of Sustainable RoE and long-term growth. We use a one-year forward book value based on average of
FY23E and FY24E book value to arrive at 1H24E end target price. We believe the market can be brutal with growth stocks if
the growth story shows any structural weakness and thus, we constantly stress-test for structural growth weakness across our
industry and company investment thesis.

RISKS

India Financials

Key risks to our sector thesis

+ Rising rates and price competition on the liability side puts pressure on margins

+ Banks counter net interest margin pressures by going up the risk curve sharply, boosting earnings in the near term but being
exposed to asset quality risks

+ Tighter global and local monetary policy leads to an economic slowdown in India

RATINGS DEFINITIONS, BENCHMARKS AND DISTRIBUTION

Bernstein brand

The Bernstein brand rates stocks based on forecasts of relative performance for the next 6-12 months versus the S&P 500 for
stocks listed on the U.S. and Canadian exchanges, versus the Bloomberg Europe Developed Markets Large & Mid Cap Price
Return Index (EDM) for stocks listed on the European exchanges (except for Russian companies), versus the Bloomberg Emerging
Markets Large & Mid Cap Price Return Index (EM) for Russian companies and stocks listed on emerging markets exchanges
outside of the Asia Pacific region, versus the Bloomberg Japan Large & Mid Cap Price Return Index USD (JP) for stocks listed on
the Japanese exchanges, and versus the Bloomberg Asia ex-Japan Large & Mid Cap Price Return Index (ASIAX) for stocks listed
on the Asian (ex-Japan) exchanges -unless otherwise specified.

The Bernstein brand has three categories of ratings:

• Outperform: Stock will outpace the market index by more than 15 pp

• Market-Perform: Stock will perform in line with the market index to within +/-15 pp

• Underperform: Stock will trail the performance of the market index by more than 15 pp

Coverage Suspended applies when coverage of a company under the Bernstein research brand has been suspended. Ratings and
price targets are suspended temporarily. Previously issued ratings and price targets are no longer current and should therefore

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not be relied upon.

Not Rated: The stock Rating, Target Price and/or estimates (if any) have been suspended temporarily.

Autonomous brand

The Autonomous brand rates stocks as indicated below. As our benchmarks we use the Bloomberg Europe 500 Banks And
Financial Services Index (BEBANKS) and Bloomberg Europe Dev Mkt Financials Lrg & Mid Cap Price Ret Index EUR (EDMFI) index
for developed European banks and Payments, the Bloomberg Europe 500 Insurance Index (BEINSUR) for European insurers, the
S&P 500 and S&P Financials for US banks and Payments coverage, S5LIFE for US Insurance, the S&P Insurance Select Industry
(SPSIINS) for US Non-Life Insurers coverage, and the Bloomberg Emg Mkt Financials Large, Mid & Small Cap Price Return Index
(EMLSF) for emerging market banks and insurers and Payments. Ratings are stated relative to the sector (not the market).

The Autonomous brand has three categories of ratings:

• Outperform (OP): Stock will outpace the relevant index by more than 10 pp

• Neutral (N): Stock will perform in line with the relevant index to within +/-10 pp

• Underperform (UP): Stock will trail the performance of the relevant index by more than 10 pp

Coverage Suspended (CS) applies when coverage of a company under the Autonomous research brand has been suspended.
Ratings and price targets are suspended temporarily. Previously issued ratings and price targets are no longer current and should
therefore not be relied upon.

Not Rated: The stock Rating, Target Price and/or estimates (if any) have been suspended temporarily.

Those denoted as ‘Feature’ (e.g., Feature Outperform FOP, Feature Under Outperform FUP) are our core ideas. Not Rated (NR) is
applied to companies that are not under formal coverage.

For both brands, recommendations are based on a 12-month time horizon.

DISTRIBUTION OF RATINGS/INVESTMENT BANKING SERVICES

Rating Market Abuse Regulation (MAR) and Count Percent Count* Percent*
FINRA Rule 2241 classification
Outperform BUY 393 48.82% 1 0.25%

Market-Perform (Bernstein Brand)

HOLD 290 36.02% 1 0.34%
Neutral (Autonomous Brand)

Underperform SELL 122 15.16% 0 0.00%

* These figures represent the number and percentage of companies in each category to whom Bernstein and Autonomous
provided investment banking services.
As of Nov 08 2023. All figures are updated quarterly and represent the cumulative ratings over the previous 12 months.

PRICE CHARTS/ RATINGS AND PRICE TARGET HISTORY

This research publication covers six or more companies. For price chart and other company disclosures:
Please visit: https://bernstein-autonomous.bluematrix.com/sellside/Disclosures.action.
Or, you can also write to the Director of Compliance, Sanford C. Bernstein & Co. LLC, 1345 Avenue of the Americas, New York,
N.Y. 10105.

Axis Bank Ltd, HDFC Bank Ltd, ICICI Bank Ltd, Kotak Mahindra Bank Ltd and State Bank of India are covered by both
the Autonomous and Bernstein brands. For the research ratings and price target history please go to https://bernstein-
autonomous.bluematrix.com/sellside/Disclosures.action.

CONFLICTS OF INTEREST

Bernstein provided non-investment banking-securities related services and received compensation for such services during the
past twelve months for the following clients: Axis Bank Ltd, HDFC Bank Ltd, ICICI Bank Ltd and Kotak Mahindra Bank Ltd.

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Ishan Mittal maintains a long position in Axis Bank Ltd, HDFC Bank Ltd and ICICI Bank Ltd (AXSB.IN, HDFCB.IN and ICICIBC.IN).

Dhruv Luthra maintains a long position in HDFC Bank Ltd (HDFCB.IN).

OTHER MATTERS

It is at the sole discretion of the Firm as to when to initiate, update and cease research coverage. The Firm has established,
maintains and relies on information barriers to control the flow of information contained in one or more areas (i.e. the private side)
within the Firm, and into other areas, units, groups or affiliates (i.e. public side) of the Firm.

The legal entity(ies) employing the analyst(s) listed in this report can be determined by the country code of their phone number,
as follows:

+1 Sanford C. Bernstein & Co., LLC; New York, New York, USA

+44 Bernstein Autonomous LLP; London UK

+353 Sanford C. Bernstein Ireland Limited; Dublin, Ireland

+91 Sanford C. Bernstein (India) Private Limited; Mumbai, India

+852 Sanford C. Bernstein (Hong Kong) Limited 盛博香港有限公司; Hong Kong, China

+65 Sanford C. Bernstein (Singapore) Private Limited; Singapore

+81 Sanford C. Bernstein Japan KK; Tokyo, Japan

Where this report has been prepared by research analyst(s) employed by a non-US affiliate, such analyst(s), is/are (unless
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interactions between research analysts and investment banking personnel, participation by research analysts in solicitation and
marketing activities relating to investment banking transactions, public appearances by research analysts, and trading securities
held by a research analyst account.

CERTIFICATION

Each research analyst listed in this report, who is primarily responsible for the preparation of the content of this report, certifies
that all of the views expressed in this publication accurately reflect that analyst's personal views about any and all of the subject
securities or issuers and that no part of that analyst's compensation was, is, or will be, directly or indirectly, related to the specific
recommendations or views in this publication.

II. OTHER IMPORTANT INFORMATION AND DISCLOSURES

References to "Bernstein" or the “Firm” in these disclosures relate to the following entities: Sanford C. Bernstein & Co., LLC,
Bernstein Autonomous LLP, Sanford C. Bernstein Limited (for dates prior to January, 1, 2021), Autonomous Research LLP (for
dates between April 1, 2019 and December 31, 2020), Sanford C. Bernstein (Hong Kong) Limited 盛博香港有限公司, Sanford
C. Bernstein (Canada) Limited, Sanford C. Bernstein (India) Private Limited (SEBI registration no. INH000006378) and Sanford C.
Bernstein (Singapore) Private Limited, which is a licensed entity under the Securities and Futures Act and registered with Company
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Sanford C. Bernstein & Co., LLC may act as principal for its own account or as agent for another person (including an affiliate) in
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Separate branding is maintained for “Bernstein” and “Autonomous” research products.

• Bernstein produces a number of different types of research products including, among others, fundamental analysis and
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research product may differ from recommendations contained within other types of research products, whether as a result of

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differing time horizons, methodologies or otherwise. Furthermore, views or recommendations within a research product issued
under one brand may differ from views or recommendations under the same type of research product issued under the other
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• Each operates as a separate business unit within the following entities: Sanford C. Bernstein & Co., LLC, Sanford C. Bernstein
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Information related to the acquisition of Autonomous Research:

• On and as of April 1, 2019, AllianceBernstein L.P. acquired Autonomous Research. As a result of the acquisition, the research
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continue to publish research under the Autonomous brand.

• References to “Autonomous” in these disclosures relate to the Autonomous Research LLP and, with reference to dates prior
to April 1, 2019, to Autonomous Research US LP and Autonomous Research Asia Limited, and, with reference to April 1, 2019
onwards, the Autonomous Research US unit and separate brand of Sanford C. Bernstein & Co., LLC and the Autonomous
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Information related to the reorganization of Sanford C. Bernstein Limited and Autonomous Research LLP:

• On and after close of business on December 31, 2020, as part of an internal reorganisation of the corporate group, Sanford C.
Bernstein Limited transferred its business to its affiliate Autonomous Research LLP. Subsequent to this transfer, Autonomous
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Analysts are compensated based on aggregate contributions to the research franchise as measured by account penetration,
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This report has been produced by an independent analyst as defined in Article 3 (1)(34)(i) of EU 296/2014 Market Abuse
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Where this material contains an analysis of debt product(s), such material is intended only for institutional investors and is not
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To our readers in the United States: Sanford C. Bernstein & Co., LLC, a broker-dealer registered with the U.S. Securities and
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To our readers in the United Kingdom: This publication has been issued or approved for issue in the United Kingdom by
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EC2M 5SH, +44 (0)20-7170-5000. Registered in England & Wales No OC343985.

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To our readers in Ireland and the member states of the EEA: This publication is being distributed by Sanford C. Bernstein
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To our readers in the People’s Republic of China: The securities referred to in this document are not being offered or sold and
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To our readers in Japan: This publication is being distributed in Japan by Sanford C. Bernstein Japan KK (サンフォード・C・
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For the institutional client readers in Japan who have been granted access to the Bernstein website by Daiwa Securities
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To our readers in Australia: Sanford C. Bernstein & Co., LLC., Bernstein Autonomous LLP, Sanford C. Bernstein Ireland Limited,
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Bernstein (India) Private Limited ("Bernstein Affiliates") are regulated, respectively, by the Securities and Exchange Commission
under U.S. laws, by the Financial Conduct Authority under U.K. laws, by the Central Bank of Ireland, by the Hong Kong Securities
and Futures Commission under Hong Kong laws, by the Monetary Authority of Singapore under Singapore laws, and Securities
and Exchange Board of India, all of which differ from Australian laws. The Bernstein Affiliates are exempt from the requirement to
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• providing financial product advice;

• dealing in a financial product;

• making a market for a financial product; and

• providing a custodial or depository service.

To our readers in Canada: If this publication pertains to a Canadian domiciled company, it is being distributed in Canada by
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To our readers in India: This publication is being distributed in India by Sanford C. Bernstein (India) Private Limited (SCB India)
which is licensed and regulated by Securities and Exchange Board of India ("SEBI") as a research analyst entity under the SEBI
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INZ000213537. SCB India is currently engaged in the business of providing research and stock broking services. Please refer to
www.bernsteinresearch.in for more information.

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Pranav Gundlapalle +91 226 842 1407 [email protected] 8 November 2023

• SCB India is a Private limited company incorporated under the Companies Act, 2013, on April 12, 2017 bearing corporate
identification number U65999MH2017FTC293762, and registered office at Level 6, 4 North Avenue, Maker Maxity, Bandra
Kurla Complex, Bandra (East), Mumbai 400051, Maharashtra, India (Phone No: +91-22-68421401).

• For details of Associates (i.e., affiliates/group companies) of SCB India, kindly email [email protected].

• SCB India does not have any disciplinary history as of the date of this report.

• Except as noted above, SCB India and/or its Associates (i.e., affiliates/group companies), the Research Analysts authoring this
report, and their relatives

• do not have any financial interest in the subject company

• do not have actual/beneficial ownership of one percent or more in securities of the subject company;

• is not engaged in any investment banking activities for Indian companies, as such;

• have not managed or co-managed a public offering in the past twelve months for the subject company;

• have not received any compensation for investment banking services or merchant banking services from the subject
company in the past 12 months;

• have not received compensation for brokerage services from the subject company in the past twelve months;

• have not received any compensation or other benefits from the subject company or third party related to the specific
recommendations or views in this report;

• do not currently, but may in the future, act as a market maker in the financial instruments of the companies covered in the
report; and

• do not have any conflict of interest in the subject company as of the date of this report.

• Except as noted above, the subject company has not been a client of SCB India during twelve months preceding the date
of distribution of this research report. Neither SCB India nor its Associates (i.e., affiliates/group companies) have received
compensation for products or services other than investment banking, merchant banking or brokerage services from the
subject company in the past twelve months.

• The principal research analyst(s) who prepared this report, members of the analysts' team, and members of their households
are not an officer, director, employee or advisory board member of the companies covered in the report.

• Our Compliance officer / Grievance officer is Ms. Rupal Talati, who can be reached at +91-22-68421451, or
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• Disclaimer: Registration granted by SEBI, and certification from NISM, is in no way a guarantee of performance of the
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LEGAL

This publication has been published and distributed in accordance with the Firm's policy for management of conflicts of interest
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This publication is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of, or
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any change in the reported information or in the opinions herein. This publication was prepared and issued by entity referred to

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Pranav Gundlapalle +91 226 842 1407 [email protected] 8 November 2023

herein for distribution to eligible counterparties or professional clients. This publication is not an offer to buy or sell any security,
and it does not constitute investment, legal or tax advice. The investments referred to herein may not be suitable for you. Investors
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This report has been prepared for information purposes only and is based on current public information that we consider reliable,
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The analysis contained herein is based on numerous assumptions. Different assumptions could result in materially different
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subscribe for shares, or to induce engage in any other investment activity. The value of any securities or financial instruments
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may not be realized due to unforeseen factors like market volatility/fluctuation. In relation to securities or financial instruments
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The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors where that
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No part of this material may be reproduced, distributed or transmitted or otherwise made available without prior consent of the
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INDIA FINANCIALS BERNSTEIN 18