Invest India Strategy

Financial Services Retail Automobiles FMCG Telecom

Investing in India’s Potential Winners…

Portfolio Management
Agenda Portfolio Management

• India – Why The Good Times Will Continue…

• Invest India Strategy
• Why Motilal Oswal PMS

Invest India Strategy 2

 Portfolio Management

India – why the good times will continue…

Invest India Strategy 3

 Recap of India’s Growth Journey Portfolio Management

• 60 years for first US$ 1 trillion of GDP

• 6 years to become US$ 2 trillion GDP

2.5
2
2.0
12% CAGR
GDP in US$ tn

1.5 1.3
1
16% CAGR
1.0
4% CAGR 0.5
0.5

0.0

FY10E

FY12E
FY13E
FY14E
FY11E
FY90
FY91
FY92
FY93
FY94
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
Period Source: CMIE/MOSL

Invest India Strategy 4

 The Chinese Experience Portfolio Management

• GDP in US$ trillion

4.5
4
4.0 1 year

3.5
3 years 3
GDP in US$ tn

3.0 China
2.5 India
6 years 2
2.0

1.5 6 years 6 years 1

1
1.0

0.5

0.0
1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008
Period Source: CMIE/MOSL

Invest India Strategy 5

India’s BOOM Theme Portfolio Management

• Consumption Boom
• Savings Boom
• Investment Boom
• Corporate profit boom

Invest India Strategy 6

Consumption Boom Portfolio Management

• Poverty will fall from 93% in 1985, 54% in 2005 to 22% by 2025.

Share of population in each income brackets Household income brackets

%, millions of people '000 Indian rupees, 2000
755 928 1,107 1,278 1,429
100% 6 4 Globals (>1,000)
9
18 19 Strivers (500-1,000)
41 32 Seekers (200-500)

43
93
80 36 Aspirers (90-200)
54
35
22 Deprived (<90)

1985 1995 2005E 2015F 2025F

Source: McKinsey Global Institute

Invest India Strategy 7

Consumption Boom Portfolio Management

• Discretionary spend will rise from 52% in 2005 to 70% in 2025

Share of average households consumption Discretionary spending

%, '000 Indian rupees, 2000 Necessities
60 82 140 248
100% 4 7 9
1 13 Health care
3 11 2 5 6
3 9 Education & recreation
2 4 17
19 6 Communication
14 8
3 20 Transporation
5 9
12 3
6 12 11 Personal Products & Services
3 Household Product
5 10 Housing & Utilities
56 5 Apparel
42
34
25 Food, beverages,& Tobacco

1995 2005 2015 2025

Source: McKinsey Global Institute

Invest India Strategy 8

Consumption boom in Next Trillion Dollar Era Portfolio Management

• Middle class will swell 12x from 50m in 2005 to 583m in 2025
Number of households in each income bracket Household income brackets
millions of people thousand, Indian rupees, 2000
140
Actual Forecast
120
Aspirers (90-200)
100
Seekers (200-500)
80

60
Deprived (<90)
40
Strivers (500-1,000)
20
Globals (>1,000)
0
1985 1990 1995 2000 2005 2010 2015 2020 2025
source:14th Wealth Creation Study by MOSL

Invest India Strategy 9

Savings Boom Portfolio Management

• At 40% of GDP, India’s savings could hit US$1 tn in 7-8 years

India's GDS (Rs trillion) % to GDP

39
38
34 36
32
30

21
CAGR 20% 18
15
12
10
8

FY04 FY05 FY06 FY07 FY08 FY09

Source: CMIE/MOSL

Invest India Strategy 10

Investment Boom Portfolio Management

• Huge opportunity for Engineering, Construction, Real Estate, Infrastructure,

Cement, Steel, Electricals, etc

India's GFCF (Rs trillion) % to GDP

34 35
33
31
28
25
19
16
CAGR 22%
13
11
9
7

FY04 FY05 FY06 FY07 FY08 FY09

Source: CMIE/MOSL

Invest India Strategy 11

Corporate Profit Boom Portfolio Management

• Future corporate profitability should be better than past

Aggregate profits of 100 1,981

highest profit companies

18% CAGR

861
21% CAGR

332

FY99 FY04 FY09

Source: MOSL

Invest India Strategy 12

 Portfolio Management

Presenting an avenue to take part in this growth...

Invest India Strategy 13

...Invest India Strategy Portfolio Management

Strategy Objective
The Strategy aims to generate long term capital appreciation by creating a focused portfolio
of high growth stocks having the potential to grow more than the nominal GDP for next 5-7
years across market capitalization and which are available at reasonable market prices.

Invest India Strategy 14

Formula of INVEST INDIA Portfolio Management

The formula to achieve the objective of the strategy is to find

• Winner Categories =
Sectors that will participate in India’s growth + Scalability

• Category Winners=
Winning Categories + Entry Barriers + Great Management

• Great Investments =
Category Winners + Reasonable Valuation

Invest India Strategy 15

Winner Categories - Insights Portfolio Management

• Value migrates from basic spend to discretionary spend categories

• Winner Categories see hockey-stick demand curves
• Falling product price accelerates demand in wireless telecom

Invest India Strategy 16

Winner Categories - Insights Portfolio Management

• Value migrates from basic spend to discretionary spend categories

BICYCLES V/S TWO-WHEELERS V/S CARS

Cars ('000) Motorcycles - Re-based Bicycles - Re-based

1,600

1,200

800

400

0
FY04 FY05 FY06 FY07 FY08 FY09

Source: Industry/MOSL

Invest India Strategy 17

 Winner Categories - Insights Portfolio Management

• Winner Categories see hockey-stick demand curves

Hockey-stick demand curve occurs when product price

meets affordability for a large section of customers

Hockey-stick Hockey-stick Demand Curve

demand hits earlier
if product prices
fall
Affordability
Price,
Demand
Affordability Product Price

Falling Product Price

Time Source: CMIE/ MOSL

Invest India Strategy 18

Winner Categories - Insights Portfolio Management

• Falling product price accelerates demand in wireless telecom

Wireless users (m) Revenue per minute (Rs)

386
2.3

1.9 256

1.5
162
1.2
96 0.9
55 0.8
35 0.6
13

FY03 FY04 FY05 FY06 FY07 FY08 FY09

Source: CMIE/ MOSL

Invest India Strategy 19

Category Winners Portfolio Management

Characteristics to find Category Winners -

• Entry Barriers
• Great Management

Invest India Strategy 20

Category Winners Portfolio Management

Entry Barriers
1. Demand side
• Customer Captivity, Differentiated Brands, Strong distribution network, High
switching costs
2. Supply side
• Patent protection for products and/or processes
• Privileged access to critical inputs e.g. captive ore mines
3. Economies of scale

Great Management
• One who Successfully defends or even increases Entry Barriers and Manages growth
at least in line with category
Category Winners tend to enjoy all 3 kinds of Entry Barriers and
run by Great Management

Invest India Strategy 21

Strategy Style & Construct Portfolio Management

• Investment Style & Timing

• Buy Growth Stocks across Market capitalization which have the potential to grow at
1.5 times the nominal GDP for next 5-7 years
• BUY & HOLD strategy, leading to low to medium churn thereby enhancing post-tax
returns

• Allocations - Market capitalization

• Large Caps :50 % - 100%
• Mid & Small Caps: 0% - 50%

• No. of Stocks: Concentrated portfolio of 10 to 14 stocks.

• Scrip Allocation: Not more than 10% -15% in a single stock
• Sector Allocation Limit: 30% in a sector

Invest India Strategy 22

Strategy Features Portfolio Management

High
• Investment Horizon:
• Medium to Long Term (3 Years+)

Medium to
High
• Benchmark: Invest

Medium
• BSE 200 India

Risk
Strategy
• For Whom:

Medium
Low to
• Investors keen to generate wealth
by participating in India growth
story over a period of time

Low
Low Low to Medium High
Medium
Medium to High
Return

Invest India Strategy 23

Key Features Portfolio Management

• Strategy available to client only from : January 15, 2010 to February 27, 2010
• Min Investment Amount: Rs.10 lakhs & in multiples of Rs.1 lakh
• Plans: Growth Plan
• Pay less for staying Long: Reduced Fixed Management Fees - by 0.25%
from year 4 onwards
• Mode of payment: Cheque or transfer of existing stocks or a combination
of both
• Mode of Reporting: Monthly Performance statement, Transaction &
Corporate Action statement & Annual CA certified statements for your
investment

Invest India Strategy 24

 Fixed Fee Structure Portfolio Management

Nature of Fees Fees %

Upfront Fee 1.00%
Fixed Management Fees 1st Year * 2nd Year 3rd Year 4th Year onwards
Assets Under Management
Rs. 10 Lakhs to < Rs. 25 Lakhs 2.75% p.a. 2.75% p.a. 2.75% p.a. 2.50% p.a.
Rs. 25 Lakhs to < Rs. 100 Lakhs 2.50% p.a. 2.50% p.a. 2.50% p.a. 2.25% p.a.
Rs. 100 Lakhs & Above 2.25% p.a. 2.25% p.a. 2.25% p.a. 2.00% p.a.
Custodian Fees 0.25% p.a.
Depository Charges As Applicable
Exit Fee*
Exit between 0 months to < 12 Months 2.00%
Exit between 12 months to < 24 Months 1.00%
Exit after 24 Months & Above NIL
Registrar & Transfer Fees NIL
Service Tax, Security Transaction Tax & As Applicable
Other Statutory levies
The Portfolio Manager will have the discretion to appoint any broker/s
Brokerage to execute the transaction for the Portfolio Management Scheme.
Brokerage rate would be as applicable.
*pls refer to the detailed terms and conditions in the fee schedule

Invest India Strategy 25

 Variable Fee Structure Portfolio Management

Nature of Fees Fees %

Upfront Fee 1.00%
Fixed Management Fees Frequency of Charging
1st Year * 2nd Year 3rd Year 4th Year onwards
Assets Under Management
Rs. 10 Lakhs to < Rs. 25 Lakhs 1.50% p.a. 1.50% p.a. 1.50% p.a. 1.25% p.a.
Rs. 25 Lakhs to < Rs. 100 Lakhs 1.00% p.a. 1.00% p.a. 1.00% p.a. 0.75% p.a.
Rs. 100 Lakhs & Above 0.75% p.a. 0.75% p.a. 0.75% p.a. 0.50% p.a.
Performance based Management Fees 10 % Profit Sharing on Higher Water Marking Basis
(For Details please refer to Example overleaf)
Exit Fee *
Exit between 0 months to < 12 Months 2.00%
Exit between 12 months to < 24 Months 1.00%
Exit after 24 Months & Above NIL
Custodian Fees 0.25% p.a.
Depository Charges As Applicable
Registrar & Transfer Fees NIL
Service Tax, Security Transaction Tax & Other As Applicable
Statutory levies
The Portfolio Manager will have the discretion to appoint any broker/s to
Brokerage
execute the transaction for the Portfolio Management Scheme.
Brokerage rate would be as applicable.
*pls refer to the detailed terms and conditions in the fee schedule

Invest India Strategy 26

Why Motilal Oswal PMS? Portfolio Management

• One of the most respected investment house with 7 years investment

management experience.
• Strong and stable Investment Management Team
• The fund management team follows the Investment Committee model with Mr.
Raamdeo Agrawal as the Chairman of the committee.

• Research Capability
• Over 200 stocks under active coverage.

• Well defined processes, risk management and diversification norms.

• Risk management through Sector and stock limits
• Optimal diversification through 10 to 14 stocks.

• Performance
• Consistent above average performance since inception across all Strategies.

• Low churn portfolio resulting in low transaction cost

Invest India Strategy 27

 Portfolio Strategies Portfolio Management

Portfolio Strategies Highlights

Value • The portfolio aims to deliver superior wealth creation by way of long term
compounding effect, with investments in good businesses run by great
business managers
• Strategy launched in June 2003.
Bulls-Eye • The portfolio aims to deliver superior returns in Low to medium term by
investing in fundamentally strong stocks with momentum approach, coupled
with active profit booking.
• Strategy launched in Dec 2003.
Focused Series • A “Focused Value” approach that invests in specific investment themes that
benefit from the approach. Focused Series- I runs a Re-Rating approach,
Focused Series - II runs a Deep Discount approach, Focused Series - III is a
Target Returns strategy, Focused Series - IV is a Flexi-Cap Strategy.
• First Series launched in April 2008.
Next Trillion • The portfolio aims to deliver superior returns by investing in Small & Mid cap
Dollar Opportunity ideas that are part of the next Trillion Dollar GDP growth opportunity
• Strategy launched in Dec 2007.

Invest India Strategy 28

Investment Manager Portfolio Management

Mr. Manish Sonthalia

• 15 Years Experience in Equity Research, Fund Management & Equity Sales
• Qualifications – FCA, ICWAI, CS, MBA
• He has been Sr. Vice President – for Equity Strategy for Motilal Oswal Securities Ltd.

Invest India Strategy 29

 Performance Track Record Portfolio Management

Since
Inception date 1 Month 3 Months 6 Months 1 Year 3 Year 5 Year
Inception
Value Strategy 10th Jun 2003 3.15 2.29 20.28 74.41 14.11 27.17 40.86
Nifty - 3.35 2.30 21.21 75.76 9.43 20.10 -

Bulls Eye Strategy 15th Dec 2003 5.54 7.91 31.30 110.22 18.68 16.65 18.80
Focused Series I 12th Apr 2008 4.06 5.94 37.37 124.02 N.A N.A 33.35
Focused Series II 22nd Feb 2009 4.65 15.96 34.98 N.A N.A N.A 143.61
Focused Series III 8th Jul 2009 3.37 0.29 N.A N.A N.A N.A 21.71
BSE 200 - 3.55 4.07 23.38 88.51 9.58 19.72 -

Next Trillion Dollar

Opportunity Strategy 11th Dec 2007 5.24 10.90 31.18 116.75 N.A N.A 2.26
CNX MIDCAP - 3.97 10.72 36.95 98.97 N.A N.A -

All Figure in % Data as on 31st December 09

Please Note: The above strategy returns are of a Model Client. Returns of individual clients may differ depending on time of entry in the strategy. The above
returns are calculated on NAV basis. Past performance may or may not be sustained in future. Returns above 1 year are annualized. *Past performance of the
other strategies deployed by the Portfolio Manager may not be indicative of the future performance of any strategy of the Portfolio Manager

Invest India Strategy 30

 Risk Disclosure And Disclaimer Portfolio Management

• Investments in Securities are subject to market and other risks and there is no assurance or guarantee that the objectives of any of the strategies of the
Portfolio Management Services will be achieved.
• Clients under Portfolio Management Services are not being offered any guaranteed/assured returns.
• Past performance of the Portfolio Manager does not indicate the future performance of any of the strategies.
• The investments may not be suited to all categories of investors.
• The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should be relied upon
as such.
• Neither Motilal Oswal Securities Ltd. (MOSL), nor any person connected with it, accepts any liability arising from the use of this material. The recipient
of this material should rely on their investigations and take their own professional advice.
• Opinions, if any, expressed are our opinions as of the date of appearing on this material only. While we endeavor to update on a reasonable basis the
information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so.
• The Portfolio Manager is not responsible for any loss or shortfall resulting from the operation of the strategy.
• Recipient shall understand that the aforementioned statements/presentation cannot disclose all the risks and characteristics. The recipient is
requested to take into consideration all the risk factors including their financial condition, suitability to risk return profile, and the like and take
professional advice before investing. As with any investment in securities, the Value of the portfolio under management may go up or down depending
on the various factors and forces affecting the capital market. Disclosure Document shall be obtained and read carefully before executing the PMS
agreement and any time thereafter.
• Prospective investors and others are cautioned that any forward - looking statements are not predictions and may be subject to change without notice.
• For tax consequences, each investor is advised to consult his / her own professional tax advisor.
• This presentation is not for public distribution and has been furnished solely for information and must not be reproduced or redistributed to any other
person. Persons into whose possession this document may come are required to observe these restrictions. No part of this material may be duplicated
in any form and/or redistributed without MOSL’s prior written consent.
• Distribution Restrictions – This material should not be circulated in countries where restrictions exist on soliciting business from potential clients
residing in such countries. Recipients of this material should inform themselves about and observe any such restrictions. Recipients shall be solely liable
for any liability incurred by them in this regard and will indemnify MOSL for any liability it may incur in this respect.

Registered Office: Motilal Oswal Securities Ltd. Palm Spring Centre, 2nd Floor, New Link Road, Malad (West), Mumbai - 400 064
SEBI Certificate of Registration as Portfolio Manager INP 000000670

Invest India Strategy 31

 Portfolio Management

For more information:

Call : 022 30896680 I SMS: MOSL IIS to 575753 I Email: [email protected]
Website: www.motilaloswal.com

Motilal Oswal Securities Ltd.,

Regd. Off.: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad (W), Mumbai - 400064.
SEBI PMS Registration No. INP000000670