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Mutual Fund industry is growing rapidly with major contribution from

Corporates in Debt products

AUM grew at 32% CAGR from 2005 to 2010

Debt instruments ad corporate customers

dominate the MF industry

AUM growth has exceeded the GDP growth

rate indicating growing investor interest

AUM grew at 32% CAGR from 2005 to 2010

Debt instruments ad corporate customers

dominate the MF industry

AUM growth has exceeded the GDP growth

rate indicating growing investor interest

Source: AMFI Data, KPMG Report, PWC Report

2,3193,590

5,385 4,9336,140

1,496

2005 2006 2007 2008 2009 2010

Indian MF industry - AUM(000 Cr.)

Eq L q H r

0

00 00 00 00 00

Indian MF industry ProductsIndian MF market Products

H

a l

Corp &

Banks

Indian MF industry

Customersegments

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Indian MF industry is expected to witness aggressive growth led by

increased investments by retail investors

44

69

19%

Indian MF industry - AUM( Cr.)

6

etail Corporates H Is

Segment-wise Growthrates

Growth Drivers

Retailsegment

ow penetration of MFs as a mode of

investment for retail investors

o MFs account for only of Gross

Domestic Household Financial Savings

ow penetration of MFs beyond the Metros and

Tier I cities

o Top cities account for ~ of AUM

Improved financial literacy and awareness levels

to aid understanding of MF products

Corporatesegment

ising Corporate earnings SM s to emerge as potential customers seeking

advice on managing their funds

Proportion ofequity AUMexpected to increase

as retail segment grows faster

Source: KPMG report

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L&T MF currently ranks 25th in terms of AUM share but its product

performance is comparable with those of industry leaders

Absolute Returns (vs. Best Performers) Absolute Returns (vs. Largest Schemes)

AMC Market Share (Rank)

L&T Mutual Fund is at a nascent stage as

compared to big players in industry

L&T MF uity diversified Scheme has

delivered comparable returns to large asset

schemes on absolute return basis

Source: Company websites, AMFI Data, www.moneycontrol.com

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L&T MF should target the retail investors and NIs and increase share

in corporate segment to achieve its target

120%

AUM( Cr.)

0.6% 9%

L&T

Market

Share

Capture a very large proportion of the

growth in the retail segmentI

Increase market share in the corporate

investors segmentII

Target NIs for PMS as well as mutual

fund investmentsIII

xplore possibilities for inorganic

expansionIV

ased on the target

of becoming the top

AMCs in India

Source: KPMG Report

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Debt

i i

47%

Equit

%

Retail AUM Product-wise

(2010)

96% 89% 81%

2% 4% 11% 19%

98%

2004 2006 2008 2010

-SI flows SI i flows

ShareofSIPs

2 664 2 27 2 2

984

2004 2006 2008 2010

SIP AverageTicket-size

Majorit ofretail i vestorspreferto i vesti equit schemes

ELSSproducts withtaxbenefitsprovide stable source ofAUM

Most oftheequit AUMis in largecap fundso Attributed to lackofcustomerunderstandingand advice on

sophisticatedproducts

Share of SI s as modes of`pa mentis increasing

Averageticket sizeto reduce withpenetrationinto rural areas

71%

21%

16%12%8%14%

3%

%

200 2010

argecap Multicap Midcap Sectoral

Equity AUM Product-wise

(2010)

TMF shouldpromoteits equit SI schemes with low ticket sizeto

penetrateinto the retail segment

Source: BCG and CAMS Report

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L&T should strengthen its IFA network and develop relationships with

PSU banks to increase its share in the retail segment

Banks

2 %

Direct

5%

Distribut

ors

3 %

IFAs

32%

Distributortype

Recenttrends ImplicationsforL&TMFsstrategy

Independent

Financial

Advisors

(IFA)

Very important to reach

customers in rural areas

Mostly provide transactional

services Lack of advisory

Strengthen presence amongst

IFAs to penetrate rural areas

Provide training to enable

IFAs to provide advisory

services

Distributors Share of distributors withonline presence increasing

rapidly

Regional distributors

Provide slab-wise incentivesto enable them to sell more of

their product

Channel management to

develop relationships and build

loyalty

Banks Public sector banks have

recently entered thedistribution business

Private banks dominant in

Top cities

Leverage on the reach of PSU

banks to penetrate into the ruralareas

uild relationships with banks

to promote loyalty

Direct Sales Increase in online sales Develop and implement anonline sales platform

Retail AUM Channel-mix(2010)

1. %1.3 %

0. %

1. 3%

200 200 200 2010

%upfrontcommissionsto

distributors

Entry load

ban by SE

BI

Source: AMFI data, KPMG Report, BCG and CAMS Report

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L&T MF should strengthen its presence in corporate through its li uid

funds and developing relationships with customers and distributors

6 99

10

2010 2015

16%

Indian MF Corporate AUM( Cr.)

Corporate investments in

MFs to double in next 5 years

L&T MF needs to establish astrong foothold in this

segment to achieve its goal

Debt &

Li uid

%

E uity

7%

Corporate AUM Product-wise

(2010)

Implications

Investments mainly in short

term li uid and debt products

Generally corporates dividetheir investments among

several AMCs

Promote short term products

like Freedom Income and

Li uid Fund

Implications

Banks

22%

Direct

16%

Distribut

ors

45%

IFAs

17%

Corporate AUM Channel-mix

(2010)

Develop relationships with

distributors to promote their

products Ensure superior channel

management and servicing for

distributors and customers

Setup a sales team to target

corporate customers

Implications

Source: AMFI data, KPMG Report, PWC-CII Report

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Total HNI Assets(US $ Billion)

HNI Asset Allocation

L&T MF should focus on performance and superior levels of service to

attract NI customers

17% Expected rapid rise in the

number and assets of NIs

Potential to increase the share

of MFs (esp. from e uities)

igh potential for PortfolioManagement Services (PMS)

Clients demand very high

levels of service

Not a price-sensitive market

NIs investments in MFs

e ually divided between

e uity and debt products

Channel-mix for NI

investments

o anks 5%

o Distributors 32%

o IFAs 1 %

Implications

Differentiate on the basis of

service level

Relationship manager should

be highly responsive to client

sensitivities & expectations Setup a dedicated sales force

for PMS services

Develop strong relationships

with banks and corporate

distributors

Undertake joint marketing

campaigns with channel

partners

L&TMFsstrategy

Source: AMFI data, KPMG Report, Booz Report

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L&T MF can use the direct-to-customer approach, provide sub-advisory

services or launch new products to further fuel its growth

Direct-to-investor Approach

Online sales platform

~ 0% of AUM from e uity products

igher profitability due to cutting down

on distributor commissions

Commodity products Gold

ETFs

Provide wider variety for customers

Total Gold ETF AUM: INR 3,000 Cr.

Sub-Advisory to foreign funds India an attractive investment destinationfor foreign investors

Leverage on foreign presence and local

expertise

Source: Company websites, AMFI data

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Customer segmentation and competitor benchmarking have been used to

estimate future revenues and costs forL&T MF

Industry Forecast

Customer Segment

Growth rates

Corporates

Retail

NIsFIIs

Industry AUM (201X)

Customer Segment-wise

L&T Target Market Share

Customer Segment-wise

L&T AUM (201X)

Customer Segment-wise

Customer Segment

uying ehavior1

Average Product

revenue per AUM2

L&T MF Revenue

(201X)

Revenue Calculations

1. Split between E uity, debt and hybrid funds

2. Assumption based on the performance of top 5 players

Cost Calculations

Operating Costs

Rent

Marketing Costs

Personnel Costs

Distribution Costs

Other Costs

enchmarked to current

industry leaders

Past 2 year average, reducing

gradually

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Industry Growth Scenarios

BaseAll customer segments grow at a similar rate of 15-1 % with a heavy inflow

from FIIs, maintaining the current customer split

RetailBoomRetail segment growth at 25% fueled by increased investor preference and

tier 2 and tier 3 cities penetration

CorporateBoom A heavier growth in corporate customers at 1 % fueled by targeted productsand dedicated distribution

L&TMarket Share Growth Scenarios

BaseWith MF schemes distributed e ually across customer preferences , - %

market share target in each customer segment for 2015

Retail PushMajor focus on retail customers through ELSS, SIP and low ticket size

products targeting 11% retail market share in 2015

Corporate PushDedicated schemes from corporates in li uid and debt segments targeting a

10% market share in corporate segment by 2015

Model simulates different scenarios based on external market growth as

well as strategic alternatives

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Key Assumptions on industry and market share growth can be used to

monitor progress

25% growth rate for retail segment based on a heavyretail boom assumption

Current customer segment split ofL&T same as that ofindustry

A target market share to be achieved in each customersegment by 2015 with heavier growth in retail

Straight line market share growth between 2010 and2015 target

Revenue as % of AUM in e uity, debt and hybridproducts as 1.25%, 0.15% and 0. 5% respectively

Portfolio preferences ( e uity, debt, hybrid) for eachcustomer segment

1

2

3

4

5

6

Segment TargetCorporate 8%

FII 9%

HNI 11%

Retail 11%

Segment GrowthCorporate 16%

FII 30%

HNI 15%

Retail 25%

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All the above figures based on the retailboom and retailpushscenario E uity AUM as % of total AUM expected to increase to 25-30%

o Greater penetration into retail segment

Projection indicates a positive profit from 2013

o Distribution costs expected to reduce in the future

Market share by AUM in 2015: .52% (Expected to be in the top 5 AMCs)

4068

10613

1

2011 2012 2013 2014 2015

L&TMF AUM

(INR 000 Cr)

431

1 7

(33)(36)

2011 2012 2013 2014 2015

L&TMF Profitbeforetax

(INR Cr)

L&T MF would rapidly increase its market share with positive profits from

2013 onwards

63%

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2011