L&T Emerging Opportunities Fund – Series I

29th Jan 2018 – 12th Feb 2018

For product labelling please refer to last slide no 16

Small cap rally… Still a long way to go?

• Small cap segment has delivered good returns in the past few years, outperforming other segments of the market

• However, performance is nowhere close to previous cycle. Given the expected economic / earnings recovery and

positives of recent policy reforms, we believe we are still somewhere in the middle of this small cap rally

The next leg of the small cap rally is likely to be predominantly driven by earnings growth

Source: ICRA MFIE. The above details are for information only and do not represent performance of the

scheme. Data as on 29-12-2017

2

And not all small cap stocks have participated in the rally

• Lot of small cap companies are trading below their Dec-14 price level

• Opportunities exist for small cap stock pickers willing to invest with a medium term view

Source: Ace Equity, based on closing price on 29-Dec-17. Stocks in Nifty 500 index have been categorised into

two categories (Top 250 / beyond 250) based on market capitalization as on 29-Dec-17.

3 year CAGR

3

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

140%

160%

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Top 200 stocks

201-400 stocks

401-600 stocks

Smaller companies tend to do well during earnings recovery…

4

When earnings recover, smaller companies tend to post significantly higher profit growth

Earnings recovery is expected to gain momentum over the next 6-12 months

Source: Ace Equity, LTMF. Based on aggregate earnings growth for each of the financial year. Market cap

ranking of Top 200, 201-400 and 401-600 is based on market capitalization at the end of respective financial year.

YoY earnings growth for companies across different market cap segments

Focus on

strengthening

banks

Policy reforms - A growth catalyst for smaller companies

• Small cap opportunities in sectors such as infra, housing,

manufacturing, etc

• Higher operating leverage to boost margins as demand picks up

• Shift from unorganized to organized sector

• Improvement in transparency / corporate governance

• Increased efficiency / ease of doing business

GST

Thrust on

investment and

manufacturing

Over the medium term, policy reforms expected to boost the growth of

smaller companies

• Smaller companies to benefit from overall economic recovery

• Expected improvement in lending environment to aid in providing

necessary capital to support growth of smaller companies

5

Index valuations may not necessarily reveal the complete story…

Source: Ace Equity, based on trailing P/E ratio as on 29-Dec-17. Stocks in CNX 500 index have been categorised

into two categories, namely Top 250 and beyond top 250 based on market capitalization as on 29-Dec-17. Stocks

with negative EPS have not been considered.

• While some small cap stocks seem to be trading at expensive valuation, there are still

large number of stocks available at reasonable valuation levels

• This coupled with expected earnings bounce back could mean a great wealth creation

opportunity for investors in the small cap segment over the next few years

Trailing 12M P/E

6

And the universe of small cap stocks continues to grow…

PAT (Trailing 12 months) Number of companies

Greater than Rs. 100 crore 232

Rs. 50 – 100 crore 142

Rs. 10 – 50 crore 109

Out of 600 companies (from 251st to 850th company by mkt cap)

Market cap rank

Source: Bloomberg. TTM PAT numbers are as on Q2 2017. Market cap numbers are as on 29th

December 2017.

More than 370 small cap companies are making PAT of over Rs. 50 crore

7

Small cap stocks are under-researched and under-owned

Source: Bloomberg. Classification of stocks into top 100 / Next 100 / Bottom 300 is based on the market

capitalization of stocks in CNX 500 index. As on 03-1-2018. Free Float refers to the proportion of shares

that are freely available to the investing public.

• Analyst coverage of small and mid cap companies is significantly lower as compared to large cap

companies – on an average, only 8 analysts cover stocks in the bottom 300 as compared to 33

analysts covering top 100 stocks

• FII ownership of free float market cap is low for small and mid cap companies – less prone to risks

emanating from FII outflows

Small cap segment of the market provides more opportunities to spot pricing anomalies

8

However, stock selection is extremely critical in this

segment…

Though smaller companies have the potential to grow at a higher rate, not all smaller

companies would grow to become mid or large cap

The key is to identify companies with

• Scalable opportunities

• Competent management / promoters

• Strong corporate governance practices

• Balance sheet strength

• Competitive edge

Stocks of such businesses when bought at appropriate valuation levels could

offer upside potential over the medium to long term

9

Proven stock picking track record in small and midcap space

Source: ICRA MFIE. Data as on 29th December 2017. Please refer to last slide no 17 for product labeling. Please refer to last slide for

performance of other schemes managed by the fund manager.

L&T Emerging Businesses Fund v/s Benchmark L&T Midcap Fund v/s Benchmark

Rebased to 1000

Rebased to 1000

10

Introducing…

L&T Emerging Opportunities Fund –

Series I

L&T Emerging Opportunities Fund – Series I – Key details

• A close - ended equity scheme predominantly investing in small cap stocks with tenure of 1151 days

from the date of allotment

•The Fund will invest at least 65% of the portfolio in small cap stocks to generate long term capital

appreciation. Small cap stocks will comprise of equity and equity related instruments of companies

that are beyond top 250 companies based on the market capitalization

•Asset Allocation

• Focus on bottom-up stock selection using our proprietary G.E.M investment approach

• Valuations to play an important role in all investment decisions – focus on investing in stocks with

adequate margin of safety

• Benchmark: S&P BSE Small Cap Index

Instruments Indicative allocation

(% of net assets)

Equity and equity related securities of small cap companies* 65 - 100

Equity and equity related securities of companies other than small cap companies* 0- 35

Debt and money market instruments^ 0 -20

* Includes investment in derivatives up to 50% of the net assets of the Scheme. ^ The Scheme may invest in securitized

debt up to 20% of its net assets. Small cap companies are defined as companies beyond the top 250 companies in India

based on market capitalization. For product labeling please refer to slide no 16.

12

Product positioning

• A product that is suitable for investors looking to benefit from superior long term

business growth potential of small cap companies

• A product that is aimed to deliver higher alpha from a longer term perspective

• Adds style diversification to investor’s portfolio

• A close ended structure to allow fund manager to take positions in high conviction

stocks which have potential to outperform over the medium term

• A close ended structure also helps in effectively managing the portfolio liquidity which

is extremely critical in small cap space

Top 100 companies

Next 150 companies

Companies beyond top

250

Large cap Mid cap Small /

Micro cap

L&T Emerging Opportunities Fund – Series

I

Classification shown in the matrix above is based on market capitalization of companies. For asset allocation

pattern, please refer to previous slide. For product labeling please refer to slide no 16.

13

Product Features and NFO dates

Brief description A close - ended equity scheme predominantly investing in small cap stocks

Scheme benchmark S&P BSE Small Cap Index

Minimum initial application amount

Rs. 5000 per application and in multiples of Re. 1 thereafter

Options available Dividend Payout and Dividend Sweep (dividend declared under this option will have

the facility to switch out the entire dividend amount to any other scheme of L&T Mutual

Fund, as opted by the investor at the time of NFO)

Plans available Regular and Direct

Fund Manager Vihang Naik

NFO opens: 29th January 2018 NFO closes: 12th February 2018

14

Generation

of Ideas

Manufacturing

and

monitoring of

Portfolios

• In house fundamental

research:

• Around 350 stocks

under coverage

• Filters / screens

• Business cycles

• Meet industry

experts,

competitors,

suppliers, regulators

• External Research:

• Broker research

• Industry research

Identify potential ideas

• Quality

• Profitability and attractiveness of business

• Competitive positioning

• Stage in business cycle

• People

• Management track record and management incentives

• Corporate governance

• Valuations

• P/E, EV / EBITDA

• Good businesses at reasonable valuations or companies

on cheap valuations where fundamentals are improving

When buying a business, know the business

• Investment team

discussion

• Investment mandate –

scheme objective,

diversification,

Regulatory limits,

internal guidelines

• Risk philosophy –

concentration, liquidity,

market cap size,

Tracking error, stress

testing, etc.

Implementation

Valuations

Evaluation

of

companies

Equity Investment Process – G.E.M.

15

Important Information

This presentation is for general information only and does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this information. The data/information used/disclosed in this presentation is only for information purposes and not guaranteeing / indicating any returns. Recipient of this presentation should understand that statements made herein regarding future prospects may not be realized. He/ She should also understand that any reference to the securities/ sectors / indices in the document is only for illustration purpose. Neither this presentation nor the units of L&T Mutual Fund have been registered in any jurisdiction. The distribution of this presentation in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this presentation are required to inform themselves about, and to observe, any such restrictions.

Any reference to the securities/ sectors / indices in the document is only for illustration purpose and may or may not form a part of the portfolio of the scheme and is not any indication of the portfolio of the scheme.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

CL05132

L&T Emerging Opportunities Fund Series – I

16

Important Information

17

Performance of other schemes managed by the fund managers

18

Mr. Vihang Naik manage 3 scheme and Mr. Soumendra N. Lahiri manages 8 scheme respectively.

The performance shown above is of regular plan.