PowerPoint Presentation · For limited private circulation only Motilal Oswal Business...

July 2019

For limited private circulation only

Motilal Oswal Business Opportunities Strategy

The PMS Strategy will invest in a high conviction concentrated portfolio of minimum 20 stocks

The portfolio will be constructed based on in-depth research leading to bottom-up stock picking

with a view of equities from 3 – 4 years perspective

High Conviction portfolio which will invest across market capitalization and will primarily focus on

Consumer Discretionary – Beneficiary of Doubling of per Capita GDP

Private Banks and NBFC – Play on Value Migration from Public sector to Private sector

Agriculture – A Play on Rising Rural Income

Affordable housing – Governments Focus on Housing for All by 2022

GST Beneficiaries – Business Migration from Unorganized to Organized


Themes we Believe in

Consumer Discretionary

Beneficiary of Doubling of Per Capita GDP

Private Bank & NBFC

Value Migration from Public Sector to Private

Sector

Agriculture

A Play on Rising Rural Income

Affordable Housing

Government Focus on Housing for All by 2022

GST Beneficiary

Business migration from Unorganized to

Organized


Rise in GDP - Creates Disposable Income

Source: statisticstimes.comNote: Above forward-looking statements are based on external current views and assumptions and involve known and unknown risks and uncertainties that could affect actual results.

GD

P (

USD

bn

)2

2 34 59 1

55 3

01 4

65

47

5

49

4

52

4 61

8 72

1 83

4 94

8

1,2

39

1,2

26

1,3

66

1,7

08

1,8

79

1,8

28

1,8

64

2,0

42

2,0

90 2,2

74

2,4

53 2

,70

2 2,9

76 3

,27

8

3,6

11

3,9

77

FY5

1

FY6

0

FY7

0

FY8

0

FY9

0

FY0

0

FY0

1

FY0

2

FY0

3

FY0

4

FY0

5

FY0

6

FY0

7

FY0

8

FY0

9

FY1

0

FY1

1

FY1

2

FY1

3

FY1

4

FY1

5

FY1

6

FY1

7

FY1

8E

FY1

9E

FY2

0E

FY2

1E

FY2

2E

FY2

3E

1st US$ tn58 years

2nd US$ tn7 years

3rd US$ tn5 years

4th US$ tn3 years


Exponential opportunity in Consumer Discretionary Space

When per capita GDP doubles, discretionary spend becomes 12x

GDP p.c. $1000

GDP p.c. $2000

9001,000

100

1,200

Discretionary Spend

Basic Spend

12X

GDP p.c. $2200


Value Migration in Banking

At present, PSU banks have ~70% market share Vs 30% with private banks

The total stressed assets in PSU Banks – Rs 10 lakh crores, causing dent to their lending ability

Economy is expected to grow by 7%#, Credit growth expected to be 2X from banking sector

Credit growth largely to benefit Private Sector banks as PSU Banks are struggling with Non Performing loansand stretched tier 1 capital adequacy ratio

Private banks PAT contribution to Nifty 50 was 13.4% in FY17, as compared to PSU banks with 2.9% andexpected to grow further

Data Analytics, IT Infrastructure and Dynamic workforce – added advantage for private banks

Source: MOSL# Source: www.ibef.org as on June 2017The statements made herein may include statements of future expectations and other forward-looking statements that are based on our current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Past performance may or may not be sustained in future

0

5

10

15

20

25

30

FY12 FY13 FY14 FY15 FY16 1HFY17

Private Banks PSU Banks

Loan Growth : Private Banks outpacing the Public BanksPAT Contribution in NIFTY 50 – Private Vs PSU Banks

7.6

2.9

10.6

13.4

0

5

10

15

FY 14 FY 17

NIF

TY P

AT

Co

ntr

ibu

tio

n %

PSU Banks Private Banks


19 20 2124

2622 23

36

59

71

0

10

20

30

40

50

60

70

80

FY13 FY14 FY15 FY16 FY17

In stock of loans In incremental loans

Private Banks gaining market share

(%)

Source: Banks, CLSA

Private banks contributed > 70% of incremental bank lending in FY17


Agriculture Growth: Rise in Rural Income

Government wants to Double the Farm Income by 2022

Agriculture infrastructure - increasing investments in agricultural infrastructure such as irrigation facilities,warehousing and cold storage

Increase in crop yield - Use of genetically modified crops will likely improve the yield

Subsidies and Incentives - Short-term crop loans at subsidized interest rate of 7% p.a. & additional incentive of3% for prompt repayment

Total Budget allocation for rural, agricultural and allied sectors for FY2017-18 has been increased by 24%

Increase in Rural income led by rise in MSP’s (Minimum Support Price) will create demand in related sectorslike Agrochemicals, Consumer Staples and Consumer Discretionary

Source: www.ibef.org/industry/agriculture-india.aspx

1100 11701285 1350 1400 1450 1525

16251735

0

500

1000

1500

2000

FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18

MSP of Wheat (Rs. per quintal)

MSP of wheat has risen from Rs.1,100 in FY10 to Rs.1,735 currently

6% 10%5% 4% 4% 5%

7%7%


Affordable Housing

Economic growth, urbanization and rapid change in socio-economic profile will drive demand

Government vision – ‘Housing for all by 2022’

Rising disposal income - Per capita income is expected to increase from 2,800 USD in 2012 to USD 8,300 by2028*

10 million people moving to urban cities every year, is likely to increase the demand#

Growth in Affordable housing will create parallel demand in related sectors like Cements, Paints, Tiles, PlasticPipes and Electricals

Demand supply dynamics of housing for various income

35%

25%20%

15%

5%5% 5%

20%

40%

30%

0%

10%

20%

30%

40%

50%

200-300 300-500 500-700 700-1000 >1000

Co

st o

f U

nit

(IN

R ‘0

00

)

Income Level (INR ‘000)

Share of Demand Share of Supply

High Demand supply gap for residentialunits priced below 10 Lakhs

Source:- Jones Lang LaSalle (Affordable Housing in India)* Source: PWC: Building the economy block by block# Source: www.kpmg.com


Multiple Sector Linkages

Sector

Demand linked to housing

FY 14-17 industry growth

FY17-24 Expected growth

Cement

US$ 14 bn

3%

12%

Steel

US$ 12 bn

3%1

8%1

Paints

US$ 4.5 bn

9%

15%

Wood Panel

US$ 3.7 bn

1%

12%

Tiles

US$ 3.5 bn

8%

11%

Plastic Pipes

US$ 2.1 bn

5%

14%

Light Electricals

Us$ 2.1 bn

8%

13%

Adhesives Construction

Chemicals

US$ 1.1 bn

8%

13%

Affordable Housing: Impact on Different Sectors

Construction of 60m units over FY 18 -24

Total spend on housing over 7 years: US$ 1.3 trn

Note: Industry size data based on CLSA estimates for housing led demand in each building materials sub-sector. Light electricals include switchgears/switches, fans, lightings & fixtures and water heaters. Source: MoSPI, Ministry of Commerce, RBI, Ministry of Steel, AceEquity, CLSA as on March 31, 2017


GST: Movement from Unorganized to Organized

Portion of economy to migrate from informal to formal, leading to a 4.2%* growth in real GDP

Institutional demand inclined to move towards branded players

Increased efficiency in businesses due to reduced state level regime

Tax evasion to fade away – Unorganized players to loose competitiveness

Companies in sectors like paints, appliances, apparel, logistics, plastic pipes, ceramic tiles, batteries, etc. willstand to benefit

Sector

Benefit of moving to Organized Segment

Change inTax Rate

Supply ChainManagement

Overall

Auto-Batteries

Logistics

Apparels

Pipes, Ceramics

Highly Positive Positive Slightly Positive NeutralSource:- The Financial Express

*Source:- www.federalresrve .gov.in**Source:- KPMG India Retails the next growth story***Source:- Edelweiss: Analysis Beyond Consensus

5

SectorUnorganizedShare

OrganizedShare

Auto-Batteries 40%*** 60%

Logistics 92%** 8%

Apparels 70%*** 30%

Pipes, Ceramics 50%*** 50%


MOAMC - Investment Team

Raamdeo Agarwal Chairman, MOAMC

7 Fund Managers

2 Senior Research Analysts & 5 Analysts

7 Dealers

Experience of 38 years in Equities, authoring wealth creation studies for last 21 years

3 Fund Managers in Mutual Fund & 4 in PMS, with overall experience of over 95 years

Experienced pool of analyst covering sectors with cumulative experience of 65 Years

3 dealers for Mutual Fund & 4 in PMS & AIFwith 50 – 55 years of cumulative experience

Over 250 years of cumulative experience in managing equities and wealth creation


Fund Managers

Manish SonthaliaHead Equity PMS and Alternatives

As one of the founding members of the MOAMC’s business,

Manish today heads the Managed Accounts business and is the

Portfolio Manager for the firm’s PMS Strategies and AIFs

He has been with the Group for over 14 years.

He has a cumulative 26 years of experience across equity fund

management and research covering Indian equity markets.

He holds a Bachelors Degree in Commerce (Hons) , Chartered

Accountancy, Cost & Works Accountancy, Company Secretaries. He

has also completed his Masters of Business Administration in

Finance from IISWBM.


MOAMC - Investment Philosophy

At Motilal Oswal Asset Management Company (MOAMC), our investment philosophy is centered on 'Buy Right: Sit Tight‘ principle

Buy Right Sit Tight

‘Q’uality denotes quality of the business andmanagement

‘G’rowth denotes growth in earnings andsustained RoE

‘L’ongevity denotes longevity of thecompetitive advantage or economic moat ofthe business

‘P’rice denotes our approach of buying agood business for a fair price rather thanbuying a fair business for a good price

Buy and Hold: We are strictly buy and holdinvestors and believe that picking the rightbusiness needs skill and holding onto thesebusinesses to enable our investors to benefitfrom the entire growth cycle needs evenmore skill.

Focus: Our portfolios are high convictionportfolios with 25 to 30 stocks being ourideal number. We believe in adequatediversification but over-diversification resultsin diluting returns for our investors andadding market risk


Investment Philosophy

Competent management

Volume growth

Price growth

Operating leverage

Financial leverage

Long-term relevance of business

Extended competitive advantage

Initiatives to sustain growth for 10-15 yearsTypically prefer stocks with earnings growth

of around 1x

Enduring business, preferably consumer facing

Compelling business opportunity

Sustainable competitive advantage

Reasonable valuation, relative to growth prospects

High margin of safety

Q-G-L-P Demystified

QGLP – The investment philosophy has been framed out of 21 years of annual wealth creation studies authored by our co–founder, Raamdeo Agrawal


Emergence to Endurance – Key Strength of MOAMC

2010IOP PMS

2.9x in 9 Yrs2007

NTDOP PMS5.7x in 11 Yrs

2003Value PMS

27x in 16 Yrs

A Multi Cap strategy - in the

making…To identify

emerging value creators

2018

Motilal Oswal Business

Opportunities Strategy

Portfolio Management Services

Value has identified wealth creators at an early stage - thus, its market cap increased from ~16k Crs to ~198k Crs

NTDOP’s journey started as mid cap strategy and today converging towards maturity & stability

IOP’s is a newly created small and mid cap portfolio following the footsteps of NTDOP

Data as on 30th June 2019 ; The performance shown above is of Absolute Return a model client, performance of an individual client may be different , depending on the time of investment in the strategy. Past performance may or may not be sustained in future


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-19

NTDOP Strategy

Nifty 500

5.68X

1.90X

MOAMC – PMS Track Record

IOP Strategy

9+ years track record

Mid & Small Cap Portfolio

Invests in stocks with potential togrow more than the nominal GDPfor next 5-7 years

Focus is on identifying well runcompanies that are potentialleaders in the field of operations


Diversified Portfolio

Invest in stocks with potential tobe beat the markets

Concentration on emergingthemes which are part of thenext trillion dollar GDP growthopportunity

NTDOP Strategy Value Strategy


Large Cap Portfolio

The focus is on buying blue-chiphigh growth companies

To identify potential long-termwealth creators by focusing onindividual companies and theirmanagement

Data – As on 30th June 2019, The performance shown above is of a model client post fees & expenses. Performance of an individual client may be different, depending on the time of investment in the strategy

Inception Date – February 15, 2010 Inception Date – March 25, 2003Inception Date – December 5, 2007

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50

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-03

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r-0

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g-0

8

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-10

No

v-1

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-12

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-14

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-15

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-16

Ap

r-1

7

May

-18

Jun

-19

Value Strategy

Nifty 50

11.66X

27.02X

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Feb

-19

Jun

-19

India Opportunity PortfolioStrategy

Nifty Smallcap 100

2.90X

1.79X


MOAMC – Some Success Stories

Multibaggers across PMS strategies…

Stocks Purchase DatePurchase

Price (INR)Current Market

Price (INR)*Performance (% Growth)

CAGR (Growth %)

IOP PMS

DCB Bank August 2016 110 237 116% 30%

Mahanagar Gas August 2016 511 850 66% 19%

Aegis Logistics August 2016 123 200 62% 18%

NTDOP PMS

Page Industries December 2007 456 20582 4410% 39%

Bajaj Finance August 2010 63 3681 5786% 58%

Eicher Motors August 2010 1,174 19139 1531% 37%

Value PMS

Hero MotoCorp June 2003 254 2582 918% 16%

HDFC Bank July 2008 201 2444 1116% 25%

Eicher Motors April 2012 2,055 19139 831% 36%

* As on 30th June 2019The given stocks are part of portfolio of a model client of respective PMS Strategies. The Stocks mentioned above are used to explain the concept and are for illustration purpose only and should notbe used for development or implementation of an investment strategy. The stocks forming part of the existing portfolio of PMS Strategies may or may not be bought for new clients of PMS Strategies.The stocks may or may not be part of the Fund. It shall not be constitute as an advice, an offer to sell/purchase or as an invitation or solicitation to do so for any securities. The portfolio wouldconstitute number of stocks having different weightage in the PMS portfolio. The Stocks held in the portfolio may or may not give positive returns. Past performance may or may not be sustained infuture. Motilal Oswal AMC does not provide any guarantee/ assurance any minimum or maximum returns


Disclaimer

Disclaimer: This presentation has been prepared and issued on the basis of internal data, publicly available information and other sources believed to bereliable. The information contained in this document is for general purposes only and not a complete disclosure of every material fact and terms andconditions. The information / data herein alone is not sufficient and shouldn’t be used for the development or implementation of an investment strategy. Itshould not be construed as investment advice to any party. All opinions, figures, charts/graphs, estimates and data included in this presentation are as ondate and are subject to change without notice. While utmost care has been exercised while preparing this document, Motilal Oswal Asset ManagementCompany Limited does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use ofthis information. The statements contained herein may include statements of future expectations and other forward-looking statements that are based onour current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differmaterially from those expressed or implied in such statements. Readers shall be fully responsible /liable for any decision taken on the basis of thispresentation. No part of this document may be duplicated in whole or in part in any form and/or redistributed without prior written consent of the MotilalOswal Asset Management Company Limited. Readers should before investing in the Strategy make their own investigation and seek appropriateprofessional advice. Investments in Securities are subject to market and other risks and there is no assurance or guarantee that the objectives of any of thestrategies of the Portfolio Management Services will be achieved. Clients under Portfolio Management Services are not being offered anyguaranteed/assured returns. Past performance of the Portfolio Manager does not indicate the future performance of any of the strategies. The name of theStrategies do not in any manner indicate their prospects or return. The strategy may not be suited to all categories of investors. The material is based uponinformation that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Neither MotilalOswal Asset Management Company Ltd. (MOAMC), nor any person connected with it, accepts any liability arising from the use of this material. Therecipient of this material should rely on their investigations and take their own professional advice. Opinions, if any, expressed are our opinions as of thedate of appearing on this material only. While we endeavor to update on a reasonable basis the information discussed in this material, there may beregulatory, compliance, or other reasons that prevent us from doing so. The Portfolio Manager is not responsible for any loss or shortfall resulting from theoperation of the strategy. Recipient shall understand that the aforementioned statements cannot disclose all the risks and characteristics. The recipient isrequested to take into consideration all the risk factors including their financial condition, suitability to risk return, etc. and take professional advice beforeinvesting. As with any investment in securities, the Value of the portfolio under management may go up or down depending on the various factors andforces affecting the capital market. Disclosure Document shall be obtained and read carefully before executing the PMS agreement. Prospective investorsand 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 document is not for public distribution and has been furnished solely forinformation and must not be reproduced or redistributed to any other person. Persons into whose possession this document may come are required toobserve these restrictions. No part of this material may be duplicated in any form and/or redistributed without ’MOAMCs prior written consent.Distribution Restrictions – This material should not be circulated in countries where restrictions exist on soliciting business from potential clients residing insuch countries. Recipients of this material should inform themselves about and observe any such restrictions. Recipients shall be solely liable for any liabilityincurred by them in this regard and will indemnify MOAMC for any liability it may incur in this respect.

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