Reliance Capital Builder Fund III Series A (A Close Ended Equity Oriented Scheme)

Transcription

1 Reliance Capital Builder Fund III Series A (A Close Ended Equity Oriented Scheme) Offer for Sale of Units at Rs.10/- per unit during the new fund offer period Tenure 3 years from the date of allotment of units NFO Opens June 10, 2015 NFO Closes June 24, 2015

2 Reliance Capital Builder Fund III Series A is suitable for investors who are seeking*: Long term capital growth Investment in diversified portfolio of equity & equity related instruments with small exposure to fixed income securities High risk. (BROWN) *Investors should consult their financial advisers if in doubt about whether the product is suitable for them. Note: Risk is represented as: (BLUE) investors understand that their principal will be at low risk (YELLOW) investors understand that their principal will be at medium risk (BROWN) investors understand that their principal will be at high risk Slide 2

3 Market Outlook Slide 3

4 India s GDP growth Linear growth, exponential opportunity India can double GDP size in <7 mere 12% nominal GDP growth It took over 50 years for the Indian economy to reach $1 trillion plus, however the next $1trn could be in less than ~5 years Source: RMF Internal Research Slide 4

5 Indian Economy The BIG Picture 9th largest economy in the world $2 trillion Nominal GDP as per World Bank Potential Rapid Growth India took 50 years+ to get to a $1trn economy, however even at mere 13% nominal GDP growth, it could be a $4trn + economy in 5 yrs Least vulnerable to External Global Shocks Debt / GDP ~120% vs average of 220% for developed/developing economies Foreign holdings as a %age of total domestic 1.5% vs average of 25% of major large economies Multi-decade mega trends under development Acceleration in urbanization and urban transport, Transformational digitization, All round structural governance reforms, preparing for manufacturing renaissance Source: World Bank, Bloomberg Slide 5

6 The Equity Machinery at Work.. Fundamentals Valuations Sentiments Slide 6

7 Macro economic trends continue to be positive THEN (June 2014) NOW (June 2015) Crude Oil ($/bbl) CPI Inflation 8.6% 4.9% GDP Growth* 4.7% 5.3% Foreign Reserves (USD billion) Fiscal Deficit 4.6% 3.99% PMI Source: Bloomberg, CSO PMI refers to HSBC/Markit manufacturing purchasing managers' index. * Old series considered for GDP Growth Slide 7

8 The Fundamental Story Rapid Growth around the Corner on account of Reforms: Financial Inclusion ~100% of eligible India under UIDAI (Unique Identification Authority of India) to lead to (Direct Benefit Transfer) DBT of all social sector schemes Project Monitoring Group clearing high impact projects: projects worth ~ $100 billion cleared so far All-round Business-easy reforms Establishing NITI Establishing National Institution for Transforming India leading to substantial reduction in bureaucracy Agriculture reforms Restructuring FCI (Food Corporation of India), APMC (Agricultural Product Market Committee) reforms, Soil health cards, Farmer insurance, proposal for National Irrigation scheme, Easing supply side bottle necks Housing for all Affordable housing mission aims for housing for all by 2022 Ambitious foreign trade policy to grow exports from $466bn in FY14 to $900bn in 2020 Source: Bloomberg, indiabudget.nic.in Slide 8

9 The Fundamental Story Subsidy savings and innovative revenues give Government financial muscle to spend on the economy Coal and spectrum auctions have been highly successful (Auction and allotment of 67 blocks has unlocked over $55bn (335k crs ) for states / Telecom spectrum auctions raised $17.6bn - Over 1 lac crs) Disinvestments : CY15 targeting to raise Rs. 55k crs i.e $9bn (Several other big ticket disinvestments in pipeline Hind. Zinc, SUUTI (Specified Undertaking of the Unit Trust of India), Coal India, ONGC etc with cumulative potential of $20bn+) Banks allowed to raise funding for infrastructure with minimum SLR / CRR requirement Fuel Reforms has reduced the budgeted fuel subsidy bill by Rs. 30,000 Crs, a drop of 50% GST implementation will result in improved tax collection, and is expected to add to the GDP growth Source: Bloomberg, indiabudget.nic.in Slide 9

10 The Fundamental Story Huge investments totaling Rs. 24 Lakh Crs envisaged over the next few years Railways to invest over ~600,000 crores over next 5years on expansion & up gradation Digital India - ~1,13,000 crores (Over next 5 yrs) Roads ~5,00,000 crores (Over next 5 yrs) Healthcare (National Health Assurance Mission): ~1,60,000 Crore (Over next 4 yrs) Swacch Bharat Mission : ~2,00,000 crore (Over next 4 yrs) National Rural Housing Mission: ~3,45,000 crores (by 2022, next 7 yrs) Solar ( Renewable Energy ) : ~6,00,000 crore ( In next 7 yrs for 100,000 MW ) Source: Bloomberg, indiabudget.nic.in Slide 10

11 The Fundamental Story Combination of low interest rate and economic recovery will lead to Higher Profit Growth for Indian companies India is one of the few countries in the world, which could afford to cut interest rates meaningfully already 3 rate cuts since Jan-15 Continuing fiscal prudence, disinflationary trends and benign liquidity scenario would result in lowering of interest rates Corporate India s earnings have been subdued in the past due to lower capacity utilization and higher interest rate scenario We expect this to turn around, and corporate earnings to grow meaningfully on the back of operating leverage and financial leverage Source: Bloomberg, RBI, RMF Internal Research Slide 11

12 The Valuations Story Reasonable Valuations With the recent market correction, with S&P Sensex trading around 27,000 and Nifty trading around 8200, valuations are quite reasonable. India s market cap / GDP is ~75%. During the peak of 2008, it was over 100% Based on cyclical low past earnings and our expectation of high growth, markets are reasonable at ~19x trailing PE We expect Earnings to pick up in the near term, and markets to capture the growth in earnings through commensurate returns over the next 3 years Source: Bloomberg, RMF Internal Research Slide 12

13 Earnings to be a Big Driver!!! SENSEX PE(x) at 16.8x 1yr & 13.6x 2yr forward earnings: still reasonable Source : MOSL Estimates. Slide 13

14 Valuations remain reasonable At ~16.8x 1yr Fwd & ~13.6x 2yr Fwd PE ( Valuations still tad above long-term average on cyclical low earnings ) SENSEX 26,769 ( As on 05-Jun-15 ) FY 15 FY 16E FY 17E Sensex EPS 1,355 1,605 1,980 Sensex P/E ( Long-term avg. of fwd multiples - ~15x ) 19.9x 16.8x 13.6x Source : MOSL Estimates., BSE Slide 14

15 Can growth surprise..!!! In the previous growth cycle, Earnings became ~3 times in less than 6 years.. Sensex grew 6 times. Previous Growth Cycle 31 st March th Jan 2008 Times(x) CAGR S&P BSE Sensex EPS S&P BSE Sensex Index Level x 26% 3,049 20, x 49% Past performance may or may not be sustained in future Current S&P BSE Sensex EPS S&P BSE Sensex Index Level June 5, ,355 26,769 Today India is at the cusp of the biggest transformation it ll undergo!! Source: Bloomberg, BSE, MOSL Estimates Slide 15

16 The Sentiment Story Brand India has never been more vibrant and appealing than now, which will augur very well in attracting foreign flows, both FIIs and FDI Nearly 20 foreign trips have been made by the PM (5 of these for multi-lateral meetings like BRICS, G-20, SAARC ) USA & China support India's bid for permanent UNSC seat $35bn investment by Japan over 5 years & expertise in high speed trains Australia for supplying Nuclear Power fuel - ~500 tns of uranium Canada agrees to supply 3,000mt of uranium to power Indian atomic reactors CXO s of global corporations for investment in India: Satya Nadella (Microsoft), Indra Nooyi (Pepsico), Mark Zuckerberg & Sheryl Sandberg (Facebook), Jeff Bezos (Amazon) $20 billion investment from China Source: Bloomberg, Economic Times, Hindu Business Line Slide 16

17 Summary Building blocks in place. Rapid growth round the corner Significant improvement in macro parameters Subsidy savings and innovative revenues give Government financial muscle to spend on the economy. Earnings growth could lead to robust market Combination of low interest rate and economic recovery will lead to higher profit growth for Indian companies Huge investments totaling Rs. 24 Lakh Crs envisaged. Slide 17

18 PRESENTING Reliance Capital Builder Fund III Series A Twin benefits of Alpha Generation & Higher Market Participation Slide 18

19 Investment Philosophy Slide 19

20 Portfolio Philosophy Twin benefits: Alpha Generation through Active Fund Management Higher Market Participation through Long Call Options Direct Equity (80%) Options (20%) Strategy Diversified Portfolio Strong track record of creating alpha over benchmark for the last 3 years Call Options Buy June 2018 Call Options Note: The current fund philosophy may change in future depending on market conditions or fund manager s views. Slide 20

21 Equity Strategy Multi-cap strategy with an aim to participate in investment opportunities across all sectors and market capitalization The Fund Manager keeps the discretion to change the mix between large cap and mid caps Sector concentration based on market conditions Use of both top down and bottom up strategies Top-down Focus on macro trends Broad sector calls Bottom-up Invest in niche industries Invest in companies having potential of sustainable growth Slide 21

22 Call Option for Higher Equity Participation Call option gives the buyer the right to "call in" (buy) an asset at a specific price on or before a certain date The investor profits on a call when the underlying asset increases in price. The upside is unlimited, whereas the downside is limited to the option premium Options can provide enhanced market participation Investors can buy options just by paying premium instead of the cost of the shares Unlimited Upside Limited Downside Slide 22

23 RMF Fund Management Expertise Slide 23

24 RMF Fund Management Strength Large & Experienced Team: 6 Fund Managers including CIO Equities supported by 15 member analyst team. Cumulative experience of over 350 years in Indian Equities of which collectively over 100 years with RMF Strong In House Research: Active coverage of over 450 companies (> 1100 co s tracked) Analyst Team subdivided with specialists covering all key areas: Sectors & Companies Quantitative Analysis Economics & Macro Technical Analysis Our research capability empowers the Fund Manager to be BOLD in identifying high growth potential stocks & manage the RISK associated with it (Past performance may or may not be sustained in future) Slide 24

25 Scheme Facts Slide 25

26 Scheme Features Investment Objective The investment objective of the scheme is to provide capital appreciation to the investors, which will be in line with their long term savings goal, by investing in a diversified portfolio of equity & equity related instruments with small exposure to fixed income securities. Although, the objective of the Fund is to generate optimal returns, the objective may or may not be achieved. Asset Allocation Diversified Equity & Equity Related Instruments: 80%-100% Debt & Money Market Instruments: 0%-20% Plans & Options Minimum Application Amount Benchmark Growth & Dividend Payout Option Direct Plan Growth & Dividend Payout Option Rs 5,000 and in multiples of Re 1 thereafter S&P BSE 200 Index Load Structure Fund Manager Entry Load - Nil. Exit Load: Nil Since the scheme shall be listed on BSE or any other recognised Stock Exchange, Exit load shall not be applicable. Omprakash Kuckian & Jahnvee Shah (Overseas Investments) Slide 26

27 Scheme Specific Risk Factors: Trading volumes and settlement periods may restrict liquidity in equity and debt investments. Investment in Debt is subject to price, credit, and interest rate risk. The NAV of the Scheme may be affected, inter alia, by changes in the market conditions, interest rates, trading volumes, settlement periods and transfer procedures. The NAV may also be subjected to risk associated with investment in derivatives, foreign securities or script lending as may be permissible by the Scheme Information Document. BSE Disclaimer: It is to be distinctly understood that the permission given by BSE Ltd. should not in any ways be deemed or construed that the SID has been cleared or approved by BSE Ltd. nor does it certify the correctness or completeness of any of the contents of the SID. The investors are advised to refer to the SID for the full text of the Disclaimer clause of the BSE Ltd. Disclaimers The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. Certain factual and statistical information (historical as well as projected) pertaining to Industry and markets have been obtained from independent thirdparty sources, which are deemed to be reliable. It may be noted that since RCAM has not independently verified the accuracy or authenticity of such information or data, or for that matter the reasonableness of the assumptions upon which such data and information has been processed or arrived at; RCAM does not in any manner assures the accuracy or authenticity of such data and information. Some of the statements & assertions contained in these materials may reflect RCAM s views or opinions, which in turn may have been formed on the basis of such data or information. Before making any investments, the readers are advised to seek independent professional advice, verify the contents in order to arrive at an informed investment decision. None of the Sponsor, the Investment Manager, the Trustee, their respective directors, employees, affiliates or representatives shall be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material. Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Slide 27

28 Thank you