BOI AXA Midcap Tax Fund Series 1

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NFO Open date: November 10, 2017 NFO Close date: February 9, 2018 BOI AXA Midcap Tax

appreciation over a period of 10 years Investment in equity and equity related

Tax Act, 1961 *Investor should consult their financial advisor if they are not clear

1 NFO Open date: November 10, 2017 NFO Close date: February 9, 2018 BOI AXA Midcap Tax Fund Series 1 ^ This product is suitable for investors who are seeking: (*) Capital appreciation over a period of 10 years Investment in equity and equity related securities of mid cap companies along with income tax benefit u/s 80C of the Income Tax Act, 1961 *Investor should consult their financial advisor if they are not clear about the suitability of the product. ^A 10 year close ended equity linked savings scheme

2 Agenda Equity Outlook Why Invest Now? The 3 Big Themes Why invest in Midcaps? Existing Midcap Expertise BOI AXA Midcap Tax Fund Series 1 Investment Philosophy About us 1

Equity Outlook Corporate Profits Time for a Upturn Corporate profits as a % of GDP are historic lows. We expect this to significantly improve and move back up towards the long term average.

3 Equity Outlook Corporate Profits Time for a Upturn Corporate profits as a % of GDP are historic lows. We expect this to significantly improve and move back up towards the long term average. We believe the improved business fundamentals, macro environment and governments continuing reforms will help drive this ROEs have also started to improve. We expect the subdued interest rates combined with improving return ratios would drive the market to move higher We expect the downgrade cycle to abate, going forward and earnings to grow 18% year on year over the next two years on the back revival of demand (pay commission, government s rural push and focused increase in public capital expenditure) Corp Profits as a % of GDP Average 5.2% Improving ROEs & Subdued Interest rates Source: Bloomberg 2

4 Domestic Equity Investments A multi decade growth driver We have seen a sharp increase in domestic investment in equities we expect this trend to gain further momentum as : 1. Equity still forms only a small part of overall household savings. Furthermore, this is significantly lower than global averages 2. Favorable demographics Young working population would result in rising incomes and financial savings in the system and would drive further flows towards equity markets 3. Improving financial literacy and regular investor education programs conducted by various market participants. We expect, the deluge of domestic liquidity would be one of the key drivers for India s equity markets over the foreseeable future 3

5 Why invest now? Is this India s Thatcher moment? Margaret Thatcher became UK s Prime Minister in She inherited an economy in doldrums high inflation, low growth, bad fiscal health and underperforming PSUs UK Privatization PSUs such as British Petroleum, British Airways, British Telecom etc. were privatized Labor reforms - The Government took on many strong labor unions which had crippled UK by long strikes Increase in Home Ownership Incentives were given to increase house ownership Tax Cuts Personal income tax rates were gradually reduced from 33% to 25% and peak rates were reduced from 80% to 40% India Disinvestment The Government has been able to achieve ambitious disinvestment targets. Furthermore, plans for privatizing others such as Air India have also been drawn up Labor reforms - 4 new labor codes simplifying a plethora (44 in total) of labor laws is on the anvil Housing for All It is an ambitious project announced that aims to provide housing for all by the year Tax Cuts Corporate tax rates have started to reduce and would move to a flat rate of 25%. With GST a plethora have indirect taxes have been subsumed Thatcher was elected as PM thrice. Over the 11 year period, the FTSE went up 5x. Source: Bloomberg 4

6 The 3 Big Themes Rise of the Private sector financials : The private sector has continued to gain share from the PSU banks in both CASA and Loans over the past few years. We expect this trend to continue in the foreseeable future as PSUs would continue to grapple with stressed asset provisioning and under capitalization. Earnings growth in Private sector Financials (especially retail oriented banks and NBFCs) would far outstrip the PSU banks. China capacity shutdowns benefiting India : China initiated widespread capacity shutdowns over the past year across the metals, chemicals and agro chemical sectors in its bid to shutdown all environmentally non compliant units. This trend is likely to accelerate the growth for Indian companies in these sectors as cheap Chinese supply gets off the market and demand supply dynamics becomes favorable. We expect Chemicals, Metals, Metal Consumable sectors to continue to do well. Discretionary consumption revival : Post the disruption due to Demonetization and GST, we see signs of discretionary consumption reviving well. The combination of a growing aspirational middle class and under penetration in almost all consumer discretionary categories (cars, white goods, ACs) bodes well for the sector. We expect companies within this sector to see healthy demand growth over the next few years. 5

7 Midcaps have delivered superior returns over the long term Mid caps delivered better returns than both large cap and small cap stocks. Period Returns (Annualized %) (in years) Nifty 50 Index Nifty Mid Cap 100 Index NSE Small Cap 100 Index % 10.1% 6.4% 7 8.0% 11.1% 9.7% % 20.3% 20.2% 3 7.5% 18.2% 18.2% with volatility similar to large caps over the longer term Period (in years) Volatility (Annualized) Nifty 50 Index Nifty Mid Cap 100 Index NSE Small Cap Index % 22.2% 24.1% % 17.3% 20.2% % 16.9% 21.0% % 16.8% 20.6% Source : Bloomberg, Internal calculations. Data as of 31st October 2017, Volatility refers to Annualized standard deviation of daily returns For illustration purposes only. Past performance may or may not be sustained in future 6

8 Mid caps are under-researched and under-owned Higher returns can be attributed to these stocks remaining out of the spotlight until they attain a noteworthy size in terms of revenues and profits. Inefficiencies in price discovery mean a higher potential for better returns, as typically lesser number of sell side analysts track these companies, and institutional ownership is low. Top 100 Stocks Stocks below the top 100 and above Rs.500cr market cap* No. of analysts tracking each stock (avg.) 33 No. of analysts tracking each stock (avg.) 5 Total institutional holding per stock 30.4% Total institutional holding per stock 14.6% Total FII holding per stock 20.8% Total FII holding per stock 8.4% *848 stocks as on November 2, 2017 Source: Bloomberg 7

9 Key to Mid caps Catch them early! Most of the stocks that have transitioned from mid cap to large cap, and have been included in the Nifty 50, have significantly out-performed prior to inclusion in the index Source: Bloomberg, BOI AXA- IM Research For illustration purposes only. Past performance may or may not be sustained in future 8

10 Existing Midcap Expertise BOI AXA Midcap Equity and Debt Fund Our existing Hybrid Midcap fund - BOI AXA Midcap Equity and Debt Fund was launched in July 2016 The fund invests 65% to 70% in equities and the balance in fixed income The fund has returned 27.7% since inception as compared to 15.7% for the fund s benchmark (as on Oct 31, 17) Alpha generation based on bottom-up stock selection has been the main driver of fund performance - 65% of the portfolio is invested in stocks outside the benchmark as on Oct 31, 2017 The fund mobilized Rs.60 cr at the time of launch and has subsequently grown to Rs.228 cr (as on Oct 31, 17) on the back of sustained strong performance Performance on BOI AXA Midcap Equity and Debt Fund as on Oct 31, 2017 Period Scheme Returns (%) ^ Benchmark Returns # (%) Additional Benchmark Returns^ (%) Current Value of Standard Investment of Rs,10,000 in the Scheme (Rs) Benchmark # (Rs) Additional Benchmark^ (Rs) 1 year 27.6% 18.5% 19.5% 12,782 11,872 11,965 3 years NA NA N.A NA NA N.A 5 years NA NA N.A NA NA N.A Since inception 27.7% 21.4% 15.7% 13,690 12,832 12, Mr. Alok Singh & Mr. Piyush Baranwal have been managing the Scheme as co fund managers since February 16, 2017 and July 20, 2016 respectively. In addition to this scheme, Mr. Alok Singh manages 4 open ended schemes and also co-manages 2 open ended schemes of BOI AXA Mutual Fund. Mr. Piyush Baranwal, in addition to this scheme manages 2 open ended schemes and also co-manages 1 open ended schemes of BOI AXA Mutual Fund. 2. This Scheme has been in existence for more than 1 year but less than 3 years 3. Period for which scheme s performance has been provided is computed basis on last day of the Month-end preceding the date of publication. 4. Different plans shall have a different expense structure. The performance details provided herein are of Regular plan. 5. Please refer to the next slide for performance of other funds managed by Alok Singh and Piyush Baranwal ^Past performance may or may not be sustained in the future # Nifty Midcap 100 Index (70%) & CRISIL Short Term Bond Fund Index (30%) Allotment date: July 20,

BOI AXA Midcap Tax Fund Series 1 New Fund Offer Our new fund, BOI AXA Midcap Tax Fund Series 1, aims to leverage on the midcap expertise that has been established by our equity team It is a pure

11 BOI AXA Midcap Tax Fund Series 1 New Fund Offer Our new fund, BOI AXA Midcap Tax Fund Series 1, aims to leverage on the midcap expertise that has been established by our equity team It is a pure equity fund and will therefore aim to be fully invested in equities under normal market situations The fund provides investors with the additional benefit of Tax Savings (Under Section 80C of the Income Tax Act) The close-ended nature of the fund will enable the Fund Manager to take a long-term view on his portfolio construct without having to worry about liquidity pressure Hence, long-term investors will benefit from the close ended nature of the fund coupled with the proven track-record of mid cap expertise stablished by the fund house Mr. Alok Singh CIO, is the fund manager for this fund. He has over 16 years of experience in Fund Management. Below is the performance of other funds managed by BOI AXA Mutual Fund: : Past performance may or may not be sustained in the future 10

12 BOI AXA Midcap Tax Fund Series 1 Fund Facts Fund Type Close-ended Equity Linked Savings Scheme (ELSS) NFO Open date November 10, 2017 NFO Close date February 9, 2018 Allotment date February 19, 2018 Benchmark Fund Manager Plans Options Nifty Midcap 100 Index Alok Singh Regular & Direct Growth & Dividend 11

13 Investment philosophy Our investment philosophy entails identifying high quality and well managed companies which have exhibited faster than industry growth rates, superior capital allocation and robust cash flows. We endeavor to identify companies which can sustainably deliver on these parameters thereby driving steady earnings compounding and long term outperformance. The first step in the process is to identify sectors exhibiting leading growth rates with visible tailwinds such as improving margins and high return on incremental capital deployed. Sectors displaying these attributes coupled with a long runway for growth are selected as our preferred sectors. Thereafter, we identify the best potential companies within these sectors based on our Excellence Framework methodology. We extensively use screeners to identify companies and then subsequently do detail due diligence and research to shortlist companies that fit this framework. These shortlisted companies eventually form the core of our equity portfolios. 12

14 Investment team Alok Singh, CIO Joined in years experience Saurabh Kataria, Fund Manager - Equity Joined in years experience Piyush Baranwal, Head Fixed Income Joined in years experience Ajay Khandelwal, Senior Research Analyst - Equity Joined in years experience Aakash Manghani Research Analyst - Equity Joined in years experience Varun Agrawal, Senior Credit Analyst Joined in years experience Anand Shah, Dealer - Equity Joined in years experience 13

15 About us established Overview BOI 51% - AXA IM 49%, headquartered in Mumbai 6,000 Growth in Assets under Management ( ) Liquid Debt Hybrid Equity Rs.5,180 cr of assets 2 Rs.3,655 cr of non-liquid assets 2 Initially set up as Bharti AXA, Bharti sold its 25% equity to BOI in 2012 CEO, Sandeep Dasgupta with the company since day 1 (December 2006) ably supported by senior and experienced management team Complete product suite with unique products in each category 5,000 4,000 3,000 2,000 1,000 Based in Mumbai with 13 sales offices Currently manages 10 open-ended funds and 4 closeended funds - AUM of Rs.5,180 cr Recognized for product innovation Most of the funds have over 5 year track record - Oct 12 Oct 15 Oct 17 Distributor segment-wise AUM break-up 35 Additional locations Pan India retail distribution spread over 13 sales offices and additional 35 sales outlets in as many cities Balanced investor mix of mass retail, HNI and Corporates 27% 47% 26% BOI Direct Third Pary Distributors 1 Initially set-up in 2006 as Bharti AXA. Bharti sold its stake to BOI in AUM as at October 31,

16 Complete product suite with unique product offering in each category 15

17 Disclaimer This presentation is as of November 6, 2017 unless indicated otherwise. This presentation is for information purpose only and is not an offer to sell or a solicitation to buy any mutual fund units. These views alone are not sufficient and should not be used for basing investment decisions. All data included in this presentation can change without any prior notice. Statements relating to opportunities for investing in India and investment themes etc. are the opinions of the Author. The views expressed by the author are personal and are not necessarily that of BOI AXA Investment Managers Private Limited (AMC). This presentation is for information purpose only and is not intended to be any investment advice. Please make independent research / obtain professional help before taking any decision of investment / sale. AMC makes no representation as to the quality, liquidity or market perception of any securities/ issuer / borrower, if described in the report above, nor does it provide any guarantee whatsoever. The information used in this presentation has been obtained from sources published by third parties, mostly consisting of information that is publicly available, including information that is developed in-house. Information and material used in this report are believed to be from reliable sources. However, AMC does not warrant the accuracy, reasonableness and/or completeness of any information. AMC does not undertake to update any information or material in this report. Decisions taken by you based on the information provided in this report are to your own account and risk. AMC and any of its officers, directors and employees shall not be liable for any loss or damage of any nature, as also any loss of profit in any way arising from the use of this material in any manner. AMC or its directors, officers and employees, including author of this report/ persons involved in the preparation or issuance of this report may, from time to time, have long or short positions in, and buy or sell the securities, if any, mentioned herein or have other potential conflict of interest with respect to any recommendation and related information and opinions given in the report /report. This report, or any part of it, should not be duplicated, or contents altered / modified, in whole or in part in any form and or re-distributed without AMC s prior written AXA Investment Managers Private Limited

18 BOI AXA Mutual Fund

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