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

Transcription

1 Reliance Capital Builder Fund Series C (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 September 17, 2014 NFO Closes October 1, 2014

2 Reliance Capital Builder Fund Series C 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 2

3 Market Outlook 3

4 India: Nascent Bull Market Stage* Macro economic recovery already visible Decisive political mandate after 30 years Huge pent up demand due to severe domestic under investment in equity markets Valuation still favorable for long term wealth creation S&P BSE Sensex Levels Markets At Life Time Highs But Earnings Per Share (EPS) Trailing P/E (Price To Earnings) ~28x ~19x Forward P/E ~24x ~17x Market Cap To GDP Ratio 103% ~70% Source: Bloomberg, RCAM estimates August 28, * RCAM Internal View 4

5 India: Now & Then Parameter Month 2013^ 2014* Manufacturing PMI August Index of Industrial Production Passenger Car Sales June July -1.8% 1.3 lacs 3.4% 1.4 lacs CPI Inflation July 9.64% 7.96% Exports (USD million) Fiscal Deficit July March 25, % 27, % Foreign Reserves (USD billion) GDP Growth August June % % Source: Bloomberg. * Data is the last published number.^ Data is the numbers a year back from the last published number. 5

6 Equity markets perform in the long term S&P BSE Sensex has given positive returns 23 out of the 35 years Markets have given an average return of 25% S&P BSE Sensex Annual Returns (%) 35 year CAGR (1979 to 2014): 16.7% Out of 35 years: 23 years of positive returns 12 years of negative returns Past performance may or may not be sustained in future Source: Bloomberg, Annual returns above refer to absolute returns & are Financial Year returns. 6

7 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jun-14 Aug-14 Significant turnaround in equity markets Better macro numbers & stable political environment leading to recovery of equity markets Sharp recovery after prolonged period of sluggish market conditions S&P BSE Sensex S&P BSE Midcap S&P BSE Smallcap Performance of Equity Markets (July 2013 August 2014) Past performance may or may not be sustained in future. Source: MFIExplorer. Index values have been normalized. 7

8 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14 Market valuations still favorable for wealth creation Valuations are at long term average level 25 Forward P/E S&P BSE Sensex 6 Forward P/BV S&P BSE Sensex Average 4 3 Average Past performance may or may not be sustained in future Source: Bloomberg Estimates. P/E = Price to Earnings ratio. P/BV = Price to Book Value ratio. 8

9 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15E Market Cap to GDP is below levels Current level is lower than the last bull market of Case for expansion in India s market cap 120 Market Cap to GDP (%) Average: 72% Past performance may or may not be sustained in future Source: Bloomberg, MOSL estimates 9

10 Key Drivers going forward 10

11 FY51 FY60 FY70 FY80 FY90 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY17E FY18E FY19E FY20E FY21E FY22E FY23E FY24E ,239 1,226 1,366 1,708 1,879 1,858 1,878 2,113 2,280 2,460 2,655 2,865 3,092 3,337 3,601 3,886 4,194 Pace of Indian GDP growth has improved While the first trillion dollars required 58 years, the next trillion dollars in GDP required only 7 years FY51-08: 7.3% CAGR FY08-15: 7.9% CAGR India GDP Trend (USD) The Next Trillion Dollar Opportunity 3 rd US$ tn 5 years 4 th US$ tn 4 years 2 nd US$ tn 7 years 1 st US$ tn 58 years Past performance may or may not be sustained in future Some of the above data are only estimates & actual data may vary depending on various market & economic factors. Source: Central Statistical Organization, MOSL estimates 11

12 India expected to lead in the emerging market space Highest EBITDA & PAT growth for FY14 to FY16 Highest ROE with reasonable average Lowest PEG; cheapest among emerging markets Country No. of Cos Growth (CAGR FY 14 16e) RoE (%) Net Debt/ Sales EBITDA PAT e 2016e Equity China 89 6% 9% 12% 13% 13% 13% 13% 47% 1.2 India 123 8% 14% 15% 16% 16% 17% 17% 53% 1.0 Australia 32 4% 6% 6% 10% 16% 16% 15% 38% 1.9 South Korea 47 5% 7% 11% 12% 15% 15% 15% 31% 1.2 South Africa 19 6% 2% 2% 13% 18% 17% 15% 42% 4.9 Taiwan 20 8% 8% 8% 16% 17% 16% 16% -9% 1.6 Saudi Arabia 15 4% 3% 4% 14% 15% 15% 14% 31% 3.5 Singapore 15 9% 9% 10% 11% 10% 11% 11% 23% 1.6 Malaysia 16 5% 8% 8% 12% 11% 12% 12% 13% 1.9 Indonesia 14 11% 10% 12% 20% 19% 19% 19% 8% 1.4 World 1,563 5% 8% 10% 15% 15% 15% 15% 41% 1.3 Past performance may or may not be sustained in future Source: Bloomberg estimates. EBITDA = Earnings before interest, taxes, depreciation & amortization, PAT = Profit before tax, RoE = Return on Equity, PEG = Price to Earnings Growth. The above analysis is done on the top 200 market cap companies of each above mentioned country. From this subset the following filters have been applied excluding companies which are 1) listed in multiple country exchanges 2) do not have published data for the specified years in Bloomberg & 3) financial companies. The above no of companies is the remaining after applying all the above filters. Some of the above data are only estimates & actual data may vary depending on various market & economic factors. PEG 12

13 Growth recovery on track Indian GDP growth expected to pick up Recent Budget proposals show the intent of improving growth rates GDP Growth (%) Past performance may or may not be sustained in future Source: Central Statistical Organization, MOSL estimates. 13

14 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Sensex Earnings Growth GDP Growth Economic Recovery leads to higher earnings High correlation between company earnings & GDP Growth In the last bull market of , Sensex earnings growth had reached a high of 37% 43.0% 38.0% 33.0% Earnings growth GDP Growth 12.0% 10.0% 28.0% 23.0% 18.0% 13.0% 8.0% 3.0% 8.0% 6.0% 4.0% 2.0% -2.0% 0.0% Past performance may or may not be sustained in future Source: Bloomberg. Earnings growth is of S&P BSE Sensex. 14

15 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY17E FY18E Corporate profits to GDP likely to revert to mean Corporate profits to GDP is below the long term trend Mean reversion of corporate profits to long term average may lead to earnings revival Corporate Profit to GDP (%) Average: 5.5% Past performance may or may not be sustained in future Some of the above data are only estimates & actual data may vary depending on various market & economic factors. Corporate Profit above is Profit after Tax of all listed companies. Source: MOSL Estimates 15

16 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015E FY2016E FY2017E Sensex EPS Index Level Earnings Growth expected to propel equity markets After a subdued 8% EPS growth period, Sensex EPS expected to grow 2,500 2,000 EPS S&P BSE Sensex FY08-14: 8% CAGR 1,836 2,190 25,000 20,000 1,500 1, FY03-08: 25% CAGR ,340 1,123 1,183 1, ,524 15,000 10,000 5, Past performance may or may not be sustained in future Source: Bloomberg, MOSL estimates. EPS = Earnings per share. 16

17 Budget Announcements Furthering Growth Big sector reforms Reforms in banking, housing, infrastructure & rationalizing tax reforms Opening sectors for FDI FDI cap for defence, railways & insurance was raised Fiscal consolidation Fiscal deficit target was left unchanged; roadmap for fiscal consolidation Focus on Investments Measures to attract capital inflows & to boost household disposable income (higher exemption & tax deduction limit) Inflation Commitment to address structural issues in the supply side to contain inflation; setting up a fund to smoothen out fluctuations in food prices Source: Ministry of Finance 17

18 Reliance Capital Builder Fund Series C Investment Framework & Strategy 18

19 Investment Philosophy Key Themes: Economic Recovery Urban Recovery: Auto, Retail Industrial revival: Engineering, Capital Goods Emerging Themes Defence, Railways Media Internet, E-Commerce High Capability companies at Reasonable Valuations Leader in ignored or underpriced segments Long operating history Low near term visibility Travel & Hospitality Note: The current fund philosophy may change in future depending on market conditions or fund manager s views. 19

20 Investment Themes: Urban Recovery Signs of an Urban Recovery in India Car sales up for 3 rd straight month; with festive season nearby SIAM has given a full-year sales growth guidance of 8-10% Forrester s Asia Pacific Online Retail forecasts, no. of online buyers in India to reach 39 mn by 2014-end & 128 mn by 2018-end India's largest car maker Maruti Suzuki India says its August domestic sales grew by 29% from last year Credit card payments have picked up in 2014 suggesting uptick in urban consumption Source:Business Standard, Economic Times, Forbes, IIFL Research 20

21 Investment Themes: Urban Recovery Higher per capita GDP increases disposable income Discretionary spending typically increases by 10x when per capita GDP doubles Basic Spend Discretionary Spend GDP growth & discretionary spending correlation 10x 1, ,000 GDP p.c. $1,000 GDP p.c. $2,000 Past performance may or may not be sustained in future Source: MOSL estimates. The above analysis does not consider inflation, savings & other economic factors. The actual data may vary depending on various economic factors. 21

22 2QFY10 3QFY10 4QFY10 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 1QFY14 2QFY14 3QFY14 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Investment Themes: Industrial Recovery Manufacturing capacity utilization at the lower end of historical range June IIP growth number positive for the third straight month Traffic volume at major ports has picked up in last couple of months Capacity Utilization for manufacturing companies (%) Average: 77% 10% 8% 6% 4% 2% 0% -2% -4% -6% Index of Industrial Production (IIP) Source: RBI, Bloomberg, CMIE & IIFL Research 22

23 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14* FY15* Investment Themes: Defence Capital Expenditure of armed forces is expected to be ~INR 90kcrs in FY15E; INR 33k crs in FY05 India in the midst of a major spending drive to modernize its armed forces; entails an investment of ~$100bn 1, Defense Capex Expenditure (INR bn) Various Segments likely to benefit from Defence spending Aerospace & Air force Requirements Electronics Naval Systems Maintenance, Repairs and Operations (MROs) Artillery, Transportation, Components Source: Ministry of Finance. * Union Budget estimates 23

24 Investment Themes: Defence New Government explicitly envisages India as exporter of defence equipment in the next decade Union Budget increased FDI in defence to 49%; enhanced capex by 20% Defense Procurement Procedure 2013 (Made in India v/s Import) & offset opportunity (Technology transfer) key prospects for local companies Total opportunity of ~USD bn from offset opportunity over next 5-7 years Per capita defence spend globally Source: Nation master, Edelweiss research 24

25 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14* FY15* Investment Themes: Railways Railway capex expected to increase to INR ~65,000 crs* in FY15; investments expected to increase over INR 1 lakh crs (12 th Five year plan) by FY17 Dedicated Freight Corridor Corporation of India (DFCC) spending estimated at INR 82,000 85,000 crores Metro projects under construction at ~ 390 kms; 730 kms at planning stage Investments in Railways (INR bn) Various Segments likely to benefit from Railway spending Civil Construction Electricals Signaling Locomotive & Coach Air Cooling & Ventilation Source: Ministry of Finance. * Union Budget estimates 25

26 Investment Framework Fund will endeavor to invest in High growth potential companies generating relatively good earnings High ROEs or rising ROEs Companies with: High operating leverage Sustainable businesses with operational track record; at an inflexion point to scale up Good quality managements; no fractured balance sheets Companies across market cap with bias towards midcaps stocks; focused portfolio Note: The current fund philosophy may change in future depending on market conditions or fund manager s views. 26

27 RMF Fund Management Expertise 27

28 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) 28

29 Scheme Facts 29

30 Scheme Features Investment Objective Asset Allocation 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. Diversified Equity & Equity Related Instruments: 80%-100% Debt & Money Market Instruments: 0%-20% Option Minimum Application Amount Benchmark Direct Growth & Dividend Payout Other than Direct Growth & Dividend Payout, Rs 5,000 and in multiples of Re 1 thereafter S&P BSE 200 Index Load Structure Entry Load - Nil. Exit Load: Not Applicable. Since the scheme shall be listed on BSE or any other recognised Stock Exchange, Exit load shall not be applicable. Fund Manager Sailesh Raj Bhan & Jahnvee Shah (Overseas Investments) 30

31 Fund Manager Profile Name Sailesh Raj Bhan Designation Deputy CIO Equity Qualification MBA (Finance), CFA (ICFAI) Experience Over 18 years in Equity research and Analysis Managing funds at Reliance Capital Asset Management Ltd since

32 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. 32

33 Thank you