For product labelling please refer to slide no 16

Transcription

1 For product labelling please refer to slide no 16

2 Structural bull markets see intermittent correction phases Actively managed Small & Midcap funds vs Indices -11.9% -13.4% -19.4% -34.5% -15.7% Growth of Rs 1000 (Oct 2004-Mar2018) Crisil AMFI Small & Midcap Fund Performance Index S&P BSE Smallcap Index Nifty 50 10,832 6,834 5,697 2 Small caps have created wealth over the long term Source: Crisil, ICRA MFIE. Crisil AMFI small and midcap fund performance index has inception date of October Data as of 28-Mar-2018.

3 Active small cap funds fare better... Stock picking is crucial Smallcap MF Scheme Composite* Smallcap Index** L&T Emerging Businesses Fund - Reg (G) Correction from peak in 2018 (absolute) % % -9.6% Last 3 years returns (cagr) 17.80% 11.61% 23.8% Downside Protection On a 3 year basis Smallcap MF scheme composite* has given negative returns only 9% of the times, compared to 25% by the Index 3 Source: icra mfie. Data as on * smallcap MF scheme composite is an equal weighted average performance of nine smallcap schemes which have a long term track record. **Smallcap index represented by Nifty smallcap 100 index. For product labeling and performance in SEBI format please refer to slide no 17.

4 Smallcap discount to largecap is the highest in 3 years attractive time to invest in smallcaps with a long term view, as relative valuations look comfortable 4 Source: Bloomberg. Largecaps represented by S&P BSE Sensex and smallcaps represented by S&P BSE Smallcap Index. Adjusted Index P/e ratio has been considered for comparing valuations considering only companies with positive earnings and excluding companies with negative earnings

5 Valuation distortion in the Index Median P/E N.A. 42.4x 26.5x Universe for Small Cap funds FY17 Net Income Only about 50% of BSE Small Cap index companies make profits of more than Rs50cr This segment is trading at reasonable historical valuations compared to the index Source: Bloomberg, Companies 5 in BSE Small Cap Index, P/E is on FY17 earnings

6 Revival in earnings visible Nifty PAT growth (%) 4QFY18 Nifty PAT expected to grow by 12-13%* The 4QFY18 earnings season (ex-banking) has been broadly in line with expectations Sales, EBITDA and PAT (for Nifty companies released so far, ex-banking) have grown at 16.8%, 12.1% and 12.9% respectively for this quarter Source: Bloomberg, MOSL. * ex PSU banks and private corporate banks

7 Smaller companies tend to do well during earnings recovery YoY earnings growth for companies across different market cap segments 160% 140% 120% 100% 80% Top 200 stocks stocks stocks 60% 40% 20% 0% -20% -40% 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 7 Source: Ace Equity, LTMF. Based on aggregate earnings growth for each of the financial year. Market cap ranking of Top 200, and is based on market capitalization at the end of respective financial year.

8 The universe of small cap stocks continues to grow Out of 600 companies (from 251 st to 850 th company by mkt cap) PAT Number of companies Greater than Rs. 100 crore 256 Rs crore 134 Rs crore 108 Market cap rank More than 390 small cap companies are making PAT of over Rs. 50 crore 8 Source: Bloomberg. PAT numbers are as on FY18. Market cap numbers are as on 30 th April 2018.

9 Small cap stocks are under-researched and under-owned 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 31 analysts covering top 100 stocks FII ownership of free float market cap is low for small and mid cap companies, as they are under owned Small cap segment of the market provides more opportunities to spot pricing anomalies 9 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 Free Float refers to the proportion of shares that are freely available to the investing public.

10 What do we look for in a small cap company? 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 10

11 Introducing L&T Emerging Opportunities Fund Series II

12 L&T Emerging Opportunities Fund Series II Key details A close - ended equity scheme predominantly investing in small cap stocks with tenure of 1110 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 Instruments Benchmark: S&P BSE Small Cap Tri Indicative allocation (% of total assets) Equity and equity related securities of small cap companies* Equity and equity related securities of companies other than small cap companies* 0-35 Debt and money market instruments^ * 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.

13 Product positioning Top 100 companies Next 150 companies L&T Emerging Opportunitie s Fund Series II Companies beyond top 250 Large cap Mid cap Small / Micro cap A product that is suitable for investors looking to benefit from 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 13 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.

14 Product Features and NFO dates Brief description Scheme benchmark Minimum initial application amount A close - ended equity scheme predominantly investing in small cap stocks S&P BSE Small Cap Tri Rs per application and in multiples of Re. 1 thereafter Options available Plans available Fund Manager 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) Regular and Direct Vihang Naik NFO opens: 7 th June 2018 NFO closes: 20 th June

15 Equity Investment Process G.E.M. Generation of Ideas Evaluation of companies Valuations Manufacturing and monitoring of Portfolios Identify potential ideas 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 When buying a business, know the business 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 Implementation Investment team discussion Investment mandate scheme objective, diversification, Regulatory limits, internal guidelines Risk philosophy concentration, liquidity, market cap size, Tracking error, stress testing, etc. 15

16 Important Information L&T Emerging Opportunities Fund Series II 16 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. CL05555

17 Important Information Performance in SEBI Format (as on ) (Regular Plan) CAGR returns % (period) Since inception 1 year 3 years 5 years Date of inception of the Scheme CAGR Returns (%) PTP Returns* (in Rs.) L&T EBF Fund (G) NA 12/May/ S&P BSE Small Cap Tri NA S&P BSE Sensex Tri^ NA Source: ICRA MFIE, internal. Past performance may or may not be sustained in the future * Point to Point (PTP) Returns in INR show the value of Rs10,000/- invested ^Standard Benchmark. For detailed performance of the scheme and that of other schemes managed by the same fund managers please refer to slide no 18. As per the SEBI standards for performance reporting, the since inception return is calculated on NAV of Rs.10/- invested at inception. Date of inception is deemed to be date of allotment (12-May-14). Different plans shall have a different expense structure.

18 Performance of other schemes managed by the fund managers Performance data is as of 30 th April Different plans shall have a different expense structure. Mr. Vihang Naik manages 4 schemes and Mr. Soumendra N. Lahiri manages 8 schemes respectively. The performance shown above is of regular plan.