Prudent Corporate Advisory Services Limited · NSE:PRUDENT
Prudent Corporate Advisory Services — ICICI Prudential Mutual Fund — Investor Presentation (January 2014)
32 slides from Prudent Corporate Advisory Services's investor presentation, Jan 20, 2014
Slide 1: Equity Savings Fund - Series1
Equity Savings Fund - Series1 NFO Period: January 20, 2014 to February 07, 2014 This product is suitable for investors who are seeking*: • Long term wealth creation solution HIGH RISK • A close-ended equity scheme that seeks to generate capital appreciation by investing in Equity securities (BROWN)
Slide 2: Contents
Contents 1 Prelude 2 Equity Investing - Framework 3 Triggers – Short term and Long term 4 Capturing ROE Expansion 5 ICICI Prudential Equity Savings Fund - Series 1 2
Slide 3: Prelude
Prelude • We launched ICICI Prudential Value Fund - Series 1 & 2 with an aim to capture mispriced stocks in a “polarized” market with focus on mid and small cap segment. • Value opportunities were available in large cap as well as in mid and small cap segment. • We ended up allocating more to large
Slide 4: Equity Investing - Framework
Equity Investing - Framework 4
Slide 5: Equity Investing - Framework
Equity Investing - Framework • MACRO INDICATORS • Invest when GDP growth is low • Invest when IIP is low • Invest when Fiscal Deficit is high • VALUATIONS • Invest when markets are not over valued • SENTIMENT • Invest when investors sentiment is bad GDP: Gross Domestic Product; IIP: Index of Industr
Slide 6: Macro Indicators
Macro Indicators Invest when GDP growth is low Invest when Fiscal Deficit is high 10.0 India GDP growth 6500 Fiscal Deficit Nifty 0.0 7000 9.0 Nifty 5500 8.0 (1.0) 6000 7.0 4500 (2.0) 5000 6.0 3500 (3.0) 4000 5.0 (4.0) 3000 2500 4.0 (5.0) 2000 3.0 1500 (6.0) 1000 2.0 500 (7.0) 0 1998 1999 2000 2001
Slide 7: Valuations
Valuations 1.20 Market Cap to GDP Ratio Average 1.00 0.80 0.60 0.40 0.20 0.00 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 • India's market cap to GDP indicates market valuations are below 10 year average. Source: Bloomberg 7
Slide 8: Sentiment
Sentiment India’s Allocation to various asset classes AUM in ` Bn Nov-13 Sep-07 Change Equity Funds 1811.92 1578.63 14.8% Deposits in ` Bn 29-Nov-13 28-Sep-07 Change Aggregate Deposits of Scheduled Commercial 74779.28 28737.35 160% Banks • The above table shows that domestic investors sentiment has
Slide 9: Triggers
34/ MUTUAL FUND = TARAKKI KAREIN!
Slide 10: Triggers - Short Term
Triggers - Short Term Local Event - 2014 General Elections GDP growth rate USD mn 8.5% 900.00 8.0% 800.00 7.9% 7.6% 700.00 7.5% 7.7% 600.00 7.0% 7.0% 500.00 6.8% 400.00 6.5% 6.5% 6.3% 300.00 6.0% 200.00 100.00 5.6% 5.5% 0.00 5.0% -100.00 6 - 10 5 months Election 5 months 6 - 10 11 - 15 months prior
Slide 11: Triggers - Short Term
Triggers - Short Term Better prepared to deal with taper now than in May India Russia Korea Taiwan Czech Rep Reducing trade surplus / Chile increasing trade deficit Israel Pakistan Hong Kong Reducing trade deficit / Hungary increasing trade surplus Thailand Mexico Argentina S Africa Malaysia Indones
Slide 12: Triggers - Long Term
Triggers - Long Term Inflation poised to ease Structural Reforms Interest rate cycle can reverse Investment cycle to pick up Corporate Health to Improvement in improve GDP growth 12
Slide 13: Capturing ROE Expansion
ICICI _ 33 MUTUAL FUND = TARAKKI KAREIN!
Slide 14: Why is ROE Important?
Why is ROE Important? • A healthy ROE is a sign of good corporate management and efficient use of capital • High correlation between ROE and real GDP growth rate • Increasing market share leads to high ROE • Healthy margins; good financial health echoes in ROE • ROE reflects in stock prices • Effect
Slide 15: ROE, GDP growth and market performance
ROE, GDP growth and market performance 24.0 10 24 25000 9 22 22.0 20000 8 20 20.0 18 15000 7 6 16 10000 18.0 5 14 16.0 5000 4 12 14.0 3 10 0 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 Sensex ROE (%, LHS)
Slide 16: ROE and Interest Rates
ROE and Interest Rates 25 11 10 20 9 15 8 7 10 6 5 5 0 4 Sensex ROE (%, LHS) 10 year Gsec Broad market ROE is at multi year low, and is expected to increase as the rate cycle reverses. Source: Edelweiss Securities Ltd and Bloomberg 16
Slide 17: Relationship between ROE and Stock Prices
Relationship between ROE and Stock Prices Increasing ROE’s and relative stock price outperformance 400 ITC 37 180 Price Dr. Reddy's 40 160 ROE 30 350 Price relative to Nifty 35 140 ROE 20 ROE (%) 300 33 120 ROE (%) (Price, x) (Price, x) 100 10 250 31 80 0 200 29 60 -10 40 150 27 20 -20 0 -30 100 25
Slide 18: Spotting the TREND
Spotting the TREND Number of companies as per ROE band for CNX100 constituents ROE band FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 <15 29 32 26 19 23 35 24 26 34 38 Increase in number 15-20 14 17 20 18 20 14 23 21 23 24 of companies 20-25 18 13 18 15 13 19 22 20 19 15 Lesser number of compani
Slide 19: Opportunities for ROE Expansion
Opportunities for ROE Expansion Regulatory Economic Changes Leverage Favourable Company Industry Specific Dynamics factors Identifying companies where there could be turnaround based on above parameters, leading to increase in Return on Equity (ROE) Source: Bloomberg 19
Slide 20: Example 1: Regulatory Issues
Example 1 : Regulatory Issues� MSCI Oil and Gas 28 26 24 22 20 18 16 14 12 10 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 ROE (%) • Increase in global crude prices and depreciation of INR led to increase in under recoveries for the Oil marketing companies. • Deregulation of diesel prices can r
Slide 21: Example 2: Industry Dynamics
Example 2 : Industry Dynamics 30 MSCI Telecom 25 20 15 10 5 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 ROE (%) • The telecom market in India is a highly competitive market with a number of small regional players. • Consolidation in the industry with smaller players reducing their presence m
Slide 22: Example 3: Economic Leverage
Example 3 : Economic Leverage� 30 28 MSCI Industrials MSCI Industries Domestic Macro 26 24 • Any reversal in the interest rate ROE (%) 22 cycle may lead to improvement in 20 18 the earnings for industrial sector. 16 14 12 10 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 40 MSCI Metals Global Mac
Slide 23: Example: Company Specific Factors
Example 4 : Company Specific Factors Reliance Industries Ltd 400 28 350 26 (Re-based to 100, x) 300 24 22 ROE (%) 250 20 200 18 150 16 100 14 50 12 0 10 Mar04 Mar05 Mar06 Mar07 Mar08 Mar09 Mar10 Mar11 Mar12 Mar13 Price relative to Nifty ROE (%, RHS) • The company has allocated capital to businesses
Slide 24: Factors for Improvement in ROE
Factors for Improvement in ROE MACRO FACTORS REGULATORY FACTORS • Stable political environment • Deregulation of diesel prices • Better resilience to taper and • Dividend pay outs by PSU’s related news • Industry-friendly regulation in • Good monsoon supporting telecom e.g. spectrum price, agricultu
Slide 25: Factors for Improvement in ROE
Factors for Improvement in ROE COMPANY SPECIFIC FACTORS INDUSTRY DYNAMICS • Increase in market share • Improved competitive dynamics • Increase in profits due to operating in the industry leverage • Improved margins due to better pricing power or decreasing costs. • Optimal capital structure • Cheap
Slide 26: The Product
The Product Equity Savings Fund - Series 1 26
Slide 27: About the Fund
About the Fund • A 3 year close ended fund investing in focused 20-25 stocks# • Aims to provide long-term capital appreciation by: • Identifying companies which are likely to see expansion in ROE over next 3 years period. • Identifying companies which are likely to gain from improving economy, a fav
Slide 28: Investment Approach
Investment Approach Investable Universe (Constituents of CNX 100, BSE 100, Maharatna, Navratna, Miniratna) Data Integrity Screens Company Characteristics Recurring process • Strong competitive edge • Sustainable market position • Proven business model • Financial Strength • Business Durability Valua
Slide 29: Scheme Features
Scheme Features Type of scheme A Close ended RGESS qualifying equity scheme Investment Objective The primary investment objective of the Scheme is to seek to generate capital appreciation, from a portfolio that is constituted of equity securities which are specified as eligible securities for Rajiv
Slide 30: What is Rajiv Gandhi Equity Savings Scheme?
What is Rajiv Gandhi Equity Savings Scheme? Rajiv Gandhi Equity Savings Scheme or RGESS is a new equity tax advantage savings scheme for equity investors in India, with the stated objective of "encouraging the savings of the small investors in the domestic capital markets." The Scheme qualifies unde
Slide 31: Disclaimers
Disclaimers All figures and other data given in this document are as on 31st December 2013 unless stated otherwise. The same may or may not be relevant at a future date. The AMC takes no responsibility of updating any data/information in this material from time to time. The information shall not be
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