HDFC Asset Management Co. Ltd. · NSE:HDFCAMC
HDFC Asset Management — Investor Presentation (October 2022)
44 slides from HDFC Asset Management's investor presentation, Oct 27, 2022
Slide 1: HDFC NIFTY IT ETF and HDFC NIFTY Private Bank ETF
rusted HDFC NIFTY IT ETF Capture Global IT potential through India’s leading IT companies. HDFC NIFTY Private Bank ETF NFO Period : 28th October - 9th November Capture potential of private banks 2022 riding India’s economic growth. For product labelling, refer to page 35 01
Slide 2: HDFC NIFTY IT ETF
HDFC NIFTY IT ETF For disclaimers, refer slide 43 02
Slide 3: Why NIFTY IT?
Why NIFTY IT? Technology continues to transform the world – the demand for digital services is steadily increasing Revenues for Indian IT services is forecast to grow at 12.3% CAGR to an estimated $300-350bn by FY26 from $196bn in FY21, according to NASSCOM Indian IT companies are well poised to tak
Slide 4: Technology continues to transform the world
Technology continues to transform the world “We are living through a generational shift in our economy and society. Digital technology is the most malleable resource at the world’s disposal to overcome constraints and re-imagine everyday work and life.” - Satya Nadella, Microsoft CEO For disclaimers
Slide 5: Indian IT sector is now a vital pillar of the economy
From humble beginnings, the Indian IT sector is now a vital pillar of the economy EXPORTS EMPLOYMENT INNOVATION In FY2021, Indian IT IT sector added 4.5 lakh net ~10K patents filed at sector exports totaled new jobs in FY2022, taking direct the end of 2021 by top $152bn employment to 5.1 million peop
Slide 6: Steady growth of India's Technology Market
Steady growth of India’s Technology Market Growth of India’s Technology Market Segment wise breakup of growth 240 250 227 % 15.8 220 17 200 13 200 196 49 36 180 45 150 $bn 44 $ bn 160 227 100 140 178 120 152 116 50 100 FY2021 FY2022E 0 IT Services BPM ER&D Software Hardware Total Exports Domestic Pr
Slide 7: Enterprise IT spending on public cloud to overtake traditional IT in 2025
Global Enterprise IT spending on public cloud computing will overtake spending on traditional IT in 2025* Share of Total Global Addressable Revenue between Global Enterprise IT – Total Addressable Revenue ($ bn) Traditional and Cloud ($ bn) 1000 Traditional Cloud 75% % Traditional 900 70% % Cloud 80
Slide 8: Indian IT companies poised to take advantage of structural tailwinds
Indian IT companies well poised to take advantage of structural tailwinds including growth of cloud computing IT companies have pivoted towards more revenue Infosys’ share of revenue from Digital segment from the new-age Digital* segment compared to the legacy Core^ segment 60.0% 57.0% 48.5% Eg. Inf
Slide 9: Presenting the HDFC NIFTY IT ETF
Presenting the HDFC NIFTY IT ETF to gain exposure to the Indian IT sector The NIFTY IT Index is the underlying index for the HDFC NIFTY IT ETF. Weight(%) 3.2% 2.6% Key highlights 4.3% Infosys Ltd. 4.6% Tata Consultancy Services Ltd. HCL Technologies Ltd. Consists of the 10 largest IT stocks 5.4% 26.
Slide 10: 1-year volatility of NIFTY IT Index lower than most constituents
1-year volatility of NIFTY IT Index lower than most of constituents A single ETF gives the investor sector exposure to multiple IT stocks – no need for individual stock selection Advantage of the ETF is that it offers exposure to the IT sector with lower volatility than most of the underlying consti
Slide 11: NIFTY IT Index has strong fundamentals
NIFTY IT Index has strong fundamentals The IT sector is more efficient than the broader Nifty 50 The IT sector has higher profit margins than the broader Nifty 50 Return on Equity (%) 25 Profit Margin (%) 30.00 Nifty IT Nifty 50 Nifty IT Nifty 50 25.00 20 20.00 15 15.00 10 10.00 5 5.00 0.00 0 2014 2015
Slide 12: NIFTY IT Index approaching longer-term average valuations
NIFTY IT Index is approaching the longer-term average valuations on a 12 month forward P/E and P/B basis 40 12 NIFTY IT Fwd PE NIFTY IT Fwd PB Average 35 Average 10 30 8 25 20 6 15 4 10 2 5 0 0 2011 2017 2012 2013 2015 2021 2014 2016 2019 2007 2010 2018 2022 2020 2006 2009 2008 2011 2017 2012 2013 2
Slide 13: NIFTY IT TRI Performance since Inception
NIFTY IT TRI, NIFTY 500 TRI and NIFTY 50 TRI – Performance since Inception CAGR* as on September 30, 2022 Value of INR 1 lakh invested on Jun 30, 1999^ NIFTY IT TRI: INR 26.5 lakh NIFTY 50 TRI: INR 19.8 lakh Return Periods NIFTY 500 NIFTY 50 NIFTY 500 TRI: INR 26.5 lakh NIFTY IT TRI TRI TRI 40000 1
Slide 14: NIFTY IT TRI FY Performance
NIFTY IT TRI, NIFTY 500 TRI and NIFTY 50 TRI – FY Performance Financial Year NIFTY IT TRI NIFTY 500 TRI NIFTY 50 TRI FY00^ 381.4% 65.2% 29.2% FY01 -73.2% -42.5% -24.2% FY02 6.6% 5.7% -0.1% NIFTY IT TRI FY03 -19.0% -6.6% -11.7% FY04 30.4% 114.4% 86.3% FY05 52.5% 24.7% 17.3% Number of FY06 49.5% 67.3%
Slide 15: NIFTY IT TRI Rolling returns
NIFTY IT TRI, NIFTY 500 TRI and NIFTY 50 TRI – Rolling returns Average Rolling Returns Std. Deviation of Rolling Returns Return-Risk Ratio Return NIFTY NIFTY NIFTY NIFTY NIFTY NIFTY NIFTY NIFTY NIFTY Periods IT TRI 500 50 IT TRI 500 50 IT TRI 500 50 TRI TRI TRI TRI TRI TRI 1 year 19.6% 18.4% 16.6% 4
Slide 16: NIFTY IT, NIFTY 500 and NIFTY 50 Valuations and ROE
NIFTY IT, NIFTY 500 and NIFTY 50 – Valuations and Return on Equity (ROE) NIFTY IT NIFTY 500 NIFTY 50 P/E 24.72 21.65 20.64 P/B 7.52 3.9 4.02 Dividend yield (%) 2.25% 1.33% 1.32% Return on Equity 29.9% 17.7% 17.7% Source: NSE Indices Ltd. Bloomberg and internal calculations. Data as on Sep 30, 2022.
Slide 17: Why invest in HDFC NIFTY IT ETF?
Why invest in HDFC NIFTY IT ETF? Benefit from Indian IT companies well poised to take advantage of structural structural tailwinds tailwinds in tech spending including growth of cloud computing Higher average The NIFTY IT TRI has generated higher average rolling returns over rolling returns 1 year ho
Slide 18: HDFC NIFTY Private Bank ETF
HDFC NIFTY Private Bank ETF For disclaimers, refer slide 43 18
Slide 19: Why NIFTY Private Bank?
Why NIFTY Private Bank? Banks are vital for economic growth, providing loans for capex, working capital, purchasing homes, autos etc. Private banks continue to gain market share across loans and deposits and have higher profitability than the overall banking sector Additionally, Private banks have hi
Slide 20: Private Banks: Superior fundamentals relative to sector peers
Private Banks: Superior fundamentals relative to sector peers For disclaimers, refer slide 43 20
Slide 21: Private Banks' share of loans and deposits rising steadily
Private Banks’ share of system-wide Total Loans & Total Deposits rising steadily 38.1 40 Private Banks 34.3 35.5 Share of Total Loans (%) 35 32.5 Private Banks have witnessed rising 30 26.9 29.3 24.1 market share of loans outstanding 25 20 18.5 19.1 19.4 20.8 through the Covid and post-Covid 15 peri
Slide 22: Capital Adequacy higher than sector peers
Capital Adequacy higher than sector peers 20 Private banks Overall SCBs* 18.8 Capital Adequency Ratio (%) 18.4 18 16.7 16.4 16.5 16.3 15.7 15.5 16.1 16 14.8 13.8 14.3 13.3 13.7 14 12 10 8 6 2016 2017 2018 2019 2020 2021 2022 The Capital Adequacy Ratio (CAR) is the ratio of the bank’s capital to risk
Slide 23: Lower GNPA ratios and higher PCR than sector peers
Lower GNPA ratios than sector peers GNPA Ratio (%) Private Banks Overall SCBs * 12.0 The Gross Non-performing Assets (GNPA) Ratio^ is a 10.0 measure of asset quality – a lower GNPA is preferable 8.0 6.0 The GNPA of Private Banks is declining and is significantly 4.0 lower than the GNPA of SCBs on agg
Slide 24: Higher RoE & RoA ratios than sector peers
Higher RoE & RoA^ ratios than sector peers RoE (%) 20.0 Private Banks Overall SCBs* RoE and RoA are measures of efficiency 15.0 10.0 5.0 These ratios have recovered from the 0.0 drop experienced in 2020 due to the -5.0 pandemic for both Private Banks and -10.0 SCBs on aggregate 2012 2013 2014 2015 20
Slide 25: Investing in Private Banks – why now?
Investing in Private Banks – why now? Corporate deleveraging expected to continue Corporate Profits are Improving Profits / Losses as % of GDP 1.10 (x) 8% All profits All losses Net Profit 0.99 Deleveraging cycle 1.00 6% 0.90 4% 4.7% 4.5% 0.80 2% 0.71 0% 1.6% 0.70 0.60 -2% -4% 0.50 2024E 2000 2008 2023E
Slide 26: Snapshot of NIFTY Private Bank Index
Snapshot of NIFTY Private Bank Index Weightage (%) 2.5% 1.3% Consists of the 10 largest and most 3.1% liquid private bank stocks 4.0% 4.7% ICICI Bank Ltd. Stocks capped at 33% each, top 3 stocks HDFC Bank Ltd. 25.4% IndusInd Bank Ltd. capped at 62% in aggregate Kotak Mahindra Bank Ltd. 11.1% Axis Ba
Slide 27: 1-year volatility of NIFTY Private Bank Index lower than constituents
1-year volatility of NIFTY Private Bank Index lower than constituents A single ETF gives the investor sector exposure to multiple Private Banking stocks – no need for individual stock selection Advantage of the ETF is that it offers this exposure to the Private Banking sector with lower volatility t
Slide 28: NIFTY Private Bank TRI Performance since Inception
NIFTY Private Bank TRI, NIFTY Bank TRI, NIFTY 500 TRI and NIFTY 50 TRI – Performance since Inception CAGR* as on Sep 30, 2022 Value of INR 1 lakh invested on Apr 01, 2005^ NIFTY Private Bank TRI: INR 23.0 lakh NIFTY 50 TRI: INR 10.3 lakh Return Periods NIFTY NIFTY Bank TRI: INR 12.8 lakh NIFTY 500 T
Slide 29: NIFTY Private Bank TRI FY Performance
NIFTY Private Bank TRI, NIFTY Bank TRI, NIFTY 500 TRI and NIFTY 50 TRI – FY Performance Financial NIFTY NIFTY NIFTY 500 NIFTY 50 Year Private Bank TRI Bank TRI TRI TRI NIFTY Private FY06 53.0% 31.2% 64.3% 67.4% Bank TRI FY07 42.7% 16.2% 10.0% 14.3% FY08 28.5% 26.7% 22.9% 25.1% -46.3% -36.9% -39.1% -
Slide 30: NIFTY Private Bank TRI Rolling returns
NIFTY Private Bank TRI, NIFTY Bank TRI, NIFTY 500 TRI and NIFTY 50 TRI – Rolling returns Average Rolling Returns Std. Deviation of Rolling Returns Return-Risk Ratio Return NIFTY NIFTY NIFTY NIFTY NIFTY NIFTY NIFTY NIFTY NIFTY NIFTY NIFTY NIFTY Periods Private Bank 500 50 Private Bank 500 50 Private
Slide 31: NIFTY Private Bank Index trading below long-term average P/E and P/B
NIFTY Private Bank Index trading below its long-term average on a trailing 12m P/E and P/B basis 60 10 P/E P/B 9 50 P/E Long-term Average 8 P/B Long-term Average 7 40 6 30 5 4 20 3 2 10 1 0 0 2008 2006 2009 2020 2007 2010 2022 2018 2016 2014 2019 2015 2013 2012 2021 2008 2006 2009 2017 2011 2020 200
Slide 32: Valuations and Return on Equity (ROE)
NIFTY Private Bank, NIFTY Bank, NIFTY 500 and NIFTY 50 – Valuations and Return on Equity (ROE) NIFTY Private Bank NIFTY Bank NIFTY 500 NIFTY 50 P/E 19.03 17.97 21.65 20.64 P/B 2.53 2.55 3.9 4.02 Dividend yield (%) 0.61% 0.73% 1.33% 1.32% Return on Equity 12.9% 13.6% 17.7% 17.7% Source: NSE Indices L
Slide 33: Why invest in HDFC NIFTY Private Bank ETF?
Why invest in HDFC NIFTY Private Bank ETF? Strong fundamentals NIFTY Private Bank Higher average HDFC AMC has been a compared to sector Index trading below trusted fund manager in its long-term average rolling returns Index Solutions for 20+ peers on a trailing 12m P/E years (HDFC Index Fund and P/B
Slide 34: Presenting HDFC NIFTY IT ETF & HDFC NIFTY Private Bank ETF
Presenting HDFC NIFTY IT ETF & HDFC NIFTY Private Bank ETF Open-ended schemes replicating/tracking the NIFTY IT Index & NIFTY Private Bank Index respectively Make Smart Additions to your Portfolio For disclaimers, refer slide 43 34
Slide 35: Product Labelling
HDFC NIFTY IT ETF and HDFC NIFTY Private Bank ETF – Product Labelling NAME OF THE SCHEME(S) THIS PRODUCT IS SUITABLE FOR INVESTORS WHO ARE SEEKING* RISKOMETER OF THE SCHEME(S)# Returns that are commensurate (before fees and expenses) with the performance of the Underlying Index (TRI) (NIFTY IT Index
Slide 36: Why ETFs?
Why ETFs? For disclaimers, refer slide 43 36
Slide 37: Reasons to invest in ETFs
Reasons to invest in ETFs Simplicity Liquidity Diversification A simple objective to Ability to purchase or sell A one-shot diversification track a benchmark during market trading hours of portfolio at a low cost For disclaimers, refer slide 43 37
Slide 38: HDFC Mutual Fund Index Solutions
HDFC Mutual Fund Index Solutions For disclaimers, refer slide 43 38
Slide 39: Multiple reasons for investing in HDFC ETFs
Multiple reasons for investing in HDFC ETFs Processes Client Focus and Experience comes with highly disciplined Outcome Tighter benchmark and robust Investment and tracking and minimizing Risk Management policies tracking error and processes Values Experience Investor first approach 20 years of conti
Slide 40: Fund Facts
Fund Facts Particulars HDFC NIFTY IT ETF HDFC NIFTY Private Bank ETF Type of scheme An Open-ended Scheme replicating/tracking NIFTY IT Index An Open-ended scheme replicating/tracking NIFTY Private Bank Index To provide investment returns that, before expenses, correspond to the total To provide inve
Slide 41: Asset Allocation
Asset Allocation Under normal circumstances, the asset allocation of the scheme’s portfolio will be as follows: Minimum Allocation Maximum Allocation Types of Instruments Risk Profile (% of Total Assets) (% of Total Assets) Securities covered by the Underlying Index* 95 100 Very High Debt Securities
Slide 42: Stock Liquidity Risk in the event of Circuit Filter
Stock Liquidity Risk in the event of Circuit Filter Liquidity of stocks which are available only in cash segment and not in F&O segment gets adversely impacted in the event of a circuit filter imposed by any of the stock exchanges. This would also impact the subscription and redemption of ETF units,
Slide 43: Disclaimer
Disclaimer The views expressed herein are as of 27th October, 2022 and are based on internal data, publicly available information and other sources believed to be reliable. Any calculations made are approximations, meant as guidelines only, which you must confirm before relying on them. The informati
Slide 44: Thank You
Thank You
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