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Reliance Capital Builder Fund III – Series A (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 – June 10, 2015
NFO Closes – June 24, 2015
Slide 2
Reliance Capital Builder Fund III – Series A 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
Slide
Linear growth, exponential opportunity
4
India can double GDP size in <7 years @ mere 12% nominal GDP growth
It took over 50 years for the Indian economy to reach $1 trillion plus, however the next
$1trn could be in less than ~5 years
India’s GDP growth
Source: RMF Internal Research
Slide
Indian Economy … The BIG Picture
5
9th largest economy in the world $2 trillion Nominal GDP as per World Bank
Potential Rapid Growth India took 50 years+ to get to a $1trn economy, however even at mere 13%
nominal GDP growth, it could be a $4trn + economy in 5 yrs
Least vulnerable to External Global Shocks Debt / GDP ratio @ ~120% vs average of 220% for developed/developing
economies
Foreign holdings as a %age of total domestic debt @ 1.5% vs average of 25% of
major large economies
Multi-decade mega trends under development Acceleration in urbanization and urban transport, Transformational digitization, All
round structural governance reforms, preparing for manufacturing renaissance
Source: World Bank, Bloomberg
Slide
Macro economic trends continue to be positive
7
Source: Bloomberg, CSO
PMI refers to HSBC/Markit manufacturing purchasing managers' index. * Old series considered for GDP Growth
Crude Oil ($/bbl) 109 63
THEN
(June 2014)
NOW
(June 2015)
CPI Inflation 8.6% 4.9%
GDP Growth* 4.7% 5.3%
Foreign Reserves
(USD billion) 265 330
Fiscal Deficit 4.6% 3.99%
PMI 51 53
Slide 8
Rapid Growth around the Corner on account of Reforms:
The Fundamental Story
Financial Inclusion
~100% of eligible India under UIDAI (Unique Identification Authority of India) to lead to
(Direct Benefit Transfer) DBT of all social sector schemes
Project Monitoring Group
clearing high impact projects: projects worth ~ $100 billion cleared so far
All-round Business-easy reforms
Establishing NITI Establishing National Institution for Transforming India – leading to
substantial reduction in bureaucracy
Agriculture reforms
Restructuring FCI (Food Corporation of India), APMC (Agricultural Product Market
Committee) reforms, Soil health cards, Farmer insurance, proposal for National
Irrigation scheme, Easing supply side bottle necks
Housing for all
Affordable housing mission aims for housing for all by 2022
Ambitious foreign trade policy
to grow exports from $466bn in FY14 to $900bn in 2020
Source: Bloomberg, indiabudget.nic.in
Slide 9
Subsidy savings and innovative revenues give Government financial
muscle to spend on the economy
The Fundamental Story
Coal and spectrum auctions have been highly successful (Auction and allotment of 67
blocks has unlocked over $55bn (335k crs ) for states / Telecom spectrum auctions raised
$17.6bn - Over 1 lac crs)
Disinvestments : CY15 targeting to raise Rs. 55k crs i.e $9bn (Several other big
ticket disinvestments in pipeline – Hind. Zinc, SUUTI (Specified Undertaking of the Unit
Trust of India), Coal India, ONGC etc with cumulative potential of $20bn+)
Banks allowed to raise funding for infrastructure with minimum SLR / CRR
requirement
Fuel Reforms has reduced the budgeted fuel subsidy bill by Rs. 30,000 Crs, a drop of
50%
GST implementation will result in improved tax collection, and is expected to add to the
GDP growth
Source: Bloomberg, indiabudget.nic.in
Slide 10
Huge investments totaling Rs. 24 Lakh Crs envisaged over the next few
years
The Fundamental Story
Railways to invest over ~600,000 crores over next 5years on expansion & up
gradation
Digital India - ~1,13,000 crores (Over next 5 yrs)
Roads ~5,00,000 crores (Over next 5 yrs)
Healthcare (National Health Assurance Mission): ~1,60,000 Crore (Over next 4
yrs)
Swacch Bharat Mission : ~2,00,000 crore (Over next 4 yrs)
National Rural Housing Mission: ~3,45,000 crores (by 2022, next 7 yrs)
Solar ( Renewable Energy ) : ~6,00,000 crore ( In next 7 yrs for 100,000 MW )
Source: Bloomberg, indiabudget.nic.in
Slide 11
Combination of low interest rate and economic recovery will lead to
Higher Profit Growth for Indian companies
The Fundamental Story
India is one of the few countries in the world, which could afford to cut interest rates
meaningfully – already 3 rate cuts since Jan-15
Continuing fiscal prudence, disinflationary trends and benign liquidity scenario would
result in lowering of interest rates
Corporate India’s earnings have been subdued in the past due to lower capacity
utilization and higher interest rate scenario
We expect this to turn around, and corporate earnings to grow meaningfully on the
back of operating leverage and financial leverage
Source: Bloomberg, RBI, RMF Internal Research
Slide 12
Reasonable Valuations
The Valuations Story
With the recent market correction, with S&P Sensex trading around 27,000 and
Nifty trading around 8200, valuations are quite reasonable.
India’s market cap / GDP is ~75%. During the peak of 2008, it was over 100%
Based on cyclical low past earnings and our expectation of high growth, markets
are reasonable at ~19x trailing PE
We expect Earnings to pick up in the near term, and markets to capture the
growth in earnings through commensurate returns over the next 3 years
Source: Bloomberg, RMF Internal Research
Slide
SENSEX PE(x) at 16.8x 1yr & 13.6x 2yr forward earnings: still reasonable
Earnings to be a Big Driver!!!
Source : MOSL Estimates.
13
Slide
At ~16.8x 1yr Fwd & ~13.6x 2yr Fwd PE
( Valuations still tad above long-term average on cyclical low earnings )
14
SENSEX – 26,769 ( As on 05-Jun-15 )
FY 15 FY 16E FY 17E
Sensex EPS 1,355 1,605 1,980
Sensex P/E ( Long-term avg. of fwd
multiples - ~15x )
19.9x 16.8x 13.6x
Source : MOSL Estimates., BSE
Valuations remain reasonable
Slide
Can growth surprise..!!!
15
In the previous growth cycle, Earnings became ~3 times in less than 6
years….. Sensex grew 6 times.
Source: Bloomberg, BSE, MOSL Estimates
Previous
Growth Cycle 31st March 2003 8th Jan 2008 Times(x) CAGR
S&P BSE Sensex
EPS 272 833 3.1x 26%
S&P BSE Sensex
Index Level 3,049 20,600 6.7x 49%
Today India is at the cusp of the biggest transformation it’ll
undergo!!
Current S&P BSE Sensex EPS S&P BSE Sensex Index Level
June 5,
2015 1,355 26,769
Past performance may or may not be sustained in future
Slide 16
Brand India has never been more vibrant and appealing than now,
which will augur very well in attracting foreign flows, both FIIs and FDI
The Sentiment Story
Nearly 20 foreign trips have been made by the PM (5 of these for multi-lateral
meetings like BRICS, G-20, SAARC )
USA & China support India's bid for permanent UNSC seat
$35bn investment by Japan over 5 years & expertise in high speed trains
Australia for supplying Nuclear Power fuel - ~500 tns of uranium
Canada agrees to supply 3,000mt of uranium to power Indian atomic reactors
CXO’s of global corporations for investment in India: Satya Nadella (Microsoft),
Indra Nooyi (Pepsico), Mark Zuckerberg & Sheryl Sandberg (Facebook), Jeff
Bezos (Amazon)
$20 billion investment from China
Source: Bloomberg, Economic Times, Hindu Business Line
Slide
Summary
17
Building blocks in place. Rapid growth round the corner
Significant improvement in macro parameters
Subsidy savings and innovative revenues give Government financial muscle
to spend on the economy.
Earnings growth could lead to robust market
Combination of low interest rate and economic recovery will lead to higher
profit growth for Indian companies
Huge investments totaling Rs. 24 Lakh Crs envisaged.
Slide 18
Reliance Capital Builder
Fund III – Series A
Twin benefits of Alpha Generation & Higher Market Participation
PRESENTING
Slide
Portfolio Philosophy
20
Twin benefits:
Alpha Generation through Active Fund Management
Higher Market Participation through Long Call Options
Note: The current fund philosophy may change in future depending on market conditions or fund manager’s views.
Diversified Portfolio
Strong track record of creating
alpha over benchmark for the
last 3 years
Call Options
Buy June 2018 Call Options
Direct Equity (80%) Options (20%)
Strategy
Slide
Multi-cap strategy with an aim to participate in investment opportunities
across all sectors and market capitalization
The Fund Manager keeps the discretion to change the mix between large cap
and mid caps
Sector concentration based on market conditions
Use of both top down and bottom up strategies
Top-down
– Focus on macro trends
– Broad sector calls
Bottom-up
– Invest in niche industries
– Invest in companies having potential of sustainable growth
21
Equity Strategy
Slide
Call option gives the buyer the right to "call in" (buy) an asset at a specific
price on or before a certain date
The investor profits on a call when the underlying asset increases in price.
The upside is unlimited, whereas the downside is limited to the option
premium
Options can provide enhanced market participation
Investors can buy options just by paying premium instead of the cost of the shares
22
Call Option for Higher Equity Participation
Unlimited
Upside
Limited
Downside
Slide
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)
24
Slide
Scheme Features
26
Investment
Objective
Plans & Options
Minimum
Application
Amount
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.
Growth & Dividend Payout Option
Direct Plan – Growth & Dividend Payout Option
Rs 5,000 and in multiples of Re 1 thereafter
Benchmark S&P BSE 200 Index
Asset Allocation Diversified Equity & Equity Related Instruments: 80%-100%
Debt & Money Market Instruments: 0%-20%
Load Structure
Entry Load - Nil.
Exit Load: Nil Since the scheme shall be listed on BSE or any other recognised
Stock Exchange, Exit load shall not be applicable.
Fund Manager Omprakash Kuckian & Jahnvee Shah (Overseas Investments)
Slide
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 third-
party 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.
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