Growth PP - Aug 10

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Portfolio Management ServicesPMS Registration No.INP000001546

Title

Wealth Management Services

August 2010

Portfolio Management Services


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Domestic Consumption

Indias economy is driven by domestic consumption. Indias private

domestic consumption as a percentage of GDP is 57%*, as compared toChina which consumes only 37%* of its GDP.

Rural India which constitutes 72%^ of the total population is insulatedfrom global shocks to a great extent as it still depends on agriculture andallied activities. Moreover services aimed at domestic market continue to

do well due to a high pent up demand.

A stable economy thrives on positive demographic profile leading to a mixof savings and consumption.

India which ranks 164# in the world lagging behind countries such as

Kazakhstan, Sri Lanka, and Cuba in terms of per capita income will makesignificant progress in the years to come.

*Global Insight: McKinsey Global Institute Analysis ^ Press Information Bureau # CIA World Fact Book


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Favorable Demographic Profile

India has a low median age of 25* years with 55%* of the population

below the age of 35*.

Indias working population has been growing at a healthy 2.1%*,

compared to a 1.1%* growth in the US and a 0.5%* growth in the UK.

Closer home, the proportion of working-age population in East Asiancountries will stabilize by 2015 and decline gradually.

India, in contrast, is at an inflexion point as its working age population is

expected to grow till 2035 before stabilizing for another 15 years.

* UN Department of Economic & Social Affairs


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India Growth Story has Just Begun

A stable economy thrives on positive demographic profile leading to a mix

of savings and consumption.

India which has a median age of 25*, per capita income of USD 3100*

(ranks 164* in the world in terms of per capita income) will make

significant progress in the years to come.

Indias savings rate has improved over the years to 36%* of GDP.

Consumption growth will also accelerate as the young take center stage.

India still lags behind hugely on all core infrastructure and consumption

parameters.

* CIA World Fact Book


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Power Consumption (Per Capita kWh)

12607

2118

487

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

0

2000

4000

6000

8000

10000

12000

14000

USA China India

Power Consumption ( Per Capita kWh)

Chinas per capita power consumption is 5x of India

kWh kWh

US per capita power consumption is 25x of India

Source: Angel Research, US Geological Survey


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Steel & Cement Consumption

420 400328

1000

30

150

0

200

400

600

800

1000

1200

Steel Consumption ( per capita kg) Cement Consumption ( per capita kg)

USA China India

(Kg)

Source: Angel Research, World Steel Association

Chinese per capita steel consumption is 10x of India

Chinese per capita cement consumption is 6x of India


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Car Penetration per 1000

900

20

13

0

10

20

30

40

50

60

70

80

90

100

0

100

200

300

400

500

600

700

800

900

1000

USA China India

(Nos.) (Nos.)

Source: Angel Research, Crisil

US car penetration is 70x of India


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Credit Under Penetration

Source: Angel Research, World Bank


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Market Cap Follows GDP Growth

India will also witness strong growth in

market capitalization

US has seen good market capitalization

with GDP growth

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

1970 1980 1990 2000 2008

USA Mcap/Gdp(x)

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1990 2000 2010P 2020P 2030P

India Mcap/Gdp(x)

Source: Angel Research, World BankSource: Angel Research


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Why Invest in Midcaps?

India ploughs back only 5%* of its domestic savings into the equity market

every year. As interest rates head lower structurally, it is imperative thatequity would be become the preferred asset class in the next 10 to 15^years.

It is also important to note that equity is already gaining acceptanceamong Indias working classes with each passing year.

As equity gains prominence, a doubling of the domestic allocations to10%^ of savings in the next 5^ years (domestic allocations doubled duringthe previous 5 year period FY2004-09) would increase retail and HNIinflows by 3.5x^ into the equity market.

When exposure to equities increases over a period of time, it has beenobserved that midcaps tend to create more wealth than large caps.

* RBI ^ Angel Research


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Midcap Investing Dynamics

It is interesting to note that a large part of the change in stock prices (and

indices) happen because of change in valuation multiples (P/E, P/BV)

Re(De)-rating is a leading indicator for any expected change in the

performance of a business.

Midcaps are especially sensitive to changes in valuation metrics.

After a strong battering in CY2008, midcaps recovered in CY2009 but many

of them are still below their median valuations.

Combining a strong earnings growth in the medium term, a lot of wealth

can be created in the right midcaps.


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P/E Analysis- CNX Midcap v/s SENSEX

P/E (x)

5

10

15

20

25

5

10

15

20

25

Apr-04

Sep-04

Feb-05

Jul-05

Dec-05

May-06

Oct-06

Mar-07

Aug-07

Jan-08

Jun-08

Nov-08

Apr-09

Sep-09

Feb-10

Jul-10

CNX MIDCAP (LHS) SENSEX (RHS)Source: NSE India, Capitaline, Bloomberg, Angel Research

P/E (x)


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Rs 1 Lac invested in Mar -03 would have amounted to more than Rs 49 Lac in Mar -10

Wealth Creation in Midcaps -

Praj Industries

0

20

40

60

80

100

120

FY03 FY10

- Stock returns: 49x

- Institutional Holding up from 15% to 28%

- Sensex P/E expanded from 11.2x to 19.5x

- Discount to Sensex in FY03: 4%

PAT(R

s.Cr)

Source: BSE India, Capitaline, Bloomberg, Angel Research


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Havells India


0

25

50

75

100

125

150

175

200

225

250

FY03 FY10

- Stock returns :58x

- Institutional Holding up from 2.5% to 37%



PAT(Rs

.Cr)



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Elecon Engineering

0

10

20

30

40

50

60

FY03 FY10


- Institutional Holding upfrom 6.5% to 16%


- Discount to Sensex in FY03 : 69%

PAT(Rs.Cr)




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Shriram Transport Finance


0

100

200

300

400

500

600

700

800

900

FY03 FY10


- Institutional Holding up from 2.5% to 37%



PAT(R

s.Cr)



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Midcap Investing

Midcap investing presents a daunting challenge of assessing the

qualitative and quantitative aspects of a business to decide the right

value.

A good stock bought at expensive valuation may lead to

underperformance while investing in a bad business at any level may lead

to a capital loss.


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Angel Growth Strategy

Combines the best of Value & Growth investing.

Value forms the bedrock of all investments.

Growth in core business is essential for an investment to be a part of the

portfolio.

Growth is viewed through the prism of value.


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Investment Objective

To create Wealth over the medium to long term by investing in mid

caps and small caps blending the philosophy of Value and Growth

investing.


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Investment Strategy

Growth is viewed through the prism of value. A unique matrix of

Profitability (RoNW), Growth prospects, and Value proposition employed

to chose 12 to 14 Companies among thousands of listed stocks.

Portfolio Profitability (RoNW) Growth Value

Angel Growth Weighted average RoNW

of the portfolio to be at

least equal to that of

Sensex Companies* on12 to 18 month forward

estimates

Weighted average

Growth prospects of

the portfolio to be at

least equal to that ofSensex Companies* on

12 to 18 month

forward estimates

Weighted average

P/E or P/BV (which

ever is applicable) of

the portfolio to be atleast 25% lower to

that of Sensex

Companies *on 12

to 18 month forward

estimates

Profitability- Growth- Value Matrix


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Investment Strategy

Turn around stories are also considered with in the framework of the

Profitability- Growth- Value matrix. For instance:

Tech Mahindras profits have been impacted due to the debt taken on its books for the

acquisition of Satyam Computers. It paid an interest of Rs 218 Crore in FY10 compared to

Rs 2.5 Crore in FY09. Interest adjusted for taxes accounted for almost 26% of its profits of

Rs 700 Crore in FY10. Tech Mahindra generates a free cash in excess of Rs 800 Crore per

annum and at that rate it can retire its debt of approximately 1400 Crore in 2 years leading

to a huge jump in profits.

Businesses that generate inferior Return on Networth (RoNW) as

compared to the Sensex Companies* over longer periods of time (3 to 5

years) are not considered for investment.

*Note: Although our performance benchmark is BSE Midcap, we intend to invest in Midcaps and Small-caps

whose business fundamentals are in line or better than the Sensex Companies who happen to be the leaders in

their respective industries .


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Active portfolio management ensures periodic profit booking while

infusion of fresh ideas keeps the portfolio current with the macro-

economic conditions.

Emphasis on Wealth creation. Endeavor to leverage the power of

compounding to grow the portfolio. Ensure that unnecessary churning isavoided in the portfolio to reduce the financial costs to the client.

Stock selection based on Fundamental Analysis.

Investment Strategy


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Angel Growth- Sector Allocation

* As on 31stJuly 2010

Banking & Financial

Services, 19.7%

FMCG, 10.0%

Infrastructure, 19.5%IT & ITES, 28.1%

Auto Ancillaries, 0.8%

Shipping, 6.6%

Tyres, 9.1%

Cash, 6.2%


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Angel Growth- Top 5 Holdings

Company Weightage Sector

Heritage Foods 10.0% FMCG

Jyoti Structures 10.1% Infrastructure

Punj Lloyd 9.4% Infrastructure

3i Infotech 9.3% IT & ITES

JK Tyres & Industries 9.1% Tyres

* As on 31stJuly 2010


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Angel Growth- Performance

* As on 31stJuly 2010 ^ Annualized/Compounded returns

3 Months 6 Months 1 Year 2 Years^ Since Inception^( 08 August 2007)

Angel Growth - 6.1% - 2.9% 26.5% 36.6% 17.8%

BSE Midcap 3.1% 11.8% 41.5% 15.4% 3.6%

Note: The above indicated Strategy returns are absolute (except where it is indicated^) in nature and are

calculated on the Time Weighted Rate of Returns (TWR) methodology. Returns of individual clients may vary

depending on their time of entry/profit booking in the Strategy. Past performance may not be indicative of the

future returns delivered by the Portfolio Manager.

Fund Manager: P.Phani Sekhar

Experience: Equity Research (Indian Markets, US Markets), PortfolioManagement (multiple Portfolios) at Angel Broking since inception of PMS.

Education: BE (Mechanical Engg.), MBA (Finance)


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Service Proposition

Online Access to Portfolio Login Id & Password

Interactive back office interface for detailed view of portfolio

Monthly fund performance and fund manager views on e-mails

Quarterly performance report statement in a new form

Dedicated fund coordinator for fund related queries

Centralized team of service coordinators for hassle free servicing

Event based interaction with fund management team

Servicing from large network of branches across India


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Fee Structure & Other Details

Nature of Fees Fee

One Time upfront Fee / Processing Fee NilFixed Management Fees (on Assets under Management) per annum 2%*

Exit Load Nil

Custodian Fees Nil

Depository Charges As Applicable

Registrar & Transfer Fees Nil

Service Tax, Security Transaction Tax & Other Statutory levies As Applicable

Brokerage 0.5% per Transaction

*In the case of redemption with in the first year, a fixed management fee of 2% will be levied on the

assets under management.


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Investment Dynamics

Investment horizon: 18 to 24 months

Risk: Moderate

Return: Moderate


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DISCLAIMER: Investments in Securities are subject to market risks and other related risks and there is no assurance or guarantee that

the objectives of any of the strategies of the Portfolio Management.

As a SEBI registered Portfolio Manager Angel Broking Ltd provides Portfolio Management Services to clients and at no point of time

assure guaranteed returns. Past Performance of schemes do not guarantee/indicate future performance.

This document has been prepared by Angel Broking Ltd. based upon information available to the public and sources including

newspapers and information available on various financial web-portals and other media which are generally believed to be reliable. No

representation or warranty, express or implied is made by Angel Broking Ltd with regard to the accuracy, correctness and completeness

of the contents.

The information contained herein does not constitute an offer, solicitation or recommendation for the purchase or sale of any

securities or other financial instruments nor does the information constitute advice or an expression of our view as to whether a

particular security or financial instrument is appropriate. The recipient is requested to make itself aware of all the risk factors including

its financial condition, suitability to risk return profile, e.t.c and read and understand the Risk Disclosure Document prior to availing

Portfolio Management Services

This document is not for public distribution and has been furnished solely for information and must not be reproduced or

redistributed to any other person. Persons into whose possession this document may come are required to observe these restrictions.

No part of this material may be duplicated in any form and/or redistributed.

This material should not be circulated in countries where restrictions exist on soliciting business from potential clients residing in such

countries. Recipients of this material should be aware of any restrictions imposed on them w.r.t possession of such documents. AngelBroking Ltd stands indemnified from any disputes/issues that may arise on account of failure on this part by the recipient.

SEBI Registration No : INB 010996539

Website: www.angeltrade.com


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Growth PP - Aug 10

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