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
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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
Market Outlook
3
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 $4trn + economy in 5 yrs
Least vulnerable to External Global Shocks Debt / GDP ratio @ ~120% vs average of 220% for developed/developing
economies
Foreign holdings as a %age of total domestic debt @ 1.5% vs average of 25% of
major large economies
Multi-decade mega trends under development Acceleration in urbanization and urban transport, Transformational digitization, All
round structural governance reforms, preparing for manufacturing renaissance
Source: World Bank, Bloomberg
Slide
Sentiments
Valuations
Fundamentals
The Equity Machinery at Work..
6
Slide
Macro economic trends continue to be positive
7
Source: Bloomberg, CSO
PMI refers to HSBC/Markit manufacturing purchasing managers' index. * Old series considered for GDP Growth
Crude Oil ($/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