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Motilal Oswal Business Opportunities Strategy July 2020 1 Motilal - - PowerPoint PPT Presentation
Motilal Oswal Business Opportunities Strategy July 2020 1 Motilal - - PowerPoint PPT Presentation
Motilal Oswal Business Opportunities Strategy July 2020 1 Motilal Oswal Business Opportunities Strategy Investment Manager Motilal Oswal AMC is the pioneer of PMS business in India with over 16 years of track record One of the co-founders,
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Beneficiary of Doubling of Per Capita GDP Consumer Discreonary Value Migraon from Public Sector to Private Sector Private Bank & NBFC A Play on Rising Rural Income Agriculture Business migraon from Unorganized to Organized GST Beneficiary Government Focus on Housing for All by 2022 Affordable housing
BANK
Themes we Believe in
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India GDP (current $ bn)
186 193 201 218 212 233 249 279 297 296 321 270 288 279 327 360 393 416 421 459 468 485 515 608 709 820 940 1217 1199 1342 1676 1823 1828 1857 2039 2104 2290 2653 2726 2972 3258 3577 3924 4306 4729
500 1000 1500 2000 2500 3000 3500 4000 4500 5000
FY 1980 FY 1981 FY 1982 FY 1983 FY 1984 FY 1985 FY 1986 FY 1987 FY 1988 FY 1989 FY 1990 FY 1991 FY 1992 FY 1993 FY 1994 FY 1995 FY 1996 FY 1997 FY 1998 FY 1999 FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020E FY 2021E FY 2022E FY 2023E FY 2024E
1st US$
tn
2nd US$
tn
3rd US$
tn
4th US$
tn
Nearing 5th US$
tn
According to World Bank data, India has now become the world’s sixth-largest economy India is one of the fastest growing among major economies
Source: statisticstimes.com Past performance may or may not sustain and does not guarantee future performance Note - Above forward looking statements are based on external current views and assumptions and involve known and unknown risks and uncertainties that could affect actual results. Investments are subject to market risk.
Rise in GDP - Creates Disposable Income
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§ §
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Indian income pyramid in 2022 will bulge at the center
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2022 7mn HHs 44mn HHs 100mn HHs 133mn HHs 33m pop RICH (Above Rs 6.1 mn) 219m pop MIDDLE CLASS (Above Rs 1.3 to 6.1 mn) 499m pop ASPIRERS (Above Rs 1.3 to 6.1 mn) 667m pop DEPRIVED (Below Rs 0.5 mn) 2017 3mn HHs 32 mn HHs 74 mn HHs 141 mn HHs
§
The total stressed assets in PSU Banks – Rs 10 lakh crores, causing dent to their lending ability
§
Household incomes rose the fastest for those at the bottom of the pyramid
§
Households with annual earnings
- f
USD10,000 - 50,000 have also grown at a CAGR of 20% over the last five years
§
Increase in the number of households with annual earnings of USD10,000-50,000 will lead to an increase in ‘indulgence spending’ by the group
§
It is estimated that 23% of the global middle class will be from India by FY30
Source: Axis Capital
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§ § § § §
Source: MOSL The statements made herein may include statements of future expectations and other forward-looking statements that are based on our current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Past performance may or may not be sustained in future
Value Migration in Banking
5 The total stressed assets in PSU Banks – Rs. 10 lakh crores, causing dent to their lending ability Economy is expected to grow by 7%#, Credit growth expected to be 2X from banking sector Deposits market share of nationalized banks has dropped from a peak of 52% in FY14 to 44% in FY18. The share was fully taken over by the private banks Credit growth largely to benefit Private Sector banks as PSU Banks are struggling with Non Performing loans and stretched tier 1 capital adequacy ratio The market share shift of loans by private banks from PSUs has been consistent. Private Banks have 80% market share in incremental loans versus 70% in deposits.
§
Data Analytics, IT Infrastructure and Dynamic workforce – added advantage for private banks
5 10 15 20 25 30
FY12 FY13 FY14 FY15 FY16 FY17 Private Banks Growth (%) PSU Banks Growth (%)
Loan Growth
FY18 100 75 50 25
FY07
Loan Growth
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 20FY19
14
67 19
11
69 20
7
74 19
6
76 18
3
78 19
5
76 19
3
77 20
1
78 21
4
75 22
6
69 25
6
67 27
4
66 30
5
64 31
Private Banks PSU Banks Others
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Government wants to Double the Farm Income by 2022
MSP of wheat has risen from Rs.1,100 in FY10 to Rs.1,840 currently
1100 1170 1285 1350 1400 1450 1525 1625 1735 500 1000 1500 2000 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18
MSP of Wheat (Rs. per quintal)
Source: www.ibef.org/industry/agriculture-india.aspx
Agriculture Growth: Rise in Rural Income
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§
Agriculture infrastructure - increasing investments in agricultural infrastructure such as irrigation facilities, warehousing and cold storage
§
Increase in crop yield - Use of genetically modified crops will likely improve the yield
§
Subsidies and Incentives - Short-term crop loans at subsidized interest rate of 7% p.a. & additional incentive
- f 3% for prompt repayment
§
Total Budget allocation for rural, agricultural and allied sectors for FY2017-18 has been increased by 24%
§
Increase in Rural income led by rise in MSP’s (Minimum Support Price) will create demand in related sectors like Agrochemicals, Consumer Staples and Consumer Discretionary
1840 6% 10% 5% 4% 4% 4% 5% 7% 6% FY19
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Economic growth, urbanization and rapid change in socio-economic profile will drive demand
§ Government vision – ‘Housing for all by 2022’ §
Source:- Jones Lang LaSalle (Affordable Housing in India) * Source: PWC: Building the economy block by block # Source: www.kpmg.com
Demand supply dynamics of housing for various income
Income Level (INR ‘000)
High Demand supply gap for residential units priced below 10 Lakhs
35% 25% 20% 15% 5% 5% 5% 20% 40% 30% 0% 10% 20% 30% 40% 50% 200-300 300-500 500-700 700-1000 >1000 Cost of Unit (INR ‘000) Share of Demand Share of Supply
Affordable Housing
7 Rising disposal income - Per capita income is expected to increase from 2,800 USD in 2012 to USD 8,300 by 2028*
§
#
10 million people moving to urban cities every year, is likely to increase the demand
§
Growth in Affordable housing will create parallel demand in related sectors like Cements, Paints, Tiles, Plastic Pipes and Electricals
§
The govt in September 2019 announced a last mile INR 20,000 cr affordable housing package to benefit 3,50,000 house owners. The main objective of the plan is to revive stalled housing projects in the middle & lower income category across the country.
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Note: Industry size data based on CLSA estimates for housing led demand in each building materials sub-sector. Light electricals include switchgears/switches, fans, lightings & fixtures and water heaters.
Construction of 60m units over FY 18 -24 Total spend on housing over 7 years: US$ 1.3 trn Multiple Sector Linkages
Demand linked to housing FY 14-17 industry growth FY17-24 Expected growth Sector Cement Steel Paints Wood Panel Tiles Plasc Pipes Light Electricals
Adhesives Construcon Chemicals
US$ 14 bn Demand linked to housing US$ 12 bn US$ 4.5 bn US$ 3.7 bn US$ 3.5 bn US$ 2.1bn US$ 2.1 bn US$ 1.1 bn 3%
1
3% 9% 1% 8% 5% 8% 8% 12%
1
8% 15% 12% 11% 14% 13% 13%
Source: MoSPI, Ministry of Commerce, RBI, Ministry of Steel, AceEquity, CLSA as on March 31, 2017
Affordable Housing
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GST: Movement from Unorganized to Organized
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Source:- The Financial Express
§ Portion of economy to migrate from informal to formal, leading to a 4.2%* growth in real GDP § Institutional demand inclined to move towards branded players § Increased efficiency in businesses due to reduced state level regime § Companies in sectors like paints, appliances, apparel, logistics, plastic pipes, ceramic tiles,
batteries, etc. will stand to benefit
§ Tax evasion to fade away – Unorganized players to loose competitiveness
YoY
Auto-Batteries Logistics Apparels Pipes, Ceramics Benefit of moving to Organized Segment Sector
§§§ §§§ §§§ §§ § §§ §§ §
§ § §
§§ §§§ §§§ §§ §§
Highly Positive
§§§ §§ Positive § Slightly Positive § Neutral
Change in Tax Rate Supply Chain Management Overall Auto-Batteries Logistics Apparels Pipes, Ceramics Unorganized Share Sector Organized Share 40%*** 92%** 70%*** 50%*** 60% 8% 30% 50%
*Source:- www.federalresrve .gov.in **Source:- KPMG India Retails the next growth story ***Source:- Edelweiss: Analysis Beyond Consensus
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General Insurance
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§
GI penetration is low in India with Industry Premiums at
- nly 0.9% of GDP. Growth drivers for this sector are linked to
a) Vehicle stock (Motor), b) Improving income levels (Health) and c) Economic activity (Commercial), with each segment currently under-penetrated
§
In addition to acceleration of growth in the existing lines, it is expected that new lines of business such as property insurance, liability insurance, cyber insurance etc. (which are negligible as of now) will also add to growth
§ Attractive industry structure for select private players –
45% market share is with PSUs which are largely in poor shape due to weak capital position and profitability.
§ Top private players have competitive advantages – due to
scale, brand, distribution, capital position, underwriting discipline, industry leading profitability and superior customer service.
§ Nature of business is promising – The sector is
countercyclical to rising interest rates. In addition, premium mix is diversified with individual segments having uncorrelated growth and profitability drivers providing earnings stability.
3,000 2,500 2,000 1,500 1,000 500 2,542 1,523 938 901 174 159 167 113 18 18 USA
- S. korea
UK Japan Brazil China
- S. Africa
Russia Indonesia India Source: IRDA, Investec Securities Research Insurance density (Premium per capita)
Insurance penetration improved in last 2 years. Similarly there has been an increase in Insurance density
1.0% 0.8% 0.6% 0.4% 0.2% 0.0% 0.6% 2010 2011 2012 2013 2014 2015
2015
2016 2017 2018
2009
0.6% 0.6% 0.7% 0.7% 0.7% 0.7% 0.7% 0.8% 0.9% Insurance Penetration
India - Insurance penetration improved in last 2 years..
Source: IRDA, Investec Securities Research Source: IRDA, Investec Securities Research
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Life Insurance: Growth opportunity- Under-penetration vs global benchmarks
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17.9% 14.6% 6.6% 6.3% 3.6% 3.3% 2.8% 2.7% Taiwan Hong Kong Singapore Japan Thailand Malaysia India China
Life Insurance Penetraon
FY18
6756 4195 3835 2411 339 237 225 55
Hong Kong Taiwan Singapore Japan Malaysia Thailand China India
Life Insurance Density (US$) FY18
92.2% 88.3% 78.4% 73.3% 72.5% 70.2% 56.3% 56.0% 16.4% Protecon Gap (2014) India China Thailand Indonesia Malaysia Hong Kong Japan Singapore Taiwan 4.0% 4.6% 4.4% 3.4% 3.2% 3.1% 2.6% 2.7% 2.7% 2.8% FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 India Life Insurance Penetraon (FY09-FY18) 41 48 56 49 43 41 44 43 47 55 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 India Life Insurance Density (US$) (FY09-FY18)
§ India has the highest protection
gap in the region, as growth in savings and life insurance coverage has lagged behind economic and wage growth
§ Protection gap has increased over
4x in last 15 years with significantly low penetration and density
Note: Penetration as measured by premiums as % of GDP, Density defined as the ratio of premium underwritten in a given year to the total population. Source: Swiss Re (Based on respective financial year of the countries), MOSPI
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Life Insurance
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Source: United Nations World Populations Prospects Report (2017)
67.6 71.9 75.0 2015 2035 2055 Life Expectancy (Years) 38% 30% 25% 56% 61% 60% 6% 9% 15% 2015 2035 2055 Populaon Composion (bn) 65 years and above 20-64 years Less than 20 years 1.3 1.7 1.6
§ India's insurable population is anticipated to touch 750 million by 2020 § India is currently one of the world's youngest nations, offering great opportunies for long term savings and
investment plans
§ Demand for retirement policies to rise with increasing life expectancy, declining birth-rates and proportion of
India's elderly population expected to increase by almost 100% by 2035 (as compared to 2015)
§ Emergence of nuclear families and increasing life expectancy to facilitate need for pension and protection
based products
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Buy Right Sit Tight
At Motilal Oswal Asset Management Company (MOAMC), our investment philosophy is centered on 'Buy Right: Sit Tight‘ principle.
‘Q’uality denotes quality of the business and management ‘G’rowth denotes growth in earnings and sustained RoE ‘L’ongevity denotes longevity of the competitive advantage or economic moat of the business ‘P’rice denotes our approach of buying a good business for a fair price rather than buying a fair business for a good price Buy and Hold: We are strictly buy and hold investors and believe that picking the right business needs skill and holding onto these businesses to enable our investors to benefit from the entire growth cycle needs even more skill. Focus: Our portfolios are high conviction portfolios with 25 to 30 stocks being our ideal number. We believe in adequate diversification but over-diversification results in diluting returns for our investors and adding market risk
Our investment philosophy – ‘Buy Right : Sit Tight’
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Scrip Name %Holding
12.3 10.8 9.8 9.4 7.8 7.3 5.8 5.5 5.4 4.9 Max Financial Services Ltd. HDFC Bank Ltd. Tata Consultancy Services Ltd. Kotak Mahindra Bank Ltd. ICICI Bank Ltd. Bata India Ltd. Britannia Industries Ltd. HDFC Life Insurance Company Ltd. Eicher Motors Ltd. Larsen & Toubro InfotechLtd.
Top 10 Holdings
Large Cap Mid Cap Small Cap
Market Capitalization Sectoral Allocation
Please Note: The given stocks are part of portfolio of a model client of BOP Strategy as on 30th June 2020. The stocks forming part of the existing portfolio under BOP Strategy may or may not be bought for new client. The stocks mentioned above are only for the purpose of explaining the concept and should not be construed as recommendations from MOAMC. Past performance may
- r may not be sustained in future and should not be used as a basis for comparison with other
- investments. Name of the PMS Strategy does not in any manner indicate its future prospects and
returns.
Weighted Average Market Cap : Rs. 2,40,540 Crs
73% 23% 3%
Portfolio Allocation
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0.5 3.0 5.4 13.0 14.7 17.6 17.8 28.0 Cash Construcon Auto Consumer Durables Soware Consumer Non Durables Non-Lending Financials Banks
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BOP Strategy has delivered a CAGR of -1.1% vs. Niy 500 returns of -5%, an
- utperformance of 3.9%
(CAGR) since incepon (16th January 2018)
BOP Strategy Niy 500
*Strategy Inception Date: 16/01/2018. Please Note: The Above strategy returns are of a Model Client as on 30th June 2020. Returns of individual clients may differ depending on time of entry in the Strategy. Past performance may or may not be sustained in future and should not be used as a basis for comparison with other investments. Returns below 1 year are absolute and above 1 year are annualized. Strategy returns shown above are post fees & expenses.
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Performance Snapshot
- Rs. 1 crore invested in BOP
Strategy at incepon is Rs. 1 crore as on 30th June 2020. For the same period Rs.1 cr invested in Niy 500 Index is now worth Rs. 90 lakh.
BOP Strategy Niy 500
4.0 6.0 8.0 10.0 12.0 14.0 16.0 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Jun-20 1X 0.9X
6.6 16.3
- 13.7
- 10.5
- 5.9
- 0.6
- 1.1
8.3 21.1
- 14.2
- 9.3
- 12.3
- 3.8
- 5.0
1 Month 3 Months 6 months 9 months 1 year 2 Year Since Incepon
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MOAMC – Some Success Stories
Mulbaggers across PMS strategies…
Stocks Inial Purchase Date Market Cap Rs. Crores (Purchase Date) Market Cap
- Rs. Crores
(30th June 20)
Absolute Growth
CAGR (%) Kotak Mahindra Bank September-2010 30,379 2,69,078 8.9X HDFC Bank July-2008 40,986 5,85,181 12.7X HDFC Life Insurance Company November-2017 69,229 1,10,883 1.6X Next Trillion Dollar Opportunity Porolio Strategy City Union Bank March-2013 3,026 21,112 3.6X Ipca Laboratories November-2012 5,922 8,951 3.3X Value Strategy 25% 19% HPCL August-14 13,633 33,029 2.2X IpcaLaboratories May-2018 9,239 21,112 2.3X 46% 25% 18% 16% 16%
Alkem Laboratories
August-16 19,847 28,290 1.4X 9%
Mahanagar Gas
August-16 5,061 10,398 2.1X 20% Indian Opportunity Porolio Strategy
* As on 30th June 2020 The given stocks are part of portfolio of a model client of respective PMS Strategies. The Stocks mentioned above are used to explain the concept and are for illustration purpose only and should not be used for development or implementation of an investment strategy. The stocks forming part of the existing portfolio of PMS Strategies may or may not be bought for new clients of PMS Strategies. It shall not be considered as an advice, an offer to sell/purchase or as an invitation or solicitation to do so for any securities. Past performance may or may not be sustained in future. Motilal Oswal AMC does not provide any guarantee/ assurance any minimum or maximum returns
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Fund Manager
17 Manish has been managing the Strategy since inception and also serves as the Director of the Motilal Oswal India Fund, Mauritius. He has over 25 years of experience in equity research and fund management, with
- ver 14 years with Motilal Oswal PMS.
He has been the guiding pillar in the PMS investment process and has been managing various PMS strategies and AIFs at MOAMC. Manish holds various post graduate degrees including an MBA in Finance, FCA, Company Secretaryship (CS) and Cost & Works Accountancy (CWA). Manish Sonthalia
Fund Manager
Atul Mehra Atul has over 11 years of experience in equity research and fund management specializing in mid and small cap space, with over 5 years with Motilal Oswal Group. Before joining Motilal Oswal, he was associated with Edelweiss Capital. Atul is a Chartered Financial Analyst (CFA) from CFA Institute, USA and a Masters in Commerce.
Associate Fund Manager
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Disclaimer: This presentation has been prepared and issued on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this document is for general purposes only and not a complete disclosure of every material fact and terms and conditions. The information / data herein alone is not sufficient and shouldn’t be used for the development or implementation of an investment strategy. It should not be construed as investment advice to any party. All opinions, figures, charts/graphs, estimates and data included in this presentation are as on date and are subject to change without notice. While utmost care has been exercised while preparing this document, Motilal Oswal Asset Management Company Limited does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. The statements contained herein may include statements of future expectations and other forward-looking statements that are based on our current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Readers shall be fully responsible /liable for any decision taken on the basis of this presentation. No part of this document may be duplicated in whole or in part in any form and/or redistributed without prior written consent of the Motilal Oswal Asset Management Company Limited. Readers should before investing in the Strategy make their own investigation and seek appropriate professional
- advice. Investments in Securities are subject to market and other risks and there is no assurance or guarantee that the objectives of any of the strategies of the Portfolio Management Services
will be achieved. Clients under Portfolio Management Services are not being offered any guaranteed/assured returns. Past performance of the Portfolio Manager does not indicate the future performance of any of the strategies. The name of the Strategies do not in any manner indicate their prospects or return. The strategy may not be suited to all categories of investors. The material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Neither Motilal Oswal Asset Management Company Ltd. (MOAMC), nor any person connected with it, accepts any liability arising from the use of this material. The recipient of this material should rely on their investigations and take their own professional advice. Opinions, if any, expressed are our opinions as of the date of appearing on this material only. While we endeavor to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. The Portfolio Manager is not responsible for any loss or shortfall resulting from the operation of the strategy. Recipient shall understand that the aforementioned statements cannot disclose all the risks and characteristics. The recipient is requested to take into consideration all the risk factors including their financial condition, suitability to risk return, etc. and take professional advice before investing. As with any investment in securities, the Value of the portfolio under management may go up or down depending on the various factors and forces affecting the capital market. Disclosure Document shall be
- btained and read carefully before executing the PMS agreement. Prospective investors and others are cautioned that any forward - looking statements are not predictions and may be
subject to change without notice. For tax consequences, each investor is advised to consult his / her own professional tax advisor. 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 without ’MOAMCs prior written consent. Distribution Restrictions – 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 inform themselves about and observe any such restrictions. Recipients shall be solely liable for any liability incurred by them in this regard and will indemnify MOAMC for any liability it may incur in this respect.
Custodian: IL&FS Securities Services Ltd | Auditor: Aneel Lasod & Associates | Depository: Central Depositary Services Ltd Portfolio Manager: Motilal Oswal Asset Management Company Ltd. (MOAMC) | SEBI Registration No. : INP 000000670
THINK EQUITY THINK MOTILAL OSWAL
For any PMS queries please call us on +91 81086 22222 / 022-4054 8002 (press 2 for PMS)
- r write to pmsquery@motilaloswal.com or visit www.motilaloswalmf.com