HDFCPMS Presentation May2010

8/8/2019 HDFCPMS Presentation May2010

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Portfolio Manager: HDFC Asset Management Company Limited

HDFC Portfolio Management Services


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Namaste India


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India Economic Prospects

Accelerating GDP Growth

Decadal GDP Growth Rate has been rising sincethe 50s, currently over 7%.

Young India51% of the Indian population is below 25 years of age

By 2015, the net addition to the productive population

(25-44 years) will be 90m, 1/3rd of USAs current

population or five new Australia's

Source: Govt. of India - Economic Survey

Source: UN, IMF, World Bank Morgan Stanley Research


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0% 20% 40% 60% 80% 100

India

Thailand

Malaysia

Taiwan

Korea

Japan

USA

Household Debt as % of GDP

Rising Household Income Low Household Debt


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Source ML & CLSA

Strong consumption growth prospectsPer Capita consumption (US$) India China Indoneasia Brazil Germany USA

Oral care 0.6 1.4 1.5 10.0 18.5 18.9

Tea 0.8 0.4 2.4 1.0 11.9 5.5

Detergents 1.4 2.2 1.9 12.1 16.6 22.9

Shampoo 0.3 1.0 1.0 6.0 7.5 6.7

Skin care 0.3 3.2 0.8 12.2 36.6 26.9

Car Penetration (per '000 people)

8

1 1

8 6

1 0 1

1 2 0

1 8 8

2 0 0

4 3 8

4 5 6

5 0 0

5 1 9

0 1 0 0 2 0 0 3 0 0 4 0 0 5 0 0 6 0 0

I n d i a

C h i n a

B r a z i l

S o u t h A f r ic a

M e x i c o

S o u t h K o r e a

M a l a y s i a

J a p a n

U S A

U K

G e r m a n y

8

1 1

8 6

1 0 1

1 2 0

1 8 8

2 0 0

4 3 8

4 5 6

5 0 0

5 1 9

0 1 0 0 2 0 0 3 0 0 4 0 0 5 0 0 6 0 0

I n d i a

C h i n a

B r a z i l

S o u t h A f r ic a

M e x i c o

S o u t h K o r e a

M a l a y s i a

J a p a n

U S A

U K

G e r m a n y


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Low per capital Cement

consumption

Low per capital Energy

consumption

Cem ent consumpt ion per cap i ta (Kg)

-20 040 060 080 0

1,0001,2001,400

South

Korea

Spain

Saudi

Arabia

Itlay

China

Malaysia

Japan

Iran

Turkey

USA

Thailand

Egyp

t

France

Germany

Vietnam

Mexico

Russia

Brazil

Indoneasia

India

(Kg)

KWhr per capita

8,795

1,841 1,684 2,043 2,227

618 478

2,701

-

2,000

4,000

6,000

8,000

10,000

OECD

Countries

Middle

East

China Latin

America

Asia India A frica World

Average

Consumption of Electric Energy per Capita

Ta iw anT h a i

S ing

Ph i l

M a l

K o re a

I ndo

I nd i a

H K

C hin a

0

20

40

60

80

1 00

1 20

1 40

1 60

- 5 ,0 0 0

1 0 ,0 0 0 1 5 ,0 0 0 2 0 ,0 00 2 5 ,0 0 0 3 0 ,0 0 0 3 5 ,0 0 0

M o b i l e p e n e t r a t i o n (% )

G D P p e r c a p i ta

Low mobile penetration to GDP

Large Investment needs

Source: CLSA


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Robust Banking System- ROEs around 16%

- Capital Adequacy levels are healthy as per Basel IInorms (12-14% for most banks)

- Negligible exposure to toxic assets due todomestic focus

- Gross NPAs including restructured assets isaround 5%; Net NPAs ~1%

Robust Stock Markets

- 100% paperless transactions (demat), T+2 settlement system

- Average daily turnover of USD 20bn

- Average commissions in cash markets of 10bps and 3bps in F&O

- Around 150 stocks in which futures and options are available

- FIIs own more than 15% of Indias market capitalization. Domestic institutions hold around 11%

Source:: BSE, NSE websites, Internal Estimates

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

800.0

900.0

FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

Deposits ($bn) Bank credit ($bn) % credit growth yoy % deposit growth yoy


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Share of

WorldRank

Total Cereals 11.1 Third

Wheat 11.7 Second

Rice (Paddy) 22.3 Second

Total Pulses 21.2 First

Ground Nut 17.1 Second

Vegetables & Melons 9.7 Second

Fruits excluding Melons 10.5 SecondPotatoes 8.1 Third

Onion (Dry) 10.6 Second

Bauxite Iron Ore Coal Zinc

Indian Reserves(MT) 3,290 25,000 92,000 28

World Reserves(MT) 32000 370,000 909,000 490

Indian reserves as a % of global reserves 10% 7% 10% 3%

Global Rank 6th 4th 4th 6th

Production 2010(MT) E 18 200 510 1

Mine life@2006 Production in years 183 125 180 28

Details of existing Natural Resources of India

Source: NIC

Rich Natural Resources

India is amongst the lowest costproducer of metals- esp. Zinc, Iron andAluminum

India is the second largest producer of

wheat, rice, groundnut and onions and

the largest producer of pulses


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Impact of global slowdown on Indian

economy

Fall in Commodity prices benefits India

FY09 Exports composition (USD 200bn) FY09 Imports composition (USD 268bn)

Source: CITI, N.A.

Other

Commodities

3%

Net Oil

Imports

26%

Chemicals &

related

products11%

Textiles (

incl. RMG)

1%

Food &

related items

2%

Pearls

precious &Semi prec.

Stones

5%

Gold &Silver

7%

Capital

Goods

18%

Other non -

POL items

27%

Leather &

Leather Manf.

2%

Other

Commodities

4%

Ores &

Minerals

4%

Agriculture &

Allied prd

9%

Softw are22%

Othermanufactured

goods

4%

Gems &

Jew llery

14%

Readymade

Garments

5%

Textiles5%

Engineering

Goods

22%

Chemicals &

related prd

9%


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Economic Growth Outlook

FY08-09, 09-10 are years of a relatively moderate growth (GDP

growth of 6.7% & 7.2% respectively) on account of impact of

global slowdown (although moderated by Govt. fiscal stimulus)

Economic growth should accelerate from FY10-11 onwards

Exports should stop de-growing

Roads/Power to see unprecedented investmentsPower: 50,000 MW of capacity to be commissioned by FY 2012 on a baseof 150,000 MW

Roads: USD 20bn worth projects to be awarded by June 2010

Consumption is growing at a steady pace


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HDFC Asset Management Company Limited

(HDFC AMC)


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HDFC Asset Management Company Limited

40%

60%

40% owned by Standard Life

Investments Ltd (An Investment

Management Company under Standard Life Plc.)

-The Standard Life Group wasestablished in 1825 and has

considerable experience in globalfinancial markets.

60% owned by HDFC Ltd.

HDFC is one of the most respected

financial services group in India

CRISIL Fund House Level - 1 Rating*

This is its highest Fund Governance and Process Quality Rating. The

rating reflects the highest governance levels and fund management

practices at HDFC AMC.

*Past performance is no guarantee of future results. Please refer Rating Methodology & Disclaimer

for the Rating.


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HDFC Portfolio Management Services


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Investment Philosophy

Wealth

Creation

Invest in companies that have a strong

competitive advantage over their peers

Buy high quality companies at reasonable prices &

reasonably attractive companies at below-averageprices.

Stress on analysis of

individual companies

and not on

predicting movement

of stock marketindices

Invest when prices

are

Attractive


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Investment Principles

Minimize Capital Losses

Invest for the long term

Focus on identifying strong

investment companies

Greater emphasis on

price of purchase

Ignore short term

volatility

Low levels of trading

activity


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Investment Process

dfjsldfjAdding value through active management

Robust investment process

Investment Discipline

Long term focus, but understand short term drivers

Risk Management

Team approach, coupled with talented individuals


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Qualities we look for in a company

Proven track record

Competent and honest management

Strong presence in its own industry (preferably No.1 or No.2)

Strong efficiency indicators such as higher sales/capital, improvingROCE etc.

Free Cash Flow generation

Proven ability of management to successfully introduce new products

Strong balance sheet

Significant competitive advantage that would make it difficult for itspeers to dislodge the company

Good prospects over the next few years

Price that affords a reasonable margin of safety


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When do we Sell?

Price has gone beyond what is warranted by fundamentals

Fundamentals of the business have deteriorated/Originalassumptions with which the stock was purchased are no longer

valid

Another stock with similar characteristics but with more

attractive valuations has appeared on the horizon

Another stock with similar or better valuations but with moreattractive fundamentals has appeared on the horizon

Reducing exposure in a stock


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Portfolio Characteristics

Exposure limits under normal circumstances

To a single stock 1.5% to 15%

To a sector / industry 30%

Portfolio will consist of four un-correlated sectors.

A portfolio of approx. 15 to 20 high quality stocks

Rigorous company analysis guided by fundamentals of the stock

Growth available at reasonable valuation

Discounted asset value compared to enterprise value


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Disclosures on www.hdfcfund.com*

Detailed Portfolio on weekly basis

Value of the portfolio on daily basis

Other reports P&L, Balance Sheet, Capital GainsStatement, etc.

* Please note that information on the website is restricted to existing clients of HDFC Portfolio Management Services


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Minimum Funds & Fees Payable

Minimum Funds Rs.25 Lacs

Portfolio Management Fee

2.75% p.a.* of daily average assets under managementOR

1.75% p.a* of daily average assets under management plus

20% of gains in excess of 10% per annum

Exit Fees:

- Upto 12 months 3%

- More than 12 months and upto 24 months 2%

- More than 24 months Nil

* Plus Applicable Service Tax


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Purpose of Client Documentation

PMS Client Registration Form- to Know your Customer

Execution of Discretionary Portfolio Management Services Agreement for availing of HDFC PMS

Bank and Depository Account opening forms to open separate andindividual bank and depository accounts for each client

Power of Attorney to be issued by client in favour of HDFC AMC tooperate the bank and depository accounts on behalf of the client

Disclosure Document to understand HDFC AMC as PortfolioManager and its services


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Risk Factors

Securities investments are subject to market risks and there can be noassurance or guarantee that the objectives will be achieved

Investment in securities, the value of the portfolio under managementmay go up or down depending upon various factors and forces affectingthe capital markets

Investors in PMS are not being offered any guaranteed / assured returns

Each client is advised to consult his / her own Financial Advisor /

professional tax advisors before availing of PMS


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Thank You

Documents

HDFCPMS Presentation May2010