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8/8/2019 HDFCPMS Presentation May2010
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Portfolio Manager: HDFC Asset Management Company Limited
HDFC Portfolio Management Services
8/8/2019 HDFCPMS Presentation May2010
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Portfolio Manager: HDFC Asset Management Company Limited
Namaste India
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Portfolio Manager: HDFC Asset Management Company Limited
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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Portfolio Manager: HDFC Asset Management Company Limited
India Economic Prospects
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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Portfolio Manager: HDFC Asset Management Company Limited
India Economic Prospects
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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Portfolio Manager: HDFC Asset Management Company Limited
India Economic Prospects
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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Portfolio Manager: HDFC Asset Management Company Limited
India Economic Prospects
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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Portfolio Manager: HDFC Asset Management Company Limited
India Economic Prospects
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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Portfolio Manager: HDFC Asset Management Company Limited
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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Portfolio Manager: HDFC Asset Management Company Limited
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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Portfolio Manager: HDFC Asset Management Company Limited
HDFC Asset Management Company Limited
(HDFC AMC)
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Portfolio Manager: HDFC Asset Management Company Limited
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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Portfolio Manager: HDFC Asset Management Company Limited
HDFC Portfolio Management Services
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Portfolio Manager: HDFC Asset Management Company Limited
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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Portfolio Manager: HDFC Asset Management Company Limited
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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Portfolio Manager: HDFC Asset Management Company Limited
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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Portfolio Manager: HDFC Asset Management Company Limited
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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Portfolio Manager: HDFC Asset Management Company Limited
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 Manager: HDFC Asset Management Company Limited
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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Portfolio Manager: HDFC Asset Management Company Limited
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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Portfolio Manager: HDFC Asset Management Company Limited
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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Portfolio Manager: HDFC Asset Management Company Limited
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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Portfolio Manager: HDFC Asset Management Company Limited
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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Portfolio Manager: HDFC Asset Management Company Limited
Thank You
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