Sources: Oxford Economics, Datastream.

Will India’s growth rebound?

Real GDP, projection after 2012

2

3

4

5

6

7

8

9

10

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Percent change, year ago

Sources: Oxford Economics, Datastream, Milken Institute.

Share of services in GDP has been increasing

Constant prices

10

20

30

40

50

60

1980 1984 1988 1992 1996 2000 2004 2008 2012

Percent

Services

Industry

Agriculture

Sources: Government of India, Datastream.

India’s international trade

Current prices, not seasonally adjusted

0

100

200

300

400

500

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

US$ billions

Th

ou

san

ds

Imports

Exports

Source: United Nations.

India has much less of an aging problem

Share of population, 65+

0

4

8

12

16

1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012

Percent

U.S.

India

13.6% in 2012

5.1% in 2012

Sources: United Nations, Milken Institute.

There will be more youngsters in India

Share of population, 25 years old or younger

20

30

40

50

60

70

1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Percent

India

China

U.S.

Source: OECD.

India and China make waves in the global middle class

Share of global middle-class consumption, 2000-2050

Sources: Government of India, Datastream, Milken Institute.

India’s oil imports pick up

Share of oil in total imports

15

20

25

30

35

40

45

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Percent

Source: Thomson Reuters.

Indian rupee has weakened against US Dollar

35

40

45

50

55

60

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Indian rupee per US$

Sources: Reserve Bank of India, Datastream.

India' s current account deficit hits record high

Current prices, not seasonally adjusted, 2000 Q1–2012 Q4

-35

-30

-25

-20

-15

-10

-5

0

5

10

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

US$ billions

Th

ou

san

ds

Sources: Oxford Economics, Datastream, Milken Institute.

India’s exports of goods and services

Current prices, 1990-2012

15

20

25

30

35

40

0

50

100

150

200

250

300

350

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

US$ billions

Th

ou

sa

nd

s Services (left axis) Goods (left axis)

Share of services (right axis)

Percent

0

2

4

6

8

10

12

14

0

20

40

60

80

100

120

140

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Millions

Mil

lio

ns

Internet users (left axis) Internet penetration (right axis)

Percent

India is undergoing an Internet boom

Sources: World Bank, McKinsey.

6,000

9,000

12,000

15,000

18,000

21,000

24,000

Ap

r-0

8

Oct-

08

Ap

r-0

9

Oct-

09

Ap

r-1

0

Sep

-10

Mar-

11

Sep

-11

Mar-

12

Au

g-1

2

Feb

-13

0.015

0.016

0.017

0.018

0.019

0.020

0.021

0.022

0.023

0.024

Ap

r-1

1

May

-11

Jul-

11

Sep

-11

No

v-1

1

Jan

-12

Mar-

12

Ap

r-1

2

Jun

-12

Au

g-1

2

Oct-

12

Dec-1

2

Feb

-13

Mar-

13

India Macro Environment High degree of uncertainty

Over the last two years, the BSE Sensex has not appreciated much, though there have been intermediate periods of volatility

However, India underperformed on several economic metrics; Over the last 2 years, the INR has declined by 18% against the

USD

5-Year BSE Sensex

INR

-US

D R

ate

INR-USD Exchange Rate (Apr’11-Apr’13)

Source: CapitalIQ Source: CapitalIQ

India Macro Environment Stressed balance sheets

Global and local uncertainties have resulted in tripling of debt being restructured through Corporate Debt Restructuring (CDR)

Cases referred to CDR ($ billion)

Source: CDR Cell; year ending March 31st

$1.9$4.3 $4.9

$15.8

FY09 FY10 FY11 FY12

Indian companies face an increasing wall of foreign currency debt maturities

FCCBs and ECBs due for redemption/repayment ($ billion)

Source: RBI, Kotak Institutional Equities. Year ending March 31st

$18.1

$11.6

$15.3

$6.2

FY12 FY13 FY14 FY15

India Macro Environment Increased leverage levels

There is a high degree of leverage in Indian companies; and leverage levels have increased markedly over the last two years

Total Debt based on Debt/EBITDA of a sample of 1,050 companies

Source: CapitalIQ. Note: Companies listed on the BSE with market cap. greater than $1 million; excludes banks and financial institutions, companies with negative EBITDA, LFY numbers for Debt and EBITDA.

5x-8x

$69 billion

0x-5x

$125 billion

8x+

$42 billion

FY10

Total stressed

debt of $110 bn

FY11

Total stressed

debt of $135 bn

5x-8x

$55 billion

0x-5x

$169 billion

8x+

$80 billion

FY12

Total stressed

debt of $187 bn

5x-8x

$82 billion

0x-5x

$184 billion

8x+

$105 billion

India Macro Environment

India will grow. Whether growth is 5% or 6% or more, India’s fundamentals

portend growth.

Buying great companies in an environment that will grow is more compelling

than buying companies in stagnant or declining environments.

Not paying upfront for that growth is crucial.

Being a contrarian and buying at very low multiples (eg. 4-6x EBITDA) during

this “pause” in India’s momentum is a fundamentally intelligent proposition.

Source: GTC

The Government is beginning to move in the right direction

Government has initiated policy reform and administrative measures to boost the economy

Policy & administrative measures implemented recently Policy measures in the pipeline

Allowing FDI in multi-brand retail Increasing FDI in insurance to 49%

Allowing FDI in civil aviation, broadcasting, exchanges Allowing 49% FDI in pension in India

Restructuring of loans to state power utilities & re-pricing of troubled fixed tariff power projects

Goods and Services tax

Increase in petrol and diesel prices and partial fuel price de-regulation

Setting up for national investment board for expediting clearance of infrastructure projects

Approval of fertilizer investment policy Improving efficiencies in targeting of subsidies through direct transfers and unique identification

Sugar Industry De-control to increase efficiency and reduce working capital of sugar mills

Decontrol of Gas pricing and new regime for energy exploration

Curbing of fiscal deficit: From expectations of 6% to ~5%.

Digitization of Cable TV systems

10.0%

11.0%

12.0%

13.0%

14.0%

15.0%

16.0%

17.0%

18.0%

50000

52000

54000

56000

58000

60000

62000

64000

66000

68000

70000

Ap

r-1

1M

ay-1

1Ju

n-1

1Ju

l-1

1Ju

l-1

1A

ug-

11

Sep

-11

Oct

-11

No

v-1

1D

ec-

11

Jan

-12

Feb

-12

Mar

-12

Ap

r-1

2M

ay-1

2Ju

n-1

2Ju

n-1

2Ju

l-1

2A

ug-

12

Sep

-12

Oct

-12

No

v-1

2D

ec-

12

Jan

-13

Feb

-13

Mar

-13

Despoits in INR Bn

Depsoit Growth YoY (RHS)

Pick up in Deposits

Source: GTC, Bloomberg

Interest rate cycle has peaked

Inflation and interest rates have peaked Financial savings : deposit growth is picking up

Indian household savings were $400bn in 2011, comparable to the savings of US households. Indian household investments in real estate and gold have driven more than $4.5 trillion of wealth creation.

7.50%

7.70%

7.90%

8.10%

8.30%

8.50%

8.70%

8.90%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Ap

r-1

0

Jun

-10

Au

g-1

0

Oct

-10

Dec

-10

Feb

-11

Ap

r-1

1

Jun

-11

Au

g-1

1

Oct

-11

Dec

-11

Feb

-12

Ap

r-1

2

Jun

-12

Au

g-1

2

Oct

-12

Dec

-12

Feb

-13

Headline Wholesale Inflation (yoy)

Core Inflation (yoy)

10 Year Rate (RHS)

Source: GTC, M&M, Credit Suisse

Rising Rural Incomes and Consumption ~70% of India lives in rural areas. Rising rural consumption and wages will

support Indian growth

Rural income growth has outpaced inflation and has created real demand

Rural incomes have been helped by rising food prices and rising wages due to food consumption growth, government schemes and improved productivity

Higher rural incomes are leading to increased demand for many agri - investment and consumption items. Companies have a structural opportunity to penetrate and serve a very underpenetrated rural market

100000

150000

200000

250000

300000

350000

400000

450000

500000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Annual Tractor Sales #Last 3 year CAGR: 20.7%

Source: GTC, RBI, Macquarie

Break up of Current Account Deficit Gold and Oil imports are mainly responsible for current account deficit

16 28

38 46

78

94

11 11 23

29 38

31

51

66 59 64

99

120

0

20

40

60

80

100

120

140

FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

Current Account Deficit ($ bn)

Gold Imports ($ bn)

Oil Imports ($ bn)

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

Gold Imports (% of GDP) Oil Imports (% of GDP)

CAD (% of GDP) CAD ex Oil and Gold (% of GDP)

50.4 39.7 39.2 47

2.1

5 16.2 25.7

9.6 23.5

17 26.2

0%

20%

40%

60%

80%

100%

FY 2010 FY 2011 FY 2012 FY 2013

ECB and Short Term Credit ($ bn) NRI Deposits and Banking Capital ($ bn) Foreign Investment ($ bn)

CAD getting financed by deposits, banking capital and foreign investment

| Nandita Agarwal Parker | Managing Partner| Karma Capital Management LLC |

Source: Euromonitor, BCG Analysis

India is going through a once-in-a-lifetime transformation Middle Class as a % of total Households

-Middle class contribution as a % of total HHs will rise from 28% to 45% by 2020. -An Indian kid will consume 13x their grandparents

Note: Distribution of classes based on annual income - Lower: < $15K, Middle: $15 - $45K, Upper: > $45K

# of HHs in millions # of HHs in millions

| Nandita Agarwal Parker | Managing Partner| Karma Capital Management LLC |

1. As a % of total households

Source: Indiastats, "Thinking blue sky" – Business Today, UN statistics.

Consumption patterns have undergone a sea of change in the last

few decades

| Nandita Agarwal Parker | Managing Partner| Karma Capital Management LLC |

Source: Internet World Stats 2010; Business Monitor International (BMI); International Telecommunication Union (ITU); McKinsey Digital Consumer Survey; Public Information; Pyramid Research

A better connected India

India’s projected 370 mn Internet users will form the 2nd largest Internet population by 2015

| Nandita Agarwal Parker | Managing Partner| Karma Capital Management LLC |

Source: WorldBank statistics, Bloomberg, TRAI

India’s productivity led growth - # of Telecom Subs

0

100

200

300

400

500

600

700

800

900

1000

0

500

1000

1500

2000

2500

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Tele

com

Su

bsc

rib

ers

(m

illio

ns)

Ind

ia G

DP

($

bill

ion

)

GDP (US$ bn) Telcom Subscribers (mn)

| Nandita Agarwal Parker | Managing Partner| Karma Capital Management LLC |

Source: WorldBank statistics, Bloomberg

India’s productivity led growth – # of internet users

0

20

40

60

80

100

120

140

160

0

500

1000

1500

2000

2500

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Inte

rne

t u

sers

(m

illio

ns)

Ind

ia G

DP

($

bill

ion

)

GDP (US$ bn) Internet users (mn)

Inflection point for Internet penetration

| Nandita Agarwal Parker | Managing Partner| Karma Capital Management LLC |

Source: Ministry Power, India

India’s productivity led growth - Electricity Consumption growth

Growth of per capita electricity consumption in India – 72% CAGR in the last two decades

…and Transmission lines have more than doubled during the same period

| Nandita Agarwal Parker | Managing Partner| Karma Capital Management LLC |