AcePro Advisors Pvt. Ltd. · Following factors have contributed to current correction in market: Crude Price Global fund flows Financial sector developments post IL&FS event The rise

AcePro Advisors Pvt. Ltd.

AcePro C3B Strategy(Consumption Theme)

Asset Management 2018

C3B Strategy

Private and Confidential 2

nBasic consumption (including rural)

nB2C (Business to consumer)

nBrand

Consumption theme with the focus on

Presentation Flow


About Us

Current Market Status

Data Points

Rural Growth

Ideal Consumption Business

Product Contours

Investment Approach

About Us


AcePro Advisors Pvt Ltd. is a subsidiary of Sarthi

Capital Advisors Pvt Ltd., a part of Sarthi Group.

Sarthi is committed to deliver exceptional

client service with operations in six service

lines- Investment Banking, Merchant Banking,

Compliance Management, Advisory services,

Asset Management and NBFC with prime

business focus on SME segment. Sarthi

provides solutions across geographies to a

wide range of clients enabling them to meet

their business, regulatory and financing

objectives.

qPromoted by senior Financial Services Proffessionals,

qManaged over 50 IPOs on SME and Main board Exchanges,

qClosed multiple M&A transactions

qHave received Top of the League industry awards by NSE/BSE/CNBC

Investment Advisory Board


Deepak Sharma, B.Com (Hons.), CWAOver 2 decades of experience in various Financial Service domains at organizations like IL&FS and TATAs; and has been recognized for his professional services on various national platforms including CNBC

Mohit Sachdev, IIT-Delhi, IIM Bangalore Over 25 years of experience in financial services, including capital markets, corporate finance and asset management. Previous stints were with Canbank, IL&FS, L&T & Srei Infra at senior levels

Ashish Shah, BE (Mechanical)Mr. Ashish is a wellspring of knowledge with more than 25 years of rich experience in finance & investment management. He is the Founder & Managing Director of Wealth First Portfolio Managers Ltd

Iqbal Singh B.E , MBA, CFA(Domestic) CFA level 2 CandidateAn entrepreneur with rich experience of 20 years with leading Private & Foreign Banks. He is the Founder

& Managing Director, Innovative Financial Management Private Limited. He is on the Advisory Board of

first SBI AIF Fund(PIPE).

Fund Management


Kunj B. Bansal, Director & Chief Investment Officer

nSenior investment professional with around 25 years of experience in financial markets

nHas seen multiple cycles in the market and managed money across different formats

such as Mutual Funds, Offshore Funds and PMS

nStarted his career as a Research Analyst at Unit Trust of India (UTI) which was India’s

biggest mutual fund at that time

nSubsequently, he worked with the biggest and best names in the financial services

industry such as Reliance Mutual Fund, Kotak and Sanlam (a South African group) –

managed money up to Rs50 bn in these assignments

nWas awarded Best Fund Manager award by Business Today magazine early in his

career

nHe writes for various magazines and newspapers and his valued opinion is sought by

various news/business channels. He has been a Speaker in various seminars &

conferences

Research Team


Bharat Agarwal- Senior Research Analyst

nEducation- B.tech (IIT BHU), MBA ( IIFT Delhi), CFA Level 3, FRM Part 2

nWorked with Edelweiss Financial Services where he assisted his clients with hedging and trade financing solutions

Bhaskar Maheshwari- Research Analyst

nEducation- B.tech ( NIT Raipur), MBA ( IIM Shillong), CFA Level 3 candidate

nWorked previously with companies like Tata Steel and HZL

Sonali Patwa- Junior Research Analyst

nEducation- BAF, MBA-Finance

nOver 2 years of experience in Financial domain at companies like VNS Finance and Capital Services Ltd. & has been awarded for her services.

Investment Process


1) Idea Generation:

• Macro Trends

• Policy Changes

• Internal research

• News flow2) Initial Analysis:

• Industry analysis

• Annual reports

• Other available information

• Expected future numbers

3) Management Discussion:

• Industry prospects

• Thought process

• Softer issues and future plans

4) Follow up Analysis:

• Detailed Financial Modeling

• Valuation

• Peer comparison

• Final decision

5) Portfolio Action:

• Product suitability check

• Stock weight

• Sector weight

6) Portfolio Monitoring & Review:

• Performance

• Attribution analysis

• Back to step 1

Process Stages


All Listed Stocks

(#2000)

Investable Universe (#500)

Researchable Universe

(#250)

Detailed Research List

(#150)

1) Buy List;

2) Watch List

(#100)

Final Portfolio (#10-20)

Liquidity and market cap criteria

Qualitative and quantitative Criteria

Sector criteria

In-depth Research; Stock research meeting


Current Market Status

5 Year Return


80.00

134.00

188.00

242.00

296.00

350.00

137%, S&P BSE Midcap

63%, S&P BSE SENSEX

138% ,S&P BSE Smallcap

Recent Market Correction


75.00

80.00

85.00

90.00

95.00

100.00

105.00

-18.6%, S&P BSE Smallcap

-14.5%, S&P BSE Midcap

-12.4%, S&P BSE SENSEX

Reason for Market Correction


Equity as an asset class witnesses volatility in its journey of long term wealth creation. Following factors have contributed to current correction in market:

Crude Price

Global fund flows

Financial sector developments post IL&FS event

The rise in crude price will increase the import burden

thus affecting the current account deficit. Indian

currency has already witnessed sharp pressure due to

this. Companies dependent on crude derivatives for their

raw material requirement will see increased

manufacturing costs.

Indian market has been witnessing an outflow of global

funds. With US fed continuing its tightening monetary

policy, future fund flows will be a key monitorable

There has been a liquidity squeezee after the default by

IL&FS and the availability of money to NBFCs and HFCs

has reduced

Interest Rate

Spate of elections

Worsening Deficit/ Macroeconomic numbers

Trade War Impact

The increase in inflation has already resulted in interest

rates moving up which is likely to continue.

Developments related to assembly elections in states of

Rajasthan, Madhya Pradesh, Chhattisgarh and Mizoram

can have a sentimental impact on the market

Historically, governments are known to spend

aggressively ahead of general elections. This is likely to

put pressure on fiscal deficit.

The global trade war initiated by the US and followed by

other countries has created uncertainty and needs to be

monitored

Factors that may affect Capital Market in coming times


Following

factors are

likely to have

impact on

market

Assembly elections related sentimental developments

Followed by general elections

Commodity prices including crude

Downward rating of corporate earnings

Global Uncertainty (US-China trade war)

International funds flow

Liquidity squeeze in domestic market

Generally embedded risks of A Government Change


Investment / Infrastructure

nGovernments have a major

role to play towards the

infrastructure and investment

policies for economic growth,

development of country,

social infrastructure, Public

utilities and social welfare

nThese are the policies that

change in a significant way

f r o m g o v e r n m e n t t o

government


Consumption

nSince government generally do

not have greater say in the

consumption habits of the

people, consumption patterns

don’t get affected much by

government change

nConsumption patterns get

affected by technology changes,

innovative products and services,

rising expectation of people and

i t s f u l f i l m e nt , d e s i re fo r

availability of best global products

What doesn't get affected by Government change


Data Points

% Contribution to Total GDP


57.2

56.0

56.2

56.5

57.6

58.1

58.8

59.0 59.1

31.7

30.9

34.3

33.4

31.3

30.1

28.5 28.5 28.5

20.0

22.0

24.0

26.0

28.0

30.0

32.0

34.0

36.0

55.0

55.5

56.0

56.5

57.0

57.5

58.0

58.5

59.0

59.5

FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18

GFC

F, (

%)

PFC

E,

(%

)

Private Final Consumption Expenditure

Gross Final Capital Formation

Sustainability of Consumption Growth


Consumption is likely to continue to grow for following

reasons

Inherent demand of 1.3

billion population

Rise in living standard

Increasing disposable

income

Increasing awareness

(health, hygiene,

education)

Government's rural

supportive schemes

Availability of latest global

products

Market Size


204 238 278 321 368424

518 490 534600 641

795

1200

1750

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2000 2002 2004 2006 2008 2010 2012 2013 2014 2015 2016 2017E 2021F 2026F

Retail market size ($ billion)

8.6%

1824

3600

0

500

1000

1500

2000

2500

3000

3500

4000

2017 2020F

Consumption Expenditure in India ($billion)

FMCG Growth


9.0% 9.4%

5.5%7.6%

12.5% 12.8%

20.9%

15.1%

11.6%13.5% 12.7%

6.6% 7.2%

2.8%

6.0%

10.3%11.9%

19.4%

12.5%

9.3% 10.0% 9.2%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19

FMCG Growth Rural Vs Urban

Rural Urban

10.59.6

15.1

7.7 7.9

12.6

8.7 8.5

13.5

0

2

4

6

8

10

12

14

16

2016 2017 2018

FMCG sector growth by Value (%)

rural urban total

8.2

6.1

9.7

5.4 5.7

8.6

6.55.9

9.1

0

2

4

6

8

10

12

2016 2017 2018

FMCG sector growth by Volume (%)

Rural Urban Total

Room AC Volume


1.11.3

1.5

1.9 2

2.5

3.3

2.92.7 2.8

3.5

4

5.2

5.8

6.7

7.7

0

1

2

3

4

5

6

7

8

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20E

Room AC Volume (million units)

13.9%

2.5

3.8

5

12.4

0

2

4

6

8

10

12

14

2005 2011 2016 2026E

(%)

Indian AC penetration, (%)

White Goods


3.84.1

4.55

5.76.3

7.2

8.3

0

1

2

3

4

5

6

7

8

9

FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20E

Washing Machine Volume (million units)

11.8%

9.89.5

11.1

9.6

10.6 10.7

11.4

12

12.6

13.6

6

8

10

12

14

FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20E

Refrigerator market (million units)

3.7%

Passenger Data


153.8

343.1

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

CY14 CY15 2016 2017 2018

Domestic Airlines (lakhs)

20.4%

6524

6920

7246

7651

82248421 8397

82248107 8116

4000

5000

6000

7000

8000

9000

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Indian Railways (million)

Online Transactions


846.3

951.3

898.0933.0

996.5

1058.9

1194.6 1206.2

600.0

700.0

800.0

900.0

1000.0

1100.0

1200.0

1300.0

Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18

Total Telecom Subscribers (million)

2369.6

2962.1

3749.1

7383.7

8909.8

7150.0

0.0

1000.0

2000.0

3000.0

4000.0

5000.0

6000.0

7000.0

8000.0

9000.0

10000.0

2013 2014 2015 2016 2017 2018*

POS Transactions Value (Rs. Billion)

Primary Production


20183.8

21306.8

22504.1

23337.2

23977.5

18000

19000

20000

21000

22000

23000

24000

25000

2013 2014 2015 2016 2017

Dairy Market Volume( Million Kgs)

992.8

1007.9

965.9

1015.4

1027.4

930

940

950

960

970

980

990

1000

1010

1020

1030

1040

2013 2014 2015 2016 2017

Agricultural Produce (Million tonnes)

Vehicle Sales


138.0

148.1

159.8164.6

175.9

201.9

100.0

120.0

140.0

160.0

180.0

200.0

220.0

2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

Two Wheelers (Lakh Units)

7.9

6.36.1

6.9

7.1

8.6

5.0

6.0

7.0

8.0

9.0

2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

Commercial Vehicles (Lakh units)

26.7

25.026.0

27.9

30.5

32.9

20.0

22.0

24.0

26.0

28.0

30.0

32.0

34.0

2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

Passenger Vehicles (Lakh Units)

5.4

4.8

5.3 5.45.1

6.4

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

Three Wheelers (Lakh Units)


Rural Growth

Rural Consumption


nAccounting for a revenue share of around 55%, urban segment is the largest contributor to the overall revenue generated by the FMCG sector in India

nRural segment is growing at a rapid pace and accounted for a revenue share of 45% in the overall revenues recorded by FMCG sector in India. FMCG products account for 50% of totalrural spending

nIn the last few years, the FMCG market has grown at a faster pace in rural India compared with urban India. In 2018-19, revenues from rural segment are expected to grow 15-16% outpacing

nDemand for quality goods and services has been going up in rural areas of India on the back of improved distribution channels of manufacturing and FMCG companies

nFMCG urban segment is expected to have a steady revenue growth at 8% in FY19

Rural Economy


11.112.5 12.9

10.3

14.215.8

13.915.2

16.9

0

2

4

6

8

10

12

14

16

18

20


Allotment to rural and (As a % of total capital outlay)

agri spending by states

Rural Development Agriculture & allied services

141.77 139.39157.35 160.8

140.71 132.71

259.46245.04

369.25

0

50

100

150

200

250

300

350

400


GDP of agriculture, forestry and fishing sector, at current prices, ($ billion)

12.71%

27533387

41574806

54665899

6660

7659

8826

9909 10216

0

2000

4000

6000

8000

10000

12000

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18

Sectoral Bank Credit Agriculture & Allied Activities (Rs. Billion)

1875

2167

2667

3229

0

500

1000

1500

2000

2500

3000

3500

2010 2015 2020 2025

Real disposable household incomein rural India ($)

3.6%

Consumption Oriented Government Policies


Direct benefit transfer

Pradhan Mantri Awas

Yojna

MSP hike Ujwala Yojna

Rural electrification

Ayushman Bharat Yojna

Nirmal Bharat Abhiyan

Government Initiatives


nThe Government of India has planned

various initiatives to provide and improve

the infrastructure in rural areas which can

have a multiplier effect in increasing

movements of goods, services and thereby

improve earnings potential of rural areas

subsequently improving consumption.

nThe Government of India has approved the

proposal to construct 10 million houses for

the rural population, which will require an

investment outlay of Rs 81,975 crore (US$

12.7 billion) for the period from 2016-17 to

2018-19.

nThe Government of India aims to provide tap

water regularly to every household by 2030

in line with United Nations Sustainable

Development Goals, requiring a funding of

Rs 23,000 crore (US$ 3.57 billion) each year

until the target is met.

Rural Micro


282.2

330.8349.2

377.7

419.3

449.2

501.6524.6

150.0

200.0

250.0

300.0

350.0

400.0

450.0

500.0

550.0

Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18

Rural Telecom Subscribers (million)

9.3%

3.1 3.23.1

2.42.5 2.4

3.02.8

3.63.5

4.1

2.0

2.5

3.0

3.5

4.0

4.5

H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1

FY14 FY15 FY16 FY17 FY18 FY19

Tractor sales (in lakhs)

25824

42398

20000

25000

30000

35000

40000

45000

No. of Rural ATMs

3.34

0

1

2

3

4

5

6

7

8

9

Rural Inflation, (%)


Ideal Consumption Business

Factors for a Successful Consumption Business


Customer faith (led by

product quality)

Successful Business

How should the financials of a Good Consumption Business be!


Increasing sales

growth (leading to

market share gain)

At Better than

industry margins

With tight working capital

Leading to good

profitability

Resulting into high

return ratios

Along with net

positive cash flows


Product Contours

AcePro C3B Strategy


• Max no of stocks – 20

• Theme – ConsumptionPortfolio Constituents

• Market cap agnostic but not less than Rs. 1000 CrCapitalization Bias

• Companies with strong fundamental, proven track record and with high growth potentialStock Selection

• Consumption theme with the focus on basic consumption, B2C businesses and brand, with an exposure to higher growth rural market Sector Allocation

• Investments will be made in phases over the next few months to average out the market volatilityStaggered Investment

• Investors with moderate to high risk appetite and a horizon of 3-5 years Client Suitability

• Sector exposure limit – nil

• Stock Exposure limit – 10% Stock/ Sector exposure


Investment Approach

Investment Philosophy


ValueInvesting-difficult to

find

EfficientMarkets

Value TrapNon

fundamental factors driven

valuation

Financials

Good

Bad

Cheap Mature

Valuation

Space- where we invest

Growth at reasonable price

lGrowth

lValue

lQuality

Corporate Headquarters:

Mumbaith401, 4 Floor, Manek Plaza,

167, Vidyanagri Marg, Kalina,

Santacruz (E), Mumbai-400098

Landline: (022) 26528671-72,

Fax: (022) 26528673

Regional Office:

New Delhi

411, Pratap Bhawan,

5 Bahadurshah Zafar Marg,

New Delhi - 110002

Landline: (011) 23739426 – 27

Fax: (011) 23739424

Chandigarh

SCO, 151-152, 1st Floor,

Sector-9

Chandigarh - 160009

Landline: 0172-4243333

AcePro ADVISORS PRIVATE LIMITED

A Sarthi Group Enterprise

Documents

AcePro Advisors Pvt. Ltd. · Following factors have contributed to current correction in market: Crude Price Global fund flows Financial sector developments post IL&FS event The rise