JPMorgan Indian Investment Trust plc AGM · JPMorgan Indian Investment Trust plc AGM February 2018 Rukhshad Shroff, CFA, Managing Director, ... Maruti Suzuki India Limited 2.97 232.47

JPMorgan Indian Investment Trust plc AGM

February 2018

Rukhshad Shroff, CFA, Managing Director, Emerging Markets and Asia Pacific Equities Team

Rajendra Nair, CFA, Managing Director, Emerging Markets and Asia Pacific Equities Team

1 |

Portfolio Performance and Positioning

2 |

Market value

JPMorgan Indian Investment Trust plc (Diluted) GBP 915.5m^

Performance

JPMorgan Indian Investment Trust plc as of 31st December 2017

Annualised performance (%)

Calendar year performance (%)

Three

months

Six

MonthsYTD

One

year

Three

years

Five

years

Since

Inception#

JPMorgan Indian Investment Trust plc 8.89 10.24 29.87 29.87 15.66 15.78 9.91

MSCI India (NDR)* 10.91 10.55 26.74 26.74 13.96 12.94 7.49

Excess return (Geometric) -1.81 -0.28 2.46 2.46 1.49 2.51 2.25

2011 2012 2013 2014 2015 2016 2017

JPMorgan Indian Investment Trust plc -32.29 18.92 -6.43 43.71 3.59 15.01 29.87

MSCI India (NDR)* -36.70 20.43 -5.62 31.57 -0.69 17.57 26.74

Excess return (Geometric) 6.96 -1.26 -0.86 9.22 4.31 -2.18 2.46

^JPM shadow valuation, # Inception: 1 Jul 1994 * Prior to 1 Oct 2003, BSE100 index

Source: J.P. Morgan Asset Management, MSCI, Thomson Reuters Datastream. Net asset value performance data has been calculated on a NAV to NAV (using the cum income

NAV with debt at fair) basis, including ongoing charges and any applicable fees, with any income reinvested, in GBP. Past performance is not a reliable indicator of current and

future results

3 |

Source: J.P. Morgan Asset Management. Past performance is not necessarily a reliable indicator of current and future performance.

Performance (GBP)


0

100

200

300

400

500

600

700

800

900

1000

07/94 07/96 07/98 07/00 07/02 07/04 07/06 07/08 07/10 07/12 07/14 07/16

NAV (Net of fees)

MSCI India (NDR) (Prior to 1 Oct 03, BSE100)

Share Price

4 |

Performance attribution

Source: J.P. Morgan Asset Management, MSCI, FactSet, gross of fees in GBP. Data for Total Attribution shown (stock selection plus sector allocation). Attribution may not match

official returns due to differences in systems, rounding. Past performance is not an indication of current and future performance. The trust is an actively managed portfolio, holdings,

sector weights, allocations and leverage, as applicable are subject to change at the discretion of the Investment Manager without notice. Past performance is not an indication of

current and future performance.

Top five contributors

Relative

weight (%)

Stock

return (%)

Impact

(%)

Motilal Oswal Financial Services Limited 2.11 179.58 1.91

Maruti Suzuki India Limited 3.31 79.35 1.30

IndusInd Bank Ltd. 6.15 45.00 1.03

HDFC Bank Limited 8.81 39.46 0.91

Jubilant Foodworks Limited 1.56 100.78 0.80

Top five detractors

Relative

weight (%)

Stock

return (%)

Impact

(%)

Reliance Industries Limited -7.11 66.49 -2.05

Hindustan Unilever Limited -2.61 63.28 -0.69

Multi Commodity Exchange of India

Limited1.04 -29.03 -0.68

Bharat Heavy Electricals Limited 0.72 -20.79 -0.59

Bharti Airtel Ltd. -1.67 68.73 -0.56

Sector attribution (%)

JPMorgan Indian Investment Trust plc Calendar Year 2017

Attribution summaryStock: -0.59

Sector: 5.00

Benchmark MSCI India (NDR)

3.96

1.52

0.66

0.18

0.10

0.07

-0.31

-0.51

-0.54

-0.70

-1.54

1.52

-3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 4.0 5.0

Financials (o)

Consumer Discretionary (o)

Information Technology (u)

Health Care (u)

Utilities (u)

Real Estate (o)

Materials (o)

Telecommunication Services (u)

Industrials (o)

Consumer Staples (u)

Energy (u)

Cash (u)

Asset Allocation Stock Selection

5 |

Performance attribution

Source: J.P. Morgan Asset Management, MSCI, FactSet, gross of fees in GBP. Data for Total Attribution shown (stock selection plus sector allocation). Attribution may not match

official returns due to differences in systems, rounding. Past performance is not an indication of current and future performance. The trust is an actively managed portfolio, holdings,

sector weights, allocations and leverage, as applicable are subject to change at the discretion of the Investment Manager without notice. Past performance is not an indication of

current and future performance.

Top five contributors

Relative

weight (%)

Stock

return (%)

Impact

(%)

Maruti Suzuki India Limited 2.97 232.47 3.61

Motilal Oswal Financial Services Limited 1.67 599.03 3.42

Ashok Leyland Limited 3.69 171.91 3.35

HDFC Bank Limited 8.25 102.49 3.21

IndusInd Bank Ltd. 5.07 116.82 2.68

Top five detractors

Relative

weight (%)

Stock

return (%)

Impact

(%)

Reliance Industries Limited -5.32 12.53 -3.28

Hindustan Unilever Limited -2.99 116.38 -1.41

Bharat Heavy Electricals Limited 0.41 -61.48 -1.40

Gujarat Pipavav Port Limited 1.44 -20.98 -1.06

Sun Pharmaceutical Industries Limited 1.06 -20.88 -1.01

Sector attribution (%)

JPMorgan Indian Investment Trust plc 36M to 31st December 2017

Attribution summaryStock: 5.53

Sector: 5.89


8.23

2.87

2.09

1.34

0.83

0.59

0.44

-0.32

-0.95

-2.56

-2.57

2.42

-5.0 0.0 5.0 10.0

Financials (o)

Consumer Discretionary (o)

Materials (o)

Telecommunication Services (u)

Industrials (o)

Real Estate (o)

Information Technology (u)

Utilities (u)

Health Care (u)

Consumer Staples (u)

Energy (u)

Cash (u)

Assetallocation

Stockselection

6 |

Active Share

Source: J.P. Morgan Asset Management. Active Shares is a measure of the percentage of stock holdings in the portfolio that differ from the benchmark index. Past performance is

not a reliable indicator of current and future results


Active Shares (%)


20

30

40

50

60

70

80

12/0

3

04/0

4

08/0

4

12/0

4

04/0

5

08/0

5

12/0

5

04/0

6

08/0

6

12/0

6

04/0

7

08/0

7

12/0

7

04/0

8

08/0

8

12/0

8

04/0

9

08/0

9

12/0

9

04/1

0

08/1

0

12/1

0

04/1

1

08/1

1

12/1

1

04/1

2

08/1

2

12/1

2

04/1

3

08/1

3

12/1

3

04/1

4

08/1

4

12/1

4

04/1

5

08/1

5

12/1

5

04/1

6

08/1

6

12/1

6

04/1

7

08/1

7

12/1

7

Active Shares %

7 |

Portfolio positions


Source: J.P. Morgan Asset Management. The trust is an actively managed portfolio, holdings, sector weights, allocations and leverage, as applicable are subject to change at the discretion of the

Investment Manager without notice.


Top 5 overweights

Fund

weight (%)

Relative

position (%)

HDFC Bank Limited 9.0 9.0

IndusInd Bank Ltd. 4.9 4.9

Maruti Suzuki India Limited 7.4 4.0

Kotak Mahindra Bank Limited 3.8 3.8

UltraTech Cement Limited 5.0 3.7

Top 10 holdings

Fund

weight (%)

HDFC Bank Limited 9.0

Housing Development Finance Corporation Limited 7.6

Maruti Suzuki India Limited 7.4

Axis Bank Limited 5.2

UltraTech Cement Limited 5.0

IndusInd Bank Ltd. 4.9

Bajaj Auto Limited. 4.4

Ashok Leyland Limited 4.0

ITC Limited 4.0

ACC Limited 3.9

Top 5 underweights

Fund

weight (%)

Relative

position (%)

Reliance Industries Limited 0.0 -7.9

Infosys Limited 0.0 -6.3

Hindustan Unilever Limited 0.0 -2.9

ICICI Bank Limited 0.0 -2.5

Bharti Airtel Ltd. 0.0 -2.1

8 |

Portfolio

weight (%) 41.9 32.6 9.3 0.0 22.0 18.4 9.7 0.5 1.7 0.0 2.9 5.2 3.9 0.3 -6.4

Relative to benchmark (%)

18.8

13.0

6.6

-0.7

9.0 8.5

3.8

0.5

-1.7 -2.1-3.0

-4.2

-10.8-12.3

-6.4

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

Financials Banks DiversifiedFinancials

Insurance ConsumerDiscretionary

Materials Industrials RealEstate

Telecoms Utilities HealthCare

ConsumerStaples

InformationTechnology

Energy Cash

Sector positions

Source: J.P. Morgan Asset Management. Individual figures may not add up exactly to the total due to rounding.

The trust is an actively managed portfolio, holdings, sector weights, allocations and leverage, as applicable are subject to change at the discretion of the Investment Manager without notice.

JPMorgan Indian Investment Trust plc as of 31st December 2017 Benchmark MSCI India (NDR)

Active and absolute sector positions

9 |

Portfolio characteristics

Source: FactSet, J.P. Morgan Asset Management. The trust is an actively managed portfolio, holdings, sector weights, allocations and leverage, as applicable are subject to change at the discretion of

the Investment Manager without notice. Past performance is not a reliable indicator of current and future results


Market capitalisation (USD)

36.0

31.3

26.6

10.3

2.2

43.1

36.0

19.7

1.20.0

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

> 30 bn 10 bn - 30 bn 4 bn - 10 bn 1 bn - 4 bn < 1 bn

Fund Benchmark


Portfolio Fund Benchmark

Number of Holdings 42 78

Top 10 Holdings (% of Fund/Benchmark) 55.3 44.1



12-Month Forward Price to Earnings (x) 22.9 18.7

3-5 Year Earnings Per Share Growth (%) 21.6 16.8

Active Share (%) 70.6

10 |

Outlook

11 |

Recent backdrop

MSCI India Index returns in 2017 38.8%

MSCI India Small Cap Index returns in 2017 67.0%

Trailing PE – MSCI India Index 23.6x

Record mutual fund inflows in 2017 USD30bn

Growth stagnation…

…Yet meaningful reforms

Source: J.P. Morgan Asset Management. As of 31st December 2017. Opinions, estimates, forecasts, projections and statements of financial market trends are based on market conditions at the date of

the publication, constitute our judgment and are subject to change without notice. There can be no guarantee they will be met.

PE = Price to Earnings Ratio

12 |

Outlook

2018 – possible turbulence to absolute returns

Cleansing process underway

Clearing path to recovery

Improving corporate health

Compelling 3 – 5 year outlook

Opinions, estimates, forecasts, projections and statements of financial market trends are based on market conditions at the date of the publication, constitute our judgment and are subject to change

without notice. There can be no guarantee they will be met.

13 |

The Modi era: Big changes, many firsts

A majority government, strong leader, strategic vision

Changes: Undoing, then rebuilding

Governance, Inclusive growth and efficiency

Examples:

– ‘Aadhaar’ (National ID programme)

– Financial Inclusion: ‘Jan Dhan’ and Direct Benefits Transfer (DBT)

– Bankruptcy Code – May 2016

– Demonetisation – November, 2016

– Goods and Services Tax (GST) – July 2017



The Modi era references to the period in which Narendra Modi (Prime Minister of India) has been in office.

14 |

Financial Inclusion: A Key Theme

Source: CLSA, data as of 17th November 2017

~1.2bn Unique IDs (UID) issued – almost every Indian is now

covered

Rising Smartphone penetration is driving the fintech revolution

Bank accounts for the “unbanked”: Over 300m new bank

accounts opened, with rising balances

Digital payments is growing exponentially, particularly after

‘Demonetisation’

Source: CLSA, data from July 2012 to October 2017Source: CLSA, data from September 2014 to October 2017.

PMJDY = Pradhan Mantri Jan Dhan Yojana

Source: CLSA, data as of 17th November 2017

0

10

20

30

40

50

0

500

1,000

1,500

Mar 13 Mar 14 Mar 15 Mar 16 Mar 17 Mar 18CL

(m) (%)

Mobile subscribers Data penetration (RHS)

0

5,000

10,000

15,000

20,000

25,000

FY13 FY14 FY15 FY16 FY17 1HFY17 1HFY18

(Rsbn) Credit card POS Debit card POS

Mobile banking Mobile wallet

0

200

400

600

800

1,000

1,200

Jul 12 Jul 13 Jul 14 Jul 15 Jul 16 Jul 17

(m)Cumulative UID enrolment

0

200

400

600

800

0

100

200

300

400

08/14 01/15 06/15 11/15 04/16 09/16 02/17 07/17

(m) (Rs bn)No. of Jan Dhan accounts openedBalance in PMJDY accounts (RHS)

Demonetisation

15 |

Source: Reserve Bank of India, National Payment Corporation of India, Bernstein Research

as of 19th January 2018. UPI = Unified Payments Interface

Digital money

UPI: Monthly transaction value (INR bn) Average UPI ticket size (INR)

Source: Reserve Bank of India, National Payment Corporation of India, Bernstein Research

as of 19th January 2018. UPI = Unified Payments Interface

0 0 0 1 7

17 19 24 22

28 31 34 41

53

71

97

131

Aug-1

6

Sep-1

6

Oct-

16

No

v-1

6

De

c-1

6

Jan-1

7

Feb

-17

Ma

r-1

7

Apr-

17

Ma

y-1

7

Jun-1

7

Jul-1

7

Aug-1

7

Sep-1

7

Oct-

17

No

v-1

7

De

c-1

7

Pre-Demonitisation Post-Demonitisation

333

4,713

3,520

3,994

4,577

3,881

3,017 2,485

1,720

904

300

1,300

2,300

3,300

4,300

5,300

Aug-1

6

Sep-1

6

Oct-

16

No

v-1

6

De

c-1

6

Jan-1

7

Feb

-17

Ma

r-1

7

Apr-

17

Ma

y-1

7

Jun-1

7

Jul-1

7

Aug-1

7

Sep-1

7

Oct-

17

No

v-1

7

De

c-1

7

Post-DemonitisationPre-Demonitisation

16 |

Goods and Services Tax

Near term challenges

X Multiple & changing tax slabs

X Onerous filing process

X Initial disruption = temporary shortfall in tax

collections

X Job losses in the unorganized sector

Long term positive

Transparent tax structure – removes

cascading effect

Shift from unorganized to organized

Boost tax collections

Better supply chain efficiency

Business decisions on economic merit rather

than tax incentives

One unified market = ease of doing business

Lower product prices = boost demand



17 |

Source: Central Statistics Offices, Centre for Monitoring Indian Economy, Morgan Stanley

Research, Data from March 2000 to September 2017. * GDP = Gross domestic product

Cyclically depressed

Quarterly GDP* Growth Credit Growth

Source: Centre for Monitoring Indian Economy, Morgan Stanley Research, 30th December 2017

0

2

4

6

8

10

12

Sep-0

0

Sep-0

1

Sep-0

2

Sep-0

3

Sep-0

4

Sep-0

5

Sep-0

6

Sep-0

7

Sep-0

8

Sep-0

9

Sep-1

0

Sep-1

1

Sep-1

2

Sep-1

3

Sep-1

4

Sep-1

5

Sep-1

6

Sep-1

7

YoY%

New GDP Series

New GDP

series from

Jun-12,

extended

backwards

using trend

in old series

4%

8%

12%

16%

20%

24%

28%

32%

36%

De

c-0

1

De

c-0

2

De

c-0

3

De

c-0

4

De

c-0

5

De

c-0

6

De

c-0

7

De

c-0

8

De

c-0

9

De

c-1

0

De

c-1

1

De

c-1

2

De

c-1

3

De

c-1

4

De

c-1

5

De

c-1

6

De

c-1

7

Credit Growth

18 |

Source: CLSA, as of 15th January 2018

GDP = Gross Domestic Output

The investment cycle has been the key source of disappointment

Gross Fixed Capital Formation as of GDP (%) Capacity utilisation

Source: CLSA, as of 15th January 2018

26

30 32

33 35 34 34 33

34 33

31 30

29

27

0

5

10

15

20

25

30

35

40

FY04 FY06 FY08 FY10 FY12 FY14 FY16

68

70

72

74

76

78

80

82

Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17

(%) Tr-12 mth

19 |

Strong correlation between GDP and earnings growth, long term

Source: Central Statistical Organisation, CLSA, as of 17th January 2018

.

Market vs. Economy

0

2

4

6

8

10

12

14

5-yr Average 10-yr Average 15-yr Average 20-yr Average

Nominal GDP growth (%) BSE 500 Profits Growth

20 |

Source: Motilal Oswal Securities Ltd, data from 1993 to 2016. Estimates as of 17th January 2018. CAGR = Cumulative Annual Growth Rate


without notice. There can be no guarantee they will be met. Past performance is not a reliable indicator of current and future results

Long term earnings growth and cyclicality

Sensex Index Earnings Per Share (EPS)

FY93-96:

45% CAGR

FY96-03: 1% CAGR

FY03-08:

25% CAGR

81 129 181250 266 291 278 280

216 236 272361

446540

720

833 820 834

10241109

1179

1,3341,3571,346

1,338

1,520

1,852

FY

93

FY

94

FY

95

FY

96

FY

97

FY

98

FY

99

FY

00

FY

01

FY

02

FY

03

FY

04

FY

05

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18E

FY

19E

FY93-96: 45%

CAGR

FY96-03: 1% CAGR

FY03-08: 25%

CAGR

FY08-17:

5.5% CAGR

FY17-19: 17.6%

CAGR

FY93-17:

12% CAGR

21 |

Source: Worldscope, RIMES, MSCI, Morgan Stanley Research, as of 31st December 2017. Past performance is not a reliable indicator of current and future results

MSCI India Index

Operating Leverage can drive earnings growth and profitability

50%

60%

70%

80%

90%

100%

110%

10%

12%

14%

16%

18%

20%

22%

24%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Asset Turn Trend (RHS)

ROE Trend (LHS)

22 |

Source: Capitaline, Company Data, Morgan Stanley research, as of 31st December 2017

Improving corporate health

Free Cash Flow to Sales BSE 500 (ex-financials)

Source: Capitaline, Company Data, Morgan Stanley research, as of 31st December 2017

-10%

-5%

0%

5%

10%

15%

FY

02

FY

03

FY

04

FY

05

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

BSE 500 (ex-financials)

-20%

0%

20%

40%

60%

80%

100%

-20%

0%

20%

40%

60%

80%

100%

FY

00

FY

01

FY

02

FY

03

FY

04

FY

05

FY

06

FY

07

FY

08

FY

09

FY

10

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

Debt change YoY (RHS)

Net Debt/Equity

23 |

Note - consumer price index (CPI) (with base 2012) from January 2014

Source: CEIC, Morgan Stanley Research, 30th December 2017

Inflation has rebounded recently

Inflation Short-term Policy Rate and 1-year Deposit Rates

* State Bank of India (SBI) 1-year deposit rates. For recent months we have used SBI special

deposit rates on 555 days.

Source: Company data, Morgan Stanley Research, 30th December 2017

-7%

-5%

-3%

-1%

1%

3%

5%

7%

9%

11%

13%

Nov-0

7

Ma

y-0

8

Nov-0

8

Ma

y-0

9

Nov-0

9

Ma

y-1

0

Nov-1

0

Ma

y-1

1

Nov-1

1

Ma

y-1

2

Nov-1

2

Ma

y-1

3

Nov-1

3

Ma

y-1

4

Nov-1

4

Ma

y-1

5

Nov-1

5

Ma

y-1

6

Nov-1

6

Ma

y-1

7

Nov-1

7

WPI CPI - New Index

YoY%

4%

5%

6%

7%

8%

9%

10%

11%

Dec-0

5

Jun

-06

Dec-0

6

Jun

-07

Dec-0

7

Jun

-08

Dec-0

8

Jun

-09

Dec-0

9

Jun

-10

Dec-1

0

Jun

-11

Dec-1

1

Jun

-12

Dec-1

2

Jun

-13

Dec-1

3

Jun

-14

Dec-1

4

Jun

-15

Dec-1

5

Jun

-16

Dec-1

6

Jun

-17

Dec-1

7

Repo Rate

SBI 1 year Deposit Rate*

10 Yr Yield

24 |

The Banking sector

A two (or three) tier market

– Public Sector Banks – severely strained (18.7% stressed assets, 9.6% tier 1 ratio)

– Private corporate banks – strained (8.8% stressed assets, 14.6% tier 1 ratio)

– Premium private banks – thriving (1.9% stressed assets, 14.7% tier 1 ratio)

Important changes

– Reserve Bank of India (RBI) intervention, forcing Non-Performing Loan (NPL) recognition

– New Bankruptcy legislation: Fast tracking resolution

– Recapitalisation of Public Sector Banks (~US$ 32bn)

– Fund raising

Source: J.P. Morgan Asset Management. As of January 2018.



25 |

Bank Recapitalisation: India’s TARP moment

Source: Credit Suisse, as of 31st December 2017. TARP = Troubled Asset Relief Program

21

3

24

9

32

Capital infusion through recap bonds Planned infusion by the govt Total infusion by the govt Planned capital raise from the market Total planned capital raise

Planned capital infusion (~US$ 32bn)

32

16

17

9

26

Capital infusion through recap bonds Capital for growth Capital used for increasingprovisioning

Normalised provisions in FY19E Total provisioning required

Utilisation of the capital infusion (~US$ 32bn)

Total planned capital raise Capital for growth Capital for more provisioning Normal provisions in FY19 Total provisions required

26 |

Source: RIMES, MSCI, IBES, Morgan Stanley Research, 30th December 2017

Fwd PE = Forward Price to Earning, 10Y = 10 Years, 5Y = 5 Years

Valuations have rerated…

MSCI India MSCI India

Source: RIMES, MSCI, IBES, Morgan Stanley Research, 30th December 2017

PB = Price to Book, 10Y = 10 Years, 5Y = 5 Years

5

7

9

11

13

15

17

19

21

23

25

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

Fwd PE

10YAverage5Y Average

MSCI India

1

2

3

4

5

6

7

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

PB

10YAverage5Y Average

MSCI India

27 |

Source: RIMES, MSCI, Morgan Stanley Research, 30th December 2017. PB = Price / Book

Mid and Small caps are expensive

MSCI India Small Cap Trailing PB MSCI India small cap relative to MSCI India Trailing PB

Source: RIMES, MSCI, Morgan Stanley Research, 30th December 2017, PB = Price / Book

0.4

0.9

1.4

1.9

2.4

2.9

3.4

3.9

4.4

4.9

01 01 02 03 04 05 06 07 08 09 10 11 12 12 13 14 15 16 17

10-year average

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

01 01 02 03 04 05 06 07 08 09 10 11 12 12 13 14 15 16 17

10-year average

28 |

Flows: Strong

Source: Securities and Exchange Board of India, Bombay Stock Exchange, Morgan Stanley

Research. Data from 2000 to 2016, For C2017 flows data is as of 30th December 2017

FII = Foreign Institutional Investor DII = Domestic Institutional Investor

MF = Mutual Funds

Source: Association of Mutual Funds in India, Morgan Stanley Research, latest data available

as of 30th December 2017

DMF = Domestic Mutual Funds

India Fund Flows Monthly flows into DMFs (3M average)

-15,000

-10,000

-5,000

0

5,000

10,000

15,000

20,000

25,000

30,000

FII (Cash)

DII Flows (Domestic MF +Insurance)FII Debt Flows

USD mn

-1500

-500

500

1500

2500

3500

4500

Dec-9

9

Dec-0

0

Dec-0

1

Dec-0

2

Dec-0

3

Dec-0

4

Dec-0

5

Dec-0

6

Dec-0

7

Dec-0

8

Dec-0

9

Dec-1

0

Dec-1

1

Dec-1

2

Dec-1

3

Dec-1

4

Dec-1

5

Dec-1

6

Dec-1

7

3M Average DMFFlows

in USD mn

29 |

Sensex Return Scenarios using Rigour framework

Scenarios 1 2 3 4

EPS Growth (%) 2018 12 15 18 15

2019 15 15 25 18

2020 12 18 25 20

Trend EPS Growth (%) For 3 years post 2020 10 15 20 25

Exit PE @ end of Year 6 (x) 13 17 18 20

Forex assumption (INR/US$) 63.9 58.5 63.9 63.9

5 year US$ Expected Return (%) 0 11.5 17.6 19.9

Source: J.P. Morgan Asset Management. As of 23 January 2018. EPS= Earnings per Share



30 |

Source: J.P. Morgan Asset Management, as of 23rd January 2018


without notice. There can be no guarantee they will be met. The companies above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell.

Example: HDFC Bank

20

-3.5

0.1

16.6

-5

0

5

10

15

20

25

Earnings Growth Valuation Dividend /Currency

Expected Return

Previous

Cycle Next

CycleFY06-08 FY18

GDP growth (real) 9.5 6.7 8

GDP growth (nominal) 15.4 9.5 13

System credit growth 29 7.5 19.5

Credit growth (x) 1.9 0.8 1.5

HDFCB credit growth 35 24 30

Credit growth (x) 1.2 3.2 1.5

PPOP change (bp)* 50 30 over FY08

ROA 1.4 1.9 2.2

PAT growth* (x) 2.4 2doubles in

~3 years

PAT absolute (Rs bn) 11.4 179 361

ROE 18.3 16.3 18 21.3% peak

PE (M.cap/PAT) 28.3 14

* FY08 over FY05

31 |

Example: Ultratech Cement

38.7

-26.3

-0.2

12.2

-30

-20

-10

0

10

20

30

40

50

EarningsGrowth

Valuation Dividend /Currency

ExpectedReturn

Previous

Cycle Next

CycleFY08 FY18

Capacity 18.2 83.5 94.5

Utilisation (%) 83 67 87 peak was 87%

Avg selling price

(per tonne)3,222 5,182 6,930

continued to rise and is

Rs5,125 in 1H2018

Sales (absolute RS bn) 55 291.3 569.4

Avg cost (per tonne) 2,222 4,108 4,998

Ebitda / tonne 1,000 1,074 1,932

Ebitda margin (%) 31.2 20.7 27.9

Ebitda (absolute) 17.2 60.4 158.7

PAT 10 24.4 98.2

ROE 45 9.5 18.9 56% peak in FY07

PE 48.6 12.1

EV / Ebitda 22.1 8.4

EV / Sales 4.6 2.3




ROE = Return on Equity, PAT = Profit after Tax, PE = Price to Earnings Ratio, EV = Enterprise Value

32 |

Example: BHEL

* Avg of FY09 and FY10

14.8

0.5 0.5

15.8

0

2

4

6

8

10

12

14

16

18

Earnings Growth Valuation Dividend /Currency

Expected Return

Previous

Cycle*

FY11

Actual FY17/18

Next

Cycle

Market size (MW) 30,000 30,000 9,000 15,000 peak and then stable

Order inflows (MW) 17,000 15,000 5,000 9,000 peak and then stable

Utilisation (%)

Realisation

(Rs m per MW)29 29 40 42.5

Revenue (Rs bn) 300 404 292 432 in year FY23

Ebitda margin (%) 19.5 20 3.3 9.9within the forecast

period

Ebitda (Rs bn) 58 81 9.8 41.5 at the peak in FY23

PAT (Rs bn) 37 60 11.7 35.7vs the previous high

of Rs70 bn in FY12

ROE (%) 27.6 26 3.4 7.8

PER 6.4 32.9 10.7

EV / Sales 0.7 1.0 0.7

EV / Ebitda 3.5 28.9 6.8




ROE = Return on Equity, PAT = Profit after Tax, PE = Price to Earnings Ratio, EV = Enterprise Value

33 |

Outlook

2018 – possible turbulence to absolute returns

Cleansing process underway

Clearing path to recovery

Corporate health - better

Compelling 3-5 year outlook



34 |

J.P. Morgan Asset Management

This is a marketing communication and as such the views contained herein are not to be taken as an advice or recommendation to buy or sell any investment or interest thereto. Reliance upon

information in this material is at the sole discretion of the reader. Any research in this document has been obtained and may have been acted upon by J.P. Morgan Asset Management for its own

purpose. The results of such research are being made available as additional information and do not necessarily reflect the views of J.P. Morgan Asset Management. Any forecasts, figures, opinions,

statements of financial market trends or investment techniques and strategies expressed are unless otherwise stated, J.P. Morgan Asset Management’s own at the date of this document. They are

considered to be reliable at the time of writing, may not necessarily be all inclusive and are not guaranteed as to accuracy. They may be subject to change without reference or notification to you. It

should be noted that the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount

invested. Changes in exchange rates may have an adverse effect on the value, price or income of the products or underlying overseas investments. Past performance and yield are not reliable

indicators of current and future results. There is no guarantee that any forecast made will come to pass. Furthermore, whilst it is the intention to achieve the investment objective of the investment

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Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our EMEA Privacy Policy www.jpmorgan.com/jpmpdf/1320694304816.pdf. Investment is

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Registered address: 25 Bank Street, Canary Wharf, London E14 5JP.

Material ID: 821c4750-e79a-11e6-a524-005056960c63

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