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December 2018
SUNDARAM ALTERNATE ASSETS LIMITED Sundaram Mid-Cap Portfolio
November 2018
Portfolio to capture the India Story3Q Quality Approach To Stock Selection
Quality of Business
Pricing Power, Profitability, Growth, Brand Strength,Capital Intensity, Complexity of Business
Quality of Management
Past Track Record, Management Bandwidth, CorporateGovernance
Quality of Financials
Capital Allocation, Leverage, Cash Flow Generation,Return on Capital
• Bet on Sundaram’ mid cap strength but yet differentiated with aconcentrated portfolio and attractive cap curve positioning
• Concentrated 20-30 stocks, Multi sector portfolio
• Stcoks with less than > : Rs500bn market cap
• We like companies – “EASE” portfolio
i. Emerging leaders –clean and high quality promoter /management
ii. Asset light & High ROCE businesses
iii. Scalable companies : mid cap to large cap, small cap to midcap transitioning companies
iv. Excellent Cash conversion from operations
• Identify stocks in the Mid & Small Cap space that are in earlystages of their business cycle and could emerge as tomorrow’slarge caps.
• India 2025 - Themes
i. Consumer discretionary
ii. Services
iii. BFSI
Key Features Sector Bets (%) - Underweight/Overweight vs Benchmark
-12.1
-9.6
- 8.6
- 3.7
-3.2
-1.8
-1.5
-1.3
-1.3
-0.8
-0.2
1.0
1.1
1.7
2.8
4.3
5.5
17.3
Financial Services
Pharma
Energy
Automobile
Industrial Manufacturing
Metals
IT
Construction
Cement & Cement Products
Telecom
Others
Textiles
Healthcare Services
Fertilisers & Pesticides
Chemicals
Media & Entertainment
Services
Consumer Goods
Long term investors seeking high returns through a investmentpredominently in midcap stocks and are comfortable with shortterm volatility.
Target Investors
To seek long term capital appreciation with investments in Mid-Capcompanies.
Objective
Midcap Strategy has outperformed benchmark during the month and as well as for the 1-year period. During the month PVR, Brigade, ABFRL and LTTS, were majoroutperformers while SRF and VIP were underperformers. We broadly followed strategy of investing into good quality companies, where we are confident of earningsdelivery over the next 12 months. We have added Chola Finance and Orient Electricals in our portfolio during the month. Chola is an excellent fit in to our midcap strategypost valuation correction it has witnessed due to liquidity squeeze in NBFC sector. Management is of the opinion that they were able to sail through the period withminimal impact to profits.
Strategy Review (Midcap)
Market Capitalization (%)
Large Cap Mid Cap Small Cap Cash & Others
14 54 21 10
Media &Entertainment
BFSI
Services
ConsumerDiscretionary
EXPERT SOLUTIONSHAND DELIVERED
SUNDARAM ALTERNATE ASSETS Mid-Cap Portfolio
December 2018
November 2018
1Y 2Y 3Y 5YMid-Cap Strategy -11.3 13.3 13.3 21.5
Nifty Mid-Cap -15.4 11.6 10.1 17.2
Nifty 500 -3.4 14.6 10.9 13.3
Excess returns to Nifty Midcap 4.1 1.7 3.2 4.3
Excess returns to Nifty 500 -7.9 -1.3 2.4 8.2
Performance (%)
Strategy Benchmark
Annualised returns 17.6 10.8
Annualised Standard Deviation 15.8 17.0
Beta 0.7 -
Sharpe Ratio 0.6 0.2
Correlation 0.8 -
Alpha 7.7 -
Tracking Error 11.5 -
Performance Measures - Since Inception
Strategy Benchmark Excess returnCY 2011 -11.6 -31.0 19.4CY 2012 35.3 39.2 -3.8CY 2013 23.0 -5.1 28.1CY 2014 71.4 55.9 15.5CY 2015 6.3 6.5 -0.2CY 2016 13.2 7.1 6.1CY 2017 44.8 47.3 -2.5YTD 2018 -11.3 -15.4 4.1
Calendar Year Performance (%)
BenchmarkFund
` 100.3 Lakhs
` 55.2 Lakhs
Jun 20105
20
40
60
80
100
120
Dec 2018
140
Value of ` 25 Lakhs invested at launch
Consumer Goods31.6%
Financial Services15.5%
Services8.1%
Media & Entertainment5.1%
IT, 4.7%
Others24.7%
Cash, 10.5%
Sector Allocation
17.7
9.88.0
Strategy Benchmark Excess return
Performance Since Inception - June 2010 (%)
Kansai Nerolac Paints Ltd
PVR Ltd
Trent Ltd
L&T Technology Services Ltd
Tata Chemicals Ltd
Top Holdings - # Stocks -24
Compounded annualised returns are in percentage, excess returns is in percentage pointCompounded annualised returns for periods greater than one year
Returns are in percentage; Excess Returns are in percentage points
Wt. Avg. Market cap 19,387 Crs
Key Contributors to the Strategy
Name of the stocks Weighted Market Gain/LossAvg Cost (`) Price (`) %
Heritage Foods Limited 365 527 44
Titan Industries Limited 662 931 41
PVR Ltd 1,255 1,065 28
All data as of 31 December 2018 Source: Inhouse computation
EXPERT SOLUTIONSHAND DELIVERED
SUNDARAM ALTERNATE ASSETS Mid-Cap Portfolio
December 2018
November 2018
Key Holdings
Disclaimer
General Disclaimer: Returns over a period of one year are on a compounded annualized basis • All returns are in percentage • Performance as of 31 December 2018 • Past performance may or may not be sustained in future • Returns represented are of a modelportfolio. The model portfolio return indicated in this document may not represent the returns of individual portfolio It should not be construed as investment advice to any party. All opinions, figures, charts/graphs, estimates and data included in this document areas on 31 December 2018 and are subject to change without notice. While utmost care has been exercised in preparing this document, Sundaram Alternate Assets Limited does not warrant the completeness or accuracy of the information and disclaims all liabilities,losses and damages arising out of the use of this information.Detailed Disclaimer: This document is issued by Sundaram Alternate Assets Limited registered with the Securities and Exchange Board of India in India. This document is produced for information purposes only and not a complete disclosure of every material factand terms and conditions. It does not constitute a prospectus or disclosure document or an offer or solicitation to buy any securities or other investment The statements contained herein may include statements of future expectations and other forward-lookingstatements that are based on our current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Investors shall befully responsible /liable for any decision taken on the basis of this document. The material relating to economy, market and industry is based upon information sourced from different agencies - Government as well as Private. Therefore, the Portfolio Manager will notattest for the reliability of such information. Investors should before investing in the portfolio make their own investigation and seek appropriate professional advice. Investments in Securities are subject to market and other risks and there is no assurance or guaranteethat the objectives of any of the strategies of the Portfolio Management Services will be achieved. • Clients under Portfolio Management Services are not being offered any guaranteed/assured returns. • Past performance of the Portfolio Manager does not indicate thefuture performance of any of the strategies. • The name of the Strategies do not in any manner indicate their prospects or return. • The investments may not be suited to all categories of investors. • The material is based upon information that we consider reliable,but we do not represent that it is accurate or complete, and it should not be relied upon as such. • Neither Sundaram Alternate Assets Limited. , nor any person connected with it, accepts any liability arising from the use of this material. The recipient of this materialshould rely on their investigations and take their own professional advice. • Opinions, if any, expressed are our opinions as of the date of appearing on this material only. While we endeavour to update on a reasonable basis the information discussed in this material,there may be regulatory, compliance, or other reasons that prevent us from doing so. • The Portfolio Manager is not responsible for any loss or shortfall resulting from the operation of the strategy. • Recipient shall understand that the aforementioned statements cannotdisclose all the risks and characteristics. The recipient is requested to take into consideration all the risk factors including their financial condition, suitability to risk return, etc. and take professional advice before investing. As with any investment in securities, theValue of the portfolio under management may go up or down depending on the various factors and forces affecting the capital market. Disclosure Document shall be obtained and read carefully before executing the PMS agreement. • Prospective investors and othersare cautioned that any forward - looking statements are not predictions and may be subject to change without notice. • For tax consequences, each investor is advised to consult his / her own professional tax advisor. • This document is not for public distribution andhas been furnished solely for information and must not be reproduced or redistributed to any other person. Persons into whose possession this document may come are required to observe these restrictions. Distribution Restrictions – This material should not becirculated in countries where restrictions exist on soliciting business from potential clients residing in such countries. Recipients of this material should inform themselves about and observe any such restrictions.
Stocks Name Rationale
Kansai Nerolac PaintsLtd.
• Kansai Nerolac serves customers across the paint segment, such as decorative, wood coatings, automotive, auto refinish, performancecoating and powder coating.
• 40% of revenue of Kansai comes from the Auto industry. • Strong growth trajectory of Passenger car segment. The auto industry is expected to continue witnessing double digit growth for the medium
term. • Kansai with a higher share of industrial coating sales vs. peers, reported healthy 17% sales growth with underlying volumes up 16-
17% in Q1FY19. Subdued crude prices will further help the performance.
Tata Chemicals
• Tata Chemicals is a key global player in Soda Ash (has presence in India, Kenya, UK and USA; manufactures both Synthetic and Natural form),has a good brand in "Tata Salt" and is expanding presence in the consumer focused business (has presence in pulses). The Company has soldboth its Urea and Complex fertilizer businesses and decided to focus more on consumer facing businesses.
• It looks like the supply-demand scenario seems to be well balanced with some capacities getting shut in China, while there has been somecapacity addition the market was able to absorb the additional production without big correction in prices. Industry players expects Soda Ashprices to remain firm with favorable near-term outlook.
• Tata Chemical's decision to move away from the Fertilizer business is positive, its overall return ratios will increase from ~12% to +18% orso, further with the cash coming in the company is set to become debt free by FY20. The company recently monetized its holding in TataGlobal Beverages, it further has sizeable investments across other group companies which could get monetized / unlocked.
Trent
• Trent is an excellent play on the fast growing retail segment. It has retail presence through its Westside stores and also has a JV with Inditexof Spain for selling “Zara” brand in India.
• Zara is the fastest growing apparel company globally with 7500 shops in 75 countries and operates under 8 brands.• Trent is amongst the few profitable apparel brand company in the listed space that can support their future expansions as well as fund the
new format ventures within the same category.• Star Bazaar, another joint venture with TESCO addresses the grocery/ other home needs of a customer and has the potential to pose a formidable
competition to the likes in the same category in future.
1. Strong track record 2. Low Churn 3. Time Tested stock Selection Process 4. Reach across Country 5. Transparency 6. Strict adherence to risk guidelines7. Shared Research Capabilities
Reporting Statements andServicing
Monthly performance Statements Transactions, Holding & Corporate action reports, Annual CA certifiedStatement of the account & Online access
Why Sundaram PMS ?
Customer Services
Investment Horizon Three to Five Years
Asset Allocation (%) Equity: 0 - 95; Cash: 5 - 100
Benchmark Nifty Mid-Cap
Fund Manager Madanagopal Ramu
Fund Facts
EXPERT SOLUTIONSHAND DELIVERED
SUNDARAM ALTERNATE ASSETS Mid-Cap Portfolio
December 2018