Vinidhan Annual Report FY15.pdf

VINIDHAN

Annual Report FY15

April 15, 2015

Period Ending: 31/03/2015

Portfolio Inception date: 19/11/2014

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MARKET COMMENTARY

Growth picked up in financial year 2015, inflation declined markedly helped by lower global oil

prices and positive policies. The outlook for India is for economic strengthening through

infrastructure spending and continued reform to financial and monetary policy. The government

has moved to tackle politically difficult structural problems that have stalled investments in the

past years.

INDIA OUTLOOK

While the global outlook looks weak, IMF and World Bank in separate forecasts see India

overtaking China in 2015 to become the worlds fastest growing major economy and widening the

gap further in 2016. Growth in the gross domestic product is expected to accelerate to 7.8% in

2015 on improved performance in both industry and services as policy addresses structural

bottlenecks and external demand improves.

Growth is expected to edge up further to 8.2% in 2016, helped by a supportive monetary policy in

2015, as inflation continues to trend lower and by a pickup in capital expenditure.



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FUND PERFORMANCE

For the financial year 2015, Vinidhans portfolio returned 16.01% compared to 0.60% for its

benchmark, the NSE Nifty 50 Index. The annualized return of the Fund stands at 50.31%.

The portfolios relative better performance versus the NSE Nifty 50 Index was due to the

Portfolios asset allocation strategy as stock selection in defensive sectors helped the Portfolio in

outperforming the benchmark. The Portfolio also outperformed S&P BSE Sensex Index, which

returned a loss of 0.84% during the period.

The performance of the Fund in comparison with the benchmark indices are as shown in the table

below.

Table: Fund performance relative to benchmark indices

Vinidhan Portfolio

March 31st 2015

Investment Performance

50-day ended Year ended

09th January

2015

31st March

2015

The Fund 1.12% 16.01%

NSE Nifty 50 -2.27% 0.60%

BSE Sensex -2.16% -0.84%

The Jensen measure also known as alpha calculates the excess return that a portfolio generates

over its expected return. The Fund has an alpha of 15.16% and shows the fund in good light. The

beta value for the fund is 0.88 which shows lower risk and volatility as compared to the benchmark

indices. The Treynor ratio for the Fund which measures returns in excess of that which could have

been earned on a risk free investment is 15.01% and once again shows how well the Fund has

performed during the period.

PORTFOLIO OVERVIEW

The fund has over 32% of the portfolio invested in the pharmaceutical sector in the form of

Aurobindo Pharma and Lupin. The sector has seen solid performance over the period and Lupin

has been the star performer with returns of over 42%. The fund also has considerable investments



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in the IT sector with Infosys and HCL Technologies combining to form just under 35% of the

portfolio.

The Fund has a diversified portfolio with investments in six diffferent sectors. Overall, defensives

outperformed as can be seen in the sector wise performance charts below.

Figure: Sector wise performance for a sample corpus of Rs 10,000

The sector wise holdings of the Fund is

as shown in the pie chart on the right.

Information Technology has the highest

weightage in the fund closely followed

by Pharma sector. The weightage is

based on the holdings as on 31st March

2015 and is subject to change as and

when deemed necessary.

-500.00

0.00

500.00

1000.00

1500.00

2000.00

2500.00

3000.00

3500.00

4000.00

IT Pharma FMCG Bank Power Automobile

Invested Amount Unrealized gain/loss

IT35%

Pharma32%

FMCG8%

Bank12%

Power5%

Automobile8%

SECTOR-WISE HOLDINGS



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Table: Current Fund Portfolio holdings

Vinidhan Portfolio

March 31st 2015

Stock % of net assets

Aurobindo Pharma 15.27%

Axis Bank 11.69%

Bajaj Auto 8.42%

HCL Technologies 16.35%

JSW Energy 4.94%

Infosys 18.50%

Lupin 16.75%

Marico 8.08%

Total 100.00%

HCL Technologies witnessed broad based business growth across geographies, verticals and

horizontals during the last year. Constant currency growth and strong client additions ensures a

RoE well in excess of 30 per cent. As a result, the board gave dividends of Rs 8 per share along

with a 1:1 bonus share issue. The stock has given returns of close to 20 per cent since being added

to the fund. The earnings result of HCL Tech is expected on 21st April 2015.

Infosys, another IT giant, beat estimates for its third quarter earnings and retained its annual

guidance of 7-9% for the fiscal year 2015. With the US expected to grow faster than Europe,

Infosys is in a better position compared to the other IT firms. With revenues from India seeing a

considerable growth it can only augur well for the IT giant. The fourth quarter and annual results

of Infosys will be announced on 24th April 2015.

Marico, the FMCG representative in the Fund, expects continued volume growth in the range of

8-10 per cent. Copra prices are expected to cool down in the coming year and this can improve the

margins considerably in the coming years. The firm announced dividends of Rs 1.5 per share last

quarter and is expected to continue paying high dividends. With its strategy to enter less

competitive segments and international markets by leveraging on its brand value along with its

strong pricing power in the coconut oil segment, Marico has a potential for strong consistent

growth.

Aurobindo Pharma is driven by accelerating US contribution to its sales mix and has seen higher

margins in US revenues. Aurobindo Pharma is set for 40% CAGR growth in the next two years

and has given returns in excess of 11 per cent during the short period and we see further growth in

the stock.



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Lupin is driven by international sales contributing to 74 per cent of its revenues, with 37 per cent

coming from the US. The continuously evolving US drugs portfolio ensures sustainable top-line

growth of 19% Y-o-Y. An average of 30 ANDA filings each year ensures its portfolio keeps

growing steadily. This pharmaceutical big shot was the star performer for the fund with returns of

over 42 per cent.

JSW Energy has 3740 MW of operational generating capacity and a further 8630 MW under

development phase. Net sales and PAT are expected to grow at a CAGR of 5% and 18%

respectively in the next two years. With demand expected to grow strongly with economic

resurgence JSW Energy has positioned itself well for a sustainable future.

With improved economic conditions and good monsoon expectations we can expect strong sales

from Bajaj Auto this coming year. Although the industry has been struggling with lackluster sales

KTM Duke has grown considerably in the premium bike segment. Bajaj has a string of new bike

releases in the year including the new Pulsar A-S 150 and A-S 200 that aim to target buyers looking

for an affordable adventure sport bike. Bajaj Auto is in prime position to take advantage of a

renewal in the industry which is very much expected.

Banking sector has struggled in past quarters with increasing NPA levels and dropping NIM. A

shining star in this segment is Axis Bank. The NPAs have consistently remained well below 1.5

and NIM has inched closer to 4%. With a great focus on retail business and strategy to move

towards higher risk adjusted return business like credit cards, personal loans and mortgage, we

expect the profit to grow by at least 17%. Axis Bank has given returns in excess of 20 per cent and

we expect them to continue providing strong returns.

PORTFOLIO OUTLOOK

We believe that economic growth will move ahead and will favor the Indian equity markets. In

such an environment, strategic allocation adjustments between various sectors in equity should be

key drivers of performance going forward.

Vinidhan SIF team

15th April 2015



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MANAGEMENT

Appellant Authority

Dr. C. Joe Arun SJ, Director, Goa Institute of Management

Faculty Advisor

Prof. Amiya Kumar Sahu, Goa Institute of Management

VINIDHAN TEAM

Fund Manager

Deepak K S (8113085314)

Fundamental Head

Gaurav Nolakha (7738922273)

Fundamental Team

Anu Khatri, Ashish Sood, Nidhi Kalani, Nikita Bindal, Nisarg Popat, Toshan Oswal, Yash Gupta

Technical Head

Sunil Khale (7768004041)

Technical Team

Abhishek Nigam, Saurav Kumar, Vigneswar N, Vinodh Ramadas

Contact Information

Goa Institute of Management,

Poriem, Sattari,

Goa 403505

Email: [email protected]

Disclaimers and Disclosures

This report has been prepared by the members of Vinidhan. The views and opinions expressed in

this document may or may not match or may be contrary at times with the views, estimates and

rating of other equity research reports of Vinidhan The SIF. This report is for informational

purposes only and is not an investment suggestion.



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Documents

Vinidhan Annual Report FY15.pdf