AGENDA Introduction Investment Strategy Why Old Bridge Track Record Investment Landscape Portfolio Strategies 2 AGENDA Introduction Investment Strategy Why Old Bridge Track Record Investment Landscape Portfolio Strategies 3 Founder and Chief Investment Officer Proven Track Record 25 years of experience in Fund Management Long Term track record of stock picking across multiple cycles 4 .INTRODUCTION Kenneth Andrade. Journey so far… 1991-02 2002-04 2005 2006 KENNETH • Journalist .No1 in • Top percentile in Performance • Fund Manager IEF • Analyst .Capital Market • Joined Kotak Mutual Fund • Launched Kotak Midcap Fund • Fund Manager PEF Magazine • Kotak MNC Fund . • IEF top percentile fund • PEF Top percentile Fund Award-Business World Business Standard / across all funds acrosss all funds • Lipper Award for 3year Sterling Equity • PEF top percentile fund • ICRA-Moody's Award for performance across all funds the best performing • ICRA-Moody’s 7 Star Fund • Launched Sterling Equity Diversified Fund in India Award Fund 2012 2013 2014 2015 • Lipper 5 year category • First unique close ended fund • First billion dollar equity • Best performing fund across award with div payout option only fund for IDFC asset 10 years • Mobilized 250Crs in a management • Started Old Bridge Capital negative equity environment Management • Established leadership in the Mid Cap category in India 5 .Apple Asset its Category/Top decile across all categories Management Company amongst all equity funds in • Joined Standard Chartered • Head Portfolio Advisory . India Asset Management Sharekhan 2010 2009 2008 2007 • Smartest Fund Manager • Fund Manager of the Year. Institutional Sales 6 . Senior Vice President . Oil & Gas and Mid-caps Rupanjana Sur 9 years of experience in financial services Last assignment. Motilal Oswal Securities Experience – Equity research.Investment Team at Old Bridge Capital Management Gauri Anand 12 years of experience in equity research Last assignment. Vice President – Research at Phillipcapital Experience – Equity research Chemicals. FoF Performance evaluation and Equity research Sanjay Dam 21 years of experience in Equities Last Assignment. Credit analyst at Dun & Bradstreet Experience – Credit research.Institutional Equities Sales. AGENDA Introduction Investment Strategy Why Old Bridge Track Record Investment Landscape Portfolio Strategies 7 . The underlying companies have to belong in industries that are consolidating. demonstrate leadership skills and have financial discipline.Investment Philosophy Concentrate on identifying businesses early into a cycle. 8 . $2bn market cap Portfolios may not be necessarily diversified across industries 9 .Investment Strategy Create a portfolio of companies which meet the criteria of Capital efficiency Low leverage Profit making with low capex scheduled Low valuation Universe of companies between $50mn. Stock Selection Capital efficient nature of the business Monopolistic/Consolidator of the industry Low financial leverage Low valuation 10 . Stock Selection Capital efficient nature of the business Look to identify companies that Monopolistic/Consolidator of the industry would migrate upwards from a low RoE Low financial leverage The ideation is not to predict growth. but to necessarily look for capital employed to be controlled Low valuation Cash flow positive nature of the business with low gearing are critical elements of this transition 11 . Stock Selection Capital efficient nature of the business Preference for consolidating businesses Monopolistic/Consolidator of the industry Identify companies gaining market share with no corresponding change in capital employed Low financial leverage Identify companies with the lowest cost in their respective industry Low valuation Companies need to be profitable in this transition Leadership at the end of consolidating cycle usually end up with higher market share and pricing power 12 . Stock Selection Capital efficient nature of the business Monopolistic/Consolidator of the industry Preference for companies with negligible debt Low financial leverage Prefer businesses leveraging into an economic up-cycle & deleveraging at the top of the cycle Low valuation 13 . Stock Selection Capital efficient nature of the business Look for “out of favor” businesses Monopolistic/Consolidator of the industry where current value of the stock reflects its depressed earnings Low financial leverage EV/ Sales Market Cap/Cash Profit (Flows) Low valuation 14 . Stock Selection Capital efficient nature of the business Stock selection in the past Page Industries MRF Monopolistic/Consolidator of the industry Kaveri Seeds Balrampur Chini Low financial leverage Vardhaman Textiles Blue Dart Bata Bharat Financial Incl Low valuation VA Tech Wabag Coromandel Intl 15 . AGENDA Introduction Investment Strategy Why Old Bridge Track Record Investment Landscape Portfolio Strategies 16 . Why Old Bridge Capital Management Investment Team cumulative experience of 65 years in Equity Research Aligning with a manager with An established 13 year public markets track record Managed a billion dollar portfolio with 90% active weights Outperformed the benchmark every single year over the last 10 years Investment style has been Consistent with Stock Picking Adopt a buy and hold strategy 17 . AGENDA Introduction Investment Strategy Why Old Bridge Track Record Investment Landscape Portfolio Strategies 18 . Premier Equity-Performance & Active Share Premier Equity vs Indices: Outperformed over the last 10 years Calendar Returns (%) Ca 19 . Premier Equity-Across Cycles 20 . Sterling Equity-Performance & Active Share Sterling Equity vs Indices: Outperformed over the last 5 years Calendar Returns (%) 21 . Premier Equity-Across Cycles 22 . Thematic Portfolios 23 . AGENDA Introduction Investment Strategy Why Old Bridge Track Record Investment Landscape Portfolio Strategies 24 . 355 593.61 0.8% 4.493 924.503.72 7.77 8.121 5.6% 12.75 12.4% 13.1% 20.0% 13.77 18.6% 11.98 16.3% 0.0% 8.At extreme values Growth in Balance Sheet down to single digit (7% in FY15). surplus capacities across various industries 25 .1% 2002 329 579.8% 8.236 784.0% 2010 415 2.8% 0.87 6.798 0.7% 19.7% 0.310 124.35 0.244 302.222 0.5% 2006 396 1.104.73 8.0% 0.698 293.52 0.221 0.482 0.2% 0.614 36.0% 8.014.733 0.74 8.622 0.4% 19.9% 2001 309 530.9% 12.693.86 6.976 4.54 0.7% 13.133 5.150 7.2% 13.735.8% 192.5% 5.933.2% 0.436.0% 13. for promoters to take incremental risk in new asset creation RoE’s.55 0.4% 0.4% 2000 296 439.8% 21.644. of Net Net Total Net Total Ebitda Asset 10 Year Year Companies Sales Profit Assets Debt/Equity Debt/Equity Margin RoE Turnover Gsec Yield Spread 1999 280 353.597 19.272.830 2.386 0.4% 5.73 17.456 1.56 18.101 0.664 693.546.62 20.0% 21.66 0. Debt Equity.7% 0.71 19.692 22.871.71 7.272.40 0.5% 15.89 10.8% 2005 394 1.854 0.636 0.136 1.87 16.26 0.569.79 7.74 18.82 10.86 8.37 0.43 0.6% 0.328 281.0% Too much leverage to start a fresh cap-ex cycle No incentive owing to stagnating profits.98 16.290. Asset turnovers.0% 4.69 18.6% 16.56 0.45 0.710 3.9% 2013 418 4.81 8.935 6.555 0.211 251.595.4% 3.5% 11.237.310 75.2% 16.94 15.732 0.80 16.185 106.77 8.8% 0.62 0.89 7.4% 0.2% 10.005 0.6% 10.8% 2008 411 2.3% 14.0% 0.6% 0.7% 2012 420 4.6% 0.455 0.573 471.981 25.3% 2003 358 674.65 17.139.8% 2014 416 5.28 0.669 281.915.25 0.513 227.906 36.8% 0.380 534.529 178.4% 2004 381 786.8% 0.113.025 53.68 17.2% 3.9% 2007 403 1.2% 12.035 1.323 28.5% 0.2% CAGR: CAGR: CAGR: 2009 408 2.393 11.6% 2011 418 3.849 0.85 5.67 0.8% 2015 414 5.64 20.161.7% 3.84 7.54 20.447 0.5% 16.5% 0.073.0% 13.716 340.55 0.73 19.296.BSE 500 Index Financials: Deleveraging No.7% 0. 0% 0.998 2.5% 7.53 12.94 16.4% 0.1% 0.82 0.78 0.4% 2005 626 320.8% 6.9% 2010 681 879.84 1.751 23.6% 2.74 10.8% 2.354 0.141 2.052 1.5% -1.1% 2013 694 1.954 20.1% 0.2% 0.67 0.2% 7.8% 0.56 0.67 8.8% 8.099 0.7% 9.3% 17.309 1.69 2000 463 140.92 15.72 8.89 7.337 250.978.2% 6.4% 2014 691 1.55 0.600 0.6% 4.123 0.777 0.0% -3.2% 5.9% 0.844 26.868 1.546 347.0% 10.67 7.58 12.1% 14.67 8.700 0. of Net Net Total Net Total Ebitda Asset 10 Year Year Companies Sales Profit Assets Debt/Equity Debt/Equity Margin RoE Turnover Gsec Yield Spread 1999 446 123.2% -2.86 14.96 16.1% 11.00 14.745 178.0% 7.7% 2006 642 400.3% 7.1% 15.85 1.780.92 6.258.563 41.4% 0.32 1.4% -1.316 6.431 1.738 1.010 11.0% 2.3% 2003 547 202.9% 2011 692 1.235.76 7.02 14.82 1.13 13.8% -3.2% 9.863 1.75 8.01 15.83 8.329.26 1.1% 0.1% CAGR: CAGR: 2008 666 655.36 1.219 7.038.520.2% 2007 655 524.3% 0.886 CAGR: 628.5% 0.8% -3.475 5.90 1.5% 2015 685 1.04 14.282.886 13.102 0.01 17.5% 7.6% 10.232 235.432 1.8%) 868.5% 16.72 8.89 5.6% 0.0% 2.6% 0.3% 2009 665 792.119 1.0% 2001 480 162.310 25.276 0.89 14.7% Key ratios are hit even harder in case of small cap businesses 26 .285 18.059 209.789 34.77 7.7% 0.94 14.50 12.482 0.840 52.67 1.9% 2004 603 255.09 1.413.3% 0.095.666 31.The Small Cap Index: Deleveraging No.0% 2002 513 180.9% 48.77 10.156 (4.1% 0.652 0.845 37.789 5.970 0.71 7.34 12.690 1.065.485.2% 0.0% 9.4% 2012 697 1.62 0.83 1.81 6.280 5.3% 0.12 14.8% 0.158 0.5% 8.864 287.050 447.916 46.981 191.7% -5.73 1. The Re-leveraging Trade Non-Food Credit-Break up (As on March 2016) Agriculture 13% Banks will move to finding the next credit cycle Industries Retail 44% 20% Corporates/ Organised Sector already account for 65% of the debt Service 23% RBI Data 27 . 0% 18 18 18 8.0% 49.7% 15 6.0 51.0% 25 Housing (Including Priority Sector Housing) 53.9% 50.0% 17 7.0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 28 .0 11 48.9% 50.0 21 20 19 19 19 52.0 55.0 53.0% 53.7% 50.0 13 49.3% 23 22 22 21 53.RHS 27 26 11.0% 5.0% 9.0% 9 4.0 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 47.4% 19 50.Consumer Leverage Consumer leverage low in the Indian economy Housing Loans a dominant part of Retail credit Retail credit as % of total non-food credit -(LHS) Housing % retail loans (Including Priority Sector Housing) Retail credit % of GDP .9% 25 24 54.9% 51.0 15 49.6% 10. Trend likely to play out Easier to grow retail credit (@30% CAGR) than to increase corporate credit Retail credit rates will have a secular downward trend Micro Finance yields have fallen from 24% to sub 20% in 2 years Mudra Bank re-finance of SME credit could be significant Availability of credit will release equity employed in SMEs Consumption could be a secular trend 29 . The Rural Rush Farm Insurance is set to drive stability of cash flows in the system New crop insurance. premiums tripled (Rs cr) Crop insured doubled in FY17 ($ bn) 50 25000 E E 17000 S S T 25 T I I M M A 13 A T T 5000 E E S S FY15 FY17 FY20 FY15 FY17 FY20 This will drive availability of affordable finance through the system 30 . to bring down leakages in the system Transfer subsidy direct in the hands of the farmer 60% of population are direct beneficiaries They rely on cash flows of 15.4% of GDP.5% CAGR in per capita income Policies to look beyond MSP’s to deliver this result Intent to focus on eliminating the cyclicality of the monsoons in the entire country All realignment of subsidies. which is Agriculture This should stimulate capital spend in the Rural economy 31 .Addressing the bottom of the pyramid Government’s intent is to double farm income by 2022 This is a 12. Sizing The Opportunity Financials Farm Inputs Mechanization Processors/ Agro Logistics Commodities Rs25. Lead to higher per capita leads to higher Premiums a far more efficient to create Volumes working capital demand cycle 32 .000cr Incremental Lower credit cost.000cr Rs126. Productivity Insurance disbursed.000cr Rs130.000cr Rs30. Disruption in the Growth linked to Value Addition to Higher Large growth in way the subsidy is wage inflation drive capacity. AGENDA Introduction Investment Strategy Why Old Bridge Track Record Investment Landscape Portfolio Strategies 33 . 3% Time to Fully Invest 45-60 days 34 .$2bn Create a portfolio of 12-20 companies which meet the criteria of Capital efficiency Low leverage Profit making with low capex scheduled Low valuation Reference Index BSE500 Exit Loads 18 Months.Old Bridge Capital Management “All Cap Strategy” Style Diversified Number of Stocks 12 – 20 Max Sector Concentration 30% Market Cap bias $50mn . 5% Year 2. It takes its idea from the ongoing disruption of cash flows in rural India and the lower dependance of the rural economy from the monsoons. Reference Index NIFTY Exit Loads Year 1. 4% Year3. maximum 20 at any time Market Cap bias Nil The Thematic Portfolio would align to the fastest growing part of the economy/ industry / subsector and build a value chain around the specific sector/ theme.Old Bridge Capital Management “Thematic Portfolio” Style Concentrated Number of Stocks Average 10 stocks. 3% Time to Fully Invest 45-60 days 35 . It will put a portfolio of companies together that benefit from the increased cash flow in the system. or a substitute for. directors. neither OBCM nor any of its shareholders. 1992. 1993. it is important to read through and understand the contents of the Disclosure Document. agents or advisors shall be liable for any loss or damage (direct or indirect) suffered as a result of reliance upon any statements contained in. Securities investments are subject to market risks and there is no assurance or guarantee that the objectives will be achieved. no current or prospective client should assume that the future performance will be profitable or equal to corresponding indicated performance levels. 36 . or solicitation of an offer. you should destroy this document immediately. employees. If you receive a copy of this document and you are not the intended recipient. without independent verification. This presentation is prepared by OBCM strictly for the specified audience and is not intended for distribution to public and is not to be disseminated or circulated to any other party outside of the intended purpose. Accordingly. to buy or sell any securities or funds or to enter into any contribution agreements. Past performance may not be indicative of future results. guidelines. the accuracy and completeness of information available from public sources. including the merits and risk involved. This document may contain confidential or proprietary information and no part of this document may be reproduced in any form without its prior written consent to OBCM. In making an Investment decision. Therefore. circulars issued under the Securities Exchange Board of India Act. Any dissemination. Old Bridge Capital Management Private Limited (“OBCM”) is the Investment Manager of the Old Bridge Capital Management "All Cap Strategy" and Old Bridge Capital Management "Thematic Portfolio". OBCM has relied upon and assumed. OBCM has obtained registration from SEBI and is duly authorised to provide Portfolio Management Services under SEBI (Portfolio Managers) Regulations. Investor must rely on their own examination of the terms of the offering. personalized individual advice from the adviser or any other investment professional. and any amendments thereto from time to time and rules.Disclaimer This presentation is strictly for information and illustrative purposes only and should not be considered to be an offer. No client or prospective client should assume that any information presented in this presentation as the receipt of. or any omission from this presentation and any such liability is expressly disclaimed. Before anyone considers an investment. copying or circulation of this communication in any form is strictly prohibited. In preparing this presentation. Thank You 37 .
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