Indian Entrepreneur Fund (R) Fund Factsheet I June 2014
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INDIAN ENTREPRENEUR FUND (R) FUND FACTSHEET I JUNE 2014 Indian Entrepreneur Fund (IEF): Objective: Launched in March 2010, Indian Entrepreneur Fund aims to invest in “Entrepreneur run and/or family owned businesses”; listed on the Indian stock markets, for compounding gains over the medium to long term. Indian Entrepreneur Fund aims to invest in high growth (listed) businesses owned and managed by Indian entrepreneurs/families for superior long term wealth creation. IEF will be a portfolio of around 20 high growth, high quality businesses led by entrepreneurs with vision and integrity, execution, capital allocation and distribution skills. The fund seeks value creating traits in the investments, including, Size of Opportunity, Management Quality, Earnings Growth, Quality of Business and Value. Research methodology and brief rationale: Our study covered the universe of Top 500 listed companies by market cap and we segregated them into four categories based on their ownership structures - Entrepreneur run/ Family Owned Entrepreneur/Family Owned Firms comprise ~50% of India’s market cap (in 2003 it was ~38% ) . Fastest growing businesses . Superior operating margins . Over 20% OPMs consistently over the last 10 years. Biggest wealth creators Portfolio Manager’s Commentary: Markets continued their good run. The benchmark BSE 500 increased by 6.4% during the month. Key outperforming stocks during the month were Ajanta Pharma, Havells, Astral Polytechnik, Asian Paints etc, while Bajaj Finance and Shree Cement underperformed during the month. However, we remain positive on the strength of these businesses. During the month we trimmed holding in Havells and Shree Cement, while increasing stake in Astral Polytechnik. Thermax has been the new inclusion in the fund. Thermax is one of the leading engineering companies which caters to a diverse set of industries like Oil & Gas, Iron & Steel, Cement, Chemical, Power, etc. It has a dominant presence in medium range boilers and heaters as well as a strong presence in industrial and waste water treatment which should offer a large opportunity going forward. Thermax is also the largest players in rooftop solar equipment, which is one of the focus areas for the current government. The company is also expanding its presence in the international markets like South-east Asia, Middle-east, USA & Europe apart from consolidating its presence in China. It is one of the few engineering companies which is debt-free with a cash of INR. 8.5 bn and it should benefit from the revival in the capex cycle in India. In this environment of buoyant stock market, we continue to focus on quality businesses that have economic moat and meet the filtering criteria. We believe these businesses will deliver strong profit growth coupled with superior ROCE and that should help in delivering compounded returns. Fund Details Performance Snapshot (% US$) Investment geography India 2014 Since 2010 2011 2012 2013 Investment style Long only (JUNE YTD) Inception CAGR Domicile Mauritius Indian Entrepreneur Fund 20.6 (27.5) 24.0 10.4 31.7 11.3 Base currency US $ BSE 500 16.2 (38.9) 27.6 (8.6) 28.8 1.5 NAV frequency Every Thursday * Inception date 26th March 2010 Dividend policy None Website www.ieof.com Sector allocation Top 10 holdings ISIN MU0185S00027 (Retail A) MU0185S00035 (Retail B) Sectors Portfolio Stock NAV MU0185S00043 (Retail C) (% ) (%) Bloomberg ticker code INDENPR MP (Retail A) INDENR2 MP (Retail B) INDENR3 MP (Retail C) Healthcare 18.7 PI Industries Ltd. 6.5 Auto 16.5 Motherson Sumi Systems Ltd. 6.4 NAV details as on 26 June, 2014 Materials 13.6 Page Industries Ltd. 6.1 Retail 10.9 Sun Pharmaceutical Industries Ltd. 5.5 Class Fee Type NAV (US$/Share) Financials 9.8 Amara Raja Batteries Ltd. 5.1 Retail - A Fixed 1.520 Industrials 8.4 Bajaj Finserv Ltd. 5.1 Fixed 1.521 Retail - B Information Technology 5.0 Havells India Ltd. 5.1 Variable Retail - C 1.525 FMCG 4.9 Hero Motocorp Ltd. 5.1 Note: Please refer to the terms of the fund overleaf. Utilities 4.8 Tata Consultancy Services Ltd. 5.0 Chemicals 4.2 Lupin Ltd. 4.9 Cash 3.2 Total 54.7 Total 100.0 INDIAN ENTREPRENEUR FUND (R) FUND FACTSHEET I JUNE 2014 Brief on top 5 companies PI Industries is one of the leading players in the Crop protection industry. Company largely operates under two main segments a) agriculture inputs, b) custom synthesis and contract manufacturing. PI Industries currently operates two formulation and five API facilities under its two business verticals in Jammu and Gujarat. Motherson Sumi Systems Ltd. (MSSL) is a joint venture of Sumitomo Wiring Systems of Japan and Motherson group of India. It is the largest manufacturer of wiring harness, and automotive plastic parts and mirror of India with over 65% market-share. It supplies to all leading passenger-car and two-wheeler OEMs and sells to a wide spectrum of the vehicular industry. It also operates in the non-automobile segment, with customers in earth-moving and material-handling sub-segments. Page Industries is a leading player in the branded innerwear/leisurewear for men and women in India. It has exclusive license to manufacture and distribute "Jockey" products in India, Srilanka, Bangladesh, Nepal and UAE till 2030. Page has also entered into agreement with Speedo International to manufacture, distribute and market Speedo range of swimwear in India. Sun Pharma is a leading Pharma company in India, with a strong franchise in the lifestyle ailment segments. Sun Pharma has leadership ranking with specialists in the segments of central nervous/neurology, cardiovascular, psychiatry, anti diabetes and hypertension. It also has good rankings in various chronic ailments. Sun pharma is also developing a strong presence in the overseas markets and gets strong growth from those regions. In the US it acquired and successfully turned around Caraco Inc, a firm in the US generic segment. Sun Pharma has been evolving its strategy in the US and attempts to introduce products with significant entry barriers. Sun Pharma has been on roll since the positive verdict on Taro. Management capability demonstrated by superior strategy and track record of value creation from acquisitions. Successful value unlocking from recent acquisition of Ranbaxy. Amara Raja Batteries Limited is a joint venture between the Amara Raja Group and Johnson Controls Inc. The company is one of the leading lead acid battery manufacturers, whose batteries are used in a wide array of industries, ranging from the automobile industry, the telecom industry, the power industry, the railways industry, the oil industry and the defense industry. Terms of the Fund Class Fee type Investment Amount Management Fees Performance fees** Retail - A Fixed US$ 3,000 -US$ 250,000 2.50% p.a Nil Retail - B Fixed 2.25%p.a. Nil US$250,000- US$1mn Retail - C Variable 1.25% p.a 20% over 10% on XIRR basis at the end of 3 years Notes: ** First Performance Linked Fee would be calculated and charged at the end of 3 years from the date of the investment or on early exit due to partial or full redemption whichever is earlier. Post 3 years, performance fees would be calculated and charged on annual basis. For details on subscription fees please refer to the detailed subscription agreement Contact details Service providers India Emerging Opportunities Fund Limited Fund Administrator Deutsche International Trust Corporation (Mauritius) Tel: +230 20207881/202 7812 Fax: +230 202 7906 Auditor KPMG, Mauritius Email: [email protected] Global Banker Deutsche Bank, (Mauritius) Limited Fund Administrator Indian Custodian Deutsche Bank - India Deutsche International Trust Corporation (Mauritius) Limited Tel: +230 20207881/202 7812 Fax: +230 202 7906 Email: [email protected] Investment Manager Enterprise Investment Managers Limited Mauritius International Trust Co. Ltd., 4th Floor, Ebene Skies, Rue de l`Institut Ebene, Mauritius Ph: (230) 404-2200/ Fax (230) 404-21 88 Investment Advisor ASK Investment Managers Private Limited No. 254, Bandbox house, Dr. Annie Besant Road, Worli, Mumbai - 400030, India. Ph: 9714-3554770, Fax: 9714-3556476 Important information: Past performance is not indicative of future results. Shares of the Fund are offered only pursuant to the Fund's current Information Memorandum and this summary should not be construed as an offer to sell or for solicitation of an offer to buy or a recommendation for the securities of the Fund. Any information contained in this fact sheet shall not be deemed to constitute an advice, an offer to sell/purchase or as an invitation or solicitation to do so for security of any entity and further India Emerging Opportunities Fund (IEOF) and its employees/ directors shall not be liable for any loss, damage, liability whatsoever for any direct or indirect loss arising from the use of this information. .