Indian Entrepreneur Fund
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INDIAN ENTREPRENEUR FUND FUND FACTSHEET NOVEMBER 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 Businesses (FOBs), Public Sector Undertakings (PSUs), Multi National Corporations (MNCs) and Pure Professional Firms. Since the widely held professional firms were only a handful in number, the three categories were taken up for intensive analysis and compared against a host of criteria i.e. sales growth, profit growth, operating margins, capital efficiency – RoE & RoCE and wealth creation. In each of the above comparisons, the entrepreneur run/family owned businesses fared exceedingly well. The summary of the findings are as below: Following are the findings and salient features of the research on Indian Entrepreneur and for Family Owned Companies: Continued Dominance of Entrepreneur / Family owned firms 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. Strong capital efficiency Biggest wealth creators Portfolio Manager’s Commentary: Markets continue to scale new heights. The month saw markets closing at all time highs, aided by the fall in crude oil prices. The benchmark BSE 500 closed up 3.4% during the month. Indian Entrepreneur Fund continues to record superior performance. During the month stocks like Titan and Divi’s Laboratories underperformed the markets. Titan was impacted due to low consumer sentiments towards gold and also the possibility of government increasing crubs on gold imports. With the fall in crude prices, government on the contrary has eased gold imports and has scrapped 80:20 scheme, which, should benefit Titan. While Divi’s Laboratories underperformed due to relatively muted H2 FY15 guidance by the company. However, we remain positive on the strength of both these businesses and continue to hold on to our positions. We have included Kotak Mahindra Bank (KMB) in the strategy, replacing Bajaj Finserv. Kotak Mahindra is a very strong financial franchise in the country. The service portfolio of Kotak Mahindra Bank includes banking solutions, insurance business, asset management business etc. The bank under the chairmanship of Mr Uday Kotak has performed very strongly under varied business conditions. Asset quality outlook continue to remain sanguine given large exposure to retail lending, high quality exposure within corporate lending and absence of exposure to troubled sectors such as infrastructure financing and airlines. Also worst may be behind for capital market operations. The acquisition of ING Vysya Bank should be very synergistic with KMB. The acquisition give KMB much needed exposure in South India. On the whole, we are very positive on the economy and the businesses that we own. The economic moat that these businesses have created over the last few years should enable them to further improve on their market positioning and thereby deliver superior performance. Overall, the strategy continues to remain biased towards very high quality businesses. Fund Details Performance Snapshot (% US$) Investment geography India Investment style Long only 2014 Since 2010 2011 2012 2013 (NOV YTD) Inception CAGR Domicile Mauritius Base currency US $ Indian Entrepreneur Fund* 20 (27) 25 10 63 15 NAV frequency Every Thursday BSE 500 16 (39) 28 (9) 40 3 Dividend policy None * Inception date 26th March 2010 Performance data of fee plan with 2.5% fixed management fees (Bloomberg Website www.ieof.com Ticker: INDENPRMP) MU0185S00191 (Retail T1) Sector allocation Top 10 holdings ISIN MU0185S00209 (Retail T2) MU0185S00217 (Institutional T1) Sectors Portfolio Stock NAV (% ) (%) Healthcare 19.3 Amara Raja Batteries Ltd. 6.5 Auto 16.8 Page Industries Ltd. 5.6 Materials 11.6 Havells India Ltd. 5.6 NAV details as on 30 November, 2014 Retail 9.5 Pidilite Industries Ltd. 5.6 Finance 9.4 PI Industries Ltd. 5.5 NAV Class Fee Type Industrials 8.8 Motherson Sumi Systems Ltd. 5.5 ( US$ / Share ) Chemicals 7.6 Lupin Ltd. 5.3 Institutional -T1 Fixed 1.949 FMCG 5.6 Sun Pharmaceutical Industries Ltd. 5.2 Utilities 5.0 Bajaj Finance Ltd. 5.2 Note: Please refer to the terms of the fund overleaf. Information Technology 4.2 Astral Poly Technik Ltd. 5.0 Cash 2.2 Total 55.0 Total 100.0 INDIAN ENTREPRENEUR FUND FUND FACTSHEET NOVEMBER 2014 Brief on top 5 companies 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. 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. Havells manages its operations through four divisions: switchgears, cables and wires, lighting and fixtures and electrical consumer durables. In 2007, Havells acquired the lighting business of Sylvania which was 1.5 times its size, which has a considerable presence in Europe as well as in Latin America and Asia, for USD 300 mn. The acquisition have Havells access to a much larger geography. Pidilite Industries Limited is the market leader in adhesives and sealants, construction chemicals, hobby colours and polymer emulsions in India. Its brand name Fevicol has become synonymous with adhesives in India and is ranked amongst the most trusted brands in India. Pidilite has expanded its presence in emerging segments like mechanized joinery, modular furniture, flooring, auto care and waterproofing through brands like Dr Fixit and Roff. 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 andTerms five API of facilities the Fund under its two business verticals in Jammu and Gujarat. Class Fee type Investment Amount Management Fees Performance fees** Retail - T1 Fixed US$ 3,000 -US$ 250,000 2.50% p.a Nil Retail – T2 Fixed US$250,000- US$1mn 2.25%p.a. Nil Institutional T1 Fixed US$1mn and above 1.75%p.a. Nil Notes: For details on subscription fees please refer to the detailed subscription agreement Exit load – up to 1% in the first year Contact details Service providers India Emerging Opportunities Fund Limited Fund Administrator Deutsche International Trust Corporation (Mauritius) Suite 450, 4th floor, Barkly Wharf East, Le Caudan Waterfront, Port Louis, Auditor KPMG, Mauritius Mauritius Tel: +230 20207881/202 7812 Fax: +230 202 7906 Email: [email protected] Global Banker Deutsche Bank, (Mauritius) Limited Indian Custodian Deutsche Bank - India Fund Administrator Deutsche International Trust Corporation (Mauritius) Limited Suite 450, 4th floor, Barkly Wharf East, Le Caudan Waterfront, Port Louis, Mauritius 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 Corporate of ce No. 254, Bandbox house, Dr. Annie Besant Road, Worli, Mumbai - 400030, India. Ph: 91-22-66520000 Fax: 91-22-24985665. Website: www.ask nancials.com Dubai Office 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. Recipients of this information should exercise due care and caution and read the offer document (if necessary obtaining the advice of nance/ other professionals) prior to taking any decision on the basis of this information. .