Investment Opportunities in Indian Financial Markets
INVESTMENT OPPORTUNITIES IN INDIAN FINANCIAL MARKETS
IDFC ASSET MANAGEMENT
GAURAB PARIJA – HEAD – SALES & MARKETING
January 2019
The information contained herein is the confidential and proprietary information of IDFC Asset Management Co. Ltd.. Any use, reproduction, dissemination, or disclosure of the information contained herein is strictly prohibited.
For Investment Professional Use Only 1. India
2. Key drivers of future growth
3. Investment opportunity
4. Routes to participate in Indian Opportunity
2 INDIA IN THE WORLD
3rd Largest 2nd Largest $393 bn GDP (PPP) Foreign Reserves Internet Users $ 10 Trillion
nd 2nd Largest Fastest 2 Largest growing major Rail Network Road Network economy in the world
Source: International Monetary Fund Source: Department of Industrial Policy and Promotion, Government of India
India Investment Partnership Industry Case opportunities Overview 3 For Investment Professional Use Only INDIA – THE TIME IS NOW
Substantial GDP Growth Infrastructure Huge Consumer Market
Investments by 2025 by 2025 (BCG Study) 20 (PPP) 1.5 in next 20 3.6 $Trillion
$ Trillion $Trillion years ECONOMIC Young Nation Upward mobility Skilled work force Literacy rate Average age More added to by 2025 29 in 2025 150 middle class by 2025 99%
SOCIAL Years Million
Inclusion in Banking system Deregulation Democracy
Accounts opened under Archaic laws st World’s Largest 241 ‘Banking for all’ 1000+ repealed to reduce 1 Democracy
Million red-tape POLITICAL
India Investment Partnership Industry Case opportunities Overview 4 For Investment Professional Use Only INDIA – THE TIME IS NOW - ECONOMIC
1. One of the world's fastest-growing majorCompanies economies achieving global scale from their domestic 8 8.1 India remains an oasis of 7.8 7.7 7.6 7.7 7.8 7.2 7.2 Indian growth amongst slowing 6.9 business 6.6 7.3 6.7 6.5 global outlook 6.6 6 6 5.9 5.6 5.8 India is projected to be the fastest growing major economy in 2017 surpassing 2.5 China 2.2 2.4 2.4 2.3 1.9 1.5 1.6 1.7 1.6 The trend is expected to continue at least till 2021
2013 2014 2015 2016 2017 P 2018 P 2019 P 2020 P 2021 P 2022 P Source: International Monetary Fund India China US Source: Department of Industrial Policy and • P = Projected Promotion, Government of India • Source: International Monetary Fund Source: Ernst & Young Emerging Markets Center
India Investment Partnership Industry Case opportunities Overview 5 For Investment Professional Use Only INDIA – THE TIME IS NOW - ECONOMIC 2. Indian Infrastructure 350 mn Indians will move into cities over next 30 years
$ 1.5 tn Infrastructure investments planned for the next 20 years
Investments planned across key government initiatives
$ 184.5 bn Port and Port-led Industrialisation $ 131.7 bn Railways
$ 106.5 bn Highways (Bharatmala & NHDP) $ 100 bn Industrial Corridors • Source: McKinsey Global Institute • Source: Press Information Bureau, Government of India $ 58 bn Airports • Source: Press Information Bureau, Government of India • Source: Government of India
India Investment Partnership Industry Case opportunities Overview 6 For Investment Professional Use Only INDIA – THE TIME IS NOW - SOCIAL 3. Largest Youth Population in the World
1800 1,705 40 37 1600 1,528 35 3X Expected income levels by 2025 1400 1,311 31 30 1200 1,145 Share of Urban market in consumption 27 1,033 25 rd 1000 2/3 growth in the next 10 years 860 20 800
15 (years) Age 600 1.14 bn Expected Working population by 2025 Population (million) Population 400 10 200 5 Median age of India by 2050 – 0 0 37.3 Yrs “Young Nation” 2015 2030 2050 Total Population Working age population Median age of population
*Source: UNDP Asia Pacific Human Development Report 2016 Source: United Nations Population Fund Source: British Council Source: All India Management Association & The Boston Consulting Group
India Investment Partnership Industry Case opportunities Overview 7 For Investment Professional Use Only INDIA – THE J.A.M TRINITY - SOCIAL 4. Transition from Physical to Digital Companies achieving global scale from their domestic Indian business
Jan Dhan Aadhaar Mobile Integrated approach to Unique identity to Indian market is the bring financial inclusion every resident citizen second largest in of all citizens the world Attractive 1 billion enrollments ~219Macro million Story accounts under Aadhaar More than 1 billion opened- so far scheme Reforms plus mobile subscribers growth narrative Inclusivity, banking for all, connectivity for all; 3 pillars to Create Huge Demand, Motivate Investment, Manufacturing and Economic Growth
India Investment Partnership Industry Case opportunities Overview 8 For Investment Professional Use Only INDIA – THE TIME IS NOW - POLITICAL 5. Pillars of Resurgent India Companies achieving global scaleEase of Doing Business New Processes from their domesticGST IndianDe -monetization business New Sectors Major FDI reforms and inflows
Make in India New Approach Digital India Skill India New Infrastructure Key Infrastructure and Urbanization India – Design & Innovation New Innovation and R&D Start Up India Intellectual Property Rights New Mind-set From red tape to red carpet
India Investment Partnership Industry Case opportunities Overview 9 For Investment Professional Use Only INDIA – THE TIME IS NOW - POLITICAL 6. Rising Global Competitiveness Companies achieving th global scale 77 Position in ‘World Bank’s Ease od Doing Businessfrom Ranking their 2018’, from 142nd in 2014 domestic th Indian 40 Rank on the Global Competitiveness Index 2017-18business Key Reforms across various sectors
Defence Food Manufacturing Processing Telecommunication Agriculture Attractive Macro Story Private Security - Pharmaceutical Civil Aviation Space Reforms plus Agencies growth narrative
Source: World Bank Railways Insurance & Pensions Medical Devices Single Brand Retail Source: World Economic Forum
India Investment Partnership Industry Case opportunities Overview 10 For Investment Professional Use Only STRATEGIC PERSPECTIVE - THE INDIAN INVESTMENT TIMELINE Reforms momentum plus digitization of the economy will create global Companies Positive feedback loop from Scale effect Scale achieving Digitally interconnected continental sized economy creates viral scale companies which reflexively global scale growth opportunities from their attract more investment flows domestic Larger companies drive greater Equity and Debt investment flows Indian business
Technology Technology - Government's reforms blue print Nation Startup India - Vibrant start-up environment to improve productivity especially via B2B growth J.A.M Trinity – Inclusivity, Banking for all, Connectivity for all
Attractive Macro Story - Outlier in the EM commodity / China driven basket Reforms plus Political integration growth Taxation reforms - Value added tax regime for Economic Integration and increase in tax compliance narrative Shifting of the domestic savings from real assets to financial assets
India Investment Partnership Industry Case opportunities Overview 11 For Investment Professional Use Only CAPTURING THE INDIAN INVESTMENT OPPORTUNITY
India Investment Partnership Industry Case opportunities Overview 12 For Investment Professional Use Only CAPTURING THE INDIAN INVESTMENT OPPORTUNITIES A wide spectrum of opportunities.
Attractive Technology Global Scale Macro Story Nation Companies
Indian diversified Well penetrated Indian VC & PE funds Indian Private Equity & long only equity funds Private credit funds
Indian Long / Short Indian fixed Thematic funds Less penetrated income funds Equity funds which capture opportunities Smart beta funds from potential winners & losers due to structural Indian multi-asset funds changes in India. Large dispersion of returns in Indian equity markets provides opportunities to capture inter and intra sector long and short alpha
India Investment Partnership Industry Case opportunities Overview 13 For Investment Professional Use Only PRODUCT OPTIONS Equity based solutions Main Strategy Sub Strategies • India all cap growth Growth seeking Investors Diversified • India midcap growth Equity Funds Equity based solutions • Part of Global / EM / APAC funds
Equity based solutions
Main Strategy Sub Strategies • Growth India focused • Value Smart beta strategies INDIA • Quality + Growth • Value + Growth • Currency Hedged Equity based solutions Main Strategy Sub Strategies Thematic and Infrastructure Sector Focused Bespoke themes / sectors Funds
India Investment Partnership Industry Case opportunities Overview 14 For Investment Professional Use Only PRODUCT OPTIONS Fixed Income based solutions Main Strategy Sub Strategies Yield Seeking investors India focused • G-Sec. & Corps fixed income • Hard currency bonds fund • Local currency bonds
Multi Asset based solutions
Main Strategy Sub Strategies India multi–asset, • Fixed Income multi strategy funds • Equity Arbitrage INDIA • Dividend Yield Cos • Special Situations
Alternative Investment based solutions Main Strategy Sub Strategies India absolute • Long / Short return funds • Equity Arbitrage • Covered Call • Tail Risk Hedging
India Investment Partnership Industry Case opportunities Overview 15 For Investment Professional Use Only STRUCTURE OPTIONS FOR INDIA FOCUSED FUNDS Sub-advisory services to partner firm which acts as the Investment Manager
Partner owned
Investment Partner sets up an Company Advisor to the Manager Investment Company which invests directly Indian Asset Partner’s Clients Management in India based on & advisory services Distributors
offered by Indian AMC Purchase / Sale of Indian securities Portfolio of Indian Securities
IDFC AMC was previously the Investment Advisor to Natixis Asset Management (Asia) for the Natixis IDFC India Equities Fund (Luxembourg domiciled UCITs fund part of Natixis International funds SICAV)
India Investment Partnership Industry Case opportunities Overview 16 For Investment Professional Use Only INDIA FOCUSED FUNDS - WHITE LABELED SOLUTIONS Partner sets up feeder structures into INR or USD denominated IDFC Funds
Feeder Vehicle Investment Manager
Transactions in Indian Securities Partner’s clients Portfolio of Owned by Indian Asset and Indian Partner Management Distributors Securities
Partner sets up a Feeder fund for its clients which invests into an Offshore or Onshore Investment Company managed by Indian AMC for investing in Indian securities
India Investment Partnership Industry Case opportunities Overview 17 For Investment Professional Use Only INVESTMENT EXPERTISE AND SOLUTIONS
Mutual Funds Alternative Portfolio Investment Funds Management Offshore Funds Services
• Equity strategies • Absolute returns based •Artificial Intelligence •SCA in the UAE long short strategies based investment • Fixed Income strategies •MAS in Singapore strategy
India Investment Partnership Industry Case opportunities Overview 18 For Investment Professional Use Only INDIAN ASSET MANAGEMENT INDUSTRY - OVERVIEW
India Investment Partnership Industry Case opportunities Overview 19 For Investment Professional Use Only INDIAN ASSET MANAGEMENT INDUSTRY
42 AMCs, $ 342 bn* AUM, 5.5 times 7284~ 80.3 mn Folios
Mutual Fund Industry Growth in last 10 years Listed Companies
REGULATOR S.E.B.I.
Securities Exchange Board Of India Source: AMFI, NSE, BSE, IBEF.com ~ Total of companies listed on NSE as on October 2018 and BSE as on August 2018 *Between April to Nov 18 ^ from 2008 till 2018
India Investment Partnership Industry Case opportunities Overview 20 For Investment Professional Use Only IDFC Asset Management Company Ltd. One Indiabulls Centre, 6th Floor 841 Jupiter Mills Compound, Elphinstone Road (West) Mumbai 400 013 INDIA www.idfc.com
THANK YOU
21