As on April 30, 2020 Invesco India Caterpillar Portfolio

Equity Market Commentary

Indian Markets sharply recovered in April with Nifty up ~ 15%, tracking the rally in global indices helped by the narrative that some countries are coming out of lockdown. Due to the sudden collapse in energy demand, and the huge temporary oversupply situation coupled with lack of storage, sent WTI (West Texas Intermediate) oil futures into a negative territory. At the time of writing this piece, the number of Covid cases globally stood above 3.3 mn but the trend of new case addition has stabilized at 80k /day. In India, despite the extension of nationwide lockdown, number of confirmed cases / deaths rose to ~60k / 2k respectively with majority of cases coming from the developed western / northern parts of India. Earlier, the Indian Prime Minister had extended the nation-wide lockdown until May 3, which was subsequently extended for another 2 weeks albeit with considerable relaxations permitted in areas considered less dangerous. During the month, RBI came out with the second round of monetary stimulus wherein they cut Reverse Repo by 25bps to further discourage banks from parking funds with RBI and opened another TLTRO (Targeted Long-Term Repo Operations) window.

In terms of India’s domestic economic activity indicators which were already exhibiting weak trends, were hit significantly in March (towards the end) and April month due to nationwide lockdown. In flow related trends, both FIIs (Foreign Institutional Investors) (-$0.15bn) and DIIs (Domestic Institutional Investors) (-$0.1bn) were net sellers during April. In terms of sectoral indices; during the month, all sectors showed recovery (post a sharp drop in March), with Healthcare, Auto, Oil & Gas and Metals relatively outperforming whereas FMCG, Consumer durables, Realty and Bankex underperforming the BSE Sensex index.

After the sharp correction in March followed by an equally strong recovery in April, Indian markets presently appear to be evenly poised. While it may take materially poor data regarding the progress of the virus globally and within India for market to retest recent lows, it’s a little difficult to argue for significant upside in the near term either, given valuations have very quickly turned fair after having become cheap in March. As of April, the Nifty trades at ~19x trailing earnings, which is a modest discount to its long-term average of 20x. With earnings visibility for FY’21 quite unclear at this stage, market movement in the near future can at best stay confined to a narrow range. Govt fiscal policy support and vigilant monetary authorities, however, may ensure market volatility too stays subdued.

In view of the still developing impact of the pandemic both globally and in India, growth and earning's outlook for the economy and corporate sector remains highly unpredictable and sets back our expectation of a modest cyclical economic recovery by at least two quarters. Markets will keenly watch the extent and nature of the economic recovery as many parts of India gradually emerge from a lockdown of over 40 days.

At present we believe that while global and local economic activity will stay significantly disrupted, it would settle down in the next few months. We are of the opinion that more market and economic stabilization measures will be necessitated to instill economic and market normalcy. Policy measures to support leveraged sectors of the economy such as NBFCs, real estate, telecom etc. are still awaited.

Many earnings-based valuation determinants can likely throw up incorrect conclusions in the near term due to dislocation in earnings. Today, investment decisions that discount near term earnings profile but are justifiable based on long-term intrinsic or franchise value of enterprises attract our attention. For the medium term, we do take a more constructive stance on the economy and markets as a whole, but we remain measured in our conduct with regard to portfolio choices. We keep our growth expectations muted while simultaneously increasing the bar on quality of businesses and balance sheets as our guide to our choice of investments.

Disclaimer: Past performance may or may not be sustained in future. The estimates expressed herein are based on internal analysis of publicly available information and other sources believed to be reliable. Any such calculations made are approximations, meant as guidelines only. The recipient(s) before acting on any information herein should make his/their own investigation and seek appropriate professional advice. Page 1 of 4 As on April 30, 2020 Invesco India Caterpillar Portfolio

Portfolio Commentary Indian economy has continued to deliver strong real GDP growth over the last many years as the country has decisively migrated from being an agrarian driven to consumption and manufacturing driven. The consumerism within Indians has started manifesting itself across products and services – fueled by aspirations. Further supporting it, is the fact that per capita GDP income has moved above US$ 2,000 p.a., a level where daily needs are taken care of and discretionary consumption takes off.

Ensuring availability of products and services across all pin codes of the country has differentiated winners from losers within corporate India. This has led to opportunities for companies not only selling such products & services but also for those involved in aspects of logistics, infrastructure, software solutions etc. The government has been increasing spend on infrastructure to keep pace with rising needs of roads & ports etc.

Over the next few years, we expect some companies to benefit from this growth and transform into bigger companies. We have witnessed that the companies which have traversed this journey – if identified at early stage – have created a lot of wealth for long term investors. In our experience smaller companies, which have operated in industries that have potential to become large, for e.g. in the banking industry, few players have conducted business in a financially-sound manner (based on healthy return ratios), over years, transformed into bigger companies. This portfolio endeavors to capture this transformational growth.

India had been navigating economic challenges over the previous 2 years and only recently, towards the end of CY19 and early part of CY20, had started to witness certain green shoots of recovery in economic activity. However, the global outbreak of COVID 19 virus has created a health issue which is transcending into an economic challenge. This pandemic has brought this process to a halt and as a result the reaction of stock markets has been a vicious one.

Globally, we have seen a coordinated move by various agencies announce economic packages – right from QE (quantitative easing by central banks) to governments paying out cash into the hands of people. The level of monetary aid announced is several folds as that announced during the global financial crisis of 2008-09. These steps give us confidence, that once the pace of spread of this disease stabilizes/ cure is found we would see liquidity chase risk assets and equity could be one of those.

We believe, as we have identified companies that have continued to maintain their leadership through cycles and gained market shares – profitably; these could be the wealth creators of future as well. The steep market fall has resulted in a lot of such companies emerge as relative value plays and we have made certain changes in portfolio to reflect that.

As of December 2019, YTD (year to date) over the previous financial year, the companies in this portfolio have delivered, on portfolio weighted basis, revenue growth of 3% YoY, EBITDA growth of 2% YoY and PAT growth of 8% YoY. This subdued growth in EBITDA and PAT is explained by few companies that have recently been added to our portfolio, subsequent to fall in their market capitalizations, – which factor the fall in earnings. Our understanding of the companies in this portfolio suggests that they have a potential to grow the earnings at 14% CAGR over the period FY20-22E. The portfolio is available at an average P/E 16.35 on FY21 earnings estimates, which we consider attractive from long term investment purpose.

Portfolio Data Source: Factset, Internal. EBITDA: Earnings before interest, tax, depreciation and amortization, PAT: Profit after Tax. P/E: Price to Earnings. CAGR: Compound Annual Growth Rate. Disclaimer: Past performance may or may not be sustained in future. The estimates expressed herein are based on internal analysis of publicly available information and other sources believed to be reliable. Any such calculations made are approximations, meant as guidelines only. The recipient(s) before acting on any information herein should make his/their own investigation and seek appropriate professional advice. Page 2 of 4 As on April 30, 2020 Invesco India Caterpillar Portfolio

Investment Objective Investment Strategy To achieve capital appreciation over a long ▪ Investments in fundamentally strong and high growth midcap and smallcap companies term by investing in a diversified portfolio. ▪ Participate in companies with structural growth trends ▪ Participate in niche or emerging business areas ▪ Exploit overlooked investment opportunities, Benefit from both earning growth and P/E multiple expansion, ▪ Bottom-up stock picking, High conviction portfolio

Key Facts Indexed Performance (In ₹ Lacs) Portfolio Benchmark 250 Portfolio Manager & Experience Mr. Amit Nigam Total Experience: 20 yrs. 200 Managing this portfolio since May 16, 2018 155.61 150 Benchmark Index NIFTY MIDCAP 100 100 84.27 Inception Date June 26, 2006 50

Performance Attributes 0 Standard Deviation: 6.73% Jun-06 Nov-07 Apr-09 Aug-10 Jan-12 May-13 Oct-14 Feb-16 Jul-17 Dec-18 Apr-20 Beta: 0.84 Values rebased to ₹ 25 Lacs, Since June 26, 2006 Sharpe Ratio: -0.11 Cumulative Performance Based on 3 yrs., monthly data points (Risk-free rate of 4.41% based on Overnight MIBOR) In % 1 mth 3 mths 6 mths 1 year 2 yrs. 3 yrs. 5 yrs. 7 yrs. 10 yrs. Since Inc. Portfolio 13.02 -23.71 -18.80 -24.83 -17.52 -7.14 4.22 16.34 12.94 14.12 Market Capitalization Large Cap: 2.53% Benchmark 15.36 -25.03 -19.72 -23.14 -18.41 -9.28 1.25 8.12 5.29 9.17 Mid Cap: 50.14% Since Inc.: Since Inception. Small Cap: 40.64% Average Weighted Calendar Year Performance ₹ 9,512 crs. Market Capitalization: In % YTD 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 Median Market ₹ 6,722 crs. Portfolio -20.18 -4.24 -9.57 41.80 10.44 15.01 80.60 18.91 45.18 -17.36 22.00 Capitalization: Benchmark -21.05 -4.32 -15.42 47.26 7.13 6.46 55.91 -5.10 39.16 -31.00 19.16 Source: Bloomberg, Internal Past performance may or may not be sustained in future. The data given above is for model portfolio. Returns up to 1 year are absolute & over 1 year are Compounded Annualized. The returns are calculated on the basis of daily market value of the Portfolio Fundamentals Portfolio. Dividend Yield1 0.46% Price to Earnings1 FY 20 Estimate 17.05 Portfolio Holdings Sector Allocation Price to Earnings1 FY 21 Estimate 16.35 Holding % of Net Assets Sector % of Net Assets Price to Earnings1 FY 22 Estimate 12.72 Mahanagar Gas Ltd. 8.83 Consumer Discretionary 29.43 Financials 15.06 2 Year EPS CAGR (FY20-FY22)2 15.26% Central Depository Services India Ltd. 7.65 1 India Ltd. 6.59 Utilities 13.16 Return on Assets FY 20 Estimate 6.71% Ltd 6.00 Materials 12.19 Return on Equity1 FY 20 Estimate 14.67% Moil Ltd 5.33 Industrials 9.23 Source: Factset, Internal. Ltd. 5.31 HealthCare 6.59 1. Weighted Harmonic Mean. 2. EPS Growth is derived Consumer Staples 5.30 from P/E ratios. Note: Excludes companies with net Ltd. 4.33 loss for appropriate results for various ratios. EPS: V-Mart Retail Ltd. 4.18 Communication Services 2.35 Earnings per share. Ltd. 3.94 Cash & Cash Equivalent 6.70 Sundaram Fasteners Ltd. 3.93 Gulf Oil Lubricants India Ltd. 3.84 Jubilant Foodworks Ltd. 3.53 Mahindra Logistics Ltd. 3.49 Tvs Motor Company Ltd. 3.34 Returns Attributors/ Detractors for April 2020 Ltd. 3.20 Top 3 Attributors Johnson Controls-Hitachi AirCon. India Ltd 3.12 Mahanagar Gas Ltd. Tata Metaliks Ltd. 3.02 Sanofi India Ltd. Heritage Foods India Ltd. 2.77 Moil Ltd Ahluwalia Contracts India Ltd. 2.54 United Breweries Ltd. 2.53 Top 3 Detractors Music Broadcast Ltd. 2.35 Cholamandalam Investment & Finance Co. Ltd. Equitas Holdings Ltd. 2.34 Music Broadcast Ltd. RBL Bank Ltd. 1.13 Bharat Electronics Ltd. Total Equity Exposure 93.30

Large Cap:1st 100th company in terms of full market capitalization. Mid Cap: 101st to 250th company in terms of full market capitalization. Small Cap: 251st company onwards in terms of full market capitalization. All data provided above is for model portfolio. The returns of model portfolio given above are for illustration purpose only. Model portfolio returns does not take into account expenses/charges and Profit/Loss on account of derivative transactions. Returns under client wise portfolio may vary vis‐à‐vis returns of model portfolio due to various factors viz. timing of investment/additional investment in client’s portfolio, timing of withdrawals in client’s portfolio, mandates given by respective client, profit/loss on account of derivative transactions, expenses charged to respective portfolio, dividend income in the respective portfolio etc. The stocks referred above should not be construed as recommendations from Invesco Asset Management (India) Private Ltd. (“IAMI” / “Portfolio Manager”). There has been change in return disclosure format for PMS pursuant to amendment in SEBI Portfolio Managers Regulations 2020, which will be implemented in due course. The Portfolio may or may not have any present or future positions in these stocks or in any other portfolios offered by IAMI. The performance of above stocks should not be construed as performance of the portfolio as the portfolio would be constituted of number of stocks having different weights and the individual stock held by the portfolio may or may not give positive returns. Disclaimer: The Portfolio manager does not offer guaranteed or assured returns. Securities investments are subject to market risks, please read the Disclosure Document carefully before investing. Invesco Asset Management (India) Private Ltd. -Portfolio Manager –Registration No. PM/INP000005273 Page 3 of 4 As on April 30, 2020 Invesco India Caterpillar Portfolio

New entries in the model portfolio during the month of April 2020

Not Applicable

Exits in the model portfolio during the month of April 2020 Cholamandalam Investment & Finance Co. Ltd.

▪ In the current situation of countrywide lockdown (because of COVID 19), whereby either moratorium has come into play or the collection efficiency has taken a hit, asset liability mismatch can be a big risk for Non Banking Financial Companies (NBFCs). NBFCs unlike banks, do not have privilege of relatively sticky Current Account Savings Account (CASA) deposits. ▪ Also, in absence of direct window of borrowing from the central bank, NBFCs are generally dependent on the money markets for refinancing – which to our understanding are not operational at its optimum (heightened risk aversion is resulting in very high spreads). Hence we are exiting our NBFC exposure.

Data Source: Internal, Bloomberg Disclaimer: Past performance may or may not be sustained in future. The estimates expressed herein are based on internal analysis of publicly available information and other sources believed to be reliable. Any such calculations made are approximations, meant as guidelines only. The stock referred above should not be construed as recommendation, advice to buy, sell or in any manner transact in this stock and neither should it be considered as Research Report from IAMI. IAMI may or may not have any present or future positions in this stock or in any other portfolios offered by IAMI The performance of above stock should not be construed as performance of IAMI portfolio offerings as each portfolio would be constituted of number of stocks having different weights and the individual stock held by the portfolio may or may not give positive returns.The recipient(s) before acting on any information herein should make his/their own investigation and seek appropriate professional advice. Disclaimer: This document does not solicit any action based on the material contained herein. Invesco Asset Management (India) Private Ltd. (“the Portfolio Manager / the Company”) will not treat recipients as clients by virtue of their receiving this document. The document does not constitute a personal recommendation or take into account the particular investment objectives, financial situation / circumstances and the particular needs of any specific person who may receive this document. The Companies / Stocks referred in this document are only for the purpose of explaining the concept of Portfolio and should not be construed as recommendations from Portfolio Manager. The Portfolio may or may not have any present or future positions in these stocks / sector. The Portfolio(s) discussed in the document may not be suitable for all the investors. The recipient of this material alone shall be fully responsible / liable for any decision taken based on this material. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Persons who may receive this document should consider and independently evaluate whether it is suitable for his / her / their particular circumstances and are requested to seek professional / financial advice. Past performance is not a guide for future performance. Future returns are not guaranteed, and a loss of principal may occur. The statements contained herein may include statements of future expectations and other forward-looking statements that are based on our current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. The Company and its affiliates accept no liabilities for any kind of loss arising out of the use of this document. With respect to all information found in this document the Company has obtained data from sources it considers reliable however, the Company and its directors, officers, agents, or employees and its affiliates make no warranty, express or implied, including the warranties of merchantability and fitness for a particular purpose, or assume any legal liability or responsibility for the accuracy, completeness, or usefulness of any information contained therein and the Company shall not be liable for any indirect, incidental or consequential damages sustained or incurred in connection with the use, operation, or inability to use this document and information contained therein. Under no circumstances will the Portfolio Manager be liable for any loss or damage caused by anyone’s reliance on information contained in this document. The Portfolio Manager does not offer guaranteed or assured returns. Securities investments are subject to market risks, please read the Disclosure Document carefully before investing. Page 4 of 4