1 All data/information used in the preparation of this material is dated and may or may not be relevant any time after the issuance of this material. ICICI Prudential Asset Management Company Limited (the Portfolio Manager/ the AMC) takes no responsibility of updating any data/information in this material from time to time. The recipient of this material is solely responsible for any action taken based on this material. The information contained herein are strictly confidential and are meant solely for the benefit of the addressee and shall not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of the AMC. Further, the information contained herein should not be construed as forecast or promise. Past performance of the Portfolio Manager may not be indicative of the performance in the future. Please refer to page 24 & 25 for risk factors and disclaimers. ICICI Prudential PMS PIPE Strategy Stringent Selection Our Philosophy for Growth In-depth Study Careful Evaluation
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All data/information used in the preparation of this material is dated and may or may not be relevant any time after the issuance of this material. ICICI Prudential Asset Management Company Limited (the Portfolio Manager/ the
AMC) takes no responsibility of updating any data/information in this material from time to time. The recipient of this material is solely responsible for any action taken based on this material. The information contained herein are
strictly confidential and are meant solely for the benefit of the addressee and shall not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any
form, without prior written consent of the AMC. Further, the information contained herein should not be construed as forecast or promise. Past performance of the Portfolio Manager may not be indicative of the performance in
the future. Please refer to page 24 & 25 for risk factors and disclaimers.
Past performance may or may not be sustained in future
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A Negative Year Can Wipe Off Years Of Positive Return
8.23% 11.36%
{
Difference in Return
3.13%
Rs.154 Rs.137
Valuation
of Rs.100 invested:
30% 30% 30%
40% 40% 40%
-30%
-50%
Money saved in negative markets has a
disproportionate impact on Return on
Investment(ROI).
In this context, in the first scenario, an investor earns a yearly return of 40% for three consecutive years—a normal feat in a raging bull market. But, he
ends up with a loss of 50% in the fourth year. Such a scenario cannot be ruled out post a bull market. This loss of 50% in the 4th year brings down his
annualised return or CAGR to just 8.23% over 4 years. In the second scenario, the investor lowers his risk of loss. Thus, even though he earns just 30%
yearly in the first three years, the loss of 30% in the 4th year only partially erodes his overall CAGR, which is 11.36%
Decision making is the most important aspect
The above is only for illustration purpose. The actual results may vary.
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Core 4 Parameters
The aforesaid factors/framework are only indicative. There may be other factors that may be relevant for identification/selection of stocks.
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7
India: Well Positioned for the Next Leap
Stable and growth focused
Government.
Favourable Macros, Benign Crude,
Relatively stable currency and
low inflation.
Structural reforms may lead to
revival in business cycle.
GDP Size:
2.5 Trillion $
GDP Target in next 5 years:
5 Trillion $
Map not to scale. This map has been used for design and representational purpose only, it does not depict the geographical boundaries of the country. These do not conform to the external boundaries of India
recognized by the Survey of India. Source: Ministry of Statistics and Programme Implementation(MOSPI). Edelweiss Research
The advantages mentioned above are only indicative. The outcome of these factors may or
may not be reflected in the portfolios managed by the Portfolio Manager
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India’s Statistics: What’s Trending?
Divergence Between Mega Cap stocks and
Mid & Small Cap Stocks
Source: BSE. All data as of February 29th
, 2020. Returns are in Absolute terms. Past performance may or may not sustain in future.
113
82
71
60
70
80
90
100
110
120
130 S&P BSE Sensex S&P BSE MID CAP S&P BSE SMALL CAP
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In 2012 -2013: Top 10 stock led the
market movement
114
99
80
85
90
95
100
105
110
115
120
Top 10 stocks Overall Market (excluding top 10 stocks)
Rest of the market regained the lost
ground in subsequent period
Re
-b
ased
at 100
Re
-b
ased
at 100
Is it happening for the first time?
In 2012-13 too, the top 10 stocks ran ahead the rest of the market. Consequently, the
broader market gathered pace, giving way to a major bull market.
Source: Edelweiss Research, Motilal Oswal Research, Data of NSE.
0
50
100
150
200
250
300
Top 10 stocks Overall Market (excluding top 10 stocks)
10
0
100
200
300
400
500
600
700
800
900
S&P BSE Sensex S&P BSE MID CAP S&P BSE SMALL CAP
Convergence in performance
typically at the start of a fresh rally
Market fall tailed by sharp
spurts in small caps,
followed by midcaps and
large caps.
Midcaps and Smallcaps: Well placed
Source: NSE BSE Website. Data as on February 29th
, 2020
The performance of major market capitalization segments (large, mid and small) have
typically converged at the beginning of a fresh rally.
Major Market
Cap Segments
have converged
once again in the
recent past
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Valuation in Midcap and Smallcap Space
Valuations of Midcap and Smallcap has corrected from its recent peaks.
Both Small cap stocks and Mid cap stocks are trading near or below their long term average values.
Interest rate cuts has been the trigger of the equity market movement
Data as on February 29th
, 2020 | Source: NSE BSE Website, RBI
Cost of capital is a key trigger for Earning Growth, Stock Prices have appreciated with fall in interest rates with a lag effect.
??
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ICICI Prudential PMS PIPE Strategy aims to provide long term capital appreciation and generate returns by
investing primarily in Mid and Small segment of the market by having exposure in companies enjoying some
economic moat or undergoing special situations or in the midst of unfavourable business cycle.
The Portfolio features mentioned herein involves risk and there can be no assurance that specific objectives will be met under differing market conditions or cycles. The strategy features as stated herein is only
indicative in nature and is subject to change within the provisions of the disclosure document and client agreement without any prior notice to investors. Please refer to the disclosure document & client
agreement for details and risk factors.
ICICI Prudential PMS PIPE Strategy
About the Strategy
• A portfolio with a long term view on stocks predominantly in the Mid and Small Cap Space.
• The Strategy intends to invest in companies with market capitalization less than the largest market
capitalisation stock in S&P BSE Smallcap Index.
• The Strategy shall follow top down approach in sector selection and bottom up process for stock selection
on the basis of 4 parameters: Business Models, Valuations, Sentiments, and Themes.
• Combination of stocks in Mid and Small Cap Market Capitalization space aiming to provide rapid growth
along with some steady performers.
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Market Capitalization Break-up Top 10 Holdings
Stocks % to Net Assets
Current Positioning
The portfolio data mentioned above is of the oldest client and data of an individual client may vary significantly from the above. The Stock(s)/Sector(s) mentioned in this material do not constitute any recommendation of the same and
the portfolios may or may not have any future positions in these Stock(s)/Sector(s). Data as on February 29, 2020.
The Portfolio is predominantly invested
in Small cap Stocks
CCL Products India Ltd 7.54
Tata Metaliks Ltd 6.13
Godrej Agrovet Limited 5.66
Brigade Enterprises Ltd 5.11
Mahindra Lifespace Developers Ltd 4.87
DCB Bank Limited 4.41
Suprajit Engineering Limited 4.25
Chambal Fertilizers & Chemicals Ltd 4.24
Timken India Ltd 4.22
KNR Constructions Ltd 4.00
Midcap ,
24.3
Smallcap,
75.7
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Portfolio Statistics
PE Ratio:
14.55
PB Ratio :
1.99
Valuation Parameters (TTM)
P/S Ratio:
1.14
Top 5 Sector Exposure
The portfolio data and the statistical analysis mentioned above is of the oldest client of the Strategy and data of an individual client may vary significantly from the above. Valuation Parameters Source: ICICI Prudential PMS PIPE Strategy Factsheet
PE: Price to Earning. PB: Price to book, P/S: Price to Sales. The Stock(s)/Sector(s) mentioned in this material do not constitute any recommendation of the same and the portfolios may or may not have any future positions in these Stock(s)/Sector(s). Data
as on February 29th, 2020. Past performance may or may not be sustained in future.
, 2020. Past performance may or may not be sustained in future. *Performance of Investment approach/strategy is calculated using Time Weighted Rate of Return (TWRR) for the aggregate portfolio. All the returns
calculated above are after deduction of the applicable expenses. Inception date: September 5, 2019. Inception Date of the Strategy is the date of onboarding of first client in the Strategy
Returns for one year or less are on absolute basis, while returns more than one year are on annualized basis
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The Proposition : Sources of Alpha
1) Investing in secular growth stories Potential of price appreciation backed by EPS growth.
2) Investing in companies with possibilities of demand explosion and margin expansions.
Expansion of revenue and profit growth rates surpasses historical averages leading to PE re-rating.Improves visibility and valuations leading to PE re-rating.
3) Buying businesses undergoing special situations,cyclicality and mispriced by market, now available at huge discount.
Aiming to provide margin of safety
The aforesaid factors are only indicative and the investee companies of the Portfolio may or may not meet the aforesaid criteria. The Portfolio Manager’s reserves the right to invest in accordance with the Client
Agreement and the Disclosure Document
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The Proposition : Sources of Alpha
Low PE(x)
and Valuation
Growth in
Earnings PE(x)
Acceleration
PR
ICE
TIME
Time horizon - Typically 3 to 5 years
Scepticism
Discovery
Wider
Acceptance
Maturity/ decline
Seed/ Start
up Capital
Expansion
of Capital
Increased
Institutional
Flows
Maturity
Proposed Entry by
portfolio Wider acceptance leading to increase in
Optimization
Of Capital
Structure
Price
Likely profile of investee companies
• Potential for High growth with established business models
• Addressing sizable revenue opportunity with unmatched Market
cap
• Superior capital productivity ratios compared to its peers in the
industry
• Competent and ambitious management
• Enjoys an economic moat which may helps generate economic
profits over an extended period of time
• May be out of flavor and offer significant potential for returns
• May be available at distressed valuations wherein the value
unlocking triggers are identifiable
The aforesaid factors are only indicative and the investee companies of the Portfolio may or may not meet the aforesaid criteria. The Portfolio Manager’s reserves the right to invest in accordance with the Client
Agreement and the Disclosure Document
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Quality of
Business
Valuation
Sentiments Trends
ICICI
Prudential
PIPE
Strategy
Active Coverage
Active Coverage of over 350 stocks
Portfolio Construction
Portfolio Monitoring
Regular monitoring of portfolio for adherence
to internal limits and mandates. Portfolio
attribution system tracks performance of
portfolios
Convictions that navigate mandates
and research
The Portfolio construction process mentioned above are only indicative. There may be other processes for construction of the Portfolio.
ICICI Prudential PIPE Portfolio (A series under “The PIPE Portfolio”)
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Screening by market cap,
liquidity, Industry and Corporate
Governance
STOCK SCREENING
ACTIVE COVERAGE OF
350 COMPANIES
An Initiation note is prepared
actively covering the stock.
RESEARCH OUTPUT
• Stock Recommendation
• Model Portfolio
ACTIVE RESEARCH
Investment Matrix
DESK RESEARCH
•Annual Report Analysis
•Quarterly Result Analysis
•Industry Research
•Sell Side Research
MEETINGS
• Industry Conferences
• Vendor Meetings
CHANNEL CHECKS
• Distributor Meetings
• Expert Meetings
STOCK UNIVERSE
2500 COMPANIES
+ IPOs
The aforesaid points are only indicative. There may be other factors that may be relevant for stock research.
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Risk Control Measures
The word “risk” derives from the early Italian risicare, which means “to dare”. In this sense, risk is a choice rather
than a fate.
- Peter L. Bernstein, Against the Gods, The Remarkable Story of Risk.
RISK EVALUATION WHILE PORTFOLIO CONSTRUCTION
Qualitative Filters
•Management Track Record
•Moat in Business
Quantitative Filters
•Valuation: PE, PB, RoE, RoCE etc.
•Net Debt to EBITDA – Company’s
ability to decrease debt
•Market cap to sales, FCF to sales
•Cash Conversion Cycle
RISK EVALUATION WHILE PORTFOLIO MONITORING
Event Driven Volatility
If the investment thesis is intact,
the Portfolio Manager may increase
the weight in the holding.
If the investment thesis is
broken, the portfolio manager
may exit from the stock.
Noise Driven Volatility
Compelling valuations may
trigger increase in the
weight.
Risk parameters are highly unstable through time because
noise driven volatility differs from event-driven volatility.
Abbreviations used: PE – Price to Earnings; PB – Price to Book Value; RoE, Return on Equity; RoCE – Return on Capital Employed; EBITDA – Earnings before Interest, Tax, Depreciation and Amortization; FCF – Free Cash Flow
The Risk Control measures mentioned above are only indicative. There may be other parameters which will be considered for evaluation of risk by the Portfolio Manager.
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Mr. Parag N. Thakkar
Portfolio Manager - PMS
Parag joined the AMC in December 2016. He currently manages ICICI Prudential
PMS Large Cap Portfolio, ICICI Prudential PMS Value Portfolio, ICICI Prudential
PMS Absolute Return Portfolio, ICICI Prudential PMS Enterprising India Portfolio,
ICICI Prudential PMS Enterprising India Portfolio - Series II, ICICI Prudential PMS
Contra Portfolio, ICICI Prudential Flexi-cap Portfolio in PMS segment. He also
manages ICICI Prudential LEAP Fund – Series I and ICICI Prudential CompAct
Fund under Category – III AIFs.
He has an overall work experience of more than 14 years, having worked
with Quant Capital, BRICS Securities and Refco Sify Securities (Now
Philips Capital). His previous stint has been with HDFC Securities where
he worked as Head of Institutional Sales. He is a commerce graduate from
Jai Hind College, Mumbai.
Investment Team
**We have an integrated common research team which includes Equity Research analysts across PMS, Mutual Funds and Advisory. IPAMC: ICICI Prudential Asset Management Company Ltd. Note:
Investment team shall be supported by the dealing team and research team
Lakshminarayanan
KG
Anand
Sharma
Parag
Thakkar
Dhaval
Desai
Priti
Agarwal
Equity Research Analysts**
INVESTMENT TEAM
PMS Equity Investment
Team – Fund Manager Dealing Team
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Key Highlights of The Strategy
Strategy Name ICICI Prudential PMS PIPE Strategy
Investment Objective
The Strategy aims to generate capital appreciation by investing predominantly in Companies falling
in Mid and Smallcap Market Capitalization
Portfolio Manager Mr. Parag Thakkar
Benchmark* S&P BSE Smallcap Index
Minimum Investment Rs. 50 Lacs
Management Fee 2.50% p.a. calculated on the average daily
portfolio value payable on a quarterly basis at the
end of each calendar quarter.
1.85% p.a calculated on the average daily
portfolio value payable on a quarterly basis at the
end of each calendar year
Performance Linked Fee** Nil Upto 10%p.a: Nil, Above 10%: 15% of the returns
in excess of 10% p.a
Exit Load on redemption/
partial redemption
Amount Sought to be redeemed upto 12 months from the date of each investment- 3%
After 12 months to 24 months from the date of each investment- 2%
After 24 months to 36 months from the date of each investment- 1%
After 36 months from the date of each investment – Nil
The information provided above is only indicative. Please refer to the Client Agreement and the fee schedule for further details. #Redemption amount is arrived at after calculation / charging of all Fees and
Expenses (including Performance Linked Fee) Goods & Services tax on Exit load will be charged separately.
* The Portfolio Manager reserves the right to change the Benchmark of the portfolio at its discretion. The composition of the Portfolio may or may not be the same as that with
the composition of the Benchmark. **Please refer client agreement and fee schedule for further details. In addition, custody fee, fund accounting charges, account opening
charges, goods & service tax and cess or any other such statutory levies or transaction expenses, as applicable will be payable by the client on actual basis.
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Investing in securities involves certain risks and considerations associated generally with making investments in securities. The value of the portfolio investments may be affected generally by factors
affecting financial markets, such as price and volume, volatility in interest rates, currency exchange rates, changes in regulatory and administrative policies of the Government or any other appropriate
authority (including tax laws) or other political and economic developments. Consequently, there can be no assurance that the objective of the Portfolio would be achieved. The value of the portfolios
may fluctuate and can go up or down. Prospective investors are advised to carefully review the Disclosure Document, Client Agreement, and other related documents carefully and in its entirety and
consult their legal, tax and financial advisors to determine possible legal, tax and financial or any other consequences of investing under this Portfolio, before making an investment decision. The
Stock(s)/Sector(s) mentioned in this material do not constitute any recommendation of the same and the portfolios may or may not have any future positions in these Stock(s)/Sector(s).
The composition of the portfolio is subject to changes within the provisions of the disclosure document. The benchmark of the portfolios can be changed from time to time in the future. The inability of
the Portfolio Manager to make intended securities purchases due to settlement problems could cause the portfolio to miss certain investment opportunities. By the same rationale, the inability to sell
securities held in the portfolio due to the absence of a well-developed and liquid secondary market for securities would result, at times, in potential losses to the portfolio. Please note that past perfor-
mance of the financial products, instruments and the portfolio does not necessarily indicate the future prospects and performance thereof. Such past performance may or may not be sustained in future.
Portfolio Manager’s investment decisions may not be always profitable, as actual market movements may be at variance with anticipated trends. The investors are not being offered any guaranteed or
assured returns. The AMC may be engaged in buying/selling of such securities. Please refer to the Disclosure Document and Client Agreement for portfolio specific risk factors.
Individual returns of Clients for a particular portfolio type may vary significantly from the data on performance of the portfolios as may be depicted by the Portfolio Manager from time to time. This is due
to factors such as timing of entry and exit, timing of additional flows and redemptions, individual client mandates, specific portfolio construction characteristics or structural parameters, which may have
a bearing on individual portfolio performance. No claims may be made or entertained for any variances between the performance depictions and individual portfolio performance. Neither ICICI Prudential
Asset Management Company Ltd. (the AMC) nor its Directors, Employees or Sponsors shall be in any way liable for any variations noticed in the returns of individual portfolios.
The Client shall not make any claim against the Portfolio Manager against any losses (notional or real) or against any loss of opportunity for gain under various PMS Products, on account of or arising out
of such circumstance/ change in market condition or for any other reason which may specifically affect a particular sector or security.
Risk Factors & Disclaimers
25
The Portfolio Manager shall have the sole and absolute discretion to invest in respect of the Client’s investment in any type of security subject to the Agreement and as stated in the Disclosure Document
and make such changes in the investments and invest some or all of the Client’s investment amount in such manner and in such markets as it deems fit would benefit the Client. The Portfolio Manager’s
decision (taken in good faith) in deployment of the Clients’ account is absolute and final and can never be called in question or be open to review at any time during the currency of the agreement or any
time thereafter except on the ground of malafide, fraud, conflict of interest or gross negligence. This right of the Portfolio Manager shall be exercised strictly in accordance with the relevant Acts, rules
and regulations, guidelines and notifications in force from time to time.
By their nature, certain market risk disclosures are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains or losses could materially differ
from those that have been estimated. The recipient(s) alone shall be fully responsible/are liable for any decision taken on the basis of this material. All recipients of this material should before dealing
and/or transacting in any of the products referred to in this material make their own investigation, seek appropriate professional advice. The investments discussed in this may not be suitable for all inves-
tors. Financial products and instruments are subject to market risks and yields may fluctuate depending on various factors affecting capital/debt markets. There is no assurance or guarantee that the
objectives of the portfolio will be achieved. Please note that past performance of the financial products, instruments and the portfolio does not necessarily indicate the future prospects and performance
thereof. Such past performance may or may not be sustained in future. Portfolio Manager’s investment decisions may not be always profitable, as actual market movements may be at variance with
anticipated trends. The investors are not being offered any guaranteed or assured returns.
In the preparation of this material the AMC has used information that is publicly available, including information developed in-house. Some of the material used herein may have been obtained from mem-
bers/persons other than the AMC and/or its affiliates and which may have been made available to the AMC and/or to its affiliates. Information gathered and material used herein is believed to be from
reliable sources. The AMC however does not warrant the accuracy, reasonableness and/or completeness of any information. For data reference to any third party in this material no such party will
assume any liability for the same. We have included statements/opinions/recommendations in this material, which contain words, or phrases such as “will”, “expect”, “should”, “believe” and also PE
ratios, EPS and Earnings Growth for forthcoming years and similar expressions or variations of such expressions, that are “forward looking statements”. Actual results may differ materially from those
suggested by the forward looking statements due to risk or uncertainties associated with our expectations with respect to, but not limited to, exposure to market risks, general economic and political
conditions in India and other countries globally, the monitory and interest policies of India, inflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices, the performance of
the financial markets in India and globally, changes in domestic and foreign laws, regulations and taxes and changes in competition in the industry.
All data/information used in the preparation of this material is dated and may or may not be relevant any time after the issuance of this material. The Portfolio Manager/ the AMC takes no responsibility
of updating any data/information in this material from time to time. The Portfolio Manager/ the AMC (including its affiliates), and any of its officers directors, personnel and employees, shall not liable for
any loss, damage of any nature, including but not limited to direct, indirect, punitive, exemplary, consequential, as also any loss of profit in any way arising from the use of this material in any manner.
