nipa ladiwala, lead portfolio manager, sbi fm · financing, insurance, real est & business...

Indian Equities Road Show

Nipa Ladiwala, Lead Portfolio Manager, SBI FM

March 2007

(A Joint Venture between SBI & Société Générale Asset Management)

Part I - The Indian Dynamics

Société Générale Asset Management 3March 2007

[ Indian Equities ]

Import/ Exports Details as of December 2006

Source: RBI, Ministry of trade


[ Indian Equities ]

Import/ Exports Details as of December 2006



[ Indian Equities ]

Import Cover improves to 11.4 months



[ Indian Equities ]

Likely Scenario by the Fiscal Year end

Export growth is likely to average 20% for FY07 as export performance is usually more robust in the last quarter, despite the slowdown in December

Import growth is likely to average 30% for FY07 due to the continuing demand for capital goods

Total Trade as a percentage of GDP is expected to be 35% for FY07

Trade Deficit as a percentage of GDP is expected to cross 7% forFY07

Oil Imports as a percentage of GDP are expected to be 7% for FY07


[ Indian Equities ]

Demographics

Favorable long-term investment themes

Source: Planning Commission

The active workforce is expected to grow in excess of 50% leading to continued consumption

As the world ages, India will have a vibrant workforce


[ Indian Equities ]

A growing consumer class


Per 1000 People Cars

Two wheelers TV sets PC

Mobile phones

India 6 53 83 7 52

China 12 26 350 28 269

France 491 40 632 347 647

USA 480 15 938 658 488

Source: CLSA Asia Pacific Markets

Source: NCAER, RBI, Citigroup estimates

Penetration levels of consumer goods is low in IndiaSecular demand for aspirationalgoods

Sustained earning & spending –Indian consumer is turning out to be a great growth engine


[ Indian Equities ]

Infrastructure


0

2000

4000

6000

8000

10000

12000

14000

16000

FY00 FY01 FY02 FY03 FY04 FY05 FY06E FY07ERs

Crs 0

5

10

15

20

25

30%

Total Loans Retail Loans Retail loans as a % of Total Loans (RHS)

Source: SSKI research

Source: Cris Infac

Change in credit growth


[ Indian Equities ]

The 2007/08 outlook

Outsourcing – Changing trends

Lower end Labour arbitrage

Value added outsourcing

Innovation based exports

Exports through acquisitionCustomer acquisitionDirect Market presenceBuy out and relocate production base to India

Source: RBI, Office of the economic advisor


[ Indian Equities ]

Source: CSO

Changing composition of GDPReducing the dependency on agricultureBuilding public administration infrastructureAvailability of skilled work forcePower/Energy supplyPoliticsInfrastructureInterest ratesBuilding pension funds

Employment Scenario and Opportunities Current Share in GDP (%)

Employment, 2002 (Mils)

Share of Total Employment (%)

Projected Elasticity, 2007E

Projected Employment, 2007E (Mils)

Agriculture 22.1 191.0 55.6 0.01 191.4Industry 26.9 61.6 17.9 74.9Mining and Quarrying 2.3 2.2 0.6 -0.4 2.0Manufacturing 17.1 42.1 12.3 0.3 49.5Electricity, Gas, Water Supply 2.4 1.1 0.3 -0.5 0.9Construction 5.2 16.2 4.7 0.8 22.5Services 51.0 90.8 26.4 106.8Trade, Hotels, Restaurant 15.0 41.0 11.9 0.6 52.2Transport, Storage, Communication 7.3 14.9 4.3 0.6 20.4Financing, Insurance, Real Est & Business Services 12.9 5.3 1.5 0.6 7.3Community, Social, Personal Services 13.4 29.6 8.6 -0.3 26.9Total 100.0 343.4 100.0 0.2 373.0Source: Planning Commission

Medium-term to long-term challenges

02-03 03-04 04-05 05-06 06-07

Overall GDP 3.8 8.5 7.5 9 9.2Agriculture & Allied -7.2 10 0 6 2.7Industry 7.1 7.4 9.8 9.6 10Services 7.4 8.5 9.6 9.8 11.2


[ Indian Equities ]

Indian Consuming middle class


[ Indian Equities ]

Retail Credit growing


[ Indian Equities ]

Estimating retail Market Size


[ Indian Equities ]

FY04 FY05 FY06 FY07E FY08E FY09E FY10E CAGR(06-10)

Wireliss Market (Rs b) 138 246 379 605 853 1074 1197 33.3

All India ARPU(Rs) 485 455 410 374 330 304 280 -9.1

Cellular (m) 33.3 52.0 89.5 161.5 241.9 309.7 360 41.7

GSM(m) 26.2 41.0 69.2 122 183.2 234.2 272 40.9

CDMA (m) 7.2 11.0 20.3 39.5 58.7 75.5 88.1 44.3

WLL-F (m) 1.2 3.6 8.9 10.1 17.3 19.7 22.1 25.5

Fixedline (m) 42.1 42.8 41.3 42.5 46.1 48.5 52.1 6.0

Total 76.6 98.4 139.7 214.1 305.3 377.9 434.9 32.8

Population Tele density (%) 0.1 9.0 12.7 19.1 26.7 32.4 36.8 NA

Source: TRAI

Tele Density to more than double by FY 10

Part II - The Indian Markets


[ Indian Equities ]

Significant Features…

India has of the oldest Stock Exchanges in the world (BSE set up in 1875)

The exchange has adapted to changing times,Free Float indices adopted in 2003Demutualised and corporatised entity

Trading in equities is conducted on an ‘Automated Trading Platform’since 1994

T+2 settlement for equity trades

Independent Regulator – SEBI, established in 1988 and became a fully autonomous body in 1992

Trade Guarantee Fund – the client will never face a default even if the broker defaults

High levels of transparency and corporate governance

Businesses transforming from family managed to professionally managed entities


[ Indian Equities ]

Market YTD performance

Sensex @ 14190 as on 12th February 2007 FY05 FY06 FY07 E FY08 E

EPS 475 576 749 861

EPS Growth 21% 30% 15%

P/E 24.63 18.9 16.48

Liquidity driven

Valuation driven

Global down-turn


[ Indian Equities ]

18x16x

14x

12x

BSE SENSEX with P/E bands

4 0005 0006 0007 0008 0009 000

10 00011 00012 00013 00014 000

03-04

05-04

07-04

09-04

11-04

01-05

03-05

05-05

07-05

09-05

11-05

01-06

03-06

05-06

07-06

09-06

11-06

01-07

03-07


[ Indian Equities ]

Markets drivers

Continued mobilization by India dedicated overseas funds

Impressive corporate developmentsBig-ticket M&A activityValue unlocking through de-mergersStrong auto, IT, cement & telecom numbers

Positive sectoral developmentsReduction in commodity pricesBuoyant growth in FMCG sales

Strong GDP growth – upgraded forecast growth of 8.3%By IMF for the next year

Higher IIP numbers month-on-month

Near normal monsoon

Falling oil prices


[ Indian Equities ]

Are the FIIs driving the Indian Market?

Period Net Investment (USD Bln)

Year 2003 6.9

Year 2004 8.7

Year 2005 10.5

Year 2006 8.0

Year 2007 (till 29.1.07) 0.1

Number of FIIs registered with SEBI : 1056

Source: SEBI

Ownership of Indian Equities FII investments

Source NSE

Ret ail ( indian) : 16%

Foreign Inst it ut ions : 8%

NRI/ OCB : 2%

Corporat es ( indian) : 5%

Promot ers : 58%

Ot hers : 3%

Domest icInst it ut ions6%

Mut ual Funds (domest ic) : 2%


[ Indian Equities ]

Where to invest is the key question

At 32.5% domestic savings rate –Annual household savings at Rs. 850,000 Cr , USD 189.39 Bln.

Reduction in capital gains taxes to drive strong flows into the equity markets

Reducing returns in bond funds to increase momentum of shift into equities

At 3% into equities – Rs.25,000 Cr , USD 5.57 Bln into equities every year


[ Indian Equities ]

Source: RBI

Foreign Exchange Reserves

Part III – SBI FM


[ Indian Equities ]

The best of two worlds…

India’s premier & largest bank, The State Bank of India

A 200 years old bank,Close to 14,000 branches across India,More than 105 Ml customers,28% of the fixed deposits.

A global and leading asset management company, Société Générale Asset Management

A French based AMC, 100% owned by the 5th largest Bank in EU. USD 500 bl AUM (22,500,000 Crores) in all asset classesA strong presence in all financial centers for portfolio management (US, Japan, UK, EU, HK, Singapore, Korea, China & India)

63%

37%

Exclusive joint-venture(Dec. 2004)

SBI Funds Management Pvt. Ltd.


[ Indian Equities ]

…with a great pedigree

SBI Funds management has been expert in managing assets since 1993 & tied-up with Société Générale in 2004.

Today:

Through mutual funds, PMS, & offshore business SBIFM is managing more than USD 4.1 bl (18,000 Cr)

SBIFM has won the trust of 3 million investors

SBIFM promotes among the best performing equity funds over the past 1, 3 & 5 years.

SBIFM has an 20 members experienced investment team

SBIFM has more than 290 experts (corporate office in Mumbai & 54 investors centers)


[ Indian Equities ]

SBIFM’s Expertise recognition

4 out of 9 funds RankedCPR 1 in the industry

S&P - 2005 & 2006(updated in Sept 2006)

3 Gold

2 Silver

4 Gold

4 Silver

Moody’s - 2005 Moody’s - 2006

Economic Times(October 2006)

CNBC - July 2006

Lipper(April 2006)CNBC / S& P - May 2006

http://www2.standardandpoors.com/servlet/Satellite?pagename=sp/Page/HomePg&r=1&l=EN


[ Indian Equities ]

Main characteristics of SGAM Fund Equities India 1/2

Name: SGAM Fund Equities IndiaManaging Centre: SGAM SingaporeAdvisory Centre: SBI Fund ManagementFund Manager(s): Shaun GiacomoAdvisor: Nipa LadiwalaTrustee: SGBT LuxembourgStructure / Legal form: Compartment of the Luxembourg Umbrella

SICAV SGAM FundInception Date: February 28th, 2006NAV availability: Daily official NAVSubscription Frequency: DailyRedemption Frequency: DailyMaximum investment capacity: NilCCR approval: 22 December 2006AuM at end January 2007: USD 150 million


[ Indian Equities ]

Main characteristics of SGAM Fund Equities India 2/2

A share B share P shareInstitutional Private Banking

Initial NAV USD 100 USD 1 000 USD 100

LU0239671547 LU0239669301

EUR 500,000 or equivalent in USD

1.5

EUR 3 million or equivalent in USD

0.8

Investors Retail

ISIN Code LU0239668675

Minimum subscription 1 share

Maximum management fees (% per annum) 2

Performance fees

15% of the out-performance versus[ BSE 100 + 400bp (net of flat fees) ]

Only in the case of positive performance of the fund

High Water MarkMaximum subscription fee Up to 5 %Redemption fee Nil


[ Indian Equities ]

Thank You

Principle Trustee: State Bank of India; Trustees: SBI Mutual Fund Trustee Company Private Ltd Asset Management Company: SBI Funds Management Pvt. Ltd. (A joint venture between SBI and Societe Generale Asset Management) 191 Maker Towers 'E', Cuffe Parade, Mumbai - 400 005. Tel: 91 22 2218 0221-27. Website: www.sbimf.com Email: [email protected].

Past performance of the schemes of the Sponsor/AMC/Mutual Fund is no guarantee for the future performance of the scheme.

This presentation is for information purposes only and is not an offer to sell or a solicitation to buy any mutual fund units/securities. These views alone are not sufficient and shouldn’t be used for the development or implementation of an investment strategy. It should not be construed as investment advice to any party. All opinions and estimates included here constitute our view as of this date and are subject to change without notice. Neither SBI Funds Management Private Limited, nor any person connected with it, accepts any liability arising from the use of this information. The recipient of this material should rely on their investigations and take their own professional advice

Mutual funds are subject to market risks. Please read the offer document of the schemes carefully before investing.

http://www.sbimf.com/

nipa ladiwala, lead portfolio manager, sbi fm · financing, insurance, real est & business...

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