An informative presentation about Indian Economy

1. Meeting with Students of IIT Mumbai 11 Aug 2007 Rakesh Jhunjhunwala

11. RARE ENTERPRISES TODAY RARE Enterprises Trading Public Investments Private Equity + Value Addition Secondary Market IPO / Pre-IPO

14. INVESTMENT BELIEF 4 3 2 1 Realism - a Conviction Rigidity - a Taboo Safety of Capital - a Religion Absolute Returns - a Passion

17. GROWTH ENABLERS Democratic Tolerance Secular Educational base Populous Skilled People Welfare Savings Oriented Consensus Young working population Sub-continent 54% of population <25 years old Vast natural resources Vast domestic market Nuclear power Top 4 Middle class in the world Amongst largest economies Entrepreneurial class well developed Resilience (no boom-bust cycles) ECONOMICS CULTURAL POLITICAL DEMOGRAPHICS GEO-POLITICAL Judicial System Irrelevance of Geographies GROWTH ENABLERS

18. INDIA ON A STRONG GROWTH TRAJECTORY Growth enablers Growth solidifiers & accelerators Growth and Indian stock markets

20. INDIA ON A STRONG GROWTH TRAJECTORY Growth enablers Growth solidifiers & accelerators Growth and Indian stock markets

22. THE INVESTOR PERSPECTIVE: LONG TERM Source: Bloomberg INDIA USA

24. US: CHEAP CREDIT FUELS ECONOMIC GROWTH Quest for higher returns: use of financial engg from regular mortgages  CDOs, CLOs Cheap credit Enable loans to customers with poor credit rating – 15% of all loans in 2006 , $ 1.2 Trillion Rising home prices Consumption boom Investment Boom GDP growth Low interest rates after dot com Collapse…from 4.5 to 1% in 8Q Demand for housing Poor housing credit shielded by innovative structures, rising home prices Low interest rates led to US Economy Debt surging to 340% of GDP from 280% of GDP in 2000 and 175% in 1980 … thereby fueling an extra ordinary consumption and investment boom Source: UBS

25. US: VICIOUS CYCLE OF GDP GROWTH Default by sub prime Increase in EMIs As interest rates reset upward Unsold inventories @ 15 yr high, 1.7 M homes Housing Prices decline Jobs lost Consumption Declines significantly Investment in housing declines GDP slows down Rise in credit standards to sub prime due to defaults US Residential Consumption and Investment accounts for 20% of World GDP and 60% of US GDP Inability to refinance

28. SENSEX POSSIBILITIES SENSEX VALUE = SENSEX EPS X SENSEX PE Base Sensex EPS of 700 in FY2007 EARNINGS PER

31. Thank You

32. INDIA UTILIZES CAPITAL MORE EFFICIENTLY Avg. GDP Growth rate Domestic Investment as % of GDP FDI as % of GDP Total Investment as % of GDP Incremental capital output ratio China 10.3% 39% 4% 43% 4.2 India 7.8% 30% 0.8% 30.8% 3.95

34. INDIA's PEOPLE - ITS STRONGEST ASSET Based on IMD World Competitiveness Survey A large pool of skilled people... Note: Survey results: 1=low; 10 = high Source: IMD world competitiveness Yearbook 2003 ...with high end qualifications... ...and extremely cost efficient Availability of skilled labour, 2003 Availability of qualified engineers, 2003 Total compensation for manufacturing workers, 2002

36. FAVOURABLE DEMOGRAPHICS WILL AID CONSUMPTION LED GROWTH

37. CONSUMPTION: EXPANDING MIDDLE CLASS India To Have 4 th Largest Number Of House Holds Earning > US $5000 Number of households with income >US $5,000 p.a. Source: EIU Country Data Italy Mexico Spain France Brazil Korea UK Russia Mexico Brazil China Brazil Russia Italy Italy Germany France France India UK UK Japan Germany Germany China Japan Japan U.S. U.S. U.S. 2008 2004 1994

38. INDIA: ECONOMIC RESILIENCE Least Volatile Economic Growth Maximum-Minimum GDP Growth Rate (1993-2005) Source: EIU; World Bank; IMF; Literature review % GDP growth

42. CONFIDENCE: INDIA INC. GOING GLOBAL Source: Literature Review Overseas Acquisitions by India Inc ($ US Million)

43. REFORMS TO HAVE A MULTIPLIER EFFECT Financial sector Infrastructure Development Telecom Tariff reduction Insurance Competition Bill Power VAT / Indirect taxes Capital Market Direct taxes Confluence of Reforms

44. IN GOOD MACROECONOMIC SHAPE Interest rate on 5 yr G-sec paper Inflation (WPI) Exports ($ Bn) Forex reserves ($ Bn) Forex reserves as months of imports Currency appreciation Current a/c deficit (% of GDP) Fiscal deficit Source: Analyst reports, literature review 13.8% 8.2% 8.1% 4.8% 32 103 17 4.7 14 -8.6% - 1.5% -1.7% - 1.3% 4.2% 4.1% Indicator 1996 2006 158 Barring Fiscal Deficit

45. IMPRESSIVE TRANSFORMATION OF INDIA INC. The sustained improvement in RoE and the growth in profits has come despite significantly lower tariff protection, lower inflation and deferred tax accounting. Indian skills and Indian enterprise have now got a global level playing field, and a much superior platform than India Inc. has ever had before.

46. PRODUCTIVITY IMPROVEMENTS: ASSET TURNS

47. PRODUCTIVITY IMPROVEMENTS: MARGIN EXPANSION

48. STRONG BALANCE SHEETS

49. POTENTIAL TO ENHANCE EQUITY OWNERSHIP Distribution of Financial Savings

50. SAVINGS EXPLOSION AHEAD

52. FUND FLOW FOR EQUITY MARKETS