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Reliance Small Cap Fund

  1. A R C
  2. Table Of Contents India Opportunity Why Invest in Small Caps Investment Case for Small Caps Success Essentials and Reliance Mutual Fund Advantage Reliance Small Cap Fund Investment Strategy Positioning Product Features
  3. India Moving Towards Higher Growth Trajectory ...despite concerns of coalition politics, bureaucracy & poor infrastructure Estimated for 2009-2011 Source: CIEC, RCAM Estimates
  4. India - The Next Trillion Dollar Opportunity INDIA’S GDP IN USD TRILLION India took 60 years to get to its first USD 1 Trillion GDP in FY08 but the move to USD 2 FY08, Trillion GDP will be in next 5-6 years, similar to that of China Due to the huge consumption and savings/investment boom, USD 2 Trillion GDP is not a destination, but a milestone in India’s ongoing journey towards USD 4 Trillion GDP in the g gj y subsequent 5-7 years, and so on Estimated for 2010-2014 Source: CMIE, MOSL, RCAM Estimates
  5. Emerging Markets To Attract Higher Inflows Period 1995-99 2000-04 2005-09 2009 Growing size of EM economy and Avg. World GDP $Bn 30,292 35,291 53,583 57,228 fading distinction between EM Proportion of the World Average GDP level (%) DM countries 80.4 79.5 72.2 69.3 and DM economies should lead to US 27.6 30.5 25.7 24.9 increased capital allocation to EM UK 4.4 4.9 4.6 3.8 economies Euro area 23.2 21.4 22.1 21.5 Japan 14.8 12.2 8.7 8.8 Period 1995-99 2000-04 2005-09 2009 EM countries 19.6 20.5 27.8 30.7 Avg.World M-Cap 14,047,039 17,734,308 25,689,296 24,630,640 Brazil 2.6 1.7 2.4 2.6 Proportion of the Average World M-Cap (%) Russia 1.0 1.1 2.2 2.2 DM markets 94.1 95.3 90.1 86.8 India 2.2 1.5 1.9 2.2 United States 46.6 51.9 44.3 42.5 China 3.1 4.3 6.5 8.3 United Kingdom 9.7 10.4 9.6 9.0 South Africa 0.5 0.4 0.5 0.5 Europe (ex-EM) 30.0 29.1 29.0 27.3 Japan 13.8 9.0 9.5 8.6 Presently, Presently EM economies hold over 30% EM markets 5.9 4.7 9.9 13.2 share in Global GDP, while their share in Brazil 0.7 0.4 1.3 2.2 Global market cap is only 13% Russia 0.2 0.2 0.8 0.8 India 0.4 0.3 0.7 1.0 China 0.0 0.3 1.5 2.4 Korea K 0.6 06 0.8 08 1.4 14 1.7 17 MSCI Indices used as proxy for market-cap data (Units: USD million) Source: IMF GDP data, MSCI m-cap data, RCAM Estimates, DM : Developed Markets, EM: Emerging Markets
  6. Investments Will Flow To India USD (Trillion) CY2008 CY2014 BRIC GDP 8.29 16.36 Market Cap 5.61 16.36 FII Investments* 1.00 ?? US GDP 14.20 14 20 16.47 16 47 Market Cap 12.09 16.47 FII Investments* 10.64 ?? In 2014 BRIC’s combined GDP will be equal to US GDP 2014, BRIC s At Market Cap GDP ratio of 1, BRIC countries will have a market cap of USD 16.36 Trillion Significant FII money will flow into the BRIC markets – India will gets its share of investments Source - RCAM Estimates, *FII numbers are approximations, BRIC – Brazil, Russia, India, China
  7. Investment Outlook Currently market is evenly poised with positive bias India has emerged stronger from the global slump and is back on track to grow in excess of 7-8% per annum For a sustained long term growth, the 3 growth drivers are in place: Savings – Domestic savings are among the highest in the world Consumption – S t t explode C ti Set to l d Investments – At 34% of the GDP, again among the highest in the world Policy announcements will have significant impact on the direction of the market y g p Themes for the coming year Big valuation disparity among large, mid caps & small caps. Opportunity for alpha creation Stock selection will be the key Source: Bloomberg, RCAM Estimates
  8. Why Invest In Small Caps?
  9. Key Benefits Of Investing In Small Caps Higher Earnings Growth Small Cap Presence in Emerging Sectors Large Universe
  10. Emergence Of Small Caps To Large Caps Today s Today’s Small …Are Tomorrow’s Potential Tomorrow s Caps …. Which May Eventually Mid Caps, Become Large Caps Small Caps Mid Caps Large Caps
  11. Re – Rating Potential For Small Caps Small Cap Mid Cap Large Cap Research Available Limited Moderate Widely Institutional Very Ownership Moderate Large Limited Valuation Multiple p Low Moderate Fair
  12. Entrepreneurial Passion Indian entrepreneurial skills / mindset / spirit has been globally acknowledged over a period of time End f License R j h opened many b i E d of Li Raj has d business opportunities f entrepreneur t iti for t Multiple sources of fund raising at various stage of business has been of tremendous help p Competitive talent is being attracted & retained by rewarding performance linked incentives, ESOPs, etc In today’s economic environment, individuals with entrepreneurial mindset are exploring new business opportunities that will not only survive in a recession but will also thrive Thus, E Th Emerging I di i offering various growth opportunities t entrepreneurs, b it fi t i India is ff i i th t iti to t be first generation entrepreneur or otherwise
  13. Emerging Sectors Offer Opportunities For Growth In a developing economy like India, multiple sectors provide opportunities for growth Example: Retailing, Food Processing, Pharmaceuticals, Media & Entertainment, Real Estate, Education, Hospitality etc y Once established and successful, ramp up can be rapid Thus, emerging sectors are true reflection of entrepreneurial spirit, new opportunities and creation of global behemoths
  14. Dynamics Of Multi - Baggers Market Capitalization = Net Profits X Perception Market Price = EPS X PE High Growth Potential / Scalability Under Ownership, Under Differentiated Business Model Researched & Under Covered Emergence of Educated & Understanding Value of Market Cap Passionate Management Various Modes of Fund Raising Niche focus & ability to attract talent Emerging Sectors start small – in form of Quasi Entrepreneurs & Technology, Retail, Real Estate, Stock Options Insurance etc This simultaneous impact on both EPS & PE creates a MULTI BAGGER
  15. How Small Caps Are Classified ? There is no scientific methodology to classify Large Caps, Mid Caps and Small Caps but there are pre-defined indices on BSE & NSE Mentioned below is the categorization of the same on the basis of market capitalization as on August 2010 Index Market Cap Total Market No. Of Indices Categorization Range Cap approx Companies (Rs. Crs) (Rs Crs) BSE SENSEX Large Cap g p 30 15,300 – 329,400 , , 2,761,687 , , BSE Mid Cap Mid Cap 273 1000 – 12,350 1,078,821 BSE Small Cap Small Cap 534 170 – 2300 351,840 Source:, 5th August 2010 , Index Market Cap Range given implies companies with the smallest market cap and largest market cap in that particular indices respectively as on August 5, 2010. Small Cap stocks for the purpose of the Reliance Small Cap Fund are stocks whose market capitalization is in between the highest and lowest market capitalization of companies on BSE Small Cap Index
  16. The Indian Small Cap Opportunity 4300+ Cos. listed on Bombay Stock Exchange 1383 Cos. with Market Capitalization of over Rs 100 Cr 1065 Cos. with Market Capitalization of over Rs 200 Cr 664 Cos. with a Sales Turnover of over Rs. 200 Cr 613 Cos. with an Operating Profits over Rs 25 Cr 548 Cos. with net profits of over Rs 10 Cr p Source :, Capitaline Neo as on 6th August 2010
  17. Investment Case For Small Caps Performance Over The Last 2 Years (31st July 08 - 30th July 10) Valuation As On 31st July 2010 Outperformance of Index I d P/E Price T Book Value P i To B k V l Index CAGR (%) BSE SMALL CAP Relative To Indices S&P CNX Nifty 22.31 3.78 S&P CNX Nifty 11.32 5.00 BSE SENSEX 21.20 3.40 BSE SENSEX 11.58 4.74 BSE MIDCAP 19.24 2.90 BSE MIDCAP 15.37 0.95 BSE SMALL CAP 15.66 2.34 BSE SMALL CAP 16.32 Source :, Capitaline Neo as on 6th August 2010 Small Caps are still available at better valuations compared to Large Caps
  18. Examples of how Small Cap companies have emerged E l fh S ll C i h d as Large Cap companies over a period of time creating wealth for the shareholders The companies chosen herein are purely for illustrative purpose only Reliance Mutual Fund or Reliance Small Cap Fund may or may not invest in the shares of these companies The investment decision of Reliance Mutual Fund to invest in any company is based on several factors including research, market potential, future outlook etc
  19. Retailing Market Capitalization Market Capitalization (July 30th 2001) (July 30th 2010) Outperformance relative to Company Name BSESENSEX (Rs. Cr) (Rs. Cr) (July 30th 2001- July 30th 2010) Pantaloon Retail (India) P l R il (I di ) 19.98 19 98 9457.13 9457 13 19,316% 19 316% PAT Rs.140.58 Crs (30th June 2009) PAT Rs.6.40 Crs (30th J June 2001) Source as on 31st July 2010, Capitaline Neo
  20. Realty - Construction Market Capitalization Market Capitalization (July 31st 2003) (July 30th 2010) Outperformance relative to Company Name BSESENSEX (Rs. Cr) (Rs. Cr) (July 31st 2003- July 30th 2010) Unitech U i h 72.44 72 44 20,457.53 20 457 53 17,550% 17 550% PAT Rs.1,195.53 Crs (31st M March 2009) h PAT Rs.13.57 Crs (31st M t March 2003) h Source as on 31st July 2010, Capitaline Neo
  21. Computers - Education Market Capitalization Market Capitalization (Jan 31st 2006) (July 30th 2010) Outperformance relative to Company Name BSESENSEX (Rs. Cr) (Rs. Cr) (Jan 31st 2006- July 30th 2010) Educomp Solutions Ed S l i 447.20 447 20 5,797.46 5 797 46 904% PAT Rs.140.33 Crs (31st March 2009) PAT Rs.14.00 Crs (31st March 2006) Source as on 31st July 2010, Capitaline Neo
  22. Healthcare Market Capitalization Market Capitalization (Jan 31st 2001) (July 30th 2010) Outperformance relative to Company Name BSESENSEX (Rs. Cr) (Rs. Cr) (Jan 31st 2001- July 30th 2010) Apollo H A ll Hospitals i l 715.31 715 31 4,841.08 4 841 08 20% PAT Rs.130.03 Crs (31st March 2010) PAT Rs.30.92 Crs (31st March 2002) Source as on 31st July 2010, Capitaline Neo
  23. FMCG – Food & Dairy Products Market Capitalization Market Capitalization (July 1st 2003) (July 30th 2010) Outperformance relative to Company Name BSESENSEX (Rs. Cr) (Rs. Cr) (July 01st 2003- July 30th 2010) Zydus W ll Z d Wellness 2.31 2 31 2,015.23 2 015 23 9,924% 9 924% PAT Rs.46.71 Crs (31st March 2010) PAT Rs.0.94 Crs (31st M t March 2003) h Source as on 31st July 2010, Capitaline Neo
  24. Dynamics Of Successful Small Cap Investing Stock Selection Small Cap investing is all about stock selection rather than asset allocation Stock selection based on Size of opportunity Possible higher growth and its sustainability Emerging theme / sector (Example: real estate retail food processing etc) estate, retail, Zeal of management to scale and grow Stock price movement tend to be more volatile Limited research Lesser/negligible institutional ownership However the sharp volatility subsides over a longer period and makes way for higher profitability
  25. Reliance Mutual Fund Advantage Our Expertise Bottom up approach has been strongly advocated as the key investment strategy of Reliance Mutual Fund Fund. Well-experienced team of investment professionals having Collective experience of over 150 years in Indian equities Most members individually tracking Indian equity markets for well over 15 years In depth research capabilities to identify small caps with huge growth potential Our research capability empowers the Fund Manager to be BOLD in identifying high growth potential stocks & manage the RISK associated with it Only fund in RMF’s product basket with a pre-dominant investment focus on small cap companies where stock selection would play a key role Past Performance may or may not be sustained in future
  26. Reliance Mutual Fund Presents Reliance Small Cap Fund A Fund With A Very Aggressive Investment Style
  27. Investment Philosophy With an endeavor to maximize returns & minimize risks by reasonable diversification , primary focus would be on small cap stocks Investment in Equities of Small Cap Companies : 65%-100%* Investment in Equities of any other Companies : 0%-35%* Investment i D bt & M I t t in Debt Money M k t S Market Securities : 0% - 35%* iti Small cap stocks, for the purpose of the fund are defined as stocks whose market capitalization is in between the highest & lowest market capitalization of companies p g p p on BSE Small Cap Index Investment with a longer term horizon * Please refer detailed asset allocation on slide no 29. Market Capitalization: Market value of the listed company, which is calculated by multiplying its current market price by number of its shares outstanding
  28. Positioning Of Reliance Small Cap Fund Returns High Medium Low Reliance Small High Risk Ri k Cap Fund C F d Medium Low A very aggressive small cap oriented fund A relatively high risk/high return oriented fund characterized by volatility which will get smoothened out over long term investment horizon Reliance Small Cap Fund will be a vital part of an investor’s core portfolio that aims to create an alpha for their investments
  29. Scheme Features The primary investment objective of the scheme is to generate long term capital appreciation by investing predominantly in equity and equity related instruments Investment Objective of small cap companies and the secondary objective is to generate consistent returns by investing in debt and money market securities Benchmark BSE Small Cap Index Equity & equity related securities of small cap companies including derivatives# - 65% 100% 65%-100% Equity & equity related securities of any other companies including derivatives# Proposed Asset - 0%-35% Allocation Debt & Money Market Securities **(including investments in securitised debt) - 0% - 35% ** including securitised debt up to 30% # The Scheme proposes to invest at least 65% of the corpus in Equity & equity related instruments of small cap companies which may go upto 100% of the corpus. The investment in Equity & equity related instruments of any other companies other than small cap companies will be in the range of 0-35% of the corpus F d Manager Fund M Sunil Singhania New Fund Offer Price: Rs.10/- per unit
  30. Scheme Features Choice of Plans/Options Load Structure : During New Fund Offer & Continuous Offer including SIP Installments Growth Plan: Growth & Bonus Option Entry Load: E t L d Nil Dividend Plan : Dividend Payout Option Exit Load: Dividend Reinvestment Option • 2% If redeemed or switched out on or before completion of 12 months from the date of allotment of units Minimum Application Amount • 1% If redeemed or switched out after 12 months but on or Rs.5000 & in multiples of Re. 1 thereafter before completion of 24 months from the date of allotment of units Additional Purchase Amount • Nil If redeemed or switched out after th completion of 24 d d it h d t ft the l ti f Rs.1000 (plus in the multiple of Re.1) months from the date of allotment of units In accordance with the requirements specified by the SEBI circular no. SEBI/IMD/CIR SIP No.4/168230/09 dated June 30, 2009 no entry load will be charged for purchase / additional purchase / switch-in accepted by the Fund. Upfront commission shall be paid directly by the investor to the AMFI Registered Distributor based on the investor’s assessment of various Mode of Payment : Auto Debit/ECS factors including the services rendered by the AMFI Registered Distributor.
  31. Disclaimers The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the readers. This information is meant for general reading purpose only and is not meant to serve as a professional guide for the readers. This document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. The Sponsor, The Investment Manager, The Trustee or any of their respective directors, employees, affiliates or representatives do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and opinions given fair and reasonable. This information is not intended to be an offer or solicitation for the purchase or sale of any financial product or instrument. Recipients of this information should rely on information/data arising out of their own investigations. Readers are advised to seek independent professional advice and arrive at an informed investment decision before making any investments. None of The Sponsor, The Investment Manager, The Trustee, their respective directors, employees, affiliates or representatives shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the information contained in this material. The Sponsor, The Investment Manager, The Trustee, any of their respective directors, employees including the fund managers, affiliates, representatives including persons involved in the preparation or issuance of this material may from time to time, have long or short positions in, and buy or sell the securities thereof, of company(ies) / specific sectors mentioned herein. Terms of issue and mode of sale and redemption of units: The Scheme will offer for Subscription/ Switch-in and Redemption / Switch-out of Units on every Business Day on an ongoing basis, within five business days of allotment. The redemption or repurchase proceeds shall be dispatched to the unitholders within 10 Business Days from the date f d d t of redemption or repurchase. ti h Investor benefits and general services offered: The Scheme offers Systematic Investment Plan, Auto Switch facility, Online Transactions and Reliance Any Time Money Card during the NFO period. The NAV of Scheme shall be published on a daily basis by the Mutual Fund at least in two daily newspapers and will also uploaded on the AMFI site and Reliance Mutual Fund site i.e. Statutory Details: Reliance Mutual Fund has been constituted as a trust in accordance with the provisions of the Indian Trusts Act, 1882. Sponsor: Reliance Capital Limited. Trustee: Reliance Capital Trustee Company Limited. Investment Manager: Reliance Capital Asset Management Limited (Registered Office of Trustee & Investment Manager: “Reliance House” Nr. Mardia Plaza, Off. C.G. Road, Ahmedabad 380 006). The Sponsor, the Trustee and the Investment Manager are incorporated under the Companies Act 1956 The Sponsor is not responsible or liable for any loss resulting from the operation of the Scheme beyond their initial contribution of Rs 1 lakh towards the 1956. Rs.1 setting up of the Mutual Fund and such other accretions and additions to the corpus. Risk Factors: Mutual Funds and securities investments are subject to market risks, and there is no assurance or guarantee that the objectives of the Scheme will be achieved. As with any investment in securities, the NAV of the Units issued under the Scheme can go up or down depending on the factors and forces affecting the securities market. Reliance Small Cap Fund is only the name of the Scheme and does not in any manner indicates either the quality of the Scheme; its future prospects or returns. Past performance of the Sponsor/AMC/Mutual Fund is not indicative of the future performance of the Scheme. The NAV of the Scheme may be affected, interalia, by changes in the market conditions, interest rates, trading volumes, settlement periods and transfer procedures. There are various risks associated with investing in Equities Bonds Foreign Securities investing and use of Derivatives Securitised Debt and Short Selling & Securities Lending For Scheme specific risk factors Equities, Bonds, Securities, Derivatives, Lending. and more details, please refer to the Scheme Information Document & Key Information Memorandum, which is available at all the DISC, Distributors and Investors can also call at our call centre 1800-300-11111 (toll free) for more details. Please read the Scheme Information Document and Statement of Additional Information carefully before investing.
  32. Thank You A R C