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Franklin India


India has the 2nd largest pool of scientists and engineers in the world. Gap in price of labor between India and the rest of the world plus a young ... – PowerPoint PPT presentation

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Title: Franklin India

Franklin India
High Growth Companies Fund
An equity fund with a high growth focus
  • The India Story
  • Why focus on Growth ?
  • Franklin India High Growth Companies Fund
  • Why Franklin Templeton ?

India Economy Past
Share of World GDP ()
India and China starting to pick up
Source Source Angus Maddison, The World
Economy Historical Statistics, OECD 2003.
India Economy Present
GDP Real GDP growth
One of the fastest growing economies
Source CSO, RBI, Ministry of Finance, Citigroup
estimates (March end)
India Economy Economic Power of the future
India to be among the biggest economies
Source Economist
India Economy Relatively insulated to global
Share of Exports as a of GDP
Source Citigroup
Low export to GDP ratio compared to other Asian
markets, but high forex reserves
Macro drivers Increasing affluence leads to
higher consumption
Source Mckinsey Global Institute
Macro Drivers Potential Services Capital of
the world
  • Services are tradable India has cost and skill
    set advantages
  • India has the 2nd largest pool of scientists and
    engineers in the world
  • Gap in price of labor between India and the rest
    of the world plus a young population are the main

Source Citigroup
Macro Drivers Infrastructure spending on the rise
Driven by - Government Infrastructure spending e
specially in the rural areas Port/airport modern
ization/expansion Cross-country road corridors U
pstream/midstream investments
Significant capacity additions driven by rising
demand and utilization Rising telecom demand driv
en by lower handset prices and newer technologies
Source CLSA - expected investments in
10th/11th plans
GDP growth could be 2-3 higher with proper
infrastructure backbone
Macro Drivers Corporate India is a value creator
Source CLSA
LiquidityIndia dedicated funds
  • Sharp rise in assets and number of India funds -
    34 billion

Source Bloomberg, Apr 07
LiquidityDomestic savings
Vast pool of untapped household savings can
provide support to equity markets
Financial savings accounting for 16.8 of GDP
148.03 bln Available savings poo
l if household accumulations are assumed at 6
-7 years savings
888 - 1036 bln Equity inflows at
different levels of allocation

Source RBI data-FY06, 1 USD Rs.45.25
Why High Growth ?
Economy and investment styles
Different styles are pertinent for the various
stages of the economic/business cycle
Source MSCI (Compounded Annualised returns as
on April 30, 2007 and in US terms)
What is Growth Style?MSCI measures
Growth investment style characteristics
Long-term forward earnings per share growth rate
Short-term forward EPS growth rate
Current Internal Growth Rate Long-term historical
EPS growth trend Long-term historical sales per
share growth trend Companies with above average
revenue growth/potential and ROE
Value investment style characteristics
Book value to price ratio 12-month forward earnin
gs to price ratio Dividend yield Out-of-favour s
tocks/sectors with good fundamentals, turn-around
opportunities and undervalued
Growth Drivers
India is undergoing a paradigm shift due to
changing lifestyles and dynamics
Industry-specific investment themes are used to
identify sectors/companies with above-average
market growth
High Growth Companies
Companies expanding sales as well as earnings at
a much higher rate than that of the general
economy. Because these companies tend to grow ea
rnings at a fast pace, they will typically have
higher valuations (P/E) Enjoy competitive advanta
ges Proprietary intellectual property Strong ma
nagement Distribution/cost advantages Entry bar
riers specific to the respective sector
High Growth strategy
How the strategy would have worked with a focus
on high growth companies
Source Citigroup investment research (compounded
and annualised as on April 30, 2007). Quintile-I
being the top 20 and Quintile-V the bottom 20
of the group. The table denotes Annualised Compo
unded returns over the specified period on a
portfolio of companies constructed based on the
following two parameters. Earnings Revision Ratio
(ERR) the number of upward revisions (of
estimates of company's earnings by analysts) over
the past month minus the number of downward
revisions over the past month divided by the
total number of estimates. Long Term Price /
Earnings to Growth (PEG) Ratio Trailing P/E
ratio divided by Annualised Mean Earnings Growth
Rate over the company's Next Business Cycle,
usually 3 to 5 yrs. Annualised Mean Earnings
Growth Rate is the Mean value of Growth forecasts
of all contributing analysts. The companies
considered are forming part of the SP Emerging
markets global indices.
High Growth Companies
Some well known examples from the last decade - .
For illustrative purposes only. Source DB
Research. Compounded and annualised returns as on
April 30, 2007. Please note that this should not
be construed as an investment advice.
High Growth Companies Infosys
Rs. in Crs
Industry IT Services Opportunity To deliver s
oftware services in a cost effective manner re
motely. US Europe became target markets Ma
cro drivers Global offshoring trend and
friendly regulatory environment
Competitive Advantages Strong team, flexibility
to reinvent itself along with market
opportunities, Ability to build long-term drivers
of cost efficiency, brand name, High quality of
services, Corporate Governance
Management Quality/Execution Built capable
stable management attracted new and skilled
talent with strong retention policies, delivered
de-risked growth without dilution in
profitability, followed shareholder friendly
High Growth Companies Bharti Airtel
Industry Telecom Services Opportunity New mar
ket for mobile telephony with evolving regulatory
environment Macro drivers Changing lifestyles
and aspirations helped in rapid growth for the
sector Competitive Advantages Spearheaded a un
ique business model which competitors took time
to catch up with, Presence in wider geographic
segment providing scale benefits, Innovative
service packages, Brand equity
Management Quality/Execution Entrepreneurial
and highly innovative, exhibited ability to
generate consistently high growth rates,
trend-setting financial management and leadership
High Growth Companies ABB
Rs. in Crs
Industry Engineering capital goods
Opportunity Huge demand for Power
Urban infrastructure Macro drivers Infrastr
ucture spending and capex Competitive Adva
ntages World class product and services,
Higher-end technology, Dependable execution,
Strong support of the parent Management Quality/E
xecution High quality management with strong
track record, sound financial management,
consistent ability to introduce new products and
deliver growth.
High Growth Companies HDFC
Rs. in Crs
Industry Home Loan Mortgages
Opportunity Rising middle-income households
and their need for affordable housing
Macro drivers Strong economic growth
and rising income levels Competitive Advanta
ges Strong brand name, competitive pricing,
customer-friendly practices, Reliability and
stability, Efficient management of balance
sheet, Low cost structure Focus
Management Quality/Execution Stable management
team with strong corporate philosophy, Shows
consistent ability to understand the environment
well, willingness to forego unprofitable growth,
Minimal dilution to fund growth.
High Growth Companies Kotak Bank
Rs. in Crs
Industry Financial Services Opportunity Growi
ng affluent middle class with high savings a
nd need for comprehensive financial services
Macro drivers Changing financial landscape
Competitive Advantages Complete range of
services under one brand, Customer-focused
approach, competitive pricing, Unique business
model, Brand Equity Management Quality/Execution
Strong and aggressive team, Highly
entrepreneurial, Stable and confident top
management, Have shown ability to build a large
retail franchise without dilution of quality
Franklin India High Growth Companies Fund
Benefit from the fastest growing companies in
Franklin India High Growth
Companies Fund
An open end diversified equity fund that seeks to
achieve capital appreciation through investments
in Indian companies/sectors with high growth
rates or potential
Investment style is growth Blend of top-down
and bottom-up approach of investing
Asset Allocation
including investments in foreign securities as
may be permitted by SEBI/RBI up to 35 of the net
assets of the scheme, exposure in derivatives up
to a maximum of 50. including securitised debt
upto 30
Investment Style
Primary focus will be to identify high growth
companies, especially in sectors witnessing
above-average growth. Blend of top-down (macro a
nalysis to identify sectors) and bottom-up
approach (micro analysis to pick stocks within
these sectors) The top-down considerations will i
nclude an analysis of Domestic and global eco
nomic drivers Macro factors such as interest ra
tes, inflation, regulatory environment, political
environment and global market dynamics
Identification of sectors based on the above and
relative valuations liquidity
Investment Process
Identify key trends based on various economic
drivers Analyze and ascertain the nature, certain
ty and predictability of such growth trends
List companies that provide exposure to these
growth themes Research further for Management q
uality, business strengths, competitive
advantages, financial strength
Value these businesses through appropriate
High Growth High returns
The impact of an extra 5 on an initial
investment of Rs.1 lakh
(Please note that this is for illustrative
purpose only and the actual returns would depend
on the market conditions and the performance of
the fund)
Longer the horizon, higher the potential
Volatility is part parcel of stock market
investing. Staying invested for a longer period
reduces the risks
Simulation for Bluechip Fund
Past performance may or may not be sustained in
future. Annualised compounded returns based on
growth plan NAV Period - Inception date
(1.12.1993) to 30.4.2007 Sales load has not been
taken into consideration. Dividends are assumed
to be reinvested and bonus is adjusted. BSE
Sensex rolling returns for the same period
Maximum returns, Minimum returns, Average
returns, Possibility of making money, Possibility
of losing money 1 Year, 101.7, -41.3, 13.8,
57.8, 42.2 3 Year, 62.2, -18.5, 9.9, 64.1,
34.9 5 Year, 36.4, -7.8, 7.1, 71.1, 28.9
7 Year, 20.4, -7.6, 5.8, 71.5, 28.5 9 Year,
17.9, -2.9, 7.2, 82.1, 17.9. Sales load has
not been taken into consideration. Dividend/Bonus
are adjusted. As the investment time horizon incr
eases, the numbers change in favour of
investors... the possibility of losing money
reduces and so do the minimum returns.
Equity investing is attractive
No long term capital gains tax for investments
over a 1-year period
Short term capital gains are only 10
Dividends are totally tax-free in the hands of
the investors and no dividend distribution tax is
required to be paid by the Fund
However investors are liable to pay securities
transaction tax (STT). As per current tax laws

Why Franklin Templeton ?
Franklin Templeton Worldwide
More than 50 years of experience in global
Extensive international presence and breadth of
product line with offices in 29 countries,
supported by over 450 investment professionals
Over US 601.1 billion assets under management
over 17.1 million billable investor accounts
Offers more than 200 investment solutions under
the Franklin, Templeton, Mutual Series, Bissett,
Fiduciary Trust and Darby names globally
As on April 30, 2007
Franklin Templeton in India
Established office in 1996 and currently one of
the leading fund houses in India. Manages
Rs.24,510 crores for over 21 lakh shareholder
One of the largest equity assets in India
Assets Under Management Asset Mix (in Rs. Crs)
Source AMFI Website (as on April 30, 2007)
Rich Experience Product innovation
  • Manages 4 equity funds with a track record of
    over 10 years
  • Manages 3 of the 15 largest equity funds in the
  • First to launch an open end private sector fund
    Prima Fund
  • First to launch a value fund - Templeton India
    Growth Fund
  • Indias first Infotech/Pharma Fund
  • Indias first fund of funds FT India Dynamic PE
    Ratio Fund of Funds
  • Category starters Franklin India Flexi Cap
    Fund, Franklin India Smaller Companies Fund
  • First Capital Protection Fund
  • Templeton India Equity Income Fund

Source AMFI Website (April 30, 2007)
Equity team - Key strengths
People Continuity and depth of experience of the
Contacts and Presence Constant company visits
and frequent meetings with industry people help
in forming independent views.
Local and Global Team focused on local needs, at
the same time, tuned in to global trends.
Discipline Consistent adherence to investment
objectives and philosophy.
Global standards Disclosure and compliance with
independent dealing desk. Constant interaction
with risk management team to gauge risk-adjusted
Long Term The longevity of the team has led to
combined experience of market cycles which has
inculcated a long term perspective and the
ability to take out emotions out of investing
Investment process
Portfolio and Risk Management
Portfolio Construction
Stock Recommendations
Idea Generation
Fund Facts
New Fund Offer May 31, 2007 to June 29, 2007
Minimum Investment Amount Rs.5000/1
New Fund Offer Price Rs.10 plus applicable load
Load Structure - Entry Rs.5
Crs Nil Exit Load redemption within 6 months of allotment), Rs.5
Crs 1 (for redemption within 1 year of
Options Growth Dividend Plan (Payout
Reinvestment options)
Fund Managers Sivasubramanian K.N Anand
Systematic Investment Plan Rs.1000 or more for
atleast 12 months all installments should be
for the same amount (Only through ECS/Direct
Summing up
Participate in Indias robust economic growth
Access the potential of Indias fastest growing
companies in terms of revenue and earnings
Benefit from FTs rich investment experience in
the Indian equity markets for over a decade
You can do all of this with a single investment
in Franklin India High Growth Companies Fund
Thank You
The information contained in this commentary is
not a complete presentation of every material
fact regarding any industry, security or the fund
and is neither an offer for units nor an
invitation to invest. This communication is meant
for use by the recipient and not for
circulation/reproduction without prior approval.
The views expressed by the portfolio managers are
based on current market conditions and
information available to them and do not
constitute investment advice. Scheme
classification and investment objective Franklin
India Bluechip Fund (FIBCF) is an open end growth
scheme with an objective to primarily provide
medium to long term capital appreciation. Entry
Load 2.25, Exit Load Nil. FIHGCF is an
open-end diversified equity fund that seeks to
achieve capital appreciation through investments
in Indian companies/sectors with high growth
rates or potential. Asset allocation Equity and
Equity Linked Instruments 70 - 100, Debt
securities and Money Market Instruments 0 -
30. including investments in Foreign Securities
as may be permitted by SEBI/RBI up to 35 of the
net assets of the scheme, exposure in derivatives
up to a maximum of 50 including securitised
debt up to 30. Terms of the offer The Units are
being offered at Rs.10 per unit plus applicable
load during the NFO and NAV based prices upon
reopening. Risk Factor All investments in mutual
funds and securities are subject to market risks
and the NAV of the scheme may go up or down
depending upon the factors and forces affecting
the securities market. There can be no assurance
that the schemes investment objectives will be
achieved. The past performance of the mutual fund
managed by the Franklin Templeton Group and its
affiliates is not necessarily indicative of
future performance of the schemes. The above is
only the name of the scheme and does not in any
manner indicate the quality of the scheme, its
future prospects or returns. The Mutual Fund is
not guaranteeing or assuring any dividend under
the scheme and the payment of the dividend is
subject to availability of distributable surplus.
The investments made by the schemes are subject
to external risks. Please read the offer document
carefully before investing. Offer Documents /
Application Form are available free of cost at
any of the Investor Service Centres or
distributors or from the website Statutory
Details Franklin Templeton Mutual Fund in India
has been set up as a trust by Templeton
International Inc. (liability restricted to the
seed corpus of Rs.1 lac) with Franklin Templeton
Trustee Services Pvt. Ltd. as the Trustee
(Trustee under the Indian Trusts Act, 1882) and
Franklin Templeton Asset Management (India) Pvt.
Ltd. as the Investment Manager.
Product Positioning
Product Positioning
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