Investing in India

1
Investing in India

• David Velikonja
• Kasi Rao
• Pierre Daillie

2
International Investing

• David Velikonja, MBA
• RBC Dominion Securities

3
Why Equities?
4
Returns 30 Years
1975-2004
5
30 Year Returns - After Inflation
6
30 Year Returns - After Taxes
7
Compounding Impact
1,744k
875k
100k
8
Asset Allocation
Intl 20-35
9
International

• Europe
• Australia
• Far east
• India
• China

10
Kasi Rao

• Management Consultant, India

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Chindia

• China
• India

12
Economics Politics
13
Investment Mission
14
Emerging Titan
15
Foreign Investment
16
Economic Growth
17
Technology
18
Manufacturing
19
Hard Soft Infrastructure
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Chindia Twins
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Oil
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Number 3

• China
• USA
• India

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Rich Man, Poor Man
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Isolation Issues
25
USACanada
26
Pierre Daillie
27
India The Awakening Giant
28
Agenda

• Why INDIA?
• Unmatched Demographics
• Democratic, educated, and English speaking
• Burgeoning middle class - Consumption Boom
• Economic Growth

• Indian Equity Market
• Superior Earnings Growth
• Attractive valuations
• Low correlation
• Key Risks

• Why Excel India Fund?
• Efficiently Structured
• Outstanding Portfolio Manager
• High Quality Portfolio Performance

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Future of India

• Indian economy will be the fastest growing
  economy over the next 3 5 decades. Growth
  expected to be approx. 6 for the next 3 5
  decades.
• In terms, Indian economy will be one of the
  largest in the globe. US27 trillion by 2050.
• Indias per capita income in terms will grow by
  35 times in the next 47 years (i.e. 2050)
• Indian rupee is likely to appreciate by
  approximately 2 per annum total appreciation
  of nearly 300 over next 3 5 decades.
• India is the research hub to the world.
• Source Goldman Sachs, Global Report No. 99

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Demographics

• Population 1.085 billion
• Middle class 450 million (est.)
• (growing at 30-40 million/year)
• 550 million Indians under age 25
• 350 million under age 15

Source IBEF 2006
31
Economic Liberalization
1991 Dr. Manmohan Singh, Finance Minister
(architect of Indias liberalization) Fiscal
crisis collapse of Soviet Union End of the
Licence Raj India opened to Multi-Nationals
2005 Dr. Manmohan Singh, Prime Minister 2nd
fastest growing at 8.5 4th largest economy at
3.7tn (PPP)
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Reservoir of Intellectual Capital

• A meritocratic education system with a special
  focus on English, Science Maths
• Success rate for admission to the top technology
  institutes - IITs is 2 at 10
• 250 universities, 1,500 research institutions,
  10,000 higher education institutes. 3 million new
  BAs per year
• Pool of 23m professionals (graduates/post-grads)
  doctors, accountants, IT engineers, engineers
• of Post-Graduates increasing by nearly half a
  million every year
• Historically India has been a net exporter of
  talent Indians makeup a significant proportion
  of Microsoft, IBMs development teams or Intels
  scientist pool.

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IT and Technology

• Technology the enabler
• Indian IT firms are becoming the worlds leading
  players
• Western IT firms are making India their home
• Technology has brought India next door
• Is it New York or New Delhi?
• Is it Montreal or Mumbai?

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Infrastructure Boom
New Subways
New Deep Sea Ports
New Toll Highways
35
Indias Western Institutions

• Fully democratic society
• Parliamentary government
• Rule of Law
• Strong independent judiciary
• English speaking (lingua franca)

India's Parliament House The President of India
545 directly elected members of the Lok Sabha
(House of the People) and 250 indirectly elected
members of the Rajya Sabha Council of States)
constitute this supreme legislative body.
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Indias Western Institutions

• 675 million voters took part in last elections
  (2004)

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Indias Western Institutions

• Solid banking system
• 2nd largest stock market in the world
• Debt market
• Entrepreneurial spirit
• Educational system (high standard)

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Globalization

• 240 Multinationals have business in India
• Over 100 Fortune 500 cos. have operations in
  India
• All Major governments have India strategy
• Unequalled labour arbitrage
• Indian companies expanding operations globally
• Indian companies acquiring foreign companies

4
39
India Urban Centres
Mumbai
Bangalore
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Disposable Incomes Rising / Middle Class Expanding
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Consumption Led Boom
Brigade Road, Bangalore
Forum Mall, Bangalore
Bangalore BMW Dealership
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India 1 for Global Retail Expansion A.T
Kearney
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Consumption Led Boom
99 of new shopping centres under construction
in India (280 Shopping Centres are in the
planning stages for 2006-7)
44
Retailing Expansion Boom
Gurgaon, India (New Delhi)
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Demand for Real Estate (Mortgages)
There is a net shortage of 23 million residential
properties arising from demand
46
Strength in Engineering and Manufacturing

• 1.2 million cars per year and accelerating
• Domestic auto component sector on the fast track
• 34 per cent growth in the past three years.

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Consumers are Under Leveraged
48
India on China Timeline
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Consumption Led Boom

• Luxury goods market now US14 billion
• 91 million cell phones (March 06)

During 2005, Cell phone subscriptions grew from
40 million to 75 million. There were an
additional 5 million added in January.
50
India on China Timeline
51
India Ten Year Outlook

• GDP to grow at 7
• Real GDP est. 2005 - 800bn
• Real GDP est. 2015 1,600 bn
• Market Cap to grow to 1.0X to 1.5X GDP
• 2005 Market Cap - 550 bn
• 2015 Market Cap 1.0X GDP - 1,600 bn (est.)

52
Economic Size India Moves into the Big Three
The Largest Economies in 2050
BRICs Have a Larger USGDP Than the G6
GDP
in Less Than 40 Years
GDP
(2003 USbn)
(2003 USbn)
50000
100,000
45000
By 2040
BRICs
90,000
BRICS
40000
G6
80,000
overtake
2025 BRICs
35000
the G6
India 27 Trillion by 2050
economies
70,000
over half as
30000
60,000
large as the G6
25000
50,000
20000
40,000
15000
30,000
10000
20,000
10,000
5000
0
0
2000
2010
2020
2030
2040
2050
Ch
US
In
Jpn
Br
Russ
UK
Ger
Fr
It
Goldman Sachs Model Projections.
Goldman Sachs Model Projections.
Source Goldman Sachs
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Risks

• High crude oil prices, inflation
• Managing fiscal deficit
• Geo-political risk
• Infrastructure
• Interest rates

54
Birla Sun Life Asset Management Co. Ltd.
Birla Sun Life AMC Ltd.

• Joint venture between Sun Life Financial of
  Canada and the Aditya Birla Group in India
• 3.5 billion AUM (US)
• 50 owned by Sun Life
• Based in Mumbai, India
• Rated as Indias best Many Awards
• One of the largest team of research analysts in
  the industry
• Bottom Up investment strategy, Value based
• Strong Fundamental

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Excel Funds - Performance As of March 31, 2006
Past performance is no assurance or indicator of
future returns. These rates of return are
historical annual simple total returns they
include changes in net asset value and
reinvestment of all distributions, but do not
take into account any sales, redemption, or other
charges payable by an investor, which would
reduce returns. PLEASE READ a Fund's simplified
prospectus carefully and consult your advisor
before investing. Mutual funds are not
guaranteed their values change frequently.
Investors may experience a gain or loss when they
sell their units in any mutual fund.
56
Infosys Exemplary
The Infosys War Room (above) Infosys Control
Centre (below)
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Top 10 Holdings of Excel India Fund As of March
31, 2006
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Summary Why INDIA?

• Economic Liberalization
• Indias Institutions Rule of Law, Education
  System, Parliamentary Government
• Huge Youth Population
• Middle Class Expanding
• Surge in Consumption and Exports
• Earnings Growth
• Valuations Attractive
• Currency Appreciation
• Risks
• Low Correlation to North American Markets

59
Disclaimer

• Any information contained in this presentation
  does not constitute and shall be deemed not to
  constitute an advice, an offer to sell/ purchase
  or as an invitation or solicitation to do so for
  any entity and further, Excel Funds Management,
  Birla Sun Life Mutual Fund / its affiliates/
  sponsors/employees, directors shall not be liable
  for any loss, damage, liability whatsoever for
  any direct or indirect loss arising from the use
  or access of any information that may be
  displayed in this presentation from time to time.
  Recipients of the information contained herein
  should exercise due care and caution and read the
  offer document (including if necessary, obtaining
  the advice of tax/legal/accounting/financial
  /other professionals) prior to taking of any
  decision, acting or omitting to act, on the basis
  of the information contained herein.
• Opinions expressed in the presentation are not
  necessarily those of Birla Sun Life Mutual Fund
  or any of their officers, employees, personnel,
  directors and Excel Funds Management Inc. does
  not accept responsibility for the content and
  make no representation as to the accuracy,
  completeness or reliability of the content and
  hereby disclaim any liability with regard to the
  same.