CONTENTS Vol. 33 No.

18 • AUG 06 - 19, 2018

Recommendations

10 Choice Scrip

12 Low Priced Scrip

14 Hot Chips

Regulars
06 Editor’s Keyboard
07 Company Index
08 Market View
16 Technicals
62 Query Board
64 Reviews
65 Kerbside

Subscribers can access

the complete databank
consisting of more than
3500 companies on our
website www.DSIJ.in

Communication Feature sections

are advertorials provided by the
company & carried on “as is” basis.

4 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018 DSIJ.in

 Markets At All-Time Highs –
But No Reason To Worry !
W
e said it in the issue no 10, volume 33, dated April 16-29 2018, even when everyone
else was bearish on the markets that Sensex will reach 38000 by year end. Now, here
we are at a kissing distance of the magic figure with almost five months to go for the
markets to conclude the year. The journey has been comparatively more volatile for
Sensex this year when compared with Sensex movement in 2017. The story of the
broader markets has been a total contrast. Almost 80 per cent of the stocks that trade on the bourses
have underperformed the key benchmark index, thus making it difficult for majority of the investors to
generate positive returns.

The current bull run is not broad-based and only the select large-caps are showing outperformance.
Also, note that the delivery volume is at five-month low in the month of July, suggesting lower
participation from investors.

It is only logical to remain cautious about the markets

with so many visible headwinds ahead for the markets.
However, it is not advisable to exit equities and remain
in cash at this juncture. We believe markets can scale
new heights owing to consistent improvement in
earnings QoQ over the next few years, improvement in
GDP growth rate by 0.4 to 0.5 per cent every year in the
next 3 to 5 years and stable macroeconomic
environment.

The way to invest in this market is to avoid short term

focus and select quality stocks that are either reporting
quality earnings or are expected to do so in future. It is
tempting to say that mid-caps and small-caps are bottoming out, however one should always be more
cautious when it comes to investing in these stocks.

The current issue is a special CFO edition where we have provided an opportunity for investors to get to
know directly from the strategists themselves about the company’s future plans and goals. I am sure the
long-term investors would benefit from the specific comments made by the finance captains of
Corporate India on various issues facing Indian economy and various sectors. It is interesting to see that
majority of the CFOs do not see the trade war as a major factor that may dampen the investment
sentiment at the corporate level. To find many more such interesting aspects from the insiders, please go
though our special edition on CFOs in India. Do give us your feedback on the special edition and
whether you agree with the views of the CFOs on a variety of topics.

We are expecting some good set of results from NBFCs this season. We have hinted where the investors
should focus in the NBFC space in our cover story. For sure, NBFCs should occupy good amount of
space in your long-term equity portfolio.

Going forward, focus on bottom-up investing opportunities. Before you make investment, study if the
balance sheet is intact and that it is not stretched, cash flows are consistently positive and analyse if the
business in which you are investing will survive for the next 10 years. Markets are expected to remain
robust owing to liquidity and improvement in quality of earnings. Markets at all-time highs should not
worry you. If markets at all-time highs were bad for equity prices, they would have never moved up
from previous all-time highs. So don’t be scared of investing at all-time highs!!

Invest smartly, invest regularly.

V B PADODE
Editor-in-Chief

6 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018 DSIJ.in

 facebook.com/DSIJin twitter.com/DSIJ

www.dsij.in/apps.aspx
enquiry@dsij.in linkedin.com/in/DalalStreetInvestmentJournal

Vol. 33. No. 18 • AUG 06 - 19, 2018

Founder & Editor-In-Chief
V B Padode
Editors
Prakash Patil - Chief Copy Editor
Gayathri Udyawar - Copy Editor
Deputy Editors
Yogesh Supekar, Shashikant Singh
Research
Neerja Agarwal - VP
Karan Bhojwani - Sr. Manager
Bhagyashree V - Sr. Analyst-CRU
Apurva Joshi - Analyst
Tanay Loya - Sr. Associate
Graphics
Vipin Bendale
Subscription & Customer Service
Utkarsh Sawale, Mayank Dubey
Mid-caps Carnage
Compliances and Internal Audit
Arvind Manor I am really appreciative of the DSIJ team for very appropriately taking up
Cover Story “Underperforming Stocks: What Should You Do with
them?” It has been very correctly brought out that holding the
Marketing & Sales
Farid Khan - AVP underperformers is a cascading risk which can wipe out the invested
capital altogether. As indicated by the learned authors and very relevantly,
Mumbai:
Anand Chinchole - Manager investors find it a tough decision to sell a stock at a loss under the
Delhi: sentiment and belief of an eventual pick-up.
Lokesh Sharma - Sr. Manager
Kolkata : One issue on which I would like to see coverage relates to the buyback
Soutrik Ghosh - Sr. Manager and subsequent announcement of bonus issue by Infosys. The company
Chennai: undertook buyback in Dec 2017, which reduced the equity and has now
P V Bhaskar - Sr. Manager announced a 1:1 bonus to celebrate 25 years of listing, which may not be
Domain Experts
value accretive and would reduce the EPS. The matter appears perplexing
as the object of buyback and thereby improving earnings gets nullified by
Hemant Rustagi
Jayesh Dadia bloating equity through bonus shares. Can the attention of SEBI be
invited to put time limits/ restriction on such acts in a span of even less
than a year? - Ajay Gupta

Editor Responds: Thank you for your great feedback on our previous issue.
DSIJ Private Limited As far as corporate actions go, we would be studying your observations on
Infosys and shall cover the topic in one of our coming issues. Yes, investors
Managing Director can highlight pertinent issues to SEBI by sending them a query. You can
Rajesh V Padode surely do so in your capacity as an investor. Keep writing to us and hope you
For Customer Service would also enjoy the current issue.
020-49072626 OR service@DSIJ.in
Mumbai Office
419-A, 4th Floor, Arun Chambers, Tardeo, Next to AC Market Recommendations
Mumbai - 400034 022-43476012/16/17 Company/Scheme Reco. Price (`) Column Page No
Pune Office
Adlabs Entertainment zExit 34.85 QueryBoard 63
C-305, 3rd Floor, Trade Center, North Main Road, Near Axis Bank,
Opposite Lane no. 6, Koregaon Park, Pune - 411001 BBTC LTD zBuy 1567.15 Technicals 18
020-49072600
Bharat Forge zBuy 641.00 Kerbside 65
Chennai 9445546165
Capri Global Capital zBuy 82.25 Low Priced Scrip 12
Kolkata 7003118028 Cholamandalam Investment zHold 1432.40 QueryBoard 62
Delhi 8076878278
Deep industries zExit 106.80 QueryBoard 62
Delta Corp zBuy 256.25 Hot Chips 14
To advertise, mail us on ads@dsij.in Havells zBuy 634.25 Kerbside 65
Printer and Publisher: Nitin Sawant, Editor: V B Padode for DSIJ Pvt Ltd. IDFC Bank zHold 40.00 QueryBoard 63
on behalf of Achievements Merchandise Pvt Ltd. Printed at Kala Jyothi
Process Pvt. Ltd. Plot No.: W-17&18, M.I.D.C. Industrial Area, Taloja, IFB Industries zHold 1095.25 Reviews 64
Dist. Raigad, Navi Mmbai. - 410 206. and published from 419-A, 4th
Floor, Arun Chambers, Tardeo, Next to AC Market, Mumbai - 400034 „ INDIAN BANK zBuy 358.20 Technicals 18
All rights reserved. „ While all efforts are made to ensure that the
information published is correct and up-to-date, Dalal Street Investment Lemon Tree Hotels zBuy 78.25 Kerbside 65
Journal holds no responsibility for any errors that might occur. All
material contained herein is based on fundamental and technical analysis MCX zBuy 881.70 Kerbside 65
and other in-house methods, which though reliable, are not infallible. The PVR Ltd. zHold 1127.40 Analysis 20
information given in the magazine is of an advisory nature. Readers are
advised to consult experts before taking any investment decision and Dalal Sanwaria Consumer zHold 12.75 Reviews 64
Street Journal holds no responsibility for any losses that may arise due to
investment decisions made on the basis of information given within the Sun Pharma zBuy 566.65 Hot Chips 14
magazine. No reproduction is permitted in whole or part without written
consent from Dalal Street Journal „ All disputes are subject to the Take Solutions zBuy 208.00 Choice Scrip 10
exclusive jurisdiction of competent courts and forums in Mumbai only. „
Dalal Street Investment Journal is a member of INS/ABCs. BP - Book Profit • BPP - Book Partial Profits • BL - Book Loss

DSIJ.in AUG 06 - 19, 2018 I DALAL STREET INVESTMENT JOURNAL 7

Market Watch Blue chip index stocks are
fuelling the market rally,
Q1FY18 Results Give Direction To The Market whereas companies with
lacklustre, flat and

I
t was time to cut the celebration
cake at the BSE as the Sensex soared
past the 37,000 mark, gaining
positive momentum from good
quarterly earnings. The fortnight
had it all, all-time highs, record closings,
and the usual swings with Sensex and
Nifty testing new highs. The PSU banks
as well as private banks fuelled the
market’s upward trajectory as they
reported better asset quality for the
quarter. The markets also took support
from macro developments, including
easing of trade war between the US and
the European Union. Also, the fact that
the US economy posted a GDP growth of
4.1% in Q2 eased some fears of recession.
The global markets were upbeat during
the fortnight with only Nasdaq down by
1.13% on the back of disappointing
earnings by tech gaints Facebook and
Twitter. In the last two weeks, Dow Jones
gained by 1.71%, while S&P 500 was up
by 0.63%. In Europe, UK’s FTSE 100
gained 0.51%, whereas the German index
DAX posted a surge of 2.55% and the
French CAC40 registered a growth of
broader markets participated in the rally,
with the BSE Mid-cap and Small-cap
indices registering 3.12% and 1.57% gains,
respectively, during the fortnight. Among
the sectoral indices, the FMCG and Banks
outshined the market, while Auto was the
only sector that dipped as Q1 results of
auto majors Maruti, Hero Motocorp and
Bajaj Auto disappointed on the margin
front. In the two-week period, the BSE
Bankex gained 3.20%, FMCG was up by
3.55%, while Auto dipped by 1.21%. Power
index grew by 2.11%, followed by IT
which was up 0.91%, Realty up by 0.35%
and Metal up 0.35%.
In a reversal of the trend, albeit
marginally, the FIIs have turned net
buyers during the fortnight. The FIIs have
bought equities to the tune of Rs 45.52
crore; whereas the domestic institutional
investors (DIIs) have bought equities of
Rs 598.38 crore, during the fortnight.
As concerns over the trade war between
the US and the EU eased, gold turned
bearish. A dip in demand from local
jewellers, coupled with weakness in the
disappointing earnings are
being dumped by investors.
Despite the rally, the market is
reevaluating a large number of
stocks that were earlier peaking
on the back of mere sentiments.
global markets, put pressure on
domestic gold prices. The crude oil
prices still lingered around the US$75
per barrel mark, even as the Trump
administration continued to threaten
Iran with sanctions.
With the earnings season turning out
be a success, investors are indulging
in cherry-picking to update and
rebalance their portfolios. The Reserve
Bank of India at its August policy
meet maintained the GDP growth
forecast for FY19 at 7.4% and increased
the repo rate by 25 bps to 6.5 per cent.
Going ahead, banking and auto
stocks are expected to give direction to
the markets. DS

13th July 27th July Gain/Loss

Indices
2018 2018 (%)
Dow Jones Ind 25,022.00 25,451.06 1.71
S&P 500 2,801.31 2,818.82 0.63
NASDAQ 7,825.98 7,737.42 -1.13
FTSE 100 7,661.87 7,701.31 0.51
DAX 12,540.73 12,860.40 2.55
CAC 40 5,429.20 5511.76 1.52
Hang Seng 28,524.44 28,804.28 0.98
Nikkei 22,597.35 22,712.75 0.51
Shanghai 2,831.13 2,873.59 1.50

1.52%. During the fortnight, the Asian Performance Of Indices Net Investment In Equity Markets (`/Cr)
markets Hang Seng, Nikkei and Shanghai 13th July 27th July Gain/Loss Date FIIs DIIs
exchange, gained by 0.98%, 0.51% and Indices
2018 2018 (%) 27-Jul-18 738.05 406.12
1.50%, respectively. SENSEX 36,501.61 37,336.85 2.29 26-Jul-18 2,453.57 -2,716.04
Nifty 11,018.90 11,278.35 2.35 25-Jul-18 -1,195.75 97.64
Far ahead of its global peers, the Indian Mid-Cap 15,431.47 15,912.62 3.12 24-Jul-18 104.34 513.78
benchmark indices registered impressive Small-Cap 16,196.33 16,450.20 1.57 23-Jul-18 259.37 124.82
gains of above 2% during the fortnight Auto 24,567.12 24,269.32 -1.21 20-Jul-18 310.27 -50.73
studded by new all-time highs. As the bulls Bankex 29,788.45 30,743.13 3.20 19-Jul-18 -315.69 470.02
took over the Indian equity markets, FMCG 11,485.10 11,892.60 3.55 18-Jul-18 95.68 111.01
Sensex and Nifty scaled new highs gaining IT 14,385.70 14,516.97 0.91 17-Jul-18 -673.99 840.06
2.29% and 2.35%, respectively. Sensex Metal 12,470.90 12,511.06 0.32 16-Jul-18 -625.68 -70.3
breached the 37,500 mark, while Nifty was Power 1,910.79 1,951.17 2.11 13-Jul-18 -1,104.65 872
trading above the 11,300 mark. Even the Realty 2,061.04 2,068.32 0.35 Total 45.52 598.38

8 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018 DSIJ.in

Trackpad
Bajaj Auto Reports Stellar July Sales Numbers

T
wo and three-wheeler giant, Bajaj Auto Limited reported its best
July sales growth since 2010.

The company sold 4 lakh units during the month, registering a growth of
30 per cent over the same period last year.

The company in its filing to the exchanges also said that the Domestic
sales during the month grew by 27 per cent YoY to 2.37 lakh units and
exports increased 34 per cent to 1.63 lakh units.

The company’s motorcycle segment reported a 25 per cent growth in

sales to 3.32 lakh units whereas its three-wheeler division posted its
highest ever monthly sales of 67,663 units, registering a growth of 59 per
cent YoY.

RBI Surprises With 25 bps Repo Rate Hike

T
he central bank has increased the repo rate by 25 bps to 6.5
per cent in its third bi-monthly RBI policy review meeting
for 2018-19. However, RBI has maintained a neutral stance
on the economy.

This is the first time the RBI has raised the benchmark interest rate
by 25 basis points in two consecutive policy meets. RBI also hiked
reverse repo rate by 25 bps to 6.25 per cent.

RBI’s monetary policy committee (MPC) cited impressive

corporate earnings, increase in investment activity as a basis for
this raise.The central bank has forecast GDP growth for the
current fiscal at 7.4 per cent and expected it at 7.5 to 7.6 per cent
for the second half of the fiscal.

BSE Investments Limited Acquires 24% Stake In

CDSL Commodity Repository Limited
B
SE Investments Limited (BSEIL), a 100% subsidiary of BSE acquired 24 per cent stake in
CDSL Commodity Repository Limited (CCRL). Regulated by the Warehouse Development
and Regulatory Authority (WDRA), CCRL will record the storage and transfers of
commodities including warehouse receipt transfers, although deliveries are in physical form. It is
similar to the way depositories function for equities and other financial securities. A trade
repository is another important step forward in improving regulatory transparency in the
commodity derivatives markets in India.

CCRL will enable electronic accounting of commodities, thereby ensuring ease of use, higher
accuracy and lower costs for document transmission. The commodity repository will also provide
the legal and regulatory environment for inventory financing and warehouse receipt lending.

Shri Ashishkumar Chauhan, MD & CEO, BSE said, “We are delighted to partner with CCRL to
provide a repository for commodities that will support regulatory reporting requirements for
development of the commodities derivatives in India. We believe this partnership will further
strengthen our quest of developing and strengthening Commodity markets in India”.

DSIJ.in AUG 06 - 19, 2018 I DALAL STREET INVESTMENT JOURNAL 9

Recommendations Equity
currently available at reasonable
Take Solutions valuation of 19.3x P/E on TTM earnings.
In terms of return ratios, the company’s

TAKE THIS SOLUTION TO MAKE PROFIT!

ROE and RoCE stands at 14.3 per cent
and 15 per cent, respectively.

On an annual basis, the operating

revenue of Take Solutions surged almost
18 per cent to `1587.2 crore in FY18
HERE IS WHY from `1344.5 crore in FY17. In dollar
Operates in niche segment terms, its revenue rose almost 23 per cent
YoY in FY18. The operating profit
Strong order book (EBITDA) also rose 17 per cent YoY to
Robust industry outlook `306.4 crore. The EBITDA margin for
FY18 stood at 19.3 per cent. The net
profit for the full year increased 9.4 per

T
ake Solutions operates in a
niche technology-led
segment and offer services to
the life sciences industry
which accounts for almost
91 per cent of the total revenue. The
company provides IP-based solutions in
clinical, regulatory, safety and consulting
processes to global life science
companies across multiple therapeutic
areas.
The company also operates in the supply
chain management segment, where it
focuses on high-margin niches in
engineering services, and supply chain
collaboration. The company’s IP-led
approach enables its clients to automate
supply chain processes, track, trace and
control at item level, mandate supplier
compliance, and streamline material and
shipment movement, and thus optimise
their processes. The company has its
presence in North America, Europe,
Asia, and South America, etc. The
company’s majority of the revenue come
from the United States (~80 per cent),
followed by APAC (13 per cent) and
Europe (7 per cent).
On financial front, looking at the last
cent YoY to `159.8 crore in FY18.
The company’s order book for life
sciences, as on FY18, stood at USD 179.5
million, which is likely to be executed in
7-9 months, which provides strong
revenue visibility for the near term.
Notably, the company’s management
Best of LAST ONE Year expects life sciences business to grow at
Name of Reco Exit/CMP Absolute Annual 30 per cent for FY19. Overall, the
Company Price Price (`) Gains Returns management has indicated that the
(`) (%) (%) company is likely to witness growth of
Balkrishna Ind. 1079.8 1317.85 22.05 417.79
almost 22-24 per cent. Furthermore, in
Tata Metaliks 667.8 826.2 37.93 89.89 biosimilars, the company is witnessing
Colgate-Palmolive (I) 1051.65 1231 17.5 77.78 traction in orders in monoclonal
PFC 122.6 147.6 20.39 64.96 antibodies space, which is used to treat
Symphony Ltd. 1429.8 1672 16.94 64.19 rare indications like rheumatoid arthritis,
spot psoriasis and some rare indications
quarter of FY18, the operating revenue of cancer. The company’s addressable
rose 11.3 per cent on a QoQ basis to market Clinical Research Organisation
`453.9 crore. In dollar terms, the revenue (CRO) is expected to grow from USD 32
during the same period rose 11.7 per billion in the year 2016 to USD 44 billion
cent. The operating profit (EBITDA) in the year 2021 (representing 7 per cent
during the period increased almost 13.4 CAGR) driven by R&D spend and
per cent to `90.5 crore from `79.8 crore increasing level of clinical development
in the previous quarter. In terms of outsourcing. Above all, the strengthening
bottomline, the company witnessed of USD as against INR gives further
growth of almost 10 per cent QoQ to boost to the company as majority of its
`45 crore. revenue comes from the US. Owing to all
these, we urge our reader-investors to
On the valuation front, the company is BUY the stock. DS

CMP
Monthly Stock Market Returns Shareholding Pattern Last Five Quarters (`/Cr)
(`) Particulars Mar '18 Dec '17 Sep '17 Jun '17 Mar '17
BSE Code: 532890 June 2018
CMP: `208 FV: `1 Total Income 453.92 408.02 370.93 354.37 355.51
BSE Volume: 29865 Promoters 66.80
Date: 30/07/2018 Other Income 2.87 1.37 1.10 1.08 0.50
Public 33.20 Operating Profit 93.38 81.18 71.06 67.27 69.54
Interest 5.51 5.03 5.52 4.70 5.33
Others 0
Net Profit 45.49 41.96 36.69 35.72 41.81
Total 100 Equity 14.59 13.12 13.11 13.10 13.10

10 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018 DSIJ.in

Recommendations Equity
Capri Global Capital profitability from its existing operations

NURTURING MSMES FOR FAST-PACED GROWTH

in this segment.

On the financial front, the company

posted a 66.76 per cent increase in its net
sales to `101.84 crore in the fourth
quarter of FY18 as against `61.07 crore
HERE IS WHY in the same quarter of the previous fiscal.

Rural growth driving demand The PBDT of the company increased by

Robust financials 69.33 per cent to `38.59 crore in the
fourth quarter of FY18 as against
Higher consumption by nuclear families `22.79 crore in the same quarter of the
previous fiscal. The net profit of the

C
apri Global Capital Limited
(CGCL) is a RBI registered
non-deposit taking,
non-banking finance
company (NBFC). It PRICED SCRIP
focuses on the financing of micro, small
and medium enterprises (MSME), Best of LAST ONE Year
construction finance and housing Name of Reco Exit/CMP Absolute
finance segments. Product portfolio of Company Price Price (`) Gains
MSME finance include business loan (`) (%)
against residential/ commercial/ National Fert. 61.30 78.00 27.24
industrial properties and financing for Gufic BioSci. 78.70 95.10 20.84
purchase of commercial/ industrial Jamna Auto Ind. 77.15 96.75 25.41
properties. Virinchi Ltd. 88.00 110.00 25.00
Amines & Plasti. 68.00 81.00 19.12
In the MSME finance segment in FY18,
CGCL increased its presence to 66
locations from 38 in FY17, adding affordable housing like Telangana and
new branches in tier 2/3 cities. Its Rajasthan.
MSME book size increased 28.46 per
cent to `1,55,923.35 lakh on a YoY basis. Further, FY18 was the first full year of
In the coming years, CGCL plans to operation of the company’s housing
reduce reliance on intermediaries and finance subsidiary. The loan book at the
focus on direct sourcing via its branch end of the year was `24,633 lakh with an
network. average ticket size of `11 lakh and average
tenure of over 207 months.
Its construction finance segment book
size stood at `1,05,404 lakh at the The housing finance business is expected
end of the year, registering an increase to blossom on the back of incremental
of 74.86 per cent from a year-ago business from smaller towns. CGCL
period. The company plans to reach plans to consolidate its presence in North
further into high potential states for and West India and drive higher
company also increased by over
114 per cent to `25.5 crore in the
fourth quarter of FY18 as compared to
`11.91 crore in the same quarter of the
previous fiscal.
On the annual front, the net sales of the
Annual
company increased by 57.76 per cent to
Returns `336.45 crore in FY18 as against
(%) `213.27 crore in FY17. The PBDT of the
350.22 company increased by 39.46 per cent to
288.55 `138.61 crore in FY18 as against `99.39
254.10 crore in the previous fiscal. The net profit
225.00 of the company increased by over 62 per
167.88 cent to `94 crore in FY18 as compared to
`57.79 crore in the previous year.
On the valuation front, the company is
trading at a PE ratio of 13.16x. The
company’s return on equity (RoE) and
return on capital employed (RoCE)
stood at 8.61 per cent and 62.46 per cent,
respectively. The company has a
debt-to-equity ratio of 1.25x.
The stock is trading at 1.09 times its
book value and is expected to give a
good quarter. Further, considering the
drive in consumption due to higher per
capita income and growth in rural
demand, we recommend our reader-
investors to BUY the stock. DS

CMP
Monthly Stock Market Returns Last Five Quarters (`/Cr)
Shareholding Pattern
(`) Particulars Mar'18 Dec'17 Sep'17 Jun'17 Mar'17
BSE Code: 531595
June 2018
CMP: `82.25 FV: `2 Total Income 108.42 95.1 82.89 84.01 62.03
BSE Volume: 9,018 Promoters 74.94
Date: 30/07/2018 Other Income 13.88 6.81 3.57 0.04 6.48
Public 25.06 Operating Profit 73.59 66.42 57.48 54.92 38.18

Others 0 Interest 33.31 26.42 21.61 20.71 16.02

Net Profit 24.75 28.3 27.65 23.38 11.46
Total 100
Equity 35.03 35.03 35.03 35.03 35.03

12 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018 DSIJ.in

Recommendations Equity
DELTA CORP CMP - `256.25

BSE CODE Volume Face Value Target Stoploss

532848 635301 `1 `282 `229

T he owner of casinos (88.7% revenue)

and hotels (11.3%) in Goa is the only
listed company in this segment. The
company owns three casinos, viz; Deltin
Royle, Deltin JAQK, Deltin Carvel and two
Scrip’s Movement

hotels viz; Deltin Suites and Deltin Palms in

Goa. The fundamentals show that the
company’s TTM topline and bottomline have
grown considerably by 46.7% and 138.4%,
respectively. Even the conventionally 2018

lacklustre Q1 was surprisingly good as

Last Seven Days’ Volume Table
revenue rose 46% YoY driven by exuberant
rise of 53% YoY in casino gaming. Casino (No. of Shares)
revenue grew with revival in footfalls and Days Volume
spillover from other casinos shutting down 23-Jul-18 5,33,000
and pricing. The EBITDA margin too stood 24-Jul-18 10,38,500
flat instead of de-growing, despite huge hike 25-Jul-18 4,29,070
in licence fee. The online gaming section's 26-Jul-18 2,72,074
margin contracted due to higher promo- 27-Jul-18 3,14,793
tional expenses along with one-time expense 30-Jul-18 5,20,938
on Fantasy sports, but going forward, it is 31-Jul-18 6,35,301
expected to fetch better returns with rise in be shifted to an entertainment zone near
The scrips in this number of active users. Further, with a new soon-to-be-built airport. We
column have been government’s initiative, Delta’s casinos would recommend a BUY.
recommended CMP - `566.65
SUN PHARMA
with a 15-day investment
horizon in mind and BSE CODE Volume Face Value Target Stoploss
524715 297926 `1 `609 `525
carry high risk. Therefore,
investors are advised to
take into account their risk
appetite before investing,
Scrip’s Movement

D ilip Sanghvi-promoted pharma company

Sun Pharma holds highest weightage in
pharma index, being the largest pharma
company in India. The company is engaged in
global consumer healthcare business and
as fundamentals may manufacture of active pharmaceutical ingredients.
or may not back the The company generates revenue from exports,
recommendations. namely, US-46% and emerging markets-16.2%,
while domestic sales contribute 26.6%. Consider-
ing the financials, its consolidated Q1FY18 topline
2018
and bottomline posted a growth of nearly 5% and
282%, respectively. Though the company’s TTM
PAT show a de-growth on a consolidated basis, its
standalone PAT showed loss recovery. The Halol
Last Seven Days’ Volume Table plant resolution followed by the first-ever USFDA
(No. of Shares) approval in the last five years from this plant
Days Volume assures business growth with base business
23-Jul-18 2,15,056 moving to 120 million USD from 80 million USD
24-Jul-18 1,53,696 per quarter starting Q2. Further, the company’s
25-Jul-18 1,59,830 base generic business loss is likely to get counter-
26-Jul-18 1,76,172 balanced with innovative launches in the pipeline
27-Jul-18 1,59,573 viz; Odomzo, Siscera, Tiltra and Illya. With
30-Jul-18 2,03,852 expected 10% and 4% CAGR in Indian pharma
31-Jul-18 2,97,926 and global pharma market, we recommend
(Closing price as of July 31, 2018) a BUY. DS

14 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018 DSIJ.in

Technicals Equity
NIFTY Index Chart Analysis
Q1 earnings act as catalyst as benchmarks peak and broader indices bottom out

I
ndian benchmark indices breached
their major resistances and are
hitting all-time high levels. Sensex
had hit its first all-time high after
January on July 12, while Nifty did it for
the first time on July 26. Currently, the
indices are trading at their peaks, making
higher highs on a daily basis. The broader
markets too witnessed bottom fishing and
have succeeded in breaking their prior
major resistances, depicting trend reversal
in Mid-cap and Small-cap indices.
The FIIs have turned net buyers for the
first time after March 2018, reporting net
Roadmap for the next 15 trading sessions
Ideas Nifty Levels Action to be Initiated Probable Targets
Close above 11375 on the daily chart on closing
Resistance for the medium term 11375 11117-11171
basis would give further momentum to the bulls.
Close below 11260 on the weekly chart would
Support for the medium term 11260 11200-11145
change the trend and trigger a retreat.
of USD 72.45/barrel and thereby the range target at 11235-11250 level. In case
Indian rupee went off its all-time low, Nifty continues with the upside rally
which further buoyed the markets. even above 11375, we hold 11450 as the
However, the markets did not react much immediate resistance. Above this, the
to the bounce-back in the oil prices level of 11550, followed by 11750, will act
above USD 75/barrel. as the major resistance, which is 80% of
the symmetric triangle pattern target in
Further, the RBI is expected to keep the the medium term.

equity investment of `2408.5 crore in the
month of July. The DIIs continued to buy,
but their buying remained modest in July
2018 at `4503 crore, its lowest since
February 2018.
The revival in the domestic
macroeconomic numbers, followed by
robust corporate earnings for Q1FY19,
have acted as the catalysts for this
northward movement. Further, the Brent
oil had slipped below its crucial support
rates unchanged in its upcoming policy,
despite higher CPI and WPI amid high
fuel prices. We are at the doorstep of the
release of macros and the core
infrastructure output and PMI numbers
are likely to direct the markets followed
by auto sales numbers for July.
Technically speaking, our benchmark
index Nifty broke its major resistance at
11080, where it also breached its range of
10925-11080. Nifty also surpassed its
Nifty has been making higher highs in
daily trading sessions, except for a
one-day breather in-between.
However, the upside in the prices is
accompanied with relatively falling
volumes and the 14-period RSI hitting
above 75. In case Nifty turns back from
the current levels, we hold 11260-11200
as the immediate supports, followed by
11145-11095. The level of 10925 will act
as the trend reversal in this case.

16 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018 DSIJ.in

Technicals Equity
STOCK RECOMMENDATIONS

BBTC LTD ............................ BUY ............................ CMP `1567.15

BSE Code : 501425 Target 1 .. `1657 | Target 2 ..... `1714 | Stoploss....`1460(CLS)
The stock of BBTC is currently trading at `1567.15. Its
52-week high and low stand at `1820/`847 made on
January 10, 2018 and August 4, 2017, respectively.
Considering the weekly time frame, the stock fell nearly
40% up to `1082 on March-end and hit a bullish
piercing pattern, which indicated a bounce-back.
Accordingly, the stock rose above 61.8% retracement till
`1654-1657 levels. It also gave correction in-between
38.2% and 50% retracement of the bounce, where it
witnessed a double bottom at `1382 level, which was just
above its 200-day EMA support level. Considering the
daily time frame, the stock is currently trailing at
`1575-1545 resistance zone. Moreover, it has given a
kind of symmetric triangle pattern breakout at `1512 on
a closing basis. The volumes are justifiable and the
14-period RSI is quoting at 59, which suggests
momentum going forward. The stock is trading above its
Bollinger band average and is heading the upper band,
which is placed at `1581. We recommend a BUY.

INDIAN BANK .......................... BUY ........................ CMP `358.20

BSE Code : 532814 Target 1 ..... `385 | Target 2 ..... `398 | Stoploss....`329 (CLS)
The stock of Indian Bank is currently trading at
`358.20. Its 52-week high/low stand at `428/`254,
which were made as on November 17, 2017 and
September 28, 2017, respectively. Considering the
monthly time frame, the stock had given a sharp rise
of 67% in October and November 2017, and a sharp
fall of 37% from November to March 2018. The stock
has bounced back and is trailing at 61.8% of the fall
since last two months. Considering the weekly time
frame, the stock has been taking support at multiple
point upward trendline since November 2016. It
recently took a support at `305 level in the July 27
week and bounced back sharply. With this bounce, the
stock also gave rounding base and a downward sloping
trendline breakout at `353 on a closing basis.
Considering the daily time frame, the stock has given
a kind of cup and handle pattern breakout at `364 and
is trailing near the levels. The volumes are reasonable
and the 14-period RSI is quoting at 59, suggesting
DS
momentum. We recommend a BUY.

*LEGEND: „ EMA - Exponential Moving Average. „ MACD - Moving Average Convergence Divergence „ RMI - Relative Momentum Index
„ ROC - Rate of Change „ RSI - Relative Strength Index (Closing price as of July 31, 2018)
Disclaimer : Above recommendations are based on various technical parameters and any fundamental input has not been considered for the recommendations. Follow strict stop loss for the recommendation.

18 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018 DSIJ.in

Analysis
PVR Ltd.
SHOWCASING BLOCKBUSTER PERFORMANCE
S
ince its inception in the year 1997,
PVR has transformed itself into
India’s largest and premium film
exhibition company. PVR Ltd,
the integrated film and retail brand, has
PVR Cinemas as its major subsidiary.
Post-acquisition of Cinemax in 2012 and
DT Cinemas in 2016, the company
serves 76 million consumers annually. In
June 2018, the company opened 5
multiplexes, taking its total multiplex
network to 630 screens at 135 properties
in 52 cities (19 states and 1 Union
territory), thereby emerging as the
largest multiplex operator in India.
PVR also operates as distributor of
non-studio/independent international
films in India through its subsidiary PVR
Pictures. Since 2002, the company has
released more than 350 Hollywood, 175
Hindi, 75 regional films across genres
under its banner. PVR Pictures has the
highest box office share of independent
foreign language films in the India.
Likewise, with its another subsidiary,
PVR Leisure, the company offers in-mall
entertainment, gaming, food, etc.
Screen expansion to showcase
blockbuster performance
With 630 screens, PVR is already the
largest film exhibition company in the
country. The company is determined to
maintain its leadership position and to
scale up its business, the company is
expanding its screens across the country
and focusing on tier-I and tier-II cities to
capitalise on the untapped opportunities.
The company has given an indication
that it will open almost 90 screens
organically in FY19. Accordingly, 23
screens are ready and awaiting licences,
53 screens are under fit-out and are
expected to be completed in the next 5-8
months. Also, the company is expecting
mall development across the country,
which in turn would lead to further
organic growth. For FY19, the company
has given capex guidance of `400-450
20 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018
Equity
State Cinemas Screens various other premium services such as
Punjab 7 39 Gold Class, Director’s Cut, IMAX, 4DX,
Chandigarh 3 15 P[XL] and Playhouse which at present
Haryana 8 29 contribute around 9 per cent of total
Delhi 15 50 premium screen formats. Going forward,
Rajasthan 2 7 the company is looking to substantial
Gujarat 13 60 expansion in this space and aims to take
Madhya Pradesh 3 11 premium screen share from current 9
Maharashtra 37 157 per cent to 20 per cent over the next
Karnataka 11 85 three years.
Kerala 2 13
Uttarakhand 1 5 Likewise, the company has also started
Uttar Pradesh 12 58 innovative initiative Vkaao, where
Jharkhand 2 7 patrons can watch cinemas of their
Assam 1 2 choice on demand and at a theatre of
West Bengal 3 13 their choice with a minimum booking
Chhattisgarh 4 17 for 50 seats. Patrons can choose movies
Telangana 6 36 from PVR Pictures library of 500 titles
Andhra Pradesh 1 4 which the company eventually targets to
Tamil Nadu 3 17 take it to more than 1,000 titles. Another
Date as on Q4FY18. innovative initiative of PVR is that
during summer holidays, the company
crore as against `350 crore in the has started showing movies from the
previous fiscal. This capex is expected to kids’ genre. All these initiatives would
be funded majorly through internal help the company drive footfalls during
accruals, which will help the company to leaner periods for movies.
avoid strain on its balance sheet.
However, it had passed resolution to Low screen penetration provides
raise `1000 crore through debt, which is headroom for multiplexes to grow
expected to be used for encashment of Increasing urbanisation is expected to
opportunities in the future. result in 35 per cent population living in
urban areas by 2020. Further, the average
PVR has not just pioneered the multiplex household income is expected to grow by
industry in India but has been 1.5x to reach USD 10,100 by 2020.
instrumental in driving innovation and
providing premium movie watching Besides, with an increasing population
experience. PVR’s premium formats and a majority of this population (61
includes Gold Class, Director’s Cut, per cent) expected to be below the age of
IMAX, 4DX, P[XL] and Playhouse. 35 bodes well for the overall
Currently,PVR has 59 screens or 9.4% of entertainment industry. When
total screens across the premium compared with nations such as China,
formats. PVR is targeting aggressive Brazil, South Korea, US and UK, India
growth and has targeted premium is an under-screen market as seen in the
screens to reach ~20% of its screen exhibit below. Thus, the company's
portfolio in the next three years. screen expansion plan majorly in the
tier-I and tier-II cities would be fruitful
New offering to bring incremental for PVR in years to come.
revenue for PVR
Apart from its conventional film Factors that may lead to flop show
exhibition the company also offers From August 1, 2018, the multiplexes in
DSIJ.in
Analysis Equity
PVR Ltd.
Maharashtra may not be able to restrict Financials BSE Code : 532689 CMP: `1127.40
patrons from bringing in outside food. Looking at the last quarter of FY18's Particulars Amount (`Crore)
Also, food stalls are not allowed to performance, PVR’s consolidated
Net Sales 2334.11
charge prices higher than the MRP. The revenue for the quarter rose almost 21
government is working on the same and per cent to `584.9 crore over the % Change 10.13%
it is likely to come with resolution of the corresponding quarter of last year. This Operating Profit 428.61
issue in the next few weeks. This is a robust revenue growth was led by growth % Change 14.03%
serious issue for multiplex owners such of 18 per cent YoY in net box office Net Profit 124.74
as PVR as it has almost 25 per cent of its collections, which contributed almost 55
total screens in Maharashtra. PVR per cent of the total revenue. Also, the % Change 30.17%
generates almost 28 per cent of its total segments such as food & beverages (28 Equity 46.74
EPS (`) 26.51
FV (`) 10.00
P/E (x) 39.80
Dividend Yield (%) 0.18
Book Value (`) 230.08
(Trailing Four Quarter Data) „ CMP as on 30-July-2018

of almost 10 per cent each YoY. The

revenue from the high margins in food
and beverages segment. However, to
mitigate this risk, the multiplex owners
are likely to go for price hike for movie
tickets.
Another threat that the multiplex
owners may face is the increasing
penetration of digital or OTT platforms.
In recent years, digital or over-the-top
(OTT) platforms are emerging as a
strong competitor to conventional
multiplexes as these platforms have
created a space for watching movies.
Earlier, movies were available on theses
digital platforms on or even before four
weeks post the movie release. However,
one big relief for multiplexes is that in
the second half of FY18, the industry has
aligned itself to 8 weeks' exclusive
window for multiplexes and single
screens from the date of the release.
Peer Comparison:
Stocks Market Cap P/E
(` Cr)
YTD
PVR 5,269.31 39.8 -20.5
Inox Leisure 1,888.64 15.8 -32.94
Source: Inox Leisure
per cent of revenue) and advertising (13
per cent of revenue) contributed in the
overall revenue growth with an increase
of 22 per cent and 37 per cent
YoY,respectively.
The company’s EBITDA for the quarter
doubled from Q4FY17 to `94.4 crore
with a corresponding margin expansion
of 645 bps. Its EBITDA margin for the
quarter stood at 16.1 per cent. Notably,
the company witnessed turnaround in its
bottomline to `26.2 crore from a loss of
`0.05 crore in Q4FY17.
On the annual front, the company’s
revenue for FY18 rose 10 per cent to
`2334 crore over the last fiscal. In terms
of full year, the advertising segment
registered growth of 20 per cent YoY.
Other segments such as net box office
and food & beverages recorded growth
Returns (%) Dividend
Yield (%)
1 Year 3 Years 5 Years
-15.73 10.25 26.9 0.18
-21.83 -5.48 28.54 9.38
EBITDA for the full year rose 28 per cent
YoY to `402 crore, with corresponding
margin expansion of 240 bps. The net
profit for the period also jumped 30 per
cent to `125 crore.
Valuation
In terms of price-to-earning (P/E)
multiple, the stock is currently available
at reasonable valuation of 43.3x on TTM
earnings, as against five years median
P/E of 55.87. The company’s RoCE also
stands at the comfortable level of 13.31x
as against 8.56x of its close peer Inox
Leisure.
Conclusion
The increasing urbanisation and
disposable incomes in the country,
coupled with the low penetration of
screens, gives a huge headroom for the
multiplex operators to grow faster in the
coming years. We believe being a market
leader, PVR is well placed to encash this
opportunity. Besides, increasing revenue
from non-ticket revenue provides
sustainability for the foreseeable future.
However, the recent developments in
Maharashtra (allowing outside food into
multiplex, sale of foods on MRP, etc.)
may restrict incremental revenue from
the F&B segment. Going forward, we
would like to see how the company the
responds to this development. Thus, we
recommend our reader-investors to
HOLD the stock. DS

22 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018 DSIJ.in

Communication Feature
The Dark Knight Rises!
B
harat Agri Fert & Realty, a
Mumbai-based company engaged
in the manufacture of fertilisers
(single super phosphate) has three other
divisions – realty, resorts, and
pharmaceuticals. The company has been
a Single Super Phosphate (SSP)
manufacturer since inception. The
manufacturing factory with installed
capacity of 132,000 MT is located in
Wada, Palghar on company's owned land
parcel of 18.36 acres. This business
contributed around 60 per cent of the
revenue last year financial year ended
March 31, 2018, that is around `20.1
crore.
Owing to normalcy in business post GST
and good monsoon in Maharashtra so
far, the capacity utilisation has improved
drastically to 60%. The management
expects this momentum to continue and
pickup in demand by next year. Bharat
Agri's fertiliser business is expected to
grow at a CAGR of 36 per cent for next
three years to `50 crore in FY21 with a
positive operating margin of 7%.
Favourable Policy changes will enhance
the production of SSP. The SSP is one of
the important fertilisers manufactured in
India. SSP is a traditional product for
supplying phosphorus and sulphur to
pastures, the main two nutrients
required for pasture production. SSP is
generally mixed with sulphate of
ammonia and muriate of potash, but can
be blended with other fertilisers. The
company imports raw materials from
Egypt at a much reasonable price, which
has led to improvement in its raw
material cost.
Implementation of Nutrient Based
Subsidy (NBS) policy, inclusion of
sulphur under NBS, encouragement of
micro-nutrients fortified with zinc and
boron etc. has led to enhancement in
production of SSP, which can be seen
from higher capacity utilisation of 60 per
cent in the current financial year
(FY18-19). Subsidised fertilisers fortified
with zinc and boron is eligible for
24 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018
additional subsidy of `500 per tonne and
`300 per tonne respectively under NBS
policy. This is highly positive for the
industry.
Realty Business
Bharat Agri as it owns a freehold of
around 106 acre of surplus land at Wada
district, Palghar is valued at around
`106 crore on conservative basis
calculated @ `1 crore/acre. This is
excluding its 18.3 acre land on which it
has its fertiliser factory operating and 8
acre land on which it has its resort. This
surplus land is categorised under
'Agricultural land.' However, the
company has already applied for it to be
changed to 'Non-Agricultural land.' The
company plans to expand its resort
business once they have the approval that
could be a game changer.
The company also owns 6.25 acre
freehold land at Majiwada, Thane. Of
which Phase I project on 3 acre land is
already completed. The total saleable
area has been around 3.65 lakh sq.ft
and has sold 348 flats. Unsold stock of
OC received flats will be sold in current
financial year. The company has sold 3
flats in the first quarter and expects to
sell the remaining 8 flats by end of this
financial year. Average ticket size for
each flat is around `1.30 crore for
saleable area of 1111 sq. ft. Since the cost
has already been recognized in previous
years, the entire cash collected from sale
of 11 flats will flow directly to the
bottom-line in this year. Analyst `13-15
crore cash coming from unsold
inventory.
Phase II- The company plans to launch
its phase II project soon at Majivada on
the balance 3.25 acre land. The company
is eligible for stilt +30 floors which is
pending with TMC & MOEF and will
complete both buildings in next few
years with 3,00,000 sq. ft. saleable area. It
will have a mix of 1BHK and 2BHK and
project itself will generate about
`360-400 crore of revenue for the
company.
Bharat Agri Fert & Realty
Anchaviyo Resort
The 150 acre resort is just 80 kms away
from Mumbai and a perfect getaway
from the tussle of day to day life. The
resort has 20 rooms with average ticket
size per room is around `22,000 per
night for a couple. The occupancy rate is
currently around 60%. With the current
inventory in hand, the company can
generate total revenue of around `10
crore in FY19. The management has
plans to increase its room strength from
20 to 80 in order to accommodate more
people as it is considering introducing
'Destination Wedding' at the Resort.
Attractive Valuation
With a net worth of `75.6 crore, the
stock trades at 1x P/BV at current market
price of `145. The company is at an
inflection point with all its business
verticals are at the cusp of massive
growth. The fertiliser business is set to do
well with better capacity utilisation and
improved working capital cycle will lead
to higher profitability. This business is set
to touch revenue of `50 crore by FY21.
The surplus land parcel of 106 acre that
the company owns at Wada is valued
conservatively at `106 cr. The unsold
inventory of 11 flats of Phase I Majiwada
project will cash in `15 crore for the
company in this year. Phase II Project of
Majiwada is valued conservatively at 1x
sales of `360 cr. Overall, the realty
business is valued at `481 crore.
Coming to the resort business, with hotel
industry facing tailwinds, the company is
well set to do a business of `10 crore this
year and `13 crore next year. The value of
the resort business is valued at 2x FY20
sales to `26 crore that is well within the
average industry valuation of 3x sales.
The company has no long term
borrowings and `17.5 crore as short term
borrowings for working capital
requirements. As on March 31, 2018, the
company had `5.8 crore of liquid assets.
The combined intrinsic value of all the
business net of debt comes to `570 crore
while the market cap for the company
today is just `79 crore.
DSIJ.in
Communication Feature Cerebra Integrated Technologies

Cerebra Becomes India’s Largest

E-Waste Player, Commences New
Facility To Handle E-Waste For
White Goods
promoters are still looking at increasing
the shareholding. According to another
market source, it appears that the
company may also plan a share buyback
of 50 lakh shares, with price of upto `100
per share.
V. Ranganathan With the government support and the
MD, Cerebra new e-waste policy, the entire market will
be handled by organised players only,
lakh square feet of modern facilities to
handle the complete gamut of waste
electronic electrical equipments, thereby
making the company a leader in this
segment. With the commissioning of the
new facility, there will be a major boost
to the turnover and profits of the
company, thus making it the largest
player in this country.

B
SE 532413/NSE listed Cerebra
Integrated Technologies Ltd has
India’s largest e-waste recycling
facility currently with a capacity of
96000 MT per annum. This facility is
fully automated and pollution free .
Cerebra has informed the stock
exchanges that it has commenced
construction of its second factory
building measuring 50,000 sq ft to house
state-of-the-art, fully automated, ultra
modern, pollution-free, e-waste
recycling facility to handle white goods
specifically. The facility will be ready and
fully operational by December 2018. The
total facility now stands at 1,00,000 sq ft.
Cerebra was recently awarded 'CRISIL
MSE 2' rating which indicates high
financial strength, high operating
performance and also high credit-
worthiness in relation to other SMEs.
The company has been performing well
with excellent results for FY2017-18.
During this period, the company
reported total revenue of `316.13 crore,
EBITDA of `43.91 crore and EPS of
`2.75.
It is heard from market sources that the
promoters of the company have been
acquiring the shares through creeping
acquisition at regular intervals from the
market and are now holding about 1.35
crore shares of the company. The
whereby Cerebra will make substantial The investment for this ultra modern
gains in turnover and profits. Cerebra plant will be done from internal accruals
Middle East FZCO is a niche IT and it will be a major revenue earner by
distribution house offering data centre, the end of this financial year. Cerebra has
security surveillance and IT started processing large quantities of
According to a report by the International Telecommunication Union (ITU), a
UN agency working in the field of information and communication
technologies, India discarded about 2 million tonnes, i.e. 2,000,000,000 kg,
of electronic waste (e-waste) in 2016. And, the number is increasing steadily
every year.
In its first phase, Cerebra has setup the e-waste recycling facility, and in the
near future, it will be adding catalytic converters, tubelight and battery
recycling facilities other than the gold extraction facility. Cerebra is
currently having offices across the country and has the infrastructure to
collect e-waste pan-India.
Very soon with government support, which will encourage entire market
being handled by organised players only, Cerebra will gain with turnover
and profits increasing substantially.
infrastructure management solutions to e-waste and has now established
the Middle East and North Africa country-wide collection centres and will
(MENA) regions. be expanding this further by identifying
and establishing around 3000-plus third
This new facility will be an ultra modern party collection centres.
facility capable of handling all white
goods, including refrigerators, washing The Government of India has brought
machines, air-conditioners and ensure out a detailed set of rules under the
that it is safely disposed off without E-waste Handling Rules 2017 and it is
causing any pollution, without letting out working towards strengthening this law,
anything into the atmosphere, land or which ensures that the electronic waste
water. This will be a state-of-the-art will not be handled by the informal
automated plant. With this new facility, sector and, thereby, ensuring that India
Cerebra will be having an unparalleled has pollution-free society and helps in
infrastructure in the country of over one saving our planet from pollution.

26 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018 DSIJ.in

DSIJ.in AUG 06 - 19, 2018 I DALAL STREET INVESTMENT JOURNAL 27
Cover Story
CFOs' Top Priorities:
Growth , Corporate
Governance, Risk
Management And
Enhancing Market Share
CFOs are often the most trusted
management resource for the
investors. Leading CFOs of Corporate
India interact with the DSIJ TEAM
and share their company’s vision and
strategies in this CFO special edition
When major indices are trading at record valuations and are
touching all-time highs in line with the US indices, the
million-dollar question facing the investors is where are we
headed from here and what are the industry captains thinking
about India'a growth story?
Investors definitely must be asking themselves -
„ Are we going to get stronger from here on or weaker in
terms of corporate balance sheets and economy?
„ Are the corporate balance sheets immune from the risks
of global trade war and where is the Indian currency
headed vis-à-vis USD?
While these questions are important for investors, there are
many things an investor would want to know from a corporate
insider, including capex plans, organic or inorganic expansion
plans, future growth outlook, etc. In this special edition, we
have the insiders in the form of CFOs of major corporations in
India being candid with us, sharing their optimism and outlook
for the economy and their vision for their own company.
CFOs are mastermind behind the growth strategy adopted by
any company. The tightrope that a CFO has to walk to balance
growth with risk management without ignoring the corporate
governance makes him a highly valuable player in the effort of
wealth maximisation for the shareholders. As a master
strategist, a CFO has to be future ready and needs to own
analytics that improves predictive powers. While investing in
28 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018
C F O
S P E C I A L
technology for efficiency is a priority, growth financing comes
first in the priority list of majority of CFOs.
We find that the Indian CFOs are optimistic on the economy
and in principle do not believe that the trade war is going to
impact the Indian companies too much. In fact, few of the
financial masterminds believe that India will emerge victorious
in the trade war game, going forward. This sentiment is in
sharp contrast with what the CFOs of major global
conglomerates believe as per the latest Deloitte survey of global
CFOs.
Majority of the CFOs we spoke to are planning for expansion,
thus reflecting their confidence in the economy and positive
sectoral outlook. CFOs of consumer-facing companies are
bullish on the consumption story in India even as the CFO of
the NBFC company is betting on increasing financialisation of
savings in India. While the CFO of a leading graphite player in
India is bullish on the prospects for the industry owing to the
structural changes in the demand and supply, the outlook is
positive for the automotive industry in India as per the CFO of
the leading automotive brand in India.
Overall, the India growth story is intact as per the financial
captains of Corporate India. The focus areas for almost all of
the CFOs is growth, corporate governance, keeping margins
intact and continuously concentrating on improving market
share.
DSIJ.in
Interview
Manoj Bhat
CFO, Tech Mahindra
Manoj Bhat has been associated with
Tech Mahindra since 2006. He brings
with him a rich experience of more
than 20 years in the IT and ITES
industry -- across various roles in
Finance, Corporate Planning &
Development, Merger &
Acquisitions, and Strategy, and has
played a key role in Tech Mahindra’s
organic and non-organic growth
initiatives.
He has been the Deputy CFO of Tech
Mahindra from 2013, with global
responsibilities for Business Finance,
Investor Relations and Corporate
Planning. He is also handling the role
of ‘Head of Mergers and Acquisitions’
for Tech Mahindra from 2011 and is
responsible for the acquisition
strategy of the company.
Mr. Bhat has a Bachelors in
Technology degree from IIT Mumbai
and a postgraduate diploma in
management (PGDM) from IIM
Bangalore.
30 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018
The IT landscape is on a digital
transformation journeya
As a CFO of Tech Mahindra,
what are your top three
strategic priorities?
Tech Mahindra has been on a
transformation journey over the last few
quarters, using a multi-pronged
approach of digital and service
modernisation, embracing new age
delivery and improving operational
efficiencies while reskilling our talent
pool. Providing strategic inputs on
investing in high yield, high growth
businesses, while driving performance
management and enhancement is key.
The other strategic priority is to make
sure our processes and systems are in line
with the changing needs and demands of
the marketplace, and incorporating
technology changes like automation and
AI, and data analytics to help steer agile
decision-making. Last, but not the least,
driving operating efficiencies and helping
Tech Mahindra drive value creation for
investors, customers and employees is a
priority area.
As a company, we have started this
journey well, but believe that we have to
keep the momentum and achieve a lot
more.
Due to rationalisation of
onsite and offshore, what
impact do you think it will
have on your company mar-
gins going forward?
Tech Mahindra is a global digital
transformation provider with operations
in 90 countries serving over 926
customers - this, apart from the partner
and alliance ecosystem that we work
with. Also, co-innovation with clients,
academia, industry as well as
collaborating with start-ups form an
integral part of our TECHMNxt charter.
Our delivery models, therefore, are
C F O
S P E C I A L
equally global and digital, well-equipped
to adapt and leverage both global and
local presence. While there may be
short-term dips and gains in some
pockets, overall at the company level, we
are on an improving bottom-line
trajectory and continuously working
towards expanding it. Automation and
AIOps through our proprietary
platforms is key margin lever to achieve
this. In addition, enhancing synergies
with our portfolio companies and
embracing new age delivery are key areas
of focus.
What are the key growth
drivers for your company
going forward?
For Tech Mahindra, FY19 will be a year
of digital transformation and growth.
Our endeavour is to clock 40 per cent of
the overall revenue from digital over
time. As part of our TechMNxt charter,
we are betting big on the next gen
technologies like Blockchain,
Cybersecurity, Artificial Intelligence
(AI), Machine Learning (ML), Internet
of Things (IoT), Robotics and Analytics.
Our enterprise vertical has been
delivering growth over the last few years
and our vertical presence and our service
offerings across IT, BPS and engineering
services has enabled us to maintain this
momentum. The communication vertical
is also showing signs of growth after a
period of consolidation and investments
in digital and networks of the future.
Due to 5G implementation,
what kind of opportunities do
you see for your company’s
telecom vertical?
If we look at 5G , the key benefits of the
5G technology will be increased data
capacity and more flexible and agile
DSIJ.in
networks. 5G will enable the customers
or the network service providers to
choose their own strategy, whether to be
equipment-based, software-based or to
work with players who create an entire
ecosystem of services. Tech Mahindra is
geared up to leverage all the three
segments. We are betting big on 5G – the
network of the future, and making
investments in capabilities and
ecosystem creation.
Networks will also become more
software-defined, which will enable
multiple-use cases across segments. The
first opportunity is to be part of an
ecosystem of players that will deliver 5G
outcomes to the customers, be it to retail
consumers or enterprise customers.
We continue to partner with
communication services providers,
equipment manufacturers and software
players like Altiostar to benefit from
this growth in capital expenditure due
to 5G.
At the second level, we have an
opportunity in the whole IoT solution
layer, which will enable effective
utilisation of the capabilities of the 5G
network. This could involve creation,
implementation and managing these
solutions to achieve the objectives of the
enterprise customers.
We have also historically seen network
spend leading a revival in IT spends in
our customer base and we could see
some benefits in our IT business with
communication service providers as we
move further into the 5G cycle.
We have already set up a lab in
Bengaluru in association with the US
chipmaker Intel as part of our
preparedness for 5G services. Further,
our VNF (Virtual Network Function)
exchange programme is geared towards
collaborating and co-creating solutions
for the future, with more than 40
partners on-board from across the globe.
I must add that like any network change,
5G is a journey and we expect benefits on
revenues may start flowing in by FY20
and pick up steam later.
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What will be the impact of
ongoing trade war on Indian
IT sector in your view? Do you
intend to diversify your
revenues further?
Trade wars or protectionism is not a new
phenomenon. In the current global
socio-political and economic backdrop,
it has certainly garnered more attention.
Protectionism will exist, but there will be
enough windows of business
opportunities as well.
For the Indian IT sector, this is an issue
of importance, but my view is that, given
the strong demand cycle for technology
and the scarcity of talent globally, there
will not be a long-term impact.
What is your outlook on the IT
industry going forward? What
are the internal growth tar-
gets you are working on?
The IT landscape is on a digital
transformation journey. We have seen a
phase of rapid evolution of technology
and this has disrupted many traditional
business models. However, post the
initial phase of this change, we are seeing
many of our customers having clear
roadmaps and approaches to digital. This
augurs well for the industry since this
could potentially speed up decision-
making and increase revenue velocity for
the industry.
We have laid a clear goal on how we as a
company can add value, and this model
is called RUN, CHANGE and GROW.
a.) RUN is about enabling customers to
do their existing business more
efficiently.
b.) CHANGE enables our customers to
change their service offerings/
portfolio to their customers so that
they are ready for today, tomorrow
and the future.
c.) GROW is built around constructing
new revenue-generating
partnerships with customers by
taking a leadership position in the
new connected world propelled by
next gen technologies
AUG 06 - 19, 2018 I DALAL STREET INVESTMENT JOURNAL
All this will be enabled by one or a
combination of many technologies be it
Cloud, IoT, Analytics, Blockchain and
the application of these technologies will
be for modernising the traditional and
creating new systems.
We don’t give a view on our growth
numbers, but our goal would be to
maintain the momentum we have in our
enterprise segment and increase growth
in our communications segment.
How do you manage the
currency volatility at Tech
Mahindra? Where do you see
INR headed versus USD?
The long term trend of the INR is that it
has depreciated against the USD, with
short term periods where it appreciates
against the USD. To insulate against this,
we follow a hedging policy consistently.
Our hedging policy, which has delivered
us good results, takes a longer view of
two years while we decide our approach
to covering our exposures in foreign
currency. We cover multiple currencies
since we are present in most of the major
markets globally.
Our view is that we cannot foresee the
short term movements of the INR, hence
we have institutionalised this policy.
What is the best part of being
a CFO of a leading IT company
from the fastest growing
nation in the world?
First and foremost, the global nature of
business and our exposure to multiple
business verticals, economies, currencies
and regulations, makes it a challenging
and satisfying task to assess risks,
manage performance and figure out the
right strategy from both financial and
business perspectives.
The other advantage of being in an IT
company is the exposure to various
companies doing path-breaking work in
new technology areas, some of whom we
partner with and others whom we invest
in. This keeps me abreast of the latest in
an ever-changing environment.
31
Interview
In future, investing
across gas value
chain will kick-start
new phase of
growtha
Mr. A. K. Sharma is a Commerce &
Law graduate and a Chartered
Accountant. Mr. Sharma has rich and
varied experience in Petroleum
Industry. He joined IndianOil in 1983
and has handled various assignments
in Finance function both in
Marketing as well as the Refinery
Division of Indian Oil. As the Head of
Treasury, he was credited for issuing
the first ever Foreign Currency Bonds
($500 million bonds REG-S) of
IndianOil in the International
Markets in 2010. Mr. Sharma brings
with him the vast experience of
Project appraisal, Project Finance and
Treasury Operations. Mr. Sharma is
also the Chairman of IndianOil
Mauritius Ltd., a subsidiary of
IndianOil in Mauritius.
32 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018
C F O
S P E C I A L
A K Sharma
Director (Finance), Indian Oil Corporation
As a CFO of Indian Oil Corporation, what are your top three
strategic priorities?
Our biggest strategic priority would be sustaining leadership in core business
verticals. In the deregulated market scenario, where domestic and foreign players are
jostling to garner a bigger share of the market, it would be necessary to remain ahead
of the competition. This would call for capacity expansion of existing refineries,
increasing pipeline networks and augmenting marketing touch points with
appropriate product/service differentiators.
The second priority would be to further entrench our integration and diversification
drive along with furthering the global reach to have a natural hedge against our core
business of refining and marketing. Petrochemicals would be an important growth
area, raising equity oil and gas production from international and domestic assets
through future acquisitions as a part of diversification of business risk, will also form
part of the integration drive. In future, the demand for cleaner fuels will be the
hallmark for a cleaner environment, wherein investing across the gas value chain will
kick-start a new phase of growth.
Further, disruption is the new buzzword in every sphere of business and oil and gas is
not an exception. Therefore, from a long term perspective, we would have to intensify
our foray into alternate energy sources, while also establishing presence in waste-to-
energy, bio-CNG, EV battery manufacturing and the like.
In all the above endeavours, technological advances would be harnessed to the hilt to
achieve speedier results. Of course, it has to be ensured that capital is available at the
right cost for the above choices to be profitable, at the same time, the bigger challenge
would be to prioritise the capital allocation to support such growth.
What kind of technical changes you will have to make to
refineries to produce BS-VI fuel?
You would be aware that for migration from BS-IV to BS-VI fuel, sulphur content of
MS and HSD has to be reduced from 50 PPMW max (BS-IV) to 10 PPMW max
(BS-VI). In the refineries, the sulphur from fuels, that is, from high speed diesel
(HSD) and motor spirit (MS) is removed through hydro-treating utilising hydrogen.
The sulphur content in HSD is removed through units like diesel-hydro treating unit
(DHDT) and with respect to MS FCC gasoline (high sulphur component of MS) is
DSIJ.in
removed through gasoline hydro-treater unit (e.g. Prime-G).
To take care of additional hydrogen requirement, new
hydrogen generation unit may be required depending on
availability of hydrogen. Further, to supply utility requirements
like steam, power for above units, new gas turbines and steam
generators would be required depending on the characteristics
of each refinery.
The work on the above changes is already in full swing and the
company is geared up to make available the BS VI compliant
auto fuels well before the designated date.
Can you tell us how much amount are you
investing for refinery upgradation and new
expansion?
To meet the Government of India guidelines for production of
100% BS-VI compliant fuel (MS and HSD) in the entire
country w.e.f. April1, 2020, BS VI projects worth about
`16,000 crore have been approved. BS-VI programme envisages
revamps/installation of new units at Panipat, Mathura, Gujarat,
Haldia, Bongaigaon, Digboi Refinery, Paradip and Guwahati.
At Haldia refinery, about `4,200 crore is being invested for
improvement of distillate yield. This project, which envisages
installation of Delayed Coking Unit, is on the verge of
completion and the benefits should start accruing from the
current year itself.
To improve production of LPG and gasoline at Bongaigaon
refinery, we are adding a secondary processing unit known as
INDMAX unit at cost of about `2600 crore. This unit is based
on technology developed in-house by IOC’s Research &
Development wing.
We are also planning a project at Mathura refinery worth
`6000 crore with the twin objective of improving the distillate
yield through a residue upgradation unit and also enhancing
the capacity of the refinery by about 1.2 MMTPA.
As far as capacity expansion of our refineries are considered, we
are looking to increase refining capacity at Gujarat refinery by
about 4 MMTPA at an estimated investment of about `15,000
crore. This would also include major revamp of some of the
existing units. We are also planning to add 3 MMTPA of
refining capacity at Barauni refinery at a cost of about `6200
crore. In addition to the above, enhancing capacity of Panipat
refinery by about 10 MMTPA is also on the anvil.
Further, a mega refinery on the west coast christened as
Ratnagiri Refinery and Petrochemical Project is envisaged and
a JV has been formed by the three oil PSUs for implementation
of the same.
Over the past few years, your operating
margins are heading northward. Can you tell
us your view on the same for FY19E? Also, can
DSIJ.in
you tell us about your strategy for inorganic
growth?
With the average yearly crude prices hovering around $ 46 in
2015-16, $ 47 in 2016-17 and $ 56 in 2017-18, we could achieve
a gross refinery margin (GRM) of $ 5.06 per barrel in the first
year, which rose to $ 7.77 during the year 2016-17 and
continued its upward trend by clocking $ 8.49 per barrel in
2017-18. Notably, during the last two years, we have bettered
the Singapore GRMs, considered as benchmark for refineries in
South Asian geography. Though the spreads in 2018-19, which
is beyond our control, would certainly be instrumental in
determining the level of GRMs that we would be able to achieve
in 2018-19, yet I would like to place on record there are many
steps that we have taken to ensure a healthy and robust GRM.
The commissioning of Paradip refinery and its stabilisation,
improving crude slate, reduction in crude procurement cost
and tendering time lags and improvement in distillate yields
and energy efficiency have been some measures that has helped
in realising better GRMs.
As far as inorganic growth is concerned, with a view to diversify
our business risk, we have been making concerted efforts to
acquire producing/near producing/under development/
discovered upstream assets, either alone or in consortium with
other companies. Regular efforts are also being made to
identify and evaluate possible acquisition opportunities in
other business-related areas.
What impact does deregulation of oil prices
have on your company’s profitability?
The most significant impact of deregulation has been on our
working capital requirement. Before deregulation we were
selling most commonly used fuels, i.e. petrol and diesel, at
below market prices and the difference was being reimbursed
in the form of subsidy. Due to time lag in the receipt of subsidy,
there was no other alternative but to borrow from the market to
meet working capital requirement. This impacted the
profitability in terms of finance cost. On the other hand,
deregulation has attracted private players in the market. The
entry of new players generally puts pressure on the market
share as well as margins. However, we have reviewed our
business processes to make them more robust to keep abreast
with time and increased focus on automation and upgradation
of our retail outlets to retain market share.
As the CFO of India’s largest fuel retailer, what
challenges do you face?
In the face of competition from private players, sustaining
leadership in core areas is a challenge. In a competitive
scenario, the marketing margins will be under pressure and,
therefore, ensuring high levels of revenue is a challenge.
A fallout of the above would be fierce competition among the
oil marketing companies to retain market share. The challenge
would be to maintain investor confidence as well as augment
shareholder’s wealth.
AUG 06 - 19, 2018 I DALAL STREET INVESTMENT JOURNAL 33
Interview
We want to take the
lead in shaping
Indian CV industry
with path-breaking
technologies and
innovationsa
Balaji is a global finance professional
with over two decades of experience
in the corporate sector. He started his
career with Unilever in 1995 and
worked in different corporate finance
roles across Asian markets,
Switzerland, UK and India. Since
2014, he has been heading the finance
function as the Chief Financial Officer
of Hindustan Unilever, a $6 billion
enterprise. Prior to that, he was the
Chief Accountant of the Unilever
Group in London.
34 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018
C F O
S P E C I A L
P B Balaji
Group CFO, Tata Motors
Can investors expect financial performance of Tata Motors to
improve in the coming quarters?
With Turnaround 2.0, we will continue to enhance the organisation’s effectiveness,
enabling greater speed, simplicity and agility in our efforts. Our plan is to focus on
sustaining the momentum for the CV business and to further increase our market share
in the PV segment
We plan to manage transition through more personalised and calibrated change in CVs,
while delivering elevation through more individualised experiences in PV. We have
started the year with a bang, with an 86% growth in our domestic sales in April 2018
and we can only go higher from here
With regards to JLR, the contribution margins are healthy. We are keen to step up on
the operating leverage. Our portfolio is starting to fill up with plug-in hybrids and
electrics. That means that all the products which are there with electric options are
starting to sell exceedingly well. Range Rover, Range Rover Sport get their full model
year impact as well this year. We are quite excited and expect to see both demand and
profitability improve in FY19 compared to last year
How is the company planning to bolster up its topline? What are
the cost reduction initiatives undertaken by the company under
your leadership?
As mentioned earlier , under Turnaround 2.0, we will continue to enhance the
organization’s effectiveness enabling greater speed, simplicity and agility in our efforts.
Our goal is to continue sustaining the momentum for CV Business and further increase
our market share in the PV segment. We will manage transition through a more
personalized and calibrated change in CVs, while delivering elevation through more
individualized experiences in PV
We plan to do this by enhancing our presence in emerging countries, with a focus on
APAC, Africa and Middle-East markets, on the back of new range of world-class
products like the Xenon, Super Ace, Prima and Ultra range of trucks. For PVs, we will
focus on filling in product gaps and tapping the white spaces that will emerge
Our portfolio of gaps have also been filled. Due to supply chain challenges, we have not
supplied the full number of vehicles that we would want to supply. Therefore, this year
DSIJ.in
those things are getting fixed. We have grown too fast compared
to what our capabilities were and we have picked up shares.
Therefore, it is important that we build the capability to meet the
demand
We have already taken tough decisions for streamlining and
consolidating the businesses through the sale of defence business
to TASL and shelving the Racemo project to improve cash flow.
We have also had a significant ramp-up of production by nearly
22%, thanks to the structural debottlenecking of the supply
chain. The exceptional contribution to the bottomline by cost
reduction efforts is enabling us to build a robust cost structure
and competitive advantage as we go ahead
How is the company planning to cope with
sector-defining challenges, namely, the advent
of electric vehicles and stricter emission norms?
We at Tata Motors have identified sustainable transportation as
one of the core elements of our company strategy, in line with the
Sustainable Mobility Vision outlined by the Indian government.
Over the last one decade or so, we have been continuously
innovating in the electric mobility space across our passenger
and commercial vehicle portfolio. Over the years, we have run
several projects and demonstrated EV concepts like Vista, Zest,
Bolt, Tiago, Tata Ace, Tata Ace Magic and the Iris. With our
understanding of the technology and customer requirements, we
have bagged the order for Tigor EV, which we are supplying to
EESL currently. In the commercial vehicle category, we
successfully participated in the EV bus tendering process and
have won orders from six out of the 10 cities (62% of the total
tender order)
There are primarily two concerns when it comes to electric
vehicles in India. Firstly, EV battery cost continues to be a
dominant aspect of vehicle electrification. As the conventional
IC powertrains are replaced by Li-ion battery, motor and
reduction drive, the cost of the propulsion system goes up
significantly. This means, despite FAME incentives, the on-road
price of a typical B segment car is well beyond the expectations
for a retail customer, eventually limiting its penetration.
Optimising the costs of the electrical drive systems and
providing a commensurate payback in terms of reduced
operational costs are the major challenges for OEMs, including
Tata Motors
Another challenge is the absence of electric charging
infrastructure. Customers are reluctant to take on an EV with the
uncertainty of being able to recharge the batteries
How is the company’s restructuring plan helping
it improve its market share across various
segments?
The company has been streamlining and consolidating the
businesses. The new modular platform strategy across CV
segments will enable more variety to the customers. We want to
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take the lead in shaping the Indian CV industry with the
introduction of path-breaking technologies and innovations. We
are working towards enhancing the value proposition and the
total cost of ownership for customers, while bolstering revenue
potential. We are now the sixth largest CV player and the fourth
largest truck manufacturer globally
In PVs, Turnaround 2.0 strategy will focus on filling in product
gaps and tapping the white spaces that will emerge – sporting a
robust product pipeline with its current and future products. The
focus will be on driving volumes and increasing market share.
TML will leverage its architecture strategy through the OMEGA
and the ALFA architectures and the plan is to deliver 7-8
products/variants from these two platforms
We also plan to enhance our presence in emerging countries,
with a focus on APAC, Africa and Middle-East market on the
back of new range of world-class products like the Xenon, Super
Ace, Prima and Ultra range of trucks
The company has recently unveiled several EVs
in the CV and PV segments. What proportion of
the company’s total investment is likely to be
dedicated to the EV segment? How do you view
the EV revolution in the Indian auto industry?
We believe that the EV space will emerge gradually, as the
customers start experiencing EV products and, more importantly,
their inherent benefits of zero emission and lower operating costs.
As far as Tata Motors is concerned, we will continue to scout for
opportunities to fulfil our e-mobility aspirations
Under the FAME Scheme, Tata Motors has won tenders in six
cities (out of 10 cities, which is about 62% of the share of the total
tender orders); that amounts to a total order of 190 electric buses.
We are also actively engaging with a number of potential
customers - from city transport authorities, cab aggregators,
private fleet owners and, of course, early enthusiasts. As part of
our tender with EESL, we have already completed the
production of 250 cars and initiated the execution of phase-2
orders. We are committed to the government’s mission of
e-mobility by 2030 and continue to work in a collaborative
manner to facilitate faster adoption of electric vehicles and to
build a sustainable future for India
India's power generation trend is dominated by
conventional energy resources like thermal and
renewable sources are less as compared to other
countries. Don't you think the shift to EVs will
burden the conventional power generation and
negate the effect of shift to EVs?
Diesel buses consume 30 times more fuel than average-sized cars
and, hence, their impact on energy use so far has become much
greater. It is estimated that for every 1,000 battery-powered buses
on the road, about 500 barrels a day of diesel fuel will be
displaced from the market
AUG 06 - 19, 2018 I DALAL STREET INVESTMENT JOURNAL 35
Interview
Mr. Lalit Malik is the CFO at Dabur
India Ltd. A Finance professional
with over three decades of experience
in India and abroad, Lalit oversees the
Accounting, Business Support,
Financial Planning and Analysis,
Mergers & Acquisitions, Internal
audit and Tax functions at Dabur
globally. He is a strong proponent of
good Corporate Governance
Practices and believes that
transparency is the key ingredient for
success of any organisation.
Lalit is part of the core strategic group
at Dabur. As Dabur’s Joint Chief Risk
Officer, he has helped the company
successfully navigate the emerging
risks and the several structural
changes in India’s Regulatory
Environment.
Lalit has been conferred with several
prestigious awards like:
Most Influential CFO’s of India –
from CIMA.
CFO Award for Excellence in
Contribution to the World of Finance
from – CFO India in 2016 and 2017.
Ranked among the Top 3 Best CFO’s
by Business World Magazine in the
consistent Liquidity Management
Category.
36 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018
C F O
S P E C I A L
Ensuring sustainable and profitable
growth is both a challenge and
opportunity for CFOa
Lalit Malik
CFO, Dabur India Ltd
As CFO of Dabur, what are your top three strategic priorities?
CFO's responsibility covers the 5 's of the business: Cost Control, Compliance,
Consistency, Continuous Improvement and Effective Communication. In a highly
volatile environment where strong external headwinds and regulatory changes are the
order of the day, a CFO has to be forward thinking to not just manage the emerging
challenges but also ensure sustainable growth for his organisation.
For me, the top three priorities will be:
a. Being a partner in ensuring sustainable, profitable growth for Dabur
b. Ensuring complete statutory compliance and corporate governance
c. Ensuring control and cost savings
What are the growth drivers for your company? Which product
segment are you expecting to show maximum growth?
There are three key pillars to Dabur’s growth strategy:
a. New product development
b. Expansion into new geographies
c. Acquisition
Dabur has been witnessing a highly secular growth across all its key categories, which
has been reflected in the performance in Q1 of FY2018-19. Despite an increase in the
level of competitive intensity, our brands reported a robust performance during the
quarter, growing ahead of the market and delivering strong double-digit growth
across all our key categories like health supplements, hair care, oral care, skin care,
home care and foods. Our business has performed well on all operating parameters.
This strong performance reflects the robustness of our business model and our ability
to efficiently manage the emerging challenges. We have put in place a prudent growth
strategy and continued to invest heavily behind our brands to successfully tap the
emerging opportunities.
The recent years have seen a marked increase in demand for Ayurveda and natural
products. This trend has been gaining momentum with the growing awareness about
the benefits of Ayurveda and Ayurvedic products. To tap these opportunities, Dabur
strengthened its healthcare portfolio by introducing several time-tested Ayurvedic
remedies in modern day formats to cater to the new generation. In a market that
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continues to grow and expand and is seeing increasing
consumer awareness and government support, companies like
Dabur -- with its traditional herbal positioning and strong
R&D -- are likely to benefit disproportionately from this trend.
Can you throw some light on the outlook of
your international business amid trade war
situation?
The international markets have been witnessing high volatility
in recent years due to geopolitical disturbances and currency
fluctuations in some of our key geographies. Even in these
challenging times, we identified opportunities ahead of
competition, which is reflected in the strong constant currency
growth that our international business has been reporting.
Your operating margins over the last few
quarters have grown. Can you tell us which
factors have contributed to margin improve-
ment? Going forward, what kind of operating
margin are you looking for?
Our margin improvement has primarily been on account of
cost-saving initiatives and synergies. Despite the growing
inflationary pressures, our intent is to maintain margins
through proactive measures.
Dabur is one of the pioneers in the Ayurvedic
segment. How do you plan to leverage this
position amid rising awareness for Ayurvedic
products?
The recent years have seen a marked increase in demand for
Ayurveda and natural products. The consumers today,
particularly the youth, are increasingly shifting to natural and
Ayurvedic products for both their healthcare and personal care
needs. This is also reflected in the sudden increase in the
number of players entering this category and the general
increase in natural and Ayurvedic products offerings from
mainstream players too.
Dabur has been pioneer in the Ayurveda and natural space in
India. We are today the leading Ayurveda and natural
healthcare company with a portfolio of products that are based
on nature and natural ingredients. Dabur has always believed in
the benefit of Ayurveda and has been spreading the goodness
among our consumers in India with a range of Ayurvedic
products. We have been, for the past 134 years, developing and
successfully introducing products based on Ayurveda to cater
to the ever-changing needs of the consumer. We continue to
introduce new products, invest in enhancing our distribution
network and effective communication with our consumers to
spread awareness about the high quality of our products as also
the benefits that they offer. Going forward too, we will continue
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to introduce a range of products that will be value-added and in
the premium category, which will help us improve our market
share.
Dabur maintains its edge over competitors with its herbal and
Ayurvedic heritage of over a century. We remain true to our
heritage and are continuously working to update our portfolio
in line with changing consumer demands and aspirations.
Dabur India also has a strong in-house research wing that
follows a ‘bush-to-brand’ approach. We have our in-house
nursery, which grows several rare herbs that go into various
products. We have been growing quality rare medicinal herbs
that are used in our products. Today, we grow rare herbs in over
5,000 acres of land across India. This in-depth knowledge about
nature and natural ingredients is one of our big strengths in the
market.
It has been one year since GST implementa-
tion. How has GST impacted Dabur?
The introduction of GST is, by far, the most important
transformational tax reform introduced in India in recent years.
Given the fact that GST has subsumed all other taxes, it not
only improved the ease of doing business, but it also ushered in
a degree of convenience and numerous benefits for consumers.
The subsequent introduction of E-Way Bill further helped the
supply chain.
While there were some disruptions in the initial period and a
steep learning curve, we were fully geared up for the GST. We
had engaged an external consultant and have been working on
GST for over a year before its actual roll-out. We had completed
all the groundwork regarding amendments in our IT
infrastructure much ahead of the actual announcement to
ensure a seamless transition. We had also supported our
channel partners to help them become GST-ready.
The introduction of GST led to a downward revision in prices
of several products across key consumer categories, which
helped improve consumer sentiments. In the subsequent
months since the roll-out of GST, we have seen consumer
confidence improving, which has resulted in higher growth
with consumer demand shifting from unorganised players to
organised players.
What is the best part of being a CFO of Dabur?
As I mentioned earlier, we are living in a highly volatile
environment today, marked by regulatory changes and
geopolitical disturbances. Ensuring sustainable and profitable
growth in these times of high volatility and complexity is both a
challenge and an opportunity for any CFO. Being part of a team
taking proactive measures and timely decisions while managing
a complex portfolio would be the best part of being a CFO.
AUG 06 - 19, 2018 I DALAL STREET INVESTMENT JOURNAL 37
Interview
Mr. Naresh Bhansali, CEO - Finance,
Strategy and Business Development
and CFO, Emami Limited is a FCA
with more than 2 decades of rich
experience in the field of Finance &
Accounting.
Currently, he is in – charge of the
overall responsibility of Strategy &
Business Development, Mergers &
Acquisitions, Finance and Accounts,
Legal & Taxation, Internal Audit and
Information Technology verticals
among others for Emami Limited.
Mr. Naresh H. Bhansali has been
awarded the Best CFO in the ‘Healthy
Balance Sheet Management – Mid
Size Corporate’ category by YES
BANK-BW BusinessWorld for the
year 2018. For three years in a row
since 2015-16, Mr Bhansali has been
adjudged the BEST CFO by YES
BANK-BW BusinessWorld, which is
indeed a commendable achievement.
He has also been awarded in the
category of ‘Winning Edge’ in Cost
Management – Revenue above `1000
cr in 2013 for his exceptional
contribution to corporate finance by
CFO India Magazine. Back in 2012, he
had also been chosen as the winner of
ICAI Awards in the category CA CFO
– FMCG.
38 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018
C F O
S P E C I A L
When growth is priority, challenge
is the growth drivera
Naresh H. Bhansali
CEO – Finance, Strategy and Business Development and CFO
Emami Limited
As a CFO of Emami, what are your top three strategic priorities?
For any business, nowadays, the CFOs do not look only after finance. They are the
enablers for the business, and in fact, they participate very actively in the growth and
strategy of the business. So, the strategic priorities for the business becomes the priority
for the CFO as well. The number one priority for any organisation and for us also is the
growth, how to grow the business, and then if you are to grow the business, what are the
building blocks challenging that growth and how the CFO and other top management
team can help build that kind of ecosystem that facilitates growth. First, is the overall
growth from the existing business, and second, is the inorganic growth from any JV or
acquisition, etc. While growing the business faster than peers is the number one
priority, growing profitability is another priority. CFOs play a vital role in balancing
between growth and profitability. The world is changing around you, and using
technology optimally for digitalization, efficiency enhancement and to reduce the cost
of the business is yet another priority.
How has FY18 been for your company and what are your expec-
tation in terms of volumes and profitability in FY19 & FY20?
The last two years FY17 and FY18 were impacted by the structural changes which have
happened in the Indian economy in terms of demonetisation and GST. Though one can
say that the primaries were impacted while the secondaries remained intact, there had
been lot of challenges during this period because these changes demanded realignment
of the ways of doing business, as the new business rules evolved. For instance, the
wholesale channel, one of the important channels of the business, got impacted and that
disruption lasted a little longer than expected. But, during this period, we actively
engaged in increasing our network of direct retail distribution to smaller towns and
villages and brought down our percentage of wholesale dependence. This helped us to
hold on to the field and we could grow despite the disruption. To that extent, our
performance has been satisfactory. Almost all our power brands have strengthened
their respective market shares, new launches have also performed satisfactorily and
international business has also started growing consistently. With the stabilisation of the
above mentioned structural changes, normal monsoons, growing rural incomes and the
increasing government outlays on infrastructure, among others, would help the
consumer sector grow rapidly. Emami is poised to take benefit of this growing
opportunity. We expect to return to our aggressive growth trajectory with double digit
volume growth across all segments.
DSIJ.in
What are the key growth challenges faced by
your company in the current market scenario?
When growth is the priority, then challenge is also the growth
driver. We have grown very aggressively compared to the peers
in the past and we still have an edge. But we would like to
continue to grow further. In terms of the business model, the
penetration of our products in all the categories is still very low,
so the scope of growth is quite high. To achieve the desired
result, we are ramping up our distribution, our marketing and
our overall ecosystem to support that kind of an aggressive
growth trajectory. Our brands enjoy handsome market shares
with leadership positions in many categories. We now need to
strategise on how to increase the market itself through further
penetration and retain our leadership position. Increasing the
relevance of the brand, increasing its usage, communicating it
very clearly to the consumers, which will help increase
penetration and the per person usage are the action areas for us.
These are the things that drive the growth in the existing
business and existing categories. To further this growth, brand
extensions are good levers to drive it ahead. For example, we first
came up with Navratna oil, and when it succeeded, we
introduced Navratna cool talc on the same cooling proposition.
Similarly, in Fair and Handsome, first we came up with the
cream, followed by a facewash extension. Again, BoroPlus
initially started with an antiseptic cream, which was later
extended to body lotions, prickly heat powder, face washes, etc.
This strategy has helped us deliver sustainable profitable growth
while taking leadership positions in the niche categories.
What are the challenges you are facing?
Having made the right products, the challenge is to
communicate to consumers and then make the products
available, when and where the consumers want. All our products
are made on the basis of the science of Ayurveda using modern
laboratory practices. We then market them aggressively through
ATL/BTL campaigns with celebrity endorsements for top of the
mind recall. Our sales team then ensures that products are made
available to every consumer through our well-entrenched
distribution in general trade, modern trade, rural market,
e-commerce and even defence supplies. We work relentlessly to
improve on each of the areas to deliver superior results, better
than the past and better than the peers.
Raw material prices are heading northward.
How do you plan to mitigate this rise in input
cost?
In the past years, the costs had been relatively benign,
particularly the agri-products were at a lower level and the crude
was also low, so that had an impact on the overall cost. However,
despite the present rise in the cost of key materials like menthol
and crude, we have been able to sustain the improved margins.
We strategise our procurement plans through long term
purchase contracts; use hedging mechanisms, develop new
sources of procurement, and so on. Besides, we also take some
moderate price increases Y-o-Y wherever we feel that there is a
DSIJ.in
probability of raw material price hike. But we try to do that
without impacting the consumers very hard. So, we always take
around a 3-4 per cent kind of an annual price increase. We,
therefore, expect that despite such cost increase, there would not
be a significant material erosion in the gross margin.
Can you throw some light on your capex plan
for the next two to three years?
If you look at the past, we have built up a lot of capacities across
all our units, including our overseas units in Bangladesh and in
North-East India, where we have built our largest plant last year.
The plant is at Pacharia in Assam, which is a state-of-the-art,
highly modern unit commissioned at an investment of around
`300 crore. So, almost all the capacity expansion has happened
and now there would be only some kind of regular and/or some
upgradation capex. We, therefore, do not expect a lot of capex in
the next two years in terms of the capacity expansion, but more
towards investing in the technology and upgradation, which may
not cost more than `100 crore of investment Y-o-Y in the next
two years.
What kind of EBITDA margin are you looking for
FY19?
As our EBIDTA margins are at the peak and we intend to
capitalise on the evolving business opportunity by investing
behind the brands and processes and also on introducing new
products to the consumers, our margins may reduce by 100/200
bps, but that would be more than offset by growth in the business.
In your view, how will the ongoing trade war
end and what will be its impact on the Indian
economy?
While the world has become so unpredictable and things are
changing on a daily basis, some day you may find that the things
are changing for the better, but sometime one may feel that the
things are becoming so negative. On an overall level, I don't
think that there would be something which would impact us
adversely. In-between, for a month or so, there could be some
price increases for the crude, there could be import embargo or
something else, but that should not last for long. Though I am
not an expert, but that's my view.
Any message you would want to convey to your
company's shareholders?
We are working relentlessly and the whole team is very excited to
take up the opportunity of this evolving Indian economy.
Consumerism is expected to increase substantially and we are
placed very favourably to take advantage of this situation. We are
an Ayurveda company, which is very relevant in present times,
duly supported with most modern technology. We sell the
products across all channels and markets. Our products have a
very strong value-for-money proposition. So, I think we are very
rightly placed with an optimistic business outlook.
AUG 06 - 19, 2018 I DALAL STREET INVESTMENT JOURNAL 39
Interview
Anupam Jindal
CFO, Sterlite Technologies
Anupam Jindal has been associated
with the Vedanta Group since 1998 in
various business verticals, including
its aluminium and copper businesses.
Having set up a large finance team for
one of the aluminium entities in
2001-03 for a US$ 1 billion greenfield
project, he moved to Australia in
2003 as head of finance for Vedanta
Group’s two copper mines, before
returning to India in 2006 as CFO,
Sterlite Technologies.
Anupam has been heading a team of
more than 100 people in his current
role that drives the complete finance
function of Sterlite Tech, along with
multiple subsidiaries in India and
overseas. As part of the senior-most
leadership team at Sterlite Tech,
Anupam has been instrumental in
enabling the company’s foray into
various new business initiatives,
investor relations, capex planning,
financing and refinancing of its large
telecom business with more than
`10,000 crore portfolio of
transmission assets. He has also
played a crucial role in the acquisition
of Elitecore Technologies in 2015.
Being a Chartered Accountant from
ICAI, his focus areas have been
finance, treasury, accounts and MIS.
40 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018
S P E C I A L
Basis historical trend, we may maintain 24-25
per cent margin for FY19 and beyond that.a
As a CFO of Sterlite Technolo-
gies, what are your top three
strategic priorities?
Our objective is to increase the
shareholder value for all our stakeholders
– suppliers, customers, employers,
governments, authorities in India and
outside, where we impact digital
experiences. On No.1 priority is the
growth that we have committed to the
market up to FY20. Beyond that, we need
to create sustainable growth
opportunities for the company. The
entire executive management is working
towards it. We have charted out a
programme so that some of us focus on
long term growth, while the team is
focused on delivering the ‘here and now’
happening on the ground.
The No. 2 priority is all about maintaining
and improving our corporate governance
standards. We have set quite high
parameters to meet corporate governance
standards, disclosure, transparency and
communication. How do we further
elevate this as we grow, remains a priority.
We are driving this through systems, team
building and culture building.
The No. 3 priority is beyond the
company. How can we look at
positioning the country in the overall
global market as a thought and industry
leader? There are overseas players like
Cisco, Ericsson, Nokia, among other
companies ruling the entire network and
telecommunication industry. How can
Sterlite Tech become a large company
like those while driving the technology
revolution in this space. We see a huge
opportunity here and have started to
think along these lines. It is a long and
tough journey, but it’s a job I’m driving
along with my team.
Recently, you have acquired
Metallurgica Bresciana. Can
you through some light on the
C F O
synergy of this acquisition?
Also, can you tell us about
your plans for inorganic
growth?
We are a large global network solutions
provider. On the optical fibre and fibre
cables side, we hold about 6 to 7 per cent
global market share. From a technology
perspective, we are uniquely positioned.
In India, we are the only company having
the capability of making fibre right from
silica, the basic raw material. Globally, we
are among the only 10 companies which
manufacture preforms and are currently
addressing fibre demands of 8 among the
top 10 global telecom operators.
From an international perspective, we have
been able to secure a good market in
Europe and China. Last year, our
international revenue was nearly half of
our total revenue. Of which, 27 per cent of
revenue was from Europe and 18 per cent
from China. With this large market in
Europe, which has also grown over the last
2-3 years, we didn’t have manufacturing
base there until now. So, to serve the
European markets better, we were looking
at something closer which are not
high-cost markets like France and
Germany, but good hubs. We were looking
for such opportunities for some time now,
and found it in Metallurgica Bresciana.
The company is based in Italy and has
the potential to ramp up significantly.
Currently, this company is serving Italy
and customers around the country. They
have some Chinese customers as well.
This company has fibre cable
manufacturing capacity of 3 million and
some copper communication cable,
which serves new industry verticals that
we didn’t have access to. This opportunity
was aligned to our existing offerings and
is of value from day 1.
It also provides an opportunity to scale
up, thereby getting better utilisation of
the 3 million capacity, which is currently
DSIJ.in
utilised up to 60 per cent. We may ramp
it up to 5 million over the next 6 months
or so by balancing and debottlenecking.
Then we may look at expanding capacity
further to help increase the market.
We have a clearly defined and articulated
inorganic growth policy, which we have
communicated to investors also from time
to time. We would continue to look at
inorganic opportunities which fits very well
with our strategy of growing the company
in all three industry verticals – telecom
products, system integration and software
solutions. There are certain financial
parameters which we would continue to
look at. Size does not really matter, but it
definitely has to be within our reach and
capability. The geography has to be closer to
our customers, where we have market
access, primarily Europe and China. We are
also trying to enter the US where we see a
huge opportunity for growth.
You have also forayed into 5G
enabling front haul and fibre-
to-home network technolo-
gies. What kind of growth do
you see from this segment?
Over the next five years, what
kind of revenue share do you
expect from this segment?
The 5G is a very recent growth driver that
is emerging. So far, the fibre industry was
driven by the transition towards 4G, which
was happening around the world. In India,
we are still witnessing this transition. Large
telecom operators in developed countries
have started talking about 5G, taking up
trials. The commercial launch will start as
early as end of 2018, early 2019 globally.
This will be a huge transformation in
telecom and digital communication
industry, where the network will get more
and more dense with fibre.
Fibre demand in India is very small as
compared to what will be seeing going
forward. Today, the global industry is
about 500 million km of fibre
consumption per annum. With new fibre
deployment, this 500 million may go up
to 700-800 million km on a short-term
basis. Post that, about 900 million - 1
billion km fibre will be globally
DSIJ.in
consumed on a sustainable basis with
rising 5G penetration. It will be at least 5
to 7-year demand cycle, if not more.
As far as our market share is concerned,
we have consistently increased it in the
global industry from less than 1 per cent
to currently about 6 to 7 per cent. We are
increasing our capacity from 30 million
out of this 500 million market to 50
million, and I am sure by the time this 50
million capacity comes up by June 2019,
the market will also have shifted from 500
million to about 550-600 million mark.
We may increase to 8-9 per cent market
share, depending on the market dynamics
and will look at our own capability to
increase capacity on the ground.
Currently, we are looking from the
product segment, which is fibre and fibre
cables, which together contributes 75 per
cent of the revenue. This segment
currently serves the needs of 3G, 4G.
When the market moves to 5G and
last-mile connectivity through fibre to
the home (FTTH), the movement will
not happen simultaneously in all the
countries. Some countries move faster;
some may move slower. For example,
India lagged behind in terms of
changeover to new network. India
moved towards 4G with Reliance Jio
pursuing it aggressively over the last 3-4
years. All existing players have been
lagging behind in rolling out network
because of many constraints. Fortunately,
to grow, we aggressively looked at global
opportunities in time.
While products business will have its own
growth, we also have system integration
and software businesses which are growing.
We started services and software businesses
3-5 years back and these are getting good
traction. The software business serves
revenue monetisation and OSS/BSS
requirements of telecom companies and has
huge growth opportunity. Currently, it is
about 20-25 per cent of our revenue profile
and we see this growing in terms of absolute
value, in our overall profile.
Your EBITDA margin over the
past years is on an upward
trend. What kind of margin
are you looking for FY19E?
AUG 06 - 19, 2018 I DALAL STREET INVESTMENT JOURNAL
We have maintained EBIDTA margin of
about 20-21 per cent on a long-term
average basis. Essentially, we are a very
cost-focused company. At the same time,
we ensure that the customer is serviced
with the best solutions at par with the
global players. This creates the best
profitability in the industry. The margins
are already at a high level. While the long
term average is 21-22 per cent on
EBIDTA, in Q1FY19 we have delivered
EBIDTA margin of 29 per cent. I won’t
say that 29 per cent would continue as it’s
a function of how our services and
software businesses pick up. Within
products business, it is a play of optical
fibre, which is a high margin business,
versus optical cable, which is a relatively
lower margin business. EBITDA margin
is a combination of all these three
businesses of telecom products, services
and software. Basis historical trend, we
may maintain 24-25 per cent margin for
FY19 and beyond that.
What is your view on ongoing
trade war?
This trade war between two of the largest
economies of the world is unfortunate. We
don’t see an immediate threat to the
company, but it’s quite complicated.
Fortunately, fibre is not a commodity or
product that is exported from China to US.
China itself is consuming huge amount of
fibre. But in retaliation to the US measure of
curbing or imposing high duty on Chinese
products, there is a possibility of China
imposing huge duty on imports from US or
the US players setting up shop in China.
This may have some impact on the
industry, but presently, I don't see that as a
significant challenge.
India does not export much of
engineering products to China, apart
from companies such as ours. As per my
knowledge, India generally exports more
of raw materials and natural resources
than actually importing. The impact on
the Indian economy may be seen if
aggressive imports from China could be
coming into India because of the gates to
the US getting closed or getting higher.
That may result in some dumping and
that’s where the government has to act to
protect local industries.
41
Interview
We have to ensure
that we increase the
size of the market
piea
Kumar Subbiah joined CEAT in Feb
2015 after spending little over 20 years
with Unilever and Hindustan
Unilever, where he handled various
finance and commercial roles in India
and outside India. Kumar is a B.Com
graduate from Loyola College,
Chennai. He is also a Chartered
Accountant and a Cost Accountant
with professional interests both in
finance and supply chain.He is fond of
macroeconomics and information
technology.
42 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018
C F O
S P E C I A L
Kumar Subbiah
CFO, CEAT
As a CFO of CEAT, what are your top three strategic priorities?
My priorities will be aligned to the organisations priorities. So, our priority number one
is growth, and to grow profitably. So, my priority as a CFO is how do I help business to
grow and to grow profitably? Priority no. 2, we have large capex plans and so my
priority is how do I help the business to manage that capex in terms of funding,
managing the overall cash flows, ensuring that capex is well spent, etc. The third priority
is, in the tyre industry, the commodity or the raw material cost is 60 per cent of the
turnover and any volatility in the raw material prices will certainly impact the margins.
Therefore, how do we manage that commodity to ensure that the business gets enough
time whenever there is upward movement in the raw materials prices or the commodity
prices, and how do I give protection or cover even the exposure arising out of forex? So,
these are the top three priorities for me.
Can you throw some light on your capex plan?
In terms of capex plan, we have already stated that we would be spending about `4000
crore over the next 3-5 years. So that is our capex plan. It is a large amount of capex and
currently CEAT's balance sheet is reasonably healthy, particularly with respect to
leverage ratios, whether debt/equity, debt/EBIDTA, etc, so CEAT's consolidated basis
debt-equity ratio is 0.28 and standalone is 0.2 as on.June 30. So we have enough balance
sheet strength to fund capex, but considering that the capex amount is large, we are
planning to fund one-third of it from internal accruals and two-third through debt.
However, it depends on the cash flow. We have already started expanding our capacity.
The first one is for truck and bus radial tyres at our existing location in Halol and we are
going to set up one large modern passenger car radial plant in the southern part of India
near Chennai. So, we have clearly drawn out a plan in terms of where would be
investing that capex and how much for each of the categories is being worked out and
broadly shared also.
In FY18, 61 per cent of your revenue was from replacement
market. What is your strategy to ramp-up revenue from the OEM
segment?
Our original equipment share is very close to about 28-30 per cent. If you really look at
sales of tyres in India also, it would be a similar ratio between replacement and OEM.
But when you really want to grow, we have to ensure is that we increase the size of the
DSIJ.in
pie and not necessarily change the ratio significantly. So when we
increase the size of the pie, then it means we have to sell more
tyres to original equipment manufacturers even to maintain the
same ratio.Hence, we are doing a lot of work with the OEMs to
get our products approved well in advance, so that when we add
capacities we are able to supply tyres to them.
Presently, you are a leader in Sri Lankan market.
What is your strategy to grow in other interna-
tional markets?
In Sri Lanka, we have a manufacturing presence. In Bangladesh
also, we have some plans to set up a factory because these are
neighbouring countries. For all other markets, we export out of
India. Therefore, we have not thought of manufacturing presence
in other locations, however, we certainly have plans to grow in
the international market. So step number one, we have set up a
specialty tyre manufacturing plant at Ambernath, which
commenced operations in October last year. This is an export-
oriented unit, so whatever is produced there will be
predominantly exported. Its export market is large. Secondly, we
are also adding capacity and some portion of that capacity is also
for meeting exports of both passenger car tyres as well as truck
and bus tyres, in addition to specialty tyres. Therefore, currently
once we expand our capacity, we'll have that much additional
volumes for us to export.
DSIJ.in
How do you plan to sustain your margins amid
rising crude oil prices?
This is a very big challenge. To be honest, I don't think anybody
can influence crude oil prices, and it is also very difficult to
predict crude oil prices. You can understand the trend, you can
understand the macroeconomic reasons for the prices in case of
any movement in prices, but it is difficult to sustain. What we do
is that, we have a good procurement cover policy. What happens
is when the raw materials prices increase, it increases for
everyone, so we are not in a disadvantageous position compared
to any of our competitors. Therefore, what is important is that
business needs adequate time to react in the market. Therefore, it
is important for us to ensure that we give that much time for the
business to react in the market whenever the raw material prices
move up significantly.
We are in a competitive market and CEAT is not a market leader,
therefore, sometimes we have to ensure that we remain
competitive in a market because we are not a leader for us to take
any initiative. So what we try to do is, we try to have good control
over costs, efficiency and overheads and try to minimise
discretionary costs whenever raw material prices increase, if we
are not able to support it with price increase, etc. So, we take
these actions in addition to ensuring that we buy well and we
give enough time for the business to change or react to the
market whenever the raw material prices increase
AUG 06 - 19, 2018 I DALAL STREET INVESTMENT JOURNAL 43
Interview
CFO’s role has
evolved from
reporting numbers to
managing businessa
Sanjay Upadhyay is an Associate
Member of the Institute of Cost
Accountants of India. He is also a
Fellow Member of the Institute of
Company Secretaries of India. He has
also completed Advanced
Management Program from Wharton,
USA. He has vast experience in the
areas of finance, accounts, commercial
and secretarial functions. He is
associated with the company since
1994.
44 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018
C F O
S P E C I A L
Sanjay Upadhyay
Director - Finance & CFO, Deepak Nitrite
How has the role of CFO evolved over several years? How is CFO
in general influencing the strategy adopted by the company?
It is a fact that the role of CFO has changed over the past decade and it is still evolving
towards managing, growing and diversifying business. The number of CFOs has rapidly
grown due to the growing intellectual needs of the businesses. The evolution started
with presenting correct numbers, smart reporting, paving the way towards new
regulations for a healthy commercial world, installing of cost management and cost
leadership in an integrated ERP environment, managing working capital and capital
expenditure, enhancing return on capital and adhering to regulatory compliances etc.
Gradually, the role did spread towards a greater involvement in the decision-making of
the business and came with an expectation towards providing deep and precise insights.
The commercial and financial considerations of all management decisions are vital to
enable the collective leadership to steer an organisation forward and this is where the
CFO started having increasing strategic relevance.
Today’s CFO fraternity is very different from what it used to be.
« They are able to partner their CEOs in creating a resilient but flexible business model
«They are analytical about data, regulations, business environment, competition;
which helps in effective facilitation of business needs
«CFOs now analyse their business model and ascertain how the model is amenable
towards adapting constant change
«CFOs are now very cautious about various known and unknown risks (e.g country-
specific risk, product/sector risk, product technology obsolescence risk, cyber risk,
etc) and they continuously find out ways to mitigate such risks
«In recent times, lot of socio-economic-political changes have had severe impact on
business and CFOs are now constantly striving towards establishing their business
in such a new regime
«Grasping future technological developments and application of AI in business
«Developing, managing and retaining a focused team
What are the top three key challenges faced by you as a CFO?
Kindly mention your top three priorities as a CFO in
implementing the business strategy and technology?
The key challenges are:
1) Monitoring complexity and putting all the assets of the company into maximum
DSIJ.in
 and best possible use for return maximisation
2) Internationally, chemical industry is going through a
major change in terms of its geographical and regional
presence, catering to the world market from its region and
enhancing return to all stakeholders. In our country, our
positioning is such that we are endeavouring towards
converting such a changing climate into a sustainable
opportunity.
3) i) To grow our presence into petrochemical intermediates,
which we have embarked into now, through organic/
inorganic route and thus creating a sustainable business
model.
ii) To assess potential acquisition target and consummate
transaction with best possible funding option, wherever
feasible.
The top priorities are:
«The organisation is in the threshold of a quantum jump,
which needs a very effective team with some of the finest
operating managers. I am concentrating on that currently.
«Removing some of the potential limiting factors which have a
tendency towards becoming impediments on growth plans,
which we are currently working on. This includes application
of technology and innovation with the focus of creating and
sustaining a competitive advantage
«Making the organisation ready, in terms of financial
flexibility, towards funding upcoming projects, which are
going to bring in the planned quantum jump.
Please share with us your outlook on chemical
Intermediate space in which you operate?
India is the third largest producer of chemicals in Asia and
seventh largest in the world. As revealed by the National
Accounts Statistics 2017, the chemical industry constitutes 2.4%
of India’s Gross Value Added (GVA). The chemical industry is a
critical component of the Index of Industrial Production (IIP)
and has 7.9% weight in the index. Its expansive portfolio of more
than 80,000 products makes Indian chemical industry one of the
most diversified chemical industries in the world. According to a
report jointly published by FICCI and Tata Strategic
Management Group, India ranks 14th in exports and 8th in
imports of chemicals.
Based on properties and applications, India’s chemical industry
can be classified into seven major segments — bulk chemicals,
speciality chemicals, petrochemicals, pharmaceuticals, fertilisers,
agrochemicals and biotechnology. India’s chemical industry is
projected to double in size to $300 billion by 2025, growing at
nearly 10% annually, with specialty and agrochemical sectors
leading the pace, thereby outgrowing the pace of growth of other
industries across the world.
We are witnessing encouraging opportunities across the
chemicals and specialty chemicals landscape. China had been
the largest supplier of bulk chemicals for about last three
decades, while it used to dominate intermediates and fine
DSIJ.in
chemicals offering low costs achieved with the support of low
funding cost, inadequate environmental norms and also
government support by way of export/import incentives,
whereas countries like India had to maintain sustainability
standards at higher costs. Now that the Chinese government has
become stricter with respect to environmental norms, such cost
advantage disappeared, resulting in level playing field for the
Indian chemical industry.
What kind of investment do you envisage for
FY19? What will be the company's focus areas
for the fiscal?
As you may be aware, we have entailed a capex of `1,400 crore
towards greenfield project for manufacturing phenol and
acetone. The project is expected to be commissioned shortly, in
about couple of months. The greenfield project is now into final
round of pre-commissioning activities. In view of the impending
commissioning, DPL’s leadership team is already in place and the
marketing team has commenced customer outreach
programme. There is complete focus on operational readiness
and flawless start-up, for which technology provider's team is
engaged at the project site.
Apart from this, we are implementing brownfield expansion
projects across all business segments, incurring capital
expenditure of around `60–70 crore to take advantage of strong
demand, both globally as well as in the domestic market.
Kindly highlight growth drivers for your com-
pany and the future prospects on the backdrop
of commissioning of phenol business?
The commissioning of the greenfield project for manufacture of
phenol and acetone is one of the foremost growth drivers in the
coming years. This project is set to commence commercial
operations soon. This will make Deepak Phenolics Ltd the
company’s wholly-owned subsidiary as a market leader for
phenol and acetone in the country and also open up new
frontiers of growth for DNL. The outlook remains favourable as
phenol is finding new applications, resulting in increased local
demand, which has now crossed 320,000 tonnes per annum. As
the local supply is limited, the wide demand-supply gap is met by
increase in imports. Further, the availability of raw materials in
the local market has eased considerably, while margins are
improving. The combination of these factors is contributing to a
strong tailwind ahead of the commissioning.
We are currently working on few downstream products of
phenol and acetone, and once we establish basic operations, we
shall bring in those products.
There are several other softer sides which have remained and
expected to remain strong growth drivers for our company:
 «Sound corporate governance
«Product portfolio to suit sustainable growth
«Sound environmental compliance leading to lapels like
Responsible Care
AUG 06 - 19, 2018 I DALAL STREET INVESTMENT JOURNAL 45
Interview
Prabodh Agarwal
Group CFO, IIFL
As a CFO of IIFL Holdings,
what are your top three
strategic visions in the next
few years?
IIFL is one of the largest financial
services firms in India. We primarily
have three businesses – IIF Finance, IIFL
Wealth & IIFL Securities. IIFL Finance
has loan AUMs of `311.3 billion, which
is retail-focused and diversified.
The products we offer are home loan,
loan against property, SME and micro
finance loans. IIFL Wealth is a leader in
the wealth management industry with
assets under advise and management
exceeding `1,40,000 crore.
IIFL Securities is India’s leading
securities trading company. Marquee
global investors like Fairfax, General
Atlantic and CDC Group have invested
in IIFL Holdings, IIFL Wealth and IIFL
Finance, respectively. We serve over four
million customers across the length and
breadth of India. Our three-pronged
Vision 2020 is doubling, durability and
derisking. The first vision is doubling of
revenue between FY16 and FY20 and
profit by 2.5X during the same period.
The second is reducing volatility and
46 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018
The environment is quite good for
financial services companies like usa
cyclicality of earnings in all businesses.
The third is diversifying revenue sources
with focus on financial services.
Looking forward, which
business segment in your
view will grow the fastest?
All three businesses have been doing
well. The environment is quite good for
financial services companies like us. The
credit demand is good for the segment of
customers we are catering and the same
shows in our results every quarter. Our
wealth management business has shown
fantastic growth and has achieved
leadership position in a short span of
time. I believe all businesses have
tremendous future and should growth at
a fast pace.
Please give more details
about your company’s plan
for demerger of three key
businesses?
We have announced the demerger of our
three key businesses earlier this year. The
businesses are IIFL Finance, IIFL Wealth
and IIFL Securities. We believe each of
the businesses have achieved a certain
scale and size in terms of the total AUMs
or profit and, therefore, it is in a position
to stand on its own.
We believe that by separating them we
will allow them to grow to their full
potential. We have filed the scheme with
the stock exchanges and regulators. The
process would require approvals of the
regulators, shareholders and creditors.
After the approval, the scheme will be
filed with the ROC and then they are
ready for listing.
IIFL Wealth is amongst the top three
wealth management companies in India.
Please share the growth outlook of the
IIFL Wealth division. While I can’t give
you a future outlook, here is a glimpse to
wealth performance in Q4 FY18, which
C F O
S P E C I A L
is indicative of the growth. IIFL Wealth’s
PAT grew at 37% YoY to `103 crore. Our
assets under advice management and
distribution have grown 3% on Q-o-Q
and 39% Y-o-Y to reach `1.32 trillion.
We hired 14 bankers during the quarter,
taking the total number of bankers to
330, to further drive the growth
momentum. IIFL Wealth offers a broad
range of product and services to
participate in a larger share of the client
wallet. This includes financial products
distribution, advisory, brokerage, asset
management, credit solutions and estate
planning. We raised net new money of
`25053 crore in FY18 versus `22535
crore last year.
During the quarter, the team garnered
AUMs or commitments in excess of
`4000 crore in wide-ranging products.
AIF assets grew 52% Y-o-Y to `11736
crore. The total commitment in our
‘Special Opportunities Fund’, which
invests in pre-IPO and IPO situations, is
now close to `8700 crore.
A new Affordable Housing Fund was
launched during last quarter, which also
received an outstanding response with
the commitment of more than `1360
crore. IIFL Wealth Finance, which offers
loan against securities and margin
funding to high networth individuals,
grew its loan book 15% Q-o-Q and 85%
Y-o-Y to `6701 crore. Average lending
rate for this book is around 10.3%. This
kind of business growth is likely to
continue.
What is the most challenging
thing you faced in your cur-
rent role?
Understanding intricacies of different
product lines (we have nearly ten
products in the NBFC and several
more in other businesses) was both
challenging as well as enjoyable. It was
great learning.
DSIJ.in

As a CFO of HEG, what are your
top three strategic priorities?
Invest for growth, enhance shareholders'
value and align finance and operational
decisions based on data
Currently there is surge in
demand for your product
(graphite electrodes) and you
are operating at more than 80
per cent capacity utilisation.
Can you share your capacity
expansion plan?
The entire graphite electrodes industry is
globally facing a tremendous shortage of
needle coke - one of the critical raw
materials. We fully import this raw
material which is supplied by only three
companies worldwide. Due to the raw
material dependency, the entire graphite
industry is constrained in achieving its
full utilisation. However, we are looking
at the possibilities to debottleneck
around 20,000 MT capacity at our
existing plant and take it to 100,000
MTPA. We are rigorously working on
this project and should be able to take a
decision on this in the next few months.
We are also looking at opportunities in
carbon adjacencies in the area of carbon
and carbon-related material, which is
currently under evaluation.
Your operating margins in the
recent quarters were quite
high. Are you confident of
DSIJ.in
The structural changes in graphite
electrode industry have led to shortage of
electrodes worldwidea
R Rustogi
Chief Operating Officer & Chief Financial Officer
HEG Ltd
maintaining it going forward?
The industry has witnessed positive
development relating to trend in order
bookings. Earlier, the bookings would be
for 12 months, which has come down to
3-6 months. This has led to reasonable
level of certainty on maintaining margins
safely for the next couple of quarters and
we do believe we will be able to maintain
these margins. There is a structural
change in the supply scenario of the
industry as a whole, thereby leading to
healthy margins that will continue in the
near foreseeable future.
What are your plans to miti-
gate the rising raw material
cost (needle coke)?
As mentioned earlier, the production
and availability of single largest raw
material – needle coke is with three
major suppliers only. Hence, we believe
that that the prices would be mainly
governed by overall demand and supply
scenario of graphite electrodes. Our
analysis of the industry dynamics in the
near future gives us comfort that we shall
be able to pass on the impact of increase
in prices of needle coke to the electric arc
furnace (EAF) steel industry customer
base.
Please share your outlook on
graphite industry for next
two years?
There is a structural change in the
graphite electrode industry, both on the
demand as well as supply side. The major
AUG 06 - 19, 2018 I DALAL STREET INVESTMENT JOURNAL
influencing factor to increase the
demand for graphite electrode globally
including China has been the conscious
effort to replace the highly polluting
induction furnaces and small blast
furnaces since early 2017. We have
witnessed the continuity of the drive in
2018 and anticipate the same going
forward. This has resulted in large-scale
closing down of steel capacities in China,
thereby reducing the export of steel to
the rest of the world by 40% to 50%.
Also, as the rest of the world is producing
approximately 50% of its total steel
(approx. 825 MMT) through the EAF
route, wherein our products are used,
the production of steel has suddenly
jumped up by 30 to 50 MMT in the last
12 to 18 months. This has resulted in an
increase in demand of graphite
electrodes at a time when the graphite
electrode capacities have been shut down
by around 25% globally.
On the supply side, there have been
permanent closure of nearly 200,000
MTs of graphite electrode facilities in the
past 3-4 years and most of them have
been dismantled/razed to ground. Also,
with the alternate use of needle coke into
lithium batteries, none of the electrode
producer is able to get their full
requirement of coke, thereby restricting
operations between 80-90%.
These structural changes have resulted in
the demand growth exceeding supply
and hence shortage of electrodes
worldwide.
47
Interview C F O
S P E C I A L
R K Chandiok
As a Director (Finance) of Director (Finance), National Fertilizers Ltd.
National Fertilizers Ltd, can
you please elaborate on
your top three priorities
during the next three years?
As a Director (Finance), my priority
area shall be to arrange funds for both
short term working capital requirements
for daily operations and long term loan
requirements for various energy
reduction schemes and other ongoing
capex schemes for upgradation of
electrical and instrumentation systems,
information technology, i.e.,
implementation of ERP, etc.. It will be
my endeavor to arrange funds by
negotiating better terms and lower
interest rate. For management of
working capital requirement and
associated costs, the focus shall be to
strengthen the system for timely
submission of subsidy claims with
Government of India (GoI), earliest
realisation of subsidy claims, reduction
in mismatch of cash flow and reduction
in avoidable expenses. As the fertiliser CFOs go beyond their role and bring
industry is highly controlled industry
and with the introduction of Direct strategic thinking into playa
Benefit Transfer (DBT), the timely
release of subsidy by GoI will play an
important factor in day-to-day working shareholders,recently a decision was taken instruments. A strategic position was
capital management. It shall be my to arrange funds for energy reduction taken to raise maximum funds through
priority and focus to arrange funds for schemes from a single large bank without Commercial Papers (CPs) at a cheaper
the working capital requirement at hiring agency for undertaking debt rate for three months and discharge/
cheaper rates so as to achieve cost arrangement and advisory services. It has repay them before the expiry the quarter.
reduction and cost savings through saved the initial processing cost by `5 Generally, it is seen that the CPs cost
effective utilisation of resources to crore and the negotiations with the bank higher if these are dated after the expiry
enhance the profitability and value of has resulted in getting rupee term loan of the quarter. The borrowing through
the company. sanctioned (more than `1000 crore) at a the CPs was 30% in FY 2013-14 and
pricing almost at par with AAA rated increased to 94% in 2017-18. As a result,
Can you highlight the strate- companies. Previously, strategic decision interest savings equivalent to 60 bps was
gic initiative which paid off taken was to restructure the existing achieved in FY18. It requires very
well for your company external commercial borrowings (ECBs) efficient and close monitoring. NFL
with new ECB with reduced all-in cost sparingly borrows short term loans/cash
during your tenure as a and restructured repayment by back credit from banks limits which attract
Director (Finance)? How did loading to match with the cash flow higher rate of interest. The bank limits
it help the company and also requirement/projections of the company are used for few days, i.e. till the old CPs
investors who have parked leading to saving in the interest cost. are replaced with new CPs in the next
their money in your com- quarter. The credit rating of the company
pany’s stocks? A strategic decision was taken to review was got reviewed and upgraded to reduce
and change the composition of short overall finance cost. The utilisation mix
For increasing the wealth of term borrowings through various of cash credit facility, commercial papers

48 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018 DSIJ.in

and short terms loans, etc., was aligned
to expected cash flows to reduce the
overall cost of funding.
A strategic decision has been taken and
implemented to introduce Dealer
Financing Scheme (e-DFS) to make
available cheaper loan at interest rate of
8.80% p.a. to dealers as against their
general borrowing rate of around 10% to
14% p.a. and will enable NFL to target
saving of around `3-4 crore.
Similarly through SBI, NFL introduced
Vendor Financing Scheme (e-VFS) to
enable vendors to get realised their
invoice value before due date presently at
8.05% p.a. from SBI. It will result in
lowering interest cost to NFL as credit
period of vendors has been increased
and expected to save interest cost of
`1.50 crore to `2.00 crore on per annum
basis.
Inter Corporate Deposit (ICD) Scheme
was developed after pursuing with many
PSUs for availing short term funds at a
lower rate of interest as compared to STL/
CC etc. At times, ICDs were raised at per/
lower rate than overall CP cost.
In addition, various steps taken to reduce
interest cost such as increasing credit
period of gas suppliers (expected to lower
interest cost by `8 crore), payment of
invoices only on due dates and
introduction of Tripartite Facilitation
Arrangement between bank, supplier and
NFL for timely payment of dues on due
date in lieu of stand by LC arrangement at
very competitive bank charges as against
costlier LC charges saving of `50 lakhs. In
addition, to improve profitability, NFL is
also taking action to monetise various idle
assets of the company and unlocking the
potential income. In this regard, leasing of
school buildings, land for gas station,
piped gas, petrol pumps, etc. have been
undertaken.
The policy for investment of surplus
funds was also reviewed and revised for
optimising the return by investing
strategically in FDs with public and
private sector banks and mutual funds
within the guidelines.
DSIJ.in
As a CFO what are the key
challenges faced by you in
achieving the company’s
objectives? How did you
really overcome it?
The fertiliser industry is highly regulated
and controlled industry and as such the
objectives of the company can be
achieved through timely availability of the
finance for meeting the short term as well
as long term requirements of the
company. In the scenario of budget
constraints with GoI for release of subsidy
and challenges of recently introduced
DBT system, the full year subsidy is not
released in time leading to resorting of
working capital arrangement to meet the
day-to-day requirement for sustained
operations of the manufacturing
company. The challenge is to arrange
rupee funding for higher import of DAP/
MOP/NPK etc. as against buyers/
suppliers credit. In addition, arranging
timely funds for capex (equity portion)
will require excellent management of
liquidity. Thus, in a controlled industry
where the profit margins are fixed and are
eaten up by under-recoveries under the
subsidy regime, cost control and cost
savings are essentially required to
maintain healthy profitability levels.
The timely availability of finance and at a
lower cost improves the profitability of the
company and as such holistic approach
was adopted to achieve reduction in the
finance cost. The change in the mix of
instruments by using higher volume of
cheaper CPs, availing higher credit period
from suppliers, used MIBOR/CD-linked
loans as against MCLR-linked loans,
negotiated lower rate with existing banks,
adding new banks with lower rates,
insisted terms for repayment of loan
without prepayment premium/penalty
yielded saving in finance cost to NFL.
Most importantly, after lot of persuasion
with DOF and DEA, Special Banking
Facility (short term loan) was got
implemented for all urea manufacturers at
a cheaper interest cost of 1.75% p.a to the
company, pending release of subsidy for
want of budget by GoI.
In appreciation of achievements, I bagged
AUG 06 - 19, 2018 I DALAL STREET INVESTMENT JOURNAL
“Winner - CA Distinguished Achiever
– Public Sector Undertaking Award”by
Institute of Chartered Accountants of
India in January 2018.
What are the long terms plans
to maximise the wealth of the
shareholders?
In the long term, action has been initiated
during the last two/three years to increase
the production and sale of industrial
products such as nitric acid (54% and 60%
concentration), ammonium nitrate,
sodium nitrate/nitrite, etc., to increase the
trading volumes of imported fertilisers
(DAP, MOP and AS etc.) multifold and
leverage the strengths of vast marketing set
up, dealers’ network and experienced
highly motivated marketing team. In other
words, the share of non-urea business
which is having better potential for profits,
is being increased. As a result of constant
efforts, the urea versus non-urea business
ratio has been changed from 99:1 to 88:12.
CMD Manoj Mishra and board of
directors have played key role in making
NFL a multi-product company under the
Kisanbrand, implementation of the
various energy reduction schemes at all
the units and diversification in trading
activities. Thus, with implementation of
energy reduction schemes and focus on
reducing the finance cost, NFL is
expected to achieve better results leading
to increase in the wealth of shareholders.
CFOs are believed to be
people who only understand
numbers. What needs to be
done to ensure CFOs in India
get their dues?
CEOs are the face of the company and
providing leadership for growth of the
company, whereas DFs understand the
numbers as well as the meaning and
requirement of the overall corporate
objectives as well. For this purpose, they
go beyond their role and bring strategic
thinking into play by understanding the
dynamics of products market and
financial market so as to increase overall
market share of the company without
losing the margins.
49
Interview C F O
S P E C I A L

Kailash B Gupta
CFO, INOX Leisure Ltd

As a CFO, can you please elaborate on your top three key

priorities during next three years?
With the introduction of a wide array of alternative content, the exhibition business is
all set for a major disruption. The aim is to strike a balance between the growth levers of
the business and the core of the existing business. In the evolving regulatory landscape,
it becomes imperative to measure the political impact and its effects on the industry as a
whole. Accordingly, it is important that we have the overall controls in place, so that the
company is compliant with all the laws and regulations. Further, as an industry
representative, it also becomes necessary to put forward the industry-wide issues by
liaising with various government departments in a timely manner. As a CFO of a
company with such a high growth rate, it becomes important to manage the debt of the
company. The challenge is to strike a balance between the high growth and also the level
of debt the company can accommodate. The strategy would be to device an appropriate
finance structure which is most optimal to the organisation.

Can you highlight the strategic initiatives that paid off well for
your company during your tenure as a CFO with the present
company? How did these help the company and investors who
have parked their money in your company's stocks?
Today's CFO is a The following key initiatives were undertaken:
« We entered into a fresh deal with a few ticket aggregators which in turn led to an
financial strategist additional revenue of approx. `100 crore over a period of three years.
« We formed centralised procurement cell to take advantage of bulk buying, better
and business adviser rates and to maintain integrity issues
« We introduced multiple banking arrangement in the company and optimised the
to the CEOa loan mix from Indian and foreign banks, leading to substantial savings in the form
of lower interest rates

As a CFO what are the key challenges faced by you in achieving

the company's objectives? How did you really overcome these
challenges?
Businesses are constantly facing changes due to the technological progress and
unstable economic and political situations. The role of today´s CFO is fundamentally
changing. Their work does not end with passive control of numbers, revenues and

50 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018 DSIJ.in

expenditures as CEOs/board of directors and other
stakeholders have a lot more expectations from their
performance. As a CFO the key challenges are:
Supporting growth while managing risk: In the current
scenario, growth is the main objective of the company. The
company has already signed 700-plus new screens which are to
be operational in the next few years. The company is also
looking at the growth by the way of acquisitions. The company
relies on the CFO to help it drive the growth strategy from
mergers and acquisitions to geographic expansion and organic
growth. I, as a CFO, interact closely with the business team and
design various strategies for the growth of the business, while
managing the risk profile of the company.
Regulatory compliance: The critical need is to keep abreast of
potential new laws that will have an effect on the firm’s financial
bottom line as it remains a key challenge for any CFO. As a
CFO, I see the same as an opportunity wherein the new
strategies can be put in place and the same can be used for the
competitive advantage for the firm.
Technology and innovation: With the advancement of new
technologies, the CFOs are expected to look for new ways of
working that could involve overhauling business models and
operations in order to harness the opportunities that emerging
technologies offer. As a CFO, I closely co-ordinate with the
business team in general, and the chief information officer, in
particular, to be able to adapt the latest technologies available.
We see the new technological advancement as enabler and aim
to be the next technological disruptor in the sector.
Retaining and nurturing talent: Finding and retaining the
talent needed to drive finance teams is one of the most
important challenges for the organisation. Identifying the right
person for the job is one of the most critical aspect of people
management. As a CFO, I have to ensure that the team has
right tools, skills and capabilities to arm the management with
cutting-edge insights and analysis which can be used for taking
informed business decisions.
Cost control: Controlling the costs will always be a priority for
chief financial officers.
We keep hearing about CEOs more through
media and other such modes of communica-
tion. CFOs apparently live behind the curtain
but play a very crucial role when it comes to
wealth creation of the individual investors. Do
you feel deprived of limelight at times? How
about CFOs being faces of the companies in
India in future?
As a professional, the only ‘limelight’, according to me, is being
recognised by stakeholders and delivering immense value to
DSIJ.in
For me leadership is… all about managing the people,
resources and time to translate vision into reality
For me competition is… to bring out the best version of me
For me success is…a science. If you have the conditions, you
get the result
For me my team is…my strength and my support. Can’t
walk without team
For me growth is…the result of constant effort and smart
work
the organisation through my expertise and skills. For me, this is
the best publicity and I am absolutely satisfied with it.
CFOs are now recognised as business partners and are carrying
the business, regulatory and investor relations. They are
carrying greater responsibilities when it comes to creating value
for the shareholders. They will be seen as caretaker of the
wealth of the shareholders in good and bad times.
Numbers are the primary things that you play
with at work. People in the outside world
have a feeling that CFOs are the set of people
who only understand numbers and they are
kind of far away from other aspects of life.
How much is this true? What further needs to
be done to ensure CFOs in India get their
dues?
I believe that the above statement was true a few years back.
With the ever evolving business landscape, the role of the CFO
has also undergone a drastic change. Today's CFO can be seen
as a financial strategist and business adviser to the CEO. It is no
longer enough for CFOs to be reporting numbers and
managing financial function. In the current scenario, I see the
CFO as a business person who also has a finance background.
I believe that the CFO in India must adapt to the changing
environment. While it is vital for the head of finance to have a
deep understanding of the numbers, the CFO now has a much
more central role in deciding strategy and communicating with
internal teams and external stakeholders. This is the age of
business partnering. By adoption of the new role, I believe
CFOs will get their dues.
AUG 06 - 19, 2018 I DALAL STREET INVESTMENT JOURNAL 51
Interview C F O
S P E C I A L

As a CFO, can you please elaborate on your top three key

priorities during next three years?
The top three key priorities are to maximize capital efficiency, optimize cost and
ensure business is adequately funded with a right mix of debt and equity.

Can you highlight a strategic initiative which paid off well for your company during
your tenure as a CFO with the present company? How did it help the company and
investors who have parked their money in your company's stocks?
The company framed a strategy to allocate more resources and focus on the K-12
content segment in FY2011-12 and embarked on an inorganic path to increase its
presence in this vertical. This strategy has played out largely as per plans and
resultedin the company growing at above 30% CAGR in the last six years.
Our initial investor Everstone Capital backed us on this strategy right from the start
Saurabh Mittal and made healthy returns with a part exit from our IPO in 2017.

CFO, S Chand & Company
As a CFO what are the key challenges faced by you in achieving
the company’s objectives? How did you overcome them?
The key challenges include balancing allocation of capital and other resources to new
ventures which will pave the path for future growth without impacting the existing
business and ensuring margins are not diluted. The company must be disciplined
enough to allocate resources knowing that some venture would work and some may
not. The company has over the years invested into digital and service businesses, both
inhouse and outside, after understanding internal capabilities to spread the risk and
improve the probability of success in each of the ventures.

We keep hearing about CEOs more through media and other

such modes of communication. CFOs apparently live behind
the curtain but play a very crucial role when it comes to wealth
creation of the individual investors. Do you feel deprived of
limelight at times? How about CFOs being faces of the compa-
nies in India in future?
CFOs are not deprived This is no longer true, at least not for S Chand. The CFO is the face of the company at
of any limelight and various places including banks, financial institutions, credit rating agencies, taxation
authorities, other regulatory authorities, investors and even large customers and
are already the face vendors. All of these correspond first with the CFO and then with the CEO. As far as
public listed companies and companies where there is private equity or a foreign

of companies in partner, the CFOsare not deprived of any limelight and they are already the face of
companies in India.

Indiaa Numbers are the primary things that you play with at work.
People in the outside world have a feel that CFOs are a set of
people who only understand numbers and kind of away from
other aspects of life. How much is this true? What further
needs to be done to ensure CFOs in India get their dues?
With the changing regulatory environment, corporate governance and information
technology available today, the role of the CFO is much more than numbers. The CFO
has to be an integral part of any decision-making process, be it new product
development, new line of business, marketing strategies, new production units, hiring
of talent, mergers and acquisitions etc. Every aspect of the business has a financial
impact and there must be a buy in with the CFO for the same.

52 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018 DSIJ.in


Neeraj Jain
CFO, Cosmo Films
As CFO of Cosmo Films, what are your
top three strategic priorities?
The top three priorities are:
• To facilitate company’s medium to long
term strategy by enhancing share of
specialised films, i.e., working towards
de-commoditising the business model.
• Working towards close to zero net working
capital deployment in the business (i.e.
shorten the working capital cycle).
• To facilitate company’s growth by ensuring
cost effective finance is available at all times.
Your EBITDA margin over the past few
fiscals has been deteriorating. Can
you tell us what factors caused this
margin deterioration? Your view on
the same for FY19E?
During FY18, sales volume grew by 25% with
20% growth in speciality films. While BOPP
film margin continues to be volatile and has
wiped out gains of volume increase and
better product mix, our continuous focus on
improving operational efficiencies helped in
maintaining EBIDTA level in absolute value.
BOPP film margin has been running low due
to temporary demand and supply gap in the
domestic industry. As very minimal new
capacity is expected in domestic industry in
the next two years, we expect BOPP margins
to improve towards normal level sooner
rather than later. Further, the company is
working towards expanding speciality and
improving internal efficiencies, which will
de-commoditise and strengthen the business
model in the medium to long term.
What kind of opportunities or risk do
you see due to plastic ban in many
states?
DSIJ.in
Restrictions on use of plastic should benefit BOPP
industry due to better recyclabilitya
The Government of India has recently
issued revised guidelines in which
provisions related to restriction on
multilayer packaging has been broadly
taken out and substituted by provisions
related to further utilisation, collection and
recyclability of plastic. In the new
guidelines, the focus is on alternate usage of
plastic rather restricting production or
consumption. Some state governments
indicated restriction on specific plastic
products (such as PET based bottles,
polythene based carry bags). None of these
products uses BOPP, hence from Cosmo
Films perspective, it will not have any
impact. The provisions around restricted
use of plastic in the long term should benefit
BOPP industry as the same is better placed
from recyclability perspective compared to
other options.
How would be the coming fiscal
different from the previous one?
The company continues to focus on
improving speciality films sale. In this
direction, the company is increasing
capacity of speciality products and has also
recently launched several speciality products
such as -
• Cosmo Synthetic Papers (CSP)-
Enhanced features such as quick drying
(labels, tags, maps, ID cards, tickets for
adventure parks, etc.)
• Metalised label film- Mirror finish glossy
film which can be printed with high
speed flexo printing machine.
• BOPP films for soap wrapping- Enhances
moisture barrier which helps to maintain
consistent soap weight for longer time.
• Metalised velvet films- It is engineered to
provide brilliant metallic look with velvet
touch to the laminated paper/paperboard
or package.
• Conduction sealing films- These are one
side corona treated and other side heat
sealable, clear, laminated films for
retortable lidding applications. The major
application segments for these films
include dairy products, medicine and
pharmaceutical industry.
• Digital printable label films- These films
are designed for digital printing on HP
AUG 06 - 19, 2018 I DALAL STREET INVESTMENT JOURNAL
Indigo machine. It provides excellent ink
adhesion and high quality printing results
on finished products like wrap around
label applications.
• Solid white PSA label films- It is a solid
white film with high opacity and excellent
stiffness properties.
Further, BOPP films margins are also
expected to move towards normal level.
These factors, along with better internal
efficiencies, should facilitate better margins
and ROCE in coming years.
In FY18, you were running on 90 per
cent-plus capacity utilisation. Can you
share your capex guidance for FY19E?
The company will focus on improving
financials in FY19, hence it would be
conservative in capital expenditure during the
year. Besides the already committed capex for
buying adjoining factory land and building,
the company will enhance capacity in
speciality vertical which is running close to
full capacity utilisation. However, the overall
capex size would not be high in this fiscal.
What is your outlook on packaging
industry for the next 2-3 years and
what will be Cosmo Films’ strategy
to grow faster than the industry?
India as well as global flexible packaging
industry is expected to grow close to the
twice the respective GDP growth rate as has
been the trend during the last one decade.
As BOPP flexible packaging industry’s
growth is largely linked with India’s
consumption, which is running at low
penetration (particularly packaged food
with low penetration in India), the industry
should witness consumption-based growth,
particularly for food packaging. The
consumer sector will be looking more for
product differentiation and value-addition.
We will be working towards twin strategic
objectives of enhanced focus on speciality
films and lower production cost for BOPP
commodity products. These twin strategic
goals shall always differentiate Cosmo Films
from the competition.
53
Interview
Amit Sudhakar
CFO, Kisan Moulding
Recently your company has
raised around `59 crore. Can
you tell us how you will be
deploying these funds? Also,
do you think your company
would be in need for addition-
al funds?
We raised ~ `59 crore via a preferential
allotment of 5 million shares last year.
These funds were raised to meet our
working capital requirements and selling
and administration expenses. We have
sufficient capacities to meet incremental
demand envisaged over the next couple
of years and hence we don’t expect to
raise any funds for capex purposes.
However, based on our expectations,
growing sales would necessitate
increasing working capital requirements,
at the least. We have been constantly
working towards improving our balance
sheet and achieving a profitable growth.
This implies that some of the
incremental working capital needs
would/could be met by some easing up
of debtors on our books.
Do you have any other plan to
raise funds other than fresh
equity infusion?
As a part of our corporate restructuring
54 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018
A healthier and leaner balance sheet
ranks high on management’s agendaa
exercise initiated two years back, we had
identified some non-core assets which we
had planned to monetize. While we have
sold some such assets in the previous
financial year, we plan to dispose off some
more assets in the current year. At this
moment, we don’t intend diluting equity
anymore.
Can you throw some light on
your strategy to revive your
company’s bottomline perfor-
mance?
«While we always had a reasonable
strong brand and good products,
aggressive capacity expansion during
the economic downturn weighed
upon our performance. Over the last
couple of years, the management has
drawn up strategic turnaround plans
and successfully implemented several
of them, as listed below:
« We have streamlined our business by
changing our product mix to focus on
high margin products.
«High margin, niche products
(solvents, fittings, etc) were identified
and seasoned professionals were
inducted in the organisation with the
sole focus on growing those segments.
«We increased the number of SKUs
and currently are amongst the largest,
in terms of SKUs (+2800 SKUs)
domestically.
«We have addressed areas like working
capital, which needed immediate
attention by raising funds via equity
dilution.
«Non-core assets were identified and
some (worth ~`14 cr.) have been
already disposed off in the previous
financial year with more in the sale
pipeline in the current year.
«We successfully automated our
mother plant at Tarapur to improve
productivity and quality, while
reducing our labour costs.
C F O
S P E C I A L
How do you plan to encash
opportunities arising from
various government initiatives
such as doubling the farmer's
income and push for affordable
housing for all by 2022?
The ‘Kisan’ brand enjoys a strong recall
with its target audience in agri pipes
segment. That said, we have undertaken
several activities to improve our market
share in the non-agri pipes and fittings
business. While our regular distributor/
dealer meets help us stay updated with
customer demands, our internal R&D
team work towards bettering our
customer experience by developing
products accordingly. For instance, we
have recently developed self-locking
column pipes (patent pending), which
could prove to be a game changer in the
agri pipes segment. Roping Amitabh
Bachchan as our brand ambassador
would help drastically improve our brand
recall in all the segments and act as a
catalyst in widening our customer
connect. We also hope to increase our
distributor/dealer network (currently
500+ distributors and 30,000+ dealers
pan-India).
You have reduced your debt
recently. Can you tell us what
proportion of debt you are
targeting in your overall capital
structure in the coming fiscals?
Reduction of debt was one of the strategic
calls taken by the management.
Accordingly, our term loan repayments
have started from beginning of 2017, with
a reduction of `20 crore every year. While
it is relatively early to put a finger on the
exact debt number or gearing ratio that
the company would be comfortable with
going forward, a healthier and leaner
balance sheet ranks high on the
management’s agenda.
DSIJ.in

Subrat Nayak
CFO, Mirc Electronics Limited
As a CFO of Mirc Electronics,
what are your top three strate-
gic priorities?
Close involvement in strategy, fund-
raising and investor relations have
become three major strategic priorities
for CFO in the current dynamic
corporate world. The CFO plays a major
role in validating the many new strategic
initiatives like expansions, diversification
and mergers and acquisitions by the
company on the financial front. He needs
to communicate effectively at regular
intervals with investors. The cash flow
management at regular intervals and
assessing the requirement for raising
funds by way of debt or equity and
implementing the same to ensure smooth
functioning of the organisation.
Your company has witnessed
turnaround in net profit for
FY18. We would like to know
what strategy helped you to
register this performance?
Over the last 2-3 years, we have
undergone a turnaround by having good
controls on our costing and revamping
our operations by bringing in lots of
automation at the plant and working on
expanding our distribution network.
We have adhered to strict bottomline
approach, reduced debt and saved on
DSIJ.in
We expect consumer durables
industry to grow in double digits over
the next 4-5 yearsa
interest cost, a one-time golden
handshake with employees have
substantially saved the cost, discontinued
loss-making products like mobiles, grown
in new segments like washing machines
and the pie of air-conditioners has been
increasing. All these steps have resulted in
`23 crore profit for FY18 as compared to
the loss in FY17. We are the only large
Indian player in the consumer durables
segment growing at good growth rates.
We are confident of growing at 20%
during the current financial year.
You have reduced your bor-
rowing significantly in FY18,
what kind of debt proportion
are you targeting in total
capital?
Our total gross debt has come down
considerably to about `50 crore in FY18
from `165 crore in FY17 on account of
improved cash flows during the year and
fund infusion from Lucky Securities to
the tune of `90 crore. We would be
debt-free company during FY19 once the
warrants issued to Lucky Securities get
converted. Besides, we are in the process
of divesting our non-core assets to the
tune of `100 crore, which will further
improve our cash flow situation in the
company.
Your operating margins have
remained quite volatile in the
last few quarters. What is your
view on the same for FY19E?
The operating margins have improved in
the last couple of quarters during FY18.
We have reached EBIDTA margin of 8%,
which is the industry norm and we would
comfortably maintain these margins. As
consumer durables business is seasonal,
we have to look at year-on-year margins
rather than quarter-on-quarter margins.
At the upper level, we have reached our
AUG 06 - 19, 2018 I DALAL STREET INVESTMENT JOURNAL
PAT margin to 4%-5% and we would
continue to maintain the same going
forward. The quarters consisting of Diwali
and summer vacations would be bulky
because of television sales during Diwali
and air-conditioner sales during summer.
Due to rising disposable in-
comes and availability of credit
facility, the demand for elec-
tronic is expected to rise. How
do you plan to encash this
opportunity?
The rise in urbanisation and disposable
incomes in rural and semi-urban areas
has been very important factors for us to
increase our sales. Moreover, given the
growing electrification across India,
availability of credit facility, demand for
electronic goods and effective roll-out of
GST/E-way bills, we expect the
consumer durables industry to grow in
double digits over the next 4-5 years. The
penetration level in washing machines
and air-conditioners is well below 5% in
India, and as compared to China and
other developed markets, penetration the
level is way below. This is the major
driver for increase in demand for
consumer durables in the country. With
increasing population of ‘double income,
no kids’ in the country, the need for
consumer durables is increasing
day-by-day.
Can you tell us about your
divestment plan and how you
will be utilising these funds?
We are in the process of divesting our
non-core assets across India worth `100
crore. We have identified these assets and
have initiated the process for selling these
assets. We will use these funds for our
working capital purpose, which will
reduce the debt even on our increased
revenues in the coming years.
55
Interview
Rishabh Agarwal
MD & CFO, Responsive Industries
As a CFO of Responsive Indus-
tries, what are your top three
strategic priorities?
As a CFO, my top three strategic
priorities are transparency, optimal use of
free cash flow and communicating with
shareholders at large. Out of these three,
optimal use of free cash flow is the top
priority as it is the only matter which can
make or break any organisation. We have
enhanced our business model recently
and are expecting a significant
improvement in earnings going ahead. So
it’s very important for us to effectively use
the funds for future growth for delivering
return to shareholders. The third priority
for me is to communicate with
shareholders on how the company is
growing and other aspects of the
business. We have taken conscious
decision of discontinuing printed
flooring division which is a low margin
business in our portfolio of products.
This has really freed up lots of bandwidth
and cash flows to concentrate on our
company’s growth. We are coming out
with advanced and high value-added
products like Luxury Vinyl Tile and R
` We will be long term debt-free company
by September 2108 and from there onwards,
we will be having small amount of working
capital to the tune of `160 crore. a
56 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018
With our enhanced business
model, we expect significant
improvement in earningsa
Leather in synthetic leather products
Can you tell us about your
expansion plan to serve the US
and European market? How
will you fund this expansion?
We are setting up a Luxury Vinyl Tile
(LVT) plant in UAE. LVT is the fastest
growing segment in flooring space. Its
market size is about $7 billion globally
with USA and Europe being the key end
markets. We are exploring UAE to set up
our plant which would serve these
developed markets.
What is your view on the
domestic market for PVC
products that your company
offers?
India is an emerging market for vinyl
flooring and it constitutes only 2-3% of
global demand. However, it is highly
fragmented. The main demand drivers for
contract sheet vinyl are healthcare,
education, and sports infrastructure,
which are rapidly adopting this as
de-facto solution. In the healthcare space,
we are seeing large-scale adoption of vinyl
flooring in both private sector and public
sector hospitals. In the education sector
too, as there is a huge demand for school
infrastructure in India, we are seeing this
as a big opportunity in public sector
schools. We also see a huge demand for
vinyl flooring in transportation segment
as the Indian railways and large number
of bus body builders are in urgent need of
C F O
S P E C I A L
expansion and modernisation. Thus,
looking at the demand potential from
these sectors, we are very positive on the
domestic market for PVC products. We
are currently present in 35 cities across the
country and have the largest network of
over 75 active distributors, which would
help us to capitalise on this huge
opportunity.
What kind of topline and
bottomline growth are you
targeting for FY19E?
We have enhanced our business model by
discontinuing low margin segment of
economical vinyl flooring post Q1FY18
and increased the share of high margin
value-added products. We are expecting
good growth rates in our new products
like Luxury Vinyl Tiles and R Leather,
which is very close to real leather.
We would see significant improvement in
EBIDA from the current 12% to 24% in
the next one year. At PAT level also, we are
going to report good numbers, as our
depreciation is coming down and also our
interest cost from long term borrowings
would be zero after September 2108.
Your current debt-to-equity
ratio is at a comfortable level.
What is your target on the
same in foreseeable years?
We will be long term debt-free company
by September 2108 and from there
onwards, we will be having small amount
of working capital to the tune of `160
crore and the utilisation of these limits
would be in the range of `90 to `100 crore
at any given point of time. Considering
the increase in profitability of the
company on account of increased focus
on introducing high margin high
value-added products, the working capital
requirement also would be marginal.
DSIJ.in
 Farokh P. Gandhi
Chief Financial Officer, Eros International Media Ltd

As a CFO of Eros International, what are your top three strate-

gic priorities?
Our top three strategies include having a strong topline growth, margin expansion
and continued efforts to maintain a conservative balance sheet while funding
company’s growth plan.

What is your outlook on media industry in India?

I think that the media landscape has evolved rapidly over the past few years. Changing
technology, increased bandwidths and internet affordability has changed the industry
immensely. People now have different viewing habits and are not just consuming
content from cinema and television, but also via other media like digital and social
media.

What are your key growth drivers?

We are redefining our portfolio mix and expanding margins by investing in content
driven films with higher return on investment potential and lower risk, in turn
making Eros less dependent on box office numbers. While we continue to believe that
box office will be important, monetising traditional revenues and making content for
our OTT platform competitive is an essential growth driver for us.

Changing technology, What kind of impact do you see on debt due to investment in
content-driven film? Do you have any internal target ratio for
increased debt-to-equity?
bandwidths and The investments in premium content and distribution networks we have made over
the past few years are now clearly showing in our financials. We believe in
internet affordability maintaining a conservative balance sheet and our debt-to-equity ratio as on March 31
was 0.25, which is below the industry norms.

has changed media What is the toughest aspect of being a CFO?

CFOs have to keep up with the changing dynamics of every industry which directly or
industry indirectly affect the business. The change in consumer preferences, behaviour,
viewership and pricing, to change in government regulations, everything has an
immenselya impact on the business and financial metrics. There are times when all the above
situations arise at the same time, so one needs to be patient and handle all matters
diligently.

DSIJ.in AUG 06 - 19, 2018 I DALAL STREET INVESTMENT JOURNAL 57

Cover Story
NBFC STOCKS:
Should You NBFC
Add Them Housing Corporate

To Your Finance Loan

Retail

Portfolio? Loan Gold Loan

NBFCs have corrected sharply in CY18 MSME Transport

after outperforming in the previous 3 to
5 years. Yogesh Supekar along with Finance
Amir Shaikh analyse the prospects of
investing in NBFCs

N
on-banking finance companies (NBFCs) have
been on the radar of investors over the past few
years. Indeed, many of the leading NBFC players
have turned out to be multi-baggers, viz., Bajaj
Finserv and Bajaj Finance. While the sector has
been riding on decent growth trajectory over the past 3 to 5
years, it is worth looking at the sector afresh amidst increasing
uncertainty in the financial markets. NBFCs, along with the
broader markets, have taken a beating in CY18.
NBFCs, apart from being an integral part of the Indian financial
system, play an important role in nation-building by
complementing the banking sector in reaching out to the
unbanked segments of the populace in the country.

Advances of the NBFC sector Banks’ funding to NBFCs

increased by 21.2 per cent increased 27 per cent during
and investments increased FY2018, while the banking
by 13.4 per cent. The PAT system’s credit growth remained
increased by 30.8 per cent in muted at 8 per cent for the
2017-18. period.
58 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018 DSIJ.in

Prasanna Pathak `As of now, Mr. Market is happy to pay
Fund Manager - Equity premium for NBFC stocka
Taurus Mutual Fund
What is your outlook on NBFC stocks?
Currently, NBFCs are witnessing cyclical pressures with respect
to their liability resources/profile. This time, however, the
situation is peculiar in the fact that the demand pipeline
remains strong for majority of them and most of the NBFCs
have diversified businesses, competing against other financial
institutions. For example, LAP is a product offered by banks,
HFCs as well as other NBFCs. So, the segments with demand
limits their ability to increase their yields. The availability of
information about the basic credit profiles is also quite
uniformly available. The better ones have developed good
processes to assess the risk and mitigate it. So, to that extent,
the entry barrier is low and the demand visibility is high. So, we
feel it will be a “survival of the fittest” market.
The resilience of NBFCs has been proved again recently.
Catering to the more informal part of the economy, GST and
demonetisation had a larger impact on the NBFCs. But they
have come out strongly. So, we tend to believe that despite the
regulatory and market challenges, most NBFCs have been
nimble/agile and have sustained through the challenges.
How are valuations for NBFC stocks?
Most of them have not recovered yet from the fall seen
post-GST and demonetisation. So, it’s a mixed bag. The
valuations look high for the better performing NBFCs, which
have demonstrated a very high level of consistency and agility.
But, as of now, Mr. Market is happy to pay the premium.
Nitasha Shankar `NBFC valuations are stretched at the
Sr. Vice President and Head of Research current levelsa
Yes Securities
Will NBFCs surprise on the earnings front in
Q1FY19?
Non-food credit has grown at a healthy pace, albeit owing to a
favourable base effect on account of demonetisation. In
addition to this, favourable trends in consumer finance, auto
numbers, as well as positive traction in affordable housing
segment would help drive the topline for most of the NBFCs
lending to these segments. However, the rising cost of
borrowings can pose a threat to the NIMs. We believe that
housing finance and consumer finance companies could yield
positive surprises in the ongoing earnings season.
Should an individual investor shift to NBFC
DSIJ.in
INTERVIEW
Are you happy with Q1FY19 results so far?
Only two large ones have reported numbers till now. Both Bajaj
Finance and L&T Finance have reported satisfactory numbers.
Both are highly diversified and their loan growth continues to
show healthy traction on a consolidated basis. The asset quality
remains stable and margins are stable. So, overall, it’s a healthy
start for the results season.
One important regulatory change that has happened this
quarter is the implementation of IND-AS accounting standard.
This has led to some volatility. With IND-AS implementation,
the probable losses have been upfronted and steady-state return
ratios will be reflected from the current fiscal.
How do you expect Q1FY19 results for NBFC
stocks?
On the growth side, most NBFCs will be a mark ahead of the
banking system average growth. The margins could stagnate
and may show pressure going ahead as the system rates rise.
Companies with more diverse liability profile will be better
equipped to withstand the margin pressure. The asset quality is
expected to behave generally well for most of them. So, while
the Q1FY19 results should be strong fundamentally across, but
headline could be volatile on account of IND-AS. For the
housing finance companies specifically, the competition is
heated and the pricing power is very limited. The real estate is
also yet to pick up pace and hence we remain cautious.
Valuations are, however, not heated.
INTERVIEW
stocks from PSU bank stocks?
We have been underweight on PSU banks for a while owing to
the concerns related to asset quality, recapitalisation woes and
weak business models. On the other hand, investors could
certainly consider NBFCs in the affordable housing and
consumer financing segments.
How are valuations looking for NBFC stocks?
Valuations are stretched at the current levels. However, we
believe that the capital markets would see volatility in the
months leading up to the state and general elections. Therefore,
any dips could provide a good opportunity to accumulate
quality stocks in the NBFC segment.
AUG 06 - 19, 2018 I DALAL STREET INVESTMENT JOURNAL 59
Cover Story
NBFC Stocks : 52-Week High–Low
While there were nearly 493 stocks that touched their respective
52-week lows in June 2018, the increasing number of stocks that
touched 52-week lows suggested that the broader markets are
Indian Accounting Standards (Ind-AS) is the new set of
nearing their bottoms. Similarly, in the list of NBFCs having accounting standards notified by the Ministry of
market capitalisation greater than `500 crore, we find that the Corporate Affairs (MCA) in 2015. The standard was
number of stocks touching their 52-week lows has increased applicable from FY17 to companies having net worth
manifold in the first half of July 2018. (refer table below). of `500 crore or more.

While most NBFCs touched their 52-week highs in January, However, NBFCs have been directed to prepare their
many NBFCs touched their 52-week lows in the first half of July books of account according to new Indian Accounting
alone. This indicates the massive correction that has taken place Standards (Ind-AS) from FY19.
in the NBFC stocks. The increasing number of stocks touching
their 52-week lows in July also indicates that the prices of many of Due to convergence of Ind-AS to IFRS, the companies
the NBFC stocks are bottoming out. which are having zero coupon bonds, structured debt,
preference shares on their balance sheet and a higher
Month-Wise 52-Week Low Data share of unstable fees and higher ESOP cost are likely
No. of Stocks to have adverse impact.
Month 52-week High 52-week Low
July 3 14 This convergence is also likely to change the way
June 6 8 companies do their business related to liabilities,
May 6 2 employee compensation, structuring their loans and
April 5 0 securitisation/assignment etc.
March 0 7
February 2 4 Housing finance companies (HFCs) are well-poised for
January 13 0 the changeover to new Ind-AS. On the other hand,
corporate lenders are likely to face challenges.
NBFC Stocks Hitting 52-Week Low In First-Half Of July
Company 52-week Low date
Indostar Capital Finance 13-Jul-18
Capital First 13-Jul-18
Greencrest Financial Services
Can Fin Homes
13-Jul-18
13-Jul-18 Maket outlook
PTC India Financial Services 11-Jul-18
The Investment Trust of India 09-Jul-18
Oswal Greentech
IDFC
06-Jul-18
05-Jul-18
Rishi Kohli
Vardhman Holdings 05-Jul-18 Chief Investment Officer & MD
Shriram City Union Finance 04-Jul-18
Reliance Capital 04-Jul-18
ProAlpha Capital
`Nifty has been climbing new highs and
LIC Housing Finance 04-Jul-18
Housing & Urban Development Corporation 04-Jul-18
SREI Infrastructure Finance 03-Jul-18
is expecting to touch a record benchmark of
NBFC Stocks Touching 52-Week Lows In July After Trading At 12500. If the trend persists, exhibiting a
52-High In January 2018 continuous upward trend, Nifty can cross
Name of the stock 52-week high date 52-week low date
Vardhman Holdings 05-Jan-18 05-Jul-18 the mark in the coming 6 months.
Motilal Oswal Financial Services 09-Jan-18 28-Jun-18 Meanwhile, the Midcaps have bounced back
IDFC 15-Jan-18 05-Jul-18
Capital First 15-Jan-18 13-Jul-18
and seem to have been corrected and
Reliance Nippon Life Asset Mgmt. 16-Jan-18 01-Jun-18 reinitiated brisk movements. In the present
Paisalo Digital 18-Jan-18 14-Jul-17 scenario, considering aspects from both the
HDFC 29-Jan-18 26-Jul-17
angles, Indian markets are on the way of
NBFC Stocks Hitting 52-Week High In First-Half Of July finding its luster and a bounce is clearly on
Company 52-week High date
the cards
Bajaj Finance Ltd.
Bajaj Finserv Ltd.
13-Jul-18
13-Jul-18
a
60 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018 DSIJ.in
Where to focus in the NBFC space? Conclusion
We find that the RoEs for the consumer finance companies are NBFCs are expected to gain market share owing to the stress on
higher than the RoEs for HFCs. HFCs on an average are public sector banks. The digital disruption among the micro,
reflecting a couple of percentage points higher RoEs when small and medium enterprises is on the rise and NBFCs
compared to transport finance companies. Investors can hunt adopting advanced analytics solutions and technology may do
for opportunities in HFCs and consumer finance companies. well in terms of improving their market share.
Housing Finance Companies
ROE (%) The NBFCs are expected to perform in line with estimates in
Indiabulls Housing Finance Ltd. 25.5 Q1FY19. The results for the likes of Bajaj Finance and Shriram
LIC Housing Finance Ltd. 19.07 Transport, which are consumer-facing lenders, have been
Housing Development Finance Corporation Ltd. 18.57
better-than-expected.
Repco Home Finance Ltd. 17.27
Dewan Housing Finance Corporation Ltd. 14.17
Looking at the prospects for the NBFC sector going forward,
PNB Housing Finance Ltd. 13.15
Housing & Urban Development Corporation Ltd. 9.56
there is a good case for investors to include NBFC stocks in the
diversified portfolio.
Average RoEs 16.75
Transport Finance Companies Investors can focus on HFCs that are witnessing growth owing
ROE(%) to affordable homes and also identify opportunities in
Cholamandalam Investment & Finance Company 20.58 consumer-facing lending businesses. With heavy bouts of
Mahindra & Mahindra Financial Services 12.5 selling in mid-caps and small-caps in H1CY18, several NBFC
Shriram Transport Finance Company 13 stocks have shed their gains accumulated in 2017.
Average RoEs 15.36
Investors should scout for those stocks where the growth and
Consumer Finance Companies fundamentals are intact, while the stock prices have fallen more
RoE (%) than warranted.
Capital First 24.6
Bajaj Finserv 15
Definitely, there is potential for growth in the NBFC space, but
Average RoE 19.8 the valuations should not be ignored by long term investors. DS

DSIJ.in AUG 06 - 19, 2018 I DALAL STREET INVESTMENT JOURNAL 61

 Investment Horizon

QueryBoard Query-Specific

CHOLAMANDALAM INVESTMENT DEEP INDUSTRIES

I hold some shares of Cholamandalam Investment
bought at `1645. Should I hold or exit from a I have 100 shares of Deep Industries bought at
6-month time frame. `180. Kindly advice on this stock.
- Vinay Mestry - S. Kumar

HOLD EXIT
BSE/NSE Code 511243 / CHOLAFIN BSE Code 532760 / DEEPIND
Face Value `10 Face Value `10
CMP `1432.40 CMP `106.80
52-Week High `1,760.75 / Low `1,052.95 52-Week High `269.70 / Low `79.10
Your Current (12.64 per cent) Your Current (41.11 per cent)
Profit/(Loss) Profit/(Loss)

C D
holamandalam Investment & Finance Corporation is
part of Murugappa Group having interest in CV
financing and loan against property (LAP) financing.
As on March 31, 2018, the company’s AUM stood at `43,830
crore, which has witnessed a growth of 20 per cent CAGR over
the last 10 years. The company has transformed itself from
financing LCVs to financing of two-wheelers, tractors,
construction equipments, cars, etc. Besides, the company also
started financing used and new vehicles. The NII for the
quarter rose by 34 per cent YoY to `891 crore in Q4FY18
versus `665 crore in the corresponding quarter previous year.
The interest income for the company grew by 24.6 per cent
YoY to `1511 crore in Q4FY18. The provisions for the quarter
rose by 40.6 per cent YoY to `73.6 crore in Q4FY18 as against
`52.3 crore in Q4FY1. As a result, the net profit for the quarter
rose to `291 crore in Q4FY18 as compared with `219.6 crore in
the corresponding quarter previous year. Strong traction in
infrastructure and construction activity is expected to give
boost to commercial vehicle cycle, which in turn would benefit
commercial vehicle financing. Being one of the largest
commercial vehicle financing company, Cholamandalam is
likely to benefit from this development. Thus, we recommend
our reader-investors to HOLD this stock.
eep Industries Ltd caters to oil and gas industry. Its
segment includes exploration and production (E&P) of
oil and gas. In service business, the company is involved
in workover and drilling rigs, natural gas compression and
natural gas dehydration.On the financial front, the company’s
net sales for Q4FY18 was at `79.1 crore, representing marginal
increase of 5.6 per cent from Q4FY17. However, the net profit
during the quarter dipped almost 20 per cent YoY to `18.6
crore. Looking at the company’s full year performance, net sales
for FY18 rose almost 12 per cent YoY to `312.7 crore. The net
profit for the full year grew marginally by 4.7 per cent YoY to
`77.5 crore. The company is in the process of separating its
services business and E&P business in two separate listed
entities. This will result in own management expertise and
financial and operational resources. However, Central Bureau
of Investigation (CBI) has filed a case against 13 officials of
ONGC and Deep Industries after complaint filed by ONGC’s
vigilance department regarding contract worth `312 crore
awarded to Deep Industries in 2014 by ONGC for supply of gas
dehydration units. In this case, Deep Industries has filed
petitions with the high court in Hyderabad. we will have to wait
till the court gives its verdict. Thus, we recommend our
reader-investors to EXIT this stock.

Readers are requested to send only one query at a time so that more readers get a chance. For complaints regarding non-receipt of
dividend, bonus, rights and other matters, investors may write to www.investor.sebi.gov.in

Company Name: DEMOCRATIZING WEALTH CREATION

Vol.
Vol.No.
No.31
33 No.18
No. 17
Query:
Send in your queries:
DSIJ Pvt. Ltd.
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62 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018 DSIJ.in

 IDFC BANK
I have bought 1000 shares of IDFC Bank at `50 per
share. As long term investor, should I hold or
sell ?
-Anil
HOLD
BSE/NSE Code 539437 / IDFCBANK
Face Value `10
CMP `40.00
52-Week High `70.35 / Low `35.85
Your Current (19.40 per cent)
Profit/(Loss)
I A
DFC Bank, a part of Infrastructure Development Finance
Corporation Ltd (IDFC Ltd), is a private sector bank. IDFC
Ltd received a universal banking licence from RBI in July
2015 and started operations in October 2015. The bank serves
corporate and private customers in India, including the
infrastructure sector that IDFC Ltd specialised in since its
inception in 1997. The bank offers fixed deposits, debit cards,
savings account, cash management and other services. IDFC
Bank plans to build a network of more than one lakh points-of-
presence in the coming months to enable people across the
country to transact digitally. The private lender plans to set up
about 30,000 micro ATMs and about 75,000 Aadhaar Pay
merchant points. While the micro ATMs function as a bank-in-
a-box, most of the Aadhaar Pay merchants will be converted into
business correspondents and will deliver basic financial services.
IDFC reported a 76 per cent plunge in its quarterly profit due to
jump in provisions to cover bad loans. Its net profit stood at
`41.93 crore ($6.3 million) for the quarter ended March 2018 as
compared with `176 crore a year ago. Gross bad loans as a
percentage of total loans stood at 3.31 per cent in Q4FY18 as
compared with 5.62 per cent in the preceding quarter and 2.99
per cent a year ago period. Provisions and contingencies surged
to `242 crore in the March quarter from `4.8 crore in the same
quarter previous year.
On an annual basis, its operating income stood at `3056 crore
from `3030 crore in FY17. The company’s PAT declined to
`859 crore in FY18 from `1020 crore in FY17. The bank’s EPS
declined from `3 in FY17 to `2.5 in FY18.
With the merger of Capital First, IDFC may finally be able to
shed its image as an infrastructure finance company. The
merger could be a way for the bank to build its retail book,
something it has been unable to do since becoming a bank. If
an investor can wait for 5 years, then we recommend a HOLD on
the stock.
DSIJ.in
ADLABS ENTERTAINMENT
Should I invest in the equity shares of Adlabs
Entertainment Ltd? Kindly advice me.
- Nilotpal Saha
EXIT
BSE/NSE Code 539056 / ADLABS
Face Value `10
CMP `34.85
52-Week High `88.50 /Low `31.75
Your Current --
Profit/(Loss)
dlabs Entertainment Ltd is engaged in the business of
development and operations of theme-based
entertainment destinations in India, including theme
parks, water parks and associated activities, including retail
merchandising and food and beverages. Its segments include
tickets, restaurants, merchandise, hotel and other operations.
Adlabs also owns and operates an integrated entertainment
holiday destination, Imagica, which includes a theme park, a
water park, a snow park, a hotel and other associated activities
like retail and merchandise, and food and beverages (F&B). Its
project is branded as Adlabs Imagica for the theme park
component and Adlabs Aquamagica for the water park
component. The company also owns and operates Novotel
Imagica, Khopoli, a theme park-based hotel. It also owns and
operates a range of F&B outlets at Imagica, which include
Roberto’s Food Court, Red Bonnet, Imagica Capital, Zeze Bar
and Grill themed on an African Zulu village.
On the financial front, the company posted net sales of `50.83
crore in Q4FY18 as compared to `55.67 crore in Q4FY17. The
company’s reported a negative PBDT of `17.47 crore in Q4FY18
as compared to a negative PBDT of `18.05 crore in FY17. Also,
the company reported a loss of `40.07 crore in Q4FY18 as
compared to a loss of `31.18 crore in Q4FY17.
On an annual basis, the company posted net sales of `236.29
crore in FY18 as compared to `238.29 crore in FY17. The
company’s PBDT loss widened to `62.75 crore in FY18 as
against `58.53 crore in FY17. The company’s net loss widened to
`155.17 crore in FY18 from a loss of `117.14 crore in FY17.
The company has a debt-to-equity of 2.73x. The company has
low interest coverage ratio. Further, the company has a negative
return on equity of -22.98 per cent for the last three years. Also,
the promoters have pledged over 63 per cent of their holdings.
We don’t recommend a fresh entry in the stock. We recommend
our reader-investors to EXIT the stock.
(Closing price as on July 31, 2018)
AUG 06 - 19, 2018 I DALAL STREET INVESTMENT JOURNAL 63
Reviews
In this edition, we have reviewed Sanwaria Consumer and IFB Industries. We suggest our reader-investors to
HOLD Sanwaria Consumer and IFB Industries.

Change Scrip’s Movement

SANWARIA CONSUMER HOLD 39.91 Per Cent
CMP - `12.75

BSE CODE Reco. Price Face Value

519260 `21.25 `1

S
anwariya Consumer Ltd (SCL) was
recommended in volume 33, No.
10, dated April 16-29, 2018, under
the ‘Low Priced Scrip’ when the stock
was trading at `21.25. The
recommendation was backed by the
company’s product diversification,
robust financials and its tie-up with
Patanjali.
Sanwaria Consumer Limited is an
India-based fast-moving consumer
goods (FMCG) food processing
company. The company manufactures
and sells rice, edible oil and staple food
products, such as pulses, sugar, soya
chunks, wheat flour, rice flour, salt, suji,
maida, besan, daliya, and soya meal etc.
On the financial front, the company
posted 4 per cent growth in net sales to
`1,200 crore in Q1FY19 as against
`1,152 crore in Q1FY18. The PBDT of
the company for Q1FY19 has grown
significantly by 78 per cent to `41 crore
versus `23 crore in Q1FY18. The net company has shown a steep growth as
profit of the company has jumped 77 per well, increasing by 117 per cent to `124
cent to `32 crore in Q1FY19 as against crore in FY18 from `57 crore in FY17.
`18 crore in Q1FY18. The company posted net profit of `84
crore in FY18 as against `43 crore in
On an annual basis, the company’s FY17, a growth of 95 per cent.
revenue has grown by 43 per cent to
`5054 crore in FY 2018 as against We recommend a HOLD considering the
`3,512 crore in FY17. The PBDT of the good performance of the company.

Change Scrip’s Movement

IFB INDUSTRIES HOLD 25 Per Cent
CMP - `1095.25

BSE CODE Reco. Price Face Value

505726 `1460.1 `10

W
e had recommended IFB
Industries in volume 33, issue
no 4 dated Jan 22 – Feb 4,
2018 under Choice Scrip section when
the stock was trading at `1460.10. Our
recommendation was based on strong
fundamentals (virtually debt-free
company), new product launches and
IFB Industries’ focus on domestic
production.
IFB Industries’ operates in engineering
and home appliances business. It has two
divisions: fine blanking and home
appliances. The home appliances division
includes washing machines, clothes
dryers, dishwashers, microwave ovens,
air-conditioners, chimneys, refrigerators,
modular kitchens, built-in ovens and
components and tools to related
machines, such as straighteners,
decoilers and strip loaders.
On the financial front, looking at the
recently concluded quarter Q1FY19, the
sales increased by 22.2 per cent YoY to
`614.6 crore as against `503.1 crore in
the corresponding quarter previous year.
The EBITDA grew by 56.2 per cent YoY
to `32 crore during the quarter from
`20.5 crore in the corresponding quarter
last year.
The EBITDA margin improved by ~113
bps to 5.2 per cent in the quarter. The net
profit during the quarter increased by
104.6 per cent YoY to `14.2 crore as
against `7 crore in the corresponding
Currently, the company has 422 IFB
exclusive stores and targets to achieve
475 to 500 over the next three months.
Notably, with recent cut in GST rate from
28 per cent to 18 per cent, the company is
planning to cut the price of the
appliances by 8-9 per cent. This would
result in further boost in demand for the
electronic appliances. Considering all the
aspects, we recommend our reader-
investors to HOLD this stock. DS

built-in hobs. The fine blanking division’s quarter last year.

products range from fine blanked (Closing price as on July 30, 2018)

64 DALAL STREET INVESTMENT JOURNAL I AUG 06 - 19, 2018 DSIJ.in

 The recommendations provided in this column are taken from various market

Kerbside sources such as brokers, analysts, dealers and investment strategists, etc. These
recommendations may not be backed by strong fundamentals. Therefore we advise
readers to use their own discretion before investing in these recommendation

INDEX BASED TRADING

The Multi-Commodity Exchange of
MCX India (MCX), the country’s largest
BSE Code: 534091 commodity bourse, reported PAT
CMP: `881.70 below market expectations, which
was largely impacted by change in
valuation method of bond portfolio and lower other income.
MCX launched four more options in Q1FY19 on crude oil,
copper, silver and zinc. Among all options, the transactions in
crude oil are the strongest considering recent volatility.
Moreover, gold option turnover increased more than five-fold.
As per our sources, discussion with the regulators has started
for index-based trading in commodities and it is expected to
launch in this financial year. A big positive for the company.

BOUNCE BACK Bharat Forge, the

ROBUST RESULTS
Havells
Bharat Forge flagship company of
BSE Code: 517354
BSE Code: 500493 the Kalyani Group, is a CMP: `634.25
true world leader
CMP: `641 when it comes to
delivering innovative Havells reported robust
auto component solutions. The stock price of Q1FY19 results with
the company has seen correction on the back strong growth across
of worries about potential tariff actions. product categories
However, the stock is expected to bounce coupled with margin
back amid its positive FY18 performance expansion. If technical
with 37.5% and 20.8% topline and observations are to be
bottomlline growth. Q1FY19 too is expected believed, the stock could
to post 20% plus YoY PAT growth with robust witness further upmove
June sales growth, despite being a typically from the current levels as
weak month. Rating agency Credit Suisse too the stock has witnessed a breakout of a long consolidation
has upgraded the rating to ‘Outperform’ along with robust volumes. Hence, this stock could be looked at
forecasting FY19 to be very strong with for short term gains.
major engines likely to be firing.

AND FINALLY..
Lemon Tree Hotels
BSE Code: 541233
CMP: `78.25
This stock from the hotel sector has been buzzing this year as the occupancy
rate recorded highest growth over a decade as per a report. Moreover,
factors such as increasing disposable income has presented a rosy picture
for this sector. Among all the hotel stocks, the stock of Lemon Tree Hotels
looks attractive as it has presence in NCR, Bengaluru, Hyderabad and
Chennai, as well as tier-I and tier-II cities of Pune, Ahmedabad and
Chandigarh. It plans to enter new markets like Mumbai, Kolkata and Patna
and has a development pipeline of 3,000 rooms across 28 new hotels in 21
new cities. Along with this, the company focuses on ‘Value for Money’ and
offers attractive room rates for middle income domestic travellers. This hotel
stock could light up the fortune of your portfolio. DS

(Closing price as on July 31, 2018)

DSIJ.in AUG 06 - 19, 2018 I DALAL STREET INVESTMENT JOURNAL 65

 MF Page - 1

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Pvt MFs Have Excelled In 25 Innovative Story

Years, But Still A Long Way To Go The last issue of your magazine was very innovative as you
analyzed the mutual funds using technical analysis
methodology. Though I am not a pro in technical, I loved the

T
he mutual fund industry has come a long way since idea. I suggest you give an insight on some investment
1993, when the first private sector players entered the opportunities which can be used in down markets. I would like
space. In July 1993, Kothari Pioneer, a joint venture to read more innovative stories on mutual fund investments.
between Chennai-based Kothari Group and
US-based Pioneer Mutual Fund, was the first private sector - Nikhil Kulkarni
asset management company to get licence to launch MF
products. Prior to that, the MF space in India was largely Editor Responds: Thank you for appreciating our stories. It is the
dominated by government-owned institutions and banks. But endeavour of our editorial team to keep you updated on innovative
contrary to the general expectation that entry of private players ways of understanding mutual funds. We assure you that we will
would take the industry growth to the next level, the MF space continue to publish out of box MF stories for our readers.
remained a non-starter even after the entry of foreign firms
such as Morgan Stanley. For the next ten years, AUMs of the
industry grew at a laggardly rate of 10.5 per cent per year.

However, the next 15 years (2003-2018) saw a remarkable

increase in the AUM growth rate, growing at a rate of 21.5%.
Now, the mutual funds have emerged as the dominant vehicle
for the retail investors to channelise their savings. It is a result of
Content
all-round efforts by the regulator Securities & Exchange Board
of India (SEBI), which enacted the right kind of pro-investor
policies, and the industry body Association of Mutual Funds in
India (AMFI), which left no stone unturned to increase
Cover Story MF Page
2
awareness about the product among the masses. Not to Building A Winning Portfolio
mention that the emergence of technology has been a primary
enabler for better execution of transactions and growth of
investments. Going ahead, the industry AUM is expected to
grow by around 20% CAGR over the next five years to reach
`50 lakh crore. Technology will definitely play an important
Special Report MF Page
6
role in supporting such growth, however, a right incentive Are International Funds
structure for distributors will play a prominent role in
achieving this growth rate. Being Good For Current Market
Environment?
One of the most important lessons learned in the last 25 years is
that there is no all-weather fund that will perform in every
economic cycle. Nevertheless, there are all-weather portfolios
that can help you to achieve your financial goals. Our cover
story this time goes deep into how to create a winning portfolio.
Goal Planning MF Page
8
You do not need exotic products to create your portfolio—it
can be done simply with equity and debt funds, along with the
right amount of cash.
Special Report MF Page
10
Robo-Advisory,
SHASHIKANT The Way Forward
DSIJ.in DEC 26, 2016 - JAN 8, 2017 I DALAL STREET INVESTMENT JOURNAL 1

Cover Story
Building A
Winning
Portfolio
F
inancial independence, though desired by many, is
achieved by very few. Making a winning and
sustainable portfolio will help you to achieve it. There
is no secret mantra or rocket science to attain your
financial independence early and securely. The
formula is well researched, documented and open to all. The
only problem is, however, it is followed by very few. It requires a
well-planned strategy and a disciplined approach. Garry
Kasparov, a Russian chess grandmaster, famously said, "If you
change your strategy frequently, you don't really have one."
Hence, you need to stick to the strategy to attain your financial
goals. This story will illustrate the assets you need to invest in,
the ideal proportion of assets and how the proportion should
change with times.
Before going into the details, it is important to know the various
components that form the basic building blocks of your
portfolio. If you are a mutual fund investor, there are various
products available for you to choose from, primary among them
being equity and debt. Although direct investment in these
underlyings might help you, however, investment through
mutual funds is recommended as it requires lesser supervision
and time on your part. Maybe we are biased and believe that
investing via mutual funds is the best route for most of the
investors in most of the situations. Before we embark on the
journey of making a sustainable portfolio, we need to know
about these two primary investment avenues available to us.
Equity Funds
This is probably the most known category of mutual funds
68 DALAL STREET INVESTMENT JOURNAL I DEC
AUG26,
06 2016
- 19, 2018
- JAN 8, 2017
MF page - 2
among retail investors. These funds are categorised on various
parameters. For example, in terms of size, these are categorised
as small-cap, mid-cap and large-cap funds, and in terms of
sectors, some of the categories include healthcare, information
technology, banking, real estate, etc. There are also funds that
invest in equities of other countries known as international
funds.
According to SEBI’s rule, there are 10 types of equity schemes.
Depending upon the category, these funds invest in a given set of
stocks. For example, a large-cap fund needs to invest a minimum
of 80% of its total assets in equity and equity-related instruments
of large-cap companies. Every category has its own risk-return
profile, which helps investors to select the right category of
equity funds that suits their own risk-return profiles.
Debt Funds
This is probably lesser explored instrument by retail investors.
Mutual funds that invests in fixed income securities are known
as debt funds. Every individual debt is issued with a fixed
maturity date, that is, the date when investors are repaid the
principal amount of the bond. A typical debt fund, depending
upon its category, keeps on buying new funds to replace the
bonds that are maturing. Therefore, at any given point of time,
a debt fund might be holding some long-term bonds, some
intermediate-term bonds and some short-term bonds that are
nearing maturity. The weighted average term to maturity of the
cash flows from these funds also called duration determines
their category. For example, for a short duration fund, the
weighted average term should be between one year and 3 years.
DSIJ.in
DSIJ.in DEC 26, 2016 - JAN 8, 2017 I DALAL STREET INVESTMENT JOURNAL 3
 MF page - 4

Cover Story
Similarly, for a long duration fund, it should be greater than 7 It is easier said than done to invest in bond funds, as there are
years. The importance of the maturity period is that it is used as more varieties in bond funds than equity funds. The simple rule
a measure by bond fund investors to determine if a particular is to select a bond fund having duration (explained earlier) that
bond is appropriate for them, considering their time horizon matches your investment time horizon. For example, if you
and risk tolerance levels. The higher the duration of maturity, need money in the next three years, then you can invest in short
the more sensitive the fund would be to changes in the interest duration bonds that have duration of 1-3 years. You should
rate. Taking an example of fund with duration of 4 years, a avoid investing in bond funds that have a duration longer than
bond fund investor should expect a decline in their investment your investment time horizon. Also, do not try to time your
value by 4 per cent for every single percentage increase in the purchase/sale with interest rate hike/cut. Keep your investments
interest rate. Similarly, its value increases by the same in bond funds simple.
percentage in case the rate declines.
The next obvious question that may come to your mind is how
Why To Invest In Bond Funds much of your total portfolio should go into bond funds.
Having understood the bond funds, you might question why Although, a popular rule of thumb is to own your age in bond
should you be investing in them? The reason is that bond and funds. This means that if you are 30-year-old, you should invest
bond funds have a low correlation to stocks or equity funds and 30% in bond funds and 70% in equity funds. Nevertheless, this
hence they act as a stabilising force for your portfolio. For approach will not give you optimum results and you should
example, during 2008, when equity funds were down by consider factors such as your financial background, financial
anywhere between 35 per cent to 75 per cent, depending upon goals, risk tolerance and returns expectations to arrive at
the categories, bond funds during the same period on an amount you need to allocate to bond funds.
average gave positive return and the best medium-term debt
funds generated return of more than 20 per cent. Asset Allocation: The Cornerstone Of Successful Investing
Top 5 Funds based on one-year returns (2008) The most fundamental decision you will ever make in investing
is the allocation of your assets. How much should you own in
Equity Diversified Debt – Medium Term
stock, bonds and cash. Some of you might be thinking there are
1 Year 1 Year
Fund Name
Return (%)
Fund Name
Return (%) other investment avenues too like commodity, bullion, etc.
Birla Sun Life Asset Allocation Aggre. -35.68 Canara Robeco Income 28.62 Nonetheless, research shows that investments in stocks, bonds,
FT India Life Stage FoF 20s -40.7 IDFC Dynamic Bond Plan A 26.35 and cash have proven to be a successful combination of
IDFC Imperial Equity -43.03 IDFC SSI Inv Plan A 24.25 securities for portfolio construction and is a primary
UTI MNC -43.1 ICICI Prudential Income 23.56 determinant of your portfolio returns.
Sahara Growth -43.22 Birla Sun Life Income Plus 21.58
Some of the research shows more than 90% of the portfolio
The below diagram clearly shows why you need to invest in debt return is determined by allocating right amount of funds in
funds. The table summarises what would have been your returns these asset classes. In the year 2003, the Vanguard Group did a
(%) in year 2008, had you invested in equity and debt both in study using 40 years of data of 420 balanced mutual funds
different proportion. Although, an event like 2008 is rare, the which invests in both equity and debt. It found that 77 per cent
only problem is that such events do not come with warning and of the variability in return was determined by the asset
can pop out from nowhere and catch you off guard. Hence, a allocation policy of the fund rather than selection of individual
portion of your fund should always be invested in bond funds. securities.
Equity Holding (The number in boxes represents return (%) by holding equity and debt in various proportion.)
50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%
50% -8.14 -6.08 -4.02 -1.97 0.09 2.15 4.21 6.26 8.32 10.38 12.44
55% -4.84 -2.78 -0.72 1.34 3.39 5.45 7.51 9.57 11.62 13.68
60% -1.54 0.52 2.58 4.64 6.69 8.75 10.81 12.87 14.92
65% 1.77 3.82 5.88 7.94 9.99 12.05 14.11 16.17
Debt 70% 5.07 7.12 9.18 11.24 13.30 15.35 17.41
Holding 75% 8.37 10.42 12.48 14.54 16.60 18.65
80% 11.67 13.73 15.78 17.84 19.90
85% 14.97 17.03 19.08 21.14
90% 18.27 20.33 22.38
95% 21.57 23.63
100% 24.87
Numbers in green colour reflect 100% of your money is invested in a combination of debt and equity with varying percentages. Returns by debt and
equity are the average returns generated by these categories during 2008

4 DALAL STREET INVESTMENT JOURNAL I DEC 26, 2016 - JAN 8, 2017 DSIJ.in
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How To Design Your Wining Portfolio A middle-aged investor's portfolio (30’s to 40’s)
'One size does not fit all' so goes the adage, which is aptly Funds Dedicated to % of Assets
applicable in the case of designing a portfolio. Therefore, before Cash 5%
you build your portfolio, there are few basic questions you need Domestic Large Cap Equity 30%
to answer. First, you should know your goals, whether it is to Domestic mid/small cap Equity 15%
finance your home, child’s education or a vacation at one of the International Funds 10%
exotic locations abroad. The second question that need to be Intermediate-term bond 20%
answered is about your investment horizon. Short-term bond 20%

Depending upon the horizon, a right mix of assets is
determined. Stocks are usually unsuitable for short time frames.
Besides, you should know your risk tolerance as it imposes a
discipline in your investment and helps you resist performance
chasing.
Equity Portfolio
To get the maximum benefit of diversification, the stock
allocation should be further divided between various sub-
categories. This is because different type of stocks performs
differently at different points of time. Therefore, it is advisable
to have as many different types of stocks as is reasonable
practical. For example, the mid-cap and small-cap stocks, and
hence the funds dedicated to these categories, are down by
10-15% in the last six months. In the year 2017, these stocks
were the darlings of the investors and some of the funds were
even up by 50%. Besides, cap-wise category, international stocks
are also another option that helps you to diversify your equity
portfolio. In the last one year, the international funds have
generated return of 12 per cent. This return is better than many
other categories.
Bond Portfolio
The bond part of your portfolio should remain simple. A single
low-cost short or intermediate-term good quality fund should
be adequate in most of the cases. The only thing that you should
take care of is the duration of the bond should not be greater
than your expected investment time frame to meet your goal. If
the duration of your bond fund is lower than your investment
horizon, it reduces the chance of a negative return.
Finally, Your Portfolio
It is not only difficult, but also impossible to recommend a
specific portfolio that suits everyone, as each investor is unique
and has unique needs and requirements. They may be different
in terms of their goals, time frames, risk tolerance and their
financial background. Nevertheless, the following portfolio
may act as a guide to make a winning portfolio for you. You
may tweak it little bit here and there to make a portfolio that
suits you. It is assumed that you have emergency cash savings
to the tune of 3-12 months of income.
A Young Investor's Portfolio (In his 20’s)
Funds Dedicated to % of Assets
Cash 5%
Domestic Large Cap Equity 45%
Domestic mid/small cap Equity 30%
Intermediate-term bonds 20%
An investor nearing retirement (in early 50s)
An Investor nearing retirement
Funds Dedicated to % of Assets
Cash 10%
Diversified domestic Equity 20%
Diversified international equity 10%
Intermediate-term bond 30%
Short term bond 30%
An investor in late retirement (late 50s and 60s)
Funds Dedicated to % of Assets
Cash 20%
Diversified domestic Equity 30%
Intermediate-term bond 30%
Short term bond 20%
Track your progress and rebalance whenever necessary
Making a portfolio is your first step towards achieving your
financial goal. The next step is to keep track of your progress and
keep on rebalancing whenever necessary. Rebalancing is simply
the act of bringing your portfolio back to your target asset
allocation after it has drifted from the required or desired level
due to various factors including change in your financial goal or
age. For example, you are in 20s and 45% of your portfolio
comprises of equity diversified funds, but after a year, equity
prices have surged, and your equity portion reaches 55% of your
portfolio, so you need to sell 10% of equity portion to bring back
to the desired asset allocation. Rebalancing forces you to follow
the classical investment rule, that is, 'sell high and buy low'. You
sell your outperforming assets and buy underperforming assets.
This helps you to improve your portfolio returns as returns from
any asset class tends to revert to the mean over time. This means
outperforming assets may underperform going forward, and
vice-versa. There are various methods of rebalancing your
portfolio, which you can chose based on their suitability to you.
There are only two considerations you need to consider while
rebalancing. The first is cost and the second is tax. You need to
check the impact of these two to make your re-balancing fruitful.
Making a winning portfolio is incredibly simple if you follow the
above rules. Create a diversified portfolio based on your goals and
age. Keep track of your investments and rebalance them whenever
necessary to stay on course. A simple thumb rule of your portfolio
is it should pass ‘sleep test’. If you sleep soundly without worrying
too much about your investment, you have struck the right cord.
There is no investment worth worrying about and losing sleep
over. The volatility in the market is its inherent nature—it should
not worry you too much, but you should live with it comfortably. DS

DSIJ.in DEC 26, 2016 - JAN 8, 2017 I DALAL STREET INVESTMENT JOURNAL 5

Special Report
Are International Funds Being Good
For Current Market Environment?
The Indian equity markets have turned volatile in the last few months. In the same period, the Indian rupee has also depreciated
against the US dollar. DSIJ explains how you can use International funds to diversify your portfolio and gain from the falling rupee.
T
he recent market correction was just like a horrible
dream for the investors which has snatched their
peace and offered a worry to the investors
regarding the returns they earn through the mutual
fund investing and stock market investing.
In the recent months the major equity benchmark indices
Sensex and Nifty have recovered but still the mutual fund
schemes are facing challenges to perform. Then where should
investor invest, what are the potential opportunities for the
investor. As of now if we see the equity funds from large cap,
mid cap and small cap space are been underperforming the
benchmarks and even the stretched valuations of the stocks
won’t allow them to give better returns in near terms. So,
investor need to curtail down their returns expectation from
the Indian equity markets.
But the question remains that how one can cope up with the
situation how they can meet their financial goals for this
instead investing more into the Indian markets one should look
into the investing opportunities in the developed markets.
For this international fund are the great option for investors
which allows them to take exposure in the foreign equities.
These funds are great options for diversification, but investors
should know how these funds work.
6 DALAL STREET INVESTMENT JOURNAL I DEC 26, 2016 - JAN 8, 2017
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What are international funds?
An international fund is a type of mutual fund which invests in
firms in countries other than the ones they reside, so these
funds are also called overseas or foreign funds. These funds are
bit riskier as these funds invest in the foreign securities, but
these are poised to garner higher returns in the longer run.
Categories to invest in International Mutual funds
International mutual funds invest in three ways geographically,
thematic and direct.
By Geography - The international funds invest across the
geography differently. For instance, Kotak US Equity Fund -
Direct (G) and icici prudential us blue-chip equity fund invests
dominantly in companies/securities that are listed on the stock
exchanges of in the UNITED STATES OF AMERICA. In the
same way Edelweiss Greater China Equity fund invest in the
securities from China. So, investors should always look where
to invest before investing in these funds.
Sectoral or Thematic - Some of the International funds invest
in companies which are from a sector or theme which is
expected to perform well. For instance, Gold fund, Real estate
fund, Agriculture Fund, pharma fund etc.
Fund of Funds or direct investment - Some of the
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Special Report
international funds are fund of funds that is these funds invest
directly in the funds instead of the companies. In this case
Indian fund manager just collect or pool of investment from
investors and invest in their parent fund which is managed by
fund manager who is managing fund in the country where the
money is invested. So, these funds are the good options as the
fund manager who is managing the parent fund have a keen
knowledge of fundamental attributes.
So, now the question is does these funds are the good options
for now? Are these funds being beneficial of reaping returns in
the current market situation. For this we need to understand
the current market situation and rupee depreciation and then
we can conclude does these funds are good in current situation
or not.
will benefit with this. That is, he can gain even in just the
currency movements. Investor investing in the international
fund invest in its local currency which is INR for Indian
investor which is further changed to other currency, so he earns
returns on every increase the international currency where he
has invested.
So current rupee depreciation also accounts for the wealth of
the investors if they invest in international funds. So instead of
redeeming existing equity investment one can invest in the
international funds with a moderate exposure of 10%-15% to
just safeguard returns and push the performance of the
portfolio. US focussed equity funds can be one of the best bets
among the international funds to negate the impact of rupee
depreciation.

First one need to understand what is a rupee depreciation and

what the reasons behind it? If we see the Indian rupee has So, with above analysis we can conclude that for now investing
declined almost by 8% since January to June 2018. This was in the international fund can be a good game for an investor
mainly due to the rise in crude oil prices, trade war between US but over exposure can be much risky, so investor should
and china etc. With this equity market have also tumbled in the allocate the assets as per the risk appetite. At the same time if
last 6 months. we see the performance level the category wont offer great
returns in the very long term so investors should remember
The Indian markets have a close relation with the Indian rupee that once the current downtrends turns positive one can look
and US Dollar. To analyse this relation we have gone through into investment avenues in the Indian markets. Below is the
the last 10 year movement of Nifty 50, US dollar and Indian performance of the various categories over the period of time.
rupee. And we have analysed that Indian markets follow and
negative correlation with the US dollar and positive correlation Fund Category 1 year 3 year 5 year 10 year
with the Indian rupee. And at the same time, we have also Equity: Large Cap 10.68 9.72 15.04 10.7
analysed the movement of the S&P 500 which is a major Equity: Large & MidCap 4.99 10.36 20.15 13.12
benchmark of US markets, it has a negative correlation with the Equity: Multi Cap 7.39 10.2 19.11 13.7
Indian rupee and positive correlation with the US dollar.
Equity: Mid Cap 3.57 10 25.01 16.01
Equity: Small Cap 0.52 12.21 26.79 15.73
Equity: Value Oriented 6.17 11.06 21.13 15.58
Equity: ELSS 6.54 10.04 18.94 12.8
Equity: Sectoral-Banking 3.43 10.78 16.58 13.01
Equity: Sectoral-Infrastructure -2.02 6.17 17.78 7.3
Equity: Sectoral-Pharma -3 -3.49 11.55 16.03
Equity: Sectoral-Technology 39.24 12.02 18.13 14.77
Equity: International 13.05 7.85 6.21 4.28

1-Year Net
Expense
Fund Category Return Assets
Ratio (%)
(%) (Cr)
Franklin India Feeder Franklin
Equity-
US Opportunities Fund - Direct 0.82 30.86 597.05
With this correlation if we consider the current market International
Plan
condition, with all the macro traps rupee has been depreciated DSP BlackRock US Flexible Equity-
2.03 25.2 190.82
which statistically indicates the good performance of the S&P Equity Fund - Direct Plan International
500 in the near terms. So, investing in the international funds Reliance US Equity Opportunities Equity-
1.75 24.06 16.59
could be a high return game for the investors. Fund - Direct Plan International
DSP BlackRock World Energy Equity-
2.53 23.67 21.67
Fund - Direct Plan International
The risks these funds have currency risk, but in the current DSP BlackRock World Mining Equity-
situation where INR is depreciated against US dollar, investors 2.14 21.82 35.92D
Fund - Direct Plan International S

8 DALAL STREET INVESTMENT JOURNAL I DEC 26, 2016 - JAN 8, 2017 DSIJ.in
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MF Select
DSP BlackRock Tiger Fund - Direct Plan
Equity: Sectoral-Infrastructure 23%
Scheme Category *Expected Return In Next One Year

`1313 Cr 93.12 1.72% 1% for redemption

within 365 day
Expense Ratio (%)
AUM (`Cr) : 30 June, 2018 NAV (`) 27 July, 2018 30 June, 2018 Exit Load

Nifty 100 TRI Rohit Singhania, Jay Kothari

Benchmark Fund Manager
Reason for recommendation
Top 10 Holdings
This is an open-ended equity scheme, which seeks to invest in a
Company Name % of Net Assets
diversified manner by allocating funds to the stocks of
companies that can benefit from the ongoing structural changes ICICI Bank 7.55
and economic reforms in the country. HDFC Bank 7.43
Larsen & Toubro 6.94
The portfolio of the fund shows that the scheme invests across State Bank of India 4.61
various sectors, market capitalization and within the private Tata Steel 3.91
and PSU space. The scheme has invested 53% of its corpus in Yes Bank 3.24
large-cap stocks and around 47% in mid and small-cap stocks Ashoka Buildcon 2.74
with proper exposures to finance, construction and energy KNR Constructions 2.26
sectors. Sadbhav Engineering 2.08
Edelweiss Financial Services 2.04
The major holdings of the fund are in ICICI Bank, HDFC Bank,
Larsen & Toubro. With steady improvement in the asset quality of Larsen & Toubro is expected to benefit more in the coming
ICICI Bank, the stock is expected to perform well in the near-term periods. Moreover, the presence of stocks like SBI, Tata Steel, Yes
post management issues in the recent past. HDFC Bank with its Bank makes the fund attractive as these stocks are expected to reap
dominant position in the private banking sector is expected to better returns in the longer term. Therefore, we see this fund as a
benefit in the coming years. Going ahead, with the rural reforms, potential BUY opportunity for our valued investors.

Monthly Returns
Returns (%)

This might not be top ranked fund, however, looking at risk-reward opportunity we recommend this fund. * Expected one year return is based on the assumption that current holdings remain constant.

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2017 I DALAL STREET INVESTMENT JOURNAL 75
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Goal Planning
Abhishek Agarwal
Director, Eastern Financiers Ltd

Simple Asset Allocation

Strategies For Varying
Risk Profiles
A
sset allocation is the single most important factor in
ensuring financial success. In the broader sense, asset
allocation includes a variety of asset classes like equity,
fixed income, gold and real estate. Of this,equity, fixed income
and cash/cash equivalents form the financial assets, while gold
and real estate form physical assets. For the purpose of simple
explanation, we will restrict to equity and debt.
Please note that your asset allocation should be specific to your
long and short term financial goals and your current financial
situation. For example, if you are on a sabbatical from work for
a certain period of time, your asset allocation should be on the
conservative side with more of fixed income assets.
On the other hand, if you are an entrepreneur and your income
is irregular, then significant cash equivalents like money in
savings bank account or liquid mutual fund investments is
required to sustain during lean periods. However, equity
emerges as the best asset class for long term financial goals.
Likewise, if you are nearing to achieve a goal timeline, then you
should shift to fixed income assets so that your goal is not
compromised because of market volatility.
Let us now discuss few simple asset allocation strategies for
some generic risk profiles.
Asset allocation based on Maximum Loss Percentage
The concept of Maximum Loss Percentage brings some
quantitative objectivity to evaluation of risk appetites.
Maximum Loss Percentage(MLP),as the name suggests, is the
maximum portfolio (which includes both equity and fixed
income) loss than you can suffer, without causing any financial
distress to you. Emotional or financial distress can cause you to
trigger panic selling, which can cause financial loss. However,
MLP will differ from investor to investor as their risk capacities
and risk attitudes can differ. For some investors, it can be 10%,
while for others it can be 50% or even higher.
The formula of equity allocation in terms of MLP is as follows
Maximum Loss % + Risk Free Return
Equity Allocation (%) =
Maximum Market Loss % + Risk Free Return
What is the Maximum Market Loss? This is the worst case
scenario for the market. For most investors, 2008 was the worst
bear market in India. The Sensex fell by 60% from January to
November 2008. The asset allocation based on a 2008 like
scenario will prepare us for the worst.
Let us walk through an example to see how the formula works -
Let us assume that your maximum loss percentage is 20%, i.e.,
you are ready to suffer 20% reduction in your total portfolio
value without panicking even in a situation like 2008. Assume
the risk free rate (fixed deposit rate) is 8%. Your equity
allocation based on Maximum Loss Percentage will be (20% +
8%) divided by (60% + 8%) or 41%. This is the maximum
equity exposure you will have. Let us examine a scenario where
the market falls by, say, 35%. Your asset allocation, as discussed
earlier, is 59% fixed income and 41% equity. Your portfolio loss
will be (59% X 8%) – (41% X 35%) or -9.6%, well within your
tolerable limit. Even if the market falls by 50%, your loss will
-15.8%, which is still within tolerable limit.
If you are young and have stable income, you can have a high
maximum loss percentage(50% or more), depending on your
financial situation as you can afford to wait longer for market to
recover and recoup losses. On the other hand, if you are nearing
retirement or an important goal, you cannot wait for long and

10 DALAL STREET INVESTMENT JOURNAL I DEC 26, 2016 - JAN 8, 2017 DSIJ.in
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hence you will have lower maximum loss tolerance. Asset Age-Based Asset Allocation Strategies
allocation based on MLP is quite practical as it is based on how The Rule of 100 is a popular asset allocation thumb rule. Simply
investors react in adverse situations and protects their interest put, you subtract the investor’s age from 100, and the result
in such situations. suggests the maximum percentage of equity investment. So, for
a 30 year old investor, this rule suggests that 70% of his/her
Good old strategy - 50/50 Asset Allocation portfolio should be invested in equities and so on. This model is
Some financial planners suggest this strategy of having equal ideally suited for a passive investor.
exposure to both the assets – equity and debt. It makes intuitive
sense, especially for new investors. In fact, hybrid aggressive Some financial planners may suggest that Rule of 100 can result
funds (earlier known as Balanced Funds) are supposed to work in sub-optimal allocation to equities in retirement years. They
on the same principle, even though in India the asset allocation may argue, age expectancy and longer retired lives and rising
of hybrid aggressive funds is around 65/35 for availing equity inflation require us to have higher allocation to equities.
taxation. Therefore, instead of Rule of 100, some suggest the Rule of 120
to take care of post retirement income needs. Let us see the
A 50/50 asset allocation strategy with asset rebalancing from asset allocation guidance for different age groups, according to
time-to-time can work well for investors with moderate to Rule of 120.
moderately high risk profiles. Age Equity Fixed Income
25 95% 5%
“Ration for the Worst Case” - Asset Allocation strategy for
30 90% 10%
senior citizens
Popular US finance author, Darrow Kirkpatrick, shared in his 35 85% 15%
blog an asset allocation strategy for senior citizens. He called it 40 80% 20%
“Ration for the Worst Case”. Though Kirkpatrick’s strategy is a 45 75% 25%
little too conservative, the beauty of this strategy is its simplicity. 50 70% 30%
Let us understand it through an example - 55 65% 35%
60 60% 40%
Suppose you are nearing retirement or just retired (at the age of 65 55% 45%
60), assume your retired life will be 30 years long and annual
70 50% 50%
expenses are `8 lakh. In this strategy, you will invest an amount
75+ 45% 55%
equal to 15 years (half of your retired life), i.e.
`1.20 crore in total (`8 lakh X 15) in low risk fixed income To conclude, you can choose a strategy or even try to mix
products, e.g. short duration debt fund. Let us assume that the various strategies and form a hybrid one that works best for
post-tax debt fund returns will at least match inflation rates, say you. At the end of the day, the best strategy is the one which
6-6.5%. Using this strategy, you can make annual/quarterly/ works for you.
monthly withdrawals from your debt fund investment to meet
your expenses for the next 15 years. So, irrespective of what
happens in equity market, you can comfortably carry on with
your inflation adjusted expenses for at least first 15 years.

The question is how will you meet your expenses for the next 15
years? This is where the equity allocation comes into play. The
beauty of this strategy is that there is no reliance on income
from equities for the first 15 years, thereby allowing it to
compound and create substantial wealth which can help meet
your income needs, for the rest of your life.
Why is this strategy effective? Because, this strategy not only
takes care of first 15 years of your retired life, but also creates
sufficient wealth for the next 15 years.

The writer is Director, Eastern Financiers Ltd., http://www.easternfin.com

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Special Report
F
ew years back, a lot of fintech companies appeared
on the Indian financial landscape. Many of them
were robo-advisory firms that wanted to automate
the entire investing process for an investor. The
promotions of these firms were common in both
electronic as well as print media. There were expectations that
new investors, especially those who are internet-savvy and have
higher earnings and savings, would flock to these firms,
attracted by low fees and the promise of solid returns and
customised portfolio. These companies would automate their
client’s investment process of selecting right fund, rebalancing
of portfolio and tax-loss harvesting process to keep an investor’s
portfolio on track.
Before these robo-advisors came into the picture, the financial
advisory was largely manual. Financial advisors use to assess
the risk profile of the investors, and based on that, they would
recommend a portfolio. After that, advisors would also help the
investors with their transactions. Although everything was
smooth, it had all the drawback that a manual system could
possibly have. It was painfully slow process, there were
inconsistencies in advice and, most importantly, it was not
scalable. Hence, only a select few could afford the services.
12 DALAL STREET INVESTMENT JOURNAL I DEC 26, 2016 - JAN 8, 2017
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Robo-Advisory,
The Way Forward
Then, sometime in the year 2012-13 came the fintech
companies, who promised panacea from all these drawbacks by
offering robo-advisory services. The robo-advisors primarily
capture the basic details of the customers, and based on that
information, determine an appropriate asset allocation along
with suitable MF schemes, and then automate the entire
rebalancing, tax harvesting, billing and reporting functions. It
was supposed to democratise the investment management
market. The services that were accessible only to those with
deep pockets was now available to everyone interested in
financial planning.
Five years down the line, things have not shaped the way they
were expected to. Many of the start-ups in the field found their
enthusiasm misplaced and pressing the reset button was not
easier. Hence, many of them are changing their strategy to
survive and thrive.
This can easily be seen from the latest report released by the
AMFI on commission distributed by fund houses to mutual
fund distributors. The list is dominated by banks and few
other corporates that have human interface rather than only
digital.
DSIJ.in

Name of the ARN Holder Gross Amount Paid (` Cr)
NJ lndiainvest Pvt 786.77
HDFC Bank 641.39
State Bank ofIndia 557.90
Axis Bank 537.71
ICICIBank 470.28
ICICI Securities 316.53
Kotak Mahindra Bank
Citibank N.A
274.29
248.96
Prudent Corp. Advisory Services
Standard Chartered Bank
217.82
185.42
What went wrong?
The reason for failure of these earlier robo-advisory firms may
be attributed to idiosyncratic nature of the financial planning
service. Earlier, the start-ups thought that technology alone can
be used to fulfil every need of the investor. But algorithm do
have their own limitations and cannot completely fulfil the
essentials of a comprehensive financial planning. The human
element is as much required as technology, which can only
improve the efficiency of human being. Earlier avatar of the
robo-advisory was offering products that were suitable to you,
but it lacked the fiduciary advice which not only offers a suitable
advice to you, but also offers that which is in your best interest.
Besides, the operating cost of these firms were also very high. On
an average, they spent around `2500 to acquire a client. Even if
we assume revenue of 1.5 per cent of assets under management, a
back of the envelope calculation shows that every client needs to
come with an asset of `1,60,000 to break-even the acquisition
cost. At the end of June 2018 on an average, the retail investor
had AUM of around `1.4 lakh, which is way below the required
level to break-even. Initially most of the robo-advisory firms
were eager to acquire more clients rather than client’s assets,
which resulted into poor performance. Larger number of clients
with lower assets under management was not helping them.
The Future
Now most of the robo-advisory firms have realised that the
road to profitability as standalone business-to-consumer (B2C)
is long and uncertain. Therefore, they are changing their course
of action and want to break into the world of intermediation by
partnering with some established investment services players.
Having only digital presence will take them nowhere. The
delivery of service requires a human touch. The trend is visible
internationally also where, Betterment, which originally
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Should
You Go
For It?
Robo-advisory is still evolving and trying to find the right path.
Nevertheless, you should not mistake it as yet another fad. In its
right avatar, it is going to be an important part of the financial
planning ecosystem, but it would happen over the long-term. It is
suitable for you if you are cost-conscious and do not want to pay
higher charges for advice. Although, these charges are expressed
in percentage and may look minuscule to you, over time, it will
help you to save an immense amount of money.
Another important criterion is that you can start with a small
amount of investment as you do not need hefty bank balance
before going for robo-advisors. There is no mandatory minimum
investment amount required from the investors.
One of the benefits of opting for robo-advisors is that they do
not suffer from any behavioural biases. They are expected to
offer you a rational advice. In the case of human advisors or if
you do it yourself, there are chances that you may take decisions
influenced by your behavioural biases.
Going ahead, robo-advisors are going to be a big thing and will
experience exponential growth in their assets under
management. According to a Business Insider Intelligence
forecast, robo-advisors, including those with semi-automated
set-up, will manage investment products worth USD 1 trillion by
2020, which will go up to USD 4.6 trillion by as early as 2022.
Moreover, the advances in computing, machine learning and
artificial intelligence will make robo-advisors more acceptable
due to better customised advices.
launched as a pure robo-advisory, but has since added human
interface to its offerings. In addition to this, they need to rationalise
their cost of client acquisition and servicing them.
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MF Data Bank With Ranking

Key To Databank

T
he following table lists top-ranked equity funds based on
DSIJ's proprietary research methodology. We have
evaluated each funds underlying portfolio of stocks and
ranked them based on their expected portfolio returns. This way
we are also able to rank newly launched funds that are not rated
by others due to their short duration of existence.
We evaluate all the equity funds based on the changed ratings
of their underlying stocks and the change in their prices.
Therefore, this list is quite dynamic and reflects the best possible
return potential of the funds for the next one year.
You can use this ranking to create your own mutual fund
portfolio. Depending on your risk profile, return expectations and
overall asset allocation, you can add the best performing fund
category to your portfolio. For clarity and to include more funds,
we have not included ‘Direct’ and ‘close-ended’ funds. You can
visit our website (www.dsij.in/mutual-fund) to know the latest
ranking of both ‘Direct’ and ‘Regular’ Funds along with equity-
oriented hybrid and close-ended funds.
This ranking can also be used for reviewing different holdings
in your fund portfolio. Hence, a consistently laggard performer of
a category can be looked at as 'Switch' or 'Exit' advice.
Category Rank: Category wise ranking as on July 27th 2018
Scheme Name: This is the name of the mutual fund scheme
NAV (`): Net asset value per unit of a mutual fund or an exchange-traded fund
(ETF) on a specific date
AUM (`Crore): This is the total market value of financial assets held by the mutual
fund scheme on a specific date.
Weightage: Large-Cap: This is a percentage of total assets held by a fund in the
large-cap stocks as defined by AMFI for the current period.
Mid-Cap: This is a percentage of total assets held by a fund in mid-cap stocks as
defined by AMFI for the current period.
Small-Cap: This is a percentage of total assets held by a fund in small-cap stocks as
defined by AMFI for the current period.
Total No of Companies: This is a total number of companies held by a mutual fund
scheme at the end of a specific month.
Expenses Ratio: This is the latest expense ratio disclosed by the mutual fund scheme
Return_1Years: This is the past one-year return given by the scheme.
Expected 1-yr return: This is based on our analysis of the portfolio of mutual fund
scheme and their expected growth in the next one year, assuming the underlying
remains the same.
Current Rank: Rank as on July 27th 2018
Previous Rank of July 13th 2018 is shown under bracket ()

Category Weightage (%) Return Expected DSIJ Current

NAV AUM Total No of Expense
Scheme Name 1 Years 1 yr return Rank
Rank (`) (` Cr) Companies Ratio (%)
Large Cap Mid Cap Small Cap (%) (%) (27 July 18)
Equity - Large & Mid Cap
1 ICICI Prudential Large & Mid Cap Fund 315.96 3120.00 49.61 29.45 8.64 65.00 2.09 2.42 19.06 43 (49)
2 Reliance Vision Fund 524.66 3076.00 59.55 37.59 2.35 34.00 2.18 -5.06 17.96 59 (24)
3 UTI Core Equity Fund 62.91 915.00 49.25 38.08 9.22 60.00 2.38 4.19 17.21 72 (109)
4 Franklin India Equity Advantage Fund 80.15 2745.00 59.99 30.99 5.72 50.00 2.13 5.25 17.17 73 (106)
5 DSP BlackRock Equity Opportunities Fund 218.04 5400.00 55.27 35.80 6.40 72.00 2.14 5.38 17.08 77 (68)
6 Mirae Asset Emerging Bluechip Fund 49.62 5351.00 45.56 35.31 17.00 66.00 2.09 5.14 16.79 82 (80)
7 Canara Robeco Emerging Equities 95.50 3510.00 42.41 30.54 20.44 65.00 1.98 9.56 15.75 100 (181)
8 Principal Emerging Bluechip Fund 108.66 1811.00 40.71 31.52 23.65 88.00 2.40 9.62 15.67 105 (164)
9 IDFC Core Equity Fund 45.78 2763.00 52.61 33.44 9.35 81.00 2.13 7.23 14.59 127 (193)
10 Invesco India Growth Opportunities Fund 33.98 672.00 62.13 32.27 3.08 40.00 2.49 13.65 14.30 131 (192)
Others - Index Funds/ETFs
1 Kotak PSU Bank ETF 309.59 66.00 78.60 17.93 3.37 12.00 0.49 -13.66 23.93 6 (1)
2 ICICI Prudential Bharat 22 ETF 35.55 5459.00 89.41 10.27 0.00 22.00 0.01 ** 21.08 24 (8)
3 ICICI Prudential Nifty Next 50 Index Fund 25.86 234.00 85.84 12.13 0.00 50.00 0.85 5.99 19.99 32 (45)
4 IDBI Nifty Junior Index Fund 22.01 52.00 86.95 12.04 0.00 50.00 1.74 4.49 19.33 36 (41)
5 UTI Nifty Next 50 Exchange Traded Fund 295.76 50.00 87.68 12.10 0.00 50.00 ** 19.17 39 (41)
6 UTI Nifty Next 50 Index Fund 10.39 214.00 85.85 11.86 0.00 50.00 ** 19.17 39 ()
7 DSP BlackRock Equal Nifty 50 Fund 10.11 125.00 99.65 0.00 0.00 50.00 0.91 ** 15.56 109 (152)
8 ICICI Prudential Nifty 100 ETF 121.75 39.00 96.16 1.70 0.00 101.00 0.49 12.25 12.14 169 (217)
9 IDFC Nifty Fund 23.13 113.00 98.53 0.00 0.00 51.00 0.27 13.57 11.20 182 (235)
10 IDBI Nifty Index Fund 20.79 210.00 99.62 0.00 0.00 50.00 1.76 11.55 11.00 188 (241)
11 Franklin India Index Fund - NSE Nifty Plan 89.30 239.00 99.24 0.00 0.00 50.00 1.08 12.36 10.99 189 (250)
12 ICICI Prudential Nifty ETF 116.92 907.00 99.44 0.00 0.00 50.00 0.05 13.87 10.97 190 (252)
13 ICICI Prudential Nifty Index Fund 108.67 326.00 99.80 0.00 0.00 50.00 1.00 12.64 10.97 190 (252)
() There are some blanks in the previous ranking column. This is because these funds were not in our last ranking as they have come into
existence recently, after the realigning of the funds with respect to SEBI's guidelines on rationalisation and categorisation of schemes.
** These funds are yet to complete one year

There are 74,624,230 accounts in the mutual fund industry as at June 2018,
of which 99.4% is accounted for by individual investors.

14 DALAL STREET INVESTMENT JOURNAL I DEC 26, 2016 - JAN 8, 2017 DSIJ.in
 MF Page -15

Category Weightage (%) Return Expected DSIJ Current

NAV AUM Total No of Expense
Scheme Name 1 Years 1 yr return Rank
Rank (`) (` Cr) Companies Ratio (%)
Large Cap Mid Cap Small Cap (%) (%) (27 July 18)
14 SBI Nifty Index Fund 96.53 310.00 97.06 0.00 0.00 50.00 0.75 13.13 10.92 193 (254)
Hybrid - Dynamic Asset Allocation/Balanced Advanta
1 Union Prudence Fund 10.20 566.00 56.63 33.14 4.35 94.00 2.48 ** 16.78 83 (75)
2 ICICI Prudential Balanced Advantage Fund 33.86 27877.00 43.60 8.45 2.59 193.00 2.15 6.68 15.23 117 (213)
3 Reliance Balanced Advantage Fund 86.90 637.00 50.00 19.81 0.67 44.00 2.50 3.83 14.36 128 (260)
4 IDFC Dynamic Equity Fund 13.22 983.00 48.37 17.82 11.09 79.00 2.49 8.99 13.35 151 (203)
Equity - Large Cap
1 JM Large Cap Fund 65.87 2219.00 77.95 2.93 0.30 81.00 2.39 4.66 18.04 57 (60)
2 ICICI Prudential Bluechip Fund - Institutional Plan 45.25 17427.00 88.29 2.28 0.03 62.00 0.93 10.85 16.61 87 (135)
3 ICICI Prudential Bluechip Fund 41.30 17427.00 88.29 2.28 0.03 62.00 2.12 9.72 16.61 87 (135)
4 Reliance Large Cap Fund 33.20 10126.00 78.05 17.81 2.91 49.00 2.32 8.45 16.51 90 (56)
5 Franklin India Bluechip Fund - Growth 459.73 7933.00 90.44 6.58 0.00 42.00 2.03 3.41 16.06 97 (155)
6 SBI Blue Chip Fund 39.05 19064.00 80.61 9.50 2.19 59.00 2.44 7.24 15.79 99 (122)
7 IDBI India Top 100 Equity Fund 24.39 398.00 86.76 5.31 0.70 44.00 2.98 2.61 13.80 139 (128)
8 HSBC Large Cap Equity Fund 211.62 686.00 98.28 1.15 0.00 32.00 2.47 8.76 13.45 149 (214)
9 UTI Mastershare 121.23 5195.00 82.13 10.62 4.07 49.00 2.04 11.29 13.15 156 (228)
10 Kotak Bluechip Fund - Regular Plan 232.39 1322.00 80.57 9.60 7.25 52.00 2.24 9.23 12.95 159 (229)
11 Invesco India Largecap Fund 29.10 141.00 90.42 2.92 4.97 20.00 2.71 13.10 12.35 168 (259)
12 DSP BlackRock Top 100 Equity Fund 209.93 2836.00 99.49 0.00 0.00 33.00 2.36 7.47 11.97 172 (196)
13 Union Largecap Fund 10.80 309.00 89.44 7.05 0.00 30.00 2.59 5.57 11.05 187 (111)
14 Edelweiss Large Cap Fund 36.02 133.00 61.64 15.25 0.00 57.00 1.38 15.67 9.94 214 (298)
15 Canara Robeco Bluechip Equity Fund 24.47 122.00 92.07 2.38 0.00 32.00 2.51 13.29 8.29 226 (311)
16 IDFC Large Cap Fund 32.93 347.00 87.79 0.00 6.94 39.00 2.66 10.82 7.66 230 (320)
Equity - Sectoral/Thematic
1 ICICI Prudential Infrastructure Fund 49.26 1521.00 52.46 10.84 27.45 44.00 2.25 -1.56 24.10 4 (11)
2 IDFC Infrastructure Fund 16.09 1092.00 40.20 12.70 40.55 49.00 2.38 -3.26 23.93 6 (13)
3 Reliance Power & Infra Fund 101.57 1626.00 22.19 18.68 55.64 39.00 2.11 -2.59 23.26 9 (18)
4 DSP BlackRock Tiger Fund 90.39 1313.00 52.93 14.79 27.80 62.00 2.30 -0.87 22.68 10 (16)
5 Invesco India PSU Equity Fund 17.59 70.00 57.68 22.97 18.85 19.00 2.72 -6.49 22.57 11 (3)
6 ICICI Prudential Banking and Financial Services 61.76 2697.00 61.30 15.95 16.49 38.00 2.11 2.05 22.23 12 (19)
7 UTI Banking & Financial Services Fund 100.70 658.00 73.15 15.14 11.33 27.00 2.43 4.65 22.07 13 (25)
8 UTI Infrastructure Fund 52.66 1403.00 52.84 17.23 26.08 45.00 2.24 -1.40 21.72 14 (22)
9 Canara Robeco Infrastructure 45.60 130.00 51.01 9.46 35.53 25.00 2.50 -3.12 21.70 15 (12)
10 SBI PSU Fund 10.43 170.00 67.22 21.32 3.50 19.00 2.88 -12.08 21.26 23 (6)
11 Sundaram Infrastructure Advantage Fund 32.37 657.00 20.10 20.55 57.03 45.00 2.52 -0.46 20.71 25 (84)
12 Franklin Build India Fund 40.02 1156.00 71.99 5.95 16.11 34.00 2.35 2.72 20.62 27 (14)
13 Franklin India Opportunities Fund 74.39 626.00 68.86 12.70 14.02 36.00 2.61 4.79 19.59 34 (93)
14 Invesco India Infrastructure Fund 16.95 39.00 34.00 20.55 39.46 25.00 2.78 3.35 19.03 44 (31)
15 DSP BlackRock Natural Res. and New Energy Fund 32.87 412.00 78.24 8.95 1.65 21.00 2.71 2.81 18.81 46 (7)
16 SBI Infrastructure Fund 14.76 531.00 30.83 3.44 51.23 20.00 2.69 0.74 18.48 51 (50)
17 Invesco India Financial Services Fund 55.02 124.00 75.49 11.35 11.31 21.00 2.75 6.86 18.34 55 (62)
18 Franklin Asian Equity Fund 22.42 123.00 7.75 5.13 0.71 11.00 2.89 8.35 17.74 63 (122)
19 Sundaram Financial Services Opportunities Fund 40.23 149.00 79.02 13.43 5.80 22.00 2.80 2.41 17.06 78 (110)
20 SBI Magnum Comma Fund 36.84 290.00 54.30 23.16 18.50 24.00 2.80 1.41 16.64 86 (30)
21 SBI Banking & Financial Services Fund 17.12 509.00 60.85 23.03 11.17 19.00 2.70 15.28 16.15 94 (184)
22 HSBC Infrastructure Equity Fund 20.41 145.00 20.77 11.53 58.76 32.00 2.74 -10.39 15.91 98 (180)
23 UTI Transportation and Logistic Fund 118.90 1620.00 65.95 13.10 14.44 36.00 2.17 5.02 15.75 100 (211)
24 Reliance Consumption Fund 62.91 67.00 60.21 25.29 9.34 27.00 2.68 0.27 15.46 114 (199)
25 SBI Healthcare Opportunities Fund 114.65 958.00 36.70 27.40 30.55 24.00 2.54 -10.58 15.20 118 (174)
26 Mirae Asset Great Consumer Fund 34.11 397.00 53.69 24.85 17.50 41.00 2.70 15.49 14.83 125 (177)
27 Kotak Infra. & Eco. Reform Fund - Regular Plan 20.09 445.00 28.90 25.00 43.75 50.00 2.54 -2.70 14.34 130 (150)
28 ICICI Prudential Exports and Services Fund 58.01 701.00 62.14 3.34 25.92 22.00 2.50 8.76 14.03 136 (279)
29 Sundaram Rural and Consumption Fund 42.70 2540.00 45.92 17.38 28.46 62.00 2.17 4.65 13.68 143 (224)

Since December 2014, there is an increase in investor accounts from 4.03 crore
to 7.46 crore in June 2018

DSIJ.in DEC 26, 2016 - JAN 8, 2017 I DALAL STREET INVESTMENT JOURNAL 15
 MF Page - 16

MF Data Bank
Category Weightage (%) Return Expected DSIJ Current
NAV AUM Total No of Expense
Scheme Name 1 Years 1 yr return Rank
Rank (`) (` Cr) Companies Ratio (%)
Large Cap Mid Cap Small Cap (%) (%) (27 July 18)
30 IDBI Banking & Financial Services Fund 10.11 186.00 5.86 0.98 0.00 4.00 3.16 ** 13.53 145 ()
31 ICICI Prudential FMCG Fund - Growth 237.54 408.00 60.79 17.43 13.25 25.00 2.89 16.64 13.23 153 (266)
Equity - Focused
1 Franklin India Focused Equity Fund 38.92 7356.00 67.25 10.67 11.11 27.00 2.08 3.86 18.55 50 (23)
2 Reliance Focused Equity Fund 47.39 4295.00 67.77 20.10 7.41 32.00 2.23 4.46 17.63 66 (59)
3 DSP BlackRock Focus Fund 23.41 2718.00 91.90 6.12 1.49 31.00 2.36 6.83 13.47 148 (145)
4 IDBI Focused 30 Equity Fund 10.37 327.00 74.32 1.99 4.54 27.00 3.09 ** 12.86 160 (227)
5 ICICI Prudential Focused Equity Fund 30.13 545.00 92.24 0.00 0.00 12.00 2.76 8.03 11.08 184 (198)
6 Principal Focused Multicap Fund 63.40 298.00 71.98 9.53 3.43 30.00 2.58 8.01 10.53 203 (281)
Equity - Mid Cap
1 SBI Magnum Midcap Fund 74.22 3521.00 0.80 65.34 30.24 45.00 2.52 -4.51 20.23 31 (65)
2 IDBI Midcap Fund 11.77 250.00 14.98 59.19 22.69 49.00 3.09 3.61 19.28 38 (53)
3 Kotak Emerging Equity Scheme - Regular Plan 38.85 3163.00 6.18 57.38 34.84 67.00 2.30 4.68 18.41 53 (91)
4 Invesco India Mid Cap Fund 48.70 179.00 12.71 54.87 28.45 40.00 2.73 10.93 18.38 54 (118)
5 ICICI Prudential MidCap Fund 97.04 1523.00 9.33 46.09 33.37 82.00 2.45 5.39 18.08 56 (95)
6 DSP BlackRock Mid Cap Fund 55.38 5266.00 12.12 54.48 29.45 60.00 2.16 5.39 17.77 62 (82)
7 Franklin India Prima Fund 965.84 6336.00 19.45 61.24 15.53 57.00 2.11 5.94 16.45 91 (141)
8 UTI Mid Cap Fund 106.68 3884.00 10.88 63.79 22.68 60.00 2.06 5.70 16.09 96 (124)
9 Sundaram Mid Cap Fund 491.86 6039.00 3.38 60.61 32.61 67.00 2.11 1.97 15.50 112 (145)
10 Sundaram Mid Cap Fund - Institutional Plan 517.36 6039.00 3.38 60.61 32.61 67.00 1.59 2.74 15.50 112 (145)
Equity - Small Cap
1 Sundaram Small Cap Fund 89.40 1173.00 0.00 0.64 92.59 49.00 2.38 -9.27 24.87 3 (36)
2 HSBC Small Cap Equity Fund 53.78 575.00 5.91 18.44 64.56 51.00 2.45 0.08 21.69 16 (44)
3 DSP BlackRock Small Cap Fund 57.64 5255.00 0.00 9.02 84.12 85.00 2.18 -6.09 21.69 16 (85)
4 ICICI Prudential Smallcap Fund - Institutional Plan 25.47 174.00 12.12 2.70 74.04 37.00 2.25 -3.74 21.55 18 (51)
5 ICICI Prudential Smallcap Fund 25.48 174.00 12.12 2.70 74.04 37.00 2.74 -3.67 21.55 18 (51)
6 Franklin India Smaller Companies Fund 57.22 7114.00 13.48 9.93 68.94 72.00 2.15 3.87 20.65 26 (83)
7 Union Small Cap Fund 15.08 305.00 2.73 19.88 69.23 47.00 2.82 0.33 20.49 28 (38)
8 Kotak Small Cap Fund - Regular Plan 74.09 804.00 7.94 19.03 71.30 61.00 2.43 0.13 17.89 60 (153)
Hybrid - Balanced/Aggressive
1 ICICI Prudential Equity & Debt Fund 127.13 28266.00 72.71 6.59 1.74 116.00 2.13 4.39 19.64 33 (35)
2 Franklin India Equity Hybrid Fund 116.41 2036.00 59.26 7.91 1.63 40.00 2.18 4.49 17.33 69 (91)
3 UTI Hybrid Equity Fund 169.70 6272.00 49.94 26.95 11.32 96.00 2.04 4.60 17.11 74 (126)
4 Reliance Equity Hybrid Fund 55.58 13593.00 64.53 8.29 4.96 59.00 2.24 5.86 16.11 95 (104)
5 IDFC Hybrid Equity Fund 11.74 1162.00 43.11 13.25 14.82 75.00 2.20 4.51 15.64 107 (189)
6 IDBI Hybrid Equity Fund 12.16 421.00 53.68 16.25 9.24 53.00 3.06 6.02 15.54 110 (197)
7 Kotak Equity Hybrid - Regular Plan 24.41 2030.00 40.90 14.24 24.94 64.00 2.20 3.50 15.09 121 (176)
8 Principal Hybrid Equity Fund 76.44 1408.00 53.57 11.77 11.15 69.00 2.74 10.21 13.35 151 (202)
9 Mirae Asset Hybrid Equity Fund 13.99 1213.00 63.29 9.65 1.46 62.00 2.15 7.63 13.05 158 (188)
Equity - Multi Cap
1 Reliance Multi Cap Fund 91.24 9270.00 49.02 28.58 21.82 54.00 2.18 5.23 16.85 81 (63)
2 ICICI Prudential Multicap Fund 287.59 2794.00 79.96 12.00 4.61 35.00 2.15 10.26 16.42 92 (87)
3 Invesco India Multicap Fund 49.34 524.00 37.06 22.28 37.89 41.00 2.72 8.87 15.72 103 (160)
4 IDFC Focused Equity Fund 39.82 1667.00 41.00 22.61 27.47 25.00 2.28 10.01 15.66 106 (127)
5 Franklin India Equity Fund 589.33 11470.00 73.13 13.67 8.28 49.00 2.04 4.62 15.63 108 (163)
6 HSBC Multi Cap Equity Fund 89.67 612.00 66.34 18.59 13.20 51.00 2.43 6.16 15.04 122 (149)
7 SBI Magnum Multi Cap Fund 48.03 5413.00 59.39 12.17 19.88 67.00 2.43 9.16 14.98 123 (161)
8 Mirae Asset India Equity Fund 48.61 7945.00 82.90 9.94 2.70 63.00 2.39 9.38 13.91 137 (175)
9 DSP BlackRock Equity Fund 38.64 2503.00 63.60 17.98 15.58 62.00 2.25 8.52 13.20 154 (218)
10 IDFC Multicap Fund 95.76 5484.00 38.67 30.73 24.39 65.00 2.14 8.45 12.42 166 (310)
11 IDBI Diversified Equity Fund 21.53 363.00 48.84 21.92 23.50 49.00 2.93 9.07 12.02 171 (309)
12 Motilal Oswal Multicap 35 Fund 27.28 13016.00 79.74 17.50 0.63 27.00 2.04 8.78 11.34 180 (76)
Equity - Value/Contra
1 SBI Contra Fund 110.12 1605.00 48.22 8.10 31.45 34.00 2.34 0.43 20.31 30 (57)

The ticket size for equity oriented funds is `154,506 per account at the end of June 2018

16 DALAL STREET INVESTMENT JOURNAL I DEC 26, 2016 - JAN 8, 2017 DSIJ.in
 MF Page -17

Category Weightage (%) Return Expected DSIJ Current

NAV AUM Total No of Expense
Scheme Name 1 Years 1 yr return Rank
Rank (`) (` Cr) Companies Ratio (%)
Large Cap Mid Cap Small Cap (%) (%) (27 July 18)
2 IDFC Sterling Value Fund 54.33 2916.00 17.40 34.19 41.62 84.00 2.21 7.85 17.98 58 (115)
3 Templeton India Value Fund 264.10 568.00 51.41 26.29 19.78 31.00 2.58 2.97 17.35 68 (116)
4 Reliance Value Fund 72.97 3154.00 48.37 29.78 17.05 61.00 2.35 8.41 15.20 118 (207)
5 Invesco India Contra Fund 48.50 1868.00 70.28 10.10 15.74 39.00 2.24 18.38 14.25 132 (119)
6 Indiabulls Value Discovery Fund 12.57 47.00 10.42 18.44 46.86 34.00 2.79 -4.83 14.15 133 (232)
7 ICICI Prudential Value Discovery Fund 146.38 16281.00 74.47 9.81 4.72 40.00 1.99 6.11 13.88 138 (158)
Equity - ELSS
1 IDFC Tax Advantage (ELSS) Fund 56.88 1528.00 40.54 22.09 28.75 82.00 2.32 9.84 19.14 42 (120)
2 SBI Magnum Tax Gain Scheme 93 139.76 6080.00 69.77 10.94 12.94 65.00 2.31 0.93 18.62 49 (70)
3 HSBC Tax Saver Equity Fund 37.28 163.00 64.94 16.68 16.71 35.00 2.67 2.64 17.70 64 (133)
4 UTI Long Term Equity Fund 87.14 964.00 55.04 29.64 11.53 59.00 2.28 7.14 17.65 65 (102)
5 Franklin India Taxshield 560.09 3623.00 77.37 9.73 5.49 51.00 2.04 5.85 17.09 76 (139)
6 DSP BlackRock Tax Saver Fund 46.73 4218.00 68.15 17.56 11.12 70.00 2.07 5.63 15.75 100 (98)
7 Mirae Asset Tax Saver Fund 16.72 1024.00 69.35 19.56 10.66 61.00 2.26 9.66 15.26 116 (143)
8 ICICI Prudential Long Term Equity Fund 370.90 5218.00 74.07 11.07 13.59 47.00 2.28 12.60 14.98 123 (135)
9 Quantum Tax Saving Fund - Regular Plan 52.99 69.00 72.08 9.47 2.02 23.00 1.46 4.83 13.58 144 (221)
10 Union Tax Saver Scheme 24.46 216.00 74.53 9.60 12.23 43.00 2.58 7.28 12.09 170 (210)
11 IDBI Equity Advantage Fund 26.98 644.00 42.74 45.75 10.48 28.00 2.73 9.76 11.65 176 (323)
12 Kotak Taxsaver - Regular Plan 42.30 731.00 56.29 24.43 17.77 58.00 2.37 4.72 11.31 181 (238)
13 Motilal Oswal Long Term Equity Fund 18.45 1056.00 70.81 17.75 7.74 27.00 2.16 10.34 11.11 183 (100)
14 Edelweiss Long Term Equity Fund (Tax Savings) 47.22 73.00 63.18 19.16 10.41 54.00 2.58 7.07 10.26 211 (256)
Hybrid - Equity Savings
1 DSP BlackRock Equity Savings Fund 12.44 1652.00 49.48 24.56 7.55 126.00 2.29 4.28 20.43 29 (19)
2 Kotak Equity Savings Fund - Regular Plan 13.79 2180.00 23.55 7.97 2.24 299.00 2.30 8.46 19.39 35 (61)
3 ICICI Prudential Equity Savings Fund 12.99 2674.00 28.19 1.55 1.33 108.00 1.50 4.25 19.30 37 (48)
4 Principal Equity Savings Fund (Growth Accum) 35.10 76.00 48.35 24.91 5.99 61.00 2.79 4.39 18.94 45 (78)
5 Reliance Equity Savings Fund 12.75 2632.00 54.07 9.42 9.43 87.00 2.10 4.47 18.67 47 (55)
Solution Oriented - Children's/Retirement
1 ICICI Prudential Child Care - Gift Fund 137.01 592.00 51.15 16.72 4.31 35.00 2.50 8.32 16.77 84 (58)
2 UTI CCF Investment Plan 38.90 249.00 66.87 13.06 11.04 63.00 2.64 12.64 11.51 177 (264)
Hybrid - Multi Asset Allocation
1 ICICI Prudential Multi Asset Fund 253.09 11091.00 56.38 9.28 5.62 79.00 2.17 4.63 21.37 20 (27)
2 UTI Multi Asset Fund 33.67 947.00 54.95 12.10 5.94 57.00 2.31 4.49 15.18 120 (159)
Miscellaneous
1 Reliance CPSE ETF 26.71 4174.00 86.77 13.17 0.00 10.00 0.07 0.50 25.88 1 (5)
2 Reliance Tax Saver Fund 56.29 9545.00 58.84 16.95 20.86 59.00 2.23 -6.69 24.98 2 (10)
3 Reliance Banking Fund 278.23 2851.00 56.74 30.49 9.17 28.00 2.05 6.75 23.96 5 (21)
4 Reliance ETF PSU Bank BeES 343.18 97.00 78.81 17.83 3.34 12.00 0.49 -13.73 23.90 8 (1)
5 Reliance ETF Junior BeES 299.58 394.00 87.68 12.10 0.00 50.00 0.23 ** 19.17 39 (40)
6 Reliance Growth Fund 1099.25 6550.00 9.87 64.96 22.13 80.00 2.15 2.97 18.64 48 (100)
7 HDFC Prudence Fund - Regular Plan 491.98 36720.00 66.40 10.91 10.80 93.00 2.14 3.23 18.45 52 (46)
8 L&T Tax Saver Fund 38.77 30.00 47.28 22.14 30.26 43.00 2.63 11.22 17.81 61 (131)
9 Tata Dividend Yield Fund - Regular Plan 75.26 296.00 57.29 8.53 22.30 20.00 2.86 4.10 17.46 67 (145)
10 Aditya Birla Sun Life India Reforms Fund 19.68 100.00 55.92 23.88 12.37 25.00 2.86 9.88 17.11 74 (72)
11 UTI Multi Cap Fund 13.99 397.00 52.90 20.97 3.70 36.00 2.69 14.01 16.86 79 (144)
12 Aditya Birla Sun Life Special Situations Fund 25.71 181.00 57.20 10.55 29.33 52.00 2.70 15.78 16.86 79 (182)
13 Reliance ETF Bank BeES 2811.80 2667.00 95.58 4.18 0.00 12.00 0.22 11.07 16.77 84 (150)
14 HDFC Balanced Fund - Regular Plan 147.07 22109.00 49.11 10.31 13.27 91.00 1.92 6.97 15.72 103 (86)
15 Reliance Retirement Fund - Wealth Creation Scheme 13.64 1262.00 77.20 11.63 8.09 49.00 2.61 7.43 15.53 111 (155)
16 Invesco India Equity & Bond Fund 10.28 279.00 14.50 7.82 0.52 39.00 ** 14.65 126 ()
17 Sundaram Diversified Equity Fund 103.17 2624.00 48.22 32.99 16.02 67.00 2.28 3.12 14.12 134 (183)
18 Principal Dividend Yield Fund 53.38 146.00 61.83 11.59 18.82 58.00 3.02 12.66 14.11 135 (266)
19 Reliance Focused Large Cap Fund 29.90 1197.00 77.02 20.98 0.00 24.00 2.16 8.51 13.79 140 (71)
20 Principal Growth Fund 143.16 661.00 55.74 14.11 22.38 64.00 2.42 6.97 13.76 141 (170)
21 Principal Tax Savings Fund 210.50 379.00 58.63 14.54 23.62 63.00 2.50 6.89 13.74 142 (169)
All the NAV figures are for date July 27, 2018. Trailing returns are also calculated for the same date. AUM, weightage of a stocks , number
of companies and expense ratio are for the period ending June 2018. All the raw data is provided by Dion Global Solutions Ltd
Note : The funds in the data bank are now appropriately categorised as per SEBI guidelines, except for funds in miscellaneous category

DSIJ.in DEC 26, 2016 - JAN 8, 2017 I DALAL STREET INVESTMENT JOURNAL 17