WEBVTT 00:00:00.000 --> 00:00:04.130 align:middle line:84% So and good afternoon, and a warm welcome to everybody. 00:00:04.130 --> 00:00:08.189 align:middle line:84% As a reminder, my name is Amit Mehta. 00:00:08.189 --> 00:00:11.610 align:middle line:84% I'm a portfolio manager for your company, JP Morgan India 00:00:11.610 --> 00:00:12.950 align:middle line:90% Investment Trust. 00:00:12.950 --> 00:00:17.870 align:middle line:84% As Rosemary mentioned, I'm also joined in person, or in person 00:00:17.870 --> 00:00:20.540 align:middle line:84% for you, at the AGM by my colleagues 00:00:20.540 --> 00:00:25.380 align:middle line:84% and co managers, Sandip Patodia and Ayaz Ebrahim. 00:00:25.380 --> 00:00:28.005 align:middle line:84% The agenda will follow with me covering 00:00:28.005 --> 00:00:34.530 align:middle line:84% the year gone by, performance portfolio, and the outlook. 00:00:34.530 --> 00:00:38.280 align:middle line:84% I will then hand over to Sandip to talk a bit about portfolio 00:00:38.280 --> 00:00:41.220 align:middle line:84% additions and new ideas and new investments 00:00:41.220 --> 00:00:42.810 align:middle line:90% we've made in your company. 00:00:42.810 --> 00:00:44.910 align:middle line:84% And Ayaz will then follow on to talk a bit 00:00:44.910 --> 00:00:49.200 align:middle line:84% about the macro outlook, after which I will provide a summary 00:00:49.200 --> 00:00:51.210 align:middle line:84% and then hand back to Rosemary and the board 00:00:51.210 --> 00:00:53.780 align:middle line:90% to open up questions. 00:00:53.780 --> 00:00:58.660 align:middle line:84% So let's begin with the next slide, which 00:00:58.660 --> 00:01:00.490 align:middle line:90% is a reminder of the team. 00:01:00.490 --> 00:01:05.140 align:middle line:84% You've heard about the portfolio managers 00:01:05.140 --> 00:01:06.550 align:middle line:90% and who are present here. 00:01:06.550 --> 00:01:08.920 align:middle line:84% But it's also important to know that we 00:01:08.920 --> 00:01:15.010 align:middle line:84% have a very broad and deep resources in our analysts. 00:01:15.010 --> 00:01:17.920 align:middle line:84% So the PM team works very closely 00:01:17.920 --> 00:01:20.650 align:middle line:84% with our analysts, who I mentioned. 00:01:20.650 --> 00:01:23.920 align:middle line:84% And we have 12 of those that are both on the ground 00:01:23.920 --> 00:01:27.160 align:middle line:84% in Mumbai as well as across the world covering 00:01:27.160 --> 00:01:29.710 align:middle line:90% global industries. 00:01:29.710 --> 00:01:31.930 align:middle line:84% And most of them have long-standing tenure 00:01:31.930 --> 00:01:34.160 align:middle line:90% in the industry. 00:01:34.160 --> 00:01:36.060 align:middle line:84% That's the team as you see on that page. 00:01:36.060 --> 00:01:40.560 align:middle line:84% If you go to the next slide, it's 00:01:40.560 --> 00:01:44.100 align:middle line:84% just as important at the beginning and every year, 00:01:44.100 --> 00:01:46.800 align:middle line:84% as much as it is to talk about our resources and the breadth 00:01:46.800 --> 00:01:54.150 align:middle line:84% of the team, to also remind shareholders and investors 00:01:54.150 --> 00:01:57.180 align:middle line:84% about what types of investments you should expect 00:01:57.180 --> 00:02:00.480 align:middle line:84% us to be making in your company, but also what 00:02:00.480 --> 00:02:05.050 align:middle line:84% types of investments are unlikely for us to invest in. 00:02:05.050 --> 00:02:07.890 align:middle line:84% So apologies, I said last year, you're 00:02:07.890 --> 00:02:10.949 align:middle line:90% likely to see this slide again. 00:02:10.949 --> 00:02:13.380 align:middle line:84% And I apologize again that you'll likely see it again 00:02:13.380 --> 00:02:14.257 align:middle line:90% in the future. 00:02:14.257 --> 00:02:15.840 align:middle line:84% But I think it's very important for us 00:02:15.840 --> 00:02:17.920 align:middle line:84% to understand what we're trying to do. 00:02:17.920 --> 00:02:20.700 align:middle line:84% So again, a repeat of that slide. 00:02:20.700 --> 00:02:22.530 align:middle line:84% What we're trying to do, very simply, 00:02:22.530 --> 00:02:27.000 align:middle line:84% is find high-quality businesses with strong governance 00:02:27.000 --> 00:02:28.770 align:middle line:90% at an attractive valuation. 00:02:28.770 --> 00:02:30.360 align:middle line:90% It's really that simple. 00:02:30.360 --> 00:02:32.190 align:middle line:84% But the order there is very important. 00:02:32.190 --> 00:02:34.780 align:middle line:84% The hierarchy of our decisions is very important. 00:02:34.780 --> 00:02:37.710 align:middle line:84% We never start by asking our analysts about 00:02:37.710 --> 00:02:39.970 align:middle line:90% whether businesses are cheap. 00:02:39.970 --> 00:02:42.450 align:middle line:84% We ask our analysts and we ask ourselves 00:02:42.450 --> 00:02:44.077 align:middle line:84% whether we think it's a great business. 00:02:44.077 --> 00:02:45.910 align:middle line:84% And that's really the starting point for us. 00:02:45.910 --> 00:02:47.250 align:middle line:90% And it's really in that order. 00:02:47.250 --> 00:02:51.750 align:middle line:84% The people and business matter much more to us 00:02:51.750 --> 00:02:54.390 align:middle line:84% than just the simple consideration of valuation. 00:02:54.390 --> 00:02:57.030 align:middle line:84% In our view, if we get the first two judgments right, 00:02:57.030 --> 00:03:00.120 align:middle line:84% the ability for these businesses to compound over a long period 00:03:00.120 --> 00:03:02.370 align:middle line:90% of time will be much higher. 00:03:02.370 --> 00:03:04.350 align:middle line:84% Now, when we find these businesses-- 00:03:04.350 --> 00:03:07.350 align:middle line:84% and we say India as a market has much more fertile ground 00:03:07.350 --> 00:03:09.300 align:middle line:90% for these types of businesses-- 00:03:09.300 --> 00:03:12.040 align:middle line:84% we want to own them for as long as possible. 00:03:12.040 --> 00:03:15.210 align:middle line:84% And that's for a number of reasons, one of them being you 00:03:15.210 --> 00:03:18.160 align:middle line:84% really want to get the benefits or the full benefits 00:03:18.160 --> 00:03:19.400 align:middle line:90% of compounding. 00:03:19.400 --> 00:03:22.720 align:middle line:84% And you can only do that if you stay as long-term investors. 00:03:22.720 --> 00:03:24.940 align:middle line:84% And secondly, we want to try and dilute 00:03:24.940 --> 00:03:27.400 align:middle line:84% as much as we can the transaction costs that 00:03:27.400 --> 00:03:31.100 align:middle line:84% come with investing in some of these more emerging markets. 00:03:31.100 --> 00:03:34.330 align:middle line:84% And so we do prioritize financial outcomes. 00:03:34.330 --> 00:03:36.830 align:middle line:84% And we think this is very connected. 00:03:36.830 --> 00:03:40.270 align:middle line:84% So if you start with that premise, the only thing 00:03:40.270 --> 00:03:41.480 align:middle line:90% that really matters-- 00:03:41.480 --> 00:03:43.060 align:middle line:84% and if we go to the next slide, you 00:03:43.060 --> 00:03:45.100 align:middle line:84% can see, again, a slide that we did present 00:03:45.100 --> 00:03:48.160 align:middle line:84% last year, very much, what really 00:03:48.160 --> 00:03:49.330 align:middle line:90% matters in the long term. 00:03:49.330 --> 00:03:50.960 align:middle line:90% You're a long-term investor. 00:03:50.960 --> 00:03:53.590 align:middle line:84% You believe in the power of compounding. 00:03:53.590 --> 00:03:55.900 align:middle line:84% Actually, the only thing that really matters 00:03:55.900 --> 00:03:58.840 align:middle line:84% is whether the businesses and the investments that we're 00:03:58.840 --> 00:04:02.020 align:middle line:84% making on your behalf have the ability to grow their earnings 00:04:02.020 --> 00:04:04.790 align:middle line:84% and do it sustainably over a long period of time. 00:04:04.790 --> 00:04:06.340 align:middle line:84% And what this chart really just shows 00:04:06.340 --> 00:04:12.740 align:middle line:84% you simply is the holding period, so the bottom axis, 00:04:12.740 --> 00:04:15.970 align:middle line:84% so the longer you go out and what the returns 00:04:15.970 --> 00:04:17.410 align:middle line:90% and where the returns come from. 00:04:17.410 --> 00:04:19.930 align:middle line:84% And the blue bars are really the earnings 00:04:19.930 --> 00:04:21.380 align:middle line:90% plus the dividend stream. 00:04:21.380 --> 00:04:24.858 align:middle line:84% And you can see the longer you hold a security for actually-- 00:04:24.858 --> 00:04:26.650 align:middle line:84% or the longer you invest in the market for, 00:04:26.650 --> 00:04:28.450 align:middle line:84% actually the only thing that really matters 00:04:28.450 --> 00:04:29.908 align:middle line:84% is whether the businesses have been 00:04:29.908 --> 00:04:32.140 align:middle line:84% able to deliver attractive earnings 00:04:32.140 --> 00:04:35.680 align:middle line:84% and have been able to pay you a little bit of a dividend. 00:04:35.680 --> 00:04:38.140 align:middle line:84% And this is the area we're really 00:04:38.140 --> 00:04:42.750 align:middle line:84% focusing on in our investments for your trust. 00:04:42.750 --> 00:04:44.700 align:middle line:84% So having put that as a backdrop, 00:04:44.700 --> 00:04:45.795 align:middle line:90% we go to the next slide. 00:04:45.795 --> 00:04:48.500 align:middle line:90% 00:04:48.500 --> 00:04:51.420 align:middle line:84% Let's talk a little bit about performance and the numbers. 00:04:51.420 --> 00:04:54.410 align:middle line:84% So here, we have the last fiscal year 00:04:54.410 --> 00:04:58.080 align:middle line:84% that ended in September 2023; the portfolio return, 00:04:58.080 --> 00:05:01.550 align:middle line:84% so that's the net asset value return over that one year 00:05:01.550 --> 00:05:06.540 align:middle line:84% period was 1.2%; the return of the benchmark, which 00:05:06.540 --> 00:05:13.830 align:middle line:84% is MSCI India was 0.7%; and both those numbers are in Sterling. 00:05:13.830 --> 00:05:17.380 align:middle line:84% And the share price return was 2.2%, 00:05:17.380 --> 00:05:21.040 align:middle line:84% so a very small narrowing of the discount. 00:05:21.040 --> 00:05:22.980 align:middle line:84% So that was the return over the year. 00:05:22.980 --> 00:05:25.950 align:middle line:84% If you look at it on calendar years' basis, 00:05:25.950 --> 00:05:29.430 align:middle line:84% you can see the numbers here as they're presented. 00:05:29.430 --> 00:05:31.230 align:middle line:84% Last quarter of the calendar year 00:05:31.230 --> 00:05:33.780 align:middle line:84% was a very strong return for the market. 00:05:33.780 --> 00:05:37.710 align:middle line:84% And it was over that period that we had a little bit more 00:05:37.710 --> 00:05:39.880 align:middle line:90% of a headwind to performance. 00:05:39.880 --> 00:05:41.850 align:middle line:84% But the other thing also to remind 00:05:41.850 --> 00:05:45.630 align:middle line:84% shareholders and investors is that this is obviously before-- 00:05:45.630 --> 00:05:47.310 align:middle line:84% the numbers you see at the index level 00:05:47.310 --> 00:05:49.770 align:middle line:84% are before capital gains tax, which is obviously 00:05:49.770 --> 00:05:52.260 align:middle line:90% a real charge for everybody. 00:05:52.260 --> 00:05:56.230 align:middle line:84% If we go to the attribution on the next slide, 00:05:56.230 --> 00:06:00.690 align:middle line:84% so on slide 7 now, you can see what worked for us really well 00:06:00.690 --> 00:06:02.610 align:middle line:90% and areas that were detractors. 00:06:02.610 --> 00:06:04.590 align:middle line:84% So if we start with the contributor, 00:06:04.590 --> 00:06:07.692 align:middle line:84% clearly a big cluster of a group of companies, 00:06:07.692 --> 00:06:09.150 align:middle line:84% so the Adani Group companies, which 00:06:09.150 --> 00:06:13.260 align:middle line:84% we talked about last year, where we had no exposure to, 00:06:13.260 --> 00:06:16.470 align:middle line:84% that's obviously been one big cluster that's been positive 00:06:16.470 --> 00:06:18.990 align:middle line:84% in terms of portfolio performance, and also 00:06:18.990 --> 00:06:22.578 align:middle line:84% more recent additions, as well as businesses 00:06:22.578 --> 00:06:24.120 align:middle line:84% that we've taken larger positions in, 00:06:24.120 --> 00:06:27.510 align:middle line:84% Supreme Industries, which has done significantly well for us. 00:06:27.510 --> 00:06:30.360 align:middle line:84% And obviously, this is only a small snapshot and small number 00:06:30.360 --> 00:06:32.080 align:middle line:90% of businesses. 00:06:32.080 --> 00:06:34.600 align:middle line:84% At the bottom end of the areas that 00:06:34.600 --> 00:06:36.813 align:middle line:84% detracted from performance, three out 00:06:36.813 --> 00:06:38.230 align:middle line:84% of those four businesses, the ones 00:06:38.230 --> 00:06:41.230 align:middle line:90% that we have no exposure to. 00:06:41.230 --> 00:06:44.390 align:middle line:84% And they are, going back to what I said right at the beginning, 00:06:44.390 --> 00:06:46.390 align:middle line:84% these are businesses that we're really not 00:06:46.390 --> 00:06:49.390 align:middle line:84% likely to have exposure to because they are either deeply 00:06:49.390 --> 00:06:51.670 align:middle line:84% cyclical, very capital intensive, 00:06:51.670 --> 00:06:53.680 align:middle line:84% lower quality businesses where we think 00:06:53.680 --> 00:06:56.860 align:middle line:90% there's questions on duration. 00:06:56.860 --> 00:06:59.560 align:middle line:84% And then, from a sector attribution perspective, 00:06:59.560 --> 00:07:02.530 align:middle line:84% you can see clearly the areas that did very well not having 00:07:02.530 --> 00:07:04.720 align:middle line:84% any of the utilities, which is connected to some 00:07:04.720 --> 00:07:07.422 align:middle line:84% of those individual names, financials-- 00:07:07.422 --> 00:07:09.130 align:middle line:84% our financial holdings, I've talked a lot 00:07:09.130 --> 00:07:10.660 align:middle line:84% about this in the past, where that's 00:07:10.660 --> 00:07:12.880 align:middle line:84% been a significant overweight for us-- contributed 00:07:12.880 --> 00:07:14.230 align:middle line:90% positively. 00:07:14.230 --> 00:07:18.100 align:middle line:84% And industrials, both in terms of some businesses that we did 00:07:18.100 --> 00:07:19.840 align:middle line:84% own, but also businesses that we didn't 00:07:19.840 --> 00:07:22.510 align:middle line:84% own where the investment cycle has been very, very 00:07:22.510 --> 00:07:25.330 align:middle line:90% positive there. 00:07:25.330 --> 00:07:30.212 align:middle line:84% If we go to the next slide, and again, it's not a new slide. 00:07:30.212 --> 00:07:32.420 align:middle line:84% But I think it's very important because I don't think 00:07:32.420 --> 00:07:33.710 align:middle line:90% things are going to change. 00:07:33.710 --> 00:07:36.260 align:middle line:84% But actually, the title here is just as important today as 00:07:36.260 --> 00:07:38.330 align:middle line:90% probably as it's ever been, i.e. 00:07:38.330 --> 00:07:40.640 align:middle line:84% exploring the investment possibilities of the world's 00:07:40.640 --> 00:07:42.560 align:middle line:90% most powerful growth engine. 00:07:42.560 --> 00:07:45.770 align:middle line:84% I think the last 12 or 18 months have really 00:07:45.770 --> 00:07:49.370 align:middle line:84% been our ability for India to really show 00:07:49.370 --> 00:07:52.032 align:middle line:84% it beginning parts of the growth engine 00:07:52.032 --> 00:07:53.990 align:middle line:84% that have really been dormant for a long while. 00:07:53.990 --> 00:07:55.170 align:middle line:84% And actually, I don't show it here, 00:07:55.170 --> 00:07:56.753 align:middle line:84% but we'll talk about that in a moment. 00:07:56.753 --> 00:07:58.280 align:middle line:84% So the three big areas that we've 00:07:58.280 --> 00:08:03.080 align:middle line:84% had long standing exposure to are clearly lifestyle upgrades. 00:08:03.080 --> 00:08:05.420 align:middle line:84% And you've seen me talk about it as well as write 00:08:05.420 --> 00:08:08.990 align:middle line:84% about it, which is about, as the income pyramid continues 00:08:08.990 --> 00:08:11.480 align:middle line:84% to shift, you're going to see the desire 00:08:11.480 --> 00:08:14.300 align:middle line:84% for different products increasing. 00:08:14.300 --> 00:08:17.990 align:middle line:84% Financial deepening, and this comes from increased access 00:08:17.990 --> 00:08:19.880 align:middle line:90% by individuals to credit. 00:08:19.880 --> 00:08:21.470 align:middle line:84% And again, as you get the access, 00:08:21.470 --> 00:08:23.600 align:middle line:90% the propensity to consume grows. 00:08:23.600 --> 00:08:26.510 align:middle line:84% And then the long standing or the historical drivers 00:08:26.510 --> 00:08:30.060 align:middle line:84% of areas that have done very well for India as an economy 00:08:30.060 --> 00:08:30.930 align:middle line:90% is the offshoring. 00:08:30.930 --> 00:08:33.090 align:middle line:84% And we don't think any of those are changing. 00:08:33.090 --> 00:08:36.100 align:middle line:84% So I'm going to take all of those individually. 00:08:36.100 --> 00:08:39.057 align:middle line:84% But we're also going to talk about the next cycle, 00:08:39.057 --> 00:08:41.140 align:middle line:84% or the cycle that we think we're in at the moment. 00:08:41.140 --> 00:08:42.809 align:middle line:90% So if we go to the next slide-- 00:08:42.809 --> 00:08:44.790 align:middle line:84% look, I think the drivers of consumption 00:08:44.790 --> 00:08:46.320 align:middle line:90% are very much in place. 00:08:46.320 --> 00:08:48.060 align:middle line:84% There is still parts of the economy that 00:08:48.060 --> 00:08:50.190 align:middle line:84% are doing much better and parts that are still 00:08:50.190 --> 00:08:51.480 align:middle line:90% waiting for that recovery. 00:08:51.480 --> 00:08:53.980 align:middle line:84% Now, if you look at the left-hand side of this chart, 00:08:53.980 --> 00:08:59.080 align:middle line:84% you can see the percentage of the higher income category 00:08:59.080 --> 00:08:59.580 align:middle line:90% growing. 00:08:59.580 --> 00:09:02.350 align:middle line:84% So you see the population change with income. 00:09:02.350 --> 00:09:06.000 align:middle line:84% So the population that had more than $10,000 US 00:09:06.000 --> 00:09:10.050 align:middle line:84% in income starting from 2011 on the left-hand side going up to, 00:09:10.050 --> 00:09:13.630 align:middle line:84% today 2023, and what we expect in the next two or three years. 00:09:13.630 --> 00:09:18.270 align:middle line:84% And you can see, even if you look at 2019 to 2023, 00:09:18.270 --> 00:09:21.210 align:middle line:84% that simple four-year period has seen 00:09:21.210 --> 00:09:24.390 align:middle line:84% nearly a doubling of the number of people that 00:09:24.390 --> 00:09:28.230 align:middle line:84% have gone from being sub $10,000 in annual income 00:09:28.230 --> 00:09:29.320 align:middle line:90% to more than that. 00:09:29.320 --> 00:09:33.000 align:middle line:84% And we expect a similar doubling over the next two or three 00:09:33.000 --> 00:09:34.290 align:middle line:90% years. 00:09:34.290 --> 00:09:36.660 align:middle line:84% And it's just not that in terms of simple stats. 00:09:36.660 --> 00:09:38.310 align:middle line:84% What that means is actually you start 00:09:38.310 --> 00:09:40.102 align:middle line:84% seeing, if you look at the right-hand side, 00:09:40.102 --> 00:09:42.030 align:middle line:84% some of the simple things starting to play out 00:09:42.030 --> 00:09:46.080 align:middle line:84% where you're starting to see more and more individuals 00:09:46.080 --> 00:09:51.540 align:middle line:84% transacting and spending more time on websites like Nykaa, 00:09:51.540 --> 00:09:54.450 align:middle line:84% which is a beauty transactional website, 00:09:54.450 --> 00:09:56.442 align:middle line:90% or buying more vehicles. 00:09:56.442 --> 00:09:58.650 align:middle line:84% And actually, some of the numbers-- and maybe just to 00:09:58.650 --> 00:10:00.120 align:middle line:90% put this into context. 00:10:00.120 --> 00:10:03.210 align:middle line:84% India has roughly about 300 million households 00:10:03.210 --> 00:10:06.850 align:middle line:84% and about 1.4 billion in terms of population. 00:10:06.850 --> 00:10:09.780 align:middle line:84% And if you look at the number of households 00:10:09.780 --> 00:10:11.340 align:middle line:90% that owns a vehicle-- 00:10:11.340 --> 00:10:15.060 align:middle line:84% 30-- 30 million households out of a possible 300. 00:10:15.060 --> 00:10:19.770 align:middle line:84% Our whole population of 1.4 billion, 85 million people 00:10:19.770 --> 00:10:21.040 align:middle line:90% have credit cards. 00:10:21.040 --> 00:10:23.790 align:middle line:84% So the number is just purely staggering in terms 00:10:23.790 --> 00:10:25.410 align:middle line:90% of the long-term opportunity. 00:10:25.410 --> 00:10:28.800 align:middle line:84% And as that income pyramid continues to shift northwards, 00:10:28.800 --> 00:10:31.590 align:middle line:84% we expect the ability for businesses 00:10:31.590 --> 00:10:33.330 align:middle line:84% that are exposed to some of these areas 00:10:33.330 --> 00:10:38.060 align:middle line:84% to continue to see significant long-term growth opportunities. 00:10:38.060 --> 00:10:39.440 align:middle line:90% If we go to the next slide-- 00:10:39.440 --> 00:10:41.000 align:middle line:90% and I think this is important. 00:10:41.000 --> 00:10:44.270 align:middle line:84% And I actually think this is one of the most material changes 00:10:44.270 --> 00:10:46.160 align:middle line:84% that we've seen in the last 12 months. 00:10:46.160 --> 00:10:48.770 align:middle line:84% And actually, it also tells the picture of India 00:10:48.770 --> 00:10:51.630 align:middle line:84% as a market in the economy over the last 20 years. 00:10:51.630 --> 00:10:54.680 align:middle line:84% So if we look at the investment cycle-- and I think 00:10:54.680 --> 00:10:56.900 align:middle line:84% we wrote about this in the annual report, which 00:10:56.900 --> 00:11:00.140 align:middle line:84% was the start and the potential start of a real investment 00:11:00.140 --> 00:11:00.950 align:middle line:90% cycle. 00:11:00.950 --> 00:11:03.680 align:middle line:84% The last time we had a proper investment cycle in India 00:11:03.680 --> 00:11:08.780 align:middle line:84% was between 2000 and 2007, pre the global financial crisis. 00:11:08.780 --> 00:11:11.480 align:middle line:84% And you can see here how investments continue 00:11:11.480 --> 00:11:13.670 align:middle line:90% to grow as a percentage of GDP. 00:11:13.670 --> 00:11:15.740 align:middle line:84% The last 10 years have actually seen 00:11:15.740 --> 00:11:19.610 align:middle line:90% that significantly reverse. 00:11:19.610 --> 00:11:22.520 align:middle line:84% And it's been pretty dormant in terms of real investments. 00:11:22.520 --> 00:11:25.580 align:middle line:84% And we've only really started to see that reaccelerate 00:11:25.580 --> 00:11:29.228 align:middle line:84% in essentially the current term of the current government. 00:11:29.228 --> 00:11:31.520 align:middle line:84% And clearly, that's a view that actually the government 00:11:31.520 --> 00:11:34.883 align:middle line:84% feels pretty comfortable with the outlook on politics 00:11:34.883 --> 00:11:36.800 align:middle line:84% and in terms of the elections that are coming. 00:11:36.800 --> 00:11:39.060 align:middle line:84% And I'm sure there'll be questions around that. 00:11:39.060 --> 00:11:41.790 align:middle line:84% And also, more importantly, you can see now 00:11:41.790 --> 00:11:45.390 align:middle line:84% that after utilizations have, one, recovered 00:11:45.390 --> 00:11:50.680 align:middle line:84% from the traction from COVID to normal levels, 00:11:50.680 --> 00:11:53.520 align:middle line:84% but also likely to now start going above levels, where 00:11:53.520 --> 00:11:55.980 align:middle line:84% the private sector will need to continue 00:11:55.980 --> 00:11:57.450 align:middle line:90% to increase investments. 00:11:57.450 --> 00:12:01.080 align:middle line:84% So we think this is the real new tailwind for the India 00:12:01.080 --> 00:12:04.140 align:middle line:84% investment story to continue to have legs and continue 00:12:04.140 --> 00:12:06.495 align:middle line:90% to drive economic growth. 00:12:06.495 --> 00:12:07.870 align:middle line:84% Now, if you go to the next slide, 00:12:07.870 --> 00:12:09.328 align:middle line:84% this is very much one that everyone 00:12:09.328 --> 00:12:12.870 align:middle line:84% should be familiar with, which is about the market 00:12:12.870 --> 00:12:14.940 align:middle line:84% share gains on the supply side, where India still 00:12:14.940 --> 00:12:18.330 align:middle line:84% remains a low-cost manufacturing opportunity. 00:12:18.330 --> 00:12:20.100 align:middle line:84% Labor costs remain relatively low. 00:12:20.100 --> 00:12:21.810 align:middle line:84% The yellow part of that left-hand chart 00:12:21.810 --> 00:12:27.840 align:middle line:84% tells you that the average pool of labor costs are $13,000 US. 00:12:27.840 --> 00:12:32.340 align:middle line:84% Similar engineer in the US will cost 10-fold or 10 times 00:12:32.340 --> 00:12:33.300 align:middle line:90% that number. 00:12:33.300 --> 00:12:36.240 align:middle line:84% So the market share gains that the right-hand chart 00:12:36.240 --> 00:12:39.210 align:middle line:84% shows you are ones that we think, whilst they may have 00:12:39.210 --> 00:12:42.250 align:middle line:84% been quieter over the last year or slower over the last year, 00:12:42.250 --> 00:12:45.030 align:middle line:84% we expect them to be able to continue to gain share. 00:12:45.030 --> 00:12:47.130 align:middle line:84% And that's going to spill over also 00:12:47.130 --> 00:12:49.380 align:middle line:84% into other industries where I'm sure a lot of people 00:12:49.380 --> 00:12:51.750 align:middle line:84% have already heard about the new investments happening 00:12:51.750 --> 00:12:54.660 align:middle line:84% from companies like Tesla or Apple, et cetera. 00:12:54.660 --> 00:12:56.370 align:middle line:84% And that's going to be driven by some 00:12:56.370 --> 00:12:59.647 align:middle line:84% of that opportunity on the cost side. 00:12:59.647 --> 00:13:01.980 align:middle line:84% Now, let me just finish off before I hand over to Sandip 00:13:01.980 --> 00:13:04.290 align:middle line:84% on what that means and from a portfolio positioning 00:13:04.290 --> 00:13:07.950 align:middle line:84% and how it looks from a sector and a stock perspective. 00:13:07.950 --> 00:13:09.570 align:middle line:84% I talked about those broad themes. 00:13:09.570 --> 00:13:12.810 align:middle line:84% It shouldn't be any surprise then that actually 00:13:12.810 --> 00:13:15.450 align:middle line:84% the significant portion of your investments 00:13:15.450 --> 00:13:18.630 align:middle line:84% are in the financials, consumer, and tech sectors. 00:13:18.630 --> 00:13:22.530 align:middle line:84% It's the areas that we find both bottom up stock opportunities 00:13:22.530 --> 00:13:26.190 align:middle line:84% the most attractive, but also where we think actually 00:13:26.190 --> 00:13:29.100 align:middle line:84% the long-term opportunities from the industries exist. 00:13:29.100 --> 00:13:32.110 align:middle line:84% The right-hand side has been a long-standing structural 00:13:32.110 --> 00:13:32.610 align:middle line:90% underweight. 00:13:32.610 --> 00:13:34.330 align:middle line:84% You shouldn't expect that to change. 00:13:34.330 --> 00:13:38.440 align:middle line:84% We're unlikely to invest in energy material, utilities, 00:13:38.440 --> 00:13:41.280 align:middle line:84% property, highly capital intensive, deeply 00:13:41.280 --> 00:13:42.270 align:middle line:90% cyclical businesses. 00:13:42.270 --> 00:13:43.728 align:middle line:84% We think the India investment story 00:13:43.728 --> 00:13:45.930 align:middle line:84% is much more about the domestic opportunity, 00:13:45.930 --> 00:13:47.580 align:middle line:90% as I've already highlighted. 00:13:47.580 --> 00:13:50.280 align:middle line:84% And I think that's the real opportunity for our underlying 00:13:50.280 --> 00:13:53.030 align:middle line:90% investments for your company. 00:13:53.030 --> 00:13:54.720 align:middle line:84% And the last couple of slides are really 00:13:54.720 --> 00:13:58.660 align:middle line:84% the top 10 positions, on the next slide, which are some 00:13:58.660 --> 00:14:00.040 align:middle line:90% of them, very well-known names. 00:14:00.040 --> 00:14:01.810 align:middle line:84% But actually, I think these take away 00:14:01.810 --> 00:14:03.577 align:middle line:84% from the real other opportunities 00:14:03.577 --> 00:14:04.910 align:middle line:90% that we've got in the portfolio. 00:14:04.910 --> 00:14:06.618 align:middle line:84% And that's what I've asked Sandip to talk 00:14:06.618 --> 00:14:07.940 align:middle line:90% a little bit about in a moment. 00:14:07.940 --> 00:14:09.610 align:middle line:84% So if you go to the next slide, which 00:14:09.610 --> 00:14:12.730 align:middle line:84% is very much the portfolio characteristics, bringing 00:14:12.730 --> 00:14:15.010 align:middle line:84% all of that together, if you start actually 00:14:15.010 --> 00:14:17.290 align:middle line:84% in the bottom right, you can see a broad spread 00:14:17.290 --> 00:14:19.270 align:middle line:90% of market capitalization. 00:14:19.270 --> 00:14:23.200 align:middle line:84% We will go wherever we find the best opportunities. 00:14:23.200 --> 00:14:26.680 align:middle line:84% We are not particularly using the Trust structure. 00:14:26.680 --> 00:14:30.220 align:middle line:84% We have the ability to go down the liquidity spectrum. 00:14:30.220 --> 00:14:34.610 align:middle line:84% And we will if the valuations make sense to us. 00:14:34.610 --> 00:14:36.760 align:middle line:84% The classifications tell you that it's-- 00:14:36.760 --> 00:14:38.800 align:middle line:84% this is an internal classification system, 00:14:38.800 --> 00:14:42.040 align:middle line:84% but it tells you that the vast majority of your trust assets 00:14:42.040 --> 00:14:45.490 align:middle line:84% are in businesses of premium quality, i.e. the highest 00:14:45.490 --> 00:14:47.290 align:middle line:84% quality parts of the Indian market. 00:14:47.290 --> 00:14:49.210 align:middle line:84% And in terms of overall characteristics, 00:14:49.210 --> 00:14:52.150 align:middle line:84% you can see here that the numbers that focus 00:14:52.150 --> 00:14:55.953 align:middle line:84% a lot more on return on equity and the debt 00:14:55.953 --> 00:14:57.370 align:middle line:84% that the businesses that we invest 00:14:57.370 --> 00:14:59.020 align:middle line:84% in, which is significant, the return 00:14:59.020 --> 00:15:02.800 align:middle line:84% on equity, which is a yardstick for corporate quality, which 00:15:02.800 --> 00:15:05.470 align:middle line:84% is significantly higher than the benchmark. 00:15:05.470 --> 00:15:07.510 align:middle line:84% Leverage or debt on balance sheets 00:15:07.510 --> 00:15:09.470 align:middle line:84% is significantly lower than the benchmark. 00:15:09.470 --> 00:15:11.980 align:middle line:84% And we think businesses can sustain these high returns 00:15:11.980 --> 00:15:12.850 align:middle line:90% on capital. 00:15:12.850 --> 00:15:15.770 align:middle line:84% And they can continue to deliver higher rates of growth. 00:15:15.770 --> 00:15:17.800 align:middle line:84% And that means you get the numbers 00:15:17.800 --> 00:15:19.038 align:middle line:90% that you see on that page. 00:15:19.038 --> 00:15:20.830 align:middle line:84% The only other two numbers to point to here 00:15:20.830 --> 00:15:23.080 align:middle line:84% is our active tier, which has gradually crept up 00:15:23.080 --> 00:15:25.060 align:middle line:84% over the year and that's as we continue 00:15:25.060 --> 00:15:27.670 align:middle line:84% to find more and more idiosyncratic opportunities, 00:15:27.670 --> 00:15:31.900 align:middle line:84% and the beta, which is always going to likely be south of 1. 00:15:31.900 --> 00:15:35.210 align:middle line:84% And that's very much driven by investments in higher quality 00:15:35.210 --> 00:15:36.750 align:middle line:90% businesses. 00:15:36.750 --> 00:15:38.450 align:middle line:84% So with that, as I said, we've talked 00:15:38.450 --> 00:15:39.440 align:middle line:90% about some of the larger names. 00:15:39.440 --> 00:15:41.870 align:middle line:84% But I'll pass over to Sandip to give you a little bit more 00:15:41.870 --> 00:15:44.855 align:middle line:84% of a highlight of some of the mid-cap names 00:15:44.855 --> 00:15:46.730 align:middle line:84% or some of the more interesting opportunities 00:15:46.730 --> 00:15:49.850 align:middle line:84% that you may not see just by looking at some of our top 10 00:15:49.850 --> 00:15:50.540 align:middle line:90% holdings. 00:15:50.540 --> 00:15:51.740 align:middle line:90% So Sandip, over to you. 00:15:51.740 --> 00:15:57.800 align:middle line:90% 00:15:57.800 --> 00:16:01.910 align:middle line:84% --manage the India trust along with Amit and Ayaz. 00:16:01.910 --> 00:16:04.910 align:middle line:84% On this slide, we have highlighted four companies 00:16:04.910 --> 00:16:09.680 align:middle line:84% that we have added to the portfolio during the year. 00:16:09.680 --> 00:16:12.380 align:middle line:84% I'll start with Tube Investments, which 00:16:12.380 --> 00:16:15.590 align:middle line:84% is a part of an Indian conglomerate called Murugappa 00:16:15.590 --> 00:16:19.550 align:middle line:84% Group, with a reputation for prudent and efficient capital 00:16:19.550 --> 00:16:20.870 align:middle line:90% allocation. 00:16:20.870 --> 00:16:25.430 align:middle line:84% We were impressed by the group's clearly articulated strategy 00:16:25.430 --> 00:16:29.330 align:middle line:84% of making Tube a diversified industrial manufacturer 00:16:29.330 --> 00:16:33.980 align:middle line:84% across auto components, motors, electric vehicles, 00:16:33.980 --> 00:16:36.500 align:middle line:84% medical equipment, and CDMO sectors 00:16:36.500 --> 00:16:39.680 align:middle line:84% with low-cost manufacturing excellence at its core 00:16:39.680 --> 00:16:41.240 align:middle line:90% competency. 00:16:41.240 --> 00:16:43.400 align:middle line:84% This mindset for this business has 00:16:43.400 --> 00:16:45.890 align:middle line:84% translated into excellent economics 00:16:45.890 --> 00:16:49.280 align:middle line:84% for the business demonstrated by the strong growth, returns, 00:16:49.280 --> 00:16:52.420 align:middle line:90% and cash flow generation. 00:16:52.420 --> 00:16:54.610 align:middle line:84% The second company on the slide, as you can see, 00:16:54.610 --> 00:16:58.870 align:middle line:84% is Triveni Turbine, which is another industrial business. 00:16:58.870 --> 00:17:01.300 align:middle line:84% And this plays into the theme of the CapEx cycle 00:17:01.300 --> 00:17:03.744 align:middle line:84% that Amit talked about in his previous slides. 00:17:03.744 --> 00:17:06.514 align:middle line:90% 00:17:06.514 --> 00:17:10.630 align:middle line:84% It is the largest manufacturer of steam turbines in India. 00:17:10.630 --> 00:17:12.670 align:middle line:84% The business generates an underlying return 00:17:12.670 --> 00:17:14.500 align:middle line:90% on capital of 200%. 00:17:14.500 --> 00:17:16.960 align:middle line:84% What I mean by that, if you think of return on capital, 00:17:16.960 --> 00:17:19.569 align:middle line:84% you think about, let's say, if you 00:17:19.569 --> 00:17:22.260 align:middle line:84% have a fixed deposit in the bank account, 00:17:22.260 --> 00:17:25.569 align:middle line:84% it earns an interest income of, let's say, 5%. 00:17:25.569 --> 00:17:28.060 align:middle line:84% 200% return on capital represents the return 00:17:28.060 --> 00:17:31.300 align:middle line:84% they make on investments they make just 00:17:31.300 --> 00:17:33.985 align:middle line:90% to give you a comparison. 00:17:33.985 --> 00:17:35.470 align:middle line:84% And they generate such high returns 00:17:35.470 --> 00:17:37.780 align:middle line:84% by virtue of its technological leadership 00:17:37.780 --> 00:17:42.380 align:middle line:84% in a complex segment with strong cost advantage 00:17:42.380 --> 00:17:45.550 align:middle line:84% and extremely good relationship with its customers. 00:17:45.550 --> 00:17:48.070 align:middle line:84% There is visibility on long-term growth, 00:17:48.070 --> 00:17:51.590 align:middle line:84% both from strong domestic demand in the Indian market for power 00:17:51.590 --> 00:17:54.680 align:middle line:84% generation and market share gains in the global market, 00:17:54.680 --> 00:17:58.490 align:middle line:84% from giants like Siemens, including expansion 00:17:58.490 --> 00:18:01.460 align:middle line:84% into much higher margin after-sales services business 00:18:01.460 --> 00:18:03.410 align:middle line:90% that Triveni has embarked upon. 00:18:03.410 --> 00:18:06.050 align:middle line:84% The majority owners of this business are very conservative 00:18:06.050 --> 00:18:09.320 align:middle line:84% and have demonstrated prudent capital allocation 00:18:09.320 --> 00:18:13.820 align:middle line:84% and consistently return excess cash to shareholders. 00:18:13.820 --> 00:18:15.530 align:middle line:90% So that was the second one. 00:18:15.530 --> 00:18:18.430 align:middle line:84% The third company that I'd like to highlight is Coforge. 00:18:18.430 --> 00:18:21.760 align:middle line:84% And Coforge is a midsized IT services company 00:18:21.760 --> 00:18:25.210 align:middle line:84% that offers strong incentives to sales teams, which 00:18:25.210 --> 00:18:26.950 align:middle line:84% has allowed it to effectively compete 00:18:26.950 --> 00:18:29.500 align:middle line:84% with large, more established IT services 00:18:29.500 --> 00:18:32.740 align:middle line:84% companies in the country, likes of [? PCS ?] and Infosys 00:18:32.740 --> 00:18:37.190 align:middle line:84% that we also own in the portfolio, by the way. 00:18:37.190 --> 00:18:40.910 align:middle line:84% This incentive culture, which was instituted 00:18:40.910 --> 00:18:43.370 align:middle line:84% by the CEO Sudhir Singh following 00:18:43.370 --> 00:18:46.550 align:middle line:84% his appointment in 2017 and has resulted 00:18:46.550 --> 00:18:48.560 align:middle line:84% in the company delivering one of the fastest 00:18:48.560 --> 00:18:51.690 align:middle line:84% growth in the industry over the last five years. 00:18:51.690 --> 00:18:53.630 align:middle line:84% In addition, the company has a reputation 00:18:53.630 --> 00:18:55.700 align:middle line:84% for superior delivery of services 00:18:55.700 --> 00:18:57.320 align:middle line:84% backed by having the lowest employee 00:18:57.320 --> 00:18:59.100 align:middle line:90% attrition in the industry. 00:18:59.100 --> 00:19:01.040 align:middle line:84% All of this combined with good governance 00:19:01.040 --> 00:19:03.380 align:middle line:84% and reasonable valuations made Coforge 00:19:03.380 --> 00:19:06.950 align:middle line:84% an attractive investment for the trust. 00:19:06.950 --> 00:19:11.140 align:middle line:84% And finally, Cholamandalam is a leading 00:19:11.140 --> 00:19:14.440 align:middle line:84% wholesale-funded vehicle financier that has consistently 00:19:14.440 --> 00:19:18.340 align:middle line:84% grown its assets under management in excess of 20% 00:19:18.340 --> 00:19:21.490 align:middle line:84% by expanding into new segments while maintaining one 00:19:21.490 --> 00:19:25.540 align:middle line:84% of the lowest credit costs through a cycle 00:19:25.540 --> 00:19:29.870 align:middle line:84% and an attractive ROE profile of 19% to 20%. 00:19:29.870 --> 00:19:32.800 align:middle line:84% The company targets middle-of-the-pyramid customers 00:19:32.800 --> 00:19:37.150 align:middle line:84% in India and provides them with loans to support livelihoods 00:19:37.150 --> 00:19:40.120 align:middle line:84% with a focus on data-driven underwriting. 00:19:40.120 --> 00:19:43.660 align:middle line:84% This providing loans to customers 00:19:43.660 --> 00:19:45.370 align:middle line:84% that support livelihoods is important 00:19:45.370 --> 00:19:48.790 align:middle line:84% because it reduces the risk of default automatically, 00:19:48.790 --> 00:19:52.690 align:middle line:84% purely because it's a livelihood linked loan that they provide. 00:19:52.690 --> 00:19:56.560 align:middle line:84% Overall, Chola screens well in our economics, duration, 00:19:56.560 --> 00:19:58.630 align:middle line:84% and governance framework given the ability 00:19:58.630 --> 00:20:00.730 align:middle line:84% to balance growth and profitability. 00:20:00.730 --> 00:20:03.550 align:middle line:84% Extending growth runway via expansion 00:20:03.550 --> 00:20:06.770 align:middle line:84% into new segments and comfort, we derive on governance 00:20:06.770 --> 00:20:09.530 align:middle line:84% from it being part of Murugappa Group. 00:20:09.530 --> 00:20:12.980 align:middle line:84% I hope the examples give you a sense of types 00:20:12.980 --> 00:20:14.930 align:middle line:84% of high-quality businesses that we 00:20:14.930 --> 00:20:17.930 align:middle line:84% invest in backed by a robust research process 00:20:17.930 --> 00:20:20.000 align:middle line:84% while being conscious of valuations. 00:20:20.000 --> 00:20:23.090 align:middle line:84% It goes back to the investment process 00:20:23.090 --> 00:20:25.520 align:middle line:84% that Amit talked about in the first slide. 00:20:25.520 --> 00:20:27.530 align:middle line:84% With this, I will hand over to Ayaz 00:20:27.530 --> 00:20:29.330 align:middle line:84% to run through the rest of the presentation 00:20:29.330 --> 00:20:31.350 align:middle line:84% before we take questions from the audience. 00:20:31.350 --> 00:20:31.910 align:middle line:90% Thank you. 00:20:31.910 --> 00:20:39.960 align:middle line:90% 00:20:39.960 --> 00:20:40.590 align:middle line:90% Good afternoon. 00:20:40.590 --> 00:20:41.798 align:middle line:90% Thank you all for being here. 00:20:41.798 --> 00:20:43.760 align:middle line:84% And thank you for all the support. 00:20:43.760 --> 00:20:45.800 align:middle line:84% I'll just in a few minutes give an overview 00:20:45.800 --> 00:20:49.400 align:middle line:84% of what we think the macro position is right now in India. 00:20:49.400 --> 00:20:53.570 align:middle line:84% And the slide that we have here is a good summary of that. 00:20:53.570 --> 00:20:56.780 align:middle line:84% In terms of GDP growth over the last few years, 00:20:56.780 --> 00:20:59.120 align:middle line:84% I think all of you have already guessed that essentially 00:20:59.120 --> 00:21:03.230 align:middle line:84% in the year to March 2021, it was a negative year in terms 00:21:03.230 --> 00:21:04.040 align:middle line:90% of GDP growth. 00:21:04.040 --> 00:21:06.320 align:middle line:90% But that was because of COVID. 00:21:06.320 --> 00:21:10.310 align:middle line:84% We saw a sharp rebound in GDP growth for the year 00:21:10.310 --> 00:21:15.740 align:middle line:84% up to March 2022, which was around just short of about 9%. 00:21:15.740 --> 00:21:17.450 align:middle line:84% And we're now back to levels where 00:21:17.450 --> 00:21:20.930 align:middle line:84% we think India has a very normalized growth 00:21:20.930 --> 00:21:25.580 align:middle line:84% rates of anywhere between 5 and 1/2% to possibly 7%. 00:21:25.580 --> 00:21:29.630 align:middle line:84% And we think that is sustainable over multi years. 00:21:29.630 --> 00:21:31.770 align:middle line:84% What is it being driven by right now? 00:21:31.770 --> 00:21:33.380 align:middle line:84% And I think this is important to note. 00:21:33.380 --> 00:21:35.990 align:middle line:84% The CapEx cycle, which Amit talked about, 00:21:35.990 --> 00:21:37.100 align:middle line:90% is very much in place. 00:21:37.100 --> 00:21:40.090 align:middle line:84% The whole CapEx cycle is improving. 00:21:40.090 --> 00:21:43.620 align:middle line:84% It had been the impetus, especially after COVID, 00:21:43.620 --> 00:21:45.870 align:middle line:90% was led by the government. 00:21:45.870 --> 00:21:48.150 align:middle line:84% But we're now seeing that the private sector 00:21:48.150 --> 00:21:51.340 align:middle line:84% CapEx is beginning to grow as well, which is very important. 00:21:51.340 --> 00:21:54.810 align:middle line:84% The other thing to bear in mind here that the CapEx cycle is 00:21:54.810 --> 00:21:59.520 align:middle line:84% also linked to or an extension of infrastructure spending. 00:21:59.520 --> 00:22:01.800 align:middle line:84% Those of you who've been to India 00:22:01.800 --> 00:22:04.890 align:middle line:84% have seen the fact that, yes, India still 00:22:04.890 --> 00:22:10.440 align:middle line:84% needs better improvement in roads, ports, airports, power. 00:22:10.440 --> 00:22:13.350 align:middle line:84% And we've seen a lot of improvement in that area. 00:22:13.350 --> 00:22:16.140 align:middle line:84% I started investing in India in 1991. 00:22:16.140 --> 00:22:18.390 align:middle line:84% And even before that, I used to go regularly to India 00:22:18.390 --> 00:22:21.040 align:middle line:90% as I'm of Indian origin. 00:22:21.040 --> 00:22:24.510 align:middle line:84% And I've seen so much improvement in that area, 00:22:24.510 --> 00:22:26.070 align:middle line:90% visibly myself. 00:22:26.070 --> 00:22:28.650 align:middle line:90% Mumbai Airport is great. 00:22:28.650 --> 00:22:30.630 align:middle line:84% You've got new roads that are coming out 00:22:30.630 --> 00:22:33.570 align:middle line:84% in Mumbai that are making distances much shorter. 00:22:33.570 --> 00:22:38.350 align:middle line:84% One big commute is one area from Bandra to South Bombay, 00:22:38.350 --> 00:22:41.250 align:middle line:84% which normally takes 1, 1 1/2 hours, 00:22:41.250 --> 00:22:44.310 align:middle line:84% it's going to be cut down to 15 minutes with these coastal 00:22:44.310 --> 00:22:47.470 align:middle line:84% highways that are being built. So one of the issues, 00:22:47.470 --> 00:22:50.490 align:middle line:84% which was always being asked in the 1990s to me, 00:22:50.490 --> 00:22:52.950 align:middle line:84% is what are the risks to investing in India. 00:22:52.950 --> 00:22:56.187 align:middle line:84% And I always said the risk was the government policies 00:22:56.187 --> 00:22:58.020 align:middle line:84% are going in the right direction for growth, 00:22:58.020 --> 00:23:01.120 align:middle line:84% but bottlenecks could be reached because of infrastructure. 00:23:01.120 --> 00:23:04.230 align:middle line:84% However, we are seeing that being addressed today. 00:23:04.230 --> 00:23:06.270 align:middle line:84% And I think those developments are very strong. 00:23:06.270 --> 00:23:09.270 align:middle line:84% And it's coming out through the numbers in the infrastructure 00:23:09.270 --> 00:23:11.370 align:middle line:84% spending that we're seeing, led by the government, 00:23:11.370 --> 00:23:13.140 align:middle line:84% but the private sector is increasing 00:23:13.140 --> 00:23:14.820 align:middle line:90% as well, which is important. 00:23:14.820 --> 00:23:18.970 align:middle line:84% In terms of growth going forward into the next 12, 24 months, 00:23:18.970 --> 00:23:20.640 align:middle line:84% again, we believe the CapEx cycle 00:23:20.640 --> 00:23:22.440 align:middle line:90% is continuing to be strong. 00:23:22.440 --> 00:23:25.230 align:middle line:84% Private sector investment in that area 00:23:25.230 --> 00:23:28.920 align:middle line:84% also is going to take some of the public sector, 00:23:28.920 --> 00:23:31.170 align:middle line:84% allow the public sector to come down a bit. 00:23:31.170 --> 00:23:33.060 align:middle line:84% Very importantly in the budget, which 00:23:33.060 --> 00:23:35.430 align:middle line:84% was announced in early February, there 00:23:35.430 --> 00:23:37.350 align:middle line:84% was always a danger in speculation 00:23:37.350 --> 00:23:39.720 align:middle line:84% that this budget was going to be populist because, 00:23:39.720 --> 00:23:42.120 align:middle line:84% as you all know, the general elections are coming up. 00:23:42.120 --> 00:23:44.310 align:middle line:84% But full credit to the government, it 00:23:44.310 --> 00:23:45.690 align:middle line:90% was not populist. 00:23:45.690 --> 00:23:47.850 align:middle line:90% It was very prudent. 00:23:47.850 --> 00:23:50.550 align:middle line:84% It talked about government expenditure 00:23:50.550 --> 00:23:52.380 align:middle line:90% being tightly controlled. 00:23:52.380 --> 00:23:55.590 align:middle line:84% It was focused, again, on infrastructure. 00:23:55.590 --> 00:23:58.980 align:middle line:84% But it laid out a plan as well of government expenditure 00:23:58.980 --> 00:24:00.630 align:middle line:84% coming down over the next few years, 00:24:00.630 --> 00:24:04.090 align:middle line:84% with hopefully more private sector investment in that area, 00:24:04.090 --> 00:24:07.990 align:middle line:84% so a very prudent and sensible budget. 00:24:07.990 --> 00:24:11.650 align:middle line:84% Going on to the elections, I think all of you 00:24:11.650 --> 00:24:13.390 align:middle line:84% are fully aware of what's going on 00:24:13.390 --> 00:24:15.490 align:middle line:90% and what's being written about. 00:24:15.490 --> 00:24:19.510 align:middle line:84% It does appear that the BJP will win quite comfortably 00:24:19.510 --> 00:24:21.640 align:middle line:84% with a good majority in Parliament. 00:24:21.640 --> 00:24:25.330 align:middle line:84% What that will mean in terms of economic policy means 00:24:25.330 --> 00:24:27.160 align:middle line:84% that it will continue the way it is. 00:24:27.160 --> 00:24:31.810 align:middle line:84% It is pro business, continued investment into infrastructure, 00:24:31.810 --> 00:24:35.950 align:middle line:84% which will help India meet its full potential. 00:24:35.950 --> 00:24:39.700 align:middle line:84% So we continue to be very positive on that side. 00:24:39.700 --> 00:24:42.760 align:middle line:84% Maybe I should just mention over here very quickly 00:24:42.760 --> 00:24:43.840 align:middle line:90% what are the risks. 00:24:43.840 --> 00:24:46.720 align:middle line:84% I've pointed out some very positive picture, 00:24:46.720 --> 00:24:48.070 align:middle line:90% which we very much are. 00:24:48.070 --> 00:24:50.770 align:middle line:84% The consumption story, which Amit's already talked about 00:24:50.770 --> 00:24:54.340 align:middle line:84% and touched on by Sandip in various ways as well. 00:24:54.340 --> 00:24:58.420 align:middle line:84% I think in the nearer term, where oil prices are, 00:24:58.420 --> 00:24:59.890 align:middle line:84% we would have always been concerned 00:24:59.890 --> 00:25:02.690 align:middle line:84% in the past about current account deficits and so on. 00:25:02.690 --> 00:25:04.990 align:middle line:84% But it's in pretty decent health at the moment. 00:25:04.990 --> 00:25:07.690 align:middle line:84% Again, I think government policy has been very good. 00:25:07.690 --> 00:25:10.030 align:middle line:84% And RBI policy, Reserve Bank of India, 00:25:10.030 --> 00:25:12.462 align:middle line:84% again has managed all of this very well. 00:25:12.462 --> 00:25:14.420 align:middle line:84% But the other thing I wanted to point out here, 00:25:14.420 --> 00:25:16.480 align:middle line:84% which isn't talked about a lot, is 00:25:16.480 --> 00:25:22.060 align:middle line:84% that Amit pointed out about the cost advantage that India has. 00:25:22.060 --> 00:25:25.690 align:middle line:84% And that was always focused on the IT sector being exported 00:25:25.690 --> 00:25:27.910 align:middle line:84% out of India, providing solutions 00:25:27.910 --> 00:25:31.340 align:middle line:84% for big corporates in the US, UK, Europe, and so on. 00:25:31.340 --> 00:25:35.150 align:middle line:84% But there's a lot of onshoring taking place right now. 00:25:35.150 --> 00:25:36.200 align:middle line:90% And what does that mean? 00:25:36.200 --> 00:25:42.260 align:middle line:84% It's these global centers of where multinationals 00:25:42.260 --> 00:25:47.520 align:middle line:84% are hiring people in India to work for them in a global way. 00:25:47.520 --> 00:25:49.220 align:middle line:90% An example of that is JP Morgan. 00:25:49.220 --> 00:25:52.190 align:middle line:90% We have 270,000 people globally. 00:25:52.190 --> 00:25:57.500 align:middle line:84% We have 55,000 of them employed in India, Indian people. 00:25:57.500 --> 00:26:00.440 align:middle line:84% Now, this is not only JP Morgan, but it's 00:26:00.440 --> 00:26:05.060 align:middle line:84% the Googles, the Microsofts, the Goldman Sachs, the Citigroups. 00:26:05.060 --> 00:26:08.180 align:middle line:84% And this is providing important foreign exchange to India 00:26:08.180 --> 00:26:08.940 align:middle line:90% as well. 00:26:08.940 --> 00:26:11.750 align:middle line:84% And we see this trend continuing in providing 00:26:11.750 --> 00:26:14.760 align:middle line:84% that more balanced in terms of foreign exchange as well, 00:26:14.760 --> 00:26:16.550 align:middle line:90% so important to highlight 00:26:16.550 --> 00:26:18.602 align:middle line:84% I think geopolitically there's always tensions. 00:26:18.602 --> 00:26:20.060 align:middle line:84% And there are issues that are going 00:26:20.060 --> 00:26:21.380 align:middle line:90% on we should be aware of that. 00:26:21.380 --> 00:26:23.340 align:middle line:84% But oil prices would have been a concern, 00:26:23.340 --> 00:26:28.160 align:middle line:84% but it's mitigated at the moment with what I just talked about. 00:26:28.160 --> 00:26:30.560 align:middle line:84% Maybe just talking about inflation and interest rates 00:26:30.560 --> 00:26:31.400 align:middle line:90% on the next slide. 00:26:31.400 --> 00:26:33.980 align:middle line:90% 00:26:33.980 --> 00:26:35.660 align:middle line:84% In terms of interest rates, which 00:26:35.660 --> 00:26:37.220 align:middle line:84% is on the left-hand side of the chart 00:26:37.220 --> 00:26:39.350 align:middle line:84% there showing the 10 year bond yields, 00:26:39.350 --> 00:26:41.780 align:middle line:84% we've seen that actually stabilizing. 00:26:41.780 --> 00:26:43.280 align:middle line:84% And that's linked to the fact, if we 00:26:43.280 --> 00:26:46.610 align:middle line:84% go to the right-hand side, inflation has been steadying. 00:26:46.610 --> 00:26:49.370 align:middle line:84% And we actually believe that we may see interest rate 00:26:49.370 --> 00:26:52.160 align:middle line:84% cuts from the Reserve Bank of India later on this year. 00:26:52.160 --> 00:26:55.430 align:middle line:84% But certainly, inflation is coming under control. 00:26:55.430 --> 00:26:57.800 align:middle line:84% And we're not too concerned by that at the moment. 00:26:57.800 --> 00:27:02.060 align:middle line:84% Inflation had blipped up, largely driven by food prices, 00:27:02.060 --> 00:27:05.870 align:middle line:84% part of it due to COVID supply constraints, which is easing, 00:27:05.870 --> 00:27:07.430 align:middle line:84% but also government policy, which 00:27:07.430 --> 00:27:12.500 align:middle line:84% is helping to ease some of those supply constraints. 00:27:12.500 --> 00:27:14.120 align:middle line:84% Maybe we'll go on to the next slide 00:27:14.120 --> 00:27:17.180 align:middle line:84% about a very important factor about what 00:27:17.180 --> 00:27:19.370 align:middle line:84% is delivering returns in the Indian stock 00:27:19.370 --> 00:27:22.140 align:middle line:90% market for investors. 00:27:22.140 --> 00:27:25.950 align:middle line:84% This is showing returns or the breakdown 00:27:25.950 --> 00:27:30.930 align:middle line:84% of returns for different markets in the emerging market area. 00:27:30.930 --> 00:27:35.130 align:middle line:84% The sources of returns in terms of equity markets 00:27:35.130 --> 00:27:37.380 align:middle line:84% are really broken down into four bits. 00:27:37.380 --> 00:27:39.670 align:middle line:90% One is earnings growth. 00:27:39.670 --> 00:27:41.370 align:middle line:90% The other one is dividends. 00:27:41.370 --> 00:27:43.170 align:middle line:84% The third, which is shown in brown, 00:27:43.170 --> 00:27:45.240 align:middle line:90% is changes in valuations. 00:27:45.240 --> 00:27:48.150 align:middle line:84% And the fourth is currency movements. 00:27:48.150 --> 00:27:50.365 align:middle line:90% Now, we've taken some examples. 00:27:50.365 --> 00:27:51.990 align:middle line:84% And we've just look at emerging markets 00:27:51.990 --> 00:27:54.915 align:middle line:84% as a whole, which is shown on the left-hand side 00:27:54.915 --> 00:27:56.200 align:middle line:90% of the chart. 00:27:56.200 --> 00:28:01.180 align:middle line:84% We can see from there that we had 10.3% delivery 00:28:01.180 --> 00:28:03.820 align:middle line:84% in the last 12 months in terms of emerging market 00:28:03.820 --> 00:28:06.670 align:middle line:90% returns in US dollar terms. 00:28:06.670 --> 00:28:11.810 align:middle line:84% Changes in valuations actually was the biggest contributor. 00:28:11.810 --> 00:28:15.880 align:middle line:84% And that led to that 10% returns. 00:28:15.880 --> 00:28:17.860 align:middle line:84% Earnings growth was, in fact, a bit 00:28:17.860 --> 00:28:20.930 align:middle line:90% on the negative side as a whole. 00:28:20.930 --> 00:28:23.980 align:middle line:84% So it was actually increasing valuations 00:28:23.980 --> 00:28:27.820 align:middle line:84% that gave returns to shareholders on a positive side 00:28:27.820 --> 00:28:29.300 align:middle line:90% for the last 12 months. 00:28:29.300 --> 00:28:32.470 align:middle line:84% Now, you put India in that context, 00:28:32.470 --> 00:28:35.800 align:middle line:84% India actually returned about 21% 00:28:35.800 --> 00:28:37.930 align:middle line:90% as a whole of the equity market. 00:28:37.930 --> 00:28:42.850 align:middle line:84% But importantly, it was actually largely driven or purely driven 00:28:42.850 --> 00:28:44.540 align:middle line:90% by earnings growth. 00:28:44.540 --> 00:28:48.430 align:middle line:84% So it wasn't changes in valuations that gave investors 00:28:48.430 --> 00:28:49.210 align:middle line:90% that return. 00:28:49.210 --> 00:28:52.870 align:middle line:84% It was actually companies delivering and growing 00:28:52.870 --> 00:28:57.310 align:middle line:84% that led to those returns, which is a very healthy environment 00:28:57.310 --> 00:29:02.160 align:middle line:84% to be in that companies are producing shareholder returns. 00:29:02.160 --> 00:29:05.720 align:middle line:84% And so going forward, what do we think earnings are? 00:29:05.720 --> 00:29:08.900 align:middle line:84% For the next 12 months, we think earnings in India ballpark 00:29:08.900 --> 00:29:11.240 align:middle line:84% about 15% forecast at the moment. 00:29:11.240 --> 00:29:14.180 align:middle line:84% And we believe that's sustainable in the teens, 00:29:14.180 --> 00:29:17.300 align:middle line:84% perhaps about 13%, 14% into the following year. 00:29:17.300 --> 00:29:19.430 align:middle line:84% Obviously, we and our group of analysts 00:29:19.430 --> 00:29:22.400 align:middle line:84% will keep important forecasts and keep them updated regularly 00:29:22.400 --> 00:29:23.600 align:middle line:90% so we know where we are. 00:29:23.600 --> 00:29:26.960 align:middle line:84% But that's where the forecast is today. 00:29:26.960 --> 00:29:33.080 align:middle line:84% Maybe one last slide in terms of India offering diversification. 00:29:33.080 --> 00:29:36.870 align:middle line:84% This is showing correlations between various emerging 00:29:36.870 --> 00:29:37.370 align:middle line:90% markets-- 00:29:37.370 --> 00:29:40.160 align:middle line:84% India, China, particularly emerging markets as a whole, 00:29:40.160 --> 00:29:43.550 align:middle line:84% to the global markets of US and the global index 00:29:43.550 --> 00:29:46.120 align:middle line:90% measured by the MSCI index. 00:29:46.120 --> 00:29:49.180 align:middle line:84% So one means there's a direct correlation. 00:29:49.180 --> 00:29:51.190 align:middle line:84% Obviously MSCI India to MSCI India 00:29:51.190 --> 00:29:53.380 align:middle line:84% is a direct correlation of 1 to 1. 00:29:53.380 --> 00:29:55.480 align:middle line:84% But as you can see, when you compare 00:29:55.480 --> 00:30:00.710 align:middle line:84% India's correlation with MSCI World, it is 0.67 times. 00:30:00.710 --> 00:30:04.450 align:middle line:84% So there's some correlation, but it's not very large. 00:30:04.450 --> 00:30:07.540 align:middle line:84% Whereas, if you see the correlation of MSCI Emerging 00:30:07.540 --> 00:30:12.080 align:middle line:84% Markets, with the MSCI World, it's nearly 0.8 times. 00:30:12.080 --> 00:30:15.910 align:middle line:84% So emerging markets as a whole has a more direct correlation 00:30:15.910 --> 00:30:16.920 align:middle line:90% with global markets. 00:30:16.920 --> 00:30:19.330 align:middle line:84% In other words, if the US goes up, 00:30:19.330 --> 00:30:21.700 align:middle line:90% you've got a high degree of-- 00:30:21.700 --> 00:30:25.210 align:middle line:84% if the US goes up, there's a high degree of probability 00:30:25.210 --> 00:30:27.280 align:middle line:84% that emerging markets will also go up. 00:30:27.280 --> 00:30:31.760 align:middle line:84% India may be less so but has some correlation. 00:30:31.760 --> 00:30:34.570 align:middle line:84% But importantly, if it goes down and the US goes down, 00:30:34.570 --> 00:30:36.880 align:middle line:84% emerging markets as a whole has a higher probability 00:30:36.880 --> 00:30:39.620 align:middle line:90% of going down than India. 00:30:39.620 --> 00:30:41.240 align:middle line:90% We may point out China. 00:30:41.240 --> 00:30:44.670 align:middle line:84% China has a very low correlation right now with global markets 00:30:44.670 --> 00:30:46.350 align:middle line:90% or of the US markets. 00:30:46.350 --> 00:30:48.230 align:middle line:84% And I think that number has actually 00:30:48.230 --> 00:30:52.040 align:middle line:84% come down quite a fair bit over the last few years, one, 00:30:52.040 --> 00:30:53.720 align:middle line:90% because of the COVID policy. 00:30:53.720 --> 00:30:56.780 align:middle line:84% Second, it's going through its own economic issues, largely 00:30:56.780 --> 00:30:59.490 align:middle line:84% driven by the property sector right now. 00:30:59.490 --> 00:31:01.550 align:middle line:84% And I think if we looked at those numbers 00:31:01.550 --> 00:31:04.250 align:middle line:84% just four or five years ago, China's correlation would have 00:31:04.250 --> 00:31:05.990 align:middle line:90% been much higher with the US. 00:31:05.990 --> 00:31:11.150 align:middle line:84% So the message over here is that India offers diversification. 00:31:11.150 --> 00:31:13.580 align:middle line:84% Earnings growth is coming through. 00:31:13.580 --> 00:31:16.640 align:middle line:84% And shareholders are benefiting from earnings growth coming 00:31:16.640 --> 00:31:19.470 align:middle line:84% through as opposed to just valuations going up. 00:31:19.470 --> 00:31:21.830 align:middle line:84% And I think that's a very powerful signal. 00:31:21.830 --> 00:31:25.730 align:middle line:84% With that, I'm going to leave it to Amit to summarize. 00:31:25.730 --> 00:31:29.790 align:middle line:84% And I'll stay up here for questions. 00:31:29.790 --> 00:31:31.010 align:middle line:90% Thank you, Ayaz. 00:31:31.010 --> 00:31:33.960 align:middle line:84% And thank you, Sandip for the stock illustration. 00:31:33.960 --> 00:31:37.925 align:middle line:84% So look, I think we've articulated 00:31:37.925 --> 00:31:39.290 align:middle line:90% how the year has gone by. 00:31:39.290 --> 00:31:42.770 align:middle line:84% Ayaz has done a great job of articulating the opportunity. 00:31:42.770 --> 00:31:44.900 align:middle line:84% And look, it should be no surprise to you 00:31:44.900 --> 00:31:48.200 align:middle line:84% that we remain extremely positive about the structural 00:31:48.200 --> 00:31:50.010 align:middle line:90% opportunity that India offers. 00:31:50.010 --> 00:31:52.430 align:middle line:84% I think we've become even more positive 00:31:52.430 --> 00:31:54.440 align:middle line:84% about that structural opportunity driven 00:31:54.440 --> 00:31:56.750 align:middle line:90% by the investment cycle. 00:31:56.750 --> 00:31:59.360 align:middle line:84% And Ayaz has illustrated really very well 00:31:59.360 --> 00:32:01.990 align:middle line:84% about the government-driven investment cycle. 00:32:01.990 --> 00:32:04.010 align:middle line:84% I think that's a real opportunity for us 00:32:04.010 --> 00:32:06.530 align:middle line:90% for the next five to 10 years. 00:32:06.530 --> 00:32:09.352 align:middle line:84% If you look at the summary slide that we have here, 00:32:09.352 --> 00:32:11.060 align:middle line:84% I think the main things to take away here 00:32:11.060 --> 00:32:13.220 align:middle line:84% is that it's one of these rare markets where 00:32:13.220 --> 00:32:14.870 align:middle line:90% you're seeing economic growth. 00:32:14.870 --> 00:32:18.680 align:middle line:84% And Ayaz talked about real GDP numbers, 5%, 6%, 7%. 00:32:18.680 --> 00:32:23.180 align:middle line:84% In nominal terms, that's 10%, 11%, 12%. 00:32:23.180 --> 00:32:26.450 align:middle line:84% There is no economy in the world that's growing at 10%, 11%, 12% 00:32:26.450 --> 00:32:28.070 align:middle line:90% in nominal terms. 00:32:28.070 --> 00:32:31.560 align:middle line:84% But that's also translating into equity market returns. 00:32:31.560 --> 00:32:34.000 align:middle line:84% And again, it's one of the rare examples. 00:32:34.000 --> 00:32:37.170 align:middle line:84% So to summarize, I think we have a huge opportunity. 00:32:37.170 --> 00:32:39.990 align:middle line:84% I think India is on the beginnings of that last bit 00:32:39.990 --> 00:32:43.150 align:middle line:84% that it needed to really stimulate economic activity. 00:32:43.150 --> 00:32:45.270 align:middle line:84% If you look at the next slide, the bit 00:32:45.270 --> 00:32:47.880 align:middle line:84% that we've only really touched upon is 00:32:47.880 --> 00:32:51.430 align:middle line:84% the question we get most about is about the valuation premium. 00:32:51.430 --> 00:32:52.260 align:middle line:90% Is it justified? 00:32:52.260 --> 00:32:54.780 align:middle line:84% Are we paying too much for that India growth story? 00:32:54.780 --> 00:32:57.690 align:middle line:84% I think those are absolutely fair questions. 00:32:57.690 --> 00:32:59.220 align:middle line:84% But you need to put those in terms 00:32:59.220 --> 00:33:03.460 align:middle line:84% of the context of corporate profitability and growth rates. 00:33:03.460 --> 00:33:06.060 align:middle line:84% I think we probably all agree that there's probably 00:33:06.060 --> 00:33:09.750 align:middle line:84% no economy in the world that's going to grow sustainably 00:33:09.750 --> 00:33:12.490 align:middle line:84% at the rate that India is able to grow at. 00:33:12.490 --> 00:33:17.330 align:middle line:84% So then it's really about the long-term returns on capital 00:33:17.330 --> 00:33:20.030 align:middle line:84% that the country and the companies can deliver. 00:33:20.030 --> 00:33:21.530 align:middle line:84% And if you look at this chart, which 00:33:21.530 --> 00:33:24.020 align:middle line:84% I've talked a bit about in our annual reports as well, 00:33:24.020 --> 00:33:27.350 align:middle line:84% is that the blue bars tell you what 00:33:27.350 --> 00:33:29.870 align:middle line:84% the average return on capital for different economies 00:33:29.870 --> 00:33:31.010 align:middle line:90% in the world is. 00:33:31.010 --> 00:33:32.840 align:middle line:84% But more importantly, the yellow bars 00:33:32.840 --> 00:33:36.230 align:middle line:84% tell you how much does that return 00:33:36.230 --> 00:33:38.957 align:middle line:84% on capital change over time, so how volatile is it. 00:33:38.957 --> 00:33:40.790 align:middle line:84% And you can see the two markets on the left, 00:33:40.790 --> 00:33:45.590 align:middle line:84% there's two markets that have a very high and a very low-- 00:33:45.590 --> 00:33:49.850 align:middle line:84% or a volatility that's extremely low in that return on capital, 00:33:49.850 --> 00:33:51.470 align:middle line:90% which is India and the US. 00:33:51.470 --> 00:33:53.120 align:middle line:84% So it shouldn't be any surprise, when 00:33:53.120 --> 00:33:55.037 align:middle line:84% you look at the right-hand side of this chart, 00:33:55.037 --> 00:33:58.550 align:middle line:84% that if you look at pretty much any time period, the two 00:33:58.550 --> 00:34:01.100 align:middle line:84% markets that deliver the best performance have 00:34:01.100 --> 00:34:02.660 align:middle line:90% been India and the US. 00:34:02.660 --> 00:34:04.880 align:middle line:84% And so our view would be that actually, 00:34:04.880 --> 00:34:09.710 align:middle line:84% yes, it's been a great 5, 10, 15, 20 years we think. 00:34:09.710 --> 00:34:12.260 align:middle line:84% And our view is we remain as positive 00:34:12.260 --> 00:34:15.520 align:middle line:84% about the next decade as the last decade and, as I said, 00:34:15.520 --> 00:34:18.600 align:middle line:84% I think probably more so than I would have said 12 months ago 00:34:18.600 --> 00:34:21.870 align:middle line:84% because now you've got the last leg of that growth coming in 00:34:21.870 --> 00:34:24.330 align:middle line:84% from infrastructure and investments. 00:34:24.330 --> 00:34:29.180 align:middle line:84% So with that, let me hand back to Rosemary and the board.