1. [Title to come]
[Sub-Title to come]
Strictly for Intended Recipients Only
Date
* DSP India Fund is the Company incorporated in Mauritius, under which ILSF is the corresponding share class
Dec 2021
| People | Processes | Performance |
DSP Mid Cap Fund
#INVESTFORGOOD
2. 2
What is DSP Mid Cap Fund?
MID CAP
FUND
INVESTS PRIMARILY IN
MID CAP STOCKS
~ 2/3rd in mid caps
~ 1/3rd in large & small
caps
INVESTMENT
PHILOSOPHY
- durable businesses
- run by able managers
- high sustainable ROEs
FRAMEWORK TO
IDENTIFY COMPANIES
Business Model
Management Quality
Reasonable Valuation
LONG HOLDING
PERIOD
Investee companies
with strong business
models require time for
realizing their growth
potential
Mid-cap fund investing in quality businesses with good growth prospects
Source: Internal.
3. 3
Why invest in DSP Mid Cap Fund?
SATELLITE
EQUITY
PORTFOLIO
ALLOCATION
Small businesses which
can witness significant
growth potentially
resulting in superior
investment returns
Midcap investing has
significant risk of value
destruction. A robust &
repeatable investment
framework potentially
mitigates this risk
Documented investment
framework gives clarity
on what to expect
Easy to fit into overall
asset allocation plan of
the investor
ALPHA GENERATION
POTENTIAL
FRAMEWORK TO ELIMINATE
POTENTIAL VALUE DESTROYERS
CLEAR ROLE IN OVERALL
ASSET ALLOCATION
Suitable for a satellite allocation in an investment portfolio
Source: Internal.
5. 5
Investment Philosophy
➢ Mid cap stocks can have the potential to grow at exponential rates but are also highly volatile.
➢ They may be more susceptible to economic cycles and less likely to weather economic downturns
➢ Durable businesses run by able managers, generating superior ROEs sustainably, are sources of alpha.
Buy & hold companies to potentially create value over time and eliminate value detractors
FOR MID AND SMALL CAP EQUITIES
MID CAPS – Substantially higher probability of a Mid cap getting demoted to a Small Cap rather than
graduating to be a Mega Cap
Probability of upward migration
Mid Cap → Mega Cap
8.5% chance during 2000 – 2005
4.5% chance during 2005 – 2010
12% chance during 2010 – 2015
Probability of downward migration
Mid Cap → Small Cap
46.5% chance during 2000 – 2005
51% chance during 2005 – 2010
44% chance during 2010 – 2015
Source: Mid to Mega – 20th Wealth Creation Study by Motilal Oswal. Sample set for Indian Mid Caps – 200 largest listed companies after the top 100 listed companies
6. 6
BMV Investment Framework
Fund seeks companies with High ROEs/Growth, Low Leverage & Positive Cash Flows
MANAGEMENT
VALUATION
BUSINESS
MODEL
Simple businesses (better visibility &
higher predictability)
Good growth potential
Competitive advantage
High Cash Flows
Low leverage
Superior ROCE/ROE* over cycles
Contra-cyclical plays
Credible & capable
Past track record
Prudent capital allocation
Reasonable valuations in conjunction
with fundamentals
*ROCE – Return on Capital Employed; ROE – Return on Equity
7. 7
Business Model - Competitive advantages (Moats) are what we looking for….
Company may not be able to create value and fend off competition if it doesn’t have Moats in spite of large
opportunities. Key sources of competitive advantages that we look for include
Intangibles Cost Structure Network Effect Switching costs
Brands/Patents and
Regulations*
Lower cost of production
which stem from process,
location, scale or access to
unique assets.
Cost (time, hassle, capital
or risk) that customer
would incur from one
producer or service
provider to the other
The value of a product
increases for both new and
existing customers as new
customers join the network
Not All Moats are equally valuable Most businesses have no moats (our default assumption for evaluating any
new company) or have legacy moats i.e. no ability to reinvest in the business. We look for companies which have
either large reinvestment opportunity or capital light businesses which do not need significant capital to grow
* We refrain from buying companies which benefit from favourable regulations alone
Sheela Foam, Bata
Ramco cement,
Coromandel Int
Jubilant Foods Atul Ltd, IPCA Ltd
The sector(s)/stock(s)/issuer(s) mentioned in this note do not constitute any recommendation of the same and the Fund may or may not have any future position in these
sector(s)/stock(s)/issuer.
8. 8
Business Model - Quality of business
Facets of quality are
• Capital Intensity – Amount of capital which can be reinvested in the business
• Capital Efficiency – Returns generated on capital employed (Superiority of ROCE)
Simple businesses (with optionality of complementary extensions) with growing market shares
Quality of the business is displayed through its ability to generate superior (spread over the cost of capital),
consistent, predictable and durable ROCE.
ROCE along with growth defines the magnitude of value created by the business
Size the opportunity determines capital reinvestment which in turns drives growth
Cashflows (not earnings) defines the true character of business
Both quality of business and management are indispensable, however quality of business is our first filter
for selecting companies.
9. 9
Management – Alignment of interest with shareholders
Capital allocation
Ability to know where to allocate capital (and where to deny it)
Remain focussed on few areas of competence
Investing in areas with similar or higher ROCE
Capital Distribution
The capital to be distributed back to share holders in excess of
• Funding future growth
• Funding on acquisition
• Building contingencies
Other Facets
Integrity and passion
Stakeholder relationship – with not only shareholders, but also
employee, vendors, customers
Governance standards
Past Track record of the management
Key traits of competent management = Capital Allocation + Capital Distribution
10. 10
Valuation – Business cycle and Valuation
Business Cycle
Early Mid Advance Late
1.0 2.0 3.0 4.0
Valuation
Excessive
4.0 2.5 3.0 3.5 4.0
High
3.0 2.0 2.5 3.0 3.5
Low
2.0 1.5 2.0 2.5 3.0
Attractive
1.0 1.0 1.5 2.0 2.5
4
1
3
2
The characteristics of the investee companies chosen would mean valuation are unlikely to be in low bucket unless overall
market valuations are undemanding
We actively seek exposure to companies in early or mid cycle
Peak earnings and
valuation
Favoured zone given
market valuations
Biggest source of alpha if
thesis is correct
Valuation still supportive
11. 11
Valuation - Price Value Gap (way we think about valuation)
Margin of Safety : We scout for high for Margins of safety = Gap between Intrinsic Value and Price
Stock returns generally mirrors the earnings growth (unless the stock is incorrectly priced to begin with).
Sharp focus on entry multiples: We focus on the entry multiples which we pay for the businesses. If entry
multiples are chosen properly , we can be assured of stock returns = earnings growth.
Re-rating is not our base case: The stock re-rating can be significant driver of overall returns as the
market changes its perception on the stock – “Re-rating” however is not our base case for valuation
Business cycle critical to judge value: Companies in early or mid-cycle can cover up for moderately higher
valuation; Late cycle companies with excessive valuations are untenable.
Stocks held for momentum: We may not be comfortable in buying companies which are in late cycle and
excessively valued, however there will be stage were our core holding get significantly “re-rated”. These
are then shifted from “Core portfolio bucket” to “held for momentum tactical bucket” and are sold as the
momentum starts to fade.
Stock Returns can be derived as = Earnings Growth x Valuation multiple Change
12. 12
Buy & Hold V/S Sell Discipline
High Conviction holding
Higher concentration in the portfolio
Add to holding during market corrections
During bear phases – seek to add value creators while eliminate value destroyers
Profitable positions where valuations
rise to unsupportable levels
Trim / book profits
Loss-making positions where investment
thesis not unfolding as envisioned
Cut losses / Sell
Significant deterioration in fundamentals
Corporate governance issues
Fraud or misrepresentation of facts
BUY & HOLD FOR LONG TERM VALUE CREATION
SELL DISCIPLINE TO AVOID VALUE DESTRUCTION
Source: Internal.
13. 13
Investment Framework – Application in DSP Midcap Fund
Source: Internal. *Note: Above numbers are based on FY 19- 20 Financials and 31st March 2021 weight
Metric – Non financial Threshold Rationale DSP Midcap Fund*
3 Yr Avg ROE >16%
Long-term consistency is very important. 5% above risk free rate is floor
for profitability in business.
18.5%
5 Yr. Avg. EBITDA Growth
>13%
Growth higher than nominal GDP growth improves odds of
outperformance.
13.2%
5 Yr. Avg. PAT Growth 18.1%
EBITDA Growth > Sales Growth >1 Indicates operating efficiency and operating leverage in the business. 0.92
Tax Rate >20%
Lowers risk of accounting misrepresentation. Tax payment is one
indicator of clean accounting.
22.1%
(EPS) Growth Variability <100% over 5 Years Indicator of stability of earnings in business. Helps to size positions. 34.5%
Payout Ratio >15%
Indicator of cash generation in the business and profit sharing mindset of
the management.
29.0%
Net Debt/ EBITDA <3x
Lower ratio depicts less leverage indicating strength of the business and
makes business less vulnerable during downturns.
-0.3x
Valuation
High ROE justifies higher
P/E (Trailing 12M)
Will ascribe higher valuations for businesses with high ROE provided
other metrics are also strong.
37.2x
Free Cash Flow Yield Positive
Explains quality of operating earnings especially in the context of
working capital and capex.
4.6%
Receivable variability <30 days
Lower variability in receivable days suggests strong bargaining power of
the business.
8.5 days
Inventory variability <30 days Lower variability suggests lower cyclicality of business. 7.5 days
Payable variability <30 days
Lower variability indicates bargaining power of the management and
reduces the risk of high debt disguised as payable.
7.7 days
Metric - Financial Threshold Rationale DSP Midcap Fund*
3 Yr Avg ROE
>16%
Long-term consistency is very important. 5% above risk free rate is floor
for profitability in business.
15.4%
5 Yr. Avg. PAT Growth >13%
Growth higher than nominal GDP growth improves odds of
outperformance.
29.3%
Tax Rate >20%
Lowers risk of accounting misrepresentation. Tax payment is one
indicator of clean accounting.
33.4%
(EPS) Growth Variability <100% Indicator of stability of earnings in business. Helps to size positions. 40.5%
Gross NPA <2% Indicator of underwriting strength 1.8%
14. 14
Investment team
Vinit Sambre – Fund Manager
• 21 years of investment experience across 4
major market cycles
• Joined DSP in July 2007 as a Portfolio Analyst.
• Previously worked with DSP Merrill Lynch as a
part of its Global Private Client business as an
Equity Strategist
• Chartered Accountant from ICAI
Charanjit Singh (12)
AVP, Capital Goods,
Infra, Power Utilities,
Consumer Durables
TEAM SUPPORTING THE FUND MANAGER
Experienced investment team with a wide coverage of Indian equity markets
FUND MANAGERS*
*Jay Kothari is Dedicated Fund Manager for overseas investments. Years in brackets ( ) is years of experience.
Resham Jain – Co-Fund Manager
• Joined DSPIM in March 2016 covering small and
midcaps
• Previously working as an analyst with Batlivala
& Karani stock broking
• M.Sc in Finance (ICFAI University), FRM
(Cleared), CFP (Cleared) , CFA (US)
Chinmay Sapre (9)
AVP, Aviation, Realty
Abhishek Ghosh (12)
AVP, Small & Mid Caps,
Transportation
Kaushal Maroo (11)
AVP, Autos, Ancillaries,
Cement
Dhaval Gada (10)
AVP, Banking and
Financial Services
Abhishek Rathi (13)
AVP, Financials &
Industrials for Long /
Short
Aayush Ganeriwala
Manager, Oil & Gas,
Metals
Suryanarayanan
Manian, CFA (10)
VP, Tech, Telecom,
Media, FMCG
Nilesh Aiya (12)
AVP, Forensic Research
Chirag Dagli
VP, Healthcare
Abhishek Singh (14)
AVP, Portfolio Manager
Bhavin Gandhi (15)
AVP, Portfolio Manager
16. 16
Performance Scorecard
Source: MFIE; Scheme Benchmark – Nifty Midcap 150 TRI. Rolling Returns are as on Dec 31,2021 for DSP Mid Cap Fund, Regular Plan Growth Option. Rolling Frequency is daily. Standard Deviation
considered for Returns / Risk calculation in the above table is calculated on the basis of daily returns. Click here for scheme performance of above Scheme in SEBI prescribed format and of other schemes
managed by same Fund Manager. Past performance may or may not sustain in future and should not be used as a basis for comparison with other investments. The figure mentioned for performance of
the index should not construe as returns/performance of the Scheme. It is not possible to invest directly in an index.
DSP Mid Cap Fund aims to provide better risk adjusted returns profile across periods
ROLLING RETURN (%)
POINT-TO-POINT RETURNS (%)
DSP Mid Cap Fund Nifty Midcap 150 TRI DSP Mid Cap Fund Nifty Midcap 150 TRI DSP Mid Cap Fund Nifty Midcap 150 TRI
Average Annual Returns 20.7 20.0 16.8 14.2 16.8 14.5
Median Annual Returns 12.8 11.5 15.6 14.0 16.8 14.7
Minimum Annual Returns -60.5 -67.2 -7.6 -8.3 3.1 -2.3
Maximum Annual Returns 163.6 169.3 43.4 39.7 30.5 29.1
Returns / Risk 1.09 0.92 0.88 0.65 0.88 0.67
1 YEAR ROLLING RETURNS (%) 3 YEARS ROLLING RETURNS(%) 5 YEARS ROLLING RETURNS (%)
TIME PERIOD DSP Mid Cap Fund Nifty Midcap 150 TRI ALPHA
1 year 28.3 48.2 -19.8
3 years 20.1 23.2 -3.1
5 years 16.8 20.6 -3.7
Since Inception 15.7 14.7 1.0
17. 17
Performance Scorecard
Source: MFIE; Returns are as on Dec 31, 2021 for DSP Mid Cap Fund, Regular Plan Growth Option. Rolling frequency is daily. Click here for scheme performance of above Scheme in SEBI
prescribed format and of other schemes managed by same Fund Managers. Past performance may or may not sustain in future and should not be used as a basis for comparison with other
investments. The figure mentioned for performance of the index should not construe as returns/performance of the Scheme. It is not possible to invest directly in an index.
AVERAGE ROLLING RETURNS
RETURN PER UNIT OF RISK
20.7
16.8 16.8
20.0
14.2 14.5
0.0
5.0
10.0
15.0
20.0
25.0
1 yr RR 3 yr RR 5 yr RR
DSP Mid Cap Fund Nifty Midcap 150 TRI
1.09
0.88 0.88
0.92
0.65 0.67
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1 yr RR 3 yr RR 5 yr RR
DSP Mid Cap Fund Nifty Midcap 150 TRI
19. 19
Portfolio details – concentration and market cap trends
Source: MFIE; Portfolio data as on Dec 31, 2021. The sector(s)/stock(s)/issuer(s) mentioned in this note do not constitute any recommendation of the same and the Fund may or may not
have any future position in these sector(s)/stock(s)/issuer. Market Capitalization range from Jan 2018 is taken from data published by AMFI. Data prior to Jan 2018 is calculated from MFIE.
Large-caps are defined as top 100 stocks on market capitalization, mid-caps as 101-250 stocks, small-caps 251 stock onwards.
Has always been a diversified portfolio with significant mid cap bias
18%
32%
52
35
40
45
50
55
60
65
70
75
10%
15%
20%
25%
30%
35%
40%
45%
50%
55%
Jul-12 Sep-13 Nov-14 Jan-16 Mar-17 May-18 Jul-19 Sep-20 Dec-21
STOCK CONCENTRATION TRENDS
Top 5 stocks (LHS) Top 10 stocks (LHS) Total No of stocks
21%
60%
81%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Jul-12 Sep-13 Nov-14 Jan-16 Mar-17 May-18 Jul-19 Sep-20 Dec-21
SECTOR CONCENTRATION TRENDS
Top Sector Top 3 Sector Top 5 Sector
0
10
20
30
40
50
60
70
80
90
100
2012 2013 2014 2015 2016 2018 2019 2020 2021
MARKET CAP BREAK UP
Large Cap Mid Cap Small Cap
17%
66%
14%
20. 20
Portfolio details – sector exposures
Source: Morningstar; Portfolio data as on Dec 31, 2021. The sector(s)/stock(s)/issuer(s) mentioned in this note do not constitute any recommendation of the same and the Fund may or
may not have any future position in these sector(s)/stock(s)/issuer | More than 10% allocation highlighted in Orange and more than 5% allocation highlighted in grey
Sectors Jul-12 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21
Energy 0.9% 1.0% 4.1% 3.0% 2.1% 1.1%
Materials 15.5% 13.6% 10.3% 11.1% 15.1% 19.3% 21.2% 21.2% 22.5% 16.7% 21.1%
Industrials 19.3% 16.0% 19.9% 25.2% 27.2% 18.8% 14.2% 14.3% 12.2% 10.0% 13.4%
Consumer Discretionary 14.7% 20.3% 12.2% 13.9% 11.5% 16.8% 16.4% 12.4% 19.9% 19.7% 19.2%
Consumer Staples 7.0% 6.8% 6.2% 1.3% 2.6% 1.3% 3.2% 3.8% 4.0% 4.9% 3.9%
Healthcare 5.5% 7.4% 11.7% 1.6% 10.0% 6.0% 8.5% 11.0% 11.6% 9.8% 7.2%
Financials 16.7% 27.6% 17.1% 29.3% 19.8% 19.9% 21.2% 19.0% 15.4% 20.8% 20.0%
Information Technology 8.2% 5.8% 12.8% 5.1% 1.6% 3.1% 3.8% 3.0% 3.7% 7.5% 6.7%
Communication Services 1.2% 1.0% 6.6% 2.4% 0.6%
Utilities 2.8% 0.6% 1.2% 3.7% 4.9% 2.7% 1.5% 1.4% 1.4% 2.6% 3.0%
Real Estate 0.9% 2.1% 1.3% 1.7%
Total Equity 91.8% 99.1% 98.9% 97.6% 95.8% 90.1% 91.1% 86.9% 92.8% 93.3% 96.6%
21. 21
DSP Mid Cap Fund – Portfolio as on Dec 31, 2021
Source: Internal. The sector(s)/stock(s)/issuer(s) mentioned in this presentation do not constitute any research report/recommendation of the same and may or may not have any future position in these
sector(s)/stock(s)/issuer(s). * GICS - Global Industry Classification Standard. Market Capitalization is taken from data published by AMFI. Large-caps are defined as top 100 stocks on market capitalization,
mid-caps as 101-250 stocks, small-caps 251 stock onwards.
APPLYING THE INVESTMENT FRAMEWORK IN STOCK SELECTION & PORTFOLIO CONSTRUCTION
Investment framework is the key driver for building high conviction positions
TOP 20 HOLDINGS % OF NET ASSETS
Supreme Industries Ltd. 4.7
Manappuram Finance Ltd. 3.4
Atul Ltd. 3.4
IPCA Laboratories Ltd. 3.4
SBI Life Insurance Company Ltd. 3.1
Bata India Ltd. 3.0
ICICI Bank Ltd. 2.8
Cholamandalam Investment and Finance Co Ltd. 2.8
Coromandel International Ltd. 2.8
Sheela Foam Ltd. 2.7
Bharat Forge Ltd. 2.5
Chambal Fertilizers & Chemicals Ltd. 2.5
Max Financial Services Ltd. 2.5
Federal Bank Ltd. 2.4
Voltas Ltd. 2.4
Jubilant Foodworks Ltd 2.4
City Union Bank Ltd. 2.2
Alembic Pharmaceuticals Ltd. 2.2
Hatsun Agro Product Ltd. 2.2
Container Corporation Of India Ltd. 2.1
MARKET CAP NET ASSETS
Large Cap 14%
Mid Cap 66%
Small Cap 17%
Materials, 21.1%
Financials, 20.0%
Consumer
Discretionary,
19.2%
Industrials, 13.4%
Healthcare, 7.2%
Information Technology,
6.7%
Consumer
Staples, 3.9%
Utilities, 3.0%
GICS* Classification
22. 22
Changes to portfolio in last 1 yr
Stock Name
%Weight
added
Themes
CHAMBAL FERTILIS 2.72 Agri
CONTAINER CORP 2.21 Economic upcycle
CROM GREAVES CON 2.03 Economic upcycle / Housing
KANSAI NEROLAC P 1.77 Housing / Auto
CYIENT LTD 1.73 IT - Management change
POLYCAB INDIA LT 1.73 Economic upcycle / Housing
ICICI BANK LTD 1.42 Economic upcycle
ZENSAR TECH LTD 1.39 IT - Management change
WHIRLPOOL OF IND 1.20 Housing
KAJARIA CERAMICS 1.14 Housing
SUPREME INDS LTD 0.91 Economic upcycle / Housing
JK CEMENTS LTD 0.85 Economic upcycle
VARDHMAN TEXTILE 0.84 Textile
SHEELA FOAM LTD 0.75 Housing
APTUS VALUE HOUS 0.71 Housing
The sector(s)/stock(s)/issuer(s) mentioned in this presentation do not constitute any research report/recommendation of the same and may or may not have any future position in these
sector(s)/stock(s)/issuer(s). Source Internal, Bloomberg. Data as on 31 Dec 2021
23. 23
Portfolio characteristics
The sector(s)/stock(s)/issuer(s) mentioned in this presentation do not constitute any research report/recommendation of the same and may or may
not have any future position in these sector(s)/stock(s)/issuer(s). Source Internal, Bloomberg. Data as on 31 Dec 2021
➢ 62% of portfolio where PE is less than 26.
➢ The weighted average ROE is 19% on FY23 expected basis
➢ Few key sectors with reasonable valuation are secular growth sectors or in their low cycles
• Healthcare
• Agri
• Banks
• Gas utilities
No. of Co.s Particulars Weights (%) P/E - FY23EP/BV - FY23E
ROE-
FY23E
Growth –
FY23E
16 Less than 20x P/E 31% 13.7 2.5 18.3% 21.2%
16 Between 20x and 30x P/E 31% 26.3 5.1 19.2% 20.3%
20 Above 30x P/E 35% 45.3 10.9 19.1% 22.9%
Aggregate 29.1 6.3 18.9% 21.5%
24. 24
Portfolio characteristics
The sector(s)/stock(s)/issuer(s) mentioned in this presentation do not constitute any research report/recommendation of the same and may or may
not have any future position in these sector(s)/stock(s)/issuer(s). Source Internal, Bloomberg. Data as on 31 Dec 2021
TOP 15 ACTIVE BETS Weight (%) BOTTOM 15 BENCHMARK ACTIVE Wt (%)
SUPREME INDS LTD 4.53 ASHOK LEYLAND -1.42
ATUL LTD 3.66 LAURUS LABS LTD -1.46
SBI LIFE INSURAN 3.07 ASTRAL LTD -1.57
CHOLAMANDALAM IN 3.00 TATA ELXSI LTD -1.57
ICICI BANK LTD 2.97 AARTI INDUS LTD -1.60
SHEELA FOAM LTD 2.92 GODREJ PROPERTIE -1.61
CHAMBAL FERTILIS 2.72 SHRIRAM TRANSPRT -1.78
MANAPPURAM FINAN 2.71 BHARAT ELECTRON -1.79
JUBILANT FOODWOR 2.45 PAGE INDUSTRIES -1.84
BATA INDIA LTD 2.20 TRENT LTD -1.89
IPCA LABS LTD 2.08 MPHASIS LTD -1.95
COROMANDEL INTER 2.08 AU SMALL FINANCE -2.05
HATSUN AGRO PROD 2.02 ZEE ENTERTAINMEN -2.14
KANSAI NEROLAC P 1.77 TATA POWER CO -2.97
ALEMBIC PHARMACE 1.75 ADANI TOTAL GAS -3.57
AVG PE (FY23) BEST 35 52
AVG ROE (FY23) BEST 21% 22%
• The portfolio’s active weights have higher exposure to names where business cycles could recover
from their lows currently (Supreme, Atul, Chola, ICICI Bank, Chambal, Manappuram, IPCA,
Coromandel, Kansai, Alembic).
• Benchmark’s active weights have more expensive names with few where business cycles are peaking.
26. 26
Sector exposure & rationale
Source: Internal.
Sector Positioning
• We are positive on banking & financial sector as they are adequately capitalized, have managed the
asset quality impact well and are likely to be beneficiary of economic recovery going forward. We have
approx. 20% weight with top names being Manappuram, Federal Bank, SBI Life and Cholamandalam
Investment.
• The consumer discretionary (home improvement, food retailing, auto-ancs, agri-pipes) may be a good
long-term plays we remain positive on. We have approx. 40% weight with top names being Supreme
Industries, Bata, Sheela Foam, Jubilant Food, Kajaria, Voltas, Polycab
• We like Healthcare sector as health has assumed priority globally and Indian companies due to their
global presence have much larger addressable market to capture. We have 7% exposure with top
names being IPCA, Alembic Pharma and Alkem Labs
• We are positive on Agri Sector due to long runway for growth available given only about 50% of our
arable land is irrigated + India is 2nd largest globally in terms of agriculture output. The top names are
Coromandel, Chambal and Dhanuka agri
Sizing
• We believe in slightly higher concentration and the weight in any company would be a function of
conviction in the business, management and reasonableness of valuation. If all these three factors are
favourable we would like to have anywhere between 2-4% weight in that company. If the valuations
are expensive we would start with lower weight and gradually build our exposure.
27. 27
Outlook
Source: Internal. Data as on 31 Dec 2021
• Midcap companies are witnessing increasing opportunities for growth as economy goes through
expansion and unorganised / smaller players have weakened due to supply chain issues.
• The other positive is that the recovery seems more broad based as many parts of the economy
participates for e.g. consumption, IT, real-estate, engineering & capital goods etc. This gives
confidence on the long term positive outlook for the midcap space.
• Valuation
o The overall valuations in the midcap space seems rich and fairly factoring in earnings
expectations till FY23.
o On a Price to Book Value basis, in comparison to the large cap, the midcap index is trading
closer to 0.85 times whereas the peak was 1 time as can be seen from the charts below.
• The valuations in some categories like Healthcare, Agri,
Midcap Banks, Auto are still quite reasonable. Some
pockets like consumer discretionary (excluding auto),
Midcap IT etc are trading in expensive zone.
• The benefit of compounding in this space is available by
investing for long term as some companies takes time
to play the full cycle. Hence investor need to invest with
over 5 years’ time horizon.
0.4
0.5
0.6
0.7
0.8
0.9
1
1.1
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Nifty Midcap 100 Index P/B to Nifty 50
Index P/B
28. Scheme Product Suitability
Riskometer
DSP Mid Cap Fund Benchmark - Nifty MidCap 150
TRI
DSP Mid Cap Fund
(Mid Cap Fund-An open ended
equity scheme predominantly
investing in mid cap stocks)
This Open ended equity scheme is suitable for investors
who are seeking*
Long-term capital growth
Investment in equity and equity-related securities
predominantly of midcap companies
28
Disclaimer
This document is for information purposes only. In this material DSP Investment Managers Private Limited (the AMC) has used information that is publicly available, including information developed in-
house. Information gathered and used in this material is believed to be from reliable sources. The statements contained herein may include statements of future expectations and other forward looking
statements that are based on prevailing market conditions / various other factors and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ
materially from those expressed or implied in such statements. While utmost care has been exercised while preparing this document, the AMC nor any person connected does not warrant the
completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. The recipient(s) before acting on any information herein should make
his/their own investigation and seek appropriate professional advice. There is no assurance of any returns/capital protection/capital guarantee to the investors in any schemes of DSP Mutual Fund
(‘Fund’). The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the scheme. Past performance may or may not sustain in future and should not
be used as a basis for comparison with other investments. The sector(s)/stock(s)/issuer(s) mentioned herein do not constitute any research report/recommendation of the same and the scheme/ Fund
may or may not have any future position in these sector(s)/stock(s)/issuer(s). The strategy / investment approach / framework mentioned herein is currently followed by the scheme and the same may
change in future depending on market conditions and other factors. All opinions, figures, charts/graphs and data included in this document are as on 31 Dec 2021 (unless otherwise mentioned) and are
subject to change without notice. For scheme specific risk factors, Investment strategy & objective, asset allocation and more details, please read the Scheme Information Document, Statement of
Additional Information and Key Information Memorandum of scheme available on ISC of AMC and also available on www.dspim.com. For Index disclaimer click here
Large-caps are defined as top 100 stocks on market capitalization, mid-caps as 101-250 , small-caps as 251 and above.
The strategy mentioned has been currently followed by the Scheme and the same may change in future depending on market conditions and other factors
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
*Investors should consult their financial advisors if in doubt about whether the Scheme is suitable for them.