Motilal Oswal Growth Anchors Fund – AIF Category III

500: Top 500

Market Cap. Currently between 5 and 11 billion dollars.

200-300: Min 26% Promoter Holding

Includes substantial ESOPs and shares held by businesses by managerial personnel. Except in the case of finances.

260-280: PBT>100

Minimum PBT of INR 100 Crs

150-170: Capital Efficiency

Business quality, 15% minimum cycle ROCE

70-90: QGLP

Corporate governance, management decision-making, quality-vision, and execution

<20-30: Earnings Expectations

Companies that Are Available at a Relatively Attractive Valuation and Have Minimum Additional Expected Earnings 3-5Y Growth of 3% Over Benchmark

An exemption to the following may apply to up to 20% of the portfolio.

Promoter Driven

• Bottom line growth: Highest Growth rates
• Capital Efficiency: High Growth coupled with strong capital efficiency
• Alignment of Interest: Promoter’s skin in the game
• Price Performance: Largest wealth generated
• Sector/Industries: Value-creating business areas, innovation led, intellectual property rich businesses
• Decision Making: Speedy and Dynamic
• Business Environment: Competitive environment; often results in more efficiency
• Corporate Governance: Improving with emphasis on independent professional boards

PSUs

• Bottom line growth: Underperform the promoter-driven companies
• Capital Efficiency: Good efficiency ratios; although much lower growth
• Alignment of Interest: Social priorities Low-floating market cap
• Price Performance: Lower than promoter driven
• Sector/Industries: Natural resources, Commodities, Power and Energy necessary for the growth of the nation
• Decision Making: Over-regulated/bureaucratic and hence could often lack speed, tends to be rigid
• Business Environment: Natural monopolies in many sectors they operate
• Corporate Governance: Governmental practices

MNCs

• Bottom line growth: Steady but lower growth than promoter-driven companies
• Capital Efficiency: High capital efficiency
• Alignment of Interest: Probability of agency issues
• Price Performance: Steady growth in wealth
• Sector/Industries: Pharma, FMCG, Automobile
• Decision Making: Usually driven by parent company priorities
• Business Environment: Often satellite operations of parent companies abroad
• Corporate Governance: Overall good governance

Delivering higher growth in Profitability Metrics

• Over the past ten years, Promoter-driven businesses have had stronger operating profit, top line, and bottom line growth than PSUs and MNCs.
• Promoters are more motivated to increase margins than PSUs or MNCs are.