ICICI Prudential PMS Largecap Portfolio

(A series under the “Diversified Portfolio”)

Portfolio Strategy Note – March 2018
The information contained herein is solely for private circulation for reading/understanding of registered
distributors and referral agents of ICICI Prudential PMS and should not be circulated to investors/prospective
investors.

Portfolio Manager Commentary Investment Style

ICICI Prudential PMS Largecap Portfolio shall have the following approach for
alpha generation: Style
Value Blend Growth Size
 The Portfolio shall aim to invest in potential out performers within a sector.
Large
 The Portfolio shall focus on sector and stocks with high earnings growth,
sustainable cash flow and return on capital. Mid
The portfolio has invested into below mentioned themes, among others:
Small
Banks & Finance:

With domestic savings flowing into the financial sector, we believe the Retail Portfolio Statistics
segment could grow at relatively high rates. Recapitalisation of Public Sector
Utility Banks may have a positive effect on credit quality of PSU Banks and thus
PE Earnings ROE %
have greater ability to support growth. Additionally, announcements made in the
Growth
Budget of FY19 may help Banks reduce their capital needs and improve recovery
from Non-Performing Assets.
FY18E 27.9 11.5% 14.8%
Auto & Auto Ancillaries:
The portfolio has allocated a portion to the sector as valuations are relatively FY19E 18.5 13.4% 15.6%
attractive and a turnaround in domestic and global businesses is expected.
Additionally, increasing exports may help increase earnings going forward. The Estimates by Emkay Global
auto industry is set to witness changes in the form of Electric Vehicles, Safety
Norms, and Bharat Stage-VI emissions. Overweight Sectors
Construction:
Sector Over weight %
The Portfolio is invested into construction projects, poised to gain from the compared to
Government‟s focus on development of infrastructure in the country. The benchmark
Pradhan Mantri Awaas Yojana (PMAY) and development of Smart Cities in India
may lead to greater private investment and benefit infrastructure companies Power 10
across all sub-sectors. Additionally, it may lead to job creation and increased
order books for Engineering, Procurement and Construction Players. Pharma &
Healthcare 5
Information Technology: Services

The portfolio has also invested in Information Technology companies. The Software 2
Government‟s push on Digital Initiatives in India is expected to help software
Auto
companies grow. India is a prime offshoring destination for Information 2
Ancillaries
Technology companies across the world. Now that India has proven its
capabilities in delivering both on-shore and off-shore services to global clients,
Market Cap Allocation
emerging technologies offer new opportunities for IT firms across the country.
Pharmaceuticals:
Market Cap (%)
We believe the sector multiples are reasonable. The companies are increasing
their spending on R&D which is a good indicator of growth potential. Large Cap 98
Companies have high Return on Equity (ROE), Return on Capital Employed
(ROCE) and stable cash flows with low penetration. The USFDA issues are Mid Cap 2
expected to subside in a few quarters which may enable faster approvals.

Small Cap 0
ICICI Prudential PMS Largecap Portfolio
(A series under the “Diversified Portfolio”)
Portfolio Strategy Note – March 2018
The information contained herein is solely for private circulation for reading/understanding of registered
distributors and referral agents of ICICI Prudential PMS and should not be circulated to investors/prospective
investors.

Top 10 Stocks in the Portfolio

Company Exposure (%)

Infosys Ltd. 8.9

• Infosys is a global leader in technology services and consulting, and has a presence in 45 countries. It enables clients to
create and execute strategies for their digital transformation, and provides solutions from engineering to application
development, knowledge management and business process management.
• Infosys is a zero debt company, and is highly liquid. The Company is, to a large extent, cash intensive, with fairly large
cash reserves. It has relatively outperformed as compared to the rest of the sector.
• For Q3FY18, net revenue in rupee terms grew by 3% YoY to INR 17,794 Cr. EBITDA stood at INR 4,817 Cr, up 1% YOY.
PAT increased 37.7% QoQ to INR 5,129 Cr.
• The Company sounds optimistic on the demand environment in BFSI, retail, digital and Europe businesses.
• The market share lost due to lack of presence in emerging geographies and restructuring exercises may be revived
through increase in offshore execution coupled with higher contribution from non-linear business.

NTPC Ltd. 8.0

• NTPC is the largest power generator of India, with a total installed capacity touching 51,383 MW with the commercial
declaration of 4,415 MW capacity during FY18.
• The Company‟s standalone net profit dropped by 4.4% to Rs 2,360 cr in the third quarter ended December 31, 2017. Its
total revenue increased to Rs 21,087 cr, up by 7.1% YoY.
• In the December quarter 2017, NTPC's power generation increased by 10.50% led by revival in power demand and ramp
up of new capacities. The coal blocks being developed could improve NTPC‟s fuel security.
• Management is looking for opportunities to grow inorganically, i.e., through mergers & acquisitions. Any successful
acquisition could be a booster for the company.

Oil & Natural Gas Corporation Ltd. 6.9

• Oil and Natural Gas Corporation (ONGC) is India„s largest state-run energy producer and has a good long-term rating.
• Profit went up to Rs 5,015 Cr in the Oct-December quarter of 2017-18 from Rs 4,352 Cr, marking a YoY increase by
15.2%. EBITDAX rose 20.8% to Rs 12524.7 Cr YoY. ONGC realised a price of $60.58 per barrel for its crude from the
nominated fields for the quarter.
• ONGC in January 2018 received permission to acquire controlling stake in fellow PSU Hindustan Petroleum Corporation
Ltd (HPCL).
• Recently commissioned OPAL is expected to be extremely profitable given secured feedstock supply – naptha from
ONGC‟s Hazira/Uran plants.
• We believe that ONGC may register robust gas growth as its projects worth INR800bn ramp up. Key projects like Vashista
and Daman are firmly underway, which are predicted to ramp up gas production growth.
Dabur India Ltd. 5.9
• Dabur India Ltd (Dabur) is one of India‟s leading FMCG Companies and is among India‟s most trusted names. It is also
one of the largest Ayurveda and Natural Healthcare Companies, built on a legacy of quality and experience of over 133
years.
• Dabur reported a 13% increase in consolidated net profit to Rs 333 cr in the quarter ended 31 December, 2017 backed by
a 13% growth in volume of the company‟s packaged goods business in India. It reported consolidated revenue of Rs
1,966 cr, an increase of 6.1% YoY.
• Dabur completed the acquisition of two South Africa-based companies – D&A Cosmetics Proprietary Ltd and Atlanta
Body & Health Products Proprietary Ltd – through its subsidiary.
• The management has put in place a prudent growth strategy, which would be leveraging on Dabur‟s herbal heritage and
positioning as the „Science-based Ayurveda‟ specialist, which has a high consumer demand.
• Market share gains in select categories (especially in juices and toothpaste categories) and price cuts post-GST are the
near-term volume triggers. Further, new product launches in hair care, fruit drink, and ayurvedic segments may support
volume growth over FY18-20E. In order to capitalize on the revival in rural consumption (~45% of revenue), Dabur plans
to penetrate ~60,000 villages (particularly in South India) in the near term.
ICICI Prudential PMS Largecap Portfolio
(A series under the “Diversified Portfolio”)
Portfolio Strategy Note – March 2018
The information contained herein is solely for private circulation for reading/understanding of registered
distributors and referral agents of ICICI Prudential PMS and should not be circulated to investors/prospective
investors.

State Bank of India 5.9

• State Bank of India (SBI) is one of India‟s largest commercial banks. SBI, in line with RBI‟s goals, is keen to lower lending
rates further to accelerate credit growth and private investment in the Indian markets.
• SBI reported a net loss of Rs2,416 crore for Q3FY18 after setting aside funds to cover rising bad loans and losses on its
bond portfolio. Gross NPAs as a percentage of total loans stood at 10.35% as on 31 December, 2017 up from 9.83% YoY.
• SBI reported a loan growth of 2.52%, supported by growth in retail products, and also by credit to small and medium
enterprises. Outstanding loans as on 31 December 2017 stood at Rs 19.24 trillion.
• The clear intention of all subsidiaries of SBI is to capitalize on the escalating growth opportunities by leveraging on the
financialisation, democratization and digitization trend in the financial services space.
• SBI cards may have good growth opportunities owing to the fact that the Indian cards market is significantly under
penetrated at 2.3% vs 180% in Korea and 300% in USA.
Sun Pharmaceuticals Industries Ltd. 5.5
• Sun Pharma is one of the largest generic pharmaceutical companies in the world. It provides high-quality, affordable
medicines trusted by healthcare professionals and patients in over 150 countries.
• It is the only company among peers to have made significant investments (~USD 1.5bn) in specialty US business. They
believe in acquiring assets rather than companies to source external innovation.
• The Net Revenue earned by the company saw a 16% decline YoY to Rs 6653.2 cr, with EBITDA falling 40.8%, due to
increased competition for market share in the general medicine business, regulatory woes and endeavor to create a US
specialty business.
• Sun Pharma is making several R&D investments to launch specialty products in the coming years. The novel psoriasis
drug has received approval, and is expected to improve earnings of the company.
• Clearance of Halol plant, for which re-inspection is underway, coupled with approval for and launch of MK-3222 and
Seciera, respectively, in FY19, may allow for good earnings growth.

Mahindra & Mahindra Ltd. 5.0

 Mahindra and Mahindra Limited (M&M) is an Indian multinational car manufacturing corporation headquartered in
Mumbai, India. It is one of the largest vehicle and tractor manufacturers by production.
 M&M has set a target to manufacture 3,000 electric vehicles (EV) a month over the next two years. For this, the company
plans to invest up to Rs600cr in a new plant for EVs. Currently the company has a capacity to roll out 200 EVs/month,
which it plans to ramp up to 700-800/month over the next four months (May 2018).
 The company‟s tractors have recorded the deepest reach at ~2k versus industry average of 1k locations. 35% of tractor
sales are contributed by new products.
 M&M is launching four new Utility Vehicles (UV) in FY19 which are projected to enhance earnings. The company‟s LCV
business remains on terra firma.
Power Grid Corporation of India Ltd. 4.2
• State-owned electric utilities company, Power Grid Corporation (PGCIL), has planned heavy capex for this fiscal. Revenue
for Q3FY18 grew by 13.2% YoY to Rs7,506cr, driven by 14% spurt in the transmission business. Net Profit stood at
Rs2,040.8cr.
• PGCIL is evaluating growth opportunities via intra‐state projects and also international geographies like Brazil,
Bangladesh, etc.
• PGCIL does not expect any significant capex over the next 2-3 years and is hence focusing on diversifying. In order to
minimise risk in other geographies with respect to construction, PGCIL is going with local construction companies like
KEC.
Tata Motors Ltd. 4.2
• Tata Motors Ltd. (TTMT) is one of India's largest commercial vehicle players with products in compact and mid size cars
and utility vehicle segments.
• Through subsidiaries and associate companies, the company has operations in the UK, South Korea, Thailand and Spain.
Among them is Jaguar Land Rover (JLR), the business comprising 2 iconic British brands – Jaguar and Land Rover.
• Tata Motors‟ Q3FY18 Consolidated EBITDA rose by 66% YoY to INR 85 bn. Consolidated revenue increased 14% to Rs
74,156 cr.
• In the standalone Indian business, sales volume, including exports, rose 31% to 172,952 units in Q3FY18, with significant
growth across the entire portfolio. Key drivers were volume uptick, better product mix and control on operating costs.
• Indian business for the company is expected to benefit from strong demand outlook and cost control initiatives. JLR‟s
growth in volume may be dependent on the success of its new launches.
HCL Technologies Ltd. 4.1
• HCL Technologies Ltd. (HCL) is an Innovative Technology & Outsourcing Company that provides technical consulting, IT
solutions & software development to global firms.
ICICI Prudential PMS Largecap Portfolio
(A series under the “Diversified Portfolio”)
Portfolio Strategy Note – March 2018
The information contained herein is solely for private circulation for reading/understanding of registered
distributors and referral agents of ICICI Prudential PMS and should not be circulated to investors/prospective
investors.

• HCL‟s Revenue for Q3FY18 grew by 8.4% YoY to Rs 12,808 cr. EBITDA came in at Rs 2,964 cr, up 7.4% QoQ and 12.8%
YoY with PAT coming in at Rs 2,194 cr.
• HCL Technologies has acquired C3i Solutions for USD 60 Million, a move aimed at accelerating its growth in life sciences
and consumer services.
• CLSA has rated HCL as its top pick in the IT space, citing strong growth prospects.
• HCL also signed an IT deal with Norway-based global energy company Statkraft, to enable Statkraft to adopt market-
standard IT services across 18 countries.
Source: Internal, EdelResearch, IndiaInfoline

Top Alpha Generators

Company Alpha (%)
Bajaj Finserv Ltd. 5.26
Infosys Ltd. 4.33
Bajaj Auto Ltd. 3.02
Maruti Suzuki India Ltd. 2.42
ICICI Bank Ltd. 2.37
Data Source: Internal; Period: March 31, 2015 – March 31, 2018.

Portfolio Performance
Particulars Returns (%)
1 3 5 Since
Year years years inception
ICICI Prudential PMS
9.83 7.87 18.78 18.68
Largecap Portfolio
S&P BSE 100 10.62 6.86 13.09 16.63
Source: Factsheet for ICICI Prudential PMS Largecap Portfolio
Less than 1 year: Absolute Returns; greater than or equal to 1 year: compound annualised return.
Past performance may or may not be sustained in future.

Stock In & Stock Out

Stock in – N/A
Stock out – N/A

About The Portfolio

ICICI Prudential PMS Largecap Portfolio is a diversified equity portfolio that endeavours to achieve
long term capital appreciation by investing predominantly in large-cap companies.

Features of the Portfolio

The Portfolio aims to generate alpha by active sector rotation through a top-down approach.

The endeavour is to select the best stock/s in a sector than to diversify into many stocks confined to
sectors.
The Portfolio intends to reduce concentration risk through diversification at the stock and sector
levels.
The Portfolio seeks to invest in large cap companies with a proven track record, quality management
and good growth potential.
ICICI Prudential PMS Largecap Portfolio
(A series under the “Diversified Portfolio”)
Portfolio Strategy Note – March 2018
The information contained herein is solely for private circulation for reading/understanding of registered distributors and
referral agents of ICICI Prudential PMS and should not be circulated to investors/prospective investors.

Disclaimer
 All data provided above is as on 31st March, 2018, unless specified otherwise.
 Investing in securities including equities and derivatives involves certain risks and considerations associated
generally with making investments in securities. The value of the portfolio investments may be affected generally
by factors affecting financial markets, such as price and volume, volatility in interest rates, currency exchange
rates, changes in regulatory and administrative policies of the Government or any other appropriate authority
(including tax laws) or other political and economic developments. Consequently, there can be no assurance that
the objective of the Portfolio would achieve. Prospective investors are advised to carefully review the Disclosure
Document, Client Agreement, and other related documents carefully and in its entirety and consult their legal, tax
and financial advisors to determine possible legal, tax and financial or any other consequences of investing under
this Portfolio, before making an investment decision. The fees and charges mentioned in this document are
indicative and shall be in accordance with the Agreement executed by the Portfolio Manager with the Client.
 The Stock(s)/Sector(s) mentioned in this material do not constitute any recommendation of the same and the
portfolios may or may not have any future positions in these Stock(s)/Sector(s). The composition of the portfolio
is subject to changes within the provisions of the disclosure document. The benchmark of the portfolios can be
changed from time to time in the future. Trading volumes, settlement periods and transfer procedures may
restrict the liquidity of investments in portfolios. Different segments of the Indian financial markets have different
settlement periods and such periods may be extended significantly by unforeseen circumstances.
 Individual returns of Clients for a particular portfolio type may vary significantly from the data on performance of
the portfolios as may be depicted. This is due to factors such as timing of entry and exit, timing of additional flows
and redemptions, individual client mandates, specific portfolio construction characteristics or structural
parameters, which may have a bearing on individual portfolio performance. No claims may be made or
entertained for any variances between the performance depictions and individual portfolio performance. Neither
the Portfolio Manager nor its Directors, Employees or Sponsors shall be in any way liable for any variations
noticed in the returns of individual portfolios.
 The Client shall not make any claim against the Portfolio Manager against any losses (notional or real) or against
any loss of opportunity for gain under various PMS Products, on account of or arising out of such circumstance/
change in market condition or for any other reason which may specifically affect a particular sector or security.
 The Portfolio Manager shall have the sole and absolute discretion to invest in respect of the Client‟s account in
any type of security subject to the Agreement and as stated in the Disclosure Document and make such changes
in the investments and invest some or all of the Client‟s investment amount in such manner and in such markets
as it deems fit would benefit the Client. The Portfolio Manager‟s decision (taken in good faith) in deployment of
the Clients‟ account is absolute and final and can never be called in question or be open to review at any time
during the currency of the agreement or any time thereafter except on the ground of malafide, fraud, conflict of
interest or gross negligence. This right of the Portfolio Manager shall be exercised strictly in accordance with the
relevant Acts, rules and regulations, guidelines and notifications in force from time to time.

 All data/information used in the preparation of this material is dated and may or may not be relevant any time
after the issuance of this material. The Portfolio Manager/ the AMC take no responsibility of updating any
data/information in this material from time to time. The Portfolio Manager and the AMC (including its affiliates),
and any of its officers directors, personnel and employees, shall not liable for any loss, damage of any nature,
including but not limited to direct, indirect, punitive, exemplary, consequential, as also any loss of profit in any
way arising from the use of this material in any manner.