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Table Of Contents
‰ India Opportunity

‰ Why Invest in Small Caps

‰ Investment Case for Small Caps

‰ Success Essentials and Reliance Mutual Fund Advantage

‰ Reliance Small Cap Fund

ƒ Investment Strategy

ƒ Positioning

ƒ Product Features
India Moving Towards Higher Growth Trajectory

...despite concerns of coalition politics, bureaucracy & poor infrastructure

Estimated for 2009-2011


Source: CIEC, RCAM Estimates
India - The Next Trillion Dollar Opportunity
INDIA’S GDP IN USD TRILLION

‰ India took 60 years to get to its first USD 1 Trillion GDP in FY08,
FY08 but the move to USD 2
Trillion GDP will be in next 5-6 years, similar to that of China
‰ Due to the huge consumption and savings/investment boom, USD 2 Trillion GDP is not a
destination, but a milestone in India’s ongoing
g g jjourney
y towards USD 4 Trillion GDP in the
subsequent 5-7 years, and so on
Estimated for 2010-2014
Source: CMIE, MOSL, RCAM Estimates
Emerging Markets To Attract Higher Inflows
Period 1995-99 2000-04 2005-09 2009 Growing size of EM economy and
Avg. World GDP $Bn 30,292 35,291 53,583 57,228
fading distinction between EM
Proportion of the World Average GDP level (%)
DM countries 80.4 79.5 72.2 69.3 and DM economies should lead to
US 27.6 30.5 25.7 24.9 increased capital allocation to EM
UK 4.4 4.9 4.6 3.8
economies
Euro area 23.2 21.4 22.1 21.5
Japan 14.8 12.2 8.7 8.8
Period 1995-99 2000-04 2005-09 2009
EM countries 19.6 20.5 27.8 30.7
Avg.World M-Cap 14,047,039 17,734,308 25,689,296 24,630,640
Brazil 2.6 1.7 2.4 2.6
Proportion of the Average World M-Cap (%)
Russia 1.0 1.1 2.2 2.2
DM markets 94.1 95.3 90.1 86.8
India 2.2 1.5 1.9 2.2
United States 46.6 51.9 44.3 42.5
China 3.1 4.3 6.5 8.3
United Kingdom 9.7 10.4 9.6 9.0
South Africa 0.5 0.4 0.5 0.5
Europe (ex-EM) 30.0 29.1 29.0 27.3
Japan 13.8 9.0 9.5 8.6
Presently, EM economies hold over 30%
Presently EM markets 5.9 4.7 9.9 13.2
share in Global GDP, while their share in Brazil 0.7 0.4 1.3 2.2
Global market cap is only 13% Russia 0.2 0.2 0.8 0.8
India 0.4 0.3 0.7 1.0
China 0.0 0.3 1.5 2.4
K
Korea 06
0.6 08
0.8 14
1.4 17
1.7
MSCI Indices used as proxy for market-cap data (Units: USD million)

Source: IMF GDP data, MSCI m-cap data, RCAM Estimates, DM : Developed Markets, EM: Emerging Markets
Investments Will Flow To India
USD (Trillion) CY2008 CY2014
BRIC
GDP 8.29 16.36
Market Cap 5.61 16.36
FII Investments* 1.00 ??
US
GDP 14 20
14.20 16 47
16.47
Market Cap 12.09 16.47
FII Investments* 10.64 ??
‰ In 2014,
2014 BRIC
BRIC’ss combined GDP will be equal to US GDP
‰ At Market Cap GDP ratio of 1, BRIC countries will have a market cap of USD 16.36
Trillion
‰ Significant FII money will flow into the BRIC markets – India will gets its share of
investments
Source - RCAM Estimates, *FII numbers are approximations, BRIC – Brazil, Russia, India, China
Investment Outlook
‰ Currently market is evenly poised with positive bias

‰ India has emerged stronger from the global slump and is back on track to grow in excess
of 7-8% per annum
‰ For a sustained long term growth, the 3 growth drivers are in place:

ƒ Savings – Domestic savings are among the highest in the world


ƒ C
Consumption
ti – Set
S t to
t explode
l d
ƒ Investments – At 34% of the GDP, again among the highest in the world
‰ Policy
y announcements will have significant
g impact
p on the direction of the market
‰ Themes for the coming year

ƒ Big valuation disparity among large, mid caps & small caps. Opportunity for alpha
creation
ƒ Stock selection will be the key Source: Bloomberg, RCAM Estimates
Why Invest In Small Caps?
Key Benefits Of Investing In Small Caps
Emergence Of Small Caps To Large Caps

Today’s
Today s Small …Are Tomorrow’s
Tomorrow s Potential
Caps …. Which May Eventually
Mid Caps, Become Large Caps

Small Caps Mid Caps Large Caps


Re – Rating Potential For Small Caps

Small Cap Mid Cap Large Cap

Research Available Limited Moderate Widely

Institutional Very
Ownership Moderate Large
Limited

Valuation Multiple
p
Low Moderate Fair
Entrepreneurial Passion
‰ Indian entrepreneurial skills / mindset / spirit has been globally acknowledged over a

period of time

‰ End
E d off License
Li R j has
Raj h opened
d many business
b i opportunities
t iti forf entrepreneur
t

‰ Multiple sources of fund raising at various stage of business has been of tremendous

help
p

‰ Competitive talent is being attracted & retained by rewarding performance linked

incentives, ESOPs, etc

‰ In today’s economic environment, individuals with entrepreneurial mindset are exploring

new business opportunities that will not only survive in a recession but will also thrive

‰ Thus,
Th E
Emerging
i India
I di is
i offering
ff i various
i growth
th opportunities
t iti to t entrepreneurs,
t b it first
be fi t
generation entrepreneur or otherwise
Emerging Sectors Offer Opportunities For Growth

‰ In a developing economy like India, multiple sectors provide opportunities for growth

ƒ Example: Retailing, Food Processing, Pharmaceuticals, Media & Entertainment,

Real Estate, Education, Hospitality


y etc

‰ Once established and successful, ramp up can be rapid

‰ Thus, emerging sectors are true reflection of entrepreneurial spirit, new opportunities

and creation of global behemoths


Dynamics Of Multi - Baggers
Market Capitalization = Net Profits X Perception
Market Price = EPS X PE

ƒ High Growth Potential / Scalability ƒ Under Ownership, Under

ƒ Differentiated Business Model Researched & Under Covered

ƒ Emergence of Educated & ƒ Understanding Value of Market Cap

Passionate Management ƒ Various Modes of Fund Raising

ƒ Niche focus & ability to attract talent ƒ Emerging Sectors start small –

in form of Quasi Entrepreneurs & Technology, Retail, Real Estate,

Stock Options Insurance etc

This simultaneous impact on both EPS & PE creates a MULTI BAGGER


How Small Caps Are Classified ?
‰ There is no scientific methodology to classify Large Caps, Mid Caps and Small Caps

but there are pre-defined indices on BSE & NSE


‰ Mentioned below is the categorization of the same on the basis of market capitalization

as on August 2010

Index Market Cap Total Market


No. Of
Indices Categorization Range Cap approx
Companies
(Rs. Crs) (Rs Crs)
BSE SENSEX g Cap
Large p 30 15,300
, – 329,400
, 2,761,687
, ,
BSE Mid Cap Mid Cap 273 1000 – 12,350 1,078,821
BSE Small Cap Small Cap 534 170 – 2300 351,840

Source: www.bseindia.com, 5th August 2010 , Index Market Cap Range given implies companies with the smallest market cap and largest market cap in that particular
indices respectively as on August 5, 2010. Small Cap stocks for the purpose of the Reliance Small Cap Fund are stocks whose market capitalization is in between the
highest and lowest market capitalization of companies on BSE Small Cap Index
The Indian Small Cap Opportunity

‰ 4300+ Cos. listed on Bombay Stock Exchange

‰ 1383 Cos. with Market Capitalization of over Rs 100 Cr

‰ 1065 Cos. with Market Capitalization of over Rs 200 Cr

‰ 664 Cos. with a Sales Turnover of over Rs. 200 Cr

‰ 613 Cos. with an Operating Profits over Rs 25 Cr

‰ 548 Cos. with net p


profits of over Rs 10 Cr

Source : www.bseindia.com, Capitaline Neo as on 6th August 2010


Investment Case For Small Caps

Performance Over The Last 2 Years (31st July 08 - 30th July 10) Valuation As On 31st July 2010
Outperformance of I d
Index P/E P i To
Price T Book
B kV Value
l
Index CAGR (%) BSE SMALL CAP
Relative To Indices S&P CNX Nifty 22.31 3.78
S&P CNX Nifty 11.32 5.00 BSE SENSEX 21.20 3.40
BSE SENSEX 11.58 4.74 BSE MIDCAP 19.24 2.90
BSE MIDCAP 15.37 0.95 BSE SMALL CAP 15.66 2.34
BSE SMALL CAP 16.32
Source : www.bseindia.com, Capitaline Neo as on 6th August 2010

Small Caps are still available at better valuations compared to Large Caps
E
Examples
l off how
h Small
S ll Cap
C companies i have
h emerged
d
as Large Cap companies over a period of time
creating wealth for the shareholders

ƒ The companies chosen herein are purely for illustrative purpose only
ƒ Reliance Mutual Fund or Reliance Small Cap Fund may or may not invest in the shares of these companies
ƒ The investment decision of Reliance Mutual Fund to invest in any company is based on several factors including
research, market potential, future outlook etc
Retailing
Market Capitalization Market Capitalization
(July 30th 2001) (July 30th 2010) Outperformance relative to
Company Name BSESENSEX
(Rs. Cr) (Rs. Cr) (July 30th 2001- July 30th 2010)

P
Pantaloon
l Retail
R il (India)
(I di ) 19 98
19.98 9457 13
9457.13 19 316%
19,316%

PAT
Rs.140.58 Crs
(30th June 2009)

PAT
Rs.6.40 Crs
(30th June
J 2001)

Source as on 31st July 2010, Capitaline Neo


Realty - Construction
Market Capitalization Market Capitalization
(July 31st 2003) (July 30th 2010) Outperformance relative to
Company Name BSESENSEX
(Rs. Cr) (Rs. Cr) (July 31st 2003- July 30th 2010)

U i h
Unitech 72 44
72.44 20 457 53
20,457.53 17 550%
17,550%

PAT
Rs.1,195.53 Crs
(31st March
M h 2009)

PAT
Rs.13.57 Crs
(31stt March
M h 2003)

Source as on 31st July 2010, Capitaline Neo


Computers - Education
Market Capitalization Market Capitalization
(Jan 31st 2006) (July 30th 2010) Outperformance relative to
Company Name BSESENSEX
(Rs. Cr) (Rs. Cr) (Jan 31st 2006- July 30th 2010)

Ed
Educomp Solutions
S l i 447 20
447.20 5 797 46
5,797.46 904%

PAT
Rs.140.33 Crs
(31st March 2009)

PAT
Rs.14.00 Crs
(31st March 2006)

Source as on 31st July 2010, Capitaline Neo


Healthcare
Market Capitalization Market Capitalization
(Jan 31st 2001) (July 30th 2010) Outperformance relative to
Company Name BSESENSEX
(Rs. Cr) (Rs. Cr) (Jan 31st 2001- July 30th 2010)

A ll Hospitals
Apollo H i l 715 31
715.31 4 841 08
4,841.08 20%

PAT
Rs.130.03 Crs
(31st March 2010)
PAT
Rs.30.92 Crs
(31st March 2002)

Source as on 31st July 2010, Capitaline Neo


FMCG – Food & Dairy Products
Market Capitalization Market Capitalization
(July 1st 2003) (July 30th 2010) Outperformance relative to
Company Name BSESENSEX
(Rs. Cr) (Rs. Cr) (July 01st 2003- July 30th 2010)

Z d Wellness
Zydus W ll 2 31
2.31 2 015 23
2,015.23 9 924%
9,924%

PAT
Rs.46.71 Crs
(31st March 2010)

PAT
Rs.0.94 Crs
(31stt March
M h 2003)

Source as on 31st July 2010, Capitaline Neo


Dynamics Of Successful Small Cap Investing
‰ Stock Selection

ƒ Small Cap investing is all about stock selection rather than asset allocation

‰ Stock selection based on

ƒ Size of opportunity

ƒ Possible higher growth and its sustainability

ƒ Emerging theme / sector (Example: real estate,


estate retail,
retail food processing etc)
ƒ Zeal of management to scale and grow

‰ Stock price movement tend to be more volatile

ƒ Limited research

ƒ Lesser/negligible institutional ownership

‰ However the sharp volatility subsides over a longer period and makes way for

higher profitability
Reliance Mutual Fund Advantage
‰ Our Expertise

ƒ Bottom up approach has been strongly advocated as the key investment strategy of
Reliance Mutual Fund.
Fund
ƒ Well-experienced team of investment professionals having
ƒ Collective experience of over 150 years in Indian equities
ƒ Most members individually tracking Indian equity markets for well over 15 years
ƒ In depth research capabilities to identify small caps with huge growth potential
ƒ Our research capability empowers the Fund Manager to be BOLD in identifying high
growth potential stocks & manage the RISK associated with it
ƒ Only fund in RMF’s product basket with a pre-dominant investment focus on small
cap companies where stock selection would play a key role
Past Performance may or may not be sustained in future
Reliance Mutual Fund
Presents
Reliance Small Cap Fund
A Fund With
A Very Aggressive Investment Style
Investment Philosophy
‰ With an endeavor to maximize returns & minimize risks by reasonable diversification ,

primary focus would be on small cap stocks

ƒ Investment in Equities of Small Cap Companies : 65%-100%*

ƒ Investment in Equities of any other Companies : 0%-35%*

ƒ I
Investment
t t in
i Debt
D bt & Money
M M k t Securities
Market S iti : 0% - 35%*

‰ Small cap stocks, for the purpose of the fund are defined as stocks whose market

capitalization
p is in between the highest
g & lowest market capitalization
p of companies
p
on BSE Small Cap Index

‰ Investment with a longer term horizon

* Please refer detailed asset allocation on slide no 29. Market Capitalization: Market value of the listed company, which is
calculated by multiplying its current market price by number of its shares outstanding
Positioning Of Reliance Small Cap Fund
Returns

High Medium Low

Reliance Small
High
Ri k
Risk C F
Cap Fund
d

Medium

Low

‰ A very aggressive small cap oriented fund

‰ A relatively high risk/high return oriented fund characterized by volatility which will get

smoothened out over long term investment horizon

‰ Reliance Small Cap Fund will be a vital part of an investor’s core portfolio that aims to

create an alpha for their investments


Scheme Features
The primary investment objective of the scheme is to generate long term capital
appreciation by investing predominantly in equity and equity related instruments
Investment Objective of small cap companies and the secondary objective is to generate consistent
returns by investing in debt and money market securities

Benchmark BSE Small Cap Index

Equity & equity related securities of small cap companies including derivatives#
- 65%-100%
65% 100%
Equity & equity related securities of any other companies including derivatives#
Proposed Asset - 0%-35%
Allocation Debt & Money Market Securities **(including investments in securitised debt)
- 0% - 35%
** including securitised debt up to 30%
# The Scheme proposes to invest at least 65% of the corpus in Equity & equity related instruments of small cap
companies which may go upto 100% of the corpus. The investment in Equity & equity related instruments of
any other companies other than small cap companies will be in the range of 0-35% of the corpus

F d Manager
Fund M Sunil Singhania

New Fund Offer Price: Rs.10/- per unit


Scheme Features
Choice of Plans/Options Load Structure : During New Fund Offer &
Continuous Offer including SIP Installments
Growth Plan:
Growth & Bonus Option
E t Load:
Entry L d Nil
Dividend Plan :
Dividend Payout Option Exit Load:
Dividend Reinvestment Option • 2% If redeemed or switched out on or before completion of
12 months from the date of allotment of units
Minimum Application Amount
• 1% If redeemed or switched out after 12 months but on or
Rs.5000 & in multiples of Re. 1 thereafter before completion of 24 months from the date of allotment
of units
Additional Purchase Amount
• Nil If redeemed
d d or switched
it h d outt after
ft the
th completion
l ti off 24
Rs.1000 (plus in the multiple of Re.1) months from the date of allotment of units
In accordance with the requirements specified by the SEBI circular no. SEBI/IMD/CIR
SIP No.4/168230/09 dated June 30, 2009 no entry load will be charged for purchase / additional
purchase / switch-in accepted by the Fund. Upfront commission shall be paid directly by the
investor to the AMFI Registered Distributor based on the investor’s assessment of various
Mode of Payment : Auto Debit/ECS factors including the services rendered by the AMFI Registered Distributor.
Disclaimers
The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the readers. This information is
meant for general reading purpose only and is not meant to serve as a professional guide for the readers. This document has been prepared on the basis of publicly available
information, internally developed data and other sources believed to be reliable. The Sponsor, The Investment Manager, The Trustee or any of their respective directors,
employees, affiliates or representatives do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Whilst no
action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and opinions given fair and reasonable.
This information is not intended to be an offer or solicitation for the purchase or sale of any financial product or instrument. Recipients of this information should rely on
information/data arising out of their own investigations. Readers are advised to seek independent professional advice and arrive at an informed investment decision before
making any investments. None of The Sponsor, The Investment Manager, The Trustee, their respective directors, employees, affiliates or representatives shall be liable for
any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the information contained in this material.
The Sponsor, The Investment Manager, The Trustee, any of their respective directors, employees including the fund managers, affiliates, representatives including persons
involved in the preparation or issuance of this material may from time to time, have long or short positions in, and buy or sell the securities thereof, of company(ies) / specific
sectors mentioned herein.
Terms of issue and mode of sale and redemption of units: The Scheme will offer for Subscription/ Switch-in and Redemption / Switch-out of Units on every Business Day
on an ongoing basis, within five business days of allotment. The redemption or repurchase proceeds shall be dispatched to the unitholders within 10 Business Days from the
d t off redemption
date d ti or repurchase.
h
Investor benefits and general services offered: The Scheme offers Systematic Investment Plan, Auto Switch facility, Online Transactions and Reliance Any Time Money
Card during the NFO period. The NAV of Scheme shall be published on a daily basis by the Mutual Fund at least in two daily newspapers and will also uploaded on the AMFI
site www.amfiindia.com and Reliance Mutual Fund site i.e. www.reliancemutual.com.
Statutory Details: Reliance Mutual Fund has been constituted as a trust in accordance with the provisions of the Indian Trusts Act, 1882. Sponsor: Reliance Capital Limited.
Trustee: Reliance Capital Trustee Company Limited. Investment Manager: Reliance Capital Asset Management Limited (Registered Office of Trustee & Investment
Manager: “Reliance House” Nr. Mardia Plaza, Off. C.G. Road, Ahmedabad 380 006). The Sponsor, the Trustee and the Investment Manager are incorporated under the
Companies Act 1956.
1956 The Sponsor is not responsible or liable for any loss resulting from the operation of the Scheme beyond their initial contribution of Rs.1
Rs 1 lakh towards the
setting up of the Mutual Fund and such other accretions and additions to the corpus.
Risk Factors: Mutual Funds and securities investments are subject to market risks, and there is no assurance or guarantee that the objectives of the Scheme will
be achieved. As with any investment in securities, the NAV of the Units issued under the Scheme can go up or down depending on the factors and forces
affecting the securities market. Reliance Small Cap Fund is only the name of the Scheme and does not in any manner indicates either the quality of the Scheme;
its future prospects or returns. Past performance of the Sponsor/AMC/Mutual Fund is not indicative of the future performance of the Scheme. The NAV of the Scheme may
be affected, interalia, by changes in the market conditions, interest rates, trading volumes, settlement periods and transfer procedures. There are various risks associated with
investing in Equities,
Equities Bonds,
Bonds Foreign Securities,
Securities investing and use of Derivatives,
Derivatives Securitised Debt and Short Selling & Securities Lending.
Lending For Scheme specific risk factors
and more details, please refer to the Scheme Information Document & Key Information Memorandum, which is available at all the DISC, Distributors and
www.reliancemutual.com. Investors can also call at our call centre 1800-300-11111 (toll free) for more details. Please read the Scheme Information Document and
Statement of Additional Information carefully before investing.
Thank You

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