Kotak Manufacture In India Fund

It invests in companies engaged in manufacturing

activities, giving you an opportunity for wealth creation
alongside the growing Indian economy.

NFO starts on 1st February 2022 and ends on 15th February 2022
India Is Backoffice & Pharmacy To The World

IT exports has surpassed the gross oil import bill India 3rd largest manufacturer of pharmacy in terms of volume and
14th in value

Value of Drugs and Pharmaceuticals (in Rs Billion)

2000
1812.6
1800
1600 1467.5
1400 1339.4
1200 1106.5 1125.5 1114.1
1000 904.1 943.5

800
600
400
200
0
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

Source: Narendramodi.in

Source: CEIC, GoI, Spark Capital Research 2

Winning Formula For Renaissance In Manufacturing

Manufacturing value of mobile

Phased manufacturing program phones in INR Billion
2500

PLI scheme 2140 2200

2000
100% Automatic FDI 1700

1500
1320
Tax cuts

1000 900
Single window clearance
540
500
Electronic clusters 267
189

Import duty protection 0

FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

Source: Statista.com 3
Trade Balance Is Improving In Most Sectors For Which
PLI Has Been Announced
India’s merchandise trade balance in the sectors for which PLI has been announced

Source: Ministry of Commerce, Credit Suisse estimates 4

Why The Manufacture in India Theme?
On the cusp of a manufacturing renaissance
Significant Improvement Seen In Manufacturing

New Manufacturing Firms Set Up Share of Manufacturing by All New Firms

Source: MCA, IndiaDataHub, New firm includes Companies and LLP’s 6

Significant Improvement Seen In Manufacturing

Expect Real Manufacturing GFCF to increase from

Real Manufacturing GFCF may double by FY27
5.5% to 7.0% of GDP by FY27
8.0 16,000 14,763
7.5 7.0
7.4 14,000
7.0
12,000
6.5
6.0 10,000
7,464
5.5 5.5 8,000
5.0
6,000 5,063
4.5
4,000
4.0 1,621
3.5 3.6 2,000
3.0 -

FY02
FY04
FY06
FY08
FY10
FY12
FY14
FY16
FY18
FY20
FY22e
FY24e
FY26e
Manufacturing GFCF as % of GDP Manufacturing GFCF (INR bn)

Source: CMIE, Antique

GFCF (Gross Fixed Capital Formation) is a component of the expenditure on gross domestic product (GDP), and thus shows how much of the new value
added in the economy is invested rather than consumed. 7
Focus Investment Themes

Production Deleveraged Housing Starting Reimagining

China +1 Linked Incentive Balance Sheets To Take Off India’s Carbon
Scheme (PLI) Of Corporates Footprint

8
China +1
China Gave COVID; India Gave Vaccines To World

True to its “Vasudhaiva Kutumbakam” tradition, India has shared 11.54 crore units of its vaccines with
97 countries.

Source: MEA – 31 Dec, 2021 10

India Can Emerge As A Competent Alternate To China
Anti dumping measure against China

Anti-dumping measures against China as % of world (RHS)

• Between 2009 & 2010, 74 fresh duties were imposed by
70 50% global trade partners.
60 40% • India has 93 anti-dumping duties imposed against China
50
30% • In 2020, India imposed 5 new duties mainly in chemicals,
40
20% plastics & rubbers, auto components and iron & steel.
30
20 10%

Source: Axis Securities

GOI has announced series of PLI benefits to boost manufacturing in India

INR bn
PLI scheme Production-Linked Incentive (PLI) Scheme has been
500 Outlay Investment announced for 10 key sectors for Enhancing India’s
450
450 410 Manufacturing Capabilities and Enhancing Exports
400
350
300
250 181
200 172
150 110 122
100 62 70 46 45
24 33 34
50 7
0
Mobile IT hardware Telecom Bulk drugs & Medical Solar modules Battery
KSM devices 11
Source: PIB, Axis Capital
Indian Rupee Relatively More Competitive Than
Chinese Yuan

CNYINR
5 Year CAGR = 3.64%
12

11.5
Pre-COVID CNY
INR averaged ~10
11

10.5

10 INR has become more

competitive to CNY by
9.5 ~16% from Pre-COVID

9
Apr-17

Aug-17

Apr-18

Aug-18

Apr-19

Aug-19

Apr-20

Aug-20

Apr-21

Aug-21
Dec-16

Jun-17

Oct-17

Dec-17

Jun-18

Oct-18

Dec-18

Jun-19

Oct-19

Dec-19

Jun-20

Oct-20

Dec-20

Jun-21

Oct-21

Dec-21
Feb-17

Feb-18

Feb-19

Feb-20

Feb-21
Data as on Dec 31, 2021. Source: Bloomberg. CAGR represents depreciation of INR against CNY 12
 Production Linked Incentive
Scheme (PLI)

Production-linked incentive (PLI) scheme provides incentives to companies for enhancing their domestic manufacturing apart from
focusing on reducing import bills and improving the cost competitiveness of local goods. PLI scheme offers incentives
13
on
incremental sales for products manufactured in India.
PLI Scheme To Attract Investment Of INR 1.5 Trn Over
The Next 5 Years

PLI Schemes Can Add 1.7% To FY27 GDP

Production-linked incentive (PLI) scheme provides incentives to companies for enhancing their domestic manufacturing apart from focusing on reducing import bills and
improving the cost competitiveness of local goods. PLI scheme offers incentives on incremental sales for products manufactured in India.
Source: Credit Suisse estimates 14
PLI Scheme Will Not Only Promote Manufacturing But
Will Also Create Huge Employment Opportunity

Source: Quess Corp 15

Deleveraged Balance Sheets
Of Corporates
Increased Cash Flow Leading To Deleveraging

CFO To Capex For India Inc. At Two-decade High Corporate Balance Sheets Have Seen Deleveraging

Source: Ace Equity, Jefferies

Source: Capitaline, I-Sec Research

Cash flow from operating activities (CFO) indicates the amount of money a company brings in from its ongoing, regular business activities, such as
manufacturing and selling goods or providing a service to customers. 17
 Is The Worst Over In The Private Capex Cycle?
Overall industry capacity utilization is nearing pre-Covid levels Cement – 80% capacity utilization in ex-South
Steel – Top 6 players operating at peak utilization
80 Capacity Utilisation (%) FY05 FY10 FY15 FY20 FY21 1HFY22
75 76 76
74 74 Cement
75
69 70 69
70
69 Capacity utilisation 84% 86% 67% 68% 67% 69%
67
63 Ex-South 85% 92% 80% 77% 76% 80%
65
60 Top 10 80% 77% 69% 73% 70% 72%
60
Steel
55
Capacity utilisation 91% 88% 81% 77% 71% 78%
50 47 Top 6 100% 92% 81% 83% 78% 86%
45 Power
40 Thermal Power PLF - 78% 64% 56% 54% 57%
Jun'18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21

Manufacturing companies received more new orders, higher than pre-Covid Inventory to sales have fallen sharply, a precursor of inventory refilling
average
60.0 Inventories to Sales (%) 54.5
106.0 Average new order book (%, YoY) 105.7
50.0 44.8
86.0
40.0 36.9
66.0
46.0 27.2 29.5
32.9 30.0 33.1
26.0
7.5 20.0 22.0
6.0 17.4
-14.0 -16.8 10.0
-34.0 0.0

Dec-18

Mar-19

Dec-19

Mar-20

Dec-20

Mar-21
Jun-18

Jun-19

Jun-20

Jun-21
Sep-18

Sep-19

Sep-20
-54.0 -48.5
-74.0
Dec-18

Mar-19

Dec-19

Mar-20

Dec-20

Mar-21
Jun-18

Jun-19

Jun-20

Jun-21
Sep-18

Sep-19

Sep-20

Finished goods inventories/sales Raw material inventories/sales

18
Source: Spark capital
Housing Starting To Take Off
Real Estate To See Accelerated Growth
70 (%)
Amongst the best ever
60 56 58
53 50 affordability level
49 50 48
50 44 44
36 38 37 38
40 34 34 33
31 30
30
28 27 27 28

20

10

Affordability ratio (Home loan payment / Income ratio)

Work From Home

Source: Jefferies, Images only for representation purpose 20

 5
6
8
9

7
10
11
12
13
14
FY12 12.8
FY13 11.5

Source: Antique Capital

FY14 11.1
FY15 10.3
FY16 7.7
FY17 7.7
FY18 7.7
FY19 8.1
FY20 7.6
FY21 7.5
FY22e 7.6
FY23e 7.7

Household dwelling as % of GDP

FY24e 7.8
FY25e 7.9
FY26e 8.0
FY27e 8.0
Expect Real Housing Share To Increase To 8% Of GDP By FY27
Real Estate To See Accelerated Growth

6,000
8,000
10,000
14,000
16,000
18,000

12,000

FY12 11,223
FY13 10,628
FY14 10,882
FY15 10,864
FY16 8,722
FY17 9,426
FY18 10,095
FY19 11,369
FY20 11,127
FY21 10,185
FY22e 11,281
Household dwelling (INR bn)

FY23e 12,359
FY24e 13,335
FY25e 14,437
21

FY26e 15,627
Housing Capex (Real) May Rise To INR 17tn By FY27

FY27e 16,914
Real Estate Revival: Beneficiary Of Real Estate Pick Up

Housing Finance companies Residential Developers

Home furnishing/ Cement

Decorators/ Aggregators
DIRECT &
INDIRECT BENEFICIARIES
OF REAL ESTATE
Internet Electrical Products

Home Insurance / Building Materials/

Home-Owners Insurance Home improvements

Consumer Durables & Proxies EPC Contractors

22
Reimagining India’s
Carbon Footprint
COP26: Way Forward For India

 India has pledged to climate change at the Paris Agreement

 Renewable energy share targeted at 40% of cumulative power generation by 2030

 Shift from conventional technology in auto sector to Electric Vehicles through FAME II Policy

 Special impetus to Renewable Energy

 Massive investments across multiple sectors

• 500 GW renewables by 2030
• Higher EV penetration (~10% by 2025)
• 20% ethanol blending for petrol (~3x increase from current levels)
• Improvement in energy efficiencies (battery storage)
• Smart cities

Source: Investindia – National Investment Promotion and Facilitation Agency 24

 Rs

10000
15000
25000
30000
35000

20000

0
5000
Shift towards renewable energy

2458

Source: BofA Global Research

Rail freight capacity expansion

Metro rail projects

Improved coal power plant tech

Rail electrification 1618 499 400

Namami Gange

BSIV to BSVI transition in Autos

EESL's initiatives

Raising share of Natural Gas

2015-20 Capex: Rs 6Tn (US$ 84Bn)

Emission norms for Coal power

plant
Diesel to solar pumps in agriculture
De-carbonization Capex Opportunity

Vehicle mix change: diesel to petrol

1 234 200 470 129 74 74 63 16

EV charging stations

Shift towards renewable energy

14051

Rail freight capacity expansion

4939

Metro rail projects

Improved coal power plant tech

Emission norms for Coal power
plant
Diesel to solar pumps in agriculture

Rail electrification

Raising share of Natural Gas

2020-30 Capex: Rs 23Tn (US$ 316Bn)

EV charging stations
2044 600 589 544 273 230 132

2015-30 Capex
29638

25
Kotak Manufacture In India Fund
– Scheme Features

26
Presenting Kotak Manufacture In India Fund

Fund Name Kotak Manufacture in India Fund

Type of Fund An open ended equity scheme following manufacturing theme

The scheme shall seek to generate capital appreciation by investing in a diversified

portfolio of companies that follow the manufacturing theme.
Investment Objective
However, there is no assurance that the objective of the scheme will be realized.
Benchmark Tier 1 - Nifty India Manufacturing Total Return Index

Mr. Harish Krishnan for Equity

Fund Manager
Mr. Abhishek Bisen for Debt

Minimum Application
Rs. 5000/- and in multiples of Re. 1 for purchases and of Re. 0.01 for switches
Amount During NFO

27
Nifty India Manufacturing Index Vs Nifty 500 Index
Higher Odds Of Outperformance In The Long Term
The Nifty India Manufacturing Index aims to track the performance of stocks that represent manufacturing sectors in India.

Percentage of total instances of Outperformance and Underperformance vs Nifty 500 on daily rolling return basis

Instances of Underperformance vs Nifty 500 Instances of Outperformance vs Nifty 500

Investment
Horizon Average Average
% times alpha < 0% % times alpha >= 0%
Underperformance Outperformance

10 years 39.5% -1.8% 60.5% 1.6%

7 years 49.8% -1.6% 50.2% 2.1%

5 years 31.2% -3.6% 68.8% 1.9%

3 years 52.2% -4.5% 47.8% 4.5%

1 year 51.1% -7.0% 48.9% 10.9%

Source: NSE Indices. Instances of outperformance or underperformance calculated using daily rolling returns. Data as Dec 31, 2021. The Nifty India Manufacturing Index has a base date of
April 01, 2005. Average underperformance is calculated as the simple average of periodic returns for all periodic returns lower than 0%. Average outperformance is calculated as the simple
average of periodic returns for all periodic returns of at least 0%. 28
Recent Underperformance Provides Attractive
Allocation Zone

Last 5 years Nifty India

Manufacturing Index has
underperformed Nifty
500
5 year outperforming
odds = 69%

Higher odds of outperformance in the past over 5 year time horizon. However recent underperformance by 4.6%
CAGR^ provides attractive zone for allocation into this strategy.

^ Data as Dec 31, 2021. Source: NSE Indices 29

Risks To The Thesis

Multiple variants of High commodity Flip-flop in Geopolitical developments

Covid impacting the prices and inflation government policies impacting the availability
Indian economy and increasing the cost of raw materials /
business sentiment of capital intermediates

30
Disclaimer And Riskometer

KOTAK MANUFACTURE IN INDIA FUND – An open ended equity scheme following manufacturing theme

This Product is suitable for investors

who are seeking*

• Long term capital growth

• Investment in equity and equity

related securities across market
capitalisation

Scheme Riskometer Benchmark Riskometer

*Investors should consult their financial advisors if in doubt about whether the product is suitable for them
(The product labelling assigned during the New Fund Offer is based on internal assessment of the Scheme Characteristics or
the model portfolio and same may vary post NFO when actual investments are made)

Disclaimer: Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
31
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.
Annexures
Performance Of The Nifty India Manufacturing, Nifty
50 & Nifty 500 Index By Calendar Year
180.0%

130.0%

80.0%

30.0%

-20.0%

-70.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Nifty India Manufacturing Index TRI Nifty 50 TRI Nifty 500 TRI

Source: NSE Indices. Data as of Dec 31, 2021. Data for the year 2005 is from April 01, 2005 to December 30, 2005. 34
Sector Exposure Presents Diversification Opportunity

Sector Nifty India Manufacturing Nifty 50 Nifty 500

AUTOMOBILE 20.3 5.0 5.1
INDUSTRIAL MANUFACTURING 20.2 0.0 2.7
PHARMA 17.8 3.4 4.6
METALS 14.8 3.3 3.8
OIL & GAS 8.8 12.3 9.5
CONSUMER GOODS 6.8 10.8 11.4
CHEMICALS 6.7 0.0 2.0
FERTILISERS & PESTICIDES 3.7 0.5 0.9
TEXTILES 1.1 0.0 0.5
TELECOM 0.0 2.1 2.0
PAPER AND JUTE 0.0 0.0 0.1
CONSUMER SERVICES 0.0 0.0 2.0
HEALTHCARE SERVICES 0.0 0.0 1.1
CEMENT & CEMENT PRODUCTS 0.0 2.4 2.5
POWER 0.0 1.7 2.7
SERVICES 0.0 0.7 1.4
MEDIA, ENTERTAINMENT & PUBLICATION 0.0 0.0 0.4
FINANCIAL SERVICES 0.0 35.6 29.4
CONSTRUCTION 0.0 3.0 3.1
IT 0.0 19.1 15.0
Source: NSE Indices. Data as of Dec 31, 2021