Marcellus MeritorQ*

September, 2023

Contact –
Help.ia@marcellus.in

The stocks described in the presentation do form the part of Marcellus' portfolio so we as Marcellus, our clients and
our immediate relatives do have interest and stakes in the described stocks
*MeritorQ is a strategy of Marcellus capital partners LLP.
Private and Confidential – FOR INTENDED RECIPIENT ONLY.
 Disclosures
Investment in securities market are subject to market risks. Read all the related
documents carefully before investing.

Registration granted by SEBI, membership of BASL, and certification from National

Institute of Securities Markets (NISM) in no way guarantee performance of the
intermediary or provide any assurance of returns to investors.

The figures presented in the slide are for illustration/understanding only and do not
guarantee any future returns
Equity returns have been ahead of Gold and Fixed deposits in
India over last 3 decades

1990-2000 2001-2010 2011-2022 1990-2022

Gold 1.5% 13.9% 10.6% 9.0%

Avenues
Stock
to market
12.0% 15.6% 11.4% 13.3%

Invest
Fixed
- 7.8% 7.3% 7.5%
deposit

CPI Inflation 8.6% 6.6% 5.4%

Source: Bloomberg, RBI,ACE Equity, Marcellus Capital Partners LLP; Returns calculated on a 3Y rolling basis within each decade; average of these 3Y rolls are shown for each decade
and asset class. All data is between Dec-1990 and Dec-2022. Stock market returns are represented by Nifty 50 PR index.
Private and Confidential – FOR INTENDED RECIPIENT ONLY.
3
However, on an Inflation-Adjusted Basis, Their Returns Have Been
Poor Hypothetical Portfolio #1
Residex

Inflation-adjusted (Real) returns Gold bullion

25% 25%
Nifty50
190 Nifty50 Term deposit (3Y)

170 183
25% 25% Returns Average Median
150
Gold Nominal
bullion 7.6% 8.7%
130
119 Inflation-
Adjusted 2.3% 2.6%
Term
110 deposit Hypothetical Portfolio #2
114 (3Y) Residex
90
Gold bullion
7% 7%
Residential 7%
91 Nifty50
70 Property
Price Term deposit (3Y)
Index
Returns Average Median

Source: Bloomberg, RBI, National Housing Bank

80% Nominal 12.4% 10.2%
The hypothetical portfolio presented in the slide are for illustration/understanding only and the portfolio is not Inflation-
selection for MeritorQ. Adjusted 6.9% 5.8%
4
Compounding is the Eighth Wonder of the World
• Compounding is said to be the eighth wonder of the world

• Longer the period, bigger is the impact of compounding

• Eg: For Rs 100,000 invested, following is the pay-off matrix-

Years 10% 15% 20%

5 1,61,051 2,01,136 2,48,832
10 2,59,374 4,04,555 6,19,174
15 4,17,725 8,13,706 15,40,702
20 6,72,750 16,36,654 38,33,760
25 10,83,470 32,91,895 95,39,621
30 17,44,940 66,21,177 2,37,37,631
The figures presented in the slide are for illustration/understanding only and do not guarantee any future returns

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 Our investment process reduces chance of bad investment decisions

Ideal Investor Emotional Bias May Resulting In Lower

Behavior Lead To Reverse Investment Returns

SELL BUY BUY

HERE HERE HERE

BUY SELL
HERE HERE

6
Source: Marcellus Capital Partners LLP Private and Confidential – FOR INTENDED RECIPIENT ONLY.
Some timeless principles for successful investing

Buy Good Companies

• High return on capital
• Solid financial condition
• Clean accounts
At prices below intrinsic value
• Discount to intrinsic value compared to rest of the market
• Intrinsic value based on free cash flow

Mitigate human biases

• Avoid behavioural biases
• Process over discretion*

*Except where Marcellus has concerns over governance issues in selected stocks.
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 Our investment approach is similar to a checklist

AVIATION SURGERIES

8
Source: Marcellus Capital Partners LLP Private and Confidential – FOR INTENDED RECIPIENT ONLY.
We rebalance the portfolio every six months

WHAT IS
REBALANCING?

Reflect change in
BUY or SELL fundamentals
STOCKS Sell overvalued
Buy undervalued

Undervalued Stocks
Better Fundamentals
SELL
Overvalued
Stock

Overvalued Stocks
Poor Fundamentals

BUY
Undervalued
Stock

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Source: Marcellus Capital Partners LLP Private and Confidential – FOR INTENDED RECIPIENT ONLY.
Fee Structure
Marcellus Meritor Q has two fee option to select from.
▪ Fixed Fee: Rs 2500 per quarter*
▪ AUA fees of 2.25% pa charged on monthly basis on the daily average value of the portfolio.
Recommended Minimum investment: INR 10 lacs. However, you have the option to start with
minimum investment of Rs 2 lacs.
SIP option available on Smallcase.
For more information on the product visit: https://marcellus.in/meritorq-advisory/

* Before GST
Private and Confidential – FOR INTENDED RECIPIENT ONLY.
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 ANNEXURES

Private and Confidential – FOR INTENDED RECIPIENT ONLY.

Source: Marcellus Capital Partners LLP
MeritorQ sticks to good investing principles

Long
Long only
Short
portfolio
portfolio

Typical Marcellus’
Use of
Leveraged proprietary Marcellus No use of
Derivative Quant Portfolios forensics
MeritorQ leverage
s
Portfolio framework

Higher No use
trading derivatives
cost

Private and Confidential – FOR INTENDED RECIPIENT ONLY.

Marcellus’ forensic framework combined with rules based
approach

Marcellus
MeritorQ

• Accounting red Select stocks that • Basis value

Companies flags based on are highly ranked metric
in Large, mid Marcellus’ basis: • Semi annually
and small forensic rebalanced
cap • Profitability
accounting
segment* framework • Value
• Low financial
leverage#
• Consistently
profitable
*Life insurance companies not considered
#For debt-equity screening - Financials (Lenders & Non-lenders are considered separately)

Private and Confidential – FOR INTENDED RECIPIENT ONLY.

Portfolio Characteristics
Sector Name Sector Weight#

Consumer Staples 21.2%

35-45 Stocks*
Consumer Discretionary 18.4%

Materials 18.2%

Information Technology 17.2% 20-30% Weightage in Top 5

Health Care 8.9% stocks
Industrials 6.5% Small-Midcaps constitute 40-
Communication Services 5.1% 62%*
Financials 2.7%

Utilities 1.2%
~
50% Average Turnover*
Others 0.6%

Total 100%
Source: Ace Equity, Marcellus Capital Partners LLP.
*Based on backtested results from July-2006 to September-2022
# This represents the average sector weight over the backtested period.
Small and midcaps defined as companies falling in bottom 300 in terms of market capitalisation within BSE 500 index
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Sector distribution

Source: Ace Equity. Based on backtested results from July-2006 to September-2022, gross of transaction cost, tax, brokerage & expenses.

Private and Confidential – FOR INTENDED RECIPIENT ONLY.

Portfolio Characteristics (Contd.)
Cash flow yield
Marcellus MeritorQ BSE 500 [Eq Wt]
BSE 500 [Eq Wt] Marcellus MeritorQ

0.12x 30%
28%
Debt/Equity

1.13x

22%
14%
10%
40.0% 8%
7%
5% 5% 5%
ROCE 4% 4%
3% 3% 3%
2%
19.0%
3%

-1% 0%
-2%
33.0% -5% -9%
-10%
-11%
ROE
-15% -15%
-10%
15.0%
-21% -21%
Source: Ace Equity. Only non-financials are considered for above calculation. -22%
-23%
Based on backtested results from July-2006 to September-2022, gross of transaction cost, tax, brokerage & expenses. The
performance shows price returns for the stock and not Total Returns -27%

Private and Confidential – FOR INTENDED RECIPIENT ONLY.

Backtested performance*
Growth of ₹10,000

₹ 3,00,000

₹ 2,50,000
20X 7X
Investment Value

1,99,824
₹ 2,00,000
returns for Vs
returns for
₹ 1,50,000 strategy Nifty 500 TRI
₹ 1,00,000

₹ 50,000
69,862
₹0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

NIFTY500 TRI MeritorQ

Distribution of portfolio rolling returns with holding period

Distribution of rolling returns
40.0% 30%
30.0%
20.0% 16%
10% 10% 9% 11% 11%
10.0%
0% 1% 1%
0.0%

5 Yr rolls 3 Yr rolls
Source: Ace Equity, Vidal, Marcellus Capital Partners LLP.
*Based on backtested results from July-2006 to September-2022, gross of transaction cost, tax, brokerage & expenses. The performance shows price returns for the stock and not Total Returns
The figures presented in the slide are for illustration/understanding only and do not guarantee any future returns
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Private and Confidential – FOR INTENDED RECIPIENT ONLY.
Comparison with factor indices
₹ 25,000

19,982

₹ 20,000 20X 12.7X 8.2X

Returns* for Vs returns for & returns for
strategy NIFTY Quality NIFTY 500 Value
₹ 15,000
30 TRI 50 TRI 12,694
Investment Value

₹ 10,000

₹ 5,000

8,250

₹0
2006 2008 2010 2012 2014 2016 2018 2020 2022

MeritorQ NIFTY Quality 30 NIFTY 500 value 50

Source: Ace Equity, Vidal.
Note: Factor Indices NIFTY 200 Quality 30 TRI and NIFTY 500 Value TRI are used to merely represent the model portfolios’ performance synergies to Quality and value representation
*Based on backtested results from July-2006 to September-2022, gross of transaction cost, tax, brokerage & expenses. The performance shows price returns for the stock and not Total Returns
The figures presented in the slide are for illustration/understanding only and do not guarantee any future returns
Private and Confidential – FOR INTENDED RECIPIENT ONLY.
MeritorQ had lower drawdowns and recovered faster during
both Global financial crisis (GFC) and Covid Crisis
Corona crisis –March 2020 GFC

5.0%
0.0%
0.0%

-10.0%
-5.0%

-10.0% -20.0%

-15.0%
-30.0%

-20.0%
-40.0%
-25.0%
-50.0%
-30.0%
-34.6% -59.4%
-60.0%
-35.0%
-38.3% -64.3%

-40.0% -70.0%

Nifty500 PR MeritorQ Nifty500 PR MeritorQ

Source: Ace Equity, Vidal

*Based on backtested results from July-2006 to September-2022, gross of transaction cost, tax,
brokerage & expenses. The performance shows price returns for the stock and not Total Returns
The figures presented in the slide are for illustration/understanding only and do not guarantee any 19
Private and Confidential – FOR INTENDED RECIPIENT ONLY.
future returns
Model Back tested performance: Annual Returns
Year Nifty 500 PR Marcellus MeritorQ*
2007 62.5 42.3
2008 -57.1 -53.5
2009 88.6 144.4
2010 14.1 24.2
2011 -27.2 -12.4
2012 31.8 38.6
2013 3.6 21.5
2014 37.8 59.5
2015 -0.7 14.2
2016 3.8 5.6
2017 35.9 58.5
2018 -3.4 2.0
2019 7.7 1.1
2020 16.7 32.4
2021 30.2 44.1
2022 -YTD -1.1 -5.3
CAGR (July-2006 to September-2022) 11.4 20.2
Source: Ace Equity, Vidal. *Based on backtested results from July-2006 to September-
2022, gross of transaction cost, tax, brokerage & expenses. The performance shows
price returns for the stock and not Total Returns

The figures presented in the slide are for illustration/understanding only and do not Private and Confidential – FOR INTENDED RECIPIENT ONLY.
guarantee any future returns
Closing thoughts

Diversification Periodic Rebalancing Rules based

• Diversified exposure to • Semi annual portfolio • Method and portfolio

uncorrelated factors like rebalancing and review construction tested across
value and quality according to rules ~16 years of history

• Possibility to capture • Ensures portfolio

is aligned • Investment process over
performance from smaller to investment objectives discretion*
companies. No market cap
bias • Balance between • No portfolio manager risk
portfolio churn and picking
up undervalued stocks • Final portfolio
and rules are
regularly actively monitored to ensure
alignment with investment
objectives
*Except where Marcellus has concerns over governance issues in selected stocks.
Private and Confidential – FOR INTENDED RECIPIENT ONLY.
Stepwise Attribution to overall returns
Avg, 3Y rolling returns 3Y rolling Risk- Number of stocks
adjusted returns

Universe – BSE 500 equal

weighted 7.9% 0.33 ~500

Forensic Screen
12.8% 0.58 ~270-300
• Companies in Deciles 7 to 10 not considered

Companies with low financial leverage & 17.8% 0.96 ~80-100

which are consistently profitable

Selection
• Based on composite factor score that relies on 21.4% 1.21 ~30-50
profitability and value metrics

Position Sizing
22.0% 1.22 ~30-50
• Portfolio weighted basis value factor

Source: Ace Equity, Vidal, Based on backtested results from July-2006 to September-2022, gross of transaction cost, tax, brokerage & expenses. The performance shows
price returns for the stock and not Total Returns
The figures presented in the slide are for illustration/understanding only and do not guarantee any future returns
Private and Confidential – FOR INTENDED RECIPIENT ONLY.
MeritorQ’s Ability to Combine Best of Both Worlds

Nifty 500 Value 50 Nifty 200 Quality 30 MeritorQ Nifty 500 Value 50 Nifty 200 Quality 30 MeritorQ

90.0% 1.60
79.5%
80.0% 75.6% 1.37
1.40
1.26
70.0%
61.3% 1.20
60.3%
60.0% 1.00
51.7% 53.6% 1.00
47.9% 0.83
50.0%
0.80
36.2% 0.68
40.0% 0.63
29.5% 0.60
30.0%
0.40
20.0%

10.0% 0.20

0.0% 0.00
Up Month- win rate Down month- win rate Overall- win rate Upside Capture Ratio Downside Capture Ratio

Source: Ace Equity, Vidal, Marcellus Capital Partners LLP.Based on backtested results from July-2006 to September-2022
All measures are calculated on price returns gross of transaction cost, tax, brokerage & expenses.
The figures presented in the slide are for illustration/understanding only and do not guarantee any future returns

Private and Confidential – FOR INTENDED RECIPIENT ONLY.

Thank You!
Marcellus Capital Partners LLP
929, DBS Business Centre, Kanakia Wall Street
Andheri-Kurla Road, Andheri – East, Mumbai - 400 093
☎ +91-2262676872
Investment Advisor
Krishnan V R, CFA

Krishnan has roughly 10 years of experience spanning both equity and fixed income research. Before joining Marcellus,
he was involved with the New Indexes Development team at Morningstar where he used to create quantitative rules-
based equity and multi-asset investment products. Prior to Morningstar, he was an equity analyst with D.E. Shaw & Co.
and a credit analyst at Goldman Sachs Asset Management (GSAM) EM Corporate Debt Team. Krishnan has a Masters in
Financial Engineering from Worldquant University and a PGDM from IIM, Kozhikode.

Source: Marcellus Capital Partners LLP 25

 Disclosures
Note: The above material is neither investment research, nor investment advice. Marcellus Capital Partners LLP (“Marcellus”) is regulated by the Securities and Exchange Board of India
(“SEBI”) as an Investment Adviser. If any recipient or reader of this material is based outside India or US, please note that Marcellus may not be regulated in such jurisdiction and this
material is not a solicitation to use Marcellus’s services. This communication is confidential and privileged and is directed to and for the use of the addressee only. The recipient, if not the
addressee, should not use this material if erroneously received, and access and use of this material in any manner by anyone other than the addressee is unauthorized. If you are not the
intended recipient, please notify the sender by return email and immediately destroy all copies of this message and any attachments and delete it from your computer system,
permanently. No liability whatsoever is assumed by Marcellus as a result of the recipient or any other person relying upon the opinion unless otherwise agreed in writing. The recipient
acknowledges that Marcellus may be unable to exercise control or ensure or guarantee the integrity of the text of the material/email message and the text is not warranted as to its
completeness and accuracy. The material, names and branding of the investment style do not provide any impression or a claim that these products/strategies achieve the respective
objectives. Marcellus and/or its associates, employees, the authors of this material (including their relatives) may have financial interest by way of investments in the companies covered
in this material.

This material may contain confidential or proprietary information and user shall take prior written consent from Marcellus before any reproduction in any form.

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. Marcellus takes no responsibility of updating
any data/information in this material from time to time. The recipient of this material is solely responsible for any action taken based on this material. The recipient of this material is urged
to consult their own legal and tax consultants/advisors before making any investments.

All recipients of this material must before dealing and or transacting in any of the products referred to in this material must make their own investigation, seek appropriate professional
advice and carefully read risk related documents or disclosures provided by Marcellus, as applicable. Actual results may differ materially from those suggested in this note due to risk or
uncertainties associated with our expectations with respect to, but not limited to, exposure to market risks, general economic and political conditions in India and other countries globally,
inflation, etc. There is no assurance or guarantee that the objectives of the investment strategy/approach will be achieved.

This material may include “forward looking statements”. All forward-looking statements involve risk and uncertainty. Any forward-looking statements contained in this document speak
only as of the date on which they are made. Further, past performance is not indicative of future results. Marcellus and any of its directors, officers, employees and any other persons
associated with this shall not be liable for any loss, damage of any nature, including but not limited to direct, indirect, punitive, special, exemplary, consequential, as also any loss of profit
in any way arising from the use of this material in any manner whatsoever and shall not be liable for updating the document.

Investment in securities market are subject to market risks. Read all the related documents carefully before investing.

Registration granted by SEBI, membership of BASL, and certification from National Institute of Securities Markets (NISM) in no way guarantee performance of the intermediary or provide
any assurance of returns to investors.

26
Private and Confidential
 Details of Investment Advisor
Name of Investment Adviser - Marcellus Capital Partners LLP,

LLPIN - AAN-4864,

SEBI Registration number - INA000017204,

BASL Membership Number - BASL1879,

Registered Address - Flat No. 602, Tower 1 Odyssey, Hiranandani Gardens, Powai, Mumbai – 400076,

Correspondence office - 929 – DBS Business Center, Ground Floor, Kanakia Wall Street, Chakala, Andheri Kurla Road, Andheri (East), Mumbai – 400093, Telephone - +91 22 6931 5383,

Corresponding SEBI regional/local office address. - Securities & Exchange Board of India (‘SEBI’), SEBI Bhavan, Plot No. C4-A “G” Block, Bandra Kurla Complex, Mumbai

Principal officer details

Name Mr. Krishnan V R, Contact No - +91 22 6931 5383, Email Id: krishnan@marcellus.in

Compliance officer details

Name Ms. Mansi Bhogal, Contact No - +91 22 6931 5383, Email Id: mansi@marcellus.in

Grievance officer details

Name Ms. Mansi Bhogal, Contact No - +91 22 6931 5383, Email Id: grievance.ia@marcellus.in

Website link - https://marcellus.wealthdesk.in/

Marcellus Capital Partners LLP is a wholly own subsidiary of Marcellus Capital Partners LLP bearing a registration no INA000006183

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Private and Confidential