Decoding India's Manufacturing Boom | Motilal Oswal Fund Deep Dive | Value Research
Summary
TLDRIn this insightful discussion, Motilal Oswal AMC's Akil Chaturvedi and Dendra Kumar delve into the launch of the Motilal Oswal Manufacturing Fund. They highlight the fund's focus on India's manufacturing sector, driven by government initiatives like 'Make in India' and the potential for growth in sub-sectors such as renewable power, electronics, and EVs. The conversation underscores the fund's investment strategy, emphasizing quality, growth, longevity, and price, while considering macroeconomic factors and future trends in manufacturing.
Takeaways
- 🚀 The Motilal Oswal Manufacturing Fund was launched with a focus on the manufacturing sector, which the company sees as a high-growth opportunity due to India's economic policies and potential for sector diversification.
- 📈 The fund's investment strategy is built on the philosophy of high-quality, high-growth investing, targeting various sub-sectors within manufacturing that offer significant growth potential.
- 🔮 The speakers are optimistic about the manufacturing sector's evolution in India over the next decade, anticipating a shift from a service-dominated economy to a more balanced mix of services, manufacturing, and agriculture.
- 💡 Key growth sub-sectors highlighted include renewable power, electronic manufacturing services (EMS), automotive and electric vehicles (EVs), and defense, which are expected to benefit from government initiatives and global economic trends.
- 🌐 The government's 'Make in India' campaign and production-linked incentives are seen as catalysts for the growth of the manufacturing sector by encouraging domestic production and exports.
- 📊 The fund's stock selection criteria are based on the QGP principle: Quality, Growth, Longevity, and Price, with a focus on companies that can deliver higher earnings growth compared to the benchmark.
- 🛠 The research process for evaluating investments involves a thematic assessment, narrative and numbers analysis, and approval by the investment committee, ensuring a comprehensive approach to stock picking.
- 💼 Macroeconomic factors such as GDP growth, interest rates, and global trade policies are considered in investment decisions, as they directly impact the manufacturing sector's performance.
- 🌳 The speakers discuss the risks associated with investing in the manufacturing sector, including economic downturns and sector-specific challenges, and emphasize the importance of playing the theme wisely and booking profits at the right time.
- 🌍 While the fund is primarily focused on Indian companies, there is an option to invest up to 30% in international manufacturing companies, subject to regulatory limits.
- 🔮 Future trends and innovations in the manufacturing sector, such as EV technology, AI, and cloud computing, are seen as areas of excitement and potential incorporation into the fund's strategy.
Q & A
What is the Motilal Oswal Manufacturing Fund's key objective?
-The key objective of the Motilal Oswal Manufacturing Fund is to invest in the manufacturing sector, which the fund managers believe is a high-growth opportunity due to the government's focus on creating manufacturing capacities, efficiencies, and exports.
How does Akil Chaturvedi describe the manufacturing sector's potential for growth?
-Akil Chaturvedi describes the manufacturing sector as having a broad range of high-growth opportunities across various sub-sectors. He emphasizes that manufacturing is essential for India's economic growth and expects the sector to benefit from the continuity of government policies and reforms for at least the next 5 years.
What is Dendra Kumar's perspective on the evolution of the manufacturing sector in India over the next decade?
-Dendra Kumar sees the manufacturing sector evolving significantly over the next decade, driven by the government's Make in India campaign and the post-pandemic realignment of global supply chains. He anticipates that manufacturing could become a major contributor to India's GDP, potentially reaching 20-25% in the next 10-15 years.
Which sub-sectors within the manufacturing sector does Akil Chaturvedi find most promising?
-Akil Chaturvedi finds sub-sectors like renewable power, electronic manufacturing services (EMS), and the automotive sector, including electric vehicles (EVs), to be particularly promising due to government incentives and the potential for growth and innovation.
How does the Motilal Oswal AMC's investment strategy align with government initiatives like Make in India and Production Linked Incentives (PLI)?
-The investment strategy of Motilal Oswal AMC is to identify areas where government reforms are promoting growth and self-reliance, such as defense, electronics, and renewable energy. The fund aims to invest in companies that are poised to benefit from these initiatives and are likely to see significant growth as a result.
What criteria does the fund use to select stocks for the Motilal Oswal Manufacturing Fund?
-The fund uses the QGP principle—Quality, Growth, Longevity, and Price—as the criteria for selecting stocks. The fund managers focus on companies that can deliver high growth relative to the benchmark without compromising on quality, and they also consider valuations in the current market environment.
How does the research process for evaluating potential investments in the manufacturing sector work?
-The research process involves fund managers and sectoral experts who assess thematic opportunities based on quality (e.g., RoEs, RoAs), growth (historical and outlook), cash flows (DCF analysis), and valuations. The investment thesis is then presented to the investment committee for decision-making on individual stock picks.
How do macroeconomic factors influence the investment decisions for the Motilal Oswal Manufacturing Fund?
-Macroeconomic factors such as GDP growth, interest rates, and inflation are monitored to understand how they might impact the manufacturing sector and the fund's investments. Lower interest rates, for example, can encourage private sector capacity addition, which is beneficial for the manufacturing sector.
What is the outlook on the Indian manufacturing sector in the context of global economic trends?
-The outlook is positive, with India witnessing success stories in sectors like electronics and automotive, and states competing to attract manufacturing capacity. The ecosystem is evolving, and the government's targeted incentives are fostering an environment conducive to large-scale manufacturing growth.
How does the fund plan to manage risks associated with investing in the manufacturing sector, which can be cyclical?
-The fund managers plan to manage risks by ensuring diversification across various sub-sectors within the manufacturing theme, maintaining a focus on long-term opportunities, and being cautious about entry and exit points in the market. They also emphasize the importance of having a margin of safety and being prepared for higher volatility during economic downturns.
Are there any plans to expand the fund's scope to include international manufacturing companies?
-While the fund is currently focused on Indian companies, there is an option to invest up to 30% outside of India. However, due to current challenges with investment limits, this option is on pause for now.
What future trends or innovations in the manufacturing sector are the fund managers excited about?
-The fund managers are excited about trends in the EV space, technological advancements in power generation, and the adoption of AI, cloud computing, and tech-enabled services across various manufacturing sectors to improve efficiency, scale, and customer experience.
How do the fund managers feel about the current valuations as they are launching the Motilal Oswal Manufacturing Fund?
-The fund managers are conscious of the current valuations and plan to build the portfolio gradually, focusing on both growth potential and valuations. They are not in a hurry and will manage the inflows to ensure the fund's strategy is executed effectively.
Outlines
😀 Launch and Overview of Motilal Oswal Manufacturing Fund
The video script introduces the Motilal Oswal Manufacturing Fund, launched with a focus on the manufacturing sector. Akil Chaturvedi, Executive Director and Chief Business Officer at Motilal Oswal AMC, and Dendra Kumar, an in-house expert, join the discussion. Akil provides an overview of the fund, emphasizing the optimistic view on manufacturing within their AMC due to a philosophy of investing in high-quality, high-growth opportunities. The fund aims to capitalize on the government's focus on manufacturing capacities, efficiencies, and exports, expecting policy continuity for the next 5 years. The conversation highlights the potential for India's economy to double in the next 5 to 7 years, with manufacturing being a key driver, and the fund offers investors a chance to benefit from this growth.
📈 Manufacturing Sector Evolution and Opportunities in India
Darra Kumar reflects on the evolution of the manufacturing sector in India, noting a historical shift from service to manufacturing sectors. He discusses the 'Make in India' campaign as a turning point and the impact of the pandemic on supply chain realignment, positioning India as a beneficiary. The conversation covers the potential for manufacturing to grow from 15% of GDP to possibly 20%-25% in the next decade, with the service sector potentially balancing the economy at 50%. Akil identifies promising sub-sectors within manufacturing, such as renewable power, electronic manufacturing services (EMS), and the automotive sector, particularly electric vehicles (EVs), as areas of focus for the fund.
🌐 Impact of Government Initiatives on Investment Strategy
The script delves into how government initiatives like 'Make in India' and the Production Linked Incentive (PLI) scheme influence the investment strategy of the fund. It discusses the defense sector's transition from imports to domestic manufacturing and exports, highlighting early successes such as missile exports to the Philippines. The fund's strategy is to align with government reforms and identify opportunities in sectors targeted by incentives, aiming to support the creation of domestic capacity and self-reliance.
🔍 Criteria for Stock Selection in the Manufacturing Fund
The criteria for selecting stocks for the fund are explained, focusing on the QGP principle—Quality, Growth, Longevity, and Price. The fund managers use these criteria to identify companies that can deliver higher earnings growth compared to the benchmark. The script also touches on the importance of valuation checks in the current environment and the fund's approach to thematic investing within the broader manufacturing sector.
🌟 Research Process and Macroeconomic Influences
The video script outlines the research process for evaluating potential investments, involving fund managers and sectoral experts who focus on manufacturing and defense themes. The investment committee assesses companies based on quality, growth, and valuation narratives. Macroeconomic factors such as GDP growth, interest rates, and inflation are considered, with the current Indian economic environment appearing favorable for manufacturing due to factors like low-interest rates and controlled inflation.
🚀 Outlook on Indian Manufacturing in Global Context
Darra Kumar shares his outlook on the Indian manufacturing sector against global economic trends, expressing optimism due to the targeted government incentive programs and the success stories of domestic manufacturing. He discusses the competitive nature of the current manufacturing landscape in India, the role of government incentives in fostering growth, and the potential for India to transition from an import-dependent economy to an exporter of manufactured goods.
🛡️ Risk Management in the Manufacturing Sector
The script addresses the risks associated with investing in the manufacturing sector, such as economic downturns and sector-specific challenges. It emphasizes the importance of playing the theme correctly by entering and exiting at the right times. The fund managers aim to ensure a diversified portfolio within the manufacturing theme, focusing on high-growth sub-sectors while being cautious of economic headwinds and maintaining a margin of safety.
🌐 International Expansion and Future Trends
The conversation explores the possibility of expanding the fund's scope to include international manufacturing companies, with the current limitation of not being able to invest outside India. The script also discusses future trends and innovations in manufacturing that excite the fund managers, such as electric vehicles, power sector advancements, and the adoption of technology like AI and cloud computing across manufacturing businesses to improve efficiency and customer experience.
💹 Fund Manager's Perspective on Valuations
Akil Chaturvedi shares the fund manager's perspective on current market valuations at the time of the fund's launch. He assures that the team is conscious of valuations and will build the portfolio gradually, focusing on both growth and valuation opportunities. The fund is expected to manage inflows effectively and will not rush the investment process, ensuring a balanced approach to deployment.
Mindmap
Keywords
💡Motilal Oswal AMC
💡Manufacturing Fund
💡High-Quality Growth Investing
💡Sub-sectors
💡Government Focus
💡Make in India Campaign
💡Production-Linked Incentives (PLI)
💡Renewable Power
💡Electronics Manufacturing Services (EMS)
💡Quality, Growth, Longevity, Price (QGLP)
💡Macroeconomic Factors
💡Thematic Investing
💡Portfolio Management
💡EVs and Batteries
💡Technology Innovation
Highlights
Motilal Oswal Manufacturing Fund was launched with a focus on the manufacturing theme, which the company sees as a high growth opportunity.
The fund's investment strategy is based on high-quality, high-growth style investing within the manufacturing sector.
Motilal Oswal has a dominant positioning of manufacturing in their portfolios, due to its visibility as a high growth area.
The government's focus on creating manufacturing capacities, efficiencies, and exports aligns with the fund's objectives.
The expectation is that the continuity of policies and reforms will support manufacturing growth for the next 5 to 7 years.
Manufacturing is considered essential for India's economic growth and the doubling of its economy in the coming years.
The fund aims to provide investors with a dedicated thematic investment opportunity in manufacturing.
Dendra Kumar discusses the evolution of the manufacturing sector in India over the past decades and its potential for the next decade.
The 'Make in India' campaign and the post-pandemic recovery have been catalysts for the manufacturing sector's growth.
India has been an accidental beneficiary of global supply chain realignment, boosting its manufacturing sector.
The fund identifies various sub-sectors within manufacturing as promising, such as renewable power, electronics manufacturing services (EMS), and the auto industry.
Government initiatives like the Production Linked Incentive (PLI) scheme are positively impacting the investment strategy of the fund.
The fund's stock selection criteria are based on Quality, Growth, Longevity, and Price (QGLP).
The research process for evaluating potential investments involves a thematic assessment and a narrative and numbers approach.
Macroeconomic factors such as GDP growth, interest rates, and inflation are monitored to influence investment decisions.
The fund is optimistic about future trends and innovations in the manufacturing sector, including EVs, battery technology, and AI applications.
The fund managers are cautious about current valuations and plan to build the portfolio gradually, focusing on growth and valuations.
The fund has the flexibility to invest up to 30% outside India, although currently, there are no limits available for overseas investment.
Manufacturing is seen as a broad-based theme rather than a cyclical sector, with diverse opportunities across various industries.
Transcripts
[Music]
hello and welcome today the focus is on
motilal oswal manufacturing fund which
was launched earlier this month to talk
about it in detail joining me is Akil
chaturvedi executive director and chief
business officer at motilal oswal AMC
and our in-house expert dendra Kumar
welcome gentlemen thank
you first pakil could you provide an
overview of the mwal manufacturing fun
you know what are its key objectives
investment strategy yeah sure thanks uh
thanks so much for this opportunity uh
so we are uh we have been very very
optimistic on uh manufacturing as a
theme uh within our AMC uh if you see
across our portfolios uh we have a very
dominant positioning of manufacturing as
a theme across our portfolios whether it
is mutual fund portfolios or or the
alternate portfolios now why this is
happened is because uh
we practice this philosophy of high
quality high growth style of investing
and as you were assessing high growth
opportunities manufacturing was clearly
uh looking very very visible that this
is one space where uh you have quality
obviously but you also have uh uh
various sub sectors which were providing
uh high growth opportunities and
therefore uh and and and the the
opportunity is Diversified across sub
sectors so about 2 years back we started
building a position and uh very dominant
and therefore we thought that as the
government's Focus also is more on uh
creating manufacturing capacities
efficiencies export uh and uh we have
seen the continuity of the government
therefore we expect that the continuity
of policies and reforms also would be
there at least for next 5 years uh and
eventually if India has to grow to uh
you know doubling of economy in the next
5 years or 7 years and even more as we
go forward manufacturing is essential so
I think this would be a very interesting
theme uh I don't call it a sector I call
this as a theme it's a very Diversified
theme uh very few exclusions but you
have lot of lot of opportunities within
the manufacturing team uh as a as a
opportunity kind of a thing in the next
couple of years so we thought that this
makes sense to have a dedicated thematic
fund on this concept and give investors
the choice to create a satellite
positioning on this theme for next few
years uh and benefit from the
opportunity as it comes
along okay darra how do you see
manufacturing sector evolving in India
over the next decade and you know what
are the opportunities that you
anticipate well I'm seeing a whole you
know being a historian of mutual fund
I'm coming from the times of you know 20
years ago people were launching service
sector fund and you know they have done
well that was you know two decad of you
know dominance of services and you know
10 years nine years ago for the first
time I saw the launch of you know the
make in India campaign you know that
industrial V land you know silouette you
know launched by ad AG created by Ad
Agency and that was the beginning of the
make in India campaign and I did not
expect that you know something as
dramatic as now we can you know with the
benefit of hindsight we can see the
beginning of produ production link
incentive and you know as they say that
harder you you work luckier you get so
what we witnessed was the pandemic and
the post pandemic you know the recovery
and the realignment supply chain
realignment and India have been an
accidental beneficiary of all this and
that was the beginning of it you know
you can manufacture something but unless
there are takers and pandemic actually
gave us a very different take degree a
realization that if we don't really
Revive Our uh if we don't Revive Our uh
Manufacturing
uh we are in trouble we are in you know
we will have difficulty and now you know
the continuity of the government uh the
kind of long-term commitment and the
Strategic importance now we are
beginning to see the results of some of
the initiatives and that is very
confidence inspiring earlier you know
there used to be so much of cynicism
around it uh we had so many you know
dead so much of Deadpool you know public
sector struggling not to not speeding
ahead now we are witnessing you know a
very different kind of vibrant
manufacturing sector getting revived for
years together we have only thought that
you know we are a Services economy and
you know we will have we will will be
creating zato we will be creating
infosis but you know manufacturing we
just left uh and now we see a complete
turnaround so services to manufacturing
I think this is a long drawn story it is
not a narrow theme and uh there are a
lot of things which will actually emerge
which don't exist today
allow if I to take D's Point ahead you
see broadly 2/3 of our economy today is
service sector and one3 of our economy
is manufacturing plus agriculture uh
which means that uh today 15% of our GDP
comes from manufacturing just about 15%
now if you compare to several economies
which are manufacturing L you know like
China like Taiwan Indonesia all of these
countries are heavily uh dependent on
manufacturing uh to GDP uh they are all
at about 25 to
35% uh you know as a as a sector to the
overall GDP we are at 15% but when they
started their manufacturing cycle the
the the Bull Run of their manufacturing
team as a cycle they all started with 9
10% as component to GDP and they've gone
up to 25 to 35% we are at
15% and with the with the way the
current push is happening on the
manufacturing uh we feel that can we
reach to let's say 20% or 22 or 25%
which itself could be a very big
difference I feel that maybe in the next
10 15 years manufacturing could be 50%
and the Service Plus agriculture could
be another 50% I mean that's the
opportunity which is lying ahead of
course it's not happening in the next
one 2 three years it's going to take
some time but yes it's yeah all right
now AK you mentioned that you know there
are various sub sectors so the fund
which sub sectors do you find most
promising and the reason for that so
there are whole bunch of sectors you
know you can look at kex as a play you
can look at Power as a play you can look
at autos auto angs EVS within Autos as a
play uh you can look at electronic
manufacturing uh as a sub theme uh so
there are variety of opportunities I
mean but if you just have to you know
fortunately we are big investors in
manufacturing as a theme so if I just
take a queue from our own portfolios you
will find that power has been something
which we have introduced about a year
back and within power we are trying to
play the Renewable Power theme uh it's
looking pretty pretty interesting
because if you see that governments for
obviously to get manufacturing running
you need energy and to be energy
efficient we need to move out from
fossil fuel to Renewal power so if you
if if we if we feel that or at least the
government says that they want to double
the capacity from let's say 400 gaw
2,000 gwatt uh I think incremental uh
growth will come in the renewal site
whether it's wind or it's solar in fact
I was hearing one podcast and
interesting point there are about 42
nuclear plants which are coming in the
world 23 out of them are coming in China
eight are coming in India so uh so that
power as a theme after almost 15 years
and D would know I mean was forward
which was playing out remember in 20067
8 and then it all went for a toss now
it's coming back very very strongly and
you have few good businesses available
here uh EMS is something again
electronic manufacturing is what we have
played Electronics again if you see p as
a as a incentive of course is given to
this sub sector but uh electronics also
is one of the highly imported item which
we want to convert into export item so
you know that apple is now getting
manufactured in India we've sold about
we've done export of $10 billion likely
to do $60 billion in next five years so
this space you know whether it is for
computers mobile phones uh you know
several electronic components all of
this getting manufactured in India is
creating opportunities in this space
which is EMS uh um you know so real
estate I mean Auto auto again is looking
very good I mean if you just see in the
last one year for for several years
marui has been selling about a million
cars a year I mean last year they sold 2
million cars so you know Auto players
and then of course you have the auto Ang
so that's another very interesting uh
theme which we're playing so these are
some uh High growth sub themes within
the overall manufacturing tee which I
feel makes sense and you will find the
representation within this portfolio as
well you mentioned PL you mentioned
atbar Barat so how do these government
initiatives you know like make in India
also how do these schemes and
initiatives impact your investment
strategy see our investment strategy
will will basically be to follow uh what
where the reforms are happening right
where which way the government is taking
uh this whole opportunity now I think
one example if I have to give you is
defense now again defense was one of our
big import item uh for many years now uh
the current dispensation is talking
about making India for the for all the
defense equipments uh and all the
defense items Etc right so we're trying
to now uh import technology from us from
Russia and everybody is lapping up to
India because we are the big buyers of
Defense items uh so I think over a
period of time we will start to make
planes and guns and you know all kind of
missiles and not only for our own
security but this will become again a
very big export opportunity some some
small uh uh fruits you have already seen
if you have read the papers we have
exported the brahmos missile to
Philippine and they want some more
missiles we've exported guns to sorry
bullets to Germany Armenia has been
buying some uh some equipments from us
so in in a very small way but we are we
have started to manufacture defense uh
defense related equipments and now we
are also looking at this as an export
opportunity over over a period of time
so this is one uh area second of course
PL which is now given to almost 10 11
sectors it's a big initiative or big
incentive for private sector to think
big to set up capacities uh and you know
make us as self-reliant as possible
right in this space of electronics see
there are three big import items one is
oil secondly is electronics and third is
defense and in all these areas uh uh we
are taking several steps to become more
and more
Ator fair enough now can you explain
what are the key criteria you use to
select stocks for this fund so criteria
remain the same as a fund house we
follow the qgp principle so quality
growth longivity price these are the
four Frameworks which we use anyways to
select stocks across across sectors
which we anyways will use for this fund
but like I said the overarching
philosophy has been to focus on growth
uh relative growth to the indise so we
have to always be very conscious that
without compromising on quality where
can I get relatively high growth
compared to the Benchmark and uh
therefore this theme uh okay give you
I'll give you some more numbers on this
uh uh so like like I said that if in the
next 5 years our economy doubles from
$3.5 trillion to $7 trillion right uh
currently on a$3 and5 trillion $430
billion is manufactured to GDP as I told
you 15% this is likely to go up three
times to about $1.3 trillion it's a 3X
opportunity right and then within that
the export which is currently 750
billion out of which $250 billion is
your your it exports and rest is all the
merchandise export this also is likely
to double in the next 5 years right so
so so so this is a high growth theme and
you have the opportunity to invest in
companies which can give higher earnings
growth than the Benchmark earnings
growth and that is that is where uh you
know our skill sets are coming into play
and uh uh then we put the qgp check so
do the quality check growth check is
done and valuations all of these things
in today's environment I think the
valuation check is very very important
so in you know how to play out in the
current scenario from a fiveyear kind of
a Viewpoint uh yeah so I mean these are
some of the things we are uh using to
create this this theme and this is my
first uh uh first active thematic fund I
would first otherwise we we are
participating through Diversified funds
this is the first thematic fund we are
doing uh ever since the AMC
started all right and what is the
research process you when evalu Val
ating potential investments in this
sector so we have a we have fund
managers we have sectoral experts who
are who are experts in so we have a
expert who a who who only focuses on
manufacturing and defense as as themes
right so there is a this ugp while it
sounds very simple quality growth
longevity price every time we assess uh
thematic opportunities and then we look
at stocks there is a whole thesis which
is written under under the quality what
are aspects Roes roas then we look at
growth what has been the traditional
growth EPS growth what is the growth
outlook for for next one year next two
years then we look at cash flows DCF and
then finally we look at the valuation so
all bunch of things have put so like R
says every time you buy any company you
have to look at two things largely you
have to look at the narrative story of
the company and you have to look at the
numbers right so those this entire part
narrative and the numbers are
together as part of the proposal and
then it goes into the IC investment
Committee comprises of ruji and prik
agal and and then together as a team
decisions are made to pick up individual
stocks how do current macroeconomic
factors how do they influence your
investment decisions for the fund like
interest global trade poliy yes yes no
it does definitely while we are bottomup
investors focused more on uh companies
and companies fundamentals but uh it's
very important to always keep a check on
how the macros are shaping up so
obviously we are looking at our uh GDP
growth we are looking at the interest
rate so I mean if you have to see all of
these numbers today India is stacking up
pretty nicely right so we are the
fastest growing economic growth for last
many several years we are actually
beating all kinds of analyst and
research agencies who have been making
claims about 6% 6 and a half% and then
we cross 7% so the GDP is really doing
extremely well inflation broadly has
been in control uh it's been in the
comfortable band of RBI between four and
4 and 6% broadly it's been in the range
of 5% uh so that's okay for the last
several months I think almost a year and
a half we have not seen any interest
rate hikes at least uh there is more
talks of interest rate Cuts than
actually now interest rate hikes
fortunately the inflation in us also is
now reaching at closer to 2% and there
are talks about cuts out there so uh
essentially from manufacturing as a
sector uh because it's a it's heavy
Industries lower interest rates will
always help uh private sector to to add
more capacities right so interest rates
has a direct connection with how the
capacities can be added so all of this
is looking positive today uh so we are
keeping a check on how the overall
macros are shaping up uh then we look at
the micro check which is the earnings
growth and then finally obviously
liquidity Etc all of those things all
right d moving on to you what is your
outlook on the Indian manufacturing
sector in the context of global economic
Trends I'm you know just looking at
these are very early days about 8 nine
years back I was looking at it with awe
then I saw that you know this is a very
targeted you know government incentive
program and I was apprehensive that will
it really come about now we are
witnessing that okay there are success
stories we had all the you know cell
phones we were only importing and now we
are beginning to export a good component
of that so there is now a and the most
promising thing that I witnessed uh on a
on a macro basis or you know different
states competing with each other to
attract manufacturing capacity and the
kind of incentive being offered to
create large scale manufacturing
capacity so now we are thinking you know
we are talking of for you're witnessing
capacity is being built which is not
small scale we are talking of you know
capacities which can absorb thousand
people 5,000 people 10,000 people uh you
really have to and now we have a
supporting infrastructure so I'm
extremely optimistic unless something
goes wrong and of course you know with
this kind of manufacturing there is
there are inherent risk factors which is
you know large Capital outlays involved
setting up the capacity you borrow money
borrow money and it things have been
very favorable uh but things you know
little bit of change in the context and
you know complexion of the economic
environment and the ecosystem but you
know the ecosystem is evolving initially
we had this apprehension the cynicism
then it is beginning so I think it is
still early days but you know as Akil
was saying that you know for the first
time when we export our defense output
or production it'll be quite a feat in a
sense that you know historically we have
only imported now think of you know the
the speed at which things have happened
as compared to the way it is happening
right now reason to be very optimistic
and Be watchful for all the and that is
why you know the fund manager should be
you know extr the role of a fund manager
is critical I mean dendra always will
bring up some interesting points and if
I have to add I'll tell you as managers
we have to we at least at M I can tell
you we always whenever we are looking at
investing opportunities we are always
trying to the first thing we try to look
at is what is the long-term opportunity
size how big can an industry become and
within that so what are going to be your
winning categories and then we look at
category winners I'll give you some
small numbers I was just going through
my deck now over the next 10 years our
current semiconductors which is a $44
billion industry there's a potential to
go up 2.8 times to $17 billion our EMS
which I spoke about electronic
manufacturing $101 billion can go up to
$500 billion EVs and batteries just a
mere $4 billion industry it can go up to
$48 billion so I can give you a bunch of
these sub ideas but the opportunity is
huge and like dendra mentioned these are
very early days you seeing you're
hearing in Pocket small small
announcements here and there uh but at
least the we are going in the right
direction and we have to go in this
direction there's no way that we we we
if we don't go in that direction
obviously we are going to suffer but um
a manufacturing is often a cyclical
sector you know how do you plan to
manage the risks associated with
investing in this sector there there can
be economic downturns or you know sector
specific challenges how do you plan
to so I I find on that point that I
wouldn't call this as a sector or a
cyclical sector like I said it's
manufacturing as a theme it's a very
broad based Diversified tee the only
exclusion I can think of broadly is
financials bfsi and uh it right so you
just remove these two sectors you have
broadly everything uh you know even
Pharma is manufacturing Auto is also
manufacturing consumer durable is also
manufacturing everything is man so it's
much more Diversified compared to some
of the other things like we did the
defense sector Index Fund that's like uh
that's that's a sector you know so there
obviously the challenges could be
different and one needs to really time
it well having said so yes this is a
theme it is a theme and will play to the
theme whenever you play themes and
whenever you play sectors you have to uh
be very very sure that what you are
expecting from that theme of the sector
over the next 3 to 5 years and if the uh
if uh if the narrative looks good uh the
storyline is good and expectations are
good you have to come at the right time
and equally you have to go also at the
right time right so you have to play
these opportunities as satellite
opportunities come make money enjoy the
opportunity and at some stage also book
your profits right so uh uh so I would
say that uh uh of course one as fund
managers we have to be very very uh
cautious as we create the portfolio we
have to ensure that we go in the right
uh sub sectors right stocks we have to
ensure margin of safety all of those
things we will do at our end for sure
but yes if there is a economic downturn
there is some kind of a headwind global
headwinds local headwinds uh these kind
of funds are likely to go for higher
volatility higher draw downs and and
then one needs to wait it out I mean if
at least the long Trend long-term Trend
looks good then one has to go through
those uh those headwinds and then as you
come out of it obviously the normal
compounding will work uh yeah maybe
darra can add some more points that
would be more interesting this is
this is a theme which is getting very
close to the Diversified Equity Fund you
know think of it in terms of exclusion
what is excluded out of this uh as he
said that you know it Services look at
you know uh banking which is a very
sizable thing because you know look at
banking in terms of the broad indices it
is about 30 33% of the total thing large
cap indices I'm referring to and if you
look at you know modern Services
industry things like you know know uh
squashy Financial Services or you know
something like zato or many many new
things coming up it may not it may not
get factored here but rest of it I would
say that it is you know two3 of it is
Diversified and it will have all the
cyclicality and today the manufacturing
you know I have been witnessed to the
death of manufacturing sector in India
in the '90s
and uh it was a steady
decline in fact some of the survivors
are you know they they still are you
know ex they exist or they have survived
with dignity like Bajaj Auto but you
know rest of the things what I witnessed
in the '90s they have all disappeared
because today the surv the growth from
here for the manufacturing given that
incentive as compared to the '90s was
very different they were all in
competitive
businesses you know sheltered by the
licenses and they all died once they
were exposed to the competition today
the survivors are competitive with
businesses and once they are given the
incentive once they are you know once
they have the you know the government
works towards all you know moving all
the speed Breakers to their existence
survival Prosperity I think it'll be a
different thing Indian investors or
Indian industry has not been used to
this attitude or this temperament where
the government is working towards
developing a logo for making India and
you know getting and bureaucrats are
assigned that you look after this Pharma
bul drug you look after this what can we
and and it is actually this PL is quite
an innovation in terms of government
policy earlier it used to be give a land
this thing that thing you know
manufacture something tax incentive it
was over the blanket this is now
government is very sure that it is in
the business of incentivizing thing
which creates capacity and generates
employment that can come and then
somebody gets a direct you know it's
almost like a direct benefit to the
industry for setting up something which
achieves a regulator or you know say the
governance role and with that I'm very
optimistic that it is not free for all
it is not somebody running away with
government's money given that
opportunity earlier it subsidies and
this and that and everything used to be
like that this is very focused targeted
and that is why I'm extremely optimistic
about this so keep in mind that out of
the top 500 companies Nifty 500 has
index over 275 companies or around that
number are all manufacturing related
businesses so it's a very large large
component of the top 500 companies so
it's very very Diversified I mean let's
not conf because when I do Road shows
this question almost it comes up every
time that it's sectoral and it's cycal
and all that stuff and I keep clarifying
that it's very Diversified it's very
broad based the opportunities are huge
there are certain near-term challenges
for sure and one needs to keep that in
mind but it's very
broad-based all right any plans to
expand the fund scope to include
International manufacturing companies or
will it remain focused on Indian
companies open we have a limit of up to
30% uh to go outside of India but you
know the challenges currently is that we
don't have any limits to put any money
outside India so that's on pause for for
now but uh across our funds we have we
have kept uh this option available and
at at some stage when we have the limits
we we are open actually okay and last
question what future Trends or
Innovations in the manufacturing sector
are you excited about and how do you
plan to incorporate them in the fund
strategy I think uh what we are seeing
is around uh let's say the EV space is
looking very interesting from uh from
Technology Innovation perspective I
think that's one space which is coming
up uh it's going to be take some take
some time but uh that's one space
clearly uh Power again we are seeing a
lot of work which is happening on the
power side so so there again some
technology so you have to see where AI
is getting used I mean autos auto angs
that's I mean cars are no longer cars
you know nowadays the the new cars are
released the body doesn't change it's
only the software which is changing
right so whichever sector and I'm pretty
surprised to see that a lot of
manufacturing companies are using tech
tech enabl services products artificial
intelligence cloud computing all of
these things these these same
traditional old conventional businesses
are using to create more efficiencies uh
scale reduce cost uh you know and
eventually give a great customer
experience so it's happening everywhere
Innovation is happening
across I want to ask a last question to
you Akil that yes sir you know how
fearful are your fund manager about the
valuation today as you're launching this
and you'll end up with you know sizable
money to begin with deployment of
that we are conscious of uh we are
conscious of the current situation like
I said some time back uh we will take
our own time to build the portfolio we
take it easy uh we will be very
conscious in terms of every opportunity
we are buying both from the growth and
the valuation perspective uh so won't be
in a hurry uh we'll take our own sweet
time as we speak for a certain size we
have a model portfolio which is already
ready so it's not that we don't have
opportunities immediately I don't expect
uh two large inflows I think it's going
to be a contained inflow and should be
managed well I think anywhere between 7
52,000 cres kind of flow should be
manageable should not be an issue but we
are very very conscious on your question
for sure all right with that time for us
to wrap up this chat thank you for
taking the time and speaking with us
thank you so much thank thank you thank
you sir
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