1. Swimming against the tide Raamdeo Agrawal 12 February 2016

2. What is the tide? Tide refers to current investment headwinds —  Global deflation  Economic stagnation in India  Stagnant corporate profits  Flattish markets 2

3. Flattish markets for 5 years 3 As on 10 th Feb 2016 5 year CAGR : 6.3% 3 year CAGR : 6.9% 1 year CAGR : -16%

4. How to swim against the tide? (i.e. earn at least 15% absolute return for investors, irrespective of market conditions) 4

5. What helped us swim against the tide … … Knowledge First – 20 years of Wealth Creation Studies 5

6. … and how we swam against the tide Focused-35 v/s Nifty 6 Last 1 year F35 down by 3.3% Last 1 year Nifty down by 16.4% As on 10 th Feb 2016

7. General insights into investing 7

8. Importance & Knowability Matrix 8

9. Warren Buffett’s Investment Process a)A business we understand; b)Favorable long term economics; c)Able and trustworthy management; and d)A sensible price-tag. — 2007 Annual Letter 9

10. Powerful Mantra for Wealth Creation To make money in stocks you must have –  the Vision to see them  the Courage to buy them &  the Patience to hold them. Patience is the rarest of the three. – Thomas Phelps in 100 to 1 In The Stock Market 10

11. Short-term v/s Long-term “In the short run, the market is a voting machine … … but in the long run, it is a weighing machine.” – Benjamin Graham 11

12. Short-term v/s Long-term Irrational in short-term, rational in long-term 12

13. Market performance v/s Stock performance HDFC Bank outperforms, while peer SBI underperforms 13 As on 10 th Feb 2016

14. Stock performance v/s Portfolio performance Maximum loss on wrong stock is 1x Limited downside, Unlimited upside 14

15. 3 sources of value Growth Value Only if growth is in the same franchise, and benefits from the competitive advantage Earning Power Value Franchise value from current competitive advantage Asset Replacement Value When entry is free, and there is no competitive advantage 15

16. Equity allocation & Market levels Index Low High How investors allocate Equity Allocation Index How investors should allocate Equity Allocation Low High 16

17. QGLP: Our Investment framework 17

18. QGLP in a nutshell  Q : Quality of business & Quality of mgmt  G : Growth in earnings  L : Longevity of Quality & Growth  P : reasonable Price of purchase 18

19. QGLP frameworks  Quality frameworks  Growth frameworks  Longevity frameworks  Price frameworks 19

20. Quality frameworks 20

21. Q – Quality Quality of Business x Quality of Management 1 X 1 = 1 1 X 0 = 0 0 X 1 = 0 21

22. Great, Good, Gruesome Quality Frameworks RoE Distribution of BSE 500 FY15 RoE No. of cos. > 25%68 15-25%120 < 15%312 Only 14% of BSE 500 companies earn RoE higher than Cost of equity 22

23. Quality Frameworks (continued) 23

24. Uncommon Profit & Company lifecycle Quality Frameworks (continued) 24

25. Value Migration “Value migrates from outmoded business design to superior business design.” — Adrian Slywotzxy Quality Frameworks (continued) 25

26. Quality v/s Growth Quality Frameworks (continued) 26

27. Growth Frameworks 27

28. G – Growth Understanding 2 years Growth is a science but Understanding long-term Growth potential is an art 28

29. India’s NTD (Next Trillion Dollar GDP) Linear growth … Every successive NTD of GDP takes fewer years Growth Frameworks 29

30. India’s NTD (Next Trillion Dollar GDP) … Exponential opportunity When per capita GDP doubles, discretionary spend becomes 10x Growth Frameworks (continued) 30

31. Winner Categories, Category Winners Winner Categories= Consolidated sector + Scalability Category Winners = Winning Categories + Entry Barriers + Great Management Great Investments = Category Winners + Reasonable Valuation Quality Frameworks (continued) 31

32. 100x Indian benchmark indices rise 100x in 30 years Growth Frameworks (continued) 32

33. 100x 47 enduring 100x stocks over 1994-2014 Growth Frameworks (continued) Note: Price multiples are based on stocks being bought at the low price in the respective year of purchase, and held on to Mar-2014. 33

34. Longevity frameworks 34

35. L – Longevity Longevity of Quality & Growth  Extending Competitive Advantage Period CAP (CAP framework covered later)  Delaying mean reversion 35

36. Longevity of Quality Extend CAP (Competitive Advantage Period), Delay mean reversion Longevity Frameworks Companies enjoy CAP of some years …… but high-quality companies extend it 36

37. Power of Compounding Longer the period, exponentially higher the multiple Longevity Frameworks (continued) 37

38. Longevity of Growth Sum multiples for different growth rates over different periods Longevity Frameworks (continued) 38

39. Price frameworks 39

40. P – Price Reasonable Price which is significantly below the intrinsic value leaving good Margin of Safety 40

41. Quality & Valuation Matrix Identify Quality stocks at reasonable valuation and hold on Price Frameworks Quality Valuation LowHigh Low High 41

42. Market Cap to GDP India’s current mkt cap > LPA but below peak of 100% of GDP Price Frameworks 42

43. Payback ratio Less than 1x is almost a sureshot formula for multi-bagger Payback ratio= Market Cap Next 5 years PAT Price Frameworks 43

44.  You can swim against the tide (i.e. make money in flat markets) … provided you have the requisite skills.  The requisite skills come from a good investment philosophy, and pig-headed determination of practising it.  A good investment philosophy evolves after years of research, practice, and fine-tuning.  We believe our investment philosophy – QGLP and its continuous improvement – should help us deliver sustained superior performance. Conclusions 44

45. Thank you ! Happy investing using frameworks & best wishes for swimming against the tide !!