From the Desk of Business Head and CIO - January 2019

Dear Investor,

For FY19, while disinvestment targets can be met irrespective of the state of the stock markets on sale of REC to PFC and of
NHPC to NTPC, and some sale of SUTI, the slippage on account of weak GST collections would need to be filled and would be
challenging. On top of this around INR 20k crs have to be provided for the PM KISAN scheme in this fiscal. This is over and
above the budgetary provisions made earlier. The budgetary maths for FY19 where fiscal deficit is contained to 3.4% of GDP.

Mr. Prateek Agrawal

Rs trillion Actual Budget Revised Deviation Budget FY20B/FY19R
Particulars FY18A FY19B FY19R YoY Expec. FY20B YoY
Gross Tax Revenues 19.2 22.7 22.5 17% -1% 25.5 14%
Corporation Tax 5.7 6.2 6.7 17% 8% 7.6 13%
Income Tax 4.2 5.3 5.3 26% 0% 6.2 17%
GST, Custom, Excise, Sertice Tax 9.1 11.2 10.4 14% -7% 11.7 12%
Non-Tax Revenue 1.9 2.5 2.5 27% 0% 2.7 11%
Revenue Receipts 14.4 17.3 17.3 21% 0% 19.8 14%
Capital Receipts 7.1 7.2 7.3 3% 1% 8.1 11%
TOTAL RECEIPTS 21.4 24.4 24.6 15% 1% 27.8 13%
Major Expenditure Lines
Interest Payments 5.3 5.8 5.9 11% 2% 6.7 13%
Defence Expenditure 2.8 2.8 2.9 3% 1% 3.1 7%
Subsidies (Food+Fuel+Fertilizer) 1.9 2.6 2.7 39% 1% 3.0 11%
Pensions 1.5 1.7 1.7 14% -1% 1.7 5%
TOTAL EXPENDITURE 21.4 24.4 24.6 15% 1% 27.8 13%
Revenue Account 18.8 21.4 21.4 14% 0% 24.5 14%
Capital Account 2.6 3.0 3.2 20% 5% 3.4 6%
Fiscal Deficit 5.9 6.2 6.3 7% 2% 7.0 11%
as % of GDP 3.5% 3.3% 3.4% 3.4%

This implies strong revenue buoyancy in the remaining part of the fiscal and inflows from RBI (not quantified) or the number would be achieved with
large off-balance sheet borrowings by entities like FCI or a combination of the above.

For FY20
• Nominal GDP growth pegged at 11.5% for FY20. Revenue growth is assumed to be higher than NGDP growth due to higher buoyancy in personal
income tax. This is odd and would have to overcome the loss of revenue on account of tax sops to lower income bracket. The number implies high
growth in incomes of higher income bracket, strong high wage employment growth or better tax compliance. Direct taxes are expected to grow at
15% (vs 14.8% in FY19). We are more positive on buoyancy in corporate taxes. The profit growth projected for FY20 over FY19 is over 20% for large
companies and this should help tax revenues also. In our opinion, FY20 numbers seem to be achievable with some extra effort if the economic
buoyancy is maintained. The GST regime should see introduction of E-way bill and gradual tightening of processes to prevent leakages, post General
Elections.

• Divestment target of INR 90,000 cr in FY20BE vs INR 80,000 cr in FY19. The government has been aiming for high disinvestment targets. However,
with total market capitalization of PSUs at INR 13 lac cr and a not so buoyant equity market, this number would become increasingly hard to meet as
we go forward, especially when the more saleable PSUs have already seen a sharp drop in government holding.

• Pension scheme for weaker sections promising INR 3,000 per month after the age of 60, is a good start. However, it would have to be tweaked in
future to see that the numbers don’t cause unbearable stress at a later point in time. This would again result in an increase in spending culture vs
savings culture as the amounts become more meaningful over time and more people are covered. This scheme would probably be administered by
LIC and should help that space.

• Capex growth sharply curtailed to 6.2% in FY20 (vs 20.3% in FY19) due to higher outlay on revenue account in FY20. Revenue expenditure growth is
14.4% (from 13.9% in FY19). The expense on defense @ INR 3.18 tn has shrunk as a percentage of GDP and stands at 1.51% of projected GDP.
Railways capex of INR 1.58 tn is good and supported by INR 64,587 cr of budgetary support.

• Fiscal slippage limited. Reduced capital account spending has offset the impact on account of higher outlay on PM-KISAN scheme of INR 75,000 cr
earmarked in FY20BE

There are areas of concerns that are building up. India’s savings pool is falling, and a lot of savings are being channelled into spaces where IRRs are
unknown and repayment discipline yet to be established.

India’s household savings has fallen in recent years from 23% of GDP to 17% and excluding housing and other investments like gold, net financial
savings are just around 7% of GDP. Inclusive of Central Government Budget deficit, state deficits and borrowings from PSUs the overall market share
of government agencies is exceeding the household savings pool. This implies that private sector has no option but to seek foreign funding. FDI / FII
would need to be continuously sought. This government has had a good track record of attracting FDI over its 5 years (USD 239bn over last 5 years)
and the same needs continue and accelerate. More sectors were opened up for FDI and one should expect the same to continue if India has to
continue to grow at high growth rates.
From the Desk of Business Head and CIO - January 2019

Banks have lent INR 7.23 tn to 15.6 cr individuals under the Mudra loans towards generating self-employment. This is an activity similar in some
manner to what MFI industry is seen to be catering to. While loans are being disbursed, we are not sure of the follow-up towards repayments.
These repayments need to be focussed on else may create another pool of NPAs.

Market Outlook
There is a big uptick in gross borrowing to INR 7.04 tn vs INR 6.34 tn in FY19. This borrowing is on account of Central government. Moreover, in the
past two years, government has used FCI for extra budgetary borrowings. FCI borrowed 1.3% of GDP in FY18 apart from its budgetary allocation and
in FY19 it has raised a further 1% of GDP outside of Budget. This is something which would be difficult to reverse in normal course. The bond market
reaction was adverse as a result. However, a part of the adverse bond market reaction may be on account of other issues such as DHFL and the
losses that the system may have to take on this exposure and may not be on account of the Budget itself. The 10-year yield breached 7.65% intraday
and ended at 7.61% vs 7.48%. INR also weakened.

The sharp increase in the allocation towards poverty alleviation in the form of pension for weaker sections and PM Kisan scheme should help
consumption part of the economy while capex would get postponed further unless supported by strong FDI and multilateral funding. The weaker
sections would get an over 16% uptick in their incomes and would be able to spend more. Government has been driving capex (along with PSUs) as
private sector is deleveraging or acquiring stressed businesses. As government also focusses on consumption, we expect capex to be hurt.

We believe continuous flow of government money to weaker sections would help small loan businesses (MFI and gold) grow well and have an
added security layer. MFI borrower pool would expand as over 12 cr small land owners’ benefit. A Rs6k annual inflow would make it possible to lend
over INR 60k to such people for once. This would expand the market for MFI sharply and can result in a multiplier if the loan is used for small
enterprises.

FMCG in areas such as paints, food and small durables should benefit. Lower-end 2 Wheelers may also benefit as the people earning around Rs.5
lacs are able to save more. Also, a Rs.6k transfer could also capitalize two-wheeler purchase. The overall boost to consumption is INR 100,000 cr
which is about 0.5% of GDP.

The following chart shows the trend in subsides over the years. In FY20, the increase is on account of PM Kisan scheme.

3.00%

2.50%

2.00%

1.50%

1.00%

0.50%

0.00%
FY12A FY13A FY14A FY15A FY16A FY17A FY18A FY19R FY20B

The Budget also extends the existing benefits and provides some new benefits to the homeowners and builders and has also announced that the
GST rates applicable to home sales would be relooked into. Government has extended the exemption from tax levy on notional rent for unsold
ready inventory by one year to two years (after the end of the year in which the project is completed). Assuming a 1.5-2% rental yield, this can result
in a 60-70bp (as a % of sale value) of tax savings. Homeowners can save on payment of taxes on notional rent on one vacant self-occupied house.
Also, the criteria for relief from capital gains tax (section 54) on disposal of a residential property has been broadened to reinvestment of proceeds
in two residential houses (one earlier). This is applicable for capital gains up to INR 20 mn and can be availed once in a life time.
In our opinion, the Budget has ensured that the incumbent government gets enough talking points to impress the electorate and yet did keep the
focus on the fiscal. However, the Budget has missed the opportunity to indicate that the reduction in corporate tax rates would continue. This would
be a disappointment to the midcap part of the market.

The Budget, especially in the context of the sharp swing in the stance of global central bankers should enable continuation of liquidity injection and
hence lower rates in the Indian economy. This is needed in the current juncture given the IL&FS issue in the recent past and prospects of a few
housing finance companies also undergoing high stress. However, this is just an interim Budget and we would see another Budget in a few months.
While this Budget did not raise any taxes, if the fiscal situation is seen going out of control especially if GST numbers do not gain traction, we could
expect further attempts to increase taxation on the compliant taxpayers in the full Budget.

We believe that recognition of bad loans in banks has still not peaked. RCOM has sought bankruptcy protection. DHFL share price is falling sharply
and the entity has loans outstanding to the tune of over INR 80k cr. More could follow. This would clearly need to be recognised. As the IL&FS issue
has shown, problem in a financial entity is more difficult to handle vs a entity in other sectors on account of large leverage involved and
counterparty risks. There is a clear risk of contagion and it is best to recognize it. Earlier the issue was contained within the banking system but now
it seems likely that the NPA issue would spread to the MFs.

In the current context we believe that focus on large, high quality businesses that are able to grow consistently should remain the focus. Our
portfolios are focussed on the consumption theme which we believe get a fillip from the Budget. Accordingly, the financiers of consumption should
also do well as the financial markets stabilise. As risk aversion increases, the good quality borrowers would be sought. This would benefit better
rated financial businesses. These spaces comprise a large part of our portfolios.
Update on Global Markets - January 2019

The month of January was a good one for global equity markets with S&P500 and MSCI World Index up nearly 8% for the month. Emerging markets
also performed well with MSCI Emerging Market Index up 8.7% for the month. Commodity prices rallied in the month with Brent oil prices up 15% in
the month as the OPEC production cuts and US sanctions on Venezuela helped the steady sentiment after the more than 40% drop from peak last
year.

The month started on a negative note with Apple issuing a negative warning on revenue for the quarter which it blamed on China slowdown. That
combined with the continued shutdown of the US government over political issues (it has since ended temporarily) and uncertainty around the
future of the trade talks between China and US added to the negative sentiment. At the same time IMF lowered the global growth forecast for 2019
from 3.7% to 3.5% due to high level of economic risks that are accelerating around the globe including the slowing growth in China and Brexit.
Meanwhile China announced economic growth of 6.6% for 2018, the lowest since 1990. This slowdown is negatively affecting the financial
performance of companies as can be witnessed from the results announced by most of the global companies that do business in China.

Against this backdrop the equity markets kept climbing up in anticipation of a policy response. They were not disappointed when the US Fed in their
January policy meet towards the end of the month moved to a dovish stand, a reversal from a tighter monetary policy a month back, indicating that
they would be “patient” in raising future interest rates and flexible in reducing its balance sheet. In other words, it seems that the era of cheap
money will continue for some more time. The Fed decision caused the US dollar to depreciate against most currencies and this depreciating bias is
likely to continue going forward. Historically a deprecating US dollar has always been accompanied by a rally in emerging market equities and this
time should not be any different. In addition, policy response by China to the slowing economy and some kind of Brexit deal would add to “risk-on”
environment.

Gaurav Sharma
Portfolio Manager, ASK Capital Management Pte Ltd.
ASK Indian Entrepreneur Portfolio – January 2019

Investment Objective: ASK Indian Entrepreneur Portfolio (IEP) invests in entrepreneurially driven and/or family owned businesses; listed on the Indian stock
markets, for compounding gains over the medium to long term.
Portfolio Update : Stark difference in performance of different indices continues. Nifty 50 was down 0.9%, while CNX Midcap Index was down 5.4% during the
month. Indian Entrepreneur portfolios underperformed the benchmark BSE 500 for the month.

Auto index in general saw a sharp correction during the month. BSE Auto Index was down 12% during the month. Weak festive season impacted the
performance of auto companies. IEP with its exposure to auto and auto ancillary space also had been impacted. We believe the slowdown witnessed recently in
automobile sector should be temporary as penetration and premiumization scope remain immense. We remain positive on the portfolios companies’ ability to
bounce as demand normalizes.

On the results front, the portfolio companies that have declared results as yet, have shown strong performance in general and vs respective industry as well.
Notably strong performance has been delivered by Bajaj Finance, Cholamandalam Investment, Havells etc. The liquidity crisis has had only limited impact on our
portfolio companies. The NBFCs that we own have relatively high pricing power and better ALM position. The Q3 FY19 earnings performance have reinforced
our view on performance of these companies.

Top 10 Holdings (%) ASK IEP Movement Since Inception

Bajaj Finance Ltd 7.9 60
Havells India Ltd 7.8 55 IEP BSE 500 Nifty
50
Britannia Industries Ltd 7.7 45
Bajaj Finserv Ltd 6.9 40
NAV 35
Page Industries Ltd 6.2 30
25
Asian Paints Ltd 6.1 20
IndusInd Bank Ltd 6.1 15
10
Astral Polytechnik Ltd 5.8 5

Dec-12

Jan-17

Aug-17
Jan-10

Aug-10

May-12

Apr-15

Mar-18
Feb-14
Mar-11

Nov-15
Jul-13

Sep-14

Jun-16
Oct-11

Oct-18
Kotak Mahindra Bank Ltd 5.4
Cholamandalam Investment and F 5.4
Rs. 1 Cr invested in IEP in Jan 2010 is now worth Rs. 4.59 Cr v/s Rs. 2.13 Cr in BSE
500
Top Sector Weights (%) CAGR Performance
NBFC 13.2 IEP BSE 500 Nifty
Banks 11.5 25.0
21.5 21.1
18.4
Building Products 11.0 20.0 13.7
14.1 12.7 11.8
Consumer durables 7.8 15.0 12.5 12.2 11.0 8.8
8.9
FMCG 7.7 10.0
Insurance 6.9 5.0 2.0
Retail 6.2 0.0
Home Decor 6.1 -5.0 -1.8
-10.0 -6.9
1 Year 3 Years 5 Years 7 Years Since Inception
Portfolio Metrics
Total Assets under Management & Advisory in Rs.
6,804
Crs.

Weighted Average Market Cap in Rs. Crs. 70,285

Median Market Cap in Rs. Crs. 45,190
Beta (since inception) 0.76

Inception Date of ASK IEP is 25-Jan-2010. Information as on 31-Jan-2019

Note: Performance figures are net of all fees and expenses. The above returns are composite returns of all Integrated Clients. Returns for individual client may differ depending on time of entry in the Strategy. Past performance may or may not be sustained in
future and should not be used as basis for comparison with other investments. Returns for 1 year or less time period are absolute returns, while more than 1 year are CAGR

Disclaimers: The securities investments are subject to market risk and there is no assurance that the objectives of the Portfolio concepts / products will be achieved. Investors are not being offered any guaranteed or assured return on the Portfolio. The past
performance does not in any manner indicate the future performance of the Portfolio. The companies / sectors referred to in this document are only for the purpose of explaining the concept of the above portfolio and should not be construed as recommendations
from ASK Investment Managers. The readers should exercise due caution and / or seek independent professional advice before making any investment decision or entering into any financial obligation based on information, statement or opinion which is expressed
herein. All opinions, figures, charts / graphs, estimates and data included in this note are subject to change without notice. The data used in this material are obtained by the Portfolio Manager from sources which it considers reliable. While utmost care has been
exercised while preparing this document, ASK Investment Managers does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information.
Important Disclosure : ASK Investment Managers Limited is proposing, subject to receipt of requisite approvals, market conditions and other considerations, to make an initial public offer of its equity shares and has filed a draft red herring prospectus (“DRHP”) with
the Securities and Exchange Board of India. The DRHP is available on the website of the SEBI at www.sebi.gov.in as well as on the websites of the Book Running Lead Managers, JM Financial Limited, Axis Capital Limited, Citigroup Global Markets India Private Limited
and Nomura Financial Advisory and Securities (India) Private Limited at www.jmfl.com, www.axiscapital.co.in, www.online.citibank.co.in/rhtm/citigroupglobalscreen1.htm and www.nomuraholdings.com/company/group/asia/india/index.html, respectively. Potential
investors should note that investment in equity shares involves a high degree of risk and for details relating to such risk, see the section "Risk Factors" of the Red Herring Prospectus. Potential investors should not rely on the DRHP or any other offer document for any
investment decision.These materials are only for the intended recipient and should may not be copied or disseminated, in whole or in part, and in any manner