Aug 2019 TCG Advisory Services

Monthly Fact Sheet: TCG Funds Fund 2 – Primario Fund

Alternative Investment Fund (AIF) Cat III, Closed- End

MD: Chakri Lokapriya

Investment Information:
Portfolio Composition: Primario Fund
Equity 93.34
Primario Fund Debt / Liquid 6.66
Fund Launch Month Feb 2018
NAV (₹) 100.00
Portfolio (NAV) (₹)79.55 Select Holdings: Primario Fund
Min Investment (₹) 1 Crore
Addl. Invst. (Multiples of) (₹) 1 Lakh Wt. / Stock
Fee Structure: Primario Fund NAME (%)
SBI LIFE INSURANCE CO LTD 3.86
Contribution Management Performance Fee Hurdle AUROBINDO PHARMA LTD 3.32
Amount Fee (p.a) Rate
Option I 1 Cr to 3 Cr 2.25% 10% without catch up 10%
LIC HOUSING FINANCE LTD 2.98
Option II > 3 Cr to 5 Cr 2.00% 10% without catch up 10% IRCON INTERNATIONAL LTD 2.60
Option III > 5 Cr to 15 Cr 1.75% 10% without catch up 10% HCL TECHNOLOGIES LTD 2.41
Option IV > 15 Cr 1.50% 10% without catch up 10% VOLTAS LTD 2.01
Establishment Expenses-Up to 2.25% of aggregate capital contribution. RAIL VIKAS NIGAM LTD 1.87
KEI INDUSTRIES LTD 1.83
Primario Fund Performance: CHOLAMANDALAM INVESTMENT AND 1.79
Fund/Index (%) Aug-19 YTD19 CY18 Launch* ASIAN PAINTS LTD 1.25
Primario Fund (₹) -2.1 -6.9 -14.5 -20.5
Comp. Index (₹) -1.5 -14.0 -22.3 -26.3 Primario Fund: Multi-Cap, Multi Sector Fund:
BSE IPO Index (₹) 1.5 11.5 -11.1 -0.9 Portfolio Mix Holding (%)
Large Cap 55.4
*Launched on Feb 23, 2018
Mid Cap 23.1
Small Cap 14.9
Sector Weights (%):
Portfolio Characteristics:
Primario Fund Index
FY20 FY21 1 yr. 2 yr.
Sector (%) (%)
EPS EPS Fwd. Fwd. ROE
Materials 13.17 8.51 Growth Growth PE PE
Utilities 4.44 3.02 Primario Fund 19.2% 16.0% 16.6x 15.3x 15.8%
Consumer Discretionary 11.82 9.32 Index 17.0% 13.0% 18.7x 16.2x 14.1%
Industrials 18.40 7.31
Information Technology 7.87 10.93 Investment Objective: Primario Fund Invests in companies across
Consumer Staples 1.28 9.21 sectors requiring growth capital or turnaround capital. Infusing equity
Health Care 3.77 5.04 capital into such companies at major inflection points help
Financials 30.79 33.80 reinvigorate their financials, deleverage balance sheets, allowing
companies to expand their offerings or services translating into
Energy 1.79 9.84
higher profits and therefore higher investment returns. Primario fund
Telecommunication Services - 2.16 address the immediate need to capitalise India's listed & soon to be
Real Estate - 0.62 listed companies and help corporates break the viscous cycle of lack
Cash 6.66 - of capital impeding their growth or higher profits.
Total 100.00 100.00
Fund Style: Primario Fund invests in institutional placements,
anchor capital to initial public offerings and soon to be listed
companies, Multi-cap. As an institutional investor the fund negotiates
discounts, higher allotments that UHNIs, portfolio management
services, private equity do not qualify for. Primario Fund aims for high
absolute returns vs. index with a 3 - 4-year investment horizon. The
risk of investing, includes capital loss, however diversification across
sectors lowers the risk to deliver risk adjusted returns.

For more information: Contact: +91-22-6747 9999 I customerservice@tcgamc.com I www.tcgamc.com

 Aug 2019 TCG Advisory Services
Monthly Fact Sheet: TCG Funds Fund 2 – Primario Fund
Alternative Investment Fund (AIF) Cat III, Closed- End

Chakri Lokapriya, MD, Comments: Primario Fund

The overall market capitalization of all listed companies but for the Top 15 performers, declined Rs.34.5 lakh Cr or 29% of the total
market capitalization since Jan 2018. This situation has come to pass due to a series of measures that made capital availability tight,
cost of capital high, and return on equity falling from its highs of 28% in 2007/08 to 14% currently. The fall in profitability for corporate
India is due to a confluence of factors including, high leverage of the past and lack of timely measures to pump prime a slowing
economy. While the government finally relented in Aug and rolled back FPI taxes, by then, over $250 billion of investor money was
lost. Against this back drop valuations are close to 2013 lows. A bottom is being formed and the market is awaiting a meaningful
government stimulus. Apr to Jul tax collections were below target at 6.6%, and direct tax collection was up 5.7% vs 18% expected by
the government. This partly explains the government’s inability to cut taxes. Its Rs.1 trillion divestment target looks tough to achieve.

A muddled regulatory vision of New India, high public spend, over-zealous tax officials, imposition of price controls on various sectors,
overdue and delayed reimbursements from government to companies is making Corporate India, hesitant to commit new capital for
growth. Economic downturns are usually great entry points from an investment perspective to generate above normal returns over
the medium term. We are focused on maintaining a portfolio where its top line growth is higher versus sectoral growth, and flowing
down to higher than benchmark profit growth, which would translate into higher vs. benchmark returns to the long-term investor.

Asian Paints, India’s largest paint manufacturer, was up 6.3% in August on the back of market share gain from un-organised players.
During the quarter, gross margin expanded by 30 bp to 43.5% led by price hikes and moderation in raw material prices. SBI Life
Insurance, was up 5.2%, on increasing protection business leading to better VNB Margins. RVNL, a Miniratna company under Ministry
of Railways, was up 5.6% on better than expected results on the back higher execution. Among the weaker performers, LIC Housing
Finance, was down 13.5%, as its NIMs missed estimates by 19bp at 2.35%, and GNPA missed estimates by 43bp to 1.98%, leading
to PCR at 44.9%, down 470bp. The company is trading close to its trough and we continue to monitor the situation.

Portfolio Outlook:

The current economic slowdown is likely to lead to earnings cut for benchmark indexes from 20-23% to 10-12% for FY20 and a revival
in FY21. The debate that been doing the rounds of whether the contracting economic statistics, such PMI, consumer confidence, new
capital formation indicate whether India is going through a cyclical downswing, or a structural slowdown. Each requires a different
policy response. A cyclical downswing will need monetary and fiscal actions, but a structural slowdown will need deep reforms such
as, trying to phase out automobiles powered by fuels to focus intensely on electric vehicles, ahead of time when enabling technical
capabilities on a commercial scale do not exist with the global automotive industry for electric vehicles.

A structural decline is evidenced in one or few related sectors, and is usually not a broad-based weakness that we are seeing across
disparate sectors such as falling manufacturing, lower hotel occupancies, weak auto sales, anaemic freight and construction activity.
A concerted effort to revive private capex, higher government spend on infrastructure, and ease of doing business would revive
economic and GDP growth. We believe this is a cyclical downturn as evidenced by this broad-based weakness. The portfolio is well
placed for the economy to turn up and to improve its outperformance. We sidestepped the volatility with alacrity. Primario, as a premier
corporate capitalization fund invests in 30-50 companies which require growth or turnaround capital across sectors. The fund’s
investments are on track to deliver potentially strong CAGR returns over the three and half years life of the fund, as the capital infusion
translates into strong company balance sheets and therefore higher investment returns. The institutional placement pipeline is very
strong at Rs. 72,000 crores and is set to resume as market stability returns.

Disclaimer: This document is being furnished to you on behalf of TCG Alternative Investment Fund (“Fund”) strictly on a confidential basis and only for informational purposes. The Fund is registered
with the Securities and Exchange Board of India (“SEBI”) as a Category III Alternative Investment Fund under the SEBI (Alternative Investment Funds) Regulations, 2012. This document is for
informational purposes only and should not be considered as an advice on the matter discussed herein. The information herein has been provided to its recipient upon the express understanding
that the information contained herein, or made available in connection with any further investigation, is strictly confidential and is intended for the exclusive use of its recipient. It shall not be
photocopied, reproduced or distributed to others at any time. This document is neither a prospectus nor an invitation to subscribe to the Fund and the information contained is entirely subject to the
Fund documents. Prospective investors should carefully review the underlying constituent documents of the Fund before making a decision to invest. In general, investment in the Fund will involve
significant risks. Nothing in this document is intended to constitute legal, tax, securities or investment advice, or opinion regarding the appropriateness of any investment, or a solicitation for any
product or service. The use of any information set out in this document is entirely at the recipient’s own risk. Interested persons are advised to seek independent professional advice to understand
all the risks attached with respect to making investments in the Fund. Also, persons interested in investing into the Fund should have the financial ability and willingness to accept the risks and lack
of liquidity, which are characteristics of the investments described herein. In making an investment decision, investors must rely on their own examination of the Fund documents and the terms of
the offering as set out in detail in such documents, including the merits and risks involved. In view of the particularized nature of tax consequences, each prospective investor is advised to consult
its own tax advisor with respect to specific tax consequences arising due to the investment in the Fund. SEBI Registration details IN/AIF3/17-18/0324

For more information: Contact: +91-22-6747 9999 I customerservice@tcgamc.com I www.tcgamc.com