Sept 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

Primario Fund Equity 96.34
Fund Launch Month Feb 2018 Debt / Liquid 3.66
NAV (₹) 100.00
Portfolio (NAV) (₹)81.63
Min Investment (₹) 1 Crore Select Holdings: Primario Fund
Addl. Invst. (Multiples of) (₹) 1 Lakh Wt. / Stock
NAME (%)
SBI LIFE INSURANCE CO LTD 3.79
Fee Structure: Primario Fund INDIAN OIL CORP LTD 3.07
Contribution Management Performance Fee Hurdle RAIL VIKAS NIGAM LTD 2.43
Amount Fee (p.a) Rate KEI INDUSTRIES LTD 2.05
Option I 1 Cr to 3 Cr 2.25% 10% without catch up 10% ENGINEERS INDIA LTD 2.03
Option II > 3 Cr to 5 Cr 2.00% 10% without catch up 10% JUBILANT FOODWORKS LTD 2.16
Option III > 5 Cr to 15 Cr 1.75% 10% without catch up 10% KOTAK MAHINDRA BANK LTD 2.54
Option IV > 15 Cr 1.50% 10% without catch up 10% CHALET HOTELS LTD 1.95
Establishment Expenses-Up to 2.25% of aggregate capital contribution.
SHEELA FOAM LTD 1.44
PI INDUSTRIES LTD 1.15
Primario Fund Performance:
Fund/Index (%) Sept-19 YTD19 CY18 Launch*
Primario Fund: Multi-Cap, Multi Sector Fund:
Primario Fund (₹) 2.6 -4.5 -14.3 -18.4
Comp. Index (₹) 2.6 -11.8 -22.3 -24.5 Portfolio Mix Holding (%)
BSE IPO Index (₹) 11.3 24.1 -10.1 10.2 Large Cap 55.3%
Mid Cap 21.2%
*Launched on Feb 23, 2018 Small Cap 19.9%

Sector Weights (%): Portfolio Characteristics:

FY20 FY21 1 yr. 2 yr.
Primario Fund Index EPS EPS Fwd. Fwd. ROE
Sector (%) (%) Growth Growth PE PE
Materials 13.16 8.07
Primario Fund 19.1% 16.7% 17.9x 15.4x 15.9%
Utilities 2.89 3.01
Index 18.7% 13.5% 19.1x 16.9x 14.1%
Consumer Discretionary 14.95 8.16
Industrials 22.52 6.95 Investment Objective: Primario Fund Invests in companies across
Information Technology 2.70 10.65 sectors requiring growth capital or turnaround capital. Infusing
Consumer Staples 1.24 8.66 equity capital into such companies at major inflection points help
Health Care 3.29 4.40 reinvigorate their financials, deleverage balance sheets, allowing
Financials 32.52 37.14 companies to expand their offerings or services translating into
Energy 3.07 10.02 higher profits and therefore higher investment returns. Primario fund
address the immediate need to capitalise India's listed & soon to be
Telecommunication Services - 2.18
listed companies and help corporates break the viscous cycle of
Real Estate - 0.75 lack of capital impeding their growth or higher profits.
Cash 3.66 -
Fund Style: Primario Fund invests in institutional placements,
Total 100.00 100.00
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

 Sept 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

Primario Fund continued its outperformance and delivered 2.6% vs. 2.6% Index for Sep and -4.5% vs. -11.8% Index, YTD2019.
September saw some respite, as India’s Finance Ministry cut India corporate taxes to 22% from 30%. The effective tax rate would
be 25.17% inclusive of surcharge and cess. To boost manufacturing and the ‘Make-in-India’ initiative, the government has slashed
corporate tax rate to 15%, from 25%, for domestic companies incorporated on or after 1st October 2019. The option to pay income
tax at 15% is available to companies which do not avail any exemption/incentive and commence their production on or before 31st
March, 2023. The effective tax rate for such companies is 17.01% inclusive of surcharge and cess, and is not required to pay
Minimum Alternate Tax.

In Sep, the Finance Ministry announced the merger of 10 banks into 4 banks which is a long term positive, as the resultant larger
banks can effectively compete, have better access to capital and growth, and make credit availability easier for corporates and
consumer. We believe India is going through a cyclical downturn and the RBI responded with a cut in policy rates of 35 basis points
to invigorate growth, announced measures to enhance credit flows to NBFCs and Housing finance companies. September was also
a period of negative news flow, with rising instances of deteriorating asset quality, cautious commentary, and new scam at PMC
Bank.

Among portfolio holdings, KEI a leading player in Industrial cables, was up 16.3% in Sep. and the corporate tax cut will improve its
profitability by 8% for FY20/21. Engineer’s India, a design and engineering company, was up 14.4% due to the tax cut, and its
profits would increase by 13% in FY20/21. We expect a 15-20% revenue growth for FY20, and an order book of Rs11, 400 cr. with
good visibility. Jubilant Foodworks, the Pizza chain, was up 14.3% and is expected to see an EPS upgrade of 14.7%. The company
started new service Dominos Express for few locations where foods will be delivered in 15 minutes. PI Industries, an Indian
agrochemical company, was up 14.7% on strong order book and improving sowing. Sheela Foam, a mattresses manufacturer, with
a 21% market share was up 3.4% on expectations of a recovery in margins. IOCL, India’s largest PSU refinery, was up 1% and we
expect a recovery of earnings in the coming quarters. SBI Life Insurance was up 0.9%.

Among the weaker performers, RVNL, a rail construction company, was down 1%, but its order book is robust and we continue to
hold the stock. Chalet Hotel, a hotels operator, was down 1.8%. The corporate tax announcement and GST rate reduction from 28%
to 18% for rooms rates above Rs 7500 bodes well for Chalet Hotels. Its occupancy of 74%+ in FY19 in core business locations is
comforting in an industry which is cyclically expected turn up. It is the largest partner for Marriott in India, providing 25%+ of Marriott
India’s revenue.

Portfolio Outlook:
For coming Q2FY20 quarterly results, we forecast Corporate India’s overall revenue and profit to fall 3-5% and 4-6% respectively.
Revenue growth for most sectors is likely to moderate except for the banking sector. Across industry we are likely to have deferred
tax charges, and change to after tax profits due to the cut to India’s corporate tax rates. Automotive, corporate lending, commodity
companies are likely to witness a slowdown. Reflecting the weakness in order execution, delay in government contracts,
infrastructure sector are likely to see a lower growth. We are monitoring market conditions and expect a demand and earnings
revival after a two or three quarters. However, valuations are close to the bottom, and we are likely to see a significant pick of
institutional placement activity as the pipeline of QIPS and IPO is robust at Rs. 72,333 crores for institutional placement and Rs.
80,844 crores for initial offerings. Primario Fund is well positioned to benefit from a revival of such offerings post the corporate India
tax cuts and a gradual return of better economic conditions.

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