1

Why Small Cap

Large caps
Mid caps

Small Caps Which may ultimately

Are midcaps of
become large cap
Tomorrow
Small cap of
today

Start up Growth
Maturity
2
Big Growth in Small Sizes – Why Invest In Small Cap Companies?

SUCCESSFUL
SMALLCAP
Potentially
Successful Market
Business Darkhorses
Model

Huge
Ability to
Growth
Innovate
Potential

3
Why Look at Small Cap Funds

Ample Choice Alpha Potential Entrepreneurial Diverse Diverse

Extensive Variety of Under Owned and Growth is driven by Company specific Company specific
Sectors and Stocks Under Researched talent factors have higher factors have higher
impact than macro impact than macro
factors factors

Most Smallcap companies are driven by domestic dynamics while most large caps are influenced by global factors

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Small Cap Is An Alternative For Those Seeking Investments
In Start Ups
Small Business: Start-Ups:

Established Incredibly risky.

Successful In search of unique and

business profitable business model.
model.

Long- term
potential Temporary nature.
for success
More traditional
methods, take Extremely Innovative
less risk.

Long-term Non-Traditional Financial

potential for methods and strategy.
success.
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For a Long Term Smallcap SIP Investor even the Worst Case
Scenario is Enriching
SIP assumed at Rs 25,000 pm since 01-Apr-2005 in Nifty Smallcap 250 TRI Index
18,581,228
17,561,262
16,754,617

5,150,000

Worst Case Best Case Average Case Actual Investment

Invested at peak Index Value of Invested at Bottom Index Value of Invested at Average Index Value of
each Month each Month each Month
As on 31st May 2022
Source: ICRA. SIP assumed at Rs 25000 pm since inception. SIP is on NSE Smallcap 100 Index. The worst case scenario is assuming that investments were made at each monthly peaks. Best
case is investments are at each monthly low and average case is average price of month. Past performance is no guarantee of future return. This image is just an example to show long term
return is should not be construed as a promise of performance. Past performance may or may not be sustained in future. Since Inception date: January 1st, 2004. 6
 How An Eye For Small Cap Generates Wealth

MRF Demonetization, GST, Anti- PV, CV and 2W

dumping duty leading to decline in cyclical OEM
120000 downturn
truck radial Chinese tyres

100000
~40%+
reduction in
natural rubber
80000
prices

60000
Over 50% increase
in natural rubber
prices, key raw
40000 material
SIP corpus @ Rs
CV cycle 1.63 crs
20000 downturn

0
Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21

As on 31st May 2022. Past performance may or may not be sustained in future.
Source: Bloomberg. Stocks mentioned above are used to explain the concept and is for illustration purpose only and it should not be used for development or implementation of an
investment strategy. It should not be construed as investment advice to any party. The stocks may or may not be part of our portfolio/strategy/ underlying scheme. Past performance may or
may not be sustained in future. 7
How An Eye For Small Cap Generates Wealth

Supreme Ind
3000

2500

2000

1500

1000
SIP corpus @ Rs
3.81 crs
500
SIP of Rs
5000 pm

0
Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21

As on 31st May 2021. Past performance may or may not be sustained in future.
Source: Bloomberg. Stocks mentioned above are used to explain the concept and is for illustration purpose only and it should not be used for development or implementation of an
investment strategy. It should not be construed as investment advice to any party. The stocks may or may not be part of our portfolio/strategy/ underlying scheme. Past performance may
or may not be sustained in future. 8
Nifty Smallcaps Relative Valuations Vs. Nifty Is Below
Its Long Term Averages
Smallcap Relative Valuations v/s Nifty
2.5
(7 DMA)
2.3
Nifty Smallcap 12m forward PE
2.1 relative to Nifty 12m forward PE

1.9
PE ratio relative to Nifty

Smallcap relative valuation v/s Nifty- Back to

1.7 2014/2015/2016/2018 levels which is a strong support zone

1.5

1.3

1.1 Average

0.9

0.7
2014 2016
2015 2018 Current zone
0.5
May/17

May/22
Nov/16
Feb/14

Sep/15

Feb/20

Sep/20
Apr/16

Jan/19
Mar/15

Mar/21
Aug/14

Aug/19
Dec/17

Jun/18

Oct/21
Source : Elara Securities Ltd 9
Bigger Opportunity for alpha in Small-Cap (BSE Smallcap Index)

Small-cap are hardly covered by analysts

No. of Analysts Covering Stocks from BSE Smallcap Index
• Average number of analysts covering
large-cap ~ 30 450

Mid-cap ~27 400 384

Small-caps are relatively under-researched.

Number of stocks
350 328
300
250
• Out of 917 stocks in BSE Small-cap Index 200
*384 stocks are not covered by any analyst 150
*328 stocks are covered by less than 5 analysts 95
100 78

50 27
5
0
• This gives fund manager an edge in spotting good None <5 < 10 < 20 < 30 > 30
businesses early

Number of analysts

10
Source: Axis Capital, Bloomberg, As of 31stMay 2022
 Small Is Getting Bigger
larger universe of Smallcap companies available. For eg: between 3000 - 8000 Crs of market cap there are 225
companies available which gives the fund manager enough scope for stock picking.

Market Cap of 251st Stock (Rs. Crores)

19000
17000 16,42616,443
Market Cap (Crs) No of stocks
15000
13000 8000 Cr & above 152
10,482
11000
9,335 8,009
9000 7,745 3000 Cr to 8000 Cr 225
7000 5,472 5,610
4,650
5000 3,338 3,171 2,810 1000 Cr to 3000 Cr 306
2,959 2,512
3000 2,195
1,042
1000
500 Cr to 1000 Cr 146

May-22
Dec-08

Dec-10

Dec-11

Dec-13

Dec-15

Dec-16

Dec-17

Dec-18

Dec-20

Dec-21
Dec-09

Dec-12

Dec-14

Dec-19
Dec-07

1 Cr to 500 Cr 88

Source: Axis Capital. As of 31st May 2022

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Why Kotak Small Cap Fund

Identifies the hidden growth potential of Portfolio exhibits higher volatility than
large caps and Midcaps however tends to Buy and hold strategy
small cap sized companies
have a higher return potential in the long
run

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Why Kotak Small Cap Fund

Equity Investment Framework

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 Fund History

Previous Indicative Current Indicative

Investments
Allocation Allocation
Equity and Equity related
65% to 100% 65% to 100%
Repositioned in instruments
Launched as June 2018 and Midcap Stocks 65% to 100%
Midcap fund in renamed as Kotak
Investments in equity
February 24th, Small Cap fund and equity related
2005 with focus on 65% to 100%
securities of small cap
Small cap stocks companies
Other than Midcap
0 to 35%
Stocks
Debt and Money Market
0 to 35% 0% to 35%
Securities
Units issued by REITs &
0% to 10%
InvITs

Source: SID 14
 What We Research In A Small cap Investment

Promoter Integrity & Generates Free Cash Has seen market Simple Business
Capability Flow Cycles Model

Business Focus
High Cash Revenues Ability to tide risk Easy to Execute
Management guidance's are
realistic and honest Self Funding Has Survivability Easy to Monitor

Attractive Valuations Market Domination

Predictable Cash Flow
High Business Growth Rate Pricing Power
Reduces Business Risk

Quality Metrics Business Quality Low Leverage

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Whom is this fund is suitable for?

1 2 3 4

Return Seeker Future Investors Early Starters Risk Appetite

Aggressive Investors Job starters Anybody who
investor with looking to looking to has the risk
long term benefit from pursue future appetite and
investment potential of long-term time horizon
horizon emerging goals in favour
businesses

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Top 10 Sectors

Textiles, 3.6%
Services, 4.9%
Information Technology,
5.1% Consumer Goods, 22.2%

Automobile, 5.1%

Financial Services, 5.9%

Metals, 6.6%
Industrial Manufacturing,
16.4%

Construction, 6.7%

Chemicals, 8.0%

Source: Valuefy. Date: 31st May 2022 17

Fund Details

Asset Allocation Stock Allocation

Smallcap Midcap Largecap Cash

Century Plyboards (India) Ltd 4.9
Carborundum Universal Ltd 4.0
Sheela Foam Ltd 4.0
6%
3%
Ratnamani Metals & Tubes Ltd 3.3
Galaxy Surfactants Ltd 3.3
24%
Blue Star Ltd 2.8
Blue Dart Express Ltd 2.8
67%
Supreme Ind Ltd 2.5
V-Guard Ind Ltd 2.5
Persistent Systems Ltd 2.5

0 1 2 3 4 5 6

Source: Valuefy Data as of 31st May 2022 18

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Source: Peter Lynch In Besting The Street And One Up On Wall Street
 SIP Performance as of 31st May 2022

Scheme Inception : - February 24,2005. The returns are calculated by XIRR approach assuming investment of `10,000/- on the 1st working day of every
month. XIRR helps in calculating return on investments given an initial and final value and a series of cash inflows and outflows and taking the time of
investment into consideration. Since inception returns are assumed to be starting from the beginning of the subsequent month from the date of inception. #
Benchmark ; ^ Additional Benchmark
TRI Total Return Index, In terms of SEBI circular dated January 4, 2018, the performance of the scheme is benchmarked to the Total Return variant (TRI) of
the Benchmark Index instead of Price Return Variant (PRI). Alpha is difference of scheme return with benchmark return.
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Performance as of 31st May 2022

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Other Funds Managed by Mr. Pankaj Tibrewal

Source: ICRA MFI Explorer Date: Date: 31st May 2022 22

Riskometer

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Disclaimer

These materials are not intended for distribution to or use by any person in any jurisdiction where such distribution would be
contrary to local law or regulation. The distribution of this document in certain jurisdictions may be restricted or totally
prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and
to observe, any such restrictions

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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