Nov 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 94.04
Primario Fund Debt / Liquid 5.96
Fund Launch Month Feb 2018
NAV (₹) 100.00
Portfolio (NAV) (₹)85.01 Select Holdings: Primario Fund
Min Investment (₹) 1 Crore Wt. / Stock
NAME (%)
Addl. Invst. (Multiples of) (₹) 1 Lakh
Fee Structure: Primario Fund HOUSING DEVELOPMENT FINANCE 3.48
IRCON INTERNATIONAL LTD 3.00
Contribution Management Performance Fee Hurdle JINDAL STEEL & POWER LTD 2.91
Amount Fee (p.a) Rate RBL BANK LTD 2.51
Option I 1 Cr to 3 Cr 2.25% 10% without catch up 10% RAIL VIKAS NIGAM LTD 2.31
Option II > 3 Cr to 5 Cr 2.00% 10% without catch up 10%
CHALET HOTELS LTD 2.10
Option III > 5 Cr to 15 Cr 1.75% 10% without catch up 10%
Option IV > 15 Cr 1.50% 10% without catch up 10%
ICICI LOMBARD GENERAL INSURA 2.03
Establishment Expenses-Up to 2.25% of aggregate capital contribution.
KEI INDUSTRIES LTD 1.88
EXIDE INDUSTRIES LTD 1.41
TATA STEEL LTD 1.10
Primario Fund Performance:
Fund/Index (%) Nov-19 YTD19 CY18 Launch*
Primario Fund (₹) 0.4 -0.8 -14.3 -15.0 Primario Fund: Multi-Cap, Multi Sector Fund:
Comp. Index (₹) 1.8 -6.7 -22.3 -20.0 Portfolio Mix Holding (%)
Large Cap 45.9
*Launched on Feb 23, 2018 Mid Cap 46.4
Small Cap 1.8
Sector Weights (%):
Portfolio Characteristics:
Primario Fund Index
FY20 FY21 1 yr. 2 yr.
Sector (%) (%)
EPS EPS Fwd. Fwd. ROE
Materials 12.00 8.07 Growth Growth PE PE
Utilities 1.04 3.01
Primario
Consumer Discretionary 10.08 8.16 Fund 20.1% 18.2% 17.9x 16.2x 16.0%
Industrials 19.88 6.95 Index 15.4% 13.7% 20.4x 18.0x 14.0%
Information Technology 1.66 10.65
Consumer Staples 1.39 8.66 Investment Objective: Primario Fund Invests in companies across
Health Care 1.08 4.40 sectors requiring growth capital or turnaround capital. Infusing equity
Financials 43.96 37.14 capital into such companies at major inflection points help
reinvigorate their financials, deleverage balance sheets, allowing
Energy 1.55 10.02
companies to expand their offerings or services translating into
Telecommunication Services - 2.18 higher profits and therefore higher investment returns. Primario fund
Real Estate 1.39 0.75 address the immediate need to capitalise India's listed & soon to be
Cash 5.96 - listed companies and help corporates break the viscous cycle of lack
Total 100.00 100.00 of capital impeding their growth or higher profits.
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

 Nov 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 Primario Fund has outperformed its index by +5.9% through YTD 2019 and delivered -0.8% vs. -6.7% Index. India’s key sectors
fell 5.8% YoY in Nov, the 3rd consecutive month of a fall in electricity production, with a similar pattern in diesel and gasoline demand,
indicating that a turnaround is a few quarters away. We expect RBI to continue to maintain an accommodative stance. Q2FY20 GDP
was the lowest since 2013. India is faced with a sharp fall in economic growth with nominal GDP of 6% which is below a 10 year
Government security yield. This implies that tax collection are likely to be well below target, and high leveraged companies would face
higher interest servicing costs, as financial institutions become choosy about who they led to, and what cost.

Taxes collection fell for the first time since 2009-2009, and will miss targets by 1.5-2%. We expect a gradual recovery with fiscal and
monetary support. With a nominal GDP of 6% which is below a 10 year Government security yield, would translate into below target
government revenue. Going into 2020, GDP prints may improve, as by 1QFY21 government spending would pick up.

Among portfolio holdings, PNC Infra, a leading infrastructure player, was up 14.6% on back of strong execution, revenue beat by 21%
on back of strong order book. We expect to see an earnings acceleration as the economy bottoms out. RBL Bank, was up 11.2% in
November, as the capital raising will lower the bank’s stressed assets and provide growth capital for next two years. ICICI Bank, was
up 10.7%. On resolution of Essar Steel, bank was one of the biggest beneficiaries as provided 100% on the exposure leading to write-
back of provision to the extent of 85%. Due to landmark judgment on Essar Steel by SC, ICICI Bank became well positioned to take
market share among the peers. Tata Global Beverages, was up 1.9% in November. It appears that the company has multiple levers,
and turning around certain divisions. Starbucks is expected to breakeven in FY20. Chalet Hotel, a hotel company, was up 9%. High
occupancy of 74%+ in core locations, bodes well in an up-trending industry cycle. Chalet is the largest partner for Marriott in India,
14% of Marriott India’s total Room Inventory and 25%+ of Marriott India’s revenue. Exide, India’s leading battery manufacturer was
up 1%. A rise of 6% in lead prices coupled with weak volume growth across the OEM’s resulted in Exide performance being subdued.
During the quarter EBITDA margin missed expectation by 30 bps as higher staff costs.

Ircon International, a leading turnkey construction company in public sector was down 2.7%, despite of strong Q2 execution. Clarity
on competitive bidding is required for govt. orders, which is expected in the coming months. SBI Life Insurance, was down 3.2%. For
the monthly growth numbers related to October’19. We believe this temporary. RVNL, an undertaking under Ministry of Railways, a
miniratna company, was down 1.2%. No major order book wins during Q2 coupled with sluggish government spending weighed on
the stock performance. So far Ministry of Railways has transferred 179 projects, out of which 174 projects are sanctioned for execution.
Out of these, 72 projects have been fully executed totalling to Rs206bn. Its order book as of 2QFY19 stood at Rs775bn (10x of FY18
revenue) for 102 ongoing projects. KEI, a leading player in Industrial cables segment was down by 12% MoM. Weakness in the stock
performance was largely owning to slow dealer sales, reflecting liquidity constraints and an overall lower demand. While KEI’s B2B
growth remains strong, a pickup in retail sales growth along are key triggers ahead.

Portfolio Outlook:
Against the backdrop of a yet to recover economy, we are positioning the fund across market capitalization where we see emerging
growth, and companies with recovering balance sheets, growing profits faster than their sector averages. The recent corporate tax
cut provides a buffer to falling profits. Inflation may tick up against this backdrop, though some of it one time in nature such as a 25-
40% increase in mobile per minute calling rates. RBI has room to cut a further 65bp and as the credit deposit ratio gap lessens, and
transmission of rates would help corporates breathe easier, we are likely to see a significant pick of private placement activity as the
pipeline of QIPS is robust at Rs. 82,768 crores.

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 confidenti al and is intended for the exclusive use of its recipient. It shall not be
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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