Indian Technology Sector – Current Standing

Benefit from the potential of ‘Technology’
September 2018

Indian Technology Sector – Current Standing

Countries

US

China

India

Market cap size
of technology
stocks (in USD
trillion)^

14.2

2.8

0.3

Technology
sector as % of
total Market Cap*

32%

36%

12%

Relatively low size of technology sector in India - shows potential for growth
Source: Bloomberg, NSE, BSE, Capital ... See more

ne, Morgan Stanley Research. ^Total Market Cap of technology indices taken. NASDAQ, Shenzhen and S&P BSE Teck index’s market
capitalization is taken for showing the market cap size of US, China and India respectively. *Market Cap (%) of technology Indices vis a vis the total market cap is used for
comparison. For US – NASDAQ market cap as a % of total market cap (NASDAQ + NYSE). For China – Shenzhen Composite market cap as a % of total market cap (Shenzhen +
Shanghai index). For India – BSE Teck market cap as a % of total market cap (S&P BSE Sensex).
Data as on August 31, 2018

1

Technology Space
Growth Drivers
Widespread urbanization, rising disposable income & demographic dividend –
drive consumption
India is estimated to add 300 mn new urban residents by 2050
Disposable incomes are projected to increase by ~55% by 2020
42% of population remains between 15-40 years^

Digital India initiative by Government of India
*Government’s initiative to connect remote parts of the country has boarded 8,621 villages already
and plans to onboard 55,000 villages by 2019

Union of e-services, e-tailing and digital classifieds
Integration across e-tailing and e-servicing could enable cross sell business in the digital
classifieds
Pay per transaction could gather traction in future

Internet penetration
~38%1 internet penetration with ~494 mn2 internet users (Mar-2018)
~829 mn2 users (estimated) by 2021

Smartphone will be the game changer
Introduction of 4G & 3G at affordable rates will make smartphone a preferred point of internet
access for majority
Source (latest available report): KPMG Report – Digital Classifieds India 2020- Sep-2016. ^United Nations projection, socialcops, Jun-2016. *FICCI frames 2017. 1IBEF ecommerce
industry presentation Aug-2018 (internet penetration data as on Mar 2018). 2IBEF ecommerce industry presentation Aug-2018

2

Information Technology
Current Status and Drivers
Growth rates for US revenue lowering for top 5 IT cos

INR seen trending around 5-year average
50

16%
14%

55

12%

60

10%
8%

65

6%
4%

Aug-18

May-18

Feb-18

Nov-17

Aug-17

May-17

Feb-17

Nov-16

Aug-16

May-16

Feb-16

Aug-15

Nov-15

Feb-15

May-15

Aug-14

Nov-14

Mar-14

US revenue growth (YoY, %)

May-14

Aug-13

Aggregate revenue growth (YoY, %)

75

Nov-13

1QFY14
2QFY14
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
4QFY17
1QFY18
2QFY18
3QFY18
4QFY18
1QFY19

70

Stock valuations mostly below 10-yr avg for top 5 IT cos

•

10 year
Average
PBx 4.9

9.5

Growth in US revenue (YoY) is lowering on
account of moderate demand and protectionist
approach adopted in developed markets.

•

12.5

INR has depreciated to below 5-year average
levels. This bodes well for the sector.

•

IT stock valuations (PBx) are below last 10 year
average. Valuations appear attractive.

5.6

6.5
3.5

Sep-18

Feb-18

Jul-17

Dec-16

May-16

Oct-15

Mar-15

Aug-14

Jan-14

Jun-13

Nov-12

Apr-12

Sep-11

Feb-11

Jul-10

Dec-09

May-09

Sep-08

0.5

Source: MOSL, Bloomberg. Universe under consideration is Top 5 Indian IT Companies. It is arrived at basis revenue as per company data i.e. TCS, Infosys, HCL, Wipro and TechM
(in no particular order). Franklin Templeton Investments is not associated with these brands and may or may not have these stocks / securities in their fund portfolio. They are used for
illustration purposes only. This is neither a recommendation to buy or sell nor a view on quality or profitability of investing in these securities. The reader should not assume that
investment in the securities listed was or will be profitable. The reference to any listed security in this presentation is only for information and illustration purposes and shall in no
3
manner be deemed to be a research report.

Media
Key drivers

Expansion of
internet usage
• Wireless users in India
are expected to reach
969 mn in 2021 as
affordability of
smartphone improves

• Cheaper access to
internet data and
improving geographic
coverage

Better digital
content availability
• Increase in Over the top
(OTT*) players in India

Real Time 360
degree viewing
• Individuals may be able
to attend a live event
without leaving home

• Curated content for
digital media with focus
on regional languages
• Internet advertising to
grow at 20.4% in 2018
and internet to account
for 15.4% of total ad
spends by 2020.

Source (latest available report): FICCI Frames 2017 – Media & Entertainment Sector. *The term used for the delivery of film and TV content via the internet, without requiring users to
subscribe to a traditional cable or satellite pay-tv service. Report by media agency Zenith (Publicis groupe) http://www.livemint.com/Consumer/gHoXvgtnOnPh4fSVWamDdN/Adspending-to-grow-at-84-in-2018-in-India-Zenith-report.html

4

Telecom
Key drivers

Employment Generation
• Expected to generate four million direct and indirect jobs over next five years*
• Increasing non-voice revenues and higher telecom penetration in rural market (estimated
at 70% by 2017)
• Over 1.2 bn unique mobile subscribers as on Mar-2018&

Growing Smartphone Market
• India overtook US as the second-largest smartphone market globally&
• Mobile segment’s tele-density surged from 14.6% in FY07 to 91.09% in FY2018&@

Continued FDI
• Sector has attracted FDI worth USD 32 bn during the period Apr-2000 to June-2018**
Source (latest available report): Indian Brand Equity Foundation Sectoral Report December 2017. *According to estimates by Randstad India.. &IBEF report on Telecom industry Jun2018. @ Data till Mar 2018 **Data released by Department of Industrial Policy and Promotion.
5

What do global technology companies offer (1/2)

Exponential
Technologies

Cognitive
Technologies

• Robotics, virtual and
augmented reality
(VR) (AR), 3-D
printing, and artificial
intelligence (AI)

• Machine learning,
natural language
processing, and
speech and pattern
recognition

Internet of
Things
• Machine to machine
communication based
on cloud based
applications

Service Offerings
• Usage based
consumption
• Services being created
to enable “Edge
computing” – that allows
IoT device management
without the need for
remote cloud

6

What do global technology companies offer (2/2)
Global technology giants becoming glocal

1

Over 53% of Alphabet’s revenues are
from rest of the world (except USA)

Netflix is now available in over 190
countries

3

2

Over 2 bn users are active on Facebook on
a monthly basis

4

Amazon’s AWS (largest cloud business among
competitors) continue to perform well with 49%
growth in Q12018.

Source
(latest
available
data):
1.
https://abc.xyz/investor/pdf/20171231_alphabet_10K.pdf
2.
https://www.finder.com/global-netflix-library-totals
3.
https://www.statista.com/statistics/346167/facebook-global-dau/ 4. https://www.cnbc.com/2018/04/26/amazon-earnings-q1-2018.html Franklin Templeton Investments is not
associated with these brands and may or may not have these stocks / securities in their fund portfolio. They are used for illustration purposes only. This is neither a recommendation
to buy or sell nor a view on quality or profitability of investing in these securities. The reader should not assume that investment in the securities listed was or will be profitable. The
reference to any listed security in this presentation is only for information and illustration purposes and shall in no manner be deemed to be a research report.
7

Harness the potential in
Global & Indian ‘technology’ space

Presenting
Franklin India Technology Fund (FITF)

Product Label
• Long term capital appreciation
• A fund that invests in stocks of technology and
technology related companies.

*Investors should consult their financial advisors if in doubt
about whether the product is suitable for them.

Note: Effective May 29, 2017, Franklin Infotech Fund was renamed to Franklin India Technology Fund and changes were made to certain fundamental attributes of the scheme.
8

What opportunity does FITF offer (1/2)
•

The scheme seeks to achieve long-term capital appreciation through investments in companies across
market capitalizations in Indian as well as global markets which are expected to benefit from the
development, advancement and use of technology.

•

These will predominantly include companies in the following industries:
Technology services, including software, IT management, Data and IT Infrastructure services including Mobile
computing, cloud computing infrastructure
Internet technology enabled services including e-commerce, technology platforms, IoT (Internet of Things)
and other online services

Electronic technology, including computers, computer products, and electronic components

Telecommunications, including networking, wireless, and wire-line services, equipment and support;

Media and information services, including the distribution of information and content providers

IT products, hardware and components like PCs, Laptops, Servers, Chips, Semi-conductors etc.
9

What opportunity does FITF offer (2/2)

A mix of Indian as well as Global technology companies
Global
Technology
Companies
Indian
Technology
Companies

Global
Technology
Mutual Funds

FITF
Portfolio

10

11

Portfolio Composition (as on August 31, 2018)
Company Name

% of assets

Company Name

Foreign Investments

Indian Investments

Hardware
Samsung Electronics (South Korea)

% of assets

Software
1.53

General Electric Co (USA)
FTIF-Franklin Technology Fund*
Telecom - Equipment & Accessories
Qualcomm (USA)

1.01

Software

9.18
7.68

Cyient Ltd.*

3.21
3.74

Oracle Financial Services Software Ltd.

2.59

eClerx Services Ltd.

8.75

HCL Technologies Ltd.*

Info Edge (India) Ltd.*

Mutual Fund Units

10.29

Tech Mahindra Ltd.*

1.14

22.57

Tata Consultancy Services Ltd.*

Industrial Products

Infosys Ltd.*

1.22
0.62

Cognizant Technology (USA)*

8.08

Ramco Systems Ltd.

Miscrsoft Corp (USA)

0.99

Media & Entertainment

Twitter (USA)

0.83

Dish TV India Ltd.

0.76

Facebook (USA)

0.72

Music Broadcast Ltd.

0.95

Total Foreign Investment

23.06

Telecom - Services
Bharti Airtel Ltd.*

5.17

Idea Cellular Ltd.

1.51

Unlisted
Brillio Technologies Pvt Ltd

0.00

Total Indian Investment

69.48

Total Equity Holding

92.55

Call, cash and other current asset

7.45

Total Asset

100

All portfolio holdings are subject to change. The information stated above does not constitute an investment advice or recommendation to subscribe or transact in
these securities. * Top 10 Holdings.

11

12

Fund Characteristics (as on August 31, 2018)

Investment Objective

To provide long-term capital appreciation by predominantly investing in equity and equity
related securities of technology and technology related companies.

Inception Date

August 22, 1998

Assets

Rs. 241.06 crore (August 31, 2018)

Managed by

Anand Radhakrishnan, Varun Sharma, Srikesh Nair (dedicated fund manager for foreign
securities)

Investment Style

Blend of Growth & Value

Minimum Amount

Subscription: Fresh Purchase - Rs.5,000/-. Additional Purchase - Rs.1,000/-. Redemption:
Rs.1,000/-. The amount for subscription and redemption in excess of the minimum amount
specified above is any amount in multiple of Re. 1/-.

Benchmark

S&P BSE Teck

Exit Load

1% if the units are redeemed/switched-out within one year of allotment (w.e.f December 11,
2017. Please read the addendum for further details.)
12

Consistent Dividend History

Record Date

Dividend Per
Unit (Rs.) (A)

Record Date Nav (Rs.)
Dividend Plan (B)

Record Date NAV (Rs.)
Direct – Dividend Plan

Dividend Yield *(A/B)

2017

November 03

2.00

23.4716

24.1217

9%

2016

November 04

2.00

22.4512

22.9250

9%

2015

October 30

2.25

26.5639

26.9555

8%

2014

October 22

2.00

25.8828

26.1014

8%

2013

October 18

2.00

23.9134

24.0024

8%

2012

October 12

1.00

17.6444

N.A

6%

2011

October 21

1.50

18.2747

N.A

8%

2010

October 22

2.00

22.2878

N.A

9%

2009

October 28

0.30

16.5478

N.A

2%

2008

August 20

2.50

16.0852

N.A

16%

2007

October 24

2.50

21.4765

N.A

12%

2006

November 29

1.50

25.61

N.A

6%

2005

November 23

3.00

20.26

N.A

15%

2004

March 16

2.00

12.67

N.A

16%

March 24

6.00

37.57

N.A

16%

January 12

6.00

64.00

N.A

9%

October 08

4.00

39.59

N.A

10%

2000
1999

Dividends on face value of Rs.10/Past performance may or may not be sustained in future. Pursuant to payment of dividend, the NAVs of the schemes would fall to the extent of payout
and statutory levies (as applicable).
*Dividend yield is mentioned for Dividend option.

13

Equity MFs - Positioning
Thematic – Asian Equity

FAEF

FoF – Overseas – Europe

FIF-FEGF

FoF – Overseas - U.S.

FIF-FUSOF

Thematic – Technology

FITF

Thematic – Special Situations

FIOF

Thematic – Infrastructure

FBIF

Small Cap

FISCF

Mid Cap

FIPF

Dividend Yield

TIEIF

Value

TIVF

Focused

FIFEF

ELSS

FIT

Large & Mid Cap

FIEAF

Multi Cap

FIEF

Large Cap

FIBCF

Index – Nifty

FIIF
DIVERSIFIED

STYLE / THEME

FIIF: Franklin India Index Fund – NSE Nifty Plan, FIBCF: Franklin India Bluechip Fund, FIEF: Franklin India Equity Fund, FIEAF: Franklin India Equity Advantage Fund,
FIT: Franklin India Taxshield, FIFEF: Franklin India Focused Equity Fund, TIVF: Templeton India Value Fund, TIEIF: Templeton India Equity Income Fund,
FIPF: Franklin India Prima Fund, FISCF: Franklin India Smaller Companies Fund, FBIF: Franklin Build India Fund, FIOF: Franklin India Opportunities Fund,
FITF: Franklin India Technology Fund, FIF-FUSOF: Franklin India Feeder – Franklin U.S. Opportunities Fund,
FIF-FEGF: Franklin India Feeder – Franklin European Growth Fund, FAEF: Franklin Asian Equity Fund

14

Equity MFs – Risk Matrix

R: Risk Probability

FIF-FUSOF
FIF-FEGF
FAEF

FIIF
FIBCF
FIEF

FIEAF
FIT
FIFEF
TIVF
TIEIF

FIPF
FISCF

FBIF
FIOF
FITF

RP: Return Potential
FIIF: Franklin India Index Fund – NSE Nifty Plan, FIBCF: Franklin India Bluechip Fund, FIEF: Franklin India Equity Fund, FIEAF: Franklin India Equity Advantage Fund, FIT: Franklin India Taxshield,
FIFEF: Franklin India Focused Equity Fund, TIVF: Templeton India Value Fund, TIEIF: Templeton India Equity Income Fund, FIPF: Franklin India Prima Fund, FISCF: Franklin India Smaller Companies Fund,
FBIF: Franklin Build India Fund, FIOF: Franklin India Opportunities Fund, FITF: Franklin India Technology Fund, FIF-FUSOF: Franklin India Feeder – Franklin U.S. Opportunities Fund, FIF-FEGF: Franklin India
Feeder – Franklin European Growth Fund, FAEF: Franklin Asian Equity Fund
Note: Relative fund positioning is indicative in nature and is based on fundamental factors pertaining to relative risk return potential of 1) large caps vs mid caps vs small caps, 2) diversified vs
style/theme and 3) exposure to foreign currencies. For ex: higher the mid/small cap exposure, higher the risk return potential. This is a simplified illustration of potential Risk-Return profile of the
15
schemes and does not take into account various complex factors that may have a potential impact on the schemes.

Risk Factors

The information contained in this presentation is not a complete representation of every material fact regarding any
industry, security or the fund and is neither an offer for units nor an invitation to invest. This communication is meant for use
by the recipient and not for circulation/reproduction without prior approval. The views expressed by the portfolio managers
are based on current market conditions and information available to them and do not constitute investment advice.

Scheme Classification and Objective: Franklin India Technology Fund (FITF) is an open ended growth scheme with an
objective to provide long-term capital appreciation by predominantly investing in equity and equity related securities of
technology and technology related companies. Load Structure: The investors are requested to check the prevailing load
structure of the scheme before investing. Please refer website/latest SID/addenda for the latest load structure of the
scheme.
Risk Factors: Mutual Fund investments are subject to market risks, read all scheme related

documents carefully.
The NAVs of the schemes may go up or down depending upon the factors and forces affecting the securities market. The
Mutual Fund is not guaranteeing or assuring any dividend under any of the schemes and the same is subject to the
availability and adequacy of distributable surplus. The past performance of the mutual funds managed by the Franklin
Templeton Group and its affiliates is not necessarily indicative of future performance of the schemes. Investors are
requested to review the scheme related documents carefully and obtain expert professional advice with regard to specific
legal, tax and financial implications of the investment/participation in the scheme.

16

Franklin Templeton Asset Management (India) Pvt. Ltd.
Indiabulls Finance Centre, Tower 2,
12th and 13th floor, Senapati Bapat Marg,
Elphinstone (W)
Mumbai 400013
Tel (91-22) 6751 9100
Fax (91-22) 6639 1281
www.franklintempletonindia.com

© 2017 Franklin Templeton Investments. All rights reserved.

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