Kotak Pharma & Healthcare Scheme - Updated Oct 23.pdf

Pharma and health care fund

1. Kotak Pharma &
Healthcare
Investment Approach
October -23

2. 2
Pharma Has A Wealth Story

3. 3
Journey of Nifty 50 vs. Nifty Pharma Index
Past performance may or may not be sustained in future.
Source: ICRA MFI Explorer. Above Data is to only to show case the power of pharma sector. This is not to be construed as a model portfolio. The actual portfolio will not have any necessary
similarity with the above mentioned index and their performances. NSEPHRM-Nifty Pharma Index .Data as on 31st October2023. Initial Investment date is 1
st
June 2009. The stocks
mentioned do not constitute any kind of recommendation and are for information purpose only.
1 Crore invested in Nifty Pharma has grown to
~5.7 Crores in ~14 yrs
0
100
200
300
400
500
600
700
Jun-09 Oct-09 Feb-10 Jun-10 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Oct-12 Feb-13 Jun-13 Oct-13 Feb-14 Jun-14 Oct-14 Feb-15 Jun-15 Oct-15 Feb-16 Jun-16 Oct-16 Feb-17 Jun-17 Oct-17 Feb-18 Jun-18 Oct-18 Feb-19 Jun-19 Oct-19 Feb-20 Jun-20 Oct-20 Feb-21 Jun-21 Oct-21 Feb-22 Jun-22 Oct-22 Feb-23 Jun-23 Oct-23
Nifty 50 Nifty Pharma

4. 4
The USP For Indian Pharma Industry
➢TheIndianpharmaceuticalindustryisknownforits
innovativeandaffordablelife-savingmedicines.
➢Low-costskilledmanpowerandawell-established
manufacturingbase,makesIndiaallsettoplayabigger
roleinmedicinesecurityworldwide.
➢Indiahasevolvedasakeyglobalsupplierofvaccinesand
pharmaceuticals.
➢Amongstmostfavouredpharmaceuticalmarketsinthe
world.
Source: DGCI&S; Data as on 31
st
March 2023
India’s country-wise share of drugs,
pharmaceutical and fine-chemicals
exports (2022-23)
The US, 29.7
Belgium, 2.8
South Africa,
2.6
U K, 2.6
Brazil,
2.5Netherland,
2.3
Russia, 2.3France, 2.2Germany, 2.1
Nigeria, 2.0
Others, 48.9
India -Pharma exports mix (%)

5. 5
India Pharma Sector Set To Grow Rapidly
Indian drugs market to grow at 10-12% Strong growth for Indian CDMO market
Complex generics industry expected to grow at 15%
Source: GVR, Yes Bank report, imarcgroup, Industry. CDMO stands for Contract Development and Manufacturing Company.

6. 6
Domestic Formulations: Moats Intact
COVIDhasledtoemergenceofsomekeytrendsintheIndianpharmamarket
Businessrealignment
-Rationalization of existing brands
-Redistribution of Medical
Representatives to new business
division from existing pool (instead of
new hiring) to improve productivity.
Focus on wellness consumer
pattern changing
-Segments like preventive care,
vitamins seeing strong traction as
consumers’ inclination towards
Immunity, safety, and risk avoidance
increasing
COVIDimpact
-Lower Selling General &
Administrative expenses, disruption in
travel and marketing activities due to
lockdown, but stretched working
capital cycle (to enhance sales)
Investmentindigitalcapability
-Tostreamlinesupplychain,working
capitaloptimizationandmarket
insights.
-Useofdigitalchannelstoconnectto
doctors,customersetcsavescostand
timeaswellasincreasesreach.
01
02
03
04

7. 7
India E-pharmacies At Nascent Stage; With Large
Potential
Global e-pharmacy market to see ~18% CAGR India e-pharmacy to see robust CAGR of ~44%
E-Pharmacy share to increase in India over CY19 -25
Source: Axis Capital, EY survey report.

8. 8
Near-term Growth To Improve, Steady Long-term Visibility
GrowthforPharmacompaniesto
improve.Marginsarelikelytocontinue
toimproveonanannualbasisledby
newlaunches/complex,productmix
andcostoptimizations.
IndiaPharmamarket:FY23saw
marginalvolumesgrowthonhighbase
whichareexpectedtonormalizeto
historical4-5%growthrateincoming
quarters.
Volumesimpactedonregulatoryissues
(adverseUSFDAinspectionoutcome)
andsupplychaindisruptionbut
improvedforfew(withpositiveoutcome
fromUSFDAinspectionandsupply
shortageopportunities).Priceerosionin
USgenericstostay;scale-upin
specialty/complexlaunchesremains
keydriverforgrowthinFY24.
AsCovidledvolatility/highbaseimpact/
NLEMpricecutimpactedIndiasalesin
FY23.Likelytoseesteadygrowthfrom
FY24ledbypricehikes,volumesand
newlaunches.
India Sales
US: Volume
PharmaGrowth
India: Volume
Source: Axis Capital

9. 9
Why Pharma & Healthcare Makes
Sense Now?

10. India Pharma Exports –Growth Potential Post
Consolidation Phase Of Last 2-3years.
1
16.79
17.28
19.15
20.7
24.44 24.62
25.39
2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23
India's drug and pharmaceutical export trend (US$ billion)
Source: DGCI&S

11. Rising Shortages In The US Generics –A Trigger For
Indian Pharma Exports
1
Source: www.ashp.org

12. ROCEs Improving, As Negative Operating Leverage
Reversing
1
12
Source: Axis Capital
Negative Operating Leverage ReversingRoCE (%) FY20 FY21 FY22 FY23E FY24E FY25E
India Pharma average 14.8 17.0 13.3 13.5 15.6 16.3 0.4
(0.2)
0.0
0.6
(0.0)
(0.4)
0.1
(0.0) 0.0
0.1
0.0
(0.1)
(0.6)
(0.4)
(0.2)
-
0.2
0.4
0.6
0.8
FY20 FY21 FY22 FY23E FY24E FY25E
Average Pharma Net debt / EBITDA (x) Average Pharma Net debt / Equit y (x)

13. Global CDMO Outsourcing –A Niche Growth Market
For India
1
13
•BigPharmaglobally,seekingfor
outsourcingpartnersfrom
countrieslikeIndiatolowerR&D
costsandtakeadvantageofrapid
growthindemand
Source: Company, DART. CDMO stands for Contract Development and Manufacturing Company.
Global CDMO Market 2018-2026 (USD Bn)
•CDMO players have a superior
growth, margin, better return
profile and lower leverage.
•Indian CDMO/CRO companies
potentially attract scarcity
premium.

14. India APIs Likely To Grow At Faster Rate Than China & ROW
Markets
14
USD Bn 2018 2019 2020 2021 20222023F2024F2025F2026F
CAGR (%) 2020-
2026
Global API
Market
By Revenue 163 172 181 190 200 215 229 244 259 6.1
By Region
India 9.3 10.1 11.1 13.3 15.9 18.1 19.9 21.9 24.1 13.9
China 51.0 54.1 58.7 62.3 66.0 73.0 78.5 84.5 90.8 7.5
•ThemarketopportunityforIndianAPIindustryhasapotentialtomorethandoubletoUS$24bninthenextsixyearsledby
a)IncreaseddomesticdemandforAPI’srequiredforlocalconsumptionandformulationexports.
b)IncrementalboostforAPIexportsaidedbyChina+1factorandsupplydisruptions,newcustomerenquiries.
Source: B&K Research.

15. Potential Opportunity In Favor Of Indian API
1
15Source: B&K Research.
US $ bn 2021 20222023F2024F2025F2026F
Potential Gains for Indian API
Shift from Chinese imports to local prodn(PLI scheme, assuming 20% shift)0.5 0.6 0.6 0.6 0.7 0.7
2% share of China API market to Indian API 1.2 1.3 1.5 1.6 1.7 1.8
Incremental growth from New customers, New Product Filings 0.9 1.0 1.1 1.2 1.3 1.4
Total Potential Opportunity in API's (from China to India) 2.7 2.9 3.2 3.4 3.6 3.9
Opportunity as a % of Total Indian API market 20.0%18.1%17.4%16.9%16.5%16.0%

16. Key Drivers For Indian API
1
16Source: Pharmexcil, Industry
•BackwardintegrationintoKSM(Keystartingmaterials)/Intermediatespost-2018hasaccelerated.
•PriceincreasesforAPI’stosustainascustomersdemandqualityandsteadysupplies
•HighercostsinChinaduetochemicalblasts,environmentalissues,higherwagebills,GMPcompliance,
transitfrompollutingzonestogreenzones.
•PLIschemeintroducedtobuildself-sufficiencyinAPI’s,KSM&Intermediatesandreducedependenceon
China-investmentprojectsofUS$2bnawardedtokeyplayers(focuson53API’s&intermediates).
•NewopportunitiesinAPIemergedledbyChina+1factor,supplydisruptions
India has bigger API growth opportunity Global API consumption growth of 6%

17. Bio-similarsOffer A Larger Opportunity In The Future
1
17
Source: Evaluate Pharma, Bernstein analysis.
Between 2020 and 2024, there is a USD 60Bn opportunity in Biologic brands losing exclusivity in the US.
17

18. India Pharma –Could Be At Cusp Of Re-rating Once Growth
Surprises Markets
1
18
Source: Company Data, Refinitiv, Morgan Stanley Research Estimates.The stocks mentioned do not constitute any kind of recommendation and are for information purpose only.
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Sep/08 Feb/09
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Dec/09 May/10
Oct/10 Mar/11 Aug/11 Jan/12 Jun/12 Nov/12 Apr/13 Sep/13 Feb/14
Jul/14
Dec/14 May/15
Oct/15 Mar/16 Aug/16 Jan/17 Jun/17 Nov/17 Apr/18 Sep/18 Feb/19
Jul/19
Dec/19 May/20
Oct/20 Mar/21 Aug/21 Jan/22 Jun/22 Nov/22 Apr/23 Sep/23
1 year forward EV/EBITDA
ImportAlert -US FDA regulatory
issues at Ranbaxy 3 sites
US Pricing pressure due to customer
consolidation.
M&A Phase -Taro, Betapharm, URL,
DUSA, and Ranbaxy
Covid-19 Impact
US price erosion and
strong domestic demand
for branded generics
Strong Growth led by US FTF
launches by Indian Companies

19. Why Kotak Pharma & Healthcare
Investment Approach

20. 20
Kotak PMS –Strong Pedigree And Client Focus
PROVEN TRACK RECORD
•Since inception (20
th
Sept 2016), Kotak Pharma & Healthcare Investment Approach
has generated 10.9% CAGR*
STRONG RESEARCH AND OPERATIONS TEAM
•14 member research team
•In-house, top-notch, IT systems and back-office support
CONSISTENT CLIENT INTERACTION
•Quarterly performance reporting
•Fund manager outlook
TheaboveistoonlyillustratethePortfolioManagementcapabilitiesoftheFundmanager.Thisisnottobeconstitutedasapromiseoffutureperformance.Theperformanceofthe
Pharma&HealthcareInvestmentApproachandSpecialSituationsValueInvestmentApproachportfolioperformancemaydifferdespitethecommonfundmanager.Returnsare
TWRRbasedonAggregatePortfolio(Netofallexpenses).*Ason31stOctober2023.
Past performance may or may not be sustained in future.

21. Kotak Pharma & Healthcare InvestmentApproach Portfolio
Positioning
Robust exports
opportunity,
following supply
chain de-risking
by global pharma
from China
Domestic
formulation
demand
PLI schemes to
improve industry
competitiveness
and profitability
*CRAM &
**CDMO
opportunities
across the globe
Portfolio Focus
=
Earnings growth
+
Reasonable
Valuations
*Contract Research & Manufacturing; **Contract Development and Manufacturing; Source: www.pib.gov.in

22. Kotak Pharma & Healthcare Investment Approach –
Construct
Market Cap In Crs
MEDIAN 35,444
WEIGHTED AVERAGE 87,869
Sector Allocation (%)
PHARMA & BIOTECHNOLOGY
90.4
HEALTHCARE SERVICES
6.9
CASH & CASH EQUIVALENT
2.8
Grand Total 100.0
Market Cap (%)
LARGE CAP
46.2
MID CAP
39.5
SMALL CAP
11.6
CASH & CASH EQUIVALENT
2.8
Grand Total 100.0
Top Ten Holdings (%) Sector Market Cap
SUN PHARMACEUTICAL INDUSTRIES LTD 16.0
PHARMA & BIOTECHNOLOGY LARGE CAP
DR REDDY'S LABORATORIES LTD 12.4
PHARMA & BIOTECHNOLOGY LARGE CAP
CIPLA LTD 12.0
PHARMA & BIOTECHNOLOGY LARGE CAP
LUPIN LTD 6.1
PHARMA & BIOTECHNOLOGY MID CAP
IPCA LABORATORIES LTD 5.8
PHARMA & BIOTECHNOLOGY MID CAP
FORTIS HEALTHCARE LTD 5.4
HEALTHCARE SERVICES MID CAP
ZYDUS LIFESCIENCES LTD 5.0
PHARMA & BIOTECHNOLOGY MID CAP
ALKEM LABORATORIES LTD 4.5
PHARMA & BIOTECHNOLOGY MID CAP
AJANTA PHARMA LTD 3.9
PHARMA & BIOTECHNOLOGY SMALL CAP
AUROBINDO PHARMA LTD 3.8
PHARMA & BIOTECHNOLOGY MID CAP
Total -Top 10 Equity 74.9
Grand Total -Equity 97.2
Data as on 31st October, 2023
Source: Internal Research
22

23. 23
Kotak Pharma & Healthcare Investment Approach -A
Snapshot
Performance
Top 5 Holdings
Snapshot
Please note that performance of your portfolio may vary from that of other investors and that generated by the Investment Approach across all investors because of :
A)the timing of inflows and outflows of funds; and B) differences in the portfolio composition because of restrictions and other constraints.”
Further with reference to clause 2.13 of SEBI Circular dated 16th Dec'22 and point number C1 of SEBI letter dated 29th March'23. https://tinyurl.com/mr3ucm2v
Data as on 31
st
October 2023; Source: Internal research
SUN PHARMACEUTICAL INDUSTRIES LTD
DR REDDY'S LABORATORIES LTD
CIPLA LTD
LUPIN LTD
IPCA LABORATORIES LTD
Absolute % CAGR %
Period 1 Month*
3
Month*
6 Month*1 Year*
2
Year**
3
Year**
4
Year**
5
Year**
SI**
Kotak Pharma &
Healthcare
-4.2% -1.9% 16.4%12.2%2.6%13.2%19.9%14.7%10.9%
Nifty 50 TRI -2.7% -3.1% 6.5% 7.0%5.2%19.3%13.9%14.3%12.8%
1.* Returns are TWRR based on Aggregate Portfolio (Net of all expenses)
2.** Returns are Annualisedfor period greater than 1 Year
3.The performance related information provided therein is not verified by SEBI.
4.Past performance may or may not sustain in future
Inception Date 20-Sep-16
Benchmark Nifty 50 TRI
Minimum Initial
Investment 50 Lakhs
Investment Horizon Open Ended, minimum
investment for 3 Years
7.0
9.0
11.0
13.0
15.0
17.0
19.0
21.0
23.0
25.0
Sep-16 Nov-16 Jan-17 Mar-17 May-17
Jul-17
Sep-17 Nov-17 Jan-18 Mar-18 May-18
Jul-18
Sep-18 Nov-18 Jan-19 Mar-19 May-19
Jul-19
Sep-19 Nov-19 Jan-20 Mar-20 May-20
Jul-20
Sep-20 Nov-20 Jan-21 Mar-21 May-21
Jul-21
Sep-21 Nov-21 Jan-22 Mar-22 May-22
Jul-22
Sep-22 Nov-22 Jan-23 Mar-23 May-23
Jul-23
Sep-23
Kotak Pharma & HealthCare Nifty 50 TRI

24. 24
Kotak Pharma & Healthcare Investment Approach
NameofInvestment approach KotakPharma&HealthcareInvestmentapproach
Strategy Equity
InvestmentObjective ThemainobjectiveoftheInvestmentapproachistogeneratecapitalappreciationthroughinvestmentsinequitieswithamediumtolong-term
perspective.
Descriptionoftypesofsecuritieseg.,equityor
debt,listedorunlisted,convertibleinstruments,
etc.
ListedEquity
Basisofselectionofsuch
types of securities as part of the investment
approach
TheInvestmentapproachwillinvestinallequityandequityrelated
instruments with emphasis on capturing available opportunities in Pharma and Health care related stocks
Allocationof portfolioacross types of securitiesThe portfolio would be diversified, with a mix of small, medium and large cap companies.
Appropriatebenchmarktocompareperformance
andbasisforchoiceofbenchmark
Nifty50TRI.
TheindicesprescribedbyAPMIarealllargecapweightedindices.Ofthose,Nifty50TRIisthemostwidelyfollowedindexbymarketparticipants.
Portfoliosarethematicandthereisboundtobeperiodicdisparityvsallprescribedindices.Hencewechosethemostrepresentativeindexfor
benchmarking.
Indicativetenure or investment horizonOpenEnded
Riskassociatedwiththe investment approachRiskrelatedtoEquityandEquityrelatedSecurities,ModerateRisk.
KotakPharma&HealthcareInvestmentapproachmayinvestsubstantiallyin equityandequityrelatedsecuritiesfromthePharma&healthcareSector.
The level of concentration of sectors and stocks in this Investment approach is likely to be higher than a well-diversified equity strategy/fund. The risks
associated with such an Investment approach, are likely to be higher than in a well-diversified equity investment/fund. As the Investment approach will
beinvestedinalimitednumberofstocks,themovementofthecorpusmay
bemorevolatilethaninthecaseofadiversifiedequityInvestmentapproach/fund.SincetheInvestmentapproachfollowsaconcentrated
stockInvestmentapproach,incasethechosenStockdoesnotperform,itcouldadverselyimpactthereturnsoftheInvestmentapproach.Thevalue
oftheportfolio'sinvestmentsmaybeaffectedbyfactorsaffectingthesecuritiesmarketsuchaspriceandvolumevolatilityinthecapitalmarkets,
interestrates,currencyexchangerates,changesinlaw/policiesoftheGovernment,taxationlawsandpolitical,economicorotherdevelopmentswhich
mayhaveanadversebearingonindividualsecurities,aspecificsectororallsectors.Consequently,thevalueofinvestmentsmaybeaffected.Equity
securitiesandequityrelatedsecuritiesarevolatileandpronetopricefluctuationsonadailybasis.Theliquidityofinvestmentsmadeintheportfolio
mayberestrictedbytradingvolumesandsettlementperiods.Settlementperiodsmaybeextendedsignificantlybyunforeseencircumstances.The
inabilityoftheportfoliotomakeintendedsecuritiespurchasesduetosettlementproblemscouldcausethePortfoliotomisscertaininvestment
opportunities.Similarly,theinabilitytosellsecuritiesheldintheInvestmentapproach'sportfoliomayresult,attimes,inpotentiallossestothe
Investmentapproach,shouldtherebeasubsequentdeclineinthevalueofsecuritiesheldintheInvestmentapproach'sportfolio.Investmentsin
equityandequityrelatedsecuritiesinvolveadegreeofriskandinvestorsshouldnotinvestintheInvestmentapproachunlesstheycanaffordto
taketheriskoflosingtheirinvestment.
Othersalientfeatures,ifany -

25. 25
Disclaimer
InvestmentsinsecuritiesaresubjecttomarketriskandthereisnoassuranceorguaranteeoftheobjectivesofthePortfolio
beingachievedorsafetyofcorpus.Pastperformancedoesnotguaranteefutureperformance.Investorsmustkeepinmindthat
theaforementionedstatements/presentationcannotdisclosealltherisksandcharacteristics.Investorsarerequestedtoread
andunderstandtheinvestmentstrategy,andtakeintoconsiderationalltheriskfactorsincludingtheirfinancialcondition,
suitabilitytoriskreturnprofile,andthelikeandtakeprofessionaladvicebeforeinvesting.Opinionsexpressedareourcurrent
opinionsasofthedateappearingonthismaterialonly.
Thesematerialsarenotintendedfordistributiontoorusebyanypersoninanyjurisdictionwheresuchdistributionwouldbe
contrarytolocallaworregulation.Thedistributionofthisdocumentincertainjurisdictionsmayberestrictedortotally
prohibitedandaccordingly,personswhocomeintopossessionofthisdocumentarerequiredtoinformthemselvesabout,and
toobserve,anysuchrestrictions
Wehavereviewedthedocumentthoughitsaccuracyorcompletenesscannotbeguaranteed.Neitherthecompany,norany
personconnectedwithit,acceptsanyliabilityarisingfromtheuseofthisdocument.Therecipientsofthismaterialshouldrely
ontheirowninvestigationsandtaketheirownindependentprofessionaladvice.Whileweendeavortoupdateonareasonable
basistheinformationdiscussedinthismaterial,theremayberegulatory,compliance,orotherreasonsthatpreventusfrom
doingso.Investorsandothersarecautionedthatanyforward-lookingstatementsarenotpredictionsandmaybesubjectto
changewithoutnotice.
StatutoryDetails:PortfolioManager:KotakMahindraAssetManagementCompanyLtd.SEBIRegNo:INP000000837-
RegisteredOffice:27BKC,C-27,GBlock,BandraKurlaComplex,Bandra(E),Mumbai-400051,PrincipalPlaceofBusiness:2nd
Floor,12BKC,PlotNo.C-12,‘G’Block,BandraKurlaComplex,BandraEast,Mumbai–400051,India.Addressof
correspondence:6thFloorKotakTowers,BuildingNo21InfinityPark,OffW.E.Highway,GenAK.VaidyaMarg,Malad(E),
Mumbai400097.-Contactdetails:02266056825

26. Thank You.