A Study on Possible Investment Options in BRIC Nations

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Fund Allocation Options for Investing in Emergent BRICEconomies by a Typical Global Private Euity Firm

A dissertation submitted in partial fulfillment of t!e reuirementsfor t!e a"ard of

PG#B$

by

Gaurav #imri

Roll %o& '() E$P *++, -April.

E/ecutive $anagement Programme

Management Development Institute

Gurgaon '** ++'

August) *++0

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Fund Allocation Options for Investing in Emergent BRICEconomies by a Typical Global Private Euity Firm

A dissertation submitted in partial fulfillment of t!e reuirementsfor t!e a"ard of

PG#B$

by

Gaurav #imri

Roll %o&'() E$P *++, -April.

under t!e guidance of

Mr. Nakul Sethi Prof. Sanjay DhamijaVice President, !"

#$S ank %td. MDI, &urgaon

E/ecutive $anagement Programme

Management Development Institute

Gurgaon '** ++'

August) *++0

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Certificate of Approval

The following dissertation titled "Fund Allocation Options for Investing in Emergent BRIC Economies by aTypical Global Private Euity Firm" is hereby approved as a certified study in management carried out andpresented in a manner satisfactory to warrant its acceptance as a prerequisite for the award of PG#B$ forwhich it has been submitted. It is understood that by this approval the undersigned do not necessarily endorse or

approve any statement made, opinion expressed or conclusion drawn therein but approve the dissertation onlyfor the purpose it is submitted.

issertation !xamination ommittee for evaluation of dissertation

#ame $ignature

!xternal !xaminer %%%%%%%%%%%%%%%%%%%%%%% %%%%%%%%%%%%%%%%%%%

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Certificate from #issertation Advisory Committee

This is to certify that $r& Gaurav #imri, a participant of the E/ecutive $anagement Programme, has wor'edunder our guidance and supervision. (e is submitting this dissertation titled "Fund Allocation Options forInvesting in Emergent BRIC Economies by a Typical Global Private Euity Firm " in partial fulfillment ofthe requirements for the award of the PG#B$.

This dissertation has the requisite standard and to the best of our 'nowledge no part of it has been reproducedfrom any other dissertation, monograph, report or boo'.

$r& %a1ul 2et!i Prof& 2an3ay #!ami3a4ice President) BBFA5E2 Ban1 6td& $#I) Gurgaon

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Ac1no"ledgment

I ta'e immense pleasure in than'ing *rof. $an+ay hami+a for providing me with the opportunity tounderta'e this study on Fund Allocation Options for Investing in Emergent BRIC Economies by aTypical Global rivate E!uity Firm"under his esteemed guidance. I want to extend special than's to r.#a'ul $ethi, -ice *resident, usiness an'ing/ 0inancial dvisory $ervices, es an' 3td. to have

inspired me with this wonderful topic for study and for his support. y deep gratitude to r. *radeeprora, $r. anager, 0, es an' as well to have provided critical inputs and support in this pro+ect.

3ast, but certainly not the least, I would li'e to offer warm gratitude and than's to all the facultymembers of I who have provided me with an excellent 'nowledge base which I have utili4ed inunderstanding, analy4ing and completing this study. eep than's to the omputer entre and the 3ibraryas well which provided the facilities and avenues for research data.

GA7RA4 #I$RIRoll %o& '() E$P *++, -April.

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Abstract

Fund Allocation Options for Investing in Emergent BRIC Economies by a TypicalGlobal Private Euity Firm

by

6aurav imri

This paper hinges around a situation found in the early stages of a private equity fund7s quest toloo' for lucrative opportunities. In this scenario, we pic' up a typical global *! firm operating out of8$. To narrow down further, we assume that this is either a new fund or a branch of an existing globalfund that is newly set up for the purpose of focusing on the 9I economies. This new interest spawnsfrom a relatively recent report by 6oldman $achs about the emergent third world economies of ra4il,9ussia, India and hina, which forecasts these countries to come out as world economic super/powers bythe year 2:5:.

This study is an attempt to develop a model of macro/economic due/diligence in the preliminary

stages of a global fund without any exposure or experience in the described economies. (aving identifiedthe target economies for the new fund, a feasibility study needs to be carried out and a preliminary planwor'ed out to allocate the fund across these economies. s the first step in the investment process, thefund needs to map all the four economies across various sectors and arrive at a weighted mix of model todistribute the fund across these economies to maximi4e the returns.

0or the first phase of the study, various macro/economic indicators were collected for the four9I economies. In total, ): indicators including 6*, military expenditures, value added by industryetc. were analy4ed. weighted average model was developed to arrive at the decision as to how much toallocate in each economy. oing so, one immediately reali4es why hina is attracting so much more 0Ithan India. ;ust by simply comparing various indicators in a weighted average model, one can see whyhina of the total corpus. ra4il, 9ussia and India fall more or less in the same league with 1?>, 2:> and15> respectively.

The next phase involved loo'ing at some @hotA sectors to invest in. good thumb rule is loo' attraditionally which sectors are having more presence in the pin' press and then analy4ing them to see ifthey are feasible. (ence, the following sectors were chosenB ra4ilB 0ixed 3ine Telecom, (otels, edia and *harmaceuticals 9ussiaB 9enewable !nergy, CT *harmaceuticals, edia and (otels IndiaB 06, !ntertainment and edia, Telecom and *harmaceuticals hinaB iotechnology, omputer (ardware, obile *hones and Cnline 6aming

Interestingly, Cnline 6aming in hina came out to be the hottest sector to invest in with a shareof 1?.=:> of the total corpus. The least attractive was !ntertainment and edia in India with :.D=>.

This paper, in essence, has been more of application based in nature rather than some theoriticalresearch in the sub+ect. (ence, a basic understanding of private equity and venture capital has beenassumed for the readers.

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Table of Contents

*agec'nowledgement .................................................................................................................................. 5bstract .................................................................................................................................................... DTable of ontents ..................................................................................................................................... ?3ist of 0igures .......................................................................................................................................... =

3ist of Tables ............................................................................................................................................ E3ist of ppendices .................................................................................................................................... 11

Introduction .............................................................................................................................................. 12

P!ase I8 T!e BRIC Economies .............................................................................................................. 1)!conomic Indicators .................................................................................................................... 15Feightages ................................................................................................................................... 25$cores ........................................................................................................................................... 2?The Feighted ix ........................................................................................................................ &2The *ie .......................................................................................................................................... &&The Fay 0orward ......................................................................................................................... &)

P!ase II8 2ectoral Analysis ..................................................................................................................... &5$ectoral nalysis .......................................................................................................................... &D

ra4il ............................................................................................................................... &?hina ............................................................................................................................... )&India ................................................................................................................................. )E9ussia ............................................................................................................................... 55

P!ase III8 Final 2c!edule ........................................................................................................................ D:Investment *ortfolio ..................................................................................................................... D1

9eferences ................................................................................................................................................. D2ppendix 1 ................................................................................................................................................ D&

ppendix 2 ................................................................................................................................................ D)

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6ist of Figures

Figure %o& #escription Page

1. The 9I *ie &&2. The ra4ilian *ie )2&. The hinese *ie )=

). The Indian *ie 5) 5. The 9ussian *ie 5E

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6ist of Tables

Table %o& #escription Page

1. ): Indicators of 9I ........................................................................ 2)2. Feights for the ): Indicators ............................................................. 25

3. Feighted -alues for ra4il ................................................................ 2=4. Feighted -alues for hina ................................................................ 2E

5. Feighted -alues for India ................................................................. &:

6. Feighted -alues for 9ussia ............................................................... &1

7. ollated Feighted -alues for 9I .................................................. &2

8. 9an'ing of 9I !conomies as 0inal Feighted $core .................... &2

9. *ercentage llocation of Total orpus amongst 9I ..................... &&

10. llocation hun's for 9I ............................................................. &)

11. 0ixed 3ine Telecom in ra4il G Indicators and -alues ....................... &?

12. (otels in ra4il G Indicators and -alues ............................................. &=

13. edia in ra4il G Indicators and -alues ............................................. &=

14. *harmaceuticals in ra4il G Indicators and -alues ............................. &E15. ll $ectors of ra4il at a 6lance ....................................................... &E

16. ra4il G Feights for Indicators ............................................................ ):

17. 0ixed 3ine Telecom in ra4il G Feighted -alues of Indicators .......... ):

18. (otels in ra4il G Feighted -alues of Indicators ................................ ):

19. edia in ra4il G Feighted -alues of Indicators ................................ )1

20. *harmaceuticals in ra4il G Feighted -alues of Indicators ................ )1

21. ra4il G *roduct Totals of all four $ectors ........................................... )1

22. ra4il G *ercentage llocation amongst 0our $ectors ......................... )1

23. 0und llocation hun's for ra4il ..................................................... )2

24.

iotechnology in hina G Indicators and -alues ................................. )&25. omputer (ardware in hina G Indicators and -alues ........................ ))

26. obile *hones in hina G Indicators and -alues ................................. ))

27. Cnline 6aming in hina G Indicators and -alues ................................ )5

28. The 0our $ectors of hina at a 6lance ............................................... )5

29. hina G Feights for Indicators ............................................................. )D

30. iotechnology in hina G Feighted -alues ......................................... )D

31. omputer (ardware in hina G Feighted -alues ................................ )D

32. obile *hones in hina G Feighted -alues ......................................... )?

33. Cnline 6aming in hina G Feighted -alues ......................................... )?

34. hina G *roduct Totals for all 0our $ectors ........................................... )?

35. *ercentage llocations for hina ......................................................... )?36. 0und llocation hun's in hina ........................................................ )=

37. 06 in India G Indicators and -alues ................................................ )E

38. !ntertainment and edia in India G Indicators and -alues ................... 5:

39. Telecom in India G Indicators and -alues .............................................. 5:

40. *harmaceuticals in India G Indicators and -alues ................................. 51

41. India G The four $ectors at a 6lance ..................................................... 51

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42. India G Feights for Indicators ............................................................... 52

43. 06 in India G Feighted -alues for Indicators ................................. 52

44. !ntertainment and edia in India G Feighted -alues for Indicators .... 52

45. Telecom in India G Feighted -alues for Indicators ............................... 5&

46. *harmaceuticals in India ....................................................................... 5&

47. India G *roduct Totals for all 0our $ectors ............................................. 5&

48. India G *ercentage llocation amongst $ectors ..................................... 5&

49. 0und llocation hun's in India .......................................................... 5)50. 9enewable !nergy in 9ussia G Indicators and -alues ........................... 55

51. CT *harmaceuticals in 9ussia G Indicators and -alues ...................... 55

52. edia in 9ussia G Indicators and -alues ............................................... 5D

53. (otels in 9ussia G Indicators and -alues ............................................... 5D

54. 9ussia G ll four $ectors at a 6lance .................................................... 5D

55. 9ussia G Feights for Indicators ............................................................. 5?

56. 9enewable !nergy in 9ussia G Feighted -alues for Indicators ............ 5?

57. CT *harmaceuticals in 9ussia G Feighted -alues for Indicators ....... 5?

58. edia in 9ussia G Feighted -alues for Indicators ................................ 5=

59.

(otels in 9ussia G Feighted -alues for Indicators ................................ 5=60. 9ussia G *roduct Totals of all 0our $ectors ........................................... 5=

61. *ercentage llocations in 9ussia .......................................................... 5=

62. 0und llocation hun's in 9ussia ........................................................ 5E

63. 0inal 0und llocation $chedule across 9I !conomies .................... D1

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6ist of Appendices

Appendi/ %o& #escription Page

1. reaming with 9IsB The *ath to 2:5: .......................................... D&

2. The 9ationale for #egative Feightages for the Indian odel ...........D)

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INTRODUCTION

The Managerial Problem

The paper hinges around a situation found in the early stages of a private equity fund7s quest toloo' for lucrative opportunities. In this scenario, we pic' up a typical global *! firm operating out of the

8$. To narrow down further, we assume that this is either a new fund or a branch of an existing globalfund that is newly set up for the purpose of focusing on the 9I economies. This new interest spawnsfrom a relatively recent report by 6oldman $achs about these emergent third world economies of ra4il,9ussia, India and hina, which forecasts these countries to come out as world economic super/powers bythe year 2:5:. To simplify things further, we will assume that our fund is a mid/cap fund with a corpus ofH1 billion and will not allocate more than 25> of the corpus to any single sector. lso, real estate, alcoholand Information Technology are negative sectors for our fund.

(aving identified the target economies for the new fund, a feasibility study needs to be carried outand a preliminary plan wor'ed out to allocate the fund across these economies.s the first step in theinvestment process, the fund needs to map all the four economies across various sectors and arriveat a

weighted mix of model to distribute the fund across these economies to maximi4e the returns.

The Rationale for this Study

This study is an attempt to develop a model of macro/economic due/diligence in the preliminarystages of a global fund without any exposure or experience in the described economies. This model canbe further adapted to other situations. s the organi4ational guide, r. #a'ul $ethi, -ice *resident of0inancial dvisory division has indicated, such a study would be a great value/addition in their line ofwor' as well.

The Scope

This pro+ect is essentially an exercise in feasibility studies. It focuses on a specific stage of theinvestment process vi4. the early stage. It covers the macro/economic due diligence process. ost of theearlier papers that the author could find tended to concentrate more on evaluating fund performance andmeasuring returns. This paper will attempt to focus on the investment stage which plays a crucial part indetermining the returns fromthe fund. The main focus of the paper would be developing a model ofarriving at an overall investment strategy across 9I economies. It would attempt to further pro+ectanticipated cash flows from the investment. (owever, it would not delve into focusing on specificcompanies within a particular sector. It would also not be evaluating and measuring the returns from thefund.

The Problem Statement

To evaluate various fund allocation options for investing in the emerging 9I economies by atypical global private equity fund based in 8$.

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The Literature Survey

t the time of writing this proposal, the author had loo'ed up on 1Dresearch papers articles and& online resources for private equity and 9I economies. uring the course of the study, this list hascrystalli4ed to ) publications and ? online resources. The publications have been used mostly to bolsterthe underlying concept of this study. The online resources have been used as a source of the statisticaldata and as such have been quoted directly. The list of the same has been outlined in the @ReferencesA

section at the end of this document.

THE RESEARCH PROBLEM

(aving defined the broad managerial problem and the scope of the study, we can now brea' downthe entire pro+ect into specific areas of wor'. The study progresses on the following lines. The macroeconomic indicators of 9I economies will be collated and studied and the investment climate will beassessed basis these indicators. Through this process we will arrive at @allocation chun'sA which isessentially portions of the fund to be allocated across economies on a percentage basis.

#ext, an attempt was made to narrow down on few sectors of each economy based on thepro+ected returns, and other financial indicators. In this part, we delve into slightly higher level of detailsat the sectoral level to arrive at a few @goodA sectors to invest in. Fe ma'e intra/economy comparisons tofinalise on the sectors for allocation and deciding weightages.

THE RESEARCH DESIGN

The study is based on collecting and analy4ing financial and macro/economic data of 9Icountries. The source of this data is various publications and online resources. The 3iterature $urvey

outlines the various sources of data as collected by the author and which was directly used in the study.

This data is collected by way of researching in the institute library, the Forld Fide Feb andinputs from the guides. The analysis of the data is crystalli4ed into a concrete model which can be used toevaluate the attractiveness and safety of the investment through private equity in 9I economies. Thismodel is a weighted average one and includes various factors of the economy and fund7s ob+ectives

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ECONOMIC INDICATORS

The 9Is are an interesting wor'/in/progress to watch. ra4il, hina and India can be categori4ed asthe real third world countries. The 9ussian 0ederation, also 'nown as the 8$$9, before it


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for a better lifestyle and hence, growth in manufacturing. t the very basic level, it denotes thatthe government is concerned about the infrastructure in the country Kin generalL and has ta'ensteps to electrify it


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''& G%I per capita -PPP met!od) current 72 dollar.The 6#I per capita by the *urchasing *ower *arity method gives different figures. 9ussia is theleader with 8$ E?=1.)& followed by ra4il at 8$ 5D2.=D. hina again beats India with 8$&&&).2E as compared to it. This is followed by India at 2=.D)>.Third is 9ussia with 2:.&E> preceding ra4il with 1D.=?>. hina. 9ussia is 12.&?> and India is last with a low of).E)>

',& Imports of Goods and 2ervices -9 of G#P.This is another important indicator. lthough, every country is an importer and as such, importsare necessary for every economy to provide for a better lifestyle for it followed by 9ussia with 2&.:D>. India comes a third with 1=.&)> and lastly, ra4ilwith 12.2)>.

1?. Improved 2anitation Facilities) 7rban -9 of urban population "it! access.$anitation and hygiene are perhaps one of the most important civic infrastructures that citi4ensrequire for a decent lifestyle. community deprived of these basic elements cannot be expectedto be well off and cannot be good consumers as well. This is especially critical in urban areaswhere development of land is at a higher percentage and space is at a premium. (ence, a city witha higher percentage of urban population is li'ely provide a better and more secure environmentfor investment and returns. 9ussia ta'es the lead here with a whopping E&>. Cf course, one must

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ta'e into account that 9ussia is still the largest country in the world in terms of land area and is#CT the largest in terms of population. $urprisingly, ra4il comes next with =&>. hina comesnext with D=.5> and lastly, India with 5?>.

'0& Improved @ater 2ource -9 of population "it! access.This is another important statistic as water is a basic necessity of life and cannot sustain without

it. The higher the percentage of population with proper access to water resources, the better it is.s with sanitation facilities, 9ussia maintains the leadership with ED.5>. The trend continuesagain with ra4il coming in second with =E.5>. India beats hina with =)> vis/a/vis ?D.5>.

'& Income 2!are !eld by 6o"est *+9$ome people might call this a very blatant statistic, but I consider it as very important since this'ind of direct information is very relevant to aninvestor. Fhat is perhaps even more peculiar isthe fact that this particular figure can give us an idea of the distribution of wealthN but which canhave different interpretations for different investors. This would primarily depend upon whichsegment of the consumer their businesses are targetting J the elite or the masses. Cf course, thesi4e of the middle class in a country always interests an investor. There is big money indeveloping products for the masses J something with a huge demand, the game of numbers. y

loo'ing at this number, the investor can get a good idea of the si4e of the pie available. This isalso the first indicator where we come across India as the leader. 0or India, the number stands at=.:=> followed by 9ussia with 5.?>. hina is third with ).25> and ra4il is at 2.D5>.

*+& 4alue Added by t!e Industry -9 of G#P.nother important statistic which tells us the contribution of the industrial sector to the nationalincome. robust industrial sector is essential to sustained, mature growth. lthough a si4ablechun' of the 6* is preferred to be by the industrial sector, extreme values also raise eye brows.Too less a number indicates that the sector is not sufficiently developed enough and too large anumber indicates either a smaller si4e of the economy or an inadequately developed tertiarysector. The latter can either be interpreted as a good opportunity by the investor since usually in

the course of development Kas has been in the case of developed economiesL, the tertiary sectorassumes greater importance in the economy and contributes the greatest share of the nationalincome. Cr in other situations and ris' appetites of the investor, it can even scare them off. hinashows the way with )D.2=> followed by 9ussia with &D.55>. ra4il and India are close togetherwith 2=.?> and 2D.?&> respectively.

*'& Inflation) G#P #eflator -annual 9.6* is defined in terms of the value of the goods and services produced in a year. Fhile theactual implication is towards the !uantum of the goods, measuring it in monetary terms meansthat one has to remember that this runs on the equationB $alue % rice x &uantity' nd while weconventionally accept that an increase in national income refers to an increase in the actualamount of goods and services, the fact remains that even an increase in price can lead to a

seemingly increase in the national income Keven without a corresponding increase in the actualoutputL. This price/increase is commonly 'nown as inflation. Inflation is a common phenomenaand an adequate dose is considered healthy for the economy. (owever, to 'now the actual amountof increase in output, one needs to deflate the increase in 6* by the inflationary effects.ommonly, 'nown as the 6* deflator, it


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relatively close with ).15> and &.1)> respectively.

**& Internet 7sers -per '++ people.s part of ease of communications, one can loo' at the internet penetration as a means of gauginggovernment policy. It. hina as at )5.=D> and ra4il is at )&.?>.

*(& $erc!andise Trade -as a 9 of G#P.8sually, in the course of economic development, an economy comes to rely more and more on the

service sector vis/a/vis the manufacturing sector. lthough, none of the 9I economies havetruly gone through this process in the strictest sense of the word, having a high percentage of the6* in merchandise trade Kwhile having a substantial si4e of the 6*L is in fact, good news tomost of the investors, especially in retail and export/oriented units. s expected, hina is at thetop with 51.?D> since it has developed it followed by India with +ust 2).2=>. 3ast is ra4ilwith 21.D?>.

*,& $ilitary E/penditure -as a 9 of G#P.lthough it


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investors. oming bac' to the numbers, 9ussia is at the top with ).:5> followed by India at2.=2>. Third comes hina with 1.EE> and lastly, ra4il with 1.5?>.

*>& $ortality Rate for C!ildren under t!e age ( -per '+++.This is again, one of the @socialA indicators and emphasi4es medical support, education andeconomic development. $adly, India is the leader here, and that too with a very high margin. It isat =1.&? children followed by hina at 2=.5? children. ra4il ta'es the third position with 2&.D2

children and best is 9ussia with 1=.== persons. fact to note here is that this indicator can beta'en as it isN vi4. it need not be read @relativeA to another variable.

*0& %et Barter Terms of Trade -5r& *+++ '++.The net barter terms of trade is the ratio Kexpressed as a percentageL of relative export and importprices when volume is held constant K$ourceB www.en.wi'ipedia.comL ra4il ta'es the lead herewith EE.)>. $econd and third are India and hina respectively with E5.D=> and E5.1&>respectively. There was no data available for the 9ussian 0ederation.

*& Official #evelopment Assistance and Official Aid -current 72D.This refers to various inflows of international aid received by the nation. $ince this inflow is inthe form of aid, this figure must be used with caution and as per the requirement. higher amount

of 8$ dollar in the economy increases the forex reserves and creates equivalent @hot moneyA inthe economy. If it follows the Oeynesian theory, it generally boosts up the demand which ifcombined with the fact that the government has large forex reserves, ma'es the economy, a veryattractive destination to foreign capital. ut the @I0A is rather big in the 9I economies if weconsider the proportion of the money that actually tric'les down to the ground level to the benefitof the people that it is supposed to aid. 9ed/tapism and corruption might eat it along the wayNbesides the fact that government anyways prints more money than is warranted by the actualincrease in production. Thus, this @hot moneyA might +ust increase the inflation and not thewelfare since it hurts the poor people the most. esides, if this aid is not aid and rather, @0unnyoneyA then, it only increases the public debt. $urprisingly, hina, a communist economy is theone which has received the largest amount of aid so far / H 1,5&&,=D:,:::. India is not too far

behind with H 1,&2E,&11,)2=. ra4il


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;'& Population) Totalnd while we are at population growth rate, let. This is followed by ra4il with 21.5> andlastly, India with 2=.D>.

;;& Primary Completion Rate) Total -9 of t!e relevant group.rimary completion rate is the ratio of the total number of students successfully completing Korgraduating fromL the last year of primary school in a given year to the total number of children ofofficial graduation age in the population. K$ourceBhttpBddp/ext.worldban'.orgLnother social statistic, it can be used more for the purposes of gauging literacy levels or theefficiency of the schooling system at the primary level. Fhile there was no data available forhina, ra4il is the leader with 1::> followed by 9ussia with E2.D&>. India is at ?=.:1>.

;=& Revenue) e/cluding Grants -9 of G#P.This figure, which is +ust li'e the revenue figure in a *P3 statement is important for an investorto 'now since it gives him an idea of the quantum of money that is being currently made. It is theslice of the pie and of course, the larger it is, the better. larger proportion together with a largeeconomy indicates a potentially favourable investment climate. There was no data available forra4il. 9ussia is the leader with 2?.?1> followed by India with 12.:D>. 3ast is hina with=.5?>. Fith hina, of course, the si4e of the 6* also must be ta'en into accountM

;(& Roads) Paved -9 of total roads.nother infrastructural indicatorN ll the ) countries are large nations and not only is the reach of

the road networ' important, but also the condition and durability of the same. The higher thepercentage of the roads that are paved, the better it is. It is an absolute indicator. There is no dataavailable for 9ussia. nd amongst the rest, hina ta'es the lead with =:.12>. #ext is India whichis way below with )?.5&>. nd last is ra4il with 5.5> only.

&D. 4alue Added by 2ervices -as a 9 of G#P.nother important indicator which tells us the importance of the tertiary sector in the economy.s all the ) economies become more advanced, the contribution of the service sector naturallygrows more and more. higher contribution is of course, good news for the investor, but thenagain, being a relative term, a lower percentage does not necessarily mean a poorly developedsector. epending upon the si4e of the economy, it might +ust be a part of a robust economy.ra4il leads the way with D5.11> followed by the 9ussian 0ederation with 5?.?E>. Third is India

with 52.=5> . 3ast is hina with ):.52>.

;>& 2!ort Term #ebt Outstanding) -current 72D.lthough we are not tal'ing about consumer debt here, nonetheless, a high amount of capital debtwithout the government


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;0& Time reuired to start a Business -days.This is perhaps the most direct piece of information that an investor might require. 3esser thenumber of days, the better it is since it reflects the government


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The above indicators are summari4ed in the table belowB

2& %o& Indicator Brail C!ina India Russia'& griculture, value added K> of 6*L D.1= 1&.2 2:.)2 5.DD*& ash $urpluseficit K> of 6*L #.. /2.1D /&.?& 5.?D;& !lectric *ower onsumption KOF( per capitaL 1==2.12 1&&1.?) )&2.&D 5))E.&D=& !nergy 8se KO6 of oil equivalent per capitaL 1:=1.D5 1:)).=: )D5.?5 )&5:.E=(& !xports of 6ood and $ervices K> of 6*L 1&.E2 &:.2E 1D.D? &D.&=

,& 0ixed 3ine and obile *hone $ubscribers Kper1:: peopleL

5:.D5 )1.15 =.D= 5).??

>& 0oreign irect Investment, #et Inflows Ko*,urrent 8$HL

1E15=?D5:21 55==&2D=:)2 DE=D55&2=1 1:=D2?&E:=5

0& 6*, urrent 8$H DE55)E221?)1 1??D=E&1D55D= D&?&?):5D?): 52DD&D:21)D?& 6* 6rowth 9ate Knnual >L &.12 E.5? D.=? D.?=

'+& 6#I per capita, tlas method Kurrent 8$HL &5=1.)& 1&D2.=D 5=).2E &11=.5?''& 6#I per capita, *** Kurrent international HL ?5D2.=D &&&).2E 1===.5? E?=1.)&'*& 6#I, tlas ethod Kurrent 8$HL D52?):=&:&5) 1?5E2=:)EDD): D2?))1?E5:?2 ))E::2:&&?&?';& 6#I, *** Kurrent international HL 1&??=:1E15=)&)&:=&:&22515:2:1??21=:2:1=1)11)=211D?1:'=& 6ross apital 0ormation K> of 6*L 1D.=? ):.&1 2=.D) 2:.&E'(& (igh Technology !xports K> of anufactured

!xportsL1).?& 25.?5 ).E) 12.&?

',& Imports of 6oods and $ervices K> of 6*L 12.2) 2D.D? 1=.&) 2&.:D'>& Improved $anitation 0acilities, 8rban K> of urban

population with accessL=&.: D=.5 5?.: E&.:

'0& Improved Fater $ource K> of population withaccessL

=E.5 ?D.5 =).: ED.5

'& Income $hare held by 3owest 2:> 2.D5 ).25 =.:= 5.?:*+& Industry, -alue dded K> of 6*L 2=.?: )D.2= 2D.?& &D.55*'& Inflation, 6* eflator Kannual >L =.)5 &.1) ).15 1E.==**& Internet 8sers Kper 1:: peopleL 1:.EE 5.E2 2.21 E.:?*;& 3ife !xpectancy at irth, Total Kin yearsL ?1.&1 ?1.2) D&.?) D5.&)*=& ar'et apitali4ation of 3isted ompanies K> of

6*L)&.?: )5.=D )=.=: 5:.)E

*(& erchandise Trade K> of 6*L 21.D? 51.?D 2).2= )E.E)

*,& ilitary !xpenditure K> of 6*L 1.5? 1.EE 2.=2 ).:5*>& ortality 9ate, 8nder 5 Kper 1:::L 2&.D2 2=.5? =1.&? 1=.==*0& #et arter Terms of Trade Kr. 2::: Q 1::L EE.): E5.1& E5.D= #..*& Cfficial evelopmental ssistance and Cfficial

id Kcurrent 8$HL1=),DD?,1)2 1,5&&,=D:,::: 1,&2E,&11,)2= #..

;+& *opulation 6rowth Knnual >L 1.): :.D5 1.5: /:.&=;'& *opulation, Total 1=1,?DD,?&5 1,2=?,ED),&:E 1,:D&,D5:,15? 1)),521,D1&;*& *overty (eadcount 9atio at #ational *overty 3ine

K> of populationL21.5 #.. 2=.D 1E.D

;;& *rimary ompletion 9ate, Total K> of relevantage groupL

1:=.5? #.. ?=.:1 E2.D&

;=& 9evenue, excluding 6rants K> of 6*L #.. =.5? 12.:D 2?.?1;(& 9oads, *aved K> of total roadsL 5.5: =:.12 )?.5& #..

;,& $ervices, -alue dded K> of 6*L D5.11 ):.52 52.=5 5?.?E;>& $hort Term ebt Cutstanding Kcurrent 8$HL 25,2D:,5=D,::: E),&DD,?1),2=5 D,2&1,)2=,5?1 2,5:5?,E:=,2=5;0& Time 9equired to $tart a usiness KaysL 152.:: )).?5 ?1.:: &5.25;& Total ebt $ervice K> of 6oods, $ervices and

IncomeLD1.=) 5.E? 1).&: 12.1=

=+& For'ers< 9emittances and ompensation of!mployees, received K8$HL

2,=DD,12:,::: 15,))D,55?,1)2 1=,)=1,::=,5?1 1,EEE,&1:,:::

Table 1: 40 Indicators of BRICs

2)


25/64

WEIGHTAGES

Fhile different funds may have different ob+ectives and consequently different ris' appetites, we willattempt to build a ris'/ad+usted weighted average model in order to cover all the ): different parameters+ust discussed above.

2& %o& Indicator @eig!t

'& griculture, value added K> of 6*L 1.5*& ash $urpluseficit K> of 6*L ).:;& !lectric *ower onsumption KOF( per capitaL 1.5=& !nergy 8se KO6 of oil equivalent per capitaL 1.:(& !xports of 6ood and $ervices K> of 6*L 2.5,& 0ixed 3ine and obile *hone $ubscribers Kper 1:: peopleL &.:>& 0oreign irect Investment, #et Inflows Ko*, urrent 8$HL 1:.:0& 6*, urrent 8$H 5.:& 6* 6rowth 9ate Knnual >L 5.:'+& 6#I per capita, tlas method Kurrent 8$HL ).:''& 6#I per capita, *** Kurrent international HL &.D'*& 6#I, tlas ethod Kurrent 8$HL

&.5';& 6#I, *** Kurrent international HL ).:'=& 6ross apital 0ormation K> of 6*L 5.:'(& (igh Technology !xports K> of anufactured !xportsL D.:',& Imports of 6oods and $ervices K> of 6*L 1.:'>& Improved $anitation 0acilities, 8rban K> of urban population with

accessL&.:

'0& Improved Fater $ource K> of population with accessL 5.:'& Income $hare held by 3owest 2:> D.:*+& Industry, -alue dded K> of 6*L 1.:*'& Inflation, 6* eflator Kannual >L /).:**& Internet 8sers Kper 1:: peopleL D.:

*;& 3ife !xpectancy at irth, Total Kin yearsL 2.:*=& ar'et apitali4ation of 3isted ompanies K> of 6*L 1.5*(& erchandise Trade K> of 6*L 1.:*,& ilitary !xpenditure K> of 6*L 1.5*>& ortality 9ate, 8nder 5 Kper 1:::L /&.:*0& #et arter Terms of Trade Kr. 2::: Q 1::L D.:*& Cfficial evelopmental ssistance and Cfficial id Kcurrent 8$HL &.:;+& *opulation 6rowth Knnual >L 1.:;'& *opulation, Total :.);*& *overty (eadcount 9atio at #ational *overty 3ine K> of populationL /D.:;;& *rimary ompletion 9ate, Total K> of relevant age groupL 2.:;=& 9evenue, excluding 6rants K> of 6*L ).:;(& 9oads, *aved K> of total roadsL &.:;,& $ervices, -alue dded K> of 6*L ).:;>& $hort Term ebt Cutstanding Kcurrent 8$HL /).:;0& Time 9equired to $tart a usiness KaysL 5.:;& Total ebt $ervice K> of 6oods, $ervices and IncomeL /5.:=+& For'ers< 9emittances and ompensation of !mployees, received K8$HL D.:

Total '++&+Table 2: Weights for the 40 Indicators

25


26/64

s usual, there are positive indicators and negative indicators. *ositive indicators are desirable whilenegative ones are to be avoided. onsequently, positive indicators have been assigned positive weightswhile negative indicators have been assigned negative weights. Thus, +ust as a higher score in a positiveindicator will push up the overall score, a high score in a negative indicator will pull down the total.

Thus, the approach is different from the traditionally used weighted averages where all the

variables are usually assigned positive weightages, no matter how small they maybe. In such scenarios,even an undesirable indicator will contribute in pushing up the overall score. lthough, one may arguethat all the overall scores K) in totalL may still give us the relative ran'ings in such a situation, thenegative weight has been used to give more precision and to optimise the result. Cf course, to maintainmathematical consistency, the sum total of all the different weight ages come to 1::. The weightsthemselves, vary as per the importance to the investor in terms of safety of capital and the returnpotential.

2D


27/64

SCORES

(aving loo'ed at the different weights assigned to the different indicators, it is time that we construct ourmodel. It is going to be based on a simple weighted average equationB

Feighted verage Q w1x1R w2x2R w&x&R ........ R wnxn w1R w2R w&R ....... R wn

()ere*+ % ,acro economic Indicator( % (eig)t assigned to t)e indicator

Suite obviously, in the denominator, the weights will sum upto 1::. athematically spea'ing, one caneven assign weights in points that total upto 1: or even 1 without affecting the relative grading. Insituations where the weights are distributed amongst a factor of 1, the denominator can be completelyremoved all together.

9eflecting upon the utility of the weighted average model in our analysis, we can see that regardless ofthe numeric value of the denominator, it can be ignored all together as well. lthough, we are using aweighted average model, our main focus is not on the absolute value of the resultN in this case, thenumerator Kirrespective of the denominatorL. Fe have touched upon ): different macro/economicparameters, all of which are different and measure different variables of the system called the nationaleconomy. ue to this, all the indicators are measured in different units. *erhaps a novice can questionwhether multiplying the weight with the value of the indicator and subsequently adding it to other suchvalues derived from other indicators might lead to some mismatch of unit of the total score. The beautifulthing about weighted average models is that they are capable of incorporating such differences. ore so,in this particular situation where our end ob+ective is to arrive at B

a' Relative ran-ings amongst t)e countries* andb' roportions bet.een t)e final scores'

(ence, when we tal' about using a weighted average model to come at an allocation mix, we really arenot bothered about the different units being used in the equation. This is so since the final score willinclude an amalgamation of all such units. nd all the four economies are being evaluated on the sameparameters and units. (ence, the final score of all the four economies will be in the same @unitA. In anycase, we are only concerned about the relative proportions of the final scores with each other to arrive atthe allocation mix.

(aving said that, let


28/64

BRAZIL

2& %o& Indicator 4alue @eig!t Product'& griculture, value added K> of 6*L D.1= 1.5 E.2=*& ash $urpluseficit K> of 6*L #.. ).: :;& !lectric *ower onsumption KOF( per capitaL 1==2.12 1.5 2=2&.1?=& !nergy 8se KO6 of oil equivalent per capitaL 1:=1.D5 1.: 1:=1.D5(& !xports of 6ood and $ervices K> of 6*L 1&.E2 2.5 &).=,& 0ixed 3ine and obile *hone $ubscribers Kper 1:: peopleL 5:.D5 &.: 151.E)>& 0oreign irect Investment, #et Inflows Ko*, urrent 8$HL 1E15=?D5:21.E= 1:.: 1E15=?D5:21E.?D0& 6*, urrent 8$H DE55)E221?)1 5.: &)???)D1:=?:=.5?& 6* 6rowth 9ate Knnual >L &.12 5.: 15.5E'+& 6#I per capita, tlas method Kurrent 8$HL &5=1.)& ).: 1)&25.?1''& 6#I per capita, *** Kurrent international HL ?5D2.=D &.D 2?22D.2E'*& 6#I, tlas ethod Kurrent 8$HL D52?):=&:&5) &.5 22=)5E2E:D2):';& 6#I, *** Kurrent international HL 1&??=:1E15=)& ).: 55112:?DD&&?5.51'=& 6ross apital 0ormation K> of 6*L 1D.=? 5.: =).&?'(& (igh Technology !xports K> of anufactured !xportsL 1).?& D.: ==.&5

',& Imports of 6oods and $ervices K> of 6*L 12.2) 1.: 12.2)'>& Improved $anitation 0acilities, 8rban K> of urban population with

accessL=& &.: 2)E

'0& Improved Fater $ource K> of population with accessL =E.5 5.: ))?.5'& Income $hare held by 3owest 2:> 2.D5 D.: 15.==*+& Industry, -alue dded K> of 6*L 2=.? 1.: 2=.?*'& Inflation, 6* eflator Kannual >L =.)5 /).: /&&.=**& Internet 8sers Kper 1:: peopleL 1:.EE D.: D5.E2*;& 3ife !xpectancy at irth, Total Kin yearsL ?1.&1 2.: 1)2.D2*=& ar'et apitali4ation of 3isted ompanies K> of 6*L )&.? 1.5 D5.55*(& erchandise Trade K> of 6*L 21.D? 1.: 21.D?*,& ilitary !xpenditure K> of 6*L 1.5? 1.5 2.&D*>& ortality 9ate, 8nder 5 Kper 1:::L 2&.D2 /&.: /?:.=5*0& #et arter Terms of Trade Kr. 2::: Q 1::L EE.) D.: 5ED.)2*& Cfficial evelopmental ssistance and Cfficial id Kcurrent 8$HL 1=)DD?1)2.=D &.: 55)::1)2=.5?;+& *opulation 6rowth Knnual >L 1.) 1.: 1.);'& *opulation, Total 1=1,?DD,?&5 :.) ?2?:DDE).1?;*& *overty (eadcount 9atio at #ational *overty 3ine K> of

populationL21.5 /D.: /12E

;;& *rimary ompletion 9ate, Total K> of relevant age groupL 1:=.5? 2.: 21?.15;=& 9evenue, excluding 6rants K> of 6*L #.. ).: :;(& 9oads, *aved K> of total roadsL 5.5 &.: 1D.5;,& $ervices, -alue dded K> of 6*L D5.11 ).: 2D:.)D;>& $hort Term ebt Cutstanding Kcurrent 8$HL 252D:5=D::: /).: /1:1:)2&)):::;0& Time 9equired to $tart a usiness KaysL 152 5.: ?D:;& Total ebt $ervice K> of 6oods, $ervices and IncomeL D1.=) /5.: /&:E.2=+& For'ers< 9emittances and ompensation of !mployees, received

K8$HL2=DD12:::: D.: 1?1ED?2::::

Total 1::.: 11&=1E15)D:=D=.2Table 3: Weighted Values for Brazil

2=


29/64

CHINA

2& %o& Indicator 4alue @eig!t Product'& griculture, value added K> of 6*L 1&.2 1.5 1E.=*& ash $urpluseficit K> of 6*L /2.1D ).: /=.DD;& !lectric *ower onsumption KOF( per capitaL 1&&1.?) 1.5 1EE?.D1=& !nergy 8se KO6 of oil equivalent per capitaL 1:)).= 1.: 1:)).=(& !xports of 6ood and $ervices K> of 6*L &:.2E 2.5 ?5.?2,& 0ixed 3ine and obile *hone $ubscribers Kper 1:: peopleL )1.15 &.: 12&.)5>& 0oreign irect Investment, #et Inflows Ko*, urrent 8$HL 55==&2D=:)2 1:.: 55==&2D=:)2).250& 6*, urrent 8$H 1??D=E&1D55D= 5.: ===))D5=2?=):& 6* 6rowth 9ate Knnual >L E.5? 5.: )?.=D'+& 6#I per capita, tlas method Kurrent 8$HL 1&D2.=D ).: 5)51.)&''& 6#I per capita, *** Kurrent international HL &&&).2E &.D 12::&.)&'*& 6#I, tlas ethod Kurrent 8$HL 1?5E2=:)EDD): &.5 D15?)=1?&=2):';& 6#I, *** Kurrent international HL )&:=&:&22515: ).: 1?2&&212E::D::.?'=& 6ross apital 0ormation K> of 6*L ):.&1 5.: 2:1.5?'(& (igh Technology !xports K> of anufactured !xportsL 25.?5 D.: 15).5

',& Imports of 6oods and $ervices K> of 6*L 2D.D? 1.: 2D.D?'>& Improved $anitation 0acilities, 8rban K> of urban population with

accessLD=.5 &.: 2:5.5

'0& Improved Fater $ource K> of population with accessL ?D.5 5.: &=2.5'& Income $hare held by 3owest 2:> ).25 D.: 25.5*+& Industry, -alue dded K> of 6*L )D.2= 1.: )D.2=*'& Inflation, 6* eflator Kannual >L &.1) /).: /12.5?**& Internet 8sers Kper 1:: peopleL 5.E2 D.: &5.51*;& 3ife !xpectancy at irth, Total Kin yearsL ?1.2) 2.: 1)2.)=*=& ar'et apitali4ation of 3isted ompanies K> of 6*L )5.=D 1.5 D=.=*(& erchandise Trade K> of 6*L 51.?D 1.: 51.?D*,& ilitary !xpenditure K> of 6*L 1.EE 1.5 2.EE*>& ortality 9ate, 8nder 5 Kper 1:::L 2=.5? /&.: /=5.?*0& #et arter Terms of Trade Kr. 2::: Q 1::L E5.1& D.: 5?:.=1*& Cfficial evelopmental ssistance and Cfficial id Kcurrent 8$HL 15&&=D:::: &.: )D:15=::::;+& *opulation 6rowth Knnual >L :.D5 1.: :.D5;'& *opulation, Total 12=?ED)&:E.:D :.) 5151=5?2&.D&;*& *overty (eadcount 9atio at #ational *overty 3ine K> of

populationL#.. /D.: :

;;& *rimary ompletion 9ate, Total K> of relevant age groupL #.. 2.: :;=& 9evenue, excluding 6rants K> of 6*L =.5? ).: &).2E;(& 9oads, *aved K> of total roadsL =:.12 &.: 2):.&D;,& $ervices, -alue dded K> of 6*L ):.52 ).: 1D2.:=;>& $hort Term ebt Cutstanding Kcurrent 8$HL E)&DD?1)2=5.?1 /).: /&??)DD=5?1)2.=D;0& Time 9equired to $tart a usiness KaysL )).?5 5.: 22&.?5;& Total ebt $ervice K> of 6oods, $ervices and IncomeL 5.E? /5.: /2E.=D=+& For'ers< 9emittances and ompensation of !mployees, received

K8$HL15))D55?1)2.=D D.: E2D?E&)2=5?.1)

Total 1::.: &255)&22)21?)D.Table 4: Weighted Values for China

2E


30/64

INDIA

2& %o& Indicator 4alue @eig!t Product'& griculture, value added K> of 6*L 2:.)2 1.5 &:.D)*& ash $urpluseficit K> of 6*L /&.?& ).: /1).E1;& !lectric *ower onsumption KOF( per capitaL )&2.&D 1.5 D)=.5)=& !nergy 8se KO6 of oil equivalent per capitaL )D5.?5 1.: )D5.?5(& !xports of 6ood and $ervices K> of 6*L 1D.D? 2.5 )1.D?,& 0ixed 3ine and obile *hone $ubscribers Kper 1:: peopleL =.D= &.: 2D.:5>& 0oreign irect Investment, #et Inflows Ko*, urrent 8$HL DE=D55&2=1.ED 1:.: DE=D55&2=1E.D&0& 6*, urrent 8$H D&?&?):5D?):.5 5.: &1=D=?:2=&?:2.=D& 6* 6rowth 9ate Knnual >L D.=? 5.: &).&?'+& 6#I per capita, tlas method Kurrent 8$HL 5=).2E ).: 2&&?.1)''& 6#I per capita, *** Kurrent international HL 1===.5? &.D D?E=.=D'*& 6#I, tlas ethod Kurrent 8$HL D2?))1?E5:?2 &.5 21ED:)D2=2?52';& 6#I, *** Kurrent international HL 2:1??21=:2:1= ).: =:?:==?2:=:?&.E&'=& 6ross apital 0ormation K> of 6*L 2=.D) 5.: 1)&.2'(& (igh Technology !xports K> of anufactured !xportsL ).E) D.: 2E.D&

',& Imports of 6oods and $ervices K> of 6*L 1=.&) 1.: 1=.&)'>& Improved $anitation 0acilities, 8rban K> of urban population with

accessL5? &.: 1?1

'0& Improved Fater $ource K> of population with accessL =) 5.: )2:'& Income $hare held by 3owest 2:> =.:= D.: )=.)=*+& Industry, -alue dded K> of 6*L 2D.?& 1.: 2D.?&*'& Inflation, 6* eflator Kannual >L ).15 /).: /1D.D1**& Internet 8sers Kper 1:: peopleL 2.21 D.: 1&.2D*;& 3ife !xpectancy at irth, Total Kin yearsL D&.?) 2.: 12?.)E*=& ar'et apitali4ation of 3isted ompanies K> of 6*L )=.= 1.5 ?&.2*(& erchandise Trade K> of 6*L 2).2= 1.: 2).2=*,& ilitary !xpenditure K> of 6*L 2.=2 1.5 ).2)*>& ortality 9ate, 8nder 5 Kper 1:::L =1.&? /&.: /2)).1*0& #et arter Terms of Trade Kr. 2::: Q 1::L E5.D= D.: 5?).:D*& Cfficial evelopmental ssistance and Cfficial id Kcurrent 8$HL 1&2E&11)2=.5? &.: &E=?E&)2=5.?1;+& *opulation 6rowth Knnual >L 1.5 1.: 1.5;'& *opulation, Total 1:D&D5:15?.:E :.) )25)D::D2.=);*& *overty (eadcount 9atio at #ational *overty 3ine K> of

populationL2=.D /D.: /1?1.D

;;& *rimary ompletion 9ate, Total K> of relevant age groupL ?=.:1 2.: 15D.:2;=& 9evenue, excluding 6rants K> of 6*L 12.:D ).: )=.2&;(& 9oads, *aved K> of total roadsL )?.5& &.: 1)2.D;,& $ervices, -alue dded K> of 6*L 52.=5 ).: 211.&E;>& $hort Term ebt Cutstanding Kcurrent 8$HL D2&1)2=5?1.)& /).: /2)E25?1)2=5.?1;0& Time 9equired to $tart a usiness KaysL ?1 5.: &55;& Total ebt $ervice K> of 6oods, $ervices and IncomeL 1).& /5.: /?1.52=+& For'ers< 9emittances and ompensation of !mployees, received

K8$HL1=)=1::=5?1.)& D.: 11:==D:51)2=.5?

Total 1::.: 1&D1):)&:512E2.Table 5: Weighted Values for India

&:


31/64

RUSSIAN FEDERATION

2& %o& Indicator 4alue @eig!t Product'& griculture, value added K> of 6*L 5.DD 1.5 =.)=*& ash $urpluseficit K> of 6*L 5.?D ).: 2&.:);& !lectric *ower onsumption KOF( per capitaL 5))E.&D 1.5 =1?).:5=& !nergy 8se KO6 of oil equivalent per capitaL )&5:.E= 1.: )&5:.E=(& !xports of 6ood and $ervices K> of 6*L &D.&= 2.5 E:.ED,& 0ixed 3ine and obile *hone $ubscribers Kper 1:: peopleL 5).?? &.: 1D).&1>& 0oreign irect Investment, #et Inflows Ko*, urrent 8$HL 1:=D2?&E:=5.?1 1:.: 1:=D2?&E:=5?.1)0& 6*, urrent 8$H 52DD&D:21)D? 5.: 2D&&1=:1:?&?.1)& 6* 6rowth 9ate Knnual >L D.?= 5.: &&.=='+& 6#I per capita, tlas method Kurrent 8$HL &11=.5? ).: 12)?).2E''& 6#I per capita, *** Kurrent international HL E?=1.)& &.D &521&.1)'*& 6#I, tlas ethod Kurrent 8$HL ))E::2:&&?&? &.5 15?15:?11=:=:';& 6#I, *** Kurrent international HL 1)11)=211D?1: ).: 5D)5E2=)DD=)2.55'=& 6ross apital 0ormation K> of 6*L 2:.&E 5.: 1:1.E&'(& (igh Technology !xports K> of anufactured !xportsL 12.&? D.: ?).2)

',& Imports of 6oods and $ervices K> of 6*L 2&.:D 1.: 2&.:D'>& Improved $anitation 0acilities, 8rban K> of urban population with

accessLE& &.: 2?E

'0& Improved Fater $ource K> of population with accessL ED.5 5.: )=2.5'& Income $hare held by 3owest 2:> 5.? D.: &).1E*+& Industry, -alue dded K> of 6*L &D.55 1.: &D.55*'& Inflation, 6* eflator Kannual >L 1E.== /).: /?E.51**& Internet 8sers Kper 1:: peopleL E.:? D.: 5).)1*;& 3ife !xpectancy at irth, Total Kin yearsL D5.&) 2.: 1&:.D=*=& ar'et apitali4ation of 3isted ompanies K> of 6*L 5:.)E 1.5 ?5.?)*(& erchandise Trade K> of 6*L )E.E) 1.: )E.E)*,& ilitary !xpenditure K> of 6*L ).:5 1.5 D.:=*>& ortality 9ate, 8nder 5 Kper 1:::L 1=.== /&.: /5D.D5*0& #et arter Terms of Trade Kr. 2::: Q 1::L #.. D.: :*& Cfficial evelopmental ssistance and Cfficial id Kcurrent 8$HL #.. &.: :;+& *opulation 6rowth Knnual >L /:.&= 1.: /:.&=;'& *opulation, Total 1)),521,D1&.:= :.) 5?=:=D)5.2&;*& *overty (eadcount 9atio at #ational *overty 3ine K> of

populationL1E.D /D.: /11?.D

;;& *rimary ompletion 9ate, Total K> of relevant age groupL E2.D& 2.: 1=5.2D;=& 9evenue, excluding 6rants K> of 6*L 2?.?1 ).: 11:.=2;(& 9oads, *aved K> of total roadsL #.. &.: :;,& $ervices, -alue dded K> of 6*L 5?.?E ).: 2&1.1D;>& $hort Term ebt Cutstanding Kcurrent 8$HL 25:5?E:=2=5.?1 /).: /1::2&1D&&1)2.=D;0& Time 9equired to $tart a usiness KaysL &5.25 5.: 1?D.25;& Total ebt $ervice K> of 6oods, $ervices and IncomeL 12.1= /5.: /D:.===+& For'ers< 9emittances and ompensation of !mployees, received

K8$HL1EEE&1:::: D.: 11EE5=D::::

Total 1::.: E=?1:D51=:==E.1)Table 6: Weighted Values for Russia

&1


32/64

THE WEIGHTED MIX

Till now we have based our discussion on the various macro/economic indicators that the fund may loo'at for evaluating the investment climate of the 9I economies. Fe have assigned weights to theseindicators and loo'ed at how they add up to arrive at the scores already highlighted in the tables above.

(aving analy4ed these indicators and their respective values multiplied by their weights, it


33/64

THE PIE

$o now we come to the section where we measure each economy against the other to see who is theheavy weight. 3et,&;+ '++9

Table 9: Percentage Allocation of total corpus amongst BRIC

s can be seen from the table above, hina is the biggest heavy weight consuming almost half of theentire pie with )=>. lthough India is 2nd, it still is less than a quarter of the entire pie with 2:>. ra4iland 9ussian 0ederation are rather close to each other with 1?> and 15> respectively. 3et


34/64

THE WAY FORWARD

$o till now we have done a macro/economic analysis on the economic factors of the 9I countries andhave arrived at the weighted mix of the allocation at the country level. The fund corpus that we startedout with was H 1 billion. (ence, using our weightages, the allocation across various economies will loo'li'e thisB

Country Percentage Allocationra4il 1?> H 1?: millionhina )=> H )=: millionIndia 2:> H 2:: million9ussian 0ederation 15> H 15: million

Total '++9 D '+++ million

Table 10: Allocation Chunks for BRIC

(aving defined the allocation chun's for the various countries, it is time that we go deeper in each ofthese individual economies and loo' at various sectors to ascertain where exactly we want to put our

money.

&)


35/64

PHASE II:

SECTORALANALYSIS

&5


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SECTORAL ANALYSIS

The ob+ective of the sectoral analysis is to loo' at a few good sectors to invest now that we have decidedthe allocation chun's in large. lthough diversification strategies are used to hedge the overall ris',having too scattered a portfolio also represents a daunting tas' in terms of managing and trac'ing it. This

will surely lead to an increased, perhaps prohibitive management cost. In general, *! funds do not investacross the entire spectrum of industry. They tend to focus across only afew. It


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BRAZIL

ra4il has a moderate free mar'et and export/oriented economy. easured nominally, its6ross omestic*roduct surpasses a trillion dollars, the tenth in the world and the third in the mericasN measured bypurchasing power parity, H1.= trillion, ma'ing it the eighth largest economy in the world and the secondlargest in the mericas,after the 8nited $tates. Its nominal per capita 6* has surpassed 8$E,::: in2::?, due to the strong and continued appreciation of the9ealfor the first time this decade. Its industrialsector accounts for three fifths of the$outh mericaneconomy over previous year. The 69 or the cumulative aggregate growth rate Ksince2::2L stands at 21.D>. The mar'et value forecast for the industry for a 5 year period stands at H 2&.D&billion. ccordingly, the forecasted growth percentage turns out to be 5).?:>. ased on this forecast,umulative ggregate 6rowth 9ate, for a period of 5 years Ksince 2::DL stands at E.1:>.

3oo'ing at the above information in a tabular form, we seeB

Indicators Valuear'et -alue Kbillion dollarsL 15.2?ar'et -alue 6rowth *ercentage 11.=:

69 K2::2 onwardsL 21.D:ar'et -alue 0orecasts Kbillion dollarsL 2&.D&ar'et -alue 0orecast 6rowth *ercentage 5).?:69 K5 year forecast, 2::D onwardsL E.1:

Table 11: Fixed Line Telecom in Brazil | Indicators and Values

HOTELS

ra4il is popularly 'nown for it


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percentage as a whopping E).=:>M The 5 year forecasted 69 K2::D onwardsL is 1).&:>.$ummari4ing the above information about the hotel industry in ra4ilB

Indicators Valuear'et -alue Kbillion dollarsL ?.)?ar'et -alue 6rowth *ercentage 15.2:69 K2::2 onwardsL 1D.&:

ar'et -alue 0orecasts Kbillion dollarsL 1).5:ar'et -alue 0orecast 6rowth *ercentage E).=:69 K5 year forecast, 2::D onwardsL 1).&:

Table 12: Hotels in Brazil | Indicators and Values

MEDIA

edia is already huge in ra4il and is expected to experiencelarge sustained growth. 3et. This also means that the cumulative aggregategrowth rate K2::D onwardsL will turn out to be 12.2:>.

$o letM This is the highest yet and indicates a pharmaceutical revolution in the industry since it has thelowest current mar'et value Kout of the ) sectorsL and the highest growth rate. The cumulative aggregategrowth rate K2::D onwardsL is predicted to be 22.E:>, again the highest of the four.

The pharmaceuticals numbers are summari4ed in a tabular form on the next page.

&=


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THE WEIGHTED AVERAGE MODEL FOR BRAZIL

(aving loo'ed at the different sectoral indicators, it


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MEDIA

Indicators Value Weight Productar'et -alue Kbillion dollarsL 1D.=? 1? 2=D.?&ar'et -alue 6rowth *ercentage 12.1: 22 2.DD69 K2::2 onwardsL 11.D: 2: 2.&2ar'et -alue 0orecasts Kbillion dollarsL 2E.E& 12 &5E.2:ar'et -alue 0orecast 6rowth *ercentage ??.5: 1D 12.):69 K5 year forecast, 2::D onwardsL 12.2: 1& 1.5E

Total '++ ,,=&+

Table 19: Media in Brazil | Weighted Values of Indicators

PHARMACEUTICALS

Indicators Value Weight Productar'et -alue Kbillion dollarsL 5.&: 1? E:.1:

ar'et -alue 6rowth *ercentage 22.5: 22 ).E569 K2::2 onwardsL 1=.&: 2: &.DDar'et -alue 0orecasts Kbillion dollarsL 1).=? 12 1?=.):ar'et -alue 0orecast 6rowth *ercentage 1=:.?: 1D 2=.E169 K5 year forecast, 2::D onwardsL 22.E: 1& 2.E=

Total '++ ;+&++

Table 20: Pharmaceuticals in Brazil | Weighted Values of Indicators

(ence, summari4ing the product totals for all the sectorsB

Sector Product Totals

0ixed 3ine Telecom 55E.E=(otels &2).5Dedia DD).E:*harmaceuticals &:E.::

Table 21: Brazil | Product Total of all four sectors

nd moving on to the inter/sectoral proportionsB

Sector Percentage0ixed 3ine Telecom &:.1&>(otels 1?.)D>edia &5.?=>*harmaceuticals 1D.D&>

Total '++&++9Table 22: Brazil | Percentage Allocation amongst the four sectors

)1


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Figure 2: The Brazilian Pie

FUND ALLOCATION CHUNKS

ased on the above percentages,we divide the allocated H1?: million as followsB

Sectors Percentage Allocation Asolute Allocation0ixed 3ine Telecom &:.1&> H51.22 million(otels 1?.)D> H2E.D= millionedia &5.?=> HD:.=2 million*harmaceuticals 1D.D&> H2=.2= million

Total '++&++9 D'>+&++ million

Table 23: Fund Allocation Chunks for Brazil

)2

The Brazilian Pie

Fixed Line Telecom

Hotels

Media

Pharmaceuticals


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CHINA

The *eople of our corpus to it. s yet, the hinese economy has been better 'nown for it over the previous year. The cumulative aggregate growth rate Ksince 2::2Lstood at 1).D:>. The mar'et value forecasts over the next 5 years stands at H11.) billion. This translatesinto a growth of D:.D:>. The predicted 5 year cumulative aggregate growth rate K2::D onwardsL isE.E:>.

elow we reproduce the above statistics in a tabular formB

Indicators Valuear'et -alue Kbillion dollarsL ?.1:ar'et -alue 6rowth *ercentage 11.5:69 K2::2 onwardsL 1).D:

ar'et -alue 0orecasts Kbillion dollarsL 11.):ar'et -alue 0orecast 6rowth *ercentage D:.D:69 K5 year forecast, 2::D onwardsL E.E:

Table 24: Biotechnology in China | Indicators and Values

COMPUTER HARDWARE

Today, at least in the Indian mar'et, we see that almost all of the computer hardware and peripherals of alinternational brands has a @ade in hinaA label onto it. It is the story of cheap labour and lowermanufacturing costs. The mar'et value of the computer hardware industry stood at H&5.= billion. It grewby 12.1:> over previous year. The cumulative aggregate growth rate Ksince 2::2L came out to be1&.::>. It is predicted that in 5 years, the mar'et value will stand at HD5.= billion. This translates into agrowth of =).2:>M lthough this sounds great on an end/to/end basis, the predicted cumulative aggregategrowth rate turns out to be 1&.::> again.

The above facts are summari4ed in a tabular form on the next page.

2 $ourceB httpBen.wi'ipedia.orgwi'i!conomy%of%the%*eople


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omputer (ardware industry of hinaB

Indicators Valuear'et -alue Kbillion dollarsL &5.=:ar'et -alue 6rowth *ercentage 12.1:69 K2::2 onwardsL 1&.::

ar'et -alue 0orecasts Kbillion dollarsL D5.=:ar'et -alue 0orecast 6rowth *ercentage =).2:69 K5 year forecast, 2::D onwardsL 1&.::

Table 25: Computer Hardware in China | Indicators and Values

MOBILE PHONES

s per a recent news article onwww.forbes.com, the number of mobile phone users has crossed the D::million mar' as more and more people abandon fixed line phones for slee' loo'ing mobile handsets .&

The current mar'et value stood at H1).& billion. It grew by 2?.1:> over the previous year. The

cumulative aggregate growth rate Ksince 2::2L came out to be 2E.D:>. The 5 year mar'et value forecaststands at H52.5 billion. nd it translates into a whopping growth of 2DD.2:>, the highest amongst all the) sectorsM The predicted cumulative aggregate growth rate forecast for 5 years K2::D onwardsL stands at2E.D:>.

These figures are summari4ed as belowB

Indicators Valuear'et -alue Kbillion dollarsL 1).&:ar'et -alue 6rowth *ercentage 2?.1:69 K2::2 onwardsL 2E.D:ar'et -alue 0orecasts Kbillion dollarsL 52.5:ar'et -alue 0orecast 6rowth *ercentage 2DD.2:69 K5 year forecast, 2::D onwardsL 2E.D:

Table 26: Mobile Phones in China | Indicators and Values

ONLINE GAMING

Cnline gaming is huge in hina with applications spread across telecom, movies etc. The mar'et valuestood at H&5.& billion. This was a growth of 1?.E> over the previous year. The cumulative aggregategrowth rate Ksince 2::2L came out to be 1=.:>. It is predicted that in 5 years, the mar'et value will touch

H?D.D billion. This is an end to end growth of 11?>M The predicted cumulative aggregategrowth rateK2::D onwardsL turns out tobe 1D.=>.

The table on the next page summari4es the above factsB

& $ourceB httpBwww.forbes.comafxnewslimitedfeedsafx2::=:?2)afx52)E25E.html,accessed on 2?th;uly, 2::=.

))
http://www.forbes.com/http://www.forbes.com/afxnewslimited/feeds/afx/2008/07/24/afx5249259.htmlhttp://www.forbes.com/afxnewslimited/feeds/afx/2008/07/24/afx5249259.htmlhttp://www.forbes.com/afxnewslimited/feeds/afx/2008/07/24/afx5249259.htmlhttp://www.forbes.com/


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Cnline gaming in hinaB

Indicators Valuear'et -alue Kbillion dollarsL &5.&ar'et -alue 6rowth *ercentage 1?.E69 K2::2 onwardsL 1=.:ar'et -alue 0orecasts Kbillion dollarsL ?D.D

ar'et -alue 0orecast 6rowth *ercentage 11?.:69 K5 year forecast, 2::D onwardsL 1D.=Table 27: Online Gaming in China | Indicators and Values

THE FOUR SECTORS AT A SINGLE GLANCE

3et


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THE WEIGHTED AVERAGE MODEL FOR CHINA

(aving loo'ed at the different sectoral indicators, it;&;

Table 30: Biotechnology in China | Weighted Values

COMPUTER HARDWARE

Indicators Value Weight Productar'et -alue Kbillion dollarsL &5.=: 1? D:=.D:ar'et -alue 6rowth *ercentage 12.1: 22 2.DD69 K2::2 onwardsL 1&.:: 2: 2.D:

ar'et -alue 0orecasts Kbillion dollarsL D5.=: 12 ?=E.D:ar'et -alue 0orecast 6rowth *ercentage =).2: 1D 1&.)?69 K5 year forecast, 2::D onwardsL 1&.:: 1& 1.DE

Total '++ '='0&,*

Table 31: Computer Hardware in China | Weighted Values

)D


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MOBILE PHONES

Indicators Value Weight Productar'et -alue Kbillion dollarsL 1).&: 1? 2)&.1:ar'et -alue 6rowth *ercentage 2?.1: 22 5.ED69 K2::2 onwardsL 2E.D: 2: 5.E2ar'et -alue 0orecasts Kbillion dollarsL 52.5: 12 D&:.::ar'et -alue 0orecast 6rowth *ercentage 2DD.2: 1D )2.5E69 K5 year forecast, 2::D onwardsL 2E.D: 1& &.=5

Total '++ ;'&=*

Table 32: Mobile Phones in China | Weighted Values

ONLINE GAMING

Indicators Value Weight Productar'et -alue Kbillion dollarsL &5.& 1? D::.1:

ar'et -alue 6rowth *ercentage 1?.E 22 &.E)69 K2::2 onwardsL 1=.: 2: &.D:ar'et -alue 0orecasts Kbillion dollarsL ?D.D 12 E1E.2:ar'et -alue 0orecast 6rowth *ercentage 11?.: 1D 1=.?269 K5 year forecast, 2::D onwardsL 1D.= 1& 2.1=

Total '++ '(=>&>=

Table 33: Online Gaming in China | Weighted Values


Sector Product Totalsiotechnology 2?&.E&omputer (ardware 1)1=.D2obile *hones E&1.)2Cnline 6aming 5)?.?)

Table 34: China | Product Totals for all four sectors


Sector Percentage

iotechnology D.5?>omputer (ardware &).:1>obile *hones 22.&&>Cnline 6aming &?.1:>

Total '++&++9Table 35: Percentage Allocations for China

)?


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Figure 3: The Chinese Pie


ased on the above percentages,we divide the allocated H)=: million as followsB

Sectors Percentage Allocation Asolute Allocationiotechnology D.5?> H&1.5& millionomputer (ardware &).:1> H1D&.2) millionobile *hones 22.&&> H1:?.1= millionCnline 6aming &?.1:> H1?=.:5 million

Total '++&++9 D=0+&++ million

Table 36: Fund Allocation Chunks in China

)=

The Chinese Pie

Biotechnology

Computer Hardware

Moile Phones

!nline "aming


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INDIA

The economy of India, measured in 8$exchange/rateterms, is thetwelfth largestin the world, with a6* of around H1 trillion K2::=L. It recorded a 6* growth rate of E.:> for the fiscal year 2::?J2::=which ma'es it the second fastest big emerging economy, after hina, in the world. t this rate ofsustained growth many economists forecast that India would, over the coming decades, have a more

pronounced economic effect on the world stage.

)

India is a upcoming story in it in 2::?, higher than forecasted growthof 15> pro+ected in the previous year and is expected to grow at a 69 of 1=> till 2:12 to 9s.

115,?:: crores, as per the recently released study by 0II/*F at 0rames 2::=.D

The table on the next page, summari4es the sector


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0inancials of !ntertainment and edia in IndiaB

Parameters Values$ales 1)1).1Total !xpenses 1:E&.&*IT )1?.5

Interest 55.&epreciation )=.?*T 211.1verage !*$ ).?verage *! D:.D2

Table 38: Entertainment and Media in India | Indicators and Values

TELECOM

The telecom Industry has never had it so good. The last fiscal was a highly eventful year for the TelecomIndustry. The Industry saw superlative growth in terms of both subscriber addition and revenues. India

has become second largest wireless networ' in the world after hina by overta'ing 8$ when thesubscriber base grew from 2:5.=D million in arch 2::? to &::.51 million in arch 2::=, a growth of)D> o. It is worth mentioning that there was degrowth of &.2D> in the wireline segment during thesame period form ):.?5 million to &E.)2 million. The wireless subscriber base surged from 1D2.11million to 2D1.:E million in arch 2::=. The overall tele/density reached 2D.22> at the end of arch2::=. The sector revenues grew at the rate of 2=.1> o and the aggregate *T numbers o grew at animpressive rate of 22.&>.?

The numbers for telecom sector are as follows. ll figures are in 9s. thousand crores.

Parameters Values

$ales 1)?5&.DTotal !xpenses E5)E.?*IT 5D:&.?Interest =&?.)epreciation 1=D&.?*T 2?)5.:verage !*$ 5?.)verage *! 1:=.?

Table 39: Telecom in India | Indicators and Values

PHARMACEUTICALS

*harmaceutical is an upcoming story. Though the results in the last fiscal were not too impressive, nonethe less, the sector is set for a boom with favourable government policies.

The table on the next page summari4es the financial performance of the Indian pharmaceutical industry.ll figures are in 9s. thousand crores.

? $ourceB orporate $corecard/ arch 2::= quarter, 9esearch es', Fay2Fealth $ecurities *vt. 3td., 1:th;une, 2::=

5:


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The Indian *harmaceutical IndustryB

Parameters Values$ales =?=&.DTotal !xpenses ?&:?.?*IT 1E:=.2Interest 1?D.&

epreciation 2DD.1*T 11?:.=verage !*$ 1=.D=verage *! 2?.?2

Table 40: Pharmaceuticals in India | Indicators and Values


3et


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THE WEIGHTED AVERAGE MODEL FOR INDIA

(aving loo'ed at the different sectoral indicators, it*'*(&'=

Table 43: FMCG in India | Weighted Values for Indicators

ENTERTAINMENT AND MEDIA

Parameters Values Weights Product$ales 1)1).1 &5 )E)E&.5Total !xpenses 1:E&.& /15 /1D&EE.5*IT )1?.5 12 5:1:.:Interest 55.& 1: 55&.:

epreciation )=.? 1= =?D.D*T 211.1 &= =:21.=verage !*$ ).? 12 5D.)verage *! D:.D2 /1: /D:D.2

Total '++ =>++(&,

Table 44: Entertainment and Media in India | Weighted Values for Indicators

U$ee ppendix 2U$ee ppendix 2

52


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Figure 4: The Indian Pie


ased on the above percentages,we divide the allocated H2:: million as followsB

Sectors Percentage Allocation Asolute Allocation06 &).2E> HD=.5= million!ntertainment and edia &.)1> HD.=2 millionTelecom )2.5?> H=5.1) million*harmaceuticals 1E.?&> H&E.)D million

Total '++&++9 D*++&++ million

Table 49: Fund Allocation Chunks in India

5)

The Indian Pie

FMC"

#ntertainment andMedia

Telecom

Pharmaceuticals


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RUSSIAN FEDERATION

9ussia is a unique emerging mar'et, in the sense that being the nucleus of a former superpower showsmore anomalies. Cn one hand, its exports are primarily resource based, and on the other, it has a pool oftechnical talent in aerospace, nuclear engineering, and basic sciences. (ow this peculiar emerging mar'etintegrates itself into the world economy over the coming decade is a story as significant in today. The predicted cumulativeaggregate growth rate K2::D onwardsL is 5.?:>.

$ummari4ing the above statistics in a tabular formBIndicators Value

ar'et -alue Kbillion dollarsL =.?5ar'et -alue 6rowth *ercentage 5.D:69 K2::2 onwardsL 1&.?:ar'et -alue 0orecasts Kbillion dollarsL 11.5?ar'et -alue 0orecast 6rowth *ercentage &1.E:69 K5 year forecast, 2::D onwardsL 5.?:

Table 50: Renewable Energy in Russia | Indicators and Values

OTC Pharmaceuticals

Cver the ounter *harmaceuticals is a sub/category within the broader pharmaceutical category. Thecurrent mar'et value for this industry stands at H).1= billion. The growth over the previous year was?.1:> which was also the 69 since 2::2. It is predicted that the mar'etvalue will reach H5.=1billion showing an end to end growth of &=.E:>. The predicted 69 K2::D onwardsL will be D.=:>.

The following table reproduces the facts described aboveBIndicators Value

ar'et -alue Kbillion dollarsL ).1=ar'et -alue 6rowth *ercentage ?.1:69 K2::2 onwardsL ?.1:ar'et -alue 0orecasts Kbillion dollarsL 5.=1ar'et -alue 0orecast 6rowth *ercentage &=.E:69 K5 year forecast, 2::D onwardsL D.=:

Table 51: OTC Pharmaceuticals in Russia | Indicators and Values

= $ourceB httpBen.wi'ipedia.orgwi'i!conomy%of%9ussia

55


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MEDIA

edia is a H15.& billion mar'et currently. It grew by =.ED> over the previous year. The 69 since2::2 came out to be 1&.21>. The forecasted 5 year value of the mar'et is H2?.21 billion. This is a growthof about )&.2:>. The predicted 69 K2::D onwardsL is 12.2:>.

The table below summari4es the above factsB

Indicators Valuear'et -alue Kbillion dollarsL 15.&:ar'et -alue 6rowth *ercentage =.ED69 K2::2 onwardsL 1&.21ar'et -alue 0orecasts Kbillion dollarsL 2?.21ar'et -alue 0orecast 6rowth *ercentage )&.2:69 K5 year forecast, 2::D onwardsL 12.2:

Table 52: Media in Russia | Indicators and Values

HOTELS

9ussia being a large and scenic country, presents a huge potential in tourism. onsequently, hotelindustry recieves a boost. The current mar'et value of the industry stands at HD.?E billion. It experienceda growth of 15.2:> over the previous year. The 69 K2::2 onwardsL was 1D.&:>. The forecasted 5year mar'et value is H 1&.1= billion. This is an end to end growth of E).=:>. The predicted 5 year 69K2::D onwardsL is 1).&:>.

The above statistics are reproduced belowB

Indicators Valuear'et -alue Kbillion dollarsL D.?Ear'et -alue 6rowth *ercentage 15.2:69 K2::2 onwardsL 1D.&:ar'et -alue 0orecasts Kbillion dollarsL 1&.1=ar'et -alue 0orecast 6rowth *ercentage E).=:69 K5 year forecast, 2::D onwardsL 1).&:

Table 53: Hotels in Russia | Indicators and Values


3et


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THE WEIGHTED AVERAGE MODEL FOR RUSSIA

(aving loo'ed at the different sectoral indicators, it&='

Table 56: Renewable Energy in Russia | Weighted Values for Indicators

OTC PHARMACEUTICALS

Indicators Value Weight Productar'et -alue Kbillion dollarsL ).1= 1? ?1.:Dar'et -alue 6rowth *ercentage ?.1: 22 1.5D69 K2::2 onwardsL ?.1: 2: 1.)2

ar'et -alue 0orecasts Kbillion dollarsL 5.=1 12 DE.?2ar'et -alue 0orecast 6rowth *ercentage &=.E: 1D D.2269 K5 year forecast, 2::D onwardsL D.=: 1& :.==

Total '++ '(+&0>

Table 57: OTC Pharmaceuticals in Russia | Weighted Values for Indicators

5?


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MEDIA

Indicators Value Weight Productar'et -alue Kbillion dollarsL 15.&: 1? 2D:.1ar'et -alue 6rowth *ercentage =.ED 22 1.E?69 K2::2 onwardsL 1&.21 2: 2.D)ar'et -alue 0orecasts Kbillion dollarsL 2?.21 12 &2D.52ar'et -alue 0orecast 6rowth *ercentage )&.2: 1D D.E169 K5 year forecast, 2::D onwardsL 12.2: 1& 1.5E

Total '++ (&>;

Table 58: Media in Russia | Weighted Values of Indicators

HOTELS

Indicators Value Weight Productar'et -alue Kbillion dollarsL D.?E 1? 115.)&

ar'et -alue 6rowth *ercentage 15.2: 22 &.&)69 K2::2 onwardsL 1D.&: 2: &.2Dar'et -alue 0orecasts Kbillion dollarsL 1&.1= 12 15=.1Dar'et -alue 0orecast 6rowth *ercentage E).=: 1D 15.1?69 K5 year forecast, 2::D onwardsL 1).&: 1& 1.=D

Total '++ *>&**

Table 59: Hotels in Russia | Weighted Values of Indicators


Sector Product Totals

9enewable !nergy 2E?.)1CT *harmaceuticals 15:.=?edia 5EE.?&(otels 2E?.22

Table 60: Russia | Product Total of all four sectors


Sector Percentage9enewable !nergy 22.11>CT *harmaceuticals 11.22>edia )).5=>(otels 22.:E>

Total '++&++9Table 61: Percentage Allocations in Russia

5=


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Figure 5: The Russian Pie


ased on the above percentages,we divide the allocated H15: million as followsB

Sectors Percentage Allocation Asolute Allocation06 22.11> H&&.1D million!ntertainment and edia 11.22> H1D.=& millionTelecom )).5=> HDD.=? million*harmaceuticals 22.:E> H&&.1) million

Total '++&++9 D'(+&++ million

Table 62: Fund Allocation Chunks in Russia

5E

The Russian Pie

Renewale #nergy

!TCPharmaceuticals

Media

Hotels


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PHASE III:

FINALSCHEDULE

D:


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INVESTMENT PORTFOLIO

nd finally, we arrive at our international portfolio allocations. Fe have spread a corpus of H1::: millionacross the ) 9I economies of ra4il, 9ussia, India and hina. Fithin these economies, we haveidentified and analy4ed ) promising sectors and further divided the national allocation amongst them. The

table below summari4es our entire investment portfolio.

Country 2ector 9 ofPortfolio

Allocation Total

BRAI6

0ixed 3ine Telecom 5.12> H51.22 million(otels 2.ED> H2E.D= millionedia D.:=> HD:.=2 million*harmaceuticals 2.=2> H2=.2= million D'>+ million

R722IA

9enewable !nergy &.&1> H&&.1D million

CT *harmaceuticals 1.D=> H1D.=& millionedia D.D=> HDD.=? million(otels &.&1> H&&.1) million D'(+ million

I%#IA

06 D.=5> HD=.5= million!ntertainment and edia :.D=> HD.=2 millionTelecom =.51> H=5.1) million*harmaceuticals &.E)> H&E.)D million D*++ million

C?I%A

iotechnology &.15> H&1.5& millionomputer (ardware 1D.&2> H1D&.2) million

obile *hones 1:.?1> H1:?.1= millionCnline 6aming 1?.=:> H1?=.:5 million D=0+ million

BRIC '++&++9 D'+++ millionTable 63: Final Fund Allocation Schedule across BRIC economies

This mar's the end of our study. The fund can go ahead into the above mentioned countries and theirsectors and analy4e some promising companies to invest into. It is expected that the overall return on theportfolio of H1 billion dollars will be optimi4ed as per the schedule arrived at in this study.

In this study, therefore, we have tried to simulate a part of the due diligence process that large fundsunderta'e before they arrive at their investment deals. ctual investment in a company requires furthertedious diligence which can be a separate study all together. *! funds are rather choosy about thecompany they want to invest in and under what termsand conditions. This study acts as a navigator fromthe point the firm commits the defined corpus amounttill the point it identifies specific sectors in specificeconomies. Cf course, the same process can be replicated at a broader scale in real life. Cne criticalassumption has been that the firm carries the requisite sector/specific expertise and investment experienceto support it


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REFERENCES

6olman $achs K2::&L, reaming with 9IsB The *ath to 2:5:, 6lobal !conomics *aper, 1stCct.2::&

6oldman $achs K2::?L, 9Is and eyond, 6oldman $achs 6lobal !conomic 6roup

ritish -enture apital ssociation and *rice Faterhouse oopers K2::&L, 6uide to *rivate!quity, Oeith rundale

ustralian -enture apital ssociation, Fhy and (ow to Invest in *rivate !quity, 2::D

www.pri/center.com

www.worldban'.org

httpBen.wi'ipedia.org

www.securities.com

www.doingbusiness.org

www.coface.com

www.forbes.com

D2
http://www.pri-center.com/http://www.worldbank.org/http://en.wikipedia.org/http://www.doingbusiness.org/http://www.coface.com/http://www.forbes.com/http://www.pri-center.com/http://www.worldbank.org/http://en.wikipedia.org/http://www.doingbusiness.org/http://www.coface.com/http://www.forbes.com/


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APPENDIX 1

A Study on Possible Investment Options in BRIC Nations

Documents

Transcript of A Study on Possible Investment Options in BRIC Nations