Investment Strategy

Indias GDP is projected to grow 6-7% in the medium term and has grown over 8% in the last three years, making it one of the fastest growing economies in the world. India has favorable demographics, including the largest population of youth in the world. Manufacturing growth is beginning to take off; a complement to services growth. There is a deepening of financial markets and an increase in private sector lending. On PPP basis, the Indian economy is already fourth in the world behind the U.S., China and Japan. India has a robust public market, as evidenced by over 5,000 public companies that are traded on the local stock market.

Our focus is to invest in innovative SMEs meeting the needs of the mass market.
It is projected that India will grow an average of 7-8% until 2020, subject to caveats. India will overtake the U.S. economy by 2050, though per-capita income will remain non-comparable. Indias GDP per capita will quadruple by 2020. Around 700 million people will move to cities by 2050 in one of the largest waves of urbanization in history. India needs $500 billion of investments in the next three years, of which the domestic banking system can only provide $120 billion. Such a historic growth is predicated upon India attracting global investments as well as tackling some of the most pressing challenges it faces today; reducing gap between rich and poor, fostering human resource development, managing infrastructure development and urbanization, reducing environmental impact, tackling growing health problems, instilling governance robustness etc. Top of the stack of these challenges is to grow in an inclusive manner such that the benefits of growth reach the underserved masses of India. Interestingly market-based solutions have demonstrated their efficacy in tackling these socio-economic development issues, supplementing the efforts of the government and non-profits. We believe that developing and growing SME (Small- and-Medium-Sized Enterprises) fits well within this perspective. To be more specific, our current focus is to invest in high growth areas-which are crucial for socio-economic development-so that the benefits of economic growth reaches the underserved masses in India. We believe that India like other emerging markets have unique problems that cannot be solved by mere replication of current developed economy business models without significant local innovation. Significant opportunity exists in improving the quality of life of the masses by providing affordable products or services, enabling sustainable development and providing employment to significant number of people and in that process help build great businesses.

The three investment themes that are of interest to us are:

1. Affordable Consumption and related Supply Chain: Affordable product and services that help improve the quality of life of the masses in India. 2. Sustainable Development: Innovative solutions that help improve the quality of life for the masses through sustainable infrastructure development; tackling issues such as water and waste management, renewable energy, telecom, financial services and budget housing. 3. Leveraging Abundant Human Resource Talent: This is about companies reaping Indias demographic dividends by innovatively leveraging its abundant working population and providing jobs to the masses of India.

Few of the sectors of interest to us are:

Education and Training Indias literacy rate is 64% despite government spending on education at 4%-5% of GDP. Indias services-led economy (54% of GDP in 2007) will demand an educated and specialized labor pool. Fifty percent of India is younger than 25years-old, making it one of worlds largest markets for education and training. Public spending is constrained to meet the need in the primary and secondary education space. The acute shortage in higher and vocational education creates avenues for private sector investments. SONG aims to provide capital to entrepreneurs with scalable solutions that provide affordable access to education and training. Several interesting SME opportunities exist within e-Learning and tutorials, vocational training, preschool education, private tutorials and ICT providers for schools. Our investment thesis supports enterprises that can help industries leverage the abundant and inexpensive labor pool available in urban, semi-urban and villages, thus enhancing the employability of Indias underserved population. Agriculture/Food India has the worlds second largest population and 9% of the worlds total agricultural land. Agriculture contributes 25% to Indias GDP and employs 72% of Indias population. However, over 260 million farmers undertake subsistence farming and live on less than one dollar a day. The agriculture sector in India still lags behind many developed countries such as China and the USA in terms of yields for key crops. Several opportunities exist to bring in technologies to improve productivity and increase the efficiency of the entire supply chain from production to retail. Our investment thesis supports enterprises that can create commercially viable enterprises by leveraging the strengths of Indian agriculture space and an abundant, cost-effective labor supply from the underserved communities. Source: Census of India Healthcare India has a vast healthcare system that constitutes about 5% of the GDP. However, the public sector accounts for a mere 20-25% of total healthcare spending. Indias public spending on health remains among the lowest in the world. Large parts of the country still have no access to basic medical facilities. The public sector has not been able to deliver quality healthcare, which creates a need for private sector participation. Nearly 75-80% of outpatient visits are handled by private healthcare providers. In India, expensive healthcare adversely impacts the economic condition of the poor, leading to a vicious cycle that further reduces their standard of living. SONG aims to provide capital to entrepreneurs with innovative models to substantially reduce costs and increase access to quality preventive and curative healthcare facilities. Significant opportunities exist among tier-II and tier III towns and rural areas in segments such as medical devices and equipment, affordable hospitals, diagnostic services, medical insurance and other support services. Our investment thesis supports business ventures that can promote access to affordable consumption by reducing the costs across the supply chain so that the price and value proposition makes sense to meet the needs of underserved community. Source: World Health Organization/Crisil Report, IBEF, Technopak Advisors-India Healthcare Trends 2008, CIIMcKinsey report. Basic Utilities Indias sustained economic growth and rising urbanization has dramatically increased the need for upgrading its infrastructure and public utilities. According to the 2001 census, only 56% of Indian households-and only 44% of rural households-have electricity. Also,

over 50% of Indias urban population lives in slums without access to basic services like clean water and sanitation. The cash-strapped government has been unable to infuse efficient capital to provide basic rural and urban infrastructure to the millions of poor in India. SONG aims to provide capital to entrepreneurs with cost-effective and scalable solutions to avoid community deterioration. We are looking for businesses that will provide access to clean water, sanitation and hygiene, clean energy, rural distribution, financial services, affordable housing and transportation. Our investment thesis supports enterprises that can create commercially viable alternatives for sustainable development and improve the quality of life for the 800 million underserved population. Source: Census of India Business Services India has one of the fastest growing economies in the world today. Several sectors have shown high growth, such as automobile manufacturing, pharmaceutical, IT&ES, outsourcing, banking and financial services and domestic consumption-related businesses. India recently became one of the key global outsourcing destinations. This trend is being increasingly adopted by domestic companies who are looking to cut costs by outsourcing their non-core functions. Significant opportunities exist for entrepreneurs to form an ecosystem to facilitate continued growth of existing sectors as well as unlock opportunities in emerging sectors of the economy. SONG aims to provide capital to entrepreneurs with ideas that can leverage the abundant and inexpensive Indian labor pool to build service businesses that are critical for continued growth of the Indian economy. Significant opportunities exist among segments such as lease rental services, staffing, logistics, supply chain, IT/ ITES, BPO and other outsourcing models such as facilities management. Our investment thesis supports enterprises that can provide businesses services to the growing sectors in India at an affordable price by leveraging the abundant pool of labor available in India. Source: Census of India Learn about the interrelationship between our Investment Lens and our three Investment Strategy themes.

INVESTMENT STRATEGIES OF CHRYS CAPITAL

Consistent Investment Philosophy Our relentless focus at ChrysCapital is to generate superior investment returns for our investors. To accomplish this, we follow a few fundamental principles of value investing:

Invest in businesses that we understand

Take a contrarian approach

Disciplined risk aversion and diversification

Focus on long-term fundamentals