Orion 3

Nifty Linked Debenture (36/40 Months)

Overview Karvy Private Wealth presents 36/40 Months Nifty Linked Debenture. The main objective of the product is to strive to generate superior fixed income return while preserving the capital. The product suits those who have a moderate or a positive view on the underlying market and wish to capitalize on the prevailing market behavior. The product is a 40 months investment linked to Nifty price. The investment plan enjoys unique advantages over comparable instruments, some of which are listed as follows: 1. The product will pay an absolute coupon of 50% if the final level is greater than the strike level which is 110% of the initial level at the end of 36th Month. 2. The product is 100% principal protected and suited for investors who are risk averse in nature. 3. Redemption value of the product will be your capital plus the net interest (coupon).

Investment Rationale 1. Our in house view on the Indian market is positive, based on our long term assessment that the domestic economy that will grow at near double digit levels led by strong growth in manufacturing industry and services and resurgence in agriculture which will help drive corporate earnings growth over the next few years. 2. However, given the spate of negative news that has affected the fresh inflows into the Indian market. Further, the recent market behavior suggests that Indian markets are prone to more volatility swings amid growing uncertainties and hence one has to live with the sharp swings and a range bound movements. Further, the events that will unfold during next few months would be vital to the Indian market behavior. These events includes a) The earnings downgrade that the market is expecting post the 4Q and the annual results of the key companies/sectors/industries; b) the State Election Result which will be the key to political climate on the centre and the ruling government and; c) Expectation and actual Monsoon behavior that would aid rural demand and agricultural growth.

3. This product suits those investors with a view that market will be in a indecisive mode/zone during next few quarters; but will be positive during medium to long term, there by wanting to capitalize a superior return. Key Features

Issuer Instrument Underlying/ Reference Index Face Value Issue Size Opening Date of Issue Closing Date of Issue Proposed Deemed Date of Allotment (DDA) Date of Allotment (DA)

The Company Secured Redeemable Non-Convertible Debenture S&P CNX Nifty Index Rs. 100,000 per Debenture Rs. 50,000,000/- (Rupees Fifty Million Only), with the right to retain over subscription on a private placement basis. The amount of over subscription to be retained will be decided by the Board. 02-June-2011 23-June-2011 30-June-2011 15 days from DDA subject to receipt of all mandatory documents. The Company will allot the debentures on the date of allotment only if mandatory documents have been submitted by you before the DDA. In case of non submission of mandatory documents including the details pertaining to your demat account with NSDL, the application will be rejected and the application money will be refunded without any interest within 15 days from the DDA. Official Closing level of S&P CNX Nifty Index on DDA 26-June-2014
Official Closing level of S&P CNX Nifty Index on Final Fixing Date

Initial Fixing Level Final Fixing Date Final Fixing Level Strike Level Coupon Rate

110 % of the Initial Fixing Level Scenario If Final Fixing Level >= Strike Level

Coupon 50%

If Final Fixing Level < Strike Level 0%

Redemption Date Redemption Value Issuance & Trading Depository Security Placement Charges

23-October-2014 Face Value*(1+Coupon Rate) DEMATERIALIZED form NSDL The Debenture shall be secured by way of floating charge on loan against shares receivables of the Company. 3% of Face Value to be collected upfront.

Back tested Results 1. We have back tested 137 monthly Nifty data from Jan 2000 to May 2011 on an expiry-toexpiry basis with an assumption that both entry and exit shall take place on the expiry date during the observation period. 2. Of the 137 monthly observations, a total of 101 monthly Nifty return data on a rolling basis were observed from Jan 2003 to May 2011 and the results were recorded. 3. It has been observed that the probability of Orion 3 generating a positive return (which is 50% in this case) is 80.20%. In other words, 81 out of 101 monthly data on a rolling return basis, Orion 3 returns were positive to the tune of 50%.

Scenario Analysis and Calculation of Redemption Value

Scenario Entry Level Exit/Final Level Change in Nifty price Coupon Payable (4) (1) 1 2 3 4 6000 6000 6000 6000 (2) 7500 4500 6540 6600 (3) 25% -25% 9% 10% 50% 0% 0% 50% (5) 5,00,000 5,00,000 5,00,000 5,00,000 (6) = (5) * (4) 2,50,000 2,50,000 (7) =(5)+(6) 7,50,000 5,00,000 5,00,000 7,50,000 Minimum Value Net Interest Payable Redemption Value

Scenario 1: Here the final Nifty price is up by 25% and hence, the coupon payable is 50%. Scenario 2: Here the final Nifty price is down by 25% and hence no coupon (interest) is paid. Scenario 3: Here the final Nifty price is up by 9% which is less than the strike level of 10% and hence no coupon is paid. Scenario 4: Here the final Nifty price is up by 10% which is equal to the strike level; hence a coupon of 50% is paid. Risks - Credit risk of the issuer. However, the debentures shall be secured by way of floating charge on loan against shares receivables of the company.

Product and Investment Team

Swapnil Pawar Si Kannan

Disclaimer
The information and views presented here are prepared by Karvy Private Wealth or other Karvy Group companies. The information contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended here may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned here, investors may please note that neither Karvy nor any person connected with any associated companies of Karvy accepts any liability arising from the use of this information and views mentioned here. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above-mentioned companies from time to time. Every employee of Karvy and its associated companies are required to disclose their individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Stock Broking Ltd.

The information given in this document on tax is for guidance only, and should not be construed as tax advice. Investors are advised to consult their respective tax advisers to understand the specific tax incidence applicable to them. We also expect significant changes in the tax laws once the new Direct Tax Code is in force this could change the applicability and incidence of tax on investments.