Investment Objective

Portfolio is designed for investors seeking a secularly advantaged, concentrated, high-alpha approach to growth. Portfolio typically invests across sectors & sub-sectors targeting companies that exhibit leadership & secular growth characteristics, sustainable competitive advantages and reasonable valuations based on our analysis of fair value.

Strategic Equity Mandate

Growth:

Profit growth for past decade in higher double digits. Both were fast growing companies.

Reasonable Valuation:

Starting valuations in 2011 reasonable on peg ratio. current valuations (pe) of 112 for Page industries & 92 for pidilite is deterrent to make profitable investment.

Low Institution Ownership:

Institution ownership has increased from 34% to 42%. promoter holding has steadily declined in page industries (jockey).

Stock Selection Criterion

5 quantitative factors and 2 qualitative factors are used for stock selection

Quantitative Factors

Return Ratios

The higher the returns on equity and capital employed over weighted average cost of capital (WACC), the higher is the value addition by the companies to its minority shareholders. Studies have indicated that companies with superior return ratios outperform companies with poor or lower return ratios. Return ratios are averaged over a 5-year period to smoothen out lumpiness and volatility (if any).

Minimum Leverage

Investments will be made in those companies that can grow without leveraging the balance sheet. In a high interest rate environment like the present one, interest outgo will pinch bottom line and therefore shareholder wealth. Minimal debt for purpose of working capital is acceptable. Long term debt for the purpose of expansion, Greenfield etc is avoided.

Domestic Business

Majority of the investments will only be done in companies that generate at least 80% of their business from India. Therefore, export-oriented companies will be avoided and focus will be on domestic consumption story. The above filter will make the portfolio immune to currency risk, global slowdown etc.

Capital Light

Generally companies with very high fixed asset turnover ratios are preferred. Hence, asset heavy businesses are discarded and entry barriers in these cases are mostly due to the company s brands and the space it operates in. Most companies that pass this filter will generate sufficient cash flows to fund their capex without external borrowings.

High Operating Leverage

Companies that are in a better position to absorb rise in raw material prices and companies that are able to easily cut its cost by increasing volumes are preferred especially in uncertain environments like the one we have at present..

Qualitative Factors

Minority Shareholder Interest

Identifying managements that have generally kept in mind and have acted in the interest of minority shareholders, do not frequent capital markets (for raising funds) and have been rational in their decisions.

Strong Brands & Market Presence

Brand pull will enable companies to pass on higher raw material costs to consumers. Brand pull will also ensure that consumers continue to purchase the products with their reduced purchasing power in a high inflationary environment.

Investment Objective

Portfolio is designed for investors seeking a secularly advantaged, concentrated, high-alpha approach to growth. Portfolio typically invests across sectors & sub-sectors targeting companies that exhibit leadership & secular growth characteristics, sustainable competitive advantages and reasonable valuations based on our analysis of fair value.

High Growth Matrix

Market Size:

Companies operating in Industries which have large potential. Market size is expanding due to external as well as internal enablers.

Market Share:

Companies gaining market share.

Consistent Growth:

Companies benefiting from economies of scale and witnessing improvement in return ratios.

Stock Selection Criterion

5 quantitative factors and 2 qualitative factors are used for stock selection

Quantitative Factors

High Return Ratios

The higher the returns on equity and capital employed over weighted average cost of capital (WACC), the higher is the value addition by the company to its minority shareholders. Studies have indicated that companies with superior return ratios outperform companies with poor or lower return ratios. Return ratios are averaged over a 5 year period to smoothen out lumpiness and volatility (if any).

Minimum Leverage

Investments will be made in those companies that can grow without leveraging the balance sheet. In a high interest rate environment like the present one, interest outgo will pinch the bottom line and therefore shareholder wealth. Minimal debt for purpose of working capital is acceptable. Long term debt for the purpose of expansion, Greenfield etc is avoided.

Market Cap Threshold

Will invest in companies with market cap of not less than 1000 crores which will avoid small companies with lesser float, but at the same time will avoid investing in companies which are very large and themselves find it difficult to grow.

Capital Light

Generally companies with very high fixed asset turnover ratios are preferred. Hence, asset heavy businesses are discarded and entry barriers in these cases are mostly due to the company’s brands and the space it operates in. Most companies that pass this filter will generate sufficient cash flows to fund their capex without external borrowings.

High Operating Leverage

Companies that are in a better position to absorb rise in raw material prices and companies that are able to easily cut its cost by increasing volumes are preferred especially in uncertain environments like the one we have at present.

Qualitative Factors

Minority Shareholder Interest

Identifying managements that have generally kept in mind and have acted in the interest of minority shareholders, do not frequent capital markets (for raising funds) and have been rational in their decisions.

Strong Brands & Market Presence

Brand pull will enable companies to pass on higher raw material costs to consumers. Brand pull will also ensure that consumers continue to purchase the products with their reduced purchasing power in a high inflationary environment.

Investment Objective

Portfolio is designed for investors seeking a secularly advantaged, concentrated, high-alpha approach to growth. Portfolio typically invests across sectors & sub-sectors targeting companies that exhibit leadership & secular growth characteristics, sustainable competitive advantages and reasonable valuations based on our analysis of fair value.

Business Leader Mandate

Management:

Consistent business decision to maintain leadership in the industry along with prudent capital allocation and guarding minority shareholders all the time.

Market Opportunity:

Focusing on industry & segment which are under penetrated and offer large market opportunity for leader to expand its business activity & benefit from economies of scale.

Market Share:

Focusing on leaders or potential leaders who are gaining market share because of product innovation, distribution reach and adoption of newer technology.

Stock Selection Criterion

6 quantitative factors and 2 qualitative factors are used for stock selection

Quantitative Factors

Leader & Potential Leader

Investment will be made in companies exhibiting leadership in large market opportunities. Alternatively fund will also invest in companies which are potential leaders and gaining market share. Majority of fund will be invested in leaders or potential leaders diversified across major as well as minor sectors.

Global Size Businesses

Portfolio design by mandate, will invest in global size businesses. Majority of the companies owned will have world class distribution as well as products & services. Portfolio companies will be beneficiary of both, India s demographic growth as well as its rise in global trade. The above filter will make the portfolio withstand economic cycles and remain resilient as well as benefit during tougher economic cycle.

Economies Of Scale

Companies will benefit due to sheer size of business as well as economic dominance. Companies will also benefit from cost efficiency as well as better technology adoption. Being leaders, they will be able to use external resources at the most competitive rates.

Minimum 70% Of Weight From Nifty 200

Mandate will ensure that minimum 70% of the portfolio investment will be made in top 200 companies of India. Additional investment will be judiciously used to invest in leaders of sectors which are emerging and growing at rapid pace.

Market Cap In Excess Of Billion Dollar

Minimum market cap while investing will be 1/2 billion USD (approximately 4000 crore). this will increase focus of fund towards extra large companies.

High Return Ratios

The higher the returns on equity and capital employed over weighted average cost of capital (WACC), the higher is the value addition by the company to its minority shareholders. Studies have indicated that companies with superior return ratios outperform companies with poor or lower return ratios. Return ratios are averaged over a 5 year period to smoothen out lumpiness and volatility (if any).

Qualitative Factors

Minority Shareholder Interest

Identifying managements that have generally kept in mind and have acted in the interest of minority shareholders, do not frequent capital markets (for raising funds) and have been rational in their decisions.

Strong Brands & Market Presence

Brand pull will enable companies to pass on higher raw material costs to consumers. Brand pull will also ensure that consumers continue to purchase the products with their reduced purchasing power in a high inflationary environment.