APJ 20

Objective

The Fund seeks to achieve absolute returns with below-average risk over a horizon of 4-5 years. The fund would invest in sectors that will benefit from the next stage of India’s growth on the back of improvement in India’s economic and policy climate. The Fund endeavours to grow investors’ capital by 3x in 5 years time or less.

Investment Strategy

We believe that select participants in the following industries (a) agriculture, (b) speciality chemicals, (c) mining, (d) hi tech manufacturing and (e) infrastructure will see a new wave of growth over the next 5 years and will be a direct beneficiary of India’s macro policy initiatives as well as inherent demographic strengths it has built over a period of time.

Over the years, each of the target sectors has built a niche set competencies that have bordered on being disruptive. This has translated to them enjoying a quasi-oligopolistic status in their industry. However, these developments in absolute terms are at a small number. The evolution of the end user industry is such that, this base is poised to experience high growth and operating advantage over the next few years. In other words, each of these firms, have a high inbuilt option to participate in a disproportionate pay off. Our endeavour is to participate with concentrated positions across sectors that will be a direct or proxy beneficiary of the growth in the specified industries. While our study of the opportunities reveals the underlying and obvious risks that could play out in future, we believe the risk reward equation is favourable to an equity investor at current valuations considering the next 5 years’ potential growth. 

Universe

The Fund’s investment universe is the set of all listed companies whose market capitalization ranges from Rs. 200 cr. and above. The Fund’s primary source of investment ideas will come from firms within industries that are a proxy to the following industries: (a) agriculture, (b) speciality chemicals, (c) mining, (d) hi tech manufacturing and (e) infrastructure. The investee companies would necessarily be one that has built a niche for itself over the years and is set to leverage on the same to deliver a pace of return that is disproportionate on the upside, in the coming years. 

Structure

The Fund will operate on the PMS platform where the investor’s assets will remain either in cash with HDFC Bank/Axis Bank/liquid fund (pending deployment), or in the form of stock with CDSL. In either case, the assets will be under the investor’s name.The Fund will hold a concentrated portfolio of about 12-20 stocks, across various sectors. There is likely to be low turnover in the Fund. While the Fund will be open-ended, the expected time horizon for an investment in the Fund is 60 months.There will be no benchmarking over the life of the Fund.

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