The BC-AD Fund

Objective

 

As India’s economy grows rapidly in scale and sophistication, several sectors are positioned to change dramatically over the next decade.  Certain powerful trends are driving the shift in the balance of competitive advantage in favour of organized businesses. The fund will invest in established companies in specific sectors which are leading the migration of market share from the unorganised players to the organised players.  The endeavor is to generate an absolute return of 200% over a 5-year time period.

 

Investment Strategy

 

India’s economy has a high proportion of unorganised businesses which are estimated to account for about 35% of the GDP.  As the economy grows in size from the current $ 2.6 Tn to $ 5 Tn over the next decade, it will traverse certain social, technology, scale, legal, taxation and regulatory changes. These changes are likely to challenge the current business models of unorganized players in certain sectors. As a result, well established organized players in such sectors will gain market share along with improving margins, potentially generating very high earnings growth. The BC-AD fund has been structured to benefit from this imminent migration of market share from the unorganised segment to organised players. The fund would be investing in well-established organised players who would be gaining market share from the unorganised players thus posting higher revenue growth rate than that of their industry. The high topline growth along with the benefits of operating leverage would help them record a superior earnings trajectory over the next decade.

 

Universe

 

The Universe of Companies would be broadly selected from the following sectors:

 

1. Building materials                                                                     6. Retail & Jewellery

2. Consumer durables                                                                  7. Healthcare

3. Logistics                                                                                      8. Hospitality & Entertainment

4. Personal grooming & Hygiene                                                9. Alternative finance

5. Dairy                                                                                          10. Real Estate

 

These sectors are only indicative of our current thinking and it is entirely possible that as our research progresses we might look at companies beyond these sectors.

 

Structure

 

The portfolio is likely to have around 15-20 stocks in the PMS platform. The investor's assets will always remain in the investor's name with ILFS as custodian. While the tracking and monitoring of the investments will be active, the activity level of trades will be passive.