BC - AD Fund

Objective

The investment focus is on growth oriented companies in specific sectors which are leading the migration of market share from unorganised players to organised players. 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. 

Investment Approach

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 top line 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

2. Consumer durables

3. Logistics

4. Personal grooming & Hygiene

5. Dairy

6. Retail & Jewellery

7. Healthcare

8. Hospitality & Entertainment

9. Alternative finance

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.

Investment Risks

The fund would focus on companies in sectors where it expects a gradual shift in consumer demand from the unorganized players to the organized. The investment process would involve analysing multiple sectors and drawing up the list of factors which would be triggers for the migration of demand to the organized space. The key risk would be the time required for the transition to start playing out within the selected sectors. There might be stocks/sectors wherein the anticipated migration might take longer than the initially estimated time periods. Thus, it is suggested that investors take a longer time horizon view when investing in this particular theme.

Portfolio 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 a SEBI registered custodian. While tracking and monitoring of investments will be active, there’s likely to be low turnover in the fund.

Benchmark: S&P BSE Midcap