aequitas presentation 2.2-new-arrangement presentation.pdf · avanti feeds 26 13360 eicher motors...

Equity Fund

Oct 2019

Aequitas Equity Fund

➢ Meaning of Aequitas

➢ Why Aequitas

➢ About the Fund

➢ Our Forte

➢ Why Smallcaps

➢ Process Flow

➢ Our Perception of Risk

➢ Pitfalls we Avoid

➢ Our PMS Performance

➢ Investment Philosophy

➢ Our PMS Stock Picks

➢ Key Personnel

➢ Best in Class Processes

➢ Contact us

➢ Disclaimer


INDEX

Aequitas is the Latin goddess of Equity & Fairness. She is most often depicted holding a pair of scales to represent Fair Dealings and Equality.

She is shown in a dignified pose, wearing a diadem and holding a sceptre or staff, and sometimes She is also given a cornucopia, the symbol of abundance and wealth.

She represents true fairness, a different concept from justice for justice is under the law, and must follow it to the letter.

Some have seen in her a Goddess of honest merchants and fair dealings in contracts, negotiations, and other merchant- related endeavours: by this definition the cornucopia is seen as a symbol of the wealth to be gained through fair enterprise.

Aequitas

The word “Equity” originatesfrom the Latin word Aequitas


WHY AEQUITAS

Aequitas PMS has one of the best

track record over the last 5 years

Low churn ratio &

low transaction cost

Tax efficient investing;

lower taxes on long term

holdings

No distributors and intermediaries;

Plan to grow through references

Aequitas PMS has best risk adjusted returns


ABOUT THE FUND


Category III Open-ended

Ticket size –INR 30 mn

1 year lock-in period

Medium to long-term timeframe

Managementfee - 2% (monthly)

Performance fee -10% of

capital appreciation (annually)

Fund to be managed by Riseequities Managers LLP, an entity set up by Aequitas Investments


OUR FORTE

Contrarian

Out of favour industries

Moats

Industry leaders

Process driven

Comprehensive research approach

Fundamentals & Valuation

High margin of safety

In-house research

Zero reliance on external agencies


WHY SMALLCAPS

Index 2009 2018 Growth

Smallcap 2911 19895 7x

Largecap 9406 38645 4x

M Cap (Rs cr) 2004 Peak Mcap

Avanti Feeds 26 13360

Eicher Motors 500 89900

Finolex Cables 350 11500

HDFC Bank 10,800 602000

Mkt Price (Rs) 2008 2018

Suzlon 270 5

R Com 508 14

Unitech 276 2

DLF 1215 175

Have outperformed

largecaps in upcycles

01

Many large companies

started as mid/ smallcaps

02

‘Riskier than largecaps’ is

a myth

03

A great opportunity to play high growth companies due to low institutional interest &

lack of analyst coverage leading to high discrepancy between price & fundamentals


PROCESS FLOW

SCREENERS RESEARCH PORTFOLIO

CONSTRUCTIONONGOING

RESEARCH- Growth- Revenue, PAT,

capacity utilisation

- Valuation dislocation -

- Debt

- Dividend track record

- Promoter ownership

- Insider Buying

- Industry Leadership

- Credit rating

- Long term track record

- Annual report

- Quarterly results

- Industry/ company

news

- Management interviews

- Management meetings

- Press releases

- Conference calls/

Analyst meets

- 15-20 stocks

- Sectoral balance

- Catalyst for stock

re-rating


OUR PERCEPTION OF RISK

Risk of buying

stocks dear without

adequate margin

of safety.

Reasonable

valuation is the

cornerstone of all

our investment

decisions.

Risk that current

earnings could

decline due to

technological

changes,

economic changes

or deterioration in

management.

Risk of an over-

leveraged balance

sheet that is

ignored during

good times in

favour of the

cyclically high &

unsustainable

earnings.

Risk is not a number, it is a concept or a notion. Risk equates to what Ben

Graham called a “permanent loss of capital”.

Valuation Risk Earnings Risk Bal Sheet Risk


PITFALLS WE AVOID

IPOs

Leverage

Fad or hot sectors

Low promoter holding

Corporate governance

QIPs/secondary equity sales

High institutional ownership

Expensive valuations


AEQUITAS’ PMS PERFORMANCE

Chart depicts absolute performance since inception; Returns are adjusted for inflows/ outflows and are after expenses; 30th Sept, 2019

Aequitas Nifty Mid Cap Index Small Cap Index Avg Small & Mid Cap MFCap MF

Past performance is no guarantee of future results. Past performance may or may not be sustained in future

468%

92%

-40%

60%

160%

260%

360%

460%

560%

660%

760%

860%

960%

Feb

-13

Jun

-13

Oct

-13

Feb

-14

Jun

-14

Oct

-14

Feb

-15

Jun

-15

Oct

-15

Feb

-16

Jun

-16

Oct

-16

Feb

-17

Jun

-17

Oct

-17

Feb

-18

Jun

-18

Oct

-18

Feb

-19

Jun

-19

Oct

-19

Aequitas - CAGR 29.55%

Nifty - CAGR 10.13%A

equ

itas

-30%

-20%

-10%

0%

10%

20%

30%

1 Year

Ae

qu

itas

-20%

0%

20%

40%

60%

80%

3 Year

Aeq

uit

as

-10%

40%

90%

140%

5 year


INVESTMENT PHILOSOPHY

The company has to be a

growth company with

above average growth

potential for the next 3-5

years . Markets reward a

higher PE multiple for

growth companies

Contrarian approach

does not mean doing the

opposite of others, it

means doing things

differently. Buying in

popular names will not

give Multi-bagger returns

The valuation has to be

reasonable. This is

important because there

has to be potential for

re-rating. A combination of

EPS growth and PE re-rating

leads to multi-bagger

returns.

GROWTH VALUECONTRARIAN

X X

MULTIBAGGER APPROACH



INSTITUTIONAL IMPERATIVE

We ignore sectoral weightages while

investing in companies with the best

prospects

CONCENTRATED HOLDING

We aim to construct a portfolio of 15-20

stocks across various sectors

CATALYST

Value can remain value for long time.

We actively look for catalysts which will

lead to stock re-rating.

QUALITY COMPANIES

We invest in industry leaders with strong

-growth prospects, management, B/S

LONG-TERM OUTLOOK

Invest with a 3-5 year horizon with a

focus on low churn rate

1

3

5

2

4

PORTFOLIO CONSTRUCTION



INDUSTRY LEADERSMost of the companies in our portfolio

are industry leaders with a strong

sustainable competitive advantage

LOW DEBTCompanies have very low debt levels

and some of the companies are in fact

net cash positive

MANAGEMENTGood dividend paying record, corporate

governance practices & sound long

term performance record is a must

CREEPING ACQUISITIONS/ BBMajority of our companies have done

buy-back/ creeping acquisition in the 12

months prior to our initial investment

VALUATIONSThe portfolio PE ratio is less than

market PE ratios (adjusted for

cyclicality in earnings)

CASH FLOWOur portfolio includes companies with

strong and consistent cash flow

generation

COMPANY ATTRIBUTES



OUR PMS STOCK PICKS

Avanti Feeds Finolex Cables

✓ Industry Leadership ✓

✓ Low debt to Equity (<1 ) ✓

✓ Institutional Ownership (<20%) ✓

✓ Listing History (>10 years) ✓

✓ Low Equity Float

✓ Valuation (<12 PE) ✓

Introduction of Vannamei

shrimps

Catalyst Exceptional write offs


HEG Ltd. Garware

✓Industry Leadership

✓

Low debt to Equity (<1 )

✓

✓Institutional Ownership (<20%)

✓

✓Listing History (>10 years)

✓

✓Low Equity Float

✓

✓Valuation (<12 PE)

✓

Global GE capacity shutdown Catalyst Buyback

OUR PMS STOCK PICKS


CCL Products Heritage Foods

✓ Industry Leadership ✓

Low debt to Equity (<1 )

✓ Institutional Ownership (<20%) ✓

✓ Listing History (>10 years) ✓

✓ Low Equity Float ✓

✓ Valuation (<12 PE) ✓

Commencement of Vietnam

plant

Catalyst Healthy dairy sector outlook

OUR PMS STOCK PICKS


KEY PERSONNEL

SIDDHARTHA BHAIYA, Managing Director & Fund Manager

Siddhartha founded AICPL in 2012 with the aim of creating long term wealth for

clients. As a fund manager of AICPL, Siddhartha has outperformed the NIFTY in

6 out of 7 years and delivered a CAGR of 37.77%. He is a qualified Chartered

Accountant and prior to AICPL, managed funds at Reliance Capital Asset

Management.

NEERAV SHAH, Director - Operations

Neerav is a qualified Chartered Accountant and has more than 14 years of

experience in capital markets. Neerav is a part of Aequitas since inception. In the

past he has handled operations, fund accounting & dealing functions at various

points in his stint at Reliance Capital Asset Management and Birla Sunlife.


BEST IN CLASS PROCESSES

Working with leading service providers to ensure best in class services to clients

SEBI registered

Cat III fund

Audit & Tax

consultants

Top Institutional

Brokers

Bankers

Custodians

Trustee to the

Fund


CONTACT US

704/705, 7th floor, Balarama Building,

Plot no 3c, E Block, BKC

Mumbai 400 051

[email protected]

[email protected]

Siddhartha Bhaiya : +91 93221 85876

Neerav Shah: +91 93229 33951

www.aequitasindia.in


DISCLAIMER

• The views expressed herein are the personal views and constitute only the opinions and do not constitute any guidelines or recommendation on any

course of action to be followed by the readers. This information is meant for general reading purpose only and is not meant to serve as a professional

guide for the readers. This document has been prepared on the basis of publicly available information, internally developed data and other sources

believed to be reliable. The Sponsor, the Investment Manager or any of their respective partners, employees, affiliates or representatives do not assume

any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Whilst no action has been solicited based

upon the information provided herein, due care has been taken to ensure that the facts are accurate and opinions given fair and reasonable. This

information is not intended to be an offer or solicitation for the purchase or sale of any financial product or instrument. Recipients of this information

should rely on information/data arising out of their own investigations. Readers are advised to seek independent professional advice and arrive at an

informed investment decision before making any investments. The Sponsor, the Investment Manager or any of their respective partners, employees,

affiliates or representatives shall not be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost

profits arising in any way from the information contained in this material.

• The Sponsor, the Investment Manager or any of their respective partners, employees including the fund managers, affiliates, representatives including

persons involved in the preparation or issuance of this material may from time to time, have long or short positions in, and buy or sell the securities

thereof, of company(ies) / specific economic sectors mentioned herein.

• Risk factors: Investments in securities are subject to market risks. There are no assurances or guarantees that the objectives of any of the Products will

be achieved. The investments may not be suited to all categories of investors. The Net Asset Value of the Units can go up or down depending on various

market factors. Past performance of the Investment Manager or the Portfolio Manager do not indicate the future performance of the Products or any

other future Products of the Investment Manager or the Portfolio Manager. Investors are not being offered any guaranteed or indicative returns through

any of the Products. The names of the Products do not in any manner indicate their prospects or returns. The performance of the Products may be

adversely affected by the performance of individual companies, changes in the market conditions, micro and macro factors and forces affecting capital

markets in particular like interest rate risk, credit risk, liquidity risk and reinvestment risk. The Investment Manager is not responsible or liable for any

loss resulting from the operations of the Products/ Portfolios. Each portfolio will be exposed to various risks depending on the investment objective,

investment strategy and the asset allocation. Non-Diversified Portfolio tends to be more volatile than diversified portfolio. Aequitas Investment

Consultancy Private Limited is a SEBI registered Portfolio Manager and Aequitas Equity Fund is a SEBI registered Alternative Investment

Fund (Cat III). Please read the Fund Documents before investing.