Composite India GARP Fund

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Composite India GARP Fund

Investment Objective

The fund aims to generate long term capital appreciation by investing in a portfolio of stocks across market capitalization that are well placed to benefit from the India growth story over the next 5 - 8 years and are available at reasonable valuations.

Fund Overview
Category India Equities (Long Only)
Type Open Ended
Suggested Investment Horizon 3 years and above
Fund Style Multi cap with a mid cap bias
Minimum Investment INR 50 lakh
Benchmark S&P BSE 500 (TR)
Investment Style
  • Stocks that fit into the Growth at Reasonable Price (GARP) philosophy
  • Prefer businesses with a long growth runway where the range of outcomes is not too wide
  • Portfolio will have a mid cap bias while having exposure to large caps & small caps as well
  • The benchmark chosen is more representative of portfolio risk than of the actual portfolio construct. Actual portfolio may differ from the benchmark both in sector allocation & stock selection
  • Fund Manager likely to take up to6 months to fully deploy capital into equities
  • While market timing is not an objective, calibrating to market conditions is
Portfolio Construct & Risk Management
  • 18 - 22 stocks likely to constitute the portfolio providing adequate diversification
  • Specific sector exposure limited to 20%
  • Maximum allocation to a single stock at 10%
  • Maximum exposure to a single promoter family at 15%
  • We do not follow a model portfolio approach, portfolios across customers are likely to differ to a considerable extent based on market conditions

Investment framework in four steps. Step 1, evaluate business segments. Avoid business segments with: high entry and exit rate of players; high regulatory risk; rapid technology changes; high upfront capital requirements; too much media attention; cyclical demand patterns. Prefer business segments with: consolidated industry structure; easily assessable unit economics; industry volume growth rate at or above GDP growth rate; multi-year growth runway; low risk of accounting jugglery. Step 2, evaluate the specific business. Preferred characteristics: public for more than 5 years (exceptions can be made for great businesses); strong industry position in terms of revenue, margins, capital efficiency and market share growth; demonstrated track record of management executing well on category expansion and new product development; preference for businesses owned and run by entrepreneur families. Step 3, evaluate risk. Risk management and hypothesis building: evaluate corporate governance, does the management make the cut, is there clear evidence of improvement; triangulation from various sources to see if specific business economics is realistic and sustainable; consistency in tax payment and capital structure; inputs from trade channel and industry participants on ground reality (scuttlebutt); management interaction and inputs from other peer companies wherever feasible; higher weightage for business quality over management quality. Step 4, decision making. Valuation criteria and checklist: triangulation approach (simple P/E, OCF and FCF yield, reverse DCF engineering) to evaluate current valuation in isolation and in context of market conditions; pass the idea through a 70+ item checklist to build a comprehensive view (business segment quality, specific business quality, unit economics, annual report messaging, product development track record, corporate governance, channel checks, valuation criteria); identify triggers and milestones to finalize position sizing and allocation strategy; re-evaluate periodically.