1 st April 2019
INDEX Meaning of Aequitas Equity Advantage Why Aequitas? Process flow Risk Pitfalls we avoid Discipline Our Report Card Investment Philosophy - Multi-bagger Approach - Portfolio Construction - Company Attributes Our Stock picks Key personnel Best in class process Contact details Disclaimer Aequitas Investment Aequitas Investment
Aequitas is the Latin goddess of Equity and Fairness . She is most often depicted holding a pair of The word “Equity” originates scales to represent Fair Dealings and Equality . from the Latin word Aequitas She is shown in a dignified pose, wearing Aequit Ae uitas as 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
Why Aequitas ? Low churn ratio & low transaction cost Tax efficient investing; lower taxes on long term holdings No distributors and intermediaries; grown through references Best risk adjusted returns Best 5 year performance Aequitas Investment
What Aequitas does differently!!! We don’t work with Distributors. Never have, never will ! We don’t watch financial news channels! We don’t use Bloomberg. It’s an avoidable distraction! We have only one product. Only one yardstick to measure our performance! No marketing person. Our product should be good enough to sell by itself! Bespoke portfolios, no model portfolio. Models look good only on the ramp! Aequitas Investment
Process flow SCREENERS RESEARCH PORTFOLIO ONGOING CONSTRUCTION RESEARCH - Sales growth, PAT growth, - Annual report - 15-20 stocks capacity utilisation - Quarterly results - Balance across sectors - Valuation dislocation - - Industry & company news - Catalyst for stock EV/Sales, PE ratio, - Management interviews re-rating EV/EBITDA - Third party research - Debt - Management meetings - Dividend track record - Press releases - Promoter ownership - Conference calls/ - Insider Buying Analyst meets - Industry Leadership - Credit rating - Long term track record Aequitas Investment
RISK • Risk is not a number, it is a concept or a notion. Risk equates to what Ben Graham called a “permanent loss of capital”. • Modern finance measures risk on metrics like standard deviation, BETA, VAR etc. which we do not subscribe to. • We measure risk on 3 parameters Valuation Risk Earnings Risk Balance Sheet Risk Risk of buying stocks dear Risk that current earnings The risk of an over- without adequate margin could decline due to leveraged balance sheet of safety. Reasonable technological changes, which is ignored during valuation is the economic changes or good times in favour of cornerstone of all our deterioration in the cyclically high and un- investment decisions. management sustainable earnings. Aequitas Investment
IPO’s Leverage Fad or hot sectors Low promoter holding Corporate governance QIP’s or secondary equity sales High institutional ownership Expensive valuations PITFALLS WE AVOID Aequitas Investment
DISCIPLINE - Avoid impulsive decisions - Don't focus much on market movements - Don't chase winners or hot stocks - Avoid trading and short term investments - We don't do derivatives Aequitas Investment
Our Report Card Cap MF Aequitas Nifty Mid Cap Index Small Cap Index Avg Small & Mid Cap MF Chart depicts absolute performance since inception; Returns are adjusted for inflows/ outflows and are after expenses; 31 st March, 2019 Aequitas Investment Past performance is no guarantee of future results. Past performance may or may not be sustained in future.
Investment Philosophy Aequitas Investment
Multibagger Approach Doing things differently Above average growth Cheap valuation ensures potential re-rating M u VALUE GROWTH CONTRARIAN L T The valuation has to be The company has to be a Contrarian approach does I reasonable. This is important growth company with above not mean doing the opposite B = because there has to be X X A Average growth potential for of others, it means doing potential for re-rating. A G The next 3-5 years . Markets things differently. Buying in combination of EPS growth G reward a higher PE multiple for popular names will not give and PE re-rating leads to E growth companies Multi-bagger returns Multi-bagger returns R Aequitas Investment
Portfolio Construction Industry • We invest in quality companies with a focus on small and mid-cap growth Prospects companies Quality Companies • Most market participants focus on price; we focus on company fundamentals Concentrated Holding • We aim to construct a portfolio of 15-20 stocks across various sectors Long-term Outlook • Invest with a 3-5 year horizon with a focus on low churn rate Catalyst • Value can remain value for long time. We actively look for catalysts which will lead to stock rerating. Aequitas Investment
Company Attributes Most of the companies in our portfolio are industry Industry Leaders leaders with a strong sustainable competitive advantage Companies need to have very low debt levels and some of Low Debt the companies are in fact net cash positive Good dividend paying record, corporate governance Management practices & sound long term performance record is a must. The portfolio PE ratio is less than market PE ratios Valuations (adjusted for cyclicality in earnings). Creeping acquisition/ Majority of our companies have done buy-back / creeping acquisition in the 12 months prior to our initial acquisition buybacks Our portfolio includes companies with strong and Cash flow consistent cash flow generation Aequitas Investment
Our 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 Aequitas Investment
Our Stock Picks 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 Aequitas Investment
Our 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 Aequitas Investment
Our Stock Picks Vindhya Telelinks Maharashtra Seamless Industry Leadership ✓ ✓ Low debt to Equity (<1 ) ✓ ✓ Institutional Ownership (<20%) ✓ ✓ Listing History (>10 years) ✓ ✓ Low Equity Float ✓ ✓ Valuation (<12 PE) ✓ ✓ Increase in Order Book Catalyst Anti Dumping Duty on Pipes Aequitas Investment
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. Aequitas Equity Fund
BEST IN CLASS PROCESSES Working with leading service providers to ensure best in class services to clients SEBI registered Bankers Cat III fund Audit & Tax Custodians consultants Top Institutional Trustee to the Fund Brokers ❖ Monthly Performance appraisal statement ❖ Monthly Portfolio appraisal statement Reporting ❖ Monthly transaction statement ❖ Monthly bank book ❖ Audited statements at end of financial year Aequitas Equity Fund
Contact Details 704/705, 7th floor, Balrama Building, Plot no 3c, E block, Bandra Kurla Complex Mumbai 400 051 siddhartha.bhaiya@aequitasindia.in neerav.shah@aequitasindia.in Siddhartha Bhaiya : +91 93221 85876 Neerav Shah: +91 93229 33951 www.aequitasindia.in Aequitas Investment
Investment features and fee structure Minimum Investments Residents – INR 10 crs. Non Residents – USD 1.5 mn Suitable time frame 3 years Mode of inflow Cash inflow or stock transfer Fees 2% of daily average AUM to be charged on a monthly basis Performance sharing 10% profit sharing with high water marking to be charged annually at the end of financial year
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