1st April 2017
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
AequitasInvestment
Investment
Aequitas
Aequitas is the Latin goddess of Equity and
The word “Equity” originates
from the Latin word Aequitas
Aequitas
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 merchantrelated endeavours: by this definition the cornucopia is seen
as a symbol of the wealth to be gained through fair enterprise.
Aequitas
Equity Advantage
3.50
31.4
3.00
2.50
2.00
1.50
1.00
3.99
0.50
0.00
❖ Assumption - A monthly SIP of Rs. 1000 started in 1979 and increased every year by 10% till 2016
❖ Monthly SIP in 2016 will be Rs. 34000 and total investments over the period will be Rs. 3.99 mn
❖ The value of that portfolio today would have been Rs. 31.4 mn
Equity investments may not always give positive returns. Past performance may or may not be sustained in future.
Aequitas Investment
Why Aequitas ?
Low churn ratio -tax free returns
and low transaction cost
Tax efficient investing; tax free returns
No distributors and intermediaries;
grown through references
Best risk adjusted returns
Best 3 year performance
Aequitas Investment
What Aequitas does differently!!!
We don’t work with Distributors. Never have, never will !
We don’t watch CNBC. It is Cartoon Network for the Business Community!
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
- Sales growth, PAT growth,
capacity utilisation
- Valuation dislocation EV/Sales, PE ratio,
EV/EBITDA
- Debt
- Dividend track record
- Promoter ownership
- Insider Buying
- Industry Leadership
- Credit rating
- Long term track record
RESEARCH
PORTFOLIO
CONSTRUCTION
ONGOING
RESEARCH
- Annual report
- 15-20 stocks
- Quarterly results
- Balance across sectors
- Industry & company news - Catalyst for stock
- Management interviews
re-rating
- Third party research
- Management meetings
- Press releases
- Conference calls/
Analyst meets
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
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
The risk of an overleveraged balance sheet
which is ignored during
good times as the weak
balance sheet is ignored
in favour of the cyclically
high and un-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
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; 1st April 2017
The past performance is no guarantee of future results or Past performance may or may not be sustained in future.
Aequitas Investment
Investment Philosophy
Aequitas Investment
Multibagger Approach
Doing things differently
Above average growth
Cheap valuation
ensures potential
re-rating
GROWTH
CONTRARIAN
VALUE
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
X
X
=
M
u
L
T
I
B
A
G
G
E
R
Aequitas Investment
Portfolio Construction
Industry
Prospects
Quality
Companies
Concentrated
Holding
Long-term
Outlook
Catalyst
• We invest in quality companies with a focus on small and mid-cap growth
companies
• Most market participants focus on price; we focus on company fundamentals
• We aim to construct a portfolio of 15-20 stocks across various sectors
• Invest with a 3-5 year horizon with a focus on low churn rate
• Value can remain value for long time. We actively look for catalysts which will
lead to stock rerating.
Aequitas Investment
Company Attributes
Industry Leaders
Most of the companies in our portfolio are industry
leaders with a strong sustainable competitive advantage
Low Debt
Companies need to have very low debt levels and some of
the companies are in fact net cash positive
Management
Good dividend paying record, corporate governance
practices & sound long term performance record is a must.
Valuations
On a trailing basis the portfolio PE ratio is less than 12x
cyclically adjusted earnings.
Creeping acquisition/
buybacks
Majority of our companies have done buy-back / creeping
acquisition in the 12 months prior to our initial acquisition
Cash flow
Our portfolio includes companies with strong and
consistent cash flow generation
Aequitas Investment
Our Stock Picks
Avanti
✓
✓
✓
✓
✓
✓
Introduction of Vannemei Shrimps
Finolex Cables
Industry Leadership
Low debt to Equity (<1 )
Institutional Ownership (<20%)
Long term track record (>10 years)
Promoter ownership (>50%)
Valuation (<12 PE)
Catalyst
✓
✓
✓
✓
✓
✓
Exceptional write off’s
Aequitas Investment
Our Stock Picks
CCL Products
✓
✓
✓
✓

✓
Commencement of Vietnam plant
Heritage Foods
Industry Leadership
Low debt to Equity (<1 )
Institutional Ownership (<20%)
Long term track record (>10 years)
Promoter ownership (>50%)
Valuation (<12 PE)
Catalyst
✓
✓
✓
✓
✓
✓
Healthy dairy sector outlook
Aequitas Investment
Our Stock Picks
Maithan Alloys
✓
✓
✓

✓
✓
Subsidiary Turnaround
VST Tillers
Industry Leadership
Low debt to Equity (<1 )
Institutional Ownership (<20%)
Long term track record (>10 years)
Promoter ownership (>50%)
Valuation (<12 PE)
Catalyst
✓
✓
✓
✓
✓
✓
Labour scarcity; farm mechanisation
Aequitas Investment
Our Stock Picks
Garware Wallropes
✓
✓
✓
✓
✓
✓
Buy-back
Nilkamal
Industry Leadership
Low debt to Equity (<1 )
Institutional Ownership (<20%)
Long term track record (>10 years)
Promoter ownership (>50%)
Valuation (<12 PE)
Catalyst
✓
✓
✓
✓
✓
✓
Fall in crude prices
Aequitas Investment
Key Personnel
SIDDHARTHA BHAIYA, MD and Fund manager
❖ Siddhartha a qualified Chartered Accountant is the driving force behind
Aequitas & has over 16 years of experience into Equity research and
Equity Fund Management.
❖ Siddhartha started his career as a Research Analyst with Sushil Finance
and has worked with Strat cap Securities, Principal PNB AMC & Reliance
Capital Asset Management (RCAM).
❖ Siddhartha was part of RCAM for more than 6 years & had graduated to
become a Fund Manager.
❖ Siddhartha has experience across all market capitalizations and is a
specialist in bottom up stock selection.
NEERAV SHAH– Director, Operations and Compliance
❖ Neerav is a qualified Chartered Accountant and has more than 12 years
experience in the capital markets.
❖ Neerav has handled operations, back office, fund accounting & dealing
functions at various points in his stint at Reliance and Birla AMC.
Aequitas Investment
Best in class processes
Working with leading service providers to ensure best in class services to clients
Aequitas is a SEBI
registered portfolio
management firm
Tie-up with HDFC Bank for
banking services
Tie-up with Top
institutional brokers
for broking services
Tie-up with IL&FS for providing
custodian and fund accounting
services.
Reporting
❖
❖
❖
❖
❖
Monthly Performance appraisal statement
Monthly Portfolio appraisal statement
Monthly transaction statement
Monthly bank book
Audited statements at end of financial year
Aequitas Investment
Contact Details
704/705, 7th floor, Balrama Building,
Plot no 3c, E block, Bandra Kurla Complex
Mumbai 400 051
[email protected]
[email protected]
Siddhartha Bhaiya :
Neerav Shah:
+91 93221 85876
+91 93229 33951
www.aequitasindia.in
Aequitas Investment
Investment features and fee structure
Minimum Investments
Residents – INR 10 crs.
Non Residents – USD 1 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
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, Aequitas Investment Consultancy Private Limited (AICPL) or any of their respective directors,
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, AICPL or any of their respective directors, 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, AICPL, any of their respective directors, 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
value of the Portfolios can go up or down depending on various market factors. Past performance of the Portfolio
Manager does not indicate the future performance of the Products or any other future Products of 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 Portfolio 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. AICPL is
a SEBI registered Portfolio Manager. Please read the Disclosure Document before investing.
Aequitas Investment
Aequitas Investment