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Finance

Ambit Ten X Portfolio

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What is TenX?

  • Indian economy to be on structural growth path.
  • GDP to grow 3x plus in the next decade on the back of structural growth drivers
  • We expect India to be only the third country in the world to reach US$10tn mark
  • Mid and small cap companies to be beneficiary of the same.
  • We expect structural 13% nominal GDP growth to lead to steady double digit earnings growth for broader markets.
  • Ambit TenX portfolio to leverage this opportunity.
  • Companies that can grow there earnings TenX in the next 12-15 years.
  • Low penetration, strong leadership, light balance sheet to be the key driving factors.
  • Expect earnings CAGR of 18-21% in the portfolio over the next decade.
  • Think like a business owner focus on - earnings growth and long term.
  • Returns will automatically follow

Why the Ambit TenX Portfolio?

  • PLAYING THE INDIA GROWTH STORY
    • The next decade brings with it structural growth
    • India is truly “shining”
    • Hockey stick curve in per capita income
    • India at an inflection point
    • Low interest regime, swift formalization, strong capex pipeline, government reforms
  • LONG TERM PORTFOLIO THAT AIMS AT STRUCTURAL WEALTH CREATION
    • Ideal duration of investment more than 5 years
    • PLAYING THE EARNINGS GROWTH STORY IN THE MID-SMALL CAP SPACE
    • Identify the large/Mid caps of tomorrow
  • HIGH QUALITY COMPANIES IN NICHE SEGMENTS
    • Low penetration with strong growth potential
    • India manufacturing theme (China+1)
  • HIGHLY DIFFERENTIATED PRODUCT OFFERING
    • Strong in-house developed philosophy
    • Focused on compounding of earnings in a steady way
    • The process is the fund manager

India at US$10tn – If? When? How?

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Key Growth Pillars

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Credit Cycle and Corporate India

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SMID Corporates will be the biggest beneficiaries

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What drives success for corporate India?

Our research over the past few years shows that over and above firm-specific competitive advantages, three factors are essential for a company to consistently outperform

Ambit TenX Portfolio - Investment Process

  • Companies Market Capitalization > 500 Cr.
  • Ambit Good and Clean Framework
  • Concentrated portfolio of 15-20 primarily mid and small cap companies
  • Bottom-up research, Industry Analysis, Management meets and Channel Checks
  • Average Churn ~15 - 20% p.a.
  • Check if the companies are present in an underpenetrated market with lower per capita consumption; Net debt to equity < 1.0
  • Concentrated portfolio of 15-20 primarily mid and small cap companies

Portfolio Composition & Characteristics

  • Stellar track records of capital allocation in terms of RoE
  • Low debt with the median portfolio company cash positive
  • Median market cap of the portfolio is ~Rs.28,244 cr.
  • Growth potential above the comparable index
  • Reasonable valuations for quality stocks

Stoicism – A Behavioral Finance Methodology

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Portfolio Composition & Characteristics

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TenX philosophy delivers

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How will we deliver this?

Good risk adjusted returns is an outcome of Good Processes characterized by:

  • Stringent quantitative filters
    • Each offering is based on deeply researched and back tested framework to generate the investment universe
    • High threshold for performance over long spans of time, greatly minimize chances of poor performers or poor quality companies entering into the investment universe
    • High quality of accounts and corporate governance is uncompromised
  • Experienced team & deep-dive research
    • Dedicated and experienced research team
    • Research processes inspired by IE Research
    • Investment Committee to approve all investment decisions
    • Part of larger Ambit group lends advantages
    • Focus on what is knowable and what is important
  • Focus on earnings growth + earnings quality
    • Lower obsession with timing when one is investing in a superior calibre of companies
    • Companies with a consistent track record and leadership traits are preferred
    • Past track record + Future sector potential + Current management capabilities = Comfort on delivering quality earnings
  • Risk management
    • Concentrated Portfolios deliver best returns as returns do not get average out
    • Lower drawdowns due to consistent performers in secular sectors
    • Long term orientation with low churn realize the power of compounding

Focus on ‘good’ helps generate upside

Ambit’s ‘greatness’ framework identifies efficient capital allocators in the country Greatness model has outperformed BSE500 by a whopping 3.3% annually

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Not compromising on ‘clean’ is critical to managing drawdowns

Ambit’s proprietary forensic accounting model helps steer clear firms with questionable accounts Strong link between accounting quality and stock performance

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Who is the fund manager?

  • The process is the fund manager
    • Revolutionizing fund management
    • Moving away from people towards process
    • Team first to client first – prioritizing our fiduciary duty of staying true to the clients needs
  • A team of highly motivated and skilled research analyst drive ideation
  • Also, ensures ownership of the idea and constant monitoring
  • Staying ahead of the curve
  • Two step approval process – Research team & Investment Committee ensures robustness
  • Democratic process ensures healthy debate and disagreement
  • We don’t get married to our calls
  • Future talent grooming
  • Keeping the well oiled machine going

Ambit Asset Management Team

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Construct & structure for Indian high net worth investors

  • Fund Structure SEBI Registered Discretionary PMS
  • Fund Tenure Open Ended
  • Minimum investment INR 50 lacs
  • Stock selection Investible universe is stocks that perform well on the framework noted earlier. A further subjective assessment then leads to a more concentrated stock portfolio
  • Number of stocks 15 – 20 primarily mid and small cap stocks.
  • Investment limit 25% per sector except financials, 10% per stock
  • Benchmark index BSE500 TRI
  • Time horizon and turnover The investment horizon is 5-8 average years and longer; average turnover therefore should not exceed 15-20%p.a.
  • Cash calls Not to take aggressive cash calls; this is keeping in mind the longer term investment horizon of the portfolio.
  • Custodian & Fund Accountant ICICI Bank Limited.
  • Brokers Ambit Capital, Motilal Oswal, Kotak Securities, HDFC Securities, Spark Capital, Batlivala and Karani Securities Pvt Ltd
  • Depository Participant Ambit Capital (Central Depository Services Limited)

Ambit Overview

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