Anand Rathi MNC PMS Opportunity
Objective & Investment Philosophy
- Focus on consistency of return and risk moderation by investing in Multinational Companies listed in India.
- Investments into listed companies in India in which the foreign shareholding is over 50% and/or the management control is bestowed in foreign company and/or the technological and managerial know-how brought in by foreign partner/investor.
4P Strategy – Stock Selection
Successful Business Model
- MNC’s benefit from the economy of scales by spreading R&D expenditures and advertising costs over their global sales, pooling global purchasing power over suppliers, and utilizing their technological and managerial know-how globally with minimal additional costs.
- MNC’s can use their global presence to take advantage of underpriced labor services available in certain developing countries, and gain access to special R&D capabilities residing in advanced foreign countries.
Strong Corporate Governance
- MNC’s are generally rated high for their corporate governance standard.
- MNC’s depict high transparency and accountability with well laid out policies and regulatory framework, internal control and risk management.
- This provide good comfort for an investor who would not fall prey to any negative impact on investment due to corporate mis-management and fraud.
Healthy Balance Sheet
Special Opportunity
MNC companies during the holding period provides healthy dividend and capital appreciation by earnings growth and sometime carries an additional trigger for value appreciation in form of corporate actions like Open offers, Buybacks and Delisting etc. This usually add substantial appreciation to the share price enhancing investors ROI. Below are some illustrations of the same.
NIFTY MNC Index Analysis/Study
A study done on Nifty MNC Index which constitute 15 stocks shows favorable risk reward a portfolio of MNC company could deliver.
NIFTY MNC Index has good correlation with NIFTY 50 Index. However the Beta stands at 0.8 Annualized returns of NIFTY MNC Index is higher compared to NIFTY 50 Index and Volatility is lower. This shows a favorable risk reward for NIFTY MNC against NIFTY 50 Index.
Portfolio Strategy
Re-VIEW Strategy
- Valuation Check: A constant check is kept on the valuation of the companies so that any stock whose valuation becomes relatively high, due to any reasons like sentiments or increase in liquidity, is exited before any price correction comes to the stock. We then shift the money to a new stock with a reasonable valuation.
- Impact of Events: A stock price can be highly affected by an event or series of events, recent examples: COVID crisis, Russia-Ukraine War, Increase in Crude Price, Interest Rates Hike etc. Our team actively tracks these events and makes timely modifications as per the situation’s needs to minimize risks & optimize returns.
- Earnings Visibility Changes: Our fundamental research team scrutinizes the quarterly results of the companies to understand the current & future estimated growth. If we are not satisfied with 2 or 3 quarterly results of the company & don’t see growth, we take an exit to move to another stock.
- Weightage Check of the Holdings: Every stock & sector has been capped to a certain percentage of the total allocation to limit downside due to any uncertainties and also diversify the portfolio. If any stock or sector reaches near to the decided percent of allocation, we book profits and reduce the weightage and invest into any other stock.
Top Holdings and Allocation
4 Years Past Performance
Consistent Performer
Portfolio Performance
Top Contributors
Selection Process
Out of 4500 listed Company, there are only 90 odd MNC Companies which are own by Foreign Promoter with more then 1000 cr Market Cap which make the stock universe limited for further evaluation.
Well Balanced Defensive but Growth
The three bucket strategy with shifting allocation as per the market outlook help to further optimize the returns, However Consumables remains the core part of the portfolio.
Growth like Multicap but Quality like Large Cap
- MNC PMS is a Multicap Portfolio with all market capitalization. (large, Mid, Small)
- There are many companies which by Indian Market Cap Definition are called as Midcap Companies where as by Global Definition these are Large cap.
- One gets benefit of growth like Midcap Companies in India where as Quality of Large Cap. Few Eg given below
Low Churn - Long term but Active Management
Though we have kept single stock weight max 15%, Partial Profit booking is done whenever overall weight of single stock in portfolio reaches close to 9-10% of portfolio. Max 15% weight is kept in case of any special opportunity is going to get unfold in short term. Partial Profit booking and Stocks completely exited in profit is shown in adjacent table. To optimize performance there are couple of partial and complete exits in losses done depending upon market dynamics. Eg: Reducing allocation in Auto and Ancillary in 2018-19 where sector was going through challenges Eg 2: Covid 19. Reducing allocation in Industrial and cyclical
Success Stories - Abbott India
Strong Parentage : Abbott Laboratories USA
- Offering high-quality trusted medicines in multiple therapeutic categories such as women's health, gastroenterology, cardiology, metabolic disorders and primary care.
- Key Brands : Duphaston, Thyronorm, Udiliv, Digene, Cremaffin, Duphalac
- Balance Sheet Strength: Zero Debt, Positive Cash Flow and ROE Maintained above 20% over last 5 years
- Focus strategy
- to accelerate key brands
- Drive therapy leadership
- Strengthen Multi-channel and insight driven marketing
- Identify new product opportunity
- Focus on talent development and engagement
- 100+ products Launch in last 10 years and more launches in coming years.
Success Stories - GMM Pfaudler
- Foreign Promoter: Pfaudler Inc.
- A leading supplier of glass lined based equipment (reactors, storage tanks) in India, commanding > 50% domestic market share, finding critical application in the chemical & pharmaceutical industries.
- Benefit from Domestic Chemical, Pharma and Agrochemical capacity addition post Shut down of industries in China.
- Balance Sheet Strength: Zero Debt, Positive Cash Flow and ROE Maintained above 20% over last 5 years.
- Focus strategy
- to accelerate key brands
- Drive therapy leadership
- Strengthen Multi-channel and insight driven marketing
- Identify new product opportunity
- Focus on talent development and engagement
- 100+ products Launch in last 10 years and more launches in coming years.
Success Stories - Coforge Ltd.
- In 2019 NIIT ltd sold its stake in NIIT Technology to foreign player Barings. The company rebranded to name it COFORGE ltd.
- Over the Last 5 years Revenues for the company has grown by 10% plus CAGR and PAT has grown by 25% plus CAGR. Operating margin is maintained around 17% throughout.
- The company has three key verticals Banking and Financial contributing (17%), Insurance (30%) , Travel and Transportation (29%) and Others (24%). Geography wise America contributes 48%, EMEA 37%, ROW 15%. In terms of service Mix ADM Contributes 73%, IMS 16% and IP Based 6% and others.
- Despite COVID except for Travel business most business is doing good with constant addition of new clients especially healthcare. Company continues to remain confident about its near- medium-term growth prospects, citing its strong order booking/pipeline and its investments in building strong sales and leadership.
Product Features
Minimum investment Rs. 50 lakhs Portfolio: 15-20 STOCKS, diversified across sectors Themes offered Diversified portfolio of Multinational Companies listed in India with controlling stake with foreign holder Risk – reward & tenure Moderate risk reward. Investment tenure preferably 3 years+ Type of instruments Equity & Equity Related Instruments, Fixed Income Instruments, Cash & Cash Equivalent Benchmark BSE 500 TRI
