IIFL Multicap Advantage

Year of Inception	2014
Number of Stocks	29
Investment Horizon	Long Term

• IIFL Multi Cap PMS uses an intriguing and informative mechanism to dissect markets based on precisely this math, namely corporate earnings.
• Seculars is the best basket for investors looking for a low-risk, low-return investment.

The key investment framework of IIFL AMC is very intriguing. All BSE 200, a free float weighted index of 200 Indian companies listed on the Bombay Stock Exchange. Companies are divided into four categories predicated on their PAT (Profit After Tax) growth and ROE (Return on Equity).

Most investee companies fall into the Secular, Cyclical, Defensive, and Value Trap categories.

• Secular: Companies with PAT and ROE growth rates of 15% or higher, reflecting India’s secular upward growth shift, such as financial products, consumer discretionary, auto and auto components.
• Cyclicals: High-growth companies with high capital spending and thus a lower ROE, such as infrastructure, logistics, and capital goods. These are more susceptible to economic and business periods.
• Defensive: Companies with a high ROE and lower growth rates, low capital expenditures, and attentiveness to business cycles provide a cushion to returns during downturns such as consumer staples and healthcare.
• Value Traps: These companies with low growth rates and ROE are typically avoided in public equity strategies.

Diversified public equity schemes usually favour companies in the secular quadrant and alternate between cyclical and defensives predicated on the macroeconomic viewpoint.

IIFL Multicap Advantage adheres to strict criteria to build a stock model portfolio. As detailed below, the stock selection process is based on internal and external analysis.

Screening and financial analysis

Financial screens, which include basic value, asset value, and momentum parameters, are maintained by research analysts (RAs). Thresholds are established based on industry parameters and are regularly monitored. Screens assist analysts in gaining a preliminary understanding of a company’s positioning concerning its peers.

Checks for corporate governance

Various factors and sources are used to verify corporate governance practises, including IIFL group reference checks, primary briefings and channel checks, and governance scorecards created by independent agencies. Furthermore, analysts use internal models and forensic analysis to assess the data quality over five years.

Checklist

Each stock under coverage has a comprehensive checklist divided into five key sections. These are listed below.

• Industry Analysis: Size and potential of the industry; External challenges and opportunities ahead.
• Management: Background, record, alignment, and capital management history.
• Competitive Landscape: SWOT, market share, and competitive advantages comprise the competitive landscape.
• Statutory Requirement: Key variables to keep an eye on regularly.
• Profitability or valuations: Financial variants are used to forecast future profits and relative valuations compared to domestic and international firms.

Evaluation of Risk-Reward And Safety Margin

Analysts predict the highest downside against each of their coverage stocks and the potential upside. While the upside is typically based on future earnings and performance, the downside is calculated using a base multiple (worst case based on the previous 10-year average) to current earnings or book value.

One of the key parameters regarded by the analyst when making recommendations is the upside-to-downside ratio. 

Pitches for Stock

During the weekly all-day sessions, analysts create a detailed stock pitch outlining their corporation findings and trying to explain their investment thesis. The pitch leads to a detailed discussion with the entire team, which assists the analyst in getting feedback on his or her findings and recommendations.

Low Beta PMS which has an in-built put option