Incred Healthcare Portfolio

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About Incred

The foundation of InCred’s Asset Management business is meeting the investment needs of wealth creators, such as company owners, family offices, extremely successful individuals, and institutional customers who are searching for unique investment solutions across a broad range of strategies.

The respected InCred group’s newest member, Portfolio Management Services, entered the public eye in early 2021. Mr. Bhupinder Singh launched the parent firm InCred in 2017 with the goal of instilling a sense of confidence that propels a country towards prosperity. InCred was developed to make borrowing simple with the goal of empowering India and making credit easily accessible for the underserved population in the nation. Every firm that InCred runs has technology and data science ingrained in its Core, providing a superior customer experience.

Originally, a platform for retail and MSME lending, the company has evolved into a diversified financial services behemoth. InCred offers a range of wealth management and capital markets access services alongside Asset Management. All of InCred’s operations are powered by cutting-edge technology and have top-notch risk management capabilities.

Healthcare – A Secular Theme

The Indian Pharma Market (IPM) is a secularly growing segment with extremely high RoE due to the brands owned by pharma companies. We expect the market to continue to grow at 8%-10% in sales and mid to high teens in profits

US generic market has gone through earnings down cycle over the past 4 years and has seen signs of earnings recovery. Better pricing and gain in volumes as competition may get crowded out would lead to better RoE of the business in coming years

A ‘valuation-gap’ exists today in many companies where the poor RoE of US business is suppressing the overall RoE and valuation multiples. We expect this to reverse as US generic profitability Improves

We believe the consolidated valuation as of now lends a negative valuation to the capital guzzler (US generics) implying that this business may never turn positive and losses in the business may compound over time. This is highly unlikely and also unreasonable.

Why Indian Healthcare?

Unbranded Generics: Pricing pressure easing & RoE’s seeing revival

  • Pricing pressure easing in US market as companies start optimizing their portfolios (price erosion now at 4% vs 17% in 2017)
  • China, which is largely dominated by MNCs (~85% ms) is now looking at Indian companies to introduce generics (China market size USD150bn)

Branded Generics: High margin, low capex & steady cash flow business

  • Branded generics have high sustainable cash flows, low capex & high RoE with high barriers to entry (8-10% growth & 40%-80% RoE)
  • Increasing lifestyle related diseases, better diagnostics and affordability driven by Ayushman Bharat (affordability to expand from 150-200 m individuals to 500-600 m individuals over time)

APIs/CDMO/CMO: ‘China + 1’ a huge boost to API players

  • Anti-China rhetoric could play out well for Indian API players. China exports ~USD 30bn worth of APIs vs ~USD 4bn from India. A 10% shift in demand can double India’s API industry size
  • Given noncompliance to ESG and recent supply disruptions, Big Pharma is also looking at diversifying sourcing beyond China

Hospitals: Capex phase largely over; time to monetize

  • Indian hospital players have incurred huge capex to increase capacity which is coming to an end (Mature hospitals RoE at ~20% vs consolidated 4%-12%)
  • This may lead to better margins, cash flows and lower debt resulting in re-rating of the business

Diagnostics: Low penetration to benefit organized players

  • Diagnostics is 85% unorganized. With increase in health awareness, the organized players are expected to benefit the most
  • The broader market growing at 10% pa and organized gaining share. High RoE and low reinvestment needs

How much should one allocate? – 10%-15% of equity portfolio is justified

  • Healthcare portfolio offers a solution that invests in 5 baskets of businesses.
  • Upon closer examination, one can deduce that the portfolio in itself is a multi-cap diversified equity portfolio with exposure to 5 segments. The only difference is that consumption in healthcare in non-discretionary and secularly growing, whereas for these analogies, consumption is discretionary.

The thesis for like-to-like comparison


We believe that hospital companies work on similar business model as apparel retail segment, where hospitals have to open new units, track performance of existing hospitals and have similar economics as retail stores


Just like QSR companies where per store economics, opening of new stores, etc. matter, diagnostic companies too have to open new centres, expand into newer markets

Unbranded Generics

In unbranded generics demand supply determines the price, and hence we believe these companies do not have pricing power; similar to metals and commodity companies


Similar to industrials, API companies have huge capacity, higher utilization improves operational efficiencies, scope for China +1 strategy, have global cost leadership

Branded Generics

Branded generics are being considered like FMCG, as patients tend to prefer brands of reputed companies, have large distribution channel, have pricing power, marketing and promotional activities can drive sales

About Portfolio Manager

Aditya Khemka : Principal Officer/Portfolio Manager

Aditya Khemka InCred PMS

Over 16 years experience in healthcare businesses and investments. Rich global working experience in the US, EU, Latin America and in India Has performed various roles like member of the treasury department of the company managing debt, working capital and financial due diligence of acquisitions target in Glenmark (2006-2007), institutional equities analyst for Lehman, Nomura and Ambit Capital (2008-2015) and Healthcare fund manager for DSP (2015-2020) Qualifications – MSc. (Finance), PGDM (MDI, Gurgaon), CIIA (UK), CFA (ICFAI) Has formulated and executed a product strategy in DSP that drove alpha over the benchmark in 18 months with low churn and highest Sharpe ratio amongst peers Believes in bottom-up research and understanding the source of cash flows and their sustainability.

Uniqueness of Incred Healthcare PMS

  • Healthcare portfolio offers a solution that invests in 5 baskets of businesses. One can deduce that the portfolio in itself is a multi-cap diversified equity portfolio with exposure to 5 segments. The only difference is that consumption in healthcare is non-discretionary and secularly growing, whereas for these analogies, consumption is discretionary. 
  • Portfolio currently has a larger allocation to domestic oriented businesses
  • Currently, ~75% portfolio is Small and Midcap space (with very limited dependency on US business) and a long runway to growth
  • Managed by a domain expert fund manager Aditya Khemka, who has always been professionally associated with Healthcare businesses and investments)
Name Weights M Cap Segment
RPG Life Science 10.40% S Branded generics
Aster Dm Healthcare Ltd 9.60% S Hospitals
Healthcare Global Enterprises Ltd 8.80% S Hospitals
Krsnaa Diagnostics Ltd 7.40% S Diagnostics
IndoCo Remedies Ltd 7.00% M Branded generics
Neuland Laboratories Ltd 6.70% S API
IPCA Laboratories Ltd 6.30% S Branded generics
Lupin Ltd 4.90% M Unbranded generics
Hikal Ltd 4.50% S API
JB Chemicals And Pharmaceuticals Ltd 4.30% S Branded generics
Thyrocare Technologies Ltd 4.30% L Diagnostics
FDC Ltd 4.20% S Branded generics
Syngene International Ltd 4.00% S API
Ajanta Pharma Ltd 3.80% S Branded generics
Jubilant Pharmova Ltd 3.30% S API
Torrent Pharmaceuticals Ltd 3.00% M Branded generics
ICICI Lombard General Insurance Company Ltd 2.90% L Insurance
HDFC Life Insurance Company Ltd 2.80% L Insurance
Cash 1.80%
Total 100.00%

Why Indian Healthcare equity?

  • Indian Companies in Healthcare are globally competitive
  • Healthcare consumption is non-discretionary (Zero beta)
  • Over the last 10 years, the BSE Healthcare Index has outperformed Nifty50 by a total of 100% (~3.3% annualized outperformance).
  • Valuation still below 10-year average : Improvement in Business and Return on Equity (ROE) is leading to Earnings growth

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Disclaimer: Investing Involves Risk. This document is for information purposes only and should not be viewed as a legal offering document or solicitation. Offers to invest in this fund are made only by the Discretionary Portfolio Management Services Agreement. Past performance does not guarantee future results and there is no assurance that the managed accounts will necessarily achieve their objectives. We do not guarantee any returns in the hand of investors not we take any sort of accountability for the performance of the scheme. The above-mentioned data is collected from the respected Fund house please verify the same at SEBI website.