Nuvama Equities Expansion Target PMS

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About Nuvama

One of India’s major wealth management platforms, Nuvama Wealth and Investment Ltd (Previously Edelweiss Broking Limited) serves over 2,400 of India’s wealthiest families as well as 670,000 wealthy and high-net-worth people. Currently, this covers Securities Trading and Advisory, Investment Management, Mutual Fund Distribution, Research Analysis, Stock Broking, Clearing and Custody Business, Portfolio Management Business, Depository Participant, and Debt Syndication. The company has locations both inside and outside of India, including Singapore, Hong Kong, the USA, and the UK.

Small and mid cap focused equities portfolio. Accelerating to the NEXT level of growth.

Fund Snapshot

Strategy/ Nature Actively managed, Discretionary Portfolio Management Services
Portfolio Manager Nuvama Asset Management Limited
Custodian ICICI Bank Limited
Benchmark BSE 500
Minimum investment INR 50 lacs
Taxation At investor level
Type Multi-Cap PMS

Offerings in a nutshell

Objective

To deliver superior returns by investing in high-growth companies across SMID benefiting from India’s $3tn+ प्रगति

Portfolio

Well-diversified with 30 – 35 high-conviction, quality companies across SMID

  • Market Cap : Mid-caps 80-100%
  • Small Caps: Up to 20%

Selection and risk mitigation

Selection and risk mitigation Sector and benchmark agnostic focusing on bottom-up stock selection, grounded in research. Leverage primary connects with 100+ companies 

Key themes

  • Premiumization: ~70
  • Globalization: ~30
  • Transformation: ~40-50
  • Number of stocks in universe covering chosen themes. Focus on reasonably valued emerging themes 
  • Ideal for investors seeking to multiply their returns over a long term investment horizon of 3–5 years
  • Prudent risk management to mitigate volatility in SMID
  • Well defined risk framework, overseen by an institutionalized, three-tier risk governance structure
  • Portfolio built over a period for definitive returns over immediate returns, with low churn
  • Clearly defined red flags to be avoided

Active and close monitoring through primary checks

  • Disciplined exit strategy: Lock in profits at euphoric valuations
  • Ability to hedge and rebalance portfolio using derivatives
  • Diversified portfolio: 30–35 stocks
  • Single Stock Weight: 7%
  • Single Sector Weight: 30%
  • Days to liquidate: 100% portfolio, 5–7 days

Why NEXT?

NEXT Wealth Opportunity

Small and Mid-caps (SMID): Higher earnings growth expectations and ability to invest in emerging sectors

NEXT Investment Themes

India’s प्रगति story driven by

  • Premiumization of consumption patterns
  • Globalization: India’s time in global trade
  • Transformation of nation’s infra

NEXT Selection Rigour

Bottom-up, primary research via direct connect with 100+ corporates within chosen universe

NEXT Growth Portfolio

30-35 high conviction, quality companies with the potential to multiply 2x over next 3–5 years

NEXT Level Managers

Experienced equity investment team delivering top notch returns in existing equity schemes

Frontline indices unable to effectively capture emerging themes

Increasingly innovative, investible themes and sectors providing unique growth opportunities over large caps

Chemicals

Global clamp downs on pollution and diversification of global supply chains creating business flows for India

Hospitals

Increasing health insurance penetration and consolidation in tertiary healthcare improving profitability of hospitals.

Construction/ Building materials

Demand for ancillary materials like sanitaryware/ pipes/ cables expected to shoot up with real estate recovery and housing demand

Discretionary retail

Rising GDP per capita and higher discretionary spends creating new growth waves for this sector

Electronic Manufacturing Services

Strong government focus on indigenizing durables manufacturing and components ecosystem + PLI benefitting rapid growth

Capital Goods

Revival in industrial capex. Strong tailwinds in manufacturing sector with the highest ever capex budget outlay leading to a strong runway for growth

SMID: Only Way To Access Emerging Themes

Multiple examples of high-quality earnings growth reflecting in price performance

Sector Stock PAT (INR Cr) FY 18 PAT (INR Cr) FY 20 PAT (INR Cr) FY 22 Earnings Growth 3Y Earnings Growth 5Y Price Performance 3Y Price Performance 5Y
Chemicals Alkyl Amines 66 201 225 38% 34% 73% 53%
Chemicals Deepak Nitrite 79 611 1,067 83% 62% 75% 54%
Chemicals Navin Fluorine 180 409 263 21% 14% 59% 37%
Hospitals Apollo Hospitals 117 455 1,056 65% 37% 46% 30%
Hospitals Narayana Hrudaya 51 119 342 79% 33% 35% 21%
IT Tata Elxsi Ltd. 240 256 550 24% 26% 97% 45%
IT Persistent Sys 323 340 690 25% 18% 79% 40%
IT Coforge Ltd. 280 444 662 18% 21% 35% 43%
Building Materials APL Apollo Tubes 158 238 557 55% 30% 51% NA
Building Materials Astral Ltd. 175 248 484 35% 27% 31% 31%
Building Materials KEI Indus Ltd. 145 256 376 28% 32% 47% 31%
Nifty 50 26% 13% 14% 11%

SMID Seeing Higher Earnings Expectations Over Large Caps

Nifty 50 Nifty 50 SMID SMID
Earnings growth Performance Earnings growth Performance
3Y CAGR (FY19-FY22) 14% 14% 28% 20%
3Y CAGR Expected (FY22-FY25E) 12% ? 23% ?

Making SMID a compelling proposition for the next 3-5 years

Accelerate your investments to the NEXT level

India’s $3trn + प्रगति story

  • Premiumization: Rising aspirations of the Indian consumer

Domestic consumption, which powers ~60% of GDP, is expected to grow into a US$5 trn opportunity by 2030

  • Globalisation: India taking centre stage in global trade

Every 0.5% market share increase in global trade adds 3.5% / U$110 bn to the GDP

  • Transformation: Structural overhaul of the country’s infrastructure

Long runway to catch up to global standards, India’s GFCF as 29%, vs 42% for China – a massive opportunity and critical focus for the government and private sectors

About Fund Managers

Ajay Vora : Executive Vice President and Head, Equities

  • Extensive experience in fundamental research and fund management
  • Proven track record in Indian equities, delivering top notch returns across different market conditions
  • As Head of Equity at Reliance Industries’ Treasury, scaled AUM from US$200 mn to US$1 bn over a period of 5 years
  • Prior work experience includes Head of Research at ENAM AMC
Nikhil Ranka : Senior Vice President, Nuvama Asset Management

  • Over 18 years of experience in fund management, research, and investments
  • Last experience at Reliance Industries’ Treasury: instrumental in scaling equity AUM to US$1 bn
  • In-depth knowledge of business fundamentals across sectors
  • Prior associations: Lloyd George Management, Future Capital, ICICI Sec, Kotak Securities

Premiumization: Crossing over from ‘needs’ to ‘wants’

Birth of a young India, on the move, aspiring for a materially better life, backed by the ability to spend and make it a reality

India gets younger, as US, China age – 77%

Share of Millennials and Gen. Z in India’s population in 2030, with median age of 31, compared to US: 40, China: 42

With a working age majority – 19%

India’s share in global working age population remains broadly constant, steady decline in China’s contribution

Everyone Steps Up – 1 out of 2

Households from upper middle and high income segments by 2030 from 1 in 4 today

Basics Covered ‘wants’ Activated

Having grown up with better education/ employment opportunities, and having higher incomes, young India will break away from the frugal attitudes of the preceding generations

Sectors likely to benefit

  • Retail & Clothing brands
  • Hospitality
  • Durables
  • Alcohol & Beverages
  • Real Estate

Culminating in a long term growth story across sectors

Premiumization

Better earning capacity and higher disposable incomes leading to an upgrade in lifestyle and want driven 

spends

  • Retail & Clothing brands
  • Hospitality
  • Durables
  • Alcohol & Beverages
  • Real Estate

Globalisation

Increasing reliance on India’s manufacturing capabilities given cost and quality arbitrage combined with the need to diversify away from traditional hubs

  • Textiles
  • Engineering goods
  • Auto/ ancillary
  • Pharma/ API

Transformation

Heavy capex in key vectors such as roads, railways, airports, power modernizing India and its infrastructure

  • Cap goods
  • EPC
  • Equipment manufacturers
  • Logistics

NEXT Portfolio Construction

Disciplined fundamental approach to selection of winners within defined themes

  • 3Y Forward PAT CAGR: > 25%
  • Forward looking ROE: > 18%
  • Debt/ EBITDA: < 2x
  • Free Cash Flow trends: Positive
  • Promoter Ownership: > 50%

Additional filters

  • Sustainable business moats 
  • Pricing power and profitability 
  • Management quality
  • Industry dynamics 
  • Earnings growth visibility 
  • Valuation comparable

While bringing the rigour of private markets into public market investing

Strong networks enabling on-ground checks with 100+ companies within defined universe

Company / Channel checks

  • Management interactions Active monitoring and review, site visits to gauge quality of enterprise, efficient use of capital and governance standards
  • Peer, supplier, distributor feedback Holistic checks via multiple touchpoints with key stakeholders

In depth business analysis of catalysts

  • Visibility of multiplying current PAT by 2x over next 3–5 years
  • Re-rating driven by deleveraging in specific sectors
  • Re-rating as a result of increasing institutional ownership and coverage

Business specific factors have a much higher impact than macro factors for under-covered SMID.

Building an independent view is key to generating returns, and more importantly, managing drawdowns

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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.