ASK India Vision Portfolio

In Sep 2022, the portfolio outperformed its benchmark BSE500 which delivered -3.3%. In consumer space, Patanjali Foods, Astral and Polycab increased by 12%/7%/4% respectively in last 1 month. Page Industries, Titan and Radico Khaitan stock prices movement was within +/-1% range. Berger Paints underperformed with 8% decline in last month. In Financial services space, Bajaj Finserv, Bajaj Finance and Aavas stock prices movement was within +/-1% range while ICICI Bank and AU Bank registered 2-3% decline in last 1 month.

Among Chemical sector names, Navin Flourine increased by 5% while SRF and Aarti Industries declined by 2%/10% respectively in last 1 month. IT companies, Mphasis and Infosys declined by 2%/5% respectively in last 1 month. Among the other names, APL Apollo, Dixon and Divis Labs increased by 10%/7%/2% respectively in last 1 month. Reliance Industries and SONA BLW underperformed as stock prices declined by 10-11% in last 1 month. AAVAS Financiers was added on Sep ’22. Aavas operates in locations where banks typically do not operate (low ticket size, periphery of cities & smaller towns).

Moreover, ~65% of AUM is towards self-employed borrowers which requires a more involved underwriting due to lack of income proofs and near absent banking habits. Owing to these factors, Aavas enjoys healthy pricing power compared with urban housing finance. Aavas follows an in-house model for loan sourcing, legal and valuation activities (unlike most peers who partly depend on external agencies). This, over time, has helped build strong relations as well as more profound understanding of the borrower behavior, thus translating into a strong grip on growth, profitability, and quality.

ASK Indian Entrepreneur Portfolio (ASK IEP) invests in entrepreneurial driven and family-owned businesses; listed on the Indian stock markets, for compounding gains over the medium to long term.

Key investment objectives

• Capital preservation over a period of time
• Capital appreciation over a period of time

Achieved through

• Long-term investments in high-quality companies with strong growth prospects

Size of the Opportunity

• Size of pond v/s size of fish
• Dominance
• Resilience
• Liquidity

Quality of Business

• High quality of business (Superior RoCE)
• Strong moat. Impregnability
• Sustainability
• Key pivot of strong wealth creation

Earnings Growth

• Quantum
• Consistency
• Durability
• Predating (Early v/s Later)
• Compounding power

Value

• Favorable Price-Value Gap
• Margin of safety

• Change in Ownership: Public Sector to Private Sector Banks
• Higher incomes to increase discretionary spending: Luxury Cars, Premium Bikes
• Unorganized to Organized: Jewelry, Housing, FMCG, Auto Ancillary
• Commodity to Branded /Premium Business: FMCG, Consumer Durables
• Lifestyle changes: Railways to Airlines

Value Migration Drivers

• Technology
• Cost
• Convenience
• Easier Access to Funding
• Lower switching cost

Value migration occurs when there is a disconnect between customer priorities & existing business designs

• Inter country migration: From western geographies to Indian IT/Pharma
• Inter industry migration in same country: Railways to Airlines
• Inter company migration in same industry: Public Sector to Private Sector
• One segment to another in same company: Voice to Data in Telecom

Selecting consistent performers in disruptive times is the success formula for long-term wealth creation

• Managed by one of the pioneers in the investment management industry
• Investing in industries/companies benefitting from value migration ahead of the curve
• Journey from $2.5 Trillion to $5 Trillion GDP
• A pure bottom up, buy & hold multi cap investment approach of around 25 high quality companies
• A fitting confluence of quality, valuation, and time:3 main drivers for compounding wealth
• Positioned to capitalize on the impending value migration opportunities in India
• A fitting confluence of quality, valuation, and time: 3 main drivers for compounding wealth

• Top 500 as per market capitalization
• Subjective evaluation on management quality, their integrity, vision, past track record, execution, capital allocations and distribution skills, corporate governance standards etc.
• Businesses benefiting from value migration (e.g., ownership migration: PSU banks loosing market share to private sector banks, shift from unorganized to organized, etc.)
• Businesses with RoCE over 25% and Earnings Growth above 20%
• Selection based on psychographics optimization and valuations