ICICI Prudential PMS PIPE

ICICI Prudential PMS PIPE’s primary exposure is in small-cap and mid-cap companies enjoying some economic moat. These may also be companies amidst unfavourable business cycles or undergoing special situations.

They particularly seek companies with strong fundamentals. The PIPE strategy aims at value investing in companies which can potentially become market leaders. They focus on margins, management, and other business dynamics. The assessment of ICICI Prudential PMS PIPE concentrates on beating the average returns of capital over the long-run. This concept is termed as ‘moat’, which is significant to their investment philosophy.

• RERA & Goods & Services Tax
• Insolvency & Bankruptcy Code
• Corporate Tax Rate
• Production Linked Incentive / China Plus One Business Strategy
• Increase in Budgeted capital expenditure in the Union Budget of FY 2022-23 of 35%

Core Belief: Companies create wealth, not markets

Aims to Identify Prominent Businesses, Competent Management, at Reasonable Valuations

1st Filter: Business

• Company growing faster than industry & industry faster than market
• Qualitative assessment based on the concept of “economic moats*”
• Foreseeable changes in business leading to a positive outcome

2nd Filter: Management

• Focused on growth, improving margins & prudent capital allocation
• Competent managers with a credible track record
• Fair corporate governance standards, with aligned shareholder interests

3rd Filter: Valuation

• Cash flow is central in our Investment Process about a company’s value
• Evaluation of margin of safety required according to the ‘moat’ and competence of management
• Better risk reward profile

ICICI Prudential PMS PIPE Strategy (the “PIPE Strategy”) aims to provide long-term capital appreciation and generate returns by investing predominantly in Mid and Small Cap segment of the market by having exposure  to companies enjoying some economic moat, and undergoing special situations or in the midst of unfavourable business cycle.

Basis for selection of securities as a part of investment approach

The Portfolio Manager under the Strategy predominantly invests in mid and small capitalisation companies which may be undergoing special situations or are in the midst of unfavourable business cycle.

Types of Securities

Predominantly invests in listed equity and equity related securities. The PIPE Strategy may also take exposure to exchange-traded derivative instruments for hedging purpose.For liquidity or defensive considerations or pending deployment, the Portfolio Manager may invest in debt, money market instruments, mutual fund schemes or debt ETFs.

Basis for selection of securities as a part of investment approach

The Portfolio Manager under the PIPE Strategy predominantly invests in mid and small capitalisation companies. Nifty Mid-Small cap 400 Index includes all companies from Nifty Madcap 150 and Nifty Small cap 250 Index. Nifty Mid-400 Index intends to measure performance of the mid and small market capitalisation companies and hence, it is an ideal benchmark as it represents mid and small cap companies’ universe.

Investing in growth stories which seem sustainable: Potential of price appreciation backed by Earnings Per Share growth.

Investing in companies with possibilities of demand explosion and margin expansions: Expansion of revenue and profit growth rates surpasses historical averages leading to PE re-rating. Improves visibility and valuations leading to PE re-rating.

Buying businesses undergoing special situations, cyclically and mispriced by market, now available at giant discount: Aiming to provide margin of safety.

• The Portfolio Manager under the PIPE Strategy predominantly invests in mid and small capitalisation companies which may be undergoing special situations or are in the midst of unfavourable business cycle.
• The Strategy shall follow a top-down approach in sector selection and a bottom up process for stock selection.
• The Strategy may look to invest in companies which are fundamentally strong, and which may be considered to be one of the market leaders in their industries.