The investment focus of this strategy is on growth oriented companies in specific sectors which are leading the migration of market share from unorganised players to organised players. As India’s economy grows rapidly in scale and sophistication, several sectors are positioned to change dramatically over the next decade. Certain powerful trends are driving the shift in the balance of competitive advantage in favour of organised businesses.
India’s economy has a high proportion of unorganised businesses which are estimated to account for about 35% of the GDP. As the economy grows in size from the current $2.6 Tn to $5 Tn over the next decade, it will traverse certain social, technology, scale, legal, taxation and regulatory changes. These changes are likely to challenge the current business models of unorganised players in certain sectors. As a result, well established organised players in such sectors will gain market share along with improving margins, potentially generating very high earnings growth. The BC-AD strategy has been structured to benefit from this imminent migration of market share from the unorganised segment to organised players. The strategy would be investing in well-established organised players who would be gaining market share from the unorganised players thus posting a higher revenue growth rate than that of their industry. The high top line growth along with the benefits of operating leverage would help them record a superior earnings trajectory over the next decade.
The Universe of Companies would be broadly selected from the following sectors:
These sectors are only indicative of our current thinking and it is entirely possible that as our research progresses we might look at companies beyond these sectors.
The strategy would focus on companies in sectors where it expects a gradual shift in consumer demand from the unorganised players to the organised. The investment process would involve analysing multiple sectors and drawing up the list of factors which would be triggers for the migration of demand to the organised space. The key risk would be the time required for the transition to start playing out within the selected sectors. There might be stocks/sectors wherein the anticipated migration might take longer than the initially estimated time periods. Thus, it is suggested that investors take a longer time horizon view when investing in this particular theme.
The portfolio is likely to have around 15-20 stocks in the PMS platform. The investor's assets will always remain in the investor's name with a SEBI registered custodian. While tracking and monitoring of investments will be active, there’s likely to be low turnover in the strategy.