Mr. Prabhudas Lilladher Sheth established the company in 1944 offering broking services. Today the Group provides comprehensive gamut of financial services catering to the needs of investors. The company has been successful in providing consistent services through 7 decades of market cycles. The practice of the company’s core-values is evident from the fact that there are associates (sub-brokers) with PL (this is how the associates fondly refer Prabhudas Lilladher), smoothly running their services for many decades. The clientele consists of large Domestic as well as Foreign Institutional Investors across 150 different localities.
The Group is headed by Mr. Arun Sheth who has inherited the Business. He has not only inherited the financials but also strong ethical values imbibed by the founder. He is ably supported in the Board by highly experienced professionals namely Mr. Dhiren Sheth, Mr. Dilip Bhat, Ms. Amisha Vora & Mr. Mihir Sheth.
The core Value of wisdom of PL
Though we have assessed the Board more closely, we can state with confidence that the Board of the Group is Ethical & Trustworthy enough to entrust your wealth building process.
Finding the apt professional for the core functions of the Business and Delegation of tactical powers to the right person is an art, (practiced in very few corporate). The ability is usually derived from the Legacy. We realized during our interactions with the PMS Team, that this Legacy is well founded in Prabhudas Lilladher.
Mr. Dilip Bhat, Joint Managing Director (JMD), is one of the top-ranked equity experts in India. Apart from being the JMD he plays a crucial role in the Investment Committee that oversees the asset allocation decisions in the PMS portfolios.
PL-PMS team is headed by Mr. Ajay Bodke, CEO & Chief Portfolio Manager, a doyen in the financial/investment market with more than 20 years of experience. While we interacted with Mr. Ajay Bodke, We remembered the popular quote by " F. Scott Fitzgerald ". The quote says " The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function. "
We opine, Mr. Ajay Bodke, is wise-enough to have an orientation in time that examines the past for relevant knowledge, experience, and precedent; that examines the present context of the problem to be solved; and that projects into the future the long-range effects.
Mr. Nishna Biyani, portfolio Manager, is a young enthusiastic, knowledgeable, individual with 12 years of experience in handling large portfolios. He is capable enough to exhibit perseverance till the fruition of his ideas. Many of his ideas have resulted in sizeable return to the strategies he manages.
Clear set of objectives are drawn for each of the strategies separately. Though the portfolio Manager is free to filter and choose the stocks, the method to select to be followed as per the laid-down process. It takes courage to state " We are not interested to create the image of Star-Fund-Manager ". The final implementation, whether it is a buy/sell/trim or the % of holding will be the core team’s (Team consisting of CEO, JMD & Portfolio Manager) decision, rather than any individual.
The Group Company, PL, has a dedicated equity research team, which saves the time of the PMS team, through the process of initial filtering from the Gamut of listed entities.
The PMS team then applies the basic BVM filtering. The process is explained in a simple pictorial form (illustrated in the adjacent figure). A " Business " is selected ONLY if it meets stringent parameters like adherence to high standards of corporate governance, favorable medium-term industry dynamics, strong earnings growth trajectory, solidity of Balance sheets with high return ratios and strong free cash flows.
A business that satisfies the above mentioned criteria is then assessed for its ‘Fair value’ using various valuation parameters.
Various " Market-interest " factors like free float, Institutional holding limits, research coverage are then assessed. A good franchise at right valuation needs to be supplemented by supportive market interest factors. The BVM matrix is applied to all the strategies of Prabhudas Lilladher PMS.
PL-PMS investment philosophy mirrors the famous quote by the legendary investor Warren Buffet " The stock market is a device for transferring money from the impatient to the patient. " PL-PMS believes in following a core & satellite strategy in managing portfolios. 70-75% of the asset allocation is towards long-term structural calls while the rest can be deployed towards topical undervalued themes.
Another important function strictly followed by PL-PMS team is not to invest in any stock without meeting the Management and thoroughly analyzing the business model.
All three strategies of PL-PMS’ portfolios have large allocations to the BFSI sector which forms the major component of market’s overall capitalization. The team is well aware of the current NPA woes; however, it believes that “retail-focused” lenders are likely to benefit from the current growing credit demand. Also, the team believes that the Automobile/retail/FMCG will be beneficiaries of anticipated discretionary/spurt in rural spending by Govt. and due to favorable monsoon.
PL-PMS follows a rigorous and disciplined approach in investments. This approach is embedded in a constant evaluation of topical macro themes for the generation of ideas. These ideas are then subjected to a three-layered evaluation matrix of assessment of business fundamentals, comparative valuations and market-interest factors.
Macro themes at various points straddle a broad range of drivers of aggregate demand in the economy, like stage of investment-cycle revival, direction of monetary policy, global-commodity-cycle calculus, opportunities accorded for movements in consumption curve, harnessing of external trade winds, etc.
The portfolio construct employs various risk mitigation strategies to avoid excessive sectoral and stock concentration, achieve optimal diversification, minimize liquidity risk, etc.
The PL-PMS team has identified many “multi-bagger” ideas. (L&T Finance, Brittania, Yes bank, Maruti, D-mart, JSPL, UPL etc). The PL-PMS team has recognized that leaders of previous Bull cycles seldom lead the next bull market. Hence, while cyclical stocks are exited on waning tail-winds; core portfolio stocks are exited whenever structural drivers that had propelled their outperformance appear to weaken or the valuations become too forbidding.
There appear many common themes, which were discussed by other PMS-Managers too. However, the PL-PMS has more differentiated ideas, apart from the listed themes. The idea of value picking (after bottom-up research approach) is working well due to the ability of the team to identify the stocks earlier than other market players. Few stocks identified in the theme of shift from un-organized-to-organized players is quite interesting. It is convincing to note that these stocks will be re-rated soon. Most of the ideas are combined with the condition of picking the Leaders in the respective sector.
Strategies of Prabhudas Lilladher-PMS
This strategy endeavours to generate steady returns in varying market conditions by adopting multiple strategies. Multi-Strategy aim is to outperform the broader market in the long run. The portfolio provides capital appreciation by investing primarily in equity instruments. It always reflects the market sentiment. With Large Caps at 60-70% and Mid Caps at 30-40%, Multi Strategy is ideal for investors with a long-term horizon who want steady returns under varying market conditions without compromising on the high growth potential of the Indian economy.
Multi - Strategy has beaten the bench - mark consistently
The multi-Strategy can yield moderate return over a period of 3 to 5 years. This is apt for investors who do not like to see much “draw-down” in their portfolio. The strategy is likely to steadily grow and perform better on longer durations of more than 3-5 years.
Key-holdings in the Multi-Strategy are listed.
This strategy aims at investing and holding largely high growth stocks without any sector bias in all types of securities in the mid-cap & large-cap category for a long term, to generate superior returns.
EquiGrow - Strategy has beaten the bench - mark consistently
EquiGrow strategy aims for better returns than Multi-Strategy but during bearish cycles the draw-down can be more than that of the Multi-Strategy as it is higher on the risk-return spectrum. This is apt for an investor who is ready to take moderate risk and aim for better return.
It is the latest offering from PL-PMS and it emphases on long term opportunities for wealth creation. Holdings in this strategy range across sectors but are largely hovering around the themes of consumption and strong brand franchises. This strategy is looking to buy businesses either in their early growth phase or those that are expected to turnaround due to favourable business environment. This strategy also considers strong businesses that are encountering temporary slowdown (i.e. Good business facing temporary turbulence). Strong managements, promising growth opportunities and clean Balance sheets are some of the other traits that are looked into while selecting a stock. The entire focus in this scheme is to leverage PL years of understanding on various small cap companies and also use the domain expertise of PL strong bench of Research Analysts. This helps in better filters and also enhances the chances of entering a stock in its early stages of growth.
Fortune- Strategy is less than one year since launch
Key holdings in Fortune-Strategy are listed
Patient investors who can await for the re-ratings/turn-around/new-ideas to get recognized, with 3 to 5 years time horizon can invest in this Strategy. The investment caters to 14 different ideas (Shift from un-organized to organized players, Capacity utilization improvement, Good Businesses facing temporary head-winds, Suppliers to consumer franchisees etc.) These ideas are expected to yield higher returns than other strategies over the medium to long term.
The sector-diversification is optimum; however the numbers of stocks are restricted to less than 25 stocks at any given time as per the process laid-down by the PL-PMS team.
Fortune Strategy launched on 20-July-2017 has just completed one-year. Though the strategy has broadly performed in-line with its benchmark the fundamental parameters are intact with holdings with solid balance sheets, negligible debt or net cash on balance sheets, expected pick-up in strong earnings growth over the medium term. PL-PMS opines that re-rating is likely to occur anytime and investors with an investment horizon of 3 or more years will be rewarded suitably. The PMS-bazaar research team critically analyzed the holdings and opines that the underlying stocks are likely to become multi-baggers.
Fortune (Small cap) Strategy is suitable for those looking at higher returns and having a higher risk appetite with an investment horizon of 3 to5 years.
Multi-Strategy is suitable for investors with lower risk appetite with minimal draw-downs. The Strategy is likely to grow steadily with consistency in returns.
Equigrow Strategy is higher on the risk-return spectrum vis-à-vis Multi Strategy with higher allocations towards midcaps.
If you align expectations with reality you will never be disappointed – Terrell Owens.