UNIFI Capital Pvt. Ltd. Spin Off PMS


Key Attributes

Inception Year: 2014

Number of Stocks: 15 - 20

MD & CIO: Sarath K. Reddy

About the Company:

Unifi is essentially a value investor in growth businesses. They place Value first but always also demand growth potential in a business they own. They believe that stock performance, particularly in mid and small firms, needs a catalyst; and often the best catalyst is an attractive price combined with growth.

Unifi believes that both micro (firm level) and macro risks are critical in determining outcomes. They carefully evaluate the fundamentals of each business that they own, and in addition ask the question if the prevailing and expected conditions in the economy will act for or against their interest. At times, while making longer term investments, they consciously trade off adverse macro conditions for terrific entry valuations.

Investment Objective

The investment focus & objective of Unifi Spin Off Fund PMS is to generate superior risk adjusted returns relative to market indices by investing in stocks of companies undergoing Spin-offs. Typically, such an action by the company will help remove the holding company discount that the market attributes and thereby enhance the stock’s valuation. Unifi’s proposition is to gain from the information asymmetry linked value-price mismatch, by closely tracking the entire Spin-Off process and investing in such companies after a detailed review of their fundamentals.

Unifi Capital actively manages seven bottom up equity approaches that sift through opportunities across the breadth of the markets. Across the funds, the mandate is to participate in opportunities that arise from a mix of emergent themes, corporate actions and of course attractiveness of core fundamentals. The objective of all the respective funds under management is to deliver superior risk adjusted returns from an absolute perspective.

Investment Philosophy

Unifi Spin Off fund PMS follows the philosophy of Opportunistic Investing. Here, the investments are based on the occurrence of specific corporate events and the time frame is 3-18 months.

In a single corporate structure with multiple businesses, the sum of the value of the separate parts is often less than that of the whole. A de-merger of disparate businesses, unlocks the financial and management bandwidth required for the respective businesses to grow. Spin off fund invests in situations that offer great scope for the businesses to realize their full growth potential and attract commensurate market valuation.

The consolidated value of a business does not in its entirety capture its true value as it has to account for the lower valued business. In other words, the sum of the parts is almost always lesser than that of the whole. Corporate India has woken up to the fact that spinning off an unrelated business, or a business with a distinctly and vastly different growth profile is key to realizing the right value for the respective business, and is in the long term interest of its key stake holders. The Unifi Spin Off Fund seeks to identify such opportunities where the sum of the parts is greater than the whole and invest in such parts to unlock value that was hitherto lost in a conglomerate’s consolidated set of books.

The Spin Off Fund’s universe is built from the Spin-offs approved by Boards of respective companies as filed with the stock exchanges. At any point in time, the portfolio may include 20% of companies that may not have publicly announced a demerger but they believe, through their primary research, are close to doing so. From the universe of such companies, they would select ideas to invest based on a bottom up approach that they have been practicing over the last fourteen years.




Performance Table #


Trailing Returns (%) 1m return 3m return 6m return 1y return 2y return 3y return 5y return 10y return Since inception return




Disclaimer

#Returns as of 30 Apr 2022. Returns up to 1 Year are absolute, above 1 Year are CAGR.



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