UNIFI Capital Pvt. Ltd.


Key Portfolio Attributes

Inception Date: 2001

Number of Stocks: 12 - 18

Founder & CIO: Sarath K. Reddy

Founder's Experience:

In a career spanning 30+ years, Mr. Sarath Reddy has lead a variety of functions in the field of Investments. Having started his career in Mumbai with Standard Chartered Bank, he took the first opportunity that came along to turn into an entrepreneur. He founded Unifi Capital in 2001 with a highly experienced team of professionals. As Unifi’s Chief Investment Officer, he works very closely with the analysts and fund management team.

Investment Objective

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 Philosophy

• Opportunistic Investing: Here, the investments are based on the occurrence of specific corporate events and the time frame is 3-18 months. The portfolios that follow this philosophy are: Event Arbitrage PMS, India Spin-off PMS, Holdco PMS, The Green PMS.

• Fundamentally Driven: This is a buy & hold strategy where investments are based on sustained growth of the Indian economy. Here, the time frame is 2-3 years. The portfolios that follow this philosophy are: Insider Shadow PMS, Deep Value Discount PMS, APJ 20 PMS, BCAD PMS.

• Blended-Rangoli PMS follows a mix of both above mentioned philosophies.

Investment Approach

The PMS investments at UNIFI will be majorly concentrated in small and midcap space wherein it is difficult for “institutional” type of capital to invest and where Unifi’s relatively smaller size helps to focus in niche areas of the market.

UNIFI provides PMS services that have all thematic portfolios. The approach for each of its portfolio is stated below:

Blended-Rangoli PMS: Investments under this PMS will be cherry picked from across the portfolio of companies that Unifi manages across each of the 7 distinct PMSs it manages. In effect, the endeavor is to be able to identify the “the best of the best”. This PMS aims in cutting down the investors switching cost and effort in migrating between best opportunities at any diverse point of time.

Spin Off (Redemption ongoing for this PMS): 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 PMS invests in situations that offer great scope for the businesses to realize their full growth potential and attract commensurate market valuation.

DVD (Deep Value Discount): Few segments of the market tend to be mispriced in spite of visible growth prospects, resulting in such stocks trading at a deep discount to their intrinsic value. Reasons could vary from inadequate understanding of a business by most analysts, low relative market cap and liquidity or the lack of correlation to benchmark indices. DVD invests in such businesses and exploits market inefficiencies.

HoldCo: Many holding companies are run as group holding companies rather than strategic investment companies. This results in a perennial discount in their valuations, but such discounts are not a constant. The Holdco PMS identifies strong underlying businesses and looks for significant valuation discounts that are likely to recover as promoters feel the heat of change in the regulatory landscape; or as underlying businesses exhibit significant growth.

APJ 20: As always, markets fancy few sectors that have done well in the past ignoring the rest. Of the sectors which are less understood, few like specialist chemicals, agri, precision manufacturing has become globally competitive and are privy to an expanding market opportunity. APJ20 invests in firms that have evolved and are in a ripe position to benefit from such growth prospects.

Green PMS: The investment focus of the Green PMS is on companies which provide products and services that help in reducing the carbon footprint in the environment and/or result in more efficient use of natural resources. Within the context of this approach, the sectors that have been identified for creating the portfolio are – emission control, energy efficiency, water management and waste management.

Insider Shadow PMS: The Insider Shadow PMS invests in companies which have repurchased their own shares or where its promoters’ have acquired additional shares at market prices. Such an action demonstrates their conviction on company’s growth prospects or inherent value not captured in stock price at that point. The proposition is to gain from the eventual balancing of the value-price mismatch in the market.

BCAD (Business Consolidations After Disruptions PMS): The investment focus is on established 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 organized businesses.



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