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In the next three years, one will make more money in corporate banks than retail and MSME banks, said Anshul Saigal, who heads Kotak’s Portfolio Management Services since 2013.
Saigal should know as the Kotak PMS flagship special situations strategy has in the last six years returned 26 per cent compounded annual growth rate (CAGR).
Currently, Kotak PMS manages ₹5,000 crore of third-party funds, of which the special situation strategy is the flagship at about ₹4,000 crore.
“Our style of investing is a bit different. We will buy businesses that are scratched diamonds (not pure diamonds) where demand today is low. We are not looking for spotless, pristine diamonds which are priced higher than what they are truly worth,” Saigal told BusinessLine here.
He said that Kotak PMS — which currently has four specific strategies — would prefer to buy corporate banks where growth is still not priced in. These four existing strategies are special situations; small- and mid-cap; pharma & healthcare, and fintech.
Dedicated strategy
Kotak PMS may not even be averse to putting together a dedicated strategy for corporate banks and financials, according to Saigal.
At the same time, Saigal made it clear that he was not suggesting public sector banks which have sufficient capital and are generally large enough to manage their operations.
“Our endeavour is to buy value where growth is not priced in. As growth gets priced in, value will get unlocked. In the next three years, our endeavour will be to aim at 15-25 per cent CAGR,” he said.
If the market returns 10 per cent, Kotak PMS will eye 15 per cent, he said. However, if the market returns 15 per cent, the effort will be to do 20-25 per cent, Saigal noted.
He highlighted that India Inc — which has recovered from the after-effects of GST — is now giving “positive guidance” which augurs well for the markets and the economy.
Broader markets
In the just gone by June quarter, net sales of 246 companies (excluding financials, oil & gas and metals) forming part of the NSE 500 index grew 18.4 per cent on year-on-year basis. Commenting on the capital markets, Saigal admitted that there has been a significant decline in the broader markets, which do not show up in the frontline indices.
In the last six to eight months, because of volatility the general interest of investors has been to protect capital rather than buy into risk assets.
“Because we bought into names that did much better than the indices, we were able to return 26 per cent. That has allowed us to outperform the index. Names such as NBCC, and Britannia helped us make significant returns even as broader markets have taken a hit,” he said.
Kotak PMS investment philosophy is to seek value while being sector agnostic. “We want to get into transactions where we get value of ₹100 and we are paying ₹50,” Saigal said.
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