Series 24 – Key Takeaways of Q2’ 2023 Investor Call

In the past weeks, we have discussed the various stages of our business evaluation process, namely: BUYING, EXPOSURE, ALLOCATION, and EXIT. Now, as we prepare to launch our ‘GETTING TO KNOW ITUS’ Series, we would like to offer some key insights into our quarterly call updates.

Below, you will find the attached link where you can listen to our quarterly call, where Mr. Naveen discusses the fund’s returns profile, provides insights on investing during market highs, and also explains our approach to Risk and portfolio expectations.

Itus Capital 2Q Investor Call 2023 – ITUS Capital

Here are the key takeaways from our quarterly call –

1. Returns profile of the fund- 01:35 Minutes –

1. 1. Since Inception – The fund has yielded a return (IRR) of 19.94% (Net of fees and expenses) compared to nifty for the same period delivering a 14.48%
   2. We Continue to be selective Bottom’s up investors, focussed in deploying capital and Valuation will drive our capital allocation

2. What do we think on-“Investing in new high’s” (03:10 Minutes)

2. 1. FII Flows, Domestic Flows and Valuation are three major talks
   2. FII’s- India’s Increasing Contribution to world’s market cap and GDP Contribution with a 3.3 Tn Economy positioned no.5, and we on our way to a 6-7 Tn Economy which will position us No. 3
   3. In terms of valuation- Historical Nifty P/E is slightly above mean and well below the peak we saw during Jul-Oct’2021
   4. From now, earnings growth and capital allocation becomes important and Market multiples are not expensive.
   5. Nifty P/E and P/B historical data is also highlighted (07:50 Minutes)
   6. Considering Nifty 45% financials, P/B ration becomes more important, which is also above mean and well below the peak
   7. The new peak has been clearly driven by Strong Earnings Growth and not multiple re-rating or FII Inflows- This is a healthy sign
   8. P/B and earnings growth of Nifty Small Cap Index- We are at 21% discount to the previous peak in small cap index P/B, and growth seen at the back of earnings.

3. How we think about Risk today- (11:58 Minutes)

3. 1. The portfolio’s returns can be broken down as follows: Out of the total gross returns of 22.4%, 17.6% comes from earnings growth, and 4.8% is due to re-rating.
   2. Risk Breakdown (13:45 Minutes) Detailed on risk breakdown of the portfolio and portfolio expectation- Cash Flow Growth Drives the IRR
   3. Understanding Nifty PE and our portfolio PE- 16:56 Minutes
   4. Constructing portfolios with PE as the base (20:20 minutes)
   5. Where do we see growth pockets- Considering FII look at India as a growth market and expecting allocation increase from 3.5%-4% to 6.5%-7%
   6. Growth Expected in supply side businesses- Infra, Real Estate, Auto, Real Estate Ancillaries, Manufacturing, Metals etc together contribute to 75%-80% of our GDP
   7. Last decade growth has been on Consumer facing segments- FMCGs, QSRs, Paints etc
   8. Manufacturing shift to India- Capex, lowest wage inflation, working age population in favour- all these will be extremely beneficial on supply side growth.
   9. Contributors to GDP (27:10 Minutes) Expectations on GDP doubling

4. Portfolio Expectations- (29:05 Minutes)

4. 1. Our largest exposures are- B2B, Manufacturing, Auto Ancillaries, Real Estate Ancillaries which are supply side businesses
   2. Investing in growth, Buying at right valuation, with promotor quality are of prime importance
   3. Our Expectation is to out-perform nifty in 3 year cycles and get ourselves fully deployed if we see IRR Expectation of 20% and over

You can listen to all about it and also the questions some investors and partners has asked, in the link mentioned above. We hope these insights were useful and you use them as talking points to your clients.

 

These weekly episodes are now available in our website for your quick read and you may access the same in the below link.

Weekly Enlightenment Archives – ITUS Capital

Also, to remind you on our SIP program, investors can add funds steadily into the portfolio through this structure. Do drop an email back to [email protected] for more details. Till we meet you next week, wish you a happy weekend.