About
PGIM India Asset Management is a wholly owned business of PGIM, the global investment management business of the US based Prudential Financial, Inc. (PFI).
PFI had entered the Indian market through a joint venture with DHFL in 2014 under the brand ‘DHFL Pramerica Asset Managers’ (Pramerica being another brand owned by PFI) and immediately bought the local business of Deutsche/DWS Asset Management. But after news of regulatory issues surfaced about the DHFL group, PFI bought out its partner at the end of 2018 and rebranded as PGIM in line with its asset management business worldwide.
The PFI group has its operations in the United States, Asia, Europe and Latin America. PGIM is the global investment management business of PFI, one of the top 10 investment managers with over USD 1.5 trillion in asset under management.
Today, PGIM India Asset Management is a full service investment manager offering a broad range of equity and fixed income solutions to retail and institutional investors throughout the country. It manages 22 open-ended funds operated by 17 investment professionals. In addition to managing the investor’s assets through domestic MFs, it also offers offshore funds and Portfolio Management Services (PMS – see separate dossier).
Key details from financial statements for FY 21-22 –
| Total income (INR crores) | Total Expense (INR crores) | EBIT (INR crores) | EBIT Margin | Net Profit (INR crores) | Total Income (USD millions) | Total Expense (USD millions) | Net Profit (USD millions) |
| 508.00 | 83.00 | 425.00 | 84% | 425.00 | 67.73 | 11.07 | 56.67 |
Key staff
Ajit Menon, chief executive officer – has over two decades of leadership experience in business strategy, distribution, sales and marketing. He joined PGIM India from Tata Asset Management, where he was the Head of Strategy. Prior to Tata AMC, Ajit spent over 15 years with DSP Blackrock where he played a key role in the growth of the business.
Srinivas Rao Ravuri, chief investment officer – has been in the financial industry for more than 24 years. He has worked in various companies like HDFC AMC, Motilal Oswal Securities etc.
Puneet Pal, head of fixed income – for more than 4 years now. Prior to PGIM he worked in BNP Paribas asset management for 5 years.
Naha Aniruddha, head of equities – for more than 4 years. Prior to PGIM he worked in various companies like IDFC MF, Avendus.
Investment philosophy
The AMC believes in something called ‘long-termism’, which is very much a philosophy that looks at managing money over a complete market cycle rather than quarter to quarter.
It looks to buy quality businesses with an above average potential for sustainable growth at a reasonable price. It places maximum emphasis on quality of the business on quantitative and qualitative parameters, they buy securities of companies that are in the growth phase, and lastly they look at the valuation of the company they prefer to buy securities that have a significant upside potential.
‘The AMC believes in to deliver superior risk-adjusted returns over the long term without compromising the quality of the portfolios we manage. It place as much emphasis on managing risk and volatility as on generating returns. IT adhere to rigorous research and risk management processes and emphasise on the strength of our teams over any individual.’ https://pgimindiamf.com/about-us/investment-philosophy
Media
MMI interview with Srini Rao, July 2022
Summary –
PGIM India focuses on a fundamental approach to investment. They believe that this has become embedded in the way they conduct themselves. Srini joined 3 years ago and has been institutionalising the process. He believes he has made a genuine contribution and is effectively identifying and communicating it.
So, GARP (growth at a reasonable price) is their preferred approach. Therefore, investing in stocks is all about doing so for growth, but at the same time, he believes that the price we pay is quite crucial. Therefore, they do not support this “growing at any costs” agenda. He thinks that’s what he meant when he stated this is their investment approach and it is clearly shown in the performance of their portfolio over the past three years. They also do not believe in solely value, so they desire growth but which will pay so.
He spoke of low leverage and the importance of operating cash flow and governance. He believes that these are the three items they can locate in our portfolios in addition to GARP. But since we are aware that markets frequently ignore important information, we can now look back and describe what occurred the previous year.
About three months ago, people believed that the market should have acted in that way in regards to the valuation that many of these new, so-called takeover companies demanded. Now that we can see that they have done so, they believe that in the past 12 or months, when there was so much activity in IPOs, the market should have acted in that way. They only took part in two or three names, and they didn’t even take part in the IPOs that were billed as “growth” but were actually “growth at any price.”
Explaining the process, Srini explained that of the 3000 stocks, their stock universe is around 550 stocks (he didn’t mention how he got from 3000 to 550). Then they apply 3 filters – the first criterion is a maximum 3x for the debt/equity ratio. The second requirement is that the company must have produced positive operating cash flow for at least seven of the previous ten years. The only thing they are looking at is how competitive the business is, which is demonstrated by the fact that it can provide operating cash flows. They are not interested in profits or top rankings. The third requirement is governance. They claim that they desire reasonable governance, including being fair to those audition holders, etc. So, to be a part of their investment universe, these three requirements must be satisfied.
They have eight analysts and they divide research sectorally, so that each sector analyst in less covers, they know two or three sectors depending on his understanding expertise, and they maintain models and research reports.
However, they must have internal knowledge and experience to determine what the likely earnings of the large corporations in which they invest are. He spoke with a lot of model suppliers, and they can discuss the assumptions and ask the sales and analysts to enter their own assumptions, as has been the practice for the past 20 years.
As their size continues to increase. There is dilution taking place. He believes that this has been happening for only 30 years because they have also noticed promoters going out in some businesses. The same thing is occurring. He disagrees that they are a unit, so they start the devolution.
The second is that they must deal with the various shades of grey that the fire will be exposed to.. Therefore, during that period, keep in mind the instant that particular stock enters a big index. It unquestionably places the stock in a different bracket since he must exercise greater caution if he loses a stock.
When someone has a good appetite for risk and is considering equities funds within equity funds, he would advise Flexi since it makes the most sense, and ideally every mutual fund should only have one fund. In reality, that is what they have in markets where he originates. However, investing in small caps, for instance, does call for unique knowledge. As a result, smaller mid caps are frequently chosen by investors, who believe that they offer greater value at a certain price point when compared to Flexi caps.
He wants potential mutual fund investors. He tells them up front not to invest in equity funds if the period is less than three years because he is buying equity funds, which need to have a five-year horizon. He wants investors, or at the very least, they prefer their viewpoint while visiting a mutual fund. But he wants to assess fund managers annually due to the type of competitive pressure that exists.
MMI interview with Ajit Menon, July 2022
Summary to write
SAT stays Sebi’s penalty on PGIM AMC in inter-scheme transfers, ET, https://economictimes.indiatimes.com/mf/mf-news/sat-stays-sebis-penalty-on-pgim-amc-in-inter-scheme-transfers/articleshow/93780852.cms
The Securities Appellate Tribunal has stayed the penalty imposed by capital markets regulator Sebi on PGIM Asset Management Company in a case pertaining to flouting of mutual funds norms. Apart from the asset management firm, the regulator had penalised its chief executive officer Ajit Menon and three others — Kumaresh Ramakrishnan, Puneet Pal and Rakesh Suri. These three were the fund managers at the time of violation.
ETMarkets Smart Talk: We are cautious in short term amid tighter liquidity situation: Srinivas Rao Ravuri, Economic times, 11th May 2022 https://economictimes.indiatimes.com/markets/expert-view/etmarkets-smart-talk-we-are-cautious-in-short-term-amid-tighter-liquidity-situation-srinivas-rao-ravuri/articleshow/91469601.cms
Srinivas Rao talks about his mantra to pick stocks, they follow Growth At Reasonable Price (GARP) style for investing. Their research team focuses on identifying companies that can deliver sustainable growth. They avoid companies that are highly leveraged and companies that do not generate cash flows.
Are global REITS a good diversification option?, Mint, 10th November 2022 https://www.livemint.com/money/personal-finance/are-global-reits-a-good-diversification-option-11636562233794.html
PGIM India launched India’s first global realty funds that would invest in global REITS and global realty funds. The scheme will have exposure to realty markets in the US, Japan, the UK, Australia and Hong Kong. It is a good diversification option for the investor as long as the investor understands the risk associated in the global real estate industry.
PGIM completes the acquisition of DHFL Pramerica Asset Managers, Economic Times, 31st July 2019
PGIM acquired DHFL Pramerica Asset Managers, the company is now known as PGIM India Mutual fund in 2019.
Prepared by:- Devasri Davey, 19th May 2022, updated Debolina Dey Dec 2022
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