Valcreate Investment Managers

About

Valcreate Investment Managers is a SEBI registered Portfolio Management Service. They are a research-focused organization. Since inception, all their portfolios are beating relevant benchmarks by a wide margin.

SEBI Registration No. INP000005980

They are a highly disciplined research engine, and they buy stocks based on a strong understanding of the underlying businesses.

Further, they create concentrated portfolios based on client profiling and diversify adequately to manage the risks. Their focus is the end client needs and risk profile and they prefer to customize portfolios to suit the same.

A strong focus on research and processes are necessary to achieve the objective of long-term wealth creation. One mistake can cost a very high-quality portfolio bulk of the returns earned over many years. At Valcreate, based on the experience and initiative of the founder, they have put in place processes which are aligned to creating long term wealth and at the same time avoiding big errors of judgement.

Key staff

Rajesh Pherwani, Founder and Fund Manager – Rajesh Pherwani began his investment career in 1996 with HDFC Ltd. He has been an investment analyst during his initial years and a Head of Research and Fund Manager in the later years. During his career, he has seen multiple market and economic cycles and has identified multibaggers along the way, he has worked with large institutions such as HDFC Ltd., HDFC Mutual Fund and L&T Mutual Fund, as an integral part of their investment teams.  The overall 23+ years of experience of Rajesh Pherwani in the investment field has given a strong foundation to the investment processes of Valcreate.

Funds managed

Fund name	Asset Class/Market cap allocation	License
Valcreate Investment Growing India Strategy	Small and Mid-Cap Equity	PMS
Valcreate Investment Life Sciences and Specialty Opportunities Strategy	Sector Fund	PMS

Valcreate Investment Growing India Strategy

This is a portfolio strategy aligned to the long-term growth outlook for Indian companies.

Inception Date: 08 June 2018

Number of Stocks: 21

No entry/exit loads

Minimum investment Rs. 50 lakhs

No sector bias.

Benchmark – BSE 400 Small Midcap

Investment Objective: Under this strategy there would be no market cap preference and it would be sector agnostic. This strategy involves investing in companies which benefit from the strong growth in the Indian economy. It would categorize as a moderately aggressive portfolio.

Growing India Strategy is a good pick for investors looking for wealth creation through India growth story.

Bottom-up stock selection methodology geared towards the India growth story.

Sectoral mix focused on Capex, Consumption, Exports, Healthcare and Agriculture sectors.

Adequately concentrated yet limiting risk through sector and stock diversification

Market cap agnostic with focus on businesses which are smaller v/s size of opportunity or are reviving.

Valcreate Investment Life Sciences and Specialty Opportunities Strategy

This portfolio strategy is focused on innovation-oriented sectors such as pharmaceuticals, specialty chemicals and agrochemicals.

Inception Date: 14 Sep 2018

Number of Stocks: 10

No entry/exit loads

Minimum investment Rs. 50 lakhs

Concentrated on a few niche sectors.

Benchmark – BSE Healthcare

Investment Objective: The strategy involves investing in companies with innovative products and services which give them an edge in the long-term growth trajectory. 

This would be a more sector focused investment with primary focus on the following sectors -pharmaceutical, healthcare, animal health, seeds, agrochemicals and specialty chemicals. It may also include certain other niche businesses which have a technology or product/service edge. 

Under this investment strategy there shall be no market cap preferences. 

The strategy will invest a minimum 70% of the portfolio investment in these companies. This would categorize as a more aggressive portfolio.

Life Sciences Strategy is a good pick for investors looking for wealth creation through innovation and outsourcing theme.

Portfolio focused on innovation-based niche businesses. These are economy agnostic businesses and not dependent on market or economic cycles.

Most companies provide high earnings visibility given the structural nature of businesses. Risk control by limiting stock exposure yet adequately concentrated.

Backed by strong expertise of the Portfolio Manager who spotted many multibagger names in these sectors.

Past Performance:

PERFORMANCE AS OF 28 FEBRUARY 2021 POST ALL FEES AND EXPENSES (TWRR BASIS)

Source: https://valcreate.com/our-expertise

Investment philosophy

Valcreate Investment Growing India Strategy:

The regulatory climate, as well as economic sensitivity, both affect investment philosophy. Analysts gain a comprehensive understanding of the fiscal, political, and foreign circumstances that impact the industries under investigation.

Valcreate Investment Life Sciences and Specialty Opportunities Strategy:

To invest in a portfolio of stocks following the buy and hold approach with a reasonable diversification to mitigate the risk.

Investment Process:

Valuation: Look at valuations in the context of the quality of the business, type of industry and growth

Growth: Potential earnings growth to be seen depending upon the opportunity in place (nature of the time frame)

ROI – This aspect looks at the quality of the business – Evaluate sustainable return on capital, return on equity, leverage and cash flows.

Ownership – Evaluate promoters, shareholding, interest of promoters, their track record/reputation, group companies, group and promoter leverage, minority and institutional ownership.

Investment Style:

Evaluate business success based on traditional approach.

Look for competitive edge – business moats

Evaluate businesses based on potential in the next decade – the IDEA parameters: 

       • Innovation

       • Disruption

       • Environmental (ESG parameters)

       • Aptitude and Adaptability

Two examples of multi-bagger returns (in 2 years) in Valcreate portfolios.

Divis Labs

Reasons for purchase:

      • A leading contract research and manufacturing company

      • Global leadership in intermediates – e.g., naproxen, dextromethorphan

      • High ROCE business

      • Cash rich balance sheet

      • Strong technocrat promoter

      • Was coming out of warning letter in 2ND half of 2018 – this was an opportunity to add

      • Compounding business, huge opportunity for many years in the future

IPCA Labs

Reasons for purchase:

       • Fast growing domestic portfolio, with leadership in malaria

       • Adding lifestyle therapies which has long term business potential

       • Healthy global presence in branded generics

       • Growing API portfolio

       • Inherent strength in malaria with presence in tender markets

       • Tailwind was not being adequately captured in valuations due to impact of USFDA issues on perception

       • Further upside continues with potential clearance by USFDA

Portfolio Management Process:

Portfolio Creation Process:

Analyst questions

Investment Assessment:

The Valcreate Investment Life Sciences and Specialty Opportunities Strategy has generated an alpha return of 19.67% since inception.

Product Assessment:

No exit load, however minimum investment of 50 Lakhs is required. 

Growing India Strategy is a good pick for investors looking for wealth creation through India growth story. Bottom-up stock selection methodology geared towards the India growth story.

Quant Assessment:

Within just around 2 years of existence, Valcreate strategies have shown leading performance More than 45% to 60% returns in both the Strategies over the last 2 years as on 28th February 2021 (post all fees and expenses on TWRR basis).

What is your total AUM?

How much cash do you hold in your portfolio for liquidity purposes?

Since the BSE healthcare index comprises only Pharma and healthcare companies, how do you use it as a benchmark to compare Valcreate Investment Life and Science and Speciality Opportunities Strategy? (since it contains innovative based sectors such as Pharma, agrochemicals, speciality chemicals etc) 

How do you identify business moats?

Both your Portfolios have underperformed in their respective 1st year since inception, would you like to point out the reason behind it and what changes did you made in the portfolios?

Valcreate Investment Life and Science and Speciality Opportunities Strategy has outperformed its benchmark in its 2nd year, is it likely to be consistent?

Prepared by – Shweta Upadhyay