White Oak Capital Asset Management (YES AMC)

About

White Oak Capital Asset Management is a subsidiary of White Oak Capital after having acquired Yes Bank’s asset management business in November 2021. 

The sponsor, White Oak Capital, is an investment management and advisory firm established by Prashant Khemka in June 2017, envisioning a performance-centric organization with a strong investment culture. It has operations across India, Singapore, Mauritius, the UK, and Switzerland. 

White Oak group entities collectively have Assets Under Management (AUM) of 42,750 crores INR (~$5.7 billion @ 75 rupees/dollar, March 2022) and a global client base that includes sovereign wealth funds, pension plans, endowments, individuals and family offices investing in India.

Key staff

Prashant Khemka (Founder)– Prashant founded White Oak Capital Management in June 2017. Prior to this he was the CIO and lead portfolio manager of GS India Equity at Goldman Sachs Asset Management (GSAM) from March 2007 to March 2017, and also for the Global Emerging Markets (GEM) Equity from June 2013 to March 2017. As a lead portfolio manager, he managed all mutual funds and separate accounts under these strategies.

Prashant started his professional investing career in 1998 at SSGA in Boston as a senior portfolio officer of Enhanced International equity in the Quant group. He started his career at GSAM in 2000 as a research analyst in US Growth Equity, and by 2004 he rose to become Senior Portfolio Manager and Co-Chair of the Investment Committee. He won several accolades as the CIO and Lead PM of GS India Equity. He and his fund won several awards including an AAA rating from Citywire and an Elite rating from Fund calibre among others.

Aashish P Sommaiyaa (CEO)– Aashish P Sommaiyaa is responsible for strategizing, growing and managing the operations of White Oak Capital and has had 21 years of experience in business strategy, operations and management, grooming talent, process-driven sales and distribution, product development and marketing of investment offerings. He is the former CEO and managing director of Motilal Oswal Asset Management Co and joined the group in 2013, and quit in July 2020. From 2008 to 2012, he had been responsible for the sales and distribution of one of India’s largest AMCs, ICICI Prudential AMC.

Ramesh Mantri, CFA Chief Investment Officer, Equities for White Oak Capital – Ramesh has been the equities investment leader at White Oak for about 5 years having joined in 2017. He has more than 20 years experience. He is qualified as a chartered accountant.

Parag Jariwala, CFA (Director-Investments)- Parag has completed over 13 years of institutional equity research Banking and Financial Services Institutions (BFSI) sector. Prior to joining White Oak, he worked as a lead analyst with Religare Capital. Before that, he worked with Macquarie and other domestic sell-side firms covering the BFSI sector. He was highly rated by marquee institutional clients for his original think pieces and primary research work in the sector. Parag is a chartered accountant and MBA from K J Somaiya Institute of Management of Mumbai University. He also holds a CFA Charter from the CFA Institute (AIMR).

Investment philosophy

The firm believes that outsized returns are earned over time by investing in great businesses at attractive values and identify a great business as one that is well managed, has a scalable long-term opportunity, and generates superior returns on incremental capital along with a strong track record of execution and governance. Assessing valuation is a critical element of their research. It performs in-depth valuation analysis derived from the proprietary ‘OpcoFinco’ framework and intensive fundamental research to identify companies which, they believe, are trading at a substantial discount to their intrinsic value. It tries to build a 360-degree perspective on any business through an extensive schedule of plant visits, meetings with company management, competitors, suppliers, customers and other trade participants.

White Oak looks for companies where their estimate of cash flow or earnings, and hence intrinsic value, is significantly different from what the market has priced into the stock. Valuation is attractive when the current market price is at a substantial discount to intrinsic value. It tends to focus on economic free cash flows instead of accounting cash flows and ascribe terminal value based on the greatness of business.

The investment strategy has a long-term absolute return focus. It prefers a bottom-up approach and generally look to avoid businesses with weaker characteristics such as poor corporate governance, weak incremental returns on capital and those that face obsolescence risk arising out of technological developments. The focus is on ensuring that alpha generation is purely a function of stock selection. It’s aim is to understand, monitor, to contain residual factor risks that are a by-product of stock selection and consciously avoid market timing or sector rotation or other such top-down bets.

Investment Process:

Source: White Oak India Top 200 PMS September 2021 Report

Media

Prashant Khemka on ET Now discussing Mantra for a balanced portfolio, Economic Times, (April 25, 2022) – https://www.youtube.com/watch?v=abQxXo6WZzs&t=516s

https://economictimes.indiatimes.com/markets/expert-view/a-well-balanced-portfolio-has-both-fmcg-and-financials-it-most-attractively-valued-now-prashant-khemka/articleshow/91069923.cms

Prashant Khemka says that when the market is highly volatile, during periods of high inflation and high-interest rates what really matters for the market is how much is already anticipated by the markets and what happens to the longer-term rates-the 10-year, the 30-year. It is not possible for anyone to say where they would ultimately settle. It’s very hard to predict what would happen and when the market would stabilise.

White Oak has always advocated to go for companies which generate a lot of cash and that are enjoying some degree of pricing power. White Oak looks at companies that generate superior returns on capital, which is a prerequisite for cash flow generation. The second is scalability, which is growth, whether those cash flows can grow substantially or not. Third is good management, execution as well as governance. Cash flow generation and pricing power, are the two fundamental principles of how White Oak assesses investments.

To White Oak, from a valuation perspective, the IT sector seems most attractively valued on a price to excess ROIC multiple. It does not look at PE multiples as it believes that they are distorted, misleading and harmful. The team focuses on a cash-flow based valuation approach.

Prateek Pant of White Oak reveals OpcoFinco’s framework for stock selection Investment mantra before picking stock for investment, Moneycontrol (August 26, 2021)

Link- https://www.moneycontrol.com/news/business/markets/daily-voice-prateek-pant-of-white-oak-reveals-opcofincos-framework-for-stock-selection-7385451.html

White Oak’s investment philosophy is that outsized returns are earned over time by investing in great businesses at attractive values. It is a stock selection-based approach of investing in businesses rather than betting on macro. The two critical elements of their philosophy are business and valuation.

White Oak wants to invest in the companies that present the most compelling combinations of these two elements and to be considered great, a business should possess three attributes: (a) superior returns on incremental capital, (b) scalable, (c) well managed in terms of execution and governance.

How to spot outperformers in challenging times? Ramesh Mantri(CIO) explains (March 23, 2022) Source: Economic Times 

Link-https://economictimes.indiatimes.com/markets/expert-view/how-to-spot-outperformers-in-a-challenging-environment-ramesh-mantri-explains/articleshow/90397643.cms

Post pandemic, the Indian economy has been seeing a very strong broad-based recovery. While certain sectors like consumer, pharma and technology were doing well in the pre pandemic period, 2021 onwards, there has been broad-based recovery even in sectors like commodities, infrastructure, industrials and real estate which has a very large multiplier impact on a number of other industries. Hence, the environment is good for investing and White Oak has started seeing some early signs of a capex revival in a number of sectors, particularly metal and cement has started announcing a number of capex.

In terms of where we should look to invest in inflation, the most important is to look at companies and businesses which have pricing power, which have the ability to pass on the inflation to their customers. 

Normally in a difficult environment, strong companies emerge stronger and one has to look at companies with a track record of strong execution, market leadership, strong balance sheet and pricing power. Those are the companies White Oak has been focussing on across industries. 

White Oak Capital Group completes acquisition of YES Asset Management

https://www.moneycontrol.com/news/business/white-oak-capital-group-completes-acquisition-of-yes-asset-management-7667271.html

Analyst Questions

  1. White Oak focuses on economic free cash flows instead of accounting cash flows. What is the benefit derived from using FCF instead of ..cash flows? How effective is this? How does it help in assessing a fund?
  2. White Oak prefers a bottom-up approach and believes that outsized returns are earned over time by investing in great businesses at attractive values. In such periods when there is high inflation, conflicts and wars, and the global pandemic, does a bottom-up approach work better than a top-down approach?

Prepared by – Charles Mathew (19 May 2022)

Peer reviewed by – 

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