Aditya BSL Div Yield Plus
- Category: Flexi Cap
- Star Rating: 3 stars
- Analyst Rating: Neutral
- Investment Style: Large Growth
- Investment Process: The manager invests in growth stocks that meet the dividend yield threshold. The focus is on high-dividend paying stocks that generate free cash flow and a high ROIC.
- Fund Manager: Satyabrata Mohanty
- Morningstar Analyst: Kavitha Krishnan
Satyabrata Mohanty replaced Naysar Shah at the helm of Aditya BSL Dividend Yield Plus in July 2015; Vineet Maloo has comanaged the fund since January 2014. Mohanty doubles up as AMC’s head of mixed assets and manages a total of nine funds including this one. He has more than 17 years with the Birla group and prior research experience. While the fund has continued to follow the mandate and remain true to label, the processes have undergone a slight change given the different styles of the individual managers who led this fund previously. This has muted our level of confidence.
Mohanty focuses on investing in growth-oriented stocks with a dividend yield at least 1 times that of the CNX Nifty Index. From among the stocks qualifying on the dividend yield criteria, Mohanty invests in businesses that have a competitive advantage, steady growth, stable free cash flow, low equity dilution, and steady dividend payouts. Mohanty pays more heed to the portfolio dividend yield than to individual holdings. As a result, he does not mind holding on to a stock even if its dividend yield falls below the threshold so long as its earnings growth and ROIC are greater than the broader market rates. He is not valuation-conscious in the strictest sense and exits a company only when its fundamentals have deteriorated.
The process has been tweaked more than once to make the criteria for picking stocks more liberal. This material change in the fund’s strategy to being more growth-oriented also resulted in a decrease in the fund’s large-cap allocation. Mohanty’s strategy is not significantly different compared with Shah's. However, given the brevity of Mohanty’s track record with this fund, we would like to monitor it over a longer term before we build more conviction.
Performance under Mohanty has remained average. His fairly short record on this fund and the multiple manager changes it has witnessed in the past lead us to a Morningstar Analyst Rating of Neutral.
Check the fund’s performance and have a look at the detailed portfolio.
Aditya BSL Equity
- Category: Flexi Cap
- Star Rating: 4 stars
- Analyst Rating: Bronze
- Investment Style: Large Growth
- Investment Process: The fund manager plies a top-down approach, seeking reasonably valued sectors offering good growth prospects.
- Fund Manager: Anil Shah
- Morningstar Analyst: Kavitha Krishnan
Shah’s portfolio is based on an investment style that draws more from the top-down approach. He will focus on sectors that he believes are attractively valued with growth prospects. Although stock selection is based on fundamental research, the manager will not invest in stocks from sectors on which he has a negative view. Shah’s portfolio typically maintains the small/mid-cap allocation between 30% and 40%.
While picking stocks, Shah considers a combination of absolute and relative valuations. He seeks to invest in companies with competitive advantages such as technology prowess and market share. Shah is willing to be flexible with valuations, so long as he sees earnings visibility. The manager is not averse to taking cash calls depending on the macroeconomic environment. It must be noted that taking cash calls entails timing risk.
Overall, the investment process is a growth-oriented one that combines top-down and bottom-up approaches. However, Shah’s skill in being able to allocate across market caps and sectors stands out. Since taking over the fund, Shah has been able to execute the strategy well. Under his watch till November 2017, the fund’s performance has remained in the top quartile amongst peers. We view Shah’s execution of the strategy in a positive light and would like to monitor the fund over the long haul before we develop an even higher level of confidence. For now, we assign a Morningstar Analyst Rating of Bronze on this fund.
Check the fund’s performance and have a look at the detailed portfolio.
Aditya BSL Frontline Equity
- Category: Large Cap
- Star Rating: 5 stars
- Analyst Rating: Silver
- Investment Style: Large Growth
- Investment Process: Plying a benchmark-conscious approach, Patil scouts for companies with good growth prospects.
- Fund Manager: Mahesh Patil
- Morningstar Analyst: Kavitha Krishnan
- A skilled manager and his well-executed investment approach make this fund a compelling choice for investors.
Portfolio manager Mahesh Patil is evidently mindful of the benchmark index S&P BSE 200 while investing. For instance, he invests largely in stocks chosen from the index. Also, he loosely aligns the portfolio’s sector weights with those of the benchmark index. But that has certainly not resulted in a benchmark-like showing. Over the past five years (December 2012 to November 2017), the fund returned 17.18% annualized and bested 82% of its peers. Year-on-year too, Patil’s execution of the strategy has resulted in the fund delivering consistent returns falling in the top two quartiles.
The fund’s success can be attributed in no small measure to Patil’s deftly implemented investment approach. The manager’s stock-picking has remained impressive. A growth bias is apparent as Patil focuses on factors such as return on capital employed, return on equity, and earnings growth potential. Despite the benchmark-awareness, Patil is not a closet indexer as he is willing to deviate substantially from index weights in individual holdings.
We think that Patil utilises his understanding of market movements and stock price points skillfully. Tactical plays and a buy/sell pattern within long-held holdings are integral to the approach. But some caveats are in order. In an upturn that is not broad-based and some sectors gain significantly more than others, the benchmark-consciousness may cause the fund to underperform peers that invest in an unconstrained manner. Also, tactical plays add an element of timing risk. Then again, Patil is at ease with the investment approach. He has plied it with skill across market conditions and we draw extra comfort from his stock-picking prowess.
Our confidence on Patil, his execution, and our expectations over the fund’s ability to deliver pleasing results over a market cycle lead us to reiterate our Morningstar Analyst Rating of Silver on this fund.
Check the fund’s performance and have a look at the detailed portfolio.
Aditya BSL Mid Cap
- Category: Small/Mid Cap
- Star Rating: 3 stars
- Analyst Rating: Bronze
- Investment Style: Mid Growth
- Investment Process: This diversified small- and mid-cap fund can deviate significantly from the benchmark. A growth-oriented approach that incorporates both top-down and bottom-up factors.
- Fund Manager: Jayesh Gandhi
- Morningstar Analyst: Kavitha Krishnan
Jayesh Gandhi has been managing this fund since January 2015; however, this is not his first stint at managing this fund. He also helmed the fund during 2005-07. Gandhi is a reasonably tenured manager in the small/mid-cap space and has over 15 years of experience in investment management.
Gandhi plies a growth-oriented strategy that uses a combination of a top-down and bottom-up approach. While top-down views are used to scout for investment themes and take sector bets, a sentiment overlay is also incorporated to steer the portfolio across market conditions. Gandhi relies on relative-valuation techniques to pick stocks that he perceives to be reasonably priced. However, the fund’s mandate allows the manager enough flexibility to play to his strengths.
We believe that the success of the strategy depends on its execution, in no small measure. Gandhi is a capable manager who in our opinion has proved his skill on this fund across both the time periods that he managed it. Although Gandhi is mindful of the benchmark, he can tend to take significant off-benchmark exposure as a part of the strategy. His portfolio reflects his long-term views and he tends to stay invested over 18-36 months. Having said that, Gandhi can tend to trim or add positions based on valuations.
Gandhi runs this fund as a highly diversified portfolio of around 50-70 holdings. Individual stocks don’t exceed 3% of assets and less-liquid stocks are capped at lower limits. Though he aims to remain fully invested, cash levels on the fund can tend to fluctuate based on the manager’s views. Gandhi’s execution is reflected in the fund’s performance, which has remained above par under his helm. The fund’s long-term performance, however, remains mediocre. On an overall basis, we view the stability in the fund house’s equity team as a positive. Our conviction on Gandhi’s capabilities leads us to assign a Morningstar Analyst Rating of Bronze to this fund.
Check the fund’s performance and have a look at the detailed portfolio.
