Talk to us about the investment framework which you have set?
Manish Jain: By and large, the philosophy continues to remain absolutely unchanged which is to focus on quality and risk and reward. Basically what we are trying to achieve over here is a sustained long-term wealth creation goal where we invest in companies and businesses that have an impeccable track record as far as corporate governance is concerned. We are not so inclined towards very short cycle businesses but cyclicals in general tend to find a way into our framework.

Right now, with the way markets are poised, it is more of a bottom-up strategy where we are not focusing as much on the index levels, we are not focusing as much on sectors as we are individual ideas which are more bottom-up driven where we are focusing on risk versus reward, valuations versus growth. The effort is to try and figure out ideas which are more evenly balanced looking at sectors like auto, chemicals, NBFCs, and affordable housing. all that space where we can place these ideas which are more appropriately priced at this moment.

There are some very interesting micro-cap names in that part of your portfolio. Some uniquely poised names like the only listed vineyard company. Is wine tourism a scalable business in India? From a single location wine tourism spot, can it be scaled across the country? New genres are getting added, consumption of wine by women are going up. Why did you pick it?
Manish Jain: It is a classic play on lifestyle. As urbanisations increase, as the GDP growth rate continues at a certain pace, our per capita income will also continue to move up. Affluency, especially at the top level in the top 10 metros will continue to rise over here. As we move from what we are today which is roughly about $2,500 odd in terms of per capita GDP to $4,500-$5,000 even by the time we are at about $7 trillion an economy, by the time we finish this particular decade, lifestyle changes are going to even accentuate further.

Conspicuous consumption is going to pick up even further. Leverage consumption is going to pick up even further. We have seen the changes that have happened in terms of the consumer preferences playing out in autos, in housing. At Centrum, liquor is a play which is very similarly poised which is basically going to be discretionary consumption. People will keep moving up the value chain. It becomes a very classic lifestyle play.

The premium end will, of course, grow much faster as compared to the rest of the market which seems to be a little more saturated. If you are able to find something which is very uniquely positioned that can be distributed through a very efficient channel at a mass market level in the entirety of the top 10 metros, that is the game over here. This is what we have seen in terms of growth till now. Not just at the company level, but specifically at the industrial level also. It is just the tip of the iceberg and this will continue to rise going forward from here onwards. It is a decadal story. It is something that I would buy and forget. I own the portfolio from a 5-10 year perspective. It is an industry which everybody needs to own.

What are your thoughts on sticking with the lifestyle in some of the very unique companies which actually operate luxury malls or not exactly luxury, but malls for the affluent. Some of these malls were in Bombay but up till now, there are 30 more towns which are being identified as upwardly mobile in terms of affluence. This unique company, the mall operator is now expanding to the B30 market. Do you see this becoming big in the next 3-5 years?
Manish Jain: Absolutely. If you remember, we go back to the time 2020, there was this term which was coined and that is K-shaped recovery. We were all very focused as far as corporates were concerned in terms of K-shaped recovery, the big getting bigger. But if you look at the last three odd years, there has been a lot of volatility as far as rural demand is concerned. But if you look at the urban consumption, if you look at the top end, the luxury, the premiumisation story, that continues absolutely unabated and that just shows how affluency has continued to rise and sustain at the peak levels right at the top end of the level, talking about the top 1, top 5% sort of a population base. This is a space which will continue to get richer and richer.

Some of these industries which are a play on this, which can be, for example, retailing, it could be eating out, it could be autos, it could be real estate, and then it could be these malls as a play – are all stories which are here to stay and all of them are going to continue to play out over the course of next three to five years. So if I have a portfolio which is going to be leveraged on the India growth story, then these names would find a place in my portfolio.

How are you playing NBFCs? What category of NBFCs do you like? Are these SME oriented ones, housing finance, consumer? What exactly in NBFCs do you like?
Manish Jain: I like everything, but what we are trying to pick here are the ones that are more appropriately priced. I mean, at this juncture, I would not want to pay say six times, seven times, eight times price to book to build a fresh position into an NBFC.

But other than that, when you look at the risk reward and the balance between banks and NBFCs in the coming cycle, in the next one, one-and-a-half, two years, from an asset quality perspective, capital raising perspective and deposit mobilisation, NBFCs in general we find are much better placed as compared to banks which may have pockets which are absolutely price to perfection and very minimal upside surprise left in them from this point in onwards and that is why the inclination more towards NBFCs which can be a leverage play on consumption, on housing, several sectors, and yet give you that flavour of the BFSI.

I want to understand the three portfolios you are running. What is the kind of earnings growth each of your portfolio has for the next one-year period, one year forward earnings growth estimate versus the valuation the portfolio is trading at right now, just for my own understanding?
Manish Jain: What we are looking at from a portfolio perspective, when you look at all the three portfolios that we are running, I think by and large we should be expecting somewhere close to a 20 percentage sort of earnings growth coming through in the next four quarters. But what will happen is that for FY25, the growth is going to be more back ended rather than front ended.

So, Q1 and Q2 might actually be a little more sedated, might be a little more challenging but going forward into the second half of the year, there is still a lot of room for growth left and that is where the majority of the pickup is going to happen. Of course, valuations are now looking like a little stretched because of the run up that we have had in the midcap and the smallcap space which is where traditionally our portfolios have been kind of oriented towards, we have had between 60% to 70% run up in that space and that is why the shift in the strategy which is going to be about trying to reorganise the portfolio wherever we feel that the valuations are at one standard deviation above from the long-term average and start booking a little bit of profits over there and redeploy the same money into stocks which are a little cheaply priced.

These are stocks where we feel that the balance is far more even and have a very bottom-up driven strategy but earnings growth momentum looks like it is going to be here to stay. It is very strong.