Ace investor Porinju Veliyath’s PMS company Equity Intelligence Pvt. Ltd. may be looking forward to a strong comeback after the firm suffered a huge dip in returns in the last one year. The last one month period (ended March 28, 2019) has seen small caps and mid caps, a playground for Veliyath, log great returns. If the momentum continues, Equity Intelligence Pvt. Ltd. should be able to rebound and justify the faith time and again reposed by over 2,400 investors. RupeeIQ takes a close look.
Porinju, famous among small cap investors, has had a great run. Between January 2013 and January 2018, his PMS outfit Equity Intelligence Pvt. Ltd. grew the net asset under management from less than Rs 70 crore to over Rs 1,700 crore as equity markets were in a rip-roaring form. That’s over 20-fold growth in six years, compared to less than three-fold growth in overall PMS industry. Equity Intelligence’s client count has shown six-fold in these six years compared to two-fold rise in overall PMS industry.
Take a look at how Porjinju’s PMS assets grew in a short span of time
Porinju, who is known for his vocal support to prime minister Narendra Modi, has struck gold many times between 2013 and early 2018 much like his hero. Between September 2013 to June 2014, investors in his PMS made big bucks. During this time, the average month-end return clocked by his PMS (on weighted average basis for all clients) was 9.25%, with May 2014 witnessing a whopping 25% gain in just one month.
Porinju’s stock picks, especially in microcaps, and unknown small companies helped him gain huge popularity. It also led him to make some costly misjudgments, which came to the front later. A good case in point is LEEL Electricals. But to be fair to him, his stock picks worked.
It was sometime in January 2018 when the small and mid cap bubble started scaring investors. The LTCG tax imposition in Budget 2018 triggered a sell-off in equity markets. The Sebi recategorisation of schemes and directions on how equity funds should have exposure to large, mid and small cap firms also played a part.
The phenomenal returns given by Porinju to investors started tapering off. Then, returns became losses. The murmur on the ground was that Porinju has lost his midas touch, but performance is generally a slave of market momentum. As markets struggled in 2018, returns of Porinju’s PMS struggled too.
Between the 14 months of January 2018 to February 2019, investors of Equity Intelligence made losses in 10 months. In September 2018, the month end % return (on weighted average basis for all clients) stood at a negative 20%. March, May and June of 2018 had already seen double-digit losses.
Source: Sebi portfolio manager monthly report
With small caps and mid caps back in action, at least in the last one month, Porinju’s PMS could churn out better returns. Small cap stocks have gained around 10% in just last one month while midcaps have delivered an average 7%.
Portfolio details of Porinju’s PMS outfit are not available, but expect the overall portfolio gains to outpace the market.
Here are the basic details of Equity Intelligence PMS.
Investment philosophy – Broadly the strategy is to acquire equities of strong and profitable businesses run by smart and credible management at market prices well below what is its intrinsic worth. Besides searching for values in the marketplace, the PMS outfit uses its market intelligence and feedback network to constantly search for “Catalysts” and “Red Flags” to buy and sell stocks, as per the firm.
Minimum investment size for PMS – Rs 50 lakh
Fixed management fee – 2% per annum charged quarterly @ 0.5% on average NAV.
Performance fee – 10% share of the returns above 10% per annum.
Disclaimer: The article is only for informational purposes. Investors are requested to consult their financial, tax and other advisors before taking any investment decision.