SELECT COMPANY PERSPECTIVES

Performance measurement – the difference between TWRR and XIRR

Performance reporting in the PMS industry had no standardized reporting till SEBI mandated managers to only report TWRR. (Time Weighted Rate of Return).

TWRR measures skill of a fund manager – TWRR does not care about quantum of money invested, only the return earned over the time period money was invested. It is calculated by multiplying returns over each time period money is invested and dividing it by the total time period. Alternatively, one can calculate this by assuming units are being issued at prevailing prices and calculating how the NAV of each units has evolved (MF method).

INVESTMENT THESIS ON STAR HEALTH LIFE INSURANCE

Star Health is a Health Insurance company primarily ¹ focused on the retail segment. This is a business we would like to own for long periods of time.

It offers a product which has a tangible value proposition – Health insurance is something we think everyone should own.
Dominant leadership position in a large and growing market with a long runway for growth.
Attractive business fundamentals supported by high repeat purchase, agent stickiness and ability to correct pricing errors through product repricing.

Gold

Enclosed note contains our perspective on Gold

Has India decoupled

We have put together a brief note explaining our views on whether India has decoupled.

What I learned from Rakesh Jhunjhunwala

Rakesh Jhunjhunwala, India’s favourite investor, passed away yesterday at the young age of 62. The world knows him for his wealth, his passion for investing and for his wit. I am privileged to share a side of him not many knew by virtue of my association at his family office “RARE” between 2006 to 2014 and the mentoring I benefited from till his last days.

Rakesh “Bhaiya,” as he was affectionately referred to, was perhaps the strongest believer in the India growth story that I have known. His reasoning was India’s democratic roots and consensus-based approach meant growth would be more long lasting and gain momentum with reforms.

INVESTMENT THESIS ON MAYUR UNIQUOTERS

The lack of Earnings growth for Mayur in the last few years coupled with no immediate triggers has resulted in a reasonable valuation today.
We continue to own Mayur despite a few years of no operating earnings growth because its poor financial performance can be principally explained by the environment. The business is evolving well on operating metrics and its valuations are attractive. We also have a variance perception on key person risk. While Mr Poddar is the visionary and face of the firm, the business growth and resilience are not as dependent on the promoter as the market believes.

The stock market is not being irrational

In our last communication on 5 May, we had shared that we need to be realistic in return expectations as monetary policy is reversing which will have an impact on multiples. We are seeing this play out as the market reprices risk. There is a higher probability vs the last few months that inflation will stay elevated and that developed world Central Banks will need to raise rates aggressively and that could push their economies into recession.

Some basics of the Life Insurance industry and its economics.
Why we like Life Insurance as a long-term compounding story.
What could explain the share price correction.
Our views on LIC and whether we will participate in the IPO.
Our investment stance basis current valuations at present.