In many ways, Sunil Singhania, the founder of Abakkus Asset Manager LLP, is an old-school investor. You are not going to find a loss-making startup with crazy valuations in his portfolio. He is not a PayTM or Zomato kind of guy.
Rather, Singhania, over his 28-year long career tracking equity markets, built a reputation for finding diamonds in the rough - smaller companies with strong financials, who were just starting to see strong growth momentum. Here we take a closer look at his portfolio, to see if that reputation of picking winners still holds up in his recent bets.
Singhania founded Abakkus in 2018, and it has grown to $1.4 billion since inception. Before Abakkus, he worked at Reliance Capital as Chief Investment Officer and global head for equities, managing over $10 billion in investments. During his 22 years at Reliance Capital he significantly increased the size of the Reliance Growth Fund.
Been fortunate to have managed Reliance Growth Fund in its journey of being 100x for most of that journey! https://t.co/hWJfr7Epq3
— Sunil Singhania (@SunilBSinghania) August 9, 2019
Singhania was also the chairman of the investment committee at CFA Institute, overseeing over $400 million worth of investments in an honorary capacity.
As the head of the Abakkus Fund, Singhania has invested primarily in small and micro-caps, and a few mid-cap companies. The Fund’s net worth during Q2FY23 was Rs 2,079.2 crore, and it publicly owns a stake in 24 companies.
Singhania’s track record of choosing good companies still looks quite strong. Hindware Home Innovation, HIL, Siyaram Silk Mills and Mastek are among the oldest stocks in the portfolio. The best long-term performing companies in the Abakkus portfolio are Mastek and AGI Greenpac, which have increased by 304.7% and 285% respectively since Q4FY19. The small-cap investor cut a 1.5% stake in Mastek in Q2FY23 and now holds 2.8%. However, its price fell 47.6% during H1FY22. He also reduced stakes in AGI Greenpac to 1.9% in Q2FY23 from 3% in Q3FY21.
Other high-performing long-term companies in the portfolio are Jindal Stainless (Hisar) (bought in Q4FY19), Hindware Home Innovation and IIFL Securities (bought in Q3FY20), and HIL and ADF Foods (bought in Q1FY21). Singhania purchased a stake in Polyplex Corp in Q4FY19 but cut it to below 1% in Q2FY23. During this period, the packaging company’s price grew by 232.7%
Singhania maintains a well-diversified portfolio
While Abakkus is a well-diversified portfolio, Singhania maintains 19.7% of the portfolio in the metals and minings sector, aggregating to Rs 363.7 crore, and 19.3% in the software and services sector (Rs 357.2 crore). While cement and construction amounts to 11.4%, consumer durables has 10.9%, and textiles, apparel and accessories, 7.9%. The least invested in sectors are diversified consumer services, FMCG, retailing, and food, beverages and tobacco, with less than 2% each.
During Q2FY23, the marquee investor increased his stake in eight companies and reduced it in nine. He added a 1.2% stake of pharma company Jubilant Pharmova to his portfolio. He also bought an additional 0.4% in Stylam Industries, 0.1% each in Sarda Energy & Minerals, Hindware Home Innovation and HIL. He cut a 1.5% stake in Mastek, a 1% stake in The Anup Engineering and a 0.2% stake in Route Mobile. Singhania also cut stakes in Polyplex Corp, Saregama India, Surya Roshni, Paras Defence and Space Technologies and CMS Info Systems to below 1%.
23 out of 24 stocks report consolidated profits in Q2FY23
Sunil Singhania’s LinkedIn profile mentions his strength as “a balance sheet-focused investor with a keen eye on numbers”. All companies in the portfolio have reported consolidated profits in Q2FY23, except HIL, which reported a loss of Rs 6.8 crore (against a profit of Rs 26.1 crore in Q2FY22), despite just a marginal fall in revenue of 0.3%.
During Q2FY23, Ethos reported a 410.5% YoY rise in profit to Rs 13.6 crore, while its revenue grew 32.3% YoY. Route Mobile and J Kumar Infraprojects reported a net profit of Rs 73.6 crore and Rs 67.54 crore, indicating an increase of 74.5% YoY and 64.5% YoY, respectively. Their revenue also grew 94.2% and 31.2% respectively. Even though 23 out of 24 companies reported profits for the quarter, 11 companies saw a YoY fall in their net profit. Jubilant Pharmova, DCM Shriram Industries and Rupa & Company reported a fall in net profit by 96.2%, 92.6% and 68.2% respectively.
Sarda Energy & Minerals, J Kumar Infraprojects, AGI Greenpac and Stylam Industries outperformed their respective industries over a year, while eight companies outperformed their respective industries over a quarter, 11 outperformed over a month.
From the portfolio, HIL announced the highest basic annual EPS of Rs 280.5, followed by Sarda Energy & Minerals (Rs 223.1), Ion Exchange (India) (Rs 137.3), Technocraft Industries (Rs 109.3) and Mastek (Rs 106.5).
Currently, out of 24 stocks in the holding, eight are trading in the PE Buy Zone, aggregating to 33% of stocks, and five stocks are trading in the PE Sell Zone, aggregating to 21%. Stocks in the Buy Zone include Route Mobile, Ethos, AGI Greenpac and J Kumar Infraprojects, whereas Rajshree Polypack, Ion Exchange (India), Jubilant Pharmova, ADF Foods and DCM Shriram Industries are in the Sell Zone. Additionally, all stocks’ PE is below their respective sectors.
How volatile is Singhania’s portfolio?
For a year, beta for 14 stocks in his portfolio is greater than 1 and the other 10 have it lesser than 1. However, only eight stocks have a beta greater than one for a quarter. The average beta of the portfolio for a year is 1.1, whereas it is 1 for a quarter.
The volatility of Singhania’s portfolio is in line with the benchmark index, which shows that the marquee investor is not a risk taker nor is he especially risk-averse. He also holds stocks within both the PE Buy and Sell Zones. He tends to focus on value stocks, as all of his stocks have PE ratios lesser than that of their sectors. To conclude, even though Sunil Singhania has a neutral-risk portfolio, he looks for positive fundamentals and decent valuations while placing his bets.
