Akash Portfolio

Q&A: Questions & Answers Portfolio Q&A
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Akash Portfolio
Kindly provide suggestions on my portfolio. I am relatively new to markets with 4years experience. This portfolio is formed over a period of 2years with the intent of keeping it for a long duration. The allocations have changed over the period as I averaged up and winners became a bigger part of the portfolio.

Symbol Company name Allocation Avg cost Returns
CDSL Central Depository Services (India) Ltd. 23% 416 212%
TATAELXSI Tata Elxsi Ltd. 21% 1485 296%
RPSGVENT RPSG ventures 31% 260 316%
TATACONSUM Tata Consumer Products Ltd. 6% 696 23%
DMART Avenue Supermarts Ltd. 6% 2417 83%
SHIL Somany Home Innovation Ltd. 4% 228 79%
BOROLTD Borosil Ltd. 4% 171 30%
CLEAN Clean Science Technology 3% 1658 16%
540146 Aditya Consumer Marketing Ltd 1% 50 -6%

Rationale

Central Depository Services (India) Ltd.
CDSL benefits from financialization of savings theme. Falling interest rates of fixed deposits will propel investors towards capital markets. The penetration of markets is poor in India compared to developed countries. It is expanding at a rapid pace due to ease of opening accounts and transparency in the markets. It has become easier to transfer money by digital mode and online KYC and digitalization of shares has made it easier for retailers to safely transact shares. CDSL plays an important role in this process. Further growth can also come from foreign depository receipts and bullion depository.

Tata Elxsi Ltd.
It is an IT Software company providing design and technology services. They have diversified their revenue stream in recent years from automotive to media, communications and healthcare so growth further should be non cyclical. Strong balance sheet, good growth and Tata heritage provides downside support. I don’t have an expertise in IT but wanted to participate due to good characteristics of the industry like high margin and good profitability. I preferred Tata promoter over L&T and Tata Elxsi over TCS due to size and growth.

RPSG ventures
It is the holding company of First Source Solutions. RP Sanjiv Goenka group is using this company as a venture capital fund which is buying into new businesses and sometimes acquiring them as a whole. FSL and Quest Mall are cash generating and Guiltfree, Bowlopedia and Venture Fund are cash consuming at present. The company suffered heavily due to the lockdown. New businesses will show growth and turn profitable in a few years as the economy improves post covid.

Tata Consumer Products Ltd.
Tata decided to run their FMCG division from this company and consolidated their Tata tea, salt and sampann into this company. Starbucks joint venture and Tata Chai are into QSR space. It is the market leader in some divisions. They have recently streamlined their operations and I expect margins to improve in coming years. Strong balance sheet, good growth and Tata heritage provides downside support.

Avenue Supermarts Ltd.
Dmart has a strong financial risk profile and prudent working capital management among the retailers. Profitability has been hurt recently due to lockdown. Growth and profitability is expected to improve going further. They have bought good real estate in prime locations which can make it a good asset play in the future.

Somany Home Innovation Ltd.
It is the consumer durable division of Hindware. Hindware is an old and famous brand in the sanitaryware market. They have changed their business model into asset light where they will procure from HSIL through the Brilloca subsidiary and market the building products. They are also in the CPVC pipes business which is showing high growth. They are producing IOT enabled consumer products in the category of Water Purifiers, Water Heaters and Kitchen Chimneys. Real estate up cycle will benefit the company in coming years and consumer products will reduce cyclicality to some extent.

Borosil Ltd.
Borosil is the market leader in laboratory glassware and has a good position in kitchen glassware. They are expanding in kitchen appliances with their borosil brand. This segment is growing at a good pace. Company has reduced debt in recent years and has negligible debt at present.

Clean Science Technology
I wanted exposure in the speciality chemicals industry due to their high profitability, margin and growth but avoided them due to ESG reasons. This company has all the best features of the industry and is also ESG compliant. It is the global market leader in Anisole, MEHQ and BHA. It has a strong financial risk profile and does capex by internal accruals. This provides downside protection.

Aditya Consumer Marketing Ltd
Initiated a tracking position in this retail company. They operate supermarkets, salons, spas and restaurants. Sales growth is around 10% and margins were improving till lockdown. I expect margins to improve going further.

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You have a very strong concentrated portfolio…very few would be able to achieve this in short span of 4 years. Is it because of clarity of exactly where you want to be in or because other stocks run up too quick and you were able to control FOMO pretty well?

I liked excellent allocation to best performers like CDSL and Tata Elxsi. Your highest allocation is one of the smallest company by mcap in your portfolio - RPSG V…whch probably means you follow a stock specific approach…

Had I been in your place, my highest allocation among these set of stocks would have been Tata consumer followed by Dmart, CDSL, Tata Elxsi, RPSG V (others I dont follow)…but that would be me and not you and hence I do not recommend anything here as all 4 are good companies if you consider their underlying businesses or holdings…

I liked you patience in finding the right chemical company for you before entering that sector. You did not follow herd mentality makes be believe in you for the long term…

Pls keep evolving and developing your own style…as only that can give you more confidence and control…

With your inputs I would definitely read more on CLEAN, SHIL and Borosil - These were not in my watchlist…

Just one thought if at all I have to give - Tech stocks can run up too quickly and can run down as well. Currently all is good with Tata Elxsi. Similarly, CDSL has huge tailwind of current bull market and RPSG V has built in big expectations…75% of portfolio in these three look a bit risky to me…there maybe possibility of high risk and high gain but you need to assess all your risks and risk taking ability as well…hope you have done that and this is a conscious choice…

Disc: Invested in Tata Consumer, Tata Elxsi and Dmart hence maybe biased. Not a buy/sell recommendation. I maybe wrong in my assessments

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Thanks for you comments.
My initial portfolio during 2019 consisted of CDSL, Tata Elxsi, Dmart, RPSG Ventures (CESC Ventures at the time) and Bajaj Finance. I had allocated equally amongst those.
During the crash of 2020 I sold my mutual funds and bought into CDSL as I was the most comfortable to buy it. The demat accounts were increasing and it was financially strong due to debt free, cash rich status. I averaged up when price increased.
Tata Elxsi was bought with the idea of auto industry cycle change but they diversified and the up move was so strong that I couldn’t buy more. I averaged up after I stopped comparing valuations with the pre covid valuations.
RPSG Ventures allocation was increased when they started showing profits and stock improved fundamentally and technically during Sep2020. Recent market movements have increased its allocation more. It will self correct with time.
Bajaj Finance was sold after recovery from low. I was worried about the leveraged financials sector and the rise of npas after moratorium. I decided to avoid leveraged financials as I won’t be able to average them.
Dmart allocation was not increased as I started diversifying my portfolio with new companies since last year.

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Fully exited my mutual funds holdings and Aditya Consumer Marketing Limited. Both were insignificant part of my portfolio. Increased my holdings in Borosil Limited.

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Bought Nykaa amounting to 5% of portfolio.

Nykaa has good brand recall and trust among customers in providing genuine brands in the beauty and fashion industry. They have used innovative strategies for customer acquisition. For example, they have multiple celebrities (or influencers as they call them) who give makeup tutorials online. Various products advised in the video can be bought via the link in description. Celebrities will go where there are customers and vice versa. This will create a network effect.

Omnichannel approach with physical stores will generate visibility as some people like to have a feel of the product before buying. Follow up purchases can be done online.

In comparison with peer Purplle on Google trends, they have a continuously rising trend. I have intentionally kept the data till August 2021 to remove the spike due to ipo.

I believe E-commerce will become a dominant industry in a few years. Internet penetration along with perception change for online shopping will boost online sales. This offline to online theme can be played via Nykaa.

Risks are competition in the fashion apparel space, profitability of physical stores and high valuation. I will add further when they become more clear.

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Thats a very brave, bold and swift move! But I think thats your strength…strong concentrated heavy percentage bets!

I took a tracking position on listing day…but thats me…going slow…

Agree, what I sometimes think is why has Westside not done something similar - being an offline leader in fashion… also shopper’s stop seems to have a somewhat inventory based model of various brands (although have not researched it a bit) but they lost out on this ecommerce race…

Its intriguing that within 5-7 years of existence, Nykaa today has mcap > Trent+Aditya birla fashion+Shopper’s Stop.

Although, above comparison doesnt work in investing, what stops a trent from making a new Nykaa within next 5 years utilizing the Tata Super app ecosystem? These are just random questions…

But hats off to Nykaa for coming and emerging leader in ecommerce dominated by both Indian & Global giants!!

With around 1.5 lac CR mcap today (pls correct me if wrong), I am thinking if I will get better price or time opportunity, will it consolidate for long etc etc.

One thing is clear - The big guns lost a big race…it remains to be seen if ecommerce success is in DNA or it can be an acquired skill for the big guns like Tatas etc.

As it is, Amazon was not built by a GE!!

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Tata Cliq is the online platform for Westside and they also sell a lot of other items including beauty products. The association with Tata makes people think they only sell Tata products but they sell other brands also.

Quote from the article
‘Tata Industries owns 90% of Tata Unistore, which operates the online marketplace Tata Cliq. The rest is owned by Trent, another Tata company that operates retail chains such as Westside, Star Bazaar and Landmark.’

They are planning to launch a beauty products site to take on Nykaa. This will be interesting to watch.

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Tata Cliq started as Westside online platform initially and soon graduated to an online marketplace of multiple brands with a Westside store front.

Trent stake in Tata Cliq used to be 10% to begin with, however there were some rights issue in which only Tata Industries participated. So final ownership is not known. Would be nice to know if you have read about it somewhere. Posting link to interesting discussion on same below -

Also, now Trent is focussing on its own website rather than relying on Tata Cliq -

Lastly, I feel NYKAA is no comparison to the likes of Aditya Birla fashion & even Trent for that matter. The prior is focused on Apparels and sometimes I feel that its brands like - Allen Solly, Van Heusen, Peter England, Loui Phillipe etc. are actually its liabilities as they have to invest significantly on each stores and inventory. For that matter - their pantaloon seems a better business with private label capabilities. Foreign brands like foreever 21, Ralph lauren etc. do not have significant market yet in India and are again liabilities. Add to that now the burden of opening 100s of stores for ethnic wear brands they acquired recently.

Trent is already focused on Westside, Zudio - both King of private labels - so seems better placed with lesser liability brands. Zara brand they have some stake always have a deserted look in their own stores - again a liability.

NYKAA on the other hand has an entirely different business model. Liability does not exist in Brand creation and individual store investments. Its physical stores are also market places - somewhat like Pantaloons & Westside/Zudio (although later ones are in essence market places for their own private labels - that’s another beauty of it)

I feel if Tatas want to take on NYKAA, Tata digital may alone not be an answer. NYKAA was a concept which was neither ahead of times nor late. It was just the right concept at right time and to take it head on, Tatas need more that just a Digital platform and investments. They have a masterpiece growing in terms of Westside & Zudio and their answer to NYKAA can very well mushroom as a catchy highlight within these existing stores with its own separate online presence.

But, this is all wishful thinking and chances of pureplay Tata Digital ownership is high possibility as I have seen Noel Tata to be very focused on what they want to do and what they are good at.

So in the niche where NYKAA operates, my vote of confidence goes to NYKAA first followed by Trent. Aditya Birla fashion - I like the Pantaloon part of their business, Rest I see as liabilities as risk of not playing well lies…

Eager to know your thoughts on each of these businesses and sub brands!

Disc: Invested in Trent. Tracking position in NYKAA & ABF. Not a buy/sell recommendation. I can be wrong in all my above assessments

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This is all I could find about Tata Cliq till now. They are infusing funds in Tata Unistore (owner of Tata Cliq) by issuing unsecured, unlisted, redeemable, optionally convertible debentures on a rights basis as previously mentioned by you.

I don’t know why they can’t concentrate on a single platform? All are basically selling apparels and can be consolidated into a single brand. Maybe after the superapp launch they will push funds into the superapp only. Trent competing with the online app can become a concern.

I was researching Arvind Fashions and found everything bad about the apparel industry and stopped looking further and missed Trent. They had brands like Arrow, Flying Machine, Tommy Hilfiger, U.S. Polo, Aeropostale, Calvin Klein, Ed-Hardy, Hanes, The Children’s Place (TCP), GAP, Sephora and Unlimited (value retail format), Elle, Izod, Gant and Nautica. All those brands demand their own store and time. The sales were down and inventory built up leading to a huge pile of debt. A major problem in this industry is inventory becoming out of fashion. I found that the companies selling undergarments are at a distinct advantage due low risk of inventory loss like Page Industries selling Jockey. So I got interested in this company because it had Calvin Klein. But all these brands were pulling it down. Now they have realized it and have sold most of the brands and only US Polo Assn, Arrow, Tommy Hilfiger, Calvin Klein, Flying Machine and Sephora remain. Flipkart took a position in Flying Machine and Unlimited was sold to V-Mart.
Sephora is a competitor of Nykaa in Super luxury beauty products. It is difficult for me to take a concentrated bet on it but it is on my watchlist as things are improving now.

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Below is an exciting read of a conglomerate of luxury brands, the owner of Sephora…LVMH.

It’s amazing how today we think of the brands owned by say ABF & Arvind etc as their liabilities when another company had been collecting luxury brands as assets and grown profitably…would be interesting to know what it did differently

https://www.thefashionlaw.com/lvmh-a-timeline-behind-the-building-of-a-conglomerate/

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Brands are good for the owners of the brands and for original investors. The company acquired majority stakes in most of them. They didn’t have to pay royalty fees and sign complex agreements for their share.
This is not the case for these brands in India. The brands are given for a limited period of time and conditions and royalty is applied. This franchise arrangement gives a temporary feel to it. How can one take any long term view on it? For these reasons only, I have tried to avoid MNCs as far as possible.

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Agreed…based on my read so far…Allen Solly, Louis phillipie and Peter England are owned by ABF… Madura had bought Allen Solly and Peter England from their original owners while louis phillipie is origin in India!
Not sure about van Heusen and rest but seems these indian companies do buy old established brands…

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The quarterly results of my portfolio companies are as follows.

Symbol YoY Sales Growth % YoY Profit Growth % Allocation %
CDSL 63 76 27
TATAELXSI 38 59 23
RPSGVENT 22 -18 15
DMART 47 110 8
BOROLTD 59 175 8
TATACONSUM 9 2 6
SHIL 45 28 5
NYKAA 47 -95 5
CLEAN 9 -1 3
Average 38 37

CDSL has benefited from IPO mania. Further triggers like bullion depository and international depository exist. The timeline may vary.

Tata Elxsi showed good growth in all segments. The automotive industry growth with new technologies like EV and automated driving assistance will further fuel growth in future.

RPSG Ventures showed good sales growth driven by FSL but profitability is impacted due to various subsidiaries and ventures in the growth phase. Confusion regarding IPL team funding and Too Yumm continuation has forced me to reconsider the high allocation towards it.

Dmart has shown good sales and profit growth. Their calculated approach towards online channels with Dmart Ready gives confidence regarding their commitment to remain profitable despite growth.

Borosil results were excellent. I am invested in it for the consumerware segment which is showing good sales and profit growth. They leveraged the Borosil brand well and expanded into all kitchen appliances.

SHIL showed good sales growth with the real estate industry picking up. The profitability was affected due to increase in raw material prices. Hindware appliances and pipes segment is showing good growth.

Tata Consumer profit was affected due to higher advertisement spending in brand building. This will increase long term value. They have acquired TataQ, a ready to eat segment.

Nykaa sales have increased but profitability decreased due to increase in advertising expenses. This advertising will increase the long term value of the company and is necessary for growth. It might take a long time to attain profitable growth.

Clean Science profit was affected by increase in raw material prices. The growth in sales was not up to mark when compared to the valuations it commanded. Margins are good in spite of decline from the previous quarter.

I have changed allocations according to the fundamental changes in the companies. I am targeting a mean sales growth of 10% and profit growth of 20% at portfolio level.
Any advice or suggestions are welcome.

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I made some changes in my portfolio in preparation for the bear market.
I have exited my position in Clean Science and reduced allocation in Nykaa.

I calculated the total addressable market of Clean Science in 2025 according to various reports like drhp and concall.

Product Market Size in 2025($mill) Market Size in 2025 (₹Cr) Growth rate%
HALS 1450 10851 7.8
MAP 40 301 3.6
Ascorbyl palmitate 13 97 5.8
Guaiacol 334 2500 1.3
Vanillin 1271 9512 7.1
DDC 84 629 4.9
BHT 290 2170 4.9
BHA 115 861 3.3
MEHQ 171 1276 5.8
Anisole 114 852 5
Acrylic acid 24 176 6.6
TOTAL 3905 29223

This seems low with respect to the market cap at present. My lack of expertise in the chemical industry will make it difficult to hold the position during the fall. So I booked whatever profit was there and shifted to other companies.

I will increase allocation in Nykaa after some consolidation. I will do some introspection regarding buying during Ipo. It seems the best time to buy a quality company is after the first fall followed by a consolidation phase when sentiments regarding the company are poor. Similar thing happened in CDSL.

I expect CDSL to benefit from the LIC Ipo. If this doesn’t happen, it still is a quality company which will benefit as more people enter stock markets in the next bull run.

Tata Elxsi’s position has increased enormously. I will try to reduce it gradually. Currently it is my EV and technology bet.

I had a problem with the SHIL manufacturing arrangement with HSIL. It has been cleared with buyout of the factory by SHIL. Debt will be a concern for some years though.

Borosil will demerge the scientific division. I am in it for consumerware. The scientific division margins are good. I will have to do further research regarding it.

RPSG Ventures surprised me with the profit growth. I have not analyzed the results properly. I believe the sports division will benefit in the next quarter from the upcoming IPL season.

DMART is doing good work. Their app also has great reviews. I was reading the reviews of Jio mart when my order did not come after 10 days of expected delivery date. Every day they increase the expected delivery by one day. It has still not reached :cry:. Their reviews cite similar problems. My faith in DMART has increased significantly after this problem.

Tata consumer position remains unchanged.

Current portfolio is as follows

Symbol Company name Allocation
CDSL Central Depository Services (India) Ltd. 27%
TATAELXSI Tata Elxsi Ltd. 26%
RPSGVENT RPSG ventures 16%
BOROLTD Borosil Ltd. 10%
DMART Avenue Supermarts Ltd. 7%
SHIL Somany Home Innovation Ltd. 7%
TATACONSUM Tata Consumer Products Ltd. 5%
NYKAA FSN E-Commerce 2%
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Indeed it is a very difficult thing to do to even try to reduce a best performer from the best business house in country doing best work in one of best uprising sector…

Lofty valuations make us wary, specially if allocation is too high and sector is high beta…
But I think which sector is not high beta? Even FMCG and Pharma are thrashed in double digit percentages during markets fall!

Technology can indeed rise as well as fall dramatically, but there would be still few people who must have held on to TCS and infy since multi-decades and reaping huge benefits but I doubt if there would be even few who must have started with huge allocation to these to begin with…because most of us around are still only middle class :grinning: (including me)

Indeed it’s a double edge sword and we know not really what future beholds in such cases…

I have a 2% allocation only to it and hence thought of selling or reducing doesn’t come at all but if I had 10% or more allocation, things would have been different…

Do let us know ur thought process here…

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I honestly have no idea what to do with performing stocks. Everyday someone reminds of its high validation. I read Munger thoughts regarding this situation where he tells that he would not buy companies at high valuation but will not sell an existing position due to it.

I am expecting RPSG Ventures to turn profitable in the next quarter as the last year loss due to the FSL options in the corresponding quarter will not be repeated hopefully. This should reduce the Tata Elxsi position.

I have no new ideas at present where I would like to shift the allocation. This makes it more difficult to sell the winners.

How so you manage your winners? Any pointers would be very helpful.

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Well, so far I have been choosing businesses in relatively stable, so called less beta secular sectors like FMCG & Consumer centric, even Life insurance to some extent.

Only recently in last couple years or so, I have expanded to Retail, Technology and consumer durables/discretionary.

So, my winners from core portfolio have been mostly in FMCG. These were carefully chosen to be able to not get anxiety while holding them and have confidence to buy more subsequently. I made a mistake, as I mentioned in my most recent post in my thread, in not adding on to one of my winner Tata consumer at 4-5X my initial buy price. I have corrected that now to add it at 7X initial buy price.

Such is the nature of my highest allocation companies that I do not feel need to sell them at even 7X. Instead, get a need to buy more as I find my absolute allocation meagre after few years.

To put things into perspective, even technology has given me highest winners in terms of percentages. Tata Elxsi, LTTS, LTI etc. have all been 5-10X in last couple years…

Point to be noted here is that what FMCG gave me in approx. 10 years, technology gave in 2! FMCG have been richly valued even at time I took initial position, while Technology saw massive re-rating.

While no sector/individual company is immune to disruptions, volatility and crashes - the least sudden rises and sudden falls can be expected from like of FMCG and even Consumer centric firms like Pidilite, Asian paints etc. Life Insurance is something which market and even myself need to understand better in terms of its behavior.

Retail, Technology etc. can have massive sudden rise and even sudden falls if something goes wrong in macro as well as micro…

Precisely thats why I have chosen technology from top businesses houses in India like Tata & L&T. But that would not shield me from macro issues…

To summarize, my current winners have been a long & patient journey in FMCG & Consumer centric companies as compared to rather quick & easy Technology. (However, for example those who must have bought Tata consumer just after its restructuring would have got similar effects even in FMCG - because it is one of rare re-rating story in FMCG so far as compared to other secular ones). Because of my rather low allocation to individual Technology stocks (total portfolio allocation of approx 8-10% in a basket of stocks), I would rather keep them as core holdings through the thick & thin and may increase exposure in case of massive de-rating as now I believe in Indian technology companies. I might lose all my profits but will get opportunity to add to the story and have somewhat around 15-20% allocation that I would have wanted.

Hope I am able to explain multiple thoughts that your question triggered. Also, thoughts keep evolving on this tricky question!

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Portfolio update

Company name Allocation
Tata Elxsi Ltd. 31%
Central Depository Services (India) Ltd. 27%
RPSG ventures 12%
Borosil Ltd. 9%
Avenue Supermarts Ltd. 7%
Tata Consumer Products Ltd. 5%
Somany Home Innovation Ltd. 5%
FSN E-Commerce 4%

New financial year resolution is to reduce churn and discard new ideas quickly.

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Every time I see your portfolio update and I get this wow feeling…wow what a concentrated portfolio! Tata Elxsi is the clear Tiger here. What a run up recently before possible MSCI index inclusion! Always confusing what to do during such wild moves and high valuations…

All look secular growth stories. Is the growth in CDSL also expected to be as strong ahead as in last couple years?

How is the story of Borosil and Somany home building up? Can you let us know about their business transformation and how far are they in their journey?

Regarding RPSG, there were some hiccups with IPL and other stuff, whats your take here?

Thanks

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There is this curse of 30%. Whenever a stock reaches 30% in my portfolio it declines or fails to gain further :grinning:. First Dmart then CDSL then RPSG Ventures. I am keeping my fingers crossed for Tata Elxsi. This may be due to sector rotation and cyclical nature of the market. After failing to rotate funds I have stopped trying. Every companies time will come if they keep performing.

CDSL growth is secular in nature. Indian market will be much bigger after a decade with higher retail participation. There are some strategic assets required for Digital India to succeed and you can own a portion of them through CDSL. CDSL is infact one of the asset. CDSL has some stake in IFSC depository in Gift City Gujarat which will act as foreign depository reciepts and bullion depository. CDSL has stake in Open Network for Digital Commerce (ONDC) which will help retailers take e-commerce services and act as India’s defense against monopoly of foreign companies. These are not profitable at present but are still valuable.

Borosil will demerge into laboratory glassware and consumerware divisions. Selling pressure will be there due to reduction in size of the companies leading to forced selling. Growth in both segments is good. Brand value is good.

Sommany home innovation ltd is changing name to Hindware home innovation ltd after acquiring the manufacturing plants. The margins should improve going forward. Real estate cycle is just starting and it will have tailwind in coming years. The debt will rise due to the acquisition but the management has guided for its reduction in 3years. They are focusing on margin improvement by selling non profitable businesses. This is a wait and watch type of company at present. Undervalued sure, growth maybe.

RPSG Ventures eps will turn positive if the March results are positive. IPL is a good business with 16% NPM and RoE of 18% looking at CSK annual report. There is some oligopoly here with limited number of teams that can be formed. Other businesses have started performing after corona. Too yumm products are visible again in stores. I will let it stay and perform before increasing stake again.
Thanks.

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