Vineet Jain portfolio

Kamal Khaitan is an excellent capital allocator based on the evidence available so far. Sunteck is one of those companies that never lets a crisis go to waste. Theybdid it post demonitization, they did it during covid lockdowns. Foresight and long term thinking through and through.

I have pruned my position in Sunteck though, as I do see an oversupply coming in mid to premium segments in Mumbai RE. The stock price has run up quite a bit in anticipation of continued growth and any disappointment can lead to a correction. Still holding with about 5% of PF.
Will post a portfolio update soon.

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Thanks for your reply. I am little optimistic here and I believe oversupply won’t affect much as acquisition rates are low and easy monetisation due to sales momentum & strategic location with lot of steam left and share prices are inline compared to other RE companies with such good B/S and management.

Will await for your portfolio update. Thanks

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An update after long. Have been tied up with work and travel over the past few months. And I have had so much to say but have been lazy to post :slight_smile:

I have churned the portfolio quite a bit, some due to changes in certain industry structures, some because I found better opportunities. Will break this down into smaller posts for ease of consumption.

Scale-ups

Scaled up my positions in Valiant (3% of PF at about 600) and Newgen (4% of PF at about 400) in the last week of August.

I think Valiant’s business has bottomed out and most of the promotor selling done as well. The Gala’s now hold less than 2% share an they may or may not sell out, but it won’t be material. Meanwhile falling crude, restarting of their factory that was affected by the blast and improving realizations from chlorination should lead to increased topline and margin expansion over the rest of the year. Q2 may not be great but Q3 and Q4 should be materially better. Risk-reward at under 1.5 times sales was compelling.

Newgen is the only company in the small and mid cap IT pack that may not be affected as badly by the impending recession in the US and UK IMO. In fact low code/no code solution adoption may increase as companies look for less capital intensive options for efficiency improvements. Their last concall was encouraging. While the business bottom may be a quarter or two away, I think the stock price bottom may be in place already. It may fall if the entire IT pack continues to fall though, but I think it should do better than most mid and small cap IT companies. This is the only IT exposure I have at the moment.

Fresh additions / Add backs

Vadilal Industries (3%), Allcargo Logistics (2%) and Affordable Robotics (2%). Added back Indiabulls Real Estate (2%) and Equitas Holdings (4%).

Vadilal Industries (Buy price about 2215): I happened to meet the management of the international business last month in the US and understood the business well. They have an amazing distribution network in the US and have great relations with the largest Indian retailers. I saw the prominence that their products enjoy on the shelf and the extensions and new categories they have gotten into, from frozen foods and vegetables to RTEs to Indian sweets. The US business should continue to grow fast, and the growth may spill over to other international geographies as well.

The stock has been on a tear for the past few months though, but I bit the bullet and got in. It is still not expensive though, considering the growth I see in the international business over the next few years - trades at under 2 rimes overall sales.
I would like to buy more than 3% of the PF but will do that on consolidation or when future numbers continue improving. Also Ice-cream sales in India is seasonal so may get opportunities to add in the winter.

Allcargo logistics (buy price 305): A special situation play. They will demerge into three businesses. The real estate business carries most of the debt and has the lowest contribution to sales, so post demerger the main business should be nearly debt free, asset light and fast growing. Presently trading under 10 times FY22 earnings. Even if earnings taper with reducing global freight costs, it is still easily the cheapest listed logistics company in India. I regret not taking a larger position - this seemed like quite a full toss and looked great on charts as well. It is already up 25%from my buy price in less than a month. I may add some on consolidation or post the demerger if it has not run up a lot.

Affordable Robotics and Automation(buy price 133): This is a micro-cap startup in the robotics and automation space. Vijay Kedia owns 15% of the business. This alone is enough for me to take a small position as a boom or bust start-up like position. Bought it after weeks of consolidation.

These guys have been in the parking automation space for a while. ARAPL has various solutions to incorporate tens to hundreds of cars in very limited space. Check out their website for videos - they’re pretty cool. They have been selling these solutions to residential and commercial establishments. The potential demand in the land and parking starved cities in India is huge.

Off late they have also developed a warehouse automation and management solution. They claim this will help ecomm companies in better service operations by automating their warehouses for faster and more accurate deliveries. I guess this can be extended to FMCG, pharma and other industries in the future. Why I find this interesting is that it is much more scalable and asset light. If they can crack this for a couple of warehouses of say a Big basket, they can scale across the chain very quickly.

Lastly they also have a Ed tech solution which claims to use AI augment learning methods. They say the capital deployed for this is very small. I am not a big fan of Ed Tech in general, and treat it as an optionality, so long as they stick to not deploying too much money here.

In summary, ARAPL is in a whitespace with huge runway for growth. If their solutions click with a few customers, they can click with many very fast. If not, the small position size will protect me.

Indiabulls Real Estate (buy price 72) and Equitas Holdings (buy price 84): I bought both back last month, at about 30-40% lower than what I had sold them at. Indiabulls is a clean special situation play. The merger should go through and value will be unlocked. I may add closer to the event materializing. Equitas still trades at a slim discount to Equitas SFB and the reverse merger will happen soon. Equitas SFB traded at about 1.2 times book when I bought, and had improving RoAs. Very favourable risk-reward.

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Major sells were Mastek (at 2050), Intellect Design Arena (at 600), Rain (at 180).

Probably a bit late to sell Mastek and Intellect while the writing has been on the wall for quite sometime about the pain in Europe, and possibly US.

Mastek in particular may be more vulnerable given their huge dependence on US spending. With the new PM talking about economic boost through tax cuts, the government may be left with even less money to pursue digital transformation initiatives in the medium term. I booked a 12% loss here. If it corrects to 1300-1400 levels, I will happily buy back with more margin of safety.

Intellect is guiding for lower growth and lower margins than they had last year, and they also depend on Europe for a sizable chunk of their business. Not worth the risk in my opinion. Got out with a slim 4% profit. I will buy it back if it dips to 450 levels.

About 60% of the money from these proceeds were moved to Newgen. This lowers my IT exposure to exactly 4% of the PF.

Sold Rain at about 180. May not be the best time for commodities for sometime. Made more than 2x on Rain in three years so fairly satisfied. Will continue to track it going forward.

Edit: Sold Indoco as well. Not aure how the new policy promoting generics over brands in domestic pharma will impact Indoco. At the present price it looks like a compounder at best. Nor worth the risk of uncertainty innmy view.

Still hold tracking positions in IIFL Finance, Krsnaa and Xpro. Will probably exit all - they take my total companies to more than 20 which I don’t like.

No additions to the international portfolio (around 20%) - still hold Ark K (7%), Ark G (4.5%), KWEB (7%) and tracking position in Roundhill Ball Metaverse ETF (0.5%). I am at about 15% loss on the International portfolio (3% of total portfolio). These were always going to be volatile so I am not worried. If the lows are broken again, I may add more and then sit tight till the interest rate environment turns.

Have about 12% cash. Waiting for things to cool down a bit before deploying. Don’t have any screaming buys in sight yet, except for potentially additions to Stride, Valiant, Allcargo, Equitas. Tracking a whole host of micro and small companies which may become attractive when I understand them better.

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Seems like this is playing out perfectly to script. In bull markets, it is impossible to know when stock bottoms are formed. But my learning is that once one knows when the business bttom will be (it may not have cime already but there js reasonable certainty that it will come in a few months), it’s better to take an inital position and then pyramid, than wait for the business and stock bottoms to form. Rallies can be sharp and unforgiving.
Risk-reward is above all else.

Fresh tracking position: Looking closely at Aurum Proptech. Have taken a tracking position. It is a venture fund for property tech start-ups across the value chain. Massive massive market just about beginning to take off, a proxy on tech adoption in a recovering real estate landscape, and a lot of cross businesses opportunity across the investee companies. The rights issue was successful and the company has funds to continue its inorganic expansion. This may be one more of the start-up like boom or bust bets, purely based on risk reward.

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Studied this a bit more through last week, and I am extremely tempted to take a 2.5% position right away. PropTech is a massive whitespace which is just starting in India. It is a lot more mature in many other parts of the world.

I watched a couple of interviews of the founders of two of Aurum’s subsidiaries - Housemonk and BeyondWalls, and I liked what I saw. I have heard good thongs about Sell.do as well - lot of testimonials from RE players on this one. IN the concall Aurum ha smentioned that they will continue to look for inorganic opportunities to become an end to end integrated PropTech ecosystem. This will be one of a kind and unique in many ways - the cross selling potential in my view will be very large.

Aurum is also working on very interesting platform to allow part ownership of individual properties. In an REIR one gets a piece of a cluster of real estate, Aurum is wanting to do this for individual residential and commercial properties. This exists at the moment but minimum ticket size is 25 lakhs. Aurm is trying to do this for smaller ticket sizes - making RE investments accessible to retail folks. This can be a pretty big product in itself.

All of this for under 1000cr and with 400cr cash on books. While I learn more, I will likely initiate a start-up like position on this next week. Sold Affordable today at 147 to swap with Aurum. A better model in a better sector and better competitive structure for Aurum compared to Affordable in my view, and I have constraints of not wanting too many microcap investments with limited information, plus wanting to keep my total holdings to 20 or under.

Also evaluating swapping Allcargo for Gati. Have taken a tracking position in Gati earlier this week. Same pedigree of management, completely India focused business as opposed to global exposure for Allcargo, expected to grow faster than Allcargo, and not too much more expensive in terms of valuation. Seems like better risk-reward.

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