TCG’s NDA 2.0 fund to focus on sunrise sectors: Chakri Lokapriya
TCG’s Nation Development Agenda (NDA 2.0) have been designed keeping expected NDA-2 policies in mind.
NDA 2.0 strategy is a very interesting name! It is coinciding with NDA-2 coming into power for the second term with a much stronger mandate. Is it just a coincidence or have you deliberately put the name on this kind of order?
NDA stands for Nation Development Agenda and that is NDA 2.0 strategy for you. The way we look at it, for any company it is important to have government support behind policy initiatives. We carefully looked at the various areas that the new government is focussing on and discovered that there can be multiple areas of growth over the next five years. Keeping that in mind, we have designed the NDA 2.0 strategy.
Tell us about the NDA 2.0 strategy that TCG AMC Scheme is focussing on. What are its constituents, how would the portfolio be positioned and what is the thinking behind designing such a strategy?
The thinking behind the strategy is on one hand, if Modi 2.0 wants to make India a $5-trillion economy, then the various policy initiatives in various sectors should in a sense translate into revenues and orders and therefore earnings for companies. Then it becomes a goal of our fund to identify such companies which will benefit from the new policy initiatives and grow that kind of number over the next five years.
How will this particular strategy be different from the three other strategies you are already running at TCG AMC in terms of the stocks which it will have or positioning in terms of market capitalisation?
One we have looked at thematic funds in terms of one of our previous funds which was focussed on recapitalising India by providing growth capital or turnaround capital but again that is past as now we are looking at an environment where cyclically things will turn up for India. These are both largecap and midcap and the broader market will participate in this growth. Over the last two or three years, the index returns has largely been led by a handful of companies but in this recovery, going forward, we would see both large as well as the broader market participating in this growth and we have designed that keeping in mind that new sunrise sectors will emerge and they have found place in the portfolio.
Which are these areas where you expect new government policy initiatives and push to be so meaningful that it will lead to good earnings growth in that kind of companies Also, what are the new themes you are looking?
The government’s track record in the last five years has been very good in the sense that there has been some very big bang reforms like NCLT, the bankruptcy code and the GST.
Now Modi 2.0 is likely to be a continuation of Modi 1.0 and the market always likes continuity because it provides clarity. Against this backdrop, you will see a lot of pickup, various initiatives bearing fruit and this will give birth to a number of new sectors. The government has focussed on 12 new areas and so the fund will focus on these 12 areas.
Which are those areas? You must have done a deep dive into the manifesto which the government has come out with. What is the feedback you have gathered on that?
We have spent the last several months in looking at the election manifesto as well as looking at it in the context of what policies have been done by the government like the GST and what will translate into actually policies that can be implemented and thereby turn into earnings for companies in these 12 areas. For example, Yuva Bharat for the youth of India. We have been looking for what could be the new kinds of products and services. It is very likely that you will have a company like Paytm which will go public in the very near future.
Then you have women empowerment, Make in India, digital India and national defence which means the supplier companies and a new policy for vehicles. These are the areas which make it a very diversified portfolio instead of concentrating in any one sector.
How many stocks are you aiming to have in this portfolio? What kind of risk will this portfolio have? Will it be a high risk portfolio or a moderate risk portfolio? What kind of investors will this particular strategy be suitable for?
We aim to have between 30 and 40 companies and this will be a moderate to high risk fund, simply because a) these are emerging companies in addition to existing companies. The risk will be fairly well diversified and with India goal to become a $5-trillion economy, we will look at companies which can grow this two and a half times on current $2 trillion to reach that goal.
Contributors to that kind of growth are the ones which you aim to have in this portfolio. I am sure you have already started doing road shows and you are already interacting with HNI investors for a dipstick survey on expected response. What is the kind of feedback you have gathered so far from big investors?
Investors are very enthused and like it simply because they recognise the work that we have put in talking to the policy market. We are talking to various sections of the industry and trade bodies in trying to understand what will work and what would not work.
The key message we get do not just assume that largecap companies are safe. If you look at Nifty in the last four or five years, 19 out of the Nifty 50 companies are no longer there on the index. They have been deleted; companies like DLF, NMDC, Punjab National Bank, BHEL. All these companies, which were market leaders with competitive advantages, have just gone out of Nifty.
On the other hand, new companies are coming in. The key message is that there is a lot of return to be made by finding good companies with good governance which can benefit from the new policies.