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Introduction to Multi-Act

 Started in 1998 by two Wharton Graduates to develop an Equity research Centre of Excellence.

 After successfully using the research process as an aid to managing proprietary investments for 12 years,
Multi-Act (MA) decided to provide equity advisory services for select outside investors and families.

 Subsequently MA decided to broad base itself into providing International Independent Research and
Investment Management Services catering to UHNIs, Large Business Families, Family Offices, Hedge Funds,
Investment Managers and Intermediaries around the globe.

 Currently MA has a team of 30+ Investment Professionals most of whom are qualified CA’s, all of who are
encouraged to become CFA charter holders.

 Coverage of over 400 stocks between India and rest of the world. We cover ~150 Indian stocks and ~250
global stocks.

Founder & Chairman

– Prashant.K.Trivedi holds a B.Sc. (Econ.) from Wharton School, University of Pennsylvania. He graduated summa cum

– He is Chairman of the Multi-Act Group, a group with interests in independent investment research, investment
management, real estate investment and development, aviation financing and light engineering. Multi-Act Group has
operations globally and in India.

– Prashant is a strong believer of Austrian School of Economics and has been responsible for constructing portfolios
invested in global equities, global fixed income and real estate for the family office based on a multi-disciplinary
Our Journey

In 2006, began highlighting macro issues related to

housing bubble, identified extreme valuations in
Global and then Indian markets. In January 2008
called for large declines in Financial, Infra-structure
and Real Estate equities.
In 2011, launched
Portfolio Management
After avoiding GFC crisis of Services as the we felt
2008, we initiated equity that families continue to
advisory in 2009 on the face immense Global
In 2000, models identified and Macro challenges and
avoided tech bubble, while requests of acquainted
In 2003, expanded coverage in business families. excessive focus on the
investing in other undervalued short –term that detracts
Indian stocks looking at the very
non-tech pockets from a long term
cheap valuations in Indian Equity
markets compared to any other satisfaction.
global market.

Established in 1998 with 3

analysts, covering global stocks.

Multi-Act Offerings
For Direct Investor (UHNIs and Large Business Families)

Portfolio Management Services ‘Equisense’ - Core Investment Program for Families

For Investment Managers

Independent Equity Research Quality of Earnings

For Wealth Managers

Mutual Fund Analytics Portfolio Diagnostic Report (‘PDR’)

PMS - Investment Strategy

PMS Investment Strategy
Investment Strategy is to safeguard the Portfolio
from three types of risks:

 Business Risk • Focus on High Quality Business

• Exposure preferably to net cash companies

 Balance Sheet Risk
(Cash > Total Debt)

• Favorable Reward to Risk ratio

 Valuation Risk

Business Risks – Identify if it’s a Good Company
What we look at What we don’t look at
Quality of Numbers Short Term Indicators
 Quality of Earnings  Consensus estimates

 Quality of Growth  Reacting to Quarterly results

 Long-term Returns on Capital  Inside Information/News

 Cash Generation  Enamored by high growth, overlooking

quality of business
 Capital Structure
 Extrapolating short term
 Industry Nature negatives/positives
 Corporate Governance  IPOs/turnaround businesses
 M-score

 F-score
“Algorithms are noise-free. People are not…. When you put some data in front of an algorithm, you will always get the same
response at the other end.” - Daniel Kahneman
Business Risks – Identify if the Business has a Moat
After a Company has met our Quantitative Criteria, we evaluate if such strong financial performance is sustainable.
We believe strong financial performance is not sustainable over long term, unless the Business has strong barriers to entry
(what Buffett terms a “Moat”)
Network Effect

Intangibles Switching cost

Economies of scale

Invest in a Business that even a fool can run, because someday a fool will run – Warren Buffet
Balance Sheet Risks – Preference for Net Cash Companies
Over long term, companies with Net Cash (Total Cash> Total Debt) tend to outperform Leveraged companies

Relative Performance (Net Cash vs Net Companies)




250 12.2%



Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16

Net Cash (Total Cash>Total Debt) Net Debt (Total Debt>Total Cash)

Note: This chart is based on companies in BSE 500 excluding banks and regulated utilities.
Cash includes Cash Balances + Investments
Valuation Risks – Investing with a Margin of Safety
Unlike ‘Target Price’, we establish a Valuation range called ‘Estimated Business Value’ which defines Intrinsic Value of a
business in Worst/Best case scenario. This determines our entry and exit points, while ignoring the noise in the market.

Greed Zone
Our preferred Selling Zone
EBV High

Fair Value

Our preferred Buying Zone

Fear Zone

Portfolio Construction
Large Cap 58% Moat 15%
Select from our Universe of 150
Indian Stocks Mid Cap 27% Limited Moat 28%
Small Cap 15% Non Moat 57%

Investment Thesis prepared for every company that is added in

Portfolio or in Universe.

Indicators Quality of Business

Fundamental Earnings Technical Moat/Limited Non Moat
Bottom up Value Momentum Momentum Moat Business Business
Approach  2.0% 1.5-2% Initial Weight

 
3.5-5% * 2.5% * Incremental Weight
 
Full Weight
   5-10% * 3.5-5% *
* Cumulative Weight

Why Multi-Act

Asset Allocation Call
Investment Corpus received is not deployed into equities on day one. We decide the timing to enter and exit the market.
90% 255.00
MSSP Equity weight vs Benchmark (BSE 500 + Midcap)

Large Caps ~33%
Mid & Small ~67% 195.00




Large Caps ~73%

Mid & Small ~27%

50% 75.00

Equity Allocation in Portfolio Benchmark ( Bse 500 & BSE Midcap) Nifty

Source: MA Research, BSE 14

No Model Portfolio Concept
New Portfolio is constructed based on valuations in the market. Investment corpus received at different times will have a
different Portfolio

Equity weights across clients








01-09-2016 01-12-2016 01-03-2017 01-06-2017

6 yrs old Portfolio 1 yr old Portfolio 6 months old Portfolio 3 months old Portfolio

Source: MA Research 15
Why High Quality
Over long term High Quality Businesses always provide Superior risk adjusted returns
1,100 25.2%






Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17

High Quality Index Nifty NSE Midcap FreeFloat 100 Low Quality Index

*High quality Index constitutes Top 30 companies by market cap which have Moat/Limited Moat businesses (as classified by Multi-Act) in addition to high
returns on capital and low leverage ratios.
Source: MA Research, NSE 16
Why High Quality
When volatility hits the market, High Quality businesses fall the least and recover the fastest
Recovery period after 2008-09 Financial debacle


Midcap – 8.7 years
250 HQ Index – 1.5 years NIFTY – 2.8 years





Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16

HQ Index Nifty NSE Midcap

Source: MA Research, NSE 17
Focus on Risk-adjusted returns
Outcome of our Investment Process – In the last six years, our Portfolio Drawdown has been lower during a market turmoil

Worst Drawdowns Aug 2013 Feb 2016 Dec 2016

MSSP -12.1% -9.5% -7.1%

-15.0% -22.4% -11.7%


-22.0% -18.5% -13.5%

Note: Drawdown is the decline from Peak- to- Bottom value in a Portfolio. It reflects the potential risks inherited in the portfolio during a volatile
market. The periods mentioned above is the month when bottom was reached while the peak periods vary for each index/fund.

“Only when the tide goes out do you discover who’s been swimming naked” – Warren Buffet

Source: MA Research, BSE, NSE 18

PMS Products and Track Record

4/4/2018 19
PMS - Portfolio Scheme
 Moat & Special Situations Portfolio (“MSSP”)

– MSSP was launched with an objective to generate capital appreciation by investing in companies that are
Moats or Limited Moat businesses or in Non-Moat businesses as special situations. Special situations are
those cases where a Non Moat businesses is available at a deep discount and at that price point downside
is almost zero.

– Dynamic allocation between equity and cash (liquid funds) depending on the valuations in the market.

Moat & Special Situations Portfolio (‘MSSP’) - Performance
Since Inception
Current Year FY FY FY FY FY FY FY
27.01.11 to 27.01.2011 till
2018 2017 2016 2015 2014 2013 2012
31.03.2018 31.03.2011

Moat and Special Situations

Portfolio (MSSP)(Portfolio
Performance (%), Net of all 16.7% 20.1% 14.9% 3.4% 47.5% 22.0% 0.5% 14.8% 2.3%
fees and charges levied by
the Portfolio Manager)
Average Equity Weight 69.0% 78.2% 76.6% 71.3% 66.0% 76.0% 76.0% 47.0% 14.0%
Benchmark Performance (%)
(Average of BSE 500 And BSE 10.6% 12.5% 28.4% -3.8% 41.4% 16.2% 0.8% -8.4% -2.2%
1. *Date of inception of MSSP is January 27, 2011.
2. Past performance of MAECL does not indicate its future performance.
3. Returns are cash flow adjusted and time (Daily) weighted returns. Only for FY15 and FY16, returns are after all expenses but before Performance fees.
Rest all years it is after all expenses.
4. The actual returns of clients may differ from client to client due to different timing of investment.
5. Average Equity Weight is calculated as Monthly average of equity weight at end of the month.

Statistical Ratios
Annual Returns for March 2018
Portfolio Benchmark Nifty Risk Free Return
CAGR 16.7% 10.6% 8.4% 7.8%
Average 17.9% 15.1% 11.3% 7.8%
Minimum -3.7% -25.4% -21.5% 6.4%
Max 61.5% 63.1% 45.4% 8.9%
Statistical Ratios with Interpretation

Sharpe Ratio 0.6 0.4 0.2 MSSP has more expected return per unit of risk

Information Ratio* 0.3 To be used for comparison with other funds

MSSP is less volatile on the downside than comparable

Sortino Ratio 11.8 1.1 0.6
Higher number of outliers with positive returns than
Skewness 1.4 0.6 0.2
negative ones

Fewer large fluctuations as compared with normal

Kurtosis 0.9 -0.3 -0.3

*A high information ratio means a manager can achieve higher returns more efficiently than one with a lower ratio by taking on additional risk.

Performance Attribution –Total Positions

Fag Bearings

100% Winners: 57
Average CAGR Return: 31%
Median Holding: 1.4 Yrs


Losers: 11
Average CAGR Return: - 12%
Median Holding: 0.9 Yr



-40% Bank Of Baroda

Product Features
Moat & Special Situations Portfolio (‘MSSP’)

Lock in 39 months, 1% Exit Load

Hurdle Rate 13%

Performance Share 25%

No of stocks ~ 25

Average Holding Period 3-5 years

Portfolio Turnover 30-50 %

Benchmark Average of BSE 500 and BSE Midcap

Risk Control Maximum Weight: Stock 10%, Sector 30%

Fund Managers
Jinal Sheth, holds a Masters of Science degree in finance from Brandeis University,
Jinal Sheth Boston. During his Masters program, Jinal worked with Mosaic Capital, an
alternatives investment management platform, based in New York.
He has a diversified experience in equity research of more than a decade across
different geographies and has been managing portfolios since the past 5 years at
He specializes in identifying good quality businesses at an early stage and being a
contrarian in nature prefers to walk the least obvious path which has helped him
outperform in the equity markets consistently.
He has earlier worked with Mosaic Capital Advisors, Thomas Weisel Partners, UBS
Financial Services, Asian Markets Securities Pvt. Ltd.
Rohan Samant
Rohan Samant, a Chartered Accountant by Profession has an experience of over 9
years with Multi-Act. He is well versed with Industry research and company
specific research predominantly Business analysis and valuation.

4/4/2018 25
‘We are happy to score centuries with just ones and twos
and not necessarily with sixers’
- Prashant.K.Trivedi

Case Studies

4/4/2018 27
Case Study – Wabco India Ltd
Fundamental Analysis indicated – A Valuation Gap due to focus on temporary issues

Position in the Industry • Leader in air brakes actuation systems for M&HCV segment with an 85%
market share amongst the OEM and a 75% market share in the aftermarket.

• Enjoys benefit of Switching Cost, Access to Parent R&D, Technology superiority

(duopoly market).

• Markets focused on –
• CV is highly cyclical business.
• High dependence on road Infrastructure which has a good scope of developing.

• We focused on -
Behavioral issues • Globally its virtually a duopoly market between Wabco and their competitor.
(What were we focusing v/s Market) • ABS: Mandatory regulation norms. Huge opportunity lying ahead.
• Competitive scenario favoring Wabco (Competing company imports vs Wabco Local
• Lowest content per vehicle which is expected to go up in future.
• Export to parent company being a big opportunity.
• Wabco goes onto introduce products which turn on to become regulations in those
countries as they are come under safety norms.
Case Study – Wabco India Ltd

Case Study – Vesuvius India Ltd
Fundamental Analysis indicated – A Valuation Gap due to focus on temporary issues

• Leader in design and supply of high performance specialty ceramic refractories

Position in the Industry used to handle molten metal in production of steel, foundry castings and
photovoltaic (solar) cells.

• Stickiness- Refractories are key consumables in manufacturing steel. They

ensure that steel manufacturing continues without obstacle.
Limited Moat
• Technology - Vesuvius India continues to receive new technologies from global

• Market focused on –
• Slowdown in Steel industry.
• Competition in unshaped refractory.

Behavioral issues • We focused on -

(What were we focusing v/s Market) • Steel Price on path to recovery.
• Lower current Capacity Utilization will only help build up profitability in up
• Refractories are key consumables in manufacturing steel. (Low Value, high
Importance product)
Case Study – Vesuvius India Ltd

Case Study – Jubilant Foodworks Ltd
Fundamental Analysis indicated – A Valuation Gap due to focus on temporary issues
• Leading player in quick service restaurant (QSR) space in India.
Position in the Industry • They have sole franchisee of Dominos Pizza in India since 1996.
• They also has exclusive rights for Nepal, Bangladesh and Srilanka.

• Enjoys benefit of economies of scale (~ 70% market share of organized pizza

Moat market) and mastered the supply chain ecosystem, which helps them to
provide consistent product in efficient manner.

• Market focused on –
• Lower SSG Growth along with industry aided by competition.
• Investments in Dunkin Donuts not making money.
• Promoter diluting + pledge shares
• We focused on -
Behavioral issues • Slow SSG was a cyclical issue rather than a structural issues as perceived by
(What were we focusing v/s Market) the market, as the slowdown was seen across QSR players.
• Growing young urban population and increasing income levels, India remains
the fastest growing market for Dominos.
• Asset Light Model – Competitors not able to replicate.
• Market was worried about high PE. But we focused on cash flows – OCF was
2x of PAT historically on account of negative working capital
Case Study – Jubilant Foodworks Ltd


4/4/2018 34
Investment Approach
Global Rational Analysis Framework


 Answers to three critical questions

while arriving at investment decision:
Technical Quantitative ‒ Is it a “Good” company?
Analysis Analysis Analysis ‒ Is the “Valuation” right?
‒ Is the “Timing” right?

 Protects against “permanent loss” of

Behavioral capital

Source: CFA Magazine Article in 2005 by John Bollinger, CFA

(President of Bollinger Capital Management, Inc.)

Sensex Trend

Sensex Analysis

Risk vs Reward in broader market

EBV for Dec 2018 (27000-44000)
Statutory Details of the Portfolio Manager:
Multi-Act Equity Consultancy Private Limited - SEBI Registered Portfolio Manager having Registration No. INP000002965

• Disclaimer
• This is an Internal Document and has been solely prepared for educational and illustrative purposes only. This is not meant for sharing with or for
circulation to any third party. The information contained herein does not constitute any guidelines or recommendations on any course of action to be
followed by the recipient.
• The information is prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. MAECL
does not solicit any course of action based on the information provided by it and it is advised that the recipient should exercise independent judgment
and act upon the same based on its/his/her sole discretion based on their own investigations and risk-reward preferences.
• MAECL, its associates or any of their respective directors, employees, affiliates or representatives do not assume any responsibility for, or warrant the
accuracy, completeness, adequacy and reliability of such information and consequently are not liable for any decisions taken based on the same. This
information is not intended to be an offer or solicitation for the purchase or sale of any security or financial product.
• It is stated that, as permitted by SEBI Regulations and the Company’s Employee Dealing Policy, MAECL and/or its associates, affiliates and/or individuals
thereof may have positions in securities referred to in the information provided by it and may make purchases or sale thereof while the information is in
circulation. MAECL is not responsible for any error or inaccuracy or any losses suffered on account of any information contained in this document. Neither
MAECL nor any of its associates, directors, employees, affiliates or representatives shall be liable for any direct, indirect, special, incidental,
consequential, punitive or exemplary damages, including lost profits arising in any way from the information provided by it.
• The contents herein – information or views – do not amount to distribution, guidelines, an offer or solicitation of any offer to buy or sell any securities or
financial instruments, directly or indirectly, in the United States of America (US), in Canada, in jurisdictions where such distribution or offer is not
authorized and in FATF non-compliant jurisdiction and are particularly not for US persons (being persons resident in the US, corporations, partnerships or
other entities created or organized in or under the laws of the US or any person falling within the definition of the term “US person” under Regulation S
promulgated under the US Securities Act of 1933, as amended) and persons of Canada.

Risk factors
General risk factors
• a. Securities investments are subject to market risks and there is no assurance or guarantee that the objective of the investments will be achieved.
• b. Past performance of MAECL does not indicate its future performance.
• b. As with any investment in securities, the value of investments can go up or down depending on the factors and forces affecting the capital market.
MAECL is not responsible / liable for any losses resulting from such factors.
• c. Securities investments are subject to external risks such as war, natural calamities, and policy changes of local / international markets which affect
stock markets.
• d. MAECL has renewed its SEBI PMS registration effective October 14, 2014 and has commenced its portfolio management activities with effect from
January 2011. However MAECL has more than 10 years of experience in managing its own funds invested in the domestic market.