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  • ‘The consumption story of India has overheated’

    Mr. Neil Parikh's interview by The Hindu Business Line, May 27, 2015

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    ‘The consumption story of India has overheated’

    It was a sad day when Parag Parikh, noted value investor and co-founder of PPFAS Mutual Fund, died in a car crash earlier this month right after attending the annual investor conference of his guru Warren Buffett’s Berkshire Hathaway. Now, his 33-year-old son, Neil Parag Parikh, has taken over as CEO of the fund, which had assets of ₹575 crore as of March 31. In an interview, Parikh speaks on the takeover of fund and plans for the future. Edited excerpts: It must be difficult for you recovering from such a shock...

    It’s been awful. But on the personal front, what’s giving us strength is my mom’s recovery. She’s in rehab and doctors are pleasantly surprised by her quick recovery. We expect her to be back in India by the first week of July.

    Has it been challenging professionally, to be suddenly thrust into your new role here?

    If you had asked me this before my father’s passing away, I would have said yes, I would have been very intimidated. But of late, I had been spending a lot of time with my father, in the car, home, at the dinner table, and we were always talking about the fund. So, I know what he wants and he had given me a road map. I’ve been with the organisation for about eleven years now.

    Should investors in the fund expect changes? Have you seen any redemption pressure since your father’s accident?

    No, there won’t be any major shift. Our investing philosophy is rock solid and our research and investing team is strong and going to stay the same. What we realise is that something can be done to make the fund more visible. We have a great product, we want to create awareness about it and want people to buy it.

    We’ve not seen any redemption pressure. In fact, our AUM is bigger now than what it was when my father passed away two-and-a-half weeks back.

    Your father was a champion of value investing. But there are other investing philosophies. Were you tempted to try them?

    I’d bought into the (value investing) philosophy pretty young. If I wanted excitement, I would have gone to a casino, or bet on a horse. I did try my hand in the stock markets, and my father went around telling everyone, “I hope he loses money.” The lesson was pretty clear, pretty quickly. For us, management is key, and the business should have a moat around it — some competitive advantage in terms of pricing power, distribution network, and patents. Obviously, we like businesses with low debt and they should be available at reasonable valuations.

    I’ve seen this work professionally. In bull runs, we don’t give the crazy returns others might. We deliver reasonable rates of return, that are not extraordinary but are sustainable, and preservation of capital.

    The mutual fund industry is using the ‘Make in India’ theme to attract investors. Is there an investing opportunity here?

    For us, stock picking is done from the bottom up. We are not competing with the big guys in the industry. There are supermarkets of mutual funds out there, playing to what catches the market’s fancy. We have designed a single fund that takes advantage of everything.

    With regard to sectors, the consumption story of India has overheated, it’s also a bit expensive. Without philosophy, we won’t get into it right now. We like the private banking sector — we have Axis, ICICI, HDFC. We look at absolute over relative returns; we don’t set returns from other mutual funds as our benchmark.

    What goals do you have for the fund?

    There are several but one of the things my father really wanted is that when our fund completes five years, it has to be one of the most preferred equity mutual funds in the market, part of everybody’s portfolio.

    The original article could be seen here.

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    Sponsor: Parag Parikh Financial Advisory Services Private Limited. [CIN: U67190MH1992PTC068970], Trustee: PPFAS Trustee Company Private Limited. [CIN: U65100MH2011PTC221203], Investment Manager (AMC): PPFAS Asset Management Private Limited. [CIN: U65100MH2011PTC220623]