India’s Best Fund Managers 2021

“We may see two or four multinational, chemical companies emerging out of India”

Kotak Mahindra's Pankaj Tibrewal on the structural shift in specialty chemicals and why portfolio construction should trump stock picking

Faisal Magray

Caution could be Pankaj Tibrewal’s middle name. The Senior Equity Fund Manager at Kotak Mahindra Mutual Fund says they are paranoid about bad balance sheets and run a mile away from companies with corporate governance issues. In the current market, he is betting on a leaner corporate India’s impressive recovery over 2022 and 2023 with specialty chemicals industry and manufacturing taking off, and real estate picking up. From such a conservative fund manager, these seem highly optimistic predictions. He tells Outlook Business why he stands by these views

Is there a feeling, after the pandemic, that market leaders are gaining disproportionate market share and therefore profits, and therefore valuations? What does this mean for mid- and small-cap investing?
One of the themes we have been advocating for the last couple of years, post demonetisation and goods and services tax (GST) rollout, is that big will get bigger. Post-pandemic, it has become clearer that companies with strong balance sheets and cash flows will weather a crisis better. But, the myth is that bigger companies mean only large-caps. We did an interesting exercise, in which we studied companies ranked 101 to 650, according to their market cap. We were surprised that more than 50% of them are market leaders in their respective segments. So, there is a large universe of category leaders in the mid- and small-cap segment across sectors. For example, in the entire home-building segment, except for cement, none of the categories leaders are large-cap. This is true whether it be tiles, plyboards, wires and cables or consumer durables. If you put your money in these category leaders, which are mid- or small-cap, your money would have multiplied quite a bit and outperformed the market.


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