Art and Science Meet to Enhance Returns.
Creating unique investment products using in-depth research, smart analytics, and innovative structuring
Our Methodology
Our investment approach is based on three core pillars
01 Relational
Rigorous promoter/issuer check through our network
02 Analytical
- Stage of the business cycle
- Inflation and interest rate trajectory
- Growth dynamics and shifts
- Benchmarking the industry with a listed player and tracking performance through analyst earnings calls
- Track industry dynamics through industry reports, databases, and high-frequency indicators
- Financial Hygiene
- Sustainable growth
- Bankruptcy remoteness
- Off-balance sheet items
- Macroeconomic and sector pressures
03 Quantitative
- The most objective of the three pillars
- Draws in a lot of data for objective decision support
- Allows us to filter about 50% of the universe that approaches us
- Particular importance given the illiquid nature of the debt segment and the absence of the opportunity to price from traded data
- Uses quantitative techniques to integrate:
- G-Sec yield curve
- Credit default and loss given default data
- Instrument, sector, tenor, growth, and governance factors
Our Investment Approach
Each product has a clearly defined universe relevant to the strategy.
For example, Aries PMS focuses on investing in Intermediate-yield credit, including papers with ratings between AA to BBB.
The process is driven by two forces – Internal Research and Market Availability. Research on the current global, macro, and micro conditions allows us to narrow down sectors that will be in a sustainable growth zone for the next 2-3 years. Exposure to existing sectors is monitored by a similar research framework in order to gauge the growth ahead.
Sourcing of bonds is mainly through brokers (debt and credit) and private equity participants. In some cases, direct deals with the company and self-structuring of the instrument occur. For equity, securities are publicly listed and bought on exchanges.
All the securities are passed through our three pillar methodology to gauge their position on the risk-return spectrum. Their placement is then done in the appropriate strategy based on its risk-return profile.
Rigorous five-step process followed for ongoing monitoring and rebalancing as needed.
Navigating Strongly Through Difficult Times
Phase 1
Around Demonetization
The investment focus remained on the regional impact on financial firms along with bank perpetuals.
Learning from this phase: To closely scrutinize the cascading NPAs impacting the macroeconomy, which previously was not an area of concern for credit investing.
Phase 2
Post-IL&FS Default
A major move was dialing back on impact financials and shifting focus to fintech, cyclical, and industrial sectors.
Learning from the phase: Avoid reliance on assumed guarantees and seek concrete guarantees with a defined quantum.
Phase 3
Around COVID-19
Increased exposure to gold finance, second-hand vehicle financing, infrastructure, cyclical, and industrials on the credit side.
Learning from the phase: Any sector going into decline tends to get much worse before it can reverse its course, hence investment decisions to underweight such sectors.
How We Monitor Risks
We have a robust risks management process to ensure that risks in all our offerings is constantly monitored and mitigated.
01
Analyzing exposure to all sectors at global macro, and industry level
02
Continuously analyzing the company for the stage of the business cycle, growth dynamics, and shifts
03
Firm-level analytics of the company to monitor:
- Financial hygiene
- Sustainable growth
- Bankruptcy remoteness
- Off-balance sheet items/contingent liabilities
- Macroeconomic and sector pressures
- Quarterly earnings call
04
Reviewing the portfolios every quarter for necessary changes
05
Rebalancing the portfolios after crucial changes around the markets or after three sigma events
Case Studies
Explore how Scient Capital is adding value by identifying future winners early on.
- Oxyzo Financial Services
- SK Finance
- Spandana Sphoorty
Oxyzo Financial Services
Oxyzo Financial Services Limited is an RBI registered Non-Banking Financial Company (NBFC) incorporated in November 2017.
The company provides working capital funding to largely small and medium enterprises (SMEs) and plays a far-reaching role in the raw material financing journey for MSMEs offering products wedded with the cash flows of the clients' business. Oxyzo incorporated is a wholly-owned subsidiary of Business - a fintech platform engaging in financing and fulfilment of raw materials for SMEs.
| Financials | FY20 | FY21 |
|---|---|---|
| AUM (INR Crore) | 898 | 1357 |
| GNPA | 0.93% | 1.23% |
| NNPA | 0.29% | 0.50% |
| CAR | 35.14% | 32.32% |
| DEBT/EQUITY | 2.60 | 1.95 |
| PROFIT AFTER TAX (INR Crore) | 21.06 | 39.94 |
Scient Invests Jan 2020
Started Ops Nov 2017
SK Finance
SK Finance Limited (erstwhile Ess Kay Fincorp Limited )is a Non-Deposit Asset Finance Non-Banking Financial Corporation (NBFC-ND-AFC) registered with the Reserve Bank of India.
The company was incorporated on 21st November 1994 and received a certificate of registration from the RBI on 16th October 1998. The company operates in the state of Rajasthan, Gujarat, Madhya Pradesh, Punjab, and Maharashtra through a network of 209 branches. The company finances used commercial vehicles (Light, Medium, Heavy, Multi Utility), tractors, Cars, and Small and Medium Enterprise Loans.
| Financials | FY18 | FY19 | FY20 | FY21 |
|---|---|---|---|---|
| AUM (INR Crore) | 1282 | 2002 | 2986 | 3417 |
| GNPA | 3.29% | 3.08% | 3.26% | 4.04% |
| NNPA | 2.59% | 2.90% | 2.40% | 1.90% |
| CAR | 35.14% | 34.07% | 31.66% | 27.67% |
| DEBT/EQUITY | 4.50 | 2.38 | 2.99 | 3.47 |
| PROFIT AFTER TAX (INR Crore) | 21.95 | 52.23 | 79 | 91.08 |
Scient Invests – May 2017
Moderate Scale of Operations and High Geographic concentration of Business Rating; CARE BBB
Spandana Sphoorty
Spandana Sphoorty Financial Limited was incorporated in 2003 as a Non-Banking finance company. Following the microfinance crisis in Andhra Pradesh (AP), Spandana entered into a Corporate Debt Restructuring with its lenders in September 2011.
It was reclassified as NBFC-MFI, a new category of NBFCs released in 2013. The target segment of Spandana Sphoorty is the low-income households that are unbanked and under-banked. It offers income generation loans under the Joint Liability Group(JLG) model predominantly to women from low-income households. Over its journey of the last 18 years, Spandana has become the second largest MFI in India in FY21, also being the most seasoned MFI.
| Financials | FY18 | FY19 | FY20 | FY21 |
|---|---|---|---|---|
| AUM (INR Crore) | 3166 | 4372 | 6829 | 8157 |
| GNPA | 1.7% | 0.9% | 0.36% | 5.27% |
| NNPA | 0.05% | 0.02% | 0.07% | 3.1% |
| CAR | 32.5% | 39.6% | 47.4% | 40.0% |
| DEBT/EQUITY | 1.6x | 1.5x | 1.8x | 2.2x |
| PROFIT AFTER TAX (INR Crore) | 187 | 311 | 351 | 145 |
Scient Invests – Nov 2017
Incorporated in 2003