India's Best Fund Managers 2019

High-Conviction Contrarian

By going against the grain and spotting growth opportunities, ABSL’s Mahesh Patil has  delivered stellar return

Pratibha Dixit

In 2011, Mahesh Patil, co-chief investment officer of Aditya Birla Sun Life Mutual Fund, and his team were searching for contrarian bets. Post the 2008 financial crisis, fresh worries of a global economic downturn and local concerns over high inflation and policy inertia had pulled down the benchmark indices to a 14-month low in August 2011.

In those uncertain times, financials were seeing a turbulent churn. Deposits contracted in private banks but grew in public sector banks. Even the markets favoured PSU banks over private ones and NBFCs. But Patil chose to look beyond the obvious. He spotted the potential and promise in two lenders even before anybody else did. After carrying out a detailed research about Bajaj Finance and IndusInd Bank, Patil and his team met the management of the respective firms to learn about their vision and strategy. And he liked what he had found. “We were looking at companies doing something different in the financial services space such as using technology and pursuing robust risk management practices. We took a call on Bajaj Finance after meeting its top management. We saw a huge opportunity in the sector, and the company had the right processes in place to scale up. Importantly, the valuations were reasonable,” recounts Patil. He entered the stock which was then trading at 1.94x on one-year trailing basis compared to its current value of 8.76x. Bajaj Finance still is a part of his portfolio, accounting for 1.46% of the Frontline Equity Fund’s AUM. Similarly, Patil realised that the new management at IndusInd was taking steps to improve profitability and revive the private lender. In 2008, IndusInd had seen a change in the leadership team and was coming out of a turbulent phase, Patil felt it was worth having a look at it. “They were doing the right things to improve the profitability and build a CASA franchise. Not many funds owned the stock at that point of time. But we took a bet on the new management, and it turned out to be a good bet for us.” After discovering the potential of the lender, it was an easy call for Patil. The stock was trading at a price to book value of 2.96x in 2011 compared with its current valuation of 4x.

Value patience

Throughout his career in the stock market,

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