Daybreak - ‘Don’t call if markets are down’ — the PMS fund delivering returns the big city boys can’t match

Episode Date: May 8, 2025

Nagpur-based Counter Cyclical Investments doesn’t waste time with handholding. The six-year-old firm has a reputation for being quite cut and dry with its clients.  Consider some gems from the ‘who should invest with us’ long-list. “Those who won’t disturb us by calling us for reassurance everytime the market falls.” “We don’t have any provision for a relationship manager. Once you have taken an informed decision to invest in our PMS, please avoid calling us. Those who are looking for regular correspondence and active interaction, may please stay away.” Now, if you think moneyed investors—the kind who have to put in at least Rs 50 lakh to be a part of Counter Cyclical—are put off by the insolence, you’re wrong. Counter Cyclical’s assets under management have shot up over 10X in the past three years, and its customer count has grown by leaps and bounds.Why? The only scheme—a small-cap one —run by the six-year-old fund house is a chart-topper with five year annualised returns of, believe-it-or-not, 78%. Tune in. If you have any thoughts or questions about this episode, send them to us as texts or voice notes on Daybreak’s WhatsApp at [phone]. Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Ramon Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get alert, as soon as we release our first video. episode, please follow intermission on Spotify and Apple Podcast or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. There's a chain of burger restaurants in Australia that have gone viral in the last few years for one very specific reason. And no, it's not the food, which if Reddit reviews are anything to go by, is decent at best. You see, people visit this burger chain to get yelled at by the staff.

Yep, it's very aptly named Karen's Diner, and if you like your burgers with a side of insults, then this is certainly the place for you. Its tagline is literally rude staff and great burgers. Of course, customers get to yell back too. Now, thanks to the magic of social media, Karen's Diner blew up and was even able to expand to the UK two years ago. The reason I'm telling you about an Insta-famous Australian burger chain

with a rather bizarre claim to fame is because its approach to customer service is eerily similar to a tiny Nagpur-based PMS fund that's emerged as a top performer in the recent past. Now, counter-cyclical investments doesn't waste time with handholding. The six-year-old firm has a reputation for being quite cut and dry with its clients.

Consider some gems from the Who Shouldn't Invest with Us Long List that they have. It has things like, those who won't disturb us by calling us for reassurance every time the market falls or we don't have any provision for a relationship manager. Once you've taken an informed decision to invest in our PMS, please avoid calling us. Those who are looking for regular correspondence and active interaction may please stay away. Now, if you think money in investors, the kind who have to put in at least 50 lakh rupees to be a part of countercyclical are put off by the insolence. You're wrong.

Countercyclical's assets under management have shot up over 10 times in the past three years and its custom account has grown by leaps and bounds. Why you ask? Well, the fund house's only scheme, which happens to be a small cap one, is a chart topper with five years annualized returns of, believe it or not, 78%. As we know, investors love nothing more than returns. So you take the quirky approach to client servicing with a pinch of salt. In this episode, we dive into how this tiny small town PMS firm

has managed to make millions by venturing where most of its larger rivals fear to tread. Welcome to Daybreak, a business podcast from the Ken. I'm your host Rahil Philippos and I don't chase the news cycle. Instead, every day of the week, my colleague Snigda Sharma and I will come to you with one business story that is worth understanding and worth your time. Today is Thursday, the 8th of May. Hi, I'm Snigda.

of this podcast. And before we jump back in, I just wanted to share some exciting news with you. Daybreak is growing and we are looking to grow our team too. And if you're a journalist who listens to Daybreak and thinks, I wish they'd cover this or I know exactly what would make daybreak even better, we would love to hear from you. We're looking for somebody who's curious, who's driven and passionate about business and tech news. If that sounds like you or somebody you know, please check out the details in the show notes. Applications are open now. And back to the episode. Simply put, here's what countercyclical does. It buys the stuff that everyone else is running away from and then sells it when people start thinking it's cool again.

The PMS's only scheme, which is long diversified value, invests in small cap blue chip stocks. These are companies with a market capitalization of less than 5,000 crore rupees that exhibit the qualities of a large gap stock, meaning they show financial stability and potential for future growth. Typically, these are companies with an outsized market share in an otherwise niche sector. Essentially, countercyclical is buying gold at the price of silver. The Ken reporter, Atchisma Ayer, spoke to the founder and director Keshav Garh to understand his process. He said the objective is simple. He wants to buy the existing business at a discount and then growth should come for free. So the firm is essentially looking for companies that are undervalued but have

high operational efficiency. Okay, but how do they decide to sell then? Well, Gertz says they sell if they see another stock with better or similar quality and lower valuation or if they find that their hypothesis was wrong. Now, countercyclical does not pack down from this approach, not even when the markets look bleak. Gert doesn't introduce additional schemes. Instead, to stick with his repertoire of small and nanocaps. He says he's satisfied with this one scheme portfolio and introducing more would mean marketing, which is something he is clear he does not want to do.

Naturally, this is a risky way to do business, especially in a volatile market. Like one senior executive from a wealth management platform told at Shishma, the kind of names that Garg plays are quote unquote the craziest. There are times when he is the only buyer or seller, which is why he attracts a very specific kind of client. Now, Garde looks for clients that don't panic when markets are falling, hence the long list of disclaimers shared with them at the very beginning.

To mitigate the risks, Gertb builds a universe of about 100 to 130 shortlisted stocks. And of these, he chooses around 40 to 50 companies for each investor. With small and microcap investing, diversification is key. Garg explained that's because small can't. stocks run the risk of being decimated by factors both controllable and uncontrollable. So it's good to spread the risk. Also, because in a crashing market, it's much easier to sell small quantities in a large number of companies than a large quantity in a small number, especially in small microcaps where there

are no buyers. Now, Geyl generally gravitates towards the old economy, concentrating his holdings in things like manufacturing, consumer goods and services, chemicals and the like. He stays away from the sector's most people. choose, like banking and financial services or technology, for instance. What boosts trust is the fact that this company has skin in the game. Over a third of its 550 crore rum belongs to its promoters, that is Garg and his immediate family, which makes sense if you know the origin story of this firm.

Spoiler, it's deeply personal. Stay tuned to find out. Back in 2004, Garg ventured into investing on a lark. While studying science at Ferguson College in Pune, he started managing his family portfolio and was soon managing friends' portfolios too. Before long, through sheer word of mouth, Guy had gone from managing portfolios of 30 to 40 people, all extended family and friends, to around 400 people. The firm's minimum investment threshold is currently 50 lakh rupees,

and as of February, its client mix is 18 corporate, 333 non-corporate and 54 non-resident clients. Now, despite blowing up, the firm still only has a team of 10 people. And the unique criteria for joining is a passion for equity research and a stable internet connection. Kag also has no plans of moving to Mumbai or Bangalore despite his success. In fact, he told us that if it were up to him, he would move to an even more remote place. These are the quirks that make counter-cyclical counter-cyclical. Its employees spend most of their time conducting core research. it also doesn't charge an upfront management fee,

only a 20% performance fee on returns exceeding 10%. And Garg's reason for that is pretty straightforward. If I'm charging an investor fixed fees, I cannot ask them to leave me alone. So instead, Garg puts all his focus on identifying strong portfolios. For instance, if the steel industry is going through a downturn, Gargan's team will look out for that one outlier company that's doing well. One such stock shortlisted back in 2021 was a Patna-based consumer electronics retailer called Aditya Vision.

Gullg recalled how, after perusing the company's earnings report, he made a few calls to friends and Patna asking if they had even heard of it. Then he landed in Patna himself to do some mystery shopping, meaning he stood outside the shop to assess football. Garg then liked what he saw and ended up buying the stock. And his bet paid off. It has since turned out to be a multi-bagger. It's also gone from being relatively unknown to being picked up by institutional investors like HDFC Mutual Fund. Now, there's a lot of grunt work involved.

Garg attends and asks very tough questions at as many annual general meetings as possible. Of course, not all meetings are fruitful, but the ones that are have been enough to put countercyclical on the map. Stay tuned. The high risk that clients took with countercyclical small-cap-driven strategy seems to have paid off. Just consider the top five stocks in the scheme's portfolio as of February. A poultry company called Wienkees India,

polyester film manufacturer Garwari High Tech, business solutions company MPS Limited, Ambika Cotton Mills and pharma company Genberg. Now, these together account for nearly a quarter of its portfolio and sport market caps of less than 6,500 crore rupees each. In fact, the last two are less than 1,000 crore rupees, meaning they are microcaps. Most fund managers would be wary, but not counter-cyclical.

The bets are all well-thought-out and spot zero to negligible institutional holding. All the 14 companies that made it to counter-cyclical top five since 2020 have been profitable, with many growing their bottom lines quite smartly. Their stock performance, though, has been mixed. Some, like Kaveri Seeds and the multi-specialty hospital, Kowai Medical, have had dream rallies over the past few years. Others like Apollo Sinduri hotels Rose and Fell, while still others like the Logistic Solutions Company, all cargo logistics, fell sharply. But the overall report card has brought some cheer to investors.

That's why counter-cyclicals disclaimers come in. Remember, if bets don't go as planned, don't disturb them by calling. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of. of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters and podcast extras. Head to the Ken.com and click on the red subscribe button on the top of the website.

Today's episode was hosted by Rahil Filippo's and edited by Rajiv Sien.