Meet the Team: Franklin India

Franklin Templeton's association with India dates back almost 3 decades as an investor. As part of the group's major thrust on investing in markets around the world, the India office was set up in 1996. Our team has about 30 years of experience investing in India. I was employed as a portfolio manager at Pioneer ITI, which was acquired by Franklin Templeton in 2002. At Pioneer ITI, I was part of the investment team who designed the investment philosophy and process behind the Franklin India Equity strategy in the mid 1990s, which we have adhered to ever since.

We are a dedicated India equity specialist team with 17 investment professionals including 16 based in India and focused on Indian equities.

This has enabled us to build a unique knowledge of the asset class, develop and nurture key relationships with companies over year/decades, which would be extremely difficult to replicate.

The Franklin India Fund was launched in 2005. I am the lead manager, supported by Anand Radhakrishnan, Murali Yerram and Arya Sen, who contribute ideas to the portfolio. We draw stock ideas from company recommendations made by our team of 11 analysts based in India.

The strategy is focused on quality and sustainable growth at discounted valuations and as such, we take a medium-to-long term view when we make investments. We believe focusing on investing in companies with these characteristics allows us to generate value for our investors over the medium to long term.

We typically look for quality businesses that can generate and sustain better profitability than peers, with healthy balance sheets (low financial leverage), and strong business models with sustainable competitive advantages. Importantly, we seek companies that are well managed with an ability to position for the future through a clear strategic vision so management quality is a key investment criteria for us.

However, we are not willing to buy even a great company at any price so we focus on purchasing these quality companies at reasonable valuations, or what we refer to as “discount to their intrinsic worth”.

As mentioned earlier, we look for companies with margin of safety, i.e. whose intrinsic worth is not reflected in the market price (based on our estimates). We think the margin of safety is largely derived from qualitative factors related to a company’s ability to maintain quality, sustainability and to some extent, growth. The margin of safety that comes from identifying these qualitative factors potentially enables these companies to outperform the market over a broad period of time.

By contrast, we find that traditional valuation metrics such as price-to-earnings, price-to-book¹ are limited by accounting rules and standards and frequently fail to reveal the underlying reality, good or bad, of what is happening in a company. Sometimes, traditional valuation metrics of a company may not look cheap, and yet, our in-house assessment may suggest that the market under-appreciates that company's ability to outperform. This illustrates the type of market inefficiencies that we try to capture.

Our proprietary fundamental research is the foundation of our entire investment process.

Our research analysts conduct a rigorous quantitative and qualitative analysis of businesses to determine their growth potential, competitive position, risks and catalysts for value recognition.

Being able to meet with companies is also crucial to our investment process. Meetings with companies helps our analysts identify potential opportunities and challenges that may not be obvious on financial statements and reports alone. We meet with management, personnel at various levels, competitors, clients, suppliers and all relevant stakeholders that can provide insights on areas that may impact a company’s long-term growth prospects.

Our presence in India allows us to conduct 600 to 800 company meetings every year, with timely access to local developments. It also allows us to build strong relationships with firms and gain in-depth knowledge about companies and industries.

We manage a high conviction strategy which uses a bottom-up driven stock selection approach to build a relatively concentrated portfolio of typically 40 to 60 stocks. Yet, we aim to build a diversified portfolio, with diverse drivers of returns for our portfolio holdings.

The fund aims to achieve long-term capital growth by principally investing in companies of any size, located or predominantly performing business in India.

• Actively managed fund focused on quality companies with sustainable growth that we believe to be best positioned to take advantage of the compelling opportunity in Indian equities
• The fund is built on an investment discipline practiced by the Franklin India Equity team for around 30 years.
• The fund is managed by a large and stable local team that is globally integrated. Being on the ground allows our analysts in India to identify opportunities early and build strong relationships with companies.  Being integrated into the global Franklin Templeton Emerging Markets Equity platform, which helps to put investment opportunities into perspective.