InCred Healthcare PMS

The InCred Healthcare PMS aims to capitalize on the secular growth trends within the Indian healthcare sector.

The strategy seeks to provide long-term capital appreciation by investing in a diversified portfolio of healthcare-related businesses. They target companies that have a robust domestic presence and the potential for global competitiveness.

They aim to navigate the complexities of the sector by identifying opportunities across various healthcare segments, including pharmaceuticals, hospitals, diagnostics, API manufacturing, and branded generics. They believe that healthcare spending as a % of GDP will increase in the future, mirroring developed economies. They believe the current situation represents a strong opportunity for investment in the sector.

InCred Healthcare PMS’ investment strategy involves identifying companies that offer “Great” businesses at a fair price or “Good” businesses at a discounted value while avoiding “Bad” businesses.

Their decision-making process can be categorized into: Buy, Sizing and Sell

• Buy: Invest in “Great” businesses at a fair price or “Good” businesses at a discount to intrinsic value, while avoiding “Bad” businesses.
• Sizing: Optimizing diversification and allocating capital based on conviction.
• Sell: Reducing positions when the incremental upside-downside ratio becomes unfavorable, or when the underlying business deviates from the investment thesis.

Their strategy involves in-depth analysis of both quantitative (financial ratios) and qualitative (competitive advantage, management) aspects of companies.

InCred PMS follows a bottom-up research approach and analyze the source of cash flows.

They are open to investing in unbranded generics as they believe that supply and demand determine price.

InCred Healthcare PMS’ investment philosophy emphasizes identifying companies that have a sustainable business model with a potential for high returns on equity (RoE).

They believe that the Indian pharmaceutical market (IPM) is a secularly growing segment with high RoE.

The approach seeks to capitalize on the “China + 1” strategy that benefits Indian API manufacturers. They prefer companies with sizable CDMO (contract development and manufacturing organization) businesses.

They avoid the US generics business for now, while acknowledging potential for a turnaround in the future.

InCred PMS sees value in companies where the low RoE of the US business suppresses the overall RoE and thus provides an opportunity for future value unlock.

They believe that the Indian healthcare sector has significant growth potential given current levels of health spending in relation to GDP. They have noted a positive correlation between GDP per capita and healthcare spending. They believe that branded generics is similar to FMCG, with patients tending to prefer brands and companies having a strong distribution network.

They also highlight opportunities in diagnostics driven by low penetration in organized players. They seek to invest in companies with strong cash flows and high operational efficiencies.