Marcellus’ Partners Bulletin Jan’22

PORTFOLIO UPDATE:

All returns are post fees & net of expenses (TWRR). The returns are as on 31st January,22.

Inception Date & Benchmark:

Consistent Compounders Portfolio: Inception: 1st Dec,2018 Benchmark: Nifty 50 TRI

Little Champs Portfolio: Inception:28th Aug,2019 Benchmark: S&P BSE Small Cap TRI

Kings of Capital Portfolio: Inception:28th July ,2020 Benchmark: Bank Nifty TRI

RG PMS is open for subscription from 1^st Feb 2022

The best things in life are free, and that holds true for company’s free cash flows

 In our previous Partners’ Bulletin (click here) we had discussed about the 3 types of businesses based on their free cash flow drivers. We shall now discuss about forecasting the drivers of free cashflows which require deep research and understanding the company inside out. 

Drivers of free cashflows for any business:
1.     Volume growth or revenue growth: Volume growth or revenue growth is the most common driver of increasing free cash flow. Increase in revenue with all other parameters remaining constant automatically leads to increase in free cashflow. 
2.      Expansion of Operating Margins: Expansion of operating margin means company earning extra for each unit sold which leads to increase in cashflow (assuming other parameters remains constant) 
3.      Reduction in working Capital Cycles: Working capital cycle for a business is the length of time it takes to convert the total net working capital (Current Asset-Current Liabilities) into cash. Businesses typically try to manage this cycle by selling inventory quickly, collecting revenue form the customer quickly and paying bills slowly to optimize cash flow. Reduction in working capital cycle is difficult and improvement in the cycle indicates at the growing strength of the business and quality management.
4.      Increase in Asset Turnover: The asset turnover ratio measures the value of a company’s sales or revenues relative to the value of its assets. It is an indicator of the efficiency with which a company is using its assets to generate revenue. The higher the asset turnover ratio, the more efficient a company is at generating revenue from its assets. 

Challenges in forecasting free cash flows:
1.      It is difficult to forecast improvement in working capital cycle and asset turnover compared to forecasting volume growth and margin expansion.
2.      It requires patience and deep research because free cash flows can be far more volatile in short term compared to profits or book value per share.
Investors who have focused only on volume growth and profit growth (or only P/E multiples) and have ignored the other two factors, have only partially been able to understand the long-term compounding ability of these companies. 

Please find below links to our latest newsletters and presentations:

**For product/sales related queries please write to sales@marcellus.in**

 OPERATIONS UPDATE:
1.      New Forms on Website with addition of SEBI Circular on nomination
Ø  With reference to SEBI circular – SEBI/HO/MIRSD/RTAMB/CIR/P/2021/601 dated July 23, 2021 on nomination of eligible trading & demat accounts
Ø  Investors opening new demat accounts on or after October 1, 2021 shall have the choice of providing nomination or opting out nomination by submitting the applicable declaration.
Ø  Further, in accordance with the guidelines, Depository Participants shall activate new demat accounts from October 1st only upon receipt of applicable declaration.
Ø  We have updated the Demat forms on our website which includes No Nomination declaration as requested by SEBI.
Ø  https://marcellus.in/forms/

2.      Non-Individual – Document Update on Audited Financials.
·         It is mandatory to provide Financials Statement for last 2 years and for all account financial statement of FY 2020-21 is required.
3.      NRI Onboarding – In Person Verification update.
With regards to IPV (mandatory for NRI clients), pls find the below points:
1) If client is present in India– We will schedule In-person verification where client will have to visit the nearest HDFC bank along with the form, original documents & self-attested proofs.
2) If client is not present in India– Supporting documents can be attested to the effect that it has been verified with the Originals by Notary Public, any Court Magistrate, Judge, Local Banker having presence in India, and Indian Embassy/Consulate General of the country where NRI is residing. However, self-attestation of client is mandatory.

Also, POA needs to be notarised by Notary Public or Indian Embassy.
3) US & Canada client needs to be present in India for IPV.
4.      FOS – Form Support Service from Marcellus
To enhance onboarding experience for our channel partners & clients. Marcellus has taken an initiative to extend support on Prefilling of all New Clients PMS & Requisite Demat + others forms by Marcellus Onboarding Team. Through this initiative we expect to solve complexities involve in PMS documentations due to multiple set of accounts to be opened for single client with different entities.

Key benefits of this Process are listed down:

ü  Enable KRA check and identify need for IPV/OSV upfront and filter AML Validation.

ü  Improvise TAT of account opening and enable clients to invest sooner.

ü  Eliminate Re-iteration of seeking information and ratification from client to solve observations.

ü  Service & Operations efficiency at both Marcellus and Business Partner end. 

Process Steps for the Marcellus Form Support:

R  Download the Client Information Form [CIF] for Resident Client, NRI & Non individual through links shared below:

Ø  Resident Client: https://marcellus.in/new-cif-for-individual-clients-ver-2-0/

Ø  All Non-Individual: https://marcellus.in/new-cif-for-non-individual-clients-ver-2-0/

Ø  Non-Resident Indian: https://marcellus.in/new-cif-for-nri-clients-ver-2-0/ 

R  Fill in complete client (s) details in CIF and refer to supporting KYC documents to be shared along with CIF.

R  Ensure to share CLEAR scan copies of supporting documents & confirm dispatch address details.

R  Email CIF and Supporting KYC documents to clientsupport@marcellus.in for validation.

R  Respective SRM will validate the complete information in CIF and supporting KYC documents.

R  If Validation is complete, team will carry of necessary KRA AML checks and prepare the Prefilled form based on the CIF & KYC documents.

R  In case of need for IPV & OSV respective SRM will reach back to Partners.

R  Prefilled forms will be couriered to the requested address with T+1 days of the complete validation date.

Important Notes:

Ø  All information in CIF is mandatory and will be used in filling of complete form.

Ø  Incomplete CIF, or missing info. or unclear documents will be rejected by SRM at the time of validation process and will not be processed for form preparations.

Ø  Request clients to share clear images of the proof scan copies requested and in the readable format, unclear copies will not be accepted.

Ø  All CIF submitted before 12:00 pm will be considered for validation on same day and dispatch by next working day.

Ø  All CIF Received after 12.00 PM will be considered for dispatch on T+2 working day.

Ø  Ensure to mention the “Dispatchment Address” in the CIF.

**For operational related queries please write to clientsupport@marcellus.in**