About Unifi | Investment Firm | Risk Control Excellence

About Unifi IM

Unifi IM is an offshoot of Unifi Capital- one of India’s largest independent portfolio managers with a legacy of more than 22 years.

Unifi’s combined AUM as of September 2024 was USD 3.2B.

We are 100% employee-owned which, we believe, is the best way for the long-term interests of shareholders, employees and clients to truly converge toward the singular goal of long-term investment outperformance. A strong alliance between shareholders, employees and clients gives us the independence we need to invest with non-conformity and hold long-term convictions.

After being incubated within Unifi Capital since 2018, the offshore advisory practice was re-organised into an independent entity- Unifi IM- in 2022 to enable us to adopt the regulatory structure that caters specifically to the requirements of international investors investing in India. Being domiciled and independently governed in offers international clients a well-regulated and highly to invest directly in India.

Serving as a fiduciary for international capital warrants international standards of compliance and operations; Unifi IM is also registered as an Exempt Reporting Adviser with the U.S. Securities and Exchange Commission.

Although we are an independent entity today, Unifi IM was virtually incubated by Unifi Capital over the course of decades, staffed by , and remains a fully owned subsidiary today. Consequently, we innately inherited various aspects of our parent’s DNA, including- most prominently- our investment philosophy and analyst culture. Consequently, our approach to asset selection and portfolio strategy hinges entirely on conducting deep proprietary fundamental research of investee companies and the overall market. Given that we execute similar investment strategies, operate in the same investment universe, and adhere to the same valuation principles, there is substantial overlap between Unifi IM and Unifi Capital’s investment styles.

Chief Executive Officer,

Unifi Investment Management

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As independent specialists in Indian equities, our core-competency lies in conducting deep bottom-up research to construct concentrated portfolios. A note on our investment style:

Unifi is a bottom-up investment manager, however, since a high-growth economy is an economy in great flux, we begin with our top-down investment strategy encompassing: our view on the present Indian condition, our understanding of the structural factors driving national socio-economic development and our evaluation of the investable sectoral trends arising from them. We also use this top-down discourse to inform our take on the context in which the Indian capital markets evaluates listed Indian businesses.

Our bottom-up research is guided the investment style that we have religiously followed since our inception- our ideology. Being a GARP investor in India entails being a value-oriented investor in the world’s largest growth economy. A clear articulation of these valuation principles keeps us firmly grounded in them.

Our GARP valuation center on sensitizing our estimated forward PE multiple to 4 metrics that are critical to minority investors: governance, sustainability of earnings growth, forecasted capital efficiency, and debt burden. It is these four that drive our thinking, often in that order, although sometimes the weights vary. We judge the sustainability of earnings growth on 2 levels: (a) the long-term stickiness of a business to its direct stakeholders and society using a top-down approach; and (b) the near-term prospects of a business using a bottom-up framework. In terms of capital efficiency, we demand a return on shareholder funds (ROE) that provides a healthy margin over the business’s cost of capital. The higher the margin, the better the potential cash flow to shareholders. Debt amplifies a business’s sensitivity to economic and market cycles. This inherent volatility increases risk and constrains good valuations. Finally, the PE:G ratio we pay is a direct function of the business’s growth, capital efficiency and leverage.

Therefore, the execution of our GARP valuation principles is a pure and direct outcome of Unifi’s core competency- bottom-up fundamental research.

In this way, fundamental bottom-up research- underpins everything Unifi does…

..it is the foundation of Unifi’s
entire investment style.

While Asset Selection powers returns, Portfolio Management is largely geared to controlling risk.

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Volatility (σ/β) is a widely regarded measure of risk. However, given our long-term investment approach, we believe it makes more sense to identify risk as the probability of permanent loss of capital.

Therefore, our portfolio’s long-term risk is largely a function of two factors. First- the probability of us incorrectly forecasting a business’s prospects. And second- the quantum of the value destruction should our forecasts be incorrect. σ & β are monitored but not prominent in our risk management. Consequently, in the long-run, Unifi’s greatest act of risk mitigation is remaining 1) devoted to intense bottom-up research and 2) disciplined in our GARP valuation principles. We internalise the adage, “an ounce of prevention is worth a pound of cure“.

Additionally, achieve responsible diversification and control the inevitable uncertainty that is innate in equity. Since we can’t be absolutely certain about anything to do with tomorrow, it’s logical to think in terms of probable scenarios and size our exposure in proportion to the level of our conviction in the opportunity. Some risks are unacceptable to us, and we completely avoid them- such as managements with poor integrity.

Far from being a source of risk, market volatility has been a source of alpha to Unifi. Crucially, volatility gives GARP managers such as ourselves one of the few big opportunities to purchase discounted stakes in businesses that are usually efficiently valued.

Similarly, Unifi recognises that illiquid small/mid-cap equity (where sell-side under-coverage accentuates Unifi’s proprietary research edge) is another opportunity not to miss. As long-term investors, we know that successful investing does not chase liquidity; liquidity follows successful investing. Because when illiquid companies succeed & grow, analyst interest & liquidity follow. Therefore, again, the key to mitigating illiquidity risk lies in limiting unsuccessful investment decisions (and not in retreating from attractive opportunities merely due to their cap-sizes). Additionally, liquidity-specific exposure limits control liquidity risk.

Finally, we also control risk by having an appropriate investment horizon and maintaining a strong holding position.

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Unifi has no intellectual property, algorithm or strategic asset. Our only asset is our people.

Every point of Unifi’s return is hard fought and won by our investment team every day. Consequently, our Alpha hinges on the things about our culture that attract the best analysts and make Unifi the place they want to do their life’s work. Freedom, an obsession with beating the market & our common investment principles, unite us as comrades.