Beyond the Obvious: Rajesh Pherwani on Creating True Alpha in Indian Markets

In a recent live session hosted by PMStimes, seasoned fund manager Rajesh Pherwani, Founder & CIO of Valcreate Investment Managers LLP, walked us through his investment ideology, market frameworks, and real-world examples of identifying v

alue where the market sees none. What followed was an insightful hour that not only unpacked his process but also reminded everyone that wealth is created in silence — when t

he crowd isn’t watching.

🎯 The Genesis of Valcreate — Value, Not Just Wealth

Launched in 2017-18, Valcreate stands for “Value Creation”, but with a dual lens — not just in terms of returns, but in investor experience and education. Rajesh described it as a “career child” built after over two decades of research and fund management at HDFC AMC, L&T Mutual Fund, and other top institutions.

Valcreate currently manages four PMS strategies, two of which are led by Rajesh:

• Growing India Strategy – a flexi-cap fund focused on India's structural growth themes

• Life Sciences & Specialty Opportunities – a thematic portfolio built on pharma, specialty chemicals, and agrochemicals

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🧠 The Investment Playbook: Blend of Growth and Turnaround

Pherwani’s approach hinges on two buckets:

1. Secular Growth Compounding – Companies that grow consistently at 15–25% annually with solid fundamentals. Think Bharat Electronics, Divis Labs, or housing finance plays.

2. Value/Opportunity Plays – These are companies going through temporary downturns but operating in structurally sound industries. Examples included public sector banks like Bank of Baroda (picked at ₹90, now ~₹240), and agrochemical companies post-COVID inventory dump from China.

This dual structure ensures that growth remains balanced with valuation comfort, and risks are diversified across business cycles.

🔍 Filters That Matter: Sizing the Opportunity

So how does Valcreate separate a deep value gem from a value trap?

Rajesh laid out a simple but powerful mental model:

• Size of the opportunity – Is the industry underpenetrated or in a structural upcycle?

• Management quality – Has the team delivered through past cycles?

• Business resilience – Can it withstand disruption and deliver returns through economic shocks?

• Reasonable valuation – Is the market overreacting to a temporary problem?

His frameworks have successfully identified winners like Divis Labs during an FDA-led crash in 2017–18, and PSU Banks in 2021 when NPAs fell sharply post IBC/NCLT reforms.

🧩 What Makes PMS Different — And More Agile

Unlike mutual funds, PMS structures allow for:

• Personalized entry timing — newer investors don’t buy overvalued names

• Focused stock selection — typically only 15–20 names per strategy

• Custom allocation — each portfolio can be individually tailored

• Real-time risk management — sector trimming or position exits happen fast

This agility has shown up in performance: during COVID, Valcreate’s pharma/chemicals-heavy portfolio delivered +30% when the broader markets were -30%.

📈 India’s Long-Term Setup: The Next 20 Years

Pherwani’s view on India’s macros is unapologetically optimistic — but rooted in fundamentals, not narrative.

• Consumption is 70% of GDP — and high-income segments (₹8–10L+) are growing 12x faster than average

• Demat accounts have grown from 4 crore in 2020 to over 18 crore

• SIP inflows are ₹25,000+ crore monthly

• FII outflows in 2023 (~$30B) were offset by $70B+ from Indian investors

In his words:

“This is a 20-year consumption and innovation story. If you stay process-driven, 15–20% CAGR is achievable — and not just 12% from index investing.”

📉 On Euphoria & Exit Discipline

Addressing how Valcreate avoids getting carried away during bull runs, Rajesh shared:

• The use of internal EPS-based valuation models

• Looking at what growth rates current prices imply

• A focus on discipline, even at the cost of short-term regret

Citing the 2023 railway and engineering stock surge, he noted how some valuations assumed 35–40% CAGR growth — unsustainable in the real world. This is when trimming exposure, even to winners, becomes essential.

💼 Building Alpha in Today’s Disrupted World

In a thoughtful close, Pherwani introduced the “IDEAS” framework he now uses to evaluate companies:

• I – Innovation

• D – Disruption potential

• E – Environmental impact

• A – Adaptability

• S – Scalability

This framework is particularly relevant in today’s age of digital businesses, quick commerce, and climate-conscious investing. It’s Valcreate’s way of staying relevant without abandoning its core principles.

✅ Final Takeaway: Balanced Conviction

Rajesh’s message was clear — focus on what you understand deeply, don’t chase every theme, and always be mindful of valuation vs. growth potential.

The Life Sciences strategy, in particular, came across as a standout — offering sectoral depth, defensive strength during downturns, and a history of resilient alpha with 22%+ CAGR post-expense performance.

“Alpha isn’t luck. It’s built quietly, with discipline, over time. And India offers the perfect runway for it — if you know where to look.”