ASK Ramond James Securities India Ltd (ASK-RJ) is a 50:50 joint venture between ASK Investment and Financial Consultants and Raymond James Financial. Raymond James Financial is a New York Stock Exchange listed $1 billion market capitalisation company.

There are three investment criterion and they are to look at the business, the management and the valuation of the company. `Under the business criterion we look for simple and understandable business with favourable long term prospects.

These businesses should have sustainable competitive advantages in pricing power, with quality consciousness and cost competitiveness. We also look at themanagement which must be focussed, should have the strength to finance growth internally and the management must be fair to all stakeholders,'.

Investment philosophy consists of looking at a number of indicators of good business and management. The company should usually have market leadership and invariably be number one in the business (this is flexible depending on the company).

The other selection criteria is the return on capital employed (RoCE) which should be more than 25 per cent and the return on shareholders equity should be more than 20 per cent. The other criteria is: the company should have free cash flows with capital expenditure less than or equal to the depreciation provided by the company. Also, the company should have a low debt leverage and should preferably be a zero debt company with a top line growth of more than 15 per cent and a bottomline growth of more than 20 per cent per annum. The company should also have a dividend payout policy of at least 20 per cent per annum.

Theclient list consists of NRIs and OCBs and a list of high networth domestic clients. The firm has a total of 50 clients and is keen to expand the business further. `But, we are not looking at launching a mutual fund at least this year but cannot say anything about the future. The fund management business is good and we plan to expand it further'.

The investments which flow into the fund come into four schemes namely INVIL, the Taj Performance Fund, Safeinvest Securities and PMS II. The INVIL scheme has given a return of 29.15 per cent for the period ended April `1999 compared to a 14.98 per cent fall in S&P CNX 500 on a pound basis and of 20.13 per cent fall in the BSE Sensex on a pound basis. Similarly, the Taj Performance Fund has grown by 3.79 per cent compared to a 22.83 per cent fall in the BSE Dollex and 17.99 per cent fall in the S&P CNX 500 on dollar basis.

The Safeinvest Securities scheme has managed to grow by 74.630 per cent compared to a 22.83 per cent fall in the BSE Dollex and of 18.02 percent fall in the S&P CNX 500 in dollar terms. The PMS II scheme has grown by 61.71 per cent for the period ended April '99 with the BSE Sensex falling by 17 per cent and the S&P CNX 500 falling by 11.65 per cent.

The filter criterion used to filter 6,000 companies listed in India is simply to look at the businesses of these 6,000 companies and from that select 500 businesses. Then based on the business and management of these companies select a `focus list' of 100 companies and out of these 100, select 25 companies evaluating them on the three principal criterion of business, management and valuation.

Macmillan is the only Chennai listed company and is in publishing and typesetting books. It is a good buy at the current price and is expected to grow by 30 per cent per annum for the next 2-3 years at least. It is still catering to a very small market and there the market share in publishing is 10 per cent and in typesetting for the European market is 10 per cent and the US market just started exploringwhich has immense potential for growth. The cash flows are very good and they do not need external money for expansion.

We have been investing in Pidilite Industries for the last three years and have benefitted tremendously from this investment. The company at 13-14 price to earning multiple is expected to grow by more than 25 per cent per annum. The management of the company is well focussed and is a leader in its segments. A good company to look at.

Tata Donnelly started as a printing press but the attractive business of this company is the yellow pages business and also the special interest publications like the photography, automobile magazine and others.

Management is now focussing on these businesses. In yellow pages, the company is already the leader in eight cities and this business will continue to grow. Yellow pages already on internet and CD Rom. At the current price of Rs 180 and at a P/E of 12 (EPS of Rs 15), the company is a good pick.

Albright Wilson is7a good story in which 74 percent of the equity is held by Albright Wilson which has been taken over by Rhodia Chemicals which is part of Rhone Poulenc. Available at 10 P/E, the company has been growing by 20 per cent and with the Rhodia support, the product portfolio will increase. The company now caters to detergents and soaps. Performance in INVIL and Taj is without any exposure to the IT sector, less than 10 per cent exposure to FMCG and a small amount in pharma. We did not ride the IT boom but we are looking at it now but still have not invested much and increasingly improving exposure to the FMCG and pharma sector which will continue to be the best defensive stocks.

Most of the NRIs are disappointed and are not happy with the returns that they got from investing in the Indian market. The NRIs have got a jolt from the houses who marketed their products earlier and have not given the commensurate returns. Another reason is that even the services given to NRIs are also not good which is instrumental in pushing the NRIs frominvesting in the country.

As told to Parul Monga