What Saurabh Mukherjea's 5-year report card tells us

As his PMS strategy falters, harried investors demand explanation on performance

- Neil Borate

This was not how Saurabh Mukherjea envisaged his portfolio management service (PMS) would end up after five years: investors demanding an explanation about performance and ₹40 crore being pulled out of the PMS every week. Yet, on the fifth anniversary of his PMS, Mukherjea should be a worried man. But, is he?

Through his engaging communication style and books like Coffee Can Investing, Mukherjea had already made a big name for himself in India’s stock market by the time he launched Marcellus in 2018. Through Marcellus, Mukherjea wanted to put his much-articulated philosophy into practice. The philosophy rested on buying high-quality companies with fast-growing earnings and firms with high corporate governance. Such companies do not come cheap, but Mukherjea argued that valuations should not deter investors. The earnings would more than compensate for the multiple. This philosophy actually worked in the first three years of Marcellus’s existence.

Then came Russia’s unexpected invasion of Ukraine. A surge in inflation around the world forced the US Federal Reserve to hike rates and the market began assigning lower multiples to Mukherjea’s fast-growing companies. "The growth has not come down. Look at the profit after tax—it grew at 20-21% compounded for the Consistent Compounders Portfolio (CCP)," Mukherjea pointed out, referring to his flagship scheme. What happened instead was a de-rating: investors simply weren’t willing to pay a lot for this growth. From a peak price-to-earnings (P-E) ratio of 54, Mukherjea’s flagship CCP has moved to a P-E of 35.