How an obscure PPFAS morphed into India's Berkshire Hathaway

The way of the tortoise' has seen the fund house grow 200 times its size and deliver a stunning 19% CAGR

- Neil Borate, Sashind Ningthoukhongjam

It started off as just another obscure asset management company (AMC) that dotted the financial landscape of India. Now, it’s morphed into a behemoth—albeit without any bank or corporate parentage. That should tell us why Parag Parikh Financial Advisory Services Ltd, more popular as PPFAS, has been labelled India’s own Berkshire Hathaway, the company founded by global investment guru Warren Buffet.

PPFAS’s spectacular rise is mirrored in the growth of its mutual fund (MF) arm. Its flagship Flexicap Fund is among only 11 equity MF schemes in the country with assets under management of more than ₹30,000 crore. The Parag Parikh Flexicap scheme was launched in 2013 with just ₹150 crore in assets. A decade later, it has grown 200 times its size and delivered a stunning 18.8% CAGR, or compound annual growth rate. This story charts the success of Parag Parikh Mutual Fund and the unorthodox path that it took in India’s crowded MF industry.

The fund was initially founded as a portfolio management service (PMS) in 1996 by the late Parag Parikh, a broker who was also highly respected as a value investor. Parikh converted the PMS into a MF in 2013 after maeket regulator Sebi increased the minimum investment amount for PMSes from ₹5 lakh to ₹25 lakh.

In its more than 17 years of existence as a PMS, Parikh delivered a roughly 18% CAGR to his investors and built up a steady following. The journey, though, was not without its ups and downs. Parikh stayed away from hot technology stocks during the dot com boom and realty/infra stocks in 2007. The PMS also underperformed in highly bullish years, including in 2007, and it led to some disappointed investors opting for an exit.