*Entry load of 2.25% will be charged for investments less than Rs 50 m. Nil for investments of Rs 50 m and more..
**Exit load of 1.00% will be charged on investments of Rs 50 m or more, if the redemption is made within 1 year of allotment. In case of investments of less than Rs 50 m, an exit load of 0.50% will be charged if redemption is made within 6 months of allotment.

The Scheme seeks to achieve capital appreciation through investments in Indian companies/sectors with high growth rates or potential.
*Source: Offer Document

‘Growth’ and ‘Value’ are the most commonly pursued investment styles. Under the value style, the fund manager invests in fundamentally strong companies that are trading at a discount to their fair value. Conversely in the growth style, investments are made in well-managed companies that may be fairly/fully valued, with the expectation that they are likely to do even better going forward. Such stocks are typically expected to clock growth at an above-average rate vis-à-vis their industry or the broader market.

Franklin India High Growth Companies Fund (FIHGCF) is the latest offering from Franklin Templeton Mutual Fund. The fund has been positioned as a growth style fund. It intends to capitalise on the ‘India’ growth story by investing in companies/sectors that have high growth rates or potential to deliver likewise.

Typically, high growth companies would have higher valuations (P/E multiple). Hence, pursuing the growth style of investing would entail taking on higher risk vis-à-vis the value style of investing. Also the said style is better equipped to deliver in a scenario when equity markets are on the rise.

FIHGCF fails to offer a compelling investment proposition. Barring its positioning as a growth style fund, it has nothing unique to offer. In the context of the domestic mutual fund industry, funds are commonly known to pursue the growth style of investing; alternatively there are funds that follow a blend of growth and value investing. In fact, a number of funds from the Franklin Templeton stable offer a similar investment proposition.

For example, Franklin India Prima Plus (a predominantly large cap offering from Franklin Templeton) invests in high growth companies by pursuing both the growth and value styles of investing. Coincidentally, the fund house had in its stable Franklin India Growth Fund, a growth style fund, which was merged into Franklin India Prima Plus, on account of factors like a low net asset base. Similarly, like FIHGCF, Franklin Flexi Cap invests in stocks from across market segments, albeit it pursues both the growth and value styles of investing.

In our view, investors should give FIHGCF a miss for now. Instead they can consider investing in funds like HDFC Top 200 and DSP ML Opportunities, which follow the growth style of investing and have proven track records to show for. Investors can form a revised view on FIHGCF, after evaluating its performance over a 3-Yr time frame.

The fund will not have a bias for any market segment i.e. stocks from across market segments (large, mid and small caps) can feature in the fund’s portfolio. Also it intends to be fully invested at all times, which is in line with the fund house’s investment philosophy. FIHGCF will employ a combination of the top-down (for identifying sectors) and bottom-up (for stock picking) approaches.