'If we don't like the equity, we won't buy the debt'

After enough of these conversations, you can tell when a fund manager is reciting. Saravanan V N was not reciting.

Unifi is not a new firm. It has been running money since 2002, first under a portfolio management licence and then, from 2012, an alternative investment fund licence. What is new is the mutual fund. The licence came in 2024 and the first scheme opened in March 2025, so the business is barely twenty months old. That made this a good moment to ask a house to explain itself, before a performance record is long enough to do the talking for it.

Several things stayed with me.

The first is a rule he stated without being pushed. If Unifi looks at a company and does not like its equity, it will not buy that company’s debt. I have heard many descriptions of the credit process over the years, and most of them focus on ratings, covenants, and security cover. His answer was that the best protection a debt investor has is getting the business right. That is a simple idea, and a demanding one, because it means his credit desk cannot shelter behind a rating agency.

The second is that he has written down his own limits and is willing to say them out loud. SEBI permits investment grade, which would allow him to buy BBB and BBB-minus paper. He stops at BBB-plus. The band below AA-minus is capped at a third of the portfolio, the BBB-plus slice at a fifth, and no single credit position goes past six and a half per cent. Nobody in this industry is obliged to tell you where they have decided not to go.

The third is the best story of the hour. One of India’s largest two-wheeler makers chose to give shareholders bonus preference shares instead of a special dividend. The recipients were equity investors with no appetite for a fixed-income instrument, so they sold at whatever price the market offered. Unifi’s special situations desk reads every corporate action, spotted what was happening, and bought a short-dated, top-rated instrument yielding ten to twelve per cent, issued by a company that borrows short-term money at about seven and a half. He called it a no-brainer. His point afterwards was the better one. You only see a trade like that if equity and debt sit on the same desk.

Then there is the restraint. Three schemes, and no hurry for a fourth, because in his view launching scheme after scheme dilutes bandwidth and focus. A deliberately steep exit load on the allocation fund, because he does not want floating money in it. A fund house that writes to the regulator asking to be measured against a second benchmark—one that reflects how the fund is actually run, rather than an index carrying fifty per cent open equity it never takes.

He also handed me a yardstick, which very few managers will do. Judge us, he said, on whether we deliver three to four percentage points over core inflation across cycles. Not consumer price inflation, because food and fuel consumption is finite. Core, because education, medical and housing costs are what people actually plan for.

I pushed him on the credit book, on the churn in the equity fund, and on what an investor should brace for in a bad year. He took all of it. Watch the conversation and make your own judgement about how this house thinks.

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