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INVESTMENT CASE STUDY

Alternatives Alpha: A Financials-led Long/Short Equity Strategy

A 12-month market-neutral long/short strategy pairing a fintech long leg against a legacy banking short leg.

At-a-Glance

Beta-Neutral Relative-Value StructureInvestment Structure
Market-Neutral Equity Long/ShortStrategy Type
₹40 CroreCommitted / Invested
August 7, 2025 – August 7, 2026Execution Window
₹50 Cr Long / ₹50 Cr Short (100% Gross)Gross Exposure
Unwound at Maturity (August 2026)Status

The Opportunity

This pairs trade, long PB Fintech, short HDFC Bank, was built to give our investors upside from both sides of a divergence in Indian financial services, profiting whether the winner (fintech) pulled further ahead or the laggard (traditional banking) fell further behind, while keeping overall market exposure close to neutral. By sizing both legs equally at ₹50 crore, investors weren't betting on the direction of the market as a whole, only on the gap between two clearly diverging businesses continuing to play out.

In mid-2025, Indian financial services showed a clear structural divergence. Traditional large-cap commercial banks were working through multi-quarter Net Interest Margin compression and slowing credit growth, while capital-light fintech aggregators were compounding premiums and expanding operating leverage rapidly. This divergence formed the basis for a relative-value trade rather than a directional bet on the sector as a whole.

Rationale

The default approach to expressing a sector view is a simple long-only directional bet, which stays fully exposed to broad market moves regardless of whether the underlying thesis is right. This strategy paired a long leg and a short leg of matched size instead, with weekly rebalancing keeping the combined position's beta anchored near zero throughout the execution window. Structuring it this way meant the trade's outcome depended on the relative performance of the two names against each other, rather than on the direction of the broader index.

₹1,500 Cr

Total transaction size across both tranches

₹7,533.81

Floor price per share for the institutional tranche

₹300 Cr

Promoter warrant commitment, convertible within 18 months

27.22%

Standalone capital adequacy ratio (CRAR) ahead of the raise

Mechanics

The capital mobilization was structured in two parallel tracks — an institutional placement and a separate promoter warrant issue — executed under SEBI Chapter VI Regulations and the Companies Act, 2013.

Dual-Track Structure

An institutional QIP tranche was paired with a promoter warrant tranche to balance dilution against sponsor commitment.

QIB-Only Book

New shares priced near the floor were placed exclusively with qualified institutional buyers, including domestic mutual funds, insurers, and sovereign investors.

Warrant Conversion Window

Promoter warrants carry an 18-month exercise window rather than immediate conversion, spreading any future dilution over time.

Risk Factors: Managing the Downside

Dilution Risk:New share issuance dilutes existing shareholders' ownership percentage; mitigated by pricing near the regulatory floor and sizing the raise relative to the company's market capitalization.
Pricing / Execution Risk:QIP pricing depends on institutional demand at launch; mitigated by engaging a multi-bank bookrunner syndicate to build a diversified order book.

Track Record

For a strategy structured around isolating a sector relative-value thesis from broad market direction, the trade played out largely as designed. Both legs were unwound at maturity on August 7, 2026, the long leg in PB Fintech and the short leg in HDFC Bank, with weekly beta rebalancing having kept net market exposure anchored near zero through the full execution window. After accounting for securities lending costs on the short leg, the strategy closed with a net profit of ₹17.35 crore on the ₹50 crore cash collateral base.

This case study is shared for informational and illustrative purposes only. It describes a specific past transaction or structure and does not constitute investment advice, a recommendation, an offer, or a solicitation to invest in any security, scheme, or product. Cambridge Wealth (Baker Street Fintech Pvt. Ltd.) is a SEBI-registered Mutual Fund Distributor (ARN 172841) and does not provide investment advisory services; nothing in this document should be construed as personalized advice or a substitute for independent professional advice suited to your specific financial situation. This placement, where referenced, was made via Oister Global Scheme IV ACE FUND III. Details of the underlying structure, terms, risks, and eligibility criteria are governed solely by that vehicle's private placement memorandum, offer document, or scheme information document, which should be read in full before making any investment decision. Figures, dates, and outcomes described are historical and specific to this transaction. Past performance, whether of this transaction, this asset class, or any comparable strategy, is not indicative of, and does not guarantee, future results. Any market or industry data cited is drawn from third-party or publicly available sources believed to be reliable but not independently verified by Cambridge Wealth, and is subject to change. No representation is made that any investor will or is likely to achieve outcomes similar to those described. Investments of the type described carry risk, including but not limited to market, credit, liquidity, currency, and regulatory risk, and may result in partial or total loss of capital. This document does not account for the objectives, financial situation, or needs of any specific investor. Prospective investors should independently assess suitability and consult their own legal, tax, and financial advisors before proceeding.

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