OUR APPROACH

The “long term fundamental investing” approach of our funds demands deep diligence, fundamental research, and an independent analysis of the investment opportunities irrespective of the general prevailing opinions or state of the markets. This approach envisages employing a lot of time and effort to understand the industry, management, company and competition. This approach also demands that the investor puts his eggs in very few baskets and then watches the baskets carefully. This is an “ideas” business. At its core, good investing is about generating good ideas. Ideas that are popular or are followed by every investor cannot remain good for too long. Over time, it is only by following up on ideas that are proprietary (and potentially unpopular) that any investment team can create value. We adopt a rigorous screening process to select potential portfolio companies. A few examples are high return on capital, attractive industry, clean and outstanding management.

HIGH RETURN ON CAPITAL

We will invest only in those companies that have, or have had a consistently high return on capital. Being a long term (and not momentum) investor, our approach is to invest only in high quality businesses, and return on capital is a very good indicator of the quality of the management team and the competitive advantage of the business of the portfolio companies.

ATTRACTIVE INDUSTRY

We analyze the industry structure, conduct of industry participants and performance of key companies in the industry to assess if the industry is attractive from the point of view of long term value creation. Industry analysis in India is made quite difficult by the high growth rates of companies and changing dynamics of the competitive environment. A bottom up analysis and independent thinking is required to develop a point of view.

CLEAN AND OUTSTANDING MANAGEMENT

We will focus on management who are clean and transparent, and have an outstanding track record. We need to be convinced that the company is a “leader”. It need not be a leader in market share or volume, but the management team needs to demonstrate its leadership in some area(s) that could potentially create significant value in the future. For example, the company may be a leader in profitability, it may be a leader in a fast growing and potentially large niche segment of the market, it may be a leader on cost structure, or in creating and spotting opportunities that competitors have not been able to match.