Perspectives

investment in shivalik bimetal controls ltd

Shivalik’s core competency is high precision metal welding used to make specialized products like Shunt Resistors, Thermostatic Bimetals and Electrical Contacts (explained below).

Shivalik can grow topline at 15-20%+ CAGR for long periods benefitting from multiple secular domestic and global tailwinds (growth in Domestic Smart Meters/ Electric Vehicles/Hybrid and global customers derisking supply chains).   They have a dominant position in India and can become meaningful global players in their niches over time as customers derisk supply chains.

investment thesis on racl geartech

Manufacturing from India for the world promises to be a decadal theme. We favour categories that are strategic to customers supply chains and which are more immune to dumping from China.

• Rising geopolitical tensions between the West and China have prompted MNCs to strategically reevaluate their high dependence on China and seek alternative supply chains for derisking.
• European manufacturing faces structural challenges (low-cost competitiveness, long lead times for environmental clearances).  Current macro challenges are driving higher outsourcing to players in low-cost destinations like India.
• Manufacturing may not offer as high ROCEs as IT Services/Consumer.  However, they offer 15-20% growth with longevity at 18-20% ROCE.  When growth slows down, their ROCEs could further expand as useful life of plants is greater than life over which they are depreciated. 

Investment thesis on Delhivery

We took an initial position of 3% in Delhivery, a logistics firm. 

• Logistics is an industry with decadal tail winds. We believe the sector will grow 12%+ and leaders can grow at 15%+ for long periods of time.
• Delhivery has a competitive edge and is investing to enhance the same.
• It can be 20% ROE business at scale.
• We are aligned with the thought process of the promoter / management team.
• We are paying a price that is broadly reasonable.

What does Delhivery do?

Delhivery is India’s largest fully integrated third party logistics services provider with a nationwide network covering over 18,600 pin codes.  The company provides a wide range of logistics services

Investment thesis on IndiaMART InterMESH

A key attribute of our firm’s culture is the focus on writing a detailed investment thesis on every position of interest.  Writing clears the cobwebs in our minds and allows us to get more specific feedback from peers we respect.  It also reduces the chances of errors. 

IndiaMART is a company we have owned since 2020.  We enclose a more detailed thesis that explains why we believe this company can provide Asymmetric outcomes this decade and why the trailing PE ratio, often used as a valuation proxy, provides an erroneous representation of IndiaMARTs true value.