Outlook for future returns
We have put together a brief note to discuss our outlook for future returns.
Read MoreInvestment 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.
Is it different this time?
Like most valuation-conscious investors at present, we too are grappling to deploy capital at acceptable valuations. In many new accounts opened since January 2023, we continue to hold 20%+ uninvested cash. While we are not accepting capital from new partners at present, if we did, we would be able to deploy only ~40% in Week 1, most of it in Large Caps.
Our uninvested cash prompted a partner to ask us recently whether we are missing “something”. Sentiment for India is very positive. There is a wall of FII money waiting to enter India. SIP flows continue to be strong. Hence can’t valuation multiples continue to climb higher? Is it different this time?
It is not different this time, just the behavioural cycle at play in Small caps and select sectors.
Our perspectives on valuation euphoria in Small and Micro Caps at present
We have put together a brief note to explain our perspective on valuation in Small & Micro Caps
Read MoreLooking for Asymmetric outcomes
The enclosed blog discusses the power of Asymmetric outcomes, where to look for such returns, what it takes to achieve them, and how we think about what share of the portfolio we allocate to such ideas.
Read MoreWhat explains our optimism when they are lower ROE vs consumer companies and hardly generate any Free Cash Flow
We have put together a brief note explaining optimism around manufacturing companies even though they have structurally lower ROE vs Consumer companies and hardly generate free cash flow at present.
Read MoreHow do we decide composition of small,mid and large caps in the portfolio
We have put together a brief note explaining how we decide the composition of small, mid, and large caps in the portfolio.
Read MoreRationale for trimming position size in Life Insurance to 15%
We had an overweight position in Life Insurance (upto ~20% allocations in some accounts). We find this to be a very attractive industry and found valuations strongly in favor when it was hard to find value elsewhere. However, the industry has seen two regulatory actions in the last 24 months on tax saving products.
Read MoreInvestment thesis on Restaurant Brands Asia
We published our investment hypothesis on RBA which operates Burger King India (BK India) and Burger King and Popeyes franchises in Indonesia on Pg 7 of our Q1FY23 Letter.
Over the last few months, we received some relevant questions on Quick Service Restaurants (QSRs) as well as RBA from partners and other colleagues in the Investment industry. This note attempts to answer these questions. Please read the thesis above before reading further.
Read MoreThe shadow of Private Equity ownership on our buying decisions
The purpose of our letters and occasional blogs is to provide transparency in how we are thinking with the goal of creating stronger alignment with partners who want to think and act long-term.
Two companies in our portfolio – STAR Health Insurance and Restaurants Brands Asia – have existing Private Equity (PE) shareholders looking to exit. Everstone is looking for a buyer for its stake in RBA. Similarly, there are a few PE investors in STAR who are looking to sell their stake.
PE funds have a finite life and need to return capital. The shadow of these exits often results in a weakness in stock prices till the exit is complete. For example, one of the PE investors in STAR sold a large stake via a block deal last Friday at a discount to the prevailing market price which resulted in a 8% drop in price.
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