Investment Philosophy


Gold at the price of silver.

QiD (Quality in Downturn) – Small cap Blue-chip companies(high market share, RoCE & growth), which are temporarily going through a cyclical downturn in their business & whose stock price has been disproportionately hammered down by the markets.

We generally look for companies with the following characteristics:

  • An average company, available at a deep discount or a superior business, available even at a moderate discount.

  • Small companies with large market share, in niche sectors.

  • Companies where, EV / EBITDA < 5 & EV / OCF < 10 where, EV= Enterprise Value, OCF = Operating Cash Flow , EBITDA= Earnings before Interest, Tax, Depreciation & Amortisation.

  • Companies operating at low-capacity utilization with strong orders expected to ramp up in the near future.

  • Strong promoter track record of delivery & smart capital allocation.

  • Companies with a high dividend payout ratio.

  • Business insulated from technological disruption.

  • User of technology.

  • Business with high value addition.

  • Scope for earnings & multiple expansion.

  • Companies with very low or negative EV due to cash, investments or surplus real estate.

  • Track record of volume & unit realization growth without debt or equity dilution.

  • Companies operating at low or negative Working Capital.

  • Businesses running on customer advances.

  • Businesses with low CAPEX requirements.

  • Thinly traded counters with low volumes, signifying lack of investor interest.

  • Companies doing regular share buybacks.

  • [which provides insurance in a bear market as the company would be able to take advantage of lower share prices by extinguishing more shares via buy back thereby reducing the EPS (Earning Per Share) permanently, which will lead to EPS growing faster than profits in future.]
  • Companies with change in management leading to improvement in efficiency and corporate governance.

  • Unknown, unheard, unpopular, hated, hopeless, tainted (unfairly) companies.

  • Prefer consumable business over capital goods.

  • Businesses with strong terms of trade with customers & suppliers.

  • Generally stay away from Financials, Real Estate, Gems & Jewellery & Technology.

  • Generally avoid companies with fixed price contracts or annual price reduction contracts with customers.

  • Generally avoid companies in tender business or where the company is unable to pass on increases in input prices to its customers.

  • Generally avoid Project business.

  • Generally avoid companies whose main customers are the government.

  • We buy from pessimists and sell to optimists.

  • We buy from retail investors & sell to institutional investors.

  • Arbitrage opportunities.

We constantly strive to increase the quality & decrease the valuation of our portfolio, by switching our existing holdings with another stock offering either lower valuation & similar quality or similar valuation & higher quality.

We take P&L risk, we don’t take balance sheet risk.


  • If our initial investment hypothesis turns out to be inaccurate.

  • If the stock price increases so that all future prospects of the company are adequately being reflected in the current price.

  • If our investee company’s business fundamentals are deteriorating.

  • Any slippage in corporate governance.

  • If we find a better opportunity (superior quality business available at a discount to our current holding)