We believe that companies with a compelling business story & having a strong, competent & honest management are most likely to do well in the long term. Once we have identified prospective companies which meet the above criteria, we then use the following metrices to help us in our investment decision.
We like to invest in companies with good growth prospects which are available at relatively reasonable valuations.
We look at companies that have intrinsic value that is more than the market cap. Based on sector outlook, Financials, Interaction with Management, etc. We do DCF Valuation of the company. This allows us to get an idea of the margin of safety for Our Investments.
We generally prefer to have a company where the debt level is low.
That said, in case the debt is primarily on account of CAPEX for Growth, with a plan to pay off in the short to medium term, or the company is being restructured with a change in management, then we could still invest if we believe that potential upside far out ways the risk.
As a new fund, we even evaluate & invest in companies with a market cap of a few hundred crores. These are companies that can grow at a much faster pace if the underlying story is strong. Large established Mutual funds typically do not invest in companies with a market cap of less than 5000 Cr.
