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3 Investment Themes We At AltG Are Building This Decade

Photo of AltG Principals: Poornima Vardhan And Taponeel Mukherjee

By AltG Investment Research Lab On Behalf Of Poornima Vardhan & Taponeel Mukherjee

"Bet on the horse, not the jockey" said Warren Buffett. Essentially, investment selection trumps all other factors!

As we sift through millions of data points in our Investment Research Lab across public and private companies in global growth markets such as India, we see 3 major themes emerging that we're building:

1.A Dollar Of Free Cash Flow In Sub-$50 Million Valuation Indian Private Companies is Significantly Mispriced versus Indian Public Markets

  • The majority of India's rapidly growing 30,000 private companies, which produce $1 trillion in annual revenues and $150 billion in EBITDA, fly under the radar of larger private sector transactions and public markets.

  • They're profitable, growing and have the perfect tailwinds.

  • However, access to capital is limited beyond bank loans since they're too small for larger PE funds and to list.

  • There are two kinds of businesses. Firstly, high FCF businesses that lack access to flexible growth capital.

  • Secondly, high FCF-generating businesses that can't grow but consistently throw out significant FCF yields.

  • The opportunity is a platform that can aggregate and allocate capital through Active Capital Allocation. 

  • This is a Multi-Billion Dollar Opportunity we're building.

2. Balance Sheets Matter As Much As The Income Statement!

  • The recent decision by Tata Motor to split up its Passenger vehicles and Commercial Vehicles business brings the focus back on corporate value creation, with a focus on the Balance Sheet rather than a simple focus on the Income Statement and consequent margins. 

  • Differential CAPEX requirements, growth rates, depreciation schedules, asset turnovers and leverage levels create different businesses. A steady-state growth business is valued significantly differently from a high-growth one precisely because the previously mentioned factors differ. 

  • Indian businesses structurally focus much more on the Income Statement and have what are called "Lazy Balance Sheets." Utilising Balance Sheets to drive value in the Income Statement can significantly create value, leading to a high Return on Invested Capital.

  • Our R&D sees significant value creation opportunities across Publicly Listed and private companies this decade through the use of Balance Sheets.

3. What's The Next India?

  • If you had bought an equally weighted index of Varun Beverages, Capri Global Capital Limited, Britannia, and Bajaj Finance in India seven years ago to bet on the Indian consumer story via finance, consumption, and housing, you would have almost 10X your money today.

  • We often ask what's the next China? We're asking what the next India is?

  • It's close to India. Our neighboring country, with a $460 Billion GDP, rapidly rising income and an economic structure similar to where India was 10 years back, presents such opportunities.

  • Businesses' Cash Flows are priced attractively, and not a whole lot of capital is still flowing in. With FED Rates in the US seeming to peak, we see extremely attractive return opportunities per unit of risk.   

Disclaimer: In the article "3 Investment Themes We At AltG Are Building This Decade" above - Any views, comments or communication (above or in the past) should not be construed to be investment advice by Alternative Growth (hereafter referred to as “AltG”) in any form whatsoever. AltG does not make an offer to sell or solicit to buy any securities.


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