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ideas0688
Aug 07, 2023
In APEXX Formula
Warren Buffett's timeless wisdom echoes loud and clear in India's private markets, where simplicity and overlooked opportunities hold the key to unparalleled success. As investors eagerly chase the "hottest play," an alternative approach that emphasises cash flow generation, price discipline and tapping into neglected corners holds tremendous value - that true value lies in exploring the untapped potential of India's missing middle. Financial sponsors dominate the prevailing investor base in India's private markets focused on buyouts. While large buyouts may offer alluring prospects, they come with fierce competition, leaving little room for genuine winners. Instead, we seek out opportunities where cash-generating potential and transparent cash flow visibility converge through robust corporate governance and rapid digitisation. India's transformation and growth present a vast and largely untapped opportunity set in this context. India hosts myriad businesses generating revenues ranging from $1 million to $20 million, boasting impressive EBITDA margins that often reach the mid-teens to low thirties. These niche players thrive in industries like ITes, B2B databases, analytics & testing, financial software providers, online classifieds, wealth management, staffing, cold storage, telematics, and software distribution. Leveraging India's consumption boom and its reputation as a skilled workforce supplier, these B2B2C and service businesses hold tremendous potential for growth. Enter "India's Missing Middle," a realm where acquisitive platforms can take the stage. These platforms aim to acquire, enhance, and integrate these businesses, unlocking value for all stakeholders involved. While these companies boast healthy EBITDA margins, they often suffer from unoptimised balance sheets and cost inefficiencies. However, their ability to transform revenues into free cash flows makes them an alluring target for astute investors. From the point of view of exits and secondary market liquidity, Indian equity markets typically witness IPOs on the main board starting from approximately $40 million in revenues. Additionally, as larger PE funds and sovereigns prowl the landscape for high-quality deals, now is the opportune moment to sow the seeds of these platforms. Investing in India's missing middle today promises an awe-inspiring future when it comes time to reap the rewards. In conclusion, the allure of chasing hot trends and glamorous ventures often blinds investors to the genuine gems hidden in plain sight. Warren Buffett's pragmatic philosophy reminds us that the true treasures lie in simplicity and neglected opportunities. By focusing on creating acquisitive platforms that capitalise on India's missing middle, we can unlock the full potential of the country's private markets and pave the way for groundbreaking success. India's growth story is just beginning, and those who choose to embrace this transformation stand to reap epic rewards in the not-too-distant future.
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ideas0688
Jul 31, 2023
In Zinbase
Investment Opportunity: Aggregating B2B database businesses across industries such as BSFI, Chemicals etc through a central platform With India's B2B market witnessing incredible growth, exemplified by Indiamart's successful IPO with a $2.3 billion market cap and 365% stock performance, the potential for exceptional returns has never been more evident. Data – The Oil For The New Economy The $1 trillion B2B market in India is teeming with opportunities, but many investors have fallen short due to misplaced investments and a lack of in-depth understanding of Indian businesses and their specific needs.  Market Size And Growth: The B2B database market is currently over $2 Billion in revenues and growing at close to double digits. The Golden Opportunity- B2B database businesses across India, often overlooked but offering incredible growth, attractive margins, and a wealth of potential buyers. Investment Thesis: Data businesses will serve millions of MSMEs by removing investment complexities and opacity, making the B2B financial data services sector the essential infrastructure for driving growth in India. This trend is reminiscent of similar developments witnessed in the United States and China as these countries hit key inflexion points in their economic growth trajectories.  Expected Return: Our APEXX Formula - India's Investment Stack has evaluated a 10-20X return on investment for the B2B database platform.  Highly Fragmented Market: The market is highly fragmented, with no player holding more than 1% of market share. Cheap Valuations: Valuations of these cash flow generating businesses are particularly attractive, ranging from 3-7X EBITDA, especially when compared to public comparables like Indiamart, which trades at a P/E ratio of almost 60. Deal Size and Exit Strategy: Size Of Opportunity: $10 Million - $50 Million platform to buy and build B2B database businesses. Scale Advantage: The platform has the potential to scale, attracting both strategic buyers and mid-market PE investors in India, ensuring a high-quality exit. Why Invest Today: India - Growth Capital of The World: The surge in India’s economy and rising incomes have paved the way for B2B database businesses to thrive. Investors can expect massive returns from this sunrise sector  Exit Opportunities: IPO: B2B database businesses such as Indiamart, Traxcn have seen successful public market listings even in a tough environment. This is in line with the success of database businesses like FactSet, S&P, and Thomson Reuters in G10 markets that have shown tremendous growth and market capitalization. Private Equity Buyout: India's highly competitive investment space has seen large private equity funds competing for price on high quality deals,  making this platform an attractive option. Strategic Interest: Multiple global strategic players are focused on expansing thier footprint in India and have been on an acquisition spree. For example: LexisNexis buyout of Universal Law Publication (2015), S&P Investment in CRISIL. This presents a huge buyout opportunity.  Conclusion: In an era where data is considered the oil for the new economy, investing in India's B2B database businesses offers a chance to capitalise on India's promising growth trajectory and position oneself for massive returns in this sunrise sector. As India emerges as the growth capital of the world, investors can expect to reap significant rewards by participating in this exciting and rapidly evolving landscape.
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ideas0688
Jul 31, 2023
In APEXX Formula
In the fast-paced investing world, identifying lucrative opportunities requires keen insights, meticulous research, and a bold vision for the future. AltG, renowned for its innovative investment strategies, through its APEXX Formula - a powerful framework designed to pinpoint industries, companies, and opportunities with the potential to deliver exceptional returns. By adhering to specific criteria, AltG identifies unique investment ideas that transcend conventional thinking and set the stage for substantial growth. Let's delve into the key components of the APEXX Formula and understand the characteristics AltG looks for in its investments. Industry with High Growth and High Margin: AltG's first step is to focus on industries exhibiting robust growth prospects and high-profit margins through analysing over 40,000 private and publicly listed companies in India. The company's keen eye is drawn to non-obvious businesses, typically overlooked by mainstream investors, which operate in fragmented markets with few dominant players. Such businesses, while maintaining their margins, are also resistant to disruption from emerging technologies or competing products. AltG recognises the potential in established yet seemingly mundane enterprises poised to become exceptionally profitable due to their ability to generate rapid cash flow. Stability is a key factor, providing a solid foundation for sustained growth. Industries such as industry databases, insurance broking, testing & analytics, wealth management and staffing are examples of such industries in India.  Inelastic Demand - Annuity Income: AltG favours businesses with inelastic demand, where consumers' need for the products or services remains relatively constant regardless of market fluctuations. These "Consumer-Infra" businesses, representing a small portion of consumer spending, are characterised by competitive advantages, acting as the backbone of essential industries. With a focus on businesses that offer annuity-like income streams, AltG identifies opportunities akin to the "picks and shovels" during a gold rush, ensuring consistent returns over time. Underestimation of Potential: The APEXX Formula thrives on contrarian views that challenge conventional perceptions. AltG seeks industries that appear small or insignificant today but possess the latent potential to scale exponentially in the future. By identifying massively underestimated Total Addressable Markets (TAM) and potential growth, AltG gains a variant perception of value, TAM, margin, and revenue, positioning itself at a strategic advantage to capture significant returns. Overlooked by Big Players: AltG scours emerging sectors that major players in the market might overlook due to their relatively small size. These neglected opportunities often present untapped potential, offering a unique entry point for AltG to participate in the growth trajectory through low-risk and high-returns. Entry into Growth: For successful investment execution, AltG identifies paths that enable it to participate in the growth of promising industries. Whether as an investor or by aligning with a suitable investor base, AltG ensures it has a stake in the success of its chosen ventures. Favourable Government Regulations: Understanding the impact of governmental policies on industries is essential. AltG seeks opportunities where favourable regulatory environments create conducive growth and stability conditions, reducing investors' uncertainties. Real Moat - Unreplicable Competitive Advantage: The APEXX Formula places significant emphasis on identifying businesses with robust competitive advantages. These advantages, whether through economies of scale, proprietary resources, or a unique supply of assets, create barriers to entry that shield the company from potential competitors, securing long-term profitability. Tipping Point Trends: Recognising industry trends at their tipping points is crucial for AltG's investment success. Analysing social, economic, and political changes enables AltG to identify emerging sectors or disruptors that stand to benefit from transformative shifts in consumer behaviour and market dynamics. Underestimated TAM for Financialization: AltG seeks industries with underestimated TAM to explore financialisation opportunities. Identifying the asset classes that can be effectively financialised allows AltG to leverage its investment expertise and amplify returns. Derivative Ideas in High-Growth, High-Margin Industries: Finally, AltG uncovers derivative plays within industries exhibiting high growth and high margins. By identifying third, fourth, and nth derivative ideas, AltG capitalises on diverse investment opportunities that arise from the main industry's expansion. For example if the hospital industry will grow in India, what derivative industries around the hospital industry will also grow? Industries serving hospitals such as staffing, trade magazines, and equipment will also see exceptional returns. The APEXX formula focuses on the best risk adjusted return from the space.
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