A snapshot of India’s mid and small-cap market
Specialising in the Mid and Small Cap space since the Global Financial Crisis, Ambit Asset Management offers unique insights into the journeys and potential of companies in this sector. Here, Bhargav Buddhadev, Ambit’s Small Cap Fund Manager, provides valuable perspectives on the dynamic landscape…
India is a country of serial entrepreneurs with cost competitiveness being the biggest moat. Since time immemorial, we have had farmers, artisans and traders who have been working outside of the formal employment culture. More importantly, this entrepreneurial stint is, despite multiple failures, the secret sauce for longevity of success.
Our investment philosophy is to identify these entrepreneurs
India is blessed with several sub-sectors which are oligopolistic in nature - luggage, footwear, bearings, opal-ware, amines, rubber chemicals etc. Our investment philosophy is to invest in franchisees across these sub-sectors after passing them through our proprietary governance/forensic filters; ten accounting ratios are evaluated to assess whether promoters are good and clean or not.
Case study of Safari Industries
Luggage company Safari Industries, one of Ambit’s most successful investments; made 8X returns in less than three years. What made us buy this name?
Promoter was hunger for success: Safari was acquired in 2013 after struggling since 1974 by Sudhir Jatia (MD of VIP Industries until 2010). Sudhir was very driven and he wanted to set an example as an entrepreneur especially after his proven execution track record at VIP; 25%+ EBITDA CAGR during from FY03 till FY10
A deep relationship with the distribution partners: Our channel checks on Sudhir suggested deep relationship with VIP’s channel partners; e-commerce then was not a big channel. This gave us confidence that Safari would become successful under the leadership of Sudhir.
Ability to think big: Sudhir was not at all constrained with Safari being a small company. He was very aggressive to start with; forayed into PC manufacturing, introduced SKUs in the CSD segment, and acquired brands like Genius, Magnum, Activa, Orthofit, DBH, Egonauts, Gscape, and Genie. Fast forward to FY23, Safari’s revenue has crossed Rs12bn and its market cap is at ~Rs100bn vs VIP’s ~Rs80bn.
Ambit Asset Management is part of the Ambit Group, which has a 26-year legacy as a renowned player in Investment Banking, Institutional Equities, and Asset Management.
Bhargav Buddhadev is the Co-Fund Manager of Ambit Emerging Giants Small Cap Portfolio at Ambit Asset Management. He has more than 18 years of experience in Equity Research.
