The investment process is a multi-step exercise which starts with idea generation. Idea generation happens either as a result of quantitative analysis on financial data of companies or by broker research or through news flow and interaction with other market participants.

Investment alternatives selected from the idea generation process are subject to rigorous analysis. This includes analyzing financial statements of the company for the last 3-5 years including latest available quarterly financial data. This is then projected forward to compile estimated financial performance for the next couple of years.

Once a company appears attractive on the basis of its financial performance and prospects, qualitative analysis, including competitor checks, market referral checks on the promoter group as well as face to face meetings with the top management are conducted to attempt a more holistic view of the current position of the company and where it is headed.

A summary investment rationale is then generated based on a hypothesis created by collating data and information from the above process. The investment rationale clearly articulates the basis for investment, the growth expectation and its drivers, the competitive advantages of the business and their sustainability in the future.

Further analysis of the stock is done to understand its current valuations in context of both the historical valuations over a period of time as well as valuations of stocks in similar sectors both in the country and globally.

Once a stock comes under active coverage, either due to investments made into portfolios or as a potential investment candidate for the future, earlier annual projections are broken down into quarterly estimates. These estimates are compared with the actual performance of the company every quarter. Small discrepancies as well as larger ones that are understood are ignored. However, if the company performance is significantly different from our estimates, special efforts are made to contact the company either on telephone or as a review meeting to understand the deviation of performance and the management’s reactions to the same.

A stock in the portfolio will be sold only for three reasons. Firstly, if the price performance has been exceptional and now fully reflects the potential of the business. Secondly, if the company performance does not keep pace with the projections made based on our analysis and understanding of the potential and thirdly, if based on continuing research, there appears to be a much stronger candidate for investment, a lesser attractive investment may be switched into the more attractive one. However, the same stock will normally not be sold and bought back at different prices.