Strong Economic Moats due to Product quality, Brands, Patents, Cost advantages, or Network effects that protect market share or can help increase market share.

Companies the has shown consistent financial performance in its various parameters like RoCE (Return on Capital Employed), stable margins, reasonable debt position, strong order book etc.

High Gross Margins Indicates pricing power and the ability to absorb rising costs without eroding profitability.

A scalable business can grow revenues faster than costs, leading to margin expansion over time. Low incremental capital needs and asset-light models often grow faster with less capital requirement (e.g., Platform businesses, Fintech). Scalability leads to compounding returns, as profits grow disproportionately to reinvested capital.

Competent & Ethical Management that has proven track records, prudent capital allocation (reinvesting company’s profit at a higher RoCE), and Shareholder-friendly policies.

Companies that can compete domestically or globally often have superior margins, pricing power, and sustainability of the earnings will always trades at a premium valuations.

Cost Leadership due to efficient manufacturing or labour arbitrage (e.g., Aerospace, Electronics Manufacturing) make them preferred global suppliers and market gives them a premium valuations.

Differentiated or Niche products with high entry barriers (e.g., Specialty chemicals, CDMO), Strong R&D & IP Firms with patents (e.g., DRDO-linked defence players, biotech innovators) command premium pricing and often trades at premium valuations.

We are very agile in assessing valuations of the companies based on PE & PEG ratios. We are also cognizant while company’s share price goes much beyond its underlying earnings growth and valuation becomes unsustainable.

A company operating in an industry with strong tailwinds has a higher probability of sustained growth due to external demand drivers rather than just company-specific execution. Key tailwinds include Government Policies & Initiatives (e.g., Make in India, PLI schemes, Infrastructure push, Renewable energy transition).

Beneficiaries are capital goods, defence, electronics, and EV sectors. Digitization & Technology Adoption – Cloud computing, AI, fintech, and SaaS businesses benefit from increasing digital penetration.

Global supply chain shifts will benefit companies in chemicals, APIs, and electronics manufacturing gain from China+1 strategies. Businesses aligned with structural trends face less cyclical risk, enjoy policy support, and often see sustained and long-term growth.