20% 15%

Yrs Start Cap Rate Capital Yrs Start Cap Rate Capital

1 1.00 0.20 1.20 1 1.00 0.15 1.15

2 1.20 0.24 1.44 2 1.15 0.17 1.32
3 1.44 0.29 1.73 3 1.32 0.20 1.52
4 1.73 0.35 2.07 4 1.52 0.23 1.75
5 2.07 0.41 2.49 5 1.75 0.26 2.01
6 2.49 0.50 2.99 6 2.01 0.30 2.31
7 2.99 0.60 3.58 7 2.31 0.35 2.66
8 3.58 0.72 4.30 8 2.66 0.40 3.06
9 4.30 0.86 5.16 9 3.06 0.46 3.52
10 5.16 1.03 6.19 10 3.52 0.53 4.05
11 6.19 1.24 7.43 11 4.05 0.61 4.65
12 7.43 1.49 8.92 12 4.65 0.70 5.35
13 8.92 1.78 10.70 13 5.35 0.80 6.15
14 10.70 2.14 12.84 14 6.15 0.92 7.08
15 12.84 2.57 15.41 15 7.08 1.06 8.14
16 15.41 3.08 18.49 16 8.14 1.22 9.36
17 18.49 3.70 22.19 17 9.36 1.40 10.76
18 22.19 4.44 26.62 18 10.76 1.61 12.38
19 26.62 5.32 31.95 19 12.38 1.86 14.23
20 31.95 6.39 38.34 20 14.23 2.13 16.37
21 38.34 7.67 46.01 21 16.37 2.45 18.82
22 46.01 9.20 55.21 22 18.82 2.82 21.64
23 55.21 11.04 66.25 23 21.64 3.25 24.89
24 66.25 13.25 79.50 24 24.89 3.73 28.63
25 79.50 15.90 95.40 25 28.63 4.29 32.92
26 95.40 19.08 114.48 26 32.92 4.94 37.86
 25%
Yrs Start Cap Rate Capital

1 1.00 0.25 1.25

2 1.25 0.31 1.56
3 1.56 0.39 1.95
4 1.95 0.49 2.44
5 2.44 0.61 3.05
6 3.05 0.76 3.81
7 3.81 0.95 4.77
8 4.77 1.19 5.96
9 5.96 1.49 7.45
10 7.45 1.86 9.31
11 9.31 2.33 11.64
12 11.64 2.91 14.55
13 14.55 3.64 18.19
14 18.19 4.55 22.74
15 22.74 5.68 28.42
16 28.42 7.11 35.53
17 35.53 8.88 44.41
18 44.41 11.10 55.51
19 55.51 13.88 69.39
20 69.39 17.35 86.74
21 86.74 21.68 108.42
22 108.42 27.11 135.53
23 135.53 33.88 169.41
24 169.41 42.35 211.76
25 211.76 52.94 264.70
26 264.70 66.17 330.87
Parameters to assess business quality

1 Nature of business
(commodity, commodity processors, high-tech, cost plus, price setters, monopoly/ oligopoly, fiercely

2 Moat / Competitive Advantage

(brand plays, economies of scale, ability to pass on price, entrenched customers, long complex app

3 Sector Attractiveness / Market Fancy

(Defensives, glamour sectors, dull and boring, high growth, likely PE ranges)

4 Cyclicality
(Sales and earnings growth cycles over 5 to 10 year periods)

5 Raw Material dependence

(RM/Sales percentage, RM swings and correlation with OPM)

Parameters to assess Growth Prospects

1 Opportunity Size
There could be 2 co's each leading their niches - but size of niche may be very different - Astral

2 Ability to Scale up
a Industry Growth - (Curr Size, annual growth rates, projected CAGR)
b Company Growth - (Organic, Inorganic, Sales growth, earnings growth)
c Ability to Fund growth - (Existing D/E, Industry median D/E, previous track record, industry con
d Barrier to Entry - (From competence to manage growth, regulatory approvals, govt approvals,
economies of scale, nearest competition)
e 1 year Earnings Estimate - (TTM EPS, Half year EPS, Prev Yr YoY Growth, YoY Growth Estimate

Parameters to assess Management quality

1 Type of Management - (1st generation / Family Run / Professional)

2 Management Drive - (Stated objectives / growth & track record / domination of it's ni

3 Management Depth - (Top Management, Board Composition, Performance, Attractiven

4 Management Integrity - (Related Party transactions, Habbitually taking up stock, warr

high quality talent, auditor diff / resignations, tax payment records)

5 Disclosure Norms
(Annual reports, prompt announcement on developments, auditors qualifications)

6 Follow-Through
(Walking the talk, 5 year track plans and execution record, deliver on commitments)

7 Self confidence - ability to think and do things differently

8 Compensation - Fairness, industry standing of top management, peer comparisons, lin

9 Shareholding pattern - Promoter Holding, MF Holdig, FII Holding, Sharp changes in pr

10 Regulatory / Compliance
(SEBI strictures, penalty, fines, IT Raids, BSE NSE bans)
 , monopoly/ oligopoly, fiercely competitive)

customers, long complex approval process, patents, R&D, product innovations)

may be very different - Astral PAN India Vs Vinati Org - oligopoly

us track record, industry confidence, free cash flows)

approvals, govt approvals, patents, entrenched customers, difficult to switch vendors,

owth, YoY Growth Estimate

ord / domination of it's niche)

Performance, Attractiveness as employer)

ually taking up stock, warrant conversion at premium / disc, ability to retain

uditors qualifications)

eliver on commitments)

ent, peer comparisons, linked to performance

ding, Sharp changes in promoter holding, pledged shares

Business Quality

1 Is the business suitable for Long Term Investing?

2 Is there ample opportunity for company to grow it's business at a smart pace over the next 3 to
3 Does the business entail excessive capex? Does the capex justify the sufficiently high returns to
4 Is there a possibility of the govt interference creating problems with the prospect of the busines
5 Is the business sensitive to raw material price volatility and can it be passed on to the customer
6 What kind of business are we looking at - Sunrise sector like (agri, water waste management, c
Neglected sector (Infra / Capital goods)?
7 How are other companies in the sector doing? If most of them are doing well - it must be a good

Management Quality

1 What is Prom Holding? Any excesscive Pledging?

2 How have management handled growth in past? Have they taken excessive risks / aggressive d
3 How have shareholders been rewarded? Div Payment is a big plus in small cap cos' is great sign
4 Unusual antics by the management - allotment of warrants do they convert them and at what p
5 Whether they are likely to take minority investors for a ride?
6 Do they have a hunger to grow? Capex Plans / Vision / Objective
7 Management remuneration - justified / excess / industry norms
8 How do they answer querries at AGM's / other interactive platforms?
9 Whether they walk the talk? They Under promise and over deliver or vice-a-versa

Fundammentals
1 Kind of Growth - Fast / Medium / Slow?
2 Whether Growth is achieved through excessive debt / equity dilution
3 ROE / ROCE /
4 Chances of sudden change in the business fundamentals for better or worse? Is the company at
5 Is the company at it's peak of earnings - and going forward the earnings are likely to slow down
6 Div Payout - Increasing div with increasing profits?
7 Free cash generation / cashflows over past few years?

Industry Position / Track Record

1 Comparison with the Peer Group. Valuations & growth
2 Not necessary to invest in industry leader - as there may be limited room to grow beyond a size
3 Is the company growing at higher than the industry average? If so why / what is separating it fr
 Growth
Same as Donald - Just 1 redflag one should check - be wary of companies growing Profits witho

Valuations
1 Current Valuation I am paying for this business
2 Is there a flawed mkt perception which is giving a chance to participate in company's growth rat
3 What is the current mkt phase - bull / bear / sideways mkt
4 One should look at Enterprise Value instead of pure mkt cap
mart pace over the next 3 to 5 years?
e sufficiently high returns to justify the efforts of the capx?
h the prospect of the business?
e passed on to the customers?
water waste management, cloud computing etc) / Steady growth sector (FMCG, Consumers) /

doing well - it must be a good invest to be in.

xcessive risks / aggressive debt? Bets taken by them in past have failed / paid off.
n small cap cos' is great sign that profits are real.
convert them and at what price? Whether they sell holdings at opportune times in mkt?

r vice-a-versa

or worse? Is the company at the cusp of explosive growth?

nings are likely to slow down / show degrowth?

room to grow beyond a size. Small Nimble player with some advantage can do good.
why / what is separating it from others?
panies growing Profits without increase in Sales.

pate in company's growth rate at cheap prices

Strategic Assets Describe
- Patents
- Proprietory Knowhow
- License/Franchise
- Regulatory Framework
- First Mover Advantage
- Legal Rights
- Monopoly / Duopoly
- Oligopoly
- Natural Resource Access
- Raw Material Chain Control

Architecture/ Organisation Style Describe

- Customer Relationships
- Supplier Relationships
- Distributor Relationships
- Employee / Team Relationships
- Co-operation across Relationships

Innovation Describe
- Leader Vs Follower
- Doing Things differently
- Replicability / Catchup distance

Branding Describe
- Price Premium Vs Peers
- Branding spen - % of sales
- Time since leadership position
- Media Recognition
Ratings

Ratings

Ratings

Ratings