Akash Prakash, founder of Amansa Capital, manages funds in excess of Rs. 4200 crore. In his interview in Saurabh Mukherjea’s “Gurus of Chaos”, Akash Prakash gave important pointers of his investment philosophy. The four core points that he made are:
(i) Make sure the management has a good track record of capital allocation. Smart managements know how to create and take advantages of opportunities and overcome adversities. They can create a lot of wealth for you;
(ii) Select companies that have immense opportunity to grow, with good management team and corporate governance;
(iii) Buy high quality companies and hold them for as long as you can. There are a limited number of companies where all the factors of huge business opportunity and capable management can be found. Such companies should form a core part of the holding;
(iv) Pay attention to valuations. Generally speaking, buy stocks quoting at reasonable valuations of 10-12 times earnings and not more than 15-20 times earnings.
Now, to our good fortune, Akash Prakash has given a practical example of what he means with his latest stock pick, Balkrishna Industries.
On 20th March 2015, Amansa Capital scooped up a massive chunk of 17,50,000 shares of Balkrishna Industries at Rs. 618 each. The amount invested in the stock is Rs. 108.15 crore.
Fortunately, we don’t have to struggle hard to understand the nitty gritty of Balkrishna Industries because Dharmesh Kant has already conducted a thorough analysis of the company and its growth potential.
Dharmesh Kant has, in his report of February 2015, given 12 reasons why Balkrishna Industries is a compelling buy at present. Some of his core reasons can be summarized as follows:
(i) Balkrishna Industries has a high entry barrier/ “moat”: The manufacture of ‘Off Highway Specialty Tyres’ is a niche segment which involves huge capital investment;
(ii) It has a good track record of sales growth at a CAGR of over 22% in last three years and outperforming the industry average growth of 4% to 5%;
(iii) It reported excellent Q3FY15 results with Ebitda growth of 16% and PAT growth of 6% on YOY basis;
(iv) It has significant growth opportunities in the domestic market with NAMO’s ‘Make In India’ campaign;
(v) It has strong cash flows. Improvment in EBITDA margins to 25% likely through operating efficiencies.
Dharmesh Kant has given several other reasons in support of his thesis. After a careful reading of Dharmesh’s research report, one has to conclude that Akash Prakash has found in Balkrishna Industries, a classic embodiment of all the qualities that one looks for in a winning stock.