Initial Allocation in Vinati and thoughts on execution
Next week, I will be taking initial position of 2-3% in Vinati Organics
As mentioned in the the thread earlier, while investing my focus is on Terminal Value which is attributable more to franchise value than near term growth. Therefore my understanding of franchise value determines whether allocation will remain low or position becomes a concentrated position
In case of Vinati if I have to make it as a concentrated bet, i have to answer two questions - (1) how durable is Vinati’s spec chem franchise? and (2) what determines the longevity or durability of spec chem franchise? We all know Vinati has done all good things from process side but threat to its franchise can come from anywhere. For example - if someone cracks ATBS/ IBB code whats the impact when revenue is concentrated in these two products or concentrated portfolio is a trade off to maintain a speciality franchise because you can not introduce these products frequently
If I am able to get answers to above two questions, I would be ramping up position by averaging up or down irrespective of price and near term growth outlook
If I can not get these answers, i am open to play chemicals as IRR investor by focusing on mean reversion in valuation or growth. For this approach , i do not have to focus only on speciality chemicals but I dont mind looking bulk/commodity chemicals wherever I have comfort
Also Note - for zillionth time, i have changed my opinion on Abbott india. I wont be selling Abbott india to creat position in Vinati. It will be via fresh funds
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