Adwait’s Investment Approach and Journey

Hi Surender,

1. Too much cash: This is actually a positive trait as far as I am concerned.

• I think they will dividend out excess cash to shareholders in the future while keeping a lot of it on hand too. This works for me as I can allocate that cash to an alternate investment.

• The excess cash on the B/S will be used for inorganic acquisitions in the future if any make sense (wrt to adjacencies and valuations) when a competitor might be going through a tough time

• Excess cash provides antifragility during black swan events, it can be a strategic asset when there are headwinds (you need to survive in order to thrive)

2. Sales growth will remain around 10%, earnings growth will remain at around 15% in the long term, and I am fine with both.

• Higher topline (vanity) will result in poorer PAT margins, ROCEs and cashflows (sanity) in the future

• I am looking for share price compounding at no more than 12.5% CAGR and for that, an exit PE of 40 and earnings growth of 15% CAGR is enough (mathematically). This seems realistic for the next decade.

• Expecting 10 – 12% PA compounding from this franchise over the next 10 years. With this context, I think the explanation will make sense.