Warren Buffett has famously categorized businesses into three types: Great, Good, and Gruesome. Great businesses require little to no capital to grow (asset-light) and generate consistently high returns on capital while maintaining a durable competitive advantage. Good businesses deliver reasonable returns on capital but demand ongoing capital investment to fuel their growth. Gruesome businesses, on the other hand, are capital-intensive and produce poor returns on capital.
In this framework, Anand Rathi Wealth Limited stands out as a Great business. It operates with an asset-light model, demonstrates a high return on capital, and benefits from a robust competitive edge in the wealth management industry.
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