FRAMEWORK | The Quality Compounder MODEL PORTFOLIO
Dominant franchise. Large or growing TAM.
Honest management. Strong Capital Allocation.
The Quality Compounder model portfolio is built on a simple, rigorous premise: In the volatility of the Indian markets, sustainable alpha comes from businesses that exhibit high capital efficiency and leadership, impeccable governance, and the ability to reinvest cash flows into superior growth opportunities.
Our Four-Pillar Framework is designed to filter out the noise. Every stock pick is a battleground where thesis is rigorously challenged until only the most resilient compounders remain.
01
Market & Moat
Dominant market share and sustainable competitive advantages
- TAM >$1B / 15%+ CAGR
- Share stable / growing in last 5 years
- Gross margin stability
03
Capital Allocation
Focused reinvestment into high-yield core growth areas
- Incremental ROIC >= Historical ROCE
- Capex / Depreciation > 1.5x
- No empire building (i.e. unrelated M&A)
The Four Pillars of Quality
Our model portfolio stock picks is built upon six quantitative and qualitative checkpoints
02
Financial Quality
- Revenue CAGR >10%
- EBITDA CAGR 1.2-1.5x Revenue CAGR
- ROCE > 15%, ROE >12.5% consistently
- CFO/PAT ratio > 0.8x, D/E <1x
Numerical integrity-cash flow generation over accounting profits
04
Governance
Integrity first. Absolute alignment with minority interests
- Promoter > 40% (except PE exits)
- Pledge <10%
- Related party transactions <3% revenues
- No auditor red flags
01
Position Sizing
We limit individual exposure to 5-10% per ticker. This ensures that no single company can derail the compounding engine while maintaining enough concentration to drive meaningful alpha
PORTFOLIO Limits
Rules of Diversification
02
Sector Limits
Diversification with discipline. We enforce a 25% maximum ceiling for any single sector. This safeguard prevents systemic shocks and ensures our Verse remains resilient across Indian market cycles.
03
Stock Universe
Our focus is narrow to go deep. We maintain a high-conviction universe of maximum 20 stocks. Every name must earn its place through our rigorous six-pillar framework and constant Verse debate.
04
Valuation & Triggers
We check objective valuation metrics (5/10Y Median PE, PEG, Reverse DCF implied growth rate) and entry / exit triggers (both for individual stocks and relative to other existing / potential positions) to drive our portfolio