Over the previous 15 years, ValueQuest Funding Advisors has constructed its funding framework round what Shah describes as a “non-public fairness strategy” to public markets—specializing in deep analysis, administration high quality, trade constructions and long-term revenue swimming pools earlier than making funding choices.
On this version of ETMarkets PMS Discuss, Shah discusses how the agency’s funding philosophy has developed throughout market cycles, why concentrated portfolios can outperform when backed by rigorous evaluation, and the structural themes—from manufacturing and defence to AI, aerospace and vitality transition—that would form the following decade of investing.
He additionally shares his views on the place alpha alternatives lie in in the present day’s market and why a number of the most compelling funding concepts stay under-owned and under-appreciated by the broader market. Edited Excerpts –
Q) Worth Quest has accomplished 15 years within the funding administration enterprise. How has your funding philosophy developed over time, particularly throughout completely different market cycles?
A) Over the past 15 years, our philosophy has remained anchored in figuring out structural themes and tendencies early, supported by a powerful top-down understanding of the economic system and trade cycles.
We mix this with deep bottom-up analysis to determine companies which might be rising leaders or credible challengers inside these themes.
What has developed over time is the institutionalisation of our course of — we’ve added stronger guardrails round danger, portfolio development and governance to enhance consistency of outcomes throughout market cycles.
This stability of conviction-led investing and disciplined danger administration continues to outline ValueQuest’s strategy.
Q) Your agency follows a high-conviction and concentrated portfolio technique. In a market the place diversification is usually emphasised, what provides you confidence on this strategy?
A) At ValueQuest, we comply with what we regularly describe as a “non-public fairness strategy” to public markets — spending important time understanding industries, administration groups, aggressive benefits, and long-term revenue swimming pools earlier than making funding choices.
We have now all the time believed that knowledgeable focus is completely different from speculative focus. If you perceive administration high quality, trade construction and enterprise fundamentals deeply, a concentrated portfolio can result in higher risk-adjusted outcomes.
Diversification past a degree it may possibly dilute conviction and impression. Our focus stays on understanding companies deeply and managing dangers proactively.
Q) ValueQuest has constantly centered on figuring out structural megatrends early. Which themes at present excite you probably the most over the following 5–10 years?
A) Over the following 5–10 years, we stay extremely constructive on India’s manufacturing alternative, pushed by each home demand and world provide chain diversification. AI is rising as a defining world theme, and choose Indian firms are more and more changing into a part of the hyperscaler and knowledge centre ecosystem.
We additionally see sturdy long-term potential in defence and precision engineering, particularly throughout aerospace and space-linked alternatives. Power transition continues to learn from highly effective structural and geopolitical tailwinds, whereas pharma CDMO and the rising GLP-1 ecosystem stay compelling healthcare themes. These alternatives are being formed by coverage assist, technological disruption and rising strategic self-reliance globally.
Q) Given the present market valuations, the place are you discovering alpha alternatives in the present day — largecaps, midcaps, or rising companies?
A) We don’t strategy markets by way of the lens of market-cap segmentation. Our funding course of is pushed extra by figuring out rising tendencies, structural shifts, and areas the place giant revenue swimming pools can probably develop over the following 5–10 years.
Our top-down thematic analysis helps us determine sectors and companies which might be beneficiaries of those long-term modifications, regardless of whether or not they’re categorized as largecaps, midcaps, or rising firms.
Traditionally, alpha technology has usually come from figuring out under-appreciated companies early of their development journey quite than specializing in measurement classifications.
Q) The factsheet highlighted sectors similar to vitality transition, defence, aerospace, and manufacturing as key focus areas. What makes these sectors notably engaging from a long-term funding perspective?
A) These sectors are engaging as a result of they’re aligned with highly effective structural, geopolitical and policy-led tailwinds. Power transition is prone to speed up additional amid recurring oil shocks and the rising world deal with vitality safety and localisation.
Defence spending can be set to rise meaningfully over the following decade as nations prioritise self-reliance and trendy warfare shifts from conventional platforms in direction of drones, anti-drone techniques and superior applied sciences.
In aerospace and precision engineering, India has a powerful structural benefit pushed by its engineering expertise, value competitiveness and rising position in world provide chains.
Q) India’s manufacturing story is gaining world consideration on account of provide chain diversification and coverage assist. How are you positioning portfolios to seize this chance?
A) Manufacturing is coming into a multi-year upcycle because the world strikes from an asset-light mannequin in direction of rebuilding exhausting belongings and resilient home provide chains, creating long-duration alternatives for globally aggressive Indian companies.
We’re positioning portfolios to capitalise on this chance largely by way of “picks and shovels” companies – notably capital items, industrial expertise and engineering-led firms that allow this broader manufacturing buildout.
Our focus stays on figuring out firms with sturdy execution capabilities, technological differentiation and the flexibility to realize market share as each home capex and world provide chain diversification speed up.
Q) As a agency managing over Rs 27,000 crore throughout mandates, how do you keep agility and proceed producing alpha at scale?
A) Producing alpha at scale requires staying forward of rising tendencies whereas sustaining deep analysis and powerful danger self-discipline.
We desire scalable companies with sturdy execution and market management, which permits us to deploy capital meaningfully with out dropping agility.
Our “non-public fairness lens” helps us develop differentiated insights, assess industries with a long-term possession mindset, and determine early indicators when an funding thesis is evolving or getting challenged.
We imagine mental agility and deep engagement with portfolio firms are way more necessary than trying to reflect benchmarks or cowl each sector.
Q) Which sectors or themes do you imagine are nonetheless under-owned or under-appreciated by the broader market?
A) Lots of the most compelling alternatives in the present day are nonetheless in comparatively early levels of development and infrequently lie exterior benchmark indices, which naturally results in decrease institutional possession and market consideration.
Aerospace, precision engineering and AI/ knowledge middle performs are nonetheless early of their development journey and never absolutely mirrored in market positioning.
Equally, vitality transition continues to be considered narrowly regardless of the lengthy runway and shifting revenue swimming pools rising throughout the ecosystem. We just lately put out a be aware highlighting the identical.
(Disclaimer: Suggestions, recommendations, views, and opinions given by consultants are their very own. These don’t signify the views of the Financial Instances)
