India Inflection Fund
Control the risk.
Catch cycle early.
Stay away from noise.
Earnings over fancy stories.
Create wealth slowly.
Portfolio Construction
- Invested 100% in listed Indian equities
- 25-30 stocks to balance
- Conviction and diversification
- 5-10% position sizing to manage outcome risk
Risk Discipline
- Single-sector exposure capped at 20%
- No leverage
- No derivatives or structured products
Behavioral Edge
- Losses are cut when the thesis breaks
- Winners are allowed to compound
- Zero hero investing
Reason why we like manufacturing
Government focus after almost a decade
India Manufacturing Share: Current Level vs Government Targets (with Timelines)
Virtuous cycle of productivity growth, employment generation and income growth
Manufacturing Policy Support
Government shifts from “policy support” to pay-for-performance
Phase/Period
Key Government Action
What Changed Structurally
Manufacturing Outcome
2011-2014
National Manufacturing Policy (25% target announced)
Intent without execution capability
Stuck at~15-16% of GDP
2014-2019
Make in India, FDI liberalisation, Ease of Doing Business
Better investment climate but no output-linked incentives
Still~15-16% of GDP
2020-2023
PL schemes, China+1 shift, Gati Shakti infrastructure
Direct incentives for incremental production & exports
Manufacturing scale-up begins
2024-2025
NITI Aayog Manufacturing Roadmap (Technology-led growth)
Clear long-term roadmap to reach ~25% of GDP
Target ~25% of GDP by 2035
Opening monopolies in key sectors
We see similar theme playing out again as Govt is opening up monopolies in key sectors
Big changes in key sectors post govt focus - Import Substitution
The largest two-wheeler market globally (~23 million units annually)
The 3rd largest passenger vehicle market (~5-5.2 million units annually)
India is the 3rd-largest pharmaceutical producer in the world by volume
India is the world's largest supplier of generic medicines
The 3rd largest power generation capacity in the world
Sector
Import Dependency ~ 10 years ago (2014-16)
Current Exports / Output (2023-25)
- Mobile phone Exports: ₹1,566 cr
- Heavy import Reliance
- Mobile phone Exports: ₹1.2 lakh cr
- Mobile Production: ₹5.45 lakh cr (FY 24-25)
- API Imports: ~₹13,853 cr (Largely from China)
- Pharma Exports: US$ 30.47 Billion
- Solar Imports: US$ 2.34 Billion
- Solar Capacity: 120+ GW
- Solar Exports: US$ 344.5 Million (Qtr)
- Auto Exports: US$ 9.5 Billion
- Basic ICE Component Exports
- Auto Exports: 5.3 Million Units
- Auto Parts Exports: ₹1.95 Lakh Cr (US$ 22.9 Billion)
- Defence Exports: <1,000 cr
- High Import Dependence
- Defence Exports: ₹23,622 Crore
- Defence Production: ₹1.27 Lakh Cr
- Chemical Imports: US$ 15.9 Billion (Organic Chem.)
- Chemical Exports: US$ 34.6 Billion
Capacity Utilisation Rising
Rising capacity utilisation is a case for another capex boom
Capacity Utilisation in India manufacturing: Historical (2015-24) and projections (2025-29)
Deleveraged India
Manufacturing Sector D/E ratio trend
India Manufacturing Sector - Debt-toEquity ratio trend (2005-24) Aggrerate, RBI-based
India’s Private Sector RoCE over 2 decades
India’s Private Sector Capital Allocation (RoCE)
Average New Order Book Growth Per Company
Capability of order capture has risen for companies
Avg new orders per company (₹Bn)
Gross Block Formation
Size of the companies has widened with reduction in leverage
BSE 500 Gross Block ( ₹ Lakh Crore)
Debt/Equity (x)
50% headroom for increasing leverage to fund capex
Deleveraged India Inc has enough headroom to increase leverage for funding capex. This sets the stage for a new leg of investment cycle.
