Kings of Capital Archives

Strategy Series

Our articles specific to the six investment strategies we offer. Whether you invest with us or are looking to invest, these
articles can you give you an insight into why we make the decisions we make.

Kings of Capital

Learning from history: Discounting in Financial Services is a bad strategy

History shows that competing only on the basis of price either as a lender or as an insurer has inevitably led to heavy losses and in some cases to bankruptcy. In this newsletter, we discuss how PSU general insurers in their quest to gain market share, cut pricing in group health insurance for 5+ years […]

Kings of Capital APR 29 . 10 MIN READ

A Simple Approach to Valuing Financial Services Companies

Kings of Capital MAR 27 . 10 MIN READ

What KCP Lenders Can Teach SVB’s Management

Kings of Capital FEB 26 . 7 MIN READ

Indian Lending: Gamblers versus Franchise Builders

Kings of Capital

Learning from history: Discounting in Financial Services is a bad strategy

Sep 07 . 11 MIN READ READ MORE

Kings of Capital

A Simple Approach to Valuing Financial Services Companies

Valuing lenders and insurance companies is tricky as the well accepted principle of discounting future cash flows does not work for Financial Services companies. These companies work under a regulatory framework which requires them to maintain a minimum capitalization level and also reinvest a large part of their earnings. Technically these firms have no/negative free […]

Apr 29 . 10 MIN READ READ MORE

Kings of Capital

What KCP Lenders Can Teach SVB’s Management

Even as the global financial system is reeling from the stress created by the sharp increase in interest rates over the past year, the Indian banking system is well placed to overcome this crisis owing to its granular liability franchisee, well matched asset-liability (ALM) schedules and more calibrated monetary policy conduct by the central bank. […]

Mar 27 . 10 MIN READ READ MORE

Kings of Capital

Indian Lending: Gamblers versus Franchise Builders

The Return on Equity (RoE) of lenders is driven by: (i) strong operating profitability (Return on Assets); or (ii) capital structure (high debt to equity). Recent euphoria in share prices notwithstanding, most PSU banks suffer from weak operational profitability (RoAs of 1% or lower) and high debt to equity ratios (15x+). This deadly combination is […]

Feb 26 . 7 MIN READ READ MORE

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HANDPICKED ARTICLES FOR OUR ACTIVE INVESTORS

Consistent Compounders

How Volatile Funds Cost Investors Dear

High volatility in an equity portfolio creates zones of ‘excitement’ and ‘fear’ based on recent performance. This adversely affects the quality of decision making by equity investors. As a result, historically, investor returns in Indian equity funds have been lower than fund returns across different periods. Similarly, a recent example from the US – NYSE […]

Feb 01 . 6 MIN READ READ MORE

Consistent Compounders

The Benefits of Timing are Inversely Correlated with the Quality of Fundamentals

The rate at which fundamentals of a company compound (and hence its share price) over the long term is inversely correlated with the quantum of benefit that an investor can achieve by perfectly timing her purchases at the bottom of the share price trajectory. Moreover, for a portfolio consisting of high-quality companies, benefits from a […]

Jan 03 . 8 MIN READ READ MORE

Consistent Compounders

CCPs use more ‘S-curves’ to elongate their fundamental compounding

Value addition from every initiative undertaken by a company follows an ‘S-curve’ with three parts to it – the investment phase, the growth phase and the fade period. The fundamentals of the overall company are a consolidation of ‘S-curves’ of all initiatives. There are several limiting factors to every initiative such as addressable market size, […]

Dec 01 . 8 MIN READ READ MORE

Consistent Compounders

The Path to Consistent Compounding is Paved with Free Cashflow

There are four key drivers of free cashflow in a business – revenue growth, profit margins, working capital efficiency, and asset turnover. The order of importance across these four drivers differs across businesses. As Marcellus’ CCP companies invest in technology to improve operational efficiencies, those companies that sell day-to-day essentials to their customers whilst avoiding […]

Nov 02 . 17 MIN READ READ MORE

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Strategy Series

Learning from history: Discounting in Financial Services is a bad strategy

A Simple Approach to Valuing Financial Services Companies

What KCP Lenders Can Teach SVB’s Management

Indian Lending: Gamblers versus Franchise Builders

Learning from history: Discounting in Financial Services is a bad strategy

A Simple Approach to Valuing Financial Services Companies

What KCP Lenders Can Teach SVB’s Management

Indian Lending: Gamblers versus Franchise Builders

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