Rishi Gupta of Shepherd’s Hill highlighted that SmallCap Spotlight focuses on understanding businesses through qualitative insights, emphasising management quality, business models, competitive positioning, and long-term sustainability over stock prices. He added that the platform aims to bridge the visibility gap for small-cap companies by facilitating conversations with business leaders and entrepreneurs.
I think let me set the context a little bit and say that at SmallCap Spotlight, while we cover listed companies, we’re not interested in stock prices. So in investment analysis, that’s different, right? You are interested in the quality of the company and the stock price. But at SCS, we’re only interested in the company itself, not the stock.
And so you can study a company through numbers and quantitative analysis. You can look at the balance sheet, the profit and loss statement, the cash flow statement. But I think the value we bring at SCS is our focus on qualitative factors.
And qualitative factors actually give meaning and context to the numbers that you see on the balance sheet. And you can do this by asking simple questions. You can ask, what does the company do? What is its business model? Does it have a product that is meaningful to its customers? Is there brand recall and loyalty? Or is it just a commodity that can be easily replaced? You can ask whether there is competition? What is the competitive scenario? Does it have a strong position? Is there a market share that it has? Or is it something that can always be subject to something like pricing pressure? You can also ask, are the earnings sustainable? Can the company continue to earn the same level of revenue and profit over the next few years? How does it do that? Does it have any special feature, any unique selling point to allow it to do that and maybe even grow the earnings? What kind of level of integrity and honesty does the management have? Do they treat all the stakeholders fairly and equitably? You can look at many other factors.
And essentially, qualitative factors are not something that you can put in a neat formula. But they are as important, if not more important than the quantitative factors. So the question is, how do you start approaching this problem? And the best way to do that is to actually talk to the key people themselves, the key decision makers, the key managers, the founder, the CEO, the entrepreneur.
And of course, when you talk to them, you will get data and numbers. But what is really interesting to us at SCS is the path that they have taken, the journey. These people have spent their whole career, number of years.
And to get their insight, to understand what are their challenges and opportunities, I think is really interesting to us and also to the general viewer or reader that’s interested in business. And so here is the problem statement, is that in our market, we categorise companies by market cap. And SEBI and AMFI have a formal categorisation that’s published every six months, which treats companies as large cap, mid cap, or small cap.
Large cap being the top 100 companies, mid cap being 101 to 250, and small cap being all the others. So 251 to I think BSE has about 5,000 plus listed companies. Now keep in mind that the number 251 on this list is more than a 30,000 crore market cap.
So it’s a wide range of companies. But the media attention and financial papers tend to focus on the top 250, which is the large and the mid cap. And perhaps there’s a good reason for this, because 90% of the money or the funds are invested in these top 250 companies.
But for the rest of us who would like to know about these hundreds and thousands of other companies, there’s not that much access. And so a couple of years ago, we thought we would try to fill that gap a little bit, bring attention, create a platform where companies can meet and talk to not just investors, but people who are generally interested in the hard work that these people do. I mean, they’ve created businesses, they’ve provided employment.
Actually, I think collectively, they are responsible for taking the nation and the economy forward. So a couple of years ago, we started small cap with this objective. And I think the only thing I want to mention before we begin is that because we are incubating SCS within Shepard’s Hill, which is an asset manager, they’re very careful.
And we have two very strict guidelines, which is you not see any of our own portfolio companies showcased on this platform. And we don’t invest in any of these companies from the time that we interview them to about 30 days after the interview is published. So with that, let me welcome you all once again.
I think we have a great list of conversations ahead. There’s a special, unique preview on the RJ Rakesh Jhunjhunwala film that we have for you. And then there’s lunch as well.
So please stay for that. Thank you and welcome.