Rochon-alysing the Indian stock market

What if we apply the Francois Rochon school of investing to the Indian context? Of course, some of his four-part process uses discretion. However, here is what you would find if you were to run this philosophy in the Indian context.

  1. You have to remove banking and financial companies as applying Rochon’s process to them is not feasible

  2. Keeping a market cap requirement of Rs 600 crore or more you get 1,186 companies The number of companies reduces further if you keep companies with at least five years of financial history only

  3. 389 companies get dropped out when you apply the debt-to-PAT ratio of less than four times

  4. Another 486 companies get filtered out for not having an ROE of 15% or more Further 58 companies fail to meet the five-year profit after-tax growth of at least 10% per annum.By now only 228 companies remain 174 of the remaining companies have a promoter holding of at least 50%

  5. 32 companies have a current P/E ratio of less than 50 and less than the five-year median P/E ratio.

Finally, another 18 companies would get excluded due to a lack of market leadership, competitive advantage, and/or presence of cyclicality. Which 14 companies finally stand out after the Rochon acid test? We take a snapshot of the 14 companies that tick all the right boxes as far as Francois Rochon’s investment philosophy is concerned. This is an objective view of these companies and how their businesses have performed and grown over the last few years, along with causes of concern, if any.

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