Lapis Compounders Contest

ISB May 2019

Lapis Background
• Lapis India Capital Advisors Private Limited (Lapis), founded by the former senior management
of SUN-Apollo Real Estate Advisors Private Limited, is a privately held investment
advisor/portfolio manager in India, with offices in Mumbai (www.lapisindiacapital.com).
• Lapis has two main businesses
o Real Estate – providing non-binding real estate investment advisory services to global
institutional investors, club/commingled, discretionary funds with respect to
opportunistic investments in India real estate. Lapis is the advisor to the manager of
SUN-Apollo India Real Estate Fund LLC, one of the earliest India-focused real estate
funds, which raised US$630 million in 2006/07.
o Public Equity – providing portfolio management services to domestic clients seeking
to invest in public equity in India. Lapis is registered with SEBI as a Portfolio Manager.

Lapis Compounders Contest

Objective:
• To identify one stock investment (business listed on BSE/NSE) that would provide a 20% return
CAGR over the next 10 years
• Parameters that must be considered
o The business must be a ‘Compounder’ or have potential to become a ‘Compounder’
–businesses that compound earnings and cashflows with high returns on capital over
long periods of time
o The company selected should NOT be in the business of lending money i.e. no banks,
NBFCs or other types of lending businesses
o Market capitalization of the company must be between Rs 500 Cr and Rs 10,000 Cr as
of 31st March 2019

Useful Pointers
• We believe the fair value of a business is a function of the earnings power of the business
• Over time, Compounders are able to not only grow their earnings at a healthy rate but also
sustain earnings at the higher levels, resulting in a structural increase in earnings power of the
business, and consequently a sustained increase in fair value of the business
• Stock returns from compounders are a function of 2 variables: 1) sustained increase in
earnings power of the business 2) Valuation re-rating / de-rating (some examples of
businesses compounding from 2010-18 are shown below). Contestants would be expected to
provide their views on both variables for the stock they have selected. We would prefer
contest entries where the larger part of the return expectation is earnings driven.
 Lapis Compounders Contest
ISB May 2019

Contest Rules
• Students may form a team of up to 3 members for this contest
• Contest Start date: 13th May 2019
• Round 1: Investment thesis (submission by 15th June 2019)
o Write-up: 5-7 pages explaining the investment thesis. This should include (but may
not be limited to):
▪ Company’s competitive advantage
▪ 10-year growth opportunity for the business
▪ Assessment of management quality
▪ Potential risks to investment thesis
o Financial analysis:
▪ Historic financials for last 2 years of the company
▪ Projections for next 2 years (FY20 and FY21)
▪ Financial analysis for the business – should include cash generation potential
of the business, view on profit margins and RoE for the business
▪ Expected return based on earnings compounding and potential valuation re-
rating / de-rating

Shortlist for Round 2: 10 teams with the best entries would be selected to move on to round 2

• Round 2: Addressing Lapis questions (22nd June to 30th June 2019)

o Lapis team will pose a set of questions in relation to Round 1 submissions of the
selected teams
o Contestants would be asked to respond to the questions in writing within a week, this
could be a 2-3 page additional write-up

Shortlist for Final Round: 5 teams would be selected to move on to the Final Round

• Final Round: Presentation to Lapis senior team (around 1st week of July 2019)
o Senior management from Lapis would travel to ISB
o Teams would present their stock ideas to Lapis management

1 team would be selected as the winner of the contest

Contest Prizes
▪ Each member of Teams 6 - 10 would receive a Merit Certificate from Lapis
▪ Each member of Teams 2 – 5 would receive a Merit Certificate and a gift from Lapis
▪ The winning team would receive a Rs 100,000/- cash prize, which would be shared by team
members. In addition, each member of the winning team would receive a Merit Certificate
and a gift from Lapis.