Over the past 15 years, ValueQuest Investment Advisors has built its investment framework around what Shah describes as a “private equity approach” to public markets—focusing on deep research, management quality, industry structures and long-term profit pools before making investment decisions.
In this edition of ETMarkets PMS Talk, Shah discusses how the firm’s investment philosophy has evolved across market cycles, why concentrated portfolios can outperform when backed by rigorous analysis, and the structural themes—from manufacturing and defence to AI, aerospace and energy transition—that could shape the next decade of investing.
He also shares his views on where alpha opportunities lie in today’s market and why some of the most compelling investment ideas remain under-owned and under-appreciated by the broader market. Edited Excerpts –
Q) Value Quest has completed 15 years in the investment management business. How has your investment philosophy evolved over the years, especially across different market cycles?
A) Over the last 15 years, our philosophy has remained anchored in identifying structural themes and trends early, supported by a strong top-down understanding of the economy and industry cycles.We combine this with deep bottom-up research to identify businesses that are emerging leaders or credible challengers within those themes.What has evolved over time is the institutionalisation of our process — we have added stronger guardrails around risk, portfolio construction and governance to improve consistency of outcomes across market cycles.This balance of conviction-led investing and disciplined risk management continues to define ValueQuest’s approach.
Q) Your firm follows a high-conviction and concentrated portfolio strategy. In a market where diversification is often emphasised, what gives you confidence in this approach?A) At ValueQuest, we follow what we often describe as a “private equity approach” to public markets — spending significant time understanding industries, management teams, competitive advantages, and long-term profit pools before making investment decisions.
We have always believed that informed concentration is different from speculative concentration. When you understand management quality, industry structure and business fundamentals deeply, a concentrated portfolio can lead to better risk-adjusted outcomes.
Diversification beyond a point it can dilute conviction and impact. Our focus remains on understanding businesses deeply and managing risks proactively.
Q) ValueQuest has consistently focused on identifying structural megatrends early. Which themes currently excite you the most over the next 5–10 years?A) Over the next 5–10 years, we remain highly constructive on India’s manufacturing opportunity, driven by both domestic demand and global supply chain diversification. AI is emerging as a defining global theme, and select Indian companies are increasingly becoming part of the hyperscaler and data centre ecosystem.
We also see strong long-term potential in defence and precision engineering, especially across aerospace and space-linked opportunities. Energy transition continues to benefit from powerful structural and geopolitical tailwinds, while pharma CDMO and the emerging GLP-1 ecosystem remain compelling healthcare themes. These opportunities are being shaped by policy support, technological disruption and rising strategic self-reliance globally.
Q) Given the current market valuations, where are you finding alpha opportunities today — largecaps, midcaps, or emerging businesses?A) We do not approach markets through the lens of market-cap segmentation. Our investment process is driven more by identifying emerging trends, structural shifts, and areas where large profit pools can potentially develop over the next 5–10 years.
Our top-down thematic research helps us identify sectors and businesses that are beneficiaries of these long-term changes, irrespective of whether they are classified as largecaps, midcaps, or emerging companies.
Historically, alpha generation has often come from identifying under-appreciated businesses early in their growth journey rather than focusing on size classifications.
Q) The factsheet highlighted sectors such as energy transition, defence, aerospace, and manufacturing as key focus areas. What makes these sectors particularly attractive from a long-term investment perspective?A) These sectors are attractive because they are aligned with powerful structural, geopolitical and policy-led tailwinds. Energy transition is likely to accelerate further amid recurring oil shocks and the increasing global focus on energy security and localisation.
Defence spending is also set to rise meaningfully over the next decade as countries prioritise self-reliance and modern warfare shifts from traditional platforms towards drones, anti-drone systems and advanced technologies.
In aerospace and precision engineering, India has a strong structural advantage driven by its engineering talent, cost competitiveness and growing role in global supply chains.
Q) India’s manufacturing story is gaining global attention due to supply chain diversification and policy support. How are you positioning portfolios to capture this opportunity?A) Manufacturing is entering a multi-year upcycle as the world moves from an asset-light model towards rebuilding hard assets and resilient domestic supply chains, creating long-duration opportunities for globally competitive Indian businesses.
We are positioning portfolios to capitalise on this opportunity largely through “picks and shovels” businesses – particularly capital goods, industrial technology and engineering-led companies that enable this broader manufacturing buildout.
Our focus remains on identifying companies with strong execution capabilities, technological differentiation and the ability to gain market share as both domestic capex and global supply chain diversification accelerate. Q) As a firm managing over Rs 27,000 crore across mandates, how do you maintain agility and continue generating alpha at scale?A) Generating alpha at scale requires staying ahead of emerging trends while maintaining deep research and strong risk discipline.
We prefer scalable businesses with strong execution and market leadership, which allows us to deploy capital meaningfully without losing agility.
Our “private equity lens” helps us develop differentiated insights, assess industries with a long-term ownership mindset, and identify early signs when an investment thesis is evolving or getting challenged.
We believe intellectual agility and deep engagement with portfolio companies are far more important than attempting to mirror benchmarks or cover every sector.
Q) Which sectors or themes do you believe are still under-owned or under-appreciated by the broader market?A) Many of the most compelling opportunities today are still in relatively early stages of growth and often lie outside benchmark indices, which naturally leads to lower institutional ownership and market attention.
Aerospace, precision engineering and AI/ data center plays are still early in their growth journey and not fully reflected in market positioning.
Similarly, energy transition continues to be viewed narrowly despite the long runway and shifting profit pools emerging across the ecosystem. We recently put out a note highlighting the same.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
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