Our Mantra For Wealth Creation

Our Mantra for Wealth Creation
Over the years, Motilal Oswal Group has conducted various Wealth Creation
Studies. These studies and our passion for equity investing have helped us
hone a unique and focused stock-picking process that can be summarised in
4 letters - ‘QGLP’.
Where Q denotes quality of business and management, G denotes growth

in earnings and sustained RoE, L denotes longevity of the competitive
advantage or economic moat of the business and P denotes our approach of
buying a good business at a fair price. QGLP has helped us identify many
multibaggers in our portfolios as can be seen in the performance of our
equity mutual fund schemes and PMS strategies.
QGLP
for QUALITY for GROWTH for LONGEVITY for PRICE
Let's look at each of these characteristics in a bit more detail

Q
QUALITY
Q
Quality of a business/company is reflected in its ability to derive superior
returns on capital invested while treating stakeholders in a consistently fair
way. This ability should be deep-rooted and hence sustainable.
Quality itself can be characterized into two dimensions - ‘Quality of

Business’ and ‘Quality of Management’
1. Quality of Business
A quality business is one with a sustained competitive advantage
measured by high return ratios, in absolute terms and/or relative
to peers. Some good examples of these characteristics can be
seen in stocks like HDFC Bank and TCS
A quality business also has industry leadership position. Like

Bosch India which is the undisputed leader in fuel injection system
for medium/heavy commercial vehicles and tractors
In addition, quality businesses typically have a favourable industry

structure i.e. they operate in a monopoly, duopoly or oligopoly.
Good examples of such industries are Asian Paints and United
Spirits
Quality is found in secular and stable businesses; preferably

consumer facing. A good example of such a business is Colgate
which has been present in oral care as an established consumer
category for many years
Another characteristic of a quality business is its limited use of

leverage on its balance sheet
Q
Q
2. Quality of Management
Quality of management is one which has competence and can be

seen in the industry leading margins they command. Infosys and
Sun Pharma are good examples of this
Quality of management is also characterized by a rational capital

allocation policy. A good example is Hero Honda, given its focused
investment in core business and high dividend payouts
Quality of management believes in rewarding its shareholders

with regular dividend. Companies like Colgate and Page Industries
are examples
Quality of management thinks innovatively in terms of their

company’s products, processes and selling approach. For
example, the management of Pidilite has successfully created
new segments/markets through innovation
Quality of management is honest and trustworthy. It is also

transparent in its dealings and provides adequate disclosures.
Infosys is one of the foremost example
G
GROWTH
G
Most investors look for growth while selecting companies for investing.
However growth by itself doesn't mean much. It adds value only when the
company earns Returns on Capital higher than its Cost of Capital. Hence,
Growth is simply an amplifier; good when returns exceed the cost of
capital, bad when returns are below the cost of capital, and neutral when
returns equal the cost of capital. Higher growth adds value for high return
businesses and detracts value for low return businesses.
Growth can be identified with the following characteristics:
Is the company in a growing, large and addressable market? P&G in

the consumer goods space and Page Industries in the innerwear
category are not only in large and growing categories; they also
have the products to address various needs of their markets
Is the company gaining market share? Sun Pharma and Amara Raja
Batteries are good examples
There are various margin growth levers in the company’s

operations that can help identify growth. For example, Bata's
growth in margins has happened due to continuous reduction in its
employee costs
And lastly, the growth should preferably be in a profitable segment.

Induslnd Bank is a good example of growth in the profitable private
banking space
L
L
LONGEVITY
The final driver of franchise value is the sustainability of excess return by
companies. Over the time, economic forces tend to drive down return on
invested capital to cost of capital. Hence, a central task for an investor is to
assess how long a company earning above its cost of capital can continue
to find productive investment opportunities. Stock prices often reflect 10-
20 years of value-creating cash flows. Competitive strategy analysis is
particularly useful in this effort.
Longevity can be identified in the long competitive advantage

period that a company has. For example, Power Grid Corporation
and Container Corporation have a long period of competitive
advantage before competition can catch up
Longevity can also be seen in understanding growth potential for

10-15 years. For example, the low penetration of the spirits market
and United Spirits’ critical mass gives a good indicator of the
longevity of its growth
P
P
PRICE
Price of a stock has to be seen in conjunction with the value it offers. Price is
what we pay, value is what we get. Therefore, stocks are attractive only
when they are priced less than the value perceived in the stock.
Pricing can be evaluated by the following characteristics:
Discount to historical P/E (Price-Earnings) trading band
P/B (Price-to-Book) Discount
PEG (Price-Earnings to Growth) Ratio
DCF (Discounted Cash Flow)
Replacement Value Discount
Popular/Unpopular idea
Payback Ratio
Dividend Yield
QGLP in action
This is just a short introduction to the concept of QGLP. It has many interesting
permutations and combinations. However, the principals remain the same. Wealth
can be created if QGLP is practiced sincerely; along with the focus and discipline of
patience over the years.
It is a process practiced by investing oracles. All Motilal Oswal AMC’s offerings; be it

equity mutual fund schemes or PMS strategies; practice this process. So go ahead,
practice QGLP and create wealth. And if you do not have the expertise or time to
diligently practice this unique wealth creating mantra, all you need to do is invest in
any of our equity mutual fund schemes or PMS strategies.
To know more about us, please visit www.motilaloswalmf.com
Disclaimer: This brochure has been issued on the basis of internal data, publicly available information and other
sources believed to be reliable. The information contained in this document is for general purposes only and not a
complete disclosure of every material fact. The information/data herein alone is not sufficient and shouldn't be used
for the development or implementation of an investment strategy. It should not be construed as investment advice to
any party. All opinions, figures, estimates and data included in this brochure are as on date mentioned in the brochure.
The brochure does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and
damages arising out of the use of this information. The stocks and sectors mentioned herein is for explaining the
concept and shall not be construed as a recommendation or an investment advice from MOAMC. The statements
contained herein may include statements of future expectations and other forward-looking statements that are based
on our current views and assumptions and involve known and unknown risks and uncertainties that could cause actual
results, performance or events to differ materially from those expressed or implied in such statements. Readers shall
be fully responsible/liable for any decision taken on the basis of this brochure. Past performance may or may not be
sustained in the future. The stocks may or may not be part of our portfolio/strategy/schemes. The fund manager retain
the flexibility to increase or decrease the exposure of a stock or to exit a stock. This brochure is not for circulation in
general and is meant for intended recipient only.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully

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Our Mantra for Wealth Creation

Where Q denotes quality of business and management, G denotes growth

Let's look at each of these characteristics in a bit more detail

Quality itself can be characterized into two dimensions - ‘Quality of

A quality business also has industry leadership position. Like

In addition, quality businesses typically have a favourable industry

Quality is found in secular and stable businesses; preferably

Another characteristic of a quality business is its limited use of

Quality of management is one which has competence and can be

Quality of management is also characterized by a rational capital

Quality of management believes in rewarding its shareholders

Quality of management thinks innovatively in terms of their

Quality of management is honest and trustworthy. It is also

Growth can be identified with the following characteristics:

Is the company in a growing, large and addressable market? P&G in

There are various margin growth levers in the company’s

And lastly, the growth should preferably be in a profitable segment.

Longevity can be identified in the long competitive advantage

Longevity can also be seen in understanding growth potential for

Pricing can be evaluated by the following characteristics:

Discount to historical P/E (Price-Earnings) trading band

P/B (Price-to-Book) Discount

PEG (Price-Earnings to Growth) Ratio

DCF (Discounted Cash Flow)

Replacement Value Discount

It is a process practiced by investing oracles. All Motilal Oswal AMC’s offerings; be it

To know more about us, please visit www.motilaloswalmf.com

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