Strategy B · Primary · 20–30%

Small & Micro-Cap Listed

Listed companies below ₹2,000 crore in market value with limited institutional ownership and thin analyst coverage — entered before broad institutional adoption re-rates them. The most mispriced universe in Indian equities, and the heart of the transitions thesis.

Role in portfolio: Primary alpha sleeveWhere the ownership, information and liquidity transitions run simultaneously
Target allocation: 20–30% of the portfolio
Opportunity: Sub-₹2,000 crore companies growing earnings at 3–5× the large-cap rateWith institutional ownership and coverage far below large-cap levels — persistent mispricing
What creates alpha: Entering before the institutional re-rating triggersCoverage initiation, index eligibility and FII/DII adoption reprice the register — the entry precedes them
Investment criteria: Emerging earnings, governance or liquidity improvement; promoter quality; clean paperGovernance red flags are disqualifying at stage 6 — in this universe promoter quality decides outcomes
Typical holding period: Quarters to a few years, catalyst-dependentHeld until the re-rating case completes or the thesis breaks — whichever comes first
Liquidity: Listed but thin; positions sized to realistic exit capacityImproving liquidity is part of the return, not an obstacle to it
Primary risk: Small-cap volatility and business fragilityWider drawdowns and thinner governance than large caps — see the risk register
Exit framework: Sell into the institutional adoption the entry anticipatedBlock or market exit as volumes deepen; mandatory IC revisit if the catalyst stalls
Research process: The full pipeline with emphasis on stages 3–6Channel checks, promoter background, on-site visits — the information edge is built, not bought
Catalysts: Coverage initiation · index inclusion · FII/DII eligibility · earnings surprise · float expansion

Why This Universe All Five Strategies