Catch ‘em young is a phrase used by James J Heckman, a Nobel laureate economist, in devising a public policy which shows that investing in disadvantaged young children has a high economic return. Though the policy is aimed at promoting fairness and social justice, it does find application in investing as well. Identifying businesses at an early stage with a sound revenue model creates wealth in the long run.
An industry which is perceived, generally as inefficient and murky, stands disadvantaged to attract investments. Construction is one such business. The market cap of all listed standalone building construction companies combined is less than Rs.35,000 crore and their performance has been patchy.
The more familiar you are with a company and the more you understand its business and competitive environment, the better are your chances of finding a good ‘story’. This is why Peter Lynch is a strong advocate of investing in companies with which one is familiar, or whose products or services are relatively easy to understand. Lynch’s bottom-up approach means that prospective stocks must be picked one by one and then thoroughly investigated — there is no formula or screen that will produce a list of prospective ‘good stories’.
I came across one such company in my hometown (Ahmedabad) that has found the right balance of growth and financial discipline that distinguishes itself from most companies in the construction space.
Prahaladbhai Shivrambhai Patel (PSP), a civil engineer and first generation entrepreneur, started PSP Projects with his personal savings in 2009. The company got its big breakthrough in the same year when it won and completed within the stated time line a Rs.100 crore-hospital project in Ahmedabad. Since then, it has executed over 80 projects worth Rs.1