Why Utpal Sheth, Jhunjhunwala’s right-hand man, looks for gorillas

livemint.com:

It is time that gives the long-term investor an advantage, says Utpal Sheth, CEO of Rare Enterprises— the Mumbai based private equity firm that manages assets of more than $1 billion. “I would say 80-90% of market participants are in it for less than a year. As an investor, if you have the conviction and courage to stick around for the long term, most of your competition automatically reduces." adds Sheth, noting that most people do not have the commitment for long-term investments.

Sheth, who joined Rakesh Jhunjhunwala’s Rare Enterprises as CEO and Partner in 2003, started his career at 18 and has worked with ASK Financial, HRS Insight Financial Intermediaries (a financial intermediation firm started by his father), and Enam Financial Consultants , besides being a co-founder and mentor of the Trust Group that offers a host of financial services, including debt syndication and merchant banking. Sheth, who is on the board of Trust Mutual Fund—an asset management company (AMC) spoke to Mint about his investment philosophy Terminal Value Investing (TVI) which influences all decisions taken by the AMC. “TVI does not refer to the terminal value that you get in a discounted cash flow calculation," Sheth explains.

“It is a nebulous and dynamic concept. It cannot be a precise number because the key factors that contribute to TVI cannot be quantified. Think of it like a climber who is looking up at Mount Everest.

You cannot see the top because of clouds in between. You can sense the mountain and its top but you cannot see it," he says. According to Sheth the factors that contribute to TVI are megatrends (that lasts several decades), leadership attributes, and intangibles (like culture, brand, institutionalization, etc.).