Ravi Dharamshi of ValueQuest Investment Advisors presented his investment thesis on Data Patterns (India: DATAPATT) at Asian Investing Summit 2023.

Thesis summary:

In modern defense systems, electronics is a cornerstone of information superiority. Information may be a greater enabler of combat potential than the kinematic performance of a platform. With the rise in costs associated with an increase in the service life of platforms, electronics change repeatedly and are the force multiplier of choice.

Until 2020, the Indian defense forces were large importers of equipment and electronics. However, an emphasis on indigenous procurement brought rain to the parched Indian defense manufacturers, invigorating the industry. Most large platform integrators are “defense public sector units”, but there is also growing emphasis on private sector participants in defense systems, particularly as sub-component or sub-system providers.

Data Patterns is vertically integrated in the defense electronics and sub-systems space, catering to land, air, naval and space-based systems. Using a combination of building blocks to mitigate risk, the company has grown from a preferred R&D partner to India’s Defense Research and Development Organization to taking its first steps to bid on Make-1 and 2 programs.

Led by a technocrat owner-operator, with revenue growth of 25%-30% and EBITDA margins of ~40%, the company appears poised to enter a bigger market as a direct MoD vendor for electronic systems. With a vibrant local market and the opportunity to tap the global market, Data Patterns offers an opportunity to invest in the coming of age of Indian private defense companies.

About the instructor:

Ravi Dharamshi is Founder & Chief Investment Officer at ValueQuest Investment Advisors Pvt. Ltd. ValueQuest is more than a decade old PMS firm. Dharamshi family however has far longer legacy in the equities market of over 4 decades. ValueQuest manages AUM of 1800crs+ and have generated an XIRR of over 23% over the past 10 years. According to study done by PMS AIF World, It has been ranked recently as one of the top PMS firm in 10+ year performance category. He is managing VQ Platinum scheme, which has recently been awarded 5 star PMS rating by PMS Bazaar powered by Crisil, which is the highest possible rating. Ravi has an MBA in Finance from McCallum Business School, which is part of the Bently University in USA. He returned from the US after a brief internship stint at Salomon Smith Barney. He has been associated with the Indian stock markets for over 21 years. After graduating, he worked his way up through the stock market business, spending four years at RARE Enterprises, where he was involved with research, private equity deals and value creation activities before moving to ValueQuest and taking charge of research. With an enviable track record in stock picking and his ability to take bold calls, he has been instrumental in generating outsized investment returns. Ravi currently heads Investment Strategy and Research at ValueQuest and has proven to be an able leader. He is constantly focused on generating research ideas to maximize investment returns.