Preparing, Not Predicting

How we are positioning in small and micro caps before the tide turns

Every phase in markets has its own character. The last two to three years in the sub ₹2,000 crore market cap space have been marked by sharp drawdowns, limited liquidity, and an absence of investor enthusiasm. This is exactly when serious work needs to be done, when attention is elsewhere, and the foundations for the next cycle are quietly being laid.

That is how we have spent our time. Not chasing momentum or headlines, but going deeper into value chains, researching more companies, tracking industry shifts, and identifying businesses that can create wealth when the cycle turns.

For our readers, this note is not a set of stock calls. It is a window into what is keeping us busy: the themes we are investing time on, the industries where structural tailwinds are building, and the kind of opportunities that fit our discipline. Over the next few months, you will see this work translate into detailed research, sectoral reports, and actionable recommendations.

Our earlier picks, Creative Graphics, CWD, Senores among others, stand as proof of what disciplined, bottom-up research in this segment can deliver. The opportunities we are working on today are no less compelling.

Small, Micro, and SME Segment: Preparing, Not Predicting

The last 12–18 months have taken out much of the froth from the small and micro-cap space. Drawdowns here are always sharper than in larger segments, but that pain clears the ground for stronger recoveries. We wrote our detailed views for this segment here.

Today, we are uncovering companies trading at single digit to early double digit P/E or EV/EBITDA multiples on current earnings, with growth prospects that are visibly stronger than in the past driven by various factors like capacity expansions, regulatory shifts, gaining market share, rising demand among others.

No one can predict exactly when the next bullish phase in this segment will arrive. But we can prepare for it. We are more open to researching new ideas than we have been in the last two to three years, while staying disciplined on valuations and risk. As Howard Marks has said: “You can't predict, but you can prepare.”

The opportunity set in this segment is now broader than it has been in years. Earnings are improving, valuations are reasonable, and as bullish phase of the market returns, portfolios built with discipline today will stand to benefit disproportionately.

Wind Power: Our Next Big Theme Idea

The wind power sector is finally moving from policy to execution. After years of muted additions, the government now targets ~50 GW of new capacity over the next five years, compared to just 4.5 GW added in FY25.

The ALMM rules under AatmaNirbhar Bharat mandate domestic sourcing of critical components like yaw boxes, gearboxes, control panels, blades, towers that were earlier heavily imported. This shift creates a powerful five year tailwind for domestic manufacturers across the value chain.

We are finalizing research on both listed and unlisted companies positioned to benefit. A few are entering into technology transfer partnerships with Chinese players, which in the current geopolitical climate could prove to be a decisive advantage.

Our upcoming detailed sectoral report will map the value chain, highlight key beneficiaries, and lay out our preferred investment plays. We will also write extensive posts on the sector, value chain, preferred plays in the next few months.

Undiscovered Plays in Jewellery

The organised jewellery space has seen significant re-ratings in recent years, but beneath the large players, we have identified two companies trading at around 10x trailing earnings. Both the companies are expected to showcase stronger topline growth and expanding profitability. This mix of improving fundamentals with undemanding valuations is rare in today’s market. We believe these businesses can compound meaningfully in the years ahead.

Continuing Research in the CCTV Space

The CCTV and surveillance space is another theme we have been ahead of the curve on. Earlier this year, we released a detailed report highlighting the structural growth drivers in the industry with regulatory tailwinds.

Our recommended company from this space is executing well on its roadmap, delivering on growth expectations and building competitive strengths. Several unlisted peers are also preparing IPOs in the next 12 months, and we continue to evaluate them carefully.

As always, we will act only when valuations justify the risk-reward. But the direction of the industry is clear: CCTV is emerging as a structural growth sector, and we intend to stay at the forefront of capturing this opportunity.

New Bottom-up Opportunities

Beyond these themes, our bottom-up process continues to surface niche opportunities at different stages of research:

• Healthcare: We are assessing a small listed company, down 50% from its IPO price, that has recently entered a higher margin vertical. If execution holds, its earnings profile could look very different over the next few years.

• Nutraceuticals & Consumption: Select domestic consumption plays with ambitious expansion plans are on our radar, particularly in niche nutraceutical markets where scalability is high. Again, available at undemanding valuation on existing earnings.

• Footwear Retail: An old shoe retail business, trading at just 1x sales while peers command 5x, is undergoing a meaningful transformation from new product launches to a change in management. This could mark the start of a fresh cycle for the company.

Our Recommendations so far: Delivering Consistently

Our past recommendations like Creative Graphics, CWD, among others continue to deliver strong operational and financial progress. These are companies we partnered with early, stayed invested in, and continue to back as they execute their long term vision. They reinforce what a research driven, valuation conscious, and patient approach in the sub ₹2,000 crore space can achieve.

The Road Ahead: Prepared, Not Predicting While Being Disciplined

We are expanding our research coverage and deepening our conviction across themes and companies, guided by our process-driven approach. Every investment we consider must pass the filters of valuation comfort, sustainable growth, and risk-adjusted return.

The environment in the sub ₹2,000 crore universe is more favourable than it has been in years. Portfolios built now, with discipline, can create life changing outcomes over the next 2–3 years.

The work is being done. The opportunities are real. The tide will turn as it always does. The question is: will you be positioned when it does?

If you are interested in accessing our research and joining a network of well informed investors, please contact us at gaurav.a@nineonecapital.in or fill in the form here (link) to discover how our research services can keep you ahead of the curve.

Important Note and Disclaimer: This note is shared solely for educational purposes. Nothing discussed herein should be construed as a buy or sell recommendation. The companies and sectors mentioned are presented only to illustrate the type of work we are doing and the themes we are evaluating. Investing involves risk, including the risk of loss of capital. Readers are strongly advised to consult their financial advisor before making any investment decisions in relation to the companies or sectors discussed.