The Excitement of Finding a Multibagger
Ever since we were kids, there has been something fascinating about stories of treasure hunts. Whether it was Ali Baba and the Forty Thieves, National Treasure, or Pirates of the Caribbean, the idea was always the same: somewhere out there lies a hidden treasure, waiting to be discovered.
The stock market is not very different. Investors come to the market with a similar goal. We just call our treasure a multibagger.
Everyone is looking for one. And perhaps that is what makes investing so exciting. There is something incredibly satisfying about finding an undiscovered or underappreciated company, investing before the crowd notices it, and then watching the market slowly recognize what you saw early.
The stories are everywhere. Investors who turned an investment into 5x, 10x, 20x, even 100x returns. A small investment that compounds into something meaningful over time. That possibility is what keeps investors searching. Because beyond the numbers, finding a multibagger is the closest thing investing has to finding buried treasure. And that is exactly what makes investing so much fun.
The Preparation of a Multibagger
Maybe your favourite dish is pizza. You love eating pizza, but you probably don’t love every pizza. You might prefer a classic Margherita, while your friend swears by Pepperoni. Everyone has their own preference, a favourite ingredient, a particular combination, or simply a way of preparing the dish that makes it special.
And every cook has their own recipe. The same dish prepared by your mother can taste completely different from one prepared by your father, you, or a professional chef. The ingredients may be similar, but the recipe makes all the difference.
Finding a multibagger is no different.
There isn’t one universal recipe for finding a multibagger stock. They come in all shapes and sizes, across different industries and at different stages of their journey. But over time, we have found that the most interesting opportunities tend to share a few common ingredients.
So today, we are sharing our recipe for finding a multibagger, the four types of opportunities we look for in the market:
The Undervalued Stock: A good business that the market is currently overlooking or undervaluing, creating an opportunity for its true value to be recognized. - Supriya
The Industry Tailwind: A company operating in an industry where structural growth is so strong that its growth can exceed what the market currently expects. - HFCL
The Growth Investment: A company making significant investments or adding new capacity that can materially expand its future earnings potential. - Force
The Business Pivot: A company changing the way it operates, entering new markets, or shifting its business model in a way that opens up entirely new avenues of growth. - Bharat Forge
These are our four key ingredients. And just like in cooking, it is not enough to simply have the ingredients. The magic lies in how they come together.
1/ The Undervalued Stock
Markets have a tendency to overhype a few growth companies while punishing laggards. This can result in a company being valued on its current earnings rather than its potential, creating a valuation gap. Poor earnings, management changes or temporary scepticism can create these opportunities. Over time, quality businesses that deliver tend to get recognized.
Supriya Lifescience is the stock that comes to our mind when we think of this. One of the rare companies that exported pharmaceutical APIs to China, whereas this trend happens in reverse, the company faced headwinds when China’s market closed because of COVID-19 pandemic in FY23. Imagine, more than 30% of its revenue came from China and then suddenly no business could be continued. This delayed shipments and the company’s revenue and profits declined.
As a result, the company’s revenue declined YoY by 13% in FY23 but the bigger loss was in profitability, with the EBITDA margins declining to 28% in FY23 compared to 40% in FY22. Unsurprisingly, the stock took a beating and corrected over 40% from its peak when we entered in October 2023.
However, we saw the fall in the valuation as an opportunity because of the quality of the business. The temporary challenges didn’t impact the company’s fundamentals. It was still a strong, backward integrated API manufacturer with a leadership position in India. Hence, we invested in the company despite the magnitude of challenges it faced. Yes the China market closed but the management pivoted towards European and South American markets. The revenue and profitability started improving from 2024 and our investment grew roughly by 4x, when the stock recently crossed the Rs. 1,000 mark after Q4 FY26 results.
2/ The Industry Tailwind
Sometimes an entire industry catches fire, driven by rising demand, favourable government policy, technological change or other structural factors. When this creates a sustained growth cycle, companies operating in the industry can enjoy strong revenue and profit visibility. Investing before the full potential is reflected in valuations can create significant opportunities.
No better example for this than our investment in HFCL. The Indian stock market was well aware of HFCL, but it was considered a laggard stock. The profitability of the telecon infrastructure business was dwindling while its foray into the defense segment faced delays because of several approvals and audits. The investment thesis was falling flat on its phase and the stock was trading at a 5Y low of Rs. 61 in March 2026.
But, a bigger story was brewing in the global market, thanks to the explosion of AI investment. The entire world today acknowledges the expansion of data centers worldwide and they simply cannot function without optic fiber cables for data transfer. HFCL primarily served telecom companies with its offerings but eventually the demand from the international market rose, optic fiber cables became prized possessions and HFCL was the market maker.
We invested in the stock three years ago as we saw potential of growth in its telecom business and significant value addition from its defense business. The industry tailwind made our investment worth millions with the stock up ~4x within a span of the last 6 months. Since then the revenue has more than doubled, the profits have exploded, and rest as they say is history.
3/ Growth Investment Stock
Some companies are simply not satisfied with their existing scale. They continue investing in capacity, capabilities and vertical integration to build a much larger business. When these investments start bearing fruit, they can drive both strong revenue growth and margin expansion, creating a visible trajectory for earnings and potentially transforming the company.
Caplin Point has been a gem in our portfolio since the beginning. While most Indian pharma companies focused on the competitive US and European markets, Caplin chose a different path, building a strong presence across underserved Latin American markets such as Bolivia, Colombia, Mexico and Brazil. At the same time, continuous investments in manufacturing capacity and backward integration strengthened scale and margins.
This unconventional growth strategy was not appreciated at the beginning by the market. The US and Europe were considered high-growth markets whereas unregulated markets were seen as a low-margin segment. For many years Caplin Point’s stock traded well below the valuation of its peers which were operating in the US. Meanwhile, the company was building a very strong asset base towards both manufacturing and distribution, controlling a very important portion of the entire supply chain of the market.
This consistent reinvestment created a durable compounding engine. From ₹400 to ₹2,500, we have witnessed the entire journey. Our thesis played out better than expected as Caplin became a leader in the South American market and now has also entered the US market through launch of high-margin complex generics in the region.
4/ The Business Pivot
A business pivot occurs when a company identifies a new opportunity through product differentiation, a new market or entry into an entirely new business segment. If successful, the pivot can fundamentally change the company’s growth and profitability profile. More importantly, it can change the market’s perception of the business, creating significant investment opportunities.
We initiated a position in Force Motors following their ₹300 crore joint venture with Rolls-Royce Power Systems in March 2018, where the entire MTU Series 1600 engine manufacturing line would be relocated from Germany to their Chakan facility near Pune. This strategic investment created a ₹1,000 crore revenue opportunity while establishing Force Motors as the exclusive global manufacturing hub for these high-powered engines (545-1,050 HP) used in power generation and rail applications. Alongside this, the company’s Traveller franchise continued to benefit from its dominant position in India’s 9-26 seater passenger vehicle segment, providing another avenue for scale and growth.
This wasn’t as smooth as it sounds. The pivot in business required re-allocation of resources and the company went through a major restructuring. On top of this, COVID-19 pandemic slowed down the entire execution process. Force Motors reported a revenue decline in FY20 and FY21, and the company even became unprofitable in FY21. Two years of non-performance makes any investor jittery, but we continued to hold the stock because of our strong conviction. The thesis finally started showing results from FY22 and the company continuously reported growth in both revenue and profitability ever since.
A small but strategic shift in the business model created a much larger growth opportunity for Force Motors. By leveraging its existing manufacturing capabilities to enter the high-powered engine segment through the Rolls-Royce partnership, the company opened up a new revenue stream while strengthening its position in its core businesses. Force Motors share price chart is a clear sign of its multibagger status with the stock rising more than 15x since our initial investment.
The Takeaway for Investors
Multibagger stories sound amazing, and we have plenty more to share. But finding one is far harder than the stories make it seem. More importantly, it takes patience and conviction to hold on when things don’t go according to plan.
Every stock we have discussed has faced its share of challenges, periods of slow growth, sharp corrections, broader market declines and even geopolitical disruptions. We have seen it all. Our investment philosophy is built around long-term ownership of high-conviction, quality businesses. And even today, our team comes to work excited to find the next multibagger, not just for ourselves, but for our investors and everyone who reads this newsletter.
Of course, not every investment works out the way we expect. Mistakes and fumbles are part of the game, and we have dropped the ball more than once. But that only makes us more determined to get back up and keep searching.
Because we believe the next multibagger could be just around the corner.
Disclaimer: This newsletter is for informational and educational purposes only and does not constitute investment advice or an offer or solicitation to buy or sell any securities. Views expressed are based on publicly available information as of the date of publication and may change without notice. Please consult a qualified financial adviser before making any investment decision.