🇮🇳 Searching for compounders in India

There are over 7,500 companies listed in India. Over 2,500 listed on their National Stock Exchange (NSE) and over 5,200 listed on their Bombay Stock Exchange (BSE). This reflects both the size and growth of this remarkable country. It's GDP is project to continue around 6-7% in the near term. It has a young and growing workforce. There's an increasing level consumption of goods and services, by both individual consumers and corporates. And on top of that, India is increasingly adopting digital infrastructure.
However, there are risk factors to be mindful of - including unpredictable policymaking (particularly in taxation and regulation), layers of bureaucracy and - as we've seen recently - geopolitical tensions with its neighbour.
Despite these challenges, India's scale and its population present some compelling opportunities that we will now explore here.
To whittle the list of 7,500 Indian companies down, I used four main filters. The first is my quality screen, which factors in growth, returns on capital and margins (and other ratios too).
The second filter was to screen for share price linearity. This was to ensure I directed my attention to companies with a good track record (i.e. companies that have been publicly listed and reporting growth for a while).
The third filter was to remove sectors and industries that typically have poor economics. India has a wide range of publicly listed banks, fast moving consumer goods companies, automobile companies and even private hospitals. I would personally avoid such sectors, and instead see the best opportunities in more capital light sectors, where less leverage is required to generate growth - such as financials (excluding banks and insurers), software and industrials (but only where there's high value being added).
The fourth (and final filter) was to take recommendations from investors with experience of investing in India. The companies with the most recommendations were HDFC Bank, Titan, Bajaj Finance and Varun Beverages. You can find a list of recommendations in the Appendix below.
Armed with a strong list of companies, I began to dive into their business models before settling down on what I found to be the most compelling opportunities. The following are the highest-quality Indian companies I’ve managed to identify - including a mix of stock exchanges, digital infrastructure and advanced industrials.