Idea Brunch with Andrei Stetsenko of Gymkhana Partners
Welcome to Sunday’s Idea Brunch, your interview series with great off-the-beaten-path investors. We are very excited to interview Andrei Stetsenko!
Andrei is currently a partner at Farley Capital and co-manages Gymkhana Partners, an India-dedicated long-only equity fund invested primarily in the shares of India-based mid- & small-cap companies. Over the past decade and a half, Andrei has traveled to India 17 times to meet with hundreds of listed Indian companies, and has been cited as an expert on India’s equity market in media including Barron’s, Bloomberg News, and the Financial Times. From mid-2013 through September 30, 2025, Farley Capital’s India strategy has generated an annualized USD return net of all fees, profit allocations, and Indian taxes of 13.2%.
Andrei, thanks for doing Sunday’s Idea Brunch! Can you please tell readers a little more about your background?
I was born in Kyiv, Ukraine in the twilight years of the Soviet Union. My parents began planning to emigrate right after I was born in 1989 – three years after they watched with disgust as the Soviet authorities attempted to cover up the catastrophe unfolding 70 miles north at Chornobyl. By 1992, they had made it to Florida, and by the late 1990s, they had managed to get me enrolled on scholarship at the otherwise completely unaffordable local private school (Shorecrest Prep). Being all the rich kids’ poorest friend definitely lit a fire under me – it was around that time that I began poring over the financial section of any newspaper I could get my hands on.
Around the same time, my parents (like so many other retail investors) bought into the dot-com mania, only to lose a lot when companies like Palm came crashing back down to Earth. Experiencing that from the sidelines impressed upon me the wisdom of the kind of long-term, value-conscious investing exemplified by a funny old guy named Buffett who kept popping up in the newspapers. While speculators were chasing profitless dot-coms, he was busy snapping up boring but solid businesses like Benjamin Moore and Fruit of the Loom.
That lesson stayed with me when I headed up to Princeton, where I gravitated toward classes on sovereign debt restructurings, Soviet central planning, and EU trade policy, and spent my senior year writing a thesis examining Russian natural gas monopoly Gazprom’s efforts to build undersea pipelines bypassing Ukraine and Poland. I joined Farley Capital in June 2010 (just three days after graduation – I had student loans to pay). There, I became a kind of apprentice to Steve Farley until 2015, when I became his partner.
Why did you decide to launch Gymkhana Partners?
My first few years working with Steve included trips to visit companies in Brazil, China, India, and Mexico. We found that relative to other large emerging markets, India offered an unmatched opportunity set, with thousands of listed companies but sparse professional analyst coverage and low levels of institutional ownership. Moreover, we realized that the earnings growth of India’s listed companies was being driven by a combination of simultaneous and complementary macro tailwinds – including exceptionally favorable demographics, rapid urbanization, and market-friendly governance – that was, and remains, unique among the world’s major economies. We began buying Indian stocks for our two global investment partnerships, Labrador and Newfoundland, in 2013, and by 2015, had invested roughly one-tenth of those funds’ combined capital in over a dozen Indian businesses.
As our familiarity with India deepened and the share of our capital allocated there grew, we saw that the time had come to split off our India capital into a new, dedicated vehicle that would enable current and future partners to invest directly in our India strategy, while allowing Labrador and Newfoundland to remain allocated to India in a simplified, more efficient way with lower transaction costs (by investing 15% of their capital in Gymkhana, rather than owning Indian stocks through their own separate accounts).
A key part of Gymkhana’s research process is “intensive & recurring on-the-ground research in India.” Can you tell us why this is so important and some stories of how on-the-ground research has helped in making investment decisions?
Since we first touched down in India back in 2012, Steve and I have visited the country twice annually (with a brief interruption during Covid) to meet in person with company managements. A typical trip is a jam-packed two-week-long tour of a few dozen businesses across a handful of cities – meaning each of us spends roughly a month out of every year on the ground in India.
While Steve and I sometimes “divide and conquer” by splitting up to cover more ground, we try to spend at least part of each trip working directly alongside our full-time India-based analyst Nireeksha Makam. This allows the three of us to exchange ideas and discuss which follow-up research to prioritize during the days between my and Steve’s return to the U.S. and the next time we all touch base via videoconference. Finally, part of each trip is dedicated to catching up with and expanding our network of businesspeople, investors, financial journalists, and various other Indian friends. This local Rolodex has proven invaluable over the years – in particular, by helping us to screen companies and controlling shareholders for corporate governance, managerial competence, and basic ethics.
Of the 600 or so meetings Steve and I have held with Indian management teams, most did not conclude with us buying the stock. But nearly every single meeting contributed at least some meaningful tidbit of information to a database that constitutes probably the single most valuable piece of proprietary work product from my decade-and-half-long career in securities analysis.
Our database compiles objective financial metrics on nearly 2,000 companies (including those we have met as well as those we hope to meet on future trips). Additionally and more importantly, it contains notes recording scuttlebutt, rumors, news mentions, overheard comments, and other subjective intel accumulated in the course of countless conversations with managers, journalists, fellow investors, and other local contacts regarding the competitive advantages, reputations, and prospects not only of prospective investees, but also of their suppliers, customers, and competitors.
Finally, continual on-the-ground research is the only way to keep up with India’s constant influx of newly-listed companies (2025 is on track to be a record year for Indian IPOs). In the U.S., many IPOs result not from a dynamic company needing capital to grow, but rather from a private equity firm needing an exit option at the end of a fund lifecycle. In India, by contrast, private equity is still nascent and the banking system (despite the very significant liberalization that has taken place since 1991) still channels most lending to large, mature companies. As a result, India’s IPO pipeline still includes large numbers of high-quality, promising businesses for which an equity offering is simply their most viable capital-raising option.
As part of your research process, you have held over 600 meetings with 417 Indian management teams. What are you looking for in these management team meetings?
We are looking for growing businesses with durable competitive advantages, smart, honest managements, controlling shareholders who treat minority shareholders fairly, and a valuation that does not yet price in those attractive qualities. Our best meetings are with resourceful, creative, and scrappy managers who know their businesses inside out, are able to re-invest their growing earnings at highly attractive rates of return, and have a long-term vision for how that re-investment will further strengthen their competitive advantages.
While India’s biggest companies (and the indices that track them) often trade at high P/Es, below the top 50-100 or so entries on India’s market cap table there is an abundance of businesses trading at much lower multiples of earnings despite their being high-quality and well-managed direct beneficiaries of the multi-layered macro drivers underpinning India’s growth. These include: companies catering to rapidly-expanding domestic demand for everything from financial services to pipes/fittings to agrochemicals; exporters who have been able to grab growing shares of global markets due to cost advantages sufficiently wide that a tariff hike here or there won’t make much of a big-picture difference; and businesses facilitating India’s nationwide infrastructure upgradation.
Many of the managements with whom we meet are not used to meeting institutional investors – much less foreign ones. Oftentimes, they are not especially savvy with respect to their fluency in Wall Street jargon – and this is not necessarily bad. For example, we’ve met with founder-CEOs who lived and breathed their businesses, whether it be ball bearings or polymer masterbatches, and simply had not yet learned to translate into the metrics we find most crucial (e.g., return on equity) the math that they had up until that point been doing without much in the way of external feedback. Conversely, in our experience it often is a red flag when managements are overly slick, as those executives tend to be more skilled at building up investor enthusiasm than they are at delivering on those lofty expectations.
Who are some of the most talented management teams in India today?
Examples of Indian management teams I believe to be highly talented include:
· Cholamandalam Investment and Finance (NSE: CHOLAFIN)
o “Chola” (pronounced “TCH-ola”) is part of the highly-respected Chennai-based Murugappa Group. I have been continually impressed by the clear-eyed, data-dependent capital allocation exhibited by Chola, which refuses to grow just for the sake of market share, readily divests non-core operations when someone offers to overpay for them, and observes the wisdom that, when it comes to the lending business, competition isn’t about how effectively you can issue loans to more customers, but rather about how effectively you can collect from them.
· Gala Precision Engineering (NSE: GALAPREC)
o Since its founding in 1989, Gala has achieved technical expertise in the design and manufacturing of high-performance fasteners and other precision engineering components. Today, the company serves nearly 200 customers across 25 countries – including the European home markets of the sleepy, higher-cost-structure German, Austrian, and Swiss rivals from which it has been steadily winning market share.
· Sansera Engineering (NSE: SANSERA)
o A manufacturer of “tough-to-get-into” engineered products for the automotive and aerospace industries, Sansera has steadily grown both its business and its addressable market by patiently convincing customers such as Daimler, Fiat, and Yamaha that they can count on Sansera to supply critical components they had previously produced in-house. With a competitive edge that includes extensive arrays of custom-built, proprietary machine tools and a decades-long runway for continued growth, I can see Sansera remaining a core position for many years to come.
· Jamna Auto (NSE: JAMNAAUTO)
o Jamna has steadily built up a dominant position in India’s market for commercial vehicle suspension springs – an unsexy but critical product for trucks operating on India’s often-bumpy roads. Management has achieved +20% compound annual EPS growth over the past decade in part by maintaining a stellar balance sheet, which has allowed Jamna to take advantage of the industry’s periodic cyclical downturns by gobbling up the market shares of smaller, less financially disciplined rivals.
Governance is important for any company, especially in developing countries. How does the governance culture in India differ from that in the U.S.? What should investors in India look at to avoid companies with bad governance?
Yes, ascertaining the quality of corporate governance is the most critical step of our research process. It doesn’t matter how optically fast-growing or cheap a stock might look if management are dishonest and/or unethical.
When Steve and I first started traveling to India, we wrongly assumed that some of the best-governed listed companies were the many listed Indian subsidiaries of blue-chip multinationals (MNCs). These listed MNC subs, such as ABB India (NSE: ABB), Colgate-Palmolive India (NSE: COLPAL), Maruti Suzuki India (NSE: MARUTI), and Nestlé India (NSE: NESTLEIND), are a legacy of onerous 1970s-era restrictions on foreign equity ownership. While those constraints were largely abolished during India’s post-1991 economic liberalization, the process by which MNCs can try to buy out their Indian units’ public shareholders has remained sufficiently onerous that many delisting attempts have failed (though market regulator SEBI recently introduced reforms that may help address this issue). In reaction, many of these MNCs now treat their Indian subsidiaries not as investments to be maximized, but rather as profit pools to be extracted via royalty payments that allow their respective overseas parent companies to divert ever-increasing shares of earnings toward themselves – thereby reducing the share of those earnings available for re-investment in the business and/or distribution on an equitable basis to all shareholders.
Meanwhile, some of the highest-quality corporate governance we’ve encountered in India has been at family businesses run by first- or second-generation founder-owners. In my experience, these family-controlled companies often allocate capital much more prudently (and thereby drive better returns to minority shareholders such as Gymkhana) than do many so-called “professional” boards of directors overseeing firms where ownership is so diffuse that critical decisions are made not through the diligent lens of owner-operators but rather with the carelessness of spending “someone’s else’s money.”
Whereas a decade ago I recall uncovering corporate governance red flags in annual reports (e.g., an unlisted affiliate collecting lucrative related-party payments for nebulous services), nowadays even less-than-scrupulous founders seem to have realized that they are perhaps better off boosting their market caps than crudely siphoning funds. Not to say that corporate governance red flags have become rarer – now it just often takes more work to unearth them. The process we use combines our own due diligence with references obtained from our expanding network of Indian managers, journalists, local investors, and other experts. Growing and sustaining this network has required years of work and no small measure of luck – particularly at the start, when my partner Steve realized that an Indian-American fellow parent at his kids’ Manhattan school could put us in touch with his friends in Mumbai and Delhi, who in turn introduced us to their friends, and so on.
Finally, a simple but effective rule that has served us well in India is simply avoiding altogether any industries where competitive advantages have more to do with political affiliations than managerial skill. This rules out anything having to do with mining, telecoms, and utilities, as well as – in what may come as a surprise to some – dairy companies, which after years of research we ultimately concluded are in too many cases simply too intertwined with India’s rough-and-tumble politics.
Over the years, you’ve analyzed a wide range of industries in India, from payments and banking to airlines. How do you approach studying a sector that’s new or very different from its U.S. counterpart, and is there an Indian industry that’s especially promising to you?
Even when it comes to sectors where the Indian market is structurally dissimilar to its U.S. or European counterparts, I find it useful to use that contrast as a tool for understanding why an Indian business may be more or less lucrative than its analogue abroad. For example, I spent much of the Covid lockdown diving deep into Universal Music Group (AMS: UMG), Sony Music Group (a subsidiary of Japan’s Sony Group – NYSE: SONY), and Warner Music Group (NASDAQ: WMG). These so-called “Big Three” global music companies build and retain ownership over vast catalogs of recordings and compositions that give them enormous leverage over streaming platforms and other music licensors.
Market dynamics could not be more different in India, where film soundtracks account for the lion’s share of music industry revenue. Indian record labels such as Tips Music (NSE: TIPSMUSIC) and Saregama (NSE: SAREGAMA) must constantly bid in auction-like processes for the rights to distribute the soundtracks accompanying movies coming out of Bollywood (the Hindi-language film industry), Kollywood (Tamil-language), Tollywood (Telugu-language), and other regional Indian film industries. To make matters worse, bids must be submitted before movies are released – meaning they are at best informed guesses with respect to the anticipated commercial value of acquired rights. While Indian revenue from local non-soundtrack releases and global hits is increasing, most of that growth is being captured by the Big Three, whose well-funded Indian offices quickly scoop up local acts that manage to break through internationally. For example, Indian rapper Hanumankind signed with UMG-owned Capitol Records within days of scoring a globally viral hit with his 2024 single Big Dawgs.
In other cases, familiarity with the way in which an industry has developed in the U.S. can shed light on the possible future direction of its Indian analogue. For example, in retrospect we can clearly see that early-1980s tweaks to America’s tax code jump-started a decades-long boom in households’ allocations to financial assets in general and equities in particular. I believe that India, where two-thirds of household wealth is still parked in real estate and gold, is in the early stages of a comparably profound long-term shift. Thanks to its world-class digital payments infrastructure, years of mutual-fund industry advertising, and government promotion of payroll deduction-funded, 401(k)-style automatic investment plans called SIPs, the percentage of Indians’ wealth invested in shares of listed Indian companies more than doubled over the past decade, from 2%-3% in 2014 to 6%-7% as of last year.
However, it’s still very much early days, and I believe that there remains enormous potential for further convergence between the savings allocation patterns of India’s burgeoning class of savers and those in developed economies. Companies benefiting directly from this long-term trend include Bajaj Finserv (NSE: BAJAJFINSV) and Cholamandalam Investment and Finance (NSE: CHOLAFIN).
Other examples of “cross-pollination” from researching both Indian companies and their non-Indian counterparts include our investments in listed Indian holding companies trading at very significant discounts to sum-of-the-parts values consisting largely of substantial stakes in publicly-traded operating affiliates.
Notable examples include Gymkhana portfolio companies Maharashtra Scooters (NSE: MAHSCOOTER) and Cholamandalam Financial Holdings (NSE: CHOLAHLDNG), which trade at ~40%-70% discounts to their sum-of-the-parts values and consequently allow us to indirectly gain exposure to underlying businesses including Bajaj Finserv and Cholamandalam Investment and Finance (the beneficiaries of financialization mentioned above) at effective P/Es drastically lower than what we would have paid buying those underlying stocks directly.
When we bring up these undervalued holdcos with our India-based investor friends, we invariably hear that they’ve always traded at wide discounts, that those discounts will likely never close, and that we’re better off simply owning shares in the underlying operating affiliates. Well, within my lifetime, sprawling conglomerates selling at discounts to their sum-of-the-parts values were similarly widespread in the U.S., and attracted similar skepticism from investors. Ultimately, though, a combination of investor pressure and managerial incentives led to the breakup and favorable revaluation of firms including Gulf and Western, Allegheny Teledyne, ITT, United Technologies, General Electric, and (most recently) Honeywell.
Of course, just because an Indian holdco sells at a discount to its sum-of-the-parts value is not enough to make it a good investment. We own the ones we do because they allow us to gain exposure to high-quality, earnings-compounding operating businesses at reasonable valuations – and if their discounts eventually narrow, that would be icing on the cake. And while such a narrowing is not integral to our investment thesis, we wouldn’t be surprised if it happened sooner than some of our aforementioned friends expect. In a meaningful but largely under-the-radar development, SEBI (India’s securities regulator) recently unveiled multiple reforms aimed specifically at narrowing the very wide gaps between listed holdcos’ market and book values. These included newly-introduced annual special call auctions intended to improve “price discovery” of otherwise illiquid holdco stocks, as well as streamlined procedures by which a holdco can distribute to its stockholders the holdco’s stakes in other listed companies.