Remember the childhood science experiment of burning paper with a magnifying glass. It was fun creating fire without matches. It was, of course, no wizardry. It was all about focusing the sunlight using magnifying glass. Focus is a powerful trait and together with specialisation, it can create extraordinary and durable competitive edge for businesses. Durable competitive advantage or moat, as it is called, can help create superior economics in businesses, meaning high pricing power, sticky and predictable revenue streams with fabulous free cash flows. Such businesses usually come with superior margin profile and high return metrics measured by return on equity (ROE) and return on capital employed (ROCE). They don’t guzzle capital to fund the growth because of free cash flows, and, usually, depend less on debt to fuel their growth.
Nucleus Software is one such fascinating company that has built an extraordinary moat by specialising in a much-differentiated product space of loan origination and lending. Within its flagship award-winning FinnOne Neo platform, Nucleus has built the next generation lending suite to shape the future of lending across retail, corporate and Islamic sectors for banks, non-banking finance companies (NBFCs) and financial services companies. Its lending suite runs the back-end of almost all leading banks and NBFCs in the country. Be it HDFC bank or Bajaj Finance, they call Nucleus for their lending solutions. It has to its credit, the covetous Global No.1 lending product award by IBS Publishing (UK) for seven consecutive years. Not a small feat for a homegrown company to achieve this at a global stage with the who’s who as competition.
Not very often, one comes across a great business at a great price. It is a rare thing in the