Wealth-Insight - Oct 2023

Subscription copy of [webmaster.srini@gmail.com]. Redistribution prohibited.
A monthly SIP
of ` 10,000@ in
HDFC Flexi Cap Fund
since its inception
has bloomed into
~ ` 14.35 Crore^.
A. HDFC Flexi Cap Fund - SIP Performance - Regular Plan - Growth Option
Since Inception 15 year SIP 10 year SIP 5 year SIP 3 year SIP 1 year SIP
Total Amount Invested (` in lacs) 34.40 18.00 12.00 6.00 3.60 1.20
Market Value as on August 31, 2023 (` in lacs) 1,435.38 64.53 27.73 10.26 5.10 1.36
Returns (%) 20.79 15.52 15.98 21.61 24.03 25.26
Benchmark Returns (%)# 14.84 13.89 14.43 17.38 15.83 19.72
Additional Benchmark Returns (%)## 13.70 13.08 13.50 15.45 13.41 13.48
Past performance may or may not be sustained in the future. @Assuming ` 10,000 invested systematically on the first Business Day of every month since January 01, 1995 (Scheme
Inception Date). CAGR returns are computed after accounting for the cash flow by using XIRR method (investment internal rate of return) for Regular Plan - Growth Option. The above
investment simulation is for illustrative purposes only and should not be construed as a promise on minimum returns and safeguard of capital. SIP - Systematic Investment Plan.
HDFC AMC / HDFC MF is not guaranteeing or assuring any returns on investments in the Scheme.
B. HDFC Flexi Cap Fund - Performance - Regular Plan - Growth Option NAV as at August 31, 2023 ` 1310.426 (per unit)
Period Scheme Returns (%) Scheme Benchmark Additional Benchmark Value of investment of (`) 10,000
Returns (%)# Returns (%)## Scheme Benchmark Additional Benchmark
(`) (`)# (`)##
Last 1 Year 19.54 11.39 9.50 11,959 11,142 10,953
Last 3 Years 30.54 23.10 20.58 22,244 18,655 17,532
Last 5 Years 14.49 12.33 11.83 19,676 17,893 17,495
Since Inception* 18.53 12.10 11.48 13,10,426 2,64,518 2,25,833
Common notes for the above table A & B: #NIFTY 500 (Total Returns Index) ##NIFTY 50 (Total Returns Index). *Inception Date: January 01, 1995. The scheme is managed by
Ms. Roshi Jain since July 29, 2022. As NIFTY 50 TRI data is not available since inception of the scheme, additional benchmark performance is calculated using composite
CAGR of NIFTY 50 PRI values from January 1, 1995 to June 29, 1999 and TRI values since June 30, 1999. Âs on August 31, 2023.
C. Performance of Other Funds Managed by Ms. Roshi Jain, Fund Manager of HDFC Flexi Cap Fund
(who manages total 3 schemes which have completed one year) Returns (%) as on August 31, 2023
Scheme Managing Scheme since Last 1 year (%) Last 3 years (%) Last 5 years (%)
HDFC Focused 30 Fund January 13, 2022 19.51 30.33 13.67
Benchmark - NIFTY 500 (Total Returns Index) 11.39 23.10 12.33
HDFC TaxSaver January 13, 2022 18.17 25.69 11.56
Benchmark - NIFTY 500 (Total Returns Index) 11.39 23.10 12.33
Common notes for the above table B & C: Past performance may or may not be sustained in the future. Returns greater than 1 year period are Compounded Annualised
(CAGR). Load is not taken into consideration for computation of above performance(s). Different plans viz. Regular Plan and Direct Plan have different expense structure.
The expenses of the Direct Plan under the scheme will be lower to the extent of the distribution expenses/commission charged in the Regular Plan. The above returns
are of Regular Plan - Growth Option.
HDFC FLEXI CAP FUND (An Open-ended Dynamic Equity Scheme Investing Across Large Cap, Mid Cap & Small Cap Stocks) is suitable for investors
who are seeking*:z To generate long-term capital appreciation/income | z Investments predominantly in equity & equity-related instruments
*Investors should consult their financial advisers, if in doubt about whether the product is suitable for them.
Name and Riskometer of Benchmark Name of scheme(s) Riskometer of the Scheme(s)
NIFTY 500 (Total Returns Index) Modera
oderate High tely
o M
Modera w t erate Hi
oderate High tely
Mo Lo
gh
z HDFC Flexi Cap Fund

d
o M
w t erate Hi
Contact your MFD / RIA today.
HDFC Focused 30 Fund
Mo Lo
Very
z
gh
High
Low
d
z HDFC TaxSaver
Very
High
Low
RISKOMETER
Investors understand that their principal will be at
RISKOMETER very high risk
Benchmark and Scheme Riskometer as on August 31, 2023
#For latest riskometer, investors may refer to the Monthly Portfolios disclosed on the website of the Fund viz. www.hdfcfund.com
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.
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October 2023 VOLUME XVII, NUMBER 4
EDITORIAL POLICY 35 COVER STORY

The goal of Wealth Insight, as with
Cool
all publications from Value
Research, is not just limited to gen-
erating profitable ideas for its read-
ers; but to also help them in gener-
ating a few of their own. We aim to
bring independent, unbiased and
meticulously- researched stories
that will help you in taking better-in-
formed investment decisions,
stocks
encouraging you to indulge in a bit
of research on your own as well.
All our stories are backed by
quantitative data. To this, we add
in a hot
rigorous qualitative research
obtained by speaking to a wide vari-
ety of stakeholders. We firmly stick
to our belief of fundamental
research and value-oriented
market
approach as the best way to earn Stock picks based on a
wealth in the stock market. Equally famed Canadian value
important to us is our unwaveringly
focus on long term planning. investor’s approach
Simplicity is the hallmark of our
style. Our writing style is simple
and so is the presentation of ideas,
but that should not be construed to
mean that we over-simplify.
32 WORDS WORTH WISDOM
Read, learn and earn – and let’s
grow and evolve as we undertake
this voyage together.
An owners’ manual for shareholders
Incredible insights
EDITOR-IN-CHIEF Dhirendra Kumar from trillion-dollar
COPYEDITING Anupama Garg, Mithilesh companies
Bhaumik and Ujjal Das
RESEARCH & ANALYSIS Asif Ali,

Hemkesh Khattar, Karthik Anand Vijay,
Kunal Bansal and Udhayaprakash J
DESIGN Anand Kumar, Aprajita Anushree,

Kamal Kant Koner, Mukul Ojha and
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4 Wealth Insight October 2023
CONTENTS
7 Edit 34 vis-a-vis
by DHIRENDRA KUMAR
Cable chronicles
The guru element Two leading players, varied strengths, one market
What makes for a visionary investment expert
52 Stock Advisor
8 Twitter by DHIRENDRA KUMAR
The value advocate Confidence as a Service

Value|Compounding | @oldschoolinvest | 28.9k X-as-a-service is a common buzzword of the digital age.
Here’s one that will help you more than most.
10 Market Reporter
54 Straight Talk
Buzz of the month by ANAND TANDON
Quantum computing: Harnessing the

14 Stock Story power of atoms
From NBFC to a banking titan What potential does quantum technology hold for the world
A testament to visionary leadership, through strategic
ventures and relentless innovation 57 Main Street
by SAURABH MUKHERJEA
16 Big Moves The octopus ascends

Find out how a tiny elite section is getting
The most significant price movements
exponentially richer
17 ABCD ETF
60 Everyday Economics
Passive funds for young earners by PUJA MEHRA
The Danish economy’s lifesaver

20 Index Watch How one pharmaceutical giant reshaped Denmark’s
Market and sectoral moves economic landscape
62 Stock Screen
22 IPO Tracker
Reasonably priced growth stocks
D-Street debutants
Investing in growth companies is one of the most
Here is how the S&P BSE IPO Index has performed over the
popular ways to profit from stocks. But one shouldn’t
last one year and how the biggest IPOs have fared
overpay for them. This is where this screen helps.
24 Market Barometer 66 Wordsworth Now
Trends and trails Quotable words from prominent figures

Here are some charts that will help you make sense of the
current market in terms of valuations and return potential
9DOXH5HVHDUFK,QGLD3YW/WG
Wealth Insight is owned by Value Research India Pvt. Ltd., 5, Commercial
26 Analyst’s Diary Complex, Chitra Vihar, Delhi 110 092.
z The IDFC First Bank makeover Editor-In-Chief: Dhirendra Kumar.
z Printed and published by Dhirendra Kumar on behalf of Value Research India
EaseMyTrip’s growth blueprint Pvt. Ltd. Published at 5, Commercial Complex, Chitra Vihar, Delhi 110 092.
z Rear-view mirror investing Printed at Option Printofast, 46, Patparganj Industrial Area, Delhi-110092
z Frothy small caps Total pages 68, including cover
',6&/$,0(5
The contents of Wealth Insight published by Value Research India Private Limited (the ‘Magazine’) are not intended to serve as professional advice or guidance and the Magazine takes no responsibility or liability, express or implied, whatsoever for any investment
decisions made or taken by the readers of this Magazine based on its contents thereof. You are strongly advised to verify the contents before taking any investment or other decision based on the contents of this Magazine. The Magazine is meant for general reading
purposes only and is not meant to serve as a professional guide for investors. The readers of this Magazine should exercise due caution and/or seek independent professional advice before entering into any commercial or business relationship or making any
investment decision or entering into any financial obligation based on any information, statement or opinion which is contained, provided or expressed in this Magazine.
The Magazine contains information, statements, opinions, statistics and materials that have been obtained from sources believed to be reliable and the publishers of the Magazine have made best efforts to avoid any errors and omissions, however the
publishers of this Magazine make no guarantees and warranties whatsoever, express or implied, regarding the timeliness, completeness, accuracy, adequacy, fullness, functionality and/or reliability of the information, statistics, statements, opinions and
materials contained and/or expressed in this Magazine or of the results obtained, direct or consequential, from the use of such information, statistics, statements, opinions and materials. The publishers of this Magazine do not certify and/or endorse any
opinions contained, provided, published or expressed in this Magazine.Reproduction of this publication in any form or by any means whatsoever without prior written permission of the publishers of this Magazine is strictly prohibited. All disputes shall be subject
to the jurisdiction of Delhi courts only. ALL RIGHTS RESERVED
October 2023 Wealth Insight 5

EDIT
The guru element

What makes for a visionary investment expert
investments. Not just one or two Five, honest self-appraisal and

bets or a year or two of beating the humility. No investing guru ever
indexes but many years, preferably has a chest-thumping ‘I’m the
decades, and over many different greatest’ attitude. If anyone does,
kinds of market cycles and that’s an instant, 100 per cent
conditions. disqualification from guru status.
Two, a distinct investment This is not just about character but
philosophy. I won’t say unique about being honest. The markets
because there’s nothing new under are a great leveller. If you have been
the sun, but it has to be something investing for more than a few years,
that is differentiated in some then you have made mistakes. You
By Dhirendra Kumar substantive way. Warren Buffett have been stupid and thick-headed
and Peter Lynch are extreme many times. In fact, you have
examples, but that makes it clear probably started that way. The only
O
ur cover story this month is what distinct means in this context. way to learn investing (and many
about investing guru Three, influence. In today’s other things in life) is to recognise
Francois Rochon. Surprised? context, this is the tricky one those mistakes and make sure you
Never heard of him? Well, your because the word ‘influence’ has never do them again. Unless
surprise is justified. If I search been completely demeaned by someone does that, they will not get
Google for “Peter Lynch” (with the social media. Once upon a time, the kind of investing track record
quotes), I get 20+ lakh results. For people did something in life much that bestows gurudom upon them.
“Francois Rochon”, I get 17,700. better than others that made them To my mind, this covers the basic
That’s quite the difference. influential. Nowadays, being qualifying characteristics of an
And yet, here we are, declaring influential has become an activity investing guru, and Francois Rochon
this relatively unknown person as by itself. However, the way I think certainly fits them. In fact, when you
an investing guru. So, what makes about it, when you combine it with read the cover story that my young
a guru a guru? In the context of the two previous characteristics, colleagues have written, you will see
investing, what qualifies an then influence is a good indicator. that Rochon has this great (brief) list
investor to be called a guru? To Four, for want of a better word, of things that you should not do. The
take a name from a very different thought leadership. I hate the smell interesting part is that, in a way, a
background, would one call Rakesh of fakeness that this phrase emits, certain chunk of his approach to
Jhunjhunwala a guru? Surely not. but in this context, what I mean is investing lies in the vacant space
When we were planning this that the gurus must have created by not doing the wrong
cover story, I was forced to think articulately described their approach things. This is a concept I like and
through this problem of defining in some public way, like books, one that I have written about many
gurudom. Here is my conclusion articles, talks, interviews, etc. They times. If you don’t do things that are
regarding what is an investing guru. must have contributed to the known to be wrong things, then
In the context of investing, an intellectual tradition of thoughtful you’re highly likely to do well.
“investment guru” typically refers investing. Again, look at Peter Unfortunately, there are many
to someone who has: Lynch. Decades after retiring, his more ways to make mistakes than
One, a proven track record that great investment track record just there are to be right. Imbibing the
incorporates a long-term record of validates his books, but the latter are wisdom of gurus is one way to
generating significant returns on actually more important to us. improve your chances.

TWITTER
The value
advocate
Every Tom, Dick and Harry are coming with an IPO with absurd valuations.
Value|Compounding All the IPOs are getting overwhelming responses inspite of poor financials
@oldschoolinvest or stressed balance sheets. People are only interested in GMP and listing
gains. Very soon the new investors will learn old lessons.
28.9k | Followers
Mcap/order book ratio is a new scam to trap the retail investors who don’t
understand much about the fundamentals. Sad!
Why Follow
Emotions can be your worst enemy when investing in the stock market.
A
s the moniker Make decisions based on research and analysis, not fear or excitement. Stay
suggests, the rational to achieve long term financial success.
nameless face
No one can live on borrowed conviction, as every business goes through up
behind @oldschoolinvest
& down cycles, headwinds or tailwinds, and it is during those tough times
is a risk-averse, old-school when markets offer opportunities to participate in those businesses, which
value investor. You will over a period of time will deliver multibagger returns.
find tweets pointing out
TCNS Clothing was a hot stock on social media. Few facts about the
ongoing market fads and company:
absurd valuations. But ~ IPO price : 716 (in 2018)
the underlying theme ~ Promoters exited at 503 rs : 40% discount to the IPO price after 5 years!
of most of the posts is Investing in IPOs with exorbitant valuations and no earning growth is a
perfect recipe for disaster.
time in the market.
You will find multiple In my investing journey many times I have witnessed my portfolio
threads highlighting the businesses not performing for 5-6 years and then they have given
importance of buying at multibagger returns in the next 5 years. E.g. Tata Consumer, Ion Exchange,
P&G Health. The key is to sit tight when you trust the management.
the right price and playing
the long game. Some posts The key is to remain invested in good quality businesses for a long term.
also go beyond investing The ideal period of long term is more than one decade. 54% of NSE 500
stocks gave 10x returns in last 2 decades: Goldman Sachs study.
wisdom and cross into the
territory of life lessons.
Follow us on
social media
@VROStocks vrostocks VROStocks

3CANHERE
TOKNOWMORE
+HBDMBDV@RFQ@MSDCSN,HQ@D RRDS,TST@K%TMCNM-NUDLADQ AX2$!(TMCDQ2DBTQHSHDR@MCDWBG@MFD!N@QCNE(MCH@ ,TST@K%TMC QDFTK@SHNMR

MARKET REPORTER
Banking legend
bows out
Uday Kotak stepped down
as the MD and CEO of
Kotak Mahindra Bank on
September 1, 2023. Dipak
Gupta, the joint managing
director of the bank, has
`82,174
been named the interim
cr
CEO and received RBI’s
approval for a tenure of ITC plans new capex
for `1,500 crore
two months. Uday Kotak
is the capex planned will continue to serve as a
by NLC to increase non-executive director on FMCG major ITC has
mining and power the board. announced the setting up
generation capacity to of a new integrated food
17,171 MW by 2030. It manufacturing, logistics and
also plans to venture packaging facility in Madhya
Pradesh with an investment
into other businesses.
of `1,500 crore. In the food
plant, it will manufacture
some of its best-selling
CCI green lights products, such as Yippie,
Aashirvaad and more. In its
Air India and fibre products facility,
Vistara merger it aims to focus on
sustainable packaging.
Tata’s Air India is set to merge
with the joint venture of Tata
Group and Singapore Airlines
(SIA), Vistara. SIA will invest
`2,059 crore in Air India and SEBI strives for instant
hold a 25.1 per cent stake in the
newly merged entity. The
trade settlements
merger is expected to be The regulatory authority has
completed by the end of FY24. announced its plan to shorten the
trade settlement cycle in the market
from the current T+1 setup to one
hour by the end of FY24. It will
enable investors to receive their
shares or money within an hour of
making the trade, thus promoting
instant trade settlement.
Grid-scale batteries get gap funding

The Union Cabinet approved viability gap funding of `3,760 crore for
private players to set up battery-energy storage to increase renewable
energy capacity. It aims to develop 4,000 MWh of battery energy storage
projects by FY31. The fund will be released in five tranches linked with
stages of implementation.

Ind-Swift Laboratories to sell its API business
The Board of the drugmaker Ind-Swift Laboratories has approved selling its
API and contract research & manufacturing business to Synthimed Labs for an
enterprise value of `1,650 crore. Synthimed Labs is a portfolio company of India
Resurgence Fund, backed by Piramal Enterprises and Bain Capital. On the day
of the announcement, the share price of Ind-Swift hit the upper circuit of
20 per cent.
RBI approves Arm valued at

re-appointment of $55 billion post-IPO
ICICI and HDFC Softbank-backed chip designer Arm
Bank’s CEOs
Holdings was listed on the Nasdaq on
September 9, 2023, at a valuation of
RBI has given the approval $54.5 billion. The UK-based company
for the re-appointment of raised $4.9 billion from the public.
Sandeep Bakshi as ICICI Earlier this year, NVIDIA’s attempt to
Bank’s CEO for the next acquire the company was squashed.
three years. He has been Ashok Leyland On the day of its listing, it climbed
21 per cent. However, since then, it
the CEO since 2018. HDFC
Bank also got the nod to invests in green has fallen 13 per cent.
re-appoint Sashidhar
Jagdishan as CEO for the
bus plant
next three years, a position Ashok Leyland announced
he has held since Aditya its plan to invest `1,000 crore
Puri’s departure in 2020. in a greenfield
manufacturing unit for the
production of green buses in
UP. Upon completion, the
plant will have the capacity
to produce 2,500 buses each
year and intends to double it
by the next decade. Apart
from production, the facility
may also be used for
assembly of other vehicles.
Blue Star to raise

capital through QIP
The company plans to raise
`10,347 cr
`1,000 crore at a floor price of was raised by Reliance Retail
`785. This is 2 per cent lower than from Qatar Investment Authority
its trading price on the day of the
(`8,278 crore) and KKR
announcement. It plans to use
these proceeds for business
(`2,069 crore). After these
expansion and retirement of investments, the company is
existing debt. valued at upwards of $100 billion.

MARKET REPORTER
£500 million ECONOMIC METRICS

.:;JVSSLJ[PVU
is the grant received by Tata Steel 2,00,000 In ` cr
from the UK government for 1,50,000
continuing operations at Port Talbot
1,00,000
(in Wales). Tata Steel will invest
£700 million in the joint venture. 50,000
This will help modernise and 0
decarbonise the Port Talbot plant. Aug '21 Aug '23
0UMSH[PVU!*VUZ\TLY7YPJL0UKL_
A fight against 8 % change YoY
inflation 7
In its latest monetary policy 6

meeting, the US central bank 5
kept its benchmark federal
funds rate steady. The fed 4
Global debt at an rate continues to be in the Aug '21 Aug '23
all-time high range of 5.25 to 5.5 per cent.

Meanwhile, the European 0UK\Z[YPHSHJ[P]P[`!0UKL_VM
According to a report by the Central Bank has increased 0UK\Z[YPHS7YVK\J[PVU
Institute of International its benchmark interest rate 20 % change YoY
Finance, global debt hit a by 25 basis points to its
record high of $307 trillion in highest-ever level. Both 10
the June 2023 quarter. This central banks have indicated 0
has raised the debt-to-GDP that rates will stay higher for
ratio to 336 per cent. Prior to a long period of time. -10
2023, the ratio was declining Jul '21 Jul '23
for seven straight quarters.
More than 80 per cent of the
059]Z<:+
latest debt build-up came
72 Inverted scale
from developed economies,
including the US, Japan, 75
Britain, and France.
78
81
Adani Green and 84

Sep '21 Sep '23
TotalEnergies join hands
France energy major TotalEnergies and
*Y\KLVPS
Adani Green Energy have entered into
150 Brent $/barrel
a binding agreement to create a new
joint venture. Both entities will have an
120
equal share. The joint venture will
comprise a portfolio of 1,050 MW of
90
solar and wind power. While
TotalEnergies will invest $300 million,
60
Adani Green will bring the assets.
Sep '21 Sep '23

STOCK STORY KOTAK MAHINDRA BANK
From NBFC to
a banking titan
g
A testament to visionary leadership, through
on
strategic ventures and relentless innovation
I
n just almost four decades, Kotak
Mahindra Bank has transformed
from a non-banking financial
company (NBFC) to India’s third-
largest private bank by market cap! In
1985, Uday Kotak started a bill
discounting business, and Anand
Mahindra, his friend and former client,
helped him with a small investment.
Under Kotak’s astute leadership, the
business rapidly branched into
multiple segments. In 1989, they dived
into vehicle financing, booking
numerous cars under the company.
This move let the customers quickly
get cars, which usually had long wait
times, but only if financed through
Kotak Mahindra.
The erstwhile NBFC thrived through
strategic joint ventures, like those with
Goldman Sachs in investment banking,
Ford Credit in vehicle financing, and
Old Mutual in life insurance.
Impressively, they later secured their
partners’ stakes, ensuring fair exits.
Jan 7, 2008
Sensex rebased to stock price `347
Mar 20, 2009
Kotak Mahindra Bank Sensex `64
Jan 3, 2000
`10
February 06, 2003 June 10, 2005 July 28, 2010 February 05, 2013
Gets licence from Plans to raise up to Raises `1,366 crore from Acquires a business
RBI to carry on `1,000 crore for its Sumitomo Mitsui loan portfolio (worth
banking business private equity and real Banking Corp via an `700 crore) from
estate venture funds issue of shares Barclays India

1HWLQWHUHVWLQFRPHDQGQHW 1HWSURILWDQG52(
LQWHUHVWPDUJLQ z Net profit (` cr; left side)
z Net interest income (` cr; left side) z ROE (%; right side)
z Net interest margin (%; right side) 15,000 30
30,000 8
10,000 20
20,000 6
In 2003, Kotak Mahindra became
5,000 10
the first NBFC to transform into a 10,000 4
commercial bank, constantly 0 2 0 0
pioneering technology for its FY02 FY23 FY02 FY23
customers: launching a mobile
banking app in 2011 and the 3HHUFRPSDULVRQ*URVV 6KDUHLQVFKHGXOHGFRPPHUFLDO
innovative Kotak 811 digital savings 13$UDWLR EDQNDGYDQFHV
account in 2017. z HDFC Bank z ICICI Bank z HDFC Bank z ICICI Bank
The bank raises capital z Axis Bank z Kotak Mahindra Bank z Axis Bank z Kotak Mahindra Bank
masterfully, often at peak share 10.5 15
prices, thus minimising dilution. 7.0 10
Thanks to robust capital allocation
3.5 5
and efficient management, its
advances and net profit soared by 0 0
FY14 FY23 FY14 FY23
27 per cent and 30 per cent yearly
over two decades, with share prices
climbing by 29 per cent annually. Oct 26, 2021
`2,211
It has maintained a median ROE of
14 per cent.
The stock has been in the
spotlight lately as its founder and
CEO, Uday Kotak, stepped down
from his leadership role. He will Sep 7, 2023
`1,789
remain a non-executive director, Jul 13, 2018
`1,405
but a remarkable era in the
banking industry has ended.
By Udhayaprakash
Mar 23, 2020
`1,100
Sep 3, 2012 Jul 17, 2015

`300 `733
123
September 29, 2014 November 20, 2014 November 20, 2015 April 28, 2017 Sept-Dec 2021 July 08, 2022
Acquires 15 per cent Acquires Received licence Buys out the entire Acquires vehicles Acquires DLL India’s
stake in MCX for ING Vysya Bank from IRDAI to stake of Old Mutual financing portfolio agri and healthcare
`459 crore for `15,000 crore commence general in Kotak Old Mutual of Volkswagen equipment financing
in an all-stock deal insurance business Life Insurance and Ford portfolio

BIG MOVES
Large caps
z Price to earnings z 3Y avg RoE (%) z 3Y earnings growth (%) z 3M returns (%)
IRFC 3M price (`) movement Indian Overseas Bank 3M price (`) movement
77 47
2.1* 14.6 25.7 132.1 3.9* 9.8 31.5 92.4
It raised `2,500 crore through a bond While its Q1 FY24 net profit was up
issue and signed an MoU 28 per cent YoY, its net NPA fell by
with Rites.
33 99 basis points.
24
REC 3M price (`) movement JSW Energy 3M price (`) movement
5.6 21.1 30.1 63.7 53.6 8.5 4.2 55.2

251 394
Its Q1 FY24 net profit rose 21 per cent It signed a power purchase agreement
YoY and provided `3,000 crore debt 153 for 300 MW and GQG Partners
funding to GreenCell Mobility. acquired a minor stake.
254
PNB 3M price (`) movement Power Finance Corp 3M price (`) movement
77
288
0.9* 3.5 21.5 47.9 0.8* 28.0 30.7 45.7
Its Q1 FY24 net profit was up Raised `5,000 crore through NCDs.
four times YoY. Signed pacts worth `2.37 lakh
52 crore for green energy projects.
197
Polycab 3M price (`) movement Vodafone Idea 3M price (`) movement
53.1 19.1 24.8 45.4 5,133

- - 19.0 43.1 11
Its Q1 FY24 revenue and net profit Stock rose as the promoter entity
were up 42 and 80 per cent YoY, 3,531 confirmed injection of `2,000 crore
respectively. into the company when needed.
8
Adani Power 3M price (`) movement HDFC AMC 3M price (`) movement
375 2,652
9.8 32.7 95.4 42.1 35.7 27.4 7.6 40.2
Its Q1 FY24 net profit doubled YoY Abrdn (a former promoter) sold a
and GQG Partners picked up an 264 10 per cent stake and its Q1 FY24 net
8.1 per cent stake. profit rose 52 per cent YoY.
1,891
*Price to book value. Our large-cap universe has 128 large companies, making the top 70 per cent of the total market capitalisation. The list mentions the stocks that have fluctuated most wildly in
the last three months. Data as of Sept 18, 2023.

Passive funds for young earners
What a great moment! Regularly investing a
small portion of your
My first salary . I am salary can reap huge
all set for financial freedom. rewards. Moreover, the
But what should I do with it? earlier you start, the
better. With time on
your side, you can
benefit from the magic
of compounding.
The
early bird
Young earners
Index might not be
But wait… Mid-cap funds Hybrid Thematic
ETFs funds financially savvy in
equity funds
There are so the first place. They
funds
many options may not know how
to choose Flexi cap to start investing.
Sectoral Large- Traditional
from. funds cap equity
funds
investments Passive
funds funds can be
of great help here.
Passive funds As you may be aware, Sensex &

simply track an underlying Nifty 50 comprise India’s biggest
index and seek to generate companies.
returns as per that.
So, by investing in passive funds
They comprise index
you shall get exposure to the
funds and Exchange
stocks which are part of the index.
Traded Funds.
3TARTINVESTINGEARLYINYOUR The views expressed here constitute only the opinions and do not constitute any
WEALTHCREATIONJOURNEY guidelines or recommendation on any course of action to be followed by the reader. The
data/information/opinions are meant for general reading purposes only and are not meant
to serve as a professional guide/investment advice for the readers. Readers are advised
to seek independent professional advice and arrive at an informed investment decision
before making any investments.
An investor education and awareness initiative by Mirae Asset Mutual Fund. All
Mutual Fund investors have to go through a one-time KYC (Know Your Customer) process.
Investors should deal only with Registered Mutual Funds (RMF). For further information on
KYC, RMFs and procedure to lodge a complaint in case of any grievance, you may refer
3CANTHE12CODETOKNOWMORE the Knowledge Center section available on the website of Mirae Asset Mutual Fund.
Mutual fund investments are subject to market risks, read all scheme related documents carefully.

BIG MOVES
Mid caps
Jupiter Wagons 3M price (`) movement SJVN 3M price (`) movement

77
78.3 13.0 865.3 122.8 27.6 10.3 -12.8 98.9
335
Its Q1 FY24 PAT was up five times The company won various orders
YoY and the board approved raising including one worth `7,000 crore
another `700 crore via QIP.
150 from Punjab State Power Corp.
39
J&K Bank 3M price (`) movement Central Bank of India 3M price (`) movement
107 52
1.2* 10.3 10.4 89.3 1.7* 2.3 16.8 87.9
Its Q1 FY24 net profit doubled YoY. Its Q1 FY24 net profit went up by
81 per cent. The gross NPA was
57 down 995 basis points.
28
Cochin Shipyard 3M price (`) movement Himadri Speciality 3M price (`) movement
1,090
39.7 12.0 -13.3 83.7 40.0 5.2 30.2 82.5
Its Q1 FY24 net profit doubled. It won Its resolution plan proposed for the
240
several orders including those from bankrupt Birla Tyres was approved
the Indian Navy and Wilson
593 by a committee of creditors.
131
Shipowning AS.
Mazagon Dock 3M price (`) movement ITI 3M price (`) movement
2,197 189
36.7 17.9 51.5 80.3 - -3.3 -250.7 73.8
Won a major order from the Ministry It signed an MoU with TCIL and
of Defence. Its Q1 FY24 net profit 1,218 C-DOT. Recently announced 109
was up 32 per cent YoY. introduction of laptops and micro
PCs under the ‘Smaash’ branding.
Kalyan Jewellers 3M price (`) movement Suzlon 3M price (`) movement

25
50.3 6.7 44.8 72.5 65.3 - 30.1 70.5
229
Its Q1 FY24 net profit jumped 33 per It won a 100 MW order from
cent YoY and it opened 33 showrooms 133 Everrenew Energy and a 48 MW
during the quarter. order from KP Group.
15
*Price to book value. Our mid-cap universe has 281 mid-sized companies, making the next 20 per cent of the total market capitalisation. The list mentions the stocks that have fluctuated most
wildly in the last three months. Data as of Sept 18, 2023.

Small cap
Jai Balaji Industries 3M price (`) movement Insolation Energy 3M price (`) movement
372
29.1 - 46.3 391.9 82.6 47.2 47.4 245.0 419
Its Q1 FY24 PAT was up eight times The company recently announced its
YoY. Promoters increased their stake venture into solar cell manufacturing
by three percentage points.
76 and plans to set up a new facility.
122
GVK Power & Infra 3M price (`) movement GMR Power and Urban Infra 3M price (`) movement
9 46
0.5 - 59.8 201.1 3.7 -206.6 -997.0 156.7
It reported a Q1 FY24 net profit of They received an order from the
`119 crore against a loss in the government of UP to install 75 lakh
previous year.
3 smart meters.
18
Mafatlal Industries 3M price (`) movement Genus Power 3M price (`) movement
19.9 -4.8 45.2 145.4 168.7 5.8 -17.5 133.5 263

137
Its Q1 FY24 revenue and net profit Won a smart meter order worth
were up 53 and 73 per cent YoY, `2,200 crore. Attracted a $2 billion
respectively.
56 investment from GIC (Singapore’s
112
sovereign wealth fund).
Ashapura Minechem 3M price (`) movement Premier Explosives 3M price (`) movement
310
15.7 13.6 -27.2 133.3 81.0 0.2 45.2 133.2
1,035
Its Q1 FY24 PAT more than doubled It won orders worth `552 crore from
YoY. Recently it won two huge 133 the Ministry of Defence for supplying
444
contracts for the supply of bauxite. chaffs and flares.
Lloyds Enterprises 3M price (`) movement SKM Egg Products 3M price (`) movement
36
79.5 11.5 335.9 105.8 10.7 23.3 139.8 100.7
Its Q1 FY24 net profit jumped Q1 FY24 net profit jumped 424
26 times YoY (formerly known as five times YoY. 211
Shree Global Tradefin).
17
Our small-cap universe (minimum market capitalisation `550 crore) has 977 small-cap companies, making the last 10 per cent of the total market capitalisation. The list mentions the stocks that
have fluctuated most wildly in the last three months. Data as of Sept 18, 2023.

INDEX WATCH
S&P BSE PSU

With a return of 17.8 per cent, the S&P BSE PSU index is one of the best performers
in the last three months. However, the index has fared poorly in comparison to
Sensex over the last five years. Don’t let the low P/E and the high dividend yield fool
you since PSU companies are notorious for their poor wealth-creation ability.
.H\QXPEHUV ,QGH[PRYHPHQW
z BSE PSU z BSE Sensex z Median
9.0 1.5
14,000
12,000
Price to earnings Price to book 10,000

8,000
3.13 40.2 6,000

4,000 Sensex rebased to index
Dividend yield (%) Market cap (` lakh cr) Sep ‘18 Sep ‘19 Sep ‘20 Sep ‘21 Sep ‘22 Sep ‘23
,QGH[ZHLJKWV 3ULFHWRERRNYDOXH 3%

5.0
Others
53.3 4.0
3.0
2.0
1.1
In % 1.0
Coal India
5.0 0
SBI Sep ‘18 Sep ‘19 Sep ’20 Sep ’21 Sep ’22 Sep ’23
18.0
Power Grid 3ULFHWRHDUQLQJV 3(
7.1
40
ONGC NTPC
7.6 9.0 32
24
9DOXDWLRQVGLYLGHQGVDQGUHWXUQV 16
Dividend 1Y 9.8
Company P/B P/E yield (%) return (%) 8
HAL 5.5 22.1 1.4 60.6 0
Bank Of Baroda 1.0 6.5 2.5 58.3 Sep ‘18 Sep ‘19 Sep ’20 Sep ’21 Sep ’22 Sep ’23
ONGC 0.8 6.2 3.0 42.3

NTPC 1.5 12.5 3.0 39.5
'LYLGHQG\LHOG
In %
GAIL 1.2 19.5 4.1 34.3 6.0
Indian Oil 0.9 5.3 3.2 32.4 4.8

BHEL 7.1 32.4 1.3 25.8 3.6
3.6
Coal India 2.7 6.3 8.6 21.7 2.4
Power Grid 2.1 12.1 5.5 13.2 1.2
SBI 1.5 8.1 1.9 7.5 0
3ULFHGDWDDVRI6HSWHPEHU Sep ‘18 Sep ‘19 Sep ’20 Sep ’21 Sep ’22 Sep ’23

IPO TRACKER
D-Street debutants
Here is how the S&P BSE IPO Index has performed over the last one year and
how the biggest IPOs have fared
HIGHEST
LISTING-DAY GAIN ,32LQGH[YVWKH6HQVH[
Ideaforge Tech With a slew of IPOs, the IPO Index has performed well in the last few months
120 z IPO z Sensex
94.2% 113
110
HIGHEST
LISTING-DAY LOSS
Inox Green Energy
100 108
-6.9% 90
HIGHEST 80
POST-LISTING GAIN
Kaynes Tech 70 Rebased to 100
173.2% September 2022 September 2023
HIGHEST HIGHEST LOWEST BIGGEST TOTAL

POST-LISTING LOSS SUBSCRIBED IPO SUBSCRIBED IPO IPO ISSUE SIZE
Elin Electronics Ideaforge Tech Radiant Cash Mgmt. Mankind Pharma
-31.9% 106.1 times 0.5 times `4,326 cr `30,105 cr
7RS,32VE\LVVXHVL]H
Subscription Issue Issue List Current Listing Change post Sensex Current
Company Listing date ratio (times) size (` cr) price (`) price (`) price (`) gain (%) listing (%) change (%) P/E
Mankind Pharma 09-May-2023 15.3 4,326 1,080 1,300 1,765 20.4 35.7 9.8 55.2
Five-Star Business 21-Nov-2022 0.7 1,593 474 450 688 -5.1 52.9 10.9 4.5*
Global Health 16-Nov-2022 9.6 1,571 336 398 703 18.5 76.5 9.5 57.8
Concord Biotech 18-Aug-2023 24.9 1,551 741 900 1,014 21.5 12.6 4.4 44.1
KFin Technologies 29-Dec-2022 2.6 1,500 366 369 465 0.8 25.9 11.0 40.1
Archean Chemical 21-Nov-2022 32.2 1,462 407 449 616 10.3 37.3 10.9 19.7
Fusion Micro Finance 15-Nov-2022 2.9 1,104 368 361 617 -2.0 71.0 9.6 2.5*
SBFC Finance 16-Aug-2023 70.2 1,025 57 82 86 43.8 4.7 3.5 3.2*
Sula Vineyards 22-Dec-2022 2.3 960 357 358 485 0.3 35.4 11.5 48.5
Bikaji Foods 16-Nov-2022 26.7 881 300 321 495 7.1 54.2 9.5 80.5
TVS Supply Chain 23-Aug-2023 2.8 880 197 206 222 4.7 7.8 3.7 244.4
Kaynes Tech 22-Nov-2022 34.2 858 587 775 2,117 32.0 173.2 10.5 130.1
Uniparts India 12-Dec-2022 25.3 836 577 575 589 -0.3 2.4 9.2 13.0
Harsha Engineers 26-Sep-2022 74.7 755 330 444 432 34.5 -2.7 18.7 33.5
Inox Green Energy 23-Nov-2022 1.6 740 65 61 69 -6.9 13.8 10.3 –
*Price to book value. Price data as of September 15, 2023

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MARKET BAROMETER
Trends and trails

Here are some charts that will help you make sense of the current market in
terms of valuations and return potential
z Max Current z Median z Min
Sensex’s movement The Sensex is the most convenient indicator to

In ’000 tell the state of the Indian market. The 10-year
72
graph presented alongside shows the secular
67,839 run in the markets. However, this rally was
60 punctuated by several bearish phases. The
67,597
most prominent ones include the following:
48 Chinese growth concerns in 2015, demoneti-
sation blues in 2016, the sell-off in 2018 due
to US–China trade war, and the March 2020
36
COVID-19 shock. After staging a remarkable
recovery from the lows of March 2020, the
24 markets yielded to the Russian invasion of
19,380 Ukraine and rising interest rates. With reces-
12 sionary fears easing, Sensex reached a new
Sep ’13 Sep ’23 all-time high.
Sensex’s price to earnings The price-to-earnings ratio of the Sensex is a

40 simple market-valuation ratio. A general
guideline to help understand the valuation is:
35 35.1 Highly undervalued
(mouthwatering Fairly Dangerously
30 valuations) valued overvalued
25 22.9 P/E
24.3 12 16 20 24
20 Undervalued Overvalued
16.8
15 This graph is based on standalone data of Sensex companies.
Sep ’13 Sep ’23 If one takes the consolidated data, the P/E will likely be lower.
Sensex’s price to book value

4.0 The price-to-book-value ratio tells us how
3.83 many times an investor is ready to pay for a
rupee of net assets. Since book value is stable
3.6 3.61 and less volatile than earnings, some consider
it better than the P/E as a measure of
3.2 3.02 valuation.
If:
2.8 P/B > Median P/B = Overvalued
P/B < Median P/B = Undervalued
2.4 2.36
2.0
Sep ’13 Sep ’23

Sensex’s dividend yield
1.7% Dividend yield is nothing but the return an
investor gets in the form of dividend on his
investment. It is measured as dividend per
1.5 1.52 share divided by price per share. Generally
speaking, when stocks are cheap, dividend
yields are high.
1.3
If:
1.22 Dividend yield > Median dividend yield
1.1
1.22 = Undervalued
Dividend yield < Median dividend yield
= Overvalued
0.9
0.7
0.72
Sep ’13 Sep ’23
Market cap to GDP

125% Here we have considered the market
capitalisation of all the listed companies on
112 the BSE.
100
106 This measure is Buffett’s personal favourite.
81 He said, “It is probably the single best
75 measure of where valuations stand at any
given moment.”
57 If:
50 Market cap > GDP = Overvalued
Market cap < GDP = Undervalued
25
Considering market cap of all the listed companies on
the BSE, revised estimate of FY22 nominal GDP and
advance estimates of FY23 and FY24 nominal GDP
0
FY14 FY16 FY18 FY20 FY22 FY24
10Y G-sec yield vs Sensex’s earnings yield

4.0%
3.97 The spread between G-sec yield and Sensex’s
earnings yield is another valuation measure.
G-sec yield is the yield of the 10-year
3.2 2.91 government bond. Sensex’s earnings yield is
3.04 the inverse of the Sensex’s P/E ratio. The
greater the deviation from the median in either
2.4 direction, the greater the degree of
overvaluation or the undervaluation of the
Sensex.
1.6
If:
0.94 Spread > Median = Overvalued

0.8 Spread < Median = Undervalued
0
Sep ’13 Sep ’23 All data as of September 18, 2023

ANALYST’S DIARY
The IDFC First Bank

makeover
A merger, strategic shifts, and the path to
financial redemption
T
he recent addition to
the MSCI Global
Standard Index and its
announcement of a
reverse merger with its parent
company have pushed IDFC First
Bank into the spotlight. Like most
other banks, its stock performance
has been remarkable, returning
90 per cent in the past year (as of
September 8, 2023).
While it struggled with dismal
profits and losses between FY19 and First’s own transformation from a
FY21, the bank has consistently 3UHPHUJHUSHUIRUPDQFH 90 per cent wholesale-focused loan
increased profits and ROE in the Between the two, Capital First stands out book in FY10 to a 94 per cent retail-
last eight quarters (from September Capital First Erstwhile IDFC Bank dominated loan book in FY18.
2021 to June 2023). The transition was a rocky
How did this journey come 36.2 6.8 journey, even though the
about to be? Let’s look. destination was clear. Building
retail deposits meant investing
Pre-merger days 2Y loan book growth (% pa) heavily in branches, staff, and tech.
In 2017, IDFC Bank sought a The number of branches increased
partner to boost its retail side due from 206 to 601 in just three years.
to heavy exposure to wholesale Despite the growth and reduction
40.4 43.1
business. Enter Capital First, a in retail and wholesale loans,
retail non-banking financial 2Y PAT growth (% pa) respectively, the total loan book
company (NBFC) led by grew only by 8 per cent annually
12.6 6.3
V Vaidyanathan, known for from FY19 to FY21. During this
its good track record in loan
book growth, high ROE, and low
% 3Y avg. ROE (%)
% shift, many old loans turned bad as
well, thus pushing the gross NPA
NPA ratios. ratio from 3.3 per cent in FY18 to
Moreover, Capital First was 1.7 4.2 per cent in FY21.
eyeing a banking licence to access 4.2 Consequently, the bank reported
low-cost retail deposits. It was a losses for two consecutive years
3Y avg. gross NPA ratio (%)
golden opportunity for both! (FY19 and FY20). It looked
Data for FY16-18 disastrous!
Post-merger journey
In December 2018, the two bank aimed to shift its assets and Change in the tide
companies merged to create IDFC liabilities from wholesale to retail. The two years after the merger
First Bank. After the merger, the They planned to leverage Capital were gruesome, but the company’s

3RVWPHUJHUSHUIRUPDQFH
It’s been a rough ride for IDFC First Bank
Loan book (` cr) PAT (` cr) ROE (%) Gross NPA ratio (%)
FY19 86,302 -1,880 -11.2 2.4
FY20 85,595 -2,843 -16.9 2.6
FY21 1,00,550 483 2.9 4.2
FY22 1,17,858 132 0.7 3.7
FY23 1,51,795 2,485 10.6 2.5
investments in technology and trailing only behind Bandhan directly boost the bank’s profits.
branches started paying off soon Bank. It also demonstrated the Q Similarly, their recent branch
after. By June 2023, the bank’s fastest growth in net profit over the expansion is another reason
assets and liabilities started last five years. for hope. Many of them have
showing a positive picture. IDFC Just like its peers, its gross NPA opened in just the last two to
First Bank had: ratio is significantly high. However, three years and will take time to
Q Completed its restructuring on the bright side, it’s been on a scale up and contribute to
from wholesale to retail in the decline for the past two years. profitability.
second quarter of FY22, growing It would be a mistake to think Q Also, there are fresh ventures
its book by 25 per cent annually. It that the management can relax yet. that the bank has ventured into
currently stands at `1,70,000 crore. The bank’s ROE is still hovering over the past year or two like
Q The share of retail loans surged at around 10.6 per cent (FY23). credit cards, wealth management,
from 35 per cent in December 2018 Its cost-to-income ratio remains and cash management services.
to 79 per cent by FY23. high at roughly 71 per cent. The All these ventures demand
Q Customer deposits jumped from reason is that the bank is still heavy initial investment.
`38,455 crore in December 2018 to servicing its legacy wholesale bonds Yet, once they hit their stride,
`1,48,000 crore by June 2023. on which they pay an 8-9 per cent they’ll surely contribute to the
Retail deposits’ contribution interest rate. bottom line.
shifted from 27 per cent to However, things are not The bank has managed to
77 per cent during this period. entirely bleak, and there’s hope navigate its way through a maze
Q Consequently, its net interest on the horizon. but there are still plenty of
margin soared from 2.9 per cent Q As these bonds mature and the obstacles in its way. It remains to
to 6.3 per cent. focus pivots towards retail be seen whether it will be able to
Q Credit cost (net loan losses as a deposits (which come at a much come out on top.
percentage of loan book) remained lower cost), the cost saved will By Kunal Bansal
around 1.2 per cent in FY23,
thanks to the better credit
6WDQGLQJDPRQJVWSHHUV
environment in that year.
IDFC First Bank has reported the fastest growth in net profit
Simply put, the bank has so far
managed to turn around all its 4Y growth (% pa) FY23
obstacles into milestones. Bank M-cap (` cr) Advances PAT ROE (%) Gross NPA ratio (%)
IDBI Bank 76,149 2.6 22.4 10.2 6.38
Where does it stack up against IDFC First Bank 63,494 15.2 34.8 10.6 2.51
its peers?
Yes Bank 52,740 -4.2 -19.0 2.0 2.17
We assessed the bank’s performance
Bandhan Bank 39,193 27.5 3.0 1.5 4.87
against four private sector banks
with loan books of a similar size. Federal Bank 34,651 13.0 24.8 15.4 2.36
IDFC First Bank has seen the Price data as of September 8, 2023. Financials as of FY23.
second-fastest growth in advances,

ANALYST’S DIARY
EaseMyTrip’s growth blueprint

The only profitable player in the competitive OTA market
I
n the wake of the pandemic, the
travel and tourism industry has
finally witnessed a revival.
Rising above previous declines,
airlines and hotels have registered
considerable growth in the last few
quarters. But in their shadows lie
online travel agencies (OTAs). Just
like the overall industry, these
companies have witnessed
exponential growth as well.
The proliferation of affordable
access to the internet and increasing
penetration of smartphone usage
has been a boon for OTAs. They are
now able to offer price
transparency, a wide range of
options, and user-generated reviews,
thereby enabling informed decision-
making. Moreover, they have also
rolled out loyalty programs,
dynamic pricing, and mobile apps
for enhanced user journey.
However, what good will these
services do if the companies don’t 5LVLQJERRNLQJV *DLQLQJPDUNHWVKDUHLQ
generate any profit? We discovered Over the five-year period, DLUOLQHWLFNHWLQJ
that from a trio of prominent Indian EaseMyTrip has grown the most EaseMyTrip still lags MakeMyTrip
OTAs we examined, only Easy Trip Gross booking revenue (` cr) Air ticket volume (` cr)
Planners, commonly recognised as FY19 FY23 FY19 FY23
EaseMyTrip, stood out as profitable.
We were intrigued and studied the
company in depth to figure out how
38,123 52,529 3.9 4.4
this was accomplished.
MakeMyTrip MakeMyTrip
The journey of EaseMyTrip

When the Pitti brothers founded
EaseMyTrip in 2008, they had a
mere `15 lakh as their initial 2,938 8,051 0.6 1.1
capital. They wanted to help travel EaseMyTrip EaseMyTrip
agents sell air tickets, essentially a
B2B model. In those days, a travel
agent had to pay `30,000 upfront to
airlines. So, if they wanted to book
11,409 6,756 1.0 0.6
tickets for 10 airlines, they needed
Yatra Online Yatra Online
to commit `3 lakh indefinitely.

,QDQLQGXVWU\SODJXHGE\ORVVHV«
EaseMyTrip has been consistently profitable Profit after tax (` cr)
Year MakeMyTrip EaseMyTrip Yatra Online
FY19 -1,342 24 -115
FY20 -3,582 33 -83
FY21 -445 61 -118
FY22 -363 106 -48
FY23 -91 134 -29
Yatra Online recently filed for an IPO. In its prospectus, the company has restated its statements and reported a profit in FY23.
Here is where the brothers came up with a brilliant

solution. They decided to integrate all the airlines and (PSOR\HHFRVWVDPRQJSHHUV
charged the agents only `20,000 as the initial deposit. EaseMyTrip’s employee costs are significantly lower
Also, they paid commissions to the agents since they Employee expense as % of revenue
had aggregated a bunch of them. It gave them a z MakeMyTrip z EaseMyTrip z Yatra Online
successful business model. Over time, the company 70%
has cloned this model and entered different segments.
60
To our surprise, we discovered that EaseMyTrip
50
has never raised capital from private equity. It has
achieved its growth organically through internal 40
accruals. Today, EaseMyTrip is the largest OTA in 30
terms of agent network (over 60,000) in the OTA space. 20

10
EaseMyTrip’s success mantra 0
The company has displayed some astute business FY20 FY21 FY22 FY23
moves. Let’s see what it did to accomplish this.
No convenience fees: When EaseMyTrip ventured into led customer service model during the lockdowns. It
the B2C market, it noticed that the competitors were not resulted in a 45 per cent reduction in their call centre
only getting margins from the airlines, but they were team, translating into substantial cost savings.
also charging convenience fees from the customers. In Furthermore, the company focused on fortifying its
response, EaseMyTrip charged no convenience fee. This technology team. Its technological investments not only
distinct strategy played a significant role in helping them improved efficiency but also helped maintain a leaner
gain traction on their platform. organisation.
Customer-centricity: Amidst the pandemic, the travel
and tourism industry faced unprecedented challenges. What lies ahead
Passengers were seeking refunds for disrupted plans. Since its listing in March 2021, the share price of
This is when EaseMyTrip stood out as a customer- EaseMyTrip has tripled (as of September 11, 2023).
oriented company. While airlines offered credits, it Whether it will continue to grow is anybody’s guess.
chose to refund customers with hard cash and, in the However, there are a couple of things to watch out for.
process, earned immense goodwill. This move catapulted If the global economy faces a long slump, then the travel
EaseMyTrip to eventually become the second-largest and tourism industry will face the heat.
OTA platform in terms of airline ticket bookings. Also, the competition is increasing. For instance,
Better cost management: EaseMyTrip’s remarkable Flipkart acquired Cleartrip (a direct competitor of
cost-efficiency strategies have been pivotal in weathering EaseMyTrip). It remains to be seen whether the
the storms of the pandemic. Facing a tenfold surge in industry is drawn towards fierce price competition or
customer calls while grappling with increased call towards sustainable profitability.
abandonment rates, EaseMyTrip shifted to a WhatsApp- By Asif Ali

ANALYST’S DIARY
Rear-view mirror investing

Is past performance a reliable investment indicator?
W
hat motivates
people to undertake 3HUVLVWHQWO\FRQVLVWHQW
any business
With time, very few companies are able to perform consistently
activity? The desire
to generate profits. The long-term FY09-13 FY10-14 FY11-15 FY12-16 FY13-17 FY14-18 FY15-19 FY16-20 FY17-21 FY18-22 FY19-23
growth and success of a business

No. of companies
depend on its ability to earn profits
and generate positive cash flow on zz
zzzzz
a consistent basis. zzzzzzzz
zzzzzzzzzzzzz
To explore more about such zzzzzzzzzzzzzzzzz
companies, we ran some filters. zzzzzzzzzzzzzzzzzzzzzzzzzzz z
zzz zzz zzz zzz zzz zzz zzz zzz zzz zzz zzz
We studied companies with a
197 166 135 114 98 81 64 61 50 39 35
market cap of over `500 crore (as
of September 6, 2023) and with at
least a 15-year trading history. Median return (% pa)
We found 371 companies that have

reported profit and positive cash
flow from operations in at least
13 out of the last 15 years. 31.9 18.7 26.2 29.7 39.0 31.8 15.2 9.7 14.7 11.5 14.6
From an investor’s perspective,
this represents 371 possible
investment opportunities. But in
Sensex return (% pa)
retrospect, it is easy to identify
which companies became massive
wealth creators. This made us
wonder whether an investor could 18.0 6.3 9.5 9.8 12.0 10.2 8.4 3.8 13.7 15.4 11.1
reliably use past performance to Return calculated based on prices at the end of financial year
make investment decisions.
To find this out, we created 11
five-year rolling periods over the around 18 per cent of the environments is very rare to find.
last 15 years (such as FY09-13, FY10- companies performed consistently Thus, such companies are often
14 and so on). Then, we applied the throughout the 15-year period. generously rewarded by the
following filters to the companies. However, what is more market in the long run.
Q Market cap over `500 crore interesting is that the median While consistent performance is
and a trading history of at least return of companies in each important, it is not the only
15 years. period was higher than that of the significant factor to consider.
Q YoY growth in profit after tax in Sensex. There was only one Other parameters, such as a
at least three of the five years. exception to it - FY18-22. company’s fundamentals, business
Q YoY growth in cash flow from A company might report growth strategy, growth opportunities, etc.,
operations in at least two of the over a five-year period because of must also be evaluated before
five years. favourable market conditions. making a decision to invest.
We started out with 197 However, recording consistent Continued due diligence is essential
companies, and in the end, we growth through various business for a long-term investor.
were left with only 35. This means cycles and challenging market By Hemkesh Khattar

ANALYST’S DIARY
Frothy small caps

A graphical guide to small-cap valuation in today’s market
T
he real joy of
equity investing
lies in finding a 5HWXUQVDFURVVPDUNHWFDSV 35 per cent
Large-, mid- and small-cap indices have doubled, tripled and quadrupled, respectively is the return the BSE
hidden small-cap gem SmallCap index has
and sticking with it 500 z S&P BSE LargeCap z S&P BSE MidCap z S&P BSE SmallCap generated in the last one
year. Over the last one,
through thick and thin. 400
two, and three years, the
But as the venerable 300 BSE SmallCap index has
Charlie Munger once outperformed the other
200 two indices.
said, “It’s not the bad
100
ideas that do you in, it’s
March 2020 September 2023
the good ideas… the
Data as of September 8, 2023. All indices rebased to 100.
good ideas are a
wonderful way to suffer
terribly if you overdo
them.”
7KH3(VSUHDG 21.5 per cent
Distribution of P/E ratio of small-cap companies over the years is the percentage of
The stock market (and small-cap companies
100 z Negative z Less than 50 z More than 50 with a P/E of over 50 (in
most of its participants)
September 2023). This
has a tendency to take 75
is the highest proportion
things to the extreme. 50 across all the
Take the case of small- September(s) since
25 2000. The same
cap companies, for measure for all traded
0
instance. They have had companies is also at its
September 2000 September 2023 highest in 2023 (at
a remarkable run in the For the month of September. Data as of September 8, 2023. 19.1 per cent).
last three or so years.
But as the graphs depict,
the valuation of most
+LVWRULFDOYDOXDWLRQRIVPDOOFDSFRPSDQLHV 777 companies
small-cap companies is out of 955 small-cap
Median P/E of small-cap companies is at its highest-ever
anything but cheap. companies (or about 81
500 z Median P/E (left side) z % of small caps with P/E over 100 (right side) 8 per cent) are currently
As of September 8,
trading above their five-
2023, around 81 per cent 400 6
year median P/E.
of small-cap companies 300 4 Moreover, there are 64
small-cap companies
are trading above their 200 2 with a P/E of over 100 in
five-year median P/E. If 100 0 September 2023!
you are tempted to March 2020 September 2023
invest in small caps For the month of September. Data as of September 8, 2023. Median P/E denotes the
because some friend or median of all small-cap companies as of month end.
colleague made a killing,
then hold your horses.
'RHVWKH Only 46 cos.
Do your due diligence
before stepping on the
small-cap bandwagon. It
EXVLQHVVMXVWLI\
WKHYDOXDWLRQ"
10.3 10.3 9.6
5Y revenue 5Y profit after tax 5Y median
out of 178 small caps
with a P/E of over 50
have a five-year median
For small-cap companies growth (% pa) growth (% pa) ROE (%) ROE of more than
would be tragic if the
with a P/E of over 50 Data as of FY23 15 per cent.
company does well, and
you don’t.

WORDS WORTH WISDOM
An owners’ manual
for shareholders
Incredible insights from trillion-dollar companies
Illustration: ANAND
Larry Page, founder of Google Sergey Brin, founder of Google Jeff Bezos, founder of Amazon
A
lphabet (erstwhile Google) and Amazon are two Google) and Jeff Bezos (founder of Amazon). In fact, in
of the most iconic companies in the world their first-ever letter to shareholders, these founders
today. With over a trillion dollars in market had set out the equivalent of Warren Buffett’s
cap, both companies have rewarded their ‘Owner’s Manual’. Just like Buffett’s ‘Owner’s
shareholders handsomely over the years. Since its listing Manual’ explains the economic principles of operation
in May 1997, Amazon has multiplied shareholders’ of Berkshire Hathaway, these founders had delineated
wealth by 1,379 times, whereas Google (since its listing in their principles.
August 2004) has multiplied shareholders’ wealth by 54 Folks like us, aka long-term investors, can gain
times. (Both returns are as of September 7, 2023). valuable insights from their principles. With that in
While going through the shareholder letters of both mind, we have taken snippets of their first
these companies, we found some similarities in the shareholder letters. These principles can form the
mindset of Larry Page, Sergey Brin (founders of bedrock of your investment philosophy.

CUSTOMER CENTRICITY
From the beginning, our focus has been on Serving our end users is at the heart of what
offering our customers compelling value… we do and remains our number one priority.
Our goal remains to continue to solidify Our goal is to develop services that
and extend our brand and customer base. significantly improve the lives of as many people
This requires sustained investment in as possible. In pursuing this goal, we may do
systems and infrastructure to support things that we believe have a positive impact on
outstanding customer convenience, the world, even if the near-term financial returns
selection, and service while we grow. are not obvious.
RISK VERSUS REWARD WORK CULTURE

We will make bold rather than timid We will work hard to spend wisely and
investment decisions where we see maintain our lean culture. We understand
a sufficient probability of gaining the importance of continually reinforcing
market leadership advantages. Some of these a cost-conscious culture, particularly in a business
investments will pay off, others will not, and incurring net losses.
we will have learned another valuable lesson …We will continue to focus on hiring and
in either case. retaining versatile and talented employees and
…We will continue to measure our programs continue to weigh their compensation to stock
and the effectiveness of our investments options rather than cash. We know our success will
analytically, to jettison those that do be largely affected by our ability to
not provide acceptable returns, and attract and retain a motivated
to step up our investment in those employee base, each of whom must
that work best. We will continue to think like, and therefore must
learn from both our successes actually be, an owner.
and our failures.
We provide many unusual
We will not shy away from high-risk, benefits for our employees, including
high-reward projects because of short- meals free of charge, doctors and washing
term earnings pressure… Although we machines. We are careful to consider the long-term
cannot quantify the specific level of risk we advantages to the company of these benefits.
will undertake, as the ratio of reward to risk Expect us to add benefits rather than pare them
increases, we will accept projects further down over time. We believe it is easy to be penny-
outside our current businesses, especially when wise and pound-foolish with respect to benefits that
the initial investment is small relative to the can save employees considerable time and improve
level of investment in our current businesses. their health and productivity.
LONG-TERM FOCUS
We believe that a fundamental measure of our If opportunities arise that might cause us to
success will be the shareholder value we sacrifice short-term results but are in the best
create over the long term. This value will be a long-term interest of our shareholders, we will
direct result of our ability to extend and solidify our take those opportunities. We will have the fortitude to
current market leadership position. The stronger our do this. We would request that our shareholders take
market leadership, the more powerful our economic the long-term view.
model. Market leadership can translate directly to …Many companies are under pressure to
higher revenue, higher profitability, greater keep their earnings in line with analysts’
capital velocity, and correspondingly stronger forecasts. Therefore, they often accept smaller,
returns on invested capital. predictable earnings rather than larger and
…We will balance our focus on growth with less predictable returns. Sergey and I feel
emphasis on long-term profitability and capital this is harmful, and we intend to steer in the
management. opposite direction.

VIS-A-VIS
Cable chronicles
Two leading players, varied strengths, one market
Finolex Cables KEI Industries

India’s largest electrical cable manufacturer, Finolex, A leading manufacturer of cables, KEI is one of the
has a 22 per cent share of the organised cables market. few players who can manufacture extra-high-
With a wide distribution network of 26 depots, 1.75 lakh voltage cables above 220kV. It focuses on the
outlets, and backwards integrated PVC resin production, institutional business (46 per cent of FY23 revenue).
it’s strategically positioned. Electrical cables contribute Low tension cables are its biggest revenue
the most to the company’s revenue, with 82 per cent in generators at 41 per cent, followed by home wires
FY23, followed by communication cables (13 per cent) and wind wires at 27 per cent, and high tension at
and other products (5 per cent). It also operates in the 17 per cent. Similar to Finolex, KEI also
FMEG segment. manufactures its own PVC resin.
Financials (All numbers in ` cr)

Revenue Operating profit Net profit Net worth Total debt Cash from operations Market cap
4,670 489 545 4,370 0 356 16,848
7,129 667 495 2,136 135 514 23,691
3ULFHFKDUW 3(UDWLR
800 60
Rebased to 100
600 45
400 30
200 15
0 0
September 2018 September 2023 September 2018 September 2023
30.9 47.7 3.8 8.7 0.6 0.1 0.0 0.1

Price to earnings Price to book Dividend yield (%) Debt to equity
26.1
)LYH\HDUDQQXDOLVHGJURZWK SD
20.3
15.7 23.4
11.3 10.5 9.4 12.2
6.9 16.1
14.8
3.4
9.7 8.8
Net Operating ROE (%) ROCE (%)
margin (%) margin (%) Revenue Operating profit EPS
P&L items as of TTM June 2023. Balance sheet, cash flow, and ratios for FY23. Price data as of September 14, 2023
The wires and cables industry is considered to be a proxy play for the upcycle in several industries.
The current realty boom, major capital investment plans by the government, high private capex, and the
5G rollout are expected to be the growth drivers of the industry going forward. Polycab’s annual report
shows that the industry is expected to grow at 9.5 per cent per annum until FY26.

COVER STORY
Cool stocks
in a hot market
Stock picks based on a
famed Canadian value
investor’s approach
By Karthik Anand Vijay and Udhayaprakash
W
ith the market close to its all-time high,
spotting great investment opportunities
can be an uphill task. But don’t worry.
We have got you covered.
This month, we have taken a page out of the
renowned Canadian value investor Francois Rochon’s
playbook. He is the founder of Giverny Capital Inc.,
an investment firm based out of Canada. For a
long time, we have admired him from afar and
have been avid readers of his annual letters.
So, we thought about sharing his
experience and knowledge with you. In the
following pages, we have explained his
investment philosophy and applied his
filters to the Indian listed universe.
Needless to say, the companies mentioned
in the story are not our
recommendations.
And oh, by the way, Rochon has
beaten the market by a wide margin!
Since the inception of his first fund
(Rochon Global Portfolio) in July 1993,
he has returned 5,355 per cent against
the benchmark returns of 1,177 per cent.
The returns are as of December 2022.
Now you know why he is a force to be
reckoned with.

COVER STORY
The artistic investor

Unravelling the investment philosophy of Francois Rochon
I
t was in the early 1990s when
Francois Rochon discovered the
writings of Warren Buffett,
Benjamin Graham, John Templeton,
Philip Fisher and Peter Lynch.
These writings struck a chord with
him and eventually formed the core
of his investing philosophy as a
long-term value investor. However,
he didn’t follow these principles
blindly either. Instead, he developed
a signature style of investing
unique to him.
Blending science and art

An engineer by education,
Rochon says it has helped him
develop a rational mind.
Moreover, he didn’t have to How not to beat the
unlearn many of the financial stock market? +RZQRWWREHDWWKH
beliefs held by most people. At Before explaining his stock VWRFNPDUNHW"
the same time, he is very selection process, let’s read A sure shot way to mediocrity
passionate about art, too. In fact, Rochon’s advice about what you
the name of his firm (Giverny) is should do if you don’t want to beat Think the same way as
the city (in France) where Claude the market. You should, other investors
Monet, the great impressionist z Think the same way as other
painter, lived. He says he got the investors, i.e., invest in similar
Have the same time
idea about the art of investing, stocks.
horizon as other investors
i.e., going beyond the numbers, z Have the same time horizon as
while reading Peter Lynch’s book other investors.
‘One Up on Wall Street’. z Own lots of companies so that Own lots of companies
So, Rochon combines his scien- you don’t differ much from the
tific mindset with that of an artist average.
to identify companies that will z Believe that you are smarter than Believe that you are
create wealth in the long term. He others and can predict the market. smarter than others and
says that to master any art form, Now, if you flip these points, you can predict the market
you must study the masters, will get an idea of what it takes to
actively practise your craft, devel- beat the market. You need to think Last but not least, you need to
op your own style and continuous- for yourself and have a long-term develop the right behaviours -
ly strive for improvement. The horizon. Furthermore, you need to patience, humility and rationality.
same goes for investing. With that own only a few select companies. (In If you want to beat the market,
insight into Rochon and his a Google Talk in 2017, Rochon you have to stand apart from others.
thoughts, let’s dig deeper into his mentioned that he held 25 It will be difficult at times, but
investment philosophy. companies in his firm’s portfolio). that’s what it takes.

Rochon cites a quote by John Market valuation: Essentially,
Maynard Keynes to drive this point 5RFKRQ¶VVWRFNVHOHFWLRQ Rochon and his team are looking for
home, “It is the long-term investor SURFHVV businesses that can double their
who will, in practice, come in for investment in five years (i.e.,
most criticism. It is in the essence 15 per cent per annum). Here is
of his behaviour that he should be how they go about it.
eccentric, rash and unconventional z To the best of their abilities, they
in the eyes of the average opinion.” try to forecast the profit five years
from now.
The stock selection process z Apply a P/E multiple (based on
As you can see in the exhibit the nature of the business) to get the
‘Rochon’s stock-selection process’, FINANCIAL STRENGTH price it will trade at.
there are four parts. Let’s take a z ROE > 15 per cent z They buy if the current price is
closer look at each of them. z EPS growth > 10 per cent less than half of the forecasted
Financial strength: This component z Debt/profit ratio < 4 times price.
depicts the scientific aspect of It is not the easiest of methods,
investing. These are purely based BUSINESS MODEL but given his investment track
on numbers. For those of you who z Market leader record, it has undoubtedly worked
might be new to the debt-to-profit z Competitive advantages for them. However, use the Value
ratio, this metric shows how many z Low cyclicality Research method if you are looking
years it would take to repay the for a more straightforward
debt if the company maintained its MANAGEMENT TEAM approach. That is, shortlist the
current net profit. It was z High levels of ownership companies that are trading at a
mentioned by Buffett in his 1991 z Constructive acquisitions discount to their five-year median
shareholder letter. z Good capital allocation P/E or P/B.
Business model: This segment is
about the art of investing. The MARKET VALUATION The competitive advantage
market leadership and low z Try to purchase at half the of investors
cyclicality are fairly estimated value in five years Given the intense (and rising)
straightforward parameters to competition among investors to
consider. However, Rochon has a generate market-beating returns,
rather unique way of looking at criterion to help me decide the Rochon argues that investors can
competitive advantages. He says direction of the moat, it’s the develop an edge over others by
that he wants to find the business managers. I mean, those moats are developing certain behaviours. He
equivalent of art masterpieces. He not built by angels. They’re built cites three such behaviours that he
cites the examples of McDonald’s, by human beings. So what makes a and his team have developed and
the Washington Post, Starbucks, moat grow, I think, is something in strive hard to maintain.
Google, and Gillette. the culture of the company. Those Patience: There are times when the
He says that usually, the things don’t come from thin air. It share price doesn’t reflect the true
uniqueness of these companies is comes from the top management value of a company. Rochon
either in their product, service or that builds that culture.” suggests that you should focus on
culture. This is the equivalent of Management team: Rochon says that what is happening to the company
having a moat that protects them judging the quality of the and not on what is happening to
from invaders. management team is a highly the stock.
However, there are times when subjective call. Nonetheless, it is an In the last 13 out of 20 years, the
moats deteriorate, to which he important aspect. He asks himself, share price of Titan (a leading
says, “There are always companies “Would I like this person to marry jeweller) has fallen by at least
with new moats. Some are my daughter/son?” If the answer is 20 per cent (calculated by taking the
expanding, and some are ‘Yes’, then it is probably a good highest price in Year 1 and the
shrinking. If I had to choose one person to partner with. lowest price in Year 2). At the same

COVER STORY
time, the net profit has grown except for the P/E ratio, which was
nearly 200 times. Had you focused around 40 times. So, he didn’t invest 7KHUXOHRIWKUHH
on the share price of the company in the company.
To accept that:
rather than the inherent business, However, using his hindsight he
you would have missed out on an says that the company was One year out of three, the
800-bagger! undervalued and that the market stock market will decline
So, patience is truly a virtue in didn’t discount its future earnings by 10 per cent or so
investing. However, Rochon argues entirely. How big a mistake was it,
that we shouldn’t confuse patience you ask? He missed out on a One stock purchased out
with stubbornness. There are 100-bagger! It shows you the of three will not perform
moments when we fail to recognise importance of studying your as expected
our mistakes. Take the case of mistakes objectively. By doing so,
Brightcom (a digital marketing you can avoid committing it the One year out of three, we
company). If you have held it for the next time. will underpeform the index
last five years, you have multiplied Rationality: Again, Rochon gives
your investment by nine times. A three points that highlight what it
superb feat! But there is no getting means to be rational. In summary
around the fact that the company is z To not be affected when others The remarkable thing about
in dire straits. Amidst all the make more money than you. Rochon is that he has stayed
hodgepodge transactions by the z To be impervious to stock market consistent with his investment
promoter and SEBI’s investigations, prices in the short term. philosophy since 1993. Of course,
the share price is down 63 per cent z To accept that you don’t know he would have improved his skills
in one year. the future and focus on what you and learned to avoid certain
Humility: In today’s world, with easy can have some control over, i.e., mistakes during this time. But not
access to multiple social media your process. deviating from his core
platforms, anyone can voice an Mastering these three philosophy is perhaps one of the
opinion about anything. This is behavioural traits (patience, key reasons why he has
particularly true with stock humility and rationality) can give outperformed the market.
investing. Irrespective of merit, you an edge over other investors. The exhibit ‘What it means to be
thousands of people debate about Sure enough, it will take time, an artistic investor’ summarises
stocks and the direction of markets. but the rewards are pretty sweet. Rochon’s philosophy and compares
Rochon is the complete opposite. Rochon has taken it a step further it to what an average investor does.
He gives three points on how to and devised a rule of three (see If you find Rochon’s investing
remain grounded. the exhibit ‘The rule of three’). It philosophy and framework
z Don’t predict macroeconomic can act as a guide to help you intriguing, you can also listen to
events. through the vagaries of the his Google Talk (titled ‘The art of
z Define your circle of competence stock market. investing’) that he gave in 2017.
and know its limits.
z Recognise your mistakes and
always strive for improvement. :KDWLWPHDQVWREHDQDUWLVWLFLQYHVWRU
He says that investing is about
being imprecise and accepting to be
wrong 40 per cent of the time. Most Average investor Artistic investor
of the mistakes he and his team
make are mistakes of omissions z Focus on market quotes z Focus on intrinsic value
(i.e., opportunities they missed out z Short-term oriented z Long-term horizon
on). And they can be pretty costly! z Have an opinion on everything z Focus on circle of competence
Citing the example of Starbucks, he z Try to predict WHEN to buy z Focus on WHAT to buy (to own)
first looked into the company in z Cannot resist the latest fad z Resists fads and popular beliefs
1994. Everything was to his liking

Our methodology
Here’s how we applied Rochon’s stock-selection process to the Indian market
W
e walked you through companies. This gave us 1,186 228 companies.
Rochon’s investment companies. 7. Promoter stake of at least 50 per
philosophy in the 3. At least five years of financial cent. 174 companies were found to
previous section. His stock- history. You should research at be good on this parameter.
selection process contains four least the past five years’ history 8. The current P/E ratio should be
parts. While we strived to before investing in a company. less than 50 times. Moreover, the
maintain as close a similarity as 4. A debt-to-PAT ratio of less than current P/E ratio should be less than
possible, we had to make some four times. This filter removed 389 the five-year median P/E ratio.
adjustments in the context of the companies from consideration. Only 32 companies cleared
Indian market. 5. ROE of 15 per cent or more in at this criterion.
Here are the filters we applied. least four out of the last five years. From this final list of 32
1. Removed banking, financial 486 companies fell short of companies, we removed 18
services and insurance companies. this criterion. companies. This was on account of
We couldn’t ascertain Rochon’s 6. Five-year profit after tax growth of the lack of market (or niche)
criteria for such companies. at least 10 per cent per annum. leadership, competitive advantage
2. Market cap greater than 58 companies failed to clear this and/or cyclicality. Thus, we ended
`600 crore. To filter out micro-cap filter, and we were left with just up with 14 companies in total.
&RPSDQLHVFOHDULQJRXUILOWHUV
Based on Francois Rochon’s stock-selection process
5Y PAT 5Y median Debt-to-PAT
Company Sector M-cap (` cr) growth (% pa) ROE (%) (FY23; times) Current P/E 5Y median P/E
Godfrey Phillips India FMCG 11,072 34.1 15.9 0.05 13.8 14.8
Swaraj Engines Auto & Anc 2,456 10.8 35.8 0.00 18.2 18.5
0lZER Healthcare 17,458 11.6 17.2 0.00 25.5 35.9
Fine Organic Industries Chemicals 14,768 45.3 30.4 0.04 26.4 41.9
Galaxy Surfactants FMCG 9,457 19.2 23.7 0.71 26.6 27.1
TCS IT 12,36,467 10.3 38.0 0.00 28.3 29.0
Emami FMCG 23,372 15.8 25.4 0.12 33.2 43.0
Garware Technical Fibres Textile 6,498 10.4 20.2 0.77 34.9 35.5
Procter & Gamble Health Healthcare 8,041 30.3 22.0 0.00 35.0 47.2
Glaxosmithkline Pharma Healthcare 24,367 11.7 21.7 0.00 39.1 53.2
Rossari Biotech Chemicals 4,733 29.9 23.1 0.69 43.9 56.7
Britannia Industries FMCG 1,08,031 18.2 46.9 1.28 44.2 55.1
Abbott India Healthcare 48,266 18.8 27.4 0.00 46.7 49.7
Blue Dart Express Logistics 14,885 20.7 18.8 0.67 47.6 51.7
Price data as of September 1, 2023. Financial data as of fiscal year-end.

COVER STORY
GODFREY PHILLIPS INDIA
Marlboro's Indian Maven
H
eard of Marlboro cigarettes? The company’s recent growth to exit ventures that did not yield
Godfrey Phillips, in could be credited to astute capital results. Even among exports, the
partnership with US tobacco allocation. The management mix was changed as per the demand
giant Phillip Morris, exclusively efficiently shifted to retail and and prospects.
manufactures and sells cigarettes exports when cigarette volumes In future, Godfrey plans to
for Marlboro in India. It also has its were muted. They were also quick continue similar strategies. It will
own brands like Four Square, Red & focus on its unmanufactured
White, and Cavanders. The firm tobacco export, which has grown by
also has a foothold in exports and 34 per cent annually in the last five
owns the 24seven retail chain. years. Also, the expansion of retail
The two pillars of Godfrey’s stores remains a priority.
success are its brand recognition However, investors must
and smart capital allocation. remember that the domestic
Marlboro’s global reputation as a cigarette business is still the
cigarette brand made its marketing primary source of revenue. It is not
simpler in India. Additionally, the only heavily regulated but also
launch of its own brands further highly taxed. So, any adverse
strengthened its position in the 13.8 14.8 movement in that context could
cigarette market. Current P/E 5Y median P/E impact the business significantly.
SWARAJ ENGINES
Mahindra's powerhouse
S
waraj Engines, a Mahindra been consistent, as a result of parent company faces.
group entity, is one of the which, Swaraj has a consistently Additionally, the tractor
largest tractor engine low debtor position and a industry’s seasonal nature is
manufacturers in the country. The negative cash conversion cycle. something to watch out for.
company supplies 20-65 This association is also one of Swaraj Engine’s growth directly
horsepower diesel engines to its weaknesses since it can fall hinges on tractor penetration and
Mahindra & Mahindra for their victim to any slowdown that its farm mechanisation in the country.
‘Swaraj’ brand of tractors. Its This change is expected to be driven
Mohali (Punjab) manufacturing by favourable government policies
plant has a total capacity of and labour shortages in the sector.
1,50,000 engines per annum. Anticipating an increase in demand,
The company’s biggest 18.2 the company plans to increase its
strength is its association with Current P/E capacity by 30 per cent and has
Mahindra & Mahindra. Being the revised the limit of related party
supplier to the world’s largest transactions with Mahindra &
tractor manufacturer provides 18.5 Mahindra. A dividend yield of
stability and visibility in 5Y median P/E 4.3 per cent and a P/E ratio that is
revenue. Despite their around its five-year median provides
relationship, the payments have a good opportunity for investors.

PFIZER INDIA
Expansion and caution

`368 crore towards promotional
U
S-based Pfizer’s subsidiary, its parent company’s portfolio to
Pfizer India, is one of the launch products like Meronem, activities in the past half-decade.
pharmaceutical giants in Zavicrefta (anti-infectives), Zinforo A significant hurdle is Pfizer’s
the country. It sells around 150 (anti-infectives), Neksium products entering the National List
products in 15 therapeutic areas. (gastrointestinal), and others. With of Essential Medicines (NLEM). So,
Its only manufacturing facility in advertising restrictions on many the company might lose not only
Goa has a capacity to manufacture offerings, Pfizer has channelled price control but also the
over 300 crore tablets a year. exclusivity of its products. In FY23,
Pfizer’s expansive product
portfolio is its forte. It owns some
25.5 35.9 it lost two key brands under
NLEM, and further inclusion could
Current P/E 5Y median P/E
renowned brands that have helped affect its growth.
it become a market leader in anti- Its future strategy is to expand
microbial medicines, product portfolio with the help of
immunisation, antacids, etc. The new launches and improve its
national immunisation program’s reach. Recently, it has also pivoted
adoption of Prenevar 13 boosted its towards core therapeutic areas.
volume, solidifying its dominance However, the company continues
in the pneumonia vaccine space. to remain cautious about the
In recent years, it has leveraged dynamic regulatory environment.
FINE ORGANIC INDUSTRIES
From oils to eco-excellence
E
stablished in 1970, Fine also long. This has created an entry annual report that the
Organic is the largest Indian barrier for other firms while Fine oleochemical segment is expected
manufacturer of Organic continues to pioneer the to outperform the broader specialty
oleochemical-based additives and industry. As a result, it can chemical industry due to one
the world’s sixth-largest player. maintain a high return on capital major reason: sustainability. Fine
These additives are used in a range (five-year median ROCE of about Organic’s eco-friendly alternatives
of end products such as food, 39 per cent). to petrochemicals position it
plastic polymer, cattle feed, The company has stated in its favourably around the world
cosmetics, coatings, and more. Its because globally, companies are
exports contributed to around
68 per cent of revenue in FY23.
26.4 41.9 looking for affordable solutions.
However, this growth may not
Oleochemicals are made by all be gradual since the company’s
converting vegetable oils and profitability depends on the
animal fats into additives instead volatile prices of vegetable oils, its
of using chemical compounds. This primary raw materials. In the
requires complex technology and recent quarters, it witnessed a fall
expertise. Due to the significance due to fluctuating raw material
of these compounds in various end prices, and this may happen again
products, the time for approval is in future.

COVER STORY
GALAXY SURFACTANTS
Crafting chemical excellence
G
alaxy Surfactants is one of performance chemicals and the firm’s future strategy is to
India’s premium rest from specialty care. anticipate the upcoming demand.
manufacturers of The company’s clients, product It intends to plan a capex of
performance chemicals and portfolio, and technical expertise around `150-200 crore annually
specialty care products. It is also have been developed as its for the next few years, focusing
the country’s largest strengths, with consistent R&D on specialty care.
manufacturer of oleochemical- activities and experience. In the Nevertheless, investors should
based surfactants. 65 per cent of last five years, it has obtained keep an eye on growth. Notably,
its revenue comes from 30 patents and launched over in recent years, growth was
20 products. This, in turn, has predominantly driven by price
captivated some top-tier clients in growth, while volumes in both
26.6 the home care sector, ensuring segments have been just around
Current P/E
long-term relationships. These 3 per cent per annum, which
three factors have consolidated causes some concern. The export
its position in the industry. segment has not posted growth in
The management is optimistic the last five years either. So, the
about the future because of a post- volume growth needs to be
27.1 pandemic surge in the demand observed, as ultimately, that is
5Y median P/E for home care products. The the key to success in the long run.
TATA CONSULTANCY SERVICES
Leading digital dynamics
T
ata Consultancy Services BaCNS, Quartz, and Twix secured some major clients over
(TCS), the flagship company leading their niches. the years. However, competition
of the Tata group, stands as Strategically, the management in the industry has risen as TCS
India’s foremost IT company both at TCS blends innovation with an competes with many Indian and
in terms of revenue and market emphasis on partnerships and global firms, and high exposure to
cap. Most of its revenue (38 per geographic diversification. The one sector can further affect its
cent in FY23) comes from the Tata branding has further consistency in times of slowdown.
banking, financial services and The projected global IT sector
insurance industry. growth is 5.2 per cent per annum
TCS’s innovation prowess is till 2030, as per the company’s
one of its core strengths. It annual report. The firm is all set
pioneered IT research
laboratories in partnership with
28.3 29.0 to capitalise on this growth with
an order book of $34.1 billion,
various academic institutions. In which is 1.2 times its current
the last five years, the company revenue. It aspires to a target of
has spent `9,937 crore on R&D $50 billion in revenue by 2030 and
and innovation hubs. It has been is making numerous investments
clearly successful with some of in future-oriented technology.
its recent launches, such as

EMAMI
Business brilliance beyond beauty
E
mami is one of the largest built in a day. Well, neither were topline growth has been poor at
Indian FMCG companies, Emami’s brands. Over the last just 6 per cent per annum, with
predominantly in the five years, the company has spent most of the growth happening in
consumer healthcare segment. Its `2,483 crore on advertising at an the last two years.
products are available in over average of 17 per cent of revenue. The company has stated that
49 lakh retail outlets, with six of Since FY18, Emami’s profits have despite its muted growth, there
its brands leading in their more than doubled. However, its are many areas where its
respective segments. products are still
The company’s biggest underpenetrated, such as
strength is easily its stellar brand 33.2 43.0 antiseptic creams, men’s
reputation. It has some of the skincare, etc. It plans to continue
most well-known brands in the building its brand and improve
country, such as Navratna, its distribution. Apart from this,
Zandu, Boro Plus, Fair & it has also made quite a few
Handsome, Dermi Cool, and investments in small and
others. Out of these, the first medium-sized companies, and it
three brands have an annual believes they will be the growth
turnover of more than `500 crore! drivers going forward.
Like they say, Rome wasn’t
GARWARE TECHNICAL FIBRES
From ropes to riches
F
ounded in 1970 as a modest minimising cleaning costs and markets to drive growth.
rope manufacturer, Garware time. The company is committed The company aims to increase
Technical Fibres has evolved to innovation, as is visible by the its market penetration with an
into a frontrunner in the technical 90 patents it has filed for. Out of increased focus on sports nets.
textiles domain. Initially catering these, 24 have been granted. Additionally, it is exploring the
primarily to fishing and shipping Further, it has consistently potential growth from
industries, it has expanded its strived to expand its overseas geosynthetics, a low-cost
offerings to sports, agriculture, presence and capture new synthetic product used to protect
building, construction, etc. Exports the terrain with use cases in the
contribute to about 60 per cent of
the business revenue.
34.9 35.5 infrastructure industry.
While the export revenues have
Garware’s success can be posted decent growth despite the
entirely attributed to its superior Covid effect, domestic topline
R&D process. Technological growth has been just around
innovation to solve problems is 1 per cent per annum in the last
the bedrock of its success. For five years. Investors should also
instance, in 2018, it launched keep an eye on the oil prices
fishing nets with built-in because they can drag the margins.
antifouling technology,

COVER STORY
PROCTER & GAMBLE HEALTH
Optimising its profits
O
nce called Merck, P&G Health notable profit growth despite a astute management, efficient cost
is now a subsidiary of the stagnant topline. In 2018, when optimisation and divesting from
US-based global giant Procter P&G acquired the company, its non-consumer health sectors.
& Gamble, after its acquisition by five-year median operating profit Merck strengthened its market
P&G in 2018. It leads India in margin was just 7.4 per cent.Today, presence through targeted
manufacturing and selling vitamins, it has grown to 21 per cent! campaigns. P&G aims to continue
minerals, and supplements. This was achieved through the strategy, encouraged by the
P&G Health has a robust double-digit growth of Neuorbion
product portfolio that includes last year. It has also increased its
Neurobion (Vitamin B), Evion 35.0 47.2 sales promotion activities, which
(Vitamin E), Nasivion (Nasal Current P/E 5Y median P/E now stand at a five-year median of
Decongestant), Polybion 10 per cent of revenue.
(B-complex), and Livogen (iron). Investors should still keep an
These brands lead their eye on the top line. While the
therapeutic niches respectively company could post decent growth
and have become staples in many in the last three years because of
households, thanks to extensive adequate strategic initiatives, any
outreach and company initiatives. slowdown could potentially impact
The company has posted a future growth.
GLAXOSMITHKLINE PHARMA
Healthy dose of market dominance
G
SK Pharma is the subsidiary in their categories. Thanks to its both competition and the potential
of UK-based GSK Plc, the parent entity, GSK Pharma has inclusion of its products in NLEM.
tenth-largest pharmaceutical consistently introduced new While the company aims to balance
company in the world. The company products across both divisions. these challenges with cost
works in two main segments - Further, it conducts various optimisation and volume growth,
pharmaceuticals (contributing campaigns to target more one can’t be sure yet to what extent
around 80 per cent of the revenue) practitioners, and consolidate its the effect can be mitigated.
and vaccines (20 per cent). market position. The company’s annual report
Like the other two MNC pharma The company faces hurdles from indicates an anticipated growth
companies on our list, GSK rate of 15 per cent per annum for
Pharma’s product portfolio, and its
global parentage, stands out as its
39.1 53.2 the Indian pharma industry until
2030. It aims to leverage its parent’s
biggest strength. Its key brands, portfolio to enter the adult
like Calpol (fever), Augmentin vaccines segment and further
(anti-biotic), T-bact (topical anti- strengthen its specialty medicines
biotic), etc., dominate their division. Consistent product
respective therapeutic niches. launches in general medicines are
Additionally, many of their expected to secure its market
vaccines rank within the top three leadership position.

ROSSARI BIOTECH
Strategising against chemical headwinds
R
ossari Biotech, a leading This shift led the revenue to boost Moreover, due to recent headwinds
manufacturer of specialty by 12 times, thus positively in the chemical sector, the
and textile chemicals in impacting its bottom line. company has also posted a decline
India, serves the three segments. However, investors should note in revenue for three consecutive
These are, home and personal care that the company’s cash quarters on a YoY basis.
chemicals (70 per cent of FY23 conversion cycle has almost Despite these challenges, the
revenue), textile specialty doubled in the last five years. company anticipates the demand
chemicals (23 per cent), and animal for its products to double in the
health & nutrition (7 per cent). next few years. In order to expand
The company could pivot a its business, Rossari has recently
relatively new segment into its acquired Unitop (agrochemicals
primary growth driver through and oil & gas chemicals), Tristar
robust R&D initiatives. With its (preservatives, aroma chemicals
expertise gained in technical
43.9 and home & personal care
Current P/E
textiles, it developed its home care additives), and Romakk Chemicals
segment. Also, in FY19, it bagged 56.7 (silicone oils). This is expected to
some marquee clients like 5Y median P/E accelerate its future growth.
Hindustan Unilever, which However, investors need to be
changed its growth trajectory. aware of the competitive market.
BRITANNIA INDUSTRIES
Food beyond biscuits
B
ritannia Industries is one of This has established Britannia as minority shareholder decisions
the largest Indian FMCG the go-to brand for millions of were proposed but were eventually
companies in the biscuit Indian households. rejected. For instance, the
segment. It is also the largest However, the biscuit segment company proposed to increase the
organised player in the bread has recently witnessed a slowdown limit for loans and guarantees to
market. Further, it is home to due to high market saturation and `5,000 crore, which the
various famous brands such as competition. Also, some anti- shareholders rejected.
Good Day, Marie Gold, Milk Bikis, Due to a slowdown in its core
Nutri Choice, and others. 44.2 business, Britannia has entered
other related segments like bakery
Britannia’s success can be Current P/E
broadly attributed to its strong and dairy segments, which are
marketing and robust 55.1 expected to drive future growth.
5Y median P/E
distribution system. It has spent The company aims to replicate its
`2,520 crore in the last five years success in these new areas. So, the
on advertising, averaging 4 per company has added five new plants
cent of revenue. The number of since 2018 and allocated an
retail outlets reached has grown additional advertising spend for
8 per cent annually, with the FY23 to augment its success in the
rural growth at double this rate. new segments.

COVER STORY
ABBOTT INDIA
Business as usual
A
bbott India, the subsidiary of company’s revenue and lead their expected to double by 2030, as per
Abbott Laboratories US, respective therapeutic niches. the FY23 Economic Survey.
stands tall in India’s pharma However, note that the company Lifestyle changes and improved
sector. It caters to various operates in a highly regulated and access to healthcare are expected
therapeutic areas such as competitive landscape, which to be the main drivers for this
gastroenterology, metabolism, could affect its growth plans. growth. As per the company, the
women’s health, vaccines, The Indian pharma industry is surge in the number of pharmacies
consumer health, etc. It is well is expected to reach seven crore
known for brands like Thyronorm, households by 2025. These factors
Duphalac, Digene, Influvac, etc. 46.7 49.7 will play a significant role in
Unsurprisingly, Abbott’s biggest Current P/E 5Y median P/E growth, along with friendly
strength is its association with its government policies. The company
international parent and portfolio, bets on this and expects to
allowing it to launch new products continue its current pace of new
consistently. In the last five years, launches for steady growth.
it introduced 72 new products, Although the company does
averaging around 14 products a trade below its median P/E, at
year. These new products 47 times, the valuation still feels
contribute significantly to the slightly expensive.
BLUE DART EXPRESS
Differentiated delivery
A
subsidiary of the Germany- facilitate this, the company has benefits of operating leverage in
based DHL, Blue Dart is taken over 12,000 vehicles and six an upturn, its losses can amplify
India’s largest express and Boeing 757s on a lease. In fact, it when the sector is in the
parcel delivery company. It leads is the only logistics player to fly doldrums. Moreover, its topline
the air express segment with a its own aircraft in the country! growth has been inconsistent in
54 per cent market share. It has an This market is competitive, the last decade.
unparalleled distribution system and while the company enjoys the With a strong distribution
among logistics companies covering network in place, Blue Dart right
over 14,000 pin codes in the country. 47.6 51.7 now hinges its growth prospects
Blue Dart built a brand for Current P/E 5Y median P/E on three factors: friendly
itself through its superior service government policies to support
offerings. The company the logistics sector, expansion in
differentiated its business from the e-commerce segment, and
its national and regional growth in the SME segment. But
competitors by offering unique whether Blue Dart will be able to
services such as day-definite capitalise on these factors
delivery, industry-specific depends on how it fares against
shipping, and various other time- the competition, especially in the
sensitive delivery options. To e-commerce segment.

21ANNIVERSARY
ISSUE
st
On stands October 15, 2023

INTERVIEW
KENNETH ANDRADE
Founder and CIO,
Old Bridge Capital Management
E
very business goes through
a cycle, and some are more
evident than others.
Kenneth Andrade is perhaps one
of the most guiling investors in
India to take advantage of this
inherent cyclicality. With over
20 years of experience in
managing other people’s money,
Andrade currently dons the hat
of Chief Investment Officer at an
investment firm that he founded
- Old Bridge Capital
Management. In fact, his firm
has now received SEBI’s
go-ahead to set up an asset
management company.
Recently, Andrade was in
town, and we sat down with him
to learn more about his
investment philosophy, the
sectors he is looking at and
many other things. We have
taken snippets of the
interview that we
thought would be of
interest to our readers.
But don’t worry. We’ll
soon upload the
complete interview on
our website.
“Our job is to buy high

capital efficiency at a price”
Investing insights from a master of cycles

How do you judge value in a that we bought in 2006-2009, a lot of say I was wrong with it. I was very
business, and how difficult it has them were in the consumer early into the cycle. I probably
been to find value and quality franchise business. You take Bata, missed the opportunity to wait for
together all these years? GlaxoSmithkline Consumer, Asian the right price. So, as it corrects, I
Quality is often understood as a Paints, Page Industries. All of them just waited a little too long, and
company with a ROE of 15 per cent were available at a 10 per cent cash then you don’t get it right.
or more. But when you go down flow yield. That’s the value. Today,
that path of an established they’re all available at 50 times, You’re known to invest in
business that has been around for 100 times earnings. That’s growth. cyclical, down and attractive
a long time, you usually get it at an So, the market shifted from value sectors. Where are you
extremely exorbitant price. So you to growth with the same names. looking these days?
have to shell out a lot of money to So that’s all you try to do. You We are somewhere at the
buy great businesses. try to anticipate it. And if you have beginning or in the middle of the
What if I just step back for a anticipated that and try to pick the capex cycle. I wouldn’t want to
minute and try to address how to cycle right, in probably all formats, choose the point, but this thing has
buy quality at a price? Take an you really get a great business, and legs to go. It’s because it’s not
industry that is going through a at a price. At different points in about India going through a capex
down cycle and buy the largest cycle, but globally, the world is
company. In all probability, you’ll going through a capex cycle.
get it free of cost. When I say free If I have to look at value, This capex cycle could be bigger
of cost, you’ll get it at pennies
buy a business which has than what you saw in the last
to the dollar. round. Now, it might sound
So what happens in a down got low margins. Buy a intuitive that commodities do well,
cycle? Today, the biggest story in business which has low but I look at it in another format. A
the marketplace is capital goods
ROEs. Exit the business lot of commodity businesses are
because everyone is talking about still at one-time price to book.
the expansion of infrastructure with high margins. Exit You take some of the large steel
and capex actually taking place. the businesses which mills, one-time price to book. You
But none of this was there between
2015 to 2019 or 2020. Half or more of
have high ROEs. take some of the large aluminium
businesses - one-time price to book,
these companies were trading not only in India but globally also.
below the book. It’s a game of time, even today, you have a And you can’t have a rollout of any
patience. Everyone wants growth, business hitting a 52-week low - a infrastructure without the base
but you have to pay the price for good quality large business hitting primary metals.
growth. But if you have to pay the a 52-week low. That’s where the Now, if they are trading at a one-
price for value, you’re getting it for focus and attention has to go. To time price to book, everything in
pennies to the dollar. That’s the value being valued, look for the life cycle of those businesses is
space that we try to optimise. 52-week lows. also trading reasonably cheap,
When we choose a business Our job is to buy high capital which is basically the mining
which is out of favour, we usually efficiency at a price. And that’s the businesses, etc. They’re all paying a
buy the best company in that way we do it. So, if I have to look at dividend. I don’t know the future of
entire sector. We buy it way it, buy a business which has got that business, but I know for sure
ahead of the curve and probably low margins. Buy a business which that there’s no downside to it. You
participate every time because has low ROEs. Exit the business can’t lose money. And that’s what
that’s the only time you get a high- with high margins. Exit the establishes a portfolio. First, you’ve
quality business at a price that you businesses which have high ROEs. got to protect your downside. Your
want it to be. And then you ride upside will come because the
the cycle with it. How often have you been wrong marketplace gives it back. And I
If I just step back into my career with this? think that’s around the corner.
and look at some of the businesses A couple of times, but I wouldn’t The way we are looking at it and

INTERVIEW
when you ask me which stocks

look valuable or which stocks have
reasonable value, I think the entire
commodity cycle has it. Metals
could be just one part of it. If you
look at agro commodities and
processors, they’re the second leg.
So, right through the chain, what
is happening in India, and
somewhere, we’ve been looking at a
lot of these businesses for the last
30 years. The commodity companies
in India today are adding 10 per cent
or 15 per cent of incremental
capacity without recourse to debt.
Plus, they are debt-free. Put it
together, I am adding 15 per cent of
incremental capacity with my own
cash flows. I’ve taken financial
solvency out, so I am solvent as a
business, and I am waiting for the
cycle to come through.
How can an investor use cycles to

improve their investment return? I don’t think there is anything which is structural
What is value investing? Everyone in nature. There are survivors of the cycle, and those
says it is to buy cheap. And that’s
what value investing is, but
businesses get larger with every transition that
everyone has different parameters keeps coming back.
about how to define it as cheap.
Our format is when you try to
buy a business which is right at Which are better long-term growing business needs capital to
the bottom end of the industrial investments - structural grow. And incrementally, as they
cycle, and you’re waiting for a or cyclical? continue to keep growing, more
cyclical recovery. When the I think one leads to the other. And money gets channelled out till the
cyclical recovery comes, you have as I say, you have long-term cyclical banks create their own
earnings growth. journeys in every industry. So, I’ll competition. And that turns
Now, bring compounding. try and put it in a very simplistic cyclical all over again.
Compounding happens when you way. Every industry grows at the If you just step back, at least
have earnings growth, and you GDP growth level. To grow faster, from my framework, I don’t think
have price-earning multiples you have to leverage it. there is anything which is
steering up. You have two Watch the banks. Figure out structural in nature. There are
parameters working for you. If I’m who they’re leveraging, and that survivors of the cycle, and those
buying a business at 30 times or industry will grow faster. So, that businesses get larger with every
35 times earnings, one variable is ends up being structural till it hits transition that keeps coming back,
fixed. Only earnings growth is the another cyclical patch. They will every industry cycle that keeps
variable. So that’s how we try and go through the same cycle because coming back.
compartmentalise ourselves and the banks across the world go and When you look at larger
look for a cyclical business on leverage the fastest growing investors that are there across the
the down cycle. business because the fastest world, they will always look at

companies which have longevity. When do you sell? points, which are nice. Not very
So if you have a company which This is an interesting question attractive, but nice.
has got a longevity of 50 years, because selling as a discipline Second is what I have spoken
undoubtedly, you’ve made money. doesn’t come very naturally to about - commodities. I’ve never seen
So, irrespective of whether most of us. But the data point that I companies in India generating this
you’re buying growth businesses use is that if every company in an kind of cash flow and adding
or value businesses, you have to industry is making money - that’s capacity on the ground without debt.
stress the point that you have to a very dangerous place to be. And the third one, it is
buy longevity. It will help you go It’s a common sense approach to interesting, and I’ve been saying
through a cycle, and in that cycle, why I say that. When everyone this for the last 18 months, it is IT
you’ll also get a structural piece makes money, what are those services, especially the big players.
of the action. companies doing? They’re
reinvesting in their existing What was your biggest mistake?
How do you assess whether a businesses. So they’re bringing in I think 2017, 18 and 19 was
company’s decision to either more capacity than what demand probably the most horrendous part
invest in capacity or pay exists. Then, the adjacent of my career. We had a roaring
dividends to shareholders is the industries are also putting in 2017, and in the back of that 2017,
right decision? capital, looking at their ROEs. from a portfolio perspective, we
If I look at historical returns on More capacity is created. tried to look for value when there
equity, it has been 15 per cent to Numerically, if you have to put it was none. And quite contrary to
almost 25 per cent. This 25 per together, if an industry makes where I would have wanted to be,
cent was in 2006, 07. Now, if I were a 30 per cent return on capital we moved downwards instead of
a shareholder of that business, I employed, there’s always a private moving sideways. That’s where
would want the company to equity investor who says my return mistakes came in the portfolio.
reinvest that capital at the same on capital employed hurdle is I think it took us about two
ROE. If it doesn’t have the 15 per cent. And he will fund the and a half, three or four years.
opportunity, it pays it out. competition. Then the bank will say Today, if I look at the CAGR from
But the problem with paying that my hurdle rate is 9 per cent. the start, it’s not so bad, but those
too much of dividends is that you So, in the longer run, the whole two years definitely did impact
get valued at bond valuation. industry’s return on capital how the cyclicality, or how
The company is indicating the employed comes to 9 per cent. being at the right place with the
fact that it will take away all the wrong strategy, impacted long-
cash flow because they do not Which sectors are at their term returns.
know what to do with it. So when cyclical lows?
you get into that kind of matrix, So, one is agrochem. It’s gone
it becomes a little difficult to horrid this year, but my sense is
quantify or substantiate that it’s still somewhere from
you will trade at an X amount bottoming. But we’re getting price
of valuation. And these are
all physical assets which are
on the ground.
We’re not a very big proponent The data point that I use
of companies paying us capital (to consider when to sell)
back, and dividends are the wrong
way to reward the shareholder.
is that if every company
Buybacks make much more sense in an industry is making
because the simple reason is that money - that’s a very
when you buy back stock, you
reduce shareholder capital. So, it
dangerous place to be
influences my return on equity.

STOCK ADVISOR
Confidence as a Service
X-as-a-service is a common buzzword of the digital age. Here’s one that will
help you more than most.
By Dhirendra Kumar
W
hen I set out to think
about what I would write
on this page, the markets
were riding a raging bull, with the
Sensex at an all-time high. As I’m
putting it down on the screen, it
has had a sharp decline for a cou-
ple of days, which has dampened
the smiles a bit.
Of course, nothing materially
important has happened. The
declines have been barely a couple
per cent – it just looks big in abso-
lute points because the base is so Illustration: ANAND
high now. Over the past year, the

Sensex is up 11.3 per cent, the
BSE MidCap index is up 24 per cent, There are actually three kinds of are the real champions – a select
and the much-maligned BSE investor behaviours when stocks group seizes the opportunity of
SmallCap is up 26.6 per cent. do fall. When stock prices decline, reduced prices to increase their
In short, there is nothing to numerous investors hastily exit, holdings, fully understanding the
panic about. Or is there? The thing fearing that their stocks may never stock’s true value.
is that whenever the markets are rebound, solidifying their losses. Somehow, it’s the first group –
at a high or near a high, there is On the other hand, some investors the ones who are ready to cut and
always a certain proportion of maintain their investments, believ- run – who get the maximum mind-
investors who are in a constant ing the dip is momentary and share. However, their arguments
state of worry about when to cut expecting a recovery. are generally the least logical. I’m
and run. Meanwhile, waiting in the wings not saying that stocks that fall

must necessarily rise again. As we your hard-earned and even more Here’s what we will do for you
know well, plenty of stocks do not hard-saved money in unproven We will ask you to invest in:
ever rise again and essentially hidden gems, however promising 1. High-quality established compa-
destroy all value for shareholders. they may appear. nies that are leaders in either small
Instead, the moral of the story is 2. We will never ask you to invest niches or leaders by a wide margin.
that you need to know your stock, in unproven small caps, no matter 2. That is run by competent and
the business, and your investment what the market says. trustworthy management, and,
case and have confidence in your 3. We will never ask you to invest in 3. Earn significantly higher
knowledge. It’s essential to have a hot, momentum stocks, irrespective returns over their cost of capital.
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of your investment thesis. experience shows, small caps are
This is precisely what Value Why will we never do that? not significantly riskier than larger
Research Stock Advisor provides. Because, in our experience, such stocks and can earn higher returns.
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STRAIGHT TALK
Quantum computing:
Harnessing the power of atoms
What potential does quantum technology hold for the world
the number of transistors in an equation for the wave, and

integrated circuit would double suddenly, the entire periodic table
every year. This observation has could be understood as solutions
held for over half a century. We to the wave equation.
are now approaching a physical One of the implications of the
limit. Kaku explains: “As the equation was that before the
width of the components of a measurement of the state of a
silicon chip approaches the size of particle, the particle exists in all
an atom, the Heisenberg possible states. An atom behaves
uncertainty principle kicks in, as a spinning top and can spin up
and the electrons’ positions or down a varying percentage of
By Anand Tandon become uncertain, causing them times. As a result, the atom can
to leak out and short the circuit”. carry much more information
This will eventually limit the than a two-state bit. This is called
M
ichio Kaku is a Professor possible miniaturisation and slow a qubit (quantum bit), i.e., a
of theoretical physics at down the increase in silicon simultaneous mixture of the up
the University College of computer processing capacity. and down states. The ability of
New York. A prominent physicist, Formulated by the German qubits to be simultaneously in
he co-authored some of the early physicist and Nobel laureate multiple states is known as
papers in string theory. He is a Werner Heisenberg in 1927, the superposition.
futurologist and popular science uncertainty principle states that Further, qubits can interact with
author with several best-selling we cannot know both the position each other, which is not possible
popular science books to his and speed of a particle, such as a for ordinary bits. This is called
credit. His latest ‘Quantum photon or an electron, with perfect ‘entanglement’. Whereas digital
Supremacy’ deals with accuracy; the more we nail down bits have independent states, each
developments in the field of the particle’s position, the less we time you add another qubit, it
quantum computing and its know about its speed and vice interacts with all the previous
implications for humankind. The versa. This principle becomes qubits, so you double the number of
possibilities are stunning. dominant as the size of the object possible interactions. Hence,
decreases. Sub-atomic particles quantum computers are inherently
What is a quantum computer? demonstrate wave-particle duality. exponentially more powerful than
Modern computers process Austrian physicist Erwin digital computers because you
information in the form of bits. Schrödinger developed the double the number of interactions
These exist in two forms, every time you add a qubit.
represented by 0 and 1. State Quantum computers are inherently
changes represent information. exponentially more powerful than So why don’t we see quantum
This is implemented in circuits digital computers because you computers everywhere?
through transistors. double the number of interactions While theoretically, quantum
Gordon Moore (co-founder of every time you add a quantum bit computers have been proven to
Intel) suggested back in 1965 that exist, it is a lot more difficult to

make them in practice. Atoms need
to vibrate together (called
‘coherence’) for the quantum
computer to work. External shocks
of even the mildest nature can
break this coherence. One way to
solve this is to bring the
surrounding temperature to near
absolute zero. This is both a
difficult and costly exercise.
Another method is to use light. This
can operate at normal temperatures
but requires to be configured using
tubes and splitters – which makes it
cumbersome.
Despite the engineering
difficulties and costs, several
companies have been working on
developing quantum computers.
These include IBM (Quantum
System One), Google (Sycamore) Illustration: ANAND
IonQ, Regetti Computing, D-wave Nature, on the other hand, does computing becomes a reality.
systems, and Alibaba, to name a it at room temperature and Enhanced computing power
few. The approach adopted by each pressure in the form of a nitrogen- offers pathways to unlock more
company is different, and it is too fixing legume like groundnut secrets of nature. These range
early to determine which one will plants. As CB Insights magazine from finding medical pathways to
succeed. But if successful, the notes, “Using today’s cure diseases, developing
variety of problems to which this supercomputers to identify the best personalised medicine, replacing
greatly enhanced computing power catalytic combinations to make organs and reversing ageing.
can be applied is mind-numbing. ammonia would take centuries to One of the most promising
solve. However, a powerful developments could be in enhanced
Food - Nitrogen fixation quantum computer could be used to AI. Deep learning models of AI
The Haber-Bosch process developed much more efficiently analyse require lots of data and time to
by Fritz Haber is responsible for different catalyst combinations”. train the model to find linkages. A
humanity escaping the dire super powerful quantum computer
forecasts of Malthus, who had Other uses could improve existing AI models
predicted that war and famines In theory, quantum computers at rapid speed – creating a mutually
were the future of the human race can carry out operations hundreds reinforcing cycle of improvement!
as food supply lagged population of millions of times faster than A quantum computer is powerful
growth. Haber developed a process supercomputers. The most but doesn’t learn from mistakes. A
to “fix” nitrogen from the obvious threat that this poses is to neural network-connected
atmosphere, where it is abundant, cryptography, as demonstrated by computer could correct that and
to form fertilisers. This enabled Shor’s algorithm. Almost all open up unknown areas for
food production to keep pace with current algorithms for encryption research and development.
population growth. However, the can be cracked open using
Haber-Bosch process is energy quantum computers. Already, Challenges aplenty
intensive. Nitrogen gas molecules government standard-setting Despite these advances, many
have to be broken down at 200-300 agencies have warned financial challenges still need to be
atmosphere pressure and institutions to prepare tougher addressed before quantum
300-degree-centigrade temperature. standards for when quantum computers can become a reality.

STRAIGHT TALK
These challenges include: The field of quantum computing is Technologies and Applications
Q The need for more qubits: rapidly evolving... Quantum (NMQTA) with `8,000 crore
Quantum computers need to have computers have the potential to allocation over five years. Under
a large number of qubits to be revolutionise many industries and this, MeitY, in collaboration with
useful. However, creating and AWS, has launched QCAL
could have a major impact.
controlling qubits is difficult, and (Quantum Computing
the number of qubits that can be Applications Labs). IISC, TIFR
reliably controlled is still advantage of the power of and some of the IITs and IISERs
relatively small. quantum computers. are working on quantum
Q The need for better quantum Despite these challenges, the computing problems.
error correction: Quantum error field of quantum computing is In the private sector, leading IT
correction is essential for scaling rapidly evolving, and there is a lot companies have collaborations
up quantum computers. However, of optimism about the future of this with academic institutions to stay
current quantum error correction technology. Quantum computers abreast of the developments.
techniques are not yet perfect, have the potential to revolutionise Companies largely dependent on
and they can introduce errors many industries and could have a quantum computing are not yet
into the computation. major impact on the world. listed on Indian bourses. The US
Q The need for more efficient markets do offer specialist stocks
algorithms: Quantum algorithms Quantum computing in India like QBTS (D-Wave Quantum),
are still in their early stages of While the USA and China are IONQ (IonQ), and RGTI (Rigetti
development, and they are still leading the race to develop Computing), to name a few
less efficient than classical quantum computing, India is besides, IBM, Google, Microsoft,
algorithms for many problems. doing its bit too. In the union and NVIDIA, which are at the
Researchers are working to budget of 2020-21, the government forefront of quantum computing
develop more efficient quantum announced the launch of the developments - an exciting and
algorithms that can take National Mission on Quantum fast-developing field to watch.
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MAIN STREET
The octopus ascends

Find out how a tiny elite section is getting exponentially richer
The rapid rise of the super rich: `5 lakh rose by 1.4 per cent in the
data and measurement same period, as per e-filing data
India’s gross domestic product of the Income Tax Department. In
(GDP) has risen from $607 billion absolute terms, 2.69 lakh income
in 2003 to $3.75 trillion in 2023. tax returns were filed for income
However, this six-time jump in above `1 crore for financial year
national income over a 20-year 2022-23 as against 1.93 lakh for
period has been unevenly distrib- 2021-22 and 1.80 lakh for 2018-19.”
uted. To be specific, a tiny elite of (Source: Indian Express)
around 2,00,000 Indian families You can see the super-rich
(or 10 lakh individuals) have Indians’ rapid ascent in the
By Saurabh Mukherjea become incredibly wealthy over income tax data in the charts
the past 20 years. According to below, where ‘HNW’ is defined as
BCG, in the two decades between those earning more than `1 crore
A
new wealthy class is exert- 1999-2019, the Indian elite’s per annum, whereas ‘LNW’ is
ing its will on the city— wealth grew 15.8 times. We can defined as those earning less than
driving BMWs and see the rapid rise of the super- `10 lakhs per annum.
Porsches, storming elite schools rich Indians from three different The second source of data that
and colleges in Chanel and types of data. points to the rapid rise of a tiny
Birkenstock, and erecting grand The first source is income tax super-rich elite is corporate prof-
towers while sipping on tandoori data. “Over 2.69 lakh income tax its. As highlighted in our
cold coffee and nibbling on kul- returns were filed for income
had pizza. It is the story of every above `1 crore for the financial A mere 20 companies account for
tier-2 Indian city – toggling year 2022-23, an increase of 80 per cent of the $1.4 trillion of
between new cash and kitsch.” 49.4 per cent from the pre-pan- wealth created by the Nifty over
– Antara Baruah (August 12, 2023, demic year of 2018-19, while the past decade
The Print) returns filed for income up to
5LVHRIWKHµ&UD]\5LFK,QGLDQV¶
`50 lakh cr z Low net worth z Medium net worth z High net worth 250 z Low net worth z High net worth
IT returns value (Normalised
40 220
to FY16 = 100)
IT return value
30 190
20 160
10 130
0 100
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY16 FY17 FY18 FY19 FY20 FY21 FY22
Source: Marcellus Investment Managers, incometaxindia.gov.in; Data only until FY22 has been considered

MAIN STREET
What is driving the rapid ascent of

3$7DQG)&)(RIWRS3$7JHQHUDWRUV the super rich?
While general factors such as the
z PAT top 20/PAT India Inc (left side) z FCFE top 20/FCFE India Inc (right side)
rise in stock prices (the Nifty
120 % 40%
grew around 18 times over the
FCFE for top 20 / FCFE for India

past 20 years) and land prices
Inc (3 yr moving average)

90 30
(India’s national highway net-
work has approximately trebled
60 20
in the last 22 years; the price of
land rises 60-80 per cent when a
30 10
highway goes past it) have helped
the elite get rich, there are two
0 0
very different wealth creation
FY01 FY22 models at play in India. The first
Source: Marcellus Investment Managers, Bloomberg, Ace Equity, IIFL Capital; 3Y moving averages have been is a small-town model, and the
used to smoothen the year-on-year volaitlity in PAT and FCFE; PAT and FCFE of India Inc consists of only the
listed entities as data for unlisted not available yet second is a big-city model.
Small-town wealth creation model

December 24, 2022 note, ‘Winner over the last 20 years, i.e., the big Let’s consider grain traders in a
Takes All in India’s New, keeps getting bigger in India as small town. For years, these trad-
Improved Economy’, every industry consolidates into ers were doing business conven-
“Capitalising on the exponential the hands of two-three market tionally and a large part of it
surge in digital transactions and leaders. In fact, what is even informally. But with demonetisa-
the massive improvements in more noteworthy is that out of tion and GST, most of them have
transport infrastructure and mar- the 24 lakh registered companies formalised their businesses and
ket structure seen over the past in the country, only about 66,000 now have access to formal bank-
decade, a handful of Indian com- companies generate income (or ing channels. The larger and
panies – no more than 20 – are profits) greater than `1 crore (i.e., smarter of these grain traders
taking home around 80 per cent a meagre 2.7 per cent)! now take loans from banks to
of the profits generated by the The third source of data on open cold storages, increase the
Indian economy. Simultaneously, India’s new elite is the research shelf life of their products and
a mere 20 companies account for published by wealth managers sell them at a later date when
80 per cent of the $1.4 trillion of and their consultants: prices are higher. As a result of
wealth created by the Nifty over z According to Credit Suisse, this, over time, they generate a
the past decade.” between 2020 and 2021, the num- surplus from selling grain. They
In fact, at every level of aggre- ber of dollar millionaires in India then use the surplus to secure
gation in the stock market, the grew from 6,89,000 to 7,96,000. two-wheeler dealerships. As these
trend of consolidation is visible. z BCG’s 2020 Global Wealth dealerships flourish, they use
If we were to look at the market Report says that India has their enhanced surplus to open
cap of BSE 500 companies vis-à- 1,12,000 individuals with wealth car dealerships.
vis the total market cap in the in excess of $1 million. By this time, they have gener-
country, the prior’s share in the z According to Statista and ated considerable clout within
latter has increased significantly Credit Suisse Global Wealth the town (financially as well as in
Report (2022), the share of terms of social status).
Out of the 24 lakh registered wealth in India held by its richest Leveraging this clout, they get
companies in the country, only about 1 per cent of the population their children into the local
66,000 companies generate income (i.e., around 20 lakh families) is municipal corporation (or zila
(or profits) greater than `1 crore 40.6 per cent, following Russia parishad). Over the next few
(i.e., a meagre 2.7 per cent)! (at 58.6 per cent) and Brazil (at years, their children climb up the
49.3 per cent). local political hierarchy. The

traders and their children then ty-based compensation, which At the national level, around 2 lakh
combine to get contracts for local then compounds with the share families (or between 7 to 10 lakh
road construction/repair. Profits price of the company. Thus, individuals) end up controlling
from these local construction con- buoyed by the market, their 80 per cent of India’s wealth
tracts further enhance the fami- wealth multiplies four times
ly’s surplus, which they can then every decade.
use to become local real estate Furthermore, the most ambi- across India. From humble begin-
developers. Thus, over the course tious of the corporate octopi are nings in Kanpur (Uttar Pradesh),
of a decade, mini conglomerates likely to quit to create a start-up RSPL’s Ghari detergent today com-
are created that consolidate where a combination of their mands a share of approximately
financial, social, as well as politi- equity ownership and venture 20 per cent in the $3.75 billion
cal power in that town. These capital or private equity funding detergent industry in India
conglomerates steadily push their make them dollar millionaires in (source: IIFL Research). Apart
tentacles into every economically the span of a few years. from this, RSPL has also forayed
lucrative activity in that area – Thus, the big-city octopi are a into dairy, footwear, renewable
hence the term ‘Octopus’. combination of listed company energy (they have five wind power
owners (there are around 6,000 plants with an installed capacity
Big-city wealth creation model such families in India), VC-and of 50.1 MW), and real estate. Had
The big-city octopi operate in a PE-backed companies’ owners this Kanpur-based company
different way to their small-town (which we estimate are approxi- been a listed entity, its owners
cousins. In particular, they are mately 680 – assuming an average would be dollar billionaires.
likely to have a high skill quo- of three rounds are conducted per ‘Dainik Bhaskar’ (DB Corp):
tient in terms of technical qualifi- company), and the senior talent The Bhopal-based Agarwal family
cations, which they deploy to get working in these companies. started with just one Hindi daily
well-paid jobs in India Inc. As Our travels across India over back in 1958 called Dainik
India’s leading companies contin- the past decade have shown us Bhaskar. Today, this daily is the
ue gunning out profit growth of the following: most popular and circulated daily
20 per cent per annum, the num- z About 20 families account for in the entire country. Over the
ber of highly paid executives who 80 per cent of the wealth in a years, DB Corp (controlled to this
manage these companies contin- town with less than 5 lakh people. day by the Agarwal family) has
ues to burgeon. To hold on to z About 50 families account for sought to enter other verticals
their best talent, these companies 80 per cent of the wealth in a city like power and real estate.
z Pay their executives well. The with 10 lakh people. Although they haven’t been as
Economic Times says that in the z About 100-300 families account for successful in these as in their
listed company universe, there 80 per cent of the wealth in a tier-2 print business, it is the entrepre-
are 1,161 individuals who have an city like Pune or Lucknow, and neurial talent of this family
annual pay package of `1 crore z A few thousand families which has made Dainik Bhaskar
or more. account for 80 per cent of the become what it is today. Even
z Give their executives equi- wealth in major metros like within the media vertical, DB
Mumbai and Delhi. Corp has forayed into radio and
%LJJHWWLQJELJJHU Thus, at the national level, digital media. DB Corp’s market
around 2 lakh families (or cap is around `4,000 crore, and
BSE500 between 7 to 10 lakh individuals) the Agarwal family owns close to
India BSE500 m-cap as a
m-cap m-cap % of India end up controlling 80 per cent of 72 per cent of the entity.
Year (`lakh cr) (`lakh cr) m-cap India’s wealth.
2004 12 11 92 Saurabh Mukherjea is part of the
2023 251 241 96 Case studies of super-rich families Investments team at Marcellus
‘Ghari’: – RSPL’s (previously Investment Managers (www.marcellus.
in). He is the author of ‘Diamonds in the
Source: Marcellus Investment Managers, Rohit Surfactants) Ghari deter-
Bloomberg; market cap as of March end Dust: Consistent Compounding for
gent is a ubiquitous brand today Extraordinary Wealth Creation’.

EVERYDAY ECONOMICS
The Danish economy’s lifesaver

How one pharmaceutical giant reshaped Denmark’s economic landscape
es half of the world’s insulin sup- nal success and booming con-
plies, Novo Nordisk, founded by sumption in the US have sin-
Nobel-laureate August Krogh. It gle-handedly saved the Danish
became the first company to pro- economy from falling into reces-
duce and sell insulin after Krogh, sion, as said by Denmark’s cen-
whose wife (a doctor) had diabe- tral bank, Danmarks
tes, got permission from its dis- Nationalbank. Denmark’s GDP
coverers in Canada to produce the growth is now outperforming
life-saving medicine in Denmark. those of its European peers.
Novo Nordisk is in the news for Meanwhile, its neighbours,
the resounding success of Germany and Sweden, are going
By Puja Mehra Wegovy, its weight loss drug that through slumps.
has been reported to help patients Everyone from Boris Johnson
reduce as much as 12 per cent of to Elon Musk wants Wegovy. The
C
openhagen is a beautiful their body weight. Besides, there company isn’t managing to keep
city, going by the view from is Ozempic, an injectable diabetes up with the growing demand but
flights in and out of the air- drug that is also prescribed for has raised its profits and sales
port, where I spent a couple of treating obesity. Both are tipped outlook for 2023 after reporting a
hours in transit a few years ago. to go down in history as the 344 per cent increase in sales in
The crisp, clean air and sharp vis- best-selling medicines of all time. the first six months of the year. It
ibility are breath-taking. There’s Since its launch in the US two has become so important that
not a speck of dust. The sunlight years ago, Wegovy sales have Denmark’s Economy Ministry
feels sweet; you can almost taste exploded. Novo Nordisk’s value mentioned the company 31 times
it. Danes are incredibly good-look- has nearly doubled over the last in its outlook on the economy. Its
ing and stylish. Effortlessly polite year after it was found to be safe government has said that it is on
and witty, have no airs, and each for the heart. This rise in the guard to ensure that the company
one looks like a supermodel. It share price has made the compa- or its business – and the jobs,
seems to me that everything this ny more valuable than the entire income, tax revenue, and pride
country’s people do, they seem to Danish economy’s annual output that come with it – aren’t ever lost
do exceedingly well. (or its GDP) and Europe’s most to any adventurous corporate
From the Netflix sensation - valued company, the French luxu- takeover raiders.
their suave political drama series ry group LVMH. Pharmaceutical exports have
Borgen (meaning the castle in As a newspaper wrote, the mir- roughly quadrupled since 2019,
Danish and a nickname for acle drug has also delivered an and the government has doubled
Denmark’s Parliament, economic miracle. Its phenome- the economy’s GDP growth fore-
Christiansborg, which is a former cast for this year. Two-thirds of
royal palace) to LEGO (an abbre-
Novo Nordisk’s value has nearly that growth is expected to come
viation of the two Danish words’ doubled over the last year after it from just one sector, pharmaceu-
leg godt’, meaning play well), the was found to be safe for the ticals, which is dominated by a
world’s best-known toy maker heart. This rise in the share price single company.
started 90 years ago by a carpen- has made the company more Already the country’s largest
ter from his workshop. Or the valuable than Denmark’s GDP! taxpayer, Novo Nordisk’s surging
100-year-old company that produc- profits have shored up Denmark’s

tax revenues, and its booming
export earnings have increased
the country’s current account sur-
plus. The influx of dollars from its
international sales has pushed up
the value of the Danish krone,
which has forced the Danmarks
Nationalbank to keep interest
rates lower than it would have
otherwise preferred. Denmark’s
central bank is keeping interest
rates below those set by the
European Central Bank to reduce
the currency’s value and align it
with the euro. The European
Union is an economic as well as
monetary and fiscal (which is
incomplete so far) integration of
its member economies. Besides
the use of a common currency,
the euro, this involves close coor-
dination of fiscal and monetary
policies by all the member coun-
Illustration: ANAND
tries. Thus, the Danish central
bank normally aims to keep the lation of six million, less than the In India, the National Statistics
krone stable against the euro in population of Hyderabad. But the Office (NSO) uses data from large,
order to achieve the same level of lessons from its response to its daz- organised corporates to extrapo-
inflation as in the countries that zling pharmaceutical success are late and estimate the output of
use the euro. But doing so has especially important for India, informal parts of the economy
meant that home mortgages in where official statistics are not of that contribute more than half
Denmark have become lower than very good quality, rendering eco- the GDP and nearly 90 per cent of
elsewhere in Europe. nomic policy somewhat wobbly. employment. Does this skew GDP
Novo Nordisk is growing so Consider this: Should Denmark’s estimates and, therefore, econom-
fast that it is, in the words of a economic policies be set according ic policy? Probably yes. However,
newspaper, dominating and dis- to the GDP and other estimates of it is difficult to say to what extent
torting the Danish economy. This the whole economy? Will those poli- since the inputs required to reach
has become an important case cies suit the whole economy, espe- those conclusions can only come
study for students of economics cially given that excluding the from surveys that have not been
and statistics. pharmaceutical output, the rest of conducted in more than 10 years.
Denmark is a small the economy is in contraction? This There are many such weaknesses
Scandinavian country with a popu- is why Denmark’s statistics office is in how NSO computes its esti-
working to ensure it can publish mates. It is forced to do so as data
There are many weaknesses in economic estimates, such as the required for high-quality estima-
how NSO computes its estimates. GDP, stripped of the pharmaceuti- tion isn’t collected. As a result,
It is forced to do so as data cal output so that policies don’t get policymaking often becomes an
required for high-quality estimation skewed by just one industry’s out- exercise in flying blind.
isn’t collected. As a result, performance. The way some coun-
policymaking often becomes an tries publish estimates excluding Puja Mehra is a Delhi-based journalist and the
author of ‘The Lost Decade (2008-18):
exercise in flying blind. the performance of the dominating How the India Growth Story Devolved
oil industry in their economies. into Growth Without a Story’

STOCK SCREEN
Reasonably priced growth stocks

Investing in growth companies is one of the most popular ways to profit from
stocks. But one shouldn’t overpay for them. This is where this screen helps.
A
stock screen filters out companies based on growth stocks is that their valuations also tend to be
certain criteria. Its main advantage is that it high as growth commands a valuation premium.
helps you generate stock ideas with just a As an investor, your job is to pick wealth-creating
few clicks. Once you have the list of stocks at fair or less than fair value. This is what this
‘deserving’ stocks, you can research them screen is all about. It combines earnings
further to find the ones worth investing growth and low valuations. However, do
in. note that this is based on past
The Value Research website performance. Your returns will be
provides you with many ready- determined by future
made stock screens. Here we performance. So, don’t forget to
will be covering the ‘reasonably take into account the future
priced growth stocks’ screen in prospects of the companies in
detail. We have also given a the list.
concise stock list from the
other screens. To get the full A word of caution
list in real time, visit https:// Note that mere inclusion in a
www.valueresearchonline.com/ stock screen does not mean that
stocks-screener/in/. a stock is investment-worthy.
Consider the output of stock
What does this screen offer? screens as the starting point for your
Growth companies are those that, as you research. You must apply your own
may have guessed it, in the growth phase. This analysis to select companies.
means that they are expanding, growing their However, if you are interested in a list of stocks to
revenues and profits, and hence their share prices invest in right away, then subscribe to our
also tend to follow the course of the underlying recommendation service at Value Research Stock
business. Growth investing is perhaps the most Advisor. You can access the details by visiting: www.
popular form of investing. The main problem with valueresearchstocks.com.
Key terms
Universe companies have a high P/E ratio, while a value Quarterly EPS growth (%) the right, we have shown the stock
In order to arrive at our universe of stock will have a relatively lower The YoY growth rate of the style of a large-cap growth stock.
companies, we checked if the P/E ratio. quarterly EPS M-cap
companies traded on all the days 5Y median P/E TTM EPS growth (%) Stands for market capitalisation.
for the last two quarters. We The median P/E over the last five The YoY growth rate of the trailing- Obtained by multiplying the stock price
considered the companies with a years 12-month EPS by the total number of shares. Shows
market capitalisation of more than a company’s market value or size.
`500 crore. P/E to earnings growth (PEG) 5Y EPS growth (%)
The ratio of P/E to the five-year The five-year annualised growth 52-week high/low
Price to earnings EPS growth of the stock. Shows rate of the EPS The highest/
The ratio of the stock price and how high a price we are paying for lowest price of Growth Value
earnings per share (EPS). It shows Stock Style
the growth that we are purchasing. Derived from a combination of the the stock over Large
in multiples how much investors A PEG of less than one indicates the last one
are willing to pay for the earnings. stock’s valuation (growth or value)
an attractively priced stock. year or 52 Mid
The thumb rule of valuing a stock and its market capitalisation (large,
mid and small). For example, on weeks. Small
is that a high-growth stock will

REASONS TO INVEST THE FILTERS No. of companies that
CLEAREDTHElLTERS
All-weather style Market cap greater than `500 cr z At least 20% in latest quarter
Companies with strong Earnings growth of: YoY 1,468
fundamentals z At least 20% in the past five Stocks with a P/E of less
Greater stability vis-a-vis years than 15 200
value or growth z At least 20% in the trailing
12 months YoY 56
On a fast track
Company Stock 5Y median Quarterly EPS TTM EPS 5Y EPS Market cap Share 52-week
Industry style P/E P/E PEG growth (%) growth (%) growth (%) (` cr) price (`) high/low (`)
SBI 8.0 13.6 0.56 153 89 50 5,36,414 601 630-499

Banking
LIC 8.8 13.3 0.00 1,498 900 72 4,14,572 656 754-530

Life Insurance
Adani Power 9.7 17.0 0.19 83 56 51 1,42,147 368 410-132

Electricity Generation
Bank of Baroda 6.3 12.2 0.30 129 102 43 1,10,434 213 220-124
Banking
Canara Bank 5.3 8.0 0.24 72 81 26 67,304 371 377-208

Banking
REC 5.7 3.7 0.28 21 23 20 67,002 254 285-91

Electricity Distribution
Aditya Birla Capital 9.3 19.9 0.17 41 171 43 46,776 180 199-107
Misc. Fin.services
Federal Bank 10.1 10.6 0.62 38 51 26 34,417 147 150-109

Banking
Bank of Maharashtra 10.8 14.1 0.60 85 115 24 32,766 46 51-17

Banking
Raymond 8.3 23.7 0.30 1,217 204 58 12,561 1,893 2,240-984

Cloth
Great Eastern Shipping 4.3 7.1 0.09 26 154 48 11,668 817 865-479
Shipping
Jindal Saw 12.7 6.4 0.05 5,325 237 29 11,346 354 391-77
Steel Tubes & Pipes
Jammu & Kashmir Bank 8.2 5.8 0.76 92 128 26 11,052 107 112-27
Banking
Karur Vysya Bank 8.7 10.6 1.04 56 55 37 10,735 134 140-77

Banking
Godfrey Phillips India 13.2 14.7 0.39 79 71 34 10,615 2,046 2,252-1,107

Tobacco Products
Equitas Small Finance Bank 14.1 16.0 0.55 122 89 75 9,414 84 101-46
Banking

STOCK SCREEN
Company Stock 5Y median Quarterly EPS TTM EPS 5Y EPS Market cap Share 52-week
Industry style P/E P/E PEG growth (%) growth (%) growth (%) (` cr) price (`) high/low (`)
Religare Enterprises
2.7 48.3 0.07 182 332 29 8,630 264 270-136
Misc. Fin. services
Karnataka Bank
5.4 4.5 0.47 224 177 29 7,772 248 258-76
Banking
Maharashtra Seamless
8.2 10.2 0.26 48 29 29 7,528 561 599-280
Steel Tubes & Pipes
H.G. Infra Engg

11.7 10.6 0.28 37 37 40 6,257 960 1,019-532
Construction
Bengal & Assam Co.

5.8 5.6 0.14 35 48 29 5,863 5,190 5,320-2,606
Misc. Fin.services
LT Foods
12.7 8.4 0.57 41 39 24 5,730 165 194-90
Other Agriculture Products
Utkarsh Small Finance Bank

Banking
13.9 13.3 0.35 20 558 40 5,632 51 56-25
JSW Holdings
Investment Services
14.9 30.4 0.43 339 146 37 5,219 4,705 5,085-3,681
West Coast Paper Mills

Paper 4.4 5.6 0.12 32 118 33 4,427 671 749-461
Share India Securities

Brokerage Services 12.4 13.0 0.15 37 55 75 4,364 1,336 1,426-991
Ramky Infrastructure
Construction 3.5 11.6 0.04 2,052 75,890 101 4,300 619 625-184
Jain Irrigation
Plastic Tubes & Pipes 4.8 12.6 0.16 458 176 23 4,161 62 70-27
Welspun Enterprises
Construction 5.2 10.9 0.09 108 423 57 3,966 286 319-117
Ganesh Housing Corp.

Real Estate 14.8 30.1 0.42 1,130 141 21 3,672 440 492-262
Best Agrolife
Pesticides 10.9 29.2 0.04 126 101 143 2,645 1,119 1,774-887
Den Networks
Media & Entertainment 9.0 11.6 0.14 232 85 33 2,441 51 52-25
Andhra Paper
Paper 4.3 8.1 0.11 40 180 40 2,392 601 622-371
Hindustan Oil Exploration

Oil & Gas Exploration 9.6 16.8 0.25 104 452 39 2,181 165 258-116
Marathon Nextgen Realty

Cloth 13.7 16.2 0.43 270 232 25 2,107 447 469-187
Pearl Global Industries

Cloth 13.3 9.1 0.24 32 50 54 2,082 958 1,028-335
Data as of September 20, 2023. This is not the full list. For the full list, visit https://bit.ly/3ImzbSQ.

Want more? Here you go.
Other screens available on the Value Research website, along with their themes
and some of their stocks
P/E P/E
Attractive blue Kama Holdings 8.8 Hindustan Aeronautics 22.2

chips Coromandel International 16.0 SRF 36.0
Gives you large caps with strong fundamentals Angel One 16.5
and solid growth that are trading at a
reasonable valuation
Rushil Décor 12.4 Steelcast 18.8

Quality stocks
Shriram Pistons & Rings 13.5 Dr Reddy’s Labs 19.8
available cheap
Fiem Industries 16.3 Wonderla Holidays 20.9
Companies that clear our essential checks on
solvency, accounting, recent financial CMS Info Systems 17.6 Linc 25.8
performance and valuation Granules India 18.4 Snowman Logistics 56.9
Prakash Pipes 9.6 Themis Medicare 27.6

Small-cap growth
Vadilal Industries 15.2 Stylam Industries 28.3
companies
Steelcast 18.8 Gufic Biosciences 34.9
Wades through the small-cap maze and gives
out fundamentally strong small caps that are Likhitha Infrastructure 19.4 Dreamfolks Services 35.4
available at a reasonable valuation Mastek 25.0 Prudent Corporate Advisory 38.8
P/B P/B
Jindal Poly Investment 0.24 ONGC 0.80

Discount to
Dhunseri Ventures 0.35 DCB Bank 0.88
book value
GSFC 0.56 Canara Bank 0.91
Presents companies that are available at less
than their net worth Oil India 0.77 Nava 0.94
Balmer Lawrie Inv. 0.80 Shipping Corporation 0.97
Dividend yield (%) Dividend yield (%)
REC 4.95 IIFL Securities 3.84

High dividend
GNFC 4.95 GE Shipping 3.52
yield stocks
PFC 4.62 Sundaram Fin. Hold. 3.39
A screen for those looking for a steady stream
of dividends Rashtriya Chem. & Fert. 4.09 SMC Global Securities 3.05
Gujarat Mineral Dev. 3.98 ONGC 3.02
For all the screens and to customise them

as per your requirements, visit
z Customisable filters z Value Guru screens z Easy peer comparison
www.valueresearchonline.com/stocks/selector

WORDSWORTH NOW
UDAY KOTAK
Former MD & CEO, Kotak Mahindra Bank
I stand in a lonely place of being a founder, promoter and

significant shareholder of this great institution. It also bears
our family name and carries that as its brand. The institution
that we have together built stands for purpose, trust and
integrity. I am committed as a stakeholder to see this
institution sustain and grow.
Resignation letter, September 1, 2023
WALTER ISAACSON CHARLIE MUNGER

Author of the book ‘Elon Musk’ Vice Chairman, Berkshire Hathaway
We all have some demons in our heads from Here is what Charlie Munger once said about Elon Musk:
childhood, and he’s got two orders of magnitude My thoughts are two. I would never
more than most of us. He’s been able to harness buy (Tesla), and I would never sell it
those demons into drive. “I have to make
short. I have a third comment. Never
humans get to Mars, and I’ve got to bring us into
the era of electric vehicles, and I’ve gotta make underestimate the man who
sure AI is safe.” These are three grand missions overestimates himself. I think Elon
that I thought were just him spouting off, but he Musk is peculiar and
really gets motivated by that. He also just so he may overestimate
craves excitement, drama and risk that whenever
himself, but he may
things are going well, he can’t leave well enough
alone or savour it. He’s got to push all of his not be wrong
rong all
chips back on the table, which means you can the time.
either go into orbit or you can melt down. Daily Journal AGM,
GM,
The New York Times, September 10, 2023 February 2020
MANEKA GANDHI
Longest-serving Lok Sabha MP
I have spent most of my adult life in this institution (old parliament building) and I have seen seven
Prime Ministers and the shaping of grand history… You can change things wherever you are, for
instance in opposition as BJP member, as chairperson of the often ignored Assurances Committee.
We changed the way people were experimented by pharmaceutical companies...
My happiest moment was being given the responsibility by the Prime Minister who
coined the phrase ‘Beti Bachao, Beti Padhao.’ Within two years, we changed the
entire thought of the country and the statistics show that it is a lasting change.
The Times of India, September 19, 2023

BIG THINGS
START SMALL
Franklin India Smaller Companies Fund
An open-ended equity scheme predominantly
investing in small cap stocks.
Over 350,000 Unique Investors^ in this fund,

call your Mutual Fund Distributor or visit
www.franklintempletonindia.com
PRODUCT LABEL
Alternative to: Suitable for: This fund is suitable for investors
who are seeking*:
• Long term capital appreciation
• A fund that invests primarily in
small-cap stocks
Investments in Retirement Education Long Term
predominantly Corpus Corpus Wealth Creation
Small Cap Companies
*Investors should consult their financial
advisers if in doubt about whether the
product is suitable for them. Riskometer is as on August 31, 2023
Follow us at: âs on July 31, 2023

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EDITORIAL POLICY 35 COVER STORY

RESEARCH & ANALYSIS Asif Ali,

DESIGN Anand Kumar, Aprajita Anushree,

PRODUCTION MANAGER & CIRCULATION

The value advocate Confidence as a Service

Quantum computing: Harnessing the

16 Big Moves The octopus ascends

The Danish economy’s lifesaver

24 Market Barometer 66 Wordsworth Now

Trends and trails Quotable words from prominent figures

October 2023 Wealth Insight 5

The guru element

investments. Not just one or two Five, honest self-appraisal and

October 2023 Wealth Insight 7

Subscription copy of [webmaster.srini@gmail.com]. Redistribution prohibited.

+HBDMBDV@RFQ@MSDCSN,HQ@D RRDS,TST@K%TMCNM-NUDLADQ AX2$!(TMCDQ2DBTQHSHDR@MCDWBG@MFD!N@QCNE(MCH@ ,TST@K%TMC QDFTK@SHNMR

Subscription copy of [webmaster.srini@gmail.com]. Redistribution prohibited.

Grid-scale batteries get gap funding

10 Wealth Insight October 2023

RBI approves Arm valued at

Blue Star to raise

October 2023 Wealth Insight 11

£500 million ECONOMIC METRICS

In its latest monetary policy 6

Global debt at an rate continues to be in the Aug '21 Aug '23

all-time high range of 5.25 to 5.5 per cent.

Adani Green and 84

12 Wealth Insight October 2023

14 Wealth Insight October 2023

Sep 3, 2012 Jul 17, 2015

October 2023 Wealth Insight 15

REC 3M price (`) movement JSW Energy 3M price (`) movement

5.6 21.1 30.1 63.7 53.6 8.5 4.2 55.2

Polycab 3M price (`) movement Vodafone Idea 3M price (`) movement

53.1 19.1 24.8 45.4 5,133

16 Wealth Insight October 2023

Passive funds As you may be aware, Sensex &

October 2023 Wealth Insight 17

Jupiter Wagons 3M price (`) movement SJVN 3M price (`) movement

Mazagon Dock 3M price (`) movement ITI 3M price (`) movement

Kalyan Jewellers 3M price (`) movement Suzlon 3M price (`) movement

18 Wealth Insight October 2023

19.9 -4.8 45.2 145.4 168.7 5.8 -17.5 133.5 263

October 2023 Wealth Insight 19

S&P BSE PSU

Price to earnings Price to book 10,000

3.13 40.2 6,000

,QGH[ZHLJKWV  3ULFHWRERRNYDOXH 3%

ONGC 0.8 6.2 3.0 42.3

Indian Oil 0.9 5.3 3.2 32.4 4.8

20 Wealth Insight October 2023

HIGHEST HIGHEST LOWEST BIGGEST TOTAL

*Price to book value. Price data as of September 15, 2023

22 Wealth Insight October 2023

15 Handpicked Stocks updated monthly

Special coupon for you

9999322422 C-103, Sector 65, Noida - 201301 support@valueresearchstocks.com

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Trends and trails

Sensex’s movement The Sensex is the most convenient indicator to

+HBDMBDV@RFQ@MSDCSN,HQ@D RRDS,TST@K%TMCNM-NUDLADQ AX2$!(TMCDQ2DBTQHSHDR@MCDWBG@MFD!N@QCNE(MCH@ ,TST@K%TMC QDFTK@SHNMR

,QGH[ZHLJKWV 3ULFHWRERRNYDOXH 3%