Wealth-Insight - Sep 2023

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September 2023 VOLUME XVII, NUMBER 3
43 COVER STORY
EDITORIAL POLICY
Pro vs
The goal of Wealth Insight, as with
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,
Amateur
Can amateur stock
encouraging you to indulge in a bit
of research on your own as well. investors be better
All our stories are backed by than pros?
quantitative data. To this, we add
rigorous qualitative research Yes! Here’s how
obtained by speaking to a wide vari-
ety of stakeholders. We firmly stick
to our belief of fundamental
research and value-oriented
approach as the best way to earn
wealth in the stock market. Equally
important to us is our unwaveringly
focus on long term planning.
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.
Read, learn and earn – and let’s
grow and evolve as we undertake
this voyage together.
38 WORDS WORTH WISDOM

EDITOR-IN-CHIEF Dhirendra Kumar
COPYEDITING Anupama Garg, Mithilesh

Bhaumik and Ujjal Das
“Minimise risk before
RESEARCH & ANALYSIS Asif Ali, Karthik
Anand Vijay, Shubham Dilawari,
maximising returns”
Swastik Sharma, Udhayaprakash J Investing insights from a permanent investor
and Vishal Goyal
DESIGN Anand Kumar, Aprajita Anushree, Pulak Prasad

Harish Kumar Singh, Kamal Kant Koner, Founder, Nalanda Capital
Mukul Ojha and Nitin Yadav
DATA SOURCE FOR STOCKS AceEquity
MARKETING
Aastha Tiwari, Ashish Jain, Jash Ashar, 54 INTERVIEW
Kasturi Kaushik
PRODUCTION MANAGER & CIRCULATION

Hira Lal +91-9958058407 “Buying is dependent on
ADVERTISING CONTACT
Venkat K Naidu +91-9664048666
Biswa Ranjan Palo +91-9664075875
pricing but not on timing”
Insights of a fund manager at PPFAS Mutual Fund
SUBSCRIPTION
Shipra Srivastava +91-9868891830
Chhaya Verma +91-9560200520 Raunak Onkar
Fund Manager & Research Head, PPFAS Mutual Fund
4 Wealth Insight September 2023

CONTENTS
7 Edit 57 Straight Talk
by DHIRENDRA KUMAR by ANAND TANDON
Going one up Data protection and cyber security
Ordinary investors can outperform The increasing need for cyber security is opening up
professionals using everyday knowledge investment opportunities
8 Twitter 60 Stock Advisor

by DHIRENDRA KUMAR
The quality scrutiniser
How to do magic
Leading Nowhere | @leading_nowhere | 26k
Getting great equity returns sustainably only looks like
magic, it actually isn’t
10 Market Reporter
Buzz of the month 62 Main Street
by SAURABH MUKHERJEA
14 Stock Story The democratisation of

opportunity in India’s boardrooms
Built on strong foundations
How leadership in India’s corporate landscape has
The journey of Delhi Land & Finance, one of the oldest witnessed a paradigm shift
commercial real estate developers of India
66 Everyday Economics
16 Big Moves by PUJA MEHRA
The most significant price movements Licence Raj Redux?

The import policy changes might take us back to the
22 Index Watch days of License Raj
Market and sectoral moves 68 Of This & That...

by SANJEEV PANDIYA
24 Monthly Agenda Bad ideas, F&O trading and the market
Quarterly result update Find out the mindset required to find success
How various sectors have performed in Q1 FY24 in terms of in F&O trading
revenue, profit and margins and which companies stand out
70 Stock Screen
Quality stocks available cheap
26 Market Barometer
Here is a ready-made list of stocks that clear essential
Trends and trails checks on solvency, accounting, recent financial
Here are some charts that will help you make sense of the performance and valuations
current market in terms of valuations and return potential
74 Wordsworth Now
28 Market Compass Quotable words from prominent figures

z Institutional Moves
z Change in promoter stake
9DOXH5HVHDUFK,QGLD3YW/WG
z Pledging tracker
Wealth Insight is owned by Value Research India Pvt. Ltd., 5, Commercial
Complex, Chitra Vihar, Delhi 110 092.
32 Analyst’s Diary Editor-In-Chief: Dhirendra Kumar.
z Printed and published by Dhirendra Kumar on behalf of Value Research India
Simplifying valuations Pvt. Ltd. Published at 5, Commercial Complex, Chitra Vihar, Delhi 110 092.
z First tryst with profitability Printed at Option Printofast, 46, Patparganj Industrial Area, Delhi-110092
z The dimming of Brightcom Total pages 76, 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
September 2023 Wealth Insight 5

EDIT
Going one up
Ordinary investors can outperform professionals using everyday knowledge
wealth generation of the equity it’s not enough of a reason to

markets was a radical one for all own the stock!”
except the very rich – you couldn’t The heart of the book is an
even get a stockbroker to talk to education on how to do this
you if you were investing a research – I understood clearly
‘middle-class amount’. Most what a business’ finances were,
investors only ever invested in how to understand financial
IPOs or new issues, as they were statements, what to look for and
called. These were ‘sell-only’ what to ignore. This is the
investors, in the sense that the knowledge that I use even to this
only time they interacted with a day. This is the A-B-C of
By Dhirendra Kumar broker was to sell whatever investment research, and unless
allotment they got in the new an investor understands this, he
issue lottery. can’t progress beyond copying
S
oon after I finished college in Of course, the brokers were all others’ ideas and looking for tips.
1990, something really swindlers, and the stock exchanges When Peter Lynch wrote the
exciting happened to me. If operated in a manner that helped book, he was known only for his
this was 2023, you could have them swindle. There was no incredible track record as a fund
expected this excitement to be transaction proof. The brokers manager. From 1977 to 1990, while
finding a VC for some new would claim to have sold your managing the Fidelity Magellan
business or some such thing. stock at the lowest price of the day fund in the US, he generated an
You see, 1990 was a much duller at the stock exchange (there were annualised return of 29.4 per cent,
time – my excitement was simply 8-9, I think), where the price was making it the best-performing fund
that I acquired a copy of Peter the lowest anyway. You had no in the world. While this
Lynch’s book ‘One Up on Wall choice but to accept all this. performance made Lynch a legend
Street’. I know that sounds trivial Apart from planting the seed of in the world of investments, it is his
today, but this was a really going ‘one up on Dalal Street’ in writings on equity investing that
fortuitous thing to happen. In my mind, Lynch’s book was also a have firmly secured his legacy.
those pre-internet days, the flow of great education in investment You should read our cover
information was much slower and research. In fact, it’s this which is story, and I’m sure that you will.
harder, and this great book had the real value of the book. As he However, you must also read his
just come out the year before. put it in the introduction, “Peter books. Apart from the classic,
Lynch’s book was like a primary Lynch doesn’t advise you to buy ‘One Up on Wall Street’, there are
education for me as an investor. stock in your favourite store just others just as valuable. There are
His central idea, which we have because you like shopping in the ‘Beating the Street’ and ‘Learn to
tackled in detail in this issue’s store, nor should you buy stock in Earn’, and many articles and
cover story, was that an a manufacturer because it makes interviews that can be found on
individual could invest well – your favourite product or a the internet. As you can probably
better than Wall Street – using the restaurant because you like the tell from the titles alone, the other
knowledge that was available in food. Liking a store, a product, or books are also based on his belief
one’s daily life. a restaurant is a good reason to that ordinary individual investors
At that time, the idea that an get interested in a company and can do better than professional
individual could participate in the put it on your research list, but investors and fund managers.

TWITTER
The quality
scrutiniser
What is outperforming the benchmark/index if the benchmark itself is
Leading Nowhere stupidly constituted? Brightcom is on Nifty Smallcap 250 Index.
@leading_nowhere Comparison with indexes and index investing in general is great from cost
perspective, but the game is played with constitution and criteria.
26k | Followers
Some concall transcripts in microcaps give me the creeps, seem totally
pre-planned. Correlate with SM activity on the co, start feeling hints of a
Why Follow
pump. Financials and valuation have no correlation, zero cash flows.
When bonus or split comes (always does), distribution climaxes.
I
ndian companies,
beware! You will not Consternation with Siemens’ sale of its low voltage motors business
escape the scrutiny of division is interesting, because who bid up the company to such absurd
valuations in the first place? Would any rational business owner respect
@leading_nowhere. The
such valuations? ‘MNC chor’ tripe only sounds smart in media.
anonymous account is
on a mission to unmask As an employee or investor, if a company is (a) deferring salaries; or (b)
accounting shenanigans. cutting salaries - it’s time to leave or write off. Many cos give generous
appraisals to retain employees or raise bridge rounds - it is a
A financial detective in
smokescreen, LEAVE. Don’t fall for sunk cost fallacy.
every right, the account
sheds light on dubious Even a company like Coca-Cola is barely able to make correct short-term
claims hidden behind predictions, yet new breed of ‘informed’ retail investors continue to form
investment thesis on short-term management guidance.
corporate jargon. However,
financials are not all that Nibbling, but feels worse may be yet to come. Lots of smallcaps seem
is under scrutiny. The fairly valued or cheap, but drawdown from peak isn’t a good metric to
unknown face behind the determine margin of safety. Valuations are always forward looking, they
care nothing about recent or past peaks. Can never tell how it ends.
handle also has watchful
eyes on valuations. You Symphony Ltd doing buyback at 2x market price. Wildly priced buybacks
will often find scathing are net-negative from governance side. Convert passive payout (dividend)
to opt-in payout. Non-participants pay tax at company level for everyone
posts on companies with
else, and share reduction is minimal. Not a big deal, but still.
obscene valuations.
Follow us on
social media
@VROStocks vrostocks VROStocks

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MARKET REPORTER
Maruti to acquire Fitch downgrades US credit rating

parent’s subsidiary Fitch Ratings, a US credit rating agency,
has downgraded the US long-term debt
Maruti Suzuki plans to acquire
rating from AAA to AA+. This
a majority stake in Suzuki
decision is based on projected fiscal
Motors Gujarat (SMG), a
deterioration in the next three years
subsidiary of Suzuki Motors
and a substantial debt burden. The
(Maruti Suzuki’s parent
agency also pointed out that
company). It aims to enhance
recurring political stand-offs over
the supply chain and
the debt limit and eleventh-hour
production efficiency through
solutions have weakened governance.
this move. The acquisition cost
will be covered by issuing
shares to Suzuki Motors,
though the exact terms of the
deal remain pending. Temasek invests
`1,200 crore
in M&M’s EV biz
Temasek (a Singapore-based
private equity firm) will
invest `1,200 crore in
Mahindra Electric
Automobile (MEA), a
subsidiary of Mahindra &
Government Mahindra specialising in
restricts laptop and passenger electric vehicles.

MEA will issue compulsorily
computer imports convertible preference shares
to Temasek. Post the deal,
`5.6
The Indian government has
Temasek will own between 1.5
lakh cr
implemented restrictions on the
to 2.9 per cent stake in the
import of laptops, computers,
company. The deal values
tablets and other similar
is the revenue recorded by electronic items. Starting
MEA at `80,580 crore.
the Indian auto component November 1, 2023, the import of
industry in FY23. The these goods will only be allowed
industry grew by 32.8 per against a valid license. The
cent YoY to clock its government is yet to disclose any
specific reason behind the move.
highest-ever revenue. The However, the consensus is that
growth was driven by a the government wants to bolster
40 per cent growth in sales domestic manufacturing and
to OEMs. reduce dependency on China.
Ambuja Cements to acquire Sanghi Industries

Ambuja Cements is set to acquire a majority stake in Sanghi Industries. It
will acquire a 56.7 per cent stake from the promoters for `1,674 crore and
another 26 per cent through an open offer. The deal will cost Ambuja around
`2,441 crore. The acquisition aligns with Ambuja’s plan to expand its total
capacity to 140 MTPA by 2028.

Change in Paytm’s ownership structure
Vijay Shekhar Sharma (founder and CEO of Paytm) will acquire a 10.3 per cent
stake in Paytm from Antfin (an Ant Financial group firm). The acquisition will
be made through Sharma’s overseas entity (Resilient Asset Management). Antfin
will be issued optionally convertible debentures by Resilient as a consideration
for the acquisition. Post acquisition, Antfin will cease to be the largest
shareholder in Paytm.
SBI tops the profit list in Q1 ITC to demerge its hotel biz
The largest bank in India beat In a move to unlock value and sharpen capital allocation,
Reliance Industries to the top spot. ITC has decided to demerge its hotel business. As per the
disclosed share entitlement ratio, for every 10 shares held in
ITC, shareholders will receive one share of ITC Hotels (the
6%,¶V4SHUIRUPDQFH demerged entity). Post the demerger, shareholders of ITC
YoY will own 60 per cent of ITC Hotels while ITC will hold the
Metric Q1 FY24 Q1 FY23 change (%)
remaining 40 per cent.
Net interest income (` cr) 43,415 34,850 24.6
Net interest margin (%)* 3.33 3.02 –
0ROlTAFTERTAX` cr) 18,537 7,325 153.1
Gross NPA (%)* 2.76 3.91 –
Advances (` lakh cr) 33.1 28.8 13.9
Deposits (` lakh cr) 45.8 40.8 12.2
*Standalone numbers. Other data on consolidated basis.
`1 lakh cr
is the investment
planned by ONGC by
the end of 2030 in
low-carbon energy Deloitte resigns
opportunities,
including renewables as Adani Ports
RBI keeps repo rate and green hydrogen. and SEZ auditor
It aims to reduce its
unchanged carbon intensity by
Deloitte (an auditing firm)
resigned as the auditor of
RBI has kept the repo rate unchanged at 45 per cent by 2030. Adani Ports and Special
6.5 per cent for the third time in a row. Economic Zone as it wanted
However, to drain the excess liquidity a wider remit over the other
from the banking system, it has imposed Adani group companies
(temporarily) a 10 per cent incremental following the Hindenburg
cash reserve ratio (percentage of deposits report. Deloitte issued a
to be maintained as cash). Moreover, the qualified audit opinion in
RBI revised its inflation forecast for FY24 the Q4 FY23 financial
to 5.4 per cent from 5.1 per cent. statements of the company.

MARKET REPORTER
Adani Group continues ECONOMIC METRICS

stake sale .:;JVSSLJ[PVU
The Adani group stake selling spree 2,00,000 In ` cr
continued as it sold its stake in
1,50,000
Adani Green Energy and Adani
Power. Qatar Investment Authority 1,00,000
(Qatar’s sovereign wealth fund)
50,000
bought a 2.7 per cent stake in Adani
Green Energy for `3,920 crore. 0
Similarly, GQG Partners, Goldman Jul '21 Jul '23
Sachs and other investors bought an
8.1 per cent stake in Adani Power.
0UMSH[PVU!*VUZ\TLY7YPJL0UKL_
8 % change YoY
7
M&M pick up a 6
stake in RBL Bank 5
Mahindra & Mahindra has
4
bought a 3.5 per cent stake in
Jul '21 Jul '23
RBL Bank for `400 crore. It
has stated that it may
consider further increasing 0UK\Z[YPHSHJ[P]P[`!0UKL_VM
its stake to 9.9 per cent, 0UK\Z[YPHS7YVK\J[PVU
given some compelling 20 % change YoY
strategic value at some point
Zomato turns profita- in the future. 10
ble for the first time 0
-10
The food delivery major reported
Jun '21 Jun '23
a profit after tax of `2 crore in Q1
FY24, making it profitable (on a
consolidated basis) for the first 059]Z<:+
time. However, it was a tax gain of 72 Inverted scale
`17 crore that helped it tide over.
We have covered it in greater 75
detail in an ‘Analyst’s diary’. 78
Don’t forget to read that.
81
84
Titan adds to its Aug '21 Aug '23
CaratLane stake *Y\KLVPS

Titan, the leading Indian jeweller, is 150 Brent $/barrel
poised to acquire a 27.2 per cent stake in
CaratLane. The acquisition will cost 120
Titan `4,621 crore and will be funded
through a combination of cash, accruals 90
and debt. Post the acquisition, Titan’s
stake in CaratLane will increase from 60
71.1 per cent to 98.3 per cent. Aug '21 Aug '23

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STOCK STORY DLF
Built on strong
foundations
The journey of Delhi
Land & Finance, one of
the oldest commercial
real estate developers
of India
I
t is hard to miss the name DLF
(Delhi Land & Finance) while
navigating the sprawling
concrete labyrinth of the National
Capital Region. A commercial real
estate development company, DLF
was founded by Chaudhary
Raghvendra Singh in 1946.
However, it had to put its real estate
dreams on hold after developing 22
colonies as the Delhi government
banned all private developers.
Post the ban, DLF diversified
into sectors like batteries and
cables. However, a turning point
arrived in 1981 when the company
secured its first real estate license
in Gurugram, marking its re-entry
Sensex rebased to stock price
DLF Sensex
Jan 14, 2008
`1,206
Jul 05, Aug 06, 2013

2007 `122
`570
Feb 05, 2009
`139
Dec 04, 2007 Dec 2008 Feb 2010 Nov 02, 2012 Feb 10, 2014
Started JV with Launched Capital Launched a Divested stake in DLF Exited its stake in
US-based Prudential Green, the largest 200-acre project in Cyber City Developers Silverlink Resorts for
Financials to enter the private sector Panchkala, with an and DLF Universal in an enterprise value of
asset management residential project investment of Jwala at an enterprise `2,226 crore
business in Delhi `2,200 crore value of `2,700 crore

into the real estate arena. Since
Revenue and net profit Operating profit and margin
Revenue (` cr, left side) Operating profit (` cr, left side)
then, DLF has risen to become the
Net profit (` cr, right side) Operating profit margin (%, right side)
market leader in terms of revenue
12,000 6,000 4,000 40
and market capitalization on the
back of consistent new project 9,000 4,000 3,000 30
launches and a growing land book. It 6,000 2,000 2,000 20
came out with one of India’s biggest 3,000 0 1,000 10
IPOs in June 2007. It has also played
0 -2,000 0 0
a pivotal role in Gurugram’s
FY14 FY23 FY14 FY23
transformation into a modern
metropolis.
Yet, beneath its current towering ROE and ROCE Debt and interest coverage ratio
stature lies a battle scar from the ROE (%) ROCE (%) Total debt (` cr, left side)
Interest coverage ratio (times, right side)
2008 financial crisis. In its aftermath, 24
total debt surged from `4,132 crore in 32,000 6.0
16
2006 to `20,223 crore in 2012. 24,000 4.5
Concurrently, revenue contracted, 8
16,000 3.0
and profitability suffered. To 0 8,000 1.5
weather the storm, DLF divested
-8 0 0
non-core assets, including cinemas
and power projects. FY14 FY23 FY14 FY23
Today’s landscape is markedly
brighter. The company has diligently However, the spectres of regulatory
reduced its debt in recent years, shifts, potential interest rate hikes,
reporting its lowest level since 2006 and the broader macroeconomic
in FY23. Remarkably, it achieved its currents are perpetual threats for
2,505
highest-ever booking, totalling this seasoned real estate titan.
`15,058 crore in the same period. By Udhayaprakash
Buoyed by current infrastructural
momentum and improved outcomes,
the stock has surged 36 per cent
within the past six months.
Aug 11, 2023

Nov 08, 2021
`482
Jan 11, 2018 `441
`271 Mar 24, 2020
`121
Mar 13,
2023
`343
June 09, 2015 Mar 20, 2019 Dec 26, 2020 Feb 18, 2021 Jan 27, 2023
Sold DT Cinemas to Announced that its JV Acquired Hines’ stake Acquired Fairleaf Announced plans to
PVR for `500 crore with Hines will invest in Gurugram project Real Estate for launch `7,500 crore
`1,900 crore to for `780 crore `779 crore premium housing
develop 2.9 million project
square feet

BIG MOVES
Large caps Price to earnings Net profit (` crore)

3M returns (%) 3Y avg RoE (%) 3Y earnings growth (%) 3M price (`) movement
235
81.6 1.0* 11,681

REC
Net profit rose 21 per cent YoY in Q1 FY24. Signed green energy
project pacts worth `2.75 lakh crore. 21.1 30.1
130
271
64.3 0.8* 17,049

Power Finance Corp
Raised `5,000 crore through NCDs and signed pacts worth
`2.37 lakh crore for green energy projects. 25.5 30.7
165
4,360
55.9 63.7 867

Supreme Industries
Its Q1 FY24 revenue was up 7.4 per cent YoY. It was recently
included in the MSCI Global Index. 26.4 22.1
2,798
715
44.5 175.5 394

Macrotech Developers
Reported a 30 per cent jump YoY in pre-sales during Q1 FY24.
6.9 -12.9
495
866
44.5 25.7 1,978

Aurobindo Pharma
Q1 FY24 net profit was up 10 per cent YoY, and received
US FDA approval for Vancomycin Hydrochloride injection. 15.5 -13.0
599
91
43.5 – -784
Zomato
Posted a consolidated profit for the first time in Q1 FY24.
-12.8 16.8
63
352
42.8 48.0 1,207

JSW Energy
Signed a power purchase agreement for 300 MW with
Solar Energy Corp. 8.5 4.2
247
4,820
41.5 49.9 1,449

Polycab
Its Q1 FY24 revenue and net profit were up 42 and
80 per cent YoY, respectively. 19.1 24.8
3,405
48
40.7 1.3* 6,232

IRFC
It raised `2,500 crore through a bond issue and signed an
MoU with Rites. 13.6 39.3
34
2,543
40.5 34.2 1,587

HDFC AMC
Abrdn (a former promoter) sold 10 per cent stake and its
Q1 FY24 net profit rose 52 per cent YoY. 27.4 7.6
1,810
*Price to book value. Our large-cap universe has 124 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 on August 17, 2023.

BIG MOVES
Mid caps Price to earnings Net profit (` crore)

1,923
146.1 32.1 1,209

Mazagon Dock
Its Q1 FY24 net profit was up 32 per cent YoY and signed
agreements with the Indian Navy and Germany’s ThyssenKrupp. 13.8 51.5
781
274
138.7 64.1 171

Jupiter Wagons
Its Q1 FY24 PAT jumped five times YoY and it raised
`125 crore via QIP. 7.4 -17.4
115
20
130.8 52.0 517

Suzlon Energy
It bagged a 99 MW wind energy project from Vibrant Energy.
– 30.1
9
223
108.5 48.9 469

Kalyan Jewellers
Its Q1 FY24 net profit jumped 33 per cent YoY and it
announced the opening of 11 new stores. 6.7 44.8
107
1,438
88.2 132.1 129

JBM Auto
It won an order for 5,000 electric buses from several state
transport undertakings. 12.0 63.9
764
327
75.9 11.7 891

Jindal Saw
After the merger of Sathavahana Ispat, its Q1 FY24 profit
jumped 54 times YoY. 5.3 29.2
186
4,704
73.2 25.3 713

Apar Industries
The company has reported more than 50 per cent YoY
jump in net profit for four consecutive quarters. 20.4 115.9
2,715
568
71.6 27.5 1,045

Lloyds Metals & Energy
Reported its best-ever Q1 numbers as its PAT jumped
143 per cent YoY. 0.6 312.4
331
57
56.6 20.5 1,022

SJVN
It won an order worth `7,000 crore from Punjab State Power
Corp. for 1,200 MW. 11.4 -12.8
36
219
53.9 1.0* 1,030

RBL Bank
Its Q1 FY24 PAT increased by 53 per cent YoY and M&M
bought a 4 per cent stake. 3.4 7.2
142
*Price to book value. Our mid-cap universe has 278 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 on August 17, 2023.

BIG MOVES
Small caps Price to earnings Net profit (` crore)

35
303.0 76.9 57
Shree Global Tradefin
Its Q1 FY24 net profit jumped 26 times YoY.
11.5 335.9
9
522
271.6 – -104
JITF Infralogistics
Its Q1 FY24 net profit was up 84 per cent YoY.
– 15.1
141
224
187.3 16.9 206

Jai Balaji Inds.
Its Q1 FY24 net profit was up eight times YoY and promoters
increased their stake by three percentage points. – 46.3
78
6,180
163.5 245.0 34
PTC Industries
Its subsidiary received approval from Israel Aerospace
Industries to supply components. 7.3 34.9
2,345
225
156.6 144.8 40
Genus Power Infra
Won a smart meter order worth `2,200 crore and attracted
$2 billion investment from Singapore based GIC. 7.8 -17.5
88
495
156.4 31.0 35
Dynamic Cables
Its Q1 FY24 profit was up 59 per cent YoY.
17.1 19.4
193
1,075
156.2 83.3 14
Premier Explosives
It received orders worth `552 crore from the
Ministry of Defence. -2.6 45.2
419
163
155.3 – -18
Artson Engineering
Its net profit more than doubled YoY in Q1 FY24.
– -207.6
64
851
151.9 86.8 82
Zen Technologies
The company secured multiple orders including an order
worth `202 crore from the Ministry of Defence. 13.1 30.3
338
302
127.9 9.2 72
Master Trust
Its Q1 FY24 revenue and net profit are up 16 and 42 per cent
YoY, respectively. 13.5 71.8
132
Our small-cap universe (minimum market capitalisation `550 crore) has 972 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 on August 17, 2023.

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INDEX WATCH
S&P BSE Auto

The auto index has given a return of about 10 per cent in the last three months.
Mahindra & Mahindra, Ashok Leyland and Samvardhana Motherson were the top
three performers over this period. The index’s P/E is well below its five-year median
P/E, whereas the P/B is over its median. The dividend yield is at its median level.
2LÙ\TILYZ ,QGH[PRYHPHQW
z BSE Auto z BSE Sensex z Median
24.5 4.5
50,000
40,000
Price to earnings Price to book 30,000

20,000
1.15 14.5 10,000

0 Sensex rebased to index
Dividend yield (%) Market cap (` lakh cr) Aug ‘18 Aug ‘19 Aug ‘20 Aug ‘21 Aug ‘22 Aug ‘23
3ULFHWRERRNYDOXH 3%
,QGH[ZHLJKWV
5.0
Mahindra &
Others Mahindra 4.0 3.5
35.0 20.7
3.0
2.0
In %
1.0
Aug ‘18 Aug ‘19 Aug ’20 Aug ’21 Aug ’22 Aug ’23
Maruti
Suzuki
Eicher Motors 16.2 3ULFHWRHDUQLQJV 3(
6.0
12,000
Bajaj Auto Tata Motors 9000

7.8 14.3
6000
Valuations, dividends and returns 3000
Dividend 1Y 53.5
Company P/B P/E yield (%) return (%) 0
Apollo Tyres 1.9 19.0 1.2 50.6 -3000
Cummins 8.0 34.8 1.4 39.3 Aug ‘18 Aug ‘19 Aug ’20 Aug ’21 Aug ’22 Aug ’23
TVS Motor 10.7 43.7 0.4 38.0

Ashok Leyland 6.1 31.2 1.4 27.8
'LYLGHQG\LHOG
In %
Tata Motors 4.2 19.2 0.3 26.4 2.5
Tube Investments 12.7 54.9 0.1 23.9 2.1

Mahindra & Mahindra 3.3 16.8 1.0 23.1 1.7
MRF 3.0 36.6 0.2 22.7 1.3 1.20%
UNO Minda 8.5 53.1 0.2 14.6 0.9
Bajaj Auto 4.3 20.2 3.0 14.5 0.5
Data as of August 17, 2023 Aug ‘18 Aug ‘19 Aug ’20 Aug ’21 Aug ’22 Aug ’23

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MONTHLY AGENDA
Quarterly result update

How various sectors have performed in Q1 FY24 in terms of revenue, profit and
margins and which companies stand out
Change in median
2EVENUEGROWTH /PERATINGPROÜTGROWTH 0!4GROWTH OPERATINGPROÜTMARGINPT
Sector QoQ YoY QoQ YoY QoQ YoY QoQ YoY

Automobile 0.0 24.1 6.3 163.9 -7.4 365.0 0.5 4.8
Bank 5.9 34.6 – – 16.1 67.2 – –
Capital Goods -14.8 10.5 -32.1 28.9 -27.2 -19.5 -2.3 1.3
Chemicals -9.2 -11.7 -14.7 -38.1 -13.7 -44.3 -0.6 -3.9
Communication -0.5 10.5 4.8 45.6 77.2^ -4.0^ 0.9 4.1
Construction -16.0 23.1 -13.3 20.8 -35.5 6.0 0.4 -0.2
Consumer Discretionary -17.8 44.7 0.8 -4.6 5.0 -11.5 0.5 -1.3
Consumer Staples 1.6 1.8 4.9 14.5 11.2 14.4 0.4 1.5
$IVERSIlED -4.8 3.8 -27.7 -20.5 -27.9 -23.9 -3.3 -3.2
Energy -1.8 -9.3 25.1 88.9 29.8 102.0 2.6 6.2
Finance 3.1 28.4 – – -18.6 4.2 – –
Healthcare 3.2 15.4 16.5 42.4 34.0 22.0 1.8 3.0
Insurance -25.4 2.2 – – -30.1 347.0 – –
Materials -3.6 5.4 17.9 -6.5 4.5 -5.8 2.7 -1.9
Metals & Mining -7.3 -0.5 -17.7 -34.8 -14.2 -33.4 -1.2 -5.0
Services 2.3 4.8 25.2 104.4 116.8 169.0 1.6 4.3
Technology 0.1 11.2 -4.1 11.4 -3.7 11.2 -0.8 0.0
Textiles -5.7 -7.3 -12.2 -37.6 55.5 2.7 -0.5 -3.1

/PERATINGPROFITISREPRESENTEDBY%")4OREARNINGSBEFOREINTERESTANDTAXEXCLUDINGOTHERINCOME >INDICATESINCREASEORDECREASEINLOSS
7EHAVENOTINCLUDEDBANKING FINANCIALSERVICESANDINSURANCECOMPANIES1&9DATAAVAILABLEFOR COMPANIESASON!UGUST -INM CAP`CR
4OFINDOUTWHICHCOMPANIESAREINCLUDEDINEACHOFTHESECTORS VISITHTTPSVROINSTOCKSSELECTOR
7RSFRPSDQLHVE\4UHYHQXH 7RSFRPSDQLHVE\43$7
In ` cr In ` cr
SBI
2,25,410 18,537
2,10,831 1,63,824
Reliance Inds.
16,011
Indian Oil Reliance Inds. ONGC Indian Oil

14,437
1,28,264 1,19,162 ONGC
14,134
HDFC Bank
BPCL HPCL 12,370

7RSFRPSDQLHVE\4UHYHQXHJURZWK %RWWRPFRPSDQLHVE\4UHYHQXHJURZWK
)N 9O9 )N 9O9
Crest Hemisphere PC Orissa Ravindra

Ventures Properties Jeweller Minerals Dev. Energy
81,373
20,732 5,067
14,005 1,083
-78.0 -75.1
Hexa W.S. EFC GKW Jyoti -87.6

-94.5 -92.3
Tradex Industries Structures
7RSFRPSDQLHVE\4RSHUDWLQJSURILWJURZWK %RWWRPFRPSDQLHVE\4RSHUDWLQJSURILWJURZWK
)N 9O9 )N 9O9
42,900
11,371
7,573 4,790 4,720 -1,050 -879 -804 -776 -519
Cressanda Graphite TCNS Network Orissa

Strides Pharma Chembond Onward Hindustan Spacenet Solutions India Clothing 18 Media Minerals
Science Chemicals Tech. Construction Enterprises & Inv. Dev.
%XCLUDINGBANKING FINANCIALSERVICESANDINSURANCECOMPANIES %XCLUDINGBANKING FINANCIALSERVICESANDINSURANCECOMPANIES
7RSFRPSDQLHVE\43$7JURZWK %RWWRPFRPSDQLHVE\43$7JURZWK
)N 9O9
)N 9O9
1,01,893
Quick Heal Tech.
-7,189
TCNS Clothing
-1,616
19,325
Bharat Agri Fert.
-1,500
10,104
Sharda Cropchem
5,326
5,267 -492
Subex
RPSG Magadh Sugar Ashok Jindal Indian -448
Ventures & Energy Leyland Saw Oil

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
67,572 run in the markets. However, this rally was
60 punctuated by several bearish phases. The
65,402
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
17,906 Ukraine and rising interest rates. With reces-
12 sionary fears easing, Sensex reached a new
Aug ’13 Aug ’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
24.1 12 16 20 24
20 Undervalued Overvalued
16.8
15 This graph is based on standalone data of Sensex companies.
Aug ’13 Aug ’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 3.56 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
Aug ’13 Aug ’23

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

115%
112 Here we have considered the market
capitalisation of all the listed companies on
the BSE.
100 100 This measure is Buffett’s personal favourite.
He said, “It is probably the single best
85
81 measure of where valuations stand at any
given moment.”
If:
70 Market cap > GDP = Overvalued
Market cap < GDP = Undervalued
55 57
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
40
FY14 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 2.90 government bond. Sensex’s earnings yield is
3.10 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
Aug ’13 Aug ’23 All data as of August 17, 2023

MARKET COMPASS
Institutional
moves
Top five companies across
market caps in which mutual
funds and foreign institutions
have significantly changed their
holdings (in terms of per cent
of equity) between March and
June 2023
,QFUHDVHLQSRVLWLRQ
0XWXDOIXQGV ),,V
Large caps Change Large caps Change
Company Sector Jun ’23 Mar ’23 (% pt) Company Sector Jun ’23 Mar ’23 (% pt)
HDFC AMC Finance 11.5 7.2 4.3 Max Healthcare Healthcare 60.1 52.4 7.7
Shriram Finance Finance 8.8 6.0 2.8 Zomato Retailing 60.7 55.1 5.6
Mankind Pharma Healthcare 3.9 1.8 2.1 Shriram Finance Finance 55.4 49.8 5.6
Zomato Retailing 8.3 6.4 1.9 HDFC AMC Finance 13.0 7.5 5.5
Muthoot Finance Finance 12.5 11.3 1.2 Indian Hotels Hospitality 21.6 18.2 3.4
Mid caps Change Mid caps Change

KIMS Healthcare 27.4 21.7 5.7 Sona BLW Auto & Anc. 31.7 24.7 7.0
RHI Magnesita Capital Goods 12.8 7.5 5.3 Cyient IT 36.6 32.6 4.0
Timken India Auto & Anc. 16.5 11.3 5.2 RBL Bank Bank 38.6 35.0 3.6
Aether Industries Chemicals 12.5 7.6 4.9 Craftsman Automation Capital Goods 16.9 13.6 3.3
CG Cons. Electricals Cons. Durables 37.5 33.2 4.3 Aditya Birla Capital Finance 11.2 8.1 3.1
Small caps Change Small caps Change

CMS Info Systems IT 19.0 9.9 9.1 Toyam Sports Finance 20.7 1.3 19.4
Orchid Pharma Healthcare 9.8 2.5 7.3 Kamdhenu Ventures Miscellaneous 14.6 0.3 14.3
Sansera Engg. Auto & Anc. 17.9 11.4 6.5 Veritas India Trading 24.6 14.9 9.7
Astra Microwave Capital Goods 6.4 0.1 6.3 Gravita India Non-Ferrous Metal 9.3 3.1 6.2
Vijaya Diagnostic Healthcare 18.4 13.3 5.1 Camlin Fine Sciences Chemicals 31.5 26.4 5.1

'HFUHDVHLQSRVLWLRQ
0XWXDOIXQGV ),,V
Large caps Change Large caps Change
Max Healthcare Healthcare 11.3 18.9 -7.6 Adani Total Gas Gas Transmission 14.1 16.3 -2.2
Indian Hotels Hospitality 19.3 22.3 -3.0 Cipla Healthcare 25.5 27.4 -1.9
Hindustan Aeronautics Capital Goods 6.6 8.8 -2.2 Infosys IT 33.6 35.2 -1.6
Axis Bank Bank 21.7 23.6 -1.9 Adani Energy Sol. Power 21.1 22.5 -1.4
Hero MotoCorp Auto & Anc. 10.3 12.2 -1.9 Tech Mahindra IT 25.7 26.9 -1.2
Mid caps Change Mid caps Change

Cyient IT 20.4 24.1 -3.7 Zee Entertainment Media & Entt. 33.4 41.5 -8.1
Sona BLW Auto & Anc. 24.1 27.0 -2.9 CG Cons. Electricals Cons. Durables 35.0 42.2 -7.2
Triveni Turbine Capital Goods 12.3 14.9 -2.6 KIMS Healthcare 13.3 19.6 -6.3
Tata Chemicals Chemicals 8.5 10.8 -2.3 PVR Inox Media & Entt. 28.0 32.4 -4.4
RBL Bank Bank 11.6 13.7 -2.1 Piramal Pharma Healthcare 36.5 40.7 -4.2
Small caps Change Small caps Change

Stove Kraft Cons. Durables 0.2 6.6 -6.4 Axita Cotton Textile 3.4 12.5 -9.1
Elin Electronics Capital Goods 11.9 16.0 -4.1 Landmark Cars Trading 11.1 18.8 -7.7
Mirza International FMCG 0.0 4.1 -4.1 Sansera Engg. Auto & Anc. 30.8 38.5 -7.7
Kolte-Patil Developers Realty 0.7 4.7 -4.0 Brightcom Group IT 8.9 15.8 -6.9
SIRCA Paints Trading 0.0 3.9 -3.9 Hindustan Construction Infrastructure 5.6 12.3 -6.7
7RSKROGLQJVRIPXWXDOIXQGV 7RSKROGLQJVRI),,V
% of Amount % of Amount
M-cap equity invested M-cap equity invested
Company name Sector (` cr) held (` cr) Company name Sector (` cr) held (` cr)
Kalpataru Projects Infrastructure 10,401 39.0 4,059 One97 Comm. (Paytm) IT 54,777 72.1 39,500
CG Cons. Electricals Cons. Durables 19,203 37.5 7,199 CarTrade Tech Auto & Anc. 2,435 69.7 1,697
Gateway Distriparks Logistics 3,999 37.5 1,497 Delhivery Logistics 30,425 65.6 19,950
Equitas SFB Bank 9,583 37.1 3,551 360 One Wam Finance 18,440 63.9 11,789
MCX Finance 8,116 34.4 2,795 Ugro Capital Finance 2,812 61.1 1,719
Federal Bank Bank 31,231 33.1 10,347 Zomato Retailing 79,849 60.7 48,476
KNR Constructions Infrastructure 7,101 33.0 2,344 Max Healthcare Healthcare 50,747 60.1 30,504
Greenply Inds. Const. Mat. 1,974 32.2 636 Redington Trading 11,690 59.2 6,922
Rolex Rings Auto & Anc. 5,744 31.3 1,798 PNB Housing Finance Finance 16,823 57.5 9,670
Ipca Labs Healthcare 22,425 30.3 6,788 Shriram Finance Finance 67,915 55.4 37,598
M-cap as on August 14, 2023. Other data as of June 2023. M-cap as on August 14, 2023. Other data as of June 2023.

MARKET COMPASS
Change in promoter stake

Companies that have seen a rise or decline in promoter stake in Q1 FY24
H
igher promoter holding shows that holdings. Hence, one needs to dig deeper
promoters are bullish about their while tracking promoter stake.
company. In contrast, a fall in The tables below list companies in which
promoter stake is usually a negative the promoter stake has changed notably
development. over the last quarter. We took companies
However, corporate actions, such as where the promoter stake in the previous
rights issue, mergers, and promoter quarter was at least 25 per cent and changed
reclassification, can also impact promoter by at least 4 percentage points.
,QFUHDVHLQSURPRWHUVWDNH
Companies where the promoter stake in the previous quarter was at least 25 per cent and has risen by at least 4 percentage points
Promoters’ stake (%)
Company Sector M-cap (` cr) Jun '23 Mar '23 Increase in promoter holdings (% pt) 3M return (%)
Expleo Solutions IT 2,081 71.1 56.2 14.9 30.7
3HREE'LOBAL4RADElN Trading 4,447 73.9 60.9 13.0 116.6
Steel Exchange Iron & Steel 1,484 55.9 50.9 5.0 13.8
Imagicaaworld Entt. Hospitality 2,998 70.9 66.0 4.9 4.3
)DOOLQSURPRWHUVWDNH
Companies where the promoter stake in the previous quarter was at least 25 per cent and has fallen by at least 4 percentage points
Company Sector M-cap (` cr) Jun '23 Mar '23 Decrease in promoter holdings (% pt) 3M return (%)
Orchid Pharma Healthcare 2,823 72.4 90.0 -17.6 31.7
Indostar Capital Finance Finance 2,226 75.0 89.2 -14.2 37.5
CMS Info Systems IT 5,568 46.5 60.2 -13.7 32.1
HDFC AMC Finance 53,240 52.6 62.8 -10.2 36.8
Timken India Auto & Anc. 24,192 57.7 67.8 -10.1 23.7
Vedant Fashions Textile 30,727 75.0 84.9 -9.9 12.0
Kamdhenu Ventures Miscellaneous 1,097 50.3 58.7 -8.4 43.5
MTAR Tech. Capital Goods 6,825 39.1 46.6 -7.5 24.7
CreditAccess Grameen Finance 22,119 66.8 73.7 -6.9 39.9
Gravita India Non-Ferrous Metal 5,174 66.5 73.0 -6.5 27.3
Kalpataru Projects Infrastructure 10,401 41.1 47.2 -6.1 -2.1
Escorts Kubota Auto & Anc. 28,624 67.6 72.9 -5.3 19.8
Aether Inds. Chemicals 14,035 81.8 87.1 -5.3 18.0
RHI Magnesita Capital Goods 14,552 55.5 60.1 -4.6 6.8
Bank of Maharashtra Bank 27,518 86.5 91.0 -4.5 17.4
Praveg Miscellaneous 1,093 57.6 62.0 -4.4 16.3

Company name Sector M-cap (` cr) Jun '23 Mar '23 Decrease in promoter holdings (% pt) 3M return (%)
SEPC Infrastructure 2,006 26.7 31.1 -4.4 -17.0

Datamatics Global IT 3,068 66.5 70.9 -4.4 97.9
PNB Housing Finance Finance 16,823 28.2 32.5 -4.3 41.3
Tega Inds. Capital Goods 6,434 75.0 79.1 -4.1 39.2
M-cap more than `1,000 crore as on August 14, 2023. Returns as of June 2023.
Pledging tracker
Companies that have seen a rise or decline in promoter pledging in Q1 FY24
P
romoter pledging is an important pledged stake is high and the promoter is
analytical parameter. When unable to pay back the dues. This may
promoters pledge shares, they force the financing institution to sell
keep shares as collateral with a the pledged stake, which can result in
financial institution, such as a bank, a sudden fall in the stock price and
to raise money. It’s just like the dilution of promoter stake in
mortgaging something for money. the company.
Pledging is not always bad. Many Generally speaking, a high
times, promoters pledge their stake pledged stake also indicates a bad
for sound business reasons and later management. Investors should stay
release their pledged shares. But away from companies that have high
pledging takes an ugly turn when the levels of pledging.
,QFUHDVHLQSOHGJLQJ
Companies in which promoter pledging has gone up by 10 percentage points and the minimum promoter stake is 25 per cent
M-cap Pledged stake (%) Increase Promoter 3M stock Debt to

Company Sector (` cr) Jun '23 Mar '23 (% pt) stake (%) return (%) Z-Score F-Score equity
Responsive Inds. Plastic Products 5,941 17.2 0.0 17.2 58.9 37.6 11.5 4 0.3
Mangalore Chem. & Fert. Chemicals 1,181 75.9 63.9 12.0 60.6 8.3 2.0 5 1.7
Hindustan Zinc Non-Ferrous Metal 1,33,774 99.4 87.6 11.8 64.9 2.7 6.4 6 0.9
Eris Lifesciences Healthcare 11,223 11.4 0.0 11.4 52.9 21.5 19.4 4 0.4
'HFUHDVHLQSOHGJLQJ
Companies in which promoter pledging has come down by 10 percentage points and the minimum promoter stake is 25 per cent
Pledged stake (%)
M-cap Decrease Promoter 3M stock Debt to
Company Sector (` cr) Jun '23 Mar '23 (% pt) stake (%) return (%) Z-Score F-Score equity
RattanIndia Power Power 2,551 0.0 89.0 -89.0 44.1 67.7 -4.6 4 -2.4
Usha Martin Iron & Steel 9,877 0.0 54.7 -54.7 47.9 25.0 8.1 8 0.2
Vishnu Chemicals Chemicals 2,107 3.8 36.1 -32.2 75.0 33.5 4.7 8 0.9
Prakash Inds. Iron & Steel 1,634 58.6 74.4 -15.7 44.1 49.5 3.1 9 0.2
Steel Exchange Iron & Steel 1,484 63.7 76.0 -12.3 55.9 13.8 3.3 4 0.5
Min m-cap `1,000 crore as on August 14, 2023. Returns as of June 2023. Z-Score: Predicts a company’s financial distress or the possibility of its going bankrupt within two years.
A Z-score of more than three is desirable. F-Score: Highlights financial performance as compared to that in the previous year. An F-Score of seven or above is good.
A negative value for debt-to-equity implies negative net worth.

ANALYST’S DIARY
Simplifying
valuations
We explore O’Shaughnessy’s unique
valuation framework
V
aluations can be challenging. A company might
seem attractive using one metric and overvalued
using another. To tackle this, James
O’Shaughnessy, the founder of O’Shaughnessy Asset
Management, suggested combining the following six 0DUNHWEHDWLQJUHWXUQV
valuation metrics to arrive at a composite score in his A historical analysis of composite score methodology
book ‘What Works on Wall Street’: Period Return (% pa) BSE 500 return (% pa)
1. Price to earnings, FY18-23 11.4 10.4
2. Price to book,
FY17-22 21.7 13.4
3. Price to sales,
FY16-21 20.7 14.0
4. Price to cash flow,
5. Enterprise value to EBITDA, FY15-20 1.6 0.1
6. Shareholder yield (dividend yield + change in shares FY14-19 27.0 13.0
outstanding due to buybacks).
He argued that every valuation metric has some blind
spots. Hence, the optimum approach should be to 7RSFRPSRVLWHVFRUHSLFNV
combine different metrics. In his method, companies are The list is dominated by cyclical companies
assigned scores based on each metric individually. Next, M-cap 5Y median
the scores are combined to arrive at a composite score. Company Sector (` cr) ROCE (%)
The companies are then arranged in descending order of Andhra Paper Paper 1,643 27.3
the composite score and divided into ten groups of equal West Coast Paper Paper 3,141 26.1
size. The first group with the highest composite scores Seshasayee Paper Paper 1,633 25.2
are the worthy investment candidates.
Polyplex Corp Plastic Products 3,992 19.7
To put this framework to the test, we did some
EID Parry Agri 8,846 27.7
number crunching. We applied the framework to BSE
JK Paper Paper 5,606 21.3
companies with a market cap of over `500 crore and
excluded BFSI companies. Our goal was to ascertain if an Andhra Sugars Chemicals 1,478 15.6
investor would profit if they remained invested for five Indian Metals & Ferro Manganese 1,900 15.7
years. The results were quite surprising. GTPL Hathway Media & Entt 1,503 20.7
The score had its own caveats. The first group had Redington Trading 12,444 21.8
more than 50 companies in it, making it difficult for a
M-cap as of August 6, 2023
retail investor to invest and maintain it. Moreover, the
framework favours low-valued high-dividend yield stocks.
Hence, the group was filled with cyclical companies. As a applied a filter of a five-year median ROCE of at least 15
result, while there were some stocks that performed well, per cent. Below are the top companies picked using our
many gave single-digit or even negative returns. modified framework and ranked by their composite score.
So to circumvent the above drawbacks, we modified Like most valuation methodologies, O’Shaughnessy’s
the framework. We decided to remove PSUs (as they made technique also has blind spots. However, the composite
up the bulk of low-valued high-dividend yield cyclical score can be an excellent starting point.
stocks) along with BFSI companies. In addition, we By Udhayaprakash

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in top gear
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Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

ANALYST’S DIARY
First tryst with profitability

Find out if food aggregators have found
a cure to their loss-making curse
T
he notoriety of food aggregators as cash
guzzlers is well-earned. Many believed that
the model itself was doomed to
burn through wealth for years,
dangling the prospects of profit
in front of the business like a
sadistic joke.
Food aggregators’ primary
revenue sources are two:
advertising and commission.
Restaurants, in hopes of getting
higher traffic, list on aggregator
apps and pay them advertising fees. The
food aggregator takes care of the delivery
and charges a cut in the profit per
order as commission. Sounds
simple enough.
But here’s the conundrum.
The restaurant business
operates on wafer-thin
margins. So the earnings
from the commission per
order are often barely
enough to cover the fuel costs and
the delivery personnel charges. Should aggregators AVTH[V»ZMVVKKLSP]LYÌPaPZWYVMP[HISL
attempt to raise these commissions, restaurants would Sizeable other income has helped turn a profit In ` cr
opt out of their services. With no restaurants onboard,
Quarter Sep ‘22 Dec ‘22 Mar ‘23 Jun ‘23 TTM
users would dwindle. Furthermore, in a fiercely
Revenue 1,178 1,191 1,207 1,420 4,996
competitive food delivery landscape, drawing users
necessitates enticing them with discounts, further Operating profit -182 -159 -18 95 -263
squeezing margins. Other income 198 225 204 186 813
Initially, many focus on volume as the solution.
PAT 12 62 182 276 531
Spend capital, expand rapidly, and profits should
follow. However, with losses on every order, more These are standalone numbers (food delivery business).
orders don’t necessarily help. The testament to this is Operating profit refers to earnings before other income, interest and tax.
what happened during Covid. Food aggregators TTM refers to trailing 12 months.
globally witnessed a demand boom.
The topline shot up and yet profits remained elusive. Coming of age
In fact, most resorted to innovative techniques to Zomato reported a PAT of `2 crore in Q1 FY24 to
conceal losses, such as the infamous adjusted EBITDA. become the first Indian food aggregator company to
Yet, the recent buzz of the town is that Zomato has report profits. In fact, it is only the second company in
found a way to break the loss-making curse of the food the world to make money delivering food after the
aggregator model. Chinese food delivery giant, Meituan.

Before diving in, let’s address the `17 crore deferred
tax assets Zomato added to its earnings, resulting in the
`2 crore net profit. For those unfamiliar, deferred tax
assets signify that the company either pre-paid or
overpaid taxes, allowing for reduced tax payments in
the future.
Undoubtedly, these tax assets played a significant
role in Q1. Additionally, Zomato’s substantial other
income contributed to this positive outcome.
However, contrary to what many are saying, this
profitability is not all smoke and mirror. The above is
indeed true. But so is the fact that Zomato’s food
delivery business recorded `95 crore of earnings before
interest and taxes in Q1 FY24. It was rather its quick-
commerce acquisition, BlinkIt, that held its earnings
back and incurred a loss of `105 crore (EBITDA).
So, has Zomato finally cracked the puzzle of
profitable food delivery?
Yes, but with conditions applied.
0DQDJLQJLWVFRVWV
Operating expenses as a percentage of revenue (%)
Keys to delivering success 3.5 3.4

1.8
There are some common lines between Meituan and 1.3
Zomato’s success. 19.3 19.2
16.7
URBAN DENSITY: Both companies benefited from the 25.2 13.0
23.8
17.9 14.2
dense population of the urban cities of India and China.
23.2 24.6 20.7 19.9
In fact, Zomato recently exited 225 cities (rural cities),
which directly contributed to reducing its losses. The
44.1 42.5 44.4 44.9
maths is simple. In the metros and Tier-1 cities of India,
the density of restaurants, i.e., the number of
Sep ‘22 Dec ‘22 Mar ‘23 Jun ‘23
restaurants available within a given radius, is far
higher than in rural areas. This drastically reduces the Delivery charges Ad expenses Employee Other expenses Depreciation
delivery distance, reducing Zomato’s fuel costs. In These are standalone numbers (food delivery business).
addition, the astronomical population density in the
urban cities of the two most populous countries offers uncertainties persist. Firstly, the overall business still
order volumes very few can match. has a considerable journey ahead. Zomato’s operations
LOW COSTS: Let’s not shy away from it. The obscenely span three segments: food ordering and delivery (as
low labour costs in India (and China) are discussed earlier), B2B operations (Hyperpure), and
one of the prime reasons Zomato succeeded where rapid-commerce (Blinkit). Unfortunately, both
others failed. According to various media reports, Hyperpure and Blinkit are currently running at a loss.
minimum delivery fees fell to `15-18 in 2023 from `40-50 Secondly, the spectre of intense competition
in 2022. Also, though delivery costs as a percentage of continues to cast a shadow. As the sector has
revenue have remained constant (averaging 44 per undergone consolidation, Zomato and Swiggy have
cent) in the last four quarters, advertising expenses established a near duopoly.
and employee costs have trended downwards (as a However, the presence of ONDC and similar
percentage of revenue). aggregator platforms poses a substantial risk. Until
Zomato and similar players demonstrate consistent
What lies ahead and sustainable profitability, it would be premature
Is Zomato’s recent turn towards profitability a sign of to declare an imminent revolution in the food unicorn
impending change for the entire sector? The answer landscape.
remains uncertain. While it marks a beginning, several By Asif Ali, Mithilesh Bhaumik and Swastik Sharma

ANALYST’S DIARY
The dimming of Brightcom

Shedding light on irregularities at the Brightcom Group
H
ere is an enticing opportunity
for you. We found a company
that grew its revenue and net
profit by 26 and 28 per cent per
annum, respectively, over FY18-23.
At the same time, it maintained an
average ROCE of about 25 per cent.
But here’s the kicker. The
stock is available at a P/E of
just four times!
Sounds too good to be true, doesn’t it?
That’s because it is. The case
This is the story of the Brightcom During FY20 and FY21, the Brightcom Group had
Group. Long-term readers of Wealth undertaken four rounds of preferential allotment (i.e.,
Insight might remember that this it raised capital by issuing shares or warrants to a
company has made multiple select group of investors). In total, the company
appearances on our ‘Big Moves’ pages claimed to raise `868 crore.
over the last two-three years. And SEBI received multiple complaints that these
with a good reason. amounts were raised from (and shares were issued
As you can see in the price chart, to) entities directly or indirectly connected with the
the share price went up 52 times company. Moreover, these amounts were further
between March 2020 and December given out as loans to its own subsidiaries.
2021. However, its share price has
plunged 80 per cent from its peak. The smokescreen
What really happened? Let’s look! In its investigation, SEBI found that the company
A recent order issued by SEBI against the company had indeed undertaken circulation of funds to create a
(August 22, 2023) shines a spotlight on various false impression of receipt of warrant/share
irregularities. Moreover, we also highlight some glaring application money, allotment of warrants/shares
red flags that could have been spotted from a mile. without a receipt or partial receipt of money, diversion
of proceeds, and submission of false documents (bank
7KUHH\HDUVKDUHSULFHPRYHPHQW account statements) to SEBI, etc.
The stock went up 52 times between March 2020 and December 2021. While auditing the company’s bank account
Since then it has fallen 80 per cent. statements, SEBI also found that the company had only
`120 received partial payments against the total amount.
`118 The remaining was either not received by the company
90 or returned to the entities through multiple
transactions involving subsidiaries and conduits.
60
`24
Cheap stake
30 Out of the 82 entities that participated in the
`2 preferential allotments, four non-promoter entities
0 accounted for 28 per cent of the total allotted shares.
March 2020 August 2023
While the total amount raised (reported) from these
Price data as of August 22, 2023
entities was `112 crore, the actual amount received by

participating investors.
8WLOLVDWLRQRIDPRXQWVUDLVHG However, for the 22 investors that have been
About 95 per cent of the amount raised was lent out to subsidiaries scrutinised, it was found that the amount to be received
LIL Projects YReach Media was `245 crore. However, the actual amount received
z Amount loaned (as reported; `cr)
stood at `53 crore (about 22 per cent). As a result of this,
z Actual amount lent (`cr) SEBI has banned the Suresh Reddy from dealing in
securities market and has also barred him from
506 257 318 94
holding director’s post in any listed firm.
The red flags

z Amount utilised (as reported; `cr) This convoluted network of transactions is indeed
z Actual amount utilised (`cr) dizzying.
However, one thing is clear. You could have smelled
395 72 121 75
trouble from a long way out. Let’s see some of the
glaring red flags.
Huge trade receivables
A high trade receivable (or amount owed to the
the company is only `2 crore. company by its customers) is not a comfortable
Moreover, in an interesting turn of events, position for any company. In Brightcom’s case, trade
Brightcom Group announced in April 2022 that receivables as a percentage of total assets have
Chairman and MD Suresh Reddy was inducted as a averaged 31 per cent over FY19-23!
partner in all these four firms. Loans and advances to subsidiaries
Consequently, these four companies were (now) Continuing with the balance sheet, the company’s loans
classified as promoter group entities. The promoter and advances as a percentage of total assets have
shareholding increased from about 4 per cent in averaged 23.4 per cent over FY19-23. Close to a quarter
December 2021 to nearly 19 per cent in March 2022. of the balance sheet has been loaned out.
Question marks over the independence of the Board
What happened to the amount raised? A deeper dive into Brightcom’s annual report also
Brightcom Group had loaned out about 95 per cent revealed a concerning lack of independence among its
(`824 crore) of the amount they claimed to raise to two directors. Mr Peshwa Acharya was appointed as a non-
subsidiaries. They claim that they extended support in executive independent director effective September
product development initiatives. Further, the actual 2020. However, he was reappointed as a non-executive
amount loaned was only `351 crore. See ‘Utilisation of non-independent director in September 2021.
amounts raised’. These are just some of the many red flags flashing
The larger issue is that it can’t be ascertained how for a long time. Hopefully, you noticed them and stayed
much of the `868 crore the company actually received. away from investing in this company.
SEBI is still investigating the transactions of all the By Vishal Goyal and Shubham Dilawari
Invest like pros

Learn the craft of investing by reading about the
investment styles of world-class money managers
https://shop.valueresearchonline.com/store/

WORDS WORTH WISDOM
7<3(279(:(+ Founder, Nalanda Capital
“Minimise risk before

maximising returns”
Investing insights from a permanent investor
INVESTMENT PHILOSOPHY
P
ulak Prasad is the
Nalanda’s approach to investing
founder of Nalanda In a world where most investors
comprises three sequential steps:
Capital, a Singapore- (amateurs and professionals
based firm that manages alike) are frequently 1. Avoid big risks
over $5 billion and invests exchanging one 2. Buy high quality
in listed Indian companies. stock for the at a fair price
Prasad recently wrote a other, Prasad’s
3. Don’t be lazy
investment
book titled ‘What I – be very lazy
philosophy
Learned about Investing
might seem
from Darwin.’ To say that
rather
Prasad likes evolutionary
extreme. He
biology would be an summarises
understatement. it as “we want
He has cited many to be perma-
examples of Darwinian nent owners
evolutionary principles – of high-quali-
from the varieties of dung ty businesses”.
beetle horns to the house-
Illustration: ANAND
scouting dance of the
honeybees – to explain
how his and Nalanda
Capital’s investment
philosophy was shaped.
And it has been highly
rewarding! One rupee
invested in Nalanda
Capital’s first fund
(launched in June 2007)
was worth `13.8 in
September 2022. The
same rupee would be
worth `3.9 if invested in
the Sensex.
Let’s wait no more
and jump right in. Here
are some key insights
from his book.

AVOID BIG RISKS Motors. From 2007 to 2021, Prasad ry of at least 20 per cent ROCE.
Prasad says that investing mistakes writes, the company multiplied its However, he acknowledges that a
fall into two broad categories: shareholders’ wealth by 70 times. high ROCE is not a sufficient condi-
He didn’t invest in it because, in tion. So, he also looks for robustness.
THE ERROR OF 2007, it was a turnaround story with
COMMISSION no history of success. He explains, Businesses must be robust to evolve
“Making a lot of investments “We believe our success is contin- Prasad says that if a business can’t
so as not to lose out on some gent upon our being comfortable survive indefinitely, then he will
good opportunities and, as a with missing out on Teslas and not invest in it. He says, “We want
result, living with some Eichers because, on average, avoid- our businesses to mimic
ing type I errors (error of commis- the robustness of the
failed investments”
sion) works wonders over the long living world: to sur-
THE ERROR OF term. It has done so for us.” vive and prosper in
OMISSION a dynamic external
“Being highly selective BUY HIGH QUALITY AT A environment, with-
to avoid making bad FAIR PRICE stand internal strategic

How to decipher quality? and organisational upheavals, and
investments, thereby The clue lies in the process of natu- evolve by taking calculated risks.”
missing out on some good ral selection. Prasad notes, “In
investments” nature, selection for just one trait Investing by looking at the
can influence many other rear-view mirror
behavioural and physi- Rather than making forecasts of a
To make matters more difficult, if you cal qualities of an business’s performance, Prasad
try to minimise the risk of one type of organism.” Similarly, and his team analyse the historical
error, the probability of committing he uses a single metric performance (financials and strate-
the second type of error increases. So, that brings with it many gies) of a business to
investors have to decide which error favourable business qualities. uncover its present.
they can live with. That metric is the return on cap- He reasons, “We
Taking cues from how evolution ital employed (ROCE). And here have dissociated our-
has programmed living things to are the additional traits that a com- selves from the “what
prioritise survival over everything pany with a consistently high will happen?” obsession
else, Prasad has chosen to minimise ROCE brings: and replaced it with “what has actu-
the error of commission in his ally happened?” The former is a
investment approach. He says, “At laundry list of conjectures and opin-
Nalanda, we want to be permanent ions, and the latter, to a large extent,
“They deliver products and
owners of high-quality businesses. services to their customers that consists of facts. Of course, facts in
Hence, we want to minimise risk are superior to those of their and of themselves are empty, and
before maximising returns.” competitors, allocate capital what matters is the opinions
However, he acknowledges that prudently, attract and retain we build onto those facts, but at
most investors (including himself) quality employees, manage least they give us a foundation for
will continue making errors of their cost structure (which is a discussion.”
commission. So he proposes that commensurate with their size
we try to avoid the errors that can and revenue), maintain a quality What is a fair price?
be avoided. balance sheet, and continuously Having been on the boards of more
If you choose to follow this
innovate by taking calculated than 25 companies, Prasad found
risks. All this should – and does
approach, you will have to be con- that no management team was ever
– correlate with high ROCE.”
tent with the fact that you will miss able to meet its budget. Thus, he
out on some huge wealth-creation advises, “If the company manage-
opportunities. Prasad explains it He and his team are on the look- ment can’t forecast correctly, how
through the example of Eicher out for companies with a long histo- can investors do so? They can’t.

WORDS WORTH WISDOM
More importantly, they shouldn’t

try. We have never done a DCF (dis- DON’T BE LAZY – BE VERY LAZY
counted cash flow) analysis and As Nalanda Capital seeks to be a permanent
never will.” owner, its buying and selling activities
His valuation approach goes are remarkably different to what most
like this: investors do.
Prasad writes, “When it comes to buying
and selling businesses, we are not just lazy.
We are very lazy. We rarely buy and seldom
“Let me take the example of a SELL-ANYnPROBABLYMOSTnLONG TERMINVESTORS
NON CYCLICALBUSINESSGROWING ultimately sell their investments, especially when
at a moderate pace. We know the price is egregious. We don’t. We are permanent owners.
THEMARKET TRAILING0%MULTIPLE We will not sell a single share in a business we love.”
is about 19 or 20. We pay a
multiple at or below the market
for an exceptional business with
high ROCE, a wide moat, and Sell
LOWBUSINESSANDlNANCIALRISK
Occasionally, we stretch a bit
by paying a trailing multiple in
the high teens or low 20s for a When to buy? When to sell?
truly unique business, but these Based on the characteristics of Unlike most investors, Prasad
occasions are few and the company that Prasad and doesn’t sell based on valua-
far between.” his team like, it is no surprise tion. That is because he has
that such companies don’t not set a target price for any
trade at cheap or fair valua- of his portfolio companies.
Look for convergent patterns tions. So, how do they invest at Instead, his selling is driv-
In nature, it is quite common for fair value? Prasad explains, en by three conditions:
unrelated organisms to develop the 1. A decline in governance
same solutions to similar problems. h7HENWElNDHIGH QUALITY standards
Moreover, there are only a small set businesses that do not 2. Egregiously wrong capital
of solutions to each problem. fundamentally alter their allocation
Similarly, Prasad writes, “The character over the long 3. Irreparable damage to the
business world, too, is convergent.
term, we should exploit business
THEINEVITABLESHORT TERM
There are definitive patterns to the Prasad says that their
mUCTUATIONSINTHEIRBUSINESSES
success and failure of companies. stance on not selling has
for buying and not selling.”
We exploit this property of the cor- made them better buyers.
porate world to select outstanding Occasionally, investors lose He says,
businesses and reject lousy ones by sight of a company’s strong
asking a simple question: Where fundamentals and begin sell- “None of our professionals
else have we seen this?” ing in droves. These occasions spends even a minute thinking
Here is an example. Prior to are often precipitated by some about selling unless the
investing in Info Edge in 2013, temporary macroeconomic, business make an egregiously
Prasad noted two convergent pat- industry or company issues
wrong capital allocation or if
the company (according
terns. One was the network effect (such as the global financial
to us) is irreparably
enjoyed by the erstwhile Yellow crisis of 2008-09). It is during
damaged… We are always
Pages businesses. The second one these periods that Prasad well prepared to buy because
was the success of the leading inter- invests aggressively in we have been freed of the
net job boards in other countries. high-quality companies that he concerns of selling.”
These patterns gave him the confi- has already identified.
dence to bet on Info Edge.

Coming soon...
Stock investing is about

to get a lot simpler
or

COVER STORY
Pro vs
Amateur
Can amateur stock investors be better than pros?
Yes! Here’s how
Illustrations: ANAND
By Karthik Anand Vijay and Udhayaprakash
aking money in the market is not
M exclusive to the experts and the wealthy.

Peter Lynch, the fund manager of the
Magellan Fund (of Fidelity Investments),
showed this in his book ‘One Up on Wall Street’.
It would be an understatement to say that we
like the way Lynch invests. He multiplied his
investors’ wealth by more than 27 times from 1977
to 1990! His illustrious career and philosophy have
guided many investors — including a few at Value
Research. The sheer simplicity of his investing
philosophy put things in perspective way better
than any textbook. But don’t let his straightforward
words lull you into thinking that investing is easy.
It certainly isn’t.
In this cover story, we have taken nine (out
of the dozens!) quintessential
Lynch quotes to help you
invest the Lynch way.
Let’s get started!
Nine quintessential Peter Lynch quotes

to help you pull one up on D-street

COVER STORY
Circle of competence
Why odds are in your favour if you invest in what you know
are adept at evaluating banks. But
“People seem more comfortable they might lack the prerequisite
knowledge required for evaluating
investing in something about which insurance companies. So, that is
where the boundary of their circle
they are entirely ignorant.” of competence lies.
If you want to identify your
boundary, start with your line of
I
nvest in what you know. As sectors). However, it’s important work and then move outwards
simple-sounding as this to figure out the boundary of your towards adjacent sectors. Here is
principle is, it is one of the most circle of competence. Knowing the an example. If you are an
important principles of equity limits of your circle is vital for architect, you deal with products
investing. Surprisingly, it is also long-term success. from various industries - cement,
one of the most violated principles. For instance, some investors paint, tiles, furniture, bathroom
The legendary Warren Buffett fittings, adhesives, pipes, etc.
was the first to use the term However, it could be the case that
‘circle of competence’ to describe you might need to be better-versed
this timeless principle. Let’s dive in the broader construction and
into what it means. engineering sector. If you find
yourself evaluating a company in
What is the circle of competence? that sector, you should realise
Simply put, it means investing in that you are at the periphery of
companies that you understand. your circle of competence.
All of us (irrespective of our
investing experience) have some Stack the odds in your favour
know-how in specific sectors. We Investors often tend to deviate
either develop it through our line from their circle of competence.
of work, as a customer or through Someone with a thorough
plain-old research. knowledge of the tyre industry
The circle of competence varies might try to figure out which
with experience and knowledge. bank will be the next HDFC Bank.
Investing debutants might have a Similarly, a bank manager might
narrow circle of competence be busy finding a winner in the
limited to a few sectors. On the pharma sector.
other end of the spectrum, Sure, there is no rule that
veterans and professionals restricts you from investing
might have a broad circle of outside your circle of
competence encompassing competence. But bear in
multiple sectors. mind that investing is a
game of probabilities. You
How to identify your circle want the odds in your
of competence? favour. And the best way to
It doesn’t matter whether the ensure that is to stay
circle is big or small (i.e., whether within your circle of
you understand many or a few competence.

Shopping for ideas
Simplicity is often the key to spotting the next multibagger
opportunities further. Most
“The best place to begin looking for businesses might turn out to be
poor; however, occasionally, a
the tenbagger is close to home—if winner will crop up.
not in the backyard then down at An analyst’s tale of a 130-bagger
the shopping mall, and especially

Last year, an analyst from Siwan
(Bihar) joined our team. In 2015,
wherever you happen to work.” he noticed a new consumer

electronics retail store open in his
locality. This store belonged to
L
ynch is famous for bagging Marico), and travel to office Aditya Vision. The company is a
multiple 10-baggers during (Maruti, M&M, Tata Motors, Bajaj consumer electronics retailer and
his time at Fidelity. It wasn’t Auto, Eicher Motors, TVS Motor, primarily operates in Bihar.
his fancy college degree or Hero MotoCorp). That is 15 unique The analyst observed that the
superior IQ that led to this happy companies by the time you reach company’s stores were usually
outcome. Instead, it was his your work. crowded. But the proof is in the
curiosity and observation. And once you get to the office, pudding. From FY16 to FY23, the
He would find out the names of your line of work will give you company’s revenue increased
the companies that made or many companies in and around from `240 crore to `1,322 crore.
served a product or service he your industry. Although, you will The net profit increased from
used. During vacations, he would need to scrutinise these about `1 crore to `64 crore over
make detours to learn more about the same period. Moreover, its
a company he had been tracking. ROCE grew from 13 per cent in
These are not some esoteric skills FY16 to 35 per cent in FY23.
that only a few possess. You can From its listing in December
also apply this process to your 2016 to August 14, 2023, the stock
investment process. multiplied 130 times! All of us
were in awe when he told us the
Use your surroundings same. But then he ended the
Our lives revolve around products story with this, “If only I had
and services offered by checked, anytime during the first
companies. In our daily four years, whether the company
routine, we interact with was listed.” Ouch! That must
the offerings of several have hurt!
companies. Observation and curiosity can
For instance, you wake open up a once-in-a-lifetime kind
up and brush your teeth of opportunity for you (but don’t
(Colgate, HUL, Dabur, P&G forget to check whether the
Hygiene and Health), take a company is listed).
bath (HUL, Godrej A Lynch quote captures this
Consumer), dress (textile perfectly, “So often we struggle
companies and apparel to pick a winning stock when
retailers), eat breakfast all the while a winning stock
(Nestle, Tata Consumer, has been struggling to pick us.”

COVER STORY
Few winners suffice

A successful portfolio needs only a few big winners 7KHSRZHUODZ
Worth of `10,000 invested 10 years ago in
current Sensex constituents
“All you need for a lifetime of In ` lakh
successful investing is a few big

Bajaj Finance 5.71
Bajaj Finserv 2.45
winners, and the pluses from those JSW Steel 1.50
will overwhelm the minuses from Titan 1.10
Asian Paints 0.74

the stocks that don’t work out.” Maruti Suzuki 0.67
Reliance Inds. 0.60
L
ynch had over 1,000 responsible for most of the returns.
companies in the Magellan The power law holds true for the ICICI Bank 0.58
Fund’s portfolio and still stock markets too. See the graph Kotak
Mahindra Bank
0.54
managed to generate a phenomenal ‘The power law’. It represents the
return. He was able to do it because worth of `10,000 invested 10 years HDFC Bank 0.52
a few stocks performed superbly. ago in the current constituents of HCL Tech 0.51
The outperformance of a few stocks Sensex. While none of the
L&T 0.50
more than compensated for the companies have lost you a single
poor or average performance of rupee, only a few have delivered Tata Steel 0.50
other stocks. outsized gains. Ultratech
Cement
0.47
It turns out that you just need a Does this mean that you keep
Nestle India 0.43
few big winners in your portfolio to picking up many stocks
drive returns. Here’s why. Assume impulsively? We are not suggesting HUL 0.41
you invest `1 lakh each in two that you adopt the venture capital Axis Bank 0.41
companies - one good and the other way. You can’t just throw money
TCS 0.38
poor. The maximum you would lose and hope that it will hit the mark.
by investing in the poor company is There’s a way to find the balance Tech Mahindra 0.37
`1 lakh. However, there is no limit (mentioned later in this story).
IndusInd Bank 0.36
to the maximum gain from Remember that power law holds
investing in a good company. It can true for most investors. A few Infosys 0.36
continue to compound as long as it companies are responsible for most M&M 0.35
stays good. of the returns generated by a
SBI 0.34
No one deliberately picks poor portfolio. The strong companies
Power Grid
companies for their portfolio. But become stronger, and the weak Corp.
0.34
investors make mistakes. However, become weaker. Bharti Airtel 0.28
if you have picked even a handful of So, how to be sure you have
Wipro 0.24
winners, your mistakes will not picked a winner. Lynch says,
hurt you very much. “Frankly, I’ve never been able to Sun Pharma 0.21
predict which stocks will go up ITC 0.20
The power law tenfold or which will go up
Tata Motors 0.19
In venture capital investing, there fivefold”.
is a phenomenon called the power There is no way to know which NTPC 0.18
law. It states that just a small companies will outperform. You
Data as of August 14, 2023
number of investments are must do your due diligence, pick

Wealth is not for the impatient
The secret ingredient to the compounding recipe is patience
“The typical big winner in the Lynch portfolio

(I continue to pick my share of losers, too!) generally
takes three to ten years or more to play out.”
O
ne of the most important that you need to remain invested successfully implementing a
mathematical concepts that for that long to benefit from strategy. You must give the
find its application in compounding. company a few years to execute it
investing is compounding. Lynch, properly. There would be
Buffett, and other great investors Is your investment horizon setbacks, but the company might
are all testaments to its power. long enough? overcome them. But, if you don’t
But we often miss out on one Lynch’s record of about 30 per exercise patience, then you won’t
aspect of compounding - it is quite cent per annum return means that be able to benefit from its success.
slow in the beginning. he multiplied the wealth of his
Look at the table ‘The slow investors by nearly 14 times in Do the professionals
nature of compounding.’ It 10 years. So if it took the great have it right?
depicts the worth of `1 lakh Lynch three to 10 years on Not really. It is sad that not just
invested in various combinations average to win big, shouldn’t retail investors are becoming
of interest rates and time investors have an investment more short-term oriented. Even
horizons. Take a look at the 20 horizon of at least three years? most professionals are not
per cent interest rate column. In In fact, Value Research has long-term oriented
10 years, your `1 lakh has become always maintained that anymore.
`6.2 lakh. But in the next five you should invest In a 2018 report
years, it becomes `15.4 lakh! with an investment published by Morgan
Sure enough, the “slow period” horizon of at least Stanley (titled ‘Long-
also diminishes as the interest five years. Anything Term Conviction in a
rate increases. But the point is less is not an Short-Term World’),
investment, and it is the authors found
painfully obvious why. that the average
7KHVORZQDWXUHRIFRPSRXQGLQJ Companies go holding period of
For the starting few years, the pace of growth
through phases - both mutual funds (in the
is quite slow
good and bad. Even if US) has fallen from
Interest rate (%)
you own a high- seven years in 1960 to
Years 10 20 30
quality company, less than one year in
1 1.1 1.2 1.3 there will be periods 2018.
5 1.6 2.5 3.7 when the company might do What good can come from
10 2.6 6.2 13.8 poorly. It could be an industry- picking the right companies if we
20 6.7 38.3 190.0
wide slowdown or a company- can’t hold it through thick and
specific factor. You’ll need to be thin? As Lynch remarks,
30 17.4 237.4 2,620.0
patient and let the storm pass. “Everyone has the brainpower to
Worth of `1 lakh invested at various combinations
Similarly, let’s say your make money in stocks. Not
of interest rates and time horizons
investment in a company rests on everyone has the stomach.”

COVER STORY
Valuations: The Achilles’ heel

Ignoring valuations can turn an otherwise good investment sour
this has a major flaw. There are
“It’s a real tragedy when you buy times when a company deserves
to trade at low valuations because
a stock that’s overpriced, the of low growth prospects or poor
fundamentals. On the other hand,
company is a big success, and still a good company with a high
you don’t make any money.”

growth potential and better
fundamentals will trade at a
relatively higher valuation.
O
ne of the most common investor had bought the This is why seasoned
reasons investors often fail stock at its highest in investors first assess the
despite identifying a 2000 (i.e., at the peak of quality of the business and
promising company is that they the dotcom bubble), the then move on to valuations.
pay too much for it. annualised return to That way, even if it is
Investors often spend days date would only be slightly overpriced, they
trying to understand the business 8.6 per cent. still know they can
but fail to give much thought when The valuation reflects return to it when
it comes to valuation, the factor how much the market expects the there is a correction.
that determines whether they will company to grow. If it is found
make a profit. A business can be that the company’s growth How we do it
excellent in every aspect and yet prospects are far lower than what While it may sound easy,
be a bad investment if it is not the market expects, chances are valuation has always been a
available at an attractive price. that it could be a poor investment. daunting task as it involves a lot
Let’s take the example of of subjectivity. Only
Infosys. Since 2000, in the last 23 Should valuations come first? understanding a company in
years, its revenue and net profit Does it make sense to first screen detail will help investors assess
have jumped 166 and 84 times, for companies available at low what kind of valuation a company
respectively, while maintaining a prices and then deep dive into deserves.
decent return on capital. The them. Some investors take that Lynch uses the famous price
business has been a huge success approach as well. earnings-to-growth (PEG) ratio as
and yet a poor investment. If an While this may seem effective, a valuation metric. We can arrive
at the PEG ratio by dividing the
current P/E ratio by the growth
,QIRV\V¶SHUIRUPDQFH rate of earnings during a period.
Phenomenol growth in profit and yet poor returns Adding the growth factor to the
equation presents a better picture
Revenue (` cr) PAT (` cr) M-cap (` cr) Sensex
than just using the P/E.
FY00 882 286 58,887 5,001
At Value Research, we compare
FY23 1,46,767 24,095 5,90,782 58,992 a company’s current P/E and P/B
with their five-year median. It is
Growth considered attractive if the
(times) company trades at a discount to
166 84 10 12 its median. This is how we know
whether the company has a better
M-cap and Sensex data for March 2000 and 2023
window to enter than before.

The ideal portfolio size
Striking the right balance between diversification and concentration
after you’ve identified your
“Hold no more stocks than you can universe, you must also assess
how many stocks you can handle
remain informed on.” in reality.
For that, Lynch asks you to
look at each stock individually as
N
ow comes the most critical This could work for one stock as a story. According to him, each
and the most commonly well as for a bunch of stocks. What stock has its own thesis and a
asked question. If power is important is that you have to be path it follows going forward.
law applies to investing, how familiar with all your companies. It Buying this stock is only the
many stocks should you have in gives a baseline idea of how many beginning of this story.
your portfolio? How many stocks stocks fall within your purview. The story of a stock goes on
are enough? Broadly speaking, this is your forever until you exit this stock. So,
Hold too many, and you have a investment universe. you must constantly be aware of all
cluttered portfolio. Hold too few, updates and developments in this
and you didn’t diversify your Assess each stock individually company’s journey. Accordingly,
risk well! No one can keep track of all the you will be able to determine
There is no fixed answer to the stocks that they want. Specially whether the path this stock is
dilemma of ‘how many is too when their money’s at stake. So, taking is right for you as an
many’. No wonder this remains a investor.
dilemma. Unfortunately or not, as It is important to note that no
an investor, you alone can answer matter how good an investor you
this question best for yourself. are, you can only track so many
During his tenure as a fund stories that depend on your
manager, Lynch held as many as experience and expertise. So, this
1,400 stocks at the same time. step allows you to further tighten
While he managed to juggle them your portfolio by handpicking
around successfully to produce stocks from a larger universe and
good returns, he does point out that letting go of the rest.
this approach has significant flaws.
He has constantly argued that What works better?
diversification purely for the sake A portfolio focused on just a
of it will bear no fruit for investors. handful of well-researched stocks is
often less risky and easier to track.
A potential solution But you are less likely to land on a
To help you combat this dilemma, multibagger. Conversely,
Lynch advises that you look at your diversifying across numerous
portfolios on a case-by-case basis. stocks increases the likelihood of
You need not restrict yourselves to finding a multibagger. However,
a fixed number in two situations: the risk factor rises as tracking all
z When you have an edge in a of them becomes a mammoth task.
respective area. Hence, investors must take a call
z When you have uncovered an based on their risk appetite and
exciting opportunity that has goals. However, don’t be too
qualified all the basic tests. concentrated or too diversified.

COVER STORY
Timing the market

Attempting to time the market mostly does more harm than good
the market. Examples like these
“It would be wonderful if we could invariably and unfortunately entice
investors to pursue this strategy
avoid the setbacks with timely and make them believe that they
can replicate it in the future.
EXITS BUTNOBODYHASlGUREDOUT However, in reality, there is no
how to predict them.”

possible way to successfully predict
such things in the stock market
over the long term.
I
f you’re even remotely If held to date (August 14, 2023), their Even Jim Simmons, the
interested in the investing returns would be 16.5, 15.4, and 13.1 exceptional hedge fund manager,
philosophy of most seasoned per cent per annum, respectively. was able to achieve success in
investors, most likely, “Buy low If each invested `1 lakh, then A multiple short-term periods only.
and sell high” is your investing would have `3 lakh more than B For the curious, he could be
mantra too. After all, buying low and `11 lakh more than C! While considered an exception since he
and selling high is how investors the example is obvious, and it looks was able to successfully predict
generate returns and avoid all like the time you enter the market the market and replicate this
potential losses. is crucial to your success, in truth, strategy using complex
The only problem with this there’s a fallacy in these examples. mathematical models.
investment strategy? Well, wisdom It is in hindsight alone that one
is always in hindsight! can determine which dates might Rewards of the long road
The strategy looks great on have been the best dates to enter Consider there was a fourth person
paper, yet you must identify the D in the above example, who
best low and high points for a stock. couldn’t identify the low point in
The downside is that persistently 2003 and waited till 2004. Finally,
trying to find the lowest of the lows D could predict it in 2004 and
and highest of the highs often remained invested to date. She
results in missed opportunities for would have achieved a return of
investors. So, while this is a 14.9 per cent per annum.
tempting strategy, it often becomes She put such efforts into
a blindspot for many investors. predicting the lowest point during
the year. Yet, her returns are still
The wisdom in lower than the one who just
hindsight invested at the beginning of 2003
Assume there are (B). Simply being in the market
three investors: A, for one more year made a
B and C. Each of difference of around `5 lakh in B’s
them invested in final corpus!
the year 2003 (i.e., a Hence, one should focus on
20-year horizon). A valuations and fundamentals rather
invested in Sensex at than the lowest days and the
its lowest level. B dates to enter the market.
invested on the first trading Worrying about daily
day of the year, and C invested fluctuations and trying to time
at the highest point of the year. the market is futile.

The art of strategic exit
The factors you should (and should not) consider when exiting a stock
Whenever you come across any
“There is always something to such number or metric, the first
question that must be asked is
worry about. Avoid weekend whether your companies will be
affected. This answer will tell you
thinking and ignoring the latest dire whether you need to worry. These
predictions of the newscasters.

numbers may affect market
sentiment and hence daily price
Sell a stock because the company’s movements; you do not need to

fret about them if you are a long-
fundamentals deteriorate, not term investor.
because the sky is falling.” What really matters

In reality, there are three major
reasons why you should think
Meaningless macros
D
o you look at the winners of about exiting an investment:
the last decade or two with And short-term movements are not z You have a need for capital.
amazement? Well, these the only thing that will distract you. z When you’ve found a better
numbers are no happenstance. There will be macroeconomic opportunity with the ability to yield
Each of them traversed a long numbers like inflation, interest better returns.
treacherous road to reach the rates, unemployment rates, trade z When the company’s
present summit. balances and more. In many fundamentals have deteriorated
For instance, look at Century instances, these numbers may not and the chances of bouncing back
Plyboards. In the last 10 years, the even affect your investments much. are slim.
stock has yielded 38 per cent per Yet, due to the incessant These are the major factors that
annum! It multiplied your wealth information overload, you are often most investors should focus on
nearly 25 times. But take a closer pushed towards acting based on when it comes to the question of
look at the stock’s journey, and impulses, all under the when to sell. Simply avoiding hasty
you discover an entirely different misconception that you are taking decisions can serve you with
picture. Since 2013, the company into account these big numbers. significantly better returns.
has reported negative returns in
five calendar years, with a more
than 50 per cent fall in 2013. 7XPXOWRXVMRXUQH\RI&HQWXU\3O\ERDUGV
This is common for almost all Despite the big drawdowns in 2013 and 2018, the company has rewarded its shareholders
multibaggers. Even the best of handsomely
the best experience headwinds 800 Yearly return (%) Share price (`)
from time to time which will 600
hamper their performance in the
400
short term.
But you need to focus on the 200
core story. If the core story 0
remains intact and the company
-200
has the ability to overcome these
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
hurdles, your investment is Data as of August 14, 2023
doing fine.

COVER STORY
Stocks to avoid
The common red flags all bad investments share
“If I could avoid a single stock, it would be the hottest

stock in the hottest industry, the one that gets the most
favourable publicity, the one that every investor hears
about in the car pool or on the commuter train—and
succumbing to the social pressure, often buys.”
W
e all know selecting the Look at the case of August 14, 2023).
right company to invest the companies in Hundreds of other
in isn’t easy. We’ve just the Adani Group. such examples
seen how much due diligence From March 2020 come up during
should go into picking a stock. It to the end of each bull run to
must satisfy different criteria, 2022, these which too many
should have good prospects, and stocks together investors fall
should be available at a achieved an victim.
reasonable price. absolute return Remember, just
But one thing is easy – avoiding of more than 1,000 tuning out this
some kinds of stocks. This is one per cent! If you were noise can help you
step that can often save you from big impressed by their avoid potential wealth
losses. Just apply some basic filters, performance, and had eroders.
and you can significantly reduce the invested in these companies at
number of companies that you the beginning of the year (2023), Not the up and coming
should potentially invest in. your portfolio would be down Another category you should
59 per cent year to date (as of avoid is the stocks dubbed as the
Mute the short-term noise next big thing. Either these
The market rewards consistent ,I\RXKDGERXJKW$GDQLVWRFNV stocks fail due to inadequate
performers in the long run. But in ODWHLQWKHEXOOUXQ« fundamentals, or they do so
the short term, it is anyone’s guess. Returns (%) because of the huge burden of
In fact, the markets are rather expectations they carry. These
Company Mar '20 to Dec '22 Jan-Aug '23
notorious for often driving up the stocks are often priced in with so
Adani Energy 127.6 -67.9
prices of duds in the short term. much expectation that no
To makes matters worse, Adani Enterprises 176.1 -36.4 amount of growth can justify
investing FOMO or the fear of Adani Green 143.9 -49.8 their valuations.
missing out can panic you into Adani Ports 36.3 -5.7 The dot-com boom and crash of
investing in them! Here, Adani Power 92.5 -6.3 2000 is an apt example of this
conventional wisdom or common scenario. Many companies that
Adani Total Gas 223.3 -82.1
sense, as we call it comes to our were dubbed to be the next big
Adani Wilmar 132.9* -38.8
aid. Do not be tempted to enter thing no longer exist. So, you
such stocks when they have run *Returns since listing. Returns between March 2020 must look beyond the hype if you
to December 2022 are annualised.
up too much and end up want to find value or at least
Data as of Aug 14, 2023
regretting later. avoid losses.

INTERVIEW
“Buying is dependent on
pricing but not on timing”
Insights of a fund manager at PPFAS Mutual Fund
RAUNAK ONKAR
Fund Manager &
Research Head,
PPFAS Mutual Fund
Where do you get your investment ideas from?
D
o successful investments share some common traits?
Questions like these have kept investors awake What method has worked the best for you?
countless nights. We don’t profess to have There are many sources for investment ideas.
definitively cracked this age-old puzzle. However, seeking Firstly, it is quantitative, driven by many screens
insights from a seasoned expert with over 11 years of that filter out companies based on long-term
experience in the equity markets seems like a good start. trends of return on capital, growth, valuation,
Hence, we turned to Raunak Onkar, Fund Manager and etc. We also screen ideas based on some known
Research Head of PPFAS Mutual Fund, to tap into his factors like quality, value, etc. Other sources are
wisdom. In our conversation, we delved into his investment reading about different sectors/companies and
philosophy, the balance between diversification and finding linkages to various vendors/suppliers/
concentration, and crucially, the key attributes he believes customers of those companies. Even sell-side
successful investments share. We also asked him about research sometimes becomes a good starting
common investing mistakes most investors make. point to evaluate some ideas.

No single source is more important than the other. Conviction only changes when we assess that the
It’s the consistency of evaluating different companies/ business cannot come back to its growth trajectory or
sectors that keeps throwing up interesting ideas from profitability trajectory or that the business has
time to time. deviated materially from the assumptions we had
made about it before investing.
According to you, how many stocks are too many?
Where do you stand on the concentrated versus Do you rely more on a company’s past (business)
diversification divide? performance or what opportunities lie ahead?
I think the sweet spot is an average of 30 stocks. This Moreover, how do you value a company?
provides the benefit of both concentration and Past business performance is an important milestone
diversification without tilting too much in either to track and understand a business and can be a good
direction. I prefer reasonable diversification instead guide for future business performance. There’s no
of extreme concentration. guarantee that the performance repeats, but given the
probable range of outcomes of that business, it can be
In your experience, what are the common traits in a a good source of understanding for how the future
company (qualitative and quantitative) that make might turn out.
them a successful stock pick?
Quantitative traits are well known. The company
should have a long operating history of positive cash Conviction only changes when we
flow operations where it should have been earning assess that the business cannot
above-average returns on capital over many cycles. come back to its growth
There should be growth in the sector it operates in.
trajectory or profitability
The business should also be stable and not prone to
extreme cyclical fluctuations.
trajectory or that the business
Qualitative factors are related to the management/ has deviated materially from the
promoters and their history of treating minority assumptions we had made
shareholders. Another aspect of quality is also the about it before investing.
history of capital allocation by the management.
The competence of the management is also evident
through the long history of operations. The Valuing a business has to happen across multiple
business’s competitive advantages, either from criteria. The most preferred method is a Discounted
operational excellence or efficiency or even unique Free Cash Flow analysis, but it has limitations. It
product/services or long-term strategy, are good really forces you to predict the range of future
qualitative indicators. outcomes. Since predictions can be misleading, a
simpler way to value a business is against its own
How do you assess whether a company faces past valuation across many years, preferably across
temporary issues or a structural weakening? And many cycles. We can value earnings, book value and
then what gives you the conviction to invest in it? operating and free cash flow multiples this way, along
In this situation, it’s better to focus on data than the with changing profitability metrics. These are also
narrative. In many instances, the data might clearly relative valuation metrics which can be compared
show a trend. Next, we try to figure out if the trend is with other peers in the industry and across the world,
temporary because of cyclical factors or seems long- which also gives a good benchmark of how far the
term because something in the industry has changed. valuation is from the mean.
Usually, structural issues tend to provide a lot of data An important criterion is to not overpay for any
points and take place over a longer time frame, which investment opportunity. We also compare the cash
anyway is being studied as we evaluate a business. flow and earnings yield of a growing business with
Cyclical factors are more rapid and can ruin a few that of government securities. This also helps us stay
quarters of cash flow or profits, but that’s to be grounded while wanting to pay more for future
expected and factored in when we study any business. earnings/cash flows of any business.

INTERVIEW
What is your strategy when the markets are at an then choose to keep cash in the portfolio in the form of
all-time high? Is your buying dependent on timing overnight money market investments/cash to futures
or pricing? arbitrage opportunities/short maturity certificate of
Buying is dependent on pricing but not on timing. The deposit of select corporates with good credit ratings.
market can be at an all-time high, but there might be These are clearly mentioned in our factsheets as well.
several businesses that might still be available at
reasonable prices. We don’t mind investing in such All investors make mistakes. But the good ones learn
businesses during these times. As I mentioned before, from their mistakes. Can you share one such learning?
we don’t wish to overpay for opportunities. That A very good investment lesson, learnt very early on, is
means we will restrict ourselves from investing if the still one of the most important checklist items for us.
businesses we like are overvalued in our opinion. We If the business operates in a sector where the base rate
of business success is very low, then it’s best to ignore
that sector entirely.
We may miss some opportunities, but that’s a risk
If the business operates in a worth taking if the companies in that sector have not
sector where the base rate of demonstrated consistent operating performance over
business success is very low, many cycles. There’s a low probability that the one or
then it’s best to ignore that two businesses we like in that sector will operate in a
sector entirely different manner than their peers. It’s good to avoid
such investment ideas.
6XEVFULEH1RZ BUY A NEW

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August 2023 Wealth Insight 56

STRAIGHT TALK
Data protection and

cyber security
The increasing need for cyber security is opening up investment opportunities
purpose of the Act addresses the Taking a long-term view, the average
lawful use of personal data, it also cost has increased 15.3 per cent from
brings into focus the need for $3.86 million in the 2020 report”.
corporations, and indeed any data Increased usage of mobile and
repository, to protect itself against online transactions and usage of
cyber crimes. cloud services are only going to
IBM regularly publishes a add to the pace of attacks and the
report titled ‘Cost of a Data cost of mitigation.
Breach Report’. The 2023 edition
of the report studied data Market size
breaches at 553 organisations Mckinsey estimates that
By Anand Tandon spread across 16 countries in the organisations globally spent
12 months ending March 2023. The $150 billion in 2021 on cybersecurity.
report states, “The average cost of As against that, it estimates that
O
n August 11, 2023, the a data breach reached an all-time the total addressable market may
Gazette of India published high of $4.45 million in 2023. This exceed $2 trillion. While the
‘The Digital Personal Data represents a 2.3 per cent increase market isn’t expected to reach this
Protection Act, 2023’. It described from the 2022 cost of $4.35 million. size anytime soon, given the
the Act as “an Act to provide for
the processing of digital personal
data in a manner that recognises 7RWDODGGUHVVDEOHPDUNHW
both the right of individuals to Total addressable
Segment market ($ bn) Current penetration (%)
protect their personal data and
the need to process such personal Data protection 50-100 30-35
data for lawful purposes and for Governance, risk, and compliance 50-100 30-35
matters connected therewith or Email security and awareness 50-100 10-15
incidental thereto.” While the
Cloud security 50-100 1-5
Network security 50-100 15-20
7RWDOFRVWRIDGDWDEUHDFK Identity and access management 50-100 20-25
(in $ mn) 4.45 Security consulting 100-200 15-20

Web security 100-200 5-10
4.24
4.35 IoT/OT 100-200 1-5
End point security 100-200 5-10
3.86
3.86 Application security 100-200 1-5
3.92
3.62
Security and operations management 400-500 1-5
MSSP/outsourcing 400-500 5-10
2017 2019 2021 2023
Source: IBM report Source: McKinsey report

STRAIGHT TALK
current growth rate of about A survey of CIOs by Morgan Stanley

12.4 per cent annually, it does revealed that across industries in a 'DWDEUHDFKFRVWVDFURVV
mean that the opportunity is downturn, software projects that VHJPHQWV
staggeringly large. This means are least likely to face budgetary Lost business cost Detection and escalation
there will be interesting Post-breach response Notification
cuts are those related to security
investment opportunities $5 mn
software and digital transformation
going forward.
4
Importantly, a survey of CIOs
by Morgan Stanley revealed that breach is unevenly spread across 3
across industries in a downturn, industries. The more regulated 2
software projects that are least the industry, the more the cost to
1
likely to face budgetary cuts are the business. Healthcare, financial
those related to security software services and pharmaceuticals lead 0
and digital transformation. This is the pack. Healthcare faces almost 2018 2023
Source: IBM report
also an area where the spending is twice the costs of the next sector.
likely to be faster than other The nature of the cost, too, has
software categories. This is not changed over time. As attacks technology-related costs remain
only a growth sector but resilient become more sophisticated, the high and continue to increase.
in a possible downturn. cost of detection and escalation
has increased. Businesses have A shortage of expertise
Cost of a data breach become more capable of managing Given the constantly evolving
The cost of remediation of a data the costs of lost business, but nature of cyber security threats,
there is a severe shortage of
manpower that can address the
7RWDODGGUHVVDEOHPDUNHW
issues. This has led to a move to
0 2 4 6 8 10 12 the cloud in the hope that
Healthcare companies offering cloud services
Financial will be able to better manage
emerging threats. As can be
Pharmaceuticals
expected, those industries that
Energy face the highest regulations are
Industrial adopting the cloud faster than
those that are not. This has also
Technology
led to most of the attacks being
Professional
services focused on the cloud - 82 per cent
Transportation of the breaches occurred in data
stored in cloud environments or
Communications
hybrid environments. This has led
Consumer companies offering cloud services
Education to focus more on offering solutions
In $ mn for cyber security. Both Microsoft
Research 2022
and Google are increasing their
Entertainment 2023
presence in the area.
Media
Hospitality Nature of attacks

The most common threats that
Retail
businesses and individuals face
Public sector include ransomware, phishing
attacks, and social engineering
Source: McKinsey report
attacks. Ransomware is a type of

malware that encrypts a victim’s Like in any fast-growing space Typical use cases of AI for
data and demands a ransom facing rapid technological change, cybersecurity include predictive
payment in order to decrypt it. it is difficult to identify winners analytics to forecast attack
Phishing attacks are emails or early in the game… With the US possibilities, behavioural analysis
text messages that appear to be of user behaviour to identify
being the leader (and the biggest
from a legitimate source, such as suspicious activity and automated
target) in the space, most tech
a bank or credit card company. incident response in the event of a
companies offering solutions are
These emails or text messages threat to enable rapid isolation of
based there.
often contain a link that, when the infection and prevent the
clicked, will take the victim to a spread of malware. As attack
fake website that looks like the in funding in the first quarter of methods change, so does the
real website. Once victims enter 2023. This represented a drop of response required. At the RSA
their personal information on the 58 per cent from the $6.5 billion in Conference of 2023, for example,
fake website, the attacker can the same quarter in the previous the CEO of Mandiant, now part of
steal it. Social engineering attacks year. This doesn’t, however, Google Cloud, highlighted multi-
are a type of attack that relies on reflect investor optimism. factor authentication as one of the
human psychology to trick the Investors are more heavily major routes to preventing attacks
victim into giving up their weighting capital efficiency like ransomware.
personal information or clicking metrics, and coupled with a fall in
on a malicious link. secondary market valuations, Investment opportunity
Attacks are not restricted to have shifted to early-stage Like in any fast-growing space
only stealing personal investment opportunities. facing rapid technological change,
information. Major cyberattacks The potential use of AI and it is difficult to identify winners
today are increasingly being machine learning is generating early in the game. A basket
conducted by geopolitical excitement. By leveraging approach works best. With the US
adversaries like China and often algorithms that can analyse being the leader (and the biggest
focus on shutting down critical patterns, detect anomalies and target) in the space, most tech
supply chains and infrastructure, predict potential threats, machine- companies offering solutions are
such as the power grid. Mumbai learning-based cybersecurity based there. Besides Microsoft
faced an attack like that from offers a proactive approach. and Google, others in the space
Chinese hackers not too far back. Simply knowing the patterns include Cisco, Fortinet,
associated with how threats work Crowdstrike, IBM, Palo Alto
Start-up funding and use of AI is enough to find antidotes for Network, SentinelOne, and
Security startups saw $2.7 billion many types of attacks. FireEye to name a few. ETFs, too,
offer a way to invest in this space.
CIBR, HACK, IHAK, and BUG
0LJUDWLRQWRFORXG
VGT are some that offer exposure
Share of total workloads by disposition
to cybersecurity companies.
Public cloud Private cloud Corporate data center Co-located/managed
The Indian market, too, has a
/HVVUHJXODWHG 0RUHUHJXODWHG few players but offers a restricted
100 % 100 % portfolio of services. While most
80 18 16 14 80 19 18 16 specialist companies will focus on
23 25 developing products, a possible
60 34 29 60 35 service component may develop in
47
40 26 40 21 the deployment and configuration
19 23
20
20 20 16 of these tools. Recovery will
29 32 36 28 37
18 almost certainly have a service
0 0
component. In all this, Indian
3Y ago Present 3Y from now 3Y ago Present 3Y from now
Source: McKinsey report
services companies will
undoubtedly find their space.

STOCK ADVISOR
How to do magic
Getting great equity returns sustainably only looks like magic, it actually isn’t
ing or change course. investors of some kind – who pos-

I believe one of the fundamental sess some magic that the small guy
reasons why so many people have does not have access to. This is par-
trouble investing in the stock mar- tially correct. I mean there is a
kets is that they have severely magic in investing well, but the
flawed mental models of what deter- small guy can also master it and
mines a stock price. become a magician.
The most common model is: Personally, I was lucky to under-
‘There are people who know when a stand this when I was very young,
stock’s price is about to rise. If one simply because I stumbled on Peter
of them tells me, then I can make Lynch’s great book ‘One Up on Wall
money.’ This is the ‘tip’ model of Street’ (see my EDIT on page 7). No
By Dhirendra Kumar
the stock markets. It isn’t so much a individual investor should ignore
mental model as the lack of one. A reading Peter Lynch. Here’s a quote
G
iven the performance of the little broader than the ‘tip’ model is from an article he wrote for Worth
Indian stock markets over the ‘operator’ model. Under the magazine in 1997:
the last few decades, no one operator model, people believe that
should have lost any money. there are people (“operators”) who
It’s true. The markets are up manipulate stocks and what one
1.7 times over the last five years, needs is to figure out what the oper- A Handful of Winners
3.6 times over 10 years, 4.6 times ators are doing and then somehow, If you put together a portfolio of five
over 15 years, 16 times over 20 years manage to ride the stock while the to ten of these high achievers,
and 22 times over 25 years. operator is pushing it. This model there’s a decent chance one of them
On the face of it, one would think might be realistic for fringe stocks will turn out to be a 10-, a 20-, or
that with such a high-performing but it’s actually useful only for the even a 50-bagger, where you can
market, all that an investor needs to operators themselves. The individu- make 10, 20, or 50 times your invest-
do is just be in the market and stick als who believe in it end up being ment. With your stake divided
to some basic rules like avoiding the ‘greater fools’ that the clever among a handful of issues, all it
obvious duds and diversifying. operators need. takes is a couple of gains of this
That’s all that is needed to generate magnitude in a lifetime to produce
wealth. Even though this is funda- Fear of the big guys superior returns.
mentally true, most investors stum- The psychological factor that under- One of the oldest sayings on Wall
ble somewhere or the other. Many, lies both these models is the fear of Street is “Let your winners run,
perhaps most, get diverted to specu- the big guy. Investors believe that and cut your losers.” It’s easy to
lation and short-term trading under there are others – professional make a mistake and do the opposite,
the influence of their brokers or pulling out the flowers and water-
now, by the general short-termist
I believe one of the fundamental ing the weeds. … If you’re lucky
atmosphere on markets-related reasons why so many people have enough to have one golden egg in
social media. Others don’t pay trouble investing in the stock your portfolio, it may not matter if
attention to basic research and markets is that they have severely you have a couple of rotten ones in
diversification. At some point pret- flawed mental models of what there with it. Let’s say you have a
ty soon, they make big losses and determines a stock price portfolio of six stocks. Two of them
then either withdraw from invest- are average, two of them are below

Illustration: ANAND
average, and one is a real loser. But Research Stock Advisor does for from our recommendations. Use
you also have one stellar performer. you. It gives you not just a list of this set to start building your port-
Your Coca-Cola, your Gillette. A stocks to buy but their investment folio right away!
stock that reminds you why you thesis. More than that, our z The complete investment thesis
invested in the first place. In other researchers and analysts keep for all recommended stocks so
words, you don’t have to be right all re-examining the thesis and keep it that you understand why you are
the time to do well in stocks. updated and fresh, so to speak. investing
Members get not just the ‘what’, z New recommendations as soon
but the ‘why.’ As Peter Lynch says as they are released
in everything that he writes, this is z Continuous updates and analysis
How to do magic a long game. You need all the help on all recommended stocks straight
Summing up, this leads us to a that you can get. That’s the role of from our dedicated analyst team
few steps: identify likely stocks Value Research Stock Advisor. We z Tools and data to research and
that will do sustainably well, don’t pretend to take all the deci- analyse any other stock
research them, buy them and track sions for you – we are your To start immediately, head over
them. The question is, how to do research assistant team but our to valueresearchstocks.com, read
all this without putting in the kind goal is to make you the investor. the details and become a member.
of time and effort that a profession- Let me just recap what you get You can take the one-year mem-
al can. I’m sure you know the when you become a member: bership or get a 33 per cent dis-
answer to that. z Access to all our stock picks count for three years. Either way,
This is exactly what Value z Best Buy Stocks: Selected stocks it’s a great deal.
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at www.valueresearchstocks.com or scan the QR code.

MAIN STREET
The democratisation of
opportunity in India’s boardrooms
How leadership in India’s corporate landscape has witnessed a paradigm shift
ing the constituents of our portfoli- India, meanwhile, has made it

os – symbolise this change of guard. much, much more competitive to
crack the UPSC examinations.
Rapid economic growth changes lots Track the lists of toppers and
of things rank-holders published by IAS
India’s economy grew at an aver- academies when you open our full
age of 5.6 per cent per annum front pages now,
through the 1980s, 5.8 per cent per and check if there are any from
annum through the 1990s and it these old institutions. It is just too
has grown at an average of 6.6 per hard to compete, and even in the
cent per annum in this century. interview process, there is no pre-
By Saurabh Mukherjea Rapid economic growth has creat- mium on pedigree.”
ed both, a pressing need for talent, The fading away of an old, estab-
and massive opportunities. This lished elite – the inheritors of the
F
or the first time in India’s his- has resulted in the democratisa- British Raj so to speak – has taken
tory, a majority of the promot- tion of opportunities in modern place over the past four decades. In
ers and executive directors of India as, Shekhar Gupta, its place has emerged a new elite
Nifty50 companies are NEITHER explained in a recent article: which hails from more modest
foreign educated NOR educated at “As long as the economy was
the elite IITs & IIMs. Instead, the small and growing slowly, the few 1LIW\%RDUGFRPSRVLWLRQ
majority of the people running privileged institutions sufficed to
z Not a graduate
Nifty50 companies now have ‘nor- produce the talent India needed,
z Indian Non-IIT, Non-IIM graduate
mal’ Indian degrees. Symptomatic from corporate boardrooms to the z IIT/IIM graduate
of this transformation is HDFC civil services and the judiciary. z Foreign university graduate
Bank, India’s second-largest listed Now, a rapidly growing economy In %
company by market cap. All the needed many more talented people
Executive Directors on the Board of and a much larger catchment area. 30 31
the bank are graduates of Mumbai St. Stephen’s/Doon/Mayo/St. 40
University and the rise of such Columba’s/St. Xavier’s/La
19 15
executives is now the norm in Martinière… are still great institu-
17
India. The old conglomerates run tions — they may be India’s finest 54
by elite families – whose core even now — but they are just too 40 50
strengths were Anglicised ways and few to meet India’s need for talent.
political connectivity – are steadily That’s why a Tata Administrative
fading away. Entrepreneurial drive, Services equivalent today needs to
2 1 1
the aptitude to understand and use go way beyond these institutions, FY03 FY13 FY23
tech and the ability to harness family networks and checking the Source: Marcellus Investment Managers, company annual
diverse talent pools are now crucial names of the candidates’ fathers. reports, Bloomberg; instances where the educational
qualification data was not available were excluded from
for success in modern India. India’s The desperate, slog 24×7 push of
the analysis
most successful companies – includ- middle, lower middle and poor

Era 2: 1980-2003
,QGLD¶VULVHRYHUGLIIHUHQWHUDV Independent India’s first brush
with capitalism
Avg. real GDP USD-INR exchange
Period Sensex return (% pa) growth (% pa) rate growth (% pa) “…India was, in the simplest way,
on the move, that all over the vast
Era 1: 1947-1980 NA 3.5^ -0.4*
country men and women had
Era 2: 1980-2003 17.3 5.6 7.9
moved out of the cramped ways and
Era 3: 2003-2013 13.7 8.0 3.1 expectations of their parents and
Era 4: 2013-2023 12.4 5.6 3.3 grandparents and were expecting
more.” – VS Naipaul in ‘India: A
Source: Marcellus Investment Managers, Bloomberg; âverage calculated from 1952;
*calculated from 1973 to 1980 Million Mutinies Now’ (1989)
The first chinks of light came
in the early 1980s as the then
economic backgrounds, speaks ments – heavily influenced by the Prime Minister (PM), Indira
English with a vernacular accent, perceived success of Communism Gandhi, started liberalising the
is at ease with using technology in the USSR - chose to cultivate Indian economy. From 1980
and is confident of its ability to and capitalise on (e.g., State Bank onwards, India’s GDP growth per
manage diverse pools of talent. of India, Steel Authority of India, capita doubled from the misera-
How did this transition take Coal India, Bharat Heavy ble 1.7 per cent rate the country
place? India’s history suggests Electricals). Many of these firms had clocked between 1947-80.
that there were four distinct eras were actually private sector enti- What was responsible for this
in this remarkable journey. ties which the Government of upshift in GDP growth? In a cele-
India nationalised by fiat, e.g., brated paper published in 2004,
Era 1: 1947-1980 State Bank of India and Coal India. Dani Rodrik and Arvind
Wars, famines & socialism z Family-run conglomerates Subramanian say:
“There were no longer any rules, which had already attained scale, “…the trigger for India’s eco-
and India - so often invaded, con- wealth, and success in the pre-In- nomic growth was an attitudinal
quered, plundered, with a quarter dependence era, e.g., Tatas, shift on the part of the national gov-
of its population always in the Birlas, M&M, Godrej, and TVS. ernment in 1980 in favour of private
serfdom of untouchability, people For pretty much everybody else, business. The rhetoric of the reign-
without a country, only with mas- the first three decades after ing Congress Party until that time
ters - was discovering again that Independence was a really difficult had been all about socialism and
it was cruel and horribly violent.” time. The discontent within India pro-poor policies. When Indira
– VS Naipaul in ‘India: A found its expression through the Gandhi returned to power in 1980,
Wounded Civilization’ (1977) medium of cinema with the 1970s she re-aligned herself politically
In a dirt-poor nation (repeated- seeing the rise of the ‘Angry Young with the organized private sector
ly ravaged by famine, food short- Man’. Amitabh Bachchan became and dropped her previous rhetoric.
ages and wars with neighbours), a superstar by capturing the face of The national government’s attitude
capital scarcity was endemic in how Indians ought to deal with towards business went from being
the decades immediately following this disillusionment, with Zanjeer outright hostile to supportive.
Independence. Access to capital in 1973 and Deewar in 1975 being Indira’s switch was further rein-
and access to the new political blockbusters. forced, in a more explicit manner,
elite (who controlled the ‘License by Rajiv Gandhi following his rise
Raj’) in the state capitals and in This doubling in economic growth, to power in 1984. This, in our view,
New Delhi was essential for suc- first in the 1980s and then in the was the key change that unleashed
cess post-1947. Only two constitu- 1990s unleashed the first wave of the animal spirits of the Indian pri-
encies were able to pull this off: entrepreneurial activity in vate sector in the early 1980s…”
z Giant Public Sector Units that independent India This doubling in economic
the successive socialist govern- growth, first in the 1980s and

MAIN STREET
then in the 1990s [on the back of

an epic second wave of economic
reforms catalysed by the then
PM Narasimha Rao and Finance
Minister (FM) Manmohan
Singh], unleashed the first wave
of entrepreneurial activity in
independent India.
Two different types of entrepre-
neurs emerged over this remarka-
ble 20-year period:
z Larger-than-life entrepreneurs
like Karsanbhai Patel (Nirma),
Dhirubhai Ambani (Reliance), the
Ruias (Essar), the Dhoots
(Videocon), the Jindals (Jindal
Steel) and the Hindujas (Ashok
Illustration: ANAND
Leyland, IndusInd Bank, Gulf Oil)
built pan-India scale and muscle
over this 20-year period. They were Yusuf Hamied (Cipla), Anji Reddy estate, construction, power genera-
financed primarily by public sector (Dr Reddy’s), and Desh Bandhu tion and distribution, metals &
banks over this period with domes- Gupta (Lupin). mining, and telecom.
tic capital markets playing second Whilst the old, established elites z High-quality private sector
fiddle. Private sector banks did faced a challenge to establish their enterprises run by clean, compe-
NOT have meaningful financing grip on the keys to the kingdom of tent and driven management
capacity at this stage of India’s eco- wealth, their way of life (i.e., speak- teams. Amongst the most success-
nomic evolution. Access to polity ing BBC English, cultivating the ful listed private sector firms from
remained critical for success as ways of the West) was what every- this era (as measured by market
licenses, permissions, and permits one else aspired to. cap change in absolute terms from
aplenty were still required. Poverty, relative to the West, 2003-13) were HDFC Bank, HDFC,
However, the new-gen entrepre- was still triggering an inferiority Infosys, and ITC.
neurs were able to muscle into the complex in the Indian mind. For Financed by foreign institution-
corridors of power that mattered that to change, we needed the onset al investors, private sector banks,
and get relevant access. of the 21st century. and by copious amounts of private
z Technocratic entrepreneurs edu- equity (PE), the aspirations of the
cated either in India’s elite insti- Era 3: 2003-2013 Indian entrepreneur now changed.
tutes of higher education (the IITs, The rise of, both, crony capitalists Owning private jets, IPL cricket
IIMs, BITS, IISc, NCL) or educated and technocrats teams, mansions in London, sub-
abroad emerged and scaled up large Once we entered the 21st centu- sidiary companies in the West and
businesses, e.g., Deepak Parekh ry’s first bull market from 2003-08, entire ministries in the govern-
(HDFC), Narayana Murthy Indian capitalism’s wild side was ment became important status
(Infosys), Ratan Tata (Tata group), unleashed. Now the public sector symbols for the men who now mat-
enterprises and the old school tered in India.
The climax of this wild phase of conglomerates started giving way The climax of this wild phase of
capitalism was 2010-2011, years in rapidly to: capitalism was 2010-2011, years in
which the then Comptroller & z The crony capitalistic compa- which the then Comptroller &
Auditor General of India laid bare nies mushroomed in sectors where Auditor General of India (CAG),
the corruption plaguing the country the polity-controlled access to Vinod Rai, laid bare the corruption
in a series of hard-hitting reports licenses, permissions and con- plaguing the country in a series of
tracts were required, e.g., real hard-hitting reports. The CAG’s

reports showed how the nexus over the past decade: Reserve is doing with its monetary
between politicians and crony capi- z India has got networked. The policy). Alongside foreign capital,
talists was being used to purloin national highway network saw a the rapid financialisation of savings
public assets for private profit. near doubling from about 79,000 km [e.g., the number of brokerage
Whilst the outsized corruption of in 2012 to about 1,40,000 km in 2022, (demat) accounts has grown 8 times
this era was a big negative, the dis- domestic air travel passengers over the past decade] drove a struc-
crediting of the established way of more than trebled from about 54 tural downtrend in the cost of both
doing things, e.g., practising cham- million in 2009 to around 170 mil- debt and equity capital.
pagne socialism in the elite clubs of lion in 2019 (pre-pandemic), house-
Bombay and Delhi whilst speaking holds with broadband connections Investment implications
Anglicised English was the lasting grew around 7 times from 20 mil- As new entrepreneurs from small-
legacy of this era. Indians’ attitude lion in 2013 to 137 million in 2023, er towns – particularly those with a
towards the government, towards the number of bank accounts grew strong grip on how modern tech
business, and to its politicians around 3 times from 100 crore in works – are pushing the entrenched
changed decisively in this era. A 2015 to 300 crore in 2023. elites of the big cities out of the
certain way of living, behaving and z The India stack was built. It way, we are seeing rapid changes in
thinking lost credibility in the cor- began with Aadhaar (Unique India’s boardrooms. No longer are
ridors of power in India. Identification Authority of India) people with crisp English, member-
in 2009, giving a digital identity to ship in the right clubs and degrees
Era 4: 2013-2023 all the country’s citizens. This was from prestigious universities
A new breed of entrepreneur followed by Jan Dhan bank assured a place at the apex of
takes centre stage accounts introduced in 2014 which India’s economic pyramid. The new
“Networking inherently implies successfully gave every Indian fam- elite are those with a strong grip on
equality. Everyone, rich and poor, ily a bank account. This combined vernacular languages and a practi-
is plugged into the same electric, with the proliferation of mobile cal understanding of how small-
water, sewer, gas and telephone phones in India and the launch of town India functions.
network. The poor may only be Jio’s ultra-cheap mobile broadband A combination of these factors
able to hook up years after the services in 2017 networked India (networking, India stack, drop in
rich, but eventually they receive digitally. This, in turn, paved the cost of capital) has unleashed long
the same access.” – Robert Gordon way for the creation of Unified pent-up entrepreneurial energy not
in ‘The Rise & Fall of Economic Payments Interface (UPI), where just in the tech and start-up space
Growth’ (2016). anyone with a bank account, a (resulting in the creation of 68
Leaving aside the NDA’s victo- smartphone and an internet con- Unicorns) which were primarily
ries in the General Elections of nection can transfer any amount financed by foreign PE & VC capi-
2014 and 2019, which led to the of money to anyone in the coun- tal, but also in conventional busi-
broader policy changes that the try instantly! Today, more than 9 nesses (i.e., businesses whose found-
country witnessed, three other sets billion UPI transactions are tak- ers were either part of the old elite
of factors have kicked-into play ing place each month and over or the technocrats who got educated
No longer are people with crisp half of India’s GDP is being trans- at premier institutions in the coun-
acted via UPI. try, and were primarily financed by
English, membership in the right
z The cost of capital dropped sharp- the Indian stock market).
clubs and degrees from
ly measured not just by the 10
prestigious universities assured a Amongst the companies mentioned in
year-Government of India bond this article, HDFC Bank and Infosys are
place at the apex of India’s yield (which has dropped from part of Marcellus’ portfolios.
economic pyramid. The new elite around 9 per cent in August 2013 to
are those with a strong grip on about 7 per cent now), but also by Saurabh Mukherjea is part of the
vernacular languages and a the large pools of PE and VC money Investments team at Marcellus
practical understanding of how which now flow into India each Investment Managers (www.marcellus.
in). He is the author of ‘Diamonds in the
small-town India functions. year (anywhere between $20-70 bil- Dust: Consistent Compounding for
lion depending on what the Federal Extraordinary Wealth Creation’.

EVERYDAY ECONOMICS
Licence Raj Redux?

The import policy changes might take us back to the days of License Raj
obtain the permits after they had tions, resulting in juicy opportuni-
warned of imminent shortages due ties for extracting returns; you can-
to the demand-supply mismatches. not conjure these returns when poli-
Importers had said that the govern- cies and rules are stable and predict-
ment’s decision to suddenly change able. Take the example of the Goods
the import conditions was bound to & Services Tax (GST) rules and noti-
cause a consequence. This tells us fications. Since the new tax regime
that the government had proceeded was rolled out in 2017, the GST law
to announce the new licence has been amended more than 900
requirement without thinking times in five years. The Central
about the fallout that it would have Board of Indirect Taxes and Customs
By Puja Mehra on consumers in the interim and (CBIC) has already published more
also perhaps in the long run; the than 900 notifications and over 1,100
consequences of the policy changes circulars and orders on the 20 per
A
ll of a sudden, India has a are not rocket science, and anyone cent tax collected at source (TCS) on
new import policy regime. with a graduate-level degree in international payments made
Importing laptops, comput- basic economics would have been through credit cards under the liber-
ers and other such electronic able to predict them. alised remittance scheme (LRS).
items will now require licences. The original decision to apply the
U-turns, revisions, flip-flops, and
However, it would probably be 20 per cent TCS across the board
non-stop tinkering with regulations
wrong to call it new. Imports was notified on May 16 this year.
required licences before the 1991
and rules that affect everyday life for Credit card owners raised com-
reforms tore down that regime and businesses have become the norm. plaints about how complying with
gave us some semblance of a mod- Businesses have to invest effort and this would lock up the TDS money
ern economy. We thought that the time to adjust to these changes. pending refunds (which now are tak-
reforms had killed import licenses. ing place quite quickly and efficient-
However, the bureaucratic mind- It is also important to note that ly). In addition, credit card issuers
set has turned out to be resilient, this has been the bureaucrats’ gen- said that they had no reliable way to
and licences have been resurrect- eral approach to big policy decisions know how much tax to deduct in
ed. Is this a well-thought-out policy in recent years. U-turns, revisions, cases where a single customer uses
that will do what the government flip-flops, and non-stop tinkering multiple cards and also when trans-
says it wants it to do? with regulations and rules that actions are reversed or disputed.
The first thing to note is that the affect everyday life for businesses The requirement was to be imple-
government was forced into have become the norm. Businesses mented from July 1. But, on June 28,
rethinking the idea within hours of have to invest effort and time to the government said that it stood
announcing the new import policy adjust to these changes. In addition, postponed till October 1 – just like it
regime. It announced the new they have to live with the uncertain- has now done for laptop imports.
licencing requirement on August 3 ty that the policies could be altered The stated intent of the import
and a day later, on August 4, said all of a sudden again. licences is to make sure that hard-
that it was putting the implementa- No prizes for guessing who bene- ware isn’t coming into the country
tion of the policy on hold till fits from this style of functioning – from sources deemed a risk to
November 1. It stated that it wanted the officialdom. Businesses are national security. Many countries
to give importers transition time to forced to lobby with them for correc- don’t buy equipment from China.

Illustration: ANAND
The China threat cannot be under- lection on the occasion of the 25th ing local industry and create more
stated, given the continuing trouble anniversary of liberalisation by high-productivity jobs for Indians.
on the line of actual control and in Infosys founder N. R. Narayana But licensing is hardly the way to go
Ladakh since 2020. Also, the disrup- Murthy: “There was also such a about doing this. It will make cor-
tions in supplies of chips during the strict licensing regime to import a ruption uncontrollable and afforda-
Covid-19 pandemic that rendered computer that it took me three years bility and supplies unpredictable.
global supply chains vulnerable and I went about 50 times to Delhi.” It’s a mistake to think that
across the world for car, laptop and However, things are unlikely to get licensing will help the domestic
phone makers highlighted the risk of that dire this time as the issue cur- industry rise. On the contrary,
dependence on China. No country rently isn’t a shortage of foreign licences will take the pressure off
today wants to depend on China for exchange as it was back then. the domestic industry to serve con-
vital factory components, equipment The other explanation given for sumer interests and become global-
or even essential metals and miner- reverting to licencing is the need to ly competitive; it will continue to
als. The US, for instance, has banned promote Indian manufacturing at a remain mediocre. By slapping the
high-end microprocessors and time when consumption of electronic licencing condition, will India force
chips-making equipment from items is surging, a healthy sign of big global manufacturers, like
China. Its latest tech curbs even improving economic well-being. Apple, HP and Dell, to shift manu-
restrict certain companies from hav- Here, the policymakers’ dilemma is facturing bases and substantial
ing employees in that country. understandable. Nearly 90 per cent chunks of global supply chains here
Laptops are hardly a strategic of the PCs sold in India are not made so as to be able to retain easy access
item. Even so, India could have just in India; they are imported. to the Indian consumption market?
restricted imports selectively from Computer makers, such as HP, Dell, That calls for policy to remove the
China. Instead, it has imposed and Lenovo, produce in India, but red tape, difficulties and relatively
licence requirements on the imports mostly with components imported higher costs of manufacturing in
of seven electronic items. This from other countries. Ensuring that India, which has clearly not hap-
seems excessive. Let’s not forget more take to manufacturing in India pened even nearly a decade after
consumers’ experiences, nightmares is a good objective. It will help Make In India was unveiled.
rather, before the 1991 reforms of reduce the dependence on imports,
importing computers. The plight of especially from China, the source of Puja Mehra is a Delhi-based journalist and the
author of ‘The Lost Decade (2008-18):
purchasing computers pre-liberali- nearly half the value of these ship- How the India Growth Story Devolved
sation is best captured in this recol- ments. Also, it will assist in develop- into Growth Without a Story’

OF THIS & THAT...
Bad ideas, F&O trading and

the market
Find out the mindset required to find success in F&O trading
these sundry, silent players of the sets prices (because of its 60 per cent
market. And they use algorithms to market share and lowest cost of
provide the two-way trades that operation), while everyone else
slowly bleed retail. loses money because they have to
Limited success often makes one take those prices and work
look intelligent. We believe that backwards to see if they can
people who have made money are in survive. Different shades of this
some way intelligent and not plain happen in all commodity markets.
lucky. Importantly, self-attribution There’s always a fool on one side
bias ensures that they think that of any trade. In a bilateral
they’re intelligent. transaction with Mr Market, you
By Sanjeev Pandiya In index trading, you don’t need must have a three-dimensional
any idea about the price you’re understanding of your own
looking for (since you don’t know foolishness plus that of Mr Market.
W
e know from SEBI studies how to calculate the “correct” Like Warren Buffett points out, it’s
that 99 per cent of option option price that you should be just you and Mr Market; Mr Market
traders trade in the Nifty/ looking for). No fundamental is manic-depressive, but then, so are
Bank Nifty. Have you ever understanding of the intrinsic value you. If you can’t define (and name)
wondered why? of an index is needed - it is Mr Market’s foolishness, then rest
It is because trading indices in “volatility based upon liquidity”. assured that the fool is on your side
the retail market takes no real skill. It’s common in commodity markets of the table.
There’s nothing to go on except (defined as many-buyers-and-many Another secret you must know
perhaps a P/E ratio: nobody has sellers): we go to buy potatoes in the about Mr Market: it knows your
evaluated an index, stock-by-stock, mandi with no idea about the cost of weaknesses; it is because
or done a DCF (discount cash flow) producing a potato. We just “take” Mr Market is your weaknesses.
or understands the broad direction the price and haggle a bit (more for When you let your ‘lizard brain’
of the underlying businesses. All a our own satisfaction than any take control, you join Mr Market’s
trader has is an underlying ‘India fundamental understanding of the craziness. When you use your
Story’ and some kind of perpetual intrinsic value of a potato). That’s prefrontal cortex (an idea from
bullishness. It is an exact recipe for “price-taking”. Neurology. It’s possible to tell when
a Lemming Rush. A key rule governing all your prefrontal cortex is being
Strangely, nearly none of these commodity markets is that the used or when your amygdala is
option traders (just 2 per cent of winners are only those who make running the show), you’ll find
traders) are active in the actual prices; the losers are those who take yourself talking about valuations,
underlying stocks that make up prices. So if you want to know not stock prices.
these indices. So who do you think whether you will ever make any So you have fun at high tide, and
is determining the price discovery permanent profits in the F&O you die at low tide. Or, once in a
of these stocks and hence, their market, just ask yourself: are you while, you get caught in a tsunami
derived indices? If you ask me, I making or taking prices? (COVID-19 bottom or GFC 2008).
call them the alligators: they’re So in aviation, it is IndiGo that Since public memory operates on

survivorship bias, we only often called conviction in the own set of rules that describe these
remember the survivors who made jargon. But in trading, it’s often things. These rules may vary from
it through the last disaster. Once in about diffidence. This is the forked person to person, but you must
a while, it rains for 40 days, but tongue that most people cannot check the boxes. Think about
nobody remembers the time before handle. How can one be convinced all the rules before you enter the
Noah’s Ark. No one remembers the yet diffident? Here’s the secret: it’s F&O markets. These are things
ones who didn’t make it. about time horizons. You should be not covered by the classical finance
Now tell me, if everyone is confident about the long-term courses offered in textbooks and
trading indices, who’s at the (based, preferably, on valuations or classrooms. This is where it
individual stock counters? Is it an some model of value investing) but turns into an art, not some science
algorithm? So prices are being built tentative over the short term. of finance.
by a machine on the other side, like So, the lesson from the above is But it’s very important to
playing chess with IBM Watson. that carrying an investor’s hat into emphasise that F&O is not a “free”
What are the chances that you will the trading ring is futile. The lunch. It takes serious competence,
get it right? market decides when you will and you should not go to sea unless
Don’t enter the options arena invest; you just decide what script you know how to swim. The SEBI
without a clear understanding of you want at what valuation. Can study highlights losses but doesn’t
the battlefield. Firstly, it is a you see how this is more art than emphasise the education that most
battlefield, not a walk in the park. science? market losers lack. The same study
Only the fittest survive, not the builds an excellent case for
strongest, nor the smartest, nor the The options arena is a battlefield, highlighting the things that you
fastest, but the most flexible or not a walk in the park. Only the need to learn if you want to survive
adaptable. It’s a jungle, and you fittest survive, not the strongest, in F&O markets.
must learn by the seat of your nor the smartest, nor the When it comes to F&O, the media
pants, not from YouTube courses. fastest, but the most flexible or focuses more on fear due to the
So, first lesson: it is not corpus adaptable… you must learn by the flawed assumption that it is better
investing; it is cash flow investing. seat of your pants, not from to keep people out of the markets
Don’t ever assume that any single YouTube courses. rather than to teach them to be
trade of yours is the correct one. sophisticated players in the market.
Unless you know how to construct a F&O is dangerous if you don’t
Probability Density Function of the If it’s all a bilateral game with Mr know things and don’t want to
probability that you will be correct, Market, then one of the important learn. But if you do both, you will
don’t trade. mental models you must carry in make money directly and broaden
So, therefore, derivatives are all your mind is to expect the market to the market. The F&O market is as
about probability, not prediction. be manipulated, especially at the integral to the equity market as
When predicting things, we’re extremes. These are times when BFSI companies are to the real
attributing a “bundled” probability what looks like a broad, genuine economy. But debt is sometimes a
to the occurrence of an event, “commodity” market becomes problem for the economy.
usually a certain stock price, on dominated by just a few, often
either an expiry date or some future coordinated, players (I call them the Sanjeev Pandiya is a student of
date. We’re expecting returns but alligators). Unless you know how to Behavioural Economics. He has spent
over 3 decades as a CFO & has immense
often not prepared for the ensuing distinguish genuine liquidity from
experience in Corporate Transformation.
losses when Mr Market goes against artificial liquidity, you are bound He has been stock-picking for high
us. This is a classic case of to be blindsided from time to time. profile investors & has experience as a
derivatives strategist. He is passionate
overconfidence. This is when you lose many years
about mentoring people, communities &
Yet there’s a contradiction here. of earnings. corporates on the principles of Human
Investing is an act of confidence, It’s very important to have your Irrationality. www.sanjeevpandiya.com
Disclaimer: In the previous issue, I argued that F&O is not for amateurs, like Mountain Climbing (or F1 racing)

STOCK SCREEN
Quality stocks available cheap

Here is a ready-made list of stocks that clear essential checks on solvency,
accounting, recent financial performance and valuations
A
stock screen filters out companies based on companies that cleared the essential checks. This
certain criteria. Its main advantage is that it ensures that companies with a cheap and reasonable
helps you generate stock ideas with just a few valuation are selected.
clicks. Once you have the list of ‘deserving’ This screen is one of the largest of all our screens in
stocks, you can research them further to find the ones terms of the number of companies clearing the filters.
worth investing in. The reason is that it only focuses on the soundness of
The Value Research website provides you many ready- companies and not on their growth or efficiency
made stock screens. Here we will be covering the ‘quality characteristics. So, some companies would have better
stocks available cheap’ screen in detail. We have also growth prospects than others. It is your job to figure out
given a concise stock list from the other what those companies are. We have taken
screens. To get the full list in real time, visit care of checking the soundness of their
https://www.valueresearchonline.com/ financial position and financial statement
stocks/selector/. for you.
What does this screen offer? A word of caution

This screen lays stress on the Note that mere inclusion in a stock
soundness of companies. Quality for screen does not mean that a stock is
this screen means clearing our essential- investment-worthy. Consider the output
checks metrics. These essential checks remove of stock screens as the starting point for your research.
companies with a high probability of encountering You must apply your own analysis to select companies.
financial distress, companies trying to paint a better However, if you are interested in a list of stocks to
picture of their reality and companies that performed invest in right away, then subscribe to our
poorly in the current year as compared to the previous recommendation service at Value Research Stock
year. Advisor. You can access the details by visiting: www.
Then we apply three valuation filters to the valueresearchstocks.com.
Key terms
<UP]LYZLJVTWHUPLZ investors are willing to pay for the (S[THUA:JVYL 4VKPMPLK*:JVYL
Should have traded on all the days earnings. The thumb rule of valuing Developed by Edward Altman of Tells the probability of financial
for the last two quarters and a stock is that a high-growth stock New York University, the Z-Score manipulations. To develop it, we have
should have a market capitalisation will have a high P/E ratio, while a predicts a company’s financial modified James Montier’s C-Score. A
of more than `500 crore, the lower value stock will have a relatively distress or the possibility of its going C-Score of less than four is desirable.
cut-off for small-cap stocks as per lower P/E ratio. bankrupt within two years. A :[VJR:[`SL
the Value Research criteria. 7YPJLLHYUPUNZ[VNYV^[O7,. Z-Score of more than three is Indicates the style of the stocks. It is
4JHW This ratio demonstrates how high a desirable. derived from a combination of the
Stands for market capitalisation. price we are paying for the growth 7PV[YVZRP-:JVYL stock’s valuation – growth or value –
Obtained by multiplying the stock that we are purchasing. It is the Developed by Joseph Piotroski, the and its market capitalisation – large,
price and the number of shares. ratio of price to earnings to the F-Score highlights financial mid and small. For example, on the
Shows a company’s market value. EPS growth of the stock. In all our performance as compared to that right, we Growth Value
analyses, we have taken five-year in the previous year. It thus points have shown
7YPJL[VLHYUPUNZ7, Large
historic EPS growth. out the current outperformer in the stock
The price-to-earnings ratio is
simply the ratio of the price of a ^LLROPNOSV^ terms of profitability and financial style of a Mid
stock to its earnings per share. It The highest and the lowest levels of improvement. An F-Score of seven large-cap
or above is good. growth stock. Small
shows in multiples how much the stock price in the last one year.

REASONS TO INVEST THE FILTERS
Safety M-cap greater than `500 cr C-Score less than 4 No. of companies that
CLEAREDTHElLTERS
Soundness Z-Score greater than 2.99 PEG < 1; P/E to median
P/E < 1.5; E/P > 5% 1,431
Good performance F-Score greater than or equal to 7
Reasonable valuations 1,008
251
240
Banking and finance companies were removed from this analysis as the metrics don’t apply to them. 64
Top companies by market cap

Company Stock Altman Piotroski Modified Earnings Market Share 52-week
Industry style Z-Score F-Score C-Score yield (%) P/E PEG cap (` cr) price (`) high/low (`)
Coal India 4.0 8 1 36.6 5.2 0.20 1,41,804 230 263-208

Coal & Lignite
Dr. Reddy’s Laboratories 9.3 8 0 7.0 20.9 0.72 98,518 5,911 5,980-3,997
Drugs & Pharma
Oil India 4.0 9 1 24.9 4.3 0.15 31,567 291 293-168

Oil & Gas Exploration
Gujarat Fluorochemicals 9.1 8 2 5.5 25.4 0.25 31,066 2,829 4,174-2,534

Misc.Chem.
Fine Organic Industries 36.4 8 2 5.8 25.0 0.55 13,930 4,546 7,329-4,040
Organic Chemicals
Raymond 3.5 9 2 7.9 8.6 0.31 12,990 1,952 2,022-935

Cloth
Godfrey Phillips India 7.1 8 2 8.2 14.1 0.41 11,415 2,192 2,252-1,047
Tobacco Products
The GE Shipping Co 7.7 9 0 32.1 4.1 0.09 11,057 775 834-479

Shipping
Gujarat Narmada Valley 4.7 9 3 17.9 8.6 0.32 8,449 544 789-484
Nitrogenous Fertilizer
Granules India 4.4 8 0 8.3 16.5 0.55 7,219 298 381-268

Drugs & Pharma
Allcargo Logistics 3.4 8 0 9.3 12.1 0.41 6,597 269 495-247

Logistics
Maharashtra Seamless 6.7 8 1 16.8 7.0 0.23 6,511 487 544-280

Steel Tubes & Pipes
Kirloskar Brothers 5.0 9 0 7.0 22.4 0.60 6,336 797 993-286

Pumps & Compressors
Chennai Petroleum Corp 3.8 9 1 27.7 3.2 0.29 5,517 369 459-187
Oil Refineries & Marketing
CMS Info Systems 16.2 8 0 8.7 17.5 0.65 5,494 351 409-253
Misc.Other Services

STOCK SCREEN
Company Stock Altman Piotroski Modified Earnings Market Share 52-week
Industry style Z-Score F-Score C-Score yield (%) P/E PEG cap (` cr) price (`) high/low (`)
Shipping Corp Of India 3.5 8 3 13.2 5.6 0.24 5,375 115 151-79
Shipping
Neuland Laboratories 7.3 9 2 5.8 23.4 0.34 5,035 3,923 4,340-1,080

Drugs & Pharma
Shriram Pistons & Rings 6.2 8 2 10.2 14.7 0.93 5,023 1,140 1,566-354
Auto Ancillaries
AGI Greenpac 3.8 8 0 7.8 19.0 0.60 4,691 725 758-261

Packaging & Containers
Surya Roshni 5.3 8 1 11.0 12.0 0.47 4,454 820 935-354

Steel Tubes & Pipes
West Coast Paper Mills 5.6 9 1 57.5 3.8 0.10 3,760 569 664-461
Paper
Wonderla Holidays 18.6 8 0 6.8 21.4 0.71 3,623 640 658-317

Leisure & Recreation
Ganesh Housing Corp 10.2 8 3 13.9 14.3 0.40 3,589 429 492-262
Real Estate
Gokaldas Exports 7.1 8 3 6.4 21.2 0.60 3,522 581 594-328

Readymade Garments
LG Balakrishnan & Bros 6.4 8 2 11.4 12.7 0.47 3,144 1,000 1,238-607
Auto Ancillaries
J Kumar Infraprojects 5.3 9 1 16.1 10.8 0.77 3,067 404 418-217

Construction
Sanghvi Movers 13.4 8 1 7.2 20.1 0.62 2,803 647 705-212

Construction
Kingfa Science & Tech (I) 5.5 8 1 6.0 23.5 0.60 2,676 2,217 2,595-965
Plastic Resins
Sharda Motor Industries 7.0 9 1 14.1 11.6 0.49 2,497 841 950-550
Auto Ancillaries
Fiem Industries 8.5 8 3 9.3 16.5 0.76 2,406 1,827 2,087-1,364

Auto Ancillaries
Cigniti Technologies 16.0 8 0 13.1 11.6 0.62 2,120 778 938-516

Software
Vishnu Chemicals 4.6 8 1 8.6 15.8 0.28 2,076 316 434-245

Inorganic Chem.
Vadilal Industries 6.0 8 1 8.1 16.8 0.44 1,989 2,777 3,295-1,799

Dairy products
Seshasayee Paper 5.6 8 2 39.9 4.5 0.17 1,828 290 348-220

Paper
Kuantum Papers 3.7 8 1 17.3 7.4 0.27 1,769 202 216-81

Paper
Data as of August 21, 2023. This is not the full list. For the full list, visit https://bit.ly/43Rppks

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 Coromandel International 15.7 Hindustan Aeronautics 21.2

chips Angel One 15.9 SRF 35.6
Gives you large caps with strong fundamentals
and solid growth that are trading at a
reasonable valuation
Welspun Enterprises 5.6 Jindal Saw 11.8

Reasonably priced
Raymond 8.6 D-Link (India) 12.3
growth stocks
Nitta Gelatin 9.2 LT Foods 13.3
Combines growth and value investing and
spills out companies with high earnings growth Hercules Hoists 9.4 Godfrey Phillips India 14.1
trading at a cheap valuation Pearl Global Industries 9.8 KNR Constructions 14.2
JK Paper 5.0 Globus Spirits 21.6

Small-cap growth
Prakash Pipes 10.4 Mastek 22.5
companies
Sharda Motor Inds. 11.6 Themis Medicare 26.1
Wades through the small-cap maze and gives
out fundamentally strong small caps that are WPIL 15.5 Gufic Biosciences 31.9
available at a reasonable valuation Balaji Amines 20.6 Prudent Corporate Advisory 38.1
P/B P/B
Dhunseri Ventures 0.33 Karnataka Bank 0.89

Discount to
Nahar Spinning Mills 0.61 Excel Industries 0.89
book value
SAIL 0.65 Bank of Baroda 0.90
Presents companies that are available at less
than their net worth Nahar Poly Films 0.77 Elpro International 0.94
Tamilnadu Petroproducts 0.85 Panacea Biotec 0.95
Dividend yield (%) Dividend yield (%)
Oil India 6.87 IIFL Securities 4.03

High dividend
GSFC 6.40 Sundaram Finance Holdings 3.24
yield stocks
GNFC 5.52 IRFC 3.14
A screen for those looking for a steady stream
of dividends REC 5.27 SMC Global Securities 3.05
PFC 4.91 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
SN DAVID KOHLER
SREEDHARA SOMNATH
SUBRAHMANYAN Chairman & CEO, Kohler
Chairman, ISRO
CEO, L&T (On the company completing
If everything fails, if all the 150 years)
(Speaking at A M Naik’s
last AGM as Chairman
sensors fail, nothing works, still it The only way you
of L&T) (Vikram) will make a landing. survive for 150 years, let
You may take The whole design has been alone thrive, is if there’s
A.M. Naik out made to make sure that it should a level of discipline and
of L&T, but L&T be able to handle many failures, sticking to a set of
won’t move out provided the algorithms work values that have made
of A.M. Naik properly. We have also made you successful. So, I
Forbes India, sure that if two of the engines (in think our story is one of
August 10, 2023 Vikram) don’t work this time, it perseverance and
will still be able to land. discipline.
Moneycontrol, August 9, 2023 Forbes India, August 14, 2023
NARENDRA MODI Prime Minister, India
When you go to a
village, you will find
bank-wali didi,
Anganwadi didi and
SIDDHARTHA LAL
dawai-wali didi. It is
Managing Director & CEO,
Eicher Motors
my dream to make SHAKTIKANTA DAS
We are not obsessed two crore lakhpati Governor, RBI
about competition, which Our economy has

in fact, our competitors do
didis in villages. continued to grow at a
The Economic Times, August
g 16, 2023 reasonable
easo ab e pace,
pace becoming
very often. We obsess
about the consumer
mer and the fifth-largest economy
e in
his wants. Wee are the world and contributing
co
obsessed about stuff that around 15 per cent to
we believe is tangible
angible global growth… A large
reality for our consumers,
nsumers, economy marching
march ahead
(which is) to havee a better with vast domest
domestic demand,
ride, to have more untapped resources
resou and
enjoyment. So yeah,ah, really, demographic advantages,
ad
we built a fortress.
s. It’s not India can become
becom the new
going to be easyy for, let’s growth engine for fo the world.
say robbers, to penetrate.
enetrate. Governor’s statement, A
August 10, 2023
Moneycontrol, August
st 4, 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
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PRODUCT LABEL
Alternative to: Suitable for: This fund is suitable for investors
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Investments in Retirement Education Long Term
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*Investors should consult their financial
advisers if in doubt about whether the
product is suitable for them. Riskometer is as on July 31, 2023
Follow us at: âs on July 31, 2023

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̴UŨǍğơƭųƙơ͘ơŀųƵŝė͘ĐųŨơƵŝƭ͘ƭŀğņƙ͘ǦŨñŨĐņñŝ͘ñėǍņơğƙơ͘ņķ͘ņŨ͘ėųƵĎƭ͘ñĎųƵƭ͘ǎŀğƭŀğƙ͘ƭŀğ͘ƖƙųėƵĐƭ͘ņơ͘ơƵņƭñĎŝğ͘ will be at Very

38 WORDS WORTH WISDOM

COPYEDITING Anupama Garg, Mithilesh

DESIGN Anand Kumar, Aprajita Anushree, Pulak Prasad

DATA SOURCE FOR STOCKS AceEquity

PRODUCTION MANAGER & CIRCULATION

8 Twitter 60 Stock Advisor

14 Stock Story The democratisation of

The most significant price movements Licence Raj Redux?

Market and sectoral moves 68 Of This & That...

28 Market Compass Quotable words from prominent figures

September 2023 Wealth Insight 5

wealth generation of the equity it’s not enough of a reason to

September 2023 Wealth Insight 7

Subscription copy of [premnath16@gmail.com]. Redistribution prohibited.

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Maruti to acquire Fitch downgrades US credit rating

restricts laptop and passenger electric vehicles.

Ambuja Cements to acquire Sanghi Industries

10 Wealth Insight September 2023

*Standalone numbers. Other data on consolidated basis.

September 2023 Wealth Insight 11

Adani Group continues ECONOMIC METRICS

ble for the first time 0

Titan adds to its Aug '21 Aug '23

CaratLane stake *Y\KLVPS

12 Wealth Insight September 2023

$YNAMIC!LLOCATION /PTIMIZE0ARTICIPATION 2OBUST-ODEL 0!PPROACH %QUITY4AXATION

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Jul 05, Aug 06, 2013

14 Wealth Insight September 2023

Aug 11, 2023

September 2023 Wealth Insight 15

Large caps Price to earnings Net profit (` crore)

81.6 1.0* 11,681

64.3 0.8* 17,049

55.9 63.7 867

44.5 175.5 394

44.5 25.7 1,978

42.8 48.0 1,207

41.5 49.9 1,449

40.7 1.3* 6,232

40.5 34.2 1,587

16 Wealth Insight September 2023

Mid caps Price to earnings Net profit (` crore)

146.1 32.1 1,209

138.7 64.1 171

130.8 52.0 517

108.5 48.9 469

88.2 132.1 129

75.9 11.7 891

73.2 25.3 713

71.6 27.5 1,045

56.6 20.5 1,022

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7<3(279(:(+ Founder, Nalanda Capital