THE UNUSUAL BILLIONAIRE BOOK SUMMARY

BY RAHUL GUPTA

ABOUT THE BOOK ABOUT THE AUTHOR

Saurabh Mukherjea is a bestselling author and the

founder and CIO of Marcellus Investment Managers.
Previously, he was the CEO of Ambit Capital, an Indian
• Focus on the long term without being distracted by short
investment bank. He was rated the leading equity
term gambles.
strategist in India in polls conducted by Asia money in
• Constantly deepen the moat around the core franchise
2014, 2015 and 2016. A London School of Economics
• Sensibly allocate capital whilst studiously avoiding betting
alumnus, Mukherjea, is also a CFA charter holder. He
the balance sheet on expensive and unrelated forays.
has authored five books till now
 SEARCHING FOR GREATNESS

Saurabh Mukherjea has started the chapter with an interesting story of how he found one the best stock picks of his life,” Asian Paints" during a train
journey. Unexpectedly, this story did not leave him with a specific answer, but a very important question, "What defines a great company."
• Attracts best talent
• Commands respect in the business community
• Generally, trades at a premium valuation in the stock market

STOCK SELECTION ADVICE BY SAURABH MAUKHARJEA

Define Companies: Out of all the stocks listed in the Indian stock market, Mukherjea has excluded companies with mcap
lower than 100 crores which leaves him with about 1500 listed companies. From this universe he selects the stocks which
possess quality factors
Define Long Periods: He has taken a time horizon of 10 years for his study. The logic behind this is that a decade usually
covers a full business cycle.
Define Superior Financial Performance: The author emphasizes consistency in performance over time, seeking companies that
maintain at least 10% sales growth and 15% ROCE annually for the past ten years.
•This criterion ensures that selected companies exhibit resilience and stability, capable of performing well in both favorable
and adverse market conditions.
•Achieving and sustaining this level of performance is challenging, as evidenced by only a limited number of companies
meeting both criteria over the decade.
Companies with an ROCE exceeding 15% demonstrate superior ability to generate returns and create value, outperforming
market benchmarks like the BSE200 index.
 Phase 1: 1942-6
Formation and Visionary Leadership
Champaklal excelled in foreseeing consumption
trends and understood the potential of the
decorative paint market in India over industrial
paints.
Market Penetration Strategy:
Started by targeting rural markets, contrary to
industry norms, during festivals like Pongal and
Pola.
Identified the lack of availability of small packs of
good quality paints and introduced them, even at
lower margins, to gain customer trust.
Addressing Consumer Needs
Introduced washable distemper in 1950, bridging
the gap between low-quality distemper and
expensive plastic emulsion, meeting consumer
demand for better quality at a reasonable price.
Phase 2: 1967-97
Focus on Talent Acquisition and Retention
Recognized the importance of hiring top
talent from prestigious institutes like IIMs
and IITs to succeed in the dynamic market.
Early Adoption of Technology
Became the first Indian company to
purchase a mainframe computer in the
early 1970s.
Utilized computer technology for demand
forecasting, enhancing supply chain
efficiency.
Leadership Succession and Operational
Efficiency
Expanded the company's operations
beyond West India to South and North
India.
Product Innovation and Market Expansion
Introduced iconic brands like Utsav and
Royale, contributing to the company's
growth and brand recognition.
Phase 3: 1997-15
Stake Sale and Conflict Resolutions
• Atul sold 9% of his stake to a competitors in
frustration, but this sale was blocked by the
promoters
Modernization and Structural Changes
• The remaining three families decides to
modernize the company structure
Technological Investment
• Starting in 1999, the company aggressively
invested in technology , including software
for supply chain management , demand
forecasting ,and Enterprise resource(ERP).
• These technological investments resulted in
a significant reduction in the company
working capital days from 100 in 1995 to just
20 in 2015 indicating improved operational
efficiency and financial management
 WHAT IS THE SECRET SAUCE OF ASIAN PAINT SECCESS?

Focusing On Core Business:

Deepening Competitive Moats: We understand this by
Throughout the first 50-60 years of inception, the management had spent
Mukherjea's IBAS framework - Innovation, Brand,
their time and money on just two things, supply chain effi ciency and
Architecture, Strategic asset.
brand development. This paid off well in the future. The promoters
refrained by going into unrelated diversifications.

BRAND INOVATION
Product innovation: Starting right from the beginning, the
The company has a very strong brand recall. They have spent heavily on
company came up with small packaging of paints that can
advertisements. The "Gattu" mascot was designed by the famous RK
be used during festivities. Then washable distemper was a
Lakshman and remains the longest run mascot for the company as it attracted
successful innovation
the Indian consumers. Post 2002, the company moved towards premium
marketing.
ARCHITECTURE
Creating a unique working culture that nurtures talent.
Using technology to improve competitive advantage.
Creating an independent board of directors to shape the
evolution of the firm

STRATEGIC ASSETS
Its wide geographical spread of supply chain network
Deep rooted relation with paint dealers
Business related to homes such as kitchenware and
bathroom fittings
Services they could disrupt the traditional Indian model of
hiring painters to paint their homes
 Berger Paints: 250 Years in The Making

•Establishment and Early Ownership: Berger Paints was founded in 1760 by Lewis Steinberger.
•Ownership Changes: The company changed hands three times until it came under the ownership of Vittal Mallya, the
father of Vijay Mallya.
•Vijay Mallya's Involvement: After Vittal Mallya's death, Vijay Mallya acquired Berger Paints' overseas operations,
except those in Australia, Europe, and the UK.
•Final Takeover: In 1991, the ownership of Berger Paints was transferred to the Dhingra brothers, Kuldip Singh and
Gurbachan Singh.

Berger’s Astonishing Outperformance

A rupee invested in Berger in April 1994 is worth Rs 212
presently (in April 2016), implying a compounded annual
return of 28 per cent. That same rupee would be worth just Rs
7 if invested in the Sensex, implying a CAGR of 9 per cent.
Thus, Berger has outperformed the Sensex by 31.5 times over
the past twenty-two years. At the heart of this outstanding
performance there have been (a) a deep focus on the paints
business and only on the paints business; (b) a deepening of its
competitive moats through a focus on hiring good people,
training them well and creating a healthy work culture; and (c)
prudent capital allocation.
 Phase 1: 1972-91 Phase 2: 1992-2010 Phase 3: 2011-15
1.Challenges Faced: Leadership Transition:
Baji Kurien's Impact:
• Expansion into the decorative segment • After Baji Kurien's retirement in 1994, Subir
Baji Kurien, joining Berger Paints from Asian
strained Berger Paints' balance sheet, Bose assumed leadership, leveraging his
Paints in 1972, brought significant changes to
leading to working capital issues and delays decade-long association with Berger Paints.
the company.
in salary payments. Transformation and Expansion:
Kurien shifted the company's focus from
• Limited manufacturing capacity, with only • Subir Bose spearheaded the transformation
industrial paints to decorative paints, aligning
one unit serving the entire country, resulted of Berger Paints from the industrial segment
with market trends and consumer preferences.
in supply chain challenges as demand to the decorative segment.
Strategic Partnerships and Initiatives:
surged. • He focused on ramping up the company's
Berger Paints engaged the Lintas Media Group,
1.Innovations and Market Growth: rural presence and expanding its market
India's largest advertising agency at the time, to
• Berger Paints introduced color tinting reach.
develop its decorative paints division
machines, expanding the available color Supply Chain Solutions:
Change of Ownership: The Dhingra family,
shades from 125 to over 5000. • Bose addressed supply chain issues by
already involved in the paints business with a
• Despite financial struggles, by 1990, Berger supplying tinting systems to over 1000
focus on exports to Russia, viewed acquiring
Paints emerged as the third-largest player in outlets and acquiring manufacturing units in
Berger Paints' global business as a strategic fit
both the decorative and industrial paints Nepal to enhance production capacity and
for their expansion plans.
market. distribution efficiency.
 WHAT IS THE SECRET SAUCE OF BERGER PAINT SECCESS?
Brand and Reputation
Berger has been able to create a strong brand in both the economy and premium
segment. Berger's advertisements were quite different from what was prevalent during
those times. Some of them like "When the Piano is Steinway, the walls are Luxol
Silk", "Luxol Silk - the only emulsion paint you can tell with closed eyes ",
Controlled Capital Allocation
‘We are clear that whatever capital is available with us, we will use it for our paints
business and not anywhere else. This is clear. We will not go for diversification,’ said
K.S. Dhingra, promoter, Berger Paints, in my meeting with him in October 2015. The
Dhingra's have brought with them a disciplined approach towards capital allocation
that has been carried forth by Berger’s leadership. When the Dhingra's acquired
Berger, its financials were capital-starved. The Dhingra's pumped in their funds to
improve the situation
INOVATION
Introduction of Tinting Machines:
Tinting machines revolutionized paint dealership by
reducing SKU requirements. Dealers benefited from
reduced space requirements and improved inventory
management. Despite high upfront costs (INR 8,31,000
per machine in the 1990s), Berger effectively marketed
them as cost and space-saving devices. By 1999, Berger's
dealer network held 33% of the tinting machines in India.
Architecture
Berger has been able to recruit and retain great talent for
a long time. Kurien used to say to the hiring manager,
"Don't recruit someone who is not able to do a job, just
to fill a vacancy. Secondly, even if we don't have a job, but
you come across the right person, you must recruit him.
Strategic Asset
An all-India network of plants, manufacturing facilities
and dealer-distributor network are the key strategic
assets that build competitive moats around Berger Paints .
 Marico: From A Commodity Trader To An FMCG Giant

INTRODUCTION
Marico as we know it today, was a lot different in its history. It was a family-owned commodity trading company called
Bombay Oil Industries Limited (BOIL). BOIL was formed in the year 1948 and used to initially trade in spices and then
began manufacturing coconut oil, vegetable oil and Chemicals. This remained a B2B company, until the legendary
entrepreneur, Harsh Mariwala joined the family business in 1971.

Marico’s share price outperformance

A rupee invested in Marico at its IPO in May 1996 is worth Rs
117 presently (in April 2016), implying a compounded annual
return of 27 per cent. That same rupee would be worth just Rs 7
if invested in the Sensex, implying a CAGR of 10 per cent. Thus,
Marico has outperformed the Sensex by over 17.8 times over the
past twenty years. At the heart of this outstanding performance
there has been a relentless focus on maintaining brand leadership
(even amidst the tremendous odds as seen during the turn-of-the-
century battle for supremacy in the coconut hair oil market with
HUL), extending winning brands (such as Saffola) across
categories and divesting low-margin brands (such as Sweekar)
which struggle to deliver adequate levels of ROCE.
 Phase 1: 1972-91 Phase 3: 1997-2006 David
(Marico) vs Goliath (HUL)
Transition to B2C Focus:
•Harsh Mariwala aimed to shift the family business from a low-margin B2B model to a • The battle of coconut oil became intense between
higher-margin B2C model for sustainability and profitability. Marico (which owns Parachute oil brand) and HUL
•Introduced smaller 100ml packs of coconut oil for consumer convenience, marking the (which owned the Nihar Coconut Oil brand). The
beginning of the B2C journey. battle started when Mariwala quite courageously
Talent Acquisition and Expertise: dismissed HUL's offer to acquire the Parachute
•Recruited talents from other corporates and B-Schools to strengthen the company’s brand.
capabilities. • The battle was finally won in 2005 when Nihar was
•Bindu Madhavan, a packaging expert and Ranbaxy veteran, was among the first hires put up for sale and Marico acquired the brand in
Saffola's Transformation and Market Leadership: 2005. This not only made the Parachute brand
By 1991, Marico emerged as the market leader in edible oil, propelled by the success of superior but also gave it pricing power and hence
Saffola. increased the overall margins of the company. After
this, Marico acquired the Mediker brand and also
launched Kaya skin clinic.
Phase 2: 1990-96

This phase started with the spin-off of the

consumer division of BOIL. However, the
journey was not smooth. The separated entity
with 80cr of capital was left with just 90 Lakhs of
capital, 2.4 crores of reserves and 4.7 crores of
debt. This led Mariwala to keep his focus on
making an organization an attractive place for
the best of management talent. Also, he
decided to slow down the acquisitions.
Focusing on the Core Business
What is Marico’s Secret Sauce?
Marico: (I) maintaining brand
leadership
(ii) extending winning brands
(iii) divesting low-margin brands
Product innovation
Marico dedicates 10% of its profits to strategic funding
for innovation, leading to pioneering products like
safflower oil blends, flavoured oats, and light hair oils.
Saffola Tasty and Saffola Gold propelled it to a 58%
market share in premium edible oils by 2015. Marico's
masala oats, launched in response to Indians' preference
for Savory snacks, dominates the category with over Rs
100 crore in sales
Controlled capital allocation
(a) Low capital intensity: Manufacturing of FMCG products isn’t
capital-intensive and can be outsourced. This result in high asset
turnovers—typically, one rupee of fixed asset investment results in
four rupees of sales.
(b) Low working capital requirement: Most FMCG companies have
negative working capital as their creditors exceed debtors.
(c) High operating profit margins: Market-leading brands command
a price premium which results in higher margins.
Deepening the competitive moat:
• Packaging innovation
• Product innovation
• Brands/Reputation
Packaging innovation
Marico further innovated by introducing wide-
mouthed bottles to counter coconut oil freezing in
northern winters. To combat counterfeit products, the
company imported foreign moulds, delaying
copycats' ability to replicate packaging. These
strategic moves helped Marico maintain market
integrity and solidify its position against competitors.
Brands/Reputation
Marico’s leadership in both Parachute and Saffola over the past four
decades is backed by significant investments. As a result, in FY15,
Parachute had sales of more than Rs 2,000 crore and controlled more
than 55 per cent of the coconut oil market and more than 25 per cent of
the value-added hair oil market. Similarly, Saffola’s FY15 sales were
Rs 880 crore, with the brand controlling 58 per cent market share in
the premium edible oils market and more than 65 per cent of the
flavoured oats market.
 Page Industries: Jockeying from Manila to Bengaluru

Page Industries, the biggest licensee of Jockey in the world, has its origins split between two cities located around 13,000
kilometres apart. In St Joseph, Wisconsin, USA, Samuel Cooper and his sons started making socks and undergarments. In
1934, they struck gold with the invention of Jockey shorts, featuring the famous Y-shaped fly, which became a sensation
and sold 30,000 units in three months.
In the 1990s, Jockey International (USA) granted an exclusive license to the Genomals to launch and expand Jockey's
presence in India. This led to the formation of Page Industries, which within two decades became the largest licensee of
Jockey in the world.

Page Industries’ astonishing share price

performance:
Page Industries' IPO in March 2007 has yielded
remarkable returns, with a rupee invested then
worth Rs 34 by April 2016, indicating a compounded
annual return of 47%. In contrast, the same rupee
invested in the Sensex would only be worth Rs 2,
resulting in a CAGR of 8%. This demonstrates Page
Industries' exceptional outperformance compared
to the broader market, exceeding the Sensex by 16.6
times over the past nine years
 Phase 1: 1959–92 Phase 2: 1993–97 Phase 3: 1997–2003

Establishment of Jockey's Leadership
in the Philippines:
•Verhomal Genomal's successful business in the
Philippines drew the attention of Jockey
International, leading to a licensing agreement in
1959.
•Sunder Genomal, promoter of Page Industries,
had early exposure to the Jockey factory as a
child, with his brothers Nari and Ramesh joining
the business later
.Introduces new retail models like the concession
model in the Philippines, leveraging Jockey's
expertise and innovation
Jockey's Re-entry into India
through Page Industries:
•In 1991, as India liberalized its economy,
Jockey International explored tie-ups with
several large Indian companies.
•Innovative Distribution Strategy:
•Page Industries expanded solely through
individual distributors, unlike competitors
relying on wholesale-driven networks.
•Ensured uniform selling prices across all
stores and introduced innovative in-store
marketing strategies.
Early Challenges:
.Page Industries faced challenges in
establishing relationships with high-quality
raw material suppliers in the Indian textile
manufacturing environment.
Competitive Landscape:
.Competitive intensity was high, with
incumbents like Rupa and Maxwell
dominating the market.
.Established brands like Liberty, Libertine,
and Tented held firm positions in the mid-
premium segment, with Associated Apparels
reporting significant sales.

Phase 4: 2004–15

Beating the competition:

Page Industries surged ahead of its competitors, achieving remarkable revenue
growth of Rs 1543 crore in FY15, far surpassing Rupa and Maxwell. Over eleven
years, Page expanded its revenues twenty-five times, boasting an impressive CAGR
of 35%. This growth was fuelled by consistent product launches, expanding
manufacturing capacity, and leveraging technology and data analytics to enhance
supply chain efficiency.
 What is Page Industries’ secret sauce?
Focusing on the core business
•Page Industries has maintained a partnership with Jockey for over six decades
and four generations of the Genomal family, demonstrating unwavering
commitment to the brand.
•Page Industries holds dominance in the mid-to-premium innerwear segment,
attributed to focused attention from promoters and singular focus on Jockey as
the sole brand.
•Despite opportunities to diversify with other brands, Page's deep
understanding of Jockey and Speedo, along with effective labour relations
management, has deterred competitors.
Nature of advertising/media initiatives
Page Industries has distinguished itself through a unique approach to
advertising, characterized by impactful campaigns such as "Just Jockeying" and
"Jockey or Nothing."
Deepening its competitive moats
Innovation
Page Industries maintains competitiveness through frequent
product launches and high-quality offerings.
Collaborates with Jockey USA's team and other licensees to stay
updated on technological advancements.
Dedicated R&D team identifies local consumer preferences,
ensuring a steady stream of fresh products.
Strategic asset
Genomal’s relation with Jockey International, USA, is Page’s
biggest strategic asset. As I mentioned earlier, Jockey renewed
its licence with Page in 2010 for twenty-one years, instead of the
earlier practice of five years. In effect, until 2030, Page will
remain Jockey’s exclusive franchise in India and the UAE.
Brand
Page Industries has succeeded in maintaining aspirational value
in competitive consumer segments like watches, footwear,
garments, and kitchenware, distinguishing itself from brands like
Titan, VIP Frenchie, and Bata, which experienced a decline in
market share due to diluted aspirational value. Page achieves
this through consistent investment in advertising, typically
around 5% of its revenues, and a unique approach to branding.
 Axis Bank: Confounding the Sceptics Repeatedly

Axis Bank, formerly known as UTI Bank, began its journey in 1994 with significant advantages, including backing from
Unit Trust of India (UTI) and experienced leadership from the public sector. However, the bank faced challenges in its initial
years. Despite this, under the leadership of Supriya Gupta, P. Jayendra Nayak, and Shikha Sharma, Axis Bank evolved into
one of India's leading private sector banks.

Axis Bank’s share price outperformance

An analysis of Axis Bank's performance reveals its

exceptional growth trajectory. A rupee invested in
Axis Bank at its IPO in November 1998 would be
worth Rs 128 in April 2016, translating to an
impressive compound annual growth rate (CAGR)
of 32%. In contrast, the same rupee invested in the
Sensex would be worth only Rs 9, indicating a
CAGR of 13%. This outperformance of the Sensex
by fourteen times over seventeen years underscores
Axis Bank's remarkable track record
 Phase 1: 1994–99
•Economic Reforms and Entry of
Private Players:
•India underwent significant economic reforms
in the 1990s following the balance of payments
crisis of 1991.
•The government liberalized the banking sector
in 1994, allowing private players to enter,
leading to the licensing of ten private sector
banks by the RBI.
Financial Performance and Morale
Decline:
•By the end of 2000, Axis Bank's financial
performance was bleak, with rising NPAs, low
CASA ratio, and weak profitability.
•Morale within the bank was low, exacerbated
by Gupta's health issues and a declining stock
price.
Phase 2: 2000–09 Phase 3—2009-Present
•Banking as a Commodity Business:
Shikha Sharma's Leadership and
•Banking is characterized as a commodity
Transformations:
business, necessitating banks to be low-cost
•Under Shikha Sharma's leadership, Axis
producers, particularly in lending.
Bank underwent significant transformations
•Low-cost liabilities, such as Current Account
focused on diversification, consolidation,
and Savings Account (CASA), are essential for
and strategic expansion.
a bank to maintain low-cost operations.
•Acquisition of Enam Securities and
•Foreign Capital Injection and CASA
Expansion in Equity Markets:
Improvement: •Sharma's bold move of acquiring Enam
•This resulted in a significant improvement in
Securities expanded Axis Bank's capabilities
CASA from 15% in FY01 to 44% in FY09,
in equity markets, enabling it to offer
aligning well with competitors like HDFC Bank
integrated banking solutions to corporate
and ICICI Bank.
clients.
•Downhearted End for Nayak:
•Focus on Retail Lending, Analytics,
•Despite the immense success during Nayak's
and Digital Innovation:
tenure, the end was disheartening as the board
•Sharma prioritized retail lending, data-
did not allow him to choose his successor.
driven analytics, and digital innovation,
propelling Axis Bank's growth and market
presence despite challenges in asset quality.
 Brand
•Further Investments in Branding under Sharma's
Leadership (2010):
•Under Sharma's leadership, Axis Bank made further investments in
branding, culminating in the "Badhti ka naam zindagi" campaign in 2012.
•This campaign targeted the aspirational needs of customers and featured
Bollywood superstar Deepika Padukone as the brand ambassador in 2014,
aligning with the bank's vision of progress and youthfulness.
Architecture
•Enduring Financial Success:
•Axis Bank has maintained consistent returns on equity (ROE) exceeding
15% for fifteen consecutive years, highlighting its robust internal
architecture.
•Pillars of Strong Architecture:
•Axis Bank's architecture rests on two pillars: a strong, autonomous board
of directors and an employee-centric work culture.
Innovation
•Leadership-driven Innovation and Adaptation:
•Nayak and Sharma's leadership drove innovation and strategic
adaptation, propelling Axis Bank's growth and differentiation in the
competitive banking landscape.
•Axis Bank's focus on retail liabilities and assets, coupled with
innovative strategies and operational enhancements, contributed to
its success and market differentiation.
Innovative Retail Banking Strategies:
•Axis Bank implemented innovative strategies such as providing
accident insurance with salary accounts and targeting niche markets
like government departments and armed forces for salary accounts.
Strategic assets
Axis Bank possesses robust strategic assets in the form of its
extensive branch and ATM network, along with a sizable base of
deposit holders. With 2805 branches, 12,631 ATMs, and 16.6 million
savings accounts as of December 2015, Axis Bank stands strong
alongside competitors like HDFC Bank and ICICI Bank
 ASTRAL POLY What is Astral’s secret sauce?
 Astral's secret sauce lies in its unwavering commitment to
quality, innovation, and customer-centricity, fostered by
Phase 1: 1997–2003: To the Brink of Bankruptcy: Founder Engineer's leadership, proactive learning, and
 Engineer's journey underscores the resilience required in entrepreneurship, as he navigated through setbacks in the global market exploration.
pharmaceutical industry to pioneering CPVC technology in India, despite facing financial strain and market resistance.  Innovation drives Astral's success, seen in pioneering CPVC
 Despite facing bankruptcy threats due to market challenges and external crises, Engineer's strategic decisions and perseverance in products, aggressive pricing, and initiatives like plumber
promoting CPVC pipes exemplify the significance of adaptability and determination in entrepreneurial endeavors. training, setting industry standards and maintaining
leadership.
 Astral's strong brand reputation stems from innovative
advertising, resonating with consumers and positioning the
Phase 2: 2003–06: The Building company as synonymous with reliable plumbing solutions.
Blocks:  Engineer's integrity and hands-on approach foster strong
 Engineer's strategic turnaround relationships with distributors and customers, driving
post-bankruptcy, with support Astral's customer-centric ethos and brand success.
from Thompson Plastics,  Astral distinguishes itself through strong relationships with
prioritized CPVC pipes, plumbers, fostering loyalty within its workforce and
leveraging partnerships and grooming successors like Engineer's sons, Kairav and
aggressive marketing. Saumya, ensuring continuity and excellence.
 Astral's focus on building  Astral's extensive manufacturing network and partnerships
relationships with plumbers, with global industry leaders, including Lubrizol, provide a
alongside competitive pricing competitive edge in innovation and market dominance.
and capacity expansions, fueled  Prudent capital allocation, prioritizing financial stability and
market penetration. strategic investments, drives Astral's sustained growth and
 Trust in employees and success, reflected in its steady improvement in Return on
leadership empowerment Phase 3: 2007–15: Building Scale and Pan-India Brand Recall: Capital Employed (ROCE).
contributed to Astral's 1.Engineer's strategic focus on capacity expansion and nationwide branding propelled Astral  Discipline in capital expenditure decisions, coupled with a
credibility and growth, leading Poly Technik to become India's leading CPVC manufacturer, securing contracts with focus on quality and innovation, positions Astral for
to Engineer's continued prestigious clients and earning the moniker "Dabangg-wala pipe" among plumbers. continued market leadership and expansion into new
leadership alongside his sons. 2.Despite setbacks like unsuccessful overseas ventures and currency risks, Astral ventures.
 Astral's success story reflects demonstrated resilience and adaptability, rebounding to make significant acquisitions in the  Astral's strategic assets, including its manufacturing
the power of resilience, adhesives business in 2014, diversifying its portfolio and strengthening its market presence. network and global partnerships, reinforce its position as
strategic planning, stakeholder 3.Astral's consistent revenue growth and return on capital, despite its smaller market an industry leader, driving innovation and market
engagement, and familial capitalization, position it alongside esteemed companies like ITC and HDFC Bank, dominance.
involvement in sustaining and showcasing its status as a formidable player in India's manufacturing sector.  By balancing innovation, customer-centricity, brand
innovating within the plastic 4.Through strategic initiatives and a commitment to excellence, Astral Poly Technik has building, strong relationships, strategic assets, and prudent
pipe industry. carved a niche for itself in India's manufacturing landscape, underscoring the importance of capital allocation, Astral sustains its competitive advantage
proactive expansion and diversification to sustain growth and competitiveness. and paves the way for future growth and success.
 HDFC Bank: The Power of Textbook Execution

HDFC Bank was started by a group of bankers previously working in eminent foreign banks such as Bank of America and
Citibank. As of writing the book, the author states that HDFC Bank was the only Indian bank to be featured in the list of
top fifty largest banks in the world. The bank is known for its flawless and consistently successful execution.

HDFC Bank’s share price outperformance

HDFC Bank has demonstrated exceptional
performance over the past twenty-one years,
significantly outpacing the Sensex with a Compound
Annual Growth Rate (CAGR) of 26% compared to the
Sensex's 10% CAGR. This outstanding achievement
can be attributed to its risk-aware culture, innovative
internal architecture, and the strength of the HDFC
brand. By prioritizing healthy returns while mitigating
risks, innovating core processes, and leveraging its
renowned brand, HDFC Bank has cemented its position
as a leader in the banking sector.
 SECRECT SAUCE OF HDFC BANK
Innovation
HDFC Bank can be titled as a pioneer in bringing
many technological revolutions in how we do
bank today. The
centralized banking system was one of the
major innovations of the bank. The other
innovations were real time
processing for stock exchanges, mobile banking,
ten-second loan disbursal process, and many
others.
Architecture
The consistency in financial outperformance is a result
of the strong internal architecture of the bank. The bank
has fixed
allocations for each of its segments in order to control
the risk for the overall bank. The bank has a well
established
process and hence is sometimes even called an SOP bank.
Brand
The story of how HDFC Bank got its name
has already been discussed. The reputation
of the HDFC brand can be felt by the
eagerness of Puri to keep the name of the
bank on the mortgage lender itself. The
bank is also said to spend very less on
marketing in comparison to other private
sector banks. They have also been endorsed
by celebrities like Axis Bank and ICICI Bank.
Strategic Assets
The branch network, ATMs and 25
million retail saving accounts remain
the strategic assets of the bank.
Phase 1: 1994–99: A corporate bank with a difference:
 Leadership Legacy: HDFC Bank's inception under Deepak Parekh's guidance and Aditya Puri's recruitment from Citibank Malaysia established a
strong leadership foundation rooted in mortgage lending expertise.
 Technological Innovation: Early adoption of centralized banking systems and innovative services like cheque settlement streamlined operations,
setting HDFC Bank apart as a technology-driven pioneer.
 Strategic Focus: Targeting low-cost corporate deposits and cash management, coupled with prudent risk management, enabled HDFC Bank to
maintain higher net interest margins and resilience during economic downturns.
 Performance Excellence: Consistent outperformance in profitability, attributed to superior NIMs and low NPAs, solidified HDFC Bank's
reputation as a leading corporate bank committed to prudent practices and innovation.

Phase 2: 2000–08: Building the Retail Bank:

 Retail Banking Focus: HDFC Bank shifted its attention to retail banking, acquiring Times Bank in 2000 and hiring retail banking experts to capitalize
on the growing market potential.
 Technological Innovation: Pioneering mobile banking in India and expanding branch and ATM networks underscored HDFC Bank's commitment to
leveraging superior technology for retail banking operations.
 Diversified Product Portfolio: Introduction of various retail loan products including loans against shares, car loans, personal loans, and credit cards,
coupled with home loan distribution through HDFC Limited, diversified HDFC Bank's retail lending portfolio.
 Financial Performance: Remarkable growth in retail banking and prudent initiatives led to impressive return on equity (ROE) for HDFC Bank,
consolidating its position as a leading player in the Indian banking sector.

Phase 3: 2009–16: Reaching the Hinterland and Taking on Silicon Valley:

 Rural Expansion: HDFC Bank's acquisition of Centurion Bank of Punjab in 2008 bolstered its presence in rural areas, particularly in two-wheeler loans, while also improving cost-to-income ratio and
asset quality..
 Focus on Rural India: Post-acquisition, HDFC Bank intensified its rural expansion, opening branches and dedicated desks for agriculture loans, tapping into segments like microfinance, gold loans, and
tractor loans.
 Digital Transformation: Initiating a digital banking overhaul, HDFC Bank launched initiatives like the PayZapp mobile wallet and ten-second pre-approved personal loans, showcasing agility and
adaptation to stay ahead in the evolving fintech landscape.
 Market Leadership: HDFC Bank's strategic vision, aligned with market dynamics and customer needs, solidified its position as a pioneering force in Indian banking, driving sustainable growth and
maintaining leadership.
 Regulatory Compliance: Amid expansion and transformation, HDFC Bank maintained regulatory compliance, fostering trust and sustainability while navigating through evolving market conditions.
 FINAL CHECKLIST FOR
INVESTORS

Industry Attractiveness Management quality

• Is the company’s business heavily dependent on government • Does the management have a track record of good
• regulation? governance and clean accounting?
• How strong is the competitive intensity of the industry? • Do the owners of the company have connections to political
• What is the overall size of the industry and its growth potential? parties?
• Is the company in an industry where the value addition is high? • Does the company have a strong track record of efficient
• Is it a capital intensity industry? capital allocation?
• Is the industry cyclical? • Do the promoters have a track record of remaining focused on
their core operations?

WHY SHOULD INVESTORS AVOID FREQUENT

CHURNING OF PORTFOLIO?
•Higher probability of profits over the long term
•Benefits of compounding over the long term
•Neutralizing the negatives of short-term noise in the market
•Reduced transaction costs which help in increasing the overall returns in the
long term
•Finally, back-testing results have proved that rebalancing of the portfolio does
not improve returns.
Competitive advantage
• What’s the company’s track record on innovation?
• What is the company’s investment in brand and reputation?
• How strong is the company’s architecture?
• Does the company own any strategic assets?
• Does the company have ROCEs that are higher than the
industry average?