The Weekend MBA - IIC Alpha Series - Part 1

www.nooreshtech.co.in
Analyse India – The Weekend MBA – Indian Investing Conclave
In this series, Jatin Khemani has called on various
Investors where they cover diverse Investing topics.
Alpha Series: Part-1
https://indianinvestingconclave.com/alpha_series

Mr. Vishal Mittal and Mr. Saurabh Basrar - In Conversation with Altais Advisors
About: Mr. Vishal Mittal and Mr. Saurabh Basrar are co-founders of Altais Investment
Advisors. The two of them have curated a compilation of in-depth interviews with India’s
leading investors, in the form of the well known book, Masterclass With Super-Investors.
Mr. Vishal Mittal worked in AT Kearney and Bharti Airtel for seven years, before starting
out Altais Investment Advisors. Mr. Saurabh Basrar worked with AT Kearney and Fidelity
for a few years and also did his CFA during that time. They have known each other from
their time together at AT Kearney
Excerpts from the Episode
“The bigger mistake has been not spending more time on testing out more strategies as
well as learning about new sectors. That time was spent in terms of reading about
investing, which has lower incremental returns. I would say, one should spent more time
learning about news sectors, learning about macroeconomics, learning about new
strategies which one can implement. You’ll see many investors who have done well in
one market but haven’t continued that success into another market, just because they
followed a mono-strategy and refused to evolve with the market.
Saurabh Basrar and Vishal Mittal

Mr. Deepak Kapur - Thoughts on Valuation, with examples of cyclicals
About: Deepak Kapur has over 15 years of experience in the secondary equity markets of India, where he focusses
on the mid and small cap space. His preferred style of investing is to focus on businesses which are currently out
of favour in the market. He is passionate about teaching and is a visiting professor at IIM, Indore, where he has
been teaching a course on business valuation for the last 11 years.
“Investing has 3 parts to it: One, is to be able to analyze the business, two, is to be able to value the business and
third part is largely the behavioral part, when do you buy and when do you sell. My experience says that the
financial part of valuation is just about 20-25% of the valuation and 70-75% of the valuation is being able to
understand the intricacies of the business.”
“We need to bother about valuing growth only when a business is such that new investments also earn returns in
excess of its cost of capital.”
In this episode, Deepak Kapur talks about the basics of valuation, how stocks ultimately revert to their intrinsic
value, discusses DCF and Economic Profit models and uses stock examples to demonstrate his ideas on
valuation. An interesting takeaway from this episode – Some of the best returns you can make in investing is
when you find cyclical stocks where in both capacity utilization and price realizations increase rapidly during
the upcycle.
Deepak Kapur

Mr. Samit Vartak - Thoughts on Valuation along with Case Studies
About: Samit Vartak is the Founding Partner and Chief Investment Officer of SageOne Investment
Managers LLP. Samit has been investing in the equities markets since 1999 and has experienced and
studied many bull and bear cycles over the last two decades.
This episode is titled, “Valuation as a profession.” Samir Vartak talks about the various drivers of the p/e
multiple and valuations through simple DCF analysis. He takes us through various examples and real-
life scenarios to explain why and on what basis businesses are valued. An interesting takeaway on the
importance of valuation – big returns in the stock market always occur as a result of both p/e rerating
and earnings growth, rather than just earnings growth.
“In equities market, valuation is less of a science and more of an art. It’s more important for you to
understand the softer aspects of the drivers of valuation, than the number crunching of valuation.”
“Just creating growth doesn’t increase value of the p/e multiple, just like increasing the return on equity,
doesn’t increase the value of the p/e multiple. Higher ROE with redeployment opportunities increases
p/e multiples.”
Samit Vartak

Mr. Ravi Dharamshi : Fortune at the bottom of the pyramid – Small Finance Banks in India
Ravi Dharamshi
About: Ravi Dharamshi is the Founder and MD of ValueQuest Investment Advisors. He has been associated
with the Indian equity markets for over 16 years. He has worked in the past with RARE Enterprises, where he
was involved in research, private equity dealings and value creation activities.
In this episode, Ravi Dharamshi does a presentation titled “Fortune at the bottom of the pyramid – Small
Finance Banks in India.” He talks about what he thinks is the best way to play the financial inclusion theme
in India, ie. through Small Finance Banks and details the advantages and risks attached.
“There are many many ways to play the financial inclusion theme in India. It has really picked up steam in
the last few years. We’re the second largest mass of population in the world and the largest unbanked
population. That is the size of the opportunity.”
“For a long time, the financial inclusion hasn’t happened as it didn’t provide a profitable model for the banks
to exploit. So, what is leading to this inclusion and formalization of the economy? Mobile has penetrated,
Aadhar, Jan Dhan, which has led to opening of bank accounts, data analytics. All that is aiding the financial
inclusion agenda of RBI in the country.”

Mr. Naresh Katariya : Global Economic Cycle: How Long Will The Party Last?
About: Naresh Katariya holds a bachelor of Engineering and risk management certification PRM. He has
consulting experience in investment banking, risk management and trading in global capital markets. He
has been a passionate full-time investor since 2014, applying analytical and sentimental analysis to value
investing.
This episode is titled, “Global Economic Cycle: How Long Will The Party Last.” He discusses and analyses
the current macroeconomic conditions and discusses where we could be headed, going into the future.
“Higher interest rates causes lower valuations of stocks.”
“As US Federal Reserve withdraws liquidity, it tightens the global liquidity, strengthens the Dollar and
weakens the currencies the world over.”
Naresh Katariya

Mr. Jana Vembunarayanan : 3 Bucket Investing Framework & My Learnings As A
Value Investor
About: Jana Vembunarayanan is a software engineer based in California. He developed interest in value-
investing after reading One Up On Wall Street. He started his investing journey in 2006 and he has
been periodically investing in index funds.
This episode is titled, “On Fragility and Optionality.” In his own words – “Both these ideas have somethings
in common, their impact on investment returns are underappreciated. The reason is that both these
concepts are hard to model.” He defines fragility as “a structural weakness in the business model, which can
decimate the earnings power of the business and therefore its value.” This episode provides an important
framework for analyzing, identifying and “stress testing” sound business models.
“Time destroys things. Things which survive is extremely important and index has this feature of
survivorship.”
“Over a 50 year period, a 7% return will make your original capital go up by 32x. The key point is to survive.”
“A company should be viewed as an unfolding movie, not a still photograph.”
Jana Vembunarayanan

Mr. Varadharajan R : Basics of Forensics & Scuttlebutt
About: Varadharajan is a self-taught investor with a focus on small companies ignored by Mr. Market. He
views investing as an intersection of economic incentives, psychological motivations and on the ground
tribulations. He has done several sessions on forensics, triangulations, scuttle butt and writes occasionally.
In this episode, Varadharajan talks about the basics of forensics and triangulation, the linkages between
financial statements and explains the aspects which are important to look out for while analyzing companies,
which help us in asking the right questions as investors.
“In the textile industry, most of these machines are imported and bought from maybe three or four players
and there is hardly any variation in the prices of these machines. How is it that, for example, company A
maybe spending 50 crores for 100 thousand spindles and company B, which practically goes to the same
market to go to by the same sort of spindles, unless there are some minor variations here and there, ends up
spending 100 crores. So there has to be some rationale to get to the bottom of.”
Varadharajan
Ragunathan

Prof. Sanjay Bakshi : Fragility & Optionality in Business Models
About: Sanjay Bakshi is one of India’s best recognized finance professors, who has been teaching
behavioral finance, business valuation, forensic accounting and corporate governance at MDI Gurgaon,
since 2001. He received MSc Economics from London School of Economics and Political Science and
B.com Honors from University of Delhi.
This episode is titled, “On Fragility and Optionality.” In his own words – “Both these ideas have
somethings in common, their impact on investment returns are underappreciated. The reason is that both
these concepts are hard to model.” He defines fragility as “a structural weakness in the business model,
which can decimate the earnings power of the business and therefore its value.” This episode provides an
important framework for analyzing, identifying and “stress testing” sound business models.
“You have to not just think about probabilities but also consequences. If you have a high customer
concentration risk, even though the customers love you and therefore, there is very low chance of
abandoning you for somebody else (which makes you feel safe as an investor in that business) that misses
the point of the principle I am trying to illustrate here. The point is don’t think so much of the
probabilities, but think of the consequences. Even though the chances of customers abandoning you may
be very small, the consequences would be particularly large, if, for example, you have a high fixed cost
structure or you have a financially fragile balance sheet. Therefore, as investors, we must focus on the
consequences of low probability events happening.”
Sanjay Bakshi

Mr. Abhishek Basumallick : My Investment Journey, Philosophy & Lessons
About: Abhishek has an experience of nearly 2 decades in the Indian markets and has witnessed many bull
and bear cycles. He is among the moderators of the popular forum, Valuepickr. His focus is on finding
strong long term compounding stories, that can help create investor wealth. He emphasis on creating the
investor mindset and reducing the behavioral biases, while investing.
In this episode, Abhishek Basumallick talks about his investing journey, describes his philosophy and
approach, shares insights and learnings based on his experiences and also talks about the mistakes he
made.
An interesting quote: “Whoever we are, whatever we are, as people, as investors, is a culmination of all our
past experiences.”
“Investing is something which forces us to be lifelong learners. The market everyday gives us feedback that
our knowledge isn’t absolute.”
Abhishek Basumallick

Mr. Gordon Dsouza : Investing with the odds
About: Gordon has been a private equity (PE) investor for over 12 years and a public market investor
since the early 2000s. As a PE investor, he has made investments across a variety of industries, which
include consumer, healthcare and industrials. He has also been involved in multiple exits in various
exit formats, such as IPOs, M&A and secondary sales.
This episode is titled, “Investing with the Odds.” Gordon talks about the key factors to look for
while investing and how investors can increase their odds of success by focusing on them.
Aspects which an investor can control: Understand risk and price it, time preference, return
expectation yourself!
Aspects which an investor can’t control: Price movements, financial results, management actions
and returns.
Growth is a function of three elements: The company/management edge, the business model and
the capital it consumes and internal processes.
Companies which constantly require capital for growth (either working capital or capex) are bound
to hit a growth ceiling.
Gordon DSouza

Mr. Amey Kulkarni : Investing in Lending Businesses
About: Amey Kulkarni is the founder of Candor Investing, a boutique investment advisory, which partners
with select individuals and family offices. He has previously worked with MNCs like L&T, Siemens and
Jindal steel for a decade, with experience spanning over India, Europe and African markets.
He invests in companies which don’t require external capital, have the ability to grow for a long time and are
run by honest management teams.
In this episode, Amey Kulkarni discusses about lending businesses and evaluates potential investment
opportunities.
“Stock returns are determined by how good the lending business is in recovering loans, not in giving out
loans. Recovering loans is very difficult – that is exactly why India is in the midst of a NPA crisis.”
“A high price to book value coincides with a low return on equity and low NPA’s.”
Litmus test for a lending business: “Is the lending business able to grow its loan book when there is liquidity
squeeze in the market?”
Amey Kulkarni

Thank You for Watching
Nooresh Merani
9819225396
nooreshtech@analyseindia.com
www.analyseindia.com

The Weekend MBA - IIC Alpha Series - Part 1

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