Mohnish Pabrai - Boston College Oct 9, 2014 Presentation

https://www.youtube.com/watch?v=dnS5xWIxo1I

APL Apollo Tubes

Recently I was bit stumped by the liquidity of the stocks in my portfolio. I had also sold some illiquid stocks and was a bit lost in getting a new concentrated big idea. As a stop gap I wanted to get into a good fundamental company which had liquidity.

The below article in Business Today impressed me.

http://businesstoday.intoday.in/story/shri-lakshmi-metal-udyog-best-emerging-indian-companies-2014/1/211904.html

I found out that it was subsidiary of APL Apollo (the erstwhile Bihar Tubes). The Annual Result of APL Apollo for the year 2014 was good. The shareholding for Sep 2014 quarter was very impressive.

The financials were looking lucrative. Based on the above information I had bought a few shares in APL Apollo. I am not at this point sure if it a long term or short term bet. 

P.S This is not a recommendation.

The unsung billionaire - Qimat Rai Gupta of Havells India

www.business-standard.com/article/opinion/bhupesh-bhandari-the-unsung-billionaire-114112001358_1.html

Bhupesh Bhandari: The unsung billionaire

New Delhi  November 20, 2014 Last Updated at 21:44 IST

Two weeks ago, Qimat Rai Gupta of Havells India passed away quietly. Born in a low-income family of Malerkotla in Punjab, he was worth almost $2 billion when he died at the age of 77 after a cardiac arrest. Yet the businessman kept a low profile and stayed focused on his work. He created minimum fuss in life - and in death. He always looked contended and unhurried; at times, he came across as rather taciturn. Yet he ran Havells with authority. There was never any doubt that he called the shots in the company. He would take stock of the situation every morning in a meeting with his key executives, including his son (Anil) and nephew (Ameet). Nobody dared to skip these meetings. His house in Civil Lines was big but not ostentatious. He travelled in simple cars, though he could easily afford the most expensive set of wheels in the world.

That's because people from humble origins know fortune is fickle. And Gupta's roots were truly modest. Early in life, he had even sold oil on a cycle in the villages of Punjab. In 1958, he moved to Delhi and, along with a relative, started a shop for electrical equipment at Bhagirath Place, a crowded market in Old Delhi. Over the next decade or so, he painstakingly built the business. His big opportunity came in 1971 when he acquired a company called Havells. Contrary to the perception that the name is of German extraction, Havells is the anglicised name Haveli Ram Gandhi, grandfather of fashion designer Rohit Gandhi, gave to his switchgear company when he started it several decades ago. He subsequently sold the company to Gupta, who was one of his distributors. There was no looking back for Gupta after that. From switchgear, he diversified into newer areas like cables, lightings, appliances, fans and geysers.

When I first met Gupta, he used to operate out of a cramped office in Civil Lines. The interiors may have been chaotic, but the energy was palpable. Cubicle walls had gaps so that senior executives could talk and exchange papers quickly. Some years ago, the company moved lock, stock and barrel to a swank 130,000-square-ft office called QRG Towers spread over 3.5 acres in Noida. This was also the time Gupta decided to reinvent the company. He realised that Havells was competing with strong brands in the market: Philips and Osram in lighting; Crompton Greaves, Orient, Polar and Khaitan in fans; and Finolex in cables. Still, most of the rivals did not spend more than one or two per cent of their turnover on brand promotion. Moreover, a large part of their promotion was below the line. In 2007, Gupta decided that if Havells had to break the clutter, it would have to radically outspend rivals. From around Rs 15 crore, the budget for brand building was bumped up to Rs 60 crore: over four per cent of the company's then turnover. It signed on Lintas Lowe to devise a campaign, and R Balki, the agency's chairman and chief executive, personally supervised it.

The brand, it was decided, would talk to men between 25 and 45 years of age (electrical fittings are selected by men, tiles and bathroom fittings by women), and for that, cricket would be the right medium. Fortunately for Havells, that was the time India had done badly in the World Cup in the West Indies. Cricket properties were going dirt cheap, and Havells was able to strike some amazing advertising deals. Ever since, Gupta kept the bar for advertisements high. Some didn't work, like the one for Havells fans that showed people wading through a pool of sweat, but mostly they were of a high quality. One immediate benefit was that the discount at which Havells sold its lamps and fixtures to market leader Philips soon vanished.

Gupta's biggest challenge came soon thereafter. In 2007, Havells acquired Sylvania for euro 227 million. Not only was it his first overseas foray, but Sylvania was much bigger than Havells. Digesting the acquisition was never going to be easy. The slowdown of 2008 drove Sylvania into the red. As a result, the share price of Havells crashed to a third. There was pressure from the banks to infuse capital into Sylvania to resurrect it, which would have bled Havells further. Some advised Gupta to sell off the company and cut his losses. Still others told him the new office in Noida was unlucky and he should get rid of it as quickly as possible. Instead, he decided to take the challenge head on.

One day in December 2008, Gupta summoned Anil and Ameet to his office and read out the riot act to them. Sylvania's plummeting performance, he told the two, was a blow to Havells' reputation. If they cannot turn it around, they would never again be able to do any acquisition. No banker would ever support them again. It was a challenge, but also an opportunity to prove their mettle. They had, Gupta told them in no uncertain terms, not run Sylvania well and had been happy to play the role of a financial investor. Over the next few months, the duo consolidated in South America, downsized in Europe, relocated the nerve centre from New York to Noida, and migrated production to low-cost factories in China and India. By 2010, Sylvania had turned the corner.

Gupta had an extraordinary life, and he chose to live it away from the limelight.

Rokda: How Baniyas Do Business

Rokda: How Baniyas Do Business 

by Nikhil Inamdar

my Take

This book basically features stories of entrepreneurship of people who happen to belong to the same community. There is no "how to" in this book. Overall a good read for all those interested in entrepreneurship. The inspiring stories of the following people are featured

Neeraj Gupta - Meru Cabs

Radheshyam Agarwal and Radheshyam Goenka - Emami

Rohit Bansal - Snapdeal

R.K.Somany - Hindustan Sanitaryware and Industries

V.K. Bansal - Bansal Classes 

The Longer long tail

The Longer long tail by

Chris Anderson

my Take

The concept of Long Tail can be explained by first talking about the head. The head is essential "the hits" and the tail is made up of "misses". In the music industry the head consists of the hit songs and the tail of not so popular songs.

In the brick and mortar stores, the inventory is mostly made up of the head items. Due to the cost of physical storage the tail items are not stocked. The web has disrupted this business model. The online sites have the head and the tail items in their stock. The buyers now have unlimited choice of items to buy.

This book has revealed that the tail does not become zero for the e-tailers. Thus the title Longer Long Tail. Even the not so popular songs and books are bought by customers. Thus money can be made in the misses as well as the hits.

The e-tailers also have another advantage over the retail stores. The tail items can be appropriately be given to the buyers by using filters. In a retail store with a huge choice, it becomes difficult for a customer to narrow down her choice. But in a e-tailer with good filters, the customer can have easy access to their choice of product

Mr & Mrs Khanna: The latest blockbuster on D-street tracked by market watchers

http://economictimes.indiatimes.com/markets/stocks/news/mr-mrs-khanna-the-latest-blockbuster-on-d-street-tracked-by-market-watchers/articleshow/45141382.cms

By Jwalit Vyas, ET Bureau | 14 Nov, 2014, 07.10AM IST

ET Intelligence Group: Every bull market produces stars — those who churn one multi-bagger after another. One such name which is being closely tracked by avid market watchers, and participants these days, is Dolly Khanna.

With stakes of more than 1% in 14 listed companies, Khanna's shareholdings are worth at least a few hundred crores. Most of these stocks — mainly small-caps — have multiplied several times, earning her a devoted fan following on Dalal Street in recent years. But, there is one thing that flummoxes them: they don't know who Dolly Khanna is.

That is strange because such impressive stock pickings usually spark frenzied hero worship, especially among those who prefer to piggyback rather than identify their own winners to make big money.

The only time her name pops up is when she buys more than 1% or more in a company. No one knows how she looks though traders' blogs have some versions of her identity. But, those market watchers who insist on knowing more about the thoughts behind picking the stock winners, could benefit better by talking to her husband, Rajiv. The low-profile investor revealed to ET that Dolly Khanna is a homemaker and that he manages her investments.

For Chennai-based Khanna, stock investing is more of a hobby than a profession. The Khannas own Kwality Milk Foods, which sold its ice-cream business to Hindustan Unilever in 1995. With the money he got after selling the ice cream business, Rajiv Khanna, 67, started investing in the market in 1996-97 for the first time.

company has given at least 70% of its profits as dividends.

Then, there was nothing stopping Khanna. He went on to identify small-cap winners such as Wimplast (more than 7 times in two years), Cera Sanitaryware (more than 7 times in two years ), RS Software (4 times in less than two years), and Avanti Feeds (more than 4 times in less than 6 months). Khanna's passion for picking stocks through extensive research can be traced back to his first job. A chemical engineer from IIT Madras, Khanna worked for ICI Ltd, a pharmaceutical company as a research person in the field of industrial explosives and blasting physics. In 1986, he started his company - Kwality Milk Foods. In the first decade of his investing career, gains from the market were modest. It was only after 2007 that the stakes started becoming bigger.

Dolly Khanna's portfolio (companies in which she holds more than 1%) has grown from Rs 1 crore in 2007 to Rs 175 crore at present. She also holds shares in several other companies but that does not appear in the shareholding of those companies. "We also have holdings in larger companies but we can't buy more than 1% of them," he said.

Khanna has held most of the stocks in his portfolio for a long time now but he has also played the momentum game. For instance, he had purchased 1% stake in Amara Raja Batteries worth Rs 13 crore in the June quarter of 2012 and sold the entire stake in less than six months for Rs 39 crore, making three times the profit. "I am just somebody who got lucky. People just see the profits we make, nobody knows the kind of hits we have taken."

Khanna's latest bets (bought in the last one year) include Premier Explosives, Mold-tek Packaging and Nilkamal. These stocks have at gained significantly from the time of the purchase. He declined to talk in detail about his investments. But, when asked about Nilkamal, a plastic product company and the only stock in which he increased his holding in the September quarter, Khanna said "Crude has started correcting. Let's see what happens." He claims he does not talk to company managements before buying a stock. "We purely rely on the public information and act on it."

ET spoke to top officials of three companies, including Liberty Shoes, Manjushree Technopak and Nilkamal, in which Khanna's holding is more than 1%.

The officials said they have not heard of Dolly Khanna. While the name is well-known on Dalal Street, few in the market know about Rajiv Khanna. "Although I have never got to meet them, I'vebeen hearing of them. They have been able to identify good companies at a very early stage and have made good money through investments," said a Chennaibased fund manager.

When asked about the investment strategy, Khanna said, "It all depends on the underlying market condition. Like in tennis you play different games on different courts — hard court, clay court and lawn, we also study the market situation and pick our stocks accordingly. It can be either a value stock, growth stock, momentum stock or buying based on technicals." He feels market is the most complex puzzle, "It's not the money, it's the challenge what is exciting. Money is just the outcome. And once you start to understand the game, making money is not difficult," he said.

The 80/20 Individual

The 80/20 Individual 

by Richard Koch

my Take

This book is a must read for entrepreneurs or want to be entrepreneurs. The book title may not actually reflect the link to entrepreneurship and also initially the book may be a bit slow but it definitely has some gems in it. Below are some of the points from the book which interested me.

Takeaways from the book

In 1897 Italian Economist Pareto noticed that a small minority of top earners had accounted for a large majority of the total wealth. The Pareto principle became widely known as 80/20 rule. This can be interpreted as 20% of the effort produces 80% of the result.

80/20 Individuals are those who concentrate on the 20% effort and create great value.

The Nine Essentials of 80/20 success

1.Use your most creative 20 percent

• Find the 20% of yourself that creates the 80% of your impact and happiness
• Nurture and grow the 20%
• Outsource the remaining 80% (partners or employees) 

2.Spawn and mutate great ideas

• Look for the minority of ideas that have already proven themselves to be highly successful (20%)
• Combine / Tweak the idea until it is successful for you

How to enlist and mutate great ideas

a. Circle your wagons: Define the domain where you'll use your great idea

b. Short-list the vital few ideas: 

c. Ferment a unique brew: Combine the ideas until you get a unique new business idea

d. Test, test, test

e. Confirm the economics of 80/20 enterprise

f. Discover the new 20 percent with the 20 percent

3. Find the vital few profit sources

"He that is everywhere is nowhere" - Thomas Fuller (1608-61)

• Changing the customer base - by targeting a smaller, but attractive segment of customers
• Changing the business formula - by improving the ways the new customer is served

Identify the vital 20% profit forces that give you the 80% of the profits

• People (Employees & partners)
• Customers 
• Products / Services

Vital few products and services

a. Think small : Honda bought smaller motorbikes to the US in 1960 when Harley Davidson and like dominated

b. Think big : Computers were meant for corporates when Steve Jobs wanted them to used at homes

c. Think upmarket : Ferraris , Rolex

d. Think mass market: Ford Model T, budget airlines and fast food chains

e. Provide more for less: Formule 1, a French hotel chain provides cheap small but clean hotel rooms with large, comfortable beds. The rooms are modular and mass manufactured, and you wont find lounges, room services or 24 hour reception, but the good sound insulation and low cost suits many business travellers just fine.

f. Use direct distribution channels : Dell

g. Focus on activities that have the highest ratio of value to cost: Cherry pick. Find sweet spots. Find activities that have the greatest customer appeal but require the least capital. Product design, branding, and direct selling are often sweet spots. Manufacturing, physical distribution, retailing through a fixed store network are often sour spots

4. Enlist Einstein

In 1916, Einstein argued in his general theory of relativity that time is not independent of space;rather, instead of three dimensions of space, there are four, time being the fourth.

Creating 80/20 time

Compress the delivery time to customers: For any business you are in or might enter, identify the 20% of activities that take 80% of the time and the 20% that comprise 80% of your total cost. Reduce the time taken for those activities.Check if costs are significantly lower or customer satisfaction higher. If so make the changes.

5. Hire great individuals

"If I have seen further,it is by standing on the shoulders of giants" - Sir Isaac Newton

20% of any peer group will typically achieve 80% of its results.

How to spot and hire great 80/20 Individuals

a. Understand the practical implication of the law of individual wealth creation: Hiring talent is much better deal than hiring mediocrity.

b. Exploit the theory of wealth/talent arbitrage: Talent is not difficult to spot. Grab it before your competitors do, and convert it into wealth-creating capacity as quickly and fully as possible.

Talent rarely gets paid fairly. At the very beginning of its career, talent is overpaid. But before long, if talent mutates into wealth-creating ability, it will be underpaid.

c. Appreciate the value of young talent

Hire the type of young talent that can become wealth generators quickly.

• Of these, hire the cheapest: if you look in the right places, you may be able to hire brilliant people for moderate pay.
• Favour the under confident and beware of the over confident.
• Hire to raise the bar in your department no matter how high it is already. Hire people whose potential ability to create wealth is greater than yours.

Lock in great talent by making them partners.

6. Use your current company to your advantage.

How to build your 80/20 business

a. Start a new venture

b. Finding a hybrid solution with the current employer

• Partnership
• Incubator deal

7. Exploit other firms

A new enterprise needs working capital, but should not need to invest in capital goods as there is already a glut of infrastructure and frozen capital. There are too many factories, too many machines within them, too many warehouses, too much retail spaces, even too many laboratories for research and development.

The essence of growth used to be physical-now it is intellectual.

How to exploit other firms

a. Identify the missing ingredients in missing markets: Mature companies often posses nine-tenths of the puzzle. They have brands, manufacturing assets, and access to markets, but they lack the imagination to generate growth. If you can find the small missing piece of the jigsaw, you'll be made

b. Adhere strictly to the 80/20 frugality principle: Only do the 20% of the work that produces 80% of the profit. Outsource the remaining 80% of the work.

c. Separate drones from star partners, temporary from permanent deals

d. Force birds of a different feather together: Individuals from your firm and the partners firm should work together

8. Secure capital

How to use capital

a. Use capital only when you can multiply it

b. Reduce your need for capital

c. Raise more capital than you need

d. Provide your own capital: 

Sources of capital ranked from cheapest to most expensive

• Capital made unnecessary by other firms (outsourcing)
• Suppliers and other creditors, and billing customers in advance (negative working capital)
• Own savings
• Capital from family and friends
• Bank debt
• Capital from existing employer
• Capital from alliances with other firms
• Public equity (stock market)
• Angel Equity
• Specialist industry sources of finances (e.g. insurance companies)
• Private equity
• Venture capital

e. Use the cheapest available sources of external capital

f.  Be obsessed with cash

g. Treat capital providers as valued partners

9. Make Zigzag progress

Finding the 20% of inputs that will yield 80% or more of results requires experimentation and insight.