Govind Parikh On Margin Of Safety Long Term Investing Wealth Creation

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you have to take a lot of calculated risks. Lot of companies may be available very cheap but you need not buy them just because they are cheap because there’s a lot of value. There could be value trap also. It could be a sunset industry where the future earnings are going to be down down and down. The best way to make money is in bull market right but you saying the best time to make money is to buy in beer market. Nobody knows exactly what is the bottom but there is a range in which you buy. After this the valuations are at absurd levels. There’s nothing more it can go down to. If it comes down more we buy more. You may ask how you have so much money to buy because we sell in good markets. Many people can’t sell at the top of the cycle because they are seeing so much of profit coming. But this profit is all history. The same profit in after 3 years is not going to be there. Have you observed any macro trend? My feeling is that India is in a very very good position today. If we play our cards correctly, we are in the best position today. There are very few countries which are growing at 6% plus. Some of the states which were lagards are doing extremely well. Pradesh is doing very well. Amount of money that can come to India, it’s it will surprise everybody. How do I know that this is going to grow at least 20 25% a year? When market is bad, first of all, it’s very easy to locate such stocks. Losing money in a bad share, even the good share also he will sell. So the price comes down. 2008 the markets were so bad that you were able to get stocks at such ridiculous valuations and the value of land in one of the companies was equal to the market cap of the company. Margin of safety you don’t not only see that the stock is cheap but you have to make sure that why it is cheap. Sometimes it is cheap because the future is not good. Sometimes future may be extremely good and the stock may be fairly priced or it’ll be cheap but due to some technical reason it has come down. For younger person you should be in the top 50 people who know about that company. Humanly for one person how many companies he or she can learn about. You should pick up only the industry leaders. You look at the leaders in that and you look at the price of those leaders how much they’ve gone up. For example, if you take cement industry in the last 10 years the cement prices average price has gone up by 1%. CGR compared to that the cost of sand has gone up the cost of land has gone up so much but the cement price has just been at 1%. The infrastructure development which was there in the last 10 years compared to that the infrastructure which is going to be there in the next 10 years is going to be at least threefold more. So this is the kind of industry you should look at. Give me an example of other industry right now. perform you think that this can gather a lot of growth. But one industry I feel which will do very well eventually is the now Germany is going to be another very very big story in the next 5 to 10 years. Why do you say so? So because all these years they were not doing anything in defense. America was a big brother. Now America said we I’m not going to help anyone of you guys. You be on your own. So all these guys are going to do a lot of spending on infrastructure on defense aerospace everywhere. They’re going to do lot of spending. You were very close with Hasha sir. One thing about him is when he’s talking with you, he will know what you have in your mind. Any company he’s thinking of investing first he will look at exit. But how will I exit that stock? Tell me something that you have learned recently which kind of changed your belief system. Stock market will humble anybody and everybody. Market on the whole is always superior than yourself. But when you think that you are superior than the market or you can turn the market around, it’s the beginning of a downfall. What is the meaning of wealth? if you’re not able to spend it. Hi everyone, I’m your host Shivank and we are part of the 01 network by Zerodhub. Together we intend to bring you insights from the top thinkers in the field of entrepreneurship, technology and investing. say investing they want to learn investing they can get better at investing also but investing in capital first reputed investors to invest longterm came with zero capital you know it was zero capital literally basically you know uh initially you should uh I mean try to see that you can make money you know ethically and uh I I mean you have to work very hard. Uh you have to try to meet a lot of people. You have to try to visit a lot of companies and factories. You should read a lot of balance sheet and balance sheets and you should also try to take advice of some people who are senior in the market and but never try to be become overnight rich in the stock market is it’s very difficult uh for anybody to become overnight rich. Uh so it’s a process. It is not that it is something like a tablet given to you and next 3 years you keep taking this tablet and from trading you become a very top investor. You make a lot of money. It’s not like that. Mhm. So there’s a process involved. So the main principle of this process is uh I would say that you should try to not lose money. First thing you should try to keep your expenses very very low. Okay, money saved is money earned and and then you should also have two things which are patience and discipline. So with this and with margin of safety like Warren Buffet says that you know if you if there is a bridge and it can take 50 tons of 50 tons truck on that I will only run 10 ton truck on that. So that kind of a margin of safety if you go with and you have to take a lot of calculated risks but every time you take a risk you should try to balance between the return and risk. You cannot uh take uh undue uh risk you know for high returns initially. So you can take calculated risk and keep saving money which is very important you know and then slowly you you’ll start building confidence and then you will you know start uh independently come out as a investor. You will know how since you have been following the stock fluctuations every day. You will know how you have become uh uh you know how the markets have moved in the past and uh that way you can have an idea about uh you know you keep improving upon yourself. Margin of safety app. What is margin of footy? See margin of safety is you know in stock markets there are times when you know the markets are so very very low. You take for example 2008 or take for example 2020 COVID times. Now during these times the stocks were at such low levels that there was a lot of margin of safety in investing because the downside was much much lesser compared to the upside. So generally you should ask tell yourself convince yourself how much you will not lose and invest rather than how much you will make money. So that is where I feel the margin of safety is important and when you you have to be very agile and alert and when you find that the things are turning around at that time you should buy truckload of shares you know. Mhm. And for that you should it requires experience and it also requires you know uh uh a lot of uh years of experience of course and you should keep revisiting your thoughts that whether you are right whether it has bottomed out like that because sometimes after the bottom also the stock price can go up little bit again it may come down it is never a linear uh thing. So that is where the margin of safety comes you know and uh when you buy the shares after uh uh a sizable fall Mhm. you should first of all you should know the valuations of the company. So value how to value the stock that is there are so many methods of that you try to find out the earning of the company future running of the company future growth of the company what is going to be the competition international domestic competition government policies international policies and availability of raw materials all those things after that you convince that and good strong management that’s the first important thing after that you are convinced then you can uh you know invest confidently in some stocks and the pricing is very important. It is not that you buy a best of the best stock at the top of the top price. You know you will never make money. For example, if you take when you know during peak times of tech boom uh vipro used to be two paid up share was 10,000 bucks. Mhm. And after that 25 30 years that price didn’t come. So that way you have to be very careful about your price at which you buy also the margin of safety comes there a lot see what price you buy the stock you cannot if this watch is the best watch then there’s still there’s a price for it you cannot buy it at any price okay I mean and of course lot of companies may be available very cheap but you need not buy them just because they are cheap because there’s a lot of value. There could be value tap also. It could be a sunset industry where the price uh where the future earnings are going to be down down and down. So all these things you should see when you invest. It requires a lot of patience and discipline and you know that’s what we try to do. Margin of safety sir I told you you know in the in the times when you buy a stock uh you should find out how much you will not lose and you buy for investment and then uh keep studying the company if it goes down more and more again you study it you know whether your initial thought process was right and you can add more and more shares and similarly you know if it is going to go up uh I mean similar thing happens while selling also but margin of safety more for buying is you must make sure that the stock is going to double into three years from today. So that is that is one sure thing should be there. Sometimes it so happens that a stock is very cheap but going down the line it can become even cheaper. a a P multiple of 7 8 may come down to P multiple 2 three also you know then there’s no growth in the company or there’s some fraud detected like recently there’s been fraud detected in a company so all these things happen so margin of safety you don’t not only see that the stock is cheap but you have to make sure that why it is cheap the question why it is cheap is important because sometimes it is cheap because the future is not good sometimes future future may be extremely good and the stock may be fairly priced or it’ll be cheap but due to some technical reason it has come down for example there is a a fund which is closing down the thing and they want to sell all their stocks so that they will definitely sell at any price and get out. So you should be aware that why it is cheap also for from the market sources you keep interacting with more and more people because generally in the stock market you can’t just be isolated and work just uh read the balance sheets and make money. You have to meet more people you have to meet more visit more factories and more market participants also and you should not get carried away with what all the fellow says then you’ll be confused. You should know how to eliminate things you know and but what you want to know you should know focus it correctly and then do it. So for for example if you’re going to listen to too many people they will get five followers you will say is very good three followers will say is very bad you’re confused but over a period of time you with experience you’ll be able to find out that you know whom to rely and you try to meet the managements also which managements to rely which investors advisor to rely like that you should do and then you should invest. So margin of safety is is is most important part investing in the stock market. You should only invest in something which is going to pay at least 2x in next 3 years or let’s going to appreciate with 20% at least every year. Yes. Exactly. So how do I know that this thing? How do I know you know probabilistically little bit more that this is going to grow at least 20 25% a year? How should I know about it? See, uh when market is bad, first of all, it’s very easy to locate such stocks because for some reason they are bad. Overall market is bad and if somebody is making losing money in a bad share, even the good share also he will sell. So the price comes down. So when market is very bad and if you buy you will always make good 20 25% upside when the market stabilizes or turns around. That is one way of looking at it. The other thing is you know when you are looking at a at a at a long-term investor an investment you must always see that you know this is uh why the stock has come down. I told you that and further you know you should also be able to find out that how much more the stock can come down from these levels. So if I feel that at some point of time it is at at a valuation which is observed valuation it’s it’s a it’s hindsight now but 2008 the markets were so bad that you were able to get stocks at uh you know such ridiculous valuations. A company having 12 13 factories and the value of land in one of the one of the and no debt and the value of land in one of the companies was equal to the market cap of the company just the value of land but people were just selling because these are illquid stocks of very very good top blue chip companies you know so I mean you know that you’re not going to lose because you have done your homework you are supposed to invest think a lot and invest in the market see stock market is not like you know uh you will not give any anybody money if suppose somebody comes and says I am ashok or I am TVs or I am bajan suit and say I I I’ll give you I owe you you give me 1 lakh rupees okay it is not that you can’t you will not give any money any money to anybody who comes and ask you money like that but you understand the company well so you have to your first thing is you have to do lot of homework about those companies and about the industry about the general you know market scenario and all those things before investing from trading to investing was because of you meeting your mentors right Nar sir and no sir no I I didn’t know anything I first met them uh and every time I was meeting them I was learning something new and uh when I was very very young we didn’t have any money So we bought some shares of Asian Paints uh 500 shares. Just then the public issue had come and my uncle also bought couple of thousand shares you know and then I didn’t know I was only watching the stock price every day and after a while the 31 rupees what I had paid for or 31 or 35 I don’t remember it went up to some 6575 and I sold it off. It was too much of money for me in about 8 n months doubling the money but my uncle never sold. So after 2 3 years I found out that the stock was going up and it went to 140 150 and then it went to 350 and all. So like this there were several examples of the investments which he had made like Bajage Auto. Those days we had invested in a company called Indian Rion which belonged to Biras and you know all these companies they did phenomenally well they were growing. so fast. Mhm. That you know I realized that if I had not sold at 65 75 rupees my Asian paint I would have got 300 rupees. So that was one of the biggest that that’s how you learn you know and it’s it’s an active process. Mhm. Even today you keep learning only you are always a student like my guru gi kishan choxi says never be a guru never be a teacher always be a student why because if you are a teacher you have to keep giving everybody the knowledge you don’t get anything because you’re a teacher but if you are a student you will receive from everybody so it is better to be a student than a teacher so even today you know a lot of new things are coming up lot new deep tech things are coming up. I don’t try to break my head over that. So we’ve decided to we’ve invested in a in a very dear friend’s fund who is a master at investing in deep tech fund you know from Chennai and uh we just depend we depend we know him very well. So the companies which he has invested we try to know what they are doing but I can’t go too deep in inside it now a because I don’t have the bandwidth now at this age to learn new things about space or about AI and all that at the same time you know the priorities are also not there much so it is are you talking about vish by any chance exactly vajaram especially in a very dear friend of mine so manav speaks a lot of things about you and Kishan sa uh Kishan’s grandfather grand tell me what were certain incidents and stories that you remember while you know spending time with Kishan sir that that had fundamentally shaped your that you that you’re remembering now you so do I’m sure that you must be having some interesting conversations yeah lots of it every year we used to go out to Bajage autoM like a pilgrimage and uh Kishanai and I we used to go and meet uh managements in south uh and of course in north also. So once Kishan and I we went and met a management of a big tire company which is the biggest company today in India. Mhm. Based out of Chennai. Yeah. Based out of Chennai. So it’s very difficult to get appointment with the chairman. But we somehow I somehow managed and we met the chairman and the chairman and we were after the meeting we were supposed to go to Raja Palyam for another meeting which is in beyond Maduray in the evening 5:30 train. So this meeting was at 3:00 2:30 or so. So we went and uh understood Kisan had a big questioner and the chairman answered couple of questions and then he said that we are coming out with a you know our new new project is coming up now and uh it will come up in next 2 years and the margins will be turnover will be doubled and margins will be even little better. So this company used to have a turnover of 200 crores and a margin of 2%. Oh 1% sorry. H and he said margins will be substantially higher. So assuming they double the turnover also which the chairman said they will do even better than that and margins will be better and assuming even if they double the margins also even then it means 400 crores turn over and at least 2% margin which means you know nearly four times what the what they made the profit any and and a company making you know four times the money in the next two uh the stock price has to go up. So we were in the lift. We were getting down. We got delayed. So we directly went to station and kiss by held my hands and shook it while I go in you don’t know this. I couldn’t understand then. I was very young. I said what he said he’s going to put up a new plant and okay some margin will come up and turn over will double and all that. But then subsequently later years I found out what he what he meant. And the stock price also I also bought a lot of shares at uh it was it used to 10 rupees share was 40 bucks. I bought a lot of shares and I sold them at 80 bucks and now the share has gone to unbelievable levels now. Of course it’s so many years past. So this is one of the incidents uh with Kisan you know uh how how much in depth he goes into a company. There’s one more incident you know next trip every year he used to come to at least twice to Chennai. So one other incident we went and met uh one other auto component uh company and that gentleman asked kissbai what are the good companies so said bajo is very good at some 100 paid up share was some 400 or 600 or something you know 600 so this gentleman said no no no I don’t agree with you know baj is a good share but you can’t buy at this price I will not give more than 400 rupees for that price for the share it’s a good company ra is a friend of mine. So, Kisser was getting a little restless. He patted me and he said, “Let’s go go in.” You know, finally of course Baj went became multi multiagger. Uh but from that time onwards I got a little uh bias towards this management. So I never invested in that company. In Chennai we have in Tamil Nadu we have many autocomponent companies in our investments but this particular group we never bought. So this is a prejudice. So this is one of the mistakes. Prejudices you should not keep things will change. So you have to keep thinking about the new generation may come new changes will come but this is a weakness you know. So we I lost the opportunity in investing in that also a very good group now. So this is one of the other incidents management. So they always put their best best foot forward. How do you know? I’ve met so many companies and their promoters are so bullish. How do you know? It depends. You know, some companies even speak less than what they’re going to do. There are some companies who do that. And classic example is a company which was taken over by a company in Chennai and the promoter said we’ll do 500 crores turnover and I mean 5,000 crores turnover and 500 crores profit in 5 years. Yeah. And he is understated. Then subsequently I told him that look this is misguiding the shareholders. He said no we had to tell that because we we owed that old company owed a lot of money to a lot of people. If we showed too much rosi rosi picture then those fellows will again sit on our head. So that was a smart thing to do. But yeah most of the times the most of the promoters are always bullish about their stock but we never listen to any promoter. I know almost all the promoters in south. I don’t listen to them about the stock price. So then what do you listen to them? I listen to I look at the body language. I look at uh his consistency what he had told last time and if that has happened uh the right steps he has taken it has happened suppose it has not happened there’s a delay in a project coming up by 2 3 months there was some agitation there was some delay in getting in put you you should know the truthfulness of the promoter second thing is you should know the passion you know how much passion it is about the company you know and third thing is you know the employees the employees should be equally passionate. If the top management is a crook, the employees will be crook. If the top management is a extremely and passionate, the the people down the line will also be that. So you should also meet those kind of people and you try to meet the employees also and understand you know about their passion not about the company but you know what what they are doing now and all those things and and a very very uh another important thing is you should also try and meet a competitor also so that you can understand how much this guy’s uh telling the truth and how much he’s exaggerating and you know that way you mean the competitor it really helps also that way. So these are some of the things which you try to you know find out when people are you are right most of the times most of the promoters are extremely uh bullish you know some are very passionate and some are not intentionally misguiding you but they have their own opinion about themselves about their company know they feel that they are the best so this is again a shortcoming you know some managements companies How are these different from northern companies? What have you observe? What’s your understanding? See, basically it’s stocks stock company wise you should see south or north you know there one thing is the south people are very conservative. Okay. Second thing is you know they’re very very good at technology you know they they are especially in Chennai Kimaturur and all these places if you see they are more interested in seeing the getting the best of the best plant in the world and they generally they will be in the top two or three you know in in the world also some of them or India definitely they will be in the top two uh so this is uh this is one thing which uh you know it differentiates them and uh other thing is you know most of the people the children especially are quite educated not that north also of course everybody’s these days educated but the main thing in south what I find is the culture not just the companies the culture in south is people want to educate their children send them to the best schools my driver or my cook or my servant anybody they want to make sure that the children are not a driver or a co-ar what they want to make sure that they study well. So that kind of a thing is happening in Chennai. I mean I it’s it’s I’m I’m very happy to see that happening today. You know they will even borrow money to educate the children the the young people. So that culture is there and industrial is of course a lot of them you know their children and all they also uh see there there are always uh different type of people you know but most of the good managements and their children also they study abroad and they come out with newer uh methods like for example you know uh uh a company is 50 years back they bought a piece of land you know they would have got it uh for uh 10 lakhs rupees land which was worth 40 lakhs then but and they are very proud of it and they’re keeping it all this time and they have a feeling that land is land land bought is never to be sold like that it’ll always keep eternally appreciating but this young guy who’s gone to Watton or Harvard or Stanford and he comes after MBA he says that look the 40 lakhs worth which I got for 10 lakhs Today it is worth 1,200 crores and I have debt in the company and today it may even the land may even appreciate but my priority is to make my company lean and you know thin. So he will definitely say we’ll knock it off that and then he will try to concentrate on this reducing the debt. he may go in for newer technology you know in the existing plants instead of sitting with the old laurels. So some of these new age entrepreneurs they are extremely extremely uh you know efficient and they really run the company very well and we have a couple of them who in Chennai who are extremely good and you like to think you like to buy things in bad market because bad market may you get things at cheaper value right but this is not the way but I’m sure that you also make money when the markets are good the best way to make money is in bull market, right? But you were saying the best time to make money is to buy in bare market. Bare market is definitely a best time to buy the thing because nobody knows exactly what is the bottom. There is a I’ve always mentioned you know perfect is enemy of good. You can’t be a perfect stock picker at the correct price you will pick it up or at the correct price you will sell. It’s very difficult. But there is a range in which you buy. So the bare market according to me is you know uh we try to keep a range that okay this range after this the valuations are at absurd levels. Mhm. There’s nothing more it can go down to. Uh that way you know we pick up those stocks and we wait a lot and if it comes down more we buy more. Now you may ask how you have so much money to buy because we sell in good markets. In good markets, you know, most of the people they have the kind of, you know, attachment towards their stock and every day they see the prices going up, their adrenaline goes up and you know the good feeling is there all through. But at that time nobody is thinking about nobody’s fearful nobody is thinking that the market can come down also a little bit you know or quite a lot. So nobody sells at that time you know they will only wake up when the start starts going down also they will not sell first instant if it comes down they will buy some more to average because they are still possessive know this their own property so everybody likes know their son to be the most intelligent they always feel that my son is the most intelligent fellow my daughter is the most beautiful girl everybody feels like that but same way in the stocks once you buy it you possess it it becomes of property. So you have a different rational about it in your mind. So this has to be this has to overcome to be very honest with you. I can only talk. I have I have not been able to follow it 100%. But I know that this is what you should be dispassionate at higher levels. You should start worrying more and also you should try to sell something. Let somebody else also make money. It’s not just a charitable idea, but it’s it’s a smart thing to do because at that level of the market, which is a zone, in that zone, if you have sold, you don’t know. You can’t hold somebody’s hand and say, “Don’t buy, man. The zone is between 80 and 100 and now it’s gone to 120.” He still wants to buy. Let him buy. But you sell. You keep quiet and don’t panic. After you sell, it goes up eventually. You know if it comes down you make a good good amount of money and then you keep cash that cash will be very useful in bad times. So one thing that we can learn from you is to keep cash so that you can invest in bad times right but have have cash where do you park this cash? Do you park this cash in your savings account or park this cash into some short form short-term uh you know liquid debt funds or or somewhere else? Five, six, seven, six, seven years back it was just lying in the bank and uh after 2008 seriously we started keeping some cash but uh afterwards we realized that we should keep it we should even that should earn a little bit of money. Mhm. So we started investing in liquid funds. We always want it to be liquid. I don’t want even to put it in a 15-day deposit also. That is not liquid for me. Yeah. It will take 15 days. Yeah. I want a 24 hours kind of thing. So we used to put in that or we will put it in saving bank. These days some saving bank uh which are not the top of the line banks they give 7.25% saving interest rate payable every month. So we just park it not idea is not to get interest idea is to make the money make the money available when you need it. And so um I want to understand how is your investing style different from your son’s investing style. Have you seen any differences? No. Over the years we’ve been generally doing everything together. So I think more or less we invest in the same way. It’s not that it is a it’s a not by design but by years of being together. Even before he was graduating, we had a lot of uh we used to I used to discuss talks and he was very keen to listen to that what was happening and all that. So but of course we have our own differences. We agree to disagree and we go on and so I and only one thing difference is you know with my experience I’m more aggressive than him though I am older one friend of mine used to joke that if I ask Goind to buy he will buy one lakh share but if I ask Shinmai to buy he will buy shares for one lakh rupees that was a joke actually but yeah I mean he’s doing good and especially in the new age companies he’s very focused and where whichever companies he’s looking or industries is looking into it. He does a good homework actually which I’m very happy about. And sir, what is your core competence of industries? What kind of industries you only invest in? Do you also invest in outside those industries, those core competencies or you invest in anything? Industries as such is not very important. We invest in stocks basically individual stocks. So you know cyclical for example you know now if if you’re investing in cyclical the whole cycle is good. everything will go up. The worst share will be available at the cheapest price and then it’ll go up the maximum compared to the best share percentage wise. But after a while when the market crashes, this fellow will disappear. So that is why you know for cycl cyclical stocks you buy them when they are extremely cheap, you know, and then you also sell them when they are little less cheap than the fair value. You don’t even wait till the fair value is reached because it’s a cyclical thing. You know for sure that the cycle is only 3 years, four years like that. And now we are on the top of the cycle. Unfortunately very few people can sell. Even I can’t sell but very few people can many people can’t sell at the top of the cycle because they are seeing so much of profit coming. Uh but this profit is all history or paper profit. No, it’s it’s actual profit. Yeah. Okay. But it’s a history. The same profit if the after 3 years is not going to be there. Okay. And the stock market works for the profit after 3 years not the correct the profit today. So that is what is uh learning one should do. Yeah. How do you know what stock is cyclical and what stock is not cyclic? Generally what kind of stocks are cyclical? What what industry what sectors are? Generally businesses are always cyclical but there are some companies um you know which are which have so much of potential ahead and you know like you take for example infrastructure industries. Mhm. Couple of companies which are very unique you know they will continue to grow because in India infrastructure is going to grow in a big way. So they will grow keep growing keep on growing you know and a good management at the top will try to make sure that at the top of the cycle they will try to conserve the resources they will try to they will be prepared for the next 2 three years of lull period in that lull during that lull period by the time the lull period is over they will be ready for the next boom so this is the quality of a top class management you know they they will keep themselves ready for the thing which is going to come after one or two years. So they think ahead of others. So this is one one thing we look at actually. But how do you know what is cyclical and what is not cyclical? Generally if we understand what is what is cyclical means you see metals for example they are generally cyclical. Okay. Because you know uh there’s always a boom and the bear this thing you know uh slow down uh suppose government spending is uh going to be there for some time and then after that it comes down you know then then you know some of those uh I’m not able to exactly define which are cyclical but generally commodities are cyclical if you take sugar for example every 3 four years there’s a I’m cyclical or non cyclical you will you can only know by the history it is very difficult to predict that is going to be cyclical or nonyclical first thing I’m telling you okay cyclical or nonyclical you’ll know only by history that in the past the steel cycle was very high like that suppose there is a war then there’s very big boom in steel very big boom in everything like that you know uh you know war related things there’ll be a very big boom in those things so it is very difficult to exactly Say that which one but paper industry for example some of the textile industries, chemical industries they all are cyclical because sometime not chemical specialty chemical but some chemicals also because what happens is after a while when the period is very bad then you know people start putting up more and more capacity they good period is coming they’re making money they put more more capacity the capacity is so much then too many people have also gone into that so in the next few years they will start seeing that the margin shrinks. So these are the kind of companies which are cyclical. Very interesting. I’m not able to exactly correctly give you a you know pinpoint answer to that question. So so right now in how many years are you able to double your money? No, we are not interested. We don’t look at that. No, but you mentioned key you want to double your money in the in a specific company which we invest. We make sure that we should it should double in see today’s uh today’s thing I’ll be very happy if I can compound my money at 15%. Why do you say so sir is it a function of the interest rates it’s a function of the basically interest rates you know interest rates if I put in fixed deposit I get 7 7% or 8% the debt debt will give me about 8%. Some little bit of risk I take maybe I get 10%. So I should be able to get about you know 4 5% more than that but related to inflation also you know inflation is so much the interest rates also depending on inflation. So interest rate is inflation is high five 6 7%. And you get about 15% means you get about 7 8% above your inflation level. So that is but with 15% rate of return you will be able to double your money in 5 years. I mean it’s okay. Okay, see basically today the question is uh the valuations have gone up so high uh because there’s so much awareness of stock market in India. So it is actually penetrated so much that people are willing to take risk, take better bets. Big big companies are uh you know having their family offices. The young fellow is coming and starting a family office. He’s he’s happy to be in a family office. I don’t see anything wrong though there are some very big stalwart who have said that big people don’t want to come and do their own father’s business. When I was young, I used to, you know, people used to say our friends in school that okay, you’re uh what are you going to do? I’m going to uh you know go for a job. Somebody says no no I’m going to be in my family business. So being in the family business was something to be very proud of. But uh over a period of time now most of the companies are very very wellrun with professionals. So in a young entrepreneur who’s very well educated his idea should be he’s it’ll be nice if he can control the top guys and he can get the best talent to do the work. He need not be a hands-on guy in his business but he should have the talent to which is top class talent. So his strength is in that and then if he’s got extra money you know instead of putting new projects where the payback period is 6 7 years this young guy can go and say that okay boss I will invest the money elsewhere and make that much money and he’s in the industry so he’ll have access to all the other compet people in the industry also and also lot of lot many companies also they will know so it makes sense for a guy to run a family office and there are some of them are very very smart guys some family offices they invest in startups you know in Bangalore you go and see all some of these guys the kind of startups they’ve invested and kind of money they’ve made you know earlier to reach 5,000 cr people used to take 50 years 25 years still the company is 3,000 4,000 crores today a young guy is coming and you know he’s putting up a startup company three four guys and then you it becomes a unicorn in no time. So all these things uh you know there is five years today our our main aim is to protect our money. Our aim is not to earn money more now because we we live in relatively simple life compared to our wealth and we like to do it. It’s not that we as a snobbish this thing that oh we are very simple not like that. We generally like to do it you know. So uh it’s by God’s grace and by a lot of luck of having been in the market in 80 and beyond in those days when market was so inefficient and getting the right people’s advice in the initial days and even now so we have been able to you know uh we we have we have made some reasonable wealth. So we are we are happy to protect this wealth rather than you know taking more and more risk. It’s not that we don’t take risks. The risks have to be calculated and the automatically sometimes you know lot of things will become so obvious for you to invest and then you can with your experience you can buy truckloads of them. Tata Motors came down to about 62 65 rupees uh couple of years back. I don’t know how many few years back you know maybe 10 years back or 8 years back 65 rupees Tata Motors came down to I’ve seen Jamu I’ve seen the factories I know what Tata Motor companies at that time is not going to close down a company like Tata Motor is not going to close down and we started buying from 80 rupees and it came down to 65 we still bought so that time you can buy a big truckload of shares like that you know two things that I want to ask is you know you mentioned very interesting thing frugal living frugal living right yes right uh what is the meaning of wealth if you’re not able to spend it well I’ve been I’ve been we’ve been taught like that to preserve the wealth and you know little bit of I mean I’m I’m not doing enough justice by you know helping some people uh philan philanthropy and all that which I should I should do but uh you know what is the meaning of wealth is a is a different thing it’s sometimes it becomes just a hobby it’s it’s been created over period of time little bit of effort I put but mainly it is by luck and god’s grace that the wealth has come so the we don’t want to we want to make sure that we don’t lose today because it’s very very difficult to take a huge loss suppose if you have a a a a a a you know a line and then above the line is uh you know your gains and happiness. Okay. So if you if you have 50 number of gains and happiness is 50. If you have 50 loss your sadness will be more than 50. People when they lose money it it hurts more than the pleasure of making money. And it doesn’t make a difference because we make sure that we are not borrowed. So we life is going on like that. I I don’t know uh I can’t answer the question. What do you think is making wealth? We are not running after wealth. We are not running after wealth at all. You know we just invest and sometimes it clicks, sometimes it doesn’t click. So you have to be careful. No. And age also counts. I your age I will risk I will say I have to become a Radani or something like that you know. But today I know at the age of 66 I don’t want to keep running after you know like that there are other priorities in life also my health is important, family is important, grandchildren is important, so friends are important. So, so tell me do you see any have you observed any macro trend that you are playing that you have observed in the past currently in today’s in 2025 today Irend I feel that my this is my feeling because it’s uh I I I’ve been reading a lot about uh Trump and uh about the tariffs and about China and about Germany and all that my feeling is that India is in in a very very good position today. Okay, if we play our cards correctly, we are in the best position today because there are very few countries which are growing at 6% plus. And second thing is we’ve not grown to the extent like other advanced countries number from 1 to 10. If we are at two and others are at 7, 8, 6, all that. So we have to only grow. There’s no other way we can’t go. And third thing is the population. Mhm. Education is being I’m very very happy that everywhere education is going up and fortunately now some of the states which were lagards are doing extremely well. Uttar Pradesh is doing very well. I was having a chat with somebody unbelievable work is being done in Uttar Pradesh. And now this Chadamun, Sabharati, Andhra Pradesh, you know. So most of the states also uh I mean there is there is you know uh a lot and lot of potential in India to grow still today but uh it will be in some pockets there could be disappointment. Mhm. because of the change in technology like AI and all it will take away a lot of jobs in the lower level you know kind of thing you know but uh otherwise if you if you see the uh long-term outlook and amount of money that can come to India it’s it’ll surprise everybody Mhm. because uh normally in the past I think 10 11% of the total global funds were in emerging markets and it came down to some hardly nothing now and China was the biggest beneficiary of emering market and then India was there others others were also there Korea and others now I feel that you know uh the emerging market because US is not going to do very well Europe has also got its own problems The money is still there all around the world. It has to find some place. So if we play our cards correctly, I think lot of lot of foreign money will come to India. But what do you mean by playing the cards correctly? Sir, see for example, I’m talking about portfolio investors. It used to take 6 months for somebody to open account in the past for KYC this that palana tikna. So many things were there. I believe they’ve reduced it to some 6 weeks or something now. So ease of doing business, ease of entering India. See earlier there was a fear that you know it could be misused. Some well well-run companies could be taken over by competitors who have money abroad and all that. These days it is not so easy you know like that. It is not very easy you know. And other thing is the amount of uh opportunities people have worldwide. Very few opportunities are there for people to invest. So eventually I think India is going to be the the place in the next at least 3 to 5 years. I’m extremely bullish. And so tell me something that you have learned recently about markets or life which kind of shocked you or which kind of you know taught you something differently which kind of changed your belief system. Has something happened? See frankly something which which has taught me something differently. I keep learning and this is the kind of examination which you keep writing every year and you keep failing and then your next year again you start studying again you write the exam only thing is initially I was getting five marks out of 100 maybe I have gone to some 25 30 marks but pass mark is still 40 so you keep failing and then you keep learning but then failure is a must in stock market if you if you’ll not fail then one day you’ll collapse so what has been one learning from failure in the recent times and what is one learning from success in the recent times? failure one one one always uh uh mistake or whatever you say which which I have I I want to learn but I have not been able to learn is that being a scared investor you know and uh also now I’m getting old I’m not doing enough homework so we sell very early so that’s a mistake I’ I’ve been doing and of late I did very very big way I did mistake couple of shares which I sold and they’ve gone up three four times in about a year and a half or two. So that is the biggest learning that you know you should not be in a hurry to sell everything. Why did you sell these shares sir? Because you have sold it’s gone so we can learn from them. It’s uh there’s a very important thing in stock market. Good qualities for investors are patience and discipline. bad qualities or worst enemies of a investor is greed and ego. So I have greed but more than the greed I have a lot of ego. So because of the ego once I sell the share and if it goes up I start not questioning you know I don’t I I I’m supposed to start find out why it is going up and do again my research. my research has failed. But the ego says that my research is always right. You know, if it has gone up a little bit, I will sell more. If it has gone up a little bit, I’ll sell more. But that time, I’m stupidly thinking that by selling the market is going to come down and satisfy my ego that what I did was correct. I would have told 10 fellows also. So that all that thing is in getting into my head ego. So the price going up ego is hurt. Okay. So you want to sell and then you don’t want to listen to anybody. Some wellisher who is connected with the company he knows about the company. He’s done better research than you. He’s telling you some new points. These are the reason boss it’ll go up still. No you said no I know better. I know I’m right. When I’m selling a share at 2,000 it goes to 2,200. Mhm. Whole world is full. Many people are fooled at 2,200. I have to sell more at 2,200 to teach them a lesson. And then it goes to 2,400. I feel the whole world is fooled. So this is a kind of uh reason. You know, you you explained one crane analogy. Crane crane one. Tell me another analogy like that one. Can you think of any other interesting analogy like the crane one? Yeah. basically you know process of elimination in that context I had mentioned so you get lots of ideas from lot of people and analogy I’m not able to immediately think about but you know uh you get lots of ideas from lot of people and then you should learn to how to process those ideas and you should learn how to not listen to people so what I do is uh when I’m extremely bullish about a sector and a company or about the market on the whole and somebody comes and gives me one big nan about you know he may be my best friend he may be so bearish he will give me marry stories I don’t want to change my mind I listen to him but once I made up my mind I don’t want to change the mind so that same way you know when I’m uh uh extremely bearish and somebody comes and gives gives me you know uh this is good this is good this company 10 times it’ll go up there we want to keep off that got it do do you still hold a 3M sir every share we hold we don’t sell in fact two years back I went and met them and they were kind enough to show me their experience center and is one of its kind and now with rupees strengthening and government also insisting on more imports I mean world US is insisting on more imports it’s a great company actually it’s very difficult ult to replicate a company like that. So tell me what about you sold about one and a half lakhs above that previous part. I have not seen a factory like that. Uh I had I used to see Bajo earlier. So it should also be they also would have been changed. Interesting. Of late I not been to Bajage. So that’s one great factory I’ve seen. The other one I have seen is Kaborandum Universal. They have a ceramic unit. That’s also very very good actually. So a very very good plant. something that not very many people can do that those kind of plants. It is very difficult first of all to understand the company and the product is used in all the industries. As long as there is a growth in India, they will grow two times the GDP growth at least and uh you know each and every industry they’ll be used and especially infrastructure in India is so poor. It is really making me very excited about future. Of course now things have changed quite a lot compared to what it was earlier but if you look at u you know those days I remember we used to stand in the queue to pay electricity bill and that kind of thing 2 hours you waste to pay electricity bill so this digital economy payment system is fantastic it’s one of the best in the world I will say this is our UPI econ farmers also things have been really going up very very well. India is really in a very very good wicket. Is there any other plant that you have visited which was which was very interesting in recent days which you find very unique. No, I’m not visiting that many plants nowadays. In the past I visited Dr. Ed’s lab, Dr. Ed’s research lab. I went to Dr. Ed’s. We recorded an episode with him at the at their plant. It is crazy. It’s in Hyderabad. No Hyderabad one. With whom? with with GB Prasad sir. GB Prasad I have talked about the Anji also Dr. Anji ready Dr. Ranji sir. So crazy. You have met him also? Yeah. Yeah. Yeah. Many times. So you you you mentioned that you remember you you were very close with hers ma sir. You mentioned it somewhere. No. I was not very close. There are many people who are very close to him but he used to come to he came once to Chennai and I used to know from my friends in Bombay that he’s been a growing star and all that. So he came once to Madras stock exchange and he wanted a you know north Indian broker. So those executives there told him my name. So I met him and he came to my office and then you know he wanted to place some orders and all. STD was not there in those days. Okay. I mean in on the floor no cell phone no STD on the floor also but my office there was STD so he wanted to make some call that I came to know him like that. You know he was very extremely bullish on and I had some inside information that company’s not doing well and all that. So initially he was refusing to believe later on he said yes you what you said is right and he became a good friend. Very interesting. Is there something that you have learned from him? Because you know people say a lot of stories but what is something one thing about him is uh you know when he’s talking with you he will know what you have in your mind. If you talk about a company, he will any company he is thinking of investing first he will look at exit where how will I exit that stock and then enter. So these are all the qualities of him it’s unfortunate. Mhm. And there are some of the I mean the qualities which are not right in my opinion again you know I don’t want to tell anything about a person who’s not there but then he got he got a lot carried away by with people around him you know some of them used to you know put him on the moon and all that kind of thing you know so once it goes into the head you know Mhm. The stock market will humble anybody and everybody. Okay? Market on the whole is always superior than yourself. But when you think that you are superior than the market or you can turn the market around, it’s the beginning of a downfall. So one question that you often ask promoters when you meet them. I don’t meet them much nowadays. So one thing what we do is when we meet anybody, we do a lot of homework. These days Chinmai does it. So he will do a big questioner and then we’ll sit on the dining table and he will ask me these are the questions I’m going to ask like that. Okay. And I will also have a look at it and if I have to add one or two points I’ll add otherwise he will do the act. And how old is he right now? He’s 84 December bond. So okay 16 plus 25 41 41 41. So what where do you see the craziest growth from now? Is there some specific industry or sector where growth in the industry? I think overall there will be growth in all the companies you know uh especially Indiacentric companies will do very well uh India they are not much dependent on the foreign products like uh if you take cement for example cement only thing they are depending on is oil is which is imported commodity but oil is oil prices are generally soft and likely to remain soft so that way you know uh Indiacentric companies will do well but otherwise you know you should look at you you can make a lot of money by buying some good companies at a wrong valuation mispriced valuations but how do you find those see you you have done a lot of work studying those companies you know those companies thoroughly see first thing is for a youngster like you I will suggest don’t go and uh do a research on 10,000 companies business you you just study a few companies but study them very well and keep studying them and then you know you should be in the top 50 I’d say today in the country those days who understand those company who who who understand better than the rest better than the rest top 50 those days it was you should be in the top five during my times 80s and all that you should be in the top five in India to know about those companies but today you should be in the top 50 to know about those companies Mhm. Because there are so many people researching. Mhm. And again that you wait for the time for the company to you know for the stock to come cheaper. Yeah. No so you don’t wait for that but then where where I see the biggest growth. Mhm. I see the biggest growth uh you know in a very bad market if you buy the biggest growth will come. You take for example COVID times this came down to 1,800 rupees Bajas finance after that it went to 8,000 bucks or 10,000 bucks crazy it’s only 5 years that’s a very big money so big growth will come like that a lot of companies were like throwaway prices they’ve all gone up four five times so in a bad time if you’re going to buy that is going to be the making the biggest growth so I mean it’s not that you expect it to come. Your aim should be to only make sure that you know the companies. You know the company not know the company. You know the company better than most of the people. For that you have to toil. You should try to learn so much about those companies. Visit the factories, visit the this thing you know competitors you know try to talk to as many people as possible. There are some companies there are some specialists you know in that company he knows very well about chemical so you talk to him you go and talk to some friends who are connected to some chemical dealer okay you go and talk to some friend who who’s in import export so he will tell you about the you know industry logistics costs and all that how it’s going to be all those things you know you should do more and more work on those companies so then then it’s going to be a very very good decision going to happen. Is it also true that you know you’ve mentioned it many times key you you should have cash to buy those companies in bad times right so how do I know that how much cash should I keep as a rule uh it depends on how much is your worth of portfolio okay but one thing is you should never have borrowing and second thing is that you know the The money which you have put in the stock market. Mhm. It should be not the regular required money for you for the lifestyle. For the lifestyle. Mhm. Okay. Plus little bit of money for emergencies. You should have the balance money only you should put to the stock market. You should study companies for younger person. You should be in the top 50% top 50 people who know about that company. I want to know sir how many companies humanly for one person how many companies he or she can learn about no I again I can’t answer that question because it depends on the human being individual persons they have individual appetite so for example let’s talk about yourself at one point in time when you study whenever you were studying and whenever you study now at one time how many companies do you keep a track of or do you study and do you know of no but at that point of time idea was not to look just for investment. My idea was to make money. Okay. So I will I will not study too many companies but I will know the prices of too many companies and I will do trading and I will I will those kind of things there. But otherwise you know you should basically at least I will suggest if you have some some money your family wealth and you have some extra money which you’re investing you should pick up only the industry leaders you you study the company you study the industry which is growing well which will which will grow well which has been in bad shape for the last so many years in the next couple of years they may do well First the second thing is you look at the leaders in that okay okay and you look at the price of those leaders how much they’ve gone up for example if you take cement industry in the last 10 years the cement prices average price has gone up by 1% caggr wow cement price only 1% 1% compared to that the cost of sand has gone up the cost of land has gone up so much the cost of wages have gone up the cost of cons I mean oil everything has gone up last 10 15 years but the cement price has just been at 1%. And the infrastructure development which was there in the last 10 years compared to that the infrastructure which is going to be there in the next 10 years is going to be at least threefold more. Okay. So this is the kind of industry you should look at. Plus it is also depending a lot on not depending much on the outside uh whatever happens abroad. Cement is not something which can be easily imported. Steel can be imported because it’s got a value and China can import it at a lesser cost. Yeah. They can export it. Yeah. But in cement today one I mean at the lower level now that the of course the prices have gone up cement prices but in at lower levels even your uh you know uh one bag of cement which is 50 kilos of cement if you if you remove the GST then 1 kilo of cement was available around 5 rupees you’d only get even a chocolate for 5 rupees way. So and most important thing is see cement is used in housing mainly. It’s also used for infrastructure projects and all that. But for housing, you know, the amount of value of cement in a in a house, the content is much lesser. Now the price wise, you know, uh because earlier the land prices were low and cement prices were reasonably good. So it meant a big thing. Today if cement price goes up a little bit, it not much change in the over. Yeah. Huh. So this is the kind of industry you should look at. Give me an example of other indry right now. But do you think you think that this can gather a lot of growth because it has not worked for quite some time and it’s a good time to look at this industry. It’s very difficult to you know judge that because it’s a very fast changing scenario. Makes sense. M you know globally things are changing so fast but one industry I feel which will do very well eventually is the hospitality industry will do very well. Why do you say that sir? Because uh more and more people are now wanting to travel. The wealth effect is there. More and more people want to travel. I’ve been last 7 months I must have traveled about 7 8 flights I would have taken 8 nine flights I would have taken every time I went by do flight it was full the second thing is you know the number of work hours also will reduce with the technology okay so people will have a lot of leisure time and and also nowadays you know earlier it was very unaffordable to go abroad Now people and now also it’s not not very much affordable now but there are lots of places in India which are developing very well so people will also like to see those places in fact we’ve traveled most of the places around uh globally but in India a lot of places we have not seen so we are very keen on seeing those places so likewise lot of people will be more willing to see places in India where you get easily food you get easy accessibility and you know so that can that is one thing which that industry I feel will do well but of course you have to look at the individual stock prices and you should buy at the right price you cannot buy it at any price you know anything for example I mean Indian hotel three three years back 800 900 now you’re talking about multibaggers 800 covid time it was I think 200 I’m not sure but it was Even less maybe you bought it you right the way we’ve been holding for a long time. Wow. We didn’t sell luckily. So but 800p you can’t buy. No you can buy. Mhm. I’m telling you see it is I I can’t comment whether you can buy or can’t buy. Right. Right. But if you see this new CEO who has been there Mhm. he’s coming out with such very many novel ideas you know. So there’s a lot of change in happening also. So again you look at the leader if the industry is going to grow you look at the leader at a fall you buy and fall you buy and you be prepared to hold on to it because you know today we went to Kunor and we stayed in there one of our friends’s bungalows who was given it to Taj five bedroomedroom bungalow beautiful bungalow in the thing you know and you know he’s absolutely pure vegetarian so which is again it’s a unique thing he’s gone now Taj has taken that So some 25 days or 1 month he has given to the owner. Balance Taj is happy. Taj has kept one chef of this and everything inside is managed by Taj. The owner is also very happy and there is no capital employed for Taj. He got the land everything. He’s only providing a service and his name Taj and there is no capex going into you know buying a land creating. like this you can have 500 bungalows all over India you know with the Taj brand. So these kind of companies will do well. I think the third sector is you know people are uh you know talking uh uh there are some standard sectors like auto components and all that they will definitely do well because it’s very very diffing you know basically it’s very difficult for uh other countries to compete some of our companies have become so good comparable to any any world-class company can you give me an example of a company which is so good that’s comparable to a world-class company sir many not one mhm there are many companies like that sundam fastness mhm it’s like a world-class company TVs of course is a multiversal company a world-ass company Bosch everything everything in India all these are world-ass companies and the the best part is you know their delivery schedules are very much in time their pricing is very good their quality is very good their product is as comparable to any other top class company in Germany. Mhm. Okay. And other thing is you know lot of some of these forging industries and all they were closing down in Europe. So lot of work is going to be moved to here in India. Sometimes back Timkan uh marrying company in America some two products they wanted it to be done in India you know just the two products for the whole world only India will make it so these kind of companies will do well because there’s continuous market for them and also the size of our companies you know is so small the contribution is so small it doesn’t make much difference in the world scheme of things you know so now with China and America in trouble with each other uh they have put tariff of 25% 26% reciprocal of tariffs I believe they paused it for 9 months but any tariff comes now General Motor is some manufacturer here is supplying for 50 years to General Motors and you know every year they’ve been getting supplier of supplier reward from General Motors so these kind of companies is Jambod is not going to say bos we won’t buy from you. This is an Indian company. Indian company Chennai waste yes and there are so many uh other people you know other countries they’ll make the similar product but then their tariffs are even higher than us. First thing second thing is they always have you know a a contract for 6 months. Mhm. So you know any price change you know if the suppose raw material prices go up the they get a higher price from them. If the raw material prices come down they cut the prices. Similarly with the dollar rate going up and going down. About Germany. Now Germany is going to be another very very big story in the next 5 to 10 years. Why do you say so? So because all these years they were not doing anything in defense because they were America was a big brother. Now Americace everywhere they’re going to do a lot of spending. But so how does it help us? How does it help retail Indian again? Again you know the companies component companies and all it’s not very easy for them to do it do anything everything. So they cannot do they cannot do it even if they want to because the the wages are very high there. Right? first thing and uh second thing is why should they do it at at a higher cost if they landed cost for them is cheaper so they will get it outsourced in company in countries like India so if let’s say defense let’s say you know defense company defense industry is rising in Germany what kind of industries in India will grow uh parally all the all the companies which are uh you know supplying to uh the defense industry how do kind of arts. Well, that you should find out makes sense. Army needs helicopters. So, what are the companies which are supplying helicopters? They may need software, some specialized software. So, which are the companies who are doing that? They may need tires. Of course, tires anybody can supply you know like so many products some parts are there. So, electric vehicles lot of movement will come in future. So, we have to see what happens there. So, it’s it’s as I told you you know learning is learning is a very active process. learning next interview sir we are hosting we learning from very good he’s is very he’s my guru actually is everybody’s guru to try to understand the company and the industry very well understanding the annual report I can teach you in three 3 hours okay he said in 3 hours I’ll tell you how to look at the annual report but how to look at the company you should go there and find out that is one thing he taught me I don’t know whether he’s now going to be much interested he’s more into meditation and all that he’s a he’s in the board of along with my friend Prakasarogi all in the board of that yeah Praas is also an investor no he’s not an investor he owns a company called go colors oh yeah yeah they based out of Chennai no his son is now leading goautam I see so what you can ask him. Yeah. To learn and understand things which can help changing now I’m I am talking about wab in ’ 80s. So today you he will start telling you guys you know you be Indians be true patriots that’s the thing he cannot I don’t know what you can ask him and you have to decide you know. Okay. What would you have done and you have the energy of a 20y old what would you do? It depends on you know how much wealth I have and how much wealth I’m contented with. So I will only concentrate on my health when I if I’m 20 now I will concentrate on health to live for at least 120 and and and and and tell me if you were in 20s you knew all the big people right? I met all of them. Everybody has become big. Let me put it that way. But who are some young investors that you think do of the world is of the world of the world that you bet I meet a lot of youngsters but I’m not able to make out because each person is different. Each person’s style of investing is different. Some people are uh interested in you know uh quick trading and they’re doing extremely well also. Mhm. Some people are interested in real bulk bulk business you know. Mhm. So they will buy you know for 100 crores 200 crores at a shot and then after some times knock it off. A lot of people are there differently. It’s very difficult to pinpoint one person. Got it. Got it. No I think so I learned a lot of small things from you. You were also you shared a couple of interesting points that was very helpful. Thank you so much for this sir. Always a pleasure. Really grateful.