Hiren Ved Reveals the HATED Sector for India's Next Billionaires

ELI5 / TLDR

Hiren Ved is a third-generation investor who co-founded Alchemy Capital with Rakesh Jhunjhunwala in the late ’90s. Over two hours he lays out how he actually thinks: every hot new sector goes through a wild first phase (everyone bets on the size of the dream) and a sober second phase (only the operators who make real cash survive). He explains how to value a business by finding the “Amitabh Bachchan” of each industry and pricing everyone else against him, why you exit when competition heats up rather than when the stock looks dear, and why valuation is your only safety net in private deals. The clickbait “hated sector” is barely in the video — the real content is a clean tour of frameworks from someone who has watched four decades of cycles repeat.

The Full Story

A man who collected annual reports

Ved grew up inside the market. His grandfather wound up businesses in Africa during political upheaval and parked the proceeds in Indian equities; his father ran the family book from Bombay and dragged young Hiren along to shareholder meetings. He describes a world with no Excel, no conference calls, no databases. Results were pinned to a physical notice board at the exchange, and you copied them into a notebook before a peon took them down to make room for the next company. Production data was collected in person from industry associations. The edge, in those days, was simply access to information.

In those times merely having access to information itself was a competitive edge.

He met his future partners by chance in 1991, at the AGM of a chemicals company, where a handful of non-employee shareholders had each bought ten shares just to get in the room and ask questions. Nine years later that friendship became Alchemy. Jhunjhunwala, already a partner, backed the young founders the way private equity backs people now — early, on character, on a bet about India.

The wisdom passed down by osmosis

Most of the Jhunjhunwala material is one-liners with long shadows. On when foreign money would arrive: agar ladki sundar hai to sab aayenge — if the girl is beautiful, everyone will come. The point being that India is the beautiful girl, and capital is fickle and will return on its own schedule. On India’s potential: a runner without shoes — imagine how fast it goes once it gets them.

The deeper lesson Ved keeps returning to is humility. Jhunjhunwala ended every conviction statement with “but I have the right to be wrong.” Not a throwaway disclaimer — a working principle.

There is a very fine line between having high conviction and being obstinate. What he was not, was obstinate.

And the line that does a lot of work later in the conversation: price is the ultimate arbiter of truth. Nobody is bigger than the market. Hold a view long enough against the market and you should question your own thesis, not the market’s.

Ved also notes the thing that separated the great ones: most people wanted to know what Jhunjhunwala was buying. He and his partners wanted to know why.

Version 1.0 and Version 2.0 — the master framework

This is the spine of the whole interview, and it applies to every new sector he has watched. Version 1.0 is the blue-sky phase. The opportunity is enormous, nobody can value anything properly, and you simply tag a company with the magic word and the price goes up. Software before 1998. Organized retail. Quick commerce. AI today. In 1.0, companies were rewarded for announcing how many million square feet of retail space they’d add — nobody asked about margins or inventory turns.

Before ‘97, ‘98, anything you tag the name software behind a company and the stock price would go up.

Then reality arrives. People start asking the hard questions: where is the cash flow, what is the return on capital. Something cracks in the macro, the sector falls, the dust settles. Version 2.0 is the survivors’ phase — the operators who actually built a business and can show real cash compound from here. Every industry runs this loop. AI will too: every big tech company is forced to spend on AI because investors will punish anyone seen sitting out, but only a couple will earn a real return on that capex, and the rest will destroy value.

The practical kicker: if you are doing 1.0 investing, you are playing momentum, and you don’t know when the music stops. The rule he was given by elders — if a stock falls 20-25% from its peak, ask no questions, take your money or cut your loss, and go home.

How to actually value a business

Ved is blunt that valuation is the hard, fun part, and that earnings prediction — where most analysts spend their time — is both fraught and the lesser skill. There is no correct PE. Valuation is a relative truth driven by four things: growth, return on capital, capital intensity, and longevity of growth.

His method is to find the best operator in an industry — the Amitabh Bachchan — and let the market’s long collective verdict on him set the anchor. Everyone else is priced against that anchor. A company growing faster than the best, with better margins, can argue for a premium even to the best.

He works through the new-age businesses with the same lens. A loss-making business isn’t automatically uninvestable; the question is whether the model can inherently become profitable, and whether the customer will pay once the discounts stop. The Indian customer, he notes, is loyal only to the discount — when free delivery ended, the customer left. The test of a real business is the opposite: Zomato kept raising its platform fee from 2 rupees to 10, and customers stayed. That’s a business. He and his friends bought Zomato around 40-50 after the Blinkit acquisition tanked it, not because it was profitable but because the whole market cap was cheap against the opportunity and everyone was negative.

There is always a price at which something makes sense.

When to sell — competition, not price

The most useful idea on exits: you don’t necessarily sell because a stock got expensive. You sell when the variables change. The clearest signal is rising competitive intensity. He uses Asian Paints — a superb business with a long record — where holders made no money for five years not because the business broke but because new competition put a fresh, unsettled variable into play. Until you know whether the entrant can take share and how long returns stay sub-optimal, there’s no point paying a high multiple.

The other exit triggers: over-ownership (when everyone who could buy has bought, who is the next marginal buyer?), and the arrival of comparables. When a unique business is the only listed name in a hot space, it commands a silly premium; the moment three peers IPO at those prices, capital reshuffles and the original de-rates. Selling, in other words, isn’t a spreadsheet output — it’s a read on the relative choices available.

Bajaj Finance — the aging superstar

Bajaj Finance gets the warmest and most honest treatment. It compounded profits at 40-45% for years with flawless execution and broke the valuation ceiling for NBFCs, once trading at eight times book. But a lender can’t grow at 40% forever — do that at scale and you’re taking undue risk — so growth has settled to 18-20%, and a de-rating had to follow. Still the Amitabh Bachchan of the space, Ved says, but an aging one who now does character roles. And the premium was always partly about a lack of choices; now there’s a Cholamandalam executing just as well, so the disproportionate multiple compresses.

Amitabh Bachchan also had a Shah Rukh Khan who came in, and then people said okay, I can watch a Shah Rukh Khan movie too.

Finding the next one — ingredients and a chef

To find tomorrow’s compounder you need a large opportunity (no runway, no story), the right founder attributes, and then a bet on execution. His analogy: a great dish needs good ingredients and a good chef — get both and the probability is high, miss either and it fails.

But conviction is a process, not a one-shot read. Investing in a small company is like hiring a person: the annual report and channel checks are the CV, interview and references. You think you know them. Then they start working and the real character shows under pressure — and you only really learned 25% from the research; the rest comes from watching the company through COVID, slowdowns, bad quarters. Every time he met Bajaj Finance he came away thinking they were four steps ahead, and that’s when you add even at higher prices. He’s candid that the fairy-tale version hides the truth: the stock corrected 40-50% three or four times along the way, doubt crept in, and the LPs questioned him. Surviving those drawdowns is the actual edge.

Macro is the wind, not the boat

On trade deals and macro generally: these are enablers, not passports. Macro is the wind behind a boat — it makes sailing easier, but someone still has to row. He won’t buy a sector just because a trade deal helped it. Where he does see real opportunity from the AI build-out is the picks-and-shovels layer: electrical equipment, transformers, HVDC gear for US data centers, where Indian companies are globally cost-competitive. He thinks the consumer AI game belongs to the Anthropics and Googles — even Apple chose to partner with Gemini rather than burn 50 billion dollars building its own stack.

On self-sufficiency, he sees a global capex boom coming in defense, critical minerals, semiconductors and electronics, because the era of extreme globalization and single-source supply broke with COVID and geopolitics. His sharpest example: India could vaccinate 1.4 billion people only because it made its own vaccines — six vaccines existed in the world, two American, one Chinese, one Russian, two Indian.

FIIs, narratives, and the stock-picker’s market

On foreign investors abandoning India: they are people like you and me, with the same fears and the same FOMO. In 2021 US allocators told him China was uninvestable and pulled out in droves — then started buying it back. Narratives flip. India will look attractive again and the same crowd will manufacture fifty reasons to buy. His conclusion: don’t stress the flows. India has always been, and will always be, a stock-picker’s market — the mistake is getting swept into whatever narrative is loud that week.

Crypto and Vedanta

The clickbait “hated sector for the next billionaires” never really materializes — the closest thing to a contrarian sector call is PSU banks (Jhunjhunwala’s old trade) and the global capex/defense/semiconductor theme. The final segment is crypto, where Ved is refreshingly non-dogmatic: he doesn’t own it, his data-scientist son does, and he refuses to declare it dead or destined. It has to pass tests of legitimacy and adoption, and the regulation and ETF flows are early evidence. His son’s framing landed on him: when you came to equities in the early ’90s, people called the stock market the Wild West and satta bazaar — that’s exactly what people say about crypto now. Ved won’t bet a disproportionate share of his wealth on it, but won’t dismiss it either. The market, as always, will be the last arbiter.

He closes on spirituality — Vedanta as the anchor he reaches for when markets break and nothing works — and the books that shaped him: Peter Lynch’s One Up On Wall Street, parts of The Intelligent Investor, and Charlie Munger’s Poor Charlie’s Almanack, plus a multidisciplinary diet of biography, psychology, technology and archaeology.

Key Takeaways

Version 1.0 vs 2.0: every new sector first rewards the size of the dream (momentum, no real valuation possible), then punishes everyone and rewards only the operators with real cash flow. Software, retail, quick commerce, EVs, AI — same loop.
The 20-25% rule for 1.0 bets: when you’re playing pure momentum in a blue-sky sector, a 20-25% fall from the peak is your exit. No questions.
Valuation is relative, not absolute: there is no correct PE. Price is driven by growth, return on capital, capital intensity, and longevity of growth — and anchored by what the market has decided the best operator (the “Amitabh Bachchan”) is worth.
Sell on changed variables, not just high price: rising competitive intensity, over-ownership (no marginal buyer left), or new listed comparables are the real exit signals. Asian Paints stayed a great business while holders made nothing for five years.
Loss-making isn’t disqualifying — the discount test is: ask whether the model can inherently become profitable and whether the customer pays once subsidies stop. Zomato raising platform fees from 2 to 10 rupees and keeping customers proved the business; free-delivery loyalty proves nothing.
In new-age industries, raising capital is itself a moat. Number one takes a disproportionate share of both the market and the market cap; number two is a distant second; the rest vanish.
Conviction is built, not bought. Research gets you 25%; the rest comes from watching management act through crises. You add at higher prices once they’ve earned it.
Macro is the wind, not the boat — an enabler, never a reason to buy. Play structural themes (AI infra, defense, semis) through picks-and-shovels, not headlines.
Private/pre-IPO investing has no exit door, so entry valuation is the only safety valve — it must compensate for both execution and illiquidity risk. FOMO into pre-IPO deals “may land up in tears.”
FIIs are not a special animal — same fears, same FOMO, same narrative-chasing as anyone. India is and always will be a stock-picker’s market.

Claude’s Take

This is the second Hiren Ved interview in the vault, and the title is pure bait — there is no single “hated sector” reveal, and “India’s next billionaires” is the host’s framing, not his. What you actually get is a clean, unhurried run through frameworks from someone with genuine four-decade pattern recognition. On that level it holds up well.

The strongest material is the Version 1.0 / 2.0 model and the “sell on changed variables” idea — both are portable, both cut against the lazy instinct to sell purely on a high multiple, and both are illustrated with examples that actually fit. The Amitabh Bachchan anchoring method is a nice mental shortcut for relative valuation, though it quietly assumes the market’s verdict on the best operator is correct, which is the very thing a contrarian would question.

Apply the BS filter to the stock-picking claims and a familiar pattern shows up: the winners get named and narrated (Bajaj Finance, Zomato bought at the bottom, Dynamatic held 20 years, Tata Elxsi, Varun Beverages), while the losers stay deliberately fuzzy. He is more honest than most — he volunteers Ramco Systems and Subex, and the “you only know 25%” and “the stock fell 40-50% three or four times” admissions are real and useful. But survivorship bias is doing quiet work throughout: “there is always a price at which something makes sense” is true, and is also exactly what people tell themselves before averaging down into a value trap. The framework tells you what to look for; it can’t tell you that you’ve correctly identified the next compounder versus the next zombie, and the interview doesn’t pretend otherwise.

The crypto segment is the most intellectually honest stretch — a veteran refusing to pose as an oracle on something outside his circle, which is rarer than it should be. Docked from an 8 mostly for length and the host’s hagiographic framing (“gold mines one after the other”); the signal-to-runtime ratio over 121 minutes is lower than the ideas deserve. Score: 7.