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and now this is the reason why I'm very plain and simple reasons and I'm no Economist I'm raaka sh Bazar Road chop I only know Common Sense and whatever little I need and then he has asked me a question how do I how do I analyze the investment a lot of people think that you know I have an investment philosophy I think I'm too young to have philosophy you'll find most investors of white hair right and they get better with time and there and the quest to learn is a journey and not a destination so I think rather than saying I have a philosophy I think I have an investment approach or a thought the first thing I look at is opportunity without opportunity there can be no economic activity and without e economic activity there can be no profitability for example when I look at Colgate I look at the present demand for toothpast in India and the potential for the growth in in demand for enosis became enosis partly because what infosis was but enosis also became infosis infosis did not create the internet or infosis never fors you the explosion in the use of Information Technology but that was one of the key ingredients and reasons why enforces TCS vpro and other software companies were successful why because the opportunity just expanded right so I first look at Opportunity if you look at I mean I made a lot of money in company called PR why because the EXP the they to make ethanol plants the opportunity for ethanol just you know just went through the roof so first thing I look for opportunity unfortunately I think retail is one industry which has one of the highest opportunties in this country and I call it extern you can do internal things to create demand but it is too taxing and that's not the favorite place where I want to invest I want to invest where demand naturally exists then in then this is a very important part of my investment I invested in rallies I made a large investment because I think there is no question that the usage of pesticides and seeds and all other agricultural inputs has to go to the roof because you cannot increase food production without increasing productivity and this is one of the only means of increasing productivity one of the main means so the Appo of rallies is going to go through the roof then I look at competitive ability you know in a in a in a capitalist Society or a free Society you cannot make profit just on opportunity you got to be competitive you got to be profitable those profits can be driven by technology they can be driven I think culture is very important company they can be driven by a culture they can be driven by barriers which could arise because of maybe taxes location Capital so know I try and zero on try and understand a company zero on in its competitive ability or what it already has in relation to the opportunity and the price third you know what I look at is my friend said that should I invest in large cap companies or small cap companies I said no there we should invest in the small cap companies which will become the large caps what do you need for that you need scalability and believe me you know I saw marui K it said when I grow will I be a Mercedes I think they're prophetic words how does a small organization grow into a large organization right when I invested in Titan at 500 crores I made a lot I made a lot of money party was Titan today is 11,000 company and great are the challenges of scaling Capital ambition especially small organizations I've seen entrepreneurs don't want to give up control they don't want system they don't processes they still want to work on intuition right so therefore I think working on intuition up to a point is extremely important right but you got to have some systems and processes they don't want to delegate power opportunity will be limited competive intensity may be very high so it is very very important to judge whether the company will be able to scale I call it scalability then of course I look for management and then how do you find out whether you have good management or not I mean you know first thing I see is it's say no in the market does the market play the market does the management play the market and then in one meeting or two meetings is very really difficult to judge but you know we investors we invest I invest in a jewelry company I invest in a software company I invest in a hotel company I invested in a footware company finally I think we invest out of informed ignorance we have some information but that is very limited in relation to what our ignorance is so finally we invest out of intuition so then you have to interally feel and every management carries a reputation I think that's what is also very important is Corporate governance what kind of corporate governance and I Define corporate governance as how the company views all stakeholders whether Society whether employees with shareholders right and of course I belong I believe in investing lot of G companies why I call them G companies they should carry two characteristics that capital investment and profitability ratio should be low I mean they should need very low capital in order to enhance growth right and they should buy on credit and sell in cash I think if these if a company carries these two characters it has the highest p in the markets you go to any you you take the top 50 PS in the stock market price earning ratios for 45 companies will carry this characteristic and they should be you know EV positive and last but not the least sir what I buy is important at what price I buy is extremely important you know I made lot of money I bought in 199 I bought 5% United Bru and United Spirits for about six CR of rupees if I had held on to that investment today it would be worth 2,000 crores and everybody told me of course I sold at 50 60 crores everybody told me you're buying vam Malia shares he's a thief he's this he's that nobody's ever gained from him but to my common sense I was getting 55% of the Indian liquor industry not for a market cap but for Enterprise value of 200 cres and for a person who like to have four drinks a day he knew the value of that money of that you know value I you can't believe the Indian liquor industry both beer and whiskey and every item 55% at an Enterprise value of 200 cres to my common I said no I don't want to so it's important what you buy a lot of people you know Hindustan liver talk over fcg if I tell you you'll be shocked in 2001 at the index of 2900 the price of liver was 327 liver did not exceed that price for 11 years and the index went from 2900 to 23 22,000 liver exceeded that price only in 2012 or 13 I think so if you had invested in liver for 11 years except dividends you had no returns when the market had gone up seven eight times that was because in the precedent period liver had a real run up right so I I think it's important what you buy and these are facts this is not AR's opinion right it's important what you buy it's more important what price
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