If You are a promoter of a listed
company and your basic idea is to loot the gullible public by privatising profits and socialising
losses as recently done by Uber and tried hard by we-work this piece is a waste
of time for you. If not read on…..
company and your basic idea is to loot the gullible public by privatising profits and socialising
losses as recently done by Uber and tried hard by we-work this piece is a waste
of time for you. If not read on…..
Google.v top wealth destroyers in last 2 years and You will deduce that the
behavioral pattern of all companies and their promoters is shockingly
congruent. Malafide intent of promoters has resulted in almost entire market
capitalization being eroded away and gullible minority shareholders left
holding just an entry in their demat statement.
behavioral pattern of all companies and their promoters is shockingly
congruent. Malafide intent of promoters has resulted in almost entire market
capitalization being eroded away and gullible minority shareholders left
holding just an entry in their demat statement.
At least 1-2 friends/acquaintances
send me their portfolios each day for a review and the list of defunct
companies in those, is shockingly long. Thousands of companies have just vanished since
early 90’s and the erstwhile promoters must all be sipping mojitos in some
Caribbean country such as Antigua. A sampler of these is pasted here for
nostalgia. Some names were the darling of markets – Pentamedia graphics, Aftek Infosys, Crest communication………
send me their portfolios each day for a review and the list of defunct
companies in those, is shockingly long. Thousands of companies have just vanished since
early 90’s and the erstwhile promoters must all be sipping mojitos in some
Caribbean country such as Antigua. A sampler of these is pasted here for
nostalgia. Some names were the darling of markets – Pentamedia graphics, Aftek Infosys, Crest communication………
In a short life where the vicissitudesof health, fate or accident could just kill you instantly doing a Houdini on
your minority shareholders, wont take You anywhere. But philosophy of life later
or in some other piece.
This is not Your Pop’s company
Even if you own more than 50% of the
company you are responsible for and towards the minority shareholder who has no
access to your operations, books, has no say in management decisions and
sometimes millions of shareholders end up trusting their hard earned money
by investing in your company in the belief that You would do justice to the job
that you are supposed to do. You are a representative of the smallest
shareholder who doesn’t have a voice.
company you are responsible for and towards the minority shareholder who has no
access to your operations, books, has no say in management decisions and
sometimes millions of shareholders end up trusting their hard earned money
by investing in your company in the belief that You would do justice to the job
that you are supposed to do. You are a representative of the smallest
shareholder who doesn’t have a voice.
Don’t overdraw Your salary and misuse
Your perks
Your perks
It was shocking to hear way back in
Sep 18 that the promoters of Apollo Tyres were
drawing close to 12 million dollars in salary + perks (upto 300% of the
salary) . Obviously minority shareholders revolted and the stock price tumbled
and never ever recovered from there. More erosion happened in the market
capitalization of Apollo Tyres when investors realized that the promoters were
running a public company like their piggy bank rather than by the loss through their skyhigh salary, despite the muted
cyclical performance QoQ.
Sep 18 that the promoters of Apollo Tyres were
drawing close to 12 million dollars in salary + perks (upto 300% of the
salary) . Obviously minority shareholders revolted and the stock price tumbled
and never ever recovered from there. More erosion happened in the market
capitalization of Apollo Tyres when investors realized that the promoters were
running a public company like their piggy bank rather than by the loss through their skyhigh salary, despite the muted
cyclical performance QoQ.
Are You kidding me – Its appalling, when as a minority shareholder I learn that the manager of
my company (call him promoter for the purpose of respect) is drawing more
salary than the base salary of CEO of Google , Apple and Microsoft.
The company is struggling for growth,
costs are increasing and the father son duo are breaking all records while
owning only 41% of the company. Nothing gives them the right to short change
the rest of the 60% shareholders – just because they don’t have a voice.
Obviously the company’s EPS is falling with religious regularity over the last
few years.
I know of a popular Entrepreneur in India who claims that he hasn’t taken a salary hike in 10 years and only draws some 2 Mil USD per annum. Its public knowledge that his electricity bill is 1.3 Mil USD. Isnt it obvious that minority shareholders are unknowingly paying for all his lifestyle and his expenses?
costs are increasing and the father son duo are breaking all records while
owning only 41% of the company. Nothing gives them the right to short change
the rest of the 60% shareholders – just because they don’t have a voice.
Obviously the company’s EPS is falling with religious regularity over the last
few years.
I know of a popular Entrepreneur in India who claims that he hasn’t taken a salary hike in 10 years and only draws some 2 Mil USD per annum. Its public knowledge that his electricity bill is 1.3 Mil USD. Isnt it obvious that minority shareholders are unknowingly paying for all his lifestyle and his expenses?
Lesson – No one ever gets a second
chance in life and in corporate world unless you are making a movie – life
isn’t a film shoot where you can keep taking a retake unless you achieve a
perfect shot. You f%$# up once you will never be pardoned.
chance in life and in corporate world unless you are making a movie – life
isn’t a film shoot where you can keep taking a retake unless you achieve a
perfect shot. You f%$# up once you will never be pardoned.
Never take personal holidays in the
garb of an official trip
garb of an official trip
I know a lot many promoters who
travel along with families on company expense. And mostly in the garb of an official
trip. Imagine giving a pro-rata travel subsidy to all shareholders. You can get
away with all this for a while, but one day it will catch up with you because
its just not right. And You and Your share price will be punished.
travel along with families on company expense. And mostly in the garb of an official
trip. Imagine giving a pro-rata travel subsidy to all shareholders. You can get
away with all this for a while, but one day it will catch up with you because
its just not right. And You and Your share price will be punished.
Don’t load the company with expenses
of personal staff
of personal staff
Your being at the helm doesn’t give
you a right to seek subsidy for your personal staff expenses from the minority
shareholders. Lead a lifestyle that’s afforded by Your salary that’s approved
by the board and is in public domain. There is a verified story that our Ex Prime Minister Sh. L B Shastri ji personally paid when family used the official
car
in sharp contrast to today’s national political leaders and CEO s and promoters
of listed companies who use the nation and their corporate authority as their
personal piggy bank – and that too shamelessly.
you a right to seek subsidy for your personal staff expenses from the minority
shareholders. Lead a lifestyle that’s afforded by Your salary that’s approved
by the board and is in public domain. There is a verified story that our Ex Prime Minister Sh. L B Shastri ji personally paid when family used the official
car
in sharp contrast to today’s national political leaders and CEO s and promoters
of listed companies who use the nation and their corporate authority as their
personal piggy bank – and that too shamelessly.
Watch Your words in Public Domain
You Gentlemen are the custodians of
the company’s public image and reputation. Your public conduct and character
and any tongue malfunction can have ramifications that are sometimes hard to
fathom. If Paytm was a listed company I would have been very very wary of
buying its common stock and if bought – holding the same after the stellar performance of its
founder Vijay Sharma.
the company’s public image and reputation. Your public conduct and character
and any tongue malfunction can have ramifications that are sometimes hard to
fathom. If Paytm was a listed company I would have been very very wary of
buying its common stock and if bought – holding the same after the stellar performance of its
founder Vijay Sharma.
Demonstrate benevolence and humility
What goes around, comes around is
well known to everyone. But very few can fathom the intensity and quickness of ‘coming
around’. If You are riding a crest of success, you will most certainly see a
trough and a tempest sometime later in Your journey as a promoter. Build reputation
and relationships through benevolence and humility so that the world conspires
to give you support when required. Lehman Brothers was the big daddy when it opposed
the bailout of Bear Sterns in March 2008 when BSC was going down and while
there is very little evidence or data, the rumor has it that Lehman was left alone
when it needed the support a few months later and while Lehman’s assets and
liabilities matched to a great extent, the powers that be – allowed Lehman to
sink while teaching them a lesson.
well known to everyone. But very few can fathom the intensity and quickness of ‘coming
around’. If You are riding a crest of success, you will most certainly see a
trough and a tempest sometime later in Your journey as a promoter. Build reputation
and relationships through benevolence and humility so that the world conspires
to give you support when required. Lehman Brothers was the big daddy when it opposed
the bailout of Bear Sterns in March 2008 when BSC was going down and while
there is very little evidence or data, the rumor has it that Lehman was left alone
when it needed the support a few months later and while Lehman’s assets and
liabilities matched to a great extent, the powers that be – allowed Lehman to
sink while teaching them a lesson.
The lifestyle of Dick Fuld would have put God to
shame and when his company was in trouble this CEO who was like a tiger riding
a tiger just couldn’t get off – and neither was he allowed to – by his alleged friends.
shame and when his company was in trouble this CEO who was like a tiger riding
a tiger just couldn’t get off – and neither was he allowed to – by his alleged friends.
Don’t flash your expensive toys and
lifestyle
lifestyle
In an ideal world the promoter is
really the Chief Servant of the minority shareholders and in good times the
media christens You as the Branson of Your respective country ala Mr. Vijay Mallaya
but don’t sympathise with You when You ever land on thin ice. On the contrary media pulls the carpet under your feet when you
would least expect it. If Mr. Mallaya had kept a low profile during his tough
times, he would have easily come out of his troubles and could have still been
enjoying his envious Villa in tropical Candolim rather than weathering the
biting cold of the Hertfordshire. Does anyone know that Mallaya’s 1 Billion USD
in debt is a fraction of the top defaulting companies in India. If only he had postponed
Eminems trip for his 60th he could have gained some sympathy and some reprieve.
really the Chief Servant of the minority shareholders and in good times the
media christens You as the Branson of Your respective country ala Mr. Vijay Mallaya
but don’t sympathise with You when You ever land on thin ice. On the contrary media pulls the carpet under your feet when you
would least expect it. If Mr. Mallaya had kept a low profile during his tough
times, he would have easily come out of his troubles and could have still been
enjoying his envious Villa in tropical Candolim rather than weathering the
biting cold of the Hertfordshire. Does anyone know that Mallaya’s 1 Billion USD
in debt is a fraction of the top defaulting companies in India. If only he had postponed
Eminems trip for his 60th he could have gained some sympathy and some reprieve.
The system and the regulator comes
after You even more harshly when they see a diluted intent. Naresh Goyal of Jet
smartly offloaded his headache to the Govt and the Banks (SBI) and maintained a low
decibel lifestyle and almost took that proverbial Houdini flight recently while on the other hand the regulators
are still counting cars and houses of the Wadhawan clan ( HDIL and DHFL ). One
hell of a capacity – this Wadhawan family has to create a systemic faultline.
after You even more harshly when they see a diluted intent. Naresh Goyal of Jet
smartly offloaded his headache to the Govt and the Banks (SBI) and maintained a low
decibel lifestyle and almost took that proverbial Houdini flight recently while on the other hand the regulators
are still counting cars and houses of the Wadhawan clan ( HDIL and DHFL ). One
hell of a capacity – this Wadhawan family has to create a systemic faultline.
Lead a frugal meaningful life
Inspite of being billionaires, all the
founders of Infosys lead a simple inspiring life. Help the society thru genuine
foundations and philanthropy. They talk of values more than the wealth they
have created, they talk of their social responsibility and they don’t hesitate
to call a spade a spade (even at the cost of wealth erosion in stock price)
when they see anything wrong. The analysts have written off Infosys many times
but I have always tanked up on the share when its going thru the seemingly
‘baddest’ time – to my financial advantage.
founders of Infosys lead a simple inspiring life. Help the society thru genuine
foundations and philanthropy. They talk of values more than the wealth they
have created, they talk of their social responsibility and they don’t hesitate
to call a spade a spade (even at the cost of wealth erosion in stock price)
when they see anything wrong. The analysts have written off Infosys many times
but I have always tanked up on the share when its going thru the seemingly
‘baddest’ time – to my financial advantage.
The culture and character of organisations
that is usually set and left to flourish by the promoters is often unshakable
and its like the stuxnet virus that keeps flowing in the proverbial veins and
arteries of the organisations for infinite periods of time to achieve the end
objective and common compelling goals of the organisations. And that’s why Infy
always emerges stronger from every momentary crisis thereby creating swathes of
loyal shareholders who don’t ditch its stock or the ‘proud part ownership’.
that is usually set and left to flourish by the promoters is often unshakable
and its like the stuxnet virus that keeps flowing in the proverbial veins and
arteries of the organisations for infinite periods of time to achieve the end
objective and common compelling goals of the organisations. And that’s why Infy
always emerges stronger from every momentary crisis thereby creating swathes of
loyal shareholders who don’t ditch its stock or the ‘proud part ownership’.
Don’t borrow based on excel sheets
and best case scenario
and best case scenario
I have professed before (in a lighter
vain) that the biggest disservice to the corporate world has been done by Bill
Gates for making Excel program that allows the new age CFO s and analysts to make
specious assumptions of growth and plot it for tens and tens of years by just
dragging the formula across infinitely convenient columns and make anything
look rosy.
vain) that the biggest disservice to the corporate world has been done by Bill
Gates for making Excel program that allows the new age CFO s and analysts to make
specious assumptions of growth and plot it for tens and tens of years by just
dragging the formula across infinitely convenient columns and make anything
look rosy.
The gullible promoters fall for the
elusive growth trap and start expanding to achieve what?? More promoters fail
because of leverage than the ones who are able to manage leverage to their
advantage.
elusive growth trap and start expanding to achieve what?? More promoters fail
because of leverage than the ones who are able to manage leverage to their
advantage.
I knew of a CFO at close quarters who would tell his battery of analysts to
just make up the numbers to borrow from financial institutions thereby putting
both the promoter and the business in harms way. The CFO moved on to meet his
eventual fate of karma etc but the promoter was left holding a cluster of hot
potatoes and an unmanageable debt portfolio.
In this VUCA world and environment –
even if someone is God s gift to mankind, an unknown variable or an unknown
disruption will take the wind out of Your sail and at that time margin
of safety is what would hold You in good stead rather than being hit by the
train – head-on from which the recovery is impossible. Simply follow what Buffet
says “find a reason not to invest and then find a compelling investment” rather
than the other way round.
even if someone is God s gift to mankind, an unknown variable or an unknown
disruption will take the wind out of Your sail and at that time margin
of safety is what would hold You in good stead rather than being hit by the
train – head-on from which the recovery is impossible. Simply follow what Buffet
says “find a reason not to invest and then find a compelling investment” rather
than the other way round.
Don’t frivolously announce buybacks
to hide Your mess
to hide Your mess
We have seen in Indian markets that
the moment a promoter is caught with his pants down they announce a buy back as a
distraction and diversion (D&D) tactic. Markets are intelligent and now the
investors even more. And D&D will oft be punished brutally and sometimes it
becomes terribly difficult to emerge victorious from that. PC
Jewellers announced a buyback to skittle away attention from its abysmal corp
governance when it was caught.
the moment a promoter is caught with his pants down they announce a buy back as a
distraction and diversion (D&D) tactic. Markets are intelligent and now the
investors even more. And D&D will oft be punished brutally and sometimes it
becomes terribly difficult to emerge victorious from that. PC
Jewellers announced a buyback to skittle away attention from its abysmal corp
governance when it was caught.
Of course it was D&D and the
stock that was the darling of the analysts and traded at some Rs 600 is now
trading at Rs 20, a 96% wealth erosion…..
stock that was the darling of the analysts and traded at some Rs 600 is now
trading at Rs 20, a 96% wealth erosion…..
Declare dividends as evidence of
performance and real cash
performance and real cash
Only hard cash in the hands of
minority shareholders is an evidence of your performance and intent. The translation
of EBIDTA to PAT is the only real evidence of performance. Don’t hide your mess
in the below the EBIDTA line items. Investors are wise and investors are
unforgiving. Share the company profits with shareholders. Declare dividends to
allow cash to flow to the mute believers in your performance. Cash is tangible
and its rewarded. Promise of just the elusive capital appreciation doesn’t hold
water with today’s well informed investor.
minority shareholders is an evidence of your performance and intent. The translation
of EBIDTA to PAT is the only real evidence of performance. Don’t hide your mess
in the below the EBIDTA line items. Investors are wise and investors are
unforgiving. Share the company profits with shareholders. Declare dividends to
allow cash to flow to the mute believers in your performance. Cash is tangible
and its rewarded. Promise of just the elusive capital appreciation doesn’t hold
water with today’s well informed investor.
Above all – Don’t ever lie
When in doubt – Disclose, has been
Mr. Narayan Murthy’s dharma for the longest period of time and is gospel truth
for corporate conduct. No matter how bad the news is – Disclosure will always
hold You and Your company in good light
Mr. Narayan Murthy’s dharma for the longest period of time and is gospel truth
for corporate conduct. No matter how bad the news is – Disclosure will always
hold You and Your company in good light
As we see hundreds of companies that
are trading at abysmally low valuations struggle to emerge from even the realms
of nothingness, some of the top companies where the quality of promoter and
management team is impeccable, continue to outperform the indices and are
rewarded through very rich valuations.
are trading at abysmally low valuations struggle to emerge from even the realms
of nothingness, some of the top companies where the quality of promoter and
management team is impeccable, continue to outperform the indices and are
rewarded through very rich valuations.
And Lastly
Watch the movie – Snowden / Enemy of the
State
State
Rules are tightening and technology
is so advanced that most of us cannot fathom. Surveillance agencies can listen to
every conversation, track every movement, map all spending patterns to draw
conclusions. Basically hiding and doing a Houdini on the
Bankers and Shareholders will become more and more difficult. What the MD
of Bhushan Steel recently did like many of his brethren in the past will
become almost impossible as new Govt policies come into effect and whats the
point in hiding in a remote island / country , away from the family, not able
to return with a solace that You have billions stashed somewhere.
is so advanced that most of us cannot fathom. Surveillance agencies can listen to
every conversation, track every movement, map all spending patterns to draw
conclusions. Basically hiding and doing a Houdini on the
Bankers and Shareholders will become more and more difficult. What the MD
of Bhushan Steel recently did like many of his brethren in the past will
become almost impossible as new Govt policies come into effect and whats the
point in hiding in a remote island / country , away from the family, not able
to return with a solace that You have billions stashed somewhere.
A noble life full of respect and love
from the people around You, cannot be founded on the bedrock of fraud and diluted
intent. When we die ( which we most certainly will – sooner than we think ) we
become a body in a second from Mr. So and So. Remember this and life
will be just fine and world will become a better place.
from the people around You, cannot be founded on the bedrock of fraud and diluted
intent. When we die ( which we most certainly will – sooner than we think ) we
become a body in a second from Mr. So and So. Remember this and life
will be just fine and world will become a better place.
Manu also writes for the Huffington Post
This is an amazing article as most of your articles are…could relate to some of the narratives and what you were referring to…..
Very well written
Amazing blog! We need investor protection rules to strengthen . Promoters should buyback the minority shareholders if fraud is proven. Attach the properties and put them behind bars. SEBI has to act fast to restore investor confidence
Apt and hard hitting as usual Manu! This speaks the reality on the ground!
Loved the post … Almost like an RCA analysis … gene pool decides a lot .. the DNA of our species can be traced to monkeys .
While looking at investing … dig deeper and see who is running the company … a good homo sapien or a monkey 😉 !
Jasdev