How the Photocopier Changed the Way We Worked—and Played – Link here
In Corporate Crimes, Individual Accountability Is Elusive – Link here
Game changing invention in honey collection – Link here
Observations From a Decade in the Investment Business – Link here
DEAR SILICON VALLEY: Here's your wake-up call – Link here
Tales of Russia’s First Activist Investor – Link here
A Man Of Value And Wit - Chandrakant Sampat – Link here
Just in time for the Indian budget: The real definition of free markets – Link here
The RSS and the BJP: A convenient arrangement – Ambit Report – Link here
What can I learn/know right now in 10 minutes that will be useful for the rest of my life? – Link here
Saturday, February 28, 2015
Wednesday, February 25, 2015
Real Estate prices never fall
Real Estate prices never fall
I had written this post in Oct’14 when SEBI passed judgment on DLF Ltd and its key promoter management barring them from accessing capital market. However I have modified key numbers /stock prices.
SEBI order / judgment – Link here , Media Coverage Link - 1, Link - 2, Link - 3
A rich businessman enters into business deal with a subsidiary of DLF (India’s largest real estate company, owns highest amount of land). Somewhere along the line DLF cheats him to the tune of Rs 34 cr. Businessman files case against DLF and battle goes to court.
Everybody knows DLF, the biggest landowner of India. Everybody also knows real estate business in India is not for regular folks. Real estate is very much mafia business and black money flows like champagne. Hence most would have expected battle would be favour of DLF, but as would destiny would have in case of David vs Goliath, David won. The relatively small businessman won court case and impact; stock price dived by 30% …… (Last time I saw similar kind of drop in stock price was when Satyam was declared a scam company, obviously altogether a different case). Below is chart showing what 30% drop looks like…from Rs 132 to 105……..phew.
However this is nothing compared to IPO price. If you had bought DLF stock in IPO somewhere in 2007 for Rs525, at CMP of Rs 105 it would be wealth erosion of 80%.
Do you remember all those so called expert Analyst coming on Television/in-person telling you…”Real estate is great investment prices never fall...Its best investment”…. then why did stock price fall?......well my mother always said “son, if things are too good to be true, you are either in sleep & dreaming or you are dead”
Carl Gustav Jacob was a German mathematician, that most of us don’t know (you may know if you are related to his field). One of his biggest contribution to world was “Invert, always invert”. The great investor Warren Buffett has quoted that many times and probably you may feel you have heard that before. Charlie Munger , partner of Warren Buffett, often cited as Siamese twins (he is not) of Buffett said it as “tell me where I am going to die and I won’t go there”
Business of real estate involves selling a house/shop for a price. Most of investor who invested in real estate always believed that real estate prices would never fall. What one needs to invert here is not price part but demand part. Fundamental economic law states “all else being equal, as the price of a product increases, quantity demanded falls; likewise, as the price of a product decreases, quantity demanded increases”.
Below are the key Sales & PAT figures of few top real estate companies, watch trend you get idea. If maxim of real estate prices never falls hold true and demand for real estate never drop. Can all those smart people explain what went wrong with DLF’s PAT numbers from FY2010 to FY2014?
DLF that use to make profit of Rs1700cr in 2010 made Rs583cr in 2014, drop of 66%, in case of Oberoi its 32%, for HDIL its 68%. However Prestige, Godrej and Sobha seem to be growing.
I had written this post in Oct’14 when SEBI passed judgment on DLF Ltd and its key promoter management barring them from accessing capital market. However I have modified key numbers /stock prices.
SEBI order / judgment – Link here , Media Coverage Link - 1, Link - 2, Link - 3
A rich businessman enters into business deal with a subsidiary of DLF (India’s largest real estate company, owns highest amount of land). Somewhere along the line DLF cheats him to the tune of Rs 34 cr. Businessman files case against DLF and battle goes to court.
Everybody knows DLF, the biggest landowner of India. Everybody also knows real estate business in India is not for regular folks. Real estate is very much mafia business and black money flows like champagne. Hence most would have expected battle would be favour of DLF, but as would destiny would have in case of David vs Goliath, David won. The relatively small businessman won court case and impact; stock price dived by 30% …… (Last time I saw similar kind of drop in stock price was when Satyam was declared a scam company, obviously altogether a different case). Below is chart showing what 30% drop looks like…from Rs 132 to 105……..phew.
However this is nothing compared to IPO price. If you had bought DLF stock in IPO somewhere in 2007 for Rs525, at CMP of Rs 105 it would be wealth erosion of 80%.
Do you remember all those so called expert Analyst coming on Television/in-person telling you…”Real estate is great investment prices never fall...Its best investment”…. then why did stock price fall?......well my mother always said “son, if things are too good to be true, you are either in sleep & dreaming or you are dead”
Carl Gustav Jacob was a German mathematician, that most of us don’t know (you may know if you are related to his field). One of his biggest contribution to world was “Invert, always invert”. The great investor Warren Buffett has quoted that many times and probably you may feel you have heard that before. Charlie Munger , partner of Warren Buffett, often cited as Siamese twins (he is not) of Buffett said it as “tell me where I am going to die and I won’t go there”
Business of real estate involves selling a house/shop for a price. Most of investor who invested in real estate always believed that real estate prices would never fall. What one needs to invert here is not price part but demand part. Fundamental economic law states “all else being equal, as the price of a product increases, quantity demanded falls; likewise, as the price of a product decreases, quantity demanded increases”.
Below are the key Sales & PAT figures of few top real estate companies, watch trend you get idea. If maxim of real estate prices never falls hold true and demand for real estate never drop. Can all those smart people explain what went wrong with DLF’s PAT numbers from FY2010 to FY2014?
DLF that use to make profit of Rs1700cr in 2010 made Rs583cr in 2014, drop of 66%, in case of Oberoi its 32%, for HDIL its 68%. However Prestige, Godrej and Sobha seem to be growing.
| Rs cr | |||||
| Sales | 2014 | 2013 | 2012 | 2011 | 2010 |
| DLF | 8,298 | 7,773 | 9,629 | 9,561 | 7,459 |
| Prestige | 2,549 | 1,948 | 1,052 | 1,543 | 1,024 |
| Oberoi | 798 | 1,048 | 825 | 996 | 790 |
| Godrej | 1,179 | 1,037 | 770 | 447 | 241 |
| Sobha | 2,173 | 1,865 | 1,408 | 1,477 | 1,133 |
| HDIL | 872 | 1,025 | 2,006 | 1,850 | 1,502 |
| PAT | |||||
| DLF | 583 | 663 | 1,169 | 1,638 | 1,708 |
| Prestige | 324 | 294 | 88 | 167 | 129 |
| Oberoi | 311 | 505 | 463 | 517 | 458 |
| Godrej | 236 | 197 | 129 | 143 | 124 |
| Sobha | 234 | 217 | 210 | 185 | 138 |
| HDIL | 178 | 74 | 810 | 822 | 549 |
| source - moneycontrol.com | |||||
Saturday, February 21, 2015
Read, Learn, Improve - 21-Feb-15
The smartest animal you’ve never heard of – Link here
Indians are chocolate addicts but still suckers for tradition – Link here
Wall Street's brightest minds reveal the most important charts in the world – Link here
How Our Memories Shape Market Cycles – Link here
Anonymous Analysts Are Wreaking Havoc in the Asian Markets – Link here
How Much Would You Pay for Snapchat? – Link here
Why everyone — even Warren Buffett — got oil prices wrong – Link here
Finding Your Passion – Link here
The Time Everyone “Corrected” the World’s Smartest Woman – Link here
Indians are chocolate addicts but still suckers for tradition – Link here
Wall Street's brightest minds reveal the most important charts in the world – Link here
How Our Memories Shape Market Cycles – Link here
Anonymous Analysts Are Wreaking Havoc in the Asian Markets – Link here
How Much Would You Pay for Snapchat? – Link here
Why everyone — even Warren Buffett — got oil prices wrong – Link here
Finding Your Passion – Link here
The Time Everyone “Corrected” the World’s Smartest Woman – Link here
Monday, February 16, 2015
Miracle of Negative Revenue
Miracle of Negative Revenue
This is guest post – idea has come in from very good Analyst friend - MV.
One of the best parts about Being Analyst is number of different kind of companies you and financial miracle you come across. I happened to call up very good Analyst friend who goes by the name MV to clarify one point about a company called “Career Point Ltd” (BSE code – 533260) and discuss led to discovering of miracle.
I will shortly come across big main miracle before that let me introduce to small miracle that I came across.
Career Point (CPIL) came up with IPO in Sept’10 with issue size of 115cr shares at price band Rs295-310 (CMP – 165, please be rest assured there was no bonus or split). CPIL was involved in providing tutorial service to high school and and post high school various competitive entrance exam (AIEE-JEE, medical & dental entrance, etc).
I still remember trying to understanding subscribe justification given by an Analyst belonging to retail broking firm. I said “valuations seem to factor in the best case scenario”, Analyst replied “its order from Sales guy”, I was like "couldn’t agree more".
First Miracle
Anyway so here we are today and looking at Q3FY15 result of company and what do I see, company has expanded its scope of business from tutoring to automobile division. I vaguely remember talking to MV about it, so thought to call up and ask him about the same. MV clarified its actually not new thing, it’s been there for some time now, and they have started generating revenue hence it’s now visible. Career launcher has auto dealership of Hyundai cars.
BSE Link of Result – refer segment result on page-8
Capital Allocation and Circle of competency
For starters this is one of biggest thing that makes or breaks an company or an investor is “Capital Allocation. Everyone has limited capital and businessman/investor has to correctly allocate this capital in order to generate best return. However also remember, just because returns are good one should not go ahead and invest in it. One ought to remain in circle of competence. The Great Warren Buffett has said it many times he doesn’t invest in IT & Tech (barring his recent investment in IBM) as he doesn’t understand. Something similar seems to be happening here, not sure why a tutoring company is getting in auto dealership.
Second Miracle
MV bought to my notice the real miracle, if you observe above segmental finance, one would notice a segment called “Formal Education Division” (just bear with me; don’t try to understand what it means). Now look at the revenue figure for the quarter negative 2.93cr (293.99 lakh). Now how does a company earn negative revenue…? If one were to total all segmental revenue and cross verify it with P&L Total revenue it comes to same number, so it’s not that somebody accidentally put a minus sign ahead of numbers.
This result was posted on 13-Feb-15 on BSE website, till now there has been no clarification so we wait. In mean time if anybody has clue on this negative revenue please do share.
This is guest post – idea has come in from very good Analyst friend - MV.
One of the best parts about Being Analyst is number of different kind of companies you and financial miracle you come across. I happened to call up very good Analyst friend who goes by the name MV to clarify one point about a company called “Career Point Ltd” (BSE code – 533260) and discuss led to discovering of miracle.
I will shortly come across big main miracle before that let me introduce to small miracle that I came across.
Career Point (CPIL) came up with IPO in Sept’10 with issue size of 115cr shares at price band Rs295-310 (CMP – 165, please be rest assured there was no bonus or split). CPIL was involved in providing tutorial service to high school and and post high school various competitive entrance exam (AIEE-JEE, medical & dental entrance, etc).
I still remember trying to understanding subscribe justification given by an Analyst belonging to retail broking firm. I said “valuations seem to factor in the best case scenario”, Analyst replied “its order from Sales guy”, I was like "couldn’t agree more".
First Miracle
Anyway so here we are today and looking at Q3FY15 result of company and what do I see, company has expanded its scope of business from tutoring to automobile division. I vaguely remember talking to MV about it, so thought to call up and ask him about the same. MV clarified its actually not new thing, it’s been there for some time now, and they have started generating revenue hence it’s now visible. Career launcher has auto dealership of Hyundai cars.
BSE Link of Result – refer segment result on page-8
Capital Allocation and Circle of competency
For starters this is one of biggest thing that makes or breaks an company or an investor is “Capital Allocation. Everyone has limited capital and businessman/investor has to correctly allocate this capital in order to generate best return. However also remember, just because returns are good one should not go ahead and invest in it. One ought to remain in circle of competence. The Great Warren Buffett has said it many times he doesn’t invest in IT & Tech (barring his recent investment in IBM) as he doesn’t understand. Something similar seems to be happening here, not sure why a tutoring company is getting in auto dealership.
Second Miracle
MV bought to my notice the real miracle, if you observe above segmental finance, one would notice a segment called “Formal Education Division” (just bear with me; don’t try to understand what it means). Now look at the revenue figure for the quarter negative 2.93cr (293.99 lakh). Now how does a company earn negative revenue…? If one were to total all segmental revenue and cross verify it with P&L Total revenue it comes to same number, so it’s not that somebody accidentally put a minus sign ahead of numbers.
This result was posted on 13-Feb-15 on BSE website, till now there has been no clarification so we wait. In mean time if anybody has clue on this negative revenue please do share.
Saturday, February 14, 2015
Read, Learn, Improve - 14-Feb-15
The man who brought us the lithium-ion battery at the age of 57 has an idea for a new one at 92 – Link here
New York’s Baccarat Hotel Fetches Record Valuation From Chinese Buyer – Link here
Avoiding Stupidity is Easier than Seeking Brilliance – Link here
The Shifting Market for Corn in the United States – Link here
Two Years To No Lies – Link here
A Warning from Warren Buffett – Link here
The Rs 6,500-Crore Mystery At Mukesh Ambani’s Reliance Industries Limited – Link here
Amazon Prime Is One of the Most Bizarre Good Business Ideas Ever – Link here
You have a second brain in your gut, and it can live without you – Link here
New York’s Baccarat Hotel Fetches Record Valuation From Chinese Buyer – Link here
Avoiding Stupidity is Easier than Seeking Brilliance – Link here
The Shifting Market for Corn in the United States – Link here
Two Years To No Lies – Link here
A Warning from Warren Buffett – Link here
The Rs 6,500-Crore Mystery At Mukesh Ambani’s Reliance Industries Limited – Link here
Amazon Prime Is One of the Most Bizarre Good Business Ideas Ever – Link here
You have a second brain in your gut, and it can live without you – Link here
Tuesday, February 3, 2015
Quick thoughts on chalta hai attitude – a case of medical store and Bollywood awards
First foremost case of rule of law, which I thoroughly believe is most important variable in progress of any democratic society. Given case of India where tonnes of case are filed (god knows how many go unreported) and millions are stuck in court, its becomes utmost important for society to understand how much it’s not only job of “judiciary (court) & executive (police)” but also of individual to obey the law that helps in implementation of “rule of law”.
Here is the case in point, I was standing at medical store and couple walks in asking for couple of medicine. Pharmacist asks for doctor’s prescription, couple replies they don’t have it. Pharmacist responds his inability to provide medicine without doctor’s prescription letter/paper. Lady starts whining (read “kya yaar, aisa kya....please yaar etc etc), But pharmacist stays firm on his position. Couple replies, they have evening flight for USA and they don’t have time to go back to doctor for prescription, pharmacist non-response meant “no medicine without authentic paper”. To this lady says, I will connect doctor through her cell and pharmacist can speak to him, however he replied negative and reiterate for written prescription.
To me this was surprising on one level only, pharmacist response/behaviour/conduct. Nonchalant attitude by customer was total expected, given they have not really experienced rule of law. Law clearly states that doctor letter is must for prescription medicine, but given our system it was always taken casually, as saying no means saying no to business and who says no to money. Hence when this pharmacist refused I was partly surprised. I had small chat with him and he made is clear some medicines are not allowed to be sold under any condition without prescription (these are one which have some drug like effect, think of sleeping pills). Hence it’s medical store’s responsibility to ask for doctor’s prescription and herein lays problem area on how to make medical store responsible. Difficult problem to tackle one way I can think is one can complaint
Coming to lighter topic Bollywood awards, which is flavour of current season given we are at beginning of new year. Interesting trend that was visible was how much general public at large have started to understand that awards are probably rigged. Best of the best, there are many blogs who have highlighted deteriorating standard & quality of awards in past (in 2011, 2012 etc) but it seems award organiser refuse to pay any heed. If that was not enough these days many of YouTube channels along with Movie stars have openly made fun of this award Link-1 . To me Deepika’s award dedication to Kangana (who refuses to attend any award show) clearly shows even movie stars seem to know how these awards are losing charm. One more interesting trend that hints at how old (print) media is losing to new (online) media is increasing trend of big stars working with startup YouTube Channels – have you seen SRK – TVF or Alia –AIB (All India Bakchod) and recent AIB knock out had attendance by Ranveer singh, Arjun Kapoor, Deepika Padukone, Sonakshi sinha, Alia Bhatt, Anurag Kashyap and many more. If you notice it’s clear, these guys have understood who trendsetter is gone be going ahead. In earlier days relationship between movie star and magazine/print media was inter-dependent, as they would give them fodder to print and media in turn would give them award or media would give star award so that s/he would perform for free at award ceremony or media would give star award so that s/he would give extra interviews & details for upcoming movies...etc etc. Now given audience had moved on-demand consumption of media, magazines & TV are losing appeal and hence the shift.
Here in lies opportunity, if somebody can organised an award show which has jury member with lot of credibility and whole process is more systematic and audited by auditors, basically making whole process systematic and authentic...boom...you have winner.
Here is the case in point, I was standing at medical store and couple walks in asking for couple of medicine. Pharmacist asks for doctor’s prescription, couple replies they don’t have it. Pharmacist responds his inability to provide medicine without doctor’s prescription letter/paper. Lady starts whining (read “kya yaar, aisa kya....please yaar etc etc), But pharmacist stays firm on his position. Couple replies, they have evening flight for USA and they don’t have time to go back to doctor for prescription, pharmacist non-response meant “no medicine without authentic paper”. To this lady says, I will connect doctor through her cell and pharmacist can speak to him, however he replied negative and reiterate for written prescription.
To me this was surprising on one level only, pharmacist response/behaviour/conduct. Nonchalant attitude by customer was total expected, given they have not really experienced rule of law. Law clearly states that doctor letter is must for prescription medicine, but given our system it was always taken casually, as saying no means saying no to business and who says no to money. Hence when this pharmacist refused I was partly surprised. I had small chat with him and he made is clear some medicines are not allowed to be sold under any condition without prescription (these are one which have some drug like effect, think of sleeping pills). Hence it’s medical store’s responsibility to ask for doctor’s prescription and herein lays problem area on how to make medical store responsible. Difficult problem to tackle one way I can think is one can complaint
Coming to lighter topic Bollywood awards, which is flavour of current season given we are at beginning of new year. Interesting trend that was visible was how much general public at large have started to understand that awards are probably rigged. Best of the best, there are many blogs who have highlighted deteriorating standard & quality of awards in past (in 2011, 2012 etc) but it seems award organiser refuse to pay any heed. If that was not enough these days many of YouTube channels along with Movie stars have openly made fun of this award Link-1 . To me Deepika’s award dedication to Kangana (who refuses to attend any award show) clearly shows even movie stars seem to know how these awards are losing charm. One more interesting trend that hints at how old (print) media is losing to new (online) media is increasing trend of big stars working with startup YouTube Channels – have you seen SRK – TVF or Alia –AIB (All India Bakchod) and recent AIB knock out had attendance by Ranveer singh, Arjun Kapoor, Deepika Padukone, Sonakshi sinha, Alia Bhatt, Anurag Kashyap and many more. If you notice it’s clear, these guys have understood who trendsetter is gone be going ahead. In earlier days relationship between movie star and magazine/print media was inter-dependent, as they would give them fodder to print and media in turn would give them award or media would give star award so that s/he would perform for free at award ceremony or media would give star award so that s/he would give extra interviews & details for upcoming movies...etc etc. Now given audience had moved on-demand consumption of media, magazines & TV are losing appeal and hence the shift.
Here in lies opportunity, if somebody can organised an award show which has jury member with lot of credibility and whole process is more systematic and audited by auditors, basically making whole process systematic and authentic...boom...you have winner.
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