First Generation entrepreneurs and Multibaggers
Printed From: The Equity Desk
Category: Market Strategies
Forum Name: Identifying Multibaggers
Forum Discription: Discuss specific attributes that investors could look at while choosing multibaggers. Also point out certain factors that investors tend to overlook while finding multibaggers.
URL: http://www.theequitydesk.com/forum/forum_posts.asp?TID=201
Printed Date: 03/May/2025 at 2:23pm
Topic: First Generation entrepreneurs and Multibaggers
Posted By: basant
Subject: First Generation entrepreneurs and Multibaggers
Date Posted: 19/Aug/2006 at 2:56pm
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First Generation entrepreneurs and Multibaggers A predominant number of the promoters in the multibaggers that we discussed in the section http://www.theequitydesk.com/forum/forum_posts.asp?TID=113&PN=1 - "All multibaggers started with small market caps" were first generation entrepreneurs. Even if they were second or third generation the companies that went up 40 50 or 60 times were all new ventures or start ups as we may call them. Clearly the amount of stress that we pay on management integrity should not be focused on the past experience but more so on what they are and what they would like to become. Strangely none of the top multibaggers had the bigger names like:
Tatas Birlas Ambanis Foreign company Now many would argue that Tata could have been right at the top had they got TCS listed in 1995 but that is precisely the point I am trying to make. A good business house wills never give you something very cheap. A few examples that come to light are: Reliance intends to list its retail business once it is established but not today. Bharti never made an IPO for its agro business. M&M waited all these years to get its technology related business listed. There is nothing wrong in following this strategy but the concept of trying to make a huge multibagger from an established promoter remains remote and undiscussed. Established promoters can only give you a 3 to 5 multibagger. If you intend to make a 20 bagger you need to look at the new blood. This is because an established promoter will never sell his shares very cheap. He knows how to extract his pound or even half an pound of flesh. On the other hand the new promoter has no option. He needs money and would raise it irrespective of the valuations that he gets, banks would not finance him nor does he have personal resources to fund the plans. Before I end just think of another event where people made huge money and some could not. In the early part of 2003 when Mobile Telephony was being introduced Reliance, Tatas, Hutch, Essar and BPL preferred to go alone while Bharti had no option but to come to the public. From the IPO price the stock is up 9 times whereas the Primary beneficiaries of Reliance Infocom have been the promoters and their group companies. Investors should think that real multibaggers will emerge from promoters who have an element of unknown quantity within them. I think that the difference between established and first generation entrepreneurs is the lack of alternative opportunities. The newer breed of promoters have nothing to lose. As Nandan Nilekani once mentioned that he had started his career with Rs 250 and all he could lose was Rs 250. On the other hand if Ratan Tata were to mess up a big project he could land himself in trouble. They find it better to take lesser risks and concentrate on existing businesses rather then jump head long into a new venture. So as Mukesh Ambani admitted during a session at IIM that they missed the software boom because of their preoccupancy with Petrochemicals. Even if they had started software I doubt Investors would have been invited to take a share from the booming new venture. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Replies:
Posted By: Ajith
Date Posted: 20/Aug/2006 at 12:05pm
| I agree entirely.India is a vey largish growth story and so there are a growing number of such opportunities and if one catches the right stock early one could easily earn the returns got from Infosys in the past 12 or 13 years and that is a certainty.But execution risk being high it would be better to diversify.Pantaloon market cap can grow 10 times in 2 years if execution and format strategies work out. With the diversification tool in hand,the software sector is a good sector if one takes help from a domain expert and keeps PEG in mind. |
Posted By: basant
Date Posted: 20/Aug/2006 at 12:44pm
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Absolutely and that is why it is essential to have the downsides in mind so that you do not get a jolt. If you think electronic media will do well you could buy TV 18 and NDTV, or Zee Tv with SUN Tv depoending which specific section you are more bullish on. That way we can cut down the event risk and still play the broad theme.But investing in companies like Sab Tv and ETC will trake you nowhere.
Given a choice I would put all my money in Pantaloon rather then Trent but just because I want to be hedged (partially) from an event risk I have taken an exposure to Trent. I am sure of one thing organized retailing will do extraordinarily well. Which companies would go up 10 times is debatable thouigh. It therefore makes sense to make a basket of the top three in each sector. Your losses from any one will be more then adequately compensated by the growth in the others.
I want to look at new management trying to establish integrity and honesty. Rarely will you get an establised managemnt in a new sector. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: Ajith
Date Posted: 20/Aug/2006 at 2:20pm
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Never even think of putting all your money in one stock even if it looks very good and even if it clicks that strategy has inherent and deeprooted flaws.The world is too chaotic for that strategy to work consistently. I am saying this generally-not that anyone in his right senses will actually put all his eggs in one basket but there was this weird rule put up by a then(1991) leading now non-extistant financial weekly-Put all your eggs in one basket and watch that basket carefully.
I think if I have the short to medium term in mind 3 to 5 will do.
But my time perspective is minimum 6 years and hopefully I want to ensure my selection is so good that I do not have to exit/switch. So I need at least 15 stocks,I think.
I agree with you on the electronic media stocks though on the face of it Sun TV looks overpriced.
I have Trent.I think its a slower but steadier multibagger.Everyone knows its from the Tatas and so they are wooed as anchors and customers are attracted on that alone. Pantalon may outperform Trent and with that you will agree.
No one is looking at the software sector seriously.R Damani 's choice Nucleus Software looks good.
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Posted By: basant
Date Posted: 23/Aug/2006 at 7:39pm
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Mr. Ajit:Can you throw more light on the financial weekly that you are referring to what strategy they advised at that time and what went wrong. WOuld be very interesting to know(learn). ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: go4lalit
Date Posted: 28/Aug/2006 at 10:43am
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Another way to look at the Next Infosys or next leaders, as to from 5-10 years from now, what are the new entrants to the sensex.
All the new big growth stories like Infy, Wipro, HDFC, ICICI, Saytam entered the sensex in the late Nineties, Now the task is to indentify which companies/sectors will be in sensex in say 2015.
Obvisously, Retaining is going to be a big story in India, and the obviously Pantaloon/Trant will be the beneficiaries. Next line can be Internet stocks like, we have Amazon, AOL, Google in US. Can TV18 make it, with its Internet ventures? What are the other growing Internet companies in India with sound Business model & management.
New banks like Yes Bank and Insurance companies can also be the candidates from 5-10 year down the line.
Another area that I see is Energy. The demand for Energy will always increase. (I am thinking of how much Energy/Power/Oil we will need 20-25 years down the line). Now to indentify Niche businneses with good management in Power sector which are availabe at good price. Also this becomes indirect consumer play, as can you think of stop consuming power/electricity?
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Posted By: basant
Date Posted: 28/Aug/2006 at 10:59am
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Hey, I think EXACTLY the same way (on the sectors that you have put up).Without trying to cut you down there are many instances when companies entering the sensex are at their peak ZEE TV is one such example although ZEE met its disastor because of the management rather then any other reason. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: prashantmohta
Date Posted: 29/Aug/2006 at 9:19pm
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well in the long run a company cannot maintain its ROCE more than 25% (app.) and if in some cases like levers of the world has 60% in which there is very little scope left for expanding ROCE beyond this level.for investor its impossible to catch each and every rallies in its financial career because stocks gives extraordinary returns if it has been bought in its nascent stage.
we should expects reasonable returns from the market (26%) and in ten years your money has worked 10 times for you.my point is that if anybody wants to make serious money then diversified equity mutual funds is a best way to invest,and all mfs in india has given more than 26% in ten years,where most of the investors has burnt their fingers in two of our serios crashes.
prashantmohta,
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Posted By: basant
Date Posted: 29/Aug/2006 at 10:33pm
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You have raised a good point. If @ 26% we can make a 10 bagger in 10 years it becomes a 1000 bagger in 30 years. That means an investment of Rs 10 lacs could become Rs 100 crores in 30 years.
Now try telling someone about a stock at Rs 100 with a suggestion that it could go to Rs 126 the next year and you will get a sample of how greedy (ignorant) we are about investing.People want to double their moneyy in 3 months here.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: basant
Date Posted: 07/Sep/2006 at 7:53pm
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http://www.theequitydesk.com/forum/forum_posts.asp?TID=224 - Financial Technologies and http://www.theequitydesk.com/forum/forum_posts.asp?TID=135 - - are the biggest examples of first generation promoters whom no one took seriuiously and which went up some 20 - 30 times. Once the stocks went up that much the business magazines initiated focus on the icons of the new India that says "I can think". ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: prosperity
Date Posted: 07/Sep/2006 at 10:11pm
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I liked this topic very much - specially Mr. Basant's first post of this topic ... Frankly speaking, i never thought about this - that bigcaps would never list their shares .. and give adv. to public ... That how i lost on reliance communications... and how i will loose on reliance retail.... But somehow i am not convinced on Pantaloon either... coz. Mr. Basant himself told that TV18 which has very less revenues as compared to Pantaloons as very high profits and profit margins as compared to Pantaloons... Retail needs lots of money (in form of land banks) ... and Retail margins go for a toss - because retailers wants to capture good revenues and market share and hence sacrifice margins for it... Big Bazaar is good for customers - but very bad for promotors - coz even with scale - margins are so low that scale cannot nullify the margin impact I want to differ from u on Pantaloons...
It might have been a multi-bagger ...
But not anymore !
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Posted By: Ajith
Date Posted: 07/Sep/2006 at 9:35am
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Mr.Basant, saw your post only now.Financial Wizard popular in early 90s carried this quote -put all your eggs in 1 basket and watch that basket.I think it is very risky to have a concentrated portfolio.My experience is that one should have 3 to 5 large positions and around 18 moderate holdings. ------------- Ajith |
Posted By: basant
Date Posted: 07/Sep/2006 at 9:50am
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Never advised putting everything in one company only. I have exeactly that strategy 3 significantly wwighted stocks and the other 10- 12 small exposure stocks. I used to see that paper and they were basically looking at small undiscovered companies that were not sector leaders if I remember correctly.Never talked about good well managed companies; the focus was always to suggest something that moves faster then the market.
------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: Ajith
Date Posted: 07/Sep/2006 at 10:20am
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Sorry,I knew you meant it that way but my words by mistake indicated otherwise. ------------- Ajith |
Posted By: basant
Date Posted: 07/Sep/2006 at 10:27am
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No Problem. I had thought so but still wanted to clarify. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: omshivaya
Date Posted: 08/Sep/2006 at 2:26pm
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Shoppers Stop or Pantaloon from here on in Retail Basant jee? Can you please throw some comparisons here? RJ mentioned somewhere shoppers stop to be entered into currently and surprisingly didnt mention pantaloon for any fresh entries?? appreciations! ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: basant
Date Posted: 08/Sep/2006 at 2:48pm
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I have always maintained and do PRACTICE that your buy price is relevant only to the extent that your trade gets executed once it does then it makes little sense whether we own the stock from lower levels or are planning to buy more of that In retailing I prefer . http://www.theequitydesk.com/forum/forum_posts.asp?TID=135 - - and Trent. Private labels make 80% of Trent sales while they make hardly 25% ij case of SHoppers Stop. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: omshivaya
Date Posted: 09/Sep/2006 at 2:38am
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Thanks sir. Appreciate it. ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: investor
Date Posted: 29/Sep/2006 at 3:59pm
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Basant, did you read the one page interview with Mukesh Ambani in todays ET? Its amazing to see his views on the future....just like his dad, he is thinking really BIG.... |
Posted By: basant
Date Posted: 29/Sep/2006 at 4:10pm
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Yes but I think that this hjas only academic value sharehoilders can be benefitted big time only with a. http://www.theequitydesk.com/forum/forum_posts.asp?TID=201 - first generation businessman who thinks that big ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: BubbleVision
Date Posted: 29/Sep/2006 at 4:15pm
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Yes from an investing point of view and a entrepreneurship point of view, you are absolutely correct.
------------- You can't make money if you are unwilling to lose...It's like willing to breathe in but not willing to breathe out. -- ED SEYKOTA ....Read Disclaimer! |
Posted By: basant
Date Posted: 26/Nov/2006 at 10:36am
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Bharti announced a tie up with Wal Mart but before you buy the listed telecom company please understand that this venture is tucked away in Bharti Enterprises - so the telecom investors woulkd not get a penny out of it.That is the problem of being invested with established promoters. They will offer you their shares as long as they are not established and once they have made their millions they prefer to go it alone. Reliance Infocom was also put up on similar lines. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: xbox
Date Posted: 26/Nov/2006 at 10:57am
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Not long ago 'Bharti Enterprises' was listed entity, which was unlisted by promotors to give clear way to Bharti TeleV. There are ppl who are holding it's earlier avatar. They will benifit from this.
This 'not sharing wealth creation by venturing different sector' is also catchup with 'First Generation entrepreneurs' . Mittals are First Generation entrepreneurs.
Here is problem is not with generations of entreprenurs but listing structure. So far RIL was acting as holding companies for all relaince group. So there was not problem.
For Indiabulls, IBFL acts as holding company so no problem. But Mittal's earlier delisted holding company.
TATA's holiding company is also not listed. For Birla holding companies grasim, hindalco, ABN are all listed, so I expect no ptoblem there. ------------- Don't bet on pig after all bull & bear in circle. |
Posted By: nav_1996
Date Posted: 27/Nov/2006 at 1:09pm
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In such cases professionally owned companies like L&T and ITC are better off as all subsidaries will be a part of the listed entity.
I guess Bajaj is an exception where all new businesses are held by Bajaj Auto. But again when promoters see risk they share it with minority shareholders and when they don't they prefer to keep it to their family. |
Posted By: vip1
Date Posted: 27/Nov/2006 at 1:24pm
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Basant, This whole episode of listing -delisting is to create personal wealth . Does it not put the promoters of Bharti in the same league as many penny stock- promoters?. Reliance Retail is a 100% Subsidary of Reliance , same could have been done with Bharti . |
Posted By: basant
Date Posted: 27/Nov/2006 at 2:28pm
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It does as far as I can think but since their underlying businesses do well they are entitled to those things. ALso in Bharti's case they robbed the shareholders in the late 90's by first taking the company private and then relisting it at over a billion dollars.
In this case they have legally done nothing wrong because they sold off their stake and then reinvested it but if you see Reliance the shares to the listed company are issued at a higher price while promoters subscribe it at par. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: basant
Date Posted: 30/Nov/2006 at 2:59pm
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So finally Birla ji has decided to do the retail business through his private company. I was wrong when I thought he would do it with Av Birla Nuvo. It is unfortunate but as these promoters do things that are entirely legal we cannot complaint - sour grapes if you remember. ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
Posted By: kulman
Date Posted: 27/Jan/2007 at 12:11pm
------------- Life can only be understood backwards—but it must be lived forwards |
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Posted By: omshivaya
Date Posted: 27/Jan/2007 at 12:29pm
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Excellent article you extracted Kulman ji. Wonderful really! ------------- The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it |
Posted By: gopal
Date Posted: 14/Feb/2008 at 11:18pm
XBOX bhai the main holding company of BIRLA group PILANI INVESTMENTS is not listed on any exchange ........ further the BIRLA group also has another pvt holding company abroad also
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Posted By: xbox
Date Posted: 14/Feb/2008 at 1:38am
...Every company's holding could be traced down to a private Indivisual...exp...tv18 ->nw18 -> RB. End is always a private. ------------- Don't bet on pig after all bull & bear in circle. |
Posted By: khokhadream
Date Posted: 14/Feb/2008 at 3:06am
 kaya sehi kaha |
Posted By: basant
Date Posted: 14/Feb/2008 at 8:00am
I had missed this link earlier but it is truely a wonderful post. On a generalised note please remember that for most promoters those initial 1 or 2 crores are also not pure cash. Generally promoters try and arrange money which in marwari parlance is called "entries". That means cheques go in but the actual money flow isn't incremental it is just an entry!!!
Makes one revisit the talk on http://www.theequitydesk.com/forum/forum_posts.asp?TID=364 - Diversified vs Concentrated Portfolios and that is actually what a concentrated portfolio can make for you.  ------------- 'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in |
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Posted By: ramani
Date Posted: 12/Aug/2009 at 5:23am
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Hello Basant and TEDs,
your insight ( the first post on this blog) is absolutely fantastic. i could only agree with you. i believe the same. rich will never share money but risk. starters because of no other choice ( opportunity cost of capital) will share money and risk. secondly, the passion they bring to the table is unparalleled - they are on fire.
otherside to be very honest, i dont see so many posts in that respects of companies like that in equitydesk. i see large concentration on midcaps and to some limited extent small caps. or am i missing something here?
by the way VOLTAS in our TED list is also a TATA company...
I am looking forward to and support more discussion on small, micro and mini caps with fire in the belly of entrepreneurs and more than happy to share the risk for them as well.
warm regards
Ramani.
------------- It's not important whether you are right or wrong, it more important how much you lose when you are wrong and how much money you make when you are right" - Soros. keep profit makers, sell loss-makers |