Manappuram and Muthoot are the most profitable NBFCs in India. You can see this from Figure 2 of an earlier post here. I’m using return on assets (ROA) as measure of profitability. ROA is the core profitability of the business without taking leverage into account. For FY18, the ROA of Manappuram and Muthoot was 4.8% (5.5% in FY17) and 5.5% (3.8% in FY17) respectively. The ROA for Manappuram and Muthoot for H1 FY19 was 4.6% and 5.6% respectively. An ROA of 2% is generally considered respectable for financial institutions and anything close to 5% is unheard of. So, the question is – what is so special about these two companies…
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When breath becomes air by Paul Kalanithi
What will we do if we had one year to live? Will we still continue with our day jobs? What changes will we make to our life? Will the approaching end scare us or will it jolt us to live more fully? Will we pick up a hobby which has always been our passion but never had the time to indulge? Maybe we never reflect on these things, because these are theoretical possibilities. But for Paul Kalanithi, this was not an abstract topic. Paul was towards the end of competing his decade long training of neurosurgery when he was diagnosed with advanced lung cancer. He was 36 years old and…
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Sterlite – a complicated story
Introduction Sterlite is a vertically integrated manufacturer of fiber optic cables. The manufacturing of fiber optic cable starts from silicon chemicals which is converted into preform which is used to draw fiber which are combined to make the end product – fiber optic cable. Preform is a glass rod with extremely high purity and forms the core of the fiber. It is the most important component of the fiber optic cable and the quality of the cable derives to a large extent from the quality of the preform. The manufacturing of preform requires highly specialized manufacturing process. Preform is to optical fiber cable what software was to the computer industry.…
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Fearless: The Undaunted Courage and Ultimate Sacrifice of Navy SEAL Team SIX Operator Adam Brown
At the end of the movie Matrix, Neo says – “I’m going to tell these people what you don’t want them to see. I’m going to show them a world where anything is possible.” Adam Brown is the real-life Neo and he shows us that anything is indeed possible. This is an inspirational story about an ordinary person and his transformation from being a struggling drug addict to one of the most badass navy seals. Adam Brown was able to accomplish it due to the sheer determination to be the best version of himself. The journey and the training required to become a navy seal is so brutal that people…
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Oberoi Realty – quality real estate business
Following up from the first two articles about real estate (you can find them here and here). Since the articles were quite long, I’m going to summarise them here for convenience. So, the first article talks about the real estate cycle in India starting from the liberalization in 1991. We are currently in the second real estate cycle. The first cycle peaked in 1995 and the second cycle peaked in 2012-14 period. Currently, we are in the final stage of the second real estate cycle. While it is not clear when the third real estate cycle will start, it feels like we are close to the bottom because there is…
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Mahindra Holidays – a melting ice cube?
Mahindra Holidays is a company which sells vacation ownership for 7 days per year for 25 years – also known as timeshare. The company earns revenue from one time admission fee plus annual membership fee over the period of 25 years. In addition, it earns revenue from selling food and beverages at its resorts. The business has a market capitalization of INR 2,600cr. They have total assets of more than INR 6,000cr. Out of this 6,000cr, they have land + other fixed assets + receivables + cash of 4,309 cr. Out of this, they have land + receivables + cash of 3,438cr. Out of this they have land + cash…
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There is no such thing as a self-made man by P P Chhabria
Charlie Munger mentioned the qualities Warren Buffett looks for when hiring – “But other people interpret that to mean that if you take a pile of money and hire the very best people you can get, who’ve gotten A’s in business schools and who are honest and know the lingo of modern management and are nice to their wives and work hard and are just quality people, then its sure to work. That’s not what he means. His definition of a wonderful person, is somebody who could fall out a freight car with no money in a strange town and without cheating anybody become rich without waiting too long.” Mr.…
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The Inner game of tennis by Timothy Gallwey
This book was written in 1970s by Timothy Gallwey who at the time was a tennis coach and amateur tennis player. The book was written as a manual for tennis players to improve their game. But it has found widespread applicability outside of tennis and even outside of sports to areas as diverse as music, business, writing etc. Think about a person you admire who is an expert in their field. What are the qualities you think set them apart from others? One obvious quality is that they have better skills in their chosen field. But the thesis of this book is that there is something else apart from the…
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Narayana Hrudayalaya – Building an affordable model of healthcare at scale
Hospitals provide a necessary service and are hence relatively immune to economic cycles. On the other hand, it is a highly capital intensive business and is inherently riskier to that extent. For capital intensive businesses such as hospitals, the capital expenditure required is more than the cash generated from operations especially during the growth phase of the business. Most of the hospital chains currently in India are in their growth phase and hence have negative free cash flows as can be seen from the table below. Kovai has a positive cash flow as they derive a majority of their revenues (88%) from one single multi-specialty hospital. NH (2011-18) NH (2011-18)…
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Speech by Charlie Munger – A lesson on elementary worldly wisdom as it relates to investment management and business
Anything by Charlie Munger is pure gold and this speech is no exception. It is phenomenal and full of wisdom. In the first part, Charlie talks about elementary mental models from various disciplines and their application to investing and business. In the second part, he talks about the art of stock picking. I have read the speech multiple times and it deserves to be read in full and I would encourage everyone to do that. I have taken the liberty of highlighting a few portion of the speech which stand out for me. Enjoy! Full text of the speech Charles Munger, USC Business School, 1994 I’m going to play…
