Saurabh Mukherjea - Founder and CIO of Marcellus Investment Managers

Saurabh Mukherjea - Founder and CIO of Marcellus Investment Managers

My guest for today is one of India’s most celebrated public market investors and educators, given his penchant to share his learnings frequently. Saurabh Mukherjea is the Founder and Chief Investment Officer of Marcellus Investment Managers. Saurabh was educated at the London School of Economics where he earned a BSc in Economics (with First Class Honours) and an MSc in Economics (with distinction in Macro & Microeconomics). In London, Saurabh was the co-founder of Clear Capital and in 2007 he was rated by the Extel Survey as one of the top small cap analysts in the UK. In India, Saurabh was rated as the leading equity strategist in 2015, 2016 and 2017 by the Asiamoney polls. Prior to setting up Marcellus, Saurabh was the CEO of Ambit Capital.

Saurabh is a CFA charter holder and a SEBI registered investment advisor. In 2017, upon SEBI’s invitation, he joined SEBI’s Mutual Fund Advisory Committee. In 2019, Saurabh was part of the Expert Committee constituted by SEBI to update and upgrade the PMS regulations. Saurabh has written four bestselling books – Gurus of Chaos (2014), The Unusual Billionaires (2016), “Coffee Can Investing:  (2018) and ‘The Victory Project: Six Steps to Peak Potential’.

This episode is brought to you by where we believe Investing is an ignored life skill. Multipie is building up a platform where people can form communities and learn, share , collaborate on growing their wealth using the right tools. We want your hard earned money to work for you

Show notes:

0:42 - Introduction about Saurabh

2:18 - Saurabh’s “Coffee can” approach; highlights on Asian Paints, Nestle, Bajaj Finance, Divis

6:39 - Tracks less than 30 stocks that meet his criteria.

10:20 - Views on the state of income in India and a parallel with America

12:37 - How to identify a company with a monopoly. Deep dive into understanding barriers

18:34 - Discussion on various PMS schemes at Marcellus and selection process

27:38 - Discussion on Rupee vs Dollar and Investing mindsets in India

30:01 - Saurabh’s view on Indian Real Estate as an Investment

35:20 - Saurabh’s thoughts on valuations 3 metrics Saurabh considers before selling a stock

44:00 - Perspective on ITC and why they exited it

46:55 - How can a retail investor conduct basic forensic checks

48:35 - A good business vs a good investment

54:07 - Investing in Nifty index versus Investing in stocks

56:51 - Behavioural aspects of investing

58:33 - Saurabh’s take on “Breaking Investment Stereotypes”

1:00:38 - Saurabh’s advice on writing and journaling along with some book recommendations

1:06:10 - Advice to 20 year old self


Raj  00:00

Hello, listeners. My name is Raj Singhal and welcome to another episode of breaking investment stereotypes. This episode is brought to you by, where we believe that investing is an ignored life skill. Our mission is to create a platform where people can come learn, share and collaborate through the right tools. Ultimately, we want your hard earned money to work for you. Here at breaking investment stereotypes, my job is to deconstruct world class investors, or wealth managers and deep dive into their investing journey professionally personally or both. I want to give a little guidance on how to use the shows. Now the following should be taken as investment advice. Please see for more information. My guest today is one of India's most celebrated public market investors and educators given his pension to share his learning frequently. Saurabh Mukherjhea is the founder and Chief Investment Officer at Marcellus Investment Managers. Saurabh was educated at the London School of Economics on a BSc in economics with first class honours, and an MSc in economics. In London, Saurabh was the co-founder of Clear Capital and in 2007, he was rated by the external survey as one of the top small cap analysts in the UK.

In India Saurabh was rated as the leading equity strategist in 2015, ‘16 and ‘17 by the Asiamoney polls, prior to setting up Marcellus. Previously, Saurabh was the CEO of Ambit Capital. Saurabh is a CFA charterholder and a SEBI registered investment advisor. Upon service invitation in the Joint Service Mutual Fund advisory committee in 2019, Saurabh was part of the expert committee constituted by SEBI to update and upgrade the PMS regulations. Saurabh has written four bestselling books - Gurus of Chaos in 2014, The Unusual Billionaires in 2016, Coffee Can investing, The low risk route to stupendous wealth in 2018, and The Victory Project in 2020.

Saurabh is also a Fellow of the Royal Society of Arts. So without further ado, please enjoy my conversation with Saurabh. Hi Saurabh, I've been reading your books and listening to some of your talks. And while I broadly understand your investment process, can you briefly share for our listeners - how would you describe your investment process?


Saurabh  02:23

I mean, look, right, it's very simple, right? What we have written about both Unusual Billionaires in 2016, and in Coffee Can Investing in 2018. And what we'll once again reiterate in our forthcoming book is that in India, you just have to do three things, which you have to get right if you want to make money in this vast country:

First is that a vast majority of Indian promoters are corrupt, right, the businesses, the books are cooked. And even amongst the cleaner businesses, which I would say around 20% of businesses are clean, quality of management and governance is fairly, fairly pedestrian. So the first priority for any investor in India, should we look for a clean set of accounts, believable numbers, I would, I would submit to you that there's no more than 70 such businesses in our country, where the published financial statements are a reliable indicator to the quality of the franchise. The second layer of what I think an investor in India has to do is recognise that this is a vast country, but it's still a very poor country, you know, contrary to any delusions, to the delusional view of superpower, India and all of that. It is a very poor country, consistently among the world's poorest countries in the United Nations Human Development Index. And if anybody has any illusions about India being a poor country, hopefully in the last 90 days, the tragic events have put that to rest.

So the second thing we therefore do, is focus on businesses, which sell the essentials of life. These could be services businesses say Dr. Lals, these could be product businesses, say Nestle. These could be B2C (the examples I just cited) or they could be B2B. Divis Labs provides the essentials of life. But in a B2B context, it makes 75% of the world's painkiller API.

So step one is cleanliness. Step two is essentiality. And the third thing to do in India is invest in monopoly franchises. We are among the world's most monopolised, amongst the top 10 economies in the world. Pretty much every product or service which is essential in India, either one company or at most two companies take home 90% of the profits from that product. And therefore the priority in India has to be to look for companies which operate unchallenged for all practical purposes. These promoters are not going to come on TV and tell the world - hey look at me, I'm the monopolist. It's stupid of them to do that. But you and I have to therefore do the work and say not only is the promoter clean, not only is the product essential, but this company operates by and large unchallenged in its market. So simple examples, as every school child in India knows, in practical terms, only one brand of adhesive sells in the country. You and I were in school when Fevicol was a dominant franchise now that my kids are in school, it is still a dominant franchise. As the parent of every young baby in India knows, in practical terms, only one brand of milk baby milk powder sells in the country, Nestle, with 97% share, and similarly in the if you want to take up different context B2B, Divis Labs is a monopolist in the global painkiller market. 75% of the world's Naproxin API is manufactured by Divis Lab from its Vizag and Hyderabad plants. So clean promoter, essential products and monopoly franchises. That's all we do. We've been doing this for four years, we do this for the best part of more than a billion dollars now. There's hardly any churn in the portfolio. The good news is this makes us earn our clients a lot of money. The bad news is unfortunately no more than 30 Indian businesses make the cut here, of which 14-15 make it to our portfolio. I wish there were more, I wish the investable universe was a little bigger. But you know, it is what it is, if they are also such companies I guess there'll be other fund managers who could make money like us at one level. It's a blessing in disguise.


Raj  06:26

So before I come to your various PMS schemes, you mentioned about 15-30 companies in your 20 years of career that fit the bill. Have those companies been the same? Or have they changed?


Saurabh  06:42

This set of elite monopolists, by the way, this set of 20-25 giant monopolies, they account for 90% of corporate India's profitability, right so in the world's sixth largest economy, 20 firms take home 90% of corporate profits. When my colleagues and I migrated to India 13 years ago, the top 20 profit generators were only a third of India's profits. So imagine how transformative the last 12-13 years have been. From one-third of corporate India's profits, the leading monopolists now account for 90%. And by the way, it's similar, the statistics for Japan and Korea are very similar. And American statistics at corresponding stages of development are very similar. Every single country which is developed has gone through this, what I call profit concentration, profit polarisation in the hands of 15-20 elite franchises, everybody else is kind of a bystander in this stage of development. Not until you cross $10,000 or $15,000 per capita income, do you see the profit concentration reduce. Anybody in India who believes that profit concentration will reduce in the next 10 years, I think has to be drinking something very interesting, because there is no country in the history of this planet, which in the journey to $10,000 per capita income has seen anything other than radical profit concentration.

And India's story is very similar to other large economies which have industrialised. Now on how much churn is there in this, yes there is churn. So if you take the elite 20-30 franchises, over the course of a 10 year cycle, around half will drop out, and another half will jump in. So for example, when I came to India, Kotak Bank wasn't on this list. It is now on this list of elite monopolists. When I came to India, HDFC Bank wasn't in the top 10. Now it's number two on the PAT generation list in our country, right? When I came to India 13 years back, companies like BHEL, Steel Authority of India were on this list and they have now dropped out. I'm sure that hopefully for most listeners it is obvious as to why they have dropped out. So there is churn here. And therefore the job of a Fund Manager is to understand whether these franchises, these monopolies that we are investing in, are sustainable monopolies, or is their time in the sun behind them. And that's what makes the job interesting, right? These are clean franchises, essential products, monopoly franchises, the interesting part is to understand what drives the monopoly, and how long can the monopoly sustain. In most cases, the companies we are investing in have good visibility that at least the next 10 years, the monopoly power will be more or less unchallenged.


Raj  09:34

So that's interesting, actually, you bring up an interesting point on per capita income. And I also you know, we keep telling people that you know, India has an Income problem actually, it is not. I mean, you know, my friend made an interesting point that for US the income came first and then the whole tech ecosystem came later. In China, the income and the tech ecosystem came together. And in India, the whole Tech ecosystem is already there, but income is missing right now. And when you know, we are still a very poor nation, as you mentioned, so I think we have a long way to go. And I think that's a good sign. 


Saurabh  10:07

I don’t really think that's a problem. I think that's quite a positive thing, right? Now America in 1879-80, America was in every sense of the word a poor and backward country. In 1880s, the railroad came to America. In 1890s, the Telegraph came to America. 1910, the Ford Model came, and the American road networks are getting built out. 1910 onwards, and by 1930, the contours of the modern economy American economy were built.

Now in that 50 year period 1880 to 1930, pretty much all the American brands that we know of today, Kellogg's Pillsbury, Heinz Wrigley's, they were all built in that 50 year period. 1880, America did not have a single supermarket. By 1930, America had 500,000 supermarkets. So, in America, technology and industrialization came together, the formalisation of the US economy has happened together. And India is going through exactly the same process through a very similar dynamic, right GST, low cost airlines, highway network broadband connectivity. And there is nothing unusual about this. What we are going through is textbook formalisation. It's happened in Taiwan, it's happened in Japan, it's happened in Korea, it's happened in America, there's nothing unfortunate. This is textbook economic development. Where 15-20-25 powerful monopolists drive the development of the country. They obviously do it for their selfish good. But that's how development happens. Development doesn't happen out of charity. It happens when 15-20-25 determined driven industrialists, monopolists say that, look, I want to build something big. Something which dominates the country changes the country and their ambition, their drive, their brains, drives industrialization, right? There's a lot of people in our country because of a socialist mindset, have a very romantic notion of how development takes place, courtesy governments, civil servants, politicians. It doesn't work like that. It didn't in Taiwan, it didn't in Japan, it didn't in Korea, it didn't in America, it won't happen like that in India.


Raj  12:23

No, no, that's absolutely right. You spoke about the monopolist and then you said that you know probably some of this monopoly will last about 10 years, what are the signs one has to see?


Saurabh  12:34

So a lot of people mistakenly use market share, as a sign of monopoly. Market share has nothing to do with monopoly. So in our country, the leading airline has 55% market share. Does it have a monopoly? No, it doesn't. If tomorrow Vistara, Spicejet offered lower fares, I would happily switch, right? So the best way to understand a monopoly is a Monopolist is that company, where even if a rival comes and offers the product 20% cheaper, the customer will say I am not shifting boss. The best example, Nestle’s Lactogen milk powder. If tomorrow say Abbott, it’s product is called Similac, again a high quality product, comes up and says from tomorrow, we cut the prices of Similac by 20%. Do you think Indian parents or mass will shift from Nan and Lactogen to Similac? Have you ever heard a parent go to a chemist and say sabse sasta doodh mere bacche ke liye dedo, they don't. Right? I haven't heard that right. Nobody buys baby milk basis price. So price has no time and no dimension of the baby milk powder market. Similarly the world's largest pharma companies buy their Naproxen API from Divis Lab. If tomorrow Divis increases the price of Naproxen by 20%, do you think a single customer of any of those agencies will walk away? They couldn't care less! The point is Divis supplies the world's purest naproxen API, at the lowest cost, even if the cost goes up 20%, the API is barely 1% of the cost of the drug on the shelves of CVS in America. 1 goes to 1.2, the American pharma companies not going to miss a beat. More importantly, if they were to change Divis’ API and their drug in their formulation, they would have to go back to the FDA stand in a queue, to get the formulation pre approved. It's simply not worth their while. So the monopolist is that company where a rival comes in offers a product 20% cheaper and there is not a single basis point of market share lost. Any company which is competing on price is not a monopolist by definition.


Raj  14:48

You're right. So actually interesting points in both of these. So in both the situation in the Lactogen and even in the Divis Lab, the barrier is so high because,in case of baby milk, you know, it's a very emotional thing and nobody wants to take any chance. And in the case of Divis Lab, you mentioned about FDA and who wants to wait!


Saurabh  15:07

So it's not about emotion. It feels like there's a deeper story. I'll tell you some other time about that deeper saga. Yeah, but let's take another example. Bajaj finance has 80% of the market for consumer durable financing in the country. Bajaj Finance is not cheap, Bajaj finance is the highest ROE NBFC in the country. Why does Bajaj finance have 80% of the market for consumer durable financing? Why can't Chola, HDFC Bank, the might of these massive institutions, why can't they make a dent on Bajaj finances, consumer durables franchised because of barriers to entry, very cleverly constructed barriers to entry around data science around artificial intelligence around the application of that to the customers who come to Chroma or Vijay Sales to buy their electronics. Similarly, the Nestle barrier to entry has nothing to do with emotion and has everything to do with very clever structuring of the legality around that product. Similarly, Divis labs API Naproxen barrier to entry, only notionally is around trust. There is a trust layer, but the barriers to entry are deeper and that is the skill in investing. To spend one to two years figuring out what is the real barrier to entry. It takes that sort of effort because if you go to meet Murali ji or Suresh at Nestle or Rajiv ji at Bajaj finance, he's not going to say but just sit down. Let me tell you all about your what we do right. So you could spend one to two years of hard work to figure out why it is practically impossible to compete with Bajaj finance in several segments, not all of the segments for example, I think housing finance, you can compete with finance, I reckon. Similarly, with Nestle in Maggie, I think you can compete. I think Chings noodles has done a good job in competing with Maggie. But in baby milk powder with Nestle in consumer durables, financing with Bajaj finance, in an approximate Divi’s lab, you cannot compete. And it takes one to two years to figure it out. And that's where you need to talk to ex employees, competitors, industry consultants, regulators to get your head around the barrier to entry. And it's very cleverly done. It's camouflaged. It's camouflaged. And I think the biggest privilege of living in this country is that camouflage is one that the market can't penetrate. And that's how you load up, you sit back and you watch the compounding play out over 10-20 years. It's camouflage in the sense that the average Joe can't figure it out. So you got the Nestle one. People think it's something to do with emotions, right? It's not much to do with emotions, you simply cannot compete with Nestle. So tomorrow, if you and I teamed up, and we say we got some private equity money, you would find it impossible to even get a licence to sell the product, they will powder that is, even if we could get the licence, we would not be allowed to advertise. Even if we could advertise, no pharmacist would stock your product. And emotions don't come into it. You will not get into the business, no licence, no advertising, the channel will block you out. Game over.


Raj  18:28

So the whole thing is clever, you know. So let's come to your PMS schemes. You have three offerings, and one is called Consistent Compounders. Then you have a small cap called Little champs. And I think you've recently launched another on financials called Kings of capital. How does your selection and investment approach differ if at all, in each of this?

Saurabh  18:49

It's similar to identical, actually clean promoters, right step one forensic accounting we've got over the last decade we've hired in 12 of India's best forensic auditors. And we know most of India's chor promoters on first name terms. They also know that we know that they are chors and it's a long relationship of knowing these people and understanding how they have cooked their books over many many years. So the first layer across all our portfolios screen out the naughty people. Secondly, is to look for their essentiality. So whether it is a whether it is say fine organics and little champs. Fine organics makes the emulsifiers which go into almost all of India's biscuits and baked products right monopolist in emulsifiers. So look for essential products. Fine Organics is a B2B monopoly, or as we were discussing consistent compounders, baby milk powder, consumer durable financing. So look for essentiality, and the third leg across all portfolios. Look for barriers to entry, try to figure out right and until you have figured this out, don't invest. Try to figure out why can't anybody compete with Fine Organics. Why can't Rajkumar and Saurabh go to Parle? And say, sir, I will tell you, I'll sell you cheaper emulsifiers than Nestle. Please try us out. Why won't Rajkumar and Saurabh be entertained at Britannia or Nestle with the cheaper emulsifier, right? Why won't Rajkumar and Saurabh be entertained at the Divi’s Lab? If we went with a cheaper glass line reactor than GMM Pfaudler? Right? Why won't Raj Kumar and Saurabh be entertained by Glaxo or by Sanofi or by Pfizer if we went with cheaper active pharmaceutical ingredients, that Divi’s Lab, right, so the third bit is the time consuming bit. While we have three portfolios, there are some common stocks across each of them. So overall around 30 stocks we’ve invested in. Little champs are the little monopolists by definition. Little champs are the mini versions of Nestle, little champs are the mini versions of Pidilite, the mini versions of Divi’s Labs. Average market capital of little champs is half a billion dollars, which is why the compounding is stupendous there, unfortunately, because there is very little float available in the market. Last year in July, we stopped taking inflows into those little champs, whoever got in was lucky to get in by last July. They're obviously making a lot of money and it'll be difficult for us to take new money in Little Champs for a while now, for some period of time. Consistent compounders are the flagship product, Nestle, Asian Pains, Pidilite, HDFC Bank, Kotak Bank, Divi’s lab etc. Large monopolist's average market cap $25 billion massively powerful businesses. Typical ROC of 45%, free cash flow therefore of 45 minus 15%- 30% be free cash flow, one thirds of dividend paid out, two thirds reinvested two thirds of 30% is 20%. 20% Capital employed reinvested by these dominant monopolists every year and therefore PAT compounding of 20%. Therefore, my clients are compounding 20-25% every year so that's the flagship product that has around 5000 crores in it now. And then in between little champs which are niche monopolists and consistent compounders which are giant monopolies. In between these two extremities lies kings of capital, which are the financial monopolies in our country, right so financials are a very intriguing sector Rajkumar. In the rest of the world, right, including the city you live in. Right? The rest of the economy is competitive. So if you look at countries like the UK, France, Germany, you will see lots of companies selling biscuits and baby milk and, and cooking oil and hair oil and paint and adhesives right. But financial services will be monopolised. So the UK will have three-four large banks, three-four large life insurers, two-three large general insurers, five-six large brokerages and that will be it. Similarly for France and Germany, India is the reverse. Our normal economies monopolised as discussed with the last 20 minutes our financial services is bizarrely fragmented. And we have 50 banks. You have 10,000 NBFCs, as many wealth managers as there are offices in BKC, 25 life insurers and so on. Now, the reason we have a bizarrely fragmented financial services industry in India is threefold. One is public sector intervention. So the Government of India for 70 years has taken tax dollars and given it to public sector enterprises who have no commercial viability to run at the behest of the Government of India using our hard earned income tax payments right. Second is corruption. Right if there is corruption in corporate India, in lending, the corruption is magnified further, right by collusion of client auditors, credit rating agencies who look the other way and give very generous ratings. And I also have to confess collusion in parts of my industry, the fund management industry, where fund managers work with promoters to invest in substandard lenders, right. The third aspect of why we have fragmented financial services, our financial services sector itself is very very small. Right India's household savings is around 10 trillion. And as the RBI has repeatedly pointed out in the last five years, financial savings, financial savings as a percentage of household wealth is only 5%. So, over $10 trillion household balance sheet $9.5 trillion is in physical assets. Barely half a trillion is financial assets. This skew has no precedent anywhere in the world. The RBI has said so, the Credit Suisse world wealth report has said so and that 5% here including bank deposits as well as your assets. Sab financial assets milake. To put it another way, Jeff Bezos has more financial assets than India combined. Now what's happening? All three of these factors are under pressure. Firstly, because of COVID the government doesn't have the money anymore to sustain 50 loss making PSU banks right loss making in the sense ROE is below cost of equity even for State Bank of India return on equity has been below cost of equity for the best part of a generation. So, as these PSU banks slide into oblivion, over the next 10-20 years, the 60% market share that they have will migrate to the private sector banks and kings of capital we’re making money from that by investing in five clean well run dominant private sector banks. The second aspect was the naughtiness in the NBFC sector, corrupt accounts, pliant credit rating agencies and naughty fund managers that are cracked down upon by the authorities. Right, the funding supply to naughty NBFC to bad NBFC has been cut off. There are by and large 100 prominent NBFCs in the country. I'll be surprised if even 10 of these guys are around a decade hence, right my reckoning is the NBFC sector will polarise very sharply. So, lenders such as Bajaj finance which is part of our kings of capital portfolio. Bajaj finance's market share today is one and a half percent. If a decade hence, it's not five, six times this number I'll be astonished because as the weaker NBFC the more corrupt NBFC die and the third aspect the financialization aspect financialization of savings, right. Yours and my relatives, friends in the country have realised that there is no great fun in buying flats and gold anymore. Your wealth actually depletes in real terms, the more flats and the more gold you buy, right, and what we're seeing over the last five years is, every time there's an exigency like de-mon or COVID, the flows into financial products, life insurance, health insurance, motor insurance, Asset Management, pensions is increasing. Right, it's roughly increasing at a rate of 1% a year. So 5% of 10 Trillion becomes 6% or 10 Trillion in a year 7%. So each year, there's around 100 billion dollars of domestic inflows into this financial savings pot. So half a trillion pot a decade hence, even without compounding should be one and a half trillion. With a little bit of compounding it becomes 2 trillion. So the savings spot quadruples, I reckon in the next 10 trillion, by the way, it still means that a decade hence even a decade, hence 85% of Indian wealth will still be flats and gold. But just the 10% shift, I reckon will transform the insurance industry, the asset management industry, the wealth management industry, and that's what we are participating in in India and Marcellus.


Raj  27:38

So I agree with you on the real estate part and we'll come to the real estate question some time later, but gold is kind of a you know, this is the only dollar hedged asset for an Indian investor. And actually it’s helped them. 


Saurabh  27:51

So I don’t get this point right. It's not as if the rupee is a you know, some banana republic currency from 91 to today, we can see the rupee depreciation is a steady three, three and a half percent and that is the inflation differential between it is that much. So what exactly is this big priority on hedging the rupee? I've never quite got my head around it. I would love it if you or somebody else could explain to me what is this great fascination with hedging the rupee?


Raj  28:20

So we'll come to this on in some other conversation you know.


Saurabh  28:25

I have to hedge the rupee? Why? I mean, are you investing in Zimbabwe, are you investing in India?


Raj  28:30

Now, I understand but as I said..


Saurabh  28:35

It’s not like the American 10 year bond yield in dollar terms is anything other than the risk adjusted equivalent to India so the Indian 10 year bond deal the G-SEC is giving you six and a half the American one is two and a half. The currency risk premium is the four so I fail to understand. I've heard these guys for a long time ki mujhe hedge karna hai


Raj  28:59

Depreciation is not more than three-three and a half percent. Exactly. with a focus on India as inflation 


Saurabh  29:06

This is a central bank, which is 550 billion dollars of FX reserves. So again, I think a lot of this discussion, right and one of the reasons it's so much fun living in India and working here is that a lot of our mindsets are legacy mindsets. Why do wealthy Indians buy flats and gold because they and their parents grew up in an era where they couldn't trust the financial system, were buying flats and gold was seen as a way to grow wealth not just preserving that era has gone but the mindset hasn't. So even now half my neighbours will say you know yeh flat dekha hai, voh building ke baare me suna hai. I think these are intelligent business people, why do they want to invest in flats in Bombay or Delhi or wherever. And similarly, even for people who have left India, the mindset is still ki boss, gareeb desh ko chhod ke aaye, bhikhari desh ko chhod ke aaye, abhi bhi bhikhari hoga. Nobody told them that the central bank has 600 million of forex reserves.


Raj  30:01

So since you brought in real estate, let me come to that now. So I think in 2016, you probably called out that, you know, real estate trap and and you've been talking about that, are you still holding the same view, I mean, you know, in terms of that, when you


Saurabh  30:13

You’ve worked in banking, you have a country where the cost of a home loan is and this is a record low By the way, cost of home loans, it is a record percent 6.6% right, record low all time low. Rental yield on flats everywhere in the country is after tax 2%. It is so, unless there is some rampant capital appreciation, which is going to happen in a country where affordability on flats has already stretched. I'm a little perplexed as to what is the business case, I understand the business case for buying an affordable flat in the deep suburbs of Bombay, Delhi, Bangalore, because these are cities with large commuter commuter working, working class people who need a residence of their own and it's a very visceral need right and a roof. The desire to own your own home to own your own home is a very visceral need, but that's a first time buyer buying a 50 lakh one crore one and a half crore flat in the suburbs of deep suburbs of Bombay say Borivali, Kandivali, Sarjapur in Bangalore, Noida, Gurgaon, but the business case for buying luxury property in South Bombay, South Delhi, Indira Nagar Bangalore, somehow beats me, right, I can't see the business case, I can see the the emotional case for buying your first home affordable. My reckoning is that when the residential piece anybody wants to do it is welcome to do it. It's their money, their’s to burn. The commercial real estate market by reckoning will gradually be owned by the global PE funds and the global pension funds.


Raj  31:59

And we are seeing that.


Saurabh  32:00

And once they do that, they will own it at their cost of capital, which is say 6% dollar. Now, if an Indian investor says I want 6%, I want to own a flat, I want to own an office in BKC with a rental yield of seven 8% in rupee terms, they're welcome to do that. But then you might as well buy a tax free IRCTC bond No. So so. So it's so much ado about nothing in many regards, I reckon. And these are the sorts of discussions I love having over a drink on a Saturday evening, but never quite understood how money's made out again. And we'll have those discussion


Raj  32:36

one of these days when we meet. Let's come to the next part. You know, I mean, you have now access to all sorts of data, you know, with online sources, including Twitter and not to forget the WhatsApp University. Information no longer seems to be the edge. And there is a problem of plenty. How do you consume your information? 


Saurabh  32:56

I don't have any access to social media.  Right? You're trying to reach me on my mobile phone. My mobile phone also doesn't function. The reason I've never sort of lost too much sleep about it is last time you Divi’s labs monopoly secrets are not on social media. Fine Organics is a monopoly, the reason it's a monopoly is not on social media. So on so forth, right, the core of money. The core of what makes money in India or elsewhere, does not circulate on social media, nor is it sort of, you know, displayed on the, in the annual report on page 65 in bold, bold text. Right. And, and that's, that's why we've never lost too much sleep about it. Neither are we that fussed about chatter, you know, what is the latest view on what the Fed is going to do and what is RBI going to do? What will India's next GDP print be? What is the IMF view on the COVID crisis in India? What is the Chinese government or American government's view on the COVID we've never really understood how people correlate these things to investing. This is good sort of lunchtime gossip to be had, you know, if you and I met at a coffee shop in Hong Kong, but it doesn't make any money. So I think a lot of people confuse chatter, social media, infotainment and entertainment with investing. It has got nothing to do with investing. It is about as relevant to investing as figuring out whether India or New Zealand will win the World test championship, interesting, but not really relevant for my day job. And hence, I've never really lost too much sleep about not having access to social media or, or being any part of, that discourse. It's very interesting.


Raj  34:44

And you don't miss that at all?


Saurabh  34:49

I've got enough to read and enough to do so. You know, it's all right. Yeah, of course by now.


Raj  34:57

Given the fact that, you know, markets are considering a market, it's supposed to be a discounting machine. Right? I mean, you know, and then you spoke about when you have those big companies like Nestle and Asian Paints, but they continued to outperform nifty over a sustained period, even when they are trading at such a high valuations, what is your thought on you know, valuations and you know, some of these are trading at 60-70-80 PE.


Saurabh  35:21

So a lot of people tell me who are far better informed than me on these subjects. So they say this stock is at 60, somebody else says 80, somebody else says 100. And I find it very interesting, the same company, the same company at the same point in time, three different people will give me three different PE multiple, ask myself, you know, it's like a, it's like a, you know, in Hindu philosophy question, what is the PE multiple of Nestle's at this point in time also, a lot of people don't seem to agree upon but but the reason we don't worry about these things is as follows. The job of a fund manager is not to sort of say that Nestle is PE multiple today's x and it should have been y, right? And you know, x versus y is a delta of one. So let me make an investment column. That is not the job of a fund manager. The job of a fund manager is to say, how long can Nestle's monopoly sustain? How long can Nestle or Divi’s lab, or Bajaj finance or Pidilite, or Asian Paints as monopolies sustain? And this answer this question, and this answer is of immense significance, because if a franchise can grow cash flows at 25% for the next five years, but no more than that, I'll happily pay 25 times earnings. If the same franchise can grow free cash flow at 25% for the next 15 years, I can still make money paying 80 PE for it. And if the same franchise can grow free cash flows at 25%. Over the next 25 years, even if I paid 250 PE for it, I'm still going to make a return on equity return on my money about the cost of my capital. Right now, Nestle's franchise or Pidilite franchise or HDFC Bank, Bajaj finance, are going to sustain their monopoly strength for 5 years, for 15 years, for 25 years. And that is the sole purpose of a fund manager's existence. It is not to second guess the COVID wave, the one cue earnings, the FY 22 earnings are the PE multiple, the sole job of a fund manager is to make a call on the longevity of the barriers to entry. And to answer that question, my colleagues and I, 15 of us who work in the investment team, need to spend one to two years to answer that question. We appreciate there are people far brighter than us? Who could answer this question in 15 days, other than the 15 months, it often takes us. But we are happy that we don't have a problem. If they can do it in 15 days, good for them, they can make plenty of money in our country. But this is modern investing. A decade ago, this piece wasn't as essential. Because a decade ago, or 13 years ago, when I came to India, it was such an underdeveloped market that people didn't even read the annual report properly. Right? Today, people do read the annual report. I could argue we read a few more than them. But most people, most investors, by and large, do read the annual report. And therefore if you want to make money, you're only going to make money around 20 to 30 stocks in India, right? That your list would be different from my list. But the data is very clear: no more than 20 to 30 stocks in this country with 6000 stocks will make you money. How long? Will those franchises sustain? Is the question that each of us is trying to answer. And our call on Nestle, just to be clear, our call on Nestle is that the monopoly can sustain comfortably for the next 20 years. So whatever Nestle’s PE multiple is, even if we bought it at 3x, that PE multiple, you would still comfortably generate a return on our investment well above the cost of our equity.


Raj  39:10

Okay, interesting. So you never make any decision on sizing the position based on or valuation doesn't matter at all, as you said, and you never change the size of the position.


Saurabh  39:23

This is what I said, What should we size on? Should we size the valuation? Or should we size on the length? the sustainability of the franchise and we do the latter. There are people smarter than us, there are two sides to valuation. I still haven't figured out how they do it. How do you size on valuation? I still haven't figured out if you say to me 20% overvalued so I'll buy less of it. Do you say it's only 20% undervalued? So I'll buy in so we'll never quite get round my head. No, I haven't read anything sensibly. Then we tried to figure it out. But our reckoning is a simpler way to go about it. It is size on the large The deeper the monopoly. The higher the barriers to entry, the greater the position size. So Asian Paints in most of our portfolios have a double digit position sizing. Typically in our portfolios, the top four stocks will account for 40% of the portfolio. And these four stocks tend to be unchallenged monopolies. So in paints in India, it is not possible hasn't been for the last 40 years unlikely to be for the next 20 years to challenge Asian Paints. You can be whoever you want, the world's largest paint company, India's largest paint company, India largest corporate, feel free to come and challenge Asian Paints. It will not be practical, you will not be entertained by the paint and hardware stores in our country, and if they don't entertain you at the paint and hardware stores in the country, you are not going to enter the living rooms of Indian households. So therefore, to understand that took us the best part of a couple of years and Asian Paints, therefore, is a double digit allocation. 


Raj  40:57

So while we spoke about some of the great companies and do you want to bring in any name, where your own theses of the you know, the metrics you've been using, got challenged by you guys itself, and you found that something which is changed, and you want to change your position? Any names you want to bring in? And what happened? Or what would it bring? If you're comfortable talking about it?


Saurabh  41:17

I've spoken about so far I've spoken about every company, I've spoken about our companies in our portfolio. So there are three reasons why we sell right, none of them have anything to do with valuation. I'll quickly summarise the reasons or why we sell and then I'll try to give an example of a stock that we have sold. So the first reason we sell is when we see naughtiness, right. So as I've said at the outset, our corporate communities are drowned in a very corrupt ecosystem. And what we have seen, unfortunately, is even the cleanest of Indian corporates, even the cleanest of promoters gets tempted to steal money. And often we see when we do the forensics, even in our portfolio, we continue doing forensics, we say that, we see that the promoter has stolen 5-10 crores right, and we obviously have a chat with him or her. And if we can't understand his point of view, we exit, right. Second reason we exit is capital allocation. By definition, these monopolies that we're investing in, the return on capital is 30, 40-45, average 45%. free cash flow therefore, is 45% minus the cost of capital around 30% of capital employed is free cash flow. And because these franchises generate so much cash flow, often they miss allocate capital. And that's when we sit down and have a chat. As you know, please tell us what you are thinking here, we are not able to follow your thinking. And again, if we can't get on the same page as the board, or the promoter on capital allocation, we check out. And the third reason is succession planning. A lot of these very successful franchises, the promoters are now north of 60 years of age, often, you know, they're you know, they've ascended up Maslow's hierarchy of needs, and all along are focused on wealth and are focused on spirituality, charity, etc, etc. They tend to abdicate control in favour of their sons and daughters. And sometimes we find that the sons and daughters are not up to the mark, at which point we again, engage with the promoter and say, you know, so your franchise, if you are interested in running it, please let us know because we don't want to be that involved in owning shares. Right. So this is our site. And these are obviously all in all three sets of conversations are difficult conversations. And we think it's part of our job to have those we're not here to, you know, make friends with the promoter community, our job is to manage money for our 6000 clients. And that means having difficult conversations then so be it right and then one has these conversations in a polite, hopefully cordial setting, and have the conversations work out. And our franchise benefits our investee companies. So be it if it doesn't, you know, there's plenty of other investors that these companies can quote, life moves on. So just to give an example. ITC in many regards, fits all of our criteria, right? It's, as we know, essential. Cigarettes are essential. It's an unchallenged monopoly in cigarettes, there really is no competitor. For all practical purposes. It's a giant cash machine and we were ITC shareholders for a long time, where we couldn't sort of see the logic of how ITC was functioning in capital allocation. Right. So they had they had the best part of 40,000 crores on the balance sheet a couple of years back and we used to highlight that in our newsletters, so to give them a lot of credit to give ITC a lot of credit, they reached out and they said, Come to Kolkata, let's have a chat. And we went to Kolkata, Jan 2020. We went to Kolkata and had a long chat with them. We explained our concerns about the capital allocation to hotels, about a 65% payout ratio rather than 95% and the 40,000 crores line on the balance sheet. They said, they told us that we heard you, you know, will now do whatever we think is appropriate. Again, to give more credit to them. I think it was April 2020, just the month after COVID hit the country hard. In April 2020, ITC announced that they were going to increase the dividend payout ratio from 65 to 95%. We said, you know, a big tick that I think may happen in 2020. They further said that incremental capital allocation to hotels is going to stop, so we said even bigger tick, but in their AGM last year, June, the thing was due last year, they said that they were only going to do a 5000 crores buyback, which meant 35,000 crores would stay on the balance sheet. And we couldn't quite see the logic of that. We had another brief chat just to make sure we weren't misunderstanding them. But once you realise that the surplus cash was going to sit on the balance sheet, rather than being deployed to grow EPS, we felt it was best for us to check out. So in July last year, we sold our ITC, so it remains a great monopoly. My reckoning is the stock will compound at around 15%. But our job is to compound for our clients at 20%. Most of our clients don't pay fixed fees. Most lines charge only performance fees. And therefore for us to earn our performance fee properly, we need to compound at 20% at a minimum. And if we feel a franchise is not going to get us to 20% compounding net of fees, we tend to sell that stock.


Raj  46:28

So interestingly, ITC has got a maximum number of means made on non at least on Twitter, I see that you know this is this is the whole Twitter community is divided by ITC where so much fun is being made. 


Saurabh  46:38

I wouldn't know anything about Twitter.


Raj  46:44

Interestingly, under the forensic part you mentioned and you know, you said you have access to a team as well, is it a big boys game or even a retail guys can do some basic checks?


Saurabh  46:57

I think you do have to be a chartered accountant. And I think the Indian CA qualification is extremely high quality. Right? I've worked with British CEOs before. I think the Indian CA qualification is amongst the best in the world. So we are sort of in financial jargon, we long on Indian CA's big time. Every year we make it a point of hiring two or three super bright CAs Chartered Accountants into Marcellus. Can someone sitting at home do it? Yes, I think an intelligent amateur investor can do it. You obviously have to read up on accounts. So read financial shenanigans by Howard Shallot. By far the best forensic accounting book I've I believe, if you can, if you're lucky enough to get a copy of Terry Smith's accounting for growth, it's out of print. But if you're one of those fortunate people who can get a copy of Terry Smith's Accounting for Growth, read that as well. We put on our website free of charge plenty of webinars, several of which are on forensic accounting. We have separate webinars on fraud accounting for lenders, with our presentations on our website. So I think intelligent inquisitive amateur investors can also do a good job on forensic accounting. But it helps to have a good and good Indian chartered accountancy or any country if you're a British chartered accountant. But I think it's an essential aspect. If you can't read annual reports, and you can't figure out how the promoters are stealing money, you're creating a big challenge for yourself if you're an amateur investing in stocks in India.


Raj  48:24

Now, is there a case that a good business may not be a good investment? And if so, Are there examples?


Saurabh  48:31

I don't really understand this piece right? Either understanding about it sounds very erudite to say good, okay, that's good. I also heard that a lot of people in India say to everything, there is a price, and I'm never gonna ask, how do you put a price on honesty, integrity, talent, barriers to entry, right, because they're all derivatives of the same thing. Honesty, Integrity, barriers to entry talent, deep competitive advantages, world class intellectual property. But you know, to each their own, if somebody believes that everything has a price, they're welcome to that view, who am I to challenge them?


Raj  49:06

Now, I'll pick an example. You mentioned airlines, right? So say IndiGo, which has got about 55% market share? Is it a good business?


Saurabh  49:16

I don't know. I mean, the way we've seen it is the basic assessment should be: does return on capital exceed cost of capital happens in any airline, any airline, any steel company, any telecom company, any real estate developer, generate a return on capital above cost of capital. Now, you know, I'm not a CA, I'll put my hand up and say, I'm not a CA, I'm a CFA. But I learned in my level one of CFA, that free cash flow is the basic basic reason for investing in a franchise. If you cannot deliver return on capital above cost of capital in any 10 year cycle. And by the way, you know, I hope your podcast is widely listened. Anybody out? Anybody out there can show me one airline company, one telecom company, one steel manufacturer, or indeed metals more generally, let's include aluminium as well. And one real estate developer, which is a sink in any 10 year cycle, has generated return on capital above cost of capital. I would love to know that because it'll be a big learning for us as well. We haven't found that in India, which means that these sorts of franchises cannot create free cash flow. If they cannot create free cash flow, I fail to understand on what basis can I buy these shares?


Raj  50:37

So you mentioned Divi’s, which is, you know, very competitive on a global scale on API. And so that one name you mentioned, are there other businesses in listed space in India, which is...


Saurabh  50:48

This is one of the reasons why living in India is so much fun. So what were India's historical issues right? India's historical issues were our infrastructure was poor still is poor, it's less poor than it was 10 years ago, but our infrastructure still is obviously nothing compared to forget China even countries like Indonesia, Thailand are probably ahead of us. And the second issue was that the cost of capital was high. And the third issue was the cost of labour was high. In the state I live in, Maharashtra, the minimum wage is thrice that in Bangladesh. Now, what's happened in the last 7, 8, 9 years is the rise of businesses driven by intangibles by intellectual property, which mitigates all the three issues I just mentioned, right? So Divi’s is a great example of that. So are Fine Organics. So is Garware Technical Fibres. So increasingly what we are finding is Indian companies with 60, 70, 80% global market share with no competitors anywhere in vicinity and, and we are the only Joe's in town loading up big time on these stocks. Right. And this is this feature of franchises like Garware, like GMM Pfaudler, like Divi’s being global leaders, right? Garware technical fibres has 70% of the global market for salmon aquaculture nets. GMM Pfaudler has 55% of the global market for lastline ceramic reactors in which pharmaceutical products are made, right? Divi’s as I said 75% of the global market for naproxen, in fact, more generally, out of the world's top 20 APIs, Divi’s, the world leader and nine out of top 20, right, is all of this and there's plenty more to come in this regard. Right? As intellectual property, intangible assets, becomes the main driver of wealth globally. This is playing right up India's alley, because it de-emphasises the inadequacy in physical infrastructure, de-emphasizes our labour market issues and it mitigates to a significant extent our high cost of capital. And that's why right? It's so important to look for companies in India, where beyond the physical assets on the balance sheet, the main driver of competitive advantage is intangibles. And Bajaj is an example of that. Nestle is an example of that Asian Paints is an example of that, HDFC life insurance. Dr. Lal path Labs is an example of that, right? So if you look at Microsoft, right, a massive company, I think Microsoft's balance sheet physical assets is only $3 billion. Nobody really invests in Microsoft because of their campus in Seattle, I hope they invest in Microsoft because of intellectual property. You invest in Divi’s lab, or GMM Pfaudler, or Fine Organics or Asian Paints or HDFC life for much the same reason. It's just that if I tell you that you and I invest in Microsoft and Google because of intangible assets, people will say han boss bilkul. But if I tell you, invest in Asian Paints because of intangible assets that have a blank look on the person's face. Kaunsa intangible asset? That's where that's where doing the hard work and figuring out the intangible assets which drive in Asian Paints as franchise becomes so central to making money in India


Raj  54:07

Interesting, so you know, the last decade, I heard you as well that he mentioned, Nifty earnings have been probably zero in the last 10 years. And the returns are also probably very low in terms of the dollar for sure. How does the next decade and you bring in some of the interesting but what does the next look like?



It is true, but it has no relevance for me. I don't know Nifty, I have zero interest in Nifty for the reasons we discussed right at the outset. Location corruption. India's India's nominal GDP growth over the last 10 years has been around 10%. Right. I mean, whatever scepticism your listeners might have on India's GDP accounting, at least I hope they will believe that the nominal GDP growth has been 10%. Almost all of that upside has gone to 20 champion monopolists, the nifty has not benefited because as you rightly said nifty EPS growth across three, five and ten years is zero. Indian monopolies’ EPS growth across 1, 3, 5 and 10 years is 20%. Right? So the nifty has nothing to do, investing in the nifty, right? I hope your listeners understand this carefully. Investing in the nifty has nothing to do with making money in India. And if anybody listening to this is crazy enough to invest in a tracker fund and gain exposure to India like that, God save you, because the bulk of your money is going towards promoters who will get zero about capital allocation and have no competitive advantages.


Raj  55:31

So when you look at the next 10 years, you still look at today's paradigm? 


Saurabh  55:36

Strong will get stronger the monopoly as we discussed at the beginning of our conversation, these monopolies are already occupying 70-80% market shares. By the time the decade is out, they will account for 90-100% market shares in many industries. And as you rightly mentioned, or alluded to five minutes back in several cases, they're taking the monopolies global. They're taking the monopolies global on the strength of their intellectual property, not on the strength of their physical assets. I don't think we can compete with countries like China. But on intellectual property, in especially sectors like pharma, spec-chem, speciality chemicals, light industrial manufacturing, we can hack it in intellectual property, basically anything to do with process in the process of chemistry and industrial engineering, we are capable. And that's where after dominating India, these franchises are increasingly going global. Unfortunately, these franchises form no more than 30% of the nifty or whichever global index, you're using MSCI, India or whatever. And therefore, if you are one of those people who seeks exposure to India via tracker funds, it'll be tough for you to benefit from the monopoly paradigm in our country.


Raj  56:51

So let's bring in the behavioural aspects, right, because, you know, as they say, investing is a lot more about behavioural as well. And, you know, I think I'd read from one of your books as well that we, you know, we regret losses two to two and a half times more than the gains, right. And patience is a big virtue and said so because it is missing in many people. So what do you think since you, you know, read and write a lot, you have any thoughts?


Saurabh  57:16

I haven’t reached that level of evolution where I can self analyse myself really, we have a, we have a we have a counsellor counsellor, as I as I psychologist to who helps us discuss behavioural issues. But I'm not so self evolved, that I can critique my own, my own behavioural biases. And clearly, as you would have made out over the last hour, I have several biases about how to invest. What we have tried to do is create a team where everybody shouts loudly and punches quite hard. So that whatever biases, you know, the 15 of us have, in the totality the biases, at least get muted, if not completely subsumed, right, no, not completely submerged. So if you create a lalla franchise, if I create a lalla franchise, anybody creates a promoter ji ka, lalla ji ka franchise, obviously, there's a greater risk that the behavioural biases become very prominent, because we are all human, we are all frail, we're all fallible, but by creating a franchise where a broad group of people with differing views, different preferences, different behaviours, you create less risk of bias driving behavioural bias driving investing.


Raj  58:33

Interesting. So say you know, our show is called actually breaking investment stereotypes, any stereotype which comes to mind which you know, in your journey of investing or broken or you want to share with our listeners


Saurabh  58:46

I know I get told by a lot of people that for a Bengali You speak very good Hindi, but know what, how to respond to that. Okay. He likes saying


Raj  58:55

I have quite a few friends who actually have been Bengali and who speak very good Hindi. So? Yes.


Saurabh  59:02

You know, it is what it is. I think everybody a lot of people in our country still think in terms of a lot of people in our countries in terms of Madrasi, Punjabi, Bengali, so, you know, they're welcome to think like that. But I think the more such categories we create in our mind, the more meaningless barriers we impose in our mind. And similarly, there are other people who say, well, I thought FIIs are better investors than domestic investors or rather people who think vice versa. So, the less the less one tries to the less one tries to create you know, archetypes stereotypes, in one's mind, the easier it is, as Daniel Kahneman, so beautifully points out in that book right thinking faster. So the reason we create stereotypes, racial stereotypes, religious stereotypes, in India, caste based language based stereotypes, is because it's a heuristic which helps us deal with day to day life. It might have worked 50 years ago. Unfortunately, it doesn't work anymore. Right? The more stereotypes one gets into, I think the less useful one's brain becomes.


Raj  1:00:14

So we're coming to the last part of our podcast, and I'll be bringing some of your personal elements here. So how would you describe yourself? You know, if you take out your persona of a hotshot fund manager?


Saurabh  1:00:27

No, I think the way I describe myself is the way my wife describes me as a geek who reads nonstop, and as an opinion on every planet, every subject under the sun.


Raj  1:00:38

Okay, so since you brought about the reading, you know, do you want to give some book recommendations for the audience? What are you reading nowadays? And which one do you like? Also, more importantly, how do you journal your thoughts, because that's what I've been finding a lot of problems with. 


Saurabh  1:00:57

Every Sunday we publish. Anybody who's listening, you can sign up, it's easy. Go to, every Sunday, we publish the six best reads of the week from across the whole team, around 35,000 people subscribe to it, it's free. We don't charge money for this. So if you go to our website and just go to one of the newsletters or blogs, and you'll see a pop up, put your email address there and you'll get our three longs and three shorts 7am Indian time on Sunday. So every week, the team collates whoever's read, the best pieces, we collate in one place, and we send it out to the whole world. That's our way of journaling, I guess. And especially through this lockdown, we've tried to read a book a week, it's been a lot of fun doing that. We try to publish a book every alternate year. And, and that keeps us sort of, you know, writing plenty, because if you know you have to publish a book, or every alternate year, you'd have to do some degree of writing every week. For each of our three funds that you mentioned, Little champs, Consistent Compounders, and Kings of Capitalism newsletter every month. So that means that three newsletters have three products every month, so there's a fair bit of writing, which happens we found writing to be very useful. It helps you build your neural networks, it helps you journal catalogue your thoughts. It helps you spot flaws in your thinking. The more you write, the more gaps in your thinking you're able to spot and in terms of books to read. Obviously, anybody's interested in whatever we've written, “Gurus of Chaos” was my first book 2014 about the six fund managers who taught me the most in India, I suppose my little Guru dakshina or shout out to people like Naren, people like Sashi Reddy, the people like Manjunath ji, people like, Subramaniam. 2016 was “Unusual Billionaires” about the six or seven franchises, which shaped my thinking on monopolies right. Now, I think it is the third edition. The audible version has been made available free of charge to you courtesy, I guess the kindness of Mr. Jeff Bezos 2018 was “Coffee Can Investing”. That's how we created a wealth management construct for the average person who might not be able to afford our services. So coffee can investing is how you build your own portfolio, your own wealth over your working life without, you know, hiring expensive fund managers and wealth managers. That's, I think, gone on to become the largest selling personal finance book written by a brown person, right? Because a lot of Indians have this fascination. If it's published in America they immediately have to read it. But it was published in India, and I never quite understood that. But anyway, to each their own. We're hoping to publish our next book this summer. COVID permitting, because even our publisher has been hit hard by COVID. So COVID permitting, hopefully, the next book will come out this summer. But generally, the books that I have learned a lot from was Roger Lowenstein. His book on Buffett the making of an American capitalist. I felt that was a that's the best biography. I think that was written on Buffett, Roger Lowenstein, “The Making of Buffett: The Making of American Capitalists”. I think Daniel Kahneman Thinking Fast and Slow, enormously useful. And if you focus on India, right books or India, where you can learn a lot about the country, and you can develop a very differentiated view on the country. three books that I think stand out. First is VS Naipaul, “India, a Million Mutinies” now published in 1990. I read it when it was published in 1990. I read it once every 10 years and every time I read it, it still feels like it was written yesterday morning, right? Then Ramachandra Guha, “India After Gandhi”, I think, an essential book, I think every Indian should get that book as to where our country was, in that first five years, 10 years, 20 years after independence, and how far we have come. Anybody who sits out there outside India and is trying to hedge the rupee. You certainly should read Ramchandra Guha, “India After Gandhi” . You probably benefit more from reading a broker's report to get the dollar to be focused. And I think the third book. It's formally written by Sunil Kilnani ji. It's called “Incarnations: India in 50 Lives”. Although it's formally written by Sunil Kilnaniji, he was a professor of Indian history in London. I reckon it's actually written by Manu Pillai, who I think is the best young writer in India today. He's written several super books, but I think “Incarnations: India and 50 Lives” is just simply sublime. If you don't like reading, you can go to the BBC website, and there's a podcast. There are, I think 10 podcasts on the BBC website on the 50 lines, right, beautiful podcasts are an ideal for a Sunday evening with a glass of something nice to drink rather than listening to some financial podcast rather than listening to investing in Indian banks. 


Raj  1:06:10

This is a question we ask every guest: what will be your advice to your own 20 year old self?


Saurabh  1:06:18

I think advisedly formal education counts for 0. Don't worry about your credentialing and this qualification and that education and this gives you


Raj  1:06:28

it gives you an entry ticket, 


Saurabh  1:06:30

it gives you nothing, it just gives you a sense of false sense of entitlement. And it's deeply damaging. This whole notion that, you know, go to this university, that university, it's the most useless form of credentialing that I think we follow, and I did it, I have to confess, and I am the poorer for it. Having spent most of my youth in this mistaken notion that no prestige of the university you go to somehow has some bearing on your life and is a reflection of you, it isn't. And I think it'll be be even clearer 10 years hence, I think for my children's generation, the notion that formal education somehow contributes to making you the person that you become, I think will increasingly challenged in our lifetime itself, we will discover that what we learned in university actually means and counts for very little and, and those developing those habits around learning, reading, learning non stop will become far more important. I wish I had understood that when I was 21 rather than when I was 41.


Raj  1:07:38

Thanks. So I think this is a great conversation. We have had sort and you know, really thanks to you. I really enjoyed it. And I'm very sure our listeners are going to enjoy it as well. So really nice talking to you and we of course hope each other and have a discussion over a cup of tea or a glass or something interesting. On for sure on the real estate advisor. Thank you, Saurabh.


Saurabh  1:08:05

My pleasure, sir.