‘India's Entrepreneurial Spirit Alive And Kicking': ASK Group's Bharat Shah On Changing Markets And Growing Economy

India’s primary market could see a build up in the next six months as around 71 companies are reportedly planning to launch Initial Public Offering (IPO) worth Rs 89,069 crore in the second half of the year. While this is yet to happen, in 2023, 100 small and medium enterprises (SMEs), so far, have raised a record Rs 2,600 crore from the SME board, surpassing the 2018 record of Rs 2,287 crore raised by 141 firms.

Amid these developments and other interesting shifts happening in the markets at present, how does one double down on identifying the right companies, promoters, balance sheets and  governance? What does the coming of more companies to IPO or raising capital signify? The Core’s Govindraj Ethiraj spoke to Bharat Shah, executive director at the ASK Group, a wealth management company, to find out.  

“I don't think fundamental investing principles or valuation thoughts have changed. Markets in the core character remain the same. Ultimately businesses have a value not because some large number of people or large amounts of capital at a point of time think so. That may happen when large capital or large money chases something at a point of time but these are ephemeral and temporary outcomes,” Shah said.

Shah was of the opinion that more companies planning to launch IPOs signified that the country was expected to grow “at a material pace for a long period of time”. “That growth needs to be harnessed by the businesses, which are part of that ecosystem and therefore it is natural for them to raise capital to be able to accelerate their own growth,” Shah said. 

Speaking on corrosive growth, Shah added, “Corrosive growth is always a problem and many times behaviourally people get carried away by growth for its own sake. But the quality of growth perhaps is not just as important as the rate of growth but probably even more important than the rate of growth.”

 

Here are the edited excerpts from the interview:  

The four or five major tech companies that IPO-ed mostly between July and November last year, when I look at where they are today, almost all of them are down. If I look at Paytm, Nykaa, Zomato Delivery, PB Fintech, these were all grand IPOs. They all saw their peaks when they listed and since then they have been down for various reasons. The reason I'm only trying to link these companies to today is that they are part of the noise or they could be the signal, depending on how you look at it. So let me start there.
How are you seeing this IPO rush today, if I want to call it a rush? 

 

Let me answer in three, four parts. It is natural when the markets are seen to be on an up move, the capital raise programmes are going to accelerate and that is directly correlated to the markets doing well and generally seem to be doing well. So nothing surprising there. Like always, you need to balance whether the supply of more demand for capital will affect overall behaviour of the market or not. And the answer to that lies in, again, micro analysis of each business while paying attention to the fact that if there is too much supply of capital which is sought to be there to that extent, it may affect the market behaviour in the short run. But from a fundamental point, I do not think that is such a critical issue if it is subject to the quality of the new programmes or the new companies that are coming. 

Second, I would say the more companies coming to IPO or raising capital is also the sign of the fact that the country is expected to grow at a material pace for a long period of time. That growth needs to be harnessed by the businesses, which are part of that ecosystem and therefore it is natural for them to raise capital to be able to accelerate their own growth. 

Third, I think we should look at more than just the amount of new capital to be raised. What is the quality of the businesses and quality of firms that are coming to the markets? In a general way, I would say overall quality of the capital raise programmes and the quality of firms compared to the past is materially improved in general, in terms of the solidity of the businesses, in terms of level of governance, in terms of durable long term strength of those businesses. So I would say at one point of time the kind and quality of the firms that used to come to the market and were able to raise money or were looking at raising money and today there is a significant change. That change is the quality of the businesses that is coming to the markets today.

Four, I think it is an indirect affirmation that the entrepreneurial spirit of the country is healthy, alive and kicking because most of the firms that are coming to the markets are basically entrepreneurial firms, and India’s one of the most defining features of the rise and growth has been capability of entrepreneurs to take the economic progress ahead. Therefore, many more of them are looking at raising capital is also an affirmation of the fact that entrepreneurial spirit is alive and kicking. 

Fifth, some of the firms that are coming to the market are in relatively more distinguished areas and not the standard kind of sectors or areas in which those businesses had taken… I mean that we know of. Many of the businesses are in fresh new opportunities, some of them are very virgin kind of opportunities, and many others are more innovative new applications in the areas that in the existing sectors. Therefore entrepreneurial spirit, innovation quotient, novelty of the new businesses, relatively superior quality of the new capital raise programmes in those firms. These are some of the aspects.

 

So that is all the good news.

Many of these are in my opinion good news. But in general, ultimately price is a function of — like classic economics — demand and supply at a point of time but over a period of time supply and demand both change and therefore in a short run supply and demand for capital where it settles and where it needs to settle may be different. And therefore our past experience has been that new capital typically has not been viewed very favourably for a simple reason that the general experience in the aftermath of those raising programmes has not been very pleasant ones. Also, the quality of those programmes has been, for legitimate reasons, not so healthy. Many of these things have changed. 

By quality — you mean its founders getting out at a much larger, higher level than you would expect?

No, I am saying the quality of the firms which are coming to the market, even the quality of the entrepreneurs, the governance, the standards is definitely of a distinguished variety compared to the past. Therefore, our past experience of what happens when large capital programmes are around and in a short run the puncturing effect on the markets and over a period of time very poor capital raise programmes resulting in vaporisation of capital leads to a lot of investor dissatisfaction. From those points, the picture today is somewhat different and in positive territory.

 

And one thing that's changed in a way is that many of these companies including the examples I took because these were large are all loss making and there is some question about what the definition of profit is. Are investors now perhaps in a mood to say that okay, this is the new era where in the public markets — we are not talking about private markets. In the public markets they are willing to accept a certain degree of loss and burn and despite that I feel that there is value in this because of so many other reasons. Do you feel like that?

Well, I don't think fundamental investing principles or valuation thoughts have changed. Markets in the core character remain the same. Ultimately businesses have a value not because some large number of people or large amounts of capital at a point of time think so. That may happen when large capital or large money chases something at a point of time but these are ephemeral and temporary outcomes. Ultimately long-term value in a business will come only if the business creates a real economic value. There is no confusion from where real economic value comes from. It comes from when the business earns superior return on capital employed compared to what it costs those businesses to use that capital pool. 

Therefore, superiority of economic returns or economic efficiency or return on capital employed over the cost of capital is a very important benchmark of whether value is being created, neutered or obliterated. And at a point of time there may be legitimate reasons that the business may not fully meet the cost of capital and where return on capital employed falls short of that cost of capital. Well, if a business structurally is going to remain stymied and will have to live with a negative outcome on a year-after-year basis, there is no benediction from above whereby value of the business has to rise. It cannot and will not.

So whether the businesses do need to make profits? Without any doubt. Whether they do need to make it in a reasonably foreseeable manner? Again, without any doubt. Whether these profits are accidental or emanating from a business model? Obviously they have to come from the business model, it cannot be an accidental chance as an outcome. Whether they have to appear as profits in the reasonably foreseeable future rather than a very distant unseeable horizon? Again nothing has gone away from that. And if the business makes no profits or losses today, clearly, in order for it to have a value today, the expectation has to be fulfilled that it will make profits soon and it will be large enough and it will cover for the period during which those profits have not been there or losses have been there, is that the overall value assigned today, mathematically and otherwise kind of synergises. So nothing of that goes away. And clearly, profits are not accounting profits, only profits. Real profits are the cash flows and the real cash generated in the business.

There can be legitimate reasons why a good business or sound business, there can be a temporary mismatch on these equations. But if that mismatch is on a forever basis or there is no easy way to resolve that dilemma and therefore it becomes kind of a gambling opinion, or if that equation is not large enough in favour tomorrow, if it is unfavorable today or that does not happen soon enough so that all the value diminution is taken care of, then eventually the reality will catch in. So nothing goes away from that. Businesses have to create economic value for them to have market returns. There is a perfect correlation between the two. Long term value of a business and long term returns generated from that investment are perfectly correlated.

It doesn't always have to be now and in the near term, necessarily. But believe in it to be there and logical reasons why it has got to be there and it has to be adequate enough and tangible enough in the reasonably foreseeable, tangible period. Nothing on that goes away and therefore judged, forecasted future, however well formed or foggy it may be. Ultimately, that judged future has to be discounted today, and that discount can occur only if there is a positive number in the future. If there is a series of negative numbers in the future they cannot be positive numbers today beyond the realms of that equation.

 

When you talk about the near future what is the time frame you are looking at or that comes to mind? Have you looked at a company or a business recently which you may or not name and if you can tell us why it failed — based on some of these principles that you've just talked about.

Many of the names that you mentioned, we have met all of them and have met them many times. We are in the process of forming our opinion on them because we have met them several times but we have not been able to form a full enough opinion on these businesses. The reliability for that continues to be the same whether the business model is something that you can relate to and can comprehend and can believe logically as a reason to exist and prevail.

Secondly, it has to be at a scale. If the business model is not at a scale and will satisfy only a very specialised set of conditions and in a limited arena, then it may not be very valuable. Therefore, it is not only the economic success, but also at a scale that economic success over a period of time that you have to believe.

 

But scale does not seem to be an issue for some of these companies, right? Because they are all talking and perhaps working in very large market spaces. 

But I am saying both have to be there. It is not just one of them. You need economic success. You need scale as well for the two together to produce a healthy outcome overall. Thirdly, as I mentioned, ultimately business model solidity, your conviction about the business model gives you some way to predict, however hazy you may call it, but a business model gives you a sense of predictability, a sense of destiny under control and therefore that allows you to make some judgments about the future. 

The typical area of judgment that you always want to make is the size of opportunity. Not just size but the size of opportunity. Whether the particular business and the management has got what it takes to seize that opportunity and convert into an outcome. Therefore, whether there will be growth and adequate growth. Because without growth nothing creates value in the system. Even in nature nothing remains where it is. If things do not move, they eventually regress and therefore businesses have to grow. There is no getting away from that.

And the next question is whether the growth is a corrosive growth or a value creating growth. And if it is value creating growth, whether it will be large value creating growth or the limited value creating growth. And therefore corrosive growth is always a problem and many times behaviourally people get carried away by growth for its own sake. But the quality of growth perhaps is not just as important as the rate of growth but probably even more important than the rate of growth. But you need both in order to form an opinion about value. When you combine all of these the character of the business, the size of opportunity, the opinion of the growth, character of the management, not just competence, but governance; not just foresight, but execution; not just good capital distribution, but good capital allocation, fire in the belly, adaptability, resilience, ability to work through the challenges. Many of these aspects you need to form an opinion about the management. All of these then will give some view about the growth and its duration and the rate, its sustainability, also a view on the quality of growth so that the two together will cement your view on the value today. And that value compared with the price will give you a glimpse into the margin of safety. 

Essentially, you are staring at three sets of returns as an investor. The future growth rate that you contemplate or judge is one annuity that you hope to get out of investments. The second annuity that you hope to get is the quality of the growth. Other things being equal, superior quality growth rate will produce more than just the rate of growth as a return. 

Growth rate is more mathematical, it is the quality of growth rate and its equation on the value which often becomes a bit more challenging for people because rate of growth and its impact on the rate of return is relatively more straightforward and more logically mathematically correlated. But the quality of growth has a deep bearing on the value. And it is again an annuity kind of thing. If the good quality growth is there it will aid to the rate of growth is one annuity outcome. If it is good enough but not extra then only the rate of growth will be the return. If it is inferior growth, then it will be a deduction from the rate of growth and a punishment. 

When it is corrosive growth, it may be so large, negative that the overall outcome may turn into negative. And therefore the two together and finally the margin of safety, the value today compared to price today— your judgment of the value and that margin of safety it is favorable one time additional debt.

When you talk about corrosive or inferior growth are you referring to basically spending more than you are earning to acquire a certain set of customers or sell to them? 

Essentially capital efficiency. Ultimately you use a certain amount of capital either your own equity capital or borrowed capital to produce an outcome. Clearly, if a business is to create value it must get more out of the capital used than what it spends to use that capital or to get a right to use that capital. Borrowed capital cost is more explicit and clear because it is very defined contextually. But the cost of equity capital is much higher and less easily understood but a very real cost. And therefore the two together will define your cost of capital. And clearly business must generate not just equal to the cost of capital but more. And how much more will have a bearing on how much is the delta of that economic value added and therefore the size of value created. 

The growth of the business will expand that value. Therefore excess of economic returns or economic efficiency over the cost of capital will create the value pie and the growth of that opportunity will expand that pie and you need both. You need quality of growth to protect your investment and you need growth in order for that value to expand over a period of time. 

 

I am going to contrast this now with the present markets because finally you are choosing from a large pool of existing stocks, incoming stocks, recently listed stocks and so on. But one of the points that you have also talked about in the past is how much take two founders have. So many of the new gen companies because of recent legacy reasons have diluted and diluted quite sharply. So is that something that can be a good thing also because you are saying okay, it is professionally run, “from day one” as opposed to let us say having a family and transmission of ownership and so on.

No, without any doubt. I mean skin in the game is a very vital idea and skin in the game allows firms to reach heights because it aligns the interest. It gives the passion or at least possibly can give passion, provided the passion is there within. But skin in the game along with the passion for creating something substantial are very important ingredients for the value creation process. And therefore that is a legitimate question to be raised in many cases, some of the new ones or the old ones. 

If there is not enough skin in the game you never know whether the policies and the thought processes are from a long term value creation journey or from an immediate gratuitous, self gratifying kind of an outcome. And you cannot rule out that possibility, right? When the skin in the game is limited or low, there is a possibility that policies are pursued for short-term dazzle rather than long term solidity. And there are enough examples where supposed founders or supposed builders, one fine day,  you just learned that they are no longer in the business and they are into something else and therefore a temporary parking place or a short-term retainer is not the best recipe for building great value in a business.

So we have touched the quality of growth. We have talked about skin in the game, we have talked about fire in the belly and passion, which I am assuming is somewhat of a constant which you are also saying is let us say we are seeing an abundance today.

No, I'm saying apart from many of these things that I mentioned and you reiterated, business model is something which is vital. And businesses need to have a well arguable, well articulated business model, which not only they can see but others also can hopefully understand and participate in. 

But you are saying that because you feel that there are times when you are not able to understand, they may be able to articulate very well.

Yes, obviously. I mean, there are many times, my own inadequacies will prevent me to understand well what is being done. Because there is only so much you know. It is not as if you know everything that is going on. And we all have to accept that limitation on ourselves that we may or may not be able to understand many things around. So clearly some of it could be due to my own inadequacies and my inability to understand what actually is the business model and how it is supposed to work. But there have been other occasions and where reasonably legitimately I can say that one is not able to see enough strength of the business model.
And again, when I am talking of a business model, it is not for a short period, it is not for a limited arena. It has to be at a scale and it has to prevail over a period of time. And it cannot be a creature of a special set of circumstances. Only we have to take into account many vagaries and many challenges that may come into play. And yet it has to work its way through and has to provide a glimpse of the light at the end of it. Therefore, this becomes a serious issue because the business model is not merely a nice thing to say. In a way it is a compass of the business. It is a guiding light of the business because it gives you visibility of what is likely to come even though short-term may be hazy, or difficult or very challenging. And therefore business owners, to be able to articulate their business model and the suppliers of capital whose job it is to understand the business models — both have to be able to arrive at some consensus on that in order for an outcome to come by. Because that in turn, along with the fire in the belly and management quality and the character of the business, and the size of opportunity will give you a glimpse of the growth and the quality of growth and therefore its value and therefore your ability to work on the margin of safety with discipline.

And most importantly it gives you staying power because it is the business model and its longevity and likeliness to prevail over a period of time that gives you staying power in a business during challenging times. In absence of that merely you play the dance of the market in terms of the prices and therefore you are very vulnerable when that dance happens either on an upside or on a downside. Therefore it is these issues and skin in the game, incidentally also is a very important issue because the footloose behaviour in many cases is simply because there is not enough skin in the game. Not in just a physical sense of owning a fair bit of capital of the business that you have a right to manage, but also mental belief that you are there in the long run to build the game, to build the value and to run through it and not merely in the sunshine phase only. So many of these issues. 

One more thing I will say. Many of the track records are not tested and therefore ability also is something that reveals itself over a period of time. There is no magic bullet to figure out in one go whether you see that capability or otherwise. And therefore it takes time. It takes time before you really understand the strength, character, motivation, capability of the people who are running the business apart from skin in the game. Therefore, all of those judgments do take some time. It requires a few meetings, it requires many meaningful dialogues before you are able to make a more solid judgment. Therefore, there is no shortcut to all of this. And in some of the cases, this is not to say that some of these new businesses will suffer, as you said, in terms of their pricing. Whether the pricing goes right or wrong is probably not as much a subject matter of discussion, I would say. But whether really businesses will be in a position to create value. Even if many may fail, some of them will probably fail spectacularly. But I definitely believe some will succeed and some of them will succeed very well. And therefore, when you want to create an ecosystem of entrepreneurship, innovation, new business models, some of those work in progress attempts would happen and there may be failure in some of them. There may be success, sure.

 

As investors now look at opportunities, there are IPOs which are coming in. There are, let's say, beaten down IPOs of last year in the tech space. There are some occasional new opportunities. Let us say a company like Jio Financial could be a new opportunity, which is very interesting because there is no business right now. There is a track record. There is, let's say, a perception of management competence and the faith that they will deliver in this area too. So how does an investor look at this particular period where things are paused and you have all these options and if you had a limited amount of capital how would you select?

It has never been different in the past either. Ultimately your capital will always be limited compared to the set of opportunities especially in a rising economy. In a growing economy where you believe the growth rate is not going to be merely a temporary affair it is likely to happen over a long period of time. The durability of growth is a greater power than just the strength of the growth. Many times we do not fully take that into account. Reasonable growth but prevailing over a long period of time produces extraordinary outcomes compounding power. 

Equally, we do not always fully pay attention to but apart from the growth rate, the quality of growth, it is a very, very deep imprint on the final outcome in terms of the returns being created. Therefore, while rate of growth is important, its durability, predictability, solidity, compounding character and the quality of growth rate are essential characteristics to create value—all are vital ideas. Capital will always be limited in an economy which is going to grow, where entrepreneurship is flowering, where new opportunities are welcomed and there are favourable circumstances and the ecosystem is getting built, where there is a scope for trying out many new businesses which otherwise may have looked difficult in the past. But the rules of the game remain the same. 

Ultimately, returns are important. Controlling risk is important. Return is a tangible number, risk is not and therefore often disregarded but it is equally vital because the real returns over a period of time is what is left after deducting risk from the returns that you see. And risk may or may not happen or invade the system at a point of time when you are measuring the results. It may just happen the next day after you measure the results. And therefore the task remains the same. You have to optimise on the return. 

You have to ensure that you have a meaningful handle over the risk, both at an individual stock level as well as at a portfolio level, so that there is a robustness of a process, of a discipline. And you are mentally carrying yourself for a long term compounding journey rather than a series of short term gratifications. Is it may be convenient as for the dance of the market or what may be popular in the market at a particular point of time that may be desired, maybe profitable, if it can be made to work that way that you can make series of dancing steps in a very adroit way and success in each of them.

But usually that is not something that will work because markets have their own quirks and temperament and moods. Our ability to judge what will occupy the attention of the markets at a point of time at best is likely to be very poor. And therefore trying to match the markets is a perfect way markets will extract the price from you. So the task is the same. You judge both at a micro individual name as well as you control your risk and optimise your return at a portfolio level. And again, the effort is similar. Whether the business has got what it takes to create value? And whether that value creation can be adequately large enough?  Whether the management can be trusted and relied upon to do what you expect them to do?  Whether the size of opportunity is large enough to produce a meaningfully large outcome, or it may be a very maverick, niche thing where it may be nice, but overall it can't move the needle in the aggregate money level.

And finally, that rate of growth and the quality of growth both have to be in the place in order to create value. You have to have mechanism, method, science and art, both of judging that value because if it were to be a perfect number then it wouldn't have called for a debate. Therefore it is a good deal of art. Equally it is not as if it is a very intangible beauty that lies in the eyes kind of a thing. There is a fair bit of mathematics and science behind it. So it is a very beautiful amalgamation of the two. The growth rate in other parts and its mathematical correlation is more obvious but the impact of the quality of growth rate on the valuation and sustainability and how much more it can deliver is often less appreciated or less calculated. But it is that, which is really a very vital part of investing. And to package all of that with discipline time after time after time, while remaining long term at the same time agile, while having confidence in what you have and what you believe in at the same time enough scepticism to understand that you can be wrong. So therefore you have trust but you have doubt. You have faith but you have scepticism. You have belief, but you have enough diffidence about it and therefore that keeps you all the time in a right questioning mode.

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And that should apply to journalists as well.

Absolutely. 

In all these principles that you have spoken of as you apply them, what are you looking at today that's interesting to you? It could be either a sector or a company or a group. 

Companies I won't really talk about because in a public space I will prefer to not talk about businesses, individual names. But many things will grow. I think more than always, the greatest prediction, what may be the most appropriate mental framework to have is whatever happens, whether you have ability to adapt to it and benefit from it. Because often when we make very intellectually, very energising predictions, we sometimes over believe ourselves and we tend to get carried away by those judgments ourselves. And therefore our own formulated opinion of that forecast becomes our guiding star as to what is going to happen rather than actual reality which may be unfolding. 

We have to be mindful of the risks of making forecasts, however intelligent and however beautifully articulated they may look like. Greater chance of success is our ability to observe patiently and carefully what is happening and our ability to benefit from it by intelligent adaptation to it in reasonable time rather than making the grandest and the most intelligent sounding forecast. Not that one can be away from it.

 

Are you referring to forecasts about 2047 and 2075 and so on?

No, I am saying investing horizons encompass longer periods but investing horizons have to encompass shorter term reality as well. I am saying generalised trends, when we make a forecast. Let us say AI will change the world and AI will be the most defining new revolution. Maybe, maybe not. Do I know enough about it? I don't. And will I just make all my predictions based on artificial intelligence overtaking humanity and fundamentally altering all the earth and the wealth creation norms? Maybe, maybe not. 

 

SoftBank did that singularity right?

I am saying those kinds of predictions we often get carried away by where generality of predictions overrides the intelligent specificity of a particular situation. And investing is all about that specificity. Overall context may exist, the background may be of that long term view that you may have but it must match and be aligned with the micro specificity of that individual thing. That is where disconnect happens. Mentally, once you have formulated a view, then you start believing it and you stop paying adequate attention to micro reality may be unfolding and therefore the general view may override sensibility of a micro specificity and you may end up making big mistakes. 

I mean it could be that generally this sector will now do very well. Maybe it will. Maybe you want to have some view about that. But ultimately, more than grand predictions, ability to observe what is happening, and ability to adapt to what is happening at the margin in terms of a change, in my opinion, has a greater chance of sustained success. 

Therefore, many things will do well, if the economy grows at a good rate, in a durable way, in a predictable way for a long period of time and in a qualitatively sound way. Many of these are judgments again. So again of that same long-term variety that I am kind of putting question marks on. But that macro view is there that enough circumstances, enough situations now today happen to synergise where there is a reason to believe that a country will grow at a material pace for a long period of time and that predictability gives greater value. Solidity of that prediction gives a greater value. Durability gives a greater value. And the quality of that growth rate, if it is sound, also gives a greater value. Those are opinions you are forming but those opinions you constantly will keep checking from time to time along with the actual unfolding micro reality at a business level. 

But many things will do well in my opinion. I mean whether you talk of lenders— the condition in the overall lending has never been more favourable. Quality of the asset book, decline in the real cost of capital, good balance sheets of the borrowers, digitisation and cleanup that has happened in the entire lending culture. Many of these and the demand for capital in a growth economy all these factors lend a lot of strain to the lending businesses to do durably well at a material scale over a long period of time. 

Insurance is another opportunity in manufacturing. Lot of opportunities will come by. It may be popular to characterise it as China plus one but it is not limited to that. Manufacturing takes time. You think today something and it will become reality only over a period of many years but path has opened up and therefore I think chances are very bright that outcomes are going to be gratifying over a period of time in hands of determined calibre, high calibre entrepreneurs and the business owners. 

 

The capital expenditure related government has worked its bit a strong way so far by kickstarting the capex cycle. I think we are roughly at a stage where a private capital expenditure programme is about to kick in because there has been in some areas where excess capacity is still available but in some of the areas capacity utilisations are nearing completion and therefore we are seeing capital expenditure programmes. I think consumption of various varieties and consumption again today is very different from consumption in the past. Past was more the existential, more staple, kind, bread and butter variety of consumption. Today it is more variegated, can be luxury, can be discretionary, can be very premiumised, very different. And all of those are opportunities, including the staples and all of that. 

One particular area in chemicals where India has a lot of strength, I think enough reasons for good quality players to do well, not just seizing opportunity, being loosened up by our key competitor, but I think independently, many of these businesses have a great chance to do well. The great digitisation that has occurred in the country both in the public space as well as in the businesses and in businesses not just large but even medium and small that pervasive digitisation, pervasive usage of technology in an intelligent way, I think makes businesses very productive. And therefore many of these enabling architectures and intelligent usage of that will create very powerful business opportunities.  Auto, automobile related many of those opportunities, even technology laid like artificial intelligence. What we are talking about, who knows? I mean many dramatically new opportunities may spring up and we'll have to observe and find out what can work. 

Even out of some of the businesses that you initially begin with saying many of them have seemed to not done too well in the marketplace. While price wise, some of those businesses may not have done well and I today do not own any one of them, but I will not ignore any of them, I would still continue to remain engaged, I will continue to remain watchful. And if good business models will emerge which give that solidity, I think that opportunity will be there and we'll have to wait and see and evaluate. Plenty of things—-in a rising economy, rising capability, when your self confidence and belief stand high, many new things will happen which you may not have imagined and which you may not have been able to fully forecast. But they will emerge and I think the good part will be to be aware of it. I mean, look at the EMA space, electronic manufacturing space, which is relatively newly opened up. It is not as if businesses have just come about today. Some of the businesses have been there for a couple of decades and even more. But there is a time when opportunity, preparedness, confidence, all they ignite together into a very powerful combination. So many opportunities of this kind, healthcare, supportive systems around it, many of these opportunities, plenty will come.

My key point will be while we can all sort of say make our judgments on these, it is important to remember that investing is not market index predicting. Investing is not riding on themes, investing is not riding on generalities, investing is not on macroeconomic factors. Investing remains simple. You want to be enthusiastic about a business which is a case to create value where the character of business is sound. It is run by people of character and capability that it sits atop of a large size of opportunity. And it is not a small pond. It is a large pond where even small, mid and big fish all can thrive and grow much bigger. And that it will actually produce growth which is essential. Equity and businesses, and value creation cannot exist without reasonable long-term durable forecastable growth rate. And coupled with quality of growth, our ability to judge value, discipline to bite at some margin of safety. And the wisdom to remain faithful about that equation while remaining adequately doubtful about whatever you yourselves are doing, I think is the way investing produces gratifying, risk optimised return optimal outcomes. And that remains the watchword. Therefore, even with all the many forecasts, if at all I make you should discount it and throw it away. They merely are a set of beliefs today and they have to stand the test of actual reality from time to time. 

 

We started by saying that let's look at stocks and let's look at the bottom. And you've brought it back by taking us through a whole journey of the future economic growth potential and back to stocks and companies and entrepreneurial opportunity that this country has. 

I believe entrepreneurial fire has truly been ignited. I think we will see some very good minds, very bright minds with good business models, new business models, new innovation. Some may fail, some may not succeed as much as we may like them to. But enough and I think that represents the true defining capability of this economy. India has always been very entrepreneurial unlike most parts of the world where you do not see it. 

I mean Europe, very little, America, barring technology, not much. In Asia, if you see in Japan, Korea, not really; China, we all know what challenges entrepreneurial talent is undergoing there. India truly is special in that respect. That entrepreneurial capability is very remarkable and that coupled with an enabling environment will foster very powerful forces. That is what I believe in.