The Jewels Of India

The Jewels Of India- Introspecting “which won the Alexander” (I- Tapping the source)

The name must be sounding as if some jeweller is trying to sell you few immaculate pieces of rare stones unearthed from Moghul emperor building,with a possibility of event happening again in 100 years!

This is my inward looking journey of studying the Alexander (winners) of last decade in Indian stock market. Why such unusual way of backward rolling, what I will gain out by doing something eventually may not lead anywhere. Are not there others who would have done it and what kingdom they could over turn for themselves? Am I not better off continuing focussing on time tested investing philosophy (value/growth) and continue to enhance the capabilities there of.

If you ask me, you are right about these questions and many more. But now I don’t think you need a model framework which includes helmet to war dress and fit for all so that everyone can look like Alexander. Opportunities were always unique, problems as well and I continue to search the unanswered questions where I was getting edgy. You continue to do as well in your own way.

The “Jewels of India” is an attempted ongoing project on working backwards the performers of Indian market during last ten years (performers in the sense of price) and directing these winners to look out for any standard patterns. Now these patterns so far I have kept open ended but nevertheless going to include investment philosophy, fundamental behaviour of these stocks vis-a-vis price, technical indicators (I am not good at these!), chunking themes( either exceptions investing, value investing or growth or any other name we like). I will jot down the kind of KPI we are hammering down for now. I am immensely thankful to my friends who has been kind enough to explain the Morningstar classification, pointers to look at, debates that fried the bheja and reminded me how after 21 years of investing sand box still remain fragile, so much that sometimes sounds nothing more than a whisper!

But before I jump into the beginning of specifics of this project, I want to bring out a pre-cursor of an interaction with an multifaceted personality few months back which shaken me off the collar.

Here it is, I hope you enjoy it as well:

If you don’t mind can I ask your age? This is after 2 and half hours in a cosy restaurant located in MG Road, Bengaluru. I was almost in a trance state post the high intensity conversation. Mr P sipped a bit of water and replied I am 53. We continued the conversation for another hour almost before I headed to home in an evening with traffic chaos and minor drizzle. As I started rewind myself on roads of Bengaluru I realised some one just told me he left a job at 32, made millions in 15 years and lost everything in 90 days. By 47 he was bankrupt, made an equally strong come back. I will come very soon on Mr P and his lessons of “applied behavioural finance”.

Mr P passed out as graduate in engineering ( Mechanical Engineering from Indian Institute of Technology, Mumbai) followed by a MBA from Jamnalal Bajaj. He recounts despite being an average student still he could crack it, he thought he just invented a formula….rules are for crowd….not applicable for super men and women. He worked for 7 years and elevated to ranks of senior management in a fortune 30 company, a feat again very few does it. This prompted him to go out of the way and start risking trade off with customers and suppliers, breaking all cardinal rules of traditional corporate, only to be fired by ethical committee on 8th year. At 32 he said I was back to square one. World seems to be cruel and evening were darker than ever before. The saving grace was Mr P’s casual venture into equity investing. After forced to a hole, he thought I can go back and start hunting another job……but somehow my ego didn’t allow me to repeat what he feels a master stroke blurred by corporate ethics.

He says I was an avid fan of Warren Buffett and Chandrakant Sampat, but fan following wont fetch you a livelihood. Then follows his journey from value investing, to what he calls speculation, a bankruptcy and finally rise from rubbles from as late as 47. I could spot all excitement ingredients from the conversation, every number he was uttering was millions; even fancied a luxury caravan living to loosing Bose music system and office apparatus.

There are tonnes to learn from these unsung heroes, I am forced to comeback to my table……thinking how to manage The Black Swan, the stop loss ……more importantly the behavioural finance.

A lot of mental strips he has suggested me to adopt from the book “What I learned by loosing a million dollar”. A book six years back I passed it as casual read, this time I finished 3 times in 9 days!

Below is abstract of Mr P’s advise customised:

Personalising success sets people up for disastrous failure. It didn’t even spare Henry Ford or IBM. Sometimes we fail to admit we are plain lucky. The easiest way to lose success is getting convinced that you are successful. I was convinced I am successful, I am stand apart from crowd. Whether the IIT or Fortune 30 or a even Vice President. Come on no one becomes a VP at 32 in a 100 Billion dollar plus MNC! I must be something!!

He continued his journey, after being fired from job I started rebuilding my kingdom again. This time I became a trader (actually a speculator) and within 2 years I was raking moolah. Even as much as 10-15 lacs a day was sometime a normal incident. Be it soya bean, sugar , oil or stock market I was all over place. I joined a coveted club in Mumbai with proximities to who’s and who’s of dalal street. Life was on an elevator surrounding unstoppable dreams. Then came big bucks, 15 days I cracked a couple of Crores , prompted me to hire a Mercedes customised Caravan and set out for a month’s journey all across Maharashtra. More than leisure it was a display of wealth and might. I ridiculed all sort of people who complains life is cruel, jobs are scarce or even Ginni coefficient is rising.

Then came the day where I told my partner this time we will erase Rakesh Jhunjhunwala from records and replace our name. The bet riding was too high and working in our favour. We continue with juggernaut of success, all of a sudden market started sputtering downwards. I was Napoleon of Dalal Street, we can do….we can do…The margins kept getting increased as the position limit falls further. I started getting irritated at wife and kids, couldn’t slept for days….lost 18 kg weights. As margin continues to rise, I borrowed money….till one fine morning I realised I cant afford any more. Still I didn’t had the courage to close the position. The position was forcibly closed by dealer and my entire office, properties and everything saleable being snatched away. From a few dozen of crore rupees I was reduced to a street beggar….all in a matter of 90 days.

It was half past 9 in night, I came out of Worli (Mumbai) office and started driving towards Pune expressway. The only solution came to mind is to dash off the car into the sea in such a way so that it looks like an accident and my family get paid off the insurance. I couldn’t muster my courage in front of so many people and started moving to Pune. Till the time realise a cop stopped me on highway. He shouted immediately do you know what speed you are driving the car? I replied immediately must be 75-80. No you are driving at 15 kms per hour and a nuisance on highway , creating obstacles for others!! (here I guess he was trying to impersonate Jim Paul!)

I came back to home and remain mum for a month or so before gathering courage again. I must fight! But with whom and on what?

This time I went back to experts and started reading, meeting all I could. I observed one thing very clearly; there are many ways of winning and all of them differ with each other. When it comes to loosing all are on same page!

I sort of organised the conversation into an questionnaire format though it didn’t happen in exact sequence.

Question: So you give credit only to luck? All your pedigree, intellectualism didn’t play a role in the spectacular come back?

Mr. P: I didn’t say that, all I was emphasising luck play a role in everything. Accept it rather reconciling every bit of success to all the mavericks things you think you possess.

Question: Can I say a value investor turned to trader, but still you have strong portfolio stocks?

Mr. P: I am not aware of who defines value investing or any other form of investing philosophy for whom? I think was investing in business earlier, now trying to behave like a business man.

Question: Can you please elaborate what is behaving like business man?

Mr. P: When you are doing research, thinking, or any other act before putting money you are not doing business. The moment you put money you need to behave like business man and accept things can either go wrong or right and you must have a plan in both the case.

Question: Did you not feel like going back to job after the debacle? I mean after all you are IITian , anyone could have hired you.

Mr. P: Career means an occupation taken for a significant period of life with opportunities and progress. My debacle was financial turmoil, what career has to do with it?

Question:Quite interesting, a lot of people successful investor speak arrogantly though they think are polite. Is that how you feel?

Mr. P: It only happens when you start thinking bigger than whom you are talking to. Start talking to yourself, will realise what you are.

Question: Do you think any particular investment philosophy is a must for succeeding in market place?

Mr. P: Don’t boil the ocean to find out a rocket science, create a method and stick to it. Don’t worry you have to change at least a million time before you die. Certain things come naturally.

Few more questions may not be relevant at this point of time will stamp them later. This forced me to look at a changing view point. And part of the chunking an inward looking introspection was order of the time.

I will jot down the approach, methodology , assumptions etc in next bucket. Meanwhile an indication of analytic strips below:

  • India market overview and classification (cyclical, defensive, sensitive and further two levels breakdown)
  • The winners and their classification
  • Price analytics of winner (fundamental and speculation growth)
  • Relative price analysis behaviour against growth (MC/OP, MC/Sales, P/B, P/FCF)
  • Margin analysis (against price and against sectoral competition)
  • Return behaviour with price (ROE, ROIC, ROA etc)
  • Financial health behaviour with price (balance sheet management KPI)
  • Management action and price behaviour (unwanted bonus, over split, dividend, buy back, non organic investments)
  • Growth behaviour with price (acceleration engine- revenue, profit; both individual and sectoral)
  • Cash flow management with price behaviour
  • Efficiency with price behaviour
  • Identifiable competitive advantage, competitive force against company
  • Identifiable uncontested market place (Blue Ocean) against company
  • Favourable base case valuation (asset, earning power, franchise) and price behaviour
  • Capital allocation (other than management action such as growth capex) and price behaviour. I may merge with management action.
  • The technical trends ! (to my limited knowledge)
  • The growth investing themes, business strategy if they can be identified to a company (e.g. unbundling, bait and hook, the long shot, freemium).

This is a good amount of work for me, will start off loading one by one. A couple of strips are ready, will sanitise and come back soon.

Do let me know questions if any and suggestions, can include them back to practice notes.

Good wishes

Talk to you soon.


Why don’t you read the Motilal wealth creation surveys? They attempt something similar on a 5 tear scale and have been doing it for years now, so have pretty decent insights.


Thanks for making a reference, agree. I have included Motilal, DSIJ and
Moneylife for references. Some themes may repeat as elementary themes,
definitely want to look beyond existing realm of their study.

1 Like

Market overview and classification

Thanks once again for scrolling down pages here. Before we move to the classification of the markets and associated industry & sectors a gist of approach and methodology.

Approach & Methodology:

  1. To obtain raw data for all Indian listed companies who has issued equity shares. Preference shares excluded.
  2. The data above includes market data such as market capitalisation, current market price etc. This also includes the fundamental data like ROE, margins, and so on. (we will cover the important one as part of break down analysis).
  3. Map the company to industry and sectors exhibiting a common pattern. I have used the Morning star mapping, a great job by the guys out there.
  4. Record the price performance of stock for the list and compute CAGR.
  5. Segregate the top performers and analyse pattern if any.
  6. Focus on top 100 performers for experimentation hot bed- the KPI discussed earlier.

Note- the above 5-6 points is a summary of several pointers, in case you are interested we can discuss further.

Data Universe

  1. 4934 Companies, this is publicly available information on Morningstar website. In addition I used two more data bank subscription for accuracy and validity, still not ruling out a percentage of error.
  2. The above 4934 companies include the companies which are suspended for trading on stock exchange for several reasons. But I have not excluded them , however I pruned the complete delisted companies. The number I got is 4427 companies.
  3. The data spooled is between 10 July 2016 and 31 Aug 2016 at various dates. The idea is not to get the pinball accuracy but rather themes and ideas.
  4. The data gathered constitutes a value of 113000 Billion INR.

Demystified view of Indian stock universe

A snap shot first

A Sectoral View

Numbers	Penetration	Value 	Penetration

Basic Materials 718 16.22% 14944186 13.22%
Communication Services 25 0.56% 2806686 2.48%
Consumer Cyclical 1068 24.12% 16156383 14.30%
Consumer Defensive 355 8.02% 10609813 9.39%
Energy 49 1.11% 8613595 7.62%
Financial Services 706 15.95% 23622375 20.90%
Healthcare 230 5.20% 8475766 7.50%
Industrials 626 14.14% 8986644 7.95%
Real Estate 168 3.79% 980493 0.87%
Technology 434 9.80% 12750185 11.28%
Utilities 48 1.08% 5054321 4.47%
4427 113000445

Couldn’t upload the image or attach the file as restricted.

Key Take Away 1

  1. Half of stocks are cyclical which will continue to exhibit volatility.
  2. In terms of sectors materials, consumer cyclical, financial services and technology takes the major cake of wealth chain.
  3. Is it indicating where is likes of Google and Apple? If the technology sector turns out to be commoditised service then a bunch of American books……where do they go?
  4. This wealth creation doesn’t speak of economic profit at this point of time. So, if the growth comes at a high cost of capital, lower margin and return it can lead to destruction as well.

Break down of Big 4 Sectors

Sector- Financial Services

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Numbers	Penetration	Value 	Penetration

Asset Management 124 17.56% 541897 2.29%
Banks - Global 1 0.14% 1784394 7.55%
Banks - Regional - Asia 41 5.81% 13618234 57.65%
Capital Markets 293 41.50% 524022 2.22%
Credit Services 188 26.63% 3203111 13.56%
Financial Exchanges 2 0.28% 50664 0.21%
Insurance - Diversified 1 0.14% 472048 2.00%
Insurance - Life 1 0.14% 152066 0.64%
Savings & Cooperative Banks 1 0.14% 53 0.00%
Specialty Finance 54 7.65% 3275886 13.87%
706 23622375
As expected 57% the big boys i.e. banks. This is followed by speciality finance and credit services. A cluster of companies sit in capital markets without doing anything. Lot of these companies have their own reason for survival.

  • Speciality finance includes housing finance, mortgage financing (not covered by banks). Credit services refer to micro finance, seed capital financing, consumer finance (not covered by banks).

Sector- Consumer Cyclical

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Numbers	Penetration	Value 	Penetration

Advertising Agencies 2 0.19% 1097 0.01%
Apparel Manufacturing 52 4.87% 371323 2.30%
Apparel Stores 5 0.47% 96850 0.60%
Auto & Truck Dealerships 2 0.19% 1319 0.01%
Auto Manufacturers 18 1.69% 8053118 49.84%
Auto Parts 109 10.21% 2422537 14.99%
Broadcasting - Radio 1 0.09% 36713 0.23%
Broadcasting - TV 16 1.50% 887889 5.50%
Department Stores 8 0.75% 132394 0.82%
Footwear & Accessories 35 3.28% 171368 1.06%
Home Furnishings & Fixtures 26 2.43% 320027 1.98%
Leisure 28 2.62% 149019 0.92%
Lodging 47 4.40% 256171 1.59%
Luxury Goods 62 5.81% 649562 4.02%
Media - Diversified 66 6.18% 213156 1.32%
Packaging & Containers 83 7.77% 188024 1.16%
Publishing 17 1.59% 290597 1.80%
Residential Construction 11 1.03% 2229 0.01%
Resorts & Casinos 8 0.75% 123038 0.76%
Restaurants 8 0.75% 157407 0.97%
Rubber & Plastics 98 9.18% 831623 5.15%
Specialty Retail 9 0.84% 3273 0.02%
Textile Manufacturing 357 33.43% 797646 4.94%
1068 16156383

On expected lines 64% of value hovers around auto manufacturing and spare parts. Pockets of money has been generated in TV broadcasting, luxury goods, plastic/rubber and textiles.

  • TV Broadcasting includes guys like television network/media. Luxury goods is basket of jewellery, precious metals etc.

Sector- Basic Material

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Numbers	Penetration	Value 	Penetration

Agricultural Inputs 58 8.08% 999610 6.69%
Aluminum 20 2.79% 454869 3.04%
Building Materials 112 15.60% 4160650 27.84%
Chemicals 115 16.02% 813797 5.45%
Coal 11 1.53% 2205320 14.76%
Copper 8 1.11% 64260 0.43%
Gold 3 0.42% 8281 0.06%
Industrial Metals & Minerals 35 4.87% 1623417 10.86%
Lumber & Wood Production 10 1.39% 54985 0.37%
Paper & Paper Products 63 8.77% 112113 0.75%
Specialty Chemicals 119 16.57% 2600741 17.40%
Steel 164 22.84% 1846144 12.35%
718 14944186

Natural resource like coal and mineral is 1/3 rd of this sector, chemical together 22%, and of course infrastructure backbone 28%.

Sector- Technology

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                     Numbers	Penetration	Value 	Penetration

Communication Equipment 27 6.22% 55246 0.43%
Computer Distribution 7 1.61% 9298 0.07%
Computer Systems 11 2.53% 23717 0.19%
Consumer Electronics 27 6.22% 332600 2.61%
Contract Manufacturers 4 0.92% 99 0.00%
Data Storage 2 0.46% 1665 0.01%
Electronic Components 62 14.29% 490692 3.85%
Electronic Gaming & Multimedia 4 0.92% 9084 0.07%
Electronics Distribution 7 1.61% 79942 0.63%
Information Technology Services 129 29.72% 10891111 85.42%
Internet Content & Information 11 2.53% 191944 1.51%
Scientific & Technical Instruments 5 1.15% 567 0.00%
Semiconductors 3 0.69% 3162 0.02%
Software - Application 108 24.88% 272919 2.14%
Software - Infrastructure 17 3.92% 374063 2.93%
Solar 10 2.30% 14074 0.11%
434 12750185

On expected lines 85% of thrust comes from IT services, even a disappointing 2% from software application.

Key take away 2

  1. As expected auto, banks, natural resources and IT services continue to rule the roast. But have they generated accelerated wealth for shareholders? Are they winners? We are yet to check that.
  2. As a few sectors are concentrated liquidity migration may or may not happen.

Few bold points

  1. So far no Apple or Google (many feels the same way for product innovation and patents). The front runners are either cyclical or defensive; at the most IT services. This should have a major impact on the way we look at competitive advantage and business strategy. Saying that it doesn’t take away any major industry force from Indian market i.e. intangibles, switching cost, cost advantage etc. But mapping the industry between sector will throw up the value chain which may be different to other market. Lets do that for top performers.
  2. At this stage no way we know whether these big boys having concentrated values have created an economic profit. For example energy fellow like gas and oil etc have been suffering from margin after spending huge capex and cost of capital. Not sure whether that would be translated to superior wealth creation for shareholders?
  3. It would be interesting to map the Indian economic sectors (as per Finance ministry) with the sectors here. That should give a rough empowerment of unorganised sectors, a lot feel its huge!

Too early days for analysis, shortly within a couple of days I will post more about the winners who actually created big bucks for shareholders, their penetration etc. Then we can accordingly deep dive the real trends of winners.

Good wishes, talk to you soon.

Note: though I would love to upload the base data file, however a bunch of data has came through restricted access, it would violate the respective copy rights. Apologies.


excellent work buddy …highly learning …thanks a ton !

keep sharing and enriching , god bless !

The wealth creation spots and trends, list of winners

Wheel of wealth creation

I focused on capital appreciation created by my database companies numbering total to 4427. This obviously exclude the distributed dividend, but considering low dividend yield it wont materially impact structural view of chart vis-a-vis price. Though it may have an impact on capital allocation by company, lets include as one criteria while chasing the top performers down the line.

Sanguine to look both a long term and medium term view. I have taken both price performance of 10year and 5 year. The current market cap minus the initial value (either 5 year or 10 year) gives me the amount of capital appreciation of wealth created.

10 year wealth creation wheel

Interestingly there are 908 wealth destroyers, lets analyse as second phase. 1653 companies created a positive wealth of 65906 billion INR, with adjusted negative wealth destruction it comes around 61241 Billion INR. If you divide with current population stock market has delivered 52752 INR of capital appreciation against every citizen of India! And this is a bouncer when we take per capita income around 70K, close to a month savings. But this doesn’t tell any story actually, our Gini Coefficient is one of worst in world (disperse income or wealth distribution), countries like Thailand Sri Lanka are ahead of us. However the data like any other macro data is prone to bigger error in India as people don’t disclose income here properly. In fact IMF feels the inequality will further rise. In short our wealth is concentrated, nothing new….we have embarked capitalism after all!

Another interesting aspect is theory of probability. 1773 companies have either create a positive wealth or neutral wealth. That’s a whopping chance of 60% plus staying positive from total universe of active companies. This means you have 1700 choices to choose from 2681 companies to avoid wealth destruction. I wonder why people stay away from market? I pruned the minimum rate of average PLR (capital gain of 8% would have been around 10-11% interest cost with tax effect). This indicates in 64% of cases you had a chance making money more than fixed deposit. Again my head rolling to these fund managers managing public money, I guess there would be 1000 plus people here in this forum who will do better than these wealth wizards!

Wealth creation wheel- economic indicator and sectoral view

No surprises as positive wealth creators maintain the same classification of market with cyclicals having 50% wealth creation value, followed by a narrow fight between defensive and cyclicals. This is in line with 50% composition of market constituents were cynical (please refer to previous post).

The big 4 sectors remain financial services, technology, consumer cyclical, basic material. A new addition is health care among wealth creators, expectedly pharma companies have out performed for a considerable period more than weightage in market composition. Even consumer defensive performed reasonably well.

How does a 5 year view of wealth creation wheel look like?

Consumer cyclical gathered momentum in last five years in terms of performance, financial services remain a sweet spot, technology is trying recoup old glory, health care trying nudge ahead ( not so convincingly), defensive sector maintain its status.

Industrial View of wealth creation of Leading Sectors- Basic Material

  • I have attached file to overview the data.

One is steel which got severely battered, next industrial metals and minerals. In net net there is a wealth destruction in industry. Look at speciality chemicals where 2/3rd wealth is created during last five years. Building material a significant component just trying to hold on at same level.

Industrial View of wealth creation of Leading Sectors- Consumer Cyclical

  • I have attached file to overview the data.

One of crowded sectors, but heavily concentrated. 75% of wealth is created by auto manufacturers and parts. Tv channels are one of major beneficiary of wealth creation at the expense of jewellers and textiles in last five years.

Industrial View of wealth creation of Leading Sectors- Consumer Defensive

  • I have attached file to overview the data.

House hold products, packaged foods and tobacco remain the major wealth contributors during last decade. On a five year scale nothing much changed.

Industrial View of wealth creation of Leading Sectors- Financial services

  • I have attached file to overview the data.

Banks, speciality finance, credit services are major pillars of this sector. Banks have suffered off late at the cost of speciality finance i.e. housing finance partly contributed.

Industrial View of wealth creation of Leading Sectors- Healthcare

  • I have attached file to overview the data.

It’s all about pharma having almost 95% share across long and medium term.

Industrial View of wealth creation of Leading Sectors- Technology

  • I have attached file to overview the data.

No surprise of IT service dominance of 90%.

Key take away from wealth creation chunking

  1. The wealth has been created more or less in line with market classification of cyclicals, defensive etc; no surprises here.
  2. Despite of cyclical nature of business auto, financial services, hold on to their fort. industrial mining, steel have suffered among cyclicals.
  3. Defensive hovers around pharma, personal products etc and continue their same pattern of dominance.
  4. IT services remain big boy of technology, we are yet to see product company impact on sector/industry.
  5. Speciality chemicals is a clear winner recently.
  6. However all these number crunching doesn’t tell much beyond a historical significance. Whether trend will remain or not , obviously there is no guarantee. Yet it does point to type of competitive advantages and business model studies we should be doing.

We haven’t spoken about performance of the wealth creators, that’s key focus and further driving down.

The TOP performers

I have tried to utilise mix of methods to select the top performers. One take the fastest wealth creators, second is greatest wealth creators, third consistent wealth creators.

Step 1: I have pruned the data for companies having 20% CAGR on last ten years.
Step 2: I shorted the step 1 data for minimum market cap of 100 crores (this is a low number actually) to avoid low base effect.
Step 3: I emphasised those companies only where 100 crores wealth has been created at least.
Step 4 to 6: Repeat of step 1 to 3 with a data for 5 year period.
Step 7: I have shortlisted the consistent performers who are appearing in both long term and long term.

Basically we have collected companies having highest CAGR in order, at least having 100 Cr market cap and created a 100 cr wealth in last 10/5 years.

I got a list of 224 companies, as I wanted to focus 100 companies only; I preferred to choose 115 companies. The additional 15 companies is to ensure low float, low base or any other unwanted data crept in case! That will give a margin for error.

Industrial. Sectoral View.xls (53 KB)
List of top performers.xls (88 KB)

Key notes before deep dive

  1. All of them have compounded at least 30% CAGR wealth for shareholders.
  2. Lot of popular names like Symphony (proud to be an owner) is 978 baggers in last ten years. Other usual suspects like Ajanta Pharma, Vinati, PI, Mayur, Eicher….all there.
  3. On a ten year performance 70% of top performers are cyclical, this is ahead of composition of 50%. Relatively cyclicals have out performed.
  4. Other than cyclical and defensive, the sensitive have under performed, mostly due to lacklustre performance of technology sector against market.
  5. Health care is turning the table with a out performance and financial services have retained its share.
  6. If we see a comparative performance of top guys in 5/10 year scale then not much has changed in terms of industry. Financial services, basic material, health care, technology have performed more or less on both time horizon. The performers have maintained status quo despite performance fluctuations at a over all level as discussed above.

I have attached a file listing the top performers (The Jewels) and their overview.

Next the real journey begins, where we go down the hill for the 115 jewels (most likely some of them further will be pruned) to study trends, patterns and any other meaningful relationship. The statistical trends may loose their significance after all effort being historical data, I am keeping my fingers crossed for now.

Note- past performers may not repeat the story, already growth acceleration have come down in few companies like Symphony. Already 46 of 115 I could see bucking the CAGR trend downwards. But what it tells it the structural view of market doesn’t get changed over night despite of individual names. That helps in focussing on the kind of research we need to do. Further it may help in understanding how market is reacting to different value drivers such as management action, growth, fads etc.

Good wishes and happy investing.


That’s great job done Suvi.


This is Excellent Stuff !!
Kumanan Sir Thanks for showing me this.


best post ever i’ve read…brilliant analysis…applause!!!

Thanks for this analysis

One more takeaway: the median starting market cap of these cos is somewhere around 411cr. It really pays to invest in small and tiny cos.

True, what role market cap, float played with price lets test it sometime.

A view of Products, Services with customers

First I wanted to see how products and services including their characteristics stacked up for these performers and that would mean:

  1. Is it necessary to have a demographic concentration or spread across?
  2. Can I make money by selling seasonal product?
  3. Are the products/services price sensitive?
  4. Are the products end user facing or intermediate products?
  5. How much companies are impacted by manufacturing? (trading or manufacturing).
  6. Are the products enforced spending or voluntary spending? Can it be postponed?
  7. How the products and services are linked to savings of a person?
  8. Does the products/services one time transaction fee or recurring fee for customer?
  9. Do I need to pay a switching cost for shifting the products or services?
  10. Are products or services mass market/niche market?Segmented, diversified or multi sided platforms?
  11. Value proposition- newness, performance, customisation etc?
  12. What kind of distribution channel adopted by the winners?
  13. What kind of customer channelisation practiced by company?

As you will notice it includes both product and customers. I couldn’t finish the bold ones, will do them next time. For now what I could observe:

Mix of Product and Services

93 companies are product companies and 22 belong to service sector which includes financial services/banks. This to me would mean:

  1. every step of product life cycle management is applicable. Design to release to service, either we outsource or manage in house.
  2. the companies are expected to asset heavy unless co-sourced/leased to make it asset light. This would be something interesting we will see later.
  3. Inventory is going a play major role in terms of asset, working capital, procurement etc.
  4. impact of intangible assets will be minimal, even banks though services book value are more reliable. That would mean asset reproduction value can throw some decent valuation.
  5. chances of recurring revenue are minimal unless services are bundled.
  6. end user involvement would be minimal.
  7. mass manufacturing or batch can play a big role in economies of scale.
  8. delay in delivery will not have deadly impact like services.

86 companies products are end user facing where as 28 are intermediate and 1 both (this emphasises a lot of routine, daily consumer products). This means 28 companies are in the middle of supply chain management. This indicates customer relationship management, partnership has played a key role for these companies (for the majority of 86). If an advantage is created in this space difficult to replicate easily unless support services are automated radically.

Only 8 company’s products or services are of seasonal in nature. Rest 107 have defied the nature, they can sell at any time. The performers have sole actively sold during entire year. Quarter to quarter comparison should be as reliable as YOY.

Consumption story is big take away, 113 of 115 companies have made tons of money either by selling in export market or local market. They need not depend only on exports. However a caveat here, pharma and speciality chemicals both are heavy export dependent. Perhaps I need to a further breakdown export/domestic numbers.

Customer Segmentation

This is more focussed to know:

  • are we serving mass product with a differentiation between customer needs?
  • are we selling niche product with a differentiation between customer needs?
  • are we selling diversified products unrelated to customer segment?
  1. 81 company’s products can be sold to different customer segments (mass market) where as 33 are directed niche market.
  2. But our companies are smart enough to understand customer needs in almost all cases extending to106. Except bland food products like biscuits, milk products.
  3. Only 4 companies have sold to unrelated customer segments (pure diversification, nothing wrong in this). Other wise all most all of them have ventured in their own territory.

My analytics would be at this point of time

  1. The biggest key take away for me product still rules. Product is ruling, may not be flashy, technical superior products like US which is patented. It’s medicines, plastics to chemicals; they been all over there. This is raising a big confidence on using like ratios ROE/ROA, though price movement may have gone completely ahead of these numbers (we need to check with price behaviour at some point of time). Second Porter five force remain formidable tool to evaluate.
  2. Creative accounting practices has a lesser chance as tangibles are backed by internal controls like reconciliation and physical verifications, routine audits (no guarantee though).
  3. The role of sales and marketing remain formidable, you can’t channelise the sales easily through multi sided platforms. Let’s check that next.
  4. Chances of having product profitability accounting is high, this would in turn help in retiring products which are not working. This can be checked.
  5. A lot of companies have been able to sell cutting across customer segments (bot not unrelated customer segments e.g. speciality chemicals and auto ancillaries) while differentiating needs. This may indicate a mix of standard manufacturing process & a differentiated pricing with value add. This mean multiple things a. with standard manufacturing process economies of scale can be achieved by high capacity utilisation b. maintenance capex should be minimal, I don’t foresee a lot of technical changes in assets. c. industry expertise built as prototype which can be replicated easily with expansion d. if customer preference change, it would be interesting to know how these people will change the process e. relatively easier entry barrier with off the shelve technology.
  6. Consumption story has played a big part right from building to body, chair to car. It will continue to fuel demand with burgeoning population, rural urban demographic and all that other macro stories.

There can be many more inferences, please feel free to hole them out. As I progress further, let me try to intertwine all of this for better understanding.


Working file attached.

Products. Services.xls (188 KB)


Brilliant stuff! Thanks for sharing

You are welcome, please do read this sometime.

There are enough twists and turns. Income tax raid, panic, fear of
opportunity loss, conviction etc.

I am making a case study out of this for presentation.

A must read!


Dear @The_Confused_Consult, Would you mind updating this thread on changes you noticed in the past 15 months+. I stumbled upon your posts and found this thread is real jewel, but not updated after September 2016. Thank you for the knowledge sharing.


You are right, I did not update afterwards. Two reasons:

  1. Few of us were working together, we got aligned to something else we felt important.

  2. After sometime we realise updation to same thread will lose it’s sanctity. As performance numbers are date driven, using an old base will not align with current market environment.

In the month of February/March you would see some action. We are planning to have another project, we have named it already. ‘Jewels Recoated- Manmohan to Modi’ :slight_smile:

This time we will make it more focused with close ended unlike grandiose ambitions last time which couldn’t be full filled.

I am glad you find the project useful.

Best wishes


Thank you.
However, now I am “The_confused_Learner” :wink: I thought Jewels are precious stones and they don’t change easily whether Manmohan or Modi at helm and/or just in 4 years…or coatings can be changed… Now I am trying to look underneath coatings and want experts like you to help us to scratch it and tell ‘real’ jewels :smiley: Those are the ones the wise men will buy, by selling not so precious jewels which can perish on the way! They survived and improved the shine on the way and will continue to improve it and expected to continue to do so for long, so that anyone who possess it would be blessed.

Yes, I am looking forward to hear from you on jewels which will not change colours very easily…


Thanks for taking time out and giving valuable feedback. I will attempt to consider in coming project.

Best regards

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