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20150205_T&I India Event Final

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20150205_T&I India Event Final

  1. 1. Private and Confidential – Not for Circulation 11Private and Confidential Private and Confidential Not for Circulation Private Equity and Public Markets My Key Learnings Over The Last Two Decades February 05, 2015 T&I India
  2. 2. Private and Confidential – Not for Circulation 2 Great Business + Great Management + Reasonable Valuations = Solid Value Creation  Some experience from Private deals:  Acquired controlling stake in Landmark Partners and Northgate Capital  Both of these companies have unique assets, exceptional management teams, hard-to-replicate relationships and very powerful network effects  Since both businesses had locked revenues at the time of investment there was low downside risk  Profits generated from both these businesses have more than doubled in last 3 years  Value of acquired stake in both firms has significantly increased
  3. 3. Private and Confidential – Not for Circulation 3 Great Business + Great Management + Reasonable Valuations = Solid Value Creation “The investor rides along in a sidecar pulled by a powerful motorcycle. The more the investor is distinctively positioned to have confidence in the driver’s integrity and his motorcycle’s capabilities, the more attractive the investment.” - Richard Zeckhauser  “It doesn’t matter if an investment is public or private, fractional or full ownership, or in debt, preferred shares, or common equity” – Warren Buffett; …… the same investment principles apply  Most investors tend to be passive and separate from the management..hence most investments are akin to sidecar investments
  4. 4. Private and Confidential – Not for Circulation 4 The Market Often Misunderstands A Great Manager  Relaxo Footwear Limited  Promoter family company owned the Relaxo brand - key source of its moat  “There is not just one cockroach in the kitchen” – Warren Buffett… if the fellow was a crook we would have found other clues  Subsequently, promoters even transferred the brand to the company for ~ USD 15,000  Symphony Limited  Similarly in Symphony pre 2005 promoters were focused on multiple products and only one market  Important lessons learnt from past – “One Product - Many Markets”  Recently, covered by The Economist; much after we invested  Thomas Cook India Limited  Thomas Cook India has an excellent brand but didn’t have a great expereince with acquisitions prior to Fairfax  Faifax acquired Thomas Cook in May 2012 and that to us was a game changer
  5. 5. Private and Confidential – Not for Circulation 5 The Stock Market is a Semi-Psychotic Creature  In Private Equity you are dealing with relatively smarter promoters who don’t offer you bargains every now and then when someone sneezes  “Volatility is the friend of the buyer of value” – Warren Buffett  Risk is not the same as volatility; risk results from overpaying or overestimating a company’s prospects. Prices fluctuate more than value; price volatility can drive opportunity
  6. 6. Private and Confidential – Not for Circulation 6 Management Equation  Management Evaluation hinges around identifying learning machines.  Look for smart management teams who try and reduce errors and cost of errors by managing risks  Look for managers who are willing to learn and evolve through their own mistakes and through vicarious experience.  “You don’t have to pee on an electric fence to learn not to do it”  It is important to learn and widen circle of competence and innovate.  “If you only do things where you know the answer in advance, your company goes away” - Jeff Bezos
  7. 7. Private and Confidential – Not for Circulation 77Private and Confidential Private and Confidential Not for Circulation THANKS

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