"You can define a free person precisely as someone whose fate is not centrally or directly dependent on peer assessment." - @nntaleb

Five types of Businesses in the IT Industry!

Full post 🔗:https://t.co/N4e3a5KQao

It's endlessly fascinating how economic datapoints get interpreted.

When I was in charge of a P&L, the guy who ran Finance for us and I had what we called the 'shelf plan.'

There were maybe 3-4 of us who knew it existed.

What's a shelf plan?
1/

Well it's a plan you keep on the shelf (full FP&A model), that you hope you never have to use.

It reduces forward hires, cuts back various line items (typically ad spend, travel, that sort of thing).

Oh, it also has a big fat RIF in there.

That's why we don't talk about it.
2/

Why have a plan instead of winging it?

Because this is where companies (particularly young companies) sometimes err. They do little cuts - 2-3% here and there, preserving as much headcount as they can, that sort of thing.

This is incorrect.
3/

If you're at the point where you need to make material changes to your forward P&L, at 2-3% RIF will be followed by another.

And another.

And this series of progressive cuts will cripple morale, incrementally reducing the productivity of the staff you retain to survive.
4/

And so the shelf plan cuts deep.

Your goal is to go from being a peacetime machine to a wartime machine, so you gotta lean out quick. Can't do that without a plan, hence the need to have one.

~30% cut is what you need.

And then you need to tell everyone left they're safe.
5/

I always knew that aiming low was the best path for me, and so I merely sought to learn from my betters a few practical mental tricks that would help me avoid some of the worst miscognitions common in my age cohort.

Guy in 1989: "Wow, those Nifty Fifty investors were so stupid."
Same guy in 1999: "Yes, a 250 P/E makes sense for Cisco."

Guy in 2011: "Wow, those tech bubble investors were so stupid."
Same guy in 2021: "Yes, 25x sales and a 450 P/E makes sense for a car company."

@SunDudez @Iamsamirarora Even if one had invested when Infosys valuations' were at its peak, one would have still made index-par returns in hindsight

Some points for Canfin Homes bulls to ponder upon:

1. It has been on the block twice in the last 5 years. Why didn't anyone buy?

2. If it gets sold, would the liabilities side stability remain?

3. Is it granular enough or only limited to Tier 2 cities unlike Aavas which is in

Tier 3 and Tier 4 and is able to print abnormal ROAs.

4. NIMs are okay-ish for a HFC. ROA is good at 2%+

5. ROE is 19%, because it is leveraged almost 9x.

My view remains- it isn't granular enough to escape competition from Banks like SBI and ICICI etc. Thus we see a lower

growth rate. Why not HDFC ltd over this in that scenario if you are settling for a lower growth rate and also taking the risk of competition and company being sold. Its likely to be a compounder and not a fast grower. Adjust expectations accordingly.

Disc: not invested in both^

@ValueEducator Neogen, Gujarat Fluorochem, Tatva (Electrolytes less than 1% currently though, used in Sdas).
Best way is:- Sona comstar, Valuations leave a lot to be desired though. What a business nonetheless 👌👌👌

+Polyplex working on films that will be used in EV. Seemingly less competitive intensity here according to the management

Compelling copy combined with good storytelling is an unfair advantage.

An unfair advantage that the Wall Street Journal used to drive $2 Billion in revenue over 28 years using the same sales letter.

Here are 7 copywriting tips to help you write sticky stories 🧵

1. Use Familiar Words

Every audience has words familiar to their interests.

Injecting these words into your stories connects the familiarity gap.

And unfamiliar words create seclusion.

Gary Provost with a great example:

2. Inject Real Stories

Your story is your social proof.

The more a consumer can see that you were once in their shoes, the more that consumer will see you as the guide they’ve been looking for.

Customers want to know you’ve walked a mile in their shoes.

3. Your Brand Isn’t The Hero

The customer is always the hero.

And their goal is the destination.

Your brand provides the map.

The visualization from start to destination is how you sell them.

4. Use Emotional Tones

Emotions are your best friend.

They’re what get people to take action.

And the best writers use emotional tones to transfer information through characters, plots, and conclusions.

“Targeting” doesn't mean what it used to in the marketing world - the days of targeting different ages etc are GONE - algorithms do that now.

“Targeting” means crafting messages that resonate with your customer.

#PolicybazaarIPO Long thread: There is monetary printing by RBI, there is lending by banks & finally there is the Indian IPO. “Foreign owned” company with ~1 Bn investment is selling “Indian” unicorn to “savvy” Indians for $ 6.2 Bn. Want to know how this printing works? Let’s go-

The basics: Rs 6017 Cr being raised by new shares (Rs 3750) & re-selling (Rs 2267). Face value Rs 2 offered at Rs ~1000 per share is one of a kind. Who decides the price? Examine the valuation ladder below.
With ~$ 150 Mn invested till 2017, we see $ 525 Mn rushes in after 2018

So, a company valued $1 Bn in 2018 & $ 1.5 Bn in 2019 by key investors like Tencent, suddenly “needs money” in March 2021. Falcon Edge “invests” all of $ 75 Mn in March at valuation of $ 2.65 Bn.
Enter IPO bankers a couple of months later & they value the company at $ 6.2 Bn

Why does PolicyBazaar need $ 75 Mn just 6 months before IPO & give away 2.5 times in returns? And it doesn’t even use that money as the B/S reflects appx Rs 1000 Cr in cash lying around.
What kind of a favor is that? Why do they need US investment bank for this just before IPO?

Notice 50% rise in shareholding of promotors here & a 1: 500 bonus share issue. After all, how do you print money & still keep share price at “reasonable” Rs 1000?
Without bonus issue in June 2021, each share would have costed Rs 50,000. Heard of circular valuation?

Has anyone compared AB Fashion in lieu with Nykaa valuations?

Nykaa FY21 TOTAL sales at around 2500 cr: expected m-cap over 50,000 cr

Aditya Birla Fashion FY21 online e-commerce sales 900 cr (total sales 5600 cr) – has done 8700 cr pre-covid; m-cap is 25,000 cr

#justcurious

What caused all the supply chain bottlenecks? Modern finance with its obsession with "Return on Equity."

To show great ROE almost every CEO stripped their company of all but the bare minimum of assets. Just in time everything. No excess capacity. No strategic reserves. No cash on the balance sheet. Minimal R&D.

We stripped the shock absorbers out of the economy in pursuit of better short term metrics.

Big businesses are supposed to be more stable and resilient than small ones. And economy built around giant corporations like America's should be more resilient to shock. However the obsession with ROE means that no company was prepared for the inevitable hundred year storms.

Now as we're facing a hundred year storm of demand, our infrastructure simply can't keep up.

@this_the_burner @typesfast Yes. Worked for a company who leased floor space to a supplier so they could put in a cage to hold inventory. When the goods passed through the door in the cage to the assembly line, the supplier was paid.

@dollarsanddata In early 2000, a company where I used to work wanted to go public. The investment bankers looked at the numbers and said, YOU ARE PROFITABLE?! ARE YOU CRAZY? YOU CANNOT IPO UNLESS YOU ARE LOSING MONEY.

I’m paraphrasing, but not by much.

The company dutifully piled on huge expenses so it could lose money.

Then the IPO window closed when Nasdaq imploded.

The company was never the same again.

Among all the risks, regulatory risk hits with no warning
https://t.co/oOb1FMg35e

This is not new and will occur again. Gets amplified if the owner and regulator are the same

If you do invest, do it with proper risk management

From the same post

The secret to understand competitive dynamics in gold finance is to focus on the player which has approvals from Rbi to set up more than 2000 branches and not the ones which are facing difficulties in expanding. You know who the real challenger to Muthoot will be

@ValueEducator Anup Engineering.. those who are wondering

Diff between Bajaj Finance and HDFC bank customer experience

My friend who got loan from both says BAF charged him 4% higher interest rate than HDFC bank. But process of disbursement was so fast and simple that he got amount in his account in 2 days. While HDFC bank took 2 weeks

It’s all about cost saving against convenience/urgency. I think Bajaj Finance has a very good value proposition.