Is Infosys the next HLL

As a student of business history, as someone who took a shot at being a strategist and a novice investor I find this line of thought interesting…. Bear with me while I try to articulate what I am thinking….

HLL (now HUL) was (is?) a dream company to many bright minds in India, it launched dreams – the beauty secret of film stars, one which made dark south Indian men chase their fairness dreams, brightness to our clothes – gave us Rin Brightness, Lalithaji, Liril girl and set a generation of women to dream… A generation of marketers were born, a slew of products unleashed – one senior executive once told me – in the early 80’s there were 4 good schools which churned out good managers – IIM – A, B, C and HLL.. It has given Indian Industry many CEO’s, many more middle managers who will lead Indian Industry in the years to come…. To borrow a line, it went where no marketer went, deep into the Indian hinterland... back in 1980 when fads like “Bottom of Pyramid” were still not around; they unleashed campaigns in rural India, with bullock carts peddling messages of hygiene, cleanliness and Lifebuoy…

It was a darling of the investors, gave fantastic returns, it was one of those blue chip stocks people held… I cant find any number on the holding, but it gave returns for a long time and was a staple of most portfolios…

Infosys, the company born out of the Indian middle class dream, the success story of Indian economic liberalization, the company which made ‘global delivery model’ , ‘flat world’ well recognized words, while it did not spawn the IT industry it’s the most recognized child of the industry. It made millionaires out of middle class families and gave a wealth creation a chance to gain respectability in our hypocritical society..

It too was a darling of the investors, every quarter results of Infy sets the market tone, it was the stock which is keenly tracked by the FIIs , opened the NASDAQ with a bell from mysore… its languishing now, for a year, IT has not driven markets, returns have not kept track… will it follow HLLs footsteps?

Mr. Market ( to borrow Ben Graham’s reference to the stock market) is fickle, runs behind momentum, flavours of the season ( infrastructure, real estate now ) are what excites it, but these two companies need to succeed… they are refreshing oasis of professional management established, led, managed companies in family driven companies in India. I have nothing against family managed firms, I work with them, but the rise, flourish and continued existence of professional companies is what will keep the dream of middle class professionals like me…

The day I stopped a tram in its track....

And before you guys start thinking I did something our Indian film heroes regularly do with their little finger on the left leg with ease and say so what, let me explain.....

I went on a student exchange to Belgium. I was with Solvay Business School, University of Brussels. I loved my stay there ( and the Belgians, I think they were wonderful!). My hostel was about a km from the university campus and was an awesome place. More of a living community, with people protesting against war, sun bathing( when the damn thing came out), coffee with music and music performances... sigh those were awesome days. Anyways, back from the detour.

The Belgians are probably the most courteous people I met on my trip to Europe ( I saw, trekked, traveled to some 7 countries!!). On the main signals, there are anyways pedestrian requests, where you request for the traffic to stop, which then turns red to let you pass. On most other roads, all you need to do was to step near the Zebra crossing and the vehicles would stop to let you go. You acknowledge their courtesy and off you go..... it took me a while to get used to cars stopping completely to let me pass.... I would usually be dumbstruck as to why the heck are they stopping :) problem of upbringing...

And one fine day, I was listening to Bob Marley on the discman, having hot waffles and out I step on the street from the pavement and realise a huge gush of air around me ..... and then I realise, the tram which was on the street stopped to let me go.... jackass that I was :) I apologised to the driver, acknowledged and moved. And surprise he didn't swear at me nor did the others who were waiting to cross....

Now lets play that scene in Indian frames... Deepak steps on the street, driver says "B#@$%^, iski to aaj main le loonga" and pushes the throttle, wham, passengers say " sahi hua saale ki dimaag thikaane aagaye" and then me, with a few handicaps (not the golf types mind you) would be seeking treatment and sympathy!!!


I think about this and try to attribute why we Indians will not let people cross even when the signal is red.... vehicles do a 'creeping acquisition' of the Zebra crossing, swear, spit,scream and honk... I tell myself maybe we are an aggressive race, maybe we are trying to catch up on lost time under the sun, maybe people have urgent work, maybe population trouble leading to too much competition leading to high levels of aggro behaviour but its plain lack of culture I decide, lack of courtesy and respecting someone on the road.... I might be guilty of the same conduct, but trying to change...

All about managing money...

Am down with a bad cold and fever.... so some random tidbits/ observations :

1. You make money by taking concentrated bets - if you are convinced about a stock and can lose all the money you are investing in it, then bet a substantial portion of the portfolio in it. Remember - a 100% return on a 10% part of your portfolio is not much if the others are averaging 25% - A study says, most people in the Forbes richest 400 made it there because of the one big idea that worked for them. So spend sometime, research and come up with a few bets u think will work
2. Once money reaches a critical mass - passive income keeps you going if you harness the power of compounding. So while the attraction of being frugal might not seem great, frugality when you still can ( read : no wife, no kids, no huge medical bills, lifestyle diseases) pays well when you want to party later - so make that large sum of money and build capital
   
3. Use Leverage - Debt is a bad thing. I plays on your mind and creates chaos in times when you want to splurge. But then when investing using debt prudently will allow you to add that zing to your effort to build a passive income stream. Set a level , say you will use 20% of your current income to service debt, that should allow you to get 10X of that money to invest, club it with your capital, which is usually 25% margin and voila you have an asset of 12.5X. Remember - don't use this for stock market investing or debt or commodity. Use this for real assets where the return is higher than the cost of debt
   
4. Protect your capital through diversification - Before you think I am joker who has lost it due to fever, ( Pt 1 says - take concentrated bets, and here I say otherwise) - The same study also says that on an average over 3 centuries ( or was it some lower number of years?) only 20% of people remained in the next Forbes 400 richest list. The ones who did diversified. This is simple, once you have capital built, diversify and protect it from cyclicality.
   
5. Don't self medicate - Since you will not operate on your loved one and will seek a doctor, why do you think you can invest on your own? ( Yeah we know you made 100% on the stock market last week, my pet fish can do better in this market bozo!!) - so set aside a part of your portfolio to be managed by the ( so called !!) experts - Mutual fund ( for aam junta like you and me) , Portfolio managers ( for creatures of higher living) and maybe own fund manager ( Read : Azim Premji , Narayan Murthy , Anil ambani etc who can setup a private equity fund from their dividends)
   
6. Don't forget leakages - Shoddy government working, death, taxation and transaction charges are the only certainties in life - cant avoid the first two, don't let the latter two kill the return % ( and you thought love was also a certainty?)
7. Don't forget to have fun - All the bloody money in the world is to let you have the choice to say "No I don't want to do that crap, maybe something else" - so work towards freedom of choice.
   

Vodafone - a irresponsible corporate citizen

If you move around in Bangalore these days, you will notice the advertising blitzkrieg that has been unleashed. I have no problem with advertising, but when some enthusiastic Area sales manager/ marketing manager thinks he has to be innovative and goes overboard I get pained. So what is the issue?

To create what in marketing parlance " a new marketing asset" vodafone has splashed the trees in Bangalore with metal ad boards which have a metal angle which needs to be nailed to the tree and the ad juts out. While vodafone did nothing to help these trees grow or maintain them, it makes full use of this. This damages the tree ( to whatever little extent - I don't care) , and encourages other businesses to do the same. In no time I am sure, the trees in Bangalore will have this all over and we can bid goodbye to the trees. When you pay for getting your message across, its advertising, when someone else writes to give you exposure its publicity, but when you make use of public property , its Vandalism - and Vodafone is no less than our irresponsible political parties....

Get a mentor now....

One of the things one should surely do is get a mentor. Remember, you need not have one mentor, but multiple mentor. The critical thing why you need a mentor is to show you the 'bigger picture'. Sometimes you get so engrossed in what you are doing, you lose focus of what it is that you set out in the first place for. So where all should you get yourself a mentor -

1. Life mentor - A person who will straddle your personal life and career and helps you articulate what you see yourself to be when you are maybe 45 and have hopefully higher callings in life and not just that big house, corner office, faster car, smaller phone and snazzier gadget

2. Career mentor - One who will help you move towards a long term goal in your career. The assumption here is that your current job is a step towards it and not the one which will lead you there. This applies more to the MBA friends I have who are chasing larger goals and are using the current job to get a skill set - E.g. - I come from a family with no business background, so I might join a startup to understand how they work if I want to startup on my own. But my mentor needs to be one who has done similar things and has started up

3. Job mentor - This person serves the need of the hour and helps you acquire the skills in the current job and helps you move through the organizational clutter. This person need not necessarily be from the same company, but from the same field

So where do you look for a mentor? - in the networks that you have built over a period of time. If you are the type who does not network, ask friends to refer you. Don't expect a high level of involvement from the mentor straight away. Most probably the person will evaluate you before he decides to spend his time where all you offer in return is the feeling of reminding him/her of what he/she was in a younger time.

Remember to do your home work when you approach a mentor, a mentor is not for cribbing but to act as a sounding board. Define your objectives, look at the problem, generate options, do an analysis of the pros and cons and then approach your mentor for advice. Trust me this is important in your own development. Acknowledge the impact mentors have had on you when you succeed, that's the best you can give them.

Make sure your mentor understands your life situation, goals and ambitions ( this is for the first class of mentor i specified) and job, career respectively. Don't hide what you think are the mistake you made, your weakness and strengths. After all they need to help you climb mountains. Respect their time, the effort they are putting in. You maybe a hotshot and the next Bill Gates but this person is fulfilling a purpose.

Some mentor/ mentee relationships quickly move to a co-learning level. Offer what your best, that is what will change the perspective you have about life/ career/ job from what your peers will have.

I have had some fantastic mentors, I can just pick the phone, tell them the mess I am in and they are there to offer me support. I can share my achievements and see the happiness and be thrilled. I have very little to offer to some of them, but hope some day I can pass this along...