Our country’s growth trajectory is driven by small and medium scale businesses and who better than Arvind Sir could have helped us realise the same, as Niveshay Investment is one of Bharat’s top investment advisories in the small-mid cap category. And hence, the third session of the AVM Talk Series was conducted by Arvind Sir, discussing about how entrepreneurs of Bharat under this category have maximised their market capitalisation using their amazing hands-on skills and unique insight into doing business to outperform their competitors in the prevailing geo-political scenario. The AVM Auditorium was filled with students and teachers on 2nd December, Saturday evening to learn from yet another talk on ‘Uncovering Opportunities within India”.
The session started with the discussion on how foreign brands are sourcing goods from our country which results in increasing our exports. So, should businesses engaged in exports increase their capital investment to meet the rising demand for the export production? The real meaning of small cap was then revealed when Sir asked the question, “Why does the stock price of a company not go up even if profit has increased?” He then masterfully explained that the capital employed in the business to its revenue generated ratio has not changed, and as a result, there is no reflection on the share price even if a business seemed to be doing everything right. Sir explained how efficient use of capital makes economic value and stirred the discussion on generating more revenues using less cost of capital. Using more capital to generate more profit may lead to a reduction in share price. Sir also explained how cash flow matters more than net worth of the business. Actual assets of the business should be looked at where the cash flow has been invested because sometimes the amount of capital is allocated for the assets but there is no actual value due to the decisions that are left to be taken by the management. On the other hand, Sir shared real stories of such businesses that are thriving and fuelling their own growth by generating more revenues with the same capital employed.
During the session, Sir also shared about the SMiLE (Small in size, Medium in experience, Large in desire, and Extra-large in market potential) investing strategy of Dr Vijay Kedia.
Some of the take away points from this session:
- Think about what this company has done that other companies have not.
- Investing is about businesses and not about money.
- Understand the business well so that you can behave well when prices are against you.
- Focus more on qualitative analysis and use quantitative analysis to verify it.
- Conviction based on your own research gives you courage which in turn helps you make right decisions in times of crisis.
- Have passion for your work, focus more on learning than just what you have figured out.
- Make adjustments after every experience.
- Good decision making can result in higher joy of success, and lesser pain of failure.
The session was a perfect tribute to one of the greatest investors of all time, Charles Munger. Arvind Sir’s talk reflected how his lessons are not only beneficial to those who are aspiring to make careers in the field of investment, but also for learning life lessons such as sincerity, simplicity, constantly learning, become little wiser every day and strive for a win-win solution.
Written by: Jesal Madaliya, Bhagya Patel, Jay Patel (Grade 11)