Finatter

  The sign of a raging bull market was evident with the oversubscription of Reliance power IPO by 69 times. The touted biggest Indian IPO not only made the promoter surpass  Mukesh Ambani but made Anil Ambani the richest Indian. Apparently, little did the investors know that its market cap will get eroded by 94% since IPO  in 2018. This dramatic episode unfolded for a reason. PRELUDE: The Reliance group was valued at 15 billion when Shri Dhirubhai Ambani passed away in 2002, This was followed by the split of the giant conglomerate with RIL led by Mukesh Ambani and sunrise industries like financial services, construction, entertainment, power, health care, aviation, and defense industries being led by Ani Ambani, but what went wrong with each company floated by him which cumulatively lost 42 billion in 12 years? Reliance infrastructure Infrastructure is greatly influenced by the government's stratagem, governments do impact real estate companies as its policy on infrastru...

  Pandemic has changed the world in an unprecedented way. It has affected, disrupted, and changed our lives once for all. If the world as a whole gets shattered is the real estate spared?? Old Model of Real Estate : In earlier days real estate followed this five-staged value creation model from  1 Change in original usage of land from agriculture to residential or commercial 2 Physical structure put up from residential or commercial drives other new venture driving up the price of the land  3 Improvement in commercial value as the locality populates more due to facilities made available results in increasing the demand. 4 Periodic booms and busts  5 Impact of the economic development and Inflation When the utility of the land changes it results in a price rise so is when the commercial value increases or demand due to an increase in population.  The price rise of real estate is also catalyzed by the easy availability of credit due to repo rate cuts or economic d...

  The Indian banking system has seen a tectonic shift with the introduction of digital payments. The RBI has stated that there has been a phenomenal increase in digital payments with a CAGR of 19% in value and 66% in volume for digital payments in India between 2014-2019, despite this exceptional growth 70-80% of transactions in India are still in cash this only shows the scope of further growth in this sector. Let us discuss how digital payments can generate profits despite their thin margins, direct government control of regulators on pricing with customers who prefer no cost for the services rendered with minimum customer loyalty. Digital payment Apps can create revenues from the following verticals 1 Bank: The watertight compartment between banking roles and payment apps has been blurred. Payment apps generate income by partnering with banks and cross-sell bank products to their existing customers like insurance, stock brokerage, etc on a revenue-sharing basis. 2 Wallets: As pe...

  We believe that we are rational decision-makers but little do we realize that it is also influenced by our biases. The human brain quickly categorizes new information with the experiences of the past, Once grouped it responds to the same ways it does with other things in the category-leading to bias. finance unlike physical sciences it is affected by one's behavior and gives different results to different people according to their temperament be it wealth creation or financial debacles. To overcome financial debacles we should see things as they are without our biased lens. To let go of our biases we should constantly challenge our beliefs by engaging in debates and discussions who have a contrarian view( just to hear the other side) but confirm with the facts available. Here is the list of biases researchers have warned that we may fall for. Anchoring Bias: Over-reliant on the first piece of information. Availability Bias: Overestimate the importance of the information available...

  The margin of safety (MOS) has been extrapolated from bonds to equity it can be defined as the " Difference between the price paid for an equity share and the least price available in the range of intrinsic value of the share ". The best MOS is available when there is blood on the street and good quality are sold in fear and panic  It is also noteworthy to mention that as inflation rise MOS will continue to rise. For MOS company should be large-cap and have a track record of more than 10 years, MOS may not help to not lose money but will help minimize risk.  Loses usually occur when stocks are bought at high prices when markets are optimistic at the turn of economic tide these companies may lose significant market share. So, money can be lost even in quality companies when bought at a high price. PS: This is an excerpt from  the book  " Ordinary Stocks Extra Ordinary Profits" by Anand Srinivasan

  For all gold enthusiasts here is the answer  Gold has a special place in Indian households and is blindly trusted by Indians and let's delve deeper into how gold has earned such a special place. let's weigh-in. Gold as investmen t vs currency vs insurance vs ornaments  Let's desegregate into different clubs which gold belongs to  Investment : Anything which puts money into your pocket can be called an investment just because you hoard gold nobody gives you a penny unlike stocks or bank deposits which earn dividends and interest for just hoarding it, so gold will only have capital appreciation without yearly yield making a bad investment. On the flip side, it has an added benefit of easy transfer of wealth unlike any other investment known to man with less or no paperwork. Currency : Gold is a perfect currency as its supply is constant, it is either present under the earth or above the earth and with no scope for manipulation.   Gold does not dissipate into th...

 Reverse mortgage  The middle class biggest asset will be their house (assuming it to be the primary house, not the second one) but the sad truth is they cant sell it nor can they generate income from it (by renting as they live there)   US had encountered this problem where retirees without money but  with house mortgage, their house(it's reverse of EMI bank will pay you money till you are alive and foreclose the property and sell it after you ) though not popular in India it may happen anytime soon  For processing, reverse mortgage banks take the help of an insurance company so banks and insurance companies take a cut before giving you 

 Cashflow over Networth  Most (including me) fall into the trap of overhyping Networth At least when we read headlines  Mukesh Ambani made 79 billion during this pandemic, Jeff Bezos made 72 billion  Rich are getting richer etc  What people miss here is their assets are getting revalued and claim a higher price tag (Due to a steep rise in their listed company)but does that change the cash generated from their companies is a real question to ask Similar is the case when the middle-class boast that their property prices(Networth)have soared but does that mean you get more rent(cashflow)? The sad reality is rental income is less than the saving bank rate in fact in Bangalore it's less than 2%. Always cash flow gives the real picture, Networth will rise and fall according to a market frenzy. A successful and prosperous company generates tons of cash allowing them not only to invest in other companies but might return shareholders money in buyback the equity (Usually...

Added sugars in food and beverages offer no nutritional values other than empty calories but are excessively consumed because our brain gets to lighten up due to a surge in dopamine ignoring the long-term chronic illness caused by it. Let me introduce you to yet another class of alleged silent killers called inflation which may result in a pay hike every year releasing the dopamine but may destroy your wealth in a relatively long period of time when not invested in assets that grow more than inflation. Imagine you are cruising upstream in a ship, wading against the stream. It is natural that for you to move forward your speed has to be more than the opposing stream. so, the inherently present stream has to be opposed relentlessly for you to move forward. Inflation is similar to the opposing stream. It has to be defied relentlessly for you to build wealth not letting inflation corroding your money. M Pattabiraman of Freefincal has this anecdotal explanation that he could buy a cup of te...

It is commonly believed that money alone is enough to create more money although it is necessary but not sufficient this can be inferred from the history post world war 2 when Germany broke into two countries west Germany took to capitalism and the east was influenced by Russia so it killed all its businessmen bankers and economists although both west and east were of same economic conditions after the fall of Berlin wall it's clear that west was much much prosperous than east because it nurtured talent who was in the know of money so knowledge is much much superior to money itself let's dwell deeper into what secrets of money do the rich know that makes them richer. 1 Delayed gratification  The Rich take them less seriously so delay their wants and thereby create assets by foregoing their impulsive temptations the more they delay their wants more money is at their disposal so they create more assets which in turn creates more money  2 Compounding  Rich knows the importan...