Book review: The Unusual Billionaires by Saurabh Mukherjea

Saurabh Mukherjea’s deep dive into the seven most successful Indian companies


Saurabh Mukherjea is one of our most erudite young writers in the field of investment banking
Saurabh Mukherjea is one of our most erudite young writers in the field of investment banking

Not all the billionaires in this book are unusual but that doesn’t deflect from the merits of Saurabh Mukherjea’s deep dive into the strategic merits of seven of India’s most consistent corporate performers in the last 25 years. Using Robert Kirby’s “Coffee Can Portfolio” model (which posits that to make serious money, an investor has to let a sensibly constructed portfolio of stocks lie untouched for a long period of time), Mukherjea, who is the chief executive officer (CEO) of institutional equities for brokerage firm Ambit Capital, first examined the universe of 5,000 listed stocks and zeroed in on those with a market cap of at least Rs.100 crore. This surprisingly low barrier yielded a list of just 1,500 companies, which points to the lack of choice for Indian investors.

Next, he used the filter of revenue growth of at least 10% and return on capital employed of 15% every year for non-financial services companies. For financial services firms—two of which, Axis Bank and HDFC Bank, made the cut—the filter was loan book growth of 15% and return on equity (RoE) of 15% every year for 10 years. Starting with the period 1991-2000, when only five firms—NIIT, Cipla, Hero MotoCorp, Swaraj Engines and HDFC—met these criteria, Mukherjea repeated the exercise for the next block of 10 years. Eventually he came up with a list of eight companies, which he calls the primus inter pares of India Inc.—Asian Paints, Astral Poly, Berger Paints, ITC, Marico, Page Industries, HDFC Bank and Axis Bank. In the final analysis, he dropped ITC.

Axis Bank and HDFC Bank are among the eight companies that Mukherjea calls the primus inter pares of India Inc. in his book
Axis Bank and HDFC Bank are among the eight companies that Mukherjea calls the primus inter pares of India Inc. in his book

Besides the presence of two paint companies, what’s most striking here is that there are no firms from the showpiece sector of the last two decades—information technology. Indeed, the absence of high-fliers like Infosys and Tata Consultancy Services is a credit to Mukherjea’s ability to look beyond the obvious and back it with extensive number-crunching.

He and his colleagues spent two years researching on the companies, in the process talking not only to members of the current management teams but also the CEOs who reigned during the 1970s, 1980s and 1990s, the customers, suppliers, and even competitors. The effort shows.

Mukherjea is one of our most erudite young writers in the field of investment banking. His appearances on television and in the columns he writes reveal a sharp, insightful mind and the ability to look beyond the daily swings of the markets. His first book, Gurus Of Chaos: Modern India’s Money Masters, looked at the investing philosophies of seven masters of the stock market.

Here, he turns his attention to the stocks they might have bought to make their vast fortunes. Using a structured format, he examines the reasons for their consistent performance over a 10-year period. In each chapter, there is a brief history of the company, which in many cases reveals some real gems. Marico Ltd, for instance, is named after Vallabhdas Vasanji, its founder Harsh Mariwala’s grandfather, who was called Mariwala because of his proficiency in trading pepper, which is known as mari in Gujarati.

Axis Bank and HDFC Bank are among the eight companies that Mukherjea calls the primus inter pares of India Inc. in his book.
Axis Bank and HDFC Bank are among the eight companies that Mukherjea calls the primus inter pares of India Inc. in his book.

The short history is followed by a look at the company’s secret sauce as well as how it has built on its competitive advantages across the four criteria of John Kay’s IBAS framework, encompassing innovation, brand and reputation, architecture and strategic assets. Mukherjea, who worked for two years at the consultancy firm London Economics, founded by Kay, a professor of economics at the London School of Economics, says building sustainable competitive advantages allows these companies to pull ahead of their competitors by adding more and more value. Each of the chapters closes with a close look at the company’s stock price performance vis-à-vis the Sensex.

The individual pieces are not nearly as important as the common strands that run through them. These are illuminating and include a razor-sharp focus on the core business as well as on the long term, the promoters leaving the business of running the company to hard-core professionals, the constant pursuit for excellence in the business and, finally, the judicious application of capital without indulging in the wild opportunism of the latest business crush.

The Unusual Billionaires: By Saurabh Mukherjea, Penguin Random House India, 445 pages, Rs499.
The Unusual Billionaires: By Saurabh Mukherjea, Penguin Random House India, 445 pages, Rs499.

Mukherjea’s book isn’t an easy read. His style is laboured and, despite a generous sprinkling of literary references, the book won’t make for an enjoyable afternoon diversion. Which is not to say there is nothing in here to interest the casual reader. There are some great anecdotes that also show how company executives come up with brilliant ideas thanks to a keen eye and smart applications. Asian Paints, for instance, saw an opportunity in the traditional practice of painting the horns of bulls during Pongal in Tamil Nadu and Pola in Maharashtra. In the main, however, it is a serious study of companies and serves up a useful framework to examine the long-term prospects of any firm.

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