Markets with Bertie: On the banks of Sabarmati, risk-taking and private credit

The banks of Sabarmati hold a special place in Bertie’s heart. Whatever little of fundamentals of corporate finance he still recollects, was taught to him there. Apart from the gastronomic delights, the place is also famous for being the equity capital of the country with financial risk-taking in its DNA. Bertie was amused but not surprised when the rare vacant billboard at a prominent chaar-rasta had this quote by Swami Vivekananda “Take risks in your life. If you win, you can lead. If you lose, you can guide.”

That reminded Bertie of how risk-taking ability leading to an embrace of equity culture was the common feature between the two hottest markets in the world now - the US and India. He is also painfully aware of how hard it is to invest in markets that have a stock exchange but no equity culture worth speaking of. More than the cost of capital, it is the attitude to capital that decides the market multiple and more than your stock-picking acumen, when and where you decide to exercise it determines the extent of your investing success. This is what Buffett calls the ‘ovarian lottery’ and Bertie wonders if Indian equity investors have won it.

Dhumado-vaado

While on Sabarmati banks, Bertie met up with his old market friends. They aren’t the steady SIP investors but hard-core nano cap equity type. As the evening progressed, ideas flew thick and fast, liberally sprinkled with choicest Gujarati terms of endearment. The old fox of the group was bulled up on power - not the renewable variety but the old-fashioned thermal one. “Dhumado-waado” he laughed uproariously.

Bertie felt a strong whiff of nostalgia as names from his past started tumbling out. The fox mentioned a company of yore that did the menial fabrication and erection job for the dhumado-waados, which Bertie had presumed was long dead. “Haji jivti che?” Bertie asked wanting to flaunt his command over the language of risk-taking. “300 crore na market cap, 1000 crore na QIP “the fox showed him a clip from Bertie’s favourite newspaper. “Party like it’s 2006 Bertie” he said in his Oxford-Amdavad accent as he drained his glass of malt. Bertie loved the line and has decided to use it in his next investor newsletter.

Performing credit

Back in the bay, Bertie went out for lunch with his private banker Natasha. He knows that there ain’t no such thing as a free lunch and was waiting for Natasha to play her cards. After they had ordered the Tiramisus, she bought up the subject. “ Have you looked at private credit Bert?” she said in her sales voice. Now Bertie likes all things private, except credit. If one is getting credit, it rather be public, no? Bertie rolled up his eyes.

“But there are some great opportunities there” Natasha persisted. Bertie was of the opinion that if one were to take corporate risk, he would rather do it through equity. Fixed income investment was meant to be sovereign and hence boring but risk-free. He told Natasha as much. “But it’s performing credit, Bert” she countered “14% pucca!”. Bertie’s knowledge of fixed income may be limited but his understanding of the English language is good enough to tell him that when something has to specially pre-fixed with an adjective indicating that it does what it is supposed to do in the first place, astute investors must stay away. Natasha was crestfallen but being a gent, it was Bertie who paid the bill.

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