Audience Asks

I want to create a diverse portfolio. How do I invest in multiple sectors and how many sectors can simultaneously invest in? Any limit to it?

Pick out 3-4 good multi-cap funds like Kotak focus, SBI focus, DSP flexi cap, Tata large and mid caps and it will give you good exposure. If you have time and know how to read balance sheets then you can go ahead with buying good companies. Having said that, start with a mutual fund investment portfolio and they will give you good exposure across sectors and market caps.

As a beginner how do I narrow down the good companies as there are many publicly listed companies in the stock market?

Out of 6000 listed companies, the actual company to look at is not more than 500 and they are further drilled down to 160-170 companies which are actually good. So instead of looking into the individual companies one of the easiest ways is to look at good portfolios of mutual funds or multi-caps or large-caps funds and work on the various parameters. Start with Nifty 50 and narrow it down in terms of earning number, longevity of business and economic growth.

Sir, as a newbie investor can you guide me regarding the small-caps, mid-caps, and bluechip companies? And also investment in which will be more profitable for me?

Mr. Mahajan quoted, “The more the risk, the more the return”, there is a variation in the market where a bluechip company will give 13-14% of return, a mid-cap company will give 16-17% return and a small-cap company will give 18-20% return. The profit is little higher for the small-caps but the risk associated is highest as compared to mid-caps and lowest in large-caps. It depends on time and therefore the best way is to invest in a multi-cap fund where you will get all these three categories and your job will be done.

In the goal identification step, it gets very challenging to look beyond the long term horizon, so one should categorise it into short, medium and long term. After identifying these goals you need to calculate the approximate values that you will be needing. Mr. Shenoy advised, “Fulfill the nearer and easier goals first, it’s easier to do that. But start early for the long term.” In all these comes the power of compounding, the 8th wonder, which will eventually help an investor to fulfill their long term goals. With the new products in the market coming each day, it makes our tasks more challenging to find the right financial product. “First and foremost, whenever you decide to invest, be clear in your mind whether you are looking at a wealth preservation objective or a wealth creation objective. There is no other third objective in my opinion.”

As far as selecting the right vehicle is concerned, always look for your own comfort level. Get a right time frame for your investments so that you do not regret the lost opportunities. Be patient and stay focused on real returns and never ever get swayed away by the luring market values. Instead be patient, as the journey of wealth creation needs persistence and determination. Last but not the least, drawing the analogy of a road trip throughout, the mentor underlined the relevance of periodic checks. Similarly, your investments and your portfolio needs to have a periodic review. Get this review done by a financial coach, or an advisor to get a third party perspective. Monitor and rebalance your portfolio and avoid over-information.

Thereafter, the mentor elucidated a typical marketing model framework. “I have always experienced that marketing is always considered as a cost centre. I think it is high time we consider marketing as a revenue centre, because your reason to exist is itself a cost. From day one, you are incurring a fixed cost. Therefore, marketing should be considered as a revenue investment.” He further talked about the different stages of marketing from the awareness stage where a brand introduces oneself to the prospective customer mainly registering their presence and offering a solution.

Engagement follows awareness wherein the prospect’s information has to be collected. But that appears difficult without selling a unique or emergency product. But again, to convert the prospect into a subscriber, social media outreach is the way. An advantage that social media automation offers is brand listening which is nothing but a means to know what prospects and customers think about.

Audience Asks

Newbie investors can invest in a loss making company. Don’t you think it is risky for them?

The newbie investors should be asking themselves what is their risk appetite. This is where I usually tell people, please do not take the gambler’s approach. Please do not do it with your own money unless and until you know that you can take that risk for many people. Yes, startups are very risky. As I said, out of ten, they know five, six, seven of them will miserably fail but one has to take that risk. Higher the risk, higher the return, lower the risk, lower the return.

The investor has that mindset that it does not matter even if the company is burning cash – I will invest because when we take that company to the next stage, we know to a great extent that it is going to be valued at least three to four times the money that they have invested.

When a profit-making company merges with a loss making company will there be any benefit in the portfolio of investors of both the companies?

Sometimes it might be a strategy with regards to buying a competitor or it might be simply because they want to create more monopoly. For example, Ola, when they launched, there were many other players who were offering very similar services. 

Two founders of two such companies, they were techies. I had met one of the founders so I was listening to their story and they said, we knew Ola was one of our competitors and then it is like – you are playing a cricket match against each other and you really hate them but all of a sudden in IPL you have to play next to them. You have to share the same dressing room, so even the same thing happens in the investment world. When our investors in Ola decided that let’s buy them out, they bought TaxiForSure. 

Of course, even Taxi (TaxiForSure) was making a loss for 200 crores, the main reason behind the strategy was to make sure that they are capturing the market and they are kind of creating a monopoly. So, with that perspective, yes, it was definitely a success. Now that does not mean that we can apply the same strategy to every business or industry.

Considering the supply chain, Indian agriculture exhibits a highly fragmented scenario with concerns like high water stress, degrading soil quality, unavailability of labour coupled with low mechanisation. Similarly, inadequate storage, processing and transportation facilities cause a significant amount of food loss which makes the supply chain very inefficient. “If you look from a farmer perspective, one of the biggest challenges most of the farmers in India end up selling their produce at the nearest mundi (market yard) which is typically thirty to fifty kilometres from the farmer’s field and it is not necessary he gets the best price from that market.” Thus, there is an urgent need for logistic solutions to discover more buyers.

Agri-fintech: The Next Big Opportunity for Agritech Start-ups

Mr. Mathur also mentioned that only about thirty percent of Indian farmers have access to institutional credit and the rest have to pay as high as twenty-four to sixty percent of credit per annum. He stated, “Just imagine the cost of capital is so high which makes the whole farm economics look very vulnerable. So, can we improve the excess of institutional credit to the farmers and that is where I see a very interesting intersection of agritech and fintech, I call it agri-fintech.

I think this is the next big opportunity in the sector.” Again, data figures out as a scarce commodity in the entire agricultural value chain where it fails to meet the requirements for decision making. “That is where I see a huge application potential for data sciences. I think agriculture is another area which is heaven for data scientists, there’s so many variables and you can do so much with it which can essentially help in decision making for the farmers as well as for other value chain members.”

The mentor listed down seven opportunities in his presentation for the audience and thereafter he elaborated on each of them. The seven opportunities are:

• Access to Quality Inputs
• Farm to Fork Market Linkages/Post Harvest Management
• Access to Financing (Agri-fintech)
• Data & Advisory
• Mechanisation
• Novel Farming
• Platforms

Mr. Mathur underlined the nitty gritty of the Indian agritech ecosystem. He is thrilled at the promising presence of many high-quality entrepreneurs, supportive incubators and accelerators to whom he insists to connect. “One area which I feel is catching up is the village ecosystem. None of the agritech models are going to scale without participation from village level entrepreneurs. Because a farmer is not going to trust a person who’s coming from Bangalore, Delhi or Mumbai. He is going to trust someone who is there in the rural area. So, I think that it is very important that we build the local ecosystem, create opportunities for rural entrepreneurs.” He believes that entrepreneurship and agritech go hand in hand and it will create millions of jobs in the rural areas. Furthermore, Mr. Mathur also listed down some of the key incubators who can be reached out for assistance.

In his illustrative presentation, Dr. Shyam talked about the success stories of Indian startups established between 2014 and 2019. Unicorns like OYO Rooms, Snapdeal, Ola Cabs, BYJU’s, Delhivery among others are role models for a young population. “In 2015, there was a Fintech boom. One of the Fintech companies, One97 Communications, came with a brand called PayTM and what wonders it did! Today even if you go anywhere, even a vegetable vendor, you see across even the smallest vendor, they are using PayTM. After the pandemic, it is a revolution.”

“Now the question is, why should we not have a dream if the OYO promoter Mr. Agarwal can start at such an early age? It changed the entire hotel and tourism industry of India.” In a country like India, young minds are inculcating high ambitions and are at a lower risk as compared to one generation prior. With a high motivation, passion and a little craziness to stand out of the crowd, an aspiring startup founder can do wonders. Dr. Shyam also underlined the catalytic role of a mentor as for pursuing a startup dream. A mentor can also be someone from the peer group who has failed in his/her venture, but it is equally important to learn from such an individual so as to not repeat the past mistakes.

“Yesterday was the man of finance, today is the man of marketing and tomorrow is the man of HRD.” Many years ago, only those who had money could think about a business venture but in the present scenario, investors come forward to fund. The years ahead, as Dr. Shyam envisions, are that of technology. India has a strong IT infrastructure and has to be exploited to the fullest. Dr. Shyam stressed on how different cities like Bengaluru, Gurgaon, Noida, Pune, Hyderabad, Kochi have emerged as convenient ecosystems for boosting startups and support opportunities have to be utilised in these cities. Apart from that, there is an easy availability of manpower and technical support aided by a supportive supply chain and digital marketing avenues.

Dr. Jindal from his own experience as a pioneer in the robotics space of the country feels that there is a need for a common platform to share awareness about AI in order to ethically, successfully and knowledgeably harness its benefits. He envisions that such a platform will bring the mentors, trainers and educators together and build a bridge with the industry leaders.

While there are speculations that continue to remain about robots posing as threats to human employment in jobs, Dr. Jindal negates such apprehensions,“At this very moment when we are talking, there are 52 million opportunities available just in the domain of artificial intelligence and who is developing these robots? It is on us humans so all we need to do is learn to learn, continuously learn and unlearn to learn. We just need to develop ourselves so that we can keep on innovating, creating, producing and forcing disruption so that we keep on moving to the next level.” Thereafter he shared the curriculum of AI giving examples of popular applications in our smartphones like Facebook, WhatsApp and their own set of data processing techniques. Whether it is just a mouse click or a photo upload, data is continuously being processed and retrieved in systems all within fragments of seconds.

Five Commandments: The Litmus Test to Scale Up

One should start small, but should always envision the growth from the very beginning. That’s the quality of a visionary entrepreneur. In the MentorED workshop, Sameer Kaul shares a very insightful framework: The CENTS Framework. It acts as a litmus test to scale up a business.

The CENTS Framework consists of 5 Commandments:

C – Commandment of Control

E – Commandment of Entry

N – Commandment of Need

T – Commandment of Time

S – Commandment of Scale

Commandment of Control

Sameer Kaul explains, “If you are a business owner, you want to be on the driver’s seat all the time. You cannot be a hitchhiker. You have to have control over the revenues, over the strategy of the company and over the whole business plan.”

“You shouldn’t be diluting your equity, you should be calling the shots, whether it is talent or whether it is strategy. Raising money is not about growth. Having control over the business is the first thing that a lot of promoters and a lot of entrepreneurs are losing out these days. So, the first commandment of scaling up which you have to build from the design stage is to have control.”

Commandment of Entry

“The commandment of entry talks about building a business that gives you some core competency. Either it is through your proprietary technology, or either it gives you economies of scale, as you grow,” the mentor explains.

Commandment of Need

It’s high time to adopt the new school mindset. “It talks about an outside-inside perspective which is called a customer-based business strategy.” Kaul explains, “You have to look at your customers, you have to look at the needs: 

What needs are unmet in the market. 

What needs a funnel?

In the market, is there a service gap? 

Is there a pain point which is not getting addressed? 

Is there an emotional disconnect?

Sameer Kaul asks all entrepreneurs to look at these perspectives and then start working on those.

Commandment of Time

Time should be in your control. Elaborating on the importance of this commandment, the mentor states, “If you are spending all the time in your business, you will not be able to scale it up. Then you have found yourself a job but you’re masquerading as an entrepreneur. That’s a different mindset.”

“We see a lot of these retailers, shopkeepers who are 90% involved in their business. That is why they build the business so dependent on them that they are not able to scale. Because they are not able to delegate or because they are not able to trust, they become small business people who can, at the most, run one shop but they cannot expand. If you want to expand you need to have control over your time. In fact, as they say, you should be able to make money while you sleep. A good business has to be a good business system.”

Commandment of Scale

Scalability is measured with two parameters: 

Reach

Reach refers to the number of units sold

Magnitude

Magnitude refers to the unit profitability

“If you want to scale, you need to have both reach and magnitude. It is very important not to get a false sense of scale,” he warns.