Ivy League or Poison Ivy
In a country like India where quality education is rare, the respect given to an esteemed institution & students stepping out of the same is immense. For 20 years or so recruiters have been crazy about an IIT-IIM combo in India. It was an entry pass to a swashbuckling career in investment banking or consultancy. Off late this craze has trickled down to start-ups, where 90% funding is cornered by students from 'Haloed Portals'. This trick is trickling down into listed equities, especially when the baton is being passed & a newer generation takes over. How does one understand their capability - Education from an Ivy League is amongst the easiest short cuts.
Back in 2009, in our endeavor to find the next United Spirits, we narrowed down on a company called Tilaknagar Industries. It was a leader in some categories with a good regional distribution & was attempting to grow in the others. Inspired & named after Lokmanya Tilak, the 4th generation company seemed to possess the foundation & values to move ahead. It was now being headed by Amit Dahanukar, a Stanford alumni. A mix of values & talent, the combination was potent. Too potent for the consumer to survive, actually.
The Stanford badge was a great attraction as one felt he would draw the talent & expertise to catapult the company into the next level. The numbers were not hideous either, infact the company was sound on relevant metrics. 2010 saw a three fold jump in loans & advances given by the company. This number kept growing & the entities that these were extended to was dubious at best. Not an uncommon practice but definitely not ideal & not one featuring in an ethics course in any business curriculum. The company got plagued by one suite or the other & Dahanukars decided the way to deal with this was by weakening the company. Ironically all these have been written off the book & a massive quantum of money siphoned away leaving behind a struggling business. This has been done as a pre-cursor to insolvency & since the loans/ advances have been written off, the RP will not be going after the entities.
This is a bias which I felt is important to let go. Given the limitation of time, knowledge & access, one relies on background to paint a rosy/ gloomy picture. This is a risky shortcut.
Back in 2008, Rashmi Bansal an IIM Ahmedabad alumnus published a book titled 'Stay Hungry Stay Foolish'. Inspired by a speech by Steve Jobs, she chose to cover 25 successful entrepreneurs passing out of IIM Ahmedabad. Within 10 years, 5 of them have become NPA's(some being accused of wilful default), another 10 have disappointed or have not grown or done anything noteworthy since(maybe the book was gratification enough). Merely 5 of them have lived upto the promise of doing something great & scaled new heights. These entrepreneurs from India's best institute were the toast of the nation 10 years ago. Yet the survival rate is about 40% and those achieving excellence 25%. This sample suggests that 25% of success stories will thrive in 10 years from a great institute. The chances of picking the right stock based on IIM Ahmedabad credentials is 25%, for most other institutes it might be lower !
Back in 2009, in our endeavor to find the next United Spirits, we narrowed down on a company called Tilaknagar Industries. It was a leader in some categories with a good regional distribution & was attempting to grow in the others. Inspired & named after Lokmanya Tilak, the 4th generation company seemed to possess the foundation & values to move ahead. It was now being headed by Amit Dahanukar, a Stanford alumni. A mix of values & talent, the combination was potent. Too potent for the consumer to survive, actually.
The Stanford badge was a great attraction as one felt he would draw the talent & expertise to catapult the company into the next level. The numbers were not hideous either, infact the company was sound on relevant metrics. 2010 saw a three fold jump in loans & advances given by the company. This number kept growing & the entities that these were extended to was dubious at best. Not an uncommon practice but definitely not ideal & not one featuring in an ethics course in any business curriculum. The company got plagued by one suite or the other & Dahanukars decided the way to deal with this was by weakening the company. Ironically all these have been written off the book & a massive quantum of money siphoned away leaving behind a struggling business. This has been done as a pre-cursor to insolvency & since the loans/ advances have been written off, the RP will not be going after the entities.
This is a bias which I felt is important to let go. Given the limitation of time, knowledge & access, one relies on background to paint a rosy/ gloomy picture. This is a risky shortcut.
Back in 2008, Rashmi Bansal an IIM Ahmedabad alumnus published a book titled 'Stay Hungry Stay Foolish'. Inspired by a speech by Steve Jobs, she chose to cover 25 successful entrepreneurs passing out of IIM Ahmedabad. Within 10 years, 5 of them have become NPA's(some being accused of wilful default), another 10 have disappointed or have not grown or done anything noteworthy since(maybe the book was gratification enough). Merely 5 of them have lived upto the promise of doing something great & scaled new heights. These entrepreneurs from India's best institute were the toast of the nation 10 years ago. Yet the survival rate is about 40% and those achieving excellence 25%. This sample suggests that 25% of success stories will thrive in 10 years from a great institute. The chances of picking the right stock based on IIM Ahmedabad credentials is 25%, for most other institutes it might be lower !
In short run, the market is a voting machine. but in the long run, it is a weighting machine. Free Commodity Tips
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