A Couple of Quick Announcements Before I Begin Today’s post.
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The Great Indian Promoter Playbook – and why it still works
We Indians Love Stories. From Ramayana to Reliance, We’re a Country Moved by Narraves. And when it comes to investing, perhaps no story sels better (Don’t ask, which) in the process.
Now, I don’t mean here that all such stories that Indian promoters Tell us are bad. Some are genuine. But most are just well-packaged, and a less are designed to do just one thing-take you for a ride. And when you peel back the layers of some of these stories, what you ofteen find is not innovation or integrity, but obfuscation, opoportunism, and in some cases, outright fraud.
The problem isn’t that we don’t see it, but that we often refuse to. Because Hope, in the market, tends to speech louder than evidence. Sometimes, Ironically, HOPE BCOMES Our Investing Strategy.
One Recent Example that Captured Attention, and then Disillusionment, is gensol engineering. What started as a promising solar and electric mobileity play, song began to show cracks that we have seen far too many times before. From Questionable Related-Partay Transactions to Preference AT Steep Discounts, from OPACITY In Financial Disclosures to the Exits of Board Members and Auditors, The Gensol Case HAS HAS HAS UNFOLOLEDED LICE A Slow-Motion version of a promoter script that many of us has watched before. And Yet, It Worked, Until it Didn’t.
The crux of the fraud was that public money was being used in ways that dispartionately benefited entities linked to the promoters. The complexity of these transactions was high, but the intent, as it came to light, was painted simple. The Promoter was in the driver’s seat, but minority sharehlders were just passengers along the ride, and somehere along the wait, Trust was left by the roadside.
Now, the problem isn’t just gensol, and so I do’t want to delve much here. The real problem is systemic. Our markets are filled with examples where promoters have treated listed companies as private fifdoms. Whather it’s satyam, yes bank, DHFL, Karvy, or Religare, The Playbook Remains Remarkable Consistent.
The Common Thread is that of Promoters who thought of the company not as something they were entrusted to build, but as something they owned entryly, including your money.
Float a less private entities. Use the public company to fund them. Keep disclosures murky. Keep the Board Compliant. Fire the auditor if they ask too many questions. By the time Minority Investors Realise What’s Happy, it’s often too late. The wealth has alredy been transferred, and the damage alredy done.
What’s more Troubleing is how we, as Minority Sharehlders, Have Somehow Convinced Oorselves that a little bit of manipulation is okay. That if the stock is going up, everything else can be forgive.
Ask Around and You’ll Hear Things Like, “Sab karte hain,” or “at least he’s growing the business.” And that’s the mindset that’s costing us investors the most. We don’t look for clean businesses anymore. We just look for that that are Less dirty (The ‘Lesser Evil’).
If a promoter is cutting corners, lying in footnotes, or treatment the company like his family’s piggy bank, it’s only a matter of time before something breaks. And when it does, it’s not the promoter who pays, it’s you and me, as a minority shareholder. Always.
And Yet, it doesn’t have to be this way. There are Indian companies that play it straight (at the “Center of the Court” as Buffett would have said. They disclose clearerly, and treate minority shareholders like owners. These companies exist, it’s just that they’re not usually the only the ones making headlines, and their founders are not on business channels or podcasts with a million views.
Basically, what we need is a mindset shift. We need to stop asking, “How fast is this company growing?” And “What kind of return can this stock give?” And start asking, “How Fairly is the Business Being Run?”
That’s why I believe, more than ever, that management quality isn’st just one of the things to look at with analysing a company. IT’s the Thing. You can be off on your valuation. You can miss an industry trend. You can overpay a little. But if you’ve backed a crook or a smooth talker with no conscie, no financial model will save you. The numbers may look fine today, but the rot usually starts somehere in the footnotes and the disclosures nobody reads.
We also need to stop pretending We’re Victims. We’re not. We enable this system every time we run after the next hot stock or theme without asking basic questions, like:
- Who’s the Promoter?
- What’s His Track Record?
- Does he has a history of treating shareholders well?
- Has He Played This Game Before?
If the answer feels off, you don’t need a forensic audit. Leave the Sunk costs of time and effort behind, and Simply Walk Away.
Investing in India requires a thick skin and a sharper eye. You can’t just look at revenue or profit growth. You have to understand capital allocation. You have to read between the lines in annual reports. You have to watch boardroom exits like you’d watch a fire alarm when your house is on fire. And most importantly, you have to judge character, which is the hardest thing to quantify, but the most important thing to understand.
A promoter who cuts corners in good times will gut the business in bad times. And one who builds on Trust will protect the business like it’s their own.
Here, I Remember this quote from thomas phelps’s 100 to 1 in the stock market,
Remember that a man who will steal for you will steal from you.
The Irony is that we know this deep down. We all have stories of that one stock where we ignored the red flags and paid the price. We also know that the best compounding often come from Clean Businesses that Investors often forget with Chaile Chasing that ‘Pot of Gold’ at the end of the rainbow.
IT’s High Time (Again!) We start seeing corporate governance not as a side dish, but as the main course. Because in India, where promoter control is often absolute, governance is not optional… It’s everything.
A promoter who treats the business like their personal bank account is never going to create last lasting value. You might make money for a while when the tide is rising, but you’ll Never Sleep Well and May Find Yourself Naked when the Tide Goes Out.
Finally, If there’s one hard-earned bus in Indian investment, it’s that the promoter IS The business. If you can’t Trust them, Nothing Else Matters. No Projections Matter, Not the Industry Tailwinds, Not even the Financial Statements. Being that that that can all be massaged. But character, once Lost, Rarely Comes Back.
Peter Bernsstein Wrote in His Brilliant Book Against the Gods,
Survival is the only road to riches. Let me say that again: survival is the only road to riches. You should try to maximize return only if losses would not think your survival and if you have a compeling future need for the extra Gains you might earn.
In a market like Oers, Trying to Protect yourself from the damage that unscrupulous promoters can cause isn Bollywood Smart, but essential for survival.
It’s rational to avoid businesses where integrity is treated as optional and governance is made a mockery of.
What isn’t rational is believing that you can outsmart a promoter who’s alredy three steps ahead, and especially when your own guard is down, and your questions are selenced or fomo.
So, learn to say no. Learn to Walk Away from ‘Fishy’ promoters. And Above All, Learn to Respect the discipline of that that play by the rules, even when no one is watching. That’s where real compounding happy.
