1. Global Value Investing by Thomas Russo
Value Investing – is an investment paradigm that involves buying securities that appear under priced by some form of fundamental analysis(works over long term). Buy the business which are of fantastic quality with terrific management.
Businesses which are generally tends to grow have following criteria or trend identifiable in companies like Nestle, Pernod Ricard. Some of these trends are capacity to reinvest and capacity to suffer
Investors should invest in growing / growth market rather than the mature market.We tend to benefit in life, when we sacrifice something today to gain something tomorrow. In value investing it is also preferable to own a business that grows itself over a period of time. General Electric had brought it 100 billion $and brought down to commercial paper overnight (4% yield). While warren was investing his 50 billion $ in the liquid overnight funds and having 0.1% yield and on the same side he is buying the call option of the desired company before the GFC in 2007. Always earning higher returns doesn’t matter, we have to take risk accordingly keeping in mind the risk associated with it.
Capacity to suffer – in the business people should have ideology of deferred business also the best analyst has best capacity to suffer.
Summary : We tend to benefit in life, when we sacrifice something today to gain something tommorow. Always buy an asset at lower price/value which will give you money(cash outflows) at least greater than buy price, keeping in mind the ” time value of money.”
2. Corporate Governance issue in KRBL
This all Started from April-18. when, ED had cancelled Mohnish Pabrai’s transaction to buy 2.7$ stake in KRBL, as the shares were to be purchased from Omar Ali Balsharaf and ED has alleged that Balsharaf was one of the culprits of VVIP chopper scam and the shares were purchased using Crime money. Balsharaf has filed case against this in High Court and the High court has ruled the case out as it was outside the law. Also, high court states that Balsharaf has purchased such shares in 2003 and the scam was occurred in 2008. So, it is not possible. Which means ED was simply lying
Then, ED came with another case in June-19-Gautam Khaitan case. Gautam Khaitan (Independent director of KRBL between jul-2007 and April-2013) has been the beneficiary of Rs 850 crore of slush funds in various defence deal (with these shares of KRBL was tanged by 20%). According to ED report, crime money was routed through RAKGT (Rawaal Al Khaleej General Trading LLC, Dubai). KRBL management told that this business was started by KRBL, but it was sold to Anurag Potdar, which is run by its nephew and High court claims that KRBL has no relation with RAKGT
Then ED attached KRBL land property worth RS 15 Crore in Dhuri, Punjab, the case is related to Embraer Défense scam and the case is still ongoing. Then, KRBL board declared that the income tax (IT) department had raised tax demand of Rs 1270 Cr. (8th Feb-2019). As, IT department has disallowed expense of RS 2221 cr. (related to paddy purchase). According to KRBL management it was wrong as all the transaction of paddy was done directly through farmers and when they purchase it from farmer, the purchase is routed through Mandi and KRBL has all the receipt of collecting goods from Mandi. Due to which, tax department had reduced tax from Rs 1270 crore to Rs 101 Crore.
There can be a doubt that KRBL has bribed money in VVIP Chopper scam, but nothing has been provedThe conclusion came from this is that KRBL has clean management has all cases were in favour of KRBL and they have every type of proves to prove them correct. ED clearly lied and he tried to block the Pabrai-Balsharaf deal and also Land scam of 15 crore was seemed to be part of showing company negative
In short, KRBL has good corporate governance and all the ED claims were proved to be wrong
Case against ITC in the 1990s
Case was of evasion of excise duty of Rs 800 crore between 1990 and 1995, violation of FERA Act and also money was illegally routed by the international division of ITC
The case solved after 4 years by ED and only formal charges were imposed against ITC and its chairman. Case was in favour of ITC
From then ITC stock has gone up 33 times in last 25 years
Summary: Good corporate governance is necessary for growth of company and also people like to invest in those companies, which have good corporate governance (Example: ITC)