Gymkhana Partners' Andrei Stetsenko on Maharashtra Scooters and Indian Holdcos
Summary
Core Thesis: Maharashtra Scooters (MAHSCOOTER) is an Indian listed holdco trading at roughly a 50% discount to NAV, with a ~$2B market cap versus ~$4B of listed assets and no debt.
Key Assets: NAV is dominated by Bajaj Finserv (BAJAJFINSV), Bajaj Finance (BAJFINANCE), and Bajaj Auto (BAJAJ-AUTO), complemented by the parent holdco Bajaj Holdings (BAJAJHLDNG).
Compounding Engines: Bajaj Finance (consumer finance/NBFC) and Bajaj Finserv (multi-line insurance and financial services) are positioned to compound over the long term, with management emphasizing underwriting discipline over rapid, risky growth.
Insurance Upside: India’s insurance market remains early with many first-time buyers; Bajaj Finserv’s buyout of Allianz JVs and focus on prudent pricing supports durable growth in multi-line insurance.
Governance & Quality: The Bajaj group is viewed as top-tier on corporate governance, with professionalization trends and alignment shifting toward market-cap creation for an increasingly broad family shareholder base.
Regulatory Tailwind: SEBI’s push to reduce holdco discounts (including enabling tax-efficient share distributions and improving dividend treatment) mirrors Japan-style reforms and could catalyze value unlocks.
Potential Catalysts: Options include tax-efficient distributions of underlying shares, more buybacks/tenders (e.g., precedent at BAJAJ-AUTO), and potential actions by BAJAJHLDNG, which has already sold holdings and increased dividends.
Macro Backdrop: Bullish India setup—fastest-growing major economy, favorable demographics, accelerating urbanization, and infrastructure build-out—supports sustained earnings growth for core holdings.
Transcript
You're about to listen to the yet another value podcast. Look, if you like this podcast, the best way to help me make this podcast is to rate, subscribe, review wherever you're watching or listening to it. Uh, today we are going to have Andre from Jim Kana Partners. Andre is going to talk about Maharaj scooters. It is I call it Moscooter because that is the ticker throughout the episode. But I think you're going to enjoy this episode. We have a really good blend of we dive into Mos scooters. is one of the classic hold codes trading at a big discount to their NAV. So we're going to talk specifically about that. We're going to have some policy on hold code. We're going to talk about how he Andre has done a lot of work on the fundamental value of the NAV here. How he thinks about the fundamental value of the NAV, how the incentives of the controlling shareholders have changed over time, why the Indian stock market might be pushing them to kind of unlock value here. So we're going to talk about all that in general. We're going to talk about the Indian stock market in general. We're going to talk about a bunch of other stuff. So I I think you're going to enjoy it. It's a fun conversation. We're going to get there in a second. But first, a word from our sponsors. Today's episode is sponsored by AlphaSense. Look, you know, AlphaSense as a long-term sponsor of this podcast. They've been a great partner. I I think we've done some interesting, unique stuff with them. And today's sponsorship is driven by I just had Doug Laughlin on the podcast. That was podcast number 348. All things AI, power, and corporate governance with semi- analysis is Doug Laughlin. Got absolutely fantastic feedback on the podcast. had multiple people calling me to ask me about different things we talked about. Uh, one person did call me and say, "Hey, Andrew, you got really out of breath talking about something in there." I did cuz I get really excited about stuff sometimes, but it was a fantastic episode. And if you like that episode, the reason Doug came on, the reason AlphaSense is sponsoring it is because Doug did a webinar with AlphaSense decoding the AI infrastructure ecosystem. It just went live. I'll include a link in the show notes and kind of in the clip. You can go register and watch it for yourself if you want to see more of Doug. But, you know, first go listen to episode 348, the episode I just did with Doug. See if you like that. You will like that. And when you like that, you can go listen to the full webinar. Uh, and now to the full episode. All right. Hello and welcome to yet another value podcast with me today. I'm happy to have on Andre. You're going to help have to help me with the last name. I'm not even going to bother to butcher. It's >> from Jim Kana Capital. Andre, how's it going? >> Doing well. Thanks for having me on. >> Hey, thanks for so much for coming on. I'm really excited to talk about the company we're going to talk about today. Uh we'll get there in one second, but first a disclaimer to remind everyone nothing on this podcast investing advice. That's always true. But we're going to be talking about a truly international stock here. So uh keep in mind that carries all sorts of extra risks. You know, consults financial adviser and I've always got a full disclaimer at the end of the episode. Uh Andre. Anyway, the company we're going to talk about today is Mosc. It trades in India. Uh I I'd love to Mahashra Scooter, I guess, is the full thing. I I labeled it Mosscooter because I think you primed me for that. >> Clicker. And that's the exchange ticker. >> Uh we can talk all things Mahashra scooter. I guess let's just start there and then we can zoom out broadly on India or zoom focus here. What is Mahashra scooter and why are they so interesting? >> So uh in India there's this phenomenon of listed hold codes and um I know you've had uh some interesting discussions about other hold codes recently which I'd be glad to tie this into. Um especially the recent ep you had on um Jardine Mat which was fascinating. This is a very different situation from that. Um where whereas in the case of um you know a Jardine or a uh Liberty Media or even a a Bergkshire Hathway even probably the best in class of of the of what people think of when they think of Holdco. you're you're making a bet on um usually one person who's a capital allocator and um you're basically trusting that they're going to uh sustainably outperform the market uh and that that's that's you know comes with its own challenges whereas the kinds of companies uh hold codes that were invested in in India um they are more like family trusts they're um we can talk about how they came about but the way they exist today is they're basically ways for third, fourth, fifth generations um to equitably participate in the economics of a business um that you know their great great great grandfather um started. Um they're more pretty passively run um although that's changing in interesting ways uh in some cases including um the stock we're talking about today. Um and so with respect to the Bajage group specifically um there's a few names in India that um are I think universally considered you know platinum uh seal of corporate governance um truly universally respected. God is one um uh Muragapa out of Chennai is another and Baj is definitely in that um top tier. And so what uh this company al along with another um holding company in the same group that uh we'll definitely want to touch on which is Bajage Holdings. Um these two are basically ways to get in at a discount into one of India's bestrun groups. Um and it's it's not just about buying into the discount. That's not the reason we're invested. That's we view that as kind of a potential um bonus down the line if and when the discount ever narrows. Um the the reason we own this is first and foremost because of um the high quality businesses it owns. >> That's perfect. Let's start with just some details. So most of my listeners are domestic. This is an Indian company. You know, if you're lucky enough to have a Bloomberg or if you pull up Yahoo Finance, you're going to see this listed in different things. Maybe we could just start. What is the market cap of Mahashra scooter? What what are we talking about here? So round numbers, it's $2 billion and um it owns stuff not not stuff that's that it's put value on but stuff that's traded on exchange. So we know what uh the market value is. It owns about 4 billion US worth of um Bash company shares. So $2 billion company, $4 billion of assets, no debt. >> That's that's perfect. And I just want I really wanted to express that because I think you know I've looked at weird Korean hold codes and stuff and sometimes you're looking be like oh it's a $75 million market company and I think people just like press off at that point. This is a pretty large company. So let's move to the next point. I I want to dive into a lot of the things you said but the market's a competitive place. You know this is trading you you mentioned the hold code discount that's trading for kind of 50% of MNAV and MNAV. I'm on Bitcoin companies right now of NAV and most of that NAV is publicly traded companies. So you're kind of getting Mark, but what are you seeing that you think the market is missing that makes this an alpha opportunity? >> So um if you are uh invested in some, you know, any run-of-the-mill ETF um that markets itself as an India ETF, um most likely that ETF owns at least a couple of the Bajage operating companies. Um you know, these are blue chip stocks. Um at the same time the Bajash Fins Serve especially and Bajash Finance the the two financial holdings that make up the vast majority the line share of of um the some of the parts or the NAV whatever you want to call it in this case um these are big but um for reasons I'm happy to get into they're destined to keep compounding you know not not at 5% a year more like 20% yearon year for probably decades. I mean realistically decades because they are plays on insurance and asset management and uh commercial lending things that are um you know have grown a lot over the last decade or two in India but are still very much early days. >> Let let me ask a question there. So a lot of the underlying holdings of MOS scooters is uh is commercial insurance all that sort of stuff and you said hey these are plays that can grow at 20% per year and I hear that right obviously I India is a huge place it's an emerging economy all this sort of stuff I definitely hear that but then I also say hey what is the scariest thing as an investor and it's a fast growing insurance company or a fast any type of fast growing financial and you know if you've got this huge market that's growing rapidly. Like at some point, you'd have to imagine the giant insurers are going to move in here. So, I guess I'm posing this question in two ways. Yes, there are tailwinds here, but is there any on one hand, are you at all scared that hey, they've been doing a ton of quick growing underwriting? And on the other hand, when you say, hey, this can compound for years. Are you worried about as the market kind of opens up, you get a ton a flood of new money into this then and that's going to bring returns down? And when you say, "Hey, I think this can compound in the double digits for years." No, insurance commodity business. Capital comes in and all the returns down. So, I think I kind of presented two counterveailing views there. I'll I'll kind of let you take them. >> Yeah. Yeah. But both very uh valid good points. Um on the subject of insurance specifically, I I couldn't agree more. The same really is true of um just a basic lending business. I mean if uh you have a lender that's suddenly issuing a ton of loans that's that's a red flag and >> um my partner Steve and I one of our um most memorable early experiences in India we've been going there since 2012 um is was recalling analysts in a group meeting being IATE with this uh CFO or CEO of a of a lending business what they call non-bank financial company um because they weren't growing growing as fast as their competitors. And uh the reason they weren't growing as fast is because pricing was getting worse, underwriting was getting looser, and they didn't want to participate in that. And um if you look at the track record of Bajash Finance um the non-banking financial company that uh accounts for the single biggest chunk of um the Maharash scooter some of the parts um and Bajash Finserve which owns majority of Bajash finance um but in addition to that also has a bunch of businesses that include insurance like you said these businesses uh they do not grow at 20% year after year after year they compounded that on average over a decade or longer and uh in any given year they may not grow barely at all and other years they may grow way north of 20%. Um and I think if if you judge stocks based on Greek letters and complex formulas that take you know equate volatility with risk then you may not like that. But um that that to me is a sign of uh discipline management where they're avoiding exactly the kind of pitfalls you described. Um as for insurance uh point very well taken the thing I'd say uh with respect to Baja's participation in that market is that until a few months ago uh it was via two joint ventures with Alons the German insurance or I guess just financial services giant. um they bought out alons earlier this year and after trying to for a long long time and uh I think there are two things that really differentiate insurance as many listeners might conceive of it coming from a developed world perspective and how it works in India one is that uh it's such a nent industry that there really isn't that much fighting over good customers um as we might be used to here um Most people who are signing up for insurance policies in India are firsttime insurance customers. Uh that's definitely not the case in the US. You know, most customer acquisitions in the US are uh one company stealing a customer from another. Um and the way you do that typically is you think you you can afford to offer them a better price. that that's not as much of a factor in India where uh you know living standards uh are improving living standards are allowing people to think about the utility of um an insurance product for the very first time. And then um the uh other issue is that uh with Bajash specifically same as in their lending business like I just described um these uh insurance businesses have not grown as fast as some of their competitors. Uh and I think that's for a very good reason. It's because they they they realize that uh succeeding in a financial business isn't about lending money. It's about collecting. Let me let me jump to a completely different uh point. You know, you me just you mentioned at the start of your answer going to India a few times. So I'll ramble and then I'll ask a question. You know, one thing I worry as a guy who operates out of a shoe box uh office in New York City is being the psy at the poker table when it comes to international stocks. You know, I I don't think I've told the story before, but a few years ago I I got pitched a stock in Eastern Europe and I got really excited about it. It like literally seemed too good to be true. And then I was about to pull the trigger on it and right before I did, I mentioned to a friend and he was like, "Oh yeah, it's widely known that the numbers are great, but that's like a front for the the mafia." And then I just kind of passed because I was like, "I don't really need to get involved with the mafia." But I I point that out is, you know, I'm reading the spreadsheets online and I always worry I could be the sucker at the py at the poker table because it's a front for the mob or something. So, uh, I I I I want to ask you, let me let me rant just a little bit more. I have a friend who is so good at this, whenever somebody pitches him a stock, like when I would have pitched him this stock, he would say, "Hey, where would you buy a hammer if you were in that market and looking at a local store?" So, I'll ask you, if you were in India, where would you buy a hammer if you were kind of walking around? >> Um, probably at a Kiran Corner shop. Um, I doubt they have it at any of the fancy malls that are attached to the kinds of hotels that foreigners stay at. >> Nope. It's a great That's a fine answer. His point would be if I asked you domestically, you could list like a hundred places. If he asked me to ask you like Ace Hardware, uh, the way he told the story or the way I heard him the first time was somebody pitched a stock uh, a German stock at a conference and it was a really interesting pitch and he was the first question. He said, "Hey, if you weren't in Germany, where would you buy a hammer?" And the guy couldn't answer and the guy he was like you could ask uh >> there's actually a big culture conflict qu thing that that immediately made me realize that I just have to interject with which is >> I think if you asked an Indian that question they would laugh because they'd say I don't pick up a hammer I pay people to do that because labor is so much cheaper there. um when wealthy Indians come to the states that's you that's and vice versa for me it's a culture shock um seeing it there but you know people we would consider middle middle class um in the states in India have household staff so [laughter] they they truly may not know where to get a hammer >> well I was rambling thank you for cutting me off I I'd love to just ask because you can answer that question and because I kind of know the answer how do you you know as somebody who was raised in the US college how do you guys get kind of a handle on the local you're Indian focused fund on the local Indian. >> That uh that's I'd say the single most important screen in um the research we do. We have this database of about 2,000 companies that's filled with um literally every little last piece of scuttlebutt down to something we might have overheard in a hallway. Uh and it's the product of hundreds of meetings with hundreds of companies most of which we didn't invest in. uh as well as meetings with uh what we consider now it's not formalized m might be one day uh but it's an informal network of local investors, business people, analysts um financial journalists, people who uh know the inside story at uh you know just about any business that we might encounter and uh that is has been invaluable as a screening tool. We've uh not to say that we've never made a mistake. Uh I can definitely think of at least one. But um I'd say that we've been successful in avoiding any uh mistake that would in terms of you know investing capital in a business that was fraudulent or or what have you. I definitely avoided anything uh that would have been uh really significant for the fund. Uh we we also I mean we also remain humble by being pretty diversified. Uh we own uh over 50 stocks and our you know top position is less than 5% typically less than 4% of capital. >> And just to clarify you guys are in you're running in an India focused fund is kind of what I I was driving out there too. >> Correct. And you know we spend two weeks uh twice a year each on the ground in India. So roughly a month out of every year and have every year uh since 2012 with the exception of COVID and uh we now have a full-time analyst on the ground there which has also been critical but but I'd say even before we had this analyst when it was just us 11 months out of the year um here in the states one month there um it was a lot of cultivating this local network so we could get feedback on well you know what's the reputation of these guys uh have they been known when we we're in a meeting with a competitor we ask them have they been known to you know uh compete in a way that's maybe not above board uh and you piece all these data points together and you get a pretty good picture and I'll I'll just one last related comment on this is that u you know I mentioned at the outset that Bajage is in what I'd consider to be the top tier of Indian firms or Indian family groups in terms of corporate governance And uh you know I if if I'm wrong about Bajage and God having excellent corporate governance then um I then I don't know what I'm right about. I I I have great confidence about this this particular point. Um and I have definitely encountered plenty of uh Indian groups that uh I would rate very very poorly um on this metric. whereas literally every single data point um points in the positive direction with these guys. >> Let me I I'm just a dumb generalist. You're an India expert market. I guess most of my listeners have not spent a ton of time in India. So let me just stay kind of broad right now. What's like what's the biggest thing that me as a generalist who maybe has only seen stories about especially the Indian market out the corner of my eye? What's the biggest misperception that you think generalists or people who don't you know live and breathe the Indian market that like you do have about the Indian market? >> I think a lot of people especially in America have an outdated picture of India. you know, they think of uh Slumb Dog Millionaire to be perfectly honest. Just, you know, a picture that's uh exaggerated at best and just distorted at worst of um you know, a country that's not not so much a a a showcase of capitalism as a showcase of, you know, development assistance when the reality is an Indian company, Tata, is the biggest employer in the UK. Uh India has the world's biggest oil refinery, biggest steel mill. Um there when you go to Mumbai as a as a New Yorker myself, you are too. You you just mentioned um and so I'm sure that you're regularly frustrated with how we can't seem to build anything in the city, you know, even repair the the subway system we have. Whereas you go to Mumbai, there's something like a dozen subway lines under construction simultaneously. Uh there's a new airport being built, there's a new highspeed rail line. It feels like u you know China uh two decades ago. Uh but it I'd say even more impressive than that because this is being done in the context of a very pluralistic multicultural democracy. Um uh the other thing I'd say is that India is the only market truly the only market that gives the US a run for its money in terms of uh fundamentals. And uh I'd say that the the drivers of u you know the the EP whether you look at EPS growth or actual equity returns um benchmark index returns the the underlying drivers of that are I think very durable. India is the world's fastest growing major economy. Has been for years, will be for years. Um it'll eclipse Germany probably in the next 18 months uh to become the world's uh uh third or fourth biggest economy. It uh its demographics are better than really any other major economy on earth. Uh it's urbanization is still in its early stages. And so that's as China showed over the past two decades until finally stalling out more recently that that's a driver that uh keeps going and going when you move people from relatively poorly paid agricultural work to higher productivity jobs in cities. um that is a tremendously uh important driver for you know years after years of recurring um economic development um GDP growth and ultimately equity earnings. >> Let me Okay, so we've we've talked about India broadly. I'm going to try to start narrowing us back down back to Moscooters and I I'm going to start with this question. uh Indian hold co I I think there are quite a few again I I'm just a generalist but I I think there are quite a few of these Indian hold codes that trade at a discount to their NAV so before asking you to compare them and Mosc and everything let me just ask broadly I know you think Indian hold co as a whole are attractive I'd love to just broadly talk about that uh your overall views on Indian hold co >> sure um so like with the universe of Indian stocks as a whole there's uh there's good ones and there's bad ones. I mean, there's definitely holding companies that uh I'm not interested in even though they optically trade at big discounts to their underlying holdings because what uh I'm really looking for is uh to be a shareholder in a really high quality business with a long runway for continued compounding growth. Um when there's an opportunity to gain exposure to that at a big juicy discount, that's gravy. that's that's not, you know, we're not invested in the hold codes that we're invested in because of the discounts. We're invested because we really like what they own. Um, and the just to tie this back to what where we were talking at the start um about what Indian hold what differentiates them from what some listeners might uh be thinking of when they think of that word. Um, these are more like uh family trusts. You know, they're diversified. They're almost passively managed. They're owners in a diversified set of businesses that are united by history, but really not not much else. Um, it it's not like you're making a bet on a on a John Malone. You're you're making a bet on a set of companies that are, you know, household names in their respective sectors. Um, and so the the ones we own, including Maharashtra Scooters, u I'll throw out another couple names. uh one is u cola mandolum which is a hold co of the muragapa group which I I mentioned earlier out of chennai another extremely wellrespected group industries is another um although that discount has uh narrowed so considerably that um we've sold a bunch of shares so there are I'd say a maybe a dozen out of a universe of at least triple or quadruple that number of listed Indian hold codes that that I'd say are uh I I I have good enough confidence in both the quality of the underlying assets and the quality of the governance to to really um to really like them. >> Well, let's go to I'll jump that point and let's go to Mosc then. Um you know I think one question I would have here is you mentioned highquality governments that but it is a nesting you know just to me reading the the documents it is an interlocking nest of uh kind of companies that own shares in each other right so I I would just ask you on this hold co like the the the biggest worry I have with hold codes is the incentives and when I look at this like it doesn't seem like there's really an incentive to unlock the value here and I I really worry when you've got interlocking sets of companies like hey forget the incentives if the assets are good it goes up but I really worry about the uh potential for management say hey let's you heard it on Jardine Mat right where I was worried hey there's an incentive to grow at any cost because you can pay yourself more if you grow so I'd love to just talk about the incentives both at the unlock the holdco level and at the hey do we kind of get paid when these guys get paid or do these guys get paid when we get paid or do they just figure got a way to pay themselves no matter what. >> Yeah, I I uh sense that part probably one of the things that's in the back of your mind and asking that um are Korean hold codes where the the web >> I I have that I have a note tell me how this is different than Korea was one of the notes I had. >> Yeah, I've I've uh I've diagrammed out the various Indian hold code groups and they're uh in some cases complex but not so complex that you can't draw a series of arrows and figure out the inter relationships. Whereas in the case of some of these Korean groups, uh the the whole point it seems to be to be confusing and convoluted and ultimately uh the thing that motivates something that's that convoluted typically is uh a desire to control a web of companies uh because you own 51% of something that owns 51% of something that owns so so you don't have to actually have all the capital at stake if you just owned it outright. um that is the case in a couple Indian um uh listed groups but not in the case of the high-quality ones I've I've been mentioning. The the one that uh where that would be a fairly accurate or more accurate description is Jindle. Uh Jindel is a is a big name in India. It's it uh there's a number of uh branches of the family that have their own listed entities and uh JSW Steel um Gentle Steel and Power some of their operating businesses. But yeah, if you try to diagram that out, it's it's doable. But there's so many unlisted intermedi intermediaries and uh you know, it's pretty clear that the point of all these uh uh listed and unlisted hold uh is to preserve family control above all else. It's not about value unlocking. In the case of Bajage and Maharashtra scooters, uh the the exciting thing I'd say in terms of potential catalysts is that there's really are a number of things that are moving in the right direction. Um number one is that SEBI so India's SEC uh as of last fall of about a year ago has uh started pursuing u you know publicly pursuing policies that are specifically aimed at um reducing the discounts to book value of uh what they call investment holding companies a category that includes Maharashtra scooters. Uh and so they define uh this as companies that uh trade at a big uh discount to their uh reported book value and that that's the fact that this is on Seby's radar at all um is big. So they've started uh implementing reforms that won't change anything uh tomorrow, but they set the groundwork for uh over the coming years for a potentially momentous shift where uh it's uh become much easier for companies to um uh dividend out not just the uh earnings they are getting in the form of dividend income from their equity holdings, but the actual shares. So you can now distribute shares to as as a whole go to your shareholders in a taxefficient way. You uh the tax treatment of dividends has improved and so uh companies like Maharash scooters have uh you know quadrupled their dividends uh over the past few years. >> Can I pause you there? This this was actually the most exciting part of the pitch for me because as soon as I read it, I was like, "Oh, Japan." Like, obviously there's a lot of similarities between many of the things you're talking about and Japan. And you and I 12 years ago could have gone and literally thrown a dart at any Japanese stock board and hit a company that traded for less than cash and had a good business. But the issue is none of them did anything. And then what, like 2, three years ago, the Japanese stockboard got serious about things not trading below book value. And I I mean the past 12 months, all of these things, you know, I I'd have notes 10 years ago, trades below cash. Eight years ago, trades below cash. Two years ago, trades below cash. And all of a sudden, they're all ripping because they're returning capital and doing all this stuff. And you know, when a national government and the regulator gets interested in these things, not trading below book, that tends to be when they stop training below book. So to me, that was the most exciting because I I could see the parallels to Japan just instantly there. >> Yeah, that's a really good analogy. Um I think that's a good description of what's happening. The the other other thing that uh is Bajage specific uh is that so I I've met with uh the management of this group. They were one of the first companies I met with I think uh first in 2014 or 2015 and then again in 2017. I went down to Pune about two or three hours south of Mumbai um to the headquarters of all these businesses and you know at the time especially at the first meeting I remember the CFO I was supposed to meet the CFO of the holding company and I walked into a meeting with the CFO his business card said Paj Auto and I was a little confused thinking well am I meeting with the wrong guy? turned out he he had both jobs. Um the the holding company wasn't really thought of as an independent unit as its own entity. It was it was kind he the the literal words he used was it's the central bank of the group. So its job was to uh you know give uh loans to operating underlying businesses to uh you know basically serve as a captive financeier. Um whereas oh oh and he also me said that you know very uh with great certainty he said that you know these holding companies Bajage and Maharashtra they'll never sell any of the shares they own and the underlying businesses that's they're not they're not trying to uh you know be be smart for their shareholders that that's not their purpose. Fast forward to uh the last few years and uh so the executive ranks have all turned over that the guy I met with is no longer there. the there uh is still some uh managerial overlap but it's typically uh in you know the case of the investor investor relations person not so much in the case of the very top job um and Bajage Holdings which is kind of the older brother of Maharasher scooters about four times the market cap and a narrower discount um to some of the parts um that company for the very first time or at least the first time in decades sold some shares within the past couple years of its underlying Bajash holdings um and uh essentially distributed the the um the proceeds to its shareholders um via increased dividends. Uh it that company is the majority shareholder of Mar after scooters and so one could very easily imagine uh a day where I'm not saying this uh is is likely to happen soon um even a decade from now. I'm just saying that uh if there was one Indian holding company where I could very clearly see a path to uh waking up to a new story about some serious value unlocking and a discount closing, it would be this specific case because you have a uh majority owner other co that is for the first time being run professionally in a way that uh is allocating capital in the interest of its shareholders, not on the interests of the broader group. um that uh could in a very in a way that was accretive for everyone do a buyout of uh the minority interest in Maharashra scooters. Le >> let's talk a little bit more about Mos Maharasha scooters and their controlling shareholder. So the controller shareholder owns about 50% of M scooters and I just want to ask like what are their what are their incentives to unlock value at Moscooters or you know you do worry I I have seen in the US all the time terrible ownership groups who have who have entrenched themselves and it always looks great right the some of the parts always says it's worth a thousand and the stock always trades it trades at 100 but every year that a thousand produces a hundred of earnings and the earnings all go to the the controlling shareholder and shareholders always sitting there frustrated like why are we never getting anything but I I just want to ask like what is the incentive structure for the controlling shareholders everyone to unlock value or maybe to take the value for themselves. Yeah, the the uh uh refrain that we have heard over and over again over the past few years in India from the local network that I alluded to earlier is that whereas a decade ago, if you were a crook in India, you did it in a way that was you could detect uh in the notes to a financial report. you know it would be something like siphoning funds to a affiliate unlisted affiliate for some nebulous uh service. Now uh Indian managers, executives, business owners, the thing they care about is market cap. Um it's it's not about it's not about pulling up to their local Jim Kana Club in uh a fancy car. It's about being the guy in the room who has the biggest market cap. And so that that's a very important shift in motivations across India. And in the case of this group specifically, I'd say the the family uh that's in control now, they're the fourth generation um dating back to the the founder um a century ago. And once you've gone that far down through a family tree, if you kind of picture it, Indians have big families. that the ownership that uh even 50 years ago would have been split among maybe a couple dozen individuals now is split up uh among over you know 100 or more individual people with the last name Bajage and so uh their interests as smaller interests in a very valuable empire uh are varied. You know, someone might be uh getting married, someone might be buying uh homes, someone might be sending their kids abroad for education. And the the reasons they might want um to make some of their wealth liquid are sufficiently diverse and varied. Now that there is no monolith u that uh you know would exert the kind of pressure in a that that might in a a more tightly controlled or earlier generation. um family group uh cause the kind of risks that that you're talking about >> at the top coast you mentioned Baj controlled by literally hundreds of family members at this this point >> how how do they kind of get together and organize for for this company like I I will just in sports a lot of times you'll hear hey you know most of these sports teams were bought by one rich man in their 80 in the 1980s and then he passes away or hands control over to their family and sometimes like James Dolan it's like nine kids and grandkids, but he's kind of got the controlling share, but he still has to please them. Or sometimes you'll hear it passes on and there's like seven kids and there's just huge fights where, you know, three of them are there, hey, I just want the dividends so I can go party on a boat. Two of them are saying, hey, I want to run this team really well. Like, how do they kind of, if you've got, let's just say a hundred families, how do they control this this company together? And what are the incentives and the structure like there? it it is a bit of a monarchy um in most Indian business groups and definitely this falls into that category where >> who's the king in this case then >> uh uh Rahul Bajage is the the fourth generation Scion and his brother um uh sorry he's the third generation his children um Rajie and uh Sanjie are the two the fourth generation guys who are in control now so Rajie runs Bajage auto and uh Sanjie runs the uh finance companies Finserve um and indirectly through Finserve he runs finance and um the you know the the family has not been without disputes but I'd say that it's uh the governance at the top is a lot more amicable than it is in some other cases where you know there's a newspaper fight every week >> you let me uh so here's This is another one. So you mentioned a little bit li you said li L li Liberty Media earlier. You know Liberty Media has one of the more interesting hold co unlock stories that I always worry about and it it's this for 10 years Liberty Media Sirius traded for the implied price of their SiriusXM stock was $2.50 on the open market, right? That's kind of where Liberty Serious XM traded. >> Sirius XM traded at $5 per share. So and I was one of them for a while. You know, hedge funds would say, "Hey, you buy Liberty Series, you short Sirius, and when they collapse, you'll make a profit." Now, the issue was Liberty Serious owned 80% of SiriusXM, so there wasn't a lot of borrow. So, you kind of had to go naked and just say, "Oh, Sirius XM trades so far above Liberty Serious that when they collapse, we'll make money." Well, a year or two ago, they collapsed and guess what happened? Sirius XM came all the way down to Liberty Serious's price, right? So it it turned out because SiriusXM was an operating company that w paid a dividend, was in a bunch of ETFs, got tracked like that, its price was actually inflated by the small float. And that's my favorite example because it's Liberty and it was pretty public and but there are other examples of stocks with the small float actually having their price inflated and the hold coach kind of trading at the last the right level. We've mentioned a few times that Moscer trades at 50% of NAV, right? And I can't claim that I've gone and looked at each individual component of NAV, but I just want to ask you like I I know you look at these businesses on a fundamental level. You've looked at all them. What are the chances that we're kind of looking at, oh, the market's got it right because the NAV is actually overstated by the trading prices because you've got all these slivers and they're kind of properly allocating at the holdco level if that makes sense. Well, so these businesses, the underlying operating businesses that the first point is that there's really only one layer of complexity here. Um, you know, you you can view I think it wouldn't be inaccurate to simplify Mahar scooters and its majority owner Bajash holdings down to their their one level of ownership and then below them there's auto, finserve, finance and then a bunch of smaller companies that um really relative to those three aren't aren't that material. Um and uh so so the operating businesses aren't you know a web of cross shareholderings removed from from the ownership level. Um the the uh other point is that these businesses, they're doubling earnings per share in all three cases. Um at at worst every five or six years, you know, so that they're I'm not saying that they're necessarily going to uh grow 20% u each year. I think in the case of the finance businesses, especially for the reasons I I mentioned earlier, it's it's good that they don't um grow double digits every year, but over the long term, they shouldn't compound at that rate. And so, um we don't need for our thesis to work here, we don't need the discount to narrow. It can even widen. I mean, that I would I wouldn't want that to happen. I'd be surprised if it did, but the underlying earnings growth from business is so good. Um that's the most important factor. And then the other one is uh the underlying businesses are sufficiently high quality that I'd want to own them even without the discount. You know they they trade at a weighted average multiple of 25 times uh next year's earnings or next fiscal year's earnings. Um so you can definitely think of examples of Indian uh businesses that uh probably the the best known Indian stock is HDFC Bank and uh it's an extraordinary business. it deserves a premium valuation, but you know, it's it sells at, um, my numbers are probably out of date, but at one point it sold close to 10 times book value. And so, uh, even if I could buy that at a 50% discount, I'd still be worried about overvaluation. In the case of these Bajage businesses, 25 times, uh, weighted average PE, uh, I can indirectly get that down to roughly 12 or 13 through Maharashra scooters. And I'm not buying something that's uh, you know, a distressed asset that I'm not sure if uh the story is going to work out. I'm I'm buying um some real icons of capitalism in the world's fastest growing economy. >> You you mentioned a few times the incentives and they're kind of professionalizing the if they are haven't already, they're professionalizing the incentive structures like all of them. I I have a few questions on that. First, Moscer, the dividend is growing, but it is still a very small dividend. And you know, the first thing I did, and this says financials in English, by the way, which is always awesome for us forward investors, not needing to rely on Google Translate. Uh, but first thing I did was search, they haven't, I don't believe they've ever repurchased shares, and they're kind of, you know, if you and I can do the math of 50% of NAV, they can do the math. So, I just want to ask you, the capital returns look skinny and particularly the lack of share repurchase, like how do you kind of think about that? So um Bajage Auto did a tender offer repurchased a big chunk of stock within the past few years. Uh that was if not their first ever. Uh definitely the first in the group in a long long time. Um I would be surprised if uh other companies in the group didn't do it as well. U India is you know has liberalized in so many ways especially since 1991. But one of the uh ways in which there's a lot of work a lot of reforms still to be done is the the procedures for uh you know stuff like tender offers and uh buyouts of minority shareholders are pretty cumbersome and seb the markets regulator starting to address that um which is making stuff like tender offers easier. So, I I I uh kind of counterintuitively those cumbersome rules, they they were intended presumably to protect minority shareholders. Um, but the the result has been that it's it's hard it's harder to close discounts like this, but I think that's changing. I I'm just laughing because poison pills and stuff were intended to pro to protect US minority shareholders from creeping takeovers and everything, but in practice they're intended to protect management teams from losing their jobs after they've done a terrible job for 10 years and somebody comes in and tries to >> I I just add one more point on on the comparison to to the US. I I've uh can't tell you the number of times that um I've encountered a US company where, you know, there's all these marquee names, marquee institutional investors that own it. Uh and I don't know if you can tell, by the way, that I'm in New York with the sirens behind me. Um but there's all these marquee investors that own the stock. The board is full of quote unquote professionals. Uh and they are terrible capital allocators. They make horrible acquisitions. they u don't really represent the interests of public shareholders whatsoever. And so even though uh it's a quote unquote professionally run company, um you're you'd be much better off uh entrusting your capital to essentially a family trust like like this one where um it's it's uh you know the Bajage family. They're you know generationally wealthy. But um there are multiple examples in our portfolio of companies where I could tell from you know just my interactions with the managements who are also the founders and the majority owners that they they thought of the capital they were allocating as their capital and they were smart about it in the way that people really only at the end of the day are when it it's it's a personal financial stakes for them. And if they're smart and if their market is good, then you'd want to be along for the ride with that. You'd much rather be there with them than in a, you know, with a bunch of uh no offense to your prior Sten and Mackenzie, but a bunch of people being advised by consultants to buy XYZ. >> There there is absolutely no offense taken. Uh, you told me before we started recording that you've got some good friends at McKenzie, so maybe they should take offense. But I'd love your point on US governments cuz I will talk to people all the time about stocks where I'm like, "Hey, I think this is a good asset. Uh, I I just I think it's mismanaged, right? I think the board has stepped on rakes 10 times in a row." And you look at the stock price and a friend will come back and be like, "Hey, this board is great, man. Like, I know this person. They're really sharp. This person is ex Apollo. this person is ex Mackenzie. Like I think this board is great. What are you talking about? Be like, hey, the pedigree doesn't matter here, right? Like I'm talking I'm pointing you to, hey, they did a billion dollar acquisition and they had to write off 85% of the goodwill 18 months later and you're saying, but I think they've got good resumes. Like I I'm I'm just talking actions and I I see that over and over again. So I I love the point you made there. Uh just one last one on Monstros scooters. You mentioned, hey, maybe the Balage family is more incentivized to unlock. They own 50% of Mahashra scooters. If there was an unlock, what does that look like in your mind that kind of, you know, that has that great, if you ever been involved in a holdco and they do the unlock and the stocks up, you know, 30, 40, 50% of the day, you you'll get pretty addicted to it. But what does the unlock actually look like? Do they just say, "Hey, we're spinning out all the Mahashra scooters stock. Hey, Mahasha Scooter is spinning out all of its underlying stock." Like, what what would it look like in your mind? the the cleanest and simplest way to do it probably would be uh to take advantage of the one of the new um u frameworks that SEBI has put in place for hold codes that that I mentioned earlier where it is now possible for a hold co to uh dividend out its holdings so in a taxefficient way and so uh if if uh Marash or scooters decided to it could essentially liquidate itself and that that can be complicated in the case of businesses that own a bunch of unlisted stuff where you know you can dividend out all the uh public shares but uh you're still left with a bunch of stuff that people aren't can't agree on how to value it. Um in the case of my archer scooters it's essentially shares in a handful of companies listed companies and a really dimminimous amount of cash. So it wouldn't be complicated at all to do that. um you could that would be very clean and there really would be no even possibility for conf conflict of interest. Bajage um holdings the majority owner would get its prata share of all the underlying holdings and its shareholdings. It already owns shares directly in u most if not all of those companies and it just own more. Um, a more complex way to do it, uh, would be for PE holdings to simply offer a a premium price to buy out minority shareholders. And even under the slightly loosened rules that are in effect now, uh, looser compared to where they were a few years ago, the it's I won't say impossible to gain the system. I can't think of a way to do it. But the only way one can successfully buy out minority shareholders is if you offer a price that's always has to be a premium to you know the past x number of days average volume weighted price uh that gets you over 90% ownership. So it's basically the determined by that marginal um marginal price that at which someone is willing to tender their their stock would get the majority owner over 90. Interesting. I I didn't have to think it look bar. All right. I have one last question and then we can wrap this up. This is a very strange question to ask, but if I just rewind 10 years and you know I hate rewinding 30 years because you never know what happens, but 10 years Mahashra scooter the stock is up over 10x uh probably a 15 backer over the past 10 years. This is why it's such a weird question. Is that good? Because I I know the India market and I don't mean that facitiously. I know the India market has had a lot of inflation. There's been a lot of other stuff going on. it. It sounds crazy to ask is 15x good, but I is would this beat the index? Has this historically been a good performer that kind of I'm using this as a sign of all of the value creation that you kind of alluded to at the beginning of the podcast. So um we have aim we've outperformed the benchmark Indian indices I think through investments in companies that are typically smaller market cap wise as well as kind of at an earlier stage of their development where you know our archetypal investment is in a business that is not or barely if at all covered by sellside analysts. It's um uh often times it's in a big city like Mumbai or Hyderabad or or Delhi, but oftentimes it's in a city that Westerners haven't typically heard of. It's in an unsexy business. You know, they're making ball bearings or you know, they're they're selling um uh asset management products or even something like cement which is not a commodity like we think of here for that's a whole separate conversation. Um and uh you know there's multiple reasons why they have the potential to outperform. So their earnings are compounding. Their PE typically expands as the story becomes better known. Um they gain coverage from other analysts and investors yada yada. Um the in the case of the underlying Bajash companies uh they're already everybody knows about uh in India knows that Bajash auto is is a good um two and three-wheeler manufacturer that Finser Bajes Finance Baj Finance is probably the single best respected non-banking financial company. Uh so these stories are known. Uh so the the uh reason that they should be able to continue compounding really comes from their earnings uh generation potential and I think that they will be able to pull that off um because of the markets they're in and the shrewd managements they have um uh even without so in a in a way that produces results for shareholders of the hold codes that are are very will be the shareholders will be very happy with even in the absence of a narrowing of the discount. Um and for reasons we've talked about I I I think that I I my confidence about all these various potential catalysts for the discount to uh I should say continue to narrow because it has already started to narrow as of the past couple years. um the the reasons are multiplying sufficiently that um I I might even feel confident enough to say that it we can kind of build it into our expectations for for returns. But um it doesn't it doesn't need to narrow for this to work. >> Cool. Well, hey, I I let's wrap it up there. I think that's a great look forward uh not backward but forward. I I will say jimcon partners.com I will include a link in the show notes. I I actually as obviously prep for this podcast, I started reading a lot of the dispatches from India and I I've really enjoyed those and you get backwards pretty quickly in time when you start reading those. But uh Andre, thank you so much for coming on and pitching interesting bold. >> Could I highlight two could I highlight two blog posts if you have a moment? >> Heck yeah. Throw them on my reading list right now. >> One one is um the uh financialization of Indian savings. Uh so that like I said the the single biggest piece of the some of the parts puzzle here with Maharashra scooters and and the Bajage group more broadly is um financial businesses you know lenders, asset managers, insurance companies and >> uh these are huge opportunities in India that are only just getting started. Um and uh that blog post goes into that. Um the other one is there's a two-part series India before 1991 and India after 1991. And the the after 1991 post specifically I bring up because uh I think it was Rahul Baju. It was the the the dad of the two brothers who are currently running the show. Uh right before India liberalized its economy um under great pressure in 1991. Um he he was running what was then a kind of a you know what we would consider a very provincial company. And they they basically made auto rick shaws and motorcycles just for the Indian market and maybe some uh minimal exports to nearby countries. And this guy uh at the time was very worried that liberalization would uh flood India with um you know cheaper Japanese Korean imports um and destroy his business. Well, the the result was of liberalization was that not only has Bajash thrived at home in ways that he probably could never have even imagined, but um it's almost half its sales now come from exports. So you you can see Bajash motorbikes on the streets in Latin America and the Philippines and um point being that the the the story of this company really has been the the story of India. >> Cool. Well, I will include a link in the show notes. Uh the the India sense and before 1991 posts that you mentioned I'm looking are from 2017. So I didn't go quite that far back into the index in my pod prep, but maybe for the second post I'll uh I'll be ready to speak on those. But Andre, this has been great. Link in the show notes and uh looking to having you forward looking to have looking forward to having you on again for a another episode on India in the near future hopefully. >> Likewise. Thanks Andrew. A quick disclaimer, nothing on this podcast should be considered investment advice. Guests or the hosts may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial adviser. Thanks.
Gymkhana Partners' Andrei Stetsenko on Maharashtra Scooters and Indian Holdcos
Summary
Transcript
You're about to listen to the yet another value podcast. Look, if you like this podcast, the best way to help me make this podcast is to rate, subscribe, review wherever you're watching or listening to it. Uh, today we are going to have Andre from Jim Kana Partners. Andre is going to talk about Maharaj scooters. It is I call it Moscooter because that is the ticker throughout the episode. But I think you're going to enjoy this episode. We have a really good blend of we dive into Mos scooters. is one of the classic hold codes trading at a big discount to their NAV. So we're going to talk specifically about that. We're going to have some policy on hold code. We're going to talk about how he Andre has done a lot of work on the fundamental value of the NAV here. How he thinks about the fundamental value of the NAV, how the incentives of the controlling shareholders have changed over time, why the Indian stock market might be pushing them to kind of unlock value here. So we're going to talk about all that in general. We're going to talk about the Indian stock market in general. We're going to talk about a bunch of other stuff. So I I think you're going to enjoy it. It's a fun conversation. We're going to get there in a second. But first, a word from our sponsors. Today's episode is sponsored by AlphaSense. Look, you know, AlphaSense as a long-term sponsor of this podcast. They've been a great partner. I I think we've done some interesting, unique stuff with them. And today's sponsorship is driven by I just had Doug Laughlin on the podcast. That was podcast number 348. All things AI, power, and corporate governance with semi- analysis is Doug Laughlin. Got absolutely fantastic feedback on the podcast. had multiple people calling me to ask me about different things we talked about. Uh, one person did call me and say, "Hey, Andrew, you got really out of breath talking about something in there." I did cuz I get really excited about stuff sometimes, but it was a fantastic episode. And if you like that episode, the reason Doug came on, the reason AlphaSense is sponsoring it is because Doug did a webinar with AlphaSense decoding the AI infrastructure ecosystem. It just went live. I'll include a link in the show notes and kind of in the clip. You can go register and watch it for yourself if you want to see more of Doug. But, you know, first go listen to episode 348, the episode I just did with Doug. See if you like that. You will like that. And when you like that, you can go listen to the full webinar. Uh, and now to the full episode. All right. Hello and welcome to yet another value podcast with me today. I'm happy to have on Andre. You're going to help have to help me with the last name. I'm not even going to bother to butcher. It's >> from Jim Kana Capital. Andre, how's it going? >> Doing well. Thanks for having me on. >> Hey, thanks for so much for coming on. I'm really excited to talk about the company we're going to talk about today. Uh we'll get there in one second, but first a disclaimer to remind everyone nothing on this podcast investing advice. That's always true. But we're going to be talking about a truly international stock here. So uh keep in mind that carries all sorts of extra risks. You know, consults financial adviser and I've always got a full disclaimer at the end of the episode. Uh Andre. Anyway, the company we're going to talk about today is Mosc. It trades in India. Uh I I'd love to Mahashra Scooter, I guess, is the full thing. I I labeled it Mosscooter because I think you primed me for that. >> Clicker. And that's the exchange ticker. >> Uh we can talk all things Mahashra scooter. I guess let's just start there and then we can zoom out broadly on India or zoom focus here. What is Mahashra scooter and why are they so interesting? >> So uh in India there's this phenomenon of listed hold codes and um I know you've had uh some interesting discussions about other hold codes recently which I'd be glad to tie this into. Um especially the recent ep you had on um Jardine Mat which was fascinating. This is a very different situation from that. Um where whereas in the case of um you know a Jardine or a uh Liberty Media or even a a Bergkshire Hathway even probably the best in class of of the of what people think of when they think of Holdco. you're you're making a bet on um usually one person who's a capital allocator and um you're basically trusting that they're going to uh sustainably outperform the market uh and that that's that's you know comes with its own challenges whereas the kinds of companies uh hold codes that were invested in in India um they are more like family trusts they're um we can talk about how they came about but the way they exist today is they're basically ways for third, fourth, fifth generations um to equitably participate in the economics of a business um that you know their great great great grandfather um started. Um they're more pretty passively run um although that's changing in interesting ways uh in some cases including um the stock we're talking about today. Um and so with respect to the Bajage group specifically um there's a few names in India that um are I think universally considered you know platinum uh seal of corporate governance um truly universally respected. God is one um uh Muragapa out of Chennai is another and Baj is definitely in that um top tier. And so what uh this company al along with another um holding company in the same group that uh we'll definitely want to touch on which is Bajage Holdings. Um these two are basically ways to get in at a discount into one of India's bestrun groups. Um and it's it's not just about buying into the discount. That's not the reason we're invested. That's we view that as kind of a potential um bonus down the line if and when the discount ever narrows. Um the the reason we own this is first and foremost because of um the high quality businesses it owns. >> That's perfect. Let's start with just some details. So most of my listeners are domestic. This is an Indian company. You know, if you're lucky enough to have a Bloomberg or if you pull up Yahoo Finance, you're going to see this listed in different things. Maybe we could just start. What is the market cap of Mahashra scooter? What what are we talking about here? So round numbers, it's $2 billion and um it owns stuff not not stuff that's that it's put value on but stuff that's traded on exchange. So we know what uh the market value is. It owns about 4 billion US worth of um Bash company shares. So $2 billion company, $4 billion of assets, no debt. >> That's that's perfect. And I just want I really wanted to express that because I think you know I've looked at weird Korean hold codes and stuff and sometimes you're looking be like oh it's a $75 million market company and I think people just like press off at that point. This is a pretty large company. So let's move to the next point. I I want to dive into a lot of the things you said but the market's a competitive place. You know this is trading you you mentioned the hold code discount that's trading for kind of 50% of MNAV and MNAV. I'm on Bitcoin companies right now of NAV and most of that NAV is publicly traded companies. So you're kind of getting Mark, but what are you seeing that you think the market is missing that makes this an alpha opportunity? >> So um if you are uh invested in some, you know, any run-of-the-mill ETF um that markets itself as an India ETF, um most likely that ETF owns at least a couple of the Bajage operating companies. Um you know, these are blue chip stocks. Um at the same time the Bajash Fins Serve especially and Bajash Finance the the two financial holdings that make up the vast majority the line share of of um the some of the parts or the NAV whatever you want to call it in this case um these are big but um for reasons I'm happy to get into they're destined to keep compounding you know not not at 5% a year more like 20% yearon year for probably decades. I mean realistically decades because they are plays on insurance and asset management and uh commercial lending things that are um you know have grown a lot over the last decade or two in India but are still very much early days. >> Let let me ask a question there. So a lot of the underlying holdings of MOS scooters is uh is commercial insurance all that sort of stuff and you said hey these are plays that can grow at 20% per year and I hear that right obviously I India is a huge place it's an emerging economy all this sort of stuff I definitely hear that but then I also say hey what is the scariest thing as an investor and it's a fast growing insurance company or a fast any type of fast growing financial and you know if you've got this huge market that's growing rapidly. Like at some point, you'd have to imagine the giant insurers are going to move in here. So, I guess I'm posing this question in two ways. Yes, there are tailwinds here, but is there any on one hand, are you at all scared that hey, they've been doing a ton of quick growing underwriting? And on the other hand, when you say, hey, this can compound for years. Are you worried about as the market kind of opens up, you get a ton a flood of new money into this then and that's going to bring returns down? And when you say, "Hey, I think this can compound in the double digits for years." No, insurance commodity business. Capital comes in and all the returns down. So, I think I kind of presented two counterveailing views there. I'll I'll kind of let you take them. >> Yeah. Yeah. But both very uh valid good points. Um on the subject of insurance specifically, I I couldn't agree more. The same really is true of um just a basic lending business. I mean if uh you have a lender that's suddenly issuing a ton of loans that's that's a red flag and >> um my partner Steve and I one of our um most memorable early experiences in India we've been going there since 2012 um is was recalling analysts in a group meeting being IATE with this uh CFO or CEO of a of a lending business what they call non-bank financial company um because they weren't growing growing as fast as their competitors. And uh the reason they weren't growing as fast is because pricing was getting worse, underwriting was getting looser, and they didn't want to participate in that. And um if you look at the track record of Bajash Finance um the non-banking financial company that uh accounts for the single biggest chunk of um the Maharash scooter some of the parts um and Bajash Finserve which owns majority of Bajash finance um but in addition to that also has a bunch of businesses that include insurance like you said these businesses uh they do not grow at 20% year after year after year they compounded that on average over a decade or longer and uh in any given year they may not grow barely at all and other years they may grow way north of 20%. Um and I think if if you judge stocks based on Greek letters and complex formulas that take you know equate volatility with risk then you may not like that. But um that that to me is a sign of uh discipline management where they're avoiding exactly the kind of pitfalls you described. Um as for insurance uh point very well taken the thing I'd say uh with respect to Baja's participation in that market is that until a few months ago uh it was via two joint ventures with Alons the German insurance or I guess just financial services giant. um they bought out alons earlier this year and after trying to for a long long time and uh I think there are two things that really differentiate insurance as many listeners might conceive of it coming from a developed world perspective and how it works in India one is that uh it's such a nent industry that there really isn't that much fighting over good customers um as we might be used to here um Most people who are signing up for insurance policies in India are firsttime insurance customers. Uh that's definitely not the case in the US. You know, most customer acquisitions in the US are uh one company stealing a customer from another. Um and the way you do that typically is you think you you can afford to offer them a better price. that that's not as much of a factor in India where uh you know living standards uh are improving living standards are allowing people to think about the utility of um an insurance product for the very first time. And then um the uh other issue is that uh with Bajash specifically same as in their lending business like I just described um these uh insurance businesses have not grown as fast as some of their competitors. Uh and I think that's for a very good reason. It's because they they they realize that uh succeeding in a financial business isn't about lending money. It's about collecting. Let me let me jump to a completely different uh point. You know, you me just you mentioned at the start of your answer going to India a few times. So I'll ramble and then I'll ask a question. You know, one thing I worry as a guy who operates out of a shoe box uh office in New York City is being the psy at the poker table when it comes to international stocks. You know, I I don't think I've told the story before, but a few years ago I I got pitched a stock in Eastern Europe and I got really excited about it. It like literally seemed too good to be true. And then I was about to pull the trigger on it and right before I did, I mentioned to a friend and he was like, "Oh yeah, it's widely known that the numbers are great, but that's like a front for the the mafia." And then I just kind of passed because I was like, "I don't really need to get involved with the mafia." But I I point that out is, you know, I'm reading the spreadsheets online and I always worry I could be the sucker at the py at the poker table because it's a front for the mob or something. So, uh, I I I I want to ask you, let me let me rant just a little bit more. I have a friend who is so good at this, whenever somebody pitches him a stock, like when I would have pitched him this stock, he would say, "Hey, where would you buy a hammer if you were in that market and looking at a local store?" So, I'll ask you, if you were in India, where would you buy a hammer if you were kind of walking around? >> Um, probably at a Kiran Corner shop. Um, I doubt they have it at any of the fancy malls that are attached to the kinds of hotels that foreigners stay at. >> Nope. It's a great That's a fine answer. His point would be if I asked you domestically, you could list like a hundred places. If he asked me to ask you like Ace Hardware, uh, the way he told the story or the way I heard him the first time was somebody pitched a stock uh, a German stock at a conference and it was a really interesting pitch and he was the first question. He said, "Hey, if you weren't in Germany, where would you buy a hammer?" And the guy couldn't answer and the guy he was like you could ask uh >> there's actually a big culture conflict qu thing that that immediately made me realize that I just have to interject with which is >> I think if you asked an Indian that question they would laugh because they'd say I don't pick up a hammer I pay people to do that because labor is so much cheaper there. um when wealthy Indians come to the states that's you that's and vice versa for me it's a culture shock um seeing it there but you know people we would consider middle middle class um in the states in India have household staff so [laughter] they they truly may not know where to get a hammer >> well I was rambling thank you for cutting me off I I'd love to just ask because you can answer that question and because I kind of know the answer how do you you know as somebody who was raised in the US college how do you guys get kind of a handle on the local you're Indian focused fund on the local Indian. >> That uh that's I'd say the single most important screen in um the research we do. We have this database of about 2,000 companies that's filled with um literally every little last piece of scuttlebutt down to something we might have overheard in a hallway. Uh and it's the product of hundreds of meetings with hundreds of companies most of which we didn't invest in. uh as well as meetings with uh what we consider now it's not formalized m might be one day uh but it's an informal network of local investors, business people, analysts um financial journalists, people who uh know the inside story at uh you know just about any business that we might encounter and uh that is has been invaluable as a screening tool. We've uh not to say that we've never made a mistake. Uh I can definitely think of at least one. But um I'd say that we've been successful in avoiding any uh mistake that would in terms of you know investing capital in a business that was fraudulent or or what have you. I definitely avoided anything uh that would have been uh really significant for the fund. Uh we we also I mean we also remain humble by being pretty diversified. Uh we own uh over 50 stocks and our you know top position is less than 5% typically less than 4% of capital. >> And just to clarify you guys are in you're running in an India focused fund is kind of what I I was driving out there too. >> Correct. And you know we spend two weeks uh twice a year each on the ground in India. So roughly a month out of every year and have every year uh since 2012 with the exception of COVID and uh we now have a full-time analyst on the ground there which has also been critical but but I'd say even before we had this analyst when it was just us 11 months out of the year um here in the states one month there um it was a lot of cultivating this local network so we could get feedback on well you know what's the reputation of these guys uh have they been known when we we're in a meeting with a competitor we ask them have they been known to you know uh compete in a way that's maybe not above board uh and you piece all these data points together and you get a pretty good picture and I'll I'll just one last related comment on this is that u you know I mentioned at the outset that Bajage is in what I'd consider to be the top tier of Indian firms or Indian family groups in terms of corporate governance And uh you know I if if I'm wrong about Bajage and God having excellent corporate governance then um I then I don't know what I'm right about. I I I have great confidence about this this particular point. Um and I have definitely encountered plenty of uh Indian groups that uh I would rate very very poorly um on this metric. whereas literally every single data point um points in the positive direction with these guys. >> Let me I I'm just a dumb generalist. You're an India expert market. I guess most of my listeners have not spent a ton of time in India. So let me just stay kind of broad right now. What's like what's the biggest thing that me as a generalist who maybe has only seen stories about especially the Indian market out the corner of my eye? What's the biggest misperception that you think generalists or people who don't you know live and breathe the Indian market that like you do have about the Indian market? >> I think a lot of people especially in America have an outdated picture of India. you know, they think of uh Slumb Dog Millionaire to be perfectly honest. Just, you know, a picture that's uh exaggerated at best and just distorted at worst of um you know, a country that's not not so much a a a showcase of capitalism as a showcase of, you know, development assistance when the reality is an Indian company, Tata, is the biggest employer in the UK. Uh India has the world's biggest oil refinery, biggest steel mill. Um there when you go to Mumbai as a as a New Yorker myself, you are too. You you just mentioned um and so I'm sure that you're regularly frustrated with how we can't seem to build anything in the city, you know, even repair the the subway system we have. Whereas you go to Mumbai, there's something like a dozen subway lines under construction simultaneously. Uh there's a new airport being built, there's a new highspeed rail line. It feels like u you know China uh two decades ago. Uh but it I'd say even more impressive than that because this is being done in the context of a very pluralistic multicultural democracy. Um uh the other thing I'd say is that India is the only market truly the only market that gives the US a run for its money in terms of uh fundamentals. And uh I'd say that the the drivers of u you know the the EP whether you look at EPS growth or actual equity returns um benchmark index returns the the underlying drivers of that are I think very durable. India is the world's fastest growing major economy. Has been for years, will be for years. Um it'll eclipse Germany probably in the next 18 months uh to become the world's uh uh third or fourth biggest economy. It uh its demographics are better than really any other major economy on earth. Uh it's urbanization is still in its early stages. And so that's as China showed over the past two decades until finally stalling out more recently that that's a driver that uh keeps going and going when you move people from relatively poorly paid agricultural work to higher productivity jobs in cities. um that is a tremendously uh important driver for you know years after years of recurring um economic development um GDP growth and ultimately equity earnings. >> Let me Okay, so we've we've talked about India broadly. I'm going to try to start narrowing us back down back to Moscooters and I I'm going to start with this question. uh Indian hold co I I think there are quite a few again I I'm just a generalist but I I think there are quite a few of these Indian hold codes that trade at a discount to their NAV so before asking you to compare them and Mosc and everything let me just ask broadly I know you think Indian hold co as a whole are attractive I'd love to just broadly talk about that uh your overall views on Indian hold co >> sure um so like with the universe of Indian stocks as a whole there's uh there's good ones and there's bad ones. I mean, there's definitely holding companies that uh I'm not interested in even though they optically trade at big discounts to their underlying holdings because what uh I'm really looking for is uh to be a shareholder in a really high quality business with a long runway for continued compounding growth. Um when there's an opportunity to gain exposure to that at a big juicy discount, that's gravy. that's that's not, you know, we're not invested in the hold codes that we're invested in because of the discounts. We're invested because we really like what they own. Um, and the just to tie this back to what where we were talking at the start um about what Indian hold what differentiates them from what some listeners might uh be thinking of when they think of that word. Um, these are more like uh family trusts. You know, they're diversified. They're almost passively managed. They're owners in a diversified set of businesses that are united by history, but really not not much else. Um, it it's not like you're making a bet on a on a John Malone. You're you're making a bet on a set of companies that are, you know, household names in their respective sectors. Um, and so the the ones we own, including Maharashtra Scooters, u I'll throw out another couple names. uh one is u cola mandolum which is a hold co of the muragapa group which I I mentioned earlier out of chennai another extremely wellrespected group industries is another um although that discount has uh narrowed so considerably that um we've sold a bunch of shares so there are I'd say a maybe a dozen out of a universe of at least triple or quadruple that number of listed Indian hold codes that that I'd say are uh I I I have good enough confidence in both the quality of the underlying assets and the quality of the governance to to really um to really like them. >> Well, let's go to I'll jump that point and let's go to Mosc then. Um you know I think one question I would have here is you mentioned highquality governments that but it is a nesting you know just to me reading the the documents it is an interlocking nest of uh kind of companies that own shares in each other right so I I would just ask you on this hold co like the the the biggest worry I have with hold codes is the incentives and when I look at this like it doesn't seem like there's really an incentive to unlock the value here and I I really worry when you've got interlocking sets of companies like hey forget the incentives if the assets are good it goes up but I really worry about the uh potential for management say hey let's you heard it on Jardine Mat right where I was worried hey there's an incentive to grow at any cost because you can pay yourself more if you grow so I'd love to just talk about the incentives both at the unlock the holdco level and at the hey do we kind of get paid when these guys get paid or do these guys get paid when we get paid or do they just figure got a way to pay themselves no matter what. >> Yeah, I I uh sense that part probably one of the things that's in the back of your mind and asking that um are Korean hold codes where the the web >> I I have that I have a note tell me how this is different than Korea was one of the notes I had. >> Yeah, I've I've uh I've diagrammed out the various Indian hold code groups and they're uh in some cases complex but not so complex that you can't draw a series of arrows and figure out the inter relationships. Whereas in the case of some of these Korean groups, uh the the whole point it seems to be to be confusing and convoluted and ultimately uh the thing that motivates something that's that convoluted typically is uh a desire to control a web of companies uh because you own 51% of something that owns 51% of something that owns so so you don't have to actually have all the capital at stake if you just owned it outright. um that is the case in a couple Indian um uh listed groups but not in the case of the high-quality ones I've I've been mentioning. The the one that uh where that would be a fairly accurate or more accurate description is Jindle. Uh Jindel is a is a big name in India. It's it uh there's a number of uh branches of the family that have their own listed entities and uh JSW Steel um Gentle Steel and Power some of their operating businesses. But yeah, if you try to diagram that out, it's it's doable. But there's so many unlisted intermedi intermediaries and uh you know, it's pretty clear that the point of all these uh uh listed and unlisted hold uh is to preserve family control above all else. It's not about value unlocking. In the case of Bajage and Maharashtra scooters, uh the the exciting thing I'd say in terms of potential catalysts is that there's really are a number of things that are moving in the right direction. Um number one is that SEBI so India's SEC uh as of last fall of about a year ago has uh started pursuing u you know publicly pursuing policies that are specifically aimed at um reducing the discounts to book value of uh what they call investment holding companies a category that includes Maharashtra scooters. Uh and so they define uh this as companies that uh trade at a big uh discount to their uh reported book value and that that's the fact that this is on Seby's radar at all um is big. So they've started uh implementing reforms that won't change anything uh tomorrow, but they set the groundwork for uh over the coming years for a potentially momentous shift where uh it's uh become much easier for companies to um uh dividend out not just the uh earnings they are getting in the form of dividend income from their equity holdings, but the actual shares. So you can now distribute shares to as as a whole go to your shareholders in a taxefficient way. You uh the tax treatment of dividends has improved and so uh companies like Maharash scooters have uh you know quadrupled their dividends uh over the past few years. >> Can I pause you there? This this was actually the most exciting part of the pitch for me because as soon as I read it, I was like, "Oh, Japan." Like, obviously there's a lot of similarities between many of the things you're talking about and Japan. And you and I 12 years ago could have gone and literally thrown a dart at any Japanese stock board and hit a company that traded for less than cash and had a good business. But the issue is none of them did anything. And then what, like 2, three years ago, the Japanese stockboard got serious about things not trading below book value. And I I mean the past 12 months, all of these things, you know, I I'd have notes 10 years ago, trades below cash. Eight years ago, trades below cash. Two years ago, trades below cash. And all of a sudden, they're all ripping because they're returning capital and doing all this stuff. And you know, when a national government and the regulator gets interested in these things, not trading below book, that tends to be when they stop training below book. So to me, that was the most exciting because I I could see the parallels to Japan just instantly there. >> Yeah, that's a really good analogy. Um I think that's a good description of what's happening. The the other other thing that uh is Bajage specific uh is that so I I've met with uh the management of this group. They were one of the first companies I met with I think uh first in 2014 or 2015 and then again in 2017. I went down to Pune about two or three hours south of Mumbai um to the headquarters of all these businesses and you know at the time especially at the first meeting I remember the CFO I was supposed to meet the CFO of the holding company and I walked into a meeting with the CFO his business card said Paj Auto and I was a little confused thinking well am I meeting with the wrong guy? turned out he he had both jobs. Um the the holding company wasn't really thought of as an independent unit as its own entity. It was it was kind he the the literal words he used was it's the central bank of the group. So its job was to uh you know give uh loans to operating underlying businesses to uh you know basically serve as a captive financeier. Um whereas oh oh and he also me said that you know very uh with great certainty he said that you know these holding companies Bajage and Maharashtra they'll never sell any of the shares they own and the underlying businesses that's they're not they're not trying to uh you know be be smart for their shareholders that that's not their purpose. Fast forward to uh the last few years and uh so the executive ranks have all turned over that the guy I met with is no longer there. the there uh is still some uh managerial overlap but it's typically uh in you know the case of the investor investor relations person not so much in the case of the very top job um and Bajage Holdings which is kind of the older brother of Maharasher scooters about four times the market cap and a narrower discount um to some of the parts um that company for the very first time or at least the first time in decades sold some shares within the past couple years of its underlying Bajash holdings um and uh essentially distributed the the um the proceeds to its shareholders um via increased dividends. Uh it that company is the majority shareholder of Mar after scooters and so one could very easily imagine uh a day where I'm not saying this uh is is likely to happen soon um even a decade from now. I'm just saying that uh if there was one Indian holding company where I could very clearly see a path to uh waking up to a new story about some serious value unlocking and a discount closing, it would be this specific case because you have a uh majority owner other co that is for the first time being run professionally in a way that uh is allocating capital in the interest of its shareholders, not on the interests of the broader group. um that uh could in a very in a way that was accretive for everyone do a buyout of uh the minority interest in Maharashra scooters. Le >> let's talk a little bit more about Mos Maharasha scooters and their controlling shareholder. So the controller shareholder owns about 50% of M scooters and I just want to ask like what are their what are their incentives to unlock value at Moscooters or you know you do worry I I have seen in the US all the time terrible ownership groups who have who have entrenched themselves and it always looks great right the some of the parts always says it's worth a thousand and the stock always trades it trades at 100 but every year that a thousand produces a hundred of earnings and the earnings all go to the the controlling shareholder and shareholders always sitting there frustrated like why are we never getting anything but I I just want to ask like what is the incentive structure for the controlling shareholders everyone to unlock value or maybe to take the value for themselves. Yeah, the the uh uh refrain that we have heard over and over again over the past few years in India from the local network that I alluded to earlier is that whereas a decade ago, if you were a crook in India, you did it in a way that was you could detect uh in the notes to a financial report. you know it would be something like siphoning funds to a affiliate unlisted affiliate for some nebulous uh service. Now uh Indian managers, executives, business owners, the thing they care about is market cap. Um it's it's not about it's not about pulling up to their local Jim Kana Club in uh a fancy car. It's about being the guy in the room who has the biggest market cap. And so that that's a very important shift in motivations across India. And in the case of this group specifically, I'd say the the family uh that's in control now, they're the fourth generation um dating back to the the founder um a century ago. And once you've gone that far down through a family tree, if you kind of picture it, Indians have big families. that the ownership that uh even 50 years ago would have been split among maybe a couple dozen individuals now is split up uh among over you know 100 or more individual people with the last name Bajage and so uh their interests as smaller interests in a very valuable empire uh are varied. You know, someone might be uh getting married, someone might be buying uh homes, someone might be sending their kids abroad for education. And the the reasons they might want um to make some of their wealth liquid are sufficiently diverse and varied. Now that there is no monolith u that uh you know would exert the kind of pressure in a that that might in a a more tightly controlled or earlier generation. um family group uh cause the kind of risks that that you're talking about >> at the top coast you mentioned Baj controlled by literally hundreds of family members at this this point >> how how do they kind of get together and organize for for this company like I I will just in sports a lot of times you'll hear hey you know most of these sports teams were bought by one rich man in their 80 in the 1980s and then he passes away or hands control over to their family and sometimes like James Dolan it's like nine kids and grandkids, but he's kind of got the controlling share, but he still has to please them. Or sometimes you'll hear it passes on and there's like seven kids and there's just huge fights where, you know, three of them are there, hey, I just want the dividends so I can go party on a boat. Two of them are saying, hey, I want to run this team really well. Like, how do they kind of, if you've got, let's just say a hundred families, how do they control this this company together? And what are the incentives and the structure like there? it it is a bit of a monarchy um in most Indian business groups and definitely this falls into that category where >> who's the king in this case then >> uh uh Rahul Bajage is the the fourth generation Scion and his brother um uh sorry he's the third generation his children um Rajie and uh Sanjie are the two the fourth generation guys who are in control now so Rajie runs Bajage auto and uh Sanjie runs the uh finance companies Finserve um and indirectly through Finserve he runs finance and um the you know the the family has not been without disputes but I'd say that it's uh the governance at the top is a lot more amicable than it is in some other cases where you know there's a newspaper fight every week >> you let me uh so here's This is another one. So you mentioned a little bit li you said li L li Liberty Media earlier. You know Liberty Media has one of the more interesting hold co unlock stories that I always worry about and it it's this for 10 years Liberty Media Sirius traded for the implied price of their SiriusXM stock was $2.50 on the open market, right? That's kind of where Liberty Serious XM traded. >> Sirius XM traded at $5 per share. So and I was one of them for a while. You know, hedge funds would say, "Hey, you buy Liberty Series, you short Sirius, and when they collapse, you'll make a profit." Now, the issue was Liberty Serious owned 80% of SiriusXM, so there wasn't a lot of borrow. So, you kind of had to go naked and just say, "Oh, Sirius XM trades so far above Liberty Serious that when they collapse, we'll make money." Well, a year or two ago, they collapsed and guess what happened? Sirius XM came all the way down to Liberty Serious's price, right? So it it turned out because SiriusXM was an operating company that w paid a dividend, was in a bunch of ETFs, got tracked like that, its price was actually inflated by the small float. And that's my favorite example because it's Liberty and it was pretty public and but there are other examples of stocks with the small float actually having their price inflated and the hold coach kind of trading at the last the right level. We've mentioned a few times that Moscer trades at 50% of NAV, right? And I can't claim that I've gone and looked at each individual component of NAV, but I just want to ask you like I I know you look at these businesses on a fundamental level. You've looked at all them. What are the chances that we're kind of looking at, oh, the market's got it right because the NAV is actually overstated by the trading prices because you've got all these slivers and they're kind of properly allocating at the holdco level if that makes sense. Well, so these businesses, the underlying operating businesses that the first point is that there's really only one layer of complexity here. Um, you know, you you can view I think it wouldn't be inaccurate to simplify Mahar scooters and its majority owner Bajash holdings down to their their one level of ownership and then below them there's auto, finserve, finance and then a bunch of smaller companies that um really relative to those three aren't aren't that material. Um and uh so so the operating businesses aren't you know a web of cross shareholderings removed from from the ownership level. Um the the uh other point is that these businesses, they're doubling earnings per share in all three cases. Um at at worst every five or six years, you know, so that they're I'm not saying that they're necessarily going to uh grow 20% u each year. I think in the case of the finance businesses, especially for the reasons I I mentioned earlier, it's it's good that they don't um grow double digits every year, but over the long term, they shouldn't compound at that rate. And so, um we don't need for our thesis to work here, we don't need the discount to narrow. It can even widen. I mean, that I would I wouldn't want that to happen. I'd be surprised if it did, but the underlying earnings growth from business is so good. Um that's the most important factor. And then the other one is uh the underlying businesses are sufficiently high quality that I'd want to own them even without the discount. You know they they trade at a weighted average multiple of 25 times uh next year's earnings or next fiscal year's earnings. Um so you can definitely think of examples of Indian uh businesses that uh probably the the best known Indian stock is HDFC Bank and uh it's an extraordinary business. it deserves a premium valuation, but you know, it's it sells at, um, my numbers are probably out of date, but at one point it sold close to 10 times book value. And so, uh, even if I could buy that at a 50% discount, I'd still be worried about overvaluation. In the case of these Bajage businesses, 25 times, uh, weighted average PE, uh, I can indirectly get that down to roughly 12 or 13 through Maharashra scooters. And I'm not buying something that's uh, you know, a distressed asset that I'm not sure if uh the story is going to work out. I'm I'm buying um some real icons of capitalism in the world's fastest growing economy. >> You you mentioned a few times the incentives and they're kind of professionalizing the if they are haven't already, they're professionalizing the incentive structures like all of them. I I have a few questions on that. First, Moscer, the dividend is growing, but it is still a very small dividend. And you know, the first thing I did, and this says financials in English, by the way, which is always awesome for us forward investors, not needing to rely on Google Translate. Uh, but first thing I did was search, they haven't, I don't believe they've ever repurchased shares, and they're kind of, you know, if you and I can do the math of 50% of NAV, they can do the math. So, I just want to ask you, the capital returns look skinny and particularly the lack of share repurchase, like how do you kind of think about that? So um Bajage Auto did a tender offer repurchased a big chunk of stock within the past few years. Uh that was if not their first ever. Uh definitely the first in the group in a long long time. Um I would be surprised if uh other companies in the group didn't do it as well. U India is you know has liberalized in so many ways especially since 1991. But one of the uh ways in which there's a lot of work a lot of reforms still to be done is the the procedures for uh you know stuff like tender offers and uh buyouts of minority shareholders are pretty cumbersome and seb the markets regulator starting to address that um which is making stuff like tender offers easier. So, I I I uh kind of counterintuitively those cumbersome rules, they they were intended presumably to protect minority shareholders. Um, but the the result has been that it's it's hard it's harder to close discounts like this, but I think that's changing. I I'm just laughing because poison pills and stuff were intended to pro to protect US minority shareholders from creeping takeovers and everything, but in practice they're intended to protect management teams from losing their jobs after they've done a terrible job for 10 years and somebody comes in and tries to >> I I just add one more point on on the comparison to to the US. I I've uh can't tell you the number of times that um I've encountered a US company where, you know, there's all these marquee names, marquee institutional investors that own it. Uh and I don't know if you can tell, by the way, that I'm in New York with the sirens behind me. Um but there's all these marquee investors that own the stock. The board is full of quote unquote professionals. Uh and they are terrible capital allocators. They make horrible acquisitions. they u don't really represent the interests of public shareholders whatsoever. And so even though uh it's a quote unquote professionally run company, um you're you'd be much better off uh entrusting your capital to essentially a family trust like like this one where um it's it's uh you know the Bajage family. They're you know generationally wealthy. But um there are multiple examples in our portfolio of companies where I could tell from you know just my interactions with the managements who are also the founders and the majority owners that they they thought of the capital they were allocating as their capital and they were smart about it in the way that people really only at the end of the day are when it it's it's a personal financial stakes for them. And if they're smart and if their market is good, then you'd want to be along for the ride with that. You'd much rather be there with them than in a, you know, with a bunch of uh no offense to your prior Sten and Mackenzie, but a bunch of people being advised by consultants to buy XYZ. >> There there is absolutely no offense taken. Uh, you told me before we started recording that you've got some good friends at McKenzie, so maybe they should take offense. But I'd love your point on US governments cuz I will talk to people all the time about stocks where I'm like, "Hey, I think this is a good asset. Uh, I I just I think it's mismanaged, right? I think the board has stepped on rakes 10 times in a row." And you look at the stock price and a friend will come back and be like, "Hey, this board is great, man. Like, I know this person. They're really sharp. This person is ex Apollo. this person is ex Mackenzie. Like I think this board is great. What are you talking about? Be like, hey, the pedigree doesn't matter here, right? Like I'm talking I'm pointing you to, hey, they did a billion dollar acquisition and they had to write off 85% of the goodwill 18 months later and you're saying, but I think they've got good resumes. Like I I'm I'm just talking actions and I I see that over and over again. So I I love the point you made there. Uh just one last one on Monstros scooters. You mentioned, hey, maybe the Balage family is more incentivized to unlock. They own 50% of Mahashra scooters. If there was an unlock, what does that look like in your mind that kind of, you know, that has that great, if you ever been involved in a holdco and they do the unlock and the stocks up, you know, 30, 40, 50% of the day, you you'll get pretty addicted to it. But what does the unlock actually look like? Do they just say, "Hey, we're spinning out all the Mahashra scooters stock. Hey, Mahasha Scooter is spinning out all of its underlying stock." Like, what what would it look like in your mind? the the cleanest and simplest way to do it probably would be uh to take advantage of the one of the new um u frameworks that SEBI has put in place for hold codes that that I mentioned earlier where it is now possible for a hold co to uh dividend out its holdings so in a taxefficient way and so uh if if uh Marash or scooters decided to it could essentially liquidate itself and that that can be complicated in the case of businesses that own a bunch of unlisted stuff where you know you can dividend out all the uh public shares but uh you're still left with a bunch of stuff that people aren't can't agree on how to value it. Um in the case of my archer scooters it's essentially shares in a handful of companies listed companies and a really dimminimous amount of cash. So it wouldn't be complicated at all to do that. um you could that would be very clean and there really would be no even possibility for conf conflict of interest. Bajage um holdings the majority owner would get its prata share of all the underlying holdings and its shareholdings. It already owns shares directly in u most if not all of those companies and it just own more. Um, a more complex way to do it, uh, would be for PE holdings to simply offer a a premium price to buy out minority shareholders. And even under the slightly loosened rules that are in effect now, uh, looser compared to where they were a few years ago, the it's I won't say impossible to gain the system. I can't think of a way to do it. But the only way one can successfully buy out minority shareholders is if you offer a price that's always has to be a premium to you know the past x number of days average volume weighted price uh that gets you over 90% ownership. So it's basically the determined by that marginal um marginal price that at which someone is willing to tender their their stock would get the majority owner over 90. Interesting. I I didn't have to think it look bar. All right. I have one last question and then we can wrap this up. This is a very strange question to ask, but if I just rewind 10 years and you know I hate rewinding 30 years because you never know what happens, but 10 years Mahashra scooter the stock is up over 10x uh probably a 15 backer over the past 10 years. This is why it's such a weird question. Is that good? Because I I know the India market and I don't mean that facitiously. I know the India market has had a lot of inflation. There's been a lot of other stuff going on. it. It sounds crazy to ask is 15x good, but I is would this beat the index? Has this historically been a good performer that kind of I'm using this as a sign of all of the value creation that you kind of alluded to at the beginning of the podcast. So um we have aim we've outperformed the benchmark Indian indices I think through investments in companies that are typically smaller market cap wise as well as kind of at an earlier stage of their development where you know our archetypal investment is in a business that is not or barely if at all covered by sellside analysts. It's um uh often times it's in a big city like Mumbai or Hyderabad or or Delhi, but oftentimes it's in a city that Westerners haven't typically heard of. It's in an unsexy business. You know, they're making ball bearings or you know, they're they're selling um uh asset management products or even something like cement which is not a commodity like we think of here for that's a whole separate conversation. Um and uh you know there's multiple reasons why they have the potential to outperform. So their earnings are compounding. Their PE typically expands as the story becomes better known. Um they gain coverage from other analysts and investors yada yada. Um the in the case of the underlying Bajash companies uh they're already everybody knows about uh in India knows that Bajash auto is is a good um two and three-wheeler manufacturer that Finser Bajes Finance Baj Finance is probably the single best respected non-banking financial company. Uh so these stories are known. Uh so the the uh reason that they should be able to continue compounding really comes from their earnings uh generation potential and I think that they will be able to pull that off um because of the markets they're in and the shrewd managements they have um uh even without so in a in a way that produces results for shareholders of the hold codes that are are very will be the shareholders will be very happy with even in the absence of a narrowing of the discount. Um and for reasons we've talked about I I I think that I I my confidence about all these various potential catalysts for the discount to uh I should say continue to narrow because it has already started to narrow as of the past couple years. um the the reasons are multiplying sufficiently that um I I might even feel confident enough to say that it we can kind of build it into our expectations for for returns. But um it doesn't it doesn't need to narrow for this to work. >> Cool. Well, hey, I I let's wrap it up there. I think that's a great look forward uh not backward but forward. I I will say jimcon partners.com I will include a link in the show notes. I I actually as obviously prep for this podcast, I started reading a lot of the dispatches from India and I I've really enjoyed those and you get backwards pretty quickly in time when you start reading those. But uh Andre, thank you so much for coming on and pitching interesting bold. >> Could I highlight two could I highlight two blog posts if you have a moment? >> Heck yeah. Throw them on my reading list right now. >> One one is um the uh financialization of Indian savings. Uh so that like I said the the single biggest piece of the some of the parts puzzle here with Maharashra scooters and and the Bajage group more broadly is um financial businesses you know lenders, asset managers, insurance companies and >> uh these are huge opportunities in India that are only just getting started. Um and uh that blog post goes into that. Um the other one is there's a two-part series India before 1991 and India after 1991. And the the after 1991 post specifically I bring up because uh I think it was Rahul Baju. It was the the the dad of the two brothers who are currently running the show. Uh right before India liberalized its economy um under great pressure in 1991. Um he he was running what was then a kind of a you know what we would consider a very provincial company. And they they basically made auto rick shaws and motorcycles just for the Indian market and maybe some uh minimal exports to nearby countries. And this guy uh at the time was very worried that liberalization would uh flood India with um you know cheaper Japanese Korean imports um and destroy his business. Well, the the result was of liberalization was that not only has Bajash thrived at home in ways that he probably could never have even imagined, but um it's almost half its sales now come from exports. So you you can see Bajash motorbikes on the streets in Latin America and the Philippines and um point being that the the the story of this company really has been the the story of India. >> Cool. Well, I will include a link in the show notes. Uh the the India sense and before 1991 posts that you mentioned I'm looking are from 2017. So I didn't go quite that far back into the index in my pod prep, but maybe for the second post I'll uh I'll be ready to speak on those. But Andre, this has been great. Link in the show notes and uh looking to having you forward looking to have looking forward to having you on again for a another episode on India in the near future hopefully. >> Likewise. Thanks Andrew. A quick disclaimer, nothing on this podcast should be considered investment advice. Guests or the hosts may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial adviser. Thanks.