1. Private and Confidential – Not for Circulation 11Private and Confidential
Private and Confidential
Not for Circulation
Private Equity and Public Markets
My Key Learnings Over The Last Two Decades
February 05, 2015
T&I India

2. Private and Confidential – Not for Circulation 2
Great Business + Great Management + Reasonable Valuations = Solid Value Creation
 Some experience from Private deals:
 Acquired controlling stake in Landmark Partners and Northgate Capital
 Both of these companies have unique assets, exceptional management teams,
hard-to-replicate relationships and very powerful network effects
 Since both businesses had locked revenues at the time of investment there was
low downside risk
 Profits generated from both these businesses have more than doubled in last 3
years
 Value of acquired stake in both firms has significantly increased

3. Private and Confidential – Not for Circulation 3
Great Business + Great Management + Reasonable Valuations = Solid Value Creation
“The investor rides along in a sidecar pulled by a powerful motorcycle. The more the investor is
distinctively positioned to have confidence in the driver’s integrity and his motorcycle’s capabilities,
the more attractive the investment.” - Richard Zeckhauser
 “It doesn’t matter if an investment is public or private, fractional or full ownership, or in debt,
preferred shares, or common equity” – Warren Buffett; …… the same investment principles apply
 Most investors tend to be passive and separate from the management..hence most investments
are akin to sidecar investments

4. Private and Confidential – Not for Circulation 4
The Market Often Misunderstands A Great Manager
 Relaxo Footwear Limited
 Promoter family company owned the Relaxo brand - key source of its moat
 “There is not just one cockroach in the kitchen” – Warren Buffett… if the fellow was a
crook we would have found other clues
 Subsequently, promoters even transferred the brand to the company for ~ USD 15,000
 Symphony Limited
 Similarly in Symphony pre 2005 promoters were focused on multiple products and only
one market
 Important lessons learnt from past – “One Product - Many Markets”
 Recently, covered by The Economist; much after we invested
 Thomas Cook India Limited
 Thomas Cook India has an excellent brand but didn’t have a great expereince with
acquisitions prior to Fairfax
 Faifax acquired Thomas Cook in May 2012 and that to us was a game changer

5. Private and Confidential – Not for Circulation 5
The Stock Market is a Semi-Psychotic Creature
 In Private Equity you are dealing with relatively smarter promoters who don’t offer
you bargains every now and then when someone sneezes
 “Volatility is the friend of the buyer of value” – Warren Buffett
 Risk is not the same as volatility; risk results from overpaying or overestimating a
company’s prospects. Prices fluctuate more than value; price volatility can drive
opportunity

6. Private and Confidential – Not for Circulation 6
Management Equation
 Management Evaluation hinges around identifying learning machines.
 Look for smart management teams who try and reduce errors and cost of errors by
managing risks
 Look for managers who are willing to learn and evolve through their own mistakes
and through vicarious experience.
 “You don’t have to pee on an electric fence to learn not to do it”
 It is important to learn and widen circle of competence and innovate.
 “If you only do things where you know the answer in advance, your company goes
away” - Jeff Bezos

7. Private and Confidential – Not for Circulation 77Private and Confidential
Private and Confidential
Not for Circulation
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