Spotting Wealth Creation Opportunities for The Next Decade with Saurabh Mukherjea of Marcellus Investment Managers

Speakers: Saurabh Mukherjea | Founder and Chief Investment Officer, Marcellus Investment Managers (PMS)
Moderator: Kamal Manocha
Date & Time: 6^th Feb 2021; 10:00 AM to 10:30 AM

The second day of the event began with a very hooked-on-to-listening session. Just like any other decade, this decade will also have various opportunities to create wealth; and who better than one of the most popular fund managers, Mr. Saurabh Mukherjea of Marcellus PMS to give insights on the same.

Mr. Mukherjea asserted that wealth creation opportunities for the decade ahead will be driven by the same basic principles on which it was dependent for the last 10 years, 20 years or 100 years. Covid or no Covid, the underlying principles to invest money, will remain the same. He explains these principles in detail: investing into biz. that have good, honest, and clean promoters, biz. that sell products & services that are essential, and biz. that have “Himalayan barriers” i.e., are monopolies in their respective category/sector.

Covid created a needless panic for a country like India where there are diseases like Tuberculosis that’s 6 times more fatal in the country. This led way to create opportunities for many investors. Now, India’s economy booms every time there’s a recession in the US. This happens majorly on account of two things- the fall in crude oil price by 50-80% leads to ~3% GDP stimulus in India and as the US long term bond yields are cut down by 2-2.5%, the RBI passes down this bond yield cut to Indians through interest rate reductions. Now, with recovery kicking in (he believes that we are in Year 1 of a 3-year recovery), people will now enter the “greed” phase where they will just buy “broken balance sheet” companies, whose promoters are not necessarily honest, but smart; and in the process, destroy wealth in the next 2-3 years.

With the help of examples of a few companies, he explains in detail why some companies will gain the larger market share and emerge as monopolies in that sector and grow as the economy recovers. There are about 6000 listed companies in India but about 20-25 monopolies are taking away about 60-70% of the economy’s profit. If one can identify these outliers and stay invested in these, wealth creation may become easier. Mr. Mukherjea threw light on the IT/Tech sector and the financial sector in India and why the funds in his company hold or don’t hold a particular stock in these segments.

He concluded by advising investors to not look at P/E or P/B multiples when looking for investment opportunities as the denominator of these multiples for 80% of Indian companies are fabricated. Even veterans like Aswath Damodaran assert that a company’s valuation can’t be done based on P/E or P/B multiple because that does not capture the real value of high-class companies, which is intangible assets.