Case studies

Can a company have a moat while its customers have an even bigger one? I went looking for the answer in a business that owns hundreds of thousands of hard-to-copy assets, and found that most of the questions I had been asking about moats were pointed in the wrong direction.

A stock's price is earnings times a multiple. When the earnings drop but the price climbs, the multiple did all the work. Here is the mechanism, using Vinati Organics in COVID.

The mirror image of the Airtel story. Airtel grew for a decade and its stock went nowhere. BSE, one of the oldest companies in the country, roughly 13-folded in three years. The two teach the same idea from opposite ends: a stock follows pricing power and cash economics, not size or age.

A business can improve four-fold while the market's valuation of it rises twenty-two-fold. Here is how both happen at once. Cupid, a thirty-year-old maker of condoms, rose roughly ninety-fold in three years, and the more interesting half of the story is why the market changed its mind so completely before the profit arrived.

This is the sequel to the Crompton story. By 2020 the company that had been Crompton Greaves was a wreck: an accounting fraud, a negative net worth, and a share price under ₹5. Then a new owner, the Murugappa group's Tube Investments, took control. Six years later the stock is around ₹863 and the company is worth over a lakh crore. This asks the honest question: how much of that was a viable business getting fixed, and how much was a near-dead stock simply being repriced?

Paint stocks fell for years while the paint market kept growing. Reconstructed from the numbers: most of the drop was valuation, on returns that had been fading for a decade, with new competition as the accelerant rather than the sole cause.

A collapse that looked like an auto-cycle story but was really a capital-allocation story. Understand the fall in detail and you understand exactly why today's Mahindra is a different company.

A company worth over ₹65,000 crore whose shares cost about ₹48 each looks like a puzzle, and the answer is one of the least understood lessons in investing: a business can recover completely while its original owners are left behind. The company nearly died of too much foreign-currency debt, and the only way it survived was by creating new shares, round after round. That saved the company. It did not save the 2008 shareholder.

The mirror image of the Mahindra story. Airtel's business grew for over a decade while its stock went almost nowhere, because the growth kept being eaten before it reached shareholders. A growing business is not the same as a rewarding stock.

In 2005 Crompton bought a distressed Belgian transformer maker, Pauwels, cheaply, fixed it, and doubled overnight. A masterstroke, and for a while it was. Then it decided it had a repeatable formula, bought eight more companies on borrowed money, and a decade later the whole overseas empire was sold or liquidated. How one good deal became the reason for a disastrous one.

The best Indian case study for distribution. Asian Paints did not win because paint was impossible to copy. It won because it made dealers, painters and supply chains work better than anyone else.

For most of two decades Jet Airways was the airline middle-class India grew up flying: the polished full-service name, the one business travellers trusted, the market leader that felt permanent. Then in April 2019 it simply stopped. This is not a history of that airline. It is an attempt to answer one uncomfortable question: why did India's best airline still fail? The answer is not a villain. It is the airline business itself, a structure so harsh that being the most-loved player was never the thing that made you safe. Debt, fuel, and a price war it could not win did the rest.

For well over a century, if you wanted to buy or sell an Indian share, you went to one address: BSE's trading floor on Dalal Street. A new exchange arrived in 1994 with screen-based trading, and within about two years it was doing more business than BSE. Technology opened the door. What actually kept BSE out of its own market once the door was open was liquidity.