The Exchanges

Q And do you think the liquidity for Indian startups be both an SME, like in India till now, in the last seven, eight months, 72 companies have listed on SME exchange, which is the highest India has ever seen. Right. And so startups are going towards more SME exchange. And would you yourself as part of your PMS dip into the SME exchange?

A No, because SME doesn't have liquidity. It doesn't make sense for a company like ours, where we offer liquidity to our customers. I can't offer them and then have companies which I can't sell in a day. But I think it makes sense for a lot of closed-ended funds, a lot of, in fact, VC funds themselves, you could actually finance companies on an SME exchange. You could, the minimum per share is one lakh rupees, I think. That means you can buy in multiples of one lakh rupees. So, which is easily possible for VC funds. You could actually finance companies on an SME exchange until they become big enough. Uh, may not work out for us particularly, but I know PMSs, there are some PMSs who have restrictive conditions, who say, you can't get money for four years and there's an exit load of X percent. So, they use that to buy these SME stocks.

AI assessment note: “No, because SME doesn't have liquidity. It doesn't make sense for a company like ours”

Q Take for example, Traxen we talked about, right? Uh, 60, 65 crores of revenue, 800 crores they listed at, and they have oscillated between 600 to 900 crores of valuation, which is decent, right? And as the company grows, the markets will value them more.

A I, I would say using a revenue metric A loan is not very useful. At some point, the companies will be profitable. So for over 65 crores, the guy earns a profit after tax of say five or six crores. Then 800 crores is a little rich. Unless you have a way to compound that 65 crores of revenue into say 400 crores of revenue. And because of economies of scale, you're able to increase your margins net after tax to say 25%, which means you get a 125 crores in profits. I'm willing to pay, say, 30 times for that. So that's 3700 crores. So I don't mean paying 800 crore valuation today if I can get a 3700 crore valuation, say, four or five years. So if there is that as a hope, then I can do this. But if there is no way to demonstrably increase that 65 crore into 500, and that could be because Stratxon, for instance, serves the startup ecosystem, and it serves VCs, serves PEs. They, that market has an inherent limitation in size in India. Perhaps in the U.S. US also, I mean, unless they're doing worldwide these things, but there's also the fact that, um, this is an inherently cyclical business. You reach an upcycle and we see investments, you get a certain amount of business. When the down cycle starts, your customers will start telling you, I heard this recently, a company that I know was selling SaaS software to a bunch of ed tech companies. Uh, because by user acquired a bunch of web te…

AI assessment note: “using a revenue metric A loan is not very useful”

Q And, uh, Deepak, uh, is investing you think in 2021 becoming mainstream for a general public? Because, uh, you know, the, the signals that we see, right? For example, during IPL and T-twenty World Cup, uh, 90% of the ads, uh, are about investing platforms or brokerages like Upstocks, CoinSwitch, and others.

A So what's happened right now is the surplus of money that's making its way into investing into such companies. They are using the money to buy into IPL ads. They're probably driving up the price of IPL ads so much that the traditional advertisers, the car manufacturers or the Um, or the FMCG companies are no longer advertising on the IPL because the prices are too high because these people have come in, and they have come in with deep, deep pockets. So you see cred, you see up stocks. All of them have raised significant rounds, um, of capital in the recent past, and that capital is going towards ads. Now, this is not very different from the US. You had a period in the US when such companies were the only ones advertising in the Super Bowl. Um, so, uh, that's because they had extreme amounts of capital and they were able to finance those, uh, large, even now, if you see, if you see what's on the t-shirts of the Indian team in the, in the, in the t-twenty. It's got buy juice on it, or it's got a Paytm on it. These are all startups. Earlier there used to be SEAT and all that. Even now SEAT makes BATS and MRF makes BATS and that's what shows on the front of BATS. I'm telling you tomorrow a startup will start making BATS and you will see some Paytm or something like that in that. It's a function of money that has been pumped in into these spaces. It is not because investing is mains…

AI assessment note: “It is not because investing is mainstream that they have got They're doing this.”

Q And, uh, since your journey, right, you have built wealth for yourself and wealth for many number of clients. Uh, uh, if you can start from basic, what is it required to build your first year in wealth, uh, in public stocks or in assets, as you say?

A So in general, and I write this in my book also, your first rupees will always come from the amount you earn from your job, from your, From your work and so on. It's very rare that you find a person who says, you know, I'll put some five lakhs and it becomes 20 X, it becomes a crore. That is hardly the case. Most of the people who earn their first crore million, whatever, earn it from the job that they do. And that is possibly how most people will eventually build wealth. So you build, build your first crore. Through your job, through your savings. Your savings can grow, but the incremental amount that you will earn from the job and savings is higher than how much of a return you get from the money you put in. So a person saving one lakh a month will add 12 lakhs to his savings every year. If he starts off with a saving of 50 lakhs, he has to make a 25% return, 24% return, just to make that 12 lakhs. And you won't. Most likely, 24% returns are obscene. They're not going to happen to everybody. You'll make 1012, 13%. And therefore, what you add to your portfolio at a 50 lakh level will be another six lakhs or seven lakhs. But your income savings are giving you that one lakh extra a month, which is 24%. So, you can change these numbers. You can say, okay, I save 50,000 a month, but I have a 25 lakh corpus. No matter how you do it, your first crore will come mostly from the extra …

AI assessment note: “your first crore will come mostly from the extra money you save every year”

Q Deepak, so, uh, emotional decisions like buying a house, buying car, or vacations, do they hinder in the process of wealth creation?

A Well, they are emotional things, and I think it's important to, uh, solve the emotional problems at some point in life. So you have to buy a nice car, um, when you want to travel. And I love driving. So, you know, if I, I mean, there are people who may not find a car very useful. They can just use an Uber or whatever or Ola to travel. But for me, it's important because I like to travel outside, uh, out of the city quite a bit. Uh, so, you know, it's important for me, so I'll buy it. A house is not as important for me. I don't mind living on rent for a long time because I don't really care. But for other people, it's an emotional decision to buy. You should buy those and solve your emotional problems because that's what money is for. But, um, wealth creation in the longer term is, is going to be beyond all of this. So you have to spend on these things because they give you emotional satisfaction. Um, but you should also ensure that money is, is to enhance your journey. It is not to reach a destination saying I'm free financially and all that stuff. You know, like my parents say, or my mother just say, my dad used to say it a long time back, which is that if you don't eat sweets, Uh, for the longest time thinking that you'll eat it when you're older. You get diabetes and then you can't eat sweets. So, you know, you should enjoy your journey. So don't think of these as hindrances …

AI assessment note: “don't think of these as hindrances on the path of wealth creation”

Q And, and then, uh, starting from one crore to 10 crore journey, uh, what are the, the best behavior patterns that you have observed and today which you advise?

A So in general, your, uh, uh, 10 crores is, is like achievable for a very, very small set of people who typically do not want to give up their jobs and just want their savings to kind of grow. They will earn this money towards the later part of their life. So if you keep saving over time and time and time and you will get to that number over a period of maybe 1520 years is when that money will come typically from your, from the savings you make and investments you make. The difference can be if you go to run a startup, if you join a startup and or, or found a startup, a sale or a valuation or a secondary from a VC may actually give you enough to be able to generate that one crore relatively faster. So it's a leap of faith in a way. The other one is to join a startup or a, or a listed company or any of these companies where the growth from the stock price or the price of the stock from your options itself can give you a big leap. From the two or three crores which you would otherwise have saved to the 10 crore levels. So I think behaviorally, the idea is to maximize those opportunities for the longer, Uh, gains, uh, build in stock options into whenever you're working, build more, uh, uh, savings, but the savings itself is not going to give you this, you know, this sudden jump. It's going to be more linear in nature. Um, or, you know, people who dig risks, for instance, invested e…

AI assessment note: “behaviorally, the idea is to maximize those opportunities for the longer, Uh, gains”

Q And, uh, in today's market, you see, uh, I think in 21 has seen the highest number of Indian companies go public. Uh, is it also a signal of the capacity of retail investors to buy, or is it a signal of this is the best time to go public? You might not never find a chance again in the next three, four years.

A Mostly the, it's called the chip cow moment. Okay. So it's when you can, you do that's the way the investment bankers think. That boss, they are putting money, they have put, I don't know, Naika got 18 times oversubscribed. It was valued, I think, more than 40% higher than what it was valued in February of this year. And, uh, relatively speaking, you know, this is froth. So in froth, you can price anything in any, you know, people buy diamonds at whatever price. What is the price of a diamond? It means nothing. It's, it's price is what you can tell me about because the industrial usage of a diamond is nothing. It can be used to cut glass or a few things, but, um, other than that, there's no use of it. And I won't be like, you know, six million dollars for a diamond, but people are, there are people who do like art, like crypto. There's more inherent use of anything of that sort, but you, uh, you price it according to what another person wants it, wants to buy it at. So that's what's happening in stock markets right now. The inherent value will be visible over time. Some of these will be crossly underpriced, even though at these prices, and some of them will be grossly overpriced because people have expected too much of them. And, uh, you know, those expectations were too high.

AI assessment note: “Mostly the, it's called the chip cow moment. Okay. So it's when you can, you do”

Q And you were actively investing slash trading back then?

A Uh, from 2003 onwards, I think I've been more or less active. 2003, I didn't know what stocks were really. So, uh, I mean, little bit here and there, but nothing more. The smart thing that was happening over the next few years, in 2006, if you believe it, as a percentage of GDP, more stocks were traded in 2007 than they are now. So we think stocks are popular, but they're not. That time, the amount of popularity of the stock market was much bigger as a percentage of GDP. Uh, to give you an example, at that time, you used to trade maybe 30, 35,000 crores per day. Today, we trade about 80,000 crores a day. 2007 to now is about four, 68 years.

AI assessment note: “from 2003 onwards, I think I've been more or less active.”

Q And, uh, on, on the path of, let's say, getting to, uh, X target for some, it may be one CR for some, it may be two or five CR. Uh, how much is investing monthly a part of their savings important, uh, to attract?

A Typically it is important in the sense if you can. So a lot of people have these EMIs, which don't allow them to save. So they keep using those EMIs to buy their house or whatever. And then the house is not really a saving for a long term. You're going to all have that house and that's going to be a house you'll have, but, uh, that's not going to feed you, you know, so unless you sell it and get the money, and that's not something that you're going to want to do unless you're in a distress situation. So really, um, saving is an important part of longer term wealth creation beyond all of these spending things like houses and cars and all that stuff.

AI assessment note: “Typically it is important in the sense if you can.”

Q Let's focus on financial independence, right? Where, uh, uh, our listener doesn't have to work, uh, for money, right? He, he works for his choice, his love for work or passion, right? Well, at what stage you think, right? Uh, uh, what, what does it require to reach there?

A So, um, you know, they call retirement as that's why we have a statement at CapitalMine because you, you can't really retire, you can't really stop working, but you work because you want to, not because you have to. That is the retirement concept. Um, a lot of people achieve that over time by two ways. First one is financial independence, which is you make enough money to be able to say to your boss that I don't care about this anymore. Um, and I don't want to do stuff that I don't want to do. And therefore I'm going to be, you know, if you don't want me to do this, I can leave my job and I'm fine because my financial, um, uh, independence is big enough. Uh, but more commonly what we're seeing is that people just get to these spots where they don't have to worry about the money anymore.

AI assessment note: “a lot of people achieve that over time by two ways. First one is”