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The Unusual Billionaires

The Unusual Billionaires

by Saurabh Mukherjea 2016 454 pages
4.01
1k+ ratings
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Key Takeaways

1. Sustainable high performance is rare but achievable

"Over 99 per cent of the 5000 companies that are listed in India simply fail to fulfil his filters over the past decade."

Consistent excellence is uncommon. Out of thousands of listed companies in India, only a handful consistently deliver both revenue growth and profitability over long periods. These exceptional companies, dubbed "Coffee Can" stocks, share common traits:

  • Sustained revenue growth of at least 10% annually
  • Return on Capital Employed (ROCE) of 15% or higher each year
  • Consistent performance over a decade or more

The rarity of such sustained success highlights the difficulty of maintaining excellence in a competitive business environment. However, the existence of these outliers proves that long-term, superior performance is achievable with the right strategies and execution.

2. Focus on core business drives long-term success

"We have consciously stuck to a sector which is growing and offers decent potential and have always strived for excellence across all functional areas."

Concentration beats diversification. Successful companies resist the temptation to diversify into unrelated areas and instead focus intensely on their core competencies. This focus allows them to:

  • Develop deep expertise in their chosen field
  • Allocate resources efficiently
  • Build strong brand recognition
  • Continuously improve their products and services

Examples:

  • Asian Paints maintained its focus on paints for decades
  • HDFC Bank concentrated on banking services without venturing into unrelated sectors
  • Page Industries focused exclusively on innerwear with the Jockey brand

3. Deepen competitive moats through innovation and brand building

"Architecture is a system of relationships within the firm, or between the firm and its suppliers and customers, or both."

Build barriers to entry. Successful companies continuously strengthen their competitive advantages, or "moats," using John Kay's IBAS framework:

  • Innovation: Continuously improve products and processes
  • Brands: Build strong, recognizable brands that command customer loyalty
  • Architecture: Develop unique relationships with stakeholders
  • Strategic Assets: Acquire or develop assets that provide competitive edge

Examples:

  • Asian Paints' innovative supply chain management
  • Marico's strong brand portfolio (Parachute, Saffola)
  • HDFC Bank's technology-driven customer service

These moats make it difficult for competitors to replicate the company's success and help maintain market leadership.

4. Prudent capital allocation is crucial for growth

"Good management teams work on proving a concept before investing a lot of capital. They are not likely to put a lot of money in all at once hoping for a big payoff."

Invest wisely for growth. Successful companies allocate capital judiciously, focusing on:

  • High-return projects within their core business
  • Gradual, organic expansion rather than risky acquisitions
  • Returning excess cash to shareholders when profitable opportunities are scarce

Key principles:

  • Maintain a strong balance sheet
  • Avoid overleveraging
  • Focus on projects that generate returns above the cost of capital
  • Be patient and disciplined in pursuing growth opportunities

Examples:

  • Astral Poly's careful expansion of manufacturing facilities
  • HDFC Bank's focus on high-quality lending over rapid growth

5. Strong corporate governance and clean accounting matter

"Companies which have high-quality accounts also tend to be companies which have high-quality management. These stocks tend to do significantly better than those with inferior management, whose accounts often tend to be dodgy."

Integrity builds trust. Companies with strong corporate governance and transparent accounting practices tend to outperform their peers over the long term. Key factors include:

  • Independent board of directors
  • Clear separation of ownership and management
  • Transparent financial reporting
  • Fair treatment of minority shareholders

Benefits:

  • Increased investor confidence
  • Lower cost of capital
  • Better access to funding
  • Reduced regulatory risks

Companies like Asian Paints and HDFC Bank have consistently demonstrated high standards of corporate governance, contributing to their long-term success.

6. Customer-centric strategies create lasting value

"Customers use the strength of the company's reputation as a proxy for the quality of the product or the service."

Prioritize customer needs. Successful companies build their strategies around understanding and meeting customer needs. This approach leads to:

  • Higher customer loyalty
  • Increased market share
  • Stronger brand reputation
  • Greater pricing power

Key strategies:

  • Continuous product innovation based on customer feedback
  • Investment in customer service and support
  • Building long-term relationships with customers
  • Leveraging data analytics to understand customer behavior

Examples:

  • Page Industries' focus on product quality and comfort
  • HDFC Bank's emphasis on customer convenience through digital banking

7. Empower employees and build a positive work culture

"I strongly feel that focus will lead to depth and depth will lead to excellence."

Culture drives performance. Companies that create a positive work environment and empower their employees tend to outperform their peers. Key elements include:

  • Meritocracy and performance-based rewards
  • Opportunities for career growth and development
  • Open communication and transparency
  • Alignment of employee goals with company objectives

Benefits:

  • Higher employee retention
  • Increased productivity and innovation
  • Better customer service
  • Stronger organizational resilience

Examples:

  • Asian Paints' focus on hiring and nurturing top talent
  • Marico's culture of empowerment and innovation

8. Technology and data analytics drive operational excellence

"Technology has allowed banks to go for both enhancing client experience, and managing operational challenges and risk."

Leverage technology for efficiency. Successful companies invest heavily in technology and data analytics to:

  • Improve operational efficiency
  • Enhance decision-making
  • Provide better customer experiences
  • Manage risks more effectively

Key focus areas:

  • Supply chain optimization
  • Customer relationship management
  • Predictive analytics for demand forecasting
  • Automation of routine processes

Examples:

  • Asian Paints' use of technology in supply chain management
  • HDFC Bank's digital banking initiatives
  • Astral Poly's investment in manufacturing automation

9. Adapt to changing market dynamics while maintaining core strengths

"An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative."

Balance stability and flexibility. Successful companies maintain their core strengths while adapting to changing market conditions. This involves:

  • Continuous monitoring of industry trends
  • Proactive adaptation of business models
  • Investment in research and development
  • Balanced approach to risk-taking

Strategies:

  • Regular review and update of long-term strategy
  • Fostering a culture of innovation and continuous improvement
  • Maintaining financial flexibility to capitalize on opportunities
  • Building diverse leadership teams with varied perspectives

Examples:

  • Marico's expansion into new product categories
  • HDFC Bank's evolution from corporate to retail banking

10. Long-term perspective trumps short-term gains

"We love to be boringly consistent."

Patience pays off. Companies that consistently outperform focus on long-term value creation rather than short-term gains. This approach involves:

  • Consistent investment in core capabilities
  • Willingness to forgo short-term profits for long-term growth
  • Building enduring relationships with stakeholders
  • Maintaining financial discipline through economic cycles

Benefits:

  • Sustainable competitive advantage
  • Higher shareholder returns over time
  • Greater resilience during economic downturns
  • Stronger brand equity and customer loyalty

Examples:

  • Asian Paints' decades-long focus on building distribution networks
  • HDFC Bank's consistent approach to risk management and growth

Last updated:

FAQ

What's The Unusual Billionaires about?

  • Focus on Indian Companies: The book delves into the stories of seven to eight Indian companies that have shown exceptional financial performance over decades.
  • Case Studies and Insights: It provides detailed case studies of companies like Asian Paints and HDFC Bank, exploring their strategies and management practices.
  • Investment Philosophy: Saurabh Mukherjea introduces a framework for identifying successful companies, aimed at guiding long-term investors.

Why should I read The Unusual Billionaires?

  • Valuable Lessons: Gain insights into effective business strategies and management practices from successful companies.
  • Investment Framework: Learn a systematic approach to evaluating companies, useful for building a robust investment portfolio.
  • Inspiring Stories: The book offers motivational examples of perseverance and integrity in business.

What are the key takeaways of The Unusual Billionaires?

  • Sustained Financial Performance: Successful companies consistently achieve revenue growth of at least 10% and a ROCE of 15% over a decade.
  • Importance of Management: Strong, ethical management is crucial for maintaining competitive advantages and driving success.
  • Long-term Focus: Investors are encouraged to adopt a long-term perspective, avoiding short-term market speculation.

What are the best quotes from The Unusual Billionaires and what do they mean?

  • “Greatness is not a function of circumstance.”: Achieving greatness is a conscious choice, not just a result of external factors.
  • “Persistence is what makes the impossible possible.”: Highlights the importance of perseverance in overcoming challenges.
  • “In investing, as in auto racing, you don’t have to win every lap to win the race.”: Emphasizes patience and long-term strategy in investing.

Who are the unusual billionaires discussed in The Unusual Billionaires?

  • Seven Key Companies: Profiles include Asian Paints, Berger Paints, Marico, Page Industries, Axis Bank, HDFC Bank, and Astral Poly.
  • Diverse Industries: These companies span sectors like paints, FMCG, banking, and textiles, showing that great practices apply across industries.
  • Common Traits: They share traits such as strong management, innovative practices, and a focus on long-term growth.

What is the Coffee Can Portfolio method mentioned in The Unusual Billionaires?

  • Investment Strategy: Advocates for a buy-and-hold strategy, selecting companies based on specific financial criteria.
  • Criteria for Selection: Companies must show consistent revenue growth of 10% and ROCE of 15% over ten years.
  • Long-term Wealth Creation: Aims to minimize trading and maximize returns by focusing on high-quality companies.

How does Saurabh Mukherjea define greatness in companies in The Unusual Billionaires?

  • Financial Metrics: Greatness is defined by sustained superior financial performance, specifically through consistent revenue growth and high ROCE.
  • Durability and Resilience: Great companies endure economic downturns and maintain their competitive edge.
  • Management Quality: Strong, ethical management is crucial for achieving and sustaining greatness.

How does The Unusual Billionaires address the issue of corporate governance?

  • Emphasis on Integrity: Highlights the importance of ethical management practices and transparency in building trust.
  • Long-term Vision: Companies prioritizing long-term growth over short-term gains tend to perform better.
  • Case Studies: Illustrates how good governance practices contribute to sustained success.

What investment advice does Saurabh Mukherjea offer in The Unusual Billionaires?

  • Focus on Quality: Prioritize high-quality companies with strong fundamentals and a proven track record.
  • Avoid Churning: Advises against frequent trading, emphasizing long-term investment strategies like the Coffee Can Portfolio.
  • Use Financial Metrics: Apply specific financial filters (10% revenue growth and 15% ROCE) to identify investment opportunities.

How does The Unusual Billionaires suggest investors should approach market volatility?

  • Long-term Perspective: Maintain a long-term view, especially during market volatility, to mitigate short-term impacts.
  • Focus on Fundamentals: Concentrate on the fundamental strengths of companies rather than reacting to market noise.
  • Patience and Discipline: Emphasizes the importance of patience and discipline in achieving long-term success.

How does Saurabh Mukherjea define sustainable competitive advantages in The Unusual Billionaires?

  • IBAS Framework: Categorizes advantages into Innovation, Brands, Architecture, and Strategic Assets.
  • Importance of Innovation: Continuous innovation helps companies adapt to market changes and consumer preferences.
  • Brand and Reputation: Strong brands enhance market presence and customer loyalty, leading to better performance.

What role does management quality play in the success of the companies in The Unusual Billionaires?

  • Track Record of Governance: Strong governance and clean accounting practices build investor trust.
  • Focus on Core Operations: Successful management teams focus on core business areas, avoiding distractions.
  • Ability to Adapt: Effective leaders navigate challenges and seize opportunities, crucial for company success.

Review Summary

4.01 out of 5
Average of 1k+ ratings from Goodreads and Amazon.

The Unusual Billionaires explores the success stories of 7 Indian companies that consistently outperformed their peers. Readers appreciated the book's insights into business strategies, capital allocation, and long-term focus of these companies. Many found it informative and eye-opening, especially for those new to investing. The book's use of case studies and frameworks like IBAS and Coffee Can Investing was praised. Some reviewers noted repetitive content and outdated information, but overall, it was well-received as a valuable resource for understanding successful Indian businesses.

Your rating:

About the Author

Saurabh Mukherjea is a prominent figure in the Indian investment landscape. He founded Marcellus Investment Managers and previously served as CEO of Ambit Capital, where he significantly grew assets under advisory. Mukherjea's background includes co-founding Clear Capital, a London-based equity research firm. He holds a CFA charter and degrees in economics from the London School of Economics. His expertise in small-cap equity research and wealth management has established him as a respected voice in the financial industry. Mukherjea's academic credentials and practical experience in investment management have contributed to his success and influence in the field.

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