Deepak Shenoy is the CEO and Founder of Capitalmind, a Bangalore-based investment research and wealth management startup. He has over 20 years of experience in investing and the stock market. Deepak is frequently featured on CNBC-TV18 and ET Now, and he also writes for Mint. He is a SEBI registered Research Analyst, with a degree from NIT Surathkal. You can follow him on Twitter at @deepakshenoy. He has also authored a book titled “Money Wise: Timeless Lessons on Building Wealth” which is available on Amazon.

TLDR:

The key idea of the video is that investing in India offers growth and opportunities, but there are challenges and complexities in managing money, property rental, and startup valuations in the country.

Key Insights

Impact of Technology on Financial Landscape in India

📈 Reliance Jio is credited with bringing significant change to India, offering the cheapest stock trading and payment systems in the world, which has had a major impact on the country’s financial landscape.

💰 Capital Mine started off as a tech company in the finance space and eventually transitioned into managing external money, obtaining registration in 2017 after three years of effort.

💰 “We wanted to be profitable, so we’ve been profitable every year since 2017.”

📈 The growth of online investing in India, particularly after the implementation of UPI, has led to the emergence of large companies like Zero that have revolutionized the industry.

💻 Reliance Jio revolutionized the trading industry in India by providing cheap and high-speed internet, making online trading more accessible and affordable.

💡 “He said per lot doesn’t make sense…if we charge it per order, then they can get profitable at a lesser fee.” - Deepak Shenoy highlights the impact of changing the pricing model in the options industry, leading to increased profitability for traders.

💸 The introduction of UPI and instant payments has had a significant impact on the brokerage industry, with online brokerages thriving while offline ones suffered.

💻 The fight between NSC and financial technology company ft led to the birth of omnisys, which provided free front-end software for brokers, ultimately leading to the development of platforms like Nest and Kite for online trading.

📈 Using revenue as the sole metric for valuing companies is not very useful, as profitability and the ability to compound revenue and increase margins are important factors that determine market valuation.

🚫 Bankers selling bad financial products to old people should require a jail term because it is a malicious action that creates a trust deficit.

💰 India’s stock market may be small compared to global markets, but it is the largest single stock futures market in the world and the second or third largest options market in terms of number of contracts.

Importance of Permanent Capital in Investment Strategy

📈 India has experienced positive changes in its macroeconomic factors, such as inflation and government finances, which have benefited the country relative to others.

🏢 Tata has created a different playbook by acquiring multiple companies and allowing the founders to run them, with the aim of eventually taking each unit public.

💪 “This is the power of permanent Capital…I am keeping my Coke shares nobody can force me.”

💼 Having access to permanent capital, like Sanjeev Bikhchandani with Naukri, allows investors to be more patient and targeted in their investments, as they have the ability to hold onto assets for as long as they see fit.

Role of Telecom Industry in India’s Connectivity

📱 The Telecom industry, particularly Reliance, has played a significant role in improving connectivity in India, allowing for seamless work and entertainment experiences.

Long Summary

00:00 💼 Deepak Shenoy, a finance portfolio manager, discusses his experience in managing money, starting his own company, and the challenges and profitability of his property rental business in India, while also highlighting the growth and opportunities in investing in India.

1.1 Reliance Jio has revolutionized India with its affordable stock trading and payment systems, and the speaker, Deepak Shenoy, is a finance portfolio manager who once fired himself from his own company and now manages over 500 crores in the Indian markets.

1.2 The speaker discusses their experience in managing money, starting their own company, and the changing landscape of entrepreneurship in India.

1.3 The speaker discusses their experience with setting internal goals for their property rental business in India and the challenges they faced in meeting external expectations, but ultimately they have been profitable since 2017.

1.4 Raising money for a mutual fund in India is challenging, but the speaker is confident in their ability to attract customers and manage their investments.

1.5 The speaker explains that they are not doing the business for free, as they invest in the markets to make more money, but they also acknowledge the limitations of growth in a regulated industry and the cyclical nature of the markets.

1.6 Investing in India has seen significant growth in recent years, with the rise of online platforms like UPI and companies like Zeroza offering lower trading costs compared to traditional brokers.

10:04 💡 Stock trading in India has become more accessible and affordable due to advancements in technology, such as cheap internet and online brokerages, leading to increased investment in mutual funds but still lagging behind the US.

2.1 Stock trading in India was more popular as a percentage of GDP in 2007 compared to now, despite the economy having more than tripled in size since then.

2.2 Reliance Jio revolutionized the trading industry in India by providing cheap and fast internet, leading to the emergence of online brokerages like Zerodha that offered lower trading costs and a fixed fee per order.

2.3 In 2006, the speaker discusses how a change in charging fees for options trading led to the growth of the industry, but stock trading has decreased due to reduced leverage and other factors.

2.4 Investment in mutual funds in India has increased, but it is still far behind the levels seen in the US 25 years ago, with net investment in India currently at 8,000 crores compared to 500 billion dollars in the US.

2.5 Online KYC and digital onboarding have helped destroy offline brokerages, while the introduction of UPI and instant payments has made transfers faster and more convenient, with NEFT now being free due to recent changes by the RBI.

2.6 India has made significant advancements in technology, particularly in the telecom industry, resulting in the cheapest stock trading and payment systems in the world, as well as improved internet connectivity.

16:51 💡 Trading in India has evolved with shorter settlement periods and online platforms, while options trading has become more accessible; Carat Lane’s successful acquisition highlights the importance of valuing startups independently; Zomato and Naukri had a relationship as investors, with Triton being absorbed by another company; Reliance and Data have started paying, but there is an ego problem in India’s startup ecosystem; ownership of a public company determines control.

3.1 Trading in India has undergone significant changes, including shorter settlement periods, the introduction of online trading platforms, and the development of alternative software for brokers, resulting in a more reliable and advanced trading system.

3.2 Options trading in India has become more frequent and accessible, with new products like “fin Nifty” being introduced, allowing people to trade options on various commodities without needing a license or passing a test, and India has experienced positive changes in its macroeconomic factors and funding availability for startups.

3.3 Carat Lane founder stuck to his guns and received valuable advice from Rakesh Jhunjhunwala, leading to the company’s successful acquisition by Titan and highlighting the importance of valuing startups independently from their parent companies.

3.4 Zomato and Naukri had a relationship as investors, with Naukri eventually being absorbed by Zomato, and in the case of Triton, they had to be absorbed by another company due to no other suitor being available, with the valuation being lower than expected but still benefiting from the Tata brand.

3.5 Data and Reliance, previously known for not paying, have now started paying, with Reliance investing in various companies and making distress buys, but there is an ego problem in India where people are concerned about the impact on the startup ecosystem, leading to VCs preferring to merge companies rather than compete.

3.6 Ownership of a public company determines control and the majority owner has the authority to make decisions without disclosing all information.

28:37 📝 Startups should consider going public earlier to increase valuations, but must show potential for revenue growth; down cycles can lead to loss of software licenses; private companies value different things than public companies; private market transactions in India may have different standards leading to conflicts of interest; financial influencers in India are now selling stocks; influencers should not be held responsible for investment advice unless malicious or manipulative.

4.1 Startups should consider going public at an earlier stage to increase their valuations, but it is important for them to demonstrate the potential to significantly increase their revenue and profitability in order to attract higher market valuations.

4.2 During a down cycle, companies may realize they don’t need as many licenses for certain software, leading to a loss in revenue for the software provider, such as in the case of a company losing revenue from Baijus due to not needing eight licenses, and this cyclical nature of business can also affect the number of licenses needed for services like Bloomberg.

4.3 Private companies value different things compared to public companies, and in the case of merging private companies into a public company, the promoter’s intention may be to eliminate distractions and bring everything together for a small but fair valuation.

4.4 Private market transactions in India may have different standards of valuation and corporate governance compared to public markets, leading to potential conflicts of interest and unethical practices.

4.5 Financial influencers in India, who used to sell protein shakes on YouTube, are now selling stocks, potentially leading their followers to bankruptcy.

4.6 In the financial world, influencers like Mr Beast should not be held responsible for giving investment advice unless their actions prove malicious or manipulative, as freedom of opinion should be respected and regulators cannot clamp down on statements beyond the extent of causing a constitutional market.

42:47 🏢 Renting out properties in India can be challenging and involve legal issues, unlike dealing with stocks.

5.1 The speaker discusses the importance of free speech and how it should not be used to incite malicious actions.

5.2 Selling bad financial products to old people should be considered a malicious action and result in a jail term, but if a banker recommends a product without abusing trust, it is not malicious.

5.3 The speaker shares a personal experience of dealing with a tenant who refused to pay rent, leading to a lengthy legal process and ultimately deciding to not invest in real estate for rental purposes.

5.4 The validity of a rental agreement is established through the payment of rent and physical visits to court hearings, with the possibility of multiple adjournments.

5.5 The speaker shares a personal story about dealing with a frustrating legal process and tracking down a tenant who owed rent, highlighting the challenges of renting out property in India.

5.6 Dealing with renting out properties in India can be unpleasant and involve dealing with legal issues, unlike dealing with stocks.

50:10 💡 Owning a house provides more freedom and is worth the cost, while renting may limit options; India’s stock market is relatively small but still larger than some smaller exchanges; Valuations of startups in India are being slashed by US companies, causing problems for founders.

6.1 Owning a house provides more freedom and is worth the cost, while renting may limit options and feelings of impunity.

6.2 India’s stock market is relatively small compared to global stock markets, with the combined market caps of Amazon and Apple being greater than all of India’s listed companies, but it is still larger than some smaller stock exchanges like the Belgian Stock Exchange.

6.3 Global companies listing in India is a possibility due to liquidity and market depth, but the valuation of Indian companies should not be solely based on investments made by companies like Walmart.

6.4 Foreign companies like Flipkart are unlikely to list in India due to lack of familiarity and liquidity in the Indian market, while Indian companies may choose to list on the SME exchange to gain early access to capital.

6.5 Valuations of startups in India are being slashed by US companies, causing problems for founders who may be left with nothing if they raise more capital at a lower valuation due to ratchet clauses in the cap table.

6.6 Google had trouble when it listed at $80 a share, but now it is profitable and successful, while Amazon’s stock price dropped significantly in its second year.

01:00:37 💡 Companies in India often face time constraints to raise capital, venture capitalists prioritize exiting investments, permanent capital allows investors more freedom, India and China have ownership issues, Geo financials won’t be included in India’s index funds, listing on the SME exchange can provide liquidity for startups.

7.1 Companies in India often have a limited amount of time to raise capital before they have to turn to public markets, and venture capitalists prioritize exiting investments to return funds to their customers rather than focusing on the potential return value.

7.2 Permanent capital allows individuals to hold onto their shares for a long time without being forced to sell, while temporary capital requires individuals to sell shares if instructed to do so by customers or investors.

7.3 Permanent capital allows investors to have more freedom and patience in managing their investments, as they are not obligated to return the money to their customers and can instead make long-term decisions.

7.4 India and China have issues with each other’s ownership of companies, as seen in the case of Apollo tires and Cooper tires, but ultimately it doesn’t matter as long as there are rules in place for selling, such as the recent listing of Geo financials.

7.5 Geo financials, a demerger from Reliance Industries, will not be included in India’s index funds, causing the index funds to sell their shares and resulting in a lack of liquidity for Indian startups on the SME exchange.

7.6 The speaker suggests that listing on the SME exchange can provide partial liquidity for startups and recommends VCs to encourage companies to list on the exchange.

1. 01:12:33 💡 Valuations are a problem when renting out property in India, as companies valued at high prices may be brought down to a lower size in the future.

Q&A

Q: What are the major concerns raised regarding the financial industry in India?

A: One major concern raised in the video transcript is the issue of bankers selling bad financial products, particularly targeting older individuals. This toxic practice of financial influencers aggressively promoting products to vulnerable populations is a cause for alarm.

Q: How has technology impacted stock trading in India?

A: Advancements in technology have revolutionized stock trading in India, making it seamless and convenient. The growth of online platforms like Zerodha has significantly increased the number of people investing in stocks. Additionally, traders can now connect their laptops to their phones, allowing them to work and trade from anywhere.

Q: Why has options trading become popular in the Indian market?

A: Options trading has gained popularity in the Indian market due to the availability of new products and lower barriers to entry. The increased accessibility and ease of trading options have attracted a growing number of investors.

Q: What challenges do regulators face in controlling financial advice from influencers?

A: Regulators face challenges in controlling financial advice from influencers due to the limitations imposed by freedom of opinion. While financial influencers giving advice without expertise can potentially lead to blind investment decisions, regulators in some jurisdictions are restricted by regulations governing securities and exchange, limiting their authority to restrict statements about stocks.

Q: What are the concerns related to valuations of startups in public markets?

A: There is a concern regarding the valuation of startups in public markets, as they have been valued at significantly lower levels than their private valuations. This disparity can create a significant impact on the perceived value of these startups, potentially affecting investor sentiment and market dynamics.

Q: Why is listing on the SME exchange beneficial for startups?

A: Listing on the SME (Small and Medium-sized Enterprises) exchange provides liquidity for startups with less volatility. This means that founders and early investors can exit their shares within a few days, offering them an opportunity to realize the value of their investments without enduring long lock-up periods typically associated with listing on larger stock exchanges.

Note - This content is generated by AI, we believe it is accurate, but we don’t claim any liability of inaccuracies in the AI generated content.

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