Two stocks from the backwaters
Two companies that theoretically should not have succeeded are Kochi-based V-Guard and Geojit Financial Services.
In the V-Guard case, let it be wondered why anyone would have selected to buy a ‘Made in Kerala’ product over a ‘Made in China’. The state was considered industry-unfriendly; Kerala was back-of-beyond for most; they would never be able to recruit better sitting in Kochi.
Why anyone on the financial markets should have selected to trade through a company as Dalal Street-removed as Geojit is also puzzling. Let us face it; it’s better to trade through a second-grade Mumbai financial intermediary for access to ‘hot’ information than an close-tothe-bone intermediary but sitting in the wrong geography.
Two factors worked in their favour. Both delivered a first-rate product or service; they were ethical. More customers came; the companies said ‘Okay, we will not take a big risk but, yes, we may consider extending our business next door to Tamil Nadu and Karnataka’. From Karnataka, they went to the seven states of south and west India that drive national gross domestic product (GDP) growth; emboldened (provoked partly by analysts who kept asking ‘What’s the bigger story?’), they went national.
In the past five years, V-Guard transformed from a stabiliser-driven company to a multi-product one; from back-end products (like stabilisers) to front-end consumer-facing products (water heaters and others); from dealer-dependence to consumer-driven; from outsourcing products to a combination of manufacturing and outsourcing; from individual-driven to institutionalised. The financial impact: It took V-Guard more than 30 years to get to its first ~1,000 crore in revenue; it took five years to get to the next ~1,000 crore; based on a 15 per cent compounded annual growth rate (CAGR) forecast, the next ~1,000-crore should come in three years (only organic initiatives).
V-Guard’s debt of ~200 crore a few years ago is now more than ~200 crore of net cash. Market capitalisation was ~120 crore nine years ago; it is ~7,300 crore now. Yet, the head office has a hospital-like austerity; every working day has a Saturday afternoon feel; by 5.30 pm, most have swiped out of office; V-Guard is taking the pants off hyper-tensed and slick-talking competition.
Geojit was even more disadvantaged. It began operations from a semi-urban environment before extending urbanwards; moved from a mix of owned and franchised operations to a largely owned network (damn asset-lightness!), from local to international (West Asia, where else?) and regional to pan-South India to pan-India. One of India’s most exciting financial services companies came from Kerala’s backwaters, would you believe.
Besides, Geojit pays on time, it is like us (no glib talking to financiallybewildered clients), it makes things convenient (online); it is accessible (friendliness works), Geojit encourages Systematic Investment Plandriven mutual fund investing over doomed-to-fail day trading (hey, that’s client aspiration).
The hare and the rabbit Aesopism has a modern equivalent: Geojit reported a loss in only one of the past 20 years. The December quarter generated ~27.50 crore in operating earnings on revenue of ~67 crore; there is more than ~200 crore cash on the books. Rakesh Jhunjhunwala is on its board; market capitalisation was ~1,250 crore previous weekend.
When good people do business in a good way, they make the world richer. In more senses than one.