Post-demerger:
ABFRL (the listed entity) = Pantaloons + TMRW (D2C platform) + Ethnic wear brands + TCNS Clothing
Aditya Birla Lifestyle Brands Ltd (ALBL) = Van Heusen, Louis Philippe, Allen Solly, Peter England, Innerwear, Reebok, American Eagle etc.
✅ 1. Definitions
| Metric | Meaning | What it reveals |
|---|---|---|
| Gross Margin | = (Revenue - Cost of Goods Sold) / Revenue | Measures core value addition; how much profit is made after producing the product |
| Operating Margin | = Operating Profit (EBIT) / Revenue | Measures overall business efficiency, including marketing, R&D, employee costs, admin, etc. |
Matthew Berry and his paper “Mean Reversion in Corporate Returns”:
Here are some key red flags to watch for before investing in banks like Axis Bank (or any other financial institution):
1. Pan-India Scale with Strong Rural Penetration
🧭 Key Industry Insights (from CEO & MD commentary)
The industry experienced severe stress and a credit downcycle in FY25.
Gross Loan Portfolio (GLP) declined 13.9% YoY to ₹3.81 lakh crore.
Disbursements fell 38% YoY to ₹71,500 crore as of March 2025.
Delinquency remained high, especially in the PAR180+ bucket, but early delinquency (PAR1–30) showed improvement:
PAR1–30 dropped to 1.4% by March 2025 (from 2.1% in Sept 2024).
PAR31–180 dropped slightly to 6.2% by March 2025.
Key takeaway: The sector was hit hard by overleveraging and external shocks, but early signs of recovery were visible in Q4FY25.
🚨 Negatives (Short-Term Perception Risk)
Abrupt CEO + ED Exit
– In banking, sudden exits without succession planning raise red flags.
– Markets hate surprises—especially in a sector that runs on trust.
Internal Rift with the Board
– Shows lack of alignment at the top. Even a ₹1.5 crore dispute indicates breakdown of communication or trust.
– Raises concern whether the transformation drive (tech, digital, profitability) will lose momentum.
No Immediate Replacement
– Delay in naming a credible successor may spook some investors.
In 2017, a behavioral economics study in rural Bangladesh posed a simple choice to poor participants:
Would you prefer $6 now or $18 after three months?
Surprisingly, 70% chose the $6 — a guaranteed but far smaller reward.
The researchers were puzzled. Why would someone reject a 200% return in just 90 days?
The answer lies in something deeper than numbers — and it reveals a psychological pattern that dominates even the modern stock market.
Logistics Sector Growth: Expected CAGR of 9.3%, with premium warehousing (Grade A) growing at 15%. Demand is rising due to e-commerce, consumption, infrastructure build-out, and government initiatives like Gati Shakti and the National Logistics Policy.
Multimodal Logistics Push: Driven by Dedicated Freight Corridors (DFCs), port-rail-road connectivity, and cost efficiency, India is seeing a shift to integrated logistics platforms. MLL is building multimodal capabilities to meet demand.
E-commerce & Quick Commerce: Hyperlocal delivery is booming, especially in Tier 2/3 cities. Quick commerce alone accounts for 65% of e-grocery orders, up from 13% in 2022. This trend is reshaping warehousing, last-mile delivery, and tech investment.
Digital Transformation: Indian logistics is embracing AI, IoT, drones, AR, real-time tracking, and digital twins. Tech is now key to operational efficiency and customer experience.
Imagine you're sitting in a packed theater. Suddenly, smoke starts seeping in from the back. Maybe it's a minor issue, or maybe there's a fire — no one knows yet. But instinct kicks in. Some people rush for the exits. Others freeze. A few even shout warnings. The calm dissolves into chaos.
This scene perfectly captures what happens in the stock market when a company or sector experiences a major negative event — whether macro (like a global crisis) or micro (like a governance issue, regulatory overhang, or earnings collapse).
The geometric (non-linear) relationship between Return on Equity (ROE) and Price-to-Book Value (PBV) is deeply tied to the long-term compounding of earnings and value creation.
The reason PBV expands geometrically with ROE is:
A higher ROE allows the company to compound book value faster
That higher compounding justifies a higher multiple today, because:
Future earnings are much larger
Market discounts future cash flows; higher ROE implies better reinvestment opportunities
A 30% ROE business can double book value in ~2.5 years, while a 10% ROE business takes ~7 years
This difference in earnings growth and reinvestment efficiency leads to an exponential divergence in intrinsic value over 5, 10, 15 years — hence, the PBV market assigns also diverges non-linearly.
The Securities and Exchange Board of India (Sebi) has barred former IndusInd Bank CEO Sumant Kathpalia and four other senior officials from trading in the securities market, following allegations of insider trading linked to a massive accounting discrepancy.
Aditya Birla Fashion and Retail Ltd (ABFRL) has successfully demerged its Madura Fashion & Lifestyle (MFL) division into a new, separately listed entity named Aditya Birla Lifestyle Brands Ltd (ABLBL). This strategic move aims to unlock value by allowing each business to pursue tailored growth strategies and optimize capital structures.
Delinquent Loans (PAR 31+ Days):
📈 ₹43,075 crore – up 163% from ₹16,379 crore in FY2024.
Gross Loan Portfolio (GLP):
📉 Declined 13.9% to ₹3.81 lakh crore, from ₹4.43 lakh crore in FY2024.
PAR 31–180 Days:
⬆️ Rose to 6.2% (from 2.1%).
PAR >180 Days:
⬆️ Increased to 5.1% (from 1.6%).
90+ Days Past Due (DPD):
⬆️ More than doubled to 6.0%, from 2.4% a year earlier.
The term "kitchen sink" in the context of corporate earnings refers to a strategy where a company takes significant one-time charges, write-offs, or provisions in a single quarter to clean up its balance sheet, often to address accumulated issues and set a lower base for future performance. IndusInd Bank's Q4 FY25 results, announced on May 21, 2025, are a recent example, with a reported net loss of ₹2,328.92 crore, driven by ₹1,979 crore in derivative losses, ₹674 crore in overstated interest income, and microfinance portfolio stress.
🧠 What is Probability?
Probability is the likelihood or chance that a certain event will happen.
While AI can excel at pattern recognition and data analysis, experienced human traders have unique advantages that can outperform AI in specific market conditions. This checklist is designed to help you identify and exploit these edge cases effectively.
The Indian financial sector is broadly divided into two key segments: banks and non-banking financial companies (NBFCs). While both play critical roles in credit delivery and financial intermediation, their business models, risk profiles, and income generation capacities differ significantly. These differences translate into varied valuation levels in the stock market.
There is an interesting parallel between IndusInd Bank's current situation and Axis Bank's 2018 episode—both involve:
A regulator-triggered disruption (Axis: NPA divergence, IndusInd: derivative accounting issues).
CEO's tenure cut short or not extended (Shikha Sharma denied extension; Sumant Kathpalia exiting before term completion as on 29th april 2025).
A committee of executives managing operations temporarily.
Let’s break this down:
“The best business at the wrong price is a bad investment.” - Warren Buffett
The 1970s "Nifty Fifty" episode is one of the most important and misunderstood lessons in market history, and Howard Marks often refers to it to illustrate the dangers of overpaying, regardless of business quality.
In the rhythms of history and markets, there’s a fascinating Greek term that captures the essence of dramatic turnarounds: enantiodromia. Coined by the philosopher Heraclitus and popularized by Carl Jung, enantiodromia means that anything that reaches an extreme will eventually turn into its opposite. In simple terms, when a system goes too far in one direction, it corrects by swinging back the other way. And nowhere is this psychological and philosophical concept more relevant today than in the Indian tea industry.
Tulip Mania is one of the most famous speculative bubbles in history. It took place in the Dutch Republic (now the Netherlands) in the early 17th century, reaching its peak in 1636-1637 before crashing dramatically.
Both Railway Mania and the Dot-Com Bubble were driven by revolutionary technologies that changed the world. However, they also saw massive speculation, unrealistic valuations, and an eventual crash. Let's break them down across multiple parameters:
| Parameter | Railway Mania (1840s) | Dot-Com Bubble (1999-2000) |
|---|---|---|
| Main Tech Revolution | Railways, steam locomotives, and faster transportation networks. | The Internet, digital connectivity, and online businesses. |
| Core Value Proposition | Faster movement of goods and people, reducing travel time by 90%. | Instant access to information, digital commerce, and global connectivity. |
| Actual Impact | Railways reshaped economies and made industrialization much faster. | The Internet changed communication, shopping, finance, and business forever. |
Investment Rationale
The Indian tea sector is at an inflection point after a decade-long downturn. Government interventions, supply constraints, and rising domestic demand indicate that the cycle is turning. Goodricke Group Ltd., backed by the multinational Camellia Plc, stands out as one of the few well-managed, high-quality tea producers in India. With a strong balance sheet, premium tea gardens, and high promoter holding (74%), Goodricke presents a compelling investment case for significant capital appreciation.
The Hinduja Group has pledged around 30 crore shares of Ashok Leyland (mkt cap ~ 60k crores), the group's flagship company in India. The pledge was created through Hinduja Automotive, a UK-based holding company and a key part of the Hinduja Group, which serves as the primary vehicle through which the Hinduja family holds its stake in Ashok Leyland.
As of 31 December 2024, promoters held 51.10% stake in Ashok Leyland. Hinduja Automotive held 34.72%.
Risk is measurable; it can be quantified and hedged against. For example, if a company operates in a cyclical industry, investors can analyze past cycles to gauge the extent of earnings volatility.
Uncertainty, on the other hand, is when there isn’t enough information to make a precise assessment. It causes markets to react with fear, often leading to excessive pessimism.
Investors who can differentiate between the two and take advantage of overreactions to uncertainty often unlock massive wealth creation opportunities.
IndusInd Bank has historically been admired in the banking industry for several reasons, making it one of the standout franchises in Indian banking. Here’s why it earned that reputation:
Big Shock Event:
Underlying Business Strength:
One strategy that many investors deploy is betting on turnarounds including myself and I am always on the lookout for a turnaround as that creates maximum wealth in the shortest period of time.
Now what I have experienced is that there are two types of turnarounds:
1. Business Turnaround
2. Sentiment Turnaround
Let’s dive into how large institutions with deep pockets—like hedge funds, proprietary trading firms, or FPIs—exploited the earlier, looser position limit rules for index derivatives in India to generate profits or influence intraday volatility, and why the new maximum position limits (effective 2025) deter such strategies.
In 2012, large tea estates were the primary producers of tea in India, contributing approximately 75% of the total tea production, while small tea growers (STGs) accounted for about 25%. It is 45% now and 55% is ontributed by STG as on 2023 production data.
the growing dominance of small tea growers (STGs) over large estates is a major reason for the dire state of the Indian tea industry. Here’s why:
Yes, large U.S. banks generally have lower Capital Adequacy Ratios (CAR) compared to Indian banks. Let’s break it down:
RBL Bank's stock collapsed massively between July 2019 and September 2019 due to a combination of corporate governance concerns, asset quality fears, and broader market panic. Here’s a detailed breakdown of what triggered the sharp fall:
👉 Impact: The stock began correcting as governance fears emerged.
As of 2023, Turkey's Gross Domestic Product (GDP) per capita is approximately $14,713.57 in current U.S. dollars.
Over the past decade, Turkey's GDP per capita has experienced fluctuations due to various economic factors. Here's a summary of the recent trends:
When a major crisis breaks out for a bank or financial institution, the stock tends to follow a typical pattern in the first 30 days. Below is a summary based on historical cases:
✅ Example:
1. For a 40% move from the bottom:
Based on historical banking scandals and recoveries, the average time required for a 40% rise from the low is approximately 235 days (~8 months).
What Happened?
In 2016, Wells Fargo (WFC) faced one of the biggest banking scandals in U.S. history, leading to a 20% stock price decline and severe reputational damage.
Warren Buffett’s investment in Commonwealth Trust Company is one of his lesser-known but highly profitable early deals. It showcases his deep value investing approach—buying a strong but undervalued business at a time when others ignored it.
In 2017, Axis Bank faced multiple challenges that affected its performance and reputation. Here are some key issues that emerged during that period:
Between 2017 and 2020, Yes Bank was embroiled in several fraudulent activities and governance lapses that significantly impacted its financial health. Key issues identified during this period include:
Underreporting of Non-Performing Assets (NPAs): The Reserve Bank of India (RBI) discovered that Yes Bank had significantly underreported its NPAs. In 2017, the bank's actual bad loans were found to be five times higher than what was disclosed to the government.
Before 2018, IndusInd Bank consistently traded at a premium valuation compared to most other banking stocks in India. Here’s why investors assigned a higher Price-to-Book (P/B) and Price-to-Earnings (P/E) multiple to the bank:
If derivative positions are restricted for a month in a stock, arbitrage funds that depend on taking counter positions in the cash and derivatives market will face significant challenges. Here’s what could happen:
During the 2008 financial crisis, Wells Fargo's stock price experienced significant fluctuations:
Charlie Munger, serving as chairman of the Daily Journal Corporation, made a strategic investment in Wells Fargo during this tumultuous period:
The Salad Oil Crisis was a major financial scandal that hit American Express (AmEx) in 1963. It was caused by Anthony "Tino" De Angelis, a commodities trader who ran Allied Crude Vegetable Oil Company. He took massive loans using falsified collateral—tanks supposedly filled with soybean oil that actually contained mostly water.
Since American Express was heavily involved in warehousing and certifying collateral for loans, they were directly implicated when the fraud was uncovered. The company faced huge liabilities and its reputation was severely damaged.
ICICI Bank faced several controversies and adverse news reports between 2015 and 2017. Here are some of the biggest issues:
How RBI’s Ban on Internal Trades Affects Indian vs. Foreign Banks (Like HSBC)
RBI’s September 2023 directive prevents banks in India from using internal trades for currency and interest rate risk management. Instead, they must use external market instruments for hedging. However, this rule impacts Indian banks and foreign banks (like HSBC) operating in India differently.
1. Always go against tide. Buy when others are selling and sell when others are buying. 2. If you believe in the growth prospects o...
