The first episode of insider investing features Sandeep Jethwani and Sahil Contractor, the co-founders of dezerv. in conversation with Mr. Amit Jatia, the fast-food tycoon. The episode features the journey of investing professional and business leader Mr Amit Jha, how the pandemic treated him, perspectives on how to set oneself up for financial success and much more..
Sandeep Jethwani (0:06)
Hi, welcome to the first episode of insider investing. Sahil and I have been friends, colleagues drinking buddies for over 15 years now. And fortunately or unfortunately, we are also co founders and co podcasters now for the very first time in our lives, so super excited to be here. A lot of our journey as wealth managers has been about learning from the smartest and wealthiest individuals in India, about their investing journeys, we thought why not bring that story out to all of you. And that is the effort behind insider investing. Hello, and welcome, everyone.
Sahil Contractor (0:45)
So let me introduce you to a friend and someone I've known for the last decade or more, whom I've worked very closely with. I have tremendous respect for this gentleman. And he's taught me a lot in life over the last couple of years. Mr. Amit Jatia needs no introduction. But I'd love to say a couple of lines about him. Possibly at the age of 14, he tried a milkshake in Japan. And he probably said, I'm just loving it. He didn't leave any stone unturned, came back and jumped right into starting McDonald's in India. Something which is interesting is he also completed his degree in hamburger logic from the hamburger Institute in the US, which is super, super interesting. We'd love to know more about that as well. Today, McDonald's has over 300 restaurants, India has a turnover of over 1100 crores. And I think this committed a lot to growing the business over the next five years and increasing the number of restaurants in India as well. Amit started right at the beginning. You know, even while in university, he went through all the rigmarole of understanding the business, getting his hands dirty, and came back to India and indianized the entire menu for India. So you got the best of both worlds in terms of the global menu and the Indian menu, which today has been a big success story for Amit. And his new venture, which is the McAfee has actually sold more than 10 Million Cups so far in India. So welcome. It's a pleasure hosting you here. And we'd love to know more about your journey.
Amit Jatia (2:21)
Thank you so much, Sandeep and Sahil. Really appreciate it. And yeah, happy to be here. Yeah, it was, it's been quite a fun journey, I must say very challenging, but good fun. So I'm more than happy today to share sort of my learnings, my experiences, with everybody. Really happy to be here.
Sandeep Jethwani (2:42)
So thanks for taking time for doing this for us. You know, in my previous role, I used to travel quite a bit. And one of the high points of that travel especially going to Pune used to be stopping over at the McDonald's on the way and grabbing that cup of coffee from McAfee. So, it's been a, you know, through right through the pandemic, I've missed that caffeine short, how have the last couple of years been for you guys, because you're in the services business, you're out there meeting your customers, etc? How has the pandemic treated you?
Amit Jatia (3:20)
See, my philosophy has been that all times are good times for business. I'm not saying that the pandemic was a good thing for anybody for that matter. It was completely unprecedented. And a challenge that I don't think any business has ever seen. But my philosophy is always to sort of find the positivity in every difficult situation. And I told my team right from day one, that as we enter this pandemic, and when we come out of the pandemic, if the business is foundationally stronger, then we have not wasted this opportunity. So I would say that it's been very challenging. In the beginning, we were grappling with a lot of things, but I think the leadership team and I want to credit them with this thinking where they came up with sort of a three mantra plan. You know, the first was basically survival. Okay, the second was revival, and then growth. So we said that in the very early days, as long as we survive as a business, it's all about cash flow management, and the safety of our employees. And as the pandemic starts settling down, and the new normal comes into play, the idea was to basically revive the business back. And finally once the business was revived, the idea was to get back on a growth plan. So I must say that if I look at all of last year, we in the first half, we lost a lot of money, because we are retail on the ground, 10,000 employees, absolutely. Structure all all for growth. Right and when you are sort of getting prepared for growth, you obviously don't sort of staff, your organisation, or have resources only for running a mature business. So we had to deal with all those challenges. But I think in the second half, we made up not only all the losses, but essentially we part down, you know, we were always zero debt in any case, but we essentially were able to build a small reserve as well. So I think that was a bit of a mantra, I think the pandemic continues, volatility is the new reality. And we continue to sort of deal with that.
Sandeep Jethwani (5:34)
And personally, how's it been Amit, away from the business handling it remotely, must have been a crazy experience.
Amit Jatia (5:43)
See, I mean, I've right from day one, always believe that it's about the team. And I'm not one of those entrepreneurs, that is sort of a control maniac. I'm not saying there are some entrepreneurs like that there are some otherwise, but I like to give authority and responsibility to people. And therefore, I must say that we as a team came together, they were shoulder to shoulder walking with me, primarily the responsibility fell on Smita, who's sort of the managing director and also my wife in that sense, but you know, I am able to I am, I am able to handle stress quite alright. So even through the pandemic, I did not have any sleepless nights. But I'll tell you the reason for that, though. And you know, so people would always asked me that, you know, why aren't you are going more aggressive? Why don't you do this? Why don't you do that. And I would always tell people, it's about sustainable growth. And to my mind, India is a marathon. India is not a sprint, I can tell you that in any business for that matter. And the the depth of the market is sort of very limited. But of course, there is opportunity. And to mine, that depth, you got to run your business, right. So I would always tell people that think of our business as a ship, going from one place to the other. And when you are in the middle of the ocean, and turbulence comes, we shouldn't be knocked over. And in other words, we call it oxygen canisters. So the good news is that we had a lot of extra oxygen canisters that took us through this journey. And because we entered with it with a decent platform, you know, I was not very, very worried about it. But the important thing was, how do we do this without, you know, people losing their jobs. So I'm quite happy to say that none of people lost their jobs. Of course, every company has vaccinated all their employees, to their owners. But we did our best to ensure that we are human through this process. And it's not only about money. So I was quite alright, to be honest, I did not have many sleepless nights.
Sandeep Jethwani (7:48)
Golden stuff, there Amit, especially the thing that you mentioned about survival, revival and growth. I feel like a lot of our own entrepreneurs, listeners, I think this is very valuable, because every business at some point, sometimes because of external issues, or sometimes because of internal problems goes through challenges. But, you know, I just want to dig deeper into the story of building this foundation that you spoke about, right? did how did you like envision McDonald's in India to be this behemoth that has become what is the foundational stuff that you guys did at the very beginning that enabled you to scale?
Amit Jatia (8:27)
You know, that's a that's a great question. And, to my mind, it was a building block approach. While I knew that is going to be a challenging journey, I really did not anticipate it to be what, at least in my opinion, an extremely challenging journey. I mean, first and foremost, to settle the brand down in India, you know, with all the other sort of angles involved, you know, globally McDonald's does sell beef, while in India, we were well known, were separated, separated and all of that, it was important to get that communication right, from a consumer point of view from the government point of view and all of that. So, the early days were very challenging. Also, you know, eventually what I learned is that the cost structure of a US business is very different in India, and the dynamics of how the business plays out both in terms of sales and costs are again very different. So the answer does not lie in cutting corners, and giving the Indian consumer sort of a roadie. The answer lies in without losing the brand essence. How do you get the cost structure and make it relevant for India? So you know, our journey, not that I am telling you from a hindsight point of view, I didn't know this when I was entering it. But essentially, our journey had about sort of three or four components to it. In the early days, it was all about what I call localization. So the idea was to take our global strength and localise it. So it was all about supply chain menu. equipment, hiring local talent, training them and so on. So from 97 to about 2002-2003, it is what I call the build phase. Yeah, in the build phase, unlike other people, and this is where I feel we differentiated ourselves, we took the time to build. So the first thing we did is get the menu right? There, we started understanding what the consumers think about the brand. So we started making changes to the way the consumers are perceived perceiving the brand. But more importantly, after all of this, we started getting the cost structure, right. So we launched what I call restaurant operating platform 1.0, where we essentially asked ourselves the question, that what is it that we can do to bring the cost down, right, where it does not impact food safety and the consumer, right, but all the nice to haves have to go. And with that, we were able to bring the cost structure down by 60-70%. And get the unit economics from a breakeven point of view, right? by 2003. So once we got all of that I call the 2003 to 2012, the sort of growth is now that is when we build hundreds and hundreds of restaurants but all on solid unit economics. And we launched happy price menu, we got affordability right for the consumer, we got brand relevance by launching menu products that were more sensible for the consumer, we launched delivery with all of that, in 2012. Right, we said Now is the time to accelerate. Right. So while while this is the growth phase, the important thing is how do we now sort of take this business to a whole different platform. And that was when when we started opening about 3035 restaurants a year, we completely we launched MC cafe, we missed all our restaurants, and so on. So you know, these are the three or four phases. But I must tell you, I felt that we were very aggressive. Maybe it did not come out. And people thought that it took too much time. But remember, we introduced the concept of eating out and making burgers relevant to the country. So this was our journey. This is how we sort of built it along the way. tonnes of problems, sons of crisis that came up. It's all the fact that companies built on that foundation today.
Sahil Contractor (12:20)
That's lovely. I'm gonna pull you back to one question, which is on you mentioned the oxygen canister. Right? Can you can you dig a little bit deeper to that. And the second part was on the McAfee journey hours, that being an, you know, penetrating into this segment in India, where a lot of people are tea drinkers versus coffee drinkers, how is that panned out for you?
Amit Jatia (12:41)
Sure. So I'll take the oxygen canisters. So the oxygen canister word obviously is not invented by me, per se. So I'm, you know, I read a lot of sort of books, and this one came from, I think, Good to Great, okay, by Jim Collins. And, you know, in the early days, when we were really struggling, I would take our management team and leadership team, because how do you keep them entrenched and motivated, when they can see the rest of the world moving ahead. And we are struggling, you know, building one restaurant at a time and things like that. So one of the things that stayed with me is that, as I mentioned to you earlier, they are if you look at a car, you know, actually especially how the Germans made it. The point is, you don't build it so tight to capacity that if you put one feather on top, and it all collapses, similarly in the business, right? I mean, particularly the pandemic is a great example. There are basically all our oxygen goes just enough to keep the business going. When the crisis came, and we were running short of oxygen, these extra canisters is what kept us breathing. And I could sleep easy. So really, in other words, it's whatever resource you need, primarily starts with capital, to be honest, in a business, that's the reality of life. And the other most important thing is human capital. Because during crisis, if you don't have the right skills, if you don't have the right, sort of people involved, including suppliers and other partners, yeah, the business could collapse. So I mean, that's really what I meant by oxygen canisters. In this case, we were debt free. We had cash in the bank, you know, our cost of borrowing was very low, because we were net cash. So that's what I meant from a business point of view in terms of oxygen canisters. Coming to McCafe, you see a business is not about what you see today. Right. One of my gurus after jack welch was, you know, somebody who I would follow a lot of Steve Jobs. You know, I was absolutely a total fan of Steve Jobs. Same time with us. Yeah.
Now, nobody would have told you that consumers need an iPad. Okay. So what I realised is that consumers cannot tell you what they want, but consumers can tell you what they don't have. have what they aspire to be. And it is the business's job to figure out how to put it together and bring a consumer value proposition. So everything is about the consumer value proposition right. Now, when we launched McCafe, we felt that the India's a young country, the demographics are very much in favour of youth. And basically, we felt that the coffee culture is going to catch up in India, more than the tea culture and tea is drank at home. But really, coffee is a great thing that is drunk outside. And, and thankfully, in this case, cafe coffee day and some other even Starbucks or actually started Costa Coffee it started. So that culture was sort of catching on. In fact, there was a team that did some work on India, it was a global team. And they told us that make cafe something that, you know, India should not do. Right. So that was on top of that, that's what we were hearing. However, you know, my our sense was our, you know, finally it's the field, finally, out there in the market. Right, and you're watching consumers are observing their behaviour, you're seeing what else is happening, we felt this is the right thing to do. Now, this is the important part, globally, we implement McCafe in three ways. Okay. The one one is what we call a product strategy. And particularly, the second primary one is what we call a place strategy. So product strategy means that you will could have come to a McDonald's and order the same cappuccino across the counter. But you would not see a barista, and sort of a McCafe kind of setup. But the quality of the coffee would be the same but and it would all be done behind the scenes. Yeah, that's a slightly or nothing is easy, but slightly easier strategy. But we chose to go with place because places little more difficult to implement. But we felt we wanted consumers to see the gourmet side of the coffee. You know, baristas making, it is handmade is crafted for you, and all of that. And, and it worked. But the most important thing I'll tell you is that coffee is an art. Right? So it's not about so people would ask me that it's doing well, why aren't you opening more McCafe's posture and so on. So my so what we were doing was we were training 200 300 baristas at a time. And we were crystal clear that you launched make cafe with three image restaurants. So we were simultaneously re imaging as well. And we had a pretty well laid out master plan of how we want to roll out. Because in a retail, I think ruling out is most important. So net net, it worked out consumers loved it. And McCafe thankfully is doing quite well. But there was no science behind it as well.
Sahil Contractor (17:52)
Correct? No, it's been it's been great. I mean, we love the coffee there now and we prefer it over Starbucks. But at the same time. You know, one other important thing, which I noticed a couple of outlets is the implementation of technology. Right? And that's been pretty crazy. So you know what got you to think around that because, you know, we perceive McDonald's as a quick meal in and out. But the amount of tech you've enabled into the restaurants now has been it's been phenomenal.
Sandeep Jethwani (18:18)
Before you answer that. I just want to add that you guys did it at a time in the pre geo era when the internet was not and I remember going to some McDonald's outlet where my phone network wasn't great. But they had a touchscreen and everything was working very seamlessly. So yeah, just I think big question around how you dealt with that.
Amit Jatia (18:43)
Remaining so slightly longer answer because I want to give you some context. What happened is that while we were doing really well, between 2004 and 2012, you know, we doubled our same store sales, we had the best record profit ever. And you know, we thought we were invincible. Life was great. And we got we got caught in this whole thing of being invincible. And that led me to one of my learnings that you make your biggest mistakes in your highs. Okay, when you think you are invincible, and that kind of we'll talk a little bit about it later when it comes to investing and capital allocation and things like that. But in 2013, we realised one thing, that even though I'm sort of a student of jack Welch, and he was my guru, and jack Welch's whole thinking is around never letting bureaucracy come into the organisation. We realised that we had become very slow in our implementation. And to be honest, we had really fallen back on technology. Our customers had moved ahead in their life and our brand had straight back and we became known only for affordable burgers. Yeah, obviously simultaneously the economy tanked in 2013. Inflation was rampant and the entire sector And the entire industry started falling down. So that is when you know, I said that now we need HRPL and Westlife 2.0. Yeah, the McDonald's brand has to completely reorient itself. But simultaneously, I learned another thing. And what I learned is and I tell me do this every single day, when people ask me, What is this one big thing that you're going to do tomorrow day after? I tell him that the day I have to do one big thing, you should sell our stock. And the reason is that we need to evolve every single day because the consumer is changing every single day. That means every two to three years if you do if you recognise the McDonald's, you went three years ago, we've not done okay. And three years ago, we were x Today we are why they after we will be z Yeah. Now, why does this link into technology? So what happened is that Remember I said the consumers young, adapt your internet, smartphones, that whole revolution was coming. And we had fallen back on digital. So in 2012, and 13, we were really behind, we did not even have a digital organisation. The important thing is when we did a bit of a culture study, yeah, and I call it transient advantage. We can talk about that a bit later. But the behaviours required for an organisation that is evolving every day. Yeah, did not reflect the behaviour at HRPL and Westlife. So that is when we started making significant changes. And we said to ourselves, that we will now never allow our brand to fall behind consumer needs. And one of the biggest things that we identified as a gap was digital. I mean, if you go back at that period, we were not even accepting credit cards. Can you believe that? Yeah, no payment, a game has changed completely, you have to be able to accept payment in any way in every way that the consumer is talking. Correct. So that was when we made the transformation. You know, we were we upgraded our POS systems, we launched experience of the future restaurants, we build the backbone of technology. And therefore, you know, we launched an app for our delivery business in 2014-15. And therefore, when this crisis came, our foundation was so strongly in place here that we could continue to pivot the business very, very quickly into convenience into where the consumer was consuming. So we were the first company in India and QSR to launch contactless delivery. contactless in store ordering contactless takeaway corner on the go on the goes are very interesting concept which cannot be done without technology. And it adds quite a bit of incremental sales. People don't get that normally. But on the go means that as you are approaching the restaurant, you place the order and we come outside and deliver it to you. So it's like a bit like drive thru. So it was our journey on technology, a bit of a long answer, but I wanted to ensure you get the context that we were behind. But now we've kind of caught up quite well.
Sandeep Jethwani (23:10)
No, and you're caught up in how when you refer to the point about capital allocation and investing, and let's first dig into how you did it for the company, and then we'll move to how your own personal journey has been. But what have been your big learnings around how companies should manage their cash?
Amit Jatia (23:32)
I mean, you know, we learned the hard way, to be honest on the so what happened is, you know, I keep going back to 2012 and 2013. So we are fixed our unit economics, we were doing really well. What What happened is slowly cost started creeping back between 2004 and 2012. Like I told you, we thought we are invincible. And what we did is we allow costs to come back into store development cost. So that means to build a restaurant, the cost started going up, you know, and it was great till sales were going up. But when sales plateaued, now we struggled. So in 2012 and 13 we realised that we need to completely reorient the way we look at our the way we are putting capital to work. So the first thing we do is However, instead of stopping growth, because that was not the right answer, we launched restaurant operating platform 2.0. And in restaurant operating platform 2.0. Boy, we got the cost back down to what was sensible, right and we continue to grow. But at that time, we made it a significant discipline in the company, where we started focusing very, very hard on side by side performance. We started looking at what we budget to open a restaurant versus what we actually do. So there was very, very serious review mechanisms discipline, every new capital, we were watching the return on incrementally invested capital Right. So now I'll tell you, I'll tell you one other story linked to McCafe that will tell me answer your question as well. So we are sitting, this is 2013. Our business is tanking by the day. And, you know, we were talking about all the things I just talked about. And the question came Should we do McCafe or we shouldn't do. Now McCafe means you have to not only reimage the restaurant, you're launching a new platform, while the capital allocation and the cost structure return on capital employed is all struggling.
So, my leadership team is saying no, this is not the right time to do McAfee, and da da da, da da. So, I told them that see, let's first analyse the risk. Yeah, at the end of the day, we are debt free. In fact, we had that time even 200 crores plus cash in the bank. At that, you know, the risk on McAfee is what is five crores but if we are not going to take this risk, how are we going to reinvent the business? Right, I said the makeup of all the consumer data everything is telling us is the right thing to do. So, I told my team there that is my business call, okay, because capital a capital allocation was my single call. I said I listened to everybody but I made the call on capital. So I said "Chalo 5 crore". Let's put it in right and we built the first McCafe in crossroads. Now that may cost me 75 lakhs Okay, at 75 lakhs nothing is viable. So, we look very, very carefully at what is the average unit volume that we are going to get, what is the capital deployed to build that and therefore, what is the cash flow? What is the ROC? We have? I mean, without every single side going through that discipline, we do not put any capital. Now, the minute we launched coffee, it started doing well. Okay, but obviously, one make cafe does not mean that the consumers know McDonald's has McCafe. So we decided that we're gonna focus on Mumbai. But what is the next thing we do? for six months, we did not open a single McCafe. What we did instead was we made that 75 lakhs which was global standards, all imported material. And we brought that down to 20 lakhs at 20 lakhs, I'll say this here today, that basically at even a 5000 incremental rupee sale per day of coffee, you know, it may made sure that we recovered our capital on McAfee. So it became a no brainer that you don't have to think about anything we can open a cafe irrespective. So while we got that, right, we got the baristas right. And that is when we've been the next year, we made the five crore with maker 10. Then we made it then I said, once we felt that we have enough what I call empirical evidence, again, coming from good to great, and we have enough history of sites. We started then building 50 McCafe's a year. So now what we've done is we have very, very, very serious discipline on capital allocation. Our capital goes primarily in building new restaurants reemerging, adding McCafe and things like that, and we do a review on that. And our there is accountability around return on capital employed. So our return on capital employed is actually quite low because of historic reasons. But it was rapidly moving up. And our target is to get to 20-25%. And so the answer to you know, our learning is at least, that you got to be very disciplined, and it cannot go on gut. And you have to build empirical evidence and you go one step at a time. So for example, don't say I'll put 100 crores depending on the company's capacity. For us five crores was a risk we could take, we could carry that risk. So we took the risk of that five crores. So I at that time, I could not take 100 crore risk. So you gotta manage your risk in that, in that sense. So I hope this gives a bit of flavour. Yeah, but I guess.
Sandeep Jethwani (28:53)
So I think that's a learning and capital allocation, but also in how you were able to bring down cost, right, a 70% cost reduction in what is a global standard product is unheard of. And I feel like most of McDonald's globally will probably benefit from those learnings on how you did it right.
Amit Jatia (29:12)
We had no option when you have to fight for survival, when you find solutions that are not visible.
Sandeep Jethwani (29:20)
So with one of the things we are curious about is how you managed your journey as an entrepreneur along with your journey as an investor, sometimes those things are working in opposite directions, your emotions are playing games with you. How has been your own investing process over the years? Sure.
Amit Jatia (29:40)
No, I'll give you my honest view and my honest learning here. What had happened is, you know, my many years ago, my belief I grew up with the belief that it's all about the operating business. And our family is all about entrepreneurs. So we would invest in our own businesses and we would grow that and we never really Thankfully, we always did have a small Treasury, but we never really bother too much about it. But I must say that five to 10 years ago, I realised that you know, that also needs to be built, but more recently in the last three to four years, so my learning on investing has come, firstly, you got to be very clear about your risk appetite, and what are you gunning for? If it's a side thing, I think it has a certain thing, if it's your primary driver, it's a certain thing, if you're retired, it's a certain way of doing things and so on. However, from my point of view, what my first biggest learning is that along with your operating business, you got to start building your own individual capital outside of the business as well. And that needs to be actively managed, it cannot be given a second review, like he used. The second big thing I learned is that, basically, you got to balance your portfolio out. And you know, you got to play between equities, you got to look at some private equity you got to look at, you got to look at some fixed income return. And you got to balance that out. But it all again, depends on your own individual needs. If suppose there is no need, then you got to look at time horizon, like if you go private equity, while the gains are very large, but you're locked in for a long period of time. You know, if you do fixed income, that's good. If you need the income, equities, you got to have some exposure and equity. That's where you get the growth aspect, then you got to have diversity geographically, you know, I'm thankfully now in India, you are allowed to invest offshore as well. So you get a bit of play in the EU, in the offshore markets. So I'm a firm believer in dividing all this up. Yeah. And again, I'm a goal oriented guy. So you know, for example, in India, I always believe that you got to at least get a 15% return. Minimum, I know interest rates have gone down. And therefore based on my risk appetite, based on how I think about investing, and therefore then I try to plan my investable surplus in that manner. And one last last thing I want to say there is that, you know, people tend to forget time horizon. And I think time horizon is an extremely, extremely important thing. If all your investments are locked in for 10 years, and suppose some other opportunity comes forget even need now, then you don't have enough cash available to deploy. So it's not an easy thing. But it all depends on the individual's relevance, where they stand in their life, what are their needs, and it's got to be balanced based on that. So that's how at least I think about a 15% return split between private equity so that you can get a bit of long term growth, get some fixed income, do some bits of equity, and then you do diversification geographical.
Sahil Contractor (32:56)
Oh, absolutely. And I think the good point you mentioned is, you know, 15%, but the most important thing is there, that you need to compound that 15% you're on. You're right, a lot of people what I've seen, and you can correct me if I'm wrong is you know, they see 30-40% return possibly in a shorter period. And then they walk away from the market. So they will walk away from their investments, right? I think compounding at that 15% over a 10-15 year period, is what actually gets you you know, the net worth that you are gunning for right? And that goal at the end of the day?
Amit Jatia (33:31)
No, that's a very, very, very good and important point. My learning is you got to stay the course. You know. So what happens is that I feel that's why you got to keep liquid cash also, like let's say the pandemic happened. Yeah, I think when the markets collapsed, I was a buyer. I was buying everything. And to be honest, that worked out very well for me. But I did not take debt on I bought with my own funds. Right. And that allowed me to sort of deal with it. So today, what's happening Two years later, markets have gone up like crazy. But even when they crash? Yeah. And it doesn't bother me at all. So that is the point you're making gotta stay invested. Especially if you're taking equities, you got to take a five year view, you can't just keep coming in exiting, coming in and exiting, you got to stay the course. And that is when you start compounding the returns otherwise, you don't compound returns.
Sahil Contractor (34:24)
Absolutely. Just a quick take from you on. You know, you've seen a bunch of entrepreneurs in India, you know, budding all over the place, right? We've had some crazy amount of unicorns in the last couple of months and years as well in India. What's your take on? You know how this is going to progress over the next couple of years? Are you doing yourself some amount of startup investing as well. And you know, the fire you see in these entrepreneurs today is very, very different than what it was before. Right. So how do you see this panning over the next couple of years, especially from India point of view?
Amit Jatia (34:56)
No, I think these are very, very exciting times. While some People say it's a bubble, I think some good things are here to stay. I think the ecosystem that is emerging because of these unicorns is going to make us not definitely not Silicon Valley. Because for that rules and regulations of the government also, guess what is going to get there. And I think, is going to encourage more and more people to become entrepreneurs. And my thought process around that is the way I'm thinking about investing in startups is one, you must have a plan, there's no doubt in my mind. But what I'm how I thought about it is again, take five crores, okay. And you, at least in adjacency, so how I'm thinking about is okay, we are in the retail business, let's say there's a company that is doing something decent in payments, or somebody is doing some agritech, or somebody is doing something around the consumer experience, right? I'm saying, Can we start investing in such companies, where later on if anything really works out, then we could even acquire that company and integrate that technology into our core business? Right? Yeah. And I think about that, should we do incubation? Now, should we use some of our capital and help an incubation lab where they bring ideas to us, which we can buy? I'm still thinking with a corporate mindset? Yeah. Because the whole idea is, how do I take our current business, and whatever his value is today, how do I triple that value, okay, and not get lost or lose out on this phenomenal work in the startup ecosystem, where they are redefining the way things are being done from a consumer point of view. So what happens is, when you are a very large company, they are you tend to slow down. And that is why they call ambidextrous organisations are the best way to go. When you take a smaller company or startup in these areas that are connected to your business, and start investing in them with the view that you can help them keep investing, and maybe even do a strategic buyer. You know, at a personal level, I'm more opportunistic. Okay, primarily, I go with the entrepreneur and the theme. And I must say, though, that I'm not an expert. So I have friends who are really good, and then I co invest with them. So that is how I've been thinking about it or put in, I've even invested in one or two funds that are doing startup investing. So these are different ways in which I've sort of dealt with the situation.
Sandeep Jethwani (37:22)
However, it'll be good to know, for our listeners, what are the things that you've learned from your investing mistakes? Like throughout our journey, we've all made some errors of judgement, sometimes errors of omission that you just missed the opportunity? How, what what has been the one or two couple of things that stood out for you. The most important one I'll tell you is not new. But it is called FOMO.
Amit Jatia (37:51)
And when you go after fear of missing out, and you hear a cocktail table, everybody's making money and you are not right, that's what you feel correct. But that's not the truth. Because people only talk about their wins. They don't necessarily talk about the losses, not because they want to lead people in the wrong direction. But what are you proud of your wins, right? Not necessarily your losses. So what happens is you start feeling my God, the whole world is doing this, this, this, this, and then you make an unqualified sort of investment. So I think fear of losing out is one aspect where I feel at least I've made the biggest mistake, because then you tend to get impulsive. And you feel that you need a part of the action as well.
Sandeep Jethwani (38:34)
I completely agree with that. So there are two four letter acronyms right. FOMO and YOLO. Right. fear of missing out and you only live once. And when these things, when these two things impact your investing, I think there is something to be worked on. No, I think this is this is excellent. Another huge learning for our listeners as well. I guess there's one question that we ask all our guests on the on the show it is that one big takeaway there insider tip on investing? And I know we think of tips, like a stock tape or something like that, but I'm trying to think a little beyond. And what is that one thing that you'd like, folks to think about when it comes to their portfolios?
Amit Jatia (39:24)
It's a tough one. But I always think of, you know, no pain, no gain, no risk, no return. And as long as you get that, so that when somebody offers you that I'll get to 30% Yeah, it may be correct. But the minute you hear 30%, you have to recognise that the risk goes up dramatically. And as long as you recognise that, and on that you add time horizon. People forget time horizon. Okay, so when you bring the two together, I think to me, that's how I think of everything. No, no risk, no return, no pain, no gain, and you bring time horizon into the equation. And I think you have a decent foundation to start thinking about investing.
Sandeep Jethwani (40:10)
Yeah, I guess you need to be at peace with the loss that can happen if you're right.
Amit Jatia (40:15)
Absolutely see investing is not for the faint hearted I always say because then you got to go fixed income. Okay, you're if you're if you don't have the courage to if markets go up and down and you go up and down with it. I don't think you're an investor. Okay, then you are a sort of punter. But I personally feel I even feel that you want to punt on 25% of your portfolio. Right? Okay. Do if you want with 100 you're gonna have sleepless nights. So I think of very, very big investors in India who are so I mean, Warren Buffett, of course, for me, is God. And and you know, with one of his lines is sort of my favourite. Okay. And that goes with investing as well. He says only when the tide is out. You know, who is swimming naked? Yeah, I never, never, never forget that. Okay, because when the tide is in, everybody's doing well. Right, but when the tide is out, you realise "kitna debt hai"? What else is going on in their life? Exactly. So that's the other one one's gotta keep in mind.
Sandeep Jethwani (41:21)
investment businesses that are foundations, right? Like you said, like,
Amit Jatia (41:25)
exactly. So even, even though it may look bad with the pandemic today, you know that the management is solid business has oxygen canisters, is competitive advantage places good well placed in the industry. You can sleep peacefully, you don't have to worry. That's how I think about it.
Sahil Contractor (41:44)
Absolutely. Well, my that's been. That's been amazing. I think we've, we've learned a lot as always from you, and especially for our dezerv clients and going forward. For everyone who listens to this podcast, I think it will be a massive, massive, you know, value addition in terms of education, etc. So super, super happy to have you with us on the show. Ahmed. Thank you.
Amit Jatia (42:06)
Thank you for having me on the show.
Sandeep Jethwani (42:09)
It's been a pleasure. And more than that, it's also been a privilege to have you as our first guest on the show. I feel that we couldn't have hoped for a better start. And I look forward to meeting you in person very soon. Thank you. Thank you guys. Take care.
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