Tuesday, 24 September 2019

Why we have finalized Homeschool for our son?


Sometimes back, I was talking to an Educator friend (who thinks Educator word is a better representative of his role than teacher) and our discussions turned towards the memorization problem of our education. When I asked him whether he understood the gravity of the crisis I realized that he did not even understand the concept of memorization. He was taking this in literal sense when the issue is relative (IQ vs Memory).

So I gave him the example of my son-my 7 years old son who has almost 200 car toys and remarkably he remembers the source of each and every car. Sometimes he comes to me with a car and tells the source like that car I had bought for him when he was crying after he got his vaccination. And almost every child has this type of memory because they have fewer things to take care off and they are busy and wander in their own fantasy world. So is there any need to check and test their memory? They are already demonstrating that they are good in remembering things so is there any need to waste their precious time in proving that they have good memory. In fact best way to enhance their memory is to expose them to newer phenomenon routinely especially the things they like and prefer.

But in our schools, most of the study and time is oriented towards making them remember things and then more time is wasted in testing the same (exams/tests) when it serves no purpose and there will be minimal reward in their future life for the use of memory. What is the purpose in asking a 1st /2nd standard child to memorize a story and then taking exam/test of the same? By taking exam we are testing the memory only (which is not required at all at first) but there is no test to see whether he can apply the understandings/learning of the story in life or situations.

We humans build opinions when we see and comprehend things relative to us like when a child sees how bad he feels when his friend does not share the chocolate with him and this lays the foundation of opinion about sharing things with others. We can’t understand that which does not have its existence relative to us. Like can we make a child understand what is love? Why people die for love? No, we can’t because a child with his present physical and emotional development stage can’t comprehend this just like we can’t comprehend what our Sages/Gurus/Rishis mean when they urge us to rise beyond our present consciousness level to higher spiritual level to experience the vastness and greatness of life. We can’t comprehend when they say there is no death…when they die for the virtue.
So the consciousness and wisdom of a child is developed when he is exposed to the different phenomenon of the world. He makes his inferences about the phenomenon based on his present state of consciousness.

So we can direct our efforts in channelizing and exposing them to the phenomenon which is relevant to them like love story movies are worthless for them, English grammar is useless for them (they learn languages on their own with much more efficiency), General knowledge books are useless for them (I have seen questions about MS Dhoni in GK Book for 1st standard!!). But cartoons like Doraemon are much more helpful (even better than schools) as a child can relate to it as he lives the same type of life…his dreams are same. My son that day asked me about the time machine which Doraemon has and asked me whether he could meet his grandfather with the help of that machine by going back in time. I was surprised that he could understand the linear flow of time (although we are not sure about the linearity).

Every child understands and uses mathematics in his life but with things with which he is associated. You give them 5 cookies and takes away 1 and they can tell how many are left very easily as compared to the effort when we ask them to solve this one paper (5-1=?). Now, these numerical alphabets are foreign objects for them which they do not use in their daily life. Also, our mind thinks and understands phenomenon in pictures (we may not realize this but whatever I am writing here we are seeing a picture for every word/emotion in our mind running like a movie) so their mind can comprehend 5 cookies lined up on a paper but then cannot comprehend that “5” represents the count of anything numbered 5. For them it is a picture only but we still try to teach them math in this way only. I have seen the use of five things along with 5 but I feel whether we need to teach and force mathematics on them in this boring way or in a way which they use in their daily life.

IQ is about application of Data/Knowledge

At present, in our schools children (7-8 years) are being forced to sit for 7 hours studying GK, Grammar, and EVS which are useless for them. When I put my son to a Nagpur school they have asked us to bought books on some 7-8 subjects. But CBSE rules provides for only 3 subjects: Hindi, English and Maths but there were extra subjects like GK, EVS, Science, and English Grammar and all these are strictly prohibited by court, NCERT and CBSE. Even the honorable Madras High court Judge was shocked and surprised to note that Grammar and Computer science have been studied in class 1. To teach these useless subjects children are being forced to sit for 7 hours in schools. I raised the issue with the management of the school and to my surprise they replied that the curriculum and time is just like other schools in the Nagpur and it is the benchmark. But I told them that the benchmark is decided by CBSE/NCERT not by schools. For this they had no answer.

I immediately realized that they don't have the IQ to understand the uselessness of forcing these books on small children. I have seen these schools shouting “IQ-IQ” all the time in their promotions but after my interactions with so many of them I have realized that they do not understand this at all. I asked about this to so many educators I have met and their fully confident answer was that it is about the intelligence. But how and why-they do not have any clue at all.

Once I gave one example on this to some of my friends. I am detailing the same here. I am an investor and pick stocks after detailed study about the business. I was having one stock- Praj industries ltd which is one of the most innovative company in India and their main business is to set up plants to produce Ethanol from Molasses/sugarcane which is called 1st generation Bio fuel. Then they were focusing on producing 2G bio fuel from the bio wastes like Wood chips, rice husk etc. So one day I was sitting with some of my friend and we were discussing this issue and then one of my friend said that 2G bio fuel may not be possible as there is no technology to extract or synthesize fuel from grass, wood etc.

At that time I had done the study of Enzyme industry for finding a stock related to enzymes. I had also completed the study of Dairy industry. So at once something flashed in my mind and I told my friend that this activity of extracting energy from wood, grass is already being done. My shocked friends asked where. I told them about the cow. A cow uses special set of enzymes to convert the tough and complex matter like cellulose into energy so we can also extract these enzymes from them and use the same for 2G fuel. It is just like we extract rennet from the stomach of calves for making cheese. We later checked and found that research for 2G bio fuel is indeed based on enzymes from cow stomach.

So study about the enzymes and their role in our life is just DATA but when we use them for the solution of the problems then it is about IQ. Intelligence is the use of the data. I always say that Data is God and advise all to absorb as much data as they can. But data for me is not about the Birth place of Lord Buddha. I refer data about the name of a player, awardee, birth place, book writer etc. as “Spatial Data” and most of the time it is useless in the context of our life. But what Lord Buddha preached, his experience about the life and world is something which can’t even be valued. Because just the words of a person like Lord Buddha can transform the life of anyone just like he did for “Angulimal”. So the data about what our world is and how it behaves the way it behaves is most important for our life and I call this as “Essential Data” and the data which we can gather by comprehending the teachings of persons like Lord Buddha, Mahavir, Krishna etc. is “Transformational Data".

So when we have the data about how the phenomenon of the world behave then we can use that data for our use or for solving or for betterment of our life whether it is about electricity or medicines. Human first understood what electricity is and how it behaves and then with this data they had been able to produce the electricity on their own. This is IQ. IQ is more related to the use of knowledge rather than superficial knowledge. Use of knowledge requires deep understanding of the concept and factors affecting the behavior and outcomes which is very different from “surface scratching” teaching methods of our schools.

Our Brain has this amazing capability to create new insights, extract innovative ideas from the unknown in a flash but it happens when we have the data for processing in our mind, when our mind is filled with the essential data…data about how phenomenon works here in this world and most of the times our brain appears to create these insights on its own…in auto mode.

And the sad part is that our schools focus on imparting data only (that too “spatial data”) and very little effort is put on devising study material and method to promote and enhance the use of data by children for finding solutions of the problems. With our current low standards of imparting study in schools, most of the times they end at teaching “Essential data” as “Spatial Data” just like when they ask students to memorize the formula for calculating the area of a circle (πr2) and the derivation is never explained to them.

And if we can try to look beyond the apparent then we can see that the primary function of current education system is not to enhance the skills of students but to certify what they have-memory, intelligence etc. At present, a student is brilliant because he is brilliant on its own and there is no contribution from the school. Our schools just can’t enhance the intelligence of a poor child. There is no method and efforts to develop intelligence. So in essence, our schools are just certifying which student is brilliant,dumb or average.They are a testing platform only and there is no value addition from schools in the intellectual development of an average student. We all can remember how our poor school friend from 5th standard was poor even in 10th standards. I have seen people performing well in studies once they are out of school because after schools they were able to utilize their time much better on their problem areas but still the loss of most creative and productive period of childhood can never be replaced.

Our current education system can never create revolutionary innovators. Sometimes, Indian education system appears good due to individual brilliance stories but system itself doesn’t contribute much to create and develop brilliant brains. The contribution of our schools in creating and nurturing the brilliance is insignificant. These individuals could have written their destiny even in sheer darkness.

For the current sorry state of our education system is due to many reasons but surprisingly one of the reasons is- NCERT, the failure of NCERT in developing the qualitative aspects of education and content. There is big hue and cry every year about compulsory sourcing of NCERT textbooks by CBSE schools and it appears that only mandate of NCERT is to produce cheap textbooks. However books publication was never the mandate of NCERT. NCERT was set up in 1961 to assist and advise the Central and State governments on policies and programmes for qualitative improvement in school education. Its main focus areas were research related to school education and the publication of “model” textbooks. As we can see the mandate was “to publish Model books”. It was never of “Mass publication of books” as it is thought of.

However the government is using the tax payers' money to subsidize the paper cost which is used by the NCERT books and therefore being made cheaper. The government is subsidizing it to the end students by using the tax payers’ money. So, as we can see taxpayers are paying for the cheap books and it is not that they are producing it cheaply. That’s why I sometimes feel that it is better for NCERT to stick to its original mandate of research in improving the quality of school education rather than wasting time on publishing millions of books and wasting time on supply chain.

Excessive Useless study material and study time

When I was looking for a suitable school for my son in Nagpur I was shocked to see that all the schools were forcing excessive useless study material and excessive school timings on small children. How can a small child of 7 years afford to spend 7-8 hours in a controlled tiring environment in a school daily and then after that hope to enjoy their golden childhood. I have seen parents sending their children to tuition even when they already wasted 7-8 hours already in school. This is injustice and torture beyond imagination.

Due to long school hours a child is not being able to take food properly plus food always gets stale/cold during these long hours. After the poor child comes back home after putting 7-8 hours he is always very tired. This affects his playtime and sleeping pattern very badly as they are supposed to get up at 7 am which is not good for children as their body clock and sleep/rest pattern is different. Most of the children I have seen take school as some type of jail which they have to endure somehow and this is not good at all for the long term intellectual growth of a child.It is surprising that in spite of the regular intervention by high court still the schools are being allowed to play with the rules and the lives of small children.

This forcing of extra subjects by the school is the main cause of extended hours (or torture not study). Because even if we take 45 minutes for 3 subjects as prescribed by NCERT/CBSE the total study time will be 135 minutes plus 15 minutes assembly and another 1 hour for play and food break will make it approx. 250 minutes (4 hours) but now they are put to endure school for 7 long hours and this becomes 8-9 hours due to travelling times in larger cities.

A child learns and absorbs the world best when he is a free spirit without any stress or pressure. Class rooms are not the best way for this as a child learns by visuals and real life phenomenon not through empty words. So the need is to give them proper environment, free time in real life for the observation and visualization not trapped in the class rooms like prisoners.

We still have in our education system the wrong notion of “Population syndrome” where we perceived more people as good (for earning more income) but ended up being a highly populated country devoid of even most basic amenities. The same mentality we are following for child education thinking “more is better” while it is common sense that burden of books kills creativity, ingenuity, Natural flow of thinking and natural talent. Numerous studies have shown that the education standard is one of the true indicator (Other is health) of economic development in a country and it is sorry to see that India is lacking both.

So our schools need to throw away the herd like mentalities and try to bring in innovative models for imparting knowledge…schools should play the role of more of a medium (Channel) through which the students absorb the knowledge than a heavy burden which only forces students to struggle for walking straight on a tight rope with heavy burden on their heads.

PISA moment for India

A young man has the responsibility for his own action and life but a child is the responsibility of the parents, school and society and we try to fulfill this responsibility by putting them for long painful hours in school. In fact, this “More is good “ mentality has polluted our education system so much that India occupied 73th place among of 74 countries participating in PISA (Program for International Student Assessment) test (the last one in which India participated).

PISA survey is conducted by the Organization for Economic Cooperation and Development (OECD)  to test education systems by comparing the test performance of 15-year-old pupils. Indian education planners were shocked at the poor standing and cited reasons like language problems of Indian students which was not even a face hiding excuse since many other non-English speaking nations like China emerged as winners. Besides, there is not much role of a language in Mathematics.

Students from Singapore, Japan, Taiwan, Vietnam, and China (Hong Kong, Macao, Beijing, Shanghai, Guangdong, and Jiangsu province) were among the top performers. Over 540,000 students, from 70 countries, participated in the tests. The two-hour test not only evaluates the cognitive skills of students in science, math, and reading, but also assesses their ability to solve problems in new and unfamiliar conditions (as I have explained earlier the IQ). The approach of PISA “reflects the fact that modern economies reward individuals not for what they know, but for what they can do with what they know.” All this implies creativity, free and natural thinking process, long rooted culture of understanding the problem and concept not just memorization and we know that our education system fails big time in inculcating and motivating these traits. Due to embarrassment India did not participated in the 2012 and 2015 survey. At present India is thinking of participating in 2020 PISA test and i think this apprehension is a tight slap on the face of our so called great educators who are basking in self glorification.

Success of innovative education system of Finland-An eye opener for India

Countries like Denmark and Finland have with their focus on creativity, innovation and continuous restructuring created an environment where children take schools a place of enjoyment and learning not as some type of Jail and this has resulted in the children of these countries achieving big in their life and these are some of the happiest countries in the world. Recently, the success of Finland in raising their education standards has made even the likes of USA to follow their approach. Finnish students have been turning in some of the highest test scores in the world. In PISA tests, Finland has ranked at or near the top in all three competencies on every survey since 2000. Earlier world over, the education system of USA, Germany and France was considered the best but the success of Finland in PISA tests continuously shocked the entire globe.

The likes of China, Taiwan has done well but even in these countries children are being made to sit for long hours in schools. These countries are now finding that their children are unhealthy and devoid of energy due to excessive brain drain and long school hours. However Finland has achieved the success in education in much better and healthiest way. Finland has achieved this remarkable progress just in a span of 10 years.

In Finland they do the opposite-children are assigned minimum homework (half an hour only) and most of the school time is used for creative play outdoors. There are no regular exams/tests for evaluating the students in fact they have one test after the end of high school taken at the age of 16 which may be equal to our matriculation test. Unlike our great indian Educators they were first to realize that tests/exams make students and teachers to focus on the narrow syllabus and focus is just to pass the exam so this leaves minimum scope for learning, creativity and enjoyment. In Finland, there are no lists of top performing schools, students and teachers.

My son asks me how power plant produce electricity, how AC cools the room, how lemon grows on the tree in our apartment…..so just like every child he has a lot of question about “how the phenomenon works” but we want them to spend their time in watching aimlessly at class room blackboard for hours and absorb the common study content which tries to fit all the children with varying choices and passions into same box.

Our schools take all the children as a commodity and there is no focus on individualization. This fact when I brought in front of management of my son’s school they were looking at me aimlessly and I understood that they were incapable of understanding this. But in Finland teachers create their own tests to assess every child. A master's degree is required to enter the profession, and teacher training programs are among the most selective professional schools in the country while in India most of the people choose teaching when they do not get employment elsewhere or when they himself were average students (But indeed there are some brilliant teachers because exception is general). I have seen some of the dumbest (academically) persons working as school teachers and even head of school.

The main idea behind the education system in Finland is to provide same education to every child regardless of financial, family or geographical background and the aim was not to make children Job ready but on social equality. So there are no private schools and children are given healthy meals, psychological counseling, and individualized student guidance.  But most startling achievement is that the difference in the top preforming and low preforming students is lowest in Finland and similarly no other country has so little variation in results across schools. So as I was pointing out earlier that our schools have no value addition in the intelligence of students but Finland has proved that they can do it.  So Finland has proved that it is possible to achieve excellence by focusing not on competition, but on cooperation, and not on choice, but on equity.

In Finland, schooling starts at the age of 7. I have seen Indian parents sending their kids to school at the age of 2-3 years which pains me. We sent our son to Pre-nursery school at the age of 4 that too for 2-3 times a week for some 2-3 hours just to play but no study. We sent him to school when he was 6. In Finland Science classes have only 16 students so that all can focus on practical experiments in detail. School timings are only for about 4 hours (which I want to see in India also and I failed to make our so called educators understand). Their school starts around 10 am as they also understand that early school timings inflict severe damage to the health of children.

The national curriculum is only broad guidelines and so teachers are required to use their creativity and innovation to devise the learning methods for each and every child individually. That’s the reason that some of the brilliant academic minds choose teaching as a profession in Finland and they are respected and enjoy the status just as doctors and lawyers. Finland publishes highest books every year and Finnish people are avid readers. Helsinki the capital of Finland was declared the city with the most honest people.

The focus on Finland on improving the quality of their education has begun to show results as in 2017 Finnish startups received highest venture capital by GDP share in Europe. They have most innovative startups like Solar Foods has developed a product named “solein”, which is an edible protein produced without any current agricultural systems and its environmental impact is ten to one hundred times lower than soy or meat. Another startup Sulapac has developed an award winning material from wood chips and natural binders to replace plastic. Then another startup Spinnova transforms cellulose into textile-ready fiber without dissolving processes or harmful chemicals, using 99% less water than the cotton value chain. Spinnova won Fast Company’s World Changing Ideas Award. These are just few of the startups they are creating. Our Nokia is also a Finnish company.

Most important thing, Finland is a country which has forest products as major exports so one would think that they must have destroyed all of their forests like we are destroying. Now the fact, 74% of the area of Finland is covered by forests just like Bhutan which have in their constitution to have minimum 60% forests. In Europe, Finland is a "forest giant", there being over sixteen times more forest per capita than in European countries on average.  The amount of timber in their forests would make a 10-metre wide and 5-metre high wall around the globe. Finland has ensured this by growing more trees than they are cutting every time. This wisdom and care is possible because of the high education standards unlike India where we consider The Ganga river as holiest and our Mother but still pollutes it like gutter so can we say that our education system has made us more civilized, aware, full of wisdom and compassion? The answer we all know without even any need to study anything.
You all can check more interesting details about the success of Finland education system by googling it.

Finally a Homeschool for our Son 

There were many big and expensive schools in Nagpur but they were also suffering from the same disease-no understanding of education and children. So we were helpless and chose a school which looks like having some sanity. But their only sanity was that they never forced us to send our child to school daily as we started sending our child school every alternate day in order to give him time to recover and rest.

Our only hope was that may be he would be able to like the school which he did to some extent but the main issue was the excessive school timings and unnecessary study of GK, Grammar and EVS which was total wastage of time for a 1st standard student. We realized that he was always very tired in the evening, lack of energy, disorientation, irritation, frequent stomach problem and Nausea. This I have seen with almost every child.

So we decided that all this torture is not good for our child and I met/wrote to the school principle many times and explained the situation and the fact that they are breaking the rules of CBSE/Court/NCERT by forcing these extra books and extra school hours. But they were limited by their wisdom (and IQ level). This is not the story of that particular school….everywhere is the same situation…all over India. I asked them what is the purpose of teaching these small kids the English grammar? What is the usefulness of teaching them about the vowels and consonants? I even challenged them that even their teachers do not understand the concept behind Vowels.

We do job for 8 hours a day and time for us moves very fast. As we can see that years are passing like months once we cross 30-35. But time for a child moves very slow…extremely slow. We all can remember our life at school and college and those 10 years (until graduation) seems like 50 years to us if we compare the current speed of movement of our time. There are some strange theories which say that this perception of time (moving fast or slow) has its roots linked with the ratio of time interval to the total life span we have been alive. Like for a 10 year old young boy, one year is a long period of time since one year is 10% of his total life so far. But for a 50 year old this one year is just 2% of his total life. So no doubt we can see here that 10% is more than 2% I explained this to the principal that 7 hour for a child are equal to some 20 hours of ours and this is what Einstein’s theory of relativity is all about and as a teacher they can better understand this but they could never as they suffered from intellectual myopia.

Once the school principal told my wife that we needed to up the ante for our son as he was lagging behind in studies. But these great educators could not see that first of all they failed to do something when they were fully aware of the problems our son was facing. They were breaking the rules of court/CBSE and could never muster the courage to answer any of my emails about these issues because in essence they lacked the intellect to comprehend these intricacies of human mind and growth. They could not gather the courage to accept that all these unnecessary books, long school timings are just a ploy to fetch higher school feel from parents..who will pay them such hefty fees if not for these long hours and number of books. They are doing this injustice to small children and ruining their golden period of learning with all sorts of garbage. How? Because their customers-the parents are not aware of anything...they are dead illiterate when the issue is to choose quality over quantity.

Our son loves drawing and draws the shapes with great accuracy and drawing is just like writing alphabets or words because these alphabets are nothing more than drawing shapes…as one can see “O” is a circle…”A” is a triangle. So we promoted our son to drawing and he could learn writing alphabets very easily without much effort on our part. Our son is very fond of things like Trains, Air conditioners, cranes, road rollers etc. and he likes writing the names of various AC’s like Onida, Samsung, Panasonic and he memorize these words without much effort when he was 6. So I tried explaining this to the school that “A” for Apple is not the only way to teach. “S” for Samsung conveys the same idea…for him “S” means Samsung or Shatabadi express. The purpose of “A” for Apple is not to teach him about the Apple but to make a child aware of the Sign (A) and related things because apple is not the only word to start with “A”…there is Ant…there are thousands. So no teacher can say that “S” only means Sun or Strawberry.

I still see parents putting their children to pre-school etc. at the age of 2-3. Actually early schools were discovered when both husband and wife used to work in the early dawn of industrialization and these pre-schools were required to take care of children. But there is no such situation now. Even when mother is a housewife and is well educated they still send their child to school at very tender age of 2-3 years and there is great risk to their mental health because 8 out of 10 children feel like in foreign territory and remain fearful. They yearn for home and mother continuously and this dis-orientation of mind is very dangerous.

These days we see so many children suffering from eye disease and they have to use spectacles. Now doctors have realized and confirmed that this is due to reduced exposure to sun light and focus of the children on near sight objects and they use their eyes to see far sight objects very less. This happens as they spend most of their times indoors in schools, then indoors at home and tuition and then TV and mobile phones. So this makes their eyes to suppress the growth of eye ball resulting into Myopia. They have listed sun light as the best remedy and prevention for this. This has taken the form of epidemic in countries like China where they have put excessive pressure for academic performance. Even in China the problem is severe in cities not in villages where the focus on education is still far less.

So left with no other option, we thought and finally decided to teach our son at home. There are some innovative alternate schools in India and some intelligent fellows are trying to teach students in a better engaged and joyful way where learning is a play but we could not find any such school in Nagpur otherwise that could be an option. So these days our son is living a happy and relaxed life. I am a chartered accountant and my wife is a merit holder in Masters in geography and I feel our son could not find better teachers. These days so many parents are becoming aware of the uselessness of our school education system and Homeschooling is fast catching the imagination of many parents in India. In fact, this is the highest growing education system in USA.

Even Government recognizes the value of homeschooling in india and recently Maharashtra Government launched Open SSC Board for homeschool students under which homeschool children can give exams for 5th std at the age of 10, for 8th Std at the age of 13 and for 10th Std at the age of 15. And if by the grace of God we could find any school imparting engaged and torture free learning then we'll put our son into that school...so the search is still on.


Not to Bring school at home while Home-schooling

As our son is very fond of Cranes, Trains, Power plants, cars etc. so we bought as many toys for him as much we can and he has large collection of toys on which he uses his creativity to make structures and build stories and narrate those to us. These days he is a free and relaxed soul and taking his interests in various activities like martial arts etc. For building his interest i have built my own gym at home so that he can see me doing gym and can relate himself. Most of his study time now is focused on "how" of this universe like how the things he likes works like he asked about goods train and we explained the same to him in detail-like we need transportation for carrying food, coal, cement etc...giving him the example of Chips (which he loves) which are produced in Gujarat but delivered to Nagpur in Trucks and now he explains the meaning of “Distribution” to others. He goes to see a nearby power plant almost 2-3 times in a week where he stands for half an hour watching and asking questions on its working. For us this is his schooling…much near to reality and involved.

So while home schooling we have tried not to bring "school at home". So we are not following just the regular textbooks for his study because as i have explained earlier most of the times they are just one dimensional. So we are exposing him to all sorts of phenomenon of the world so that he gets the exposure to various things of life/world and we are just watching him from the edge to see what can be his motivation for his future course of action in life. That motivation can be science, space, medicine, sports, art, construction etc. So we try to expose him to variety of Data in a relaxed and enjoyable manner. Like, he loves his mother the most and one day he told me that he was very worried that one day his mother would also get old. So seeing his interest, I tried to explain him the role of DNA/Genes in controlling and directing our bodies and told him that he could make his mother forever young if he could learn how to control the genes responsible for old age. He got really interested and I showed him the diagrams of DNA and how such vast amounts of data is stored in every cell of our body. Actually, if we can see at this age he can’t understand all these to the core but here the focus is to check and develop his interests. When we love something…have passion for something then learning becomes a play not a burden.

I have a small Gym at home and he sees me doing gym and he also loves physical activities the most whether it is running, cycling, wall climbing etc. but now after seeing me in the gym he likes doing push-ups and barbell curls. He can standstill between two doors on the sheer strength of his arms. So, we explained him the role of nutrition in the growth of our bodies and now he understands the role of Protein (in muscle building), carbs, fat and Vitamins in our bodies. He understands the danger of hydrogenated vegetable oils used in processed foods like chips etc. and he has left taking cold drinks, Frooti, most of the junk foods. He uses these only occasionally now. For developing his reading skills, we encourage him to use real life examples like reading the ingredients of the Chips bag. He can read, spell and write long and complex words like Palmolien, hydrogenated vegetable oils. For language & reading, we encourage him to imagine/create his own stories and while he narrates his stories we type the same for him. So he tells stories about how he and Doraeman save a child in a train accident. Then we make him read the story and as he has created it so he reads and understands words very easily.


But here the biggest difference if one can see is-He loves and enjoys reading and studying this way…for him this is not stress of education but a fun activity…and this is the only and best way to learn things and this joyful learning is the thing which keeps us motivated and full of life and energy even when we are old. Learning is not a phase but a vision. But no school in India understand this way of teaching as for them children are commodity and they impose only one learning method on everyone.
As one can see here there is no limit on learning. He can learn what he loves/likes or wants to know. and it is not confined to the borders defined by books and this really surprise me sometimes why most of the parents can't see the narrow range of school books. Our son just like other children wants to know how it rains, how trains operate, wants to play as long as he wants…but our schools forces them to not to ask anything beyond books and instead of playing watching real world they should sit in a narrow dark classroom watching and listening in which he is not interested at all.

School- a Partner in understanding and choosing the way of Life

I have always believed that we are here as part of our journey and this is not our first life. Because if we can see then we can realize that we are born with some of the behavior aspects of our persona like bravery, kindness, fear, will power…we were like this since our birth and we do not seem to done something in this life to acquire these attributes. We and our siblings are part of the same family…raised in the same environment…but yet we are all very different by nature, have different views, aspirations…why? Because we are all just continuing our journey from where we have left the same in our last attempt. Some children learn the music at very early age, some understands complex studies, some demonstrates amazing memory…these are all signs that we are starting the journey from where we have left last time in our last life.

So the most important thing in raising the children is to understand their path, their inclinations, their aspirations and creativeness through which they will express themselves to this world. To understand their path we need to observe them with open mind and not to impose our useless notions onto them. Parents do not know how many brilliant artists, scientists, musicians they have killed. Creativity is the biggest worship of this life and its only purpose…creativity enable us to transcend the realm of mind and comprehend and absorb the real essence of this life which fulfill our purpose of being here and prepares for the next much higher layer of life.

No child likes the school. The happy faces we see in schools do not enjoy the learning they were getting from school and they are happy because of other reasons like friends or play time. Also most of them after being forced into this daily accept this as part of their life but this also ensures the end of learning and purpose of life. Parents think that sad children in school are natural because they were like them in their childhood also but if they have any wisdom then they can very easily see that even their life was centered around job and career and they never enjoyed and relish what is real life…the flowers were never blossomed…they could never sing the song for which they have come to this world…and one day they will left unmanifested, unexpressed, unpronounced and unsatisfied. But they think that eating tasty food, gossiping, watching movies, having a car and house is the only aim of life and they feel that only this much fulfillment is possible in this life and our world (Tier-3 level). They can never understand what it feels like to create something…anything…music, a song, a story, an idea, a scientific discovery, spiritualism, occult…there is so much beyond our obvious world and so much to achieve and feel the bliss of having this beautiful time here until our death.

Death is inevitable yet all our efforts in our life are centered towards our survival only…very few have the strength to live out and put efforts for their dreams. Our sages like Vivekananda try hard to make us believe that what we are valuing as life is just worthless. They cry but we even go to them to get blessings to fulfill our worldly desires. I have heard many such stories where an enlightened person has said that his biggest sorrow is his incapability to make other people believe that our life has much superior purpose and structure. Once one of my friend remarked that it is due to death that life and all our efforts/hard work looks nonsense and foolish as at the end there is only this painful death. But i told him that may be we are taking and seeing it this way because reality may be that the ultimate aim of our life/efforts is just to get READY for this most important EVENT we call DEATH because there appears nothing much worth of this life...it appears and is low grade. So maybe we should think of welcoming this Death with hope rather than despair. May be Death is the only ultimate “Test” of our life but most of us passes the school test and due to passing this useless test we fail miserably in the ultimate Death test.

Tuesday, 20 August 2019

Max India,Max ventures and Analjit singh:Money,Velocity and Salvation


I see people analyzing a company…they try to extract the gold from financial data, numbers…investing all their efforts on the financial data as if the figures of turnover, profits are generated in auto mode by some business entity. But no such entity exists…behind all these superlative businesses, giant economies is just one factor-Human factor. The figures we try to use to judge the worthiness of a business are nothing but a quantification of human efforts….and bad news is that even this quantification can’t capture the force behind human efforts-wisdom. It counts the money but leaves the velocity....human spirit, creativity and bravery is the Velocity. Total money in an economy is a function of base money multiplied by velocity of money.

Any central bank can increase the base money but still it does not ensure that this will increase the liquidity in any economy. The best example for the same is the massive quantitative easing by the US Fed where it raised the money base from some $ 900 billion in 2008 to $ 4 trillion in 2014 but still it could not impact anything-neither inflation rate as was feared but nor the consumption (and GDP)  as was expected because if money base was increased 4 times velocity of money came down to 4 from 17 (factor of 4). That’s why it is so difficult to channelize any economy in the desired direction. Due to uncontrolled factors like this we still do not have any universal growth formula just like E=MC2.

Economists still can’t foresee how the velocity of money will change. There is no trend analysis possible because past experiences do not provide any such trends relative to supply of base money.  Money is a powerful tool in directing any economy but only when money velocity is stable. So the most important tool in the hands of central bank is hampered by the inability to measure the velocity factor and same thing is true for stock analysis. We try to use the best possible fundamental analysis tools to judge the validity and value of a stock…but still these tools are ineffective in valuing the force behind all performance indicators which is the-Human factor.

Also, sometimes I feel that economists can’t measure or judge this Velocity (V) because in the money equation (M*V=P*T or GDP) except V all other factors are independent of each other-Money base is an individual independent entity, so is Price level and volume of transactions. But here V is just an expression expressing the use of money (in fact, decision to use money) by general public...means V does not direct or establish anything because it is not an independent entity. Velocity does not direct the prices of goods but individual choices of demand and supply. More on this some other time. But in driving the performance of a company the velocity of the human factor is indeed independent of all other variables and that’s why this is so important.

So in most of the cases, I have found that we can focus on human being alone and we can find the gems. I have found some of my best picks by just valuing the human factor behind the company-Kiran Mazumdar shaw (Biocon), Vikas Oberoi (Oberoi Realty), Ajay Piramal (Piramal Enterprises), Analjit singh (Max Group), PRS Oberoi (EIH Hotel) and from current big bets Dr. Devi shetty (Narayana Hrudayalaya).

Today I am focusing again on Mr. Analjit singh who in my view has fantastic eye for gauging the next big thing in the business. He was one of the first to enter mobile telephony in India through his joint venture with Hutchison and made 561 cr by selling his stake to enter Life Insurance and created very strong brand image of Max New York life insurance among the big names in insurance sector backed by giant business houses like ICICI and HDFC and Reliance. Max New York life insurance is one of the most ethical having lowest agent turnover and highest agent productivity. Then he selected healthcare as the next focus area and started Max Healthcare which established itself quite fast. He singlehandedly created an empire of Rs. 15000 cr. But this eye for opportunity is not the real worthiness of Analjit singh.

A) Analjit singh means trust, ethics and wisdom

 He is one of the few in Indian business who has maintained and followed very high corporate governance and ethical standards. World renowned management Guru Ram Charan is his close friend. With his guidance, Analjit  singh transferred all his holding in Max group into Trusts. He wants Max to be a professionally managed company not promoter governed. He has kept management separate from ownership. His children had to work from scratch in Max to earn their place. He is so much obsessed with ethical management that if 4 out of 5 trustees vote against him then even he can’t move ahead with his action.

Max has one of India’s strongest Board and best independent directors. The Board has immense powers and no investor dares to challenge or force them to be yes men. I have never seen such a strong and high caliber board in any group as each board member is an institution in itself with highest regard for ethics and transparency. Some people find it hard to understand Analjit Singh’s obsession with governance and ethical standards and his decision to stay away from day-to-day management. But he has seen and bore the brunt of mismanagement in his family. Analjit singh is the son of Late Bhai Mohan singh the founder of Ranbaxy. In the family settlement of assets-His elder brother Parvinder singh who was close to Bhai Mohan singh got the  prized possession of Ranbaxy, Real estate went to brother Bhai Manjeet singh and Analjit singh got a small troubled textile factory at Okhla.


Analjit singh with Ram Charan
(Source: Forbes India)
















Ram charan regards Analjit singh as one of his best students with great eye for details. Ram charan is a world renowned Management Guru, best-selling author. He advises to who’s who of global giants like GE, BOA, Dupont, Tata. He works alone and shaped a number of global CEO’s like current CEO of GE. GE is working with him for last 45 years. They say that nobody knows Corporate America better than Ram Charan. Ram Charan is the common link between the promoter, board and the senior management of Max India. He attends board meeting of Max once a year and give his guidance. Ram charan guides three children of Analjit singh in their individual businesses. Analjit singh regards Ram Charan central to strategy, people and ethics at Max group. Presence of person like Ram Charan is the best indication of Corp governance standards of the group.

Also, now is the time when cases of fraud, mismanagement, money leakage are coming out daily and it is shocking to see big names in the list. So here, a group like max with very strong ethical management and board has immense value. A company never commits a fraud...it is always the human factor that's why human is the most important factor in judging and evaluating a company.

I am a great fan of this man Analjit singh and learned quite a bit by following him. However, there are some people who think that he is a mercenary as he starts a business with great devotion but then when he gets a fair value he sells the same without any emotion whether it was Hutch, Life insurance (tried to merge with HDFC), Healthcare, health insurance. But I think all these transactions were prudent business decisions taken with a focus on protecting and growing shareholders. And decision to quit these businesses was primarily motivated by a new much better business opportunity in his eyes. His prime motive is earning profit and maintaining business viability not to create and maintain a legacy business. So whenever he sees that dynamics of their line of business are changing due to rising competition and requirement of high capital he understands that now is the time to change track. On the contrary, it is very challenging, difficult and discomforting to start a new business with great dedication again and again and i think this alone proves the risk taking ability and mettle of Analjit singh to succeed in tough environment.

But this change of track is never abrupt…new track is always laid beforehand. It is not that they start laying a fresh track only after taking the decision to change the track. Like when his life insurance business was generating profits he started healthcare business. But apart from business angle, I think there may be another reason that we see Analjit singh selling these businesses time and again-he does not feel belonged or related to these businesses. His inner being wants to demonstrate creativity, innovation on some other canvas.

Then, few years back, one day I read something about his new investment. He went to Africa to watch football world cup in 2010 and he just fell in love with the place-the Franschhoek winelands of Cape Town, the world-renowned wine-producing town.  He felt a sense of connection with that place and then started his string of investments in the real estate of Africa.

And I knew at once that Analjit singh has found his path to salvation-Real estate. And I am buying Max venture since then along with Max India. Earlier I earned 7 time return in erstwhile Max India (Before Demerger).

B) Real estate-Next big thing for Analjit singh

I think the moment he understood that he yearns for this business…that he wanted to use his creativity in this business he must have made his mind to exit his complex set of businesses of healthcare and insurance. People say that he wanted to quit as both especially healthcare needs high capital investment amid tight regulatory framework but I think he does not love the healthcare just like our Dr. Devi shetty who feels healthcare like his breath…like our PRS Oberoi who loves creating masterpieces through his hotels. Analjit singh was a close confidant of PRS Oberoi and was about to acquire a significant stake in EIH hotels to thwart the hostile takeover threat of ITC which holds a 15% stake in EIH hotels but his investment in EIH was strongly objected by Vikram oberoi and Arjun oberoi,  son and nephew of PRS oberoi.

Later on Reliance picked 15% stake in EIH (along with buying Analjit singh’s stake…some 5%). Although ITC always maintained that it’ll never go for hostile take-over of EIH…quite contrary of what L&T has just done to Mindtree. I think the recent hostile takeover of MIndtree by L&T is a black day for Indian corporate world. Mindtree was a stunning company and one of the most ethical, employee and shareholder friendly. Its promoters are one of the most passionate and visionary. On the contrary L&T is anything but ethical with accusations of forgery (by world bank), bribing and money laundering. When I was searching one name in Indian IT which can do big in Artificial Intelligence then Mindtree was the name I finalized and was planning for investing in it but takeover by L&T was a big blow for my plans also and I have dropped any plans of investing in it as of now.

Coming back to Analjit singh’s love for Africa-ever since he has felt the connection with the picturesque village of south Africa, he has invested some 300-400 cr in his personal capacity in south African real estate. Singh purchased 68 hectares of farmland with vineyards, olive trees, plum trees and pomegranate fields in Franschhoek valley in South Africa. Singh has 17 land holdings and substantial hectarage under wine cultivation.

He set up Leeu Collection, an international collection of four boutique hotels, restaurants, a spa, a microbrewery, and home to Mullineux & Leeu Family Wines.

Singh told Forbes Africa “Business is one part of my life but the person is more permanent and more holistic in a manner of speaking. So when I think of myself as a person and my likes and dislikes, and I don’t have many dislikes, what I like most are all the things this life embodies. This place gives me greenery, nature, mountains, fog, and science and technology, as wine-making is all about technology [with regard to] the maturation process, and the way the fruit is extracted. These are the things I like. I don’t like sitting in front of a computer screen trying to trade off the New York Stock Exchange. It’s not my cup of tea. I have therefore really begun to think of this lifestyle, even though my days are busy when I come here. But whilst you may call it work, for me, it’s the most pleasurable thing to do… I am in the moment when I am here. It’s the most restful state for the mind. I feed off natural energy.”

Local village people treat him like one of them now and he is a very famous person especially because people see in him the prospectus of job growth. In Franschhoek valley, he has one special figure as his neighbour- Sir Richard Branson founder of Virgin group is investing big in the valley due to superior wine making capability of the valley. The great mountains, pure and clean air and vast tourism potential has made the valley one of the biggest investment destination. Not a surprise that Analjit singh has seen the opportunity much earlier. These days he spends three months every year in his African properties.

He has also bought properties in Italy and London (Linthwaite House, a boutique luxury hotel at Windermere) and has around 68 key properties around the world including India. Recently, he has acquired a bungalow owned by his nephews Malvinder and Shivinder Singh for Rs 185 crore in Lutyens’ Delhi which is the most expensive real estate zone in Delhi. In acquiring all this, he has invested significant money of its own apart from incurring debt of some Rs. 2000 cr. Recently he is in talks with KKR to raise 2000 cr for reducing debt. The deal with KKR is going to have equity portion also.

Earlier in 2014, Analjit singh tried to buy a stake in Nashik based Nashik Vintners, the makers of Sula wines only to be pipped by Anil Ambani. I do not know the status of investment of Anil ambani.
As per latest estimates the property prices in the Franschhoek valley has increased by some 150% in last 5 years and so are the prices of properties of Analjit singh.

So I see that this is going to be one of his biggest and passionate venture and something which has the capability to engage him permanently. And this is where Analjit singh is seeking his salvation after wandering and covering the distance.

But as it has happened all the time, I think market has failed itself in understanding and valuing Analjit singh. However in difficult times, one would always prefer man of wisdom like Analjit singh. I do not know what is going in the mind of Mr. Market as I am trying to guess the next step of Analjit singh and in the process regularly buying the stocks of Max India and Max Ventures.

Healthcare business of Max India is another factor apart from real estate business which has great growth prospectus and something which is my favorite as I see healthcare to achieve the status of IT industry for india in few years’ time.

C) Why Real Estate for Analjit singh

Real estate is not just like any other business…it has some unique features which require specific approach to understand the dynamics of real estate.

1. Quite opposite to what most people think real estate is very regional. There is nothing like pan India market for real estate. Every market is unique with its own set of supply demand dynamics. It is just like when people say that the world temperature is rising at the earth when the matter of the fact is there is no such thing as world temperature. Every place on this earth has different temperature which goes on changing everyday all the time. So what they do is to calculate the average of all these worldwide temperature to conclude that temperature is rising. But I have serious doubts whether we can take this average as a representative of global temperature to conclude and prove things.

Similarly there is no such thing as Indian real estate. If I want/need to buy a property in Chandigarh but then I won’t be buying a property in Surat if same is available cheaper. If I need to buy in Chandigarh then I’ll go for chandigarh only. And due to this demand supply dynamics of Chandigarh are more important because every place has specific factors which affect the elasticity of supply of real estate.

Like, I am always of the view that Mumbai market may not follow the trend of fall in the prices of real estate in NCR, Bangalore etc. One of the main reason for this is Mumbai has relatively inelastic market as far as supply is concerned and the reason is-Mumbai is land locked from 3 sides by sea so we can expand the city only by that much. But there is no such limitation for the city like Bangalore which can expand in all the directions. Also Mumbai municipality is on the verge of raising the Floor space index (FSI) in the city which will further increase the supply of space for more real estate development from sane piece of land. Due to this, I have been investing in Oberoi Realty for last 3-4 years from 200 levels but invested quite a bit last year when it fell to 350 levels. Apart from these Mumbai factors, Oberoi realty is one of the most ethical and premium builder in Mumbai with one of the strongest balance sheet. In my real estate stock portfolio, Oberoi Realty is the biggest investment followed by Mahindra Life space.

Most of the manufacturing and business activity of the country is restricted to some 10-15 large cities like Delhi, Mumbai, Bangalore, Hyderabad, Chennai or pune. That’s why regional factors become more and more important. Normal Tier 2 or Tier 3 cities do not have any real demand for real estate.

2. Then there is commercial real estate which has its own set of impact factors which are quite different from residential real estate. Demand for commercial real estate is more stable than residential. As more and more global companies and manufacturing is entering in India the need for Tier 1 office space is growing fast. And I have a feeling that as compared to residential, commercial real estate is fairly priced and less chance of a bubble. The reason is- rental yield. Rental yield on residential real estate is just 2%-3% in India while the same for commercial real estate is in the range of 8%-12% which looks authentic. This much higher yield is the proof that demand for commercial real estate is real and based on the natural economics of demand and supply rather than speculative demand for residential real estate where the customers are not much aware of the steep prices. People invest in residential property out of baseless speculative instincts and then they keep it forever in the hope of getting 100%-200% gain and due to higher prices and low demand the rentals are low in the vicinity of 2%.

Due to this higher and much real yield, foreign investors are investing big time in Indian commercial real estate. The likes of GIC, Blackstone Group, Canada Pension Plan Investment Board and Brookfield Asset Management etc. have invested big in Indian commercial real estate. GDP growth is still good in India and this will create the demand for more commercial real estate. Another factor which I think behind the higher demand for commercial space is due to much higher investments in residential segment in the last decade or so and this has sort of created a supply constraint in the commercial space and all of a sudden people have realized the much higher yield of commercial assets.

In 2018 around 50 million sq. ft. of commercial space was leased out which is the highest in last 8 years with major contributions from NCR and Bangalore. Few days back some of my friends opined in favor of a friend who bought a flat at expensive price (in my view, some 70-80 lacs for 1100-1200 Sq feet) and they submitted that this is better than stock market investment. But I told them that the rental value of the flat is Rs.15000 pm (1.8 lac a year) which is around 2% yield and this is the yield (dividend) I am currently getting from my investments in stocks and this is going to grow much faster as most of the recent investments made at very low prices in high dividend stocks are yet to accrue dividends. On the contrary, he bought the flat at the peak prices and chance of further growth in residential flat prices is very remote. So by paying Rs. 30 lac upfront and taking a loan of Rs. 40-50 lac for next 20-25 years my friend is just saving 2% rental yield which he could have earned by keeping his 30 lac in bank.

In my view most of the just concluded bull run in residential property market was created by investors (black money) buying real estate for further selling (or renting?) not by end users. I do not think that normal end users in India have so much money to buy such expensive but ordinary houses. Low rental yield of 2% dwarfed by bank interest of 8-9% on loans discourages investment in residential property for earning rent. So focus was always on capital appreciation which did happen but money circulated in a narrow loop and no real demand was created.

Now as our economy needs new sectors to push the GDP growth, I think time has come to have a revisit of real estate sector and in order to promote authentic and real investment we need low interest rates and most importantly government should reduce the tax rates on long term and short term capital gain. Also, there is urgent need to cut stamp duty and registration charges as these are very high (6%-10%). Stamp duty charges in china are .05%, in Brazil and USA around 2%. Cutting stamp duty will not lower the revenue of the state as people will declare real deal price (now 50% of deal price) and there will be volume growth and curbing of black money.

Growth in commercial real estate also results in creating demand for residential properties as employees move to new business places and require homes.

Apart from Max, in commercial real estate i have so far invested in Mahindra Lifespace and Prozone Intu which have high share of lease rentals in their overall revenue. Mahindra Lifespace was the first one to introduce integrated cities in India and created gigantic integrated cities in Chennai world city and Jaipur world city spanning 1500 acre and 2900 acre respectively. Prozone earns some 100 cr a year as lease rent but its market cap is just 300 cr with fully paid land bank of around 2000 cr with almost nil debt. Oberoi Realty's commercial real estate business is smaller as compared to residential portfolio but he has invested big for this business and from its present commercial portfolio of some 1.6 million sq feet it is going to touch 4.2 msf in the near future.

3. Supporting Infrastructure: Recently, there is high growth in much needed supporting infrastructure in metro cities like Metro rail, Airports etc. This has resulted in growth in demand for commercial properties. Metro rail network has created the biggest impact and corporates are moving to these cities. Here, NCR region has the most robust and vast metro rail network which is way bigger than any other cities. It is the twelfth largest metro network in the world and it goes beyond connecting intra city and connects nearby cities like Noida, Gurugram, Faridabad and Ghaziabad. Most importantly, Max ventures has developed and is developing its commercial properties in NCR market.

4. RERA Impact and debt problems of the sector: strong regulation of RERA and tight liquidity position of the most of the small developers is forcing them to re-consider their approach and they are making deals with large corporates for completion and sale of the project. This is going to create great opportunities for strong corporate developers like Oberoi Realty, Godrej and Mahindra. Max group is also going to jump in as they have all the resources and strong brand image. In fact, their first completed commercial project Max Tower in Delhi 1 has been acquired from original developer 3C which ran into financial troubles.

NCR market has huge unsold inventory and Analjit singh himself has invested quite a bit in NCR market so I am sure with having the pulse of this market they are definitely going to pick such deals. Residential developers have some 4 lac cr debt as on date and they are required to pay around 1.2 lac cr every year including interest payments to the lenders. However their EBIDTA is around 60000 cr so they are in no case in a situation to pay back the money to lender with current situation. So I am sure we are going to see big stressed sale in the near future.

In fact, Max estates (Subsidiary of Max Ventures) is already in discussions to acquire land parcels in NCR for office projects in partnership with Apollo management Singapore ltd.

D) So where does Max groups stand now

1) Max ventures: Let me first come to Max ventures as it has just completed one of the marquee commercial project in NCR market.

a)Earlier it was mainly a packaging product player with investments in hospitality and E-commerce startups. Then as they planned for real estate foray and expansion of packaging business, they raised the capital for the same by stake sale of packaging business, right issue and investment by New York life.

So in all they collected Rs. 770 cr-200 cr from stake sale of 49% in packaging business to Japanese major Toppan, 450 cr through right issue (at Rs. 61 per share) and also earlier partner of Max in life insurance business New york Life picked 22.5% stake in max venture for Rs 121 cr (Rs 78 per share). Right issue was primarily for real estate business. After the right issue, promoter holding in the company has gone to 47% from 38%.

b) The repeated investments by the marquee global business houses and investors in Max are a testimony for the faith in managerial capability of the max group by these global giants. New york life acquired 26% stake in Max Life in 2001 which it sold to Mutsui Sumitomo in 2012. Earlier, KKR picked 10% stake in the life insurance business and now KKR is putting big money in acquiring majority stake in Max Healthcare. KKR has also supported the personal real estate business of Analjit singh by providing some 2000 cr credit line.

c) Apart from the above, they have also made partial exits from their investment made in e-commerce venture Nykaa. Max ventures invested 17.5 cr in 2016 for 2% stake. It sold 1% stake (around 17 cr) at 100% profit in FY-2018 and sold .5% in June-19 quarter for 25 cr. Max ventures holds 18.87% stake in Azure hospitality with investments of Rs. 70.5 cr. Azure is the owner of some of the fastest growing restaurant brands in india like Mamagoto and Rollmaal. Azure is backed by Goldman sachs which holds around 35% stake in it. Azure is debt free and profitable with topline of some 180 cr with 45 restaurants and 2300 employees. So this is not some generic restaurant business selling run of the mill chinese food, butter chicken and Dal makhani which opens and closes daily. Max has selected one of the best and successful names in Indian food space.

Max has earned 42 cr from 11-12 cr invested in Nykaa so far. For Azure, I do not have any valuation figure right now but the minimum valuation of Max’s stake should be around 100 cr. So we’ll see Max exiting these investments in due course of time in order to grow real estate business.

d) So far Max ventures has completed its first commercial development project Max tower in record 24 months in Delhi 1 which is located on the DND flyway between Delhi and Noida. After its original developer 3C ran into financial troubles, it was being executed by the private real estate arm of Analjit singh Piveta Estates Pvt. Ltd. But later on the same was transferred to Wise Zone Builders Pvt Ltd (Subsidiary of Max estates which is a subsidiary of Max Ventures for Real estate business). It is probably the only stressed real estate asset in North India to have witnessed such a speedy revival and completion.

Max tower is 22 story building with top 3 floors are for amenities like Auditorium, food courts, green areas, an air purifying system, Gym, swimming pool and spa etc. It is the only office building in Delhi NCR to have these facilities. No doubt, with this Max has changed the concept of office life from nothing else than boring all day tireless sitting to involving and refreshing work well philosophy. It has total leasable area of 5 lac sq feet.

e) Max tower is an “A” grade LEED certified commercial property built at a total cost of 600 cr out of which Rs. 150 cr is debt and 450 cr is own contribution. There is shortage of “A” grade office space in NCR and due to amenities being offered, Max tower is getting monthly lease rental of Rs 100 sq feet which are 40% higher than the neighborhood rents. So the rental yield is coming around 12% which speaks volume about the capability and eye for business opportunity of the management. Most players and foreign investors are happy at 8% yield so in this background this indeed is a commanding performance and I am expecting Max group with their fantastic eye for details and trends to establish strong brand image in Indian real estate market.

Global co-working giant IWG has taken on lease 50000 sq feet for its space brand. 20% of the leasable area has been taken on lease by Max group firms. French Bakery player L’Opera, well-known for bringing authentic French bakery products to India has opened its biggest outlet in Max Tower which was inaugurated by French Ambassador to India in June-2019.

Actually, they are not a novice in this sector as building of large hospitals require tireless planning for most efficient use of the premium space and providing and meeting the expectations of patients. So they already have the ground work for this business.

f) As shared earlier, due to financial troubles faced by developers strong hands like Max has the opportunity to grab land parcels, projects cheaply and for Delhi 1 projects most of the projects are facing insolvency proceedings and Max has already submitted bids for these projects.

g) Apart from Max Towers they are also developing a commercial project “Max House” in Okhla Delhi with leasable area of 1 lac sq feet in the first phase. Earlier they were having 50% interest in this project and the balance belongs to Max India ltd as Max India is the holding 85.17% stake in Pharmax corporation in which phase 1 of the Okhla project was housed. But in June-19 Pharmax corporation has sold its 85.17% stake to Max estates for 87 cr including preference share capital. With this I think now as Max Estate is holding 85.17% in the Pharmax corporation so their interest is also 85.17% of Phase 1 and further expansions. Pharmax is already earning lease rent income from the building.

A residential project at Rajpur Dehradun comprising 22 super luxury villas with a price tag of Rs 4-5 cr each has been completed and so far they have sold 11 units for 44 cr.

h) For their manufacturing business, they have almost doubled the capacity with recent expansion of around 250 cr. Last year was the difficult period for indian packaging firms due to over supply but this is normalized now and June-19 results were great for packaging business and I expect this business to result in good profits and cash flows.

i) I think of a situation in the future where Max needs cash to buy stressed real estate assets cheaply  then they may sell their 51% stake in packaging business. Although before that they would sell their investments in Azure. Also from now on they will get steady lease income from Max Tower which they can use for expansions.

j) So no doubt, Max ventures is going to create serious wealth in future and things have set up nicely for that. But its share price was falling along with market and after Mar-19 results I have started my second phase of investment in this one from Jun-19 onward. I started 2nd round from 42 and goes on picking this one all the way to 38 just before jun-19 results. I was having strong feeling that its june results would be great which they were and after stellar June-19 results it has already shot up from 35 to 45. My earlier avg was around 62 but picked up good quantity in the current fall and the average now is 46.  

k) Let’s try to find out its minimum value. Last time they sold 49% stake in packaging unit for 200 cr so after the recent expansion (with debt) and growth in business they should get minimum 250 cr for their 51% stake at present. They have invested 450 cr in Max Tower project. They were having 120 cr in Mar-19 balance sheet out of which they have agreed to pay 87 cr for Pharmax acquisition but let’s take this 120 cr. Take the value of their Nykaa and Azure investments at 125 cr. The sale price of balance 11 flats in Rajpur at 4 cr per flat is 44 cr. So all this make the minimum valuation at 989 cr or 1000 cr when its current market capitalization is just 650 cr. Please keep in mind that we have only taken the minimum value of its various verticals. So this makes current market price of 45 a good entry point.

l) They have also setup Max Asset Services to take care of the servicing needs of their commercial assets. But it is not like our traditional facilities management entity to take care of tap and toilet. Its focus is on creating community in the building and creating events, sports and all that which will lead to a better customer experience. This is a novel idea which may create niche business opportunity in the future.

2) Max India: Market has literally thrown this one into garbage bin. Max India houses the heathcare (Max Healthcare), Heath insurance (Max Bupa) and senior living business (Antara senior living). Recently they have sold out their 51% stake in health insurance business for 515 cr and then sold out their stake in Pharmax corporation to max estates for 87 cr. So these two deals mean that they have 600 cr cash in the books.

a) In Antara senior living they have created one of the most premium senior living project with excellency in design and facilities named ‘Antara Purukul’ which is spread over 14 acres of lush greenery in Dehradun.. Senior living as a concept is growing fast in India and it is coming out of the negativity attached due to old age home thinking but this one is a premium hospitality project where old age residents live in best in class luxury homes which are designed around the safety, wellness and lifestyle requirements of seniors.

Senior living communities is popular in USA from 1980’s and we are trying to catch up now with the potential. Senior living is a $ 300 billion industry in USA. Other developers have opted to outsource the management of the community but Antara has decided to manage the entire community with an in-house staff trained by the company. And their top notch community service is winning accolades from around the world. I have seen disputes emerging in other senior living communities over frequent increase in dining charges etc. but residents of Antara are living and enjoying a great life. Residents are provided with dining facilities, daily housekeeping, laundry services, concierge services, Yoga, healthcare, Bar, sports activities and life time maintenance of everything in the house be it the flooring, plumbing, lighting or electrical appliances.

















Images source: Antara senior living




















But Antara is not our normal real estate project. Antara has been carefully crafted by internationally renowned architects Perkins Eastman from New York and Esteva & Esteva from Spain, with design execution support from Arcop Architecture Inc. and Studio Lotus. With construction partners such as Shapoorjii Pallonji, Suri & Suri Constructions (civil works), Vadhera Builders (finishing works), Sterling Wilson (plumbing and firefighting) and Jakson (electrical). While designing the homes, focus was on the fact that these are to be used by senior citizens where premium-ness should be supported by safety.

Antara was having the inventory of 192 apartments with price ranging from 2 cr to 6 cr. So far they have sold 111 apartments and 73 residents have moved in. They have collected around Rs.300 cr so far.
Antara is the brain child of Tara Singh Vachani, the youngest of Analjit Singh’s three children. Her husband, sahil Vachani, is having the charge of max ventures.  In order to understand the senior living model and finer details she has visited numerous senior living projects across countries and she has come out with a project which is at par with world’s best so far.

Now, Antara is focusing on growing its business via asset light, low risk business model where it will partner with developers for operating or joint development model. It is looking to leverage its strong brand name and execution skills. Antara’s responsibility will be to provide design, quality assurance, sales and marketing support, and program management during the project and sales phase and independently run the community operations after handing over the apartments to the residents. It has so far identified two such opportunities in Chandigarh and Noida. For Chandigarh project comprising 650 units with price range of 75 lac to 1.5 cr, developer will arrange land and debt whereas Antara will invest some 20cr and will get 17%of collections as fee. For Noida project comprising 550 units with price range of 75 lac to 1.5 cr, it will put 51 cr apart from guarantees for debt of 130 cr whereas developer will arrange land. Here it will get 10% of collections as fee and 62.5% of net realization.

So I think, this fee based co-development model will provide vast business opportunities and as the contribution of Antara will mostly be designing and marketing at development stage so the same will ensure execution of more projects at a given point of time resulting in more revenues for given amount of capital. Max India has invested around 283 cr in Antara so let’s take this as minimum valuation of Antara.

b) Max Healthcare: Max India has 49.7% stake in Max healthcare. South Africa based Life healthcare is also having 49.7% stake and they are selling the same to Radiant life care for Rs. 2136 cr (Rs. 80 per share) thus valuing the Max Healthcare at 4298 cr. Radiant is owned by Abhay Soi and backed by KKR. After that Radiant’s healthcare assets will be demerged into Max Healthcare which will result in KKR and Radiant promoter Abhay Soi together acquiring a majority stake in Max Healthcare and Max Healthcare will be listed separately. Max India shareholders holding 100 shares will get 99 shares of demerged Max healthcare and this means that current 1 share of Max india will get 1 share of Max healthcare valued at Rs. 80 at a valuation of 2136 cr. Combined valuation of Max Healthcare and Radiant life care will be around 7300 cr.

Max healthcare has revenues of some 2800 cr. Last 2 years were very difficult for the healthcare industry in India due to regulatory overhang where it was perceived that Hospitals are looting people with exorbitant pricing. However this is not true as hospitals are very capital intensive business and require large capital due to high real estate cost of setting up hospitals in prime locations and high cost of imported machinery. Contrary to the general public opinion, Hospitals have low return on equity of some 8%. So industry suffered in last two years due to control over pricing. Hospitals do not mention the charge for machinery, building etc. in their bills so it appears that they are charging way too much for drugs and consumables. But then they corrected their billing composition and to counter the price control over drugs they raised the procedure prices.

Now the industry is back to the growth in bottom line and the likes of Apollo and Narayana Healthcare have given stellar performances. Max Healthcare has also shown a Net profit of 20 cr in Mar-19 quarter. Healthcare industry is going to witness high growth from hereon. India is leading the world in low cost quality healthcare and this is going to be once in a life time opportunity for India to improve its infrastructure and support to encourage the growth of medical tourism which I think has the potential to achieve the scale achieved by our IT industry. Healthcare is still a luxury and around 90% global population can’t afford this. But India is now leading the way in changing the notion that healthcare is costly. The likes of Narayana are providing heart surgeries at the cost of Rs. 2-3 lac when the same is costing around 70-80 lacs in USA. Healthcare is the top priority of Modi Government also so in my view healthcare stocks are stunning high growth but defensive bet for any portfolio.

I have invested most of my money this year into healthcare stocks and the likes of Narayana Healthcare, HCG and Max India are my top investments and I feel NH is going to be the stock of this year.

After the demerger of Max Healthcare (merging Radiant life care), Abhay soi is going to lead the company. In the resultant MHIL, KKR will be the majority shareholder with 51.9% stake, Abhay Soi will hold 23.2%, Analjit singh will hold 7% and public will hold 17.8%. Radiant life care has the management contract for running BLK hospital, Delhi (650 beds) and Nanavati hospitals Mumbai (350 beds). Before Abhay Soi took the operations of both these hospitals, both were having stagnant topline and losses. But after Abhay Soi, BLK revenues has grown at CAGR of 43% from FY10 - FY18 and 27% in Nanavati from FY15 - FY18. During the period EBIDTA growth in BLK is 48% while in Nanavati EBIDTA margins in FY 2018 are 2.7% against losses in FY 2015 when Abhay soi took the control.

This Abhay soi is a very dangerous man and he is the reason I am very excited about the growth of Max healthcare in the future. This is also due to the fact that after the merger, there will be the positive impact of synergy as both these chains have major business from Delhi market and so they will witness savings in costs like HR, IT, Finance function, common and bulk sourcing of drugs, machinery and consumables. So I think even these changes alone will bring significant positive impact on the bottom line. And most of the impact will come from the superior management skill of Abhay Soi and financial clout of KKR.

So I think investment in Max India now is a fantastic chance to be a part of high caliber business lead by the likes of Abhay Soi and KKR and due to market imperfection the same is not available even at par value but at throw away price.

Before starting Radiant life care, the first firm in India in the hospital management business, Abhay Soi worked as turnaround specialist and was the head of corporate restructuring at KPMG and EY. The learning of turning around businesses has made sure that he had the wisdom and eye for turning around hospital business of BLk and Nanavati even when he was not having any experience of healthcare business. He was backed by KKR and Radiant invested its own money (350 cr) in re-developing BLK and making it a force to reckon in Delhi circle. Radiant life is one of the top player in medical tourism in India especially because Delhi is the main market for the same and Radiant has BLK in Delhi. Max also has strong presence in Delhi-NCR market. Out of the total combined bed capacity of 3200 beds after merger, both will have some 2400 beds in Delhi-NCR market alone.

I will cover the detailed analysis of healthcare sector in india in another post dedicated to it and will be posting the same within few days. i am leaving it here due to the length of this post.

So after adding the cash of 600 cr and 283 cr investment in Antara and valuation of stake in MHIL at 2136 cr, we are getting the valuation of Max India at 3000 cr and this will prove that stock markets are weird as current market value of Max India is just 1500 cr. My average used to be around Rs. 125 for Max India but in last two months I have picked good quantity in the range of 56-65 and now the average is down to 78 which is a fantastic price to have it. I do not  know what market is seeing here which i am not being able to see because the valuation gap looks too good to be true that too of a top notch group like Max. Fantastic buy at CMP of 56.

Apart from the baove, Max India has another high growth business in max Skill first which is into providing professional skilling solutions. It has been acknowledged as the 5th Best Place to Work for, in a survey among 50 companies in the SME Biz category across major industry sectors in India, by the 'Great Place to Work Institute(GPTW). Earlier it was having Max group companies as its client but now it has expanded the clientele to cover the likes of HDFC, Karur Vysya Bank, Ujjivan and Rattan India. In FY 2019, it imparted over 3.9 Lakh hours of training to more than 1 Lakh learners through 90,000+ sessions to both Max Group and other accounts.  It has grown its revenues very fast to touch 52 cr last year and I think this is going to be one of the future value creater for Max India.

Further, Max Financial services Ltd which holds the life insurance business of group is also trading at very cheap valuations. At CMP of 400 its market value is around 10000 cr which means it is trading at 1.6 times of its Embedded value (EV) which in my view is extremely low for a highly efficient and reputed life insurance player. For a perspective, SBI Life trades at 5 times its EV and HDFC at some 20 times. Last year both SBI Life and Max Fin were trading at 3 times EV so one can see the gross undervaluation. Looks like market is worried about pledged shares (some 80%) but Analjit singh is having high value real estates for backing his debt so he may decide to either sell stake in max Fin or his real estate holdings but there will be no default. So i think Max Fin is also a stunning buy at present and i am buying this one regularly.

Path to salvation for Analjit singh

Max India, Max venture and Analjit singh have one common link and that’s real estate business. Max India will be having 600 cr cash in its books which can be utilized for the expansion of group real estate business. Analjit singh has some of the marquee real estate and hospitality properties across the world but he has high debt to focus on. Max ventures has settled commercial real estate business and the cash flows from the same can be utilized for the further expansion.

But if one can see, the real value will emerge if we can combine the real estate businesses of these three entities and I think this will be the best solution. KKR is already backing Analjit singh and there is high chance for a place for KKR also. Analjit singh has also expressed in so many interviews that they are not afraid of listed companies and they like it because they even run their private businesses just like listed companies. I feel Analjit singh can opt to merge full or some part of his real estate holdings with Max India/Max venture and for this he may further opt to pay off his real estate debt before the merger.

Analjit singh was in development phase of his personal real estate venture and now he has settled most of these and will witness strong growth in revenues like his winery is setting its eye on exports market of Europe, America, Uk and Asia. General public opinion is that Analjit singh has sold healthcare due to tough regulatory environment and high capital requirement but I think this can’t be the case with someone who has crafted and handled those businesses throughout his life time which require large capital amid tough regulations. It is just that he had to choose between Real estate and Healthcare and he chose the former because it is where he wants to manifests his creativity and purpose.

I have seen people living (wasting) whole their life thinking that uniform is the religion and taking care of this uniform is the karma and the purpose. But the real karma is what puts us on the path to salvation all else is just dusting. And path implies effort, dedication and yearning to cross over…uniform is cheap but salvation is dear.

When we use financial analysis we are just taking care of the uniform...Analjit singh is the salvation.

(Update Sep-2020: Max healthcare is listed around 120 in Aug-2020 after demerger from Max India. Max India listed and trading around 60 (12 Rs. for 2 Rs. face value of erstwhile Max India). So total value of both is 120+12=132 which is around 2.5 times of our investment at 56...so it is doing great and still there is a lot of value unlocking is due and both are great long term bets.)

(Views are personal and should not be taken as a recommendation for buying or selling a stock. Stock markets are inherently risky so kindly do your Due Diligence before investing. I am not a certified Sebi Analyst and holding the shares discussed in this Post. Reach me at oscillationss@yahoo.in).

Tuesday, 30 April 2019

Nelco Ltd: Sky is coming Down-Result update


Last year when we picked Nelco Ltd (click here for earlier detailed post on Nelco ltd) it was still in transition mode and much action was pending for execution but we had the faith in Nelco keeping in view its strong technical capabilities, the scale of opportunity in Indian VSAT industry and its Tata parentage which ensured strong brand image and easy availability of capital/funds. And after 1 year the sky is getting clear. We picked it around 110-120 last time and it is now at 300 after one year and this is one of the best performer of my portfolio in difficult last one year of stock market.

Lets’ first of all focus on its financial performance this year. Nelco has shown stupendous performance both in topline and in bottom line in FY-2018-19. Its topline this year has grown 27% from 150 cr to 191 cr and the same has touched 51 cr in Mar-19 quarter from 39 cr in Mar-18. At this juncture I am more inclined towards growth in the topline than bottom line because there is still vast scope of scale in VSAT industry in India. So capturing the major chunk of the future scale will be the major growth catalyst and this is exactly what Nelco is doing right now.

It has invested quite a bit last year in expansions as its gross assets/capital work in progress has touched 100 cr from 50 cr last year. I am sure that these investments are made for maritime and aerospace connectivity because in Sep-18 its gross assets base including capital WIP was 70 cr and it has crossed 100 cr now only after the approval of maritime and aerospace connectivity by Indian government in Dec-18 (for which I was waiting for long time). This expanded assets base is one of the reason which has impacted its already good bottom line figures due to depreciation and interest charges as it has taken debt to the tune of 34 cr to fund its expansions. Still it has managed to grow the figure of PBT at 20 cr from 15 cr last year. However I think the maximum benefit of the expansions done this year will accrue in the next year and we’ll see high growth in top line but bottom line growth will be even faster.

But the most important move is the declaration of dividend by the company. They have declared Rs. 1.5 dividend which is a significant move and it shows the confidence of the company in the stability of the future growth and profits. Its dividend history was erratic due to subdued performance in last 2 decades and last time it gave dividend was way back in 2013 (50 paise). So this dividend is very important indicator of the future growth. It has given great all round performance this year and I think this will take its stock price to new orbits. Its current PE is around 30 which for a company growing like Nelco is not expensive and we should see this touching 40 and the same will get re-rated after the June-19 quarter results and any other favorable regulatory and policy action.

Its transformation phase started in 2016-17 after it sold its loss making automation business and shifted focused on profitable VSAT business. But due to the dynamics of VSAT industry in India where much action was needed at regulatory and policy front not much was in the hands of Nelco even if it wanted to grow its business. Nelco needed to wait for some important actions in external environment to settle some of the most pertinent issues restricting the growth of satcom industry in India like Satellite capacity/bandwidth was not available to Satcom industry in India even if they wanted to grow their business, Internet connectivity in some high growth sectors like marine and aerospace was not allowed. So for me, more than the action in the topline and bottom line it was the action in the regulatory and satellite capacity fronts which was more important.

GSAT satellites: Game changers by ISRO for India

As I have noted in the last blog post on Nelco that affordable supply (New satellites) and corresponding high demand (Marine/Aerospace/Remote areas) is the most significant factor for a new technology/product to achieve widespread acceptability and growth. So this year, as Government created the new supply avenues by launching new satellites it has also created the scope for demand growth by allowing internet connectivity in marine and aerospace sector and this has really opened the doors of huge growth for Nelco.


This year, ISRO has done some serious work in creating the satellite communication capacity for India. ISRO has launched GSAT-19 in June 2017, GSAT-29 in Nov 2018, GSAT-11 india’s heaviest satellite launched in dec-2018 and GSAT-20 another heavyweight was launched in Jan-2019.  So by mid-2019, these satellites will cover the entire nation and together they have the capacity for 100 Gbps internet capacity but this will provide more benefit to rural and remote areas of India. As I have shared in the last post, the main motive behind these satellites is creating fast reliable internet capacity in rural india. This massive capacity will also support commercial and industrial applications like ATM, Marine and aerospace connectivity, Oil and gas sector, mining, education sector etc. India has huge ambitions for smart cities and without satellite internet connectivity in smart cities is not possible especially keeping in view the mission criticality of satellite internet. Similarly, IOT also needs reliable satellite internet.

So the supply of this massive bandwidth will create the demand for VSAT in remote areas and other industrial application like marine and aerospace. So many of Government’s public welfare and e-governance initiatives like e-banking, e-health, e-governance aimed to grow rural India was on hold due to lack of cheap and reliable internet connectivity in remote and rural areas.

As I have explained in the old post, in remote and tough terrains building of terrestrial communications is very costly and not suitable for mass scale application. Satellite internet is the best choice here as one satellite is enough to cover large area cost effectively. Like, take the case of Indonesia, which has string of 13677 islands so instead of creating terrestrial infrastructure for telephony it has launched dedicated satellite for telephonic communication in the country and this has proved very cheap as compared to creating time consuming and costly physical infrastructure.


Satellite Internet can fight on cost

So we will see satellite internet creating its own space and there may be a situation where it can give tough fight to terrestrial internet on low cost. The biggest factor affecting the cost of satellite bandwidth is not the cost of satellite but it is the high costs of satellite launch. Like, for example, cost of satellite launch by Arianespace's rocket is around $100 million after subsidies. SpaceX due to its backward integration offers the same at around $62 million and India’s ISRO is at $60 million and it is looking to reduce the cost even further and ISRO will launch all of its future heavy satellite on its own.

So due to heavy launch costs, the focus was always on to create long life satellites in order to get the maximum out of the launch costs and it was not possible to use new age technologies in space communication instantly as the same is being used in terrestrial communications like 3G/4G/5G. Further, the focus is always on reducing the weight of the satellite as every KG costs big to launch. So it has resulted in light weight space hardware and machinery which often creates problems in launching and sometimes entire satellites is destroyed.

So this risk of failure and high launch costs discouraged the satellite use for mass scale applications like personal internet. The high cost of a space program has traditionally put it beyond the reach of most countries. For example, Intelsat, the firm which currently operates more communications satellites than any other, has been around for 54 years and has launched just 94.
But space launch costs are declining fast and trend is expected to continue and costs will be reduced even faster which will pave the way for massive growth in space technologies for the benefit of army, industries and general public as a whole.

Along with ISRO, Elon musk owned SpaceX is doing great work in reducing the cost of launch rockets. Its Falcon 9 has reduced the cost of space travel to ISS (International space station) by almost 20 times at $2,720 per kilogram as compared to $54,500 per kilogram earlier. And with current focus, it is expected that space launch costs will go even lower due to focus on reuse of launch vehicle, more demand resulting in further cost reduction due to economies of scale, advanced engineering and technical advances. Reduced launch cost will result in heavier, strong, reliable, and better performing spacecraft to be developed at lower cost and this will revolutionize every sphere of connectivity. At present , due to weight issues more reliable and strong models are not being used but low launch costs will result in better design and materials which will further reduce the cost of space shuttle as the same can be designed keeping in view the performance rather than low weight.

So much work is under way in space technologies and as per our past experience commercial aspect can really transform anything and result in advance technologies and cost reductions. Earlier avatar of satellite internet was mainly for defense and national security where cost was never a constraint but now as people in remote areas has money for connectivity and industries are finding novel applications for satellite internet like IOT the satellite connectivity sector is going to witness radical innovations and investments to create the economies of scale.

Marine and Aerospace connectivity: Big growth factors in the near future

Indian Government in Dec-2018 has allowed internet connectivity for maritime and aerospace sector and this is one big event which will create the demand for satellite internet and attract more investments in the sector.

At present, I think maritime connectivity has high growth prospectus than aerospace because worldwide this industry is one of the few which has embraced satellite internet quite early. Just for a perspective, maritime connectivity in Europe is growing some 20% yearly and generates revenues of some $1 billion. Actually shipping sector due to its dynamics is more suitable for satellite internet. First of all, still sea route accounts for more than 90%of world trade and this is really big!! We think that now is the age of aviation but shipping is still the cheapest when it is about global trade.

VSAT provides these giant ships fast and reliable internet connectivity which is vital for their operation and safety in the vast sea. Further, internet connectivity is a major factor for employees while choosing shipping lines for jobs because they are away from their families for long long time so connectivity is a big factor for them. Same is true for passengers on cruise ships where internet connectivity is a major differentiating factor as they need fast and reliable internet for their entertainment, connectivity and business needs while at sea.

Also, fishing sector was one of the fastest in recent times in using VSAT on their vessels due to crew safety and welfare, weather mapping, regulations and vessel safety. India also has vast fishing lines and I think this is going to be one of the first to embrace satellite internet.

Across globe, maritime VSAT is set to grow fast and the same thing is true for indian shipping lines also. Global satellite leasing revenues for maritime applications alone are going to touch $1 billion by 2026 from the current levels of $500 millions.

For offering maritime connectivity to Indian and foreign vessels sailing into Indian waters, Nelco has already entered into partnership with global satellite communication giant Speedcast International Ltd. As per the deal customers/vessels of the both the companies will be able to connect to the network of both the companies while moving in or out of Indian waters. This is one of the first such partnership for Indian maritime connectivity.

Although there will be competition but i expect Nelco to capture significant share of maritime connectivity just like it did in Oil & Gas and ATM industry in the recent times where it has emerged as one of the fastest growing player. I am expecting Nelco to be very aggressive in its expansions.

Similarly, airlines are going to adopt VSAT technology at fast pace in the near future as just like maritime aerospace connectivity is proving to be the decisive factor in choosing the airlines by passengers. Further, the demand will be created by business class passengers for applications such as emails with large attachments, and video conferencing. 

There are some concerns over the rules by Indian authorities that satellite bandwidth can be taken only through ISRO and this will render satellite bandwidth very costly as even at present satellite bandwidth charges in India are some 6-7 times higher compared to other parts of the world. Due to capacity constraint in the satellite communication the charges are highest in India whereas for broadband the charges are lowest in India. But I think this was when ISRO was not having bandwidth capacity for leasing for commercial purposes but now after the launch of 4 giant GSAT satellites last year there will be no dearth of bandwidth capacity.

So Nelco is still in transition phase and this year will be even more significant as the focus is on maritime and aerospace connectivity and big investments will be done.

Continue to hold for further re-rating.

One last thing I would like to add is that I got so many queries from worried investors about the fall in the price of a stock which they have bought at higher price. Some gets desperate for non performance of their stock over long time. Like, take for example, Narayana Hrudayalaya and HCG which are one of my favorites in healthcare sector and I am investing in these stocks regularly for last 2 years but both these have fallen (although almost all the stocks have fallen some 40-50%) in last one year. But both have invested quite a lot in building capacities and it’ll take time for these capacities to reflect in the top and bottom line so for me current fall is a fantastic opportunity. Same is true for the likes of MCX, Laurus labs, Mahindra lifespace etc. which are fantastic stocks.

I see people getting worried when their stock is not valued, not tracked, not followed by the market and it lies low and down. I see them talking about PE ratio assigned, traded quantity and coverage by analysts and when these are missing from their stock they shiver with fear. But let me tell you one thing-Divine is not divine because of offerings. Offerings do not transform something into divinity..they can't even differentiate between a real or fake because mortal beings offer these as per their expectations. And divine is still divine even if not recognized by mortal beings and if we can see the wisdom level in our mortal world chances are much higher that a real divinity is missed by mortals as they always value bunch of offerings. But a true seeker always yearns for a Lord Buddha sitting alone under a tree…eyes closed...unnoticed…radiating divine…

(Views are personal and should not be taken as a recommendation for buying or selling a stock. Stock markets are inherently risky so kindly do your Due Diligence before investing. I am not a certified Sebi Analyst and holding the shares discussed in this Post. Reach me at oscillationss@yahoo.in).