I feel like the song "Cats in the cradle" again. The layman investor in 2000. The guy who knew (in 2007) that things would hit the fan, but not exactly how.
And the guy who's worried about the market now in 2021 - and the only lesson he's learnt is "Participate."
In 2007, October 29, I was like - what are these people afraid of? Make merry while the sun shines. Too focussed on "value" I said: capitalmind.in/2007/10/so-its…
And then, in just a few days more, I'd decided it was going to be over. November 10, 2007, wishing everyone Happy Diwali: capitalmind.in/2007/page/3/
I did end up being short in the crash, in Jan 2008, largely because I was moving from Bangalore to Mumbai. I wrote this piece - fascinating, because it applies even now: capitalmind.in/2008/01/market…
Yet I stand here again, after an insane bear move last year, and find myself nodding when the really smart folks say this is absolute madness. If anything, I've learnt one thing: Participate. And stay near the door for when the music stops.
And just when I think I have a plan..
Been there, taken those punches, but do I still remember? Everyone has a plan...
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Understanding India's bankruptcy laws needs more nuance. A company like Patanjali that takes loans on its own balance sheet to buy a Ruchi Soya, doesn't mean the banks are lending to Ruchi Soya.
Patanjali also has to pledge the Ruchi Soya shares it purchases, as part of that deal. Apart from those shares, there are corporate guarantees. If it doesn't service the loan, banks can sell the shares, if that's not enough, they should invoke the guarantee.
In general, any bankruptcy purchaser will want to fund the purchase partly by equity, partly by debt, and it's quite likely the same banks provide the debt; to them, it's actually a different borrower.
We decode the massive 512.5 cr. fine on Franklin Templeton, by SEBI in an order, on the debt funds that were shuttered unilaterally by the AMC in April 2020.
A few follow ups: We had posted in December on a thread about what action we hoped SEBI would take, and I'm glad to say that SEBI has been incredibly open and listened.
Be careful if you hear tips asking you to buy DHFL. The nclt has approved the resolution plan, where I believe the plan is for the shares to be written off to zero. Piramal will then get new shares. Today's shares will have zero value, beware.
There's some brouhaha about salaries of founders in a private company, so let me do a little thread about why it's still probably tax efficient to pay yourself through salaries versus other mechanisms.
The dividend is the least tax efficient mechanism now. The company earns Rs. 100, pays Rs.25 tax, and if it distributes the remaining 75, that can get taxed at 42.74% (highest tax bracket) so the founder gets Rs. 43 (Effectively 57% taxes)
Salary is better. The company earns Rs. 100, pays Rs. 100 as salary, founder pays 42.74% tax, company has no profit so it pays no tax (salary is deductible). Effective tax rate: 42.74%.
But the companies act restricts payouts to 10% of profit (you need govt permission for more)
RBI balance sheet: 4 lakh crores added this year to 57 lakh crores (this is around 25% of money supply - quite large) They pay 99,000 cr. mostly because they didn't need to make provisions.
Quick thread on the RBI accounts.
Income from interest came down to 69,000 cr. from 109000 cr. Due to two things: lower rates (on indian and foreign bonds) and banks having to get paid for reverse repo.
RBI didn't generate as much profit selling dollars as I had thought. Only 50,000 cr. versus 30,000 cr. last year. Overall, income fell from 1.49 lakh cr. to 1.33 lakh cr.