Welcome to RMCTalks – The Weekly Newsletter.
First thing first.
5 Interesting Stories of the Week
M: Louis Vuitton buys jewelry firm Tiffany for $16 Billion; its CEO Bernard Arnault surpasses Bill Gates to become 2nd richest person on Earth; owns a fortune of $107 Billion
T: World’s most profitable company, Aramco raises $25.6 Billion through the biggest IPO in the history of the business world; clocks a valuation of $1.7 Trillion upon listing
W: A Chinese venture capital firm sends a $1 Million seed fund to an Israeli start-up; hackers steal it by spoofing the domain name
T: NASA’s solar probe, Parker, becomes the 1st spacecraft ever to fly closest to Sun; reports that its atmosphere is 100-times hotter than its surface
F: Statue of Unity, over a year-old, surpasses the average daily footfall at 133-years-old Statue of Liberty; attracts around 15,000 visitors a day
• • •
Explained: The Zee Horror Show
Image Source: The Logical Indian
A Bit of History: Before we dig deeper, let me share a few things about Mr. Subhash Chandra. A commodity trader who went on to become a media baron by establishing Zee Entertainment. It’s a mammoth media group which he founded 28 years ago after witnessing CNN and Star TV making it big with satellite television.
With his business acumen, he left no stone unturned in transforming it into a mass media company. Today, it broadcasts numerous channels under its flagship banner; publishes mobile content; produces movies; and whatnot.
In fact, every media business he ventured into, turned out to be a golden goose. And continued laying golden eggs (cash) until he decided to step into infra business. And thus began the broadcasting of the horror show.
An Ill-timed Expensive Bet: His desire to build an empire out of an infra boom made him step into a costly affair. From a cash-generating media business model, he turned towards a capital intensive business that required a continuous supply of money.
To fund his road and renewable energy projects, not only he borrowed from Mutual Funds but also from non-banking financial firms.
As a banking rule, a borrower needs to offer something as collateral in exchange for the money that he/she borrows. It can be a property on paper. Inventory. Equipment. Jewelry. Investment Accounts.And many others.
Chandra knew it well. He chose to pledge Zee shares as collateral. And borrowed tons of money. Since Zee shares were touching new highs, lenders sanctioned the amount comfortably.
Everything worked well until he failed to repay debt payments to a motley bunch of lenders in January this year. To recover the amount, the lenders stepped into the market to offload the shares. The panic prevailed. Its share price took a massive hit. And crashed by 30%.
However, the other lenders chose not to sell those shares in order to save themselves as well as the company from the mayhem.
Chandra sought an extension to figure out a way to repay his dues. During this honeymoon period, he sold 11% of his shareholding to the Invesco fund. Later, in a few months, he dumped another 16% to pay off a major chunk of his dues. Eventually, this exercise left him with just a 5% stake in a company which was his own brainchild. Just 5%! And as recently as in November 2019, he resigned as Zee’s Chairman.
Whether Zee is in safe hands or not, I can’t say at this point in time. It needs to be watched with a hawk eye.
• • •
Quote of the Week
This time, instead of moving oceans and healing planets, let’s get our bills in order and pay down the debt so we control our own future.
~ Artur Davis
• • •
What’s Your Financial Goal?
When I interact with people on Personal Finance, all of them list down their financial goals as:
- Yearly Vacations
- House Renovation
- Retirement after 60
- Driving a Luxury Vehicle
- Child’s Marriage & Education
None of them talk about:
- A Debt Free Life
- Financial Independence
- Building an Emergency Corpus
- Increasing Investments with an Increase in Income
• • •
Tweet: House Built From A Monthly SIP of Rs.1,500
*House made from SIP Money*. Real Example
A Mutual Fund Investor, who started 1500 Rs SIP before 22 Years, purchased home with those money and put such board on the gate.
— Vipul Shah (@vipuls1979) September 1, 2019
• • •
3 Interesting Articles I Enjoyed Reading
Simply put, the markets are up purely on the hope of a better future. And this dissonance between the markets and economic numbers naturally causes confusion in the minds of observers.
In 1982, working as a 26-year-old money manager, I passed on Berkshire Hathaway, which was trading at $97, because I thought it was too expensive.
The price represented a 50 percent price to earnings and price to book premium to the broad market. Had I made a different decision – at the time I was sitting on a large cash position from a successful real estate investment – I would now be smoking $10 cigars and hanging out with swell chicks.
I’ll wait, I thought until it hits $60. I’m still waiting. On Friday BRK.A closed at $3,33,640.
The most dangerous of all people is the fool who thinks he is brilliant.
I should know: That describes me at age 18, arriving at Columbia University for my first week of college. And, I have no doubt, it describes me equally well on countless other occasions since.
• • •
That’s all for this week, friends! Have a lovely winter vacation 🙂
Cover Image: Fortune India
Dhruv Girdhar | RichifyMeClub
• • •