Lessons from the past

Investing in India: A value investor’s guide to the biggest untapped opportunity in the world provides a good overview of the economic and financial history of India over a span of three decades. The narration is simple, lucid and the effort taken to produce a case study with each topic is commendable. The book covers an array of topics from politics, crony capitalism and corruption to natural resources, banking systems, financial architecture and real estate, which are all impressive.

Author Rahul Saraogi has done a good job of connecting the many dots of Indian capital markets in brief. In my view, the primary audience of this book would be beginner foreign institutional investors, who seek to enter the Indian markets and wish to gain an insight into the economic history of India. Towards the end, the author outlines his philosophy about value investing and experiences surrounding those strategies. The case studies on the Vedanta Group, EID Parry and the Godrej group are interesting but I disagree with his thesis of Himatsingka Seide, which I found to be a problem of huge forex losses, a distorted balance sheet and unbridled expansion into a low-margin business.

The book lacks lustre on three critical counts. One, it is a disappointment for investors and audiences seeking a critical analysis of value investing strategies and thoughts on methods for identification of specific investment opportunities in India. For example, a reader looking for suggested stock screening tools specific to the context of investing in India could eventually be overwhelmed by other offerings.

Also, the author’s brief observations on specific investment case studies may not stand the test of time. Second, the narration of the book is like a rear-view mirror drive: it delves deep into the past and offers very little on what the future holds for investors investing in India. With a progressive and business-friendly government firmly saddled at the centre, the economic environment will be much more predictable and the future is going to be much better than what investors have experienced over the last two decades.

A peek into the future would have had improved the appeal for investors. Lastly, as I mentioned earlier, the book has been written keeping in mind a firm target audience and ideally, should be called ‘a beginners guide to Indian capital market for foreign institutional investors’. A close observer of stocks will find themselves living through these episodes in the last two decades. 

Investors looking for pure value investing strategies that would work in most circumstances should refer to investing classics such as Security Analysis by Benjamin Graham and David Dodd, Margin of Safety by Seth Klarman and You Can Be a Stock Market Genius by Joel Greenblatt. This book’s distinction lies in compiling the timeline of the Indian investing landscape over the last three decades and partially examining investing strategies in such a setting.