Indigenous Investors Weekly Insights!
Top 3 well curated stories from the stable of Indigenous Investors incase you missed them. These can range from finance to sports, depends on what made the headlines. Stay tuned.
This week we cover the following:
Judicial Overreach & Insolvency & Bankruptcy Code over-ruled? - Supreme Court’s Bhushan Steel Ruling
Hunger Inc: Empire of Taste
Different Kinds of Smart - Morgan Housel
The victims and the families of Pahalgam Terror attack and the crash of Air India’s London bound flight are still in our thoughts as we write this newsletter. It’s difficult to absorb such information and still lead our lives in a normal way.
Year 2025 then decided to throw another surprise in the nature of Israel - Iran conflict. And this too seems like a war that will stretch just like Russia - Ukraine one.
These wars have a direct cost on India.
Crude Oil !!
India imports about 85% of its crude oil, making it extremely sensitive to global price fluctuations. Every $10 per barrel increase in crude prices widens the current account deficit by approximately $14–15 billion (about 0.4% of GDP).
Higher crude prices result in increased cost of production and transportation. As per Economists, a 10% rise in crude prices can push the wholesale price index (WPI) up by about 0.9% and the consumer price index (CPI) by 40–60 basis points.
Rupee too then depreciates against the mighty dollar. We can argue that Russia will offer us cheap oil, but those discounts always come at a cost to maintaining an independent opinion in Geopolitics.
In the short term, getting cheap oil from Russia can be a masterstroke but for a country like India that has to depend on the rest of the world to feed its ever growing population becomes a huge liability.
Here’s how Crude has moved since the war broke out.
Petrol prices in Mumbai at the moment are still the same but we can expect them to go up!
It hardly took a few days to jump from $62 to $74 per barrel. And like we did mention in our previous newsletter that some analysts are predicting a $100 - $150 per barrel. You don’t need to calculate the impact that it can have our economy, we will be just screwed for no fault of our own.
Here are a few sectors that are directly impacted when the crude oil prices go up!
Oil Marketing Companies (OMCs): Companies like HPCL, BPCL, and Indian Oil face margin pressures as retail fuel prices may not always be adjusted immediately to reflect higher crude costs.
Aviation: Aviation turbine fuel (ATF) accounts for over one-third of airlines’ operating costs. Higher crude prices directly increase fuel bills, pressuring profits and potentially leading to higher airfares.
Paints: Paint manufacturers use crude derivatives for nearly 50% of their raw material costs. Rising crude prices force companies to increase prices, potentially hurting demand.
Chemicals, Petrochemicals, and Fertilizers: These sectors rely heavily on crude derivatives as feedstock. Higher input costs can reduce profitability and, in the case of fertilizers, increase the government’s subsidy burden.
Automobiles: Input costs rise due to more expensive plastics, rubber, and composites. However, higher fuel prices may boost the relative appeal of electric vehicles (EVs).
Logistics and Transport: Higher fuel costs increase the cost of transporting goods and people, raising prices across the economy.
If your portfolio is geared towards these sectors, we request you to have it re-assessed for a second opinion.
Prices tend to crash much faster when the overall mood is dampened in a particular sector. Seeing these price crashes in strong stocks often take a toll on retail investors because they aren’t used to seeing such anomalies in the markets.
And it’s during these times, our favorite financial influencers are either nowhere to be seen or they have suddenly changed the course of their investment philosophy.
Either ways, it’s hard to be an investor when the chips are down.
Rajeswari Sengputa has no filters to call a spade, a spade.
A rare quality we find in Economists these days.
“In summary, the Supreme Court’s ruling in the Bhushan Power and Steel Ltd “BPSL” case exposes deep flaws in the IBC’s institutional framework and raises concerns about judicial overreach. To sustain financial sector reforms and attract long-term investment, policymakers must urgently address these issues. Restoring confidence in the IBC requires institutional as well as judicial reforms. Only by building competent, accountable institutions can the IBC’s full potential be realised and the interests of creditors, investors, and the broader economy protected.”
Insolvency and Bankruptcy Code “IBC” was created to introduce a strict timeline (originally 180 days, extendable to 330 days) for insolvency resolution, ensuring that businesses could be revived or wound up quickly, thereby preserving economic value.
The focus was to maximise the value of assets for creditors such as banks and credit institutions that had lent to the company. A brilliant move that could also save the economic impact on shareholders if some other company would take over it’s assets.
JSW Steel (market cap of Rs 2.5 lakh crores approx) took over the assets of Bhushan Power and Steel under the IBC framework. All the creditors of the BPSL were paid following its liquidation.
JSW Steel now had the head office + branch network + steel plants of BPSL to expand in different directions which they started working on.
Honestly, in such cases where liquidation and takeover has happened there are some aggrieved stakeholders who are left with a bad taste or want some more. So they approach Supreme Court (as if the highest court of India isn’t already over-burdened enough).
Now, Supreme Court found some lapses which could’ve been dealt with some punishments, fines, etc. But somehow like a strict school teacher (who ordered biryani for Ajmal Kasab) overruled the previous decision. This put the entire ecosystem in shock.
If Supreme Court is the supreme authority, then what’s the whole point of having IBC?
A question that will haunt India’s business ecosystem for a long time to come.
Story #2: Hunger Inc: Empire of Taste
Rahul Sanghi is a fantastic storyteller. There’s a way to read his work - a cup of coffee, some chips and a notepad.
If you as a reader want to have a crash course on restaurants and its passionate founders, then this a blog for you. Trust me, this is a complete book in itself.
In our limited understanding, running a restaurant is like running a marathon but in sprint mode. You have to be super fast, adjust to your surroundings and changing preferences from your customers all the time.
For the rest of us, who like to live a Warren Buffet style of life - owning a piece of equity is the closest we can get to running it.
Rahul starts with sharing the personalities of the founders giving us a deeper look into their minds and hearts. Coming from different households they are bound by their love for food. And that keeps them going.
Along the way, we are offered a chance to read some more books on the subject. One recommendation by the author - Unreasonable Hospitality tops my list of lifetime reading. It’s like if you haven’t read this book, you’ve missed living a life.
And then the blog goes on!
Honestly, it’s a fine piece of writing and a wealth of knowledge that is only transferred when you read it. My opinion might just mellow it down, hence, it’s best to refrain from writing anything further.
Story #3: Different Kinds of Smart - Morgan Housel
Morgan may not have been born in India, but is the brand ambassador for the song ‘Sar jo tera chakaraye, ya dil duba jaaye, aaja pyare paas hamare, khae ghabraye!’
Whenever we read his work, it seems like clarity presents itself to us in the middle of the storm.
Key types of “smarts”:
Interdisciplinary Thinking: Recognizing that your field is just one piece of a much larger puzzle. Being able to connect ideas across disciplines—like economics, psychology, and sociology—gives a broader and more practical understanding of how the world works.
Balanced Confidence and Paranoia: Having the confidence to make bold moves, but also a healthy paranoia that keeps survival and risk management at the forefront. This balance helps avoid catastrophic mistakes.
Storytelling Ability: Understanding that facts alone don’t persuade people; stories do. Good communicators and storytellers have more influence than those who rely solely on the strength of their ideas.
Humility and Empathy: Recognizing the limits of your own experience and perspective, and making an effort to listen and empathize with others who have different backgrounds and ways of thinking.
Delayed Gratification: The ability to forgo immediate rewards for greater long-term gains, often by using strategic distraction rather than sheer willpower.