Book Summary of The Unusual Billionaires
by Saurabh Mukherjea
What is this book about?
"The Unusual Billionaires" by Saurabh Mukherjea explores the stories of seven extraordinary Indian companies that have consistently outperformed their peers in the stock market. These companies—Asian Paints, Berger Paints, Marico, Page Industries, Axis Bank, HDFC Bank, and Astral Poly—have achieved remarkable financial success by maintaining a rigorous focus on core business practices, prudent capital allocation, and sustainable competitive advantages. The book delves into the strategies, leadership, and operational practices that have enabled these companies to thrive over long periods, making them standout performers in the Indian business landscape.
Who should read the book?
This book is ideal for:
- Investors: Those interested in long-term investing strategies, particularly in the Indian stock market, will find valuable insights.
- Business Professionals: Entrepreneurs and managers looking to understand what makes companies successful over the long term.
- Students of Business and Economics: The book provides case studies of successful companies, offering lessons in corporate strategy and financial management.
- Anyone interested in Indian Business: Readers curious about the stories behind some of India's most successful companies will find this book informative and engaging.
10 Big Ideas from the Book
- Sustainable Competitive Advantage: The companies profiled have built and maintained strong competitive advantages over decades.
- Focus on Core Business: Successful companies concentrate on their core competencies rather than diversifying into unrelated businesses.
- Prudent Capital Allocation: Effective management of resources and capital is crucial for long-term success.
- Importance of Professional Management: The transition from family-led to professionally managed operations has been key to scaling these businesses.
- Customer-Centric Approach: Understanding and responding to customer needs is a common thread among the companies.
- Innovation in Operations: Continuous innovation, particularly in supply chain and technology, has helped these companies stay ahead.
- Brand Building: Consistent investment in brand and marketing has been essential for establishing strong market positions.
- Data-Driven Decision Making: Use of data analytics for demand forecasting and inventory management has significantly improved operational efficiency.
- Resilience through Economic Cycles: These companies have shown the ability to perform well across different economic conditions.
- The Coffee Can Portfolio Strategy: Investing in a well-chosen portfolio of stocks and holding them for the long term can yield significant returns.
Summary of "The Unusual Billionaires"
"The Unusual Billionaires" by Saurabh Mukherjea presents an in-depth analysis of seven Indian companies that have demonstrated exceptional financial performance over an extended period. These companies—Asian Paints, Berger Paints, Marico, Page Industries, Axis Bank, HDFC Bank, and Astral Poly—are not only leaders in their respective industries but also share common characteristics that set them apart from their peers.
1. Objective of the Book
The book aims to identify the characteristics that make certain companies extraordinarily successful over the long term. By using rigorous financial metrics, Mukherjea narrows down a list of thousands of Indian companies to just seven that consistently delivered over a decade or more.
2. The Selection Criteria
Mukherjea’s approach is data-driven, using two main financial filters:
- Revenue Growth: Companies must have delivered at least 10% revenue growth every year for the past decade.
- Return on Capital Employed (ROCE): Companies must have consistently maintained an ROCE of 15% or more over the same period.
These stringent criteria ensure that only companies with sustained financial performance are selected, reflecting their ability to generate growth while efficiently using capital.
3. The Companies Analyzed
The seven companies profiled in the book are:
- Asian Paints: A leader in the paint industry, known for its strong distribution network and brand equity.
- Berger Paints: Another major player in the paint sector, with a rich history and strong growth trajectory.
- Marico: An FMCG giant that transitioned from a commodity trader to a dominant player in personal care and wellness.
- Page Industries: The exclusive licensee of Jockey International in India, it has grown rapidly by focusing on brand and distribution.
- Axis Bank: Known for its consistent performance and ability to navigate through economic cycles.
- HDFC Bank: A powerhouse in the Indian banking sector, celebrated for its operational excellence and conservative approach.
- Astral Poly: A company that innovated in the plumbing and pipe industry and managed to expand rapidly while maintaining profitability.
Key Insights from the Book
1. Sustainable Competitive Advantage
These companies have managed to build and maintain strong competitive advantages, whether through brand strength, distribution efficiency, or product innovation. For instance, Asian Paints leveraged its vast distribution network and deep understanding of the Indian market to stay ahead of competitors.
2. Focus on Core Competencies
A common trait among these companies is their relentless focus on their core businesses. They avoided the pitfalls of diversification into unrelated sectors, which often dilutes a company’s competitive edge and managerial focus.
3. Prudent Capital Allocation
The ability to allocate capital judiciously is a hallmark of these companies. They consistently reinvest in their businesses to sustain growth while maintaining high returns on capital. This is evident in their ROCE figures, which consistently exceed 15%.
4. Importance of Professional Management
Transitioning from family-led to professionally managed operations allowed these companies to scale effectively. Professional management brought in expertise, better governance, and a focus on long-term success rather than short-term gains.
5. Customer-Centric Approach
These companies deeply understand and cater to customer needs. For example, Marico’s evolution from a commodity trader to a consumer products leader was driven by its ability to identify and respond to consumer trends in personal care.
6. Operational Excellence
Operational excellence, especially in supply chain management, is a significant factor in these companies’ success. Asian Paints, for example, has continually innovated in supply chain logistics, enabling it to deliver products quickly and efficiently across a vast country.
7. Brand Building
These companies have invested heavily in brand building. Page Industries, through its association with Jockey, has created a brand synonymous with quality undergarments in India.
8. Data-Driven Decision Making
Data analytics played a crucial role in these companies’ strategies. Asian Paints, for instance, was an early adopter of IT systems for demand forecasting and inventory management, which helped optimize its operations.
9. Resilience Across Economic Cycles
These companies have shown the ability to perform well across various economic conditions, reflecting their strong business models and management practices.
10. The Coffee Can Portfolio Strategy
Mukherjea introduces the concept of the "Coffee Can Portfolio," where a well-chosen portfolio of stocks is left untouched for a decade. This strategy is based on the premise that great companies will continue to deliver superior returns over time, and frequent trading often erodes potential gains.
Relevant Metrics and Key Points to Remember
- Revenue Growth: Consistent revenue growth of at least 10% per annum over a decade is a key metric used to identify the companies profiled.
- Return on Capital Employed (ROCE): A minimum of 15% ROCE over a decade is crucial, indicating that these companies efficiently use their capital to generate profits.
- Market Capitalization: The focus is on companies with significant market caps, ensuring that the analysis is of companies that have already achieved a certain scale.
- Professional Management: The transition from family-led to professional management is highlighted as a critical factor in sustaining long-term growth.
- Focus on Core Business: The companies have stayed true to their core competencies, avoiding unnecessary diversification that could dilute their strengths.
Final Thoughts
"The Unusual Billionaires" offers valuable lessons in corporate strategy, financial management, and long-term investing. The book’s emphasis on data-driven analysis, combined with in-depth case studies, provides readers with a clear understanding of what it takes to build a great company. For investors, business professionals, and students alike, the book is a treasure trove of insights on how to identify and invest in companies that have the potential to deliver sustained superior performance.
Which Other Books are Used as Reference?
The book references several other works that inform its analysis and concepts, including:
- "Good to Great" by Jim Collins: This book is referenced for its exploration of what makes companies great.
- "The Halo Effect" by Phil Rosenzweig: Used to discuss how perceptions of success can influence the way companies are viewed.
- "Sapiens: A Brief History of Humankind" by Yuval Noah Harari: Referenced in the context of historical longevity and greatness.
- "Zero to One" by Peter Thiel: Thiel’s work on the Pareto Principle and its application to investing is discussed in relation to the Coffee Can Portfolio strategy.
- "Capital: The Story of Long-Term Investment Excellence" by Charles D. Ellis: This book is mentioned in the context of long-term investment strategies.
These references help frame the analysis and provide a broader context for the concepts discussed in "The Unusual Billionaires."
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