The Energy Bus: Lessons for Value Investors in the Transformational Story of Ajanta Pharma – Bamboo Innovator Weekly Insight

“Bamboo Innovators bend, not break, even in the most terrifying storm that would snap the mighty resisting oak tree. It survives, therefore it conquers.”
BAMBOO LETTER UPDATE | September 14, 2015
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Dear Friends,

The Energy Bus: Lessons for Value Investors in the Transformational Story of Ajanta Pharma

“I am not bound to win, I am bound to be true.

I am not bound to succeed, but I am bound to live up to the light that I have.”

– Abraham Lincoln, sixteenth President of the United States of America who saved the Union during the American Civil War and emancipated the slaves

Battling clinical depression. Two bankruptcies. Death of fiancée, son and father.

A seeming failure at the age of 51, one cannot help but marvel at the man who summoned his courage and strength to overcome all these adversities to take on the responsibilities as the President of the United States and unify the country.

Energy BusNo one goes through life untested and the answer to these tests is Energy. In his inspiring book “The Energy Bus”, Jon Gordon shared the story of Abraham Lincoln waiting for Civil War battle reports to come in, not knowing if his country was one step closer to unification or destruction. Gordon likened Lincoln’s feeling of time inching by to that of us wondering and waiting who will board our Energy Bus in the journey of Life and who would stay off it. An important rule, Gordon illustrates, is to “Drive With Purpose”. Purpose is the ultimate fuel for our journey through life. When we drive with purpose we don’t get tired or bored and our engines don’t burn out. Abe’s opening quote “I am bound to be true; I am bound to live up to the light that I have” illuminates his Purpose to emancipate the slaves and unify the country. Rather than vilify people opposed to slave emancipation, Lincoln sought to comprehend their position through empathy; the Purpose was not to defeat his opponents but to heal them of their false beliefs. Purpose is the fuel that energizes himself and the people around him to board his Energy Bus to drive transformation.

Ajanta Pharma (NSI: AJANTHPHARM) vs Nifty – Stock Price Performance, 2000-2015


Reading The Energy Bus obliquely reminded me of the transformational story of India’s Ajanta Pharma (AJP IN, MV $1.87bn). In The Energy Bus, the life of the protagonist George was in shambles: his marriage was at risk, his job was threatened. Similarly, when the Agrawal brothers joined their family firm, it was in shambles, like the life of George. Like Lincoln’s empathy – the ability to put himself in the place of another, to experience what they were feeling and to understand their motives and desires – which gave him the power to forecast with uncanny accuracy what people were likely to do, the value investor will be able to better appreciate the deeper thoughts expressed by Rajesh Agrawal, the second generation leader who joined the family business in 2000 when the company was listed in the same year. Rajesh said, “When I joined Ajanta in 2000, and realised what was going on, I wanted to run away. I thought to myself, ‘Why did I return from the US? I could have had a job there. It was tough in the beginning, especially the situation with creditors and debtors.”

The Mumbai-based Ajanta — set up in 1973 by three brothers, Mannalal, Purushottam and Madhusudan Agrawal — had been incurring huge losses for many years. In 2001-2002, it reported a consolidated loss of Rs 1 crore ($0.15m) and by the following year, it was reeling under a debt burden of Rs 130 crore ($19.6m). Together, Mannalal’s sons Rajesh and his elder brother Yogesh, transformed the debt-laden Ajanta into an extraordinary compounding story that has seen an over 60-fold growth in market value. How the second-generation Agrawal brothers drive transformation by getting everyone on board their Energy Bus offers timeless lessons for value investors to also board the Energy Bus early to participate in the compounding journey.

Before investigating the story of Ajanta, we have the privilege of interacting recently with a thoughtful, low-profile and accomplished Indian value investor Mr. M. Through our conversations, we are able to sense Mr. M’s values towards investing and life and he also provided value investors a powerful thought-provoking insight and a potential structural mispricing opportunity that bears emphasis:

“I have come across quite a few instances, where in initial days, management may have resorted to some not so kosher practices but as it grew in size / found the runway much bigger than it anticipated, grew in confidence, grew in management bandwidth, and gradually became very professional, transparent and dependable.”

Interestingly, Mr. M went on to cite various such examples, including Ajanta Pharma and five other companies in his investing universe. In an earlier Weekly article “Keepers of the Flame: Revisiting the Origins of Compounders in India and Asia”, we had previously discussed about Mr. M’s idea – in the opposite light, in that there are increasingly groups of entrepreneurs who did not start out wanting to be fraudulent, but turned to the dark side as things got tough. This is the opposite scenario of Mr. M’s insight of entrepreneurs emerging from the dark side of Extractors to the warm glow in the land of the Compounders:

“Value investors in Asia cannot look purely at quant “valuation” metrics since many business models and moats are “permanently impaired” and these stocks are the fertile ground for momentum traders and nefarious insiders who have the incentive and power to manipulate prices and volumes. Value investors who attempted to invest in these statistically cheap stocks in Asia have found themselves facing deadweight losses in their portfolio. We observed firsthand how some business owners grew to become either contented with what they have achieved or disillusioned with their core business, straying to seek “growth” for their private interests such as property development, or simply numbing/”exciting” their senses with destructive lifestyle at the casinos while treating both their listed business vehicles as a personal ATM and their employees as disposable expenses rather than as valuable intangible assets. The listed companies belonging to the latter group become dangerous value traps; some even slipped into conniving with “syndicates”. Financial numbers were “propped up” artificially with the prospects of sexy growth projects to lure in funds from investors and the studiously-assessed asset value has already been “tunnelled out” or expropriated. Western-based accounting fraud detection tools and techniques have not been adapted to the Asian context to avoid these traps. And we have seen how the perpetrators go away scot-free and live a life of super luxury on minority investors’ hard-earned money. When investors have knowledge in their hands, we have a choice to stay away from these people and away from temptations and do the things that we think are right. With knowledge, we have a choice to invest in the hardworking Asian entrepreneurs and capital allocators who are serious in building a wide-moat business.”

Before we explore the story of Ajanta to sieve for the timeless insights to identify similar compounders, below is a reproduction of some excerpts of our conversation with Mr. M:

—–Original Message—–

From: Kee Koon Boon


Sent: Thursday, 10 September 2015 11:27 PM

There is one word that I have learnt from the Godrej Group management when I visited India (Mumbai/Delhi/Pune) in 2013: Antevasin (अंतेवासिन्). It is a Sanskrit word for “border-dwellers”, a term used at Godrej where the leaders refer to the Group’s position today as “antevasin”, border-dwellers walking the line of trust, integrity and humility on which they have built their credibility. Antevasin is about learning which is far from the safe horizons, a learning which brings you face front to the ground reality. Antevasin is about leaving the bustling center of worldly life to go live at the edge where the Truth dwells closer. That simmering line between your old thinking and new understanding, always in a state of learning. An antevasin is also a scholar who lives in the sight of two worlds, but is looking towards the unknown, just as the value investor is cognizant of the two worlds of the wide-moat Compounders Vs the fraudulent Extractors and is guided by knowledge and teamwork to distinguish between the value creators and destroyers.

Sent: Friday, 11 September 2015 10:37 PM


To: Kee Koon Boon

Wonderful to get your very insightful mail. “Antevasin” is a concept known to me for a long time …. It is a person who is neither fully a family / household / material man nor a fully transcended and self-realised individual, but a person constantly seeking for higher truth, more integrated truth and truth about his “believed and socially conditioned moral codes” with honesty, dedication and hard work. Trust in self, trust in his spiritual teacher and simplicity are the key characters of a true “antevasin”, the dwellers in the border of material and eternal truth.

I am fully aligned to your approach of separating wheat from the “ocean of chaff” prevalent in the Indian equity market. My 18 years of investment experience in Indian market has taught me that Indian market is quite fast in recognising the wheat and value it appropriately in a very short span of time. Conversely, a chaff, however fancied, slowly falls back to the place it actually deserves. But at the same time, I must say, I have come across quite a few instances, where in initial days management may have resorted to some not so kosher practices but as it grew in size / found the runway much bigger than it anticipated, grew in confidence, grew in management bandwidth, and gradually became very professional, transparent and dependable. I can site quite a few examples like Shilpa Medicare (SLPA IN, MV $553m), Welspun India (WLSE IN, MV $1.3bn), IFB Industries (IFBI IN, MV $274m), Avanti Feed (AVNT IN, MV $388m), Suprajit Engineering (SEL IN, MV $243m), Ajanta Pharma (AJP IN, MV $1.87bn) and few more from my own investment universe. One needs to have patience, understanding of the business and feel from the ground to be really successful in Indian market.

And yes, like an “antevasin” one need to remain away from the crowd, clutter and noise but not so far away as to miss the news, developments, changes happening in society, in business, in invested companies and new emerging opportunities.


Second-generation leaders Rajesh and Yohesh Agrawal transformed Ajanta by driving with Purpose, adopting a slightly unconventional approach of not following time-tested business models. The Agrawal brothers…


Read more at the Moat Report Asia:


In The Energy Bus, the life of the protagonist George was in shambles: his marriage was at risk, his job was threatened. When his car had a flat tyre, George was forced to take the bus to work. And he meets with a unique kind of bus driver called Joy and an interesting cast of characters who shared with him the rules for approaching life and work and transform him. As the author Jon Gordon says,

“Everything happens for a reason. Don’t forget that. Every person we meet. Every event in our life.  Every flat tire happens for a reason. You can choose to ignore it or ask what the reason is and try to learn from it. Every problem has a gift for you in its hands as my man Richard Bach says. You can choose to see the curse or the gift. And this one choice will determine if your life is a success story or one big soap opera.”

When the Agrawal brothers joined their family firm, it was in shambles, like the life of George. Perhaps the crisis happens for a reason – it forces change and transformation. The brothers choose to be the driver of their bus, re-energizing Ajanta with a Purpose, adopting a slightly unconventional approach of not following time-tested business models.

Jon Gordon illuminated the insight that for the Energy Bus to keep moving forward and expand so as to always be able to add more people, it is important to “Love Your Passengers”. Love takes time. It’s a process not a goal. Love focuses on bringing out the best in each person on your team. When you love someone you want the best for him. You want him to shine. Gordon shared five ways to love your passengers:

  1. Make time for them
  2. Listen to them.
  3. Recognize them.
  4. Serve them. – A great leader once said, the higher you get in an organization the more it is your duty to serve the people below you rather than having the people below serve you.
  5. Bring out the best in them.

Value investors will do well to identify and invest in wide-moat compounders by hopping on their Energy Bus early to enjoy the ride by evaluating whether the driver drives with a Purpose, that he or she has the desire, vision and focus to move the bus in the right direction and above all, they love their passengers.

PS: We also like to share with you an article “Scouring Accounting Footnotes to Prevent Tunneling” which we penned for our local newspaper Business Times Singapore that was published on 19 Aug 2015: PDF article link on SMU website. We are honoured to be able to have the opportunity to make an upcoming presentation on 23 September to the senior management of the regulator in Singapore about the fact-based forward-looking fraud detection framework.

Warm regards,


The Moat Report Asia

A new monthly issue of The Moat Report Asia is now available!

Access the in-depth idea presentation:

In the month of September, we investigate a listed Asian family business that has persevered for over fifty years since 1962 in this high-electricity-rates emerging country to sell something that seems risky – air-conditioners and refrigerators to consumers and commercial clients. Led by the capable, down-to-earth third generation leader Mr. C who believe in making available to his countrymen products and services that used to be affordable by only the rich as his family and personal SWFF, [Company’s name] is now the #1 market leader in air-conditioner (36.7% market share) and refrigeration (25.6% market share) which are under-penetrated appliances in the country, with household penetration rates at 6% and 35% respectively, amongst the lowest in Asia where its neighbours have at least twice the penetration rate, representing significant untapped market potential.

Amongst the white good appliances that are disrupted by ecommerce, the sale of aircon and refrigerator remain resilient because they require installation and aftermarket service support. [Company’s name] provides unmatched end-to-end solutions from production to distribution to aftersales services network that spreads across the logistically-challenged country. [Company’s name] has over 90% appliance store coverage nationwide and its unrivalled aftersales service business is supported by over 170 accredited installer companies; over 130 accredited service centers; over 2,000 technicians; rapid sales facilitation and service turnaround from over 1,000 merchandisers deployed at the point of sale; and 8 dedicated parts stores; and a centralized in-house call center, distribution, parts availability/support as well as regional field personnel. Its robust logistics network ensure speedy delivery and fast service response.

In terms of business nature, margins and profitability, [Company’s name] is comparable to India’s Voltas (NSI: VOLTAS), India’s #1 aircon company who is an affiliate of the Tata Group with a 20% market share. [Company’s name] has a much higher and more stable market share than Voltas and generates higher ROE at 23.1% as compared to Voltas’ 18.1%. Yet, [Company’s name] trades at a 140% valuation discount in terms of EV/EBIT and EV/EBITDA at 9x as compared with 21x for Voltas. We think [Company’s name] deserves to command a higher valuation premium for its market leadership in an under-penetrated domestic market, its strong portfolio of synergistic businesses, and its visible long run way to reinvest its profits back into the core business to extend its market leadership and widen the moat. The company has a healthy balance sheet with net cash comprising 26% of book equity due to its integrated business model that has enabled the generation of steady, resilient and growing margins, profits and cashflow and the efficient employment of capital with a 23.1% ROE.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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