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Prominent Indian entrepreneur in the financial services industry shares his journey to the top

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Ramdeo Agarwal
Mr. Ramdeo Agarwal is the Managing Director of Motilal Oswal Financial Services. He is a reputed stock picker and is one of the most successful Indian entrepreneurs in the financial services industry.



Mr. Ramdeo Agarwal, Co-Founder Motilal Oswal, is the man behind the strong research capabilities at Motilal Oswal Financial Services Ltd. His firm belief in “Value Investing” forms the core of the Motilal Oswal group’s investment philosophy. The investor community eagerly awaits his annual Wealth Creation studies, which he has been authoring for the last 16 years. He is an Associate of Institute of Chartered Accountants of India and also a member of the National Committee on Capital Markets of the Confederation of Indian Industry. Mr. Agrawal specializes in equity research. He has been authoring the annual Motilal Oswal Wealth Creation Study since its inception in 1996. In 1986, he wrote the book ‘Corporate Numbers Game’, along with co-author, Mr. Ram K Piparia. He has also featured on 'Wizards of Dalal Street on CNBC TV 18'. Mr. Agrawal has received the "Rashtriya Samman Patra" awarded by the Government of India.

This interview was conducted by Pallav Maheshwari, an MBA student from IIT Kharagpur.

Please tell us about your current job profile.

I am a joint Managing Director and co-founder of Motilal Oswal Financial Services. This company was formed in 1987 by Mr. Motilal Oswal and me. I was taking care of the research and Motilalji was taking care of the rest and other operational functions. That’s how the company has come up. My passion has always been equity research and investment management. I am a Chartered Accountant by profession and I don’t have a long lineage of stock market background in my family. My parents come from agricultural background, so I am absolutely a first generation from my family in stock market and also an entrepreneur. In the last 16 years, I have done a study of wealth creation. It is a study which is an annual affair and we look at how companies have created wealth in last 5 years and what are the key characteristics and how things are developing in the field of wealth creation. The 16th part of the study will be presented this year sometime in December. I keep myself busy with the financial numbers of companies by studying their balance sheet and looking at their cash flow.  This keeps me abreast with all the latest company-related developments.


What prompted you to go for the wealth creation study, because this is a unique thing in the industry?

I had read a book called “Common Stocks and Uncommon Profits” by Philip Fisher. It’s a very good book for anybody starting in the stock markets. It tells about what to look for in a company before buying its stock. The author states in the book that in a market everybody knows the price of everything but nobody knows the value. So you have to keep doing the study of value. The biggest challenge of market place is to understand the value. You have to keep yourself updated with the knowledge of movement of values in the market place. Value keeps on moving from one company to another company, one sector to another and so on. I wanted to do a study where you can see the aggregates etc of the company and that’s how the idea of wealth creation study came to study.


Being a co-founder of MOFSL, what was the vision in your mind when you had started? Do you feel you have achieved what you wanted to or there is still a long way to go?

Of course, there is a long way to go. When I had started I wasn’t a stock market expert. I had to make money and a career out of it. When we started in 1987, making a success out of it was the main aim. I was pretty confident that I can help people make money though I didn’t have much money. Thanks to my Chartered Accountancy background and deep interest in reading balance sheet.  I had this firm belief that if I can help people make money I’ll get paid by brokerage or the service fees. I had also done an equity research in ‘85-86 and wrote a book called “Corporate numbers game”. The book gave me confidence that I can help people in the stock market, which was very uncommon in ‘85-86. Helping people make money was also the vision of the company.


Given the book "Corporate Numbers Game” was published in 1986, how relevant is the book today?

Hardly few hundred copies of the book were produced and sold. That time it was a highly quantitative stuff and had 5-6 years performance of all the companies. Doing it on a first generation PC was quite a cumbersome job. The number crunching was telling us which are the good investments and they have rewarded the investors for a very long time. They were the main wealth creators for the shareholders at that point of time. So, I think the stories still remain the same, of course the situation changes. Bigger and newer companies come up. Good business when comes together with good management, there is a good backdrop set for making money.


Given the current scenario of global markets, where do you think the economy is headed to? Given the situation in Eurozone, do we have sufficient avenues for domestic driven growth? Which sector you feel will be the most resilient to global turmoil?

In the last few years, the Indian economy has become much more integrated with rest of the world. So, if there is a major chaos in the world, we clearly will be impacted through our capital flows, export routes, ECB lending/borrowing etc. But, I think India is a very large country and it has got a strong domestic demand base, good technology base and good savings base. Unless the world comes to a complete standstill (the doomsday kind of situation), Indian economy will do well. There is no solution to eliminate the fear. Economic performance and stock market performance are two different things. This is because economy’s performance doesn’t fluctuate because of greed and fear, whereas stock markets can go up 50% because of greed and go down 50% because of fear. It is a very invisible kind of sentiment in the stock markets, so one should not mix both of them. Right now globally, there is a lot more fear in the stock markets than the strain on the global economy. Greece is a very small issue. $300 billion is very small figure in $63 trillion global economy. So, it’s not that big, but it is driving the sentiments of the investors globally. It is really a very complex subject. I really don’t say that I understand global and local economy subject that deeply. But I feel a lot depends on the company. So a very good company with good management will not be stretched much unless they are too much dependent on exports.


With enough competition in the Financial Services space, what is the differentiating factor which MOFSL has that will help maintain its position of being amongst the top?

I would like to say that we are a focussed company. We are not leveraging the balance sheet at all. We are taking care of our operations in all spheres whether it is retail, HNIs, or institutional. Anything we do in the market our one foot is always in the stock market. Whether you do IB, you are related to the stock market. Asset management is also related to the stock market. So, our strength is the research and wherever we can leverage that research, whether it is retail broking, institutional broking, investment banking, private equity, public equity, we are just doing things around stock markets.

We are differentiating ourselves with the research. We sincerely think that we can do a good job in research. Focus on the other areas is also very important. It’s a cyclical industry and we are going through the lower end of the cycle right now. We are building distribution across the country. We are present in 1500+ outlets across the country. We are optimizing the existing outlets, opening new ones and phasing out the old ones which are unviable. So we are continually building up the distribution. Whenever an uptrend comes, we should be there with a better distribution, cleaner balance sheet, better people and better research. Our belief is that in spite of good competition, we can succeed with better brand equity, better distribution, better research and focused balance sheet. I don’t know how many firms are there at our level, our size with these attributes and with completely unlevered balance sheet. Once you hit the downturn you should not have stress of leverage. We hope that in 2020, when the big day comes for the Indian economy, when it is a 5 trillion dollar economy and market goes from 1.3 trillion to 4-5 trillion we should be there to do the broking for our customers.


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