In 1929, the “White Label” was not received well.

About 6 years earlier, Shinjiro Torii had set out to build Japan’s first whisky distillery.

He had hired Masataka Taketsuru.

Masataka had been to Scotland to learn the art.

White Label was perceived as too smoky, too heavy, and didn’t sit well with its target audience, the Japanese public.

It was at this time that Shinjiro Torii realized that directly copying the best whisky in the world was not going to work. At least not in Japan.

The Japanese wanted something else from their whisky. They wanted something lighter, more delicate, and Japanese-food compatible.

Introduced in 1937, Kakubin (“Square Bottle”) was that.

It caught on very well over the years.

Shinjiro’s idea worked.

Meanwhile, Masataka Taketsuru had different ideas.

He wanted his whisky to be more like the original Scottish whisky he had learned to make while in Scotland.

He had left in 1934 and started his own company.

Masataka insisted that his whisky should be perfectly made. The right air temperature, the right kind of water, the right wood barrels for aging, the right duration, and so on.

He was a meticulous man.

The industry evolved. While these two played a seminal role, a few others also joined the industry in Japan.

The Japanese whisky industry had players who believed in different philosophies. But their desire for perfection, nuance, and detail-oriented nature was common across the industry.

The quality was top-notch.

Then World War 2 hit. The ensuing economic crisis. All that.

Boom & Bust

Those who know Japan are well aware that the decades after World War 2 saw Japan climb by leaps and bounds.

The Japanese economy soared to new heights in the 1980s.

Japanese whisky consumption also followed a similar trajectory. It peaked a bit earlier, in 1983.

Japanese whiskies were mostly affordable and non-premium. They were for the salaryman.

In 1991, an economic slump hit Japan, and with that, corporate party budgets, individuals’ salaries, and disposable income shrank.

People were drinking less.

It did not help that the younger generation saw whisky as a drink of their parents’ generation. Sake, wine, shochu, and beer gained popularity.

Seeing dwindling demand, the Japanese whisky distillers struggled to generate strong revenues.

They scaled their operations down. They distilled less whisky.

Re-rating

Towards the start of the 2000s, Japanese whisky makers were struggling to sell their stock.

Whisky takes years to mature, and whatever they had left to age about a decade prior was not seeing enough customers.

Until this point, Japanese whisky was popular in Japan, but not outside. Japan itself was a huge whisky market, so these distillers had never felt the need to step outside much.

In blind tastings, the finely crafted Japanese whisky started to win awards sometime in the early 2000s — Western awards.

The Whisky Bible is an annual guide published by Jim Murray.

While it is not the only such guide, the Whisky Bible is one of the most popular.

It is subjective and not blind. It is opinionated. Jim Murray’s opinion.

Every year, Jim would sample over 1,000 new whiskies and rate them on various traits, scoring them on a scale of 100.

The highest-scoring whisky is titled the “World Whisky of the Year”.

In 2015, a Japanese whisky won this title for the first time: Yamazaki Single Malt Sherry Cask 2013.

Its price at launch in the UK was less than £100. After the “discovery”, its price rose to the £1,900 region.

The delicate and meticulously crafted Japanese whiskies had been quietly gaining global recognition. This award brought that into the open.

Whisky connoisseurs, collectors, enthusiasts, and regular whisky consumers all wanted Japanese whisky.

Whisky takes a while to age — 10 to 12 years, or even more.

And 10 to 12 years prior to the award and rise in popularity, Japanese whisky makers had been struggling and scaling down. This led to shortages in stock when demand was finally moving up.

The whisky had not changed. But the global recognition for it was new.

It had always been high quality; now, people outside Japan knew it as well.

The result, as you’d guess, was that the price shot up.

Japanese whisky had been re-rated.

Re-rated Stocks

This happens in the stock markets too.

Costco:

For years, Costco, the departmental superstore, was seen as a retail chain: high volume, low margin.

Consequently, it was priced like one.

Its revenues and profits kept climbing, but its multiple, or P/E ratio, remained in a fixed range.

(The P/E ratio or price-to-earnings ratio tells us how a stock is priced compared to its earnings per share.)

Some investors knew what Costco truly was. The wider market failed to realize this.

These investors realized that while Costco was selling high-volume, low-margin daily consumer goods, its earnings did not come from them entirely.

Instead, membership fees were the big driver. It was a gated club where members paid an annual charge to buy cheap goods.

About 50% of the company’s operating profits come from membership fees.

The renewal rate of this membership is extremely high, usually above 90%.

The company has been in a self-reinforcing loop.

Cheap goods attract more buyers. More buyers mean more volume. More volume means the company can negotiate even cheaper prices from suppliers, thereby making items even cheaper. This in turn attracts even more membership sales.

Until 2014, this company’s P/E ratio was mostly in the 20s. During the Great Recession, its P/E ratio even dipped as low as 15.

In the last 5 years or so, its P/E ratio has mostly been in the mid-40s.

Apple:

It is a little astonishing, but even years after the immensely successful launch of the iPhone, Apple’s P/E ratio was sometimes in the single digits. Mostly, it was in the 10-15 zone.

Everyone had made note of the iPhone’s stupendous success, but estimates suggested that the market for smartphones in the world was limited.

Android was offering much cheaper smartphones, and the fear was that they would saturate the market, thus eating into Apple’s share.

What they failed to realize was that Apple was able to create entirely new markets. It was able to expand the size of the markets.

Thanks to the iPhone, many new buyers who had not been smartphone users earlier also bought iPhones.

Investors recognized Apple’s ability to create markets where they didn’t previously exist.

Like Costco, Apple’s users were also extremely loyal and likely to switch/upgrade devices within the Apple ecosystem.

Further, Apple had done a fantastic job of increasing its income from services. It was not just a hardware company.

Over the last few years, Apple’s P/E ratio has often been in the 30s.

There are many other examples.

Microsoft got re-rated when it transitioned from being a PC operating system company to a cloud computing company somewhere around 2014–2020.

It went from having a P/E in single digits to being in the 30s.

If you look for more such examples, you will easily find them.

The phenomenon is not rare.

The lesson here is that many times, the wider market does not realize how good a company is.

And many other times, companies become better quality (compared to their earlier self).

In both cases, eventually, the wider market realizes and re-prices the stocks.

Their valuations are given a boost.

When companies get re-rated by the wider market, their P/E ratios often rise.

For really shrewd investors, the game is to spot a great company before it gets re-rated.

Quick Takes

+ India’s gross GST collections rose 22.9% year-on-year to Rs 2.31 lakh crore in October. Collections from imports rose 42.2%, while domestic collections increased 15.8%.

+ The price of a 19-kg commercial LPG cylinder rose by Rs 10 to Rs 2,820 in Delhi from 1 November. Prices also increased in other major cities.

+ The government introduced new aviation rules requiring airlines to clearly display cancellation charges and refund conditions when showing ticket prices. The rules will take effect on 1 January 2027.

+ TRAI tightened consumer grievance redressal rules where telecom operators can be penalised up to Rs 20 lakh per quarter per service area for improper handling of complaints.

+ SEBI recommended the government to remove long-term capital gains (LTCG) tax on foreign investors, as per media reports.

+ Coal production from captive and commercial mines rose 42% year-on-year to 22.03 MT from 15.49 MT a year ago.

+ SEBI allowed REITs and nvITs to issue Depository Receipts (DRs) backed by their units that permits them to access foreign investors.

+ IRDAI tightened Employee Stock Option Plan (ESOP) rules and reduced processing fees for share transfer among other measures in its revised framework.

+ Multi-asset international exchange, NSEIX, extended market operations for 23.5 hours from 03:15 am to 02:45 am to improve global accessibility.

+ The government approved two schemes: Rs 14,500 crore to develop 92 GWh of electricity storage capacity by FY31, and Rs 2,814 crore to support four lithium and nickel processing plants.

+ RBI received bids worth Rs 73,907 crore for its Rs 50,000 crore reverse repo auction, up from Rs 23,905 crore a day earlier. The auction helps RBI temporarily absorb excess money from banks.

+ The government shared tax devolution worth Rs 1.09 lakh crore with state governments to increase capital spending and welfare expenditure.

+ SEBI permitted mutual funds to settle cash market trades on a net basis to reduce funding requirements.

+ SEBI also revised the threshold limit for taking positions in currency derivatives involving the Rupee, without establishing underlying exposure.

+ India’s forex reserves fell $2.69 billion to $717.06 billion for the week ended 30 Oct.

+ Retail automobile sales fell 23.80% year-on-year to 31.72 lakh units in October compared to a year ago as per Federation of Automobile Dealers (FADA).

The information contained in this Groww Digest is purely for knowledge. This Groww Digest does not contain any recommendations or advice.

Team Groww Digest

The information presented in this post has been compiled and prepared by Groww Invest Tech Pvt Ltd and is intended solely for informational purposes. It is not tailored to any specific investment objectives, financial situations, or needs of any individual investor. The content should not be construed as investment, financial, legal, or tax advice and should not be relied upon as a substitute for professional consultation.

Investing in securities markets involves inherent risks. Investors are advised to carefully review all relevant documents and consider their own risk tolerance before making any investment decisions.

Mutual fund investments are subject to market risks; please read all scheme-related documents carefully. Past performance of financial instruments, schemes, or markets is not indicative of future results.

Groww Invest Tech Pvt Ltd is registered with the Securities and Exchange Board of India (SEBI) under Registration No: INZ000301838, as a Research Analyst under No: INH200008662, as a Depository Participant under No: IN-DP-417-2019, and with the Association of Mutual Funds in India (AMFI) under ARN-111686.

SEBI registration details: View registered name and registration numbers

Research Analyst Disclaimer: View Research Analyst disclaimer

There was no side with a clear upper hand.

The Netherlands was putting up a strong fight to defend itself.

The Spanish had colonies across the globe. One of their biggest colonies was New Spain (modern-day Mexico).

This new land had been a source of immense wealth for Spain.

Lots of gold and silver was being shipped from New Spain to Spain (Europe).

This consistent supply of money was one of the biggest reasons why Spain had sustained the war for so many decades.

Ships would sail from New Spain in groups. Sailing alone was risky since there was always the fear of pirates and bad weather.

For Spain, this practice had become routine. By that point, they had been importing gold and silver for about 100 years. They had grown to rely on this inflow of wealth.

In 1628, it had already been 60 years since the start of the war. The Dutch were desperate to find alternative ways to deal with Spain.

A fleet of 50 ships was sent to the Caribbean to intercept the Spanish ships’ fleet. The idea was a good one.

If the gold and silver never reached Spain, it would struggle to fund the war against the Netherlands.

Multiple Plans Fail

The Dutch ships, after a long journey across the Atlantic Ocean, were low on food supplies.

Scouting for food supplies, they went to different ports and docked. They managed to find enough goats and donkeys on a deserted island in the West Indies.

There they left a crewman behind.

This crewman ended up being captured by the Spanish. When interrogated, the crewman revealed the full plan to the Spanish.

The plan had failed.

The Dutch, however, were not aware that their plan had been discovered by their enemies.

A little way ahead, they waited for the Spanish ships to cross.

The Spanish, equipped with their newly acquired intelligence, came up with a simple strategy.

They knew the Dutch didn’t really have any support in this part of the world.

Eventually, their supplies would run out. Hunger and illness would set in, and the Dutch ships would leave.

The Spanish ships waited at two different ports.

The Dutch, unaware of the Spanish ships’ plans, continued patrolling the waters around Cuba.

Weeks passed, and the Dutch found no Spanish ships crossing them.

Eventually, the Dutch ships’ food supplies started running low. The Spanish plan was working.

The captain spearheading the Dutch expedition noticed that sailors of his fleet were starting to fall ill.

He had come with about 50 ships and decided to send 19 back with the sick. He hoped that the reduced burden would allow them to sustain their patrolling effort for longer.

The Spanish had placed their messengers and informants to keep an eye on this fleet.

Seeing these Dutch ships turn around was exactly what they had strategically planned for.

But even their planning was not airtight.

When they noticed some of the Dutch ships leaving, they assumed they were all turning around. They failed to notice that fewer than half the ships had actually gone back.

After some gap, the Spanish ships, 16 of them, set off on their journey across the Atlantic.

And to their surprise, the Dutch were waiting.

When they entered the Cuban waters, they were spotted by the Dutch who started chasing.

The Spanish ships were commanded by someone who lacked sea-combat experience. The ships were also overloaded with treasure to the point that the sailors found it difficult to use their guns.

Heavily outnumbered by 31 Dutch warships, the 16 treasure ships were captured.

Overjoyed with the treasures they had bagged, the Dutch actually treated their Spanish prisoners well. They were given enough food and water and left on the shores, to walk back to civilization.

The captured gold and silver weighed over 90 tons. Most of it was silver.

These 16 captured ships made up a third of all Spanish ships in the region.

The wealth captured helped the Dutch sustain their war effort for about 8 months. It was a huge hit to the Spanish.

The war continued for nearly 20 years after this heist. But the heist did severely dent Spain’s ability to fight.

Indirectly, it can be said that the capture of these ships helped end the war between Spain and the Netherlands.

Moving Money

Moving money across vast distances is not easy. There are always extreme safety risks en route.

This is not an isolated event in history.

It might be easy to imagine merchants’ and traders’ wealth getting ransacked while travelling.

What’s more fascinating is that even governments were not immune — there are plenty of examples of that as well.

Thankfully, today, money moves a lot more easily and faster. And, safer too.

It is why the economy runs as smoothly as it does today.

So, how does it all happen?

One of the biggest reasons for the money’s safety is that the cash does not really move as such. A system called the SWIFT system is the most common global bank-network system.

And it works more like a secure messaging system.

SWIFT

Society for Worldwide Interbank Financial Telecommunication (SWIFT) is based in Belgium.

It was established by a group of 239 banks from across 15 countries in 1973. The idea was to standardize and automate the international money transfer mechanism.

Over the years, the system has grown to include more member banks from different countries. So much so that today, it is almost the default method of making international payments.

How does it work?

Imagine WhatsApp, but for banks.

Member banks are given access to the SWIFT portal. Using this portal, all they do is tell the bank on the other side that the money has moved from person X to person Y.

Example:

Say there is a company in Italy, Italiano Coffee, buying factory equipment from Tokyo Equipments, in Japan.

They agree to pay each other in the Japanese currency, Yen.

The Italian company asks its bank to pay Tokyo Equipments.

The Italian bank converts the money (which is in Euros) to Yen.

The two banks talk to each other.

The Italian bank tells the Japanese bank, “We have received money from Italiano Coffee. Please move the equivalent amount into Tokyo Equipments’ bank account from our account”.

Done — the money has moved out from Italiano’s account and at the same time, money has been deposited into Tokyo Equipments’ account.

The key point to note here is that banks that deal with each other maintain bank accounts with each other.

So, the Italian bank has a bank account with the Japanese bank. And the Japanese bank has a bank account with the Italian bank.

When Italiano Coffee pays, the Italian bank moves the equivalent amount from its Japanese account into the Japanese account of Tokyo Equipments.

The Italian bank has a Yen account, and the Japanese bank has a Euro account.

Notice that money never crossed borders during this exchange.

The money went from one account in Japan to another account in Japan.

It is actually a bit more complicated than that.

Many countries use US dollars to trade even though they might use their own currency within their country.

In such cases, both countries’ banks would maintain accounts in the US or in banks that deal with the US dollar.

Yes, confusing. But that is how it works.

SWIFT is not really a platform to send or receive money. It’s a platform that lets banks securely talk to each other in a fixed format.

Banks that offer services to send money across borders are members of the SWIFT system.

Membership of this backbone of international payments is almost a non-negotiable for international trade.

In 2022, when the Russia-Ukraine war started, Europe gradually barred many Russian banks from the SWIFT system.

This made it extremely difficult for the Russians to trade with the rest of the world. It was one way the Europeans levied sanctions on Russia.

SWIFT is not the only such system.

Many parallel systems exist that are based on other currencies.

But SWIFT is the biggest and most significant one.

So whenever you hear about India receiving FII inflow or FDI investment, you can assume that it was mostly routed via the SWIFT system.

And yes, it is many times safer than how the world used to send money across borders.

But that doesn’t mean it is 100% safe.

Hacks and exploits exist even today. It is a constant game of cat and mouse, in which online pirates are kept at bay most of the time. But failures do happen from time to time.

Quick Takes

+The government approved the rollout of flex fuel vehicles capable of running on E20 to E100 ethanol blends under the new Central Motor Vehicles Rules, 2026.

+A total of Rs 17.73 lakh crore was spent on 1,853 infrastructure projects from a total budget of Rs 37.56 lakh crore, as of September. Transport and Logistics accounts for the highest number of ongoing projects (1,320 projects) worth Rs 20.07 lakh crore.

+The government cleared acquisition proposals worth Rs 2.12 lakh crore for defence forces. About 82% of the procurements will be made from the Indian industry.

+The due date for companies to file financial statements for FY25-26 is extended up to 31 December without payment of additional fees. Annual returns can be filed up to 31 January.

+India’s outward FDI fell 13.96% to $4.34 billion in September compared to $5.05 billion in August according to RBI data. Outward FDI is the significant investment made by Indian companies in foreign companies.

+India’s total number of broadband subscribers rose 0.59% to 1,107.68 million in September compared to 1,101.21 million in August: TRAI.

+SEBI extended the deadline for compliance by Debenture Trustees for activities outside of SEBI’s purview to April 2027.

+India’s Industrial Production (IIP) slowed to 6.7% in September from 8% in August. Manufacturing and electricity & gas supply sectors were the top contributors this month.

+The government increased the Dearness Allowance (DA) and Dearness Relief (DR) by 3% with effect from 1st July, which will cost the treasury Rs 10,016.10 crore annually.

+A budget of Rs 10,000 crore up to FY 2039-40 was approved by the government for Container Manufacturing Promotion Scheme (CMPS).

+The government approved Pradhan Mantri Viksit Gram Swaraj Yojana for 5 years with a total budget of Rs 7,395.55 crore. The central government will fund Rs 4,869.48 crore and the remaining will be covered by the state government.

+Jio Platforms listed at Rs 1,358 on NSE, a premium of 21.36% over its issue price and closed 26.81% higher. It became the second most valued company on listing, in terms of market cap.

+India’s forex reserves fell $1.27 billion to $719.75 billion for the week ended 23 Oct.

+India’s fiscal deficit widened to 42.1% of the annual budget estimates between April and September, from 36.5% in the same period last year.

+The government defended the valuations and bidding process for IDBI Bank- Fairfax deal, saying that the procedure adopted helped increase the transaction value by Rs 3,917 crore.

The information contained in this Groww Digest is purely for knowledge. This Groww Digest does not contain any recommendations or advice.

Team Groww Digest

The information presented in this post has been compiled and prepared by Groww Invest Tech Pvt Ltd and is intended solely for informational purposes. It is not tailored to any specific investment objectives, financial situations, or needs of any individual investor. The content should not be construed as investment, financial, legal, or tax advice and should not be relied upon as a substitute for professional consultation.

Investing in securities markets involves inherent risks. Investors are advised to carefully review all relevant documents and consider their own risk tolerance before making any investment decisions.

Mutual fund investments are subject to market risks; please read all scheme-related documents carefully. Past performance of financial instruments, schemes, or markets is not indicative of future results.

Groww Invest Tech Pvt Ltd is registered with the Securities and Exchange Board of India (SEBI) under Registration No: INZ000301838, as a Research Analyst under No: INH200008662, as a Depository Participant under No: IN-DP-417-2019, and with the Association of Mutual Funds in India (AMFI) under ARN-111686.

SEBI registration details: View registered name and registration numbers

Research Analyst Disclaimer: View Research Analyst disclaimer

In 1713, Britain’s war with Spain and France came to an end.

The war had been an expensive affair and Britain was drowning in debt.

The dues ran into many tens of millions of pounds, which in those days was a staggering amount.

For Britain, the debt problem was an ongoing worry throughout the war period.

Britain’s revenues were going towards servicing debt and creditors were growing anxious.

During the war, the British Treasurer, Robert Harley, along with a financier named John Blunt, came up with an idea to deal with this debt.

In 1711, they created the South Sea Company.

South Sea Company

The South Sea Company was created to trade with what is now known as South America.

It was believed that all of South America was a frontier with endless wealth and trade opportunities (and lots of gold & silver).

The South Sea Company was granted a monopoly on British trade with this region.

According to this grant, only the South Sea Company would have access to all the vast riches from trading with South America.

But why was the company given this grant?

Because the company promised the British government that it would take on a large portion of its national debt. In exchange, the creditors who were owed money by the British government would be given shares in the company.

Essentially, the lenders would become shareholders.

Investors were promised steady income (guaranteed interest of 6% per annum), along with a stake in a future multi-bagger company.

Everyone was satisfied and the idea was executed without much opposition.

Word Spreads

People got to know about the new company with a monopolistic grip over all trade from the faraway land with great wealth.

More investors wanted in on the action. They purchased shares.

The South Sea Company had immense political power since it was partly the idea of the government itself.

The investment idea spread through the elite circles among aristocrats, lawyers, financiers, and the like.

South America was mostly controlled by Spain (the very country the British had been warring with).

When the war ended in 1713, the company could start sending its ships and trading with South America.

The first goods ship voyage finally took place in 1717. The treaty signed at the end of the war in 1713 was very restrictive for the British.

To make matters worse, the two countries went to war again in 1718.

The trade was not earning anywhere near enough to justify the hype around it.

While the trade hadn’t caught up, the larger audience of investors was incredibly optimistic about its future.

So well-connected was this company that the King himself became the governor of the South Sea Company in 1718, adding to its prestige and legitimacy.

Seeing the continuous frenzy for the stock, even lower-income citizens who could not afford to take risks sold other assets to buy the stock.

Eventually, people even started taking loans to fund their purchase of the stock.

Unsustainable

Towards the end of 1719, the stock price was around £100.

But the masses were talking about the stock even more. It was hotter than it had ever been before based purely on hopes of a future rise.

By this point, investors didn’t seem to care about the company and its trade. The company’s share price was enough to draw everyone in.

The frenzy was so mad that many other companies felt like they could take advantage of this situation. It was too tempting for others to stay away.

Some promised similarly vague results — trades with South American entities, silver mining, selling commodities, etc.

Some went so far as to not reveal what they would actually do, keeping it for “later”.

Money started pouring into those companies’ stocks too.

The South Sea Company felt this was money being diverted away from it. Using its political power, it got laws passed to have such companies banned.

This gave investors an even clearer signal.

The signal was that the South Sea Company was the only real company that could trade with South America.

The South Sea Company had taken on even more national debt, and issued more shares to the public. Free shares were given to certain politicians.

The South Sea Company even started giving out loans to investors to buy shares of itself!

The price of the stock rose further.

January: £128
May: £550
June: £1050

The stock had risen by 10 times in less than 1 year.

Many investors were surprised by how far their investment had already grown in a short period. Some booked profits and sold.

Some stayed. Some doubled down and increased their investments further.

Mind you, the actual trade had still not picked up enough.

The Expected

From this point on, what was expected happened.

The bubble burst.

Some selling started, others caught wind, more selling happened.

The ones who were most on the line — the ones who had taken loans to buy stocks — panicked the most and sold.

Seeing the stock price fall sharply, everyone else tried to sell before it was too late. That only made matters worse.

The crash was so severe that it pulled down other stocks as well.

Mid-Sept: £520
Oct: £200
End of 1720: £100

Some company insiders sold at the peak and were able to leave with fat wallets. Some were stripped of their wealth and jailed.

The damage was so large that it threatened the entire financial system of the country.

The situation was similar to what we saw in 2008.

The government had to step in to restore public trust in the system. The general public was badly bruised, and so were the bigwigs.

This episode came to be known as the South Sea Bubble.

It is widely regarded as one of the first stock market crashes of the world.

Between then and the 2008 Great Recession, we have seen many other crises come and go.

The avatars change.

The patterns are often strikingly similar.

Speculative bubbles always start with a promise of a good investment.

Then the gains come from others joining the fray, not from the investment’s original promise.

It becomes a speculative bubble. And bubbles only go out one way — by bursting.

Quick Takes

+NSE and BSE announced that the special one hour trading session called Muhurat Trading will take place between 02:20 pm and 03:30 pm on 08 Nov.

+The India- New Zealand Free Trade Agreement (FTA) will come into effect from tomorrow, 20 Oct. It will provide duty free access for 100% of Indian exports to New Zealand.

+The government directed oil marketing companies to reduce sugar diversion for ethanol production to 0 in 2026-27, as per media reports. This aims to protect sugar supplies and reduce prices.

+Jio Platforms raised Rs 8,109.84 crore from 212 anchor investors ahead of its IPO. LIC, New World Fund, Government of Singapore, received the highest allocation.

+The government clarified that it has no plans to regulate airline ticket prices under the new airfare rules, but will impose caps on airfares in exceptional cases like natural disasters or major disruptions, as per media reports.

+India’s Infrastructure Output rose 7.9% in September compared to 5.9% in August.

+Retail automobile sales fell 6.52% year-on-year to 11.23 lakh units in the Navratri period compared to the previous year, as per provisional data from Federation of Automobile Dealers Associations (FADA).

+The government introduced Form 173A, a new form to claim income-tax exemption on interest and capital gains from government securities under the Income-tax (Seventh Amendment) Rules, 2026.

+India’s crude oil imports rose 47% to $15.4 billion in September while volumes grew 6.8% to 21.7 million tonnes, as per media reports.

+National Commodities and Derivatives Exchange (NCDEX) launched NDEX and FINNDEX, 2 rule based indices and entered the equity and equity derivatives market.

+India’s forex reserves fell $5.01 billion to $721.02 billion for the week ended 16 Oct.

+SEBI relaxed margin rules for cash trades by allowing clients to use value of early delivered shares for subsequent trades as margin, effective from 22 February 2027.

+Commerce Minister Piyush Goyal said that the EU’s carbon tax on steel and other industrial products could increase infrastructure costs, and trigger retaliatory measures from its trading partners.

+SEBI removed the mandatory call recording requirements for research analysts interacting with institutional investors, while keeping the requirements for retail investors.

+BSE invited applications for the post of MD & CEO and announced requirements through a post on X (formerly Twitter). The deadline for applications is 19 Nov.

The information contained in this Groww Digest is purely for knowledge. This Groww Digest does not contain any recommendations or advice.

Team Groww Digest

The information presented in this post has been compiled and prepared by Groww Invest Tech Pvt Ltd and is intended solely for informational purposes. It is not tailored to any specific investment objectives, financial situations, or needs of any individual investor. The content should not be construed as investment, financial, legal, or tax advice and should not be relied upon as a substitute for professional consultation.

Investing in securities markets involves inherent risks. Investors are advised to carefully review all relevant documents and consider their own risk tolerance before making any investment decisions.

Mutual fund investments are subject to market risks; please read all scheme-related documents carefully. Past performance of financial instruments, schemes, or markets is not indicative of future results.

Groww Invest Tech Pvt Ltd is registered with the Securities and Exchange Board of India (SEBI) under Registration No: INZ000301838, as a Research Analyst under No: INH200008662, as a Depository Participant under No: IN-DP-417-2019, and with the Association of Mutual Funds in India (AMFI) under ARN-111686.

SEBI registration details: View registered name and registration numbers

Research Analyst Disclaimer: View Research Analyst disclaimer

GDP growth was in double digits.

And therefore stock markets were buzzing.

On 19 Oct 1987, the infamous Black Monday happened. The Hong Kong markets fell by 11%. The US markets had already been sliding for a week before that.

Then, the US stock markets fell over 20% in a single day.

What followed was an absurd wave that hit both sides of the world.

The chairman of the exchange in Hong Kong decided to “prevent” this spread of panic. He ordered the markets to be shut down for 4 days.

His logic was that if the markets were shut, panic would not spread (and share prices would not fall).

Later, when the markets opened, the investors were even more scared, because the markets had been forced to shut down — something they just did not expect.

A massive sale took place.

The markets fell a further 33%, making matters much worse.

But why?

Why did a sudden crash in the US also cause a crash in the Hong Kong markets?

And why did shutting the markets down only worsen the situation?

The answer — it’s all connected. Investors from across the globe invest in different stock markets.

And their behavior can lift, or crash different markets.

In that light, it makes sense to understand the main factors that affect their behavior.

Interest Rates Reduction

This is one of the biggest factors affecting how global investors invest (or withdraw).

In India, these global investors are called FIIs or Foreign Institutional Investors.

The core mechanism behind this is bond rates. Specifically, US bond rates.

From time to time, the US Fed adjusts its target interest rate range. This is done with the aim of either controlling inflation (by increasing interest rates) or spurring economic growth (by decreasing interest rates).

The mechanics behind this are bit lengthy and is a topic for another edition of this digest.

But those interest rate targets affect most major bond rates.

The US government bonds are considered the safest investment in the world.

So investors love investing in them.

But, their returns are pretty low compared to other options.

Most investors own a basket of different types of assets. Some money is in US government bonds, some in US stocks, some in stocks of other countries, etc.

And these investors have a desired or target return in their mind for their investments.

Whenever bonds’ interests are reduced, especially the US government bonds’ interest, investors start moving money around.

So, they take out money from US bonds and move it to higher risk but higher return investments.

In short, the reduced interest rates mean they must take on more risk to reach their target returns.

So now, more money flows into riskier assets.

Some money moves from US government bonds to corporate bonds, US companies shares, developing countries’ stocks, startups, etc.

If interest rates are reduced further, even more money will get moved from US government bonds into riskier investments.

Obviously each of these investment-categories carries with it a different level of risk, and is expected to yield different kinds of returns.

US companies’ shares are usually expected to give lower returns than emerging markets’ stocks.

Startup investments are expected to give some of the highest returns while also being extremely risky.

After the dot-com bubble in 2000, the US Fed reduced interest rates to around 1%. Lots of money flowed into emerging markets including India.

We saw this repeat after the US Fed reduced interest rates post the recession in 2008.

And yet again, in 2020, when they reduced interest rates as a response to the slowdown caused by the pandemic.

Interest Rates Increased

The flip side of this is when interest rates are hiked.

The opposite happens.

Why should investors take more risk when they can earn the same returns while taking on less risk?

So when interest rates are increased, some money leaves these riskier categories and moves into less risky categories, like US government bonds, US corporate bonds, etc.

At the extreme end, it means less money is available for startup investments.

Money also flows out of emerging markets’ stocks, and other riskier investments.

After cutting interest rates post 2000, the US Fed started increasing interest rates in 2004. As the rates kept on being increased, money started flowing in the other direction. 2006 saw Indian markets dip by 20-30% in about a month.

The same happened in 2013, when the US Fed hinted at reducing quantitative easing (QE).

Similar patterns could be observed a few times after that as well like in 2018 and 2022-23.

Sentiments

If it were just interest rates, things would have been simpler. But obviously it is not.

Interest rates are one of the biggest factors for sure, but another factor that plays a big role is the perception of certain investments.

Investors don’t just blindly move money based on interest rates.

If a country’s markets seem more promising, more money will be moved there. If US companies’ shares show more promise, more money will move there.

If everything looks gloomy and negative, money will start moving into US government bonds — even without any interest rate change.

This is why any news of conflict can cause money to move from riskier assets to less risky assets.

That is, money starts moving away from emerging markets like India towards the US stocks and bonds markets.

We saw the same during the start of the pandemic in 2020. Everybody was selling everywhere and moving money into US bonds or gold.

One really good example of this is Brexit in 2016.

Britain voted to leave the European Union. Nothing else had changed: no interest rate changes, no regulatory changes, etc.

But investors sold UK assets and moved their money into US bonds, Japanese Yen, and other markets.

The first wave of panic that hit the Hong Kong stock market was mostly because of sentiments.

Comparison

Money can also move simply because new opportunities show up.

Investors love investing in undervalued assets. So, let’s say the stock markets of one country are fairly valued but for some reason, other countries’ stock markets suddenly seem very undervalued.

This is enough to trigger a sell-off even though nothing changed in the country or its companies.

Not just countries, money can move between asset classes too.

The sudden technological boom driven by AI has caused a lot of money to move into tech sector investments (AI related stocks and bonds).

This money would have come from somewhere. Investors would have sold bonds, others stocks, commodities like gold, etc to invest in tech stocks and bonds.

One recent example of this is from the 2nd part of 2024. The Indian stock markets overall looked very overvalued. PE ratios were above the 20 mark.

At the same time, China’s stock markets looked very undervalued. PE ratios were around the 10 mark.

This made the Chinese stocks look cheap and tempting. Economic measures announced by China further helped the cause.

So some money got moved from India to China even though the Indian companies and the economy in general were doing fine.

The opposite, buying Indian and selling Chinese stocks, had happened a few years ago for a similar reason.

Country & Regulation Level Factors

A lot of times, money moves because of factors related to a country.

When a policy shift or regulation dramatically affects its future, foreign money reacts accordingly.

This could be positive or negative.

Many times, reforms in foreign investment, debt, taxation, business environment, etc lead to money flowing into a country’s stock markets.

If things destabilize or get worse, money flows out.

In 2009-2010, the government of Greece revised its deficit numbers. It turned out that the country’s deficit was double the earlier estimate.

Investors saw this as a massive red flag and sold Greek assets en masse.

In 2023, an economically suffering Argentina elected a new president who promised massive economic reforms.

This led to investors buying Argentinian assets as the country looked more stable and reliable than before.

The Hong Kong stock exchange’s chairman shutting down the markets for 4 days was a regulation blunder. Foreign investors felt trapped. That spooked them.

The second fall — 33% fall after the markets opened was a regulation factor. Investors were afraid of future closures that would prevent them from selling if they wanted to.

Mechanical Factors

This one’s a bit non-intuitive but very real.

We are aware that index investing has become a prominent style of investing in the West.

Index funds usually follow an index. And constituents are added/removed from various indices based on fixed formulas.

We in India are used to Nifty 50 index funds. These invest only in Indian stocks.

But globally, there are index funds that invest in companies across the globe.

When a stock gets added or removed from these indices, money can flow into or away from that stock.

Though not always, many times this flow of money can be significant.

When the Russia-Ukraine conflict started in 2022, sanctions meant that economic ties with Russia were cut.

This also meant that Russian bonds and stocks were no longer allowed to be part of global indices.

Since the nature of the indices were changed, the index funds had to rebalance that money according to the new constituents.

More recently, Indian bonds were added in an index by JP Morgan. At that point, some forecasts estimated an inflow of about $25 billion into Indian bonds because of this.

One peculiar case was back in the late 1980s, in Japan.

Index funds were made based on a formula, and as long as that formula included Japanese stocks, they remained invested in Japanese stocks.

Many active fund managers were of the opinion that the Japanese markets were extremely overvalued.

But they worried about missing out on potential returns (compared to index funds). So many fund managers chose to stay invested in Japan.

This example clearly shows that not all money moves when a certain market seems overvalued.

Sometimes, money just stays put despite being overvalued. And hence, money doesn’t move when it logically should.

Why Money Moves

The point of all of this is to try and explain why money moves in the global financial system.

While it is easy to point out a reason, or assume something else, one must remember that at any time, there are multiple factors at play.

The above stated reasons are all individually acting.

But they are also acting along with each other.

So, not all rate hikes will result in more money moving to less-risky investments.

Sometimes, the opposite of what you’d expect may happen.

Each major money movement must be analyzed. But looking at them only individually is not enough. They all work together.

It also explains why in many cases, the markets move against our expectations.

The economy of a country might be doing well, but money starts moving out of its markets simply because some other country’s stocks look more attractive in that year.

Rates may be hiked, but because of some bullish sentiment, money may continue moving towards high-risk investments.

Quick Takes

+India’s retail inflation rose to 5.54% in September from 4.83% in August. Rural inflation at 6.08% (vs 5.24%) and urban inflation at 4.88% (vs 4.31%).

+Equity mutual fund inflows rose 30.61% to Rs 38,306.55 crore in September. The outflows from debt funds widened to Rs 1.83 lakh crore in September compared to Rs 8,127 crore in August. SIP contributions reached a record high of Rs 32,490 crore in September.

+SEBI introduced a common advertisement code for regulated entities (stock brokers, research analysts, mutual funds, etc). Celebrities can now promote these entities, brands but cannot endorse specific products or services, without approval.

+US President Trump lifted sanctions on Russian fuel and said that Russia agreed to supply diesel to global markets till April 2027, to lower rallying fuel prices.

+RBI announced to sell dollars to meet the entire daily dollar requirements of oil marketing companies (OMCs) among other measures to support the rupee.

+MDR on UPI transactions has been postponed until after Diwali, keeping the festive season in mind. The new start date has not been announced yet.

+The IMF raised India’s economic growth forecast to 7% for FY27 (earlier forecast was 6.4%). Forecast for FY28 was also increased to 7% (vs 6.7% earlier).

+The government approved the sale of 60.72% stake in IDBI Bank to Canada-based Fairfax Financial Holdings for Rs 52,878.08 crore as part of the bank’s strategic restructuring.

+India’s wholesale inflation rose to 11.39% in September compared to 9.92% in August driven largely by fuel and power inflation.

+India changed the double taxation avoidance agreement (DTAA) with Mauritius to prevent investors from using Mauritius-based entities primarily to get tax benefits.

+SEBI extended the timeline for companies to adjust their IPO sizes by up to 50% without the need for new approvals. This is applicable to IPOs that open on or before 31 March 2027, as per media reports.

+Jio Platforms filed its RHP with SEBI for an IPO to raise around Rs 28,755- 30,000 crore, making it the biggest IPO in India. The IPO comprises a fresh issue of 27 crore shares with no offer for sale.

+India’s exports rose 13.84% year-on-year to $476.20 billion between April and September, compared to $418.31 billion in the same period last year.

+The government signed contracts worth Rs 4,106 crore with NewSpace India Limited and Bharat Dynamics for a dedicated communication satellite capability and heavy weight torpedoes.

+India’s unemployment rate remained at 5% in September; the same level as August. Urban unemployment rose to 6.9% (vs 6.8%) and rural unemployment rose to 4.2% (vs 4.1%).

+Passenger vehicle sales grew 30.7% to 1.36 million units in the July-Sept quarter. Two wheeler sales: up 15.2% to 6.43 million units, commercial vehicle sales: up 28.7% to 3.09 lakh units: SIAM.

+India’s net direct tax collections rose 13.21% year-on-year to Rs 13.38 lakh crore as of 14 Oct.

+SEBI revised the CAS framework to calculate the reference price for closing auctions based on volume-weighted average price (VWAP) of trades. The changes will take effect from 7 Dec.

+India’s forex reserves fell $8.58 billion to $726.03 billion for the week ended 9 Oct.

+The government raised windfall tax on petrol exports to Rs 2.5 per litre (vs Rs 0.5 earlier). The duty on diesel exports was cut to Rs 8.5 per litre (vs Rs 16 per litre).

+India’s current account deficit narrowed to $5.2 billion in August compared to $6.1 billion in August a year ago.

+Mutual funds stopped accepting new investments in gold fund of funds (FoFs) from 16 Oct due to verbal restrictions imposed by SEBI, as per media reports.

+Indian Gas Exchange Ltd, Cult.fit Ltd and 2 others received SEBI approval for IPO.

The information contained in this Groww Digest is purely for knowledge. This Groww Digest does not contain any recommendations or advice.

Team Groww Digest

The information presented in this post has been compiled and prepared by Groww Invest Tech Pvt Ltd and is intended solely for informational purposes. It is not tailored to any specific investment objectives, financial situations, or needs of any individual investor. The content should not be construed as investment, financial, legal, or tax advice and should not be relied upon as a substitute for professional consultation.

Investing in securities markets involves inherent risks. Investors are advised to carefully review all relevant documents and consider their own risk tolerance before making any investment decisions.

Mutual fund investments are subject to market risks; please read all scheme-related documents carefully. Past performance of financial instruments, schemes, or markets is not indicative of future results.

Groww Invest Tech Pvt Ltd is registered with the Securities and Exchange Board of India (SEBI) under Registration No: INZ000301838, as a Research Analyst under No: INH200008662, as a Depository Participant under No: IN-DP-417-2019, and with the Association of Mutual Funds in India (AMFI) under ARN-111686.

SEBI registration details: View registered name and registration numbers

Research Analyst Disclaimer: View Research Analyst disclaimer

The oil company, Socal, wanted answers.

Max was the chief geologist working in the petroleum company.

In 1938, the US economy was in the middle of the Great Depression. Everybody had to be tight with money and the pressure was felt by Socal executives also.

Socal or Standard Oil Company of California was feeling the pressure too.

Max was not known to be a reckless risk taker. He was a careful and measured person.

On this occasion, knowing all he knew, he had decided to take the risk — he would defend himself and fight for oil exploration to continue.

1933

It started 5 years earlier, in 1933.

Socal had struck a deal with the King of Saudi Arabia and could start exploring for oil.

Socal had discovered oil in nearby Bahrain a year earlier. Early reports and estimates suggested the oil basin was quite large and that oil might be found under Saudi as well.

Discussions had lasted a few months and once the terms were finalized, Socal could start exploration.

Within 5 days of arriving, the geologists identified a few limestone hills the formation of which resembled the location where they had found oil in Bahrain.

This was named the Dammam Dome.

With the dome found, they established their offices in Saudi Arabia, to start serious exploration.

Almost immediately, the team encountered all kinds of problems.

American geologists, engineers, and staff were not used to working in the harsh and hot desert. The heat drained them fast. Their trucks would often get stuck in the loose sandy surface. Local taxes and exemptions led to conflicts. Language was a barrier.

The list was long. But the prize was too tempting to stop.

To better survey the area, they flew planes over the region and took pictures. Then, with all data collected, they went to Lebanon for a summer vacation where they finally made up their minds.

After lots of surveying, they were sure — they must drill oil wells.

Wells

About a year and a half after arriving, they started drilling the first oil well in 1935.

After crossing the 1,700 feet mark, promising signs started being seen. Some gas and some oil flow were detected.

Not commercial success, but there were clear signs that they were onto something. They pushed further.

At around 2,200 feet, a strong gas flow pushed out, damaging the equipment and causing the well walls to cave at some portions.

Panicking, the geologists and engineers decided to plug the well with mud and cement. Later, they sourced better equipment and pushed past 3,000 feet.

The well continued to be an operational nightmare, costing more money to manage than it yielded. They decided to shut it off in 1937, treating it as a gas well.

Dammam Well 1 was a failure.

The drilling of the 2nd well was started in 1936.

After drilling beyond 2,000 feet, the well started producing commercially viable amounts of oil. The volume of oil was enough to send waves of excitement across to Socal’s California headquarters.

They commissioned the building of a permanent base with staff quarters and also, digging more wells.

The news died off soon. Well 2 started producing more water than oil — it was flooded with groundwater.

It wasn’t as good as they had thought it would be.

Still, Dammam Well 2 gave hope that there was oil.

The 3rd well turned out to be a dud. Not enough oil to be commercially viable.

On to the next well — the 4th well. That turned out to be completely dry. It was a massive hit to the oil explorers’ morale.

Doubts about having misjudged the presence of oil started surfacing.

Drilling of the wells continued. The 5th well was exactly like the 4th — dry.

Well 6 yielded some oil, but again, not enough.

The drilling of the 7th well started some time in 1936. The chief geologist Max Steineke had noticed a pattern in the digging of the previous wells.

They were all dry or yielded too much water at a certain depth, which is when the drilling was stopped.

Well 7 was proving to be an even bigger nightmare. They had pushed further ahead to more than 3,300 feet and gotten no oil or water. It was dry.

Under Max’s leadership, they continued. At 3,600 feet, a small quantity of oil was found. They pushed further.

At about 4,500 feet, a massive gas blowout took place. The crew struggled to fight it and somehow managed to plug it. No oil was found.

Max Defends His Thesis

Over the roughly 5 years they had been there, the entire oil exploration exercise had turned out to be a money pit. It yielded nothing.

And Socal’s executives were getting anxious.

Max Steineke was called to San Francisco.

The executives wanted to know if it made sense to continue pouring millions of dollars into wells that didn’t yield any oil.

Max explained his thinking on maps. He wanted to continue drilling.

The executives were not convinced, so Max continued making his case.

He was still in San Francisco on 4th March 1938 when news came in that well number 7 had hit oil and was producing enough oil to be commercially viable. This was at a depth greater than 4,700 feet.

Excitement was back on the floor.

Past experience from the previous wells had taught them not to get excited too soon.

A few weeks passed. The oil flow remained steady and consistent. Dammam Well 7 was a success.

It was later renamed the Well of Prosperity.

It produced oil till 1982 — a 45 year run. Over 32 million barrels of oil.

Based on his knowledge, some of the earlier failed wells were also deepened. They also yielded oil and became commercially viable.

Thesis

Investing, too, works somewhat like this.

Nobody has all the knowledge. There’s an idea — a thesis. The thesis is based on as many real-world facts and knowledge as possible.

Then, the thesis is tested in the real world. Multiple bets are placed that align with the thesis.

Some of the bets pay off, some don’t.

We see this in business and investing almost every day. Single bets are a rarity. Multiple bets are the norm.

Take the case of Warren Buffett and Japanese trading houses.

Some time in 2020, Warren Buffett developed the thesis that Japanese trading houses were some of the most diversified companies in the world with operations spanning 60-90 countries.

They were well run and professionally managed. And they appeared to be available at cheap valuations.

Instead of choosing the best of the lot, he simply invested in all 5 of the biggest trading houses acquiring more than 5% (each) of their stake.

Over time, he has increased his stake.

He has invested similarly in the past — with airline stocks and newspaper stocks among others.

Institutional investor Blackstone did something similar.

After the 2008 recession, home prices had hit rock bottom. But people didn’t have the money to buy homes despite them being cheap.

Their thesis was this: house prices were cheap. But people would be renting for a long time. So, good time to be a homeowner.

Blackstone started buying homes in 2012. It didn’t bother inspecting individual homes.

By the time they were done, they had bought a total of around 48,000 homes.

The company that they used to buy these homes, Invitation Homes, listed on the stock markets in 2017, giving them a fat profit.

Another good example of this comes from the world of startup investing.

SoftBank’s thesis was that ride-hailing was going to be the way many commuters moved around town.

Instead of trying to find the best ride-hailing company to put their money in, they just tried to buy a stake in many startups in the space, across different countries.

SoftBank was an investor in Uber, Ola, Didi (China), Grab (SE Asia), 99 (Brazil), etc.

Distribution of Returns

The thing about having a thesis is that it is necessary to understand the nature of the winners and losers.

It is necessary to understand where the returns are going to come from — and what can hurt them.

Some kinds of portfolios have few winners and mostly losers. But the winners are so big that the losers don’t matter.

Some kinds of portfolios have an even number of winners and losers. The profits aren’t super big, but neither are the losses.

Some portfolios have most of the gains coming from most of their investments. There are only a small number of losses. The profits are low but consistent and the losses are tiny.

If you look at share market investing funds, many of them have portfolios that are far less asymmetric. More winners, fewer losers.

Bond investors tend to have more wins and fewer losses in their portfolios.

Investors use many checks and filters to keep their investments in line.

This method is one such check.

The central idea is that you could be right about an idea, but end up with the wrong investment.

So, place more bets while sticking to the idea.

Quick Takes

+The government will launch the 1st Fleet Support Ship (FSS-1) and lay the foundation for FSS-5, along with other shipbuilding infrastructure on 06 Oct in Visakhapatnam.

+The government approved Rs 10,000 crore for establishment of SME Growth Fund for direct equity investments in small and medium enterprises.

+Indian auto retail sales rose 31.82% year-on-year to 25.37 lakh units in September 2026, as per data from Federation of Automobile Dealers Associations (FADA).

+A special purpose vehicle called Integrated Transport & Logistics Authority was approved by the government to improve research, planning and monitoring in transportation and logistics.

+The government signed a contract with BrahMos Aerospace Private worth Rs 661 crore to procure BrahMos Fire Control System and Launchers for Indian Navy ships.

+RBI raised the repo rate by 25 basis points to 5.5% in the monetary policy; the 1st hike in about 4 years. It also changed its stance to “calibrated tightening” from “neutral” which could indicate more rate hikes.

+The US 30-year bond yield rose to a 24 year high of 5.7041% ahead of the Federal Reserve’s September meeting results.

+Federation of Indian Export Organisations (FIEO) asked for an extension of export credit period to 450 days after the RBI hiked repo rate to support exporters.

+The GST Council approved a series of measures such as removing tax officers’ arrest powers, reducing the general penalty amount, changing input tax credit rules, etc.

+The government said that India’s regulatory framework for satellite communication services is fair and non-discriminatory, after Elon Musk claimed that Starlink’s entry in India was “being blocked by certain oligarchs”.

+RBI officially removed Paytm Payments Bank from the Scheduled Banks list under the RBI Act, following the cancellation of its banking license earlier this year.

+India’s forex reserves fell $12.95 billion to $734.61 billion for the week ended 02 Oct.

+The US suspended Microsoft and 7 other IT companies including Infosys, TCS, Wipro from a key green card programme called PERM (Permanent Labour Certification).

+The government said that the daily coal supplies to the power sector rose 36% from September lows and stock depletion slowed, but stock rebuilding is yet to commence, in response to media reports on power shortage risks.

+FirstCry backed Swara Baby Products received SEBI approval for a Rs 1,000 crore IPO. The IPO will comprise a fresh issue of Rs 500 crore and an offer for sale of Rs 500 crore.

The information contained in this Groww Digest is purely for knowledge. This Groww Digest does not contain any recommendations or advice.

Team Groww Digest

The information presented in this post has been compiled and prepared by Groww Invest Tech Pvt Ltd and is intended solely for informational purposes. It is not tailored to any specific investment objectives, financial situations, or needs of any individual investor. The content should not be construed as investment, financial, legal, or tax advice and should not be relied upon as a substitute for professional consultation.

Investing in securities markets involves inherent risks. Investors are advised to carefully review all relevant documents and consider their own risk tolerance before making any investment decisions.

Mutual fund investments are subject to market risks; please read all scheme-related documents carefully. Past performance of financial instruments, schemes, or markets is not indicative of future results.

Groww Invest Tech Pvt Ltd is registered with the Securities and Exchange Board of India (SEBI) under Registration No: INZ000301838, as a Research Analyst under No: INH200008662, as a Depository Participant under No: IN-DP-417-2019, and with the Association of Mutual Funds in India (AMFI) under ARN-111686.

SEBI registration details: View registered name and registration numbers

Research Analyst Disclaimer: View Research Analyst disclaimer

It is illegal.

A trader has insider information about a big stock purchase.

Before the purchase happens, he goes and buys that stock.

Then the big purchase happens. Prices go up. The trader sells and exits. Quick profit.

Severe punishments depending on the country.

When would it be not-illegal?

When that information is openly and publicly available. Then anyone can try to take advantage of this situation.

But that’s the problem. This trick doesn’t work when it’s public knowledge.

Too many investors try to buy before the transaction takes place. And then, the price shoots up.

The profit margins in such a trade become smaller and smaller — until they practically vanish.

This isn’t as good a trick as it sounds.

Japanese Buying

Except, there was one time, for many years, when it did work. And it was legal.

Many would know about the situation in Japan over the last few decades.

In short: their stock markets rose astronomically, then crashed in 1990. Their economy wasn’t growing.

To support economic growth, the Bank of Japan (their version of the RBI) tried many options for many years.

Keeping interest rates extremely low was one trick Japan was most famous for.

A few others too.

The story of Japan, its stock markets, and its economy is a long and elaborate one.

That’s not what today’s write-up is about, so we won’t go into greater detail. If you’re interested, please read more about it. There is some fantastic content easily available on it online.

Rock-bottom interest rates — well known.

But there’s another less-known trick they tried for about 13-14 years.

When lowering interest rates didn’t work as well, the Bank of Japan decided to do something radically different.

Propping up the stock markets.

Their stock markets had given extremely low returns. The sentiment of investors and those running the companies was affected by it.

So the government thought that by helping the stock markets, they would be able to encourage companies to make more ambitious plans for the future.

They started buying the biggest companies on the Nikkei 225 (the index with the 225 biggest companies). They did so by buying ETFs.

This index was made up of the biggest companies in Japan.

They owned stocks of the biggest Japanese companies via these ETFs.

Traders were trying to cash in on this.

This was all publicly known. And as we discussed earlier, if it is well known, the trick doesn’t really work all that well.

But it did work in this case.

Scale

But why — why exactly does it not work?

Well, let’s take one company.

It’s a medium-sized company. Let’s say you heard that a particular mutual fund was about to buy its shares.

But if this was public knowledge, everyone would start buying and the price would start shooting upwards.

Trick fails.

But what if only you knew about it? Then the trick would work, right?

Why is that?

Because, your investment amount is too small compared to the company’s total market-cap. So your buying is not big enough to change the share price.

(Market-cap or market capitalization is the total value of all shares of a company).

If too many people start buying, that’s a lot of money chasing some stocks. Then the share price gets affected.

So the trick works only when the buying is small compared to the total size of the company’s market-cap.

And Nikkei 225 was made up of some of the biggest companies with incredible amounts of shares being bought and sold every day.

But then, wait.

The market-caps of these companies are so big that even many investors buying them does not cause the share prices to rise.

Then how would this trick work?

For it to work, we need two things.

First, the company should be large enough that many investors’ buying does not cause its price to rocket up.

Second, at the same time, when the big investor buys, the price should move up.

So, first, it must be large enough. Second, it must not be too large.

Those are very, very difficult conditions to find most of the time.

In the Japanese case, we are not even talking about one large company. We are talking about 225 of the largest companies.

That’s just too massive to move.

Too massive, yes. Very, very few can move these prices.

The Japanese government themselves were big enough. They were gigantic.

The Plan

The plan was easy.

The Japanese government (via the Bank of Japan) had planned to buy billions of dollars’ worth of the largest companies’ stocks.

In front of the Nikkei 225 stocks, the traders’ buying combined was too small to do much.

But the government’s scale of buying was large enough.

Easy profit.

And this seemed to work well for a long, long time — 13 to 14 years, in fact.

The amount invested was not fixed. It only increased over time.

It appeared that the Bank of Japan would buy stocks whenever the Nikkei index fell by a certain percentage. It was not a fixed rule. It was decided.

But traders soon figured out a pattern quite accurately.

In 2024, the Bank of Japan announced that they were stopping buying more stocks/ETFs.

They were done with it.

Were they successful?

Opinions are mixed.

But what is sure is this — traders will no longer be able to exploit this easy and legal front-running trick.

Around 2010, when this buying started, the Bank of Japan owned close to 0% Japanese stocks.

By 2025, this number was 7%.

They owned 7% of the biggest companies in Japan by value.

The Challenge

The Bank of Japan decided to sell off these stocks, now that the experiment was over.

Unfortunately, that was not going to be easy at all. They owned too much.

They owned so much that if they started selling, the share prices would fall. Since they practically owned shares in all the biggest companies, the entire stock market would be destabilized. Irresponsible.

The other side of this was that the money belonged to no single investor. It belonged to the public via the Bank of Japan.

If the Bank of Japan sold the shares fast, they might have to lower their gains or suffer losses from the investment.

That would also be irresponsible.

7% might not sound like that much. That may be true if it were just one company. But owning 7% of the entire stock market is something else.

What made it worse was that they owned 7% of all shares of these companies. Not just the free float.

What is that and why does it make matters more serious?

Free Float

When we hear about companies’ shares being traded, not all shares might be traded.

There might be shares that will never come on the share markets.

Example: the promoter and/or family might never sell their shares. Those shares are for maintaining control over the company.

These are called non-free float shares.

These aren’t only owned by the promoters or their family. Shares owned for control and not active trading are all considered non-free float shares.

It could include shares owned by government bodies, parent companies, etc.

The remaining shares are traded on the markets. These shares are called free float shares.

This complicates things more.

Why?

Because if the free float is low, fewer shares are available for trading.

Despite the companies being big, a small number of shares are traded. The smaller the number of shares traded, the bigger the price fluctuations.

Say a small town has only a few rental homes available. And many people show up to rent. Wouldn’t that cause the rent to jump up faster? When compared to a large city with many rental homes?

The opposite effect would happen if too many people left — rents would fall just as fast.

That’s why free float matters. The bigger the free float, the more stable the share price.

Free float vs non-free float shares, the split is not fixed, by the way. It changes.

Not all free-float shares are available on the markets every day.

This is why traders and investors look at daily trading volume or number of shares being traded per day. Yes, this makes it even more complicated, but that’s what it is.

If tomorrow a family that has owned 20% of a company for decades decides to sell shares, the free float increases.

These Japanese companies had pretty sizable non-free float shares.

The Bank of Japan owned 7% of all shares.

But what about free float shares? Much more.

That should highlight just how massive their holding was.

If the Bank of Japan had to sell their shares and not crash the market, they would have to do so extremely slowly. Little by little.

They started selling in January 2026.

A rough arithmetic estimate puts this duration at 112 years.

(No, that’s not a typo).

They will take roughly 112 years to offload these shares.

The aim is to sell 330 billion yen worth of stocks every year (via ETF sales).

(The total is about 37 trillion yen).

The speed of selling may increase or decrease based on market conditions. 112 years is not a fixed schedule.

Big

When you’re big, buying and selling is a problem. That’s what this teaches us.

Most individual investors are not likely to experience this problem with most mainstream stocks.

You know who does face this issue?

Institutional investors — mutual funds, pension funds, sovereign funds, banks, insurance companies, etc.

This is an advantage individual investors have over institutional investors.

Individuals can enter and exit without worrying about changing the price.

The bigger the company (and/or its free float), the easier it is to buy/sell the shares.

Institutional investors tend to stagger their buy/sell orders over days, weeks, and even months sometimes.

The smaller the company (and/or its free float), the more difficult it is for them to buy/sell.

If you look at some extremely small companies’ stocks, you’d be surprised how easily their share price gets moved by placing some relatively big orders.

Even individual investors with a little bit of money might be able to do this in some cases.

The short version of all of this is: compare the amount you are investing or withdrawing against the company’s entire market-cap and its free float.

So, if most individual investors cannot move the price, why are we even writing about it in this digest?

Because when certain news comes in, and many individual investors start panicking or feeling excited. They behave similarly.

Combined, they become a “large investor” as a group.

That’s one way how share prices move every single day.

That, and also, big buy/sell orders by institutional investors, governments, and promoters.

That explains why many investors like to keep track of big-ticket buyer/seller activities.

Whenever a big enough block forms, the price moves.

Quick Takes

+India’s industrial production rose 8% in August from 6.7% in July. The growth was led by electricity & gas supply and manufacturing sectors.

+The government extended the due date for providing income return for AY 26-27 for persons subject to audit to 21 Nov from 31 Oct.

+The government approved Rs 223 crore for Kavach 4.0, an Automatic Train Protection (ATP) system in the Varanasi division and Rs 122 crore separately, for an additional 6 km stretch in Odisha.

+Tonbo Imaging India Ltd, Pioneer Fil-med Ltd, and Functional & Innovative Foods Ltd received SEBI approval for IPO.

+BSE Ltd stock will enter Nifty 50 from tomorrow and Wipro will exit in accordance with the NSE release in August.

+17 out of 19 sub-sectors rose as per Index of Services Production (ISP) data for July 2026. Only repair services and air transport fell.

+SEBI settled non-compliance with minimum public shareholding proceedings against Adani Group Chairman Gautam Adani and 4 other group companies for a settlement amount of Rs 1.48 crore.

+EverBrands India which operates restaurant brands like Subway, Lavazza and Dilmah, filed DRHP for an IPO. The issue will comprise a fresh issue of Rs 600 crore with no offer for sale component.

+India’s fiscal deficit widened to 41.9% of the annual budget estimates between April and August, from 38.1% in the same period last year.

+The government approved Rs 1.86 lakh crore under the Green Energy Corridor Phase-III scheme to build infrastructure for up to 135 GW of renewable energy.

+Jewellery maker Royal Chain filed a DRHP for an IPO that will consist of a fresh issue of Rs 850 crore and an offer for sale of Rs 150 crore.

+India’s gross GST collection rose 14.7% year-on-year to Rs 2.04 lakh crore in September.

+The government cut sugar stockholding period to 15 days from 30 days and fixed the stock holding limit to 1,000 quintals with effect from 15 Oct to 30 Nov 2026, ahead of the festive season to prevent speculative trading.

+Inox Clean Energy filed a DRHP for an IPO that will comprise a fresh issue of Rs 8,000 crore and an offer for sale of Rs 2,000 crore.

+The government reduced windfall taxes on diesel to Rs 16 per litre (vs 20 earlier), and ATF to Rs 10.5 per litre (vs 15 earlier).

+Carlsberg India, TMC Transformer (India) Ltd and 2 other companies received SEBI approval for IPO.

+Moneyview listed at Rs 55 on NSE, a premium of 61.76% above its issue price and closed 57% higher.

+India’s forex reserves fell $18.34 billion to $747.56 billion for the week ended 25 Sep.

+The government extended RoDTEP (an export tax-refund scheme) until 31 Dec from 30 Sep for several categories of exporters, including SEZ and export-oriented units.

The information contained in this Groww Digest is purely for knowledge. This Groww Digest does not contain any recommendations or advice.

Team Groww Digest

The information presented in this post has been compiled and prepared by Groww Invest Tech Pvt Ltd and is intended solely for informational purposes. It is not tailored to any specific investment objectives, financial situations, or needs of any individual investor. The content should not be construed as investment, financial, legal, or tax advice and should not be relied upon as a substitute for professional consultation.

Investing in securities markets involves inherent risks. Investors are advised to carefully review all relevant documents and consider their own risk tolerance before making any investment decisions.

Mutual fund investments are subject to market risks; please read all scheme-related documents carefully. Past performance of financial instruments, schemes, or markets is not indicative of future results.

Groww Invest Tech Pvt Ltd is registered with the Securities and Exchange Board of India (SEBI) under Registration No: INZ000301838, as a Research Analyst under No: INH200008662, as a Depository Participant under No: IN-DP-417-2019, and with the Association of Mutual Funds in India (AMFI) under ARN-111686.

SEBI registration details: View registered name and registration numbers

Research Analyst Disclaimer: View Research Analyst disclaimer

More than once.

The underwriter realised that there was high demand.

And that meant they could get a higher price.

We are talking about the IPO process of Facebook (now Meta).

During an IPO, the underwriter (usually an investment bank), takes on the task of taking the company public.

They are responsible for finding the right value of the shares of the company, and therefore also the valuation of the company.

Before a company’s shares can be offered to the public in an IPO, they must be offered to institutional investors.

The idea is that large institutional investors would do their homework about a company. They would also be better at catching bad offers and fraudulent practice.

Based on the demand it received from such institutional investors (called anchor investors in India), the underwriter is able to decide a price range for the shares.

The system is designed to protect individual investors (retail investors).

Once the demand from institutional investors is received, the underwriter can offer a price range to retail investors during the subscription period.

This is what we hear about — “IPO subscription is open from x date to y date”.

During this period, investors bid for the shares within this set price range. When the bids received are for more shares than available, it is said to be oversubscribed.

We then hear, “XYZ IPO was oversubscribed by 20x”.

This means for every single share, 20 bids were received.

In such a case, the shares are allotted randomly (this is how it works in India). They are not allotted based on a first-come-first-serve basis.

Facebook’s Roadshow

The 2008-2009 period was horrible at Wall Street as we are all aware. The Great Recession.

Things were starting to look up. The mood was changing. A few tech companies’ IPOs were lined up.

The LinkedIn, Groupon, Pandora, and Zynga IPOs set the ball rolling.

Around then, the big daddy of tech companies announced its IPO plans. Facebook.

The company had 900 million users already and was still growing fast.

In 2011, they had a revenue of $3.7 billion. And an extremely enviable $1 billion in earnings. This number was 88% higher than the previous year.

By any measure, these are incredible numbers.

The company was hot.

Every major institutional investor wanted to attend the roadshow to know more. The first roadshow was held on 7th May, 2012, in New York.

Subsequent roadshows were held in various major cities across the country.

The underwriter positioned Mark Zuckerberg as a rockstar CEO.

And the institutional investors were impressed. So impressed, the underwriting team felt they could increase the share price.

Why IPO?

Before that, one may wonder, why does a company do an IPO?

Why does it want its shares to be traded on the stock exchange?

There are two main reasons for this.

Reason 1: Raising money from investors for future expansion.

Reason 2: Exit opportunity for existing shareholders.

Reason 1

In a fresh issue, brand new shares are created by the company and offered to investors. The money from these sales go directly to the company.

This is why in the IPO, companies tend to state what their intention with this money is.

Investors judge the future potential of the company based on this among others.

Reason 2

Doing an IPO lets existing shareholders sell their shares (and new investors to buy) easily.

In this case, all shares sold are existing shares.

It could be an early investor in the company (venture capitalists, angel investors, etc), it could be the employees with stocks, and even the founders themselves.

The money from selling these shares goes to whoever is selling. It does not reach the company.

Such shares are called Offer-For-Sale (OFS) shares.

Many IPOs are a mix of both: there are some fresh issue shares and some OFS shares.

In their papers, IPO-bound companies reveal this clearly: number of shares on offer, and the number of fresh issue, and OFS shares.

Yes, there are cases where companies do a 100% fresh issue IPO and also a 100% OFS IPO.

Neither of the two is automatically better. It all depends on why and how. It is extremely subjective.

Facebook’s IPO had about 43% fresh issue shares and about 57% OFS shares.

Underwriter?

Now, wait, who is the underwriter?

In Facebook’s case, Morgan Stanley was the lead underwriter while several others were also a part of the process.

The underwriter is hired by the company going public. In case of very large IPOs, multiple underwriters may be appointed.

What is an underwriter’s task anyway?

Well, it is appointed by the shareholders for their benefit.

Their first task is to ensure due diligence. They check all the company numbers and make sure everything is correct and accurate.

They prepare the paperwork and ensure the company is fully compliant with all listing requirements.

Then, they try to establish the right share price.

At first, they prepare the estimates based on all existing numbers and future prospects.

Then they file with the regulators to seek clearance to go ahead with the IPO. If all checks out, they are ready to start asking for bids.

At this stage, the Draft Red Herring Prospectus (DRHP) is made publicly available.

DRHP is what it’s called in India. In the USA, it’s called the S-1 Filing.

This document contains all details that investors must know to decide whether they want to invest or not.

After the release of the documents, the underwriter conducts roadshows.

Roadshows are basically conferences where prominent institutional investors are invited to express interest in the shares of the company via bidding.

In Facebook’s case, the initial price range quoted was $28 to $35 per share.

This translated to a valuation of $77 billion to $96 billion.

Mid-way through the roadshows, this was raised to $34 to $38 per share. This meant Facebook was being valued up to $104 billion.

Then, they kept the price range the same, but increased the total shares on offer by 25%.

At the end of the roadshow, the final price was $38. A valuation of $104 billion.

Leaving Money on the Table

Predicting the “right” price is an extremely tough task. It can be considered impossible to do perfectly.

If the underwriter keeps the share price too low, the share gets sold at a price too low to IPO investors. The money the company gets in such a case is too low.

Then, when the share lists, the share price shoots up. Investors and flippers who bought the stock during the IPO process make big money.

This is often described as “leaving money on the table”.

The company misses out on the potential money it could have made from the IPO.

The challenging bit is estimating how positively or negatively a company will be received by the larger investment community.

Every single bumper IPO listing or crash is viewed as a miss by underwriters. It means their estimates were wrong.

On the flip side, if they price the share too high, fewer investors will buy into the IPO. They’d expect the share price to fall after listing and thus would not be interested.

If an underwriter does their job extremely well, the share price would be flat after listing.

A situation like that would mean the company left less “money on the table”.

In reality, this almost never works.

Listing prices are seldom flat. They are either up or down.

Or, they are very up or very down.

After Listing

On the day of Facebook’s listing, 18th May 2012, chaos ensued.

The exchange algorithm got overwhelmed by the massive number of orders being placed. It glitched.

The stock finally listed 30 min after it was supposed to.

The price shot up to as high as $45.

However, it was clear that the glitches were not solved. The price was not reliable. Nobody trusted the price shown. Total chaos.

Towards the end of the trading day, the price started plummeting down. From $45, it fell to around $38.

If a share price falls below the issue price, it is deemed a failure. It wouldn’t have looked good for Facebook. It wouldn’t have looked good for its underwriters either.

It is common for underwriters to try to “support” the price.

How did they support the price?

Green shoe option.

Green Shoe Option

A green shoe option is an agreement underwriters sign with other investors.

The green shoe option lets underwriters sell up to 15% more shares. These shares don’t exist by the way. This is a naked position.

What happens is that the underwriter is supposed to buy these shares from the open markets and supply the shares to the buyers.

By using the green shoe option, the underwriter had been able to gather $2.4 billion.

This is how they supported the shares.

They started buying as the share price fell towards the end of the day.

This kept the price above $38.

The day closed with Facebook’s share trading at $38.23 — an extremely small listing gain.

Over the next few days, when the underwriter was no longer supporting the price, the share price fell well below the $38 mark.

The underwriters had placed shorts at $38 and as the share price fell, they were able to make $100 million in profits.

The green shoe + naked shorting was what did the trick for them.

The green shoe option is a fully legal method that is used to ensure price stability. Underwriters do not always use this option.

In India, this kind of a naked green shoe option is not allowed. They must borrow shares, not sell shares that don’t exist.

Also, in India, underwriters cannot profit from green shoe options. The green shoe option must only be used to stabilise the share price.

Share Price After IPO

It wasn’t just the IPO. The company was also facing challenges.

Facebook’s revenues were almost entirely reliant on ads from its website.

2012 was a period when a rapid shift from computers to smartphones was taking place.

There were fears about how Facebook’s future revenues would fare.

By September 2012, the stock had fallen by over 50%. This also coincided with the ending of the lock-in period of many early investors.

(Early investors like venture capitalists, angel investors, founders, etc. are locked in for some period. They cannot sell their shares on the listing day. In the case of Facebook, it was between 90 and 180 days).

Which means, many of them were selling their shares.

Around this time, Facebook initiated a massive shift to being mobile-first. Acquiring Instagram and WhatsApp was a part of this strategic shift.

Early indicators of this were starting to become visible. In October 2012, it was revealed that 14% of Facebook’s revenue was coming from smartphones (website and apps).

This was the turning point.

About a year later, the turn around was complete as the stock finally crossed the $38 mark.

After that of course Facebook grew at a pace so good that it became one of the best performing stocks of the last decade.

Measured between the listing date (May 18 2012) and this month (Sept 2026), the stock has returned around 23% per annum.

Today, it stands at about $750 per share.

IPOs

Facebook’s IPO is an excellent lesson in IPOs.

It shows us how underwriters try to “discover” the price of a stock before the listing takes place.

It also shows us how wrong they can be — not only because it’s hard to estimate, but also because the factors affecting companies keep changing.

The companies themselves keep changing.

To keep matters simple, some details have been skipped. The reality is that this particular IPO had some controversies too. And that’s a lesson as well — there are vested interests and some bad behaviour can happen.

This is why investors’ analysis into each IPO matters.

The gist of all of this is: a company decides to make its shares available on the share markets.

The share price range is estimated and offered to institutional investors. Based on that, a more realistic price is reached.

The newly arrived price range is then offered to retail investors.

Investors bid for this and get shares allotted.

When the share lists, the share price shoots up if investors think the shares are still underpriced. Or shoots down, if it is grossly overpriced.

Or, they move slightly up or down if priced more or less correctly.

Eventually, in the long run, the company’s fundamental business catches up.

Its operations, revenues, earnings, and future potential determine its share price.

The IPO becomes a distant memory.

Quick Takes

+India’s Core Industrial Output rose 4.8% in August, as per provisional data compared to 5.4% in July. Out of the 9 sectors, coal, natural gas, crude oil, and fertilizers fell.

+The India-New Zealand Free Trade Agreement (FTA) will come into effect from 20 Oct. It provides duty free access for 100% of Indian exports to New Zealand.

+The government signed a contract worth Rs 586 crore with Accurate Industrial Controls to purchase auxiliary power units for T-72 and T-90 tanks.

+SEBI settled adjudication proceedings against 5 Adani group companies after settling with an amount of Rs 1.50 crore over corporate governance issues highlighted in the Hindenburg report.

+NPCI clarified that merchants do not bear the cost of GST on MDR as it will be adjusted against GST payable on sale of goods, clarifying concerns on additional burden on merchants.

+The government signed a contract with Bharat Dynamics worth Rs 810.79 crore for 160 Satellite Smart Anti Airfield Weapons and associated equipment.

+All PSU Banks and regional rural banks will be open on Sunday, 27 Sep ahead of the nationwide bank strike from 28 Sep to 30 Sep.

+The government connected a remote area in South Chhattisgarh through a new rail line that will facilitate iron ore transportation to Bhilai Steel Plant.

+SEBI approved multiple decisions in its board meeting, including portfolio management regulations, Unified Common Advertisement Code (CAC), Depository Receipts (DRs) for REITs and InvITs, among others.

+The government reduced customs duty on imported crude edible oils due to high international prices. Crude Sunflower Oil: 10% to nil, Crude Soybean Oil and Crude Palm Oil: 10% to 5%.

+Finished steel production rose 4.1% year-on-year to 68.3 million tonnes between April and August.

+The government extended anti-dumping duty on decor paper imports from China till Mar 2027. The duty imposed in Dec 2021 was $110-$542 per tonne for 5 years.

+NSE listed at Rs 1,800 on BSE, a premium of 0.84% over its issue price and closed 1.85% higher.

+India’s forex reserves fell $14.88 billion to $765.90 billion for the week ended 18 Sep.

+India recorded the highest ever FDI inflow of $94.53 billion in FY25-26: Commerce Minister Piyush Goyal. The cumulative inflows between FY14-15 and FY25-26 stood at $843 billion.

The information contained in this Groww Digest is purely for knowledge. This Groww Digest does not contain any recommendations or advice.

Team Groww Digest

The information presented in this post has been compiled and prepared by Groww Invest Tech Pvt Ltd and is intended solely for informational purposes. It is not tailored to any specific investment objectives, financial situations, or needs of any individual investor. The content should not be construed as investment, financial, legal, or tax advice and should not be relied upon as a substitute for professional consultation.

Investing in securities markets involves inherent risks. Investors are advised to carefully review all relevant documents and consider their own risk tolerance before making any investment decisions.

Mutual fund investments are subject to market risks; please read all scheme-related documents carefully. Past performance of financial instruments, schemes, or markets is not indicative of future results.

Groww Invest Tech Pvt Ltd is registered with the Securities and Exchange Board of India (SEBI) under Registration No: INZ000301838, as a Research Analyst under No: INH200008662, as a Depository Participant under No: IN-DP-417-2019, and with the Association of Mutual Funds in India (AMFI) under ARN-111686.

SEBI registration details: View registered name and registration numbers

Research Analyst Disclaimer: View Research Analyst disclaimer

Starbucks was looking for a CEO again.

They needed his help.

This was not the first time Howard Schultz had been asked to become the CEO of Starbucks.

Not even the second time. It was the third time.

Why did he choose to return each time? And why did he leave in the first place?

To understand how Howard became Starbucks’ CEO a third time, we have to delve back in time.

Starbucks Not Founded by Schultz

Technically speaking, Howard was employed at Starbucks. He did not found the company.

Back then, Starbucks was a small coffee bean and coffee equipment supplier.

A trip to Milan, Italy, convinced Howard that Starbucks needed to open lively cafes where people hung out.

The founders of Starbucks were not interested.

So in 1985, Howard Schultz left to start his own company, Il Giornale.

Il Giornale was what Howard had in mind. The coffee beans were sourced from a reliable source (the original Starbucks).

Il Giornale did well. So well, in fact, that they wanted to in-house sourcing coffee beans.

Around the same time, Starbucks’ founders wanted to exit their company.

And thus, Il Giornale acquired Starbucks.

Il Giornale was a brand name proving to be difficult to associate for the American customers.

Howard decided to rebrand Il Giornale to a brand Americans were more familiar with — Starbucks.

This is why we can say Starbucks was not founded by Schultz. But technically speaking, Howard Schultz did found the company that acquired Starbucks.

So he was the founder of the company that is Starbucks today.

Schultz Doesn’t Own Starbucks

In 1992, Starbucks went for an IPO.

At that point in time, they had around 160+ Starbucks outlets.

Howard Schultz had needed money to reach this point.

At the time of IPO, he owned roughly 8% of Starbucks. The rest was with venture capital investors, angel investors, private equity, etc.

8% is significant, but in no way is it a controlling stake.

Since its IPO in 1992, Howard’s stake kept reducing as he sold some shares to diversify his own wealth, and Starbucks issued new shares.

In 2000, Howard decided to step down from the role of CEO.

He was tired from the intense grind of heading the company. By the time he stepped down, the cafe count had reached over 3,000 (from the 165 cafes at the time of IPO).

Howard became the Chairman and Chief of Global Strategy while handing over the role of CEO to Orin Smith (who was the COO till that point).

This era was one where Starbucks was rapidly expanding and quality suffered a bit, though the reach was getting better and better.

In 2005, Orin was succeeded by Jim Donald.

The expansion continued.

The in-cafe experience kept deteriorating. The baristas were not as well trained. The vibe was not what Starbucks had been known for.

It was becoming just-another-cafe-chain.

Schultz Is Back

Howard Schultz owned only about 2-3% of Starbucks by 2008.

As the chairman, he didn’t have much operational power to change things.

Howard wrote to the management about this in 2007, about the commoditization of the Starbucks experience.

The board agreed with him.

They fired Jim a year later and hired Howard Schultz as CEO again.

There was one famous evening when all 7,100 Starbucks outlets in the US were shut so the baristas could be upskilled.

Howard’s second stint as the CEO of Starbucks was marked by another round of consistent high-quality growth.

The number of stores expanded, the quality of service improved, and offerings were made more relevant.

The star work of this period, however, was the rewards program coupled with an app to pay. Most other companies in the space had not done this with success as well as Starbucks had.

In 2017, he decided to step down again. He would become the executive chairman and focus his attention on philanthropy, and some other responsibilities.

Kevin Johnson, the COO at the time, was appointed as the new CEO.

At the time of quitting, Schultz still owned around 2-3% of Starbucks. Roughly the same as his stake in 2008 when he rejoined as CEO.

But thanks to the immense growth, the market-cap of the company had gone from about $12 billion to about $80 billion.

And thus, Howard Schultz’s net worth had climbed proportionately.

The Kevin Era

The new CEO, Kevin, had come with tech experience.

He was previously at Microsoft and was driven to improve efficiency and integrate tech throughout the value chain.

Kevin scaled up customised drinks during his period.

He even navigated the brand through one of the toughest times in the global economy — the 2020 pandemic period.

At the same time, employee resentment was growing because of customised orders, poor equipment, and wage-related issues.

Kevin missed out on catching this development early.

Towards 2022, he announced his retirement.

The Starbucks board was faced with a mounting challenge of a rebellious workforce, and deteriorating trust.

Third Time

Desperate to find a good CEO who could restore the trust of its employees, they looked, once again, towards Howard Schultz.

He came back a third time as the CEO of Starbucks in April 2022.

This was going to be an “interim” role. In short, he was there till the board found the correct CEO for the job.

Howard moved quickly to restore order.

He suspended a share buyback plan and redirected $1 billion towards cafe equipment and employee benefits.

It worked.

A few months later, Laxman Narasimhan was hired as CEO. He shadowed Howard till March 2023, after which he took over the company’s reins fully.

The market-cap of the company was around $115 billion during this CEO transition.

Key CEO

Despite not holding a significant stake in the company, Howard Schultz remained a key figure at Starbucks for decades.

He became the firefighter who was brought back repeatedly — and brought back the company successfully each stint.

This story is an excellent example of promoters running their companies more effectively.

This is one reason why investors love keeping an eye on the promoters’ stake in the company. Although Howard himself didn’t change his stake much.

Starbucks’ challenges didn’t end in 2023 though.

Laxman Narasimhan left in only 17 months. Declining sales were cited as the main reason.

The next CEO was appointed in 2024, and news of his arrival was received with a 25% stock price increase.

A lot happened in that period.

That’s for another story altogether.

Quick Takes

+India’s wholesale inflation rose to 9.92% year-on-year in August compared to 9.78% in July. India’s retail inflation rose to 4.82% in August compared to 4.45% in July.

+The total revenue from allocated commercial coal mines was Rs 3,090 crore in FY25-26. The government expects annual revenue of around Rs 47,500 crore from the 147 coal blocks since 2020 across 9 states.

+SEBI issued a consultation paper, proposing changes to the Closing Auction Session (CAS), market timings and settlement rules for derivative contracts. It has invited public comments until 3 October.

+India’s unemployment rate fell to a 6 month low of 5.00% in August compared to 5.10% in July.

+The government introduced Merchant Discount Rate (MDR) of 0.4% on person-to-merchant UPI transactions above Rs 2,000 from 15 Oct. The MDR will be capped at Rs 300 for transactions above Rs 75,000. There will be no charges whatsoever on person-to-person UPI transactions.

+India’s trade deficit decreased to $26.86 billion in August compared to $31.98 billion in July.

+Passenger vehicle sales rose 36.5% year-on-year to 4.39 lakh units in August, according to SIAM data.

+The government approved increasing the EPFO wage ceiling to Rs 25,000 per month from Rs 15,000 per month. As a result, an additional 51 lakh employees could come under mandatory coverage.

+The government removed the requirement of certificate of registration for export consignments of up to Rs 3 lakh to lower entry barrier for MSMEs and first time exporters.

+The government said the possible US tariffs of 100% on Russian oil importing countries, including India, could impact bilateral ties. The bill is yet to be signed into a law.

+The government denied media reports alleging that MDR on UPI payments were introduced under any external influence.

+The government reduced windfall taxes on petrol exports to Rs 0.5 per liter (vs Rs 1.5 earlier); diesel, Rs 20 (vs Rs 25 earlier); ATF, Rs 15 (vs Rs 19 earlier).

+India’s textile sector exports rose 16.10% year-on-year to Rs 29,776 crore in August, from Rs 25,656 crore a year ago.

+India’s forex reserves fell $4.92 billion to $780.78 billion for the week ended 11 Sep.

+The government relaxed the existing 15 days’ stockholding limit on sugar for bulk consumers subject to conditions.

+The government approved multiple railway projects; a 38.21 km rail line worth Rs 493 crore near Maharashtra-Telangana border and doubling the 10.86 km Chouk-Karjat section worth Rs 497 crore.

+India’s net direct tax collections rose 12.96% year-on-year to Rs 12.12 lakh crore as of 17 Sep.

+India’s crude oil imports fell 11.17% in August to 19.01 million metric tonnes, from July: Petroleum Planning and Analysis Cell.

+Digital lending platform Social Worth Technologies (Fibe) got SEBI approval for IPO (fresh issue Rs 750 crore and OFS of 4 crore shares).

The information contained in this Groww Digest is purely for knowledge. This Groww Digest does not contain any recommendations or advice.

Team Groww Digest

The information presented in this post has been compiled and prepared by Groww Invest Tech Pvt Ltd and is intended solely for informational purposes. It is not tailored to any specific investment objectives, financial situations, or needs of any individual investor. The content should not be construed as investment, financial, legal, or tax advice and should not be relied upon as a substitute for professional consultation.

Investing in securities markets involves inherent risks. Investors are advised to carefully review all relevant documents and consider their own risk tolerance before making any investment decisions.

Mutual fund investments are subject to market risks; please read all scheme-related documents carefully. Past performance of financial instruments, schemes, or markets is not indicative of future results.

Groww Invest Tech Pvt Ltd is registered with the Securities and Exchange Board of India (SEBI) under Registration No: INZ000301838, as a Research Analyst under No: INH200008662, as a Depository Participant under No: IN-DP-417-2019, and with the Association of Mutual Funds in India (AMFI) under ARN-111686.

SEBI registration details: View registered name and registration numbers

Research Analyst Disclaimer: View Research Analyst disclaimer

No news, no contact.

Four centuries ago, there was no satellite communication or internet.

Then they would return (if things went well) with traded goods.

The company that owned the ships was traded on the stock markets, just like today.

The stock markets are not new.

The tricks used to make a quick buck aren’t new either.

In the 1600s, Amsterdam was the biggest stock market in the world.

Just like us, they would trade stocks of companies. Very, very few companies.

Companies back then would offer shares to investors to raise money for high-cost expansion projects — also exactly like our times.

What was different was the industry.

Back then, sea routes to far off places had been discovered.

Namely, these were routes to India and South-East Asia. Spice routes, these sea routes were called.

A ship would leave European waters and sail down the Atlantic Ocean, around Africa, across the Indian Ocean, and enter India or other South-East Asian ports.

It would trade at those ports, and then come back to Europe.

As the ships appeared on the horizon, they would be spotted by men sitting by the sea holding telescopes.

As soon as a ship was visible, the telescope man would dart for the stock exchange. This man would be an informant.

He would give this newly acquired knowledge to whoever had hired him — someone trading stocks.

The trader would then buy large quantities of the stock before the rest of the market got wind of the news.

Some time later, as the ship entered the ports, the newly traded goods were offloaded and sold, money was made.

The new profits would cause the share price of the company to climb.

The trader who hired the man with a telescope would have bought the company’s stocks much before they went up.

So he would be sitting on fat profits made over a very short period of time.

Further Up Stream

Traders tried to get info about ships before they reached the ports.

The game was practically never ending.

These cargo ships were heavy and moved slowly. Other ships moving along the same routes were usually much faster.

Some traders would try to talk to the sailors on these ships to learn more about the cargo ships.

How was the weather? What was the economic situation in the port they had gone to trade at? Was the cargo ship loaded or did it look empty?

Whoever got wind of the information first could potentially make a killing over a short period.

The more innovative and rich traders would hire informants in different ports and have them write letters back to the traders.

Letters were often put on faster ships or light ships, resulting in the information arriving before the cargo ships did.

There were some coffee houses in cities like London and Amsterdam that were famous as meeting places for traders, sailors, and other informants.

Often, news picked up here could give a significant advantage to traders.

The cycle doesn’t end here.

There was always someone who wanted to move further up the stream.

Some tried to use letters carried over land routes to beat the mail-carrying ships.

Some used men on horse-back to cross the countryside from the nearest point any information could be picked up.

How?

Many times, the ships would reach European waters a few days before reaching the port since the port would be a little way further in.

A man on horseback would travel from this point to the stock exchange (horses were much faster than ships).

Things Have Changed: Efficiency

This race for speed has not changed even today. The best traders are desperately trying to get information faster than ever before.

What has changed is the duration.

Information travelled over days, weeks, and even months. Now, it happens in microseconds. Seconds at worst.

This has made the markets a lot more ‘efficient’.

What this means is, new developments get factored in and affect stock prices much faster than before.

The faster the information travels and affects share prices, the less time traders have to react to place their trades. Further, they have less time to process the news and decide how good/bad/neutral it is.

At the same time, information availability has improved massively. Which means that while earlier only a few people had information. Now, almost everyone has it.

So, more traders have the information about an event almost as soon as it happens.

This is one of the biggest reasons for trading being so difficult.

Only the traders who are the fastest to react are able to make a quick buck. The fastest to react are the ones using algorithms and a very fast network of computers.

At the same time, the same factors — information availability and speed — have made it much easier for another type of investor: long term investors.

Quick Takes

+NSE changes pre-open session rules, including new time windows for market and limit orders, separate period of order matching and opening price determination came into effect on 7 September.

+SEBI’s revised framework for ETF trading came into effect on 7 September. The framework revised base price norms, introduced dynamic price bands based on underlying assets, among others.

+The government approved Strategic Investment Plans (SIPs) worth Rs 735.70 crore for ITI clusters in Rajasthan, Uttar Pradesh, and Telangana.

+SEBI removed the regulatory requirement for FPIs investing in government securities to provide investor group details. This follows a recent RBI circular that removed concentration limit requirements.

+Alternative fuel vehicle sales overtook petrol sales in August, as per FADA. The combined retail sales of alternative fuels for passenger vehicles, including CNG, hybrids and EVs rose to 41.95% against petrol’s 40.85%.

+The government approved 3 multitracking projects worth Rs 10,783 crore across 14 districts in West Bengal, Jharkhand, Odisha, Madhya Pradesh and Chhattisgarh.

+The government approved 5 multitracking projects worth Rs 10,021 crore in 17 districts across Tamil Nadu, Andhra Pradesh, Karnataka and Telangana.

+Equity mutual fund inflows rose 18.75% to Rs 29,328.62 crore in August. Debt funds saw an outflow of Rs 8,127 crore in August vs an inflow of Rs 1.87 lakh crore in July.

+India’s forex reserves rose $44.90 billion to a record high of $785.70 billion for the week ended 4 September.

+The government notified that the Banker’s Books Evidence Act, which modernises the legal framework for the use of banking records as evidence, will be effective from 1 October.

The information presented in this post has been compiled and prepared by Groww Invest Tech Pvt Ltd and is intended solely for informational purposes. It is not tailored to any specific investment objectives, financial situations, or needs of any individual investor. The content should not be construed as investment, financial, legal, or tax advice and should not be relied upon as a substitute for professional consultation.

Investing in securities markets involves inherent risks. Investors are advised to carefully review all relevant documents and consider their own risk tolerance before making any investment decisions.

Mutual fund investments are subject to market risks; please read all scheme-related documents carefully. Past performance of financial instruments, schemes, or markets is not indicative of future results.

Groww Invest Tech Pvt Ltd is registered with the Securities and Exchange Board of India (SEBI) under Registration No: INZ000301838, as a Research Analyst under No: INH200008662, as a Depository Participant under No: IN-DP-417-2019, and with the Association of Mutual Funds in India (AMFI) under ARN-111686.

SEBI registration details: View registered name and registration numbers

Research Analyst Disclaimer: View Research Analyst disclaimer

The information contained in this Groww Digest is purely for knowledge. This Groww Digest does not contain any recommendations or advice.

Team Groww Digest

In just a month, they are required to set up an entire store.

The stores are almost always abandoned old shop spaces.

They would probably have been empty for months, even years.

Dirt, rats, non-functional lights and air conditioning are all part of the setup experience.

Sometimes, conditions can go from simply being uncomfortable to downright dangerous.

To make matters more challenging, about 50,000 workers working across 1,500 stores are all not full-time employees.

They are temporary workers who would have been hired mere days to weeks before the work started.

New employees, new locations, new stores, entirely new setups.

Somehow, these stores do get set up in about 4 weeks.

And then the business starts.

Buyers crowd Spirit Halloween stores looking for their favourite merchandise. The crowd turnout can be such that the footfall in areas where a Spirit Halloween store opens can shoot up by big percentages.

Prices are kept dynamic — they are updated regularly based on the demand for items.

This goes on for about 2 months.

At the end of this period, the discounts keep increasing for items that are selling in lower numbers.

After Season

Then, at the end of the period, the store shuts down.

The 50,000 workers will be without a job.

But before that happens, the same workers who were given a tight 30-day deadline to build the stores are asked to take down the entire store. The time, an even tighter 3-4 days.

Everything is quickly sold for a discount.

The few items that remain get put in boxes and loaded on trucks, along with shelves and other store furniture.

The store just vanishes.

And just like that, about 1,500 stores shut down.

This isn’t a one-time occurrence.

This elaborate (and fast) dance wasn’t a one-time activity.

It happens every year and has been happening for about 40 years.

Halloween is an annual festival celebrated in the West. People dress in various costumes that are supposed to be spooky, and go door to door collecting candy and treats.

It is a huge affair in the West, and people are very serious about what they wear.

While earlier, it was more about spookiness, the modern more evolved Halloween sees people dress in costumes that are not necessarily spooky.

Costumes can range from those of ghosts, to movie characters, cartoon characters, animals, and even objects like hammers, bombs, chocolates, and so on.

The creativity shown in costumes is stupendous.

People take the costumes very seriously and spend big money.

Spirit Halloween caters to that market — Halloween costumes and accessories.

As you’d know, this is an extremely peculiar company with an equally peculiar business model.

Business Model

Real estate is an expensive drag on many companies.

For a company focused on one festival in a year, real estate can be a massive money pit.

Spirit Halloween deals with this by avoiding year-round stores.

Their team specialises in finding real estate (stores mostly) that are lying empty for a long time. This space is then rented for just the few months they need it. June to just after October ends.

The rent is only for that period — the 1,500 stores exist only for those few months.

The 50,000 employees are temporary workers. They are working at Spirit Halloween for just the period the stores are active.

They are aware of the nature of their contract and work.

The company has box-kits for each store that are carefully designed to be able to be set up in a month’s time.

They try to heavily discount their items towards the end of the season so as to not have any inventory to store.

They are not inactive for the rest of the year.

As soon as the season ends, the company goes deep into analysing the sales and patterns. They try to understand the products that did well and those that didn’t.

This helps them place fresh orders for the next year’s season much in advance, at lower rates.

They also keep a close eye on cultural and social trends so as to be able to offer newer and more trendy costumes.

Now, they do maintain an e-commerce website year-round, but that does not require a store-front.

Do note that this company is held by a larger holding company that does business all-year round. It is not a standalone company operating on its own.

Investors

Not just business models, there are even investors who operate like this — seasonally.

Seth Clarman is an investor who has a habit of investing only in undervalued stocks. This means the window of opportunity for him to invest in is extremely small.

He is famous for holding as much as 50% of his total investments in cash.

This approach helped him during the 2000 dotcom crash and the 2008 Great Recession.

Post those crashes, he was sitting on huge piles of cash. He used that cash to buy discounted stocks post the two crashes.

Michael Bury is another such investor who made a killing during the 2008 recession.

When he was sure the recession was over, he chose to close his fund instead of trying to make money during the bull run.

Not all investors and businesses are active at all times. Some work only during certain seasons, and are inactive at other times.

Quick Takes

+India’s GDP rose 7.80% year-on-year in the April-June quarter compared to 6.90% a year ago.

+India’s fiscal deficit narrowed to 26.80% of the annual budget estimates between April and July, from 29.90% in the same period last year.

+The government released Index of Services Production data for June 2026. 18 out of 19 sub-sectors rose, led by real estate, retail trade and wholesale trade. Only air transport fell.

+India’s gross GST collections rose 14.80% year-on-year to Rs 1.99 lakh crore in August compared to Rs 1.74 lakh crore a year ago.

+The government reduced the stock holding limit for sugar dealers to 2,000 quintals from 4,000 quintals, effective from 15 September to 30 November. This was done to prevent hoarding and speculative trading of sugar.

+The government approved an 11 km bypass line worth Rs 272 crore between Adra and Joychadipahar, West Bengal to boost freight capacity.

+The government approved Rs 233 crore for electronic interlocking at 21 stations in Samastipur Division, Bihar to strengthen signalling infrastructure.

+The government levied windfall taxes on petrol exports to Rs 1.5 per litre from nil. Diesel export duty was raised to Rs 25 per litre from Rs 24 per litre. The export duty on ATF exports was reduced to Rs 19 per litre from Rs 19.5 per litre.

+Coal India subsidiary, Mahanadi Coalfields filed a DRHP for an IPO, consisting of an offer for sale of 66.18 crore shares by promoter Coal India.

+India received foreign inflows worth $136.38 billion through a special USD-INR forex swap facility from June to August, as per RBI. Foreign currency non-resident (bank) deposits saw inflows worth $127.23 billion during this period.

+MSCI Global will delete Swiggy from its MSCI Global Standard Index and MSCI Mid Cap Index effective 7 September, after the company reduced its foreign ownership limit to 49.50%, leaving no room for new foreign investors.

+India’s forex reserves rose $11.47 billion to $740.80 billion in the week ended 28 August.

+National Stock Exchange (NSE) along with 3 other companies received SEBI approval for their IPOs.

+SEBI will review the methodology used to determine settlement price for derivative contracts in the Closing Auction Session (CAS), following feedback from market participants.

The information contained in this Groww Digest is purely for knowledge. This Groww Digest does not contain any recommendations or advice.

Team Groww Digest

The information presented in this post has been compiled and prepared by Groww Invest Tech Pvt Ltd and is intended solely for informational purposes. It is not tailored to any specific investment objectives, financial situations, or needs of any individual investor. The content should not be construed as investment, financial, legal, or tax advice and should not be relied upon as a substitute for professional consultation.

Investing in securities markets involves inherent risks. Investors are advised to carefully review all relevant documents and consider their own risk tolerance before making any investment decisions.

Mutual fund investments are subject to market risks; please read all scheme-related documents carefully. Past performance of financial instruments, schemes, or markets is not indicative of future results.

Groww Invest Tech Pvt Ltd is registered with the Securities and Exchange Board of India (SEBI) under Registration No: INZ000301838, as a Research Analyst under No: INH200008662, as a Depository Participant under No: IN-DP-417-2019, and with the Association of Mutual Funds in India (AMFI) under ARN-111686.

SEBI registration details: View registered name and registration numbers

Research Analyst Disclaimer: View Research Analyst disclaimer

A railroad company went bankrupt.

Texas Pacific Railway Company.

In the late 1800s, there was a railroad boom in America, and many railroad companies were born, successful, and dead.

Texas Pacific Railway Company was one of those that had died.

Prior to its death in 1888, it had issued bonds to raise money to buy land for building railroads.

The land was roughly about 3 million acres.

Texas was not really a high-demand area. It was mostly barren, and not many people lived there. So land was cheap.

When Texas Pacific Railway Company went bankrupt, its bond investors did not get back any money they invested.

These bonds were secured though. Which means, the land was used as collateral.

The 3 million acres (30 lakh acres) belonged to the bondholders.

A trust was formed, and the ownership of the land was transferred to the trust.

The bondholders got shares in the trust.

Texas Pacific Railway Land Trust.

The trust was peculiar. It could not issue fresh shares. No new shares could be created.

The management of the trust could not create shares and reward themselves.

But they could buy shares and destroy them.

The trust’s only purpose was to sell the land and return money to the bondholders. It was created for the benefit of the bondholders, and nothing else.

Which meant the land was fixed; the shares could not be increased.

As the shares were bought and destroyed by the trust, the shares’ price would go up — the same land represented by a smaller number of shares.

So the purpose was to return the bondholders’ money.

The method of that was selling land. Using that cash to buy shares in the share markets. And destroying them.

Thus, whoever sold the shares got their money back.

Once that aim was achieved, the trust could be shut down.

There was no time limit imposed on the trust.

They could take their time in selling off the land. As much time as they needed.

Why?

One possible reason could be that if the trust sold too much of the land too fast, the land price would fall. And that would possibly mean the bondholders get a less-than-ideal price.

Not good for the bondholders.

So, the trust would sell only when it thought the price was right, and only quantities that it felt would not cause the land price to plummet.

That never happened — yet. It hasn’t happened in the 138 years since the trust was created.

The trust is very much around even today.

The shares of this trust are available on the stock markets.

Earnings

Texas Pacific Railway Land Trust (TPRLT) has been doing what it was supposed to ever since.

For all these decades, the trust has been selling land, buying back shares, and destroying them.

The total land owned has reduced by about 75%.

Most of this land was sold in the few decades after the trust’s formation.

About 1.1 million acres owned, down from 3 million acres.

Over the last 100 years, this number has only gone down slightly, to about 0.8 million acres.

But they did keep doing the buybacks. So, the shares have reduced faster than the land being sold.

What this means is that the land-owned-per-share has been rising consistently for decades.

Now, sharp minds would ask, about where they get the money to perform these share buybacks?

Well, the trust’s job is to protect the interests of the bondholders. It didn’t leave the land barren just like that.

The trust would license the land for various purposes — grazing rights to farmers, and oil extraction rights to oil companies.

Those licenses generate cash.

The cash thus generated is used for buying back shares and also giving dividends to shareholders (who were bondholders).

The beauty of this arrangement is that the TPRLT has to spend almost no money to earn money.

They do not buy any equipment. They simply rent their land to farmers and oil companies. All costs necessary are borne by them.

Discovery

For decades, this stock existed. And barely anyone ever spoke of it.

This is one of the most peculiar cases — it was not discovered for decades because GAAP regulations require companies to disclose the buying price of land. Not the current price.

So in its quarterly and annual reports, TPRLT was writing the price at which it bought all the land before 1888.

Trusts usually make for very dull returns. Most investors would not even bother investigating the stock.

And thus, no significant investor realized that this company owned so much valuable land. For decades.

The stock was making good returns (we’ll talk about it later). But nothing that would draw the attention of institutional investors.

Then, some technological breakthroughs occurred. No, TPRLT had nothing to do with these breakthroughs.

Shale Oil Revolution

The US has lots of oil trapped in shale rocks.

Taking this out is a nightmare. Too expensive to make it a viable business.

Around 2010, oil prices were touching scary highs. Despite that, digging for shale oil was not making much sense.

But then, technological revolutions in the form of horizontal drilling, slickwater fracturing, and underground imaging — suddenly made shale oil very viable.

The USA started pumping out oil like never before.

Guess who owned a lot of land with shale oil under it?

Oil companies lined up in front of TPRLT, asking for licenses to dig out oil.

In an especially smart move, TPRLT had even sold some land but retained the oil rights under that land.

All of these licensing fees became cash flow for TPRLT.

The company achieved a massive profit margin of around 80%.

Once a stock’s profit margin looks like that, it really is hard to ignore.

Wall Street suddenly found itself very interested in a trust’s shares.

In the decade after that, a lot of attention fell on the trust.

Around 2019, activist investors attempted to turn the trust into a corporation.

Their argument was that the trust was not transparent and was not acting in the best interest of its shareholders.

One example given by them was that of the trustee selection. The shareholders didn’t get to vote. The existing trustees chose one discretionarily.

The mechanics of this are a story in itself. We will not get into that today.

Just know this — Texas Pacific Railway Land Trust became a corporate company in 2021.

Earlier, index funds couldn’t invest in it. Now, the stock gets consistent money from them.

Now, let’s talk about the returns.

Returns

Over the last 5, 10, and 15 years, the TPRLT stock has performed better than the index S&P 500.

Yes, many other stocks have done that too.

But what’s interesting is that the TPRLT has also done better than some of the best performing stocks over the same periods.

Microsoft, Google, Apple, Amazon, and even Berkshire Hathaway have given lower returns than TPRLT.

Is this an apples to apples comparison?

No, TPRLT is a much smaller company. Still, it does highlight how well it has done.

But keep in mind that this immensely good performance is the result of this stock being “discovered” around 2010.

Else, this monumental run would not have been possible.

TPRLT’s stock has given great returns before that period as well. Just that it wasn’t as high as it is now.

There have also been periods when the stock has suffered big drops and remained flat for extended periods of time.

Many of these periods have coincided with oil prices being low.

This goes without saying — past returns are no indication of future returns. Maybe it will continue performing as it has.

Or maybe, its golden years are over now that it has been discovered. We haven’t done that research ourselves.

If you’re very keen, please do the research for yourself.

Takeaways

One of the most important takeaways of this tale is that published numbers don’t tell us everything.

It makes the case for fundamental research and understanding the business even stronger.

Another one is that inefficiencies exist in the system. The big institutional investors have not discovered all that there is to find. Even they miss out on great investments.

Yet another one could be that old companies’ (trusts in this case) cannot be written off as easily as we assume.

Maybe one of the most important lessons is that there will always be stocks that most of us miss out on. There’s no reason to feel regret.

Surely there would be many other lessons you would have observed while reading this piece.

The shortest takeaway is probably this: finding multi-baggers is hard.

If things go as originally planned, Texas Pacific Railway Land Trust will shut down sometime in the future — after it has sold all its land and performed buybacks of the last remaining shares.

Till then, this very peculiar stock will continue to draw eyeballs.

Quick Takes

+The government lifted the ban on exports of grains and permitted wheat exports as well as others like maida, semolina, etc, effective immediately.

+The service producer prices rose for 4 out of 7 sectors in the April-June quarter, compared to the previous quarter. Air (passenger) services rose the most, along with banking services, pension fund management, and railway services.

+The government revised the conditions for import of raw sugar. It removed the 31 October deadline to process and sell the refined product in the domestic market to a period not exceeding 2 months from date of filing Bill of Entry, as a relief to sugar importers.

+The net profit of Regional Rural Banks rose to a record high of Rs 10,176 crore in FY26. Both gross and net NPAs reached all time lows of 5.30% and 2.10% respectively.

+Finished steel production rose 4.70% year-on-year to 54.70 million tonnes between April and July. Consumption of finished steel grew 7.90% to 56 million tonnes in the same period.

+India and Seychelles held talks and discussed a possible dedicated MoU to strengthen cooperation in fisheries, aquaculture and the blue economy (including tuna fishing, marine farming and fisheries technology).

+India’s forex reserves rose $12.42 billion to a record high of $729.33 billion for the week ended on 21 August.

+India’s Industrial Production rose 6.70% in July compared to 7.30% in June. The July growth was supported by 7.30% growth in the manufacturing sector and 8.70% increase in the electricity and gas supply sector.

+Jio Platforms, Paras Healthcare and Bharat PET along with 4 other companies received SEBI approval for their IPOs.

+SEBI extended the implementation deadline for the new framework for exchange traded funds to 7 September from 1 September, based on the feedback from the stock exchanges.

The information contained in this Groww Digest is purely for knowledge. This Groww Digest does not contain any recommendations or advice.

Team Groww Digest

The information presented in this post has been compiled and prepared by Groww Invest Tech Pvt Ltd and is intended solely for informational purposes. It is not tailored to any specific investment objectives, financial situations, or needs of any individual investor. The content should not be construed as investment, financial, legal, or tax advice and should not be relied upon as a substitute for professional consultation.

Investing in securities markets involves inherent risks. Investors are advised to carefully review all relevant documents and consider their own risk tolerance before making any investment decisions.

Mutual fund investments are subject to market risks; please read all scheme-related documents carefully. Past performance of financial instruments, schemes, or markets is not indicative of future results.

Groww Invest Tech Pvt Ltd is registered with the Securities and Exchange Board of India (SEBI) under Registration No: INZ000301838, as a Research Analyst under No: INH200008662, as a Depository Participant under No: IN-DP-417-2019, and with the Association of Mutual Funds in India (AMFI) under ARN-111686.

SEBI registration details: View registered name and registration numbers

Research Analyst Disclaimer: View Research Analyst disclaimer

That was the headline of an article published in WSJ.

The heading was deliberately eye-catching.

In March 2004, Walmart was under fire for paying its workers too little. It was a cause that gained good traction in wider circles.

The workers’ unions and politicians backing them often mentioned Costco.

Their question was, why was Walmart paying its workers so little when Costco was able to pay so much better?

Costco operates in the same space as Walmart and is subject to the same factors.

Walmart is a publicly listed company. On Wall Street, Walmart was a revered giant. Their numbers were closely scrutinized.

So was Costco.

And yet workers, unions, and politicians somewhat admired Costco.

The flipside of this was that some investors did not speak favorably about Costco.

The article published in the WSJ was referring to that.

Some Wall Street analysts and big shots felt Costco was ‘leaving money on the table’.

A company’s purpose is to earn money for its shareholders. They accused Costco of not doing that. It was paying higher salaries and offering more employee benefits than necessary.

The accusation was that Costco was reducing its profits that way.

Many of the vocal Wall Street analysts had already been bitter about Costco’s higher spending on employees’ health benefits.

But while some analysts accused Costco of being irresponsible with money, there was no denying that Costco was a very healthy business — comfortably profitable.

Long-term investors of Costco were not bothered by this article. They were not even bothered by the higher salaries and employee benefits.

They had seen Costco pull off similar moves earlier and later as well.

Business Model

Costco’s business model was born many years before it.

In the mid 1950s, product makers could dictate a minimum selling price for their items. A seller could not legally offer lower prices even if it wanted to.

Sol Price, a lawyer-turned-retailer, found a way around this problem.

The rules prevented retailers from selling items to the public below the floor price. The rules didn’t say anything about selling inside clubs.

At his retail chain, FedMart, he introduced a membership fee. Only some eligible members could buy.

With this, he was able to circumvent the rules and sell items below the floor price.

The subscription fee was just a key to enable them to sell items at a cheaper price.

It was in Sol Price’s next company, Price Club, that they raised the membership fee and realized that the membership fee itself could be a source of income.

And because they were making substantial profits from membership fees, they were able to compromise on their earnings from sales even more — making items even cheaper for customers.

Sinegal was an employee at FedMart. He had joined at the age of 18 years only.

He worked with FedMart, and then at Price Club.

In 1983, he started Costco. The philosophy was the same.

So, Costco makes a huge chunk of its money from the annual membership fee.

Over 50% of its operating income comes from membership fees alone.

This is the main source of income.

Everything else is just to help keep customers renewing the membership every year. Over 90% of existing members renew their memberships. New members also join every year.

Currently, the annual membership fee starts at $65.

DNA

The DNA of Costco was the same as FedMart’s — membership gives you access to rock bottom prices.

One of the most famous/infamous signatures (depends on who you ask) is that they have put a cap on their per-product profit.

Not a floor price — not the minimum price they would sell for.

Costco capped their upper price — the max markup they could make selling an item.

It sits roughly at 14%. For their signature brand Kirkland, this is 15%.

Many other retailers keep this margin roughly in the range of 20-25%.

If an item gets cheaper because of lower raw material costs, Costco lowers its prices accordingly. Most others would simply continue with the existing price.

Another major decision Costco took was to sell fewer items. Instead of offering 10 different shampoo brands, they’d offer only 2 or 3.

Compared to other retail chains, they have 10-30 times less variety across different categories.

This lowered the number of items they had to deal with. Lower costs of handling.

Costco famously has fewer suppliers per category. Thus, they’re able to negotiate lower rates.

Costco famously does not sell small packages. They mostly sell bulk items. This reduces their handling costs per unit.

No/low advertising. Word of mouth only.

Unlike other retail chains, Costco is famous for paying higher wages to its workers.

Internal promotions are common too. Current Costco CEO, Ron Vachris, started his career as a forklift driver.

Costco sells everything from petrol to ready-to-eat cooked items to premium apparel — all with the same philosophy. Max 14-15% markup.

Short Term vs Long Term

Co-founder and CEO Sinegal (till 2011) is famous for his sharp words to investors.

One of his most famous quips against short-term-orientated professional investors was:

“On Wall Street, they’re in the business of making money between now and next Thursday. I don’t say that with any bitterness, but we can’t take that view. We want to build a company that will still be there 50 and 60 years from now.”

This one line set him apart from many other CEOs who were hell-bent on keeping numbers consistent, quarter after quarter. That often meant big sacrifices being made in the long run.

He was careful too.

Sinegal never said he didn’t care about shareholders. He just maintained that ensuring investors got good returns started with keeping customers and employees happy.

Sinegal’s manic quest for keeping customers happy and coming back again and again has done well for Costco.

Over the last 10 years, the Costco stock gave a return of ~22% per annum. This number was 19% per annum for 20 years.

By the way, these returns are in USD. If you convert these returns and measure in INR, they’ll be even higher.

Stocks on the stock markets often suffer from this problem.

Stock prices change every single day, in seconds.

Any small negative or positive news can influence the stocks almost immediately.

Many of the investors buying and selling these stocks do not wish to stick around. They are short-term traders who’d rather make a quick buck and move on to another stock.

To them, any stock that performs poorly even for short durations is unattractive.

Often this group also tends to be very loud and vocal.

Focusing only on the opinions of these traders can lead to good decisions in the short-term that actually end up harming the company in the long run.

Not always. But it definitely happens.

The job of the management of a company is to ensure the company performs well.

It is therefore necessary for them to listen to what investors are saying. It is equally important for them to know when to ignore what investors are saying.

There are companies that listened to traders too much and followed them too closely. So much so that they harmed themselves in the longer run.

Moat

Why don’t others just copy Costco?

It’s clear that the model works. So, might as well copy it.

Well — it is not easy.

This model doesn’t work if you’re small. It only works when you have a gargantuan scale. Most start-ups cannot start off with a giant network of stores. They must start small.

So right there, Costco has removed thousands of tiny competitors from being able to compete.

Now we’re left with the bigwigs.

They surely have the money and scale to compete.

For starters, no large company’s CEO is willing to cut their profits in half or more just to match Costco. That is exactly the kind of short-term (even medium-term) hit most other companies do not dare take.

Then there’s trust.

Costco has built a name for itself playing this exact game for decades. Even the largest of companies cannot replicate this over a short period of time.

Various competitors have copied parts of the Costco model.

But the Costco model isn’t just the various parts. It’s the entire system together.

That is Costco’s 100-feet-tall moat.

Quick Takes

+India’s unemployment rate fell to a four month low of 5.10% in July compared to 5.50% in June.

+RBI advanced the deadline for swap facility for FCNR(B) deposits to 31 August instead of the earlier announced 30 September, after inflows of over $56 billion.

+Regional Rural Banks’ gross loans rose 10.30% to Rs 578,349 crore in FY26 compared to Rs 524,163 crore in the previous year.

+DoT, Government of Chhattisgarh, CSBIL, BSNL and CHiPS signed an agreement worth Rs 3,942 crore for implementation of BharatNet program in the state to strengthen digital infrastructure and expand broadband connectivity.

+The government imposed a minimum import price of Rs 34,000 per tonne on clear float glass with 4mm to 12 mm thickness for a year to protect domestic manufacturers from cheaper imports. Imports below this threshold will face restrictions.

+The government approved upgradation of Muzaffarpur-Sitamarhi-Sonbarsa section of NH-22 in Bihar worth Rs 3,590.73 crore.

+India’s crude oil imports rose 41.24% year-on-year in July to $13.70 billion compared to $9.70 billion a year ago. The volumes rose 13.22% to 21.40 million metric tonnes in the same period.

+UK’s retail inflation rose to 2.90% in July compared to 2.60% in June.

+India’s infrastructure output rose 5.40% in July compared to 6.00% in June.

+SEBI has barred Copthall Mauritius Investment (owned by JPMorgan Chase & Co) and Mansi Share and Stock Broking from the securities market for manipulative trades under the Closing Auction System (CAS) and impounded a combined Rs 3.68 crore.

+SEBI permitted the use of digitally signed power of attorney documents for FPIs, removing the need for notarization and enhancing ease of doing business, effective today.

+India’s forex reserves rose $9.91 billion to $716.90 billion for the week ended on 14 August.

+The government announced measures such as permitting duty free import of 10 LMT of raw sugar, among other measures, to reduce sugar prices and boost supply during the festive season.

+The number of active individual traders fell 20% to 78.60 lakh in FY26 compared to a year ago. Net losses suffered by individuals fell. 87.70% traders still made losses in FY26: SEBI.

+29 FDI proposed investments worth Rs 4,895.65 crore were made under the revised framework as of 20 August. Entities based in Mauritius, the US, Japan, among others, invested across sectors like IT, AI, information and communication, manufacturing etc.

+India’s PMS industry’s AUM rose 2.0% month-on-month to Rs 44.11 lakh crore in July as per APMI. The client base increased 1.30% to 2.23 lakh accounts during the month.

+The government signed an MoU with Brazil to strengthen bilateral cooperation in Telecommunications and Information and Communication Technologies (ICTs) including Artificial Intelligence (AI), 5G and 6G, Open RAN etc.

+The government with Asian Development Bank signed a $230 million loan to modernise and expand Chennai’s water supply and sanitation infrastructure.

The information contained in this Groww Digest is purely for knowledge. This Groww Digest does not contain any recommendations or advice.

Team Groww Digest

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In 2026, their cash pile had grown to ~$397 billion.

Then they spent some money. Now, it’s ~$365 billion.

They have that much lying around in cash.

Warren Buffett, who recently retired from his position as CEO of Berkshire Hathaway, is famous for buying good companies’ stocks at “good” prices.

He continues as the chairman of the company while Greg Abel has become the new CEO.

It appears that Berkshire is struggling to invest money.

So much so, their cash pile only keeps growing.

But Warren Buffett is one of the world’s most successful investors. One of the best to have ever lived.

And he is struggling to find stocks to invest in?

Right Price

If you track him closely, for decades now, he has made one thing absolutely clear.

Buying shares of good companies is not going to make you money.

Buying shares of good companies — at the right price — is going to make you money.

The stock markets are driven by supply and demand. Often some of the best companies’ stocks attract a ton of interest and money from investors.

This pushes their stock price up.

Beyond a certain level, it can be considered ‘overvalued’.

The challenge with overpriced stocks is that they can fall to what is considered a fair price.

And if an investor buys at overvalued levels, and the stock price falls to fair levels: the investors make losses.

According to him, stocks can remain overvalued for periods much greater than people realize.

For decades now, he has believed many stocks are overvalued. Which means, he cannot buy them.

This goes far beyond just stock price.

His method is to account for potential future revenues and earnings. And based on that, assess present stock prices. That’s how Warren Buffett and Berkshire Hathaway decide if a stock is worth purchasing.

This sounds simple when written like that. Of course it isn’t.

Stock Universe

25 years ago, the S&P 500 was dominated by a mix of companies — tech, financial, and healthcare mostly.

That has changed in this period. Now, almost all of the biggest companies in the S&P 500 are tech companies.

Warren Buffett used to famously say that he does not understand tech companies.

One crucial factor behind Warren Buffett’s, and therefore Berkshire Hathaway’s success, is that he does not invest in anything he does not understand.

(The S&P 500 is an index made of the 500 biggest companies on the US markets; also many of the biggest companies in the world).

Tech companies were not the biggest 25 years ago, and are now the biggest. This means they grew much faster than other stocks.

And Berkshire Hathaway was not investing in these stocks for a significant period of the last 25 years.

It’s wrong to say he missed out on these. He knew they were hot. But he intentionally stayed away, citing that he did not understand them well enough.

Warren Buffett has been vocal about admiring Jeff Bezos and his company, Amazon. He just never understood it well enough to take a bet on it. Eventually, he did invest in Amazon.

Berkshire did start investing in Apple in 2016. But that was more because he inspected Apple through the lens of a consumer company, not a tech company.

He did make one more attempt before this. He bought IBM in 2011 and sold it off in 2018. The investment was worth about $10 billion. The returns were subpar.

Too Big

Berkshire Hathaway has been a victim of its own success.

Their investments have worked out so well, they’ve become one of the biggest companies in the world.

Their cash pile is one of the biggest in the world.

At that size, there just aren’t enough places you can still invest money in.

This is why we can point out plenty of small companies that have grown spectacularly well. But Berkshire never really talks about them.

They’re growing well, but Berkshire can only invest a small portion of their total cash in them.

Which means, no matter how well those companies’ stocks performed, Berkshire’s overall portfolio would grow by only a tiny fraction.

So smaller companies’ stocks are off-limits.

When The Wallet Is Opened

So, he does not buy overvalued stocks — and he is extremely disciplined about it. He can wait for years and decades. As evident from his cash pile.

He also sticks to stocks that are well within his competence.

Some of his most successful investments have happened in sectors like consumer brands, banking and financial services companies, and utilities and railroads.

So when an investor as accomplished and cautious as Warren Buffett and his Berkshire Hathaway opens their wallet, everyone wants to know what they bought.

Last year they were in the news for what looked like an odd purchase — they had bought $15 billion worth of stocks in Japan total.

The buying started back in 2019.

5 different conglomerate companies based out of Japan but operating practically across the globe. To add to that, they weren’t making one product or operating in one industry.

They were conglomerates — they held stakes in companies that make everything from pens to ships.

So their revenue sources were well-diversified.

The Japanese markets had been underperforming for decades, and global investors tended to not look at Japanese companies with a lot of hope.

According to Warren Buffett, the valuations of these high-quality companies’ stocks were too cheap to ignore.

He still hasn’t stopped.

As of today, he owns roughly 10% of each of the 5 Japanese conglomerate companies.

Newest Purchase

His newest purchase is Google.

(Actually, it’s Alphabet, Google’s parent company.)

Google is spending hundreds of billions of dollars building data centers for the AI race.

And to continue doing so, they need more money.

What used to be a low capital expenditure business (mostly software) is now starting to look more like a high capex business (data center heavy).

Oddly, Berkshire Hathaway, the company that used to shy away from software companies, is now leaning towards them.

Warren Buffett had earlier stated he liked Google’s asset-light structure.

Oddly, Google is starting to look more like a utilities company than a software company with heavy investments in assets (data centers).

Warren Buffett has expressed regret at not buying Google earlier.

He has been buying the stock since the 2nd half of 2025.

The recent news cycle is about Berkshire’s latest investment in Google — a $10 billion investment for fresh issue shares.

Right now, Berkshire holds about $30 billion worth of Google stock.

As of writing this, Google is now the 5th biggest holding of Berkshire Hathaway.

Apple is still its biggest holding — though Berkshire did reduce its stake in the company in 2024-2025.

Apple followed by American Express, Coca-Cola, and Bank of America.

Quick Takes

+ India’s imports of Russian crude oil rose 2.10% month-on-month to 5.50 billion euros in July (vs 4.50 billion euros in June) and hit a record high for the second consecutive month.

+ The government removed physical duty payment challans for exporters to ease compliance burden and save transaction cost, effective on voluntary duty payments from 1 August.

+ The unemployment rate in urban areas was 6.70% (vs 6.60%) and the rural unemployment rate rose to 4.80% from 4.30%.

+ Equity mutual fund inflows fell 15% to Rs 24,697.39 crore in July compared to Rs 28,973 crore in June. Debt funds saw a net inflow of Rs 1.87 lakh crore compared to net outflow of Rs 1.09 lakh crore in June.

+ Nifty 50 and Nifty 50 Equal Weight indices will be reshuffled on 30 September. Wipro will exit the index and the BSE Ltd stock will enter the index.

+ The government approved the RBI’s proposal for introduction of one billion plastic notes of Rs 10 and Rs 20 for field trials. Plastic bank notes are proposed to be issued along with paper notes.

+ The government halved the incentives for electric two wheelers to Rs 2,500 per kWh from Rs 5,000 per kWh. The scheme has been extended by a year to 31 March 2028.

+ India’s retail inflation rose 4.45% in July compared to 4.38% in June. Food inflation rose 5.52% in July (vs 5.32% in June).

+ Net Direct Tax collection rose 23.09% year-on-year to Rs 8.11 lakh crore as of 10 August (compared to Rs 6.59 lakh crore a year ago).

+ SEBI Chairman said that they have observed no market manipulation under the Closing Auction System yet but data is being monitored continuously; as per media reports.

+ India’s merchandise exports rose to $44.24 billion in July compared to $36.98 billion a year ago. Petroleum Products, Electronic Goods, Engineering Goods, Organic & Inorganic Chemicals etc, were the major drivers of merchandise exports.

+ MSCI will add four companies (Adani Energy Solutions, Billionbrains Garage Ventures, Laurus Labs and Lenskart Solutions) to its Global Standard Index and it will remove Astral, Balkrishna Industries and SBI Cards, effective from 1 September.

+ India’s forex reserves rose $14.14 billion to $707 billion for the week ended on 7 August.

+ India’s wholesale price inflation fell to 9.78% year-on-year in July compared to 9.87% in June.

The information contained in this Groww Digest is purely for knowledge. This Groww Digest does not contain any recommendations or advice.

Team Groww Digest

He was bleeding from his chest.

This was a summer night in Chicago. The year, 1893.

He was taken to the Provident Hospital.

The founder of the hospital was a doctor named Daniel Williams.

Back then, many hospitals refused to accept black patients. Daniel was black and urgently felt the need for a hospital that readily accepted patients of both races.

And thus, with some support, he started the Provident Hospital.

It had only been a few years since starting. The hospital’s reputation had not been well-established just yet.

It was against this backdrop that this particular tense evening presented itself to Daniel.

Daniel rushed to the operating room.

While doing so, he pulled in 6 other doctors with him to the operation — two black and four white doctors. They were not there to help him. Their only job was to be witnesses to what he was about to do.

This might not make sense to us initially, but we’ll talk about that later.

In the small and cramped operating room, he inspected the stab wound.

He found an artery had been ruptured. He stitched it and reduced the bleeding.

Upon further inspection, he found a bigger problem.

The stabbing had ruptured the pericardium — the sac that surrounds the heart — and slashed a blood vessel in the heart.

This was a devastating discovery.

Common Convention

In those days, a problem like this would be solved by external treatment.

Doctors would wait and hope a heart injury would heal while providing salt water, and other support.

Most patients would die as the heart could not heal so quickly.

But the heart was never operated upon.

The common belief was that the beating heart was the final limit of the human capacity to operate.

Surgery could not be performed on it while it was still beating. But a heart that did not beat was a dead person’s heart.

Thus, heart injuries remained out of reach of surgeons.

In such cases, the risk of performing surgery was considered extreme as any opening of the chest cavity also entailed lung-related risk.

The heart itself is always moving and any operation on it carries the risk of worsening an already bad situation.

And so, doctors maintained that the heart must never be touched.

The Solution

1893 was an era when extreme skepticism followed black doctors.

Any death on their watch was scrutinised to a greater extent than in the case of white doctors.

For any deaths on their watch, they’d have to explain what went wrong.

People with injuries like James Cornish’s never made it. A knife stab that tore open a heart artery almost always led to the patient’s death.

It was because of this certainty that Daniel decided to take a risk.

This probably explains why Daniel had pulled in 6 doctors into the operation theatre, especially given that the majority of them were white.

It was because of what he was planning to do next.

Daniel decided to attempt to stitch the ruptured heart-artery.

He rinsed the wound, held the ruptured ends with forceps, and sutured the open wound. Then he stitched the sac that the heart sits in.

James Cornish walked out of the hospital 51 days later. His heart surgery had been a success.

James Cornish lived for another 20 years after the surgery.

Daniel’s decision to perform open heart surgery had proven to be a success.

This also happened to be one of the world’s first ever open-heart surgeries.

Despite the risk of reputational damage, and possible scrutiny, Daniel had the presence of mind to continue.

He saw an injury that looked treatable.

He took some precautions — the 6 witnesses.
He weighed his odds — the patient would probably die without surgery anyway.

And decided to go ahead.

It worked.

Templeton

This lesson on situation awareness — that of knowing when to go against the commonly established practices — is one of the most telling traits of successful surgeons.

It also applies to investors.

The investment world is filled with examples like these.

One such case was that of John Templeton.

He had practically retired in 1992, at an age of roughly 80 years old.

John had been a young man during the Great Depression of the 1930s.

After studying law, he had the unique experience of travelling to 35 countries. This period was marked by conflicts and economic hardship.

The voyages gave him a perspective few in his time had.

His trading and investment journey started in 1937 — a little before the time the Second World War started. In the thick of extreme pessimism and doom, Templeton saw what others were not seeing.

Even in that era, Templeton had spent considerable time researching history.

Wars mean certain sectors pick up extremely well.

Railroads were one such. Steel and manufacturing were others. There were a bunch of others like them.

He had carefully bought stocks that had the potential to turn around in times of war.

The success from this investing marked the start of his fortunes.

Owing to his global exposure, he started a mutual fund called the Templeton Growth Fund in 1954 — a mutual fund that invested in stocks across the globe.

Templeton was often called one of the world’s best global fund managers because of this mutual fund.

Between the fund’s inception in 1954 and John Templeton retiring in 1992, the fund gave a return of around 15% per annum.

In 1968, he moved to the Bahamas. His reasoning was that it was necessary for him to stay away from Wall Street in order to not mimic their mistakes. Some also speculated that it was for tax-saving reasons.

In 1992, he sold his mutual fund to Franklin Resources and retired.

His focus would now turn towards philanthropy.

2000s

And yet, despite retiring, despite being 87 years old, despite quitting the money management world — he was back to the markets in the year 2000.

The tech boom was at its peak.

Everyone else saw dotcom companies’ valuations reach astronomical levels. Nobody knew how to price these internet companies.

Many were trading almost 100x their earnings.

John Templeton just couldn’t resist.

He had seen many booms and busts. Unlike others, he was seeing a pattern.

Many dotcom companies were doing IPOs.

After the IPO, the founders and major investors (venture capitalists) were locked in. They could not sell their shares immediately.

But they could sell once the lock-in period ended after a few months.

These insiders (founders, venture capitalists, etc) knew that there was no way they could ever make enough earnings to justify a 100x valuation.

They would all start selling their shares as soon as the lock-in period ended.

John Templeton had never studied dotcom companies in history. They never existed in the past.

But from past experience, he knew what overhyped companies looked like. They looked like what he was seeing in the dotcom companies.

He started placing shorts on all these dotcom companies’ shares, starting in Jan 2000 when optimism and euphoria were touching new peaks.

He had a very specific strategy: the shorts were placed exactly 11 days before the lock-in ended.

With near-perfect timing, the shorts worked in his favour.

According to some reports, he made about $86 million from just shorting dotcom companies.

He lived till 2008, dying at the age of 95.

Quick Takes

+ India’s gross GST collections rose 15.40% year-on-year to Rs 2.11 lakh crore in July 2026 compared to Rs 1.83 lakh crore a year ago.

+ The government increased windfall taxes on fuel exports. The export duty on petrol was increased to Rs 3.50 per litre. Diesel export duties increased to Rs 25.50 per litre. ATF exports were raised to Rs 22 per litre.

+ LIC’s Rs 31,410 crore OFS was subscribed over 3.3 times from institutional investors on day 1. The government is selling up to 6.50% stake at a floor price of Rs 382 to comply with minimum public shareholding norms. The offer will open for retail investors tomorrow.

+ RBI kept the repo rate unchanged at 5.25% and maintained a ‘neutral’ policy stance.

+ The government operationalised the Inventory-based Cross-border E-Commerce Export Framework under the Foreign Trade Policy, 2023 for exports of goods manufactured or produced in India.

+ RBI Governor Sanjay Malhotra said that plastic currency notes will be in circulation from next financial year.

+ SEBI proposed allowing depository receipts to be issued against units of REITs and InvITs in a consultation paper. This is aimed at attracting foreign inflows.

+ The government approved construction of a 135.87 km, four lane Guwahati-Tezpur Corridor along the NH-15 in Assam worth Rs 8,970.20 crore.

+ The government approved Rs 23,731 crore for ‘GOBARdhan’-India’s national unified scheme for compressed biogas.

+ The government clarified that India is neither importing nor intends to import ethanol from the US for fuel blending. The fuel blending programme and ethanol procurement is entirely from domestic producers.

+ Coal production rose 7.51% year-on-year to 69.75 MT in July. Coal dispatch grew 18.03% in the same period to 86.85 MT.

+ India remained a net importer of steel in July. Finished steel consumption rose 6.50% year-on-year to 14.40 MT in July. Steel production rose 1.40% to 13.70 MT in the same period.

+ India’s forex reserves rose by $10.51 billion to $692.87 billion in the week that ended on 31 July.

+ Nine companies including Rediff.com India, Garuda Aerospace, and Playsimple Games Limited received Sebi approval for their proposed IPO.

+ SEBI streamlined inspection of market intermediaries by mandating joint inspections by stock exchanges and depositories.

The information contained in this Groww Digest is purely for knowledge. This Groww Digest does not contain any recommendations or advice.

Team Groww Digest

He had become a billionaire who started as a truck driver.

In 2020, Lim filed a direct and blunt legal affidavit. The affidavit was also read by major banks in Singapore.

The banks were flabbergasted. A wave of panic spread.

It led to arrests and sweeping regulatory changes.

But before that, let’s talk about who Lim Oon Kuin was.

Lim Oon Kuin

In the 1960s, Lim Oon Kuin (also known as OK Lim) arrived in Singapore from China. He was only 20 years old.

Singapore back then was not the developed city-state that it is today.

It was undergoing a phase shift. The government was trying to attract investors, encourage economic activity, and solve potential conflicts among different ethnic groups.

OK Lim owned one truck. He bought diesel wholesale, and sold it to fishing boat operators, bus operators, etc.

He wasn’t just a driver, he was also an oil trader.

OK Lim’s company was called Hin Leong Trading.

People who traded or worked with Lim described him as a hard working and determined man. He was able to expand his business and buy more trucks.

In 1968, he bought his first sea vessel.

This purchase changed the nature of his work. He was no longer limited to being a last-mile fuel delivery operator.

By 1973, he had added more vessels to his fleet. Hin Leong became an oil trading company.

Hungry for more, he started trading beyond Singapore and bought oil tanker ships for his operations.

In the 1980s, he started trading oil with China and that monumentally changed his fortunes.

The momentum only grew from there. By the 2010s, he had a fleet of over 100 ocean-going tanker ships.

By 2019, the company reported a revenue of around $20 billion. A staggering number for any company anywhere in the world.

Hin Leong Trading

What made Hin Leong Trading more unique was that this company had cast a wider net than its peers.

Instead of just buying and selling oil, they did other parts of the chain too.

Ocean Tankers was a company run by Lim’s son.

This was the company that owned close to 150 tanker ships that were used to transport the oil.

They also owned moored ships in the ocean that were used not to transport oil but merely as oil storage tanks.

Universal Terminal was another company. It was majorly owned by Lim’s family.

Universal Terminal owned oil storage tanks on land. They were in the business of only storing and not transporting oil.

There were a few other companies that were also owned by family members of Hin Leong.

The First Sin

Hin Leong used to trade in oil futures as a way to hedge against oil price fluctuations.

This can act as an insurance policy against unpredictable price swings.

But Hin Leong went a bit further. They tried to make extra profits using these futures trades.

The challenge with these speculative bets is that they can be a double edged sword as well — when the bets go wrong, losses can be huge.

For several years in the 2010s, Hin Leong Trading had been incurring losses from such speculative trading activities. These losses were hidden.

Fearing a backlash, Hin Leong never disclosed the losses it was suffering in these trades. Over time it had accumulated about $800 million in losses from these speculative trading activities.

To cover up these losses, they needed more cash.

Circle Trade

This is where Hin Leong got into a vicious cycle.

Hin Leong would sell oil to another company (Company 1).

Company 1 would take a loan for this purchase.

Then Company 1 would sell the oil to another company (Company 2).

Company 2 would take a loan to buy this oil. This would be paid to Company 1.

So Company 1 would be able to pay back its loan.

Then, Company 2 would sell the very same oil back to Hin Leong.

And Hin Leong would take a loan for this purchase.

With the money received from the sales, both Company 1 and Company 2 would be able to pay back their loans.

The oil changed hands on paper and returned to Hin Leong.

But now, Hin Leong has some extra cash on its hands.

Because it was technically selling oil successfully, banks were willing to lend it money to buy oil too.

This cycle would continue.

It artificially increased Hin Leong’s revenue to $20 billion.

This is called a circular trade.

Actual trade didn’t happen. But banks gave money to the company for it.

Circle Trade

Didn’t the banks check?

Valid question. Yes, they did.

They were using the oil as collateral. So to check, they would seek certificates of storage and transport from the companies involved.

But remember the two companies run by Lim’s daughter and son?

Universal Terminal, the oil storage company run by his daughter, and Ocean Tankers, the oil tanker ship company run by his son.

They were easily able to give (fake) certificates needed as proof of movement of oil.

There were other non-family-run companies that got in on this trade too, along with Hin Leong. Some claimed to know. Others claimed they weren’t aware of what they were doing.

Could the banks have been more careful?

Yes. But OK Lim’s reputation was such that banks trusted him after doing the basic required due diligence. He had built a name for himself over 5 decades.

Discovery

This was not unravelled by some detective or forensic expert.

Everything was going well.

The $800 million loss was from speculation — Hin Leong was betting the oil prices would rise. But they had not. That is how the losses increased further.

But then, the pandemic hit in 2020 and demand for oil collapsed globally.

His already loss-making futures bets expanded and became even bigger losses.

This made the entire act difficult to hide.

At the same time, remember banks used oil as collateral?

When the price of oil went down, banks called Hin Leong to increase the oil quantity kept as collateral (so that their collateral’s value still matched the loan value).

April 2020, various banks started calling the company asking for more oil, or for their money to be returned.

No replies.

On 17th April, OK Lim submitted a legal affidavit.

Plainly, without hiding behind legal words, he mentioned that he was responsible for all that had happened.

The total loans he had taken were worth $3.85 billion.

The company’s total assets were worth only $714 million.

Because the various banks had no simple way of checking with each other, many banks had given loans keeping the same oil as collateral.

Hin Leong Trading was using borrowed money to buy its own oil back from other companies.

This is called circular trading.

It is illegal.

It is illegal because the sales are not real.

It’s just deceptive accounting to show fake sales.

They sold something, took out a loan, and bought that thing back. The cycle repeated.

Revenue kept climbing.

Nothing the company sold was actually being consumed.

Quick Takes

+India received foreign capital worth $32 billion so far after measures announced on 5 June, said RBI Governor in media interviews. The current scheme has surpassed the 2013 level of $26 billion in 45 days. Majority of the inflows are through FCNR(B) deposits.

+India’s engineering goods exports rose 21% year-on-year in June to $11.48 billion. Shipments to China increased 74% to $361.47 million from a year ago. The US was the largest market for engineering goods at $1.95 billion in June.

+India’s Industrial Output rose 7.3% in June (vs 5.1% in May). This is the fastest pace of growth since July 2024. Manufacturing output increased 7.8% year-on-year in June (vs 5.2% in May).

+India’s exports rose to the highest ever at $863.10 billion in FY25-26. Merchandise exports stood at $441.80 billion and services exports increased to $421.30 billion. FTA’s with UAE, UK and Australia were the core drivers of growth.

+Regional Rural Banks reported the highest ever net profit of Rs 10,177 crore in FY25-26. Credit Deposit Ratio improved to 75.2% (vs 73.4% in FY25). Net NPA stood at 2.1% (vs 2% in FY25).

+India launches its first 40-wagon, direct commercial container freight train to Nepal under the revised India-Nepal Rail Transit protocol.

+Public Sector Banks’ net profit is at record high of Rs 1.98 lakh crore. Gross NPA was at a record low of 1.9% in FY25-26.

+The government released Index of Services Production (ISP) data for May 2026. 16 out of 19 sub-sectors grew, with accommodation & food and real estate growing the most. Air Transport, postal & courier and information and broadcasting were the only ones that fell.

+SEBI will replace the current volume-weighted average price method and use the Close Auction System to calculate the closing prices of shares that have F&O contracts from Monday (3 August).

+The US Federal Reserve kept the benchmark interest rate unchanged at 3.50%-3.75%.

+The government said that the Ethanol Blended Petrol programme trials confirmed that E20 is safe for use under prescribed standards and legacy vehicles do not exhibit any significant variation in performance or abnormal wear and tear due to E20.

+The Bank of England kept interest rates unchanged at 3.75%.

+Veritas Finance re-filed for an IPO with SEBI. The IPO will comprise a fresh issue of Rs 900 crore and an offer for sale of 1.28 crore shares. The company had earlier filed for an IPO in January 2025.

+India’s forex reserves rose by $6.11 billion to $682.35 billion in the week that ended on 24 July.

+India’s fiscal deficit widened to Rs 3.07 lakh crore in the April-June quarter compared to Rs 2.81 lakh crore in the same period a year ago.

+The government approved Rs 84,084 crore for the National Offshore Exploration Scheme of the Ministry of Petroleum and Natural Gas up to FY30-31.

+The government approved Rs 5,070 crore for development of 5,000 MW floating solar photovoltaic projects with energy storage systems.

+SEBI introduced the ‘GARUDA’ framework to simplify and expedite the launch of AIFs effective from 30 July. This allows AIFs to launch 10 day after filing a Private Placement Memorandum (PPM).

The information contained in this Groww Digest is purely for knowledge. This Groww Digest does not contain any recommendations or advice.

Team Groww Digest

He was a financier and one of the richest persons in the world.

Morgan loved stability. He invested in companies aiming for good margins and consistency.

JP Morgan had a reputation for being a consolidator. He would often finance and merge two competing companies.

This would result in much less competition and better margins.

Too much competition destroys value was his mantra.

Andrew Carnegie was on the opposite side of this belief system.

Andrew Carnegie was also one of the richest people in the world. But his wealth did not come from finance or investing.

It came from steel.

Carnegie Steel owned the steel-making chain end-to-end. Iron ore mining, transporting, blast furnaces, steel mills, etc. His company owned them all.

It allowed the entire system to work closely and in an integrated manner. Its efficiency and cost savings were the kind others could not achieve.

Around 1900, Carnegie Steel was considered the world’s biggest steel producer.

Carnegie vs Morgan

Carnegie was not in the business of making steel end-products to a great extent. It was mainly a producer of steel.

Some of the companies Morgan had invested in were end-product makers. And they depended on steel bought from Carnegie.

Things were good until Andrew Carnegie’s gaze fell on end-products. These were steel items like rods, pipes, wires, buckets, nails, etc.

He thought about how much cheaper and more efficiently he could make end-products since he already owned the entire steel-making chain.

The news got out. The word reached JP Morgan.

He was obviously not pleased.

JP Morgan realised that if Carnegie started making end-products along with owning the entire steel-making process, his own companies would not be able to compete.

The solution?

JP Morgan’s companies would also have to set up their own steel-making system and expand existing ones.

Everything that Carnegie already had, they would have to get for themselves. That was how he would be able to put up a fight.

In short, both Andrew and Morgan would become owners of end-to-end steel and steel products making companies.

This would require massive investments from both companies.

More so from JP Morgan’s companies since the cost of setting up blast furnaces, iron mines, etc is much higher.

Charles Schwab

Today we talk about semiconductor technology and crude oil being crucial industries.

Steel was considered a crucial industry in the early 1900s.

America was rapidly industrializing, and steel was required in massive quantities.

This also coincided with a massive expansion in railroad networks in America.

A young man named Charles Schwab joined Carnegie Steel in 1880 as a stake driver. He was working on the factory floor.

He performed exceptionally well. Within a year, he was promoted to chief engineer and assistant manager.

And within 17 years of joining the company, Charles became the president of the Carnegie Steel Company.

Perceived as being very charismatic, Charles was well-regarded.

He was a great salesman. He would successfully sell not only products but also goals, and vision to the factory workers.

Charles would visit the factories often, talk to individual workers, remember their names, praise them publicly, and encourage a healthy sense of competition among them.

Charles Meets Morgan

In 1900, Charles Schwab attended a dinner at a club in New York.

This dinner was also attended by JP Morgan.

It was here that Charles Schwab floated an idea.

He informed JP Morgan about how his goal of reducing competition and protecting margins could be met if he invested in Carnegie Steel.

He did not propose an offer. He did not suggest a move. He just wondered aloud about the idea in front of JP Morgan.

JP Morgan was interested.

After the dinner, they met privately and talked further. Morgan asked more about the potential deal Charles Schwab was proposing.

JP Morgan felt threatened by Carnegie’s desire to make end-products. JP Morgan had thought about setting up his own steelmaking factories.

But the proposition of acquiring an existing steel-making business seemed like an even better deal. It would allow him to make steel, and at the same time his end-product-making companies would not have to worry about supply.

Charles Schwab had taken a big risk here.

He was merely suggesting the idea to JP Morgan. He had not spoken to Andrew Carnegie about this at all.

But he had a deep understanding of steel-making, much like Andrew Carnegie had.

He had a good understanding of capital management of steel companies — the kind of the topic that JP Morgan dealt with.

And he was aware of some of Andrew Carnegie’s recent thoughts.

Armed with the knowledge that JP Morgan might agree to buy Carnegie Steel, he approached his boss, Andrew.

Charles Meets Andrew

Carnegie Steel was an extremely successful company that had essentially become a money-printing machine.

On the surface, there was little reason for Andrew to sell his company.

But Charles knew a few things about Andrew and felt he could push the topic.

Andrew Carnegie was at the peak of his successful career. He had built a behemoth company.

He could restart building a brand new vertical in his company — that of making steel end-products. That would be a fresh start requiring years-long effort.

But at the age of 65, Andrew was getting more interested in philanthropy. He wanted to build schools and libraries.

Charles knew that, and pitched the proposal accordingly.

Carnegie Steel was a private company. By selling, he could make his wealth more liquid. With money like this, Andrew could pursue his philanthropic endeavors like nobody else before.

Charles also highlighted that given this was not a distress sale, Andrew could demand a price he deemed fit for the company.

After some thought, he pitched a price. $480 million.

Charles took the number to JP Morgan.

According to reports, JP Morgan agreed to the price almost immediately.

United States Steel Corporation

JP Morgan didn’t just acquire Carnegie Steel, he consolidated a bunch of other steel companies.

He used a mix of bonds and equity shares sold to investors to raise the massive amount of money needed for this acquisition.

It became a system of steel industry companies composed of entities that did everything from mining, smelting, steel-making, end-product making, and so on.

The parent company came to be called United States Steel Corporation.

Combined together, United States Steel Corp was the world’s first unicorn company ($1.4 billion, to be precise).

And Charles Schwab was its president.

Quick Takes

+ India’s Infrastructure output rose to a five month high of 5% year-on- year in June. (vs 3.2% in May). The Index of Core Industries for June is the first data released with a revised base year of 2022-23.

+ The government clarified that there is no proposal to remove long-term capital gains tax on equities for domestic investors in the parliament. The clarification was followed by the decision to exempt FPIs from LTCG tax on investments in government securities last month.

+The government will sign an Implementation Agreement with Germany on 22 July to strengthen institutional capacity, facilitate knowledge sharing and foster technical cooperation. The agreement will be signed during the release of ‘AAROH-Annual Report on Mine Closure’.

+Sebi directed depositories to issue operational guidelines for freezing promoter holdings at the ISIN level during buybacks by 1 August.

+US President Donald Trump said that all imported generic drugs will have 100% tariff in 2028 and 200% a year after that. There will be no tariff for 2 years starting 1 August. This is done to reshore generic pharmaceutical production into America.

+The government approved two Electronics Manufacturing Clusters (EMCs) worth Rs 1,012 crore in Manallur and Pillapaikkam, Tamil Nadu.

+The government approved construction of a 14.52 km line between Nimpura and Midnapur, West Bengal for Rs 440 crore. The project is expected to support additional 3.52 MTPA traffic on the freight corridor to transport coal, iron ore, steel, etc.

+India’s forex reserves rose by $1.08 billion to $676.24 billion in the week that ended on 17 July.

+The government approved two additional railway lines in Karnataka and Andhra Pradesh (46 km network) with a total cost of Rs 1,264 crore.

+India’s services exports rose 8.72% to $421.3 billion in FY25-26, compared to last year. Telecommunications, computer & information services, and business services contributed the most to the growth.

The information contained in this Groww Digest is purely for knowledge. This Groww Digest does not contain any recommendations or advice.

Team Groww Digest

But there was a time when Louis Vuitton almost took over Gucci.

Almost. But it managed to save itself.

Louis Vuitton is a part of a larger group called LVMH.

And LVMH had made a bid to take over Gucci. It had built stakes or taken over various other luxury brands across Europe.

So it had reason to believe a Gucci takeover would be easily possible as well.

But Gucci had a few tricks up its sleeve. What followed were a few desperate measures by both sides. Some worked in favour of Gucci, some against.

The last trick Gucci used was what’s called a white knight.

But before we get to that, and what eventually happened, we must understand Gucci and LVMH individually.

Gucci Before This Episode

The first thing to understand about this story is that Gucci was no longer controlled by the family that started it.

It was an Italian leather goods shop started in Italy in 1921.

Over the decades, the Gucci brand had lost its sheen because of over-licensing their brand name. Luxury brands work on exclusivity, and the name appearing on too many products ruins that image.

That was one problem.

Family infighting had meant that gradually, the family as a whole did not act as one.

Internal disputes and conflicts meant that the company’s various shareholders (who were family members) were either leaving the company or were being pushed out.

Eventually, a family member sold enough stake to an investment company based out of Bahrain. This was a little over 50% of the company.

By 1993, Gucci became a fully non-family-owned company.

Over time, all family members sold their portions off.

Investcorp owned 100% of Gucci.

Investcorp made Domenico De Sole the CEO. Tom Ford was made the creative head.

Together, they started righting what was wrong.

A large number of branding licenses were cut. The brand focussed on newly designed products.

The brand started clawing back lost glory.

To raise fresh money, the brand went for an IPO in 1995. The price was $22 per share.

In this IPO, Investcorp sold off about half of its stake. It was still the largest shareholder.

Investcorp was not in for the long run. They wanted to turn around a burning ship and exit. They had succeeded.

By March 1996, the company’s share price had risen to $48 per share.

They were sitting on very handsome profits.

They did a secondary offering and sold off all their shares.

From this point on, Gucci was owned by various investors, but there was no single controlling shareholder.

Domenico De Sole continued as the CEO since the board of the company felt confident in his abilities.

LVMH This Episode

LVMH was essentially a holding company.

Bernard Arnault had bought Christian Dior’s parent company at a distress sale in 1984.

Since then, he’d gone on to acquire one luxury company after another. It worked well. Today, the company is the world’s biggest luxury brand holding company.

By 1998, LVMH had acquired top luxury brands like Sephora, Givenchy, and Loewe.

Unlike other holding companies, LVMH was a holding company/investor that operated almost exclusively in the world of luxury.

It had developed a system for running such companies. It knew that luxury companies were not run using the same principles as any other consumer goods company.

LVMH understood luxury.

The Episode

So now, we get to the LVMH vs Gucci battle.

Gucci shares were almost entirely available on the share markets. There was no single large controlling shareholder.

To make Gucci even more tempting, it was no longer a fledgling luxury brand that was directionless or losing reputation.

It was a healthy, functional, and growing luxury brand.

These conditions made Gucci nearly perfect for a takeover bid by LVMH.

In 1999, LVMH announced that it had bought nearly 5% of Gucci’s shares. LVMH positioned this as a pure investment interest.

It is difficult to take over a company that has large controlling shareholders. They usually tend to stick and not sell easily.

But since Gucci was almost entirely held by smaller groups of investors, Gucci seemed like an easy takeover.

The CEO of Gucci had feared about a day like this.

In the meantime, LVMH kept buying more shares of Gucci in the open markets. The CEO of Gucci had been correct to worry about it.

LVMH had built a business model out of this. They had lots of cash and could deploy the money fast. This helped them acquire companies rapidly.

Not long after that announcement, LVMH announced that it owned about 34.4% of the company.

34.4% does not give the company a majority. They were still far from 50%.

But they did become the largest shareholder, and that itself is powerful enough in a company where all other shareholders own smaller portions.

The CEO of Gucci did not like this.

Why?

CEOs are appointed by the boards of directors of companies.

The board of directors are elected by shareholders. So, the CEO and the board must act in the interest of the current shareholders.

De Sole, the CEO, was worried that LVMH might buy a little over 50% of the company and attain full control over it.

This, he felt, was unfair to the existing shareholders.

His pitch was that LVMH should take over the company and pay a fair price to all shareholders, not just 50%.

The Negotiation

With 34.4% stake, LVMH demanded board seats.

De Sole countered, saying LVMH should offer a price for all shares or reduce his stake to about 20% and accept a lower number of board seats.

Neither could meet in the middle. The tussle set off.

LVMH then tried to call for a shareholders’ meeting to let the shareholders decide who the members of the board should be.

In effect, he tried to get control over the company.

Poison Pill

De Sole decided to counter this with a shrewd move that is sort of a last resort for companies being taken over.

The move is called a poison pill.

What companies do is they create lots of new shares and give them to other shareholders (excluding the one trying to take over).

Gucci created new shares and gave them to employees via stock options (ESOP).

Since these were new shares entirely, the total number of shares increased.

Since LVMH was not given any new shares, the number of shares they owned remained the same. But the percentage they owned would drop from 34.4% to about 25%.

The move diluted the ownership percentage of LVMH.

This reduced their influence over the company.

Why is it called a poison pill?

Because it is a bit self-damaging to prevent a larger damage. It is trying to make the company less attractive to the party trying to take over. It makes it tougher for them since now they’ll have to spend even more money to acquire the same percentage of stocks as before.

There are numerous examples of cases where the poison pill method worked as intended.

White Knight

The poison pill failed.

This gets a bit complicated.

Companies are allowed to use a poison pill to defend themselves. The idea is that a company can use poison pills to protect shareholders.

In this case, the poison pill got challenged in court because LVMH was also a large shareholder and was effectively being targeted by the board.

Poison pills are supposed to help buy shareholders time.

It cannot be used to retain voting power when another buyer is buying shares and therefore voting power.

The argument made by LVMH was that the board was using its powers to retain control over the company without respecting all shareholders.

Remember, these were ESOPs. So even other shareholders’ (the various small and individual investors) stakes were being diluted. Even their voting power was being effectively reduced.

Many poison pills use a strategy where free new shares are given to all shareholders except the one trying to take over the company.

This is more often allowed.

Gucci’s poison pill looked more like voting power manipulation and less like protecting shareholders’ best interests.

The poison pill did not pass the court’s test.

So now you’d imagine LVMH has a straight path towards acquiring a controlling stake in Gucci. They had 34.4% shares and could increase or demand board seats.

But De Sole had one more trick planned.

In March 1999, they signed an agreement with PPR, a French retail company.

The deal was to raise money from them by issuing fresh shares. Specifically, $3 billion cash.

A company is allowed to raise capital by issuing shares.

This move was legal.

So, Gucci created new shares and sold them to PPR for $3 billion.

With this, PPR now had a little over 42% stake in Gucci.

LVMH was no longer the biggest shareholder. PPR had more voting power and was friendly with the existing board.

PPR became the large, friendly shareholder — the white knight!

How was this a friendly move for the board and existing shareholders?

PPR had agreed to buy the shares for a 7% higher price than the market price. Since the company was also raising more cash while selling shares for a higher price, the company was benefitting from the move.

Why would PPR pay a higher price?

They wanted an entry into the luxury space. Unlike LVMH, they were not already a luxury holding company.

So they were willing to pay a higher price.

Gucci is still with PPR (PPR changed its name to Kering in 2013).

And yes, Kering is now what it wanted to be. It is a luxury holding company.

Its portfolio includes Balenciaga, Saint Laurent, and several others — around 12 core brands.

Kering’s market cap is about $35 billion today.

Between 1999 and 2004, PPR continued acquiring more stake in Gucci. Today, it is entirely owned by PPR (or Kering).

LVMH gave up on the idea of taking over Gucci. By the end of 2001, they had sold off their entire stake in Gucci. A big portion of that was sold to PPR.

But it did not give up on its strategy. It continued to acquire other luxury brands.

Today, LVMH is the largest luxury holding company in the world with over 75 brands.

Its market capitalization is about $280 billion today.

Quick Takes

+ India’s annual inflation rate rose to 4.38% year-on-year in June (vs 3.93% in May).

+ India’s merchandise exports rose 15.5% year-on-year to $40.41 billion in June while imports grew 31% to $70.84 billion. The merchandise trade deficit widened to $30.43 billion.

+ Zetwerk has received SEBI’s approval for its IPO.

+ India’s Wholesale Price Index inflation rose 9.87% year-on-year in June (vs 9.68% in May)

+ India’s net direct tax collections rose 16.4% year-on-year to over Rs 6.51 lakh crore as of 13 July, 2026.

+ MoSPI released the first Index of Services Production (ISP) for April 2026, covering 19 sub-sectors which cover 60% of the services sector. 17 out of 19 sub-sectors grew, with accommodation & food and retail trade growing the most. Air transport and railway transport were the only ones that fell.

+ The government has updated the Foreign Trade Policy to prohibit the import of goods made fully or partly using forced labour. The rule will come into effect 30 days after its publication in the Official Gazette.

+ US inflation fell 0.4% in June (vs a 0.5% rise in May). Core inflation, which excludes food and energy, stayed flat in June (vs a 0.2% rise in May).

+ The India-UK Comprehensive Economic and Trade Agreement (CETA) came into effect, aimed at increasing bilateral trade.

+ India’s unemployment rate remained unchanged at 5.5% compared to May. The rural unemployment rate fell to 5% (vs 5.1% in May). Urban unemployment rose to 6.6% (vs 6.4% in May)

+ The government approved two railway projects in Odisha and Jharkhand worth Rs 3,907 crore.

+ The government approved Semicon 2.0 with a budget of Rs 1.27 lakh crore to support the semiconductor design and manufacturing ecosystem in India.

+ The Ministry of Ports, Shipping and Waterways (MoPSW) has given in-principle approval for two maritime projects: a new shipbuilding cluster in Porbandar, Gujarat, and another project at Vadinar in the Gulf of Kutch.

+ The government increased windfall taxes on diesel and Aviation Turbine Fuel (ATF) exports effective today. Diesel export duties increased to Rs 15.5 per litre (vs Rs 8.5 per litre). ATF exports were raised to Rs 14.5 per litre (vs Rs 7.5 per litre). The export duty on petrol, however, was reduced to Rs 2.5 per litre (vs Rs 4 per litre).

+ India’s first hydrogen-powered train with a capacity of around 2,600 passengers, will begin operations tomorrow. The train will run on the Jind-Sonipat section of Haryana.

+ India’s forex reserves rose $964 million to $675.16 billion for the week ended on July 10.

+ The government will revise the series of the Index of Core Industries (ICI) with the base year 2022-23 on 20 July. The number of core industries has increased to 9 from 8 with the addition of iron ore.

+ MakeMyTrip’s Indian subsidiary confidentially filed for an IPO with SEBI. The company and its subsidiary, ibibo Holdings, will sell shares in the IPO, as per its filing to the U.S. SEC.

The information contained in this Groww Digest is purely for knowledge. This Groww Digest does not contain any recommendations or advice.

Team Groww Digest

Gillette and Schick together had 90% of the US shaving market.

It was technically still a monopoly, as 70% of the market was dominated by Gillette.

One quirky video shot by Dollar Shave Club (DSC) rocketed it to popularity in 2012.

It was actually the founder of the company, walking around their warehouse, explaining how DSC was better.

There were props like a machete, forklift, and other such eye-catching details. It made things a bit edgy.

It worked well.

The proposition was simple.

Modern-day shaving razors had become too complicated and expensive — unnecessarily.

DSC shipped razors for just $1 a month.

Their servers crashed, and they got 12,000 orders within 2 days.

DSC was a Direct-to-Consumer (D2C) brand aiming straight at the big shaving razor companies.

In that year, blades by Gillette or Schick cost around $5.

These razors were quite unique and were not interchangeable. You could not buy a razor from one company and fit blades from any other company.

In short, the company sold you a razor and hoped to lock you in via blade purchases.

DSC challenged this model by offering each of their blades for around $0.60.

So what DSC promised was a pack of 5 blades for $1.

(Shipping was $2, so the final cost was around $3 a month).

It was a subscription. Unlike other blades that were bought at the department store, DSC blades just arrived at home via courier.

So once users subscribed, customers just stayed with their choice.

DSC

By 2015, some reports put DSC’s market share (USA) at around 5%.

Sure, that’s nothing compared to Gillette’s 70%. But definitely not worth ignoring.

Dollar Shave Club was acquired by Unilever for $1 billion in 2016. Unilever was a competitor to P&G (Gillette’s parent company).

At the time of acquiring, the D2C brand had revenue of around $150 million and was growing fast. And this was a sticky group of customers since they weren’t simply buyers, they were subscribers.

Almost simultaneously, chatter about the acquisition started doing the rounds.

Media, business school students, and several others were all asking what exactly Unilever acquired.

Why was that the case?

Their question was grounded in the fact that DSC did not have any manufacturing plants of their own.

Their blades weren’t unique in any real way.

They were sourcing blades from a Korean manufacturer that sold very similar blades under different brand names.

Some DSC customers actually started buying blades from this manufacturer directly since they worked out even cheaper!

But that was never DSC’s pitch.

DSC was a subscription service that eased the delivery of cheap blades to the customers. It was never promised it had its own manufacturing or R&D facilities.

In some ways, it was white-labelling the blades. And it worked.

Later though, DSC switched their blade sources and made them more proprietary.

Unilever had acquired Dollar Shave Club to grab a slice of a very fast subscription-based shaving market. Unfortunately for them, that didn’t pan out as expected.

In 2023, it sold 65% of Dollar Shave Club off to an investor while remaining a minority shareholder.

D2C: Distribution

Dollar Shave Club was a perfect D2C example.

Companies that operate in the Fast-Moving Consumer Goods (FMCG) space have incredible moats. It is tough to crack their markets.

One crucial link in their chain is that of the distribution network.

New companies do not have the supply chain that FMCG companies have built over years. This allows them to make their products reach stores in every corner.

FMCG companies do not own the entire chain. It is a well-oiled machine with many parties involved. Distributors, wholesalers, transporters, etc, each with their own little business model and tiny margins.

So when a customer buys a product, they are indirectly paying for that entire chain of companies working to get that product on the shelves.

Obviously a new company cannot match that from day 1. In fact, the complexity and difficulty of building the distribution network are one reason why this industry does not get as many competitors as some others.

The difficulty is a barrier.

D2C companies try to crack that.

They try to establish a connection with the final customer directly, skipping the wholesalers, distributors, etc in between.

The added advantage of this process is that they are able to offer much lower prices on their products. Not always, but many times.

The D2C space is not new. It has existed for a long time. But the internet, and then social media, made it that much easier for D2C brands to reach their target customers.

And that in turn led to more D2C brands being started.

In India, we have been seeing a particularly high number of D2C brands mushrooming in the last 5 years or so.

Modern e-commerce websites aid in this too.

D2C brands manage to attract customers via their social media and content while listing their products on Amazon and Flipkart.

That makes it easier for customers to trust them with their money since they already trust buying on Amazon and Flipkart with their hard-earned money.

Further, since e-commerce companies have existed in India for so long, many of the logistics bumps have been well-ironed out. Example: courier companies are well-versed with handling e-commerce packages, and even accepting payments.

But it isn’t just that reason that D2C brands have mushroomed in such numbers.

It’s also the manufacturing, or rather, the lack of manufacturing needed.

D2C: Manufacture

D2C companies don’t always manufacture. In fact, forget a factory, they might not even have a warehouse.

Of course, not all of them are that way. Many do have their own factories.

—White-Labelling—

White-labelling is a sticker job.

Some suppliers manufacture the products in bulk without any labels. When a brand wants to label the product and sell under their brand, they buy in bulk and add their own label to it.

This is why you will notice that certain products like power banks, chargers, trimmers, etc often look alike despite being from different brands.

White-labelling is also common in textiles and apparel, grooming & beauty products, pet products, etc.

Some D2C brands do go one step extra and put their own quality check measures on these generic sourced products.

—Private Label/Custom Spec—

Many D2C brands wish to change available products and make them more in line with their brand’s positioning.

In such cases, the brand specifies what they want, and the manufacturer makes the product accordingly.

Of course, there are levels to this customisation. For example:

Level 1: A sunscreen D2C brand might ask its supplier to put the cream in a customised container and packaging.

Level 2: In addition to that, the brand might ask its supplier to add a certain perfume and colour to the cream.

Level 3: In addition to that, the brand might ask its supplier to change the very formulation of the cream to increase its SPF count or reduce its viscosity.

If a D2C brand customises its products to this extent, it is getting close to what many large and established brands are doing.

—Contract Manufacturer—

This is an option even the biggest and most established brands use.

This is even more specialised than the previous option. In this, the product gets designed/formulated by the company.

And then the specifications are handed over to the manufacturer to make the product. The brand may even define how the quality of the products will be tested.

The key distinction between the Private Label model and contract manufacturer model is the level of customisation.

In the case of a private label, the brand makes minimal changes to a product already developed by the manufacturer.

In contract manufacturing, the brand has far more control over the product.

In fact, in this, the manufacturer might be asked to carry out operations that it does not already do.

D2C brands that employ this model are often seeking higher quality, product distinction, and/or have a large order size.

—Co-developed Product—

Some D2C brands, and even large established brands might work closely with their manufacturer and their capabilities to develop a product that is highly customised and unique.

This obviously is more expensive and requires a large order size or high margins.

—Fully Integrated—

The last step in this chain is the fully integrated option.

Not even all big and established brands use this. But many do.

And some D2C brands also make use of it. Especially in cases where they want absolute control over the final product.

D2C: Suppliers and Manufacturers

Companies that work in this space are usually very secretive about brands they supply to. They sign contracts and NDAs to ensure word does not get out.

When Dollar Shave Club’s sourcing news was out in public, everyone was talking about Dorco, the South Korean razor blade manufacturer that used to supply to many brands.

There are similar companies in many product categories.

Cosmax is a South Korean company that plays in the skincare industry. The company does not reveal the brands it works with.

But it does clearly talk about its offerings — including cream products that can be white-labelled, customised, manufactured-to-spec, tested, packaged, etc.

Pou Chen works similarly in the world of sports footwear.

Even the energy drink industry have their own set of manufacturing companies offering all sorts of options from ready-made energy drinks to custom-formulated fruit juices.

Refresco is one such company operating in Europe and the Americas.

This might help explain how some popular YouTubers who specialise in making content suddenly start selling energy drinks, apparel, etc.

Safilo does the same in the world of eyewear.

You’d be surprised.

There are such companies serving D2C brands even in sectors like babycare, pet food, home care, and supplements.

Ease

So by now, it must be clear that starting a D2C company might be more accessible than you think.

If a person has reasonable knowledge about a product and its sector, knows what he or she wants to make, and reaches out to the right vendors, the input costs can be incredibly low.

Some D2C brands have nothing more than a small office space and a few employees.

Clearly manufacturing was never really a challenge.

There are enough options. White labelled products are available for companies that do not have the resources to support a R&D team of their own.

Warehousing — that is offered too, often by the same folks who manufacture.

The supply chain has become a well-oiled machine.

And thanks to social media, distribution has gotten much easier too.

Often, many D2C brands are nothing more than branding and marketing companies for products that have been developed and manufactured by someone else.

This does make it incredibly easy for new entrants.

And that’s where D2C brands have some drawbacks.

Many D2C brands are often unable to answer what makes their product better or unique. It’s often the case that they’re not unique at all.

Customers may trust them less since they are new and their standards are less known.

To make matters worse, their products are easily copied by competitors. So many D2C brands die early deaths because their products suffered due to imitation.

That said, D2C brands are often able to do what big brands can only dream about.

Many D2C brands are excellent at finding a niche audience and serving them exactly what they want.

Think about a D2C wrist-watch brand that caters to fans of astronomy. Examples like that.

They’re also excellent at listening to feedback from these customers and making adjustments accordingly.

Storytelling plays a big role when it comes to targeting niche markets, and D2C brands are much better placed to do just that.

India’s many D2C brands have all sorts of examples that have performed well and risen through the ranks to become established players themselves.

Can you think of any companies that are operating in the Indian D2C space?

You’d be surprised to know some top-favourite brands today started off as D2C brands.

Quick Takes

+ The Defence Acquisition Council (DAC) approved proposals worth nearly Rs 52,000 crore to procure advanced indigenous military hardware, including Akash Tarang electronic warfare systems, Kamikaze drones, anti-tank missiles, and naval unmanned aerial systems.

+ The India-Israel Bilateral Investment Agreement (BIA) came into force on 4 July, establishing a secure legal framework to boost cross-border capital flows while safeguarding both nations’ sovereign rights to regulate public policy.

+ India and Indonesia signed multiple MoUs including agreements on defense cooperation for BrahMos and Astra missile systems, critical minerals and steel supply chain technology, medical product regulation, disaster management, telecommunications, agriculture, etc.

+ Manipal Health has received SEBI’s approval for a Rs 8,000 crore IPO.

+ Cult.fit has filed draft papers with SEBI for a Rs 950 crore IPO.

+ The US-Iran ceasefire collapsed with the US launching airstrikes on 80 targets in Iran and revoking its oil sanctions waiver after Iran attacked 3 commercial shipping tankers in the Strait of Hormuz. This triggered retaliatory attacks on US bases in Bahrain and Kuwait.

+ India’s auto component industry grew 12.7% year-on-year reaching a turnover of Rs 7.6 lakh crore in FY26.

+ India and Australia signed a Joint Declaration on Defence and Security and fast-tracked negotiations for a CECA (Comprehensive Economic Cooperation Agreement) while concluding strategic partnerships in maritime security, civil nuclear administrative arrangements, and critical tech supply chains during the 3rd Annual Leaders’ Summit in Melbourne.

+ Zostel has approached SEBI to review Prism’s (Oyo’s parent company) updated Rs 6,650 crore IPO prospectus, claiming it conceals critical facts about their decade-long 7% equity ownership dispute.

+ India’s forex reserves rose by $0.73 billion to $674.19 billion in the week that ended on 3 July.

+ Equity mutual funds saw a net inflow of Rs 28,973 crore in June (compared to Rs 22,908 crore in May). Debt funds saw a net outflow of Rs 1.09 lakh crore in June (compared to a net outflow of Rs 96,948.51 crore in May): AMFI.

+ The Indian Railways has approved 2 projects: Rs 175 crore to set up additional maintenance facilities for 250 three-phase electric locomotives at the Raipur Diesel Shed and Rs 206 crore to install the ‘Kavach 4.0’ Automatic Train Protection system across 680 route kilometers of the Northern Railway.

The information contained in this Groww Digest is purely for knowledge. This Groww Digest does not contain any recommendations or advice.

Team Groww Digest

Melvindale, Michigan (USA), 15 Aug 2003.

It was at a local oil refinery. The explosion resulted in what looked like smoke or steam rising from the site.

Unsure, the authorities feared the worst. They acted as though some toxic gases had been released.

Not wanting to take chances, they evacuated an area roughly equal to 550 football fields.

A little over 700 km away, in Sudbury (Canada), another accident was making life difficult for local authorities.

170 miners were working at a mine 4,000 ft below the surface. Their hoist lift stopped working. In damp and dark conditions, the lights went out, and miners had no real source of food.

They had water and their battery-powered flashlights still worked. But there was no way for them to leave.

In New York City, all metro trains ground to a halt. 4 lakh passengers were being helped out of the underground metro system.

800 km or so from there, workers at an amusement park were helping riders down a 200-ft tall roller coaster. It was stuck and wouldn’t move.

The water supply was affected in several cities in the Northeast of the USA and Southeast of Canada.

A whole host of systems were failing. Traffic lights weren’t working. Metro rails halted. Elevators trapped people. Cellphone communication became unreliable as many towers failed. Flights were disrupted. Hospitals were struggling.

A very long list of systems failed over a very large area.

Why were things going so wrong in such far-off cities? And that too at the same time?

Because they were linked to one essential system. The power grid.

This particular power grid was called the Eastern Interconnection. And parts of it had lost power on 14 Aug, 2003.

The event came to be known as the Northeast Blackout of 2003.

Even today, it remains the biggest power outage event the USA has experienced.

(In case you’re wondering — the smoke in Melvindale was mostly steam; all the trapped miners at Sudbury were rescued the next morning).

What Happened?

What happened is quite obvious. Power cut.

But why and how?

The summer was upon the region and power consumption was increasing (fans, ACs, fridges, etc).

Hot summers cause the power cables to sag (heat leads to expansion). Further, since more power was being drawn, more current was flowing through each, further heating the power cables.

The grid is connected in an interesting manner. It’s not connected in a straight line. It’s more like a web of connections.

So if one line goes out, power still reaches via the other lines.

And to deal with sudden issues like touching trees or even overcapacity, there are safety mechanisms in place.

Circuit breakers kill sections of the grid to protect them.

On 14 Aug, the hot power cables expanded and sagged. And at some locations, they touched untrimmed trees.

Immediately, those sections went off.

As soon as one cable touched some trees, it went off. A cascade of events was set off. A large part of the Eastern Interconnection grid was shut off.

There were many existing issues in the grid. But the trees sort of started the domino effect.

Events like these highlight the extreme importance of grids in our lives. They also make us curious about a part of the modern economy that we often take for granted.

The Grid

It is a giant net. There is no single point of entry or exit for electricity.

Think of a lake of water. Water is entering the lake from multiple streams. And multiple consumers are pumping water out of the lake.

It’s something like that.

The grid has many different power producers all contributing electricity to the system. And various consumers take out this electricity and consume it.

Electricity is produced at a certain voltage.

Its voltage is increased for sending over long distances. This is done because it is more efficient. Sending low-voltage electricity over long distances results in more power loss.

Then, at the destination, its voltage is lowered because the high voltage is too dangerous to be sent to homes, shops, and offices.

Once the voltage is brought down, it can then be distributed to various consumers.

For the system to sustain, the frequency needs to be within certain limits. If the frequency falls below the limit, there is a power cut.

If it increases above a certain limit, the power is cut or controlled to prevent overwhelming other parts of the grid.

Since there is no storage in the grid system, power consumed must be roughly equal to the power produced.

In recent times, many battery systems are being incorporated in the grid. So grids are starting to add storage (battery).

When demand for power goes up, the frequency starts falling. That’s when power producers start making more power. And vice versa.

This is why whenever there is a drastic change in frequency, parts of the grid automatically shut down (using breakers and relays). It is intended to prevent damage and contain the spread of a disturbance.

The voltage is stepped down in stages since different consumers require different voltages of electricity.

Example: factories need higher voltages than homes and offices.

Parts of Grid: Fuel Supplier

There are many different sources of electricity. Many come from burning some kind of fuel.

Companies that find, gather, and supply the fuel form the very first layer in the grid.

So, coal mining companies, oil and gas companies, uranium mining companies, etc.

Of course this layer of companies does not exist in the case of renewable sources like wind, solar, and hydroelectricity.

The thing to understand about these companies is that they are not dedicated to the grid.

Most companies that are digging for coal or oil & gas are doing so for all sorts of customers, not just power plants.

Parts of Grid: Power Generation

These generate the power.

They run thermal power plants (coal), gas turbine plants, hydroelectric dams, nuclear power plants, wind farms, etc.

This sector has many companies specializing in one kind of power generation. So some companies stick to hydroelectric power only, some stick with coal, etc.

The ability to produce power is measured in megawatts (MW) or gigawatts (GW). Where 1 GW = 1,000 MW.

Power generation companies have something called installed capacity. This is the designed output of the facility.

Many plants produce electricity that is under the capacity. Only during high demand periods does the plant reach full capacity. This is true for thermal plants and gas plants. Many other types always operate at capacity all the time.

Power generation companies often report their total capacity by adding all their plants’ installed capacity. This gives an idea of how big the company’s operations are.

Many companies also report capacity that is under construction or even planned but not started.

MWh (megawatt-hours) or GWh are units to measure the actual electricity generated by a plant over a period.

Plant Load Factor (PLF) and Capacity Utilisation Factor (CUF) help understand how much of a plant’s capacity was actually used.

In each type of power producer, there are metrics that measure the efficiency of the process. Example: thermal power plants use thermal efficiency as a measure of efficiency of the plants.

Then we have power transmission companies.

These companies transmit the power that’s generated over large distances.

So it is their job to increase the voltage of the electricity and send it over long distances.

In India, this field is dominated by one very large government-owned company, though there are other players in the space as well.

In India, distribution of power is primarily done by DISCOMs (Distribution Companies) that are predominantly government owned and operated.

These DISCOMs are responsible for the last mile of power distribution. They maintain the wires, poles, transformers, etc along with taking care of meter installation, billing, etc.

Parts of Grid: Equipment

The list of companies in this space is enormous. Primarily because the equipment list itself is very vast.

Yes, there are companies operating in the space that make wires and cables (which is literally what a grid is made up of).

Electricity meters, fuses, relays, etc are all in this ecosystem.

One crucial link in the equipment list is the transformer. And this space is one to watch out for.

Transformers are the devices that change the voltage of electricity. So they are a part of the grid from the power plant to the end-consumer.

Transformers that increase voltage are called step-up transformers; those that decrease it are called step-down transformers.

This is how the voltage changes across the grid.

+Power generation at plant terminal: Output at 11–25 kV
+Generator step-up transformer: 11–25 kV to 400 kV
+Bulk transmission substation: 400 kV to 220 kV
+Sub-transmission substation: 220 kV to 132 kV
+Regional distribution substation: 132 kV to 33 kV
+Primary distribution substation: 33 kV to 11 kV
+Local distribution transformer: 11 kV to 415 V
+End-consumer supply: 230 V or 415 V

Every time the voltage changes, a transformer is involved.

Transformers obviously come in various sizes and shapes.

There are quite a few transformer makers in India. Similar to many industries, the smaller, lower capacity transformers are easier to make. And thus, there’s more competition in that space.

The larger ones are more difficult to make and there’s less competition there.

When we say “bigger” we mostly mean the transformer’s ability to handle more power through it (measured in kVA or MVA). Of course, handling higher voltages requires more complex engineering than lower voltages.

Obviously there are a ton of different equipment involved other than those listed above. Many of them are made by the same group of companies.

These are things like breakers, towers & poles, capacitors, batteries — this list is very long.

India’s Power Game

Why are we talking about this sector?

Well, it started with our research into data centres. Many are being built in India and they’ll need a lot of power.

But then we realised that India is on a mission to expand its power capacity and that this sector needed to be looked at independently.

India’s peak electricity demand as of 2026 was about 270 GW. India is projected to have a peak demand of ~340 GW by 2030, and ~440 GW by 2035.

This is going to require a massive amount of everything.

Those of you who follow this sector closely would be right to point out we haven’t covered many sectors in this report, like the companies involved in building the plants themselves.

Further, each type of power source has multiple layers. For example, nuclear power has tons of different types of companies right from miners, to refiners (not actually called that in the industry), to suppliers, and equipment makers, and so on.

This sector is so vast, it cannot be covered in one write-up.

We’ll keep adding more reports on this sector in the future.

Quick Takes

+ India’s industrial production grew 5.1% year-on-year in May (vs 4.9% in April). Manufacturing production rose 5.5% (vs 6.1% in April).

+ The government has extended the customs duty exemption on key imported petrochemicals until 15 July 2026 to keep supplies stable and help manufacturers and consumers.

+ The government has lifted temporary fuel sale restrictions from 1 July, allowing bulk buyers to resume normal purchases as fuel supplies have stabilised. The restrictions, introduced on 12 June, had capped diesel sales at retail outlets at 200 litres per customer/vehicle per day.

+ Indian Railways has approved three projects: Rs 499 crore for doubling the 44.40 km Mansi–Saharsa section in Bihar, Rs 432 crore for Electronic Interlocking at 27 stations/cabins in Asansol Division, and Rs 200 crore for laying 48-fibre OFC over 1,696.2 route km across South Eastern Railway.

+ The government has kept interest rates on all small savings schemes, including PPF and NSC, unchanged for the ninth straight quarter from July to September 2026.

+ India’s manufacturing PMI fell to 54.2 in June (vs 55.0 in May). This means manufacturing activity rose less in June than in May.

+ India’s gross GST revenue rose 13.9% year-on-year to 1.95 lakh crore in June. Net GST revenue rose 11.2% to 1.62 lakh crore.

+ The government approved Rs 7,145.14 crore for the construction of a 117.7 km access-controlled Kanpur-Kabrai section of the NH-34 greenfield highway in Uttar Pradesh.

+ The government approved Rs 6,969.67 crore for the construction of an 8.1 km, 6-lane road tunnel (NH-148AE) in Delhi.

+ India and Japan signed a Memorandum of Cooperation (MoC) with an investment of $10 billion in AI, semiconductors, clean energy, and economic security.

+ Carlsberg has filed draft papers with SEBI for an IPO through the confidential route.

+ India’s composite PMI fell to 57.1 in June (vs 59.3 in May). Services PMI fell to 57.4 (vs 59.8 in May). This means overall economic activity grew less in June than in May.

+ India’s forex reserves fell by $5.65 billion to $666.93 billion in the week that ended on 26 June.

The information contained in this Groww Digest is purely for knowledge. This Groww Digest does not contain any recommendations or advice.

Team Groww Digest

Based out of Toronto, Andrew owned a desirable SUV.

A GMC Yukon. This SUV was kept parked right outside his house.

Andrew and his wife had returned from a trip and had been suspicious since then.

The car’s steering wheel was slightly bent. The seat position was adjusted differently.

In 2024, he looked outside after dinner and saw what he had been fearing — the car was gone.

Andrew had worried about this situation. To try and prepare for such a day, he had installed two AirTags on his car.

The idea was that if the car was stolen, he’d be able to track it in real-time. He hoped that that information would help the police recover his vehicle for him.

Andrew checked his phone and could see that his SUV was still very much in the city.

He did not waste time. He called the cops. To be doubly sure, he even hired private investigators.

The police officer who responded to his calls went after the car based on the live location shared by Andrew.

Some time later, the cop sent pictures of shipping containers loaded onto a train. The cop was sure the car was inside one of the containers.

He had managed to trace the car, thanks to Andrew’s AirTag.

But Andrew did not have any reason to be happy.

The cop informed him that he couldn’t just go and open the containers. He didn’t have the authority to do so. He would have to raise the matter with the train authorities.

While he was still figuring that out, the train departed as per its schedule.

Andrew watched his car’s location update live on his phone. It was now moving towards the Port of Montreal.

Different authorities, bodies, and agencies were involved in each part of this network.

The authorities were still figuring out a way to flag the container’s contents as stolen.

The container had already been put on a ship. And that ship had sailed out to the seas.

Andrew watched it all on his phone, live.

The live tracker went offline as it left the port.

Andrew got an update a month later. The car had been offloaded at a port in Belgium, Europe. A few days later, it showed up in Dubai.

Andrew’s private investigator found the car in a used car showroom in the UAE.

A theft of this kind, where the car can be tracked live, and yet not stopped, is possible thanks to the incredibly efficient global supply chain network.

And central to that system is one single invention — the container.

Shipping Container

Trade by sea. There’s nothing new about it. It had been happening for centuries.

Grains were put in sacks and loaded on ships. Boxes for easily broken items. Baskets for fruits. Some items were loaded directly onto the ships.

In the mid-1900s, Malcolm McLean was working in this very industry.

He was in the trucking business. He hated the long waiting time. Once he reached port with his truck full of cargo, he often waited an entire day for them to load the items onto the ship.

The lines were long and seemed like a monumental waste of his time. While he viewed the situation from the perspective of a trucker, the same logic applied to the ship.

It was an expensive machine wasting time just standing.

With nothing much to do while waiting in queues, he eventually started wondering if simply loading the truck’s trailer itself would save time.

The idea evolved and he concluded that the wheels were not needed either.

Large boxes loaded on trucks would make loading and unloading ships and trucks much faster.

He took out a loan, bought 2 ships, and started using large steel boxes for easy loading and unloading. McLean’s patented steel boxes had posts on all corners that enabled them to be locked in place.

This allowed them to be easily loaded on truck trailers.

These boxes were also made sturdy enough to be stacked up to a certain height and load limit.

In 1956, his first ship completed its first journey with 58 containers.

The trucking and shipping industry veterans were watching keenly.

There were obstacles but all of them paled in comparison to the advantages.

The shipping costs were lower, the items arrived safe and dry, and the loading/unloading time was much shorter.

His company, Sealand Industries, was off to a flying start.

McLean understood that for these containers to be truly efficient, they needed to be standardized. Fixed sizes of containers. One type of corner locking mechanism.

A lot needed to change before these containers became the standard.

Ports would have to be better designed with cranes for loading and unloading containers. More truck-trailers that could handle containers were needed.

Above all else, ships designed exclusively for containers would need to be built.

Mass Adoption

The idea was simple, yet brilliant.

Sealand Industries had the patent to their container design. But unlike other companies that profit from keeping their design exclusive, Sealand needed mass adoption.

Without others adopting the same standards, Sealand wouldn’t be a widespread success.

So they offered the patent to many other companies operating in the same industry, for free.

And the trick worked.

Soon, more truck-trailers started being built optimized to carry the containers. Trains too. Ships started being built specifically to ferry containers.

The supply chain industry adapted to shipping using containers better.

The ease and speed was such, the container enabled globalized trade like never before.

Toys could be made in a factory in one remote corner of the world and loaded in a container.

That would then ride on trucks, trains, and ships to reach children on literally the other side of the globe.

This meant that containers were built, repaired, handled, and customized by companies across the world. Nearly 70 years later, the container hasn’t changed. It’s still pretty much the same in the external shape, size, and locking mechanism.

Today, some of the world’s biggest ships can easily carry more than 24,000 TEU (Twenty-foot Equivalent Unit).

Which means, these ships can carry 24,000 containers that are 20 ft long.

Compare that number to the 58 containers carried by the first ship.

Just to be clear, the containers these ships carry are most often 40 ft long. Which means, a ship with 24,000 capacity would be able to carry around 12,000 containers that are 40 ft long.

Some estimates say there are 40 million containers in the world.

About 250-300 million containers are moved per year (the same containers do multiple trips in a year).

There are different types of containers too now. But the overall form factor remains the same.

The scale and speed of this is absolutely staggering. Things move so fast, countries and border police have a difficult time ensuring illegal items don’t get transported.

This greatly explains why Andrew’s car left Canada before the police could intervene.

Containers & Modern Life

Modern life is impossible without containers.

It just isn’t possible without these steel boxes.

Just look around. Most things would have been inside a container. The device you are reading this write-up on has definitely been inside a container.

If something was made outside India, it would have almost certainly been inside a container and on a container-carrying ship too — through the various ports and supply chain systems.

Some examples of item-categories transported in containers.

Obviously, a lot of things are better not transported by containers. Some examples:

Revenue & Profits

An industry that is so essential, the world would crumble without it. Surely that’s a great moat to have for companies in this space?

Not quite.

In fact, the container industry and industries around it are infamously low margin. It’s all down to fierce competition and thin margins.

In that sense, it is very similar to the airline industry — absolutely essential and yet brutally difficult to survive in.

— High Capex —

This is a very high capex or capital expenditure industry. Everything requires spending lots of money before the first dollar starts coming in the form of revenue.

To make matters worse, the industry goes through violent cycles.

There are periods when the margins are non-existent. Sometimes, even below operating cost.

And then there are periods when margins are thick.

Half the trick is being able to survive a thin-margin period till the next cycle of thick-margins.

— Competition is Fierce —

Containers are containers. There’s not much different that companies can offer. It’s easily replicable across the world. Same with ships carrying them, ports loading and unloading them, and so on.

So competition among the players in this space is fierce. They keep eating into their margins.

— Scaling Up or Down Takes Time —

If demand for global shipping increases, new containers cannot just be added. They take time to manufacture and put into service.

Conversely, if demand subsides, companies cannot just get rid of excess containers. There’s a lot of it and needs storage when not in use. Or, they need to be sold as scrap/recycled material.

All of those require time, effort, and money.

The above is true not only in the case of containers, but also in the case of the very ships that carry them.

— Demand Unpredictability —

Now, all of this ties into the unpredictable nature of demand.

Yes, many industries face unpredictable demand. But most of those industries never face the kind of challenges the container industry (and related industries) face in scaling up or down.

Wars, interest rates, inflation, crude oil prices, manufacturing output, tariffs, ports, weather, changing demand trends — there’s a lot that can move demand for the container space.

As for Sealand Industries, it was acquired by different companies until it was finally acquired by Maersk.

Maersk is one of the world’s biggest shipping companies. For a few years, they used the Sealand brand name.

As of today, even that does not exist. It’s just called Maersk.

Quick Takes

+ India’s infrastructure output of core industries grew 0.5% year-on-year in May (vs 1.7% in April). Electricity, cement and steel production increased, while coal, crude oil, natural gas, petroleum refinery products and fertilizer production declined.

+ SBI Mutual Fund received SEBI’s approval for a Rs 13,000 crore IPO.

+ India’s manufacturing PMI fell to 57.4 in June (vs 59.3 in May) as per preliminary estimates. Services PMI fell to 54.5 (vs 55.0 in May). Composite PMI fell to 57.3 (vs 59.8 in May). This means that economic activity grew less in June than in May.

+ The RBI sold a net $8.9 billion in April to protect the rupee amid West Asia war tensions, while physical gold holdings remained unchanged: RBI

+ The government will auction securities worth Rs 28,000 crore on 25 June, including Rs 17,000 crore of 6.68% GS 2040 and Rs 11,000 crore of 7.43% GS 2076.

+ Ministry of Statistics and Programme Implementation (MoSPI) will launch the Index of Services Production (ISP) in July 2026, a new monthly indicator to track growth in India’s services sector, similar to the Index of Industrial Production (IIP) for manufacturing.

+ The government has approved 96 road projects worth Rs 211.71 crore in Tripura under PMGSY-IV. The projects will cover 163.9 km.

+ RBI has proposed draft guidelines requiring banks to strengthen governance and risk management of AI and machine learning models.

+ The government has removed restrictions on the supply of commercial LPG cylinders and restored supplies to pre-West Asia crisis levels. It has also resumed bulk LPG supplies at 50% of pre-crisis levels.

+ The government is planning to estimate the economic value of India’s coal reserves, helping track their role in the economy and environment rather than their market price.

The information contained in this Groww Digest is purely for knowledge. This Groww Digest does not contain any recommendations or advice.

Team Groww Digest