8th September 2023. Courtyard Marriot, Chennai.

Talk with Mr Anil Goel moderated by Mr Shyam Sekhar, conducted by CFA Society

SS: Mr Anil Goel is unique simply because he has a mind, method of his own. Does everything to his own conviction. You can't convince him to do anything which he doesn't believe in.

AG: I grew up in a small town in Punjab - my grandfather called me to Chennai - he had a steel trading business. He called me for holidays, but I got interested in business.

SS: Your business - tell us about it and what you liked in your business.. AG: I always innovated and did things differently from the market. I got into custom sizes in steel much earlier than others.

SS: During HM scam, you weren't in the market but you had an opinion on it AG: During those days, I would go to the bank. All the bank staff would discuss stocks. One day I felt something is wrong - nothing can go up so much. I told the manager that I believe something is wrong with the market and I told him to get out. The market went up and the manager made fun of me. One day he called and said that I proved him right. I realised that people are not having common sense and with that I took the plunge. September 1992 I ventured into stocks with a sum of 50 Lakhs without knowledge of family members. I invested a large amount in April 1993 and FIIs too came in at that time and we made good money. It was our first time so we thought we are very smart. In 1994, lot of companies places GDRs at a high rate. Once the GDRs were placed at a high rate, we thought companies got the cash, will repay debt and interest will go down. Instead companies mis allocated capital. All the GDRs came down - 50% discount - so I started buying. But there was no bottom. 180 became 7. I lost all the money I made.

The only saving grace was I bought land from my 1993 profit in ECR. I sold that land and re started my portfolio.

SS: In 1995-1998 the amount of companies you studied was enormous - how did you get the thought of doing equity research?

AG: For anything you buy, you have to see the value of it. You can't just buy because the market is giving it. You have to see the asset value. Initially I used to calculate the asset value.

SS: So basically Grahamian investing. How do you track so many industries? Sugar, steel, engineering cos…

AG: With time I had a lot of people from industries who were discussing with us. So we used to get ideas from industry people. Because I had a business experience before stock markets, I was able to judge companies better.

SS: Coming to dividend, your favourite point

AG: Dividend became favourite when it became tax free. We used to calculate the pre tax dividend yield and compare it with FDs.

SS: You have 100s of companies where we are buying on high PE, but AG bought it on dividend yield. Extremely patient dividend investing has been the story. Can you tell us about dividend compounding?

AG: I used to see the companies growing dividend year on year. That was one filter of mine.

SS: Every year, most investors estimate earnings of portfolio companies, but you used to estimate dividend for future years.

AG: That is because we were only buying companies which were effectively growing dividend every year as a proxy for earnings growth.

SS: Right. Because the dividend compounded, multiples also expanded as dividend paying companies turned better capital allocators.

Sir, how do you rank your investments?