Yet Another Value Podcast - Gymkhana Partners' Andrei Stetsenko on Maharashtra Scooters and Indian Holdcos

Episode Date: November 3, 2025

Andrei Stetsenko from Gymkhana Partners explores the investment case for Indian holdcos in general and Maharashtra Scooters in particular. Andrei outlines why he isn't just looking for a discount to NAV; he talks about how he breaks down the underlying NAV and incentives of the key players when assessing an Indian holdco, and how he believes the control of the Bajaj Group can create long term value.Gymkhana Partners website: www.gymkhanapartners.comGymkhana's Q3 letter: https://www.gymkhanapartners.com/investor-letters/gymkhana-partners-q3-2025-quarterly-letterPost on financialization of Indian savings: https://www.gymkhanapartners.com/dispatches/the-equitization-of-indian-savingsDoug's Alphasense webinar: ______________________________________________________________________[00:00:00] Podcast and guest introduction[00:02:57] Indian holdcos and Bajaj group[00:05:47] Maharashtra Scooter NAV breakdown[00:06:45] Growth prospects in Bajaj firms[00:09:03] Insurance and lending discipline[00:12:45] Risks of investing abroad[00:15:25] India research and diligence[00:17:03] India-dedicated fund strategy[00:19:08] India’s economic transformation[00:22:20] Attractive Indian holdcos overview[00:25:36] Holdco incentive and structure[00:28:50] SEBI reforms and catalysts[00:29:41] Parallels with Japan’s reforms[00:32:58] Professionalization and buyback signs[00:33:46] Shareholder alignment and liquidity[00:36:48] Family dynamics and governance[00:39:23] NAV reliability and fundamentals[00:42:03] Buybacks, dividends, and hurdles[00:43:59] Governance: India vs US[00:47:06] Potential unlock mechanisms[00:49:56] Past performance and future growth[00:52:33] Closing thoughts and blog postsLinks:Yet Another Value Blog - https://www.yetanothervalueblog.comSee our legal disclaimer here: https://www.yetanothervalueblog.com/p/legal-and-disclaimer

You're about to listen to the Yet Another Value podcast. Look, if you like this podcast, the best way to help me make this podcast is to rate, subscribe, review wherever you're watching or listening to it. Today, we are going to have Andre from Jim Kana Partners. Andre is going to talk about Maharaj Scooters. I call it Ma Scooter, because that is the ticker throughout the episode. But I think you're going to enjoy this episode. We have a really good blend of we dive into Moss Scooters. It's one of the classic Holdcoes trading at a big discount to their NAV.

So we're going to talk specifically about that. We're going to have some policy on hold code. We're going to talk about how he, Andre, has done a lot of work on the fundamental value of the NAV, how he thinks about the fundamental value of the NAV, how the incentives of the controlling shareholders have changed over time, why the Indian stock market might be pushing them to kind of unlock value here. So we're going to talk about all that in general. We're going to talk about the Indian stock market in general.

We're going to talk about a bunch of other stuff. So I think you're going to enjoy it. It's a fun conversation. We're going to get there in a second. But first, a word from our sponsors. Today's episode is sponsored by Alpha Sense. Look, you know AlphaSense as a long-term sponsor of this podcast. They've been a great partner.

I think we've done some interesting, unique stuff with them. And today's sponsorship is driven by, I just had Doug O'Loughlin on the podcast. That was podcast number 348. All Things, AI, Power, and Corporate Governance with so many analysis, Doug O'Loughlin, got absolutely fantastic feedback on the podcast. Had multiple people calling me to ask me about different things.

We talked about one person did call me and say, hey, Andrew, you got really out of breath talking about something there. I did because I get really excited about stuff sometimes. But it was a fantastic episode. And if you like that episode, the reason Doug came on, the reason Alpha Sense is sponsoring it is because Doug did a webinar with Alpha Sense decoding the AI infrastructure ecosystem. It just went live. I'll include a link in the show notes and kind of in the clip. You can go register and watch it for yourself if you want to see more of Doug. But, you know, first, go listen to episode 348, the episode I just did with Doug. See if you like that. You will like that.

And when you like that, you can go listen to the full webinar. And now to the full episode. All right. Hello, welcome to yet another value podcast with me. Sam, happy to have on. Andre, you're going to have to help me with the last name. I'm not even going to bother It's a busher. It's Francisco. It's from Jim Cona Capital. Andre, how's it going? Doing well. Thanks for having me on. Hey, thanks for so much for coming on. I'm really excited to talk about the company we're going to talk about today. We'll get there in one second. But first, a disclaimer to remind everyone, nothing on this podcast investing advice. That's always true. But we're going to be talking about a truly international stock here. So keep in mind that carries all. sorts of extra risks, you know, consults financial advisor, and I've always got to fold a disclaimer at the end of the episode. Andre, anyway, the company we're going to talk about today is Maa Scooter.

It trades in India. I'd love to Mahastra Scooter, I guess, is the full thing. I labeled it Maascooter, because I think you prime me to that. That's a ticker. Yeah, that's the exchange ticker. We can talk all things Mahastra Scooter Scooter. I guess let's just start there, and then we can zoom out broadly on India or Zoom focus here. What is Mahastra Scooter Scooter and why are they so interesting?

So in India there's this phenomenon of listed holdcos, and I know you've had some interesting discussions about other holdcoes recently, which I'd be glad to tie this into, especially the recent ep you had on Jardine Matheson, which was fascinating. This is a very different situation from that, whereas in the case of a Jardine or a Liberty Media or even a Berkshire Hathaway, even probably the best in class of what people think of when they think of Holdco, you're making a bet on usually one person who's a capital allocator, and you're basically trusting that they're going to sustainably outperform the market. And that's, that's, you know, comes with its own challenges, whereas the kinds of companies, Holdco's that were invested in in India, they are more like family trusts. We can talk about how they came about, but the way they exist today is they're basically

ways for third, fourth, fifth generations to equitably participate in the economics of a business that, you know, their great, great, great grandfather started. They're more pretty passively run, although that's changing in interesting ways in some cases, including the stock we're talking about today. And so with respect to the Bajajj group specifically, there's a few names in India that are, I think, universally considered platinum seal of corporate governance, truly universally respected. Godrej is one.

Muragapah out of Chenai is another. And Bajaj is definitely in that top tier. And so what this company, along with another holding company in the same group that will definitely want to touch on, which is Bajaj Holdings, these two are basically ways to get in at a discount into one of India's best run groups. And it's not just about buying into the discount. That's not the reason we're invested. We view that as kind of a potential bonus down the line if and when the discount ever narrows. The reason we own this is first and foremost, because of the high quality businesses it owns. That's perfect.

Let's start with just some details. So most of my listeners are domestic. This is an Indian company. If you're lucky enough to have a Bloomberg or if you pull up Yahoo Finance, you're going to see this listen and different things. Maybe we just start, what is the market cap of Mahasur Skid, or what are we talking about here? So round numbers, it's $2 billion, and it owns stuff, not stuff that it's put value on, but stuff that's traded on in exchange. So we know what the market value is.

It owns about $4 billion U.S. worth of Bajajaj company shares. So $2 billion company, $4 billion of assets, no debt. That's perfect. I just want to, I really wanted to express that because I think, you know, I've looked at weird Korean hold codes and stuff. And sometimes you're looking to be like, oh, it's a $75 million market company. And I think people just like press off at that point. This is a pretty large company.

So let's move to the next point. I want to dive into a lot of things you said, but the market's competitive place. You know, this is trading. You mentioned the hold co-discount this trading for kind of 50% of MNAV and I'm on Bitcoin companies right now of NAV. And most of that NAV is publicly traded companies. So you're kind of getting marked. But what are you seeing that you think the market is missing that makes this an alpha

opportunity? So if you are invested in some, you know, any run-of-the-mill ETF that markets itself as an India ETF, most likely that ETF owns at least a couple of the Bajajaj operating companies. You know, these are blue chip stocks. At the same time, the Bajajan-Serve, especially in Bajas finance, the two financial holdings that make of the vast. majority, the line share of the some of the parts or the nav, whatever you want to call it, in this case, these are big, but for reasons I'm happy to get into, they're destined to keep compounding, you know, not at 5% of year, more like 20% year on year for probably decades, I mean, realistically decades, because they are plays on insurance and asset management

and commercial lending, things that are, you know, have grown a lot over the last decade or two in India, but are still very much early days. Let me ask a question there. So a lot of the underlying holdings of Moss scooters is commercial insurance, all that sort of stuff. And you said, hey, these are a place that can grow at 20% per year. And I hear that, right? Obviously, India is a huge place. It's an emerging economy, all this sort of stuff.

I definitely hear that. But then I also say, hey, what? What is the scariest thing as an investor? And it's a fast-growing insurance company or any type of fast-growing financial. And, you know, if you've got this huge market that's growing rapidly, like at some point, you'd have to imagine the giant insurers are going to move in here. So I guess I'm posing this question in two ways. Yes, there are tailwinds here, but is there any, on one hand, are you at all scared that,

hey, they've been doing a ton of quick-growing underwriting? And on the other hand, when you say, hey, this can compound for years, are you worried about as the market kind of opens up, you get a ton of flood of new money into this thing and that's going to bring returns down. And when you say, hey, I think this can compound in the double digits for years. No, insurance commodity business. Capital comes in and all the returns down. So I think I kind of present two countervailing views there. I'll kind of let you take them. Yeah, but both very valid and good points. On the subject of insurance specifically, I couldn't agree more. The same really is true of just a basic lending business. I mean, if you have a lender

that's suddenly issuing a ton of loans, that's a red flag. And my partner, Steve and I, one of our most memorable early experiences in India, we've been going there since 2012, is what was recalling an analyst in a group meeting being irate with this CFO or CEO of a lending business, what they call non-bank financial company, because they weren't growing as fast as their competitors. And the reason they weren't growing as fast is because pricing was getting worse, underwriting was getting looser, and they didn't want to participate in that. And if you look at the track record of Bajajaj finance, the non-banking financial company

that accounts for the single biggest chunk of the Maharsher scooter, some of the parts, and Bajash FinServe, which owns majority of Bajash finance, but in addition to that also has a bunch of businesses that include insurance, like you said. These businesses, they do not grow at 20% year after year after year. They compounded that on average over a decade or longer. And in any given year, they may not grow barely at all. And other years, they may grow way north of 20%. And I think if you judge stocks based on Greek letters and complex formulas that take, you know, equate a volatility with risk, then you may not like that.

But that, to me, is a sign of discipline management where they're avoiding exactly the kind of pitfalls you described. As for insurance, point very well taken. And the thing I'd say with respect to Bajaajaj's participation in that market is that until a few months ago, it was via two joint ventures with Alianz, the German insurance or I guess just financial services giant. They bought out Alianz earlier this year and after trying to for a long, long time. And I think there are two things that really differentiate insurances. Many listeners might concede of it coming from a developed world perspective and how it works in India. One is that it's such a nascent industry

that there really isn't that much fighting over good customers, as we might be used to here. Most people who are signing up for insurance policies in India are first-time insurance customers. That's definitely not the case in the U.S. Most customer acquisitions in the U.S. are one company stealing a customer from another. And the way you do that typically is you think you can afford to offer them a better price. That's not as much of a factor in India where, you know, living standards are improving living standards are allowing people to think about the utility of an insurance product for the very first time.

And then the other issue is that with Bajash specifically, same as in their lending business. like I just described, these insurance businesses have not grown as fast as some of their competitors, and I think that's for a very good reason. It's because they realize that succeeding in a financial business isn't about lending money. It's about collecting. Let me jump to a completely different point. You mentioned at the start of your answer going to India a few times. So I'll ramble in the last question.

You know, one thing I worry as a guy who operates out of a shoebox office in New York City is being the Patsy at the poker table when it comes to international stocks. You know, I don't think I've told the story before, but a few years ago, I got pitched a stock in Eastern Europe. And I got really excited about it. It, like, literally seemed too good to be true. And then I was about to pull the trigger on it. And right before I did, I mentioned to a friend. And he was like, oh, yeah, it's widely known that the numbers are great, but that's like a front for the mafia. and then I just kind of passed because it was like,

I don't really need to get involved with the mafia. But I point that out as, you know, I'm reading the spreadsheets online and I always worry I could be the sucker at the patsy, at the poker table because it's a front for the mob or something. So I want to ask you, let me rant just a little bit more. I have a friend who is so good at this, whenever somebody pitches him a stock,

like when I would have pitched him this stock, he would say, hey, where would you buy a hammer if you were in that market and looking at a local store. So I'll ask you, if you were in India, where would you buy a hammer if you were kind of walking around? Probably at a Kiranah Corner shop.

I doubt they have it at any of the fancy malls that are attached to the kinds of hotels that foreigners stay at. Nope. It's a great, that's a fine answer. His point would be, if I ask you domestically, you could list like 100 places. If he asked me to ask you, like, Ace Hardware,

the way he told the story, or the way I heard him, the first time was somebody pitched a stock, a German stock at a conference, and it was a really interesting pitch. And he was the first question. He said, hey, if you were in Germany, where would you buy a hammer? And the guy couldn't answer. And he was like, you could ask, uh, there's actually a big culture conflict question, uh, thing that that immediately made me realize that I just have to interject with, which is, I think if you asked an Indian that question, they would laugh because they'd say, I don't pick up a hammer. I pay people to do that. Because labor is so much cheaper there. Um, when

wealthy Indians come to the states, that's, and vice versa. For me, it's a culture shock seeing it there. But, you know, people we would consider middle class in the states in India have household staff. So they truly may not know where to get a hammer. Well, I was rambling. Thank you for cutting me off. I'd love to just ask, because you can answer that question and because I kind of know

the answer, how do you, you know, as somebody who was raised in the U.S., when it's U.S. How do you guys get kind of a handle on the line? local, your Indian focus fund on the local Indian. That's, I'd say, the single most important screen in the research we do. We have this database of about 2,000 companies that's filled with literally every little last piece of scuttle butt down to something we might have overheard in a hallway. And it's the product of hundreds of meetings with hundreds of companies, most of which we didn't invest in, as well as meetings with.

What we consider now, it's not formalized, might be one day, but it's an informal network of local investors, business people, analysts, financial journalists, people who know the inside story at, you know, just about any business that we might encounter. And that has been invaluable as a screening tool. Now, we've, not to say that we've never made a mistake, I can definitely think of at least one, but I'd say that we've been successful in avoiding any mistake that would, in terms of investing capital in a business that was fraudulent or what have you, definitely avoided anything that would have been really significant for the fund. We also, I mean, we also remain humble by being pretty diversified. We own over 50 stocks and our top position is less than 5%, typically less than 4% of capital. And just to clarify, you guys are in, you're running an India focus fund is kind of what I was driving at there too. Correct. And we spend two weeks twice a year each on the ground in India, so roughly a month out of every year and have every year since 2012 with the exception of COVID.

And we now have a full-time analyst on the ground there, which has also been critical. But I'd say even before we had this analyst, when it was just us, 11 months out of the year here in the States, one month there, it was a lot of cultivating this local network so that we could get feedback on, well, you know, what's the reputation of these guys? Have they been known, when we're in a meeting with a competitor, we asked them, have they been known to, you know, compete in a way that's maybe not above board? And you piece all these data points together and you get a pretty good picture. And I'll just one last related comment on this is that, you know, I mentioned at the outset that Bajaj is in what I'd consider to be the top tier of Indian firms or Indian family groups in terms of corporate governance. And, you know, I, if I'm wrong about Bajaj and Godrej, having excellent corporate governance, then I don't know what I'm right about. I have great confidence about this particular point. And I have definitely encountered plenty of Indian groups that I would rate very, very poorly on this metric, whereas literally every single data point.

points in the positive direction with these guys. Let me, I'm just a dumb generalist. You're an India extra market. I guess most of my listeners have not spent a ton of time in India. So let me just stay kind of broad right now. What's like, what's the biggest thing that me as a generalist who maybe has only seen stories about, especially the Indian market out of the corner of my eye, what's the biggest misperception that you think generalists or people who don't, you know, live and breathe

the Indian market that like you do have about the Indian market? I think a lot of people, especially in America, have an outdated picture of India. You know, they think of a slumdog millionaire, to be perfectly honest, just, you know, a picture that's exaggerated at best and just distorted at worst of, you know, a country that's not so much a showcase of capitalism as a showcase of, you know, development assistance. when the reality is an Indian company, Tata, is the biggest employer in the U.K. India has the world's biggest oil refinery, biggest steel mill. When you go to Mumbai, as a New Yorker myself, you are too, you just mentioned. And so I'm sure that you're regularly frustrated with how we can't seem to build anything in the city, even repair the subway system we have, whereas you go to Mumbai, there's something like a dozen subway lines

under construction simultaneously. There's a new airport being built. There's a new high speed rail line. It feels like, you know, China two decades ago. But I'd say even more impressive than that because this is being done in the context of a very pluralistic multicultural democracy. The other thing I'd say is that India is the only market, truly the only market that gives the U.S. a run for its money in terms of fundamentals. I'd say that the drivers of, you know, whether you look at EPS growth or actual equity returns, benchmark index returns, the underlying drivers of that are, I think, very durable. India's the world's fastest growing major economy has been for years, will be for years. It'll eclipse Germany probably in the next 18 months to become the world's third to fourth biggest economy.

economy. Its demographics are better than really any other major economy on Earth. Its urbanization is still in its early stages. And so that's, as China showed over the past two decades until finally stalling out, more recently, that's a driver that keeps going and going. When you move people from relatively poorly paid agricultural work to higher productivity jobs in cities, that is a tremendously important driver for, you know, years after years of recurring economic development, GDP growth, and ultimately equity earnings. Let me, okay. So we've talked about India broadly. I'm going to try to start narrowing us back down, back to Moss Gooders. And I'm going to start with this question. Indian hold coves. I think there are quite a few, again, I'm just a generalist, but I think there are quite a few of these Indians. Indian holdcoes that treated a discount to their NAV. So before asking you to compare them and Moss Coeter and everything, let me just assess broadly. I know you think Indian Holdcoes as a whole are attractive. I'd love to just broadly talk about your overall views on Indian Holdcoes.

Sure. So like with the universe of Indian stocks as a whole, there's good ones and there's bad ones. I mean, there's definitely holding companies that I'm not interested in, even though they optically traded big discounts to their underlying holdings because what I'm really looking for is to be a shareholder in a really high-quality business with a long runway for continued compounding growth. When there's an opportunity to gain exposure to that at a big juicy discount, that's gravy. That's not, you know, we're not invested in the hold codes that we're invested in because of the discounts. We're invested because I really like what they own. And

Just to tie this back to what we were talking at the start about what Indian hold codes, what differentiates them from what some listeners might be thinking of when they think of that word. These are more like family trusts. You know, they're diversified. They're almost passively managed. They're owners in a diversified set of businesses that are united by history, but really not much else. It's not like you're making a bet on a John Malone. You're making a bet on a set of companies that are, you know, household names in their respective sectors.

And so the ones we own including Maharashtra scooters, I'll throw out another couple names. One is Colomandelum, which is a hold co of the Muragapa group, which I mentioned earlier out of Chennai, another extremely well-respected group. Goddridge Industries is another, although that discount has narrowed so considerably that we've sold a bunch of shares. So there are, I'd say, maybe a dozen out of a universe of at least triple or quadruple

that number of listed Indian hold codes that I'd say are, I have good enough confidence in both the quality of the underlying assets and the quality of the underlying assets and the quality of the governance to really, to really like them. Let's go to my, I'll jump that point and let's go to Moss Cooter then. You know, I think one question I would have here is you mentioned high quality governments that, but it is a nesting, you know, just to me reading the documents, it is an interlocking nest of kind of companies that own shares in each other, right? So I would just ask you on this HoldCo, like, the biggest worry I have with HoldCos is the incentives.

And when I look at this, like, it doesn't seem like there's really an incentive to unlock the value here. And I really worry when you've got interlocking sets of companies like, hey, forget the incentives. If the assets are good, it goes up. But I really worry about the potential for management to say, hey, you heard it on Jardine Matheson, right? Where I was worried, hey, there's an incentive to grow at any cost because you can pay yourself more. you grow. So I'd love to just talk about the incentives, both at the unlock the hold code level and at the, hey, do we kind of get paid when these guys get paid? Or do these guys get paid when we get paid? Or do they just figure out a way to pay themselves no matter what? Yeah, I sense that

probably one of the things that's in the back of your mind and asking that our Korean hold codes where the web. I have that. I have a note. Tell me how this is different than Korea was one of the notes ahead. Yeah, I've, I've diagramed out the various Indian hold code groups, and they're, in some cases, complex, but not so complex that you can't draw a series of arrows and figure out the inner relationships. Whereas in the case of some of these Korean groups, the whole point seems to be to be confusing and convoluted. And ultimately, the thing that motivates something that's that convoluted, typically is a desire to control a web of companies. because you own 51% of something that owns 51% of something that owns. So you don't have to actually have all the capital at stake if you just owned it outright. That is the case in a couple Indian listed groups, but not in the case of the high-quality ones I've been mentioning. The one where that would be a fairly accurate or a more accurate description is Gindle. Gindle is a big name in Indyance.

There's a number of branches of the family that have their own. own listed entities and JSW Steel, Gentle Steel and Power, some of their operating businesses. But, yeah, if you try to diagram that out, it's doable, but there's so many unlisted intermediaries. And, you know, it's pretty clear that the point of all these listed and unlisted holdcos is to preserve family control above all else. It's not a bad value in locking. In the case of Bajaj and Maharashtra Scooters, the exciting thing, I'd say, in terms of potential catalysts, is that there's really are a number of things that are moving in the right direction. Number one is that Sebi, so India's SEC, as of last fall, about a year ago, has started pursuing, you know, publicly pursuing policies that are specifically aimed at, reducing the...

the discounts to book value of what they call investment holding companies, a category that includes Maraasher Scooters. And so they define this as companies that trade at a big discount to their reported book value. And that's the fact that this is on Sebi's radar at all is big. So they've started implementing reforms that it won't change anything tomorrow, but they set the groundwork for over the coming years for a potentially momentous shift where it's become much easier for companies to dividend out, not just the earnings they're getting in the form of dividend income from their equity holdings, but the actual shares. So you can now distribute shares as a hold to your shareholders in a tax-efficient way. The tax treatment of dividends has improved. And so companies

like Mahoraptor scooters have, you know, quadrupled their dividends over the past few years. Can I pause you there? Yeah. This was actually the most exciting part of the pitch for me because as soon as I ran it, I was like, oh, Japan, like obviously there's a lot of similarities between many of the things you're talking about and Japan. And you and I, 12 years ago, could have gone and literally thrown a dart at any Japanese stockboard and hit a company that tried to afford less than cash and had a good business. But the issue is none of them did anything.

And then what, like two, three years ago, the Japanese stockboard got serious about things not trading below book value. And I mean, the past 12 months, all of these things, you know, I'd have notes 10 years ago, trades below cash, eight years ago, trades below cash, two years ago, trades below cash. And all of a sudden, they're all ripping because they're returning capital and doing all this stuff. And, you know, when a national government and the regulator gets interested in these things, not treating below book, that tends to be when they stop training below book. So to me, that was the most exciting because I could see the parallels to Japan just instantly there. Yeah, that's a really good analogy.

I think that's a good description of what's happening. The other thing that is Bajajas-specific is that... So I've met with the management of this group. They were one of the first companies I met with, I think, first in 2014 or 2015, and then again, in 2017, I went down to Pune, about two or three hours south of Mumbai to the headquarters of all these businesses. And, you know, at the time, especially at the first meeting,

I remember the CFO, I was supposed to meet the CFO of the holding company, and I walked into a meeting with the CFO. His business card said, Bajaj Otto. And I was a little confused thinking, well, am I meeting with the wrong guy? It turned out he had both jobs.

The holding company wasn't really thought of as an independent unit as its own entity. It was the literal words he used was, it's the central bank of the group. So its job was to, you know, give a loan, to operating underlying businesses to, you know, basically serve as a captive financier. Whereas, oh, and he also mentioned, said that, you know, very with great certainty, said that, you know, these holding companies, Bajajaj and Maharashtra, they'll never sell

any of the shares they own and the underlying businesses. That's, they're not, they're not trying to, you know, be, be smart for their shareholders. That's not their purpose. Fast forward to the last few years, and so the executive ranks have all turned over, the guy met with is no longer there. There is still some managerial overlap, but it's typically in the case of the investor relations person, not so much in the case of the very top job. And Bajajad Haldings, which is kind of the older brother of Maharsher Scooters, about four times the market cap and a narrower discount.

to some of the parts, that company for the very first time, or at least the first time in decades, sold some shares within the past couple of years of its underlying Bajash holdings, and essentially distributed the proceeds to its shareholders via increased dividends. That company is the majority shareholder of Myrachr Scooters. And so one could very easily imagine

a day where, I'm not saying this is likely to happen soon, even a decade from now. I'm just saying that if there was one Indian holding company where I could very clearly see a path to waking up to a new story about some serious value unlocking and a discount closing, it would be this specific case because you have a majority owner, other Holtco, that is for the first time being run professionally in a way that is allocating capital in the interest of its shareholders, not on the interests of the broader group that could in a very, in a way that was accretive for everyone, do a buyout of the minority interest in Maharashtra scooters. Let's talk a little bit more about Maajahara scooters and their controlling shareholder.

So the control of the shareholder owns about 50% of Maas Scuders. And I just want to ask, like, what are there, what are their incentives? incentives to unlock value at Moss Scooters. Or, you know, you do worry, I have seen in the U.S. all the time terrible ownership groups who have entrenched themselves and it always looks great, right? Some of the parts always says it's worth 1,000 and the stock always trades at 100. But every year that 1,000 produces 100 of earnings and the earnings all go to the controlling shareholder, right? And shareholder is always sitting there freshly like, why are we never getting anything? But I just want to ask, like, what is the incentive structure for the controlling

shareholders, everyone to unlock value, or maybe to take the value for themselves. Yeah, the refrain that we have heard over and over again over the past years in India from the local network that I alluded to earlier is that whereas a decade ago, if you were a crook in India, you did it in a way that was, you could detect in the notes to a financial report, you know, it would be something like siphoning funds to an affiliate, unlisted affiliate for some nebulous service. Now, Indian managers, executives, business owners, the thing they care about is market cap. It's not about pulling up to their local Jim Cona Club in a fancy car.

It's about being the guy in the room who has the biggest market cap. And so that's a very important shift in motivations across. India and in the case of this group specifically I'd say the the family that's in control now they're the fourth generation dating back to the the founder a century ago and once you've gone that far down through a family tree if you kind of picture it Indians have big families that the ownership that even 50 years ago would have been split among maybe a couple dozen individuals now is split among over, you know, a hundred or more individual people with the last name,

Bajaj. And so their interests as smaller interests in a very valuable empire are varied. You know, someone might be getting married. Someone might be buying a home. Someone might be sending their kids abroad for education. And the reasons they might want to make some of their wealth liquid are sufficiently diverse and varied now that there is no monolith that would exert the kind of pressure that might in a more tightly controlled or earlier generation family group cause a kind of risk that you're talking about. At the top, Holdcoast, you mentioned Baj, controlled by literally hundreds of family members at this point.

How do they kind of get together and organize for this company? Like, I would just, in sports, a lot of times you'll hear, hey, you know, most of these sports teams were bought by one rich man in their 80 in the 1980s, and then he passed away or hands control over to their family. And sometimes like James Dolan, it's like nine kids and grandkids, but he's kind of got the controlling share, but he still has to please them. Or sometimes you'll hear it passes on and there's like seven kids and there's just huge fights where, you know, three of them are there, hey, I just want the dividends so I can go party

on a boat. Two of them are saying, hey, I want to run this team really well. Like, how do they kind of, if you've got, let's just say 100 families, how do they control this company together? And what are the incentives and the structure like there? It is a bit of a monarchy in most Indian business groups, and definitely this falls into that category where... Who's the king in this case, then?

Rahul Bajajaj is the fourth generation Zion and his brother. sorry, he's the third generation. His children, Rajiv and Sanjeev are the two of the fourth generation guys who are in control now. So Rajiv runs Bajajadado and Sanjeev runs the finance companies, Finnserve. Indirectly through Finnserve, he runs finance. And the, you know, the family has not been without disputes, but I'd say that, But it's, the governance at the top is a lot more amicable than it is in some other cases where, you know, there's a newspaper fight every week.

Let me, so here's another one. So you mentioned a little bit, you said Liberty Media earlier. You know, Liberty Media has one of the more interesting hold-co-unlock stories that I always worry about. And it's this. For 10 years, Liberty Media Serious traded for the implied price. of their Serious XM stock was $2.50 on the open market, right? That's kind of where Liberty Sirius XM traded.

Serious XM traded at $5 per share. So, and I was one of them for a while, you know, hedge funds would say, hey, you buy Liberty Serious, you sort serious, and when they collapse, you'll make a profit. Now, the issue was Liberty Serious owned 80% of SiriusXM, so there wasn't a lot of borrow. So you kind of had to go naked and just say, oh, Sirius XM trade so far above Liberty Sirius that when they collapse, we'll make money. Well, a year or two ago, they collapsed, and guess what happened? Sirius XM came all the way down to Liberty Sirius's price, right?

So it turned out because Sirius XM was an operating company that paid a dividend, was in a bunch of ETFs, got tracked like that. Its price was actually inflated by the small float. And that's my favorite example because it's Liberty and it was pretty public. But there are other examples of stocks with the small float actually having their price inflated and the hold code kind of trading at the right level. We've mentioned a few times that Moss Goeter trades at 50% of NAV, right? And I can't claim that I've gone and looked at each individual component of NAF.

But I just want to ask you, like, I know you look at these businesses on a fundamental level. You've looked at all of them. What are the chances that we're kind of looking at, oh, the market's got it right because the NAV is actually overstated by the trading prices because you've got all these slivers and they're kind of properly allocating at the Holtco level, if that makes sense. Well, so these businesses, the underlying operating businesses, the first point is that

there's really only one layer of complexity here. You know, you can view, I think it wouldn't be inaccurate to simplify Mahathra scooters and its majority owner, Badrash Holdings down to their one level of ownership. And then below them, there's auto, FinServe, finance, and then a bunch of smaller companies that really relative to those three aren't that material. And so the operating businesses aren't, you know, a web of cross-shareholdings removed from from the ownership level.

The other point is that these businesses, they're doubling earnings per share in all three cases at worst every five or six years. I'm not saying that they're necessarily going to grow 20% each year. I think in the case of the finance businesses, especially for the reasons I mentioned earlier, it's good that they don't grow double digits every year. But over the long term, they should compound of that rate. And so we don't need, for our thesis to work here, we don't need the discount to narrow.

It can even widen. I mean, I wouldn't want that to happen. I'd be surprised if it did. But the underlying earnings growth from businesses is so good, that's the most important factor. And then the other one is the underlying businesses are sufficiently high quality that I'd want to own them even without the discount. You know, they trade at a weighted average multiple of 25 times next year's earnings or next fiscal year's earnings.

So you can definitely think of examples of Indian businesses that probably the best known Indian stock is HDFC Bank and it's an extraordinary business. It deserves a premium valuation, but you know, it sells that my numbers are probably out of date, but at one point, it sold close to 10 times book value. And so even if I could buy that at a 50% discount, I'd still be worried about overvaluation. In the case of these Bajajha businesses, 25 times weighted average PE, I can indirectly get that down to roughly 12 or 13 through Maharasher scooters. And I'm not buying something that's, you know, a distressed asset that I'm not sure if

the story's going to work out. I'm buying some real icons of capitalism in the world's fastest growing economy. You mentioned a few times the incentives, and they're kind of professionalizing the, if they haven't already, they're professionalizing the incentive structures, like all of them. I have a few questions of that. First, Mosch, Guter,

the dividend is growing, but it is still a very small dividend. And, you know, the first thing I did, and this has financials in English, by the way, which is always awesome for us forward investors not needing to rely on Google translate. But first thing I did was search, they haven't, I don't believe they've ever repurchased shares. And they're kind of, you know, if you and I can do the math of 50% of NAV, they can do the math. So I just want to ask you, the capital returns look skinny and particularly the lack of share repurchase. Like, how do you kind of think about that? So Bajajato did a tender offer, repurchased a big chunk of stock

within the past few years. That was, if not their first ever, definitely the first in the group in a long, long time, I would be surprised if other companies in the group didn't do it as well. India has liberalized in so many ways, especially since 1991. But one of the ways in which there's a lot of work or a lot of reforms still to be done is the procedures for stuff like tender offers and buyouts of minority shareholders are pretty cumbersome and Seby, the markets regulator is starting to address that, which is making stuff like tender offers easier. So I kind of counterintuitively, those cumbersome rules, they were intended, presumably,

to protect minority shareholders. But the result has been that it's hard, it's harder to close discounts like this. But I think that's changing. I'm just laughing because poison pills and stuff were intended to protect U.S. minority shareholders from creeping takeovers and everything, but in practice, they're intended to protect management teams from losing their jobs after they've done a terrible job for 10 years and somebody comes in and tries to them. I just add one more point on the comparison to the U.S. I can't tell you the number of times

that I've encountered a U.S. company where there's all these marquee names, marquee institutional investors that own it. And I don't know if you can tell, by the way, that I'm in New York with the sirens behind me. But there's all these marquee investors that own the stock. The board is full of, quote, unquote, professionals, and they are terrible capital allocators. They make horrible acquisitions. They don't really represent the interests of public shareholders whatsoever. And so even though it's a quote unquote professionally run company, you'd be much better off interest in your capital to essentially a family trust, like this.

one where it's, you know, the Bajajaj family, they're, you know, generationally wealthy, but there are multiple examples in our portfolio of companies where I could tell from, you know, just my interactions with the managements who are also the founders and the majority owners that they thought of the capital they were allocating as their capital and they were smart about it in the way that people really only at the end of the day are when it's personal financial stakes for them. And if they're smart and if their market is good, then you'd want to be along for the ride with that.

You'd much rather be there with them than with a bunch of, no offense to your prior Stenna McKinsey, but a bunch of people being advised by consultants to buy X, Y, Z. There is absolutely no offense taken. You told me before we started recording that you've got some good friends at McKinsey, so maybe they should take offense. But I love your point on U.S. governments because I will talk to people all the time about stocks where I'm like, hey, I think this is a good asset. I just, I think it's mismanaged, right?

I think the board has stepped on Rakes 10 times in a row. And you look at the stock price. And a friend will come back and be like, hey, this board is great, man. Like, I know this person, they're really sharp. This person is ex-Apalo. This person is X. McKinsey, like, I think this board is great. What are you talking about? Be like, hey, pedigree doesn't matter here, right? Like, I'm talking, I'm pointing you to, hey, they did a

billion dollar acquisition and they had to write off 85% of the Goodwill 18 months later. And you're saying, but I think they've got good resumes. Like, I'm just talking actions. And I see that over and over again. So I love the point you made there. Just what does one on Monster's Scooters? You mentioned, hey, maybe the Bosch family is more incentivized to unlock. They own 50% of Mahastro's scoot. If there was an unlock, what does that look like in your mind that kind of, you know, that has that great, if you ever been involved in a hold co and they do the unlock and the stock, you know, 30, 40, 50 percent in the day, you'll get pretty addicted to it.

But what does the unlock actually look like? Do they just say, hey, hey, we're spinning out all the Mahasher scooters stock. Hey, Mahasher scooter is spinning out all of its underlying stock. Like, what would it look like in your mind? The cleanest and simplest way to do it probably would be to take advantage of one of the new frameworks that Seby has put in place for hold coes that I mentioned earlier where it is now possible for a hold co to dividend out its holdings in a tax-efficient way and so if Marasher scooters decided to it could essentially liquidate itself and that can be complicated in the case of businesses

that own a bunch of unlisted stuff where you know you can dividend out all the public shares but you're still left with a bunch of stuff that people can't agree on how to value it. In the case of my hars scooters, it's essentially shares in a handful of companies, listed companies, and a really de minimis amount of cash. So it wouldn't be complicated at all to do that. That would be very clean, and there really would be no even possibility for conflict of interest. Bajajas Holdings, the majority owner, would get its proratish. share of all the underlying holdings and its shareholdings.

It already owns shares directly and most, if not all, those companies and it just own more. A more complex way to do it would be for Bajash Holdings to simply offer a premium price to buy out minority shareholders. And even under the slightly loosened rules that are in effect now, looser compared to where they were a few years ago, it's I won't say impossible. to gain the system i can't think of a way to do it but the only way one can successfully buy out minority shareholders is if you offer a price that's always has to be a premium to you know the past x number of days average volume weighted price that gets you over 90 percent

ownership so it's basically the determined by that marginal um marginal price that i wish someone is willing to tender their their stock that would get the majority owner over 90. Interesting. I didn't have to think you'd look for. All right. I have one last question, and then we can wrap this all.

This is a very strange question to ask, but if I just rewound 10 years, you know, I hate rewinding 30 years because you never know what happens, but 10 years, Mahasher Scooter, the stock is up over 10x, probably a 15 backer over the past 10 years.

This is why it's such a weird question. Is that good? Because I know the India market, and I don't mean that facetiously, I know the India market has had a lot of inflation. There's been a lot of other stuff going on. It sounds crazy to ask, is 15x good, but would this beat the index? Has this historically been a good performer that kind of, I'm using this as a sign of

all of the value creation that you kind of alluded to at the beginning of the podcast? So we have, as you've outperformed the benchmark Indian indices, I think, through investments in companies that are typically smaller market cap-wise. as well as kind of at an earlier stage of their development where, you know, our archetypal investment is in a business that is not, or barely, if at all, covered by sell-side analysts. It's, oftentimes it's in a big city like Mumbai or Hydrobat or Delhi, but oftentimes it's in a city that Westerners haven't typically heard of. It's in an unsexy business. You know, they're making ball bearings or they're selling asset management products or even something

like cement, which is not a commodity like we think of here for this, a whole separate conversation. And, you know, there's multiple reasons why they have the potential to outperform. So their earnings are compounding. Their PE typically expands as the story becomes better known. They gain coverage from other analysts and investors, yada, yada. In the case of the underlying Bajash companies, they're already, everybody knows about, in India, knows that Bajajado is a good two and three wheeler manufacturer, that Finservant in Bajash Finance. Bajash finance is probably the single best respected non-banking financial company. So these stories are known. So the reason that they should be able to continue compounding really comes from their earnings generation. potential and i think that they will be able to pull that off um because of the markets there and the shrewd managements they have um even without so it in a way that produces results for

shareholders of the hold codes that are are very will be the shareholders will be very happy with even in the absence of a narrowing of the discount um and for reasons we've talked about i i think that my confidence about all these various potential catalysts for the discount to, I should say, continue to narrow because it has already started to narrow as of the past couple of years. The reasons are multiplying sufficiently that I might even feel confident enough to say that we can kind of build it into our expectations for returns, but it doesn't need to narrow for this to work. Cool. Well, hey, let's wrap it up there. I think that's a great look forward.

Not backward, but forward. I will say Jimcana Partners.com. I will include a link in the show notes. I actually, as obviously prep for this podcast, I started reading a lot of the dispatches from India, and I've really enjoyed those. And you get backwards pretty quickly in time when you start reading those. But Andre, thank you so much for coming on and pitching an interesting bold cup. Could I highlight two block posts if you have a moment? Heck, yeah. Throw them on my reading. this right now. One is the financialization of Indian savings. So like I said, the single biggest piece of some of the parts puzzle here with Maharashtra scooters and the Bajaj group more broadly is financial businesses, you know, lenders, asset managers, insurance companies. And these are

huge opportunities in India that are only just getting started. And that blog post goes into that. The other one is there's a two-part series, India before 1991 and India after 19901. And the after-1991 post specifically I bring up because I think it was Rahul Bajajad, it was the dad of the two brothers who are currently running the show right before India liberalized its economy under great pressure in 1991. He was running what was then a kind of a, you know, what we would consider a very provincial company. And they basically made auto rickshaws and motorcycles just for the Indian market and maybe some minimal exports to nearby countries. And this guy at the time was very worried that liberalization would flood India with, you know, cheaper Japanese, Korean imports and destroy his business.

Well, the result of liberalization was that it only has Bajash thrived at home in ways that he probably could never have even imagined, but it's almost half its sales now come from exports. So you can see Bajesh motorbikes on the streets in Latin America and the Philippines. And the point being that the story of this company really has been the story of India. Cool. Well, I will include a link in the show notes. the India since and before 1991 post that you mentioned I'm looking are from 2017

so I didn't go quite that far back into the index in my pod prep but maybe for the second post I'll be ready to speak on those but Andre this has been great link in the show notes and looking to having you forward looking forward to having you on again for another episode on India in the near future hopefully likewise thanks Andrew

a quick disclaimer nothing on this podcast should be considered investment advice Guests or the host may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advisor. Thanks.