Mailbag: What are DVR Shares which State Bank of India (SBI) is planning to issue soon?

I got this question from one of the readers yesterday. The State Bank of India’s Chairperson recently announced, that they were going to look at issuing shares with differential voting rights (hence the name DVR) to raise funds to meet the Basel-III capital adequacy norms.

Government has also clearly indicated that it won’t continue to fund Public Sector Banks indefinitely. And these banks now need to look after their own needs. I believe that it is easier said than done because any problem, which these banks face will eventually become the problem of the government – reason being that these banks are deeply woven into the fabric of Indian economy, and hence the government cannot have a hands-off approach with them. But nevertheless let’s believe the government for the time being. 🙂 

The government has allowed these banks to raise up to Rs 1.60 lakh crore from markets by diluting government holding to 52% in phases – so as to meet Basel III norms, which come into effect from March 31, 2019. The norms are aimed at improving risk management and governance while raising the banking sector’s ability to absorb financial and economic stress.

So what exactly is this DVR creature?

What are DVRs?

Differential Voting Rights shares or as popularly known as DVRs, are a special category of shares issued by an already listed company to raise funds, with lower dilution of ownership when compared with issuance of normal shares.

Like ordinary shares, DVRs are also listed and traded on stock exchanges.

How are DVRs different from ordinary shares?

A DVR provides fewer voting rights to the shareholder than a normal share. While a normal shareholder generally has one vote per share held, a DVR shareholder needs to hold many more shares to get the right to ‘one’ vote.

One example of an Indian company having DVRs is Tata Motors. A normal shareholder of Tata Motors gets one vote for every share, whereas a holder of DVR shares gets one vote for every 10 shares held.

Companies generally compensate DVR shareholders with a higher dividend. A Tata Motors DVR has 5% extra dividend than normal shareholders as compensation for lower voting rights.

DVR generally trade at a discount to ordinary shares and Tata Motors has seen its DVRs historically quote at more than 30% discount to normal shares. I have written about the dual categories of shares of Tata Motors – Ordinary and DVR earlier too.

Is issuing DVR a common practice? Haven’t seen many in India.

Indian companies have somehow been averse to issuing DVRs. Apart from Tata Motors, very few have gone on to issue DVRs of their own – namely Gujarat NRE Coke, Jain Irrigation, etc. World over its a much more common practice and well known companies like Google, Berkshire Hathaway have dual categories of shares listed on exchanges.

Boring Tuesdays – Three Things to Read Today – 2

Its Tuesday again and I am here to share with you some articles which I found interesting. Hopefully it will brighten up this boring Tuesday a bit 🙂

Boring Tuesdays Readings

So here it is…
Article 1

I completed my MBA couple of years back and have realized that even though, they teach a lot about finance in B-Schools, there still aren’t many rich professors 🙂 Guy Spier in this beautiful article, tells you why it makes sense to read Warren Buffett’s Letters to Shareholders instead of doing a MBA.

Article 2

Rs 10,000 invested in this company’s stock in 2001 is now more than Rs 3,10,000 i.e 31 Times!! And that’s despite the company operating in a highly cyclical industry. Forbes has documented an interesting story about how Mahindra became the King of Indian SUV market and why it is still going to rise further.

Article 3

This is a story about someone who took his girlfriend to attend Berkshire Hathaway’s Shareholder Meeting. As of now, Wall Street bankers are fighting off each other to give their money to him. This college dropout is now known as The 400% Man.
That’s all guys…

If you missed last week’s Boring Tuesday post, you can find it here.

And if you find some interesting articles which you want to share with others, please copy+paste the link to that article in comments* or drop a mail to

*Don’t worry if your comment is not visible as soon as you post it. Anti-Spam filters generally detect hyperlinks in comments (which you are sharing) and automatically park it for my review. I will eventually be notified about your comment. 🙂

Interview – Safal Niveshak’s Vishal Khandelwal – Part 3

You can read the first two parts of this interview at the following links:

Question 6.

Compared to good old days, the amount of noise (useless information in common terms) is much more today. How do you cut out the noise and remove personal biases while evaluating potential investment?

I think one of the keys to investment success is to avoid noise. And the best way to avoid noise is to learn to say ‘No’.
I say ‘No’ to a lot of things. In fact, to most things. That helps. I don’t watch business television, nor do I read newspapers. I have not had a newspaper delivered to my house for the past 5-6 years now. Also, I do not participate in stock discussion forums. That saves me a lot of time and energy that I would have otherwise wasted amidst the noise all around.
It was of course difficult at the start to avoid noise because I used to mix that up with information, and information to me meant wisdom. But ever since I have learnt to differentiate between the noise/information, knowledge, and wisdom, I have tried to keep as much away from the first i.e., noise/information, soak in as much of the second i.e., knowledge, and work towards building wisdom. There’s a long road to travel to become wise, but my journey has begun.
You see, the problem with noise or information is not only that it is diverting and generally useless, but that it is toxic.
Look at how too much noise and information creates commitment and consistency bias amongst most of us. We want to consume so much information because we are perennially in search of the ones that are consistent with our worldviews.
So if I believe, say Tata Motors, is a great business, I will scour for information that proves it is a great business, and dismiss every information that tells me how foolish I am in my belief.
If I believe the Sensex is heading towards 100,000, I will keep myself busy searching for information that validates my belief, and ignore every person who tells me how the stock market does not move in a straight line.
That’s an utter waste for time and brainpower, both of which are in such short supply (at least I can say the same for myself).
In a recent post on Brain Pickings, which I suggest every one trying to become wise must read, the author Maria Popova shared an essay on seeking wisdom in the age of information. She wrote…
We live in a world awash with information, but we seem to face a growing scarcity of wisdom. And what’s worse, we confuse the two. We believe that having access to more information produces more knowledge, which results in more wisdom. But, if anything, the opposite is true — more and more information without the proper context and interpretation only muddles our understanding of the world rather than enriching it.
This barrage of readily available information has also created an environment where one of the worst social sins is to appear uninformed. Ours is a culture where it’s enormously embarrassing not to have an opinion on something, and in order to seem informed, we form our so-called opinions hastily, based on fragmentary bits of information and superficial impressions rather than true understanding.
The Dutch philosopher Spinoza suggested that wisdom is seeing things sub specie eternitatis, that is, in view of eternity.
A fundamental principle of wisdom is to have a long term perspective; to see the big picture; to look beyond the immediate situation.
That’s a great advice for me as an investor – to have a long term perspective; to see the big picture, and to look beyond the immediate situation. That’s the dawn of wisdom.
But them, wisdom requires humility. You must be teachable. You must be willing to live with understanding, with meaning, and with wisdom. And you can do all this only when you say “no” to noise.

Question 7.

This question came in from a reader of Stable Investor. How do you generate investment ideas? Is it through screening, or reading, or blogs, or from your personal sources like friends and fellow investors?
Well, it’s a mix of all.
As far as screening is concerned, I largely used, owned and managed by my friend and fellow investor Ayush Mittal. I also sometimes used Morningstar and Google Finance. In fact, I had written a full-fledged post on screening and generating stock ideas here, which I would direct your readers to read.
While don’t read much apart from investment books, among the few magazines I read and find good are Forbes India and Outlook Business. These publish a lot of good insights on businesses, both listed and unlisted.
Among blogs, my favourites are Fundoo Professor written by Prof. Sanjay Bakshi, Value Investor India written by Rohit Chauhan, and of course your own blog, Stable Investor.
A few exceptional international blogs I read include Old School Value and Farnam Street, the latter not directly related to investing but to multi-disciplinary mental models.
Finally, I find a lot of great investment ideas inside my existing portfolio itself. 🙂

Question 8.

Thinking back, what would you say was most instrumental in your development toward investing sensibly and successfully in stock markets?
A. Finding my role models, I must say. Sensible investing is something you either pick up instantly or you don’t. So I have been lucky to get introduced to the writings of Buffett, Munger & Co., and then to Prof. Sanjay Bakshi. I just fell in love with what they had to say and that, I believe, has made the difference.
As I understand, you become the average of five people you spend the most of your time with. Three of those five people I spend most of my time with (not face-to-face, but vicariously) are Buffett, Munger, and Prof. Bakshi, and that has really helped me build a sensible process for investing.
How successful that process will be, only time will tell, but I am not worried about the outcome knowing that the process is all I have control on.
So yeah, to answer your question, finding the right role models has been the most instrumental factor in my development toward investing sensibly. And why just investing, these people have helped me tremendously in becoming a better, more humble person, than I was a few years back.
I would like to leave you here with a brilliant quote from Guy Spier’s book The Education of a Value Investor. He writes about the criticality for a budding value investor to find his role models early in life…
…there is no more important aspect of our education as investors, business people, and human beings than to find these exceptional role models who can guide us on our own journey.
Books are a priceless source of wisdom. But people are the ultimate teachers, and there may be lessons that we can only learn from observing them or being in their presence. In many cases, these lessons are never communicated verbally. Yet you feel the guiding spirit of that person when you’re with them.
Role models are highly important for us psychologically, helping to guide us through life during our development, to make important decisions that affect the outcome of our lives, and to help us find happiness in later life.

Question 9.

What is the best advice you got from your investment guru or mentor?
A. I would mention two advices here. One, keep things simple. And two, learn to say ‘No’. Whether it’s how I pick my stocks or how I live my life, these two advices have helped me tremendously.
Simplicity – in thinking, in my investment process, and the kind of businesses I pick – is what I learned largely from Buffett.
Saying ‘no’ to things is what Munger taught me. I believe, Munger’s quote – “All I want to know is where I’m going to die so I’ll never go there” is one of the most important ideas that investors must always remember.

To be continued… (Final Part remains)


Brief Bio

Vishal Khandelwal has 11+ years experience as a stock market analyst and investor, and 3+ years as an investing coach. He is the founder of Safal Niveshak, a website dedicated to helping small investors become smart, independent, and successful in their stock market investing. Over the years, Vishal has trained 1,500+ individual investors in the art of investing sensibly in the stock market, through his Workshops and online investing courses.

A Short Story to tell why You shouldn’t Compare Your Portfolio Returns with Index Returns

There is a general trend to compare your portfolio returns with returns of popular indices like Sensex and Nifty. And this is not a recent phenomenon. It has been going on since years. Ask anyone and they will tell you that their portfolios have beaten Sensex by 5% or 10% year on year.

Here is a short but interesting story about why it doesn’t make much sense to do it:

Years back, there was a man searching for something under a streetlight. A policeman comes by and asks what he’s lost. The man replies that his keys are missing and he can’t get back into his house.

After a few minutes searching together, the policeman inquires whether the man is sure he lost his keys under the lamp.

No, the man replies, he lost them in the park.

“Then why are we searching here?” exclaims the officer.

“This is where the light is,” replies the man, continuing to search.

Story Investing Street Lights

That is the end of the story. Can’t get it?

Don’t worry. Read further…

The problem with evaluating relative performances is that you can’t get much out of relativity, i.e. you can’t eat relative performance. And the biggest problem with relative performances is that it ignores what an investor actually needs? Some investors invest for growth. Others might invest for generating dividend income. And many like me invest for a combination of the two. 

And comparing short term relative performances when you are investing for longer time horizons like 5 or more years does not make much sense.

And an index is not designed keeping in mind an individual investor’s needs. Remember that. So if you are comparing your portfolio performance with that of an index, then remember that index does not know that you use it (and not your actual needs) to judge your portfolio performance.

So if you really want to find your lost keys, you need to look where you’ve lost them, not where the light is (index performance). And if you want to know how your portfolio is doing, compare it to your actual needs and not any arbitrary index.

Note 1 – The idea for this post is sourced from here.

Note 2 – If you want  to read another interesting story about monkeys & goats and what they tell about stock markets, then you can read it here.

Boring Tuesdays – Three Things to Read Today – 1

I know. Just yesterday it was a Monday. And a day before that, it was a Sunday. And you are already waiting for the weekend to arrive. 🙂 Sorry I can’t help you with that. Weekend is still a few days away.
But there are few articles which I found interesting while reading stuff on internet in last few days. And I thought I will share it with you to brighten up this boring day.
Article 1
“When most people say they want to be a millionaire, what they really mean is to say ‘I want to spend a million dollars’, which is literally the opposite of being a millionaire.”
Liked it? Great…There are 139 more such amazing thoughts which the author has recorded in this beautiful compilation titled ‘140 Things to Know about Investing’ (the author has removed this article).
Article 2
Now listen to this very carefully. If you have to sit and read this long article for next 15 minutes, then please do so. This is the fastest way of getting your MBA in finance and how to manage your money, instead of your money managing you. Don’t miss this one guys…This is indeed what it claims to be, the Ultimate Cheat Sheet for Investing.
Article 3
You have always been bombarded with long lists of wise quotes by intelligent investors. Now this one is different. Here is a hilarious list of Stupid (& Laughable) things people in stock markets say.
That’s all guys. 
I hope you have an interesting Wednesday, Thursday & Friday. As far as Saturday and Sunday are concerned, they take care of themselves. 🙂

Had He Not Bought That House For Rs 27 Crores…

Since childhood, we are brought up with this idea that we should buy our own houses as soon as possible. And for almost everyone, house is the biggest investment (or expenditure) which one makes during his lifetime. And there is absolutely nothing wrong with that.

But there is something that makes me restless.

Why is it that as soon as we start earning, we should commit ourselves to make the biggest investment of our lives, and tie ourselves for next 15 – 25 years of paying EMIs? Are we really supposed to live a life like that?

Real Estate Cartoon

Don’t get me wrong. I am not saying that one should not buy a house at all. I am just weighing the pros and cons of buying a house early on in one’s career.

Few days back while surfing the internet, I came across this interesting post, where it was said that in 2005, one of India’s most well known investor Rakesh Jhunjhunwala sold some shares of CRISIL for purchasing a house in Mumbai. The amount received on selling the shares was Rs 27 Crores. The house today might be worth Rs 50 to 60 Crores. This means a compounded annual growth of 7% to 9.5%.

Now what would have happened had he not sold his shares in the company?

I am not sure if he purchased that house for living purposes or for investment. Had it been for living purposes, it’s possible that he would still be staying in a house on rent(!) And assuming he paid a rent of Rs 2 Lac a month, till now he would have paid close to Rs 2.1 crores as rent itself. Seems horrible… right?

But what happened to 27 Crores worth of shares then?

The shares are now worth a whopping Rs 700 Crores!! A growth rate of more than 43% every year!! 🙂

Now we are not experts like Jhunjhunwala or Buffett. We may not be able to find multibaggers like CRISIL. But we can find mutual funds which offers reasonable growths…isn’t it? Any reputed well diversified equity mutual fund scheme would have given returns in excess of 15% in last 10 years. And that is more than what real estate offers.

Now does it not make sense that early on in our financial lives, we should invest as much as possible in equities? If not directly, then through mutual funds? Returns are far more than what average real estate offers. And you also don’t have to remain stuck with paying EMIs for decades. Why not stay on rent and invest the remaining amount? I know it sounds controversial but I am just doing loud thinking.

I seriously think that our mindset of buying house early on in our lives needs a serious rethink.

Note – I know people around us these days, are constantly talking about doubling their real estate investments every 2-3 years. But believe me that this is an exception and not a norm. Trends like these do not continue forever.

If Other People Were Like Stock Market People – Thankfully, They Are Not!

Stock Market is a strange place. A really strange one…

At times, things which happen here are so far away from common sense, that if aliens were looking at stock markets, they would refuse to make any contact with humans… because lack of common sense shown here proves that we may not be an intelligent form of life at all.

One of the simplest examples of stupidities in stock markets can be illustrated as follows: We wait for discount sales and promotional offers when we want to purchase clothes, furniture, etc. But when the same discount sale starts in stock markets, we run away. We are no longer interested in purchasing goods (stocks) which are available in markets at cheap prices and at very high discounts.

I just read an interesting article by Morgan Housel here, which almost forced me to imagine my own set of hypothetical situations, where other people start behaving like those in stock markets.

In each of the following situations, I have used my name (Dev) instead of anybody else’s, to avoid getting into conflict with readers for use of anybody else’s name. Unfortunately, if your name is Dev too, then please accept my apologies 😉

So go on…Enjoy the rest of the post… 😉

If we are as impatient about gardening as we are about investing: Dev plants some seeds in his backyard. He checks them after 4 hours. Nothing changes. He digs them up and replants them. Four hours later…. still nothing changes. Two days later, Dev is disheartened and angry that there is no mango tree in his backyard. He calls mango trees a big scam.

If we thought of private businesses like public businesses: Dev owns a bakery. One year he sells 1024 cakes. The next year he sells 1023 cakes. Business channel reporters stand in front of his bakery and call him incompetent and unworthy of running a bakery.

If medical advice is given as universally and indiscriminately as financial advice: Dev is a doctor who goes on TV talking about the benefits of a new cancer drug. He doesn’t mention that unless you have cancer, the advice is irrelevant for you. Unaware, half of the viewers start using the new cancer drug despite not having cancer.

If we credentialed doctors as easily as we do stock brokers: Dev keeps shouting just one thing: “the hip bone is connected to the leg bone.” This simple and obvious observation qualifies him to be a famous ortho-surgeon and your life is now in his hands.

If we held weathermen to the same standard as stock market experts: Dev, a local weatherman has been predicting since 1990s, that next year, it will rain in Delhi during monsoons. As common knowledge is, monsoons do bring in rains every year in India (including Delhi). But Dev is inducted into the Meteorology Hall of Fame for his “spot-on, dead-accurate forecasts of the Delhi’s climate for last 20+ years.” 

If we checked our physical health as often as we check our portfolios: Dev wakes up in morning and checks his blood pressure. He checks it again before breakfast, during breakfast and after breakfast. He checks it again just before leaving for work. When he reaches office, he checks it again, then again before lunch, and twice before leaving office. During one of these times, he weighs himself during the day and notices that he has lost half a kilogram. He calls his doctor to find out about his health and what exactly is going on.

If we thought of school grades like we do corporate accounting: Dev gets an ‘F’ in maths test, but says he actually got an ‘A’ if you strip out one-time bad answers on a pre-mistake basis. His teacher* buys the logical explanation and gives him an ‘A’ in report card.

* -‘Auditors’ 😉

Stable Investor Completes 3 Years – My Letter to You

Today Stable Investor completes 3 years. So congratulations are in place. 🙂 I wanted to write a long speech but that’s not my forte. So will keep it as simple and as direct as possible.
So first of all, I take this opportunity to thank myself for being the one man unit behind the concept of Stable Investor. ;-P ;-P
Secondly but more importantly, I thank You. It would not have been possible without your support, time, comments and feedback. Had it not been for you all, I would have been like a person in closed room, shouting out his thoughts about investing with no one to listen to.
So thank you once again for listening to me.
Stable Investor Birthday
Not a day goes when I don’t think about what I should write here on Stable Investor. It has become such an integral part of my life that I am now unable to imagine how I used to spend my free time before starting Stable Investor.
This 3rdyear was an important one as I launched my first premium product Ultra Long Term Stocks in June. I was pleasantly surprised by the response which it received and would like to thank subscribers of Ultra Long Term Stocks in particular once again.
Some numbers to gauge what has been build in last 3 years – I have written a total of 179 articles; Have received more than 5.8 Lac pageviews; Email subscription has reached 1400+ and there are quite a few hundreds subscribing to RSS feeds using feed aggregators. Facebook Page has crossed 3200 Fans and there are more than 650 Twitter followers of @StableInvestor.
These numbers are not big ones but still mean a lot to me as each one represents a person who is ‘actually’ interested in real long term investing.
And that is what keeps me motivated on this long journey of learning about investing and of course about getting to know my real self a little better.
Stable Investor is all about Investing – So I share with you this thought by Morgan Housel which I read some days back:
Investing isn’t easy. It can get emotional. It can make you angry, nervous, scared, excited, and confused. Most of the time you make a decision under the fog of these emotions, you’ll do something regrettable. So talk to someone before making a big money move. A friend. An advisor. A fellow investor. Just discuss what you’re doing with other people. “Everyone you meet has something to teach you,” the saying goes. At worst, they give advice you don’t agree with and can ignore. More often, they’ll provide prospective and help shape your thinking.
So I request you to be my friend, advisor and a fellow investor – who helps me on this path and helps me learn and get over my mistakes.
Thanks once again…
Looking forward to do more in fourth year. 🙂