An interaction with Vallabh Bhansali

Vallabh Bhansali, Chairman of Enam Financial Consultants
By Morningstar |  09-02-17 | 
 
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Vallabh Bhanshali of Enam Holdings is a leading investment banker, investor, venture capitalist and capital markets expert. Nilesh Shah, Managing Director at Kotak AMC, engaged him in a very thought-provoking discussion during the Morningstar Investment Conference. Below is an excerpt.

Enam was an entrepreneurial journey and today it has become an institution. Many people in the audience are individual entrepreneurs. What will be your advice to them in terms of building an institution?

First is inspiration. Do you see yourself doing something a lot bigger than just yourself and then whether that is followed by an intellectual conception of it? Just having an ideal dream is no good. You need some kind of plan that you are able to take action on. Keep reviewing it because everything keeps changing. In every aspect of my life, I have followed these steps: have a large ambition, be inspired by something much bigger than your immediate self, create a conceptual plan, execute, review and renew.

VB

There are many people in this audience who are chartered accountants or lawyers. What will be your advice to them in terms of scaling up their business and accepting change?

Very early in my journey two things happened.

I decided to stop doing what I did not enjoy. I was practicing as an accountant and I realized that I may have been academically brilliant, but my heart was not an accountants. So, I just walked out of my practice, not knowing what I was going to do next. You have to be very passionate about what you do.

The second is rules of engagement. I tell my people, are you the person that you would like to deal with? Try and think of the other side. If you are too selfish, I want my commission, I was my sales, et cetera, it's not good. But if you think of the other side, they will talk to an honest man, a consistent man, a knowledgeable person, and someone who will keep him out of trouble, and if in trouble, will stand by him.

Clients swore by us. The best of people walked into my office saying “Enam should take the IPO because you will stand by”.

Air Deccan was the first low-cost airline. It caught the country by imagination and storm. Captain Gopinath wanted us to do the IPO. As I dug deeper, I realized many things were not solid. Out of the five bankers appointed, three scooted when they realized that things were not as solid as they appeared. But I said “Captain, I'm not going to leave you”.

If I had, the airline would have stopped in next week or so; it was that bad. In the hope of the IPO, the show went on. The day we opened the IPO, the market tanked by 800 points. If we pulled the IPO, the dream of this nation to have a low-cost airline would go.

So we changed the price band. We got the IPO subscribed by begging and borrowing. I have seen this again and again - how you are rewarded for your good work and integrity. The IPO traded well. All the initial investors were able to exit. Eventually that company merged with Kingfisher.

Are you the person who will stand by the client? Will you keep him out of trouble?

So, I think having that kind of harmony in your organization where key people think the same way is extremely important. Be passionate. Be the man you would want to deal with. Be lucky so that you can find a partner of that kind.

You are available to the government, corporates, entrepreneurs, HNI clients, retail clients, acquaintances. You are there for everyone. What will be your advice in terms of building a connect with customers?

I think it's just a matter of being passionate. But I want to tell you another story about time management.

If you distribute uniform time to everybody, you cannot have relationships. But if you give time to people when they need it most, they will still value the relationship. Then you can afford not to be present with them on many, many different occasions.

Let me narrate one extraordinary experience of my life. The papers were full of Essar announcing the deal. Soon after Ruia signed the deal, he called me and said Vallabh, we just signed the deal and we can't forget that we have Essar Oil because of you.

We did the Essar issue way back in 1995. The issue almost didn't happen. It closed with all kinds of difficulties in approving the allotment then in sheer listing. Listing in one exchange was approved; we had mentioned we will approve on other exchanges, difficulties came up there also.

During that period of roughly two months, it used to take a long period of time to list, all kinds of difficulties including court cases being threatened, company law being used, I was sitting at Essar office every day. There were even small tasks I didn't leave to anybody. I said I need to know what's happening. We are facing something and I will fight it. I was not the only banker, there were many bankers, but I was there every day. I did my duty. If I started something, I must do my best not to scoot from the responsibility. Can you imagine my happiness when they do a Rs 80,000 crore deal and they make it a point to say that we cannot forget you?

And the second thing is, if you can't drop what you don't believe in, where there is no value to add, you can't keep on doing new things. So, as I said renewal – I've understood renewal is very important in life. So, you must renew yourself, that's how you remain young. And so, I would say that to whatever extent if you feel that I have succeeded is because of these two principles.

You have out-of-box solutions for many things. How does one become as knowledgeable as you? You are able to see a lot of other things which people are not able to see. For example, some of the advice you gave the government on some of the steps which they have taken…..

To be liberated you must be knowledgeable. Your desire to be liberated from ignorance is what makes you knowledgeable. Not having any selfish interest beyond what you have disclosed is what makes you credible.

So, whether you are talking to somebody in an ordinary fashion, or talking to the government, or talking to sensitive relationships like a spouse or child, the rules of the game remain the same. Before you speak have you given thought if you are qualified to speak?

People still want to come and talk to me and Nimesh because we will do speak without knowledge. If you look at the possibility of knowledge today, it's infinitely greater and easier than what it was when we started 30-40 years ago. I remember when we started, many times we would laugh and say “oh, we are able to trade successfully because we know what is the capital of the company or we have read the balance sheet.” People didn't even know the basic facts. Sorry to say, but many times I come across financial professionals who haven't done their homework, they aren't thorough.

I remember I went through an illness and in a period of three months I read at least 100 balance sheets. You have to be very thorough about what you have to say. And then it becomes an intoxication. You really want to know then. It is not for the results; it is just for the sheer pleasure of knowing.

Over the you have launched many IPOs, some became Infosys, some became Motherson Sumi. What is your advice to the audience to become the next Narayan Murthy or Vivek Chaand Sehgal?

Even Narayan Murthy probably cannot become a Narayan Murthy again.

Walk your own journey. Never forget that you don't control success. If you are after success, there is no formula. But there is a formula for excellence. That's how I have lived my life and that's what I would advise you. Your processes - mental, physical, intellectual, emotional, must be excellent and not just adequate.

If you continue to work on taking them to the next level, the chance that you will become somebody in life is disproportionately high. I have had many Gurus, one of them, Dr. Rooshikumar Pandya, said he does not have a sixth sense. He only uses his five senses very well.

I have personally experienced how you have convinced clients on things which we couldn't convince them for months. In this audience many of entrepreneurs talk to their clients. But does the client always listen to them? What advice would you give them in terms of being an effective communicator?

Every evening when I go home, my communication skills are tested very severely. There is no guarantee that you will get success.

You can control your processes, never the outcomes.

I'm angry because something is bothering me. The other person may have no connection with it. The other person may have a completely different perception. So, if I say something out of my emotion, it is my need. The other person has nothing to do with it. Getting a client to buy something or to act in a certain manner is my need. I've no idea what is the other person's need.

The biggest principles in communication; one, you listen. You have to listen a lot more. The second is to anticipate the result of what you're going to say. And then you can alter your communication accordingly. With these two principles, itself I think one can do very well.

What are the basic principles you follow when you pick up a company for investment?

I think in economics there is a principle that what has value. Diamonds will have no value if there is abundant supply. So only rare things have value. If you look for rare qualities in your company - either from the brand, capital efficiency. Obviously, management is at the top. There are very few good managements, good from integrity and capability point of view and having a business model right. So, if you look for them and you stay with them over the long term, you'll get 7/10 right.

Investment is a very simple process. Life too is a simple process. I think the difficulty that I've seen in many people is that a tree that grows big has a particular seed. It may look the same size as some other seed, so look for seeds that grow tall. In your own life, be that seed.

The method to win in the short term is completely different from the method to win in the long term. You can say, hey, this year chemicals have turned around, so let me invest in it. Now, government policy has changed, so let me jump into it. Those things don't work. Most of the time - news, media, advice, et cetera, is short-term. This has nothing to do with the long term. They are completely different.

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