The power of Legal

I have come across 3 cases in my life where the power of legal has changed the game in a business and my positive perspective of it:

Case 1. 

Having worked in the financing of the airlines, I came across a very secret insight which very few people in the world know. The main cause of Indigo's success v/s its competition. 

To understand this, you need to understand one of the main reasons why the various airlines became bankrupt for the last 10-15 years in India.

In airline lingo, An AOG, or "Aircraft on Ground," is an aviation maintenance term for when a plane cannot fly due to a mechanical or technical problem. It is a critical situation for any airline, as it can be extremely costly and disruptive.

Go Air went bankrupt due to a supply shortage of engines from Pratt & Whitney, which were used in its fleet of Airbus A320 aircraft. When the airline ceased operations in 2023, it had 26 aircraft operational, while the other 28 aircraft were grounded due to engine issues with Pratt & Whitney.

Kingfisher airlines - Reasons for Collapse: The collapse was due to a combination of factors, including a huge debt burden and losses, a high number of grounded aircraft due to maintenance issues, and a prolonged financial crisis.

IndiGo currently has a number of aircraft grounded, a number that peaked in mid-2024 at over 70 but has been gradually decreasing.

Spicejet also have a number of AOG almost all the time.

While all airlines have AOG, the reason for the AOG is necessary to know.

If tight finances is a reason for payment to engine supplier to resolve AOGs, then the airline will struggle because of its finances and not necessarily because of the supplier.

If the engine supplier is not having much replacements immediately despite the airline being ready to pay, the airlines suffers for no fault of its.

The secret of Indigo's success comes from the agreement Indigo got into with Airbus and the engine supplier when it first made a huge purchase with them. Possibly knowing the industry risk of AOGs due to engine problems and its impact on the business and its first CEO being a lawyer by profession (Aditya Ghosh), they got in a clause to the effect that the engine supplier is obligated to replace the faulted engine with 24-48 hrs or else the engine supplier would pay damages per day of AOG.

I believe this clause didn't exist with the other airlines' agreements and the engine supplier agreed to this demand  of Indigo as part of the negotiation of the big order Indigo placed.

So, while Indigo had any engine trouble, the engine supplier had to prioritise to replace its engine with ready ones (mostly in Singapore being a hub for Asia) while the other airlines waited for their turn.

As the supply is usually very strained, Indigo flights went up in a day or 2 while the others only kept mailing and calling the engine supplier for replacement and lost their revenues till they went up bankrupt.

This is the power of the right legal clause.

Case 2:
In Banking, money and assets can be transferred by 2 ways: 

A. Transferring money through banking channels

B. 'Assigning' the asset/ monies through legal agreement

The common people don’t know this way of transfer of assets. This is somewhat similar to a gift deed.

Case 3:

Movie: The Firm featuring Tom Cruise

A legal firm traps its own key lawyer and blackmails him to keep the illegal things they do a secret. 

Now the hero as an individual has to fight back against a big firm and bring it down.

And how does he bring down the firm? After multiple attempts fail to bring the firm down, he finds a small misstep the firm keeps doing which he observes. The firm illegally overbills its clients and is documented in its records.

Sometimes, the key to success lies is in the details others oversee / cant think of.

Each of these stories / cases has left a lasting bright impression on me on how legal can be a solution to problems which others in the world don't consider.

The Adani Hidenburg boxing match

I heard about the Hidenburg research report over a week ago and read the report on their website 2 days later once everyone was talking about it. While going through the report, the first question remained unanswered: why did they take 2 years for this report? The research seems genuine on all the things dug up, researched and put up.

While the Adanis were busy doing the puppet show to the audience, someone outside the audience saw the Adanis doing the puppet show. This is visible in the counter-transactions shown with the firms outside India and not shown in the annual reports of the Indian companies.

Round 1 goes to Hindenburg! The shock & awe hard punch will hurt Adanis for a long time to come.

The twists in the tale get interesting. Right after the damaging report, the international fund IHC promises to invest $400 million into the accused company. 

Round 2 goes to Adani!

Which company would ever do that unless the other company was a holding company or a govt. nationalising a company or trying to prevent a big bank bust case? This raises a lot of eyebrows and red flag as it is very unusual and non-sensical.

The hidden truth is revealed the next day. Adanis cancel the FPO. This means that the Adanis had to save face and get the FPO successful while ensuring that IHC gets its money back after the jitters of the report. This seems to be a pre-meditated invest and pull back strategy while influencing the other investors into investing into this FPO.

Round 2 was an unexpected double punch going to the Adanis!

I am sure on detailed investigation of the FPO process, the regulators would be able to find this pre-meditated arrangement duping the others (retail investors and few others) into the trap of investing their monies in this FPO only to be forced to get out of it.

Another interesting critique from some people is the timing of the report. I laugh at their questioning. For any investor in a fair market, maximising returns is the objective. This report was timed to maximise the value of the shorts and earn profit. Isn't this is what fair market is all about? Plus maximum visibility for the brand. Who wouldn't do it given the opportunity?

While reading the report,  the Adani strategy to raise funds becomes clear.
Step 1: Keep a number of close set of companies with maximum percentage control on and off the public books. Includes hiring experts in price manipulation like experienced Ketan Parekh.

Step 2: Based on these inflated stock prices, pledge the promoter stocks and raise more loans that is actually possible to fund the investments.

Awaiting to see Round 3!

Innovations in the washrooms

There have always been television ads on italian/porcelain bathroom fixtures usually showcasing the shininess of the products. And print ads containing attractive females to add to the fixture.

How come none of these bathroom fixture makers ever advertises on the benefits of using their products? Like, the commode whose design enables waste to be cleared with the least amount of water usage per flush? Or the tap which is rust proof/drip proof?

Even after all these years, it is difficult to see why innovations in the washroom space have not yet become common in India. Why cant I have a shower that shows me the temperature of the water coming out of it? Which brand do I have to see if I want commodes that heat up the seats during winter? Do I have a commode that does make sound while flushing? Do I have toilets made of anti-bacterial material? How about a special geyser that not just heats water, but also has an option to make steam so that I can have a sauna bath in my bathroom.

Where are the innovations in the bathroom? I demand euphoria in the most private of spaces to start the day off!

Know the 4 Dimensions of Investing

Investing and analysing investment options can seem burdensome, tiring, boring, confusing, hair-splitting to know everything about it before committing your money to it. Irrespective of what the brokers, sales guys, agents try to push to you as an excellent opportunity for you and your loved ones, it is important to know that they have an inbuilt interest in selling things to you and you have to do your own due diligence. Doing your own due diligence is often spoke about, but some of you may wonder what does this mean and how do you do it.

There are essentially 4 dimensions to understand any investment:

1. Return/Potential Return

I say return/ potential return and not just return so that you are not overly swayed by the superb past returns of an investment, but realise that not all investments will repeat their super duper track record time and again. There may have been a time and environment where something really made great returns, but this time and environment may well be very different. 

A plot in a far away village may not give you a great return on your investment without nothing new happening. But, once it is known that an international airport will be coming in the area, the investment may have great returns. And once all the development is done, the return on investment may not follow the run you saw during the days when the news of the airport was coming. Similarly with stocks. There are good times and great times for companies depending upon a myriad of factors such as demand for the product/service, cost of making things, saturation of product usage, etc.

2. Risk & Return

Each investment has a certain risk to it. Even Govt. owned companies and their shares/bonds have some risk in it. Nothing is risk free. Sometimes the risk is on the return, while on some others, the risk is on the capital deployed itself. One has be aware of the risks and consider the return on the investment proportionately to the risk involved. Derivatives are more riskier than Stocks which is more riskier than fixed deposits/bonds/gold.

Do remember that sometimes even a less risky investment can cause a major loss compared to a higher risk investment.

3. Liquidity

This involves multiple things and is very important but unfortunately not given much importance by many people. Liquidity refers to how fast can you to convert the investment to cash whenever you need it. Another related aspect to liquidity is whether the investment can be used as a collateral against which you can get a loan. Certain investments cannot be given as collateral and no loan can be obtained against them. E.g. Bonds, Fixed deposits in some NBFC (Non Banking Financial Company)s. Some investments may have a lock in period which will limit the ability to sell the investment. Certain bonds have a lock in period before which you cannot trade it in the market. Sometimes, holding a stock/bond that is not widely traded also brings about liquidity problems while trying to sell it.

4.  Tenor

The length of the investment period. At the end of the day, you will need to match the investment tenures to the life's various goals. No point in investing in a 20 year investment that is locked if you don't have money for your other urgent goals.

All investment avenues would have the above mentioned 4 characteristics. You should know these 4 aspects of your investment and competing investments before you make a decision to invest in one based on your life's goals and risk apetite.

Solve this case

Case study:

On a lazy day in office, you dont have much to do and you staring at the Brownian motion of the leaves on the tree you can see through the window of the office building. You wonder what you want to do this weekend. You check the movies online after a 360 degree turn of the head to confirm no one is looking at your non-official work. After some 5 min, you are done finding the theater and the time of the show you want to see and where. Now what?

You start thinking of a weekend vacation and how long it has been since you had been somewhere of some significance. With some memory recollection, you remember how your colleague had talked about the great things of a nearby town - a 3hr ride by bus. Whats wrong with checking out some details? Where is this? Whats there to watch? How to get there and back? Timings of the bus, etc.

Again looking around that no one is looking at you and glancing into the boss's cubicle to confirm that he is not yet in office, you start finding details of your potential next trip.

Twenty min have passed and you have found valuable information on the place. Now, to plan the bus trip. So, you open the popular top of mind site for bus travel, www.redbus.in

And you have entered the locations and are about to enter the dates, when suddenly, you hear a faint voice. It is not readily identifyable but slowly you realise that you recognise that voice. It is coming from behind and the loudness of the voice is slowly increasing. This is processed by the brain after your nerve cells communicate with each other by synaptic pulses as the subject is approaching nearer to you. This realisation gets your heart to beat faster of impending situation. You then realise that the voice is that of your dreaded boss who already doesnt like you and will get furious seeing you wasting time instead of doing office work, surfing sites and making travel plans. Your heart is now racing at the speed of Ussain Bolt and you are not sure what to do. Closing the tab on your browser will show the other travel sites that you have open. Closing the browser will show your desktop with no work on it. What do you do? All these scenarios are running through your head in a fraction of a second and you are sure either of two things: A miracle to save the day or to embrace the impending disaster. What do you do?

Answer: you click the link "Boss is watching? Look busy." :D

How to get great discounts on SpiceJet

Spicejet is currently running an offer "Scan this code now and get discount of the day"

I just used this and got a Kool Rs.600 discount on each ticket booked.

And to make things sweeter, booked separate one way tickets to get twice the benefit = Rs.1,200/-

The code is what is called a QR code. The method mentioned in their website is complicated and doesn't work. Use the following method to get the benefit of the discount.

1. Printscreen the whole page with the small qr code.

2. paste in Microsoft Paint and cut only the code and save this cropped code.

3. Upload this code in this website http://www.onlinebarcodereader.com and get the code (which is something like SGDIS600)

4. Apply this alphanumeric phrase in the promotion code while paying for the ticket (just below the travel insurance section of the payment page) and voila! you get a nice discount. The discount could vary on a day to day basis, but it is actualy very much worth the effort.

Maybe soon, we can expect other websites also to give discounts based on this method.

In these cases, it is always better to book each passenger's ticket separately and each way separately too to maximise the discount on each person and each way.

The wise men

Once upon a time, some time ago, there were a group of men who were very very rich and owned around 40% of the world's resources. They had land, industries, gold and what not. They were wise and understood how to maintain and grow their wealth throughout time. They very well knew that value is in the thought of the beholder. If the thought of value in something vanishes, the value in the product is zero. To further help themselves, they thought upon an idea to globalise the world to make use and exploit the best of everything. Further, they spread the benefits of globalisation and free market access. At this point of time, they realised that with free markets, value is being interfered by the exchange rates. The group of wise men, decided that they will have to be proactive and move as a group to maintain order and control of the maintenance and growth of their precious valuables in the world. Since they own a substantial part of the world, and markets are never deep enough for them, they could influence the markets with ease. Moreover, they realise the people's psychology and the various govt.'s response to the situations they would create. They start buying into an 'item' initially and start spreading the word how that would be the next 'big' thing in the world. The high risk takers and loyalists start buying it immediately. As the value of the 'item' increases, more people start believing the prophecy and start buying it while all the while the wise men's value increases. After a few years, the wise men believe that they have milked the 'item' to its limit and their value has stopped growing at a fast rate. Further, before someone else calls that the 'item' is overvalued, they start selling the 'item' and buying into another 'item'. And the next prophecy of how this item is undervalued and how it is the next 'big' thing, starts to grow. This cycle keeps repeating over periods of time and the only people who are always in the green are the wise men and the loyalists, while the general public is bled and slaughtered each time when they start buying at the height of the cycle and when the wise men are selling it to the blind public. These "items" could be various currencies, gold, silver, commodities, bonds, houses, land and what not. The frequency with which these wise men are interchanging the 'items' has increased in the recent years. It is not clear whether another set of 'wise men' are on the street trying to call shots on an item which is different from the first set of wise men. This fight between the two sets of wise men having contradictory ideas on some 'items' is probably being seen in the high volatility of the markets. E.g: Crude oil falling by around 6% in a week, INR moving by 1% in a day, gold falling by over 9% in 5 days.

Moral of the story: Besides the all the financial porn being thrown by the media at us and all the talk of finding value, in the end it seems you just have to stick to the side of the 'wise men' if you want to make money/store value. If only, we could easily pinpoint who are these 'wise men' and know their next move.

P.S: This is just one of the hypothesis I have to show that most people have know idea of how the market could be working against you all the time. At times, I feel like one of the little guys who feel like they are born to just get exploited by the 'wise men'.

Another conspiracy theory

One of the most romantic hindi songs was probably actually written and sung to shut up wife/gf "kuch na kaho, kuch bhi na kaho..." :D

Life insurance isn't everything

One usually thinks that getting life insurance is a great way to cover for your life and to provide for your family 'Zindagi ke baad bhi'. I am sure at least it is portrayed that way and many more believe it so. Till, you go through the 'fine' print.

Forget, about dying doing dangerous stuff like sky-diving or adventure sports and getting yourself killed.

Whats shocking is that a lot of risks are just not covered in the policies.

Being a victim of a terrorist attack on the way home need not necessarily be covered in your life insurance. My document clearly mentions "War, invasion, hostilities (whether war is declared or not), civil war, rebellion, revolution or taking part in a riot or civil commotion are excluded". This means that tomorrow if a neighbouring country bombs some city and people die, then life insurance won't cover you.

Imagine being part of a peaceful protest and suddenly police starts lathi charging you and some commotion occurs. The insurance may mostly deny your claim.

What's worse is that certain accidents are also not covered. Especially nuclear contamination. I find this highly ridiculous. Why cant all these risks be covered as riders. I believe a price can be put on any risk. If you believe its impossible or too difficult to measure such a risk, stop being in the life insurance business because you are no longer insuring lives.

Whats the point of having a life insurance when all it effectively covers is just road accidents and we need to depend on the govt. money for decades together after a disaster like the Bhopal tragedy. 

The worst part is life insurance is it makes me stupid even if I am smart enough to buy life insurance. Thats the real irony of it.

In diagrams

Src: www.thisisindexed.com

Lift kara de

I overheard a very interesting conversation while in a lift. I heard one guy saying: The lift takes more energy to take a person going down than a person going up. The logic is that the lifts usually have a big counter-balance attached to it. The counter-balance always goes in the opposite direction of the lift. If the lift goes up, the counter-balancing weight goes down and vice-versa. So while you and the lift has to go down, the heavy counter-balance has to be lifted and hence is very energy intensive. So the next time, walk down and go up in lift to save some electricity.

Creating value

Story 1:

How to sell off a dead donkey

A city boy, Kenny, moved to the country and bought a donkey from an old farmer for $100.00. The farmer agreed to deliver the donkey the next day. The next day the farmer drove up and said, "Sorry son, but I have some bad news, the donkey died last night."

Kenny replied: "Well then, just give me my money back."

The farmer said: "Can't do that. I went and spent it already."

Kenny said: "OK then, just unload the donkey.."

The farmer asked: "What ya gonna do with him?"

Kenny: "I'm going to raffle him off." (Note: To raffle is to sell a thing by lottery - draw lot - to a group of people each paying the same amount for a ticket)

Farmer: "You can't raffle off a dead donkey!"

Kenny: "Sure I can. Watch me. I just won't tell anybody he's dead."

A month later the farmer met up with Kenny and asked, "What happened with that dead donkey?" Kenny: "I raffled him off. I sold 500 tickets at two dollars apiece and made a profit of $898.00."

Farmer: "Didn't anyone complain?"

Kenny: "Just the guy who won. So I gave him back his two dollars."

*********************************************************************

Story 2:

A company has a debt of say 100 units and equity of 100. It splits up the company into 5 companies: 4 are debtless and the other takes all the debt. The one with excess debt shuts down and the other 4 companies take on more debt, do an IPO and prosper. Result: Tremendous value created for shareholders!

Moral: How many of you guys participated in things (eg:smsed to tv serials) thinking things are straight forward and were ignorant?

How come fooling people seems to be a very sustainable source of value creation?

I leave it to you to think it over...

Destroy the pyramids

Well, it is time we destroy the pyramids and start constructing apartments/flats. If we are to remove the widening rich-poor divide, the government will have to make some new policies and rules to discourage the people at the bottom of the pyramid to stop growing and simultaneously make them jump to the highest level. So how is it possible?

I have a probable solution. Yes, it is a little radical but here is a solution.

Make it compulsory for the rich to have/raise atleast 3 kids. If the family has one or two biological kids of their own, then they should adopt two or one kid respectively of their choice from the thousands of orphanage kids in the country and the adopted should have the same right as any other kid in the house and should also have the adopting parents' surname and religion. If they already have 3 kids, then they should adopt atleast one more. Such rules will make the following things possible:
1. There is a real chance for the poorest of the poor to come up in life if they are adopted.
2. The caste discrimination between the higher rich castes and the lower poor castes will come down drastically.
3. Parents who have always wanted either a boy or a girl but couldn't conceive one will have their wish come true.
4. The rich will be forced to have their riches divided between more children. So the average wealth of the richest will fall a lot bridging the rich-poor gap.

On the other end of the spectrum, the people at the bottom of the pyramid should be punished in some way for having more than two kids. Their selfishness to have more kids is putting more strain on the society and making the society as a whole poorer and creating excesses following the invisible leg theory
http://ajitjagan.blogspot.com/2009/09/invisible-leg.html

Till now, people are only avoiding to solve the real issues and problems and trying only to solve the symptoms of the problem. How else can people keep giving ideas of how to keep the people going up the pyramid structure while continuing to have the pyramid in the first place? Why not realise that the pyramid structure of society is not the most efficient and worthwhile of structures? I think the apartment structure is better. There is also a fair chance in the apartment structure that the non-performing may come down by a level and someone may have a better chance to go up.

Two sides of a coin

I learnt a trick that is really useful for making decisions in this web world. Usually, when we don't understand a specific topic or want to know about something, we do a search of the topic in google or do the search on wiki. This is ok. But when you need information on topics that you going to make you decide on something important, this is not enough.

Eg: Say you are planning to buy a product made of Neem(a tree) for your family and assuming you didnt know about Neem before. Doing a google links gives wiki as the first link. I went through the page and understood all its benefits.

Now, does that mean I can just buy it and use it? Could there be any harmful effects of it?

So now I do a google for the words 'harmful neem' and I got multiple links saying the harmful effects of neem on children and on pregnant women.

This is my learning from my finance prof. Deepak Kapur: Do the google search as before and then do a google search with the contents "problems" along with the topic. The word problems/harmful effects, etc will give you the lesser known criticising view of the topic at hand. This tip/trick can be used to gauge the problems related to companies in the stock market to increasing your knowledge and for being more decisive and critical in your thinking.

Security guards

Today, in one of the classes we were talking about GCC(Gulf cooperation council) consisting of Saudi Arabia, Bahrain, Qatar, Kuwait, UAE and Oman. The prof describes Kuwait: These guys have a strange problem. They have a lot of money from the oil. But they are weak and have a lot of wealth and are surrounded by thugs. So what do you do if you are Kuwait? First, stash the money outside the country by buying assets abroad. Then to protect the money in the country, hire cheap security guards. So who are these cheap security guards? These are the US guys. They even pay you to protect you. When asked about what they give in return, the Kuwait guys reply "we buy a lot of their US made cars. But then it is dirt cheap and it is for the security guys. These is the least we could do for those security people." I bow to my prof for this wonderful insight.

SOP for choosing hostel room

The standard operating procedure for choosing a hostel room are as follows: 1. Avoid rooms near the main corridor, bathrooms & lavatories. 2. Choose rooms at the end of the wing. Though you may have to walk a lot, it will be more peaceful as others wont come so far just to disturb you. 3. Choose rooms which have windows facing north or south. This way there will be no direct sunlight coming into your room. 4. Do not choose a room very near to the water purifier. This may sound illogical, but the main problem is that when there are more people standing in line, they tend to just barge in to see what you are upto and eat away your precious time. 5. Avoid rooms at the ground floor. These are the mostly the oldest rooms and have high chances of water seepage. Insects and rats are closer to you than any other floor. 6. Choose rooms with peaceful neighbours. This way all you people can live peacefully. I hope this will help you choose a good hostel room to stay in.