I had a pleasure of attending the 24th Wealth Study conference of Motilal Oswal (MOS) on 18th December, hosted at the Motilal Oswal Towers in Mumbai. As always, it is a pleasure to hear Mr. Raamdeo Agrawal himself presenting the study, rather than going through the written material.
I have uploaded the video of the live coverage by CNBC at the bottom of the page which includes the presentation of the Wealth Study along with Panel discussion on key matters impacting an investor in the current economic era.
The key THEME in this year’s wealth study was focused around Management Integrity so far that the investment philosophy of the MOS group has now started looking into Management Integrity as a part of the their QGLP framework. Mr. Agrawal briefed the audience of the SHARP accounting practices which could be used by the Corporates to inflate their profits and stuff the trash into the Balance Sheet.
Summary conclusion notes were :
- While investing, Management quality is 90% of the weight, with 9% consideration towards industry and 1% every thing else. Though in the panel discussion, it was clarified that it is key to get the industry right before delving into the management integrity.
- While there is only one way of writing honest accounts, there are million ways to fudge them;
- Most fraudulent accounting practices inflate P&L account and put the trash into the Balance sheet.
- It is vital that Auditors should be increasingly made accountable to the minority shareholders;
- As an investor, one must have forensic mindset to identify fraudulent accounting practices;
- Interaction with other stakeholders of a Company is vital to have a feel of Management Integrity – these include customers, employees, suppliers, competitors
- Public Sector Units have been consistently not being wealth generators and their share in wealth creation has dropped from nearly 51% in 2000’s to <10% in 2019
- Banking and Financial services sector continues to take a lion 1/3rd share of the wealth created for the investors and it is expected to continue this journey.
I particularly liked the ‘Integrity-Competence’ Matrix which show cased that the nirvana business is one which has ‘High’ Management Competence and ‘High’ Management Integrity standards. Any others like ‘High’ Competence but low ‘Integrity’ or vice-versa will not result in wealth creation, but destruction.
The detailed Wealth Study handout is attached here >
Video of the entire presentation is here (Courtesy CNBC TV 18)