Maya Bazar: Market for big money

Sep 26, 2022

Pandemic, a disastrous time for most people, changed everything. However, some segments could grow up. No edifice built on the air of illusion, be it the bet on equities or the kingdom of the virtual world, sustains a storm. They would fall like ninepins.

It has been shocking for me. Maybe for many others like me too. In the pandemic time, we have no other option than to rely on a virtual world. As I used to say in many earlier blogs, we have lost our wisdom, because we have chosen to plunge ourselves into an illusionary world. Imaginations, conjectures and hypotheses drive us. No surprise then that we are tempted to risk our hard-earned money into elusive assets.

We have the legacy of weighing imagination with values, giving larger than a real-life image to something impalpable. We have lost our sense in the tussle between imagination and reality.

I am damn sure someone will ask me, why am I calling the world an imaginative sphere. I usually don’t bet on conjecture or speculation, since I hate all gambling. The modern world is being increasingly built on imagination. The capital that flows into the imagination is unsafe since the imagination hardly maintains harmony with reality. The trillions traded in the capital market, hence for me, are only the bet-money on smoky offers and baseless instruments.

Simply, look at the capitalisation of Zomato that started in 2008. Around a trillion rupees on listing! The market capitalisation itself is an imaginative figure, being unrealisable at the price of liquidation. Zomato’s capitalisation is around 40-50 times more than its gross earning, set aside the bottom line. The story of the loss-making online restaurant aggregator would be more shocking if anyone tries to calculate the earning multiples on earning loss per share instead of an earning per share (EPS). It fired many employees at the very time people relied more on virtual dining stores. Yet, there was a huge bet on the virtual restaurant. Not for any other reason, a legendary investor vowed not to bet on its stocks.

Millions of virtual entities sprouted during the lockdown period. The virtual entities like Zomato, Swiggy, BB, Amazon are only online access facilitators for people who sought unconventional shopping and manufacturers, who could not reach their real market. The lockdown fuelled the necessities of online facilitators. The initial public offer (IPO) of the virtual entity like Zomato followed by an equally big private equity bet on Swiggy and the plan of PAYTM for raising a substantially higher amount are the results of lockdown fired business prospects. All have taken the chance to blow the iron rod when it was red-hot.

Let’s not be unrealistic. The shrewd ones hammer on the ill-fate of others. PAYTM could add value to it during the crisis. We saw it when the Indian market was in chaos killing millions of small and micro ventures after the high-value currency was withdrawn.

Food and money are rolling through a virtual platform. We already have almost everything transacted on a virtual platform, but not the hot food and confidential wealth. Now, these also have migrated into the virtual world. Apparently, this transformation may look inevitable and desirable, because we prefer convenience rather than its ultimate results.

Creating access through a virtual platform for delivery of what one produces has never been easy for every small producer. In this process, many small players crashed. Even in spaces where physical interventions are required, small ones could not find any chance. A local delivery company does not get a chance to deliver what the people of the locality buys and sells.

In the olden days, we used to count our wealth on the merit of holding cultivable land parcels. Industrialisation over 150 years changed the trend. We started investing in building “homes”, setting manufacturing facilities and buying vehicles and ornaments. These are always tangible assets that cannot dissipate overnight unlike the value of the genres of virtual. Normally, to build a company one needs many years. Now in a short period, “Unicorns” are created, Baijiu’s is an example.

Industrialisation fuelled people’s obsession for multiplying wealth in a short period. That is unnatural even by economic logic. Recently, the crazy ones started investing in pharma and telecom stocks. While the pandemic created a demand for medicines, people’s over-dependence on online transactions triggered demand for more internet data use. The use of online correspondingly throws out more information about people, their buying character, spending power, etc. Big data is tomorrow’s determiner of who wins the corporate war. The bigger the data an entity possesses, the bigger the value it would command.

Now more Indian corporations also realise the value of so-called online companies. When corporate entities value something, we follow them blindly. When Reliance started a dialogue with Just Dial and Tata took over Big Basket and other online platforms, every online entrepreneur began to see prospects of investors in them. This was a trend in the mid-1990s and 2000s. Entrepreneurs of retail chains in the last 1990s expected the arrival of Walmart once the government permitted foreign multi-brand retailers to enter India. The expectation died down soon. In the early 2000s, dot coms stole the limelight. Soon, the balloon burst.

How did such companies build such a huge value in such a short period? Some have amassed unprecedented amounts of wealth during the pandemic, while millions of business units have lost everything. We must explore an answer.

Many people may not have forgotten the collapse of pyramid schemes and another genre of it called MLM. It is easy to fool people. It is easier for shrewd ones to tame those who are crazy about making quick and easy money. On the other hand, those who have money are known to be reluctant and cautious of lending even a minuscule amount to others without ensuring the borrower’s repayment capacity. But they apply no second thought to play dice on MLM or bet on the so-called equities.

Still, many people invest their hard-earned money in the stock market. Nevertheless, only a minor portion is well-informed about the markets, and how they are working. How can the value of a company change every day while their accounting is done quarterly? If that was because of the demand factor, what could be the calculation or speculation of those who demanded it? That means the investor is acting not on an actual value, but a conjectural value of some companies. Three decades ago, we had seen how Harshad Mehta had driven the price of ACC from Rs 200 to 9000 in three months. One may argue that today the technology adoption can guard the system against such fraud. But I can only laugh because where technology creates a block, our imprudence is unlocked. That was the reason companies could mobilise a much bigger sum than the aggregate asset value of restaurants, which is aggregated on its platform. Incidentally, the internet food aggregators do not own any of the restaurants. Is it not shocking? Indeed, hardly any online platform is a factory owner or owner of any product with a credible brand. The lockdown forced big and small brand owners and manufacturers to rely on others’ platforms of their misfortune. That opened the luck line of the invisible kings, who appeared as saviours of dying shops and factories. Finally, as we ponder, we get the answer. Why do large companies become larger, and small vendors become poorer in this pandemic time? The game is too big for our imagination.

Here the folk story of Naranathu Branthan of the Panthirukulam draws a contextual relevance, as an irony of what we do. The Naranathu Branthan story, which carried a strong moral of the futility of our irrational works, has been familiar among the people of Kerala. He was one of the 12-member clans. The youngest hardly interacted with others but was an amusing character.

Naranathu Branthan was a brilliant person but known for his madness. With half-a-day hard work, he used to roll up a boulder to a hill labouriously and then let it roll down to the foot-hill. That gave him a moment of pleasure as he burst into laughter. The action is an allegory of futile human activity. We also do this futile exercise. Both business and life are on a fallacious expedition

While we believe human beings are intellectually superior, we have countless things of non-intellectual exercises everywhere. The primate chimpanzees would have been ashamed of our achievements, lodged in a world of illusions.