Water From Stone

About 27 years ago, I worked in an investment team in ICICI Ventures that was led by one of those superior types, who walked around with with his nose at 45 degrees to mean sea level.

One day, a proposal for investing in a textile mill that had gone bust landed up. The company was up to its neck in debt, yet needed more money and the family that ran the business asked one of its own – a US-MBA type - to take over (the fact that he agreed was indicative of his IQ, but it did not occur to me then).

If you know anything about textile mills, you are probably in stitches by now and laughing yourself sick.  The general rule is, the more spindles you have, the higher your societal value in Coimbatore, and the more losses you make.  The only way to make money off a textile mill is to keep digging below the factory floor till you strike oil.  

Under every circumstance, we would have neatly stacked this proposal document in the weekly waste paper sale to the raddi-wala (which was at that time the only profitable activity we did), but that year we were hopelessly behind the annual investment target (those who set targets should be tried in a court reserved for War Crimes), so the team head – I shall call him Mr Vapour – decided that I should take a look.

…which in his language generally meant, We should take a Good Look and hit the Invest button.    

I was ok about it for two reasons:

- I had now some work to do to keep myself occupied

- I was heavily into reading Warren Buffett in those days and he too had begun with a bust textile mill (Warren, do note that’s where the similarity sort of ends).

(talk of vested interests)

Now, there were a 1000 reasons to be cautious as hell about this deal, but Vapour had made up his mind (or what was left of it).  So, I waded through mindless stuff on spindles, cotton and jargon, without understanding anything.  What I did understand – the balance sheet – reminded me of Jaws 3, because it was terrifying.  We then made a case for investment (which must be under the Fiction section somewhere in the archives of the company now), while I prayed for divine intervention (Indian Express headline, “Lightning strikes Coimbatore Mill, machinery to be exchanged for eighteen bags of peanuts”) and waited anxiously for the Big Day to present this basket case to our Board. 

If you have ever doubted the existence of The Higher Power, please note: He’s There.

A day before the Big Day, the company’s MD – influenced no doubt by a kamikaze pilot – called me and set out a list of conditions if we were to invest. Hang on: we should have been setting the conditions! 

So, not knowing what Vapour would do, I went to his boss, i.e., my super boss – that’s nowadays called ‘doing a skip level’.  He let out a sardonic, low-decibel sort of laugh-cum-growl, used Shakespearean English, which is now banned on Facebook, and asked me to tell the MD to fly a kite, which message I passed on at once, asking him to choose from either flying kites or digging for oil.  

ps: I did not actually do the last part, but it makes the ending sort of cool.  

ps2: Vapour may have forgiven me, I suppose, but he does not show it.   

…and, finally, 

ps3: and, here is what the Oracle from Omaha has to say in general:

When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.