Goggle – Yeah, you read it right, it’s not Google

Blogging after a break of 2 years really needs a big stimulus. Particularly, the case is more demanding, when influenced to tread against the trends of headlines in business newspapers.

I recently browsed through a newspaper column that compared the Indian federal structure to that of Euro zone. The comparison primarily focused on growing regional powers. The recent benevolence of this power shift to the country was evident, when it helped to divert the print media headlines from singing sad ballads on economy to high voltage narrations of Didi vs Dada manoeuvres on who should walk the lawns in India’s grand palace, Rashtrapati Bhavan. This gives a reprieve for a commoner like me to mull over what’s really happening in the economy.

While the concerns on the growth story are engineered to put pressure on policy makers, such news may mislead other potential players in the economy. So, the intent of this series of blog – Goggle (yeah you read in right, it is not Google), is to have top of the mind views and experiences on the commoners’ economy (Boundary definition: Economy not covered or not adequately covered by business news papers) that may or may not be in line with the tunes of published news.

The story goes like this. It happened in 2007-08. The prelude is as important to the story. We were working with an entrepreneur who wanted to raise equity investment for the next level of growth of his mid-size company. The company had the typical SME (Small and Medium Enterprises) growth syndrome – relatively healthy assets, promising growth plans, entrepreneurial spirit at all levels of the company but no cash (liquidity) to grow further.

The company’s expected value was a combination of land bank (that had locked the company’s erstwhile cash in bank) and perceived super- normal growth envisioned by the promoter (that he alone could comprehend). As a matter of experience, we knew that questioning the science of promoter’s gut feel (valuation) was an unpardonable sin and so we did not. As in any case of deal making, after a long process, a funds man found ‘value’ in the company and was willing to invest. His figures were quite close to the perceived value of the business. His valuation was also instinct driven – strange hybrid of scientific thinking and gut- feel (based on market capitalization of comparable listed comparable companies). Naturally, both the investor and target company’s expected valuations defied our internal valuation logic. But, we were happy to have narrowed the gap between the expected and offered value. The fund was supposed to share the quote for a cub’s share (just to say, it is minority shareholding and it is not a lion’s share) of the business.

Morning coffee with mint (Business news paper) is a fringe benefit at office. On one fine Wednesday, even before the caffeine could act, the promoter called me to say that he felt that the real estate component of his business was undervalued. Why? Given the bullish outlook of Sensex with graphics as reported on that day’s morning paper, he felt that the market value of the company’s assets had appreciated. It was poetic. He felt that the bright sentiments in Dalal Street, Mumbai, have appreciated the value of his company’s real estate situated in Mint Street, Chennai. I could think of no better correlation between the two variables other than the word ‘Street’.

This event is one of the illustrations of the impact that headlines in business newspapers have on SMEs, a part of commoners’ economy who are lured by the fancies of graphs of bourses. In spite of the fact that there is low participation of retail investors in capital markets, indicated by about 10% retail equity ownership (non- promoter)[i], whims around capital market graphs and correlation on health of economy is unfortunate.

To throw some light on the bearing of capital markets on Indian economy, we could refer to the metric called percentage of market capitalisation of listed entities to the GDP that is widely used in investment proposals.


2002 – 03





From newspaper articles[ii]






World Bank Data[iii] @






@ – 2010 -11 data refers to 2010 in World Bank data

Source: News Articles, World Bank Data


In spite of marginal differences between the two ratios, it is apparent that the market capitalisation was just a quarter the value of GDP in 2002 -03. Gradually, the valuation hiked and peaked in 2007-08. Incidentally, India’s growth story reached new high in 2007, when it joined the trillion dollar GDP club. But, the bloodshed in the global financial market shattered the rally in 2008 -09, pulling down the ratio to 53.08 and then the economy gradually limped back in 2009 -10 to 85.62. Comparing the volatility of the market capitalisation against a solid base of GDP provides a sneak preview on the strength of valuation in of capital market. Does the low ratio in 2008-09 or the growing ratio in 2010 -11 indicates economic health erosion and build-up in subsequent periods?  This underlines the representative quality of capital markets on the real economic activity.

With this preamble for Goggle, I welcome you to watch this space as we continue to explore the live nerves of real economy in this series. We will try to unveil the indigenous characters of business, society and economy that may sometimes go against the sentiments of news paper headlines.

 – By Navaneethakrishnan Sankaraiah, Student of EPGP 2012-13. Views are personal

2 thoughts on “Goggle – Yeah, you read it right, it’s not Google

  1. Very detailed and meaningful insights Navneeth. The impact of popular media on business sentiments and leadership cannot be any more exemplified.

  2. Pingback: Goggle – Yeah, you read it right, it’s not Google | navaneeblogs

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