Take a look at this news item below :
An engineer friend of mine this morning forwarded it to me and exclaimed in confounded astonishment!
“This is very difficult to comprehend! A food delivery company which went public only a year ago is valued more than ONGC!!”
It astonished me too but I was not confounded at all since I am a Chartered Accountant with 37 years of working experience in Corporate and Project Finance in both India and abroad and am very familiar with the rather arcane, shifty specialism called Company Valuation. Over the years I have discovered a few truths and half-truths — and quite a few fanciful myths too — about this special branch of High Finance in the world …. enough to have formulated a few theories of Valuation of own.
With one such original theory of my own, I was able to explain in simple terms to my dear friend the Zomato-ONGC paradox-inside-a-conundrum- inside-an-enigma.
Here below ⬇️ is the theory in outline:
Value is relative … And has a lot to do with human psychology and perception.
Zomato delivery service is part and parcel (sorry for the punning) of the consumer’s immediate, tangible, palpable and pleasant retail experience.
The Zomato delivery man promptly delivers right at the doorstep whatever the consumer has eagerly ordered for and is awaiting it as a yummy , yummy goody … that is perceived to be true value.
ONGC on the other hand is not felt similarly as consumer retailed experience… It’s a perceived as a far off corporate monolith somewhere out there digging for ONG in the ocean depths or plying giant oil tankers … Why, even at the petrol pump station, People in fact when they shell out a ₹100/- or more per litre of gas to fill their vehicle fuel tanks, they feel it not as any pleasant consumer experience but as consumer burden. The product is received and experienced only with a grumble .
The difference between Zomato and ONGC is precisely that : one is yummy , the other is grumpy . And that gets reflected as difference in valuation too.
My friend thought my theory to be very hilarious! But he also understood exactly what I was saying to him.
Finance and Financial Services Industry is a pseudoscience when it is not an outright scam. This great truth was discovered in the 2008 financial meltdown in America and its continuing aftermath lasting to this very day is felt worldwide with governments tottering and lurching in near financial crises that are hovering just around the corner.
Corporate Finance is a very convenient truth which is why people simply cannot do without it .
Even if God didn’t exist, people will want to invent Him is a very old quip. Modern monetary truths —- of which Company Valuation is one important one — doesn’t really exist as a genuine body of knowledge but then we all still have to invent it and reinvent it as one just to be able to carry on the business of life.
My engineer friend seemed convinced and appreciated my piece of “gyaan” for the day.
I thanked him 😁🤗…. And told him “Please make this viral by calling it a new theory of Company Valuation by guru M K Sudarshan ! 😂”
Sudarshan Madabushi