Annual Reports Excerpts

Converting Rs.1,000 to Rs.65,00,000

Source:Priyankar Sarkar

Excerpt from Asian Paints’ Annual Report


Enduring Business Moats in India

Today we have a special treat.Vijay Gawde is a seasoned investor in the Indian Equity Markets and he runs Equity Growth Partners.


I had asked Vijay to write a guest post and he graciously obliged with the write up below which talks about enduring business moats in India.-Raoji




“Moat” – a medieval term, coined and popularised in business by Warren Buffett who refers it to as a durable competitive advantage. Warren Buffett always looks for companies with durable competitive advantage; businesses with deep and wide economic moat.
In capitalism, if you own a wonderful business it is like owning an economic castle. And the nature of capitalism is that people are eager to come and take your castle. It is perfectly understandable. If you are selling mobile phone handsets, there are going to be five others who are going to try and sell similar or better handsets. If you own a restaurant, competitors will come and copy your recipes and will hire your chef and so on. Capitalism is all about somebody coming and trying to take the castle.

So to protect your valuable castle (wonderful business), you need a castle that has moat (durable competitive advantage) around it. Moat can be in the form of strong popular brand, superior product, quality of service, infrastructure, size and scale of operation, distribution network, management reputation etc. All these factors individually make moat deeper and combination of factors together makes moat wider. Deeper moats are source of high profitability and wider moats protects the consistency of supernormal profitability over longer period.

So, In Indian context which are the companies that have strong and enduring business moats? Let’s have a look at some of the examples.

Asian Paints is one obvious example that comes to mind. Here is a company that has created a strong brand out of boring product such as chemical or paint. In fact the process of selecting paint hardly used to be consumer’s own decision. But this company focused on engaging the end user and created differentiated products; the strong brands backed by its hard to replicate nationwide distribution network have created a dominant market leading position for itself – enduring moat.
HDFC Bank is another prominent example where company is into a seemingly commodity business where raw material and final product is both money. The bank created a strong entry barrier (the enduring moat) with its quality of service, professional management and the most important factor in banking business – the “Trust” of its customers.
Pidilite Industries is one more example where company created a strong brand out of boring chemical adhesives. “Fevicol ka majoob jod” – is company’s enduring business moat. It enjoys near monopoly in its line of business with hardly any visible competition. Company widened its moat by entering in other lines of businesses such as water proofing compounds etc.
Titan is a company that has become synonymous with watches in India with its high quality and affordable products. The brand Titan extended its enduring moat into other areas such as jewellery, eyewear, fashion accessories etc. and has become sector leader in each of its business line – Watches(Titan), Jewellery(Tanishq), eyewear(Titan eye+) and fashion accessories (Fastrack). is India’s most successful online recruitment website. It is the only site that survived the dot com bubble. It has countered even the global competitors such as Monster, Dice etc well and has become India’s most preferred recruitment channel. The company (Info edge) extended its business moat in other areas such as matrimony (, real estate (, education ( & and host of other emerging new businesses.
One factor common in all the above companies is the possession of a strong and enduring business moat which has given them a dominant leadership position and that has resulted in creating huge wealth for its shareholders over the years.

Disclaimer: No part of this article should be inferred as an investment advice. Author may have vested interest in all the companies mentioned directly or indirectly.




Investor Presentation:Asian Paints Feb 2013

this post is in continuation of my Investor Presentations series (see here)

[gview file=””]

Sellside Research

Research Reports:Oberoi Realty, Ranbaxy and Asian Paints

These reports are for informational purposes only.Not a recommendation to buy or sell.

Emkay Report on Oberoi Realty

Karvy Report on Ranbaxy

ICICI Report on Asian Paints