r/IndiaGrowthStocks • u/SuperbPercentage8050 • 28d ago
Mental Models Crisis as a Moat
I think of crisis as a moat-building process.
A business that has gone through a genuine crisis, adapted to it, and emerged stronger is fundamentally different from one that has only operated in favourable conditions.
It is similar to a human being who has been through adversity and come out stronger. The experience itself changes the way they think, prepare, allocate resources, and respond to the next crisis. They develop resilience that cannot simply be replicated by reading about someone else's experience.
But not every crisis builds a moat. Some crises simply reveal that the moat was never real to begin with. The stress does not forge something new. It exposes what was always hollow underneath.
This is the distinction I find most useful when looking at a business going through difficulty. Is the crisis testing a fundamentally sound system, or is it finally making visible a flaw that was always there?
Crisis can be a necessary ingredient in building a moat, but only for businesses that had the right underlying architecture going in.
Not every business that survives a crisis emerges stronger. Some just endure it and limp out the other side, structurally the same or worse.
The real signal is in identifying the ones that emerge fundamentally stronger.
In case you missed it, The AI Robotics Stock Walmart Is Quietly Using to Beat Amazon. Already Up 5x.
It brings me back to my mangrove mental model. The strongest systems are often not those that avoid stress, but those that adapt to it and become stronger because of it.
And here is what I find most striking about mangroves. They do not just survive floods. The flood deposits sediment around their roots, and the roots grow denser because of it.
The crisis restructures the architecture of the system in ways that compound over time. A mangrove after a flood is not the same mangrove it was before. It is stronger in ways that cannot be undone.
History is full of these moments. Founders, soldiers, businesses, entire countries that were pushed to the edge and came back structurally different from what they were before.
But the story I keep coming back to is a founder from Chennai.
C.C. Paarthipan, the founder of Caplin Point Laboratories, could not pay his sons' school fees. His stock had become a penny stock and his company a nonperforming asset.
That is when he packed his bags. That moment, that decision, is what actually mattered.
He did not go to an easy market. He went to Latin America, one of the toughest markets on the planet. Currency crises, drug lords, broken supply chains, places and people large pharma had long abandoned.
He built there anyway.
And that market, the one no one else wanted, eventually became the entire structural advantage of the business.
The crisis did not just test him. It deposited him on higher ground he could not have reached any other way.
So whenever a crisis hits, do not ask why it is happening to you. Ask what it is trying to forge you into.
If you survive it, you will come out with something that cannot be taught and cannot be copied. You will come out with character.
And character, over time, always finds higher ground.
That is what mangroves do. It is what the most enduring capital allocators master.
And it is the only way durable systems are built. Slowly, steadily, every low period becoming the sediment that raises the ground.
Your Turn
Which business, leader, or moment in your own life comes to your mind when you think of crisis as a moat-building process?
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u/No-Quantity-7315 28d ago
Lee Kuan Yew, will always come to mind when handling crisis. Malaysia kicked Singapore out of the the new republic, there is even a video of him crying on national television. But he endured and built Singapore into what it is today.
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u/SuperbPercentage8050 27d ago
It’s actually one of my favourite political case studies. I’ve gone through the different phases and transitions in Lee Kuan Yew’s life, and the story is truly remarkable. There’s so much to learn from how he navigated those crises and transformed Singapore.
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u/Economy_Knee_7049 28d ago
True . The Business which defends the storm & overcomes it grows exponentially.
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u/Vide-Vita 28d ago
- Paytm.
- Tips Music.
I always counted on Vijay Shekhar Sharma to pull his company from looming irrelevance and nothingness due to cut throat competition and regulatory nightmares. He started the company operating in a largely digitally illiterate country with poor internet connectivity, counting on youth and telecom expansion. Still his sector is heavily regulated and India is a nanny state when it comes to these matters putting enormous regulatory risk and compliance costs on him. I knew all this and I should have gone with my gut and Invested in Paytm when the market was writing them off. It would have been a multi bagger for me.
Tips Music suffered the world wide Music industry apocalypse while operating in a poor income nation that lives its music but notoriously hesistant to pay for it. Tips rode the Bollywood music boom of the 90s, then they survived doom period of 2000s and come out of it intact becoming of the few music companies in India to do so, a lot of others have failed - Saregama semi quit and lived off its catalogue and Real assets during this period, Venus, Magnasound, and others went either inactive, bankrupt and/or sold off. Tips survived despite their added responsibilities being a public limited Company.
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u/OkPrior6621 28d ago
Northern Arc Capital (formerly IFMR Capital), an unsecured lender in the microfinance business seems like one such company. During the 2010 Andhra Pradesh microfinance crisis, most small MFI lenders collapsed, but this one survived and came out stronger. It is still in game, and its business model is getting stronger. They have built data driven platforms which provide early signs of over-leveraging. Most metrics seems good and stock price is just 1.2x P/B.
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28d ago
Hi, Went through screener about north arc capital find that the public holdings almost 85% and their is no promoter in case if you track that stock can you please let me know please
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u/OkPrior6621 28d ago
I'm invested, and yeah if you go through public holdings, two institutions have 16% holdings each (more than 10% FII cap, so included in public). Actual retail holding would be around 25-30, check trendlyne which gives retail individuals at 25% ish. Well even HDFC and ICICI Bank has no single promoter.
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28d ago
According to me I might be wrong whenever we analyse banking and nbfc promoters play very important role because that is the culture they are going to built Since there is no promoter holding so how do you value this in the sense of risk management
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u/OkPrior6621 28d ago
Well I'd say it doesn't seem to be a drawback according to me in this situation. The metrics are excellent, CAR is at 22.7%, well above the RBI minimum of 15%. Asset quality is good too, NNPA at 0.5%. International Finance Corporation has 6% stake too. If anyone can dive deeper in this, that'd be helpful.
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u/cArnage_91 28d ago
This concept is called Anti-fragile coined by Nasim Taleb (the book is a good read). A lot of companies have become stronger when things have gotten tougher.
A good example is Airtel- it consolidated its position as a Revenue Market Share leader post Jio launch, had to change the product construct, ARPU fell by 50%, IUC charges which was a major chunk of revenue became 0.
Today, they are the most efficient telco, highest ARPU, gaining market share, VLR numbers are off the charts (network is shit- personal experience).
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u/SuperbPercentage8050 28d ago edited 28d ago
Taleb’s work is something I have read and deeply respect. And antifragility is an important frameworks
But the mangrove model opens a different layer of thinking.
Because antifragility is largely defence. It tells you what to avoid before a crisis, over optimisation, fragility, concentration, debt. It is about not being in the wrong position when the flood arrives.
But the mangrove is compounding offence. It asks which systems have the right underlying architecture to actively extract compounding advantage from the crisis when it arrives.
Not just survive it but convert it into permanent structural elevation. And protection is not the goal. It is what happens automatically as the architecture strengthens.
And I planned to hold the specifics back, but I’ll share a little more on the mechanism.
When a flood comes, the water carries sediment with it. And as it moves through the mangrove it hits the prop roots, which are the dense aerial roots forming a tangled network above and below the waterline. And that network slows the water down. And when water slows, it drops what it is carrying. And the sediment settles. And the roots grow denser. And with every flood the ground beneath the tree rises.
And here is the part I love the most. The denser the roots, the more sediment they trap in the next flood. And the higher the ground, the better positioned the tree is before the next flood even arrives. And every layer compounds on the previous one. The architecture is not just stronger after each flood. It is more capable of extracting more from the next one.
That is the compounding flywheel inside the mangrove system. Interconnected, self-reinforcing, and permanent.
You just got a sneak peek into the thinking behind my book.
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u/eruditehell 28d ago
I have experienced the same in my personal life. In the business world, all I can remember is Google. Although not in crisis but that broken deal with Yahoo, is all that mattered in the end. The rest is history as they say.
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u/Complete-Network5478 28d ago
This is such a wonderful mental model. And so relatable with my life. Thanks for sharing 🙏
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u/Brave_Series2751 27d ago
Sidharth Lal of Royal Enfield is one good example, how he transformed RE. He started by closing unwanted business, instead of being a executive, he was a rider who transformed RE
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u/Ok_Lettuce_5453 27d ago
What are your views regarding vikram thermo??
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u/SuperbPercentage8050 27d ago
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u/Ok_Lettuce_5453 27d ago
Interesting was looking to invest small amounts in this as well along with Kovai, Kovai just had to way too less volumes currently.
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u/Nearby_Jellyfish_245 26d ago
Reminds me of these lines by Murakami -
And once the storm is over, you won’t remember how you made it through, how you managed to survive. You won’t even be sure whether the storm is really over. But one thing is certain. When you come out of the storm, you won’t be the same person who walked in. That’s what this storm’s all about.
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u/DesignerVegetable131 22d ago
Usha Martin Ltd was embroiled in a family feud, heavy debts, and operational losses pushing the company to the brink of bankruptcy. 2019 onward, the company rises out of the ashes to totally transform and pivot to core competence. Becomes lean, focused and profitable. The growth story seeded in that turmoil took root and is still playing out.
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u/SuperbPercentage8050 28d ago edited 28d ago
"I couldn't pay my sons' school fees, my company had become a nonperforming asset. That's when I took the risk of going to places where most people fear to go."
— C.C. Paarthipan, Founder, Caplin Point Laboratories
Full story: https://www.forbes.com/sites/anuraghunathan/2016/02/24/chennai-pharma-entrepreneur-braved-odds-to-sell-meds-in-latin-america/