These consistently underperforming startup stocks have a common element that investors may not fully have factored in: Founder-promoters running multiple companies with different ownership structures. These capital guzzling ventures are deeply loss making, with some now at the risk of fading into insignificance
Value creation at the corporate level acquired a different meaning in the 80s and 90s, thanks to economist Michael Porter who demonstrated that conglomerate structures are a drag on profitability. The structure of the businesses of the Bajajs, Birlas, Chettiars, and the Singhanias are remotely what they were two decades ago, thanks to them moving away from the conglomerate model.
Nearly three decades later, some of the current crop of entrepreneurs appear to take a U-turn in their approach to building businesses. They may not be exactly going back to the same formula that family businesses adopted but are spreading thin in ventures that would consume their energy even before their main business established sustained profitability.
Nearly three decades later, some of the current crop of entrepreneurs appear to take a U-turn in their approach to building businesses. They may not be exactly going back to the same formula that family businesses adopted but are spreading thin in ventures that would consume their energy even before their main business established sustained profitability.