[v1p3r]

Originally Posted by SmartCat

That's how Byju founder ended up with zero networth. His personal debt was equal to the value of his Byju shares, which he had taken a loan against.

Byju is very far from zero networth. He supposedly took on personal debt against his shareholding. Now that financial institution has to figure out how to recoup its debts. He separately gained half a billion in liquidity which has been cleverly financially engineered to be untouchable. This is Byju laughing at creditors ->

Originally Posted by SmartCat

$239 billion value is a tiny amount relatively speaking, and most of it comes from Musk/Ellision etc (Top 5).

This is the value of listed shares only, right?

Originally Posted by tsk1979

This is a big loophole. You are using capital to live the same lifestyle without paying income taxes.

Thank you for explaining it well and using real-world examples.

Originally Posted by SmartCat

- Unlike a car loan, you don't have to pay back the principal.
- However, just like the billionaire, if you want the shares/ETF/MF back, you have to pay back the principal ($50,000)
- If the stock market tanks like in 2008 or 2020, you will asked to pledge more shares/ETF/MF. Or pay up $50,000 cash within 24 hours. That is the infamous margin call (which is literally a phone call from the financial institution).
- If you do neither, they will sell off your shares/ETF/MFs.

Congratulations. Because now you paid $75,000 to $100,000 for your $50,000 car! Plus interest paid so far.

How do you figure? If the market crashes, your 75k shares might be worth less than 50k. In that case, your asset came to you cheaper than at market value. If my shares tank, I'm now holding much more cash. I still win. Repayment? Hello St. Kitts!

Of course, it's much more likely that the markets climb, so the margin account maintenance becomes far lower in number of shares, so once again I profit. I can now either increase my margin loan, or unencumber some equity.

And remember, even if I decide to pay the loan back, my interest (if structured correctly) is deductible from my tax outflow. So my 3% is subtracted from my 20%. Net tax rate of 17%? Why yes please!

[SmartCat]

Originally Posted by v1p3r

Byju is very far from zero networth. He supposedly took on personal debt against his shareholding. Now that financial institution has to figure out how to recoup its debts. He separately gained half a billion in liquidity which has been cleverly financially engineered to be untouchable. This is Byju laughing at creditors ->

The liability still remains right? Can you doublecheck this?

For eg:

- Let's say Byju Raveendran pledged unlisted shares worth $1 billion & borrowed $500 million (50% haircut)
- Market value of Byju shares have crashed 90%. So assume the lender liquidated shares & recovered $100 million.
- But Byju Raveendran still has to pay $400 million to the lender.

As I pointed out before a couple of times, founders mostly use proceeds of pledging to invest in appreciating assets. And Byju Raveendran is a good example of that. He does not have $500 million lying around in bank accounts. Most of that is gone because Raveendran used the cash proceeds to invest in his own company (that is, he increased his holdings): https://economictimes.indiatimes.com.../112660251.cms

Over the last 29 months, the company’s sole source of capital was the founders, infusing around Rs 7,500 crore for operations. Of the Rs 3,976 crore paid in salaries over two years, Riju personally infused Rs 1,600 crore, Byju Raveendran said.

So if value of Byju Raveendran's remaining unpledged stocks + real estate assets + other investments is $400 million, his liability is also $400 million, thereby making his networth zero.

Byju Ravindran’s networth plunges to zero in Forbes Billionaire Index 2024
https://www.livemint.com/companies/p...204869544.html

This is a great example of how pledging stocks by founders (or anybody else) to get cash can backfire bigtime.

[vaibhav_a_a]

so now the RBI gov has come out saying rate cut at this stage will be risky, premature etc etc - basically ruling out a December cut.

https://economictimes.indiatimes.com...8.cms?from=mdr

This obviously impacts all rate sensitive sectors but also bonds that wont go up in value now (will stagnate, till a cut happens).

Grr...

[Fuldagap]

Originally Posted by SmartCat

The liability still remains right?

2 cases of pledged shares/assets:
1. Vijay Mallaya.
Pledged shares sold. Still unable to recover the loan amount which is huge. Court case going on. Mallaya enjoying in the UK.

2. Jet Airways.

Pledged shares/assets sold off. No substantial recovery owing to severe plummeting of the pledged shares/assets.

A major chunk of loan written off due to several reasons. For the rest of the money, court case going on.

Liability remains but where is the recovery?
Many escape like this, many.

[SmartCat]

Originally Posted by Fuldagap

2 cases of pledged shares/assets. Liability remains but where is the recovery? Many escape like this, many.

Both Kingfisher and Jet Airways are examples of corporate fraud and corruption. That's why one is a fugitive and another is in jail.

Kingfisher pledged the "brand" and "trademark" for Rs. 3,000 cr. That is not a real asset. Something like this can happen only in connivance with politicians and senior-most employees of public sector banks.

But despite that, no banks lost money on Kingfisher Airlines loan of Rs. 6,000 cr. Because Mallya also pledged United Breweries and United Spirits stock. They finally recovered Rs. 10,000 cr!
https://www.vccircle.com/kingfisher-...ited-breweries

He is still considered a defaulter because interest on that Rs. 6k crore loan would have compounded.

[dragracer567]

Comparing countries - GDP per capita & HDI

In both economies and life, it’s challenging to determine the value of something without a point of comparison. For instance, we recognize a Maybach as expensive because we know most cars are significantly cheaper in comparison. Similarly, we label people as ‘rich,’ ‘educated,’ or other such tags based on relative comparisons. A couple of generations ago, holding a bachelor’s degree was considered a marker of high education. However, in my hometown today, even a PhD seems to carry little value.

Returning to the main point, we assess whether an economy is performing well or achieving high growth by comparing it to other economies. If all economies were growing at 10%, India's or China's growth rates wouldn’t seem particularly remarkable.

Out of curiosity, I created the table below, which compares the GDP per capita (both nominal and PPP-based) of several major economies as a percentage of India’s and China’s GDP per capita for the years 2005, 2010, 2019, and 2024. I avoided 2020 due to the COVID anomaly, and the data for 2024 is estimated (sourced from the IMF Economic Outlook, October 2024). You might need to open the image in a new tab for a clearer view of the data.



1) The resilience of the U.S. economy is remarkable. Between 2019 and 2024, the U.S. has widened its lead in terms of GDP per capita relative to China and India. This means that, on a per-person basis and in absolute terms, the U.S. economy grew faster than both. However, when viewed through the lens of purchasing power parity (PPP), the Chinese and Indian economies continue to catch up steadily. I assume much of this U.S. growth can be attributed to an exceptionally strong dollar and post-COVID inflation but correct me if I'm wrong. Given the massive size of the U.S. economy, even a modest 2.5% growth translates into substantial absolute gains. That being said, dark clouds loom in the form of divisive politics and erosion of key institutions which might accelerate based on the results of the upcoming elections.

2) The Chinese economy is facing a relative decline. From 2005 to 2015, China surged ahead, taking a significant lead over India—even during a period when the Indian economy itself was growing rapidly. However, from 2015 to 2024, China’s momentum slowed, and we now see the gap between the two economies starting to close, albeit gradually. This is happening despite India facing its own challenges during this era, including demonetization and the COVID-19 pandemic, as well as China’s near-zero population growth, which positively impacts its GDP per capita. We can expect the gap to close more quickly in the coming half-decades.

3) Russia has been a surprising case. After 2015, one might have expected Russia’s economy to perform worse, especially with sanctions. Yet, the decline relative to other economies has been as steady as that of the U.S., though from a much lower base. Interestingly, Russia’s economy has held up well post-Ukraine war, I assume likely due to increased oil trade and government stimulus to support its war effort.

4) Both the U.K. and Japan have experienced steady decline. These two economies have seen a consistent relative decline compared to both China and India, and this trend holds even when compared to the U.S. Remarkably, the U.K. is now poorer than Mississippi in terms of GDP per capita. However, it raises the question: is the average American truly living better than the average Briton or Japanese citizen? This points to the broader limitations of GDP as a measure of overall well-being.



To address the limitations of GDP as a measure of human capital and well-being, we turn to the Human Development Index (HDI) (data from UNDP). As we know, the HDI offers a broader perspective by incorporating factors like education, health, and standard of living. When comparing HDI scores, the U.S. ranks similarly to the U.K. and Japan and actually lags behind in certain areas like life expectancy. However, even the HDI has its shortcomings—it doesn’t account for income inequality, which can significantly skew perceptions of overall well-being. For a more comprehensive view, we would need to look at the inequality-adjusted Human Development Index (IHDI), which could be a topic worth exploring another day.

[SilentEngine]

Originally Posted by sukhbirST

Down south where ,I lived major part of my life , education is seen as the gateway to move up the ladder. Population has been under control and is playing an important role. Was shocked to see the opposite in states as you move up. Even today 3 kids and more is common amongst the lower class. Time we call a spade a spade.

TFR (Total Fertility Rate) breakup by education level - found this document of a Q&A in Indian Parliament which answered this question. Gives an interesting perspective on this.

https://sansad.in/getFile/annex/262/...f?source=pqars

TFR of India as a whole is 2.0 - Already lower than the replacement level of 2.1 and most states are also under this already except for 5 out of 36 states and UTs.
TFR of illiterate section of society: 3.1

Obviously education has a direct correlation to TFR, but i would like to believe we are trending in right direction.

[SmartCat]

Originally Posted by SilentEngine

TFR of India as a whole is 2.0 - Already lower than the replacement level of 2.1

Actually, when commentators say TFR of 2.1 is the "replacement level", it is not the whole truth. And it cannot be applied to a country like India.

- Most developed countries have a high percentage of elderly population. That is, a big percentage of population is "closer to death". However, in India, the percentage of elderly population is signficantly lower than developed countries. Far less % population is "closer to death"

- In developed countries, infant mortality and life expectancy will be more or less stable. But for countries like India, infant mortality will be going down and life expectancy will be going up. And this adds to population growth.

So in India's case, despite having a TFR of 2.0, India's population is expected to rise. For atleast the next 40 or 50 years.

[SilentEngine]

Originally Posted by SmartCat

So in India's case, despite having a TFR of 2.0, India's population is expected to rise. For atleast the next 40 or 50 years.

Attachment 2672784

Yes, that's true. TFR is a leading indicator. Effect of that going below replacement level will be seen in a few decades from now (if TFR decline continues further).

Japan and South Korea are good examples on how declining TFR results in eventual population decline after a few decades.

Anyway the main point was how education plays a role in lowering population growth, and the document kind of backs it up. It was interesting to look at TFR numbers for the literate cohort in most of the states. Those are actually comparable to that of western countries.

[somersault]

Originally Posted by SilentEngine

Anyway the main point was how education plays a role in lowering population growth, and the document kind of backs it up. It was interesting to look at TFR numbers for the literate cohort in most of the states. Those are actually comparable to that of western countries.

This is so true. Most of the southern states have high literacy, high GDP per capita and hence lower population. If this is so, then the goal should be to increase the allocation for education and healthcare systematically from the current levels. The education should be skill based education than today's paper tigers. As a country, in my opinion, our focus should be on the creation/ manufacturing. Out education should support this aspect. As of now, we are encouraging the service sector only and not manufacturing through education.

USP of the America and other advanced countries is the manufacturing and the Education.

[warrioraks]

Originally Posted by dragracer567

The resilience of the U.S. economy is remarkable. Between 2019 and 2024, the U.S. has widened its lead in terms of GDP per capita relative to China and India. This means that, on a per-person basis and in absolute terms, the U.S. economy grew faster than both. However, when viewed through the lens of purchasing power parity (PPP), the Chinese and Indian economies continue to catch up steadily. I assume much of this U.S. growth can be attributed to an exceptionally strong dollar and post-COVID inflation but correct me if I'm wrong.

The resilience of US economy is based on two factors.
1. Numero Uno is their tech industry which is the absolute best and is able to drive all weather growth.
2. The dominant reason in my opinion is their ability to print infinite money. The sort of access to capital that companies in US have is just mind-blowing. This in-turn fuels a lot of innovation and growth.

A 2.5% growth number is just enough considering the inflation is around 3% mark in the US. So not a great performance and I am guessing this will continue like this unless we see an industrial revolution like phenomena. Their economy is on a slow burn with no levers to push without significant pain - Debt is at all time high, cost arbitrage due to outsourcing has been mostly milked, dollar has been weaponized and is losing global appeal, rich poor divide is polarizing the country. It's the start of the end in my opinion.

[JediKnight]

Originally Posted by warrioraks

The resilience of US economy is based on two factors....

2. The dominant reason in my opinion is their ability to print infinite money. The sort of access to capital that companies in US have is just mind-blowing. This in-turn fuels a lot of innovation and growth.

US dollar is the world's reserve currency. Hence they can get richer just by printing money and it inflates the size of their economy. Actually purchasing power parity is more accurate way to compare the size of economies.

If the USD loses its reserve currency status the US economy will actually be much smaller. India and China already realize that and there have been efforts to use INR and renminbi instead of USD wherever possible. There was even talk for BRICS country to have their own currency something on the lines of Euro. Of course US would want the USD to remain the reserve currency of the world. Trump actually threatened sanctions on countries if they don't use USD for international trade.

[LaRoca]

The ideal India would have been one with a sustainable population of under 300m people. India could have achieved tremendous strides in terms of HDI. Everything from education, employment, infrastructure, healthcare and quality of life would have been so different, had it been for sustainability!

[dragracer567]

Originally Posted by JediKnight

There was even talk for BRICS country to have their own currency something on the lines of Euro. Of course US would want the USD to remain the reserve currency of the world.

The BRICS currency is never going to happen. Given the outsized role of China in the block, it would almost surely be controlled by the Chinese system, which is something a country like India would never go for. Also, lets not forget that the UAE and Saudi currencies are basically pegged to the USD!

Originally Posted by LaRoca

The ideal India would have been one with a sustainable population of under 300m people. India could have achieved tremendous strides in terms of HDI. Everything from education, employment, infrastructure, healthcare and quality of life would have been so different, had it been for sustainability!

Well, in terms of the share of the global population, the share of the Indian population is much lower than it has been in history. I think the over-population trope has been overused way too much when it comes to explaining India's economic malaises, along with 'too much democracy' trope. The US has the third largest population in the world with most concentrated into a few cities (despite the size) but is still among the top 5 in GDP per capita and top 20 in HDI.

[Jeroen]

Originally Posted by dragracer567

I think the over-population trope has been overused way too much when it comes to explaining India's economic malaises, along with 'too much democracy' trope. The US has the third largest population in the world with most concentrated into a few cities (despite the size) but is still among the top 5 in GDP per capita and top 20 in HDI.

Well, have a look at these numbers. I don’t think it explains everything, but there is a notable difference in various ratios, India/China compared to the US when it comes to demographics.