V for Value

During his SOLOx session at IMAGES RetailME Awards 2024, Gaurav Mahajan, Chief Executive Officer – Lifestyle, Landmark Group touched upon an interesting concept that he likes to call “the virtual cycle of three Vs.

The three Vs are valuation, value and a value system, he elaborated.

“For a while, I managed my family office that generated a reasonable amount of capital through real estate investments. I was looking to diversify our portfolio, and that’s when the aspect of valuation and a deep study of the correlation between value and valuation came about.

To showcase that the 3 Vs aren’t just in theory, I’ll share the example of stock performance of Trent Group, an Indian retail company that’s part of the Tata Group. In the last five years, this publicly listed company’s stock has brought 1,500% returns. The performance of the organisation and the valuation of the stock have been exceptional.

But I’d like to point out that in the first 15 years, the stock didn’t perform very well, barely at par with the Sensex. Only in the next five years, its valuation has been 2-2.5X of Sensex and there is a lesson here. And that is most successful organisations, business leaders in retail ignore valuation, because valuation is a perception of the current value of the business and a speculation of the future value, and it tends to be fuzzy. It’s not like they are not conscious of what’s happening with valuation of their business; they don’t get led by it.

There is empirical evidence that organisations which have chased valuation have destroyed value. It’s organisations that focused on value, led by leaders who are completely obsessed with value found that compelling benefit to offer to consumers meeting their unmet need or want for that matter. That’s not all; they have also created profitable growth.

It’s also crucial to institutionalise the value system. A culture that’s embedded in the organisation through people and processes. Such organisations are obsessed with value, not just for the customer, but also for the investor and the shareholder, therein creating a lasting system of sustainable value.”